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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

~~For the quarterly period ended SEPTEMBER 30, 2002~~


For the quarterly period ended JUNE 30, 2003

OR

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

~~Commission File Number: 1-12252~~

~~EQUITY RESIDENTIAL~~
~~(Exact name of registrant as specified in its charter)~~

~~Maryland~~		~~13-3675988~~

Commission File Number: 1-12252

EQUITY RESIDENTIAL
(Exact Name of Registrant as Specified in its Charter)

Maryland		13-3675988
(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)

http://www.equityapartments.com
(Registrant’s web site)

~~(312) 474-1300~~
~~(Registrant's telephone number, including area code)~~

~~http://www.equityapartments.com~~
~~(Registrant's web site)~~

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o

The number of Common Shares of Beneficial Interest, $0.01 par value, outstanding on ~~October~~July 31, ~~2002~~2003 was ~~270,855,698.~~273,706,254.

EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)

September 30,
2002
December 31,
2001

ASSETS
Investment in real estate
Land $ 1,854,750 $ 1,840,170
Depreciable property 11,228,526 11,096,847
Construction in progress 124,811 79,166

13,208,087 13,016,183
Accumulated depreciation (2,026,010 ) (1,718,845 )

Investment in real estate, net of accumulated depreciation 11,182,077 11,297,338

Real estate held for disposition

—

3,371

Cash and cash equivalents 21,756 51,603
Investments in unconsolidated entities 435,701 397,237
Rents receivable 2,951 2,400
Deposits—restricted 168,108 218,557
Escrow deposits—mortgage 58,343 76,700
Deferred financing costs, net 32,881 27,011
Rental furniture, net — 20,168
Property and equipment, net — 3,063
Goodwill, net 30,000 47,291
Other assets 66,379 90,886

Total assets $ 11,998,196 $ 12,235,625

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Mortgage notes payable $ 3,088,798 $ 3,286,814
Notes, net 2,446,779 2,260,944
Line of credit 35,000 195,000
Accounts payable and accrued expenses 139,268 108,254
Accrued interest payable 67,725 62,360
Rents received in advance and other liabilities 71,037 83,005
Security deposits 46,250 47,644
Distributions payable 143,008 141,832

Total liabilities 6,037,865 6,185,853

Commitments and contingencies

Minority Interests:
Operating Partnership 358,729 379,898
Preference Interests 246,000 246,000
Junior Preference Units 5,846 5,846
Partially Owned Properties 10,568 4,078

Total Minority Interests 621,143 635,822

Shareholders' equity:

Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 10,539,534 shares issued and outstanding as of September 30, 2002 and 11,344,521 shares issued and outstanding as of December 31, 2001 946,544 966,671
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 275,850,003 shares issued and outstanding as of September 30, 2002 and 271,621,374 shares issued and outstanding as of December 31, 2001 2,759 2,716
Paid in capital 4,977,195 4,892,744
Employee notes (3,780 ) (4,043 )
Deferred compensation (26,407 ) (25,778 )
Distributions in excess of accumulated earnings (512,093 ) (385,320 )
Accumulated other comprehensive loss (45,030 ) (33,040 )

Total shareholders' equity 5,339,188 5,413,950

Total liabilities and shareholders' equity $ 11,998,196 $ 12,235,625

June 30,
2003

December 31,
2002

ASSETS

Investment in real estate

Land

$
1,815,685

$
1,803,577

Depreciable property

11,178,596

11,240,245

Construction in progress

2,502

2,441

12,996,783

13,046,263

Accumulated depreciation

(2,247,136
)
(2,112,017
)
Investment in real estate, net of accumulated depreciation

10,749,647

10,934,246

Cash and cash equivalents

243,838

29,875

Investments in unconsolidated entities

509,937

509,789

Rents receivable

2,119

2,926

Deposits – restricted

280,935

141,278

Escrow deposits – mortgage

44,831

50,565

Deferred financing costs, net

32,321

32,144

Goodwill, net

30,000

30,000

Other assets

150,064

80,094

Total assets

$
12,043,692

$
11,810,917

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:

Mortgage notes payable

$
2,850,493

$
2,927,614

Notes, net

2,854,198

2,456,085

Line of credit

—

140,000

Accounts payable and accrued expenses

71,746

64,369

Accrued interest payable

64,374

63,151

Rents received in advance and other liabilities

165,244

165,095

Security deposits

44,965

45,333

Distributions payable

142,004

140,844

Total liabilities

6,193,024

6,002,491

Commitments and contingencies

Minority Interests:

Operating Partnership

347,598

349,646

Preference Interests

246,000

246,000

Junior Preference Units

5,846

5,846

Partially Owned Properties

8,622

9,811

Total Minority Interests

608,066

611,303

Shareholders’ equity:

Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 7,101,384 shares issued and outstanding as of June 30, 2003 and 10,524,034 shares issued and outstanding as of December 31, 2002

995,591

946,157

Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 273,119,105 shares issued and outstanding as of June 30, 2003 and 271,095,481 shares issued and outstanding as of December 31, 2002

2,731

2,711

Paid in capital

4,837,961

4,839,218

Deferred compensation

(7,538
)
(12,118
)
Distributions in excess of accumulated earnings

(547,693
)
(535,056
)
Accumulated other comprehensive loss

(38,450
)
(43,789
)
Total shareholders’ equity

5,242,602

5,197,123

Total liabilities and shareholders’ equity

$
12,043,692

$
11,810,917

See accompanying notes
2

EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)

Nine Months Ended
September 30,
Quarter Ended
September 30,

2002
2001
2002
2001

REVENUES
Rental income $ 1,504,274 $ 1,523,723 $ 501,853 $ 518,096
Fee and asset management 6,957 5,805 2,647 1,665
Interest and other income 11,551 17,685 2,235 6,166
Interest income—investment in mortgage notes — 8,786 — 23

Total revenues 1,522,782 1,555,999 506,735 525,950

EXPENSES
Property and maintenance 390,241 411,370 136,104 140,573
Real estate taxes and insurance 153,127 139,827 50,698 45,173
Property management 55,767 56,302 17,565 19,760
Fee and asset management 5,366 5,358 1,702 1,888
Depreciation 348,947 333,041 118,120 113,300
Interest:
Expense incurred, net 255,693 267,572 84,153 89,212
Amortization of deferred financing costs 4,344 4,328 1,362 1,524
General and administrative 33,000 23,604 10,673 9,525
Impairment on corporate housing business 17,122 — 17,122 —
Impairment on technology investments 872 7,968 291 1,193
Amortization of goodwill — 1,862 — 581

Total expenses 1,264,479 1,251,232 437,790 422,729

Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle

258,303

304,767

68,945

103,221

Allocation to Minority Interests:
Operating Partnership (19,067 ) (22,666 ) (5,283 ) (6,192 )
Partially Owned Properties (1,584 ) (1,523 ) (259 ) (1,285 )
Income (loss) from investments in unconsolidated entities (1,746 ) 1,885 (1,979 ) 925
Net gain (loss) on sales of unconsolidated entities (626 ) 339 (5,872 ) —

Income before discontinued operations, extraordinary items and cumulative effect of change in accounting principle 235,280 282,802 55,552 96,669
Net gain on sales of discontinued operations 61,209 99,793 32,763 53,567
Discontinued operations, net 6,815 (49,241 ) 346 (56,257 )

Income before extraordinary items and cumulative effect of change in accounting principle 303,304 333,354 88,661 93,979
Extraordinary items (468 ) (22 ) — (128 )
Cumulative effect of change in accounting principle — (1,270 ) — —

Net income 302,836 332,062 88,661 93,851
Preferred distributions (72,969 ) (81,759 ) (24,188 ) (24,340 )

Net income available to Common Shares $ 229,867 $ 250,303 $ 64,473 $ 69,511

Net income per share—basic $ 0.84 $ 0.94 $ 0.24 $ 0.26

Net income per share—diluted $ 0.83 $ 0.93 $ 0.23 $ 0.26

Weighted average Common Shares outstanding—basic 272,738 266,614 273,943 268,253

Weighted average Common Shares outstanding—diluted 298,690 294,661 299,057 296,391

Distributions declared per Common Share outstanding $ 1.2975 $ 1.2475 $ 0.4325 $ 0.4325

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003

2002

REVENUES

Rental income

$
943,529

$
950,540

$
473,967

$
476,418

Fee and asset management

7,878

4,310

5,390

2,592

Interest and other income

7,128

9,304

3,787

5,206

Total revenues

958,535

964,154

483,144

484,216

EXPENSES

Property and maintenance

258,017

239,744

129,269

120,338

Real estate taxes and insurance

101,780

96,872

50,455

48,267

Property management

32,194

37,663

16,343

18,213

Fee and asset management

3,607

3,620

1,837

1,758

Depreciation

231,582

218,684

116,555

110,464

Interest:

Expense incurred, net

164,532

170,528

84,103

86,573

Amortization of deferred financing costs

3,104

2,962

1,701

1,584

General and administrative

20,146

22,327

8,970

11,527

Impairment on technology investments

581

581

290

290

Total expenses

815,543

792,981

409,523

399,014

Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and discontinued operations

142,992

171,173

73,621

85,202

Allocation to Minority Interests:

Operating Partnership

(18,281
)
(13,784
)
(9,171
)
(7,343
)
Partially Owned Properties

(243
)
(1,325
)
(128
)
(519
)
Income (loss) from investments in unconsolidated entities

(1,744
)
233

(1,851
)
7

Net gain (loss) on sales of unconsolidated entities

4,675

5,246

3,463

(411
)
Income from continuing operations

127,399

161,543

65,934

76,936

Net gain on sales of discontinued operations

140,992

28,446

70,320

25,630

Discontinued operations, net

3,347

24,186

137

10,731

Net income

271,738

214,175

136,391

113,297

Preferred distributions

(48,417
)
(48,781
)
(24,237
)
(24,256
)

Net income available to Common Shares

$
223,321

$
165,394

$
112,154

$
89,041

Net income per share – basic

$
0.82

$
0.61

$
0.41

$
0.33

Net income per share – diluted

$
0.82

$
0.60

$
0.41

$
0.32

Weighted average Common Shares outstanding – basic

271,031

272,126

271,380

273,146

Weighted average Common Shares outstanding – diluted

298,405

298,422

299,217

299,494

Distributions declared per Common Share outstanding

$
0.865

$
0.865

$
0.4325

$
0.4325

See accompanying notes
3

Nine Months Ended
September 30,
Quarter Ended
September 30,

2002
2001
2002
2001

Comprehensive income:
Net income $ 302,836 $ 332,062 $ 88,661 $ 93,851
Other comprehensive income (loss)—derivative instruments:
Cumulative effect of change in accounting principle — (5,334 ) — —
Unrealized holding gains (losses) arising during the period (12,605 ) (20,451 ) (14,595 ) (17,055 )
Losses reclassified into earnings from other comprehensive income 615 397 230 171

Comprehensive income $ 290,846 $ 306,674 $ 74,296 $ 76,967

EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Amounts in thousands except per share data)
(Unaudited)

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003

2002

Comprehensive income:

Net income

$
271,738

$
214,175

$
136,391

$
113,297

Other comprehensive income (losses) – derivative and other instruments:

Unrealized holding gains (losses) arising during the period

1,879

1,085

1,742

(3,091
)
Equity in unrealized holding gains (losses) arising during the period – unconsolidated entities

2,759

905

1,565

(2,128
)
Losses reclassified into earnings from other comprehensive income

701

385

471

217

Comprehensive income

$
277,077

$
216,550

$
140,169

$
108,295

See accompanying notes
4

EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

Nine Months Ended
September 30,

2002
2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 302,836 $ 332,062
Adjustments to reconcile net income to net cash provided by operating activities:
Allocation to Minority Interests:
Operating Partnership 19,067 22,666
Partially Owned Properties 1,584 1,523
Cumulative effect of change in accounting principle — 1,270
Depreciation 353,206 349,313
Amortization of deferred financing costs 4,350 4,338
Amortization of discount on investment in mortgage notes — (2,256 )
Amortization of goodwill — 2,852
Amortization of discounts and premiums on debt (589 ) (1,424 )
Amortization of deferred settlements on interest rate protection agreements (238 ) 533
Impairment on corporate housing business 17,122 —
Impairment on furniture rental business — 60,000
Impairment on technology investments 872 7,968
Loss (income) from investments in unconsolidated entities 1,746 (1,885 )
Net gain on sales of discontinued operations (61,209 ) (99,793 )
Net loss (gain) on sales of unconsolidated entities 626 (339 )
Extraordinary items 468 22
Unrealized loss (gain) on interest rate protection agreements 383 (161 )
Book value of furniture sales and rental buyouts — 8,703
Compensation paid with Company Common Shares 15,158 12,298

Changes in assets and liabilities:

(Increase) in rents receivable (551 ) (2,069 )
Decrease in deposits—restricted 8,186 4,538
Additions to rental furniture — (17,827 )
Decrease (increase) in other assets 11,849 (17,124 )
Increase in accounts payable and accrued expenses 32,102 25,535
Increase in accrued interest payable 5,365 25,702
(Decrease) in rents received in advance and other liabilities (579 ) (7,628 )
(Decrease) increase in security deposits (1,037 ) 885

Net cash provided by operating activities 710,717 709,702

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in real estate—acquisitions (232,097 ) (242,366 )
Investment in real estate—development (86,115 ) (54,344 )
Improvements to real estate (110,291 ) (107,263 )
Additions to non-real estate property (5,562 ) (5,210 )
Interest capitalized for real estate under development (6,952 ) (6,651 )
Interest capitalized for unconsolidated entities under development (12,492 ) (14,381 )
Proceeds from disposition of real estate, net 291,368 452,060
Proceeds from disposition of furniture rental business 28,741 —
Proceeds from disposition of unconsolidated entities 34,796 359
Proceeds from refinancing of unconsolidated entities 4,375 5,691
Investments in unconsolidated entities (97,582 ) (69,195 )
Distributions from unconsolidated entities 31,021 26,311
Decrease in deposits on real estate acquisitions, net 42,046 98,582
Decrease (increase) in mortgage deposits 19,605 (4,167 )
Business combinations, net of cash acquired (658 ) (8,231 )
Consolidation of previously Unconsolidated Properties — 52,841
Investment in property and equipment — (2,185 )
Principal receipts on investment in mortgage notes — 61,419
Other investing activities, net 192 (58 )

Net cash (used for) provided by investing activities (99,605 ) 183,212

Six Months Ended June 30,

2003

2002

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
271,738

$
214,175

Adjustments to reconcile net income to net cash provided by operating activities:

Allocation to Minority Interests:

Operating Partnership

18,281

13,784

Partially Owned Properties

243

1,325

Depreciation

237,392

234,846

Amortization of deferred financing costs

3,110

2,988

Amortization of discounts and premiums on debt

(451
)
(424
)
Amortization of deferred settlements on derivative instruments

104

(176
)
Impairment on technology investments

581

581

Loss (income) from investments in unconsolidated entities

1,744

(233
)
Net gain on sales of discontinued operations

(140,992
)
(28,446
)
Net gain on sales of unconsolidated entities

(4,675
)
(5,246
)
Loss on debt extinguishments

380

468

Unrealized (gain) loss on derivative instruments

(83
)
483

Compensation paid with Company Common Shares

8,082

10,061

Changes in assets and liabilities:

Decrease (increase) in rents receivable

512

(227
)
(Increase) decrease in deposits – restricted

(404
)
12,108

(Increase) decrease in other assets

(21,912
)
3,898

Increase in accounts payable and accrued expenses

7,420

9,026

Increase in accrued interest payable

1,238

316

(Decrease) in rents received in advance and other liabilities

(10,792
)
(9,972
)
(Decrease) in security deposits

(686
)
(189
)
Net cash provided by operating activities

370,830

459,146

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in real estate – acquisitions

(243,004
)
(153,034
)
Investment in real estate – development/other

(4,676
)
(57,066
)
Improvements to real estate

(76,821
)
(66,509
)
Additions to non-real estate property

(1,552
)
(4,602
)
Interest capitalized for real estate under development

—

(4,369
)
Interest capitalized for unconsolidated entities under development

(10,923
)
(7,954
)
Proceeds from disposition of real estate, net

473,186

183,494

Proceeds from disposition of furniture rental business

—

28,741

Proceeds from disposition of unconsolidated entities

8,595

11,317

Investments in unconsolidated entities

(5,671
)
(42,441
)
Distributions from unconsolidated entities

14,557

21,483

(Increase) decrease in deposits on real estate acquisitions, net

(139,261
)
56,305

Decrease in mortgage deposits

5,848

14,651

Business combinations, net of cash acquired

(485
)
(461
)
Consolidation of previously Unconsolidated Properties

(697
)
—

Other investing activities, net

(45,912
)
192

Net cash (used for) investing activities

(26,816
)
(20,253
)
See accompanying notes
5

Nine Months Ended
September 30,

2002
2001

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs $ (10,495 ) $ (4,383 )
Mortgage notes payable:
Proceeds 104,572 59,312
Lump sum payoffs (283,681 ) (315,302 )
Scheduled principal repayments (24,351 ) (24,210 )
Prepayment premiums/fees (468 ) (201 )
Notes, net:
Proceeds 397,064 299,316
Lump sum payoffs (225,000 ) —
Scheduled principal repayments (4,669 ) (4,649 )
Line of credit:
Proceeds 368,500 436,491
Repayments (528,500 ) (791,953 )
(Payments) from settlement of interest rate protection agreements (1,534 ) (7,360 )
Proceeds from sale of Common Shares 8,425 7,277
Proceeds from sale of Preference Interests — 48,500
Proceeds from exercise of options 28,542 56,326
Redemption of Preferred Shares — (210,500 )
Payment of offering costs (170 ) (1,535 )
Distributions:
Common Shares (354,683 ) (218,632 )
Preferred Shares (57,919 ) (69,359 )
Preference Interests (15,185 ) (13,338 )
Junior Preference Units (243 ) (190 )
Minority Interests—Operating Partnership (29,859 ) (19,738 )
Minority Interests—Partially Owned Properties (11,568 ) (31,970 )
Principal receipts on employee notes, net 263 219

Net cash (used for) financing activities (640,959 ) (805,879 )

Net (decrease) increase in cash and cash equivalents

(29,847
)

87,035

Cash and cash equivalents, beginning of period 51,603 23,772

Cash and cash equivalents, end of period $ 21,756 $ 110,807

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest

$
270,885

$
270,849

Mortgage loans assumed through real estate acquisitions

$
14,000

$
45,918

Mortgage loans (assumed) by purchaser in real estate and furniture rental business dispositions

$
(8,840
)
$
(28,231
)

Transfers to real estate held for disposition

$
—

$
4,102

Mortgage loans recorded as a result of consolidation of previously Unconsolidated Properties

$
—

$
301,502

Net (assets) liabilities recorded as a result of consolidation of previously Unconsolidated Properties

$
—

$
(20,839
)

EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)

Six Months Ended June 30,

2003

2002

CASH FLOWS FROM FINANCING ACTIVITIES:

Loan and bond acquisition costs

$
(3,616
)
$
(9,124
)
Mortgage notes payable:

Proceeds

48,680

47,213

Lump sum payoffs

(161,914
)
(119,386
)
Scheduled principal repayments

(16,187
)
(16,322
)
Prepayment premiums/fees

(472
)
(468
)
Notes, net:

Proceeds

398,816

397,064

Lump sum payoffs

—

(225,000
)
Scheduled principal repayments

(195
)
(253
)
Line of credit:

Proceeds

172,000

292,000

Repayments

(312,000
)
(487,000
)
(Payments on) settlement of derivative instruments

(12,999
)
(1,533
)
Proceeds from sale of Common Shares

4,247

6,354

Proceeds from exercise of options

13,626

27,030

Proceeds from sale of Preferred Shares

150,000

—

Payment of offering/redemption costs

(5,099
)
(158
)
Redemption of Preferred Shares

(100,000
)
—

Distributions:

Common Shares

(235,081
)
(235,548
)
Preferred Shares

(37,861
)
(35,832
)
Preference Interests

(10,106
)
(10,132
)
Junior Preference Units

(162
)
(162
)
Minority Interests – Operating Partnership

(19,270
)
(20,095
)
Minority Interests – Partially Owned Properties

(2,458
)
(10,375
)
Principal receipts on employee notes, net

—

173

Net cash (used for) financing activities

(130,051
)
(401,554
)
Net increase in cash and cash equivalents

213,963

37,339

Cash and cash equivalents, beginning of period

29,875

51,603

Cash and cash equivalents, end of period

$
243,838

$
88,942

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest

$
175,009

$
184,216

Real estate acquisitions/dispositions:

Mortgage loans assumed

$
34,968

$
14,000

Valuation of OP Units issued

$
105

$
—

Mortgage loans (assumed) by purchaser

$
(9,075
)
$
(1,680
)

Consolidation of previously Unconsolidated Properties:

Mortgage loans assumed

$
26,500

$
—

Valuation of OP Units issued

$
4,231

$
—

Net (assets) liabilities recorded

$
1,633

$
—

See accompanying notes
6

EQUITY RESIDENTIAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
~~(Unaudited)~~
~~1.    Business~~(Unaudited)

1.                                      Business of the Company
Equity Residential ~~("EQR"~~(“EQR”), formed in March 1993, is a fully integrated real estate company engaged in the acquisition, ownership, management and operation of multifamily properties. ~~The Company~~EQR has elected to be taxed as a real estate investment trust ~~("REIT"~~(“REIT”).

EQR is the general partner of, and as of ~~September~~June 30, ~~2002~~2003 owned an approximate 92.4% ownership interest in, ERP Operating Limited Partnership, an Illinois limited partnership (the ~~"Operating Partnership"~~“Operating Partnership”). ~~The Company conducts substantially all of its business and owns substantially all of its assets through the Operating Partnership.~~ The Operating Partnership is, ~~in turn,~~ directly or indirectly, a partner, member or shareholder of numerous partnerships, limited liability companies and corporations which have been established primarily to own fee simple title to multifamily properties or to conduct property management activities and other businesses related to the ownership and operation of multifamily residential real estate. References to the ~~"Company"~~“Company” include EQR, the Operating Partnership and each of the partnerships, limited liability companies and corporations controlled by the Operating Partnership and/or EQR.

As of ~~September~~June 30, ~~2002,~~2003, the Company owned or had ~~interests~~investments in ~~a portfolio of 1,059 multifamily~~ 1,005properties ~~containing 227,426 apartment units located~~ in 3635 states consisting of ~~the following:~~216,644 units. An ownership breakdown includes:

Number of
Properties
Number of
Units
Wholly Owned Properties 934 197,354
Partially Owned Properties (Consolidated) 36 6,931
Unconsolidated Properties 89 23,141

Total Properties 1,059 227,426

Number of
Properties

Number of
Units

Wholly Owned Properties

884

187,043

Partially Owned Properties (Consolidated)

36

6,931

Unconsolidated Properties

85

22,670

Total Properties

1,005

216,644

2.                                      Summary of Significant Accounting Policies
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included. Certain reclassifications have been made to the prior period financial statements in order to conform to the current year presentation. Operating results for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2002.~~2003.

The balance sheet at December 31, ~~2001~~2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, including definition of capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the ~~Company's~~Company’s annual report on Form 10-K for the year ended December 31, ~~2001.~~2002.
7
Other
        ~~In June 2001, the FASB issued SFAS No. 141,~~~~Business Combinations~~. SFAS No. 141 requires companies to account for all business combinations using the purchase method of accounting. SFAS No. 141 is effective for fiscal years beginning after December 15, 2001. The Company adopted the standard effective January 1, 2002.
        ~~In June 2001, the FASB issued SFAS No. 142,~~~~Goodwill and Other Intangible Assets~~. SFAS No. 142 requires companies to eliminate the amortization of goodwill in favor of a periodic impairment based approach. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The Company adopted the standard effective January 1, 2002. See Note 16 for further discussion.
In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44 and 64,
7

Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145, among other items, rescinds the automatic classification of costs incurred on debt extinguishment as extraordinary charges. Instead, gains and losses from debt extinguishment should only be classified as extraordinary if they meet the ~~"unusual~~“unusual and infrequently ~~occurring"~~occurring” criteria outlined in APB No. 30. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The Company ~~will adopt~~adopted the standard effective January 1, 2003.
In January 2003, ~~but~~the FASB issued Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities. FIN No. 46 requires a variable interest entity to be consolidated if a company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The Company will adopt FIN No. 46 in the third quarter of 2003 prospectively using carryover basis. The Company has preliminarily determined its investment in real estate will increase approximately $1.3 billion, investment in unconsolidated entities will decrease approximately $494.5 million and mortgage notes payable will increase $833.5 million as a result of the consolidation of its previously unconsolidated stabilized development projects and projects under development (see Note 7). The Company does not ~~expect it to~~anticipate that the adoption of FIN No. 46 will have ~~a material impact~~any effect on ~~its financial condition and results of operations.~~net income.
3.    ~~Shareholders'~~                                      Shareholders’ Equity and Minority Interests

The following table presents the changes in the ~~Company's~~Company’s issued and outstanding Common Shares for the ~~nine~~six months ended ~~September~~June 30, ~~2002:~~2003:

~~2002~~2003
Common Shares outstanding at January 1,
~~271,621,374~~
271,095,481

Common Shares ~~Issued:~~Issued:

Conversion of Series E Preferred Shares
~~892,625~~
25,198
~~Conversion of Series G Preferred Shares~~ 70
~~Conversion of Series H Preferred Shares~~ ~~4,050~~
Employee Share Purchase Plan
~~278,655~~
203,498
~~Dividend Reinvestment—DRIP Plan~~ ~~41,407~~
~~Share Purchase—DRIP Plan~~ ~~31,347~~
Exercise of options
~~1,385,584~~
732,724
Restricted share grants, net
~~900,000~~
955,658
Conversion of OP Units
~~694,891~~
106,546
Common Shares outstanding at ~~September~~June 30,
~~275,850,003~~
273,119,105

The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for a partnership interest are collectively referred to as the ~~"Minority Interests—~~“Minority Interests – Operating ~~Partnership"~~Partnership”. The Minority ~~Interests—~~Interests – Operating Partnership held ~~22,537,901~~22,353,524 units of limited partnership interest ("(“OP ~~Units"~~Units”), representing a 7.6% interest in the Operating Partnership, at ~~September~~June 30, ~~2002.~~2003. Assuming conversion of all OP Units into Common Shares, total Common Shares outstanding at ~~September~~June 30, ~~2002~~2003 would have been ~~298,387,904.~~295,472,629. Subject to applicable securities law restrictions, the Minority ~~Interests—~~Interests – Operating Partnership may exchange their OP Units for EQR Common Shares on a one-for-one basis.
Net proceeds from the ~~Company's~~Company’s Common Share and Preferred Share (see definition below) offerings are contributed by the Company to the Operating Partnership. In return for those contributions, EQR receives a number of OP Units in the Operating Partnership equal to the number of Common Shares it has issued in the equity offering (or in the case of a preferred equity offering, a number of preference units in the Operating Partnership equal in number and having the same terms as the Preferred Shares issued in the equity offering). As a result, the net offering proceeds from Common Shares are allocated between shareholders’ equity and Minority Interests – Operating Partnership to account for the change in their respective percentage ownership of the underlying equity of the Operating Partnership.
During the six months ended June 30, 2003, the Operating Partnership issued 159,427 OP Units to various limited partners at an average price of $27.48 per unit. These OP Units are classified as Minority Interests – Operating Partnership in the accompanying consolidated balance sheets.
8

The ~~Company's~~Company’s declaration of trust authorizes the Company to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (the ~~"Preferred Shares"~~“Preferred Shares”), with specific rights, preferences and other attributes as the Board of Trustees may determine, which may include preferences, powers and rights that are senior to the rights of holders of the ~~Company's~~Company’s Common Shares.

The following table presents the ~~Company's~~Company’s issued and outstanding Preferred Shares as of ~~September~~June 30, ~~2002~~2003 and December 31, ~~2001:~~2002:

Amounts in thousands

Annual
Dividend
Rate per
Share (1)

September 30, 2002
December 31, 2001
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized:

9¹/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at September 30, 2002 and December 31, 2001

$
22.81252

$
125,000

$
125,000

9¹/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at September 30, 2002 and December 31, 2001

$
22.81252

115,000

115,000

8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at September 30, 2002 and December 31, 2001

$
21.50000

175,000

175,000

7.00% Series E Cumulative Convertible Preferred; liquidation value $25 per share; 2,563,614 and 3,365,794 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively

$
1.75000

64,090

84,145

7¹/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,692 and 1,264,700 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively

$
18.12500

316,173

316,175

7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 51,228 and 54,027 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively

$
1.75000

1,281

1,351

8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at September 30, 2002 and December 31, 2001

$
4.14500

50,000

50,000

7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 4,000,000 shares issued and outstanding at September 30, 2002 and December 31, 2001

$
1.90625

100,000

100,000

$
946,544

$
966,671

Annual
Dividend
Rate per
Share (1)

Amounts in thousands

June
30, 2003

December
31, 2002

Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized:

9 1/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at June 30, 2003 and December 31, 2002

$
22.81252

$
125,000

$
125,000

9 1/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at June 30, 2003 and December 31, 2002

$
22.81252

115,000

115,000

8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at June 30, 2003 and December 31, 2002

$
21.50

175,000

175,000

7.00% Series E Cumulative Convertible Preferred; liquidation value $25 per share; 2,525,464 and 2,548,114 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively

$
1.75

63,137

63,703

7 1/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,692 shares issued and outstanding at June 30, 2003 and December 31, 2002

$
18.125

316,173

316,173

7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 51,228 shares issued and outstanding at June 30, 2003 and December 31, 2002

$
1.75

1,281

1,281

8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at June 30, 2003 and December 31, 2002

$
4.145

50,000

50,000

7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 0 and 4,000,000 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively

(2
)
—

100,000

6.48% Series N Cumulative Redeemable Preferred; liquidation value $250 per share; 600,000 and 0 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively (3)

$
16.20

150,000

—

$
995,591

$
946,157

(1)
Dividends on all series of Preferred Shares are payable quarterly at various pay dates. Dividend rates listed for Series B, C, D, G and GN are Preferred Share rates and the equivalent Depositary Share annual dividend rates are $2.281252, $2.281252, $2.15, $1.8125 and ~~$1.8125,~~$1.62, respectively.

