EQR-2014.12.31 - 10K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 31, 2014
OR
¨ 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:
Common Shares of Beneficial Interest, $0.01 Par Value (Equity Residential)
New York Stock Exchange
7.57% Notes due August 15, 2026 (ERP Operating Limited Partnership)
New York Stock Exchange
(Title of each class)
(Name of each exchange on which registered)

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

None (Equity Residential)
Units of Limited Partnership Interest (ERP Operating Limited Partnership)
(Title of each class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Equity Residential Yes x    No ¨
ERP Operating Limited Partnership Yes x      No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 
Equity Residential Yes ¨    No x
ERP Operating Limited Partnership Yes ¨      No x

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 x    No ¨
ERP Operating Limited Partnership Yes x      No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). 
Equity Residential Yes x    No ¨
ERP Operating Limited Partnership Yes x      No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Equity Residential x
ERP Operating Limited Partnership x




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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Equity Residential:
 
Large accelerated filer x
             Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
             Smaller reporting company ¨
ERP Operating Limited Partnership:
 
Large accelerated filer ¨
             Accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)
             Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 
Equity Residential Yes ¨    No x
                        ERP Operating Limited Partnership Yes ¨        No x 
The aggregate market value of Common Shares held by non-affiliates of the Registrant was approximately $22.3 billion based upon the closing price on June 30, 2014 of $63.00 using beneficial ownership of shares rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting shares owned by Trustees and Executive Officers, some of who may not be held to be affiliates upon judicial determination.
The number of Common Shares of Beneficial Interest, $0.01 par value, outstanding on February 20, 2015 was 363,798,297.




























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DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain information that will be contained in Equity Residential's Proxy Statement relating to its 2015 Annual Meeting of Shareholders, which Equity Residential intends to file no later than 120 days after the end of its fiscal year ended December 31, 2014, and thus these items have been omitted in accordance with General Instruction G(3) to Form 10-K. Equity Residential is the general partner and 96.2% owner of ERP Operating Limited Partnership.


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EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 2014 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 December 31, 2014 owned an approximate 96.2% ownership interest in, ERPOP. The remaining 3.8% interest is owned by limited partners. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP's day-to-day management.

The Company is structured as an umbrella partnership REIT (“UPREIT”) and contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, the Company receives a number of OP Units (see definition below) in the Operating Partnership equal to the number of Common Shares it has issued in the equity offering. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units in the Operating Partnership, which 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. The Company maintains a one-for-one relationship between the OP Units of the Operating Partnership issued to EQR and the Common Shares.
    
The Company believes that combining the reports on Form 10-K 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.

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 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 and guarantees certain debt of ERPOP, as disclosed in this report. 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 the Company, which are contributed

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to the capital of the Operating Partnership in exchange for additional limited partnership interests in the Operating Partnership (“OP Units”) (on a one-for-one Common Share per OP 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, the issuance of secured and unsecured debt and equity securities and proceeds received from disposition of certain properties and joint ventures.

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 and development joint venture partners. 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 significant 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 II, Item 9A. 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 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 the Operating Partnership, the Company consolidates the Operating Partnership 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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EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
TABLE OF CONTENTS
 
 
 
PAGE
PART I.
 
 
 
Item 1.
 
Item 1A.
 
Item 1B.
 
Item 2.
 
Item 3.
 
Item 4.
 
PART II.
 
 
 
Item 5.
 
Item 6.
 
Item 7.
 
Item 7A.
 
Item 8.
 
Item 9.
 
Item 9A.
 
Item 9B.
 
PART III.
 
 
 
Item 10.
 
Item 11.
 
Item 12.
 
Item 13.
 
Item 14.
 
PART IV.
 
 
 
Item 15.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PART I

Item 1. Business
General
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. ERP Operating Limited Partnership (“ERPOP”), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 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.

EQR is the general partner of, and as of December 31, 2014 owned an approximate 96.2% 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 public equity from time to time 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 December 31, 2014, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 391 properties located in 12 states and the District of Columbia consisting of 109,225 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):

 
 
Properties
 
Apartment Units
Wholly Owned Properties
 
364

 
98,287

Master-Leased Properties – Consolidated
 
3

 
853

Partially Owned Properties – Consolidated
 
19

 
3,771

Partially Owned Properties – Unconsolidated
 
3

 
1,281

Military Housing
 
2

 
5,033

 
 
391

 
109,225


The Company's corporate headquarters are located in Chicago, Illinois and the Company also operates property management offices in each of its core markets. As of December 31, 2014, the Company had approximately 3,500 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.

Certain capitalized terms used herein are defined in the Notes to Consolidated Financial Statements. See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
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 and any amendments to any of those reports we file with the SEC free of charge at our website, www.equityresidential.com. These reports are made available at our website as soon as reasonably practicable after we file them with the SEC. The information contained on our website, including any information referred to in this report as being available on our website, is not a part of or incorporated into this report.
Business Objectives and Operating and Investing Strategies
The Company invests in high quality apartment communities located in strategically targeted markets with the goal of maximizing our risk adjusted total return (operating income plus capital appreciation) on invested capital.

We seek to maximize the income and capital appreciation of our properties by investing in markets that are characterized by conditions favorable to multifamily property operations and appreciation. We are focused primarily on the six core coastal, high barrier to entry markets of Boston, New York, Washington DC, Southern California (including Los Angeles, Orange County and San Diego), San Francisco and Seattle. These markets generally feature one or more of the following characteristics that allow us to increase rents:

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High barriers to entry where, because of land scarcity or government regulation, it is difficult or costly to build new apartment properties, creating limits on new supply;
High home ownership costs;
Strong economic growth leading to job growth and household formation, which in turn leads to high demand for our apartments;
Urban core locations with an attractive quality of life and higher wage job categories leading to high resident demand and retention; and
Favorable demographics contributing to a larger pool of target residents with a high propensity to rent apartments.
Our operating focus is on balancing occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. Revenue is maximized by attracting qualified prospects to our properties, cost-effectively converting these prospects into new residents and keeping our residents satisfied so they will renew their leases upon expiration. While we believe that it is our high-quality, well-located assets that bring our customers to us, it is the customer service and superior value provided by our on-site personnel that keeps them renting with us and recommending us to their friends.

We use technology to engage our customers in the way that they want to be engaged. Many of our residents utilize our web-based resident portal which allows them to sign and renew their leases, review their accounts and make payments, provide feedback and make service requests on-line.

Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt, sales of properties and joint venture agreements. In addition, the Company may acquire properties in transactions that include the issuance of limited partnership interests in the Operating Partnership (“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. The Company may acquire land parcels to hold and/or sell based on market opportunities as well as options to buy more land in the future. The Company may also seek to acquire properties by purchasing defaulted or distressed debt that encumbers desirable properties in the hope of obtaining title to property through foreclosure or deed-in-lieu of foreclosure proceedings.

Over the past several years, the Company has done an extensive repositioning of its portfolio from low barrier to entry/non-core markets to high barrier to entry/core markets. Since 2005, the Company has sold over 166,000 apartment units primarily in its non-core markets for an aggregate sales price of approximately $16.1 billion, acquired over 67,000 apartment units primarily in its core markets for approximately $19.5 billion and began approximately $5.3 billion of development projects primarily in its core markets. We are currently seeking to acquire and develop assets primarily in the following six core coastal metropolitan areas: Boston, New York, Washington D.C., Southern California, San Francisco and Seattle. We also have investments (in the aggregate about 12.1% of our NOI at December 31, 2014) in the two core markets of South Florida and Denver but do not currently intend to acquire or develop new assets in these markets. Further, we are in the process of exiting Phoenix and Orlando and will use sales proceeds from these markets to acquire and/or develop new assets and for other corporate purposes.

As part of its strategy, the Company purchases completed and fully occupied apartment properties, partially completed or partially occupied properties and takes options on land or acquires land on which apartment properties can be constructed. We intend to hold a diversified portfolio of assets across our target markets. As of December 31, 2014, no single market/metropolitan area accounted for more than 17.5% of our NOI, though no guarantee can be made that NOI concentration may not increase in the future.

We endeavor to attract and retain the best employees by providing them with the education, resources and opportunities to succeed. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and residents as well as extensively train our customer service specialists in maintaining our properties and improvements, equipment and appliances. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees' engagement by surveying them annually and have consistently received high engagement scores.

We have a commitment to sustainability and consider the environmental impacts of our business activities. Sustainability and social responsibility are key drivers of our focus on creating the best apartment communities for residents to live, work and play. We have a dedicated in-house team that initiates and applies sustainable practices in all aspects of our business, including investment activities, development, property operations and property management activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been

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primarily concentrated in pedestrian-friendly urban locations near public transportation. When developing and renovating our properties, we strive to reduce energy and water usage by investing in energy saving technology while positively impacting the experience of our residents and the value of our assets. We continue to implement a combination of irrigation, lighting, HVAC and renewable energy improvements at our properties that will reduce energy and water consumption. The Company was recently named as the 2014 North American Residential – Large Cap Sector Leader by the Global Real Estate Sustainability Benchmark ("GRESB") survey, a globally recognized analysis of the sustainability indicators of approximately 650 real estate portfolios worldwide. For additional information regarding our sustainability efforts, see our December 2014 Corporate Social Responsibility and Sustainability Report at our website, www.equityresidential.com.

Competition

All of the Company's properties are located in developed areas that include other multifamily properties. The number of competitive multifamily properties in a particular area could have a material effect on the Company's ability to lease apartment units at its properties and on the rents charged. The Company may be competing with other entities that have greater resources than the Company and whose managers have more experience than the Company's managers. In addition, other forms of rental properties and single family housing provide housing alternatives to potential residents of multifamily properties. See Item 1A. Risk Factors for additional information with respect to competition.

Archstone Transaction

On February 27, 2013, the Company, AvalonBay Communities, Inc. (“AVB”) and certain of their respective subsidiaries completed their previously announced acquisition (the “Archstone Acquisition” or the "Archstone Transaction") from Archstone Enterprise LP (“Enterprise”) (which subsequently changed its name to Jupiter Enterprise LP), an affiliate of Lehman Brothers Holdings Inc. (“Lehman”) and its affiliates, of all of the assets of Enterprise (including interests in various entities affiliated with Enterprise), constituting a portfolio of apartment properties and other assets (the “Archstone Portfolio”). As a result of the Archstone Acquisition, the Company owns assets representing approximately 60% of the Archstone Portfolio. The consideration paid by the Company in connection with the Archstone Acquisition consisted of cash of approximately $4.0 billion (inclusive of $2.0 billion of Archstone secured mortgage principal paid off in conjunction with the closing), 34,468,085 Common Shares (which shares had a total value of $1.9 billion based on the February 27, 2013 closing price of EQR common shares of $55.99 per share) issued to the seller and the assumption of approximately $3.1 billion of mortgage debt (inclusive of a net mark-to-market premium of $127.9 million) and approximately 60% of all of the other assets and liabilities related to the Archstone Portfolio. See Note 4 in the Notes to Consolidated Financial Statements for further discussion.

Debt and Equity Activity

EQR issues public equity from time to time and guarantees certain debt of ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. In addition, ERPOP issues OP Units and preference interests ("Preference Units") from time to time.

Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the Company’s and the Operating Partnership's Capital Structure charts as of December 31, 2014.

Major Debt and Equity Activities for the Years Ended December 31, 2014, 2013 and 2012
During 2014:
The Company assumed $28.9 million of mortgage debt on one property.
The Company repaid $100.7 million of mortgage debt.
The Company repaid $500.0 million of 5.250% unsecured notes at maturity.
The Company repaid its $750.0 million unsecured term loan facility in conjunction with the note issuances discussed below.
The Company issued $450.0 million of five-year 2.375% fixed rate public notes, receiving net proceeds of $449.6 million before underwriting fees and other expenses, at an all-in effective interest rate of 2.52% and swapped the notes to a floating interest rate in conjunction with the issuance (see Note 9 in the Notes to Consolidated Financial Statements for further discussion).

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The Company issued $750.0 million of thirty-year 4.50% fixed rate public notes, receiving net proceeds of $744.7 million before underwriting fees, hedge termination costs and other expenses, at an all-in effective interest rate of 4.57% after termination of various forward starting swaps in conjunction with the issuance (see Note 9 in the Notes to Consolidated Financial Statements for further discussion).
The Company issued 2,086,380 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $82.6 million.
The Company issued 68,807 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $3.4 million.
The Company repurchased and retired 31,240 of its Common Shares at a price of $56.87 per share for total consideration of $1.8 million (all related to the vesting of employee restricted shares). See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
During 2013:
The Company assumed as part of the Archstone Transaction $2.2 billion of mortgage debt held in two Fannie Mae loan pools, consisting of $1.2 billion collateralized by 16 properties with an interest rate of 6.256% and a maturity date of November 1, 2017 ("Pool 3") and $963.5 million collateralized by 15 properties with an interest rate of 5.883% and a maturity date of November 1, 2014 ("Pool 4").
The Company paid down $825.0 million of Pool 3 mortgage debt and repaid $963.5 million of Pool 4 mortgage debt.
The Company assumed as part of the Archstone Transaction $346.6 million of tax-exempt bonds on four properties with interest rates ranging from SIFMA plus 0.860% to SIFMA plus 1.402% and maturity dates through November 15, 2036.
The Company assumed as part of the Archstone Transaction $339.0 million of other mortgage debt on three properties with fixed interest rates ranging from 0.100% to 5.240% and maturity dates through May 1, 2061.
The Company assumed as part of the Archstone Transaction $34.1 million of other mortgage debt on one property with a variable rate of LIBOR plus 1.75% and a maturity date of September 1, 2014.
The Company obtained an $800.0 million secured loan from a large insurance company which matures on November 10, 2023, is interest only and carries a fixed interest rate of 4.21% and was used in part to pay down Pool 3.
The Company repaid $400.0 million of 5.200% unsecured notes at maturity.
The Company issued $500.0 million of ten-year 3.00% fixed rate public notes, receiving net proceeds of $495.6 million before underwriting fees and other expenses, at an all-in effective interest rate of 3.998%.
The Company entered into a senior unsecured $750.0 million delayed draw term loan facility which was fully drawn on February 27, 2013 in connection with the Archstone Acquisition. The maturity date of January 11, 2015 was subject to a one-year extension option exercisable by the Company. The interest rate on advances under the term loan facility generally was LIBOR plus a spread (1.20%), which was dependent on the credit rating of the Company's long-term debt. The facility was paid off in the second quarter of 2014.
The Company issued 34,468,085 Common Shares to an affiliate of Lehman having a value of $1.9 billion (based on the February 27, 2013 closing price of EQR Common Shares of $55.99 per share) as partial consideration for the portion of the Archstone Portfolio acquired by the Company. Lehman has since sold all of these Common Shares.
The Company issued 586,017 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $17.3 million.
The Company issued 73,468 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $3.4 million.
During 2012:
The Company repaid $253.9 million of 6.625% unsecured notes and $222.1 million of 5.500% unsecured notes, both at maturity.
The Company repaid its $500.0 million term loan at maturity.
In connection with the Archstone Transaction, the Company issued 21,850,000 Common Shares at a price of $54.75 per share for total consideration of approximately $1.2 billion, after deducting underwriting commissions of $35.9 million. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.

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The Company issued 3,173,919 Common Shares at an average price of $60.59 per share for total consideration of $192.3 million pursuant to its At-The-Market (“ATM”) share offering program. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
The Company issued 1,608,427 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $49.0 million.
The Company issued 1,081,797 OP Units having a value of $66.6 million (based on the closing price for Common Shares of $61.57 on such date) as partial consideration for the acquisition of one rental property.
The Company issued 110,054 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $5.4 million.
The Company redeemed its Series N Cumulative Redeemable Preferred Shares for cash consideration of $150.0 million plus accrued dividends through the redemption date.

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 on July 30, 2013 and expires on July 30, 2016. In July 2013, the Board of Trustees also approved an increase to the amount of shares which may be offered under the ATM program to 13.0 million Common Shares and extended the program maturity to July 2016. 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).
Credit Facilities

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. EQR guarantees the Operating Partnership’s revolving credit facility up to the maximum amount and for the full term of the facility.

On January 11, 2013, the Company replaced its existing $1.75 billion facility with a $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The Company has the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 1.05%) and the Company pays an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt.

In July 2011, the Company replaced its then existing unsecured revolving credit facility with a new $1.25 billion unsecured revolving credit facility maturing on July 13, 2014, subject to a one-year extension option exercisable by the Company. The Company had the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. On January 6, 2012, the Company amended this credit facility to increase available borrowings by an additional $500.0 million to $1.75 billion with all other terms, including the July 13, 2014 maturity date, remaining the same. The interest rate on advances under the credit facility was generally LIBOR plus a spread (1.15%) and the Company paid an annual facility fee of 0.2%. Both the spread and the facility fee were dependent on the credit rating of the Company's long-term debt. The facility had replaced the Company's previous $1.425 billion facility which was scheduled to mature in February 2012.
   
As of February 20, 2015, the amount available on the credit facility was $1.94 billion (net of $43.8 million which was restricted/dedicated to support letters of credit, net of $300.0 million outstanding on the credit facility and net of $220.0 million outstanding on the commercial paper program) (see Note 18 in the Notes to Consolidated Financial Statements for additional discussion of the commercial paper program). As of December 31, 2014, the amount available on the credit facility was $2.12 billion (net of $43.8 million which was restricted/dedicated to support letters of credit and net of $333.0 million outstanding). During the year ended December 31, 2014, the weighted average interest rate was 0.95%. As of December 31, 2013, the amount available on the credit facility was $2.35 billion (net of $34.9 million which was restricted/dedicated to support letters of credit and net of $115.0 million outstanding). During the year ended December 31, 2013, the weighted average interest rate was 1.26%.
Environmental Considerations
See Item 1A. Risk Factors for information concerning the potential effects of environmental regulations on our operations.


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Item 1A. Risk Factors
General
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. Unless otherwise indicated, when used in this section, the terms “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP and the term “Operating Partnership” means collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. This Item 1A. includes forward-looking statements. You should refer to our discussion of the qualifications and limitations on forward-looking statements included in Item 7.
The occurrence of the events discussed in the following risk factors could adversely affect, possibly in a material manner, our business, financial condition or results of operations, which could adversely affect the value of our common shares of beneficial interest or preferred shares of beneficial interest (which we refer to collectively as “Shares”), Preference Units, OP Units, restricted units (formerly known as Long-Term Incentive Plan ("LTIP") Units) and our public unsecured debt. In this section, we refer to the Shares, Preference Units, OP Units, restricted units and public unsecured debt together as our “securities” and the investors who own such securities as our “security holders”.
Our performance and securities value are subject to risks associated with the real estate industry.
General
Real property investments are subject to varying degrees of risk and are relatively illiquid. Numerous factors may adversely affect the economic performance and value of our properties and the ability to realize that value. These factors include changes in the global, national, regional and local economic climates, local conditions such as an oversupply of multifamily properties or a reduction in demand for our multifamily properties, the attractiveness of our properties to residents, competition from other multifamily properties and single family homes and changes in market rental rates. Our performance also depends on our ability to collect rent from residents and to pay for adequate maintenance, insurance and other operating costs, including real estate taxes, all of which could increase over time. These operating expenses could rise faster than our revenues causing our income to decline. Sources of labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated. Also, the expenses of owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property.
We may be unable to renew leases or relet units as leases expire.
When our residents decide to leave our apartments, whether because they decide not to renew their leases or they leave prior to their lease expiration date, we may not be able to relet their apartment units. Even if the residents do renew or we can relet the apartment units, the terms of renewal or reletting may be less favorable than current lease terms. If we are unable to promptly renew the leases or relet the apartment units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then our results of operations and financial condition will be adversely affected. If residents do not experience increases in their income, we may be unable to increase rent and/or delinquencies may increase. Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction and excess inventory of multifamily and single family housing, increasing portions of single family housing stock being converted to rental use, rental housing subsidized by the government, other government programs that favor single family rental housing or owner occupied housing over multifamily rental housing, governmental regulations, slow or negative employment growth and household formation, the availability of low-interest mortgages or the availability of mortgages requiring little or no down payment for single family home buyers, changes in social preferences and the potential for geopolitical instability, all of which are beyond the Company's control. In addition, various state and local municipalities are considering and may continue to consider rent control legislation or take other actions which could limit our ability to raise rents. Finally, the federal government's policies, many of which may encourage home ownership, can increase competition and possibly limit our ability to raise rents. Consequently, our cash flow and ability to service debt and make distributions to security holders could be reduced.
The retail/commercial space at our properties primarily serves as an additional amenity for our residents. The long term nature of our retail/commercial leases (generally five to ten years with market based renewal options) and the characteristics of many of our tenants (generally small, local businesses) may subject us to certain risks. We may not be able to lease new space for rents that are consistent with our projections or for market rates. Also, when leases for our existing retail/commercial space expire, the space may not be relet or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the current lease terms. Our properties compete with other properties with retail/commercial space. The presence

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of competitive alternatives may affect our ability to lease space and the level of rents we can obtain. If our retail/commercial tenants experience financial distress or bankruptcy, they may fail to comply with their contractual obligations, seek concessions in order to continue operations or cease their operations which could adversely impact our results of operations and financial condition. The revenues from our retail/commercial space represent approximately 4% of our total rental income.
We have increased our concentration of properties in certain core markets, which could have an adverse effect on our operations if a particular market is adversely affected by economic or other conditions.

We have increased our concentration of properties in certain core markets as a result of our strategy to reposition our portfolio from low barrier to entry/non-core markets to high barrier to entry/core markets. If any one or more of our core markets (Boston, New York, Washington D.C., Southern California, San Francisco, Seattle, South Florida and Denver) is adversely affected by local or regional economic conditions (such as business layoffs, industry slowdowns, changing demographics and other factors) or local real estate conditions (such as oversupply of or reduced demand for multifamily properties), such conditions may have an increased adverse impact on our results of operations than if our portfolio was more geographically diverse.
Because real estate investments are illiquid, we may not be able to sell properties when appropriate.
Real estate investments generally cannot be sold quickly. We may not be able to reconfigure our portfolio promptly in response to economic or other conditions. This inability to reallocate our capital promptly could adversely affect our financial condition and ability to make distributions to our security holders.
New acquisitions, development projects and/or rehabs may fail to perform as expected and competition for acquisitions may result in increased prices for properties.
We intend to actively acquire, develop and rehab multifamily properties for rental operations as market conditions dictate. We may also acquire multifamily properties that are unoccupied or in the early stages of lease up. We may be unable to lease up these apartment properties on schedule, resulting in decreases in expected rental revenues and/or lower yields due to lower occupancy and rates as well as higher than expected concessions or higher than expected operating expenses. We may not be able to achieve rents that are consistent with expectations for acquired, developed or rehabbed properties. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position, to complete a development property or to complete a rehab. Additionally, we expect that other real estate investors with capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development and acquisition efforts. This competition (or lack thereof) may increase (or depress) prices for multifamily properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including large portfolios, that could increase our size and result in alterations to our capital structure. The total number of apartment units under development, costs of development and estimated completion dates are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation.
In connection with such government regulation, we may incur liability if our properties are not constructed and operated in compliance with the accessibility provisions of the Americans with Disabilities Act, the Fair Housing Act or other federal, state or local requirements. Noncompliance could result in fines, subject us to lawsuits and require us to remediate or repair the noncompliance.
Development and construction risks could affect our profitability.
We intend to continue to develop multifamily properties. These activities can include long planning and entitlement timelines and can involve complex and costly activities, including significant environmental remediation or construction work in high-density urban areas. We may abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover expenses already incurred in exploring those opportunities. The occupancy rates and rents at a property may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions beyond our control and the development by competitors of competing properties. We may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or the delay or abandonment of opportunities.


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Our investments in joint ventures could be adversely affected by our lack of sole decision-making authority regarding major decisions, our reliance on our joint venture partners' financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.
We currently do and may continue in the future to develop and acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. A portion of the assets acquired in the Archstone Transaction were acquired through joint ventures with AVB that neither we nor AVB control solely. We have several joint ventures with other real estate investors. Joint venture investments, including the joint ventures with AVB, involve risks not present with respect to our wholly owned properties, including the following:
our joint venture partners might experience financial distress, become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture;
we may be responsible to our partners for indemnifiable losses;
our joint venture partners may have business interests or goals with respect to a property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;
we may be unable to take actions that are opposed by our joint venture partners under arrangements that require us to share decision-making authority over major decisions affecting the ownership or operation of the joint venture and any property owned by the joint venture, such as the sale or financing of the property or the making of additional capital contributions for the benefit of the property;
our joint venture partners may take actions that we oppose;
our ability to sell or transfer our interest in a joint venture to a third party may be restricted without prior consent of our joint venture partners;
we may disagree with our joint venture partners about decisions affecting a property or the joint venture, which could result in litigation or arbitration that increases our expenses, distracts our officers and disrupts the day-to-day operations of the property, including by delaying important decisions until the dispute is resolved; and
we may suffer losses as a result of actions taken by our joint venture partners with respect to our joint venture investments.
At times we have entered into agreements providing for joint and several liability with our partners. Frequently, we and our partners may each have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partners' interest, at a time when we otherwise would not have initiated such a transaction. Any of these risks could materially and adversely affect our ability to generate and recognize attractive returns on our joint venture investments, which could have a material adverse effect on our results of operations, financial condition and distributions to our shareholders.
Several of the assets we acquired in the Archstone Transaction along with certain preferred interests acquired in joint ventures with AVB as part of the Archstone Transaction are subject to tax protection agreements, which could limit our flexibility with respect to our ownership of such assets or cause us to incur material costs.

Several of the assets we acquired in the Archstone Transaction were contributed to Archstone subject to various agreements limiting the ability of the owner of the property to take actions that would trigger income tax liability for the contributing owner of the property, including a taxable disposition of the property. In addition, we will also be required to maintain a certain amount of qualified nonrecourse financing on the tax protected properties during their respective restricted periods. Our obligations relating to the tax protected properties may affect the way in which we conduct our business, including whether, when and under what circumstances we sell properties or interests therein and the timing and nature of our financings and refinancing transactions. As a result, we may not be able to dispose of or refinance the tax protected properties when to do so may have otherwise been favorable to us and our shareholders, which could have a material adverse effect on our results of operations and financial condition. Certain preferred interests acquired in joint ventures with AVB as part of the Archstone Transaction have complex tax requirements that, if violated, may cause us to be required to indemnify the preferred stockholders for certain tax protection costs.
Changes in market conditions and volatility of share prices could adversely affect the market price of our Common Shares.
The stock markets, including the New York Stock Exchange, on which we list our Common Shares, have experienced significant price and volume fluctuations over time. As a result, the market price of our Common Shares could be similarly volatile, and investors in our Common Shares may experience a decrease in the value of their shares, including decreases unrelated to our

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operating performance or prospects. The market price of our Common Shares may decline or fluctuate significantly in response to many factors, including but not limited to the following:
general market and economic conditions;
actual or anticipated variations in our guidance, quarterly operating results or dividends;
changes in our funds from operations, normalized funds from operations or earnings estimates;
difficulties or inability to access capital or extend or refinance debt;
large portfolio acquisitions or dispositions;
decreasing (or uncertainty in) real estate valuations;
rising crime rates in markets where our increasingly urban portfolio is concentrated;
a change in analyst and/or credit ratings;
adverse market reaction to any additional debt we incur in the future;
governmental regulatory action, including changes or proposed changes to the mandates of Fannie Mae or Freddie Mac, and changes in tax laws;
the issuance of additional Common Shares, or the perception that such issuances might occur, including under EQR's ATM program; and
the resale of substantial amounts of our common shares, or the anticipation of the resale of such shares, by large holders of our securities.
We may not have sufficient cash flows from operations after capital expenditures to cover our distributions and our dividend policy may lead to quicker dividend reductions.
We generally consider our cash flows provided by operating activities after capital expenditures to be adequate to meet operating requirements and payment of distributions to our security holders. However, there may be times when we experience shortfalls in our coverage of distributions, which may cause us to consider reducing our distributions and/or using the proceeds from property dispositions or additional financing transactions to make up the difference. Should these shortfalls occur for lengthy periods of time or be material in nature, our financial condition may be adversely affected and we may not be able to maintain our current distribution levels. While our current dividend policy makes it less likely we will over distribute, it will also lead to a dividend reduction more quickly should operating results deteriorate. See Item 7 for additional discussion regarding our dividend policy.
The value of investment securities could result in losses to the Company.
From time to time, the Company holds investment securities and/or cash investments that have various levels of repayment and liquidity risk, including government obligations and bond funds, money market funds or bank deposits. On occasion we also may purchase securities of companies in our own industry as a means to invest funds. There may be times when we experience declines in the value of these investment securities, which may result in losses to the Company and our financial condition or results of operations could be adversely affected. Sometimes the cash we deposit at a bank substantially exceeds the FDIC insurance limit or we invest cash in money market or similar type funds with investment management institutions that may be subject to, now or in the future, liquidity restrictions, resulting in risk to the Company of loss or lack of immediate availability of funds if these banks or institutions fail to meet their obligations.
Any weaknesses identified in our internal control over financial reporting could have an adverse effect on our share price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which in turn could have an adverse effect on our share price.


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The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our reputation and business relationships, all of which could negatively impact our financial results.
    
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data or steal confidential information, including information regarding our residents and employees. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced to third party service providers. In addition, information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber attacks. Our primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our reputation, damage to our business relationships with our residents/tenants and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident.
Changes in laws and litigation risk could affect our business.
We are generally not able to pass through to our residents under existing leases any real estate or other federal, state or local taxes. Consequently, any such tax increases may adversely affect our financial condition and limit our ability to make distributions to our security holders.
We may become involved in legal proceedings, including but not limited to, proceedings related to consumer, shareholder, employment, environmental, development, condominium conversion, tort and commercial legal issues that, if decided adversely to or settled by us, could result in liability material to our financial condition or results of operations.
Environmental problems are possible and can be costly.
Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at such property. The owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination. These laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site.
Substantially all of our properties have been the subject of environmental assessments completed by qualified independent environmental consulting companies. While these environmental assessments have not revealed, nor are we aware of, any environmental liability that our management believes would have a material adverse effect on our business, results of operations, financial condition or liquidity, there can be no assurance that we will not incur such liabilities in the future.
We are aware that some of our properties have lead paint and have implemented an operations and maintenance program at each of those properties. While we do not currently anticipate that we will incur any material liabilities as a result of the presence of lead paint at our properties, there can be no assurance that we will not incur such liabilities in the future.
There have been a number of lawsuits against owners and managers of multifamily properties alleging personal injury and property damage caused by the presence of mold in residential real estate. While we have adopted programs designed to minimize the existence of mold in any of our properties as well as guidelines for promptly addressing and resolving reports of mold to minimize any impact mold might have on our residents or the property, should mold become an issue in the future, our financial condition or results of operations may be adversely affected.
We cannot be assured that existing environmental assessments of our properties reveal all environmental liabilities, that any prior owner of any of our properties did not create a material environmental condition not known to us, or that a material environmental condition does not otherwise exist as to any of our properties.



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Climate change
To the extent that climate change does occur, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected.
In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties and could also require us to spend more on our new development properties without a corresponding increase in revenue.
Insurance policy deductibles, exclusions and counterparties
    
As of December 31, 2014, the Company's property insurance policies provide for a per occurrence deductible of $250,000. Any earthquake and named windstorm losses in critical areas are subject to a deductible of 5% of the values of the buildings involved in the losses. The Company also typically self-insures a substantial portion of the first $50 million of a property loss in excess of these base deductibles. Should a claim exceed these amounts, it would be 100% covered by insurance. Furthermore, the Company purchased additional coverage in the event that the Company suffers multiple non-catastrophic occurrences with losses from $25 million to $50 million within the same policy year. The Company's general liability and worker's compensation policies at December 31, 2014 provide for a $2.0 million and $1.0 million per occurrence deductible, respectively. These higher deductible and self-insured retention amounts do expose the Company to greater potential for uninsured losses. The Company also has become more susceptible to large losses as it has transformed its portfolio, becoming more concentrated in fewer, more valuable assets over a smaller geographical footprint. Furthermore, the potential impact of climate change, increased severe weather or earthquakes could cause a significant increase in insurance premiums and deductibles, or a decrease in the availability of coverage, either of which could expose the Company to even greater uninsured losses which may adversely affect our financial condition or results of operations.

The Company also has $750.0 million in terrorism insurance coverage, with a $100,000 deductible. This coverage excludes losses from nuclear, biological and chemical attacks. In the event of a terrorist attack impacting one or more of our properties, we could lose the revenues from the property, our capital investment in the property and possibly face liability claims from residents or others suffering injuries or losses.

As of December 31, 2014, the Company's cyber liability insurance policy provides for a $5.0 million general limit and a per occurrence deductible of $250,000. Cyber liability insurance generally covers costs associated with the wrongful release, through inadvertent breach or network attack, of personally identifiable information such as social security or credit card numbers. This cyber policy would cover the cost of victim notification, credit monitoring and other crisis response expenses.

The Company relies on third party insurance providers for its property, general liability and worker's compensation insurance. While there has yet to be any non-performance by these major insurance providers, should any of them experience liquidity issues or other financial distress, it could negatively impact the Company. In addition, the Company annually assesses its insurance needs based on the cost of coverage and other factors. We may choose to self insure a greater portion of this risk in the future or may choose to have higher deductibles or lesser policy terms.

The inability of Lehman to fulfill its indemnification obligations to us under the purchase agreement for the Archstone Transaction could increase our liabilities and adversely affect our results of operations and financial condition.
 
In addition to certain indemnification obligations of each party to the purchase agreement for the Archstone Transaction relating to breaches of fundamental representations and warranties and breaches of covenants and certain other specified matters, we negotiated as a term in the purchase agreement that Lehman retain responsibility for and indemnify us against damages resulting from certain third-party claims or other liabilities. These third-party claims and other liabilities include, without limitation, costs associated with various litigation matters. Lehman filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in September 2008 and is currently in the process of post-petition liquidation. If Lehman completes its liquidation prior to the termination of their indemnity obligations to us under the purchase agreement, or otherwise distributes substantially all of its assets to its creditors prior to such time, Lehman may not be able to satisfy its obligations with respect to claims and retained liabilities covered by the purchase agreement. The failure of Lehman to satisfy such obligations could have a material adverse effect on our results of operations and financial condition because claimants may successfully assert that we are liable for those claims and/or retained liabilities. In addition, we expect that certain obligations of Lehman to indemnify us will terminate upon expiration of the applicable indemnification period (generally no more than three years following the closing). The assertion of third-party

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claims after the expiration of the applicable indemnification period, or the failure of Lehman to satisfy its indemnification obligations, could have a material adverse effect on our results of operations and financial condition. 
Non-performance by our operating counterparties could adversely affect our performance.
We have relationships with and, from time to time, we execute transactions with or receive services from many counterparties. As a result, defaults by counterparties could result in services not being provided, or volatility in the financial markets could affect counterparties' ability to complete transactions with us as intended, both of which could result in disruptions to our operations that may adversely affect our business and results of operations.
Debt financing and preferred shares/preference units could adversely affect our performance.
General
Please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for the Company's total debt and unsecured debt summaries as of December 31, 2014.
In addition to debt, we have a liquidation value of $50.0 million of outstanding preferred shares of beneficial interest/preference units with a dividend preference of 8.29% per annum as of December 31, 2014. Our use of debt and preferred equity financing creates certain risks, including the following:
Disruptions in the financial markets could adversely affect our ability to obtain debt financing and impact our acquisitions and dispositions.
Dislocations and liquidity disruptions in capital and credit markets could impact liquidity in the debt markets, resulting in financing terms that are less attractive to us and/or the unavailability of certain types of debt financing. Should the capital and credit markets experience volatility and the availability of funds again become limited, or be available only on unattractive terms, we will incur increased costs associated with issuing debt instruments. In addition, it is possible that our ability to access the capital and credit markets may be limited or precluded by these or other factors at a time when we would like, or need, to do so, which would adversely impact our ability to refinance maturing debt and/or react to changing economic and business conditions. Uncertainty in the credit markets could negatively impact our ability to make acquisitions and make it more difficult or not possible for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing. Potential continued disruptions in the financial markets could also have other unknown adverse effects on us or the economy generally and may cause the price of our securities to fluctuate significantly and/or to decline.

Potential reforms to Fannie Mae and Freddie Mac could adversely affect our performance.

There is significant uncertainty surrounding the futures of Fannie Mae and Freddie Mac (the “Government Sponsored Enterprises” or “GSEs”). Through their lender originator networks, the GSEs are significant lenders both to the Company and to buyers of the Company's properties. The GSEs have a mandate to support multifamily housing through their financing activities. Any changes to their mandates, further reductions in their size or the scale of their activities or loss of key personnel could have a significant impact on the Company and may, among other things, lead to lower values for our assets and higher interest rates on our borrowings. The GSE's regulator has set overall volume limits on most of the lending activities of the GSEs. For 2015, these activities are generally consistent with historical requirements and are not anticipated to materially impact the GSEs' overall multifamily lending activity. However, going forward the regulator could require the GSEs to focus more of their lending activities on small borrowers or properties that the regulator deems affordable, which may or may not include the Company's assets. Disruptions in the floating rate tax-exempt bond market (where interest rates reset weekly) and in the credit market's perception of the GSEs, which guarantee and provide liquidity for many of these bonds, have been experienced in the past and may be experienced in the future and could result in an increase in interest rates on these debt obligations. These bonds could also be put to our consolidated subsidiaries if the GSEs fail to satisfy their guaranty obligations. While this obligation is in almost all cases non-recourse to us, this could cause the Company to have to repay these obligations on short notice or risk foreclosure actions on the collateralized assets.

Non-performance by our financial counterparties could adversely affect our performance.
Although we have not experienced any material counterparty non-performance, disruptions in financial and credit markets could, among other things, impede the ability of our counterparties to perform on their contractual obligations. There are multiple

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financial institutions that are individually committed to lend us varying amounts as part of our revolving credit facility. Should any of these institutions fail to fund their committed amounts when contractually required, our financial condition could be adversely affected. Should several of these institutions fail to fund, we could experience significant financial distress.
The Company also has developed assets with joint venture partners which were financed by financial institutions that have experienced varying degrees of distress in the past and could experience similar distress as economic conditions change. If one or more of these lenders fail to fund when contractually required, the Company or its joint venture partner may be unable to complete construction of its development properties.
A significant downgrade in our credit ratings could adversely affect our performance.
A significant downgrade in our credit ratings, while not affecting our ability to draw proceeds under the revolving credit facility, would cause our borrowing costs to increase under the revolving credit facility, impact our ability to borrow secured and unsecured debt, impair our ability to access the commercial paper market or otherwise limit our access to capital. In addition, a downgrade below investment grade would require us to post cash collateral and/or letters of credit in favor of some of our secured lenders to cover our self-insured property and liability insurance deductibles or to obtain lower deductible insurance compliant with the lenders' requirements at the lower ratings level.
Scheduled debt payments could adversely affect our financial condition.
In the future, our cash flow could be insufficient to meet required payments of principal and interest or to pay distributions on our securities at expected levels.
We may not be able to refinance existing debt, including joint venture indebtedness (which in virtually all cases requires substantial principal payments at maturity) and, if we can, the terms of such refinancing might not be as favorable as the terms of existing indebtedness. If principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our operating cash flow will not be sufficient in all years to repay all maturing debt. As a result, certain of our other debt may cross default, we may be forced to postpone capital expenditures necessary for the maintenance of our properties, we may have to dispose of one or more properties on terms that would otherwise be unacceptable to us or we may be forced to allow the mortgage holder to foreclose on a property. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would likely have a negative impact on our financial condition and results of operations.
Please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for the Company's debt maturity schedule as of December 31, 2014.
Financial covenants could adversely affect the Company's financial condition.
The mortgages on our properties may contain customary negative covenants that, among other things, limit our ability, without the prior consent of the lender, to further mortgage the property and to reduce or change insurance coverage. In addition, our unsecured credit facility contains certain restrictions, requirements and other limitations on our ability to incur debt. The indentures under which a substantial portion of our unsecured debt was issued also contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios, as well as limitations on our ability to incur secured and unsecured debt (including acquisition financing), and to sell all or substantially all of our assets. Our credit facility and indentures are cross-defaulted and also contain cross default provisions with other material debt. While the Company believes it was in compliance with its unsecured public debt covenants for both the years ended December 31, 2014 and 2013, should it fall out of compliance, it would likely have a negative impact on our financial condition and results of operations.
Some of the properties were financed with tax-exempt bonds or otherwise contain certain restrictive covenants or deed restrictions, including affordability requirements. The Company, and from time to time its consultants, monitor compliance with the restrictive covenants and deed restrictions that affect these properties. If these compliance requirements restrict our ability to increase our rental rates to low or moderate-income residents, or eligible/qualified residents, then our income from these properties may be limited. While we generally believe that the interest rate benefit attendant to properties with tax-exempt bonds more than outweighs any loss of income due to restrictive covenants or deed restrictions, this may not always be the case. Some of these requirements are complex and our failure to comply with them may subject us to material fines or liabilities.



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Our degree of leverage could limit our ability to obtain additional financing.
Our degree of leverage could have important consequences to security holders. For example, the degree of leverage could affect our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes, making us more vulnerable to a downturn in business or the economy in general. Our consolidated debt-to-total market capitalization ratio was 28.5% as of December 31, 2014. In addition, our most restrictive unsecured public debt covenants are as follows:
 
 
December 31,
2014
 
December 31,
2013
Total Debt to Adjusted Total Assets (not to exceed 60%)
 
39.2
%
 
40.0
%
Secured Debt to Adjusted Total Assets (not to exceed 40%)
 
18.4
%
 
19.2
%
Consolidated Income Available for Debt Service to
 
 

 
 

Maximum Annual Service Charges
 
 

 
 

(must be at least 1.5 to 1)
 
3.38

 
3.07

Total Unsecured Assets to Unsecured Debt
 
 

 
 

(must be at least 150%)
 
336.5
%
 
326.9
%
    
Rising interest rates could adversely affect cash flow.
Advances under our credit facility bears interest at a variable rate based upon LIBOR at various interest periods, plus a spread dependent upon the Operating Partnership's credit rating, or based upon bids received from the lending group. Certain public issuances of our senior unsecured debt instruments may also, from time to time, bear interest at floating rates or be swapped to a floating rate of interest. We may also borrow additional money with variable interest rates in the future. Increases in interest rates would increase our interest expense under these debt instruments and would increase the costs of refinancing existing debt and of issuing new debt. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt and make distributions to security holders.
Derivatives and hedging activity could adversely affect cash flow.
In the normal course of business, we use derivatives to manage our exposure to interest rate volatility on debt instruments, including hedging for future debt issuances. At other times we may utilize derivatives to increase our exposure to floating interest rates. We may also use derivatives to manage our exposure to foreign exchange rates or manage commodity prices in the daily operations of our business. There can be no assurance that these hedging arrangements will have the desired beneficial impact. These arrangements, which can include a number of counterparties, may expose us to additional risks, including failure of any of our counterparties to perform under these contracts, and may involve extensive costs, such as transaction fees or breakage costs, if we terminate them. No strategy can completely insulate us from the risks associated with interest rate, foreign exchange or commodity pricing fluctuations.
We depend on our key personnel.
We depend on the efforts of the Chairman of our Board of Trustees, Samuel Zell, and our executive officers, particularly David J. Neithercut, our President and Chief Executive Officer (“CEO”). If they resign or otherwise cease to be employed by us, our operations could be temporarily adversely affected. Mr. Zell has entered into retirement benefit and noncompetition agreements with the Company.
Control and influence by significant security holders could be exercised in a manner adverse to other security holders.
The consent of certain affiliates of Mr. Zell is required for certain amendments to the Sixth Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Partnership Agreement”). As a result of their security ownership and rights concerning amendments to the Partnership Agreement, the security holders referred to herein may have influence over the Company. Although to the Company's knowledge these security holders have not agreed to act together on any matter, they would be in a position to exercise even more influence over the Company's affairs if they were to act together in the future. This influence could conceivably be exercised in a manner that is inconsistent with the interests of other security holders. For additional information regarding the security ownership of our trustees, including Mr. Zell, and our executive officers, see Equity Residential's definitive proxy statement.

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Shareholders' ability to effect changes in control of the Company is limited.
Provisions of our declaration of trust and bylaws could inhibit changes in control.
Certain provisions of our Declaration of Trust and Bylaws may delay or prevent a change in control of the Company or other transactions that could provide the security holders with a premium over the then-prevailing market price of their securities or which might otherwise be in the best interest of our security holders. This includes the 5% Ownership Limit described below. While our existing preferred shares/preference units do not have these provisions, any future series of preferred shares/preference units may have certain voting provisions that could delay or prevent a change in control or other transactions that might otherwise be in the interest of our security holders. Our Bylaws require certain information to be provided by any security holder, or persons acting in concert with such security holder, who proposes business or a nominee at an annual meeting of shareholders, including disclosure of information related to hedging activities and investment strategies with respect to our securities. These requirements could delay or prevent a change in control or other transactions that might otherwise be in the interest of our security holders.
We have a share ownership limit for REIT tax purposes.
To remain qualified as a REIT for federal income tax purposes, not more than 50% in value of our outstanding Shares may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of any year. To facilitate maintenance of our REIT qualification, our Declaration of Trust, subject to certain exceptions, prohibits ownership by any single shareholder of more than 5% of the lesser of the number or value of any outstanding class of common or preferred shares. We refer to this restriction as the “Ownership Limit.” Absent any exemption or waiver granted by our Board of Trustees, securities acquired or held in violation of the Ownership Limit will be transferred to a trust for the exclusive benefit of a designated charitable beneficiary, and the security holder's rights to distributions and to vote would terminate. A transfer of Shares may be void if it causes a person to violate the Ownership Limit. The Ownership Limit could delay or prevent a change in control and, therefore, could adversely affect our security holders' ability to realize a premium over the then-prevailing market price for their Shares. To reduce the ability of the Board to use the Ownership Limit as an anti-takeover device, the Company's Ownership Limit requires, rather than permits, the Board to grant a waiver of the Ownership Limit if the individual seeking a waiver demonstrates that such ownership would not jeopardize the Company's status as a REIT. We have issued several of these waivers in the past.
Our preferred shares may affect changes in control.
Our Declaration of Trust authorizes the Board of Trustees to issue up to 100 million preferred shares, and to establish the preferences and rights (including the right to vote and the right to convert into common shares) of any preferred shares issued. The Board of Trustees may use its powers to issue preferred shares and to set the terms of such securities to delay or prevent a change in control of the Company, even if a change in control were in the interest of security holders.
Inapplicability of Maryland law limiting certain changes in control.
Certain provisions of Maryland law applicable to real estate investment trusts prohibit “business combinations” (including certain issuances of equity securities) with any person who beneficially owns ten percent or more of the voting power of outstanding securities, or with an affiliate who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the Company's outstanding voting securities (an “Interested Shareholder”), or with an affiliate of an Interested Shareholder. These prohibitions last for five years after the most recent date on which the Interested Shareholder became an Interested Shareholder. After the five-year period, a business combination with an Interested Shareholder must be approved by two super-majority shareholder votes unless, among other conditions, holders of common shares receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Shareholder for its common shares. As permitted by Maryland law, however, the Board of Trustees of the Company has opted out of these restrictions with respect to any business combination involving Mr. Zell and certain of his affiliates and persons acting in concert with them. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to a business combination involving us and/or any of them. Such business combinations may not be in the best interest of our security holders.
Our success as a REIT is dependent on compliance with federal income tax requirements.
Our failure to qualify as a REIT would have serious adverse consequences to our security holders.
We believe that we have qualified for taxation as a REIT for federal income tax purposes since our taxable year ended December 31, 1992 based, in part, upon opinions of tax counsel received whenever we have issued equity securities or engaged in significant merger transactions. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements,

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however, are highly technical and complex. We cannot, therefore, guarantee that we have qualified or will qualify as a REIT in the future. The determination that we are a REIT requires an analysis of various factual matters that may not be totally within our control. For example, to qualify as a REIT, our gross income must generally come from rental and other real estate or passive related sources that are itemized in the REIT tax laws. We are also required to distribute to security holders at least 90% of our REIT taxable income excluding net capital gains. The fact that we hold our assets through the Operating Partnership further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status; however, the REIT qualification rules permit REITs in certain circumstances to pay a monetary penalty for inadvertent mistakes rather than lose REIT status. There is also risk that Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for us to remain qualified as a REIT. We do not believe, however, that any pending or proposed tax law changes would jeopardize our REIT status.

If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified from taxation as a REIT for four years following the year in which we failed to qualify as a REIT. If we fail to qualify as a REIT, we would have to pay significant income taxes. We therefore would have less money available for investments or for distributions to security holders. This would likely have a significant adverse effect on the value of our securities. In addition, we would no longer be required to make any distributions to security holders. Even if we qualify as a REIT, we are and will continue to be subject to certain federal, state and local taxes on our income and property. In addition, various business activities which generate income that is not qualifying income for a REIT are conducted through taxable REIT subsidiaries and will be subject to federal and state income tax at regular corporate rates to the extent they generate taxable income.
We could be disqualified as a REIT or have to pay taxes if our merger partners did not qualify as REITs.
If any of our prior merger partners had failed to qualify as a REIT throughout the duration of their existence, then they might have had undistributed “Subchapter C corporation earnings and profits” at the time of their merger with us. If that was the case and we did not distribute those earnings and profits prior to the end of the year in which the merger took place, we might not qualify as a REIT. We believe, based in part upon opinions of legal counsel received pursuant to the terms of our merger agreements as well as our own investigations, among other things, that each of our prior merger partners qualified as a REIT and that, in any event, none of them had any undistributed “Subchapter C corporation earnings and profits” at the time of their merger with us. If any of our prior merger partners failed to qualify as a REIT, an additional concern would be that they could have been required to recognize taxable gain at the time they merged with us. We would be liable for the tax on such gain. We also could have to pay corporate income tax on any gain existing at the time of the applicable merger on assets acquired in the merger if the assets are sold within ten years of the merger.
Compliance with REIT distribution requirements may affect our financial condition.
Distribution requirements may increase the indebtedness of the Company.
We may be required from time to time, under certain circumstances, to accrue as income for tax purposes interest and rent earned but not yet received. In such event, or upon our repayment of principal on debt, we could have taxable income without sufficient cash to enable us to meet the distribution requirements of a REIT. Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to meet these distribution requirements.
Tax elections regarding distributions may impact future liquidity of the Company.
In past years we have made, and under certain circumstances may consider making again in the future, a tax election to treat future distributions to shareholders as distributions in the current year. This election, which is provided for in the Internal Revenue Code, may allow us to avoid increasing our dividends or paying additional income taxes in the current year. However, this could result in a constraint on our ability to decrease our dividends in future years without creating risk of either violating the REIT distribution requirements or generating additional income tax liability.
Federal Income Tax Considerations
General
The following discussion summarizes the federal income tax considerations material to a holder of common shares. It is not exhaustive of all possible tax considerations. For example, it does not give a detailed discussion of any state, local or foreign tax considerations. The following discussion also does not address all tax matters that may be relevant to prospective shareholders

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in light of their particular circumstances. Moreover, it does not address all tax matters that may be relevant to shareholders who are subject to special treatment under the tax laws, such as insurance companies, tax-exempt entities, financial institutions or broker-dealers, foreign corporations, persons who are not citizens or residents of the United States and persons who own shares through a partnership or other entity treated as a flow-through entity for federal income tax purposes.

The specific tax attributes of a particular shareholder could have a material impact on the tax considerations associated with the purchase, ownership and disposition of common shares. Therefore, it is essential that each prospective shareholder consult with his or her own tax advisors with regard to the application of the federal income tax laws to the shareholder's personal tax situation, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

The information in this section is based on the current Internal Revenue Code, current, temporary and proposed Treasury regulations, the legislative history of the Internal Revenue Code, current administrative interpretations and practices of the Internal Revenue Service, including its practices and policies as set forth in private letter rulings, which are not binding on the Internal Revenue Service, and existing court decisions. Future legislation, regulations, administrative interpretations and court decisions could change current law or adversely affect existing interpretations of current law. Any change could apply retroactively. Thus, it is possible that the Internal Revenue Service could challenge the statements in this discussion, which do not bind the Internal Revenue Service or the courts, and that a court could agree with the Internal Revenue Service.
Our taxation

We elected REIT status beginning with the year that ended December 31, 1992. In any year in which we qualify as a REIT, we generally will not be subject to federal income tax on the portion of our REIT taxable income or capital gain that we distribute to our shareholders. This treatment substantially eliminates the double taxation that applies to most corporations, which pay a tax on their income and then distribute dividends to shareholders who are in turn taxed on the amount they receive. We elected taxable REIT subsidiary status for certain of our corporate subsidiaries engaged in activities which cannot be performed directly by a REIT, such as condominium conversion and sale activities. As a result, we will be subject to federal income tax on the taxable income generated by these activities in our taxable REIT subsidiaries.

We will be subject to federal income tax at regular corporate rates upon our REIT taxable income or capital gains that we do not distribute to our shareholders. In addition, we will be subject to a 4% excise tax if we do not satisfy specific REIT distribution requirements. We could also be subject to the “alternative minimum tax” on our items of tax preference. In addition, any net income from “prohibited transactions” (i.e., dispositions of property, other than property held by a taxable REIT subsidiary, held primarily for sale to customers in the ordinary course of business) will be subject to a 100% tax. We could also be subject to a 100% penalty tax on certain payments received from or on certain expenses deducted by a taxable REIT subsidiary if any such transaction is not respected by the Internal Revenue Service. If we fail to satisfy the 75% gross income test or the 95% gross income test (described below) but have maintained our qualification as a REIT because we satisfied certain other requirements, we will still generally be subject to a 100% penalty tax on the taxable income attributable to the gross income that caused the income test failure. If we fail to satisfy any of the REIT asset tests (described below) by more than a de minimis amount, due to reasonable cause, and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the highest marginal corporate tax rate multiplied by the net income generated by the non-qualifying assets. If we fail to satisfy any provision of the Internal Revenue Code that would result in our failure to qualify as a REIT (other than a violation of the REIT gross income or asset tests described below) and the violation is due to reasonable cause, we may retain our REIT qualification but we will be required to pay a penalty of $50,000 for each such failure. Moreover, we may be subject to taxes in certain situations and on certain transactions that we do not presently contemplate.
We believe that we have qualified as a REIT for all of our taxable years beginning with 1992. We also believe that our current structure and method of operation is such that we will continue to qualify as a REIT. However, given the complexity of the REIT qualification requirements, we cannot provide any assurance that the actual results of our operations have satisfied or will satisfy the requirements under the Internal Revenue Code for a particular year.
If we fail to qualify for taxation as a REIT in any taxable year and the relief provisions described herein do not apply, we will be subject to tax on our taxable income at regular corporate rates. We also may be subject to the corporate “alternative minimum tax.” As a result, our failure to qualify as a REIT would significantly reduce the cash we have available to distribute to our shareholders. Unless entitled to statutory relief, we would not be able to re-elect to be taxed as a REIT until our fifth taxable year after the year of disqualification. It is not possible to state whether we would be entitled to statutory relief.


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Our qualification and taxation as a REIT depend on our ability to satisfy various requirements under the Internal Revenue Code. We are required to satisfy these requirements on a continuing basis through actual annual operating and other results. Accordingly, there can be no assurance that we will be able to continue to operate in a manner so as to remain qualified as a REIT.

Ownership of Taxable REIT Subsidiaries by Us. The Internal Revenue Code provides that REITs may own greater than ten percent of the voting power and value of the securities of a “taxable REIT subsidiary” or “TRS”, provided that the aggregate value of all of the TRS securities held by the REIT does not exceed 25% of the REIT's total asset value. TRSs are corporations subject to tax as a regular “C” corporation that have elected, jointly with a REIT, to be a TRS. Generally, a taxable REIT subsidiary may own assets that cannot otherwise be owned by a REIT and can perform impermissible tenant services (discussed below), which would otherwise taint our rental income under the REIT income tests. However, the REIT will be obligated to pay a 100% penalty tax on some payments that we receive or on certain expenses deducted by our TRSs if the economic arrangements between us, our tenants and the TRS are not comparable to similar arrangements among unrelated parties. A TRS may also receive income from prohibited transactions without incurring the 100% federal income tax liability imposed on REITs. Income from prohibited transactions may include the purchase and sale of land, the purchase and sale of completed development properties and the sale of condominium units.

TRSs pay federal and state income tax at the full applicable corporate rates. The amount of taxes paid on impermissible tenant services income and the sale of real estate held primarily for sale to customers in the ordinary course of business may be material in amount. The TRSs will attempt to reduce, if possible, the amount of these taxes, but we cannot guarantee whether, or the extent to which, measures taken to reduce these taxes will be successful. To the extent that these companies are required to pay taxes, less cash may be available for distributions to shareholders.

Share Ownership Test and Organizational Requirement. In order to qualify as a REIT, our shares of beneficial interest must be held by a minimum of 100 persons for at least 335 days of a taxable year that is 12 months, or during a proportionate part of a taxable year of less than 12 months. Also, not more than 50% in value of our shares of beneficial interest may be owned directly or indirectly by applying certain constructive ownership rules, by five or fewer individuals during the last half of each taxable year. In addition, we must meet certain other organizational requirements, including, but not limited to, that (i) the beneficial ownership in us is evidenced by transferable shares and (ii) we are managed by one or more trustees. We believe that we have satisfied all of these tests and all other organizational requirements and that we will continue to do so in the future. In order to ensure compliance with the 100 person test and the 50% share ownership test discussed above, we have placed certain restrictions on the transfer of our shares that are intended to prevent further concentration of share ownership. However, such restrictions may not prevent us from failing these requirements, and thereby failing to qualify as a REIT.

Gross Income Tests. To qualify as a REIT, we must satisfy two gross income tests:

(1)
At least 75% of our gross income for each taxable year must generally be derived directly or indirectly from rents from real property, interest on obligations secured by mortgages on real property or on interests in real property, gain from the sale or other disposition of non-dealer real property and shares of REIT stock, dividends paid by another REIT and from some types of temporary investments (excluding certain hedging income).
(2)
At least 95% of our gross income for each taxable year must generally be derived from sources qualifying under the 75% test described in (1) above, non-REIT dividends, non-real estate mortgage interest and gain from the sale or disposition of non-REIT stock or securities (excluding certain hedging income).

To qualify as rents from real property for the purpose of satisfying the gross income tests, rental payments must generally be received from unrelated persons and not be based on the net income of the resident. Also, the rent attributable to personal property must not exceed 15% of the total rent. We may generally provide services to residents without “tainting” our rental income only if such services are “usually or customarily rendered” in connection with the rental of real property and not otherwise considered “impermissible services”. If such services are impermissible, then we may generally provide them only if they are considered de minimis in amount, or are provided through an independent contractor from whom we derive no revenue and that meets other requirements, or through a taxable REIT subsidiary. We believe that services provided to residents by us either are usually or customarily rendered in connection with the rental of real property and not otherwise considered impermissible, or, if considered impermissible services, will meet the de minimis test or will be provided by an independent contractor or taxable REIT subsidiary. However, we cannot provide any assurance that the Internal Revenue Service will agree with these positions.

If we fail to satisfy one or both of the gross income tests for any taxable year, we may nevertheless qualify as a REIT for the year if we are entitled to relief under certain provisions of the Internal Revenue Code. In this case, a penalty tax would still be applicable as discussed above. Generally, it is not possible to state whether in all circumstances we would be entitled to the benefit of these relief provisions and in the event these relief provisions do not apply, we will not qualify as a REIT.

