EQUITY RESIDENTIAL - Quarter Report: 2021 June (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 June 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 July 23, 2021 was 374,457,337.

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EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended June 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 June 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 June 30, 2021 and December 31, 2020	2

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

Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	5

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

Financial Statements of ERP Operating Limited Partnership:

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

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

Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	13

Consolidated Statements of Changes in Capital for the six months and quarters ended June 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	35

Item 3. Quantitative and Qualitative Disclosures about Market Risk	52

Item 4. Controls and Procedures	52

PART II.

Item 1. Legal Proceedings	53

Item 1A. Risk Factors	53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3. Defaults Upon Senior Securities	53

Item 4. Mine Safety Disclosures	53

Item 5. Other Information	53

Item 6. Exhibits	53

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EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)

	June 30,			December 31,
	2021			2020
ASSETS
Land	$	5,780,705		$	5,785,367
Depreciable property		21,161,984			20,920,654
Projects under development		372,243			411,134
Land held for development		90,446			86,170
Investment in real estate		27,405,378			27,203,325
Accumulated depreciation		(8,164,287	)		(7,859,657	)
Investment in real estate, net		19,241,091			19,343,668
Investments in unconsolidated entities		53,364			52,782
Cash and cash equivalents		39,492			42,591
Restricted deposits		353,009			57,137
Right-of-use assets		480,671			499,287
Other assets		296,719			291,426
Total assets	$	20,464,346		$	20,286,891

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	2,280,251		$	2,293,890
Notes, net		5,338,671			5,335,536
Line of credit and commercial paper		631,770			414,830
Accounts payable and accrued expenses		114,288			107,366
Accrued interest payable		65,814			65,896
Lease liabilities		314,379			329,130
Other liabilities		341,817			345,064
Security deposits		62,228			60,480
Distributions payable		232,958			232,262
Total liabilities		9,382,176			9,184,454

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		440,123			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 June 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; 374,354,830 shares issued and outstanding as of June 30, 2021 and 372,302,000 shares issued and outstanding as of December 31, 2020		3,744			3,723
Paid in capital		9,110,121			9,128,599
Retained earnings		1,321,875			1,399,715
Accumulated other comprehensive income (loss)		(39,029	)		(43,666	)
Total shareholders’ equity		10,433,991			10,525,651
Noncontrolling Interests:
Operating Partnership		205,691			233,162
Partially Owned Properties		2,365			4,673
Total Noncontrolling Interests		208,056			237,835
Total equity		10,642,047			10,763,486
Total liabilities and equity	$	20,464,346		$	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)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
REVENUES
Rental income	$	1,195,661		$	1,335,837		$	598,059		$	653,532

EXPENSES
Property and maintenance		224,800			220,268			107,746			104,452
Real estate taxes and insurance		200,871			192,770			97,401			95,038
Property management		50,585			51,317			24,455			23,608
General and administrative		30,061			26,353			14,678			11,835
Depreciation		400,635			418,398			200,673			205,976
Total expenses		906,952			909,106			444,953			440,909

Net gain (loss) on sales of real estate properties		223,695			352,243			223,738			144,266

Operating income		512,404			778,974			376,844			356,889

Interest and other income		24,320			3,471			24,104			1,511
Other expenses		(7,452	)		(4,227	)		(3,342	)		(1,694	)
Interest:
Expense incurred, net		(134,482	)		(167,475	)		(67,124	)		(81,885	)
Amortization of deferred financing costs		(4,124	)		(4,152	)		(1,939	)		(2,111	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		390,666			606,591			328,543			272,710
Income and other tax (expense) benefit		(395	)		(240	)		(242	)		(187	)
Income (loss) from investments in unconsolidated entities		(1,872	)		(2,199	)		(261	)		(1,042	)
Net gain (loss) on sales of land parcels		5			—			—			—
Net income		388,404			604,152			328,040			271,481
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(13,056	)		(21,248	)		(10,913	)		(9,713	)
Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Net income attributable to controlling interests		373,925			569,494			316,386			260,888
Preferred distributions		(1,545	)		(1,545	)		(772	)		(772	)
Net income available to Common Shares	$	372,380		$	567,949		$	315,614		$	260,116

Earnings per share – basic:
Net income available to Common Shares	$	1.00		$	1.53		$	0.84		$	0.70
Weighted average Common Shares outstanding		373,050			371,689			373,812			371,795

Earnings per share – diluted:
Net income available to Common Shares	$	1.00		$	1.53		$	0.84		$	0.70
Weighted average Common Shares outstanding		387,367			386,272			387,820			385,913

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)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
Comprehensive income:
Net income	$	388,404		$	604,152		$	328,040		$	271,481
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			(223	)
Losses reclassified into earnings from other comprehensive income		4,637			11,398			2,334			5,764
Other comprehensive income (loss)		4,637			10,208			2,334			5,541
Comprehensive income		393,041			614,360			330,374			277,022
Comprehensive (income) attributable to Noncontrolling Interests		(14,641	)		(35,026	)		(11,732	)		(10,792	)
Comprehensive income attributable to controlling interests	$	378,400		$	579,334		$	318,642		$	266,230

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	388,404		$	604,152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		400,635			418,398
Amortization of deferred financing costs		4,124			4,152
Amortization of above/below market lease intangibles		(154	)		(35	)
Amortization of discounts and premiums on debt		2,593			2,553
Amortization of deferred settlements on derivative instruments		4,631			11,392
Amortization of right-of-use assets		7,308			5,892
Write-off of pursuit costs		2,647			3,278
(Income) loss from investments in unconsolidated entities		1,872			2,199
Distributions from unconsolidated entities – return on capital		—			100
Net (gain) loss on sales of real estate properties		(223,695	)		(352,243	)
Net (gain) loss on sales of land parcels		(5	)		—
Realized/unrealized (gain) loss on derivative instruments		—			25
Realized (gain) loss on sale of investment securities		(23,432	)		—
Compensation paid with Company Common Shares		16,077			13,475
Other operating activities, net		—			1,805
Changes in assets and liabilities:
(Increase) decrease in other assets		(4,462	)		(61,422	)
Increase (decrease) in accounts payable and accrued expenses		6,514			5,954
Increase (decrease) in accrued interest payable		(82	)		737
Increase (decrease) in lease liabilities		(3,211	)		(1,199	)
Increase (decrease) in other liabilities		(5,387	)		(18,070	)
Increase (decrease) in security deposits		1,748			(6,057	)
Net cash provided by operating activities		576,125			635,086
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(281,426	)		—
Investment in real estate – development/other		(125,156	)		(95,215	)
Capital expenditures to real estate		(66,443	)		(61,265	)
Non-real estate capital additions		(1,042	)		(15,536	)
Interest capitalized for real estate under development		(8,176	)		(4,102	)
Proceeds from disposition of real estate, net		406,922			747,600
Investments in unconsolidated entities		(4,491	)		(5,626	)
Distributions from unconsolidated entities – return of capital		4			—
Purchase of investment securities and other investments		(166,945	)		(509	)
Proceeds from sale of investment securities		191,398			—
Net cash provided by (used for) investing activities		(55,355	)		565,347

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(362	)	$	(2,907	)
Mortgage notes payable, net:
Proceeds		47,759			495,145
Lump sum payoffs		(59,880	)		(91,500	)
Scheduled principal repayments		(3,713	)		(3,873	)
Line of credit and commercial paper:
Line of credit proceeds		—			1,870,000
Line of credit repayments		—			(1,890,000	)
Commercial paper proceeds		2,819,940			6,726,167
Commercial paper repayments		(2,603,000	)		(7,724,000	)
Proceeds from (payments on) settlement of derivative instruments		—			(1,215	)
Finance ground lease principal payments		(232	)		—
Proceeds from Employee Share Purchase Plan (ESPP)		2,667			2,359
Proceeds from exercise of options		39,623			11,322
Other financing activities, net		(31	)		(31	)
Contributions – Noncontrolling Interests – Partially Owned Properties		—			341
Contributions – Noncontrolling Interests – Operating Partnership		—			12
Distributions:
Common Shares		(448,983	)		(435,427	)
Preferred Shares		(1,545	)		(1,545	)
Noncontrolling Interests – Operating Partnership		(16,540	)		(16,478	)
Noncontrolling Interests – Partially Owned Properties		(3,700	)		(10,269	)
Net cash provided by (used for) financing activities		(227,997	)		(1,071,899	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		292,773			128,534
Cash and cash equivalents and restricted deposits, beginning of period		99,728			116,999
Cash and cash equivalents and restricted deposits, end of period	$	392,501		$	245,533

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	39,492		$	187,416
Restricted deposits		353,009			58,117
Total cash and cash equivalents and restricted deposits, end of period	$	392,501		$	245,533

