EQUITY RESIDENTIAL - Quarter Report: 2023 March (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q

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 March 31, 2023

☐

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 April 21, 2023 was 378,904,669.

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended March 31, 2023 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 March 31, 2023 owned an approximate 96.8% ownership interest in, ERPOP. The remaining 3.2% 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 March 31, 2023 and December 31, 2022	2

Consolidated Statements of Operations and Comprehensive Income for the quarters ended March 31, 2023 and 2022	3

Consolidated Statements of Cash Flows for the quarters ended March 31, 2023 and 2022	5

Consolidated Statements of Changes in Equity for the quarters ended March 31, 2023 and 2022	8

Financial Statements of ERP Operating Limited Partnership:

Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	10

Consolidated Statements of Operations and Comprehensive Income for the quarters ended March 31, 2023 and 2022	11

Consolidated Statements of Cash Flows for the quarters ended March 31, 2023 and 2022	13

Consolidated Statements of Changes in Capital for the quarters ended March 31, 2023 and 2022	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	34

Item 3. Quantitative and Qualitative Disclosures about Market Risk	43

Item 4. Controls and Procedures	43

PART II.

Item 1. Legal Proceedings	44

Item 1A. Risk Factors	44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3. Defaults Upon Senior Securities	44

Item 4. Mine Safety Disclosures	44

Item 5. Other Information	44

Item 6. Exhibits	44

EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)


	March 31,			December 31,
	2023			2022
ASSETS
Land	$	5,559,883		$	5,580,878
Depreciable property		22,343,556			22,334,369
Projects under development		132,341			112,940
Land held for development		60,665			60,567
Investment in real estate		28,096,445			28,088,754
Accumulated depreciation		(9,207,194	)		(9,027,850	)
Investment in real estate, net		18,889,251			19,060,904
Investments in unconsolidated entities		292,279			279,024
Cash and cash equivalents		133,460			53,869
Restricted deposits		85,625			83,303
Right-of-use assets		466,911			462,956
Other assets		235,000			278,206
Total assets	$	20,102,526		$	20,218,262

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	1,968,243		$	1,953,438
Notes, net		5,343,851			5,342,329
Line of credit and commercial paper		—			129,955
Accounts payable and accrued expenses		144,660			96,028
Accrued interest payable		49,776			66,310
Lease liabilities		314,854			308,748
Other liabilities		283,418			306,941
Security deposits		68,728			68,940
Distributions payable		258,992			244,621
Total liabilities		8,432,522			8,517,310

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		323,551			318,273
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 March 31, 2023 and December 31, 2022		37,280			37,280
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 378,898,221 shares issued and outstanding as of March 31, 2023 and 378,429,708 shares issued and outstanding as of December 31, 2022		3,789			3,784
Paid in capital		9,488,320			9,476,085
Retained earnings		1,619,131			1,658,837
Accumulated other comprehensive income (loss)		(11,232	)		(2,547	)
Total shareholders’ equity		11,137,288			11,173,439
Noncontrolling Interests:
Operating Partnership		211,718			209,961
Partially Owned Properties		(2,553	)		(721	)
Total Noncontrolling Interests		209,165			209,240
Total equity		11,346,453			11,382,679
Total liabilities and equity	$	20,102,526		$	20,218,262

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per share data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
REVENUES
Rental income	$	705,088		$	653,348

EXPENSES
Property and maintenance		137,579			124,874
Real estate taxes and insurance		106,669			100,688
Property management		31,466			30,747
General and administrative		16,165			17,238
Depreciation		215,830			229,961
Total expenses		507,709			503,508

Net gain (loss) on sales of real estate properties		100,209			(102	)

Operating income		297,588			149,738

Interest and other income		1,538			3,528
Other expenses		(8,995	)		(3,056	)
Interest:
Expense incurred, net		(66,401	)		(72,792	)
Amortization of deferred financing costs		(1,979	)		(2,077	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		221,751			75,341
Income and other tax (expense) benefit		(298	)		(282	)
Income (loss) from investments in unconsolidated entities		(1,382	)		(1,261	)
Net income		220,071			73,798
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(7,059	)		(2,394	)
Partially Owned Properties		(977	)		(639	)
Net income attributable to controlling interests		212,035			70,765
Preferred distributions		(772	)		(772	)
Net income available to Common Shares	$	211,263		$	69,993

Earnings per share – basic:
Net income available to Common Shares	$	0.56		$	0.19
Weighted average Common Shares outstanding		378,341			375,509

Earnings per share – diluted:
Net income available to Common Shares	$	0.56		$	0.19
Weighted average Common Shares outstanding		390,664			389,628

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per share data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
Comprehensive income:
Net income	$	220,071		$	73,798
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		(9,780	)		—
Losses reclassified into earnings from other comprehensive income		1,095			2,425
Other comprehensive income (loss)		(8,685	)		2,425
Comprehensive income		211,386			76,223
Comprehensive (income) attributable to Noncontrolling Interests		(7,755	)		(3,113	)
Comprehensive income attributable to controlling interests	$	203,631		$	73,110

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	220,071		$	73,798
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		215,830			229,961
Amortization of deferred financing costs		1,979			2,077
Amortization of discounts and premiums on debt		868			1,358
Amortization of deferred settlements on derivative instruments		1,092			2,422
Amortization of right-of-use assets		3,150			3,046
Write-off of pursuit costs		1,332			1,463
(Income) loss from investments in unconsolidated entities		1,382			1,261
Distributions from unconsolidated entities – return on capital		151			79
Net (gain) loss on sales of real estate properties		(100,209	)		102
Realized (gain) loss on sale of investment securities		87			(2,066	)
Compensation paid with Company Common Shares		9,044			9,203
Changes in assets and liabilities:
(Increase) decrease in other assets		26,257			30,174
Increase (decrease) in accounts payable and accrued expenses		45,357			54,553
Increase (decrease) in accrued interest payable		(16,534	)		(12,634	)
Increase (decrease) in lease liabilities		(334	)		(902	)
Increase (decrease) in other liabilities		(16,032	)		(27,213	)
Increase (decrease) in security deposits		(212	)		1,374
Net cash provided by operating activities		393,279			368,056
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		—			(113,046	)
Investment in real estate – development/other		(16,786	)		(24,255	)
Capital expenditures to real estate		(55,392	)		(35,285	)
Non-real estate capital additions		(600	)		(971	)
Interest capitalized for real estate and unconsolidated entities under development		(3,393	)		(1,017	)
Proceeds from disposition of real estate, net		133,916			—
Investments in unconsolidated entities – development/other		(14,480	)		(24,897	)
Distributions from unconsolidated entities – return of capital		6			9
Purchase of investment securities and other investments		—			(1,009	)
Proceeds from sale of investment securities		452			3,434
Net cash provided by (used for) investing activities		43,723			(197,037	)