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Asset Tests. In general, on the last day of each quarter of our taxable year, we must satisfy four tests relating to the nature of our assets:

(1)
At least 75% of the value of our total assets must consist of real estate assets (which include for this purpose shares in other real estate investment trusts) and certain cash related items;
(2)
Not more than 25% of the value of our total assets may consist of securities other than those in the 75% asset class;
(3)
Except for securities included in item 1 above, equity investments in other REITs, qualified REIT subsidiaries (i.e., corporations owned 100% by a REIT that are not TRSs or REITs), or taxable REIT subsidiaries: (a) the value of any one issuer's securities owned by us may not exceed 5% of the value of our total assets and (b) we may not own securities representing more than 10% of the voting power or value of the outstanding securities of any one issuer; and
(4)
Not more than 25% of the value of our total assets may consist of securities of one or more taxable REIT subsidiaries.
The 10% value test described in clause (3)(b) above does not apply to certain securities that fall within a safe harbor under the Code. Under the safe harbor, the following are not considered “securities” held by us for purposes of this 10% value test: (i) straight debt securities, (ii) any loan of an individual or an estate, (iii) certain rental agreements for the use of tangible property, (iv) any obligation to pay rents from real property, (v) any security issued by a state or any political subdivision thereof, foreign government or Puerto Rico only if the determination of any payment under such security is not based on the profits of another entity or payments on any obligation issued by such other entity, or (vi) any security issued by a REIT. The timing and payment of interest or principal on a security qualifying as straight debt may be subject to a contingency provided that (A) such contingency does not change the effective yield to maturity, not considering a de minimis change which does not exceed the greater of ¼ of 1% or 5% of the annual yield to maturity or we own $1,000,000 or less of the aggregate issue price or value of the particular issuer's debt and not more than 12 months of unaccrued interest can be required to be prepaid or (B) the contingency is consistent with commercial practice and the contingency is effective upon a default or the exercise of a prepayment right by the issuer of the debt. If we hold indebtedness from any issuer, including a REIT, the indebtedness will be subject to, and may cause a violation of, the asset tests, unless it is a qualifying real estate asset or otherwise satisfies the above safe harbor. We currently own equity interests in certain entities that have elected to be taxed as REITs for federal income tax purposes and are not publicly traded. If any such entity were to fail to qualify as a REIT, we would not meet the 10% voting stock limitation and the 10% value limitation and we would, unless certain relief provisions applied, fail to qualify as a REIT. We believe that we and each of the REITs we own an interest in have and will comply with the foregoing asset tests for REIT qualification. However, we cannot provide any assurance that the Internal Revenue Service will agree with our determinations.
If we fail to satisfy the 5% or 10% asset tests described above after a 30-day cure period provided in the Internal Revenue Code, we will be deemed to have met such tests if the value of our non-qualifying assets is de minimis (i.e., does not exceed the lesser of 1% of the total value of our assets at the end of the applicable quarter or $10,000,000) and we dispose of the non-qualifying assets within six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered. For violations due to reasonable cause and not willful neglect that are in excess of the de minimis exception described above, we may avoid disqualification as a REIT under any of the asset tests, after the 30-day cure period, by disposing of sufficient assets to meet the asset test within such six month period, paying a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets and disclosing certain information to the Internal Revenue Service. If we cannot avail ourselves of these relief provisions, or if we fail to timely cure any noncompliance with the asset tests, we would cease to qualify as a REIT.
Annual Distribution Requirements. To qualify as a REIT, we are generally required to distribute dividends, other than capital gain dividends, to our shareholders each year in an amount at least equal to 90% of our REIT taxable income. These distributions must be paid either in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the prior year and if paid with or before the first regular dividend payment date after the declaration is made. We intend to make timely distributions sufficient to satisfy our annual distribution requirements. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100% of our REIT taxable income, as adjusted, we are subject to tax on these amounts at regular corporate rates. We will be subject to a 4% excise tax on the excess of the required distribution over the sum of amounts actually distributed and amounts retained for which federal income tax was paid, if we fail to distribute during each calendar year at least the sum of: (1) 85% of our REIT ordinary income for the year; (2) 95% of our REIT capital gain net income for the year; and (3) any undistributed taxable income from prior taxable years. A REIT may elect to retain rather than distribute all or a portion of its net capital gains and pay the tax on the gains. In that case, a REIT may elect to have its shareholders include their proportionate share of the undistributed net capital gains in income as long-term capital gains and receive a credit for their share of the tax paid by the REIT. For purposes of the 4% excise tax described above, any retained amounts would be treated as having been distributed.

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Ownership of Partnership Interests By Us. As a result of our ownership of the Operating Partnership, we will be considered to own and derive our proportionate share of the assets and items of income of the Operating Partnership, respectively, for purposes of the REIT asset and income tests, including its share of assets and items of income of any subsidiaries that are partnerships or limited liability companies.
State and Local Taxes. We may be subject to state or local taxation in various jurisdictions, including those in which we transact business or reside. Generally REITs have seen increases in state and local taxes in recent years. Our state and local tax treatment may not conform to the federal income tax treatment discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in common shares.
Taxation of domestic shareholders subject to U.S. tax
General. If we qualify as a REIT, distributions made to our taxable domestic shareholders with respect to their common shares, other than capital gain distributions and distributions attributable to taxable REIT subsidiaries, will be treated as ordinary income to the extent that the distributions come out of earnings and profits. These distributions will not be eligible for the dividends received deduction for shareholders that are corporations nor will they constitute “qualified dividend income” under the Internal Revenue Code, meaning that such dividends will be taxed at marginal rates applicable to ordinary income rather than the special capital gain rates currently applicable to qualified dividend income distributed to shareholders who satisfy applicable holding period requirements. In determining whether distributions are out of earnings and profits, we will allocate our earnings and profits first to preferred shares and second to the common shares. The portion of ordinary dividends which represent ordinary dividends we receive from a TRS, will be designated as “qualified dividend income” to REIT shareholders. These qualified dividends are eligible for preferential tax rates if paid to our non-corporate shareholders.

To the extent we make distributions to our taxable domestic shareholders in excess of our earnings and profits, such distributions will be considered a return of capital. Such distributions will be treated as a tax-free distribution and will reduce the tax basis of a shareholder's common shares by the amount of the distribution so treated. To the extent such distributions cumulatively exceed a taxable domestic shareholder's tax basis, such distributions are taxable as gain from the sale of shares. Shareholders may not include in their individual income tax returns any of our net operating losses or capital losses.

Dividends declared by a REIT in October, November, or December are deemed to have been paid by the REIT and received by its shareholders on December 31 of that year, so long as the dividends are actually paid during January of the following year. However, this treatment only applies to the extent of the REIT's earnings and profits existing on December 31. To the extent the shareholder distribution paid in January exceeds available earnings and profits as of December 31, the excess will be treated as a distribution taxable to shareholders in the year paid. As such, for tax reporting purposes, January distributions paid to our shareholders may be split between two tax years.

Distributions made by us that we properly designate as capital gain dividends will be taxable to taxable domestic shareholders as gain from the sale or exchange of a capital asset held for more than one year. This treatment applies only to the extent that the designated distributions do not exceed our actual net capital gain for the taxable year. It applies regardless of the period for which a domestic shareholder has held his or her common shares. Despite this general rule, corporate shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income.
    
Generally, our designated capital gain dividends will be broken out into net capital gains distributions (which are taxable to taxable domestic shareholders that are individuals, estates or trusts at a maximum rate of 20% for individual taxpayers in the highest tax bracket) and unrecaptured Section 1250 gain distributions (which are taxable to taxable domestic shareholders that are individuals, estates or trusts at a maximum rate of 25%).

Certain U.S. shareholders that are taxed as individuals, estates or trusts may also be required to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of shares.

If, for any taxable year, we elect to designate as capital gain dividends any portion of the dividends paid or made available for the year to holders of all classes of shares of beneficial interest, then the portion of the capital gains dividends that will be allocable to the holders of common shares will be the total capital gain dividends multiplied by a fraction. The numerator of the fraction will be the total dividends paid or made available to the holders of the common shares for the year. The denominator of the fraction will be the total dividends paid or made available to holders of all classes of shares of beneficial interest.

We may elect to retain (rather than distribute as is generally required) net capital gain for a taxable year and pay the income tax on that gain. If we make this election, shareholders must include in income, as long-term capital gain, their proportionate

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share of the undistributed net capital gain. Shareholders will be treated as having paid their proportionate share of the tax paid by us on these gains. Accordingly, they will receive a tax credit or refund for the amount. Shareholders will increase the basis in their common shares by the difference between the amount of capital gain included in their income and the amount of the tax they are treated as having paid. Our earnings and profits will be adjusted appropriately.
In general, a shareholder will recognize gain or loss for federal income tax purposes on the sale or other disposition of common shares in an amount equal to the difference between:

(a)
the amount of cash and the fair market value of any property received in the sale or other disposition; and
(b)
the shareholder's adjusted tax basis in the common shares.
    
The gain or loss will be capital gain or loss if the common shares were held as a capital asset. Generally, the capital gain or loss will be long-term capital gain or loss if the common shares were held for more than one year.

In general, a loss recognized by a shareholder upon the sale of common shares that were held for six months or less, determined after applying certain holding period rules, will be treated as long-term capital loss to the extent that the shareholder received distributions that were treated as long-term capital gains. For shareholders who are individuals, trusts and estates, the long-term capital loss will be apportioned among the applicable long-term capital gain rates to the extent that distributions received by the shareholder were previously so treated.
Taxation of domestic tax-exempt shareholders
Most tax-exempt organizations are not subject to federal income tax except to the extent of their unrelated business taxable income, which is often referred to as UBTI. Unless a tax-exempt shareholder holds its common shares as debt financed property or uses the common shares in an unrelated trade or business, distributions to the shareholder should not constitute UBTI. Similarly, if a tax-exempt shareholder sells common shares, the income from the sale should not constitute UBTI unless the shareholder held the shares as debt financed property or used the shares in a trade or business.

However, for tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans, income from owning or selling common shares will constitute UBTI unless the organization is able to properly deduct amounts set aside or placed in reserve so as to offset the income generated by its investment in common shares. These shareholders should consult their own tax advisors concerning these set aside and reserve requirements which are set forth in the Internal Revenue Code.

In addition, certain pension trusts that own more than 10% of a “pension-held REIT” must report a portion of the distributions that they receive from the REIT as UBTI. We have not been and do not expect to be treated as a pension-held REIT for purposes of this rule.
Taxation of foreign shareholders
The following is a discussion of certain anticipated United States federal income tax consequences of the ownership and disposition of common shares applicable to a foreign shareholder. For purposes of this discussion, a “foreign shareholder” is any person other than:

(a)
a citizen or resident of the United States;
(b)
a corporation or partnership created or organized in the United States or under the laws of the United States or of any state thereof; or
(c)
an estate or trust whose income is includable in gross income for United States federal income tax purposes regardless of its source.
Distributions by Us. Distributions by us to a foreign shareholder that are neither attributable to gain from sales or exchanges by us of United States real property interests nor designated by us as capital gains dividends will be treated as dividends of ordinary income to the extent that they are made out of our earnings and profits. These distributions ordinarily will be subject to withholding of United States federal income tax on a gross basis at a 30% rate, or a lower treaty rate, unless the dividends are treated as effectively connected with the conduct by the foreign shareholder of a United States trade or business. Please note that under certain treaties lower withholding rates generally applicable to dividends do not apply to dividends from REITs. Dividends that are effectively connected with a United States trade or business will be subject to tax on a net basis at graduated rates, and are generally not subject to withholding. Certification and disclosure requirements must be satisfied before a dividend is exempt

27

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from withholding under this exemption. A foreign shareholder that is a corporation also may be subject to an additional branch profits tax at a 30% rate or a lower treaty rate.

We expect to withhold United States income tax at the rate of 30% on any such distributions made to a foreign shareholder unless:

(a)
a lower treaty rate applies and any required form or certification evidencing eligibility for that reduced rate is filed with us; or
(b)
the foreign shareholder files an IRS Form W-8ECI with us claiming that the distribution is effectively connected income.

If such distribution is in excess of our current or accumulated earnings and profits, it will not be taxable to a foreign shareholder to the extent that the distribution does not exceed the adjusted basis of the shareholder's common shares. Instead, the distribution will reduce the adjusted basis of the common shares. To the extent that the distribution exceeds the adjusted basis of the common shares, it will give rise to gain from the sale or exchange of the shareholder's common shares. The tax treatment of this gain is described below.

We intend to withhold at a rate of 30%, or a lower applicable treaty rate, on the entire amount of any distribution not designated as a capital gain distribution. In such event, a foreign shareholder may seek a refund of the withheld amount from the IRS if it is subsequently determined that the distribution was, in fact, in excess of our earnings and profits, and the amount withheld exceeded the foreign shareholder's United States tax liability with respect to the distribution.

Any capital gain dividend with respect to any class of our stock which is “regularly traded” on an established securities market, will be treated as an ordinary dividend described above, if the foreign shareholder did not own more than 5% of such class of stock at any time during the one year period ending on the date of the distribution. Foreign shareholders generally will not be required to report such distributions received from us on U.S. federal income tax returns and all distributions treated as dividends for U.S. federal income tax purposes, including any capital gain dividends, will be subject to a 30% U.S. withholding tax (unless reduced or eliminated under an applicable income tax treaty), as described above. In addition, the branch profits tax will no longer apply to such distributions.

Distributions to a foreign shareholder that we designate at the time of the distributions as capital gain dividends, other than those arising from the disposition of a United States real property interest, generally will not be subject to United States federal income taxation unless:
(a)
the investment in the common shares is effectively connected with the foreign shareholder's United States trade or business, in which case the foreign shareholder will be subject to the same treatment as domestic shareholders, except that a shareholder that is a foreign corporation may also be subject to the branch profits tax, as discussed above; or
(b)
the foreign shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual's capital gains.
Under the Foreign Investment in Real Property Tax Act, which is known as FIRPTA, distributions to a foreign shareholder that are attributable to gain from sales or exchanges of United States real property interests will cause the foreign shareholder to be treated as recognizing the gain as income effectively connected with a United States trade or business. This rule applies whether or not a distribution is designated as a capital gain dividend. Accordingly, foreign shareholders generally would be taxed on these distributions at the same rates applicable to U.S. shareholders, subject to a special alternative minimum tax in the case of nonresident alien individuals. In addition, a foreign corporate shareholder might be subject to the branch profits tax discussed above, as well as U.S. federal income tax return filing requirements. We are required to withhold 35% of these distributions. The withheld amount can be credited against the foreign shareholder's United States federal income tax liability.

Although the law is not entirely clear on the matter, it appears that amounts we designate as undistributed capital gains in respect of the common shares held by U.S. shareholders would be treated with respect to foreign shareholders in the same manner as actual distributions of capital gain dividends. Under that approach, foreign shareholders would be able to offset as a credit against their United States federal income tax liability their proportionate share of the tax paid by us on these undistributed capital gains. In addition, if timely requested, foreign shareholders might be able to receive from the IRS a refund to the extent their proportionate share of the tax paid by us were to exceed their actual United States federal income tax liability.

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Foreign Shareholders' Sales of Common Shares. Gain recognized by a foreign shareholder upon the sale or exchange of common shares generally will not be subject to United States taxation unless the shares constitute a “United States real property interest” within the meaning of FIRPTA. The common shares will not constitute a United States real property interest so long as we are a domestically controlled REIT. A domestically controlled REIT is a REIT in which at all times during a specified testing period less than 50% in value of its stock is held directly or indirectly by foreign shareholders. We believe that we are a domestically controlled REIT. Therefore, we believe that the sale of common shares will not be subject to taxation under FIRPTA. However, because common shares and preferred shares are publicly traded, we cannot guarantee that we will continue to be a domestically controlled REIT. In any event, gain from the sale or exchange of common shares not otherwise subject to FIRPTA will be subject to U.S. tax, if either:

(a)
the investment in the common shares is effectively connected with the foreign shareholder's United States trade or business, in which case the foreign shareholder will be subject to the same treatment as domestic shareholders with respect to the gain; or
(b)
the foreign shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a tax home in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual's capital gains.
Even if we do not qualify as or cease to be a domestically controlled REIT, gain arising from the sale or exchange by a foreign shareholder of common shares still would not be subject to United States taxation under FIRPTA as a sale of a United States real property interest if:

(a)
the class or series of shares being sold is “regularly traded,” as defined by applicable IRS regulations, on an established securities market such as the New York Stock Exchange; and
(b)
the selling foreign shareholder owned 5% or less of the value of the outstanding class or series of shares being sold throughout the five-year period ending on the date of the sale or exchange.
    
If gain on the sale or exchange of common shares were subject to taxation under FIRPTA, the foreign shareholder would be subject to regular United States income tax with respect to the gain in the same manner as a taxable U.S. shareholder, subject to any applicable alternative minimum tax, a special alternative minimum tax in the case of nonresident alien individuals and the possible application of the branch profits tax in the case of foreign corporations. The purchaser of the common shares would be required to withhold and remit to the IRS 10% of the purchase price.
    
Information reporting requirement and backup withholding

We will report to our domestic shareholders and the Internal Revenue Service the amount of distributions paid during each calendar year and the amount of tax withheld, if any. Under certain circumstances, domestic shareholders may be subject to backup withholding. Backup withholding will apply only if such domestic shareholder fails to furnish certain information to us or the Internal Revenue Service. Backup withholding will not apply with respect to payments made to certain exempt recipients, such as corporations and tax-exempt organizations. Domestic shareholders should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. Backup withholding is not an additional tax. Rather, the amount of any backup withholding with respect to a payment to a domestic shareholder will be allowed as a credit against such person's United States federal income tax liability and may entitle such person to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Withholding on foreign financial institutions and non-U.S. shareholders

The Foreign Account Tax Compliance Act (“FATCA”) is contained in Sections 1471 through 1474 of the Internal Revenue Code (and the Treasury Regulations thereunder) and was originally enacted in 2010 as part of the Hiring Incentives to Restore Employment Act. FATCA will impose a U.S. withholding tax at a 30% rate on dividends paid after June 30, 2014 and on proceeds from the sale of our shares paid after December 31, 2016 to “foreign financial institutions” (as defined under FATCA) and certain other foreign entities if certain due diligence and disclosure requirements related to U.S. accounts with, or ownership of, such entities are not satisfied or an exemption does not apply. If FATCA withholding is imposed, non-U.S. beneficial owners that are otherwise eligible for an exemption from, or a reduction of, U.S. withholding tax with respect to such distributions and sale proceeds would be required to seek a refund from the Internal Revenue Service to obtain the benefit of such exemption or reduction. Any payment made by us that is subject to withholding under FATCA or otherwise will be net of the amount required to be withheld.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties
As of December 31, 2014, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 391 properties located in 12 states and the District of Columbia consisting of 109,225 apartment units. The Company’s properties are summarized by building type in the following table:
Type
 
Properties
 
Apartment Units
 
Average
Apartment Units
Garden
 
207

 
57,140

 
276

Mid/High-Rise
 
182

 
47,052

 
259

Military Housing
 
2

 
5,033

 
2,517

Total
 
391

 
109,225

 
 

The Company’s properties are summarized by ownership type in the following table:
 
 
Properties
 
Apartment Units
Wholly Owned Properties
 
364

 
98,287

Master-Leased Properties – Consolidated
 
3

 
853

Partially Owned Properties – Consolidated
 
19

 
3,771

Partially Owned Properties – Unconsolidated
 
3

 
1,281

Military Housing
 
2

 
5,033

 
 
391

 
109,225

The following table sets forth certain information by market relating to the Company's properties at December 31, 2014:

PORTFOLIO SUMMARY
    
Markets/Metro Areas
 
Properties
 
Apartment Units
 
% of
Stabilized
NOI (1)
 
Average
Rental
Rate (2)
Core:
 
 
 
 
 
 
 
 
Washington DC
 
57

 
18,652

 
17.5
%
 
$
2,196

New York
 
38

 
10,330

 
16.3
%
 
3,863

San Francisco
 
51

 
13,208

 
14.3
%
 
2,403

Los Angeles
 
61

 
13,403

 
13.0
%
 
2,208

Boston
 
34

 
7,816

 
10.1
%
 
2,889

South Florida
 
35

 
11,434

 
7.4
%
 
1,629

Seattle
 
43

 
8,542

 
7.2
%
 
1,896

Denver
 
19

 
6,935

 
4.7
%
 
1,438

San Diego
 
13

 
3,505

 
3.1
%
 
1,982

Orange County, CA
 
11

 
3,490

 
2.9
%
 
1,790

Subtotal – Core
 
362

 
97,315

 
96.5
%
 
2,291

Non-Core:
 
 
 
 
 
 
 
 
Inland Empire, CA
 
10

 
3,081

 
2.1
%
 
1,570

Orlando
 
3

 
827

 
0.4
%
 
1,218

All Other Markets
 
14

 
2,969

 
1.0
%
 
1,178

Subtotal – Non-Core
 
27

 
6,877

 
3.5
%
 
1,357

Total
 
389

 
104,192

 
100.0
%
 
2,229

Military Housing
 
2

 
5,033

 

 

Grand Total
 
391

 
109,225

 
100.0
%
 
$
2,229


(1)
% of Stabilized NOI includes budgeted 2015 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
(2)
Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the last month of the period presented.
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.

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The Company’s properties had an average occupancy of approximately 95.1% (95.7% on a same store basis) at December 31, 2014. Certain of the Company’s properties are encumbered by mortgages and additional detail can be found on Schedule III – Real Estate and Accumulated Depreciation. Resident leases are generally for twelve months in length and can require security deposits. The garden-style properties are generally defined as properties with two and/or three story buildings while the mid-rise/high-rise are defined as properties with greater than three story buildings. These two property types typically provide residents with amenities, such as a clubhouse and swimming pool. Certain of these properties offer additional amenities such as saunas, whirlpools, spas, sports courts and exercise rooms or other amenities. In addition, many of our urban properties have parking garage and/or retail components. The military housing properties are defined as those properties located on military bases.
The distribution of the properties throughout the United States reflects the Company’s belief that geographic diversification helps insulate the portfolio from regional influences. At the same time, the Company has sought to create clusters of properties within each of its core markets in order to achieve economies of scale in management and operation. The Company may nevertheless acquire additional multifamily properties located anywhere in the United States and internationally.
The properties currently in various stages of development and lease-up at December 31, 2014 are included in the following tables:
Consolidated Development and Lease-Up Projects as of December 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
Projects
Location
 
No. of
Apartment
Units
 
Total
Capital
Cost (1)
 
Total
Book Value
to Date
 
Total Book
Value Not
Placed in
Service
 
Total
Debt
 
Percentage
Completed
 
Percentage
Leased
 
Percentage
Occupied
 
Estimated
Completion
Date
 
Estimated
Stabilization
Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development - Wholly Owned:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residences at Westgate II (formerly Westgate III)
 
Pasadena, CA
 
88

 
$
55,037

 
$
45,661

 
$
45,661

 
$

 
86
%
 

 

 
Q1 2015
 
Q3 2015
170 Amsterdam (2)
 
New York, NY
 
236

 
110,892

 
97,372

 
97,372

 

 
88
%
 

 

 
Q1 2015
 
Q1 2016
Parc on Powell (formerly 1333 Powell) (3)
 
Emeryville, CA
 
176

 
87,500

 
71,765

 
71,765

 

 
85
%
 
13
%
 

 
Q2 2015
 
Q4 2015
Azure (at Mission Bay)
 
San Francisco, CA
 
273

 
189,090

 
146,609

 
146,609

 

 
75
%
 

 

 
Q3 2015
 
Q4 2016
Junction 47 (formerly West Seattle)
 
Seattle, WA
 
206

 
67,112

 
44,514

 
44,514

 

 
62
%
 

 

 
Q4 2015
 
Q3 2016
Tallman
 
Seattle, WA
 
303

 
84,277

 
55,794

 
55,794

 

 
62
%
 

 

 
Q4 2015
 
Q2 2017
Village at Howard Hughes
 
Los Angeles, CA
 
545

 
193,231

 
86,642

 
86,642

 

 
26
%
 

 

 
Q2 2016
 
Q2 2017
Potrero
 
San Francisco, CA
 
453

 
224,474

 
72,354

 
72,354

 

 
14
%
 

 

 
Q2 2016
 
Q3 2017
Millikan
 
Irvine, CA
 
344

 
102,331

 
41,367

 
41,367

 

 
13
%
 

 

 
Q2 2016
 
Q3 2017
Tasman
 
San Jose, CA
 
554

 
214,923

 
119,554

 
119,554

 

 
46
%
 

 

 
Q2 2016
 
Q2 2018
340 Fremont (formerly Rincon Hill)
 
San Francisco, CA
 
348

 
287,454

 
106,972

 
106,972

 

 
24
%
 

 

 
Q3 2016
 
Q1 2018
One Henry Adams
 
San Francisco, CA
 
241

 
164,434

 
39,923

 
39,923

 

 
1
%
 

 

 
Q4 2016
 
Q4 2017
Cascade
 
Seattle, WA
 
483

 
158,494

 
34,543

 
34,543

 

 
1
%
 

 

 
Q2 2017
 
Q1 2019
2nd & Pine (4)
 
Seattle, WA
 
398

 
214,742

 
40,122

 
40,122

 

 
4
%
 

 

 
Q3 2017
 
Q2 2019
Projects Under Development - Wholly Owned
 
 
 
4,648

 
2,153,991

 
1,003,192

 
1,003,192

 

 
 
 
 
 
 
 
 
 
 
Projects Under Development - Partially Owned:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prism at Park Avenue South (5)
 
New York, NY
 
269

 
251,961

 
226,959

 
226,959

 

 
91
%
 
5
%
 
3
%
 
Q2 2015
 
Q1 2016
Projects Under Development - Partially Owned
 
 
 
269

 
251,961

 
226,959

 
226,959

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development
 
 
4,917

 
2,405,952

 
1,230,151

 
1,230,151

 

 
 
 
 
 
 
 
 
 
 
Completed Not Stabilized - Wholly Owned (6):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jia (formerly Chinatown Gateway)
 
Los Angeles, CA
 
280

 
92,920

 
89,611

 

 

 
 
 
98
%
 
97
%
 
Completed
 
Q1 2015
1111 Belle Pre (formerly The Madison)
 
Alexandria, VA
 
360

 
112,072

 
111,433

 

 

 
 
 
97
%
 
96
%
 
Completed
 
Q1 2015
Park Aire (formerly Enclave at Wellington)
 
Wellington, FL
 
268

 
49,000

 
48,917

 

 

 
 
 
95
%
 
93
%
 
Completed
 
Q1 2015
Urbana (formerly Market Street Landing)
 
Seattle, WA
 
287

 
88,774

 
86,789

 

 

 
 
 
90
%
 
86
%
 
Completed
 
Q2 2015
Residences at Westgate I (formerly Westgate II)
 
Pasadena, CA
 
252

 
127,292

 
124,606

 

 

 
 
 
68
%
 
67
%
 
Completed
 
Q2 2015
Projects Completed Not Stabilized - Wholly Owned
 
 
 
1,447

 
470,058

 
461,356

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed Not Stabilized
 
 
1,447

 
470,058

 
461,356

 

 

 
 
 
 
 
 
 
 
 
 
Completed and Stabilized During the Quarter - Wholly Owned:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Elevé (7)
 
Glendale, CA
 
208

 
70,500

 
70,500

 

 

 
 
 
99
%
 
96
%
 
Completed
 
Stabilized
Reserve at Town Center III
 
Mill Creek, WA
 
95

 
21,280

 
21,264

 

 

 
 
 
95
%
 
94
%
 
Completed
 
Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned
 
303

 
91,780

 
91,764

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed and Stabilized During the Quarter
 
 
303

 
91,780

 
91,764

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated Projects
 
 
6,667

 
$
2,967,790

 
$
1,783,271

 
$
1,230,151

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land Held for Development
 
 
N/A
 
N/A
 
$
184,556

 
$
184,556

 
$

 
 
 
 
 
 
 
 
 
 

(1)
Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.

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(2)
170 Amsterdam – The land under this project is subject to a long term ground lease.
(3)
Parc on Powell – During the fourth quarter of 2014, the Company acquired its partner's 95% interest in this unconsolidated development project which was valued at $87.5 million  In conjunction with the buyout, the outstanding construction loan of $27.2 million was paid off. The project is now wholly-owned.
(4)
2nd & Pine – Includes an adjacent land parcel on which certain improvements including a portion of a parking structure will be constructed as part of the development of this project. The Company may eventually construct an additional apartment tower on this site or sell a portion of the garage and the related air rights.
(5)
Prism at Park Avenue South – The Company is jointly developing with Toll Brothers (NYSE: TOL) a project at 400 Park Avenue South in New York City with the Company's rental portion on floors 2-22 and Toll's for sale portion on floors 23-40.The total capital cost and total book value to date represent only the Company's portion of the project. Toll Brothers has funded $113.8 million for their allocated share of the project.
(6)
Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
(7)
Elevé – The Company acquired this project during the second quarter of 2014, prior to stabilization, and has completed lease-up activities.

Unconsolidated Development and Lease-Up Projects as of December 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects
 
Location
 
Percentage Ownership
 
No. of
Apartment
Units
 
Total
Capital
Cost (1)
 
Total
Book Value
to Date
 
Total Book
Value Not
Placed in
Service
 
Total
Debt
 
Percentage
Completed
 
Percentage
Leased
 
Percentage
Occupied
 
Estimated
Completion
Date
 
Estimated
Stabilization
Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completed Not Stabilized - Unconsolidated (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domain (3)
 
San Jose, CA
 
20.0
%
 
444

 
$
155,820

 
$
155,274

 
$

 
$
96,793

 
 
 
93
%
 
91
%
 
Completed
 
Q1 2015
Projects Completed Not Stabilized - Unconsolidated
 
444

 
155,820

 
155,274

 

 
96,793

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed Not Stabilized
 
 
 
444

 
155,820

 
155,274

 

 
96,793

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unconsolidated Projects
 
 
 
444

 
$
155,820

 
$
155,274

 
$

 
$
96,793

 
 
 
 
 
 
 
 
 
 

(1)
Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
(2)
Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
(3)
Domain – This development project is owned 20% by the Company and 80% by an institutional partner in an unconsolidated joint venture. Total project cost is approximately $155.8 million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The Company was responsible for constructing the project and had given certain construction cost overrun guarantees but currently has no further funding obligations. Domain has a maximum debt commitment of $98.6 million, the loan bears interest at 5.75% and matures January 1, 2022.

Item 3. Legal Proceedings
The Company is party to a housing discrimination lawsuit brought by a non-profit civil rights organization in April 2006 in the U.S. District Court for the District of Maryland. The suit alleges that the Company designed and built approximately 300 of its properties in violation of the accessibility requirements of the Fair Housing Act and Americans With Disabilities Act. The suit seeks actual and punitive damages, injunctive relief (including modification of non-compliant properties), costs and attorneys’ fees. The Company believes it has a number of viable defenses, including that a majority of the named properties were completed before the operative dates of the statutes in question and/or were not designed or built by the Company. Accordingly, the Company is defending the suit vigorously. Due to the pendency of the Company’s defenses and the uncertainty of many other critical factual and legal issues, it is not possible to determine or predict the outcome of the suit or a possible loss or a range of loss, and no amounts have been accrued at December 31, 2014. While no assurances can be given, the Company does not believe that the suit, if adversely determined, would have a material adverse effect on the Company.
The Company does not believe there is any other 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 4. Mine Safety Disclosures

Not applicable.


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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Share Market Prices and Dividends (Equity Residential)
The following table sets forth, for the years indicated, the high, low and closing sales prices for and the distributions declared on the Company’s Common Shares, which trade on the New York Stock Exchange under the trading symbol EQR.

 
 
Sales Price
 
 
 
 
High
 
Low
 
Closing
 
Distributions
2014
 
 

 
 

 
 

 
 

Fourth Quarter Ended December 31, 2014
 
$
74.72

 
$
61.47

 
$
71.84

 
$
0.5000

Third Quarter Ended September 30, 2014
 
$
67.91

 
$
60.44

 
$
61.58

 
$
0.5000

Second Quarter Ended June 30, 2014
 
$
63.54

 
$
57.19

 
$
63.00

 
$
0.5000

First Quarter Ended March 31, 2014
 
$
59.41

 
$
51.55

 
$
57.99

 
$
0.5000

 
 
 
 
 
 
 
 
 
2013
 
 

 
 

 
 

 
 

Fourth Quarter Ended December 31, 2013
 
$
56.06

 
$
50.08

 
$
51.87

 
$
0.6500

Third Quarter Ended September 30, 2013
 
$
59.40

 
$
50.24

 
$
53.57

 
$
0.4000

Second Quarter Ended June 30, 2013
 
$
60.97

 
$
52.71

 
$
58.06

 
$
0.4000

First Quarter Ended March 31, 2013
 
$
58.81

 
$
53.64

 
$
55.06

 
$
0.4000


The number of record holders of Common Shares at February 20, 2015 was approximately 2,700. The number of outstanding Common Shares as of February 20, 2015 was 363,798,297.
Unit Dividends (ERP Operating Limited Partnership)
There is no established public market for the Units (OP Units and restricted units).
The following table sets forth, for the years indicated, the distributions on the Operating Partnership's Units.
 
 
Distributions
 
 
2014
 
2013
Fourth Quarter Ended December 31,
 
$
0.5000

 
$
0.6500

Third Quarter Ended September 30,
 
$
0.5000

 
$
0.4000

Second Quarter Ended June 30,
 
$
0.5000

 
$
0.4000

First Quarter Ended March 31,
 
$
0.5000

 
$
0.4000

The number of record holders of Units in the Operating Partnership at February 20, 2015 was approximately 500. The number of outstanding Units as of February 20, 2015 was 378,285,425.
Unregistered Common Shares Issued in the Quarter Ended December 31, 2014 (Equity Residential)
During the quarter ended December 31, 2014, EQR issued 26,375 Common Shares in exchange for 26,375 OP Units held by various limited partners of the Operating Partnership. OP Units are generally exchangeable into Common Shares on a one-for-one basis or, at the option of the Operating Partnership, 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(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.

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Equity Compensation Plan Information
The following table provides information as of December 31, 2014 with respect to the Company's Common Shares that may be issued under its existing equity compensation plans.

 
 
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
 
Weighted average
exercise price of
outstanding
options, warrants
and rights
 
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
in column (a))
Plan Category
 
 
 
 
 
(a) (1)
 
(b) (1)
 
(c) (2)
Equity compensation plans
     approved by shareholders
 
7,030,620
 
$46.16
 
11,555,468
Equity compensation plans not
     approved by shareholders
 
N/A
 
N/A
 
N/A

(1)
The amounts shown in columns (a) and (b) of the above table do not include 482,466 outstanding Common Shares (all of which are restricted and subject to vesting requirements) that were granted under the Company's 2011 Share Incentive Plan, as amended (the "2011 Plan") and outstanding Common Shares that have been purchased by employees and trustees under the Company's ESPP.
(2)
Includes 8,516,934 Common Shares that may be issued under the 2011 Plan, of which only 33% may be in the form of restricted shares, and 3,038,534 Common Shares that may be sold to employees and trustees under the ESPP.

Any Common Shares issued pursuant to EQR's incentive equity compensation and employee share purchase plans will result in ERPOP issuing OP Units to EQR on a one-for-one basis, with ERPOP receiving the net cash proceeds of such issuances.

Item 6.
Selected Financial Data
The following tables set forth selected financial and operating information on a historical basis for the Company and the Operating Partnership. The following information should be read in conjunction with all of the financial statements and notes thereto included elsewhere in this Form 10-K. The historical operating and balance sheet data have been derived from the historical financial statements of the Company and the Operating Partnership. Certain capitalized terms as used herein are defined in the Notes to Consolidated Financial Statements.

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EQUITY RESIDENTIAL
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(Financial information in thousands except for per share and property data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
OPERATING DATA:
 
 

 
 

 
 

 
 

 
 

Total revenues from continuing operations
 
$
2,614,748

 
$
2,387,702

 
$
1,747,502

 
$
1,525,220

 
$
1,334,418

Interest and other income
 
$
4,462

 
$
5,283

 
$
151,060

 
$
8,413

 
$
4,877

Net gain on sales of real estate properties
 
$
212,685

 
$

 
$

 
$

 
$

Income (loss) from continuing operations
 
$
657,101

 
$
(168,174
)
 
$
160,298

 
$
(72,941
)
 
$
(204,152
)
Discontinued operations, net
 
$
1,582

 
$
2,073,527

 
$
720,906

 
$
1,008,138

 
$
500,135

Net income
 
$
658,683

 
$
1,905,353

 
$
881,204

 
$
935,197

 
$
295,983

Net income available to Common Shares
 
$
627,163

 
$
1,826,468

 
$
826,212

 
$
879,720

 
$
269,242

Earnings per share – basic:
 
 

 
 

 
 

 
 

 
 

Income (loss) from continuing operations
    available to Common Shares
 
$
1.73

 
$
(0.47
)
 
$
0.45

 
$
(0.28
)
 
$
(0.73
)
Net income available to Common Shares
 
$
1.74

 
$
5.16

 
$
2.73

 
$
2.98

 
$
0.95

Weighted average Common Shares outstanding
 
361,181

 
354,305

 
302,701

 
294,856

 
282,888

Earnings per share – diluted:
 
 

 
 

 
 

 
 

 
 

Income (loss) from continuing operations
    available to Common Shares
 
$
1.72

 
$
(0.47
)
 
$
0.45

 
$
(0.28
)
 
$
(0.73
)
Net income available to Common Shares
 
$
1.73

 
$
5.16

 
$
2.70

 
$
2.98

 
$
0.95

Weighted average Common Shares outstanding
 
377,735

 
354,305

 
319,766

 
294,856

 
282,888

Distributions declared per Common Share
    outstanding
 
$
2.00

 
$
1.85

 
$
1.78

 
$
1.58

 
$
1.47

BALANCE SHEET DATA (at end of period):
 
 

 
 

 
 

 
 

 
 

Real estate, before accumulated depreciation
 
$
27,675,383

 
$
26,800,948

 
$
21,008,429

 
$
20,407,946

 
$
19,702,371

Real estate, after accumulated depreciation
 
$
22,242,578

 
$
21,993,239

 
$
16,096,208

 
$
15,868,363

 
$
15,365,014

Total assets
 
$
22,950,614

 
$
22,834,545

 
$
17,201,000

 
$
16,659,303

 
$
16,184,194

Total debt
 
$
10,844,861

 
$
10,766,254

 
$
8,529,244

 
$
9,721,061

 
$
9,948,076

Redeemable Noncontrolling Interests –
   Operating Partnership
 
$
500,733

 
$
363,144

 
$
398,372

 
$
416,404

 
$
383,540

Total shareholders’ equity
 
$
10,368,456

 
$
10,507,201

 
$
7,289,813

 
$
5,669,015

 
$
5,090,186

Total Noncontrolling Interests
 
$
339,320

 
$
337,995

 
$
237,294

 
$
193,842

 
$
118,390

OTHER DATA:
 
 

 
 

 
 

 
 

 
 

Total properties (at end of period)
 
391

 
390

 
403

 
427

 
451

Total apartment units (at end of period)
 
109,225

 
109,855

 
115,370

 
121,974

 
129,604

Funds from operations available to Common
   Shares and Units – basic (1) (3) (4)
 
$
1,190,915

 
$
872,421

 
$
993,217

 
$
752,153

 
$
622,786

Normalized funds from operations available to
   Common Shares and Units – basic (2) (3) (4)
 
$
1,196,446

 
$
1,057,073

 
$
883,269

 
$
759,665

 
$
682,422

Cash flow provided by (used for):
 
 

 
 

 
 

 
 

 
 

Operating activities
 
$
1,324,073

 
$
868,916

 
$
1,046,155

 
$
800,467

 
$
726,037

Investing activities
 
$
(644,666
)
 
$
(6,977
)
 
$
(261,155
)
 
$
(197,208
)
 
$
(639,458
)
Financing activities
 
$
(692,861
)
 
$
(1,420,995
)
 
$
(556,331
)
 
$
(650,746
)
 
$
151,541


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ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(Financial information in thousands except for per Unit and property data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
OPERATING DATA:
 
 

 
 

 
 

 
 

 
 

Total revenues from continuing operations
 
$
2,614,748

 
$
2,387,702

 
$
1,747,502

 
$
1,525,220

 
$
1,334,418

Interest and other income
 
$
4,462

 
$
5,283

 
$
151,060

 
$
8,413

 
$
4,877

Net gain on sales of real estate properties
 
$
212,685

 
$

 
$

 
$

 
$

Income (loss) from continuing operations
 
$
657,101

 
$
(168,174
)
 
$
160,298

 
$
(72,941
)
 
$
(204,152
)
Discontinued operations, net
 
$
1,582

 
$
2,073,527

 
$
720,906

 
$
1,008,138

 
$
500,135

Net income
 
$
658,683

 
$
1,905,353

 
$
881,204

 
$
935,197

 
$
295,983

Net income available to Units
 
$
651,994

 
$
1,901,746

 
$
864,853

 
$
920,500

 
$
282,341

Earnings per Unit – basic:
 
 

 
 

 
 

 
 

 
 

Income (loss) from continuing operations
   available to Units
 
$
1.73

 
$
(0.47
)
 
$
0.45

 
$
(0.28
)
 
$
(0.73
)
Net income available to Units
 
$
1.74

 
$
5.16

 
$
2.73

 
$
2.98

 
$
0.95

Weighted average Units outstanding
 
374,899

 
368,038

 
316,554

 
308,062

 
296,527

Earnings per Unit – diluted:
 
 

 
 

 
 

 
 

 
 

Income (loss) from continuing operations
   available to Units
 
$
1.72

 
$
(0.47
)
 
$
0.45

 
$
(0.28
)
 
$
(0.73
)
Net income available to Units
 
$
1.73

 
$
5.16

 
$
2.70

 
$
2.98

 
$
0.95

Weighted average Units outstanding
 
377,735

 
368,038

 
319,766

 
308,062

 
296,527

Distributions declared per Unit outstanding
 
$
2.00

 
$
1.85

 
$
1.78

 
$
1.58

 
$
1.47

BALANCE SHEET DATA (at end of period):
 
 

 
 

 
 

 
 

 
 

Real estate, before accumulated depreciation
 
$
27,675,383

 
$
26,800,948

 
$
21,008,429

 
$
20,407,946

 
$
19,702,371

Real estate, after accumulated depreciation
 
$
22,242,578

 
$
21,993,239

 
$
16,096,208

 
$
15,868,363

 
$
15,365,014

Total assets
 
$
22,950,614

 
$
22,834,545

 
$
17,201,000

 
$
16,659,303

 
$
16,184,194

Total debt
 
$
10,844,861

 
$
10,766,254

 
$
8,529,244

 
$
9,721,061

 
$
9,948,076

Redeemable Limited Partners
 
$
500,733

 
$
363,144

 
$
398,372

 
$
416,404

 
$
383,540

Total partners' capital
 
$
10,582,867

 
$
10,718,613

 
$
7,449,419

 
$
5,788,551

 
$
5,200,585

Noncontrolling Interests – Partially Owned
   Properties
 
$
124,909

 
$
126,583

 
$
77,688

 
$
74,306

 
$
7,991

OTHER DATA:
 
 

 
 

 
 

 
 

 
 

Total properties (at end of period)
 
391

 
390

 
403

 
427

 
451

Total apartment units (at end of period)
 
109,225

 
109,855

 
115,370

 
121,974

 
129,604

Funds from operations available to Units –
   basic (1) (3) (4)
 
$
1,190,915

 
$
872,421

 
$
993,217

 
$
752,153

 
$
622,786

Normalized funds from operations available to
   Units – basic (2) (3) (4)
 
$
1,196,446

 
$
1,057,073

 
$
883,269

 
$
759,665

 
$
682,422

Cash flow provided by (used for):
 
 

 
 

 
 

 
 

 
 

Operating activities
 
$
1,324,073

 
$
868,916

 
$
1,046,155

 
$
800,467

 
$
726,037

Investing activities
 
$
(644,666
)
 
$
(6,977
)
 
$
(261,155
)
 
$
(197,208
)
 
$
(639,458
)
Financing activities
 
$
(692,861
)
 
$
(1,420,995
)
 
$
(556,331
)
 
$
(650,746
)
 
$
151,541


(1)
The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) (April 2002 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 operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain

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or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
(2)
Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:
the impact of any expenses relating to non-operating asset impairment and valuation allowances;
property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs;
gains and losses from early debt extinguishment, including prepayment penalties, preferred share/preference unit redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
other miscellaneous non-comparable items.

(3)
The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (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 accounting principles generally accepted in the United States. 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.
Note: See Item 7 for a reconciliation of net income to FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units.

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the results of operations and financial condition of the Company and the Operating Partnership should be read in connection with the Consolidated Financial Statements and Notes thereto. Due to the Company's ability to control the Operating Partnership and its subsidiaries, the Operating Partnership and each such subsidiary entity has been consolidated with the Company for financial reporting purposes, except for three unconsolidated operating properties and our military housing properties. Capitalized terms used herein and not defined are as defined elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2014.

Forward-Looking Statements
Forward-looking statements in this Item 7 as well as elsewhere in this Annual Report on Form 10-K 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. 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. Factors that might cause such differences include, but are not limited to the following:

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We intend to actively acquire, develop and rehab multifamily properties for rental operations as market conditions dictate. We may also acquire multifamily properties that are unoccupied or in the early stages of lease up. We may be unable to lease up these apartment properties on schedule, resulting in decreases in expected rental revenues and/or lower yields due to lower occupancy and rates as well as higher than expected concessions or higher than expected operating expenses. We may not be able to achieve rents that are consistent with expectations for acquired, developed or rehabbed properties. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position, to complete a development property or to complete a rehab. Additionally, we expect that other real estate investors with capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development and acquisition efforts. This competition (or lack thereof) may increase (or depress) prices for multifamily properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including large portfolios, that could increase our size and result in alterations to our capital structure. The total number of apartment units under development, costs of development and estimated completion dates are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation;
Debt financing and other capital required by the Company may not be available or may only be available on adverse terms;
Labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated;
Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction and excess inventory of multifamily and single family housing, increasing portions of single family housing stock being converted to rental use, rental housing subsidized by the government, other government programs that favor single family rental housing or owner occupied housing over multifamily rental housing, governmental regulations, slow or negative employment growth and household formation, the availability of low-interest mortgages or the availability of mortgages requiring little or no down payment for single family home buyers, changes in social preferences and the potential for geopolitical instability, all of which are beyond the Company's control; and
Additional factors as discussed in Part I of this Annual Report on Form 10-K, 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.

Overview

Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. ERP Operating Limited Partnership (“ERPOP”), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 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.

EQR is the general partner of, and as of December 31, 2014 owned an approximate 96.2% 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 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.

The Company's corporate headquarters are located in Chicago, Illinois and the Company also operates property management offices in each of its markets. As of December 31, 2014, the Company had approximately 3,500 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.




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Business Objectives and Operating and Investing Strategies

The Company invests in high quality apartment communities located in strategically targeted markets with the goal of maximizing our risk adjusted total return (operating income plus capital appreciation) on invested capital.

We seek to maximize the income and capital appreciation of our properties by investing in markets that are characterized by conditions favorable to multifamily property operations and appreciation. We are focused primarily on the six core coastal, high barrier to entry markets of Boston, New York, Washington DC, Southern California (including Los Angeles, Orange County and San Diego), San Francisco and Seattle. These markets generally feature one or more of the following characteristics that allow us to increase rents:
High barriers to entry where, because of land scarcity or government regulation, it is difficult or costly to build new apartment properties, creating limits on new supply;
High home ownership costs;
Strong economic growth leading to job growth and household formation, which in turn leads to high demand for our apartments;
Urban core locations with an attractive quality of life and higher wage job categories leading to high resident demand and retention; and
Favorable demographics contributing to a larger pool of target residents with a high propensity to rent apartments.

Our operating focus is on balancing occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. Revenue is maximized by attracting qualified prospects to our properties, cost-effectively converting these prospects into new residents and keeping our residents satisfied so they will renew their leases upon expiration. While we believe that it is our high-quality, well-located assets that bring our customers to us, it is the customer service and superior value provided by our on-site personnel that keeps them renting with us and recommending us to their friends.

We use technology to engage our customers in the way that they want to be engaged. Many of our residents utilize our web-based resident portal which allows them to sign and renew their leases, review their accounts and make payments, provide feedback and make service requests on-line.

Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt, sales of properties and joint venture agreements. In addition, the Company may acquire properties in transactions that include the issuance of limited partnership interests in the Operating Partnership (“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. The Company may acquire land parcels to hold and/or sell based on market opportunities as well as options to buy more land in the future. The Company may also seek to acquire properties by purchasing defaulted or distressed debt that encumbers desirable properties in the hope of obtaining title to property through foreclosure or deed-in-lieu of foreclosure proceedings.
Over the past several years, the Company has done an extensive repositioning of its portfolio from low barrier to entry/non-core markets to high barrier to entry/core markets. Since 2005, the Company has sold over 166,000 apartment units primarily in its non-core markets for an aggregate sales price of approximately $16.1 billion, acquired over 67,000 apartment units primarily in its core markets for approximately $19.5 billion and began approximately $5.3 billion of development projects primarily in its core markets. We are currently seeking to acquire and develop assets primarily in the following six core coastal metropolitan areas: Boston, New York, Washington D.C., Southern California, San Francisco and Seattle. We also have investments (in the aggregate about 12.1% of our NOI at December 31, 2014) in the two core markets of South Florida and Denver but do not currently intend to acquire or develop new assets in these markets. Further, we are in the process of exiting Phoenix and Orlando and will use sales proceeds from these markets to acquire and/or develop new assets and for other corporate purposes.

As part of its strategy, the Company purchases completed and fully occupied apartment properties, partially completed or partially occupied properties and takes options on land or acquires land on which apartment properties can be constructed. We intend to hold a diversified portfolio of assets across our target markets. As of December 31, 2014, no single market/metropolitan area accounted for more than 17.5% of our NOI, though no guarantee can be made that NOI concentration may not increase in the future.


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We endeavor to attract and retain the best employees by providing them with the education, resources and opportunities to succeed. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and residents as well as extensively train our customer service specialists in maintaining our properties and improvements, equipment and appliances. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees' engagement by surveying them annually and have consistently received high engagement scores.

We have a commitment to sustainability and consider the environmental impacts of our business activities. Sustainability and social responsibility are key drivers of our focus on creating the best apartment communities for residents to live, work and play. We have a dedicated in-house team that initiates and applies sustainable practices in all aspects of our business, including investment activities, development, property operations and property management activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been primarily concentrated in pedestrian-friendly urban locations near public transportation. When developing and renovating our properties, we strive to reduce energy and water usage by investing in energy saving technology while positively impacting the experience of our residents and the value of our assets. We continue to implement a combination of irrigation, lighting, HVAC and renewable energy improvements at our properties that will reduce energy and water consumption. The Company was recently named as the 2014 North American Residential – Large Cap Sector Leader by the Global Real Estate Sustainability Benchmark ("GRESB") survey, a globally recognized analysis of the sustainability indicators of approximately 650 real estate portfolios worldwide. For additional information regarding our sustainability efforts, see our December 2014 Corporate Social Responsibility and Sustainability Report at our website, www.equityresidential.com.

Current Environment

During the year ended December 31, 2014, the Company acquired six consolidated rental properties consisting of 1,353 apartment units for $469.9 million and two land parcels for $28.8 million. We believe our access to capital, our ability to execute large, complex transactions and our ability to efficiently stabilize large scale lease up properties provide us with a competitive advantage, which was demonstrated in the Archstone Transaction that closed in 2013. The Company currently budgets consolidated rental acquisitions of approximately $500.0 million during the year ending December 31, 2015 to be funded with proceeds from rental dispositions (see discussion below).
    
The Company started construction on six projects representing 2,267 apartment units totaling approximately $1.2 billion of development costs during the year ended December 31, 2014. The Company significantly increased its development starts in 2014 as compared to the past few years and while construction activity will remain elevated in 2015, starts should return to more normalized levels. The Company has budgeted approximately $1.0 billion of combined new apartment construction starts on land currently owned during the years ending December 31, 2015 and 2016, with approximately $400.0 million occurring in 2015 and the balance occurring in 2016. We currently budget spending approximately $700.0 million on development costs during the year ending December 31, 2015. This capital will be primarily sourced with excess operating cash flow, expected debt offerings in 2015 and borrowings on our revolving credit facility and/or commercial paper program.

The Company expects to continue to sell non-core assets and reduce its exposure to non-core markets as we believe these assets will have lower long-term returns and we can sell them for prices that we believe are favorable. The Company sold ten consolidated rental properties consisting of 3,092 apartment units for $467.0 million, one unconsolidated rental property consisting of 388 apartment units for $62.5 million (sales price for the unconsolidated rental property is the gross sales price and EQR owned an 85% interest) and three land parcels for $62.6 million during the year ended December 31, 2014. The Company currently budgets consolidated rental dispositions of approximately $500.0 million during the year ending December 31, 2015, which includes the Company's three remaining properties in the Orlando market.

We currently have access to multiple sources of capital including the equity markets as well as both the secured and unsecured debt markets. In June 2014, the Company completed a $450.0 million unsecured five year note offering with a coupon of 2.375% and an all-in effective interest rate of approximately 2.52% as well as a $750.0 million unsecured thirty year note offering with a coupon of 4.5% and an all-in effective interest rate of approximately 4.57%. The Company used the proceeds from these offerings to repay its $750.0 million unsecured term loan facility that was scheduled to mature on January 11, 2015 and to repay the outstanding balance on its revolving credit facility. In February 2015, the Company entered into a $500.0 million commercial paper program, which will allow for daily, weekly, or monthly borrowing at low floating rates of interest. We believe this commercial paper program will allow the Company to continue to reduce its already low cost of capital and expect to use the program to replace a portion of the amount that we would otherwise have outstanding under our revolving line of credit. The Company has budgeted $950.0 million of secured or unsecured debt offerings during 2015, excluding usage of the commercial paper program.


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We believe that cash and cash equivalents, securities readily convertible to cash, current availability on our revolving credit facility and commercial paper program, expected debt offerings and disposition proceeds for 2015 will provide sufficient liquidity to meet our funding obligations relating to asset acquisitions, debt maturities and existing development projects through 2015. We expect that our remaining longer-term funding requirements will be met through some combination of new borrowings, equity issuances, property dispositions, joint ventures and cash generated from operations.

There is significant uncertainty surrounding the futures of Fannie Mae and Freddie Mac (the “Government Sponsored Enterprises” or “GSEs”). Through their lender originator networks, the GSEs are significant lenders both to the Company and to buyers of the Company's properties. The GSEs have a mandate to support multifamily housing through their financing activities. Any changes to their mandates, further reductions in their size or the scale of their activities or loss of key personnel could have a significant impact on the Company and may, among other things, lead to lower values for our assets and higher interest rates on our borrowings. The GSE's regulator has set overall volume limits on most of the lending activities of the GSEs. For 2015, these activities are generally consistent with historical requirements and are not anticipated to materially impact the GSEs' overall multifamily lending activity. However, going forward the regulator could require the GSEs to focus more of their lending activities on small borrowers or properties that the regulator deems affordable, which may or may not include the Company's assets. For 2015, the GSE’s regulator imposed a limit of $60 billion in multifamily lending volume which excluded certain affordable housing loans, loans to small multifamily properties, and loans to manufactured housing communities. This limit along with the exclusion of certain types of lending activity reflects a modest increase to 2014 levels. While no reductions are currently anticipated, there can be no assurances that the GSEs regulator does not mandate reductions or increases in loan pricing in the future. Such reductions in GSE activity or increases in GSE loan pricing could provide a competitive advantage to us by making the cost of financing multifamily properties more expensive for other multifamily owners while the Company continues to have access to cheaper capital in the public and private debt and equity markets. Over time, we expect that other lenders, including banks, the commercial mortgage-backed securities market and life insurance companies, will become larger sources of debt capital to the multifamily market because multifamily properties are attractive to lenders due to their relatively stable cash flows.
Same store revenues increased 4.3% during the year ended December 31, 2014 as compared to the same period in 2013, which was above the high end of our original guidance range of 3.0% to 4.0% that we provided in February 2014. Strong demand and continued strength in occupancy levels drove the outperformance during 2014, which should continue into 2015. In addition, improving labor markets, robust household formation and declining single family home ownership levels should keep demand for rental housing high and produce above trend growth for 2015. We anticipate same store revenue increases ranging from 3.75% to 4.50% and same store NOI increases ranging from 4.0% to 5.5% for 2015 as compared to 2014.

All of our markets are generally performing well, except for Washington D.C. As noted above, demand for our apartments has been strong, with high occupancy and low turnover due in part to declines in move outs to buy new homes. In general, new supply continues to be absorbed in an orderly fashion with lease-ups occurring faster than expected and only minimal impact on rents at nearby stabilized assets. During 2015, we currently anticipate three groupings of same store revenue growth, with San Francisco, Seattle, Denver and Orange County producing 5% or higher, New York, Los Angeles, San Diego, South Florida and Boston producing 3% to 5% (although Boston might be in the high 2% range) and Washington D.C. producing flat to slightly positive growth. Washington D.C., which is our largest market, has seen record absorption despite anemic job growth in 2014. However, Washington D.C. continues to show signs of stress as substantial new supply and the impact of government budget constraints and cutbacks have dampened the metro area economy. Despite slow growth in the overall economy and the issues noted in Washington D.C., our business continues to perform well because of the combined forces of demographics, household formations and increasing consumer preference for the flexibility of rental housing, all of which should ensure a continued strong demand for rental housing.

Same store expenses increased 1.8% during the year ended December 31, 2014 as compared to the same period in 2013, which was below the low end of our original guidance range of 2.0% to 3.0% that we provided in February 2014. By leveraging the integration of the Archstone Portfolio through lower onsite payroll and a more efficient property management company, we were able to offset 5.6% and 5.0% increases in same store real estate taxes and utilities, respectively. Same store expense growth in the controllable property level expenses (excluding real estate taxes and utilities) declined 1.5% during 2014 as compared to 2013. The Company anticipates that 2015 same store expenses will increase 2.5% to 3.5%, with increases in real estate taxes expected to approximate 5.0% for the full year 2015. The increase in real estate taxes is primarily due to rate and value increases in certain states and municipalities, reflecting those states' and municipalities' continued economic challenges and the dramatic improvement in apartment values and fundamentals as well as the continued burn off of 421a tax abatements in New York City. We expect full year utility costs to decline approximately 1.0% due to significant declines in natural gas and heating oil, partially offset by higher costs for electricity, water, sewer and trash. With an improving labor market and the Archstone Portfolio staffing fully optimized, we anticipate same store payroll costs to grow 2.0% to 3.0% in 2015 over 2014.

    

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We believe that the Company is well-positioned as of December 31, 2014 because our properties are geographically diverse, were approximately 95.1% occupied (95.7% on a same store basis) and the long-term demographic picture is positive. We believe certain market areas, especially Washington D.C., downtown Boston and Cambridge and Seattle, will see substantial near term multifamily supply; yet total new supply levels for our core markets remain within historical ranges. We believe over the longer term that our core markets will absorb future supply without material marketwide disruption because of the high occupancy levels we currently experience and increasing household formations. We have seen evidence of this in Seattle as supply has been absorbed and rental rates continue to grow. We believe our strong balance sheet and ample liquidity will allow us to fund our debt maturities and development costs in the near term, and should also allow us to take advantage of investment opportunities in the future.

The current environment information presented above is based on current expectations and is forward-looking.
    
Results of Operations
In conjunction with our business objectives and operating strategy, the Company continued to invest primarily in apartment properties located in our high barrier to entry/core markets and primarily sell properties in our low barrier to entry/non-core markets during the years ended December 31, 2014 and December 31, 2013. In summary, we:
Year Ended December 31, 2014:
Acquired four consolidated apartment properties consisting of 1,011 apartment units for $363.2 million at a weighted cap rate (see definition below) of 4.8% and two land parcels for $28.8 million;
Acquired two consolidated apartment properties, one that had just completed lease up and the other which was still in lease up, consisting of 342 apartment units for $106.6 million and are expected to stabilize at a 6.4% yield on cost and a 4.9% yield on cost, respectively;
Acquired the 95% equity interest it did not own in one previously unconsolidated development project with an anticipated stabilized real estate value of $87.5 million at completion and an adjusted purchase price of $64.2 million;
Sold ten consolidated apartment properties consisting of 3,092 apartments units for $467.0 million at a weighted average cap rate of 6.1% generating an unlevered internal rate of return ("IRR"), inclusive of management costs, of 8.9% and three land parcels for $62.6 million; and
Sold one unconsolidated property for $62.5 million (sales price listed is the gross sales price and EQR owned an 85% interest).
Year Ended December 31, 2013:
Acquired $8.5 billion of apartment properties consisting of 73 consolidated properties and 20,914 apartment units (inclusive of eight long-term ground leases) at a weighted average cap rate (see definition below) of 4.9% and 14 consolidated land parcels for $260.6 million, all of which we deem to be in our strategic targeted markets;
Acquired three consolidated master-leased properties consisting of 853 apartment units (inclusive of one long-term ground lease) for $249.6 million at a weighted average cap rate of 5.6%;
Acquired two consolidated uncompleted developments for $36.6 million;
Acquired one unconsolidated apartment property consisting of 336 apartment units for $5.1 million at a weighted average cap rate of 5.8% and one unconsolidated land parcel for $6.6 million;
Acquired two unconsolidated uncompleted developments for $14.9 million;
Sold $4.5 billion of consolidated apartment properties consisting of 94 properties and 29,180 apartment units at a weighted average cap rate of 6.0% generating an unlevered IRR, inclusive of management costs, of 10.0% (excluding the sale of three Archstone assets), the majority of which were in exit or less desirable markets;
Sold seven consolidated land parcels and one consolidated commercial building for $130.4 million; and
Sold one unconsolidated land parcel for $26.4 million (sales price is the gross sales price and EQR's share of the net sales proceeds approximated 25%).
The Company's primary financial measure for evaluating each of its apartment communities is net operating income (“NOI”). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. 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 communities. The cap rate is generally the first year NOI yield (net of replacements) on the Company's investment.


