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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended September 30, 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 October 26, 2023 was 379,724,934.

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EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended September 30, 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 September 30, 2023 owned an approximate 97.0% ownership interest in, ERPOP. The remaining 3.0% interest is owned by limited partners. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of EQR consists of the same members as the management of ERPOP.

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

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

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

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

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

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

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

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

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

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

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

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TABLE OF CONTENTS


	PAGE

PART I.

Item 1. Financial Statements of Equity Residential:

Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	2

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2023 and 2022	3

Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	5

Consolidated Statements of Changes in Equity for the nine months and quarters ended September 30, 2023 and 2022	8

Financial Statements of ERP Operating Limited Partnership:

Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	10

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2023 and 2022	11

Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	13

Consolidated Statements of Changes in Capital for the nine months and quarters ended September 30, 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	37

Item 3. Quantitative and Qualitative Disclosures about Market Risk	47

Item 4. Controls and Procedures	47

PART II.

Item 1. Legal Proceedings	48

Item 1A. Risk Factors	48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3. Defaults Upon Senior Securities	48

Item 4. Mine Safety Disclosures	48

Item 5. Other Information	48

Item 6. Exhibits	48

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EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)


	September 30,			December 31,
	2023			2022
ASSETS
Land	$	5,593,425		$	5,580,878
Depreciable property		22,911,464			22,334,369
Projects under development		61,411			112,940
Land held for development		62,533			60,567
Investment in real estate		28,628,833			28,088,754
Accumulated depreciation		(9,634,013	)		(9,027,850	)
Investment in real estate, net		18,994,820			19,060,904
Investments in unconsolidated entities		313,225			279,024
Cash and cash equivalents		39,250			53,869
Restricted deposits		87,477			83,303
Right-of-use assets		460,489			462,956
Other assets		213,714			278,206
Total assets	$	20,108,975		$	20,218,262

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	1,634,726		$	1,953,438
Notes, net		5,346,895			5,342,329
Line of credit and commercial paper		497,636			129,955
Accounts payable and accrued expenses		164,975			96,028
Accrued interest payable		47,519			66,310
Lease liabilities		312,781			308,748
Other liabilities		231,652			306,941
Security deposits		69,498			68,940
Distributions payable		259,624			244,621
Total liabilities		8,565,306			8,517,310

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		277,782			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 September 30, 2023 and December 31, 2022		37,280			37,280
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 379,723,838 shares issued and outstanding as of September 30, 2023 and 378,429,708 shares issued and outstanding as of December 31, 2022		3,797			3,784
Paid in capital		9,589,057			9,476,085
Retained earnings		1,426,632			1,658,837
Accumulated other comprehensive income (loss)		5,099			(2,547	)
Total shareholders’ equity		11,061,865			11,173,439
Noncontrolling Interests:
Operating Partnership		205,845			209,961
Partially Owned Properties		(1,823	)		(721	)
Total Noncontrolling Interests		204,022			209,240
Total equity		11,265,887			11,382,679
Total liabilities and equity	$	20,108,975		$	20,218,262

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
REVENUES
Rental income	$	2,146,464		$	2,035,477		$	724,067		$	695,099

EXPENSES
Property and maintenance		391,437			365,277			129,087			124,048
Real estate taxes and insurance		312,607			302,899			102,858			100,361
Property management		90,314			83,035			28,169			25,729
General and administrative		49,135			47,033			14,094			13,372
Depreciation		661,921			667,896			224,736			214,129
Total expenses		1,505,414			1,466,140			498,944			477,639

Net gain (loss) on sales of real estate properties		127,034			304,346			26,912			196,551

Operating income		768,084			873,683			252,035			414,011

Interest and other income		11,296			4,844			7,627			720
Other expenses		(20,517	)		(9,191	)		(4,958	)		(3,755	)
Interest:
Expense incurred, net		(200,882	)		(217,093	)		(68,891	)		(72,412	)
Amortization of deferred financing costs		(7,023	)		(6,421	)		(3,027	)		(2,220	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		550,958			645,822			182,786			336,344
Income and other tax (expense) benefit		(892	)		(725	)		(258	)		(152	)
Income (loss) from investments in unconsolidated entities		(3,847	)		(3,456	)		(1,242	)		(1,027	)
Net income		546,219			641,641			181,286			335,165
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(17,174	)		(21,024	)		(5,561	)		(10,997	)
Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Net income attributable to controlling interests		523,746			617,891			172,508			323,025
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Net income available to Common Shares	$	521,428		$	615,573		$	171,735		$	322,252

Earnings per share – basic:
Net income available to Common Shares	$	1.38		$	1.64		$	0.45		$	0.86
Weighted average Common Shares outstanding		378,614			375,710			378,853			375,850

Earnings per share – diluted:
Net income available to Common Shares	$	1.38		$	1.63		$	0.45		$	0.86
Weighted average Common Shares outstanding		391,135			389,394			391,351			389,300

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
Comprehensive income:
Net income	$	546,219		$	641,641		$	181,286		$	335,165
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		4,514			23,413			460			24,672
Losses reclassified into earnings from other comprehensive income		3,132			9,987			931			5,106
Other comprehensive income (loss)		7,646			33,400			1,391			29,778
Comprehensive income		553,865			675,041			182,677			364,943
Comprehensive (income) attributable to Noncontrolling Interests		(22,712	)		(24,853	)		(8,822	)		(13,123	)
Comprehensive income attributable to controlling interests	$	531,153		$	650,188		$	173,855		$	351,820

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	546,219		$	641,641
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		661,921			667,896
Amortization of deferred financing costs		7,023			6,421
Amortization of discounts and premiums on debt		2,815			4,123
Amortization of deferred settlements on derivative instruments		3,123			9,978
Amortization of right-of-use assets		9,572			9,123
Write-off of pursuit costs		2,739			3,296
(Income) loss from investments in unconsolidated entities		3,847			3,456
Distributions from unconsolidated entities – return on capital		436			251
Net (gain) loss on sales of real estate properties		(127,034	)		(304,346	)
Realized (gain) loss on investment securities		(1,511	)		(2,061	)
Unrealized (gain) loss on investment securities		(4,461	)		—
Compensation paid with Company Common Shares		26,948			24,559
Changes in assets and liabilities:
(Increase) decrease in other assets		11,887			20,734
Increase (decrease) in accounts payable and accrued expenses		71,334			76,274
Increase (decrease) in accrued interest payable		(18,791	)		(19,858	)
Increase (decrease) in lease liabilities		(1,077	)		(1,166	)
Increase (decrease) in other liabilities		(7,024	)		(23,199	)
Increase (decrease) in security deposits		558			3,106
Net cash provided by operating activities		1,188,524			1,120,228
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(324,497	)		(113,046	)
Investment in real estate – development/other		(60,179	)		(81,889	)
Capital expenditures to real estate		(229,763	)		(141,707	)
Non-real estate capital additions		(1,457	)		(2,232	)
Interest capitalized for real estate and unconsolidated entities under development		(9,579	)		(4,181	)
Proceeds from disposition of real estate, net		191,718			720,302
Investments in unconsolidated entities – acquisitions		(989	)		(49,330	)
Investments in unconsolidated entities – development/other		(34,076	)		(87,129	)
Distributions from unconsolidated entities – return of capital		15			9
Purchase of investment securities and other investments		(2,500	)		(1,045	)
Proceeds from sale of investment securities		2,952			3,584
Net cash provided by (used for) investing activities		(468,355	)		243,336

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(4,106	)	$	(373	)
Mortgage notes payable, net:
Proceeds		572,896			37,429
Lump sum payoffs		(932,598	)		(260,874	)
Scheduled principal repayments		(554	)		(3,186	)
Notes, net:
Lump sum payoffs		—			(500,000	)
Line of credit and commercial paper:
Commercial paper proceeds		4,393,568			5,140,685
Commercial paper repayments		(4,025,887	)		(5,266,158	)
Proceeds from (payments on) settlement of derivative instruments		25,169			—
Finance ground lease principal payments		(1,995	)		(1,845	)
Proceeds from Employee Share Purchase Plan (ESPP)		2,591			3,280
Proceeds from exercise of options		11,474			21,021
Payment of offering costs		—			(739	)
Other financing activities, net		(37	)		(31	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(3,737	)		(32,178	)
Contributions – Noncontrolling Interests – Partially Owned Properties		9			603
Contributions – Noncontrolling Interests – Operating Partnership		1			1
Distributions:
Common Shares		(738,584	)		(696,679	)
Preferred Shares		(2,319	)		(2,318	)
Noncontrolling Interests – Operating Partnership		(22,969	)		(22,735	)
Noncontrolling Interests – Partially Owned Properties		(3,536	)		(18,236	)
Net cash provided by (used for) financing activities		(730,614	)		(1,602,333	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		(10,445	)		(238,769	)
Cash and cash equivalents and restricted deposits, beginning of period		137,172			360,236
Cash and cash equivalents and restricted deposits, end of period	$	126,727		$	121,467

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	39,250		$	44,788
Restricted deposits		87,477			76,679
Total cash and cash equivalents and restricted deposits, end of period	$	126,727		$	121,467

