EQUITY RESIDENTIAL - Quarter Report: 2022 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended September 30, 2022

☐

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

For the transition period from to

Commission File Number: 1-12252 (Equity Residential)

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

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)


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

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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


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

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


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

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

Equity Residential:

ERP Operating Limited Partnership:

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


Equity Residential ☐	ERP Operating Limited Partnership ☐

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


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

The number of EQR Common Shares of Beneficial Interest, $0.01 par value, outstanding on October 21, 2022 was 377,918,920.

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended September 30, 2022 of Equity Residential and ERP Operating Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “EQR” mean Equity Residential, a Maryland real estate investment trust (“REIT”), and references to “ERPOP” mean ERP Operating Limited Partnership, an Illinois limited partnership. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:

EQR is the general partner of, and as of September 30, 2022 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.

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.

TABLE OF CONTENTS


	PAGE

PART I.

Item 1. Financial Statements of Equity Residential:

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	2

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2022 and 2021	3

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	5

Consolidated Statements of Changes in Equity for the nine months and quarters ended September 30, 2022 and 2021	8

Financial Statements of ERP Operating Limited Partnership:

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	10

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2022 and 2021	11

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	13

Consolidated Statements of Changes in Capital for the nine months and quarters ended September 30, 2022 and 2021	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	46

Item 4. Controls and Procedures	46

PART II.

Item 1. Legal Proceedings	47

Item 1A. Risk Factors	47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3. Defaults Upon Senior Securities	47

Item 4. Mine Safety Disclosures	47

Item 5. Other Information	47

Item 6. Exhibits	47

EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)


	September 30,			December 31,
	2022			2021
ASSETS
Land	$	5,580,878		$	5,814,790
Depreciable property		22,251,673			22,370,811
Projects under development		89,347			24,307
Land held for development		60,165			62,998
Investment in real estate		27,982,063			28,272,906
Accumulated depreciation		(8,813,578	)		(8,354,282	)
Investment in real estate, net		19,168,485			19,918,624
Investments in unconsolidated entities		256,311			127,448
Cash and cash equivalents		44,788			123,832
Restricted deposits		76,679			236,404
Right-of-use assets		465,814			474,713
Other assets		253,328			288,220
Total assets	$	20,265,405		$	21,169,241

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	1,967,827		$	2,191,201
Notes, net		5,340,807			5,835,222
Line of credit and commercial paper		189,557			315,030
Accounts payable and accrued expenses		175,843			107,013
Accrued interest payable		49,652			69,510
Lease liabilities		309,548			312,335
Other liabilities		287,955			353,102
Security deposits		69,247			66,141
Distributions payable		242,695			233,502
Total liabilities		8,633,131			9,483,056

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		370,537			498,977
Equity:
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 745,600 shares issued and outstanding as of September 30, 2022 and December 31, 2021		37,280			37,280
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 376,169,253 shares issued and outstanding as of September 30, 2022 and 375,527,195 shares issued and outstanding as of December 31, 2021		3,762			3,755
Paid in capital		9,267,450			9,121,122
Retained earnings		1,737,107			1,827,063
Accumulated other comprehensive income (loss)		(872	)		(34,272	)
Total shareholders’ equity		11,044,727			10,954,948
Noncontrolling Interests:
Operating Partnership		218,577			214,094
Partially Owned Properties		(1,567	)		18,166
Total Noncontrolling Interests		217,010			232,260
Total equity		11,261,737			11,187,208
Total liabilities and equity	$	20,265,405		$	21,169,241

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
REVENUES
Rental income	$	2,035,477		$	1,818,867		$	695,099		$	623,206

EXPENSES
Property and maintenance		365,277			341,261			124,048			116,461
Real estate taxes and insurance		302,899			297,780			100,361			96,909
Property management		83,035			74,357			25,729			23,772
General and administrative		47,033			43,102			13,372			13,041
Depreciation		667,896			616,032			214,129			215,397
Total expenses		1,466,140			1,372,532			477,639			465,580

Net gain (loss) on sales of real estate properties		304,346			587,623			196,551			363,928

Operating income		873,683			1,033,958			414,011			521,554

Interest and other income		4,844			25,293			720			973
Other expenses		(9,191	)		(10,908	)		(3,755	)		(3,456	)
Interest:
Expense incurred, net		(217,093	)		(202,733	)		(72,412	)		(68,251	)
Amortization of deferred financing costs		(6,421	)		(6,172	)		(2,220	)		(2,048	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		645,822			839,438			336,344			448,772
Income and other tax (expense) benefit		(725	)		(679	)		(152	)		(284	)
Income (loss) from investments in unconsolidated entities		(3,456	)		(3,028	)		(1,027	)		(1,156	)
Net gain (loss) on sales of land parcels		—			5			—			—
Net income		641,641			835,736			335,165			447,332
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(21,024	)		(27,903	)		(10,997	)		(14,847	)
Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Net income attributable to controlling interests		617,891			805,876			323,025			431,951
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Net income available to Common Shares	$	615,573		$	803,558		$	322,252		$	431,178

Earnings per share – basic:
Net income available to Common Shares	$	1.64		$	2.15		$	0.86		$	1.15
Weighted average Common Shares outstanding		375,710			373,474			375,850			374,308

Earnings per share – diluted:
Net income available to Common Shares	$	1.63		$	2.14		$	0.86		$	1.15
Weighted average Common Shares outstanding		389,394			387,642			389,300			388,374

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
Comprehensive income:
Net income	$	641,641		$	835,736		$	335,165		$	447,332
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		23,413			—			24,672			—
Losses reclassified into earnings from other comprehensive income		9,987			7,000			5,106			2,363
Other comprehensive income (loss)		33,400			7,000			29,778			2,363
Comprehensive income		675,041			842,736			364,943			449,695
Comprehensive (income) attributable to Noncontrolling Interests		(24,853	)		(30,100	)		(13,123	)		(15,459	)
Comprehensive income attributable to controlling interests	$	650,188		$	812,636		$	351,820		$	434,236

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	641,641		$	835,736
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		667,896			616,032
Amortization of deferred financing costs		6,421			6,172
Amortization of above/below market lease intangibles		—			(154	)
Amortization of discounts and premiums on debt		4,123			3,934
Amortization of deferred settlements on derivative instruments		9,978			6,991
Amortization of right-of-use assets		9,123			10,286
Write-off of pursuit costs		3,296			3,557
(Income) loss from investments in unconsolidated entities		3,456			3,028
Distributions from unconsolidated entities – return on capital		251			—
Net (gain) loss on sales of real estate properties		(304,346	)		(587,623	)
Net (gain) loss on sales of land parcels		—			(5	)
Realized (gain) loss on sale of investment securities		(2,061	)		(23,432	)
Compensation paid with Company Common Shares		24,559			21,919
Changes in assets and liabilities:
(Increase) decrease in other assets		20,734			16,269
Increase (decrease) in accounts payable and accrued expenses		76,274			69,170
Increase (decrease) in accrued interest payable		(19,858	)		(9,119	)
Increase (decrease) in lease liabilities		(1,166	)		(4,112	)
Increase (decrease) in other liabilities		(23,199	)		5,427
Increase (decrease) in security deposits		3,106			4,137
Net cash provided by operating activities		1,120,228			978,213
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(113,046	)		(1,022,275	)
Investment in real estate – development/other		(81,889	)		(172,850	)
Capital expenditures to real estate		(141,707	)		(107,706	)
Non-real estate capital additions		(2,232	)		(1,251	)
Interest capitalized for real estate and unconsolidated entities under development		(4,181	)		(12,365	)
Proceeds from disposition of real estate, net		720,302			1,014,328
Investments in unconsolidated entities – acquisitions		(49,330	)		(21,787	)
Investments in unconsolidated entities – development/other		(87,129	)		(9,294	)
Distributions from unconsolidated entities – return of capital		9			4
Purchase of investment securities and other investments		(1,045	)		(167,791	)
Proceeds from sale of investment securities		3,584			191,398
Net cash provided by (used for) investing activities		243,336			(309,589	)

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(373	)	$	(6,447	)
Mortgage notes payable, net:
Proceeds		37,429			51,298
Lump sum payoffs		(260,874	)		(59,880	)
Scheduled principal repayments		(3,186	)		(5,570	)
Notes, net:
Proceeds		—			497,470
Lump sum payoffs		(500,000	)		—
Line of credit and commercial paper:
Commercial paper proceeds		5,140,685			4,305,170
Commercial paper repayments		(5,266,158	)		(4,690,000	)
Finance ground lease principal payments		(1,845	)		(349	)
Proceeds from Employee Share Purchase Plan (ESPP)		3,280			3,455
Proceeds from exercise of options		21,021			68,807
Payment of offering costs		(739	)		(267	)
Other financing activities, net		(31	)		(31	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(32,178	)		—
Contributions – Noncontrolling Interests – Partially Owned Properties		603			—
Contributions – Noncontrolling Interests – Operating Partnership		1			—
Distributions:
Common Shares		(696,679	)		(674,531	)
Preferred Shares		(2,318	)		(2,318	)
Noncontrolling Interests – Operating Partnership		(22,735	)		(23,949	)
Noncontrolling Interests – Partially Owned Properties		(18,236	)		(4,461	)
Net cash provided by (used for) financing activities		(1,602,333	)		(541,603	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		(238,769	)		127,021
Cash and cash equivalents and restricted deposits, beginning of period		360,236			99,728
Cash and cash equivalents and restricted deposits, end of period	$	121,467		$	226,749

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	44,788		$	39,707
Restricted deposits		76,679			187,042
Total cash and cash equivalents and restricted deposits, end of period	$	121,467		$	226,749