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Properties that the Company owned and were stabilized (see definition below) for all of both 2014 and 2013 as well as the 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company (the “2014 Same Store Properties”), which represented 97,911 apartment units, impacted the Company's results of operations. Properties that the Company owned for all of both 2013 and 2012 (the “2013 Same Store Properties”), which represented 80,247 apartment units, also impacted the Company's results of operations. Both the 2014 Same Store Properties and 2013 Same Store Properties are discussed in the following paragraphs.
The following tables provide a rollforward of the apartment units included in Same Store Properties and a reconciliation of apartment units included in Same Store Properties to those included in Total Properties for the year ended December 31, 2014:

 
Year Ended
 
December 31, 2014
 
Properties
Apartment
Units
Same Store Properties at December 31, 2013
296

80,247

 
 
 
2012 acquisitions
9

1,896

2013 acquisitions
77

22,103

2013 acquisitions not yet included in same store (1)
(1
)
(322
)
2013 acquisitions not yet stabilized (2)
(2
)
(613
)
2013 acquisitions not managed by the Company (3)
(3
)
(853
)
2013 acquisitions not consolidated
(1
)
(336
)
2013 acquisitions disposed of in 2013 (4)
(3
)
(1,536
)
2014 dispositions
(10
)
(3,092
)
Lease-up properties stabilized
3

374

Other

43

Same Store Properties at December 31, 2014
365

97,911


 
Year Ended
 
December 31, 2014
 
Properties
Apartment
Units
Same Store
365

97,911

 
 
 
Non-Same Store:
 
 
2014 acquisitions
4

1,011

2014 acquisitions not yet stabilized (2)
2

342

2013 acquisitions not yet included in same store (1)
1

322

2013 acquisitions not yet stabilized (2)
2

613

2013 acquisitions not managed by the Company (3)
3

853

2013 acquisitions not consolidated
1

336

   Lease-up properties not yet stabilized (2)
10

2,803

   Other
1

1

Total Non-Same Store
24

6,281

Military Housing (not consolidated)
2

5,033

Total Properties and Apartment Units
391

109,225


Note: Properties are considered "stabilized" when they have achieved 90% occupancy for three consecutive months. Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented. Same store includes the 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company, with pro forma pre-ownership results for the period January 1, 2013 to February 27, 2013.

(1)
Includes one property containing 322 apartment units acquired in 2013 separately from the Archstone Acquisition.

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(2)
Includes properties in various stages of lease-up and properties where lease-up has been completed but the properties were not stabilized for the comparable periods presented.
(3)
Includes three properties containing 853 apartments units acquired on February 27, 2013 in conjunction with the Archstone Acquisition that are owned by the Company but the entire projects are master leased to a third party corporate housing provider and the Company earns monthly net rental income.
(4)
Includes three properties containing 1,536 apartment units acquired on February 27, 2013 in conjunction with the Archstone Acquisition that were subsequently sold in 2013.
The Company's acquisition, disposition and completed development activities also impacted overall results of operations for the years ended December 31, 2014 and 2013. The impacts of these activities are discussed in greater detail in the following paragraphs.
    
Comparison of the year ended December 31, 2014 to the year ended December 31, 2013
    
For the year ended December 31, 2014, the Company reported diluted earnings per share/unit of $1.73 compared to $5.16 per share/unit for the year ended December 31, 2013. The difference is primarily due to approximately $1.8 billion in higher gains on property sales in 2013 vs. 2014, partially offset by $69.6 million of higher merger-related expenses incurred in 2013 vs. 2014 in connection with the Archstone Acquisition, $122.8 million of higher debt extinguishment costs incurred in 2013 vs. 2014 in connection with early debt extinguishment of existing mortgage notes payable to manage the Company's post Archstone 2017 maturities profile and higher depreciation in 2013 as a direct result of in-place residential lease intangibles acquired in the Archstone Transaction.

For the year ended December 31, 2014, income from continuing operations increased approximately $825.3 million when compared to the year ended December 31, 2013. The increase in continuing operations is discussed below.

Revenues from the 2014 Same Store Properties increased $101.6 million primarily as a result of an increase in average rental rates charged to residents, higher occupancy and a decrease in turnover. Expenses from the 2014 Same Store Properties increased $14.8 million primarily due to increases in real estate taxes and utilities, partially offset by lower property management costs. The following tables provide comparative same store results and statistics for the 2014 Same Store Properties:

2014 vs. 2013
Same Store Results/Statistics for 97,911 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate (1)
 
 
 
 
Description
 
Revenues
 
Expenses
 
NOI
 
 
Occupancy
 
Turnover
2014
 
$
2,475,933

 
$
830,697

 
$
1,645,236

 
$
2,202

 
95.8
%
 
55.0
%
2013
 
$
2,374,350

 
$
815,865

 
$
1,558,485

 
$
2,119

 
95.4
%
 
55.5
%
Change
 
$
101,583

 
$
14,832

 
$
86,751

 
$
83

 
0.4
%
 
(0.5
%)
Change
 
4.3
%
 
1.8
%
 
5.6
%
 
3.9
%
 
 
 
 

Note: Same store results/statistics include the stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company.

(1)Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
The following table provides comparative same store operating expenses for the 2014 Same Store Properties:

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2014 vs. 2013
Same Store Operating Expenses for 97,911 Same Store Apartment Units
$ in thousands
 
 
 
 
 
 
 
 
 
 
% of Actual
2014
Operating
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Actual
2014
 
Actual
2013
 
$
Change
 
%
Change
 
 
 
 
 
 
 
Real estate taxes
 
$
287,214

 
$
271,888

 
$
15,326

 
5.6
%
 
34.6
%
On-site payroll (1)
 
174,273

 
174,589

 
(316
)
 
(0.2
%)
 
21.0
%
Utilities (2)
 
125,235

 
119,253

 
5,982

 
5.0
%
 
15.1
%
Repairs and maintenance (3)
 
100,496

 
100,319

 
177

 
0.2
%
 
12.1
%
Property management costs (4)
 
74,278

 
78,354

 
(4,076
)
 
(5.2
%)
 
8.9
%
Insurance
 
24,354

 
24,626

 
(272
)
 
(1.1
%)
 
2.9
%
Leasing and advertising
 
10,802

 
12,072

 
(1,270
)
 
(10.5
%)
 
1.3
%
Other on-site operating expenses (5)
 
34,045

 
34,764

 
(719
)
 
(2.1
%)
 
4.1
%
Same store operating expenses
 
$
830,697

 
$
815,865

 
$
14,832

 
1.8
 %
 
100.0
%

(1)
On-site payroll – Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
(2)
Utilities – Represents gross expenses prior to any recoveries under the Resident Utility Billing System (“RUBS”). Recoveries are reflected in rental income.
(3)
Repairs and maintenance – Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
(4)
Property management costs – Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
(5)
Other on-site operating expenses – Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
The following table presents a reconciliation of operating income per the consolidated statements of operations and comprehensive income to NOI for the 2014 Same Store Properties:

 
 
Year Ended December 31,
 
 
2014
 
2013
 
 
(Amounts in thousands)
Operating income
 
$
921,375

 
$
512,322

Adjustments:
 
 
 
 
Archstone pre-ownership operating results
 

 
55,694

Non-same store operating results
 
(81,940
)
 
(47,445
)
Fee and asset management revenue
 
(9,437
)
 
(9,698
)
Fee and asset management expense
 
5,429

 
6,460

Depreciation
 
758,861

 
978,973

General and administrative
 
50,948

 
62,179

Same store NOI
 
$
1,645,236

 
$
1,558,485

    





    

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For properties that the Company acquired prior to January 1, 2014 and expects to continue to own through December 31, 2015, the Company anticipates the following same store results for the full year ending December 31, 2015:

2015 Same Store Assumptions
Physical occupancy
 
95.8%
Revenue change
 
3.75% to 4.5%
Expense change
 
2.5% to 3.5%
NOI change
 
4.0% to 5.5%
The Company anticipates consolidated rental acquisitions of $500.0 million and consolidated rental dispositions of $500.0 million and expects that acquisitions will have a 1.00% lower cap rate than dispositions for the full year ending December 31, 2015.
    
These 2015 assumptions are based on current expectations and are forward-looking.

Non-same store operating results increased approximately $34.5 million and consist primarily of properties acquired in calendar years 2013 and 2014 as well as operations from the Company’s completed development properties, but exclude the 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company. This increase primarily resulted from:

Development and newly stabilized development properties in lease-up of $20.6 million;
Operating properties acquired in 2013 and 2014 of $13.8 million (excluding operating properties acquired in the Archstone Acquisition);
Other miscellaneous properties (including three master-leased properties acquired in the Archstone Acquisition) of $1.7 million; and
Partially offset by a decrease in operating activities from other miscellaneous operations.

See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.

Fee and asset management revenues, net of fee and asset management expenses, increased approximately $0.8 million or 23.8% primarily as a result of higher revenue earned on management of the Company's military housing ventures at Fort Lewis and McChord Air Force base and lower expenses, partially offset by lower fees earned on management of the Company’s unconsolidated development joint ventures.

Property management expenses from continuing operations include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third party management companies. These expenses decreased approximately $4.7 million or 5.6%. This decrease is primarily attributable to a decrease in payroll-related costs, office rent, education/conferences and legal and professional fees.

Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, decreased approximately $220.1 million or 22.5% primarily as a result of in-place residential lease intangibles which are generally amortized over a six month period and can significantly elevate depreciation expense following an acquisition, especially during 2013 as a direct result of the Archstone Acquisition, partially offset by additional depreciation expense on properties acquired in 2014, development properties placed in service and capital expenditures for all properties owned.

General and administrative expenses from continuing operations, which include corporate operating expenses, decreased approximately $11.2 million or 18.1% primarily due to a decrease in payroll-related costs and office rent. The Company anticipates that general and administrative expenses will approximate $51.0 million to $53.0 million for the year ending December 31, 2015, excluding approximately $9.7 million in duplicative costs related to the Company's revised executive compensation program. The above assumption is based on current expectations and is forward-looking.

Interest and other income from continuing operations decreased approximately $0.8 million or 15.5% primarily due to proceeds received from the sale of certain investment securities during the year ended December 31, 2013 that did not reoccur in 2014, partially offset by proceeds received from various insurance/litigation settlements totaling $2.8 million during the year ended December 31, 2014 that did not occur in 2013. The Company anticipates that interest and other income will approximate $0.5 million for the year ending December 31, 2015. The above assumption is based on current expectations and is forward-looking.

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Other expenses from continuing operations decreased approximately $20.6 million or 69.4% primarily due to the closing of the Archstone Acquisition during the year ended December 31, 2013 and the significant decline in transaction activity during the year ended December 31, 2014.

Interest expense from continuing operations, including amortization of deferred financing costs, decreased approximately $140.8 million or 23.1% primarily as a result of $122.8 million of higher debt extinguishment costs incurred on early debt prepayments and write-offs of unamortized deferred financing costs in 2013 vs. 2014 related to managing the Company's post Archstone 2017 maturities profile and higher capitalized interest in 2014. During the year ended December 31, 2014, the Company capitalized interest costs of approximately $52.8 million as compared to $47.3 million for the year ended December 31, 2013. This capitalization of interest primarily relates to consolidated projects under development. The effective interest cost on all indebtedness for the year ended December 31, 2014 was 4.74% as compared to 4.91% (excluding $107.6 million in net debt extinguishment costs) for the year ended December 31, 2013. The Company anticipates that interest expense from continuing operations will approximate $442.8 million to $455.1 million (excluding debt extinguishment costs) for the year ending December 31, 2015. The above assumption is based on current expectations and is forward-looking.

Income and other tax expense from continuing operations increased approximately $0.2 million or 19.2% primarily due to increases in estimated taxes related to properties sold by the Company's TRS in 2014 vs. 2013, partially offset by a reduction and timing of all other taxes. The Company anticipates that income and other tax expense will approximate $1.0 million to $1.5 million for the year ending December 31, 2015. The above assumption is based on current expectations and is forward-looking.

Loss from investments in unconsolidated entities decreased by $50.2 million or 86.3% primarily due to indirect costs incurred in 2013 from the Archstone Acquisition through the Company's joint ventures with AVB such as severance and retention bonuses that have significantly decreased in 2014.

Net gain on sales of real estate properties increased $212.7 million as a result of the sale of ten consolidated apartment properties during the year ended December 31, 2014 that did not meet the new criteria for reporting discontinued operations. See Notes 2 and 11 in the Notes to Consolidated Financial Statements for further discussion.

Net gain on sales of land parcels decreased approximately $7.0 million or 56.8% due to the gain on sale of three land parcels during the year ended December 31, 2014 as compared to seven land sales during the year ended December 31, 2013.

Discontinued operations, net decreased approximately $2.1 billion or 99.9% between the periods under comparison. This decrease is primarily due to substantially higher sales volume during the year ended December 31, 2013 compared to the same period in 2014 and due to the Company's adoption of the new discontinued operations standard effective January 1, 2014. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.
Comparison of the year ended December 31, 2013 to the year ended December 31, 2012
For the year ended December 31, 2013, the Company reported diluted earnings per share of $5.16 compared to $2.70 per share for the year ended December 31, 2012. The difference is primarily due to higher gains from property sales in 2013 vs. 2012 and higher total property net operating income driven by the positive impact of the Company's same store and stabilized Archstone properties, partially offset by $73.9 million of merger-related expenses incurred in connection with the Archstone Acquisition, $121.7 million of costs incurred in connection with early debt extinguishment of existing mortgage notes payable to manage the Company's post Archstone 2017 maturities profile, higher depreciation as a direct result of the Archstone Transaction, the issuance of Common Shares to the public in December 2012 and to an affiliate of Lehman Brothers Holdings Inc. in February 2013 as partial consideration for the Archstone Acquisition and the Company's recognition of $150.0 million in Archstone-related termination fees in 2012.

For the year ended December 31, 2013, loss from continuing operations increased approximately $328.5 million when compared to the year ended December 31, 2012. The decrease in continuing operations is discussed below.

Revenues from the 2013 Same Store Properties increased $76.0 million primarily as a result of an increase in average rental rates charged to residents, slightly higher occupancy and a decrease in turnover. Expenses from the 2013 Same Store Properties increased $20.2 million primarily due to increases in real estate taxes, utilities and repairs and maintenance costs, partially offset by lower property management costs. The following tables provide comparative same store results and statistics for the 2013 Same Store Properties:


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2013 vs. 2012
Same Store Results/Statistics for 80,247 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate (1)
 
 
 
 
Description
 
Revenues
 
Expenses
 
NOI
 
 
Occupancy
 
Turnover
2013
 
$
1,769,280

 
$
607,243

 
$
1,162,037

 
$
1,926

 
95.4
%
 
55.6
%
2012
 
$
1,693,239

 
$
587,037

 
$
1,106,202

 
$
1,846

 
95.3
%
 
56.3
%
Change
 
$
76,041

 
$
20,206

 
$
55,835

 
$
80

 
0.1
%
 
(0.7
%)
Change
 
4.5
%
 
3.4
%
 
5.0
%
 
4.3
%
 
 
 
 

(1)
Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
The following table provides comparative same store operating expenses for the 2013 Same Store Properties:

2013 vs. 2012
Same Store Operating Expenses for 80,247 Same Store Apartment Units
$ in thousands
 
 
 
 
 
 
 
 
 
 
% of Actual
2013
Operating
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Actual
2013
 
Actual
2012
 
$
Change
 
%
Change
 
 
 
 
 
 
 
Real estate taxes
 
$
200,315

 
$
185,646

 
$
14,669

 
7.9
%
 
33.0
%
On-site payroll (1)
 
129,543

 
127,198

 
2,345

 
1.8
%
 
21.3
%
Utilities (2)
 
89,941

 
86,326

 
3,615

 
4.2
%
 
14.8
%
Repairs and maintenance (3)
 
82,280

 
78,729

 
3,551

 
4.5
%
 
13.6
%
Property management costs (4)
 
58,386

 
63,496

 
(5,110
)
 
(8.0
%)
 
9.6
%
Insurance
 
19,585

 
18,427

 
1,158

 
6.3
%
 
3.2
%
Leasing and advertising
 
9,486

 
9,225

 
261

 
2.8
%
 
1.6
%
Other on-site operating expenses (5)
 
17,707

 
17,990

 
(283
)
 
(1.6
%)
 
2.9
%
Same store operating expenses
 
$
607,243

 
$
587,037

 
$
20,206

 
3.4
 %
 
100.0
%

(1)
On-site payroll – Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
(2)
Utilities – Represents gross expenses prior to any recoveries under the Resident Utility Billing System (“RUBS”). Recoveries are reflected in rental income.
(3)
Repairs and maintenance – Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
(4)
Property management costs – Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
(5)
Other on-site operating expenses – Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.

Non-same store operating results increased approximately $377.3 million and consist primarily of properties acquired in calendar years 2012 and 2013, as well as operations from the Company’s completed development properties. Although the operations of both the non-same store assets and the same store assets have been positively impacted during the year ended December 31, 2013, the non-same store assets have contributed a greater percentage of total NOI to the Company’s overall operating results primarily due to 2012 and 2013 acquisitions, increasing occupancy for properties in lease-up and a longer ownership period in 2013 than 2012. This increase primarily resulted from:

Development and other miscellaneous properties in lease-up of $7.2 million;
Operating properties acquired in 2013 as part of the Archstone Transaction of $346.0 million;
Other properties acquired in 2012 and 2013 of $23.7 million;

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Newly stabilized development and other miscellaneous properties of $5.5 million; and
Partially offset by an allocation of property management costs not included in same store results and operating activities from other miscellaneous operations.
    
See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company's segment disclosures.

Fee and asset management revenues, net of fee and asset management expenses, decreased approximately $1.7 million or 34.1% primarily as a result of higher expenses and lower revenue earned on management of the Company's military housing ventures at Fort Lewis and McChord Air Force Base, partially offset by fees earned on management of the Company’s unconsolidated development joint ventures.

Property management expenses from continuing operations include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third party management companies. These expenses increased approximately $2.4 million or 3.0%. This increase is primarily attributable to an increase in payroll-related costs and an increase in computer operations due to the modernization of employee technology, partially offset by the timing of legal and professional fees.

Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased approximately $418.3 million or 74.6% primarily as a result of additional depreciation expense on properties acquired in 2013 (including the Archstone properties), development properties placed in service and capital expenditures for all properties owned, partially offset by a decrease in the amortization of furniture, fixtures and equipment that were fully depreciated. In-place residential lease intangibles are generally amortized over a six month period and can significantly elevate depreciation expense following an acquisition, especially during 2013 as a direct result of the Archstone Acquisition.

General and administrative expenses from continuing operations, which include corporate operating expenses, increased approximately $14.9 million or 31.6% primarily due to an increase in payroll-related costs, which is largely a result of higher and accelerated long-term compensation expense for retirement eligible employees and higher compensation related to the Archstone Transaction, as well as an increase in office rent.

Interest and other income from continuing operations decreased $145.8 million or 96.5% primarily due to the Company recognizing $150.0 million in Archstone-related termination fees during the year ended December 31, 2012, partially offset by proceeds received from the sale of investment securities and technology investments during the year ended December 31, 2013.

Other expenses from continuing operations, which includes direct costs incurred from the Archstone Acquisition such as investment banking and legal/accounting costs, increased approximately $1.8 million or 6.6% as a result of the closing of the Archstone Acquisition during the year ended December 31, 2013, partially offset by lower property pursuit costs as the Company focused on its pursuit of Archstone.

Interest expense from continuing operations, including amortization of deferred financing costs, increased approximately $132.5 million or 27.8% primarily as a result of the following:

$121.7 million of costs incurred on early debt extinguishments in 2013 on existing mortgage notes payable to manage the Company's post Archstone 2017 maturities profile;
Interest expense on the Company's $750.0 million delayed draw term loan facility which was fully drawn on February 27, 2013; and
Interest expense on $500.0 million of unsecured notes that closed in April 2013.
The above increases to interest expense were partially offset by the following:
Higher capitalized interest in 2013 (see below);
The repayment of $253.9 million of 6.625% unsecured notes in March 2012;
The repayment of $221.1 million of 5.500% unsecured notes in October 2012;
The repayment of a $543.0 million mortgage pool in March 2013;
The repayment of $400.0 million of 5.200% unsecured notes in April 2013;
The repayment of $963.5 million of 5.883% Pool 4 mortgage debt in October 2013; and
The partial paydown of $825.0 million of 6.256% Pool 3 mortgage debt in October 2013.

During the year ended December 31, 2013, the Company capitalized interest costs of approximately $47.3 million as compared to $22.5 million for the year ended December 31, 2012. This capitalization of interest primarily relates to consolidated

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projects under development. The effective interest cost on all indebtedness for the year ended December 31, 2013 was 4.91% (excluding $107.6 million in net debt extinguishment costs) as compared to 5.37% for the year ended December 31, 2012.

Income and other tax expense from continuing operations increased approximately $0.7 million primarily due to increases in taxes related to land parcel sales owned by the Company's TRS as well as increases in all other taxes.

Loss from investments in unconsolidated entities, which includes indirect costs incurred from the Archstone Acquisition through the Company's joint ventures with AVB, increased by $58.1 million primarily as a result of severance obligations and retention bonuses in connection with the Archstone Acquisition through our 60% interest in unconsolidated joint ventures as well as the gain on sale of one unconsolidated land parcel during the year ended December 31, 2013 as compared to no sales during the year ended December 31, 2012.

Net gain on sales of land parcels increased approximately $12.2 million due to the gain on sale of seven land parcels during the year ended December 31, 2013 as compared to no land sales during the year ended December 31, 2012.

Discontinued operations, net increased approximately $1.4 billion between the periods under comparison. This increase is primarily due to higher gains on sales from dispositions during the year ended December 31, 2013 compared to the same period in 2012, partially offset by properties sold in 2013 that reflect operations for a partial period in 2013 in contrast to a full period in 2012. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.

Liquidity and Capital Resources
EQR issues public equity from time to time and guarantees certain debt of ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.
As of January 1, 2014, the Company had approximately $53.5 million of cash and cash equivalents and it had $2.35 billion available under its revolving credit facility (net of $34.9 million which was restricted/dedicated to support letters of credit and net of $115.0 million outstanding). After taking into effect the various transactions discussed in the following paragraphs and the net cash provided by operating activities, the Company’s cash and cash equivalents balance at December 31, 2014 was approximately $40.1 million and the amount available on its revolving credit facility was $2.12 billion (net of $43.8 million which was restricted/dedicated to support letters of credit and net of $333.0 million outstanding).

During the year ended December 31, 2014, the Company generated proceeds from various transactions, which included the following:

Disposed of ten consolidated properties and three land parcels, receiving net proceeds of approximately $522.6 million;
Issued $450.0 million of five-year 2.375% fixed rate public notes, receiving net proceeds of $449.6 million before underwriting fees and other expenses, at an all-in effective interest rate of 2.52%;
Issued $750.0 million of thirty-year 4.50% fixed rate public notes, receiving net proceeds of $744.7 million before underwriting fees, hedge termination costs and other expenses, at an all-in effective interest rate of 4.57%;
Received approximately $79.6 million representing the Company's pro rata share of the proceeds/distributions that have been repatriated to the Residual JV as a result of the disposition of the German portfolio fund, the German management company and the remaining wholly-owned German real estate assets that were acquired by the Residual JV as part of the Archstone Acquisition (see Note 6);
Received approximately $20.3 million for the sale of one unconsolidated property in which the Company had an 85% interest; and
Issued approximately 2.2 million Common Shares related to share option exercises and ESPP purchases and received net proceeds of $86.0 million, which were contributed to the capital of the Operating Partnership in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis).
    
During the year ended December 31, 2014, the above proceeds along with net cash flow from operations and availability on the Company's revolving line of credit were primarily utilized to:

Acquire six rental properties, two land parcels and additional development rights at one of its existing land sites for approximately $470.0 million;
Acquire its partner's 95% interest in one previously unconsolidated property for cash consideration of approximately $44.8 million;
Invest $530.4 million primarily in development projects;

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Repay $100.7 million of mortgage loans;
Repay its $750.0 million unsecured term loan facility in conjunction with the note issuances discussed above;
Repay $500.0 million of 5.250% unsecured notes at maturity; and
Repurchase 31,240 Common Shares, utilizing cash of $1.8 million (see Note 3).

On February 27, 2013, the Company issued 34,468,085 Common Shares to an affiliate of Lehman Brothers Holdings Inc. as partial consideration for the portion of the Archstone Portfolio acquired by the Company. The shares had a total value of $1.9 billion based on the February 27, 2013 closing price of EQR Common Shares of $55.99 per share. Concurrent with this transaction, ERPOP issued 34,468,085 OP Units to EQR. On March 7, 2013, EQR filed a shelf registration statement relating to the resale of these shares by the selling shareholders. Lehman has since sold all of these Common Shares.

In September 2009, EQR announced the establishment of an At-The-Market (“ATM”) share offering program which would allow EQR to sell Common Shares from time to time into the existing trading market at current market prices as well as through negotiated transactions. Per the terms of ERPOP’s partnership agreement, EQR contributes the net proceeds from 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). EQR may, but shall have no obligation to, sell Common Shares through the ATM share offering program in amounts and at times to be determined by EQR. Actual sales will depend on a variety of factors to be determined by EQR from time to time, including (among others) market conditions, the trading price of EQR’s Common Shares and determinations of the appropriate sources of funding for EQR. On July 30, 2013, the Board of Trustees approved an increase to the amount of shares which be may offered under the ATM program to 13.0 million Common Shares and extended the program maturity to July 2016. EQR has not issued any shares under this program since September 14, 2012.  Through February 20, 2015, EQR has cumulatively issued approximately 16.7 million Common Shares at an average price of $48.53 per share for total consideration of approximately $809.9 million.

Depending on its analysis of market prices, economic conditions and other opportunities for the investment of available capital, EQR may repurchase its Common Shares pursuant to its existing share repurchase program authorized by the Board of Trustees. Effective July 30, 2013, the Board of Trustees approved an increase and modification to the Company's share repurchase program to allow for the potential repurchase of up to 13.0 million shares. EQR repurchased approximately $1.8 million (31,240 shares at a price of $56.87 per share) of its Common Shares (all related to the vesting of employees' restricted shares) during the year ended December 31, 2014. No open market repurchases have occurred since 2008. As of February 20, 2015, EQR has remaining authorization to repurchase an additional 12,968,760 of its shares. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.

Depending on its analysis of prevailing market conditions, liquidity requirements, contractual restrictions and other factors, the Company may from time to time seek to repurchase and retire its outstanding debt in open market or privately negotiated transactions.

The Company’s total debt summary and debt maturity schedules as of December 31, 2014 are as follows:












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Table of Contents


Debt Summary as of December 31, 2014
(Amounts in thousands)
 
 
Amounts (1)
 
% of Total
 
Weighted
Average
Rates (1)
 
Weighted
Average
Maturities
(years)
Secured
 
$
5,086,515

 
46.9
%
 
4.21
%
 
7.5

Unsecured
 
5,758,346

 
53.1
%
 
4.79
%
 
7.7

Total
 
$
10,844,861

 
100.0
%
 
4.52
%
 
7.6

Fixed Rate Debt:
 
 

 
 

 
 
 
 

Secured – Conventional
 
$
4,351,301

 
40.1
%
 
4.82
%
 
5.9

Unsecured – Public
 
4,974,154

 
45.9
%
 
5.45
%
 
8.3

Fixed Rate Debt
 
9,325,455

 
86.0
%
 
5.15
%
 
7.2

Floating Rate Debt:
 
 

 
 

 
 

 
 

Secured – Conventional
 
7,985

 
0.1
%
 
2.08
%
 
19.1

Secured – Tax Exempt
 
727,229

 
6.7
%
 
0.66
%
 
16.2

Unsecured – Public (2)
 
451,192

 
4.1
%
 
1.15
%
 
4.5

Unsecured – Revolving Credit Facility
 
333,000

 
3.1
%
 
0.95
%
 
3.3

Floating Rate Debt
 
1,519,406

 
14.0
%
 
0.92
%
 
9.9

Total
 
$
10,844,861

 
100.0
%
 
4.52
%
 
7.6


(1)
Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 2014.
(2)
Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
Note: The Company capitalized interest of approximately $52.8 million and $47.3 million during the years ended December 31, 2014 and 2013, respectively.

Debt Maturity Schedule as of December 31, 2014
(Amounts in thousands)
 
 
Fixed
Rate (1)
 
Floating
Rate (1)
 
 
 
 
 
Weighted Average Rates
on Fixed
 Rate Debt (1)
 
Weighted Average
Rates on
 Total Debt (1)
Year
 
 
 
Total
 
% of Total
 
 
2015
 
$
408,420

 
$

 
$
408,420

 
3.8
%
 
6.32
%
 
6.32
%
2016
 
1,192,798

 

 
1,192,798

 
11.0
%
 
5.34
%
 
5.34
%
2017
 
1,346,252

 
456

 
1,346,708

 
12.4
%
 
6.16
%
 
6.16
%
2018
 
83,851

 
430,659

(2)
514,510

 
4.7
%
 
5.61
%
 
1.72
%
2019
 
806,106

 
472,363

 
1,278,469

 
11.8
%
 
5.48
%
 
3.76
%
2020
 
1,678,020

 
809

 
1,678,829

 
15.5
%
 
5.49
%
 
5.49
%
2021
 
1,194,624

 
856

 
1,195,480

 
11.0
%
 
4.63
%
 
4.63
%
2022
 
228,273

 
905

 
229,178

 
2.1
%
 
3.16
%
 
3.17
%
2023
 
1,331,497

 
956

 
1,332,453

 
12.3
%
 
3.74
%
 
3.74
%
2024
 
2,497

 
1,011

 
3,508

 

 
4.97
%
 
5.14
%
2025+
 
1,022,417

 
673,977

 
1,696,394

 
15.7
%
 
4.97
%
 
3.17
%
Premium/(Discount)
 
30,700

 
(62,586
)
 
(31,886
)
 
(0.3
%)
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
9,325,455

 
$
1,519,406

 
$
10,844,861

 
100.0
%
 
5.13
%
 
4.49
%

(1)
Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2014.
(2)
Includes $333.0 million outstanding on the Company's unsecured revolving credit facility. As of December 31, 2014, there was approximately $2.12 billion available on this facility.
The following table provides a summary of the Company’s unsecured debt as of December 31, 2014:





52

Table of Contents


Unsecured Debt Summary as of December 31, 2014
(Amounts in thousands)
 
 
Coupon
Rate
 
Due
Date
 
Face
Amount
 
Unamortized
Premium/
(Discount)
 
Net
Balance
Fixed Rate Notes:
 
 
 
 
 
 
 
 
 
 
 
 
6.584%
 
04/13/15
 
$
300,000

 
$
(27
)
 
$
299,973

 
 
5.125%
 
03/15/16
 
500,000

 
(63
)
 
499,937

 
 
5.375%
 
08/01/16
 
400,000

 
(294
)
 
399,706

 
 
5.750%
 
06/15/17
 
650,000

 
(1,272
)
 
648,728

 
 
7.125%
 
10/15/17
 
150,000

 
(181
)
 
149,819

 
 
2.375%
 
07/01/19
(1)
450,000

 
(405
)
 
449,595

Fair Value Derivative Adjustments
 
 
 
 
(1)
(450,000
)
 
405

 
(449,595
)
 
 
4.750%
 
07/15/20
 
600,000

 
(2,518
)
 
597,482

 
 
4.625%
 
12/15/21
 
1,000,000

 
(2,635
)
 
997,365

 
 
3.000%
 
04/15/23
 
500,000

 
(3,671
)
 
496,329

 
 
7.570%
 
08/15/26
 
140,000

 

 
140,000

 
 
4.500%
 
07/01/44
 
750,000

 
(5,185
)
 
744,815

 
 
 
 
 
 
4,990,000

 
(15,846
)
 
4,974,154

Floating Rate Notes:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
07/01/19
(1)
450,000

 
(405
)
 
449,595

Fair Value Derivative Adjustments
 
 
 
07/01/19
(1)
1,597

 

 
1,597

 
 
 
 
 
 
451,597

 
(405
)
 
451,192

Revolving Credit Facility:
 
LIBOR+1.05%
 
04/01/18
(2)(3) 
333,000

 

 
333,000

Total Unsecured Debt
 
 
 
 
 
$
5,774,597

 
$
(16,251
)
 
$
5,758,346


(1)
Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
(2)
Facility is private. All other unsecured debt is public.
(3)
Represents the Company's $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the credit facility will generally be LIBOR plus a spread (currently 1.05%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of December 31, 2014, there was approximately $2.12 billion available on this facility.
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 on July 30, 2013 and expires on July 30, 2016. In July 2013, the Board of Trustees also approved an increase to the amount of shares which may be offered under the ATM program to 13.0 million Common Shares and extended the program maturity to July 2016. 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’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2014 is presented in the following table. The Company calculates the equity component of its market capitalization as the sum of (i) the total outstanding Common Shares and assumed conversion of all Units at the equivalent market value of the closing price of the Company’s Common Shares on the New York Stock Exchange and (ii) the liquidation value of all perpetual preferred shares outstanding.
















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Table of Contents


Equity Residential
Capital Structure as of December 31, 2014
(Amounts in thousands except for share/unit and per share amounts)
Secured Debt
 
 

 
 

 
$
5,086,515

 
46.9
%
 
 

Unsecured Debt
 
 

 
 

 
5,758,346

 
53.1
%
 
 

Total Debt
 
 

 
 

 
10,844,861

 
100.0
%
 
28.5
%
Common Shares (includes Restricted Shares)
 
362,855,454

 
96.2
%
 
 

 
 

 
 

Units (includes OP Units and restricted units)
 
14,298,691

 
3.8
%
 
 

 
 

 
 

Total Shares and Units
 
377,154,145

 
100.0
%
 
 

 
 

 
 

Common Share Price at December 31, 2014
 
$
71.84

 
 
 
 

 
 

 
 

 
 
 

 
 

 
27,094,754

 
99.8
%
 
 

Perpetual Preferred Equity (see below)
 
 

 
 

 
50,000

 
0.2
%
 
 

Total Equity
 
 

 
 

 
27,144,754

 
100.0
%
 
71.5
%
Total Market Capitalization
 
 

 
 

 
$
37,989,615

 
 
 
100.0
%

Equity Residential
Perpetual Preferred Equity as of December 31, 2014
(Amounts in thousands except for share and per share amounts)
Series
 
Redemption
Date
 
Outstanding
 Shares
 
Liquidation
Value
 
Annual
Dividend
 Per Share
 
Annual
Dividend
 Amount
 
 
 
 
 
Preferred Shares:
 
 
 
 
 
 
 
 
 
 
8.29% Series K
 
12/10/26
 
1,000,000

 
$
50,000

 
$
4.145

 
$
4,145

Total Perpetual Preferred Equity
 
 
 
1,000,000

 
$
50,000

 
 
 
$
4,145


The Operating Partnership’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2014 is presented in the following table. The Operating Partnership calculates the equity component of its market capitalization as the sum of (i) the total outstanding Units at the equivalent market value of the closing price of the Company’s Common Shares on the New York Stock Exchange and (ii) the liquidation value of all perpetual preference units outstanding.

ERP Operating Limited Partnership
Capital Structure as of December 31, 2014
(Amounts in thousands except for unit and per unit amounts)
Secured Debt
 
 

 
 
 
$
5,086,515

 
46.9
%
 
 

Unsecured Debt
 
 

 
 
 
5,758,346

 
53.1
%
 
 

Total Debt
 
 

 
 
 
10,844,861

 
100.0
%
 
28.5
%
Total outstanding Units
 
377,154,145

 
 
 
 

 
 

 
 

Common Share Price at December 31, 2014
 
$
71.84

 
 
 
 

 
 

 
 

 
 
 

 
 
 
27,094,754

 
99.8
%
 
 

Perpetual Preference Units (see below)
 
 

 
 
 
50,000

 
0.2
%
 
 

Total Equity
 
 

 
 
 
27,144,754

 
100.0
%
 
71.5
%
Total Market Capitalization
 
 

 
 
 
$
37,989,615

 
 
 
100.0
%


ERP Operating Limited Partnership
Perpetual Preference Units as of December 31, 2014
(Amounts in thousands except for unit and per unit amounts)
Series
 
Redemption
 Date
 
Outstanding
 Units
 
Liquidation Value
 
Annual
Dividend
 Per Unit
 
Annual
Dividend
 Amount
 
 
 
 
 
Preference Units:
 
 
 
 

 
 

 
 

 
 

8.29% Series K
 
12/10/26
 
1,000,000

 
$
50,000

 
$
4.145

 
$
4,145

Total Perpetual Preference Units
 
 
 
1,000,000

 
$
50,000

 
 
 
$
4,145



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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. Under normal operating conditions, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions.

The Company has a flexible dividend policy which it believes will generate payouts closely aligned with the actual annual operating results of the Company’s core business and provide transparency to investors. Beginning in 2014, the Company began paying its annual dividend based on 65% of the midpoint of the range of Normalized FFO guidance customarily provided as part of the Company's fourth quarter earnings release. The Company's 2014 annual dividend payout was $2.00 per share and the Company paid four quarterly dividends of $0.50 per share in 2014. The Company expects the 2015 annual dividend payout will be $2.21 per share and the Company intends to pay four quarterly dividends of $0.5525 per share in 2015. All future dividends remain subject to the discretion of the Board of Trustees. The above assumption is based on current expectations and is forward-looking. While our current dividend policy makes it less likely we will over distribute, it will also lead to a dividend reduction more quickly should operating results deteriorate. However, whether due to changes in the dividend policy or otherwise, there may be times when the Company experiences shortfalls in its coverage of distributions, which may cause the Company to consider reducing its distributions and/or using the proceeds from property dispositions or additional financing transactions to make up the difference. Should these shortfalls occur for lengthy periods of time or be material in nature, the Company's financial condition may be adversely affected and it may not be able to maintain its current distribution levels. The Company believes that its expected 2015 operating cash flow will be sufficient to cover capital expenditures and distributions.

The Company also expects to meet its long-term liquidity requirements, such as lump sum unsecured note and mortgage debt maturities, property acquisitions, financing of construction and 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 and cash generated from operations after all distributions. In addition, the Company has significant unencumbered properties available to secure additional mortgage borrowings in the event that the public capital markets are unavailable or the cost of alternative sources of capital is too high. The fair value of and cash flow from these unencumbered properties are in excess of the requirements the Company must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $27.7 billion in investment in real estate on the Company’s balance sheet at December 31, 2014, $19.1 billion or 69.1% 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.

As of February 20, 2015, ERPOP’s long-term credit ratings from Standard & Poor’s (“S&P”), Moody’s and Fitch for its outstanding senior debt was BBB+ (positive outlook), Baa1 (positive outlook) and BBB+, respectively. As of February 20, 2015, EQR’s long-term equity ratings from S&P, Moody’s and Fitch for its outstanding preferred equity was BBB+ (positive outlook), Baa2 (positive outlook) and BBB-, respectively. As of February 20, 2015, ERPOP's short-term credit ratings from S&P, Moody's and Fitch for its outstanding commercial paper was A-2, P-2 and F-2, respectively. EQR does not have short-term credit ratings.

On January 11, 2013, the Company replaced its existing $1.75 billion facility with a $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The Company has the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 1.05%) and the Company pays an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company’s long-term debt. As of February 20, 2015, there was available borrowings of $1.94 billion on the revolving credit facility (net of $43.8 million which was restricted/dedicated to support letters of credit, net of $300.0 million outstanding on the credit facility and net of $220.0 million outstanding on the commercial paper program) (see Note 18 in the Notes to Consolidated Financial Statements for additional discussion of the commercial paper program). This facility may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short-term liquidity requirements.

See Note 18 in the Notes to Consolidated Financial Statements for discussion of the events which occurred subsequent to December 31, 2014.
Capitalization of Fixed Assets and Improvements to Real Estate
Our policy with respect to capital expenditures is generally to capitalize expenditures that improve the value of the property or extend the useful life of the component asset of the property. We track improvements to real estate in two major categories and several subcategories:
Replacements (inside the apartment unit). These include:

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flooring such as carpets, hardwood, vinyl or tile;
appliances;
mechanical equipment such as individual furnace/air units, hot water heaters, etc;
furniture and fixtures such as kitchen/bath cabinets, light fixtures, ceiling fans, sinks, tubs, toilets, mirrors, countertops, etc; and
blinds.
All replacements are depreciated over a five to ten-year estimated useful life. We expense as incurred all make-ready maintenance and turnover costs such as cleaning, interior painting of individual apartment units and the repair of any replacement item noted above.
Building improvements (outside the apartment unit). These include:
roof replacement and major repairs;
paving or major resurfacing of parking lots, curbs and sidewalks;
amenities and common areas such as pools, exterior sports and playground equipment, lobbies, clubhouses, laundry rooms, alarm and security systems and offices;
major building mechanical equipment systems;
interior and exterior structural repair and exterior painting and siding;
major landscaping and grounds improvement; and
vehicles and office and maintenance equipment.

All building improvements are depreciated over a five to fifteen-year estimated useful life. We capitalize building improvements and upgrades only if the item: (i) exceeds $2,500 (selected projects must exceed $10,000); (ii) extends the useful life of the asset; and (iii) improves the value of the asset.

For the year ended December 31, 2014, our actual improvements to real estate totaled approximately $186.0 million. This includes the following (amounts in thousands except for apartment unit and per apartment unit amounts):

Capital Expenditures to Real Estate
For the Year Ended December 31, 2014
 
 
Total
Apartment
Units (1)
 
Replacements (2)
 
Avg. Per
Apartment
Unit
 
Building
Improvements
 
Avg. Per
Apartment
Unit
 
Total
 
Avg. Per
Apartment
Unit
Same Store Properties (3)
 
97,911

 
$
85,045

 
$
869

 
$
93,988

 
$
960

 
$
179,033

 
$
1,829

Non-Same Store Properties (4)
 
5,000

 
236

 
60

 
5,513

 
1,410

 
5,749

 
1,470

Other (5)
 

 
920

 
 

 
255

 
 

 
1,175

 
 

Total
 
102,911

 
$
86,201

 
 

 
$
99,756

 
 

 
$
185,957

 
 


(1)
Total Apartment Units – Excludes 1,281 unconsolidated apartment units and 5,033 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company’s results.
(2)
Replacements – Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $51.4 million spent in 2014 on apartment unit renovations/rehabs (primarily kitchens and baths) on 6,111 same store apartment units (equating to about $8,400 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets.
(3)
Same Store Properties – Primarily includes all properties acquired or completed and stabilized prior to January 1, 2013, less properties subsequently sold. Also includes 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company.
(4)
Non-Same Store Properties – Primarily includes all properties acquired during 2013 and 2014, plus any properties in lease-up and not stabilized as of January 1, 2013, but excludes 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company. Per apartment unit amounts are based on a weighted average of 3,911 apartment units.
(5)
Other – Primarily includes expenditures for properties sold.
For the year ended December 31, 2013, our actual improvements to real estate totaled approximately $135.8 million. This includes the following (amounts in thousands except for apartment unit and per apartment unit amounts):




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Capital Expenditures to Real Estate
For the Year Ended December 31, 2013
 
 
Total
Apartment
Units (1)
 
Replacements (2)
 
Avg. Per
Apartment
Unit
 
Building
Improvements
 
Avg. Per
Apartment
Unit
 
Total
 
Avg. Per
Apartment
Unit
Same Store Properties (3)
 
80,247

 
$
45,184

 
$
563

 
$
49,308

 
$
615

 
$
94,492

 
$
1,178

Non-Same Store Properties (4)
 
22,826

 
16,668

 
855

 
19,246

 
988

 
35,914

 
1,843

Other (5)
 

 
3,197

 
 

 
2,213

 
 

 
5,410

 
 

Total
 
103,073

 
$
65,049

 
 

 
$
70,767

 
 

 
$
135,816

 
 


(1)
Total Apartment Units – Excludes 1,669 unconsolidated apartment units and 5,113 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company’s results.
(2)
Replacements – Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $19.5 million spent in 2013 on apartment unit renovations/rehabs (primarily kitchens and baths) on 2,560 same store apartment units (equating to about $7,600 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. The Company also completed apartment unit renovations/ rehabs (primarily kitchens and baths) on 1,200 non-same store apartment units (primarily Archstone properties), equating to a total cost of approximately $11.9 million.
(3)
Same Store Properties – Primarily includes all properties acquired or completed and stabilized prior to January 1, 2012, less properties subsequently sold.
(4)
Non-Same Store Properties – Primarily includes all properties acquired during 2012 and 2013, plus any properties in lease-up and not stabilized as of January 1, 2012. Per apartment unit amounts are based on a weighted average of 19,493 apartment units. Includes approximately ten months of activity for the Archstone properties.
(5)
Other – Primarily includes expenditures for properties sold.    

In 2014, the Company spent $1,829 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,304 per apartment unit excluding apartment unit renovation/rehab costs on its same store properties. These amounts represented an increase in the cost per unit over 2013, which was primarily driven by increases in building improvement costs (i.e roofs, mechanical systems and siding) for the Archstone assets as well as certain large building improvement projects the Company had planned to complete in 2013 but were delayed and instead completed in 2014. The Company also accelerated its renovation/rehab efforts in 2014.

In 2015, the Company estimates that it will spend approximately $1,850 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,250 per apartment unit excluding apartment unit renovation/rehab costs on its same store properties. In 2015, the Company expects to spend approximately $60.0 million for all unit renovation/rehab costs (primarily on same store properties) at a weighted average cost of $9,000 per apartment unit rehabbed. These anticipated amounts represent an increase in the cost per unit over 2014, which is primarily driven by increases in planned renovation/rehab efforts in 2015 with plans to continue to create value from our properties by doing those rehabs that meet our investment parameters. The above assumptions are based on current expectations and are forward-looking.
    
During the year ended December 31, 2014, the Company’s total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Company’s property management offices and its corporate offices, were approximately $5.3 million. The Company expects to fund approximately $4.8 million in total non-real estate capital additions in 2015. The above assumption is based on current expectations and is forward-looking.
Capital expenditures to real estate and non-real estate capital additions are generally funded from net cash provided by operating activities and from investment cash flow.
Derivative Instruments

In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks 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 its exposure to foreign exchange rates or manage commodity prices in the daily operations of the business.

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


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See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at December 31, 2014.
Other
Total distributions paid in January 2015 amounted to $188.6 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the fourth quarter ended December 31, 2014.

Off-Balance Sheet Arrangements and Contractual Obligations

Archstone Acquisition    

On February 27, 2013, in conjunction with the Archstone Acquisition, the Company acquired unconsolidated interests in certain joint ventures. The Company does not believe that these investments have a materially different impact upon its liquidity, cash flows, capital resources, credit or market risk than its other consolidated operating and/or development activities. Details of these interests follow by project:

Waterton Tenside – This venture was formed to develop and operate a 336 unit apartment property located in Atlanta, Georgia. The Company has a 20% equity interest with an initial basis of $5.1 million. The partner is the managing member and developed the project. The project is encumbered by a non-recourse mortgage loan that has a current outstanding balance of $30.0 million, bears interest at 3.66% and matures December 1, 2018. The Company does not have substantive kick-out or participating rights. As a result, the entity is unconsolidated and recorded using the equity method of accounting.
    
On February 27, 2013, in connection with the Archstone Acquisition, subsidiaries of the Company and AVB entered into three limited liability company agreements (collectively, the “Residual JV”). The Residual JV owns certain non-core Archstone assets, such as interests in a four property portfolio of apartment buildings and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters. The Residual JV is owned 60% by the Company and 40% by AVB and the Company's initial investment was $147.6 million. The Residual JV is managed by a Management Committee consisting of two members from each of the Company and AVB. Both partners have equal participation in the Management Committee and all significant participating rights are shared by both partners. As a result, the Residual JV is unconsolidated and recorded using the equity method of accounting.

During the year ended December 31, 2014, the Company closed on the sale of its unconsolidated interest in the German portfolio fund, the German management company and the remaining wholly-owned German real estate assets. With these sales, all German real estate assets that were acquired by the Residual JV as part of the Archstone Acquisition have now been sold. The Company's pro rata share of the proceeds/distributions that have been repatriated to the Residual JV and received by the Company as a result of the German dispositions was approximately $79.6 million during the year ended December 31, 2014 and $98.5 million cumulatively since the closing of the Archstone Acquisition.

On February 27, 2013, in connection with the Archstone Acquisition, a subsidiary of the Company and AVB entered into a limited liability company agreement (the “Legacy JV”), through which they assumed obligations of Archstone in the form of preferred interests, some of which are governed by tax protection arrangements. During the year ended December 31, 2013, the Company purchased with AVB $65.0 million (of which the Company's 60% share was $39.0 million) of the preferred interests assumed by the Legacy JV. At December 31, 2014, the remaining preferred interests have an aggregate liquidation value of $74.6 million, our share of which is included in other liabilities in the accompanying consolidated balance sheets. Obligations of the Legacy JV are borne 60% by the Company and 40% by AVB. The Legacy JV is managed by a Management Committee consisting of two members from each of the Company and AVB. Both partners have equal participation in the Management Committee and all significant participating rights are shared by both partners. As a result, the Legacy JV is unconsolidated and recorded using the equity method of accounting.

Other

The Company admitted an 80% institutional partner to two separate entities/transactions (Nexus Sawgrass in December 2010 and Domain in August 2011), each owning a developable land parcel, in exchange for $40.1 million in cash and retained a 20% equity interest in both of these entities. These projects are now unconsolidated. Details of these projects follow:

Nexus Sawgrass – This development project was completed and stabilized during the quarter ended September 30, 2014. Total project costs were approximately $78.6 million and construction was predominantly funded with a long-term, non-

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recourse secured loan from the partner. The mortgage loan has a maximum debt commitment of $48.7 million and a current unconsolidated outstanding balance of $48.6 million; the loan bears interest at 5.60% and matures January 1, 2021.
Domain – This development project is substantially complete. Total project costs are expected to be approximately $155.8 million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The mortgage loan has a maximum debt commitment of $98.6 million and a current unconsolidated outstanding balance of $96.8 million; the loan bears interest at 5.75% and matures January 1, 2022.

While the Company is the managing member of both of the joint ventures, was responsible for constructing both of the projects and has given certain construction cost overrun guarantees, the joint venture partner has significant participating rights and has active involvement in and oversight of the ongoing projects. The Company currently has no further funding obligations related to these projects. The Company's strategy with respect to these ventures was to reduce its financial risk related to the development of the properties. However, management does not believe that these investments have a materially different impact upon the Company's liquidity, cash flows, capital resources, credit or market risk than its other consolidated development activities.

As of December 31, 2014, the Company has 15 consolidated projects (including Prism at Park Avenue South in New York City, which the Company is jointly developing with Toll Brothers – see Note 16 in the Notes to Consolidated Financial Statements for further discussion) totaling 4,917 apartment units in various stages of development with estimated completion dates ranging through September 30, 2017, as well as other completed consolidated and unconsolidated development projects that are in various stages of lease up or are stabilized. The development agreements currently in place are discussed in detail in Note 16 of the Company’s Consolidated Financial Statements.

See also Notes 2 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s investments in partially owned entities.

The following table summarizes the Company’s contractual obligations for the next five years and thereafter as of December 31, 2014:

Payments Due by Year (in thousands)
Contractual Obligations
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Debt:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Principal (a)
 
$
408,420

 
$
1,192,798

 
$
1,346,708

 
$
514,510

 
$
1,278,469

 
$
6,103,956

 
$
10,844,861

Interest (b)
 
473,737

 
424,032

 
373,894

 
337,493

 
286,335

 
1,410,656

 
3,306,147

Operating Leases:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Minimum Rent Payments (c)
 
15,268

 
15,385

 
15,318

 
15,298

 
15,224

 
860,071

 
936,564

Other Long-Term Liabilities:
 
 

 
 

 
 

 
 

 
 
 
 

 
 

Deferred Compensation (d)
 
1,382

 
1,714

 
1,714

 
1,714

 
1,120

 
5,149

 
12,793

Total
 
$
898,807

 
$
1,633,929

 
$
1,737,634

 
$
869,015

 
$
1,581,148

 
$
8,379,832

 
$
15,100,365


(a)
Amounts include aggregate principal payments only.
(b)
Amounts include interest expected to be incurred on the Company’s secured and unsecured debt based on obligations outstanding at December 31, 2014 and inclusive of capitalized interest. For floating rate debt, the current rate in effect for the most recent payment through December 31, 2014 is assumed to be in effect through the respective maturity date of each instrument.
(c)
Minimum basic rent due for various office space the Company leases and fixed base rent due on ground leases for 14 properties/parcels.
(d)
Estimated payments to the Company's Chairman, Vice Chairman and one former CEO based on actual and planned retirement dates.

Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or different presentation of our financial statements.
The Company’s significant accounting policies are described in Note 2 in the Notes to Consolidated Financial Statements. These policies were followed in preparing the consolidated financial statements at and for the year ended December 31, 2014 and are consistent with the year ended December 31, 2013.

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The Company has identified five significant accounting policies as critical accounting policies. These critical accounting policies are those that have the most impact on the reporting of our financial condition and those requiring significant judgments and estimates. With respect to these critical accounting policies, management believes that the application of judgments and estimates is consistently applied and produces financial information that fairly presents the results of operations for all periods presented. The five critical accounting policies are:
Acquisition of Investment Properties
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets, including its investments in real estate, for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company’s ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted.
Depreciation of Investment in Real Estate
The Company depreciates the building component of its investment in real estate over a 30-year estimated useful life, building improvements over a 5-year to 15-year estimated useful life and both the furniture, fixtures and equipment and replacement components over a 5-year to 10-year estimated useful life, all of which are judgmental determinations.
Cost Capitalization

See the Capitalization of Fixed Assets and Improvements to Real Estate section for a discussion of the Company’s policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Company capitalizes an allocation of the payroll and associated costs of employees directly responsible for and who spend their time on the execution and supervision of major capital and/or renovation projects. These costs are reflected on the balance sheets as increases to depreciable property.

For all development projects, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Company capitalizes interest, real estate taxes and insurance and payroll and associated costs for those individuals directly responsible for and who spend their time on development activities, with capitalization ceasing no later than 90 days following issuance of the certificate of occupancy. These costs are reflected on the balance sheets as construction-in-progress for each specific property. The Company expenses as incurred all payroll costs of on-site employees working directly at our properties, except as noted above on our development properties prior to certificate of occupancy issuance and on specific major renovations at selected properties when additional incremental employees are hired.

During the years ended December 31, 2014, 2013 and 2012, the Company capitalized $22.4 million, $16.5 million and $14.3 million, respectively, of payroll and associated costs of employees directly responsible for and who spend their time on the execution and supervision of development activities as well as major capital and/or renovation projects.
Fair Value of Financial Instruments, Including Derivative Instruments
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, including its derivative 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.




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Funds From Operations and Normalized Funds From Operations
For the year ended December 31, 2014, Funds From Operations (“FFO”) available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units increased $318.5 million, or 36.5%, and increased $139.4 million, or 13.2%, respectively, as compared to the year ended December 31, 2013. For the year ended December 31, 2013, FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units decreased $120.8 million, or 12.2%, and increased $173.8 million, or 19.7%, respectively, as compared to the year ended December 31, 2012.
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 each of the five years ended December 31, 2014:

Funds From Operations and Normalized Funds From Operations
(Amounts in thousands)
 
 
 
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
Net income
$
658,683

 
$
1,905,353

 
$
881,204

 
$
935,197

 
$
295,983

Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties
(2,544
)
 
538

 
(844
)
 
(832
)
 
726

Preferred/preference distributions
(4,145
)
 
(4,145
)
 
(10,355
)
 
(13,865
)
 
(14,368
)
Premium on redemption of Preferred Shares/Preference Units

 

 
(5,152
)
 

 

Net income available to Common Shares and Units / Units
651,994

 
1,901,746

 
864,853

 
920,500

 
282,341

Adjustments:
 
 
 
 
 
 
 
 
 
    Depreciation
758,861

 
978,973

 
560,669

 
506,175

 
470,593

Depreciation – Non-real estate additions
(4,643
)
 
(4,806
)
 
(5,346
)
 
(5,519
)
 
(6,566
)
Depreciation – Partially Owned Properties
(4,285
)
 
(6,499
)
 
(3,193
)
 
(3,062
)
 
(3,532
)
Depreciation – Unconsolidated Properties
6,754

 
3,661

 

 

 
1,913

Net (gain) on sales of unconsolidated entities – operating assets
(4,902
)
 
(7
)
 

 

 
(28,101
)
Net (gain) on sales of real estate properties
(212,685
)
 

 

 

 

Discontinued operations:
 
 
 
 
 
 
 
 
 
    Depreciation

 
34,380

 
124,323

 
157,353

 
202,588

    Net (gain) on sales of discontinued operations
(179
)
 
(2,036,505
)
 
(548,278
)
 
(826,489
)
 
(297,956
)
Net incremental gain (loss) on sales of condominium units

 
8

 
(11
)
 
1,993

 
1,506

Gain on sale of Equity Corporate Housing (ECH)

 
1,470

 
200

 
1,202

 

FFO available to Common Shares and Units / Units (1) (3) (4)
1,190,915

 
872,421

 
993,217

 
752,153

 
622,786

Adjustments:
 
 
 
 
 
 
 
 
 
    Asset impairment and valuation allowances

 

 

 

 
45,380

Property acquisition costs and write-off of pursuit costs
8,248

 
79,365

 
21,649

 
14,557

 
11,928

Debt extinguishment (gains) losses, including prepayment penalties, preferred share/
 
 
 
 
 
 
 
 
 
    preference unit redemptions and non-cash convertible debt discounts
(1,110
)
 
121,730

 
16,293

 
12,300

 
8,594

(Gains) losses on sales of non-operating assets, net of income and other tax expense
 
 
 
 
 
 
 
 
 
    (benefit)
(1,866
)
 
(17,908
)
 
(255
)
 
(6,976
)
 
(80
)
    Other miscellaneous non-comparable items
259

 
1,465

 
(147,635
)
 
(12,369
)
 
(6,186
)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)
$
1,196,446

 
$
1,057,073

 
$
883,269

 
$
759,665

 
$
682,422

 
 
 
 
 
 
 
 
 
 
 
FFO (1) (3)
$
1,195,060

 
$
876,566

 
$
1,008,724

 
$
766,018

 
$
637,154

Preferred/preference distributions
(4,145
)
 
(4,145
)
 
(10,355
)
 
(13,865
)
 
(14,368
)
Premium on redemption of Preferred Shares/Preference Units

 

 
(5,152
)
 

 

FFO available to Common Shares and Units / Units (1) (3) (4)
$
1,190,915

 
$
872,421

 
$
993,217

 
$
752,153

 
$
622,786

 
 
 
 
 
 
 
 
 
 
 
Normalized FFO (2) (3)
$
1,200,591

 
$
1,061,218

 
$
893,624

 
$
773,530

 
$
696,790

Preferred/preference distributions
(4,145
)
 
(4,145
)
 
(10,355
)
 
(13,865
)
 
(14,368
)
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)
$
1,196,446

 
$
1,057,073

 
$
883,269

 
$
759,665

 
$
682,422


(1)
The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) (April 2002 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 operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be

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calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.

(2) Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:
the impact of any expenses relating to non-operating asset impairment and valuation allowances;
property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs;
gains and losses from early debt extinguishment, including prepayment penalties, preferred share/preference unit redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
other miscellaneous non-comparable items.

(3)
The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (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 accounting principles generally accepted in the United States. 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 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to the Company’s financial instruments result primarily from changes in short-term LIBOR interest rates and changes in the Securities Industry and Financial Markets Association ("SIFMA") index for tax-exempt debt. The Company also has foreign exchange exposure related to undistributed cash remaining after the sale of its interests in German residential real estate that were acquired as part of the Archstone Transaction.

The Company’s exposure to market risk for changes in interest rates relates primarily to the unsecured revolving credit facility as well as floating rate tax-exempt debt. The Company typically incurs fixed rate debt obligations to finance acquisitions while it typically incurs floating rate debt obligations to finance working capital needs and as a temporary measure in advance of securing long-term fixed rate financing. The Company continuously evaluates its level of floating rate debt with respect to total debt and other factors, including its assessment of the current and future economic environment. To the extent the Company carries substantial cash balances, this will tend to partially counterbalance any increase or decrease in interest rates.

The Company also utilizes certain derivative financial instruments to manage market risk. Interest rate protection agreements are used to convert floating rate debt to a fixed rate basis or vice versa as well as to partially lock in rates on future debt issuances. Derivatives are used for hedging purposes rather than speculation. The Company does not enter into financial instruments for trading purposes. See also Note 9 to the Notes to Consolidated Financial Statements for additional discussion of derivative instruments.

The fair values of the Company’s financial instruments (including such items in the financial statement captions as cash and cash equivalents, other assets, accounts payable and accrued expenses and other liabilities) approximate their carrying or contract values based on their nature, terms and interest rates that approximate current market rates. The fair value of the Company’s mortgage notes payable and unsecured debt (including its line of credit) were approximately $5.1 billion and $6.1 billion,

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respectively, at December 31, 2014.

At December 31, 2014, the Company had total outstanding floating rate debt of approximately $1.5 billion, or 14.0% of total debt, net of the effects of any derivative instruments. If market rates of interest on all of the floating rate debt permanently increased by 9 basis points (a 10% increase from the Company’s existing weighted average interest rates), the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $1.4 million. If market rates of interest on all of the floating rate debt permanently decreased by 9 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $1.4 million.

At December 31, 2014, the Company had total outstanding fixed rate debt of approximately $9.3 billion, or 86.0% of total debt, net of the effects of any derivative instruments. If market rates of interest permanently increased by 52 basis points (a 10% increase from the Company’s existing weighted average interest rates), the estimated fair value of the Company’s fixed rate debt would be approximately $8.5 billion. If market rates of interest permanently decreased by 52 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the estimated fair value of the Company’s fixed rate debt would be approximately $10.4 billion.

At December 31, 2014, the Company’s derivative instruments had a net liability fair value of approximately $12.2 million. If market rates of interest permanently increased by 24 basis points (a 10% increase from the Company’s existing weighted average interest rates), the net liability fair value of the Company’s derivative instruments would be approximately $7.2 million. If market rates of interest permanently decreased by 24 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the net liability fair value of the Company’s derivative instruments would be approximately $17.4 million.
    
