10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549

FORM 10-Q

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

For the quarterly period ended JUNE 30, 2006

OR

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

Commission File Number: 1-12252

EQUITY RESIDENTIAL
(Exact Name of Registrant as Specified in its Charter)

Maryland	13-3675988
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
Two North Riverside Plaza, Chicago, Illinois	60606
(Address of Principal Executive Offices)	(Zip Code)

(312) 474-1300

(Registrant’s Telephone Number, Including Area Code)

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.  Yes  x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  Large accelerated filer x  Accelerated filer o  Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No  x

The number of Common Shares of Beneficial Interest, $0.01 par value, outstanding on June 30, 2006 was 290,955,828.

EQUITY RESIDENTIAL
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share amounts)
(Unaudited)

	June 30, 2006			December 31, 2005
ASSETS
Investment in real estate
Land	$	3,003,791		$	2,848,601
Depreciable property	12,763,817			13,336,636
Projects under development	242,617			240,980
Land held for development	208,437			164,153
Investment in real estate	16,218,662			16,590,370
Accumulated depreciation	(2,772,806		)	(2,888,140		)
Investment in real estate, net	13,445,856			13,702,230
Real estate held for sale	635,270			—
Cash and cash equivalents	72,172			88,828
Investments in unconsolidated entities	4,733			6,838
Rents receivable	879			789
Deposits – restricted	95,855			77,093
Escrow deposits – mortgage	28,831			35,225
Deferred financing costs, net	40,628			40,636
Goodwill, net	30,000			30,000
Other assets	103,649			117,306
Total assets	$	14,457,873		$	14,098,945
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable	$	3,096,427		$	3,379,289
Mortgage notes payable, held for sale	207,029			—
Notes, net	3,838,697			3,442,784
Lines of credit	547,000			769,000
Accounts payable and accrued expenses	113,855			108,855
Accrued interest payable	86,527			78,441
Rents received in advance and other liabilities	290,205			302,418
Security deposits	60,111			54,823
Distributions payable	145,226			145,812
Total liabilities	8,385,077			8,281,422
Commitments and contingencies
Minority Interests:
Operating Partnership	367,081			345,034
Preference Interests and Units	11,684			60,184
Partially Owned Properties	20,163			16,965
Total Minority Interests	398,928			422,183
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 3,264,550 shares issued and outstanding as of June 30, 2006 and 3,323,830 shares issued and outstanding as of December 31, 2005	502,614			504,096
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 290,955,828 shares issued and outstanding as of June 30, 2006 and 289,536,344 shares issued and outstanding as of December 31, 2005	2,910			2,895
Paid in capital	5,269,054			5,253,188
Distributions in excess of accumulated earnings	(89,783		)	(350,367		)
Accumulated other comprehensive loss	(10,927		)	(14,472		)
Total shareholders’ equity	5,673,868			5,395,340
Total liabilities and shareholders’ equity	$	14,457,873		$	14,098,945

See accompanying notes

2

EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)

	Six Months Ended June 30,						Quarter Ended June 30,
	2006			2005			2006			2005
REVENUES
Rental income	$	958,911		$	808,922		$	489,619		$	412,207
Fee and asset management	4,807			5,362			2,320			3,023
Total revenues	963,718			814,284			491,939			415,230
EXPENSES
Property and maintenance	252,447			217,248			127,549			111,134
Real estate taxes and insurance	97,079			86,632			49,354			43,371
Property management	46,664			41,407			23,067			20,796
Fee and asset management	4,326			4,176			2,158			2,076
Depreciation	271,924			212,238			139,906			107,832
General and administrative	23,190			31,502			9,584			13,758
Total expenses	695,630			593,203			351,618			298,967
Operating income	268,088			221,081			140,321			116,263
Interest and other income	4,365			62,270			2,011			2,790
Interest:
Expense incurred, net	(209,049		)	(173,728		)	(104,117		)	(89,167		)
Amortization of deferred financing costs	(4,513		)	(3,230		)	(1,770		)	(1,566		)
Income before allocation to Minority Interests, loss from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and land parcels and discontinued operations	58,891			106,393			36,445			28,320
Allocation to Minority Interests:
Operating Partnership, net	(2,305		)	(5,685		)	(1,673		)	(823		)
Preference Interests and Units	(1,556		)	(5,279		)	(457		)	(1,391		)
Partially Owned Properties	(2,068		)	2,296			(547		)	819
Premium on redemption of Preference Interests	(683		)	(4,112		)	(9		)	(2,384		)
Loss from investments in unconsolidated entities	(375		)	(215		)	(145		)	(157		)
Net gain on sales of unconsolidated entities	352			124			23			—
Net gain (loss) on sales of land parcels	246			10,366			246			(2		)
Income from continuing operations, net of minority interests	52,502			103,888			33,883			24,382
Discontinued operations, net of minority interests	485,470			264,495			126,274			116,962
Net income	537,972			368,383			160,157			141,344
Preferred distributions	(20,168		)	(26,043		)	(10,073		)	(13,018		)
Net income available to Common Shares	$	517,804		$	342,340		$	150,084		$	128,326
Earnings per share – basic:
Income from continuing operations available to Common Shares	$	0.11		$	0.27		$	0.08		$	0.04
Net income available to Common Shares	$	1.79		$	1.20		$	0.52		$	0.45
Weighted average Common Shares outstanding	289,172			284,899			289,460			285,283
Earnings per share – diluted:
Income from continuing operations available to Common Shares	$	0.11		$	0.27		$	0.08		$	0.04
Net income available to Common Shares	$	1.76		$	1.19		$	0.51		$	0.44
Weighted average Common Shares outstanding	314,420			309,362			314,698			309,979
Distributions declared per Common Share outstanding	$	0.8850		$	0.8650		$	0.4425		$	0.4325

See accompanying notes

3

	Six Months Ended June 30,					Quarter Ended June 30,
	2006		2005			2006		2005
Comprehensive income:
Net income	$	537,972	$	368,383		$	160,157	$	141,344
Other comprehensive income – derivative and other instruments:
Unrealized holding gains (losses) arising during the period	2,409		(11,674		)	886		(14,842		)
Losses reclassified into earnings from other comprehensive income	1,136		1,168			547		586
Comprehensive income	$	541,517	$	357,877		$	161,590	$	127,088

See accompanying notes

4

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

	Six Months Ended June 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	537,972		$	368,383
Adjustments to reconcile net income to net cash provided by operating activities:
Allocation to Minority Interests:
Operating Partnership	36,499			24,982
Preference Interests and Units	1,556			5,279
Partially Owned Properties	2,068			(2,296		)
Premium on redemption of Preference Interests	683			4,112
Depreciation	297,472			259,268
Amortization of deferred financing costs	5,146			3,503
Amortization of discounts and premiums on debt	(3,644		)	(813		)
Amortization of deferred settlements on derivative instruments	446			478
(Income) from technology investments	—			(57,054		)
Loss from investments in unconsolidated entities	375			215
Distributions from unconsolidated entities – return on capital	101			—
Net (gain) on sales of unconsolidated entities	(352		)	(124		)
Net (gain) on sales of land parcels	(246		)	(10,366		)
Net (gain) on sales of discontinued operations	(502,297		)	(248,875		)
Loss on debt extinguishments	2,892			5,307
Unrealized loss on derivative instruments	—			3
Compensation paid with Company Common Shares	10,858			18,069
Other operating activities, net	1,155			1
Changes in assets and liabilities:
(Increase) decrease in rents receivable	(83		)	760
Increase in deposits – restricted	(9,570		)	(1,094		)
Decrease (increase) in other assets	8,608			(3,923		)
Increase (decrease) in accounts payable and accrued expenses	9,272			(1,156		)
Increase in accrued interest payable	7,931			828
(Decrease) in rents received in advance and other liabilities	(48,065		)	(8,958		)
Increase in security deposits	4,954			469
Net cash provided by operating activities	363,731			356,998
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions	(907,963		)	(642,332		)
Investment in real estate – development/other	(122,771		)	(82,375		)
Improvements to real estate	(106,441		)	(93,431		)
Additions to non-real estate property	(4,086		)	(4,109		)
Interest capitalized for real estate under development	(7,780		)	(5,761		)
Proceeds from disposition of real estate, net	1,002,714			835,703
Proceeds from disposition of unconsolidated entities	355			124
Proceeds from technology investments	—			82,054
Investments in unconsolidated entities	(1,030		)	(410		)
Distributions from unconsolidated entities – return of capital	92			330
Decrease (increase) in deposits on real estate acquisitions, net	10,178			(88,818		)
Decrease in mortgage deposits	6,794			1,238
Consolidation of previously Unconsolidated Properties:
Via acquisition (net of cash acquired)	—			(65		)
Via EITF 04-05 (cash consolidated)	1,436			—
Acquisition of Minority Interests – Partially Owned Properties	(13		)	(1,143		)
Other investing activities, net	2			—
Net cash (used for) provided by investing activities	(128,513		)	1,005

See accompanying notes

5

	Six Months Ended June 30,
	2006		2005
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs	$	(4,880)	$	(6,759)
Mortgage notes payable:
Proceeds	208,937		149,129
Restricted cash	(19,196)		—
Lump sum payoffs	(232,532)		(197,886)
Scheduled principal repayments	(13,644)		(14,392)
Prepayment premiums/fees	(2,892)		(5,307)
Notes, net:
Proceeds	398,052		—
Lump sum payoffs	—		(120,000)
Lines of credit:
Proceeds	3,207,500		2,037,800
Repayments	(3,429,500)		(1,759,800)
Proceeds from settlement of derivative instruments	10,729		—
Proceeds from sale of Common Shares	5,218		6,155
Proceeds from exercise of options	24,159		20,781
Common Shares repurchased and retired	(81,981)		—
Redemption of Preference Interests	(25,500)		(146,000)
Premium on redemption of Preference Interests	(9)		(300)
Payment of offering costs	(23)		(26)
Contributions – Minority Interests – Partially Owned Properties	3,327		1,756
Distributions:
Common Shares	(256,591)		(247,193)
Preferred Shares	(21,243)		(26,101)
Preference Interests and Units	(1,609)		(5,451)
Minority Interests – Operating Partnership	(18,012)		(17,897)
Minority Interests – Partially Owned Properties	(2,184)		(7,265)
Net cash (used for) financing activities	(251,874)		(338,756)
Net (decrease) increase in cash and cash equivalents	(16,656)		19,247
Cash and cash equivalents, beginning of period	88,828		83,505
Cash and cash equivalents, end of period	$	72,172	$	102,752

See accompanying notes

6

	Six Months Ended June 30,
	2006			2005
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	222,774		$	192,691
Cash paid during the period for income, franchise and excise taxes	$	7,509		$	3,789
Real estate acquisitions/dispositions/other:
Mortgage loans assumed	$	63,243		$	122,267
Valuation of OP Units issued	$	46,472		$	19,990
Mortgage loans (assumed) by purchaser	$	(117,949	)	$	(24,999	)
Consolidation of previously Unconsolidated Properties – Via acquisition:
Investment in real estate	$	—		$	(2,892	)
Mortgage loans assumed	$	—		$	2,012
Minority Interests – Partially Owned Properties	$	—		$	59
Investments in unconsolidated entities	$	—		$	668
Net other liabilities recorded	$	—		$	88
Consolidation of previously Unconsolidated Properties – Via EITF 04-05:
Investment in real estate, net	$	(24,637	)	$	—
Mortgage loans consolidated	$	22,545		$	—
Investments in unconsolidated entities	$	2,602		$	—
Net other liabilities recorded	$	926		$	—

See accompanying notes

7

EQUITY RESIDENTIAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.  Business

Equity Residential (“EQR”), a real estate investment trust (“REIT”) formed in March 1993, is a fully integrated real estate company primarily engaged in the acquisition, development, ownership, management and operation of multifamily properties.  In addition, EQR may acquire or develop multifamily properties specifically to convert directly into condominiums as well as upgrade and sell existing properties as individual condominiums.  EQR may also acquire land parcels to hold and/or sell based on market opportunities.  EQR has elected to be taxed as a REIT.

EQR is the general partner of, and as of June 30, 2006 owned an approximate 93.4% ownership interest in, ERP Operating Limited Partnership, an Illinois limited partnership (the “Operating Partnership”).  The Company is structured as an umbrella partnership REIT (“UPREIT”), under which all property ownership and business operations are conducted through the Operating Partnership and its subsidiaries.  References to the “Company” include EQR, the Operating Partnership and each of the partnerships, limited liability companies and corporations controlled by the Operating Partnership and/or EQR.

As of June 30, 2006, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 898 properties in 31 states and the District of Columbia consisting of 191,582 units (table does not include various uncompleted development properties).  The ownership breakdown includes:

	Properties	Units
Wholly Owned Properties	810	170,221
Partially Owned Properties:
Consolidated	42	6,872
Unconsolidated	45	10,846
Military Housing (Fee Managed)	1	3,643
	898	191,582

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included.  Certain reclassifications have been made to the prior period financial statements in order to conform to the current year presentation.  Operating results for the quarter ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, including definition of 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, 2005.

8

Other

The Company adopted SFAS No. 123(R), Share-Based Payment, as required effective January 1, 2006.  SFAS No. 123(R) requires all companies to expense stock-based compensation (such as stock options), as well as making other revisions to SFAS No. 123.  As the Company began expensing all stock-based compensation effective January 1, 2003, the adoption of SFAS No. 123(R) did not have a material effect on its consolidated statements of operations or financial position.

The Company adopted the disclosure provisions of SFAS No. 150 and FSP No. FAS 150-3, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective December 31, 2003.  SFAS No. 150 and FSP No. FAS 150-3 require the Company to make certain disclosures regarding noncontrolling interests that are classified as equity in the financial statements of a subsidiary but would be classified as a liability in the parent’s financial statements under SFAS No. 150 (e.g., minority interests in consolidated limited-life subsidiaries).  The Company is presently the controlling partner in various consolidated partnerships consisting of 42 properties and 6,872 units and various uncompleted development properties having a minority interest book value of $20.2 million at June 30, 2006.  Some of these partnerships contain provisions that require the partnerships to be liquidated through the sale of its assets upon reaching a date specified in each respective partnership agreement.  The Company, as controlling partner, has an obligation to cause the property owning partnerships to distribute proceeds of liquidation to the Minority Interests in these Partially Owned Properties only to the extent that the net proceeds received by the partnerships from the sale of its assets warrant a distribution based on the partnership agreements.  As of June 30, 2006, the Company estimates the value of Minority Interest distributions would have been approximately $96.4 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 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 June 30, 2006 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 Minority 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 Minority Interests in Partially Owned Properties.

The Company adopted EITF Issue No. 04-05, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“Issue 04-05”), effective January 1, 2006.  Issue 04-05 provides guidance in determining whether a general partner controls a limited partnership.  The Company consolidated its Lexford syndicated portfolio consisting of 20 separate partnerships (10 properties) containing 1,272 units, all of which are included as held for sale at June 30, 2006.  The adoption did not have a material effect on the results of operations or financial position.  See Note 4 for further discussion of the adoption of EITF Issue No. 04-05.

3.Shareholders’ Equity and Minority Interests

The following tables present the changes in the Company’s issued and outstanding Common Shares and OP Units for the six months ended June 30, 2006:

9

	2006
Common Shares outstanding at January 1,	289,536,344
Common Shares Issued:
Conversion of Series E Preferred Shares	61,510
Conversion of Series H Preferred Shares	5,791
Conversion of Series H and I Preference Interests	679,686
Employee Share Purchase Plan	145,758
Exercise of options	911,767
Restricted share grants, net	637,057
Conversion of OP Units	849,798
Common Shares Other:
Repurchased and retired	(1,871,883	)
Common Shares outstanding at June 30,	290,955,828

	2006
OP Units outstanding at January 1,	20,424,245
OP Units Issued:
Acquisitions	1,079,001
Conversion of OP Units to Common Shares	(849,798		)
OP Units Outstanding at June 30,	20,653,448
Total Common Shares and OP Units Outstanding at June 30,	311,609,276
OP Units Ownership Interest in Operating Partnership	6.6		%
OP Units Issued:
Acquisitions – per unit	$	43.07
Acquisitions – valuation	$	46.5 million

During the six months ended June 30, 2006, the Company repurchased 1,871,883 of its Common Shares on the open market at an average price of $43.80 per share.  The Company paid approximately $82.0 million for these shares, which were retired subsequent to the repurchase.

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 “Minority Interests – Operating Partnership”.  Subject to certain restrictions, the Minority Interests – Operating Partnership may exchange their OP Units for EQR Common Shares on a one-for-one basis.

Net proceeds from the Company’s Common Share and Preferred Share (see definition below) offerings are contributed by the Company to the Operating Partnership.  In return for those contributions, EQR receives a number of OP Units in the Operating Partnership 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 the Operating Partnership 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 Minority Interests – Operating Partnership to account for the change in their respective percentage ownership of the underlying equity of the Operating Partnership.

The Company’s declaration of trust authorizes the Company 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.

10

The following table presents the Company’s issued and outstanding Preferred Shares as of June 30, 2006 and December 31, 2005:

			Annual		Amounts in thousands
	Redemption Date (1) (2)	Conversion Rate (2)	Dividend per Share (3)		June 30, 2006		December 31, 2005
Preferred Shares of beneficial interest, $0.01 par value;  100,000,000 shares authorized:
9 1/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at June 30, 2006 and December 31, 2005 (4)	9/9/06	N/A	$	22.8125	$	115,000	$	115,000
8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at June 30, 2006 and December 31, 2005 (4)	7/15/07	N/A	$	21.50	175,000		175,000
7.00% Series E Cumulative Convertible Preferred; liquidation value $25 per share; 473,816 and 529,096 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively	11/1/98	1.1128	$	1.75	11,846		13,228
7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 30,734 and 34,734 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively	6/30/98	1.4480	$	1.75	768		868
8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at June 30, 2006 and December 31, 2005	12/10/26	N/A	$	4.145	50,000		50,000
6.48% Series N Cumulative Redeemable Preferred; liquidation value $250 per share; 600,000 shares issued and outstanding at June 30, 2006 and December 31, 2005 (4)	6/19/08	N/A	$	16.20	150,000		150,000
					$	502,614	$	504,096

(1)On or after the redemption date, redeemable preferred shares (Series C, D, K and N) 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)On or after the redemption date, convertible preferred shares (Series E & H) may be redeemed under certain circumstances at the option of the Company for cash (in the case of Series E) or Common Shares (in the case of Series H), in whole or in part, at various redemption prices per share based upon the contractual conversion rate, plus accrued and unpaid distributions, if any.

(3)Dividends on all series of Preferred Shares are payable quarterly at various pay dates.  Dividends listed for Series C, D and N are Preferred Share rates and the equivalent Depositary Share annual dividends are $2.28125, $2.15 and $1.62 per share, respectively.

(4)Series C, D and N Preferred Shares each have a corresponding depositary share that consists of ten times the number of shares and one-tenth the liquidation value and dividend per share.

The following table presents the issued and outstanding Preference Interests as of June 30, 2006 and December 31, 2005:

11

						Amounts in thousands
	Redemption Date (1) (2)	Conversion Rate (2)	Annual Dividend per Unit (3)			June 30, 2006		December 31, 2005
Preference Interests:
7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 510,000 units issued and outstanding at June 30, 2006 and December 31, 2005, respectively	03/21/06	N/A			(4)	$	—	$	25,500
7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 0 and 190,000 units issued and outstanding at June 30, 2006 and December 31, 2005, respectively	03/23/06	1.5108			(5)	—		9,500
7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 0 and 270,000 units issued and outstanding at June 30, 2006 and December 31, 2005, respectively	06/22/06	1.4542			(6)	—		13,500
7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at June 30, 2006 and December 31, 2005	12/14/06	1.4108	$	3.8125		11,500		11,500
						$	11,500	$	60,000

(1)On or after the fifth anniversary of the respective issuance (the “Redemption Date”), all of the Preference Interests may be redeemed for cash at the option of the Company, in whole or in part, at any time or from time to time, at a redemption price equal to the liquidation preference of $50.00 per unit plus the cumulative amount of accrued and unpaid distributions, if any.

(2)On or after the tenth anniversary of the respective issuance (the “Conversion Date”), all of the Preference Interests are exchangeable at the option of the holder (in whole but not in part) on a one-for-one basis for a respective reserved series of EQR Preferred Shares.  In addition, on or after the Conversion Date, the convertible Preference Interests may be converted under certain circumstances at the option of the holder (in whole but not in part) to Common Shares based upon the contractual conversion rate, plus accrued and unpaid distributions, if any.  Prior to the Conversion Date, the convertible Preference Interests may be converted under certain circumstances at the option of the holder (in whole but not in part) to Common Shares based upon the contractual conversion rate, plus accrued and unpaid distributions, if any, if the issuer has called the series for redemption (the “Accelerated Conversion Right”).

(3)Dividends on all series of Preference Interests are payable quarterly on March 25th, June 25th, September 25th and December 25th of each year.

(4)On February 10, 2006, the Company issued an irrevocable notice to redeem for cash on March 21, 2006 all 510,000 units of its 7.875% Series G Preference Interests with a liquidation value of $25.5 million.  The Company recorded approximately $0.7 million as premiums on redemption of Preference Interests (Minority Interests) in the accompanying consolidated statements of operations.

(5)On February 10, 2006, the Company issued an irrevocable notice to redeem for cash on March 23, 2006 all 190,000 units of its 7.625% Series H Preference Interests with a liquidation value of $9.5 million.  This notice triggered the holders’ Accelerated Conversion Right, which they exercised.  As a result, effective March 23, 2006, the 190,000 units were converted to 287,052 Common Shares.

(6)On May 16, 2006, the Company issued an irrevocable notice to redeem for cash on June 22, 2006 all 270,000 units of its 7.625% Series I Preference Interests with a liquidation value of $13.5 million.  This notice triggered the holder’s Accelerated Conversion Right, which they exercised.  As a result, effective June 22, 2006, the 270,000 units were converted to 392,634 Common Shares.

The following table presents the Operating Partnership’s issued and outstanding Junior Convertible Preference Units (the “Junior Preference Units”) as of June 30, 2006 and December 31, 2005:

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			Annual		Amounts in thousands
	Redemption Date (2)	Conversion Rate (2)	Dividend per Unit (1)		June 30, 2006		December 31, 2005
Junior Preference Units:
Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at June 30, 2006 and December 31, 2005	07/29/09	1.020408	$	2.00	$	184	$	184
					$	184	$	184

(1)Dividends on the Junior Preference Units are payable quarterly at various pay dates.

(2)On or after the tenth anniversary of the issuance (the “Redemption Date”), the Series B Junior Preference Units may be converted into OP Units at the option of the Operating Partnership based on the contractual conversion rate.  Prior to the Redemption Date, the holders may elect to convert the Series B Junior Preference Units to OP Units under certain circumstances based on the contractual conversion rate.  The contractual rate is based upon a ratio dependent upon the closing price of EQR’s Common Shares.

4.Real Estate

During the six months ended June 30, 2006, the Company acquired the entire equity interest in eighteenproperties containing 4,922 units and five land parcels from unaffiliated parties for a total purchase price of $1.0 billion.  The Company also acquired the majority of its partners’ interests in four partially owned properties containing 566 units for $32.2 million, partially funded through the issuance of 417,039 OP Units valued at $18.6 million.

The Company adopted EITF Issue No. 04-05, as required for existing limited partnership arrangements, effective January 1, 2006.  The adoption required the consolidation of the Lexford syndicated portfolio consisting of 20 separate partnerships (10 properties) containing 1,272 units, all of which are included as held for sale at June 30, 2006.  The Company recorded $24.6 million in investment in real estate and the following:

·Consolidated $22.5 million in mortgage debt;

·Reduced investments in unconsolidated entities by $2.6 million;

·Consolidated $0.9 million of other liabilities net of other assets acquired; and

·Consolidated $1.4 million of cash.