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022			2021
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	221,218		$	199,799
Net cash paid (received) for income and other taxes	$	728		$	1,040
Amortization of deferred financing costs:
Investment in real estate, net	$	(380	)	$	(227	)
Other assets	$	1,754		$	1,754
Mortgage notes payable, net	$	1,620		$	1,702
Notes, net	$	3,427		$	2,943
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	1,865		$	2,069
Notes, net	$	2,258		$	1,865
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(9	)	$	(9	)
Accumulated other comprehensive income	$	9,987		$	7,000
Write-off of pursuit costs:
Investment in real estate, net	$	948		$	3,000
Investments in unconsolidated entities	$	2,197		$	—
Other assets	$	151		$	533
Accounts payable and accrued expenses	$	—		$	24
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	2,517		$	2,062
Other liabilities	$	939		$	966
Realized/unrealized (gain) loss on derivative instruments:
Other assets	$	(23,413	)	$	—
Accumulated other comprehensive income	$	23,413		$	—
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(1,312	)	$	(12,260	)
Investments in unconsolidated entities	$	(2,869	)	$	(105	)
Investments in unconsolidated entities – development/other:
Investment in real estate, net	$	—		$	967
Investments in unconsolidated entities	$	(85,839	)	$	(8,251	)
Other liabilities	$	(1,290	)	$	(2,010	)
Debt financing costs:
Other assets	$	(45	)	$	228
Mortgage notes payable, net	$	(228	)	$	(2,344	)
Notes, net	$	(100	)	$	(4,331	)
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	(224	)	$	11,308
Lease liabilities	$	224		$	(11,308	)
Non-cash share distribution and other transfers from unconsolidated entities:
Investments in unconsolidated entities	$	4,201		$	1,430
Other assets	$	(4,201	)	$	(1,430	)

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
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	$	3,755		$	3,723		$	3,761		$	3,744
Conversion of OP Units into Common Shares		—			11			—			—
Exercise of share options		4			14			—			6
Employee Share Purchase Plan (ESPP)		1			1			1			—
Share-based employee compensation expense:
Restricted shares		2			1			—			—
Balance, end of period	$	3,762		$	3,750		$	3,762		$	3,750
PAID IN CAPITAL
Balance, beginning of period	$	9,121,122		$	9,128,599		$	9,229,738		$	9,110,121
Common Share Issuance:
Conversion of OP Units into Common Shares		1,680			68,246			196			1,597
Exercise of share options		21,017			68,793			2,093			29,178
Employee Share Purchase Plan (ESPP)		3,279			3,454			901			788
Share-based employee compensation expense:
Restricted shares		9,524			6,571			2,165			1,758
Share options		1,856			2,541			466			565
ESPP discount		637			798			217			165
Offering costs		(739	)		(267	)		(252	)		(267	)
Supplemental Executive Retirement Plan (SERP)		(269	)		(1,335	)		—			722
Acquisition of Noncontrolling Interests – Partially Owned Properties		(27,383	)		—			(28	)		—
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership		127,570			(119,237	)		29,430			(17,271	)
Adjustment for Noncontrolling Interests ownership in Operating Partnership		9,156			(27,085	)		2,524			3,722
Balance, end of period	$	9,267,450		$	9,131,078		$	9,267,450		$	9,131,078
RETAINED EARNINGS
Balance, beginning of period	$	1,827,063		$	1,399,715		$	1,649,960		$	1,321,875
Net income attributable to controlling interests		617,891			805,876			323,025			431,951
Common Share distributions		(705,529	)		(676,158	)		(235,105	)		(225,938	)
Preferred Share distributions		(2,318	)		(2,318	)		(773	)		(773	)
Balance, end of period	$	1,737,107		$	1,527,115		$	1,737,107		$	1,527,115
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(34,272	)	$	(43,666	)	$	(30,650	)	$	(39,029	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		23,413			—			24,672			—
Losses reclassified into earnings from other comprehensive income		9,987			7,000			5,106			2,363
Balance, end of period	$	(872	)	$	(36,666	)	$	(872	)	$	(36,666	)

DISTRIBUTIONS
Distributions declared per Common Share outstanding	$	1.875		$	1.8075		$	0.625		$	0.6025

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
NONCONTROLLING INTERESTS
OPERATING PARTNERSHIP
Balance, beginning of period	$	214,094		$	233,162		$	216,326		$	205,691
Issuance of restricted units to Noncontrolling Interests		1			—			—			—
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner		(1,680	)		(68,257	)		(196	)		(1,597	)
Equity compensation associated with Noncontrolling Interests		16,502			14,173			3,343			3,642
Net income attributable to Noncontrolling Interests		21,024			27,903			10,997			14,847
Distributions to Noncontrolling Interests		(23,078	)		(23,366	)		(7,590	)		(7,367	)
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership		870			(1,745	)		(1,779	)		(2,539	)
Adjustment for Noncontrolling Interests ownership in Operating Partnership		(9,156	)		27,085			(2,524	)		(3,722	)
Balance, end of period	$	218,577		$	208,955		$	218,577		$	208,955
PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	18,166		$	4,673		$	(1,734	)	$	2,365
Net income attributable to Noncontrolling Interests		2,726			1,957			1,143			534
Contributions by Noncontrolling Interests		603			—			—			—
Distributions to Noncontrolling Interests		(18,267	)		(4,492	)		(1,004	)		(761	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(4,795	)		—			28			—
Balance, end of period	$	(1,567	)	$	2,138		$	(1,567	)	$	2,138

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)


	September 30,			December 31,
	2022			2021
ASSETS
Land	$	5,580,878		$	5,814,790
Depreciable property		22,251,673			22,370,811
Projects under development		89,347			24,307
Land held for development		60,165			62,998
Investment in real estate		27,982,063			28,272,906
Accumulated depreciation		(8,813,578	)		(8,354,282	)
Investment in real estate, net		19,168,485			19,918,624
Investments in unconsolidated entities		256,311			127,448
Cash and cash equivalents		44,788			123,832
Restricted deposits		76,679			236,404
Right-of-use assets		465,814			474,713
Other assets		253,328			288,220
Total assets	$	20,265,405		$	21,169,241

LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net	$	1,967,827		$	2,191,201
Notes, net		5,340,807			5,835,222
Line of credit and commercial paper		189,557			315,030
Accounts payable and accrued expenses		175,843			107,013
Accrued interest payable		49,652			69,510
Lease liabilities		309,548			312,335
Other liabilities		287,955			353,102
Security deposits		69,247			66,141
Distributions payable		242,695			233,502
Total liabilities		8,633,131			9,483,056

Commitments and contingencies

Redeemable Limited Partners		370,537			498,977
Capital:
Partners’ Capital:
Preference Units		37,280			37,280
General Partner		11,008,319			10,951,940
Limited Partners		218,577			214,094
Accumulated other comprehensive income (loss)		(872	)		(34,272	)
Total partners’ capital		11,263,304			11,169,042
Noncontrolling Interests – Partially Owned Properties		(1,567	)		18,166
Total capital		11,261,737			11,187,208
Total liabilities and capital	$	20,265,405		$	21,169,241

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
REVENUES
Rental income	$	2,035,477		$	1,818,867		$	695,099		$	623,206

EXPENSES
Property and maintenance		365,277			341,261			124,048			116,461
Real estate taxes and insurance		302,899			297,780			100,361			96,909
Property management		83,035			74,357			25,729			23,772
General and administrative		47,033			43,102			13,372			13,041
Depreciation		667,896			616,032			214,129			215,397
Total expenses		1,466,140			1,372,532			477,639			465,580

Net gain (loss) on sales of real estate properties		304,346			587,623			196,551			363,928

Operating income		873,683			1,033,958			414,011			521,554

Interest and other income		4,844			25,293			720			973
Other expenses		(9,191	)		(10,908	)		(3,755	)		(3,456	)
Interest:
Expense incurred, net		(217,093	)		(202,733	)		(72,412	)		(68,251	)
Amortization of deferred financing costs		(6,421	)		(6,172	)		(2,220	)		(2,048	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		645,822			839,438			336,344			448,772
Income and other tax (expense) benefit		(725	)		(679	)		(152	)		(284	)
Income (loss) from investments in unconsolidated entities		(3,456	)		(3,028	)		(1,027	)		(1,156	)
Net gain (loss) on sales of land parcels		—			5			—			—
Net income		641,641			835,736			335,165			447,332
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Net income attributable to controlling interests	$	638,915		$	833,779		$	334,022		$	446,798
ALLOCATION OF NET INCOME:
Preference Units	$	2,318		$	2,318		$	773		$	773

General Partner	$	615,573		$	803,558		$	322,252		$	431,178
Limited Partners		21,024			27,903			10,997			14,847
Net income available to Units	$	636,597		$	831,461		$	333,249		$	446,025

Earnings per Unit – basic:
Net income available to Units	$	1.64		$	2.15		$	0.86		$	1.15
Weighted average Units outstanding		387,603			385,841			387,745			386,327

Earnings per Unit – diluted:
Net income available to Units	$	1.63		$	2.14		$	0.86		$	1.15
Weighted average Units outstanding		389,394			387,642			389,300			388,374

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
Comprehensive income:
Net income	$	641,641		$	835,736		$	335,165		$	447,332
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		23,413			—			24,672			—
Losses reclassified into earnings from other comprehensive income		9,987			7,000			5,106			2,363
Other comprehensive income (loss)		33,400			7,000			29,778			2,363
Comprehensive income		675,041			842,736			364,943			449,695
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Comprehensive income attributable to controlling interests	$	672,315		$	840,779		$	363,800		$	449,161

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	641,641		$	835,736
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		667,896			616,032
Amortization of deferred financing costs		6,421			6,172
Amortization of above/below market lease intangibles		—			(154	)
Amortization of discounts and premiums on debt		4,123			3,934
Amortization of deferred settlements on derivative instruments		9,978			6,991
Amortization of right-of-use assets		9,123			10,286
Write-off of pursuit costs		3,296			3,557
(Income) loss from investments in unconsolidated entities		3,456			3,028
Distributions from unconsolidated entities – return on capital		251			—
Net (gain) loss on sales of real estate properties		(304,346	)		(587,623	)
Net (gain) loss on sales of land parcels		—			(5	)
Realized (gain) loss on sale of investment securities		(2,061	)		(23,432	)
Compensation paid with Company Common Shares		24,559			21,919
Changes in assets and liabilities:
(Increase) decrease in other assets		20,734			16,269
Increase (decrease) in accounts payable and accrued expenses		76,274			69,170
Increase (decrease) in accrued interest payable		(19,858	)		(9,119	)
Increase (decrease) in lease liabilities		(1,166	)		(4,112	)
Increase (decrease) in other liabilities		(23,199	)		5,427
Increase (decrease) in security deposits		3,106			4,137
Net cash provided by operating activities		1,120,228			978,213
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(113,046	)		(1,022,275	)
Investment in real estate – development/other		(81,889	)		(172,850	)
Capital expenditures to real estate		(141,707	)		(107,706	)
Non-real estate capital additions		(2,232	)		(1,251	)
Interest capitalized for real estate and unconsolidated entities under development		(4,181	)		(12,365	)
Proceeds from disposition of real estate, net		720,302			1,014,328
Investments in unconsolidated entities – acquisitions		(49,330	)		(21,787	)
Investments in unconsolidated entities – development/other		(87,129	)		(9,294	)
Distributions from unconsolidated entities – return of capital		9			4
Purchase of investment securities and other investments		(1,045	)		(167,791	)
Proceeds from sale of investment securities		3,584			191,398
Net cash provided by (used for) investing activities		243,336			(309,589	)