At December 31, 2013, the Company had total outstanding floating rate debt of approximately $1.6 billion, or 15.3% of total debt, net of the effects of any derivative instruments. If market rates of interest on all of the floating rate debt permanently increased by 12 basis points (a 10% increase from the Company's existing weighted average interest rates), the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $2.0 million. If market rates of interest on all of the floating rate debt permanently decreased by 12 basis points (a 10% decrease from the Company's existing weighted average interest rates), the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $2.0 million.

At December 31, 2013, the Company had total outstanding fixed rate debt of approximately $9.1 billion, or 84.7% of total debt, net of the effects of any derivative instruments. If market rates of interest permanently increased by 51 basis points (a 10% increase from the Company's existing weighted average interest rates), the estimated fair value of the Company's fixed rate debt would be approximately $8.3 billion. If market rates of interest permanently decreased by 51 basis points (a 10% decrease from the Company's existing weighted average interest rates), the estimated fair value of the Company's fixed rate debt would be approximately $10.1 billion.

At December 31, 2013, the Company's derivative instruments had a net asset fair value of approximately $18.7 million. If market rates of interest permanently increased by 33 basis points (a 10% increase from the Company's existing weighted average interest rates), the net asset fair value of the Company's derivative instruments would be approximately $28.0 million. If market rates of interest permanently decreased by 33 basis points (a 10% decrease from the Company's existing weighted average interest rates), the net asset fair value of the Company's derivative instruments would be approximately $9.4 million.

These amounts were determined by considering the impact of hypothetical interest rates on the Company’s financial instruments. The foregoing assumptions apply to the entire amount of the Company’s debt and derivative instruments and do not differentiate among maturities. These analyses do not consider the effects of the changes in overall economic activity that could exist in such an environment. Further, in the event of changes of such magnitude, management would likely take actions to further mitigate its exposure to the changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in the Company’s financial structure or results.

The Company cannot predict the effect of adverse changes in interest rates on its debt and derivative instruments and, therefore, its exposure to market risk, nor can there be any assurance that long-term debt will be available at advantageous pricing. Consequently, future results may differ materially from the estimated adverse changes discussed above.

Item 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements and Schedule on page F-1 of this Form 10-K.


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Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    None.
Item 9A. Controls and Procedures
Equity Residential
(a)  Evaluation of Disclosure Controls and Procedures:
Effective as of December 31, 2014, 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)  Management’s Report on Internal Control over Financial Reporting:
Equity Residential’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.
Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework, management concluded that its internal control over financial reporting was effective as of December 31, 2014. Our internal control over financial reporting has been audited as of December 31, 2014 by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
(c)   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 fourth quarter of 2014 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 December 31, 2014, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership's management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the Operating Partnership's disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
(b)  Management’s Report on Internal Control over Financial Reporting:
ERP Operating Limited Partnership's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of the Operating Partnership's general partner, management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.

Based on the Operating Partnership's evaluation under the framework in Internal Control – Integrated Framework, management concluded that its internal control over financial reporting was effective as of December 31, 2014. Our internal control

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over financial reporting has been audited as of December 31, 2014 by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

(c)  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 fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership's internal control over financial reporting.

Item 9B. Other Information
None.


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PART III

Items 10, 11, 12, 13 and 14.

Trustees, Executive Officers and Corporate Governance; Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Certain Relationships and Related Transactions, and Trustee Independence; and Principal Accounting Fees and Services.
The information required by Item 10, Item 11, Item 12, Item 13 and Item 14 is incorporated by reference to, and will be contained in, Equity Residential's Proxy Statement, which the Company intends to file no later than 120 days after the end of its fiscal year ended December 31, 2014, and thus these items have been omitted in accordance with General Instruction G(3) to Form 10-K. Equity Residential is the general partner and 96.2% owner of ERP Operating Limited Partnership.


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PART IV

Item 15. Exhibits and Financial Statement Schedules.
(a)  The following documents are filed as part of this Report:
(1)
Financial Statements: See Index to Consolidated Financial Statements and Schedule on page F-1 of this Form 10-K.
(2)
Exhibits: See the Exhibit Index.
(3)
Financial Statement Schedules: See Index to Consolidated Financial Statements and Schedule on page F-1 of this Form 10-K.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
 
 
 
 
 
 
By: 
/s/ David J. Neithercut
 
 
 
David J. Neithercut
President and Chief Executive Officer
(Principal Executive Officer)
 
 
Date:
February 26, 2015


                                                                                                 
 
 
ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL
ITS GENERAL PARTNER
 
 
 
 
 
 
By: 
/s/ David J. Neithercut
 
 
 
David J. Neithercut
President and Chief Executive Officer
(Principal Executive Officer)
 
 
Date:
February 26, 2015



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EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP

POWER OF ATTORNEY
KNOW ALL MEN/WOMEN BY THESE PRESENTS, that each person whose signature appears below, hereby constitutes and appoints David J. Neithercut, Mark J. Parrell and Ian S. Kaufman, or any of them, his or her attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her in any and all capacities, to do all acts and things which said attorneys and agents, or any of them, deem advisable to enable the company to comply with the Securities Exchange Act of 1934, as amended, and any requirements or regulations of the Securities and Exchange Commission in respect thereof, in connection with the company’s filing of an annual report on Form 10-K for the company’s fiscal year 2014, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name as a trustee or officer, or both, of the company, as indicated below opposite his or her signature, to the Form 10-K, and any amendment thereto; and each of the undersigned does hereby fully ratify and confirm all that said attorneys and agents, or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of each registrant and in the capacities set forth below and on the dates indicated:

Name
 
Title
 
Date
 
 
 
 
 
/s/ David J. Neithercut
 
President, Chief Executive Officer and Trustee
 
February 26, 2015
David J. Neithercut
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ Mark J. Parrell
 
Executive Vice President and Chief Financial Officer
 
February 26, 2015
Mark J. Parrell
 
(Principal Financial Officer)
 
 
 
 
 
 
 
/s/ Ian S. Kaufman
 
Senior Vice President and Chief Accounting Officer
 
February 26, 2015
Ian S. Kaufman
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
/s/ John W. Alexander
 
Trustee
 
February 26, 2015
John W. Alexander
 
 
 
 
 
 
 
 
 
/s/ Charles L. Atwood
 
Trustee
 
February 26, 2015
Charles L. Atwood
 
 
 
 
 
 
 
 
 
/s/ Linda Walker Bynoe
 
Trustee
 
February 26, 2015
Linda Walker Bynoe
 
 
 
 
 
 
 
 
 
/s/ Mary Kay Haben
 
Trustee
 
February 26, 2015
Mary Kay Haben
 
 
 
 
 
 
 
 
 
/s/ Bradley A. Keywell
 
Trustee
 
February 26, 2015
Bradley A. Keywell
 
 
 
 
 
 
 
 
 
/s/ John E. Neal
 
Trustee
 
February 26, 2015
John E. Neal
 
 
 
 
 
 
 
 
 
/s/ Mark S. Shapiro
 
Trustee
 
February 26, 2015
Mark S. Shapiro
 
 
 
 
 
 
 
 
 
/s/ Stephen E. Sterrett
 
Trustee
 
February 26, 2015
Stephen E. Sterrett
 
 
 
 
 
 
 
 
 
/s/ B. Joseph White
 
Trustee
 
February 26, 2015
B. Joseph White
 
 
 
 
 
 
 
 
 
/s/ Gerald A. Spector
 
Vice Chairman of the Board of Trustees
 
February 26, 2015
Gerald A. Spector
 
 
 
 
 
 
 
 
 
/s/ Samuel Zell
 
Chairman of the Board of Trustees
 
February 26, 2015
Samuel Zell
 
 
 
 


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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP

 
 
PAGE
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
 
 
 
 
 
Report of Independent Registered Public Accounting Firm (Equity Residential)
 
 
 
 
Report of Independent Registered Public Accounting Firm (ERP Operating Limited Partnership)
 
 
 
 
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
    Reporting (Equity Residential)
    
 
 
 
 
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
    Reporting (ERP Operating Limited Partnership)
    
 
 
 
 
Financial Statements of Equity Residential:
 
 
 
 
 
  Consolidated Balance Sheets as of December 31, 2014 and 2013
 
 
 
 
  Consolidated Statements of Operations and Comprehensive Income
      for the years ended December 31, 2014, 2013 and 2012
 
 
 
 
  Consolidated Statements of Cash Flows for the years ended
      December 31, 2014, 2013 and 2012
 
 
 
 
  Consolidated Statements of Changes in Equity for the years ended
      December 31, 2014, 2013 and 2012
 
 
 
 
Financial Statements of ERP Operating Limited Partnership:
 
 
 
 
 
  Consolidated Balance Sheets as of December 31, 2014 and 2013
 
 
 
 
  Consolidated Statements of Operations and Comprehensive Income
      for the years ended December 31, 2014, 2013 and 2012
 
 
 
 
  Consolidated Statements of Cash Flows for the years ended
      December 31, 2014, 2013 and 2012
 
 
 
 
  Consolidated Statements of Changes in Capital for the years ended
      December 31, 2014, 2013 and 2012
 
 
 
 
Notes to Consolidated Financial Statements of Equity Residential and ERP Operating
     Limited Partnership
 
 
 
 
SCHEDULE FILED AS PART OF THIS REPORT
 
 
 
 
 
Schedule III – Real Estate and Accumulated Depreciation of Equity Residential and ERP Operating
     Limited Partnership
 

All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the consolidated financial statements or notes thereto.



Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
Equity Residential
We have audited the accompanying consolidated balance sheets of Equity Residential (the “Company”) as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the accompanying index to the consolidated financial statements and schedule. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equity Residential at December 31, 2014 and 2013 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for reporting discontinued operations as a result of the adoption of Accounting Standards Update No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," effective January 1, 2014.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equity Residential’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2015 expressed an unqualified opinion thereon.

 
/s/  ERNST & YOUNG LLP
 
ERNST & YOUNG LLP
 
 
Chicago, Illinois
 
February 26, 2015
 


F-2

Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
ERP Operating Limited Partnership
We have audited the accompanying consolidated balance sheets of ERP Operating Limited Partnership (the “Operating Partnership”) as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income, changes in capital and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the accompanying index to the consolidated financial statements and schedule. These financial statements and schedule are the responsibility of the Operating Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ERP Operating Limited Partnership at December 31, 2014 and 2013 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Operating Partnership changed its method for reporting discontinued operations as a result of the adoption of Accounting Standards Update No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," effective January 1, 2014.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ERP Operating Limited Partnership's internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2015 expressed an unqualified opinion thereon.

 
/s/  ERNST & YOUNG LLP
 
ERNST & YOUNG LLP
 
 
Chicago, Illinois
 
February 26, 2015
 



F-3

Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Trustees and Shareholders
Equity Residential
We have audited Equity Residential’s (the “Company”) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO Criteria”). Equity Residential’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Equity Residential maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO Criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Equity Residential as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2014 of Equity Residential and our report dated February 26, 2015 expressed an unqualified opinion thereon.

 
/s/  ERNST & YOUNG LLP
 
ERNST & YOUNG LLP
 
 
Chicago, Illinois
 
February 26, 2015
 


F-4

Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Partners
ERP Operating Limited Partnership
We have audited ERP Operating Limited Partnership's (the “Operating Partnership”) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO Criteria”). ERP Operating Limited Partnership's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Operating Partnership's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, ERP Operating Limited Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO Criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of ERP Operating Limited Partnership as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income, changes in capital and cash flows for each of the three years in the period ended December 31, 2014 of ERP Operating Limited Partnership and our report dated February 26, 2015 expressed an unqualified opinion thereon.

 
/s/  ERNST & YOUNG LLP
 
ERNST & YOUNG LLP
 
 
Chicago, Illinois
 
February 26, 2015
 


F-5

Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share amounts)
 
 
December 31, 2014
 
December 31, 2013
ASSETS
 
 
 
 
Investment in real estate
 
 

 
 

Land
 
$
6,295,404

 
$
6,192,512

Depreciable property
 
19,851,504

 
19,226,047

Projects under development
 
1,343,919

 
988,867

Land held for development
 
184,556

 
393,522

Investment in real estate
 
27,675,383

 
26,800,948

Accumulated depreciation
 
(5,432,805
)
 
(4,807,709
)
Investment in real estate, net
 
22,242,578

 
21,993,239

Cash and cash equivalents
 
40,080

 
53,534

Investments in unconsolidated entities
 
105,434

 
178,526

Deposits – restricted
 
72,303

 
103,567

Escrow deposits – mortgage
 
48,085

 
42,636

Deferred financing costs, net
 
58,380

 
58,486

Other assets
 
383,754

 
404,557

Total assets
 
$
22,950,614

 
$
22,834,545

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 

Mortgage notes payable
 
$
5,086,515

 
$
5,174,166

Notes, net
 
5,425,346

 
5,477,088

Lines of credit
 
333,000

 
115,000

Accounts payable and accrued expenses
 
153,590

 
118,791

Accrued interest payable
 
89,540

 
78,309

Other liabilities
 
389,915

 
347,748

Security deposits
 
75,633

 
71,592

Distributions payable
 
188,566

 
243,511

Total liabilities
 
11,742,105

 
11,626,205

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests – Operating Partnership
 
500,733

 
363,144

Equity:
 
 
 
 

Shareholders’ equity:
 
 
 
 

Preferred Shares of beneficial interest, $0.01 par value;
 
 
 
 

100,000,000 shares authorized; 1,000,000 shares issued and
outstanding as of December 31, 2014 and December 31, 2013
 
50,000

 
50,000

Common Shares of beneficial interest, $0.01 par value;
 
 
 
 

1,000,000,000 shares authorized; 362,855,454 shares issued
and outstanding as of December 31, 2014 and 360,479,260
shares issued and outstanding as of December 31, 2013
 
3,629

 
3,605

Paid in capital
 
8,536,340

 
8,561,500

Retained earnings
 
1,950,639

 
2,047,258

Accumulated other comprehensive (loss)
 
(172,152
)
 
(155,162
)
Total shareholders’ equity
 
10,368,456

 
10,507,201

Noncontrolling Interests:
 
 
 
 
Operating Partnership
 
214,411

 
211,412

Partially Owned Properties
 
124,909

 
126,583

Total Noncontrolling Interests
 
339,320

 
337,995

Total equity
 
10,707,776

 
10,845,196

Total liabilities and equity
 
$
22,950,614

 
$
22,834,545


See accompanying notes
F-6


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands except per share data)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
REVENUES
 
 

 
 

 
 

Rental income
 
$
2,605,311

 
$
2,378,004

 
$
1,737,929

Fee and asset management
 
9,437

 
9,698

 
9,573

Total revenues
 
2,614,748

 
2,387,702

 
1,747,502

 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 

Property and maintenance
 
473,098

 
449,427

 
332,219

Real estate taxes and insurance
 
325,401

 
293,999

 
206,723

Property management
 
79,636

 
84,342

 
81,902

Fee and asset management
 
5,429

 
6,460

 
4,663

Depreciation
 
758,861

 
978,973

 
560,669

General and administrative
 
50,948

 
62,179

 
47,233

Total expenses
 
1,693,373

 
1,875,380

 
1,233,409

 
 
 
 
 
 
 
Operating income
 
921,375

 
512,322

 
514,093

 
 
 
 
 
 
 
Interest and other income
 
4,462

 
5,283

 
151,060

Other expenses
 
(9,073
)
 
(29,630
)
 
(27,796
)
Interest:
 
 

 
 

 
 

Expense incurred, net
 
(457,191
)
 
(586,854
)
 
(455,236
)
Amortization of deferred financing costs
 
(11,088
)
 
(22,197
)
 
(21,295
)
Income (loss) before income and other taxes, (loss) from investments
in unconsolidated entities, net gain on sales of real estate properties and
land parcels and discontinued operations
 
448,485

 
(121,076
)
 
160,826

Income and other tax (expense) benefit
 
(1,394
)
 
(1,169
)
 
(514
)
(Loss) from investments in unconsolidated entities
 
(7,952
)
 
(58,156
)
 
(14
)
Net gain on sales of real estate properties
 
212,685

 

 

Net gain on sales of land parcels
 
5,277

 
12,227

 

Income (loss) from continuing operations
 
657,101

 
(168,174
)
 
160,298

Discontinued operations, net
 
1,582

 
2,073,527

 
720,906

Net income
 
658,683

 
1,905,353

 
881,204

Net (income) loss attributable to Noncontrolling Interests:
 
 

 
 

 
 

Operating Partnership
 
(24,831
)
 
(75,278
)
 
(38,641
)
Partially Owned Properties
 
(2,544
)
 
538

 
(844
)
Net income attributable to controlling interests
 
631,308

 
1,830,613

 
841,719

Preferred distributions
 
(4,145
)
 
(4,145
)
 
(10,355
)
Premium on redemption of Preferred Shares
 

 

 
(5,152
)
Net income available to Common Shares
 
$
627,163

 
$
1,826,468

 
$
826,212

 
 
 
 
 
 
 
Earnings per share – basic:
 
 

 
 

 
 

Income (loss) from continuing operations available to Common Shares
 
$
1.73

 
$
(0.47
)
 
$
0.45

Net income available to Common Shares
 
$
1.74

 
$
5.16

 
$
2.73

Weighted average Common Shares outstanding
 
361,181

 
354,305

 
302,701

 
 
 
 
 
 
 
Earnings per share – diluted:
 
 

 
 

 
 

Income (loss) from continuing operations available to Common Shares
 
$
1.72

 
$
(0.47
)
 
$
0.45

Net income available to Common Shares
 
$
1.73

 
$
5.16

 
$
2.70

Weighted average Common Shares outstanding
 
377,735

 
354,305

 
319,766

 
 
 
 
 
 
 
Distributions declared per Common Share outstanding
 
$
2.00

 
$
1.85

 
$
1.78


See accompanying notes
F-7


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)
(Amounts in thousands except per share data)

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Comprehensive income:
 
 

 
 

 
 

Net income
 
$
658,683

 
$
1,905,353

 
$
881,204

Other comprehensive (loss) income:
 
 
 
 
 
 
Other comprehensive (loss) income – derivative instruments:
 
 

 
 

 
 

Unrealized holding (losses) gains arising during the year
 
(33,306
)
 
18,771

 
(11,772
)
Losses reclassified into earnings from other comprehensive income
 
16,868

 
20,141

 
14,678

Other comprehensive income (loss) – other instruments:
 
 

 
 

 
 

Unrealized holding gains arising during the year
 

 
583

 
664

(Gains) realized during the year
 

 
(2,122
)
 

Other comprehensive (loss) income – foreign currency:
 
 
 
 
 
 
Currency translation adjustments arising during the year
 
(552
)
 
613

 

Other comprehensive (loss) income
 
(16,990
)
 
37,986

 
3,570

Comprehensive income
 
641,693

 
1,943,339

 
884,774

Comprehensive (income) attributable to Noncontrolling Interests
 
(26,728
)
 
(76,204
)
 
(39,624
)
Comprehensive income attributable to controlling interests
 
$
614,965

 
$
1,867,135

 
$
845,150



See accompanying notes
F-8


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 

 
 

 
 

Net income
 
$
658,683

 
$
1,905,353

 
$
881,204

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

 
 

Depreciation
 
758,861

 
1,013,353

 
684,992

Amortization of deferred financing costs
 
11,088

 
22,425

 
21,435

Amortization of above/below market leases
 
3,222

 
898

 

Amortization of discounts and premiums on debt
 
(13,520
)
 
(156,439
)
 
(8,181
)
Amortization of deferred settlements on derivative instruments
 
16,334

 
19,607

 
14,144

Write-off of pursuit costs
 
3,607

 
5,184

 
9,056

Loss from investments in unconsolidated entities
 
7,952

 
58,156

 
14

Distributions from unconsolidated entities – return on capital
 
5,570

 
2,481

 
575

Net (gain) on sales of investment securities
 
(57
)
 
(4,203
)
 

Net (gain) on sales of real estate properties
 
(212,685
)
 

 

Net (gain) on sales of land parcels
 
(5,277
)
 
(12,227
)
 

Net (gain) on sales of discontinued operations
 
(179
)
 
(2,036,505
)
 
(548,278
)
Unrealized (gain) loss on derivative instruments
 
(60
)
 
70

 
(1
)
Compensation paid with Company Common Shares
 
27,543

 
35,474

 
24,832

Changes in assets and liabilities:
 
 

 
 

 
 

(Increase) decrease in deposits – restricted
 
(1,740
)
 
3,684

 
(4,091
)
Decrease in mortgage deposits
 
1,452

 
1,813

 
176

Decrease (increase) in other assets
 
21,773

 
3,742

 
(20,411
)
Increase (decrease) in accounts payable and accrued expenses
 
17,797

 
6,229

 
(2,102
)
Increase (decrease) in accrued interest payable
 
11,231

 
(9,219
)
 
(11,898
)
Increase in other liabilities
 
8,437

 
15,401

 
2,987

Increase (decrease) in security deposits
 
4,041

 
(6,361
)
 
1,702

Net cash provided by operating activities
 
1,324,073

 
868,916

 
1,046,155

 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 

 
 

 
 

Acquisition of Archstone, net of cash acquired
 

 
(4,000,875
)
 

Investment in real estate – acquisitions
 
(469,989
)
 
(108,308
)
 
(843,976
)
Investment in real estate – development/other
 
(530,387
)
 
(377,442
)
 
(180,409
)
Capital expenditures to real estate
 
(185,957
)
 
(135,816
)
 
(152,828
)
Non-real estate capital additions
 
(5,286
)
 
(4,134
)
 
(8,821
)
Interest capitalized for real estate and unconsolidated entities under development
 
(52,782
)
 
(47,321
)
 
(22,509
)
Proceeds from disposition of real estate, net
 
522,647

 
4,551,454

 
1,049,219

Investments in unconsolidated entities
 
(15,768
)
 
(66,471
)
 
(5,291
)
Distributions from unconsolidated entities – return of capital
 
103,793

 
25,471

 

Proceeds from sale of investment securities
 
57

 
4,878

 

Decrease (increase) in deposits on real estate acquisitions and investments, net
 
33,004

 
143,694

 
(97,984
)
Decrease in mortgage deposits
 
798

 
7,893

 
1,444

Consolidation of previously unconsolidated properties
 
(44,796
)
 

 

Net cash (used for) investing activities
 
(644,666
)
 
(6,977
)
 
(261,155
)

See accompanying notes
F-9


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 

 
 

 
 

Debt financing costs
 
$
(10,982
)
 
$
(16,526
)
 
$
(21,209
)
Mortgage deposits
 
(7,699
)
 
(5,631
)
 
(57
)
Mortgage notes payable:
 
 

 
 

 
 

Proceeds
 

 
902,886

 
26,495

Restricted cash
 

 

 
2,370

Lump sum payoffs
 
(88,788
)
 
(2,532,682
)
 
(350,247
)
Scheduled principal repayments
 
(11,869
)
 
(12,658
)
 
(14,088
)
Notes, net:
 
 

 
 

 
 

Proceeds
 
1,194,277

 
1,245,550

 

Lump sum payoffs
 
(1,250,000
)
 
(400,000
)
 
(975,991
)
Lines of credit:
 
 

 
 

 
 

Proceeds
 
7,167,000

 
9,832,000

 
5,876,000

Repayments
 
(6,949,000
)
 
(9,717,000
)
 
(5,876,000
)
(Payments on) settlement of derivative instruments
 
(758
)
 
(44,063
)
 

Proceeds from sale of Common Shares
 

 

 
1,417,040

Proceeds from Employee Share Purchase Plan (ESPP)
 
3,392

 
3,401

 
5,399

Proceeds from exercise of options
 
82,573

 
17,252

 
49,039

Common Shares repurchased and retired
 
(1,777
)
 

 

Redemption of Preferred Shares
 

 

 
(150,000
)
Premium on redemption of Preferred Shares
 

 

 
(23
)
Payment of offering costs
 
(41
)
 
(1,047
)
 
(39,359
)
Other financing activities, net
 
(49
)
 
(48
)
 
(48
)
Acquisition of Noncontrolling Interests – Partially Owned Properties
 
(5,501
)
 

 
(13
)
Contributions – Noncontrolling Interests – Partially Owned Properties
 
5,684

 
27,660

 
8,221

Contributions – Noncontrolling Interests – Operating Partnership
 
3

 
5

 
5

Distributions:
 
 

 
 

 
 

Common Shares
 
(776,659
)
 
(681,610
)
 
(473,451
)
Preferred Shares
 
(4,145
)
 
(4,145
)
 
(13,416
)
Noncontrolling Interests – Operating Partnership
 
(30,744
)
 
(27,897
)
 
(21,915
)
Noncontrolling Interests – Partially Owned Properties
 
(7,778
)
 
(6,442
)
 
(5,083
)
Net cash (used for) financing activities
 
(692,861
)
 
(1,420,995
)
 
(556,331
)
Net (decrease) increase in cash and cash equivalents
 
(13,454
)
 
(559,056
)
 
228,669

Cash and cash equivalents, beginning of year
 
53,534

 
612,590

 
383,921

Cash and cash equivalents, end of year
 
$
40,080

 
$
53,534

 
$
612,590











See accompanying notes
F-10


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
SUPPLEMENTAL INFORMATION:
 
 

 
 

 
 

Cash paid for interest, net of amounts capitalized
 
$
443,125

 
$
722,963

 
$
464,785

Net cash paid for income and other taxes
 
$
1,517

 
$
1,152

 
$
673

Real estate acquisitions/dispositions/other:
 
 

 
 

 
 

Mortgage loans assumed
 
$
28,910

 
$

 
$
137,644

Valuation of OP Units issued
 
$

 
$

 
$
66,606

Amortization of deferred financing costs:
 
 

 
 

 
 

Investment in real estate, net
 
$

 
$
(152
)
 
$

Deferred financing costs, net
 
$
11,088

 
$
22,577

 
$
21,435

Amortization of discounts and premiums on debt:
 
 

 
 

 
 

Mortgage notes payable
 
$
(15,904
)
 
$
(158,625
)
 
$
(10,333
)
Notes, net
 
$
2,384

 
$
2,186

 
$
2,152

Amortization of deferred settlements on derivative instruments:
 
 

 
 

 
 

Other liabilities
 
$
(534
)
 
$
(534
)
 
$
(534
)
Accumulated other comprehensive income
 
$
16,868

 
$
20,141

 
$
14,678

Loss from investments in unconsolidated entities:
 
 
 
 
 
 
Investments in unconsolidated entities
 
$
4,610

 
$
53,066

 
$
14

Other liabilities
 
$
3,342

 
$
5,090

 
$

Distributions from unconsolidated entities – return on capital:
 
 
 
 
 
 
Investments in unconsolidated entities
 
$
5,360

 
$
2,448

 
$
575

Other liabilities
 
$
210

 
$
33

 
$

Unrealized (gain) loss on derivative instruments:
 
 

 
 

 
 

Other assets
 
$
10,160

 
$
(17,139
)
 
$
7,448

Mortgage notes payable
 
$

 
$

 
$
(2,589
)
Notes, net
 
$
1,597

 
$
(1,523
)
 
$
(4,860
)
Other liabilities
 
$
21,489

 
$
(39
)
 
$
11,772

Accumulated other comprehensive income
 
$
(33,306
)
 
$
18,771

 
$
(11,772
)
Acquisition of Archstone, net of cash acquired:
 
 
 
 
 
 
Investment in real estate, net
 
$
39,929

 
$
(8,687,355
)
 
$

Investments in unconsolidated entities
 
$
(33,993
)
 
$
(225,568
)
 
$

Deposits – restricted
 
$

 
$
(528
)
 
$

Escrow deposits – mortgage
 
$

 
$
(37,582
)
 
$

Deferred financing costs, net
 
$

 
$
(25,780
)
 
$

Other assets
 
$
(2,586
)
 
$
(215,622
)
 
$

Mortgage notes payable
 
$

 
$
3,076,876

 
$

Accounts payable and accrued expenses
 
$
(146
)
 
$
16,984

 
$

Accrued interest payable
 
$

 
$
11,305

 
$

Other liabilities
 
$
(3,204
)
 
$
117,299

 
$

Security deposits
 
$

 
$
10,965

 
$

Issuance of Common Shares
 
$

 
$
1,929,868

 
$

Noncontrolling Interests – Partially Owned Properties
 
$

 
$
28,263

 
$

Interest capitalized for real estate and unconsolidated entities under development:
 
 
 
 
 
 
Investment in real estate, net
 
$
(52,717
)
 
$
(45,533
)
 
$
(21,661
)
Investments in unconsolidated entities
 
$
(65
)
 
$
(1,788
)
 
$
(848
)
Investments in unconsolidated entities:
 
 
 
 
 
 
Investments in unconsolidated entities
 
$
(6,318
)
 
$
(13,656
)
 
$
(5,291
)
Other liabilities
 
$
(9,450
)
 
$
(52,815
)
 
$

Consolidation of previously unconsolidated properties:
 
 
 
 
 
 
Investment in real estate, net
 
$
(64,319
)
 
$

 
$

Investments in unconsolidated entities
 
$
(847
)
 
$

 
$

Accounts payable and accrued expenses
 
$
1,987

 
$

 
$

Other liabilities
 
$
18,383

 
$

 
$


See accompanying notes
F-11


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
SUPPLEMENTAL INFORMATION (continued):
 
 
 
 
 
 
(Payments on) settlement of derivative instruments:
 
 

 
 

 
 

Other assets
 
$
6,623

 
$
(50
)
 
$

Other liabilities
 
$
(7,381
)
 
$
(44,013
)
 
$

Other:
 
 

 
 

 
 

Receivable on sale of Common Shares
 
$

 
$

 
$
28,457

Foreign currency translation adjustments
 
$
552

 
$
(613
)
 
$



See accompanying notes
F-12


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)

 
 
Year Ended December 31,
SHAREHOLDERS’ EQUITY
 
2014
 
2013
 
2012
 
 
 
 
 
 
 
PREFERRED SHARES
 
 

 
 

 
 

Balance, beginning of year
 
$
50,000

 
$
50,000

 
$
200,000

Redemption of 6.48% Series N Cumulative Redeemable
 

 

 
(150,000
)
Balance, end of year
 
$
50,000

 
$
50,000

 
$
50,000

 
 
 
 
 
 
 
COMMON SHARES, $0.01 PAR VALUE
 
 

 
 

 
 

Balance, beginning of year
 
$
3,605

 
$
3,251

 
$
2,975

Conversion of OP Units into Common Shares
 
1

 
1

 
7

Issuance of Common Shares
 

 
345

 
250

Exercise of share options
 
21

 
5

 
16

Employee Share Purchase Plan (ESPP)
 

 
1

 
1

Share-based employee compensation expense:
 
 

 
 

 
 

Restricted shares
 
2

 
2

 
2

Balance, end of year
 
$
3,629

 
$
3,605

 
$
3,251

 
 
 
 
 
 
 
PAID IN CAPITAL
 
 

 
 

 
 

Balance, beginning of year
 
$
8,561,500

 
$
6,542,355

 
$
5,047,186

Common Share Issuance:
 
 

 
 

 
 

Conversion of OP Units into Common Shares
 
2,364

 
1,698

 
18,922

Issuance of Common Shares
 

 
1,929,523

 
1,388,333

Exercise of share options
 
82,552

 
17,247

 
49,023

Employee Share Purchase Plan (ESPP)
 
3,392

 
3,400

 
5,398

Share-based employee compensation expense:
 
 

 
 

 
 

Restricted shares
 
9,902

 
13,262

 
8,934

Share options
 
7,349

 
10,514

 
11,752

ESPP discount
 
859

 
632

 
965

Common Shares repurchased and retired
 
(1,777
)
 

 

Offering costs
 
(41
)
 
(1,047
)
 
(39,359
)
Premium on redemption of Preferred Shares – original issuance costs
 

 

 
5,129

Supplemental Executive Retirement Plan (SERP)
 
7,374

 
(422
)
 
282

Acquisition of Noncontrolling Interests – Partially Owned Properties
 
(2,308
)
 

 
1,293

Change in market value of Redeemable Noncontrolling Interests – Operating
Partnership
 
(139,818
)
 
79,667

 
38,734

Adjustment for Noncontrolling Interests ownership in Operating Partnership
 
4,992

 
(35,329
)
 
5,763

Balance, end of year
 
$
8,536,340

 
$
8,561,500

 
$
6,542,355





See accompanying notes
F-13


Table of Contents


EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
SHAREHOLDERS’ EQUITY (continued)
 
2014
 
2013
 
2012
 
 
 
 
 
 
 
RETAINED EARNINGS
 
 

 
 

 
 

Balance, beginning of year
 
$
2,047,258

 
$
887,355

 
$
615,572

Net income attributable to controlling interests
 
631,308

 
1,830,613

 
841,719

Common Share distributions
 
(723,782
)
 
(666,565
)
 
(554,429
)
Preferred Share distributions
 
(4,145
)
 
(4,145
)
 
(10,355
)
Premium on redemption of Preferred Shares – cash charge
 

 

 
(23
)
Premium on redemption of Preferred Shares – original issuance costs
 

 

 
(5,129
)
Balance, end of year
 
$
1,950,639

 
$
2,047,258

 
$
887,355

 
 
 
 
 
 
 
ACCUMULATED OTHER COMPREHENSIVE (LOSS)
 
 

 
 

 
 

Balance, beginning of year
 
$
(155,162
)
 
$
(193,148
)
 
$
(196,718
)
Accumulated other comprehensive (loss) income – derivative instruments:
 
 

 
 

 
 

Unrealized holding (losses) gains arising during the year
 
(33,306
)
 
18,771

 
(11,772
)
Losses reclassified into earnings from other comprehensive income
 
16,868

 
20,141

 
14,678

Accumulated other comprehensive income (loss) – other instruments:
 
 

 
 

 
 

Unrealized holding gains arising during the year
 

 
583

 
664

(Gains) realized during the year
 

 
(2,122
)
 

Accumulated other comprehensive (loss) income – foreign currency:
 
 
 
 
 
 
Currency translation adjustments arising during the year
 
(552
)
 
613

 

Balance, end of year
 
$
(172,152
)
 
$
(155,162
)
 
$
(193,148
)
 
 
 
 
 
 
 
NONCONTROLLING INTERESTS
 
 

 
 

 
 

 
 
 
 
 
 
 
OPERATING PARTNERSHIP
 
 

 
 

 
 

Balance, beginning of year
 
$
211,412

 
$
159,606

 
$
119,536

Issuance of OP Units to Noncontrolling Interests
 

 

 
66,606

Issuance of restricted units to Noncontrolling Interests
 
3

 
5

 
5

Conversion of OP Units held by Noncontrolling Interests into OP Units held
by General Partner
 
(2,365
)
 
(1,699
)
 
(18,929
)
Equity compensation associated with Noncontrolling Interests
 
11,969

 
13,609

 
5,307

Net income attributable to Noncontrolling Interests
 
24,831

 
75,278

 
38,641

Distributions to Noncontrolling Interests
 
(28,676
)
 
(26,277
)
 
(25,095
)
Change in carrying value of Redeemable Noncontrolling Interests – Operating
Partnership
 
2,229

 
(44,439
)
 
(20,702
)
Adjustment for Noncontrolling Interests ownership in Operating Partnership
 
(4,992
)
 
35,329

 
(5,763
)
Balance, end of year
 
$
214,411

 
$
211,412

 
$
159,606

 
 
 
 
 
 
 
PARTIALLY OWNED PROPERTIES
 
 

 
 

 
 

Balance, beginning of year
 
$
126,583

 
$
77,688

 
$
74,306

Net income (loss) attributable to Noncontrolling Interests
 
2,544

 
(538
)
 
844

Contributions by Noncontrolling Interests
 
5,684

 
27,660

 
8,221

Distributions to Noncontrolling Interests
 
(7,827
)
 
(6,490
)
 
(5,131
)
Acquisition of Archstone
 

 
28,263

 

Acquisition of Noncontrolling Interests – Partially Owned Properties
 
(2,244
)
 

 
(1,306
)
Other
 
169

 

 
754

Balance, end of year
 
$
124,909

 
$
126,583

 
$
77,688


See accompanying notes
F-14


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

 
 
December 31, 2014
 
December 31, 2013
ASSETS
 
 
 
 
Investment in real estate
 
 

 
 

Land
 
$
6,295,404

 
$
6,192,512

Depreciable property
 
19,851,504

 
19,226,047

Projects under development
 
1,343,919

 
988,867

Land held for development
 
184,556

 
393,522

Investment in real estate
 
27,675,383

 
26,800,948

Accumulated depreciation
 
(5,432,805
)
 
(4,807,709
)
Investment in real estate, net
 
22,242,578

 
21,993,239

Cash and cash equivalents
 
40,080

 
53,534

Investments in unconsolidated entities
 
105,434

 
178,526

Deposits – restricted
 
72,303

 
103,567

Escrow deposits – mortgage
 
48,085

 
42,636

Deferred financing costs, net
 
58,380

 
58,486

Other assets
 
383,754

 
404,557

Total assets
 
$
22,950,614

 
$
22,834,545

 
 
 
 
 
LIABILITIES AND CAPITAL
 
 
 
 
Liabilities:
 
 

 
 

Mortgage notes payable
 
$
5,086,515

 
$
5,174,166

Notes, net
 
5,425,346

 
5,477,088

Lines of credit
 
333,000

 
115,000

Accounts payable and accrued expenses
 
153,590

 
118,791

Accrued interest payable
 
89,540

 
78,309

Other liabilities
 
389,915

 
347,748

Security deposits
 
75,633

 
71,592

Distributions payable
 
188,566

 
243,511

Total liabilities
 
11,742,105

 
11,626,205

 
 
 
 
 
Commitments and contingencies
 
 

 
 

 
 
 
 
 
Redeemable Limited Partners
 
500,733

 
363,144

Capital:
 
 

 
 

Partners' Capital:
 
 

 
 

Preference Units
 
50,000

 
50,000

General Partner
 
10,490,608

 
10,612,363

Limited Partners
 
214,411

 
211,412

Accumulated other comprehensive (loss)
 
(172,152
)
 
(155,162
)
Total partners' capital
 
10,582,867

 
10,718,613

Noncontrolling Interests – Partially Owned Properties
 
124,909

 
126,583

Total capital
 
10,707,776

 
10,845,196

Total liabilities and capital
 
$
22,950,614

 
$
22,834,545










See accompanying notes
F-15


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands except per Unit data)

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
REVENUES
 
 

 
 
 
 
Rental income
 
$
2,605,311

 
$
2,378,004

 
$
1,737,929

Fee and asset management
 
9,437

 
9,698

 
9,573

Total revenues
 
2,614,748

 
2,387,702

 
1,747,502

 
 
 
 
 
 
 
EXPENSES
 
 

 
 

 
 

Property and maintenance
 
473,098

 
449,427

 
332,219

Real estate taxes and insurance
 
325,401

 
293,999

 
206,723

Property management
 
79,636

 
84,342

 
81,902

Fee and asset management
 
5,429

 
6,460

 
4,663

Depreciation
 
758,861

 
978,973

 
560,669

General and administrative
 
50,948

 
62,179

 
47,233

Total expenses
 
1,693,373

 
1,875,380

 
1,233,409

 
 
 
 
 
 
 
Operating income
 
921,375

 
512,322

 
514,093

 
 
 
 
 
 
 
Interest and other income
 
4,462

 
5,283

 
151,060

Other expenses
 
(9,073
)
 
(29,630
)
 
(27,796
)
Interest:
 
 

 
 

 
 

Expense incurred, net
 
(457,191
)
 
(586,854
)
 
(455,236
)
Amortization of deferred financing costs
 
(11,088
)
 
(22,197
)
 
(21,295
)
Income (loss) before income and other taxes, (loss) from investments
in unconsolidated entities, net gain on sales of real estate properties and
land parcels and discontinued operations
 
448,485

 
(121,076
)
 
160,826

Income and other tax (expense) benefit
 
(1,394
)
 
(1,169
)
 
(514
)
(Loss) from investments in unconsolidated entities
 
(7,952
)
 
(58,156
)
 
(14
)
Net gain on sales of real estate properties
 
212,685

 

 

Net gain on sales of land parcels
 
5,277

 
12,227

 

Income (loss) from continuing operations
 
657,101

 
(168,174
)
 
160,298

Discontinued operations, net
 
1,582

 
2,073,527

 
720,906

Net income
 
658,683

 
1,905,353

 
881,204

Net (income) loss attributable to Noncontrolling Interests – Partially
Owned Properties
 
(2,544
)
 
538

 
(844
)
Net income attributable to controlling interests
 
$
656,139

 
$
1,905,891

 
$
880,360

 
 
 
 
 
 
 
ALLOCATION OF NET INCOME:
 
 
 
 
 
 
Preference Units
 
$
4,145

 
$
4,145

 
$
10,355

Premium on redemption of Preference Units
 
$

 
$

 
$
5,152

 
 
 
 
 
 
 
General Partner
 
$
627,163

 
$
1,826,468

 
$
826,212

Limited Partners
 
24,831

 
75,278

 
38,641

Net income available to Units
 
$
651,994

 
$
1,901,746

 
$
864,853

 
 
 
 
 
 
 
Earnings per Unit – basic:
 
 

 
 

 
 

Income (loss) from continuing operations available to Units
 
$
1.73

 
$
(0.47
)
 
$
0.45

Net income available to Units
 
$
1.74

 
$
5.16

 
$
2.73

Weighted average Units outstanding
 
374,899

 
368,038

 
316,554

 
 
 
 
 
 
 
Earnings per Unit – diluted:
 
 

 
 

 
 

Income (loss) from continuing operations available to Units
 
$
1.72

 
$
(0.47
)
 
$
0.45

Net income available to Units
 
$
1.73

 
$
5.16

 
$
2.70

Weighted average Units outstanding
 
377,735

 
368,038

 
319,766

 
 
 
 
 
 
 
Distributions declared per Unit outstanding
 
$
2.00

 
$
1.85

 
$
1.78



See accompanying notes
F-16


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)
(Amounts in thousands except per Unit data)

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Comprehensive income:
 
 

 
 

 
 

Net income
 
$
658,683

 
$
1,905,353

 
$
881,204

Other comprehensive (loss) income:
 
 
 
 
 
 
Other comprehensive (loss) income – derivative instruments:
 
 

 
 

 
 

Unrealized holding (losses) gains arising during the year
 
(33,306
)
 
18,771

 
(11,772
)
Losses reclassified into earnings from other comprehensive income
 
16,868

 
20,141

 
14,678

Other comprehensive income (loss) – other instruments:
 
 

 
 

 
 

Unrealized holding gains arising during the year
 

 
583

 
664

(Gains) realized during the year
 

 
(2,122
)
 

Other comprehensive (loss) income – foreign currency:
 
 
 
 
 
 
Currency translation adjustments arising during the year
 
(552
)
 
613

 

Other comprehensive (loss) income
 
(16,990
)
 
37,986

 
3,570

Comprehensive income
 
641,693

 
1,943,339

 
884,774

Comprehensive (income) loss attributable to Noncontrolling Interests –
Partially Owned Properties
 
(2,544
)
 
538

 
(844
)
Comprehensive income attributable to controlling interests
 
$
639,149

 
$
1,943,877

 
$
883,930





See accompanying notes
F-17


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 

 
 

 
 

Net income
 
$
658,683

 
$
1,905,353

 
$
881,204

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

 
 

Depreciation
 
758,861

 
1,013,353

 
684,992

Amortization of deferred financing costs
 
11,088

 
22,425

 
21,435

Amortization of above/below market leases
 
3,222

 
898

 

Amortization of discounts and premiums on debt
 
(13,520
)
 
(156,439
)
 
(8,181
)
Amortization of deferred settlements on derivative instruments
 
16,334

 
19,607

 
14,144

Write-off of pursuit costs
 
3,607

 
5,184

 
9,056

Loss from investments in unconsolidated entities
 
7,952

 
58,156

 
14

Distributions from unconsolidated entities – return on capital
 
5,570

 
2,481

 
575

Net (gain) on sales of investment securities
 
(57
)
 
(4,203
)
 

Net (gain) on sales of real estate properties
 
(212,685
)
 

 

Net (gain) on sales of land parcels
 
(5,277
)
 
(12,227
)
 

Net (gain) on sales of discontinued operations
 
(179
)
 
(2,036,505
)
 
(548,278
)
Unrealized (gain) loss on derivative instruments
 
(60
)
 
70

 
(1
)
Compensation paid with Company Common Shares
 
27,543

 
35,474

 
24,832

Changes in assets and liabilities:
 
 

 
 

 
 

(Increase) decrease in deposits – restricted
 
(1,740
)
 
3,684

 
(4,091
)
Decrease in mortgage deposits
 
1,452

 
1,813

 
176

Decrease (increase) in other assets
 
21,773

 
3,742

 
(20,411
)
Increase (decrease) in accounts payable and accrued expenses
 
17,797

 
6,229

 
(2,102
)
Increase (decrease) in accrued interest payable
 
11,231

 
(9,219
)
 
(11,898
)
Increase in other liabilities
 
8,437

 
15,401

 
2,987

Increase (decrease) in security deposits
 
4,041

 
(6,361
)
 
1,702

Net cash provided by operating activities
 
1,324,073

 
868,916

 
1,046,155

 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 

 
 

 
 

Acquisition of Archstone, net of cash acquired
 

 
(4,000,875
)
 

Investment in real estate – acquisitions
 
(469,989
)
 
(108,308
)
 
(843,976
)
Investment in real estate – development/other
 
(530,387
)
 
(377,442
)
 
(180,409
)
Capital expenditures to real estate
 
(185,957
)
 
(135,816
)
 
(152,828
)
Non-real estate capital additions
 
(5,286
)
 
(4,134
)
 
(8,821
)
Interest capitalized for real estate and unconsolidated entities under development
 
(52,782
)
 
(47,321
)
 
(22,509
)
Proceeds from disposition of real estate, net
 
522,647

 
4,551,454

 
1,049,219

Investments in unconsolidated entities
 
(15,768
)
 
(66,471
)
 
(5,291
)
Distributions from unconsolidated entities – return of capital
 
103,793

 
25,471

 

Proceeds from sale of investment securities
 
57

 
4,878

 

Decrease (increase) in deposits on real estate acquisitions and investments, net
 
33,004

 
143,694

 
(97,984
)
Decrease in mortgage deposits
 
798

 
7,893

 
1,444

Consolidation of previously unconsolidated properties
 
(44,796
)
 

 

Net cash (used for) investing activities
 
(644,666
)
 
(6,977
)
 
(261,155
)







See accompanying notes
F-18


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 

 
 

 
 

Debt financing costs
 
$
(10,982
)
 
$
(16,526
)
 
$
(21,209
)
Mortgage deposits
 
(7,699
)
 
(5,631
)
 
(57
)
Mortgage notes payable:
 
 

 
 

 
 

Proceeds
 

 
902,886

 
26,495

Restricted cash
 

 

 
2,370

Lump sum payoffs
 
(88,788
)
 
(2,532,682
)
 
(350,247
)
Scheduled principal repayments
 
(11,869
)
 
(12,658
)
 
(14,088
)
Notes, net:
 
 

 
 

 
 

Proceeds
 
1,194,277

 
1,245,550

 

Lump sum payoffs
 
(1,250,000
)
 
(400,000
)
 
(975,991
)
Lines of credit:
 
 

 
 

 
 

Proceeds
 
7,167,000

 
9,832,000

 
5,876,000

Repayments
 
(6,949,000
)
 
(9,717,000
)
 
(5,876,000
)
(Payments on) settlement of derivative instruments
 
(758
)
 
(44,063
)
 

Proceeds from sale of OP Units
 

 

 
1,417,040

Proceeds from EQR's Employee Share Purchase Plan (ESPP)
 
3,392

 
3,401

 
5,399

Proceeds from exercise of EQR options
 
82,573

 
17,252

 
49,039

OP units repurchased and retired
 
(1,777
)
 

 

Redemption of Preference Units
 

 

 
(150,000
)
Premium on redemption of Preference Units
 

 

 
(23
)
Payment of offering costs
 
(41
)
 
(1,047
)
 
(39,359
)
Other financing activities, net
 
(49
)
 
(48
)
 
(48
)
Acquisition of Noncontrolling Interests – Partially Owned Properties
 
(5,501
)
 

 
(13
)
Contributions – Noncontrolling Interests – Partially Owned Properties
 
5,684

 
27,660

 
8,221

Contributions – Limited Partners
 
3

 
5

 
5

Distributions:
 
 

 
 

 
 

OP Units – General Partner
 
(776,659
)
 
(681,610
)
 
(473,451
)
Preference Units
 
(4,145
)
 
(4,145
)
 
(13,416
)
OP Units – Limited Partners
 
(30,744
)
 
(27,897
)
 
(21,915
)
Noncontrolling Interests – Partially Owned Properties
 
(7,778
)
 
(6,442
)
 
(5,083
)
Net cash (used for) financing activities
 
(692,861
)
 
(1,420,995
)
 
(556,331
)
Net (decrease) increase in cash and cash equivalents
 
(13,454
)
 
(559,056
)
 
228,669

Cash and cash equivalents, beginning of year
 
53,534

 
612,590

 
383,921

Cash and cash equivalents, end of year
 
$
40,080

 
$
53,534

 
$
612,590











See accompanying notes
F-19


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
SUPPLEMENTAL INFORMATION:
 
 

 
 

 
 

Cash paid for interest, net of amounts capitalized
 
$
443,125

 
$
722,963

 
$
464,785

Net cash paid for income and other taxes
 
$
1,517

 
$
1,152

 
$
673

Real estate acquisitions/dispositions/other:
 
 

 
 

 
 

Mortgage loans assumed
 
$
28,910

 
$

 
$
137,644

Valuation of OP Units issued
 
$

 
$

 
$
66,606

Amortization of deferred financing costs:
 
 

 
 

 
 

Investment in real estate, net
 
$

 
$
(152
)
 
$

Deferred financing costs, net
 
$
11,088

 
$
22,577

 
$
21,435

Amortization of discounts and premiums on debt:
 
 

 
 

 
 

Mortgage notes payable
 
$
(15,904
)
 
$
(158,625
)
 
$
(10,333
)
Notes, net
 
$
2,384

 
$
2,186

 
$
2,152

Amortization of deferred settlements on derivative instruments:
 
 

 
 

 
 

Other liabilities
 
$
(534
)
 
$
(534
)
 
$
(534
)
Accumulated other comprehensive income
 
$
16,868

 
$
20,141

 
$
14,678

Loss from investments in unconsolidated entities:
 
 
 
 
 
 
Investments in unconsolidated entities
 
$
4,610

 
$
53,066

 
$
14

Other liabilities
 
$
3,342

 
$
5,090

 
$

Distributions from unconsolidated entities – return on capital:
 
 
 
 
 
 
Investments in unconsolidated entities
 
$
5,360

 
$
2,448

 
$
575

Other liabilities
 
$
210

 
$
33

 
$

Unrealized (gain) loss on derivative instruments:
 
 

 
 

 
 

Other assets
 
$
10,160

 
$
(17,139
)
 
$
7,448

Mortgage notes payable
 
$

 
$

 
$
(2,589
)
Notes, net
 
$
1,597

 
$
(1,523
)
 
$
(4,860
)
Other liabilities
 
$
21,489

 
$
(39
)
 
$
11,772

Accumulated other comprehensive income
 
$
(33,306
)
 
$
18,771

 
$
(11,772
)
Acquisition of Archstone, net of cash acquired:
 
 
 
 
 
 
Investment in real estate, net
 
$
39,929

 
$
(8,687,355
)
 
$

Investments in unconsolidated entities
 
$
(33,993
)
 
$
(225,568
)
 
$

Deposits – restricted
 
$

 
$
(528
)
 
$

Escrow deposits – mortgage
 
$

 
$
(37,582
)
 
$

Deferred financing costs, net
 
$

 
$
(25,780
)
 
$

Other assets
 
$
(2,586
)
 
$
(215,622
)
 
$

Mortgage notes payable
 
$

 
$
3,076,876

 
$

Accounts payable and accrued expenses
 
$
(146
)
 
$
16,984

 
$

Accrued interest payable
 
$

 
$
11,305

 
$

Other liabilities
 
$
(3,204
)
 
$
117,299

 
$

Security deposits
 
$

 
$
10,965

 
$

Issuance of OP Units
 
$

 
$
1,929,868

 
$

Noncontrolling Interests – Partially Owned Properties
 
$

 
$
28,263

 
$

Interest capitalized for real estate and unconsolidated entities under development:
 
 
 
 
 
 
Investment in real estate, net
 
$
(52,717
)
 
$
(45,533
)
 
$
(21,661
)
Investments in unconsolidated entities
 
$
(65
)
 
$
(1,788
)
 
$
(848
)
Investments in unconsolidated entities:
 
 
 
 
 
 
Investments in unconsolidated entities
 
$
(6,318
)
 
$
(13,656
)
 
$
(5,291
)
Other liabilities
 
$
(9,450
)
 
$
(52,815
)
 
$

Consolidation of previously unconsolidated properties:
 
 
 
 
 
 
Investment in real estate, net
 
$
(64,319
)
 
$

 
$

Investments in unconsolidated entities
 
$
(847
)
 
$

 
$

Accounts payable and accrued expenses
 
$
1,987

 
$

 
$

Other liabilities
 
$
18,383

 
$

 
$


See accompanying notes
F-20


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
SUPPLEMENTAL INFORMATION (continued):
 
 
 
 
 
 
(Payments on) settlement of derivative instruments:
 
 
 
 
 
 
Other assets
 
$
6,623

 
$
(50
)
 
$

Other liabilities
 
$
(7,381
)
 
$
(44,013
)
 
$

Other:
 
 
 
 
 
 
Receivable on sale of OP Units
 
$

 
$

 
$
28,457

Foreign currency translation adjustments
 
$
552

 
$
(613
)
 
$



See accompanying notes
F-21


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(Amounts in thousands)
 
 
Year Ended December 31,
PARTNERS' CAPITAL
 
2014
 
2013
 
2012
 
 
 
 
 
 
 
PREFERENCE UNITS
 
 

 
 

 
 

Balance, beginning of year
 
$
50,000

 
$
50,000

 
$
200,000

Redemption of 6.48% Series N Cumulative Redeemable
 

 

 
(150,000
)
Balance, end of year
 
$
50,000

 
$
50,000

 
$
50,000

 
 
 
 
 
 
 
GENERAL PARTNER
 
 

 
 

 
 

Balance, beginning of year
 
$
10,612,363

 
$
7,432,961

 
$
5,665,733

OP Unit Issuance:
 
 

 
 

 
 

Conversion of OP Units held by Limited Partners into OP Units held by
General Partner
 
2,365

 
1,699

 
18,929

Issuance of OP Units
 

 
1,929,868

 
1,388,583

Exercise of EQR share options
 
82,573

 
17,252

 
49,039

EQR's Employee Share Purchase Plan (ESPP)
 
3,392

 
3,401

 
5,399

Share-based employee compensation expense:
 
 

 
 

 
 

EQR restricted shares
 
9,904

 
13,264

 
8,936

EQR share options
 
7,349

 
10,514

 
11,752

EQR ESPP discount
 
859

 
632

 
965

OP Units repurchased and retired
 
(1,777
)
 

 

Offering costs
 
(41
)
 
(1,047
)
 
(39,359
)
Premium on redemption of Preference Units – original issuance costs
 

 

 
5,129

Net income available to Units – General Partner
 
627,163

 
1,826,468

 
826,212

OP Units – General Partner distributions
 
(723,782
)
 
(666,565
)
 
(554,429
)
Supplemental Executive Retirement Plan (SERP)
 
7,374

 
(422
)
 
282

Acquisition of Noncontrolling Interests – Partially Owned Properties
 
(2,308
)
 

 
1,293

Change in market value of Redeemable Limited Partners
 
(139,818
)
 
79,667

 
38,734

Adjustment for Limited Partners ownership in Operating Partnership
 
4,992

 
(35,329
)
 
5,763

Balance, end of year
 
$
10,490,608

 
$
10,612,363

 
$
7,432,961

 
 
 
 
 
 
 
LIMITED PARTNERS
 
 
 
 
 
 
Balance, beginning of year
 
$
211,412

 
$
159,606

 
$
119,536

Issuance of OP Units to Limited Partners
 

 

 
66,606

Issuance of restricted units to Limited Partners
 
3

 
5

 
5

Conversion of OP Units held by Limited Partners into OP Units held by
General Partner
 
(2,365
)
 
(1,699
)
 
(18,929
)
Equity compensation associated with Units – Limited Partners
 
11,969

 
13,609

 
5,307

Net income available to Units – Limited Partners
 
24,831

 
75,278

 
38,641

Units – Limited Partners distributions
 
(28,676
)
 
(26,277
)
 
(25,095
)
Change in carrying value of Redeemable Limited Partners
 
2,229

 
(44,439
)
 
(20,702
)
Adjustment for Limited Partners ownership in Operating Partnership
 
(4,992
)
 
35,329

 
(5,763
)
Balance, end of year
 
$
214,411

 
$
211,412

 
$
159,606


See accompanying notes
F-22


Table of Contents


ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)
(Amounts in thousands)
 
 
Year Ended December 31,
PARTNERS' CAPITAL (continued)
 
2014
 
2013
 
2012
 
 
 
 
 
 
 
ACCUMULATED OTHER COMPREHENSIVE (LOSS)
 
 

 
 

 
 

Balance, beginning of year
 
$
(155,162
)
 
$
(193,148
)
 
$
(196,718
)
Accumulated other comprehensive (loss) income – derivative instruments:
 
 

 
 

 
 

Unrealized holding (losses) gains arising during the year
 
(33,306
)
 
18,771

 
(11,772
)
Losses reclassified into earnings from other comprehensive income
 
16,868

 
20,141

 
14,678

Accumulated other comprehensive income (loss) – other instruments:
 
 

 
 

 
 

Unrealized holding gains arising during the year
 

 
583

 
664

(Gains) realized during the year
 

 
(2,122
)
 

Accumulated other comprehensive (loss) income – foreign currency:
 
 
 
 
 
 
Currency translation adjustments arising during the year
 
(552
)
 
613

 

Balance, end of year
 
$
(172,152
)
 
$
(155,162
)
 
$
(193,148
)
 
 
 
 
 
 
 
NONCONTROLLING INTERESTS
 
 

 
 

 
 

 
 
 
 
 
 
 
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
 
 

 
 

 
 

Balance, beginning of year
 
$
126,583

 
$
77,688

 
$
74,306

Net income (loss) attributable to Noncontrolling Interests
 
2,544

 
(538
)
 
844

Contributions by Noncontrolling Interests
 
5,684

 
27,660

 
8,221

Distributions to Noncontrolling Interests
 
(7,827
)
 
(6,490
)
 
(5,131
)
Acquisition of Archstone
 

 
28,263

 

Acquisition of Noncontrolling Interests – Partially Owned Properties
 
(2,244
)
 

 
(1,306
)
Other
 
169

 

 
754

Balance, end of year
 
$
124,909

 
$
126,583

 
$
77,688






See accompanying notes
F-23


Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.
Business
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. ERP Operating Limited Partnership ("ERPOP"), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 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 December 31, 2014 owned an approximate 96.2% 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 public equity from time to time 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 December 31, 2014, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 391 properties located in 12 states and the District of Columbia consisting of 109,225 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):
            
 
 
Properties
 
Apartment Units
Wholly Owned Properties
 
364

 
98,287

Master-Leased Properties – Consolidated
 
3

 
853

Partially Owned Properties – Consolidated
 
19

 
3,771

Partially Owned Properties – Unconsolidated
 
3

 
1,281

Military Housing
 
2

 
5,033

 
 
391

 
109,225

The “Wholly Owned Properties” are accounted for under the consolidation method of accounting. The "Master-Leased Properties – Consolidated" are wholly owned by the Company but the entire project is leased to a third party corporate housing provider. These properties are consolidated and reflected as real estate assets while the master leases are accounted for as operating leases. The “Partially Owned Properties – Consolidated” are controlled by the Company but have partners with noncontrolling interests and are accounted for under the consolidation method of accounting. The “Partially Owned Properties – Unconsolidated” are controlled by the Company's partners but the Company has noncontrolling interests and are accounted for under the equity method of accounting. The “Military Housing” properties consist of investments in limited liability companies that, as a result of the terms of the operating agreements, are accounted for as management contract rights with all fees recognized as fee and asset management revenue.

The Company maintains long-term ground leases for 13 operating properties and one of its wholly owned development properties and land parcels. The Company owns the building and improvements and leases the land underlying the improvements under long-term ground leases. The leases expire beginning in 2026 and running through 2110. These properties are consolidated and reflected as real estate assets while the ground leases are accounted for as operating leases.

2.
Summary of Significant Accounting Policies
Basis of Presentation
Due to the Company’s ability as general partner to control either through ownership or by contract the Operating Partnership and its subsidiaries, the Operating Partnership and each such subsidiary has been consolidated with the Company for financial reporting purposes, except for three unconsolidated operating properties and our military housing properties.
    

F-24

Table of Contents


Real Estate Assets and Depreciation of Investment in Real Estate
    
An acquiring entity is required to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. In addition, an acquiring entity is required to expense acquisition-related costs as incurred, value noncontrolling interests at fair value at the acquisition date and expense restructuring costs associated with an acquired business.