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	126,742		$	148,164
Net cash paid (received) for income and other taxes	$	888		$	428
Amortization of deferred financing costs:
Investment in real estate, net	$	(100	)	$	(120	)
Other assets	$	1,169		$	1,169
Mortgage notes payable, net	$	1,139		$	876
Notes, net	$	1,916		$	2,227
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	1,374		$	1,191
Notes, net	$	1,219		$	1,362
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(6	)	$	(6	)
Accumulated other comprehensive income	$	4,637		$	11,398
Write-off of pursuit costs:
Investment in real estate, net	$	2,314		$	3,122
Other assets	$	317		$	140
Accounts payable and accrued expenses	$	16		$	16
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	1,216		$	1,554
Other liabilities	$	656		$	645
Realized/unrealized (gain) loss on derivative instruments:
Other liabilities	$	—		$	1,215
Accumulated other comprehensive income	$	—		$	(1,190	)
Investments in unconsolidated entities:
Investments in unconsolidated entities	$	(3,231	)	$	(4,726	)
Other liabilities	$	(1,260	)	$	(900	)
Debt financing costs:
Other assets	$	(44	)	$	(215	)
Mortgage notes payable, net	$	(318	)	$	(2,692	)
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	$	1,429		$	—
Other assets	$	(1,429	)	$	—

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands except per share data)

(Unaudited)

	Six Months Ended June 30,						Quarter Ended June 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		$	3,729		$	3,721
Conversion of OP Units into Common Shares		11			1			11			1
Exercise of share options		8			2			3			—
Employee Share Purchase Plan (ESPP)		1			—			1			—
Share-based employee compensation expense:
Restricted shares		1			2			—			—
Balance, end of period	$	3,744		$	3,722		$	3,744		$	3,722
PAID IN CAPITAL
Balance, beginning of period	$	9,128,599		$	8,965,577		$	9,083,346		$	9,092,441
Common Share Issuance:
Conversion of OP Units into Common Shares		66,649			3,855			66,649			2,011
Exercise of share options		39,615			11,320			16,738			171
Employee Share Purchase Plan (ESPP)		2,666			2,359			935			1,490
Share-based employee compensation expense:
Restricted shares		4,813			7,252			2,540			3,231
Share options		1,976			1,293			988			623
ESPP discount		633			416			189			263
Supplemental Executive Retirement Plan (SERP)		(2,057	)		(506	)		(828	)		(655	)
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership		(101,966	)		128,753			(29,010	)		17,304
Adjustment for Noncontrolling Interests ownership in Operating Partnership		(30,807	)		(1,987	)		(31,426	)		1,453
Balance, end of period	$	9,110,121		$	9,118,332		$	9,110,121		$	9,118,332
RETAINED EARNINGS
Balance, beginning of period	$	1,399,715		$	1,386,495		$	1,231,808		$	1,469,821
Net income attributable to controlling interests		373,925			569,494			316,386			260,888
Common Share distributions		(450,220	)		(448,750	)		(225,547	)		(224,243	)
Preferred Share distributions		(1,545	)		(1,545	)		(772	)		(772	)
Balance, end of period	$	1,321,875		$	1,505,694		$	1,321,875		$	1,505,694
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(43,666	)	$	(77,563	)	$	(41,363	)	$	(72,896	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			(223	)
Losses reclassified into earnings from other comprehensive income		4,637			11,398			2,334			5,764
Balance, end of period	$	(39,029	)	$	(67,355	)	$	(39,029	)	$	(67,355	)

DISTRIBUTIONS
Distributions declared per Common Share outstanding	$	1.205		$	1.205		$	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)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
NONCONTROLLING INTERESTS
OPERATING PARTNERSHIP
Balance, beginning of period	$	233,162		$	227,837		$	234,969		$	235,580
Issuance of restricted units to Noncontrolling Interests		—			12			—			—
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner		(66,660	)		(3,856	)		(66,660	)		(2,012	)
Equity compensation associated with Noncontrolling Interests		10,531			7,026			4,043			1,959
Net income attributable to Noncontrolling Interests		13,056			21,248			10,913			9,713
Distributions to Noncontrolling Interests		(15,999	)		(17,037	)		(7,410	)		(7,961	)
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership		794			(2,048	)		(1,590	)		(657	)
Adjustment for Noncontrolling Interests ownership in Operating Partnership		30,807			1,987			31,426			(1,453	)
Balance, end of period	$	205,691		$	235,169		$	205,691		$	235,169
PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	4,673		$	1,183		$	2,472		$	4,739
Net income attributable to Noncontrolling Interests		1,423			13,410			741			880
Contributions by Noncontrolling Interests		—			341			—			—
Distributions to Noncontrolling Interests		(3,731	)		(10,300	)		(848	)		(985	)
Balance, end of period	$	2,365		$	4,634		$	2,365		$	4,634

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

	June 30,			December 31,
	2021			2020
ASSETS
Land	$	5,780,705		$	5,785,367
Depreciable property		21,161,984			20,920,654
Projects under development		372,243			411,134
Land held for development		90,446			86,170
Investment in real estate		27,405,378			27,203,325
Accumulated depreciation		(8,164,287	)		(7,859,657	)
Investment in real estate, net		19,241,091			19,343,668
Investments in unconsolidated entities		53,364			52,782
Cash and cash equivalents		39,492			42,591
Restricted deposits		353,009			57,137
Right-of-use assets		480,671			499,287
Other assets		296,719			291,426
Total assets	$	20,464,346		$	20,286,891

LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net	$	2,280,251		$	2,293,890
Notes, net		5,338,671			5,335,536
Line of credit and commercial paper		631,770			414,830
Accounts payable and accrued expenses		114,288			107,366
Accrued interest payable		65,814			65,896
Lease liabilities		314,379			329,130
Other liabilities		341,817			345,064
Security deposits		62,228			60,480
Distributions payable		232,958			232,262
Total liabilities		9,382,176			9,184,454

Commitments and contingencies

Redeemable Limited Partners		440,123			338,951
Capital:
Partners’ Capital:
Preference Units		37,280			37,280
General Partner		10,435,740			10,532,037
Limited Partners		205,691			233,162
Accumulated other comprehensive income (loss)		(39,029	)		(43,666	)
Total partners’ capital		10,639,682			10,758,813
Noncontrolling Interests – Partially Owned Properties		2,365			4,673
Total capital		10,642,047			10,763,486
Total liabilities and capital	$	20,464,346		$	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)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
REVENUES
Rental income	$	1,195,661		$	1,335,837		$	598,059		$	653,532

EXPENSES
Property and maintenance		224,800			220,268			107,746			104,452
Real estate taxes and insurance		200,871			192,770			97,401			95,038
Property management		50,585			51,317			24,455			23,608
General and administrative		30,061			26,353			14,678			11,835
Depreciation		400,635			418,398			200,673			205,976
Total expenses		906,952			909,106			444,953			440,909

Net gain (loss) on sales of real estate properties		223,695			352,243			223,738			144,266

Operating income		512,404			778,974			376,844			356,889

Interest and other income		24,320			3,471			24,104			1,511
Other expenses		(7,452	)		(4,227	)		(3,342	)		(1,694	)
Interest:
Expense incurred, net		(134,482	)		(167,475	)		(67,124	)		(81,885	)
Amortization of deferred financing costs		(4,124	)		(4,152	)		(1,939	)		(2,111	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		390,666			606,591			328,543			272,710
Income and other tax (expense) benefit		(395	)		(240	)		(242	)		(187	)
Income (loss) from investments in unconsolidated entities		(1,872	)		(2,199	)		(261	)		(1,042	)
Net gain (loss) on sales of land parcels		5			—			—			—
Net income		388,404			604,152			328,040			271,481
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Net income attributable to controlling interests	$	386,981		$	590,742		$	327,299		$	270,601
ALLOCATION OF NET INCOME:
Preference Units	$	1,545		$	1,545		$	772		$	772

General Partner	$	372,380		$	567,949		$	315,614		$	260,116
Limited Partners		13,056			21,248			10,913			9,713
Net income available to Units	$	385,436		$	589,197		$	326,527		$	269,829

Earnings per Unit – basic:
Net income available to Units	$	1.00		$	1.53		$	0.84		$	0.70
Weighted average Units outstanding		385,594			384,702			385,856			384,818

Earnings per Unit – diluted:
Net income available to Units	$	1.00		$	1.53		$	0.84		$	0.70
Weighted average Units outstanding		387,367			386,272			387,820			385,913

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)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
Comprehensive income:
Net income	$	388,404		$	604,152		$	328,040		$	271,481
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			(223	)
Losses reclassified into earnings from other comprehensive income		4,637			11,398			2,334			5,764
Other comprehensive income (loss)		4,637			10,208			2,334			5,541
Comprehensive income		393,041			614,360			330,374			277,022
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Comprehensive income attributable to controlling interests	$	391,618		$	600,950		$	329,633		$	276,142

