** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **
| x                                    | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15  (d) OF THE** |
|--------------------------------------|------------|---------------------------------------------------------------|
| **SECURITIES  EXCHANGE ACT OF 1934** |

** **

**For the quarterly periodended SEPTEMBER 30, 2006**

** **

**OR**

** **
| **o**                                | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15  (d) OF THE** |
|--------------------------------------|------------|----------------------------------------------------------------|
| **SECURITIES  EXCHANGE ACT OF 1934** |

** **

**Commission File Number:0-24920**

** **

**ERP OPERATING LIMITED PARTNERSHIP**

(Exact Name of Registrantas Specified in its Charter)
| **Illinois**                                                    | **36-3894853**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) | (I.R.S. Employer  Identification No.) |
|                                                            |                                  |
| **Two  North Riverside Plaza, Chicago, Illinois**               | **60606**                             |
| (Address of  Principal Executive Offices)                       | (Zip Code)                            |
|                                                            |                                  |
| **(312)  474-1300**                                             |
| (Registrant’s  Telephone Number, Including Area Code)      |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes xNo o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. Large accelerated filer xAccelerated filer o Non-acceleratedfiler o

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo x

 

 

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**ERPOPERATING LIMITED PARTNERSHIPCONSOLIDATED BALANCE SHEETS(Amounts in thousands)(Unaudited)**
| ** **                                                | ** ** | **September 30,**  2006 | ** **     | **December 31,**  2005 | ** ** |
|-----------------------------------------------------------|------------|------------------------------|----------------|-----------------------------|------------|
| **ASSETS**                                                |       |                         | ** **     | ** **                  | ** ** |
| Investment in real  estate                                |       |                         |           |                        |       |
| Land                                                      |       | $                            | 3,118,538      |                        | $          | 2,848,601 |   |
| Depreciable  property                                     |       | 13,195,156                   |           | 13,336,636                  |       |
| Projects under  development                               |       | 335,227                      |           | 240,980                     |       |
| Land held for  development                                |       | 199,369                      |           | 164,153                     |       |
| Investment in real  estate                                |       | 16,848,290                   |           | 16,590,370                  |       |
| Accumulated  depreciation                                 |       | (2,911,481                   | )              | (2,888,140                  | )          |
| Investment in real  estate, net                           |       | 13,936,809                   |           | 13,702,230                  |       |
|                                                      |       |                         |           |                        |       |
| Real estate held for  sale                                |       | 646,155                      |           | -                           |       |
| Cash and cash  equivalents                                |       | 76,324                       |           | 88,828                      |       |
| Investments in  unconsolidated entities                   |       | 4,528                        |           | 6,838                       |       |
| Rents receivable                                          |       | 1,452                        |           | 789                         |       |
| Deposits — restricted                                |       | 96,567                       |           | 77,093                      |       |
| Escrow deposits —  mortgage                          |       | 32,410                       |           | 35,225                      |       |
| Deferred financing  costs, net                            |       | 43,957                       |           | 40,636                      |       |
| Goodwill, net                                             |       | 30,000                       |           | 30,000                      |       |
| Other assets                                              |       | 101,864                      |           | 117,306                     |       |
| **Total  assets**                                         | ** ** | **$**                        | **14,970,066** | ** **                  | **$**      | **14,098,945** | ** ** |
|                                                      |       |                         |           |                        |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**               |       |                         |           |                        |       |
| Liabilities:                                              |       |                         |           |                        |       |
| Mortgage notes  payable                                   |       | $                            | 3,157,088      |                        | $          | 3,379,289 |   |
| Mortgage notes  payable, held for sale                    |       | 196,325                      |           | -                           |       |
| Notes, net                                                |       | 4,469,043                    |           | 3,442,784                   |       |
| Lines of credit                                           |       | 506,000                      |           | 769,000                     |       |
| Accounts payable  and accrued expenses                    |       | 146,091                      |           | 108,855                     |       |
| Accrued interest  payable                                 |       | 73,174                       |           | 78,441                      |       |
| Rents received  in advance and other liabilities          |       | 292,515                      |           | 302,418                     |       |
| Security  deposits                                        |       | 63,901                       |           | 54,823                      |       |
| Distributions  payable                                    |       | 144,758                      |           | 145,812                     |       |
| **Total  liabilities**                                    | ** ** | **9,048,895**                | ** **     | **8,281,422**               | ** ** |
| ** **                                                |       |                         |           |                        |       |
| *Commitments and contingencies*                           |       |                         |           |                        |       |
| **Minority Interests — Partially  Owned Properties** | ** ** | **23,842**                   | ** **     | **16,965**                  | ** ** |
|                                                      |       |                         |           |                        |       |
| Partners’ capital:                                   |       |                         |           |                        |       |
| Preference Units                                          |       | 387,351                      |           | 504,096                     |       |
| Preference Interests  and Junior Preference Units         |       | 11,684                       |           | 60,184                      |       |
| General Partner                                           |       | 5,151,860                    |           | 4,905,716                   |       |
| Limited Partners                                          |       | 361,060                      |           | 345,034                     |       |
| Accumulated other  comprehensive loss                     |       | (14,626                      | )              | (14,472                     | )          |
| **Total  partners’ capital**                         | ** ** | **5,897,329**                | ** **     | **5,800,558**               | ** ** |
| **Total liabilities and partners’  capital**         | ** ** | **$**                        | **14,970,066** | ** **                  | **$**      | **14,098,945** | ** ** |

** **

**See accompanying notes**

2

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**ERPOPERATING LIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands except per OP Unit data)(Unaudited)**
| ** **                                                                                                                                                                                     | ** ** | **Nine Months Ended  September 30,** | ** ** | **Quarter Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                                                                                                     | ** ** | **2006**                                            | ** ** | **2005**                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
| **REVENUES**                                                                                                                                                                                   |       |                                                |       |                                       |       |   |   |   |   |
| Rental income                                                                                                                                                                                  |       | $                                                   | 1,470,705  |                                       | $          | 1,237,279 |   | $ | 511,794 |   | $ | 428,357 |   |
| Fee and asset  management                                                                                                                                                                      |       | 6,878                                               |       | 7,763                                      |       | 2,071 |   | 2,401 |   |
| Total revenues                                                                                                                                                                                 |       | 1,477,583                                           |       | 1,245,042                                  |       | 513,865 |   | 430,758 |   |
|                                                                                                                                                                                           |       |                                                |       |                                       |       |   |   |   |   |
| **EXPENSES**                                                                                                                                                                                   |       |                                                |       |                                       |       |   |   |   |   |
| Property and  maintenance                                                                                                                                                                      |       | 390,732                                             |       | 338,810                                    |       | 138,285 |   | 121,562 |   |
| Real estate  taxes and insurance                                                                                                                                                               |       | 148,604                                             |       | 136,813                                    |       | 51,525 |   | 50,181 |   |
| Property  management                                                                                                                                                                           |       | 70,081                                              |       | 63,351                                     |       | 23,417 |   | 21,944 |   |
| Fee and asset  management                                                                                                                                                                      |       | 6,477                                               |       | 6,358                                      |       | 2,151 |   | 2,182 |   |
| Depreciation                                                                                                                                                                                   |       | 415,179                                             |       | 323,608                                    |       | 143,255 |   | 111,370 |   |
| General and  administrative                                                                                                                                                                    |       | 37,638                                              |       | 45,944                                     |       | 14,448 |   | 14,442 |   |
| Total expenses                                                                                                                                                                                 |       | 1,068,711                                           |       | 914,884                                    |       | 373,081 |   | 321,681 |   |
|                                                                                                                                                                                           |       |                                                |       |                                       |       |   |   |   |   |
| Operating income                                                                                                                                                                               |       | 408,872                                             |       | 330,158                                    |       | 140,784 |   | 109,077 |   |
| Interest and  other income                                                                                                                                                                     |       | 11,668                                              |       | 64,824                                     |       | 7,303 |   | 2,554 |   |
| Interest:                                                                                                                                                                                      |       |                                                |       |                                       |       |   |   |   |   |
| Expense  incurred, net                                                                                                                                                                         |       | (319,236                                            | )          | (266,063                                   | )          | (110,187 | ) | (92,335 | ) |
| Amortization of  deferred financing costs                                                                                                                                                      |       | (6,419                                              | )          | (4,832                                     | )          | (1,906 | ) | (1,602 | ) |
|                                                                                                                                                                                           |       |                                                |       |                                       |       |   |   |   |   |
| Income before  allocation to Minority Interests, loss from investments in unconsolidated  entities, net gain on sales of unconsolidated entities and land parcels and  discontinued operations |       | 94,885                                              |       | 124,087                                    |       | 35,994 |   | 17,694 |   |
| Allocation to Minority  Interests — Partially Owned Properties                                                                                                                            |       | (2,550                                              | )          | 672                                        |       | (482 | ) | (1,624 | ) |
| Loss from investments  in unconsolidated entities                                                                                                                                              |       | (565                                                | )          | (450                                       | )          | (190 | ) | (235 | ) |
| Net gain on sales of  unconsolidated entities                                                                                                                                                  |       | 370                                                 |       | 124                                        |       | 18 |   | - |   |
| Net gain on sales of  land parcels                                                                                                                                                             |       | 3,183                                               |       | 10,366                                     |       | 2,937 |   | - |   |
| Income from continuing  operations                                                                                                                                                             |       | 95,323                                              |       | 134,799                                    |       | 38,277 |   | 15,835 |   |
| Discontinued  operations, net                                                                                                                                                                  |       | 555,416                                             |       | 554,744                                    |       | 35,752 |   | 270,952 |   |
| Net income                                                                                                                                                                                     |       | $                                                   | 650,739    |                                       | $          | 689,543 |   | $ | 74,029 |   | $ | 286,787 |   |
| ** **                                                                                                                                                                                     |       |                                                |       |                                       |       |   |   |   |   |
| **ALLOCATION OF NET INCOME:**                                                                                                                                                                  |       |                                                |       |                                       |       |   |   |   |   |
| Preference Units                                                                                                                                                                               |       | $                                                   | 29,682     |                                       | $          | 39,004 |   | $ | 9,514 |   | $ | 12,961 |   |
| Preference Interests  and Junior Preference Units                                                                                                                                              |       | $                                                   | 1,779      |                                       | $          | 6,442 |   | $ | 223 |   | $ | 1,163 |   |
| Premium on redemption  of Preference Units                                                                                                                                                     |       | $                                                   | 3,941      |                                       | $          | 4,316 |   | $ | 3,941 |   | $ | 4,316 |   |
| Premium on redemption  of Preference Interests                                                                                                                                                 |       | $                                                   | 684        |                                       | $          | 4,134 |   | $ | 1 |   | $ | 22 |   |
| General Partner                                                                                                                                                                                |       | $                                                   | 574,160    |                                       | $          | 592,587 |   | $ | 56,356 |   | $ | 250,247 |   |
| Limited Partners                                                                                                                                                                               |       | 40,493                                              |       | 43,060                                     |       | 3,994 |   | 18,078 |   |
| Net income available to  OP Units                                                                                                                                                              |       | $                                                   | 614,653    |                                       | $          | 635,647 |   | $ | 60,350 |   | $ | 268,325 |   |
| ** **                                                                                                                                                                                     |       |                                                |       |                                       |       |   |   |   |   |
| **Earnings per OP Unit — basic:**                                                                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Income (loss) from  continuing operations available to OP Units                                                                                                                                |       | $                                                   | 0.19       |                                       | $          | 0.26 |   | $ | 0.08 |   | $ | (0.01 | ) |
| Net income available to  OP Units                                                                                                                                                              |       | $                                                   | 1.98       |                                       | $          | 2.08 |   | $ | 0.19 |   | $ | 0.87 |   |
| Weighted average OP  Units outstanding                                                                                                                                                         |       | 310,012                                             |       | 306,171                                    |       | 310,671 |   | 306,915 |   |
| ** **                                                                                                                                                                                     |       |                                                |       |                                       |       |   |   |   |   |
| **Earnings per OP Unit — diluted:**                                                                                                                                                       |       |                                                |       |                                       |       |   |   |   |   |
| Income (loss) from  continuing operations available to OP Units                                                                                                                                |       | $                                                   | 0.19       |                                       | $          | 0.26 |   | $ | 0.08 |   | $ | (0.01 | ) |
| Net income available to  OP Units                                                                                                                                                              |       | $                                              | 1.95       |                                       | $          | 2.05 |   | $ | 0.19 |   | $ | 0.87 |   |
| Weighted average OP  Units outstanding                                                                                                                                                         |       | 314,982                                             |       | 310,211                                    |       | 315,886 |   | 306,915 |   |
| Distributions declared per OP Unit outstanding                                                                                                                                                 |       | $                                                   | 1.3275     |                                       | $          | 1.2975 |   | $ | 0.4425 |   | $ | 0.4325 |   |

** **

**See accompanying notes**

3

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Amounts in thousands except per OP Unit data)(Unaudited)**
| ** **                                                           | ** ** | **Nine Months Ended  September 30,** | ** ** | **Quarter Ended  September 30,** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                           | ** ** | **2006**                                            | ** ** | **2005**                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                                 |       |                                                |       |                                       |       |   |   |   |   |
| Comprehensive income:                                                |       |                                                |       |                                       |       |   |   |   |   |
| Net income                                                           |       | $                                                   | 650,739    |                                       | $          | 689,543 |   | $ | 74,029 |   | $ | 286,787 |   |
| Other  comprehensive income — derivative and other instruments: |       |                                                |       |                                       |       |   |   |   |   |
| Unrealized  holding gains (losses) arising during the period         |       | (1,843                                              | )          | 2,010                                      |       | (4,252 | ) | 13,684 |   |
| Losses  reclassified into earnings from other comprehensive income   |       | 1,689                                               |       | 1,797                                      |       | 553 |   | 629 |   |
| Comprehensive income                                                 |       | $                                                   | 650,585    |                                       | $          | 693,350 |   | $ | 70,330 |   | $ | 301,100 |   |

 

**See accompanying notes**

4

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**ERPOPERATING LIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands)(Unaudited)**
| ** **                                                                           | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                           | ** ** | **2006**                                                | ** ** | **2005** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                           | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Net income                                                                           |       | $                                                       | 650,739    |   | $ | 689,543 |   |
| *Adjustments to reconcile net  income to net cash provided by operating activities:* |       |                                                    |       |   |   |
| Allocation to  Minority Interests — Partially Owned Properties                  |       | 2,550                                                   |       | (672 | ) |
| Depreciation                                                                         |       | 440,727                                                 |       | 391,151 |   |
| Amortization of  deferred financing costs                                            |       | 7,092                                                   |       | 5,470 |   |
| Amortization of  discounts and premiums on debt                                      |       | (5,100                                                  | )          | (1,677 | ) |
| Amortization of  deferred settlements on derivative instruments                      |       | 628                                                     |       | 761 |   |
| Income from technology investments                                                   |       | (3,736                                                  | )          | (57,054 | ) |
| Loss from  investments in unconsolidated entities                                    |       | 565                                                     |       | 450 |   |
| Distributions from unconsolidated entities — return on capital                  |       | 138                                                     |       | — |   |
| Net (gain) on sales of unconsolidated entities                                       |       | (370                                                    | )          | (124 | ) |
| Net (gain) on sales of land parcels                                                  |       | (3,183                                                  | )          | (10,366 | ) |
| Net (gain) on  sales of discontinued operations                                      |       | (526,873                                                | )          | (503,053 | ) |
| Loss on debt  extinguishments                                                        |       | 2,901                                                   |       | 10,977 |   |
| Unrealized  (gain) loss on derivative instruments                                    |       | (12                                                     | )          | 10 |   |
| Compensation paid with Company Common Shares                                         |       | 18,401                                                  |       | 26,799 |   |
| Other operating  activities, net                                                     |       | 2,623                                                   |       | 480 |   |
| * *                                                                             |       |                                                    |       |   |   |
| *Changes in assets and  liabilities:*                                                |       |                                                    |       |   |   |
| (Increase)  decrease in rents receivable                                             |       | (656                                                    | )          | 762 |   |
| (Increase)  decrease in deposits — restricted                                   |       | (10,441                                                 | )          | 12,319 |   |
| Decrease  (increase) in other assets                                                 |       | 11,224                                                  |       | (1,468 | ) |
| Increase in  accounts payable and accrued expenses                                   |       | 35,659                                                  |       | 25,463 |   |
| (Decrease) in accrued  interest payable                                              |       | (5,422                                                  | )          | (6,146 | ) |
| (Decrease) in  rents received in advance and other liabilities                       |       | (40,908                                                 | )          | (7,123 | ) |
| Increase in  security deposits                                                       |       | 8,743                                                   |       | 452 |   |
| Net cash  provided by operating activities                                           |       | 585,289                                                 |       | 576,954 |   |
|                                                                                 |       |                                                    |       |   |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                           |       |                                                    |       |   |   |
| Investment in  real estate — acquisitions                                       |       | (1,399,339                                              | )          | (871,477 | ) |
| Investment in  real estate — development/other                                  |       | (193,601                                                | )          | (127,461 | ) |
| Improvements to  real estate                                                         |       | (181,226                                                | )          | (167,274 | ) |
| Additions to  non-real estate property                                               |       | (7,278                                                  | )          | (12,447 | ) |
| Interest  capitalized for real estate under development                              |       | (13,176                                                 | )          | (9,105 | ) |
| Proceeds from  disposition of real estate, net                                       |       | 1,066,894                                               |       | 1,476,746 |   |
| Proceeds from  disposition of unconsolidated entities                                |       | 373                                                     |       | 124 |   |
| Proceeds from  technology investments                                                |       | 3,736                                                   |       | 82,054 |   |
| Investments in  unconsolidated entities                                              |       | (1,052                                                  | )          | (1,377 | ) |
| Distributions  from unconsolidated entities — return of capital                 |       | 92                                                      |       | 330 |   |
| Decrease  (increase) in deposits on real estate acquisitions, net                    |       | 10,303                                                  |       | (235,491 | ) |
| Decrease  (increase) in mortgage deposits                                            |       | 3,215                                                   |       | (564 | ) |
| *Consolidation  of previously Unconsolidated Properties:*                            |       |                                                    |       |   |   |
| Via acquisition  (net of cash acquired)                                              |       | —                                                  |       | (65 | ) |
| Via EITF 04-05  (cash consolidated)                                                  |       | 1,436                                                   |       | — |   |
| Acquisition of  Minority Interests — Partially Owned Properties                 |       | (71                                                     | )          | (1,712 | ) |
| Other investing  activities, net                                                     |       | 2                                                       |       | 67,200 |   |
| Net cash (used for)  provided by investing activities                                |       | (709,692                                                | )          | 199,481 |   |
|                                                                                      |            |                                                         |            |  |  |  |  |

