EQUITY RESIDENTIAL - Quarter Report: 2021 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number: 1-12252 (Equity Residential)

Commission File Number: 0-24920 (ERP Operating Limited Partnership)

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

Maryland (Equity Residential)		13-3675988 (Equity Residential)
Illinois (ERP Operating Limited Partnership)		36-3894853 (ERP Operating Limited Partnership)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Two North Riverside Plaza, Chicago, Illinois 60606		(312) 474-1300
(Address of principal executive offices) (Zip Code)		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares of Beneficial Interest, $0.01 Par Value (Equity Residential)	EQR	New York Stock Exchange
7.57% Notes due August 15, 2026 (ERP Operating Limited Partnership)	N/A	New York Stock Exchange

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.


Equity Residential Yes ☒ No ☐	ERP Operating Limited Partnership Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Equity Residential Yes ☒ No ☐	ERP Operating Limited Partnership Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Equity Residential:

ERP Operating Limited Partnership:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


Equity Residential ☐	ERP Operating Limited Partnership ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Equity Residential Yes ☐ No ☒	ERP Operating Limited Partnership Yes ☐ No ☒

The number of EQR Common Shares of Beneficial Interest, $0.01 par value, outstanding on October 22, 2021 was 375,016,222.

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EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended September 30, 2021 of Equity Residential and ERP Operating Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “EQR” mean Equity Residential, a Maryland real estate investment trust (“REIT”), and references to “ERPOP” mean ERP Operating Limited Partnership, an Illinois limited partnership. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:

EQR is the general partner of, and as of September 30, 2021 owned an approximate 96.7% ownership interest in, ERPOP. The remaining 3.3% interest is owned by limited partners. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of EQR consists of the same members as the management of ERPOP.

The Company is structured as an umbrella partnership REIT (“UPREIT”) and EQR contributes all net proceeds from its various equity offerings to ERPOP. In return for those contributions, EQR receives a number of OP Units (see definition below) in ERPOP equal to the number of Common Shares it has issued in the equity offering. The Company may acquire properties in transactions that include the issuance of OP Units as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales. This is one of the reasons why the Company is structured in the manner shown above. Based on the terms of ERPOP’s partnership agreement, OP Units can be exchanged with Common Shares on a one-for-one basis because the Company maintains a one-for-one relationship between the OP Units of ERPOP issued to EQR and the outstanding Common Shares.

The Company believes that combining the reports on Form 10-Q of EQR and ERPOP into this single report provides the following benefits:

•

enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

•

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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The Company believes it is important to understand the few differences between EQR and ERPOP in the context of how EQR and ERPOP operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR’s primary function is acting as the general partner of ERPOP. EQR also issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by EQR (which are contributed to the capital of ERPOP in exchange for additional partnership interests in ERPOP (“OP Units”) (on a one-for-one Common Share per OP Unit basis) or additional preference units in ERPOP (on a one-for-one preferred share per preference unit basis)), the Operating Partnership generates all remaining capital required by the Company’s business. These sources include the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility and/or commercial paper program, the issuance of secured and unsecured debt and partnership interests, and proceeds received from disposition of certain properties and joint venture interests.

Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in the Company’s financial statements. The noncontrolling interests in the Operating Partnership’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and limited partner OP Unit holders of the Operating Partnership. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of each entity’s debt, noncontrolling interests and shareholders’ equity or partners’ capital, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.

This report also includes separate Part I, Item 4, Controls and Procedures, sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership.

As general partner with control of ERPOP, EQR consolidates ERPOP for financial reporting purposes, and EQR essentially has no assets or liabilities other than its investment in ERPOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

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	PAGE

PART I.

Item 1. Financial Statements of Equity Residential:

Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	2

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2021 and 2020	3

Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	5

Consolidated Statements of Changes in Equity for the nine months and quarters ended September 30, 2021 and 2020	8

Financial Statements of ERP Operating Limited Partnership:

Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	10

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2021 and 2020	11

Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	13

Consolidated Statements of Changes in Capital for the nine months and quarters ended September 30, 2021 and 2020	16

Notes to Consolidated Financial Statements of Equity Residential and ERP Operating Limited Partnership	18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3. Quantitative and Qualitative Disclosures about Market Risk	51

Item 4. Controls and Procedures	51

PART II.

Item 1. Legal Proceedings	52

Item 1A. Risk Factors	52

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3. Defaults Upon Senior Securities	52

Item 4. Mine Safety Disclosures	52

Item 5. Other Information	52

Item 6. Exhibits	52

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EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)

	September 30,			December 31,
	2021			2020
ASSETS
Land	$	5,779,686		$	5,785,367
Depreciable property		21,840,344			20,920,654
Projects under development		163,659			411,134
Land held for development		82,026			86,170
Investment in real estate		27,865,715			27,203,325
Accumulated depreciation		(8,260,846	)		(7,859,657	)
Investment in real estate, net		19,604,869			19,343,668
Investments in unconsolidated entities		79,429			52,782
Cash and cash equivalents		39,707			42,591
Restricted deposits		187,042			57,137
Right-of-use assets		477,693			499,287
Other assets		274,275			291,426
Total assets	$	20,663,015		$	20,286,891

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	2,281,165		$	2,293,890
Notes, net		5,833,483			5,335,536
Line of credit and commercial paper		30,000			414,830
Accounts payable and accrued expenses		166,522			107,366
Accrued interest payable		56,777			65,896
Lease liabilities		313,361			329,130
Other liabilities		350,201			345,064
Security deposits		64,617			60,480
Distributions payable		233,306			232,262
Total liabilities		9,329,432			9,184,454

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		459,933			338,951
Equity:
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 745,600 shares issued and outstanding as of September 30, 2021 and December 31, 2020		37,280			37,280
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 375,002,588 shares issued and outstanding as of September 30, 2021 and 372,302,000 shares issued and outstanding as of December 31, 2020		3,750			3,723
Paid in capital		9,131,078			9,128,599
Retained earnings		1,527,115			1,399,715
Accumulated other comprehensive income (loss)		(36,666	)		(43,666	)
Total shareholders’ equity		10,662,557			10,525,651
Noncontrolling Interests:
Operating Partnership		208,955			233,162
Partially Owned Properties		2,138			4,673
Total Noncontrolling Interests		211,093			237,835
Total equity		10,873,650			10,763,486
Total liabilities and equity	$	20,663,015		$	20,286,891

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per share data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
REVENUES
Rental income	$	1,818,867		$	1,958,270		$	623,206		$	622,433

EXPENSES
Property and maintenance		341,261			333,333			116,461			113,065
Real estate taxes and insurance		297,780			288,043			96,909			95,273
Property management		74,357			71,513			23,772			20,196
General and administrative		43,102			37,212			13,041			10,859
Depreciation		616,032			619,003			215,397			200,605
Total expenses		1,372,532			1,349,104			465,580			439,998

Net gain (loss) on sales of real estate properties		587,623			352,218			363,928			(25	)

Operating income		1,033,958			961,384			521,554			182,410

Interest and other income		25,293			4,006			973			535
Other expenses		(10,908	)		(8,324	)		(3,456	)		(4,097	)
Interest:
Expense incurred, net		(202,733	)		(248,349	)		(68,251	)		(80,874	)
Amortization of deferred financing costs		(6,172	)		(6,253	)		(2,048	)		(2,101	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		839,438			702,464			448,772			95,873
Income and other tax (expense) benefit		(679	)		(502	)		(284	)		(262	)
Income (loss) from investments in unconsolidated entities		(3,028	)		(2,445	)		(1,156	)		(246	)
Net gain (loss) on sales of land parcels		5			—			—			—
Net income		835,736			699,517			447,332			95,365
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(27,903	)		(24,624	)		(14,847	)		(3,376	)
Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Net income attributable to controlling interests		805,876			660,780			431,951			91,286
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Net income available to Common Shares	$	803,558		$	658,462		$	431,178		$	90,513

Earnings per share – basic:
Net income available to Common Shares	$	2.15		$	1.77		$	1.15		$	0.24
Weighted average Common Shares outstanding		373,474			371,749			374,308			371,869

Earnings per share – diluted:
Net income available to Common Shares	$	2.14		$	1.77		$	1.15		$	0.24
Weighted average Common Shares outstanding		387,642			385,973			388,374			385,652

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per share data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
Comprehensive income:
Net income	$	835,736		$	699,517		$	447,332		$	95,365
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			—
Losses reclassified into earnings from other comprehensive income		7,000			17,275			2,363			5,877
Other comprehensive income (loss)		7,000			16,085			2,363			5,877
Comprehensive income		842,736			715,602			449,695			101,242
Comprehensive (income) attributable to Noncontrolling Interests		(30,100	)		(39,316	)		(15,459	)		(4,290	)
Comprehensive income attributable to controlling interests	$	812,636		$	676,286		$	434,236		$	96,952

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	835,736		$	699,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		616,032			619,003
Amortization of deferred financing costs		6,172			6,253
Amortization of above/below market lease intangibles		(154	)		(53	)
Amortization of discounts and premiums on debt		3,934			3,834
Amortization of deferred settlements on derivative instruments		6,991			17,266
Amortization of right-of-use assets		10,286			8,785
Write-off of pursuit costs		3,557			4,864
(Income) loss from investments in unconsolidated entities		3,028			2,445
Distributions from unconsolidated entities – return on capital		—			100
Net (gain) loss on sales of real estate properties		(587,623	)		(352,218	)
Net (gain) loss on sales of land parcels		(5	)		—
Realized/unrealized (gain) loss on derivative instruments		—			50
Realized (gain) loss on sale of investment securities		(23,432	)		—
Compensation paid with Company Common Shares		21,919			18,275
Other operating activities, net		—			1,805
Changes in assets and liabilities:
(Increase) decrease in other assets		16,269			(30,197	)
Increase (decrease) in accounts payable and accrued expenses		69,170			54,418
Increase (decrease) in accrued interest payable		(9,119	)		(1,183	)
Increase (decrease) in lease liabilities		(4,112	)		(1,650	)
Increase (decrease) in other liabilities		5,427			(8,381	)
Increase (decrease) in security deposits		4,137			(8,609	)
Net cash provided by operating activities		978,213			1,034,324
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(1,022,275	)		(48,898	)
Investment in real estate – development/other		(172,850	)		(157,778	)
Capital expenditures to real estate		(107,706	)		(92,123	)
Non-real estate capital additions		(1,251	)		(19,290	)
Interest capitalized for real estate and unconsolidated entities under development		(12,365	)		(6,880	)
Proceeds from disposition of real estate, net		1,014,328			747,600
Investments in unconsolidated entities		(31,081	)		(6,664	)
Distributions from unconsolidated entities – return of capital		4			1,000
Purchase of investment securities and other investments		(167,791	)		(509	)
Proceeds from sale of investment securities		191,398			—
Net cash provided by (used for) investing activities		(309,589	)		416,458

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(6,447	)	$	(2,923	)
Mortgage notes payable, net:
Proceeds		51,298			505,375
Lump sum payoffs		(59,880	)		(127,767	)
Scheduled principal repayments		(5,570	)		(5,821	)
Notes, net:
Proceeds		497,470			—
Line of credit and commercial paper:
Line of credit proceeds		—			1,870,000
Line of credit repayments		—			(1,890,000	)
Commercial paper proceeds		4,305,170			6,726,167
Commercial paper repayments		(4,690,000	)		(7,724,000	)
Proceeds from (payments on) settlement of derivative instruments		—			(1,240	)
Finance ground lease principal payments		(349	)		—
Proceeds from Employee Share Purchase Plan (ESPP)		3,455			3,556
Proceeds from exercise of options		68,807			11,426
Payment of offering costs		(267	)		—
Other financing activities, net		(31	)		(31	)
Contributions – Noncontrolling Interests – Partially Owned Properties		—			417
Contributions – Noncontrolling Interests – Operating Partnership		—			12
Distributions:
Common Shares		(674,531	)		(659,668	)
Preferred Shares		(2,318	)		(2,318	)
Noncontrolling Interests – Operating Partnership		(23,949	)		(24,440	)
Noncontrolling Interests – Partially Owned Properties		(4,461	)		(11,312	)
Net cash provided by (used for) financing activities		(541,603	)		(1,332,567	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		127,021			118,215
Cash and cash equivalents and restricted deposits, beginning of period		99,728			116,999
Cash and cash equivalents and restricted deposits, end of period	$	226,749		$	235,214

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	39,707		$	178,333
Restricted deposits		187,042			56,881
Total cash and cash equivalents and restricted deposits, end of period	$	226,749		$	235,214

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	199,799		$	223,703
Net cash paid (received) for income and other taxes	$	1,040		$	(1,092	)
Amortization of deferred financing costs:
Investment in real estate, net	$	(227	)	$	(180	)
Other assets	$	1,754		$	1,755
Mortgage notes payable, net	$	1,702		$	1,337
Notes, net	$	2,943		$	3,341
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	2,069		$	1,791
Notes, net	$	1,865		$	2,043
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(9	)	$	(9	)
Accumulated other comprehensive income	$	7,000		$	17,275
Write-off of pursuit costs:
Investment in real estate, net	$	3,000		$	4,621
Other assets	$	533		$	219
Accounts payable and accrued expenses	$	24		$	24
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	2,062		$	1,474
Other liabilities	$	966		$	971
Realized/unrealized (gain) loss on derivative instruments:
Other liabilities	$	—		$	1,240
Accumulated other comprehensive income	$	—		$	(1,190	)
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(12,260	)	$	(6,880	)
Investments in unconsolidated entities	$	(105	)	$	—
Investments in unconsolidated entities:
Investment in real estate, net	$	967		$	—
Investments in unconsolidated entities	$	(30,038	)	$	(5,164	)
Other liabilities	$	(2,010	)	$	(1,500	)
Debt financing costs:
Other assets	$	228		$	(231	)
Mortgage notes payable, net	$	(2,344	)	$	(2,692	)
Notes, net	$	(4,331	)	$	—
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	11,308		$	—
Lease liabilities	$	(11,308	)	$	—
Non-cash share distribution from unconsolidated entities:
Investments in unconsolidated entities	$	1,430		$	—
Other assets	$	(1,430	)	$	—

