<PAGE>
 
                                   FORM 10-Q


               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


         [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended JUNE 30, 1998

                                      OR

         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


                        Commission File Number: 0-24920


                       ERP OPERATING LIMITED PARTNERSHIP
            (Exact Name of Registrant as Specified in Its Charter)


<TABLE>
<CAPTION>
<S>                                                           <C>
            Illinois                                                     36-3894853
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)


     Two North Riverside Plaza, Chicago, Illinois                        60606
       (Address of Principal Executive Offices)                        (Zip Code)


                                             (312) 474-1300
                          (Registrant's Telephone Number, Including Area Code)

</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes     X     No  
                                       --------     --------
<PAGE>


                       ERP OPERATING LIMITED PARTNERSHIP
                          CONSOLIDATED BALANCE SHEETS
                            (Amounts in thousands)
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                                    June 30,      December 31,
                                                                      1998            1997
                                                                   ---------      ------------
<S>                                                               <C>             <C> 
ASSETS
Investment in real estate
   Land                                                           $  935,628      $  791,980
   Depreciable property                                            6,990,511       6,293,415
   Construction in progress                                           41,982          36,040
                                                                  ----------      ----------
                                                                   7,968,121       7,121,435
Accumulated depreciation                                            (573,359)       (444,762)
                                                                  ----------      ----------
   Investment in real estate, net of accumulated depreciation      7,394,762       6,676,673

Cash and cash equivalents                                            265,915          33,295
Investment in mortgage notes, net                                     87,916         176,063
Rents receivable                                                       5,127           3,302
Deposits - restricted                                                 48,692          36,374
Escrow deposits - mortgage                                            57,655          44,864
Deferred financing costs, net                                         23,299          23,092
Other assets                                                         116,673         100,968
                                                                  ----------      ----------
     Total assets                                                 $8,000,039      $7,094,631
                                                                  ==========      ==========

LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
   Mortgage notes payable                                         $1,775,556      $1,582,559
   Notes, net                                                      1,428,304       1,130,764
   Line of credit                                                    175,000         235,000
   Accounts payable and accrued expenses                              78,362          67,699
   Accrued interest payable                                           34,952          28,048
   Rents received in advance and other liabilities                    41,822          38,750
   Security deposits                                                  33,800          28,193
   Distributions payable                                              90,471          20,223
                                                                  ----------      ----------
     Total liabilities                                             3,658,267       3,131,236
                                                                  ----------      ----------

Commitments and contingencies

  9 3/8% Series A Cumulative Redeemable Preference Units             153,000         153,000
                                                                  ----------      ----------
  9 1/8% Series B Cumulative Redeemable Preference Units             125,000         125,000
                                                                  ----------      ----------
  9 1/8% Series C Cumulative Redeemable Preference Units             115,000         115,000
                                                                  ----------      ----------
  8.60% Series D Cumulative Redeemable Preference Units              175,000         175,000
                                                                  ----------      ----------
  Series E Cumulative Convertible Preference Units                    99,950          99,963
                                                                  ----------      ----------
  9.65% Series F Cumulative Redeemable Preference Units               57,500          57,500
                                                                  ----------      ----------
  7 1/4% Series G Convertible Cumulative Preference Units            316,250         316,250
                                                                  ----------      ----------

Partners' capital:
   General Partner                                                 3,009,302       2,648,278
   Limited Partners                                                  290,770         273,404
                                                                  ----------      ----------
     Total partners' capital                                       3,300,072       2,921,682
                                                                  ----------      ----------
     Total liabilities and partners' capital                      $8,000,039      $7,094,631
                                                                  ==========      ==========
</TABLE>

                            See accompanying notes.

                                       2
<PAGE>



                       ERP OPERATING LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (Amounts in thousands, except per OP Unit data)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                         Six Months Ended June 30,       Quarter Ended June 30,           
                                                            1998          1997              1998          1997               
                                                         -------------------------       -----------------------          
<S>                                                      <C>             <C>             <C>           <C>                
REVENUES                                                                                                                  
   Rental income                                         $ 571,370       $ 290,799       $ 294,144     $ 156,564          
   Fee and asset management                                  2,790           3,110           1,430         1,532          
   Interest income - investment in mortgage notes           10,221           8,011           5,290         4,328          
   Interest and other income                                 9,010           4,404           6,186         2,513          
                                                         ---------       ----------      ---------     ----------         
                                                                                                                          
        Total revenues                                     593,391         306,324         307,050       164,937          
                                                         ---------       ----------      ---------     ----------         
                                                                                                                          
EXPENSES                                                                                                                  
   Property and maintenance                                137,910          70,760          71,197        38,426          
   Real estate taxes and insurance                          56,484          29,667          29,041        15,756          
   Property management                                      25,110          11,819          13,531         6,148          
   Fee and asset management                                  2,240           1,569           1,188           602          
   Depreciation                                            131,910          62,775          67,520        33,898          
   Interest:                                                                                                              
        Expense incurred                                   105,651          50,924          55,397        27,631          
        Amortization of deferred financing costs             1,275           1,220             651           617          
   General and administrative                               10,271           6,206           5,391         3,231          
                                                         ---------       ----------      ---------     ----------         
                                                                                                                          
        Total expenses                                     470,851         234,940         243,916       126,309          
                                                         ---------       ----------      ---------     ----------         
                                                                                                                          
Income before gain on disposition of properties            122,540          71,384          63,134        38,628          
   Gain on disposition of properties                        11,092           3,632           9,223             0          
                                                         ---------       ----------      ---------     ----------         
Net income                                               $ 133,632       $  75,016       $  72,357     $  38,628          
                                                         =========       =========       =========     =========          
                                                                                                                          
ALLOCATION OF NET INCOME:                                                                                                 
                                                                                                                          
9 3/8% Series A Cumulative Redeemable                                                                                     
   Preference Units                                      $   7,172       $   7,172       $   3,586     $   3,586          
                                                         =========       =========       =========     =========          
9 1/8% Series B Cumulative Redeemable                                                                                     
   Preference Units                                      $   5,703       $   5,704       $   2,852     $   2,852          
                                                         =========       =========       =========     =========          
9 1/8% Series C Cumulative Redeemable                                                                                     
   Preference Units                                      $   5,247       $   5,246       $   2,623     $   2,623          
                                                         =========       =========       =========     =========          
8.60% Series D Cumulative Redeemable                                                                                      
   Preference Units                                      $   7,526       $   1,714       $   3,763     $   1,714          
                                                         =========       =========       =========     =========          
Series E Cumulative Convertible                                                                                           
   Preference Units                                      $   3,498       $     615       $   1,749     $     615          
                                                         =========       =========       =========     =========          
9.65% Series F Cumulative Redeemable                                                                                      
   Preference Units                                      $   2,774       $     488       $   1,387     $     488          
                                                         =========       =========       =========     =========          
7 1/4% Series G Convertible Cumulative                                                                                    
   Preference Units                                      $  11,464       $       -       $   5,732     $       -          
                                                         =========       =========       =========     =========          
                                                                                                                          
General Partner                                             81,938          47,732          46,043        23,831          
Limited Partners                                             8,310           6,345           4,622         2,919          
                                                         =========       =========       =========     =========          
Net income available to OP Unit holders                  $  90,248       $  54,077       $  50,665     $  26,750          
                                                         =========       =========       =========     =========          
                                                                                                                          
Net income per weighted average OP Unit outstanding      $    0.86       $    0.86       $    0.47     $    0.40          
                                                         =========       =========       =========     =========          
                                                                                                                          
Weighted average OP Units outstanding                      105,077          62,787         107,182        66,266          
                                                         =========       =========       =========     =========          
                                                                                                                          
Net income per weighted average OP Unit outstanding-                                                                      
  assuming dilution                                      $    0.85       $    0.85       $    0.47     $    0.40          
                                                         =========       =========       =========     =========          
</TABLE> 

                            See accompanying notes.