** **

**See accompanying notes**

5

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Amounts in thousands)(Unaudited)**
| ** **                                                                 | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2006**                                                | ** ** | **2005** | ** ** |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                 | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Loan and bond  acquisition costs                                           |       | $                                                       | (10,159    | ) | $ | (10,525 | ) |
| *Mortgage notes payable:*                                                  | * *   | * *                                                | * *   | * * | * * |
| Proceeds                                                                   |       | 247,833                                                 |       | 249,491 |   |
| Restricted cash                                                            |       | (19,160                                                 | )          | — |   |
| Lump sum payoffs                                                           |       | (245,895                                                | )          | (351,492 | ) |
| Scheduled  principal repayments                                            |       | (21,067                                                 | )          | (21,060 | ) |
| Prepayment  premiums/fees                                                  |       | (2,901                                                  | )          | (10,977 | ) |
| *Notes, net:*                                                              | * *   | * *                                                | * *   | * * | * * |
| Proceeds                                                                   |       | 1,039,927                                               |       | 499,435 |   |
| Lump sum payoffs                                                           |       | (10,000                                                 | )          | (190,000 | ) |
| Scheduled  principal repayments                                            |       | (4,286                                                  | )          | (4,286 | ) |
| *Lines of credit:*                                                         | * *   | * *                                                | * *   | * * | * * |
| Proceeds                                                                   |       | 5,351,500                                               |       | 3,573,300 |   |
| Repayments                                                                 |       | (5,614,500                                              | )          | (3,723,300 | ) |
| Proceeds from (payments  on) settlement of derivative instruments          |       | 10,729                                                  |       | (7,823 | ) |
| Proceeds from sale of  OP Units                                            |       | 6,631                                                   |       | 7,369 |   |
| Proceeds from exercise  of EQR options                                     |       | 50,413                                                  |       | 34,610 |   |
| OP Units repurchased  and retired                                          |       | (83,230                                                 | )          | — |   |
| Redemption of  Preference Units                                            |       | (115,000                                                | )          | — |   |
| Redemption of  Preference Interests                                        |       | (25,500                                                 | )          | (146,000 | ) |
| Premium on redemption  of Preference Units                                 |       | (4                                                      | )          | — |   |
| Premium on redemption  of Preference Interests                             |       | (10                                                     | )          | (322 | ) |
| Payment of offering  costs                                                 |       | (83                                                     | )          | (26 | ) |
| Contributions —  Minority Interests — Partially Owned Properties |       | 5,830                                                   |       | 1,746 |   |
| *Distributions:*                                                           | * *   | * *                                                | * *   | * * | * * |
| OP Units —  General Partner                                           |       | (384,901                                                | )          | (371,373 | ) |
| Preference Units                                                           |       | (31,899                                                 | )          | (39,118 | ) |
| Preference  Interests and Junior Preference Units                          |       | (1,832                                                  | )          | (6,614 | ) |
| OP Units —  Limited Partners                                          |       | (27,106                                                 | )          | (26,926 | ) |
| Minority  Interests — Partially Owned Properties                      |       | (3,431                                                  | )          | (9,116 | ) |
| Net cash  provided by (used for) financing activities                      |       | 111,899                                                 |       | (553,007 | ) |
| Net (decrease) increase  in cash and cash equivalents                      |       | (12,504                                                 | )          | 223,428 |   |
| Cash and cash  equivalents, beginning of period                            |       | 88,828                                                  |       | 83,505 |   |
| Cash and cash equivalents, end of period                                   |       | $                                                       | 76,324     |   | $ | 306,933 |   |

** **

**See accompanying notes**

6

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Amounts in thousands)(Unaudited)**
| ** **                                                                       | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2006**                                                | ** ** | **2005** | ** ** |
| ** **                                                                       | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| **SUPPLEMENTAL INFORMATION:**                                                    | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Cash paid during the  period for interest                                        |       | $                                                       | 357,109    |   | $ | 303,071 |   |
| Cash paid during the  period for income, franchise and excise taxes              |       | $                                                       | 11,967     |   | $ | 9,398 |   |
| * *                                                                         | * *   | * *                                                | * *   | * * | * * |
| *Real estate  acquisitions/dispositions/other:*                                  | * *   | * *                                                | * *   | * * | * * |
| Mortgage loans  assumed                                                          |       | $                                                       | 92,528     |   | $ | 318,424 |   |
| Valuation of OP  Units issued                                                    |       | $                                                       | 49,591     |   | $ | 1,800 |   |
| Mortgage loans  (assumed) by purchaser                                           |       | $                                                       | (117,949   | ) | $ | (35,031 | ) |
| * *                                                                         | * *   | * *                                                | * *   | * * | * * |
| *Consolidation of previously  Unconsolidated Properties — Via acquisition:* | * *   | * *                                                | * *   | * * | * * |
| Investment in  real estate                                                       |       | $                                                       | —     |   | $ | (2,892 | ) |
| Mortgage loans  assumed                                                          |       | $                                                       | —     |   | $ | 2,012 |   |
| Minority  Interests — Partially Owned Properties                            |       | $                                                       | —     |   | $ | 59 |   |
| Investments in  unconsolidated entities                                          |       | $                                                       | —     |   | $ | 668 |   |
| Net other  liabilities recorded                                                  |       | $                                                       | —     |   | $ | 88 |   |
| * *                                                                         | * *   | * *                                                | * *   | * * | * * |
| *Consolidation of previously  Unconsolidated Properties — Via EITF 04-05:*  | * *   | * *                                                | * *   | * * | * * |
| Investment in  real estate, net                                                  |       | $                                                       | (24,637    | ) | $ | — |   |
| Mortgage loans  consolidated                                                     |       | $                                                       | 22,545     |   | $ | — |   |
| Investments in  unconsolidated entities                                          |       | $                                                       | 2,602      |   | $ | — |   |
| Net other liabilities  recorded                                                  |       | $                                                       | 926        |   | $ | — |   |

** **

**See accompanying notes**

7

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**ERPOPERATING LIMITED PARTNERSHIPNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

**1.**                 Business

ERP Operating Limited Partnership (“ERPOP”), a limitedpartnership, was formed in May 1993 to conduct the multifamily residentialproperty business of Equity Residential (“EQR”). EQR is a real estateinvestment trust (“REIT”) formed in March 1993 and is a fully integrated realestate company primarily engaged in the acquisition, development, ownership,management and operation of multifamily properties. In addition, ERPOP mayacquire or develop multifamily properties specifically to convert directly intocondominiums as well as upgrade and sell existing properties as individualcondominiums. ERPOP may also acquire land parcels to hold and/or sell based onmarket opportunities. EQR has elected to be taxed as a REIT.

EQR is the general partner of, and as of September 30,2006 owned an approximate 93.4% ownership interest in ERPOP. EQR is structuredas an umbrella partnership REIT (“UPREIT”), under which all property ownershipand business operations are conducted through ERPOP and its subsidiaries. Referencesto the “Operating Partnership” include ERPOP and those entities owned orcontrolled by it. References to the “Company” mean EQR and the OperatingPartnership.

As of September 30, 2006, the Operating Partnership,directly or indirectly through investments in title holding entities, owned allor a portion of 905****properties in31 states and the District of Columbia consisting of 193,692 units. Followingthe Lexford Housing Division sale on October 5, 2006, the OperatingPartnership, directly or indirectly through investments in title holdingentities, owned all or a portion of 616 properties in 26 states and theDistrict of Columbia consisting of 166,577 units. The ownership breakdownincludes the following at each respective date (table does not include variousuncompleted development properties):
| ** **                      | ** ** | ** **                                       | ** ** | **After Lexford**              | ** ** |
|---------------------------------|------------|--------------------------------------------------|------------|-------------------------------------|------------|
| ** **                      | ** ** | **As of September 30, 2006** | ** ** | **Housing Division Sale** | ** ** |
| ** **                      | ** ** | **Properties**                                   | ** ** | **Units**                           | ** ** | **Properties** | ** ** | **Units** | ** ** |
| Wholly Owned Properties         |       | 825                                              |       | 173,313                             |       | 545 |   | 147,215 |   |
| Partially Owned  Properties:    |       |                                             |       |                                |       |   |   |   |   |
| Consolidated                    |       | 34                                               |       | 5,890                               |       | 25 |   | 4,873 |   |
| Unconsolidated                  |       | 45                                               |       | 10,846                              |       | 45 |   | 10,846 |   |
| Military Housing (Fee  Managed) |       | 1                                                |       | 3,643                               |       | 1 |   | 3,643 |   |
|                            |       | 905                                              |       | 193,692                             |       | 616 |   | 166,577 |   |

 

**2.**                 Summary ofSignificant Accounting Policies

*Basis ofPresentation*

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financial informationand with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,they do not include all of the information and footnotes required by accountingprinciples generally accepted in the United States for complete financial statements.In the opinion of management, all adjustments (consisting of normal recurringaccruals) and certain reclassifications considered necessary for a fairpresentation have been included. Certain reclassifications have been made tothe prior period financial statements in order to conform to the current yearpresentation. Operating results for the nine months ended September 30, 2006are not necessarily indicative of the results that may be expected for the yearending December 31, 2006.

The balance sheet at December 31, 2005 has beenderived from the audited financial statements at that date but does not includeall of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financial statements.

8

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For further information, including definition ofcapitalized terms not defined herein, refer to the consolidated financialstatements and footnotes thereto included in the Operating Partnership’s annualreport on Form 10-K for the year ended December 31, 2005.

*Other*

The Company adopted SFAS No. 123(R), *Share-Based Payment*, as required effective January 1, 2006. SFASNo. 123(R) requires all companies to expense stock-based compensation (such asstock options), as well as making other revisions to SFAS No. 123. As theCompany began expensing all stock-based compensation effective January 1, 2003,the adoption of SFAS No. 123(R) did not have a material effect on itsconsolidated statements of operations or financial position.

Any Common Shares issued pursuant to EQR’s incentiveequity compensation and employee share purchase plans will result in theOperating Partnership issuing units of limited partnership interest (“OP Units”)to EQR on a one-for-one basis, with the Operating Partnership receiving the netcash proceeds of such issuances.

The Operating Partnership adopted the disclosureprovisions of SFAS No. 150 and FSP No. FAS 150-3, *Accountingfor Certain Financial Instruments with Characteristics of both Liabilities andEquity,* effective December 31, 2003. SFAS No. 150 and FSP No. FAS150-3 require the Operating Partnership to make certain disclosures regardingnoncontrolling interests that are classified as equity in the financialstatements of a subsidiary but would be classified as a liability in the parent’sfinancial statements under SFAS No. 150 (e.g., minority interests inconsolidated limited-life subsidiaries). The Operating Partnership is presentlythe controlling partner in various consolidated partnerships consisting of 34properties and 5,890 units and various uncompleted development propertieshaving a minority interest book value of $23.8 million at September 30, 2006. Someof these partnerships contain provisions that require the partnerships to beliquidated through the sale of its assets upon reaching a date specified ineach respective partnership agreement. The Operating Partnership, ascontrolling partner, has an obligation to cause the property owningpartnerships to distribute proceeds of liquidation to the Minority Interests inthese Partially Owned Properties only to the extent that the net proceedsreceived by the partnerships from the sale of its assets warrant a distributionbased on the partnership agreements. As of September 30, 2006, the OperatingPartnership estimates the value of Minority Interest distributions would havebeen approximately $96.5 million (“Settlement Value”) had the partnerships beenliquidated. This Settlement Value is based on estimated third partyconsideration realized by the partnerships upon disposition of the PartiallyOwned Properties and is net of all other assets and liabilities, includingyield maintenance on the mortgages encumbering the properties, that would havebeen due on September 30, 2006 had those mortgages been prepaid. Due to, amongother things, the inherent uncertainty in the sale of real estate assets, theamount of any potential distribution to the Minority Interests in the OperatingPartnership’s Partially Owned Properties is subject to change. To the extentthat the partnerships’ underlying assets are worth less than the underlyingliabilities, the Operating Partnership has no obligation to remit anyconsideration to the Minority Interests in Partially Owned Properties.

The Operating Partnership adopted EITF Issue No.04-05, *Determining Whether a General Partner, or theGeneral Partners as a Group, Controls a Limited Partnership or Similar EntityWhen the Limited Partners Have Certain Rights* (“Issue 04-05”),effective January 1, 2006. Issue 04-05 provides guidance in determining whethera general partner controls a limited partnership. The Operating Partnershipconsolidated its Lexford syndicated portfolio consisting of 20 separatepartnerships (10 properties) containing 1,272 units, all of which are includedas held for sale at September 30, 2006. The adoption did not have a materialeffect on the results of operations or financial position. See Note 4 forfurther discussion of the adoption of EITF Issue No. 04-05.

In July 2006, the FASB ratified the consensus inFinancial Interpretation (“FIN”) No. 48, *Accounting for Uncertaintyin Income Taxes*. FIN No. 48 creates a single model to addressuncertainty in income tax 

9

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positions and prescribesa minimum recognition threshold a tax position is required to meet before beingrecognized in the financial statements. It also provides guidance onderecognition, measurement, classification, interest and penalties, accountingin interim periods, disclosure and transition and, clearly scopes income taxesout of SFAS No. 5, *Accounting for Contingencies*.The Operating Partnership will adopt FIN No. 48 as required effective January1, 2007. Adoption is not expected to have a material effect on the consolidatedresults of operations or financial position.

**3.**                 Partners’ Capital

***The following tables present the changesin the Operating Partnership’s issued and outstanding OP Units and the limitedpartners’ OP Units for the nine months ended September 30, 2006:***

|                                                    | ** ** | **2006**        | ** ** |
|----------------------------------------------------|------------|-----------------|------------|
| OP Units  outstanding at January 1,                |       | 309,960,589     |       |
|                                               |       |            |       |
| Issued to  General Partner:                        |       |            |       |
| Conversion of  Series E Preference Units           |       | 71,747          |       |
| Conversion of  Series H Preference Units           |       | 7,673           |       |
| Conversion of  Series H and I Preference Interests |       | 679,686         |       |
| Employee Share  Purchase Plan                      |       | 182,460         |       |
| Dividend  Reinvestment — DRIP Plan            |       | 169             |       |
| Exercise of EQR  options                           |       | 1,894,702       |       |
| Restricted EQR  share grants, net                  |       | 621,254         |       |
|                                               |       |            |       |
| Issued to  Limited Partners:                       |       |            |       |
| Issuance —  Acquisitions                      |       | 1,144,326       |       |
|                                               |       |            |       |
| OP Units Other:                                    |       |            |       |
| Repurchased and  retired                           |       | (1,897,912      | )          |
|                                               |       |            |       |
| **OP Units outstanding at  September 30,**         | ** ** | **312,664,694** | ** ** |

 

|                                                                       | ** ** | **2006**       | ** **   |
|-----------------------------------------------------------------------|------------|----------------|--------------|
| Limited Partner  OP Units outstanding at January 1,                   |       | 20,424,245     |         |
|                                                                  |       |           |         |
| Limited Partner  OP Units Issued:                                     |       |           |         |
| Acquisitions                                                          |       | 1,144,326      |         |
| Conversion of  Limited Partner OP Units to EQR Common Shares          |       | (1,036,620     | )            |
| **Limited  Partner OP Units Outstanding at September 30,**            | ** ** | **20,531,951** | ** **   |
| Limited Partner  OP Units Ownership Interest in Operating Partnership |       | 6.6            | %            |
|                                                                  |       |           |         |
| Limited Partner  OP Units Issued:                                     |       |           |         |
| Acquisitions — per unit                                          |       | $              | 43.34        |   |
| Acquisitions — valuation                                         |       | $              | 49.6 million |   |

 

During the nine months ended September 30, 2006, theCompany repurchased 1,897,912 of its Common Shares on the open market at anaverage price of $43.85 per share. The Company paid approximately $83.2 millionfor these shares, which were retired subsequent to the repurchase. Concurrentwith this transaction, the Operating Partnership repurchased and retired1,897,912 OP Units previously issued to EQR.

The Limited Partners of the Operating Partnership asof September 30, 2006 include various individuals and entities that contributedtheir properties to the Operating Partnership in exchange for OP Units. Subject to certain restrictions, the LimitedPartners may exchange their OP Units for EQR Common Shares on a one-for-onebasis.

10

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EQR contributes all net proceeds from its variousequity offerings (including proceeds from exercise of options for EQR CommonShares) to the Operating Partnership. In return for those contributions, EQRreceives a number of OP Units in ERPOP equal to the number of Common Shares ithas issued in the equity offering (or in the case of a preferred equityoffering, a number of preference units in ERPOP equal in number and having thesame terms as the preferred shares issued in the equity offering).