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage notes payable, net:
Proceeds	$	14,090		$	2,689
Scheduled principal repayments		(40	)		(1,933	)
Line of credit and commercial paper:
Commercial paper proceeds		1,323,145			1,424,086
Commercial paper repayments		(1,453,100	)		(1,609,121	)
Finance ground lease principal payments		(665	)		(140	)
Proceeds from Employee Share Purchase Plan (ESPP)		1,452			969
Proceeds from exercise of options		8,112			14,344
Payment of offering costs		—			(114	)
Contributions – Noncontrolling Interests – Partially Owned Properties		—			446
Contributions – Noncontrolling Interests – Operating Partnership		—			1
Distributions:
Common Shares		(236,561	)		(226,639	)
Preferred Shares		(1,544	)		(772	)
Noncontrolling Interests – Operating Partnership		(7,380	)		(7,535	)
Noncontrolling Interests – Partially Owned Properties		(2,598	)		(15,836	)
Net cash provided by (used for) financing activities		(355,089	)		(419,555	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		81,913			(248,536	)
Cash and cash equivalents and restricted deposits, beginning of period		137,172			360,236
Cash and cash equivalents and restricted deposits, end of period	$	219,085		$	111,700

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	133,460		$	41,140
Restricted deposits		85,625			70,560
Total cash and cash equivalents and restricted deposits, end of period	$	219,085		$	111,700

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	79,693		$	81,391
Net cash paid (received) for income and other taxes	$	348		$	350
Amortization of deferred financing costs:
Investment in real estate, net	$	(127	)	$	(127	)
Other assets	$	697		$	585
Mortgage notes payable, net	$	449		$	557
Notes, net	$	960		$	1,062
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	306		$	685
Notes, net	$	562		$	673
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(3	)	$	(3	)
Accumulated other comprehensive income	$	1,095		$	2,425
Write-off of pursuit costs:
Investment in real estate, net	$	225		$	375
Investments in unconsolidated entities	$	649		$	1,070
Other assets	$	458		$	18
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	1,071		$	946
Other liabilities	$	311		$	315
Realized/unrealized (gain) loss on derivative instruments:
Other assets	$	7,410		$	—
Other liabilities	$	2,370		$	—
Accumulated other comprehensive income	$	(9,780	)	$	—
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(1,422	)	$	(307	)
Investments in unconsolidated entities	$	(1,971	)	$	(710	)
Investments in unconsolidated entities – development/other:
Investments in unconsolidated entities	$	(13,700	)	$	(24,897	)
Other liabilities	$	(780	)	$	—
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	(7,105	)	$	—
Lease liabilities	$	7,105		$	—
Non-cash share distribution and other transfers from unconsolidated entities:
Investments in unconsolidated entities	$	539		$	859
Other assets	$	(539	)	$	(859	)

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands except per share data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
SHAREHOLDERS’ EQUITY
PREFERRED SHARES
Balance, beginning of period	$	37,280		$	37,280
Balance, end of period	$	37,280		$	37,280
COMMON SHARES, $0.01 PAR VALUE
Balance, beginning of period	$	3,784		$	3,755
Conversion of OP Units into Common Shares		2			—
Exercise of share options		2			3
Share-based employee compensation expense:
Restricted shares		1			2
Balance, end of period	$	3,789		$	3,760
PAID IN CAPITAL
Balance, beginning of period	$	9,476,085		$	9,121,122
Common Share Issuance:
Conversion of OP Units into Common Shares		3,671			174
Exercise of share options		8,110			14,341
Employee Share Purchase Plan (ESPP)		1,452			969
Share-based employee compensation expense:
Restricted shares		3,653			3,609
Share options		1,497			876
ESPP discount		260			171
Offering costs		—			(114	)
Supplemental Executive Retirement Plan (SERP)		491			(163	)
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership		(5,946	)		939
Adjustment for Noncontrolling Interests ownership in Operating Partnership		(953	)		1,045
Balance, end of period	$	9,488,320		$	9,142,969
RETAINED EARNINGS
Balance, beginning of period	$	1,658,837		$	1,827,063
Net income attributable to controlling interests		212,035			70,765
Common Share distributions		(250,969	)		(235,351	)
Preferred Share distributions		(772	)		(772	)
Balance, end of period	$	1,619,131		$	1,661,705
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(2,547	)	$	(34,272	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		(9,780	)		—
Losses reclassified into earnings from other comprehensive income		1,095			2,425
Balance, end of period	$	(11,232	)	$	(31,847	)

DISTRIBUTIONS
Distributions declared per Common Share outstanding	$	0.6625		$	0.625

See accompanying notes

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Amounts in thousands except per share data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
NONCONTROLLING INTERESTS
OPERATING PARTNERSHIP
Balance, beginning of period	$	209,961		$	214,094
Issuance of restricted units to Noncontrolling Interests		—			1
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner		(3,673	)		(174	)
Equity compensation associated with Noncontrolling Interests		4,654			7,798
Net income attributable to Noncontrolling Interests		7,059			2,394
Distributions to Noncontrolling Interests		(7,904	)		(7,895	)
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership		668			2,278
Adjustment for Noncontrolling Interests ownership in Operating Partnership		953			(1,045	)
Balance, end of period	$	211,718		$	217,451
PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	(721	)	$	18,166
Net income attributable to Noncontrolling Interests		977			639
Contributions by Noncontrolling Interests		—			446
Distributions to Noncontrolling Interests		(2,809	)		(15,836	)
Balance, end of period	$	(2,553	)	$	3,415

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)


	March 31,			December 31,
	2023			2022
ASSETS
Land	$	5,559,883		$	5,580,878
Depreciable property		22,343,556			22,334,369
Projects under development		132,341			112,940
Land held for development		60,665			60,567
Investment in real estate		28,096,445			28,088,754
Accumulated depreciation		(9,207,194	)		(9,027,850	)
Investment in real estate, net		18,889,251			19,060,904
Investments in unconsolidated entities		292,279			279,024
Cash and cash equivalents		133,460			53,869
Restricted deposits		85,625			83,303
Right-of-use assets		466,911			462,956
Other assets		235,000			278,206
Total assets	$	20,102,526		$	20,218,262

LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net	$	1,968,243		$	1,953,438
Notes, net		5,343,851			5,342,329
Line of credit and commercial paper		—			129,955
Accounts payable and accrued expenses		144,660			96,028
Accrued interest payable		49,776			66,310
Lease liabilities		314,854			308,748
Other liabilities		283,418			306,941
Security deposits		68,728			68,940
Distributions payable		258,992			244,621
Total liabilities		8,432,522			8,517,310

Commitments and contingencies

Redeemable Limited Partners		323,551			318,273
Capital:
Partners’ Capital:
Preference Units		37,280			37,280
General Partner		11,111,240			11,138,706
Limited Partners		211,718			209,961
Accumulated other comprehensive income (loss)		(11,232	)		(2,547	)
Total partners’ capital		11,349,006			11,383,400
Noncontrolling Interests – Partially Owned Properties		(2,553	)		(721	)
Total capital		11,346,453			11,382,679
Total liabilities and capital	$	20,102,526		$	20,218,262

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per Unit data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
REVENUES
Rental income	$	705,088		$	653,348

EXPENSES
Property and maintenance		137,579			124,874
Real estate taxes and insurance		106,669			100,688
Property management		31,466			30,747
General and administrative		16,165			17,238
Depreciation		215,830			229,961
Total expenses		507,709			503,508

Net gain (loss) on sales of real estate properties		100,209			(102	)