The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets/liabilities acquired. The Company allocates the purchase price of acquired real estate to various components as follows:

Land – Based on actual purchase price adjusted to fair value (as necessary) if acquired separately or market research/comparables if acquired with an operating property.
Furniture, Fixtures and Equipment – Ranges between $3,000 and $13,000 per apartment unit acquired as an estimate of the fair value of the appliances and fixtures inside an apartment unit. The per-apartment unit amount applied depends on the type of apartment building acquired. Depreciation is calculated on the straight-line method over an estimated useful life of five to ten years.
Lease Intangibles – The Company considers the value of acquired in-place leases and above/below market leases and the amortization period is the average remaining term of each respective acquired lease. In-place residential leases' average term at acquisition approximates six months. See Note 4 for more information on above and below market leases.
Other Intangible Assets – The Company considers whether it has acquired other intangible assets, including any customer relationship intangibles and the amortization period is the estimated useful life of the acquired intangible asset.
Building – Based on the fair value determined on an “as-if vacant” basis. Depreciation is calculated on the straight-line method over an estimated useful life of thirty years.
Site Improvements – Based on replacement cost, which approximates fair value. Depreciation is calculated on the straight-line method over an estimated useful life of eight years.
Long-Term Debt – The Company calculates the fair value by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings.
Replacements inside an apartment unit such as appliances and carpeting are depreciated over an estimated useful life of five to ten years. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life, generally five to fifteen years. Initial direct leasing costs are expensed as incurred as such expense approximates the deferral and amortization of initial direct leasing costs over the lease terms. Property sales or dispositions are recorded when title transfers to unrelated third parties, contingencies have been removed and sufficient cash consideration has been received by the Company. Upon disposition, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on sale is recognized in accordance with accounting principles generally accepted in the United States.
The Company classifies real estate assets as real estate held for disposition when it is certain a property will be disposed of (see further discussion below).
The Company classifies properties under development and/or expansion and properties in the lease-up phase (including land) as construction-in-progress until construction has been completed and all certificates of occupancy permits have been obtained.

Impairment of Long-Lived Assets

The Company periodically evaluates its long-lived assets, including its investments in real estate, for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company’s ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted. If impairment indicators exist, the Company performs the following:



F-25

Table of Contents


For long-lived assets to be held and used, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, the Company would record an impairment loss for the difference between the estimated fair value and the carrying amount of the asset.
For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset measured at the time that the Company has determined it will sell the asset. Long-lived assets held for disposition and the related liabilities are separately reported, with the long-lived assets reported at the lower of their carrying amounts or their estimated fair values, less their costs to sell, and are not depreciated after reclassification to real estate held for disposition.
Cost Capitalization
See the Real Estate Assets and Depreciation of Investment in Real Estate section for a discussion of the Company’s policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Company capitalizes an allocation of the payroll and associated costs of employees directly responsible for and who spend their time on the execution and supervision of major capital and/or renovation projects. These costs are reflected on the balance sheets as increases to depreciable property.
For all development projects, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Company capitalizes interest, real estate taxes and insurance and payroll and associated costs for those individuals directly responsible for and who spend their time on development activities, with capitalization ceasing no later than 90 days following issuance of the certificate of occupancy. These costs are reflected on the balance sheets as construction-in-progress for each specific property. The Company expenses as incurred all payroll costs of on-site employees working directly at our properties, except as noted above on our development properties prior to certificate of occupancy issuance and on specific major renovations at selected properties when additional incremental employees are hired.
During the years ended December 31, 2014, 2013 and 2012, the Company capitalized $22.4 million, $16.5 million and $14.3 million, respectively, of payroll and associated costs of employees directly responsible for and who spend their time on the execution and supervision of development activities as well as major capital and/or renovation projects.
Cash and Cash Equivalents
The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash and cash equivalents at financial institutions. The combined account balances at one or more institutions typically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes that the risk is not significant, as the Company does not anticipate the financial institutions’ non-performance.
Investment Securities
Investment securities are included in other assets in the consolidated balance sheets. These securities are classified as held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. Otherwise, the securities are classified as available-for-sale and carried at estimated fair value with unrealized gains and losses included in accumulated other comprehensive (loss), a separate component of shareholders’ equity/partners' capital. As of December 31, 2014 and 2013, the Company did not hold any investment securities.
Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain the Company’s lines of credit and long-term financings. These costs are amortized over the terms of the related debt. Unamortized financing costs are written off when debt is retired before the maturity date. The accumulated amortization of such deferred financing costs was $37.7 million and $33.4 million at December 31, 2014 and 2013, respectively.
Fair Value of Financial Instruments, Including Derivative Instruments
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, including its derivative instruments, on listed market prices and third party quotes. Where these are not available, the Company bases its estimates on

F-26

Table of Contents


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 seeks 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 its exposure to foreign exchange rates or manage commodity prices in the daily operations of the business.
The Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives it currently has in place.
The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. In addition, fair value adjustments will affect either shareholders’ equity/partners' capital or net income depending on whether the derivative instruments qualify as a hedge for accounting purposes and, if so, the nature of the hedging activity. When the terms of an underlying transaction are modified, or when the underlying transaction is terminated or completed, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market each period. The Company does not use derivatives for trading or speculative purposes.

Revenue Recognition
Rental income attributable to leases is recorded on a straight-line basis, which is not materially different than if it were recorded when due from residents and recognized monthly as it was earned. Leases entered into between a resident and a property for the rental of an apartment unit are generally year-to-year, renewable upon consent of both parties on an annual or monthly basis. Retail/commercial leases generally have five to ten year lease terms with market based renewal options. Fee and asset management revenue and interest income are recorded on an accrual basis.
Share-Based Compensation
The Company expenses share-based compensation such as restricted shares, restricted units and share options. Any common share of beneficial interest, $0.01 par value per share (the "Common Shares") issued pursuant to EQR's incentive equity compensation and employee share purchase plans will result in ERPOP issuing units of limited partnership interest ("OP Units") to EQR on a one-for-one basis, with ERPOP receiving the net cash proceeds of such issuances.
The fair value of the option grants are recognized over the requisite service/vesting period of the options. The fair value for the Company's share options was estimated at the time the share options were granted using the Black-Scholes option pricing model with the primary grant in each year having the following weighted average assumptions:

    
 
 
2014
 
2013
 
2012
Expected volatility (1)
 
27.0%
 
26.9%
 
27.4%
Expected life (2)
 
5 years
 
5 years
 
5 years
Expected dividend yield (3)
 
3.78%
 
4.12%
 
4.35%
Risk-free interest rate (4)
 
1.50%
 
0.84%
 
0.71%
Option valuation per share
 
$9.12
 
$7.90
 
$8.54

(1)
Expected volatility – Estimated based on the historical ten-year volatility of EQR’s share price measured on a monthly basis.
(2)
Expected life – Approximates the actual weighted average life of all share options granted since the Company went public in 1993.
(3)
Expected dividend yield – Calculated by averaging the historical annual yield on EQR shares for a period matching the expected life of each grant, with the annual yield calculated by dividing actual dividends by the average price of EQR’s shares in a given year.
(4)
Risk-free interest rate – The most current U.S. Treasury rate available prior to the grant date for a period matching the expected life of each grant.
The valuation method and assumptions are the same as those the Company used in accounting for option expense in its consolidated financial statements. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model is only one method of valuing options. Because the Company’s share options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the actual value of the options to the recipient may be significantly different.

F-27

Table of Contents


Income and Other Taxes
Due to the structure of EQR as a REIT and the nature of the operations of its operating properties, no provision for federal income taxes has been made at the EQR level. In addition, ERPOP generally is not liable for federal income taxes as the partners recognize their proportionate 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.
Deferred tax assets and liabilities applicable to the TRS are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates for which the temporary differences are expected to be recovered or settled. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in earnings in the period enacted. The Company’s deferred tax assets are generally the result of tax affected suspended interest deductions, net operating losses, differing depreciable lives on capitalized assets and the timing of expense recognition for certain accrued liabilities. As of December 31, 2014, the Company has recorded a deferred tax asset of approximately $46.7 million, which is fully offset by a valuation allowance due to the uncertainty in forecasting future TRS taxable income.
The Company provided for income, franchise and excise taxes allocated as follows in the consolidated statements of operations and comprehensive income for the years ended December 31, 2014, 2013 and 2012 (amounts in thousands):

    
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Income and other tax expense (benefit) (1)
 
$
1,394

 
$
1,169

 
$
514

Discontinued operations, net (2)
 
8

 
449

 
34

Provision for income, franchise and excise taxes (3)
 
$
1,402

 
$
1,618

 
$
548


(1)
Primarily includes state and local income, excise and franchise taxes.
(2)
Primarily represents state and local income, excise and franchise taxes on operating properties sold prior to January 1, 2014 and included in discontinued operations. The amounts included in discontinued operations for the year ending December 31, 2014 represent trailing activity for properties sold in 2013 and prior years. None of the properties sold during the year ended December 31, 2014 met the new criteria for reporting discontinued operations.
(3)
All provisions for income tax amounts are current and none are deferred.
The Company’s TRSs have approximately $35.1 million of net operating loss ("NOL") carryforwards available as of January 1, 2015 that will expire between 2029 and 2032.
During the years ended December 31, 2014, 2013 and 2012, the Company’s tax treatment of dividends and distributions were as follows:

    

 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Tax treatment of dividends and distributions:
 
 

 
 

 
 

Ordinary dividends
 
$
1.475

 
$
0.662

 
$
1.375

Qualified dividends
 
0.088

 
0.050

 

Long-term capital gain
 
0.280

 
0.870

 
0.253

Unrecaptured section 1250 gain
 
0.157

 
0.268

 
0.152

Dividends and distributions declared per
 
 

 
 

 
 

Common Share/Unit outstanding
 
$
2.000

 
$
1.850

 
$
1.780


The cost of land and depreciable property, net of accumulated depreciation, for federal income tax purposes as of December 31, 2014 and 2013 was approximately $16.7 billion and $15.2 billion, respectively.


F-28

Table of Contents


Noncontrolling Interests
A noncontrolling interest in a subsidiary (minority interest) is in most cases an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and separate from the parent company's equity. In addition, consolidated net income is required to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and the amount of consolidated net income attributable to the parent and the noncontrolling interest are required to be disclosed on the face of the consolidated statements of operations and comprehensive income. See Note 3 for further discussion.
Operating Partnership: Net income is allocated to noncontrolling interests based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and EQR. Issuance of additional Common Shares and OP Units changes the ownership interests of both the noncontrolling interests and EQR. Such transactions and the related proceeds are treated as capital transactions.
Partially Owned Properties: The Company reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Company that are not wholly owned by the Company. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statements of operations and comprehensive income.
Partners' Capital
The "Limited Partners" of ERPOP include various individuals and entities that contributed their properties to ERPOP in exchange for OP Units. The "General Partner" of ERPOP is EQR. Net income is allocated to the Limited Partners based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the Limited Partners by the total OP Units held by the Limited Partners and the General Partner. Issuance of additional Common Shares and OP Units changes the ownership interests of both the Limited Partners and EQR. Such transactions and the related proceeds are treated as capital transactions.
Redeemable Noncontrolling Interests – Operating Partnership / Redeemable Limited Partners
The Company classifies Redeemable Noncontrolling Interests – Operating Partnership / Redeemable Limited Partners in the mezzanine section of the consolidated balance sheets for the portion of OP Units that EQR is required, either by contract or securities law, to deliver registered Common Shares to the exchanging OP Unit holder. The redeemable noncontrolling interest units / redeemable limited partner units 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. See Note 3 for further discussion.
Use of Estimates
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.
Reclassifications
Certain reclassifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications have not changed the results of operations or equity/capital.
Other

The Company is the controlling partner in various consolidated partnerships owning 19 properties and 3,771 apartment units and various completed and uncompleted development properties having a noncontrolling interest book value of $124.9 million at December 31, 2014. The Company is required to make certain disclosures regarding noncontrolling interests in consolidated limited-life subsidiaries. Of the consolidated entities described above, the Company is the controlling partner in limited-life partnerships owning six properties having a noncontrolling interest deficit balance of $10.9 million. These six partnership agreements contain provisions that require the partnerships to be liquidated through the sale of their assets upon reaching a date specified in each respective partnership agreement. The Company, as controlling partner, has an obligation to

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cause the property owning partnerships to distribute the proceeds of liquidation to the Noncontrolling Interests in these Partially Owned Properties only to the extent that the net proceeds received by the partnerships from the sale of their assets warrant a distribution based on the partnership agreements. As of December 31, 2014, the Company estimates the value of Noncontrolling Interest distributions for these six properties would have been approximately $62.9 million (“Settlement Value”) had the partnerships been liquidated. This Settlement Value is based on estimated third party consideration realized by the partnerships upon disposition of the six Partially Owned Properties and is net of all other assets and liabilities, including yield maintenance on the mortgages encumbering the properties, that would have been due on December 31, 2014 had those mortgages been prepaid. Due to, among other things, the inherent uncertainty in the sale of real estate assets, the amount of any potential distribution to the Noncontrolling Interests in the Company's Partially Owned Properties is subject to change. To the extent that the partnerships' underlying assets are worth less than the underlying liabilities, the Company has no obligation to remit any consideration to the Noncontrolling Interests in these Partially Owned Properties.

Effective January 1, 2012, companies are required to separately disclose the amounts and reasons for any transfers of assets and liabilities into and out of Level 1 and Level 2 of the fair value hierarchy. For fair value measurements using significant unobservable inputs (Level 3), companies are required to disclose quantitative information about the significant unobservable inputs used for all Level 3 measurements and a description of the Company's valuation processes in determining fair value. In addition, companies are required to provide a qualitative discussion about the sensitivity of recurring Level 3 measurements to changes in the unobservable inputs disclosed, including the interrelationship between inputs. Companies are also required to disclose information about when the current use of a non-financial asset measured at fair value differs from its highest and best use and the hierarchy classification for items whose fair value is not recorded on the balance sheet but is disclosed in the notes. This does not have a material effect on the Company's consolidated results of operations or financial position. See Notes 4 and 9 for further discussion.

Effective January 1, 2013, companies are required to report, in one place, information about reclassifications out of accumulated other comprehensive income ("AOCI"). Companies are also required to report changes in AOCI balances. For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting is required about the effect of the reclassifications on the respective line items in the statement where net income is presented. For items that are not reclassified to net income in their entirety in the same reporting period, a cross reference to other disclosures currently required under US GAAP is required in the notes. This does not have a material effect on the Company's consolidated results of operations or financial position. See Note 9 for further discussion.

In April 2014, the Financial Accounting Standards Board (the "FASB") issued new guidance for reporting discontinued operations. Only disposals representing a strategic shift in operations that has a major effect on a company’s operations and financial results will be presented as discontinued operations. Companies will be required to expand their disclosures about discontinued operations to provide more information on the assets, liabilities, income and expenses of the discontinued operations. Companies will also be required to disclose the pre-tax income attributable to a disposal of a significant part of a company that does not qualify for discontinued operations reporting. Application of this guidance is prospective from the date of adoption and early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The new standard is effective January 1, 2015, but the Company early adopted it as allowed effective January 1, 2014. Adoption of this standard resulted in and will likely continue to result in substantially fewer of the Company's dispositions meeting the discontinued operations qualifications. See Note 11 for further discussion.
    
In May 2014, the FASB issued a comprehensive new revenue recognition standard entitled Revenue from Contracts with Customers that will supersede nearly all existing revenue recognition guidance. The new standard specifically excludes lease contracts. The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Companies will likely need to use more judgment and make more estimates than under current revenue recognition guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration, if any, to include in the transaction price and allocating the transaction price to each separate performance obligation. The new standard will be effective for the Company beginning on January 1, 2017 and early adoption is not permitted. The new standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company has not yet selected a transition method and is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

In August 2014, the FASB issued a new standard that will explicitly require management to assess an entity's ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. In connection with each annual and interim period, management will assess whether there is substantial doubt about an entity's ability to continue as a going concern within one year after the issuance date. Disclosures will be required if conditions give rise to substantial doubt, however to determine the specific disclosures, management will need to assess whether its plans will alleviate substantial doubt. The new

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standard is effective for the annual period ending after December 15, 2016. The Company does not expect that this will have a material effect on its consolidated results of operations or financial position.

In February 2015, the FASB issued new consolidation guidance which makes changes to both the variable interest model and the voting model. Among other changes, the new standard specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. The new standard will be effective for the Company beginning on January 1, 2016 and early adoption is permitted, including adoption in an interim period. The new standard must be applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity/capital as of the beginning of the period of adoption or retrospectively to each period presented. The Company has not yet selected a transition method and is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

3.
Equity, Capital and Other Interests

Equity and Redeemable Noncontrolling Interests of Equity Residential
The following tables present the changes in the Company’s issued and outstanding Common Shares and “Units” (which includes OP Units and restricted units (formerly known as Long-Term Incentive Plan ("LTIP") Units)) for the years ended December 31, 2014, 2013 and 2012:

    
 
 
2014
 
2013
 
2012
Common Shares
 
 

 
 

 
 

Common Shares outstanding at January 1,
 
360,479,260

 
325,054,654

 
297,508,185

Common Shares Issued:
 
 

 
 

 
 

Conversion of OP Units
 
94,671

 
67,939

 
675,817

Issuance of Common Shares
 

 
34,468,085

 
25,023,919

Exercise of share options
 
2,086,380

 
586,017

 
1,608,427

Employee Share Purchase Plan (ESPP)
 
68,807

 
73,468

 
110,054

Restricted share grants, net
 
169,722

 
229,097

 
128,252

Common Shares Other:
 
 

 
 

 
 

Conversion of restricted shares to restricted units
 
(12,146
)
 

 

Repurchased and retired
 
(31,240
)
 

 

Common Shares outstanding at December 31,
 
362,855,454

 
360,479,260

 
325,054,654

Units
 
 

 
 

 
 

Units outstanding at January 1,
 
14,180,376

 
13,968,758

 
13,492,543

Restricted units, net
 
200,840

 
279,557

 
70,235

OP Units issued through acquisitions
 

 

 
1,081,797

Conversion of restricted shares to restricted units
 
12,146

 

 

Conversion of OP Units to Common Shares
 
(94,671
)
 
(67,939
)
 
(675,817
)
Units outstanding at December 31,
 
14,298,691

 
14,180,376

 
13,968,758

Total Common Shares and Units outstanding at December 31,
 
377,154,145

 
374,659,636

 
339,023,412

Units Ownership Interest in Operating Partnership
 
3.8
%
 
3.8
%
 
4.1
%
OP Units Issued:
 
 

 
 

 
 

Acquisitions – per unit
 

 

 
$61.57
Acquisitions – valuation
 

 

 
$66.6 million


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”. Subject to certain exceptions (including the “book-up” requirements of restricted units), the Noncontrolling Interests – Operating Partnership may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Noncontrolling Interests – Operating Partnership (including redeemable interests) is allocated based on the number of Noncontrolling Interests – Operating Partnership Units in total in proportion to the number

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of Noncontrolling Interests – Operating Partnership Units in total plus the number of Common Shares. Net income is allocated to the Noncontrolling Interests – Operating Partnership 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 Units requesting an exchange of their OP Units with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests – Operating Partnership Units for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests – Operating Partnership Units.
The Noncontrolling Interests – Operating Partnership Units 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 are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership”. Instruments that require settlement in registered shares can not 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 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 Units that are classified in permanent equity at December 31, 2014 and 2013.
The carrying value of the Redeemable Noncontrolling Interests – Operating Partnership is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership Units in proportion to the number of Noncontrolling Interests – Operating Partnership Units in total. Such percentage of the total carrying value of Units which is ascribed to the Redeemable Noncontrolling Interests – Operating Partnership is then adjusted to the greater of carrying value or fair market value as described above. As of December 31, 2014, the Redeemable Noncontrolling Interests – Operating Partnership have a redemption value of approximately $500.7 million, which represents the value of Common Shares that would be issued in exchange with the Redeemable Noncontrolling Interests – Operating Partnership Units.
The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership for the years ended December 31, 2014, 2013 and 2012, respectively (amounts in thousands):

        
 
 
2014
 
2013
 
2012
Balance at January 1,
 
$
363,144

 
$
398,372

 
$
416,404

Change in market value
 
139,818

 
(79,667
)
 
(38,734
)
Change in carrying value
 
(2,229
)
 
44,439

 
20,702

Balance at December 31,
 
$
500,733

 
$
363,144

 
$
398,372

Net proceeds from EQR Common Share and Preferred Share (see definition below) offerings 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 offering proceeds from Common Shares and Preferred Shares are allocated between shareholders’ equity and Noncontrolling Interests – Operating Partnership to account for the change in their respective percentage ownership of the underlying equity of ERPOP.
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 as of December 31, 2014 and 2013:

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Amounts in thousands
 
 
Redemption
Date (1)
 
Annual
Dividend per
Share (2)
 
December 31, 2014
 
December 31, 2013
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized:
 
 
 
 
 
 
 
 
8.29% Series K Cumulative Redeemable Preferred; liquidation
value $50 per share; 1,000,000 shares issued and outstanding
at December 31, 2014 and December 31, 2013
 
12/10/26
 

$4.145

 
$
50,000

 
$
50,000

 
 
 
 
 
 
$
50,000

 
$
50,000


(1)
On or after the redemption date, redeemable preferred shares may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation price per share, plus accrued and unpaid distributions, if any.
(2)
Dividends on Preferred Shares are payable quarterly.
Capital and Redeemable Limited Partners of ERP Operating Limited Partnership
The following tables present the changes in the Operating Partnership's issued and outstanding Units and in the limited partners' Units for the years ended December 31, 2014, 2013 and 2012:
    
 
 
2014
 
2013
 
2012
General and Limited Partner Units
 
 

 
 

 
 

General and Limited Partner Units outstanding at January 1,
 
374,659,636

 
339,023,412

 
311,000,728

Issued to General Partner:
 
 
 
 
 
 
Issuance of OP Units
 

 
34,468,085

 
25,023,919

Exercise of EQR share options
 
2,086,380

 
586,017

 
1,608,427

EQR's Employee Share Purchase Plan (ESPP)
 
68,807

 
73,468

 
110,054

EQR's restricted share grants, net
 
169,722

 
229,097

 
128,252

Issued to Limited Partners:
 
 
 
 
 
 
Restricted units, net
 
200,840

 
279,557

 
70,235

OP Units issued through acquisitions
 

 

 
1,081,797

OP Units Other:
 
 
 
 
 
 
Repurchased and retired
 
(31,240
)
 

 

General and Limited Partner Units outstanding at December 31,
 
377,154,145

 
374,659,636

 
339,023,412

Limited Partner Units
 
 

 
 

 
 

Limited Partner Units outstanding at January 1,
 
14,180,376

 
13,968,758

 
13,492,543

Limited Partner restricted units, net
 
200,840

 
279,557

 
70,235

Limited Partner OP Units issued through acquisitions
 

 

 
1,081,797

Conversion of EQR restricted shares to restricted units
 
12,146

 

 

Conversion of Limited Partner OP Units to EQR Common Shares
 
(94,671
)
 
(67,939
)
 
(675,817
)
Limited Partner Units outstanding at December 31,
 
14,298,691

 
14,180,376

 
13,968,758

Limited Partner Units Ownership Interest in Operating Partnership
 
3.8
%
 
3.8
%
 
4.1
%
Limited Partner OP Units Issued:
 
 

 
 

 
 

Acquisitions – per unit
 

 

 

$61.57

Acquisitions – valuation
 

 

 
$66.6 million

    
The Limited Partners of the Operating Partnership as of December 31, 2014 include 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. Subject to certain exceptions (including the “book-up” requirements of restricted units), Limited Partners may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Limited Partner Units (including redeemable interests) is allocated based on the number of Limited Partner Units in total in proportion to the number of Limited Partner Units in total plus the number of General Partner Units. Net income is allocated to the Limited Partner Units 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 Limited Partner Units requesting an exchange of their OP Units with EQR. Once the Operating Partnership

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elects not to redeem the Limited Partner Units for cash, EQR is obligated to deliver Common Shares to the exchanging limited partner.

The Limited Partner Units 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 Limited Partner Units are differentiated and referred to as “Redeemable Limited Partner Units”. Instruments that require settlement in registered shares can not 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 Limited Partner Units 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 Limited Partner Units that are classified in permanent equity at December 31, 2014 and 2013.

The carrying value of the Redeemable Limited Partner Units is allocated based on the number of Redeemable Limited Partner Units in proportion to the number of Limited Partner Units in total. Such percentage of the total carrying value of Limited Partner Units which is ascribed to the Redeemable Limited Partner Units is then adjusted to the greater of carrying value or fair market value as described above. As of December 31, 2014, the Redeemable Limited Partner Units have a redemption value of approximately $500.7 million, which represents the value of Common Shares that would be issued in exchange with the Redeemable Limited Partner Units.
The following table presents the changes in the redemption value of the Redeemable Limited Partners for the years ended December 31, 2014, 2013 and 2012, respectively (amounts in thousands):

        
 
 
2014
 
2013
 
2012
Balance at January 1,
 
$
363,144

 
$
398,372

 
$
416,404

Change in market value
 
139,818

 
(79,667
)
 
(38,734
)
Change in carrying value
 
(2,229
)
 
44,439

 
20,702

Balance at December 31,
 
$
500,733

 
$
363,144

 
$
398,372

EQR contributes all net proceeds from its various equity offerings (including proceeds from exercise of options for Common Shares) 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).
The following table presents the Operating Partnership's issued and outstanding “Preference Units” as of December 31, 2014 and 2013:
 
 
 
 
 
 
Amounts in thousands
 
 
Redemption
Date (1)
 
Annual
Dividend per
Unit (2)
 
December 31, 2014
 
December 31, 2013
Preference Units:
 
 
 
 

 
 

 
 

8.29% Series K Cumulative Redeemable Preference Units;
liquidation value $50 per unit; 1,000,000 units issued and
outstanding at December 31, 2014 and December 31, 2013
 
12/10/26
 

$4.145

 
$
50,000

 
$
50,000

 
 
 
 
 

 
$
50,000

 
$
50,000


(1)
On or after the redemption date, redeemable preference units may be redeemed for cash at the option of the Operating Partnership, in whole or in part, at a redemption price equal to the liquidation price per unit, plus accrued and unpaid distributions, if any, in conjunction with the concurrent redemption of the corresponding Company Preferred Shares.
(2)
Dividends on 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 on July 30, 2013 and expires on July 30, 2016. In July 2013, the Board of Trustees also approved an increase to the amount of shares which may be offered under the ATM (see definition below) program to 13.0 million Common Shares and extended the program maturity to July 2016. Per the terms of ERPOP's

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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).

On February 27, 2013, the Company issued 34,468,085 Common Shares to an affiliate of Lehman Brothers Holdings Inc. as partial consideration for the portion of the Archstone Portfolio acquired by the Company (as discussed in Note 4 below). The shares had a total value of $1.9 billion based on the February 27, 2013 closing price of EQR Common Shares of $55.99 per share. Concurrent with this transaction, ERPOP issued 34,468,085 OP Units to EQR. On March 7, 2013, EQR filed a shelf registration statement relating to the resale of these shares by the selling shareholders.

On November 28, 2012, as a partial source of funding for the Archstone Acquisition (see definition below), EQR priced the issuance of 21,850,000 Common Shares at a price of $54.75 per share for total consideration of approximately $1.2 billion, after deducting underwriting commissions of $35.9 million. Concurrent with this transaction, ERPOP issued 21,850,000 OP Units to EQR.

In September 2009, the Company announced the establishment of an At-The-Market (“ATM”) share offering program which would allow EQR to sell Common Shares from time to time into the existing trading market at current market prices as well as through negotiated transactions. Per the terms of ERPOP's partnership agreement, EQR contributes the net proceeds from 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). On July 30, 2013, the Board of Trustees approved an increase to the amount of shares which may be offered under the ATM program to 13.0 million Common Shares and extended the program maturity to July 2016. EQR has not issued any shares under this program since September 14, 2012.

During the year ended December 31, 2012, EQR issued approximately 3.2 million Common Shares at an average price of $60.59 per share for total consideration of approximately $192.3 million through the ATM program. Concurrent with these transactions, ERPOP issued approximately 3.2 million OP Units to EQR.

Effective July 30, 2013, the Board of Trustees approved an increase and modification to the Company's share repurchase program to allow for the potential repurchase of up to 13.0 million Common Shares. Considering the repurchase activity for the year ended December 31, 2014 (see discussion below), EQR has remaining authorization to repurchase an additional 12,968,760 of its shares as of December 31, 2014.

During the year ended December 31, 2014, EQR repurchased 31,240 of its Common Shares at an average price of $56.87 per share for total consideration of $1.8 million. These shares were retired subsequent to the repurchases. Concurrent with these transactions, ERPOP repurchased and retired 31,240 OP Units previously issued to EQR. All of the shares repurchased during the year ended December 31, 2014 were repurchased from employees at the then current market prices to cover the minimum statutory tax withholding obligations related to the vesting of employees' restricted shares. No shares were repurchased during the years ended December 31, 2013 and 2012.

On August 20, 2012, the Company redeemed its Series N Cumulative Redeemable Preferred Shares for cash consideration of $150.0 million plus accrued dividends through the redemption date. Concurrent with this transaction, the Operating Partnership redeemed its corresponding Series N Preference Units. The Company recorded the write-off of approximately $5.1 million in original issuance costs as a premium on the redemption of Preferred Shares/Preference Units.

On April 18, 2012, the Operating Partnership issued 1,081,797 OP Units having a value of $66.6 million (based on the closing price for Common Shares of $61.57 on such date) as partial consideration for the acquisition of one rental property.

During the year ended December 31, 2014, the Company acquired all of its partners' interests in one consolidated partially owned property consisting of 268 apartment units and one consolidated partially owned land parcel for $5.5 million. In conjunction with these transactions, the Company reduced paid in capital (included in general partner's capital in the Operating Partnership's financial statements) by $2.3 million, Noncontrolling Interests – Partially Owned Properties by $2.2 million and other liabilities by $1.0 million.

During the year ended December 31, 2012, the Company acquired all of its partner's interest in one consolidated partially owned land parcel for no cash consideration. In conjunction with this transaction, the Company increased paid in capital (included in general partner's capital in the Operating Partnership's financial statements) by $1.3 million and reduced Noncontrolling Interests – Partially Owned Properties by $1.3 million.

During the year ended December 31, 2014, the Operating Partnership issued the 3.00% Series P Cumulative Redeemable

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Preference Units with a liquidation value of approximately $18.4 million in conjunction with the buyout of its partner's 95% interest in a previously unconsolidated development property. The Series P Preference Units are classified as a liability due in part to the fact that the holder can put the units back to the Operating Partnership for cash. Dividends are paid quarterly on the Series P Preference Units. See Note 4 for further discussion of the buyout.

See Note 6 for a discussion of the Noncontrolling Interests assumed in conjunction with the acquisition of Archstone.

4.
Real Estate and Lease Intangibles
The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of December 31, 2014 and 2013 (amounts in thousands):

 
 
2014
 
2013
Land
 
$
6,295,404

 
$
6,192,512

Depreciable property:
 
 

 
 

Buildings and improvements
 
17,974,337

 
17,509,609

Furniture, fixtures and equipment
 
1,365,276

 
1,214,220

In-Place lease intangibles
 
511,891

 
502,218

Projects under development:
 
 

 
 

Land
 
466,764

 
353,574

Construction-in-progress
 
877,155

 
635,293

Land held for development:
 
 

 
 

Land
 
145,366

 
341,389

Construction-in-progress
 
39,190

 
52,133

Investment in real estate
 
27,675,383

 
26,800,948

Accumulated depreciation
 
(5,432,805
)
 
(4,807,709
)
Investment in real estate, net
 
$
22,242,578

 
$
21,993,239


The following table summarizes the carrying amounts for the Company's above and below market ground and retail lease intangibles as of December 31, 2014 and 2013 (amounts in thousands):
Description
 
Balance Sheet Location
 
2014
 
2013
Assets
 
 
 
 
 
 
Ground lease intangibles – below market
 
Other Assets
 
$
178,251

 
$
178,251

Retail lease intangibles – above market
 
Other Assets
 
1,260

 
1,260

Lease intangible assets
 
 
 
179,511

 
179,511

Accumulated amortization
 
 
 
(8,913
)
 
(4,364
)
Lease intangible assets, net
 
 
 
$
170,598

 
$
175,147

 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Ground lease intangibles – above market
 
Other Liabilities
 
$
2,400

 
$
2,400

Retail lease intangibles – below market
 
Other Liabilities
 
5,270

 
5,500

Lease intangible liabilities
 
 
 
7,670

 
7,900

Accumulated amortization
 
 
 
(2,258
)
 
(1,161
)
Lease intangible liabilities, net
 
 
 
$
5,412

 
$
6,739


During the years ended December 31, 2014 and 2013, the Company amortized approximately $4.3 million and $3.6 million, respectively, of above and below market ground lease intangibles which is included (net increase) in property and maintenance expense in the accompanying consolidated statements of operations and comprehensive income and approximately $1.1 million and $2.7 million, respectively, of above and below market retail lease intangibles which is included (net increase) in rental income in the accompanying consolidated statements of operations and comprehensive income.


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The weighted average amortization period for above and below market ground lease intangibles and retail lease intangibles is 49.8 years and 2.8 years, respectively.

The following table provides a summary of the aggregate amortization expense for above and below market ground lease intangibles and retail lease intangibles for each of the next five years (amounts in thousands):
            
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
 
 
 
 
 
 
 
 
 
 
Ground lease intangibles
 
$
4,321

 
$
4,321

 
$
4,321

 
$
4,321

 
$
4,321

Retail lease intangibles
 
(939
)
 
(896
)
 
(540
)
 
(71
)
 
(71
)
Total
 
$
3,382

 
$
3,425

 
$
3,781

 
$
4,250

 
$
4,250

    
Archstone Acquisition
    
On February 27, 2013, the Company, AvalonBay Communities, Inc. (“AVB”) and certain of their respective subsidiaries completed their previously announced acquisition (the “Archstone Acquisition” or the "Archstone Transaction") from Archstone Enterprise LP (“Enterprise”) (which subsequently changed its name to Jupiter Enterprise LP), an affiliate of Lehman Brothers Holdings Inc. (“Lehman”) and its affiliates, of all of the assets of Enterprise (including interests in various entities affiliated with Enterprise), constituting a portfolio of apartment properties and other assets (the “Archstone Portfolio”).

The Company acquired assets representing approximately 60% of the Archstone Portfolio which consisted principally of high-quality apartment properties in major markets in the United States. The acquisition allowed the Company to accelerate the completion of its strategic shift into coastal apartment markets. Pursuant to the Archstone Transaction, the Company acquired directly or indirectly, 71 wholly owned, stabilized properties consisting of 20,160 apartment units, one partially owned and consolidated stabilized property consisting of 432 apartment units, one partially owned and unconsolidated stabilized property consisting of 336 apartment units, three consolidated master-leased properties consisting of 853 apartment units, four projects in various stages of construction (two consolidated and two unconsolidated) for 964 apartment units and fourteen land sites for approximately $9.0 billion. During the year ended December 31, 2013, the Company recorded revenues and net operating income ("NOI") of $514.7 million and $352.8 million, respectively, from the acquired assets.

The consideration paid by the Company in connection with the Archstone Acquisition consisted of cash of approximately $4.0 billion (inclusive of $2.0 billion of Archstone secured mortgage principal paid off in conjunction with the closing), 34,468,085 Common Shares (which shares had a total value of $1.9 billion based on the February 27, 2013 closing price of EQR common shares of $55.99 per share) issued to the seller and the assumption of approximately $3.1 billion of mortgage debt (inclusive of a net mark-to-market premium of $127.9 million) and approximately 60% of all of the other assets and liabilities related to the Archstone Portfolio. The cash consideration was funded with proceeds from the issuance of 21,850,000 Common Shares (which shares had a total value of approximately $1.2 billion based on a price of $54.75 per share) in the November/December 2012 public equity offering, asset sales of approximately $4.5 billion that were completed during the year ended December 31, 2013, the Company's $750.0 million unsecured term loan facility (which was subsequently paid off in the second quarter of 2014) and the Company's revolving credit facility.

The Company owns the building and improvements and leases the land underlying the improvements under long-term ground leases that expire beginning in 2042 and running through 2103 for nine of the operating properties acquired and discussed above. These properties are consolidated and reflected as real estate assets while the ground leases are accounted for as operating leases. The Company also leases the three master-leased properties discussed above to third party operators and earns monthly net rental income.

The Company accounted for the acquisition under the acquisition method in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations (“ASC 805”), and the accounting for this business combination is complete and final. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which the Company determined using Level 1, Level 2 and Level 3 inputs (amounts in thousands):


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Land
 
$
2,239,000

Depreciable property:
 
 
Buildings and improvements
 
5,765,538

Furniture, fixtures and equipment
 
61,470

In-Place lease intangibles
 
304,830

Projects under development
 
36,583

Land held for development
 
244,097

Investments in unconsolidated entities
 
230,608

Other assets
 
195,260

Other liabilities
 
(108,997
)
Net assets acquired
 
$
8,968,389


The allocation of fair values of the assets acquired and liabilities assumed has changed from the allocation reported in “Note 4 – Real Estate and Lease Intangibles” in the Notes to Consolidated Financial Statements included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on February 27, 2014. The changes to our valuation assumptions were based on more accurate information concerning the subject assets and liabilities and resulted from information not readily available at the acquisition date, final purchase price settlement with our partner in accordance with the terms of the purchase agreement and reclassification adjustments for presentation. None of these changes had a material impact on our Consolidated Financial Statements. The Company's assessment of the fair values and the allocation of the purchase price to the identified tangible and intangible assets/liabilities at March 31, 2014 was its final and best estimate of fair value. As a result, the Company did not make any changes to its allocation of fair values of the assets acquired and liabilities assumed subsequent to the allocation reported in "Note 4 – Real Estate and Lease Intangibles" in the Notes to Consolidated Financial Statements included in Part I of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed with the SEC on May 8, 2014.

The fair values of investment in real estate were determined using internally developed models that were based on market assumptions and comparable sales data as well as external valuations performed by unrelated third parties. The market assumptions used as inputs to the Company’s fair value model include construction costs, leasing assumptions, growth rates, discount rates, terminal capitalization rates and development yields. The Company used data on its existing portfolio of properties and its recent acquisition and development properties, as well as similar market data from third party sources, when available, in determining these inputs (Level 2 and 3). The fair value of Noncontrolling Interests was calculated similar to the investment in real estate described above. The fair value of mortgage debt was calculated using indicative rates, leverage and coverage provided by lenders of similar loans (Level 2). The Common Shares issued to an affiliate of Lehman Brothers Holdings Inc. were valued using the quoted market price of Common Shares (Level 1).

The following table summarizes the acquisition date fair values of the above and below market ground and retail lease intangibles, which we determined using Level 2 and Level 3 inputs (amounts in thousands):
Description
 
Balance Sheet Location
 
Fair Value
Ground lease intangibles – below market
 
Other Assets
 
$
178,251

Retail lease intangibles – above market
 
Other Assets
 
1,260

 
 
 
 
 
Ground lease intangibles – above market
 
Other Liabilities
 
2,400

Retail lease intangibles – below market
 
Other Liabilities
 
8,040


As of December 31, 2014, the Company has incurred cumulative Archstone-related expenses of approximately $99.0 million, of which approximately $13.5 million of this total was financing-related and approximately $85.5 million was merger costs. During the year ended December 31, 2014, the Company expensed nominal amounts of direct merger costs. During the years ended December 31, 2013 and 2012, the Company expensed $19.9 million and $5.6 million, respectively, of direct merger costs primarily related to investment banking and legal/accounting fees, which were included in other expenses in the accompanying consolidated statements of operations and comprehensive income. During the years ended December 31, 2014 and 2013, the Company also expensed $4.3 million and $54.0 million, respectively, of indirect merger costs primarily related to severance and retention obligations, office leases and German operations/sales that were incurred through our 60% interest in unconsolidated joint ventures with AVB, which were included in (loss) from investments in unconsolidated entities in the accompanying

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consolidated statements of operations and comprehensive income. Finally, during the years ended December 31, 2013 and 2012, the Company expensed $2.5 million and $8.4 million, respectively, of financing-related costs, which were included in interest expense in the accompanying consolidated statements of operations and comprehensive income.

Unaudited Pro Forma Financial Information

Equity Residential

The following table illustrates the effect on net income, earnings per share – basic and earnings per share – diluted as if the Company had consummated the Archstone Acquisition as of January 1, 2012 (amounts in thousands, except per share amounts):

 
 
Year Ended December 31,
 
 
2013
 
2012
 
 

Total revenues
 
$
2,485,438

 
$
2,317,699

Income (loss) from continuing operations (1)
 
203,286

 
(54,940
)
Discontinued operations, net
 
2,074,072

 
720,361

Net income
 
2,277,358

 
665,421

Net income available to Common Shares
 
2,183,756

 
622,424

Earnings per share - basic:
 
 
 
 
Net income available to Common Shares
 
$
6.07

 
$
1.74

Weighted average Common Shares outstanding (2)
 
359,688

 
356,984

Earnings per share - diluted (1):
 
 
 
 
Net income available to Common Shares
 
$
6.05

 
$
1.74

Weighted average Common Shares outstanding (2)
 
375,861

 
356,984


(1)
Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a pro forma loss from continuing operations for the year ended December 31, 2012.
(2)
Includes an adjustment for Common Shares issued to the public in November/December 2012 and to an affiliate of Lehman Brothers Holdings Inc. in February 2013 as partial consideration for the Archstone Acquisition.

ERP Operating Limited Partnership

The following table illustrates the effect on net income, earnings per Unit – basic and earnings per Unit – diluted as if the Operating Partnership had consummated the Archstone Acquisition as of January 1, 2012 (amounts in thousands, except per Unit amounts):

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Year Ended December 31,
 
 
2013
 
2012
 
 
 
Total revenues
 
$
2,485,438

 
$
2,317,699

Income (loss) from continuing operations (1)
 
203,286

 
(54,940
)
Discontinued operations, net
 
2,074,072

 
720,361

Net income
 
2,277,358

 
665,421

Net income available to Units
 
2,273,798

 
651,548

Earnings per Unit - basic:
 
 
 
 
Net income available to Units
 
$
6.07

 
$
1.74

Weighted average Units outstanding (2)
 
373,421

 
370,837

Earnings per Unit - diluted (1):
 
 
 
 
Net income available to Units
 
$
6.05

 
$
1.74

Weighted average Units outstanding (2)
 
375,861

 
370,837


(1)
Potential Units issuable from the assumed exercise/vesting of the Company's long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per Unit calculation as the Operating Partnership had a pro forma loss from continuing operations for the year ended December 31, 2012.
(2)
Includes an adjustment for Common Shares issued to the public in November/December 2012 and to an affiliate of Lehman Brothers Holdings Inc. in February 2013 as partial consideration for the Archstone Acquisition. Concurrent with these transactions, ERPOP issued the same number of OP Units to EQR.

For the years ended December 2013 and 2012, acquisition costs of $19.9 million and $5.6 million, respectively, and severance/retention and other costs of $54.1 million and none, respectively, related to the Archstone Acquisition are not expected to have a continuing impact on the Company's financial results and therefore have been excluded from these pro forma results. The pro forma results also do not include the impact of any synergies or lower borrowing costs that the Company has or may achieve as a result of the acquisition or any strategies that management has or may consider in order to more efficiently manage the Company's operations, nor do they give pro forma effect to any other acquisitions, dispositions or capital markets transactions (excluding the equity offering in November/December 2012 which proceeds were used for the Archstone Acquisition) that the Company completed during the periods presented. These pro forma results are not necessarily indicative of the operating results that would have been obtained had the Archstone Acquisition occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.

Other

During the year ended December 31, 2014, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):
 
 
Properties
 
Apartment Units
 
Purchase Price
Rental Properties – Consolidated
 
6

 
1,353

 
$
469,850

Land Parcels (two)
 

 

 
28,790

Total
 
6

 
1,353

 
$
498,640


The Company also acquired the 95% equity interest it did not previously own in one unconsolidated development project with an anticipated stabilized real estate value of $87.5 million at completion and an adjusted purchase price of $64.2 million. The Company paid cash of approximately $44.8 million and issued the Series P Preference Units with a liquidation value of approximately $18.4 million to complete the buyout (see Note 3). The Company recognized a revaluation loss of approximately $3.5 million, which is included in loss from investments in unconsolidated entities in the accompanying consolidated statements of operations and comprehensive income, in conjunction with this buyout.

In addition to the Archstone Acquisition described above, during the year ended December 31, 2013, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):

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Properties
 
Apartment Units
 
Purchase Price
Rental Properties – Consolidated
 
1

 
322

 
$
91,500

Land Parcel (one)
 

 

 
16,500

Total
 
1

 
322

 
$
108,000


During the year ended December 31, 2014, the Company disposed of the following to unaffiliated parties (sales price in thousands):

 
 
Properties
 
Apartment Units
 
Sales Price
Consolidated:
 
 
 
 
 
 
Rental Properties
 
10

 
3,092

 
$
466,968

Land Parcels (three)
 

 

 
62,602

Unconsolidated:
 
 
 
 
 
 
Rental Properties (1)
 
1

 
388

 
62,500

Total
 
11

 
3,480

 
$
592,070


(1) The Company owned an 85% interest in this unconsolidated rental property. Sale price listed is the gross sale price.

The Company recognized a net gain on sales of real estate properties of approximately $212.7 million, a net gain on sales of unconsolidated entities of approximately $4.9 million (included in loss from investments in unconsolidated entities in the accompanying consolidated statements of operations and comprehensive income) and a net gain on sales of land parcels of approximately $5.3 million on the above sales.

During the year ended December 31, 2013, the Company disposed of the following to unaffiliated parties (sales price in thousands):
 
 
Properties
 
Apartment Units
 
Sales Price
Consolidated:
 
 
 
 
 
 
Rental Properties
 
94

 
29,180

 
$
4,459,339

Land Parcels (seven)
 

 

 
99,650

Other (1)
 

 

 
30,734

Unconsolidated:
 
 
 
 
 
 
Land Parcel (one) (2)
 

 

 
26,350

Total
 
94

 
29,180

 
$
4,616,073


(1) Represents a 97,000 square foot commercial building adjacent to our Harbor Steps apartment property in downtown Seattle that was acquired in 2011.
(2) Sales price listed is the gross sales price. EQR's share of the net sales proceeds approximated 25%.

The Company recognized a net gain on sales of discontinued operations of approximately $2.0 billion and a net gain on sales of land parcels of approximately $12.2 million on the above sales.

5.
Commitments to Acquire/Dispose of Real Estate
The Company has entered into separate agreements to acquire the following (purchase price in thousands):
        
 
Properties
 
Apartment Units
 
Purchase Price
Rental Properties
1

 
202

 
$
131,250

Land Parcels (four)

 

 
31,100

Total
1

 
202

 
$
162,350

In addition to the properties that were subsequently disposed of as discussed in Note 18, the Company has entered into separate agreements to dispose of the following (sales price in thousands):

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Table of Contents


        
 
Properties
 
Apartment Units
 
Sales Price
Rental Properties (1)
1

 
150

 
$
169,800

Total
1

 
150

 
$
169,800


(1) Includes a 193,230 square foot office building under contract to be sold for approximately $123.3 million which is adjacent to our Longfellow Place property located in Boston and acquired in 1999.    

The closings of these pending transactions are subject to certain conditions and restrictions, therefore, there can be no assurance that these transactions will be consummated or that the final terms will not differ in material respects from those summarized in the preceding paragraphs.

6.
Investments in Partially Owned Entities
The Company has co-invested in various properties with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated). The following tables and information summarize the Company’s investments in partially owned entities as of December 31, 2014 (amounts in thousands except for project and apartment unit amounts):

 
Consolidated
 
Unconsolidated
 
Development Projects
 
 
 
 
 
Development Projects
 
 
 
 
 
Held for
and/or Under
Development
 
Operating
 
Total
 
 
Completed, Not Stabilized (3)
 
Operating
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Total projects (1)

 
19

 
19

 
 
1

 
2

 
3

 
 
 
 
 
 
 
 
 
 
 
 
 
Total apartment units (1)

 
3,771

 
3,771

 
 
444

 
837

 
1,281

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet information at 12/31/14 (at 100%):
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Investment in real estate
$
340,740

 
$
682,374

 
$
1,023,114

 
 
$
155,376

 
$
134,669

 
$
290,045

Accumulated depreciation

 
(194,481
)
 
(194,481
)
 
 
(6,921
)
 
(11,391
)
 
(18,312
)
Investment in real estate, net
340,740

 
487,893

 
828,633

 
 
148,455

 
123,278

 
271,733

Cash and cash equivalents

 
19,338

 
19,338

 
 
2,684

 
3,172

 
5,856

Investments in unconsolidated entities

 
51,979

 
51,979

 
 

 

 

Deposits – restricted
22,706

 
300

 
23,006

 
 

 
214

 
214

Deferred financing costs, net

 
2,141

 
2,141

 
 

 
8

 
8

Other assets
6,658

 
26,609

 
33,267

 
 
529

 
691

 
1,220

       Total assets
$
370,104

 
$
588,260

 
$
958,364

 
 
$
151,668

 
$
127,363

 
$
279,031

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY/CAPITAL
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable (2)
$

 
$
360,479

 
$
360,479

 
 
$
96,793

 
$
78,628

 
$
175,421

Accounts payable & accrued expenses
13,307

 
1,611

 
14,918

 
 
769

 
259

 
1,028

Accrued interest payable

 
1,283

 
1,283

 
 
464

 
227

 
691

Other liabilities
69

 
885

 
954

 
 
294

 
671

 
965

Security deposits
25

 
1,954

 
1,979

 
 
173

 
300

 
473

       Total liabilities
13,401

 
366,212

 
379,613

 
 
98,493

 
80,085

 
178,578

 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests – Partially Owned
Properties/Partners' equity
117,350

 
7,559

 
124,909

 
 
47,223

 
43,655

 
90,878

Company equity/General and Limited
Partners' Capital
239,353

 
214,489

 
453,842

 
 
5,952

 
3,623

 
9,575

       Total equity/capital
356,703

 
222,048

 
578,751

 
 
53,175

 
47,278

 
100,453

       Total liabilities and equity/capital
$
370,104

 
$
588,260

 
$
958,364

 
 
$
151,668

 
$
127,363

 
$
279,031




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Table of Contents


 
Consolidated
 
Unconsolidated
 
Development Projects
 
 
 
 
 
Development Projects
 
 
 
 
 
Held for
and/or Under
Development
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
Completed, Not Stabilized (3)
 
 
 
 
 
Operating
 
Total
 
 
 
 
Total
Operating information for the year ended 12/31/14 (at 100%):
 
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
$
22

 
$
88,157

 
$
88,179

 
 
$
10,182

 
$
15,160

 
$
25,342

Operating expenses
91

 
25,674

 
25,765

 
 
3,781

 
6,818

 
10,599

 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating (loss) income
(69
)
 
62,483

 
62,414

 
 
6,401

 
8,342

 
14,743

Depreciation

 
21,679

 
21,679

 
 
6,512

 
5,800

 
12,312

General and administrative/other
1

 
116

 
117

 
 
1

 
209

 
210

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (loss) income
(70
)
 
40,688

 
40,618

 
 
(112
)
 
2,333

 
2,221

Interest and other income

 
11

 
11

 
 

 

 

Other expenses

 
(54
)
 
(54
)
 
 

 

 

Interest:
 
 
 
 
 
 
 
 
 
 
 
 
Expense incurred, net

 
(15,626
)
 
(15,626
)
 
 
(5,296
)
 
(3,831
)
 
(9,127
)
Amortization of deferred financing costs

 
(355
)
 
(355
)
 
 

 
(2
)
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
(Loss) income before income and other taxes and (loss)
from investments in unconsolidated entities
(70
)
 
24,664

 
24,594

 
 
(5,408
)
 
(1,500
)
 
(6,908
)
Income and other tax (expense) benefit

 
(36
)
 
(36
)
 
 
(7
)
 

 
(7
)
(Loss) from investments in unconsolidated entities

 
(1,593
)
 
(1,593
)
 
 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(70
)
 
$
23,035

 
$
22,965

 
 
$
(5,415
)
 
$
(1,500
)
 
$
(6,915
)

(1)
Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
(2)
All debt is non-recourse to the Company.
(3)
Projects included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing.

Note:
The above tables exclude the Company's interests in unconsolidated joint ventures entered into with AVB in connection with the Archstone Transaction. These ventures own certain non-core Archstone assets that are held for sale and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests have an aggregate liquidation value of $74.6 million at December 31, 2014. The ventures are owned 60% by the Company and 40% by AVB.

During the year ended December 31, 2014, the Company and its joint venture partners sold one consolidated partially owned land parcel and recognized a net gain on the sale of approximately $1.1 million as well as one unconsolidated partially owned property consisting of 388 apartment units and recognized a net gain on the sale of approximately $4.9 million.

During the year ended December 31, 2012, the Company and its joint venture partner sold two consolidated partially owned properties consisting of 441 apartment units and recognized a net gain on the sales of approximately $21.3 million.

The Company is the controlling partner in various consolidated partnership properties and development properties having a noncontrolling interest book value of $124.9 million at December 31, 2014. The Company does not have any VIEs.

Archstone Acquisition

On February 27, 2013, in conjunction with the Archstone Acquisition, the Company acquired interests in certain joint ventures. Details of these interests follow by project:

Wisconsin Place – This project contains a mixed-use site located in Chevy Chase, Maryland consisting of residential, retail, office and accessory uses, including underground parking facilities. The Company has a 75% equity interest with an initial basis of $198.5 million in the 432 unit residential component. The Company is the managing member, was responsible for constructing the residential project and its partner does not have substantive kick-out or participating rights. As a result, the entity that owns the residential component of this mixed-use site is required to be consolidated on the Company's balance sheet. Such entity also retains an unconsolidated interest in an entity that owns the land underlying the entire project and owns and operates the parking facility. The initial fair value of this investment is $56.5 million. The Company does not have any ownership interest

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Table of Contents


in the retail and office components.

Waterton Tenside – This venture was formed to develop and operate a 336 unit apartment property located in Atlanta, Georgia. The Company has a 20% equity interest with an initial basis of $5.1 million. The partner is the managing member and developed the project. The project is encumbered by a non-recourse mortgage loan that has a current outstanding balance of $30.0 million, bears interest at 3.66% and matures December 1, 2018. The Company does not have substantive kick-out or participating rights. As a result, the entity is unconsolidated and recorded using the equity method of accounting.

On February 27, 2013, in connection with the Archstone Acquisition, subsidiaries of the Company and AVB entered into three limited liability company agreements (collectively, the “Residual JV”). The Residual JV owns certain non-core Archstone assets, such as interests in a four property portfolio of apartment buildings and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters. The Residual JV is owned 60% by the Company and 40% by AVB and the Company's initial investment was $147.6 million. The Residual JV is managed by a Management Committee consisting of two members from each of the Company and AVB. Both partners have equal participation in the Management Committee and all significant participating rights are shared by both partners. As a result, the Residual JV is unconsolidated and recorded using the equity method of accounting.

During the year ended December 31, 2014, the Company closed on the sale of its unconsolidated interest in the German portfolio fund, the German management company and the remaining wholly-owned German real estate assets. With these sales, all German real estate assets that were acquired by the Residual JV as part of the Archstone Acquisition have now been sold. The Company's pro rata share of the proceeds/distributions that have been repatriated to the Residual JV and received by the Company as a result of the German dispositions was approximately $79.6 million during the year ended December 31, 2014 and $98.5 million cumulatively since the closing of the Archstone Acquisition.

On February 27, 2013, in connection with the Archstone Acquisition, a subsidiary of the Company and AVB entered into a limited liability company agreement (the “Legacy JV”), through which they assumed obligations of Archstone in the form of preferred interests, some of which are governed by tax protection arrangements. During the year ended December 31, 2013, the Company purchased with AVB $65.0 million (of which the Company's 60% share was $39.0 million) of the preferred interests assumed by the Legacy JV. At December 31, 2014, the remaining preferred interests have an aggregate liquidation value of $74.6 million, our share of which is included in other liabilities in the accompanying consolidated balance sheets. Obligations of the Legacy JV are borne 60% by the Company and 40% by AVB. The Legacy JV is managed by a Management Committee consisting of two members from each of the Company and AVB. Both partners have equal participation in the Management Committee and all significant participating rights are shared by both partners. As a result, the Legacy JV is unconsolidated and recorded using the equity method of accounting.

Other

In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The Company is the managing member and Toll Brothers does not have substantive kick-out or participating rights. Until the core and shell of the building is complete, the building and land will be owned jointly and are required to be consolidated on the Company's balance sheet. Thereafter, the Company will solely own and control the rental portion of the building (floors 2-22) and Toll Brothers will solely own and control the for sale portion of the building (floors 23-40). Once the core and shell are complete, the Toll Brothers' portion of the property will be deconsolidated from the Company's balance sheet. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. As of December 31, 2014, the Company's and Toll Brothers' consolidated contributions to the joint venture were approximately $336.9 million, of which Toll Brothers' noncontrolling interest balance totaled $117.4 million.

The Company admitted an 80% institutional partner to two separate entities/transactions (Nexus Sawgrass in December 2010 and Domain in August 2011), each owning a developable land parcel, in exchange for $40.1 million in cash and retained a 20% equity interest in both of these entities. These projects are now unconsolidated. Details of these projects follow:

Nexus Sawgrass – This development project was completed and stabilized during the quarter ended September 30, 2014. Total project costs were approximately $78.6 million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The mortgage loan has a maximum debt commitment of $48.7 million and a current unconsolidated outstanding balance of $48.6 million; the loan bears interest at 5.60% and matures January 1, 2021.
Domain – This development project is substantially complete. Total project costs are expected to be approximately $155.8

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million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The mortgage loan has a maximum debt commitment of $98.6 million and a current unconsolidated outstanding balance of $96.8 million; the loan bears interest at 5.75% and matures January 1, 2022.

While the Company is the managing member of both of the joint ventures, was responsible for constructing both of the projects and has given certain construction cost overrun guarantees, the joint venture partner has significant participating rights and has active involvement in and oversight of the ongoing projects. The Company currently has no further funding obligations related to these projects.

7.
Deposits – Restricted and Escrow Deposits – Mortgage
The following table presents the Company’s restricted deposits as of December 31, 2014 and 2013 (amounts in thousands):

 
 
December 31,
2014
 
December 31,
2013
Earnest money on pending acquisitions
 
$
580

 
$
4,514

Restricted deposits on real estate investments
 
24,701

 
53,771

Resident security and utility deposits
 
46,516

 
44,777

Other
 
506

 
505

Totals
 
$
72,303

 
$
103,567


The following table presents the Company’s escrow deposits as of December 31, 2014 and 2013 (amounts in thousands):
 
 
December 31,
2014
 
December 31,
2013
Real estate taxes and insurance
 
$
2,235

 
$
3,687

Replacement reserves
 
3,431

 
4,229

Mortgage principal reserves/sinking funds
 
41,567

 
33,868

Other
 
852

 
852

Totals
 
$
48,085

 
$
42,636



8.
Debt

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. EQR guarantees the Operating Partnership’s revolving credit facility up to the maximum amount and for the full term of the facility.

Mortgage Notes Payable

As of December 31, 2014, the Company had outstanding mortgage debt of approximately $5.1 billion.

During the year ended December 31, 2014, the Company:

Repaid $100.7 million of mortgage loans; and
Assumed $28.9 million of mortgage debt on one acquired property.

The Company recorded approximately $0.3 million of prepayment penalties during the year ended December 31, 2014 as additional interest expense related to debt extinguishment of mortgages. The Company also recorded $1.9 million of write-offs of net unamortized premiums during the year ended December 31, 2014 as a reduction of interest expense related to debt extinguishment of mortgages.

As of December 31, 2014, the Company had $700.5 million of secured debt subject to third party credit enhancement.

As of December 31, 2014, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through May 1, 2061. At December 31, 2014, the interest rate range on the Company’s mortgage debt was 0.03% to 7.25% . During the year ended December 31, 2014, the weighted average interest rate on the Company’s mortgage debt was 4.21% .



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The historical cost, net of accumulated depreciation, of encumbered properties was $6.9 billion and $7.3 billion at December 31, 2014 and 2013, respectively.

As of December 31, 2013, the Company had outstanding mortgage debt of approximately $5.2 billion.
During the year ended December 31, 2013, the Company:

Assumed as part of the Archstone Transaction $2.2 billion of mortgage debt held in two Fannie Mae loan pools, consisting of $1.2 billion collateralized by 16 properties with an interest rate of 6.256% and a maturity date of November 1, 2017 ("Pool 3") and $963.5 million collateralized by 15 properties with an interest rate of 5.883% and a maturity date of November 1, 2014 ("Pool 4");
Repaid $2.5 billion of mortgage loans, which includes the partial paydown of $825.0 million of Pool 3 mortgage debt and the payoff of $963.5 million of Pool 4 mortgage debt;
Assumed as part of the Archstone Transaction $346.6 million of tax-exempt bonds on four properties with interest rates ranging from SIFMA plus 0.860% to SIFMA plus 1.402% and maturity dates through November 15, 2036;
Assumed as part of the Archstone Transaction $339.0 million of other mortgage debt on three properties with fixed interest rates ranging from 0.100% to 5.240% and maturity dates through May 1, 2061;
Assumed as part of the Archstone Transaction $34.1 million of other mortgage debt on one property with a variable rate of LIBOR plus 1.75% and a maturity date of September 1, 2014;
Recorded $127.9 million of net mark-to-market premiums on the Archstone Transaction mortgage debt described above; and
Obtained $902.9 million of new mortgage loan proceeds, inclusive of an $800.0 million secured loan from a large insurance company which matures on November 10, 2023, is interest only and carries a fixed interest rate of 4.21%.