During the six months ended June 30, 2006, the Company disposed of the following to unaffiliated parties (sales price in thousands):

	Properties	Units	Sales Price
Rental Properties	38	10,528	$	1,029,459
Condominium Units	4	525	107,156
Land Parcels (one)	—	—	900
	42	11,053	$	1,137,515

On June 28, 2006, the Company announced that it agreed to sell its Lexford Housing Division for a cash purchase price of $1.086 billion.  The Company’s Board of Trustees has approved the sale, which is expected to close in the fourth quarter of 2006.  The Lexford Housing Division properties and related mortgage notes payable are classified as held for sale on the accompanying consolidated balance sheets as of June 30, 2006 and the operations have been reclassified to discontinued operations, net of minority interests on the accompanying statements of operations for all periods presented.  The Company plans to payoff $207.0 million of mortgage notes payable secured by the properties and expects to incur approximately $6.4 million in prepayment penalties upon extinguishment.  See Note 13 for additional information.

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The Company recognized a net gain on sales of discontinued operations of approximately $502.3 million (amount is net of $8.1 million of income taxes incurred on condominium sales – see additional discussion in Note 13), a net gain on sales of land parcels of $0.2 million and a net gain on sales of unconsolidated entities of $0.4 million on the above sales.

5.Commitments to Acquire/Dispose of Real Estate

As of August 2, 2006, in addition to the properties that were subsequently acquired as discussed in Note 16, the Company had entered into separate agreements to acquire the following (purchase price in thousands):

	Properties/ Parcels	Units	Purchase Price
Operating Properties	6	1,178	$	240,450
Land Parcels	2	—	70,065
Total	8	1,178	$	310,515

As of August 2, 2006, the Company had entered into separate agreements (including option rights) to dispose of the following (sales price in thousands):

	Properties/ Parcels	Units	Sales Price
Operating Properties	3	397	$	20,100
Development Properties	1	278	116,000
Land Parcels	2	—	88,000
Total	6	675	$	224,100

The closings of these pending transactions are subject to certain contingencies and conditions; therefore, there can be no assurance that these transactions will be consummated or that the final terms thereof 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 table summarizes the Company’s investments in partially owned entities as of June 30, 2006 (amounts in thousands except for project and unit amounts):

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	Consolidated										Unconsolidated
	Development Projects
	Held for and/or Under Development		Completed and Stabilized		Lexford		Other		Total		Institutional Joint Ventures
Total projects (1)	—		4		17		21		42		45
Total units (1)	—		977		1,999		3,896		6,872		10,846
Debt – Secured (2):
EQR Ownership (3)	$	127,444	$	61,000	$	27,730	$	287,149	$	503,323	$	121,200
Minority Ownership	—		—		4,531		13,321		17,852		363,600
Total (at 100%)	$	127,444	$	61,000	$	32,261	$	300,470	$	521,175	$	484,800

(1)Project and unit counts exclude all uncompleted development projects until those projects are completed.

(2)All debt is non-recourse to the Company with the exception of $28.3 million in mortgage bonds on one development project.

(3)Represents the Company’s economic ownership interest.

7.Deposits – Restricted

The following table presents the deposits – restricted as of June 30, 2006 and December 31, 2005 (amounts in thousands):

	June 30, 2006		December 31, 2005
Tax-deferred (1031) exchange proceeds	$	—	$	853
Earnest money on pending acquisitions	5,795		15,120
Resident security, utility and other	90,060		61,120
Totals	$	95,855	$	77,093

8.Mortgage Notes Payable

As of June 30, 2006, the Company had outstanding mortgage indebtedness of approximately $3.3 billion of which $207.0 million is classified as held for sale.

During the six months ended June 30, 2006, the Company:

·Repaid $246.2 million of mortgage loans;

·Assumed/consolidated $85.8 million of mortgage debt on certain properties in connection with their acquisitions and/or consolidations;

·Obtained $208.9 million of new mortgage loans on certain properties; and

·Was released from $117.9 million of mortgage debt assumed by the purchaser on disposed properties.

As of June 30, 2006, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through February 1, 2041.  At June 30, 2006, the interest rate range on the Company’s mortgage debt was 3.85% to 12.465%.  During the quarter ended June 30, 2006, the weighted average interest rate on the Company’s mortgage debt was 5.80%.

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9.Notes

As of June 30, 2006, the Company had outstanding unsecured notes of approximately $3.8 billion.

During the six months ended June 30, 2006, the Company:

·Issued $400.0 million of ten and one-half year 5.375% fixed rate public notes, receiving net proceeds of $395.5 million.

As of June 30, 2006, scheduled maturities for the Company’s outstanding notes were at various dates through 2029.  At June 30, 2006, the interest rate range on the Company’s notes was 4.75% to 7.625%.  During the six months ended June 30, 2006, the weighted average interest rate on the Company’s notes was 6.05%.

10.Lines of Credit

The Operating Partnership has an unsecured revolving credit facility with potential borrowings of up to $1.0 billion maturing on May 29, 2008, with the ability to increase available borrowings up to $500.0 million under certain circumstances.  Advances under the credit facility bear interest at variable rates based upon LIBOR at various interest periods plus a spread dependent upon the Operating Partnership’s credit rating or based on bids received from the lending group.  EQR has guaranteed the Operating Partnership’s credit facility up to the maximum amount and for the full term of the facility.

On August 30, 2005, the Operating Partnership obtained a new one-year $600.0 million unsecured revolving credit facility maturing on August 29, 2006.  This credit facility was repaid in full and terminated on January 20, 2006.

On July 6, 2006, the Operating Partnership obtained a new one-year $500.0 million unsecured revolving credit facility maturing on July 6, 2007.  Advances under this facility bear interest at variable rates based on LIBOR at various interest periods plus a spread dependent upon the Operating Partnership’s credit rating.  EQR guarantees this credit facility up to the maximum amount and for its full term.

As of June 30, 2006, $547.0 million was outstanding and $95.7 million was restricted (dedicated to support letters of credit and not available for borrowing) on the $1.0 billion revolving credit facility.  During the six months ended June 30, 2006, the weighted average interest rate under such credit facility was 5.02%.

11.Derivative Instruments

The following table summarizes the consolidated derivative instruments at June 30, 2006 (dollar amounts are in thousands):

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	Fair Value Hedges (1)			Forward Starting Swaps (2)			Development Cash Flow Hedges (3)
Current Notional Balance	$	370,000		$	100,000		$	23,825
Lowest Possible Notional	$	370,000		$	100,000		$	13,925
Highest Possible Notional	$	370,000		$	100,000		$	46,296
Lowest Interest Rate	3.245		%	5.596		%	4.530		%
Highest Interest Rate	3.787		%	5.596		%	4.530		%
Earliest Maturity Date	2009			2017			2007
Latest Maturity Date	2009			2017			2007
Estimated Asset (Liability) Fair Value	$	(20,659	)	$	981		$	223

(1)Fair Value Hedges – Converts outstanding fixed rate debt to a floating interest rate.

(2)Forward Starting Swaps – Designed to partially fix the interest rate in advance of a future debt issuance.

(3)Development Cash Flow Hedges – Converts outstanding floating rate debt to a fixed interest rate.

On June 30, 2006, the net derivative instruments were reported at their fair value as other assets of approximately $1.2 million and as other liabilities of approximately $20.7 million.  As of June 30, 2006, there were approximately $11.5 million in deferred losses, net, included in accumulated other comprehensive loss.  Based on the estimated fair values of the net derivative instruments at June 30, 2006, the Company may recognize an estimated $2.2 million of accumulated other comprehensive loss as additional interest expense during the twelve months ending June 30, 2007.

In January 2006, the Company received approximately $10.7 million to terminate six forward starting swaps in conjunction with the issuance of $400.0 million of ten and one-half year unsecured notes.  The $10.7 million has been deferred as a component of accumulated other comprehensive loss and will be recognized as a reduction of interest expense over the life of the unsecured notes.

12.Earnings Per Share

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

	Six Months Ended June 30,						Quarter Ended June 30,
	2006			2005			2006			2005
Numerator for net income per share – basic:
Income from continuing operations, net of minority interests	$	52,502		$	103,888		$	33,883		$	24,382
Preferred distributions	(20,168		)	(26,043		)	(10,073		)	(13,018		)
Income from continuing operations available to Common Shares, net of minority interests	32,334			77,845			23,810			11,364
Discontinued operations, net of minority interests	485,470			264,495			126,274			116,962
Numerator for net income per share – basic	$	517,804		$	342,340		$	150,084		$	128,326

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	Six Months Ended June 30,						Quarter Ended June 30,
	2006			2005			2006			2005
Numerator for net income per share – diluted:
Income from continuing operations, net of minority interests	$	52,502		$	103,888		$	33,883		$	24,382
Preferred distributions	(20,168		)	(26,043		)	(10,073		)	(13,018		)
Effect of dilutive securities:
Allocation to Minority Interests – Operating Partnership, net	2,305			5,685			1,673			823
Income from continuing operations available to Common Shares	34,639			83,530			25,483			12,187
Discontinued operations	519,664			283,792			135,140			125,496
Numerator for net income per share – diluted	$	554,303		$	367,322		$	160,623		$	137,683
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic	289,172			284,899			289,460			285,283
Effect of dilutive securities:
OP Units	20,506			20,894			20,557			20,907
Share options/restricted shares	4,742			3,569			4,681			3,789
Denominator for net income per share – diluted	314,420			309,362			314,698			309,979
Net income per share – basic	$	1.79		$	1.20		$	0.52		$	0.45
Net income per share – diluted	$	1.76		$	1.19		$	0.51		$	0.44
Net income per share – basic:
Income from continuing operations available to Common Shares, net of minority interests	$	0.112		$	0.273		$	0.082		$	0.040
Discontinued operations, net of minority interests	1.679			0.928			0.436			0.410
Net income per share – basic	$	1.791		$	1.201		$	0.518		$	0.450
Net income per share – diluted:
Income from continuing operations available to Common Shares	$	0.110		$	0.270		$	0.081		$	0.039
Discontinued operations	1.653			0.917			0.429			0.405
Net income per share – diluted	$	1.763		$	1.187		$	0.510		$	0.444

Convertible preferred shares/units that could be converted into 1,443,935 and 1,851,982 weighted average Common Shares for the six months ended June 30, 2006 and 2005, respectively, and 1,274,295 and 1,832,986 weighted average Common Shares for the quarters ended June 30, 2006 and 2005, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

13.Discontinued Operations

The Company has presented separately as discontinued operations in all periods the results of operations for all consolidated assets disposed of on or after January 1, 2002 (the date of adoption of SFAS No. 144), all operations related to condominium conversion properties effective upon their respective transfer into a TRS and all properties held for sale.

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets during the six months and quarters ended June 30, 2006 and 2005 (amounts in thousands).

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	Six Months Ended June 30,						Quarter Ended June 30,
	2006			2005			2006			2005
REVENUES
Rental income	$	116,323		$	190,537		$	50,855		$	92,071
Fee and asset management	—			464			—			231
Total revenues	116,323			191,001			50,855			92,302
EXPENSES (1)
Property and maintenance	42,469			62,075			19,845			30,900
Real estate taxes and insurance	13,884			23,650			5,792			10,594
Property management	5,934			5,118			3,156			2,581
Depreciation	25,548			47,030			10,795			22,368
General and administrative	826			706			389			284
Total expenses	88,661			138,579			39,977			66,727
Discontinued operating income	27,662			52,422			10,878			25,575
Interest and other income	1,015			469			37			439
Interest (2):
Expense incurred, net	(10,677		)	(17,701		)	(4,985		)	(8,564		)
Amortization of deferred financing costs	(633		)	(273		)	(586		)	(125		)
Discontinued operations	17,367			34,917			5,344			17,325
Minority Interests – Operating Partnership	(1,143		)	(2,374		)	(351		)	(1,178		)
Discontinued operations, net of minority interests	16,224			32,543			4,993			16,147
Net gain on sales of discontinued operations	502,297			248,875			129,796			108,171
Minority Interests – Operating Partnership	(33,051		)	(16,923		)	(8,515		)	(7,356		)
Gain on sales of discontinued operations, net of minority interests	469,246			231,952			121,281			100,815
Discontinued operations, net of minority interests	$	485,470		$	264,495		$	126,274		$	116,962

(1)Includes expenses paid in the current period for properties sold or held for sale 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 and/or held for sale.

For the properties sold during the six months ended June 30, 2006 (excluding condominium conversion properties), the investment in real estate, net of accumulated depreciation, and the mortgage notes payable balances at December 31, 2005 were $544.9 million and $137.0 million, respectively.

For the properties held for sale at June 30, 2006 (Lexford Housing Division), the investment in real estate, net of accumulated depreciation, and the mortgage notes payable balances at December 31, 2005 were $620.2 million and $205.2 million, respectively.  These amounts exclude the Lexford syndicated portfolio as those properties were not consolidated until January 1, 2006.

Due to the structure of the Company 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.  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, primarily those entities engaged in condominium conversion and sale activities.  The Company recognized provisions for income taxes of $8.1 million and $0.6 million for the six months ended June 30, 2006 and 2005, respectively, and $5.4 million and $0.4 million for the quarters ended June 30, 2006 and 2005, respectively.  These amounts were classified as reductions of discontinued operations, net of minority

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interests in the accompanying consolidated statements of operations.  In addition, the aggregate results of operations (primarily net operating income) of the Company’s condominium conversion properties are included in discontinued operations, net of minority interests in the accompanying consolidated statements of operations.

The net real estate basis of the Company’s condominium conversion properties and land parcels owned by the TRS and included in discontinued operations, which were included in investment in real estate, net in the consolidated balance sheets, was $281.4 million and $292.4 million at June 30, 2006 and December 31, 2005, respectively.

14.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 in April of 2006 in the United States District Court for the District of Maryland.  The suit alleges that the Company designed and built approximately 300 of the Company’s 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 and as a result, no amounts have been accrued at June 30, 2006. While no assurances can be given, the Company does not believe that the suit, if adversely determined, will have a material adverse effect on the Company.

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

During the years ended December 31, 2005 and 2004, the Company established a reserve and recorded a corresponding expense, net of insurance receivables, for estimated uninsured property damage at certain of its properties caused by various hurricanes in each respective year.  During the six months ended June 30, 2006, the Company received $9.1 million in insurance proceeds and recorded an additional $3.8 million of receivables in anticipation of proceeds expected.  As of June 30, 2006, a receivable of $5.8 million and reserve of $8.5 million are included in other assets and rents received in advance and other liabilities, respectively, on the consolidated balance sheets.

As of June 30, 2006, the Company has ten projects totaling 2,973 units in various stages of development with estimated completion dates ranging through September 30, 2008.  The primary development agreements currently in place have the following key terms:

·The first development partner has the right, at any time following completion of a project subject to the agreement, to stipulate a value for such project and offer to sell its interest in the project to the Company based on such value.  If the Company chooses not to purchase the interest, the Company must agree to a sale of the project to an unrelated third party at such value.  The Company’s partner must exercise this right as to all projects subject to the agreement within five years after the receipt of the final certificate of occupancy on the last developed property.   In connection with this development agreement, the Company has an obligation to provide up to $40.0 million in credit enhancements to guarantee a portion of the third party construction financing.  As of August 2, 2006, the Company did

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not have any amounts outstanding related to this credit enhancement.  The Company would be required to perform under this agreement only if there was a material default under a third party construction mortgage agreement.  This agreement expires no later than December 31, 2018.  Notwithstanding the termination of the agreement, the Company shall have recourse against its development partner for any losses incurred.

·The second development partner has the right, at any time following completion of a project subject to the agreement, to require the Company to purchase the partners’ interest in that project at a mutually agreeable price.  If the Company and the partner are unable to agree on a price, both parties will obtain appraisals.  If the appraised values vary by more than 10%, both the Company and its partner will agree on a third appraiser to determine which original appraisal is closest to its determination of value.  The Company may elect at that time not to purchase the property and instead, authorize its partner to sell the project at or above the agreed-upon value to an unrelated third party.  Five years following the receipt of the final certificate of occupancy on the last developed property, the Company must purchase, at the agreed-upon price, any projects remaining unsold.

·The third development partner has the exclusive right for six months following stabilization, as defined, to market a subject project for sale.  Thereafter, either the Company or its development partner may market a subject project for sale.  If the Company’s development partner proposes the sale, the Company may elect to purchase the project at the price proposed by its partner or defer the sale until two independent appraisers appraise the project.  If the two appraised values vary by more than 5%, a third appraiser will be chosen to determine the fair market value of the property.  Once a value has been determined, the Company may elect to purchase the property or authorize its development partner to sell the project at the agreed-upon value.

In addition, the Company has various deal-specific development agreements with partners, the overall terms of which are similar in nature to those described above.

15.Reportable Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by senior management.  Senior management decides how resources are allocated and assesses performance on a monthly basis.

The Company’s primary business is owning, managing, and operating multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents and includes Equity Corporate Housing (“ECH”).  Senior management evaluates the performance of each of our apartment communities on an individual basis; however, each of our apartment communities has similar economic characteristics, residents, and products and services so they have been aggregated into one reportable segment.  The Company’s rental real estate segment comprises approximately 99.5% and 99.3% of total revenues from continuing operations for the six months ended June 30, 2006 and 2005, respectively, and approximately 99.5% and 99.3% of total revenues for the quarters ended June 30, 2006 and 2005, respectively.  The Company’s rental real estate segment comprises approximately 99.8% of total assets at both June 30, 2006 and December 31, 2005.

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 (as reflected in the accompanying consolidated statements of operations).  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.  Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance.  The following table presents the NOI from our rental real estate specific to continuing operations for the six months and quarters ended June 30, 2006 and 2005,

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respectively (amounts in thousands):

	Six Months Ended June 30,						Quarter Ended June 30,
	2006			2005			2006			2005
Rental income	$	958,911		$	808,922		$	489,619		$	412,207
Property and maintenance expense	(252,447		)	(217,248		)	(127,549		)	(111,134		)
Real estate taxes and insurance expense	(97,079		)	(86,632		)	(49,354		)	(43,371		)
Property management expense	(46,664		)	(41,407		)	(23,067		)	(20,796		)
Net operating income	$	562,721		$	463,635		$	289,649		$	236,906

The Company’s fee and asset management activity is immaterial and does not meet the threshold requirements of a reportable segment as provided for in SFAS No. 131.

All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the six months ended June 30, 2006 or 2005.

16.Subsequent Events/Other

Subsequent to June 30, 2006 and through August 2, 2006, the Company:

·Acquired $113.6 million of apartment properties consisting of three properties and 625 units, assumed $26.9 million of mortgage debt on one property and issued OP Units valued at $3.1 million on one property;

·Obtained a new one year $500.0 million revolving credit facility maturing on July 6, 2007;

·Had $10.0 million of a 7.57% $150.0 million unsecured note issuance put back to it effective August 15, 2006;

·Acquired the remaining ownership interest in eleven previously partially owned properties for $5.7 million; and

·Repaid $8.6 million of mortgage loans.

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

Overview

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, 2005.

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 Company assumes no obligation to update or supplement forward-looking statements because of subsequent events.   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 and/or conversion into condominiums, as well as upgrade and sell existing properties as individual condominiums.  We may underestimate the costs necessary to bring an acquired or condominium conversion property up to standards established for its intended market position or to otherwise develop a property.  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 condominiums.  Upon conversion of properties to condominiums, we have increased our risk related to construction performed during the conversion.  Condominium associations may assert that the construction performed was defective, resulting in litigation and/or settlement discussions.  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 for either the rental or condominium market, depending on opportunities in each sub-market.  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 are 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 of multifamily housing, slow 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”.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  The Company undertakes no obligation to publicly release any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.  Forward-looking statements and related uncertainties are also included in Notes 4, 5 and 11 to the Notes to Consolidated Financial Statements in this report.

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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 six months ended June 30, 2006.  In summary, we:

·Acquired $937.2 million of properties consisting of eighteen properties and 4,922 units and $76.5 million of land parcels, all of which we deem to be in our strategic targeted markets; and

·Sold $1.0 billion of apartment properties consisting of 38 properties and 10,528 units as well as 525 condominium units for $107.2 million and one land parcel for $0.9 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 six months ended June 30, 2006 and 2005 (the “Six-Month 2006 Same Store Properties”), which represented 129,965 units and properties that the Company owned for all of both of the quarters ended June 30, 2006 and 2005 (the “Second Quarter 2006 Same Store Properties”), which represented 132,093 units, also impacted the Company’s results of operations.  Both the Six-Month 2006 Same Store Properties and Second Quarter 2006 Same Store Properties are discussed in the following paragraphs.

The Company’s acquisition, disposition, completed development and consolidation of previously unconsolidated property activities also impacted overall results of operations for the six months and quarters ended June 30, 2006 and 2005.  The impacts of these activities are also discussed in greater detail in the following paragraphs.

Comparison of the six months ended June 30, 2006 to the six months ended June 30, 2005

For the six months ended June 30, 2006, income from continuing operations, net of minority interests, decreased by approximately $51.4 million when compared to the six months ended June 30, 2005.  This decrease is primarily attributable to approximately $57.1 million of other income recognized in 2005 related to eBay, Inc’s acquisition of the Company’s interest in Rent.com.

Revenues from the Six-Month 2006 Same Store Properties increased $45.3 million primarily as a result of higher rental rates charged to residents.  Expenses from the Six-Month 2006 Same Store Properties increased $13.5 million primarily due to higher utilities, insurance and real estate taxes.  All same store results exclude the Lexford Housing Division.  See Note 4 in the Notes to Consolidated Financial Statements for further discussion.  The following tables provide comparative revenue, expense, NOI and occupancy/turnover statistics for the Six-Month 2006 Same Store Properties:

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June YTD 2006 vs. June YTD 2005

YTD over YTD Same-Store Results

$ in Millions – 129,965 Same-Store Units (excludes Lexford)

Description	Revenues			Expenses			NOI
YTD 2006	$	802.5		$	314.3		$	488.2
YTD 2005	$	757.2		$	300.8		$	456.4
Change	$	45.3		$	13.5		$	31.8
Change	6.0		%	4.5		%	7.0		%

Same Store Statistics (excludes Lexford)

	Occupancy		Turnover
YTD 2006	94.6	%	30.5	%
YTD 2005	94.4	%	31.7	%
Change	0.2	%	(1.2	)%

The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the Six-Month 2006 Same Store Properties:

	Six Months Ended June 30,
	2006			2005
	(Amounts in millions)
Operating income	$	268.1		$	221.1
Adjustments:
Insurance (1)	(4.9		)	—
Non-same store operating results	(69.6		)	(7.2		)
Fee and asset management revenue	(4.8		)	(5.4		)
Fee and asset management expense	4.3			4.2
Depreciation	271.9			212.2
General and administrative	23.2			31.5
Same store NOI	$	488.2		$	456.4

(1) Amount represents additional insurance reimbursements.

For properties that the Company acquired prior to January 1, 2005 and expects to continue to own through December 31, 2006, the Company anticipates the following same store results for the full year ending December 31, 2006:

2006 Same Store Assumptions
Physical Occupancy	94.5%
Revenue Change	5.25% to 5.75%
Expense Change	2.50% to 3.50%
NOI Change	6.50% to 8.00%

These 2006 assumptions are based on current expectations and are forward-looking.

Non-same store operating results increased $62.4 million and consist primarily of properties acquired in calendar years 2006 and 2005 as well as our corporate housing business.

