For further information including definitions for capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2007.

Forward-looking Statements

Forward-looking statements in this report 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:

• We intend to actively acquire and develop multifamily properties for rental operations. We may underestimate the costs necessary to bring an acquired or development property up to standards established for its intended market position. Additionally, we expect that other major real estate investors with significant capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development efforts. This competition may increase prices for multifamily properties or decrease the price at which we expect to sell individual properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We also plan to develop more properties ourselves in addition to co-investing with our development partners. This may increase the overall level of risk associated with our developments. The total number of development units, cost 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;

• Sources of capital to the Company or 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 housing, slow or negative employment growth, availability of low interest mortgages for single-family home buyers and the potential for geopolitical instability, all of which are beyond the Company's control; and

• Additional factors as discussed in Part I of the Annual Report on Form 10-K, particularly those under "Risk Factors".

Forward-looking statements and related uncertainties are also included in Notes 2, 5, 11 and 14 in the Notes to Consolidated Financial Statements in this report.

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. EQR has elected to be taxed as a REIT.

The Company is one of the largest publicly traded real estate companies and is the largest publicly traded owner of multifamily properties (based on the aggregate market value of its outstanding Common Shares, the number of apartment units wholly owned and total revenues earned). The Company's corporate headquarters are located in Chicago, Illinois and the Company also operates property management offices throughout the United States. The Company has approximately 4,700 employees who provide real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.

Business Objectives and Operating Strategies

The Company seeks to maximize current income, capital appreciation of each property and the total return for its shareholders. The Company's strategy for accomplishing these objectives includes:

• Leveraging our size and scale in four critical ways:

• Investing in apartment communities located in strategically targeted markets, to maximize our total return on an enterprise level;

• Meeting the needs of our residents by offering a wide array of product choices and a commitment to service;

• Engaging, retaining, and attracting the best employees by providing them with the education, resources and opportunities to succeed; and

• Sharing resources, customers and best practices in property management and across the enterprise.

• Owning a highly diversified portfolio by investing in target markets defined by a combination of the following criteria:

• High barrier-to-entry (low supply);

• Strong economic predictors (high demand); and

• Attractive quality of life (high demand and retention).

• Giving residents reasons to stay with the Company by providing a range of product options available in our diversified portfolio and by enhancing their experience through our employees and our services.

• Being open and responsive to market realities to take advantage of investment opportunities that align with our long-term vision.

Acquisition, Development and Disposition Strategies

The Company anticipates that future property acquisitions, developments and dispositions will occur within the United States. Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt securities, sales of properties, joint venture agreements and collateralized and uncollateralized borrowings. 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

When evaluating potential acquisitions, developments and dispositions, the Company generally considers the following factors:

• strategically targeted markets;

• income levels and employment growth trends in the relevant market;

• employment and household growth and net migration of the relevant market's population;

• barriers to entry that would limit competition (zoning laws, building permit availability, supply of undeveloped or developable real estate, local building costs and construction costs, among other factors);

• the location, construction quality, condition and design of the property;

• the current and projected cash flow of the property and the ability to increase cash flow;

• the potential for capital appreciation of the property;

• the terms of resident leases, including the potential for rent increases;

• the potential for economic growth and the tax and regulatory environment of the community in which the property is located;

• the occupancy and demand by residents for properties of a similar type in the vicinity (the overall market and submarket);

• the prospects for liquidity through sale, financing or refinancing of the property;

• the benefits of integration into existing operations;

• purchase prices and yields of available existing stabilized properties, if any;

• competition from existing multifamily properties, residential properties under development and the potential for the construction of new multifamily properties in the area; and

• opportunistic selling based on demand and price of high quality assets, including condominium conversions.

The Company generally reinvests the proceeds received from property dispositions primarily to achieve its acquisition and development strategies and at times to fund its share repurchase activities. In addition, when feasible, the Company may structure these transactions as tax-deferred exchanges.

