##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended SEPTEMBER 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ________________ to ________________
 Commission File Number: 0-24920
 ERP OPERATING LIMITED PARTNERSHIP
  Illinois
    
    36-3894853(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 Two North Riverside Plaza, Chicago, Illinois
(Address of Principal Executive Offices)
    
    60606
(Zip Code)
 (312) 474-1300
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ERP OPERATING LIMITED PARTNERSHIP
  PAGEPART I.Item 1. Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
    
    2Consolidated Statements of Operations for the nine months and quarters ended
September 30, 2010 and 2009
    
    3 to 4Consolidated Statements of Cash Flows for the nine months ended
September 30, 2010 and 2009
    
    5 to 7Consolidated Statement of Changes in Capital for the nine months ended
September 30, 2010
    
    8 to 9Notes to Consolidated Financial Statements
    
    10 to 28Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    29 to 48Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    48Item 4. Controls and Procedures
    
    48 to 49PART II.Item 1. Legal Proceedings
    
    50Item 1A. Risk Factors
    
    50Item 4. (Removed and Reserved)
    
    50Item 6. Exhibits
    
    50EX-31.1EX-31.2EX-32.1EX-32.2




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ERP OPERATING LIMITED PARTNERSHIP
 
 CONSOLIDATED BALANCE SHEETS  (Amounts in thousands)  (Unaudited)
 September 30,
    
    
    December 31,2010
    
    
    2009ASSETSInvestment in real estateLand
    
    $
    4,093,508
    
    
    $
    3,650,324Depreciable property
    
    
    15,161,007
    
    
    
    13,893,521Projects under development
    
    
    499,037
    
    
    
    668,979Land held for development
    
    
    290,819
    
    
    
    252,320Investment in real estate
    
    
    20,044,371
    
    
    
    18,465,144Accumulated depreciation
    
    
    (4,313,502
    )
    
    
    (3,877,564
    )Investment in real estate, net
    
    
    15,730,869
    
    
    
    14,587,580Cash and cash equivalents
    
    
    43,660
    
    
    
    193,288Investments in unconsolidated entities
    
    
    
    
    
    
    6,995Deposits  restricted
    
    
    109,608
    
    
    
    352,008Escrow deposits  mortgage
    
    
    19,632
    
    
    
    17,292Deferred financing costs, net
    
    
    44,488
    
    
    
    46,396Other assets
    
    
    138,572
    
    
    
    213,956Total assets
    
    $
    16,086,829
    
    
    $
    15,417,515LIABILITIES AND CAPITALLiabilities:Mortgage notes payable
    
    $
    4,845,244
    
    
    $
    4,783,446Notes, net
    
    
    5,185,283
    
    
    
    4,609,124Lines of credit
    
    
    146,000
    
    
    
    Accounts payable and accrued expenses
    
    
    111,121
    
    
    
    58,537Accrued interest payable
    
    
    71,374
    
    
    
    101,849Other liabilities
    
    
    341,209
    
    
    
    272,236Security deposits
    
    
    62,549
    
    
    
    59,264Distributions payable
    
    
    102,653
    
    
    
    100,266Total liabilities
    
    
    10,865,433
    
    
    
    9,984,722Commitments and contingenciesRedeemable Limited Partners
    
    
    357,702
    
    
    
    258,280Capital:Partners Capital:Preference Units
    
    
    208,653
    
    
    
    208,773General Partner
    
    
    4,656,434
    
    
    
    4,833,885Limited Partners
    
    
    106,531
    
    
    
    116,120Accumulated other comprehensive (loss) income
    
    
    (116,464
    )
    
    
    4,681Total partners capital
    
    
    4,855,154
    
    
    
    5,163,459Noncontrolling Interests  Partially Owned Properties
    
    
    8,540
    
    
    
    11,054Total capital
    
    
    4,863,694
    
    
    
    5,174,513Total liabilities and capital
    
    $
    16,086,829
    
    
    $
    15,417,515
  2




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ERP OPERATING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  (Amounts in thousands except per Unit data)  (Unaudited)
 Nine Months Ended
    
    
    Quarter EndedSeptember 30,
    
    

September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUESRental income
    
    $
    1,517,302
    
    
    $
    1,433,865
    
    
    $
    525,228
    
    
    $
    477,588Fee and asset management
    
    
    7,596
    
    
    
    7,928
    
    
    
    2,128
    
    
    
    2,653Total revenues
    
    
    1,524,898
    
    
    
    1,441,793
    
    
    
    527,356
    
    
    
    480,241EXPENSESProperty and maintenance
    
    
    386,518
    
    
    
    363,354
    
    
    
    135,000
    
    
    
    122,305Real estate taxes and insurance
    
    
    175,491
    
    
    
    158,306
    
    
    
    61,189
    
    
    
    54,579Property management
    
    
    60,548
    
    
    
    56,457
    
    
    
    19,401
    
    
    
    18,725Fee and asset management
    
    
    4,364
    
    
    
    5,916
    
    
    
    704
    
    
    
    1,931Depreciation
    
    
    500,173
    
    
    
    428,751
    
    
    
    173,642
    
    
    
    144,165General and administrative
    
    
    31,035
    
    
    
    30,476
    
    
    
    10,224
    
    
    
    9,881Impairment
    
    
    
    
    
    
    11,124
    
    
    
    
    
    
    
    Total expenses
    
    
    1,158,129
    
    
    
    1,054,384
    
    
    
    400,160
    
    
    
    351,586Operating income
    
    
    366,769
    
    
    
    387,409
    
    
    
    127,196
    
    
    
    128,655Interest and other income
    
    
    5,325
    
    
    
    15,850
    
    
    
    208
    
    
    
    3,214Other expenses
    
    
    (9,513
    )
    
    
    (2,228
    )
    
    
    (3,487
    )
    
    
    (1,922
    )Interest:Expense incurred, net
    
    
    (353,652
    )
    
    
    (360,021
    )
    
    
    (122,854
    )
    
    
    (121,166
    )Amortization of deferred financing costs
    
    
    (7,970
    )
    
    
    (9,311
    )
    
    
    (2,457
    )
    
    
    (3,101
    )Income (loss) before income and other taxes, (loss) income from
investments in unconsolidated entities, net gain (loss) on sales of
unconsolidated entities and land parcels and discontinued operations
    
    
    959
    
    
    
    31,699
    
    
    
    (1,394
    )
    
    
    5,680Income and other tax (expense) benefit
    
    
    (311
    )
    
    
    (2,844
    )
    
    
    (293
    )
    
    
    (459
    )(Loss) income from investments in unconsolidated entities
    
    
    (735
    )
    
    
    (2,372
    )
    
    
    188
    
    
    
    (151
    )Net gain on sales of unconsolidated entities
    
    
    28,101
    
    
    
    6,718
    
    
    
    22,544
    
    
    
    3,959Net (loss) on sales of land parcels
    
    
    (1,161
    )
    
    
    
    
    
    
    (1,161
    )
    
    
    Income from continuing operations
    
    
    26,853
    
    
    
    33,201
    
    
    
    19,884
    
    
    
    9,029Discontinued operations, net
    
    
    70,918
    
    
    
    301,517
    
    
    
    9,942
    
    
    
    134,336Net income
    
    
    97,771
    
    
    
    334,718
    
    
    
    29,826
    
    
    
    143,365Net loss attributable to Noncontrolling Interests 
Partially Owned Properties
    
    
    623
    
    
    
    391
    
    
    
    188
    
    
    
    317Net income attributable to controlling interests
    
    $
    98,394
    
    
    $
    335,109
    
    
    $
    30,014
    
    
    $
    143,682ALLOCATION OF NET INCOME:Preference Units
    
    $
    10,855
    
    
    $
    10,859
    
    
    $
    3,617
    
    
    $
    3,619Preference Interests and Junior Preference Units
    
    $
    
    
    
    $
    9
    
    
    $
    
    
    
    $
    2General Partner
    
    $
    83,372
    
    
    $
    306,122
    
    
    $
    25,166
    
    
    $
    132,362Limited Partners
    
    
    4,167
    
    
    
    18,119
    
    
    
    1,231
    
    
    
    7,699Net income available to Units
    
    $
    87,539
    
    
    $
    324,241
    
    
    $
    26,397
    
    
    $
    140,061Earnings per Unit  basic:Income from continuing operations available to Units
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.02Net income available to Units
    
    $
    0.30
    
    
    $
    1.12
    
    
    $
    0.09
    
    
    $
    0.48Weighted average Units outstanding
    
    
    295,572
    
    
    
    288,990
    
    
    
    296,348
    
    
    
    289,262Earnings per Unit  diluted:Income from continuing operations available to Units
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.05
    
    
    $
    0.02Net income available to Units
    
    $
    0.29
    
    
    $
    1.12
    
    
    $
    0.09
    
    
    $
    0.48Weighted average Units outstanding
    
    
    299,031
    
    
    
    289,518
    
    
    
    300,379
    
    
    
    290,215Distributions declared per Unit outstanding
    
    $
    1.0125
    
    
    $
    1.3025
    
    
    $
    0.3375
    
    
    $
    0.3375
  3




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ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Amounts in thousands except per Unit data)
(Unaudited)
 Nine Months Ended
    
    
    Quarter EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Comprehensive (loss) income:Net income
    
    $
    97,771
    
    
    $
    334,718
    
    
    $
    29,826
    
    
    $
    143,365Other comprehensive (loss) income  derivative instruments:Unrealized holding (losses) gains arising during the period
    
    
    (123,472
    )
    
    
    12,193
    
    
    
    (37,726
    )
    
    
    (462
    )Losses reclassified into earnings from other comprehensive
income
    
    
    2,379
    
    
    
    3,014
    
    
    
    914
    
    
    
    709Other
    
    
    
    
    
    
    449
    
    
    
    
    
    
    
    Other comprehensive (loss) income  other instruments:Unrealized holding (losses) gains arising during the period
    
    
    (52
    )
    
    
    3,450
    
    
    
    14
    
    
    
    339(Gains) realized during the period
    
    
    
    
    
    
    (4,943
    )
    
    
    
    
    
    
    Comprehensive (loss) income
    
    
    (23,374
    )
    
    
    348,881
    
    
    
    (6,972
    )
    
    
    143,951Comprehensive loss attributable to Noncontrolling Interests 
Partially Owned Properties
    
    
    623
    
    
    
    391
    
    
    
    188
    
    
    
    317Comprehensive (loss) income attributable to controlling interests
    
    $
    (22,751
    )
    
    $
    349,272
    
    
    $
    (6,784
    )
    
    $
    144,268
  4




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##### Table of Contents



ERP OPERATING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (Amounts in thousands)  (Unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    97,771
    
    
    $
    334,718Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    501,695
    
    
    
    451,487Amortization of deferred financing costs
    
    
    7,981
    
    
    
    9,646Amortization of discounts on investment securities
    
    
    
    
    
    
    (1,661
    )Amortization of discounts and premiums on debt
    
    
    1,454
    
    
    
    3,346Amortization of deferred settlements on derivative instruments
    
    
    1,978
    
    
    
    2,003Impairment
    
    
    
    
    
    
    11,124Write-off of pursuit costs
    
    
    3,512
    
    
    
    1,973Property acquisition costs
    
    
    6,001
    
    
    
    255Loss from investments in unconsolidated entities
    
    
    735
    
    
    
    2,372Distributions from unconsolidated entities  return on capital
    
    
    61
    
    
    
    129Net (gain) on sales of investment securities
    
    
    
    
    
    
    (4,943
    )Net (gain) on sales of unconsolidated entities
    
    
    (28,101
    )
    
    
    (6,718
    )Net loss on sales of land parcels
    
    
    1,161
    
    
    
    Net (gain) on sales of discontinued operations
    
    
    (69,538
    )
    
    
    (274,933
    )Loss (gain) on debt extinguishments
    
    
    158
    
    
    
    (4,420
    )Unrealized loss (gain) on derivative instruments
    
    
    1
    
    
    
    (2
    )Compensation paid with Company Common Shares
    
    
    14,716
    
    
    
    13,975Changes in assets and liabilities:Decrease in deposits  restricted
    
    
    75
    
    
    
    4,890(Increase) decrease in other assets
    
    
    (6,385
    )
    
    
    4,353Increase in accounts payable and accrued expenses
    
    
    66,070
    
    
    
    35,555(Decrease) in accrued interest payable
    
    
    (31,257
    )
    
    
    (40,876
    )(Decrease) in other liabilities
    
    
    (4,150
    )
    
    
    (6,167
    )Increase (decrease) in security deposits
    
    
    2,744
    
    
    
    (3,838
    )Net cash provided by operating activities
    
    
    566,682
    
    
    