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	206,080		$	221,218
Net cash paid (received) for income and other taxes	$	1,035		$	728
Real estate acquisitions/dispositions/other:
Mortgage loans assumed	$	42,256		$	—
Amortization of deferred financing costs:
Investment in real estate, net	$	(211	)	$	(380	)
Other assets	$	2,089		$	1,754
Mortgage notes payable, net	$	2,265		$	1,620
Notes, net	$	2,880		$	3,427
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	1,129		$	1,865
Notes, net	$	1,686		$	2,258
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(9	)	$	(9	)
Accumulated other comprehensive income	$	3,132		$	9,987
Write-off of pursuit costs:
Investment in real estate, net	$	421		$	948
Investments in unconsolidated entities	$	1,667		$	2,197
Other assets	$	651		$	151
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	2,909		$	2,517
Other liabilities	$	938		$	939
Realized/unrealized (gain) loss on derivative instruments:
Other assets	$	(3,749	)	$	(23,413	)
Other liabilities	$	(765	)	$	—
Accumulated other comprehensive income	$	4,514		$	23,413
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(3,468	)	$	(1,312	)
Investments in unconsolidated entities	$	(6,111	)	$	(2,869	)
Investments in unconsolidated entities – development/other:
Investments in unconsolidated entities	$	(32,667	)	$	(85,839	)
Other liabilities	$	(1,409	)	$	(1,290	)
Debt financing costs:
Other assets	$	—		$	(45	)
Mortgage notes payable, net	$	(4,106	)	$	(228	)
Notes, net	$	—		$	(100	)
Proceeds from (payments on) settlement of derivative instruments:
Other assets	$	25,613		$	—
Other liabilities	$	(444	)	$	—
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	(7,105	)	$	(224	)
Lease liabilities	$	7,105		$	224
Non-cash share distribution and other transfers from unconsolidated entities:
Investments in unconsolidated entities	$	539		$	4,201
Other assets	$	(539	)	$	(4,201	)

See accompanying notes

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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
SHAREHOLDERS’ EQUITY
PREFERRED SHARES
Balance, beginning of period	$	37,280		$	37,280		$	37,280		$	37,280
Balance, end of period	$	37,280		$	37,280		$	37,280		$	37,280
COMMON SHARES, $0.01 PAR VALUE
Balance, beginning of period	$	3,784		$	3,755		$	3,790		$	3,761
Conversion of OP Units into Common Shares		9			—			7			—
Exercise of share options		2			4			—			—
Employee Share Purchase Plan (ESPP)		—			1			—			1
Share-based employee compensation expense:
Restricted shares		2			2			—			—
Balance, end of period	$	3,797		$	3,762		$	3,797		$	3,762
PAID IN CAPITAL
Balance, beginning of period	$	9,476,085		$	9,121,122		$	9,472,628		$	9,229,738
Common Share Issuance:
Conversion of OP Units into Common Shares		13,907			1,680			9,250			196
Exercise of share options		11,472			21,017			116			2,093
Employee Share Purchase Plan (ESPP)		2,591			3,279			467			901
Share-based employee compensation expense:
Restricted shares		10,292			9,524			2,349			2,165
Share options		3,904			1,856			779			466
ESPP discount		481			637			83			217
Offering costs		—			(739	)		—			(252	)
Supplemental Executive Retirement Plan (SERP)		32,078			(269	)		31,930			—
Acquisition of Noncontrolling Interests – Partially Owned Properties		(900	)		(27,383	)		—			(28	)
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership		18,613			127,570			57,736			29,430
Adjustment for Noncontrolling Interests ownership in Operating Partnership		20,534			9,156			13,719			2,524
Balance, end of period	$	9,589,057		$	9,267,450		$	9,589,057		$	9,267,450
RETAINED EARNINGS
Balance, beginning of period	$	1,658,837		$	1,827,063		$	1,506,460		$	1,649,960
Net income attributable to controlling interests		523,746			617,891			172,508			323,025
Common Share distributions		(753,633	)		(705,529	)		(251,563	)		(235,105	)
Preferred Share distributions		(2,318	)		(2,318	)		(773	)		(773	)
Balance, end of period	$	1,426,632		$	1,737,107		$	1,426,632		$	1,737,107
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(2,547	)	$	(34,272	)	$	3,708		$	(30,650	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		4,514			23,413			460			24,672
Losses reclassified into earnings from other comprehensive income		3,132			9,987			931			5,106
Balance, end of period	$	5,099		$	(872	)	$	5,099		$	(872	)

DISTRIBUTIONS
Distributions declared per Common Share outstanding	$	1.9875		$	1.875		$	0.6625		$	0.625

See accompanying notes

Table of Contents

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Amounts in thousands except per share data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
NONCONTROLLING INTERESTS
OPERATING PARTNERSHIP
Balance, beginning of period	$	209,961		$	214,094		$	207,405		$	216,326
Issuance of restricted units to Noncontrolling Interests		1			1			—			—
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner		(13,916	)		(1,680	)		(9,257	)		(196	)
Equity compensation associated with Noncontrolling Interests		14,205			16,502			3,338			3,343
Net income attributable to Noncontrolling Interests		17,174			21,024			5,561			10,997
Distributions to Noncontrolling Interests		(22,924	)		(23,078	)		(7,284	)		(7,590	)
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership		21,878			870			19,801			(1,779	)
Adjustment for Noncontrolling Interests ownership in Operating Partnership		(20,534	)		(9,156	)		(13,719	)		(2,524	)
Balance, end of period	$	205,845		$	218,577		$	205,845		$	218,577
PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	(721	)	$	18,166		$	(4,728	)	$	(1,734	)
Net income attributable to Noncontrolling Interests		5,299			2,726			3,217			1,143
Contributions by Noncontrolling Interests		9			603			—			—
Distributions to Noncontrolling Interests		(3,573	)		(18,267	)		(312	)		(1,004	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(2,837	)		(4,795	)		—			28
Balance, end of period	$	(1,823	)	$	(1,567	)	$	(1,823	)	$	(1,567	)

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)


	September 30,			December 31,
	2023			2022
ASSETS
Land	$	5,593,425		$	5,580,878
Depreciable property		22,911,464			22,334,369
Projects under development		61,411			112,940
Land held for development		62,533			60,567
Investment in real estate		28,628,833			28,088,754
Accumulated depreciation		(9,634,013	)		(9,027,850	)
Investment in real estate, net		18,994,820			19,060,904
Investments in unconsolidated entities		313,225			279,024
Cash and cash equivalents		39,250			53,869
Restricted deposits		87,477			83,303
Right-of-use assets		460,489			462,956
Other assets		213,714			278,206
Total assets	$	20,108,975		$	20,218,262

LIABILITIES AND CAPITAL
Liabilities:
Mortgage notes payable, net	$	1,634,726		$	1,953,438
Notes, net		5,346,895			5,342,329
Line of credit and commercial paper		497,636			129,955
Accounts payable and accrued expenses		164,975			96,028
Accrued interest payable		47,519			66,310
Lease liabilities		312,781			308,748
Other liabilities		231,652			306,941
Security deposits		69,498			68,940
Distributions payable		259,624			244,621
Total liabilities		8,565,306			8,517,310

Commitments and contingencies

Redeemable Limited Partners		277,782			318,273
Capital:
Partners’ Capital:
Preference Units		37,280			37,280
General Partner		11,019,486			11,138,706
Limited Partners		205,845			209,961
Accumulated other comprehensive income (loss)		5,099			(2,547	)
Total partners’ capital		11,267,710			11,383,400
Noncontrolling Interests – Partially Owned Properties		(1,823	)		(721	)
Total capital		11,265,887			11,382,679
Total liabilities and capital	$	20,108,975		$	20,218,262

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
REVENUES
Rental income	$	2,146,464		$	2,035,477		$	724,067		$	695,099

EXPENSES
Property and maintenance		391,437			365,277			129,087			124,048
Real estate taxes and insurance		312,607			302,899			102,858			100,361
Property management		90,314			83,035			28,169			25,729
General and administrative		49,135			47,033			14,094			13,372
Depreciation		661,921			667,896			224,736			214,129
Total expenses		1,505,414			1,466,140			498,944			477,639

Net gain (loss) on sales of real estate properties		127,034			304,346			26,912			196,551

Operating income		768,084			873,683			252,035			414,011

Interest and other income		11,296			4,844			7,627			720
Other expenses		(20,517	)		(9,191	)		(4,958	)		(3,755	)
Interest:
Expense incurred, net		(200,882	)		(217,093	)		(68,891	)		(72,412	)
Amortization of deferred financing costs		(7,023	)		(6,421	)		(3,027	)		(2,220	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels		550,958			645,822			182,786			336,344
Income and other tax (expense) benefit		(892	)		(725	)		(258	)		(152	)
Income (loss) from investments in unconsolidated entities		(3,847	)		(3,456	)		(1,242	)		(1,027	)
Net income		546,219			641,641			181,286			335,165
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Net income attributable to controlling interests	$	540,920		$	638,915		$	178,069		$	334,022
ALLOCATION OF NET INCOME:
Preference Units	$	2,318		$	2,318		$	773		$	773

General Partner	$	521,428		$	615,573		$	171,735		$	322,252
Limited Partners		17,174			21,024			5,561			10,997
Net income available to Units	$	538,602		$	636,597		$	177,296		$	333,249

Earnings per Unit – basic:
Net income available to Units	$	1.38		$	1.64		$	0.45		$	0.86
Weighted average Units outstanding		389,991			387,603			390,087			387,745

Earnings per Unit – diluted:
Net income available to Units	$	1.38		$	1.63		$	0.45		$	0.86
Weighted average Units outstanding		391,135			389,394			391,351			389,300

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
Comprehensive income:
Net income	$	546,219		$	641,641		$	181,286		$	335,165
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		4,514			23,413			460			24,672
Losses reclassified into earnings from other comprehensive income		3,132			9,987			931			5,106
Other comprehensive income (loss)		7,646			33,400			1,391			29,778
Comprehensive income		553,865			675,041			182,677			364,943
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Comprehensive income attributable to controlling interests	$	548,566		$	672,315		$	179,460		$	363,800