Operating income		297,588			149,738

Interest and other income		1,538			3,528
Other expenses		(8,995	)		(3,056	)
Interest:
Expense incurred, net		(66,401	)		(72,792	)
Amortization of deferred financing costs		(1,979	)		(2,077	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		221,751			75,341
Income and other tax (expense) benefit		(298	)		(282	)
Income (loss) from investments in unconsolidated entities		(1,382	)		(1,261	)
Net income		220,071			73,798
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(977	)		(639	)
Net income attributable to controlling interests	$	219,094		$	73,159
ALLOCATION OF NET INCOME:
Preference Units	$	772		$	772

General Partner	$	211,263		$	69,993
Limited Partners		7,059			2,394
Net income available to Units	$	218,322		$	72,387

Earnings per Unit – basic:
Net income available to Units	$	0.56		$	0.19
Weighted average Units outstanding		389,851			387,397

Earnings per Unit – diluted:
Net income available to Units	$	0.56		$	0.19
Weighted average Units outstanding		390,664			389,628

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
Comprehensive income:
Net income	$	220,071		$	73,798
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		(9,780	)		—
Losses reclassified into earnings from other comprehensive income		1,095			2,425
Other comprehensive income (loss)		(8,685	)		2,425
Comprehensive income		211,386			76,223
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties		(977	)		(639	)
Comprehensive income attributable to controlling interests	$	210,409		$	75,584

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	220,071		$	73,798
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		215,830			229,961
Amortization of deferred financing costs		1,979			2,077
Amortization of discounts and premiums on debt		868			1,358
Amortization of deferred settlements on derivative instruments		1,092			2,422
Amortization of right-of-use assets		3,150			3,046
Write-off of pursuit costs		1,332			1,463
(Income) loss from investments in unconsolidated entities		1,382			1,261
Distributions from unconsolidated entities – return on capital		151			79
Net (gain) loss on sales of real estate properties		(100,209	)		102
Realized (gain) loss on sale of investment securities		87			(2,066	)
Compensation paid with Company Common Shares		9,044			9,203
Changes in assets and liabilities:
(Increase) decrease in other assets		26,257			30,174
Increase (decrease) in accounts payable and accrued expenses		45,357			54,553
Increase (decrease) in accrued interest payable		(16,534	)		(12,634	)
Increase (decrease) in lease liabilities		(334	)		(902	)
Increase (decrease) in other liabilities		(16,032	)		(27,213	)
Increase (decrease) in security deposits		(212	)		1,374
Net cash provided by operating activities		393,279			368,056
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		—			(113,046	)
Investment in real estate – development/other		(16,786	)		(24,255	)
Capital expenditures to real estate		(55,392	)		(35,285	)
Non-real estate capital additions		(600	)		(971	)
Interest capitalized for real estate and unconsolidated entities under development		(3,393	)		(1,017	)
Proceeds from disposition of real estate, net		133,916			—
Investments in unconsolidated entities – development/other		(14,480	)		(24,897	)
Distributions from unconsolidated entities – return of capital		6			9
Purchase of investment securities and other investments		—			(1,009	)
Proceeds from sale of investment securities		452			3,434
Net cash provided by (used for) investing activities		43,723			(197,037	)

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage notes payable, net:
Proceeds	$	14,090		$	2,689
Scheduled principal repayments		(40	)		(1,933	)
Line of credit and commercial paper:
Commercial paper proceeds		1,323,145			1,424,086
Commercial paper repayments		(1,453,100	)		(1,609,121	)
Finance ground lease principal payments		(665	)		(140	)
Proceeds from EQR’s Employee Share Purchase Plan (ESPP)		1,452			969
Proceeds from exercise of EQR options		8,112			14,344
Payment of offering costs		—			(114	)
Contributions – Noncontrolling Interests – Partially Owned Properties		—			446
Contributions – Limited Partners		—			1
Distributions:
OP Units – General Partner		(236,561	)		(226,639	)
Preference Units		(1,544	)		(772	)
OP Units – Limited Partners		(7,380	)		(7,535	)
Noncontrolling Interests – Partially Owned Properties		(2,598	)		(15,836	)
Net cash provided by (used for) financing activities		(355,089	)		(419,555	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		81,913			(248,536	)
Cash and cash equivalents and restricted deposits, beginning of period		137,172			360,236
Cash and cash equivalents and restricted deposits, end of period	$	219,085		$	111,700

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	133,460		$	41,140
Restricted deposits		85,625			70,560
Total cash and cash equivalents and restricted deposits, end of period	$	219,085		$	111,700

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	79,693		$	81,391
Net cash paid (received) for income and other taxes	$	348		$	350
Amortization of deferred financing costs:
Investment in real estate, net	$	(127	)	$	(127	)
Other assets	$	697		$	585
Mortgage notes payable, net	$	449		$	557
Notes, net	$	960		$	1,062
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	306		$	685
Notes, net	$	562		$	673
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(3	)	$	(3	)
Accumulated other comprehensive income	$	1,095		$	2,425
Write-off of pursuit costs:
Investment in real estate, net	$	225		$	375
Investments in unconsolidated entities	$	649		$	1,070
Other assets	$	458		$	18
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	1,071		$	946
Other liabilities	$	311		$	315
Realized/unrealized (gain) loss on derivative instruments:
Other assets	$	7,410		$	—
Other liabilities	$	2,370		$	—
Accumulated other comprehensive income	$	(9,780	)	$	—
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(1,422	)	$	(307	)
Investments in unconsolidated entities	$	(1,971	)	$	(710	)
Investments in unconsolidated entities – development/other:
Investments in unconsolidated entities	$	(13,700	)	$	(24,897	)
Other liabilities	$	(780	)	$	—
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	(7,105	)	$	—
Lease liabilities	$	7,105		$	—
Non-cash share distribution and other transfers from unconsolidated entities:
Investments in unconsolidated entities	$	539		$	859
Other assets	$	(539	)	$	(859	)

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Amounts in thousands except per Unit data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
PARTNERS’ CAPITAL
PREFERENCE UNITS
Balance, beginning of period	$	37,280		$	37,280
Balance, end of period	$	37,280		$	37,280
GENERAL PARTNER
Balance, beginning of period	$	11,138,706		$	10,951,940
OP Unit Issuance:
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		3,673			174
Exercise of EQR share options		8,112			14,344
EQR’s Employee Share Purchase Plan (ESPP)		1,452			969
Share-based employee compensation expense:
EQR restricted shares		3,654			3,611
EQR share options		1,497			876
EQR ESPP discount		260			171
Net income available to Units – General Partner		211,263			69,993
OP Units – General Partner distributions		(250,969	)		(235,351	)
Offering costs		—			(114	)
Supplemental Executive Retirement Plan (SERP)		491			(163	)
Change in market value of Redeemable Limited Partners		(5,946	)		939
Adjustment for Limited Partners ownership in Operating Partnership		(953	)		1,045
Balance, end of period	$	11,111,240		$	10,808,434
LIMITED PARTNERS
Balance, beginning of period	$	209,961		$	214,094
Issuance of restricted units to Limited Partners		—			1
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		(3,673	)		(174	)
Equity compensation associated with Units – Limited Partners		4,654			7,798
Net income available to Units – Limited Partners		7,059			2,394
Units – Limited Partners distributions		(7,904	)		(7,895	)
Change in carrying value of Redeemable Limited Partners		668			2,278
Adjustment for Limited Partners ownership in Operating Partnership		953			(1,045	)
Balance, end of period	$	211,718		$	217,451
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(2,547	)	$	(34,272	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		(9,780	)		—
Losses reclassified into earnings from other comprehensive income		1,095			2,425
Balance, end of period	$	(11,232	)	$	(31,847	)