    532,268CASH FLOWS FROM INVESTING ACTIVITIES:Investment in real estate  acquisitions
    
    
    (1,108,014
    )
    
    
    (18,500
    )Investment in real estate  development/other
    
    
    (98,282
    )
    
    
    (268,213
    )Improvements to real estate
    
    
    (98,959
    )
    
    
    (93,049
    )Additions to non-real estate property
    
    
    (1,022
    )
    
    
    (1,315
    )Interest capitalized for real estate under development
    
    
    (10,196
    )
    
    
    (28,704
    )Proceeds from disposition of real estate, net
    
    
    134,603
    
    
    
    729,153Distributions from unconsolidated entities  return of capital
    
    
    26,924
    
    
    
    5,396Purchase of investment securities
    
    
    
    
    
    
    (52,822
    )Proceeds from sale of investment securities
    
    
    25,000
    
    
    
    215,753Property acquisition costs
    
    
    (6,001
    )
    
    
    (255
    )Decrease (increase) in deposits on real estate acquisitions, net
    
    
    248,547
    
    
    
    (246,835
    )(Increase) decrease in mortgage deposits
    
    
    (2,340
    )
    
    
    775Consolidation of previously unconsolidated properties
    
    
    (26,854
    )
    
    
    Acquisition of Noncontrolling Interests  Partially Owned Properties
    
    
    (1,936
    )
    
    
    (11,480
    )Net cash (used for) provided by investing activities
    
    
    (918,530
    )
    
    
    229,904
  5




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ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)
 Nine Months Ended September 30,2010
    
    
    2009CASH FLOWS FROM FINANCING ACTIVITIES:Loan and bond acquisition costs
    
    $
    (7,897
    )
    
    $
    (9,203
    )Mortgage notes payable:Proceeds
    
    
    124,020
    
    
    
    657,785Restricted cash
    
    
    36,411
    
    
    
    34,655Lump sum payoffs
    
    
    (491,100
    )
    
    
    (774,481
    )Scheduled principal repayments
    
    
    (12,508
    )
    
    
    (13,701
    )(Loss) gain on debt extinguishments
    
    
    (158
    )
    
    
    2,400Notes, net:Proceeds
    
    
    595,422
    
    
    
    Lump sum payoffs
    
    
    
    
    
    
    (505,849
    )Gain on debt extinguishments
    
    
    
    
    
    
    2,020Lines of credit:Proceeds
    
    
    4,375,125
    
    
    
    Repayments
    
    
    (4,229,125
    )
    
    
    (Payments on) proceeds from settlement of derivative instruments
    
    
    (10,040
    )
    
    
    11,253Proceeds from sale of OP Units
    
    
    73,356
    
    
    
    Proceeds from EQRs Employee Share Purchase Plan (ESPP)
    
    
    4,251
    
    
    
    4,698Proceeds from exercise of EQR options
    
    
    57,933
    
    
    
    7,420OP Units repurchased and retired
    
    
    (1,887
    )
    
    
    (1,124
    )Payment of offering costs
    
    
    (730
    )
    
    
    (463
    )Other financing activities, net
    
    
    (33
    )
    
    
    (8
    )Contributions  Noncontrolling Interests  Partially Owned Properties
    
    
    222
    
    
    
    893Contributions  Limited Partners
    
    
    
    
    
    
    78Distributions:OP Units  General Partner
    
    
    (284,185
    )
    
    
    (395,786
    )Preference Units
    
    
    (10,858
    )
    
    
    (10,859
    )Preference Interests and Junior Preference Units
    
    
    
    
    
    
    (11
    )OP Units  Limited Partners
    
    
    (14,187
    )
    
    
    (23,736
    )Noncontrolling Interests  Partially Owned Properties
    
    
    (1,812
    )
    
    
    (1,359
    )Net cash provided by (used for) financing activities
    
    
    202,220
    
    
    
    (1,015,378
    )Net (decrease) in cash and cash equivalents
    
    
    (149,628
    )
    
    
    (253,206
    )Cash and cash equivalents, beginning of period
    
    
    193,288
    
    
    
    890,794Cash and cash equivalents, end of period
    
    $
    43,660
    
    
    $
    637,588
  6




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##### Table of Contents



ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)
 Nine Months Ended September 30,2010
    
    
    2009SUPPLEMENTAL INFORMATION:Cash paid for interest, net of amounts capitalized
    
    $
    377,467
    
    
    $
    396,922Net cash (received) paid for income and other taxes
    
    $
    (2,892
    )
    
    $
    4,047Real estate acquisitions/dispositions/other:Mortgage loans assumed
    
    $
    338,196
    
    
    $
    Valuation of OP Units
    
    $
    7,433
    
    
    $
    1,034Mortgage loans (assumed) by purchaser
    
    $
    (39,999
    )
    
    $
    (4,387
    )Amortization of deferred financing costs:Investment in real estate, net
    
    $
    (1,824
    )
    
    $
    (2,936
    )Deferred financing costs, net
    
    $
    9,805
    
    
    $
    12,582Amortization of discounts and premiums on debt:Investment in real estate, net
    
    $
    
    
    
    $
    (3
    )Mortgage notes payable
    
    $
    (5,048
    )
    
    $
    (4,631
    )Notes, net
    
    $
    6,502
    
    
    $
    7,980Amortization of deferred settlements on derivative instruments:Other liabilities
    
    $
    (401
    )
    
    $
    (1,011
    )Accumulated other comprehensive loss
    
    $
    2,379
    
    
    $
    3,014Unrealized loss (gain) on derivative instruments:Other assets
    
    $
    13,788
    
    
    $
    (9,910
    )Mortgage notes payable
    
    $
    6
    
    
    $
    (1,755
    )Notes, net
    
    $
    9,835
    
    
    $
    866Other liabilities
    
    $
    99,844
    
    
    $
    (1,396
    )Accumulated other comprehensive (loss) income
    
    $
    (123,472
    )
    
    $
    12,193(Payments on) proceeds from settlement of derivative instruments:Other assets
    
    $
    
    
    
    $
    11,253Other liabilities
    
    $
    (10,040
    )
    
    $
    Consolidation of previously unconsolidated properties:Investment in real estate, net
    
    $
    (105,065
    )
    
    $
    Investments in unconsolidated entities
    
    $
    7,376
    
    
    $
    Deposits  restricted
    
    $
    (42,633
    )
    
    $
    Mortgage notes payable
    
    $
    112,631
    
    
    $
    Net other assets recorded
    
    $
    837
    
    
    $
    OtherReceivable on sale of OP Units
    
    $
    37,550
    
    
    $
    Transfer from notes, net to mortgage notes payable
    
    $
    35,600
    
    
    $
    
  7




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##### Table of Contents



ERP
OPERATING LIMITED PARTNERSHIP
 
 CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL

(Amounts in thousands)
(Unaudited)
 Nine Months EndedSeptember 30, 2010PARTNERS CAPITALPREFERENCE UNITSBalance, beginning of year
    
    $
    208,773Conversion of 7.00% Series E Cumulative Convertible
    
    
    (120
    )Balance, end of period
    
    $
    208,653GENERAL PARTNERBalance, beginning of year
    
    $
    4,833,885OP Unit Issuance:Conversion of Preference Units into OP Units held by General Partner
    
    
    120Conversion of OP Units held by Limited Partners into OP Units
held by General Partner
    
    
    13,278Issuance of OP Units
    
    
    35,806Exercise of EQR share options
    
    
    57,933EQRs Employee Share Purchase Plan (ESPP)
    
    
    4,251Share-based employee compensation expense:EQR restricted shares
    
    
    7,348EQR share options
    
    
    5,807EQR ESPP discount
    
    
    1,122OP Units repurchased and retired
    
    
    (1,887
    )Offering costs
    
    
    (730
    )Net income available to Units  General Partner
    
    
    83,372OP Units  General Partner distributions
    
    
    (286,687
    )Supplemental Executive Retirement Plan (SERP)
    
    
    7,657Acquisition of Noncontrolling Interests  Partially Owned Properties
    
    
    (1,313
    )Change in market value of Redeemable Limited Partners
    
    
    (108,576
    )Adjustment for Limited Partners ownership in Operating Partnership
    
    
    5,048Balance, end of period
    
    $
    4,656,434LIMITED PARTNERSBalance, beginning of year
    
    $
    116,120Issuance of OP Units
    
    
    7,433Conversion of OP Units held by Limited Partners into OP Units
held by General Partner
    
    
    (13,278
    )Equity compensation associated with Units  Limited Partners
    
    
    2,058Net income available to Units  Limited Partners
    
    
    4,167Units  Limited Partners distributions
    
    
    (14,075
    )Change in carrying value of Redeemable Limited Partners
    
    
    9,154Adjustment for Limited Partners ownership in Operating Partnership
    
    
    (5,048
    )Balance, end of period
    
    $
    106,531
  8




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##### Table of Contents



ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL (Continued)
(Amounts in thousands)
(Unaudited)
 Nine Months EndedSeptember 30, 2010PARTNERS CAPITAL (Continued)ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOMEBalance, beginning of year
    
    $
    4,681Accumulated other comprehensive (loss)  derivative instruments:Unrealized holding (losses) arising during the period
    
    
    (123,472
    )Losses reclassified into earnings from other comprehensive income
    
    
    2,379Accumulated other comprehensive (loss)  other instruments:Unrealized holding (losses) arising during the period
    
    
    (52
    )Balance, end of period
    
    $
    (116,464
    )NONCONTROLLING INTERESTSNONCONTROLLING INTERESTS  PARTIALLY OWNED PROPERTIESBalance, beginning of year
    
    $
    11,054Net (loss) attributable to Noncontrolling Interests
    
    
    (623
    )Contributions by Noncontrolling Interests
    
    
    222Distributions to Noncontrolling Interests
    
    
    (1,831
    )Acquisition of Noncontrolling Interests  Partially Owned Properties
    
    
    (500
    )Other
    
    
    218Balance, end of period
    
    $
    8,540
  9




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##### Table of Contents



ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Business
    Properties
    
    
    UnitsWholly Owned Properties
    
    
    445
    
    
    
    123,327Partially Owned Properties  Consolidated
    
    
    24
    
    
    
    5,022Military Housing
    
    
    2
    
    
    
    4,680471
    
    
    
    133,029
 2. Summary of Significant Accounting Policies
 Basis of Presentation
     Income and Other Taxes
  10




---



##### Table of Contents



Other
 The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles
     11




---



##### Table of Contents



3. Capital and Redeemable Limited Partners
  12




---



##### Table of Contents



2010General and Limited Partner UnitsGeneral and Limited Partner Units outstanding at January 1,
    
    
    294,157,017Issued to General Partner:Conversion of Series E Preference Units
    
    
    5,340Issuance of OP Units
    
    
    1,057,304Exercise of EQR share options
    
    
    2,035,178Employee Share Purchase Plan (ESPP)
    
    
    136,453Restricted EQR share grants, net
    
    
    213,598Issued to Limited Partners:Issuance of LTIP Units
    
    
    94,096OP Units issued through acquisitions
    
    
    189,700OP Units Other:Repurchased and retired
    
    
    (58,130
    )General and Limited Partner Units outstanding at September 30,
    
    
    297,830,556Limited Partner UnitsLimited Partner Units outstanding at January 1,
    
    
    14,197,969Limited Partner Issuance of LTIP Units
    
    
    94,096Limited Partner OP Units issued through acquisitions
    
    
    189,700Conversion of Limited Partner Units to EQR Common Shares
    
    
    (622,321
    )Limited Partner Units outstanding at September 30,
    
    
    13,859,444Limited Partner Units Ownership Interest in Operating Partnership
    
    
    4.7
    %
      13




---



##### Table of Contents



2010Balance at January 1,
    
    $
    258,280Change in market value
    
    
    108,576Change in carrying value
    
    
    (9,154
    )Balance at September 30,
    
    $
    357,702
   14




---



##### Table of Contents



Annual
    
    

    Amounts in thousandsRedemption
    
    
    Conversion
    
    
    Dividend per
    
    
    September 30,
    
    
    December 31,Date (1) (2)
    
    
    Rate (2)
    
    
    Unit (3)
    
    
    2010
    
    
    2009Preference Units:7.00% Series E Cumulative Convertible Preference Units;
liquidation value $25 per unit; 323,666 and 328,466 units
issued and outstanding at September 30, 2010 and December
31, 2009, respectively
    
    
    11/1/98
    
    
    
    1.1128
    
    
    $
    1.75
    
    
    $
    8,091
    
    
    $
    8,2117.00% Series H Cumulative Convertible Preference Units;
liquidation value $25 per unit; 22,459 units issued and
outstanding at September 30, 2010 and December 31, 2009
    