                                       3
<PAGE>


                       ERP OPERATING LIMITED PARTNERSHIP
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Amounts in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Six Months Ended June 30,
                                                                                             ---------------------------
                                                                                               1998              1997
                                                                                             ----------------------------
<S>                                                                                          <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                                 $ 133,632        $   75,016
  Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation                                                                              131,910            62,775
     Amortization of deferred financing costs (including discounts and premiums on debt)           249             1,279
     Amortization of discount on investment in mortgage notes                                   (1,000)             (750)
     Gain on disposition of properties                                                         (11,092)           (3,632)
     Changes in assets and liabilities:
        (Increase) in rents receivable                                                          (1,825)             (326)
        (Increase) in deposits - restricted                                                     (4,537)             (237)
        Decrease (increase) in other assets                                                      3,000            (4,246)
        Increase in accounts payable and accrued expenses                                       11,466             5,093
        Increase in accrued interest payable                                                     6,904             3,548
        (Decrease) increase in rents received in advance and other liabilities                  (3,186)            7,280
                                                                                              --------          --------
     Net cash provided by operating activities                                                 265,521           145,800
                                                                                              --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in real estate, net                                                              (499,463)         (333,770)
  Improvements to real estate                                                                  (32,021)          (14,709)
  Additions to non-real estate property                                                         (4,445)           (2,730)
  Proceeds from disposition of real estate                                                      40,488             4,771
  Purchase of management contract rights                                                          (119)           (3,500)
  (Increase) in mortgage deposits                                                              (12,791)          (11,700)
  Deposits (made) on real estate acquisitions                                                  (16,321)           (1,700)
  Deposits applied on real estate acquisitions                                                   8,540            16,761
  Investment in mortgage notes, net                                                                 -            (87,418)
  Investment in partnerships - development                                                     (13,042)                -
  Costs related to Mergers                                                                      (1,851)          (51,639)
  Other investing activities                                                                   (10,583)          (34,953)
                                                                                              --------          --------
     Net cash (used for) investing activities                                                 (541,608)         (520,587)
                                                                                              --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Capital contributions from General Partner                                                   720,019           661,057
  Distributions paid to partners                                                              (115,885)          (93,159)
  Principal receipts on employee notes                                                             196               211
  Proceeds from restructuring of tax-exempt bond investments                                        -              9,350
  Repayments on line of credit                                                                (235,000)         (185,000)
  Proceeds from line of credit                                                                 175,000           185,000
  Principal payments on mortgage notes payable                                                 (39,804)          (39,437)
  Loan and bond acquisition costs                                                               (1,426)           (1,026)
  Increase in security deposits                                                                  5,607             1,878
                                                                                              --------          --------
    Net cash provided by financing activities                                                  508,707           538,874
                                                                                              --------          --------

Net increase in cash and cash equivalents                                                      232,620           164,087
Cash and cash equivalents, beginning of period                                                  33,295           147,271
                                                                                              --------          --------

Cash and cash equivalents, end of period                                                     $ 265,915        $  311,358
                                                                                              ========          ========
</TABLE>

                            See accompanying notes.

                                       4
<PAGE>

                       ERP OPERATING LIMITED PARTNERSHIP
               CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                            (Amounts in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION> 
                                                                               Six Months Ended June 30,
                                                                            --------------------------------
                                                                                1998                1997
                                                                            --------------------------------
<S>                                                                        <C>                  <C>
Supplemental information:

  Cash paid during the period for interest                                 $    98,747          $    41,451
                                                                            ===========          ===========

  Mortgage loans and unsecured notes assumed and/or entered into through
       Mergers and acquisitions of real estate                             $   232,801          $   491,143
                                                                            ===========          ===========

  Net real estate contributed in exchange for OP units                     $    16,270          $     -
                                                                            ===========          ===========
</TABLE>

                            See accompanying notes

                                       5
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Definition of Special Terms:

Capitalized terms used but not defined herein are as defined in the Operating
Partnership's Annual Report on Form 10-K for the year ended December 31, 1997
("Form 10-K").

1.   Business
 
     ERP Operating Limited Partnership (the "Operating Partnership"), an
Illinois limited partnership, was formed to conduct the multifamily property
business of Equity Residential Properties Trust ("EQR"). EQR is a Maryland real
estate investment trust formed on March 31, 1993. As used herein, the term
"Company" means EQR, and its subsidiaries, as the survivor of the mergers
between EQR and each of Wellsford Residential Property Trust ("Wellsford") (the
"Wellsford Merger") and Evans Withycombe Residential, Inc. ("EWR") (the "EWR
Merger"). The Company conducts substantially all of its operations through the
Operating Partnership. As of June 30, 1998, the Operating Partnership controlled
a portfolio of 499 multifamily properties (individually a "Property" and
collectively the "Properties"). The Operating Partnership's interest in six of
the Properties at the time of acquisition thereof consisted solely of ownership
of the debt collateralized by such Properties. The Operating Partnership also
has an investment in partnership interests and subordinated mortgages
collateralized by 21 properties (the "Additional Properties").

2.   Basis of Presentation

     The balance sheet as of June 30, 1998, the statements of operations for the
six months and the three months ended June 30, 1998 and cash flows for the six
months ended June 30, 1998 represent the consolidated financial information of
the Operating Partnership and its subsidiaries.

     Due to the Operating Partnership's ability to control, either through
ownership or by contract, the Management Partnerships, the Financing
Partnerships, the LLCs and the EWR Operating Partnership, each such entity has
been consolidated with the Operating Partnership for financial reporting
purposes. In regard to Management Corp., Management Corp. II and Evans
Withycombe Management, Inc., the Operating Partnership does not have legal
control; however, these entities are consolidated for financial reporting
purposes, the effects of which are immaterial.

     These unaudited Consolidated Financial Statements of the Operating
Partnership have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the Financial Statements and Notes thereto included in the Form 10-K. The
following Notes to Consolidated Financial Statements highlight significant
changes to the notes included in the Form 10-K and present interim disclosures
as required by the SEC. The accompanying Consolidated Financial Statements
reflect, in the opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such adjustments are of a
normal and recurring nature.

                                       6
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)


3.   Partners' Capital

     The limited partners of the Operating Partnership as of June 30, 1998
include various individuals and entities that contributed their properties to
the Operating Partnership in exchange for a partnership interest (the "Limited
Partners"). As of June 30, 1998, the Limited Partners were represented by
9,841,312 partnership interests ("OP Units"), which are exchangeable, subject to
certain restrictions, on a one-for-one basis into the Company's Common Shares.
As of June 30, 1998, the General Partner had an approximate 90.86% interest in
the Operating Partnership and the Limited Partners had an approximate 9.14%
interest.

     In regards to the General Partner, net proceeds from the various equity
offerings of the Company have been contributed by the Company to the Operating
Partnership in return for additional OP Units on a private placement basis,
which increases the General Partner's ownership percentage. Due to the Limited
Partners' ability to convert their interest into an ownership interest in the
General Partner, the net offering proceeds are allocated between the Company (as
General Partner) and the Limited Partners (to the extent represented by OP
Units) to account for the change in their respective percentage ownership of the
equity of the Operating Partnership.

     The Operating Partnership paid a $0.67 per OP Unit distribution on July 10,
1998 to OP Unit holders of record on June 26, 1998.

     The following table summarizes the distributions paid to the Company as
holder of the various Preference Units listed below related to the quarter ended
June 30, 1998:

<TABLE>
<CAPTION>
                                                                                      Quarter
                                       Distribution Amount          Date Paid           Ended
                                       -------------------          ---------         -------
<S>                                    <C>                          <C>              <C>
     Series A Cumulative
       Redeemable Preference Units          $0.585937                07/15/98        06/30/98
     Series B Cumulative
       Redeemable Preference Units          $0.570312                07/15/98        06/30/98
     Series C Cumulative
       Redeemable Preference Units          $0.570312                07/15/98        06/30/98
     Series D Cumulative
       Redeemable Preference Units          $0.537500                07/15/98        06/30/98
     Series E Cumulative
       Convertible Preference Units         $0.437500                07/01/98        06/30/98
     Series F Cumulative
       Redeemable Preference Units          $0.603125                07/15/98        06/30/98
     Series G Convertible
       Cumulative Preference Units          $0.453125                07/15/98        06/30/98
</TABLE>


     On January 27, 1998, the Company completed an offering of 4,000,000
publicly registered Common Shares, which were sold to the public at a price of
$50.4375 per share (the "January 1998 Common Share Offering"). The Company
contributed to the Operating Partnership net proceeds of approximately $195.3
million in connection therewith.

                                       7
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)



     On February 18, 1998, the Company completed offerings of 988,340 publicly
registered Common Shares, which were sold to the public at a price of $50.625
per share. On February 23, 1998, the Company completed an offering of 1,000,000
publicly registered Common Shares, which were sold to the public at a price of
$48 per share. The Company contributed to the Operating Partnership net proceeds
from these offerings (collectively, the "February 1998 Common Share Offerings")
of approximately $95 million.