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	546,219		$	641,641
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		661,921			667,896
Amortization of deferred financing costs		7,023			6,421
Amortization of discounts and premiums on debt		2,815			4,123
Amortization of deferred settlements on derivative instruments		3,123			9,978
Amortization of right-of-use assets		9,572			9,123
Write-off of pursuit costs		2,739			3,296
(Income) loss from investments in unconsolidated entities		3,847			3,456
Distributions from unconsolidated entities – return on capital		436			251
Net (gain) loss on sales of real estate properties		(127,034	)		(304,346	)
Realized (gain) loss on investment securities		(1,511	)		(2,061	)
Unrealized (gain) loss on investment securities		(4,461	)		—
Compensation paid with Company Common Shares		26,948			24,559
Changes in assets and liabilities:
(Increase) decrease in other assets		11,887			20,734
Increase (decrease) in accounts payable and accrued expenses		71,334			76,274
Increase (decrease) in accrued interest payable		(18,791	)		(19,858	)
Increase (decrease) in lease liabilities		(1,077	)		(1,166	)
Increase (decrease) in other liabilities		(7,024	)		(23,199	)
Increase (decrease) in security deposits		558			3,106
Net cash provided by operating activities		1,188,524			1,120,228
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions		(324,497	)		(113,046	)
Investment in real estate – development/other		(60,179	)		(81,889	)
Capital expenditures to real estate		(229,763	)		(141,707	)
Non-real estate capital additions		(1,457	)		(2,232	)
Interest capitalized for real estate and unconsolidated entities under development		(9,579	)		(4,181	)
Proceeds from disposition of real estate, net		191,718			720,302
Investments in unconsolidated entities – acquisitions		(989	)		(49,330	)
Investments in unconsolidated entities – development/other		(34,076	)		(87,129	)
Distributions from unconsolidated entities – return of capital		15			9
Purchase of investment securities and other investments		(2,500	)		(1,045	)
Proceeds from sale of investment securities		2,952			3,584
Net cash provided by (used for) investing activities		(468,355	)		243,336

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs	$	(4,106	)	$	(373	)
Mortgage notes payable, net:
Proceeds		572,896			37,429
Lump sum payoffs		(932,598	)		(260,874	)
Scheduled principal repayments		(554	)		(3,186	)
Notes, net:
Lump sum payoffs		—			(500,000	)
Line of credit and commercial paper:
Commercial paper proceeds		4,393,568			5,140,685
Commercial paper repayments		(4,025,887	)		(5,266,158	)
Proceeds from (payments on) settlement of derivative instruments		25,169			—
Finance ground lease principal payments		(1,995	)		(1,845	)
Proceeds from EQR’s Employee Share Purchase Plan (ESPP)		2,591			3,280
Proceeds from exercise of EQR options		11,474			21,021
Payment of offering costs		—			(739	)
Other financing activities, net		(37	)		(31	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(3,737	)		(32,178	)
Contributions – Noncontrolling Interests – Partially Owned Properties		9			603
Contributions – Limited Partners		1			1
Distributions:
OP Units – General Partner		(738,584	)		(696,679	)
Preference Units		(2,319	)		(2,318	)
OP Units – Limited Partners		(22,969	)		(22,735	)
Noncontrolling Interests – Partially Owned Properties		(3,536	)		(18,236	)
Net cash provided by (used for) financing activities		(730,614	)		(1,602,333	)
Net increase (decrease) in cash and cash equivalents and restricted deposits		(10,445	)		(238,769	)
Cash and cash equivalents and restricted deposits, beginning of period		137,172			360,236
Cash and cash equivalents and restricted deposits, end of period	$	126,727		$	121,467

Cash and cash equivalents and restricted deposits, end of period
Cash and cash equivalents	$	39,250		$	44,788
Restricted deposits		87,477			76,679
Total cash and cash equivalents and restricted deposits, end of period	$	126,727		$	121,467

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	206,080		$	221,218
Net cash paid (received) for income and other taxes	$	1,035		$	728
Real estate acquisitions/dispositions/other:
Mortgage loans assumed	$	42,256		$	—
Amortization of deferred financing costs:
Investment in real estate, net	$	(211	)	$	(380	)
Other assets	$	2,089		$	1,754
Mortgage notes payable, net	$	2,265		$	1,620
Notes, net	$	2,880		$	3,427
Amortization of discounts and premiums on debt:
Mortgage notes payable, net	$	1,129		$	1,865
Notes, net	$	1,686		$	2,258
Amortization of deferred settlements on derivative instruments:
Other liabilities	$	(9	)	$	(9	)
Accumulated other comprehensive income	$	3,132		$	9,987
Write-off of pursuit costs:
Investment in real estate, net	$	421		$	948
Investments in unconsolidated entities	$	1,667		$	2,197
Other assets	$	651		$	151
(Income) loss from investments in unconsolidated entities:
Investments in unconsolidated entities	$	2,909		$	2,517
Other liabilities	$	938		$	939
Realized/unrealized (gain) loss on derivative instruments:
Other assets	$	(3,749	)	$	(23,413	)
Other liabilities	$	(765	)	$	—
Accumulated other comprehensive income	$	4,514		$	23,413
Interest capitalized for real estate and unconsolidated entities under development:
Investment in real estate, net	$	(3,468	)	$	(1,312	)
Investments in unconsolidated entities	$	(6,111	)	$	(2,869	)
Investments in unconsolidated entities – development/other:
Investments in unconsolidated entities	$	(32,667	)	$	(85,839	)
Other liabilities	$	(1,409	)	$	(1,290	)
Debt financing costs:
Other assets	$	—		$	(45	)
Mortgage notes payable, net	$	(4,106	)	$	(228	)
Notes, net	$	—		$	(100	)
Proceeds from (payments on) settlement of derivative instruments:
Other assets	$	25,613		$	—
Other liabilities	$	(444	)	$	—
Right-of-use assets and lease liabilities initial measurement and reclassifications:
Right-of-use assets	$	(7,105	)	$	(224	)
Lease liabilities	$	7,105		$	224
Non-cash share distribution and other transfers from unconsolidated entities:
Investments in unconsolidated entities	$	539		$	4,201
Other assets	$	(539	)	$	(4,201	)

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
PARTNERS’ CAPITAL
PREFERENCE UNITS
Balance, beginning of period	$	37,280		$	37,280		$	37,280		$	37,280
Balance, end of period	$	37,280		$	37,280		$	37,280		$	37,280
GENERAL PARTNER
Balance, beginning of period	$	11,138,706		$	10,951,940		$	10,982,878		$	10,883,459
OP Unit Issuance:
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		13,916			1,680			9,257			196
Exercise of EQR share options		11,474			21,021			116			2,093
EQR’s Employee Share Purchase Plan (ESPP)		2,591			3,280			467			902
Share-based employee compensation expense:
EQR restricted shares		10,294			9,526			2,349			2,165
EQR share options		3,904			1,856			779			466
EQR ESPP discount		481			637			83			217
Net income available to Units – General Partner		521,428			615,573			171,735			322,252
OP Units – General Partner distributions		(753,633	)		(705,529	)		(251,563	)		(235,105	)
Offering costs		—			(739	)		—			(252	)
Supplemental Executive Retirement Plan (SERP)		32,078			(269	)		31,930			—
Acquisition of Noncontrolling Interests – Partially Owned Properties		(900	)		(27,383	)		—			(28	)
Change in market value of Redeemable Limited Partners		18,613			127,570			57,736			29,430
Adjustment for Limited Partners ownership in Operating Partnership		20,534			9,156			13,719			2,524
Balance, end of period	$	11,019,486		$	11,008,319		$	11,019,486		$	11,008,319
LIMITED PARTNERS
Balance, beginning of period	$	209,961		$	214,094		$	207,405		$	216,326
Issuance of restricted units to Limited Partners		1			1			—			—
Conversion of OP Units held by Limited Partners into OP Units held by General Partner		(13,916	)		(1,680	)		(9,257	)		(196	)
Equity compensation associated with Units – Limited Partners		14,205			16,502			3,338			3,343
Net income available to Units – Limited Partners		17,174			21,024			5,561			10,997
Units – Limited Partners distributions		(22,924	)		(23,078	)		(7,284	)		(7,590	)
Change in carrying value of Redeemable Limited Partners		21,878			870			19,801			(1,779	)
Adjustment for Limited Partners ownership in Operating Partnership		(20,534	)		(9,156	)		(13,719	)		(2,524	)
Balance, end of period	$	205,845		$	218,577		$	205,845		$	218,577
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period	$	(2,547	)	$	(34,272	)	$	3,708		$	(30,650	)
Accumulated other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period		4,514			23,413			460			24,672
Losses reclassified into earnings from other comprehensive income		3,132			9,987			931			5,106
Balance, end of period	$	5,099		$	(872	)	$	5,099		$	(872	)

DISTRIBUTIONS
Distributions declared per Unit outstanding	$	1.9875		$	1.875		$	0.6625		$	0.625

See accompanying notes

Table of Contents

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
Balance, beginning of period	$	(721	)	$	18,166		$	(4,728	)	$	(1,734	)
Net income attributable to Noncontrolling Interests		5,299			2,726			3,217			1,143
Contributions by Noncontrolling Interests		9			603			—			—
Distributions to Noncontrolling Interests		(3,573	)		(18,267	)		(312	)		(1,004	)
Acquisition of Noncontrolling Interests – Partially Owned Properties		(2,837	)		(4,795	)		—			28
Balance, end of period	$	(1,823	)	$	(1,567	)	$	(1,823	)	$	(1,567	)

See accompanying notes

Table of Contents

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Business

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

EQR is the general partner of, and as of September 30, 2023 owned an approximate 97.0% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.

As of September 30, 2023, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 305 properties located in 10 states and the District of Columbia consisting of 80,683 apartment units. The ownership breakdown includes (table does not include any uncompleted development properties):


	Properties		Apartment Units
Wholly Owned Properties		291		77,623
Partially Owned Properties – Consolidated		14		3,060
		305		80,683

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 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.