The following table presents the Operating Partnership’sissued and outstanding “Preference Units” as of September 30, 2006 and December31, 2005:
| *** ***                                                                                                                                                                                          | *** *** | ** **                             | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | *** *** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|------------------------------------|--------------|
| *** ***                                                                                                                                                                                          | *** *** | **Redemption  Date (1) (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend per  Unit (3)** | ** ** | **September  30, 2006**       | ** **   | **December  31, 2005** | *** *** |
| Preference Units:                                                                                                                                                                                     |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 91¤8%  Series C Cumulative Redeemable Preference Units; liquidation value $250 per  unit; 0 and 460,000 units issued and outstanding at September 30, 2006 and  December 31, 2005, respectively  |         | 9/9/06                                 |       | N/A                           |       | (5                                   | )          | $                                  | —       |   | $ | 115,000 |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 8.60% Series D  Cumulative Redeemable Preference Units; liquidation value $250 per unit;  700,000 units issued and outstanding at September 30, 2006 and December 31,  2005 (4)                       |         | 7/15/07                                |       | N/A                           |       | $                                    | 21.50      |                               | 175,000      |   | 175,000 |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.00% Series E  Cumulative Convertible Preference Units; liquidation value $25 per unit;  464,616 and 529,096 units issued and outstanding at September 30, 2006 and  December 31, 2005, respectively |         | 11/1/98                                |       | 1.1128                        |       | $                                    | 1.75       |                               | 11,615       |   | 13,228 |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.00% Series H  Cumulative Convertible Preference Units; liquidation value $25 per unit;  29,434 and 34,734 units issued and outstanding at September 30, 2006 and  December 31, 2005, respectively   |         | 6/30/98                                |       | 1.4480                        |       | $                                    | 1.75       |                               | 736          |   | 868 |   |
|                                                                                                                                                                                                  |         |                                   | ** ** | ** **                    |       |                                 |       |                               |         |   |   |
| 8.29% Series K  Cumulative Redeemable Preference Units; liquidation value $50 per unit;  1,000,000 units issued and outstanding at September 30, 2006 and December 31,  2005                          |         | 12/10/26                               |       | N/A                           |       | $                                    | 4.145      |                               | 50,000       |   | 50,000 |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 6.48% Series N Cumulative  Redeemable Preference Units; liquidation value $250 per unit; 600,000 units  issued and outstanding at September 30, 2006 and December 31, 2005 (4)                        |         | 6/19/08                                |       | N/A                           |       | $                                    | 16.20      |                               | 150,000      |   | 150,000 |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                                                                  |         |                                   |       |                          |       |                                 |       | $                                  | 387,351      |   | $ | 504,096 |   |

----

(1)             On or after theredemption date, redeemable preference units (Series D, K and N) may beredeemed for cash at the option of the Operating Partnership, in whole or inpart, at a redemption price equal to the liquidation price per unit, plusaccrued and unpaid distributions, if any, in conjunction with the concurrentredemption of the corresponding EQR Preferred Shares.

(2)             On or after theredemption date, convertible preference units (Series E & H) may beredeemed under certain circumstances at the option of the Operating Partnershipfor cash (in the case of Series E) or OP Units (in the case of Series H), inwhole or in part, at various redemption prices per unit based upon thecontractual conversion rate, plus accrued and unpaid distributions, if any, inconjunction with the concurrent redemption/conversion of the corresponding EQRPreferred Shares.

(3)             Dividends on allseries of Preference Units are payable quarterly at various pay dates. Dividendslisted for Series D and N are Preference Unit rates and the equivalent DepositaryUnit annual dividends are $2.15 and $1.62 per unit, respectively.

(4)             Series D and NPreference Units each have a corresponding depositary unit that consists of tentimes the number of units and one-tenth the liquidation value and dividend perunit.

(5)             On August 9, 2006,the Operating Partnership issued an irrevocable notice to redeem for cash onSeptember 11, 2006 all 460,000 units of its 9 1/8% Series C Preference Units inconjunction with the concurrent redemption of the corresponding EQR PreferredShares. The Operating Partnership recorded approximately $3.9 million as apremium on redemption of Preference Units in the accompanying consolidatedstatements of operations.

11

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The following table presents the issued andoutstanding Preference Interests as of September 30, 2006 and December 31,2005:
| *** ***                                                                                                                                                                                                | *** *** | ** **                             | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | *** *** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|------------------------------------|--------------|
| *** ***                                                                                                                                                                                                | *** *** | **Redemption  Date (1) (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend per  Unit (3)** | ** ** | **September  30, 2006**       | ** **   | **December  31, 2005** | *** *** |
| Preference  Interests:                                                                                                                                                                                      |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                                                                        |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.875% Series G  Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and  510,000 units issued and outstanding at September 30, 2006 and December 31,  2005, respectively             |         | 03/21/06                               |       | N/A                           |       | (4                                   | )          | $                                  | —       |   | $ | 25,500 |   |
|                                                                                                                                                                                                        |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.625% Series H  Cumulative Convertible Redeemable Preference Units; liquidation value $50 per  unit; 0 and 190,000 units issued and outstanding at September 30, 2006 and  December 31, 2005, respectively |         | 03/23/06                               |       | 1.5108                        |       | (5                                   | )          | —                             |         | 9,500 |   |
|                                                                                                                                                                                                        |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.625% Series I  Cumulative Convertible Redeemable Preference Units; liquidation value $50 per  unit; 0 and 270,000 units issued and outstanding at September 30, 2006 and  December 31, 2005, respectively |         | 06/22/06                               |       | 1.4542                        |       | (6                                   | )          | —                             |         | 13,500 |   |
|                                                                                                                                                                                                        |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.625% Series J  Cumulative Convertible Redeemable Preference Units; liquidation value $50 per  unit; 230,000 units issued and outstanding at September 30, 2006 and December 31, 2005                      |         | 12/14/06                               |       | 1.4108                        |       | $                                    | 3.8125     |                               | 11,500       |   | 11,500 |   |
|                                                                                                                                                                                                        |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                                                                        |         |                                   |       |                          |       |                                 |       | $                                  | 11,500       |   | $ | 60,000 |   |
|                                                                                                                                                                                                             |              |                                        |            |                               |            |                                      |            |                                    |              |  |  |  |  |  |

----

(1)             Onor after the fifth anniversary of the respective issuance (the “Redemption Date”),all of the Preference Interests may be redeemed for cash at the option of theOperating Partnership, in whole or in part, at any time or from time to time,at a redemption price equal to the liquidation preference of $50.00 per unitplus the cumulative amount of accrued and unpaid distributions, if any.

(2)             Onor after the tenth anniversary of the respective issuance (the “Conversion Date”),all of the Preference Interests are exchangeable at the option of the holder(in whole but not in part) on a one-for-one basis for a respective reservedseries of EQR Preferred Shares. In addition, on or after the Conversion Date,the convertible Preference Interests may be converted under certain circumstancesat the option of the holder (in whole but not in part) to Common Shares basedupon the contractual conversion rate, plus accrued and unpaid distributions, ifany. Prior to the Conversion Date, the convertible Preference Interests may beconverted under certain circumstances at the option of the holder (in whole butnot in part) to Common Shares based upon the contractual conversion rate, plusaccrued and unpaid distributions, if any, if the issuer has called the seriesfor redemption (the “Accelerated Conversion Right”).

(3)             Dividendson all series of Preference Interests are payable quarterly on March 25th, June 25th, September 25th and December 25th of each year.

(4)             OnFebruary 10, 2006, the Operating Partnership issued an irrevocable notice toredeem for cash on March 21, 2006 all 510,000 units of its 7.875% Series GPreference Interests with a liquidation value of $25.5 million. The OperatingPartnership recorded approximately $0.7 million as a premium on redemption ofPreference Interests in the accompanying consolidated statements of operations.

(5)             OnFebruary 10, 2006, the Operating Partnership issued an irrevocable notice toredeem for cash on March 23, 2006 all 190,000 units of its 7.625% Series HPreference Interests with a liquidation value of $9.5 million. This noticetriggered the holder’s Accelerated Conversion Right, which they exercised. As aresult, effective March 23, 2006, the 190,000 units were converted to 287,052Common Shares.

(6)             OnMay 16, 2006, the Operating Partnership issued an irrevocable notice to redeemfor cash on June 22, 2006 all 270,000 units of its 7.625% Series I PreferenceInterests with a liquidation value of $13.5 million. This notice triggered theholder’s Accelerated Conversion Right, which they exercised. As a result,effective June 22, 2006, the 270,000 units were converted to 392,634 CommonShares.

The following table presents the Operating Partnership’sissued and outstanding Junior Convertible Preference Units (the “JuniorPreference Units”) as of September 30, 2006 and December 31, 2005:

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| *** ***                                                                                                                                                    | *** *** | ** **                    | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | *** *** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|-------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|------------------------------------|--------------|
| *** ***                                                                                                                                                    | *** *** | **Redemption  Date (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend per  Unit (1)** | ** ** | **September  30, 2006**       | ** **   | **December  31, 2005** | *** *** |
| Junior Preference  Units:                                                                                                                                       |         |                          |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                            |         |                          |       |                          |       |                                 |       |                               |         |   |   |
| Series  B Junior Convertible Preference Units; liquidation value $25 per unit;  7,367 units issued and outstanding at September 30, 2006 and December 31,  2005 |         | 07/29/09                      |       | 1.020408                      |       | $                                    | 2.00       |                               | $            | 184 |   | $ | 184 |   |
|                                                                                                                                                            |         |                          |       |                          |       |                                 |       | $                                  | 184          |   | $ | 184 |   |
|                                                                                                                                                                 |              |                               |            |                               |            |                                      |            |                                    |              |  |  |  |  |  |

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(1)             Dividendson the Junior Preference Units are payable quarterly at various pay dates.

(2)             Onor after the tenth anniversary of the issuance (the “Redemption Date”), theSeries B Junior Preference Units may be converted into OP Units at the optionof the Operating Partnership based on the contractual conversion rate. Prior tothe Redemption Date, the holders may elect to convert the Series B JuniorPreference Units to OP Units under certain circumstances based on thecontractual conversion rate. The contractual rate is based upon a ratiodependent upon the closing price of EQR’s Common Shares.

**4.**                 Real Estate

During the nine months ended September 30, 2006, theOperating Partnership acquired the entire equity interest in 28 propertiescontaining 7,480 units and six land parcels from unaffiliated parties for atotal purchase price of $1.5 billion. The Operating Partnership also acquiredthe majority of its partners’ interests in seventeen partially owned propertiescontaining 1,415 units for $38.7 million, partially funded through the issuanceof 417,039 OP Units valued at $18.6 million.

The Operating Partnership adopted EITF Issue No.04-05, as required for existing limited partnership arrangements, effectiveJanuary 1, 2006. The adoption required the consolidation of the Lexfordsyndicated portfolio consisting of 20 separate partnerships (10 properties)containing 1,272 units, all of which are included as held for sale at September30, 2006. The Operating Partnership recorded $24.6 million in investment inreal estate and the following:

·                  Consolidated $22.5 million in mortgage debt;

·                  Reduced investments in unconsolidated entities by$2.6 million;

·                  Consolidated $0.9 million of other liabilitiesnet of other assets acquired; and

·                  Consolidated $1.4 million of cash.

During the nine months ended September 30, 2006, theOperating Partnership disposed of the following to unaffiliated parties (salesprice in thousands):

|                     | ** ** | **Properties** | ** ** | **Units** | ** ** | **Sales Price** | ** ** |
|---------------------|------------|----------------|------------|-----------|------------|----------------------|------------|
| Rental  Properties  |       | 40             |       | 10,661    |       | $                    | 1,032,459  |   |
| Condominium  Units  |       | 5              |       | 840       |       | 172,633              |       |
| Land Parcels  (two) |       | —         |       | —    |       | 1,569                |       |
|                |       | 45             |       | 11,501    |       | $                    | 1,206,661  |   |

 

The Operating Partnership recognized a net gain onsales of discontinued operations of approximately $526.9 million (amount is netof $11.2 million of income taxes incurred on condominium sales — see additionaldiscussion in Note 13), a net gain on sales of land parcels of $3.2 million anda net gain on sales of unconsolidated entities of $0.4 million on the abovesales.

On June 28, 2006, the Operating Partnership announcedthat it agreed to sell its Lexford Housing Division for a cash purchase priceof $1.086 billion. The sale closed on October 5, 2006. The Lexford HousingDivision results are classified as discontinued operations, net of minorityinterests, in the consolidated 

13

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statements of operationsfor all periods presented and Lexford investment in real estate and mortgagenotes payable balances are classified as held for sale in the consolidatedbalance sheets as of September 30, 2006. The Operating Partnership expects torecord a gain on sale of approximately $420.0 million on the sale of theLexford Housing Division in the fourth quarter of 2006. In conjunction with theLexford disposition, the Operating Partnership paid off $196.3 million ofmortgage notes payable secured by the properties and incurred approximately$10.8 million in prepayment penalties upon extinguishment. The OperatingPartnership also recorded approximately $4.5 million in one-time accruedretention benefits during the third quarter of 2006 related to the Lexford disposition.These costs are included in discontinued operations, net, in the consolidatedstatements of operations. See Note 13 for additional information.

**5.**                 Commitments toAcquire/Dispose of Real Estate

As of November 1, 2006, in addition to the propertiesthat were subsequently acquired as discussed in Note 16, the OperatingPartnership had entered into separate agreements to acquire the following(purchase price in thousands):

|                       | ** ** | **Properties/  Parcels** | ** ** | **Units** | ** ** | **Purchase  Price** | ** ** |
|-----------------------|------------|--------------------------|------------|-----------|------------|---------------------|------------|
| Operating  Properties |       | 3                        |       | 866       |       | $                   | 126,000    |   |
| Land Parcels          |       | 4                        |       | —    |       | 75,440              |       |
| Total                 |       | 7                        |       | 866       |       | $                   | 201,440    |   |

 

As of November 1, 2006, in addition to the propertiesthat were subsequently disposed as discussed in Note 16, the OperatingPartnership had entered into separate agreements (including option rights) todispose of the following (sales price in thousands):

|                         | ** ** | **Properties/  Parcels** | ** ** | **Units** | ** ** | **Sales Price** | ** ** |
|-------------------------|------------|--------------------------|------------|-----------|------------|----------------------|------------|
| Operating  Properties   |       | 6                        |       | 1,198     |       | $                    | 109,880    |   |
| Development  Properties |       | 1                        |       | —    |       | 82,690               |       |
| Land Parcels            |       | 1                        |       | —    |       | 2,500                |       |
| Total                   |       | 8                        |       | 1,198     |       | $                    | 195,070    |   |

 

The closings of these pending transactions are subjectto certain contingencies and conditions; therefore, there can be no assurancethat these transactions will be consummated or that the final terms thereofwill not differ in material respects from those summarized in the precedingparagraphs.

**6.**                 Investments inPartially Owned Entities

The Operating Partnership has co-invested in variousproperties with unrelated third parties which are either consolidated oraccounted for under the equity method of accounting (unconsolidated). Thefollowing table summarizes the Operating Partnership’s investments in partiallyowned entities as of September 30, 2006 (amounts in thousands except forproject and unit amounts):

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| ** **               | ** ** | **Consolidated**                                  | ** ** | **Unconsolidated**                 | ** ** |
|--------------------------|------------|---------------------------------------------------|------------|------------------------------------|------------|
| ** **               | ** ** | **Development Projects**                     | ** ** | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **               | ** ** | **Held for  and/or Under  Development** | ** ** | **Completed and  Stabilized** | ** ** | **Lexford** | ** ** | **Other** | ** ** | **Total** | ** ** | **Institutional  Joint Ventures** | ** ** |
|                     |       |                                              |       |                               |       |   |   |   |   |   |   |   |   |
| Total projects (1)       |       | —                                            |       | 4                                  |       | 9 |   | 21 |   | 34 |   | 45 |   |
|                     |       |                                              |       |                               |       |   |   |   |   |   |   |   |   |
| Total units (1)          |       | —                                            |       | 977                                |       | 1,017 |   | 3,896 |   | 5,890 |   | 10,846 |   |
|                     |       |                                              |       |                               |       |   |   |   |   |   |   |   |   |
| Debt — Secured (2): |       |                                              |       |                               |       |   |   |   |   |   |   |   |   |
| EQR Ownership  (3)       |       | $                                                 | 142,099    |                               | $          | 61,000 |   | $ | 13,994 |   | $ | 287,086 |   | $ | 504,179 |   | $ | 121,200 |   |
| Minority  Ownership      |       | —                                            |       | —                             |       | 415 |   | 13,321 |   | 13,736 |   | 363,600 |   |
| Total (at 100%)          |       | $                                                 | 142,099    |                               | $          | 61,000 |   | $ | 14,409 |   | $ | 300,407 |   | $ | 517,915 |   | $ | 484,800 |   |

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(1)             Projectand unit counts exclude all uncompleted development projects until thoseprojects are completed.

(2)             Alldebt is non-recourse to the Operating Partnership with the exception of $28.3million in mortgage bonds on one development project.

(3)             Representsthe Operating Partnership’s economic ownership interest.

**7.**                 Deposits —Restricted

The following table presents the deposits — restrictedas of September 30, 2006 and December 31, 2005 (amounts in thousands):

|                                        | ** ** | **September  30, 2006** | ** ** | **December  31, 2005** | ** ** |
|----------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
|                                   |       |                         |       |                        |       |
| Tax-deferred (1031)  exchange proceeds |       | $                            | —     |                        | $          | 853 |   |
| Earnest money on  pending acquisitions |       | 5,670                        |       | 15,120                      |       |
| Resident security,  utility and other  |       | 90,897                       |       | 61,120                      |       |
| Totals                                 |       | $                            | 96,567     |                        | $          | 77,093 |   |

 

**8.**                 Mortgage NotesPayable

As of September 30, 2006, the Operating Partnershiphad outstanding mortgage indebtedness of approximately $3.4 billion, of which$196.3 million is classified as held for sale.

During the nine months ended September 30, 2006, theOperating Partnership:

·                  Repaid $267.0 million of mortgage loans;

·                  Assumed/consolidated $115.1 million of mortgagedebt on certain properties in connection with their acquisitions and/orconsolidations;

·                  Obtained $247.8 million of new mortgage loans oncertain properties; and

·                  Was released from $117.9 million of mortgage debtassumed by the purchaser on disposed properties.

As of September 30, 2006, scheduled maturities for theOperating Partnership’s outstanding mortgage indebtedness were at various datesthrough September 1, 2045. At September 30, 2006, the interest rate range onthe Operating Partnership’s mortgage debt was 3.32% to 12.465%. During the ninemonths ended September 30, 2006, the weighted average interest rate on theOperating Partnership’s mortgage debt was 5.83%.