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands except per share data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
SHAREHOLDERS’ EQUITY
PREFERRED SHARES
Balance, beginning of period	$	37,280		$	37,280		$	37,280		$	37,280
Balance, end of period	$	37,280		$	37,280		$	37,280		$	37,280
COMMON SHARES, $0.01 PAR VALUE
Balance, beginning of period	$	3,723		$	3,717		$	3,744		$	3,722
Conversion of OP Units into Common Shares		11			1			—			—
Exercise of share options		14			2			6			—
Employee Share Purchase Plan (ESPP)		1			—			—			—
Share-based employee compensation expense:
Restricted shares		1			2			—			—
Balance, end of period	$	3,750		$	3,722		$	3,750		$	3,722
PAID IN CAPITAL
Balance, beginning of period	$	9,128,599		$	8,965,577		$	9,110,121		$	9,118,332
Common Share Issuance:
Conversion of OP Units into Common Shares		68,246			3,912			1,597			57
Exercise of share options		68,793			11,424			29,178			104
Employee Share Purchase Plan (ESPP)		3,454			3,556			788			1,197
Share-based employee compensation expense:
Restricted shares		6,571			9,236			1,758			1,984
Share options		2,541			1,819			565			526
ESPP discount		798			626			165			210
Offering costs		(267	)		—			(267	)		—
Supplemental Executive Retirement Plan (SERP)		(1,335	)		(395	)		722			111
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership		(119,237	)		169,825			(17,271	)		41,072
Adjustment for Noncontrolling Interests ownership in Operating Partnership		(27,085	)		438			3,722			2,425
Balance, end of period	$	9,131,078		$	9,166,018		$	9,131,078		$	9,166,018
RETAINED EARNINGS
Balance, beginning of period	$	1,399,715		$	1,386,495		$	1,321,875		$	1,505,694
Net income attributable to controlling interests		805,876			660,780			431,951			91,286
Common Share distributions		(676,158	)		(673,019	)		(225,938	)		(224,269	)
Preferred Share distributions		(2,318	)		(2,318	)		(773	)		(773	)
Balance, end of period	$	1,527,115		$	1,371,938		$	1,527,115		$	1,371,938
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(43,666	)	$	(77,563	)	$	(39,029	)	$	(67,355	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			—
Losses reclassified into earnings from other comprehensive income		7,000			17,275			2,363			5,877
Balance, end of period	$	(36,666	)	$	(61,478	)	$	(36,666	)	$	(61,478	)

DISTRIBUTIONS
Distributions declared per Common Share outstanding	$	1.8075		$	1.8075		$	0.6025		$	0.6025

See accompanying notes

Table of Contents

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Amounts in thousands except per share data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
NONCONTROLLING INTERESTS
OPERATING PARTNERSHIP
Balance, beginning of period	$	233,162		$	227,837		$	205,691		$	235,169
Issuance of restricted units to Noncontrolling Interests		—			12			—			—
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner		(68,257	)		(3,913	)		(1,597	)		(57	)
Equity compensation associated with Noncontrolling Interests		14,173			9,525			3,642			2,499
Net income attributable to Noncontrolling Interests		27,903			24,624			14,847			3,376
Distributions to Noncontrolling Interests		(23,366	)		(25,000	)		(7,367	)		(7,963	)
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership		(1,745	)		(131	)		(2,539	)		1,917
Adjustment for Noncontrolling Interests ownership in Operating Partnership		27,085			(438	)		(3,722	)		(2,425	)
Balance, end of period	$	208,955		$	232,516		$	208,955		$	232,516
PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	4,673		$	1,183		$	2,365		$	4,634
Net income attributable to Noncontrolling Interests		1,957			14,113			534			703
Contributions by Noncontrolling Interests		—			417			—			76
Distributions to Noncontrolling Interests		(4,492	)		(11,343	)		(761	)		(1,043	)
Balance, end of period	$	2,138		$	4,370		$	2,138		$	4,370

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

	September 30,			December 31,
	2021			2020
ASSETS
Land	$	5,779,686		$	5,785,367
Depreciable property		21,840,344			20,920,654
Projects under development		163,659			411,134
Land held for development		82,026			86,170
Investment in real estate		27,865,715			27,203,325
Accumulated depreciation		(8,260,846	)		(7,859,657	)
Investment in real estate, net		19,604,869			19,343,668
Investments in unconsolidated entities		79,429			52,782
Cash and cash equivalents		39,707			42,591
Restricted deposits		187,042			57,137
Right-of-use assets		477,693			499,287
Other assets		274,275			291,426
Total assets	$	20,663,015		$	20,286,891

LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net	$	2,281,165		$	2,293,890
Notes, net		5,833,483			5,335,536
Line of credit and commercial paper		30,000			414,830
Accounts payable and accrued expenses		166,522			107,366
Accrued interest payable		56,777			65,896
Lease liabilities		313,361			329,130
Other liabilities		350,201			345,064
Security deposits		64,617			60,480
Distributions payable		233,306			232,262
Total liabilities		9,329,432			9,184,454

Commitments and contingencies

Redeemable Limited Partners		459,933			338,951
Capital:
Partners’ Capital:
Preference Units		37,280			37,280
General Partner		10,661,943			10,532,037
Limited Partners		208,955			233,162
Accumulated other comprehensive income (loss)		(36,666	)		(43,666	)
Total partners’ capital		10,871,512			10,758,813
Noncontrolling Interests – Partially Owned Properties		2,138			4,673
Total capital		10,873,650			10,763,486
Total liabilities and capital	$	20,663,015		$	20,286,891

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per Unit data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
REVENUES
Rental income	$	1,818,867		$	1,958,270		$	623,206		$	622,433

EXPENSES
Property and maintenance		341,261			333,333			116,461			113,065
Real estate taxes and insurance		297,780			288,043			96,909			95,273
Property management		74,357			71,513			23,772			20,196
General and administrative		43,102			37,212			13,041			10,859
Depreciation		616,032			619,003			215,397			200,605
Total expenses		1,372,532			1,349,104			465,580			439,998

Net gain (loss) on sales of real estate properties		587,623			352,218			363,928			(25	)

Operating income		1,033,958			961,384			521,554			182,410

Interest and other income		25,293			4,006			973			535
Other expenses		(10,908	)		(8,324	)		(3,456	)		(4,097	)
Interest:
Expense incurred, net		(202,733	)		(248,349	)		(68,251	)		(80,874	)
Amortization of deferred financing costs		(6,172	)		(6,253	)		(2,048	)		(2,101	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		839,438			702,464			448,772			95,873
Income and other tax (expense) benefit		(679	)		(502	)		(284	)		(262	)
Income (loss) from investments in unconsolidated entities		(3,028	)		(2,445	)		(1,156	)		(246	)
Net gain (loss) on sales of land parcels		5			—			—			—
Net income		835,736			699,517			447,332			95,365
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Net income attributable to controlling interests	$	833,779		$	685,404		$	446,798		$	94,662
ALLOCATION OF NET INCOME:
Preference Units	$	2,318		$	2,318		$	773		$	773

General Partner	$	803,558		$	658,462		$	431,178		$	90,513
Limited Partners		27,903			24,624			14,847			3,376
Net income available to Units	$	831,461		$	683,086		$	446,025		$	93,889

Earnings per Unit – basic:
Net income available to Units	$	2.15		$	1.77		$	1.15		$	0.24
Weighted average Units outstanding		385,841			384,759			386,327			384,871

Earnings per Unit – diluted:
Net income available to Units	$	2.14		$	1.77		$	1.15		$	0.24
Weighted average Units outstanding		387,642			385,973			388,374			385,652

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
Comprehensive income:
Net income	$	835,736		$	699,517		$	447,332		$	95,365
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			—
Losses reclassified into earnings from other comprehensive income		7,000			17,275			2,363			5,877
Other comprehensive income (loss)		7,000			16,085			2,363			5,877
Comprehensive income		842,736			715,602			449,695			101,242
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Comprehensive income attributable to controlling interests	$	840,779		$	701,489		$	449,161		$	100,539

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	835,736		$	699,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		616,032			619,003
Amortization of deferred financing costs		6,172			6,253
Amortization of above/below market lease intangibles		(154	)		(53	)
Amortization of discounts and premiums on debt		3,934			3,834
Amortization of deferred settlements on derivative instruments		6,991			17,266
Amortization of right-of-use assets		10,286			8,785
Write-off of pursuit costs		3,557			4,864
(Income) loss from investments in unconsolidated entities		3,028			2,445
Distributions from unconsolidated entities – return on capital		—			100
Net (gain) loss on sales of real estate properties		(587,623	)		(352,218	)
Net (gain) loss on sales of land parcels		(5	)		—
Realized/unrealized (gain) loss on derivative instruments		—			50
Realized (gain) loss on sale of investment securities		(23,432	)		—
Compensation paid with Company Common Shares		21,919			18,275
Other operating activities, net		—			1,805
Changes in assets and liabilities:
(Increase) decrease in other assets		16,269			(30,197	)
Increase (decrease) in accounts payable and accrued expenses		69,170			54,418
Increase (decrease) in accrued interest payable		(9,119	)		(1,183	)
Increase (decrease) in lease liabilities		(4,112	)		(1,650	)
Increase (decrease) in other liabilities		5,427			(8,381	)
Increase (decrease) in security deposits		4,137			(8,609	)
Net cash provided by operating activities		978,213			1,034,324
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(1,022,275	)		(48,898	)
Investment in real estate – development/other		(172,850	)		(157,778	)
Capital expenditures to real estate		(107,706	)		(92,123	)
Non-real estate capital additions		(1,251	)		(19,290	)
Interest capitalized for real estate and unconsolidated entities under development		(12,365	)		(6,880	)
Proceeds from disposition of real estate, net		1,014,328			747,600
Investments in unconsolidated entities		(31,081	)		(6,664	)
Distributions from unconsolidated entities – return of capital		4			1,000
Purchase of investment securities and other investments		(167,791	)		(509	)
Proceeds from sale of investment securities		191,398			—
Net cash provided by (used for) investing activities		(309,589	)		416,458

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(6,447	)	$	(2,923	)
Mortgage notes payable, net:
Proceeds		51,298			505,375
Lump sum payoffs		(59,880	)		(127,767	)
Scheduled principal repayments		(5,570	)		(5,821	)
Notes, net:
Proceeds		497,470			—
Line of credit and commercial paper:
Line of credit proceeds		—			1,870,000
Line of credit repayments		—			(1,890,000	)
Commercial paper proceeds		4,305,170			6,726,167
Commercial paper repayments		(4,690,000	)		(7,724,000	)
Proceeds from (payments on) settlement of derivative instruments		—			(1,240	)
Finance ground lease principal payments		(349	)		—
Proceeds from EQR’s Employee Share Purchase Plan (ESPP)		3,455			3,556
Proceeds from exercise of EQR options		68,807			11,426
Payment of offering costs		(267	)		—
Other financing activities, net		(31	)		(31	)
Contributions – Noncontrolling Interests – Partially Owned Properties		—			417
Contributions – Limited Partners		—			12
Distributions:
OP Units – General Partner		(674,531	)		(659,668	)
Preference Units		(2,318	)		(2,318	)
OP Units – Limited Partners		(23,949	)		(24,440	)
Noncontrolling Interests – Partially Owned Properties		(4,461	)		(11,312	)
Net cash provided by (used for) financing activities		(541,603	)		(1,332,567	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		127,021			118,215
Cash and cash equivalents and restricted deposits, beginning of period		99,728			116,999
Cash and cash equivalents and restricted deposits, end of period	$	226,749		$	235,214

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	39,707		$	178,333
Restricted deposits		187,042			56,881
Total cash and cash equivalents and restricted deposits, end of period	$	226,749		$	235,214

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	199,799		$	223,703
Net cash paid (received) for income and other taxes	$	1,040		$	(1,092	)
Amortization of deferred financing costs:
Investment in real estate, net	$	(227	)	$	(180	)
Other assets	$	1,754		$	1,755
Mortgage notes payable, net	$	1,702		$	1,337
Notes, net	$	2,943		$	3,341
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	2,069		$	1,791
Notes, net	$	1,865		$	2,043
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(9	)	$	(9	)
Accumulated other comprehensive income	$	7,000		$	17,275
Write-off of pursuit costs:
Investment in real estate, net	$	3,000		$	4,621
Other assets	$	533		$	219
Accounts payable and accrued expenses	$	24		$	24
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	2,062		$	1,474
Other liabilities	$	966		$	971
Realized/unrealized (gain) loss on derivative instruments:
Other liabilities	$	—		$	1,240
Accumulated other comprehensive income	$	—		$	(1,190	)
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(12,260	)	$	(6,880	)
Investments in unconsolidated entities	$	(105	)	$	—
Investments in unconsolidated entities:
Investment in real estate, net	$	967		$	—
Investments in unconsolidated entities	$	(30,038	)	$	(5,164	)
Other liabilities	$	(2,010	)	$	(1,500	)
Debt financing costs:
Other assets	$	228		$	(231	)
Mortgage notes payable, net	$	(2,344	)	$	(2,692	)
Notes, net	$	(4,331	)	$	—
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	11,308		$	—
Lease liabilities	$	(11,308	)	$	—
Non-cash share distribution from unconsolidated entities:
Investments in unconsolidated entities	$	1,430		$	—
Other assets	$	(1,430	)	$	—

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Amounts in thousands except per Unit data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
PARTNERS’ CAPITAL
PREFERENCE UNITS
Balance, beginning of period	$	37,280		$	37,280		$	37,280		$	37,280
Balance, end of period	$	37,280		$	37,280		$	37,280		$	37,280
GENERAL PARTNER
Balance, beginning of period	$	10,532,037		$	10,355,789		$	10,435,740		$	10,627,748
OP Unit Issuance:
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		68,257			3,913			1,597			57
Exercise of EQR share options		68,807			11,426			29,184			104
EQR’s Employee Share Purchase Plan (ESPP)		3,455			3,556			788			1,197
Share-based employee compensation expense:
EQR restricted shares		6,572			9,238			1,758			1,984
EQR share options		2,541			1,819			565			526
EQR ESPP discount		798			626			165			210
Net income available to Units – General Partner		803,558			658,462			431,178			90,513
OP Units – General Partner distributions		(676,158	)		(673,019	)		(225,938	)		(224,269	)
Offering costs		(267	)		—			(267	)		—
Supplemental Executive Retirement Plan (SERP)		(1,335	)		(395	)		722			111
Change in market value of Redeemable Limited Partners		(119,237	)		169,825			(17,271	)		41,072
Adjustment for Limited Partners ownership in Operating Partnership		(27,085	)		438			3,722			2,425
Balance, end of period	$	10,661,943		$	10,541,678		$	10,661,943		$	10,541,678
LIMITED PARTNERS
Balance, beginning of period	$	233,162		$	227,837		$	205,691		$	235,169
Issuance of restricted units to Limited Partners		—			12			—			—
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		(68,257	)		(3,913	)		(1,597	)		(57	)
Equity compensation associated with Units – Limited Partners		14,173			9,525			3,642			2,499
Net income available to Units – Limited Partners		27,903			24,624			14,847			3,376
Units – Limited Partners distributions		(23,366	)		(25,000	)		(7,367	)		(7,963	)
Change in carrying value of Redeemable Limited Partners		(1,745	)		(131	)		(2,539	)		1,917
Adjustment for Limited Partners ownership in Operating Partnership		27,085			(438	)		(3,722	)		(2,425	)
Balance, end of period	$	208,955		$	232,516		$	208,955		$	232,516
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(43,666	)	$	(77,563	)	$	(39,029	)	$	(67,355	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			—
Losses reclassified into earnings from other comprehensive income		7,000			17,275			2,363			5,877
Balance, end of period	$	(36,666	)	$	(61,478	)	$	(36,666	)	$	(61,478	)

DISTRIBUTIONS
Distributions declared per Unit outstanding	$	1.8075		$	1.8075		$	0.6025		$	0.6025

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	4,673		$	1,183		$	2,365		$	4,634
Net income attributable to Noncontrolling Interests		1,957			14,113			534			703
Contributions by Noncontrolling Interests		—			417			—			76
Distributions to Noncontrolling Interests		(4,492	)		(11,343	)		(761	)		(1,043	)
Balance, end of period	$	2,138		$	4,370		$	2,138		$	4,370

See accompanying notes

Table of Contents

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Business

Equity Residential (“EQR”) is an S&P 500 company focused on the acquisition, development and management of residential properties located in and around dynamic cities that attract high quality long-term renters, a business that is conducted on its behalf by ERP Operating Limited Partnership (“ERPOP”). EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.