9

(2)          On June 19, 2003, the Company redeemed all of its outstanding Series L Cumulative Redeemable Preferred Shares at its liquidation value for total cash consideration of $100.0 million.
(3)          On June 19, 2003, the Company issued 600,000 Series N Cumulative Redeemable Preferred Shares in a public offering. The Company received $145.3 million in net proceeds from this offering after payment of the underwriters’ fee.
The liquidation value of the Preference Interests and the Junior Preference Units ~~(see~~(both as defined below) are included as separate components of Minority Interests in the consolidated balance sheets and the distributions incurred are included in preferred distributions in the consolidated statements of operations.
9
The following table presents the issued and outstanding Preference Interests as of ~~September~~June 30, ~~2002~~2003 and December 31, ~~2001:~~2002:

Amounts in thousands

Annual
Dividend
Rate Per
Unit (1)

September 30, 2002
December 31, 2001
Preference Interests:

8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
4.0000

$
40,000

$
40,000

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,100,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
4.2500

55,000

55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
4.2500

11,000

11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
4.1875

21,000

21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
4.2500

50,000

50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
4.1875

9,000

9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
3.9375

25,500

25,500

7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
3.8125

9,500

9,500

7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 270,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
3.8125

13,500

13,500

7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at September 30, 2002 and December 31, 2001

$
3.8125

11,500

11,500

$
246,000

$
246,000

Annual
Dividend
Rate per
Unit (1)

Amounts in thousands

June
30, 2003

December
31, 2002

Preference Interests:

8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
4.00

$
40,000

$
40,000

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,100,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
4.25

55,000

55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
4.25

11,000

11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
4.1875

21,000

21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
4.25

50,000

50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
4.1875

9,000

9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
3.9375

25,500

25,500

7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
3.8125

9,500

9,500

7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 270,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
3.8125

13,500

13,500

7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at June 30, 2003 and December 31, 2002

$
3.8125

11,500

11,500

$
246,000

$
246,000

10

(1)
Dividends on all series of Preference Interests are payable quarterly on March 25^th, June 25^th, September 25^th,and December 25^thof each year.

The following table presents the Operating ~~Partnership's~~Partnership’s issued and outstanding Junior Convertible Preference Units (the ~~"Junior~~“Junior Preference ~~Units"~~Units”) as of ~~September~~June 30, ~~2002~~2003 and December 31, ~~2001:~~2002:
10

Annual
Dividend
Rate per
Unit(1)

Amounts in thousands

June
30, 2003

December
31, 2002

Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 56,616 units issued and outstanding at June 30, 2003 and December 31, 2002

$
5.46934

$
5,662

$
5,662

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at June 30, 2003 and December 31, 2002

$
2.00

184

184

$
5,846

$
5,846

Amounts in thousands

Annual
Dividend
Rate per
Unit (1)

September 30, 2002
December 31, 2001
Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 56,616 units issued and outstanding at September 30, 2002 and December 31, 2001

$
5.469344

$
5,662

$
5,662

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at September 30, 2002 and December 31, 2001

$
2.000000

184

184

$
5,846

$
5,846

(1)
Dividends on both series of Junior Preference Units are payable quarterly at various pay dates.
4.Real Estate Acquisitions

During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the Company acquired the entire equity interest in the ~~ten~~ sixproperties listed below from unaffiliated parties, and ~~one~~two additional ~~unit~~units at an existing property, for a total purchase price of ~~$245.4~~$277.7 million.
Date
Acquired
Property
Location
Number of
Units
Acquisition Price
(in thousands)
03/28/02 Isles at Sawgrass Sunrise, FL 368 $ 26,000
04/24/02 Center Pointe Beaverton, OR 264 19,100
04/30/02 Mira Flores Palm Beach Gardens, FL 352 29,250
05/15/02 Gramercy Park Houston, TX 384 26,000
05/31/02 Enclave at Winston Park Coconut Creek, FL 278 25,450
05/31/02 St. Andrews at Winston Park Coconut Creek, FL 284 25,450
06/21/02 Westside Villas VII Los Angeles, CA 53 15,250
07/17/02 Savannah Lakes Boynton Beach, FL 466 37,400
08/01/02 Cove at Fisher's Landing Vancouver, WA 253 17,800
08/08/02 Avon Place (condo unit) Avon, CT 1 69
08/09/02 Montevista Dallas, TX 350 23,675

3,053 $ 245,444

Date
Acquired

Property

Location

Number
of Units

Acquisition Price
(in thousands)

01/30/03

The Reserve @ Eisenhower

Alexandria, VA

226

$
41,000

02/14/03

Artisan Square

Northridge, CA

140

27,466

03/05/03

LaSalle (1)

Beaverton, OR

554

43,000

05/01/03

Gateway at Malden Center (2)

Malden, MA

203

34,900

06/17/03

Mill Creek

Milpitas, CA

516

70,000

06/30/03

Carlyle Mill

Alexandria, VA

317

61,200

Various

Rivers Bend (Condo Units)

Windsor, CT

2

125

1,958

$
277,691

(1)          Includes 8,167 square feet of retail space.
(2)          Includes 36,326 square feet of office space and a 324-space parking garage.
On May 8, 2003, the Company acquired the remaining third party equity interests it did not previously own in Liberty Park, a 202-unit property located in Braintree, Massachusetts. This property was accounted for under the equity method of accounting and subsequent to the purchase was consolidated. The Company recorded $33.0 million in investment in real estate at carryover basis and the following:
•                  Assumed $26.5 million in mortgage debt;
•                  Issued 153,851 OP Units having a value of $4.2 million;
•                  Paid cash of $0.7 million; and
•                  Assumed $1.6 million of other liabilities net of other assets acquired.
11

5.                      ��               Real Estate Dispositions

During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the Company disposed of the ~~thirty-five~~forty-four properties listed below to unaffiliated parties. The Company recognized a net gain on sales of discontinued operations of approximately ~~$61.2~~$141.0 million and a net ~~loss~~gain on sales of unconsolidated entities of approximately ~~$0.6~~$4.7 million.
11
Date
Disposed

Property

Location

Number
of Units

Disposition
Price
(in thousands)

01/14/03

Strawberry Place

Plant City, FL

55

$
1,400

01/14/03

Smoketree Polo Club

Indio, CA

288

18,900

01/29/03

Amberwood I

Lake City, FL

50

1,175

01/30/03

Emerald Place

Bermuda Dunes, CA

240

20,125

01/30/03

Rolido Parque

Houston, TX

369

14,660

02/27/03

Fox Hill Commons

Vernon, CT

74

4,700

02/27/03

The Landings

Winter Haven, FL

60

1,475

02/27/03

Morningside

Titusville, FL

183

3,980

03/04/03

Colony Woods

Birmingham, AL

414

25,000

03/04/03

Hearthstone

San Antonio, TX

252

7,700

03/04/03

Northgate Village

San Antonio, TX

264

10,150

03/19/03

Lincoln Green I, II & III

San Antonio, TX

680

24,900

03/20/03

Meadows on the Lake

Birmingham, AL

200

10,900

03/20/03

Meadows in the Park

Birmingham, AL

200

10,900

03/20/03

Shoal Run

Birmingham, AL

276

14,350

03/31/03

Colony Place

Fort Myers, FL

300

20,600

04/08/03

Mallgate (1)

Louisville, KY

540

15,500

04/15/03

Summit Chase

Coral Springs, FL

140

8,875

04/16/03

Bayside

Sebring, FL

59

885

04/30/03

Essex Place II (Vacant Land)

Tampa, FL

—

575

05/08/03

Pueblo Villas

Albuquerque, NM

232

9,250

05/14/03

Emerald Bay

Winter Park, FL

432

17,200

05/16/03

Meadowood

Flatwoods, KY

52

975

05/29/03

Spicewood Springs

Jacksonville, FL

512

28,000

05/30/03

Princeton Square

Jacksonville, FL

288

16,750

05/30/03

Boulder Creek

Wilsonville, OR

296

16,700

05/30/03

Bridge Creek

Wilsonville, OR

315

18,100

05/30/03

Settlers Point/Brookfield

Salt Lake City, UT

416

21,500

05/30/03

Ridgewood

Russellville, KY

52

—

06/04/03

Lake Point

Charlotte, NC

296

12,401

06/05/03

Clearlake Pines II

Cocoa, FL

52

1,392

06/05/03

Sky Pines I & II

Orlando, FL

140

3,694

06/05/03

Brandywine East

Winter Haven, FL

38

884

06/05/03

Woodland I & II

Orlando, FL

169

5,175

06/12/03

Parkville

Parkersburg, WV

49

1,063

06/12/03

Cedarwood I

Belpre, OH

44

889

06/24/03

Greenwood Village

Tempe, AZ

270

14,600

06/25/03

Woodbine

Portsmouth, OH

41

660

06/26/03

Laurel Gardens

Coral Springs, FL

384

34,550

06/27/03

Crystal Creek

Phoenix, AZ

273

12,775

06/30/03

Harbor Pointe

Milwaukee, WI

595

27,800

06/30/03

Calais

Arlington, TX

264

12,500

12
Date
Disposed
Property
Location
Number
of Units
Disposition Price
(in thousands)
01/17/02 Ravenwood Mauldin, SC 82 $ 2,425
01/24/02 Larkspur I & II Moraine, OH 45 899
01/31/02 Springwood II Austintown, OH 43 900
02/21/02 Scottsdale Courtyards Scottsdale, AZ 274 26,500
04/11/02 Applegate Lordstown, OH 39 723
04/11/02 Applerun Warren, OH 48 1,054
04/11/02 Brunswick Cortland, OH 59 1,424
05/01/02 The Landings Memphis, TN 292 10,300
05/03/02 Waterbury Clarksville, TN 54 1,385
05/09/02 Arboretum Tucson, AZ 496 25,000
05/09/02 Orange Grove Village Tucson, AZ 400 17,400
05/09/02 Village at Tanque Verde Tucson, AZ 217 9,100
05/14/02 Canyon Crest Views Riverside, CA 178 20,450
05/14/02 Merrimac Woods Costa Mesa, CA 123 12,950
05/14/02 Sierra Canyon Santa Clarita, CA 232 23,500
05/15/02 Meadowood Wellsville, OH 40 812
05/23/02 Pine Meadow Greensboro, NC 204 7,550
05/23/02 Palms at South Shore League City, TX 240 12,850
05/31/02 California Gardens Jacksonville, FL 71 1,468
05/31/02 Westcreek Jacksonville, FL 86 2,282
06/19/02 Apple Run Hillsdale, MI 39 1,047
07/02/02 Cedar Ridge Arlington, TX 121 5,500
07/02/02 Fielder Crossing Arlington, TX 119 4,100
07/09/02 Vacant Land Detroit, MI — 10
07/11/02 Stonehenge Tecumseh, MI 48 1,238
07/11/02 Ashgrove Marshall, MI 51 1,314
07/12/02 Mill Village Randolph, MA 311 31,800
07/18/02 Meadowood I Jackson, MI 47 1,450
07/24/02 Mountain Run Albuquerque, NM 472 21,500
07/30/02 Celebration at Westchase Houston, TX 367 16,150
07/30/02 Pleasant Ridge Arlington, TX 63 2,605
07/31/02 Cedargate I & II Bowling Green, KY 117 3,020
08/15/02 The Cedars Charlotte, NC 360 14,800
08/29/02 Bourbon Square (Retail) Palatine, IL — 1,200
09/30/02 River Bend Tampa, FL 296 11,200
Various Four Lakes Condo Units Lisle, IL 77 8,191

Wholly Owned Properties 5,711 304,097

01/31/02 Mount Laurel Crossing* Mt. Laurel, NJ 296 11,317
04/23/02 Foxton* Seymour, IN 39 —
08/13/02 Chase Knolls* Los Angeles, CA — 23,479

Unconsolidated Properties 335 34,796

Total 6,046 $ 338,893

Date
Disposed

Property

Location

Number
of Units

Disposition
Price
(in thousands)

Various

Four Lakes Condo Units

Lisle, IL

75

$
9,168

Various

Pointe East Condo Units

Redmond, WA

17

3,177

Various

Squaw Peak Condo Units

Phoenix, AZ

39

4,125

Wholly Owned Properties

9,985

490,078

02/28/03

Kings Crossing I (2)

Jacksonville, FL

69

963

05/14/03

Culbreath Key (2)

Tampa, FL

254

7,382

Unconsolidated Properties

323

8,345

Total

10,308

$
498,423

*
~~Represents~~
(1)          The Company was leasing the ~~Company's~~land under a long-term operating ground lease.
(2)          Disposition price listed represents the Company’s share of the net disposition proceeds.
Culbreath Key was sold for $26.4 million with a portion of the net sales proceeds used to payoff the mortgage debt of $16.2 million.
6.                                      Commitments to Acquire/Dispose of Real Estate

As of ~~September~~June 30, ~~2002,~~2003, in addition to the property that was subsequently acquired as discussed in Note 19, the Company had entered into separate agreements to acquire ~~two~~four multifamily properties containing ~~581~~1,205 units from unaffiliated parties. The Company expects a combined
12
purchase price of approximately ~~$44.5~~$195.4 million, including the assumption of mortgage ~~indebtedness~~debt of approximately ~~$18.4~~$54.8 million.

As of ~~September~~June 30, ~~2002,~~2003, in addition to the properties that were subsequently disposed of as discussed in Note ~~18,~~19, the Company had entered into separate agreements to dispose of ~~seventeen~~twenty-three multifamily properties containing ~~3,338~~ 6,426units to unaffiliated parties. The Company expects a combined disposition price of approximately ~~$148.9~~$341.8 million.
The closings of these pending transactions are subject to certain contingencies and ~~conditions;~~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 paragraphs.
7.                                      Investments in Unconsolidated Entities

The Company has ~~entered into~~co-invested in various ~~agreements~~properties with unrelated third ~~party companies.~~parties. The following table summarizes the ~~Company's~~Company’s investments in unconsolidated entities as of ~~September~~June 30, ~~2002~~2003 (amounts in thousands except for project and unit amounts):

Institutional
Joint
Ventures
Stabilized
Development
Projects(1)
Projects
Under
Development
Lexford/
Other
Totals

Total projects 45 13 15 26 99 (2)

Total units 10,846 4,116 4,445 3,313 22,720 (2)

EQR's percentage ownership of outstanding debt 25.0 % 97.4 % 100.0 % 21.1 %

EQR's share of outstanding debt(4)

$
121,200

$
335,810

$
317,898
(3)
$
14,702

$
789,610

Institutional
Joint
Ventures

Stabilized
Development
Projects (1)

Projects
Under
Development

Lexford/
Other

Totals

Total projects

45

10

18

22

95
(2)

Total units

10,846

3,349

4,799

2,704

21,698
(2)

Company’s percentage share of outstanding debt

25.0
%
100.0
%
100.0
%
11.1
%

Company’s share of outstanding debt (4)

$
121,200

$
252,101

$
581,422
(3)
$
5,361

$
960,084

13

(1)
The Company determines a project to be stabilized once it has maintained an average physical occupancy of 90% or more for a three-month period.

(2)
Includes eleven projects under development ~~consisting of 3,216~~containing 2,827 units, which are not included in the ~~Company's~~Company’s property/unit counts at ~~September~~June 30, ~~2002.~~2003.   Totals ~~also~~ exclude Fort Lewis Military Housing consisting of 1one property and ~~3,637 units.~~

3,799 units, which is not accounted for under the equity method of accounting. The Fort Lewis Military Housing is included in the Company’s property/unit counts at June 30, 2003.
(3)
A total of ~~$609.4~~$790.5 million is available for funding under this construction debt, of which ~~$317.9~~$581.4 million was funded and outstanding at ~~September~~June 30, ~~2002.~~

2003.
(4)
As of ~~November 4, 2002, EQR~~August 8, 2003, the Company has funded ~~$54.5~~$51.0 million as additional collateral on selected debt (see Note 8). All remaining debt is non-recourse to ~~EQR.~~
the Company.