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(373	)	$	(6,447	)
Mortgage notes payable, net:
Proceeds		37,429			51,298
Lump sum payoffs		(260,874	)		(59,880	)
Scheduled principal repayments		(3,186	)		(5,570	)
Notes, net:
Proceeds		—			497,470
Lump sum payoffs		(500,000	)		—
Line of credit and commercial paper:
Commercial paper proceeds		5,140,685			4,305,170
Commercial paper repayments		(5,266,158	)		(4,690,000	)
Finance ground lease principal payments		(1,845	)		(349	)
Proceeds from EQR’s Employee Share Purchase Plan (ESPP)		3,280			3,455
Proceeds from exercise of EQR options		21,021			68,807
Payment of offering costs		(739	)		(267	)
Other financing activities, net		(31	)		(31	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(32,178	)		—
Contributions – Noncontrolling Interests – Partially Owned Properties		603			—
Contributions – Limited Partners		1			—
Distributions:
OP Units – General Partner		(696,679	)		(674,531	)
Preference Units		(2,318	)		(2,318	)
OP Units – Limited Partners		(22,735	)		(23,949	)
Noncontrolling Interests – Partially Owned Properties		(18,236	)		(4,461	)
Net cash provided by (used for) financing activities		(1,602,333	)		(541,603	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		(238,769	)		127,021
Cash and cash equivalents and restricted deposits, beginning of period		360,236			99,728
Cash and cash equivalents and restricted deposits, end of period	$	121,467		$	226,749

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	44,788		$	39,707
Restricted deposits		76,679			187,042
Total cash and cash equivalents and restricted deposits, end of period	$	121,467		$	226,749

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022			2021
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	221,218		$	199,799
Net cash paid (received) for income and other taxes	$	728		$	1,040
Amortization of deferred financing costs:
Investment in real estate, net	$	(380	)	$	(227	)
Other assets	$	1,754		$	1,754
Mortgage notes payable, net	$	1,620		$	1,702
Notes, net	$	3,427		$	2,943
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	1,865		$	2,069
Notes, net	$	2,258		$	1,865
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(9	)	$	(9	)
Accumulated other comprehensive income	$	9,987		$	7,000
Write-off of pursuit costs:
Investment in real estate, net	$	948		$	3,000
Investments in unconsolidated entities	$	2,197		$	—
Other assets	$	151		$	533
Accounts payable and accrued expenses	$	—		$	24
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	2,517		$	2,062
Other liabilities	$	939		$	966
Realized/unrealized (gain) loss on derivative instruments:
Other assets	$	(23,413	)	$	—
Accumulated other comprehensive income	$	23,413		$	—
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(1,312	)	$	(12,260	)
Investments in unconsolidated entities	$	(2,869	)	$	(105	)
Investments in unconsolidated entities – development/other:
Investment in real estate, net	$	—		$	967
Investments in unconsolidated entities	$	(85,839	)	$	(8,251	)
Other liabilities	$	(1,290	)	$	(2,010	)
Debt financing costs:
Other assets	$	(45	)	$	228
Mortgage notes payable, net	$	(228	)	$	(2,344	)
Notes, net	$	(100	)	$	(4,331	)
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	(224	)	$	11,308
Lease liabilities	$	224		$	(11,308	)
Non-cash share distribution and other transfers from unconsolidated entities:
Investments in unconsolidated entities	$	4,201		$	1,430
Other assets	$	(4,201	)	$	(1,430	)

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
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	$	10,951,940		$	10,532,037		$	10,883,459		$	10,435,740
OP Unit Issuance:
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		1,680			68,257			196			1,597
Exercise of EQR share options		21,021			68,807			2,093			29,184
EQR’s Employee Share Purchase Plan (ESPP)		3,280			3,455			902			788
Share-based employee compensation expense:
EQR restricted shares		9,526			6,572			2,165			1,758
EQR share options		1,856			2,541			466			565
EQR ESPP discount		637			798			217			165
Net income available to Units – General Partner		615,573			803,558			322,252			431,178
OP Units – General Partner distributions		(705,529	)		(676,158	)		(235,105	)		(225,938	)
Offering costs		(739	)		(267	)		(252	)		(267	)
Supplemental Executive Retirement Plan (SERP)		(269	)		(1,335	)		—			722
Acquisition of Noncontrolling Interests – Partially Owned Properties		(27,383	)		—			(28	)		—
Change in market value of Redeemable Limited Partners		127,570			(119,237	)		29,430			(17,271	)
Adjustment for Limited Partners ownership in Operating Partnership		9,156			(27,085	)		2,524			3,722
Balance, end of period	$	11,008,319		$	10,661,943		$	11,008,319		$	10,661,943
LIMITED PARTNERS
Balance, beginning of period	$	214,094		$	233,162		$	216,326		$	205,691
Issuance of restricted units to Limited Partners		1			—			—			—
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		(1,680	)		(68,257	)		(196	)		(1,597	)
Equity compensation associated with Units – Limited Partners		16,502			14,173			3,343			3,642
Net income available to Units – Limited Partners		21,024			27,903			10,997			14,847
Units – Limited Partners distributions		(23,078	)		(23,366	)		(7,590	)		(7,367	)
Change in carrying value of Redeemable Limited Partners		870			(1,745	)		(1,779	)		(2,539	)
Adjustment for Limited Partners ownership in Operating Partnership		(9,156	)		27,085			(2,524	)		(3,722	)
Balance, end of period	$	218,577		$	208,955		$	218,577		$	208,955
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(34,272	)	$	(43,666	)	$	(30,650	)	$	(39,029	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		23,413			—			24,672			—
Losses reclassified into earnings from other comprehensive income		9,987			7,000			5,106			2,363
Balance, end of period	$	(872	)	$	(36,666	)	$	(872	)	$	(36,666	)

DISTRIBUTIONS
Distributions declared per Unit outstanding	$	1.875		$	1.8075		$	0.625		$	0.6025

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	18,166		$	4,673		$	(1,734	)	$	2,365
Net income attributable to Noncontrolling Interests		2,726			1,957			1,143			534
Contributions by Noncontrolling Interests		603			—			—			—
Distributions to Noncontrolling Interests		(18,267	)		(4,492	)		(1,004	)		(761	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(4,795	)		—			28			—
Balance, end of period	$	(1,567	)	$	2,138		$	(1,567	)	$	2,138

See accompanying notes

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 affluent long-term renters, a business that is conducted on its behalf by ERP Operating Limited Partnership (“ERPOP”). EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.

EQR is the general partner of, and as of September 30, 2022 owned an approximate 96.7% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.

As of September 30, 2022, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 308 properties located in 10 states and the District of Columbia consisting of 79,594 apartment units. The ownership breakdown includes (table does not include any uncompleted development properties):


	Properties		Apartment Units
Wholly Owned Properties		293		76,480
Partially Owned Properties – Consolidated		15		3,114
		308		79,594

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 (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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.

The balance sheets at December 31, 2021 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, 2021.

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.

Recent 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. The Company adopted the standard when effective on January 1, 2022 and it had no impact 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. The new standard was effective for the Company upon issuance and elections can be made through December 31, 2022, subject to a proposed extension to December 31, 2024. The Company elected to apply the hedge accounting expedients and application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Equity, Capital and Other Interests

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

The following table presents the changes in the Company’s issued and outstanding Common Shares and Units for the nine months ended September 30, 2022 and 2021:


	2022			2021
Common Shares
Common Shares outstanding at January 1,		375,527,195			372,302,000
Common Shares Issued:
Conversion of OP Units		37,661			1,153,963
Exercise of share options		381,384			1,401,755
Employee Share Purchase Plan (ESPP)		49,662			59,297
Restricted share grants, net		173,351			85,573
Common Shares outstanding at September 30,		376,169,253			375,002,588
Units
Units outstanding at January 1,		12,659,027			13,858,073
Restricted unit grants, net		223,242			155,638
Conversion of OP Units to Common Shares		(37,661	)		(1,153,963	)
Units outstanding at September 30,		12,844,608			12,859,748
Total Common Shares and Units outstanding at September 30,		389,013,861			387,862,336
Units Ownership Interest in Operating Partnership		3.3	%		3.3	%

The following table presents the changes in the Operating Partnership’s issued and outstanding General Partner Units and Limited Partner Units for the nine months ended September 30, 2022 and 2021:


	2022			2021
General and Limited Partner Units
General and Limited Partner Units outstanding at January 1,		388,186,222			386,160,073
Issued to General Partner:
Exercise of EQR share options		381,384			1,401,755
EQR’s Employee Share Purchase Plan (ESPP)		49,662			59,297
EQR’s restricted share grants, net		173,351			85,573
Issued to Limited Partners:
Restricted unit grants, net		223,242			155,638
General and Limited Partner Units outstanding at September 30,		389,013,861			387,862,336
Limited Partner Units
Limited Partner Units outstanding at January 1,		12,659,027			13,858,073
Limited Partner restricted unit grants, net		223,242			155,638
Conversion of Limited Partner OP Units to EQR Common Shares		(37,661	)		(1,153,963	)
Limited Partner Units outstanding at September 30,		12,844,608			12,859,748
Limited Partner Units Ownership Interest in Operating Partnership		3.3	%		3.3	%

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

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

The Noncontrolling Interests – Operating Partnership/Limited Partners Capital are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests – Operating Partnership/Limited Partners Capital are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership” and “Redeemable Limited Partners,” respectively. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital that are classified in permanent equity at September 30, 2022 and December 31, 2021.

The carrying value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total. Such percentage of the total carrying value of Units/Limited Partner Units which is ascribed to the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is then adjusted to the greater of carrying value or fair market value as described above. As of September 30, 2022 and 2021, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $370.5 million and $459.9 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.