    
    6/30/98
    
    
    
    1.4480
    
    
    $
    1.75
    
    
    
    562
    
    
    
    5628.29% Series K Cumulative Redeemable Preference Units;
liquidation value $50 per unit; 1,000,000 units issued and
outstanding at September 30, 2010 and December 31, 2009
    
    
    12/10/26
    
    
    
    N/A
    
    
    $
    4.145
    
    
    
    50,000
    
    
    
    50,0006.48% Series N Cumulative Redeemable Preference Units;
liquidation value $250 per unit; 600,000 units issued and
outstanding at September 30, 2010 and December 31, 2009 (4)
    
    
    6/19/08
    
    
    
    N/A
    
    
    $
    16.20
    
    
    
    150,000
    
    
    
    150,000$
    208,653
    
    
    $
    208,773
 
 (1)
    
    On or after the redemption date, redeemable preference units (Series K and N) may be
redeemed for cash at the option of the Operating Partnership, in whole or in part, at a
redemption price equal to the liquidation price per unit, plus accrued and unpaid
distributions, if any, in conjunction with the concurrent redemption of the corresponding EQR
Preferred Shares.(2)
    
    On or after the redemption date, convertible preference units (Series E & H) may be redeemed
under certain circumstances at the option of the Operating Partnership for cash (in the case
of Series E) or OP Units (in the case of Series H), in whole or in part, at various redemption
prices per unit based upon the contractual conversion rate, plus accrued and unpaid
distributions, if any, in conjunction with the concurrent redemption/conversion of the
corresponding EQR Preferred Shares. See Note 16 regarding the redemption of the Series E & H
Preference Units.(3)
    
    Dividends on all series of Preference Units are payable quarterly at various pay dates. The
dividend listed for Series N is a Preference Unit rate and the equivalent depositary unit
annual dividend is $1.62 per unit..(4)
    
    The Series N Preference Units have a corresponding depositary unit that consists of ten times
the number of units and one-tenth the liquidation value and dividend per unit. 4. Real Estate
  September 30,
    
    
    December 31,2010
    
    
    2009Land
    
    $
    4,093,508
    
    
    $
    3,650,324Depreciable property:Buildings and improvements
    
    
    13,927,990
    
    
    
    12,781,543Furniture, fixtures and equipment
    
    
    1,233,017
    
    
    
    1,111,978Projects under development:Land
    
    
    79,204
    
    
    
    106,716Construction-in-progress
    
    
    419,833
    
    
    
    562,263Land held for development:Land
    
    
    228,091
    
    
    
    181,430Construction-in-progress
    
    
    62,728
    
    
    
    70,890Investment in real estate
    
    
    20,044,371
    
    
    
    18,465,144Accumulated depreciation
    
    
    (4,313,502
    )
    
    
    (3,877,564
    )Investment in real estate, net
    
    $
    15,730,869
    
    
    $
    14,587,580
  15




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##### Table of Contents



Properties
    
    
    Units
    
    
    Purchase PriceRental Properties
    
    
    14
    
    
    
    4,164
    
    
    $
    1,398,251Land Parcels (four)
    
    
    
    
    
    
    
    
    
    
    54,300Total
    
    
    14
    
    
    
    4,164
    
    
    $
    1,452,551
  Properties
    
    
    Units
    
    
    Sales PriceRental Properties:Consolidated
    
    
    11
    
    
    
    2,437
    
    
    $
    171,990Unconsolidated (1)
    
    
    27
    
    
    
    6,275
    
    
    
    417,779Land Parcel (one)
    
    
    
    
    
    
    
    
    
    
    4,000Condominium Conversion Properties
    
    
    1
    
    
    
    2
    
    
    
    360Total
    
    
    39
    
    
    
    8,714
    
    
    $
    594,129
 
 (1)
    
    The Operating Partnership owned a 25% interest in these unconsolidated rental
properties. Sales price listed is the gross sales price.   5. Commitments to Acquire/Dispose of Real Estate
  Properties
    
    
    Units
    
    
    Purchase PriceRental Properties
    
    
    3
    
    
    
    993
    
    
    $
    221,600Total
    
    
    3
    
    
    
    993
    
    
    $
    221,600
  Properties
    
    
    Units
    
    
    Sales PriceRental Properties
    
    
    18
    
    
    
    2,589
    
    
    $
    282,650Total
    
    
    18
    
    
    
    2,589
    
    
    $
    282,650
  6. Investments in Partially Owned Entities
  16




---



##### Table of Contents



Consolidated
    
    
    UnconsolidatedDevelopment Projects (VIEs)Held for
    
    
    Completed
    
    
    
    
    
    
    
    
    
    
    Institutionaland/or Under
    
    
    and
    
    
    
    
    
    
    
    
    
    
    JointDevelopment
    
    
    Stabilized
    
    
    Other
    
    
    Total
    
    
    Ventures (4)Total projects (1)
    
    
    
    
    
    
    4
    
    
    
    20
    
    
    
    24
    
    
    
    Total units (1)
    
    
    
    
    
    
    1,302
    
    
    
    3,720
    
    
    
    5,022
    
    
    
    Balance sheet information
at 9/30/10 (at 100%):ASSETSInvestment in real estate
    
    $
    306,433
    
    
    $
    390,435
    
    
    $
    433,456
    
    
    $
    1,130,324
    
    
    $
    Accumulated depreciation
    
    
    
    
    
    
    (15,406
    )
    
    
    (121,017
    )
    
    
    (136,423
    )
    
    
    Investment in real estate, net
    
    
    306,433
    
    
    
    375,029
    
    
    
    312,439
    
    
    
    993,901
    
    
    
    Cash and cash equivalents
    
    
    3,511
    
    
    
    6,732
    
    
    
    15,379
    
    
    
    25,622
    
    
    
    Deposits  restricted
    
    
    1,887
    
    
    
    3,086
    
    
    
    8
    
    
    
    4,981
    
    
    
    Escrow deposits  mortgage
    
    
    
    
    
    
    704
    
    
    
    3,631
    
    
    
    4,335
    
    
    
    Deferred financing costs, net
    
    
    3,393
    
    
    
    403
    
    
    
    260
    
    
    
    4,056
    
    
    
    Other assets
    
    
    365
    
    
    
    383
    
    
    
    215
    
    
    
    963
    
    
    
    Total assets
    
    $
    315,589
    
    
    $
    386,337
    
    
    $
    331,932
    
    
    $
    1,033,858
    
    
    $
    LIABILITIES AND CAPITALMortgage notes payable
    
    $
    154,324
    
    
    $
    275,600
    
    
    $
    301,969
    
    
    $
    731,893
    
    
    $
    Accounts payable & accrued expenses
    
    
    5,244
    
    
    
    2,376
    
    
    
    2,717
    
    
    
    10,337
    
    
    
    Accrued interest payable
    
    
    1,565
    
    
    
    585
    
    
    
    1,622
    
    
    
    3,772
    
    
    
    Other liabilities
    
    
    3,961
    
    
    
    399
    
    
    
    1,226
    
    
    
    5,586
    
    
    
    Security deposits
    
    
    860
    
    
    
    941
    
    
    
    1,566
    
    
    
    3,367
    
    
    
    Total liabilities
    
    
    165,954
    
    
    
    279,901
    
    
    
    309,100
    
    
    
    754,955
    
    
    
    Noncontrolling Interests  Partially Owned
Properties
    
    
    8,443
    
    
    
    4,464
    
    
    
    (4,367
    )
    
    
    8,540
    
    
    
    Accumulated other comprehensive (loss)
    
    
    (2,141
    )
    
    
    
    
    
    
    
    
    
    
    (2,141
    )
    
    
    General and Limited Partners Capital
    
    
    143,333
    
    
    
    101,972
    
    
    
    27,199
    
    
    
    272,504
    
    
    
    Total capital
    
    
    149,635
    
    
    
    106,436
    
    
    
    22,832
    
    
    
    278,903
    
    
    
    Total liabilities and capital
    
    $
    315,589
    
    
    $
    386,337
    
    
    $
    331,932
    
    
    $
    1,033,858
    
    
    $
    Debt  Secured (2):EQR Ownership (3)
    
    $
    154,324
    
    
    $
    275,600
    
    
    $
    221,858
    
    
    $
    651,782
    
    
    $
    Noncontrolling Ownership
    
    
    
    
    
    
    
    
    
    
    80,111
    
    
    
    80,111
    
    
    
    Total (at 100%)
    
    $
    154,324
    
    
    $
    275,600
    
    
    $
    301,969
    
    
    $
    731,893
    
    
    $
    
 17




---



##### Table of Contents



Consolidated
    
    
    UnconsolidatedDevelopment Projects (VIEs)Held for
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Institutionaland/or Under
    
    
    Completed
    
    
    
    
    
    
    
    
    
    
    JointDevelopment
    
    
    and Stabilized
    
    
    Other
    
    
    Total
    
    
    Ventures (4)Operating
information for the nine months ended 9/30/10 (at 100%):Operating revenue
    
    $
    3,507
    
    
    $
    18,946
    
    
    $
    41,885
    
    
    $
    64,338
    
    
    $
    44,179Operating expenses
    
    
    3,032
    
    
    
    7,069
    
    
    
    14,974
    
    
    
    25,075
    
    
    
    22,036Net operating income
    
    
    475
    
    
    
    11,877
    
    
    
    26,911
    
    
    
    39,263
    
    
    
    22,143Depreciation
    
    
    
    
    
    
    9,174
    
    
    
    11,125
    
    
    
    20,299
    
    
    
    11,189General and administrative/other
    
    
    52
    
    
    
    107
    
    
    
    34
    
    
    
    193
    
    
    
    141Operating income
    
    
    423
    
    
    
    2,596
    
    
    
    15,752
    
    
    
    18,771
    
    
    
    10,813Interest and other income
    
    
    21
    
    
    
    8
    
    
    
    20
    
    
    
    49
    
    
    
    73Other expenses
    
    
    (342
    )
    
    
    
    
    
    
    (493
    )
    
    
    (835
    )
    
    
    Interest:Expense incurred, net
    
    
    (2,382
    )
    
    
    (4,804
    )
    
    
    (15,258
    )
    
    
    (22,444
    )
    
    
    (16,482
    )Amortization of deferred financing costs
    
    
    
    
    
    
    (566
    )
    
    
    (172
    )
    
    
    (738
    )
    
    
    (573
    )(Loss) before income and other taxes
and discontinued operations
    
    
    (2,280
    )
    
    
    (2,766
    )
    
    
    (151
    )
    
    
    (5,197
    )
    
    
    (6,169
    )Income and other tax (expense) benefit
    
    
    (30
    )
    
    
    
    
    
    
    (24
    )
    
    
    (54
    )
    
    
    (153
    )Net gain on sales of discontinued operations
    
    
    711
    
    
    
    
    
    
    
    7,997
    
    
    
    8,708
    
    
    
    9,967Net (loss) income
    
    $
    (1,599
    )
    
    $
    (2,766
    )
    
    $
    7,822
    
    
    $
    3,457
    
    
    $
    3,645
 
 (1)
    
    Project and unit counts exclude all uncompleted development projects until those
projects are substantially completed.(2)
    
    All debt is non-recourse to the Operating Partnership with the exception of
$14.0 million in mortgage debt on various development projects.(3)
    
    Represents the Operating Partnerships current economic ownership
interest.(4)
    
    On April 30, 2010, the Operating Partnership acquired the 75% equity interest it did
not own in seven previously unconsolidated properties containing 1,811 units in
exchange for an approximate $30.0 million payment to its partner. In addition, the
Operating Partnership repaid the net $70.0 million mortgage loan, which was to mature
on May 1, 2010, concurrent with closing using proceeds drawn from the Operating
Partnerships line of credit. During the third quarter of 2010, the Operating
Partnership sold its 25% equity interest in the remaining 24 unconsolidated properties
containing 5,635 units in exchange for an approximate $25.4 million payment from its
partner and the related $264.8 million in non-recourse mortgage debt was extinguished
by the partner at closing. As of September 30, 2010, the Operating Partnership no
longer held an interest in these unconsolidated institutional joint ventures.  7. Deposits  Restricted
  September 30,
    
    
    December 31,2010
    
    
    2009Taxdeferred (1031) exchange proceeds
    
    $
    
    
    
    $
    244,257Earnest money on pending acquisitions
    
    
    1,710
    
    
    
    6,000Restricted deposits on debt (1)
    
    
    55,746
    
    
    
    49,565Resident security and utility deposits
    
    
    41,606
    
    
    
    39,361Other
    
    
    10,546
    
    
    
    12,825Totals
    
    $
    109,608
    
    
    $
    352,008
 
 (1)
    