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	388,404		$	604,152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		400,635			418,398
Amortization of deferred financing costs		4,124			4,152
Amortization of above/below market lease intangibles		(154	)		(35	)
Amortization of discounts and premiums on debt		2,593			2,553
Amortization of deferred settlements on derivative instruments		4,631			11,392
Amortization of right-of-use assets		7,308			5,892
Write-off of pursuit costs		2,647			3,278
(Income) loss from investments in unconsolidated entities		1,872			2,199
Distributions from unconsolidated entities – return on capital		—			100
Net (gain) loss on sales of real estate properties		(223,695	)		(352,243	)
Net (gain) loss on sales of land parcels		(5	)		—
Realized/unrealized (gain) loss on derivative instruments		—			25
Realized (gain) loss on sale of investment securities		(23,432	)		—
Compensation paid with Company Common Shares		16,077			13,475
Other operating activities, net		—			1,805
Changes in assets and liabilities:
(Increase) decrease in other assets		(4,462	)		(61,422	)
Increase (decrease) in accounts payable and accrued expenses		6,514			5,954
Increase (decrease) in accrued interest payable		(82	)		737
Increase (decrease) in lease liabilities		(3,211	)		(1,199	)
Increase (decrease) in other liabilities		(5,387	)		(18,070	)
Increase (decrease) in security deposits		1,748			(6,057	)
Net cash provided by operating activities		576,125			635,086
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(281,426	)		—
Investment in real estate – development/other		(125,156	)		(95,215	)
Capital expenditures to real estate		(66,443	)		(61,265	)
Non-real estate capital additions		(1,042	)		(15,536	)
Interest capitalized for real estate under development		(8,176	)		(4,102	)
Proceeds from disposition of real estate, net		406,922			747,600
Investments in unconsolidated entities		(4,491	)		(5,626	)
Distributions from unconsolidated entities – return of capital		4			—
Purchase of investment securities and other investments		(166,945	)		(509	)
Proceeds from sale of investment securities		191,398			—
Net cash provided by (used for) investing activities		(55,355	)		565,347

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(362	)	$	(2,907	)
Mortgage notes payable, net:
Proceeds		47,759			495,145
Lump sum payoffs		(59,880	)		(91,500	)
Scheduled principal repayments		(3,713	)		(3,873	)
Line of credit and commercial paper:
Line of credit proceeds		—			1,870,000
Line of credit repayments		—			(1,890,000	)
Commercial paper proceeds		2,819,940			6,726,167
Commercial paper repayments		(2,603,000	)		(7,724,000	)
Proceeds from (payments on) settlement of derivative instruments		—			(1,215	)
Finance ground lease principal payments		(232	)		—
Proceeds from EQR’s Employee Share Purchase Plan (ESPP)		2,667			2,359
Proceeds from exercise of EQR options		39,623			11,322
Other financing activities, net		(31	)		(31	)
Contributions – Noncontrolling Interests – Partially Owned Properties		—			341
Contributions – Limited Partners		—			12
Distributions:
OP Units – General Partner		(448,983	)		(435,427	)
Preference Units		(1,545	)		(1,545	)
OP Units – Limited Partners		(16,540	)		(16,478	)
Noncontrolling Interests – Partially Owned Properties		(3,700	)		(10,269	)
Net cash provided by (used for) financing activities		(227,997	)		(1,071,899	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		292,773			128,534
Cash and cash equivalents and restricted deposits, beginning of period		99,728			116,999
Cash and cash equivalents and restricted deposits, end of period	$	392,501		$	245,533

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	39,492		$	187,416
Restricted deposits		353,009			58,117
Total cash and cash equivalents and restricted deposits, end of period	$	392,501		$	245,533

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	126,742		$	148,164
Net cash paid (received) for income and other taxes	$	888		$	428
Amortization of deferred financing costs:
Investment in real estate, net	$	(100	)	$	(120	)
Other assets	$	1,169		$	1,169
Mortgage notes payable, net	$	1,139		$	876
Notes, net	$	1,916		$	2,227
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	1,374		$	1,191
Notes, net	$	1,219		$	1,362
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(6	)	$	(6	)
Accumulated other comprehensive income	$	4,637		$	11,398
Write-off of pursuit costs:
Investment in real estate, net	$	2,314		$	3,122
Other assets	$	317		$	140
Accounts payable and accrued expenses	$	16		$	16
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	1,216		$	1,554
Other liabilities	$	656		$	645
Realized/unrealized (gain) loss on derivative instruments:
Other liabilities	$	—		$	1,215
Accumulated other comprehensive income	$	—		$	(1,190	)
Investments in unconsolidated entities:
Investments in unconsolidated entities	$	(3,231	)	$	(4,726	)
Other liabilities	$	(1,260	)	$	(900	)
Debt financing costs:
Other assets	$	(44	)	$	(215	)
Mortgage notes payable, net	$	(318	)	$	(2,692	)
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	$	1,429		$	—
Other assets	$	(1,429	)	$	—

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Amounts in thousands except per Unit data)

(Unaudited)

	Six Months Ended June 30,						Quarter Ended June 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		$	10,318,883		$	10,565,983
OP Unit Issuance:
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		66,660			3,856			66,660			2,012
Exercise of EQR share options		39,623			11,322			16,741			171
EQR’s Employee Share Purchase Plan (ESPP)		2,667			2,359			936			1,490
Share-based employee compensation expense:
EQR restricted shares		4,814			7,254			2,540			3,231
EQR share options		1,976			1,293			988			623
EQR ESPP discount		633			416			189			263
Net income available to Units – General Partner		372,380			567,949			315,614			260,116
OP Units – General Partner distributions		(450,220	)		(448,750	)		(225,547	)		(224,243	)
Supplemental Executive Retirement Plan (SERP)		(2,057	)		(506	)		(828	)		(655	)
Change in market value of Redeemable Limited Partners		(101,966	)		128,753			(29,010	)		17,304
Adjustment for Limited Partners ownership in Operating Partnership		(30,807	)		(1,987	)		(31,426	)		1,453
Balance, end of period	$	10,435,740		$	10,627,748		$	10,435,740		$	10,627,748
LIMITED PARTNERS
Balance, beginning of period	$	233,162		$	227,837		$	234,969		$	235,580
Issuance of restricted units to Limited Partners		—			12			—			—
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		(66,660	)		(3,856	)		(66,660	)		(2,012	)
Equity compensation associated with Units – Limited Partners		10,531			7,026			4,043			1,959
Net income available to Units – Limited Partners		13,056			21,248			10,913			9,713
Units – Limited Partners distributions		(15,999	)		(17,037	)		(7,410	)		(7,961	)
Change in carrying value of Redeemable Limited Partners		794			(2,048	)		(1,590	)		(657	)
Adjustment for Limited Partners ownership in Operating Partnership		30,807			1,987			31,426			(1,453	)
Balance, end of period	$	205,691		$	235,169		$	205,691		$	235,169
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(43,666	)	$	(77,563	)	$	(41,363	)	$	(72,896	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		—			(1,190	)		—			(223	)
Losses reclassified into earnings from other comprehensive income		4,637			11,398			2,334			5,764
Balance, end of period	$	(39,029	)	$	(67,355	)	$	(39,029	)	$	(67,355	)

DISTRIBUTIONS
Distributions declared per Unit outstanding	$	1.205		$	1.205		$	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)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	4,673		$	1,183		$	2,472		$	4,739
Net income attributable to Noncontrolling Interests		1,423			13,410			741			880
Contributions by Noncontrolling Interests		—			341			—			—
Distributions to Noncontrolling Interests		(3,731	)		(10,300	)		(848	)		(985	)
Balance, end of period	$	2,365		$	4,634		$	2,365		$	4,634

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 June 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 June 30, 2021, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 303 properties located in 9 states and the District of Columbia consisting of 78,107 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):

	Properties		Apartment Units
Wholly Owned Properties		286		74,468
Master-Leased Property – Consolidated		1		162
Partially Owned Properties – Consolidated		16		3,477
		303		78,107

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 and 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 six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Table of Contents

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.

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 is currently evaluating its options with regards to existing contracts and hedging relationships and the impact of adopting this update on its consolidated results of operations and financial position.