The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners for the nine months ended September 30, 2022 and 2021, respectively (amounts in thousands):


	2022			2021
Balance at January 1,	$	498,977		$	338,951
Change in market value		(127,570	)		119,237
Change in carrying value		(870	)		1,745
Balance at September 30,	$	370,537		$	459,933

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

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

The following table presents the Company’s issued and outstanding Preferred Shares/Preference Units as of September 30, 2022 and December 31, 2021:


				Amounts in thousands
		Annual
	Call	Dividend Per		September 30,		December 31,
	Date (1)	Share/Unit (2)		2022		2021
Preferred Shares/Preference Units of beneficial interest, $0.01 par value; 100,000,000 shares authorized:
8.29% Series K Cumulative Redeemable Preferred Shares/Preference Units; liquidation value $50 per share/unit; 745,600 shares/units issued and outstanding as of September 30, 2022 and December 31, 2021	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 May 2022 and expires in May 2025. Per the terms of ERPOP’s partnership agreement, EQR contributes the net proceeds of all equity offerings to the capital of ERPOP in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis) or preference units (on a one-for-one preferred share per preference unit basis).

The Company has an At-The-Market (“ATM”) share offering program which allows EQR to issue Common Shares from time to time into the existing trading market at current market prices or through negotiated transactions, including under forward sale arrangements. In May 2022, the Company replaced the prior program with a new program with the authority to issue up to 13.0 million shares as of September 30, 2022 and which extended the program maturity to May 2025. Forward sale agreements under the ATM program allow the Company, at its election, to settle the agreements by issuing Common Shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the agreements in whole or in part through the delivery or receipt of Common Shares or cash. Issuances of shares under these forward sale agreements are classified as equity transactions. Accordingly, no amounts relating to the forward sale agreements are recorded in the consolidated financial statements until settlement occurs. Prior to any settlements, the only impact to the consolidated financial statements is the inclusion of incremental shares, if any, within the calculation of diluted net income per share using the treasury stock method (see Note 11 for additional discussion). The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current overnight federal funds rate and the amount of dividends paid to holders of the Company’s Common Shares over the term of the forward sale agreement.

As of September 30, 2022, the Company had entered into forward sale agreements under the prior program for a total of approximately 1.7 million Common Shares at a weighted average initial forward price per share of $83.25. All of these forward sale agreements were entered into during the quarter ended September 30, 2021. As of September 30, 2022, these forward sale agreements have not been settled and must be settled by March 2023. See Note 14 for additional discussion.

The Company may repurchase up to 13.0 million Common Shares under its share repurchase program. No open market repurchases have occurred since 2008, and no repurchases of any kind have occurred since February 2014. As of September 30, 2022, EQR has remaining authorization to repurchase up to 13.0 million of its shares.

Real Estate

The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022			December 31, 2021
Land	$	5,580,878		$	5,814,790
Depreciable property:
Buildings and improvements		19,445,470			19,632,284
Furniture, fixtures and equipment		2,295,387			2,220,203
In-Place lease intangibles		510,816			518,324
Projects under development:
Land		3,201			—
Construction-in-progress		86,146			24,307
Land held for development:
Land		46,160			46,160
Construction-in-progress		14,005			16,838
Investment in real estate		27,982,063			28,272,906
Accumulated depreciation		(8,813,578	)		(8,354,282	)
Investment in real estate, net	$	19,168,485		$	19,918,624

During the nine months ended September 30, 2022, the Company acquired the following from unaffiliated parties (purchase price in thousands):


	Properties		Apartment Units		Purchase Price
Rental Properties – Consolidated (1)		1		172	$	113,000
Total		1		172	$	113,000

(1)

Purchase price includes an allocation of approximately $25.3 million to land and $87.7 million to depreciable property (inclusive of capitalized closing costs).

During the nine months ended September 30, 2022, the Company disposed of the following to unaffiliated parties (sales price in thousands):


	Properties		Apartment Units		Sales Price
Rental Properties – Consolidated		3		945	$	746,150
Total		3		945	$	746,150

The Company recognized a net gain on sales of real estate properties of approximately $304.3 million on the above sales.

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 an agreement to dispose of the following (sales price and net book value in thousands):


	Properties		Apartment Units		Sales Price		Net Book Value at September 30, 2022
Land Parcels (one)		—		—	$	5,500	$	3,930
Total		—		—	$	5,500	$	3,930

The closing of pending transactions is subject to certain conditions and restrictions; therefore, there can be no assurance that the transactions will be consummated or that the final terms will not differ in material respects from any agreements summarized above. See Note 14 for discussion of the properties acquired or disposed of, if any, subsequent to September 30, 2022.

Investments in Partially Owned Entities

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

Consolidated Variable Interest Entities (“VIEs”)

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

The Company has various equity interests in certain joint ventures that have been deemed to be 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 following table summarizes the Company’s consolidated joint ventures as of September 30, 2022:

Operating Properties (1)

Project Under Development (2)

Properties

Apartment Units

Project

Apartment Units

Consolidated Joint Ventures (VIE)

3,114

312

(1)

During the nine months ended September 30, 2022, the Company acquired its joint venture partner’s 25% interest in a 432-unit apartment property for $32.2 million, and the property is now wholly owned. In connection with the buyout, the carrying amount of the Noncontrolling Interests – Partially Owned Properties totaling $4.8 million was reduced to zero and the remaining $27.4 million was recorded to paid in capital/general partner capital.

(2)

The land under this project is subject to a long-term ground lease.

The following table provides consolidated assets and liabilities related to the VIEs discussed above as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022		December 31, 2021
Consolidated Assets	$	675,974	$	912,955
Consolidated Liabilities	$	148,071	$	251,424

Certain consolidated joint ventures in which we have investments obtained mortgage debt to finance a portion of their activities. The following table and information summarizes the variable rate construction mortgage debt that is non-recourse to the Company at September 30, 2022 (aggregate and amounts borrowed under loan commitments in thousands):


	Recently Completed Operating Property (1)		Project Under Development
Number of joint ventures with debt financing		1		1
Aggregate loan commitments	$	67,589	$	73,344
Amounts borrowed under loan commitments (2)	$	64,816	$	34,356
Maturity dates	2023		2025

(1)

The maturity date of the construction loan was extended to June 25, 2023.

(2)

See Note 9 for the current period proceeds of secured conventional floating rate debt under Mortgage Notes Payable.

Investments in Unconsolidated Entities

The Company has various equity interests in certain joint ventures that are unconsolidated and accounted for using the equity method of accounting. Most of these have been deemed to be VIEs and the Company is not the VIEs' primary beneficiary. The remaining have been deemed not to be VIEs and the Company does not have a controlling voting interest.

The following table and information summarizes the Company’s investments in unconsolidated entities as of September 30, 2022 and December 31, 2021 (amounts in thousands except for ownership percentage):


	September 30, 2022			December 31, 2021			Ownership Percentage
Investments in Unconsolidated Entities:
Various Real Estate Holdings (VIE)	$	36,372		$	36,024		Varies
Projects Under Development and Land Held for Development (VIE)		195,974			72,488		62% - 95% (1)
Real Estate Technology Funds/Companies (VIE)		24,206			19,347		Varies
Other		(241	)		(411	)	Varies
Investments in Unconsolidated Entities	$	256,311		$	127,448

(1)

In certain instances, the joint venture agreements contain provisions for promoted interests in favor of our joint venture partner. If the terms of the promoted interest are attained, then our share of the proceeds from a sale or other capital event of the unconsolidated entity may be less than the indicated ownership percentage.

The following table summarizes the Company’s unconsolidated joint ventures that were deemed to be VIEs as of September 30, 2022:

Real Estate Holdings (1)

Projects Under Development (2), (5)

Land Held for Development (2), (3)

Entities

Projects

Apartment Units (4)

Projects

Apartment Units (4)

Unconsolidated Joint Ventures (VIE)

1,982

745

(1)

Represents entities that hold various real estate investments.

(2)

Represents separate unconsolidated joint ventures for the purpose of developing multifamily rental properties.

(3)

Represents separate unconsolidated joint ventures that have not yet started but are expected to start construction in the fourth quarter of 2022 and the second quarter of 2023.

(4)

Represents the intended number of apartment units to be developed.

(5)

The land parcel under one of the projects is subject to a long-term ground lease.

New Development Joint Ventures

The following table provides information on total unconsolidated development joint ventures entered into during the nine months ended September 30, 2022 (amounts in thousands except for number of unconsolidated joint ventures):


Number of unconsolidated joint ventures (1)		2
Apartment units (2)		797
Investments in unconsolidated entities – acquisitions	$	49,330

(1)

The entities qualify as VIEs, but the Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIE’s performance. Therefore, the entities are unconsolidated and recorded using the equity method of accounting. See Note 2 of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional discussion.

(2)

Represents the intended number of apartment units to be developed.

Restricted Deposits

The following table presents the Company’s restricted deposits as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022		December 31, 2021
Mortgage escrow deposits:
Replacement reserves	$	12,213	$	11,156
Mortgage principal reserves/sinking funds		23,484		19,104
Mortgage escrow deposits		35,697		30,260
Restricted cash:
Tax-deferred (1031) exchange proceeds		—		166,362
Earnest money on pending acquisitions		—		2,000
Restricted deposits on real estate investments		235		284
Resident security and utility deposits		38,458		35,663
Other		2,289		1,835
Restricted cash		40,982		206,144
Restricted deposits	$	76,679	$	236,404

Leases

Lessor Accounting

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

The Company generates the majority of its lease revenue 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 rent, storage rent 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.