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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 nine months ended September 30, 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		862,596			37,661
Exercise of share options		234,395			381,384
Employee Share Purchase Plan (ESPP)		48,835			49,662
Restricted share grants, net		148,304			173,351
Common Shares outstanding at September 30,		379,723,838			376,169,253
Units
Units outstanding at January 1,		12,429,737			12,659,027
Restricted unit grants, net		166,344			223,242
Conversion of OP Units to Common Shares		(862,596	)		(37,661	)
Units outstanding at September 30,		11,733,485			12,844,608
Total Common Shares and Units outstanding at September 30,		391,457,323			389,013,861
Units Ownership Interest in Operating Partnership		3.0	%		3.3	%

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The following table presents the changes in the Operating Partnership’s issued and outstanding General Partner Units and Limited Partner Units for the nine months ended September 30, 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		234,395			381,384
EQR’s Employee Share Purchase Plan (ESPP)		48,835			49,662
EQR’s restricted share grants, net		148,304			173,351
Issued to Limited Partners:
Restricted unit grants, net		166,344			223,242
General and Limited Partner Units outstanding at September 30,		391,457,323			389,013,861
Limited Partner Units
Limited Partner Units outstanding at January 1,		12,429,737			12,659,027
Limited Partner restricted unit grants, net		166,344			223,242
Conversion of Limited Partner OP Units to EQR Common Shares		(862,596	)		(37,661	)
Limited Partner Units outstanding at September 30,		11,733,485			12,844,608
Limited Partner Units Ownership Interest in Operating Partnership		3.0	%		3.3	%

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

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

The Noncontrolling Interests – Operating Partnership/Limited Partners Capital are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests – Operating Partnership/Limited Partners Capital are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership” and “Redeemable Limited Partners,” respectively. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital that are classified in permanent equity at September 30, 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 September 30, 2023 and 2022, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $277.8 million and $370.5 million, respectively, which represents the value of Common Shares that would be issued in exchange for the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners.

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The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners for the nine months ended September 30, 2023 and 2022, respectively (amounts in thousands):


	2023			2022
Balance at January 1,	$	318,273		$	498,977
Change in market value		(18,613	)		(127,570	)
Change in carrying value		(21,878	)		(870	)
Balance at September 30,	$	277,782		$	370,537

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

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

The following table presents the Company’s issued and outstanding Preferred Shares/Preference Units as of September 30, 2023 and December 31, 2022:


				Amounts in thousands
		Annual
	Call	Dividend Per		September 30,		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 September 30, 2023 and December 31, 2022	12/10/2026	$	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 September 30, 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 September 30, 2023, EQR has remaining authorization to repurchase up to 13.0 million of its shares.

During the nine months ended September 30, 2023, ERPOP issued $0.9 million of 3.00% Series Q Cumulative Redeemable Preference Units (the "Series Q Preference Units") in connection with the buyout of the noncontrolling interest in a consolidated operating property. The 933,454 Series Q Preference Units have a liquidation value of $1.00 per unit and pay distributions quarterly at

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the annual rate of $0.03 per unit. The Series Q Preference Units can be redeemed for, at EQR's/ERPOP's option, Common Shares, OP Units and/or cash upon the occurrence of specific events laid out in the agreement. If redeemed for Common Shares or OP Units, the number of shares/units issued is based on the Common Share price. The Series Q Preference Units increased the balance of Noncontrolling Interests - Partially Owned Properties in the consolidated balance sheets.

Real Estate

The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of September 30, 2023 and December 31, 2022 (amounts in thousands):


	September 30, 2023			December 31, 2022
Land	$	5,593,425		$	5,580,878
Depreciable property:
Buildings and improvements		19,825,567			19,471,503
Furniture, fixtures and equipment		2,565,554			2,352,050
In-Place lease intangibles		520,343			510,816
Projects under development:
Land		3,201			3,201
Construction-in-progress		58,210			109,739
Land held for development:
Land		46,160			46,160
Construction-in-progress		16,373			14,407
Investment in real estate		28,628,833			28,088,754
Accumulated depreciation		(9,634,013	)		(9,027,850	)
Investment in real estate, net	$	18,994,820		$	19,060,904

During the nine months ended September 30, 2023, the Company acquired the following from unaffiliated parties (purchase price and purchase price allocation in thousands):


							Purchase Price Allocation (1), (2)
	Properties		Apartment Units		Purchase Price (1)		Land		Depreciable Property
Rental Properties – Consolidated		4		1,183	$	366,334	$	41,142	$	325,611
Total		4		1,183	$	366,334	$	41,142	$	325,611

(1)

Purchase price and purchase price allocation are both net of a mark-to-market discount of approximately $11.2 million on a mortgage assumed in connection with the purchase of a property.

(2)

Purchase price allocation includes capitalized closing costs.

During the nine months ended September 30, 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		8		413	$	195,400	$	127,034
Total		8		413	$	195,400	$	127,034

Commitments to Acquire/Dispose of Real Estate

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

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Investments in Partially Owned Entities

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

Consolidated Variable Interest Entities (“VIEs”)

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

The Company has various equity interests in certain joint ventures that have been deemed to be VIEs, and the Company is the VIEs’ primary beneficiary. As a result, the joint ventures are required to be consolidated on the Company’s financial statements. The following table summarizes the Company’s consolidated joint ventures as of September 30, 2023:


	Operating Properties (1)
	Properties		Apartment Units
Consolidated Joint Ventures (VIE)		14		3,060

(1)

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

The following table provides consolidated assets and liabilities related to the Company's VIEs as of September 30, 2023 and December 31, 2022 (amounts in thousands):


	September 30, 2023		December 31, 2022
Consolidated Assets	$	550,214	$	691,880
Consolidated Liabilities	$	38,969	$	158,932

During the nine months ended September 30, 2023, the Company completed the following transactions:

•

Acquired its joint venture partner's 10% interest in a 200-unit apartment property for $4.6 million, of which the Company paid $3.7 million in cash and ERPOP issued $0.9 million of 3.00% Series Q Preference Units (see Note 3 for additional discussion). The property is now wholly owned. In connection with the buyout, the carrying amount of the Noncontrolling Interests – Partially Owned Properties totaling $3.7 million was reduced to zero and the remaining $0.9 million was recorded to paid in capital/general partner capital. The Company also repaid $64.7 million of mortgage debt at par prior to maturity in conjunction with the buyout;

•

Repaid the $67.9 million outstanding principal balance of the variable rate construction mortgage for one of its consolidated development joint ventures; and

•

Sold one partially owned property consisting of 166 apartment units for approximately $60.1 million.

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.

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The following table and information summarizes the Company’s investments in unconsolidated entities as of September 30, 2023 and December 31, 2022 (amounts in thousands except for ownership percentage):


	September 30, 2023			December 31, 2022			Ownership Percentage
Investments in Unconsolidated Entities:
Various Real Estate Holdings (VIE)	$	36,206		$	35,974		Varies
Projects Under Development and Land Held for Development (VIE)		250,880			218,043		62% - 95% (1)
Real Estate Technology Funds/Companies (VIE)		26,392			25,249		Varies
Other		(253	)		(242	)	Varies
Investments in Unconsolidated Entities	$	313,225		$	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 September 30, 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

1,334

(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.

New Development Joint Ventures

The following table provides information on total unconsolidated development joint ventures entered into during the nine months ended September 30, 2023 (amounts in thousands except for number of unconsolidated joint ventures and apartment units):


Number of unconsolidated joint ventures (1)		1
Apartment units (2)		368
Investments in unconsolidated entities – acquisitions	$	989

(1)

The entities qualify as VIEs, but the Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIE’s performance. Therefore, the entities are unconsolidated and recorded using the equity method of accounting. See Note 2 of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional discussion.

(2)

Represents the intended number of apartment units to be developed.

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Restricted Deposits

The following table presents the Company’s restricted deposits as of September 30, 2023 and December 31, 2022 (amounts in thousands):


	September 30, 2023		December 31, 2022
Mortgage escrow deposits:
Real estate taxes and insurance	$	942	$	—
Replacement reserves		15,037		12,549
Mortgage principal reserves/sinking funds		30,234		25,304
Mortgage escrow deposits		46,213		37,853
Restricted cash:
Earnest money on pending acquisitions		25		4,500
Restricted deposits on real estate investments		182		229
Resident security and utility deposits		39,821		38,432
Other		1,236		2,289
Restricted cash		41,264		45,450
Restricted deposits	$	87,477	$	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 nine months ended September 30, 2023 and 2022 (amounts in thousands):


	Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2022
Income Type	Residential Leases			Non-Residential Leases		Total			Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	1,926,869		$	46,642	$	1,973,511		$	1,816,435		$	48,279		$	1,864,714
Utility recoveries (RUBS income) (1)		64,007			662		64,669			59,826			596			60,422
Parking rent		32,955			354		33,309			32,546			322			32,868
Other lease revenue (2)		(19,172	)		330		(18,842	)		(4,016	)		(568	)		(4,584	)
Total lease revenue	$	2,004,659		$	47,988		2,052,647		$	1,904,791		$	48,629			1,953,420
Parking revenue							30,033									27,701
Other revenue							63,784									54,356
Total other rental income (3)							93,817									82,057
Rental income						$	2,146,464								$	2,035,477

(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 (see below for further discussion) and other miscellaneous lease revenue.

(3)

Other rental income is accounted for under the revenue recognition standard and primarily consists of third-party transient parking revenue, residential lease settlement income and ancillary income such as cable and laundry revenue.

