The Company's strategiesCompany’s strategy for accomplishing these objectives are:include:

•

maintainingLeveraging our size and increasing Property occupancy while increasing rental rates;



scale in four critical ways:

•

controlling expenses,Investing or “recycling” capital investments in apartment communities located in strategically targeted markets, to maximize our total return on an enterprise level;

•Meeting the needs of our customers by offering a wide array of product choices and a commitment to service;

•Engaging, retaining, and attracting the best people by providing regular preventive maintenance, making periodic renovationsthem with the education, resources and enhancing amenities;



opportunities to succeed; and

•

maintainingSharing resources, customers and best practices in property management and across the enterprise.

•Owning a ratio of consolidated debt-to-total market capitalization of less than 50%;



•

strategically acquiring and disposing of properties;



•

purchasing newly developed, as well as co-investing in the development of, multifamily communities;

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•

entering into joint ventures related to the ownership of established properties; and



•

strategicallyhighly diversified portfolio by investing in various businessestarget markets defined by a combination of the following criteria:

•High barrier-to-entry (low supply);

•Strong economic predictors (high demand); and

•Attractive quality of life (high demand and retention).

•Giving customers reasons to stay with Equity by providing a range of product options available in our diversified portfolio and by enhancing their experience through our employees and our services.

•      Being open and responsive to market realities to take advantage of investment opportunities that will enhance services for the Properties.

 The Company is committed to resident satisfaction by striving to anticipate industry trends and implementing strategies and policies consistent with providing quality resident services. In addition, the Company continuously surveys rental rates of competing properties and conducts resident satisfaction surveys to determine the factors they consider most important in choosing a particular apartment unit and/or Property.

Acquisition and Development Strategies

The Company anticipates that future property acquisitions and developments will occur within the continental United States. Management will continue to use market information to evaluate opportunities. The Company's market database allows it to review the primary economic indicators of the markets where the Company currently owns and manages Properties and where it expects to expand its operations.  Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt securities, sales of Properties,properties, joint venture agreements and collateralized and uncollateralized borrowings.  In addition, the Company may acquire additional properties in transactions that include the issuance of limited partnership interests in the Operating Partnership ("(“OP Units"Units”) as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer, in part, the recognition of taxable income or gain, which might otherwise result from the sales.

When evaluating potential acquisitions and developments, the Company will consider:generally considers the following factors:

•

the geographic area and type of community;



•

the location, construction quality, condition and design of the property;



•

the current and projected cash flow of the property and the ability to increase cash flow;



•

the potential for capital appreciation of the property;



•

the terms of resident leases, including the potential for rent increases;



•

income levels and employment growth trends in the relevant market;



•

      employment and household growth and net migration of the relevant market'smarket’s population;



•

the potential for economic growth and the tax and regulatory environment of the community in which the property is located;



•

the occupancy and demand by residents for properties of a similar type in the vicinity (the overall market and submarket);

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Capitalization as of December 31, 20012004

Convertible Preferred Shares, Preference Interests
and Junior Preference Units
Asas of December 31, 20012004

The Company'sCompany’s policy is to maintain a ratio of consolidated debt-to-total market capitalization of less than 50%.

        It is also the Company's policy that all unsecured and not incur indebtedness (otherother than short-term trade, employee compensation or similar indebtedness that will be paid in the ordinary course of business) bebusiness.

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incurred by the Operating Partnership to the extent necessary to fund the business activities conducted by the Operating Partnership and its subsidiaries.

Equity Offerings For the Years Ended December 31, 2001, 20002004, 2003 and 19992002

During 2001,2004, the Company:

•

Issued 3,187,2173,350,759 Common Shares pursuant to its Fifth Amended Option and Award PlanShare Incentive Plans and received net proceeds of approximately $65.4$79.0 million.



•

Issued 310,261275,616 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $6.9 million.



During 2003, the Company:

•

Issued 33,106600,000 Series N Cumulative Redeemable Preferred Shares with a liquidation value of $150.0 million and received net proceeds of approximately $145.3 million.

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•      Issued 3,249,555 Common Shares pursuant to its Share Purchase—DRIP PlanIncentive Plans and received net proceeds of approximately $0.9$68.4 million.

        During 2000, the Company:

•

Issued 1,370,186 Common Shares pursuant to its Fifth Amended Option and Award Plan and received net proceeds of approximately $25.2 million.



•

Issued 299,580289,274 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $5.4$6.3 million.