     On March 30, 1998, the Company completed an offering of 495,663 publicly
registered Common Shares, which were sold at a price of $47.9156 per share (the
"March 1998 Common Share Offering"). The Company contributed to the Operating
Partnership net proceeds of approximately $23.7 million in connection therewith.

     On April 29, 1998, the Company completed an offering of 946,565 publicly
registered Common Shares, which were sold at a price of $46.5459 per share (the
"April 1998 Common Share Offering"). The Company contributed to the Operating
Partnership net proceeds of approximately $44.1 million in connection therewith.

     During the first six months of 1998, the Company issued 1,003,212 Common 
Shares pursuant to the Direct Share Purchase Plan. The Company contributed to 
the Operating Partnership net proceeds of approximately $49.8 million in 
connection therewith.

     During the six months ended June 30, 1998, the Operating Partnership issued
325,209 OP Units, having a value of approximately $16.3 million, in various 
private placement transactions in exchange for the acquisistion of properties.

     Minority Interests represented by the Company's indirect 1% interest in
various Financing Partnerships and LLCs are immaterial and have not been
accounted for in the Consolidated Financial Statements. In addition, certain
amounts due from the Company for its 1% interest in the Financing Partnerships
has not been reflected in the Consolidated Balance Sheets since such amounts are
immaterial to the Consolidated Balance Sheets.


4. Real Estate

     During the six months ended June 30, 1998, the Operating Partnership
acquired the 41 Properties listed below from unaffiliated third parties. In
connection with certain of the acquisitions listed below, the Operating
Partnership assumed and or entered into mortgage indebtedness of approximately
$232.8 million and issued OP Units having a value of approximately $16.3
million. The cash portion of these transactions was funded primarily from
proceeds raised from the January 1998 Common Share Offering, the February 1998
Common Share Offerings, the March 1998 Common Share Offering, the April 1998
Common Share Offering, the Operating Partnership's line of credit, the Direct
Share Purchase Plan and working capital.


<TABLE>
<CAPTION>
                                                                                          Total
                                                                                       Acquisition
   Date                                                       Number                       Cost
 Acquired        Property             Location                of Units                (in thousands)
---------        --------             --------                --------                --------------
<C>              <S>                  <C>                     <C>                     <C>
01/07/98         Cityscape            St. Louis Park, MN           156                      $12,367
01/09/98         740 River Drive      St. Paul,  MN                162                       12,965
01/13/98         Prospect Towers      Hackensack, NJ               157                       36,336
01/16/98         Park Place           Houston, TX                  229                       13,578
01/16/98         Park Westend         Richmond, VA                 312                       13,423

</TABLE>

                                       8
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)
                                        
<TABLE>
<CAPTION>
                                                                                           Total
                                                                                        Acquisition
   Date                                                                Number               Cost
 Acquired       Property                       Location                of Units        (in thousands)
-----------     --------                       --------                --------        --------------
<C>             <S>                            <C>                     <C>             <C>
01/29/98        Emerald Bay at Winter Park     Winter Park, FL            432               15,774
02/05/98        Farnham Park                   Houston, TX                216               15,777
02/25/98        Plantation                     Houston, TX                232               10,091
02/27/98        Balcones Club                  Austin, TX                 312               12,365
03/02/98        Coach Lantern                  Scarborough, ME             90                4,856
03/02/98        Foxcroft                       Scarborough, ME            104                5,044
03/02/98        Yarmouth Woods                 Yarmouth, ME               138                6,788
03/20/98        Rolido Parque                  Houston, TX                369               10,911
03/26/98        The Fairfield                  Stamford, CT               263               45,959
03/26/98        Trails of Valley Ranch         Irving, TX                 216               10,753
04/01/98        Sonterra at Foothill Ranch     Foothill Ranch, CA         300               31,551
04/01/98        Harbor Pointe                  Milwaukee, WI              595               25,088
04/01/98        Gates at Carlson Center        Minnetonka, MN             435               28,099
04/01/98        GlenGarry Club                 Bloomingdale, IL           250               18,909
04/01/98        Plum Tree I II III             Hales Corners, WI          332               22,266
04/01/98        Ravinia                        Greenfield, WI             206               13,273
04/01/98        The Woodlands of Brookfield    Brookfield, WI             148               15,495
04/07/98        Vista Pointe at the Valley     Irving, TX                 231               19,099
04/23/98        Emerson Place                  Boston, MA                 462               72,389
05/13/98        Sierra Canyon                  Santa Clarita, CA          232               15,998
05/14/98        Northridge                     Pleasant Hill, CA          221               20,205
05/22/98        The Arboretum                  Canton, MA                 156               15,640
05/28/98        Woodridge                      Eagan, MN                  200               12,009
05/28/98        Townhomes of Meadowbrook       Auburn Hills, MI           230               13,724
06/01/98        Brookside                      Boulder, CO                144               13,803
06/10/98        The Greystone                  Atlanta, GA                150                7,439
06/11/98        Coconut Palm Club              Coconut Creek, FL          300               20,651
06/11/98        Portside Towers                Jersey City, NJ            527              119,118
06/16/98        Defoor Village                 Atlanta, GA                156               13,513
06/16/98        Plantation Ridge               Marietta, GA               454               23,264
06/18/98        Wynbrook                       Norcross, GA               318               13,536
06/24/98        Cross Creek                    Matthews, NC               420               23,436
06/26/98        Copper Hill                    Bedford, TX                204                7,006
06/26/98        Walker's Mark                  Dallas, TX                 164                7,006
06/26/98        Royal Crest Estates            Waterbury, CT              156                7,324
06/26/98        Tyrone Gardens                 Randolph, MA               165               10,724
                                                                       --------        -------------
                                                                       10,544             $817,552
                                                                       ========        =============
</TABLE>

                                       9
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)

5.   Commitments to Acquire Rental Properties


     As of June 30, 1998, in addition to the properties that were subsequently
acquired as discussed in Note 14 of the Notes to Consolidated Financial
Statements, the Operating Partnership had entered into separate agreements to
acquire 16 multifamily properties containing 4,804 units from unaffiliated third
parties. The expected combined purchase price is approximately $295.8 million,
which includes the assumption of mortgage indebtedness of approximately $114.4
million.

     The closings of these pending transactions are subject to certain
contingencies and conditions; therefore, there can be no assurance that these
transactions will be consummated or that the final terms thereof will not differ
in material respects from those summarized in the preceding paragraph.


6.   Disposition of Rental Properties

     On March 12, 1998, the Operating Partnership sold Mountain Brook Apartments
and Ridgemont Apartments, both located in Chattanooga, Tennessee for a sales
price of $16.7 million. The gain for financial reporting purposes was
approximately $1.9 million.

     On May 1, 1998, the Operating Partnership sold The Place Apartments located
in Ft. Myers, Florida for a sales price of $8.5 million. The gain for financial
reporting purposes was approximately $1.4 million.

     On May 15, 1998, the Operating Partnership sold Terraces at Peachtree
Apartments located in Atlanta, Georgia for a sales price of $7.2 million. The
gain for financial reporting purposes was approximately $1.5 million.

     On June 2, 1998, the Operating Partnership sold Stonelake Club Apartments
located in Ocala, Florida for a sales price of $8.7 million. The gain for
financial reporting purposes was approximately $6.3 million.

7.   Calculation of Net Income Per Weighted Average OP Unit

     The following tables set forth the computation of net income per weighted
average OP Unit outstanding and net income per weighted average OP Unit
outstanding--assuming dilution.