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Recently Adopted Accounting Pronouncements

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 six months ended June 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		1,084,023			97,363
Exercise of share options		833,669			217,935
Employee Share Purchase Plan (ESPP)		47,761			44,110
Restricted share grants, net		87,377			178,720
Common Shares outstanding at June 30,		374,354,830			372,209,012
Units
Units outstanding at January 1,		13,858,073			13,731,315
Restricted unit grants, net		155,638			245,999
Conversion of OP Units to Common Shares		(1,084,023	)		(97,363	)
Units outstanding at June 30,		12,929,688			13,879,951
Total Common Shares and Units outstanding at June 30,		387,284,518			386,088,963
Units Ownership Interest in Operating Partnership		3.3	%		3.6	%

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

	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		833,669			217,935
EQR’s Employee Share Purchase Plan (ESPP)		47,761			44,110
EQR’s restricted share grants, net		87,377			178,720
Issued to Limited Partners:
Restricted unit grants, net		155,638			245,999
General and Limited Partner Units outstanding at June 30,		387,284,518			386,088,963
Limited Partner Units
Limited Partner Units outstanding at January 1,		13,858,073			13,731,315
Limited Partner restricted unit grants, net		155,638			245,999
Conversion of Limited Partner OP Units to EQR Common Shares		(1,084,023	)		(97,363	)
Limited Partner Units outstanding at June 30,		12,929,688			13,879,951
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 June 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 June 30, 2021 and 2020, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $440.1 million and $336.7 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 six months ended June 30, 2021 and 2020, respectively (amounts in thousands):

	2021			2020
Balance at January 1,	$	338,951		$	463,400
Change in market value		101,966			(128,753	)
Change in carrying value		(794	)		2,048
Balance at June 30,	$	440,123		$	336,695

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 June 30, 2021 and December 31, 2020:

				Amounts in thousands
		Annual
	Call	Dividend Per		June 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 June 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 sell Common Shares from time to time into the existing trading market at current market prices as well as through negotiated transactions. In June 2019, the Company extended the program maturity to June 2022. In connection with the extension, the Company may now also sell Common Shares under forward sale agreements. The use of a forward sale agreement would allow the Company to lock in a price on the sale of Common Shares at the time the agreement is executed, but defer receiving the proceeds from the sale until a later date. EQR has the authority to issue 13.0 million shares but has not issued any shares under this program since September 2012.

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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 June 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 June 30, 2021 and December 31, 2020 (amounts in thousands):

	June 30, 2021			December 31, 2020
Land	$	5,780,705		$	5,785,367
Depreciable property:
Buildings and improvements		18,637,974			18,464,484
Furniture, fixtures and equipment		2,031,407			1,970,033
In-Place lease intangibles		492,603			486,137
Projects under development:
Land		10,424			23,531
Construction-in-progress		361,819			387,603
Land held for development:
Land		46,160			46,160
Construction-in-progress		44,286			40,010
Investment in real estate		27,405,378			27,203,325
Accumulated depreciation		(8,164,287	)		(7,859,657	)
Investment in real estate, net	$	19,241,091		$	19,343,668

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

	Properties		Apartment Units		Purchase Price
Rental Properties – Consolidated (1)		3		813	$	280,200
Total		3		813	$	280,200

(1)	Purchase price includes an allocation of approximately $30.8 million to land and $250.6 million to depreciable property (inclusive of capitalized closing costs).

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

	Properties		Apartment Units		Sales Price
Rental Properties – Consolidated		5		795	$	409,500
Total		5		795	$	409,500

The Company recognized a net gain on sales of real estate properties of approximately $223.7 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

June 30, 2021

Rental Properties - Consolidated

454

275,000

98,033

Total

454

275,000

98,033

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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 June 30, 2021.

6.	Investments in Partially Owned Entities

The Company has invested in various properties 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 16 properties containing 3,477 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 will be 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 $778.6 million and $242.0 million, respectively, at June 30, 2021 and approximately $784.1 million and $224.0 million, respectively, at December 31, 2020.

Investments in Unconsolidated Entities

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 June 30, 2021 and December 31, 2020 (amounts in thousands except for ownership percentage):

	June 30, 2021			December 31, 2020			Ownership Percentage
Investments in Unconsolidated Entities:
Operating Property (VIE) (1)	$	37,204		$	38,288		33.3%
Real Estate Technology (2)		16,609			14,866		Varies
Other		(449	)		(372	)	Varies
Investments in Unconsolidated Entities	$	53,364		$	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 investments in five separate real estate technology funds/companies.

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7.	Restricted Deposits

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

	June 30, 2021		December 31, 2020
Mortgage escrow deposits:
Replacement reserves	$	10,497	$	9,877
Mortgage principal reserves/sinking funds		16,580		14,168
Mortgage escrow deposits		27,077		24,045
Restricted cash:
Tax-deferred (1031) exchange proceeds		285,147		—
Earnest money on pending acquisitions		6,250		—
Restricted deposits on real estate investments		296		307
Resident security and utility deposits		32,405		31,412
Other		1,834		1,373
Restricted cash		325,932		33,092
Restricted deposits	$	353,009	$	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 six months ended June 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 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 six months ended June 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 six months ended June 30, 2021 and 2020 (amounts in thousands):

	Six Months Ended June 30, 2021								Six Months Ended June 30, 2020
Income Type	Residential Leases			Non-Residential Leases		Total			Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	1,078,304		$	31,237	$	1,109,541		$	1,207,106		$	30,221		$	1,237,327
Utility recoveries (RUBS income) (1)		36,533			330		36,863			35,232			375			35,607
Parking rent		19,890			362		20,252			19,460			223			19,683
Other lease revenue (2)		(18,970	)		1,138		(17,832	)		(6,273	)		(1,231	)		(7,504	)
Total lease revenue	$	1,115,757		$	33,067		1,148,824		$	1,255,525		$	29,588			1,285,113
Parking revenue							11,572									11,312
Other revenue							35,265									39,412
Total other rental income (3)							46,837									50,724
Rental income						$	1,195,661								$	1,335,837

(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.

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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 June 30, 2021 and 2020 (amounts in thousands):

	Quarter Ended June 30, 2021								Quarter Ended June 30, 2020
Income Type	Residential Leases			Non-Residential Leases		Total			Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	538,649		$	15,398	$	554,047		$	594,626		$	12,127		$	606,753
Utility recoveries (RUBS income) (1)		18,579			152		18,731			17,814			147			17,961
Parking rent		10,156			95		10,251			9,627			126			9,753
Other lease revenue (2)		(8,708	)		529		(8,179	)		(6,060	)		(951	)		(7,011	)
Total lease revenue	$	558,676		$	16,174		574,850		$	616,007		$	11,449			627,456
Parking revenue							6,139									4,529
Other revenue							17,070									21,547
Total other rental income (3)							23,209									26,076
Rental income						$	598,059								$	653,532

(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. We continue to work with our residents and tenants on payment plans and collections and our bad debt allowance policies remain consistent.

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

	Residential							Non-Residential
Balance Sheet (Other assets):	June 30, 2021				December 31, 2020			June 30, 2021			December 31, 2020
Resident/tenant accounts receivable balances	$	43,415			$	30,856		$	6,122		$	7,598
Allowance for doubtful accounts		(39,014	)			(24,021	)		(5,232	)		(6,527	)
Net receivable balances	$	4,401		(1)	$	6,835		$	890		$	1,071

Straight-line receivable balances	$	20,487			$	19,992		$	12,801		$	13,413

(1)	The Company held residential security deposits approximating 48.7% of the net receivable balance at June 30, 2021.

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

	Six Months Ended June 30,						Quarter Ended June 30,
Income Statement (Rental income):		2021			2020			2021			2020
Bad debt, net	$	25,772		$	13,348		$	12,079		$	9,564
% of rental income		2.2	%		1.0	%		2.1	%		1.5	%

Debt

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. Weighted average interest rates noted below for the six months ended June 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 six months ended June 30, 2021 (amounts in thousands):

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	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 June 30, 2021
Fixed Rate Debt:
Secured – Conventional	$	1,901,091	$	28,500	(2)	$	(28,200	)	$	(3,713	)	$	758	$	354	$	1,898,790
Floating Rate Debt:
Secured – Conventional		31,494		19,259			—			—			—		120		50,873
Secured – Tax Exempt		361,305		—			(31,680	)		—			616		347		330,588
Floating Rate Debt		392,799		19,259			(31,680	)		—			616		467		381,461
Total	$	2,293,890	$	47,759		$	(59,880	)	$	(3,713	)	$	1,374	$	821	$	2,280,251

(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.

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

		June 30, 2021
Interest Rate Ranges		0.03% - 4.21%
Weighted Average Interest Rate		3.17%
Maturity Date Ranges		2022-2061

As of June 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 six months ended June 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

June 30, 2021

Fixed Rate Debt:

Unsecured – Public

5,335,536

—

1,219

1,916

5,338,671

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

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

		June 30, 2021
Interest Rate Ranges		2.50% - 7.57%
Weighted Average Interest Rate		3.75%
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 six months ended June 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

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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 six months ended June 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 0.29% for the six months ended June 30, 2021 and a weighted average maturity of 46 days as of June 30, 2021. The weighted average amount outstanding for the six months ended June 30, 2021 was approximately $585.1 million.

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 June 30, 2021 (amounts in thousands):

	June 30, 2021
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(632,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(100,699	)
Unsecured revolving credit facility availability	$	1,767,301

Other

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

		June 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 six months ended June 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 June 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.