DISTRIBUTIONS
Distributions declared per Unit outstanding	$	0.6625		$	0.625

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)


	Quarter Ended March 31,
	2023			2022
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	(721	)	$	18,166
Net income attributable to Noncontrolling Interests		977			639
Contributions by Noncontrolling Interests		—			446
Distributions to Noncontrolling Interests		(2,809	)		(15,836	)
Balance, end of period	$	(2,553	)	$	3,415

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 March 31, 2023 owned an approximate 96.8% 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 March 31, 2023, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 301 properties located in 10 states and the District of Columbia consisting of 79,351 apartment units. The ownership breakdown includes (table does not include any uncompleted development properties):


	Properties		Apartment Units
Wholly Owned Properties		286		76,237
Partially Owned Properties – Consolidated		15		3,114
		301		79,351

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 quarter ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

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, 2022 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, 2022.

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 could be made through 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 quarters ended March 31, 2023 and 2022:


	2023			2022
Common Shares
Common Shares outstanding at January 1,		378,429,708			375,527,195
Common Shares Issued:
Conversion of OP Units		144,567			6,756
Exercise of share options		173,249			269,665
Employee Share Purchase Plan (ESPP)		27,393			13,374
Restricted share grants, net		123,304			157,080
Common Shares outstanding at March 31,		378,898,221			375,974,070
Units
Units outstanding at January 1,		12,429,737			12,659,027
Restricted unit grants, net		229,913			220,333
Conversion of OP Units to Common Shares		(144,567	)		(6,756	)
Units outstanding at March 31,		12,515,083			12,872,604
Total Common Shares and Units outstanding at March 31,		391,413,304			388,846,674
Units Ownership Interest in Operating Partnership		3.2	%		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 quarters ended March 31, 2023 and 2022:


	2023			2022
General and Limited Partner Units
General and Limited Partner Units outstanding at January 1,		390,859,445			388,186,222
Issued to General Partner:
Exercise of EQR share options		173,249			269,665
EQR’s Employee Share Purchase Plan (ESPP)		27,393			13,374
EQR’s restricted share grants, net		123,304			157,080
Issued to Limited Partners:
Restricted unit grants, net		229,913			220,333
General and Limited Partner Units outstanding at March 31,		391,413,304			388,846,674
Limited Partner Units
Limited Partner Units outstanding at January 1,		12,429,737			12,659,027
Limited Partner restricted unit grants, net		229,913			220,333
Conversion of Limited Partner OP Units to EQR Common Shares		(144,567	)		(6,756	)
Limited Partner Units outstanding at March 31,		12,515,083			12,872,604
Limited Partner Units Ownership Interest in Operating Partnership		3.2	%		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 March 31, 2023 and December 31, 2022.

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 March 31, 2023 and 2022, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $323.6 million and $495.8 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 quarters ended March 31, 2023 and 2022, respectively (amounts in thousands):


	2023			2022
Balance at January 1,	$	318,273		$	498,977
Change in market value		5,946			(939	)
Change in carrying value		(668	)		(2,278	)
Balance at March 31,	$	323,551		$	495,760

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 March 31, 2023 and December 31, 2022:


				Amounts in thousands
		Annual
	Call	Dividend Per		March 31,		December 31,
	Date (1)	Share/Unit (2)		2023		2022
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 March 31, 2023 and December 31, 2022	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. The current program matures in May 2025 and gives us the authority to issue up to 13.0 million shares, all of which remain available for issuance as of March 31, 2023.

The Company may repurchase up to 13.0 million Common Shares under its share repurchase program. No open market repurchases have occurred since 2008. As of March 31, 2023, 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 March 31, 2023 and December 31, 2022 (amounts in thousands):


	March 31, 2023			December 31, 2022
Land	$	5,559,883		$	5,580,878
Depreciable property:
Buildings and improvements		19,444,618			19,471,503
Furniture, fixtures and equipment		2,388,137			2,352,050
In-Place lease intangibles		510,801			510,816
Projects under development:
Land		3,201			3,201
Construction-in-progress		129,140			109,739
Land held for development:
Land		46,160			46,160
Construction-in-progress		14,505			14,407
Investment in real estate		28,096,445			28,088,754
Accumulated depreciation		(9,207,194	)		(9,027,850	)
Investment in real estate, net	$	18,889,251		$	19,060,904

During the quarter ended March 31, 2023, the Company disposed of the following to unaffiliated parties (sales price and net gain in thousands):


	Properties	Apartment Units	Sales Price	Net Gain
Rental Properties – Consolidated	7	247	$135,300	$100,209
Total	7	247	$135,300	$100,209

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 March 31, 2023
Land Parcels (one)		—		—	$	16,000	$	15,000
Total		—		—	$	16,000	$	15,000

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 March 31, 2023.

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 March 31, 2023:

Operating Properties

Project Under Development (1)

Properties

Apartment Units

Project

Apartment Units

Consolidated Joint Ventures (VIE)

3,114

312

(1)

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 March 31, 2023 and December 31, 2022 (amounts in thousands):


	March 31, 2023		December 31, 2022
Consolidated Assets	$	685,218	$	691,880
Consolidated Liabilities	$	169,122	$	158,932

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 March 31, 2023 (aggregate and amounts borrowed under loan commitments in thousands):


	Recently Completed Operating Property		Project Under Development
Number of joint ventures with debt financing		1		1
Aggregate loan commitments	$	67,589	$	73,344
Amounts borrowed under loan commitments (1)	$	64,735	$	59,070
Maturity dates	2023		2025

(1)

See Note 9 for the 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 March 31, 2023 and December 31, 2022 (amounts in thousands except for ownership percentage):


	March 31, 2023			December 31, 2022			Ownership Percentage
Investments in Unconsolidated Entities:
Various Real Estate Holdings (VIE)	$	36,195		$	35,974		Varies
Projects Under Development and Land Held for Development (VIE)		231,735			218,043		62% - 95% (1)
Real Estate Technology Funds/Companies (VIE)		24,594			25,249		Varies
Other		(245	)		(242	)	Varies
Investments in Unconsolidated Entities	$	292,279		$	279,024

(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 March 31, 2023:

Real Estate Holdings (1)

Projects Under Development (2), (5)

Projects Held for Development (2), (3)

Entities

Projects

Apartment Units (4)

Projects

Apartment Units (4)

Unconsolidated Joint Ventures (VIE)

1,982

966

(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.

(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.