Investments in unconsolidated entities include the Unconsolidated Properties as well as various development properties under construction or pending construction. The Company does not consolidate these entities as it does not have sole control of major decisions (such as sale and/or financing/refinancing). The Company's common equity ownership interests in these entities range from 4.5% to 57.0% at September 30, 2002.
These investments are accounted for utilizing the equity method of accounting. Under the equity method of accounting, the net equity investment of the Company is reflected on the consolidated balance
13
sheets and after the project is completed, the consolidated statements of operations include the ~~Company's~~Company’s share of net income or loss from the unconsolidated entity. Prior to the project being completed, the Company capitalizes interest on its equity contribution in accordance with the provisions of SFAS No. 58,Capitalization of Interest Cost in Financial Statements That Include Investments Accounted for by the Equity Method. During the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, the Company capitalized ~~$12.5~~$10.9 million and ~~$14.4~~$8.0 million, respectively, in interest cost related to its unconsolidated development projects (which reduced interest expense incurred in the consolidated statements of operations).

The Company generally contributes between 25% and 35% of the project cost of the unconsolidated projects under development, with the remaining cost financed through third-party construction mortgages.
~~8.    Deposits—Restricted~~
See Note 2 for further discussion regarding the adoption of FIN No. 46 and its effect on the Company’s unconsolidated development projects.

8.                                      Deposits - - Restricted
As of ~~September~~June 30, ~~2002,~~2003, deposits-restricted totaled ~~$168.1~~$280.9 million and primarily included the following:
•
~~deposits~~                  Deposits in the amount of ~~$54.5~~$51.0 million held in third party escrow accounts to provide collateral for third party construction financing in connection with unconsolidated development projects;

•
~~approximately $47.5~~                  Approximately $163.1 million in tax-deferred (1031) exchange proceeds; and

•
~~approximately $66.1~~                  Approximately $66.8 million for resident security, utility, and other deposits.
9.                                      Mortgage Notes Payable

As of ~~September~~June 30, ~~2002,~~2003, the Company had outstanding mortgage indebtedness of approximately ~~$3.1~~$2.9 billion.

During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the Company:
•
~~repaid $308.0~~                  Repaid $178.1 million of mortgage loans;

•
~~assumed $14.0~~                  Assumed $61.5 million of mortgage debt on ~~one property~~certain properties in connection with ~~its acquisition;~~

their acquisitions and/or consolidation;
•
~~disposed~~                  Obtained $48.7 million of ~~$8.8~~mortgage loans on certain properties; and
14

•                  Relinquished $9.1 million of mortgage debt assumed by the purchaser in connection with the disposition of certain ~~properties and the furniture rental business;~~

•
~~obtained $74.6 million in construction loans on certain properties; and~~

•
~~obtained $30.0 million of mortgage loans on certain~~ properties.

As of ~~September~~June 30, ~~2002,~~2003, scheduled maturities for the ~~Company's~~Company’s outstanding mortgage indebtedness were at various dates through October 1, 2033. ~~The~~At June 30, 2003, the interest rate range on the ~~Company's~~Company’s mortgage debt was ~~1.55%~~0.90% to 12.465% ~~at September 30, 2002.~~. During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the weighted average interest rate on the Company’s mortgage debt was ~~6.37%~~5.96%.
10.                               Notes

As of ~~September~~June 30, ~~2002,~~2003, the Company had outstanding unsecured notes of approximately ~~$2.4 billion.~~$2.9 billion net of a $6.8 million discount and including a $7.9million premium.

On June 5, 2003, the Operating Partnership filed a Form S-3 registration statement with the SEC to register $2.0 billion of debt securities. The SEC declared this registration statement effective on June 11, 2003. In addition, the Operating Partnership carried over $280.0 million related to the registration statement effective on September 8, 2000. As of June 30, 2003, $2.28 billion remained available for issuance under this registration statement.
During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the Company:
•
~~issued~~                  Issued $400.0 million of ten-year ~~6.625% fixed~~ 5.20% fixed–rate public notes, receiving net proceeds of ~~$394.5 million;~~

•
~~repaid $100.0 million of 9.375% fixed rate public notes at maturity;~~

•
~~repaid $125.0 million of 7.95% fixed rate pubic notes at maturity; and~~

•
~~repaid $4.7 million of other unsecured notes.~~
14$397.5 million.

As of ~~September~~June 30, ~~2002,~~2003, scheduled maturities for the ~~Company's~~Company’s outstanding notes ~~are~~were at various dates through 2029. ~~The~~At June 30, 2003, the interest rate range on the ~~Company's~~Company’s notes was 4.75% to 7.75% ~~at September 30, 2002.~~. During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the weighted average interest rate on the Company’s notes was ~~6.47%~~6.52%.
11.                               Line of Credit
~~On May 30, 2002, the~~
The Company ~~obtained~~has a ~~new three-year $700.0 million unsecured~~ revolving credit facility ~~maturing May 29, 2005. The new line~~with potential borrowings of ~~credit replaced the Company's~~up to $700.0 million unsecured revolving credit facility that was scheduled to expire in August 2002. The prior existing revolving credit facility was terminated upon the closing of the new facility. Advances under the new credit facility bear interest at variable rates based upon LIBOR at various interest periods, plus a spread dependent upon the Operating Partnership's credit rating, or based upon bids received from the lending group.million. As of ~~September~~June 30, ~~2002, $35.0 million was~~2003, no amounts were outstanding and ~~$83.3~~$50.2 million was restricted (dedicated to support letters of credit and not available for borrowing) on the line of credit. During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the weighted average interest rate ~~on borrowings under~~was 1.85%. EQR has guaranteed the ~~former and new lines~~Operating Partnership’s line of credit ~~was 2.49%.~~up to the maximum amount and for the full term of the facility.
12.                               Derivative Instruments ~~and Hedging Activities~~

The following table summarizes the ~~Company's~~ consolidated derivative instruments ~~and hedging activities~~ at ~~September~~June 30, ~~2002 (amounts~~2003 (dollar amounts are in thousands):

Cash Flow
Hedges
Fair Value
Hedges
Forward
Starting
Swaps
Offsetting
Receive
Floating
Swaps/Caps
Offsetting
Pay
Floating
Swaps/Caps
Current Notional Balance $ 400,000 $ 220,000 $ 250,000 $ 255,117 $ 255,117
Lowest Possible Notional $ 400,000 $ 220,000 $ 250,000 $ 251,410 $ 251,410
Highest Possible Notional $ 400,000 $ 220,000 $ 250,000 $ 431,444 $ 431,444
Lowest Interest Rate 3.65125% 5.33250% 5.06375% 4.52800% 4.45800%
Highest Interest Rate 5.81000% 7.25000% 5.42600% 6.00000% 6.00000%
Earliest Maturity Date 2003 2005 2013 2003 2003
Latest Maturity Date 2005 2011 2013 2007 2007
Estimated Asset (Liability) Fair Value $ (16,244 ) $ 16,567 $ (9,174 ) $ (4,708 ) $ 4,529

Cash Flow
Hedges

Fair Value Hedges

Forward
Starting
Swaps

Interest
Rate Caps

Offsetting
Receive
Floating
Swaps/Caps

Offsetting
Pay
Floating
Swaps/Caps

Current Notional Balance

$
400,000

$
120,000

$
150,000

$
37,000

$
255,120

$
255,120

Lowest Possible Notional

$
400,000

$
120,000

$
150,000

$
37,000

$
251,410

$
251,410

Highest Possible Notional

$
400,000

$
120,000

$
150,000

$
37,000

$
431,444

$
431,444

Lowest Interest Rate

3.65
%
7.25
%
4.34
%
6.50
%
4.53
%
4.46
%
Highest Interest Rate

5.81
%
7.25
%
4.48
%
6.50
%
6.00
%
6.00
%
Earliest Maturity Date

2003

2005

2014

2004

2003

2003

Latest Maturity Date

2005

2005

2014

2004

2007

2007

Estimated Asset (Liability) Fair Value

$
(9,771
)
$
8,877

$
(2,413
)
$
—

$
(1,136
)
$
1,096

15

During the six months ended June 30, 2003, the Company paid approximately $13.0 million to terminate eight forward starting interest rate swaps in conjunction with the issuance of $400.0 million of ten-year unsecured notes. The $13.0 million payment has been deferred and will be recognized as additional interest expense over the ten-year life of the unsecured notes.
At ~~September~~June 30, ~~2002,~~2003, certain unconsolidated development partnerships in which the Company invested had entered into swaps to hedge the interest rate risk exposure on unconsolidated floating rate construction mortgage loans. The Company has recorded its proportionate share of these hedges on its consolidated balance sheets. These swaps have been designated as cash flow hedges with a current aggregate notional amount of ~~$427.7~~ $338.2million (notional amounts range from ~~$166.5~~ $77.1million to ~~$552.4~~ $391.2million over the terms of the swaps) at interest rates ranging from ~~2.25%~~1.78% to 6.94% maturing at various dates ranging from 2003 to 2005 with a net liability fair value of ~~$15.0~~ $10.4million. During the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, the Company recognized an unrealized ~~loss~~gain of $0.8 million due to ineffectiveness of certain of these unconsolidated development derivatives (included in income ~~(loss)~~ from investments in unconsolidated entities).

On ~~September~~June 30, ~~2002,~~2003, the net derivative instruments were reported at their fair value as other liabilities of approximately ~~$9.0~~$3.3 million and as a reduction to investments in unconsolidated entities of approximately ~~$15.0~~$10.4 million. As of ~~September~~June 30, ~~2002,~~2003, there were approximately ~~$44.2~~$39.0 million in deferred losses, net, included in accumulated other comprehensive loss. Based on the estimated fair values of the net derivative instruments at ~~September~~June 30, ~~2002,~~2003, the Company may recognize an estimated ~~$19.3~~$14.8 million of
15
accumulated other comprehensive loss as additional interest expense during the twelve months ending ~~September~~June 30, ~~2003,~~2004, of which ~~$8.0~~$7.3 million is related to the unconsolidated development partnerships.
13.Calculation of Net Income Per Weighted Average Common Share
The following tables set forth the computation of net income per ~~share—~~share – basic and net income per ~~share—~~share – diluted:

Nine Months Ended
September 30,
Quarter Ended
September 30,

2002
2001
2002
2001

(Amounts in thousands except per share amounts)

Numerator:
Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items, cumulative effect of change in accounting principle and preferred distributions $ 258,303 $ 304,767 $ 68,945 $ 103,221

Allocation to Minority Interests:

Operating Partnership (19,067 ) (22,666 ) (5,283 ) (6,192 )
Partially Owned Properties (1,584 ) (1,523 ) (259 ) (1,285 )
Income (loss) from investments in unconsolidated entities (1,746 ) 1,885 (1,979 ) 925
Preferred distributions (72,969 ) (81,759 ) (24,188 ) (24,340 )

Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle

162,937

200,704

37,236

72,329

Net gain (loss) on sales of unconsolidated entities

(626
)

339

(5,872
)

—

Net gain on sales of discontinued operations 61,209 99,793 32,763 53,567
Discontinued operations, net 6,815 (49,241 ) 346 (56,257 )
Extraordinary items (468 ) (22 ) — (128 )
Cumulative effect of change in accounting principle — (1,270 ) — —

Numerator for net income per share—basic 229,867 250,303 64,473 69,511

Effect of dilutive securities:

Allocation to Minority Interests—Operating Partnership 19,067 22,666 5,283 6,192
Distributions on convertible preferred shares/units — 74 — —

Numerator for net income per share—diluted $ 248,934 $ 273,043 $ 69,756 $ 75,703

Denominator:

Denominator for net income per share—basic 272,738 266,614 273,943 268,253

Effect of dilutive securities:

OP Units 22,745 24,189 22,576 23,960
Convertible preferred shares/units — 82 — —
Share options/restricted shares 3,207 3,776 2,538 4,178

Denominator for net income per share—diluted 298,690 294,661 299,057 296,391

Net income per share—basic

$
0.84

$
0.94

$
0.24

$
0.26

Net income per share—diluted

$
0.83

$
0.93

$
0.23

$
0.26

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003

2002

(Amounts in thousands except per share amounts)

Numerator:

Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations and preferred distributions

$
142,992

$
171,173

$
73,621

$
85,202

Allocation to Minority Interests:

Operating Partnership

(18,281
)
(13,784
)
(9,171
)
(7,343
)
Partially Owned Properties

(243
)
(1,325
)
(128
)
(519
)
Income (loss) from investments in unconsolidated entities

(1,744
)
233

(1,851
)
7

Net gain (loss) on sales of unconsolidated entities

4,675

5,246

3,463

(411
)
Preferred distributions

(48,417
)
(48,781
)
(24,237
)
(24,256
)
Income from continuing operations available to Common Shares

78,982

112,762

41,697

52,680

Net gain on sales of discontinued operations

140,992

28,446

70,320

25,630

Discontinued operations, net

3,347

24,186

137

10,731

Numerator for net income per share – basic

223,321

165,394

112,154

89,041

Effect of dilutive securities:

Allocation to Minority Interests – Operating Partnership

18,281

13,784

9,171

7,343

Distributions on convertible preferred shares/units

2,425

—

1,211

22

Numerator for net income per share – diluted

$
244,027

$
179,178

$
122,536

$
96,406

16

Nine Months Ended
September 30,

Quarter Ended
September 30,

2002
2001
2002
2001

(Amounts in thousands except per share amounts)

Net income per share—basic:
Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle per share—basic $ 0.61 $ 0.77 $ 0.15 $ 0.27
Net gain (loss) on sales of unconsolidated entities — — (0.02 ) —
Net gain on sales of discontinued operations 0.21 0.34 0.11 0.18
Discontinued operations, net 0.02 (0.17 ) — (0.19 )
Extraordinary items — — — —
Cumulative effect of change in accounting principle — — — —

Net income per share—basic $ 0.84 $ 0.94 $ 0.24 $ 0.26

Net income per share—diluted:

Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle per share—diluted $ 0.61 $ 0.76 $ 0.14 $ 0.27
Net gain (loss) on sales of unconsolidated entities — — (0.02 ) —
Net gain on sales of discontinued operations 0.20 0.34 0.11 0.18
Discontinued operations, net 0.02 (0.17 ) — (0.19 )
Extraordinary items — — — —
Cumulative effect of change in accounting principle — — — —

Net income per share—diluted $ 0.83 $ 0.93 $ 0.23 $ 0.26

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003
��
2002

(Amounts in thousands except per share amounts)

Denominator:

Denominator for net income per share – basic

271,031

272,126

271,380

273,146

Effect of dilutive securities:

OP Units

22,294

22,831

22,316

22,653

Convertible preferred shares/units

3,136

—

3,133

75

Share options/restricted shares

1,944

3,465

2,388

3,620

Denominator for net income per share – diluted

298,405

298,422

299,217

299,494

Net income per share – basic

$
0.82

$
0.61

$
0.41

$
0.33

Net income per share – diluted

$
0.82

$
0.60

$
0.41

$
0.32

Net income per share – basic (1):

Income from continuing operations available to Common Shares

$
0.33

$
0.43

$
0.17

$
0.20

Net gain on sales of discontinued operations

0.48

0.10

0.24

0.09

Discontinued operations, net

0.01

0.08

—

0.04

Net income per share – basic

$
0.82

$
0.61

$
0.41

$
0.33

Net income per share – diluted:

Income from continuing operations available to Common Shares

$
0.34

$
0.43

$
0.17

$
0.20

Net gain on sales of discontinued operations

0.47

0.09

0.24

0.08

Discontinued operations, net

0.01

0.08

—

0.04

Net income per share – diluted

$
0.82

$
0.60

$
0.41

$
0.32

(1)          All net income per share – basic amounts have been calculated considering an allocation for Minority Interests. The following amounts were used in the calculation of the individual components of net income per share – basic for the periods presented (all amounts are net of an allocation of Minority Interests in the Operating Partnership):

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003

2002

(Amounts in thousands)

Income from continuing operations available to Common Shares

$
89,908

$
116,809

$
47,023

$
55,451

Net gain on sales of discontinued operations

130,319

26,259

65,004

23,677

Discontinued operations, net

3,094

22,326

127

9,913

Numerator for net income per share – basic

$
223,321

$
165,394

$
112,154

$
89,041

Convertible preferred ~~shares/~~share/units that could be converted into ~~15,461,855~~11,807,095 and ~~15,322,607~~15,648,034 weighted average Common Shares for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, respectively, and ~~15,095,576~~11,807,095 and ~~15,626,902~~15,369,255 weighted average Common Shares for the quarters ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.
On October 11, 2001, the Company effected a two-for-one split of its Common Shares and OP Units to shareholders and unitholders of record as of September 21, 2001. All per share and OP Unit data and numbers of Common Shares and OP Units have been retroactively adjusted to reflect the Common Share and OP Unit split.
14.                               Discontinued Operations
        ~~In August 2001, the FASB issued SFAS No. 144,~~~~Accounting for the Impairment or Disposal of Long-Lived Assets~~~~, which is effective for fiscal years beginning after December 15, 2001.~~
The Company ~~adopted~~has presented separately as discontinued operations in all periods the ~~standard effective~~results of operations for all wholly owned assets disposed of on or after January 1, 2002 ~~which did not have a material effect on the Company's financial condition and results~~(the date of ~~operations.~~
        ~~Under the provisions~~adoption of SFAS No. 144, for long-lived assets to be held and used, the Company first determines whether any indicators of impairment exist. If indicators exist, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, an impairment loss would be recorded for the difference between the estimated fair value and the carrying amount of the asset.
17
144).
For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset measured at the time that the Company has determined it will sell the asset. Long-lived assets held for disposition are reported at the lower of their carrying amounts or their estimated fair values, less their costs to sell.
        ~~Goodwill and investments in unconsolidated entities accounted for under the equity method of accounting are specifically excluded from the scope of SFAS No. 144.~~
        On January 11, 2002, the Company disposed of its furniture rental business for $30.0 million and received net proceeds of $28.7 million. No gain/loss on sale was recognized as the net book value at the sale date after giving effect to a previously recorded impairment loss approximated the sales price.
The components of discontinued operations ~~for the nine months and quarters ended September 30, 2002 and 2001, respectively,~~ are outlined below and include the results of operations ~~through the date of each respective sale~~ for the ~~nine~~respective periods that the Company owned such assets during the six months and ~~quarter~~quarters ended ~~September~~
17

June 30, 2003 and 2002, ~~and a full nine months and quarter of operations for the nine months and quarter ended September 30, 2001, for~~including the following:
•
~~the sale of~~                  The Wholly Owned Properties sold during 2003 (see Note 5); and
•                  The Wholly Owned Properties and the furniture rental ~~business; and~~

•
business sold during 2002.

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003

2002

(Amounts in thousands)

REVENUES

Rental income

$
23,112

$
70,045

$
7,429

$
33,125

Interest and other income

122

17

109

5

Furniture income

—

1,361

—

(4
)
Total revenues

23,234

71,423

7,538

33,126

EXPENSES (1)

Property and maintenance

10,643

20,270

4,239

10,289

Real estate taxes and insurance

2,631

7,424

936

3,409

Property management

112

83

62

43

Depreciation

5,810

16,162

1,919

7,614

Interest:

Expense incurred, net

685

1,969

244

1,027

Amortization of deferred financing costs

6

26

1

13

Furniture expenses

—

1,303

—

—

Total expenses

19,887

47,237

7,401

22,395

Discontinued operations, net

$
3,347

$
24,186

$
137

$
10,731

(1)             Includes expenses paid in the current period for Wholly Owned Properties sold in prior periods related to the Company’s period of ownership.
15.                               Stock-Based Compensation
Prior to 2003, the Company had chosen to account for its stock-based compensation in accordance with APB No. 25, Accounting for Stock Issued to Employees,which resulted in no compensation expense for options issued with an exercise price equal to or exceeding the market value of the Company’s Common Shares on the date of grant (intrinsic method). The Company has elected to expense its stock-based compensation in accordance with SFAS No. 123 and its amendment (SFAS No. 148), Accounting for Stock Based Compensation, effective in the first ~~nine~~quarter of 2003, which resulted in compensation expense being recorded based on the fair value of the stock compensation granted or modified.
SFAS No. 148 provides three transition methods for entities that adopt the fair value recognition provisions of SFAS No. 123. The Company has chosen to use the “Prospective Method”. This method requires that companies apply the recognition provisions of SFAS No. 123 to only employee awards granted or modified after the beginning of the fiscal year in which the recognition provisions are first applied, or January 1, 2003. Compensation expense under all of the Company’s plans is generally recognized over periods ranging from three months to five years. Therefore, the cost related to stock-based employee compensation included in the determination of ~~2002 (see Note 5).~~
net income for the six months and quarter ended June 30, 2003 is less than that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS No. 123.
The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period presented:
18

Six Months Ended June 30,

Quarter Ended June 30,

2003

2002

2003

2002

(Amounts in thousands except per share amounts )

Net income available to Common Shares – as reported

$
223,321

$
165,394

$
112,154

$
89,041

Add: Stock-based employee compensation expense included in reported net income:

Restricted/performance shares

5,246

9,912

2,912

4,828

Share options (1)

2,014

—

307

—

ESPP discount

805

—

315

—

Deduct: Stock-based employee compensation expense determined under fair value based method for all awards:

Restricted/performance shares

(5,246
)
(9,912
)
(2,912
)
(4,828
)
Share options (1)

(4,165
)
(3,051
)
(1,266
)
(1,524
)
ESPP discount

(805
)
(925
)
(315
)
(267
)
Net income available to Common Shares – pro forma

$
221,170

$
161,418

$
111,195

$
87,250

Earnings per share:

Basic – as reported

$
0.82

$
0.61

$
0.41

$
0.33

Basic – pro forma

$
0.82

$
0.59

$
0.41

$
0.32

Diluted – as reported

$
0.82

$
0.60

$
0.41

$
0.32

Diluted – pro forma

$
0.81

$
0.59

$
0.41

$
0.32

Nine Months Ended
September 30,
Quarter Ended
September 30,

2002
2001
2002
2001

(Amounts in thousands)

REVENUES
Rental income $ 19,759 $ 33,089 $ 1,595 $ 11,045
Interest and other income 1 49 (4 ) 17
Furniture income 1,361 45,051 — 15,024

Total revenues 21,121 78,189 1,591 26,086

EXPENSES
Property and maintenance 6,191 8,995 814 3,142
Real estate taxes and insurance 2,001 3,188 134 1,067
Depreciation 4,259 7,973 240 2,608
Interest expense incurred, net 546 884 57 284
Amortization of deferred financing costs 6 10 — 4
Amortization of goodwill — 990 — 347
Impairment on furniture rental business — 60,000 — 60,000
Furniture expenses 1,303 45,390 — 14,891

Total expenses 14,306 127,430 1,245 82,343

Discontinued operations, net $ 6,815 $ (49,241 ) $ 346 $ (56,257 )

~~15.~~(1)       Share options for the six months ended June 30, 2003 included $1.4 million of expense recognition related to options granted in the first quarter of 2003 to the Company’s former chief executive officer. These options vested immediately upon grant.
16.                               Commitments and Contingencies

The Company, as an owner of real estate, is subject to various ~~environmental laws of~~ Federal, state and local ~~governments.~~environmental laws. Compliance by the Company with existing laws has not had a material adverse effect on the ~~Company's~~Company’s financial condition and results of operations. However, the Company 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 Company does not believe there is any litigation pending or threatened against the Company 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 Company.
18
        ~~In regards to the funding~~As of ~~properties in the development stage and the agreements with multifamily residential real estate developers, the Company funded a net total of $65.1 million during the nine months ended September~~June 30, ~~2002. In connection with one development agreement,~~2003, the Company has ~~an obligation to fund up to an additional $9.5 million to guarantee third party construction financing. As of September 30, 2002, the Company has 17~~18 projects in various stages of development ~~(includes two consolidated projects)~~ with estimated completion dates ranging through ~~March~~December 31,2004. The Company expects to fund approximately $5.6 million in connection with these properties during the remainder of 2003 and in 2004. The three development agreements currently in place have the following key terms:
~~For one~~
•The first development ~~agreement, the Company's~~ partner has the right, at any time following completion of a project, to stipulate a value for such project and offer to sell its interest in the project to the Company based on such value. If the Company chooses not to purchase the interest, it must agree to a sale of the project to an unrelated third party at such value. The ~~Company's~~Company’s partner must exercise this right as to all projects within five years after the receipt of the final certificate of occupancy on the last developed property. The Company has an obligation to fund up to an additional $13.0 million to
19

guarantee third party construction financing, if required.
~~Under a~~
•The second development ~~agreement, the Company's~~ partner has the right, at any time following completion of a project, to require the Company to purchase the ~~partners'~~partners’ interest in that project at a mutually agreeable price. If the Company and the partner are unable to agree on a price, both parties will obtain appraisals. If the appraised values vary by more than 10%, both the Company and its partner will agree on a third appraiser to determine which original appraisal is closest to its determination of value. The Company may elect at that time not to purchase the property and instead, authorize its partner to sell the project at or above the agreed-upon value to an unrelated third party. Five years following the receipt of the final certificate of occupancy on the last developed property, the Company must purchase, at the agreed-upon price, any projects remaining ~~unsold must~~unsold.
•                  The third development partner has the exclusive right for six months following stabilization (generally defined as having achieved 90% occupancy for three consecutive months following the substantial completion of a project) to market a project for sale. Thereafter, either the Company or its development partner may market a project for sale. If the Company’s development partner proposes the sale, the Company may elect to purchase the project at the price proposed by its partner or defer the sale until two independent appraisers appraise the project. If the two appraised values vary by more than 5%, a third appraiser will be ~~purchased by~~chosen to determine the fair market value of the property. Once a value has been determined, the Company may elect to purchase the property or authorize its development partner to sell the project at the agreed-upon ~~price.~~value.
~~The~~
In connection with one of its mergers, the Company provided a credit enhancement with respect to certain tax-exempt bonds issued to finance certain public improvements at a multifamily development project. As of ~~September~~June 30, ~~2002,~~2003, this enhancement was still in effect at a commitment amount of $12.7 million.
~~16.~~  17.Asset Impairment
For both the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, the Company recorded approximately ~~$0.9~~$0.6 million ~~and $8.0 million, respectively,~~ of asset impairment charges related to its technology investments. These charges were the result of a review of the existing investments reflected on the consolidated balance sheet. These impairment losses are reflected on the ~~statement~~consolidated statements of operations in total expenses and include the write-down of assets classified as other ~~assets and investments in unconsolidated entities.~~assets.
For the nine months ended September 30, 2002, the Company recorded approximately $17.1 million of asset impairment charges related to its corporate housing business. Following the guidance in SFAS No. 142, these charges were the result of the Company's decision to reduce the carrying value of its corporate housing business to $30.0 million, given the continued weakness in the economy and management's expectations for near-term performance. This impairment loss is reflected on the consolidated statements of operations as impairment on corporate housing business and on the consolidated balance sheets as a reduction in goodwill, net.
18.                               Reportable Segments
As of September 30, 2001, the Company recorded $60.0 million of asset impairment charges related to its furniture rental business. These charges were the result of a review of the existing intangible and tangible assets reflected on the consolidated balance sheet as of September 30, 2001. The Company reviewed the current net book value taking into consideration existing business and economic conditions as well as projected cash flows. The impairment loss is reflected on the income statement in discontinued operations, net, 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.
19
~~17.  Reportable Segments~~
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by senior management. Senior management decides how resources are allocated and assesses performance on a monthly basis.

The ~~Company's~~Company’s primary business is owning, managing, and operating multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to ~~residents.~~residents and includes Equity Corporate Housing (“ECH”). Senior management evaluates the performance of each of our apartment communities on an individual basis, however, each of our apartment communities has similar economic characteristics, residents, and products and services so they have been aggregated into one reportable segment. The ~~Company's~~Company’s rental real estate segment ~~comprised~~comprises approximately ~~98.8%~~98.4% and ~~97.9%~~98.6% of total revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, respectively, and approximately ~~99.0%~~98.1% and ~~98.5%~~98.4% of total revenues for the quarters ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, respectively. The ~~Company's~~Company’s rental real estate segment ~~comprised~~comprises approximately ~~99.7%~~99.8% and ~~99.4%~~99.7% of total assets at ~~September~~June 30, ~~2002~~2003 and December 31, ~~2001,~~2002, respectively.

The primary financial measure for the ~~Company's~~Company’s rental real estate segment is net operating
20

income ~~("NOI"~~(“NOI”), which represents rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense (all as reflected in the accompanying statements of operations). The Company believes that NOI is helpful to investors as a supplemental measure of the operating performance of a real estate company because it is a direct measure of the actual operating results of the Company’s apartment communities. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. NOI from our rental real estate totaled approximately ~~$905.1~~ $551.5million and ~~$916.2~~$576.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 and ~~2001,~~2002, respectively, and approximately ~~$297.5~~$277.9 million and ~~$312.6~~$289.6 million for the quarters ended ~~September~~June 30, 2003 and 2002, ~~and 2001,~~ respectively.

During the acquisition, development and/or disposition of real estate, the Company considers its NOI return on total ~~capitalized costs is~~investment as the primary measure of financial ~~performance the Company considers.~~performance.

The ~~Company's~~Company’s fee and asset management activity is immaterial and does not meet the threshold requirements of a reportable segment as provided for in SFAS No. 131.
All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the six months ended June 30, 2003 or 2002.
~~18.~~19.                               Subsequent Events/Other
During the nine months ended September 30, 2002, the Company entered into an agreement with the U.S. Army with an initial cash investment of $10.0 million and assumed management of 3,637 multifamily units at Fort Lewis, Washington.
Subsequent to ~~September~~June 30, ~~2002~~2003 and through ~~November 4, 2002,~~August 8, 2003, the Company:
•
~~disposed of five properties~~                  Acquired one property consisting of ~~684~~200 units for approximately ~~$28.7~~$27.0 million;

•
~~repaid $53.1~~                  Disposed of three properties and various individual condominium units consisting of 592 units for approximately $43.7 million;
•                  Assumed $0.8 million of mortgage ~~loans;~~

debt on one property in connection with its consolidation;
•
~~repaid $40.0~~                  Repaid $10.9 million of ~~7.25% fixed rate public notes at~~mortgage debt at/or prior to maturity;

and
•
~~received $3.5~~                  Relinquished $15.7 million ~~representing full repayment~~ of ~~an executive's employee notes;~~

•
~~repurchased and retired approximately 5.1 million Common Shares for approximately $115.0 million; and~~

•
~~funded $4.3 million related to~~mortgage debt assumed by the ~~development agreements.~~
purchaser in connection with the disposition of certain properties.
20
21

Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
For further information including definitions for capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the ~~Company's~~Company’s annual report on Form 10-K for the year ended December 31, ~~2001.~~2002.