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

The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the nine months ended September 30, 2022 and 2021 (amounts in thousands):


	Nine Months Ended September 30, 2022									Nine Months Ended September 30, 2021
Income Type	Residential Leases			Non-Residential Leases			Total			Residential Leases			Non-Residential Leases		Total
Residential and non-residential rent	$	1,812,928		$	48,279		$	1,861,207		$	1,629,778		$	45,680	$	1,675,458
Utility recoveries (RUBS income) (1)		59,826			596			60,422			55,331			519		55,850
Parking rent		32,546			322			32,868			30,403			465		30,868
Other lease revenue (2)		(4,016	)		(568	)		(4,584	)		(19,442	)		2,914		(16,528	)
Total lease revenue	$	1,901,284		$	48,629			1,949,913		$	1,696,070		$	49,578		1,745,648
Parking revenue								27,701								18,455
Other revenue								57,863								54,764
Total other rental income (3)								85,564								73,219
Rental income							$	2,035,477							$	1,818,867

(1)

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

(2)

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

(3)

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

The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the quarters ended September 30, 2022 and 2021 (amounts in thousands):


	Quarter Ended September 30, 2022									Quarter Ended September 30, 2021
Income Type	Residential Leases			Non-Residential Leases			Total			Residential Leases			Non-Residential Leases		Total
Residential and non-residential rent	$	620,880		$	16,184		$	637,064		$	551,474		$	14,443	$	565,917
Utility recoveries (RUBS income) (1)		20,243			227			20,470			18,798			189		18,987
Parking rent		10,840			120			10,960			10,513			103		10,616
Other lease revenue (2)		(3,127	)		(371	)		(3,498	)		(472	)		1,776		1,304
Total lease revenue	$	648,836		$	16,160			664,996		$	580,313		$	16,511		596,824
Parking revenue								9,270								6,883
Other revenue								20,833								19,499
Total other rental income (3)								30,103								26,382
Rental income							$	695,099							$	623,206

(1)

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

(2)

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

(3)

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

The following table presents residential and non-residential accounts receivable and straight-line receivable balances for the Company’s properties as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	Residential							Non-Residential
Balance Sheet (Other assets):	September 30, 2022				December 31, 2021			September 30, 2022			December 31, 2021
Resident/tenant accounts receivable balances	$	34,939			$	37,959		$	3,951		$	3,218
Allowance for doubtful accounts		(30,543	)			(33,121	)		(2,767	)		(2,365	)
Net receivable balances	$	4,396		(1)	$	4,838		$	1,184		$	853

Straight-line receivable balances	$	3,466			$	7,460		$	13,792		$	13,021

(1)

The Company held residential security deposits approximating 53.9% of the net residential receivable balance at September 30, 2022.

The following table presents residential bad debt for the Company’s properties for the nine months and quarters ended September 30, 2022 and 2021 (amounts in thousands):


	Nine Months Ended September 30,						Quarter Ended September 30,
Income Statement (Rental income):	2022			2021			2022			2021
Bad debt, net (1)	$	14,854		$	29,751		$	6,707		$	3,979
% of rental income		0.8	%		1.7	%		1.0	%		0.7	%

(1)

Bad debt, net benefited from additional resident payments due to governmental rental assistance programs of approximately $32.5 million and $18.5 million for the nine months ended September 30, 2022 and 2021, respectively, and $8.0 million and $13.5 million for the quarters ended September 30, 2022 and 2021, respectively. The resident payments from governmental rental assistance decreased in the third quarter of 2022 as compared to the prior year period as these programs wind down.

Debt

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. Weighted average interest rates noted below for the nine months ended September 30, 2022 include the effect of any derivative instruments and amortization of premiums/discounts/OCI (other comprehensive income) on debt and derivatives.

Mortgage Notes Payable

The following table summarizes the Company’s mortgage notes payable activity for the nine months ended September 30, 2022 (amounts in thousands):


	Mortgage notes payable, net as of December 31, 2021		Proceeds			Lump sum payoffs			Scheduled principal repayments			Amortization of premiums/ discounts		Amortization of deferred financing costs, net (1)		Mortgage notes payable, net as of September 30, 2022
Fixed Rate Debt:
Secured – Conventional	$	1,896,472	$	—		$	(260,874	)	$	(3,147	)	$	935	$	956	$	1,634,342
Floating Rate Debt:
Secured – Conventional		59,890		37,429	(2)		—			(39	)		—		331		97,611
Secured – Tax Exempt		234,839		—			—			—			930		105		235,874
Floating Rate Debt		294,729		37,429			—			(39	)		930		436		333,485
Total	$	2,191,201	$	37,429		$	(260,874	)	$	(3,186	)	$	1,865	$	1,392	$	1,967,827

(1)

Represents amortization of deferred financing costs, net of debt financing costs.

(2)

See Note 6 for additional discussion of the variable rate construction mortgage debt.

The following table summarizes certain interest rate and maturity date information as of and for the nine months ended September 30, 2022:


		September 30, 2022
Interest Rate Ranges		0.10% - 4.21%
Weighted Average Interest Rate		3.39%
Maturity Date Ranges		2023-2061

As of September 30, 2022, the Company had $250.0 million of secured debt (primarily tax-exempt bonds) subject to third-party credit enhancement.

Notes

The following table summarizes the Company’s notes activity for the nine months ended September 30, 2022 (amounts in thousands):


	Notes, net as of December 31, 2021		Proceeds		Lump sum payoffs			Amortization of premiums/ discounts		Amortization of deferred financing costs, net (1)		Notes, net as of September 30, 2022
Fixed Rate Debt:
Unsecured – Public	$	5,835,222	$	—	$	(500,000	)	$	2,258	$	3,327	$	5,340,807

(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 nine months ended September 30, 2022:


		September 30, 2022
Interest Rate Ranges		1.85% - 7.57%
Weighted Average Interest Rate		3.65%
Maturity Date Ranges		2025-2047

The Company’s unsecured public notes contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for the nine months ended September 30, 2022.

Line of Credit and Commercial Paper

The Company has a $2.5 billion unsecured revolving credit facility maturing November 1, 2024. The Company has the ability to increase available borrowings by an additional $750.0 million by adding lenders to the facility, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.775%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. The Company did not borrow any amounts under its revolving credit facility during the nine months ended September 30, 2022.

The Company has an unsecured commercial paper note program under 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 1.18% for the nine months ended September 30, 2022 and a weighted average maturity of 28 days as of September 30, 2022. The weighted average amount outstanding for the nine months ended September 30, 2022 was approximately $177.9 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 September 30, 2022 (amounts in thousands):


	September 30, 2022
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(190,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(3,463	)
Unsecured revolving credit facility availability	$	2,306,537

Other

The following table summarizes the Company’s total debt extinguishment costs recorded as additional interest expense for the nine months and quarters ended September 30, 2022 and 2021 (amounts in thousands):


	Nine Months Ended September 30,				Quarter Ended September 30,
	2022		2021		2022		2021
Write-offs of unamortized deferred financing costs	$	369	$	264	$	277	$	—
Write-offs of unamortized (premiums)/discounts/OCI		3,947		—		3,570		—
Total	$	4,316	$	264	$	3,847	$	—

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.

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

•

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

•

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

•

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

The Company’s derivative positions are valued using models developed by the respective counterparty as well as models applied internally by the Company that use as their inputs readily observable market parameters (such as forward yield curves and credit default swap data). 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 September 30, 2022 and December 31, 2021, respectively (amounts in thousands):


	September 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value (Level 2)		Carrying Value		Estimated Fair Value (Level 2)
Mortgage notes payable, net	$	1,967,827	$	1,811,596	$	2,191,201	$	2,193,689
Unsecured debt, net		5,530,364		4,893,686		6,150,252		6,798,309
Total debt, net	$	7,498,191	$	6,705,282	$	8,341,453	$	8,991,998

The following table summarizes the Company’s consolidated derivative instruments at September 30, 2022 (dollar amounts are in thousands):


	Forward Starting Swaps (1)
Current Notional Balance	$	350,000
Lowest Interest Rate		2.447	%
Highest Interest Rate		2.972	%
Maturity Date		2033

(1)

Forward Starting Swaps – Designed to partially fix interest rates in advance of planned future debt issuances. These swaps have mandatory counterparty terminations in 2024 and are targeted for certain 2023 debt issuances.

The following tables provide a summary of the fair value measurements for each major category of assets and liabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively (amounts in thousands):


				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	9/30/2022		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps	Other Assets	$	23,413	$	—	$	23,413	$	—
Supplemental Executive Retirement Plan	Other Assets		125,585		125,585		—		—
Total		$	148,998	$	125,585	$	23,413	$	—

Liabilities
Supplemental Executive Retirement Plan	Other Liabilities	$	125,585	$	125,585	$	—	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	370,537	$	—	$	370,537	$	—


				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	12/31/2021		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	$	164,650	$	164,650	$	—	$	—

Liabilities
Supplemental Executive Retirement Plan	Other Liabilities	$	164,650	$	164,650	$	—	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	498,977	$	—	$	498,977	$	—

The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying consolidated statements of operations and comprehensive income for the nine months ended September 30, 2022 and 2021, respectively (amounts in thousands):


September 30, 2022 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	$	23,413	Interest expense	$	(9,987	)
Total	$	23,413		$	(9,987	)


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

As of September 30, 2022 and December 31, 2021, there were approximately $0.9 million and $34.3 million in deferred losses, net, included in accumulated other comprehensive income (loss), respectively, related to previously settled and unsettled derivative instruments, of which an estimated $3.8 million may be recognized as additional interest expense during the twelve months ending September 30, 2023.

11.

Earnings Per Share and Earnings Per Unit

Equity Residential

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


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
Numerator for net income per share – basic:
Net income	$	641,641		$	835,736		$	335,165		$	447,332
Allocation to Noncontrolling Interests – Operating Partnership		(21,024	)		(27,903	)		(10,997	)		(14,847	)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per share – basic	$	615,573		$	803,558		$	322,252		$	431,178
Numerator for net income per share – diluted:
Net income	$	641,641		$	835,736		$	335,165		$	447,332
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per share – diluted	$	636,597		$	831,461		$	333,249		$	446,025
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic		375,710			373,474			375,850			374,308
Effect of dilutive securities:
OP Units		11,893			12,367			11,895			12,019
Long-term compensation shares/units		1,785			1,801			1,555			2,047
ATM forward sales		6			—			—			—
Denominator for net income per share – diluted		389,394			387,642			389,300			388,374
Net income per share – basic	$	1.64		$	2.15		$	0.86		$	1.15
Net income per share – diluted	$	1.63		$	2.14		$	0.86		$	1.15

ERP Operating Limited Partnership

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


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
Numerator for net income per Unit – basic and diluted:
Net income	$	641,641		$	835,736		$	335,165		$	447,332
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Allocation to Preference Units		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per Unit – basic and diluted	$	636,597		$	831,461		$	333,249		$	446,025
Denominator for net income per Unit – basic and diluted:
Denominator for net income per Unit – basic		387,603			385,841			387,745			386,327
Effect of dilutive securities:
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units		1,785			1,801			1,555			2,047
ATM forward sales		6			—			—			—
Denominator for net income per Unit – diluted		389,394			387,642			389,300			388,374
Net income per Unit – basic	$	1.64		$	2.15		$	0.86		$	1.15
Net income per Unit – diluted	$	1.63		$	2.14		$	0.86		$	1.15

12.