Current Environment

The increasing slowdown in the economy coupled with continued job losses and/or lack of job growth leads us to be cautious regarding expected performance for the remainder of 2008 and 2009. Revenue growth has moderated in most of our major markets as the economic slowdown continues to impact existing and prospective residents. Markets with little employment loss should perform better than markets with employment issues. Should the current credit crisis continue and the economy continue to show signs of recessionary pressure, the Company may experience a period of limited revenue growth or even declining revenues, which would adversely impact the Company's results of operations. The vast majority of our leases are for terms of 12 months or less. As a result, we quickly feel the impact of an economic downturn which limits our ability to raise rents on turnover units and lease renewals. Continued job losses and a lack of household formation have hampered the Company's ability to increase rents as it replaces vacating units with new residents. Additionally, in recent months it has become increasingly difficult to raise rents with our renewing residents.

The continued credit crisis has negatively impacted the availability and pricing of debt capital. During this time, the multifamily residential sector has benefited from the continued liquidity provided by Fannie Mae and Freddie Mac. A vast majority of the properties we sold this year were financed for the purchaser by one of these agencies. Furthermore, Fannie Mae and Freddie Mac have provided us with over

Despite the challenging conditions noted above, we believe that the Company is well-positioned to withstand the continuing economic downturn. Our properties are nearly 95% occupied, little new supply has been added to most of our markets, the single family home ownership rate continues to decline and the demographic picture is positive.

We believe we are well-positioned with a strong balance sheet and relatively low levels of debt maturities in the near term, which should allow us to take advantage of investment opportunities should distressed assets become available at significant discounts. When economic conditions improve, the short term nature of our leases should allow us to quickly realize revenue growth and improvement in our operating results.

Results of Operations

In conjunction with our business objectives and operating strategy, the Company has continued to invest or recycle its capital investment in apartment communities located in strategically targeted markets during the nine months ended September 30, 2008. Recently, the Company has focused more on property dispositions than acquisitions in order to preserve liquidity. In summary, we:

• Acquired $336.9 million of properties consisting of 6 properties and 1,837 units and an uncompleted development property for $31.7 million, all of which we deem to be in our strategic targeted markets; and

• Sold $807.0 million of properties consisting of 34 properties and 8,795 units, as well as 98 condominium units for $21.6 million and a vacant land parcel for $3.3 million.

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 the operating performance of a real estate company because it is a direct measure of the actual operating results of the Company's apartment communities.

Properties that the Company owned for all of both of the nine months ended September 30, 2008 and 2007 (the "Nine-Month 2008 Same Store Properties"), which represented 115,713 units, and properties that the Company owned for all of both of the quarters ended September 30, 2008 and 2007 (the "Third Quarter 2008 Same Store Properties"), which represented 122,380 units, impacted the Company's results of operations. Both the Nine-Month 2008 Same Store Properties and the Third Quarter 2008 Same Store Properties are discussed in the following paragraphs.

The Company's acquisition, disposition and completed development activities also impacted overall results of operations for the nine months and quarters ended September 30, 2008 and 2007. The impacts of these activities are discussed in greater detail in the following paragraphs.

Comparison of the nine months ended September 30, 2008 to the nine months ended September 30, 2007

For the nine months ended September 30, 2008, income from continuing operations, net of minority interests, increased by approximately $62.9 million when compared to the nine months ended September 30, 2007. The increase in continuing operations is discussed below.

                   September YTD 2008 vs. September YTD 2007

                   YTD over YTD Same Store Results/Statistics

   $ in Thousands (except for Average Rental Rate) - 115,713 Same Store Units



                                      Results                                    Statistics
                                                                      Average
                                                                      Rental
  Description        Revenues         Expenses           NOI         Rate (1)     Occupancy     Turnover
   YTD 2008        $   1,308,557     $   478,070     $   830,487     $   1,330        94.6%        48.1%
   YTD 2007        $   1,263,482     $   468,081     $   795,401     $   1,283        94.7%        48.8%

    Change         $      45,075     $     9,989     $    35,086     $      47        (0.1% )      (0.7% )

    Change                   3.6%            2.1%            4.4%          3.7%

(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.