During 2002, the Company:

•

Issued 26,3741,435,115 Common Shares pursuant to its Share Purchase—DRIP PlanIncentive Plans and received net proceeds of approximately $0.6$29.6 million.



•

Issued 69,504 Common Shares pursuant to its Dividend Reinvestment—DRIP Plan and received net proceeds of approximately $1.7 million.

        During 1999, the Company:

•

Issued 2,026,384 Common Shares pursuant to its Fifth Amended Option and Award Plan and received net proceeds of approximately $30.8 million.



•

Issued 295,770324,238 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $5.2$7.4 million.



•

Issued 45,06831,354 Common Shares pursuant to its Share Purchase—Purchase – DRIP Plan and received net proceeds of approximately $1.0$0.9 million.



•

Issued 72,26441,407 Common Shares pursuant to its Dividend Reinvestment—Reinvestment – DRIP Plan and received net proceeds of approximately $1.5$1.2 million.



•

Repurchased and retired on October 12, 1999, 296,9065,092,300 of its Common Shares previously issued in connection withon the LFT Merger. These Common Sharesopen market at an average price of $22.58 per share.  The purchases were beneficially owned by various LFT employeesmade between October 1 and trustees.October 22, 2002.  The Company paid approximately $6.3$115.0 million in connection therewith.

 The

In February 1998, the Company filed withand the SEC on February 3, 1998declared effective a Form S-3 Registration Statement to register $1$1.0 billion of equity securities. The SEC declared this registration statement effective on February 27, 1998.  In addition, the Company carried over $272$272.4 million related to thea prior registration statement that was declared effective on August 4, 1997.statement.  As of December 31, 2001, $1.1 billionFebruary 2, 2005, $956.5 million in equity securities remained available for issuance under this registration statement.

 During 2001, 2000 and 1999,

In May 2002, the Company’s shareholders approved the Company’s 2002 Share Incentive Plan.  In January 2003, the Company filed a Form S-8 registration statement to register 23,125,828 Common Shares under this plan.  As of January 1, 2005, 23,069,873 shares are available for issuance under this plan.

Cumulative through December 31, 2004, the Company, through a subsidiary of the Operating Partnership, issued and has outstanding various series of Preference Interests series (the "Preference Interests"“Preference Interests”) with an equity value of

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$246.0  $206.0million receiving net proceeds of $239.9$200.9 million. The following table presents the issued and outstanding Preference Interests as of December 31, 2001 and December 31, 2000:

(1)

On or after the fifth anniversary of the respective issuance (the "Redemption Date"), all of the Preference Interests may be redeemed for cash at the option of the Company, in whole or in part, at any time or from time to time, at a redemption price, payable in cash, equal to the liquidation preference of $50.00 per unit plus the cumulative amount of accrued and unpaid distributions, if any.

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(2)

On or after the tenth anniversary of the respective issuance (the "Conversion Date"), all of the Preference Interests are exchangeable at the option of the holder (in whole but not in part) on a one-for-one basis to a respective reserved series of EQR Preferred Shares. In addition, on or after the Conversion Date, the Convertible Preference Interests (Series H, I & J) may be converted under certain circumstances at the option of the holder (in whole but not in part) to Common Shares based upon the contractual conversion rate, plus accrued and unpaid distributions, if any.

(3)

Dividends on all series of Preference Interests are payable quarterly on March 25^th, June 25^th, September 25^th, and December 25^th of each year.

Debt Offerings For the Years Ended December 31, 2001, 20002004, 2003 and 19992002

During 2001:2004:

•

The Operating Partnership issued $300$300.0 million of five-year 4.75% redeemable unsecured fixed rate notes (the "March 2011 Notes"“June 2009 Notes”) in a public debt offering in June 2004.  The June 2009 Notes were issued at a discount, which is being amortized over the life of the notes on a straight-line basis.  The June 2009 Notes are due June 15, 2009 with interest payable semiannually in arrears on June 1 and December 1, commencing December 1, 2004.The Operating Partnership received net proceeds of approximately $296.8 million in connection with this issuance.

•      The Operating Partnership issued $500.0 million of ten-year 5.25% redeemable unsecured fixed rate notes (the “September 2014 Notes”) in a public debt offering in September 2004.  The September 2014 Notes were issued at a discount, which is being amortized over the life of the notes on a straight-line basis.  The September 2014 Notes are due September 15, 2014 with interest payable semiannually in arrears on September 1 and March 1, commencing March 1, 2005.The Operating Partnership received net proceeds of approximately $496.1 million in connection with this issuance.