The Company recorded approximately $222.4 million and $7.4 million of prepayment penalties and write-offs of unamortized deferred financing costs, respectively, during the year ended December 31, 2013 as additional interest expense related to debt extinguishment of mortgages. The Company also recorded $110.5 million of write-offs of net unamortized premiums during the year ended December 31, 2013 as a reduction of interest expense related to debt extinguishment of mortgages.

As of December 31, 2013, the Company had $700.5 million of secured debt subject to third party credit enhancement.

As of December 31, 2013, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through May 1, 2061. At December 31, 2013, the interest rate range on the Company’s mortgage debt was 0.03% to 7.25%. During the year ended December 31, 2013, the weighted average interest rate on the Company’s mortgage debt was 4.23% (excludes $113.6 million of write-offs of unamortized premiums related to debt extinguishment of mortgages).

Notes
The following tables summarize the Company’s unsecured note balances and certain interest rate and maturity date information as of and for the years ended December 31, 2014 and 2013, respectively:
December 31, 2014
 (Amounts in thousands)
 
Net Principal Balance
 
Interest Rate Ranges
 
Weighted Average Interest Rate
 
Maturity Date Ranges
Fixed Rate Public Notes (1)
 
$
4,974,154

 
3.00% - 7.57%
 
5.45%
 
2015 - 2044
Floating Rate Public Notes (1)
 
451,192

 
(1)
 
1.15%
 
2019
Totals
 
$
5,425,346

 
 
 
 
 
 

December 31, 2013
(Amounts in thousands)
 
Net Principal Balance
 
Interest Rate Ranges
 
Weighted Average Interest Rate
 
Maturity Date Ranges
Fixed Rate Public/Private Notes
 
$
4,727,088

 
3.00% - 7.57%
 
5.55%
 
2014 - 2026
Floating Rate Public/Private Notes (2)
 
750,000

 
(2)
 
1.58%
 
2015
Totals
 
$
5,477,088

 
 
 
 
 
 

(1)
Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
(2)
Includes the Company's senior unsecured $750.0 million term loan facility that was to mature on January 11, 2015 and was paid off in the second quarter of 2014. The interest rate on advances under the term loan facility was generally LIBOR plus a spread (1.20%), which was dependent on the credit rating of the Company's long-term debt.

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The Company’s unsecured public debt contains 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 both the years ended December 31, 2014 and 2013.

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 on July 30, 2013 and expires on July 30, 2016. 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).

During the year ended December 31, 2014, the Company:
Repaid $500.0 million of 5.250% unsecured notes at maturity;
Repaid its $750.0 million unsecured term loan facility in conjunction with the note issuances discussed below and wrote-off approximately $0.6 million of unamortized deferred financing costs as additional interest expense;
Issued $450.0 million of five-year 2.375% fixed rate public notes, receiving net proceeds of $449.6 million before underwriting fees and other expenses, at an all-in effective interest rate of 2.52% and swapped the notes to a floating interest rate in conjunction with the issuance (see Note 9 for further discussion); and
Issued $750.0 million of thirty-year 4.50% fixed rate public notes, receiving net proceeds of $744.7 million before underwriting fees, hedge termination costs and other expenses, at an all-in effective interest rate of 4.57% after termination of various forward starting swaps in conjunction with the issuance (see Note 9 for further discussion).

During the year ended December 31, 2013, the Company:
Repaid $400.0 million of 5.200% unsecured notes at maturity;
Issued $500.0 million of ten-year 3.00% fixed rate public notes, receiving net proceeds of $495.6 million before underwriting fees, hedge termination costs and other expenses, at an all-in effective interest rate of 3.998%; and
Entered into a senior unsecured $750.0 million delayed draw term loan facility which was fully drawn on February 27, 2013 in connection with the Archstone Acquisition. The maturity date of January 11, 2015 was subject to a one-year extension option exercisable by the Company. The interest rate on advances under the term loan facility was generally LIBOR plus a spread (1.20%), which was dependent on the credit rating of the Company's long-term debt. This facility was paid off in the second quarter of 2014.
    
In November 2012, the Company obtained a commitment for a senior unsecured bridge loan facility in an aggregate principal amount not to exceed $2.5 billion to finance the acquisition of Archstone and to pay fees and expenses relating to this transaction. The Company incurred fees totaling $10.9 million to structure this facility, of which $8.4 million was written off in 2012 in conjunction with additional capital raising activities which curtailed amounts available on this facility. On January 11, 2013, the Company terminated this $2.5 billion bridge loan facility in connection with the execution of the term loan facility discussed above and the new revolving credit facility discussed below. The Company wrote off approximately $2.5 million of unamortized deferred financing costs during the year ended December 31, 2013 as additional interest expense.

Lines of Credit

On January 11, 2013, the Company replaced its existing $1.75 billion facility with a $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The Company has the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 1.05%) and the Company pays an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt.

In July 2011, the Company replaced its then existing unsecured revolving credit facility with a new $1.25 billion unsecured revolving credit facility maturing on July 13, 2014, subject to a one-year extension option exercisable by the Company. The Company had the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. On January 6, 2012, the Company amended this credit facility to increase available borrowings by an additional $500.0 million to $1.75 billion with all other terms, including the July 13, 2014 maturity date, remaining the same. The interest rate on advances under the credit facility was generally LIBOR

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plus a spread (1.15%) and the Company paid an annual facility fee of 0.2%. Both the spread and the facility fee were dependent on the credit rating of the Company's long-term debt. The facility had replaced the Company's previous $1.425 billion facility which was scheduled to mature in February 2012. The Company wrote-off $0.2 million in unamortized deferred financing costs related to the old facility.

As of December 31, 2014, the amount available on the credit facility was $2.12 billion (net of $43.8 million which was restricted/dedicated to support letters of credit and net of $333.0 million outstanding). During the year ended December 31, 2014, the weighted average interest rate was 0.95%. As of December 31, 2013, the amount available on the credit facility was $2.35 billion (net of $34.9 million which was restricted/dedicated to support letters of credit and net of $115.0 million outstanding). During the year ended December 31, 2013, the weighted average interest rate was 1.26%.

Other

The following table provides a summary of the aggregate payments of principal on all debt for each of the next five years and thereafter (amounts in thousands):
Year
 
Total (1)
2015
 
$
408,420

2016
 
1,192,798

2017
 
1,346,708

2018
 
514,510

2019
 
1,278,469

Thereafter
 
6,135,842

Net Unamortized (Discount)
 
(31,886
)
Total
 
$
10,844,861


(1)
Premiums and discounts are amortized over the life of the debt.

9.
Derivative and Other Fair Value Instruments

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, including its derivative 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 seeks 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 its exposure to foreign exchange rates or manage commodity prices in the daily operations of the business.

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

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

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

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

The Company’s derivative positions are valued using models developed by the respective counterparty as well as models developed internally by the Company that use as their basis readily observable market parameters (such as forward yield curves and credit default swap data). Employee holdings other than Common Shares within the supplemental executive retirement plan

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(the “SERP”) are valued using quoted market prices for identical assets and are included in other assets and other liabilities on the consolidated balance sheets. Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are valued using the quoted market price of Common Shares. The fair values disclosed for mortgage notes payable and unsecured debt (including its line of credit) were calculated using indicative rates provided by lenders of similar loans in the case of mortgage notes payable and the private unsecured debt (including its line of credit) and quoted market prices for each underlying issuance in the case of the public unsecured notes.

The carrying values of the Company’s mortgage notes payable and unsecured debt (including its line of credit) were approximately $5.1 billion and $5.8 billion, respectively, at December 31, 2014. The fair values of the Company’s mortgage notes payable and unsecured debt (including its line of credit) were approximately $5.1 billion (Level 2) and $6.1 billion (Level 2), respectively, at December 31, 2014. The carrying values of the Company’s mortgage notes payable and unsecured debt (including its line of credit) were approximately $5.2 billion and $5.6 billion, respectively, at December 31, 2013. The fair values of the Company’s mortgage notes payable and unsecured debt (including its line of credit) were approximately $5.1 billion (Level 2) and $5.9 billion (Level 2), respectively, at December 31, 2013. The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, lines of credit and derivative instruments), including cash and cash equivalents and other financial instruments, approximate their carrying or contract values.

The following table summarizes the Company’s consolidated derivative instruments at December 31, 2014 (dollar amounts are in thousands):
 
Fair Value
Hedges (1)
Forward
Starting
Swaps (2)
Current Notional Balance
$
450,000

$
400,000

Lowest Possible Notional
$
450,000

$
400,000

Highest Possible Notional
$
450,000

$
400,000

Lowest Interest Rate
2.375
%
2.274
%
Highest Interest Rate
2.375
%
3.191
%
Earliest Maturity Date
2019

2025

Latest Maturity Date
2019

2025


(1)
Fair Value Hedges – Converts outstanding fixed rate unsecured notes ($450.0 million 2.375% notes due July 1, 2019) to a floating interest rate of 90-Day LIBOR plus 0.61%.
(2)
Forward Starting Swaps – Designed to partially fix interest rates in advance of a planned future debt issuance. These swaps have mandatory counterparty terminations in 2016, and are targeted to 2015 issuances.

The following tables provide a summary of the fair value measurements for each major category of assets and liabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at December 31, 2014 and 2013, respectively (amounts in thousands):

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Fair Value Measurements at Reporting Date Using
 
 
 
 
 
 
Quoted Prices in
 
 
 
 
 
 
 
 
 
 
Active Markets for
 
Significant Other
 
Significant
 
 
Balance Sheet
 
 
 
Identical Assets/Liabilities
 
Observable Inputs
 
Unobservable Inputs
Description
 
Location
 
12/31/2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
   Interest Rate Contracts:
 
 
 
 
 
 
 
 
 
Fair Value Hedges
Other Assets
 
$
1,597

 
$

 
$
1,597

 
$

      Forward Starting Swaps
 
Other Assets
 
332

 

 
332

 

Supplemental Executive Retirement Plan
Other Assets
 
104,463

 
104,463

 

 

Total
 
 
 
$
106,392

 
$
104,463

 
$
1,929

 
$

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
   Interest Rate Contracts:
 
 
 
 
 
 
 
 
 
      Forward Starting Swaps
Other Liabilities
 
$
14,104

 
$

 
$
14,104

 
$

Supplemental Executive Retirement Plan
Other Liabilities
 
104,463

 
104,463

 

 

Total
 
 
 
$
118,567

 
$
104,463

 
$
14,104

 
$

 
 
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests –
 
 
 
 
 
 
 
 
 
   Operating Partnership/Redeemable
 
 
 
 
 
 
 
 
 
      Limited Partners
Mezzanine
 
$
500,733

 
$

 
$
500,733

 
$


 
 
 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
 
 
 
Quoted Prices in
 
 
 
 
 
 
 
 
 
 
Active Markets for
 
Significant Other
 
Significant
 
 
Balance Sheet
 
 
 
Identical Assets/Liabilities
 
Observable Inputs
 
Unobservable Inputs
Description
 
Location
 
12/31/2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
 
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
   Interest Rate Contracts:
 
 
 
 
 
 
 
 
 
Forward Starting Swaps
 
Other Assets
 
$
18,710

 
$

 
$
18,710

 
$

Supplemental Executive Retirement Plan
Other Assets
 
83,845

 
83,845

 

 

Total
 
 
 
$
102,555

 
$
83,845

 
$
18,710

 
$

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Supplemental Executive Retirement Plan
Other Liabilities
 
$
83,845

 
$
83,845

 
$

 
$

Total
 
 
 
$
83,845

 
$
83,845

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests –
 
 
 
 
 
 
 
 
 
   Operating Partnership/Redeemable
 
 
 
 
 
 
 
 
 
      Limited Partners
Mezzanine
 
$
363,144

 
$

 
$
363,144

 
$


The following tables provide a summary of the effect of fair value hedges on the Company’s accompanying consolidated statements of operations and comprehensive income for the years ended December 31, 2014, 2013 and 2012, respectively (amounts in thousands):

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December 31, 2014
 
Location of Gain/(Loss) Recognized in Income on Derivative
 
Amount of Gain/(Loss) Recognized in Income on Derivative
 
 
 
Income Statement Location of Hedged Item Gain/(Loss)
 
Amount of Gain/(Loss)Recognized in Income
on Hedged Item
Type of Fair Value Hedge
 
 
 
Hedged Item
 
 
Derivatives designated as hedging instruments:
 
 
 
 

 
 
 
 
 
 

Interest Rate Contracts:
 
 
 
 

 
 
 
 
 
 

Interest Rate Swaps
 
Interest expense
 
$
1,597

 
Fixed rate debt
 
Interest expense
 
$
(1,597
)
Total
 
 
 
$
1,597

 
 
 
 
 
$
(1,597
)

December 31, 2013
 
Location of Gain/(Loss) Recognized in Income on Derivative
 
Amount of Gain/(Loss) Recognized in Income on Derivative
 
 
 
Income Statement Location of Hedged Item Gain/(Loss)
 
Amount of Gain/(Loss)Recognized in Income
on Hedged Item
Type of Fair Value Hedge
 
 
 
Hedged Item
 
 
Derivatives designated as hedging instruments:
 
 
 
 

 
 
 
 
 
 

Interest Rate Contracts:
 
 
 
 

 
 
 
 
 
 

Interest Rate Swaps
 
Interest expense
 
$
(1,523
)
 
Fixed rate debt
 
Interest expense
 
$
1,523

Total
 
 
 
$
(1,523
)
 
 
 
 
 
$
1,523


December 31, 2012
 
Location of Gain/(Loss) Recognized in Income on Derivative
 
Amount of Gain/(Loss) Recognized in Income on Derivative
 
 
 
Income Statement Location of Hedged Item Gain/(Loss)
 
Amount of Gain/(Loss)Recognized in Income
on Hedged Item
Type of Fair Value Hedge
 
 
 
Hedged Item
 
 
Derivatives designated as hedging instruments:
 
 
 
 

 
 
 
 
 
 

Interest Rate Contracts:
 
 
 
 

 
 
 
 
 
 

Interest Rate Swaps
 
Interest expense
 
$
(7,448
)
 
Fixed rate debt
 
Interest expense
 
$
7,448

Total
 
 
 
$
(7,448
)
 
 
 
 
 
$
7,448


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 years ended December 31, 2014, 2013 and 2012, respectively (amounts in thousands):

 
 
Effective Portion
 
Ineffective Portion
December 31, 2014
 
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
 
Location of
Gain/(Loss) Recognized in Income on Derivative
 
Amount of Gain/(Loss)
Reclassified from Accumulated OCI into Income
Type of Cash Flow Hedge
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 

 
 
 
 

 
 
 
 

Interest Rate Contracts:
 
 

 
 
 
 

 
 
 
 

Forward Starting Swaps
 
$
(33,215
)
 
Interest expense
 
$
(16,868
)
 
Interest expense
 
$
91

Total
 
$
(33,215
)
 
 
 
$
(16,868
)
 
 
 
$
91

 
 
Effective Portion
 
Ineffective Portion
December 31, 2013
 
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
 
Location of
Gain/(Loss) Recognized in Income on Derivative
 
Amount of Gain/(Loss)
Reclassified from Accumulated OCI into Income
Type of Cash Flow Hedge
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts:
 
 
 
 
 
 
 
 
 
 
Forward Starting Swaps/Treasury Locks
 
$
18,771

 
Interest expense
 
$
(20,141
)
 
N/A
 
$

Total
 
$
18,771

 
 
 
$
(20,141
)
 
 
 
$



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Effective Portion
 
Ineffective Portion
December 31, 2012
 
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
 
Location of
Gain/(Loss) Recognized in Income on Derivative
 
Amount of Gain/(Loss)
Reclassified from Accumulated OCI into Income
Type of Cash Flow Hedge
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts:
 
 
 
 
 
 
 
 
 
 
Forward Starting Swaps/Treasury Locks
 
$
(11,772
)
 
Interest expense
 
$
(14,678
)
 
N/A
 
$

Total
 
$
(11,772
)
 
 
 
$
(14,678
)
 
 
 
$

As of December 31, 2014 and 2013, there were approximately $172.2 million and $155.8 million in deferred losses, net, included in accumulated other comprehensive (loss), respectively, related to derivative instruments. Based on the estimated fair values of the net derivative instruments at December 31, 2014, the Company may recognize an estimated $22.0 million of accumulated other comprehensive (loss) as additional interest expense during the year ending December 31, 2015.
    
In June 2014, the Company paid a net $2.0 million to settle seven forward starting ten-year swaps in conjunction with the issuance of $750.0 million of thirty-year fixed rate public notes. The ineffective portion of approximately $0.1 million was recorded as a decrease to interest expense and accrued interest of approximately $1.3 million was recorded as an increase to interest expense. The remaining amount of approximately $0.8 million will be deferred as a component of accumulated other comprehensive (loss) and recognized as an increase to interest expense over the first nine years and ten months of the notes.

In April 2013, the Company paid approximately $44.7 million to settle three forward starting swaps in conjunction with the issuance of $500.0 million of ten-year fixed rate public notes. The accrued interest of $0.7 million was recorded as interest expense. The remaining amount of $44.0 million will be deferred as a component of accumulated other comprehensive (loss) and recognized as an increase to interest expense over the approximate term of the notes. 
During the year ended December 31, 2013, the Company sold all of its investment securities, receiving proceeds of approximately $2.8 million, and recorded a $2.1 million realized gain on sale (specific identification) which is included in interest and other income.


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10.
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):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Numerator for net income per share – basic:
 

 
 

 
 

Income (loss) from continuing operations
$
657,101

 
$
(168,174
)
 
$
160,298

Allocation to Noncontrolling Interests – Operating Partnership, net
(24,771
)
 
6,834

 
(6,417
)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties
(2,544
)
 
538

 
(844
)
Preferred distributions
(4,145
)
 
(4,145
)
 
(10,355
)
Premium on redemption of Preferred Shares

 

 
(5,152
)
Income (loss) from continuing operations available to Common Shares, net of
  Noncontrolling Interests
625,641

 
(164,947
)
 
137,530

Discontinued operations, net of Noncontrolling Interests
1,522

 
1,991,415

 
688,682

Numerator for net income per share – basic
$
627,163

 
$
1,826,468

 
$
826,212

Numerator for net income per share – diluted (1):
 
 
 
 
 
Income from continuing operations
$
657,101

 
 
 
$
160,298

Net (income) attributable to Noncontrolling Interests – Partially Owned Properties
(2,544
)
 
 
 
(844
)
Preferred distributions
(4,145
)
 
 
 
(10,355
)
Premium on redemption of Preferred Shares

 
 
 
(5,152
)
Income from continuing operations available to Common Shares
650,412

 
 
 
143,947

Discontinued operations, net
1,582

 
 
 
720,906

Numerator for net income per share – diluted (1)
$
651,994

 
$
1,826,468

 
$
864,853

Denominator for net income per share – basic and diluted (1):
 
 
 
 
 
Denominator for net income per share – basic
361,181

 
354,305

 
302,701

Effect of dilutive securities:
 
 
 
 
 
OP Units
13,718

 
 
 
13,853

Long-term compensation shares/units
2,836

 
 
 
3,212

Denominator for net income per share – diluted (1)
377,735

 
354,305

 
319,766

Net income per share – basic
$
1.74

 
$
5.16

 
$
2.73

Net income per share – diluted
$
1.73

 
$
5.16

 
$
2.70

Net income per share – basic:
 

 
 

 
 

Income (loss) from continuing operations available to Common Shares, net of
  Noncontrolling Interests
$
1.732

 
$
(0.466
)
 
$
0.454

Discontinued operations, net of Noncontrolling Interests
0.004

 
5.621

 
2.275

Net income per share – basic
$
1.736

 
$
5.155

 
$
2.729

Net income per share – diluted (1):
 

 
 

 
 

Income (loss) from continuing operations available to Common Shares
$
1.722

 
$
(0.466
)
 
$
0.450

Discontinued operations, net
0.004

 
5.621

 
2.255

Net income per share – diluted
$
1.726

 
$
5.155

 
$
2.705


(1)
Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a loss from continuing operations for the year ended December 31, 2013.
For additional disclosures regarding the employee share options and restricted shares, see Notes 2 and 12.
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):

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Year Ended December 31,
 
2014
 
2013
 
2012
Numerator for net income per Unit – basic and diluted (1):
 

 
 

 
 

Income (loss) from continuing operations
$
657,101

 
$
(168,174
)
 
$
160,298

Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties
(2,544
)
 
538

 
(844
)
Allocation to Preference Units
(4,145
)
 
(4,145
)
 
(10,355
)
Allocation to premium on redemption of Preference Units

 

 
(5,152
)
Income (loss) from continuing operations available to Units
650,412

 
(171,781
)
 
143,947

Discontinued operations, net
1,582

 
2,073,527

 
720,906

Numerator for net income per Unit – basic and diluted (1)
$
651,994

 
$
1,901,746

 
$
864,853

Denominator for net income per Unit – basic and diluted (1):
 
 
 
 
 
Denominator for net income per Unit – basic
374,899

 
368,038

 
316,554

Effect of dilutive securities:
 
 
 
 
 
Dilution for Units issuable upon assumed exercise/vesting of the Company's
    long-term compensation shares/units
2,836

 


 
3,212

Denominator for net income per Unit – diluted (1)
377,735

 
368,038

 
319,766

Net income per Unit – basic
$
1.74

 
$
5.16

 
$
2.73

Net income per Unit – diluted
$
1.73

 
$
5.16

 
$
2.70

Net income per Unit – basic:
 

 
 

 
 

Income (loss) from continuing operations available to Units
$
1.732

 
$
(0.466
)
 
$
0.454

Discontinued operations, net
0.004

 
5.621

 
2.275

Net income per Unit – basic
$
1.736

 
$
5.155

 
$
2.729

Net income per Unit – diluted (1):
 

 
 

 
 

Income (loss) from continuing operations available to Units
$
1.722

 
$
(0.466
)
 
$
0.450

Discontinued operations, net
0.004

 
5.621

 
2.255

Net income per Unit – diluted
$
1.726

 
$
5.155

 
$
2.705


(1)
Potential Units issuable from the assumed exercise/vesting of the Company's long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per Unit calculation as the Operating Partnership had a loss from continuing operations for the year ended December 31, 2013.
For additional disclosures regarding the employee share options and restricted shares, see Notes 2 and 12.

11.
Discontinued Operations

The Company has presented separately as discontinued operations in all periods the results of operations for all consolidated assets disposed of and all properties held for sale, if any, for properties sold in 2013 and prior years. The amounts included in discontinued operations for the year ended December 31, 2014 represent trailing activity for properties sold in 2013 and prior years. None of the properties sold during the year ended December 31, 2014 met the new criteria for reporting discontinued operations. See Note 2 for further discussion.

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets for properties sold in 2013 and prior years during each of the years ended December 31, 2014, 2013 and 2012 (amounts in thousands).


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Year Ended December 31,
 
2014
 
2013
 
2012
REVENUES
 

 
 

 
 

Rental income
$
1,309

 
$
121,942

 
$
445,832

Total revenues
1,309

 
121,942

 
445,832

 
 
 
 
 
 
EXPENSES (1)
 

 
 

 
 

Property and maintenance
(141
)
 
36,792

 
103,371

Real estate taxes and insurance
267

 
11,903

 
41,208

Property management

 
1

 
211

Depreciation

 
34,380

 
124,323

General and administrative
89

 
85

 
92

Total expenses
215

 
83,161

 
269,205

 
 
 
 
 
 
Discontinued operating income
1,094

 
38,781

 
176,627

 
 
 
 
 
 
Interest and other income
317

 
217

 
156

Other expenses

 
(3
)
 
(170
)
Interest (2):
 

 
 

 
 

Expense incurred, net

 
(1,296
)
 
(3,811
)
Amortization of deferred financing costs

 
(228
)
 
(140
)
Income and other tax (expense) benefit
(8
)
 
(449
)
 
(34
)
 
 
 
 
 
 
Discontinued operations
1,403

 
37,022

 
172,628

Net gain on sales of discontinued operations
179

 
2,036,505

 
548,278

 
 
 
 
 
 
Discontinued operations, net
$
1,582

 
$
2,073,527

 
$
720,906


(1)
Includes expenses paid in the current period for properties sold in prior periods related to the Company’s period of ownership.
(2)
Includes only interest expense specific to secured mortgage notes payable for properties sold.

11.
12.
Share Incentive Plans

Any Common Shares issued pursuant to EQR's incentive equity compensation and employee share purchase plans will result in ERPOP issuing OP Units to EQR on a one-for-one basis with ERPOP receiving the net cash proceeds of such issuances.

On June 16, 2011, the shareholders of EQR approved the Company's 2011 Share Incentive Plan, as amended (the "2011 Plan"). The 2011 Plan reserved 12,980,741 Common Shares for issuance. In conjunction with the approval of the 2011 Plan, no further awards may be granted under the 2002 Share Incentive Plan. The 2011 Plan expires on June 16, 2021. As of December 31, 2014, 8,516,934 shares were available for future issuance.

Pursuant to the 2011 Plan and the 2002 Share Incentive Plan, as restated and amended (collectively the “Share Incentive Plans”), officers, trustees and key employees of the Company may be granted share options to acquire Common Shares (“Options”) including non-qualified share options (“NQSOs”), incentive share options (“ISOs”) and share appreciation rights (“SARs”), or may be granted restricted or non-restricted shares/units (including performance-based awards), subject to conditions and restrictions as described in the Share Incentive Plans. Options, SARs, restricted shares, restricted units and performance shares are sometimes collectively referred to herein as “Awards”.

The Options are generally granted at the fair market value of the Company’s Common Shares at the date of grant, vest in three equal installments over a three-year period, are exercisable upon vesting and expire ten years from the date of grant (see additional valuation discussion in Note 2). The exercise price for all Options under the Share Incentive Plans is equal to the fair market value of the underlying Common Shares at the time the Option is granted. Options exercised result in new Common Shares being issued on the open market. The 2002 Share Incentive Plan, as restated and amended, will terminate at such time as all outstanding Awards have expired or have been exercised/vested. The Board of Trustees may at any time amend or terminate the Share Incentive Plans, but termination will not affect Awards previously granted. Any Options which had vested prior to such a termination would remain exercisable by the holder.


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Restricted shares are generally granted at the fair market value of the Company's Common Shares at the date of grant. Restricted shares that have been awarded through December 31, 2014 generally vest three years from the award date. In addition, the Company’s unvested restricted shareholders have the same voting rights as any other Common Share holder. During the three-year period of restriction, the Company’s unvested restricted shareholders receive quarterly dividend payments on their shares at the same rate and on the same date as any other Common Share holder. As a result, dividends paid on unvested restricted shares are included as a component of retained earnings (included in general partner's capital in the Operating Partnership's financial statements) and have not been considered in reducing net income available to Common Shares/Units in a manner similar to the Company’s preferred share/preference unit dividends for the earnings per share/Unit calculation. If employment is terminated prior to the lapsing of the restriction, the shares are generally canceled.

In December 2008, the Company’s then existing 2002 Share Incentive Plan was amended to allow for the issuance of restricted units (formerly known as long-term incentive plan units) to officers of the Company as an alternative to the Company’s restricted shares. The 2011 Plan also allows for the issuance of restricted units. Restricted units are a class of partnership interests that under certain conditions, including vesting, are convertible by the holder into an equal number of OP Units, which are redeemable by the holder for Common Shares on a one-for-one basis or the cash value of such shares at the option of the Company. In connection with the grant of long-term incentive compensation for services provided during a year, officers of the Company are allowed to choose, on a one-for-one basis, between restricted shares and restricted units. In January 2011 and March 2014, certain holders of restricted shares converted these shares into restricted units. Similar to restricted shares, restricted units are generally granted at the fair market value of the Company's Common Shares at the date of grant and generally vest three years from the award date. In addition, restricted unit holders receive quarterly dividend payments on their restricted units at the same rate and on the same date as any other OP Unit holder. As a result, dividends paid on restricted units are included as a component of Noncontrolling Interests – Operating Partnership/Limited Partners' capital and have not been considered in reducing net income available to Common Shares/Units in a manner similar to the Company’s preferred share/preference unit dividends for the earnings per share/Unit calculation. If employment is terminated prior to vesting, the restricted units are generally canceled. A restricted unit will automatically convert to an OP Unit when the capital account of each restricted unit increases (“books-up”) to a specified target. If the capital target is not attained within ten years following the date of issuance, the restricted unit will automatically be canceled and no compensation will be payable to the holder of such canceled restricted unit.

All Trustees, with the exception of the Company's non-executive Chairman and employee Trustees, are granted options and restricted shares that vest one-year from the grant date that corresponds to the term for which he or she has been elected to serve. The non-executive Chairman's grants vest over the same term or period as all other employees.

The Company's Share Incentive Plans provide for certain benefits upon retirement. For employees hired prior to January 1, 2009, retirement generally means the termination of employment (other than for cause): (i) on or after age 62; or (ii) prior to age 62 after meeting the requirements of the Rule of 70 (described below). For employees hired after January 1, 2009, retirement generally means the termination of employment (other than for cause) after meeting the requirements of the Rule of 70. For Trustees, retirement generally means termination of service on the Board (other than for cause) on or after age 72.

The Rule of 70 is met when an employee’s years of service with the Company (which must be at least 15 years) plus his or her age (which must be at least 55 years) on the date of termination equals or exceeds 70 years. In addition, the employee must give the Company at least 6 months’ advance written notice of his or her intention to retire and sign a release upon termination of employment, releasing the Company from customary claims and agreeing to ongoing non-competition and employee non-solicitation provisions.

Under the Company's definitions of retirement, several of its executive officers, including its Chief Executive Officer, and its non-executive Chairman, are retirement eligible.

For employees hired prior to January 1, 2009 who retire at or after age 62 or for Trustees who retire at or after age 72, such employee’s or Trustee's unvested restricted shares, restricted units and share options would immediately vest, and share options would continue to be exercisable for the balance of the applicable ten-year option period, as is provided under the Share Incentive Plans. For all other employees (those hired after January 1, 2009 and those hired before such date who choose to retire prior to age 62), upon such retirement under the Rule of 70 definition of retirement of employees, such employee’s unvested restricted shares, restricted units and share options would continue to vest per the original vesting schedule (subject to immediate vesting upon the occurrence of a subsequent change in control of the Company or the employee’s death), and options would continue to be exercisable for the balance of the applicable ten-year option period, subject to the employee’s compliance with the non-competition and employee non-solicitation provisions. If an employee violates these provisions after such retirement, all unvested restricted shares, unvested restricted units and unvested and vested share options at the time of the violation would be void, unless otherwise determined by the Compensation Committee of the Board of Trustees.


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The following tables summarize compensation information regarding the restricted shares, restricted units, share options and Employee Share Purchase Plan (“ESPP”) for the three years ended December 31, 2014, 2013 and 2012 (amounts in thousands):

 
Year Ended December 31, 2014
 
Compensation
Expense
 
Compensation
Capitalized
 
Compensation
Equity
 
Dividends
Incurred
Restricted shares
$
9,244

 
$
660

 
$
9,904

 
$
1,012

Restricted units
11,049

 
920

 
11,969

 
1,248

Share options
6,453

 
896

 
7,349

 

ESPP discount
797

 
62

 
859

 

Total
$
27,543

 
$
2,538

 
$
30,081

 
$
2,260


 
Year Ended December 31, 2013
 
Compensation
Expense
 
Compensation
Capitalized
 
Compensation
Equity
 
Dividends
Incurred
Restricted shares
$
12,185

 
$
1,079

 
$
13,264

 
$
967

Restricted units
13,108

 
501

 
13,609

 
520

Share options
9,569

 
945

 
10,514

 

ESPP discount
612

 
20

 
632

 

Total
$
35,474

 
$
2,545

 
$
38,019

 
$
1,487


 
Year Ended December 31, 2012
 
Compensation
Expense
 
Compensation
Capitalized
 
Compensation
Equity
 
Dividends
Incurred
Restricted shares
$
8,014

 
$
922

 
$
8,936

 
$
949

Restricted units
5,004

 
303

 
5,307

 
234

Share options
10,970

 
782

 
11,752

 

ESPP discount
844

 
121

 
965

 

Total
$
24,832

 
$
2,128

 
$
26,960

 
$
1,183

    
Compensation expense is generally recognized for Awards as follows:

Restricted shares, restricted units and share options – Straight-line method over the vesting period of the options or shares regardless of cliff or ratable vesting distinctions.
ESPP discount – Immediately upon the purchase of common shares each quarter.
    
The Company accelerates the recognition of compensation expense for all Awards for those individuals approaching or meeting the retirement age criteria discussed above. The total compensation expense related to Awards not yet vested at December 31, 2014 is $13.5 million (excluding the accelerated expenses for individuals approaching or meeting the retirement age criteria discussed above), which is expected to be recognized over a weighted average term of 1.31 years.

See Note 2 for additional information regarding the Company’s share-based compensation.

The table below summarizes the Award activity of the Share Incentive Plans for the three years ended December 31, 2014, 2013 and 2012:

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Common
Shares Subject
to Options
 
Weighted
Average
Exercise Price
per Option
 
Restricted
Shares
 
Weighted
Average Fair
Value per
Restricted Share
 
Restricted
Units
 
Weighted
Average Fair
Value per
Restricted Unit
Balance at December 31, 2011
8,594,020

 

$36.81

 
697,510

 

$34.17

 
367,620

 

$34.80

Awards granted (1)
1,164,484

 

$60.22

 
140,980

 

$60.20

 
70,235

 

$57.24

Awards exercised/vested (2) (3) (4)
(1,608,425
)
 

$30.87

 
(300,809
)
 

$23.79

 
(152,821
)
 

$21.11

Awards forfeited
(23,795
)
 

$51.55

 
(12,728
)
 

$46.25

 

 

Awards expired
(11,029
)
 

$35.53

 

 

 

 

Balance at December 31, 2012
8,115,255

 

$41.31

 
524,953

 

$46.81

 
285,034

 

$48.41

Awards granted (1)
1,006,444

 

$55.07

 
246,731

 

$55.37

 
281,931

 

$52.73

Awards exercised/vested (2) (3) (4)
(586,017
)
 

$29.34

 
(253,816
)
 

$36.81

 
(93,335
)
 

$32.97

Awards forfeited
(47,819
)
 

$56.16

 
(17,634
)
 

$55.74

 
(2,374
)
 

$56.72

Awards expired
(17,331
)
 

$47.51

 

 

 

 

Balance at December 31, 2013
8,470,532

 

$43.67

 
500,234

 

$55.79

 
471,256

 

$55.67

Awards granted (1)
667,877

 

$56.72

 
176,457

 

$56.56

 
201,507

 

$53.82

Awards exercised/vested (2) (3) (4)
(2,086,380
)
 

$39.34

 
(175,344
)
 

$53.44

 
(60,294
)
 

$53.71

Awards forfeited
(19,022
)
 

$56.32

 
(6,735
)
 

$56.57

 
(667
)
 

$52.08

Awards expired
(2,387
)
 

$55.24

 

 

 

 

Conversion of restricted shares
to restricted units

 

 
(12,146
)
 

 
12,146

 

Balance at December 31, 2014
7,030,620

 

$46.16

 
482,466

 

$56.89

 
623,948

 

$53.38


(1)
The weighted average grant date fair value for Options granted during the years ended December 31, 2014, 2013 and 2012 was $9.21 per share, $7.97 per share and $8.55 per share, respectively.
(2)
The aggregate intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $50.8 million, $16.7 million and $46.7 million, respectively. These values were calculated as the difference between the strike price of the underlying awards and the per share price at which each respective award was exercised.
(3)
The fair value of restricted shares vested during the years ended December 31, 2014, 2013 and 2012 was $10.2 million, $13.9 million  and $18.0 million, respectively.
(4)
The fair value of restricted units vested during the years ended December 31, 2014, 2013 and 2012 was $3.2 million, $5.1 million and $9.1 million, respectively.    
The following table summarizes information regarding options outstanding and exercisable at December 31, 2014:
 
 
Options Outstanding (1)
 
Options Exercisable (2)
Range of Exercise Prices
 
Options
 
Weighted
Average
Remaining
Contractual Life in Years
 
Weighted
Average
Exercise Price
 
Options
 
Weighted
Average
Exercise Price
$18.70 to $24.93
 
988,826

 
4.09
 

$23.07

 
988,826

 

$23.07

$31.17 to $37.39
 
1,091,358

 
3.61
 

$32.61

 
1,091,358

 

$32.61

$37.40 to $43.62
 
702,568

 
2.36
 

$40.12

 
702,568

 

$40.12

$43.63 to $49.86
 
24,628

 
5.83
 

$48.63

 
24,628

 

$48.63

$49.87 to $56.09
 
2,343,836

 
6.21
 

$53.93

 
1,387,110

 

$53.85

$56.10 to $62.32
 
1,879,404

 
7.87
 

$58.72

 
817,294

 

$59.84

$18.70 to $62.32
 
7,030,620

 
5.57
 

$46.16

 
5,011,784

 

$42.18

Vested and expected to vest
as of December 31, 2014
 
6,590,486

 
5.34
 

$45.50

 
 

 
 


(1)
The aggregate intrinsic value of options outstanding that are vested and expected to vest as of December 31, 2014 is $180.5 million.
(2)
The aggregate intrinsic value and weighted average remaining contractual life in years of options exercisable as of December 31, 2014 is $148.7 million and 4.6 years, respectively.
Note: The aggregate intrinsic values in Notes (1) and (2) above were both calculated as the excess, if any, between the Company’s closing share price of $71.84 per share on December 31, 2014 and the strike price of the underlying awards.

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As of December 31, 2013 and 2012, 6,046,489 Options (with a weighted average exercise price of $38.76) and 5,385,907 Options (with a weighted average exercise price of $35.40) were exercisable, respectively.

13.
Employee Plans
The Company established an Employee Share Purchase Plan to provide each employee and trustee the ability to annually acquire up to $100,000 of Common Shares of EQR. In 2003, EQR's shareholders approved an increase in the aggregate number of Common Shares available under the ESPP to 7,000,000 (from 2,000,000). The Company has 3,038,534 Common Shares available for purchase under the ESPP at December 31, 2014. The Common Shares may be purchased quarterly at a price equal to 85% of the lesser of: (a) the closing price for a share on the last day of such quarter; and (b) the greater of: (i) the closing price for a share on the first day of such quarter, and (ii) the average closing price for a share for all the business days in the quarter. The following table summarizes information regarding the Common Shares issued under the ESPP (the net proceeds noted below were contributed to ERPOP in exchange for OP Units):
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(Amounts in thousands except share and per share amounts)
Shares issued
68,807
 
73,468
 
110,054
Issuance price ranges
$45.90 – $55.95
 
$44.26 – $48.17
 
$46.33 – $51.78
Issuance proceeds
$3,392
 
$3,401
 
$5,399

The Company established a defined contribution plan (the “401(k) Plan”) to provide retirement benefits for employees that meet minimum employment criteria. Prior to 2014, the Company matched dollar for dollar up to the first 3% of eligible compensation that a participant contributed to the 401(k) Plan. Beginning January 1, 2014, the Company increased its match to 4% of eligible compensation that a participant contributes to the 401(k) Plan for all employees except those defined as highly compensated employees, whose match remains at 3%. Participants are vested in the Company’s contributions over five years. The Company recognized an expense in the amount of $5.2 million, $4.2 million and $4.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

The Company established a supplemental executive retirement plan (the “SERP”) to provide certain officers and trustees an opportunity to defer a portion of their eligible compensation in order to save for retirement. The SERP is restricted to investments in Common Shares, certain marketable securities that have been specifically approved and cash equivalents. The deferred compensation liability represented in the SERP and the securities issued to fund such deferred compensation liability are consolidated by the Company and carried on the Company’s balance sheet, and the Company’s Common Shares held in the SERP are accounted for as a reduction to paid in capital (included in general partner's capital in the Operating Partnership's financial statements).

14.
Distribution Reinvestment Plan
On November 18, 2011, the Company filed with the SEC a Form S-3 Registration Statement to register 4,850,000 Common Shares pursuant to a Distribution Reinvestment and Share Purchase Plan (the "2011 DRIP"), which included the remaining shares available for issuance under a 2008 registration, which terminated as of such date. The registration statement was automatically declared effective the same day and was to expire at the earlier of the date on which all 4,850,000 shares have been issued or November 18, 2014. On September 30, 2014, the Company filed with the SEC a Form S-3 Registration Statement to register 4,790,000 Common Shares under an amended Distribution Reinvestment Plan (the "2014 DRIP"), which included the remaining shares available for issuance under the 2011 DRIP, which terminated as of such date. The registration was automatically declared effective the same day and will expire when all 4,790,000 shares have been issued. The Company has 4,786,788 Common Shares available for issuance under the 2014 DRIP at December 31, 2014.

The 2014 DRIP provides holders of record and beneficial owners of Common Shares and Preferred Shares with a simple and convenient method of reinvesting cash dividends/distributions in additional Common Shares. Common Shares purchased under the 2014 DRIP may, at the option of EQR, be directly issued by EQR or purchased by EQR's transfer agent in the open market using participants' funds. The net proceeds from any Common Share issuances are contributed to ERPOP in exchange for OP Units.


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15.
Transactions with Related Parties
Pursuant to the terms of the partnership agreement for the Operating Partnership, ERPOP is required to reimburse EQR for all expenses incurred by EQR in excess of income earned by EQR through its indirect 1% ownership of various entities. Amounts paid on behalf of EQR are reflected in the consolidated statements of operations and comprehensive income as general and administrative expenses.

The Company leases its corporate headquarters from an entity controlled by EQR’s Chairman of the Board of Trustees. The lease terminates on January 31, 2022. Amounts incurred for such office space for the years ended December 31, 2014, 2013 and 2012, respectively, were approximately $2.5 million, $1.7 million and $1.3 million. The Company believes these amounts equal market rates for such rental space.

16.
Commitments and Contingencies

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

The Company is party to a housing discrimination lawsuit brought by a non-profit civil rights organization in April 2006 in the U.S. District Court for the District of Maryland. The suit alleges that the Company designed and built approximately 300 of its properties in violation of the accessibility requirements of the Fair Housing Act and Americans With Disabilities Act. The suit seeks actual and punitive damages, injunctive relief (including modification of non-compliant properties), costs and attorneys' fees. The Company believes it has a number of viable defenses, including that a majority of the named properties were completed before the operative dates of the statutes in question and/or were not designed or built by the Company. Accordingly, the Company is defending the suit vigorously. Due to the pendency of the Company's defenses and the uncertainty of many other critical factual and legal issues, it is not possible to determine or predict the outcome of the suit or a possible loss or a range of loss, and no amounts have been accrued at December 31, 2014. While no assurances can be given, the Company does not believe that the suit, if adversely determined, would have a material adverse effect on the Company.

The Company has established a reserve related to various litigation matters associated with its Massachusetts properties and periodically assesses the adequacy of the reserve and makes adjustments as necessary. During the year ended December 31, 2014, the Company recorded additional reserves relating to these matters of approximately $4.0 million, resulting in total reserves of approximately $6.0 million at December 31, 2014. While no assurances can be given, the Company does not believe that the ultimate resolution of these litigation matters, if adversely determined, would have a material adverse effect on the Company.

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

As of December 31, 2014, the Company has 15 consolidated projects (including Prism at Park Avenue South in New York City, which the Company is jointly developing with Toll Brothers as discussed below) totaling 4,917 apartment units in various stages of development with commitments to fund of approximately $1.2 billion and estimated completion dates ranging through September 30, 2017, as well as other completed development projects that are in various stages of lease up or are stabilized. Some of the projects are being developed solely by the Company, while others are being co-developed with various third party development partners. The development venture agreements with these partners are primarily deal-specific, with differing terms regarding profit-sharing, equity contributions, returns on investment, buy-sell agreements and other customary provisions. The Company is the "general" or "managing" partner of the development ventures.

As of December 31, 2014, the Company has one completed unconsolidated development project that is currently in lease up as well as one other completed development project that is stabilized. Both projects were co-developed with the same third party development partner in different ventures. The development venture agreements with this partner are primarily deal-specific regarding profit-sharing, equity contributions, returns on investment, buy-sell agreements and other customary provisions. The Company currently has no further funding obligations related to these projects. While the Company is the managing member of both of the joint ventures, was responsible for constructing both of the projects and has given certain construction cost overrun guarantees, the joint venture partner has significant participating rights and has active involvement in and oversight of the ongoing projects. The buy-sell arrangements contain provisions that provide the right, but not the obligation, for the Company to acquire the partner’s interests or sell its interests at any time following the occurrence of certain pre-defined events (including at stabilization) described in the development venture agreements.
    
    

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In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The Company is the managing member and Toll Brothers does not have substantive kick-out or participating rights. Until the core and shell of the building is complete, the building and land will be owned jointly and are required to be consolidated on the Company's balance sheet. Thereafter, the Company will solely own and control the rental portion of the building (floors 2-22) and Toll Brothers will solely own and control the for sale portion of the building (floors 23-40). Once the core and shell are complete, the Toll Brothers' portion of the property will be deconsolidated from the Company's balance sheet. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. As of December 31, 2014, the Company's and Toll Brothers' consolidated contributions to the joint venture were approximately $336.9 million, of which Toll Brothers' noncontrolling interest balance totaled $117.4 million.

During the years ended December 31, 2014, 2013 and 2012, total operating lease payments expensed for office space, including a portion of real estate taxes, insurance, repairs and utilities, and including rent due under 13 ground leases, aggregated $14.7 million, $13.2 million and $8.1 million, respectively.

The Company has entered into a retirement benefits agreement with its Chairman of the Board of Trustees and deferred compensation agreements with its Vice Chairman and two former chief executive officers (one of which was fully paid out in January 2013). During the years ended December 31, 2014, 2013 and 2012, the Company recognized compensation expense of $0.5 million, $0.5 million and $1.0 million, respectively, related to these agreements.

The following table summarizes the Company’s contractual obligations for minimum rent payments under operating leases and deferred compensation for the next five years and thereafter as of December 31, 2014:
(Payments)/Receipts Due by Year (in thousands)
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Operating Leases:
 
 

 
 

 
 

 
 

 
 
 
 

 
 

Minimum Rent Payments (a)
 
$
(15,268
)
 
$
(15,385
)
 
$
(15,318
)
 
$
(15,298
)
 
$
(15,224
)
 
$
(860,071
)
 
$
(936,564
)
Minimum Rent Receipts (b)
 
65,087

 
58,860

 
53,448

 
43,987

 
37,545

 
192,455

 
451,382

Other Long-Term Liabilities:
 
 

 
 

 
 

 
 

 
 
 
 

 
 

Deferred Compensation (c)
 
(1,382
)
 
(1,714
)
 
(1,714
)
 
(1,714
)
 
(1,120
)
 
(5,149
)
 
(12,793
)

(a)
Minimum basic rent due for various office space the Company leases and fixed base rent due on ground leases for 14 properties/parcels.
(b)
Minimum basic rent receipts due for various retail/commercial space where the Company is the lessor.
(c)
Estimated payments to the Company's Chairman, Vice Chairman and one former CEO based on actual and planned retirement dates.

17.
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. The Company’s operating segments located in its core markets represent its reportable segments (with the aggregation of Los Angeles, Orange County and San Diego into the Southern California reportable segment). The Company's operating segments located in its non-core markets that are not material have also been aggregated in the tables presented below.

The Company’s fee and asset management and development (including its partially owned properties) 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 three years ended December 31, 2014, 2013 or 2012.

    

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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; 2) real estate taxes and insurance expense; and 3) property management 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 communities. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. The following tables present NOI for each segment from our rental real estate specific to continuing operations for the years ended December 31, 2014, 2013 and 2012, respectively, as well as total assets and capital expenditures at December 31, 2014 and 2013, respectively (amounts in thousands):
 
 
Year Ended December 31, 2014
 
Year Ended December 31, 2013
 
Year Ended December 31, 2012
 
 
Rental Income
 
Operating Expenses
 
NOI
 
Rental Income
 
Operating Expenses
 
NOI
 
Rental Income
 
Operating Expenses
 
NOI
Same store (1)
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

  Boston
 
$
253,032

 
$
80,680

 
$
172,352

 
$
244,370

 
$
78,249

 
$
166,121

 
$
168,063

 
$
54,888

 
$
113,175

  Denver
 
111,190

 
30,812

 
80,378

 
103,124

 
30,567

 
72,557

 
93,571

 
28,204

 
65,367

  New York
 
455,598

 
171,336

 
284,262

 
438,366

 
165,329

 
273,037

 
274,683

 
109,667

 
165,016

  San Francisco
 
340,251

 
106,424

 
233,827

 
312,345

 
108,218

 
204,127

 
159,535

 
57,373

 
102,162

  Seattle
 
156,714

 
51,293

 
105,421

 
146,109

 
49,169

 
96,940

 
122,267

 
41,041

 
81,226

  South Florida
 
191,729

 
70,296

 
121,433

 
182,620

 
69,475

 
113,145

 
177,675

 
67,811

 
109,864

  Southern California
 
420,565

 
138,605

 
281,960

 
401,516

 
137,667

 
263,849

 
320,749

 
103,925

 
216,824

  Washington DC
 
446,122

 
143,800

 
302,322

 
448,520

 
140,708

 
307,812

 
247,880

 
75,580

 
172,300

  Non-core
 
100,732

 
37,451

 
63,281

 
97,380

 
36,483

 
60,897

 
128,816

 
48,548

 
80,268

Total same store
 
2,475,933

 
830,697

 
1,645,236

 
2,374,350

 
815,865

 
1,558,485

 
1,693,239

 
587,037

 
1,106,202

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-same store/other (2) (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Boston
 
3,635

 
848

 
2,787

 
2,728

 
651

 
2,077

 

 

 

  Denver
 

 

 

 

 

 

 
1,325

 
429

 
896

  New York
 

 

 

 

 

 

 
14,611

 
5,988

 
8,623

  San Francisco
 

 

 

 

 

 

 
7,268

 
3,022

 
4,246

  Seattle
 
13,507

 
4,421

 
9,086

 
4,387

 
1,336

 
3,051

 
4,747

 
1,510

 
3,237

  South Florida
 
5,475

 
2,743

 
2,732

 
390

 
810

 
(420
)
 

 

 

  Southern California
 
43,118

 
17,755

 
25,363

 
15,016

 
6,846

 
8,170

 
3,040

 
1,179

 
1,861

  Washington DC
 
24,193

 
7,936

 
16,257

 
13,562

 
4,086

 
9,476

 
13,124

 
3,984

 
9,140

  Other (3)
 
39,450

 
13,735

 
25,715

 
59,994

 
34,903

 
25,091

 
575

 
17,695

 
(17,120
)
Total non-same store/
other
129,378

 
47,438

 
81,940

 
96,077

 
48,632

 
47,445

 
44,690

 
33,807

 
10,883

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Archstone pre-
ownership (4)
 

 

 

 
(92,423
)
 
(36,729
)
 
(55,694
)
 

 

 

Total
 
$
2,605,311

 
$
878,135

 
$
1,727,176

 
$
2,378,004

 
$
827,768

 
$
1,550,236

 
$
1,737,929

 
$
620,844

 
$
1,117,085


(1)
For the years ended December 31, 2014 and 2013, same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2013, less properties subsequently sold, which represented 97,911 apartment units. Also includes 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company. For the year ended December 31, 2012, same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2012, less properties subsequently sold, which represented 80,247 apartment units.
(2)
For the years ended December 31, 2014 and 2013, non-same store primarily includes properties acquired after January 1, 2013, plus any properties in lease-up and not stabilized as of January 1, 2013, but excludes 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company. For the year December 31, 2012, non-same store primarily includes properties acquired after January 1, 2012, plus any properties in lease-up and not stabilized as of January 1, 2012.
(3)
Other includes development, other corporate operations and operations prior to sale for properties sold in 2014 that do not meet the new discontinued operations criteria.
(4)
Represents pro forma Archstone pre-ownership results for the period January 1, 2013 to February 27, 2013 that is included in 2013 same store results.


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Year Ended December 31, 2014
 
Year Ended December 31, 2013
 
 
Total Assets
 
Capital Expenditures
 
Total Assets
 
Capital Expenditures
Same store (1)
 
 

 
 

 
 

 
 

  Boston
 
$
1,923,540

 
$
19,575

 
$
1,984,745

 
$
17,625

  Denver
 
520,537

 
5,863

 
541,480

 
5,384

  New York
 
4,647,269

 
22,118

 
4,771,001

 
12,006

  San Francisco
 
2,718,174

 
26,995

 
2,793,390

 
21,756

  Seattle
 
1,032,140

 
14,570

 
1,061,118

 
7,940

  South Florida
 
1,135,552

 
14,335

 
1,170,931

 
14,351

  Southern California
 
2,910,934

 
26,975

 
3,010,786

 
19,852

  Washington DC
 
4,223,590

 
42,927

 
4,339,246

 
24,506

  Non-core
 
408,486

 
5,675

 
427,108

 
3,528

Total same store
 
19,520,222

 
179,033

 
20,099,805

 
126,948


 
 
 
 
 
 
 
 
Non-same store/other (2) (3)
 
 
 
 
 
 
 
 
  Boston
 
48,323

 
699

 
49,372

 
102

  Seattle
 
318,488

 
1,115

 
182,745

 
55

  South Florida
 
67,833

 
8

 
68,987

 
1

  Southern California
 
747,438

 
1,780

 
411,302

 
648

  Washington DC
 
301,902

 
2,147

 
301,623

 
439

  Other (3)
 
1,946,408

 
1,175

 
1,720,711

 
7,623

Total non-same store/other
 
3,430,392

 
6,924

 
2,734,740

 
8,868

Total
 
$
22,950,614

 
$
185,957

 
$
22,834,545

 
$
135,816


(1)
Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2013, less properties subsequently sold, which represented 97,911 apartment units. Also includes 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company.
(2)
Non-same store primarily includes properties acquired after January 1, 2013, plus any properties in lease-up and not stabilized as of January 1, 2013, but excludes 18,465 stabilized apartment units acquired in the Archstone Acquisition that are owned and managed by the Company.
(3)
Other includes development, other corporate operations and capital expenditures for properties sold.

Note: Markets/Metro Areas included in the above Southern California and Non-core segments are as follows:
(a) Southern California – Los Angeles, Orange County and San Diego.
(b) Non-core – Inland Empire, CA, New England (excluding Boston), Orlando and Phoenix.

The following table presents a reconciliation of NOI from our rental real estate specific to continuing operations for the years ended December 31, 2014, 2013 and 2012, respectively (amounts in thousands):
    
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Rental income
 
$
2,605,311

 
$
2,378,004

 
$
1,737,929

Property and maintenance expense
 
(473,098
)
 
(449,427
)
 
(332,219
)
Real estate taxes and insurance expense
 
(325,401
)
 
(293,999
)
 
(206,723
)
Property management expense
 
(79,636
)
 
(84,342
)
 
(81,902
)
Total operating expenses
 
(878,135
)
 
(827,768
)
 
(620,844
)
Net operating income
 
$
1,727,176

 
$
1,550,236

 
$
1,117,085



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18.
Subsequent Events/Other
Subsequent Events
Subsequent to December 31, 2014, the Company:
Sold three properties consisting of 550 apartment units for $145.4 million;
Repaid $61.5 million in mortgage loans;
Entered into $50.0 million of forward starting swaps to hedge changes in interest rates related to future secured or unsecured debt issuances; and
Repurchased and retired 196,400 Series K Preferred Shares with a par value of $9.82 million for total cash consideration of approximately $12.7 million, incurring a cash charge of approximately $2.8 million which will be recorded as a premium on the redemption of preferred shares.
On February 2, 2015, the Operating Partnership entered into an unsecured commercial paper note program in the United States. Under the terms of this program, the Operating Partnership may issue, from time to time, unsecured commercial paper notes up to a maximum aggregate outstanding of $500.0 million. 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 Operating Partnership's other unsecured senior indebtedness.
Other
During the years ended December 31, 2014, 2013 and 2012, the Company incurred charges of $0.4 million, $0.3 million and $7.0 million, respectively, related to property acquisition costs, such as survey, title and legal fees, on the acquisition of operating properties (excluding the Archstone Transaction) and $3.6 million, $5.2 million and $9.0 million, respectively, related to the write-off of various pursuit and out-of-pocket costs for terminated acquisition, disposition and development transactions. These costs, totaling $4.0 million, $5.5 million and $16.0 million, respectively, are included in other expenses in the accompanying consolidated statements of operations and comprehensive income. See Note 4 for details on the property acquisition costs related to the Archstone Transaction.

During the year ended December 31, 2014, the Company received $2.8 million for the settlement of various litigation/insurance claims, which are included in interest and other income in the accompanying consolidated statements of operations and comprehensive income.

During the year ended December 31, 2013, the Company sold a technology investment it had previously written off, receiving proceeds of $2.1 million that were recorded as a realized gain on sale and are included in interest and other income in the accompanying consolidated statements of operations and comprehensive income.

During the year ended December 31, 2012, the Company settled a dispute with the owners of a land parcel for $4.2 million, which is included in other expenses in the accompanying consolidated statements of operations and comprehensive income.
    
In June 2012, the Company received $150.0 million in Archstone-related termination fees subject to certain contingencies. Consistent with the resolution of these contingencies, the Company recognized $70.0 million of these fees as interest and other income in July 2012 and recognized the remaining $80.0 million as interest and other income in October 2012.

During the year ended December 31, 2011, the Company disposed of its corporate housing business for a sales price of approximately $4.0 million, of which the Company provided $2.0 million of seller financing to the buyer. At the time of sale, the full amount of the seller financing was reserved against and the related gain was deferred. During the year ended December 31, 2013, the Company collected $1.5 million, which represented its final reimbursement of the $2.0 million of seller financing. During the year ended December 31, 2012, the Company collected $0.3 million on the note receivable. The Company has recognized a cumulative net gain on the sale of approximately $2.9 million.


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19.
Quarterly Financial Data (Unaudited)

Equity Residential
The following unaudited quarterly data has been prepared on the basis of a December 31 year-end. Amounts are in thousands, except for per share amounts.
 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
2014
 
3/31
 
6/30
 
9/30
 
12/31
Total revenues
 
$
633,442

 
$
652,568

 
$
664,078

 
$
664,660

Operating income
 
199,259

 
228,310

 
243,274

 
250,532

Income from continuing operations
 
81,680

 
117,210

 
231,252

 
226,959

Discontinued operations, net
 
1,052

 
510

 
(62
)
 
82

Net income *
 
82,732

 
117,720

 
231,190

 
227,041

Net income available to Common Shares
 
78,099

 
111,654

 
220,707

 
216,703

Earnings per share – basic:
 
 
 
 
 
 
 
 
Net income available to Common Shares
 
$
0.22

 
$
0.31

 
$
0.61

 
$
0.60

Weighted average Common Shares outstanding
 
360,470

 
360,809

 
361,409

 
362,018

Earnings per share – diluted:
 
 
 
 
 
 
 
 
Net income available to Common Shares
 
$
0.22

 
$
0.31

 
$
0.61

 
$
0.59

Weighted average Common Shares outstanding
 
376,384

 
377,118

 
377,954

 
378,886



 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
2013
 
3/31
 
6/30
 
9/30
 
12/31
Total revenues
 
$
504,722

 
$
617,217

 
$
626,629

 
$
639,134

Operating income
 
104,254

 
63,986

 
120,405

 
223,677

(Loss) income from continuing operations
 
(165,339
)
 
(58,511
)
 
(13,465
)
 
69,141

Discontinued operations, net
 
1,226,373

 
395,243

 
405,182

 
46,729

Net income *
 
1,061,034

 
336,732

 
391,717

 
115,870

Net income available to Common Shares
 
1,016,650

 
323,723

 
376,155

 
109,940

Earnings per share – basic:
 
 
 
 
 
 
 
 
Net income available to Common Shares
 
$
3.01

 
$
0.90

 
$
1.05

 
$
0.31

Weighted average Common Shares outstanding
 
337,532

 
359,653

 
359,811

 
359,919

Earnings per share – diluted:
 
 
 
 
 
 
 
 
Net income available to Common Shares
 
$
3.01

 
$
0.90

 
$
1.05

 
$
0.30

Weighted average Common Shares outstanding
 
337,532

 
359,653

 
359,811

 
375,860

* The Company did not have any extraordinary items or cumulative effect of change in accounting principle during the years ended December 31, 2014 and 2013. Therefore, income before extraordinary items and cumulative effect of change in accounting principle is not shown as it was equal to the net income amounts disclosed above.













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ERP Operating Limited Partnership

The following unaudited quarterly data has been prepared on the basis of a December 31 year-end. Amounts are in thousands, except for per Unit amounts.