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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, 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 June 30, 2021 and December 31, 2020, respectively (amounts in thousands):

	June 30, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value (Level 2)		Carrying Value		Estimated Fair Value (Level 2)
Mortgage notes payable, net	$	2,280,251	$	2,308,025	$	2,293,890	$	2,313,263
Unsecured debt, net		5,970,441		6,688,195		5,750,366		6,686,612
Total debt, net	$	8,250,692	$	8,996,220	$	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 June 30, 2021 and December 31, 2020, respectively (amounts in thousands):

				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	6/30/2021		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	$	162,179	$	162,179	$	—	$	—

Liabilities
Supplemental Executive Retirement Plan	Other Liabilities	$	162,179	$	162,179	$	—	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	440,123	$	—	$	440,123	$	—

				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	$	—

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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 six months ended June 30, 2021 and 2020, respectively (amounts in thousands):

	Effective Portion
June 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	$	(4,637	)
Total	$	—		$	(4,637	)

	Effective Portion
June 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	$	(11,398	)
Total	$	(1,190	)		$	(11,398	)

As of June 30, 2021 and December 31, 2020, there were approximately $39.0 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 $10.4 million may be recognized as additional interest expense during the twelve months ending June 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):

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
Numerator for net income per share – basic:
Net income	$	388,404		$	604,152		$	328,040		$	271,481
Allocation to Noncontrolling Interests – Operating Partnership		(13,056	)		(21,248	)		(10,913	)		(9,713	)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Preferred distributions		(1,545	)		(1,545	)		(772	)		(772	)
Numerator for net income per share – basic	$	372,380		$	567,949		$	315,614		$	260,116
Numerator for net income per share – diluted:
Net income	$	388,404		$	604,152		$	328,040		$	271,481
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Preferred distributions		(1,545	)		(1,545	)		(772	)		(772	)
Numerator for net income per share – diluted	$	385,436		$	589,197		$	326,527		$	269,829
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic		373,050			371,689			373,812			371,795
Effect of dilutive securities:
OP Units		12,544			13,013			12,044			13,023
Long-term compensation shares/units		1,773			1,570			1,964			1,095
Denominator for net income per share – diluted		387,367			386,272			387,820			385,913
Net income per share – basic	$	1.00		$	1.53		$	0.84		$	0.70
Net income per share – diluted	$	1.00		$	1.53		$	0.84		$	0.70

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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):

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
Numerator for net income per Unit – basic and diluted:
Net income	$	388,404		$	604,152		$	328,040		$	271,481
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Allocation to Preference Units		(1,545	)		(1,545	)		(772	)		(772	)
Numerator for net income per Unit – basic and diluted	$	385,436		$	589,197		$	326,527		$	269,829
Denominator for net income per Unit – basic and diluted:
Denominator for net income per Unit – basic		385,594			384,702			385,856			384,818
Effect of dilutive securities:
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units		1,773			1,570			1,964			1,095
Denominator for net income per Unit – diluted		387,367			386,272			387,820			385,913
Net income per Unit – basic	$	1.00		$	1.53		$	0.84		$	0.70
Net income per Unit – diluted	$	1.00		$	1.53		$	0.84		$	0.70

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 June 30, 2021, the Company has two wholly owned projects totaling 624 apartment units in various stages of development with remaining commitments to fund of approximately $60.5 million and estimated completion dates ranging through December 31, 2021, as well as one completed partially owned development project that is in lease-up.

As of June 30, 2021, the Company has two consolidated joint venture agreements with third-party partners for the development of multifamily rental properties, one of which was substantially completed during the quarter ended June 30, 2021. 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.

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 six months ended June 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.

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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 six months and quarters ended June 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 six months and quarters ended June 30, 2021 and 2020, respectively (amounts in thousands):

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
Rental income	$	1,195,661		$	1,335,837		$	598,059		$	653,532
Property and maintenance expense		(224,800	)		(220,268	)		(107,746	)		(104,452	)
Real estate taxes and insurance expense		(200,871	)		(192,770	)		(97,401	)		(95,038	)
Total operating expenses		(425,671	)		(413,038	)		(205,147	)		(199,490	)
Net operating income	$	769,990		$	922,799		$	392,912		$	454,042

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

	Six Months Ended June 30, 2021							Six Months Ended June 30, 2020
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	226,592	$	74,889	$	151,703		$	241,570	$	73,626	$	167,944
Orange County		52,510		12,458		40,052			53,013		12,083		40,930
San Diego		37,928		9,185		28,743			37,365		9,033		28,332
Subtotal - Southern California		317,030		96,532		220,498			331,948		94,742		237,206

San Francisco		209,617		65,034		144,583			246,209		62,389		183,820
Washington D.C.		198,147		64,973		133,174			207,958		62,819		145,139
New York		196,304		102,288		94,016			226,532		98,230		128,302
Seattle		120,831		38,720		82,111			133,338		37,070		96,268
Boston		113,714		37,719		75,995			123,673		35,275		88,398
Denver		18,920		5,674		13,246			19,074		5,427		13,647
Total same store		1,174,563		410,940		763,623			1,288,732		395,952		892,780

Non-same store/other (2) (3)
Non-same store		10,499		3,506		6,993			7,374		1,611		5,763
Other (3)		10,599		11,225		(626	)		39,731		15,475		24,256
Total non-same store/other		21,098		14,731		6,367			47,105		17,086		30,019

Totals	$	1,195,661	$	425,671	$	769,990		$	1,335,837	$	413,038	$	922,799

(1)	For the six months ended June 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 76,335 apartment units.

(2)	For the six months ended June 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 June 30, 2021						Quarter Ended June 30, 2020
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	113,639	$	36,769	$	76,870	$	118,686	$	35,841	$	82,845
Orange County		26,669		6,122		20,547		26,318		5,910		20,408
San Diego		19,188		4,545		14,643		18,587		4,447		14,140
Subtotal - Southern California		159,496		47,436		112,060		163,591		46,198		117,393

San Francisco		104,285		31,759		72,526		121,106		30,593		90,513
Washington D.C.		99,030		31,651		67,379		103,241		30,717		72,524
New York		98,271		49,834		48,437		110,230		47,908		62,322
Seattle		60,574		19,372		41,202		66,096		18,778		47,318
Boston		57,777		18,512		39,265		60,711		17,087		43,624
Denver		9,575		2,643		6,932		9,418		2,639		6,779
Total same store		589,008		201,207		387,801		634,393		193,920		440,473

Non-same store/other (2) (3)
Non-same store		4,589		1,755		2,834		2,190		298		1,892
Other (3)		4,462		2,185		2,277		16,949		5,272		11,677
Total non-same store/other		9,051		3,940		5,111		19,139		5,570		13,569

Totals	$	598,059	$	205,147	$	392,912	$	653,532	$	199,490	$	454,042

(1)	For the quarters ended June 30, 2021 and 2020, same store primarily includes all properties acquired or completed that were stabilized prior to April 1, 2020, less properties subsequently sold, which represented 76,556 apartment units.

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

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

	Six Months Ended June 30, 2021
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	3,052,015	$	8,232
Orange County		380,069		2,372
San Diego		237,670		1,427
Subtotal - Southern California		3,669,754		12,031

San Francisco		3,442,539		10,443
Washington D.C.		3,291,944		13,108
New York		3,951,560		13,956
Seattle		1,987,663		6,723
Boston		1,726,284		9,067
Denver		502,062		615
Total same store		18,571,806		65,943

Non-same store/other (2) (3)
Non-same store		663,201		288
Other (3)		1,229,339		212
Total non-same store/other		1,892,540		500

Totals	$	20,464,346	$	66,443

(1)	Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2020, less properties subsequently sold, which represented 76,335 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 June 30, 2021, the Company:

•

Acquired four properties consisting of 1,081 apartment units for $365.5 million;

•

Sold two properties consisting of 395 apartment units for $215.3 million; and

•

Contributed $3.3 million for one 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 Company's and the Operating Partnership's overall impact from the COVID-19 pandemic 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 six months ended June 30, 2021:

Portfolio Rollforward

($ in thousands)

	Properties			Apartment Units			Purchase Price			Acquisition Cap Rate
12/31/2020		304			77,889
Acquisitions:
Consolidated Rental Properties		2			533		$	185,000			3.9	%
Consolidated Rental Properties – Not Stabilized (1)		1			280		$	95,200			4.1	%
							Sales Price			Disposition Yield
Dispositions:
Consolidated Rental Properties		(5	)		(795	)	$	(409,500	)		(3.7	)%
Completed Developments – Consolidated		1			200
6/30/2021		303			78,107

(1)	The Company acquired one property in the Denver market in the second quarter of 2021 that is in lease-up and is expected to stabilize in its second year of ownership at the Acquisition Cap Rate listed above.