EQR is the general partner of, and as of September 30, 2021 owned an approximate 96.7% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.

As of September 30, 2021, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 307 properties located in 10 states and the District of Columbia consisting of 79,322 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):

	Properties		Apartment Units
Wholly Owned Properties		290		75,548
Partially Owned Properties – Consolidated		17		3,774
		307		79,322

Note: Effective July 31, 2021, the Company took over management of its last remaining third-party master-leased property containing 162 apartment units located in the Washington D.C. market and the property is now included in the Wholly Owned Properties count.

COVID-19 Pandemic

The Company continues to monitor the effects of and take various actions in response to the novel coronavirus (“COVID-19”) pandemic and its accompanying variants. Its duration, severity and the extent of the adverse health impact on the general population, our residents and employees, the rate of vaccine distribution and effectiveness of vaccinations, the overall reopening progress in the cities in which we operate and the potential long-term changes in customer preferences for living in our communities, are among the many unknowns that have had or could continue to have a significant future impact on the Company. These, among other items, have impacted the economy, the unemployment rate and our operations and could materially affect our future consolidated results of operations, financial condition, liquidity, investments and overall performance. There have been no material changes to the overall COVID-19 disclosures that were discussed in the notes to the consolidated financial statements of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020.

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. Operating results for the nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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In preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In response to the COVID-19 pandemic, management evaluated whether its estimates, such as lease collectibility (discussed below in Recently Adopted Accounting Pronouncements) and impairment, required revised approaches and generally concluded that no revisions were necessary at this time.

The balance sheets at December 31, 2020 have been derived from the audited financial statements at that date but do 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 definitions of capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020.

Income and Other Taxes

EQR has elected to be taxed as a REIT. This, along with the nature of the operations of its operating properties, resulted in no provision for federal income taxes at the EQR level. In addition, ERPOP generally is not liable for federal income taxes as the partners recognize their allocable share of income or loss in their tax returns; therefore no provision for federal income taxes has been made at the ERPOP level. Historically, the Company has generally only incurred certain state and local income, excise and franchise taxes. The Company has elected taxable REIT subsidiary (“TRS”) status for certain of its corporate subsidiaries and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Included in the CARES Act were tax provisions which increased allowable interest expense deductions for 2019 and 2020 and increased the ability for taxpayers to use net operating losses. These provisions did not result in a material impact to the Company’s taxable income or tax liabilities.

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued an amendment to the debt and equity financial instruments standards which simplifies the accounting for convertible instruments and accounting for contracts in an entity’s own equity. Instead of being required to assess whether an equity contract permits settlement in unregistered shares, which may require a legal analysis under the securities laws, entities will only analyze whether cash settlements are explicitly required when registered shares are unavailable. As a result, such contracts may be classified in permanent rather than mezzanine equity, which may affect the way the Company’s OP Units are presented on its financial statements. The update is effective for the Company beginning on January 1, 2022 as the Company did not early adopt the standard as allowed on January 1, 2021. The Company is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

Recently Adopted Accounting Pronouncements

In August 2021, the FASB issued an amendment to the presentation of financial statements standard which aligns the financial statements and disclosure requirements with those of the final rules released by the SEC in May 2020. The amendment changes the significance tests that determine what disclosures about significant business acquisitions are required, the periods the financial statements must cover and the pro forma financial information that must be included in certain reports. The amendment was effective for the Company upon issuance on August 9, 2021. The Company has not yet acquired businesses that exceed the threshold as defined by the standard, therefore, the amendment did not have a material effect on its consolidated results of operations and financial position.

In March 2020, the FASB issued an amendment to the reference rate reform standard which provides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. An example of such reform is the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. Entities that make this optional expedient election would not have to remeasure the contracts at the modification date or reassess the accounting treatment if certain criteria are met and would continue applying hedge accounting for relationships affected by reference rate reform. The new standard was effective for the Company upon issuance and elections can be made through December 31, 2022. The Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index

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upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, a FASB staff question and answer document was issued which intended to reduce the challenges of evaluating the enforceable rights and obligations of leases for concessions granted to lessees in response to the COVID-19 pandemic. We elected not to evaluate whether qualifying concessions provided by the Company in response to the COVID-19 pandemic are a lease modification, subject to the criteria that the total payments under the amended lease cannot result in a substantial increase in the rights of the lessor or obligations of the lessee. We also elected to treat the concessions as though they were contemplated as part of the existing contracts and therefore will not apply lease modification rules to the qualifying lease concession amendments. As such, deferrals deemed collectible are recorded as rental receivables with no change to timing of rental revenues and deferrals deemed non-collectible and abatements reduce rental revenues in the deferral/abatement period and cause rental revenues to effectively follow a cash basis related to the changes. The accounting elections provided by the FASB mainly apply to the Company’s non-residential leases and the majority of the amendments will not require a straight-line adjustment. See Note 8 for additional discussion.

In June 2016, the FASB issued a standard which requires companies to adopt a new approach for estimating credit losses on certain types of financial instruments, such as trade and other receivables and loans. The standard requires entities to estimate a lifetime expected credit loss for most financial instruments, including trade receivables. In November 2018, the FASB issued an amendment excluding operating lease receivables accounted for under the lease standard from the scope of the credit losses standard. The Company adopted this standard as required effective January 1, 2020 and it did not have a material effect on its consolidated results of operations and financial position.

3.	Equity, Capital and Other Interests

The Company refers to “Common Shares” and “Units” (which refer to both OP Units and restricted units) as equity securities for EQR and “General Partner Units” and “Limited Partner Units” as equity securities for ERPOP. To provide a streamlined and more readable presentation of the disclosures for the Company and the Operating Partnership, several sections below refer to the respective terminology for each with the same financial information and separate sections are provided, where needed, to further distinguish any differences in financial information and terminology.

The following table presents the changes in the Company’s issued and outstanding Common Shares and Units for the nine months ended September 30, 2021 and 2020:

	2021			2020
Common Shares
Common Shares outstanding at January 1,		372,302,000			371,670,884
Common Shares Issued:
Conversion of OP Units		1,153,963			99,737
Exercise of share options		1,401,755			219,922
Employee Share Purchase Plan (ESPP)		59,297			69,986
Restricted share grants, net		85,573			178,720
Common Shares outstanding at September 30,		375,002,588			372,239,249
Units
Units outstanding at January 1,		13,858,073			13,731,315
Restricted unit grants, net		155,638			247,822
Conversion of OP Units to Common Shares		(1,153,963	)		(99,737	)
Units outstanding at September 30,		12,859,748			13,879,400
Total Common Shares and Units outstanding at September 30,		387,862,336			386,118,649
Units Ownership Interest in Operating Partnership		3.3	%		3.6	%

The following table presents the changes in the Operating Partnership’s issued and outstanding General Partner Units and Limited Partner Units for the nine months ended September 30, 2021 and 2020:

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	2021			2020
General and Limited Partner Units
General and Limited Partner Units outstanding at January 1,		386,160,073			385,402,199
Issued to General Partner:
Exercise of EQR share options		1,401,755			219,922
EQR’s Employee Share Purchase Plan (ESPP)		59,297			69,986
EQR’s restricted share grants, net		85,573			178,720
Issued to Limited Partners:
Restricted unit grants, net		155,638			247,822
General and Limited Partner Units outstanding at September 30,		387,862,336			386,118,649
Limited Partner Units
Limited Partner Units outstanding at January 1,		13,858,073			13,731,315
Limited Partner restricted unit grants, net		155,638			247,822
Conversion of Limited Partner OP Units to EQR Common Shares		(1,153,963	)		(99,737	)
Limited Partner Units outstanding at September 30,		12,859,748			13,879,400
Limited Partner Units Ownership Interest in Operating Partnership		3.3	%		3.6	%

The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units, as well as the equity positions of the holders of restricted units, are collectively referred to as the “Noncontrolling Interests – Operating Partnership” and “Limited Partners Capital,” respectively, for the Company and the Operating Partnership. Subject to certain exceptions (including the “book-up” requirements of restricted units), the Noncontrolling Interests – Operating Partnership/Limited Partners Capital may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital (including redeemable interests) is allocated based on the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total plus the total number of Common Shares/General Partner Units. Net income is allocated to the Noncontrolling Interests – Operating Partnership/Limited Partners Capital based on the weighted average ownership percentage during the period.

The Operating Partnership has the right but not the obligation to make a cash payment instead of issuing Common Shares to any and all holders of Noncontrolling Interests – Operating Partnership/Limited Partners Capital requesting an exchange of their Noncontrolling Interests – Operating Partnership/Limited Partners Capital with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests – Operating Partnership/Limited Partners Capital for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital.

The Noncontrolling Interests – Operating Partnership/Limited Partners Capital are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests – Operating Partnership/Limited Partners Capital are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership” and “Redeemable Limited Partners,” respectively. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital that are classified in permanent equity at September 30, 2021 and December 31, 2020.

The carrying value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total. Such percentage of the total carrying value of Units/Limited Partner Units which is ascribed to the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is then adjusted to the greater of carrying value or fair market value as described above. As of September 30, 2021 and 2020, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $459.9 million and $293.7 million, respectively, which represents the value of Common Shares that would be issued in exchange for the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners.

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The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners for the nine months ended September 30, 2021 and 2020, respectively (amounts in thousands):

	2021		2020
Balance at January 1,	$	338,951	$	463,400
Change in market value		119,237		(169,825	)
Change in carrying value		1,745		131
Balance at September 30,	$	459,933	$	293,706

Net proceeds from EQR Common Share and Preferred Share (see definition below) offerings and proceeds from exercise of options for Common Shares are contributed by EQR to ERPOP. In return for those contributions, EQR receives a number of OP Units in ERPOP 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 ERPOP equal in number and having the same terms as the Preferred Shares issued in the equity offering). As a result, the net proceeds from Common Shares and Preferred Shares are allocated for the Company between shareholders’ equity and Noncontrolling Interests – Operating Partnership and for the Operating Partnership between General Partner’s Capital and Limited Partners Capital to account for the change in their respective percentage ownership of the underlying equity.

The Company’s declaration of trust authorizes it to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (the “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 Common Shares.

The following table presents the Company’s issued and outstanding Preferred Shares/Preference Units as of September 30, 2021 and December 31, 2020:

				Amounts in thousands
		Annual
	Call	Dividend Per		September 30,		December 31,
	Date (1)	Share/Unit (2)		2021		2020
Preferred Shares/Preference Units of beneficial interest, $0.01 par value; 100,000,000 shares authorized:
8.29% Series K Cumulative Redeemable Preferred Shares/Preference Units; liquidation value $50 per share/unit; 745,600 shares/units issued and outstanding as of September 30, 2021 and December 31, 2020	12/10/26	$	4.145	$	37,280	$	37,280
				$	37,280	$	37,280

(1)

On or after the call date, redeemable Preferred Shares/Preference Units may be redeemed for cash at the option of the Company or the Operating Partnership, respectively, in whole or in part, at a redemption price equal to the liquidation price per share/unit, plus accrued and unpaid distributions, if any.

(2)	Dividends on Preferred Shares/Preference Units are payable quarterly.

Other

EQR and ERPOP currently have an active universal shelf registration statement for the issuance of equity and debt securities that automatically became effective upon filing with the SEC in June 2019 and expires in June 2022. Per the terms of ERPOP’s partnership agreement, EQR contributes the net proceeds of all equity offerings to the capital of ERPOP in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis) or preference units (on a one-for-one preferred share per preference unit basis).

The Company has an At-The-Market (“ATM”) share offering program which allows EQR to issue Common Shares from time to time into the existing trading market at current market prices or through negotiated transactions, including under forward sale arrangements. The current program matures in June 2022 and gives EQR the authority to issue up to 13.0 million shares, all of which remain outstanding as of September 30, 2021, pending the settlement of any outstanding forward sale agreements. As of September 30, 2021, the Company had entered into such forward sale agreements under this program for a total of approximately 1.7 million Common Shares at a weighted average initial forward price per share of $83.25. These forward sale agreements allow the Company, at its election, to settle the agreements by issuing Common Shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the agreements in whole or in part through the delivery or receipt of Common Shares or cash. Issuances of shares under these forward sale agreements are classified as equity transactions. Accordingly,

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no amounts relating to the forward sale agreements are recorded in the consolidated financial statements until settlement occurs. Prior to any settlements, the only impact to the consolidated financial statements is the potential inclusion of incremental shares, if any, within the calculation of diluted net income per share using the treasury stock method. The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current overnight federal funds rate and the amount of dividends paid to holders of the Company’s Common Shares over the term of the forward sale agreement. As of September 30, 2021, no shares under the forward sale agreements have been settled. These forward sale agreements must be settled by March 2023.

The Company may repurchase up to 13.0 million Common Shares under its share repurchase program. No open market repurchases have occurred since 2008, and no repurchases of any kind have occurred since February 2014. As of September 30, 2021, EQR has remaining authorization to repurchase up to 13.0 million of its shares.