    Primarily represents amounts held in escrow by the lender and released
as draw requests are made on fully funded 18




---



##### Table of Contents



development mortgage loans. 8. Mortgage Notes Payable
   
    
    Repaid $503.6 million of mortgage loans;
    
    Obtained $124.0 million of new mortgage loan proceeds;
    
    Assumed $338.2 million of mortgage debt on six acquired properties;
    
    Was released from $40.0 million of mortgage debt assumed by the purchaser on two
disposed properties; and
    
    Assumed $112.6 million of mortgage debt on seven previously unconsolidated
properties and repaid the net $70.0 million mortgage loan (net of $42.6 million of cash
collateral held by the lender) concurrent with closing using proceeds drawn from the
Operating Partnerships line of credit.
    9. Notes
    10. Lines of Credit
   11. Derivative and Other Fair Value Instruments
  19




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##### Table of Contents



Forward
    
    
    DevelopmentFair Value
    
    
    Starting
    
    
    Cash FlowHedges (1)
    
    
    Swaps (2)
    
    
    Hedges (3)Current Notional Balance
    
    $
    315,693
    
    
    $
    850,000
    
    
    $
    91,343Lowest Possible Notional
    
    $
    315,693
    
    
    $
    850,000
    
    
    $
    3,020Highest Possible Notional
    
    $
    317,694
    
    
    $
    850,000
    
    
    $
    91,343Lowest Interest Rate
    
    
    2.009
    %
    
    
    3.478
    %
    
    
    4.059
    %Highest Interest Rate
    
    
    4.800
    %
    
    
    4.695
    %
    
    
    4.059
    %Earliest Maturity Date
    
    
    2012
    
    
    
    2021
    
    
    
    2011Latest Maturity Date
    
    
    2013
    
    
    
    2023
    
    
    
    2011
 
 (1)
    
    Fair Value Hedges  Converts outstanding fixed rate debt to a floating interest rate.(2)
    
    Forward Starting Swaps  Designed to partially fix the interest rate in advance of a
planned future debt issuance. These swaps have mandatory counterparty terminations from
2012 through 2014, and $300.0 million, $400.0 million and $150.0 million are designated for
2011, 2012 and 2013 maturities, respectively.(3)
    
    Development Cash Flow Hedges  Converts outstanding floating rate debt to a fixed
interest rate.  Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    
    Balance SheetSeptember 30, 2010
    
    Location
    
    
    Fair Value
    
    
    Location
    
    
    Fair ValueDerivatives designated as hedging instruments:Interest Rate Contracts:Fair Value Hedges
    
    Other assets
    
    $
    15,029
    
    
    Other liabilities
    
    $
    Forward Starting Swaps
    
    Other assets
    
    
    
    
    
    Other liabilities
    
    
    (91,239
    )Development Cash Flow Hedges
    
    Other assets
    
    
    
    
    
    Other liabilities
    
    
    (2,141
    )Total
    
    
    
    
    
    $
    15,029
    
    
    
    
    
    
    $
    (93,380
    )
 Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    
    Balance SheetDecember 31, 2009
    
    Location
    
    
    Fair Value
    
    
    Location
    
    
    Fair ValueDerivatives designated as hedging instruments:Interest Rate Contracts:Fair Value Hedges
    
    Other assets
    
    $
    5,186
    
    
    Other liabilities
    
    $
    Forward Starting Swaps
    
    Other assets
    
    
    23,630
    
    
    Other liabilities
    
    
    Development Cash Flow Hedges
    
    Other assets
    
    
    
    
    
    Other liabilities
    
    
    (3,577
    )Total
    
    
    
    
    
    $
    28,816
    
    
    
    
    
    
    $
    (3,577
    )
 20




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##### Table of Contents



Location ofGain/(Loss)
    
    
    Amount of Gain/(Loss)
    
    
    
    
    
    
    Income Statement
    
    
    Amount of Gain/(Loss)September 30, 2010
    
    Recognized in Income
    
    
    Recognized in Income
    
    
    
    
    
    
    Location of Hedged
    
    
    Recognized in IncomeType of Fair Value Hedge
    
    on Derivative
    
    
    on Derivative
    
    
    Hedged Item
    
    
    Item Gain/(Loss)
    
    
    on Hedged ItemDerivatives designated as hedging instruments:Interest Rate Contracts:Interest Rate Swaps
    
    Interest expense
    
    $
    9,842
    
    
    Fixed rate debt
    
    Interest expense
    
    $
    (9,842
    )Total
    
    
    
    
    
    $
    9,842
    
    
    
    
    
    
    
    
    
    
    $
    (9,842
    )
 Location ofGain/(Loss)
    
    
    Amount of Gain/(Loss)
    
    
    
    
    
    
    Income Statement
    
    
    Amount of Gain/(Loss)September 30, 2009
    
    Recognized in Income
    
    
    Recognized in Income
    
    
    
    
    
    
    Location of Hedged
    
    
    Recognized in IncomeType of Fair Value Hedge
    
    on Derivative
    
    
    on Derivative
    
    
    Hedged Item
    
    
    Item Gain/(Loss)
    
    
    on Hedged ItemDerivatives designated as hedging instruments:Interest Rate Contracts:Interest Rate Swaps
    
    Interest expense
    
    $
    (890
    )
    
    Fixed rate debt
    
    Interest expense
    
    $
    890Total
    
    
    
    
    
    $
    (890
    )
    
    
    
    
    
    
    
    
    
    $
    890
  Effective Portion
    
    
    Ineffective PortionAmount of
    
    
    Location of Gain/(Loss)
    
    
    Amount of Gain/(Loss)
    
    
    Location of
    
    
    Amount of Gain/(Loss)Gain/(Loss)
    
    
    Reclassified from
    
    
    Reclassified from
    
    
    Gain/(Loss)
    
    
    Reclassified fromSeptember 30, 2010
    
    Recognized in OCI
    
    
    Accumulated OCI
    
    
    Accumulated OCI
    
    
    Recognized in Income
    
    
    Accumulated OCIType of Cash Flow Hedge
    
    on Derivative
    
    
    into Income
    
    
    into Income
    
    
    on Derivative
    
    
    into IncomeDerivatives designated as hedging instruments:Interest Rate Contracts:Forward Starting Swaps/Treasury Locks
    
    $
    (124,908
    )
    
    Interest expense
    
    $
    (2,379
    )
    
    
    N/A
    
    
    $
    Development Interest Rate Swaps/Caps
    
    
    1,436
    
    
    Interest expense
    
    
    
    
    
    
    N/A
    
    
    
    Total
    
    $
    (123,472
    )
    
    
    
    
    
    $
    (2,379
    )
    
    
    
    
    
    $
    
 Effective Portion
    
    
    Ineffective PortionAmount of
    
    
    Location of Gain/(Loss)
    
    
    Amount of Gain/(Loss)
    
    
    Location of
    
    
    Amount of Gain/(Loss)Gain/(Loss)
    
    
    Reclassified from
    
    
    Reclassified from
    
    
    Gain/(Loss)
    
    
    Reclassified fromSeptember 30, 2009
    
    Recognized in OCI
    
    
    Accumulated OCI
    
    
    Accumulated OCI
    
    
    Recognized in Income
    
    
    Accumulated OCIType of Cash Flow Hedge
    
    on Derivative
    
    
    into Income
    
    
    into Income
    
    
    on Derivative
    
    
    into IncomeDerivatives designated as hedging instruments:Interest Rate Contracts:Forward Starting Swaps/Treasury Locks
    
    $
    9,370
    
    
    Interest expense
    
    $
    (3,014
    )
    
    
    N/A
    
    
    $
    Development Interest Rate Swaps/Caps
    
    
    2,823
    
    
    Interest expense
    
    
    
    
    
    
    N/A
    
    
    
    Total
    
    $
    12,193
    
    
    
    
    
    
    $
    (3,014
    )
    
    
    
    
    
    $
    
    21




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##### Table of Contents



Other AssetsAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Book/
    
    
    Interest andSecurity
    
    Maturity
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value
    
    
    Other IncomeAvailable-for-SaleFDIC-insured certificates of deposit
    
    Less than one year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    61Other
    
    N/A
    
    
    
    
    675
    
    
    
    411
    
    
    
    
    
    
    
    1,086
    
    
    
    Total
    
    
    
    
    
    $
    675
    
    
    $
    411
    
    
    $
    
    
    
    $
    1,086
    
    
    $
    61
  
    
    Level 1  Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
    
    Level 2  Inputs to the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the financial
instrument.
    
    Level 3  Inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
    12. Earnings Per Unit
  22




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##### Table of Contents



Nine Months Ended September 30,
    
    
    Quarter Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for net income per Unit  basic and diluted:Income from continuing operations
    
    $
    26,853
    
    
    $
    33,201
    
    
    $
    19,884
    
    
    $
    9,029Net loss attributable to Noncontrolling Interests  Partially Owned Properties
    
    
    623
    
    
    
    391
    
    
    
    188
    
    
    
    317Allocation to Preference Units
    
    
    (10,855
    )
    
    
    (10,859
    )
    
    
    (3,617
    )
    
    
    (3,619
    )Allocation to Preference Interests and Junior Preference Units
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    (2
    )Income from continuing operations available to Units
    
    
    16,621
    
    
    
    22,724
    
    
    
    16,455
    
    
    
    5,725Discontinued operations, net
    
    
    70,918
    
    
    
    301,517
    
    
    
    9,942
    
    
    
    134,336Numerator for net income per Unit  basic and diluted
    
    $
    87,539
    
    
    $
    324,241
    
    
    $
    26,397
    
    
    $
    140,061Denominator for net income per Unit  basic and diluted:Denominator for net income per Unit  basic
    
    
    295,572
    
    
    
    288,990
    
    
    
    296,348
    
    
    
    289,262Effect of dilutive securities:Dilution for Units issuable upon assumed exercise/vesting
of EQRs long-term compensation award shares/units
    
    
    3,459
    
    
    
    528
    
    
    
    4,031
    
    
    
    953Denominator for net income per Unit  diluted
    
    
    299,031
    
    
    
    289,518
    
    
    
    300,379
    
    
    
    290,215Net income per Unit  basic
    
    $
    0.296
    
    
    $
    1.121
    
    
    $
    0.089
    
    
    $
    0.484Net income per Unit  diluted
    
    $
    0.293
    
    
    $
    1.120
    
    
    $
    0.088
    
    
    $
    0.483Net income per Unit  basic:Income from continuing operations available to Units
    
    $
    0.056
    
    
    $
    0.078
    
    
    $
    0.055
    
    
    $
    0.020Discontinued operations, net
    
    
    0.240
    
    
    
    1.043
    
    
    
    0.034
    
    
    
    0.464Net income per Unit  basic
    
    $
    0.296
    
    
    $
    1.121
    
    
    $
    0.089
    
    
    $
    0.484Net income per Unit  diluted:Income from continuing operations available to Units
    
    $
    0.056
    
    
    $
    0.078
    
    
    $
    0.055
    
    
    $
    0.020Discontinued operations, net
    
    
    0.237
    
    
    
    1.042
    
    
    
    0.033
    
    
    
    0.463Net income per Unit  diluted
    
    $
    0.293
    
    
    $
    1.120
    
    
    $
    0.088
    
    
    $
    0.483
 Convertible preference interests/units that could be converted into 396,098 and 404,004
weighted average Common Shares (which would be contributed to the Operating Partnership in exchange
for OP Units) for the nine months ended September 30, 2010 and 2009, respectively, and 393,724 and
400,489 weighted average Common Shares (which would be contributed to the Operating Partnership in
exchange for OP Units) for the quarters ended September 30, 2010 and 2009, respectively, were
outstanding but were not included in the computation of diluted earnings per Unit because the
effects would be anti-dilutive. In addition, the effect of the Common Shares/OP Units that could
ultimately be issued upon the conversion/exchange of the Operating Partnerships $650.0 million
($482.5 million outstanding at September 30, 2010) exchangeable senior notes was not included in
the computation of diluted earnings per Unit because the effects would be anti-dilutive.
 13. Discontinued Operations
   23




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##### Table of Contents



Nine Months Ended September 30,
    
    
    Quarter Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUESRental income
    
    $
    7,296
    
    
    $
    90,113
    
    
    $
    1,914
    
    
    $
    21,018Total revenues
    
    
    7,296
    
    
    
    90,113
    
    
    
    1,914
    
    
    
    21,018EXPENSES (1)Property and maintenance
    
    
    2,942
    
    
    
    29,420
    
    
    
    310
    
    
    
    7,456Real estate taxes and insurance
    
    
    1,078
    
    
    
    9,565
    
    
    
    223
    
    
    
    2,209Depreciation
    
    
    1,522
    
    
    