The consolidated properties acquired were located in the Denver, Washington D.C. and Atlanta markets. The Atlanta acquisition marked the Company’s re-entry into the Atlanta market. The consolidated properties disposed of were located in the New York, Los Angeles and Seattle markets and the sales generated an Unlevered IRR of 8.8%. The consolidated property development completion was located in the San Francisco market. See Note 4 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate transactions.

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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 $260.0 million on development costs during the year ending December 31, 2021, of which approximately $125.2 million was spent during the six months ended June 30, 2021, primarily for 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.

Same Store Results

Properties that the Company owned and were stabilized (see definition below) for all of both of the six months ended June 30, 2021 and 2020 (the “Six-Month 2021 Same Store Properties”), which represented 76,335 apartment units, drove the Company’s results of operations. The Six-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 six months ended June 30, 2021:

	Six Months Ended June 30, 2021
	Properties			Apartment Units
Same Store Properties at December 31, 2020		285			73,585
2019 acquisitions stabilized		12			3,323
2021 dispositions		(5	)		(795	)
Lease-up properties stabilized		1			222
Same Store Properties at June 30, 2021		293			76,335

	Six Months Ended June 30, 2021
	Properties		Apartment Units
Same Store		293		76,335
Non-Same Store:
2021 acquisitions		3		813
2020 acquisitions		1		158
2019 acquisitions not yet stabilized		1		217
Master-Leased properties (1)		1		162
Lease-up properties not yet stabilized (2)		3		421
Other		1		1
Total Non-Same Store		10		1,772
Total Properties and Apartment Units		303		78,107

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 one property containing 162 apartment units that is wholly owned by the Company where the entire project is master-leased to a third-party corporate housing provider.

(2)	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.

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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):

	Six Months Ended June 30,
	2021			2020
Operating income	$	512,404		$	778,974
Adjustments:
Property management		50,585			51,317
General and administrative		30,061			26,353
Depreciation		400,635			418,398
Net (gain) loss on sales of real estate properties		(223,695	)		(352,243	)
Total NOI	$	769,990		$	922,799
Rental income:
Same store	$	1,174,563		$	1,288,732
Non-same store/other		21,098			47,105
Total rental income		1,195,661			1,335,837
Operating expenses:
Same store		410,940			395,952
Non-same store/other		14,731			17,086
Total operating expenses		425,671			413,038
NOI:
Same store		763,623			892,780
Non-same store/other		6,367			30,019
Total NOI	$	769,990		$	922,799

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

June YTD 2021 vs. June YTD 2020

Same Store Results/Statistics Including 76,335 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

June YTD 2021																		June YTD 2020
	Residential			% Change			Non- Residential			% Change			Total		% Change				Residential			Non- Residential		Total
Revenues	$	1,131,724			(9.5	%)	$	42,839	(1)		13.3	%	$	1,174,563		(8.9	%)	Revenues	$	1,250,911		$	37,821	$	1,288,732
Expenses	$	398,834			3.6	%	$	12,106			10.2	%	$	410,940		3.8	%	Expenses	$	384,969		$	10,983	$	395,952
NOI	$	732,890			(15.4	%)	$	30,733			14.5	%	$	763,623		(14.5	%)	NOI	$	865,942		$	26,838	$	892,780

Average Rental Rate	$	2,588			(9.4	%)												Average Rental Rate	$	2,857
Physical Occupancy		95.5	%		(0.1	%)												Physical Occupancy		95.6	%
Turnover		21.3	%		(0.3	%)												Turnover		21.6	%

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 lower bad debt and higher parking income.

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

June YTD 2021 vs. June YTD 2020

Same Store Residential Results/Statistics by Market

														Increase (Decrease) from Prior Year
Markets/Metro Areas	Apartment Units		June YTD 2021 % of Actual NOI			June YTD 2021 Average Rental Rate		June YTD 2021 Weighted Average Physical Occupancy %			June YTD 2021 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover
Los Angeles		16,193		20.4	%	$	2,402		96.1	%		20.7	%		(6.5	%)		1.8	%		(10.2	%)		(7.3	%)		0.7	%		(2.4	%)
Orange County		4,028		5.5	%		2,230		97.4	%		16.1	%		(1.0	%)		3.1	%		(2.2	%)		(1.8	%)		0.8	%		(2.7	%)
San Diego		2,706		3.9	%		2,392		97.7	%		20.5	%		1.5	%		1.7	%		1.5	%		0.5	%		1.0	%		(1.2	%)
Subtotal – Southern California		22,927		29.8	%		2,370		96.5	%		19.9	%		(4.7	%)		1.9	%		(7.4	%)		(5.5	%)		0.8	%		(2.3	%)

San Francisco		12,707		19.4	%		2,864		94.6	%		22.8	%		(15.1	%)		4.3	%		(21.6	%)		(14.0	%)		(1.2	%)		1.4	%
Washington D.C.		14,569		17.8	%		2,320		96.1	%		21.6	%		(5.1	%)		3.5	%		(8.9	%)		(5.5	%)		0.3	%		1.7	%
New York		9,343		11.2	%		3,453		93.2	%		18.4	%		(15.1	%)		4.0	%		(30.4	%)		(13.2	%)		(2.1	%)		(0.6	%)
Seattle		8,819		10.5	%		2,244		95.7	%		24.7	%		(10.3	%)		4.4	%		(16.0	%)		(9.8	%)		(0.5	%)		1.8	%
Boston		6,346		9.5	%		2,839		95.6	%		20.6	%		(9.7	%)		5.0	%		(15.5	%)		(10.7	%)		0.9	%		(2.1	%)
Denver		1,624		1.8	%		2,000		96.6	%		27.5	%		(0.6	%)		5.3	%		(3.0	%)		(2.5	%)		1.8	%		(4.0	%)

Total		76,335		100.0	%	$	2,588		95.5	%		21.3	%		(9.5	%)		3.6	%		(15.4	%)		(9.4	%)		(0.1	%)		(0.3	%)

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

The following table includes select operating metrics for Residential Same Store Properties:

	Q1 2021			Q2 2021			July 2021 (1)
Physical Occupancy (2)		95.6	%		96.3	%		96.4	%
Percentage of Residents Renewing by quarter/month		52.9	%		53.2	%		55.0	%

New Lease Change		(17.7	%)		(5.3	%)		6.3	%
Renewal Rate Achieved		(5.2	%)		0.2	%		3.6	%
Blended Rate		(12.2	%)		(2.7	%)		4.8	%

(1)	July 2021 results are preliminary.

(2)	Physical Occupancy is as of month-end March for Q1 2021, month-end June for Q2 2021 and as of July 22nd for July 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	95.3% to 96.3%	95.0% to 96.0%
Revenue change	(5.0%) to (4.0%)	(8.0%) to (6.0%)
Expense change	2.75% to 3.25%	3.0% to 4.0%
NOI change	(8.5%) to (7.5%)	(13.0%) to (11.0%)

Despite the significant impact from the pandemic on our business reflected in the results for the six months ended June 30, 2021, the pace of the recovery across our portfolio continues to exceed our expectations. The accelerating economy and reopening of cities is driving our operations to recover rapidly with robust demand for our apartments in all our markets, leading to high Physical Occupancy, increased pricing power and a significant reduction in Leasing Concessions. Key operating drivers for this recovery include:

•

Demand and Physical Occupancy – Strong demand is driving both improved Physical Occupancy in all of our markets and a return of pricing power. Across most of our markets, Physical Occupancy has recovered and stabilized at or above pre-pandemic levels and is currently at 96.4% as of July 22, 2021.

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•

Renewal Rates, Percentage of Residents Renewing and Pricing – Portfolio-wide Renewal Rate Achieved turned positive in the second quarter of 2021. The Percentage of Residents Renewing steadily improved since the end of the third quarter of 2020 and has now stabilized at approximately 55%, which is in line with historical averages but still below elevated 2019 and early 2020 levels. There has also been significant improvement in pricing (net of Leasing Concessions) since the end of the fourth quarter of 2020. Portfolio-wide pricing now exceeds pre-pandemic levels. We continue to test price sensitivity in every market by raising rents and reducing both the value and quantity of Leasing Concessions being granted.

•

Leasing Concessions – Monthly Leasing Concessions granted continue to decline significantly. Leasing Concessions granted in June and July (preliminary) 2021 are $2.0 million and $1.5 million, respectively, which are down from their peak of $6.1 million per month in February 2021. At the end of the first quarter of 2021, about 20% of applications were receiving on average four weeks in Leasing Concessions. As of July 2021, less than 3% of our applications received on average just over two weeks with further declines expected.