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Fee and asset management revenues, net of fee and asset management expenses decreased $0.7 million primarily as a result of lower income earned from managing fewer properties for third parties and unconsolidated entities.  As of June 30, 2006 and 2005, the Company managed 14,784 units and 17,539 units, respectively, for third parties and unconsolidated entities.

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 by approximately $5.3 million or 12.7%.  This increase is primarily attributable to higher overall payroll costs, temporary contracting costs and training costs specific to the Company’s rollout of a new property management system.

Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased $59.7 million primarily as a result of additional depreciation expense on newly acquired properties and capital expenditures for all properties owned.

General and administrative expenses, which include corporate operating expenses, decreased approximately $8.3 million between the periods under comparison.  This decrease was primarily due to lower executive compensation expense due to severance costs for several executive officers incurred during the six months ended June 30, 2005 and a $2.8 million reimbursement of legal expenses during the quarter ended June 30, 2006.  The Company anticipates that general and administrative expenses will approximate $48.0 million for the year ending December 31, 2006.  This above assumption is based on current expectations and is forward-looking.

Interest and other income from continuing operations decreased by approximately $57.9 million, primarily as a result of the $57.1 million in cash received during the six months ended June 30, 2005 for the Company’s ownership interest in Rent.com, which was acquired by eBay, Inc.

Interest expense from continuing operations, including amortization of deferred financing costs, increased approximately $36.6 million primarily as a result of higher variable interest rates and overall debt levels outstanding.  During the six months ended June 30, 2006, the Company capitalized interest costs of approximately $7.8 million as compared to $5.8 million for the six months ended June 30, 2005.  This capitalization of interest primarily relates to projects under development.  The effective interest cost on all indebtedness for the six months ended June 30, 2006 was 6.19% as compared to 6.18% for the six months ended June 30, 2005.

Loss from investments in unconsolidated entities increased approximately $0.2 million between the periods under comparison.  This increase is primarily the result of consolidating previously unconsolidated properties as of January 1, 2006 as the result of EITF Issue No. 04-05.  See Note 4 in the Notes to Consolidated Financial Statements for further discussion.

Net gain on sales of land parcels decreased $10.1 million, due to a large gain recorded on the sale of one land parcel during the six months ended June 30, 2005.

Discontinued operations, net of minority interests, increased approximately $221.0 million between the periods under comparison.  This increase is primarily the result of higher per unit sales prices and lower real estate net book values for properties sold during the six months ended June 30, 2006 as compared to the same period in 2005.  Discontinued operations, net of minority interests includes our Lexford Housing Division, which is held for sale as of June 30, 2006.  See Note 13 in the Notes to Consolidated Financial Statements for further discussion.

Comparison of the quarter ended June 30, 2006 to the quarter ended June 30, 2005

For the quarter ended June 30, 2006, income from continuing operations, net of minority interests, increased by approximately $9.5 million when compared to the quarter ended June 30, 2005.

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Revenues from the Second Quarter 2006 Same Store Properties increased $23.1 million primarily as a result of higher rental rates charged to residents.  Expenses from the Second Quarter 2006 Same Store Properties increased $5.3 million primarily due to higher utilities, insurance and real estate taxes.  The following tables provide comparative revenue, expense, NOI and occupancy/turnover statistics for the Second Quarter 2006 Same Store Properties:

Second Quarter 2006 vs. Second Quarter 2005

Quarter over Quarter Same-Store Results

$ in Millions – 132,093 Same-Store Units (excludes Lexford)

Description	Revenues			Expenses			NOI
Q2 2006	$	411.6		$	158.8		$	252.8
Q2 2005	$	388.5		$	153.5		$	235.0
Change	$	23.1		$	5.3		$	17.8
Change	5.9		%	3.5		%	7.6		%

Same Store Statistics (excludes Lexford)

	Occupancy		Turnover
Q2 2006	94.6	%	16.6	%
Q2 2005	94.6	%	17.3	%
Change	0.0	%	(0.7	)%

The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the Second Quarter 2006 Same Store Properties:

	Quarter Ended June 30,
	2006			2005
	(Amounts in millions)
Operating income	$	140.3		$	116.3
Adjustments:
Insurance (1)	(2.0		)	—
Non-same store operating results	(34.9		)	(2.0		)
Fee and asset management revenue	(2.3		)	(3.0		)
Fee and asset management expense	2.2			2.1
Depreciation	139.9			107.8
General and administrative	9.6			13.8
Same store NOI	$	252.8		$	235.0

(1) Amount represents additional insurance reimbursements.

Non-same store operating results increased $32.9 million and consist primarily of properties acquired in calendar years 2006 and 2005 as well as our corporate housing business.

Fee and asset management revenues, net of fee and asset management expenses decreased $0.8 million primarily as a result of lower income earned from managing fewer properties for third parties and unconsolidated entities.

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 by approximately $2.3 million or 10.9%.  This increase is

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primarily attributable to higher overall payroll costs and training costs specific to the Company’s rollout of a new property management system.

Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased $32.1 million primarily as a result of additional depreciation expense on newly acquired properties and capital expenditures for all properties owned.

General and administrative expenses, which include corporate operating expenses, decreased approximately $4.2 million between the periods under comparison.  This decrease was primarily due to lower executive compensation expense due to severance costs for several executive officers incurred during the quarter ended June 30, 2005 and a $2.8 million reimbursement of legal expenses during the quarter ended June 30, 2006.

Interest and other income from continuing operations decreased by approximately $0.8 million, primarily as a result of lower interest income on mortgages receivable and profit participation income from joint venture partners.

Interest expense from continuing operations, including amortization of deferred financing costs, increased approximately $15.2 million primarily as a result of higher variable interest rates and overall debt levels outstanding.  During the quarter ended June 30, 2006, the Company capitalized interest costs of approximately $3.8 million as compared to $2.9 million for the quarter ended June 30, 2005.  This capitalization of interest primarily relates to projects under development.  The effective interest cost on all indebtedness for the quarter ended June 30, 2006 was 6.14% as compared to 6.20% for the quarter ended June 30, 2005.

Loss from investments in unconsolidated entities was consistent between the periods under comparison.  See Note 4 in the Notes to Consolidated Financial Statements for further discussion.

Net gain (loss) on sales of land parcels was consistent between the periods under comparison.

Discontinued operations, net of minority interests, increased approximately $9.3 million between the periods under comparison.  This increase is primarily the result of higher per unit sales prices and lower real estate net book values for properties sold during the quarter ended June 30, 2006 as compared to the same period in 2005.

Liquidity and Capital Resources

As of January 1, 2006, the Company had approximately $88.8 million of cash and cash equivalents and $780.8 million available under its revolving credit facilities (net of $50.2 million which was restricted/dedicated to support letters of credit and not available for borrowing).  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 June 30, 2006 was approximately $72.2 million and the amount available on the Company’s revolving credit facility was $357.3 million (net of $95.7 million which was restricted/dedicated to support letters of credit and not available for borrowing).

During the six months ended June 30, 2006, the Company generated proceeds from various transactions, which included the following:

·Disposed of 42 properties and various individual condominium units, receiving net proceeds of approximately $1.0 billion;

·Obtained $395.5 million in net proceeds from the issuance of $400.0 million of ten and one-half year 5.375% fixed rate public notes and terminated six forward starting swaps designated to hedge the note issuance, receiving net proceeds of $10.7 million;

·Obtained $208.9 million in new mortgage financing; and

·Issued approximately 1.1 million Common Shares and received net proceeds of $29.4 million.

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During the six months ended June 30, 2006, the above proceeds were primarily utilized to:

·Invest $122.8 million primarily in development projects;

·Acquire 18 properties and five land parcels, utilizing cash of $908.0 million;

·Repurchase 1.9 million Common Shares utilizing cash of $82.0 million;

·Repay $246.2 million of mortgage loans; and

·Redeem the Series G Preference Interests at a liquidation value of $25.5 million.

Depending on its analysis of market prices, economic conditions, and other opportunities for the investment of available capital, the Company may repurchase its Common Shares pursuant to its existing share buyback program authorized by the Board of Trustees.  The Company repurchased $82.0 million (1,871,883 shares at an average price per share of $43.80) of its Common Shares during the six months ended June 30, 2006 to offset the issuance of 1,079,001 OP Units in connection with two property acquisitions and to offset restricted shares granted and ESPP shares purchased during the six months ended June 30, 2006.  The Company is authorized to repurchase approximately $503.0 million of additional Common Shares.

The Company’s total debt summary and debt maturity schedules as of June 30, 2006, are as follows:

Debt Summary as of June 30, 2006

(Amounts in thousands)

	Amounts (1)		% of Total		Weighted Average Rates (1)		Weighted  Average Maturities (years)
Secured	$	3,303,456	43.0	%	5.80	%	6.4
Unsecured	4,385,697		57.0	%	5.96	%	7.2
Total	$	7,689,153	100.0	%	5.89	%	6.8
Fixed Rate Debt:
Secured – Conventional	$	2,455,981	32.0	%	6.34	%	4.3
Secured – Tax Exempt	18,317		0.2	%	6.49	%	18.8
Unsecured – Public/Private	3,577,307		46.5	%	6.09	%	7.7
Unsecured – Tax Exempt	111,390		1.5	%	5.10	%	22.8
Fixed Rate Debt	6,162,995		80.2	%	6.17	%	6.6
Floating Rate Debt:
Secured – Conventional	293,998		3.8	%	5.99	%	2.2
Secured – Tax Exempt	535,160		7.0	%	3.45	%	17.9
Unsecured – Public	150,000		1.9	%	5.85	%	2.9
Unsecured – Revolving Credit Facilities	547,000		7.1	%	5.02	%	1.9
Floating Rate Debt	1,526,158		19.8	%	4.65	%	7.6
Total	$	7,689,153	100.0	%	5.89	%	6.8

(1) Net of the effect of any derivative instruments.  Weighted average rates are for the six months ended June 30, 2006.

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Debt Maturity Schedule as of June 30, 2006

(Amounts in thousands)

Year		Fixed Rate (1)		Floating Rate (1)		Total		% of Total		Weighted  Average Rates  on Fixed Rate  Debt (1)		Weighted  Average Rates  on Total Debt  (1)
2006	(2)	$	258,177	$	53,838	$	312,015	4.1	%	7.12	%	7.12	%
2007		326,805		42,073		368,878		4.8	%	6.88	%	6.82	%
2008	(3)	548,086		576,334		1,124,420		14.6	%	6.71	%	6.05	%
2009		477,726		377,890		855,616		11.1	%	6.44	%	5.35	%
2010		279,986		—		279,986		3.6	%	7.05	%	7.05	%
2011		806,265		24,150		830,415		10.8	%	6.86	%	6.75	%
2012		535,042		—		535,042		7.0	%	6.51	%	6.51	%
2013		567,282		—		567,282		7.4	%	5.93	%	5.93	%
2014		504,085		—		504,085		6.6	%	5.27	%	5.27	%
2015		316,432		—		316,432		4.1	%	6.54	%	6.54	%
2016+	(2)	1,543,109		451,873		1,994,982		25.9	%	5.74	%	5.45	%
Total		$	6,162,995	$	1,526,158	$	7,689,153	100.0	%	6.29	%	6.00	%

(1)Net of the effect of any derivative instruments. Weighted average rates are as of June 30, 2006.

(2)2006 includes $10.0 million of 7.57% unsecured debt with a final maturity of 2026 that has been put back to the Company effective August 15, 2006. 2016+ includes $140.0 million of 7.57% unsecured debt with a final maturity of 2026 that was not put back to the Company.

(3)Includes $547.0 million outstanding on the Company’s unsecured revolving credit facility, which matures on May 29, 2008.

The following table provides a summary of the Company’s unsecured debt as of June 30, 2006:

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Unsecured Debt Summary as of June 30, 2006

(Amounts in thousands)

								Unamortized
	Coupon		Due		Face			Premium/			Net
	Rate		Date		Amount			(Discount)			Balance
Fixed Rate Notes:
	6.690	%	11/01/06		$	50,000		$	(17	)	$	49,983
	7.625	%	04/15/07		50,000			137			50,137
	6.900	%	08/01/07		50,000			(27		)	49,973
	7.540	%	09/01/07	(1)	8,571			—			8,571
	4.861	%	11/30/07		50,000			—			50,000
	7.500	%	08/15/08	(1)	130,000			—			130,000
	4.750	%	06/15/09	(2)	300,000			(811		)	299,189
	6.950	%	03/02/11		300,000			3,999			303,999
	6.625	%	03/15/12		400,000			(1,676		)	398,324
	5.200	%	04/01/13		400,000			(799		)	399,201
	5.250	%	09/15/14		500,000			(505		)	499,495
	6.584	%	04/13/15		300,000			(974		)	299,026
	5.125	%	03/15/16		500,000			(520		)	499,480
	5.375	%	08/01/16		400,000			(1,871		)	398,129
	7.125	%	10/15/17		150,000			(732		)	149,268
	7.570	%	08/15/26	(3)	150,000			—			150,000
Floating Rate Adjustments				(2)	(150,000		)	—			(150,000		)
FAS 133 Adjustments - net				(2)	(7,468		)	—			(7,468		)
					3,581,103			(3,796		)	3,577,307
Fixed Rate Tax Exempt Notes:
	4.750	%	12/15/28	(1)	35,600			—			35,600
	5.200	%	06/15/29	(1)	75,790			—			75,790
					111,390			—			111,390
Floating Rate Notes:			06/15/09	(2)	150,000			—			150,000
Revolving Credit Facility:			05/29/08		547,000			—			547,000
Total Unsecured Debt					$	4,389,493		$	(3,796	)	$	4,385,697

(1)Notes are private.  All other unsecured debt is public.

(2)$150.0 million in fair value interest rate swaps converts 50% of the 4.750% Notes due June 15, 2009 to a floating interest rate.

(3)Put period expired July 15, 2006 with $10.0 million put back to the Company effective August 15, 2006.

As of August 2, 2006, an unlimited amount of debt securities remains available for issuance by the Operating Partnership under a registration statement that became automatically effective upon filing with the SEC in June 2006 (under SEC regulations, the registration statement automatically expires on June 29, 2009 and does not contain a maximum issuance amount) and $956.5 million in equity securities remains available for issuance by the Company under a registration statement the SEC declared effective in February 1998.

The Company’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of June 30, 2006 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 OP Units at the equivalent

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market value of the closing price of the Company’s Common Shares on the New York Stock Exchange; (ii) the “Common Share Equivalent” of all convertible preferred shares and preference interests/units; and (iii) the liquidation value of all perpetual preferred shares outstanding.

Capital Structure as of June 30, 2006

(Amounts in thousands except for share and per share amounts)

Secured Debt					$	3,096,427	40	%
Secured Debt – Held for Sale					207,029		3	%
Unsecured Debt					3,838,697		50	%
Lines of Credit					547,000		7	%
Total Debt					7,689,153		100	%	35	%
Common Shares	290,955,828		93	%
OP Units	20,653,448		7	%
Total Shares and OP Units	311,609,276		100	%
Common Share Equivalents (see below)	903,766
Total outstanding at quarter-end	312,513,042
Common Share Price at June 30, 2006	$	44.73
					13,978,708		97	%
Perpetual Preferred Equity (see below)					490,000		3	%
Total Equity					14,468,708		100	%	65	%
Total Market Capitalization					$	22,157,861			100	%

Convertible Preferred Equity as of June 30, 2006

(Amounts in thousands except for share and per share amounts)

Series	Redemption  Date	Outstanding  Shares/Units	Liquidation  Value		Annual  Dividend Per  Share/Unit		Annual  Dividend  Amount		Weighted  Average  Rate		Conversion  Ratio	Common  Share  Equivalents
Preferred Shares:
7.00% Series E	11/1/98	473,816	$	11,846	$	1.75	$	829			1.1128	527,262
7.00% Series H	6/30/98	30,734	768		1.75		54				1.4480	44,503
Preference Interests:
7.625% Series J	12/14/06	230,000	11,500		3.8125		877				1.4108	324,484
Junior Preference Units:
8.00% Series B	7/29/09	7,367	184		2.00		15				1.020408	7,517
Total Convertible Preferred Equity		741,917	$	24,298			$	1,775	7.31	%		903,766

Perpetual Preferred Equity as of June 30, 2006

(Amounts in thousands except for share and per share amounts)

Series	Redemption  Date	Outstanding  Shares/Units	Liquidation  Value		Annual  Dividend Per  Share/Unit		Annual  Dividend  Amount		Weighted  Average  Rate
Preferred Shares:
9 1/8% Series C	9/9/06	460,000	$	115,000	$	22.8125	$	10,494
8.60% Series D	7/15/07	700,000	175,000		21.50		15,050
8.29% Series K	12/10/26	1,000,000	50,000		4.145		4,145
6.48% Series N	6/19/08	600,000	150,000		16.20		9,720
Total Perpetual Preferred Equity		2,760,000	$	490,000			$	39,409	8.04	%

The Company expects to meet its short-term liquidity requirements, including capital expenditures related to maintaining its existing properties and certain scheduled unsecured note and mortgage note repayments, generally through its working capital, net cash provided by operating activities and borrowings under its revolving credit facilities.  The Company considers its cash provided by operating activities to be adequate to meet operating/capital requirements and payments of distributions.  The Company also expects to

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meet its long-term liquidity requirements, such as scheduled unsecured note and mortgage debt maturities, property acquisitions and financing of construction and development activities through the issuance of unsecured notes and equity securities, including additional OP Units, and proceeds received from the disposition of certain properties.  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 $17.1 billion in investment in real estate on the Company’s balance sheet at June 30, 2006 (including gross Lexford real estate held for sale), $11.3 billion or 66.1%, was unencumbered.

The Operating Partnership has a long-term revolving credit facility with potential borrowings of up to $1.0 billion which matures in May 2008 and a short-term revolving credit facility with potential borrowings of up to $500.0 million which matures in July 2007.  These facilities may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short term liquidity requirements.  As of August 2, 2006, $735.0 million was outstanding under these facilities.

See Note 16 in the Notes to Consolidated Financial Statements for discussion of the events which occurred subsequent to June 30, 2006.

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 unit).  These include:

·flooring such as carpets, hardwood, vinyl, linoleum 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/shades.

All replacements are depreciated over a five-year estimated useful life.  We expense as incurred all make-ready maintenance and turnover costs such as cleaning, interior painting of individual units and the repair of any replacement item noted above.

·Building improvements (outside the 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 ten-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 six months ended June 30, 2006, our actual improvements to real estate totaled approximately $106.4 million.  This i`ncludes the following detail (amounts in thousands except for unit and per unit amounts):

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Capitalized Improvements to Real Estate

For the Six Months Ended June 30, 2006

	Total Units  (1)	Replacements		Avg. Per  Unit		Building  Improvements		Avg. Per  Unit		Total		Avg. Per  Unit
Established Properties (2)	116,680	$	21,180	$	181	$	36,854	$	316	$	58,034	$	497
New Acquisition Properties (3)	25,874	4,191		179		10,886		465		15,077		644
Properties Held for Sale (4)	27,248	5,495		202		3,457		127		8,952		329
Other (5)	7,291	10,006				14,372				24,378
Total	177,093	$	40,872			$	65,569			$	106,441

(1)Total units exclude 10,846 unconsolidated units and 3,643 military housing (fee managed) units.

(2)Wholly Owned Properties acquired prior to January 1, 2004.

(3)Wholly Owned Properties acquired during 2004, 2005 and 2006.  Per unit amounts are based on a weighted average of 23,422 units.

(4)Properties held for sale include the entire Lexford Portfolio; 27,115 units under contract as previously disclosed and 133 miscellaneous units to be sold separately.

(5)Includes properties either Partially Owned or sold during the period, commercial space, condominium conversions and $3.4 million included in building improvements spent on seven specific assets related to major renovations and repositioning of these assets.

The Company expects to fund approximately $60.0 million for capital expenditures for replacements and building improvements for all consolidated properties, exclusive of condominium conversion properties, for the remainder of 2006.  This includes an average of approximately $1,000 per unit for capital improvements for established properties.

During the six months ended June 30, 2006, 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 $4.1 million.  The Company expects to fund approximately $6.2 million in total additions to non-real estate property for the remainder of 2006.

Improvements to real estate and additions to non-real estate property were funded from net cash provided by operating activities.

Derivative Instruments

In the normal course of business, the Company is exposed to the effect of interest rate changes.  The Company limits 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 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 those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.

See Note 11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at June 30, 2006.

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Other

Minority Interests as of June 30, 2006 decreased by $23.3 million when compared to December 31, 2005.  The primary factors that impacted this account in the Company’s consolidated statements of operations and balance sheets during the six months ended June 30, 2006 were:

·      The redemption or conversion of 1.0 million Series G, H and I Preference Interests with a combined liquidation value of $48.5 million and a premium on redemption of $0.7 million (see Note 3 in the Notes to Consolidated Financial Statements for further discussion);

·      Distributions declared to Minority Interests, which amounted to $17.9 million (excluding Junior Preference Unit and Preference Interest distributions);

·      The allocation of income from operations to holders of OP Units in the amount of $36.5 million;

·      The issuance of 1,079,001 OP Units for the acquisition of two properties with a valuation of $46.5 million; and

·      The conversion of 0.8 million OP Units into Common Shares.

Total distributions paid in July 2006 amounted to $146.7 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the second quarter ended June 30, 2006.

On June 28, 2006, the Company announced that it agreed to sell its Lexford Housing Division for a cash purchase price of $1.086 billion.  The Company’s Board of Trustees has approved the sale, which is expected to close in the fourth quarter of 2006.  Lexford results are classified as discontinued operations, net of minority interests, in the consolidated statements of operations for all periods presented and Lexford investment in real estate and mortgage notes payable balances are classified as held for sale in the consolidated balance sheets as of June 30, 2006.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company has co-invested in various properties that are unconsolidated and accounted for under the equity method of accounting.  Management does not believe these investments have a materially different impact upon the Company’s liquidity, capital resources, credit or market risk than its property management and ownership activities.  The nature and business purpose of these ventures are as follows:

·Institutional Ventures – During 2000 and 2001, the Company entered into ventures with an unaffiliated partner.   At the respective closing dates, the Company sold and/or contributed 45 properties containing 10,846 units to these ventures and retained a 25% ownership interest in the ventures.  The Company’s joint venture partner contributed cash equal to 75% of the agreed-upon equity value of the properties comprising the ventures, which was then distributed to the Company.  The Company’s strategy with respect to these ventures was to reduce its concentration of properties in a variety of markets.

As of June 30, 2006, the Company has ten projects totaling 2,973 units in various stages of development with estimated completion dates ranging through September 30, 2008.  The development agreements currently in place are discussed in detail in Note 14 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 Company’s contractual obligations for the next five years and thereafter have not changed materially from the amounts and disclosures included in its annual report on Form 10-K, other than as it relates to scheduled debt maturities.  See the updated debt maturity schedule included in Liquidity and Capital Resources for further discussion.

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Critical Accounting Policies and Estimates

The Company has identified six 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 assessments is consistently applied and produces financial information that fairly presents the results of operations for all periods presented.  The six critical accounting policies are:

Impairment of Long-Lived Assets, Including Goodwill

The Company periodically evaluates its long-lived assets, including its investments in real estate and goodwill, for indicators of permanent impairment.  The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset and legal and environmental concerns.  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 10-year estimated useful life and both the furniture, fixtures and equipment and replacements components over a 5-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 discussion of the policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs.  In addition, the Company capitalizes the payroll and associated costs of employees directly responsible for and who spend all of their time on the supervision of major capital and/or renovation projects.  These costs are reflected on the balance sheet as an increase to depreciable property.