4.	Real Estate

The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of September 30, 2021 and December 31, 2020 (amounts in thousands):

	September 30, 2021			December 31, 2020
Land	$	5,779,686		$	5,785,367
Depreciable property:
Buildings and improvements		19,211,662			18,464,484
Furniture, fixtures and equipment		2,125,441			1,970,033
In-Place lease intangibles		503,241			486,137
Projects under development:
Land		4,121			23,531
Construction-in-progress		159,538			387,603
Land held for development:
Land		46,160			46,160
Construction-in-progress		35,866			40,010
Investment in real estate		27,865,715			27,203,325
Accumulated depreciation		(8,260,846	)		(7,859,657	)
Investment in real estate, net	$	19,604,869		$	19,343,668

During the nine months ended September 30, 2021, the Company acquired the following from unaffiliated parties (purchase price in thousands):

	Properties		Apartment Units		Purchase Price
Rental Properties – Consolidated (1)		11		2,921	$	1,020,425
Total		11		2,921	$	1,020,425

(1)	Purchase price includes an allocation of approximately $134.2 million to land and $888.1 million to depreciable property (inclusive of capitalized closing costs).

During the nine months ended September 30, 2021, the Company disposed of the following to unaffiliated parties (sales price in thousands):

	Properties		Apartment Units		Sales Price
Rental Properties – Consolidated		10		1,842	$	1,021,800
Total		10		1,842	$	1,021,800

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The Company recognized a net gain on sales of real estate properties of approximately $587.6 million on the above sales.

5.	Commitments to Acquire/Dispose of Real Estate

The Company has not entered into any agreements to acquire rental properties or land parcels as of the date of filing.

The Company has entered into separate agreements to dispose of the following (sales price and net book value in thousands):

Properties

Apartment Units

Sales Price

Net Book Value at

September 30, 2021

Rental Properties - Consolidated

744

410,000

130,762

Total

744

410,000

130,762

The closing of pending transactions is subject to certain conditions and restrictions; therefore, there can be no assurance that the transactions will be consummated or that the final terms will not differ in material respects from any agreements summarized above. See Note 14 for discussion of the properties acquired or disposed of, if any, subsequent to September 30, 2021.

6.	Investments in Partially Owned Entities

The Company has invested in various entities with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated).

Consolidated Variable Interest Entities (“VIEs”)

In accordance with accounting standards for consolidation of VIEs, the Company consolidates ERPOP on EQR’s financial statements. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. The limited partners are not able to exercise substantive kick-out or participating rights. As a result, ERPOP qualifies as a VIE. EQR has a controlling financial interest in ERPOP and, thus, is ERPOP’s primary beneficiary. EQR has the power to direct the activities of ERPOP that most significantly impact ERPOP’s economic performance as well as the obligation to absorb losses or the right to receive benefits from ERPOP that could potentially be significant to ERPOP.

The Company has various equity interests in certain joint ventures owning 17 properties containing 3,774 apartment units. The Company has determined that these joint ventures are VIEs and the Company is the VIEs’ primary beneficiary. As a result, the joint ventures are required to be consolidated on the Company’s financial statements.

The Company also has a separate consolidated joint venture which leases a land parcel that is currently being developed into a multifamily rental property. This joint venture has been deemed to be a VIE and is consolidated due to the Company being the primary beneficiary.

The consolidated assets and liabilities related to the VIEs discussed above were approximately $839.3 million and $247.9 million, respectively, at September 30, 2021 and approximately $784.1 million and $224.0 million, respectively, at December 31, 2020.

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Investments in Unconsolidated Entities

During the nine months ended September 30, 2021, the Company acquired two land parcels through separate unconsolidated joint ventures for the purpose of developing multifamily rental properties for an aggregate gross purchase price of approximately $55.4 million, with the Company’s share approximating $21.8 million. The Company, as a limited partner in both joint ventures, does not have substantive kick-out or voting rights in the entities. As a result, the entities qualify as VIEs. The Company has the obligation to absorb losses and the right to receive benefits from the VIE that could potentially be significant to the VIE, but does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a result, the Company is not the primary beneficiary and these entities are unconsolidated and recorded using the equity method of accounting.

The following table and information summarizes the Company’s investments in unconsolidated entities, which are accounted for under the equity method of accounting as the requirements for consolidation are not met, as of September 30, 2021 and December 31, 2020 (amounts in thousands except for ownership percentage):

	September 30, 2021			December 31, 2020			Ownership Percentage
Investments in Unconsolidated Entities:
Operating Property (VIE) (1)	$	36,652		$	38,288		33.3%
Projects Under Development (VIE) (2)		24,927			—		Varies
Real Estate Technology (3)		18,127			14,866		Varies
Other		(277	)		(372	)	Varies
Investments in Unconsolidated Entities	$	79,429		$	52,782

(1)

Represents an unconsolidated interest in an entity that owns the land underlying one of the consolidated joint venture properties noted above and owns and operates a related parking facility. The joint venture, as a limited partner, does not have substantive kick-out or participating rights in the entity. As a result, the entity qualifies as a VIE. The joint venture does not have a controlling financial interest in the VIE and is not the VIE’s primary beneficiary. The joint venture does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance or the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. As a result, the entity that owns the land and owns and operates the parking facility is unconsolidated and recorded using the equity method of accounting.

(2)	Represents unconsolidated interests in the two unconsolidated joint ventures noted above.

(3)	Represents unconsolidated investments in six separate real estate technology funds/companies.

7.	Restricted Deposits

The following table presents the Company’s restricted deposits as of September 30, 2021 and December 31, 2020 (amounts in thousands):

	September 30, 2021		December 31, 2020
Mortgage escrow deposits:
Replacement reserves	$	10,830	$	9,877
Mortgage principal reserves/sinking funds		17,828		14,168
Mortgage escrow deposits		28,658		24,045
Restricted cash:
Tax-deferred (1031) exchange proceeds		121,799		—
Restricted deposits on real estate investments		292		307
Resident security and utility deposits		34,459		31,412
Other		1,834		1,373
Restricted cash		158,384		33,092
Restricted deposits	$	187,042	$	57,137

Leases

Lessor Accounting

The Company is the lessor for its residential and non-residential leases and these leases will continue to be accounted for as operating leases under the lease standard.

For the nine months ended September 30, 2021, approximately 97% of the Company’s total lease revenue is generated from residential apartment leases that are generally twelve months or less in length. The residential apartment leases may include lease income related to such items as utility recoveries, parking, storage and pet rent that the Company treats as a single lease component because the amenities cannot be leased on their own and the timing and pattern of revenue recognition are the same. The collection of

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lease payments at lease commencement is probable and therefore the Company subsequently recognizes lease income over the lease term on a straight-line basis. Residential leases are renewable upon consent of both parties on an annual or monthly basis.

For the nine months ended September 30, 2021, approximately 3% of the Company’s total lease revenue is generated by non-residential leases that are generally for terms ranging between five to ten years. The non-residential leases generally consist of ground floor retail spaces and master-leased parking garages that serve as additional amenities for our residents. The non-residential leases may include lease income related to such items as utility recoveries, parking rent and storage rent that the Company treats as a single lease component because the amenities cannot be leased on their own and the timing and pattern of revenue recognition are the same. The collection of lease payments at lease commencement is probable and therefore the Company subsequently recognizes lease income over the lease term on a straight-line basis. Non-residential leases are renewable with market-based renewal options.

The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the nine months ended September 30, 2021 and 2020 (amounts in thousands):

	Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2020
Income Type	Residential Leases			Non-Residential Leases		Total			Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	1,629,778		$	45,680	$	1,675,458		$	1,783,298		$	36,263		$	1,819,561
Utility recoveries (RUBS income) (1)		55,331			519		55,850			52,538			509			53,047
Parking rent		30,403			465		30,868			29,052			324			29,376
Other lease revenue (2)		(19,442	)		2,914		(16,528	)		(19,000	)		(5,530	)		(24,530	)
Total lease revenue	$	1,696,070		$	49,578		1,745,648		$	1,845,888		$	31,566			1,877,454
Parking revenue							18,455									16,648
Other revenue							54,764									64,168
Total other rental income (3)							73,219									80,816
Rental income						$	1,818,867								$	1,958,270

(1)	RUBS income primarily consists of variable payments representing the recovery of utility costs from residents.

(2)	Other lease revenue consists of the revenue adjustment related to bad debt and other miscellaneous lease revenue.

(3)	Other rental income is accounted for under the revenue recognition standard.

The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the quarters ended September 30, 2021 and 2020 (amounts in thousands):

	Quarter Ended September 30, 2021							Quarter Ended September 30, 2020
Income Type	Residential Leases			Non-Residential Leases		Total		Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	551,474		$	14,443	$	565,917	$	576,192		$	6,042		$	582,234
Utility recoveries (RUBS income) (1)		18,798			189		18,987		17,306			134			17,440
Parking rent		10,513			103		10,616		9,592			101			9,693
Other lease revenue (2)		(472	)		1,776		1,304		(12,727	)		(4,299	)		(17,026	)
Total lease revenue	$	580,313		$	16,511		596,824	$	590,363		$	1,978			592,341
Parking revenue							6,883								5,336
Other revenue							19,499								24,756
Total other rental income (3)							26,382								30,092
Rental income						$	623,206							$	622,433

(1)	RUBS income primarily consists of variable payments representing the recovery of utility costs from residents.

(2)	Other lease revenue consists of the revenue adjustment related to bad debt and other miscellaneous lease revenue.

(3)	Other rental income is accounted for under the revenue recognition standard.

The economic impact of the pandemic on a subset of our residents and tenants has led to elevated levels of bad debt, which was reduced, in part, by governmental rental assistance payments paid on their behalf. We continue to work with our residents and tenants on payment plans and collections and our bad debt allowance policies remain consistent from those existing prior to the pandemic.

The following table presents residential and non-residential accounts receivable and straight-line receivable balances for the Company’s properties as of September 30, 2021 and December 31, 2020 (amounts in thousands):

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	Residential							Non-Residential
Balance Sheet (Other assets):	September 30, 2021				December 31, 2020			September 30, 2021			December 31, 2020
Resident/tenant accounts receivable balances	$	42,126			$	30,856		$	4,001		$	7,598
Allowance for doubtful accounts		(37,669	)			(24,021	)		(3,442	)		(6,527	)
Net receivable balances	$	4,457		(1)	$	6,835		$	559		$	1,071

Straight-line receivable balances	$	12,650			$	19,992		$	12,759		$	13,413

(1)	The Company held residential security deposits approximating 58.4% of the net receivable balance at September 30, 2021.

The following table presents residential bad debt for the Company’s properties for the nine months and quarters ended September 30, 2021 and 2020 (amounts in thousands):

	Nine Months Ended September 30,						Quarter Ended September 30,
Income Statement (Rental income):		2021			2020			2021			2020
Bad debt, net (1)	$	29,751		$	29,419		$	3,979		$	16,071
% of rental income		1.7	%		1.5	%		0.7	%		2.6	%

(1)	The nine months and quarter ended September 30, 2021 benefited from additional resident payments due to governmental rental assistance programs.

Due to the impact of COVID-19 and the resulting economic impact on our non-residential tenants, we recognized a non-cash write-off of non-residential straight-line lease receivables of approximately $0.1 million and $12.9 million during the nine months ended September 30, 2021 and 2020, respectively. In addition, we reduced rental revenues by approximately $5.7 million and $5.6 million during the nine months ended September 30, 2021 and 2020, respectively, due to rent payment deferrals/abatements granted to our non-residential tenants.

Debt

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. Weighted average interest rates noted below for the nine months ended September 30, 2021 include the effect of any derivative instruments and amortization of premiums/discounts/OCI (other comprehensive income) on debt and derivatives.

Mortgage Notes Payable

The following table summarizes the Company’s mortgage notes payable activity for the nine months ended September 30, 2021 (amounts in thousands):

	Mortgage notes payable, net as of December 31, 2020		Proceeds			Lump sum payoffs			Scheduled principal repayments			Amortization of premiums/ discounts		Amortization of deferred financing costs, net (1)			Mortgage notes payable, net as of September 30, 2021
Fixed Rate Debt:
Secured – Conventional	$	1,901,091	$	28,500	(2)	$	(28,200	)	$	(5,570	)	$	1,140	$	689		$	1,897,650
Floating Rate Debt:
Secured – Conventional		31,494		22,798			—			—			—		(1,719	)		52,573
Secured – Tax Exempt		361,305		—			(31,680	)		—			929		388			330,942
Floating Rate Debt		392,799		22,798			(31,680	)		—			929		(1,331	)		383,515
Total	$	2,293,890	$	51,298		$	(59,880	)	$	(5,570	)	$	2,069	$	(642	)	$	2,281,165

(1)	Represents amortization of deferred financing costs, net of debt financing costs.

(2)	Obtained 3.58% fixed rate mortgage debt maturing on March 1, 2031.

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The following table summarizes certain interest rate and maturity date information as of and for the nine months ended September 30, 2021:

		September 30, 2021
Interest Rate Ranges		0.06% - 4.21%
Weighted Average Interest Rate		3.16%
Maturity Date Ranges		2022-2061

As of September 30, 2021, the Company had $250.0 million of secured debt (primarily tax-exempt bonds) subject to third-party credit enhancement.

Notes

The following table summarizes the Company’s notes activity for the nine months ended September 30, 2021 (amounts in thousands):

Notes, net as of

December 31, 2020

Proceeds

Lump sum

payoffs

Realized/unrealized

(gain) loss on

derivative

instruments

Amortization

of premiums/

discounts

Amortization

of deferred

financing

costs, net (1)

Notes, net as of

September 30, 2021

Fixed Rate Debt:

Unsecured – Public

5,335,536

497,470

(2)

—

1,865

(1,388

)

5,833,483

(1)	Represents amortization of deferred financing costs, net of debt financing costs.

(2)	Issued $500.0 million of ten-year 1.85% unsecured notes, receiving net proceeds before underwriting fees and other expenses.

The following table summarizes certain interest rate and maturity date information as of and for the nine months ended September 30, 2021:

		September 30, 2021
Interest Rate Ranges		1.85% - 7.57%
Weighted Average Interest Rate		3.69%
Maturity Date Ranges		2023-2047

The Company’s unsecured public notes contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for the nine months ended September 30, 2021.

Line of Credit and Commercial Paper

The Company has a $2.5 billion unsecured revolving credit facility maturing November 1, 2024. The Company has the ability to increase available borrowings by an additional $750.0 million by adding lenders to the facility, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.775%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. The Company did not borrow any amounts under its revolving credit facility during the nine months ended September 30, 2021.

The Company has an unsecured commercial paper note program in which it may borrow up to a maximum of $1.0 billion subject to market conditions. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of the Company’s other unsecured senior indebtedness. The notes bear interest at various floating rates with a weighted average interest rate of 0.28% for the nine months ended September 30, 2021 and a weighted average maturity of 1 day as of September 30, 2021. The weighted average amount outstanding for the nine months ended September 30, 2021 was approximately $556.7 million.