    22,736
    
    
    
    377
    
    
    
    5,487General and administrative
    
    
    26
    
    
    
    29
    
    
    
    10
    
    
    
    4Total expenses
    
    
    5,568
    
    
    
    61,750
    
    
    
    920
    
    
    
    15,156Discontinued operating income
    
    
    1,728
    
    
    
    28,363
    
    
    
    994
    
    
    
    5,862Interest and other income
    
    
    360
    
    
    
    16
    
    
    
    
    
    
    
    3Interest (2):Expense incurred, net
    
    
    (659
    )
    
    
    (1,372
    )
    
    
    (318
    )
    
    
    (352
    )Amortization of deferred financing costs
    
    
    (11
    )
    
    
    (335
    )
    
    
    (8
    )
    
    
    (293
    )Income and other tax (expense) benefit
    
    
    (38
    )
    
    
    (88
    )
    
    
    (11
    )
    
    
    (19
    )Discontinued operations
    
    
    1,380
    
    
    
    26,584
    
    
    
    657
    
    
    
    5,201Net gain on sales of discontinued operations
    
    
    69,538
    
    
    
    274,933
    
    
    
    9,285
    
    
    
    129,135Discontinued operations, net
    
    $
    70,918
    
    
    $
    301,517
    
    
    $
    9,942
    
    
    $
    134,336
 
 (1)
    
    Includes expenses paid in the current period for properties sold or held for
sale in prior periods related to the Operating Partnerships period of ownership.(2)
    
    Includes only interest expense specific to secured mortgage notes payable for
properties sold and/or held for sale.  14. Commitments and Contingencies
     24




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##### Table of Contents



15. Reportable Segments
      25




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##### Table of Contents



Nine Months Ended September 30, 2010Northeast
    
    
    Northwest
    
    
    Southeast
    
    
    Southwest
    
    
    Other (3)
    
    
    TotalRental income:Same store (1)
    
    $
    442,774
    
    
    $
    276,585
    
    
    $
    293,921
    
    
    $
    325,379
    
    
    $
    
    
    
    $
    1,338,659Non-same store/other (2) (3)
    
    
    73,979
    
    
    
    10,272
    
    
    
    6,323
    
    
    
    19,924
    
    
    
    68,145
    
    
    
    178,643Total rental income
    
    
    516,753
    
    
    
    286,857
    
    
    
    300,244
    
    
    
    345,303
    
    
    
    68,145
    
    
    
    1,517,302Operating expenses:Same store (1)
    
    
    168,263
    
    
    
    105,642
    
    
    
    122,853
    
    
    
    118,791
    
    
    
    
    
    
    
    515,549Non-same store/other (2) (3)
    
    
    37,055
    
    
    
    4,330
    
    
    
    2,795
    
    
    
    8,071
    
    
    
    54,757
    
    
    
    107,008Total operating expenses
    
    
    205,318
    
    
    
    109,972
    
    
    
    125,648
    
    
    
    126,862
    
    
    
    54,757
    
    
    
    622,557NOI:Same store (1)
    
    
    274,511
    
    
    
    170,943
    
    
    
    171,068
    
    
    
    206,588
    
    
    
    
    
    
    
    823,110Non-same store/other (2) (3)
    
    
    36,924
    
    
    
    5,942
    
    
    
    3,528
    
    
    
    11,853
    
    
    
    13,388
    
    
    
    71,635Total NOI
    
    $
    311,435
    
    
    $
    176,885
    
    
    $
    174,596
    
    
    $
    218,441
    
    
    $
    13,388
    
    
    $
    894,745Total assets
    
    $
    6,054,555
    
    
    $
    2,723,175
    
    
    $
    2,672,806
    
    
    $
    3,141,662
    
    
    $
    1,494,631
    
    
    $
    16,086,829
 
 (1)
    
    Same store primarily includes all properties acquired or completed and stabilized prior
to January 1, 2009, less properties subsequently sold, which represented 116,775 units.(2)
    
    Non-same store primarily includes properties acquired after January 1, 2009, plus any
properties in lease-up and not stabilized as of January 1, 2009.(3)
    
    Other includes ECH, development, condominium conversion overhead of $0.4 million and
other corporate operations. Also reflects a $8.0 million elimination of rental income
recorded in Northeast, Northwest, Southeast and Southwest operating segments related to
ECH. Nine Months Ended September 30, 2009Northeast
    
    
    Northwest
    
    
    Southeast
    
    
    Southwest
    
    
    Other (3)
    
    
    TotalRental income:Same store (1)
    
    $
    439,673
    
    
    $
    284,260
    
    
    $
    295,435
    
    
    $
    332,420
    
    
    $
    
    
    
    $
    1,351,788Non-same store/other (2) (3)
    
    
    13,369
    
    
    
    1,283
    
    
    
    3,144
    
    
    
    12,299
    
    
    
    51,982
    
    
    
    82,077Total rental income
    
    
    453,042
    
    
    
    285,543
    
    
    
    298,579
    
    
    
    344,719
    
    
    
    51,982
    
    
    
    1,433,865Operating expenses:Same store (1)
    
    
    164,288
    
    
    
    102,778
    
    
    
    123,769
    
    
    
    116,075
    
    
    
    
    
    
    
    506,910Non-same store/other (2) (3)
    
    
    8,126
    
    
    
    1,358
    
    
    
    1,303
    
    
    
    6,685
    
    
    
    53,735
    
    
    
    71,207Total operating expenses
    
    
    172,414
    
    
    
    104,136
    
    
    
    125,072
    
    
    
    122,760
    
    
    
    53,735
    
    
    
    578,117NOI:Same store (1)
    
    
    275,385
    
    
    
    181,482
    
    
    
    171,666
    
    
    
    216,345
    
    
    
    
    
    
    
    844,878Non-same store/other (2) (3)
    
    
    5,243
    
    
    
    (75
    )
    
    
    1,841
    
    
    
    5,614
    
    
    
    (1,753
    )
    
    
    10,870Total NOI
    
    $
    280,628
    
    
    $
    181,407
    
    
    $
    173,507
    
    
    $
    221,959
    
    
    $
    (1,753
    )
    
    $
    855,748
 
 (1)
    
    Same store primarily includes all properties acquired or completed and stabilized prior
to January 1, 2009, less properties subsequently sold, which represented 116,775 units.(2)
    
    Non-same store primarily includes properties acquired after January 1, 2009, plus any
properties in lease-up and not stabilized as of January 1, 2009.(3)
    
    Other includes ECH, development, condominium conversion overhead of $1.6 million and
other corporate operations. Also reflects a $7.4 million elimination of rental income
recorded in Northeast, Northwest, Southeast and Southwest operating segments related to
ECH. 26




---



##### Table of Contents



Quarter Ended September 30, 2010Northeast
    
    
    Northwest
    
    
    Southeast
    
    
    Southwest
    
    
    Other (3)
    
    
    TotalRental income:Same store (1)
    
    $
    150,296
    
    
    $
    93,705
    
    
    $
    100,284
    
    
    $
    109,775
    
    
    $
    
    
    
    $
    454,060Non-same store/other (2) (3)
    
    
    28,740
    
    
    
    5,351
    
    
    
    1,810
    
    
    
    7,612
    
    
    
    27,655
    
    
    
    71,168Total rental income
    
    
    179,036
    
    
    
    99,056
    
    
    
    102,094
    
    
    
    117,387
    
    
    
    27,655
    
    
    
    525,228Operating expenses:Same store (1)
    
    
    55,008
    
    
    
    36,118
    
    
    
    41,434
    
    
    
    40,491
    
    
    
    
    
    
    
    173,051Non-same store/other (2) (3)
    
    
    17,242
    
    
    
    2,146
    
    
    
    903
    
    
    
    2,685
    
    
    
    19,563
    
    
    
    42,539Total operating expenses
    
    
    72,250
    
    
    
    38,264
    
    
    
    42,337
    
    
    
    43,176
    
    
    
    19,563
    
    
    
    215,590NOI:Same store (1)
    
    
    95,288
    
    
    
    57,587
    
    
    
    58,850
    
    
    
    69,284
    
    
    
    
    
    
    
    281,009Non-same store/other (2) (3)
    
    
    11,498
    
    
    
    3,205
    
    
    
    907
    
    
    
    4,927
    
    
    
    8,092
    
    
    
    28,629Total NOI
    
    $
    106,786
    
    
    $
    60,792
    
    
    $
    59,757
    
    
    $
    74,211
    
    
    $
    8,092
    
    
    $
    309,638
 
 (1)
    
    Same store primarily includes all properties acquired or completed and stabilized prior
to July 1, 2009, less properties subsequently sold, which represented 117,286 units.(2)
    
    Non-same store primarily includes properties acquired after July 1, 2009, plus any
properties in lease-up and not stabilized as of July 1, 2009.(3)
    
    Other includes ECH, development, condominium conversion overhead of $0.1 million and
other corporate operations. Also reflects a $3.2 million elimination of rental income
recorded in Northeast, Northwest, Southeast and Southwest operating segments related to
ECH. Quarter Ended September 30, 2009Northeast
    
    
    Northwest
    
    
    Southeast
    
    
    Southwest
    
    
    Other (3)
    
    
    TotalRental income:Same store (1)
    
    $
    146,157
    
    
    $
    93,551
    
    
    $
    98,961
    
    
    $
    109,740
    
    
    $
    
    
    
    $
    448,409Non-same store/other (2) (3)
    
    
    5,932
    
    
    
    500
    
    
    
    
    
    
    
    3,742
    
    
    
    19,005
    
    
    
    29,179Total rental income
    
    
    152,089
    
    
    
    94,051
    
    
    
    98,961
    
    
    
    113,482
    
    
    
    19,005
    
    
    
    477,588Operating expenses:Same store (1)
    
    
    53,287
    
    
    
    35,377
    
    
    
    41,530
    
    
    
    39,621
    
    
    
    
    
    
    
    169,815Non-same store/other (2) (3)
    
    
    3,386
    
    
    
    457
    
    
    
    10
    
    
    
    1,812
    
    
    
    20,129
    
    
    
    25,794Total operating expenses
    
    
    56,673
    
    
    
    35,834
    
    
    
    41,540
    
    
    
    41,433
    
    
    
    20,129
    
    
    
    195,609NOI:Same store (1)
    
    
    92,870
    
    
    
    58,174
    
    
    
    57,431
    
    
    
    70,119
    
    
    
    
    
    
    
    278,594Non-same store/other (2) (3)
    
    
    2,546
    
    
    
    43
    
    
    
    (10
    )
    
    
    1,930
    
    
    
    (1,124
    )
    
    
    3,385Total NOI
    
    $
    95,416
    
    
    $
    58,217
    
    
    $
    57,421
    
    
    $
    72,049
    
    
    $
    (1,124
    )
    
    $
    281,979
 
 (1)
    
    Same store primarily includes all properties acquired or completed and stabilized prior
to July 1, 2009, less properties subsequently sold, which represented 117,286 units.(2)
    
    Non-same store primarily includes properties acquired after July 1, 2009, plus any
properties in lease-up and not stabilized as of July 1, 2009.(3)
    
    Other includes ECH, development, condominium conversion overhead of $0.6 million and
other corporate operations. Also reflects a $2.8 million elimination of rental income
recorded in Northeast, Northwest, Southeast and Southwest operating segments related to
ECH.  (a)
    
    Northeast  New England (excluding Boston), Boston, New York Metro, DC Northern Virginia and
Suburban Maryland.(b)
    
    Northwest  Central Valley, Denver, Portland, San Francisco Bay Area and Seattle/Tacoma.(c)
    
    Southeast  Atlanta, Jacksonville, Orlando, South Florida, Tampa and Tulsa.(d)
    
    Southwest  Albuquerque, Inland Empire, Los Angeles, Orange County, Phoenix and San Diego.
  27




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##### Table of Contents



Nine Months Ended September 30,
    
    
    Quarter Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Rental income
    
    $
    1,517,302
    
    
    $
    1,433,865
    
    
    $
    525,228
    
    
    $
    477,588Property and maintenance expense
    
    
    (386,518
    )
    
    
    (363,354
    )
    
    
    (135,000
    )
    
    
    (122,305
    )Real estate taxes and insurance expense
    
    
    (175,491
    )
    
    
    (158,306
    )
    
    
    (61,189
    )
    
    
    (54,579
    )Property management expense
    
    
    (60,548
    )
    
    
    (56,457
    )
    
    
    (19,401
    )
    
    
    (18,725
    )Total operating expenses
    
    
    (622,557
    )
    
    
    (578,117
    )
    
    
    (215,590
    )
    