The Company follows the guidance in SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, for all development projects and 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 all of 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 sheet 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 renovation at selected properties when additional incremental employees are hired.

Fair Value of Financial Instruments, Including Derivative Instruments

The valuation of financial instruments under SFAS No. 107 and SFAS No. 133 and its amendments (SFAS Nos. 137/138/149) 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 statements.

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Revenue Recognition

Rental income attributable to leases is recorded when due from residents and is recognized monthly as it is earned, which is not materially different than on a straight-line basis.  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.  Fee and asset management revenue and interest income are recorded on an accrual basis.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with SFAS No. 123(R),   Share-Based Payment, effective January 1, 2006, which results in compensation expense being recorded based on the fair value of the stock compensation granted.

Funds From Operations

For the six months ended June 30, 2006, Funds From Operations (“FFO”) available to Common Shares and OP Units decreased $36.9 million, or 9.1%, as compared to the six months ended June 30, 2005.  This decrease is primarily attributable to approximately $57.1 million of other income recognized in 2005 related to eBay, Inc’s acquisition of the Company’s interest in Rent.com.

For the quarter ended June 30, 2006, FFO available to Common Shares and OP Units increased $18.5 million, or 10.7%, as compared to the quarter ended June 30, 2005.

The following is a reconciliation of net income to FFO available to Common Shares and OP Units for the six months and quarters ended June 30, 2006 and 2005:

Funds From Operations

(Amounts in thousands)

(Unaudited)

	Six Months Ended June 30,						Quarter Ended June 30,
	2006			2005			2006			2005
Net income	$	537,972		$	368,383		$	160,157		$	141,344
Allocation to Minority Interests – Operating Partnership, net	2,305			5,685			1,673			823
Adjustments:
Depreciation	271,924			212,238			139,906			107,832
Depreciation – Non-real estate additions	(3,682		)	(2,685		)	(1,886		)	(1,391		)
Depreciation – Partially Owned and Unconsolidated Properties	2,563			(638		)	1,013			(387		)
Net gain on sales of unconsolidated entities	(352		)	(124		)	(23		)	—
Discontinued operations:
Depreciation	25,429			47,030			10,724			22,368
Gain on sales of discontinued operations, net of minority interests	(469,246		)	(231,952		)	(121,281		)	(100,815		)
Net incremental gain on sales of condominium units	18,553			29,036			11,426			15,554
Minority Interests – Operating Partnership	1,143			2,374			351			1,178
FFO (1)(2)	386,609			429,347			202,060			186,506
Preferred distributions	(20,168		)	(26,043		)	(10,073		)	(13,018		)
FFO available to Common Shares and OP Units	$	366,441		$	403,304		$	191,987		$	173,488

(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 of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint

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ventures will be 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 units to condominiums, it simultaneously discontinues depreciation of such property.

(2)The Company believes that FFO is helpful to investors as a supplemental measure of the operating performance of a real estate company, because it is a recognized measure 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 can help compare the operating performance of a company’s real estate between periods or as compared to different companies.  FFO in and of itself does not represent net income or net cash flows from operating activities in accordance with GAAP.  Therefore, FFO should not be exclusively considered as an alternative to net income or to net cash flows from operating activities as determined by GAAP or as a measure of liquidity.  The Company’s calculation of FFO 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s market risk has not changed materially from the amounts and information reported in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, to the Company’s Form 10-K for the year ended December 31, 2005.  See also Note 11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures:

Effective as of June 30, 2006, 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 periods specified in the SEC’s rules and forms.

(b)  Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Company identified in connection with the Company’s evaluation referred to above that occurred during the second quarter of 2006 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

PART II.        OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is party to a housing discrimination lawsuit brought in April of 2006 in the United States District Court for the District of Maryland.  The suit alleges that the Company designed and built approximately 300 of the Company’s 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 and as a result, no amounts have been accrued at June 30, 2006.  While no assurances can be given, the Company does not believe that the suit, if adversely determined, will have a material adverse effect on the Company.

The Company does not believe there is any other litigation pending or threatened against the Company

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which, individually or in the aggregate, reasonably may be expected to have a material adverse effect on the Company.

Item 1A.  Risk Factors

There have been no material changes related to the risk factors that were discussed in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2005.

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

(a)  Unregistered Common Shares Issued in the Quarter Ended June 30, 2006

On June 22, 2006, the Company issued 392,634 Common Shares, valued at approximately $17.4 million on the date of issuance, to certain preferred partners of a subsidiary of the Operating Partnership upon exchange for 270,000 Preference Interests.  Such shares were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, 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 sale and information obtained by the Company from the preferred partners in connection with these transactions, the Company believes it may rely on this exemption.

(c)  Common Shares Repurchased in the Quarter Ended June 30, 2006

The Company repurchased the following Common Shares during the quarter ended June 30, 2006:

Period	Total Number of Common  Shares Purchased (1)	Average Price Paid Per Share (1)		Total Number of  Common Shares  Purchased as Part of Publicly Announced  Plans or Programs (1)	Dollar Value of  Common Shares  that May Yet Be  Purchased Under  the Plans or  Programs (1)
May 2006	852,083	$	43.68	852,083	$	503,019,002
Second Quarter 2006	852,083	$	43.68	852,083

(1)The Common Shares repurchased during the quarter ended June 30, 2006 represent Common Shares repurchased in the open market under the Company’s publicly announced share repurchase program approved by its Board of Trustees.  Under this program, the Company may repurchase in open market or privately negotiated transactions up to $585.0 million of its Common Shares, with $503.0 million remaining following the above purchases.

Item 4.  Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Shareholders on May 25, 2006.  Shareholders holding 267,131,900 Common Shares (being the only class of shares entitled to vote at the meeting), or 91.72% of the Company’s issued and outstanding Common Shares as of the record date for the meeting, attended the meeting or were represented by proxy.  The Company’s shareholders voted on two proposals presented at the meeting and both received the requisite number of votes to pass.  The results of the shareholders’ votes on the two proposals are as follows:

Proposal I– Election of the following trustees to annual terms expiring in 2007.  A plurality of the votes cast was required for the election of trustees.

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NOMINEE	FOR	WITHHELD
John W. Alexander	260,652,629	6,479,272
Charles L. Atwood	263,280,236	3,851,666
Stephen O. Evans	245,690,267	21,441,635
James D. Harper, Jr.	260,326,651	6,805,250
Boone A. Knox	262,250,516	4,881,386
David J. Neithercut	261,940,447	5,191,455
Desiree G. Rogers	263,270,109	3,861,792
Sheli Z. Rosenberg	257,863,301	9,268,601
Gerald A. Spector	261,856,715	5,275,187
B. Joseph White	261,393,145	5,738,756
Samuel Zell	258,444,441	8,687,461

Proposal II – Approval to ratify the selection of Ernst & Young LLP as the Company’s independent auditor for the year ending December 31, 2006.  A majority of the votes cast was required for approval.

	FOR	AGAINST	ABSTAIN
Total Shares	262,531,443	3,260,741	1,339,716
% of Voted Shares	98.27%	1.22%	0.50%
% of Outstanding	90.14%	1.11%	0.45%

Item 6.    Exhibits

10.1Form of Lexford Housing Division Sale Agreement.

31.1Certification of David J. Neithercut, Chief Executive Officer.

31.2Certification of Donna Brandin, Chief Financial Officer.

32.1Certification 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.

32.2Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,  Donna Brandin, Chief Financial Officer of the Company.

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SIGNATURES

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

		EQUITY RESIDENTIAL
Date:	August 7, 2006	By:	/s/	Donna Brandin
				Donna Brandin
				Executive Vice President and
				Chief Financial Officer
Date:	August 7, 2006	By:	/s/	Mark L. Wetzel
				Mark L. Wetzel
				Senior Vice President and
				Chief Accounting Officer

EXHIBIT INDEX

Exhibit	Document
10.1	Form of Lexford Housing Division Sale Agreement
31.1	Certification of David J. Neithercut, Chief Executive Officer.
31.2	Certification of Donna Brandin, Chief Financial Officer.
32.1	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.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Donna Brandin, Chief Financial Officer of the Company.

EX-10.1

Exhibit 10.1

Certain direct and indirect subsidiaries of Equity Residential (collectively, the “Company”) have agreed to sell the Company’s Lexford Housing Division to certain affiliates of Empire Group Holdings LLC for a total cash purchase price of $1,086,000,000, as reported in the Company’s current report on Form 8-K dated June 28, 2006, through the execution and delivery of eight substantially similar purchase and sales agreements.  The Company is herewith filing the form of purchase and sale agreement and the exhibits thereto containing substantive transaction terms.  Seven of the eight Agreements contemplate the sale of limited liability equity interests, as reflected in the attached form Agreement.  The remaining Agreement, representing less than eight percent of the total cash purchase price, contemplates the direct sale of properties, and therefore certain of the provisions of such Agreement differ from the attached form solely to reflect this difference.

LEXFORD

LLC MEMBERSHIP INTEREST TRANSFER AGREEMENT – [#]

THIS LEXFORD LLC MEMBERSHIP INTEREST TRANSFER AGREEMENT (“Agreement”) is entered into as of the 28th day of June, 2006 (“Effective Date”), by and among [Seller Entity] (“              ” or the “Seller”) and [Buyer Entity], a Delaware limited liability company (“Buyer”).

RECITALS:

WHEREAS, [Seller Entity] is [or intends to be – see Section 2.1] the indirect owner of 100% of the equity ownership interests in the Properties described in Exhibit A;

WHEREAS, [Seller Entity] desires to sell and Buyer agrees to purchase [Seller Entity]’s 100% membership interest (the “Interest”) in [subsidiary of Seller Entity], a Delaware limited liability company (the “Owner LLC”), which owns 100% of the equity interests in the Property Owners (collectively, the “Property Owner Interests”) owning legal and equitable title to the Properties described in Exhibit A, including any related improvements, facilities, amenities, structures, driveways and walkways constructed on such Properties.

NOW, THEREFORE, in consideration of the above recitals, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

Section 1.               DEFINITIONS AND EXHIBITS.

1.1           Definitions.  For purposes of this Agreement, each of the following terms, when used herein with an initial capital letter, shall have the meaning ascribed to it as follows:

Affiliate.  Of any Person means another Person which, directly or indirectly, controls or is controlled by that Person, or is under common control with that Person.

Agreement.  This Lexford LLC Membership Interest Transfer Agreement – [#].

Building(s).  The buildings located on the Land and having the address shown on Exhibits A attached hereto and by this reference made a part thereof.

Business Day.  Each day other than Saturday, Sunday and any other day on which trading does not occur on the New York Stock Exchange and any day that is a Jewish holiday on which work may not be performed in accordance with Orthodox Jewish custom.

Buyer Disclosure Parties.  Buyer Parties together with their financial advisors, lenders, partners, lawyers, consultants, employees, officers and other agents.

Buyer Inspection Party.  As defined in Section 4.

Buyer’s Knowledge Parties.  Abe Miller and Mark Dean.

Buyer Parties.  Buyer and the Affiliates of Buyer that are parties to the Lexford Property Agreements.

Closing.  As defined in Section 9.1.

Closing Date.  September 27, 2006.

Closing Statement.  As defined in Section 2.3

Confidentiality Agreement.  That certain letter agreement dated March 23, 2006, executed by Buyer’s Affiliate, “Empire Group”, in favor of ERP concerning the Properties and the transaction contemplated hereby.

Damages.  Any liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements of whatever kind or nature, including but not limited to, reasonable attorney’s fees and expenses.

Disclosures.  As defined in Section 6.1.

Effective Date.  The date upon which this Agreement shall be deemed effective, which shall be the date first above written.

Delinquent Amounts.  As defined in Section 2.3.2.

Earnest Money.  As defined in the Earnest Money Escrow Agreement.

Earnest Money Escrow Agreement.  That certain Escrow Agreement of even date herewith among Seller, Buyer’s Affiliate and Escrowee substantially in the form attached hereto as Exhibit B.

Employment Matters Agreement.  An agreement, in the form attached hereto as Exhibit K, to be entered into at Closing between Lexford Management Company and Empirian Management Company, Inc.

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ERP.  ERP Operating Limited Partnership, an Illinois limited partnership.

ERPM.  Equity Residential Properties Management Corp., a Delaware corporation.

Escrowee.  First American Title Insurance Company.

Event of Buyer’s Default.  As defined in Section 10.2.

Event of Seller’s Default.  As defined in Section 10.1.

General Partners.  As defined in Section 5.1.8.

Improvements.  The Buildings and any other buildings, structures and improvements located upon the Land, including the Property Owner’s interest, if any, in all systems, facilities, fixtures, machinery, equipment and conduits to provide fire protection, security, heat, exhaust, ventilation, air conditioning, electrical power, light, plumbing, refrigeration, gas, sewer and water thereto (including all replacements or additions thereto between the date hereof and the Closing Date).  Unless otherwise specifically provided herein, the terms, conditions, representations, warranties and covenants of this Agreement, if any, relating to the Improvements shall be applied separately to the portion of the Improvements included in each Project.

Indemnification Agreement.  As defined in Section 9.2.4.

Interest.  As defined in the Recitals.

Land.  All that tract or parcel of land owned by each Property Owner and described in the applicable Title Commitment and by this reference made a part hereof and all privileges, rights, easements, hereditaments and appurtenances thereto belonging, and all right, title and interest of such Property Owner in and to any streets, alleys, passages and other rights of way included therein or adjacent thereto (before or after the vacation thereof).  Unless otherwise specifically provided herein, the terms, conditions, representations, warranties and covenants of this Agreement, if any, relating to the Land shall be applied separately to the portion of the Land included in each Project.

Lease(s).  Each lease of space within the Improvements and any amendments, renewals, extensions, expansions and guaranties thereof (a) in force and effect as of the Effective Date, and/or (b) executed by a Property Owner after the Effective Date in accordance with Section 7.5, including all of the applicable Property Owner’s right, title and interest in each such lease.  Unless otherwise specifically provided herein, the terms, conditions, representations, warranties and covenants of this Agreement, if any, relating to the Leases shall be applied separately to the portion of the Leases related to each Project.

Lexford Assets.  Collectively, all of the “Properties” - as defined in the Lexford Property Agreements - that are subject to the Lexford Property Agreements.

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Lexford Employees.  As defined in Exhibit K.

Lexford Management Company.  Equity Apartment Management LLC.

Lexford Property Agreements.  Collectively, (a) this Agreement, (b) those certain other Lexford LLC Membership Interest Transfer Agreements 1S through 6 by and between Seller and Buyer or an Affiliate or Affiliates of Buyer; (c) that certain Lexford LLC Membership Interest Transfer Agreement between ERP and an Affiliate of Buyer and (d) that certain Agreement for Sale of Real Estate and Related Property between Seller or Seller’s Affiliates and an Affiliate of Buyer.

Loan Policies.  As defined in Section 3.1.

Management Property Purchase Price.  As defined in Section 2.1

Master Disclosure Schedule.  That certain Master Disclosure Schedule, of even date herewith, furnished by Seller or Seller’s Affiliate, receipt of which has been acknowledged by Buyer or Buyer’s Affiliate.

Material Adverse Effect.  Any changes, event, effect, or set of circumstances that, when taken individually or together with all other adverse changes, events, effects, or sets of circumstances that have occurred, including any and all other defaults, breaches of representations and warranties, or failures of condition precedent, is or is reasonably likely to be materially adverse to the business, operations, improvements, or condition (financial or otherwise), of the Lexford Assets taken as a whole, except for any such change, event, effect or set of circumstances arising out of or resulting from (a) changes in conditions (including changes in law or generally accepted accounting principles) affecting the multifamily residential or real estate industries generally, or the United States of America or global economy, (b) the commencement, continuation or escalation of a war, material armed hostilities or other material international or national calamity or act of terrorism directly or indirectly involving or affecting the United States of America or (c) earthquakes, hurricanes, other natural disasters or acts of G-d.  Notwithstanding the foregoing or anything to the contrary contained herein, a Material Adverse Effect shall be deemed to arise if any one or more events, effects, or circumstances, when taken individually or together with other events, effects, or circumstances, including one or more defaults, breaches of representations and warranties, or failures of conditions precedent, have resulted or are reasonably likely to result in Damages exceeding $40 million

OFAC List.  As defined in Section 5.3.3.

Owner LLC.  As defined in the Recitals.

Owner’s Policies.  As defined in Section 3.1.

Permitted Title Exceptions.  As defined in Section 3.1.

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Person.  Any natural person, partnership, corporation, limited liability company, trust, estate, association, unincorporated organization or other entity or association.

Personal Property.  Each Property Owner’s right, title and interest in any equipment, machinery, furnishings, supplies and other tangible personal property owned by the applicable Property Owner located on the Property as of the Effective Date and through the Closing Date and used in connection with operation, ownership, management or maintenance of the Improvements.  Unless otherwise specifically provided herein, the terms, conditions, representations, warranties and covenants of this Agreement, if any, relating to the Personal Property shall be applied separately to the portion of Personal Property included in each Project.

Project.  Each separate parcel or parcels of Land, Improvements and Personal Property owned by a Property Owner.  Unless otherwise specifically provided herein, the terms, conditions, representations, warranties and covenants of this Agreement, if any, relating to the Property shall be applied separately to each Project comprising the Property.  “Projects” means and includes all of the Projects subject to this Agreement.

Property.  Each Property Owner’s right, title and interest in, to and under the following property:  (i) its Project; and (ii) all rights of way or use, trade names and marks (excluding any right to the name “Equity Residential”), Leases, Service Contracts, tenements, hereditaments, appurtenances and easements now or hereafter belonging or pertaining to any of the foregoing, except those, if any, hereinafter expressly reserved to Seller in accordance with the terms of this Agreement.  Property does not include (i) cash or cash equivalent instruments in short term investment accounts or receivables from any insurance companies for losses applicable to the period prior to the Closing Date, all of which will be retained by Seller (subject to the terms of Section 12.2 below), except for any security deposits and interest thereon held by Property Owner in connection with any Lease, which shall be treated in accordance with Section 2.3.3, or (ii) any cash, assets or other interests excluded pursuant to Section 14.4.

Property Owner.  The legal entity owning fee simple title to an applicable Property as disclosed in the applicable Title Commitment.  Any documents to be delivered by any Property Owner or any representations and covenants, or warranties made by any Property Owner in this Agreement shall apply to each Property Owner as it relates to the Property owned by that Property Owner only.

Property Owner Interests.   As defined in the Recitals.

Purchase Price.  As defined in Section 2.1.

Reynoldsburg Lease.  As defined in Section 5.1.12.

SEC.  As defined in Section 15.9

Seller Deliveries.  To the extent in Seller’s and/or the Property Owners’ possession or reasonable control as of the Effective Date, the following items (it being agreed, however, that Seller shall have no obligation to prepare or cause to be prepared

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any of the following items, to the extent that they do not already exist or would not be prepared in the ordinary course of Seller’s business, and provided that Seller does not represent or warrant the accuracy of any such items, except to the extent expressly set forth in Section 5.1 of this Agreement): Seller’s or any Property Owner’s existing plans and specifications for the Buildings, if any; any environmental, site assessment, soils, engineering, architectural, termite, pest control, endangered species, ADA and Fair Housing Act compliance, handicapped access reports or studies and data prepared by third parties and in Seller’s or any Property Owner’s possession or reasonable control with respect to the Property; Seller’s or any Property Owner’s existing surveys of the Projects, if any; the Leases; lease correspondence files; the Service Contracts; a copy of each Property Owner’s standard form lease; copies of ad valorem tax statements relating to each Project for the lesser of the prior two (2) years or Property Owner’s period of ownership; operating statements and summaries of capital expenditures for each Project for the lesser of the prior two (2) years or Property Owner’s period of ownership; a list of Personal Property at each Project; a schedule of all insurance policies relating to each Project, together with a schedule of the loss claim history (prepared by Seller or a Property Owner, as opposed to a “loss run” from an insurer) for the lesser of the prior two (2) years or Property Owner’s period of ownership; all current reports from the Property Owner’s on-site management and accounting systems located at each Project; a list of all pending or threatened litigation against any Property Owner, management company or Seller with respect to claims regarding or relating to the Property or any Property Owner; copies of the organizational documents for each Property Owner and all amendments thereto; a list, together with copies, of all license agreements; and those other materials delivered to or made available to Buyer by Seller as may be posted on the Merrill Corp. Datasite-Project Blackbird website for this transaction, to which website Buyer has been provided access.

Seller.  [Seller Entity].

Seller Parties.  Seller, ERP and each other Affiliate of Seller that are parties to the Lexford Property Agreements.

Seller’s Advisor.  J.P.  Morgan Securities Inc.

Service Contracts.  All of the service, operating, construction or management contracts, supply and equipment rental, labor or material contracts, maintenance or repair contracts or other agreements that are in force and effect, to the extent they affect the operation, ownership or management of any of the Projects, but only to the extent assignable, without cost to Buyer and the applicable Property Owner’s obligations thereunder are expressly assumed by Buyer pursuant to this Agreement.

Tax Appeals.  As defined in Section 14.8.

Tenant(s).  Each tenant that has executed a Lease.

Tenant Receivables.  As defined in Section 2.3.2.

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Title Commitment.  Commitment(s) issued by the Title Insurer for an owner’s policy of title insurance (in the form most recently adopted by ALTA) for each Property, covering title to the Land and Improvements included in such Property, and showing applicable Property Owner as owner of said Land and Improvements and made available to Buyer through the Title Insurer’s Fast Closer electronic system.

Updated Rent Roll.  As defined in Section 9.2.11.

Title Insurer.  First American Title Insurance Company, 30 N.  LaSalle St., Chicago, IL 60602, with assistance from the New York office of First American Title Insurance Company.

Vendor(s).  Each vendor with whom any Property Owner or affiliated entity has executed a Service Contract.

1.2           EXHIBITS.  Attached hereto and forming an integral part of this Agreement are the following exhibits, all of which are incorporated into this Agreement as fully as if the contents thereof were set out in full herein at each point of reference thereto:

Exhibit A	List of Properties
Exhibit B	Earnest Money Escrow Agreement
Exhibit C	Intentionally Omitted
Exhibit D	Intentionally Omitted
Exhibit E	Intentionally Omitted
Exhibit F	Notice to Tenants
Exhibit G	Intentionally Omitted
Exhibit H	Intentionally Omitted
Exhibit I	Notice to Vendors
Exhibit J	Management Property Bill of Sale
Exhibit K	Employment Matters Agreement
Exhibit L	Assignment and Acceptance of Membership Interest
Exhibit M	Indemnification Agreement
Exhibit N	Intentionally Omitted
Exhibit O	Non-Foreign Certificate
Exhibit P	Assignment and Assumption of Service Contracts
Exhibit Q	Assignment and Assumption of Reynoldsburg Lease

Section 2.               PURCHASE PRICE.

2.1           Purchase Price.  The total consideration to be paid by Buyer to Seller for the Interest (the “Purchase Price”) is set forth on Exhibit A and shall be allocated among all of the Properties as set forth on Exhibit A.  Notwithstanding the foregoing, Buyer may, by written notice to Seller no later than fifteen (15) days prior to the Closing Date, reallocate the Purchase Price among the Properties (which reallocation right may be exercised one time only), provided that such reallocation (i) is reasonable, in Seller’s reasonable judgment, (ii) does not change the overall aggregate Purchase Price set forth on Exhibit A, and (iii) does not change the allocated Purchase Price of a Property after such Property has been excluded from the Properties to be

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conveyed pursuant to the terms of this Agreement, or with respect to which there is or has been an occurrence or Permitted Title Exception that could lead to such exclusion.   The Purchase Price shall be paid in accordance with the terms of Section 2.2.  In addition to the Purchase Price, Buyer’s Affiliate shall purchase all of the tangible personal property of Lexford Management Company, and any intangible personal property of Lexford Management Company that is exclusively used by same, including without limitation goodwill, for $3,000,000 (the “Management Property Purchase Price”) concurrently with the Closing, as set forth in Section 9.2.13 hereinbelow.