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**9.**                 Notes

As of September 30, 2006, the Operating Partnershiphad outstanding unsecured notes of approximately $4.5 billion.

During the nine months ended September 30, 2006, theOperating Partnership:

·                  Issued $400.0 million of ten and one-half year5.375% fixed rate public notes, receiving net proceeds of $395.5 million; and

·                  Issued $650.0 million of twenty year 3.85% fixedrate public notes that are exchangeable into EQR Common Shares, receiving netproceeds of $637.0 million (see further discussion below).

On August 23, 2006, the Operating Partnership issued$650.0 million of exchangeable senior notes that mature on August 15, 2026. Thenotes bear interest at a fixed rate of 3.85%. The notes are exchangeable intoEQR Common Shares, at the option of the holders, under specific circumstancesor on or after August 15, 2025, at an initial exchange rate of 16.3934 sharesper $1,000 principal amount of notes (equivalent to an initial exchange priceof $61.00 per share). The initial exchange rate is subject to adjustment incertain circumstances, including upon an increase in EQR’s dividend rate. Uponan exchange of the notes, the Operating Partnership will settle any amounts upto the principal amount of the notes in cash and the remaining exchange value,if any, will be settled, at the Operating Partnership’s option, in cash, EQRCommon Shares or a combination of both.

On or after August 18, 2011, the Operating Partnershipmay redeem the notes at a redemption price equal to the principal amount of thenotes plus any accrued and unpaid interest thereon. Upon notice of redemptionby the Operating Partnership, the holders may elect to exercise their exchangerights. In addition, on August 18, 2011, August 15, 2016 and August 15, 2021 orfollowing the occurrence of certain change in control transactions prior toAugust 18, 2011, note holders may require the Operating Partnership torepurchase the notes for an amount equal to the principal amount of the notesplus any accrued and unpaid interest thereon.

Note holders may also require an exchange of the notessubsequent to September 30, 2006 should the closing sale price of EQR CommonShares exceed 130% of the exchange price for a certain period of time or shouldthe trading price on the notes be less than 98% of the product of the closingsales price of EQR Common Shares multiplied by the applicable exchange rate fora certain period of time.

As of September 30, 2006, scheduled maturities for theOperating Partnership’s outstanding notes were at various dates through 2029. AtSeptember 30, 2006, the interest rate range on the Operating Partnership’snotes was 3.85% to 7.625%. During the nine months ended September 30, 2006, theweighted average interest rate on the Operating Partnership’s notes was 5.97%.

**10.**          Lines of Credit

The Operating Partnership has an unsecured revolvingcredit facility with potential borrowings of up to $1.0 billion maturing on May29, 2008, with the ability to increase available borrowings up to $500.0million under certain circumstances. Advances under the credit facility bearinterest at variable rates based upon LIBOR at various interest periods plus aspread dependent upon the Operating Partnership’s credit rating or based onbids received from the lending group. EQR has guaranteed the OperatingPartnership’s credit facility up to the maximum amount and for the full term ofthe facility.

On August 30, 2005, the Operating Partnership obtaineda new one-year $600.0 million unsecured revolving credit facility maturing onAugust 29, 2006. This credit facility was repaid in full and terminated onJanuary 20, 2006.

On July 6, 2006, the Operating Partnership obtained anew one-year $500.0 million unsecured revolving 

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credit facility maturingon July 6, 2007. This facility was repaid in full and terminated on October 13,2006. Advances under this facility bore interest at variable rates based onLIBOR at various interest periods plus a spread dependent upon the OperatingPartnership’s credit rating. EQR guaranteed this credit facility up to themaximum amount and for its full term.

As of September 30, 2006, $506.0 million wasoutstanding and $82.0 million was restricted (dedicated to support letters ofcredit and not available for borrowing) on the $1.5 billion revolving creditfacilities. During the nine months ended September 30, 2006, the weightedaverage interest rate under the credit facilities was 5.34%.

**11.**          Derivative Instruments

The following table summarizes the consolidated derivativeinstruments at September 30, 2006 (dollar amounts are in thousands):
| ** **                              | ** ** | **Fair Value  Hedges (1)** | ** ** | **Forward Starting  Swaps (2)** | ** ** | **Development  Cash Flow  Hedges (3)** | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------|------------|
| Current Notional  Balance               |       | $                                    | 370,000    |                                      | $          | 100,000                                          |       | $ | 32,610 |   |
| Lowest Possible  Notional               |       | $                                    | 370,000    |                                      | $          | 100,000                                          |       | $ | 13,925 |   |
| Highest Possible  Notional              |       | $                                    | 370,000    |                                      | $          | 100,000                                          |       | $ | 46,296 |   |
| Lowest Interest  Rate                   |       | 3.245                                | %          | 5.596                                     | %          | 4.530                                            | %          |
| Highest Interest  Rate                  |       | 3.787                                | %          | 5.596                                     | %          | 4.530                                            | %          |
| Earliest  Maturity Date                 |       | 2009                                 |       | 2017                                      |       | 2007                                             |       |
| Latest Maturity  Date                   |       | 2009                                 |       | 2017                                      |       | 2007                                             |       |
| Estimated Asset  (Liability) Fair Value |       | $                                    | (13,881    | )                                         | $          | (3,228                                           | )          | $ | 130 |   |

----

(1)             FairValue Hedges — Converts outstanding fixed rate debt to a floating interestrate.

(2)             ForwardStarting Swaps — Designed to partially fix the interest rate in advance of afuture debt issuance.

(3)             DevelopmentCash Flow Hedges — Converts outstanding floating rate debt to a fixed interestrate.

On September 30, 2006, the net derivative instrumentswere reported at their fair value as other assets of approximately $0.1 millionand as other liabilities of approximately $17.1 million. As of September 30,2006, there were approximately $15.2 million in deferred losses, net, includedin accumulated other comprehensive loss. Based on the estimated fair values ofthe net derivative instruments at September 30, 2006, the Operating Partnershipmay recognize an estimated $2.4 million of accumulated other comprehensive lossas additional interest expense during the twelve months ending September 30,2007.

In January 2006, the Operating Partnership receivedapproximately $10.7 million to terminate six forward starting swaps inconjunction with the issuance of $400.0 million of ten and one-half yearunsecured notes. The $10.7 million has been deferred as a component ofaccumulated other comprehensive loss and will be recognized as a reduction ofinterest expense over the life of the unsecured notes.

**12.**          Earnings Per OP Unit

The following tables set forth the computation of netincome per OP Unit — basic and net income per OP Unit — diluted (amounts inthousands except per OP Unit amounts):

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| ** **                                                                                                   | ** ** | **Nine Months Ended  September 30,** | ** ** | **Quarter Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                   | ** ** | **2006**                                            | ** ** | **2005**                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Numerator for net income per OP  Unit — basic and diluted:**                                          | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income from continuing  operations                                                                           |       | $                                                   | 95,323     |                                       | $          | 134,799 |   | $ | 38,277 |   | $ | 15,835 |   |
| Allocation to Preference  Units                                                                              |       | (29,682                                             | )          | (39,004                                    | )          | (9,514 | ) | (12,961 | ) |
| Allocation to  Preference Interests and Junior Preference Units                                              |       | (1,779                                              | )          | (6,442                                     | )          | (223 | ) | (1,163 | ) |
| Allocation to premium  on redemption of Preference Units                                                     |       | (3,941                                              | )          | (4,316                                     | )          | (3,941 | ) | (4,316 | ) |
| Allocation to premium  on redemption of Preference Interests                                                 |       | (684                                                | )          | (4,134                                     | )          | (1 | ) | (22 | ) |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Income (loss) from  continuing operations available to OP Units                                              |       | 59,237                                              |       | 80,903                                     |       | 24,598 |   | (2,627 | ) |
| Discontinued  operations, net                                                                                |       | 555,416                                             |       | 554,744                                    |       | 35,752 |   | 270,952 |   |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Numerator for net  income per OP Unit — basic and diluted                                               |       | $                                                   | 614,653    |                                       | $          | 635,647 |   | $ | 60,350 |   | $ | 268,325 |   |
| ** **                                                                                                   | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Denominator for net income per  OP Unit — basic and diluted:**                                        | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Denominator for net  income per OP Unit — basic                                                         |       | 310,012                                             |       | 306,171                                    |       | 310,671 |   | 306,915 |   |
| Effect of dilutive  securities:                                                                              |       |                                                |       |                                       |       |   |   |   |   |
| Dilution for OP  Units issuable upon assumed exercise/vesting of EQR’s share  options/restricted shares |       | 4,970                                               |       | 4,040                                      |       | 5,215 |   | — |   |
| Denominator for net  income per OP Unit — diluted                                                       |       | 314,982                                             |       | 310,211                                    |       | 315,886 |   | 306,915 |   |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Net income per OP Unit  — basic                                                                         |       | $                                                   | 1.98       |                                       | $          | 2.08 |   | $ | 0.19 |   | $ | 0.87 |   |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Net income per OP Unit  — diluted                                                                       |       | $                                                   | 1.95       |                                       | $          | 2.05 |   | $ | 0.19 |   | $ | 0.87 |   |
| ** **                                                                                                   | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Net income per OP Unit — basic:**                                                                     | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income (loss) from  continuing operations available to OP Units                                              |       | $                                                   | 0.191      |                                       | $          | 0.264 |   | $ | 0.079 |   | $ | (0.009 | ) |
| Discontinued  operations, net                                                                                |       | 1.792                                               |       | 1.813                                      |       | 0.115 |   | 0.883 |   |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Net income per OP Unit  — basic                                                                         |       | $                                                   | 1.983      |                                       | $          | 2.077 |   | $ | 0.194 |   | $ | 0.874 |   |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| **Net income per OP Unit — diluted:**                                                                   |       |                                                |       |                                       |       |   |   |   |   |
| Income (loss) from  continuing operations available to OP Units                                              |       | $                                                   | 0.188      |                                       | $          | 0.261 |   | $ | 0.078 |   | $ | (0.009 | ) |
| Discontinued  operations, net                                                                                |       | 1.763                                               |       | 1.788                                      |       | 0.113 |   | 0.883 |   |
|                                                                                                         |       |                                                |       |                                       |       |   |   |   |   |
| Net income per OP Unit — diluted                                                                        |       | $                                                   | 1.951      |                                       | $          | 2.049 |   | $ | 0.191 |   | $ | 0.874 |   |

 

*Potential common shares issuable from the assumedexercise of EQR share options and the vesting of EQR restricted shares areautomatically anti-dilutive and therefore excluded from the diluted earningsper OP Unit calculation as the Operating Partnership has a loss from continuingoperations for the third quarter ended September 30, 2005.*

*Convertible preference units/interests that couldbe converted into 1,260,905 and 1,807,587 weighted average Common Shares (whichwould be contributed to the Operating Partnership in exchange for OP Units) forthe nine months ended September 30, 2006 and 2005, respectively, and 900,802and 1,720,246 weighted average Common Shares for the quarters ended September30, 2006 and 2005, respectively, were outstanding but were not included in thecomputation of diluted earnings per OP Unit because the effects would beanti-dilutive.*

**13.**          Discontinued Operations

The Operating Partnership has presented separately asdiscontinued operations in all periods the results of operations for allconsolidated assets disposed of on or after January 1, 2002 (the date ofadoption of SFAS No. 144), all operations related to condominium conversionproperties effective upon their respective transfer into a TRS and allproperties held for sale.

The components of discontinued operations are outlinedbelow and include the results of operations for the respective periods that theOperating Partnership owned such assets during the nine months and quarters 

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ended September 30, 2006and 2005 (amounts in thousands).
| ** **                                    | ** ** | **Nine Months Ended  September 30,** | ** ** | **Quarter Ended  September 30,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                            | ** ** | **2005**                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
| **REVENUES**                                  | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rental income                                 |       | $                                                   | 163,033    |                                       | $          | 275,982 |   | $ | 46,710 |   | $ | 85,445 |   |
| Fee and asset  management                     |       | —                                              |       | 693                                        |       | — |   | 229 |   |
| Total revenues                                |       | 163,033                                             |       | 276,675                                    |       | 46,710 |   | 85,674 |   |
|                                          |       |                                                |       |                                       |       |   |   |   |   |
| **EXPENSES (1)**                              | ** ** | ** **                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property and  maintenance                     |       | 61,084                                              |       | 89,467                                     |       | 18,615 |   | 27,392 |   |
| Real estate taxes and  insurance              |       | 19,452                                              |       | 34,656                                     |       | 5,568 |   | 11,006 |   |
| Property management                           |       | 8,894                                               |       | 7,835                                      |       | 2,960 |   | 2,717 |   |
| Depreciation                                  |       | 25,548                                              |       | 67,543                                     |       | — |   | 20,513 |   |
| General and  administrative                   |       | 5,555                                               |       | 924                                        |       | 4,729 |   | 218 |   |
| Total expenses                                |       | 120,533                                             |       | 200,425                                    |       | 31,872 |   | 61,846 |   |
|                                          |       |                                                |       |                                       |       |   |   |   |   |
| Discontinued operating  income                |       | 42,500                                              |       | 76,250                                     |       | 14,838 |   | 23,828 |   |
|                                          |       |                                                |       |                                       |       |   |   |   |   |
| Interest and other  income                    |       | 1,519                                               |       | 857                                        |       | 504 |   | 388 |   |
| Interest (2):                                 |       |                                                |       |                                       |       |   |   |   |   |
| Expense  incurred, net                        |       | (14,803                                             | )          | (24,778                                    | )          | (4,126 | ) | (7,077 | ) |
| Amortization of  deferred financing costs     |       | (673                                                | )          | (638                                       | )          | (40 | ) | (365 | ) |
|                                          |       |                                                |       |                                       |       |   |   |   |   |
| Discontinued operations                       |       | 28,543                                              |       | 51,691                                     |       | 11,176 |   | 16,774 |   |
| Net gain on sales of  discontinued operations |       | 526,873                                             |       | 503,053                                    |       | 24,576 |   | 254,178 |   |
|                                          |       |                                                |       |                                       |       |   |   |   |   |
| Discontinued operations, net                  |       | $                                                   | 555,416    |                                       | $          | 554,744 |   | $ | 35,752 |   | $ | 270,952 |   |

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*(1)**          Includesexpenses paid in the current period for properties sold or held for sale inprior periods related to the Operating Partnership’s period of ownership.*

*(2)**          Includesonly interest expense specific to secured mortgage notes payable for propertiessold and/or held for sale.*

Forthe properties sold during the nine months ended September 30, 2006 (excludingcondominium conversion properties), the investment in real estate, net ofaccumulated depreciation, and the mortgage notes payable balances at December31, 2005 were $544.9 million and $137.0 million, respectively.

Forthe properties held for sale at September 30, 2006 (Lexford Housing Division),the investment in real estate, net of accumulated depreciation, and themortgage notes payable balances at December 31, 2005 were $620.2 million and$205.2 million, respectively. These amounts exclude the Lexford syndicated portfolioas those properties were not consolidated until January 1, 2006.

TheOperating Partnership generally is not liable for Federal income taxes as thepartners recognize their proportionate share of the Operating Partnership’sincome or loss in their tax returns; therefore no provision for federal incometaxes has been made at the ERPOP level. Due to the structure of the Company asa REIT and the nature of the operations of its operating properties, noprovision for federal income taxes has been made at the EQR level. Historically,the Operating Partnership has generally only incurred certain state and localincome, excise and franchise taxes.

TheOperating Partnership has elected Taxable REIT Subsidiary (“TRS”) status forcertain of its corporate subsidiaries, primarily those entities engaged incondominium conversion and sale activities and as a result, these entities haveincurred federal and state income taxes. The Operating Partnership recognizedprovisions for income taxes of $11.2 million and $5.8 million for the ninemonths ended September 30, 2006 and 2005, respectively, and $3.0 million and$5.3 million for the quarters ended September 30, 2006 and 2005, respectively. Theseamounts were classified as reductions of discontinued operations, net in the 

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accompanying consolidatedstatements of operations. In addition, the aggregate results of operations(primarily net operating income) of the Operating Partnership’s condominiumconversion properties are included in discontinued operations, net in theaccompanying consolidated statements of operations.

Thenet real estate basis of the Operating Partnership’s condominium conversionproperties and land parcels owned by the TRS and included in discontinuedoperations, which were included in investment in real estate, net in theconsolidated balance sheets, was $301.7 million and $292.4 million at September30, 2006 and December 31, 2005, respectively.

**14.**          Commitments andContingencies

The Operating Partnership, as an owner of real estate,is subject to various Federal, state and local environmental laws. Complianceby the Operating Partnership with existing laws has not had a material adverseeffect on the Operating Partnership. However, the Operating Partnership cannotpredict the impact of new or changed laws or regulations on its currentproperties or on properties that it may acquire in the future.

The Operating Partnership is party to a housingdiscrimination lawsuit brought in April of 2006 in the United States DistrictCourt for the District of Maryland. The suit alleges that the OperatingPartnership designed and built approximately 300 of the Operating Partnership’sproperties in violation of the accessibility requirements of the Fair HousingAct and Americans With Disabilities Act. The suit seeks actual and punitivedamages, injunctive relief (including modification of non-compliantproperties), costs and attorneys’ fees. The Operating Partnership believes ithas a number of viable defenses, including that a majority of the namedproperties were completed before the operative dates of the statutes inquestion and/or were not designed or built by the Operating Partnership. Accordingly,the Operating Partnership is defending the suit vigorously. Due to the pendencyof the Operating Partnership’s defenses and the uncertainty of many othercritical factual and legal issues, it is not possible to determine or predictthe outcome of the suit and as a result, no amounts have been accrued atSeptember 30, 2006. While no assurances can be given, the Operating Partnershipdoes not believe that the suit, if adversely determined, will have a materialadverse effect on the Operating Partnership.

The Operating Partnership does not believe there isany other litigation pending or threatened against the Operating Partnershipwhich, individually or in the aggregate, reasonably may be expected to have amaterial adverse effect on the Operating Partnership.