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The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the quarters ended September 30, 2023 and 2022 (amounts in thousands):


	Quarter Ended September 30, 2023									Quarter Ended September 30, 2022
Income Type	Residential Leases			Non-Residential Leases			Total			Residential Leases			Non-Residential Leases			Total
Residential and non-residential rent	$	650,531		$	14,669		$	665,200		$	622,348		$	16,184		$	638,532
Utility recoveries (RUBS income) (1)		21,221			243			21,464			20,243			227			20,470
Parking rent		11,062			129			11,191			10,840			120			10,960
Other lease revenue (2)		(5,752	)		(404	)		(6,156	)		(3,127	)		(371	)		(3,498	)
Total lease revenue	$	677,062		$	14,637			691,699		$	650,304		$	16,160			666,464
Parking revenue								9,638									9,270
Other revenue								22,730									19,365
Total other rental income (3)								32,368									28,635
Rental income							$	724,067								$	695,099

(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 (see below for further discussion) and other miscellaneous lease revenue.

(3)

The following table presents residential and non-residential accounts receivable and straight-line receivable balances for the Company’s properties as of September 30, 2023 and December 31, 2022 (amounts in thousands):


	Residential						Non-Residential
Balance Sheet (Other assets):	September 30, 2023			December 31, 2022			September 30, 2023				December 31, 2022
Resident/tenant accounts receivable balances	$	25,532		$	35,688		$	2,714			$	2,820
Allowance for doubtful accounts		(20,000	)		(31,405	)		(1,703	)			(2,152	)
Net receivable balances	$	5,532		$	4,283		$	1,011			$	668

Straight-line receivable balances	$	8,604		$	4,398		$	11,851		(1)	$	13,795

(1)

During the third quarter of 2023, the Company recorded a non-cash write-off of approximately $1.5 million in straight-line receivables due to the recent bankruptcy of Rite Aid.

The following table presents residential bad debt for the Company’s properties for the nine months and quarters ended September 30, 2023 and 2022 (amounts in thousands):


	Nine Months Ended September 30,						Quarter Ended September 30,
Income Statement (Rental income):	2023			2022			2023			2022
Bad debt, net (1)	$	28,862		$	14,854		$	9,042		$	6,707
% of rental income		1.4	%		0.8	%		1.3	%		1.0	%

(1)

Bad debt, net benefited from additional resident payments due to governmental rental assistance programs of approximately $2.4 million and $32.3 million for the nine months ended September 30, 2023 and 2022, respectively, and $0.5 million and $7.3 million for the quarters ended September 30, 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 nine months ended September 30, 2023 include the effect of any derivative instruments and amortization of premiums/discounts/OCI (other comprehensive income) on debt and derivatives.

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Mortgage Notes Payable

The following table summarizes the Company’s mortgage notes payable activity for the nine months ended September 30, 2023 (amounts in thousands):


	Mortgage notes payable, net as of December 31, 2022		Proceeds			Assumptions			Lump sum payoffs				Scheduled principal repayments			Amortization of premiums/ discounts		Amortization of deferred financing costs, net (1)			Mortgage notes payable, net as of September 30, 2023
Fixed Rate Debt:
Secured – Conventional	$	1,608,838	$	550,000	(2)	$	42,256	(3)	$	(800,000	)	(2)	$	—		$	200	$	(3,324	)	$	1,397,970
Floating Rate Debt:
Secured – Conventional		108,378		22,896			—			(132,598	)			(54	)		—		1,378			—
Secured – Tax Exempt		236,222		—			—			—				(500	)		929		105			236,756
Floating Rate Debt		344,600		22,896			—			(132,598	)			(554	)		929		1,483			236,756
Total	$	1,953,438	$	572,896		$	42,256		$	(932,598	)		$	(554	)	$	1,129	$	(1,841	)	$	1,634,726

(1)

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

(2)

Obtained $200.0 million of 5.18% fixed rate mortgage debt maturing in September 2033 and $350.0 million of 5.25% fixed rate mortgage debt maturing in September 2033. The secured notes totaling $550.0 million have an all-in effective interest rate of approximately 4.7%. The proceeds from these loans were used, along with funding from the Company’s commercial paper note program, to repay $800.0 million of 4.21% fixed rate mortgage debt that was due to mature in November 2023.

(3)

Assumed $53.5 million of 2.24% fixed rate mortgage debt maturing in September 2030 on one acquired property and recorded an initial discount of approximately $11.2 million.

The following table summarizes certain interest rate and maturity date information as of and for the nine months ended September 30, 2023:


		September 30, 2023
Interest Rate Ranges (ending)		0.10% - 5.25%
Weighted Average Interest Rate		3.64%
Maturity Date Ranges		2029-2061

As of September 30, 2023, the Company had $249.5 million of secured tax-exempt bonds subject to third-party credit enhancement.

Notes

The following table summarizes the Company’s notes activity for the nine months ended September 30, 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 September 30, 2023
Fixed Rate Debt:
Unsecured – Public	$	5,342,329	$	—	$	—	$	1,686	$	2,880	$	5,346,895

(1)

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

The following table summarizes certain interest rate and maturity date information as of and for the nine months ended September 30, 2023:


		September 30, 2023
Interest Rate Ranges (ending)		1.85% - 7.57%
Weighted Average Interest Rate		3.52%
Maturity Date Ranges		2025-2047

The Company’s unsecured public notes contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for the nine months ended September 30, 2023.

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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 nine months ended September 30, 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, maturity and amount outstanding information for the commercial paper program as of and for the nine months ended September 30, 2023:


		September 30, 2023
Weighted Average Interest Rate (1)		5.36%
Weighted Average Maturity (in days)		31
Weighted Average Amount Outstanding		$236.4 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 September 30, 2023 (amounts in thousands):


	September 30, 2023
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(500,005	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(3,415	)
Unsecured revolving credit facility availability	$	1,996,580

Other

The following table summarizes the Company's total debt extinguishment costs recorded as additional expense for the nine months and quarters ended September 30, 2023 and 2022 (amounts in thousands):


	Nine Months Ended September 30,				Quarter Ended September 30,
	2023		2022		2023		2022
Write-offs of unamortized deferred financing costs	$	1,143	$	369	$	1,096	$	277
Write-offs of unamortized (premiums)/discounts/OCI		—		3,947		—		3,570
Total	$	1,143	$	4,316	$	1,096	$	3,847

10.

Fair Value Measurements

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

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

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

•

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

•

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

•

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

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


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

The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, commercial paper, line of credit and derivative instruments), including cash and cash equivalents and other financial instruments, approximate their carrying or contract value. The following table provides a summary of the carrying and fair values for the Company’s mortgage notes payable and unsecured debt (including its commercial paper and line of credit, if applicable) at September 30, 2023 and December 31, 2022, respectively (amounts in thousands):


	September 30, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value (Level 2)		Carrying Value		Estimated Fair Value (Level 2)
Mortgage notes payable, net	$	1,634,726	$	1,492,128	$	1,953,438	$	1,803,525
Unsecured debt, net		5,844,531		5,126,361		5,472,284		4,874,490
Total debt, net	$	7,479,257	$	6,618,489	$	7,425,722	$	6,678,015

The following tables provide a summary of the fair value measurements for each major category of assets and liabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at September 30, 2023 and December 31, 2022, respectively (amounts in thousands):


				Fair Value Measurements at Reporting Date Using
Description	Balance Sheet Location	9/30/2023		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Supplemental Executive Retirement Plan	Other Assets	$	99,275	$	99,275	$	—	$	—

Liabilities
Supplemental Executive Retirement Plan	Other Liabilities	$	99,275	$	99,275	$	—	$	—

Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Limited Partners	Mezzanine	$	277,782	$	—	$	277,782	$	—

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				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 nine months ended September 30, 2023 and 2022, respectively (amounts in thousands):


September 30, 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	$	4,514	Interest expense	$	(3,132	)
Total	$	4,514		$	(3,132	)


September 30, 2022 Type of Cash Flow Hedge	Amount of Gain/(Loss) Recognized in OCI on Derivative		Location of Gain/(Loss) Reclassified from Accumulated OCI into Income	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps	$	23,413	Interest expense	$	(9,987	)
Total	$	23,413		$	(9,987	)

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As of September 30, 2023 and December 31, 2022, there were approximately $5.1 million in deferred gains, net, 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 $2.3 million may be recognized as additional interest expense during the twelve months ending September 30, 2024.

During the quarter ended September 30, 2023, the Company received a net $27.1 million to settle nine forward starting swaps in conjunction with the interest rate lock on $530.0 million of ten-year secured conventional mortgage notes. The Company ultimately closed on $550.0 million of secured notes. The accrued interest of approximately $1.9 million was recorded as a decrease to interest expense. The remaining $25.2 million was initially deferred as a component of accumulated other comprehensive income (loss) and will be recognized as a decrease to interest expense over the first nine years and eight months of the mortgage notes.

Other

The Company has invested in various equity securities without readily determinable fair values and has elected to measure them using the measurement alternative in accordance with the applicable accounting standards for equity securities. These investments are carried at cost less any impairment and adjusted to fair value if there are observable price changes for an identical or similar investment of the same issuer.

The following table summarizes the Company’s real estate technology investment securities included in other assets as of September 30, 2023 and December 31, 2022 (amounts in thousands):


	September 30, 2023		December 31, 2022
Real Estate Technology Investments	$	10,307	$	4,312

During the third quarter of 2023, the Company sold a portion of one of these investment securities for proceeds of approximately $2.5 million and realized a gain on sale of approximately $1.6 million. The Company adjusted the remainder of that investment security to the observable market price of the transaction and recorded an unrealized gain of approximately $4.5 million.

11.