Forward-looking statements in this report are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words ~~"believes"~~“believes”, ~~"expects"~~“estimates”, “expects” and ~~"anticipates"~~“anticipates” and other similar expressions that 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 Company 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~~                  The total number of development units, cost of development and completion dates as well as anticipated capital expenditures for replacements and building improvements all reflect the ~~Company's~~Company’s best estimates and are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation;

•
~~alternative~~                  Alternative sources of capital to the Company or labor and materials required for maintenance, repair, capital expenditure or development are more expensive than anticipated;

•
~~occupancy~~                  Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction of multifamily housing, continuing decline in employment, ~~and~~ availability of low interest mortgages for single-family home buyers and the potential for geopolitical instability, all of which are beyond the ~~Company's~~Company’s control; and

•
~~additional~~                  Additional factors as discussed in Part I of the Annual Report on Form 10-K, particularly those under ~~"Risk Factors"~~“Risk Factors”.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company 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. Forward-looking statements and related uncertainties are also included in Note 6 to the Notes to Consolidated Financial Statements in this report.
Results of Operations

The following table summarizes the number of properties and related units for the ~~year-to-date~~ periods presented:
21
22

Properties
Units
Purchase/Sale
Price
$ Millions
At December 31, 2000 1,104 227,704
Q1/Q2/Q3 2001 Acquisitions 11 2,657 $ 288.0
Q1/Q2/Q3 2001 Dispositions (38 ) (6,241 ) $ 298.5
Q1/Q2/Q3 2001 Completed Developments 4 1,470

At September 30, 2001 1,081 225,590
Q4 2001 Acquisitions 3 766 $ 100.1
Q4 2001 Dispositions (11 ) (2,566 ) $ 118.4
Q4 2001 Completed Developments 3 1,035
Q4 2001 Unit Configuration Changes — (24 )

At December 31, 2001 1,076 224,801
Q1/Q2/Q3 2002 Acquisitions 10 3,053 $ 245.4
Q2 2002 Fort Lewis 1 3,637
Q1/Q2/Q3 2002 Dispositions (35 ) (6,046 ) $ 338.9
Q1/Q2/Q3 2002 Completed Developments 7 1,966
Q1/Q2/Q3 2002 Unit Configuration Changes — 15

At September 30, 2002 1,059 227,426

Properties

Units

Purchase /
Sale Price
$ Millions

At December 31, 2001

1,076

224,801

Q1/Q2 2002 Acquisitions

7

1,983

$
166.5

Ft. Lewis Joint Venture

1

3,652

Q1/Q2 2002 Dispositions

(23
)
(3,654
)
$
197.2

Q1/Q2 2002 Completed Developments

4

1,181

At June 30, 2002

1,065

227,963

Q3/Q4 2002 Acquisitions

5

1,651

$
123.4

Q3/Q4 2002 Dispositions

(35
)
(7,059
)
$
349.0

Q3/Q4 2002 Completed Developments

4

1,020

Q3/Q4 2002 Unit Configuration Changes

—

16

At December 31, 2002

1,039

223,591

Q1/Q2 2003 Acquisitions

6

1,958

$
277.7

Q1/Q2 2003 Dispositions

(44
)
(10,308
)
$
498.4

Q1/Q2 2003 Completed Developments

4

1,274

Q1/Q2 2003 Unit Configuration Changes

—

129

At June 30, 2003

1,005

216,644

~~The Company's acquisition and disposition activity has impacted overall results of operations for the nine months and quarters ended September 30, 2002 and 2001.~~
Significant changes in revenues between the six months and ~~expenses~~quarters presented have resulted primarily from ~~the consolidation of previously Unconsolidated Properties in July 2001, the disposition of the furniture rental business on January 11, 2002,~~ reduced rental income through increased concessions or reduced apartment rents and occupancy at ~~selected properties as well as the properties acquired and developments completed in 2001 and 2002, which have been partially offset by the properties disposed in 2001 and 2002.~~many of our properties. Significant changes in expenses have ~~also~~ resulted from increases in property and maintenance expenses including payroll, maintenance, building, utilities and leasing and advertising as well as real estate taxes, partially offset by decreases in property management expenses. In addition, the Company’s acquisition, disposition and completed development activity has impacted overall results of operations for the six months and quarters ended June 30, 2003 and 2002. These changes ~~in insurance costs, general and administrative costs, impairment charges and variable interest rates. This impact is~~are discussed in greater detail in the following paragraphs.

Properties that the Company owned for ~~all of both~~ the ~~nine~~entire six month periods ended ~~September~~June 30, 2003 as well as June 30, 2002 ~~and September 30, 2001~~ (the ~~"Nine-Month 2002~~“Six-Month 2003 Same Store ~~Properties"~~Properties”), which represented ~~191,940~~185,329 units and properties that the Company owned for all of both the quarters ended ~~September~~June 30, 2003 and June 30, 2002 ~~and September 30, 2001~~ (the ~~"Third~~“Second Quarter ~~2002~~2003 Same Store ~~Properties"~~Properties”), which represented ~~197,852~~185,697 units, also impacted the ~~Company's~~Company’s results of operations. Both the ~~Nine-Month 2002~~Six-Month 2003 Same Store Properties and ~~Third~~Second Quarter ~~2002~~2003 Same Store Properties are discussed in the following paragraphs.
Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003 to the ~~nine~~six months ended ~~September~~June 30, ~~2001~~2002
For the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2003, income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and discontinued operations ~~extraordinary items and cumulative effect of change in accounting principle~~ decreased by approximately ~~$46.5~~$28.2 million when compared to the ~~nine~~six months ended ~~September~~June 30, ~~2001.~~2002.

Revenues from the ~~Nine-Month 2002~~Six-Month 2003 Same Store Properties decreased primarily as a result of lower overall physical occupancy, increased concessions and lower rental rates charged to both new and renewal residents. Property operating expenses from the ~~Nine-Month 2002~~Six-Month 2003 Same Store Properties ~~which include property~~increased mainly due to higher payroll, maintenance, utility and maintenance, real estate taxes and insurance and an allocation of property management expenses, remained relatively stable with increases in real estate taxes and insurance costs offset by a decrease in utilitybuilding costs. The following tables provide comparative revenue, expense, net operating income ~~("NOI"~~(“NOI”) and weighted average occupancy for the ~~Nine-Month 2002~~Six-Month 2003 Same Store ~~Properties:~~Properties (NOI represents rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense):
22
~~September 30, 2002 Year-to-Date "Same Store" Results~~
23

June YTD 2003 vs. June YTD 2002
YTD over YTD Same-Store Results
$ in ~~Millions—191,940 "Same Store"~~Millions – 185,329 Same-Store Units
Description
Description
Revenues
Expenses
NOI

Revenues

Expenses

NOI

YTD 2003

$
874.9

$
344.6

$
530.3

YTD 2002 YTD 2002 $ 1,356.7 $ 506.5 $ 850.2

$
904.2

$
324.2

$
580.0

YTD 2001 $ 1,386.5 $ 503.9 $ 882.6

Change $ (29.8 ) $ 2.6 $ (32.4 )

% Change (2.1 %) 0.5 % (3.7 %)
Change

$
(29.3
)
$
20.4

$
(49.7
)
Change

(3.2
)%
6.3
%
(8.6
)%

	Cash Flow Hedges		Fair Value Hedges		Forward Starting Swaps	Offsetting Receive Floating Swaps/Caps		Offsetting Pay Floating Swaps/Caps
Current Notional Balance	$	400,000		$	220,000	$	250,000		$	255,117		$	255,117
Lowest Possible Notional	$	400,000		$	220,000	$	250,000		$	251,410		$	251,410
Highest Possible Notional	$	400,000		$	220,000	$	250,000		$	431,444		$	431,444
Lowest Interest Rate		3.65125%			5.33250%		5.06375%			4.52800%			4.45800%
Highest Interest Rate		5.81000%			7.25000%		5.42600%			6.00000%			6.00000%
Earliest Maturity Date		2003			2005		2013			2003			2003
Latest Maturity Date		2005			2011		2013			2007			2007
Estimated Asset (Liability) Fair Value	$	(16,244	)	$	16,567	$	(9,174	)	$	(4,708	)	$	4,529

Description	Description		Revenues		Expenses		NOI			Revenues		Expenses		NOI

YTD 2003			$	874.9		$	344.6		$	530.3
YTD 2002	YTD 2002		$	1,356.7		$	506.5		$	850.2			$	904.2	$	324.2	$	580.0
YTD 2001		$	1,386.5		$	503.9		$	882.6

	Change		$	(29.8	)	$	2.6		$	(32.4	)

% Change		(2.1	%)		0.5	%		(3.7	%)
Change			$	(29.3	)	$	20.4		$	(49.7	)
Change			(3.2	)%	6.3	%	(8.6	)%

The Company’s primary financial measure for evaluating each of its apartment communities is NOI. The Company believes that NOI is helpful to investors as a supplemental measure of the ~~Company acquired prior to January 1, 2001 and expects to continue to own through December 31, 2002,~~operating performance of a real estate company because it is a direct measure of the ~~Company anticipates~~actual operating results of the ~~following operating assumptions for the year ending December 31, 2002:~~Company’s apartment communities.

For properties that the Company acquired prior to January 1, 2002 and expects to continue to own through December 31, 2003, the Company anticipates the following operating ~~assumptions~~results for the full year ending December 31, 2003:

These ~~2002 and~~ 2003 operating assumptions are based on current expectations and are forward-looking.

Rental income from properties other than ~~Nine-Month 2002~~Six-Month 2003 Same Store Properties increased by approximately ~~$10.4~~ $22.3million primarily as a result of revenue from properties ~~the Company~~ acquired in ~~2001~~2002 and ~~2002~~2003 and additional Partially Owned Properties ~~that the Company~~ consolidated in ~~2001.~~the fourth quarter of 2002.

Interest and other income decreased by approximately ~~$6.1~~ $2.2million, primarily as a result of lower ~~balances available for investment and related~~ interest rates being earned on ~~the Company's~~ short-term

YTD ~~2002~~2003		~~93.87~~ 92.8	%
YTD ~~2001~~2002		~~94.59~~ 94.1	%
Change		(1.3
	~~Change~~		~~(0.72~~	)%)

~~Physical Occupancy~~		~~93.0%~~
~~Revenue Change~~		~~(2.6%)~~
~~Expense Change~~		~~0.8%~~
~~NOI Change~~		~~(4.5%)~~
~~Dispositions~~		~~$450 million~~

Physical Occupancy		93.0%
Revenue Change		~~(3.9%~~ (3.5%) to ~~(1.4%~~(1.2%)
Expense Change		~~2.1%~~ 2.8% to ~~4.4%~~5.2%
NOI Change		(9.2%) to (3.7%)
Dispositions		$~~700~~700.0 million

Description		Revenues			Expenses		NOI
Q3 2002		$	467.4		$	182.0	$	285.4
Q3 2001		$	485.4		$	178.5	$	306.9

	Change	$	(18.0	)	$	3.5	$	(21.5	)

% Change			(3.7%	)		2.0%		(7.0%	)

Description	Revenues			Expenses			NOI

Q2 2003	$	438.4		$	173.5		$	264.9
Q2 2002	$	451.9		$	164.8		$	287.1
Change	$	(13.5	)	$	8.7		$	(22.2	)
Change	(3.0		)%	5.3		%	(7.7		)%

The following table presents the changes in the Company'sCompany’s issued and outstanding Common Shares for the ninesix months ended SeptemberJune 30, 2002:2003:

EXHIBIT INDEX

			September 30, 2002			December 31, 2001
ASSETS
Investment in real estate
	Land		$	1,854,750		$	1,840,170
	Depreciable property			11,228,526			11,096,847
	Construction in progress			124,811			79,166

				13,208,087			13,016,183
	Accumulated depreciation			(2,026,010	)		(1,718,845	)

Investment in real estate, net of accumulated depreciation				11,182,077			11,297,338
Real estate held for disposition				—			3,371
Cash and cash equivalents				21,756			51,603
Investments in unconsolidated entities				435,701			397,237
Rents receivable				2,951			2,400
Deposits—restricted				168,108			218,557
Escrow deposits—mortgage				58,343			76,700
Deferred financing costs, net				32,881			27,011
Rental furniture, net				—			20,168
Property and equipment, net				—			3,063
Goodwill, net				30,000			47,291
Other assets				66,379			90,886

		Total assets	$	11,998,196		$	12,235,625

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
	Mortgage notes payable		$	3,088,798		$	3,286,814
	Notes, net			2,446,779			2,260,944
	Line of credit			35,000			195,000
	Accounts payable and accrued expenses			139,268			108,254
	Accrued interest payable			67,725			62,360
	Rents received in advance and other liabilities			71,037			83,005
	Security deposits			46,250			47,644
	Distributions payable			143,008			141,832

		Total liabilities		6,037,865			6,185,853

*Commitments and contingencies*
Minority Interests:
	Operating Partnership			358,729			379,898
	Preference Interests			246,000			246,000
	Junior Preference Units			5,846			5,846
	Partially Owned Properties			10,568			4,078

		Total Minority Interests		621,143			635,822

Shareholders' equity:
	Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 10,539,534 shares issued and outstanding as of September 30, 2002 and 11,344,521 shares issued and outstanding as of December 31, 2001			946,544			966,671
	Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 275,850,003 shares issued and outstanding as of September 30, 2002 and 271,621,374 shares issued and outstanding as of December 31, 2001			2,759			2,716
	Paid in capital			4,977,195			4,892,744
	Employee notes			(3,780	)		(4,043	)
	Deferred compensation			(26,407	)		(25,778	)
	Distributions in excess of accumulated earnings			(512,093	)		(385,320	)
	Accumulated other comprehensive loss			(45,030	)		(33,040	)

		Total shareholders' equity		5,339,188			5,413,950

		Total liabilities and shareholders' equity	$	11,998,196		$	12,235,625

	June 30, 2003			December 31, 2002
ASSETS
Investment in real estate
Land	$	1,815,685		$	1,803,577
Depreciable property	11,178,596			11,240,245
Construction in progress	2,502			2,441
	12,996,783			13,046,263
Accumulated depreciation	(2,247,136		)	(2,112,017		)
Investment in real estate, net of accumulated depreciation	10,749,647			10,934,246

Cash and cash equivalents	243,838			29,875
Investments in unconsolidated entities	509,937			509,789
Rents receivable	2,119			2,926
Deposits – restricted	280,935			141,278
Escrow deposits – mortgage	44,831			50,565
Deferred financing costs, net	32,321			32,144
Goodwill, net	30,000			30,000
Other assets	150,064			80,094
Total assets	$	12,043,692		$	11,810,917

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable	$	2,850,493		$	2,927,614
Notes, net	2,854,198			2,456,085
Line of credit	—			140,000
Accounts payable and accrued expenses	71,746			64,369
Accrued interest payable	64,374			63,151
Rents received in advance and other liabilities	165,244			165,095
Security deposits	44,965			45,333
Distributions payable	142,004			140,844
Total liabilities	6,193,024			6,002,491

*Commitments and contingencies*
Minority Interests:
Operating Partnership	347,598			349,646
Preference Interests	246,000			246,000
Junior Preference Units	5,846			5,846
Partially Owned Properties	8,622			9,811
Total Minority Interests	608,066			611,303

Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 7,101,384 shares issued and outstanding as of June 30, 2003 and 10,524,034 shares issued and outstanding as of December 31, 2002	995,591			946,157
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 273,119,105 shares issued and outstanding as of June 30, 2003 and 271,095,481 shares issued and outstanding as of December 31, 2002	2,731			2,711
Paid in capital	4,837,961			4,839,218
Deferred compensation	(7,538		)	(12,118		)
Distributions in excess of accumulated earnings	(547,693		)	(535,056		)
Accumulated other comprehensive loss	(38,450		)	(43,789		)
Total shareholders’ equity	5,242,602			5,197,123
Total liabilities and shareholders’ equity	$	12,043,692		$	11,810,917

			Nine Months Ended September 30,						Quarter Ended September 30,
			2002			2001			2002			2001
REVENUES
	Rental income		$	1,504,274		$	1,523,723		$	501,853		$	518,096
	Fee and asset management			6,957			5,805			2,647			1,665
	Interest and other income			11,551			17,685			2,235			6,166
	Interest income—investment in mortgage notes			—			8,786			—			23

		Total revenues		1,522,782			1,555,999			506,735			525,950

EXPENSES
	Property and maintenance			390,241			411,370			136,104			140,573
	Real estate taxes and insurance			153,127			139,827			50,698			45,173
	Property management			55,767			56,302			17,565			19,760
	Fee and asset management			5,366			5,358			1,702			1,888
	Depreciation			348,947			333,041			118,120			113,300
	Interest:
		Expense incurred, net		255,693			267,572			84,153			89,212
		Amortization of deferred financing costs		4,344			4,328			1,362			1,524
	General and administrative			33,000			23,604			10,673			9,525
	Impairment on corporate housing business			17,122			—			17,122			—
	Impairment on technology investments			872			7,968			291			1,193
	Amortization of goodwill			—			1,862			—			581

		Total expenses		1,264,479			1,251,232			437,790			422,729

Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle				258,303			304,767			68,945			103,221
Allocation to Minority Interests:
	Operating Partnership			(19,067	)		(22,666	)		(5,283	)		(6,192	)
	Partially Owned Properties			(1,584	)		(1,523	)		(259	)		(1,285	)
Income (loss) from investments in unconsolidated entities				(1,746	)		1,885			(1,979	)		925
Net gain (loss) on sales of unconsolidated entities				(626	)		339			(5,872	)		—

Income before discontinued operations, extraordinary items and cumulative effect of change in accounting principle				235,280			282,802			55,552			96,669
Net gain on sales of discontinued operations				61,209			99,793			32,763			53,567
Discontinued operations, net				6,815			(49,241	)		346			(56,257	)

Income before extraordinary items and cumulative effect of change in accounting principle				303,304			333,354			88,661			93,979
Extraordinary items				(468	)		(22	)		—			(128	)
Cumulative effect of change in accounting principle				—			(1,270	)		—			—

Net income				302,836			332,062			88,661			93,851
Preferred distributions				(72,969	)		(81,759	)		(24,188	)		(24,340	)

Net income available to Common Shares			$	229,867		$	250,303		$	64,473		$	69,511

Net income per share—basic			$	0.84		$	0.94		$	0.24		$	0.26

Net income per share—diluted			$	0.83		$	0.93		$	0.23		$	0.26

Weighted average Common Shares outstanding—basic				272,738			266,614			273,943			268,253

Weighted average Common Shares outstanding—diluted				298,690			294,661			299,057			296,391

Distributions declared per Common Share outstanding			$	1.2975		$	1.2475		$	0.4325		$	0.4325

	Six Months Ended June 30,						Quarter Ended June 30,
	2003			2002			2003			2002
REVENUES
Rental income	$	943,529		$	950,540		$	473,967		$	476,418
Fee and asset management	7,878			4,310			5,390			2,592
Interest and other income	7,128			9,304			3,787			5,206
Total revenues	958,535			964,154			483,144			484,216

EXPENSES
Property and maintenance	258,017			239,744			129,269			120,338
Real estate taxes and insurance	101,780			96,872			50,455			48,267
Property management	32,194			37,663			16,343			18,213
Fee and asset management	3,607			3,620			1,837			1,758
Depreciation	231,582			218,684			116,555			110,464
Interest:
Expense incurred, net	164,532			170,528			84,103			86,573
Amortization of deferred financing costs	3,104			2,962			1,701			1,584
General and administrative	20,146			22,327			8,970			11,527
Impairment on technology investments	581			581			290			290
Total expenses	815,543			792,981			409,523			399,014
Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and discontinued operations	142,992			171,173			73,621			85,202
Allocation to Minority Interests:
Operating Partnership	(18,281		)	(13,784		)	(9,171		)	(7,343		)
Partially Owned Properties	(243		)	(1,325		)	(128		)	(519		)
Income (loss) from investments in unconsolidated entities	(1,744		)	233			(1,851		)	7
Net gain (loss) on sales of unconsolidated entities	4,675			5,246			3,463			(411		)
Income from continuing operations	127,399			161,543			65,934			76,936
Net gain on sales of discontinued operations	140,992			28,446			70,320			25,630
Discontinued operations, net	3,347			24,186			137			10,731
Net income	271,738			214,175			136,391			113,297
Preferred distributions	(48,417		)	(48,781		)	(24,237		)	(24,256		)

Net income available to Common Shares	$	223,321		$	165,394		$	112,154		$	89,041

Net income per share – basic	$	0.82		$	0.61		$	0.41		$	0.33

Net income per share – diluted	$	0.82		$	0.60		$	0.41		$	0.32

Weighted average Common Shares outstanding – basic	271,031			272,126			271,380			273,146

Weighted average Common Shares outstanding – diluted	298,405			298,422			299,217			299,494

Distributions declared per Common Share outstanding	$	0.865		$	0.865		$	0.4325		$	0.4325

			Nine Months Ended September 30,
			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	302,836		$	332,062
Adjustments to reconcile net income to net cash provided by operating activities:
	Allocation to Minority Interests:
		Operating Partnership		19,067			22,666
		Partially Owned Properties		1,584			1,523
	Cumulative effect of change in accounting principle			—			1,270
	Depreciation			353,206			349,313
	Amortization of deferred financing costs			4,350			4,338
	Amortization of discount on investment in mortgage notes			—			(2,256	)
	Amortization of goodwill			—			2,852
	Amortization of discounts and premiums on debt			(589	)		(1,424	)
	Amortization of deferred settlements on interest rate protection agreements			(238	)		533
	Impairment on corporate housing business			17,122			—
	Impairment on furniture rental business			—			60,000
	Impairment on technology investments			872			7,968
	Loss (income) from investments in unconsolidated entities			1,746			(1,885	)
	Net gain on sales of discontinued operations			(61,209	)		(99,793	)
	Net loss (gain) on sales of unconsolidated entities			626			(339	)
	Extraordinary items			468			22
	Unrealized loss (gain) on interest rate protection agreements			383			(161	)
	Book value of furniture sales and rental buyouts			—			8,703
	Compensation paid with Company Common Shares			15,158			12,298
	Changes in assets and liabilities:
		(Increase) in rents receivable		(551	)		(2,069	)
		Decrease in deposits—restricted		8,186			4,538
		Additions to rental furniture		—			(17,827	)
		Decrease (increase) in other assets		11,849			(17,124	)
		Increase in accounts payable and accrued expenses		32,102			25,535
		Increase in accrued interest payable		5,365			25,702
		(Decrease) in rents received in advance and other liabilities		(579	)		(7,628	)
		(Decrease) increase in security deposits		(1,037	)		885

		Net cash provided by operating activities		710,717			709,702

CASH FLOWS FROM INVESTING ACTIVITIES:
	Investment in real estate—acquisitions			(232,097	)		(242,366	)
	Investment in real estate—development			(86,115	)		(54,344	)
	Improvements to real estate			(110,291	)		(107,263	)
	Additions to non-real estate property			(5,562	)		(5,210	)
	Interest capitalized for real estate under development			(6,952	)		(6,651	)
	Interest capitalized for unconsolidated entities under development			(12,492	)		(14,381	)
	Proceeds from disposition of real estate, net			291,368			452,060
	Proceeds from disposition of furniture rental business			28,741			—
	Proceeds from disposition of unconsolidated entities			34,796			359
	Proceeds from refinancing of unconsolidated entities			4,375			5,691
	Investments in unconsolidated entities			(97,582	)		(69,195	)
	Distributions from unconsolidated entities			31,021			26,311
	Decrease in deposits on real estate acquisitions, net			42,046			98,582
	Decrease (increase) in mortgage deposits			19,605			(4,167	)
	Business combinations, net of cash acquired			(658	)		(8,231	)
	Consolidation of previously Unconsolidated Properties			—			52,841
	Investment in property and equipment			—			(2,185	)
	Principal receipts on investment in mortgage notes			—			61,419
	Other investing activities, net			192			(58	)

	Net cash (used for) provided by investing activities			(99,605	)		183,212

			Nine Months Ended September 30,
			2002			2001
CASH FLOWS FROM FINANCING ACTIVITIES:
	Loan and bond acquisition costs		$	(10,495	)	$	(4,383	)
	Mortgage notes payable:
		Proceeds		104,572			59,312
		Lump sum payoffs		(283,681	)		(315,302	)
		Scheduled principal repayments		(24,351	)		(24,210	)
		Prepayment premiums/fees		(468	)		(201	)
	Notes, net:
		Proceeds		397,064			299,316
		Lump sum payoffs		(225,000	)		—
		Scheduled principal repayments		(4,669	)		(4,649	)
	Line of credit:
		Proceeds		368,500			436,491
		Repayments		(528,500	)		(791,953	)
	(Payments) from settlement of interest rate protection agreements			(1,534	)		(7,360	)
	Proceeds from sale of Common Shares			8,425			7,277
	Proceeds from sale of Preference Interests			—			48,500
	Proceeds from exercise of options			28,542			56,326
	Redemption of Preferred Shares			—			(210,500	)
	Payment of offering costs			(170	)		(1,535	)
	Distributions:
		Common Shares		(354,683	)		(218,632	)
		Preferred Shares		(57,919	)		(69,359	)
		Preference Interests		(15,185	)		(13,338	)
		Junior Preference Units		(243	)		(190	)
		Minority Interests—Operating Partnership		(29,859	)		(19,738	)
		Minority Interests—Partially Owned Properties		(11,568	)		(31,970	)
	Principal receipts on employee notes, net			263			219

		Net cash (used for) financing activities		(640,959	)		(805,879	)

	Net (decrease) increase in cash and cash equivalents			(29,847	)		87,035
	Cash and cash equivalents, beginning of period			51,603			23,772

	Cash and cash equivalents, end of period		$	21,756		$	110,807

SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest			$	270,885		$	270,849

Mortgage loans assumed through real estate acquisitions			$	14,000		$	45,918

Mortgage loans (assumed) by purchaser in real estate and furniture rental business dispositions			$	(8,840	)	$	(28,231	)

Transfers to real estate held for disposition			$	—		$	4,102

Mortgage loans recorded as a result of consolidation of previously Unconsolidated Properties			$	—		$	301,502

Net (assets) liabilities recorded as a result of consolidation of previously Unconsolidated Properties			$	—		$	(20,839	)

	Number of Properties	Number of Units
Wholly Owned Properties	934	197,354
Partially Owned Properties (Consolidated)	36	6,931
Unconsolidated Properties	89	23,141

Total Properties	1,059	227,426

	Number of Properties	Number of Units
Wholly Owned Properties	884	187,043
Partially Owned Properties (Consolidated)	36	6,931
Unconsolidated Properties	85	22,670
Total Properties	1,005	216,644

		~~2002~~2003

Common Shares outstanding at January 1,	~~271,621,374~~ 271,095,481

Common Shares ~~Issued:~~Issued:
Conversion of Series E Preferred Shares	~~892,625~~ 25,198
~~Conversion of Series G Preferred Shares~~	70
~~Conversion of Series H Preferred Shares~~	~~4,050~~
Employee Share Purchase Plan	~~278,655~~ 203,498
~~Dividend Reinvestment—DRIP Plan~~	~~41,407~~
~~Share Purchase—DRIP Plan~~	~~31,347~~
Exercise of options	~~1,385,584~~ 732,724
Restricted share grants, net	~~900,000~~ 955,658
Conversion of OP Units	~~694,891~~ 106,546

Common Shares outstanding at ~~September~~June 30,	~~275,850,003~~
273,119,105

				Amounts in thousands
		Annual Dividend Rate per Share (1)		Amounts in thousands
		Annual Dividend Rate per Share (1)		September 30, 2002		December 31, 2001
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized:
	9¹/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at September 30, 2002 and December 31, 2001	$	22.81252	$	125,000	$	125,000
	9¹/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at September 30, 2002 and December 31, 2001	$	22.81252		115,000		115,000
	8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at September 30, 2002 and December 31, 2001	$	21.50000		175,000		175,000
	7.00% Series E Cumulative Convertible Preferred; liquidation value $25 per share; 2,563,614 and 3,365,794 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively	$	1.75000		64,090		84,145
	7¹/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,692 and 1,264,700 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively	$	18.12500		316,173		316,175
	7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 51,228 and 54,027 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively	$	1.75000		1,281		1,351
	8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at September 30, 2002 and December 31, 2001	$	4.14500		50,000		50,000
	7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 4,000,000 shares issued and outstanding at September 30, 2002 and December 31, 2001	$	1.90625		100,000		100,000

				$	946,544	$	966,671

	Annual Dividend Rate per Share (1)			Amounts in thousands
				June 30, 2003		December 31, 2002
				June 30, 2003		December 31, 2002
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized:

9 1/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at June 30, 2003 and December 31, 2002	$	22.81252		$	125,000	$	125,000

9 1/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at June 30, 2003 and December 31, 2002	$	22.81252		115,000		115,000

8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at June 30, 2003 and December 31, 2002	$	21.50		175,000		175,000

7.00% Series E Cumulative Convertible Preferred; liquidation value $25 per share; 2,525,464 and 2,548,114 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively	$	1.75		63,137		63,703

7 1/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,692 shares issued and outstanding at June 30, 2003 and December 31, 2002	$	18.125		316,173		316,173

7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 51,228 shares issued and outstanding at June 30, 2003 and December 31, 2002	$	1.75		1,281		1,281

8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at June 30, 2003 and December 31, 2002	$	4.145		50,000		50,000

7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 0 and 4,000,000 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively	(2		)	—		100,000

6.48% Series N Cumulative Redeemable Preferred; liquidation value $250 per share; 600,000 and 0 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively (3)	$	16.20		150,000		—
				$	995,591	$	946,157

				Amounts in thousands
		Annual Dividend Rate Per Unit (1)		Amounts in thousands
		Annual Dividend Rate Per Unit (1)		September 30, 2002		December 31, 2001
Preference Interests:
	8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	4.0000	$	40,000	$	40,000
	8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,100,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	4.2500		55,000		55,000
	8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	4.2500		11,000		11,000
	8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	4.1875		21,000		21,000
	8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	4.2500		50,000		50,000
	8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	4.1875		9,000		9,000
	7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	3.9375		25,500		25,500
	7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	3.8125		9,500		9,500
	7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 270,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	3.8125		13,500		13,500
	7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at September 30, 2002 and December 31, 2001	$	3.8125		11,500		11,500