During the years ended December 31, 2005 and 2004, theOperating Partnership established a reserve and recorded a correspondingexpense, net of insurance receivables, for estimated uninsured property damageat certain of its properties caused by various hurricanes in each respectiveyear. During the nine months ended September 30, 2006, the OperatingPartnership received $11.0 million in insurance proceeds and recorded anadditional $5.8 million of receivables in anticipation of proceeds expected. Asof September 30, 2006, a receivable of $5.9 million and a liability of $3.7million are included in other assets and rents received in advance and otherliabilities, respectively, on the consolidated balance sheets.

As of September 30, 2006, theOperating Partnership has eleven projects totaling 3,454 units in variousstages of development with estimated completion dates ranging through June 30,2009. The primary development agreements currently in place have the followingkey terms:

**·**                  The first development partner has the right, at anytime following completion of a project subject to the agreement, to stipulate avalue for such project and offer to sell its interest in the project to theOperating Partnership based on such value. If the Operating Partnership choosesnot to purchase the interest, the Operating Partnership must agree to a sale ofthe project to an unrelated third party at such value. The OperatingPartnership’s partner must exercise this right as to all projects subject tothe agreement within five years after the receipt of the final certificate ofoccupancy on the last developed property. In connection with this developmentagreement, the Operating Partnership has anobligation to provide up to $40.0 million in credit enhancements to guarantee aportion of the third party 

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**construction financing. As of November 1, 2006, theOperating Partnership did not have any amounts outstanding related to thiscredit enhancement. The Operating Partnership would be required to performunder this agreement only if there was a material default under a third partyconstruction mortgage agreement. This agreement expires no later than December31, 2018. Notwithstanding the termination of the agreement, the OperatingPartnership shall have recourse against its development partner for any lossesincurred.**

**·**                        The second development partnerhas the right, at any time following completion of a project subject to theagreement, to require the Operating Partnership to purchase the partners’interest in that project at a mutually agreeable price. If the OperatingPartnership and the partner are unable to agree on a price, both parties will obtainappraisals. If the appraised values vary by more than 10%, both the OperatingPartnership and its partner will agree on a third appraiser to determine whichoriginal appraisal is closest to its determination of value. The OperatingPartnership may elect at that time not to purchase the property and instead,authorize its partner to sell the project at or above the agreed-upon value toan unrelated third party. Five years following the receipt of the finalcertificate of occupancy on the last developed property, the OperatingPartnership must purchase, at the agreed-upon price, any projects remainingunsold.

·                  Thethird development partner has the exclusive right for six months followingstabilization, as defined, to market a subject project for sale. Thereafter,either the Operating Partnership or its development partner may market asubject project for sale. If the Operating Partnership’s development partnerproposes the sale, the Operating Partnership may elect to purchase the projectat the price proposed by its partner or defer the sale until two independentappraisers appraise the project. If the two appraised values vary by more than5%, a third appraiser will be chosen to determine the fair market value of theproperty. Once a value has been determined, the Operating Partnership may electto purchase the property or authorize its development partner to sell theproject at the agreed-upon value.

In addition, the OperatingPartnership has various deal-specific development agreements with partners, theoverall terms of which are similar in nature to those described above.

**15.**          Reportable Segments

Operating segments are defined as components of anenterprise about which separate financial information is available that isevaluated regularly by senior management. Senior management decides howresources are allocated and assesses performance on a monthly basis.

The Operating Partnership’s primary business isowning, managing, and operating multifamily residential properties, whichincludes the generation of rental and other related income through the leasingof apartment units to residents and includes Equity Corporate Housing (“ECH”). Seniormanagement evaluates the performance of each of our apartment communities on anindividual basis; however, each of our apartment communities has similareconomic characteristics, residents, and products and services so they havebeen aggregated into one reportable segment. The Operating Partnership’s rentalreal estate segment comprises approximately 99.5% and 99.4% of total revenuesfrom continuing operations for the nine months ended September 30, 2006 and2005, respectively, and approximately 99.6% and 99.4% of total revenues for thequarters ended September 30, 2006 and 2005, respectively. The OperatingPartnership’s rental real estate segment comprises approximately 99.8% of totalassets at both September 30, 2006 and December 31, 2005.

The primary financial measure for the OperatingPartnership’s rental real estate segment is net operating income (“NOI”), whichrepresents rental income less: 1) property and maintenance expense; 2) realestate taxes and insurance expense; and 3) property management expense (asreflected in the accompanying consolidated statements of operations). TheOperating Partnership believes that NOI is helpful to investors as asupplemental measure of the operating performance of a real estate companybecause it is a direct measure of the actual operating results of the OperatingPartnership’s apartment communities. Current year NOI is 

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compared to prior yearNOI and current year budgeted NOI as a measure of financial performance. Thefollowing table presents the NOI from our rental real estate specific tocontinuing operations for the nine months and quarters ended September 30, 2006and 2005, respectively (amounts in thousands):
| ** **                               | ** ** | **Nine Months Ended  September 30,** | ** ** | **Quarter Ended  September 30,** | ** ** |
|------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                               | ** ** | **2006**                                            | ** ** | **2005**                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
| Rental income                            |       | $                                                   | 1,470,705  |                                       | $          | 1,237,279 |   | $ | 511,794 |   | $ | 428,357 |   |
| Property and  maintenance expense        |       | (390,732                                            | )          | (338,810                                   | )          | (138,285 | ) | (121,562 | ) |
| Real estate  taxes and insurance expense |       | (148,604                                            | )          | (136,813                                   | )          | (51,525 | ) | (50,181 | ) |
| Property  management expense             |       | (70,081                                             | )          | (63,351                                    | )          | (23,417 | ) | (21,944 | ) |
| Net operating income                     |       | $                                                   | 861,288    |                                       | $          | 698,305 |   | $ | 298,567 |   | $ | 234,670 |   |

 

The Operating Partnership’s fee and asset managementactivity is immaterial and does not meet the threshold requirements of areportable segment as provided for in SFAS No. 131.

All revenues are from external customers and there isno customer who contributed 10% or more of the Operating Partnership’s totalrevenues during the nine months ended September 30, 2006 or 2005.

**16.**          Subsequent Events/Other

Subsequent to September 30, 2006 and through November1, 2006, the Operating Partnership:

·                  Disposedof the Lexford Housing Division on October 5, 2006 for a cash purchase price of$1.086 billion. The Lexford Housing Division was comprised of 289 properties,consisting of 27,115 apartment units located in ten states and a propertymanagement business, consisting of approximately 800 employees. Prior to and inconjunction with the closing of the sale, the Operating Partnership paid off$196.3 million of mortgage notes and incurred approximately $10.8 million inprepayment penalties upon extinguishment;

·                  Disposedof two other residential properties consisting of 408 units (excludingcondominium units) and one commercial parcel for approximately $33.0 million;

·                  Acquired$222.6 million of apartment properties consisting of five properties and 1,029units;

·                  Assumed$34.5 million of mortgage debt in connection with the acquisition of oneproperty;

·                  Repaid$50.0 million of 6.69% fixed rate public notes and $11.0 million offloating rate mortgage debt at maturity; and

·                  Terminatedits $500.0 million short-term revolving credit facility.

 

During the nine months ended September 30, 2006and 2005, the Operating Partnership received proceeds from technology and otherinvestments of $3.7 million and $82.1 million, respectively, from thefollowing:

·                  $25.0 million in full redemptionof its 1,000,000 shares of 8.25% Convertible Trust Preferred Securitiesduring 2005; and

·                  $3.7 million and$57.1 million for its ownership interest in Rent.com in connection withthe acquisition of Rent.com by eBay, Inc. in 2006 and 2005, respectively. Bothamounts were recorded as interest and other income in the respectiveconsolidated statements of operations.

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**Item 2.  Management’s Discussionand Analysis of Financial Condition and Results of Operations**

**Overview**

Forfurther information including definitions for capitalized terms not definedherein, refer to the consolidated financial statements and footnotes theretoincluded in the Operating Partnership’s annual report on Form 10-K for the yearended December 31, 2005.

Forward-lookingstatements in this report are intended to be made pursuant to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995.  These statements are based on currentexpectations, estimates, projections and assumptions made by management.  While the Operating Partnership’s managementbelieves the assumptions underlying its forward-looking statements arereasonable, such information is inherently subject to uncertainties and mayinvolve certain risks, which could cause actual results, performance, orachievements of the Operating Partnership to differ materially from anticipatedfuture results, performance or achievements expressed or implied by suchforward-looking statements.  Many ofthese uncertainties and risks are difficult to predict and beyond management’scontrol.  Forward-looking statements arenot guarantees of future performance, results or events.  The Operating Partnership assumes noobligation to update or supplement forward-looking statements because ofsubsequent events.   Factors that mightcause such differences include, but are not limited to the following:

·                  Occupancylevels and market rents may be adversely affected by national and localeconomic and market conditions including, without limitation, new constructionof multifamily housing, slow employment growth, availability of low interestmortgages for single-family home buyers and the potential for geopoliticalinstability, all of which are beyond the Operating Partnership’s control;

·                  Sourcesof capital to the Operating Partnership or labor and materials required formaintenance, repair, capital expenditure or development are more expensive thananticipated;

·                  Weintend to actively acquire and develop multifamily properties for rentaloperations and/or conversion into condominiums, as well as upgrade and sellexisting properties as individual condominiums. We may underestimate the costs necessary to bring an acquired orcondominium conversion property up to standards established for its intendedmarket position or to otherwise develop a property.  Additionally, we expect that other major realestate investors with significant capital will compete with us for attractiveinvestment opportunities or may also develop properties in markets where wefocus our development efforts.  Thiscompetition may increase prices for multifamily properties or decrease the priceat which we expect to sell individual condominiums.  We may not be in a position or have theopportunity in the future to make suitable property acquisitions on favorableterms.  We also plan to develop moreproperties ourselves in addition to co-investing with our development partnersfor either the rental or condominium market, depending on opportunities in eachsub-market.  This may increase theoverall level of risk associated with our developments.  The total number of development units, costof development and estimated completion dates are subject to uncertaintiesarising from changing economic conditions (such as the cost of labor andconstruction materials), competition and local government regulation;

·                  Inaddition, upon conversion of properties to condominiums, there may be increasedrisk related to construction performed during the conversion.  Condominium associations may assert that theconstruction performed was defective, resulting in litigation and/or settlementdiscussions; and

·                  Additionalfactors as discussed in Part I of the Annual Report on Form 10-K, particularlythose under “Risk Factors”.

Readersare cautioned not to place undue reliance on these forward-looking statements,which speak only as of the date hereof. The Operating Partnership undertakes no obligation to publicly releaseany revisions to these forward-looking statements, which may be made to reflectevents or circumstances after the date hereof or to reflect the occurrence ofunanticipated events.  Forward-lookingstatements and related 

23

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uncertainties arealso included in Notes 4, 5, 11 and 16 to the Notes to Consolidated FinancialStatements in this report.

**Results of Operations**

Inconjunction with our business objectives and operating strategy, the OperatingPartnership has continued to invest or recycle its capital investment inapartment communities located in strategically targeted markets during the ninemonths ended September 30, 2006.  Insummary, we:

·                  Acquired $1.4 billionof properties consisting of 28 properties and 7,480 units and $93.5 million ofland parcels, all of which we deem to be in our strategic targeted markets; and

·                  Sold $1.0 billion ofapartment properties consisting of 40 properties and 10,661 units as well as 840condominium units for $172.6 million and $1.6 million of land parcels.

 

OnJune 28, 2006, the Operating Partnership announced that it agreed to sell itsLexford Housing Division for a cash purchase price of $1.086 billion.  The sale closed on October 5, 2006.  The Lexford Housing Division results areclassified as discontinued operations, net of minority interests, in theconsolidated statements of operations for all periods presented and Lexfordinvestment in real estate and mortgage notes payable balances are classified asheld for sale in the consolidated balance sheets as of September 30, 2006.  The Operating Partnership expects to record again on sale of approximately $420.0 million on the sale of the Lexford HousingDivision in the fourth quarter of 2006.

The Operating Partnership’s primary financial measurefor evaluating each of its apartment communities is net operating income (“NOI”).  NOI represents rental income less propertyand maintenance expense, real estate tax and insurance expense, and propertymanagement expense.  The OperatingPartnership believes that NOI is helpful to investors as a supplemental measureof the operating performance of a real estate company because it is a directmeasure of the actual operating results of the Operating Partnership’sapartment communities.

Propertiesthat the Operating Partnership owned for all of both of the nine months endedSeptember 30, 2006 and 2005 (the “Nine-Month 2006 Same Store Properties”),which represented 129,965 units and properties that the Operating Partnershipowned for all of both of the quarters ended September 30, 2006 and 2005 (the “ThirdQuarter 2006 Same Store Properties”), which represented 133,526 units, alsoimpacted the Operating Partnership’s results of operations.  Both the Nine-Month 2006 Same StoreProperties and Third Quarter 2006 Same Store Properties are discussed in thefollowing paragraphs.

TheOperating Partnership’s acquisition, disposition, completed development andconsolidation of previously unconsolidated property activities also impactedoverall results of operations for the nine months and quarters ended September30, 2006 and 2005.  The impacts of theseactivities are also discussed in greater detail in the following paragraphs.

***Comparison of the nine months endedSeptember 30, 2006 to the nine months ended September 30, 2005***

For the nine months endedSeptember 30, 2006, income from continuing operations decreased byapproximately $39.5 million when compared to the nine months ended September30, 2005.  This decrease is primarilyattributable to the reasons discussed below.

**Revenuesfrom the Nine-Month 2006 Same Store Properties increased $68.4 millionprimarily as a result of higher rental rates charged to residents.  Expenses from the Nine-Month 2006 Same StoreProperties increased $14.6 million primarily due to higher maintenance,payroll, utility costs and real estate taxes. All same store results exclude the Lexford Housing Division.  See Note 4 in the Notes to ConsolidatedFinancial Statements for further discussion. The following tables provide comparative revenue, expense, NOI andoccupancy/turnover statistics for the Nine-Month 2006 Same Store Properties:**

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** **

**SeptemberYTD 2006 vs. September YTD 2005**

**YTD overYTD Same-Store Results**

**$ inMillions — 129,965 Same-Store Units (excludes Lexford)**

 

| Description | ** ** | **Revenues** | ** ** | **Expenses** | ** ** | **NOI** | ** ** |
|-------------|------------|--------------|------------|--------------|------------|---------|------------|
| YTD 2006    |       | $            | 1,214.5    |         | $          | 474.5   |       | $ | 740.0 |   |
| YTD 2005    |       | $            | 1,146.1    |         | $          | 459.9   |       | $ | 686.2 |   |
| Change      |       | $            | 68.4       |         | $          | 14.6    |       | $ | 53.8 |   |
| Change      |       | 6.0          | %          | 3.2          | %          | 7.8     | %          |

** **

**Same-StoreStatistics (excludes Lexford)**

 

|          | ** ** | **Occupancy** | ** ** | **Turnover** | ** ** |
|----------|------------|---------------|------------|--------------|------------|
| YTD 2006 |       | 94.6          | %          | 49.3         | %          |
| YTD 2005 |       | 94.7          | %          | 50.4         | %          |
| Change   |       | (0.1          | )%         | (1.1         | )%         |

** **

**The following table presents a reconciliation ofoperating income per the consolidated statements of operations to NOI for theNine-Month 2006 Same-Store Properties:**

|                                  | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------|------------|-----------------------------------------------------|------------|
| ** **                       | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| ** **                       | ** ** | **(Amounts in millions)**                 | ** ** |
| ** **                       | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Operating income                 |       | $                                                   | 408.9      |   | $ | 330.2 |   |
| Adjustments:                     |       |                                                |       |   |   |
| Non-same-store operating results |       | (121.3                                              | )          | (12.1 | ) |
| Fee and asset management revenue |       | (6.9                                                | )          | (7.8 | ) |
| Fee and asset management expense |       | 6.5                                                 |       | 6.4 |   |
| Depreciation                     |       | 415.2                                               |       | 323.6 |   |
| General and administrative       |       | 37.6                                                |       | 45.9 |   |
| Same-store NOI                   |       | $                                                   | 740.0      |   | $ | 686.2 |   |

** **

**For**properties that the OperatingPartnership acquired prior to January 1, 2005 and expects to continue to ownthrough December 31, 2006, the Operating Partnership anticipates the followingsame store results for the full year ending December 31, 2006:

**2006 Same-Store Assumptions**

| Physical Occupancy |   | 94.5 | % |
|--------------------|--------|------|---|
| Revenue Change     |   | 5.75 | % |
| Expense Change     |   | 3.50 | % |
| NOI Change         |   | 7.20 | % |

** **

**These 2006 assumptions are based on currentexpectations and are forward-looking.**

**Non-same-store operating results increased $109.2**million and consistprimarily of properties acquired in calendar years 2006 and 2005 as well as ourcorporate housing business.

Fee and asset managementrevenues, net of fee and asset management expenses decreased $1.0 millionprimarily as a result of lower income earned from managing fewer properties forthird parties and unconsolidated entities. As of September 30, 2006 and 2005, the Operating Partnership managed14,784 units and 17,148 units, respectively, for third parties and unconsolidatedentities.

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Property management expenses from continuingoperations include off-site expenses associated with the self-management of theOperating Partnership’s properties as well as management fees paid to any thirdparty management companies.  Theseexpenses increased by approximately $6.7 million or 10.6%.  This increase is primarily attributable tohigher overall payroll costs and higher overall computer and training costsspecific to the Operating Partnership’s rollout of a new property managementsystem.

Depreciation expense fromcontinuing operations, which includes depreciation on non-real estate assets,increased $91.6 million primarily as a result of additional depreciationexpense on newly acquired properties and capital expenditures for allproperties owned.

General and administrative expenses, which includecorporate operating expenses, decreased approximately $8.3 million between theperiods under comparison.  This decreasewas primarily due to lower executive compensation expense due to severancecosts for several executive officers incurred during the nine months endedSeptember 30, 2005 and a $2.8 million reimbursement of legal expenses duringthe nine months ended September 30, 2006. The Operating Partnership anticipates that general and administrativeexpenses will approximate $50.0 million for the year ending December 31,2006.  This above assumption is based oncurrent expectations and is forward-looking.