Commitments and Contingencies

Commitments

Real Estate Development Commitments

As of September 30, 2022, the Company has both consolidated and unconsolidated real estate projects under development. The following table summarizes the gross remaining total project costs for the Company’s projects under development at September 30, 2022 (total project costs remaining in thousands):


	Projects		Apartment Units		Total Project Costs Remaining (1)
Projects Under Development
Consolidated		2		537	$	171,301
Unconsolidated		6		1,982		402,321
Total Projects Under Development		8		2,519	$	573,622

(1)

The Company’s share of the $573.6 million in total project costs remaining approximates $158.8 million, with the balance funded by the Company’s joint venture partners (approximately $6.4 million) and/or applicable construction loans (approximately $408.4 million).

We have entered into, and may continue in the future to enter into, joint venture agreements with third-party partners for the development of multifamily rental properties. The joint venture agreements with each development partner include buy-sell provisions that provide 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.

Other Commitments

We have entered into, and may continue in the future to enter into, real estate technology and other real estate fund investments. At September 30, 2022, the Company has invested in eight real estate technology funds and one other real estate investment fund with aggregate remaining commitments of approximately $22.1 million.

Contingencies

Litigation and Legal Matters

The Company, as an owner of real estate, is subject to various federal, state and local 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 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.

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 3.7% of total revenues for the nine months ended September 30, 2022 and is designed as an amenity for our residential residents. The chief operating decision maker evaluates the performance of each property on a consolidated residential and non-residential basis. The Company’s geographic consolidated same store operating segments represent its reportable segments.

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

All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the nine months and quarters ended September 30, 2022 and 2021, respectively.

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

The following table presents a reconciliation of NOI from our rental real estate for the nine months and quarters ended September 30, 2022 and 2021, respectively (amounts in thousands):


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
Rental income	$	2,035,477		$	1,818,867		$	695,099		$	623,206
Property and maintenance expense		(365,277	)		(341,261	)		(124,048	)		(116,461	)
Real estate taxes and insurance expense		(302,899	)		(297,780	)		(100,361	)		(96,909	)
Total operating expenses		(668,176	)		(639,041	)		(224,409	)		(213,370	)
Net operating income	$	1,367,301		$	1,179,826		$	470,690		$	409,836

The following tables present NOI from our rental real estate for each segment for the nine months and quarters ended September 30, 2022 and 2021, respectively, as well as total assets and capital expenditures at September 30, 2022 (amounts in thousands):


	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	351,896	$	103,121	$	248,775	$	316,206	$	99,837	$	216,369
Orange County		91,271		19,681		71,590		80,773		18,865		61,908
San Diego		64,540		14,574		49,966		58,210		13,892		44,318
Subtotal - Southern California		507,707		137,376		370,331		455,189		132,594		322,595

San Francisco		312,401		93,572		218,829		285,212		89,559		195,653
Washington, D.C.		306,161		102,564		203,597		290,255		97,407		192,848
New York		318,756		139,121		179,635		270,776		136,859		133,917
Seattle		210,011		59,222		150,789		190,386		61,092		129,294
Boston		194,640		60,003		134,637		173,953		57,478		116,475
Denver		32,505		9,129		23,376		28,732		8,482		20,250
Total same store		1,882,181		600,987		1,281,194		1,694,503		583,471		1,111,032

Non-same store/other
Non-same store (2)		131,693		54,236		77,457		31,305		15,256		16,049
Other (3)		21,603		12,953		8,650		93,059		40,314		52,745
Total non-same store/other		153,296		67,189		86,107		124,364		55,570		68,794

Totals	$	2,035,477	$	668,176	$	1,367,301	$	1,818,867	$	639,041	$	1,179,826

(1)

For the nine months ended September 30, 2022 and 2021, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2021, less properties subsequently sold, which represented 72,869 apartment units.

(2)

For the nine months ended September 30, 2022 and 2021, non-same store primarily includes properties acquired after January 1, 2021, plus any properties in lease-up and not stabilized as of January 1, 2021, and any properties undergoing major renovations.

(3)

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


	Quarter Ended September 30, 2022							Quarter Ended September 30, 2021
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	119,269	$	34,783	$	84,486		$	110,180	$	33,568	$	76,612
Orange County		31,252		6,875		24,377			28,263		6,455		21,808
San Diego		22,129		5,018		17,111			20,283		4,717		15,566
Subtotal - Southern California		172,650		46,676		125,974			158,726		44,740		113,986

San Francisco		106,382		31,984		74,398			96,451		30,173		66,278
Washington, D.C.		106,098		35,686		70,412			98,643		34,238		64,405
New York		112,595		46,194		66,401			93,454		45,282		48,172
Seattle		72,756		20,385		52,371			63,936		20,658		43,278
Boston		66,981		20,122		46,859			58,863		19,401		39,462
Denver		11,102		3,191		7,911			9,812		2,950		6,862
All Other Markets		2,148		794		1,354			1,933		697		1,236
Total same store		650,712		205,032		445,680			581,818		198,139		383,679

Non-same store/other
Non-same store (2)		42,707		17,068		25,639			15,702		7,736		7,966
Other (3)		1,680		2,309		(629	)		25,686		7,495		18,191
Total non-same store/other		44,387		19,377		25,010			41,388		15,231		26,157

Totals	$	695,099	$	224,409	$	470,690		$	623,206	$	213,370	$	409,836

(1)

For the quarters ended September 30, 2022 and 2021, same store primarily includes all properties acquired or completed that were stabilized prior to July 1, 2021, less properties subsequently sold, which represented 73,402 apartment units.

(2)

For the quarters ended September 30, 2022 and 2021, non-same store primarily includes properties acquired after July 1, 2021, plus any properties in lease-up and not stabilized as of July 1, 2021, and any properties undergoing major renovations.

(3)

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


	Nine Months Ended September 30, 2022
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	2,604,866	$	21,459
Orange County		358,574		4,170
San Diego		227,344		4,206
Subtotal - Southern California		3,190,784		29,835

San Francisco		3,090,195		21,988
Washington, D.C.		3,057,549		22,596
New York		3,424,747		17,365
Seattle		2,089,219		16,569
Boston		1,692,529		16,349
Denver		477,354		939
Total same store		17,022,377		125,641

Non-same store/other
Non-same store (2)		2,517,480		15,524
Other (3)		725,548		542
Total non-same store/other		3,243,028		16,066

Totals	$	20,265,405	$	141,707

(1)

Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2021, less properties subsequently sold, which represented 72,869 apartment units.

(2)

Non-same store primarily includes properties acquired after January 1, 2021, plus any properties in lease-up and not stabilized as of January 1, 2021, and any properties undergoing major renovations.

(3)

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

14.

Subsequent Events

Subsequent to September 30, 2022, the Company:

•

Settled all of the forward sales agreements outstanding as of September 30, 2022 for a total of 1,740,550 Common Shares, at a weighted average forward price per share of $80.22, which is inclusive of adjustments made to reflect the then-current federal funds rate and the amount of dividends paid to holders of the Company's Common Shares, for net proceeds of approximately $139.6 million. Concurrent with this transaction, ERPOP issued the same amount of OP Units to EQR in exchange for the net proceeds. See Note 3 for additional discussion of the Company’s ATM program;

•

Replaced its existing $2.5 billion facility with a new $2.5 billion unsecured revolving credit facility maturing October 26, 2027; and

•

Entered into $50.0 million of forward starting swaps to hedge changes in interest rates related to future taxable secured or unsecured debt issuances.

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, 2021. 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. 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, 2021, 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. 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.

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 affluent 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.

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 or furnish to 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 or furnish them to 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, 2021.

Results of Operations

2022 Transactions

In conjunction with our business objectives and operating and investing strategies, the following table provides a rollforward of the transactions that occurred during the nine months ended September 30, 2022:

Portfolio Rollforward

($ in thousands)


	Properties			Apartment Units			Purchase Price			Acquisition Cap Rate
12/31/2021		310			80,407
Acquisitions:
Consolidated Rental Properties		1			172		$	113,000			3.5	%
Unconsolidated Land Parcels (1)		—			—		$	56,886

							Sales Price			Disposition Yield
Dispositions:
Consolidated Rental Properties		(3	)		(945	)	$	(746,150	)		(3.4	%)

Configuration Changes		—			(40	)
9/30/2022		308			79,594

(1)

The purchase price listed represents the total consideration for the closing of the respective joint ventures.

Acquisitions

•

The consolidated property acquired during the nine months ended September 30, 2022 was located in San Diego, CA; and

•

During the nine months ended September 30, 2022, the Company acquired its joint venture partner’s 25% interest in a 432-unit apartment property in Chevy Chase, MD for $32.2 million, and the property is now wholly owned.

Dispositions

•

The consolidated properties disposed of during the nine months ended September 30, 2022 were located in New York City (2) and Washington, D.C. and the sales generated an Unlevered IRR of 5.3%.

Developments

•

The Company commenced construction on one consolidated and three unconsolidated apartment properties during the nine months ended September 30, 2022, located in Santa Clara, CA, Fort Worth, TX, Frisco, TX and Dallas, TX, consisting of 1,278 apartment units in the aggregate totaling approximately $417.7 million of expected development costs;

•

The Company stabilized one consolidated apartment property during the nine months ended September 30, 2022, located in Bethesda, MD, consisting of 154 apartment units totaling approximately $73.0 million of development costs; and

•

The Company spent approximately $155.6 million during the nine months ended September 30, 2022, primarily for consolidated and unconsolidated development projects.

Investments in Unconsolidated Entities

•

The Company entered into two separate unconsolidated joint ventures during the nine months ended September 30, 2022 for the purpose of developing vacant land parcels in Frisco, TX and Wakefield, MA. The Company’s total investment in these two joint ventures is approximately $63.2 million as of September 30, 2022. One of the projects is related to the Company’s joint venture development program with Toll Brothers, Inc. (“Toll”), which commenced construction during the first quarter of 2022 prior to our entrance into the joint venture.

See Notes 4, 6 and 14 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate investments and investments in partially owned entities.