Restricted Deposits

The following table presents the Company’s restricted deposits as of March 31, 2023 and December 31, 2022 (amounts in thousands):


	March 31, 2023		December 31, 2022
Mortgage escrow deposits:
Replacement reserves	$	12,960	$	12,549
Mortgage principal reserves/sinking funds		27,017		25,304
Mortgage escrow deposits		39,977		37,853
Restricted cash:
Earnest money on pending acquisitions		4,500		4,500
Restricted deposits on real estate investments		226		229
Resident security and utility deposits		38,640		38,432
Other		2,282		2,289
Restricted cash		45,648		45,450
Restricted deposits	$	85,625	$	83,303

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 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 March 31, 2023 and 2022 (amounts in thousands):


	Quarter Ended March 31, 2023								Quarter Ended March 31, 2022
Income Type	Residential Leases			Non-Residential Leases		Total			Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	634,752		$	15,986	$	650,738		$	587,780		$	15,874		$	603,654
Utility recoveries (RUBS income) (1)		21,383			207		21,590			19,598			181			19,779
Parking rent		10,882			109		10,991			10,783			98			10,881
Other lease revenue (2)		(7,589	)		669		(6,920	)		(6,301	)		(43	)		(6,344	)
Total lease revenue	$	659,428		$	16,971		676,399		$	611,860		$	16,110			627,970
Parking revenue							10,203									8,808
Other revenue							18,486									16,570
Total other rental income (3)							28,689									25,378
Rental income						$	705,088								$	653,348

(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 March 31, 2023 and December 31, 2022 (amounts in thousands):


	Residential						Non-Residential
Balance Sheet (Other assets):	March 31, 2023			December 31, 2022			March 31, 2023			December 31, 2022
Resident/tenant accounts receivable balances	$	32,781		$	35,688		$	2,451		$	2,820
Allowance for doubtful accounts		(28,861	)		(31,405	)		(1,500	)		(2,152	)
Net receivable balances	$	3,920		$	4,283		$	951		$	668

Straight-line receivable balances	$	5,815		$	4,398		$	13,680		$	13,795

The following table presents residential bad debt for the Company’s properties for the quarters ended March 31, 2023 and 2022 (amounts in thousands):


	Quarter Ended March 31,
Income Statement (Rental income):	2023			2022
Bad debt, net (1)	$	10,755		$	9,895
% of rental income		1.6	%		1.6	%

(1)

Bad debt, net benefited from additional resident payments due to governmental rental assistance programs of approximately $1.0 million and $10.0 million for the quarters ended March 31, 2023 and 2022, respectively.

Debt

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. Weighted average interest rates noted below for the quarter ended March 31, 2023 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 quarter ended March 31, 2023 (amounts in thousands):


	Mortgage notes payable, net as of December 31, 2022		Proceeds			Lump sum payoffs		Scheduled principal repayments			Amortization of premiums/ discounts		Amortization of deferred financing costs, net (1)		Mortgage notes payable, net as of March 31, 2023
Fixed Rate Debt:
Secured – Conventional	$	1,608,838	$	—		$	—	$	—		$	—	$	230	$	1,609,068
Floating Rate Debt:
Secured – Conventional		108,378		14,090	(2)		—		(40	)		—		184		122,612
Secured – Tax Exempt		236,222		—			—		—			306		35		236,563
Floating Rate Debt		344,600		14,090			—		(40	)		306		219		359,175
Total	$	1,953,438	$	14,090		$	—	$	(40	)	$	306	$	449	$	1,968,243

(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 quarter ended March 31, 2023:


		March 31, 2023
Interest Rate Ranges		0.10% - 7.58%
Weighted Average Interest Rate		3.82%
Maturity Date Ranges		2023-2061

As of March 31, 2023, 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 quarter ended March 31, 2023 (amounts in thousands):


	Notes, net as of December 31, 2022		Proceeds		Lump sum payoffs		Amortization of premiums/ discounts		Amortization of deferred financing costs, net (1)		Notes, net as of March 31, 2023
Fixed Rate Debt:
Unsecured – Public	$	5,342,329	$	—	$	—	$	562	$	960	$	5,343,851

(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 quarter ended March 31, 2023:


		March 31, 2023
Interest Rate Ranges		1.85% - 7.57%
Weighted Average Interest Rate		3.56%
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 quarter ended March 31, 2023.

Line of Credit and Commercial Paper

The Company has a $2.5 billion unsecured revolving credit facility maturing on October 26, 2027. 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 Secured Overnight Financing Rate ("SOFR") plus a spread (currently 0.725%), 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 quarter ended March 31, 2023.

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 following table summarizes certain weighted average interest rate and amount outstanding information for the commercial paper program as of and for the quarter ended March 31, 2023:


		March 31, 2023
Weighted Average Interest Rate (1)		4.70%
Weighted Average Amount Outstanding		$109.0 million

(1)

The notes bear interest at various floating rates.

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 March 31, 2023 (amounts in thousands):


	March 31, 2023
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		—
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(3,484	)
Unsecured revolving credit facility availability	$	2,496,516

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 March 31, 2023 and December 31, 2022, respectively (amounts in thousands):


	March 31, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value (Level 2)		Carrying Value		Estimated Fair Value (Level 2)
Mortgage notes payable, net	$	1,968,243	$	1,845,907	$	1,953,438	$	1,803,525
Unsecured debt, net		5,343,851		4,855,336		5,472,284		4,874,490
Total debt, net	$	7,312,094	$	6,701,243	$	7,425,722	$	6,678,015

The following table summarizes the Company’s consolidated derivative instruments at March 31, 2023 (dollar amounts are in thousands):


	Forward Starting Swaps (1)
Current Notional Balance	$	450,000
Lowest Interest Rate		2.4470	%
Highest Interest Rate		3.6995	%
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 March 31, 2023 and December 31, 2022, respectively (amounts in thousands):


				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	3/31/2023		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	$	14,455	$	—	$	14,455	$	—
Supplemental Executive Retirement Plan	Other Assets		124,872		124,872		—		—
Total		$	139,327	$	124,872	$	14,455	$	—

Liabilities
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps	Other Liabilities	$	3,580	$	—	$	3,580	$	—
Supplemental Executive Retirement Plan	Other Liabilities		124,872		124,872		—		—
Total		$	128,452	$	124,872	$	3,580	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	323,551	$	—	$	323,551	$	—


				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	12/31/2022		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	$	21,864	$	—	$	21,864	$	—
Supplemental Executive Retirement Plan	Other Assets		133,245		133,245		—		—
Total		$	155,109	$	133,245	$	21,864	$	—

Liabilities
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps	Other Liabilities	$	1,210	$	—	$	1,210	$	—
Supplemental Executive Retirement Plan	Other Liabilities		133,245		133,245		—		—
Total		$	134,455	$	133,245	$	1,210	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	318,273	$	—	$	318,273	$	—

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 quarters ended March 31, 2023 and 2022, respectively (amounts in thousands):


March 31, 2023 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	$	(9,780	)	Interest expense	$	(1,095	)
Total	$	(9,780	)		$	(1,095	)


March 31, 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	$	—	Interest expense	$	(2,425	)
Total	$	—		$	(2,425	)

As of March 31, 2023 and December 31, 2022, there were approximately $11.2 million and $2.5 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 $3.9 million may be recognized as additional interest expense during the twelve months ending March 31, 2024.