**Interest and other income from continuing operationsdecreased by approximately $53.2 million, primarily as a result of the $57.1million in cash received during the nine months ended September 30, 2005,partially offset by the $3.7 million in additional proceeds received during thenine months ended September 30, 2006, all for the Operating Partnership’sownership interest in Rent.com, which was acquired by eBay, Inc.**

Interest expense from continuingoperations, including amortization of deferred financing costs, increasedapproximately $54.8****millionprimarily as a result of higher variable interest rates and overall debt levelsoutstanding.  During the nine monthsended September 30, 2006, the Operating Partnership capitalized interest costsof approximately $13.2 million as compared to $9.1 million for the nine monthsended September 30, 2005.  Thiscapitalization of interest primarily relates to projects underdevelopment.  The effective interest coston all indebtedness for the nine months ended September 30, 2006 was 6.14% ascompared to 6.23% for the nine months ended September 30, 2005.

Loss from investments in unconsolidated entitiesincreased approximately $0.1 million between the periods under comparison.  This increase is primarily the result ofconsolidating previously unconsolidated properties as of January 1, 2006 as theresult of EITF Issue No. 04-05.  See Note 4 in the Notes to ConsolidatedFinancial Statements for further discussion.

Net gain on sales of land parcels decreased $7.2million, due to a large gain recorded on the sale of one land parcel during thenine months ended September 30, 2005.

Discontinued operations, netincreased approximately $0.7 million between the periods under comparison.  This increase is primarily the result ofhigher per unit sales prices and lower real estate net book values for propertiessold during the nine months ended September 30, 2006 as compared to the sameperiod in 2005.  Discontinued operations,net of minority interests includes our Lexford Housing Division, which is heldfor sale as of September 30, 2006.  SeeNote 13 in the Notes to Consolidated Financial Statements for furtherdiscussion.

***Comparison of the quarter endedSeptember 30, 2006 to the quarter ended September 30, 2005***

For the quarter ended September30, 2006, income from continuing operations increased by approximately $22.4million when compared to the quarter ended September 30, 2005.

** **

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**Revenuesfrom the Third Quarter 2006 Same Store Properties increased $23.8 millionprimarily as a result of higher rental rates charged to residents.  Expenses from the Third Quarter 2006 SameStore Properties increased $2.3 million primarily due to higher payroll,utility costs and real estate taxes.  Thefollowing tables provide comparative revenue, expense, NOI andoccupancy/turnover statistics for the Third Quarter 2006 Same Store Properties:**

**ThirdQuarter 2006 vs. Third Quarter 2005**

**Quarterover Quarter Same-Store Results**

**$ inMillions — 133,526 Same-Store Units (excludes Lexford)**

 

| Description | ** ** | **Revenues** | ** ** | **Expenses** | ** ** | **NOI** | ** ** |
|-------------|------------|--------------|------------|--------------|------------|---------|------------|
| Q3 2006     |       | $            | 423.7      |         | $          | 165.9   |       | $ | 257.8 |   |
| Q3 2005     |       | $            | 399.9      |         | $          | 163.6   |       | $ | 236.3 |   |
| Change      |       | $            | 23.8       |         | $          | 2.3     |       | $ | 21.5 |   |
| Change      |       | 5.9          | %          | 1.4          | %          | 9.1     | %          |

** **

**Same-StoreStatistics (excludes Lexford)**

 

|         | ** ** | **Occupancy** | ** ** | **Turnover** | ** ** |
|---------|------------|---------------|------------|--------------|------------|
| Q3 2006 |       | 94.6          | %          | 18.8         | %          |
| Q3 2005 |       | 95.2          | %          | 18.7         | %          |
| Change  |       | (0.6          | )%         | 0.1          | %          |

** **

**The following table presents a reconciliation ofoperating income per the consolidated statements of operations to NOI for theThird Quarter 2006 Same-Store Properties:**

|                                   | ** ** | **Quarter Ended September 30,** | ** ** |
|-----------------------------------|------------|------------------------------------------------|------------|
| ** **                        | ** ** | **2006**                                       | ** ** | **2005** | ** ** |
| ** **                        | ** ** | **(Amounts in millions)**            | ** ** |
| ** **                        | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Operating income                  |       | $                                              | 140.8      |   | $ | 109.1 |   |
| Adjustments:                      |       |                                           |       |   |   |
| Non-same-store  operating results |       | (40.8                                          | )          | 1.6 |   |
| Fee and asset  management revenue |       | (2.1                                           | )          | (2.4 | ) |
| Fee and asset  management expense |       | 2.2                                            |       | 2.2 |   |
| Depreciation                      |       | 143.3                                          |       | 111.4 |   |
| General and  administrative       |       | 14.4                                           |       | 14.4 |   |
| Same-store NOI                    |       | $                                              | 257.8      |   | $ | 236.3 |   |

** **

**Non-same-store operating results increased $42.4million and consist primarily of properties acquired in calendar years 2006 and2005 as well as our corporate housing business.**

Fee and asset managementrevenues, net of fee and asset management expenses decreased $0.3 millionprimarily as a result of lower income earned from managing fewer properties forthird parties and unconsolidated entities.

**Property management expenses from continuingoperations include off-site expenses associated with the self-management of theOperating Partnership’s properties as well as management fees paid to any thirdparty management companies.  Theseexpenses increased by approximately $1.5 million or 6.7%.  This increase is primarily attributable tohigher overall payroll costs and training costs specific to the OperatingPartnership’s rollout of a new property management system.**

Depreciation expense fromcontinuing operations, which includes depreciation on non-real estate assets, increased$31.9 million primarily as a result of additional depreciation expense on newlyacquired properties and capital expenditures for all properties owned.

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General and administrative expenses, which includecorporate operating expenses, were consistent between the periods undercomparison.

**Interest and other income from continuing operationsincreased by approximately $4.7**million, primarily as a result of $3.7million in additional proceeds received during the quarter ended September 30,2006 related to the Operating Partnership’s ownership interest in Rent.com,which was acquired by eBay, Inc.

Interest expense from continuingoperations, including amortization of deferred financing costs, increasedapproximately $18.2****millionprimarily as a result of higher variable interest rates and overall debt levelsoutstanding.  During the quarter endedSeptember 30, 2006, the Operating Partnership capitalized interest costs ofapproximately $5.4 million as compared to $3.3 million for the quarter endedSeptember 30, 2005.  This capitalizationof interest primarily relates to projects under development.  The effective interest cost on allindebtedness for the quarter ended September 30, 2006 was 6.03% as compared to6.28% for the quarter ended September 30, 2005.

Loss from investments in unconsolidated entities wasconsistent between the periods under comparison.  SeeNote 4 in the Notes to Consolidated Financial Statements for furtherdiscussion.

Net gain on sales of land parcels increased $2.9million between the periods under comparison as the Operating Partnershiprecognized a deferred gain on a collected note receivable related to a parcelsold in 2005.

Discontinued operations, netdecreased approximately $235.2 million between the periods undercomparison.  This decrease is due todisposing of only two properties during the quarter ended September 30, 2006 inanticipation of the fourth quarter disposition of the Lexford Portfolio.  See Note 4 in the Notes to ConsolidatedFinancial Statements for further discussion.

**Liquidity and Capital Resources**

As of January 1, 2006,the Operating Partnership had approximately $88.8 million of cash and cashequivalents and $780.8 million available under its revolving credit facilities(net of $50.2 million which was restricted/dedicated to support letters ofcredit and not available for borrowing). After taking into effect the various transactions discussed in thefollowing paragraphs and the net cash provided by operating activities, theOperating Partnership’s cash and cash equivalents balance at September 30, 2006was approximately $76.3 million and the amount available on the OperatingPartnership’s revolving credit facilities was $912.0 million (net of $82.0million which was restricted/dedicated to support letters of credit and notavailable for borrowing).

During the nine months ended September 30, 2006, theOperating Partnership generated proceeds from various transactions, whichincluded the following:

·                  Disposedof 45 properties, various individual condominium units and two land parcels,receiving net proceeds of approximately $1.1 billion;

·                  Obtained$395.5 million in net proceeds from the issuance of $400.0 million of ten andone-half year 5.375% fixed rate public notes and terminated six forwardstarting swaps designated to hedge the note issuance, receiving net proceeds of$10.7 million;

·                  Obtained$637.0 million in net proceeds from the issuance of $650.0 million of twentyyear 3.85% exchangeable fixed rate public notes;

·                  Obtained$247.8 million in new mortgage financing; and

·                  Issuedapproximately 2.1 million OP Units and received net proceeds of $57.0 million.

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**Duringthe nine months ended September 30, 2006, the above proceeds were primarilyutilized to:**

·                  Invest $193.6 million primarily indevelopment projects;

·      Acquire 28 properties and six landparcels, utilizing cash of $1.4 billion;

·      Repurchase 1.9 million OP Units utilizingcash of $83.2 million;

·                  Repay $267.0 million of mortgageloans;

·                  Repay $10.0 million of fixed ratepublic notes;

·                  Redeem the Series G PreferenceInterests at a liquidation value of $25.5 million; and

·                  Redeem theSeries C Preference Units at a liquidation value of $115.0 million.

**Dependingon its analysis of market prices, economic conditions, and other opportunitiesfor the investment of available capital, the Company may repurchase its CommonShares pursuant to its existing share buyback program authorized by the Boardof Trustees.  EQR repurchased $83.2million (1,897,912 shares at an average price per share of $43.85) of itsCommon Shares during the nine months ended September 30, 2006 to offset theissuance of 1,144,326 OP Units to limited partners in connection with threeproperty acquisitions and to partially offset EQR restricted shares granted andESPP shares purchased during the nine months ended September 30, 2006.  Concurrent with this transaction, theOperating Partnership repurchased and retired 1,897,912 OP Units previouslyissued to EQR.  EQR is authorized torepurchase approximately $501.8 million of additional Common Shares.  The Operating Partnership in turn wouldrepurchase $501.8 million of its OP Units held by EQR.**

**TheOperating Partnership’s total debt summary and debt maturity schedules as ofSeptember 30, 2006, are as follows:**

**DebtSummary as of September 30, 2006**

(Amounts inthousands)

 
| ** **                                    | ** ** | **Amounts (1)** | ** ** | **% of Total** | ** ** | **Weighted  Average  Rates (1)** | ** ** | **Weighted  Average  Maturities  (years)** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|--------------------------|------------|---------------------------------------|------------|--------------------------------------------|------------|
| Secured                                       |       | $                    | 3,353,413  |                     | 40.3       | %                                     | 5.83       | %                                          | 6.3        |   |
| Unsecured                                     |       | 4,975,043            |       | 59.7                     | %          | 5.91                                  | %          | 6.7                                        |       |
| Total                                         |       | $                    | 8,328,456  |                     | 100.0      | %                                     | 5.87       | %                                          | 6.5        |   |
|                                          |       |                 |       |                     |       |                                  |       |                                       |       |
| Fixed Rate Debt:                              |       |                 |       |                     |       |                                  |       |                                       |       |
| Secured —  Conventional                  |       | $                    | 2,495,958  |                     | 30.0       | %                                     | 6.33       | %                                          | 4.3        |   |
| Secured — Tax  Exempt                    |       | 18,289               |       | 0.2                      | %          | 6.40                                  | %          | 18.5                                       |       |
| Unsecured —  Public/Private              |       | 4,207,653            |       | 50.5                     | %          | 6.00                                  | %          | 7.0                                        |       |
| Unsecured — Tax  Exempt                  |       | 111,390              |       | 1.3                      | %          | 5.07                                  | %          | 22.6                                       |       |
| Fixed Rate Debt                               |       | 6,833,290            |       | 82.0                     | %          | 6.12                                  | %          | 6.3                                        |       |
|                                          |       |                 |       |                     |       |                                  |       |                                       |       |
| Floating Rate Debt:                           |       |                 |       |                     |       |                                  |       |                                       |       |
| Secured —  Conventional                  |       | 304,008              |       | 3.7                      | %          | 6.24                                  | %          | 2.0                                        |       |
| Secured — Tax  Exempt                    |       | 535,158              |       | 6.4                      | %          | 3.43                                  | %          | 17.6                                       |       |
| Unsecured —  Public                      |       | 150,000              |       | 1.8                      | %          | 6.03                                  | %          | 2.7                                        |       |
| Unsecured —  Revolving Credit Facilities |       | 506,000              |       | 6.1                      | %          | 5.34                                  | %          | 1.4                                        |       |
| Floating Rate  Debt                           |       | 1,495,166            |       | 18.0                     | %          | 4.84                                  | %          | 7.4                                        |       |
|                                          |       |                 |       |                     |       |                                  |       |                                       |       |
| Total                                         |       | $                    | 8,328,456  |                     | 100.0      | %                                     | 5.87       | %                                          | 6.5        |   |

----

(1)             Netof the effect of any derivative instruments. Weighted average rates are for the nine months ended September 30, 2006.

29

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**Debt Maturity Schedule as of September 30, 2006**

**(Amountsin thousands)**
| **Year** | ** ** | **Fixed  Rate (1)** | ** ** | **Floating  Rate (1)** | ** ** | **Total (5)** | ** ** | **% of Total** | ** ** | **Weighted  Average Rates  on Fixed Rate  Debt (1)** | ** ** | **Weighted  Average Rates  on Total  Debt (1)** | ** ** |
|----------|------------|--------------------------|------------|-----------------------------|------------|--------------------|------------|--------------------------|------------|--------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| 2006     |       | $                        | 227,510    |                        | $          | 28,578             |       | $                        | 256,088    |                                                                     | 3.1        | %                                                              | 7.03       | % | 7.02 | % |
| 2007(2)  |       | 325,525                  |       | 249,202                     |       | 574,727            |       | 6.9                      | %          | 6.88                                                                     | %          | 6.52                                                           | %          |
| 2008(3)  |       | 556,308                  |       | 359,334                     |       | 915,642            |       | 11.0                     | %          | 6.73                                                                     | %          | 6.23                                                           | %          |
| 2009     |       | 480,003                  |       | 382,029                     |       | 862,032            |       | 10.3                     | %          | 6.43                                                                     | %          | 5.34                                                           | %          |
| 2010     |       | 279,768                  |       | —                      |       | 279,768            |       | 3.4                      | %          | 7.05                                                                     | %          | 7.05                                                           | %          |
| 2011(4)  |       | 1,450,123                |       | 24,150                      |       | 1,474,273          |       | 17.7                     | %          | 5.52                                                                     | %          | 5.49                                                           | %          |
| 2012     |       | 558,522                  |       | —                      |       | 558,522            |       | 6.7                      | %          | 6.48                                                                     | %          | 6.48                                                           | %          |
| 2013     |       | 567,485                  |       | —                      |       | 567,485            |       | 6.8                      | %          | 5.93                                                                     | %          | 5.93                                                           | %          |
| 2014     |       | 504,291                  |       | —                      |       | 504,291            |       | 6.1                      | %          | 5.27                                                                     | %          | 5.27                                                           | %          |
| 2015     |       | 316,638                  |       | —                      |       | 316,638            |       | 3.8                      | %          | 6.53                                                                     | %          | 6.53                                                           | %          |
| 2016+    |       | 1,567,117                |       | 451,873                     |       | 2,018,990          |       | 24.2                     | %          | 5.74                                                                     | %          | 5.44                                                           | %          |
| Total    |       | $                        | 6,833,290  |                        | $          | 1,495,166          |       | $                        | 8,328,456  |                                                                     | 100.0      | %                                                              | 6.05       | % | 5.84 | % |

----

(1)             Netof the effect of any derivative instruments. Weighted average rates are as of September 30, 2006.

(2)             Includes$176.0 million outstanding on the Operating Partnership’s short-term $500.0million unsecured revolving credit facility. This facility was terminated by the Operating Partnership on October 13,2006.

(3)             Includes$330.0 million outstanding on the Operating Partnership’s long-term $1.0billion unsecured revolving credit facility, which matures on May 29, 2008.

(4)             Includes$650.0 million of 3.85% exchangeable unsecured debt with a final maturity of2026.  The notes are callable by theOperating Partnership on or after August 18, 2011.  The notes are putable by the holders onAugust 18, 2011, August 15, 2016 and August 15, 2021.

(5)             Theabove table includes the following maturity amounts (in thousands) related tothe Lexford Portfolio, all of which was repaid in full in October 2006: 2006 -$94,981; 2007 - $28,618; 2008 - $44,152; 2009 - $27,459; 2010 - $515; 2011 -$600.