    
    (195,609
    )Net operating income
    
    $
    894,745
    
    
    $
    855,748
    
    
    $
    309,638
    
    
    $
    281,979
 16. Subsequent Events/Other
 Subsequent Events
  
    
    Repaid $75.2 million in mortgage loans;
    
    Redeemed its Series E and Series H Cumulative Convertible Preference Units
 for cash consideration of $0.8 million and 355,581 OP Units (inclusive of any Preference Units converted after September 30, 2010 and prior to the redemption);
    
    Acquired one operating property containing 138 units for $52.3 million and two land
parcels for $14.6 million;
    
    Sold one property containing 152 units for $11.1 million; and
    
    Filed a universal shelf registration statement for an unlimited amount of equity and
debt securities for issuance by EQR and the Operating Partnership that was automatically
effective upon filing with the SEC in October 2010 (under SEC regulations enacted in 2005,
the registration statement automatically expires on October 14, 2013 and does not contain a
maximum issuance amount).
 Other
     28




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  
    
    We intend to actively acquire and/or develop multifamily properties for rental
operations as market conditions dictate. We may underestimate the costs necessary to
bring an acquired property up to standards
established for its intended market position or to complete a development property.
Additionally, we expect that other major real estate investors with significant capital
will compete with us for attractive investment opportunities or may also develop
properties in markets where we focus our development efforts. This competition (or lack
thereof) may increase or depress prices for multifamily properties. We may not be in a
position or have the opportunity in the future to make suitable property acquisitions on
favorable terms. We expect to develop properties ourselves in addition to co-investing
with our development partners. The total number of development units, costs of
development and estimated completion dates are subject to uncertainties arising from
changing economic conditions (such as the cost of labor and construction materials),
competition and local government regulation;
    
    Debt financing and other capital required by the Operating Partnership may not be
available or may only be available on adverse terms;
    
    Labor and materials required for maintenance, repair, capital expenditure or
development may be more expensive than anticipated;
    
    Occupancy levels and market rents may be adversely affected by national and local
economic and market conditions including, without limitation, new construction and
excess inventory of multifamily housing and single family housing, slow or negative
employment growth, availability of low interest mortgages for single family home buyers
and the potential for geopolitical instability, all of which are beyond the Operating
Partnerships control; and
    
    Additional factors as discussed in Part I of the Operating Partnerships Annual
Report on Form 10-K, particularly those under Item 1A. Risk Factors.
  Overview
   29




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##### Table of Contents



Business Objectives and Operating Strategies
  
    
    Leveraging our size and scale in four critical ways:
 
    
    Investing in apartment communities located in strategically targeted markets to
maximize our total risk-adjusted return on invested capital;
    
    Meeting the needs of our residents by offering a wide array of product choices
and a commitment to service;
    
    Engaging, retaining and attracting the best employees by providing them with the
education, resources and opportunities to succeed; and
    
    Sharing resources and best practices in property management across the
enterprise.
 
    
    Owning a highly diversified portfolio in our target markets. Target markets are
defined by a combination of the following criteria:
 
    
    High barrier-to-entry markets where, because of land scarcity or government
regulation, it is difficult or costly to build new apartment complexes leading to
low supply;
    
    Markets with high single family housing prices making our apartments a more
economical housing choice and allowing us to more readily increase rents;
    
    Strong economic growth leading to household formation and job
growth, which in turn leads to high demand for our apartments; and
    
    Markets with an attractive quality of life leading to high demand and retention.
 
    
    Giving residents reasons to continue living in properties owned by the Operating Partnership by providing a range
of product choices available in our diversified portfolio and by enhancing their
experience with us through meticulous customer service by our employees and by
providing various value-added services.
    
    Being open and responsive to changes in the market in order to take advantage of
investment opportunities that align with our long-term vision.
 Acquisition, Development and Disposition Strategies
   
    
    strategically targeted markets;
    
    income levels and employment growth trends in the relevant market;
    
    employment and household growth and net migration in the relevant markets
population;
    
    barriers to entry that would limit competition (zoning laws, building permit
availability, supply of
 30




---



##### Table of Contents



undeveloped or developable real estate, local building costs
and construction costs, among other factors);
 
    
    the location, construction quality, age, condition and design of the property;
    
    the current and projected cash flow of the property and the ability to increase cash
flow;
    
    the potential for capital appreciation of the property;
    
    the terms of resident leases, including the potential for rent increases;
    
    the potential for economic growth and the tax and regulatory environment of the
community in which the property is located;
    
    the occupancy and demand by residents for properties of a similar type in the
vicinity (the overall market and submarket);
    
    the prospects for liquidity through sale, financing or refinancing of the property;
    
    the benefits of integration into existing operations;
    
    purchase prices and yields of available existing stabilized properties, if any;
    
    competition from existing multifamily properties, comparably priced single family
homes or rentals, residential properties under development and the potential for the
construction of new multifamily properties in the area; and
    
    opportunistic selling based on demand and price of high quality assets.
  Current Environment
     31




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##### Table of Contents



Results of Operations
  
    
    Acquired $1.0 billion of apartment properties consisting of 12 properties and 2,926
units at a weighted average capitalization (cap) rate (see definition below) of 5.5%
and four land parcels for $54.3 million, all of which we deem to be in our strategic
targeted markets;
    
    Acquired one unoccupied property in the second quarter of 2010 (425 Mass) for $166.8
million consisting of 559 units that is expected to stabilize in its third year of
ownership at an 8.5% yield on cost and one property in the third quarter of 2010
(Vantage Pointe) for $200.0 million consisting of 679 units that was in the early
stages of lease up and is expected to stabilize in its third year of ownership at a
7.0% yield on cost;
    
    Acquired the 75% equity interest it did not own in seven previously unconsolidated
properties consisting of 1,811 units at an implied cap rate of 8.4% in exchange for an
approximate $30.0 million payment to its joint venture partner;
    
    Sold $172.0 million of consolidated apartment properties consisting of 11 properties
and 2,437 units at a weighted average cap rate of 7.5%, 2 condominium units for $0.4
million and one land parcel for $4.0 million, the majority of which was in exit or less
desirable markets; and
    
    Sold the last of its 25% equity interests in an institutional joint venture
consisting of 27 unconsolidated properties containing 6,275 apartment units. These
properties were valued in their entirety at $417.8 million which results in an implied
weighted average cap rate of 7.5% (generating cash to the Operating Partnership, net of
debt repayments, of $26.9 million).
  32




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##### Table of Contents



Comparison of the nine months ended September 30, 2010 to the nine months ended September 30,
2009
    
 Results
    
    
    StatisticsAverageRentalDescription
    
    Revenues
    
    
    Expenses
    
    
    NOI
    
    
    Rate (1)
    
    
    Occupancy
    
    
    TurnoverYTD 2010
    
    $
    1,338,659
    
    
    $
    515,549
    
    
    $
    823,110
    
    
    $
    1,344
    
    
    
    94.9
    %
    
    
    43.7%YTD 2009
    
    $
    1,351,788
    
    
    $
    506,910
    
    
    $
    844,878
    
    
    $
    1,375
    
    
    
    93.7
    %
    
    
    47.2%Change
    
    $
    (13,129
    )
    
    $
    8,639
    
    
    $
    (21,768
    )
    
    $
    (31
    )
    
    
    1.2
    %
    
    
    (3.5%
    )Change
    
    
    (1.0%
    )
    
    
    1.7%
    
    
    
    (2.6%
    )
    
    
    (2.3%
    )
 
 (1)
    
    Average rental rate is defined as total rental revenues divided by the weighted
average occupied units for the period.  33




---



##### Table of Contents



% of ActualYTD 2010Actual
    
    
    Actual
    
    
    $
    
    
    %
    
    
    OperatingYTD 2010
    
    
    YTD 2009
    
    
    Change
    
    
    Change
    
    
    ExpensesReal estate taxes
    
    $
    135,169
    
    
    $
    137,170
    
    
    $
    (2,001
    )
    
    
    (1.5%
    )
    
    
    26.2
    %On-site payroll (1)
    
    
    125,363
    
    
    
    122,276
    
    
    
    3,087
    
    
    
    2.5%
    
    
    
    24.3
    %Utilities (2)
    
    
    80,692
    
    
    
    79,099
    
    
    
    1,593
    
    
    
    2.0%
    
    
    
    15.7
    %Repairs and maintenance (3)
    
    
    77,346
    
    
    
    74,262
    
    
    
    3,084
    
    
    
    4.2%
    
    
    
    15.0
    %Property management costs (4)
    
    
    53,814
    
    
    
    50,016
    
    
    
    3,798
    
    
    
    7.6%
    
    
    
    10.4
    %Insurance
    
    
    16,785
    
    
    
    16,774
    
    
    
    11
    
    
    
    0.1%
    
    
    
    3.3
    %Leasing and advertising
    
    
    11,823
    
    
    
    12,240
    
    
    
    (417
    )
    
    
    (3.4%
    )
    
    
    2.3
    %Other operating expenses (5)
    
    
    14,557
    
    
    
    15,073
    
    
    
    (516
    )
    
    
    (3.4%
    )
    
    
    2.8
    %Same store operating expenses
    
    $
    515,549
    
    
    $
    506,910
    
    
    $
    8,639
    
    
    
    1.7%
    
    
    
    100.0
    %
 
 (1)
    
    On-site payroll  Includes payroll and related expenses for on-site personnel including
property managers, leasing consultants and maintenance staff.(2)
    
    Utilities  Represents gross expenses prior to any recoveries under the Resident Utility
Billing System (RUBS). Recoveries are reflected in rental income.(3)
    
    Repairs and maintenance  Includes general maintenance costs, unit turnover costs including
interior painting, routine landscaping, security, exterminating, fire protection, snow
removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.(4)
    
    Property management costs  Includes payroll and related expenses for departments, or
portions of departments, that directly support on-site management. These include such
departments as regional and corporate property management, property accounting, human
resources, training, marketing and revenue management, procurement, real estate tax, property
legal services and information technology.(5)
    
    Other operating expenses  Includes administrative costs such as office supplies, telephone
and data charges and association and business licensing fees.  Nine Months Ended September 30,2010
    
    
    2009(Amounts in thousands)Operating income
    
    $
    366,769
    
    
    $
    387,409Adjustments:Non-same store operating results
    
    
    (71,635
    )
    
    
    (10,870
    )Fee and asset management revenue
    
    
    (7,596
    )
    
    
    (7,928
    )Fee and asset management expense
    
    
    4,364
    
    
    
    5,916Depreciation
    
    
    500,173
    
    
    
    428,751General and administrative
    
    
    31,035
    
    
    
    30,476Impairment
    
    
    
    
    
    
    11,124Same store NOI
    
    $
    823,110
    
    
    $
    844,878
  2010 Same Store AssumptionsPhysical occupancy
    
    
    94.9
    %Revenue change
    
    
    (0.25
    %)Expense change
    
    
    1.50
    %NOI change
    
    
    (1.25
    %)
 34




---



##### Table of Contents




    
    Development and other miscellaneous properties in lease-up of $25.3 million;
 
    
    Newly stabilized development and other miscellaneous properties of $2.6 million;
 
    
    Properties acquired in 2009 and 2010 of $37.6 million; and
 
    
    Partially offset by an allocation of property management costs not included in same
store results and operating activities from other miscellaneous operations, such as the
Operating Partnerships corporate housing business.
         35




---



##### Table of Contents



Comparison of the quarter ended September 30, 2010 to the quarter ended September 30, 2009
    36




---



##### Table of Contents



Results
    
    
    StatisticsAverageRentalDescription
    
    Revenues
    
    
    Expenses
    
    
    NOI
    
    
    Rate (1)
    
    
    Occupancy
    
    TurnoverQ3 2010
    
    $
    454,060
    
    
    $
    173,051
    
    
    $
    281,009
    
    
    $
    1,360
    
    
    
    95.0
    %
    
    
    17.6%Q3 2009
    
    $
    448,409
    
    
    $
    169,815
    
    
    $
    278,594
    
    
    $
    1,362
    
    
    
    93.7
    %
    
    
    18.5%Change
    
    $
    5,651
    
    
    $
    3,236
    
    
    $
    2,415
    
    
    $
    (2
    )
    
    
    1.3
    %
    
    
    (0.9%
    )Change
    
    
    1.3%
    
    
    
    1.9%
    
    
    
    0.9%
    
    
    
    (0.1%
    )
 
 (1)
    
    Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.  
 % of ActualQ3 2010Actual
    
    
    Actual
    
    
    $
    
    
    %
    
    
    OperatingQ3 2010
    
    
    Q3 2009
    
    
    Change
    
    
    Change
    
    
    ExpensesReal estate taxes
    
    $
    43,973
    
    
    $
    45,936
    
    
    $
    (1,963
    )
    