                                       10
<PAGE>


                       ERP OPERATING LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)


<TABLE> 
<CAPTION> 
                                                                 Six Months Ended June 30,      Quarter Ended June 30,
                                                                 -------------------------      ----------------------
                                                                    1998            1997          1998           1997
                                                                 -------------------------      ----------------------
                                                                   (Amounts in thousands except per OP Unit amounts)
Numerator:
<S>                                                              <C>              <C>            <C>            <C> 
  Income before allocation of income to Redeemable
   Preference Units and gain on disposition
   of properties                                                   $122,540        $71,384       $63,134        $38,628

  Income allocated to Redeemable Preference Units                   (43,384)       (20,939)      (21,692)       (11,878)
                                                                   --------        -------       -------        -------
  Income before gain on disposition of properties                    79,156         50,445        41,442         26,750

  Gain on disposition of properties                                  11,092          3,632         9,223              -
                                                                   --------        -------       -------        -------
  Numerator for net income per weighted average
   OP Unit outstanding                                               90,248         54,077        50,665         26,750

  Effect of dilutive securities:
   Series E Cumulative Convertible Preference Units                       -              -             -              -
   Series G Convertible Cumulative Preference Units                       -              -             -              -
                                                                   --------        -------       -------        -------

  Numerator for net income per weighted average
   OP Unit outstanding - assuming dilution                         $ 90,248        $54,077       $50,665        $26,750
                                                                   ========        =======       =======        =======

Denominator:

  Denominator for net income per weighted
   average OP Unit outstanding                                      105,077         62,787       107,182         66,266

  Effect of dilutive securities (1):
     OP Units issuable upon exercise of the
     Company's share options                                          1,118            922         1,047            920
                                                                   --------        -------       -------        -------

  Denominator for net income per weighted average
   OP Unit outstanding - assuming dilution                          106,195         63,709       108,229         67,186
                                                                   ========        =======       =======        =======


  Net income per weighted average OP Unit outstanding              $   0.86        $  0.86       $  0.47        $  0.40
                                                                   ========        =======       =======        =======


  Net income per weighted average OP Unit
   outstanding - assuming dilution                                 $   0.85        $  0.85       $  0.47        $  0.40
                                                                   ========        =======       =======        =======
</TABLE>

                                      11
<PAGE>

                       ERP OPERATING LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                         Six Months Ended June 30,          Quarter Ended June 30,
                                                       -----------------------------    -----------------------------
                                                           1998           1997              1998             1997
                                                       -----------------------------    -----------------------------
<S>                                                     <C>            <C>               <C>              <C>
Net income per weighted average OP Unit
 outstanding:

Income before gain on disposition of properties
 per weighted average OP Unit outstanding               $     0.74     $     0.79        $     0.38       $     0.40
Gain on disposition of properties                             0.12           0.07              0.09             --
                                                       ------------   --------------    ------------     ------------
Net income per weighted average OP Unit outstanding     $     0.86     $     0.86        $     0.47       $     0.40
                                                       ============   ==============    ============     ============
Net income per weighted average OP Unit
  outstanding - assuming dilution:

Income before gain on disposition of properties
  per weighted average OP Unit outstanding -
  assuming dilution                                     $     0.75     $     0.79        $     0.38       $     0.40
Gain on disposition of properties                             0.10           0.06              0.09             --
                                                       ------------   --------------    ------------     ------------
Net income per weighted average OP Unit
  outstanding - assuming dilution                       $     0.85     $     0.85        $     0.47       $     0.40
                                                       ============   ==============    ============     ============

</TABLE>

(1)  Convertible Preference Units that could be converted into 7,623,507 Common
     Shares, which would be contributed to the Operating Partnership in exchange
     for OP Units, were outstanding at June 30, 1998 but were not included in
     the computation of diluted earnings per OP Unit because it would be anti-
     dilutive.

                                      12
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)


8.   Mortgage Notes Payable


     As of June 30, 1998 the Operating Partnership had outstanding mortgage
indebtedness of approximately $1.8 billion encumbering 163 of the Properties.
The carrying value of such Properties (net of accumulated depreciation of $180.9
million) was approximately $2.9 billion. The mortgage notes payables are
generally due in monthly installments of interest only. In connection with the
Properties acquired during the six months ended June 30, 1998, the Operating
Partnership assumed and or entered into mortgage indebtedness on sixteen
Properties in the aggregate amount of $232.8 million.
 
     Concurrent with the refinancing of certain tax-exempt bonds and as a
requirement of the credit provider of the bonds, the Financing Partnership,
which owns certain of the Properties entered into interest rate protection
agreements, which were assigned to the credit provider as additional security.
The Financing Partnership pays interest based on a fixed interest rate and the
counterparty of the agreement pays interest to the Operating Partnership at a
floating rate which is calculated based on the Public Securities Association
Index for municipal bonds ("PSA Municipal Index"). As of June 30, 1998, the
aggregate notional amount of these agreements was approximately $173.1 million.
The fixed interest rates for these agreements were 4.81%, 4.528% and 4.90%. The
termination dates are October 1, 2003, January 1, 2004 and April 1, 2004.

     The Operating Partnership simultaneously entered into substantially
identical reverse interest rate protection agreements. Under these agreements
the Operating Partnership pays interest monthly at a floating rate based on the
PSA Municipal Index and the counterparty pays interest to the Operating
Partnership based on a fixed interest rate. As of June 30, 1998, the aggregate
notional amount of these agreements was approximately $173.1 million. The fixed
interest rates received by the Operating Partnership in exchange for paying
interest based on the PSA Municipal Index for these agreements were 4.74%,
4.458% and 4.83%. The termination dates are October 1, 2003, January 1, 2004 and
April 1, 2004.
 
     Collectively, these agreements effectively cost the Operating Partnership
0.07% per annum on the current outstanding aggregate notional amount. The
Operating Partnership believes that it has limited exposure to the extent of 
non-performance by the counterparties of the agreements since each counterparty
is a major U.S. financial institution, and the Operating Partnership does not
anticipate their non-performance.

     The Operating Partnership also has an interest rate cap agreement for a
notional amount of $228 million, for which it will receive payments if the PSA
index exceeds 5.75%, that terminates on December 1, 1999. Any payments by the
counterparty under this agreement have been collaterally assigned to the
provider of certain sureties related to the tax-exempt bonds secured by certain
of it's Properties. The Operating Partnership has no payment obligations to the
counterparty with respect to this agreement.

     As of June 30, 1998, scheduled maturities for the Operating Partnership's
outstanding mortgage indebtedness are at various dates through February 1, 2032.
During the six months ended

                                       13

<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)


June 30, 1998, the Operating Partnership repaid the outstanding mortgage balance
on five Properties in the amount of $34.1 million.

9.   Line of Credit

     During the six months ended June 30, 1998, the Operating Partnership repaid
$235 million outstanding on its line of credit with proceeds raised from the
January 1998 Common Share Offering and the February 1998 Common Share Offerings.
As of June 30, 1998, there was $175 million outstanding on this line of credit.

10.  Notes

     As of June 30, 1998, the Operating Partnership had outstanding unsecured
notes of approximately $1.4 billion (net of a $4.1 million discount and
including a $7.4 million premium).

     In February 1996, the Operating Partnership entered into an interest rate
protection agreement that hedged the interest rate risk of the 1999 Notes by
locking the effective four-year Treasury Rate, commencing May 15, 1999 through
May 2003. There was no cost to the Operating Partnership for entering into this
agreement.

     Prior to the issuance of the 2002 Notes, the Operating Partnership entered
into an interest rate protection agreement to effectively fix the interest rate
cost of such issuance. The Operating Partnership made a one-time settlement
payment of this protection transaction, which was approximately $0.8 million and
is being amortized over the term of the 2002 Notes. As of June 30, 1998, the
unamortized balance of this cost was approximately $0.4 million.

     Prior to the issuance of the 2026 Notes, the Operating Partnership entered
into an interest rate protection agreement to effectively fix the interest rate
cost of this issuance to 7.5%. The Operating Partnership received a one-time
settlement payment of this transaction, which was approximately $0.6 million and
is being amortized over ten years. As of June 30, 1998, the unamortized balance
was approximately $0.5 million.

     Prior to the issuance of the 2001 and 2003 Notes, the Operating Partnership
entered into two interest rate protection agreements to effectively fix the
interest rate costs of such issuances. The Operating Partnership made a one time
settlement payment of each protection transaction, which was approximately $5
million and $1.7 million, respectively, which are being amortized over the term
of the Notes on a straight-line basis. As of June 30, 1998 the unamortized
balance of these costs were approximately $4.2 million and $1.5 million,
respectively.