The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the Nine-Month 2008 Same Store Properties:

                                             Nine Months Ended September 30,
                                                 2008                2007
                                                 (Amounts in thousands)

        Operating income                    $       461,528      $    388,758
        Adjustments:
        Non-same store operating results           (104,573)          (47,573)
        Fee and asset management revenue             (7,397)           (6,937)
        Fee and asset management expense              6,154             6,604
        Depreciation                                437,935           420,347
        General and administrative                   34,040            33,182
        Impairment                                    2,800             1,020


        Same store NOI                      $       830,487      $    795,401

For properties that the Company acquired prior to January 1, 2007 and expects to continue to own through December 31, 2008, the Company anticipates the following same store results for the full year ending December 31, 2008:

                           2008 Same Store Assumptions
                          Physical occupancy    94.5%
                          Revenue change        3.25%
                          Expense change        2.25%
                          NOI change            3.75%

These 2008 assumptions are based on current expectations and are forward-looking.

Non-same store operating results increased $57.0 million and consist primarily of properties acquired in calendar years 2008 and 2007 as well as operations from completed development properties and our corporate housing business.

Fee and asset management revenues, net of fee and asset management expenses, increased $0.9 million primarily due to an increase in revenue earned on the management of our military housing venture at Fort Lewis as well as a decrease in asset management expenses. As of September 30, 2008 and 2007, the Company managed 14,472 and 14,403 units, respectively, primarily for unconsolidated entities and our military housing venture at Fort Lewis.

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 by approximately $9.4 million or 13.7%. This decrease is primarily attributable to lower overall payroll-related costs as a result of a decrease in the number of properties in the Company's portfolio, as well as a decrease in legal and professional fees.

Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased $17.6 million primarily as a result of additional depreciation expense on properties acquired in 2007 and 2008, as well as capital expenditures for all properties owned.

General and administrative expenses from continuing operations, which include corporate operating expenses, increased $0.9 million primarily as a result of a $1.2 million increase in severance related costs in 2008 (see Note 16) as well as a $1.7 million expense recovery recorded for the nine months ended September 30, 2007 related to a certain lawsuit in Florida, partially offset by lower overall payroll-related costs as a result of a decrease in the number of properties in the Company's portfolio. The Company anticipates that general and administrative expenses will approximate $45.0 million to $46.0 million for the year ending December 31, 2008. The above assumption is based on current expectations and is forward-looking.

Impairment from continuing operations increased $1.8 million primarily as a result of an increase in the write-offs of various pursuit and out-of-pocket costs for terminated development transactions and halted condominium conversion properties during the nine months ended September 30, 2008.

Interest and other income from continuing operations decreased $1.3 million primarily as a result of a decrease in interest earned on restricted deposits, partially offset by an increase in interest earned on cash balances, insurance/litigation settlement proceeds received in 2008 and an increase in forfeited deposits and gains on debt extinguishment. The Company anticipates that interest and other income will approximate $27.5 million to $28.5 million for the year ending December 31, 2008. The above assumption is based on current expectations and is forward-looking.

Interest expense from continuing operations, including amortization of deferred financing costs, decreased approximately $6.3 million primarily as a result of a significant reduction in debt extinguishment costs and write-offs of unamortized deferred financing costs in 2008 as well as lower overall effective interest rates, partially offset by higher overall debt levels outstanding due to the Company's 2007 share repurchase activity and its pre-funding of its 2008 and 2009 debt maturities. During the nine months ended September 30, 2008, the Company capitalized interest costs of approximately $45.1 million as compared to $30.8 million for the nine months ended September 30, 2007. This capitalization of interest primarily relates to consolidated projects under development. The effective interest cost on all indebtedness for the nine months ended September 30, 2008 was 5.54% as compared to 5.99% for the nine months ended September 30, 2007. The Company anticipates that interest expense will approximate $480.0 million to $490.0 million for the year ending December 31, 2008. The above assumption is based on current expectations and is forward-looking.