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):


	Quarter Ended March 31,
	2023			2022
Numerator for net income per share – basic:
Net income	$	220,071		$	73,798
Allocation to Noncontrolling Interests – Operating Partnership		(7,059	)		(2,394	)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(977	)		(639	)
Preferred distributions		(772	)		(772	)
Numerator for net income per share – basic	$	211,263		$	69,993
Numerator for net income per share – diluted:
Net income	$	220,071		$	73,798
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(977	)		(639	)
Preferred distributions		(772	)		(772	)
Numerator for net income per share – diluted	$	218,322		$	72,387
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic		378,341			375,509
Effect of dilutive securities:
OP Units		11,510			11,888
Long-term compensation shares/units		813			2,090
ATM forward sales		—			141
Denominator for net income per share – diluted		390,664			389,628
Net income per share – basic	$	0.56		$	0.19
Net income per share – diluted	$	0.56		$	0.19

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):


	Quarter Ended March 31,
	2023			2022
Numerator for net income per Unit – basic and diluted:
Net income	$	220,071		$	73,798
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(977	)		(639	)
Allocation to Preference Units		(772	)		(772	)
Numerator for net income per Unit – basic and diluted	$	218,322		$	72,387
Denominator for net income per Unit – basic and diluted:
Denominator for net income per Unit – basic		389,851			387,397
Effect of dilutive securities:
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units		813			2,090
ATM forward sales		—			141
Denominator for net income per Unit – diluted		390,664			389,628
Net income per Unit – basic	$	0.56		$	0.19
Net income per Unit – diluted	$	0.56		$	0.19

12.

Commitments and Contingencies

Commitments

Real Estate Development Commitments

As of March 31, 2023, 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 March 31, 2023 (total project costs remaining in thousands):


	Projects		Apartment Units		Total Project Costs Remaining (1)
Projects Under Development
Consolidated		2		537	$	128,307
Unconsolidated		6		1,982		305,454
Total Projects Under Development		8		2,519	$	433,761

(1)

The Company’s share of the $433.8 million in total project costs remaining approximates $128.9 million, with the balance funded by the Company’s joint venture partners (approximately $6.4 million) and/or applicable construction loans (approximately $298.5 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 March 31, 2023, the Company has invested in nine separate such investments with aggregate remaining commitments of approximately $18.7 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 3.8% of total revenues for the quarter ended March 31, 2023 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 quarters ended March 31, 2023 and 2022, 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 quarters ended March 31, 2023 and 2022, respectively (amounts in thousands):


	Quarter Ended March 31,
	2023			2022
Rental income	$	705,088		$	653,348
Property and maintenance expense		(137,579	)		(124,874	)
Real estate taxes and insurance expense		(106,669	)		(100,688	)
Total operating expenses		(244,248	)		(225,562	)
Net operating income	$	460,840		$	427,786

The following tables present NOI from our rental real estate for each segment for the quarters ended March 31, 2023 and 2022, respectively, as well as total assets and capital expenditures at March 31, 2023 (amounts in thousands):


	Quarter Ended March 31, 2023							Quarter Ended March 31, 2022
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	115,681	$	37,801	$	77,880		$	108,969	$	34,184	$	74,785
Orange County		31,588		7,187		24,401			28,767		6,531		22,236
San Diego		22,441		5,189		17,252			20,940		4,952		15,988
Subtotal - Southern California		169,710		50,177		119,533			158,676		45,667		113,009

San Francisco		107,479		34,005		73,474			100,616		31,673		68,943
Washington, D.C.		107,623		36,268		71,355			100,705		34,211		66,494
New York		118,045		49,771		68,274			99,830		47,875		51,955
Seattle		74,561		20,479		54,082			68,537		19,927		48,610
Boston		70,658		22,636		48,022			64,663		21,059		43,604
Denver		17,597		5,491		12,106			16,232		4,633		11,599
Other Expansion Markets		16,002		7,963		8,039			15,107		6,490		8,617
Total same store		681,675		226,790		454,885			624,366		211,535		412,831

Non-same store/other
Non-same store (2)		20,970		7,409		13,561			15,050		7,752		7,298
Other (3)		2,443		10,049		(7,606	)		13,932		6,275		7,657
Total non-same store/other		23,413		17,458		5,955			28,982		14,027		14,955

Totals	$	705,088	$	244,248	$	460,840		$	653,348	$	225,562	$	427,786

(1)

For the quarters ended March 31, 2023 and 2022, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2022, less properties subsequently sold, which represented 76,952 apartment units.

(2)

For the quarters ended March 31, 2023 and 2022, non-same store primarily includes properties acquired after January 1, 2022, plus any properties in lease-up and not stabilized as of January 1, 2022, and any properties undergoing major renovations.

(3)

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


	Quarter Ended March 31, 2023
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	2,536,079	$	8,189
Orange County		352,643		1,678
San Diego		229,293		4,055
Subtotal - Southern California		3,118,015		13,922

San Francisco		3,046,849		7,954
Washington, D.C.		3,064,106		8,674
New York		3,377,729		5,450
Seattle		2,157,123		5,311
Boston		1,792,839		5,145
Denver		848,783		561
Other Expansion Markets		803,845		1,120
Total same store		18,209,289		48,137

Non-same store/other
Non-same store (2)		1,007,584		7,196
Other (3)		885,653		59
Total non-same store/other		1,893,237		7,255

Totals	$	20,102,526	$	55,392

(1)

Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2022, less properties subsequently sold, which represented 76,952 apartment units.

(2)

Non-same store primarily includes properties acquired after January 1, 2022, plus any properties in lease-up and not stabilized as of January 1, 2022, and any properties undergoing major renovations.

(3)

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

14.

Subsequent Events

Subsequent to March 31, 2023, the Company:

•

Acquired the following from unaffiliated parties (purchase price in thousands):


	Properties		Apartment Units		Purchase Price
Rental Properties – Consolidated		2		549	$	186,600
Total		2		549	$	186,600

•

Acquired a third-party joint venture partner's 10.0% interest in a consolidated operating property for approximately $4.6 million, of which the Company paid $3.7 million in cash and issued $0.9 million of 3.00% Series Q Cumulative Redeemable Preference Units of the Operating Partnership. The Company also repaid $64.7 million of mortgage debt at par prior to maturity in conjunction with the buyout.

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 Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

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. 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, 2022, 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, 2022.

Results of Operations

2023 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 quarter ended March 31, 2023:

Portfolio Rollforward

($ in thousands)


	Properties			Apartment Units			Sales Price			Disposition Yield
12/31/2022		308			79,597
Dispositions:
Consolidated Rental Properties		(7	)		(247	)	$	(135,300	)		(5.3	%)
Configuration Changes		—			1
3/31/2023		301			79,351

Dispositions

•

The consolidated properties disposed of during the quarter ended March 31, 2023 were located in the Los Angeles market and the sales generated an Unlevered IRR of 8.7%.

Developments

•

The Company stabilized one consolidated apartment property during the quarter ended March 31, 2023, located in the San Francisco market, consisting of 200 apartment units totaling approximately $116.4 million of development costs; and

•

The Company spent approximately $29.3 million during the quarter ended March 31, 2023, primarily for consolidated and unconsolidated development projects.