 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
2014
 
3/31
 
6/30
 
9/30
 
12/31
Total revenues
 
$
633,442

 
$
652,568

 
$
664,078

 
$
664,660

Operating income
 
199,259

 
228,310

 
243,274

 
250,532

Income from continuing operations
 
81,680

 
117,210

 
231,252

 
226,959

Discontinued operations, net
 
1,052

 
510

 
(62
)
 
82

Net income *
 
82,732

 
117,720

 
231,190

 
227,041

Net income available to Units
 
81,192

 
116,096

 
229,445

 
225,261

Earnings per Unit – basic:
 
 

 
 

 
 

 
 

Net income available to Units
 
$
0.22

 
$
0.31

 
$
0.61

 
$
0.60

Weighted average Units outstanding
 
374,201

 
374,551

 
375,116

 
375,711

Earnings per Unit – diluted:
 
 

 
 
 
 

 
 

Net income available to Units
 
$
0.22

 
$
0.31

 
$
0.61

 
$
0.59

Weighted average Units outstanding
 
376,384

 
377,118

 
377,954

 
378,886



 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
2013
 
3/31
 
6/30
 
9/30
 
12/31
Total revenues
 
$
504,722

 
$
617,217

 
$
626,629

 
$
639,134

Operating income
 
104,254

 
63,986

 
120,405

 
223,677

(Loss) income from continuing operations
 
(165,339
)
 
(58,511
)
 
(13,465
)
 
69,141

Discontinued operations, net
 
1,226,373

 
395,243

 
405,182

 
46,729

Net income *
 
1,061,034

 
336,732

 
391,717

 
115,870

Net income available to Units
 
1,059,973

 
336,511

 
390,991

 
114,271

Earnings per Unit – basic:
 
 

 
 

 
 

 
 

Net income available to Units
 
$
3.01

 
$
0.90

 
$
1.05

 
$
0.31

Weighted average Units outstanding
 
351,255

 
373,403

 
373,547

 
373,643

Earnings per Unit – diluted:
 
 

 
 

 
 

 
 

Net income available to Units
 
$
3.01

 
$
0.90

 
$
1.05

 
$
0.30

Weighted average Units outstanding
 
351,255

 
373,403

 
373,547

 
375,860

* The Operating Partnership did not have any extraordinary items or cumulative effect of change in accounting principle during the years ended December 31, 2014 and 2013. Therefore, income before extraordinary items and cumulative effect of change in accounting principle is not shown as it was equal to the net income amounts disclosed above.


F-66

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
Overall Summary
December 31, 2014
 
Properties (H)
 
Units (H)
 
Investment in Real Estate, Gross
 
Accumulated
Depreciation
 
Investment in Real Estate, Net
 
Encumbrances (1)
Wholly Owned Unencumbered
263

 
69,217

 
$
18,538,492,146

 
$
(3,650,524,741
)
 
$
14,887,967,405

 
$

Wholly Owned Encumbered
104

 
29,923

 
8,113,776,123

 
(1,587,799,207
)
 
6,525,976,916

 
4,726,035,749

Wholly Owned Properties
367

 
99,140

 
26,652,268,269

 
(5,238,323,948
)
 
21,413,944,321

 
4,726,035,749

 
 
 
 
 
 
 
 
 
 
 
 
Partially Owned Unencumbered
8

 
1,505

 
575,092,221

 
(77,534,358
)
 
497,557,863

 

Partially Owned Encumbered
11

 
2,266

 
448,022,434

 
(116,947,029
)
 
331,075,405

 
360,479,262

Partially Owned Properties
19

 
3,771

 
1,023,114,655

 
(194,481,387
)
 
828,633,268

 
360,479,262

 
 
 
 
 
 
 
 
 
 
 
 
Total Unencumbered Properties
271

 
70,722

 
19,113,584,367

 
(3,728,059,099
)
 
15,385,525,268

 

Total Encumbered Properties
115

 
32,189

 
8,561,798,557

 
(1,704,746,236
)
 
6,857,052,321

 
5,086,515,011

Total Consolidated Investment in Real Estate
386

 
102,911

 
$
27,675,382,924

 
$
(5,432,805,335
)
 
$
22,242,577,589

 
$
5,086,515,011


(1)
See attached Encumbrances Reconciliation.























S-1

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
Encumbrances Reconciliation
December 31, 2014
Portfolio/Entity Encumbrances
 
Number of
Properties Encumbered by
 
See Properties With Note:
 
Partially Owned Encumbrances
 
Wholly Owned Encumbrances
 
Total Amount
EQR-Fanwell 2007 LP
 
5
 
I
 
$

 
$
300,000,000

 
$
300,000,000

EQR-Wellfan 2008 LP (R)
 
12
 
J
 

 
550,000,000

 
550,000,000

ASN-Fannie Mae 3
 
5
 
K
 
24,840,581

 
449,338,962

 
474,179,543

Archstone Master Property Holdings LLC
 
13
 
L
 

 
800,000,000

 
800,000,000

Portfolio/Entity Encumbrances
 
35
 
 
 
24,840,581

 
2,099,338,962

 
2,124,179,543

Individual Property Encumbrances
 
 
 
 
 
335,638,681

 
2,626,696,787

 
2,962,335,468

Total Encumbrances per Financial Statements
 
 
 
 
 
$
360,479,262

 
$
4,726,035,749

 
$
5,086,515,011




























S-2

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III – Real Estate and Accumulated Depreciation
(Amounts in thousands)
The changes in total real estate for the years ended December 31, 2014, 2013 and 2012 are as follows:
 
2014
 
2013
 
2012
Balance, beginning of year
$
26,800,948

 
$
21,008,429

 
$
20,407,946

Acquisitions and development
1,121,423

 
9,273,492

 
1,250,633

Improvements
191,243

 
139,950

 
161,460

Dispositions and other
(438,231
)
 
(3,620,923
)
 
(811,610
)
Balance, end of year
$
27,675,383

 
$
26,800,948

 
$
21,008,429


The changes in accumulated depreciation for the years ended December 31, 2014, 2013 and 2012 are as follows:
 
2014
 
2013
 
2012
Balance, beginning of year
$
4,807,709

 
$
4,912,221

 
$
4,539,583

Depreciation
758,861

 
1,013,353

 
684,992

Dispositions and other
(133,765
)
 
(1,117,865
)
 
(312,354
)
Balance, end of year
$
5,432,805

 
$
4,807,709

 
$
4,912,221




S-3

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Wholly Owned Unencumbered:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 K Street
Washington, D.C.
 
 
(F)
 

 
$
15,600,000

 
$
1,949,701

 
$

 
$
15,600,000

 
$
1,949,701

 
$
17,549,701

 
$

 
$
17,549,701

 
$

1111 Belle Pre (fka The Madison)
Alexandria, VA
 
Y
 
2014
 
360

 
18,937,702

 
92,495,595

 
17,838

 
18,937,702

 
92,513,433

 
111,451,135

 
(3,422,538
)
 
108,028,597

 

1210 Mass
Washington, D.C.
 
Y
 
2004
 
144

 
9,213,512

 
36,559,189

 
610,534

 
9,213,512

 
37,169,723

 
46,383,235

 
(12,689,430
)
 
33,693,805

 

1401 E. Madison
Seattle, WA
 
 
(F)
 

 
10,322,187

 
1,019,404

 

 
10,322,187

 
1,019,404

 
11,341,591

 

 
11,341,591

 

1500 Mass Ave
Washington, D.C.
 
Y
 
1951
 
556

 
54,638,298

 
40,361,702

 
13,296,439

 
54,638,298

 
53,658,141

 
108,296,439

 
(14,670,887
)
 
93,625,552

 

170 Amsterdam
New York, NY
 
Y
 
(F)
 

 

 
97,371,663

 

 

 
97,371,663

 
97,371,663

 

 
97,371,663

 

175 Kent
Brooklyn, NY
 
Y
 
2011
 
113

 
22,037,831

 
53,962,169

 
1,072,648

 
22,037,831

 
55,034,817

 
77,072,648

 
(8,337,345
)
 
68,735,303

 

180 Montague (fka Brooklyn Heights)
Brooklyn, NY
 
Y
 
2000
 
193

 
32,400,000

 
92,675,228

 
946,790

 
32,400,000

 
93,622,018

 
126,022,018

 
(10,067,159
)
 
115,954,859

 

1800 Oak (fka Rosslyn)
Arlington, VA
 
Y
 
2003
 
314

 
31,400,000

 
109,005,734

 
1,424,829

 
31,400,000

 
110,430,563

 
141,830,563

 
(11,550,245
)
 
130,280,318

 

200 N Lemon Street
Anaheim, CA
 
 
(F)
 

 
5,865,235

 
2,802,003

 

 
5,865,235

 
2,802,003

 
8,667,238

 

 
8,667,238

 

204-206 Pine Street/1610 2nd Avenue
Seattle, WA
 
 
(F)
 

 
22,106,465

 
18,015,203

 

 
22,106,465

 
18,015,203

 
40,121,668

 

 
40,121,668

 

2201 Pershing Drive
Arlington, VA
 
Y
 
2012
 
188

 
11,321,198

 
49,316,482

 
2,018,023

 
11,321,198

 
51,334,505

 
62,655,703

 
(4,704,104
)
 
57,951,599

 

2201 Wilson
Arlington, VA
 
Y
 
2000
 
219

 
21,900,000

 
78,724,663

 
1,155,814

 
21,900,000

 
79,880,477

 
101,780,477

 
(8,243,035
)
 
93,537,442

 

2400 M St
Washington, D.C.
 
Y
 
2006
 
359

 
30,006,593

 
114,013,785

 
3,170,237

 
30,006,593

 
117,184,022

 
147,190,615

 
(37,361,925
)
 
109,828,690

 

340 Fremont (fka Rincon Hill)
San Francisco, CA
 
 
(F)
 

 
42,000,000

 
64,972,143

 

 
42,000,000

 
64,972,143

 
106,972,143

 

 
106,972,143

 

420 East 80th Street
New York, NY
 
 
1961
 
155

 
39,277,000

 
23,026,984

 
3,746,938

 
39,277,000

 
26,773,922

 
66,050,922

 
(10,547,486
)
 
55,503,436

 

425 Mass
Washington, D.C.
 
Y
 
2009
 
559

 
28,150,000

 
138,600,000

 
3,341,423

 
28,150,000

 
141,941,423

 
170,091,423

 
(29,744,846
)
 
140,346,577

 

443 - 459 Eye Street
Washington, D.C.
 
 
(F)
 

 
12,671,446

 
7,660,628

 

 
12,671,446

 
7,660,628

 
20,332,074

 

 
20,332,074

 

4885 Edgemoor Lane
Bethesda, MD
 
 
(F)
 

 

 
520,879

 

 

 
520,879

 
520,879

 

 
520,879

 

4th and Hill
Los Angeles, CA
 
 
(F)
 

 
13,131,456

 
1,242,358

 

 
13,131,456

 
1,242,358

 
14,373,814

 

 
14,373,814

 

600 Washington
New York, NY
 
Y
 
2004
 
135

 
32,852,000

 
43,140,551

 
394,984

 
32,852,000

 
43,535,535

 
76,387,535

 
(15,049,427
)
 
61,338,108

 

660 Washington (fka Boston Common)
Boston, MA
 
Y
 
2006
 
420

 
106,100,000

 
166,311,679

 
785,303

 
106,100,000

 
167,096,982

 
273,196,982

 
(18,440,877
)
 
254,756,105

 

70 Greene
Jersey City, NJ
 
Y
 
2010
 
480

 
28,108,899

 
236,941,402

 
648,362

 
28,108,899

 
237,589,764

 
265,698,663

 
(41,945,093
)
 
223,753,570

 

71 Broadway
New York, NY
 
Y
 
1997
 
238

 
22,611,600

 
77,492,171

 
11,705,700

 
22,611,600

 
89,197,871

 
111,809,471

 
(32,081,951
)
 
79,727,520

 

77 Bluxome
San Francisco, CA
 
 
2007
 
102

 
5,249,124

 
18,609,876

 
91,584

 
5,249,124

 
18,701,460

 
23,950,584

 
(2,715,377
)
 
21,235,207

 

777 Sixth
New York, NY
 
Y
 
2002
 
294

 
65,352,706

 
65,747,294

 
1,569,464

 
65,352,706

 
67,316,758

 
132,669,464

 
(19,832,874
)
 
112,836,590

 

801 Brannan
San Francisco, CA
 
 
(F)
 

 
42,367,171

 
10,605,097

 

 
42,367,171

 
10,605,097

 
52,972,268

 

 
52,972,268

 

88 Hillside
Daly City, CA
 
Y
 
2011
 
95

 
7,786,800

 
31,587,325

 
1,440,789

 
7,786,800

 
33,028,114

 
40,814,914

 
(4,524,720
)
 
36,290,194

 

Abington Glen
Abington, MA
 
 
1968
 
90

 
553,105

 
3,697,396

 
2,640,482

 
553,105

 
6,337,878

 
6,890,983

 
(4,166,796
)
 
2,724,187

 

Agoura Hills
Agoura Hills, CA
 
 
1985
 
178

 
16,700,000

 
30,103,716

 
199,116

 
16,700,000

 
30,302,832

 
47,002,832

 
(4,124,770
)
 
42,878,062

 

Alban Towers
Washington, D.C.
 
 
1934
 
229

 
18,900,000

 
89,794,201

 
209,270

 
18,900,000

 
90,003,471

 
108,903,471

 
(9,591,406
)
 
99,312,065

 

Arbor Terrace
Sunnyvale, CA
 
 
1979
 
175

 
9,057,300

 
18,483,642

 
2,555,686

 
9,057,300

 
21,039,328

 
30,096,628

 
(12,373,084
)
 
17,723,544

 

Arboretum (MA)
Canton, MA
 
 
1989
 
156

 
4,685,900

 
10,992,751

 
3,419,397

 
4,685,900

 
14,412,148

 
19,098,048

 
(8,193,657
)
 
10,904,391

 

Artisan on Second
Los Angeles, CA
 
 
2008
 
118

 
8,000,400

 
36,074,600

 
389,768

 
8,000,400

 
36,464,368

 
44,464,768

 
(6,430,450
)
 
38,034,318

 

Artistry Emeryville (fka Emeryville)
Emeryville, CA
 
 
1994
 
261

 
12,300,000

 
61,466,267

 
1,320,923

 
12,300,000

 
62,787,190

 
75,087,190

 
(7,113,391
)
 
67,973,799

 

Ashton, The
Corona Hills, CA
 
 
1986
 
492

 
2,594,264

 
33,042,397

 
6,987,399

 
2,594,264

 
40,029,796

 
42,624,060

 
(24,912,155
)
 
17,711,905

 

Avenue Two
Redwood City, CA
 
 
1972
 
123

 
7,995,000

 
18,005,000

 
1,462,589

 
7,995,000

 
19,467,589

 
27,462,589

 
(3,258,935
)
 
24,203,654

 

Azure (fka Mission Bay-Block 13)
San Francisco, CA
 
 
(F)
 

 
32,855,115

 
113,753,727

 

 
32,855,115

 
113,753,727

 
146,608,842

 

 
146,608,842

 

Ball Park Lofts
Denver, CO
 
Y
 
2003
 
354

 
5,481,556

 
51,658,741

 
4,682,528

 
5,481,556

 
56,341,269

 
61,822,825

 
(21,540,968
)
 
40,281,857

 

Barrington Place
Oviedo, FL
 
 
1998
 
233

 
6,990,000

 
15,740,825

 
3,018,496

 
6,990,000

 
18,759,321

 
25,749,321

 
(9,212,819
)
 
16,536,502

 

Bay Hill
Long Beach, CA
 
 
2002
 
160

 
7,600,000

 
27,437,239

 
963,706

 
7,600,000

 
28,400,945

 
36,000,945

 
(10,977,611
)
 
25,023,334

 

Beatrice, The
New York, NY
 
 
2010
 
302

 
114,351,405

 
165,648,595

 
593,292

 
114,351,405

 
166,241,887

 
280,593,292

 
(23,101,995
)
 
257,491,297

 

Bella Terra
Mukilteo, WA
 
Y
 
2002
 
235

 
5,686,861

 
26,070,540

 
1,142,423

 
5,686,861

 
27,212,963

 
32,899,824

 
(10,954,172
)
 
21,945,652

 

Belle Arts Condominium Homes, LLC
Bellevue, WA
 
 
2000
 
1

 
63,158

 
248,929

 
(5,320
)
 
63,158

 
243,609

 
306,767

 

 
306,767

 

Belle Fontaine
Marina Del Rey, CA
 
 
2003
 
102

 
9,098,808

 
28,701,192

 
236,115

 
9,098,808

 
28,937,307

 
38,036,115

 
(4,398,214
)
 
33,637,901

 

Berkeley Land
Berkeley, CA
 
 
(F)
 

 
13,908,910

 
8,409,958

 

 
13,908,910

 
8,409,958

 
22,318,868

 

 
22,318,868

 

Bradford Apartments
Newington, CT
 
 
1964
 
64

 
401,091

 
2,681,210

 
904,877

 
401,091

 
3,586,087

 
3,987,178

 
(1,902,145
)
 
2,085,033

 


S-4

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Breakwater at Marina Del Rey
Marina Del Rey, CA
 
 
1964/2013
 
224

 

 
73,040,897

 
390,829

 

 
73,431,726

 
73,431,726

 
(8,397,690
)
 
65,034,036

 

Briar Knoll Apts
Vernon, CT
 
 
1986
 
150

 
928,972

 
6,209,988

 
2,440,679

 
928,972

 
8,650,667

 
9,579,639

 
(4,376,105
)
 
5,203,534

 

Briarwood (CA)
Sunnyvale, CA
 
 
1985
 
192

 
9,991,500

 
22,247,278

 
3,407,674

 
9,991,500

 
25,654,952

 
35,646,452

 
(13,931,009
)
 
21,715,443

 

Bridford Lakes II
Greensboro, NC
 
 
(F)
 

 
1,100,564

 
792,508

 

 
1,100,564

 
792,508

 
1,893,072

 

 
1,893,072

 

Brooklyner (fka 111 Lawrence)
Brooklyn, NY
 
Y
 
2010
 
490

 
40,099,922

 
221,438,631

 
785,785

 
40,099,922

 
222,224,416

 
262,324,338

 
(30,934,466
)
 
231,389,872

 

Brookside (CO)
Boulder, CO
 
 
1993
 
144

 
3,600,400

 
10,211,159

 
2,708,411

 
3,600,400

 
12,919,570

 
16,519,970

 
(7,278,630
)
 
9,241,340

 

Cambridge Park
Cambridge, MA
 
Y
 
2002
 
312

 
31,200,000

 
106,048,587

 
1,280,508

 
31,200,000

 
107,329,095

 
138,529,095

 
(11,557,359
)
 
126,971,736

 

Carlyle Mill
Alexandria, VA
 
 
2002
 
317

 
10,000,000

 
51,367,913

 
5,851,009

 
10,000,000

 
57,218,922

 
67,218,922

 
(23,791,982
)
 
43,426,940

 

Cascade
Seattle, WA
 
 
(F)
 

 
23,751,564

 
10,791,356

 

 
23,751,564

 
10,791,356

 
34,542,920

 

 
34,542,920

 

Centennial (fka Centennial Court & Centennial Tower)
Seattle, WA
 
Y
 
1991/2001
 
408

 
9,700,000

 
70,080,378

 
6,937,805

 
9,700,000

 
77,018,183

 
86,718,183

 
(27,564,879
)
 
59,153,304

 

Centre Club
Ontario, CA
 
 
1994
 
312

 
5,616,000

 
23,485,891

 
3,450,905

 
5,616,000

 
26,936,796

 
32,552,796

 
(13,897,951
)
 
18,654,845

 

Centre Club II
Ontario, CA
 
 
2002
 
100

 
1,820,000

 
9,528,898

 
819,747

 
1,820,000

 
10,348,645

 
12,168,645

 
(4,700,524
)
 
7,468,121

 

Church Corner
Cambridge, MA
 
Y
 
1987
 
85

 
5,220,000

 
16,744,643

 
1,800,805

 
5,220,000

 
18,545,448

 
23,765,448

 
(7,065,181
)
 
16,700,267

 

Cierra Crest
Denver, CO
 
 
1996
 
480

 
4,803,100

 
34,894,898

 
5,414,548

 
4,803,100

 
40,309,446

 
45,112,546

 
(24,419,410
)
 
20,693,136

 

City Gate at Cupertino (fka Cupertino)
Cupertino, CA
 
 
1998
 
311

 
40,400,000

 
95,937,046

 
1,779,973

 
40,400,000

 
97,717,019

 
138,117,019

 
(10,309,105
)
 
127,807,914

 

City Pointe
Fullerton, CA
 
Y
 
2004
 
183

 
6,863,792

 
36,476,208

 
721,681

 
6,863,792

 
37,197,889

 
44,061,681

 
(9,178,639
)
 
34,883,042

 

City Square Bellevue (fka Bellevue)
Bellevue, WA
 
Y
 
1998
 
191

 
15,100,000

 
41,876,257

 
2,050,569

 
15,100,000

 
43,926,826

 
59,026,826

 
(4,422,723
)
 
54,604,103

 

Cleo, The
Los Angeles, CA
 
 
1989
 
92

 
6,615,467

 
14,829,335

 
3,773,750

 
6,615,467

 
18,603,085

 
25,218,552

 
(7,103,987
)
 
18,114,565

 

Coconut Palm Club
Coconut Creek, FL
 
 
1992
 
301

 
3,001,700

 
17,678,928

 
4,041,006

 
3,001,700

 
21,719,934

 
24,721,634

 
(12,873,552
)
 
11,848,082

 

Colorado Pointe
Denver, CO
 
 
2006
 
193

 
5,790,000

 
28,815,607

 
752,433

 
5,790,000

 
29,568,040

 
35,358,040

 
(10,517,365
)
 
24,840,675

 

Copper Canyon
Highlands Ranch, CO
 
 
1999
 
222

 
1,442,212

 
16,251,114

 
1,772,671

 
1,442,212

 
18,023,785

 
19,465,997

 
(9,990,871
)
 
9,475,126

 

Corcoran House at DuPont Circle (fka DuPont Circle)
Washington, D.C.
 
Y
 
1961
 
137

 
13,500,000

 
26,913,113

 
791,502

 
13,500,000

 
27,704,615

 
41,204,615

 
(3,669,329
)
 
37,535,286

 

Courthouse Plaza
Arlington, VA
 
Y
 
1990
 
396

 

 
87,386,024

 
3,025,937

 

 
90,411,961

 
90,411,961

 
(11,097,765
)
 
79,314,196

 

Cove at Boynton Beach I
Boynton Beach, FL
 
 
1996
 
252

 
12,600,000

 
31,469,651

 
4,584,960

 
12,600,000

 
36,054,611

 
48,654,611

 
(15,408,055
)
 
33,246,556

 

Cove at Boynton Beach II
Boynton Beach, FL
 
 
1998
 
296

 
14,800,000

 
37,874,719

 

 
14,800,000

 
37,874,719

 
52,674,719

 
(14,615,674
)
 
38,059,045

 

Creekside (San Mateo)
San Mateo, CA
 
 
1985
 
192

 
9,606,600

 
21,193,232

 
3,609,414

 
9,606,600

 
24,802,646

 
34,409,246

 
(13,787,401
)
 
20,621,845

 

Cronins Landing
Waltham, MA
 
Y
 
1998
 
281

 
32,300,000

 
85,119,324

 
1,108,920

 
32,300,000

 
86,228,244

 
118,528,244

 
(9,629,005
)
 
108,899,239

 

Crystal Place
Arlington, VA
 
 
1986
 
181

 
17,200,000

 
47,918,975

 
822,173

 
17,200,000

 
48,741,148

 
65,941,148

 
(5,368,053
)
 
60,573,095

 

Dartmouth Woods
Lakewood, CO
 
 
1990
 
201

 
1,609,800

 
10,832,754

 
2,497,430

 
1,609,800

 
13,330,184

 
14,939,984

 
(8,473,402
)
 
6,466,582

 

Dean Estates
Taunton, MA
 
 
1984
 
58

 
498,080

 
3,329,560

 
809,096

 
498,080

 
4,138,656

 
4,636,736

 
(2,275,545
)
 
2,361,191

 

Deerwood (Corona)
Corona, CA
 
 
1992
 
316

 
4,742,200

 
20,272,892

 
4,430,978

 
4,742,200

 
24,703,870

 
29,446,070

 
(15,468,543
)
 
13,977,527

 

Eagle Canyon
Chino Hills, CA
 
 
1985
 
252

 
1,808,900

 
16,274,361

 
7,553,015

 
1,808,900

 
23,827,376

 
25,636,276

 
(15,121,257
)
 
10,515,019

 

Edgemont at Bethesda Metro
Bethesda, MD
 
 
1989
 
122

 
13,092,552

 
43,907,448

 
525,086

 
13,092,552

 
44,432,534

 
57,525,086

 
(6,807,362
)
 
50,717,724

 

Elevé
Glendale, CA
 
Y
 
2013
 
208

 
14,080,560

 
56,419,440

 
79,091

 
14,080,560

 
56,498,531

 
70,579,091

 
(2,964,122
)
 
67,614,969

 

Emerson Place
Boston, MA
 
Y
 
1962
 
444

 
14,855,000

 
57,566,636

 
16,797,224

 
14,855,000

 
74,363,860

 
89,218,860

 
(47,115,657
)
 
42,103,203

 

Encinitas Heights (fka Encinitas)
Encinitas, CA
 
Y
 
2002
 
120

 
12,000,000

 
29,207,497

 
211,769

 
12,000,000

 
29,419,266

 
41,419,266

 
(3,528,264
)
 
37,891,002

 

Enclave at Waterways
Deerfield Beach, FL
 
 
1998
 
300

 
15,000,000

 
33,194,576

 
2,023,348

 
15,000,000

 
35,217,924

 
50,217,924

 
(13,576,836
)
 
36,641,088

 

Enclave at Winston Park
Coconut Creek, FL
 
 
1995
 
278

 
5,560,000

 
19,939,324

 
5,124,830

 
5,560,000

 
25,064,154

 
30,624,154

 
(11,489,835
)
 
19,134,319

 

Encore at Sherman Oaks, The
Sherman Oaks, CA
 
 
1988
 
174

 
8,700,000

 
25,446,003

 
985,534

 
8,700,000

 
26,431,537

 
35,131,537

 
(5,201,465
)
 
29,930,072

 

Estates at Tanglewood
Westminster, CO
 
 
2003
 
504

 
7,560,000

 
51,256,538

 
2,870,210

 
7,560,000

 
54,126,748

 
61,686,748

 
(20,000,446
)
 
41,686,302

 

Estates at Wellington Green
Wellington, FL
 
 
2003
 
400

 
20,000,000

 
64,790,850

 
2,415,710

 
20,000,000

 
67,206,560

 
87,206,560

 
(24,828,948
)
 
62,377,612

 

Fountains at Emerald Park (fka Emerald Park)
Dublin, CA
 
 
2000
 
324

 
25,900,000

 
83,986,217

 
329,083

 
25,900,000

 
84,315,300

 
110,215,300

 
(9,418,800
)
 
100,796,500

 

Fox Hill Apartments
Enfield, CT
 
 
1974
 
168

 
1,129,018

 
7,547,256

 
2,038,591

 
1,129,018

 
9,585,847

 
10,714,865

 
(5,061,024
)
 
5,653,841

 

Fremont Center
Fremont, CA
 
Y
 
2002
 
322

 
25,800,000

 
78,753,114

 
1,138,054

 
25,800,000

 
79,891,168

 
105,691,168

 
(8,436,511
)
 
97,254,657

 

Gables Grand Plaza
Coral Gables, FL
 
Y
 
1998
 
195

 

 
44,601,000

 
7,243,495

 

 
51,844,495

 
51,844,495

 
(20,895,735
)
 
30,948,760

 

Gallery, The
Hermosa Beach, CA
 
 
1971
 
169

 
18,144,000

 
46,567,941

 
2,170,023

 
18,144,000

 
48,737,964

 
66,881,964

 
(16,524,852
)
 
50,357,112

 

Gatehouse at Pine Lake
Pembroke Pines, FL
 
 
1990
 
296

 
1,896,600

 
17,070,795

 
7,050,209

 
1,896,600

 
24,121,004

 
26,017,604

 
(14,398,441
)
 
11,619,163

 

Gatehouse on the Green
Plantation, FL
 
 
1990
 
312

 
2,228,200

 
20,056,270

 
8,529,397

 
2,228,200

 
28,585,667

 
30,813,867

 
(17,655,268
)
 
13,158,599

 


S-5

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Gates of Redmond
Redmond, WA
 
 
1979
 
180

 
2,306,100

 
12,064,015

 
5,008,026

 
2,306,100

 
17,072,041

 
19,378,141

 
(10,668,500
)
 
8,709,641

 

Geary Court Yard
San Francisco, CA
 
 
1990
 
164

 
1,722,400

 
15,471,429

 
3,464,405

 
1,722,400

 
18,935,834

 
20,658,234

 
(11,005,136
)
 
9,653,098

 

Glen Meadow
Franklin, MA
 
 
1971
 
288

 
2,339,330

 
16,133,588

 
3,991,967

 
2,339,330

 
20,125,555

 
22,464,885

 
(11,374,011
)
 
11,090,874

 

Governors Green
Bowie, MD
 
 
1999
 
478

 
19,845,000

 
73,335,916

 
1,412,260

 
19,845,000

 
74,748,176

 
94,593,176

 
(23,032,994
)
 
71,560,182

 

Greenfield Village
Rocky Hill , CT
 
 
1965
 
151

 
911,534

 
6,093,418

 
773,225

 
911,534

 
6,866,643

 
7,778,177

 
(3,622,365
)
 
4,155,812

 

Greenwood Park
Centennial, CO
 
 
1994
 
291

 
4,365,000

 
38,372,440

 
2,833,754

 
4,365,000

 
41,206,194

 
45,571,194

 
(13,229,764
)
 
32,341,430

 

Greenwood Plaza
Centennial, CO
 
 
1996
 
266

 
3,990,000

 
35,846,708

 
2,744,839

 
3,990,000

 
38,591,547

 
42,581,547

 
(12,762,175
)
 
29,819,372

 

Hammocks Place
Miami, FL
 
 
1986
 
296

 
319,180

 
12,513,467

 
5,338,503

 
319,180

 
17,851,970

 
18,171,150

 
(12,636,539
)
 
5,534,611

 

Hampshire Place
Los Angeles, CA
 
 
1989
 
259

 
10,806,000

 
30,335,330

 
3,447,199

 
10,806,000

 
33,782,529

 
44,588,529

 
(12,995,633
)
 
31,592,896

 

Harbor Steps
Seattle, WA
 
Y
 
2000
 
758

 
59,387,158

 
158,829,432

 
14,399,390

 
59,387,158

 
173,228,822

 
232,615,980

 
(59,958,870
)
 
172,657,110

 

Heritage at Stone Ridge
Burlington, MA
 
 
2005
 
180

 
10,800,000

 
31,808,335

 
1,240,736

 
10,800,000

 
33,049,071

 
43,849,071

 
(11,857,633
)
 
31,991,438

 

Heritage Ridge
Lynwood, WA
 
 
1999
 
197

 
6,895,000

 
18,983,597

 
885,040

 
6,895,000

 
19,868,637

 
26,763,637

 
(8,025,318
)
 
18,738,319

 

Heron Pointe
Boynton Beach, FL
 
 
1989
 
192

 
1,546,700

 
7,774,676

 
2,523,556

 
1,546,700

 
10,298,232

 
11,844,932

 
(6,663,332
)
 
5,181,600

 

Hesby
North Hollywood, CA
 
 
2013
 
308

 
23,299,892

 
102,700,108

 
53,278

 
23,299,892

 
102,753,386

 
126,053,278

 
(3,116,198
)
 
122,937,080

 

High Meadow
Ellington, CT
 
 
1975
 
100

 
583,679

 
3,901,774

 
1,204,674

 
583,679

 
5,106,448

 
5,690,127

 
(2,657,575
)
 
3,032,552

 

Highland Glen
Westwood, MA
 
 
1979
 
180

 
2,229,095

 
16,828,153

 
2,784,639

 
2,229,095

 
19,612,792

 
21,841,887

 
(10,224,890
)
 
11,616,997

 

Highland Glen II
Westwood, MA
 
 
2007
 
102

 

 
19,875,857

 
168,257

 

 
20,044,114

 
20,044,114

 
(5,731,936
)
 
14,312,178

 

Highlands at Cherry Hill
Cherry Hills, NJ
 
 
2002
 
170

 
6,800,000

 
21,459,108

 
908,619

 
6,800,000

 
22,367,727

 
29,167,727

 
(8,000,482
)
 
21,167,245

 

Highlands at South Plainfield
South Plainfield, NJ
 
 
2000
 
252

 
10,080,000

 
37,526,912

 
1,066,617

 
10,080,000

 
38,593,529

 
48,673,529

 
(13,169,823
)
 
35,503,706

 

Hikari
Los Angeles, CA
 
Y
 
2007
 
128

 
9,435,760

 
32,564,240

 
226,353

 
9,435,760

 
32,790,593

 
42,226,353

 
(5,483,065
)
 
36,743,288

 

Hudson Crossing
New York, NY
 
Y
 
2003
 
259

 
23,420,000

 
69,977,699

 
1,911,448

 
23,420,000

 
71,889,147

 
95,309,147

 
(25,933,022
)
 
69,376,125

 

Hudson Crossing II
New York, NY
 
 
(F)
 

 
10,599,286

 
361,404

 

 
10,599,286

 
361,404

 
10,960,690

 

 
10,960,690

 

Hudson Pointe
Jersey City, NJ
 
 
2003
 
182

 
5,350,000

 
41,114,074

 
2,675,247

 
5,350,000

 
43,789,321

 
49,139,321

 
(16,766,304
)
 
32,373,017

 

Hunt Club II
Charlotte, NC
 
 
(F)
 

 
100,000

 

 

 
100,000

 

 
100,000

 

 
100,000

 

Huntington Park
Everett, WA
 
 
1991
 
381

 
1,597,500

 
14,367,864

 
5,321,606

 
1,597,500

 
19,689,470

 
21,286,970

 
(14,109,888
)
 
7,177,082

 

Jia (fka Chinatown Gateway)
Los Angeles, CA
 
Y
 
2014
 
280

 
14,791,831

 
74,818,783

 
92,185

 
14,791,831

 
74,910,968

 
89,702,799

 
(3,493,876
)
 
86,208,923

 

Junction 47 (fka West Seattle)
Seattle, WA
 
Y
 
(F)
 

 
11,726,305

 
32,787,325

 

 
11,726,305

 
32,787,325

 
44,513,630

 

 
44,513,630

 

Kenwood Mews
Burbank, CA
 
 
1991
 
141

 
14,100,000

 
24,662,883

 
3,139,424

 
14,100,000

 
27,802,307

 
41,902,307

 
(9,416,490
)
 
32,485,817

 

Kings Colony (FL)
Miami, FL
 
 
1986
 
480

 
19,200,000

 
48,379,586

 
5,959,307

 
19,200,000

 
54,338,893

 
73,538,893

 
(20,308,990
)
 
53,229,903

 

Landings at Pembroke Lakes
Pembroke Pines, FL
 
 
1989
 
358

 
17,900,000

 
24,460,989

 
5,417,847

 
17,900,000

 
29,878,836

 
47,778,836

 
(13,049,614
)
 
34,729,222

 

Landings at Port Imperial
W. New York, NJ
 
 
1999
 
276

 
27,246,045

 
37,741,050

 
7,383,017

 
27,246,045

 
45,124,067

 
72,370,112

 
(23,206,569
)
 
49,163,543

 

Legacy at Highlands Ranch
Highlands Ranch, CO
 
 
1999
 
422

 
6,330,000

 
37,557,013

 
2,638,356

 
6,330,000

 
40,195,369

 
46,525,369

 
(15,555,886
)
 
30,969,483

 

Lincoln Heights
Quincy, MA
 
 
1991
 
336

 
5,928,400

 
33,595,262

 
11,650,955

 
5,928,400

 
45,246,217

 
51,174,617

 
(27,775,700
)
 
23,398,917

 

Lofts 590
Arlington, VA
 
 
2005
 
212

 
20,100,000

 
67,909,023

 
103,786

 
20,100,000

 
68,012,809

 
88,112,809

 
(6,942,600
)
 
81,170,209

 

Lofts at Kendall Square (fka Kendall Square)
Cambridge, MA
 
 
1998
 
186

 
23,300,000

 
78,445,657

 
2,018,131

 
23,300,000

 
80,463,788

 
103,763,788

 
(8,212,576
)
 
95,551,212

 

Longacre House
New York, NY
 
Y
 
2000
 
293

 
73,170,045

 
53,962,510

 
1,359,584

 
73,170,045

 
55,322,094

 
128,492,139

 
(17,329,569
)
 
111,162,570

 

Longfellow Place
Boston, MA
 
Y
 
1975
 
710

 
53,164,160

 
186,182,421

 
79,837,257

 
53,164,160

 
266,019,678

 
319,183,838

 
(143,763,840
)
 
175,419,998

 

Mantena
New York, NY
 
Y
 
2012
 
98

 
22,346,513

 
61,501,158

 
261,029

 
22,346,513

 
61,762,187

 
84,108,700

 
(6,972,870
)
 
77,135,830

 

Marina 41 (fka Marina Del Rey)
Marina Del Rey, CA
 
 
1973
 
623

 

 
168,842,442

 
3,512,278

 

 
172,354,720

 
172,354,720

 
(20,885,949
)
 
151,468,771

 

Mariposa at Playa Del Rey (fka Playa Del Rey)
Playa Del Rey, CA
 
 
2004
 
354

 
60,900,000

 
89,311,482

 
2,751,781

 
60,900,000

 
92,063,263

 
152,963,263

 
(10,307,910
)
 
142,655,353

 

Marquessa
Corona Hills, CA
 
 
1992
 
336

 
6,888,500

 
21,604,584

 
3,638,093

 
6,888,500

 
25,242,677

 
32,131,177

 
(15,261,218
)
 
16,869,959

 

Martine, The
Bellevue, WA
 
 
1984
 
67

 
3,200,000

 
9,616,264

 
3,168,293

 
3,200,000

 
12,784,557

 
15,984,557

 
(4,645,681
)
 
11,338,876

 

Milano Lofts
Los Angeles, CA
 
Y
 
1925/2006
 
99

 
8,125,216

 
27,378,784

 
337,583

 
8,125,216

 
27,716,367

 
35,841,583

 
(3,549,329
)
 
32,292,254

 

Millikan
Irvine, CA
 
 
(F)
 

 
11,049,027

 
30,318,032

 

 
11,049,027

 
30,318,032

 
41,367,059

 

 
41,367,059

 

Miramar Lakes
Miramar, FL
 
 
2003
 
344

 
17,200,000

 
51,487,235

 
2,246,702

 
17,200,000

 
53,733,937

 
70,933,937

 
(19,418,255
)
 
51,515,682

 

Mosaic at Largo Station
Hyattsville, MD
 
 
2008
 
242

 
4,120,800

 
42,477,297

 
543,227

 
4,120,800

 
43,020,524

 
47,141,324

 
(11,883,141
)
 
35,258,183

 

Mozaic at Union Station
Los Angeles, CA
 
 
2007
 
272

 
8,500,000

 
52,529,446

 
1,415,603

 
8,500,000

 
53,945,049

 
62,445,049

 
(16,666,145
)
 
45,778,904

 

Murray Hill Tower (fka Murray Hill)
New York, NY
 
Y
 
1974
 
270

 
75,800,000

 
102,705,401

 
2,298,858

 
75,800,000

 
105,004,259

 
180,804,259

 
(14,081,429
)
 
166,722,830

 



S-6

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Northglen
Valencia, CA
 
 
1988
 
234

 
9,360,000

 
20,778,553

 
2,130,660

 
9,360,000

 
22,909,213

 
32,269,213

 
(11,564,178
)
 
20,705,035

 

Northlake (MD)
Germantown, MD
 
 
1985
 
304

 
15,000,000

 
23,142,302

 
10,324,900

 
15,000,000

 
33,467,202

 
48,467,202

 
(16,634,313
)
 
31,832,889

 

Northridge
Pleasant Hill, CA
 
 
1974
 
221

 
5,527,800

 
14,691,705

 
10,017,139

 
5,527,800

 
24,708,844

 
30,236,644

 
(14,954,766
)
 
15,281,878

 

Oak Mill I
Germantown, MD
 
 
1984
 
208

 
10,000,000

 
13,155,522

 
7,666,964

 
10,000,000

 
20,822,486

 
30,822,486

 
(10,690,161
)
 
20,132,325

 

Oak Park North
Agoura Hills, CA
 
 
1990
 
220

 
1,706,900

 
15,362,666

 
4,313,705

 
1,706,900

 
19,676,371

 
21,383,271

 
(12,773,791
)
 
8,609,480

 

Oak Park South
Agoura Hills, CA
 
 
1989
 
224

 
1,683,800

 
15,154,608

 
4,367,145

 
1,683,800

 
19,521,753

 
21,205,553

 
(12,723,696
)
 
8,481,857

 

Oaks at Falls Church
Falls Church, VA
 
 
1966
 
176

 
20,240,000

 
20,152,616

 
3,918,112

 
20,240,000

 
24,070,728

 
44,310,728

 
(9,576,777
)
 
34,733,951

 

Oakwood Boston
Boston, MA
 
Y
 
1901
 
94

 
22,200,000

 
28,672,979

 
803,040

 
22,200,000

 
29,476,019

 
51,676,019

 
(3,687,255
)
 
47,988,764

 

Oakwood Crystal City
Arlington, VA
 
 
1987
 
162

 
15,400,000

 
35,474,336

 
320,085

 
15,400,000

 
35,794,421

 
51,194,421

 
(4,189,805
)
 
47,004,616

 

Oakwood Marina Del Rey
Marina Del Rey, CA
 
 
1969
 
597

 

 
120,795,359

 
1,287,912

 

 
122,083,271

 
122,083,271

 
(14,413,937
)
 
107,669,334

 

Oasis at Delray Beach I
Delray Beach, FL
 
 
1999
 
196

 
5,900,000

 
25,150,766

 
793,145

 
5,900,000

 
25,943,911

 
31,843,911

 
(3,587,721
)
 
28,256,190

 

Oasis at Delray Beach II
Delray Beach, FL
 
 
2013
 
128

 
3,840,000

 
18,144,377

 
1,844

 
3,840,000

 
18,146,221

 
21,986,221

 
(1,077,031
)
 
20,909,190

 

Ocean Crest
Solana Beach, CA
 
 
1986
 
146

 
5,111,200

 
11,910,438

 
2,935,597

 
5,111,200

 
14,846,035

 
19,957,235

 
(8,670,106
)
 
11,287,129

 

Olde Redmond Place
Redmond, WA
 
 
1986
 
192

 
4,807,100

 
14,126,038

 
4,477,139

 
4,807,100

 
18,603,177

 
23,410,277

 
(11,824,788
)
 
11,585,489

 

One Henry Adams
San Francisco, CA
 
 
(F)
 

 
30,952,393

 
8,970,233

 

 
30,952,393

 
8,970,233

 
39,922,626

 

 
39,922,626

 

Orchard Ridge
Lynnwood, WA
 
 
1988
 
104

 
480,600

 
4,372,033

 
1,640,650

 
480,600

 
6,012,683

 
6,493,283

 
(4,200,950
)
 
2,292,333

 

Pacific Place
Los Angeles, CA
 
 
2008
 
430

 
32,250,000

 
110,750,000

 
572,991

 
32,250,000

 
111,322,991

 
143,572,991

 
(9,391,616
)
 
134,181,375

 

Palm Trace Landings
Davie, FL
 
 
1995
 
768

 
38,400,000

 
105,693,432

 
4,412,321

 
38,400,000

 
110,105,753

 
148,505,753

 
(39,754,320
)
 
108,751,433

 

Parc 77
New York, NY
 
Y
 
1903
 
137

 
40,504,000

 
18,025,679

 
5,211,253

 
40,504,000

 
23,236,932

 
63,740,932

 
(9,380,110
)
 
54,360,822

 

Parc Cameron
New York, NY
 
Y
 
1927
 
166

 
37,600,000

 
9,855,597

 
6,069,564

 
37,600,000

 
15,925,161

 
53,525,161

 
(7,957,659
)
 
45,567,502

 

Parc Coliseum
New York, NY
 
Y
 
1910
 
177

 
52,654,000

 
23,045,751

 
7,981,026

 
52,654,000

 
31,026,777

 
83,680,777

 
(12,833,483
)
 
70,847,294

 

Parc East Towers
New York, NY
 
Y
 
1977
 
324

 
102,163,000

 
108,989,402

 
7,888,302

 
102,163,000

 
116,877,704

 
219,040,704

 
(35,905,223
)
 
183,135,481

 

Parc on Powell (fka Parkside at Emeryville)
Emeryville, CA
 
Y
 
(F)
 

 
16,657,467

 
55,107,488

 

 
16,657,467

 
55,107,488

 
71,764,955

 

 
71,764,955

 

Park Aire
Wellington, FL
 
 
2014
 
268

 
8,000,000

 
40,917,239

 
7,790

 
8,000,000

 
40,925,029

 
48,925,029

 
(1,877,464
)
 
47,047,565

 

Park at Pentagon Row (fka Pentagon City)
Arlington, VA
 
Y
 
1990
 
298

 
28,300,000

 
78,838,184

 
313,935

 
28,300,000

 
79,152,119

 
107,452,119

 
(8,734,530
)
 
98,717,589

 

Park at Turtle Run, The
Coral Springs, FL
 
 
2001
 
257

 
15,420,000

 
36,064,629

 
1,328,323

 
15,420,000

 
37,392,952

 
52,812,952

 
(14,395,758
)
 
38,417,194

 

Park Connecticut
Washington, D.C.
 
 
2000
 
142

 
13,700,000

 
59,087,519

 
438,263

 
13,700,000

 
59,525,782

 
73,225,782

 
(5,926,288
)
 
67,299,494

 

Park Hacienda (fka Hacienda)
Pleasanton, CA
 
 
2000
 
540

 
43,200,000

 
128,753,359

 
418,551

 
43,200,000

 
129,171,910

 
172,371,910

 
(15,002,224
)
 
157,369,686

 

Park West (CA)
Los Angeles, CA
 
 
1987/1990
 
444

 
3,033,500

 
27,302,383

 
8,693,445

 
3,033,500

 
35,995,828

 
39,029,328

 
(23,298,739
)
 
15,730,589

 

Parkfield
Denver, CO
 
 
2000
 
476

 
8,330,000

 
28,667,618

 
3,305,900

 
8,330,000

 
31,973,518

 
40,303,518

 
(16,037,171
)
 
24,266,347

 

Parkside
Union City, CA
 
 
1979
 
208

 
6,246,700

 
11,827,453

 
3,900,616

 
6,246,700

 
15,728,069

 
21,974,769

 
(10,008,760
)
 
11,966,009

 

Pegasus
Los Angeles, CA
 
Y
 
1949/2003
 
322

 
18,094,052

 
81,905,948

 
2,301,007

 
18,094,052

 
84,206,955

 
102,301,007

 
(16,114,037
)
 
86,186,970

 

Phillips Park
Wellesley, MA
 
 
1988
 
49

 
816,922

 
5,460,955

 
1,092,085

 
816,922

 
6,553,040

 
7,369,962

 
(3,527,505
)
 
3,842,457

 

Playa Pacifica
Hermosa Beach, CA
 
 
1972
 
285

 
35,100,000

 
33,473,822

 
8,205,881

 
35,100,000

 
41,679,703

 
76,779,703

 
(18,071,577
)
 
58,708,126

 

Portofino
Chino Hills, CA
 
 
1989
 
176

 
3,572,400

 
14,660,994

 
3,469,722

 
3,572,400

 
18,130,716

 
21,703,116

 
(10,641,056
)
 
11,062,060

 

Portofino (Val)
Valencia, CA
 
 
1989
 
216

 
8,640,000

 
21,487,126

 
2,770,117

 
8,640,000

 
24,257,243

 
32,897,243

 
(12,417,735
)
 
20,479,508

 

Portside Towers
Jersey City, NJ
 
Y
 
1992-1997
 
527

 
22,487,006

 
96,842,913

 
19,411,866

 
22,487,006

 
116,254,779

 
138,741,785

 
(66,421,447
)
 
72,320,338

 

Potrero
San Francisco, CA
 
Y
 
(F)
 

 
40,830,011

 
31,523,663

 

 
40,830,011

 
31,523,663

 
72,353,674

 

 
72,353,674

 

Prado (fka Glendale)
Glendale, CA
 
 
1988
 
264

 

 
67,977,313

 
1,102,967

 

 
69,080,280

 
69,080,280

 
(7,364,217
)
 
61,716,063

 

Preserve at Deer Creek
Deerfield Beach, FL
 
 
1997
 
540

 
13,500,000

 
60,011,208

 
11,156,351

 
13,500,000

 
71,167,559

 
84,667,559

 
(27,613,392
)
 
57,054,167

 

Prime, The
Arlington, VA
 
 
2002
 
256

 
32,000,000

 
64,436,539

 
1,229,561

 
32,000,000

 
65,666,100

 
97,666,100

 
(21,188,390
)
 
76,477,710

 

Promenade at Aventura
Aventura, FL
 
 
1995
 
296

 
13,320,000

 
30,353,748

 
6,987,572

 
13,320,000

 
37,341,320

 
50,661,320

 
(18,578,470
)
 
32,082,850

 

Promenade at Town Center I
Valencia, CA
 
 
2001
 
294

 
14,700,000

 
35,390,279

 
2,630,025

 
14,700,000

 
38,020,304

 
52,720,304

 
(15,471,823
)
 
37,248,481

 

Promenade at Town Center II
Valencia, CA
 
 
2001
 
270

 
13,500,000

 
34,405,636

 
2,374,656

 
13,500,000

 
36,780,292

 
50,280,292

 
(14,862,278
)
 
35,418,014

 

Promenade at Wyndham Lakes
Coral Springs, FL
 
 
1998
 
332

 
6,640,000

 
26,743,760

 
5,169,866

 
6,640,000

 
31,913,626

 
38,553,626

 
(16,302,998
)
 
22,250,628

 

Promenade Terrace
Corona, CA
 
 
1990
 
330

 
2,272,800

 
20,546,289

 
5,975,907

 
2,272,800

 
26,522,196

 
28,794,996

 
(17,641,430
)
 
11,153,566

 

Quarry Hills
Quincy, MA
 
 
2006
 
316

 
26,900,000

 
84,411,162

 
417,784

 
26,900,000

 
84,828,946

 
111,728,946

 
(9,818,230
)
 
101,910,716

 

Red 160 (fka Redmond Way)
Redmond, WA
 
Y
 
2011
 
250

 
15,546,376

 
65,320,010

 
761,676

 
15,546,376

 
66,081,686

 
81,628,062

 
(8,975,666
)
 
72,652,396

 



S-7

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Red Road Commons
Miami, FL
 
Y
 
2009
 
404

 
27,383,547

 
99,656,440

 
2,120,113

 
27,383,547

 
101,776,553

 
129,160,100

 
(18,087,040
)
 
111,073,060

 

Redmond Court
Bellevue, WA
 
 
1977
 
206

 
10,300,000

 
33,488,745

 
607,648

 
10,300,000

 
34,096,393

 
44,396,393

 
(3,981,275
)
 
40,415,118

 

Regency Palms
Huntington Beach, CA
 
 
1969
 
310

 
1,857,400

 
16,713,254

 
5,435,303

 
1,857,400

 
22,148,557

 
24,005,957

 
(15,007,785
)
 
8,998,172

 

Renaissance Villas
Berkeley, CA
 
Y
 
1998
 
34

 
2,458,000

 
4,542,000

 
140,950

 
2,458,000

 
4,682,950

 
7,140,950

 
(1,389,449
)
 
5,751,501

 

Reserve at Ashley Lake
Boynton Beach, FL
 
 
1990
 
440

 
3,520,400

 
23,332,494

 
6,923,362

 
3,520,400

 
30,255,856

 
33,776,256

 
(18,742,933
)
 
15,033,323

 

Reserve at Mountain View (fka Mountian View)
Mountain View, CA
 
 
1965
 
180

 
27,000,000

 
33,029,605

 
242,910

 
27,000,000

 
33,272,515

 
60,272,515

 
(4,243,783
)
 
56,028,732

 

Reserve at Town Center II (WA)
Mill Creek, WA
 
 
2009
 
100

 
4,310,417

 
17,165,142

 
84,183

 
4,310,417

 
17,249,325

 
21,559,742

 
(3,154,760
)
 
18,404,982

 

Reserve at Town Center III
Mill Creek, WA
 
Y
 
2014
 
95

 
2,089,388

 
19,174,300

 
1,431

 
2,089,388

 
19,175,731

 
21,265,119

 
(736,100
)
 
20,529,019

 

Residences at Bayview
Pompano Beach, FL
 
Y
 
2004
 
225

 
5,783,545

 
39,334,455

 
1,213,792

 
5,783,545

 
40,548,247

 
46,331,792

 
(9,079,046
)
 
37,252,746

 

Residences at Westgate I (fka Westgate II)
Pasadena, CA
 
Y
 
2014
 
252

 
17,859,785

 
106,746,558

 

 
17,859,785

 
106,746,558

 
124,606,343

 
(1,278,424
)
 
123,327,919

 

Residences at Westgate II (fka Westgate III)
Pasadena, CA
 
Y
 
(F)
 

 
12,118,061

 
33,542,963

 

 
12,118,061

 
33,542,963

 
45,661,024

 

 
45,661,024

 

Reunion at Redmond Ridge (fka Redmond Ridge)
Redmond, WA
 
 
2008
 
321

 
6,975,705

 
46,175,001

 
300,070

 
6,975,705

 
46,475,071

 
53,450,776

 
(11,417,545
)
 
42,033,231

 

Rianna I
Seattle, WA
 
Y
 
2000
 
78

 
2,268,160

 
14,864,482

 
425,331

 
2,268,160

 
15,289,813

 
17,557,973

 
(3,897,325
)
 
13,660,648

 

Ridgewood Village I&II
San Diego, CA
 
 
1997
 
408

 
11,809,500

 
34,004,048

 
4,650,898

 
11,809,500

 
38,654,946

 
50,464,446

 
(19,997,912
)
 
30,466,534

 

Riva Terra I (fka Redwood Shores)
Redwood City, CA
 
 
1986
 
304

 
34,963,355

 
84,587,658

 
957,762

 
34,963,355

 
85,545,420

 
120,508,775

 
(9,986,376
)
 
110,522,399

 

Riva Terra II (fka Harborside)
Redwood City, CA
 
 
1986
 
149

 
17,136,645

 
40,536,531

 
1,331,562

 
17,136,645

 
41,868,093

 
59,004,738

 
(4,516,747
)
 
54,487,991

 

River Tower
New York, NY
 
Y
 
1982
 
323

 
118,669,441

 
98,880,559

 
5,781,678

 
118,669,441

 
104,662,237

 
223,331,678

 
(28,053,948
)
 
195,277,730

 

Riverpark
Redmond, WA
 
Y
 
2009
 
319

 
14,355,000

 
80,894,049

 
625,094

 
14,355,000

 
81,519,143

 
95,874,143

 
(11,733,102
)
 
84,141,041

 

Rivers Bend (CT)
Windsor, CT
 
 
1973
 
373

 
3,325,517

 
22,573,826

 
3,186,964

 
3,325,517

 
25,760,790

 
29,086,307

 
(13,537,132
)
 
15,549,175

 

Riverview Condominiums
Norwalk, CT
 
 
1991
 
92

 
2,300,000

 
7,406,730

 
2,467,328

 
2,300,000

 
9,874,058

 
12,174,058

 
(5,541,526
)
 
6,632,532

 

Rolling Green (Milford)
Milford, MA
 
 
1970
 
304

 
2,012,350

 
13,452,150

 
5,922,309

 
2,012,350

 
19,374,459

 
21,386,809

 
(10,707,965
)
 
10,678,844

 

Rosecliff II
Quincy, MA
 
 
2005
 
130

 
4,922,840

 
30,202,160

 
477,564

 
4,922,840

 
30,679,724

 
35,602,564

 
(5,256,770
)
 
30,345,794

 

Sabal Pointe
Coral Springs, FL
 
 
1995
 
276

 
1,951,600

 
17,570,508

 
7,140,842

 
1,951,600

 
24,711,350

 
26,662,950

 
(15,728,545
)
 
10,934,405

 

Sage
Everett, WA
 
 
2002
 
123

 
2,500,000

 
12,021,256

 
632,845

 
2,500,000

 
12,654,101

 
15,154,101

 
(4,686,644
)
 
10,467,457

 

Sakura Crossing
Los Angeles, CA
 
Y
 
2009
 
230

 
14,641,990

 
42,858,010

 
445,099

 
14,641,990

 
43,303,109

 
57,945,099

 
(8,084,997
)
 
49,860,102

 

Savoy at Dayton Station I & II (fka Savoy I)
Aurora, CO
 
 
2001
 
444

 
5,450,295

 
38,765,670

 
3,405,215

 
5,450,295

 
42,170,885

 
47,621,180

 
(17,320,767
)
 
30,300,413

 

Savoy at Dayton Station III (fka Savoy III)
Aurora, CO
 
 
2012
 
168

 
659,165

 
21,274,302

 
79,142

 
659,165

 
21,353,444

 
22,012,609

 
(2,539,418
)
 
19,473,191

 

Scarborough Square
Rockville, MD
 
 
1967
 
121

 
1,815,000

 
7,608,126

 
2,968,824

 
1,815,000

 
10,576,950

 
12,391,950

 
(6,577,786
)
 
5,814,164

 

Seventh & James
Seattle, WA
 
 
1992
 
96

 
663,800

 
5,974,803

 
3,665,212

 
663,800

 
9,640,015

 
10,303,815

 
(6,286,805
)
 
4,017,010

 

Shadow Creek
Winter Springs, FL
 
 
2000
 
280

 
6,000,000

 
21,719,768

 
2,299,111

 
6,000,000

 
24,018,879

 
30,018,879

 
(9,913,377
)
 
20,105,502

 

Sheffield Court
Arlington, VA
 
 
1986
 
597

 
3,342,381

 
31,337,332

 
13,400,936

 
3,342,381

 
44,738,268

 
48,080,649

 
(29,786,965
)
 
18,293,684

 

Sheridan Lake Club
Dania Beach, FL
 
 
2001
 
240

 
12,000,000

 
23,170,580

 
1,964,151

 
12,000,000

 
25,134,731

 
37,134,731

 
(9,437,897
)
 
27,696,834

 

Sheridan Ocean Club Combined
Dania Beach, FL
 
 
1991
 
648

 
18,313,414

 
47,091,594

 
17,651,928

 
18,313,414

 
64,743,522

 
83,056,936

 
(32,954,888
)
 
50,102,048

 

Skycrest
Valencia, CA
 
 
1999
 
264

 
10,560,000

 
25,574,457

 
2,362,878

 
10,560,000

 
27,937,335

 
38,497,335

 
(14,051,911
)
 
24,445,424

 

Skylark
Union City, CA
 
 
1986
 
174

 
1,781,600

 
16,731,916

 
2,659,208

 
1,781,600

 
19,391,124

 
21,172,724

 
(10,873,674
)
 
10,299,050

 

Skyline Terrace
Burlingame, CA
 
 
1967 & 1987
 
138

 
16,836,000

 
35,414,000

 
4,187,335

 
16,836,000

 
39,601,335

 
56,437,335

 
(8,225,224
)
 
48,212,111

 

Skyline Towers
Falls Church, VA
 
Y
 
1971
 
939

 
78,278,200

 
91,485,591

 
32,273,806

 
78,278,200

 
123,759,397

 
202,037,597

 
(54,795,726
)
 
147,241,871

 

Sonterra at Foothill Ranch
Foothill Ranch, CA
 
 
1997
 
300

 
7,503,400

 
24,048,507

 
2,564,362

 
7,503,400

 
26,612,869

 
34,116,269

 
(15,189,055
)
 
18,927,214

 

South City Station (fka South San Francisco)
San Francisco, CA
 
Y
 
2007
 
360

 
68,900,000

 
79,476,861

 
1,392,508

 
68,900,000

 
80,869,369

 
149,769,369

 
(9,849,234
)
 
139,920,135

 

South Winds
Fall River, MA
 
 
1971
 
404

 
2,481,821

 
16,780,359

 
5,195,897

 
2,481,821

 
21,976,256

 
24,458,077

 
(12,085,135
)
 
12,372,942

 

Southwood
Palo Alto, CA
 
 
1985
 
100

 
6,936,600

 
14,324,069

 
3,085,293

 
6,936,600

 
17,409,362

 
24,345,962

 
(10,084,791
)
 
14,261,171

 

Springbrook Estates
Riverside, CA
 
 
(F)
 

 
18,200,000

 

 

 
18,200,000

 

 
18,200,000

 

 
18,200,000

 

Square One
Seattle, WA
 
 
2014
 
112

 
7,222,544

 
26,277,456

 
(4
)
 
7,222,544

 
26,277,452

 
33,499,996

 
(93,215
)
 
33,406,781

 

St. Andrews at Winston Park
Coconut Creek, FL
 
 
1997
 
284

 
5,680,000

 
19,812,090

 
5,167,806

 
5,680,000

 
24,979,896

 
30,659,896

 
(11,483,152
)
 
19,176,744

 

Summerset Village II
Chatsworth, CA
 
 
(F)
 

 
260,646

 

 

 
260,646

 

 
260,646

 

 
260,646

 

Summit & Birch Hill
Farmington, CT
 
 
1967
 
186

 
1,757,438

 
11,748,112

 
3,477,936

 
1,757,438

 
15,226,048

 
16,983,486

 
(8,409,730
)
 
8,573,756

 

Summit at Lake Union
Seattle, WA
 
 
1995 -1997
 
150

 
1,424,700

 
12,852,461

 
4,489,502

 
1,424,700

 
17,341,963

 
18,766,663

 
(10,565,888
)
 