Earnings Per Share and Earnings Per Unit

Equity Residential

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


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
Numerator for net income per share – basic:
Net income	$	546,219		$	641,641		$	181,286		$	335,165
Allocation to Noncontrolling Interests – Operating Partnership		(17,174	)		(21,024	)		(5,561	)		(10,997	)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per share – basic	$	521,428		$	615,573		$	171,735		$	322,252
Numerator for net income per share – diluted:
Net income	$	546,219		$	641,641		$	181,286		$	335,165
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Preferred distributions		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per share – diluted	$	538,602		$	636,597		$	177,296		$	333,249
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic		378,614			375,710			378,853			375,850
Effect of dilutive securities:
OP Units		11,377			11,893			11,234			11,895
Long-term compensation shares/units		1,144			1,785			1,264			1,555
ATM forward sales		—			6			—			—
Denominator for net income per share – diluted		391,135			389,394			391,351			389,300
Net income per share – basic	$	1.38		$	1.64		$	0.45		$	0.86
Net income per share – diluted	$	1.38		$	1.63		$	0.45		$	0.86

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ERP Operating Limited Partnership

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


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
Numerator for net income per Unit – basic and diluted:
Net income	$	546,219		$	641,641		$	181,286		$	335,165
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Allocation to Preference Units		(2,318	)		(2,318	)		(773	)		(773	)
Numerator for net income per Unit – basic and diluted	$	538,602		$	636,597		$	177,296		$	333,249
Denominator for net income per Unit – basic and diluted:
Denominator for net income per Unit – basic		389,991			387,603			390,087			387,745
Effect of dilutive securities:
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units		1,144			1,785			1,264			1,555
ATM forward sales		—			6			—			—
Denominator for net income per Unit – diluted		391,135			389,394			391,351			389,300
Net income per Unit – basic	$	1.38		$	1.64		$	0.45		$	0.86
Net income per Unit – diluted	$	1.38		$	1.63		$	0.45		$	0.86

12.

Commitments and Contingencies

Commitments

Real Estate Development Commitments

As of September 30, 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 September 30, 2023 (total project costs remaining in thousands):


	Projects		Apartment Units		Total Project Costs Remaining (1)
Projects Under Development
Consolidated		1		225	$	91,210
Unconsolidated		6		1,982		186,372
Total Projects Under Development		7		2,207	$	277,582

(1)

The Company’s share of the $277.6 million in total project costs remaining approximates $97.1 million, with the balance funded by the Company’s joint venture partners (approximately $1.9 million) and/or applicable construction loans (approximately $178.6 million).

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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. As of September 30, 2023, the Company has invested in ten separate such investments totaling $37.9 million with aggregate remaining commitments of approximately $20.1 million.

Contingencies

Litigation and Legal Matters

The Company, as an owner of real estate, is subject to various federal, state and local laws. Compliance by the Company with existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new or changed laws or regulations on its current properties or on properties that it may acquire in the future.

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

13.

Reportable Segments

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

The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company’s operating performance geographically by market and both on a same store and non-same store basis. While the Company does maintain a non-residential presence, it accounts for less than 4.0% of total revenues for the nine months ended September 30, 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 nine months and quarters ended September 30, 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.

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The following table presents a reconciliation of NOI from our rental real estate for the nine months and quarters ended September 30, 2023 and 2022, respectively (amounts in thousands):


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
Rental income	$	2,146,464		$	2,035,477		$	724,067		$	695,099
Property and maintenance expense		(391,437	)		(365,277	)		(129,087	)		(124,048	)
Real estate taxes and insurance expense		(312,607	)		(302,899	)		(102,858	)		(100,361	)
Total operating expenses		(704,044	)		(668,176	)		(231,945	)		(224,409	)
Net operating income	$	1,442,420		$	1,367,301		$	492,122		$	470,690

The following tables present NOI from our rental real estate for each segment for the nine months and quarters ended September 30, 2023 and 2022, respectively, as well as total assets and capital expenditures at September 30, 2023 (amounts in thousands):


	Nine Months Ended September 30, 2023							Nine Months Ended September 30, 2022
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	355,341	$	110,436	$	244,905		$	344,579	$	101,441	$	243,138
Orange County		96,923		21,689		75,234			91,270		19,804		71,466
San Diego		68,904		15,586		53,318			64,540		14,646		49,894
Subtotal - Southern California		521,168		147,711		373,457			500,389		135,891		364,498

San Francisco		325,335		98,848		226,487			312,401		93,778		218,623
Washington, D.C.		329,196		106,687		222,509			310,071		104,515		205,556
New York		356,157		146,415		209,742			318,757		140,696		178,061
Seattle		220,353		62,621		157,732			211,040		59,858		151,182
Boston		215,667		64,156		151,511			200,808		61,934		138,874
Denver		53,324		15,883		37,441			50,284		14,463		35,821
Other Expansion Markets		48,656		22,286		26,370			45,998		20,146		25,852
Total same store		2,069,856		664,607		1,405,249			1,949,748		631,281		1,318,467

Non-same store/other
Non-same store (2)		70,736		26,946		43,790			53,449		22,429		31,020
Other (3)		5,872		12,491		(6,619	)		32,280		14,466		17,814
Total non-same store/other		76,608		39,437		37,171			85,729		36,895		48,834

Totals	$	2,146,464	$	704,044	$	1,442,420		$	2,035,477	$	668,176	$	1,367,301

(1)

For the nine months ended September 30, 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 76,789 apartment units.

(2)

For the nine months ended September 30, 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.

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	Quarter Ended September 30, 2023							Quarter Ended September 30, 2022
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	121,098	$	36,839	$	84,259		$	116,770	$	34,198	$	82,572
Orange County		33,019		7,316		25,703			31,252		6,792		24,460
San Diego		25,258		5,803		19,455			23,860		5,634		18,226
Subtotal - Southern California		179,375		49,958		129,417			171,882		46,624		125,258

San Francisco		109,215		32,782		76,433			106,382		32,025		74,357
Washington, D.C.		114,748		36,521		78,227			108,667		37,073		71,594
New York		118,326		48,555		69,771			112,595		46,755		65,840
Seattle		73,351		21,575		51,776			73,096		20,258		52,838
Boston		72,541		20,773		51,768			69,029		20,860		48,169
Denver		17,855		5,384		12,471			17,219		5,132		12,087
Other Expansion Markets		18,679		7,926		10,753			17,517		8,008		9,509
Total same store		704,090		223,474		480,616			676,387		216,735		459,652

Non-same store/other
Non-same store (2)		19,035		7,279		11,756			13,343		4,544		8,799
Other (3)		942		1,192		(250	)		5,369		3,130		2,239
Total non-same store/other		19,977		8,471		11,506			18,712		7,674		11,038

Totals	$	724,067	$	231,945	$	492,122		$	695,099	$	224,409	$	470,690

(1)

For the quarters ended September 30, 2023 and 2022, same store primarily includes all properties acquired or completed that were stabilized prior to July 1, 2022, less properties subsequently sold, which represented 77,698 apartment units.

(2)

For the quarters ended September 30, 2023 and 2022, non-same store primarily includes properties acquired after July 1, 2022, plus any properties in lease-up and not stabilized as of July 1, 2022, and any properties undergoing major renovations.

(3)

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


	Nine Months Ended September 30, 2023
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	2,509,235	$	38,810
Orange County		345,945		6,611
San Diego		230,902		12,921
Subtotal - Southern California		3,086,082		58,342

San Francisco		3,006,656		36,261
Washington, D.C.		3,023,064		39,086
New York		3,328,321		16,248
Seattle		2,092,677		23,176
Boston		1,762,350		22,430
Denver		832,017		2,547
Other Expansion Markets		790,180		4,117
Total same store		17,921,347		202,207

Non-same store/other
Non-same store (2)		1,502,692		27,291
Other (3)		684,936		265
Total non-same store/other		2,187,628		27,556

Totals	$	20,108,975	$	229,763

(1)

Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2022, less properties subsequently sold, which represented 76,789 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.

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14.

Subsequent Events

Subsequent to September 30, 2023, the Company:

•

Disposed of the following to unaffiliated parties (sales price in thousands):


	Properties		Apartment Units		Sales Price
Rental Properties – Consolidated		3		499	$	184,550
Total		3		499	$	184,550

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

For further information including definitions for capitalized terms not defined herein, refer to the 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.

On May 18, 2023, the Company announced that Samuel Zell, its Founder and Chairman of the Board of Trustees, had passed away earlier that same day. David J. Neithercut, the Company’s former Chief Executive Officer and a member of the Company’s Board of Trustees since 2006, has been appointed as Chairman.

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.

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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 nine months ended September 30, 2023:

Portfolio Rollforward

($ in thousands)


	Properties			Apartment Units			Purchase Price				Acquisition Cap Rate
12/31/2022		308			79,597
Acquisitions:
Consolidated Rental Properties		2			577		$	189,734		(2)		5.1	%
Consolidated Rental Properties – Not Stabilized (1)		2			606		$	176,600				5.9	%

							Sales Price				Disposition Yield
Dispositions:
Consolidated Rental Properties		(8	)		(413	)	$	(195,400	)			(5.3	%)

Completed Developments – Consolidated		1			312
Configuration Changes		—			4
9/30/2023		305			80,683

(1)

The Company acquired two properties in the Atlanta market during the nine months ended September 30, 2023 that are in lease-up and are expected to stabilize in their second year of ownership at the weighted average Acquisition Cap Rate listed above.

(2)

Purchase price is net of a mark-to-market discount of approximately $11.2 million on a mortgage assumed in connection with the purchase of a property.

Acquisitions

•

The consolidated properties acquired during the nine months ended September 30, 2023 are located in the Atlanta (3) and Denver markets; and

•

During the nine months ended September 30, 2023, the Company acquired its joint venture partner's 10% interest in a 200-unit apartment property in Alameda, CA for $4.6 million, of which the Company paid $3.7 million in cash and ERPOP issued $0.9 million of 3.00% Series Q Preference Units. The property is now wholly owned. The Company also repaid $64.7 million of mortgage debt at par prior to maturity in conjunction with the buyout.