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

Comparison of the quarter ended March 31, 2023 to the quarter ended March 31, 2022

The following table presents a reconciliation of diluted earnings per share/unit for the quarter ended March 31, 2023 as compared to the same period in 2022:


	Quarter Ended March 31
Diluted earnings per share/unit for period ended 2022	$	0.19
Property NOI		0.11
Interest expense		0.01
Net gain/loss on property sales		0.26
Depreciation expense		0.03
Other		(0.04	)
Diluted earnings per share/unit for period ended 2023	$	0.56

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/other results (amounts in thousands):


	Quarter Ended March 31,
	2023			2022		$ Change			% Change
Operating income	$	297,588		$	149,738	$	147,850			98.7	%
Adjustments:
Property management		31,466			30,747		719			2.3	%
General and administrative		16,165			17,238		(1,073	)		(6.2	)%
Depreciation		215,830			229,961		(14,131	)		(6.1	)%
Net (gain) loss on sales of real estate properties		(100,209	)		102		(100,311	)	N/A
Total NOI	$	460,840		$	427,786	$	33,054			7.7	%
Rental income:
Same store	$	681,675		$	624,366	$	57,309			9.2	%
Non-same store/other		23,413			28,982		(5,569	)		(19.2	)%
Total rental income		705,088			653,348		51,740			7.9	%
Operating expenses:
Same store		226,790			211,535		15,255			7.2	%
Non-same store/other		17,458			14,027		3,431			24.5	%
Total operating expenses		244,248			225,562		18,686			8.3	%
NOI:
Same store		454,885			412,831		42,054			10.2	%
Non-same store/other		5,955			14,955		(9,000	)		(60.2	)%
Total NOI	$	460,840		$	427,786	$	33,054			7.7	%

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 year 2022, operations from the Company’s development properties and operations prior to disposition from 2022 and 2023 sold properties.

•

The increase in same store rental income is primarily driven by healthy demand and lower than anticipated bad debt, net.

•

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

•

Utilities – A $4.3 million increase primarily from gas and electric driven by higher commodity prices;

•

Repairs and maintenance – A $4.4 million increase primarily driven by greater outsourcing due in part to higher internal staffing utilization to address issues from the recent California rain storms along with increases in minimum wage on contracted services; and

•

Real estate taxes – A $2.3 million increase due to modest escalation in rates and assessed values.

•

The decrease in non-same store/other NOI is due primarily to a negative impact of lost NOI from 2022 and 2023 dispositions of $5.6 million, a negative impact of $0.6 million in lower NOI from one former master-leased property and two properties that have been removed from same store while undergoing major renovations and a negative impact of $6.0 million from property damage associated with the California rain storms, partially offset by a positive impact of higher NOI from properties acquired during 2021 and 2022 of $1.0 million and higher NOI from development properties in lease-up of $4.9 million.

•

The increase in consolidated total NOI is 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 was higher than expected primarily due to repairs and maintenance expenses resulting from the severe California rain storms and increased property-related legal and administrative expenses, leading to 10.2% same store NOI growth for the quarter ended March 31, 2023 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 $0.7 million or 2.3% during the quarter ended March 31, 2023 as compared to the prior year period. This increase is primarily attributable to increases in payroll-related costs, travel costs, temporary help/contractors costs, employment expenses and legal and professional fees, partially offset by decreases in training/conference costs and third-party management fees.

General and administrative expenses, which include corporate operating expenses, decreased approximately $1.1 million or 6.2% during the quarter ended March 31, 2023 as compared to the prior year period, primarily due to decreases in payroll-related costs, legal and professional fees and training/conference costs.

Depreciation expense, which includes depreciation on non-real estate assets, decreased approximately $14.1 million or 6.1% during the quarter ended March 31, 2023 as compared to the prior year period. This decrease is primarily due to in-place leases for 2021 and 2022 acquisitions being fully depreciated as of December 31, 2022 and lower depreciation from properties sold in 2022 and 2023.

Net gain on sales of real estate properties increased approximately $100.3 million during the quarter ended March 31, 2023 as compared to the prior year period, primarily as a result of the sale of seven consolidated apartment properties in the first quarter of 2023 as compared to no consolidated property sales in the same period in 2022.

Interest and other income decreased approximately $2.0 million or 56.4% during the quarter ended March 31, 2023 as compared to the prior year period. The decrease is primarily due to a gain of $2.1 million on the sale of various investment securities that occurred during 2022 but not during 2023.

Other expenses increased approximately $5.9 million during the quarter ended March 31, 2023 as compared to the prior year period, primarily due to increases in litigation reserves and data transformation project costs that occurred during 2023 but not during 2022.

Interest expense, including amortization of deferred financing costs, decreased approximately $6.5 million or 8.7% during the quarter ended March 31, 2023 as compared to the prior year period. The decrease is primarily due to lower overall debt balances outstanding as compared to the prior year period and higher capitalized interest. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the quarter ended March 31, 2023 was 3.86% as compared to 3.65% for the prior year period. The Company capitalized interest of approximately $3.4 million and $1.0 million during the quarters ended March 31, 2023 and 2022, respectively.

Same Store Results

Properties that the Company owned and were stabilized for all of both of the quarters ended March 31, 2023 and 2022 (the “First Quarter 2023 Same Store Properties”), which represented 76,952 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 First Quarter 2023 Same Store Properties:

First Quarter 2023 vs. First Quarter 2022

Same Store Results/Statistics Including 76,952 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)


First Quarter 2023																	First Quarter 2022
	Residential			% Change			Non- Residential		% Change			Total		% Change				Residential			Non- Residential		Total
Revenues	$	656,513			9.2	%	$	25,162		9.2	%	$	681,675		9.2	%	Revenues	$	601,323		$	23,043	$	624,366
Expenses	$	220,069			7.2	%	$	6,721		8.8	%	$	226,790		7.2	%	Expenses	$	205,360		$	6,175	$	211,535
NOI	$	436,444			10.2	%	$	18,441		9.3	%	$	454,885		10.2	%	NOI	$	395,963		$	16,868	$	412,831

Average Rental Rate	$	2,968			9.8	%											Average Rental Rate	$	2,703
Physical Occupancy		95.9	%		(0.5	%)											Physical Occupancy		96.4	%
Turnover		9.0	%		0.1	%											Turnover		8.9	%

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 quarters ended March 31, 2023 and 2022:

First Quarter 2023 vs. First Quarter 2022

Same Store Residential Results/Statistics by Market


														Increase (Decrease) from Prior Year
Markets/Metro Areas	Apartment Units		Q1 2023 % of Actual NOI			Q1 2023 Average Rental Rate		Q1 2023 Weighted Average Physical Occupancy %			Q1 2023 Turnover				Average Rental Rate			Physical Occupancy			Turnover
Los Angeles		14,415		17.7	%	$	2,775		95.5	%		9.9	%			7.6	%		(1.4	%)		1.4	%
Orange County		4,028		5.6	%		2,717		96.2	%		7.3	%			10.9	%		(0.9	%)		1.0	%
San Diego		2,706		3.9	%		2,899		95.4	%		9.5	%			8.9	%		(1.5	%)		0.6	%
Subtotal – Southern California		21,149		27.2	%		2,780		95.6	%		9.3	%			8.4	%		(1.3	%)		1.2	%