Lexford OP is in the process of acquiring certain third party limited partner interests in those Properties identified as Syndicated Properties on Exhibit A or obtaining required consents sufficient to authorize the transaction contemplated hereunder.  If prior to the Closing Date, Lexford OP is unable to acquire sufficient third party limited partner interests or consents to authorize the transaction contemplated hereby, and if Buyer and Seller are unable to mutually agree upon a mutually satisfactory arrangement for conveyance of the affected Property or Properties, then the applicable Property or Properties shall not be conveyed to Buyer hereunder and, accordingly, the Purchase Price shall be reduced by the applicable amount set forth on Exhibit A.  In the event a Property or Properties are excluded from the conveyance hereunder as provided above, then at the election of Seller, made by written notice given to Buyer prior to the Closing Date, Buyer shall manage such excluded Property or Properties for up to one (1) year following the Closing Date, as elected by the Seller pursuant to a management agreement to be mutually agreed upon by Buyer and Seller; provided, however, that Seller shall have the right to terminate such management at any time upon 30 days notice given to Buyer.  The fee payable to Buyer for such post-closing management shall be a commercially reasonable market management fee. [The language in this paragraph is contained in one purchase and sale agreement (the “Syndicated Agreement”).  As of July 31, 2006, this language remains potentially applicable to three properties with an aggregate purchase price of approximately $8.4 million]

2.2           Earnest Money; Cash at Closing

2.2.1        Concurrently herewith: (i) Seller, Buyer’s Affiliate and a duly authorized representative of the Chicago Office of Escrowee shall execute the Earnest Money Escrow Agreement, in the form attached hereto as Exhibit B, and (ii) Buyer shall deposit or cause to be deposited the Earnest Money with the Escrowee. The Earnest Money shall be invested as Seller and Buyer’s Affiliate, as agent for Buyer, shall jointly direct in accordance with the Earnest Money Escrow Agreement.  Any and all interest earned on the Earnest Money shall be for Buyer’s account and shall be reported to Buyer’s federal tax identification number.

2.2.2        If the transaction closes in accordance with the terms of this Agreement, at Closing, the Earnest Money shall be delivered by Escrowee to Seller as part payment of the Purchase Price.  If the transaction fails to close due to a default on the part of Buyer, Seller shall have the remedy options provided for in Section 10.2 below.  If the transaction fails to close due to a failure of a condition precedent to Buyer’s performance as more fully provided and set forth in Section 8.1, then Buyer shall be entitled to cancel this transaction and receive a refund of the Earnest Money, and upon the occurrence of a Seller’s Event of Default, Buyer shall have the remedy options provided for in Section

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10.1 below.  If the transaction fails to close due to a default on the part of Seller, Buyer shall have the remedy options provided for in Section 10.1 below.

2.2.3        At Closing, Buyer shall pay to Seller, with current, federal funds wire transferred to an account designated by Seller in writing at least one (1) Business Day prior to Closing, an amount equal to the Purchase Price, minus the sum of the Earnest Money which Seller shall receive at Closing from the Escrowee, and plus or minus, as the case may require, the closing prorations and adjustments to be made pursuant to Section 2.3 below.

2.2.4        Buyer hereby acknowledges and agrees that Buyer’s Affiliate is acting as its agent with respect to the Earnest Money, and that Escrowee is authorized to return Earnest Money to its attorneys, Dreier LLP, in trust in the event that the Earnest Money is to be returned to Buyer pursuant to the terms of this Agreement in accordance with the terms of this Agreement.

2.3           Closing Prorations and Adjustments.  Seller shall prepare or cause Escrowee to prepare the closing statement (the “Closing Statement”) of the prorations and adjustments required by this Agreement and submit it to Buyer at least three (3) Business Days prior to the Closing Date.  The Closing Statement shall be subject to the mutual review and comment by Buyer and Seller.  Buyer and Seller shall consult in good faith regarding the preparation of a final Closing Statement with the objective of accurately reflecting all items to be prorated as of the Closing Date.  The following items are to be prorated, adjusted or credited (as appropriate) as of the close of business on the Closing Date, on the basis of a 365 day year, it being understood that for purposes of prorations and adjustments, Seller shall be deemed to be the beneficial owner of the Property on the day prior to the Closing Date and Buyer shall be deemed to be the beneficial owner of the Property as of the Closing Date:

2.3.1        Real estate and personal property taxes and assessments shall be prorated between Buyer and Seller on the basis of the current tax bill (or, the most recent ascertainable tax bill, if the current bill is not then available).  Any taxes relating to the tax period (or portion thereof) after Closing shall be assumed by Buyer effective as of Closing and paid by Buyer when due and payable, provided that Seller shall be responsible for the prorated portion thereof relating to the period prior to Closing.  If Seller or any Property Owner files (or has previously filed) an action for an adjustment of Taxes affecting any tax year prior to the year of Closing, any tax savings or refunds resulting from such action shall be solely the property of Seller.  If Seller, the Property Owners or Buyer should file such an action affecting the tax year in which the Closing occurs, and if as a result thereof taxes for said tax year are reduced, then any tax savings or refunds and the third party costs incurred to achieve the tax savings or refunds shall be prorated between Seller and Buyer effective as of the Closing Date.  The provisions of this paragraph shall survive until the first anniversary of the Closing.  The following provisions shall control for Properties located in Florida and Ohio:

(a)           Florida Properties:  real estate and personal property taxes and assessments (on the basis of the most recent ascertainable tax bill if the current bill is not then available, and in any case, calculated taking into account the 4%

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discount available for payment of real estate taxes prior to December; provided, however, in the event the Closing takes place after the period of time for the 4% discount has expired, the discount shall be applied only in the event Property Owner took advantage of such discount when it paid the real estate taxes);

(b)           Ohio Properties:  real estate and personal property taxes and assessments (on the basis of the most recent ascertainable tax bill if the current bill is not then available).  Any real estate or personal property tax proration applicable to a fiscal time period for which a tax bill has not yet been issued shall be based on 103% of the most recently issued tax bill;

2.3.2        the rent and all other sums payable by Tenants under the Leases (collectively, “Tenant Receivables”) shall be prorated between Seller and Buyer; provided, however, that rent and all other sums which are due and payable to Property Owner by any Tenant but uncollected as of the Closing (collectively, the “Delinquent Amounts”) shall not be adjusted, but shall be apportioned as follows:   All Tenant Receivables collected by Buyer or Seller after Closing shall be allocated (i) first, to Tenant Receivables due for the month during which the Closing occurs (and shall be allocated between Seller and Buyer as if same had been prorated at Closing), (ii) second, to Tenant Receivables then currently due and payable for periods of time after Closing and (iii) third, to Tenant Receivables due and payable for any periods of time before the month in which the Closing occurs.  In the event Buyer receives Tenant Receivables after Closing to which Seller is entitled as provided above, Buyer agrees to promptly remit said funds to Seller.  In the event Seller receives Tenant Receivables after Closing to which Buyer is entitled as provide above, Seller agrees to promptly remit said funds to Buyer.  At Closing, Seller shall deliver to Buyer a schedule of all such Delinquent Amounts.  In the event any Delinquent Amount is inadvertently omitted from such schedule, Seller shall not be deemed to have waived its rights to such Delinquent Amount.  Buyer shall include any and all Delinquent Amounts in the first bills submitted to the tenants in question after the Closing and, so long as such tenants remain in occupancy, shall continue to do so for twelve (12) months thereafter.  Buyer shall promptly remit to Seller any Delinquent Amounts so collected.  The provisions of this Section 2.3.2 shall survive until the first anniversary of the Closing.

2.3.3        the amount of unapplied security deposits held by the Property Owners under the Leases (and interest thereon, to the extent required by law or the Leases) shall be credited in full to Buyer and applied against the Purchase Price at Closing;

2.3.4        water, electric, telephone and all other utility and fuel charges, fuel on hand (at cost plus sales tax) shall be prorated between Buyer and Seller; provided, further, that (i) any deposits with utility companies shall remain the property of the applicable Property Owner (for the benefit of Buyer, and not Seller, after the Closing and shall be credited to Seller by way of an increase to the Purchase Price and (ii) to the extent possible, meter readings will be obtained by Seller and provided to Buyer on the Business Day immediately preceding the Closing Date, or as reasonably practical prior to the Closing Date, and Seller shall bear the charges for utility services based on such readings and Buyer shall bear charges for all such utility services thereafter (with an

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appropriate credit to Buyer for the estimated utility charges incurred between the date of reading to the Closing Date);

2.3.5        amounts payable to or by Property Owners under the Service Contracts shall be prorated between Buyer and Seller, but shall exclude any lump sum or up-front payments paid to Property Owner with respect thereto prior to the Effective Date;

2.3.6        license and permit fees shall be prorated between Buyer and Seller; and

2.3.7        any credits to which Buyer or Seller is entitled pursuant to Section 12.2 or Section 14.9;

2.3.8        Rent and additional rent pursuant to the Reynoldsburg Lease;

2.3.9        Property Owners’ share of maintenance costs pursuant to reciprocal roadway easements and other agreements with neighboring landowners covering costs to maintain and repair shared driveways, roadways, sewers and other  common facilities; and

2.3.10      other similar items of income and expenses of operation of the Property shall be prorated between Buyer and Seller.

Except with respect to general real estate and personal property taxes (which shall be reprorated upon the issuance of the actual bills, if necessary other than for Properties located in Ohio, for which any such prorations shall be final), any proration which must be estimated at Closing shall be reprorated and finally adjusted as soon as practicable after the Closing Date and in any event within six (6) months thereafter; otherwise, subject to the provisions of Section 2.3.2 above, all prorations shall be final.  Payments in connection with the final adjustment shall be due within thirty (30) days of written notice.  All such rights and obligations shall survive until the first anniversary of the Closing Date.

2.4           Closing Costs.  Buyer shall pay the costs of the Owner’s Policies and/or Loan Policies, search charges, if any, beyond those necessary for the preparation of the Title Commitments, costs for extended coverage, coinsurance, reinsurance and any endorsements to any policy of title insurance, all escrow or closing agent charges (the aforesaid costs being collectively referred to as, “Title Costs”), costs for recording any deed, state, county and municipal transfer taxes and documentary stamps (“Transfer Taxes”), the cost of any updated surveys, all costs associated with any encumbrance Buyer places on the Properties at Closing, all costs of Buyer’s due diligence (except as otherwise specifically provided in this Agreement), and any other costs not expressly required to be paid by Seller pursuant to this Agreement.  Notwithstanding the foregoing agreements of Buyer, at Closing, Seller shall pay $1,000,000 in the aggregate for Title Costs payable under the Lexford Property Agreements and $1,000,000 in the aggregate for Transfer Taxes payable under the Lexford Property Agreements.  In the event that either the Title Costs or Transfer Taxes are less than $1,000,000, Seller shall give Buyer a credit against the Purchase Price at Closing in an amount equal to the difference between the actual cost of the Title Costs and/or the Transfer Taxes, as applicable, and $1,000,000.  Additionally, notwithstanding the foregoing, in the event that Buyer obtains a quote for Title Costs from a reputable national title insurance company other than Title Insurer that is less than

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Title Insurer’s quote for Title Costs, Seller shall provide Buyer at Closing a credit against the Purchase Price in an amount equal to the difference between said quotes.  Seller shall pay all costs incurred in connection with the Seller Deliveries and in order to pay and discharge any indebtedness encumbering the Properties as of the date of this Agreement and to render title as required hereunder.  Each party shall pay its own attorneys.  Brokerage commissions shall be paid as set forth in Section 13.  The obligations of the parties to pay applicable escrow or closing charges shall survive the termination of this Agreement.  Notwithstanding anything to the contrary contained herein, Seller agrees, at the request of Buyer, to cooperate in all reasonable respects at no additional cost to Seller, in coordinating with those mortgagee(s) that are Affiliates of Seller to effectuate the assignment of any outstanding mortgage or deeds of trust encumbering the applicable Properties to Buyer’s or Buyer’s Affiliates’ lender(s) in lieu of such Affiliate mortgagees issuing satisfactions of said mortgages and/or deeds of trust.  Buyer acknowledges and agrees that the consummation of any such assignment shall not be a condition to the closing of the transaction contemplated hereby or permit any delay or extension of the Closing Date.  Empire Group Holdings LLC (“Empire Holdings”) agrees to indemnify and hold harmless all Seller Parties from and against any and all losses, risks, liabilities, costs (including legal fees) and expenses, including, without limitation, any taxes, penalties or fines imposed by any governmental entities, incurred or imposed as a result of such mortgage assignment.

2.5           Property Debt.  At or prior to Closing, each Property Owner will have paid and discharged or defeased all unpaid indebtedness for borrowed money and other monetary liens encumbering its Property.

2.6           Employees.  If there are any suits brought by pre-Closing employees of any Property Owner, Owner LLC, Seller or Lexford Management Company for causes of action relating to such pre-Closing employment (including, without limitation, wage and hour, unlawful discrimination, harassment, ERISA, immigration, collective bargaining, payment of social security and similar taxes, federal contracting, workers’ compensation and occupational safety, WARN and any health continuation coverage under COBRA) and for damages accruing prior to the Closing, which suits are not herein specifically referred to, Seller shall pay and discharge any settlement or judgment which may be obtained against, and reimburse for reasonable attorneys’ fees and disbursements and court costs incurred in the defense of same by, Buyer (and its Affiliates), any Property Owner, Owner LLC and/or Lexford Management Company by reason thereof, provided that  Seller has been afforded adequate notice of such suit and a reasonable opportunity to defend.  Buyer (and its Affiliates), at Seller’s expense, shall cooperate with Seller in the defense of any such claim.  Seller shall remain liable for any failure to withhold on account of wages payable pre-Closing.  This Section shall survive Closing.

Section 3.               EVIDENCE OF TITLE.

3.1           Title Insurance.  Seller has previously delivered to Buyer the Title Commitments, covering all of the Projects, issued by Title Insurer.  Buyer acknowledges and agrees that it has reviewed the Title Commitments and all exceptions noted therein (except for (a) liens for unpaid indebtedness for borrowed money, mechanics liens of an ascertainable amount and any other lien or matter encumbering any Property of a liquidated amount curable by the payment of money, which shall be discharged by Seller or insured over by Title Insurer at or prior to Closing, it being acknowledged and understood by Buyer that Seller may contest any such mechanic liens

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so long as Seller is able to induce Title Insurer to remove or insure over same at or prior to Closing and (b) options to purchase the applicable Project, which Seller shall either cause to be released or otherwise waived or insured over by the Title Insurer at or prior to Closing) are permitted title exceptions (“Permitted Title Exceptions”).

Notwithstanding the foregoing, Seller represents and warrants to Buyer that none of the Permitted Title Exceptions materially adversely affects or could reasonably adversely affect the ownership, operation or maintenance of the applicable Project as a multi-family property as historically operated by Seller or Property Owner.  If, however, Seller’s foregoing representation is inaccurate and there is a Permitted Title Exception which materially adversely affects or could reasonably adversely affect the ownership, operation or maintenance of the Property as a multi-family property (specifically including as examples of such exceptions that are deemed to have such a material adverse effect are the following: (i) any option to purchase, right of reverter or reversion, (ii) any superior lease, or (iii) any lis pendens or the like not filed to secure satisfaction of a monetary judgment, not relating to litigation disclosed on the Master Disclosure Schedule, and not relating to any claim similar in nature to litigation disclosed on the Master Disclosure Schedule that is based on a set of facts of a substantially similar nature), then Seller shall elect to either cause such Permitted Title Exception to be removed or insured over the by the Title Insurer at or prior to Closing or exclude such Project from the Properties to be conveyed to Buyer hereunder, in which event the Purchase Price shall be reduced appropriately by the amount of the Purchase Price allocated to the excluded Project as set forth on Exhibit A attached hereto.  In the event a Project or Projects are excluded from the conveyance hereunder as provided above, at the election of Seller, made by written notice given to Buyer prior to the Closing Date, Buyer shall manage such excluded Project or Projects for up to one (1) year following the Closing Date, as elected by Seller, pursuant to the terms of a management agreement mutually agreed upon by Buyer and Seller; provided, however, that Seller shall have the right to terminate such management at any time upon 30 days notice given to Buyer.  The fee payable to Buyer for such post-closing management shall be a commercially reasonable market management fee.

Buyer shall request that the Title Insurer issue, but Seller shall have no obligation to pay for or to cause the Title Company to issue, updated ALTA Standard Coverage Owner’s Policies of Title Insurance for the Projects (the “Owner’s Policies”), dated as of the Closing Date, in the amount of the Purchase Price allocable to each Project and insuring good and indefeasible fee simple title to the Projects to be in the applicable Property Owner as well as ALTA Standard Coverage Loan Policies of Title Insurance for some or all of the Projects (the “Loan Policies”) and/or any available endorsements to the Owner’s Policies and/or Loan Policies, excepting from coverage only the general exceptions (unless Buyer obtains coverage over the general exceptions), Permitted Title Exceptions and such other exceptions resulting from or arising out of the acts of Buyer or those of any party claiming by, through or under Buyer.  Notwithstanding the foregoing, Seller shall cause Title Insurer at Closing to omit from the Owner’s Policies and Loan Policies as an exception any printed “gap” exception, modify any tenancy exception to read as follows: “the rights of tenants shown in the attached Rent Roll as tenants only”, and omit any mechanic’s lien exception.

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Section 4.               BUYER’S ACCESS TO PROJECTS.

4.1           Buyer’s Access.  As soon as reasonably practicable after the Effective Date, Seller shall furnish to Buyer (or make available to Buyer at Seller’s management offices) the Seller Deliveries, provided that Seller shall deliver to Buyer or its designee those items that Buyer reasonably requests to be delivered (specifically including, without limitation, organizational documents, together with all amendments, for each Property Owner, surveys for each Property, internal property review reports relating to ADA and FHA compliance and insurance and benefits data).  Subject to the Leases, any restrictions under any restrictions of record and applicable laws, Buyer, any lender to Buyer and their respective employees, contractors and agents (collectively, the “Buyer Inspection Parties”) shall have the right, from time to time prior to the Closing during normal business hours, to enter upon the Projects to examine the same and the condition thereof and inspect and photocopy the books and records thereof and all reports, studies, correspondence, files, permits, authorizations and certificates relating thereto (whether in printed or electronic form), whether at any Project or at the office of Lexford Management Company, and to conduct such surveys and to make such engineering, architectural, geotechnical and other inspections, tests and studies as Buyer shall determine to be reasonably necessary, all at Buyer’s sole cost and expense, including, without limitation, a Phase I environmental report and an engineering survey and report.  Buyer acknowledges that it has previously conducted all desired due diligence with respect to the Properties, that any further inspection of the Properties shall be solely for the purpose of facilitating Buyer’s transition to owning the Properties, and that it shall not be a condition to Buyer’s obligation to proceed to Closing under this Agreement that any lender or prospective lender to Buyer be satisfied with the results of any inspection of the Properties conducted by said lender.  Notwithstanding the foregoing, Buyer shall not conduct or allow any physically intrusive testing of, on or under any Project without Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.  Buyer agrees to give Seller reasonable advance notice of such examinations or surveys and to conduct such examinations or surveys during normal business hours to the extent practicable.  Buyer agrees to conduct all examinations and surveys of the Project in accordance with all applicable laws and in a manner that will not materially interfere with the operations of Property Owners or Tenants thereon and will not materially harm or damage any Project or cause any claim adverse to Property Owners or any Tenant, and agrees to restore the Project to substantially the same condition that existed prior to any such examinations or surveys immediately after conducting the same.  No Buyer Inspection Party will contact any Tenants or governmental or quasi governmental authorities concerning the Properties without Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, and Seller shall have the right to be present during any such contacts, except that no consent shall be required to inquire with any governmental or quasi-governmental authority as to the compliance of any Project with applicable legal and regulatory requirements enforced by such authority.  Prior to and as a condition to any entry on any Project by any Buyer Inspection Party in the case of intrusive inspections or tests, Buyer shall deliver to Seller a certificate of insurance evidencing comprehensive general liability (including coverage for contractual indemnities) with a combined single limit of at least $2,000,000.00, in a form reasonably acceptable to Seller, covering any accident or damage arising in connection with any Buyer Inspection Parties on the Property, and naming Seller as additional insured.  Within 30 days after any termination of this Agreement, upon Seller’ written request therefor and Seller’s payment of one-half the out of pocket costs incurred by Buyer with respect to such items, Buyer will provide to Seller a copy of

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any written inspection, test, report or summary of the results of any physical inspection of the Properties.

Section 5.               REPRESENTATIONS AND WARRANTIES.

5.1           Seller’s Representations.  Seller, and where expressly indicated, each Property Owner with respect to its Property and Owner LLC, represent and warrant to Buyer as of the Effective Date that except as may otherwise be disclosed on the Master Disclosure Schedule:

5.1.1        To Seller’s, Owner LLC’s and Property Owners’ knowledge, the Master Disclosure Schedule lists all of the Service Contracts entered into by Seller or a Property Owner that affect the Properties, but only to the extent that such Service Contract (i) may reasonably be expected to require payments of more than Fifty Thousand Dollars ($50,000) per annum, or (ii) is essential to the management and operation of the Properties as a whole.  To Seller’s, Owner LLC’s and Property Owner’s knowledge, the Service Contracts that Seller has made available for Buyer’s review are accurate copies of the originals in Seller’s possession.  Notwithstanding anything in this Agreement to the contrary, Seller does not covenant or represent that any particular Service Contract will be in force or effect as of the Closing or the parties to the Service Contracts will not be in default under their respective Service Contracts, and the existence of any default by any party under any Service Contract shall not affect the obligations of Buyer hereunder.

5.1.2        To Seller’s, Owner LLC’s and Property Owners’ knowledge, each of the Leases affecting the Properties as of the date thereon is identified in the rent roll posted on Merrill data web site as of June 1, 2006 (“Rent Roll”), such Leases are in full force and effect, and the following information concerning each Lease is true, correct, and complete:  (a) unit number, (b) name of tenant, (c) amount of security deposit; (d) monthly rental amount; (e) number of months prepaid rent; (f) the term of the Lease; and (g) the existence of any default in payments of rent or additional rent and Delinquent Amounts with respect thereto pursuant to Section 2.3.2.  Seller makes no representation with respect to any information provided or made available regarding the Leases that is not described in the preceding sentence.  To Seller’s knowledge, the copies of Leases that Seller has made available for Buyer’s review are accurate copies of the originals in Seller’s possession.  Notwithstanding anything in this Agreement to the contrary, Seller does not covenant or represent that Tenants under Leases will not be in default under their respective Leases, and the existence of any default by any Tenant under its Lease shall not affect the obligations of Buyer hereunder.  To Seller’s knowledge, except as otherwise specifically set forth in the Rent Roll or elsewhere in the Agreement:

(a)           no leasing or brokerage commission shall be due for any period subsequent to the Closing Date other than for tenants who have executed a Lease prior to the Closing Date but do not move in until after the Closing Date, which commissions shall be paid by Buyer;

(b)           as of the Effective Date, no tenant is entitled to rental concessions or abatements for any period subsequent to the Closing Date, except as shown on

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the Rent Roll or reflected in written financial information previously disclosed to the Buyer;

(c)           as of the Effective Date, there are no deposits by any tenant other than the security deposits set forth in the Rent Roll;

(d)           fewer than one percent (1%) of the Leases existing on the Effective Date contain any extension options on the part of the tenant.