Future Outlook

•

The Company assumes consolidated rental acquisitions of approximately $113.0 million and consolidated rental dispositions of approximately $746.0 million during the year ending December 31, 2022. Given current uncertainty in the transaction environment, the Company’s acquisition and disposition assumptions reflect no additional activities beyond one land parcel sale for $5.5 million currently under contract and scheduled to close in the fourth quarter of 2022; and

•

We currently anticipate spending approximately $200.0 million on development costs during the year ending December 31, 2022, primarily for consolidated and unconsolidated properties currently under construction (amount only includes our share of development costs).

The above 2022 assumptions are based on current expectations and are forward-looking.

Comparison of the nine months and quarter ended September 30, 2022 to the nine months and quarter ended September 30, 2021

The following table presents a reconciliation of diluted earnings per share/unit for the nine months and quarter ended September 30, 2022 as compared to the same period in 2021:


	Nine Months Ended September 30			Quarter Ended September 30
Diluted earnings per share/unit for period ended 2021	$	2.14		$	1.15
Property NOI		0.49			0.17
Interest expense		(0.03	)		—
Corporate overhead (1)		(0.03	)		(0.01	)
Net gain/loss on property sales		(0.73	)		(0.43	)
Non-operating asset gains/losses		(0.06	)		—
Depreciation expense		(0.13	)		—
Other		(0.02	)		(0.02	)
Diluted earnings per share/unit for period ended 2022	$	1.63		$	0.86

(1)

Corporate overhead includes property management and general and administrative expenses.

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


	Nine Months Ended September 30,
	2022			2021			$ Change			% Change
Operating income	$	873,683		$	1,033,958		$	(160,275	)		(15.5	)%
Adjustments:
Property management		83,035			74,357			8,678			11.7	%
General and administrative		47,033			43,102			3,931			9.1	%
Depreciation		667,896			616,032			51,864			8.4	%
Net (gain) loss on sales of real estate properties		(304,346	)		(587,623	)		283,277			(48.2	)%
Total NOI	$	1,367,301		$	1,179,826		$	187,475			15.9	%
Rental income:
Same store	$	1,882,181		$	1,694,503		$	187,678			11.1	%
Non-same store/other		153,296			124,364			28,932			23.3	%
Total rental income		2,035,477			1,818,867			216,610			11.9	%
Operating expenses:
Same store		600,987			583,471			17,516			3.0	%
Non-same store/other		67,189			55,570			11,619			20.9	%
Total operating expenses		668,176			639,041			29,135			4.6	%
NOI:
Same store		1,281,194			1,111,032			170,162			15.3	%
Non-same store/other		86,107			68,794			17,313			25.2	%
Total NOI	$	1,367,301		$	1,179,826		$	187,475			15.9	%

Note: See Note 13 in the Notes to Consolidated Financial Statements for detail by reportable segment/market. Non-same store/other NOI results consist primarily of properties acquired in calendar years 2021 and 2022, operations from the Company’s development properties and operations prior to disposition from 2021 and 2022 sold properties.

•

The increase in same store rental income is primarily driven by strong Physical Occupancy and continued growth in pricing.

•

The increase in same store operating expenses is due primarily to:

•

Utilities – An $11.0 million increase primarily from gas and electric due to higher commodity prices;

•

Repairs and maintenance – A $6.8 million increase primarily driven by volume and timing of maintenance and repairs along with increases in minimum wage on contracted services; and

•

On-site payroll – A $4.5 million decrease due to improved sales and service staff utilization from various technology initiatives and higher than usual staffing vacancies during the current period.

•

The increase in non-same store/other NOI is due primarily to a positive impact of higher NOI from properties acquired during 2021 and 2022 of $45.2 million and higher NOI from development properties in lease-up of $14.6 million, partially offset by a negative impact of lost NOI from 2021 and 2022 dispositions of $41.1 million and a negative impact of $1.2 million in lower NOI from one former master-leased property and two properties that have been removed from same store while undergoing major renovations.

•

The increase in consolidated total NOI is primarily a result of the Company’s higher NOI from same store properties, largely due to improvement in same store revenues as noted above. Operating expense growth remains modest due to a combination of continued success in managing controllable expenses and modest growth in real estate tax expense (increased by only $1.2 million), leading to 15.3% same store NOI growth for the nine months ended September 30, 2022 as compared to the prior year period.

See the Same Store Results section below for additional discussion of those results.

Property management expenses include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third-party management companies. These expenses increased approximately $8.7 million or 11.7% and approximately $2.0 million or 8.2% for the nine months and quarter ended September 30, 2022, respectively, as compared to the prior year periods. These increases are primarily attributable to increases in payroll-related costs, training/conference costs, temporary help/contractors costs, travel costs and employment expenses, partially offset by decreases in legal and professional fees.

General and administrative expenses, which includes corporate operating expenses, increased approximately $3.9 million or 9.1% and approximately $0.3 million or 2.5% for the nine months and quarter ended September 30, 2022, respectively, as compared to the prior year periods, primarily due to increases in payroll-related costs, legal and professional fees and training/conference costs.

Depreciation expense, which includes depreciation on non-real estate assets, increased approximately $51.9 million or 8.4% for the nine months ended September 30, 2022, as compared to the prior year period, primarily as a result of additional depreciation expense on properties acquired in 2021 and 2022 and development properties placed in service during 2021, partially offset by lower depreciation from properties sold in 2021 and 2022. Depreciation expense decreased approximately $1.3 million or 0.6% for the quarter ended September 30, 2022 as compared to the prior year period, primarily as a result of lower depreciation from properties sold in the fourth quarter of 2021 and 2022 and in-place leases for 2021 acquisitions being fully depreciated as of December 31, 2021, partially offset by additional depreciation expense on properties acquired in 2022 and development properties placed in service during 2021.

Net gain on sales of real estate properties decreased approximately $283.3 million or 48.2% and approximately $167.4 million or 46.0% for the nine months and quarter ended September 30, 2022, respectively, as compared to the prior year periods, primarily as a result of a lower sales volume with the sale of three consolidated apartment properties in 2022 as compared to the sale of ten consolidated apartment properties in the same period in 2021.

Interest and other income decreased approximately $20.4 million or 80.8% and approximately $0.3 million or 26.0% for the nine months and quarter ended September 30, 2022, respectively, as compared to the prior year periods. These decreases are primarily due to a gain of $23.6 million on the sale of various investment securities that occurred during 2021 but not during 2022, partially offset by increases in litigation settlement proceeds that occurred during 2022 but not during 2021.

Other expenses decreased approximately $1.7 million or 15.7% for the nine months ended September 30, 2022 as compared to the prior year period, primarily due to a decline in construction defect and litigation reserves recorded between 2022 and 2021, partially offset by increases in advocacy contributions and demolition/abatement costs. Other expenses increased approximately $0.3 million or 8.7% for the quarter ended September 30, 2022 as compared to the prior year period, primarily due to increases in advocacy contributions and demolition/abatement costs, partially offset by construction defect and litigation reserves that occurred during 2021 but not during 2022.

Interest expense, including amortization of deferred financing costs, increased approximately $14.6 million or 7.0% and approximately $4.3 million or 6.2% for the nine months and quarter ended September 30, 2022, respectively, as compared to the prior year periods. These increases are primarily due to higher overall interest rates and lower capitalized interest. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the nine months ended September 30, 2022 was 3.67% as compared to 3.51% for the prior year period, and for the quarter ended September 30, 2022 was 3.67% as compared to 3.46% for the prior year period. The Company capitalized interest of approximately $4.2 million and $12.4 million during the nine months ended September 30, 2022 and 2021, respectively, and $1.9 million and $4.2 million during the quarters ended September 30, 2022 and 2021, respectively.

Same Store Results

Properties that the Company owned and were stabilized for all of both of the nine months ended September 30, 2022 and 2021 (the “Nine-Month 2022 Same Store Properties”), which represented 72,869 apartment units, drove the Company’s results of operations. 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.

The following table provides comparative total same store results and statistics for the Nine-Month 2022 Same Store Properties:

September YTD 2022 vs. September YTD 2021

Same Store Results/Statistics Including 72,869 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)


September YTD 2022																	September YTD 2021
	Residential			% Change			Non- Residential		% Change			Total		% Change				Residential			Non- Residential		Total
Revenues	$	1,813,450			11.2	%	$	68,731		8.1	%	$	1,882,181		11.1	%	Revenues	$	1,630,928		$	63,575	$	1,694,503
Expenses	$	583,185			3.0	%	$	17,802		3.1	%	$	600,987		3.0	%	Expenses	$	566,210		$	17,261	$	583,471
NOI	$	1,230,265			15.5	%	$	50,929		10.0	%	$	1,281,194		15.3	%	NOI	$	1,064,718		$	46,314	$	1,111,032

Average Rental Rate	$	2,866			10.5	%											Average Rental Rate	$	2,594
Physical Occupancy		96.5	%		0.6	%											Physical Occupancy		95.9	%
Turnover		33.6	%		(1.6	%)											Turnover		35.2	%

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

The following table provides results and statistics related to our Residential same store operations for the nine months ended September 30, 2022 and 2021:

September YTD 2022 vs. September YTD 2021

Same Store Residential Results/Statistics by Market


														Increase (Decrease) from Prior Year
Markets/Metro Areas	Apartment Units		Sept. YTD 22 % of Actual NOI			Sept. YTD 22 Average Rental Rate		Sept. YTD 22 Weighted Average Physical Occupancy %			Sept. YTD 22 Turnover				Average Rental Rate			Physical Occupancy			Turnover
Los Angeles		14,662		20.0	%	$	2,725		96.9	%		28.3	%			11.4	%		0.2	%		(3.8	%)
Orange County		4,028		5.8	%		2,591		97.1	%		25.8	%			13.6	%		(0.6	%)		(1.4	%)
San Diego		2,706		4.1	%		2,737		97.0	%		29.3	%			11.9	%		(0.7	%)		(5.2	%)
Subtotal – Southern California		21,396		29.9	%		2,701		97.0	%		28.0	%			11.8	%		0.0	%		(3.5	%)

San Francisco		11,366		17.6	%		3,127		96.3	%		32.1	%			8.0	%		1.6	%		(5.2	%)
Washington, D.C.		14,186		16.2	%		2,432		96.9	%		33.8	%			4.7	%		0.6	%		(2.5	%)
New York		8,536		13.1	%		3,964		97.0	%		34.9	%			15.8	%		2.7	%		3.9	%
Seattle		9,331		11.4	%		2,472		95.1	%		41.9	%			10.7	%		(0.7	%)		2.5	%
Boston		6,430		9.9	%		3,165		96.2	%		37.3	%			10.9	%		0.5	%		(0.4	%)
Denver		1,624		1.9	%		2,275		96.9	%		48.4	%			12.0	%		0.2	%		2.5	%

Total		72,869		100.0	%	$	2,866		96.5	%		33.6	%			10.5	%		0.6	%		(1.6	%)

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.3% of total revenues for the nine months ended September 30, 2022.