Dispositions

•

The consolidated properties disposed of during the nine months ended September 30, 2023 were located in the Los Angeles (7) and Seattle markets and the sales generated an Unlevered IRR of 8.5%.

Developments

•

The Company stabilized one consolidated apartment property during the nine months ended September 30, 2023, located in the San Francisco market, consisting of 200 apartment units totaling approximately $116.4 million of development costs;

•

The Company completed construction on one consolidated apartment property during the nine months ended September 30, 2023, located in the Washington, D.C. market, consisting of 312 apartment units totaling approximately $108.0 million of development costs; and

•

The Company spent approximately $88.0 million during the nine months ended September 30, 2023, primarily for consolidated and unconsolidated development projects.

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

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Comparison of the nine months and quarter ended September 30, 2023 to the nine months and quarter ended September 30, 2022

The following table presents a reconciliation of diluted earnings per share/unit for the nine months and quarter ended September 30, 2023 as compared to the same periods in 2022:


	Nine Months Ended September 30			Quarter Ended September 30
Diluted earnings per share/unit for period ended 2022	$	1.63		$	0.86
Property NOI		0.22			0.05
Interest expense		0.03			—
Corporate overhead (1)		(0.02	)		(0.01	)
Net gain/loss on property sales		(0.46	)		(0.45	)
Non-operating asset gains/losses		0.01			0.01
Depreciation expense		0.03			(0.02	)
Other		(0.06	)		0.01
Diluted earnings per share/unit for period ended 2023	$	1.38		$	0.45

(1)

Corporate overhead includes property management and general and administrative expenses.

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

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


	Nine Months Ended September 30,
	2023			2022			$ Change			% Change
Operating income	$	768,084		$	873,683		$	(105,599	)		(12.1	)%
Adjustments:
Property management		90,314			83,035			7,279			8.8	%
General and administrative		49,135			47,033			2,102			4.5	%
Depreciation		661,921			667,896			(5,975	)		(0.9	)%
Net (gain) loss on sales of real estate properties		(127,034	)		(304,346	)		177,312			(58.3	)%
Total NOI	$	1,442,420		$	1,367,301		$	75,119			5.5	%
Rental income:
Same store	$	2,069,856		$	1,949,748		$	120,108			6.2	%
Non-same store/other		76,608			85,729			(9,121	)		(10.6	)%
Total rental income		2,146,464			2,035,477			110,987			5.5	%
Operating expenses:
Same store		664,607			631,281			33,326			5.3	%
Non-same store/other		39,437			36,895			2,542			6.9	%
Total operating expenses		704,044			668,176			35,868			5.4	%
NOI:
Same store		1,405,249			1,318,467			86,782			6.6	%
Non-same store/other		37,171			48,834			(11,663	)		(23.9	)%
Total NOI	$	1,442,420		$	1,367,301		$	75,119			5.5	%

Note: See Note 13 in the Notes to Consolidated Financial Statements for detail by reportable segment/market. Non-same store/other NOI results consist primarily of properties acquired in calendar years 2022 and 2023, operations from the Company’s development properties and operations prior to disposition from 2022 and 2023 sold properties.

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•

The increase in same store rental income is primarily driven by healthy demand and limited new supply, partially offset by a non-cash write-off of approximately $1.5 million in straight-line receivables due to the recent bankruptcy of Rite Aid.

•

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

•

Repairs and maintenance – A $9.8 million increase primarily driven by greater outsourcing due to higher internal staffing utilization to address issues from California rain storms that occurred earlier this year;

•

Real estate taxes – A $5.9 million increase due to modest escalation in rates and assessed values; and

•

On-site Payroll – A $7.3 million increase due primarily to fewer staffing vacancies as compared to 2022 and elevated employee benefit costs, partially offset by the impact of innovation initiatives.

•

The decrease in non-same store/other NOI is due primarily to:

•

A negative impact of lost NOI from 2022 and 2023 dispositions of $15.2 million;

•

A negative impact of $1.7 million in lower NOI from two properties that have been removed from same store while undergoing major renovations;

•

A negative impact of $6.6 million from property damage primarily associated with the California rain storms and other casualty losses that occurred earlier this year; and

•

A positive impact of higher NOI from properties acquired during 2021, 2022 and 2023 of $5.7 million and higher NOI from development properties in lease-up of $8.7 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.

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 $7.3 million or 8.8% and approximately $2.4 million or 9.5% for the nine months and quarter ended September 30, 2023, respectively, as compared to the prior year periods. These increases are primarily attributable to increases in payroll-related costs, workforce/contractors costs, information technology expenses and legal and professional fees, partially offset by decreases in training/marketing costs and third-party management fees.

General and administrative expenses, which include corporate operating expenses, increased approximately $2.1 million or 4.5% and approximately $0.7 million or 5.4% for the nine months and quarter ended September 30, 2023, respectively, as compared to the prior year periods, primarily due to increases in payroll-related costs and public company expenses, partially offset by decreases in legal and professional fees and training/marketing costs.

Depreciation expense, which includes depreciation on non-real estate assets, decreased approximately $6.0 million or 0.9% for the nine months ended September 30, 2023, as compared to the prior year period, primarily as a result of 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, partially offset by additional depreciation expense on properties acquired in 2023. Depreciation expense increased approximately $10.6 million or 5.0% for the quarter ended September 30, 2023 as compared to the prior year period, primarily as a result of additional depreciation expense on properties acquired in 2023, partially offset by lower depreciation from properties sold in 2022 and 2023.

Net gain on sales of real estate properties decreased approximately $177.3 million or 58.3% during the nine months ended September 30, 2023 as compared to the prior year period, primarily as a result of the sale of eight consolidated apartment properties for a lower gain in 2023 as compared to the sale of three consolidated apartment properties in the same period in 2022. Net gain on sales of real estate properties decreased approximately $169.6 million or 86.3% for the quarter ended September 30, 2023 as compared to the prior year period, primarily as a result of the sale of one consolidated apartment property in the third quarter of 2023 as compared to the sale of two consolidated apartment properties in the same period in 2022.

Interest and other income increased approximately $6.5 million and approximately $6.9 million for the nine months and quarter ended September 30, 2023, respectively, as compared to the prior year periods. These increases are primarily due to an unrealized gain of $4.5 million on various investment securities that occurred during 2023 but not during 2022 and short-term investment income on cash and restricted deposit accounts due to a higher rate environment and higher overall invested balances, partially offset by decreases in insurance/litigation settlement proceeds received during 2022 that did not occur in 2023.

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Other expenses increased approximately $11.3 million and approximately $1.2 million for the nine months and quarter ended September 30, 2023, respectively, as compared to the prior year periods, 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 $15.6 million or 7.0% and approximately $2.7 million or 3.6% for the nine months and quarter ended September 30, 2023, respectively, as compared to the prior year periods. These decreases are primarily due to lower overall debt balances outstanding as compared to prior year periods and higher capitalized interest, partially offset by higher rates on floating debt. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the nine months ended September 30, 2023 was 3.81% as compared to 3.67% for the prior year period, and for the quarter ended September 30, 2023 was 3.81% as compared to 3.67% for the prior year period. The Company capitalized interest of approximately $9.6 million and $4.2 million during the nine months ended September 30, 2023 and 2022, respectively, and $2.6 million and $1.9 million during the quarters ended September 30, 2023 and 2022, respectively.

Same Store Results

Properties that the Company owned and were stabilized for all of both of the nine months ended September 30, 2023 and 2022 (the “Nine-Month 2023 Same Store Properties”), which represented 76,789 apartment units, drove the Company’s results of operations. Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months. Properties are included in same store when they are stabilized for all of the current and comparable periods presented.

The following table provides comparative total same store results and statistics for the Nine-Month 2023 Same Store Properties:

September YTD 2023 vs. September YTD 2022

Same Store Results/Statistics Including 76,789 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)


September YTD 2023																		September YTD 2022
	Residential			% Change			Non- Residential			% Change			Total		% Change				Residential			Non- Residential		Total
Revenues	$	1,997,058			6.3	%	$	72,798	(1)		2.8	%	$	2,069,856		6.2	%	Revenues	$	1,878,918		$	70,830	$	1,949,748
Expenses	$	644,494			5.2	%	$	20,113			9.4	%	$	664,607		5.3	%	Expenses	$	612,892		$	18,389	$	631,281
NOI	$	1,352,564			6.8	%	$	52,685			0.5	%	$	1,405,249		6.6	%	NOI	$	1,266,026		$	52,441	$	1,318,467

Average Rental Rate	$	3,015			7.0	%												Average Rental Rate	$	2,819
Physical Occupancy		95.9	%		(0.6	%)												Physical Occupancy		96.5	%
Turnover		34.3	%		0.2	%												Turnover		34.1	%

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

(1)

Includes the negative impact from the non-cash write-off of approximately $1.5 million in straight-line receivables during the third quarter of 2023 due to the recent bankruptcy of Rite Aid.