5.1.3        To Seller’s knowledge, no Property Owner has received from any governmental authority having the power of eminent domain any written notice of any condemnation of its Property or any part thereof.

5.1.4        None of the Property Owners, Lexford Management Company and ERPM has received written notice of any material pending or threatened (in writing) litigation, action or proceeding initiated against a Property Owner, the Property, Owner LLC or Seller which would affect the Property, Owner LLC or any Property Owner after Closing or any Property Owner’s, Owner LLC’s or Seller’s ability to execute or perform its obligations under this Agreement.

5.1.5        Seller, Owner LLC and each general partner of a Property Owner that is a limited partnership and each Property Owner is duly organized, validly existing and in good standing, under the laws of the State of its formation.

5.1.6        None of Seller, Owner LLC or any Property Owner is a “foreign person” as that term is defined in the Internal Revenue Code of 1986, as amended and the regulations promulgated pursuant thereto.

5.1.7        The execution, delivery of and performance under this Agreement are pursuant to authority validly and duly conferred upon Seller and the signatories hereto.  The consummation of the transactions herein contemplated and the compliance by Seller with the terms of this Agreement do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the organizational or governing entity documents of Seller, Owner LLC or any Property Owner or any agreement, decree or order by which any of them are bound.

5.1.8        Exhibit A lists the Property Owner of each of the Properties and describes the equity ownership of the Seller, the Owner LLC, each general partner of a Property Owner that is a limited partnership (the “General Partners”) and each of the Property Owners.

5.1.9        Seller is the sole legal and beneficial owner of title to the Interest free and clear of all liens, claims, encumbrances or adverse interests of any kind.  Owner LLC is the sole legal and beneficial owner of title to the equity interests in each of the Property Owners free and clear of all liens, claims, encumbrances or adverse interests of any kind.

5.1.10      None of the Property Owners or the Owner LLC has any employees.

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5.1.11      To Seller’s knowledge, neither Seller, Owner LLC nor Property Owners has received from any governmental entity or insurance underwriter, written notice of any currently existing violation of any zoning, building or fire code, any environmental law, other law or insurance requirements applicable (or alleged to be applicable) to said Property, any part thereof, Seller, Owner LLC or any Property Owner that has not been corrected.

5.1.12      With respect to that certain Lease dated February 24, 1998 between ERP, as successor to Lexford, Inc., as tenant and Americana Investment Company, as landlord, as amended on June 18, 2004 and March 23, 2006 (the “Reynoldsburg Lease”), ERP (or any Affiliate thereof) has not received any notices from the landlord of any defaults by ERP that have not been cured and there are no monetary defaults by the tenant under the Reynoldsburg Lease.  The Reynoldsburg Lease is in full force and effect and has not been modified.  All construction of the premises demised under the Reynoldsburg Lease that is the obligation of ERP (or any Affiliate thereof) pursuant to the terms of the Reynoldsburg Lease has been completed and the “Allowance Amount” (as such term is defined in the Reynoldsburg Lease) has been fully disbursed.

5.1.13      The Owner LLC and the Property Owners do not have any liability or obligation (and, to Sellers’ Knowledge, there is no reasonable basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Owner Parties giving rise to any liability or obligation) relating to any oral or written contract or lease, to which the Owner LLC or the Property Owners are parties or by which they are bound, except for liabilities or obligations (i) set forth on in the Master Disclosure Schedule, (ii) disclosed in the Financial Statements, (iii) described or disclosed in the Title Commitments, (iv) of the Property Owners under the Leases or the Service Contracts scheduled in the Master Disclosure Schedule.

5.1.14      Owner LLC and Property Owner Organization and Authority.

(a)           Owner LLC and each Property Owner is organized and governed by an operating agreement or partnership agreement, true, accurate and complete copies of which will be delivered to Buyer in accordance with Section 4.1.

(b)           The Interest and the Property Owner Interests were validly issued and are fully paid and non-assessable.

(c)           Owner LLC’s sole assets are the Property Owners, and each Property Owner is a single purpose entity whose sole real estate asset is the applicable Property owned by such Property Owner.  Seller has not sold, transferred, or encumbered the Interest or any portion thereof and Owner LLC has not sold, transferred or encumbered any of the Property Owner Interests other than pledges or collateral assignments in connection with financing that Seller will cause to be paid in full at or prior to Closing.  Seller has (or, upon payment of any financing referred to in the preceding sentence shall have) the right to assign and transfer the Interest to Buyer or its assignee in accordance with the provisions

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of this Agreement, free and clear of any and all right, title, or interest therein of any other person whatsoever.

(d)           There are outstanding no options, warrants, or rights to acquire the Interest or any portion thereof or any of the Property Owner Interests.

(e)           Neither the Interest nor any of the Property Owner Interests nor any portion thereof is the subject of any voting trust agreement or other agreement relating to the ownership of the Interest or any of the rights held by the holder thereof, or restricting in any way the sale or other transfer thereof which will survive Closing.

(f)            Neither the Interest nor any of the Property Owner Interests is evidenced by any certificate and neither Owner LLC nor any Property Owner has “opted in” to Article 8 of the Uniform Commercial Code.

(g)           The Interest constitutes 100% of the membership interests of Owner LLC.

When used in this Agreement, the term “to Seller’s knowledge” shall mean and be limited to the actual (and not imputed, implied or constructive) current knowledge of Cheryl O’Bryan, Executive Vice President-Property Operations of Lexford Management Company, Matthew L. Wakenight, First Vice President-Asset Management of Equity Residential and Tamra Potts, Vice President of Accounting and Controller of Lexford Management Company, whom Seller represents as having day-to-day oversight responsibilities for the management of the Interest and the operation of the Properties (collectively, “Seller’s Knowledge Parties”).  Notwithstanding anything to the contrary set forth in this Agreement, none of the foregoing individuals shall have any personal liability or liability whatsoever with respect to any matters set forth in this Agreement or any of Seller’s representations and/or warranties herein being or becoming untrue, inaccurate or incomplete.

5.1.15      Except for the representation and warranty set forth in Section 5.1.2 above (which shall be applied with full force and effect to the updated Rent Roll, and thereupon supersede all previous Rent Rolls), the representations and warranties of Seller set forth in this Section 5.1 shall be deemed to be remade by Seller as of Closing, and together with the Updated Rent Roll, shall survive the Closing for a period of twelve (12) months following the Closing Date.  Notice of any claim as to a breach of any representation or warranty must be made to Seller prior to the expiration of such twelve (12) month period, and a claim brought against Seller in a legal proceeding with respect thereto within three (3) months after the expiration of said twelve (12) month period, or it shall be deemed a waiver of Buyer’s right to assert such claim.  The provisions of this Section shall survive the Closing.

5.1.16      Owner LLC, each Property Owner and each other entity, if any, through which Owner LLC holds its interest in a Property Owner are each, as of the date of this Agreement, treated as a disregarded entity for federal, state and local income tax

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purposes, and, prior to Closing, neither Seller nor any of the foregoing entities will make any election to treat any of the foregoing entities as other than a disregarded entity for federal, state or local income tax purposes. Owner LLC, each Property Owner and each other entity through which Owner LLC directly or indirectly holds its interest in a Property Owner, has timely filed or will timely file any and all required federal, state and local income, estimated income, excise, property, franchise, license and other tax returns that each of such entities is or has been required by law to file prior to the Closing Date, and all such returns are or will be true, correct and complete in all material respects.  Owner LLC, each Property Owner and each other entity through which Owner LLC directly or indirectly holds its interest in a Property Owner has paid or will pay prior to the date then due any and all taxes, interest, penalties, or other sums required to be paid by each of them to any taxing authority prior to the Closing Date, whether in connection with such tax returns or otherwise.  [This Section 5.1.16 was not included in the Syndicated Agreement]

5.1.17      There is not pending any case, proceeding or other action voluntarily commenced by Seller, Owner LLC or any Property Owner or any affiliate thereof seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of Seller, Owner LLC  or any Property Owner, or the debts of Seller, Owner LLC or any Property Owner, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for Seller, Owner LLC or any Property Owner or any Property, nor to Seller’s knowledge, have any third parties commenced involuntary proceedings with respect to any of the foregoing.

5.1.18      Except as provided in the Master Disclosure Schedule, and subject to Section 8.1(d), any permission, approval, joinder or consent by any applicable third parties (excluding Seller’s direct or indirect constituent partners or members, whose consent is addressed in Section 5.1.14(b)) required in order for Seller to consummate its obligations under this Agreement has been obtained from said third parties,  except where the failure to obtain such permission, approval, joinder or consent would not or could not have a material adverse effect on the continued ownership, operation or maintenance of any Project as a multi-family property.

5.1.19      The continued maintenance, occupancy and operation of the Properties is not now and will not on the Closing Date be dependent on private facilities located at any other property other than Lexford Assets, and no building or other improvement not part of the Lexford Assets is dependent on private facilities located on any Property.

5.1.20      To Seller’s knowledge, the Merrill Data Site contains a complete set of all environmental reports and assessments relating to the Properties in the possession or reasonable control of Seller, Owner LLC, any of the Property Owners and/or Lexford Management Company.

5.1.21      Employee Matters.

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(a)           (i) Neither ERP, ERPM, Owner LLC, Seller, Lexford Management Company nor any Property Owner is a party to any collective bargaining or other labor union contract applicable to the Lexford Employees, no collective bargaining agreement is being negotiated by ERP or ERPM with respect to the Lexford Employees, and neither ERP or ERPM knows of any activities or proceedings of any labor union to organize any of the Lexford Employees; (ii) there has not been since January 1, 2005, and there is not presently pending or existing, and to the knowledge of Seller, ERP, Owner LLC, Lexford Management Company any Property Owner or ERPM, there is not threatened any strike, slowdown, picketing, work stoppage, or material employee grievance process generally, any proceeding against or affecting ERP, ERPM, Owner LLC, Seller, Lexford Management Company or any Property Owner relating to an alleged violation of the National Labor Relations Act, or any application for certification of a collective bargaining agent relating to the Lexford Employees; (iii) there is no lockout of any Lexford Employees and, no such action is threatened by ERP, ERPM, Owner LLC, Seller or any Property Owner; (iv) ERP, ERPM, Owner LLC, Seller, Lexford Management Company and each Property Owner have materially complied with and each is in material compliance with all laws relating to employment and employment practices (including, without limitation, Workers Adjustment and Retraining Notification Act), terms and conditions of employment, employment of aliens, employment of employees with disabilities (including, without limitation, the requirements of the Americans With Disabilities Act), equal employment opportunity, nondiscrimination, harassment, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar payroll taxes, occupational health and safety, and plant closings as those laws relate to the Lexford Employees; and (v) to the knowledge of Seller, ERP, ERPM, Owner LLC, Lexford Management Company and Property Owners, in all material respects any and all sums due for employee compensation and benefits, including pension and severance benefits and all vacation time owing to any Lexford Employees, have been duly and adequately accrued on ERPM’s accounting records.

(b)           Seller, ERP, Owner LLC, Property Owners, Lexford Management Company and ERPM have delivered to Buyer the following agreements governing the employment of the Lexford Employees:  (i) all employment, consulting, termination, profit sharing, severance, change of control, individual compensation or indemnification agreements; and (ii) all bonus or other incentive compensation, salary continuation, disability, severance, educational assistance, legal assistance, club membership, employee discount, employee loan, credit union or vacation agreements, policies or arrangements under which ERP, Seller, Owner LLC, Property Owners, Lexford Management Company or ERPM has any obligation or liability (contingent or otherwise) in respect of any current or former Lexford Employee.

(c)           ERP and ERPM have delivered to Empirian a true and correct list of the following for each Lexford Employee:  base salary, any bonus obligations, hire date and pay rate.

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5.2           Modification of Representations, Warranties and/or Certifications.  During the period from and after the date hereof and prior to Closing, as and to the extent that (i) it can be established by clear and convincing evidence that Buyer has obtained actual knowledge of facts, or (ii) Buyer receives (or Seller receives and delivers to Buyer) any Disclosures (as hereinafter defined) with respect to matters addressed in this Section 5.2, which contain information or facts that are inconsistent with or different from any or all of the representations, warranties and certifications made in Section 5.1 above (or in the Updated Rent Roll), and the Closing occurs even though said fact or Disclosure afforded Buyer the right not to Close, then such inconsistent portion of such representation, warranty or certification made in Section 5.1 shall be deemed to be modified and superseded by such fact or Disclosure (and, in such event, subject to Buyer’s rights pursuant to Section 8.1 hereof, Seller shall no longer have any liability hereunder with respect to that portion of the representation, warranty or certification superseded herein, as applicable; provided, however, that if said fact or Disclosure did not afford Buyer the right not to Close, Seller’s and ERP’s liability shall remain, subject to the terms of this Agreement).  When used in this Agreement, the term “to Buyer’s knowledge” or similar term shall mean and be limited to the actual (and not imputed, implied or constructive) current knowledge of Buyer’s Knowledge Party.

5.3           Buyer’s Representations.  Buyer hereby represents and warrants to Seller as of the Effective Date as follows:

5.3.1        Buyer is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware.

5.3.2        Buyer has full power, right and authority to enter into and perform its obligations under this Agreement.  The execution, delivery and performance of this Agreement by Buyer have been duly and properly authorized by proper action in accordance with applicable law and with the operating agreement of Buyer.

5.3.3        Neither Buyer nor, to Buyer’s knowledge, any direct or indirect owner of Buyer is (a) identified on the OFAC List (as hereinafter defined) or (b) a person with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, rule, regulation or Executive Order of the President of the United States.  The term “OFAC List” shall mean the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S.  Treasury Department, Office of Foreign Assets Control and any other similar list maintained by the U.S.  Treasury Department, Office of Foreign Assets Control pursuant to any law, rule, regulation or Executive Order of the President of the United States, including, without limitation, trade embargo, economic sanctions, or other prohibitions imposed by Executive Order of the President of the United States.

5.3.4        Buyer is capable, financially, of paying the Purchase Price (and the Buyer Parties are capable, financially, of paying the aggregate purchase prices under the Lexford Property Agreements) on the Closing Date.

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5.3.5        Empire Holdings owns, directly or indirectly, at least 51% of the equity ownership interests in Buyer and the Buyer Parties (other than Empirian Property Management, Inc.), and will continue to own, directly or indirectly, at least 51% of the equity ownership interests in the Property Owners upon the Closing, notwithstanding any assignment of the rights afforded pursuant to Section 15.2.

5.3.6        Survival of Buyer’s Representations and Warranties.  The representations and warranties of Buyer set forth in this Section (other than Section 5.3.4 above) shall be deemed to be remade by Buyer as of Closing and shall survive the Closing.

Section 6.               AS-IS

6.1           AS-IS CONDITION.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 6.1, ALL ACKNOWLEDGEMENTS IN THIS SECTION ARE SUBJECT TO SELLER’S REPRESENTATIONS AND WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE VARIOUS EXHIBITS REFERENCED HEREIN, IN ANY CERTIFICATE, OTHER INSTRUMENT OR DOCUMENT THAT SELLER OR LEXFORD MANAGEMENT COMPANY IS OBLIGATED HEREUNDER TO DELIVER AT CLOSING AND IN THE OTHER LEXFORD PROPERTY AGREEMENTS, AND BUYER RETAINS ALL RIGHTS AND REMEDIES OTHERWISE CONTEMPLATED IN THIS AGREEMENT WITH RESPECT TO ANY BREACH OR DEFAULT OF SUCH REPRESENTATIONS AND WARRANTIES.  ACKNOWLEDGING THE PRIOR USE OF THE PROPERTIES AND BUYER’S OPPORTUNITY TO INSPECT THE PROPERTIES TO ITS SATISFACTION PRIOR TO SIGNING THIS AGREEMENT, BUYER AGREES TO PURCHASE THE INTEREST (AND INDIRECTLY, THE PROPERTIES) “AS IS”, “WHERE IS”, WITH ALL FAULTS AND CONDITIONS THEREON.  ANY WRITTEN OR ORAL INFORMATION, REPORTS, STATEMENTS, DOCUMENTS OR RECORDS CONCERNING THE PROPERTIES (“DISCLOSURES”) PROVIDED OR MADE AVAILABLE TO BUYER OR ITS AGENTS BY SELLER, SELLER’S AGENTS, EMPLOYEES OR THIRD PARTIES REPRESENTING OR PURPORTING TO REPRESENT SELLER, SHALL NOT BE REPRESENTATIONS OR WARRANTIES, UNLESS SPECIFICALLY SET FORTH IN SECTION 5.1 OF THIS AGREEMENT OR IN ANY CERTIFICATE THAT SELLER IS OBLIGATED HEREUNDER TO DELIVER AT CLOSING.  IN PURCHASING THE INTEREST OR TAKING OTHER ACTION HEREUNDER, BUYER HAS NOT AND SHALL NOT RELY ON ANY SUCH DISCLOSURES, BUT RATHER, BUYER SHALL RELY ONLY ON BUYER’S OWN INSPECTION OF THE PROPERTIES AND INTEREST.  BUYER ACKNOWLEDGES THAT THE PURCHASE PRICE REFLECTS AND TAKES INTO ACCOUNT THAT THE PROPERTIES ARE BEING SOLD “AS IS.”

6.2           NO ADDITIONAL REPRESENTATIONS.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 6.2, ALL ACKNOWLEDGEMENTS IN THIS SECTION ARE SUBJECT TO SELLER’S REPRESENTATIONS AND WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE VARIOUS EXHIBITS REFERENCED HEREIN, IN ANY CERTIFICATE, INSTRUMENT OR OTHER DOCUMENT THAT

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SELLER OR LEXFORD MANAGEMENT COMPANY IS OBLIGATED HEREUNDER TO DELIVER AT CLOSING AND IN THE OTHER LEXFORD PROPERTY AGREEMENTS, AND BUYER RETAINS ALL RIGHTS AND REMEDIES OTHERWISE CONTEMPLATED IN THIS AGREEMENT WITH RESPECT TO ANY BREACH OR DEFAULT OF SUCH REPRESENTATIONS AND WARRANTIES.  BUYER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE PROPERTIES INCLUDING, WITHOUT LIMITATION, (A) THE NATURE, QUALITY OR PHYSICAL CONDITION OF THE PROPERTIES, (B) THE CONSTRUCTION OF THE IMPROVEMENTS AND WHETHER THERE EXISTS ANY CONSTRUCTION DEFECT THEREIN, (B) THE WATER, SOIL AND GEOLOGICAL CONDITIONS OF THE PROPERTIES, (C) THE INCOME TO BE DERIVED FROM THE PROPERTIES, (D) THE SUITABILITY OF THE PROPERTIES FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY CONDUCT OR CAUSE TO BE CONDUCTED THEREON, (E) THE COMPLIANCE OF OR BY THE PROPERTIES OR THE OPERATION THEREOF WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL AUTHORITY OR BODY HAVING JURISDICTION THEREOVER, (F) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY OR FITNESS OF THE PROPERTIES FOR A PARTICULAR PURPOSE, (G) THE STATUS OR CONDITION OF ENTITLEMENTS PERTAINING TO THE PROPERTIES, (H) ANY MATTER REGARDING TERMITES, AND (I) ANY MATTER REGARDING HAZARDOUS MATERIALS, AS HEREINAFTER DEFINED.  BUYER FURTHER ACKNOWLEDGES AND AGREES THAT SELLER, UNLESS OTHERWISE REQUIRED BY LAW OR PURSUANT TO SECTION 5.1 OF THIS AGREEMENT, IS UNDER NO DUTY TO MAKE ANY AFFIRMATIVE DISCLOSURES REGARDING ANY MATTER WHICH MAY BE KNOWN TO SELLER.

6.3           RELEASE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 6.3, ALL ACKNOWLEDGEMENTS IN THIS SECTION ARE SUBJECT TO SELLER’S REPRESENTATIONS AND WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE VARIOUS EXHIBITS REFERENCED HEREIN, IN ANY CERTIFICATE, INSTRUMENT OR OTHER DOCUMENT THAT SELLER OR LEXFORD MANAGEMENT COMPANY IS OBLIGATED HEREUNDER TO DELIVER AT CLOSING AND IN THE OTHER LEXFORD PROPERTY AGREEMENTS, AND BUYER RETAINS ALL RIGHTS AND REMEDIES OTHERWISE CONTEMPLATED IN THIS AGREEMENT WITH RESPECT TO ANY BREACH OR DEFAULT OF SUCH REPRESENTATIONS AND WARRANTIES.  BUYER REPRESENTS TO SELLER THAT BUYER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTIES, AS BUYER DEEMS NECESSARY OR DESIRABLE TO SATISFY ITSELF AS TO ANY MATTER RELATING TO THE PROPERTIES, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER, SELLER’S AGENTS,

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EMPLOYEES OR THIRD PARTIES REPRESENTING OR PURPORTING TO REPRESENT SELLER, WITH RESPECT THERETO.  UPON CLOSING, BUYER SHALL ASSUME THE RISK THAT ADVERSE MATTERS REGARDING THE PROPERTIES MAY NOT HAVE BEEN REVEALED BY BUYER’S INVESTIGATIONS, AND BUYER, UPON CLOSING, SHALL BE DEEMED, ON BEHALF OF ITSELF AND ON BEHALF OF ITS TRANSFEREES AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TO WAIVE, RELINQUISH, RELEASE AND FOREVER DISCHARGE SELLER AND SELLER’S AFFILIATES FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION, LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, BY REASON OF OR ARISING OUT OF THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, ANY LATENT OR PATENT CONSTRUCTION DEFECT OR OTHER PHYSICAL CONDITION (INCLUDING, WITHOUT LIMITATION, FUNGI, MOLD OR MILDEW) WHETHER PURSUANT TO ANY OTHER FEDERAL, STATE, OR LOCAL ENVIRONMENTAL OR HEALTH AND SAFETY LAW OR REGULATION; THE EXISTENCE OF ANY HAZARDOUS MATERIAL WHATSOEVER, ON, AT, TO, IN, ABOVE, ABOUT, UNDER, FROM OR IN THE VICINITY OF THE PROPERTIES; AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS WHATSOEVER REGARDING THE PROPERTIES.  THIS RELEASE INCLUDES CLAIMS OF WHICH BUYER IS PRESENTLY UNAWARE AND OF WHICH BUYER DOES NOT PRESENTLY SUSPECT TO EXIST WHICH, IF KNOWN BY BUYER, WOULD MATERIALLY AFFECT BUYER’S RELEASE OF SELLER.

BUYER UNDERSTANDS AND ACKNOWLEDGES THAT GIVEN THE CLIMATE AND HUMID CONDITIONS IN THE STATES OF FLORIDA, GEORGIA, AND/OR ONE OR MORE OF THE OTHER STATES IN WHICH THE PROPERTIES ARE LOCATED, FUNGI, MOLD AND MILDEW MAY EXIST OR DEVELOP WITHIN THE PROPERTIES LOCATED IN THOSE STATES.  BUYER HEREBY AGREES THAT UPON CLOSING BUYER SHALL ASSUME ALL RISK, KNOWN AND UNKNOWN, ASSOCIATED WITH THE EXISTENCE OF FUNGI, MOLD OR MILDEW ON, AT, IN, ABOUT OR THROUGHOUT THE PROPERTIES.