     In April 1998, the Operating Partnership issued $300 million of unsecured
fixed rate notes (the "2015 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Sixth Public Debt Offering"). The
2015 Notes were issued at a discount, which is being amortized over the life of
the 2015 Notes on a straight-line basis. The 2015 Notes are due April 13, 2015,
Putable/Callable April 13, 2005 by the Operating Partnership. The annual
interest rate

                                       14
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)

on the 2015 Notes to April 13, 2005 (the "Remarketing Date") is 6.63%, which is
payable semiannually in arrears on October 13 and April 13, commencing October
13, 1998. The 2015 Notes are subject to mandatory tender on the Remarketing
Date. The Operating Partnership received net proceeds of approximately $298.1
million in connection with this issuance. The Operating Partnership also
received approximately $8.1 million from the sale of the option to remarket the
2015 Notes in April 2005, which is being amortized over the term of the 2015
Notes. As of June 30, 1998 the unamortized balance was approximately $8 million.
Prior to the issuance of the 2015 Notes, the Operating Partnership entered into
an interest rate protection agreement to effectively fix the interest rate cost
of such issuance until the Remarketing Date. The Operating Partnership received
a one-time settlement payment from this transaction, which was approximately
$0.6 million and is being amortized over seven years. As of June 30, 1998 the
unamortized balance was approximately $0.6 million.
 
     In regard to all of the interest rate protection agreements mentioned in
the previous paragraphs, the Operating Partnership believes that it has limited
exposure to the extent of non-performance by the counterparties of each
agreement since each counterparty is a major U.S. financial institution, and the
Operating Partnership does not anticipate their non-performance.

11.  Deposits - restricted

     Deposits-restricted as of June 30, 1998 primarily included a deposit in the
amount of $20 million held in a third party escrow account to provide collateral
for third party construction financing in connection with the Joint Venture
Agreement. Also, approximately $16.3 million was held in third party escrow
accounts, representing proceeds received in connection with the Operating
Partnership's disposition of two properties and earnest money deposits made for
additional acquisitions. In addition, approximately $12.4 million was for tenant
security and utility deposits for certain of the Operating Partnership's
Properties.

12.  Summarized Pro Forma Condensed Statement of Operations

     The following Summarized Pro Forma Condensed Statement of Operations has
been prepared as if the January 1998 Common Share Offering, the February 1998
Common Share Offerings, the March 1998 Common Share Offering, the April 1998
Common Share Offering, the Sixth Public Debt Offering, the acquisition of an
additional 41 Properties, including the related assumption of $232.8 million of
mortgage indebtedness, the repayment of $34.1 million of mortgage indebtedness
and the disposition of five properties (as described in Note 3, Note 4, Note 6,
Note 8 and Note 10 of Notes to Consolidated Financial Statements) had occurred
on January 1, 1998. This would result in 107,711,816 OP Units outstanding. In
management's opinion, the Summarized Pro Forma Condensed Statement of Operations
does not purport to present what actual results would have been had the above
transactions occurred on January 1, 1998, or to project results for any future
period. The amounts presented in the following statement are in thousands except
for OP Unit amounts:

                                       15
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)


<TABLE>
<CAPTION>

                                                              Summarized
                                                               Pro Forma
                                                          Condensed Statement
                                                             of Operations
                                                          For the Six Months
                                                                 Ended
                                                             June 30, 1998
                                                        -----------------------
<S>                                                     <C>
Total Revenues                                                 $620,734
                                                                -------
Total Expenses                                                  498,755
                                                                -------
Pro Forma net income available for OP Units                    $ 89,687
                                                                =======
Pro Forma net income per OP Unit                               $   0.84
                                                                =======

</TABLE>
                                        

13.  Commitments and Contingencies

     The Operating Partnership, as an owner of real estate, is subject to
various environmental laws of Federal and local governments. Compliance by the
Operating Partnership with existing laws has not had a material adverse effect
on the Operating Partnership's financial condition and results of operations.
However, the Operating Partnership cannot predict the impact of new or changed
laws or regulations on its current Properties or on properties that it may
acquire in the future.

     The Operating Partnership does not believe there is any litigation
threatened against the Operating Partnership other than routine litigation
arising out of the ordinary course of business. Some of which is expected to be
covered by liability insurance, none of which is expected to have a material
adverse effect on the consolidated financial statements of the Operating
Partnership.

     In connection with the Joint Venture Agreement, the Operating Partnership
is obligated to fund an additional $20 million in connection with the third
party construction financing.

     In connection with the Wellsford Merger, the Operating Partnership has
provided a standby obligation in the amount of $30 million pursuant to an
agreement entered into with Wellsford Real Properties, Inc., a Maryland
corporation ("WRP"), for the construction financing for a multifamily
development project located in Denver, Colorado. In addition, the Operating
Partnership has provided a $14.8 million credit enhancement with respect to
bonds issued to finance certain public improvements at the multifamily
development project.

14.  Subsequent Events

     On July 1, 1998, the Operating Partnership acquired Trowbridge Apartments,
a 210-unit

                                       16
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)


multifamily property located in Atlanta, Georgia, from an unaffiliated third
party for a purchase price of approximately $12 million.

     On July 1, 1998, the Operating Partnership acquired seventeen multifamily
properties, consisting of 3,775 units, from an unaffiliated third party for a
purchase price of approximately $318.3 million, which included the issuance of
OP Units having a value of approximately $88.3 million. The properties are
located in the states of Washington, Arizona, Nevada and Colorado.

     On July 8, 1998, the Operating Partnership acquired Parkcrest Apartments, a
210-unit multifamily property located in Southfield, Michigan from an
unaffiliated third party for a purchase price of approximately $11.6 million,
which included the assumption of mortgage indebtedness of approximately $7.3
million.

     On July 8, 1998, the Operating Partnership acquired ten multifamily
properties, consisting of 1,911 units, all of which are located in Texas, from
an unaffiliated third party for a purchase price of approximately $82.3 million,
which included the assumption of mortgage indebtedness of approximately $60
million and the issuance of OP Units having a value of approximately $21
million.

     On July 8, 1998, the Operating Partnership entered into a definitive
agreement and plan of merger with a publicly held unaffiliated REIT to acquire
118 multifamily properties containing 34,990 units for a total purchase price of
$2.1 billion, which may include the issuance of $1.1 billion of common stock,
$370 million of preferred stock and the assumption of mortgage indebtedness of
up to $655 million. The closing of this pending transaction is subject to
entering into a binding agreement, the approval of the Company's shareholders
and certain other contingencies and conditions; therefore, there can be no
assurance that this transaction will be consummated or that the final terms
thereof will not differ in material respects from those summarized above.

     On July 9, 1998, the Operating Partnership acquired four multifamily
properties, consisting of 683 units, from an unaffiliated third party for a
purchase price of approximately $45.3 million, which included the issuance of OP
Units having a value of approximately $11.2 million. The properties are located
in the states of Colorado and California.

     On July 10, 1998, the Operating Partnership acquired Martins Landing
Apartments, a 300-unit multifamily property located in Roswell, Georgia from an
unaffiliated third party for a purchase price of approximately $17.7 million,
which included the assumption of mortgage indebtedness of approximately $13
million.

     On July 10, 1998, the Operating Partnership acquired The Lakes at Vinings
Apartments, a 464-unit multifamily property located in Atlanta, Georgia from an
unaffiliated third party for a purchase price of approximately $28.3 million,
which included the assumption of mortgage indebtedness of approximately $22.5
million.

                                       17
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)

     On July 14, 1998, the Operating Partnership acquired Summer Creek
Apartments, a 72-unit multifamily property located in Plymouth, Minnesota from
an unaffiliated third party for a purchase price of approximately $4.3 million,
which included the issuance of OP Units having a value of approximately $0.9
million and the assumption of mortgage indebtedness of approximately $2.4
million.

     On July 15, 1998, the Operating Partnership acquired Patchen Oaks
Apartments, a 192-unit multifamily property located in Lexington, Kentucky from
an unaffiliated third party for a purchase price of approximately $9.4 million.

     On July 15, 1998, the Operating Partnership acquired Lexington Village
Apartments, a 352-unit multifamily property located in Alpharetta, Georgia from
an unaffiliated third party for a purchase price of approximately $24.5 million,
which included the assumption of mortgage indebtedness of approximately $18.8
million and the issuance of OP Units having a value of approximately $0.4
million.

     On July 15, 1998, the Operating Partnership acquired four multifamily
properties, consisting of 558 units, all of which are located in Frederick,
Maryland, from an unaffiliated third party for a purchase price of approximately
$26.9 million, which included the assumption of mortgage indebtedness of
approximately $5.9 million.