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The following table provides results and statistics related to our Residential same store operations for the nine months ended September 30, 2023 and 2022:

September YTD 2023 vs. September YTD 2022

Same Store Residential Results/Statistics by Market


														Increase (Decrease) from Prior Year
Markets/Metro Areas	Apartment Units		Sept. YTD 23 % of Actual NOI			Sept. YTD 23 Average Rental Rate		Sept. YTD 23 Weighted Average Physical Occupancy %			Sept. YTD 23 Turnover				Average Rental Rate			Physical Occupancy			Turnover
Los Angeles		14,415		17.9	%	$	2,844		95.4	%		33.3	%			4.8	%		(1.5	%)		5.0	%
Orange County		4,028		5.6	%		2,777		96.3	%		28.7	%			7.2	%		(0.8	%)		2.9	%
San Diego		2,706		3.9	%		2,965		95.5	%		31.1	%			8.3	%		(1.5	%)		1.8	%
Subtotal – Southern California		21,149		27.4	%		2,847		95.6	%		32.1	%			5.7	%		(1.4	%)		4.2	%

San Francisco		11,368		16.5	%		3,280		95.6	%		33.6	%			4.9	%		(0.7	%)		1.5	%
Washington, D.C.		14,400		16.1	%		2,581		96.7	%		32.3	%			6.3	%		(0.1	%)		(1.6	%)
New York		8,536		14.3	%		4,483		96.8	%		30.3	%			13.1	%		(0.2	%)		(4.6	%)
Seattle		9,362		10.9	%		2,581		95.1	%		39.8	%			4.3	%		(0.1	%)		(1.9	%)
Boston		6,700		10.2	%		3,400		96.0	%		35.3	%			8.1	%		(0.2	%)		(2.1	%)
Denver		2,498		2.7	%		2,406		96.3	%		46.7	%			5.5	%		(0.1	%)		(1.7	%)
Other Expansion Markets		2,776		1.9	%		1,989		94.6	%		44.6	%			6.9	%		(1.6	%)		1.9	%

Total		76,789		100.0	%	$	3,015		95.9	%		34.3	%			7.0	%		(0.6	%)		0.2	%

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.4% of total revenues for the nine months ended September 30, 2023.

Despite geopolitical and economic uncertainties, demand to live in our apartment communities remained healthy, which our financial results reflected. This steady demand for our apartments continues to support Physical Occupancy with pricing that is largely in-line with our expectations, with the exceptions of the San Francisco and Seattle markets where recent pricing pressure has seen greater than normal seasonal deceleration. The East Coast markets continue to outperform our West Coast markets, as we expected. Key operating drivers for this performance during 2023 include:

•

Pricing – Pricing (net of Leasing Concessions) has generally continued to be healthy and consistent with expectations in most of our major markets except San Francisco and Seattle. In most of our markets, pricing peaked in early August 2023, which was typical pre-pandemic, and began to moderate thereafter. As previously mentioned, this moderation was more pronounced and greater than anticipated in San Francisco and Seattle.

•

Physical Occupancy – Physical Occupancy of 95.9% for the nine months ended September 30, 2023 remained strong, despite increased move-out activity (see further discussion below).

•

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 and team. The Percentage of Residents Renewing has been strong at 54.0% for the third quarter of 2023. Turnover remains at some of the lowest levels in the Company’s history at 34.3% for the nine months ended September 30, 2023, reflecting a healthy and consistent trend of historically high resident retention.

The Company continued to have increased move-out activity related to delinquent residents during the nine months ended September 30, 2023, which put modest pressure on Physical Occupancy, especially in our West Coast markets. While we have made significant progress in reducing delinquency in our portfolio, the backlog in the eviction process along with its slowness led to less improvement during the quarter ended September 30, 2023 than we had expected.

Overall, the fundamentals of our business remain healthy. Long-term, we expect elevated single family home ownership costs, positive household formation trends, modest competitive new supply in most of our major markets 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 resilient to economic uncertainty, including elevated inflation, due to higher levels of disposable income and lower relative rent-to-income ratios.

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Liquidity and Capital Resources

With approximately $2.0 billion in readily available liquidity, a strong balance sheet, limited near-term debt 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 nine months ended September 30, 2023 and 2022 (amounts in thousands):


	Nine Months Ended September 30,
	2023			2022
Cash flows provided by (used for):
Operating activities	$	1,188,524		$	1,120,228
Investing activities	$	(468,355	)	$	243,336
Financing activities	$	(730,614	)	$	(1,602,333	)

The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the nine months ended September 30, 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 nine months ended September 30, 2023 as compared to the prior year period, increased by approximately $68.3 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 nine months ended September 30, 2023, key drivers were:

•

Acquired four consolidated rental properties for approximately $324.5 million in cash, inclusive of $53.5 million in assumed mortgage debt with a discount of approximately $11.2 million on one acquired property;

•

Disposed of eight consolidated rental properties, receiving net proceeds of approximately $191.7 million;

•

Invested $60.2 million primarily in development projects;

•

Invested $229.8 million in capital expenditures to real estate; and

•

Invested $35.1 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 nine months ended September 30, 2023, key drivers were:

•

Obtained $550.0 million in fixed rate mortgage debt;

•

Obtained $22.9 million in variable rate construction mortgage debt;

•

Repaid $933.2 million on mortgage loans (inclusive of scheduled principal repayments);

•

Received $25.2 million to settle nine forward starting swaps in conjunction with an interest rate lock of $530.0 million of secured notes;

•

Acquired our joint venture partner’s 10% interest in an apartment property for $3.7 million in cash (remaining $0.9 million was funded by ERPOP's issuance of 3.00% Series Q Preference Units);

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•

Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $14.1 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 $767.4 million.

Short-Term Liquidity and Cash Proceeds

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

The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of September 30, 2023 and December 31, 2022 (amounts in thousands):


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	39,250	$	53,869
Restricted deposits	$	87,477	$	83,303
Unsecured revolving credit facility availability	$	1,996,580	$	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.


	October 26, 2023
Unsecured revolving credit facility commitment	$	2,500,000
Commercial paper balance outstanding		(439,655	)
Unsecured revolving credit facility balance outstanding		—
Other restricted amounts		(3,415	)
Unsecured revolving credit facility availability	$	2,056,930

Dividend Policy

The Company declared a dividend/distribution for the first, second and third quarters of 2023 of $0.6625 per share/unit in each quarter, 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 October 2023 amounted to $259.6 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended September 30, 2023.

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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 $28.6 billion in investment in real estate on the Company’s balance sheet at September 30, 2023, $25.5 billion or 89.1% 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 September 30, 2023 is as follows:

Debt Summary as of September 30, 2023

($ in thousands)


	Debt Balances (1)		% of Total
Secured	$	1,634,726		21.9	%
Unsecured		5,844,531		78.1	%
Total	$	7,479,257		100.0	%
Fixed Rate Debt:
Secured – Conventional	$	1,397,970		18.7	%
Unsecured – Public		5,346,895		71.5	%
Fixed Rate Debt		6,744,865		90.2	%
Floating Rate Debt:
Secured – Conventional		—		—
Secured – Tax Exempt		236,756		3.2	%
Unsecured – Revolving Credit Facility		—		—
Unsecured – Commercial Paper Program		497,636		6.6	%
Floating Rate Debt		734,392		9.8	%
Total	$	7,479,257		100.0	%

(1)

The Company has no significant debt maturities until June 2025, other than commercial paper, which is supported by its revolving credit facility due 2027.

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.

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Funds From Operations and Normalized Funds From Operations

The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for the nine months and quarters ended September 30, 2023 and 2022:

Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)


	Nine Months Ended September 30,						Quarter Ended September 30,
	2023			2022			2023			2022
Net income	$	546,219		$	641,641		$	181,286		$	335,165
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(5,299	)		(2,726	)		(3,217	)		(1,143	)
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
Net income available to Common Shares and Units / Units		538,602			636,597			177,296			333,249
Adjustments:
Depreciation		661,921			667,896			224,736			214,129
Depreciation – Non-real estate additions		(3,291	)		(3,189	)		(1,032	)		(1,075	)
Depreciation – Partially Owned Properties		(1,599	)		(2,097	)		(544	)		(543	)
Depreciation – Unconsolidated Properties		1,921			1,897			695			657
Net (gain) loss on sales of unconsolidated entities - operating assets		—			(9	)		—			—
Net (gain) loss on sales of real estate properties		(127,034	)		(304,346	)		(26,912	)		(196,551	)
Noncontrolling Interests share of gain (loss) on sales of real estate properties		2,336			—			2,336			—
FFO available to Common Shares and Units / Units (1) (3) (4)		1,072,856			996,749			376,575			349,866
Adjustments:
Write-off of pursuit costs		2,739			3,296			746			781
Debt extinguishment and preferred share redemption (gains) losses		1,143			4,316			1,096			3,847
Non-operating asset (gains) losses		(4,735	)		(1,174	)		(5,766	)		156
Other miscellaneous items		14,831			1,832			3,488			2,017
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	1,086,834		$	1,005,019		$	376,139		$	356,667

FFO (1) (3)	$	1,075,174		$	999,067		$	377,348		$	350,639
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
FFO available to Common Shares and Units / Units (1) (3) (4)	$	1,072,856		$	996,749		$	376,575		$	349,866

Normalized FFO (2) (3)	$	1,089,152		$	1,007,337		$	376,912		$	357,440
Preferred/preference distributions		(2,318	)		(2,318	)		(773	)		(773	)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)	$	1,086,834		$	1,005,019		$	376,139		$	356,667

(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.

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(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 September 30, 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 third 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 September 30, 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.

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(b)

Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Operating Partnership identified in connection with the Operating Partnership’s evaluation referred to above that occurred during the third quarter of 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 September 30, 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 September 30, 2023, EQR issued 681,967 Common Shares in exchange for 681,967 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

During the quarter ended September 30, 2023, no trustee or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits – See the Exhibit Index.

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EXHIBIT INDEX

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


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

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

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

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

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

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

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

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

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

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

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SIGNATURES

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


		EQUITY RESIDENTIAL

Date:	November 2, 2023	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	November 2, 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:	November 2, 2023	By:	/s/ Robert A. Garechana
			Robert A. Garechana
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

Date:	November 2, 2023	By:	/s/ Ian S. Kaufman
			Ian S. Kaufman
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)