The following table provides Physical Occupancy by geographic market for the Six-Month 2021 Same Store Properties as of the dates listed:

Markets/Metro Areas	As of March 31, 2021			As of June 30, 2021			As of July 22, 2021
Boston		95.5	%		95.3	%		95.7	%
New York		93.9	%		96.3	%		96.5	%
Washington D.C.		95.9	%		96.2	%		96.3	%
Seattle		95.5	%		95.8	%		96.0	%
San Francisco		95.0	%		95.4	%		95.2	%
Los Angeles		96.1	%		96.9	%		97.4	%
Orange County		97.6	%		98.4	%		97.9	%
San Diego		97.7	%		97.9	%		97.9	%
Denver		96.5	%		97.0	%		96.7	%
Total		95.6	%		96.3	%		96.4	%

In summary, the positive trends and favorable forward operating indicators described have positioned our portfolio well, driving the revision upward to our same store revenue and NOI guidance for the full year 2021. See below for specific discussion on operating performance by geographic market:

•

Boston – Boston has performed strongly during the second quarter and into July 2021. Physical Occupancy is currently below expectations but improvement is expected in the third quarter of 2021. Pricing continues to improve and is now above pre-pandemic March 2020 levels.

•

New York – New York experienced a surge of demand at the beginning of the leasing season with nine consecutive weeks of record application volume. The use of Leasing Concessions in this market has declined significantly with only 3% of July 2021 applications receiving a concession at an average of two weeks compared to about 40% of applications in May 2021 receiving an average concession of six weeks. Physical Occupancy and pricing continue to improve into July 2021 with pricing crossing over pre-pandemic peaks from July 2019.

•

Washington, D.C. – Washington, D.C. has shown relatively steady performance with good momentum through the second quarter and into July 2021. Physical Occupancy has been relatively stable and pricing has continued to improve.

•

Seattle – This market continues to improve with more clarity from large employers regarding the return to office. Physical Occupancy is stable while pricing has demonstrated strength in the second quarter of 2021 and is now above peak 2019 levels.

•

San Francisco – San Francisco’s pace of recovery is steady and better than originally anticipated but still lags the recovery in other markets likely due to more uncertainty around the return to office from large technology employers and a delayed re-opening of the city. Leasing Concession use continues to decline with about 5% of July 2021 applications receiving an average concession of less than two weeks, down from 15% in May 2021 receiving an average concession of four weeks. Physical Occupancy is stable and pricing continues to recover but remains below pre-pandemic levels.

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•

Los Angeles – Los Angeles has been one of the best performing markets in our portfolio during the pandemic. This market has shown resilience and signs of strengthening as Physical Occupancy and pricing have been relatively stable throughout the pandemic. Leasing Concession use is limited and primarily at urban assets. Bad debt in this market remains the most elevated in our portfolio and we continue to work with our residents to apply for federally sponsored rental assistance.

•

Orange County and San Diego – Both markets, which are largely suburban, continue to stand out in terms of performance, providing additional pricing opportunities. Physical Occupancy and pricing are performing well above pre-pandemic levels.

•

Denver – While still a relatively small market for the Company, this portfolio continues to deliver solid performance. Both Physical Occupancy and pricing showed strong growth during the second quarter and into July 2021. Demand remains strong across the market.

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, including assisting them in applying for federally sponsored rental assistance, and Non-Residential tenants on meeting their financial obligations and our bad debt allowance policies remain consistent with those in place before the pandemic. During the second quarter of 2021, we received our first payments from federally sponsored rental assistance and expect this activity to increase over the remainder of the year. However, we still expect our reserves and bad debt expense to remain elevated in 2021. See Note 8 in the Notes to Consolidated Financial Statements for additional discussion of leases at June 30, 2021.

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

June YTD 2021 vs. June YTD 2020

Total Same Store Operating Expenses Including 76,335 Same Store Apartment Units

$ in thousands

	June YTD 2021		June YTD 2020		$ Change (5)			% Change			% of June YTD 2021 Operating Expenses
Real estate taxes	$	178,082	$	174,980	$	3,102			1.8	%		43.3	%
On-site payroll (1)		82,689		83,137		(448	)		(0.5	)%		20.1	%
Utilities (2)		56,575		51,786		4,789			9.2	%		13.8	%
Repairs and maintenance (3)		51,107		45,472		5,635			12.4	%		12.4	%
Insurance		13,758		12,510		1,248			10.0	%		3.4	%
Leasing and advertising		5,522		4,453		1,069			24.0	%		1.3	%
Other on-site operating expenses (4)		23,207		23,614		(407	)		(1.7	)%		5.7	%
Total Same Store Operating Expenses (includes Residential and Non-Residential)	$	410,940	$	395,952	$	14,988			3.8	%		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.

(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 prior expectations due to lower rates and assessed values.

•

On-site payroll – Improved sales and service staff utilization from various technology initiatives, lower than expected employee benefit-related costs and higher than usual staffing vacancies during the current period.

•

Utilities – Increase driven by rate increases and higher usage of water, sewer, trash, electric and gas.

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•

Repairs and maintenance – Increase was driven by low comparable period expense due to the pandemic along with greater snowfall on the East Coast and higher turnover expense from accelerated leasing in 2021.

•

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

•

Leasing and advertising – Increase due primarily to low comparable period expense due to the pandemic, increased digital advertising and selective use of outside broker fees of approximately $0.4 million for the six months ended June 30, 2021, primarily in the New York market.

•

Other on-site operating expenses – Decrease primarily driven by lower ground lease costs due to a lease modification at one property.

The Company now anticipates same store NOI to decline for the full year 2021 by approximately 8.5% to 7.5% (previously was anticipated to decline by approximately 13.0% to 11.0%) primarily driven by the expected improvement in same store revenues discussed above. We now anticipate same store expenses to increase between 2.75% to 3.25% (previously was anticipated to increase between 3.0% to 4.0%) for 2021 as compared to 2020, primarily driven by lower real estate taxes and on-site payroll. Given the continued uncertainty resulting from the COVID-19 pandemic, we anticipate the possibility of greater variability around the midpoint, up or down, within these ranges than we would typically experience.

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 six months ended June 30, 2021 decreased approximately $23.7 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 $0.5 million;

•

A positive impact of higher NOI from non-stabilized properties acquired in 2019, 2020 and 2021 of $1.9 million;

•

A negative impact of lower NOI from other non-same store properties (including one master-leased property) of $0.2 million; and

•

A negative impact of lost NOI from 2020 and 2021 dispositions of $21.5 million.

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Comparison of the six months and quarter ended June 30, 2021 to the six months and quarter ended June 30, 2020

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

	Six Months Ended June 30			Quarter Ended June 30
Diluted earnings per share/unit for period ended 2020	$	1.53		$	0.70
Property NOI		(0.38	)		(0.16	)
Interest expense		0.08			0.04
Non-operating asset gains/losses		0.06			0.06
Net gain/loss on property sales		(0.30	)		0.21
Other		0.01			(0.01	)
Diluted earnings per share/unit for period ended 2021	$	1.00		$	0.84

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 six months and quarter ended June 30, 2021 as compared to the same periods in 2020:

	Six Months Ended June 30, 2021			Quarter Ended June 30, 2021
Consolidated rental income		(10.5	%)		(8.5	%)
Consolidated operating expenses (1)		3.1	%		2.8	%
Consolidated NOI		(16.6	%)		(13.5	%)

(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 decreased approximately $0.7 million or 1.4% for the six months ended June 30, 2021 as compared to the prior year period. This decrease is primarily attributable to decreases in payroll-related costs, travel costs, legal and professional fees and temporary help/contractors, partially offset by increases in information technology related costs specifically for various operating initiatives such as sales-focused improvements and service enhancements. These expenses increased approximately $0.8 million or 3.6% for the quarter ended June 30, 2021 as compared to the prior year period, primarily due 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. The Company anticipates that property management expenses will approximate $96.5 million to $98.5 million for the year ending December 31, 2021.

General and administrative expenses, which include corporate operating expenses, increased approximately $3.7 million or 14.1% and approximately $2.8 million or 24.0% for the six months and quarter ended June 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 Company anticipates that general and administrative expenses will approximate $55.0 million to $57.0 million for the year ending December 31, 2021.

Depreciation expense, which includes depreciation on non-real estate assets, decreased approximately $17.8 million or 4.2% and approximately $5.3 million or 2.6% for the six months and quarter ended June 30, 2021, respectively, as compared to the prior year periods. These decreases are 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 a development property placed in service during 2021.

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Net gain on sales of real estate properties decreased approximately $128.5 million or 36.5% for the six months ended June 30, 2021 as compared to the prior year period, primarily as a result of the sale of five consolidated apartment properties for a lower gain 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 $79.5 million or 55.1% for the quarter ended June 30, 2021 as compared to the prior year period, primarily as a result of a higher sales volume with the sale of five consolidated apartment properties in the second quarter of 2021 as compared to the sale of two consolidated apartment properties in the same period in 2020.

Interest and other income increased approximately $20.8 million and approximately $22.6 million for the six months and quarter ended June 30, 2021, respectively, as compared to the prior year periods. These increases are 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 received during 2020 that did not occur in 2021.