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The Company limits its utilization of the revolving credit facility in order to maintain liquidity to support its $1.0 billion commercial paper program along with certain other obligations. The following table presents the availability on the Company’s unsecured revolving credit facility as of September 30, 2021 (amounts in thousands):

	September 30, 2021
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(30,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(100,442	)
Unsecured revolving credit facility availability	$	2,369,558

Other

The following table summarizes the Company’s total debt extinguishment costs recorded as additional interest expense during the nine months ended September 30, 2021 (amounts in thousands):

		September 30, 2021
Write-offs of unamortized deferred financing costs		$	264

10.	Fair Value Measurements

The valuation of financial instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments on listed market prices and third-party quotes. Where these are not available, the Company bases its estimates on current instruments with similar terms and maturities or on other factors relevant to the financial instruments.

In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company may seek to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments. The Company may also use derivatives to manage commodity prices in the daily operations of the business.

During the nine months ended September 30, 2021, the Company purchased and sold investment securities and recognized a net gain on sale of $23.4 million, which is included in interest and other income in the consolidated statements of operations. The Company did not own any of these investment securities at September 30, 2021.

A three-level valuation hierarchy exists for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

•

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes the inputs to the valuations for each type of fair value measurement:

Fair Value Measurement Type		Valuation Inputs
Employee holdings (other than Common Shares) within the supplemental executive retirement plan (the “SERP”)		Quoted market prices for identical assets. These holdings are included in other assets and other liabilities on the consolidated balance sheets.
Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners		Quoted market price of Common Shares.
Mortgage notes payable and private unsecured debt (including its commercial paper and line of credit, if applicable)		Indicative rates provided by lenders of similar loans.
Public unsecured notes		Quoted market prices for each underlying issuance.

The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, commercial paper,

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line of credit and derivative instruments), including cash and cash equivalents and other financial instruments, approximate their carrying or contract value. The following table provides a summary of the carrying and fair values for the Company’s mortgage notes payable and unsecured debt (including its commercial paper and line of credit, if applicable) at September 30, 2021 and December 31, 2020, respectively (amounts in thousands):

	September 30, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value (Level 2)		Carrying Value		Estimated Fair Value (Level 2)
Mortgage notes payable, net	$	2,281,165	$	2,303,890	$	2,293,890	$	2,313,263
Unsecured debt, net		5,863,483		6,534,974		5,750,366		6,686,612
Total debt, net	$	8,144,648	$	8,838,864	$	8,044,256	$	8,999,875

The following tables provide a summary of the fair value measurements for each major category of assets and liabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at September 30, 2021 and December 31, 2020, respectively (amounts in thousands):

				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	9/30/2021		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Supplemental Executive Retirement Plan	Other Assets	$	160,914	$	160,914	$	—	$	—

Liabilities
Supplemental Executive Retirement Plan	Other Liabilities	$	160,914	$	160,914	$	—	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	459,933	$	—	$	459,933	$	—

				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	12/31/2020		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Supplemental Executive Retirement Plan	Other Assets	$	160,293	$	160,293	$	—	$	—

Liabilities
Supplemental Executive Retirement Plan	Other Liabilities	$	160,293	$	160,293	$	—	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	338,951	$	—	$	338,951	$	—

The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying consolidated statements of operations and comprehensive income for the nine months ended September 30, 2021 and 2020, respectively (amounts in thousands):

September 30, 2021 Type of Cash Flow Hedge	Amount of Gain/(Loss) Recognized in OCI on Derivative		Location of Gain/(Loss) Reclassified from Accumulated OCI into Income	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps	$	—	Interest expense	$	(7,000	)
Total	$	—		$	(7,000	)

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September 30, 2020 Type of Cash Flow Hedge	Amount of Gain/(Loss) Recognized in OCI on Derivative			Location of Gain/(Loss) Reclassified from Accumulated OCI into Income	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps	$	(1,190	)	Interest expense	$	(17,275	)
Total	$	(1,190	)		$	(17,275	)

As of September 30, 2021 and December 31, 2020, there were approximately $36.7 million and $43.7 million in deferred losses, net, included in accumulated other comprehensive income (loss), respectively, related to derivative instruments, of which an estimated $10.5 million may be recognized as additional interest expense during the twelve months ending September 30, 2022.

11.	Earnings Per Share and Earnings Per Unit

Equity Residential

The following tables set forth the computation of net income per share – basic and net income per share – diluted for the Company (amounts in thousands except per share amounts):

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
Numerator for net income per share – basic:
Net income	$	835,736		$	699,517		$	447,332		$	95,365
Allocation to Noncontrolling Interests – Operating Partnership		(27,903	)		(24,624	)		(14,847	)		(3,376	)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per share – basic	$	803,558		$	658,462		$	431,178		$	90,513
Numerator for net income per share – diluted:
Net income	$	835,736		$	699,517		$	447,332		$	95,365
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per share – diluted	$	831,461		$	683,086		$	446,025		$	93,889
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic		373,474			371,749			374,308			371,869
Effect of dilutive securities:
OP Units		12,367			13,010			12,019			13,002
Long-term compensation shares/units		1,801			1,214			2,047			781
Denominator for net income per share – diluted		387,642			385,973			388,374			385,652
Net income per share – basic	$	2.15		$	1.77		$	1.15		$	0.24
Net income per share – diluted	$	2.14		$	1.77		$	1.15		$	0.24

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ERP Operating Limited Partnership

The following tables set forth the computation of net income per Unit – basic and net income per Unit – diluted for the Operating Partnership (amounts in thousands except per Unit amounts):

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
Numerator for net income per Unit – basic and diluted:
Net income	$	835,736		$	699,517		$	447,332		$	95,365
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Allocation to Preference Units		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per Unit – basic and diluted	$	831,461		$	683,086		$	446,025		$	93,889
Denominator for net income per Unit – basic and diluted:
Denominator for net income per Unit – basic		385,841			384,759			386,327			384,871
Effect of dilutive securities:
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units		1,801			1,214			2,047			781
Denominator for net income per Unit – diluted		387,642			385,973			388,374			385,652
Net income per Unit – basic	$	2.15		$	1.77		$	1.15		$	0.24
Net income per Unit – diluted	$	2.14		$	1.77		$	1.15		$	0.24

12.	Commitments and Contingencies

The Company, as an owner of real estate, is subject to various Federal, state and local laws, including, but not limited to, rent regulations and environmental laws. Compliance by the Company with existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new or changed laws or regulations, whether related to COVID-19 or otherwise, 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 it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.

As of September 30, 2021, the Company has two consolidated projects (one wholly owned and one partially owned) and two unconsolidated projects totaling 1,441 apartment units in various stages of development with remaining commitments to fund of approximately $328.8 million (inclusive of applicable construction loans and joint venture partner obligations) and estimated completion dates ranging through June 30, 2024, as well as two consolidated completed development projects (one wholly owned and one partially owned) that are in lease-up.

As of September 30, 2021, the Company has two consolidated joint venture agreements with third-party partners for the development of multifamily rental properties, one of which is currently under construction as noted above and one of which was substantially completed during the quarter ended June 30, 2021. The Company also has two unconsolidated joint venture agreements with third-party partners for the development of multifamily rental properties, both of which are currently under construction as noted above. The joint venture agreements with each partner include a buy-sell provision that provides the right, but not the obligation, for the Company to acquire each respective partner’s interests or sell its interests at any time following the occurrence of certain pre-defined events described in the joint venture agreements. See Note 6 for additional discussion.

As of September 30, 2021, the Company entered into a commitment agreement (the “Commitment Agreement”) with Toll Brothers, Inc. (“Toll”) to pursue the joint development of multifamily rental properties. Over the next three years, the Company intends to invest 75% of the equity for each selected project and Toll intends to invest 25%. It is expected that each project will also be financed with approximately 60% non-recourse construction debt. The parties have targeted an initial minimum co-investment of approximately $750.0 million in combined equity. As of September 30, 2021, the Company and Toll had not yet entered into any joint venture agreements under the Commitment Agreement.

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13.	Reportable Segments

Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses and about which discrete financial information is available that is evaluated regularly by the chief operating decision maker. The chief operating decision maker decides how resources are allocated and assesses performance on a recurring basis at least quarterly.

The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company’s operating performance geographically by market and both on a same store and non-same store basis. While the Company does maintain a non-residential presence, it accounts for approximately 3.8% of total revenues for the nine months ended September 30, 2021 and is designed as an amenity for our residential residents. The chief operating decision maker evaluates the performance of each property on a consolidated residential and non-residential basis. The Company’s geographic consolidated same store operating segments represent its reportable segments.

The Company’s development activities are other business activities that do not constitute an operating segment and as such, have been aggregated in the “Other” category in the tables presented below.

All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the nine months and quarters ended September 30, 2021 and 2020, respectively.

The primary financial measure for the Company’s rental real estate segment is net operating income (“NOI”), which represents rental income less: 1) property and maintenance expense and 2) real estate taxes and insurance expense (all as reflected in the accompanying consolidated statements of operations and comprehensive income). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. Revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

The following table presents a reconciliation of NOI from our rental real estate for the nine months and quarters ended September 30, 2021 and 2020, respectively (amounts in thousands):

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
Rental income	$	1,818,867		$	1,958,270		$	623,206		$	622,433
Property and maintenance expense		(341,261	)		(333,333	)		(116,461	)		(113,065	)
Real estate taxes and insurance expense		(297,780	)		(288,043	)		(96,909	)		(95,273	)
Total operating expenses		(639,041	)		(621,376	)		(213,370	)		(208,338	)
Net operating income	$	1,179,826		$	1,336,894		$	409,836		$	414,095

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The following tables present NOI for each segment from our rental real estate for the nine months and quarters ended September 30, 2021 and 2020, respectively, as well as total assets and capital expenditures at September 30, 2021 (amounts in thousands):

	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	337,153	$	109,997	$	227,156	$	346,599	$	108,594	$	238,005
Orange County		80,773		18,937		61,836		79,241		18,539		60,702
San Diego		58,211		13,920		44,291		56,001		13,684		42,317
Subtotal - Southern California		476,137		142,854		333,283		481,841		140,817		341,024

San Francisco		302,043		93,983		208,060		346,089		90,849		255,240
Washington D.C.		298,165		99,369		198,796		311,119		95,799		215,320
New York		299,320		152,228		147,092		324,866		148,145		176,721
Seattle		181,908		58,616		123,292		195,198		55,845		139,353
Boston		171,871		57,041		114,830		182,502		53,727		128,775
Denver		28,732		8,614		20,118		28,584		8,320		20,264
Total same store		1,758,176		612,705		1,145,471		1,870,199		593,502		1,276,697

Non-same store/other (2) (3)
Non-same store		28,581		10,916		17,665		11,440		2,534		8,906
Other (3)		32,110		15,420		16,690		76,631		25,340		51,291
Total non-same store/other		60,691		26,336		34,355		88,071		27,874		60,197

Totals	$	1,818,867	$	639,041	$	1,179,826	$	1,958,270	$	621,376	$	1,336,894

(1)	For the nine months ended September 30, 2021 and 2020, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2020, less properties subsequently sold, which represented 75,288 apartment units.

(2)	For the nine months ended September 30, 2021 and 2020, non-same store primarily includes properties acquired after January 1, 2020, plus any properties in lease-up and not stabilized as of January 1, 2020.

(3)	Other includes development, other corporate operations and operations prior to disposition for properties sold.

	Quarter Ended September 30, 2021						Quarter Ended September 30, 2020
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	117,542	$	36,929	$	80,613	$	112,201	$	36,783	$	75,418
Orange County		28,264		6,480		21,784		26,229		6,457		19,772
San Diego		20,282		4,735		15,547		18,637		4,652		13,985
Subtotal - Southern California		166,088		48,144		117,944		157,067		47,892		109,175

San Francisco		102,166		31,542		70,624		109,908		30,913		78,995
Washington D.C.		100,019		34,397		65,622		103,160		32,979		70,181
New York		103,015		49,939		53,076		98,333		49,915		48,418
Seattle		61,888		20,117		41,771		62,748		18,972		43,776
Boston		58,864		19,504		39,360		59,527		18,601		40,926
Denver		9,812		2,940		6,872		9,509		2,892		6,617
Total same store		601,852		206,583		395,269		600,252		202,164		398,088

Non-same store/other (2) (3)
Non-same store		16,563		6,777		9,786		2,481		539		1,942
Other (3)		4,791		10		4,781		19,700		5,635		14,065
Total non-same store/other		21,354		6,787		14,567		22,181		6,174		16,007

Totals	$	623,206	$	213,370	$	409,836	$	622,433	$	208,338	$	414,095

(1)	For the quarters ended September 30, 2021 and 2020, same store primarily includes all properties acquired or completed that were stabilized prior to July 1, 2020, less properties subsequently sold, which represented 75,509 apartment units.

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(2)	For the quarters ended September 30, 2021 and 2020, non-same store primarily includes properties acquired after July 1, 2020, plus any properties in lease-up and not stabilized as of July 1, 2020.

(3)	Other includes development, other corporate operations and operations prior to disposition for properties sold.

	Nine Months Ended September 30, 2021
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	2,926,617	$	13,959
Orange County		375,365		4,124
San Diego		234,733		2,060
Subtotal - Southern California		3,536,715		20,143

San Francisco		3,264,017		15,853
Washington D.C.		3,270,172		20,392
New York		3,902,715		22,641
Seattle		1,975,574		10,234
Boston		1,710,489		15,766
Denver		496,969		1,101
Total same store		18,156,651		106,130

Non-same store/other (2) (3)
Non-same store		1,484,091		659
Other (3)		1,022,273		917
Total non-same store/other		2,506,364		1,576

Totals	$	20,663,015	$	107,706

(1)	Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2020, less properties subsequently sold, which represented 75,288 apartment units.

(2)	Non-same store primarily includes properties acquired after January 1, 2020, plus any properties in lease-up and not stabilized as of January 1, 2020.

(3)	Other includes development, other corporate operations and capital expenditures for properties sold.

14.	Subsequent Events

Subsequent to September 30, 2021, the Company:

•

Contributed $5.8 million for an unconsolidated land parcel subject to a long-term ground lease and $11.6 million for two unconsolidated land parcel acquisitions in connection with the formation of separate joint ventures with Toll under the Commitment Agreement; and

•

Contributed $1.1 million for an unconsolidated land parcel acquisition as part of the formation of a joint venture with a third-party.

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

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 and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020. In addition, please refer to the Definitions section below for various capitalized terms not immediately defined in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, projections and assumptions made by management. While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, 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. Many of these uncertainties and risks are difficult to predict and beyond management’s control, such as the current novel coronavirus (“COVID-19”) pandemic (see below for further discussion). Forward-looking statements are not guarantees of future performance, results or events. The forward-looking statements contained herein are made as of the date hereof and the Company undertakes no obligation to update or supplement these forward-looking statements.