IN THIS REGARD AND TO THE EXTENT PERMITTED BY LAW, BUYER HEREBY AGREES, REPRESENTS AND WARRANTS THAT BUYER REALIZES AND ACKNOWLEDGES THAT FACTUAL MATTERS NOW UNKNOWN TO BUYER MAY HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND BUYER FURTHER AGREES, REPRESENTS AND WARRANTS THAT THE WAIVERS AND RELEASES CONTAINED HEREIN HAVE BEEN NEGOTIATED AND AGREED UPON BY BUYER IN LIGHT OF THAT REALIZATION AND THAT BUYER NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE AND ACQUIT SELLER AND SELLER’S AFFILIATES FROM ANY SUCH UNKNOWN CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES.

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“Hazardous Materials” shall mean (i) hazardous wastes, hazardous materials, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases, including, but not limited to, substances defined as “hazardous wastes,” “hazardous materials,” “hazardous substances,” “toxic substances,” “pollutants,” “contaminants,” “radioactive materials,” “toxic pollutants,” or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), 42 U.S.C.  § 9601 et seq.; the Toxic Substance Control Act (“TSCA”), 15 U.S.C.  § 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.  § 1802; the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C.  § 9601, et seq.; the Clean Water Act (“CWA”), 33 U.S.C.  § 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.  § 300f et seq.; the Clean Air Act (“CAA”), 42 U.S.C.  § 7401 et seq.; and in any permits, licenses, approvals, plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar federal, state or local laws, regulations, rules or ordinance now or hereafter in effect relating to environmental matters; and (ii) any other substances, constituents or wastes subject to any applicable federal, state or local law, regulation or ordinance, including any environmental law, now or hereafter in effect, including but not limited to (A) petroleum, (B) refined petroleum products, (C) waste oil, (D) waste aviation or motor vehicle fuel and their byproducts, (E) asbestos, (F) lead in water, paint or elsewhere, (G) radon, (H) Polychlorinated Biphenyls (PCB’s), (I) ureaformaldehyde, (J) volatile organic compounds (VOC), (K) total petroleum hydrocarbons (TPH), (L) benzine derivative (BTEX), and (M) petroleum byproducts.

The provisions of this Section 6.3 shall survive the Closing.  Buyer and Seller acknowledge and agree that the disclaimers, indemnifications and other agreements set forth herein are an integral part of this Agreement and that Seller would not have agreed to sell the Properties to Buyer for the Purchase Price and Seller would not have agreed to enter into the transaction contemplated by this Agreement without such disclaimers, indemnifications and other agreements set forth above.

6.4           RADON GAS – FLORIDA.  Pursuant to Section 404.05618, Florida Statues (1988), the following notification regarding radon gas is hereby made, and all parties executing this Agreement acknowledge receipt of this notification:

“Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time.  Levels of radon that exceed federal and state guidelines have been found in buildings in Florida.  Additional information regarding radon and radon testing may be obtained from your county public health unit.”

Section 7.               OPERATIONS OF THE PROPERTIES

From and after the date hereof until the Closing Date or earlier termination of this Agreement:

7.1           Ordinary Course of Business.  Seller shall cause each Property Owner to operate the Property in its ordinary course of business and shall not sell, further pledge, or otherwise transfer or dispose of all or any part of any Property (except for such items of Personal Property

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as become obsolete or are disposed of in the ordinary course and are replaced with items of substantially equivalent value, utility and quantity), subject to the provisions of Section 12 below, and shall not make application for or otherwise consent to a change in a zoning or other land use classification, right or entitlement.

7.2           Service Contracts.  Seller shall not enter, nor permit any Property Owner to enter, into any new written service contract with respect to the Property that will not be cancelable by Buyer without penalty upon no greater than thirty (30) days notice, without the prior written consent of Buyer, which shall not be unreasonably withheld or delayed, except for contracts relating to emergency repairs, for example following a casualty, or where there is a threat of imminent harm to persons or damage to property, in which case Seller shall deliver to Buyer written notice of such contracts and copies thereof within two (2) Business Days of entering into such contract.

7.3           Property/General and Excess Liability Insurance.  Seller shall maintain or cause to be maintained in full force and effect property and commercial general and excess liability insurance on the Properties consistent with its ordinary course of business. Seller represents that such property insurance and commercial general liability insurance is issued on an ‘occurrence,’ rather than a ‘claims-made,’ basis and shall survive Closing.

7.4           Maintenance of Improvements.  Subject to Section 12, Seller shall cause Property Owners, as applicable, to maintain all Improvements in a manner consistent with Property Owners’ maintenance of the Improvements during Property Owners’ period of ownership.

7.5           Leases.  Seller will cause Property Owners to perform their material obligations under the Leases.  Seller shall not enter into, amend, renew or extend any new Leases or other occupancy agreements with respect to the Property without Buyer’s prior written consent, which shall not be unreasonably withheld or delayed, except for Leases satisfying each of the following conditions (which shall not require Buyer’s consent):   (1) such Lease is entered into, amended, renewed or extended in the ordinary course of the applicable Property Owner’s business, consistent with Seller’s historic practices; (2) the Lease is in substantially the same form as the form lease provided to Buyer prior to the Effective Date; and (3) the Tenant is not an affiliate of the Seller and ERP.  Seller shall not terminate any Lease except by reason of a default by the tenant thereunder.

7.6           Notice of Violations.  Seller shall furnish Buyer with copies of any notices that Seller or any Property Owner receives from any governmental authority or insurance underwriter with respect to any violation of any laws or insurance requirement applicable to the Properties within five (5) Business Days of Seller’s or Property Owner’s receipt thereof, provided that any such violation would or could have, if not properly remedied, a material adverse effect on the ownership, operation or maintenance of any Project as a multi-family property.

Section 8.               CONDITIONS TO CLOSING.

8.1           Buyer’s Conditions Precedent.  Buyer’s obligation to proceed to Closing under this Agreement is subject to the following conditions precedent (any or all of which Buyer may elect, in its sole discretion, to waive) but only if the cumulative effect of the failure to satisfy said

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conditions precedent when compared to the status of the Lexford Assets (which does not include any Properties which are excluded from the Properties to be conveyed to Buyer for any reason in accordance with the provisions hereof), taken as a whole, if such conditions precedent had been satisfied, represents a Material Adverse Effect (in which event Buyer may elect, by written notice given to Seller prior to the Closing Date, to terminate this Agreement, in which event the Earnest Money shall be returned to Buyer):

(a)           Seller Parties shall have performed and satisfied each and all of their respective obligations under the Lexford Property Agreements in all material respects.

(b)           Each and all of the representations and warranties of the Seller Parties set forth in the Lexford Property Agreements shall be true and correct in all material respects at the Effective Date and at the Closing Date.

(c)           The Title Insurer shall later-date the Title Commitments to cover the Closing, as to each Property and shall issue the Owner’s Policies (or pro forma owner’s policies or a so-called “marked-up” Title Commitment) to Buyer, naming Buyer or the applicable Property Owner as the insured and providing insurance on Land and Improvements included in the Property, in the amount of the Purchase Price allocated to the Property, and subject only to the Permitted Title Exceptions, all in accordance with Section 3 of this Agreement (the “Title Policies”).

(d)           Seller shall have endeavored to obtain any required third-party consents in connection with the assignment of the Service Contracts to Buyer at the Closing, provided that if any necessary third-party consents are not obtained with respect to a given Service Contract, then said Service Contract shall not be assigned and Seller shall pay any resulting termination payments (and the assignment of said Service Contract shall not be a condition precedent to Buyer’s obligation to proceed to Closing).

(e)           The transactions contemplated under the Lexford Property Agreements shall have been consummated, or shall be consummated concurrently with the Closing under this Agreement except to the extent the transactions contemplated by any such Lexford Property Agreement are not consummated as a result of a breach or default by a Buyer Party (it being understood and agreed that the failure of this condition shall be deemed to represent a Material Adverse Effect).

(f)            Seller shall have tendered all deliveries to be made at Closing pursuant to Section 9.2 herein or otherwise.  In the event that the condition precedent listed in this Section 8.1(f) fails to be satisfied and such failure does not result in a Material Adverse Effect but has a material adverse effect on the ownership, operation or maintenance of any Project as a multi-family property, then Buyer may notify Seller prior to Closing of its election to exclude such Project from the Properties to be conveyed to Buyer in accordance herewith, and Seller shall have until Closing (as such time period may be extended pursuant to Section 9.1) to cure such material adverse effect to the reasonable satisfaction of Buyer.  If Seller fails to so cure such material adverse effect, then the Project shall be excluded from the Properties conveyed at Closing, and the Purchase Price shall be reduced appropriately by the amount of the Purchase Price allocated to the

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excluded Project as set forth on Exhibit A attached hereto.  In the event a Project or Projects are excluded from the conveyance hereunder as provided above, at the election of Buyer, made by written notice given to Seller prior to the Closing Date, Buyer shall manage such excluded Project or Projects for up to one (1) year following the Closing Date pursuant to the terms of a management agreement mutually agreed to by Buyer and Seller; provided, however that Seller shall have the right to terminate such management at any time upon thirty (30) days’ notice given to Buyer.

8.2           Sellers Conditions Precedent.  Sellers’ obligations to proceed to Closing under this Agreement are subject to the following conditions precedent:

(a)           Buyer Parties shall have performed and satisfied each and all of their respective obligations under the Lexford Property Agreements in all material respects.

(b)           The transactions contemplated under the Lexford Property Agreements shall have been consummated, or shall be consummated concurrently with the Closing under this Agreement, except to the extent the transactions contemplated by any such Lexford Property Agreement are not consummated as a result of a breach or default by a Seller Party.

Notwithstanding the foregoing, nothing contained herein shall waive or diminish any right or remedy Seller or Buyer may have for the other’s default or breach of this Agreement as may otherwise be expressly provided in this Agreement.  If any of the conditions set forth in this Section 8.2 is not satisfied on or before the Closing Date, then without limitation of Seller’s rights under Section 10.2, if applicable, Seller shall have no obligation to proceed to Closing and shall have the right, by written notice furnished to Buyer, to terminate this Agreement, in which event the Earnest Money shall be returned to Dreier LLP in trust for Buyer and Buyer’s Affiliates unless an Event of Buyer’s Default has occurred.

8.3           No Finance Contingency.  Buyer acknowledges and agrees that Buyer’s obligations under this Agreement are not in any manner contingent or conditioned upon Buyer obtaining financing in order to purchase the Interest.  It is expressly understood that if any Buyer Party is unable to close the transaction contemplated by any Lexford Property Agreement as a result of its failure to obtain financing, an Event of Buyer’s Default shall have occurred under all of the Lexford Property Agreements and Seller shall have the remedies provided in Section 10.2 below.  In no event shall Seller be obligated to comply with any requirements of Buyer’s lender or otherwise incur any cost, expense or liability solely in connection with Buyer’s financing of the Property, except, however, that Seller shall cooperate as provided in Section 4.1 above and with reasonable routine requests to execute standard closing documents required by Buyer’s lender(s) so long as such closing documents do not impose any additional costs or liabilities upon Seller.

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Section 9.               CLOSING.

9.1           Closing Date.  The “Closing” of the transaction contemplated by this Agreement (that is, the payment of the Purchase Price pursuant to a so-called “New York style” closing, the transfer of title to the Interest, and the satisfaction of all other terms and conditions of this Agreement) shall occur at 11:00 a.m. (Chicago time) on the Closing Date at the Chicago and New York offices of the Title Insurer, or at such other time and place as Seller and Buyer shall agree in writing.  The “Closing Date” shall be the date of Closing.  To facilitate the Closing, upon request of either Buyer or Seller, representatives of Buyer and Seller shall meet to commence pre-Closing activities starting on the second Business Day prior to the Closing Date. Notwithstanding the foregoing, if any or all of Buyer’s conditions precedent under Section 8.1 above or Seller’s conditions precedent under Section 8.2 above are not satisfied by the other party for any cause, then the party not satisfying the Closing condition precedent shall have the right to extend the Closing Date by up to an aggregate of twenty (20) Business Days by written notice given to the other party at least three (3) days prior to the then scheduled Closing Date.  Upon satisfaction or completion of all closing conditions and deliveries, the parties shall direct Escrowee to immediately record and deliver the closing documents to the appropriate parties and make disbursements according to the Closing Statements and escrow letters executed by Seller and Buyer.

9.2           Seller’s Closing Deliveries.  At Closing, Seller shall execute and deliver, or cause the applicable Property Owners or Seller Affiliates to execute and deliver, to Buyer the following:

9.2.1        An Assignment and Acceptance of Membership Interest in the form attached hereto as Exhibit L.

9.2.2        A copy of the limited partnership resolutions of the Owner Parties, as applicable, authorizing the sale of the Interest, the transactions contemplated herein and the execution of each of the applicable documents executed at or in connection with the Closing; a certificate of good standing for the Seller, Owner LLC and each of the Property Owners in their state of formation and a certificate of good standing for each Property Owner in the state of the applicable Property; and a certified copy of the applicable organizational documents for Owner LLC and each of the Property Owners.

9.2.3        A certificate in the form attached hereto as Exhibit O stating under penalty of perjury, Seller’s U.S.  taxpayer identification number and that Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code;

9.2.4        The Indemnification Agreement (“Indemnification Agreement”) in the form attached hereto as Exhibit M, pursuant to which ERP guarantees the indemnification obligations of Seller hereunder and Empire Group Holdings LLC, a Delaware limited liability company, guarantees the indemnification obligations of Buyer hereunder.

9.2.5        Counterpart originals of the Closing Statement setting forth the prorations and adjustments to the Purchase Price as required hereunder.

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9.2.6        An ALTA Statement or other certification or affidavit, in customary form, to the extent required of Seller by the Title Insurer to remove the standard “gap”, mechanics’ liens and parties in possession exceptions from the Owners Policies which are capable of being removed by such a statement and to issue a non-imputation endorsement.

9.2.7        Such transfer tax, certificate of value or other similar documents customarily required of Seller in the county and/or municipality in which the Property is located.

9.2.8        Evidence of cancellation of all management agreements and intracompany indebtedness, if any, affecting the Properties.

9.2.9        A letter advising tenants under the leases of the change in the indirect ownership and the management of the Property in the form attached hereto as Exhibit F.

9.2.10      A notice to send to all Vendors substantially in the form attached hereto as Exhibit I.

9.2.11      An update of the Rent Roll, dated no earlier than five (5) Business Days prior to the Closing Date, certified by Seller to be to Seller’s knowledge, true and correct in all material respects, and subject to the limitations on survival and liability provided in Section 5, Section 10 and Section 12 herein (“Updated Rent Roll”) and schedule of Delinquent Amounts.

9.2.12      Evidence of resignation of all managers and officers of the Owner LLC, each of the Property Owners, and each of the General Partners, which shall include a full release, in form and substance reasonably satisfactory to Buyer, of any claims that such manager or officer may have against all said entities.

9.2.13      A Bill of Sale, in the form attached hereto as Exhibit J, by Lexford Management Company, in favor of Buyer’s Affiliate of all tangible and intangible personal property used by Lexford Management Company in connection with the management of the Properties.

9.2.14      If necessary, subject to Section 8.1(d), counterpart originals of an Assignment and Assumption of Service Contracts, in the form attached hereto as Exhibit P (the “Service Contract Assignment”).

9.2.15      Counterpart originals of an Assignment and Assumption of Lease, in the form attached hereto as Exhibit Q, with respect to the Reynoldsburg Lease (the “Reynoldsburg Lease Assignment”).

9.2.16      All certificates, if any, evidencing the Interest and the Property Owner Interests, if any.

9.2.17      Any additional documents that Escrowee may reasonably require for the proper consummation of the transactions contemplated by this Agreement (provided,

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however, that no such additional document shall expand any obligation, covenant, representation or warranty of Seller or result in any new or additional obligation, covenant, representation or warranty of Seller under this Agreement beyond those expressly set forth in this Agreement).

9.2.18      Possession of the Properties, subject only to the Permitted Exceptions.

9.2.19      Lease files, license agreements, maintenance records and warranties, plans and specifications, licenses, permits, certificates of occupancy, books and records of account, contracts, correspondence with tenants and suppliers, receipts for deposits, unpaid bills, advertising materials, booklets, keys, codes and other items, if any, in Seller’s possession or reasonable control used in the operation of the Properties.

9.2.20      Counterpart originals of the Employment Matters Agreement.

9.2.21      To the extent that any personal property of Lexford Management Company is not transferable merely by signing the Bill of Sale attached as Exhibit J, an endorsement to a certificate of title or the equivalent (e.g., an endorsement to the certificate of title for any motor vehicle necessary to transfer title thereto to Buyer).

9.3           Buyer’s Closing Deliveries.  At Closing, Buyer or the appropriate Buyer Party shall deliver, or execute and deliver to Seller or Seller’s qualified intermediary designee, as applicable, the following:

9.3.1        The funds required pursuant to Section 2 above (Buyer shall direct the Escrowee to disburse the Earnest Money to Seller, and cause Buyer’s Affiliate to pay the Management Property Purchase Price to Lexford Management Company).

9.3.2        Counterpart originals of the Assignment and Assumption and Acceptance of Membership Interest.

9.3.3        Counterpart originals of the Closing Statement.

9.3.4        Such transfer tax, certificate of value or other similar documents, if any, customarily required of Buyers in the county in which each Property is located.

9.3.5        Counterpart originals of the Indemnification Agreement.

9.3.6        Such other documents or instruments that are reasonably necessary to consummate the Closing.

9.3.7        Subject to Section 8.1(d), counterpart originals of the Service Contract Assignment.

9.3.8        Counterpart originals of the Reynoldsburg Lease Assignment.

9.3.9        Counterpart originals of the Employment Matters Agreement.

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9.4           Reasonable Cooperation.  In addition to the foregoing closing documents, Buyer and Seller each agree to execute such reasonable and customary closing documents not materially contrary to the terms and conditions of this Agreement as may be reasonably necessary to consummate the Closing.

Section 10.             DEFAULT AND REMEDIES.

10.1         Buyer’s Pre-Closing Remedies.  If Seller or Seller Parties fail to perform in accordance with the terms of this Agreement or any of the Lexford Property Agreements in any material respect at or prior to Closing, said failure would have a Material Adverse Effect, and said failure is not cured within five (5) Business Days following notice to Seller from Buyer identifying said failure (or, in the case of a failure under any of the Lexford Property Agreements, if said failure is not cured within any applicable cure period under said Lexford Property Agreement) then an “Event of Seller’s Default” shall be deemed to have occurred under this Agreement.  Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence of an Event of Seller’s Default, as Buyer’s sole and exclusive remedy hereunder and at Buyer’s option, either (i) the Earnest Money shall be returned to Dreier LLP in trust for Buyer and Buyer’s Affiliates, in which event this Agreement shall terminate, and neither party shall have any further rights or obligations under this Agreement except those which expressly survive termination, (ii) upon notice to Seller not more than ten (10) days after the expiration of any such cure period, and provided an action is filed within thirty (30) days following the scheduled Closing Date, Buyer may seek specific performance of this Agreement, but not damages (except that damages shall be a remedy available to Buyer if and to the extent the remedy of specific performance is unavailable to Buyer as a matter of law or equity due to the Interest itself being a general intangible and not real property) or (iii) waive said Event of Seller’s Default and proceed to Closing.  Seller agrees and acknowledges that due to the limitations on Buyer’s recovery of damages as provided herein, Buyer does not have an adequate remedy at law, and therefore specific performance is an appropriate remedy for an Event of Seller’s Default.  Buyer’s failure to seek specific performance as aforesaid shall constitute its election to proceed under clause (i) above.  If Buyer elects to proceed under said clause (i), Seller shall be obligated, promptly on demand from Buyer, to deliver any directions to Escrowee necessary or desirable to cause Escrowee to deliver the Earnest Money to Dreier LLP in trust for Buyer and Buyer’s Affiliates, which obligation shall be enforceable by injunction, declaratory judgment or other equitable relief.  Buyer and Seller acknowledge and agree that all Buyer Parties shall be required to elect the same remedy (i.e., either termination, with return of the applicable earnest money plus interest, waiver or specific performance and related relief) under this Agreement as under all of the Lexford Property Agreements, and that Buyer may not pursue specific performance under this Agreement unless all Buyer Parties are closing or pursuing specific performance under the Lexford Property Agreements, or terminate this Agreement unless all Buyer Parties are concurrently terminating the Lexford Property Agreements.  Notwithstanding the foregoing, nothing in this Section shall limit any indemnification obligation of ERP and Seller under this Agreement and the Indemnification Agreement.  In the event that pursuant to Section 8.1 above Buyer is not obligated to close hereunder, then Buyer at its option shall have the remedy described in clause (i) above unless the reason that Buyer is not so obligated is due to a Seller’s Event of Default, in which case Buyer shall be entitled to elect the remedy described in clause (ii) above.

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10.2         Sellers Pre-Closing Remedies.  If Buyer or Buyer Parties fail to perform in accordance with the terms of this Agreement or any of the Lexford Property Agreements in any material respect relating to the Lexford Property Agreements taken as a whole, and said failure is not cured within five (5) Business Days following notice to Buyer from Seller identifying said failure (or, in the case of a failure under any of the Lexford Property Agreements, if said failure is not cured within any applicable cure period under said Lexford Property Agreement), then an “Event of Buyer’s Default” shall be deemed to have occurred under this Agreement.  Notwithstanding anything to the contrary in this Agreement, upon the occurrence of an Event of Buyer’s Default, as Seller’s sole and exclusive remedy hereunder and at Seller’s option, either (i) the Earnest Money shall be delivered to Seller as full and complete liquidated damages with respect to Buyer’s failure to perform its obligations under this Agreement (in which case, as provided in the Lexford Property Agreements, Seller shall also be entitled to retain the earnest money thereunder as liquidated damages under the Lexford Property Agreements), (ii) upon notice to Buyer not more than ten (10) days after the expiration of any such cure period, and provided an action is filed within thirty (30) days thereafter, Seller may seek specific performance of this Agreement, but not damages, or (iii) waive said Event of Buyer’s Default and proceed to Closing.  Seller’s failure to seek specific performance as aforesaid shall constitute its election to proceed under clause (i) above.  If Seller elects, or is deemed to have elected, to proceed under clause (i) above, Buyer shall be obligated, promptly on demand from Seller, to deliver any directions to Escrowee necessary or desirable to cause Escrowee to deliver the Earnest Money to Seller, which obligation shall be enforceable by injunction, declaratory judgment, or other equitable relief.  Buyer and Seller acknowledge and agree that the actual damages to Seller from an Event of Buyer’s Default are impractical to ascertain and the amount of the Earnest Money under this Agreement is a reasonable estimate of Seller’s damages in connection with the failure to consummate the transactions under this Agreement and shall be and constitute valid liquidated damages, upon the payment of which this Agreement shall be null and void and neither party shall have any rights or obligations under this Agreement. Buyer and Seller acknowledge and agree that Seller (and Seller’s Affiliates) shall be required to elect the same remedy (i.e., either liquidated damages or specific performance) under this Agreement as under all of the Lexford Property Agreements, and that Seller may not pursue specific performance under this Agreement unless Seller or Seller’s Affiliates are closing or pursuing specific performance under each of the Lexford Property Agreements, or elect to receive liquidated damages under this Agreement unless Seller or Seller’s Affiliates elect to receive liquidated damages under each of the Lexford Property Agreements.  Notwithstanding the foregoing, nothing in this Section shall limit any indemnification obligation of Buyer under this Agreement.