Income and other tax expense from continuing operations increased $4.5 million primarily due to a change in the estimate of Texas state taxes and additional California state income taxes incurred and/or expected to be incurred in 2008. The Company anticipates that income and other tax expense will

Income from investments in unconsolidated entities decreased $0.1 million as compared to the nine months ended September 30, 2007 due to income received in 2007 from the sale of the Company's 7.075% ownership interest in Wellsford Park Highlands Corporation, an entity which owns a condominium development in Denver, Colorado.

Net gain on sales of unconsolidated entities decreased $2.6 million between the periods under comparison as the Company recognized a $2.6 million gain on the sale of an unconsolidated institutional joint venture property during the nine months ended September 30, 2007.

Net gain on sales of land parcels decreased $2.3 million primarily as a result of a higher gain recognized on the sale of a vacant land parcel located in New York during the nine months ended September 30, 2007 versus the sale of vacant land located in Florida during the nine months ended September 30, 2008.

Discontinued operations, net of minority interests, decreased approximately $477.9 million between the periods under comparison. This decrease is primarily due to the number and mix of properties sold during the nine months ended September 30, 2008 as compared to the same period in 2007 and the operations of those properties. See Note 13 in the Notes to Consolidated Financial Statements for further discussion.

Comparison of the quarter ended September 30, 2008 to the quarter ended September 30, 2007

For the quarter ended September 30, 2008, income from continuing operations, net of minority interests, increased by approximately $19.6 million when compared to the quarter ended September 30, 2007. The increase in continuing operations is discussed below.

Revenues from the Third Quarter 2008 Same Store Properties increased $15.6 million primarily as a result of higher rental rates charged to residents. Expenses from the Third Quarter 2008 Same Store Properties increased $4.4 million primarily due to higher real estate taxes, utilities and payroll. The following tables provide comparative same store results and statistics for the Third Quarter 2008 Same Store Properties:

                   Third Quarter 2008 vs. Third Quarter 2007

               Quarter over Quarter Same Store Results/Statistics

   $ in Thousands (except for Average Rental Rate) - 122,380 Same Store Units



                                   Results                                  Statistics
                                                                  Average
                                                                  Rental
 Description      Revenues        Expenses           NOI         Rate (1)     Occupancy   Turnover
   Q3 2008       $   466,810     $   171,644     $   295,166     $   1,348        94.4%      18.6%
   Q3 2007       $   451,257     $   167,271     $   283,986     $   1,305        94.3%      19.1%

   Change        $    15,553     $     4,373     $    11,180     $      43         0.1%     (0.5%)

   Change                3.4%            2.6%            3.9%          3.3%

(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.

The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the Third Quarter 2008 Same Store Properties:

--------------------------------------------------------------------------------
                                               Quarter Ended September 30,
                                                  2008             2007
                                                 (Amounts in thousands)
          Operating income                    $     156,570     $   138,398
          Adjustments:
          Non-same store operating results          (25,103)        (11,257)
          Fee and asset management revenue           (2,387)         (2,234)
          Fee and asset management expense            1,983           2,100
          Depreciation                              152,157         143,987
          General and administrative                  9,849          12,366
          Impairment                                  2,097             626

          Same store NOI                      $     295,166     $   283,986

Non-same store operating results increased $13.8 million and consist primarily of properties acquired in calendar years 2008 and 2007 as well as operations from completed development properties and our corporate housing business.

See also Note 15 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 $0.3 million during the quarter ended September 30, 2008 primarily due to an increase in revenue earned on the management of our military housing . . .