     On July 16, 1998, the Operating Partnership acquired Coachman Trails
Apartments, a 154-unit multifamily property located in Plymouth, Minnesota from
an unaffiliated third party for a purchase price of approximately $10.6 million,
which included the assumption of mortgage indebtedness of approximately $6.6
million.

     On July 21, 1998, the Operating Partnership acquired Colony Woods
Apartments, a 414 unit multifamily property located in Birmingham, Alabama from
an unaffiliated third party for a purchase price of approximately $23.4 million.

     On July 22, 1998, the Operating Partnership acquired Arbors at Century
Center Apartments, a 420-unit multifamily property located in Memphis, Tennessee
from an unaffiliated third party for a purchase price of approximately $17.7
million.

     On July 29, 1998, the Operating Partnership acquired a vacant parcel of
land, containing .910 acres located in Raleigh, North Carolina from an
unaffiliated third party for a purchase price of approximately $22,000.

     On July 31, 1998, the Operating Partnership acquired four multifamily
properties, consisting of 804 units, from an unaffiliated third party for a
purchase price of approximately $83.2 million, which included the issuance of OP
Units having a value of approximately $15.2 million and the assumption of
mortgage indebtedness of $41.3 million. The properties are located in the states
of California and Washington.

                                       18
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (Unaudited)

 
     On July 31, 1998, the Operating Partnership sold Country Club I & II
Apartments located in Silver Springs, Maryland for a sales price of $20.8
million and received net proceeds of $7.5 million.

     On August 5, 1998, the Operating Partnership acquired Fernbrook Townhomes
Apartments, a 72-unit multifamily property located in Plymouth, Minnesota from
an unaffiliated third party for a purchase price of approximately $7 million,
which included the assumption of mortgage indebtedness of approximately $5.2
million.

                                       19
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations

Overview

     The following discussion and analysis of the results of operations and
financial condition of the Operating Partnership should be read in connection
with the Consolidated Financial Statements and Notes thereto. Due to the
Operating Partnership's ability to control the EWR Operating Partnership, the
Management Partnerships, the Financing Partnerships and the LLCs, each entity
has been consolidated with the Operating Partnership for financial reporting
purposes. Capitalized terms used herein and not defined are as defined in the
Operating Partnership's Annual Report on Form 10-K for the year ended December
31, 1997.

     Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
words "believes", "expects" and "anticipates" and other similar expressions
which are predictions of or indicate future events and trends and which do not
relate solely to historical matters, identify forward-looking statements. Such
forward-looking statements are subject to risks and uncertainties, which could
cause actual results, performance, or achievements of the Operating Partnership
to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that might cause such differences include, but are not limited to, the
following: the alternative sources of capital to the Operating Partnership are
too high; occupancy levels and market rents may be adversely affected by local
economic and market conditions, which are beyond the Operating Partnership's
control; and additional factors as discussed in Part I of the Annual Report as
filed on Form 10-K. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Operating Partnership undertakes no obligation to publicly release any revisions
to these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

Results of Operations

     Since EQR's IPO and through June 30, 1998, the Operating Partnership has
acquired direct or indirect interests in 453 properties (the Acquired
Properties"), containing 129,054 units in the aggregate, for a total purchase
price of approximately $7.4 billion, including the assumption of and/or new
mortgage indebtedness of approximately $2.2 billion and $0.4 billion of
unsecured notes. The Operating Partnership's interest in six of the Acquired
Properties at the time of acquisition thereof consisted solely of ownership of
the debt collateralized by such Acquired Properties. The Operating Partnership
purchased its interests in 41 of such Acquired Properties consisting of 10,544
units in 1998 (the "1998 Acquired Properties").

     During the six months ended June 30, 1998, the Operating Partnership
disposed of five properties (the "1998 Disposed Properties") for a total sales
price of $41.1 million.

     The Operating Partnership's overall results of operations for the six
months ended June

                                       20
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)

30, 1998 and 1997 have been significantly impacted by the Operating
Partnership's acquisition activity. The significant changes in rental revenues,
property and maintenance expenses, real estate taxes and insurance, depreciation
expense, property management and interest expense can all primarily be
attributed to the acquisition of the 1997 Acquired Properties and the 1998
Acquired Properties. The impact of the 1997 Acquired Properties and the 1998
Acquired Properties is discussed in greater detail in the following paragraphs.

     Properties that the Operating Partnership owned, which equaled 64,086
units, for all of both six month periods ended June 30, 1998 and June 30, 1997
(the "Six-Month 1998 Same Store Properties") impacted the Operating
Partnership's results of operations. Properties that the Operating Partnership
owned, which equaled 68,198 units, for all of both the quarters ended June 30,
1998 and June 30, 1997 (the "Second-Quarter 1998 Same Store Properties") also
impacted the Operating Partnership's results of operations. Both the Six-Month
1998 Same Store Properties and Second-Quarter 1998 Same Store Properties are
discussed in the following paragraphs.

Comparison of six months ended June 30, 1998 to six months ended June 30, 1997

     For the six months ended June 30, 1998, income before gain on disposition
of properties increased by $51.2 million when compared to this six months ended
June 30, 1997. This increase was primarily due to increases in rental revenues
net of increases in property and maintenance expenses, real estate taxes and
insurance, property management expenses, depreciation expense, interest expense
and general and administrative expenses. All of the increases in the various
line item accounts mentioned above can be primarily attributed to the 1998
Acquired Properties and 1997 Acquired Properties. These increases were partially
offset by the 1997 Disposed Properties and the 1998 Disposed Properties. The
increase in interest income of $2.2 million earned on the Company's mortgage
note investments is primarily attributable to its $88 Million Note Investment,
which includes three months of basic interest and contingent interest in 1998
compared to two months of basic interest in the 1997 period.

     In regard to Six-Month 1998 Same Store Properties, rental revenues
increased by approximately $12.6 million to $264.1 million or 5.01% primarily as
a result of higher rental rates charged to new tenants and tenants renewals, as
well as a 1.51% increase in average economic occupancy levels. Overall, property
operating expenses which include property and maintenance, real estate taxes and
insurance and an allocation of property management expenses increased
approximately $2.5 million or 2.5%. This increase was primarily the result of
higher compensation costs, utilities and maintenance costs and leasing and
advertising costs.

     Property management represents expenses associated with the management of
the Operating Partnership's Properties. These expenses increased by
approximately $13.3 million primarily due to the continued expansion of the
Operating Partnership's property management business to facilitate the
management of the Operating Partnership's additional properties.

                                       21
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)

     Interest expense, including amortization of deferred financing costs,
increased by approximately $54.8 million. This increase was primarily the result
of an increase in the Operating Partnership's average indebtedness outstanding
which increased by $1.6 billion. However, the Operating Partnership's effective
interest costs decreased from 7.54% for the six months ended June 30, 1997 to
7.23% for the six months ended June 30, 1998.

     General and administrative expenses, which include corporate operating
expenses, increased approximately $4.1 million between the periods under
comparison. This increase was primarily due to the addition of corporate
personnel, higher compensation costs and shareholder reporting costs as well as
an increase in professional fees. However, by gaining certain economies of scale
with a much larger operation these expenses as a percentage of total revenues
were 1.73% for the six months ended June 30, 1998 compared to 2.03% of total
revenues for the six months ended June 30, 1997.

   Comparison of quarter ended June 30, 1998 to quarter ended June 30, 1997
 
     For the quarter ended June 30, 1998, income before gain on disposition of
properties increased by $24.5 million when compared to the quarter ended June
30, 1997. This increase was primarily due to increases in rental revenues net of
increases in property and maintenance expenses, real estate taxes and insurance,
property management expenses, depreciation, interest expense and general and
administrative expenses. All of the increases in the various line item accounts
mentioned above can be primarily attributed to the continued purchase of
multifamily properties, specifically the 1998 Acquired Properties and 1997
Acquired Properties. These increases were partially offset by the 1997 Disposed
Properties and the 1998 Disposed Properties.

     In regard to the Second Quarter 1998 Same Store Properties, rental revenues
increased by approximately $6.8 million to $142.3 million or 4.99% primarily as
a result of higher rental rates charged to new tenants and tenant renewals, as
well as a 1.39% increase in average economic occupancy levels. Overall property
operating expenses which include property and maintenance, real estate taxes and
insurance and an allocation of property management expenses increased
approximately $1.1 million or 2.1%. This increase was primarily the result of
higher compensation costs, utilities and maintenance costs and leasing and
advertising costs.