•      The Operating Partnership received $100.0 million as an initial draw on a $300.0 million floating rate loan in July 2004.  The loan was paid off in full and terminated in September 2004.

During 2003:

•      The Operating Partnership issued $400.0 million of ten-year 5.20% redeemable unsecured fixed rate

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notes (the “April 2013 Notes”) in a public debt offering in March 2001.2003.  The April 2013 Notes were issued at a discount, which is being amortized over the life of the notes on a straight-line basis.  The April 2013 Notes are due April 1, 2013 with interest payable semiannually in arrears on April 1 and October 1, commencing October 1, 2003.The Operating Partnership received net proceeds of approximately $397.5 million in connection with this issuance.

During 2002:

•      The Operating Partnership issued $400.0 million of ten-year 6.625% redeemable unsecured fixed rate notes (the “March 2012 Notes”) in a public debt offering in March 2002.  The March 20112012 Notes were issued at a discount, which is being amortized over the life of the notes on a straight-line basis.  The March 20112012 Notes are due March 2, 2011. The annual15, 2012 with interest rate on the March 2011 Notes is 6.95%, which is payable semiannually in arrears on September 215 and March 2,15, commencing September 2, 2001. 15, 2002.The Operating Partnership received net proceeds of approximately $297.4$394.5 million in connection with this issuance.

        During 2000:

•

The Operating Partnership did not issue new debt during the year ended December 31, 2000.

        During 1999:

•

The Operating Partnership issued $300$50.0 million of five-year 4.861% redeemable unsecured fixed rate notes (the "June 2004 Notes"“November 2007 Notes”) in a public debt offering in June 1999.November 2002.  The June 2004 Notes were issued at a discount, which is being amortized over the life of the notes on a straight-line basis. The June 2004November 2007 Notes are due June 23, 2004. The annualNovember 30, 2007 with interest rate on the June 2004 Notes is 7.10%, which is payable semiannually in arrears on December 23May 30 and June 23,November 30, commencing December 23, 1999. May 30, 2003.The Operating Partnership received net proceeds of approximately $298.0$49.9 million in connection with this issuance.

 The

In June 2003, the Operating Partnership filed and the SEC declared effective a Form S-3 Registration Statement on August 25, 2000registration statement to register $1$2.0 billion of debt securities. The SEC declared this registration statement effective on September 8, 2000.  In addition, the Operating Partnership carried over $430$280.0 million related to thea prior registration statement effective on February 27, 1998.statement.  As of December 31, 2001, $1.13February 2, 2005, $1.48 billion in debt securities remained available for issuance under this registration statement.

Disposition Strategies

        Management will use market information to evaluate dispositions. Factors the Company considers in deciding whether to dispose of its Properties include the following:

•

potential increases in new construction;



•

areas where the economy is expected to decline substantially; and



•

markets where the Company does not intend to establish long-term concentrations.

        The Company will reinvest the proceeds received from property dispositions primarily to fund property acquisitions as well as fund development activities. In addition, when feasible, the Company may structure these transactions as tax deferred exchanges.

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Credit Facilities

 The Company has

In May 2002, the Operating Partnership obtained a three-year $700.0 million unsecured revolving credit facility to providematuring May 29, 2005.  Advances under the credit facility bear interest at variable rates based upon LIBOR at various interest periods, plus a spread dependent upon the Operating Partnership with potential borrowings of up to $700 million. This line ofPartnership’s credit is scheduled to expire in August 2002 andrating, or based upon bids received from the Company has begun negotiations to have a new line of credit in place by the end of the second quarter of 2002.lending group.  As of February 28, 2002, $262.0December 31, 2004, $150.0 million was outstanding under this facility at aand $65.4 million was restricted (dedicated to support letters of credit and not available for borrowing) on the credit facility.  During the year ended December 31, 2004, the weighted average interest rate of 2.38%.

        In connection with its acquisition of Globe,on borrowings under the Company assumed a revolving credit facility with potential borrowings of up to $55.0 million. On May 31, 2001, this credit facility was terminated.