**The following table provides a summary of the OperatingPartnership’s unsecured debt as of September 30, 2006:**

** **

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**UnsecuredDebt Summary as of September 30, 2006**

(Amounts in thousands)

 
| ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Unamortized** | ** ** | ** **  | ** ** |
|----------------------------------|------------|------------|------------|------------|------------|------------|------------|-----------------|------------|-------------|------------|
| ** **                       | ** ** | **Coupon** | ** ** | **Due**    | ** ** | **Face**   | ** ** | **Premium/**    | ** ** | **Net**     | ** ** |
| ** **                       | ** ** | **Rate**   | ** ** | **Date**   | ** ** | **Amount** | ** ** | **(Discount)**  | ** ** | **Balance** | ** ** |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Fixed Rate Notes:**            |       |       |       |       |       |       |       |            |       |        |       |
|                             |       | 6.690      | %          | 11/01/06   |       | $          | 50,000     |            | $          | (4          | )          | $ | 49,996 |   |
|                             |       | 7.625      | %          | 04/15/07   |       | 50,000     |       | 94              |       | 50,094      |       |
|                             |       | 6.900      | %          | 08/01/07   |       | 50,000     |       | (21             | )          | 49,979      |       |
|                             |       | 7.540      | %          | 09/01/07   | (1)        | 4,286      |       | —          |       | 4,286       |       |
|                             |       | 4.861      | %          | 11/30/07   |       | 50,000     |       | —          |       | 50,000      |       |
|                             |       | 7.500      | %          | 08/15/08   | (1)        | 130,000    |       | —          |       | 130,000     |       |
|                             |       | 4.750      | %          | 06/15/09   | (2)        | 300,000    |       | (743            | )          | 299,257     |       |
|                             |       | 6.950      | %          | 03/02/11   |       | 300,000    |       | 3,817           |       | 303,817     |       |
|                             |       | 6.625      | %          | 03/15/12   |       | 400,000    |       | (1,603          | )          | 398,397     |       |
|                             |       | 5.200      | %          | 04/01/13   |       | 400,000    |       | (770            | )          | 399,230     |       |
|                             |       | 5.250      | %          | 09/15/14   |       | 500,000    |       | (489            | )          | 499,511     |       |
|                             |       | 6.584      | %          | 04/13/15   |       | 300,000    |       | (946            | )          | 299,054     |       |
|                             |       | 5.125      | %          | 03/15/16   |       | 500,000    |       | (507            | )          | 499,493     |       |
|                             |       | 5.375      | %          | 08/01/16   |       | 400,000    |       | (1,824          | )          | 398,176     |       |
|                             |       | 7.125      | %          | 10/15/17   |       | 150,000    |       | (716            | )          | 149,284     |       |
|                             |       | 7.570      | %          | 08/15/26   |       | 140,000    |       | —          |       | 140,000     |       |
|                             |       | 3.850      | %          | 08/15/26   | (3)        | 650,000    |       | (8,091          | )          | 641,909     |       |
| Floating Rate  Adjustments       |       |       |       |       | (2)        | (150,000   | )          | —          |       | (150,000    | )          |
| FAS 133 Adjustments -  net       |       |       |       |       | (2)        | (4,830     | )          | —          |       | (4,830      | )          |
|                             |       |       |       |       |       | 4,219,456  |       | (11,803         | )          | 4,207,653   |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Fixed Rate Tax Exempt Notes:** |       |       |       |       |       |       |       |            |       |        |       |
| ** **                       |       | 4.750      | %          | 12/15/28   | (1)        | 35,600     |       | —          |       | 35,600      |       |
|                             |       | 5.200      | %          | 06/15/29   | (1)        | 75,790     |       | —          |       | 75,790      |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
|                             |       |       |       |       |       | 111,390    |       | —          |       | 111,390     |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Floating Rate Notes:**         |       |       |       | 06/15/09   | (2)        | 150,000    |       | —          |       | 150,000     |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Revolving Credit Facilities:** |       |       |       | 05/29/08   | (4)        | 506,000    |       | —          |       | 506,000     |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Total Unsecured Debt**         |       |       |       |       |       | $          | 4,986,846  |            | $          | (11,803     | )          | $ | 4,975,043 |   |

----

(1)             Notesare private.  All other unsecured debt ispublic.

(2)             $150.0million in fair value interest rate swaps converts 50% of the 4.750% Notes dueJune 15, 2009 to a floating interest rate.

(3)             Convertiblenotes mature on August 15, 2026.  Thenotes are callable by the Operating Partnership on or after August 18, 2011.The notes are putable by the holders on August 18, 2011, August 15, 2016 andAugust 15, 2021.

(4)             Includes$176.0 million and $330.0 million outstanding on the Operating Partnership’sshort-term $500.0 million and long-term $1.0 billion unsecured revolving creditfacilities, respectively.  The short-termfacility was terminated on October 13, 2006.

**As of November 1, 2006, an unlimited amount of debt securities remainsavailable for issuance by the Operating Partnership under a registrationstatement that became automatically effective upon filing with the SEC in June2006 (under SEC regulations, the registration statement automatically expireson June 29, 2009 and does not contain a maximum issuance amount) and $956.5million in equity securities remains**

31

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**available forissuance by EQR under a registration statement the SEC declared effective inFebruary 1998.  Per the terms of ERPOP’spartnership agreement, EQR contributes the net proceeds of all equity offeringsto the capital of the Operating Partnership in exchange for additional OP Units(on a one-for-one Common Share per OP Unit basis) or preference units (on aone-for-one preferred share per preference unit basis).**

**TheOperating Partnership’s “Consolidated Debt-to-Total Market Capitalization Ratio”as of September 30, 2006 is presented in the following table.  The Operating Partnership calculates theequity component of its market capitalization as the sum of (i) the totaloutstanding OP Units at the equivalent market value of the closing price of EQR’sCommon Shares on the New York Stock Exchange; (ii) the “OP Unit Equivalent” ofall convertible preference units/interests; and (iii) the liquidation value ofall perpetual preference units outstanding.**

Capital Structure as ofSeptember 30, 2006

(Amounts in thousandsexcept for unit and per unit amounts)

 
| Secured Debt                                  | ** ** | ** **  |       | $              | 3,157,088      |       | 38         | %          |    |   |
|-----------------------------------------------|------------|-------------|------------|----------------|----------------|------------|------------|------------|---------|--------|
| Secured Debt — Properties Held for Sale  | ** ** | ** **  |       | 196,325        |           | 2          | %          |       |    |
| Unsecured Debt                                | ** ** | ** **  |       | 4,469,043      |           | 54         | %          |       |    |
| Lines of Credit                               |       |        |       | 506,000        |           | 6          | %          |       |    |
| **Total  Debt**                               | ** ** | ** **  | ** ** | **8,328,456**  | ** **     | **100**    | **%**      | **34**     | **%**   |
|                                          |       |        |       |           |           |       |       |       |    |
| OP Units                                      |       | 312,664,694 |       |           |           |       |       |       |    |
| OP Unit  Equivalents (see below)              |       | 891,646     |       |           |           |       |       |       |    |
| Total  outstanding at quarter-end             |       | 313,556,340 |       |           |           |       |       |       |    |
| EQR Common Share  Price at September 30, 2006 |       | $           | 50.58      |           |           |       |       |       |    |   |
|                                          | ** ** | ** **  |       | 15,859,680     |           | 98         | %          |       |    |
| Perpetual  Preference Units (see below)  | ** ** | ** **  |       | 375,000        |           | 2          | %          |       |    |
| **Total  Equity**                             | ** ** | ** **  | ** ** | **16,234,680** | ** **     | **100**    | **%**      | **66**     | **%**   |
|                                          |       |        |       |           |           |       |       |       |    |
| **Total Market Capitalization**               | ** ** | ** **  | ** ** | **$**          | **24,563,136** | ** ** | ** ** | ** ** | **100** | **%**  |
|                                               |            |             |            |                |                |            |            |            |         |        |  |

 

**Convertible Preference Units/Interests as of September 30,2006**

**(Amounts in thousands except for unit/interest and perunit/interest amounts)**

 
| **Series**                                    | ** ** | **Redemption  Date** | ** ** | **Outstanding  Units/  Interests** | ** ** | **Liquidation  Value** | ** ** | **Annual  Dividend  Per Unit/  Interest** | ** ** | **Annual  Dividend  Amount** | ** ** | **Weighted  Average  Rate** | ** ** | **Conversion  Ratio** | ** ** | **OP Unit  Equivalents** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|------------------------------------|------------|------------------------|------------|------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|-----------------------|------------|-------------------------------|------------|
| Preference Units:                             |       |                 |       |                               |       |                   |       |                                           |       |                         |       |                        |       |                  |       |                          |       |
| 7.00% Series E                                |       | 11/1/98              |       | 464,616                            |       | $                      | 11,615     |                                           | $          | 1.75                         |       | $                           | 813        |                  |       |                          | 1.1128     |   | 517,025 |   |
| 7.00% Series H                                |       | 6/30/98              |       | 29,434                             |       | 736                    |       | 1.75                                           |       | 52                           |       |                        |       | 1.4480                |       | 42,620                        |       |
| Preference Interests:                         |       |                 |       |                               |       |                   |       |                                           |       |                         |       |                        |       |                  |       |                          |       |
| 7.625% Series J                               |       | 12/14/06             |       | 230,000                            |       | 11,500                 |       | 3.8125                                         |       | 877                          |       |                        |       | 1.4108                |       | 324,484                       |       |
| Junior Preference  Units:                     |       |                 |       |                               |       |                   |       |                                           |       |                         |       |                        |       |                  |       |                          |       |
| 8.00% Series B                                |       | 7/29/09              |       | 7,367                              |       | 184                    |       | 2.00                                           |       | 15                           |       |                        |       | 1.020408              |       | 7,517                         |       |
| Total Convertible  Preference Units/Interests |       |                 |       | 731,417                            |       | $                      | 24,035     |                                           |       |                         | $          | 1,757                       |       | 7.31                  | %          |                          |       | 891,646 |   |
|                                               |            |                      |            |                                    |            |                        |            |                                                |            |                              |            |                             |            |                       |            |                               |            |  |  |  |

 

**Perpetual Preference Units as of September 30, 2006**

**(Amounts in thousands except for unit and per unit amounts)**

 

| Series                            | ** ** | **Redemption  Date** | ** ** | **Outstanding  Units** | ** ** | **Liquidation  Value** | ** ** | **Annual  Dividend  Per Unit** | ** ** | **Annual  Dividend  Amount** | ** ** | **Weighted  Average  Rate** | ** ** |
|-----------------------------------|------------|----------------------|------------|------------------------|------------|------------------------|------------|-------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Preference  Units:                |       |                 |       |                   |       |                   |       |                                |       |                         |       |                        |       |
| 8.60% Series D                    |       | 7/15/07              |       | 700,000                |       | $                      | 175,000    |                                | $          | 21.50                        |       | $                           | 15,050     |   |   |   |
| 8.29% Series K                    |       | 12/10/26             |       | 1,000,000              |       | 50,000                 |       | 4.145                               |       | 4,145                        |       |                        |       |
| 6.48% Series N                    |       | 6/19/08              |       | 600,000                |       | 150,000                |       | 16.20                               |       | 9,720                        |       |                        |       |
| Total Perpetual  Preference Units |       |                 |       | 2,300,000              |       | $                      | 375,000    |                                |       |                         | $          | 28,915                      |       | 7.71 | % |
|                                   |            |                      |            |                        |            |                        |            |                                     |            |                              |            |                             |            |  |  |  |

 

32

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TheOperating Partnership expects to meet its short-term liquidity requirements,including capital expenditures related to maintaining its existing propertiesand certain scheduled unsecured note and mortgage note repayments, generallythrough its working capital, net cash provided by operating activities andborrowings under its revolving credit facilities.  The Operating Partnership considers its cashprovided by operating activities to be adequate to meet operating/capitalrequirements and payments of distributions. The Operating Partnership also expects to meet its long-term liquidityrequirements, such as scheduled unsecured note and mortgage debt maturities,property acquisitions and financing of construction and development activitiesthrough the issuance of unsecured notes and equity securities, includingadditional OP Units, and proceeds received from the disposition of certain properties.  In addition, the Operating Partnership hassignificant unencumbered properties available to secure additional mortgageborrowings in the event that the public capital markets are unavailable or thecost of alternative sources of capital is too high.  The fair value of and cash flow from theseunencumbered properties are in excess of the requirements the OperatingPartnership must maintain in order to comply with covenants under its unsecurednotes and line of credit.  Of the $17.7billion in investment in real estate on the Operating Partnership’s balancesheet at September 30, 2006 (including gross Lexford real estate held forsale), $11.7 billion or 66.2%, was unencumbered.

TheOperating Partnership has a long-term revolving credit facility with potentialborrowings of up to $1.0 billion which matures in May 2008.  This facility may, among other potentialuses, be used to fund property acquisitions, costs for certain properties underdevelopment and short term liquidity requirements.  As of November 1, 2006, $315.0 million wasoutstanding under this facility.

SeeNote 16 in the Notes to Consolidated Financial Statements for discussion of theevents which occurred subsequent to September 30, 2006.

***Capitalizationof Fixed Assets and Improvements to Real Estate***

Our policy with respect to capital expenditures isgenerally to capitalize expenditures that improve the value of the property orextend the useful life of the component asset of the property.  We track improvements to real estate in twomajor categories and several subcategories:

**·**             Replacements*(inside the unit)*.  These include:

**·**                  flooring such as carpets,hardwood, vinyl, linoleum or tile;

**·**                  appliances;

**·**                  mechanical equipment suchas individual furnace/air units, hot water heaters, etc;

**·**                  furniture and fixturessuch as kitchen/bath cabinets, light fixtures, ceiling fans, sinks, tubs,toilets, mirrors, countertops, etc; and

**·**                  blinds/shades.

**Allreplacements are depreciated over a five-year estimated useful life.  We expense as incurred all make-readymaintenance and turnover costs such as cleaning, interior painting ofindividual units and the repair of any replacement item noted above.**

**·**             Building improvements (*outside the unit*).  These include:

**·**                  roof replacement and majorrepairs;

**·**                  paving or majorresurfacing of parking lots, curbs and sidewalks;

**·**                  amenities and common areassuch as pools, exterior sports and playground equipment, lobbies, clubhouses,laundry rooms, alarm and security systems and offices;

**·**                  major building mechanicalequipment systems;

**·**                  interior and exteriorstructural repair and exterior painting and siding;

**·**                  major landscaping andgrounds improvement; and

**·**                  vehicles and office andmaintenance equipment.

**Allbuilding improvements are depreciated over a five to ten-year estimated usefullife.  We capitalize**

33

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**building improvements andupgrades only if the item: (i) exceeds $2,500 (selected projects must exceed$10,000); (ii) extends the useful life of the asset; and (iii) improves thevalue of the asset.**

**For thenine months ended September 30, 2006, our actual improvements to real estatetotaled approximately $181.2 million. This includes the following detail (amounts in thousands except for unitand per unit amounts):**

CapitalizedImprovements to Real Estate

Forthe Nine Months Ended September 30, 2006

 
| ** **                      | ** ** | **Total Units  (1)** | ** ** | **Replacements** | ** ** | **Avg. Per  Unit** | ** ** | **Building  Improvements** | ** ** | **Avg. Per  Unit** | ** ** | **Total** | ** ** | **Avg. Per  Unit** | ** ** |
|---------------------------------|------------|---------------------------|------------|------------------|------------|-------------------------|------------|----------------------------|------------|-------------------------|------------|-----------|------------|-------------------------|------------|
| Established  Properties (2)     |       | 116,680                   |       | $                | 34,665     |                    | $          | 297                        |       | $                       | 57,681     |      | $          | 494                     |       | $ | 92,346 |   | $ | 791 |   |
|                            |       |                      |       |             |       |                    |       |                       |       |                    |       |      |       |                    |       |
| New Acquisition  Properties (3) |       | 28,352                    |       | 6,746            |       | 275                     |       | 22,117                     |       | 903                     |       | 28,863    |       | 1,178                   |       |
|                            |       |                      |       |             |       |                    |       |                       |       |                    |       |      |       |                    |       |
| Properties Held  for Sale (4)   |       | 27,115                    |       | 8,723            |       | 322                     |       | 6,383                      |       | 235                     |       | 15,106    |       | 557                     |       |
|                            |       |                      |       |             |       |                    |       |                       |       |                    |       |      |       |                    |       |
| Other (5)                       |       | 7,056                     |       | 15,978           |       |                    |       | 28,933                     |       |                    |       | 44,911    |       |                    |       |
|                            |       |                      |       |             |       |                    |       |                       |       |                    |       |      |       |                    |       |
| Total                           |       | 179,203                   |       | $                | 66,112     |                    |       |                       | $          | 115,114                 |       |      |       | $                       | 181,226    |   |   |   |
|                                 |            |                           |            |                  |            |                         |            |                            |            |                         |            |           |            |                         |            |  |  |  |  |  |  |

----

(1)             Totalunits exclude 10,846 unconsolidated units and 3,643 military housing (feemanaged) units.

(2)             WhollyOwned Properties acquired prior to January 1, 2004.

(3)             WhollyOwned Properties acquired during 2004, 2005 and 2006.  Per unit amounts are based on a weightedaverage of 24,498 units.

(4)             Propertiesheld for sale include the entire Lexford Portfolio, which was sold on October5, 2006.

(5)             Includesproperties either Partially Owned or sold during the period, commercial space,condominium conversions and $12.7 million included in building improvementsspent on fourteen specific assets related to major renovations andrepositioning of these assets.

**TheOperating Partnership expects to fund approximately $30.0**million for capitalexpenditures for replacements and building improvements for all consolidatedproperties, exclusive of condominium conversion properties, for the remainderof 2006.  This includes an average of approximately$1,000 per unit for capital improvements for established properties.

**Duringthe nine months ended September 30, 2006, the Operating Partnership’s totalnon-real estate capital additions, such as computer software, computerequipment, and furniture and fixtures and leasehold improvements to theOperating Partnership’s property management offices and its corporate offices,were approximately $7.3**million.  TheOperating Partnership expects to fund approximately $3.1 million in totaladditions to non-real estate property for the remainder of 2006.

**Improvementsto real estate and additions to non-real estate property were funded from netcash provided by operating activities.**

***Derivative Instruments***

In the normal course of business, the OperatingPartnership is exposed to the effect of interest rate changes.  The Operating Partnership limits these risksby following established risk management policies and procedures including theuse of derivatives to hedge interest rate risk on debt instruments.

The Operating Partnership has a policy of onlyentering into contracts with major financial institutions based upon theircredit ratings and other factors.  Whenviewed in conjunction with the underlying and offsetting exposure that thederivatives are designed to hedge, the Operating Partnership has not sustaineda material loss from those instruments nor does it anticipate any materialadverse effect on its net income or financial position in the future from theuse of derivatives.

See Note 11 in the Notes toConsolidated Financial Statements for additional discussion of derivative 

34

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instruments at September 30, 2006.

***Other***

**Totaldistributions paid in October 2006 amounted to $145.8 million (excludingdistributions on Partially Owned Properties), which included certaindistributions declared during the third quarter ended September 30, 2006.**

**Off-Balance Sheet Arrangements andContractual Obligations**

**The Operating Partnership has co-invested in variousproperties that are unconsolidated and accounted for under the equity method ofaccounting.  Management does not believethese investments have a materially different impact upon the OperatingPartnership’s liquidity, capital resources, credit or market risk than itsproperty management and ownership activities. **During 2000 and2001, the Operating Partnership entered into institutional ventures with anunaffiliated partner.   At the respectiveclosing dates, the Operating Partnership sold and/or contributed 45 propertiescontaining 10,846 units to these ventures and retained a 25% ownership interestin the ventures.  The OperatingPartnership’s joint venture partner contributed cash equal to 75% of theagreed-upon equity value of the properties comprising the ventures, which wasthen distributed to the Operating Partnership. The Operating Partnership’s strategy with respect to these ventures wasto reduce its concentration of properties in a variety of markets.