     Property management represents expenses associated with the management of
the Operating Partnership's Properties. These expenses increased by
approximately $7.4 million primarily due to the continued expansion of the
Operating Partnership's property management business to facilitate the
management of the Operating Partnership's additional properties.

     Interest expense, including amortization of deferred financing costs,
increased by approximately $27.8 million. This increase was primarily the result
of an increase in the

                                       22
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)

Operating Partnership's average indebtedness outstanding, which increased by
$1.6 billion. However, the Operating Partnership's effective interest costs
decreased from 7.63% for the quarter ended June 30, 1997 to 7.20% for the
quarter ended June 30, 1998.

     General and administrative expenses, which include corporate operating
expenses, increased approximately $2.2 million between the periods under
comparison. This increase was primarily due to the addition of corporate
personnel, higher compensation costs and shareholder reporting costs as well as
an increase in professional fees. However, by gaining certain economies of scale
with a much larger operation these expenses as a percentage of total revenues
were 1.76% for the quarter ended June 30, 1998, which was a decrease from 1.96%
for the quarter ended June 30, 1997.

Liquidity and Capital Resources

     As of January 1, 1998, the Operating Partnership had approximately $33.3
million of cash and cash equivalents and $265 million available on its line of
credit of which $24.7 million was restricted. After taking into effect the
various transactions discussed in the following paragraphs, the Operating
Partnership's cash and cash equivalents balance at June 30, 1998 was
approximately $265.9 million and the amount available on the Operating
Partnership's line of credit was $325 million of which $24.7 million was
restricted. The following discussion also explains the changes in net cash
provided by operating activities, net cash (used for) investing activities and
net cash provided by financing activities, all of which are presented in the
Operating Partnership's Statements of Cash Flows.

     With respect to Property acquisitions during the six months, the Operating
Partnership purchased 41 Properties containing 10,544 units for a total
acquisition cost of approximately $817.6 million, including the assumption of
and or new mortgage indebtedness of approximately $232.8 million. These
acquisitions were primarily funded from proceeds received from the January 1998
Common Share Offering, the February 1998 Common Share Offerings, the March 1998
Common Share Offering, the April 1998 Common Share Offering, the Direct Share
Purchase Plan, the Operating Partnership's line of credit and working capital.

     Subsequent to June 30, 1998 and through August 10, 1998, the Operating
Partnership acquired 50 additional properties, containing 10,591 units for a
total purchase price of approximately $722.5 million, including mortgage
indebtedness of $182.8 million and the issuance of OP Units having a value of
approximately $137.1 million. These acquisitions were primarily funded with
proceeds from the sale of the 2015 Notes, the Operating Partnership's line of
credit and working capital.

     During the six months ended June 30, 1998, the Operating Partnership
disposed of five properties that generated net proceeds of $40.5 million.
Subsequently, these proceeds will be ultimately applied to purchase additional
Properties.

                                       23
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)

   As of June 30, 1998, the Operating Partnership had total indebtedness of
approximately $3.4 billion, which included mortgage indebtedness of $1.78
billion (including premiums of $3.4 million), of which $730 million represented
tax-exempt bond indebtedness, unsecured debt of $1.4 billion (including net
discounts and premiums in the amount of $3.3 million) and $175 million
outstanding on the Operating Partnership's line of credit. During the first six
months, the Operating Partnership repaid $34.1 million of mortgage indebtedness
on five of its Properties. These repayments were funded from the Operating
Partnership's line of credit or from proceeds received for the various capital
transactions as discussed in Note 3 of the Notes to Consolidated Financial
Statements.

     The Operating Partnership has, from time to time, entered into interest
rate protection agreements (financial instruments) to reduce the potential
impact of increases in interest rates but believes it has limited exposure to
the extent of non-performance by the counterparties of each protection agreement
since each counterparty is a major U.S. financial institution, and the Operating
Partnership does not anticipate their non-performance. No such financial
instrument has been used for trading purposes.

     In February, 1996, the Operating Partnership entered into an interest rate
protection agreements that will hedge the Operating Partnership's interest rate
risk at maturity of $125 million of indebtedness. This agreement hedged the
interest rate risk of the Operating Partnership's 1999 Notes by locking the
effective four-year Treasury Rate, commencing May 15, 1999. There was no cost to
the Operating Partnership for entering into this agreement.

     In July 1997, the Operating Partnership entered into two interest rate
protection agreements to effectively fix the interest rate cost of the Operating
Partnership's 2001 Notes and 2003 Notes. One agreement was for a notional amount
of $100 million with a locked in treasury rate at 6.134%. The second agreement
was for a notional amount of $75 million with a locked in treasury rate of
6.287%.

     In April 1998, the Operating Partnership entered into an interest rate
protection agreement to effectively fix the interest rate cost of the Operating
Partnership's 2015 Notes. The agreement was for a notional amount of $300
million with a locked in treasury rate of 6.63%.

     The fair value of these instruments as of June 30, 1998 approximates their
carrying or contract values.

     The Operating Partnership has a policy of capitalizing expenditures made
for new assets, including newly acquired properties and the costs associated
with placing these assets into service. Expenditures for improvements and
renovations that significantly enhance the value of existing assets or
substantially extend the useful life of an asset are also capitalized. Capital
spent for replacement-type items such as appliances, draperies, carpeting and
floor coverings, mechanical equipment and certain furniture and fixtures is also
capitalized. Expenditures for

                                       24
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)


ordinary maintenance and repairs are expensed to operations as incurred. With
respect to acquired properties, the Operating Partnership has determined that it
generally spends $1,000 per unit during its first three years of ownership to
fully improve and enhance these properties to meet the Operating Partnership's
standards. In regard to replacement-type items described above, the Operating
Partnership generally expects to spend $300 per unit on an annual recurring
basis.

     During the six months ended June 30, 1998, total capital expenditures for
the Operating Partnership approximated $36.5 million. Of this amount,
approximately $8.0 million related to capital improvements and major repairs for
certain of the 1995, 1996, 1997 and 1998 Acquired Properties. Capital
improvements and major repairs for all of the Operating Partnership's pre-IPO
properties and certain Acquired Properties approximated $8.8 million, or $63 per
unit. Capital spent for replacement-type items approximated $15.3 million, or
$109 per unit. Also included in total capital expenditures was approximately
$4.4 million expended for non-real estate additions such as computer software,
computer equipment, furniture and fixtures and leasehold improvements for the
Operating Partnership's property management offices and its corporate
headquarters. Such capital expenditures were primarily funded from working
capital reserves and from net cash provided by operating activities. Total
capital expenditures for the remaining portion of 1998 are budgeted to be
approximately $60 million.

     Total distributions paid in July 1998 amounted to approximately $93.8
million, which included distributions declared for the quarter ended June 30,
1998.

     The Operating Partnership expects to meet its short-term liquidity
requirements, including capital expenditures relating to maintaining its
existing Properties, generally through its working capital, net cash provided by
operating activities and borrowings under its line of credit. The Operating
Partnership considers its cash provided by operating activities to be adequate
to meet operating requirements and payments of distributions. The Operating
Partnership also expects to meet its long-term liquidity requirements such as
scheduled mortgage debt maturities, reduction of outstanding amounts under its
line of credit, property acquisitions, financing of construction and development
activities and capital improvements through the issuance of unsecured notes and
equity securities, including additional OP Units, as well as from undistributed
FFO and proceeds received from the disposition of certain Properties. In
addition, the Operating Partnership has certain uncollateralized Properties
available for additional mortgage borrowings in the event that the public
capital markets are unavailable to the Operating Partnership or the cost of
alternative sources of capital to the Operating Partnership is too high.

     The Operating Partnership currently has a $500 million line of credit that
is scheduled to mature in November 1999. As of August 10, 1998, $340 million was
outstanding under the Operating Partnership's line of credit.

     The Operating Partnership has conducted a review of its computer operating
systems and

                                       25
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)

has identified those areas that could be affected by the "Year 2000" issue and
has developed a plan to resolve this issue. The Operating Partnership believes
that by modifying certain existing hardware and software and, in other cases,
converting to new application systems, the Year 2000 problem can be resolved
without significant operational difficulties. The Operating Partnership has
initiated formal communications with all of its significant suppliers to
determine the extent to which the Operating Partnership's interface systems are
vulnerable to those third parties' failure to remediate their own year 2000
issues. The Operating Partnership has estimated the Year 2000 project cost to be
approximately $300,000.