San Francisco		11,368		16.6	%		3,243		95.6	%		9.5	%			7.5	%		(0.8	%)		0.1	%
Washington, D.C.		14,400		16.0	%		2,531		96.6	%		7.3	%			7.1	%		(0.3	%)		(1.0	%)
New York		8,536		14.2	%		4,430		96.8	%		7.5	%			19.7	%		(0.3	%)		(0.7	%)
Seattle		9,525		11.5	%		2,579		95.1	%		11.1	%			8.0	%		0.5	%		(0.3	%)
Boston		6,700		10.0	%		3,341		95.6	%		7.9	%			9.9	%		(0.2	%)		0.3	%
Denver		2,498		2.7	%		2,383		96.3	%		11.1	%			7.4	%		0.3	%		0.5	%
Other Expansion Markets		2,776		1.8	%		1,974		94.6	%		11.4	%			7.6	%		(2.0	%)		0.6	%

Total		76,952		100.0	%	$	2,968		95.9	%		9.0	%			9.8	%		(0.5	%)		0.1	%

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.2% of total revenues for the quarter ended March 31, 2023.

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. Key operating drivers for this performance during 2023 include:

•

Pricing – Pricing (net of Leasing Concessions) has been consistent with expectations, particularly driven by strength in New York. Washington, D.C. has also shown stronger resiliency despite high levels of new supply. Pricing remained positive during the first quarter of 2023, which is slightly better than historical seasonal norms and pre-pandemic levels.

•

Physical Occupancy – Physical Occupancy of 95.9% for the first quarter of 2023 remained strong despite increased move-out activity (see further discussion below), 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 57.7% for the first quarter of 2023. Turnover remains low at 9.0% for the first quarter of 2023, reflecting a healthy and consistent trend of historically high resident retention.

In addition to these stronger fundamentals, the Company had better than expected payment and move-out activity related to delinquent residents, especially in Los Angeles, during the first quarter of 2023. This improved activity reduced bad debt, net and offset the decline in governmental rental assistance payments received on behalf of our residents in the first quarter of 2023 as compared to the prior year period.

Overall, the fundamentals of our business remain strong. 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 the risks of 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 $2.5 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 take advantage of opportunities. See further discussion below.

Statements of Cash Flows

The following table sets forth our sources and uses of cash flows for the quarters ended March 31, 2023 and 2022 (amounts in thousands):


	Quarter Ended March 31,
	2023			2022
Cash flows provided by (used for):
Operating activities	$	393,279		$	368,056
Investing activities	$	43,723		$	(197,037	)
Financing activities	$	(355,089	)	$	(419,555	)

The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the quarter ended March 31, 2023.

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 quarter ended March 31, 2023 as compared to the prior year period, increased by approximately $25.2 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 and capital expenditures. For the quarter ended March 31, 2023, key drivers were:

•

Disposed of seven consolidated rental properties, receiving net proceeds of approximately $133.9 million;

•

Invested $16.8 million primarily in development projects;

•

Invested $55.4 million in capital expenditures to real estate; and

•

Invested $14.5 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/unitholders and other Common Share activity. For the quarter ended March 31, 2023, key drivers were:

•

Obtained $14.1 million in variable rate construction mortgage debt that is non-recourse to the Company;

•

Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $9.6 million; 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 $248.1 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 March 31, 2023 and December 31, 2022 (amounts in thousands):


	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	133,460	$	53,869
Restricted deposits	$	85,625	$	83,303
Unsecured revolving credit facility availability	$	2,496,516	$	2,366,537

Credit Facility and Commercial Paper Program

The Company has a $2.5 billion unsecured revolving credit facility maturing October 26, 2027. 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 Secured Overnight Financing Rate (“SOFR”) plus a spread (currently 0.725%), 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. See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of the Company’s credit facility.

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.


	April 21, 2023
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(225,000	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(3,484	)
Unsecured revolving credit facility availability	$	2,271,516

Dividend Policy

The Company declared a dividend/distribution for the first quarter of 2023 of $0.6625 per share/unit, an annualized increase of 6.0% over the amount paid in 2022. All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees.

Total dividends/distributions paid in April 2023 amounted to $258.8 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended March 31, 2023.

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 $28.1 billion in investment in real estate on the Company’s balance sheet at March 31, 2023, $24.5 billion or 87.1% 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. For additional details, see Item 1A, Risk Factors of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

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

The Company’s total debt summary schedule as of March 31, 2023 is as follows:

Debt Summary as of March 31, 2023

($ in thousands)


	Debt Balances		% of Total
Secured	$	1,968,243		26.9	%
Unsecured		5,343,851		73.1	%
Total	$	7,312,094		100.0	%
Fixed Rate Debt:
Secured – Conventional	$	1,609,068		22.0	%
Unsecured – Public		5,343,851		73.1	%
Fixed Rate Debt		6,952,919		95.1	%
Floating Rate Debt:
Secured – Conventional		122,612		1.7	%
Secured – Tax Exempt		236,563		3.2	%
Unsecured – Revolving Credit Facility		—		—
Unsecured – Commercial Paper Program		—		—
Floating Rate Debt		359,175		4.9	%
Total	$	7,312,094		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, 2022.

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, 2022.

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 quarters ended March 31, 2023 and 2022:

Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)


	Quarter Ended March 31,
	2023			2022
Net income	$	220,071		$	73,798
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(977	)		(639	)
Preferred/preference distributions		(772	)		(772	)
Net income available to Common Shares and Units / Units		218,322			72,387
Adjustments:
Depreciation		215,830			229,961
Depreciation – Non-real estate additions		(1,156	)		(1,052	)
Depreciation – Partially Owned Properties		(545	)		(893	)
Depreciation – Unconsolidated Properties		632			620
Net (gain) loss on sales of unconsolidated entities - operating assets		—			(9	)
Net (gain) loss on sales of real estate properties		(100,209	)		102
FFO available to Common Shares and Units / Units (1) (3) (4)		332,874			301,116
Adjustments:
Write-off of pursuit costs		1,332			1,463
Non-operating asset (gains) losses		714			(1,642	)
Other miscellaneous items		6,292			(371	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	341,212		$	300,566

FFO (1) (3)	$	333,646		$	301,888
Preferred/preference distributions		(772	)		(772	)
FFO available to Common Shares and Units / Units (1) (3) (4)	$	332,874		$	301,116

Normalized FFO (2) (3)	$	341,984		$	301,338
Preferred/preference distributions		(772	)		(772	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	341,212		$	300,566

(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 real estate 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, 2022.

Item 4. Controls and Procedures

Equity Residential

(a)

Evaluation of Disclosure Controls and Procedures:

Effective as of March 31, 2023, 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 first quarter of 2023 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 March 31, 2023, 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 first quarter of 2023 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 March 31, 2023, 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, 2022.

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

During the quarter ended March 31, 2023, EQR issued 144,567 Common Shares in exchange for 144,567 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
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:	April 28, 2023	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	April 28, 2023	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:	April 28, 2023	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	April 28, 2023	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)