				$	246,000	$	246,000

	Annual Dividend Rate per Unit(1)		Amounts in thousands
	Annual Dividend Rate per Unit(1)		June 30, 2003		December 31, 2002
Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 56,616 units issued and outstanding at June 30, 2003 and December 31, 2002	$	5.46934	$	5,662	$	5,662

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at June 30, 2003 and December 31, 2002	$	2.00	184		184
			$	5,846	$	5,846

Date Acquired	Property	Location	Number of Units	Acquisition Price (in thousands)
03/28/02	Isles at Sawgrass	Sunrise, FL	368	$	26,000
04/24/02	Center Pointe	Beaverton, OR	264		19,100
04/30/02	Mira Flores	Palm Beach Gardens, FL	352		29,250
05/15/02	Gramercy Park	Houston, TX	384		26,000
05/31/02	Enclave at Winston Park	Coconut Creek, FL	278		25,450
05/31/02	St. Andrews at Winston Park	Coconut Creek, FL	284		25,450
06/21/02	Westside Villas VII	Los Angeles, CA	53		15,250
07/17/02	Savannah Lakes	Boynton Beach, FL	466		37,400
08/01/02	Cove at Fisher's Landing	Vancouver, WA	253		17,800
08/08/02	Avon Place (condo unit)	Avon, CT	1		69
08/09/02	Montevista	Dallas, TX	350		23,675

			3,053	$	245,444

Date Acquired	Property	Location	Number of Units	Acquisition Price (in thousands)
01/30/03	The Reserve @ Eisenhower	Alexandria, VA	226	$	41,000
02/14/03	Artisan Square	Northridge, CA	140	27,466
03/05/03	LaSalle (1)	Beaverton, OR	554	43,000
05/01/03	Gateway at Malden Center (2)	Malden, MA	203	34,900
06/17/03	Mill Creek	Milpitas, CA	516	70,000
06/30/03	Carlyle Mill	Alexandria, VA	317	61,200
Various	Rivers Bend (Condo Units)	Windsor, CT	2	125
			1,958	$	277,691

Date Disposed	Property	Location	Number of Units	Disposition Price (in thousands)
01/14/03	Strawberry Place	Plant City, FL	55	$	1,400
01/14/03	Smoketree Polo Club	Indio, CA	288	18,900
01/29/03	Amberwood I	Lake City, FL	50	1,175
01/30/03	Emerald Place	Bermuda Dunes, CA	240	20,125
01/30/03	Rolido Parque	Houston, TX	369	14,660
02/27/03	Fox Hill Commons	Vernon, CT	74	4,700
02/27/03	The Landings	Winter Haven, FL	60	1,475
02/27/03	Morningside	Titusville, FL	183	3,980
03/04/03	Colony Woods	Birmingham, AL	414	25,000
03/04/03	Hearthstone	San Antonio, TX	252	7,700
03/04/03	Northgate Village	San Antonio, TX	264	10,150
03/19/03	Lincoln Green I, II & III	San Antonio, TX	680	24,900
03/20/03	Meadows on the Lake	Birmingham, AL	200	10,900
03/20/03	Meadows in the Park	Birmingham, AL	200	10,900
03/20/03	Shoal Run	Birmingham, AL	276	14,350
03/31/03	Colony Place	Fort Myers, FL	300	20,600
04/08/03	Mallgate (1)	Louisville, KY	540	15,500
04/15/03	Summit Chase	Coral Springs, FL	140	8,875
04/16/03	Bayside	Sebring, FL	59	885
04/30/03	Essex Place II (Vacant Land)	Tampa, FL	—	575
05/08/03	Pueblo Villas	Albuquerque, NM	232	9,250
05/14/03	Emerald Bay	Winter Park, FL	432	17,200
05/16/03	Meadowood	Flatwoods, KY	52	975
05/29/03	Spicewood Springs	Jacksonville, FL	512	28,000
05/30/03	Princeton Square	Jacksonville, FL	288	16,750
05/30/03	Boulder Creek	Wilsonville, OR	296	16,700
05/30/03	Bridge Creek	Wilsonville, OR	315	18,100
05/30/03	Settlers Point/Brookfield	Salt Lake City, UT	416	21,500
05/30/03	Ridgewood	Russellville, KY	52	—
06/04/03	Lake Point	Charlotte, NC	296	12,401
06/05/03	Clearlake Pines II	Cocoa, FL	52	1,392
06/05/03	Sky Pines I & II	Orlando, FL	140	3,694
06/05/03	Brandywine East	Winter Haven, FL	38	884
06/05/03	Woodland I & II	Orlando, FL	169	5,175
06/12/03	Parkville	Parkersburg, WV	49	1,063
06/12/03	Cedarwood I	Belpre, OH	44	889
06/24/03	Greenwood Village	Tempe, AZ	270	14,600
06/25/03	Woodbine	Portsmouth, OH	41	660
06/26/03	Laurel Gardens	Coral Springs, FL	384	34,550
06/27/03	Crystal Creek	Phoenix, AZ	273	12,775
06/30/03	Harbor Pointe	Milwaukee, WI	595	27,800
06/30/03	Calais	Arlington, TX	264	12,500

Date Disposed	Property	Location	Number of Units	Disposition Price (in thousands)
01/17/02	Ravenwood	Mauldin, SC	82	$	2,425
01/24/02	Larkspur I & II	Moraine, OH	45		899
01/31/02	Springwood II	Austintown, OH	43		900
02/21/02	Scottsdale Courtyards	Scottsdale, AZ	274		26,500
04/11/02	Applegate	Lordstown, OH	39		723
04/11/02	Applerun	Warren, OH	48		1,054
04/11/02	Brunswick	Cortland, OH	59		1,424
05/01/02	The Landings	Memphis, TN	292		10,300
05/03/02	Waterbury	Clarksville, TN	54		1,385
05/09/02	Arboretum	Tucson, AZ	496		25,000
05/09/02	Orange Grove Village	Tucson, AZ	400		17,400
05/09/02	Village at Tanque Verde	Tucson, AZ	217		9,100
05/14/02	Canyon Crest Views	Riverside, CA	178		20,450
05/14/02	Merrimac Woods	Costa Mesa, CA	123		12,950
05/14/02	Sierra Canyon	Santa Clarita, CA	232		23,500
05/15/02	Meadowood	Wellsville, OH	40		812
05/23/02	Pine Meadow	Greensboro, NC	204		7,550
05/23/02	Palms at South Shore	League City, TX	240		12,850
05/31/02	California Gardens	Jacksonville, FL	71		1,468
05/31/02	Westcreek	Jacksonville, FL	86		2,282
06/19/02	Apple Run	Hillsdale, MI	39		1,047
07/02/02	Cedar Ridge	Arlington, TX	121		5,500
07/02/02	Fielder Crossing	Arlington, TX	119		4,100
07/09/02	Vacant Land	Detroit, MI	—		10
07/11/02	Stonehenge	Tecumseh, MI	48		1,238
07/11/02	Ashgrove	Marshall, MI	51		1,314
07/12/02	Mill Village	Randolph, MA	311		31,800
07/18/02	Meadowood I	Jackson, MI	47		1,450
07/24/02	Mountain Run	Albuquerque, NM	472		21,500
07/30/02	Celebration at Westchase	Houston, TX	367		16,150
07/30/02	Pleasant Ridge	Arlington, TX	63		2,605
07/31/02	Cedargate I & II	Bowling Green, KY	117		3,020
08/15/02	The Cedars	Charlotte, NC	360		14,800
08/29/02	Bourbon Square (Retail)	Palatine, IL	—		1,200
09/30/02	River Bend	Tampa, FL	296		11,200
Various	Four Lakes Condo Units	Lisle, IL	77		8,191

	Wholly Owned Properties		5,711		304,097

01/31/02	Mount Laurel Crossing*	Mt. Laurel, NJ	296		11,317
04/23/02	Foxton*	Seymour, IN	39		—
08/13/02	Chase Knolls*	Los Angeles, CA	—		23,479

	Unconsolidated Properties		335		34,796

Total			6,046	$	338,893

	Institutional Joint Ventures			Stabilized Development Projects(1)			Projects Under Development			Lexford/ Other			Totals
Total projects		45			13			15			26			99	(2)

Total units		10,846			4,116			4,445			3,313			22,720	(2)

EQR's percentage ownership of outstanding debt		25.0	%		97.4	%		100.0	%		21.1	%
EQR's share of outstanding debt(4)	$	121,200		$	335,810		$	317,898	(3)	$	14,702		$	789,610

	Institutional Joint Ventures			Stabilized Development Projects (1)			Projects Under Development			Lexford/ Other			Totals

Total projects	45			10			18			22			95		(2)

Total units	10,846			3,349			4,799			2,704			21,698		(2)

Company’s percentage share of outstanding debt	25.0		%	100.0		%	100.0		%	11.1		%

Company’s share of outstanding debt (4)	$	121,200		$	252,101		$	581,422	(3)	$	5,361		$	960,084

	Cash Flow Hedges			Fair Value Hedges			Forward Starting Swaps			Interest Rate Caps			Offsetting Receive Floating Swaps/Caps			Offsetting Pay Floating Swaps/Caps
Current Notional Balance	$	400,000		$	120,000		$	150,000		$	37,000		$	255,120		$	255,120
Lowest Possible Notional	$	400,000		$	120,000		$	150,000		$	37,000		$	251,410		$	251,410
Highest Possible Notional	$	400,000		$	120,000		$	150,000		$	37,000		$	431,444		$	431,444
Lowest Interest Rate	3.65		%	7.25		%	4.34		%	6.50		%	4.53		%	4.46		%
Highest Interest Rate	5.81		%	7.25		%	4.48		%	6.50		%	6.00		%	6.00		%
Earliest Maturity Date	2003			2005			2014			2004			2003			2003
Latest Maturity Date	2005			2005			2014			2004			2007			2007
Estimated Asset (Liability) Fair Value	$	(9,771	)	$	8,877		$	(2,413	)	$	—		$	(1,136	)	$	1,096

	Properties		Units		Purchase/Sale Price $ Millions
At December 31, 2000	1,104		227,704
Q1/Q2/Q3 2001 Acquisitions	11		2,657		$	288.0
Q1/Q2/Q3 2001 Dispositions	(38	)	(6,241	)	$	298.5
Q1/Q2/Q3 2001 Completed Developments	4		1,470

At September 30, 2001	1,081		225,590
Q4 2001 Acquisitions	3		766		$	100.1
Q4 2001 Dispositions	(11	)	(2,566	)	$	118.4
Q4 2001 Completed Developments	3		1,035
Q4 2001 Unit Configuration Changes	—		(24	)

At December 31, 2001	1,076		224,801
Q1/Q2/Q3 2002 Acquisitions	10		3,053		$	245.4
Q2 2002 Fort Lewis	1		3,637
Q1/Q2/Q3 2002 Dispositions	(35	)	(6,046	)	$	338.9
Q1/Q2/Q3 2002 Completed Developments	7		1,966
Q1/Q2/Q3 2002 Unit Configuration Changes	—		15

At September 30, 2002	1,059		227,426

	Properties		Units		Purchase / Sale Price $ Millions
At December 31, 2001	1,076		224,801
Q1/Q2 2002 Acquisitions	7		1,983		$	166.5
Ft. Lewis Joint Venture	1		3,652
Q1/Q2 2002 Dispositions	(23	)	(3,654	)	$	197.2
Q1/Q2 2002 Completed Developments	4		1,181
At June 30, 2002	1,065		227,963
Q3/Q4 2002 Acquisitions	5		1,651		$	123.4
Q3/Q4 2002 Dispositions	(35	)	(7,059	)	$	349.0
Q3/Q4 2002 Completed Developments	4		1,020
Q3/Q4 2002 Unit Configuration Changes	—		16
At December 31, 2002	1,039		223,591
Q1/Q2 2003 Acquisitions	6		1,958		$	277.7
Q1/Q2 2003 Dispositions	(44	)	(10,308	)	$	498.4
Q1/Q2 2003 Completed Developments	4		1,274
Q1/Q2 2003 Unit Configuration Changes	—		129
At June 30, 2003	1,005		216,644

~~Q3 2002~~ Q2 2003		~~93.67~~ 93.0	%
~~Q3 2001~~ Q2 2002		~~94.54~~ 94.1	%
Change		(1.1
	~~Change~~		~~(0.87~~	)%)

	As of 6/30/03 $Millions*		For the Six Months Ended 6/30/03 Weighted Average Rate*
Secured	$	2,851	5.96	%
Unsecured	2,854		6.38	%
Total	$	5,705	6.17	%

Fixed Rate	$	5,073	6.67	%
Floating Rate	632		2.66	%
Total	$	5,705	6.17	%

Above Totals Include:
Tax Exempt:
Fixed	$	533	4.28	%
Floating	439		2.13	%
Total	$	972	3.31	%

Unsecured Revolving Credit Facility	$	—	1.85	%

		$ Millions		Weighted Average Rate
Secured		$	3,089	6.22	%
Unsecured			2,482	6.41	%

	Total	$	5,571	6.30	%
Fixed Rate*		$	4,807	6.89	%
Floating Rate*			764	2.58	%

	Total*	$	5,571	6.30	%
Above Totals Include:
Total Tax Exempt		$	986	3.71	%
Unsecured Revolving Credit Facility		$	35	2.44	%

Year	$ Millions		% of Total
2003	$	250	4.4	%
2004	654		11.5	%
2005*	606		10.6	%
2006	490		8.6	%
2007	298		5.2	%
2008	503		8.8	%
2009	248		4.3	%
2010	198		3.5	%
2011	691		12.1	%
2012+	1,767		31.0	%
Total	$	5,705	100.0	%

Total Debt			$	5,570,576,350
Common Shares & OP Units		298,387,904
Common Share Equivalents (see below)		14,965,147

Total Outstanding at quarter-end		313,353,051
Common Share Price at September 30, 2002	$	23.94
				7,501,672,041
Perpetual Preferred Shares Liquidation Value				565,000,000
Perpetual Preference Interests Liquidation Value				211,500,000

Total Market Capitalization			$	13,848,748,391
Debt/Total Market Capitalization				40.22%

Total Debt			$	5,704,691,089
Common Shares & OP Units	295,472,629
Common Share Equivalents (see below)	14,922,693
Total Outstanding at quarter-end	310,395,322
Common Share Price at June 30, 2003	$	25.95
			8,054,758,606
Perpetual Preferred Shares Liquidation Value			615,000,000
Perpetual Preference Interests Liquidation Value			211,500,000
Total Market Capitalization			$	14,585,949,695

Debt/Total Market Capitalization			39		%

		Shares/Units	Conversion Ratio	Common Share Equivalents
Preferred Shares:
	Series E	2,563,614	1.1128	2,852,790
	Series G	1,264,692	8.5360	10,795,408
	Series H	51,228	1.4480	74,178
Preference Interests:
	Series H	190,000	1.5108	287,052
	Series I	270,000	1.4542	392,634
	Series J	230,000	1.4108	324,484
Junior Preference Units:
	Series A	56,616	4.081600	231,084
	Series B	7,367	1.020408	7,517

Total				14,965,147

	Shares/Units	Conversion Ratio	Common Share Equivalents
Preferred Shares:
Series E	2,525,464	1.1128	2,810,336
Series G	1,264,692	8.5360	10,795,408
Series H	51,228	1.4480	74,178
Preference Interests:
Series H	190,000	1.5108	287,052
Series I	270,000	1.4542	392,634
Series J	230,000	1.4108	324,484
Junior Preference Units:
Series A	56,616	4.081600	231,084
Series B	7,367	1.020408	7,517

Total			14,922,693