8,200,775

 

Summit at Sausalito (fka Sausalito)
Sausalito, CA
 
 
1978
 
198

 
26,000,000

 
28,435,024

 
1,373,534

 
26,000,000

 
29,808,558

 
55,808,558

 
(4,476,616
)
 
51,331,942

 


S-8

Table of Contents



EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Tallman
Seattle, WA
 
 
(F)
 

 
16,842,249

 
38,951,437

 

 
16,842,249

 
38,951,437

 
55,793,686

 

 
55,793,686

 

Tasman (fka Vista Montana - Residential)
San Jose, CA
 
 
(F)
 

 
27,709,329

 
91,844,910

 

 
27,709,329

 
91,844,910

 
119,554,239

 

 
119,554,239

 

Ten23 (fka 500 West 23rd Street)
New York, NY
 
Y
 
2011
 
111

 

 
58,856,293

 
109,788

 

 
58,966,081

 
58,966,081

 
(6,036,550
)
 
52,929,531

 

Terraces, The
San Francisco, CA
 
Y
 
1975
 
117

 
14,087,610

 
16,314,151

 
698,702

 
14,087,610

 
17,012,853

 
31,100,463

 
(3,403,077
)
 
27,697,386

 

Third Square
Cambridge, MA
 
Y
 
2008/2009
 
471

 
26,767,171

 
218,822,728

 
3,859,006

 
26,767,171

 
222,681,734

 
249,448,905

 
(46,866,757
)
 
202,582,148

 

Three20
Seattle, WA
 
Y
 
2013
 
134

 
7,030,766

 
29,078,811

 
324,200

 
7,030,766

 
29,403,011

 
36,433,777

 
(1,679,563
)
 
34,754,214

 

Tortuga Bay
Orlando, FL
 
 
2004
 
314

 
6,280,000

 
32,121,779

 
1,652,231

 
6,280,000

 
33,774,010

 
40,054,010

 
(12,539,818
)
 
27,514,192

 

Town Center South Commercial Tract
St. Charles, MD
 
 
(F)
 

 
1,500,000

 
5,499

 

 
1,500,000

 
5,499

 
1,505,499

 

 
1,505,499

 

Town Square at Mark Center II
Alexandria, VA
 
 
2001
 
272

 
15,568,464

 
55,029,607

 
674,851

 
15,568,464

 
55,704,458

 
71,272,922

 
(12,914,649
)
 
58,358,273

 

Trump Place, 140 Riverside
New York, NY
 
Y
 
2003
 
354

 
103,539,100

 
94,082,725

 
4,343,151

 
103,539,100

 
98,425,876

 
201,964,976

 
(33,587,819
)
 
168,377,157

 

Trump Place, 160 Riverside
New York, NY
 
Y
 
2001
 
455

 
139,933,500

 
190,964,745

 
10,315,504

 
139,933,500

 
201,280,249

 
341,213,749

 
(67,180,501
)
 
274,033,248

 

Trump Place, 180 Riverside
New York, NY
 
Y
 
1998
 
516

 
144,968,250

 
138,346,681

 
8,758,301

 
144,968,250

 
147,104,982

 
292,073,232

 
(50,963,924
)
 
241,109,308

 

Urbana (fka Market Street Landing)
Seattle, WA
 
Y
 
2014
 
287

 
12,542,418

 
74,247,060

 
592,913

 
12,542,418

 
74,839,973

 
87,382,391

 
(2,706,973
)
 
84,675,418

 

Uwajimaya Village
Seattle, WA
 
 
2002
 
176

 
8,800,000

 
22,188,288

 
463,663

 
8,800,000

 
22,651,951

 
31,451,951

 
(8,690,210
)
 
22,761,741

 

Vantage Pointe
San Diego, CA
 
Y
 
2009
 
679

 
9,403,960

 
190,596,040

 
6,068,618

 
9,403,960

 
196,664,658

 
206,068,618

 
(37,027,336
)
 
169,041,282

 

Veloce
Redmond, WA
 
Y
 
2009
 
322

 
15,322,724

 
76,176,594

 
253,112

 
15,322,724

 
76,429,706

 
91,752,430

 
(7,951,300
)
 
83,801,130

 

Verde Condominium Homes (fka Mission Verde, LLC)
San Jose, CA
 
 
1986
 
108

 
5,190,700

 
9,679,109

 
3,659,737

 
5,190,700

 
13,338,846

 
18,529,546

 
(8,271,659
)
 
10,257,887

 

Veridian (fka Silver Spring)
Silver Spring, MD
 
Y
 
2009
 
457

 
18,539,817

 
130,407,365

 
1,187,628

 
18,539,817

 
131,594,993

 
150,134,810

 
(25,425,869
)
 
124,708,941

 

Villa Solana
Laguna Hills, CA
 
 
1984
 
272

 
1,665,100

 
14,985,678

 
9,004,790

 
1,665,100

 
23,990,468

 
25,655,568

 
(16,477,170
)
 
9,178,398

 

Village at Bear Creek
Lakewood, CO
 
 
1987
 
472

 
4,519,700

 
40,676,390

 
5,730,669

 
4,519,700

 
46,407,059

 
50,926,759

 
(28,337,074
)
 
22,589,685

 

Village at Del Mar Heights, The (fka Del Mar Heights)
San Diego, CA
 
 
1986
 
168

 
15,100,000

 
40,859,396

 
252,027

 
15,100,000

 
41,111,423

 
56,211,423

 
(4,661,947
)
 
51,549,476

 

Village at Howard Hughes, The (Lots 1 & 2)
Los Angeles, CA
 
 
(F)
 

 
43,783,485

 
42,858,234

 

 
43,783,485

 
42,858,234

 
86,641,719

 

 
86,641,719

 

Virginia Square
Arlington, VA
 
Y
 
2002
 
231

 

 
85,940,003

 
1,862,631

 

 
87,802,634

 
87,802,634

 
(9,021,044
)
 
78,781,590

 

Vista Del Lago
Mission Viejo, CA
 
 
1986-1988
 
608

 
4,525,800

 
40,736,293

 
15,509,600

 
4,525,800

 
56,245,893

 
60,771,693

 
(39,353,877
)
 
21,417,816

 

Walden Park
Cambridge, MA
 
 
1966
 
232

 
12,448,888

 
52,044,448

 
3,585,931

 
12,448,888

 
55,630,379

 
68,079,267

 
(10,279,717
)
 
57,799,550

 

Waterford Place (CO)
Thornton, CO
 
 
1998
 
336

 
5,040,000

 
29,946,419

 
1,892,852

 
5,040,000

 
31,839,271

 
36,879,271

 
(13,850,610
)
 
23,028,661

 

Watertown Square
Watertown, MA
 
Y
 
2005
 
134

 
16,800,000

 
34,074,056

 
273,661

 
16,800,000

 
34,347,717

 
51,147,717

 
(3,888,131
)
 
47,259,586

 

Webster Green
Needham, MA
 
 
1985
 
77

 
1,418,893

 
9,485,006

 
1,311,268

 
1,418,893

 
10,796,274

 
12,215,167

 
(5,513,744
)
 
6,701,423

 

Welleby Lake Club
Sunrise, FL
 
 
1991
 
304

 
3,648,000

 
17,620,879

 
6,006,733

 
3,648,000

 
23,627,612

 
27,275,612

 
(13,651,141
)
 
13,624,471

 

West 96th
New York, NY
 
Y
 
1987
 
207

 
84,800,000

 
67,055,502

 
1,691,019

 
84,800,000

 
68,746,521

 
153,546,521

 
(10,502,306
)
 
143,044,215

 

West End Apartments (fka Emerson Place/ CRP II)
Boston, MA
 
Y
 
2008
 
310

 
469,546

 
163,123,022

 
1,657,912

 
469,546

 
164,780,934

 
165,250,480

 
(38,899,184
)
 
126,351,296

 

Westchester at Pavilions
Waldorf, MD
 
Y
 
2009
 
491

 
11,900,000

 
89,612,465

 
454,376

 
11,900,000

 
90,066,841

 
101,966,841

 
(8,949,050
)
 
93,017,791

 

Westchester at Rockville
Rockville, MD
 
 
2009
 
192

 
10,600,000

 
44,135,207

 
277,296

 
10,600,000

 
44,412,503

 
55,012,503

 
(5,009,486
)
 
50,003,017

 

Westmont
New York, NY
 
Y
 
1986
 
163

 
64,900,000

 
61,143,259

 
761,971

 
64,900,000

 
61,905,230

 
126,805,230

 
(7,967,408
)
 
118,837,822

 

Westside
Los Angeles, CA
 
 
2004
 
204

 
34,200,000

 
56,962,630

 
1,269,381

 
34,200,000

 
58,232,011

 
92,432,011

 
(6,264,171
)
 
86,167,840

 

Westside Villas I
Los Angeles, CA
 
 
1999
 
21

 
1,785,000

 
3,233,254

 
357,453

 
1,785,000

 
3,590,707

 
5,375,707

 
(1,813,481
)
 
3,562,226

 

Westside Villas II
Los Angeles, CA
 
 
1999
 
23

 
1,955,000

 
3,541,435

 
250,691

 
1,955,000

 
3,792,126

 
5,747,126

 
(1,850,426
)
 
3,896,700

 

Westside Villas III
Los Angeles, CA
 
 
1999
 
36

 
3,060,000

 
5,538,871

 
377,157

 
3,060,000

 
5,916,028

 
8,976,028

 
(2,880,318
)
 
6,095,710

 

Westside Villas IV
Los Angeles, CA
 
 
1999
 
36

 
3,060,000

 
5,539,390

 
385,604

 
3,060,000

 
5,924,994

 
8,984,994

 
(2,887,551
)
 
6,097,443

 

Westside Villas V
Los Angeles, CA
 
 
1999
 
60

 
5,100,000

 
9,224,485

 
657,592

 
5,100,000

 
9,882,077

 
14,982,077

 
(4,823,944
)
 
10,158,133

 

Westside Villas VI
Los Angeles, CA
 
 
1989
 
18

 
1,530,000

 
3,023,523

 
318,754

 
1,530,000

 
3,342,277

 
4,872,277

 
(1,665,408
)
 
3,206,869

 

Westside Villas VII
Los Angeles, CA
 
 
2001
 
53

 
4,505,000

 
10,758,900

 
616,684

 
4,505,000

 
11,375,584

 
15,880,584

 
(4,960,551
)
 
10,920,033

 

Westwood Glen
Westwood, MA
 
 
1972
 
156

 
1,616,505

 
10,806,004

 
2,225,649

 
1,616,505

 
13,031,653

 
14,648,158

 
(6,710,710
)
 
7,937,448

 

Windridge (CA)
Laguna Niguel, CA
 
 
1989
 
344

 
2,662,900

 
23,985,497

 
8,684,076

 
2,662,900

 
32,669,573

 
35,332,473

 
(21,637,211
)
 
13,695,262

 

Winston, The (FL)
Pembroke Pines, FL
 
 
2001/2003
 
464

 
18,561,000

 
49,527,569

 
2,852,872

 
18,561,000

 
52,380,441

 
70,941,441

 
(18,475,139
)
 
52,466,302

 

Wood Creek I
Pleasant Hill, CA
 
 
1987
 
256

 
9,729,900

 
23,009,768

 
6,555,668

 
9,729,900

 
29,565,436

 
39,295,336

 
(17,862,164
)
 
21,433,172

 

Woodbridge (CT)
Newington, CT
 
 
1968
 
73

 
498,377

 
3,331,548

 
1,266,343

 
498,377

 
4,597,891

 
5,096,268

 
(2,465,999
)
 
2,630,269

 

Woodlake (WA)
Kirkland, WA
 
 
1984
 
288

 
6,631,400

 
16,735,484

 
3,790,078

 
6,631,400

 
20,525,562

 
27,156,962

 
(12,057,883
)
 
15,099,079

 



S-9

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Woodland Park
East Palo Alto, CA
 
Y
 
1953
 
1,809

 
72,627,418

 
57,649,069

 
9,382,472

 
72,627,418

 
67,031,541

 
139,658,959

 
(24,058,784
)
 
115,600,175

 

Management Business
Chicago, IL
 
 
(D)
 

 

 

 
103,392,322

 

 
103,392,322

 
103,392,322

 
(79,507,853
)
 
23,884,469

 

Operating Partnership
Chicago, IL
 
 
(F)
 

 

 
1,434,910

 

 

 
1,434,910

 
1,434,910

 

 
1,434,910

 

EQR Wholly Owned Unencumbered

 

 

 
69,217

 
4,798,437,902

 
12,737,799,082

 
1,002,255,162

 
4,798,437,902

 
13,740,054,244

 
18,538,492,146

 
(3,650,524,741
)
 
14,887,967,405

 

EQR Wholly Owned Encumbered:

 

 

 


 


 


 


 


 


 


 


 


 


101 West End
New York, NY
 
Y
 
2000
 
506

 
190,600,000

 
131,374,708

 
1,868,722

 
190,600,000

 
133,243,430

 
323,843,430

 
(19,903,961
)
 
303,939,469

 
104,781,651

1401 Joyce on Pentagon Row
Arlington, VA
 
 
2004
 
326

 
9,780,000

 
89,668,165

 
793,393

 
9,780,000

 
90,461,558

 
100,241,558

 
(22,366,104
)
 
77,875,454

 
57,428,472

2501 Porter
Washington, D.C.
 
 
1988
 
202

 
13,000,000

 
75,271,179

 
1,555,253

 
13,000,000

 
76,826,432

 
89,826,432

 
(7,789,697
)
 
82,036,735

 
 (L)

300 East 39th (fka East 39th)
New York, NY
 
Y
 
2001
 
254

 
48,900,000

 
96,174,639

 
868,920

 
48,900,000

 
97,043,559

 
145,943,559

 
(11,236,211
)
 
134,707,348

 
59,449,107

3003 Van Ness (fka Van Ness)
Washington, D.C.
 
 
1970
 
625

 
56,300,000

 
141,191,580

 
2,514,645

 
56,300,000

 
143,706,225

 
200,006,225

 
(16,968,210
)
 
183,038,015

 
 (K)

303 East 83rd (fka Camargue)
New York, NY
 
Y
 
1976
 
261

 
79,400,000

 
79,122,624

 
738,175

 
79,400,000

 
79,860,799

 
159,260,799

 
(10,706,970
)
 
148,553,829

 
 (L)

425 Broadway
Santa Monica, CA
 
Y
 
2001
 
101

 
12,600,000

 
34,394,772

 
680,943

 
12,600,000

 
35,075,715

 
47,675,715

 
(3,569,288
)
 
44,106,427

 
 (L)

4701 Willard
Chevy Chase, MD
 
Y
 
1966
 
513

 
76,921,130

 
153,947,682

 
20,688,968

 
76,921,130

 
174,636,650

 
251,557,780

 
(24,386,428
)
 
227,171,352

 
98,427,692

55 West Fifth I & II (fka Townhouse Plaza and Gardens)
San Mateo, CA
 
 
1964/1972
 
241

 
21,041,710

 
71,931,323

 
8,114,511

 
21,041,710

 
80,045,834

 
101,087,544

 
(9,767,221
)
 
91,320,323

 
29,128,487

77 Park Avenue (fka Hoboken)
Hoboken, NJ
 
Y
 
2000
 
301

 
27,900,000

 
168,992,440

 
1,559,417

 
27,900,000

 
170,551,857

 
198,451,857

 
(16,271,604
)
 
182,180,253

 
 (K)

800 Sixth Ave (fka Chelsea)
New York, NY
 
Y
 
2003
 
266

 
59,900,000

 
155,861,605

 
218,240

 
59,900,000

 
156,079,845

 
215,979,845

 
(16,645,847
)
 
199,333,998

 
76,680,282

929 House
Cambridge, MA
 
Y
 
1975
 
127

 
3,252,993

 
21,745,595

 
5,861,409

 
3,252,993

 
27,607,004

 
30,859,997

 
(13,677,315
)
 
17,182,682

 
1,784,337

Academy Village
North Hollywood, CA
 
 
1989
 
248

 
25,000,000

 
23,593,194

 
7,244,947

 
25,000,000

 
30,838,141

 
55,838,141

 
(14,131,888
)
 
41,706,253

 
20,000,000

Acappella
Pasadena, CA
 
 
2002
 
143

 
5,839,548

 
29,360,452

 
902,132

 
5,839,548

 
30,262,584

 
36,102,132

 
(6,456,855
)
 
29,645,277

 
19,842,607

Acton Courtyard
Berkeley, CA
 
Y
 
2003
 
71

 
5,550,000

 
15,785,509

 
174,547

 
5,550,000

 
15,960,056

 
21,510,056

 
(5,066,680
)
 
16,443,376

 
9,920,000

Alborada
Fremont, CA
 
 
1999
 
442

 
24,310,000

 
59,214,129

 
3,040,631

 
24,310,000

 
62,254,760

 
86,564,760

 
(31,791,543
)
 
54,773,217

 
 (I)

Alcyone
Seattle, WA
 
Y
 
2004
 
161

 
11,379,497

 
49,360,503

 
(9
)
 
11,379,497

 
49,360,494

 
60,739,991

 

 
60,739,991

 
28,910,000

Arches, The
Sunnyvale, CA
 
 
1974
 
410

 
26,650,000

 
62,850,000

 
851,025

 
26,650,000

 
63,701,025

 
90,351,025

 
(12,837,616
)
 
77,513,409

 
 (J)

Artech Building
Berkeley, CA
 
Y
 
2002
 
21

 
1,642,000

 
9,152,518

 
260,646

 
1,642,000

 
9,413,164

 
11,055,164

 
(2,729,697
)
 
8,325,467

 
3,200,000

Artisan Square
Northridge, CA
 
 
2002
 
140

 
7,000,000

 
20,537,359

 
1,064,325

 
7,000,000

 
21,601,684

 
28,601,684

 
(9,217,575
)
 
19,384,109

 
22,779,715

Avanti
Anaheim, CA
 
 
1987
 
162

 
12,960,000

 
18,497,683

 
1,314,548

 
12,960,000

 
19,812,231

 
32,772,231

 
(7,174,217
)
 
25,598,014

 
18,169,458

Avenir
Boston, MA
 
Y
 
2009
 
241

 

 
114,321,619

 
551,758

 

 
114,873,377

 
114,873,377

 
(12,259,457
)
 
102,613,920

 
94,465,696

Bachenheimer Building
Berkeley, CA
 
Y
 
2004
 
44

 
3,439,000

 
13,866,379

 
124,166

 
3,439,000

 
13,990,545

 
17,429,545

 
(4,228,536
)
 
13,201,009

 
8,585,000

Bella Vista I, II, III Combined
Woodland Hills, CA
 
 
2003-2007
 
579

 
31,682,754

 
121,095,786

 
2,885,108

 
31,682,754

 
123,980,894

 
155,663,648

 
(40,957,341
)
 
114,706,307

 
58,055,099

Berkeleyan
Berkeley, CA
 
Y
 
1998
 
56

 
4,377,000

 
16,022,110

 
321,597

 
4,377,000

 
16,343,707

 
20,720,707

 
(5,080,620
)
 
15,640,087

 
8,290,000

Calvert Woodley
Washington, D.C.
 
 
1962
 
136

 
12,600,000

 
43,527,379

 
733,195

 
12,600,000

 
44,260,574

 
56,860,574

 
(5,010,638
)
 
51,849,936

 
 (L)

Canterbury
Germantown, MD
 
 
1986
 
544

 
2,781,300

 
32,942,531

 
15,098,222

 
2,781,300

 
48,040,753

 
50,822,053

 
(33,408,506
)
 
17,413,547

 
31,680,000

Carmel Terrace
San Diego, CA
 
 
1988-1989
 
384

 
2,288,300

 
20,596,281

 
10,568,110

 
2,288,300

 
31,164,391

 
33,452,691

 
(22,658,333
)
 
10,794,358

 
 (J)

Chelsea Square
Redmond, WA
 
 
1991
 
113

 
3,397,100

 
9,289,074

 
1,788,938

 
3,397,100

 
11,078,012

 
14,475,112

 
(6,337,147
)
 
8,137,965

 
9,270,000

Citrus Suites
Santa Monica, CA
 
 
1978
 
70

 
9,000,000

 
16,950,326

 
123,388

 
9,000,000

 
17,073,714

 
26,073,714

 
(1,867,465
)
 
24,206,249

 
 (L)

CityView at Longwood
Boston, MA
 
Y
 
1970
 
295

 
14,704,898

 
79,195,102

 
9,272,973

 
14,704,898

 
88,468,075

 
103,172,973

 
(17,874,351
)
 
85,298,622

 
23,780,076

Clarendon, The
Arlington, VA
 
Y
 
2005
 
292

 
30,400,340

 
103,824,660

 
1,980,446

 
30,400,340

 
105,805,106

 
136,205,446

 
(18,582,643
)
 
117,622,803

 
40,376,421

Cleveland House
Washington, D.C.
 
 
1953
 
214

 
18,300,000

 
66,392,414

 
1,085,128

 
18,300,000

 
67,477,542

 
85,777,542

 
(7,336,935
)
 
78,440,607

 
 (L)

Columbia Crossing
Arlington, VA
 
 
1991
 
247

 
23,500,000

 
53,045,073

 
1,524,626

 
23,500,000

 
54,569,699

 
78,069,699

 
(6,390,653
)
 
71,679,046

 
 (L)

Connecticut Heights
Washington, D.C.
 
 
1974
 
518

 
27,600,000

 
114,002,295

 
523,868

 
27,600,000

 
114,526,163

 
142,126,163

 
(12,120,961
)
 
130,005,202

 
 (K)

Deerwood (SD)
San Diego, CA
 
 
1990
 
316

 
2,082,095

 
18,739,815

 
14,095,827

 
2,082,095

 
32,835,642

 
34,917,737

 
(23,757,806
)
 
11,159,931

 
 (J)

Del Mar Ridge
San Diego, CA
 
 
1998
 
181

 
7,801,824

 
36,948,176

 
3,108,004

 
7,801,824

 
40,056,180

 
47,858,004

 
(10,328,077
)
 
37,529,927

 
23,789,381

Estancia at Santa Clara (fka Santa Clara)
Santa Clara, CA
 
 
2000
 
450

 

 
123,759,804

 
526,676

 

 
124,286,480

 
124,286,480

 
(13,537,262
)
 
110,749,218

 
 (L)

Fairchase
Fairfax, VA
 
 
2007
 
392

 
23,500,000

 
87,722,321

 
269,692

 
23,500,000

 
87,992,013

 
111,492,013

 
(9,395,216
)
 
102,096,797

 
 (L)

Fairfield
Stamford, CT
 
Y
 
1996
 
263

 
6,510,200

 
39,690,120

 
6,459,297

 
6,510,200

 
46,149,417

 
52,659,617

 
(27,466,826
)
 
25,192,791

 
34,595,000

Fine Arts Building
Berkeley, CA
 
Y
 
2004
 
100

 
7,817,000

 
26,462,772

 
302,689

 
7,817,000

 
26,765,461

 
34,582,461

 
(8,237,485
)
 
26,344,976

 
16,215,000

Flats at DuPont Circle
Washington, D.C.
 
 
1967
 
306

 
35,200,000

 
108,768,198

 
504,057

 
35,200,000

 
109,272,255

 
144,472,255

 
(11,204,638
)
 
133,267,617

 
 (L)

Gaia Building
Berkeley, CA
 
Y
 
2000
 
91

 
7,113,000

 
25,623,826

 
225,339

 
7,113,000

 
25,849,165

 
32,962,165

 
(7,962,885
)
 
24,999,280

 
14,630,000


S-10

Table of Contents


EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Gaithersburg Station
Gaithersburg, MD
 
Y
 
2013
 
389

 
17,500,000

 
74,556,144

 
231,854

 
17,500,000

 
74,787,998

 
92,287,998

 
(6,934,203
)
 
85,353,795

 
98,884,291

Gateway at Malden Center
Malden, MA
 
Y
 
1988
 
203

 
9,209,780

 
25,722,666

 
12,495,969

 
9,209,780

 
38,218,635

 
47,428,415

 
(17,530,227
)
 
29,898,188

 
14,970,000

Glo
Los Angeles, CA
 
Y
 
2008
 
201

 
16,047,023

 
48,650,963

 
394,064

 
16,047,023

 
49,045,027

 
65,092,050

 
(8,010,461
)
 
57,081,589

 
31,938,525

Hathaway
Long Beach, CA
 
 
1987
 
385

 
2,512,500

 
22,611,912

 
7,849,296

 
2,512,500

 
30,461,208

 
32,973,708

 
(20,670,436
)
 
12,303,272

 
46,517,800

Heights on Capitol Hill
Seattle, WA
 
Y
 
2006
 
104

 
5,425,000

 
21,138,028

 
265,813

 
5,425,000

 
21,403,841

 
26,828,841

 
(6,924,808
)
 
19,904,033

 
28,180,585

Heronfield
Kirkland, WA
 
 
1990
 
202

 
9,245,000

 
27,017,749

 
2,262,931

 
9,245,000

 
29,280,680

 
38,525,680

 
(9,728,197
)
 
28,797,483

 
 (J)

Ivory Wood
Bothell, WA
 
 
2000
 
144

 
2,732,800

 
13,888,282

 
751,887

 
2,732,800

 
14,640,169

 
17,372,969

 
(5,844,211
)
 
11,528,758

 
8,020,000

Kelvin Court (fka Alta Pacific)
Irvine, CA
 
 
2008
 
132

 
10,752,145

 
34,649,929

 
248,840

 
10,752,145

 
34,898,769

 
45,650,914

 
(8,359,653
)
 
37,291,261

 
26,495,000

La Terrazza at Colma Station
Colma, CA
 
Y
 
2005
 
153

 

 
41,251,044

 
642,535

 

 
41,893,579

 
41,893,579

 
(12,830,190
)
 
29,063,389

 
25,175,000

Laguna Clara
Santa Clara, CA
 
 
1972
 
264

 
13,642,420

 
29,707,475

 
4,256,707

 
13,642,420

 
33,964,182

 
47,606,602

 
(14,568,252
)
 
33,038,350

 
 (J)

Liberty Park
Braintree, MA
 
 
2000
 
202

 
5,977,504

 
26,749,111

 
3,730,323

 
5,977,504

 
30,479,434

 
36,456,938

 
(13,021,186
)
 
23,435,752

 
24,980,280

Liberty Tower
Arlington, VA
 
Y
 
2008
 
235

 
16,382,822

 
83,817,078

 
1,124,478

 
16,382,822

 
84,941,556

 
101,324,378

 
(17,478,810
)
 
83,845,568

 
46,865,218

Lindley Apartments
Encino, CA
 
 
2004
 
129

 
5,805,000

 
25,705,000

 
681,636

 
5,805,000

 
26,386,636

 
32,191,636

 
(5,246,707
)
 
26,944,929

 
20,382,643

Longview Place
Waltham, MA
 
 
2004
 
348

 
20,880,000

 
90,255,509

 
3,770,380

 
20,880,000

 
94,025,889

 
114,905,889

 
(31,602,144
)
 
83,303,745

 
60,073,423

Market Street Village
San Diego, CA
 
 
2006
 
229

 
13,740,000

 
40,757,301

 
1,480,272

 
13,740,000

 
42,237,573

 
55,977,573

 
(13,620,631
)
 
42,356,942

 
 (J)

Marks
Englewood, CO
 
Y
 
1987
 
616

 
4,928,500

 
44,622,314

 
11,548,101

 
4,928,500

 
56,170,415

 
61,098,915

 
(34,206,804
)
 
26,892,111

 
19,195,000

Metro on First
Seattle, WA
 
Y
 
2002
 
102

 
8,540,000

 
12,209,981

 
452,229

 
8,540,000

 
12,662,210

 
21,202,210

 
(4,480,929
)
 
16,721,281

 
22,843,410

Midtown 24
Plantation, FL
 
Y
 
2010
 
247

 
10,129,900

 
58,770,100

 
1,401,853

 
10,129,900

 
60,171,953

 
70,301,853

 
(10,913,036
)
 
59,388,817

 
 (J)

Mill Creek
Milpitas, CA
 
 
1991
 
516

 
12,858,693

 
57,168,503

 
5,442,026

 
12,858,693

 
62,610,529

 
75,469,222

 
(25,958,217
)
 
49,511,005

 
69,312,259

Moda
Seattle, WA
 
Y
 
2009
 
251

 
12,649,228

 
36,842,012

 
751,889

 
12,649,228

 
37,593,901

 
50,243,129

 
(7,947,470
)
 
42,295,659

 
 (M)

Monte Viejo
Phoenix, AZ
 
 
2004
 
480

 
12,700,000

 
45,926,784

 
1,356,649

 
12,700,000

 
47,283,433

 
59,983,433

 
(18,448,547
)
 
41,534,886

 
38,998,007

Montierra (CA)
San Diego, CA
 
 
1990
 
272

 
8,160,000

 
29,360,938

 
7,349,217

 
8,160,000

 
36,710,155

 
44,870,155

 
(20,207,547
)
 
24,662,608

 
 (J)

Mosaic at Metro
Hyattsville, MD
 
 
2009
 
260

 

 
59,580,898

 
396,392

 

 
59,977,290

 
59,977,290

 
(13,426,350
)
 
46,550,940

 
43,349,098

New River Cove
Davie, FL
 
 
1999
 
316

 
15,800,000

 
46,142,895

 
2,112,295

 
15,800,000

 
48,255,190

 
64,055,190

 
(17,348,296
)
 
46,706,894

 
 (J)

North Pier at Harborside
Jersey City, NJ
 
 
2003
 
297

 
4,000,159

 
94,290,590

 
2,508,073

 
4,000,159

 
96,798,663

 
100,798,822

 
(35,934,228
)
 
64,864,594

 
 (I)

Northpark
Burlingame, CA
 
 
1972
 
510

 
38,607,000

 
77,477,449

 
11,535,799

 
38,607,000

 
89,013,248

 
127,620,248

 
(21,086,248
)
 
106,534,000

 
62,833,873

Oak Mill II
Germantown, MD
 
 
1985
 
192

 
854,133

 
10,233,947

 
6,614,557

 
854,133

 
16,848,504

 
17,702,637

 
(11,657,281
)
 
6,045,356

 
9,600,000

Oaks
Santa Clarita, CA
 
 
2000
 
520

 
23,400,000

 
61,020,438

 
4,140,268

 
23,400,000

 
65,160,706

 
88,560,706

 
(27,139,584
)
 
61,421,122

 
37,159,525

Olympus Towers
Seattle, WA
 
Y
 
2000
 
328

 
14,752,034

 
73,335,425

 
5,446,206

 
14,752,034

 
78,781,631

 
93,533,665

 
(30,519,078
)
 
63,014,587

 
49,875,780

Park Place at San Mateo (fka San Mateo)
San Mateo, CA
 
Y
 
2001
 
575

 
71,900,000

 
211,907,141

 
2,736,590

 
71,900,000

 
214,643,731

 
286,543,731

 
(22,552,999
)
 
263,990,732

 
 (L)

Providence
Bothell, WA
 
 
2000
 
200

 
3,573,621

 
19,055,505

 
908,245

 
3,573,621

 
19,963,750

 
23,537,371

 
(8,060,429
)
 
15,476,942

 
 (I)

Reserve at Clarendon Centre, The
Arlington, VA
 
Y
 
2003
 
252

 
10,500,000

 
52,812,935

 
3,852,271

 
10,500,000

 
56,665,206

 
67,165,206

 
(22,423,199
)
 
44,742,007

 
 (J)

Reserve at Eisenhower, The
Alexandria, VA
 
 
2002
 
226

 
6,500,000

 
34,585,060

 
1,407,205

 
6,500,000

 
35,992,265

 
42,492,265

 
(15,227,463
)
 
27,264,802

 
 (J)

Reserve at Empire Lakes
Rancho Cucamonga, CA
 
 
2005
 
467

 
16,345,000

 
73,080,670

 
2,097,816

 
16,345,000

 
75,178,486

 
91,523,486

 
(25,847,398
)
 
65,676,088

 
 (I)

Reserve at Fairfax Corner
Fairfax, VA
 
 
2001
 
652

 
15,804,057

 
63,129,050

 
6,733,306

 
15,804,057

 
69,862,356

 
85,666,413

 
(29,870,640
)
 
55,795,773

 
84,778,876

Reserve at Potomac Yard
Alexandria, VA
 
 
2002
 
588

 
11,918,917

 
68,862,641

 
6,341,718

 
11,918,917

 
75,204,359

 
87,123,276

 
(28,902,316
)
 
58,220,960

 
66,470,000

Reserve at Town Center (WA)
Mill Creek, WA
 
 
2001
 
389

 
10,369,400

 
41,172,081

 
2,404,316

 
10,369,400

 
43,576,397

 
53,945,797

 
(17,140,399
)
 
36,805,398

 
29,160,000

Rianna II
Seattle, WA
 
Y
 
2002
 
78

 
2,161,840

 
14,433,614

 
219,336

 
2,161,840

 
14,652,950

 
16,814,790

 
(3,719,806
)
 
13,094,984

 
9,664,461

Rockingham Glen
West Roxbury, MA
 
 
1974
 
143

 
1,124,217

 
7,515,160

 
2,127,798

 
1,124,217

 
9,642,958

 
10,767,175

 
(5,189,711
)
 
5,577,464

 
732,326

Siena Terrace
Lake Forest, CA
 
 
1988
 
356

 
8,900,000

 
24,083,024

 
6,513,124

 
8,900,000

 
30,596,148

 
39,496,148

 
(16,196,382
)
 
23,299,766

 
38,440,808

Skyview
Rancho Santa Margarita, CA
 
 
1999
 
260

 
3,380,000

 
21,952,863

 
2,762,747

 
3,380,000

 
24,715,610

 
28,095,610

 
(13,314,866
)
 
14,780,744

 
30,889,928

SoMa Square Apartments (fka South Market)
San Francisco, CA
 
Y
 
1986
 
410

 
79,900,000

 
177,316,977

 
2,711,818

 
79,900,000

 
180,028,795

 
259,928,795

 
(19,032,108
)
 
240,896,687

 
 (L)

Stonegate (CO)
Broomfield, CO
 
 
2003
 
350

 
8,750,000

 
32,950,375

 
3,208,246

 
8,750,000

 
36,158,621

 
44,908,621

 
(13,931,379
)
 
30,977,242

 
 (I)

Stoney Ridge
Dale City, VA
 
 
1985
 
264

 
8,000,000

 
24,147,091

 
5,813,599

 
8,000,000

 
29,960,690

 
37,960,690

 
(13,117,254
)
 
24,843,436

 
13,414,254

Summerset Village
Chatsworth, CA
 
 
1985
 
280

 
2,629,804

 
23,670,889

 
6,735,640

 
2,629,804

 
30,406,529

 
33,036,333

 
(18,638,374
)
 
14,397,959

 
38,039,912

Talleyrand
Tarrytown, NY
 
 
1997-1998
 
300

 
12,000,000

 
49,838,160

 
4,373,570

 
12,000,000

 
54,211,730

 
66,211,730

 
(25,824,997
)
 
40,386,733

 
35,000,000

Teresina
Chula Vista, CA
 
 
2000
 
440

 
28,600,000

 
61,916,670

 
2,524,216

 
28,600,000

 
64,440,886

 
93,040,886

 
(23,028,983
)
 
70,011,903

 
41,153,983

Toscana
Irvine, CA
 
 
1991/1993
 
563

 
39,410,000

 
50,806,072

 
8,065,576

 
39,410,000

 
58,871,648

 
98,281,648

 
(30,358,453
)
 
67,923,195

 
71,243,194




S-11

Table of Contents



EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
Description
 
 
 
Initial Cost to Company
 
 Cost Capitalized Subsequent to Acquisition(Improvements, net) (E)
 
Gross Amount Carried at Close of Period 12/31/14
 
 
 
 
 
 
 
 
Apartment Name
Location
 
Retail/Commercial Space (G)
 
 Date of Construction
 
Units (H)
 
Land
 
 Building & Fixtures
 
 Building & Fixtures
 
Land
 
 Building & Fixtures (A)
 
Total (B)
 
Accumulated Depreciation (C)
Investment in Real Estate, Net at 12/31/14 (B)
Encumbrances
Touriel Building
Berkeley, CA
 
Y
 
2004
 
35

 
2,736,000

 
7,810,027

 
173,049

 
2,736,000

 
7,983,076

 
10,719,076

 
(2,537,090
)
 
8,181,986

 
5,050,000

Town Square at Mark Center I (fka Millbrook I)
Alexandria, VA
 
 
1996
 
406

 
24,360,000

 
86,178,714

 
3,101,186

 
24,360,000

 
89,279,900

 
113,639,900

 
(31,779,511
)
 
81,860,389

 
77,353,222

Uptown Square
Denver, CO
 
Y
 
1999/2001
 
696

 
17,492,000

 
100,696,541

 
4,323,125

 
17,492,000

 
105,019,666

 
122,511,666

 
(38,387,874
)
 
84,123,792

 
99,190,116

Versailles
Woodland Hills, CA
 
 
1991
 
253

 
12,650,000

 
33,656,292

 
5,439,447

 
12,650,000

 
39,095,739

 
51,745,739

 
(16,887,476
)
 
34,858,263

 
30,372,953

Versailles (K-Town)
Los Angeles, CA
 
 
2008
 
225

 
10,590,975

 
44,409,025

 
1,089,480

 
10,590,975

 
45,498,505

 
56,089,480

 
(10,851,277
)
 
45,238,203

 
29,826,475

Victor on Venice
Los Angeles, CA
 
Y
 
2006
 
115

 
10,350,000

 
35,433,437

 
493,945

 
10,350,000

 
35,927,382

 
46,277,382

 
(11,164,686
)
 
35,112,696

 
 (J)

Vintage
Ontario, CA
 
 
2005-2007
 
300

 
7,059,230

 
47,677,762

 
418,205

 
7,059,230

 
48,095,967

 
55,155,197

 
(15,673,129
)
 
39,482,068

 
33,000,000

Vintage at 425 Broadway (fka Promenade)
Santa Monica, CA
 
Y
 
1934/2001
 
58

 
9,000,000

 
13,961,523

 
354,858

 
9,000,000

 
14,316,381

 
23,316,381

 
(1,915,005
)
 
21,401,376

 
 (L)

Vista on Courthouse
Arlington, VA
 
 
2008
 
220

 
15,550,260

 
69,449,740

 
1,100,172

 
15,550,260

 
70,549,912

 
86,100,172

 
(16,370,415
)
 
69,729,757

 
31,380,000

Water Park Towers
Arlington, VA
 
 
1989
 
362

 
34,400,000

 
108,485,859

 
3,570,221

 
34,400,000

 
112,056,080

 
146,456,080

 
(12,141,171
)
 
134,314,909

 
 (K)

West 54th
New York, NY
 
Y
 
2001
 
222

 
60,900,000

 
48,193,837

 
320,475

 
60,900,000

 
48,514,312

 
109,414,312

 
(7,362,247
)
 
102,052,065

 
46,859,227

Westgate (fka Westgate I)
Pasadena, CA
 
 
2010
 
480

 
22,898,848

 
133,553,692

 
348,871

 
22,898,848

 
133,902,563

 
156,801,411

 
(18,556,819
)
 
138,244,592

 
96,935,000

Woodleaf
Campbell, CA
 
 
1984
 
178

 
8,550,600

 
16,988,183

 
4,312,027

 
8,550,600

 
21,300,210

 
29,850,810

 
(11,452,912
)
 
18,397,898

 
17,858,854

Portfolio/Entity Encumbrances (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,099,338,962

EQR Wholly Owned Encumbered
 
 
 
 
 
 
29,923

 
1,889,558,099

 
5,894,004,795

 
330,213,229

 
1,889,558,099

 
6,224,218,024

 
8,113,776,123

 
(1,587,799,207
)
 
6,525,976,916

 
4,726,035,749

EQR Partially Owned Unencumbered:

 

 

 


 


 


 


 


 


 


 


 


 


2300 Elliott
Seattle, WA
 
 
1992
 
92

 
796,800

 
7,173,725

 
6,244,167

 
796,800

 
13,417,892

 
14,214,692

 
(9,635,532
)
 
4,579,160

 

400 Park Avenue South (Toll)
New York, NY
 
 
(F)
 

 
58,090,357

 
55,679,496

 

 
58,090,357

 
55,679,496

 
113,769,853

 

 
113,769,853

 

Canyon Ridge
San Diego, CA
 
 
1989
 
162

 
4,869,448

 
11,955,064

 
2,794,600

 
4,869,448

 
14,749,664

 
19,619,112

 
(8,662,269
)
 
10,956,843

 

Country Oaks
Agoura Hills, CA
 
 
1985
 
256

 
6,105,000

 
29,561,865

 
4,053,877

 
6,105,000

 
33,615,742

 
39,720,742

 
(15,662,969
)
 
24,057,773

 

Fox Ridge
Englewood, CO
 
 
1984
 
300

 
2,490,000

 
17,522,114

 
4,601,407

 
2,490,000

 
22,123,521

 
24,613,521

 
(11,718,055
)
 
12,895,466

 

Monterra in Mill Creek
Mill Creek, WA
 
 
2003
 
139

 
2,800,000

 
13,255,123

 
670,037

 
2,800,000

 
13,925,160

 
16,725,160

 
(5,104,802
)
 
11,620,358

 

Prism at Park Avenue South (fka 400 Park Avenue South (EQR))
New York, NY
 
Y
 
(F)
 

 
76,292,169

 
150,666,648

 
11,603

 
76,292,169

 
150,678,251

 
226,970,420

 

 
226,970,420

 

Strayhorse at Arrowhead Ranch
Glendale, AZ
 
 
1998
 
136

 
4,400,000

 
12,968,002

 
443,437

 
4,400,000

 
13,411,439

 
17,811,439

 
(4,853,154
)
 
12,958,285

 

Via Ventura (CA) (fka Ventura)
Ventura, CA
 
 
2002
 
192

 
8,600,000

 
44,308,202

 
406,230

 
8,600,000

 
44,714,432

 
53,314,432

 
(5,214,735
)
 
48,099,697

 

Wood Creek II (fka Willow Brook (CA))
Pleasant Hill, CA
 
 
1985
 
228

 
5,055,000

 
38,388,672

 
4,889,178

 
5,055,000

 
43,277,850

 
48,332,850

 
(16,682,842
)
 
31,650,008

 

EQR Partially Owned Unencumbered

 

 

 
1,505

 
169,498,774

 
381,478,911

 
24,114,536

 
169,498,774

 
405,593,447

 
575,092,221

 
(77,534,358
)
 
497,557,863

 

EQR Partially Owned Encumbered:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bellevue Meadows
Bellevue, WA
 
 
1983
 
180

 
4,507,100

 
12,574,814

 
4,524,770

 
4,507,100

 
17,099,584

 
21,606,684

 
(10,473,761
)
 
11,132,923

 
16,538,000

Canyon Creek (CA)
San Ramon, CA
 
 
1984
 
268

 
5,425,000

 
18,812,121

 
6,427,590

 
5,425,000

 
25,239,711

 
30,664,711

 
(12,764,001
)
 
17,900,710

 
28,200,000

Harrison Square (fka Elliot Bay)
Seattle, WA
 
Y
 
1992
 
166

 
7,600,000

 
35,844,345

 
3,159,773

 
7,600,000

 
39,004,118

 
46,604,118

 
(3,837,725
)
 
42,766,393

 
 (K)

Isle at Arrowhead Ranch
Glendale, AZ
 
 
1996
 
256

 
1,650,237

 
19,593,123

 
2,216,333

 
1,650,237

 
21,809,456

 
23,459,693

 
(13,005,000
)
 
10,454,693

 
17,700,000

Lantern Cove
Foster City, CA
 
 
1985
 
232

 
6,945,000

 
23,064,976

 
5,705,946

 
6,945,000

 
28,770,922

 
35,715,922

 
(13,736,832
)
 
21,979,090

 
36,455,000

Rosecliff
Quincy, MA
 
 
1990
 
156

 
5,460,000

 
15,721,570

 
2,561,718

 
5,460,000

 
18,283,288

 
23,743,288

 
(9,854,030
)
 
13,889,258

 
17,400,000

Schooner Bay I
Foster City, CA
 
 
1985
 
168

 
5,345,000

 
20,390,618

 
4,756,784

 
5,345,000

 
25,147,402

 
30,492,402

 
(12,000,181
)
 
18,492,221

 
28,870,000

Schooner Bay II
Foster City, CA
 
 
1985
 
144

 
4,550,000

 
18,064,764

 
4,275,408

 
4,550,000

 
22,340,172

 
26,890,172

 
(10,806,797
)
 
16,083,375

 
26,175,000

Surrey Downs
Bellevue, WA
 
 
1986
 
122

 
3,057,100

 
7,848,618

 
2,407,669

 
3,057,100

 
10,256,287

 
13,313,387

 
(6,009,471
)
 
7,303,916

 
9,829,000

Virgil Square
Los Angeles, CA
 
 
1979
 
142

 
5,500,000

 
15,216,613

 
2,175,257

 
5,500,000

 
17,391,870

 
22,891,870

 
(6,559,144
)
 
16,332,726

 
9,900,000

Wisconsin Place
Chevy Chase, MD
 
 
2009
 
432

 

 
172,089,355

 
550,832

 

 
172,640,187

 
172,640,187

 
(17,900,087
)
 
154,740,100

 
144,571,681

Portfolio/Entity Encumbrances (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24,840,581

EQR Partially Owned Encumbered

 

 

 
2,266

 
50,039,437

 
359,220,917

 
38,762,080

 
50,039,437

 
397,982,997

 
448,022,434

 
(116,947,029
)
 
331,075,405

 
360,479,262

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated Investment in Real Estate
 
 
 
 
 
 
102,911

 
$
6,907,534,212

 
$
19,372,503,705

 
$
1,395,345,007

 
$
6,907,534,212

 
$
20,767,848,712

 
$
27,675,382,924

 
$
(5,432,805,335
)
 
$
22,242,577,589

 
$
5,086,515,011



(1)
See attached Encumbrances Reconciliation



S-12

Table of Contents



EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2014
NOTES:
(A)
The balance of furniture & fixtures included in the total investment in real estate amount was $1,365,276,528 as of December 31, 2014.
(B)
The cost, net of accumulated depreciation, for Federal Income Tax purposes as of December 31, 2014 was approximately $16.7 billion.
(C)
The life to compute depreciation for building is 30 years, for building improvements ranges from 5 to 15 years, for furniture & fixtures and replacements is 5 to 10 years, and for lease intangibles is the average remaining term of each respective lease.
(D)
This asset consists of various acquisition dates and largely represents furniture, fixtures and equipment, leasehold improvements and capitalized software costs owned by the Management Business, which are generally depreciated over periods ranging from 3 to 7 years.
(E)
Primarily represents capital expenditures for major maintenance and replacements incurred subsequent to each property’s acquisition date.
(F)
Represents land and/or construction-in-progress on projects either held for future development or projects currently under development.
(G)
A portion of these properties includes and/or will include retail/commercial space.
(H)
Total properties and units exclude three unconsolidated properties containing 1,281 apartment units and two Military Housing properties containing 5,033 units.
(I)
through (L) See Encumbrances Reconciliation schedule.
(M)
Boot Property for Bond Partnership mortgage pool.



S-13

Table of Contents


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
3.1
 
Articles of Restatement of Declaration of Trust of Equity Residential dated December 9, 2004.
 
Included as Exhibit 3.1 to Equity Residential’s Form 10-K for the year ended December 31, 2004.
3.2
 
Seventh Amended and Restated Bylaws of Equity Residential, effective as of December 14, 2010.
 
Included as Exhibit 3.1 to Equity Residential's Form 8-K dated and filed on December 14, 2010.
3.3
 
Sixth Amended and Restated Agreement of Limited Partnership for ERP Operating Limited Partnership dated as of March 12, 2009.
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated March 12, 2009, filed on March 18, 2009.
3.4
 
Form of Preference Units Term Sheet for 3.00% Series P Cumulative Redeemable Preference Units.
 
Included as Exhibit 3.1 to ERP Operating Limited Partnership's Form 8-K dated November 26, 2014, filed on December 2, 2014.
4.1
 
Indenture, dated October 1, 1994, between the Operating Partnership and The Bank of New York Mellon Trust Company, N.A., as successor trustee (“Indenture”).
 
Included as Exhibit 4(a) to ERP Operating Limited Partnership’s Form S-3 filed on October 7, 1994.
4.2
 
First Supplemental Indenture to Indenture, dated as of September 9, 2004.
 
Included as Exhibit 4.2 to ERP Operating Limited Partnership’s Form 8-K, filed on September 10, 2004.
4.3
 
Second Supplemental Indenture to Indenture, dated as of August 23, 2006.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership’s Form 8-K dated August 16, 2006, filed on August 23, 2006.
4.4
 
Third Supplemental Indenture to Indenture, dated as of June 4, 2007.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership’s Form 8-K dated May 30, 2007, filed on June 1, 2007.
4.5
 
Fourth Supplemental Indenture to Indenture, dated as of December 12, 2011.
 
Included as Exhibit 4.2 to ERP Operating Limited Partnership's Form 8-K dated December 7, 2011, filed on December 9, 2011.
4.6
 
Terms Agreement regarding 6.63% (subsequently remarketed to a 6.584% fixed rate) Notes due April 13, 2015.
 
Included as Exhibit 1 to ERP Operating Limited Partnership's Form 8-K, filed on April 13, 1998.
4.7
 
Terms Agreement regarding 5.125% Notes due March 15, 2016.
 
Included as Exhibit 1.1 to ERP Operating Limited Partnership’s Form 8-K, filed on September 13, 2005.
4.8
 
Form of 5.375% Note due August 1, 2016.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership’s Form 8-K dated January 11, 2006, filed on January 18, 2006.
4.9
 
Form of 5.75% Note due June 15, 2017.
 
Included as Exhibit 4.3 to ERP Operating Limited Partnership’s Form 8-K dated May 30, 2007, filed on June 1, 2007.
4.10
 
Terms Agreement regarding 71/8% Notes due October 15, 2017.
 
Included as Exhibit 1 to ERP Operating Limited Partnership’s Form 8-K, filed on October 9, 1997.
4.11
 
Form of 2.375% Note due July 1, 2019.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership's Form 8-K dated June 16, 2014, filed on June 18, 2014.
4.12
 
Form of 4.75% Note due July 15, 2020.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership’s Form 8-K dated July 12, 2010, filed on July 15, 2010.
4.13
 
Form of 4.625% Note due December 15, 2021.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership's Form 8-K dated December 7, 2011, filed on December 9, 2011.
4.14
 
Form of 3.00% Note due April 15, 2023.
 
Included as Exhibit 4.1 to ERP Operating Limited Partnership's Form 8-K dated April 3, 2013, filed on April 8, 2013.
4.15
 
Terms Agreement regarding 7.57% Notes due August 15, 2026.
 
Included as Exhibit 1 to ERP Operating Limited Partnership’s Form 8-K, filed on August 13, 1996.
4.16
 
Form of 4.500% Note due July 1, 2044.
 
Included as Exhibit 4.2 to ERP Operating Limited Partnership's Form 8-K dated June 16, 2014, filed on June 18, 2014.



Table of Contents


Exhibit
 
Description
 
Location
10.1
*
Noncompetition Agreement (Zell).
 
Included as an exhibit to Equity Residential's Form S-11 Registration Statement, File No. 33-63158.
10.2
*
Noncompetition Agreement (Spector).
 
Included as an exhibit to Equity Residential's Form S-11 Registration Statement, File No. 33-63158.
10.3
*
Form of Noncompetition Agreement (other officers).
 
Included as an exhibit to Equity Residential's Form S-11 Registration Statement, File No. 33-63158.
10.4
 
Revolving Credit Agreement dated as of January 11, 2013 among ERP Operating Limited Partnership, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association, as Co-Syndication Agents, J.P. Morgan Securities LLC, Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arrangers and Joint Book Runners, and a syndicate of other banks (the “Revolving Credit Agreement”).
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated January 11, 2013, filed January 15, 2013.
10.5
 
Guaranty of Payment made as of January 11, 2013 between Equity Residential and Bank of America, N.A., as administrative agent for the banks party to the Revolving Credit Agreement.
 
Included as Exhibit 10.2 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated January 11, 2013, filed January 15, 2013.
10.6
 
Amendment No. 1 to Revolving Credit Agreement dated as of January 16, 2015 among ERP Operating Limited Partnership, the Banks party thereto, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association, as Co-Syndication Agents, and the other Agents named therein.
 
Attached herein.
10.7
 
Term Loan Agreement dated as of January 11, 2013 among ERP Operating Limited Partnership, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association as Co-Syndication Agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC and J.P.Morgan Securities LLC, as Joint Lead Arrangers and Joint Book Runners, and a syndicate of other banks (the "Term Loan Agreement").
 
Included as Exhibit 10.3 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated January 11, 2013, filed January 15, 2013.
10.8
 
Guaranty of Payment made as of January 11, 2013 between Equity Residential and Bank of America, N.A., as administrative agent for the banks party to the Term Loan Agreement.
 
Included as Exhibit 10.4 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated January 11, 2013, filed January 15, 2013.
10.9
 
Master Credit Facility Agreement, dated February 27, 2013, by and among Federal National Mortgage Association and ASN Santa Monica LLC, et al.
 
Included as Exhibit 10.7 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
10.10
 
Amended and Restated Fixed Loan Note (Collateral Pool 3), dated February 27, 2013, executed by ASN Santa Monica LLC, et al. in favor of Federal National Mortgage Association.
 
Included as Exhibit 10.8 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
10.11
 
Amended and Restated Limited Partnership Agreement of Lexford Properties, L.P.
 
Included as Exhibit 10.16 to Equity Residential's Form 10-K for the year ended December 31, 1999.
10.12
*
Equity Residential 2011 Share Incentive Plan.
 
Included as Exhibit 99.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated June 16, 2011, filed on June 22, 2011.
10.13
*
First Amendment to 2011 Share Incentive Plan.
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended June 30, 2012.
10.14
*
Second Amendment to 2011 Share Incentive Plan.
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended September 30, 2013.
10.15
*
Third Amendment to 2011 Share Incentive Plan.
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended March 31, 2014.
10.16
*
Fourth Amendment to 2011 Share Incentive Plan.
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended September 30, 2014.



Table of Contents


Exhibit
 
Description
 
Location
10.17
*
Equity Residential Second Restated 2002 Share Incentive Plan dated December 10, 2008.
 
Included as Exhibit 10.15 to Equity Residential's Form 10-K for the year ended December 31, 2008.
10.18
*
First Amendment to Second Restated 2002 Share Incentive Plan.
 
Included as Exhibit 10.1 to Equity Residential's Form 10-Q for the quarterly period ended September 30, 2010.
10.19
*
Second Amendment to Second Restated 2002 Share Incentive Plan.
 
Included as Exhibit 10.3 to Equity Residential's Form 10-Q for the quarterly period ended June 30, 2011.
10.20
*
Third Amendment to Second Restated 2002 Share Incentive Plan.
 
Included as Exhibit 10.2 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended June 30, 2012.
10.21
*
Fourth Amendment to Second Restated 2002 Share Incentive Plan.
 
Included as Exhibit 10.2 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended September 30, 2013.
10.22
*
Form of Change in Control Agreement between the Company and other executive officers.
 
Included as Exhibit 10.13 to Equity Residential's Form 10-K for the year ended December 31, 2001.
10.23
*
Form of First Amendment to Amended and Restated Change in Control/Severance Agreement with each executive officer.
 
Included as Exhibit 10.1 to Equity Residential's Form 10-Q for the quarterly period ended March 31, 2009.
10.24
*
Form of Indemnification Agreement between the Company and each trustee and executive officer.
 
Included as Exhibit 10.18 to Equity Residential's Form 10-K for the year ended December 31, 2003.
10.25
*
Form of Letter Agreement between Equity Residential and each of David J. Neithercut, Alan W. George and Bruce C. Strohm.
 
Included as Exhibit 10.3 to Equity Residential's Form 10-Q for the quarterly period ended September 30, 2008.
10.26
*
Form of Executive Retirement Benefits Agreement.
 
Included as Exhibit 10.24 to Equity Residential's Form 10-K for the year ended December 31, 2006.
10.27
*
Retirement Benefits Agreement between Samuel Zell and the Company dated October 18, 2001.
 
Included as Exhibit 10.18 to Equity Residential's Form 10-K for the year ended December 31, 2001.
10.28
*
Amended and Restated Deferred Compensation Agreement between the Company and Gerald A. Spector dated January 1, 2002.
 
Included as Exhibit 10.17 to Equity Residential's Form 10-K for the year ended December 31, 2001.
10.29
*
Change in Control Agreement dated as of March 13, 2009 by and between Equity Residential and Mark J. Parrell, Executive Vice President and Chief Financial Officer.
 
Included as Exhibit 10.2 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated March 12, 2009, filed on March 18, 2009.
10.30
*
The Equity Residential Supplemental Executive Retirement Plan as Amended and Restated effective July 1, 2014.
 
Included as Exhibit 10.2 to Equity Residential's and ERP Operating Limited Partnership's Form 10-Q for the quarterly period ended September 30, 2014.
10.31
*
The Equity Residential Grandfathered Supplemental Executive Retirement Plan as Amended and Restated effective January 1, 2005.
 
Included as Exhibit 10.2 to Equity Residential's Form 10-Q for the quarterly period ended March 31, 2008.
10.32
 
Second Amended and Restated Sales Agency Financing Agreement, dated July 31, 2013, among the Company, the Operating Partnership and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
 
Included as Exhibit 1.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated and filed on July 31, 2013.
10.33
 
Amended and Restated Sales Agency Financing Agreement, dated July 31, 2013, among the Company, the Operating Partnership and BNY Mellon Capital Markets, LLC.
 
Included as Exhibit 1.2 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated and filed on July 31, 2013.
10.34
 
Second Amended and Restated Sales Agency Financing Agreement, dated July 31, 2013, among the Company, the Operating Partnership and J.P. Morgan Securities LLC.
 
Included as Exhibit 1.3 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated and filed on July 31, 2013.
10.35
 
Second Amended and Restated Sales Agency Financing Agreement, dated July 31, 2013, among the Company, the Operating Partnership and Morgan Stanley & Co. LLC.
 
Included as Exhibit 1.4 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated and filed on July 31, 2013.
10.36
 
Sales Agency Financing Agreement, dated July 31, 2013, among the Company, the Operating Partnership and Scotia Capital (USA) Inc.
 
Included as Exhibit 1.5 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated and filed on July 31, 2013.
10.37
 
Registration Rights Agreement, dated February 27, 2013, by and between Equity Residential, Archstone Enterprise LP (which subsequently changed its name to Jupiter Enterprise LP) and Lehman Brothers Holdings Inc.
 
Included as Exhibit 10.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.





Table of Contents


Exhibit
 
Description
 
Location
10.38
 
Shareholders Agreement, dated February 27, 2013, by and among Equity Residential, Archstone Enterprise LP (which subsequently changed its name to Jupiter Enterprise LP) and Lehman Brothers Holdings Inc.
 
Included as Exhibit 10.2 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
10.39
 
Archstone Residual JV, LLC Limited Liability Company Agreement.
 
Included as Exhibit 10.3 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
10.40
 
Archstone Parallel Residual JV, LLC Limited Liability Company Agreement.
 
Included as Exhibit 10.4 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
10.41
 
Archstone Parallel Residual JV 2, LLC Limited Liability Company Agreement.
 
Included as Exhibit 10.5 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
10.42
 
Legacy Holdings JV, LLC Limited Liability Company Agreement.
 
Included as Exhibit 10.6 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated February 27, 2013, filed on February 28, 2013.
12
 
Computation of Ratio of Earnings to Combined Fixed Charges.
 
Attached herein.
21
 
List of Subsidiaries of Equity Residential and ERP Operating Limited Partnership.
 
Attached herein.
23.1
 
Consent of Ernst & Young LLP - Equity Residential.
 
Attached herein.
23.2
 
Consent of Ernst & Young LLP - ERP Operating Limited Partnership.
 
Attached herein.
24
 
Power of Attorney.
 
See the signature page to this report.
31.1
 
Equity Residential - Certification of David J. Neithercut, Chief Executive Officer.
 
Attached herein.
31.2
 
Equity Residential - Certification of Mark J. Parrell, Chief Financial Officer.
 
Attached herein.
31.3
 
ERP Operating Limited Partnership - Certification of David J. Neithercut, Chief Executive Officer of Registrant's General Partner.
 
Attached herein.
31.4
 
ERP Operating Limited Partnership - Certification of Mark J. Parrell, 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 David J. Neithercut, 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 Mark J. Parrell, 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 David J. Neithercut, 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 Mark J. Parrell, Chief Financial Officer of Registrant's General Partner.
 
Attached herein.
101
 
XBRL (Extensible Business Reporting Language). The following materials from Equity Residential’s and ERP Operating Limited Partnership's Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL: (i) consolidated balance sheets, (ii) consolidated statements of operations and comprehensive income, (iii) consolidated statements of cash flows, (iv) consolidated statements of changes in equity (Equity Residential), (v) consolidated statements of changes in capital (ERP Operating Limited Partnership) and (vi) notes to consolidated financial statements.
 
Attached herein.


Table of Contents


*Management contracts and compensatory plans or arrangements filed as exhibits to this report are identified by an asterisk.