Despite geopolitical and economic uncertainties, demand to live in our apartment communities remained healthy, which our financial results reflected, as we continued to capture the gap between in-place rent levels and market rent levels. Demand for our apartments continues to support strong Physical Occupancy with pricing that is largely in-line with expectations, including modest use of Leasing Concessions. Key operating drivers for this performance during 2022 include:

•

Pricing – Pricing (net of Leasing Concessions) in 2022 has been the strongest in the Company’s history, driven by continued improvement across the portfolio, especially in New York. After this unprecedented 2022 growth, pricing began to moderate in late August 2022, which is typical, with slightly greater than anticipated price sensitivity in Seattle and San Francisco as of late. The use of Leasing Concessions has also declined significantly from its peak in February 2021.

•

Physical Occupancy – Physical Occupancy of 96.5% for the nine months ended September 30, 2022 remained strong, exceeding 2021 levels and contributing to growth in Same Store Residential Revenues.

•

Percentage of Residents Renewing and Turnover – We continue to see a high Percentage of Residents Renewing in our portfolio, which we believe reflects both the strength of demand and quality of our product. The Percentage of Residents Renewing has been strong at 53.8% for the third quarter of 2022. Turnover remains low at 33.6% for the nine months ended September 30, 2022, reflecting a healthy and consistent trend of historically high resident retention.

In addition to these stronger fundamentals, bad debt, net has moderated during the nine months ended September 30, 2022 with improvement in resident collections primarily driven by receipt of governmental rental assistance payments on behalf of our residents.

Transaction activity has slowed as buyers and sellers adjust their expectations to a volatile economic climate and rising interest rates. While this type of environment can be challenging, the Company has traditionally found investment opportunities during periods of market dislocation as our ability to move quickly and our relatively low cost of capital creates flexibility that can provide us a competitive advantage.

Long-term, we expect elevated single family home ownership costs, positive household formation trends and the overall deficit in housing across the country to buffer the impact on our business from potential economic weakness. We also see our affluent resident base as being more resilient to rising inflation due to higher levels of disposable income and lower relative rent-to-income ratios.

Liquidity and Capital Resources

With approximately $2.3 billion in readily available liquidity, a strong balance sheet, limited near-term maturities, very strong credit metrics and ample access to capital markets, the Company believes it is well positioned to meet its future obligations and opportunities. See further discussion below and Note 14 in the Notes to Consolidated Financial Statements for discussion of events, if any, subsequent to September 30, 2022.

Statements of Cash Flows

The following table sets forth our sources and uses of cash flows for the nine months ended September 30, 2022 and 2021 (amounts in thousands):


	Nine Months Ended September 30,
	2022			2021
Cash flow provided by (used for):
Operating activities	$	1,120,228		$	978,213
Investing activities	$	243,336		$	(309,589	)
Financing activities	$	(1,602,333	)	$	(541,603	)

The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the nine months ended September 30, 2022.

Operating Activities

Our operating cash flows are primarily impacted by NOI and its components, such as Average Rental Rates, Physical Occupancy levels and operating expenses related to our properties. Cash provided by operating activities for the nine months ended September 30, 2022 as compared to the prior year period, increased by approximately $142.0 million as a direct result of the NOI and other changes discussed above in Results of Operations.

Investing Activities

Our investing cash flows are primarily impacted by our transaction activity (acquisitions/dispositions), development spend, capital expenditures and unconsolidated joint venture activity. For the nine months ended September 30, 2022, key drivers were:

•

Acquired one consolidated rental property for approximately $113.0 million in cash;

•

Disposed of three consolidated rental properties, receiving net proceeds of approximately $720.3 million;

•

Invested $81.9 million primarily in development projects;

•

Invested $141.7 million in capital expenditures to real estate; and

•

Invested $136.5 million primarily in unconsolidated development joint venture entities as well as unconsolidated investments in real estate technology funds/companies for various technology initiatives.

Financing Activities

Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions/dividends to shareholders and other Common Share activity. For the nine months ended September 30, 2022, key drivers were:

•

Obtained $37.4 million in variable rate construction mortgage debt that is non-recourse to the Company;

•

Repaid $264.1 million of mortgage loans (inclusive of scheduled principal repayments);

•

Repaid $500.0 million of unsecured notes by using disposition proceeds;

•

Acquired our joint venture partner’s 25% interest in an apartment property for $32.2 million;

•

Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $24.3 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

•

Paid dividends/distributions on Common Shares, Preferred Shares, Units (including OP Units and restricted units) and noncontrolling interests in partially owned properties totaling approximately $740.0 million.

Short-Term Liquidity and Cash Proceeds

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

The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	44,788	$	123,832
Restricted deposits	$	76,679	$	236,404
Unsecured revolving credit facility availability	$	2,306,537	$	2,181,372

Credit Facility and Commercial Paper Program

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 the London Interbank Offered Rate (“LIBOR”) plus a spread (currently 0.775%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating.

The 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.

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


	October 21, 2022
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(145,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(3,463	)
Unsecured revolving credit facility availability	$	2,351,537

Dividend Policy

The Company declared a dividend/distribution for the first, second and third quarters of 2022 of $0.625 per share/unit in each quarter, an annualized increase of 3.7% over the amount paid in 2021. All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees.

Total dividends/distributions paid in October 2022 amounted to $242.7 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended September 30, 2022.

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 $28.0 billion in investment in real estate on the Company’s balance sheet at September 30, 2022, $24.3 billion or 87.0% 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 settled all of its outstanding forward sales agreements under its At-The-Market (“ATM”) share offering program subsequent to September 30, 2022. See Note 14 in the Notes to Consolidated Financial Statements for additional discussion.

The Company’s total debt summary schedule as of September 30, 2022 is as follows:

Debt Summary as of September 30, 2022

($ in thousands)


	Debt Balances		% of Total
Secured	$	1,967,827		26.2	%
Unsecured		5,530,364		73.8	%
Total	$	7,498,191		100.0	%
Fixed Rate Debt:
Secured – Conventional	$	1,634,342		21.8	%
Unsecured – Public		5,340,807		71.2	%
Fixed Rate Debt		6,975,149		93.0	%
Floating Rate Debt:
Secured – Conventional		97,611		1.3	%
Secured – Tax Exempt		235,874		3.1	%
Unsecured – Revolving Credit Facility		—		—
Unsecured – Commercial Paper Program		189,557		2.6	%
Floating Rate Debt		523,042		7.0	%
Total	$	7,498,191		100.0	%

The Company’s long-term financing and capital needs and sources have 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, 2021.

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.

•

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

•

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

•

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

•

Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2021 and 2022, plus any properties in lease-up and not stabilized as of January 1, 2021.

•

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.

•

Residential – Consists of multifamily apartment revenues and expenses.

•

Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2021, less properties subsequently sold. Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented.

•

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.

•

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

•

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

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, 2021.

Funds From Operations and Normalized Funds From Operations

The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for the nine months and quarters ended September 30, 2022 and 2021:

Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2022			2021			2022			2021
Net income	$	641,641		$	835,736		$	335,165		$	447,332
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(2,726	)		(1,957	)		(1,143	)		(534	)
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
Net income available to Common Shares and Units / Units		636,597			831,461			333,249			446,025
Adjustments:
Depreciation		667,896			616,032			214,129			215,397
Depreciation – Non-real estate additions		(3,189	)		(3,228	)		(1,075	)		(1,052	)
Depreciation – Partially Owned Properties		(2,097	)		(2,676	)		(543	)		(994	)
Depreciation – Unconsolidated Properties		1,897			1,867			657			634
Net (gain) loss on sales of unconsolidated entities - operating assets		(9	)		(4	)		—			—
Net (gain) loss on sales of real estate properties		(304,346	)		(587,623	)		(196,551	)		(363,928	)
FFO available to Common Shares and Units / Units (1) (3) (4)		996,749			855,829			349,866			296,082
Adjustments:
Impairment – non-operating assets		—			—			—			—
Write-off of pursuit costs		3,296			3,557			781			910
Debt extinguishment and preferred share redemption (gains) losses		4,316			264			3,847			—
Non-operating asset (gains) losses		(1,174	)		(23,014	)		156			294
Other miscellaneous items		1,832			4,520			2,017			1,179
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	1,005,019		$	841,156		$	356,667		$	298,465

FFO (1) (3)	$	999,067		$	858,147		$	350,639		$	296,855
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
FFO available to Common Shares and Units / Units (1) (3) (4)	$	996,749		$	855,829		$	349,866		$	296,082

Normalized FFO (2) (3)	$	1,007,337		$	843,474		$	357,440		$	299,238
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	1,005,019		$	841,156		$	356,667		$	298,465

(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 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, 2021.

Item 4. Controls and Procedures

Equity Residential

(a)

Evaluation of Disclosure Controls and Procedures:

Effective as of September 30, 2022, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)

Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Company identified in connection with the Company’s evaluation referred to above that occurred during the third quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ERP Operating Limited Partnership

(a)

Evaluation of Disclosure Controls and Procedures:

Effective as of September 30, 2022, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the Operating Partnership’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)

Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Operating Partnership identified in connection with the Operating Partnership’s evaluation referred to above that occurred during the third quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As of September 30, 2022, 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, 2021.

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

During the quarter ended September 30, 2022, EQR issued 6,572 Common Shares in exchange for 6,572 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.

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
10.1	Amendment to the Equity Residential Supplemental Executive Retirement Plan, effective as of October 1, 2022.	Attached herein.

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

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

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

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

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

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

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

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

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

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

SIGNATURES

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


		EQUITY RESIDENTIAL

Date:	October 28, 2022	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	October 28, 2022	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)


		ERP OPERATING LIMITED PARTNERSHIP BY: EQUITY RESIDENTIAL ITS GENERAL PARTNER

Date:	October 28, 2022	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	October 28, 2022	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)