Funds From Operations
 
     The Operating Partnership generally considers FFO to be one measure of the
performance of real estate companies. The resolution adopted by the Board of
Governors of NAREIT defines FFO as net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect FFO on the same basis.

     The Operating Partnership believes that FFO is helpful to investors as a
measure of the performance of a real estate company because, along with cash
flows from operating activities, financing activities and investing activities
it provides investors with an understanding of the ability of the Operating
Partnership to incur and service debt and to make capital expenditures. FFO in
and of itself does not represent cash generated from operating activities in
accordance with GAAP and therefore should not be considered an alternative to
net income as an indication of the Operating Partnership's performance or to net
cash flows from operating activities as determined by GAAP as a measure of
liquidity and is not necessarily indicative of cash available to fund cash
needs. The Operating Partnership's calculation of FFO represents net income,
excluding gains on dispositions of properties, plus depreciation on real estate
assets, amortization of deferred financing costs related to the Predecessor
Business and the allocation of net income to Cumulative Redeemable Preference
Units. The Operating Partnership's calculation of FFO may differ from the
methodology for calculating FFO utilized by other companies and, accordingly,
may not be comparable to such other companies.

     For the six months ended June 30, 1998, FFO increased $96.1 million,
representing a 85.5% increase when compared to the six months ended June 30,
1997. For the quarter ended June 30, 1998, FFO increased by $47.4 million
representing a 78.6% increase when compared to the quarter ended June 30, 1997.

     The following is a reconciliation of net income to FFO for the six months
and quarters ended June 30, 1998 and 1997:

                                       26
<PAGE>
 
                       ERP OPERATING LIMITED PARTNERSHIP

                                    PART I
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations (continued)


<TABLE>

                                                                Six            Six
                                                              Months          Months      Quarter      Quarter
                                                               Ended          Ended        Ended        Ended
                                                              6/30/98        6/30/97      6/30/98      6/30/97
                                                             ---------       --------     --------     --------
<S>                                                          <C>             <C>          <C>          <C>
Net income                                                   $ 133,632       $ 75,016     $ 72,357     $ 38,628
Adjustments:
  Depreciation on real estate assets                           129,387         61,885       66,162       33,453
  Amortization of deferred financing costs
    related to predecessor business                                 35            116           23           58
  Allocation of net income to Cumulative
    Redeemable Preference Units                                (43,384)       (20,939)     (21,692)     (11,878)
  Gain on disposition of properties                            (11,092)        (3,632)      (9,223)          (0)
                                                             ---------       --------     --------     --------
FFO                                                          $ 208,578       $112,446     $107,627     $ 60,261
                                                             =========       ========     ========     ========
</TABLE>

                                       27
<PAGE>
 
                          PART II. OTHER INFORMATION


Item 1. Legal Proceedings

     There have been no new or significant developments related to the legal
proceedings that were discussed in Part I, Item III of the Operating
Partnership's Form 10-K for the year ended December 31, 1997.

Item 6. Exhibits and Reports on Form 8-K

(A) Exhibits:

12  Computation of Ratio of Earnings to Fixed Charges.

(B) Reports on Form 8-K:

A Report on Form 8-K dated June 25, 1998, reporting information on the 
acquisition of assets.

A Report on Form 8-K dated July 23, 1998, reporting financial information of 
Merry Land and Investment Company.


                                      28
<PAGE>
 
                                  SIGNATURES
                                  ----------


     Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

                             ERP OPERATING LIMITED PARTNERSHIP
                             BY: EQUITY RESIDENTIAL PROPERTIES TRUST,
                             ITS GENERAL PARTNER



Date: August 12, 1998        By:  /s/              Bruce C. Strohm
                                      ------------------------------------------
                                                   Bruce C. Strohm
                                      Executive Vice President, General Counsel
                                                    and Secretary


Date: August 12, 1998        By:  /s/             Michael J. McHugh
                                      ------------------------------------------
                                                  Michael J. McHugh
                                      Executive Vice President, Chief Accounting
                                                Officer and Treasurer

                                      29
<PAGE>
                       ERP OPERATING LIMITED PARTNERSHIP
     Consolidated and Combined Historical, Including Predecessor Business
     Earnings to Combined Fixed Charges and Preferred Distributions Ratio
<TABLE>
<CAPTION>
                                                                                            Historical
                                                               --------------------------------------------------------------------
                                                               06/30/98  06/30/97  12/31/97  12/31/96  12/31/95  12/31/94  12/31/93
                                                               --------  --------  --------  --------  --------  --------  --------
                                                                                       (Amounts in thousands)
<S>                                                            <C>       <C>       <C>       <C>       <C>       <C>       <C>
REVENUES
  Rental income                                                $571,370  $290,799  $707,733  $454,412  $373,919  $220,727  $104,388
  Fee income - outside managed                                    2,790     3,110     5,697     6,749     7,030     4,739     4,651
  Interest income - investment in mortgage notes                 10,221     8,011    20,366    12,819     4,862         -         -
  Interest and other income                                       9,010     4,404    13,525     4,405     4,573     5,568     3,031
                                                               --------  --------  --------  --------  --------  --------  --------
     Total revenues                                             593,391   306,324   747,321   478,385   390,384   231,034   112,070
                                                               --------  --------  --------  --------  --------  --------  --------
EXPENSES
  Property and maintenance                                      137,910    70,760   176,075   127,172   112,186    66,534    35,324
  Real estate taxes and insurance                                56,484    29,667    69,520    44,128    37,002    23,028    11,403
  Property management                                            25,110    11,819    26,793    17,512    15,213    10,249     3,491
  Property management - non-recurring                                 -         -         -         -         -       879         -
  Fee and asset management                                        2,240     1,569     3,364     3,837     3,887     2,056     2,524
  Depreciation                                                  131,910    62,775   156,644    93,253    72,410    37,273    15,384
  Interest:
     Expense incurred                                           105,651    50,924   121,324    81,351    78,375    37,044    26,042
     Amortization of deferred financing costs                     1,275     1,220     2,523     4,242     3,444     1,930     3,322
  Refinancing costs                                                   -         -         -         -         -         -     3,284
  General and administrative                                     10,271     6,206    15,064     9,857     8,129     6,053     3,159
                                                               --------  --------  --------  --------  --------  --------  --------
     Total expenses                                             470,851   234,940   571,307   381,352   330,646   185,046   103,933
                                                               --------  --------  --------  --------  --------  --------  --------
Income before extraordinary item                               $122,540  $ 71,384  $176,014  $ 97,033  $ 59,738  $ 45,988  $  8,137
                                                               ========  ========  ========  ========  ========  ========  ========
Combined Fixed Charges and Preferred Distributions:
  Interest and other financing costs                           $105,651  $ 50,924  $121,324  $ 81,351  $ 78,375  $ 37,044  $ 26,042
  Refinancing costs                                                   -         -         -         -         -         -     3,284
  Amortization of deferred financing costs                        1,275     1,220     2,523     4,242     3,444     1,930     3,322
  Preferred distributions                                        43,384    20,939    59,012    29,015    10,109         -         -
                                                               --------  --------  --------  --------  --------  --------  --------
Total Combined Fixed Charges
  and Preferred Distributions                                  $150,310  $ 73,083  $182,859  $114,608  $ 91,928  $ 38,974  $ 32,648
                                                               ========  ========  ========  ========  ========  ========  ========
Earnings before combined fixed charges
  and preferred distributions                                  $229,466  $123,528  $299,861  $182,626  $141,557  $ 84,962  $ 40,785
                                                               ========  ========  ========  ========  ========  ========  ========
Funds from operations before combined fixed
  charges and preferred distributions                          $361,376  $186,303  $456,505  $275,879  $213,967  $122,235  $ 56,169
                                                               ========  ========  ========  ========  ========  ========  ========
Ratio of earnings before combined fixed charges
  and preferred distributions to combined fixed charges
  and preferred distributions                                      1.53      1.69      1.64      1.59      1.54      2.18      1.25
                                                               ========  ========  ========  ========  ========  ========  ========
Ratio of funds from operations before combined fixed
  charges and preferred distributions to combined fixed
  charges and preferred distributions                              2.40      2.55      2.50      2.41      2.33      3.14      1.72
                                                               ========  ========  ========  ========  ========  ========  ========
</TABLE>