Business Combinations

        On October 1, 1999, the Company completed the acquisition of the multifamily property business of Lexford Residential Trust ("LFT") through the LFT Merger. The transaction was valued at approximately $738 million and included 402 LFT Properties containing 36,609 units. The purchase price consisted of:

•

8.0 million Common Shares issued by the Company (each outstanding common share of beneficial interest of LFT was converted into 0.926 of a Common Share) with a market value of approximately $181.1 million;



•

assumption of mortgage indebtedness and unsecured notes in the amount of $528.3 million;



•

acquisition of other assets of approximately $40.9 million and assumption of other liabilities of approximately $25.3 million; and



•

other merger related costs of approximately $24.5 million.

        On July 11, 2000, the Company acquired Globe in an all cash and debt transaction valued at approximately $163.2 million. Globe provided fully furnished short-term housing through an inventory of leased housing units to transferring or temporarily assigned corporate personnel, new hires, trainees, consultants and individual customers throughout the United States. Additionally, Globe rents and sells furniture to a diversified base of commercial and residential customers throughout the United States. Shareholders of Globe received $13.00 per share, which approximated $58.7 million in cash based on the 4.5 million Globe shares outstanding. In addition, the Company:

•

Acquired $94.8 million in other Globe assets and assumed $29.6 million in other Globe liabilities;



•

Allocated $68.4 million to goodwill;



•

Recorded acquisition costs of $4.5 million; and



•

Assumed $70.4 million in debt, which included $1.4 million in mortgage debt, $39.5 million in unsecured notes, and Globe's line of credit of $29.5 million outstanding.

        On July 21, 2000, the Company, through its Globe subsidiary, acquired Temporary Quarters, Inc., the leading corporate housing provider in Atlanta, Georgia, in a $3.3 million all cash transaction.was 1.73%.

 As of September 30, 2001, the Company recorded $60.0 million of asset impairment charges related

The Operating Partnership is currently negotiating a new credit facility to replace or expand its furniture rental business. These charges were the result of a review of the existing intangiblefacility and tangible assets reflected on the consolidated balance sheet as of September 30, 2001. The impairment loss is reflected on the income statementfully expects to obtain this at current or improved terms in total expenses and includes the write-down of the following assets: a) goodwill of approximately $26.0 million; b) rental furniture, net of approximately $28.6 million; c) property and equipment, net of approximately $4.5 million; and d) other assets of approximately $0.9 million.March or April 2005.

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Business Combinations

 On

In January 11, 2002, the Company sold the former Globe Business Resources, Inc. (“Globe”) furniture rental business it acquired in July 2000 for approximately $30.0 million in cash, which approximated the net book value at the sale date.  The Company has retained ownership of the former Globe short-term furnished housing business, which is now known as Equity Corporate Housing.Housing (“ECH”).

 On October

For the year ended December 31, 20002002, the Company acquired Grove, which included 60 properties containing 7,308 units for a total purchase pricerecorded approximately $17.1 million of $463.2 million. The Company:

•

Paid $17.00 per share or $141.6 millionasset impairment charges related to ECH.  Following the guidance in cash to purchaseSFAS No. 142, these charges were the 8.3 million outstanding common shares of Grove;



•

Paid $17.00 per unit or $12.4 million in cash to purchase 0.7 million Grove OP Units outstanding at the merger date;



•

Converted 2.1 million Grove OP Units to 1.6result of the Operating Partnership's OP units usingCompany’s decision to reduce the conversion ratio of 0.7392 (after cash-out of fractional units). Thecarrying value of these converted OP units totaled $37.2 million;



•

Assumed $241.3ECH to $30.0 million, given the weakness in Grove debt, which included firstthe economy and second mortgages totaling $203.4 millionmanagement’s expectations for near-term performance and Grove's line of credit totaling $38.0 million. Grove's line of credit and two mortgage loans totaling $7.8 million were paid off immediately after the closing;



•

Acquired $20.1 million in other Grove assets and assumed $11.2 million in other Grove liabilities, includingdetermined based upon a contingent earnout liability totaling $1.5 million. This amount represents the estimated additionaldiscounted cash or OP Units required to be funded to the previous owners of Glen Meadow Apartments upon the transition of this property from subsidized to market rents; and



•

Recorded acquisition costs of $19.5 million.

        The Company accounted for these business combinations as purchases in accordance with Accounting Principles Board ("APB") Opinion No. 16. The fair valueflow analysis of the consideration given bybusiness.  This impairment loss is reflected on the Company was usedconsolidated statements of operations as impairment on corporate housing business and on the valuation basis for each of the combinations.consolidated balance sheets as a reduction in goodwill, net.

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