Other expenses increased approximately $3.2 million or 76.3% and approximately $1.6 million or 97.3% for the six months and quarter ended June 30, 2021, respectively, as compared to the prior year periods, primarily due to a $2.2 million construction defect reserve and other various litigation and environmental settlements, partially offset by a decrease in advocacy contributions.

Interest expense, including amortization of deferred financing costs, decreased approximately $33.0 million or 19.2% and approximately $14.9 million or 17.8% for the six months and quarter ended June 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 six months ended June 30, 2021 was 3.54% as compared to 3.95% for the prior year period, and for the quarter ended June 30, 2021 was 3.48% as compared to 3.96% for the prior year period. The Company capitalized interest of approximately $8.2 million and $4.1 million during the six months ended June 30, 2021 and 2020, respectively, and $4.4 million and $2.3 million during the quarters ended June 30, 2021 and 2020, respectively. The Company anticipates that interest expense, excluding debt extinguishment costs/prepayment penalties, will approximate $270.0 million to $276.5 million and capitalized interest will approximate $16.5 million to $17.5 million for the year ending December 31, 2021.

Net (income) loss attributable to Noncontrolling Interests in partially owned properties increased approximately $12.0 million or 89.4% for the six months ended June 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 $1.8 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 June 30, 2021 and December 31, 2020 (amounts in thousands):

	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	39,492	$	42,591
Restricted deposits	$	353,009	$	57,137
Unsecured revolving credit facility availability	$	1,767,301	$	1,984,051

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

•

Disposed of five consolidated rental properties, receiving net proceeds of approximately $406.9 million;

•

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

•

Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $42.3 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 six months ended June 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 three consolidated rental properties for approximately $281.4 million in cash;

•

Invest $125.2 million primarily in development projects;

•

Repay $63.6 million of mortgage loans (inclusive of scheduled principal repayments); and

•

Purchase $166.9 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 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.

	July 23, 2021
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(882,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(100,442	)
Unsecured revolving credit facility availability	$	1,517,558

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 and second 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.

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Total dividends/distributions paid in July 2021 amounted to $233.0 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended June 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 $27.4 billion in investment in real estate on the Company’s balance sheet at June 30, 2021, $23.4 billion or 85.6% 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.

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 June 30, 2021 are as follows:

Debt Summary as of June 30, 2021

($ in thousands)

									Weighted
						Weighted			Average
	Debt					Average			Maturities
	Balances		% of Total			Rates			(years)
Secured	$	2,280,251		27.6	%		3.17	%		5.9
Unsecured		5,970,441		72.4	%		3.41	%		9.4
Total	$	8,250,692		100.0	%		3.34	%		8.4
Fixed Rate Debt:
Secured – Conventional	$	1,898,790		23.0	%		3.68	%		4.4
Unsecured – Public		5,338,671		64.7	%		3.75	%		10.5
Fixed Rate Debt		7,237,461		87.7	%		3.73	%		8.9
Floating Rate Debt:
Secured – Conventional		50,873		0.6	%		2.36	%		1.0
Secured – Tax Exempt		330,588		4.0	%		0.46	%		15.1
Unsecured – Revolving Credit Facility		—		—			—			3.3
Unsecured – Commercial Paper Program		631,770		7.7	%		0.29	%		—
Floating Rate Debt		1,013,231		12.3	%		0.44	%		5.2
Total	$	8,250,692		100.0	%		3.34	%		8.4

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Debt Maturity Schedule as of June 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	$	3,752		$	632,000		(1)	$	635,752			7.6	%		3.27	%		0.29	%
2022		264,185			51,113				315,298			3.8	%		3.25	%		3.09	%
2023		1,325,588			3,500				1,329,088			16.0	%		3.74	%		3.73	%
2024		—			6,100				6,100			0.1	%	N/A				0.05	%
2025		450,000			8,200				458,200			5.5	%		3.38	%		3.32	%
2026		592,025			9,000				601,025			7.2	%		3.58	%		3.53	%
2027		400,000			9,800				409,800			4.9	%		3.25	%		3.17	%
2028		900,000			10,700				910,700			10.9	%		3.79	%		3.74	%
2029		888,120			11,500				899,620			10.8	%		3.30	%		3.26	%
2030		1,095,000			12,600				1,107,600			13.3	%		2.55	%		2.52	%
2031+		1,379,350			275,535				1,654,885			19.9	%		4.37	%		3.66	%
Subtotal		7,298,020			1,030,048				8,328,068			100.0	%		3.55	%		3.15	%
Deferred Financing Costs and Unamortized (Discount)		(60,559	)		(16,817	)			(77,376	)	N/A			N/A			N/A
Total	$	7,237,461		$	1,013,231			$	8,250,692			100.0	%		3.55	%		3.15	%

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

See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of debt at June 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 July 23, 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 June 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 June 30, 2021 and December 31, 2020:

	June 30, 2021		December 31, 2020
Debt to Adjusted Total Assets (not to exceed 60%)	30.7%		30.5%
Secured Debt to Adjusted Total Assets (not to exceed 40%)	9.3%		9.6%
Consolidated Income Available for Debt Service to Maximum Annual Service Charges (must be at least 1.5 to 1)		5.10	5.42
Total Unencumbered Assets to Unsecured Debt (must be at least 125%)	442.1%		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.

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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 six months ended June 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 Six Months Ended June 30, 2021

	Same Store Properties (4)		Non-Same Store Properties/Other (5)		Total		Same Store Avg. Per Apartment Unit
Total Apartment Units		76,335		1,772		78,107

Building Improvements (1)	$	38,991	$	148	$	39,139	$	511
Renovation Expenditures (2)		11,880		—		11,880		156
Replacements (3)		15,072		352		15,424		197
Total Capital Expenditures to Real Estate	$	65,943	$	500	$	66,443	$	864

(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.

(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 549 same store apartment units approximated $21,639 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 a policy of only entering into derivative contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives it currently has in place.

The Company has no derivative instruments outstanding at June 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 June 30, 2021 and 2020.

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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.

•

Blended Rate – The weighted average of New Lease Change and Renewal Rate Achieved.

•

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.

•

New Lease Change – The net effective change in rent (inclusive of Leasing Concessions) for a lease with a new or transferring resident compared to the rent for the prior lease of the identical apartment unit, regardless of lease term.

•

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.

•

Renewal Rate Achieved – The net effective change in rent (inclusive of Leasing Concessions) for a new lease on an apartment unit where the lease has been renewed as compared to the rent for the prior lease of the identical apartment unit, regardless of lease term.

•

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

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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 June 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 six months ended June 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.

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 six months and quarters ended June 30, 2021 and 2020:

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Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)

	Six Months Ended June 30,						Quarter Ended June 30,
	2021			2020			2021			2020
Net income	$	388,404		$	604,152		$	328,040		$	271,481
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(1,423	)		(13,410	)		(741	)		(880	)
Preferred/preference distributions		(1,545	)		(1,545	)		(772	)		(772	)
Net income available to Common Shares and Units / Units		385,436			589,197			326,527			269,829
Adjustments:
Depreciation		400,635			418,398			200,673			205,976
Depreciation – Non-real estate additions		(2,176	)		(2,307	)		(1,076	)		(1,020	)
Depreciation – Partially Owned Properties		(1,682	)		(1,686	)		(854	)		(830	)
Depreciation – Unconsolidated Properties		1,233			1,224			616			611
Net (gain) loss on sales of unconsolidated entities - operating assets		(4	)		—			—			—
Net (gain) loss on sales of real estate properties		(223,695	)		(352,243	)		(223,738	)		(144,266	)
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)		559,747			664,238			302,148			330,300
Adjustments:
Impairment – non-operating assets		—			—			—			—
Write-off of pursuit costs		2,647			3,278			1,316			1,651
Debt extinguishment and preferred share redemption (gains) losses		264			32			—			32
Non-operating asset (gains) losses		(23,308	)		670			(24,162	)		229
Other miscellaneous items		3,341			(2,310	)		1,099			(1,392	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	542,691		$	665,908		$	280,401		$	330,820

FFO (1) (3)	$	561,292		$	665,783		$	302,920		$	331,072
Preferred/preference distributions		(1,545	)		(1,545	)		(772	)		(772	)
FFO available to Common Shares and Units / Units (1) (3) (4)	$	559,747		$	664,238		$	302,148		$	330,300

Normalized FFO (2) (3)	$	544,236		$	667,453		$	281,173		$	331,592
Preferred/preference distributions		(1,545	)		(1,545	)		(772	)		(772	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	542,691		$	665,908		$	280,401		$	330,820

(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 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

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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 June 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 second 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 June 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 second 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 June 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 June 30, 2021, EQR issued 1,084,023 Common Shares in exchange for 1,084,023 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
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).

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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:	July 30, 2021	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	July 30, 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:	July 30, 2021	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	July 30, 2021	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)