    
    (4.3%
    )
    
    
    25.4
    %On-site payroll (1)
    
    
    42,324
    
    
    
    40,414
    
    
    
    1,910
    
    
    
    4.7%
    
    
    
    24.4
    %Utilities (2)
    
    
    26,954
    
    
    
    26,050
    
    
    
    904
    
    
    
    3.5%
    
    
    
    15.6
    %Repairs and maintenance (3)
    
    
    26,974
    
    
    
    25,866
    
    
    
    1,108
    
    
    
    4.3%
    
    
    
    15.6
    %Property management costs (4)
    
    
    18,253
    
    
    
    16,591
    
    
    
    1,662
    
    
    
    10.0%
    
    
    
    10.5
    %Insurance
    
    
    5,637
    
    
    
    5,634
    
    
    
    3
    
    
    
    0.1%
    
    
    
    3.3
    %Leasing and advertising
    
    
    4,460
    
    
    
    4,694
    
    
    
    (234
    )
    
    
    (5.0%
    )
    
    
    2.6
    %Other operating expenses (5)
    
    
    4,476
    
    
    
    4,630
    
    
    
    (154
    )
    
    
    (3.3%
    )
    
    
    2.6
    %Same store operating expenses
    
    $
    173,051
    
    
    $
    169,815
    
    
    $
    3,236
    
    
    
    1.9%
    
    
    
    100.0
    %
 
 (1)
    
    On-site payroll  Includes payroll and related expenses for on-site personnel including
property managers, leasing consultants and maintenance staff.(2)
    
    Utilities  Represents gross expenses prior to any recoveries under the Resident Utility
Billing System (RUBS). Recoveries are reflected in rental income.(3)
    
    Repairs and maintenance  Includes general maintenance costs, unit turnover costs including
interior painting, routine landscaping, security, exterminating, fire protection, snow
removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.(4)
    
    Property management costs  Includes payroll and related expenses for departments, or
portions of departments, that directly support on-site management. These include such
departments as regional and corporate property management, property accounting, human
resources, training, marketing and revenue management, procurement, real estate tax, property
legal services and information technology.(5)
    
    Other operating expenses  Includes administrative costs such as office supplies, telephone
and data charges and association and business licensing fees.  37




---



##### Table of Contents



Quarter Ended September 30,2010
    
    
    2009(Amounts in thousands)Operating income
    
    $
    127,196
    
    
    $
    128,655Adjustments:Non-same store operating results
    
    
    (28,629
    )
    
    
    (3,385
    )Fee and asset management revenue
    
    
    (2,128
    )
    
    
    (2,653
    )Fee and asset management expense
    
    
    704
    
    
    
    1,931Depreciation
    
    
    173,642
    
    
    
    144,165General and administrative
    
    
    10,224
    
    
    
    9,881Same store NOI
    
    $
    281,009
    
    
    $
    278,594
  
    
    Development and other miscellaneous properties in lease-up of $9.3 million;
    
    Properties acquired in 2009 and 2010 of $16.7 million; and
 
    
    Partially offset by an allocation of property management costs not included in same
store results and operating activities from other miscellaneous operations, such as the
Operating Partnerships corporate housing business.
         38




---



##### Table of Contents



Liquidity and Capital Resources
   
    
    Disposed of 11 consolidated properties, 27 unconsolidated properties, 2 condominium
units and one land parcel, receiving net proceeds of approximately $161.5 million;
    
    Obtained $124.0 million in new mortgage financing;
    
    Issued $600.0 million of unsecured notes receiving net proceeds of $595.4 million before
underwriting fees and other expenses; and
    
    Issued approximately 3.2 million Units and received net proceeds of $98.0 million.During the nine months ended September 30, 2010, the above proceeds were primarily utilized
to:
    
    Acquire 14 rental properties and four land parcels for approximately $1.1 billion;
    
    Acquire the 75% equity interest it did not own in seven previously unconsolidated
properties consisting of 1,811 units in exchange for an approximate $26.9 million payment
to its joint venture partner (net of $3.1 million in cash acquired);
    
    Invest $98.3 million primarily in development projects;
    
    Repurchase 58,130 OP Units, utilizing cash of $1.9 million (see Note 3);
    
    Repay $503.6 million of mortgage loans; and
    
    Settle a forward starting swap, utilizing cash of $10.0 million.
  39




---



##### Table of Contents



Debt Summary as of September 30, 2010
(Amounts in thousands)
 WeightedWeighted
    
    
    AverageAverage
    
    
    MaturitiesAmounts (1)
    
    
    % of Total
    
    
    Rates (1)
    
    
    (years)Secured
    
    $
    4,845,244
    
    
    
    47.6
    %
    
    
    4.84
    %
    
    
    8.4Unsecured
    
    
    5,331,283
    
    
    
    52.4
    %
    
    
    4.95
    %
    
    
    4.7Total
    
    $
    10,176,527
    
    
    
    100.0
    %
    
    
    4.90
    %
    
    
    6.4Fixed Rate Debt:Secured  Conventional
    
    $
    3,885,690
    
    
    
    38.2
    %
    
    
    5.75
    %
    
    
    7.0Unsecured  Public/Private
    
    
    4,373,624
    
    
    
    43.0
    %
    
    
    5.80
    %
    
    
    5.3Fixed Rate Debt
    
    
    8,259,314
    
    
    
    81.2
    %
    
    
    5.77
    %
    
    
    6.1Floating Rate Debt:Secured  Conventional
    
    
    353,892
    
    
    
    3.5
    %
    
    
    2.50
    %
    
    
    3.5Secured  Tax Exempt
    
    
    605,662
    
    
    
    5.9
    %
    
    
    0.50
    %
    
    
    20.6Unsecured  Public/Private
    
    
    811,659
    
    
    
    8.0
    %
    
    
    1.73
    %
    
    
    1.6Unsecured  Revolving Credit Facility
    
    
    146,000
    
    
    
    1.4
    %
    
    
    0.67
    %
    
    
    1.4Floating Rate Debt
    
    
    1,917,213
    
    
    
    18.8
    %
    
    
    1.39
    %
    
    
    7.7Total
    
    $
    10,176,527
    
    
    
    100.0
    %
    
    
    4.90
    %
    
    
    6.4
 
 (1)
    
    Net of the effect of any derivative instruments. Weighted average rates are for the nine
months ended September 30, 2010.  40




---



##### Table of Contents



Debt Maturity Schedule as of September 30, 2010
(Amounts in thousands)
 Weighted Average
    
    
    Weighted AverageFixed
    
    
    Floating
    
    
    
    
    
    
    
    
    
    
    Rates on Fixed
    
    
    Rates onYear
    
    Rate (1)
    
    
    Rate (1)
    
    
    Total
    
    
    % of Total
    
    
    Rate Debt (1)
    
    
    Total Debt (1)2010
    
    $
    4,087
    
    
    $
    17,812
    
    
    $
    21,899
    
    
    
    0.2
    %
    
    
    7.35
    %
    
    
    3.39
    %2011
    
    
    999,622
    (2)
    
    
    741,382
    (3)
    
    
    1,741,004
    
    
    
    17.1
    %
    
    
    5.43
    %
    
    
    3.69
    %2012
    
    
    774,807
    
    
    
    184,537
    (4)
    
    
    959,344
    
    
    
    9.4
    %
    
    
    5.68
    %
    
    
    4.85
    %2013
    
    
    270,415
    
    
    
    312,160
    
    
    
    582,575
    
    
    
    5.7
    %
    
    
    6.75
    %
    
    
    4.91
    %2014
    
    
    562,456
    
    
    
    22,054
    
    
    
    584,510
    
    
    
    5.8
    %
    
    
    5.32
    %
    
    
    5.25
    %2015
    
    
    358,167
    
    
    
    
    
    
    
    358,167
    
    
    
    3.5
    %
    
    
    6.40
    %
    
    
    6.40
    %2016
    
    
    1,150,352
    
    
    
    
    
    
    
    1,150,352
    
    
    
    11.3
    %
    
    
    5.35
    %
    
    
    5.35
    %2017
    
    
    1,355,863
    
    
    
    456
    
    
    
    1,356,319
    
    
    
    13.4
    %
    
    
    5.87
    %
    
    
    5.87
    %2018
    
    
    80,782
    
    
    
    44,677
    
    
    
    125,459
    
    
    
    1.2
    %
    
    
    5.73
    %
    
    
    4.28
    %2019
    
    
    801,786
    
    
    
    20,766
    
    
    
    822,552
    
    
    
    8.1
    %
    
    
    5.49
    %
    
    
    5.37
    %2020+
    
    
    1,900,977
    
    
    
    573,369
    
    
    
    2,474,346
    
    
    
    24.3
    %
    
    
    5.68
    %
    
    
    4.54
    %Total
    
    $
    8,259,314
    
    
    $
    1,917,213
    
    
    $
    10,176,527
    
    
    
    100.0
    %
    
    
    5.77
    %
    
    
    4.88
    %
 
 (1)
    
    Net of the effect of any derivative instruments. Weighted average rates are as of September
30, 2010.(2)
    
    Includes $482.5 million face value of 3.85% convertible unsecured debt with a final maturity
of 2026. The notes 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 and August 15, 2021.(3)
    
    Includes the Operating Partnerships $500.0 million term loan facility, which originally
matured on October 5, 2010. Effective April 12, 2010, the Operating Partnership exercised the
first of its two one-year extension options. As a result, the maturity date is now October 5,
2011 and there is one remaining one-year extension option exercisable by the Operating
Partnership.(4)
    
    Includes $146.0 million outstanding on the Operating Partnerships unsecured revolving credit
facility. As of September 30, 2010, there was approximately $1.2 billion available on this
facility.  41




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##### Table of Contents



Unsecured Debt Summary as of September 30, 2010
(Amounts in thousands)
 UnamortizedCoupon
    
    
    Due
    
    
    Face
    
    
    Premium/
    
    
    NetRate
    
    
    Date
    
    
    Amount
    
    
    (Discount)
    
    
    BalanceFixed Rate Notes:6.950
    %
    
    
    03/02/11
    
    
    $
    93,096
    
    
    $
    404
    
    
    $
    93,5006.625
    %
    
    
    03/15/12
    
    
    
    253,858
    
    
    
    (275
    )
    
    
    253,5835.500
    %
    
    
    10/01/12
    
    
    
    222,133
    
    
    
    (438
    )
    
    
    221,6955.200
    %
    
    
    04/01/13
    (1)
    
    
    400,000
    
    
    
    (296
    )
    
    
    399,704Fair Value Derivative Adjustments
    
    
    
    
    
    
    
    (1)
    
    
    (300,000
    )
    
    
    
    
    
    
    (300,000
    )5.250
    %
    
    
    09/15/14
    
    
    
    500,000
    
    
    
    (244
    )
    
    
    499,7566.584
    %
    
    
    04/13/15
    
    
    
    300,000
    
    
    
    (496
    )
    
    
    299,5045.125
    %
    
    
    03/15/16
    
    
    
    500,000
    
    
    
    (291
    )
    
    
    499,7095.375
    %
    
    
    08/01/16
    
    
    
    400,000
    
    
    
    (1,082
    )
    
    
    398,9185.750
    %
    
    
    06/15/17
    
    
    
    650,000
    
    
    
    (3,433
    )
    
    
    646,5677.125
    %
    
    
    10/15/17
    
    
    
    150,000
    
    
    
    (457
    )
    
    
    149,5434.750
    %
    
    
    07/15/20
    
    
    
    600,000
    
    
    
    (4,464
    )
    
    
    595,5367.570
    %
    
    
    08/15/26
    
    
    
    140,000
    
    
    
    
    
    
    
    140,0003.850
    %
    
    
    08/15/26
    (2)
    
    
    482,545
    
    
    
    (6,936
    )
    
    
    475,6094,391,632
    
    
    
    (18,008
    )
    
    
    4,373,624Floating Rate Notes:04/01/13
    (1)
    
    
    300,000
    
    
    
    
    
    
    
    300,000Fair Value Derivative Adjustments
    
    
    
    
    
    
    
    (1)
    
    
    11,659
    
    
    
    
    
    
    
    11,659Term Loan Facility
    
    LIBOR+0.50%
    
    
    10/05/11
    (3) (4)
    
    
    500,000
    
    
    
    
    
    
    
    500,000811,659
    
    
    
    
    
    
    
    811,659Revolving Credit Facility:
    
    LIBOR+0.50%
    
    
    02/28/12
    (3) (5)
    
    
    146,000
    
    
    
    
    
    
    
    146,000Total Unsecured Debt
    
    
    
    
    
    
    
    
    
    $
    5,349,291
    
    
    $
    (18,008
    )
    