In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic and its accompanying variants, many of which are unknown, including the duration, severity and the extent of the adverse health impact on the general population, our residents and employees, the rate of vaccine distribution and effectiveness of vaccinations, the overall reopening progress in the cities in which we operate, the potential long-term changes in customer preferences for living in our communities and the impact of operational changes we have implemented and may implement in response to the pandemic.

Additional factors that might cause such differences are discussed in Part I of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020, particularly those under Item 1A, Risk Factors.

Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report. The 2021 guidance assumptions disclosed throughout this Item 2 are based on current expectations and are forward-looking.

Overview

Equity Residential (“EQR”) is committed to creating communities where people thrive. The Company, a member of the S&P 500, is focused on the acquisition, development and management of residential properties located in and around dynamic cities that attract high quality long-term renters. ERP Operating Limited Partnership (“ERPOP”) is focused on conducting the multifamily property business of EQR. EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP.

The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in most of its markets.

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Available Information

You may access our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and any amendments to any of those reports/statements we file with the Securities and Exchange Commission (“SEC”) free of charge on our website, www.equityapartments.com. These reports/statements are made available on our website as soon as reasonably practicable after we file them with the SEC. The information contained on our website, including any information referred to in this report as being available on our website, is not a part of or incorporated into this report.

Business Objectives and Operating and Investing Strategies

The Company’s and the Operating Partnership’s overall business objectives and operating and investing strategies have not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020. As more fully discussed in the Company’s and the Operating Partnership’s Annual Report on Form 10-K, it continues to be the Company’s intention over time, through varying degrees of both acquisitions and new wholly-owned and joint venture development projects, to further diversify its portfolio into select new expansion markets that share similar characteristics as its current established markets and to optimize the mix of the Company’s properties located in urban vs. dense suburban submarkets within its markets.

COVID-19 Impact

The overall impact from the COVID-19 pandemic on the Company and the Operating Partnership has not changed materially from the information included in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2020. As more fully discussed in the Company's and the Operating Partnership's Annual Report on Form 10-K, despite the impact of COVID-19, we continue to believe that the long-term prospects for our business remain strong. See the Results of Operations discussion below for additional information on how the ongoing recovery from the COVID-19 pandemic is currently impacting our markets and operations.

Results of Operations

2021 Transactions

In conjunction with our business objectives and operating and investing strategies, the following table provides a rollforward of the transactions that occurred during the nine months ended September 30, 2021:

Portfolio Rollforward

($ in thousands)

	Properties			Apartment Units			Purchase Price			Acquisition Cap Rate
12/31/2020		304			77,889
Acquisitions:
Consolidated Rental Properties		8			2,128		$	684,725			3.9	%
Consolidated Rental Properties – Not Stabilized (1)		3			793		$	335,700			4.1	%
Unconsolidated Land Parcels (2)		—			—		$	55,409
							Sales Price			Disposition Yield
Dispositions:
Consolidated Rental Properties		(10	)		(1,842	)	$	(1,021,800	)		(3.8	)%
Completed Developments – Consolidated		2			354
9/30/2021		307			79,322

(1)	The Company acquired three properties during the nine months ended September 30, 2021, one each in the Denver, Atlanta and Seattle markets, that are in lease-up and are expected to stabilize in their second year of ownership at the combined Acquisition Cap Rate listed above.

(2)

The Company entered into separate unconsolidated joint ventures for the purpose of developing vacant land parcels in Denver, CO and suburban New York, NY. The purchase price listed represents the total consideration for the closing of the respective joint ventures. The Company’s total investment in these two joint ventures is approximately $24.9 million as of September 30, 2021. See Notes 6 and 12 in the Notes to Consolidated Financial Statements for additional discussion.

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The consolidated properties acquired are located in the Atlanta (3), Austin (2), Boston, Dallas/Ft. Worth (2), Denver, Seattle and Washington D.C. markets. The Atlanta, Austin and Dallas/Ft. Worth acquisitions marked the Company’s re-entry into these markets. The unconsolidated land parcels acquired were located in the Denver and suburban New York markets. The consolidated properties disposed of were located in the Los Angeles, New York, San Francisco and Seattle markets and the sales generated an Unlevered IRR of 9.2%. The consolidated property development completions were located in the San Francisco and Washington D.C. markets. Finally, the Company commenced construction on one consolidated and two unconsolidated new apartment properties, located in the Denver, New York and Washington D.C. markets, consisting of 971 apartment units totaling approximately $372.7 million of expected development costs. See Note 4 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate transactions.

The Company’s guidance assumes consolidated rental acquisitions of $1.5 billion and consolidated rental dispositions of $1.5 billion and expects that the Acquisition Cap Rate will be approximately equal to the Disposition Yield for the full year ending December 31, 2021. We currently anticipate spending approximately $300.0 million on development costs during the year ending December 31, 2021, of which approximately $197.7 million was spent during the nine months ended September 30, 2021, primarily for consolidated and unconsolidated properties currently under construction. Certain of these costs are expected to be funded by joint venture partner obligations and third-party construction mortgages. Work at all of our development projects continues with no material delays or cost overruns notwithstanding some brief disruptions from governmental construction moratoriums due to COVID-19.

Toll Brothers Joint Ventures

In August 2021, the Company entered into a strategic partnership with Toll Brothers, Inc. (NYSE: TOL) to develop apartment communities in key markets. The partnership will focus on selectively acquiring and developing sites for apartment rental communities in seven metro markets where both parties have a significant or growing presence: Atlanta, Austin, Boston, Dallas/Ft. Worth, Denver, Orange County/San Diego and Seattle. Toll Brothers will act as managing member of each project overseeing approvals, design and construction. See Notes 12 and 14 in the Notes to Consolidated Financial Statements for additional discussion.

Same Store Results

Properties that the Company owned and were stabilized (see definition below) for all of both of the nine months ended September 30, 2021 and 2020 (the “Nine-Month 2021 Same Store Properties”), which represented 75,288 apartment units, drove the Company’s results of operations. The Nine-Month 2021 Same Store Properties are discussed in the following paragraphs.

The Company’s primary financial measure for evaluating each of its apartment communities is net operating income (“NOI”). NOI represents rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties.

The following tables provide a rollforward of the apartment units included in Same Store Properties and a reconciliation of apartment units included in Same Store Properties to those included in Total Properties for the nine months ended September 30, 2021:

	Nine Months Ended September 30, 2021
	Properties			Apartment Units
Same Store Properties at December 31, 2020		285			73,585
2019 acquisitions stabilized		12			3,323
2021 dispositions		(10	)		(1,842	)
Lease-up properties stabilized		1			222
Same Store Properties at September 30, 2021		288			75,288

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	Nine Months Ended September 30, 2021
	Properties		Apartment Units
Same Store		288		75,288
Non-Same Store:
2021 acquisitions		11		2,921
2020 acquisitions		1		158
2019 acquisitions not yet stabilized		1		217
Lease-up properties not yet stabilized (1)		5		737
Other		1		1
Total Non-Same Store		19		4,034
Total Properties and Apartment Units		307		79,322

Note: Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months. Properties are included in same store when they are stabilized for all of the current and comparable periods presented.

(1)	Consists of properties in various stages of lease-up and properties where lease-up has been completed but the properties were not stabilized for the comparable periods presented. Also includes one former third-party master-leased property that was not stabilized.

The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store results (amounts in thousands):

	Nine Months Ended September 30,
	2021			2020
Operating income	$	1,033,958		$	961,384
Adjustments:
Property management		74,357			71,513
General and administrative		43,102			37,212
Depreciation		616,032			619,003
Net (gain) loss on sales of real estate properties		(587,623	)		(352,218	)
Total NOI	$	1,179,826		$	1,336,894
Rental income:
Same store	$	1,758,176		$	1,870,199
Non-same store/other		60,691			88,071
Total rental income		1,818,867			1,958,270
Operating expenses:
Same store		612,705			593,502
Non-same store/other		26,336			27,874
Total operating expenses		639,041			621,376
NOI:
Same store		1,145,471			1,276,697
Non-same store/other		34,355			60,197
Total NOI	$	1,179,826		$	1,336,894

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The following table provides comparative total same store results and statistics for the Nine-Month 2021 Same Store Properties:

September YTD 2021 vs. September YTD 2020

Same Store Results/Statistics Including 75,288 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

September YTD 2021																		September YTD 2020
	Residential			% Change			Non- Residential			% Change			Total		% Change				Residential			Non- Residential		Total
Revenues	$	1,692,955			(7.3	%)	$	65,221	(1)		48.7	%	$	1,758,176		(6.0	%)	Revenues	$	1,826,344		$	43,855	$	1,870,199
Expenses	$	594,688			3.1	%	$	18,017			8.4	%	$	612,705		3.2	%	Expenses	$	576,884		$	16,618	$	593,502
NOI	$	1,098,267			(12.1	%)	$	47,204			73.3	%	$	1,145,471		(10.3	%)	NOI	$	1,249,460		$	27,237	$	1,276,697

Average Rental Rate	$	2,607			(7.8	%)												Average Rental Rate	$	2,829
Physical Occupancy		95.9	%		0.6	%												Physical Occupancy		95.3	%
Turnover		35.0	%		(4.4	%)												Turnover		39.4	%

Note: Same store revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

(1)	Changes in same store Non-Residential revenues are primarily driven by the write-off of Non-Residential straight-line lease receivables in the third quarter of 2020 and lower bad debt in 2021.

The following table provides results and statistics related to our Residential same store operations for the nine months ended September 30, 2021 and 2020:

September YTD 2021 vs. September YTD 2020

Same Store Residential Results/Statistics by Market

														Increase (Decrease) from Prior Year
Markets/Metro Areas	Apartment Units		September YTD 2021 % of Actual NOI			September YTD 2021 Average Rental Rate		September YTD 2021 Weighted Average Physical Occupancy %			September YTD 2021 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover
Los Angeles		15,739		20.4	%	$	2,439		96.5	%		32.2	%		(3.2	%)		1.3	%		(5.2	%)		(4.1	%)		0.9	%		(6.1	%)
Orange County		4,028		5.6	%		2,281		97.7	%		27.2	%		1.9	%		2.1	%		1.8	%		0.9	%		1.1	%		(7.5	%)
San Diego		2,706		4.1	%		2,446		97.7	%		34.5	%		3.9	%		1.7	%		4.7	%		3.0	%		0.9	%		(3.1	%)
Subtotal – Southern California		22,473		30.1	%		2,411		96.9	%		31.6	%		(1.5	%)		1.5	%		(2.7	%)		(2.5	%)		1.0	%		(5.9	%)

San Francisco		12,114		18.6	%		2,877		94.8	%		37.0	%		(13.5	%)		3.4	%		(19.4	%)		(13.0	%)		(0.5	%)		(3.4	%)
Washington D.C.		14,569		17.8	%		2,326		96.3	%		36.4	%		(4.6	%)		3.9	%		(8.4	%)		(5.2	%)		0.6	%		(1.1	%)
New York		9,343		11.7	%		3,463		94.4	%		30.6	%		(11.6	%)		2.9	%		(23.8	%)		(12.1	%)		0.5	%		(8.8	%)
Seattle		8,819		10.5	%		2,251		95.8	%		39.1	%		(8.8	%)		4.9	%		(14.3	%)		(9.0	%)		0.2	%		(1.3	%)
Boston		6,346		9.5	%		2,853		95.7	%		37.5	%		(7.9	%)		4.0	%		(12.8	%)		(9.3	%)		1.4	%		(5.8	%)
Denver		1,624		1.8	%		2,031		96.7	%		45.9	%		1.1	%		4.1	%		(0.2	%)		(0.8	%)		1.8	%		(8.2	%)

Total		75,288		100.0	%	$	2,607		95.9	%		35.0	%		(7.3	%)		3.1	%		(12.1	%)		(7.8	%)		0.6	%		(4.4	%)

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.2% of total revenues for the nine months ended September 30, 2021.

The following table provides guidance for our expected full year 2021 same store operating performance (includes Residential and Non-Residential):

	Revised Full Year 2021	Previous Full Year 2021
Physical Occupancy	96.0%	95.3% to 96.3%
Revenue change	(3.7%)	(5.0%) to (4.0%)
Expense change	3.25%	2.75% to 3.25%
NOI change	(7.0%)	(8.5%) to (7.5%)

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Despite the significant impact from the pandemic on our business, which is reflected in the results for the nine months ended September 30, 2021, the recovery across our portfolio continues ahead of our prior expectations. Robust economic growth coupled with reopening of cities are driving our operations to recover rapidly with significant demand for our apartments in all our markets. This has led to high Physical Occupancy, increased pricing power and a material reduction in Leasing Concessions. Key operating drivers for this performance include:

•

Pricing – There has been significant improvement in pricing (net of Leasing Concessions) since the end of the fourth quarter of 2020, with pricing reaching or exceeding pre-pandemic levels. Portfolio-wide pricing is now moderating consistent with typical seasonal trends and is in line with our prior expectations. Monthly Residential Leasing Concessions granted have also declined significantly. Residential Leasing Concessions granted in July 2021 were $1.5 million, August 2021 were $0.5 million, September 2021 were $0.2 million and preliminary October 2021 is expected to be less than $50,000, which is down from a peak of $6.1 million per month in February 2021.

•

Physical Occupancy – Physical Occupancy was 96.6% for the third quarter of 2021 and is expected to remain strong for the balance of 2021.

•

Percentage of Residents Renewing – Our strategy of focusing on resident renewals continues to deliver strong results. We centralized renewal negotiations for San Francisco, New York and Boston (the markets most impacted in 2020 from the COVID-19 pandemic) in our offsite call center. Results have been positive to date as the Percentage of Residents Renewing continues to improve with September 2021 above 60%, which is higher than 2019 levels. Negotiations in all of our markets are expected to become more challenging given the material improvements in pricing relative to the prior year.

Despite strong rent collections throughout the pandemic, the financial impact from a small subset of our residents and Non-Residential tenants not paying has led to higher levels of bad debt than we have historically experienced. We continue to work with our residents and Non-Residential tenants on meeting their financial obligations. During the nine months ended September 30, 2021, the Company received governmental rental assistance payments paid on behalf of residents of approximately $18.3 million. Despite receipt of these payments, we expect our reserves and bad debt to remain elevated in 2021. Our bad debt allowance policies remain consistent with those in place before the pandemic.