**As ofSeptember 30, 2006, the Operating Partnership has 11 projects totaling 3,454units in various stages of development with estimated completion dates rangingthrough June 30, 2009.  The developmentagreements currently in place are discussed in detail in Note 14 of theOperating Partnership’s Consolidated Financial Statements.**

**See alsoNotes 2 and 6 in the Notes to Consolidated Financial Statements for additionaldiscussion regarding the Operating Partnership’s investments in partially ownedentities.**

**TheOperating Partnership’s contractual obligations for the next five years andthereafter have not changed materially from the amounts and disclosuresincluded in its annual report on Form 10-K, other than as it relates toscheduled debt maturities.  See theupdated debt maturity schedule included in Liquidity and Capital Resources forfurther discussion.**

**CriticalAccounting Policies and Estimates**

**TheOperating Partnership has identified six significant accounting policies ascritical accounting policies.  Thesecritical accounting policies are those that have the most impact on thereporting of our financial condition and those requiring significant judgmentsand estimates.  With respect to thesecritical accounting policies, management believes that the application ofjudgments and assessments is consistently applied and produces financialinformation that fairly presents the results of operations for all periodspresented.  The six critical accountingpolicies are:**

*Impairment of Long-Lived Assets,Including Goodwill*

The Operating Partnership periodically evaluates itslong-lived assets, including its investments in real estate and goodwill, forindicators of permanent impairment.  Thejudgments regarding the existence of impairment indicators are based on factorssuch as operational performance, market conditions, expected holding period ofeach asset and legal and environmental concerns.  Future events could occur which would causethe Operating Partnership to conclude that impairment indicators exist and animpairment loss is warranted.

** **

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*Depreciation of Investment in RealEstate*

The Operating Partnership depreciates the buildingcomponent of its investment in real estate over a 30-year estimated usefullife, building improvements over a 5-year to 10-year estimated useful life andboth the furniture, fixtures and equipment and replacements components over a5-year estimated useful life, all of which are judgmental determinations.

*Cost Capitalization*

See the *Capitalizationof Fixed Assets and Improvements to Real Estate* section fordiscussion of the policy with respect to capitalization vs. expensing of fixedasset/repair and maintenance costs.  Inaddition, the Operating Partnership capitalizes the payroll and associatedcosts of employees directly responsible for and who spend all of their time onthe supervision of major capital and/or renovation projects.  These costs are reflected on the balancesheet as an increase to depreciable property.

The Operating Partnership follows the guidance inSFAS No. 67, *Accounting for Costs andInitial Rental Operations of Real Estate Projects*, for alldevelopment projects and uses its professional judgment in determining whethersuch costs meet the criteria for capitalization or must be expensed asincurred.  The Operating Partnershipcapitalizes interest, real estate taxes and insurance and payroll andassociated costs for those individuals directly responsible for and who spendall of their time on development activities, with capitalization ceasing nolater than 90 days following issuance of the certificate of occupancy.  These costs are reflected on the balancesheet as construction in progress for each specific property.  The Operating Partnership expenses asincurred all payroll costs of on-site employees working directly at ourproperties, except as noted above on our development properties prior tocertificate of occupancy issuance and on specific major renovation at selectedproperties when additional incremental employees are hired.

*Fair Value of FinancialInstruments, Including Derivative Instruments*

The valuation of financial instruments under SFASNo. 107 and SFAS No. 133 and its amendments (SFAS Nos. 137/138/149) requiresthe Operating Partnership to make estimates and judgments that affect the fairvalue of the instruments.  The OperatingPartnership, where possible, bases the fair values of its financialinstruments, including its derivative instruments, on listed market prices andthird party quotes. Where these are not available, the Operating Partnershipbases its estimates on current instruments with similar terms and maturities oron other factors relevant to the financial statements.

*Revenue Recognition*

Rental income attributable to leases is recordedwhen due from residents and is recognized monthly as it is earned, which is notmaterially different than on a straight-line basis.  Leases entered into between a resident and aproperty for the rental of an apartment unit are generally year-to-year,renewable upon consent of both parties on an annual or monthly basis.  Fee and asset management revenue and interestincome are recorded on an accrual basis.

*Stock-Based Compensation*

The Company accounts for its stock-basedcompensation in accordance with SFAS No. 123(R),  * Share-Based Payment*, effectiveJanuary 1, 2006, which results in compensation expense being recorded based onthe fair value of the stock compensation granted.

Any Common Shares issued pursuant to EQR’s incentiveequity compensation and employee share purchase plans will result in theOperating Partnership issuing OP Units to EQR on a one-for-one basis, with theOperating Partnership receiving the net cash proceeds of such issuances.

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**FundsFrom Operations**

**For thenine months ended September 30, 2006, Funds From Operations (“FFO”) availableto OP Units decreased $16.6 million, or 2.9%, as compared to the nine monthsended September 30, 2005.  For thequarter ended September 30, 2006, FFO available to OP Units increased $20.2million, or 11.5%, as compared to the quarter ended September 30, 2005.**

The following is a reconciliation of net income to FFOavailable to OP Units for the nine months and quarters ended September 30, 2006and 2005:

**Funds From Operations**

*(Amounts in thousands)*

*(Unaudited)*

 
| ** **                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** | **Quarter Ended  September 30,** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                         | ** ** | **2006**                                            | ** ** | **2005**                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income                                                         |       | $                                                   | 650,739    |                                       | $          | 689,543 |   | $ | 74,029 |   | $ | 286,787 |   |
| Adjustments:                                                       |       |                                                |       |                                       |       |   |   |   |   |
| Depreciation                                                       |       | 415,179                                             |       | 323,608                                    |       | 143,255 |   | 111,370 |   |
| Depreciation — Non-real estate additions                      |       | (5,615                                              | )          | (3,928                                     | )          | (1,933 | ) | (1,243 | ) |
| Depreciation — Partially Owned and Unconsolidated  Properties |       | 3,473                                               |       | 2,136                                      |       | 910 |   | 2,774 |   |
| Net gain on sales of unconsolidated entities                       |       | (370                                                | )          | (124                                       | )          | (18 | ) | - |   |
| Discontinued operations:                                           |       |                                                |       |                                       |       |   |   |   |   |
| Depreciation                                                       |       | 25,429                                              |       | 67,543                                     |       | - |   | 20,513 |   |
| Net gain on sales of discontinued operations (3)                   |       | (522,328                                            | )          | (503,053                                   | )          | (20,031 | ) | (254,178 | ) |
| Net incremental gain on sales of condominium units                 |       | 31,431                                              |       | 56,667                                     |       | 12,878 |   | 27,631 |   |
|                                                               |       |                                                |       |                                       |       |   |   |   |   |
| FFO (1)(2)                                                         |       | 597,938                                             |       | 632,392                                    |       | 209,090 |   | 193,654 |   |
| Preferred  distributions                                           |       | (31,461                                             | )          | (45,446                                    | )          | (9,737 | ) | (14,124 | ) |
| Premium on  redemption of Preference Units                         |       | (3,941                                              | )          | (4,316                                     | )          | (3,941 | ) | (4,316 | ) |
| Premium on  redemption of Preference Interests                     |       | (684                                                | )          | (4,134                                     | )          | (1 | ) | (22 | ) |
| FFO available to OP  Units                                         |       | $                                                   | 561,852    |                                       | $          | 578,496 |   | $ | 195,411 |   | $ | 175,192 |   |

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*(1)**          TheNational Association of Real Estate Investment Trusts (“NAREIT”) defines fundsfrom operations (“FFO”) (April 2002 White Paper) as net income (computed inaccordance with accounting principles generally accepted in the United States (“GAAP”)),excluding gains (or losses) from sales of depreciable property, plusdepreciation and amortization, and after adjustments for unconsolidatedpartnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will becalculated to reflect funds from operations on the same basis.  The April 2002 White Paper states that gainor loss on sales of property is excluded from FFO for previously depreciatedoperating properties only.  Once theOperating Partnership commences the conversion of units to condominiums, itsimultaneously discontinues depreciation of such property.*

*(2)**          TheOperating Partnership believes that FFO is helpful to investors as asupplemental measure of the operating performance of a real estate company,because it is a recognized measure of performance by the real estate industryand by excluding gains or losses related to dispositions of depreciableproperty and excluding real estate depreciation (which can vary among owners ofidentical assets in similar condition based on historical cost accounting anduseful life estimates), FFO can help compare the operating performance of acompany’s real estate between periods or as compared to differentcompanies.  FFO in and of itself does notrepresent net income or net cash flows from operating activities in accordancewith GAAP.  Therefore, FFO should not beexclusively considered as an alternative to net income or to net cash flowsfrom operating activities as determined by GAAP or as a measure of liquidity.  The Operating Partnership’s calculation ofFFO may differ from other real estate companies due to, among other items,variations in cost capitalization policies for capital expenditures and,accordingly, may not be comparable to such other real estate companies.*

*(3)**          Netgain on sales of discontinued operations has been reduced by approximately $4.5million in one-time accrued retention benefits for both the nine months andquarter ended September 30, 2006, related to the previously announced October5, 2006 closing of the Lexford Housing Division disposition.*

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**Item 3. Quantitative and Qualitative Disclosures AboutMarket Risk**

**The Operating Partnership’s market risk has notchanged materially from the amounts and information reported in Item 7A, *Quantitative and Qualitative Disclosures About MarketRisk*, to the Operating Partnership’s Form 10-K for the year endedDecember 31, 2005.  See also Note 11 inthe Notes to Consolidated Financial Statements for additional discussion ofderivative instruments.**

**Item 4. Controls and Procedures**

**(a)Evaluation of Disclosure Controls and Procedures:**

**Effective as of September 30, 2006, the OperatingPartnership carried out an evaluation, under the supervision and with theparticipation of the Operating Partnership’s management, including the ChiefExecutive Officer and Chief Financial Officer of EQR, of the effectiveness ofthe Company’s disclosure controls and procedures pursuant to Exchange Act Rules13a-15 and 15d-15.  Based on thatevaluation, the Chief Executive Officer and Chief Financial Officer concludedthat the disclosure controls and procedures are effective to ensure thatinformation required to be disclosed by the Operating Partnership in itsExchange Act filings is recorded, processed, summarized and reported within theperiods specified in the SEC’s rules and forms.**

**(b) Changesin Internal Control over Financial Reporting:**

**There were no changes to the internalcontrol over financial reporting of the Operating Partnership identified inconnection with the Operating Partnership’s evaluation referred to above thatoccurred during the third quarter of 2006 that have materially affected, or arereasonably likely to affect, the Operating Partnership’s internal control overfinancial reporting.**

**PART II.        OTHERINFORMATION**

**Item 1. Legal Proceedings**

**The Operating Partnership is partyto a housing discrimination lawsuit brought in April of 2006 in the UnitedStates District Court for the District of Maryland.  The suit alleges that the OperatingPartnership designed and built approximately 300 of the Company’s properties inviolation of the accessibility requirements of the Fair Housing Act andAmericans With Disabilities Act.  Thesuit seeks actual and punitive damages, injunctive relief (includingmodification of non-compliant properties), costs and attorneys’ fees.  The Operating Partnership believes it has anumber of viable defenses, including that a majority of the named propertieswere completed before the operative dates of the statutes in question and/orwere not designed or built by the Company. Accordingly, the Company is defending the suit vigorously.  Due to the pendency of the OperatingPartnership’s defenses and the uncertainty of many other critical factual andlegal issues, it is not possible to determine or predict the outcome of thesuit and as a result, no amounts have been accrued at September 30, 2006.  While no assurances can be given, the**Operating Partnership does not believe that the suit, if adverselydetermined, will have a material adverse effect on the Operating Partnership.

**The**Operating Partnership does not believe there is any other litigationpending or threatened against the Operating Partnershipwhich, individually or in the aggregate, reasonably may be expected to have amaterial adverse effect on the Operating Partnership.

**Item 1A. Risk Factors**

**There have been no material changesrelated to the risk factors that were discussed in Part I, Item 1A of the**Operating Partnership’s Form 10-K for the year ended December 31, 2005.

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**Item 2. Unregistered Sales of Equity Securities andUse of Proceeds**

(a)  OP Units issued in theQuarter Ended September 30, 2006

The Operating Partnership issued 65,325 OP Unitshaving a value of $3.1 million to its limited partners during the quarter endedSeptember 30, 2006.

These OP Units were issued in exchange for direct orindirect interest in multifamily properties in private placement transactionsunder section 4(2) of the Securities Act of 1933, as amended (the “SecuritiesAct”) and the rules and regulations promulgated thereunder.  In light of the manner of sale andinformation obtained by the Operating Partnership from persons receiving OPUnits in connection with these transactions, the Operating Partnership believesit may rely on the exemption.  OP Unitsare generally exchangeable into Common Shares of EQR on a one-for-one basis or,at the option of EQR and the Operating Partnership, the cash equivalentthereof, at any time one year after the date of issuance.

(c)  *OP UnitsRepurchased in the Quarter Ended September 30, 2006*

The Operating Partnership repurchased the following OP Units during thequarter ended September 30, 2006:
| **Period**         | ** ** | **Total Number  of OP Units  Purchased (1)** | ** ** | **Average Price  Paid Per Unit (1)** | ** ** | **Total Number of OP  Units Purchased as Part  of Publicly Announced  Plans or Programs (1)** | ** ** | **Dollar Value of OP  Units that May Yet  Be Purchased  Under the Plans or  Programs (1)** | ** ** |
|--------------------|------------|------------------------------------------------------------------|------------|----------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| August 2006        |       | 26,029                                                           |       | $                                                        | 47.97      |                                                                                                                                                 | 26,029     |                                                                                                                                              | $          | 501,770,440 |   |
| Third Quarter 2006 |       | 26,029                                                           |       | $                                                        | 47.97      |                                                                                                                                                 | 26,029     |                                                                                                                                              |       |   |
|                    |            |                                                                  |            |                                                          |            |                                                                                                                                                      |            |                                                                                                                                                   |            |  |  |

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(1)             TheOP Units repurchased during thequarter ended September 30, 2006 represent OP Units repurchased in response torepurchases of Common Shares in the open market under the Company’s publiclyannounced share repurchase program approved by its Board of Trustees.  Under this program, the Company mayrepurchase in open market or privately negotiated transactions up to $585.0million of its Common Shares, with $501.8 million remaining following the abovepurchases.

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**Item 6.            Exhibits**
| 12    |   | Computation of Ratio of  Earnings to Combined Fixed Charges.                                                                                                                                                     |   |
|----------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                 |   |                                                                                                                                                                                                             |   |
| 10.1                 | *      | Amendment to Amended  and Restated Limited Partnership Agreement of Lexford Properties, L.P.                                                                                                                     |   |
|                 |   |                                                                                                                                                                                                             |   |
| 10.2                 | **     | Revolving  Credit Bridge Agreement dated as of July 6, 2006 between ERP Operating  Limited Partnership and JPMorgan Chase Bank, N.A., as administrative agent and  a bank (the “Credit Agreement”).    |   |
|                 |   |                                                                                                                                                                                                             |   |
| 10.3                 | **     | Guaranty  of Payment made as of July 6, 2006 between Equity Residential and JPMorgan  Chase Bank, N.A., as administrative agent for the banks party to the Credit  Agreement.                                    |   |
|                 |   |                                                                                                                                                                                                             |   |
| 31.1                 |   | Certification of David  J. Neithercut, Chief Executive Officer of Registrant’s General Partner.                                                                                                             |   |
|                 |   |                                                                                                                                                                                                             |   |
| 31.2                 |   | Certification of Donna  Brandin, Chief Financial Officer of Registrant’s General Partner.                                                                                                                   |   |
|                 |   |                                                                                                                                                                                                             |   |
| 32.1                 |   | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of David J. Neithercut, Chief Executive Officer  of Registrant’s General Partner. |   |
|                 |   |                                                                                                                                                                                                             |   |
| 32.2                 |   | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of Donna Brandin, Chief Financial Officer of  Registrant’s General Partner.       |   |

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*                    Included as aexhibit to EQR’s Form 10-Q for the quarter ended September 30, 2006.

**             Included as anexhibit to the Operating Partnership’s Form 8-K dated July 6, 2006, filed onJuly 11, 2006.

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon behalf by the undersigned thereunto duly authorized.
|                        | ERP OPERATING LIMITED PARTNERSHIP |
|------------------------|-----------------------------------|
|                   | BY: EQUITY RESIDENTIAL            |
|                   | ITS GENERAL PARTNER               |
|                   |                              |   |
|                   |                              |   |
| Date: November 6, 2006 | By:                               | s/ Donna Brandin |
|                   |                              | Donna Brandin |
|                   |                              |   | Executive Vice President and |
|                   |                              |   | Chief Financial Officer |
|                   |                              |   | (duly authorized officer and principal financial  officer) |

 

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##### **EXHIBIT INDEX**

| Exhibit    | ** ** | **Document**                                                                                                                                                                                                     |
|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                       |
| 12         |       | Computation of Ratio of  Earnings to Combined Fixed Charges.                                                                                                                                                     |
|       |       |                                                                                                                                                                                                             |
| 31.1       |       | Certification of David  J. Neithercut, Chief Executive Officer of Registrant’s General Partner.                                                                                                             |
|       |       |                                                                                                                                                                                                             |
| 31.2       |       | Certification of Donna  Brandin, Chief Financial Officer of Registrant’s General Partner.                                                                                                                   |
|       |       |                                                                                                                                                                                                             |
| 32.1       |       | Certification pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of David J. Neithercut, Chief Executive Officer of  Registrant’s General Partner. |
|       |       |                                                                                                                                                                                                             |
| 32.2       |       | Certification pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Donna  Brandin, Chief Financial Officer of Registrant’s General Partner.        |

 

 

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