    $
    5,331,283
 
 (1)
    
    $300.0 million in fair value interest rate swaps converts a portion of the 5.200% notes
due April 1, 2013 to a floating interest rate.(2)
    
    Convertible notes mature on August 15, 2026. The notes 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 and August 15, 2021.(3)
    
    Facilities are private. All other unsecured debt is public.(4)
    
    Represents the Operating Partnerships $500.0 million term loan facility, which
originally matured on October 5, 2010. Effective April 12, 2010, the Operating Partnership
exercised the first of its two one-year extension options. As a result, the maturity date
is now October 5, 2011 and there is one remaining one-year extension option exercisable by
the Operating Partnership.(5)
    
    Represents amount outstanding on the Operating Partnerships unsecured revolving credit
facility which matures on February 28, 2012. As of September 30, 2010, there was
approximately $1.2 billion available on this facility.   42




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##### Table of Contents



Capital Structure as of September 30, 2010
(Amounts in thousands except for unit and per unit amounts)
 Secured Debt
    
    
    
    
    
    $
    4,845,244
    
    
    
    47.6
    %Unsecured Debt
    
    
    
    
    
    
    5,331,283
    
    
    
    52.4
    %Total Debt
    
    
    
    
    
    
    10,176,527
    
    
    
    100.0
    %
    
    
    41.4
    %Units
    
    
    297,830,556OP Unit Equivalents (see below)
    
    
    392,697Total outstanding at quarter-end
    
    
    298,223,253EQR Common Share Price at September 30, 2010
    
    $
    47.5714,186,480
    
    
    
    98.6
    %Perpetual Preference Units (see below)
    
    
    
    
    
    
    200,000
    
    
    
    1.4
    %Total Equity
    
    
    
    
    
    
    14,386,480
    
    
    
    100.0
    %
    
    
    58.6
    %Total Market Capitalization
    
    
    
    
    
    $
    24,563,007
    
    
    
    
    
    
    
    100.0
    %
 Convertible Preference Units as of September 30, 2010
(Amounts in thousands except for unit and per unit amounts)
 Annual
    
    
    Annual
    
    
    WeightedRedemption
    
    
    Outstanding
    
    
    Liquidation
    
    
    Dividend
    
    
    Dividend
    
    
    Average
    
    
    Conversion
    
    
    OP UnitSeries
    
    Date
    
    
    Units
    
    
    Value
    
    
    Per Unit
    
    
    Amount
    
    
    Rate
    
    
    Ratio
    
    
    EquivalentsPreference Units:7.00% Series E (1)
    
    
    11/1/98
    
    
    
    323,666
    
    
    $
    8,091
    
    
    $
    1.75
    
    
    $
    567
    
    
    
    
    
    
    
    1.1128
    
    
    
    360,1767.00% Series H (1)
    
    
    6/30/98
    
    
    
    22,459
    
    
    
    562
    
    
    
    1.75
    
    
    
    39
    
    
    
    
    
    
    
    1.4480
    
    
    
    32,521Total Convertible Preference Units
    
    
    
    
    
    
    346,125
    
    
    $
    8,653
    
    
    
    
    
    
    $
    606
    
    
    
    7.00
    %
    
    
    
    
    
    
    392,697
 
 (1)
    
    Both the Series E and the Series H Preference Units have been called for redemption effective
November 1, 2010. Perpetual Preference Units as of September 30, 2010
(Amounts in thousands except for unit and per unit amounts)
 Annual
    
    
    Annual
    
    
    WeightedRedemption
    
    
    Outstanding
    
    
    Liquidation
    
    
    Dividend
    
    
    Dividend
    
    
    AverageSeries
    
    Date
    
    
    Units
    
    
    Value
    
    
    Per Unit
    
    
    Amount
    
    
    RatePreference Units:8.29% Series K
    
    
    12/10/26
    
    
    
    1,000,000
    
    
    $
    50,000
    
    
    $
    4.145
    
    
    $
    4,1456.48% Series N
    
    
    6/19/08
    
    
    
    600,000
    
    
    
    150,000
    
    
    
    16.20
    
    
    
    9,720Total Perpetual Preference Units
    
    
    
    
    
    
    1,600,000
    
    
    $
    200,000
    
    
    
    
    
    
    $
    13,865
    
    
    
    6.93
    %
   43




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##### Table of Contents



Capitalization of Fixed Assets and Improvements to Real Estate
  
    
    Replacements (inside the unit). These include:
 
    
    flooring such as carpets, hardwood, vinyl, linoleum or tile;
    
    appliances;
    
    mechanical equipment such as individual furnace/air units, hot water heaters, etc;
    
    furniture and fixtures such as kitchen/bath cabinets, light fixtures, ceiling fans,
sinks, tubs, toilets, mirrors, countertops, etc; and
    
    blinds/shades.
  
    
    Building improvements (outside the unit). These include:
 
    
    roof replacement and major repairs;
    
    paving or major resurfacing of parking lots, curbs and sidewalks;
 44




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##### Table of Contents




    
    amenities and common areas such as pools, exterior sports and playground equipment,
lobbies, clubhouses, laundry rooms, alarm and security systems and offices;
    
    major building mechanical equipment systems;
    
    interior and exterior structural repair and exterior painting and siding;
    
    major landscaping and grounds improvement; and
    
    vehicles and office and maintenance equipment.
   Capital Expenditures to Real Estate
For the Nine Months Ended September 30, 2010
 Total
    
    
    
    
    
    
    Avg.
    
    
    Building
    
    
    Avg.
    
    
    
    
    
    
    Avg.Units (1)
    
    
    Replacements (2)
    
    
    Per Unit
    
    
    Improvements
    
    
    Per Unit
    
    
    Total
    
    
    Per UnitSame Store
Properties (3)
    
    
    116,775
    
    
    $
    54,840
    
    
    $
    469
    
    
    $
    37,577
    
    
    $
    322
    
    
    $
    92,417
    
    
    $
    791Non-Same Store
Properties (4)
    
    
    11,574
    
    
    
    2,409
    
    
    
    289
    
    
    
    3,595
    
    
    
    431
    
    
    
    6,004
    
    
    
    720Other (5)
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    246
    
    
    
    
    
    
    
    538Total
    
    
    128,349
    
    
    $
    57,541
    
    
    
    
    
    
    $
    41,418
    
    
    
    
    
    
    $
    98,959
 
 (1)
    
    Total Units  Excludes 4,680 military housing units, for which repairs and maintenance
expenses and capital expenditures to real estate are self-funded and do not consolidate into
the Operating Partnerships results.(2)
    
    Replacements  Includes new expenditures inside the units such as appliances, mechanical
equipment, fixtures and flooring, including carpeting. Replacements for same store properties
also include $23.0 million spent on various assets related to unit renovations/rehabs
(primarily kitchens and baths) designed to reposition these assets for higher rental levels in
their respective markets.(3)
    
    Same Store Properties  Primarily includes all properties acquired or completed and
stabilized prior to January 1, 2009, less properties subsequently sold.(4)
    
    Non-Same Store Properties  Primarily includes all properties acquired during 2009 and 2010,
plus any properties in lease-up and not stabilized as of January 1, 2009. Per unit amounts
are based on a weighted average of 8,336 units.(5)
    
    Other  Primarily includes expenditures for properties sold during the period.    Derivative Instruments
   45




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##### Table of Contents



Other
  Off-Balance Sheet Arrangements and Contractual Obligations
     Critical Accounting Policies and Estimates
   Acquisition of Investment Properties
  46




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##### Table of Contents



Impairment of Long-Lived Assets
  Depreciation of Investment in Real Estate
  Cost Capitalization
 Capitalization of Fixed Assets and Improvements to Real Estate
  Fair Value of Financial Instruments, Including Derivative Instruments
  Funds From Operations
    47




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##### Table of Contents



Funds From Operations  (Amounts in thousands)
(Unaudited)
 Nine Months Ended
    
    
    Quarter EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    97,771
    
    
    $
    334,718
    
    
    $
    29,826
    
    
    $
    143,365Adjustments:Net loss attributable to Noncontrolling Interests 
Partially Owned Properties
    
    
    623
    
    
    
    391
    
    
    
    188
    
    
    
    317Depreciation
    
    
    500,173
    
    
    
    428,751
    
    
    
    173,642
    
    
    
    144,165Depreciation  Non-real estate additions
    
    
    (5,009
    )
    
    
    (5,569
    )
    
    
    (1,640
    )
    
    
    (1,777
    )Depreciation  Partially Owned and Unconsolidated Properties
    
    
    (849
    )
    
    
    656
    
    
    
    (856
    )
    
    
    225Net (gain) on sales of unconsolidated entities
    
    
    (28,101
    )
    
    
    (6,718
    )
    
    
    (22,544
    )
    
    
    (3,959
    )Discontinued operations:Depreciation
    
    
    1,522
    
    
    
    22,736
    
    
    
    377
    
    
    
    5,487Net (gain) on sales of discontinued operations
    
    
    (69,538
    )
    
    
    (274,933
    )
    
    
    (9,285
    )
    
    
    (129,135
    )Net incremental gain (loss) on sales of condominium units
    
    
    619
    
    
    
    (450
    )
    
    
    (12
    )
    
    
    (785
    )FFO (1) (2)
    
    
    497,211
    
    
    
    499,582
    
    
    
    169,696
    
    
    
    157,903Preferred distributions
    
    
    (10,855
    )
    
    
    (10,868
    )
    
    
    (3,617
    )
    
    
    (3,621
    )FFO available to Units (1) (2)
    
    $
    486,356
    
    
    $
    488,714
    
    
    $
    166,079
    
    
    $
    154,282
 
 (1)
    
    The National Association of Real Estate Investment Trusts (NAREIT) defines funds
from operations (FFO) (April 2002 White Paper) as net income (computed in accordance with
accounting principles generally accepted in the United States (GAAP)), excluding gains (or
losses) from sales of depreciable property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect funds from
operations on the same basis. The April 2002 White Paper states that gain or loss on sales of
property is excluded from FFO for previously depreciated operating properties only. Once the
Operating Partnership commences the conversion of units to condominiums, it simultaneously
discontinues depreciation of such property. FFO available to Units is calculated on a basis
consistent with net income available to Units and reflects adjustments to net income for
preferred distributions and premiums on redemption of preference units/interests in accordance
with accounting principles generally accepted in the United States.(2)
    
    The Operating Partnership believes that FFO and FFO available to Units are helpful to
investors as supplemental measures of the operating performance of a real estate company,
because they are recognized measures of performance by the real estate industry and by
excluding gains or losses related to dispositions of depreciable property and excluding real
estate depreciation (which can vary among owners of identical assets in similar condition
based on historical cost accounting and useful life estimates), FFO and FFO available to Units
can help compare the operating performance of a companys real estate between periods or as
compared to different companies. FFO and FFO available to Units do not represent net income,
net income available to Units or net cash flows from operating activities in accordance with
GAAP. Therefore, FFO and FFO available to Units should not be exclusively considered as
alternatives to net income, net income available to Units or net cash flows from operating
activities as determined by GAAP or as a measure of liquidity. The Operating Partnerships
calculation of FFO and FFO available to Units 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. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative and Qualitative Disclosures About Market
Risk Current Environment Managements Discussion and Analysis of
Financial Condition and Results of Operations
 
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures:
  48




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##### Table of Contents



(b) Changes in Internal Control over Financial Reporting:
  49




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 4. (Removed and Reserved).
 
 Item 6. Exhibits 
 50




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##### Table of Contents



SIGNATURES
  ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL
ITS GENERAL PARTNERDate: November 4, 2010
    By:
    /s/   Mark J. ParrellMark J. ParrellExecutive Vice President and
Chief Financial OfficerDate: November 4, 2010
    By:
    /s/ Ian S. KaufmanIan S. Kaufman
Senior Vice President and
Chief Accounting Officer 51




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##### Table of Contents



EXHIBIT INDEX
  Exhibit
    
    Description
    
    Location10.1*
    
    First Amendment to Second Restated 2002 Share Incentive Plan.
    
    Included as Exhibit
10.1 to Equity
Residentials Form
10-Q for the
quarterly period
ended September 30,
2010.31.1
    
    Certification of David J. Neithercut, Chief Executive
Officer of Registrants General Partner.
    
    Attached herein.31.2
    
    Certification of Mark J. Parrell, Chief Financial Officer of
Registrants General Partner.
    
    Attached herein.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 the
Registrants General Partner.
    
    Attached herein.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 Mark J. Parrell, Chief Financial Officer of the
Registrants General Partner.
    
    Attached herein.
 
 *
    
    Management contracts and compensatory plans or arrangements filed as exhibits to this report
are identified by an asterisk.