The following table provides comparative same store operating expenses for the Nine-Month 2021 Same Store Properties:

September YTD 2021 vs. September YTD 2020

Total Same Store Operating Expenses Including 75,288 Same Store Apartment Units

$ in thousands

	September YTD 2021		September YTD 2020		$ Change (5)			% Change			% of September YTD 2021 Operating Expenses
Real estate taxes	$	263,521	$	259,603	$	3,918			1.5	%		43.0	%
On-site payroll (1)		123,966		124,652		(686	)		(0.6	)%		20.3	%
Utilities (2)		85,290		78,408		6,882			8.8	%		13.9	%
Repairs and maintenance (3)		77,320		71,359		5,961			8.4	%		12.6	%
Insurance		20,254		18,403		1,851			10.1	%		3.3	%
Leasing and advertising		8,028		7,409		619			8.4	%		1.3	%
Other on-site operating expenses (4)		34,326		33,668		658			2.0	%		5.6	%
Total Same Store Operating Expenses (includes Residential and Non-Residential)	$	612,705	$	593,502	$	19,203			3.2	%		100.0	%

(1)	On-site payroll – Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.

(2)	Utilities – Represents gross expenses prior to any recoveries under the Resident Utility Billing System (“RUBS”). Recoveries are reflected in rental income.

(3)	Repairs and maintenance – Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair and maintenance costs.

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(4)	Other on-site operating expenses – Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.

(5)	The year-to-date over year-to-date changes were primarily driven by the following factors:

•

Real estate taxes – Increase is lower than expected due to lower rates and assessed values.

•

On-site payroll – Improved sales and service staff utilization from various technology initiatives and higher than usual staffing vacancies during the current period.

•

Utilities – Water, sewer and trash charges (approximately 65% of total) increased due to both usage and rate. Natural gas and electric charges (approximately 35% of total) increased due to higher commodity prices.

•

Repairs and maintenance – Increase primarily driven by low comparable period expense growth due to the pandemic and increases in minimum wage on contract services and maintenance repairs (including higher turnover expense from robust leasing activity) in 2021.

•

Insurance – Increase due to higher premiums on property insurance renewal due to challenging conditions in the insurance market.

•

Leasing and advertising – Increase primarily driven by increased digital advertising.

•

Other on-site operating expenses – Increase driven by higher ground lease-related expenses.

The Company now anticipates same store NOI to decline for the full year 2021 by approximately 7.0% (previously was anticipated to decline between 8.5% to 7.5%) primarily driven by the expected improvement in same store revenues. We now anticipate same store expenses to increase by approximately 3.25% (previously was anticipated to increase between 2.75% to 3.25%) for 2021 as compared to 2020, primarily driven by lower real estate taxes and on-site payroll.

See also Note 13 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.

Non-Same Store/Other Results

Non-same store/other NOI results for the nine months ended September 30, 2021 decreased approximately $25.8 million compared to the same period of 2020. These results consist primarily of properties acquired in calendar years 2020 and 2021, operations from the Company’s development properties and operations prior to disposition from 2020 and 2021 sold properties. This difference is due primarily to:

•

A negative impact of lower NOI from development and newly stabilized development properties in lease-up of $0.8 million;

•

A positive impact of higher NOI from non-stabilized properties acquired in 2019, 2020 and 2021 of $9.3 million;

•

A positive impact of higher NOI from other non-same store properties (including one former master-leased property) of $0.5 million; and

•

A negative impact of lost NOI from 2020 and 2021 dispositions of $32.5 million.

Comparison of the nine months and quarter ended September 30, 2021 to the nine months and quarter ended September 30, 2020

The following table presents a reconciliation of diluted earnings per share/unit for the nine months and quarter ended September 30, 2021 as compared to the same periods in 2020:

	Nine Months Ended September 30			Quarter Ended September 30
Diluted earnings per share/unit for period ended 2020	$	1.77		$	0.24
Property NOI		(0.40	)		(0.02	)
Interest expense		0.12			0.03
Non-operating asset gains/losses		0.06			—
Net gain/loss on property sales		0.63			0.94
Other		(0.04	)		(0.04	)
Diluted earnings per share/unit for period ended 2021	$	2.14		$	1.15

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The decrease in consolidated NOI is primarily a result of the Company’s lower NOI from same store properties, largely due to the economic impact from the COVID-19 pandemic. The following table presents the changes in the components of consolidated NOI for the nine months and quarter ended September 30, 2021 as compared to the same periods in 2020:

	Nine Months Ended September 30, 2021			Quarter Ended September 30, 2021
Consolidated rental income		(7.1	%)		0.1	%
Consolidated operating expenses (1)		2.8	%		2.4	%
Consolidated NOI		(11.7	%)		(1.0	%)

(1)	Consolidated operating expenses are comprised of property and maintenance and real estate taxes and insurance.

Property management expenses include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third-party management companies. These expenses increased approximately $2.8 million or 4.0% and approximately $3.6 million or 17.7% for the nine months and quarter ended September 30, 2021, respectively, as compared to the prior year periods. These increases are primarily attributable to increases in payroll-related costs, legal and professional fees and information technology-related costs specifically for various operating initiatives such as sales-focused improvements and service enhancements, partially offset by decreases in temporary help/contractors costs. The expenses in the comparable periods of 2020 were lower than normal due to the impact of COVID-19. The Company anticipates that property management expenses will approximate $97.5 million to $99.5 million for the year ending December 31, 2021.

General and administrative expenses, which include corporate operating expenses, increased approximately $5.9 million or 15.8% and approximately $2.2 million or 20.1% for the nine months and quarter ended September 30, 2021, respectively, as compared to the prior year periods, primarily due to increases in payroll-related costs, partially offset by decreases in office rent as a result of the consolidation of space at the Company’s corporate headquarters. The expenses in the comparable periods of 2020 were lower than normal due to the impact of COVID-19. The Company anticipates that general and administrative expenses will approximate $55.5 million to $57.5 million for the year ending December 31, 2021.

Depreciation expense, which includes depreciation on non-real estate assets, decreased approximately $3.0 million or 0.5% for the nine months ended September 30, 2021 as compared to the prior year period, primarily due to in-place leases for 2019 acquisitions being fully depreciated as of December 31, 2020 and the Company being a net seller during 2020, which resulted in lower depreciation in the current period, offset by additional depreciation expense on properties acquired in 2020 and 2021 and development properties placed in service during 2021. Depreciation expense increased approximately $14.8 million or 7.4% for the quarter ended September 30, 2021 as compared to the prior year period, primarily as a result of additional depreciation expense on properties acquired in 2020 and 2021 and a development property placed in service during the third quarter of 2021, partially offset by the Company being a net seller during 2020, which resulted in lower depreciation in the current period.

Net gain on sales of real estate properties increased approximately $235.4 million or 66.8% for the nine months ended September 30, 2021 as compared to the prior year period, primarily as a result of a higher sales volume with the sale of ten consolidated apartment properties in 2021 as compared to the sale of five consolidated apartment properties in the same period in 2020. Net gain on sales of real estate properties increased $364.0 million for the quarter ended September 30, 2021 as compared to the prior year period, primarily as a result of the sale of five consolidated apartment properties in the third quarter of 2021 as compared to no consolidated property sales in the same period in 2020.

Interest and other income increased approximately $21.3 million for the nine months ended September 30, 2021 as compared to the prior year period. The increase is primarily due to a gain of $23.4 million on the sale of various investment securities that occurred during 2021 but not during 2020, partially offset by decreases in insurance/litigation settlement proceeds and other non-comparable items that occurred during 2020 but not during 2021.

Other expenses increased approximately $2.6 million or 31.0% for the nine months ended September 30, 2021 as compared to the prior year period, primarily due to a $2.2 million construction defect reserve and various other litigation and environmental reserves/settlements, partially offset by a decrease in advocacy contributions. Other expenses decreased approximately $0.6 million or 15.6% for the quarter ended September 30, 2021 as compared to the prior year period, primarily due to decreases in advocacy contributions, partially offset by various litigation reserves/settlements.

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Interest expense, including amortization of deferred financing costs, decreased approximately $45.7 million or 17.9% and approximately $12.7 million or 15.3% for the nine months and quarter ended September 30, 2021, respectively, as compared to the prior year periods. These decreases are primarily due to lower overall debt balances outstanding as compared to the prior year periods, as well as lower overall interest rates. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the nine months ended September 30, 2021 was 3.51% as compared to 3.96% for the prior year period, and for the quarter ended September 30, 2021 was 3.46% as compared to 3.97% for the prior year period. The Company capitalized interest of approximately $12.4 million and $6.9 million during the nine months ended September 30, 2021 and 2020, respectively, and $4.2 million and $2.8 million during the quarters ended September 30, 2021 and 2020, respectively. The Company anticipates that interest expense, excluding debt extinguishment costs/prepayment penalties, will approximate $270.7 million to $274.0 million and capitalized interest will approximate $15.5 million to $16.5 million for the year ending December 31, 2021.

Net (income) loss attributable to Noncontrolling Interests in partially owned properties increased approximately $12.2 million or 86.1% for the nine months ended September 30, 2021 as compared to the prior year period, primarily as a result of noncontrolling interest allocations related to the sale of one partially owned apartment property in the first quarter of 2020 as compared to no sales in the same period in 2021.

Liquidity and Capital Resources

With approximately $2.4 billion in readily available liquidity, limited near-term maturities, very strong credit metrics and ample access to capital markets at low rates, the Company believes it is well positioned to meet its future obligations. See further discussion below.

Short-Term Liquidity and Cash Proceeds

The Company generally expects to meet its short-term liquidity requirements, including capital expenditures related to maintaining its existing properties and scheduled unsecured note and mortgage note repayments, through its working capital, net cash provided by operating activities and borrowings under the Company’s revolving credit facility and commercial paper program. Currently, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions.

The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of September 30, 2021 and December 31, 2020 (amounts in thousands):

	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	39,707	$	42,591
Restricted deposits	$	187,042	$	57,137
Unsecured revolving credit facility availability	$	2,369,558	$	1,984,051

During the nine months ended September 30, 2021, the Company generated proceeds from various transactions, which included the following:

•

Disposed of ten consolidated rental properties, receiving net proceeds of approximately $1.0 billion;

•

Obtained $28.5 million in 3.58% fixed rate mortgage debt maturing on March 1, 2031;

•

Issued $500.0 million of ten-year 1.85% unsecured notes, receiving net proceeds of approximately $497.5 million before underwriting fees and other expenses. This was the Company’s second ever green bond offering;

•

Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $72.3 million, which were contributed to the capital of the Operating Partnership in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis); and

•

Sold various investment securities, receiving net proceeds of $191.4 million.

During the nine months ended September 30, 2021, the above proceeds along with net cash flow from operations and borrowings from the Company’s revolving line of credit and commercial paper program were primarily utilized to:

•

Acquire eleven consolidated rental properties for approximately $1.0 billion in cash;

•

Acquire two land parcels in unconsolidated joint ventures for approximately $21.8 million in cash;

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•

Invest $172.9 million primarily in development projects;

•

Repay $65.5 million of mortgage loans (inclusive of scheduled principal repayments); and

•

Purchase $167.8 million of various investment securities and other investments.

Credit Facility and Commercial Paper Program

The unsecured revolving credit agreement contains provisions that establish a process for entering into an amendment to replace LIBOR under certain circumstances, such as the anticipated phase-out of LIBOR by the end of 2021. At this time, it cannot be determined with certainty what other interest rate(s) may succeed LIBOR, if any, and how any successor or alternative rates for LIBOR may affect borrowing costs or the availability of variable interest rate borrowings.

The Company may borrow up to a maximum of $1.0 billion under its commercial paper program subject to market conditions. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of the Company’s other unsecured senior indebtedness.

	October 22, 2021
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(175,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(100,442	)
Unsecured revolving credit facility availability	$	2,224,558

Dividend Policy

The Company determines its dividends/distributions based on actual and projected financial conditions, the Company’s actual and projected liquidity and operating results, the Company’s projected cash needs for capital expenditures and other investment activities and such other factors as the Company’s Board of Trustees deems relevant. The Company declared a dividend/distribution for the first, second and third quarters of 2021 of $0.6025 per share/unit in each quarter, consistent with the amount paid in 2020. All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees.

Total dividends/distributions paid in October 2021 amounted to $233.3 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended September 30, 2021.

Long-Term Financing and Capital Needs

The Company expects to meet its long-term liquidity requirements, such as lump sum unsecured note and mortgage debt maturities, property acquisitions and financing of development activities, through the issuance of secured and unsecured debt and equity securities (including additional OP Units), proceeds received from the disposition of certain properties and joint ventures, along with cash generated from operations after all distributions. The Company has a significant number of unencumbered properties available to secure additional mortgage borrowings should unsecured capital be unavailable or the cost of alternative sources of capital be too high. The value of and cash flow from these unencumbered properties are in excess of the requirements the Company must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $27.9 billion in investment in real estate on the Company’s balance sheet at September 30, 2021, $23.9 billion or 85.7% was unencumbered. However, there can be no assurances that these sources of capital will be available to the Company in the future on acceptable terms or otherwise.

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EQR issues equity and guarantees certain debt of the Operating Partnership from time to time. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.

The Company’s total debt summary and debt maturity schedules as of September 30, 2021 are as follows:

Debt Summary as of September 30, 2021

($ in thousands)

									Weighted
						Weighted			Average
	Debt					Average			Maturities
	Balances		% of Total			Rates			(years)
Secured	$	2,281,165		28.0	%		3.16	%		5.6
Unsecured		5,863,483		72.0	%		3.38	%		10.2
Total	$	8,144,648		100.0	%		3.32	%		8.9
Fixed Rate Debt:
Secured – Conventional	$	1,897,650		23.3	%		3.67	%		4.2
Unsecured – Public		5,833,483		71.6	%		3.69	%		10.2
Fixed Rate Debt		7,731,133		94.9	%		3.69	%		8.7
Floating Rate Debt:
Secured – Conventional		52,573		0.6	%		2.36	%		0.7
Secured – Tax Exempt		330,942		4.1	%		0.46	%		14.9
Unsecured – Revolving Credit Facility		—		—			—			3.1
Unsecured – Commercial Paper Program		30,000		0.4	%		0.28	%		—
Floating Rate Debt		413,515		5.1	%		0.44	%		12.1
Total	$	8,144,648		100.0	%		3.32	%		8.9

Debt Maturity Schedule as of September 30, 2021

($ in thousands)

Year	Fixed Rate			Floating Rate				Total			% of Total			Weighted Average Coupons on Fixed Rate Debt			Weighted Average Coupons on Total Debt
2021	$	1,895		$	30,000		(1)	$	31,895			0.4	%		3.27	%		0.34	%
2022		264,185			54,653				318,838			3.9	%		3.25	%		3.10	%
2023		1,325,588			3,500				1,329,088			16.1	%		3.74	%		3.73	%
2024		—			6,100				6,100			0.1	%	N/A				0.07	%
2025		450,000			8,200				458,200			5.6	%		3.38	%		3.32	%
2026		592,025			9,000				601,025			7.3	%		3.58	%		3.53	%
2027		400,000			9,800				409,800			5.0	%		3.25	%		3.17	%
2028		900,000			10,700				910,700			11.1	%		3.79	%		3.75	%
2029		888,120			11,500				899,620			10.9	%		3.30	%		3.26	%
2030		1,095,000			12,600				1,107,600			13.4	%		2.55	%		2.52	%
2031+		1,879,350			275,535				2,154,885			26.2	%		3.70	%		3.24	%
Subtotal		7,796,163			431,588				8,227,751			100.0	%		3.44	%		3.28	%
Deferred Financing Costs and Unamortized (Discount)		(65,030	)		(18,073	)			(83,103	)	N/A			N/A			N/A
Total	$	7,731,133		$	413,515			$	8,144,648			100.0	%		3.44	%		3.28	%

(1)	Represents principal outstanding on the Company’s commercial paper program.

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See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of debt at September 30, 2021.

ERPOP’s long-term senior debt ratings and short-term commercial paper ratings, as well as EQR’s long-term preferred equity ratings, have been reaffirmed during the COVID-19 pandemic by all three rating agencies listed below and all continue to maintain a stable outlook. As of October 22, 2021, the ratings are as follows:

	Standard & Poor’s	Moody’s	Fitch
ERPOP’s long-term senior debt rating	A-	A3	A
ERPOP’s short-term commercial paper rating	A-2	P-2	F-1
EQR’s long-term preferred equity rating	BBB	Baa1	BBB+

See Note 14 in the Notes to Consolidated Financial Statements for discussion of the events, if any, which occurred subsequent to September 30, 2021.

Debt Covenants

The Company’s unsecured debt includes certain financial and operating covenants including, among other things, maintenance of certain financial ratios. These provisions are contained in the indentures applicable to each note payable or the credit agreement for our line of credit. The Company was in compliance with its unsecured debt covenants for all periods presented. The following table presents the Company’s selected unsecured public debt covenants as of September 30, 2021 and December 31, 2020:

	September 30, 2021		December 31, 2020
Debt to Adjusted Total Assets (not to exceed 60%)	30.0%		30.5%
Secured Debt to Adjusted Total Assets (not to exceed 40%)	9.2%		9.6%
Consolidated Income Available for Debt Service to Maximum Annual Service Charges (must be at least 1.5 to 1)		4.93	5.42
Total Unencumbered Assets to Unsecured Debt (must be at least 125%)	453.9%		458.3%

Note: These selected covenants represent the most restrictive financial covenants relating to ERPOP’s outstanding public debt securities and are defined in the indenture relating to such securities. The Company maintains substantial additional borrowing capacity and, as reflected by the above selected covenant information, believes it could currently incur substantial additional debt before it would breach any of its debt covenants.

Capitalization of Fixed Assets and Improvements to Real Estate

The Company’s and the Operating Partnership’s capital expenditures policy has not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020.

For the nine months ended September 30, 2021, our actual capital expenditures to real estate included the following (amounts in thousands except for apartment unit and per apartment unit amounts):

Capital Expenditures to Real Estate

For the Nine Months Ended September 30, 2021

	Same Store Properties (4)		Non-Same Store Properties/Other (5)		Total		Same Store Avg. Per Apartment Unit
Total Apartment Units		75,288		4,034		79,322

Building Improvements (1)	$	60,028	$	625	$	60,653	$	798
Renovation Expenditures (2)		21,163		286		21,449		281
Replacements (3)		24,939		665		25,604		331
Total Capital Expenditures to Real Estate	$	106,130	$	1,576	$	107,706	$	1,410

(1)	Building Improvements – Includes roof replacement, paving, building mechanical equipment systems, exterior siding and painting, major landscaping, furniture, fixtures and equipment for amenities and common areas, vehicles and office and maintenance equipment.

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(2)	Renovation Expenditures – Apartment unit renovation costs (primarily kitchens and baths) designed to reposition these units for higher rental levels in their respective markets. Amounts for 996 same store apartment units approximated $21,248 per apartment unit renovated.

(3)	Replacements – Includes appliances, mechanical equipment, fixtures and flooring (including hardwood and carpeting).

(4)	Same Store Properties – Primarily includes all properties acquired or completed that are stabilized prior to January 1, 2020, less properties subsequently sold.

(5)	Non-Same Store Properties/Other – Primarily includes all properties acquired during 2020 and 2021, plus any properties in lease-up and not stabilized as of January 1, 2020. Also includes capital expenditures for properties sold.

The Company estimates that during 2021 it will spend approximately $1,950 per same store apartment unit or $150.0 million of total capital expenditures to real estate for same store properties. Included in these total expected expenditures are approximately $25.0 million for apartment unit renovation expenditures on approximately 1,250 same store apartment units at an average cost of approximately $20,000 per apartment unit renovated. The anticipated total capital expenditures to real estate for same store properties represent a higher absolute and per unit dollar amount as compared to 2020 but a lower absolute and per unit dollar amount as compared to 2019, as the Company anticipates slowly returning its capital expenditure activity to more normalized pre-COVID-19 levels.

Derivative Instruments

The Company has no derivative instruments outstanding at September 30, 2021. See Note 10 in the Notes to Consolidated Financial Statements for additional discussion of the impact of derivative instruments during the periods ended September 30, 2021 and 2020.

Definitions

The definition of certain terms described above or below are as follows:

•

Acquisition Cap Rate – NOI that the Company anticipates receiving in the next 12 months (or the year two or three stabilized NOI for properties that are in lease-up at acquisition) less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross purchase price of the asset. The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property.

•

Average Rental Rate – Total Residential rental revenues reflected on a straight-line basis in accordance with GAAP divided by the weighted average occupied apartment units for the reporting period presented.

•

Development Yield – NOI that the Company anticipates receiving in the next 12 months following stabilization less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $50-$150 per apartment unit depending on the type of asset) divided by the Total Budgeted Capital Cost of the asset. The weighted average Development Yield for development properties is weighted based on the projected NOI streams and the relative Total Budgeted Capital Cost for each respective property.

•

Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sales price of the asset. The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property.

•

Leasing Concessions – Reflects upfront discounts on both new move-in and renewal leases on a straight-line basis.

•

Non-Residential – Consists of revenues and expenses from retail and public parking garage operations.

•

Percentage of Residents Renewing – Leases renewed expressed as a percentage of total renewal offers extended during the reporting period.

•

Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period.

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•

Residential – Consists of multifamily apartment revenues and expenses.

•

Same Store Residential Revenues – Revenues from our same store properties presented on a GAAP basis which reflects the impact of Leasing Concessions on a straight-line basis.

•

% of Stabilized Budgeted NOI – Represents original budgeted 2021 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.

•

Traffic – Consists of an expression of interest in an apartment by completing an in-person tour, self-guided tour or virtual tour that may result in an application to lease.

•

Turnover – Total Residential move-outs (including inter-property and intra-property transfers) divided by total Residential apartment units.

•

Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs.

•

Weighted Average Coupons – Contractual interest rate for each debt instrument weighted by principal balances as of September 30, 2021. In case of debt for which fair value hedges are in place, the rate payable under the corresponding derivatives is used in lieu of the contractual interest rate.

•

Weighted Average Rates – Interest expense for each debt instrument for the nine months ended September 30, 2021 weighted by its average principal balance for the same period. Interest expense includes amortization of premiums, discounts and other comprehensive income on debt and related derivative instruments. In case of debt for which derivatives are in place, the income or expense recognized under the corresponding derivatives is included in the total interest expense for the period.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company has various unconsolidated interests in certain joint ventures. The Company does not believe that these unconsolidated investments have a materially different impact on its liquidity, cash flows, capital resources, credit or market risk than its consolidated operating and/or other activities. See also Note 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s investments in partially owned entities. See also Note 12 in the Notes to Consolidated Financial Statements for discussion regarding the Company’s development projects.

The Company’s contractual obligations for the next five years and thereafter have not changed materially from the amounts and disclosures included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020. See the updated debt maturity schedule included in Liquidity and Capital Resources for further discussion.

Critical Accounting Policies and Estimates

The Company’s and the Operating Partnership’s critical accounting policies and estimates have not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020.

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Funds From Operations and Normalized Funds From Operations

The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for the nine months and quarters ended September 30, 2021 and 2020:

Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2021			2020			2021			2020
Net income	$	835,736		$	699,517		$	447,332		$	95,365
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,957	)		(14,113	)		(534	)		(703	)
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
Net income available to Common Shares and Units / Units		831,461			683,086			446,025			93,889
Adjustments:
Depreciation		616,032			619,003			215,397			200,605
Depreciation – Non-real estate additions		(3,228	)		(3,433	)		(1,052	)		(1,126	)
Depreciation – Partially Owned Properties		(2,676	)		(2,514	)		(994	)		(828	)
Depreciation – Unconsolidated Properties		1,867			1,838			634			614
Net (gain) loss on sales of unconsolidated entities - operating assets		(4	)		(1,000	)		—			(1,000	)
Net (gain) loss on sales of real estate properties		(587,623	)		(352,218	)		(363,928	)		25
Noncontrolling Interests share of gain (loss) on sales of real estate properties		—			11,655			—			—
FFO available to Common Shares and Units / Units (1) (3) (4)		855,829			956,417			296,082			292,179
Adjustments:
Impairment – non-operating assets		—			—			—			—
Write-off of pursuit costs		3,557			4,864			910			1,586
Debt extinguishment and preferred share redemption (gains) losses		264			37			—			5
Non-operating asset (gains) losses		(23,014	)		1,022			294			352
Other miscellaneous items		4,520			(514	)		1,179			1,796
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	841,156		$	961,826		$	298,465		$	295,918

FFO (1) (3)	$	858,147		$	958,735		$	296,855		$	292,952
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
FFO available to Common Shares and Units / Units (1) (3) (4)	$	855,829		$	956,417		$	296,082		$	292,179

Normalized FFO (2) (3)	$	843,474		$	964,144		$	299,238		$	296,691
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	841,156		$	961,826		$	298,465		$	295,918

(1)

The National Association of Real Estate Investment Trusts (“Nareit”) defines funds from operations (“FFO”) (December 2018 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains or losses from sales and impairment write-downs of depreciable real estate and land when connected to the main business of a REIT, impairment write-downs of investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and depreciation and amortization related to real estate. Adjustments for partially owned consolidated and unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis.

(2)	Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:

•

the impact of any expenses relating to non-operating asset impairment;

•

pursuit cost write-offs;

•

gains and losses from early debt extinguishment and preferred share redemptions;

•

gains and losses from non-operating assets; and

•

other miscellaneous items.

(3)

The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses from sales and impairment write-downs of depreciable real estate and excluding depreciation related to real estate (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and

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FFO available to Common Shares and Units / Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies. The Company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company’s operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units do not represent net income, net income available to Common Shares / Units or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units should not be exclusively considered as alternatives to net income, net income available to Common Shares / Units or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company’s calculation of FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.

(4)

FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units are calculated on a basis consistent with net income available to Common Shares / Units and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares/preference units in accordance with GAAP. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the “Noncontrolling Interests – Operating Partnership”. Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s and the Operating Partnership’s market risk has not changed materially from the amounts and information reported in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, to the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020. See Note 10 in the Notes to Consolidated Financial Statements for additional discussion of fair value measurements.

Item 4. Controls and Procedures

Equity Residential

(a)

Evaluation of Disclosure Controls and Procedures:

Effective as of September 30, 2021, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)

Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Company identified in connection with the Company’s evaluation referred to above that occurred during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ERP Operating Limited Partnership

(a)

Evaluation of Disclosure Controls and Procedures:

Effective as of September 30, 2021, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the Operating Partnership’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)

Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Operating Partnership identified in connection with the Operating Partnership’s evaluation referred to above that occurred during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As of September 30, 2021, the Company does not believe there is any litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.

Item 1A. Risk Factors

There have been no material changes to the risk factors that were discussed in Part I, Item 1A of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended September 30, 2021, EQR issued 69,940 Common Shares in exchange for 69,940 OP Units held by various limited partners of ERPOP. OP Units are generally exchangeable into Common Shares on a one-for-one basis or, at the option of ERPOP, the cash equivalent thereof, at any time one year after the date of issuance. These shares were either registered under the Securities Act of 1933, as amended (the “Securities Act”), or issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder, as these were transactions by an issuer not involving a public offering. In light of the manner of the sale and information obtained by EQR from the limited partners in connection with these transactions, EQR believes it may rely on these exemptions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits – See the Exhibit Index.

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EXHIBIT INDEX

The exhibits listed below are filed as part of this report. References to exhibits or other filings under the caption “Location” indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. The Commission file numbers for our Exchange Act filings referenced below are 1-12252 (Equity Residential) and 0-24920 (ERP Operating Limited Partnership).

Exhibit	Description	Location
4.1	Form of 1.850% Note due August 1, 2031.	Included as Exhibit 4.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated August 3, 2021, filed on August 5, 2021.

10.1	First Amendment to Revolving Credit Agreement, dated as of August 31, 2021, among ERP Operating Limited Partnership, Lexford Properties, L.P., and Bank of America, N.A., as Administrative Agent.	Attached herein.

31.1	Equity Residential – Certification of Mark J. Parrell, Chief Executive Officer.	Attached herein.

31.2	Equity Residential – Certification of Robert A. Garechana, Chief Financial Officer.	Attached herein.

31.3	ERP Operating Limited Partnership – Certification of Mark J. Parrell, Chief Executive Officer of Registrant’s General Partner.	Attached herein.

31.4	ERP Operating Limited Partnership – Certification of Robert A. Garechana, Chief Financial Officer of Registrant’s General Partner.	Attached herein.

32.1	Equity Residential – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Mark J. Parrell, Chief Executive Officer of the Company.	Attached herein.

32.2	Equity Residential – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Robert A. Garechana, Chief Financial Officer of the Company.	Attached herein.

32.3	ERP Operating Limited Partnership – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Mark J. Parrell, Chief Executive Officer of Registrant’s General Partner.	Attached herein.

32.4	ERP Operating Limited Partnership – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Robert A. Garechana, Chief Financial Officer of Registrant’s General Partner.	Attached herein.

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

Table of Contents

SIGNATURES

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

		EQUITY RESIDENTIAL

Date:	October 29, 2021	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	October 29, 2021	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)

		ERP OPERATING LIMITED PARTNERSHIP BY: EQUITY RESIDENTIAL ITS GENERAL PARTNER

Date:	October 29, 2021	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	October 29, 2021	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)