10.3         Pre-Closing Knowledge.  If at any time after the execution of this Agreement, it can be established by clear and convincing evidence that either Buyer’s Knowledge Parties or Seller’s Knowledge Parties become aware of any fact which makes a representation and warranty contained in this Agreement to become untrue in any material respect, said party shall promptly disclose such fact in writing to the other party hereto.  Provided that the party making the representation has taken no willful act which is not permitted under this Agreement to cause the representation to become untrue, said party shall not be in default under this Agreement and, subject to the terms of Section 8.1, the sole remedy of the other party shall be to either (i) terminate this Agreement by written notice (provided, however, that Buyer may not terminate this Agreement unless such facts create a Material Adverse Effect) within five (5) Business Days

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of the date on which the non-breaching party becomes aware of such fact (“Notice Date”), in which event the Earnest Money shall be returned to Dreier LLP in trust for Buyer and Buyer’s Affiliates and this Agreement, without further action of the parties, shall terminate such that neither party shall have any further rights or obligations under this Agreement except for those rights and obligations which by their terms expressly survive any such termination, or (ii) elect to proceed to Closing, in which case such party shall be deemed to have waived its rights with respect to any such breach of representation or warranty.  In the event the non-breaching party fails to deliver such termination notice to the breaching party on or before the Notice Date, then the non-breaching party shall conclusively deemed to have elected to proceed under clause (ii) of the preceding sentence.  Neither party may terminate this Agreement unless its Affiliates concurrently terminate each other Lexford Property Agreement.  Notwithstanding anything to the contrary set forth in this Agreement and without limitation to anything in Section 10.4 below or in the Indemnification Agreement, Buyer and Seller are prohibited from making any claims against the other party hereto after the Closing with respect to any breaches of the other party’s representations and warranties contained in this Agreement to the extent that it can be established by clear and convincing evidence that the claiming party had actual knowledge of such breach prior to the Closing.

10.4         Post-Closing Remedies.  From and after the Closing, Seller and Buyer shall, subject to the terms and conditions of this Agreement including, without limitation, the terms of Section 10.5 below, have such rights and remedies as are available in this Agreement, the Indemnification Agreement, the Confidentiality Agreement and at law or in equity, except that neither Seller nor Buyer shall be entitled to recover from the other consequential, punitive or special damages and the Indemnification Agreement shall control in the event of any conflict with this Agreement or the Confidentiality Agreement.

10.5         Limitation of Liability.  Notwithstanding anything to the contrary contained herein, if the Closing shall have occurred (and Buyer shall not have waived, relinquished or released any applicable rights in further limitation), the aggregate liability of Seller Parties under this Agreement and all of the Lexford Property Agreements, in the aggregate (or any documents executed or delivered in connection herewith or therewith), shall be as set forth in, and all claims will be made pursuant to, and will be governed by the Indemnification Agreement.

10.6         No Personal Liability of Seller’s Directors and Employees.  No constituent partner in or agent of Seller, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, participant, representative or agent of any corporation or trust that is or becomes a constituent partner in Seller (including, but not limited to, ERP and Equity Residential, except for the respective liability under the Indemnity Agreement) shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Buyer and its successors and assigns and, without limitation, all other persons and entities, shall look solely to Seller’s assets for the payment of any claim or for any performance, and Buyer, on behalf of itself and (subject to any applicable terms of this Agreement or the Indemnification Agreement providing for indemnification by ERP) its successors and assigns, hereby waives any and all such personal liability.  The provisions of this Section shall survive the Closing or any termination of this Agreement.

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10.7         No Personal Liability of Buyer’s Directors and Employees.  No constituent partner in or agent of Buyer, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, participant, representative or agent of any corporation or trust that is or becomes a constituent partner in Buyer shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Seller and its successors and assigns and, without limitation, all other persons and entities, shall look solely to Buyer’s assets for the payment of any claim or for any performance, and Buyer, on behalf of itself and (subject to any applicable terms of this Agreement or the Indemnification Agreement providing for several and not joint liability) its successors and assigns, hereby waives any and all such personal liability.  The provisions of this Section shall survive the Closing or any termination of this Agreement.

Section 11.             INDEMNIFICATION

11.1         Sellers’ Indemnity.  Seller’s indemnification obligations shall be contained in the Indemnification Agreement.

11.2         Buyer’s Indemnity.  Buyer’s indemnification obligations shall be contained in the Indemnification Agreement.

Section 12.             CONDEMNATION OR DESTRUCTION.

12.1         Prior to Closing, the risk of loss shall remain with Seller.  If, prior to Closing, one or more Properties or parts thereof shall be condemned, or destroyed or damaged by fire or other casualty, Seller shall promptly so notify Buyer in writing.  If one or more of the Properties or the Lexford Assets or parts thereof shall be condemned such that damages are in excess of Forty Million and No/100ths Dollars ($40,000,000.00) in the aggregate with respect to the Properties and the Lexford Assets (as reasonably determined by the insurance adjuster designated by Seller’s insurance company) or if one or more of the Properties or the Lexford Assets or any part thereof shall be destroyed or damaged by fire or other casualty the repair of which would cost in excess of Forty Million and No/100th Dollars ($40,000,000.00) in the aggregate with respect to the Properties and the Lexford Assets (as reasonably determined by the insurance adjuster designated by Seller’s insurance company), then, at the option of either Seller or Buyer, which option shall be exercisable, if at all, by written notice thereof to the other party within five (5) Business Days after Buyer receives written notice of such fire, earthquake or other casualty or condemnation and the determination of the insurance adjuster as described above, this Agreement may be terminated; provided however, that Buyer may not terminate this Agreement pursuant to this Section 12.1 unless all Buyer Parties shall simultaneously terminate all of the Lexford Property Agreements pursuant to the equivalent terms contained in each Lexford Property Agreement, and Seller may not terminate this Agreement pursuant this Section 12.1 unless all Seller Parties simultaneously terminate all of the Lexford Property Agreements pursuant to the equivalent terms contained in each Lexford Property Agreement.

12.2         If either Buyer or Seller elect to terminate this Agreement pursuant to Section 12.1, the Earnest Money shall be returned to Dreier LLP in trust for Buyer and Buyer’s Affiliates by Escrowee, in which event this Agreement shall, without further action of the

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parties, terminate and neither party shall have any further rights or obligations under this Agreement, except those which expressly survive termination.  In the event that neither Buyer nor Seller exercise the option to terminate this Agreement set forth above, or if the condemnation or casualty is below the thresholds described above, then the Closing shall take place on the Closing Date and Buyer shall be entitled to receive:   (a) with respect to a condemnation, an assignment of all of each applicable Property Owner’s right, title and interest in and to the condemnation proceeds received or to be awarded to such Property Owner as a result of such condemnation, and (b) with respect to a casualty, a credit against the Purchase Price payable at Closing in the total amount of (i) the greater of (x) the proceeds of Seller’s insurance policies covering such loss plus an amount equal to Seller’s deductible amount and/or self-insured retention under such policies; and (y) either (A) in the case of a Project with non-conforming Improvements, the allocated value of the Project less the fair market value of the Land included thereunder, or (B) in all other cases the estimated cost of repair plus the estimated amount of lost rental income subsequent to the Closing Date not to exceed 1 year, all as reasonably determined by Seller’s insurance representatives; minus (ii) any sums reasonably expended by Seller in repairs or restoration prior to Closing.  In addition, in the event of the foregoing, Buyer shall deliver to Seller at Closing a release in form reasonably satisfactory to Seller whereby Buyer releases Seller from all ongoing liability and/or claims in connection with such condemnation or casualty.

Section 13.             BROKER/ADVISORS AND BROKER/ADVISORS’ COMMISSIONS.

13.1         Buyer and Seller each warrant and represent to the other that, other than Seller’s Advisor, neither party has employed any other real estate broker, broker/advisor or agent in connection with the transaction contemplated hereby.  In the event the Closing is consummated, Seller shall pay a commission to Seller’s Advisor pursuant to a separate agreement.  Each party agrees to indemnify and hold the other harmless from any loss or cost suffered or incurred by it as a result of the other’s representation herein being untrue.  This Section shall expressly survive the Closing hereunder.

Section 14.             OTHER AGREEMENTS.

14.1         Section 1031 Exchange.  Seller and/or Buyer may structure the disposition/acquisition of the Properties as one or more like-kind exchanges under Internal Revenue Code Section 1031 at their respective sole cost and expense.  Buyer and Seller shall reasonably cooperate therein, including executing documents reasonably requested by each other in connection with such exchanges, provided that neither Seller nor Buyer shall incur any material costs, expenses or liabilities in connection with the other’s exchanges.  If either party uses one or more qualified intermediaries to effectuate the exchanges, any assignment of the rights or obligations of Seller or Buyer hereunder shall not relieve, release or absolve such party of its obligations to the other.

14.2         [Intentionally Omitted]

14.3         [Intentionally Omitted]

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14.4         Excluded Assets.  The following rights, assets and interests are intended to be retained by Seller and are not intended to be transferred, directly or indirectly, to Buyer.  Upon request by Seller at any time from and after Closing, Buyer shall reasonably cooperate in causing any Property Owner to quitclaim, assign and transfer such rights, assets and interests to Seller or Seller’s designee.

14.4.1      Insurance Proceeds.  Subject to Section 12 above, Seller retains all right, title and interest in and to all proceeds and potential recoveries under all policies of insurance applicable to the Properties (not including the Title Policies) and to the period prior to the Closing, including any rights to any proceeds derived from any subrogation claims arising from or related to occurrences on or before the Closing Date.  Buyer understands that all insurance policies relating to the Properties shall be cancelled at Closing and that Buyer is responsible for obtaining all insurance for the Properties following the closing.

14.4.2      Property Owner Cash.  Immediately prior to Closing, Seller will cause all Property Owners to transfer any and all cash and cash equivalent instruments to Seller or its designee and close all deposit accounts in the name of any Property Owner.  Except for the credit to Buyer in respect of security deposits and the other pro-rations contemplated under Section 2.3, no cash, cash equivalent instruments or deposit accounts will be transferred to Buyer hereunder, except for security deposits in accordance with Section 2.3 above.

14.4.3      Employee Benefit Plans.  Buyer understands that all employee benefit plans currently covering the Lexford Employees are not being sold or otherwise transferred to Buyer as part of this transaction, that the Lexford Employees will cease to participate in such employee benefit plans as of the Closing in accordance with the terms of those plans, and that Buyer is responsible for the establishment of any employee benefit plans under which it intends to offer benefits to the Lexford Employees following the Closing, subject to the Employee Matters Agreement.

14.4.4      Miscellaneous.  Subject to the terms of this Agreement and any prorations or adjustments made at Closing.  Seller retains the right to all (i) tax refunds attributable to any period prior to Closing, (ii) cash on hand in any cash management system, exclusive of any Tenant security deposits (iii) monies returned from any escrows maintained by Seller or any Property Owner with respect to the Properties, (iv) accounts receivable referred to ERP’s collections department or any third-party agency for collection, and (v) any monies (not including, however, Tenant security deposits, if any) subsequently returned by the lenders or their agents in connection with the defeasance, prior to Closing, of any loan secured by a Property.

14.5         Tax Returns.  Seller shall be responsible for filing all federal, state and local tax returns (including, without limitation, all federal, state and local returns for income, sales, use, property, intangible and franchise taxes) filed or required to be filed on or prior to the Closing Date with respect to Owner LLC, each Property Owner and each other entity, if any, through which Owner LLC holds its interest in a Property Owner, and Buyer shall be responsible for filing all such returns required to be filed after the Closing Date.  Subject to the other provisions

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of this Agreement and the Indemnification Agreement, Seller and Buyer each shall be responsible for making any required payments with respect to returns required to be filed by them, respectively, including any deficiencies, and interest and penalties thereon.  Seller will effect any election or take any action legally available to enable the Property Owners to file short year tax returns for the period ending on the Closing Date employing the “closing of the books” method as of the Closing Date and Seller will be responsible for preparing all such short year returns, subject to the approval of Buyer, which approval shall not be unreasonably withheld.  Each other return shall be prepared by the party responsible for the filing thereof.  Prior to the last date on which said payments may be made without penalty, Seller shall make (or, where direct payment by Seller is not possible, pay to Buyer, in immediately available funds, an amount equal to the amount of) any payments, including any deficiencies, and interest and penalties thereon (including payments resulting from subsequent adjustments by taxing authorities), relating to any taxable period (or portion thereof) preceding the Closing Date; provided, however, that in the event any return prepared by Buyer would include a period prior to the Closing Date, prior to filing any such return, Buyer shall provide Seller a copy of the proposed return and the opportunity to reasonably comment on such return prior to the due date for filing thereof, unless otherwise waived by Seller.  This Section 14.5 shall not apply to taxes prorated pursuant to Section 2.3.

14.6         Conduct of Tax Audits; Tax Records.  Seller and Buyer agree to cooperate with each other in connection with any official tax inquiry, tax determination or tax-related legal proceeding affecting a tax liability of any of the Property Owners (whether before or after the Closing Date) or in connection with a determination of any tax liability or treatment (including the preparation of any tax liability or treatment relating to Seller or ERP) and to make available to each other party a reasonable amount of time, at no cost to such party, of its employees and officers, together with documents, correspondence, reports and other materials bearing on such tax inquiry, examination, proceeding or determination of tax liability or treatment (including the determination of any tax liability or treatment relating to Seller or ERP), provided that each party shall be reimbursed for any out-of-pocket expenses it reasonably incurs in assisting another party hereunder.  The parties will promptly notify each other in writing in the event any of them (or any of their Affiliates, including in the case of Buyer following the Closing Date, the Property Owners) receive written notice of any pending or threatened federal, state or local tax audits or assessments which relate or may relate to any tax liability for any tax period for which the other party or any Affiliate has retained or assumed liability hereunder.  From and after the Closing Date, Buyer, on the one hand, and Seller, on the other hand, shall make available to the other, as reasonably requested, all information, records or documents now or hereafter coming into their possession relating to tax liabilities or potential tax liabilities of any of the Property Owners (as well as any such information regarding the Property Owners that may have a bearing upon such party’s consolidated tax liabilities) for all periods prior to and including the Closing Date and shall preserve all such information, records and documents until the expiration of any applicable statute of limitations or extensions thereof made known by the extending party to the other party.

14.7         Access to Property Records, Generally.

(a)           Buyer acknowledges that Seller will require, and Buyer agrees to provide Seller on reasonable request at mutually convenient times with, continued access to all files, models and personnel relating to or involved with those

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properties commonly known as the Guilford portfolio in connection with Seller’s reporting requirements relative to those properties.

(b)           Seller has advised Buyer that, currently, the JD Edwards accounting system used by Lexford Management Company is also used by Seller and its affiliates in connection with Equity Corporate Housing Holding Co.  (“ECH”), an entity not involved in the transaction contemplated by the Lexford Property Agreements, in addition to being used in connection with the Properties.  Subject to any legal or regulatory requirement or court order or decree to the contrary, Buyer agrees on behalf of itself and its Affiliates, to keep confidential all information in the JD Edwards system that does not relate to the Properties or the Interest or the transactions contemplated hereunder, and to provide Seller, on reasonable request at mutually convenient times up to twelve (12) months following the Closing Date, with continued access to files, models and personnel relating to ECH records on the JD Edwards system.  Seller agrees on behalf of itself and its Affiliates to keep confidential all information in the JD Edwards system relating to the Properties, the Interest and the transactions contemplated hereunder.

(c)           Notwithstanding anything to the contrary set forth in this Agreement, Buyer hereby agrees that following Closing, Seller shall have, upon reasonable prior written notice to Buyer, access during reasonable business hours to all files at the Property that relate to a dispute or a set of facts that could lead to a dispute (a “Dispute”) between Seller or any Property Owner and a third party including, without limitation, a tenant of the Property, with respect to Seller’s period of beneficial ownership thereof; provided, however, all rights, defenses, causes of action and claims relating to a Dispute and arising from matters and events following the Closing Date shall belong to Buyer.  In addition, and subject to Section 2.3.2, all files at a Property that relate to tenants who have vacated their units at a Property (the “Former Tenant Lease Files”) and with whom there exists a Dispute regarding the payment of Delinquent Amounts, together with any and all rights, defenses, causes of action and claims relating thereto, shall remain the property of Seller.  Former Tenant Lease Files may be removed from the Property by Seller on or before Closing, provided that Seller shall afford Buyer access thereto upon reasonable notice during reasonable business hours if a claim is brought against any Property Owner by a former tenant to which any such Former Tenant Lease Files pertain.

14.8         Tax Refunds.  As of the Effective Date, one or more Property Owners may be seeking adjustments to real estate, ad valorem and/or personal property rates imposed upon and/or assessed values ascribed to their Properties for periods prior to or in which the Closing Date occurs (any such actions being collectively referred to as “Tax Appeals”).  Seller retains the right to cause additional Property Owners to take similar actions prior to the Closing Date, provided however that any such actions undertaken after the Effective Date, Seller shall provide Buyer with prior written notice thereof and consult with Buyer regarding any actions which may potentially impact taxes imposed on the Properties after the Closing Date (and shall not take any actions that could reasonably be expected to affect any such post-Closing Date Taxes).  Seller

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reserves the right to meet with government officials and to contest any assessment or reassessment governing or affecting any Property Owner’s real estate ad valorem and/or personal property taxes for any period prior to or in which the Closing Date occurs and to attempt to retain a refund for any taxes previously paid.  Subject to Section 2.3.1 above, Seller will retain all rights with respect to the portion of any refund of any Property Owner’s taxes applicable to the period prior to the Closing Date, but shall promptly pay over to Buyer the portion of any such refund applicable to the period following the Closing Date.  From and after the Closing Date, subject to the forgoing qualifications, Buyer will take all actions and execute and deliver all documents Seller reasonably request in order to enable Seller to continue to pursue the Tax Appeals at no out of pocket expense to Buyer.  Subject to the foregoing qualifications, Buyer hereby agrees to execute all consents, receipts, instruments and documents which may reasonably be requested in order to facilitate settling any tax appeal proceeding commenced by any Property Owner prior to the Closing Date and collecting the amount of any Tax Refund.  The provisions of this Section shall survive the Closing and shall not merge into any documentation delivered at Closing.

14.9         Building Improvements/Replacements.

14.9.1      “Building Improvements” is defined as capital improvements generally covering new capital expenditures outside the apartment units for roof replacement, paving, building mechanical equipment, exterior painting and siding and major landscaping.  Seller has provided Buyer with a schedule detailing 2006 Building Improvements work under contract as of June 14, 2006 for all Lexford Assets, including projects with an approved purchase order as shown on Seller’s JD Edwards tracking system (“PTW”), which schedule is part of the Master Disclosure Schedule as Exhibit F thereof (the “Exhibit F Improvements”).  Seller has budgeted $10,646,572 for the Building Improvements for all of 2006.  As of June 14, 2006, Seller has completed approximately $3,259,762.00 of the Exhibit F Improvements and expects to complete the balance of the Exhibit F Improvements (approximately $2,901,537.00) (the “BI Amount”) prior to Closing.    Seller shall cause all Exhibit F Improvements work relating to the Properties subject to this Agreement to be completed in the normal course of business prior to Closing in a  workmanlike manner and in compliance with all applicable legal and regulatory requirements, or if there is unfinished work under any such contracts, at Closing Seller shall assign such contracts to Buyer and Seller Parties will give Buyer a total credit under the Lexford Property Agreements for the cost of all such unfinished work; provided that the credit, together with the cost of all such finished work, shall not exceed the BI Amount.  Seller at Closing shall deliver in connection with all finished Building Improvements Work (a) full lien waivers duly executed and acknowledged by all contactors, subcontractors and materialmen, (b) all warranties issued in connection therewith in the name of the applicable Property Owner and (c) to the extent a permit was necessary to commence any such work, a certificate of completion or occupancy or other municipal “sign off,” as applicable and if available, and in connection with any unfinished work, partial lien waivers executed if available by all contractors, subcontractors and materialmen as to the amount paid by or on behalf of Seller through the Closing.   Seller shall provide Buyer with a bi-weekly capital update via the PTW, which provides details of all outstanding capital projects.  In addition, any individual capital project commencing after the Effective Date with projected costs in excess of

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$50,000 will be discussed in advance with Buyer and will be subject to Buyer’s prior written approval, such approval not to be unreasonably conditioned, delayed or withheld.

14.9.2      “Replacements” is defined as capital improvements generally covering new expenditures inside the apartment units such as carpets, appliances, mechanical equipment, fixtures and vinyl flooring.  Seller will continue to cause all such Replacements work relating to the Properties subject to this Agreement to be completed in the normal course of business (the “Replacements Program”) and in accordance with the guidelines of the 2006 Schedule of Replacements & Capital (2000-2006B) evidencing a total replacements budget for 2006 of $10,924,697  (the “Replacements Budgeted Amount”) prior to Closing, it being understood, however, that said budget is a budget for all of 2006, and that not all of said work is expected to be completed by Closing. Seller shall cause all such Replacement work relating to the Properties subject to this Agreement to be completed in the normal course of business (i.e., upon tenant move-outs and otherwise upon obsolescence) prior to Closing in a  workmanlike manner and in compliance with all applicable legal and regulatory requirements, or if there is unfinished work under any such contracts, at Closing Seller shall assign such contracts to Buyer and Seller Parties will give Buyer a total credit under the Lexford Property Agreements for the cost of all such unfinished work; provided that the credit, together with the cost of all such finished work, shall not exceed the Replacements Budgeted Amount.

14.9.3      On or before ten (10) Business Days prior to Closing, Seller shall deliver to Buyer documentation reasonably satisfactory to Buyer with respect to the completion of the Exhibit F Improvements (except as provided in Section 14.9.1) and evidencing that the Replacements Program was fully implemented as required hereunder, a detail of the work approved and an accounting of the costs estimated or invoiced.

14.9.4      In addition to the foregoing obligations of Seller, at Closing, Seller will credit a total of $4,000,000 against the aggregate Purchase Price payable under all of the Lexford Property Agreements.

Section 15.             MISCELLANEOUS.

15.1         Entire Agreement.  Except for the Confidentiality Agreement and all other agreements expressly referenced in this Agreement, all understandings and agreements heretofore had between Seller and Buyer with respect to the Properties are merged in this Agreement and the exhibits attached hereto, which alone fully and completely expresses the agreement of the parties.

15.2         Assignment.  Neither this Agreement nor any interest hereunder shall be assigned or transferred by Buyer, except to a Buyer Affiliate or Buyer Affiliates or any entity directly or indirectly controlled by Ezra Beyman and/or Samuel Weiss.  Buyer shall provide Seller prior written notice of any such permitted assignment or transfer and no such permitted assignment or transfer shall in any event release Buyer from any of its obligations under this Agreement.  Subject to the foregoing, this Agreement shall inure to the benefit of and shall be binding upon Seller and Buyer and their respective successors and assigns.

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15.3         No Modification.  This Agreement shall not be modified or amended except in a written document signed by Seller and Buyer.

15.4         Time of the Essence.  Time is of the essence of this Agreement.

15.5         Governing Law.  This Agreement shall be governed and interpreted in accordance with the laws of the State of Illinois, without regard to the principles thereof relating to conflicts of laws.  Each party hereby irrevocably:   (a) submits to the exclusive jurisdiction of any Illinois or Federal Court sitting in the County of Cook in any action or proceeding arising out of or relating to this Agreement, the relations between the parties and any matter, action or transaction contemplated hereby; (b) agrees that any such courts in which a proceeding arising out of or relating to this Agreement, the relations between the parties or any matter, action or transaction contemplated hereunder “first commenced” shall have exclusive jurisdiction over such actions or proceedings; (c) waives the defense of inconvenient forum to the maintenance and continuation of such action or proceedings; (d) consents to the service of any and all process in any such action or proceedings by the mailing of copies (certified mail, return receipt requested and postage prepaid) of such process to them at their addresses specified in Section 15.6; and (e) agrees that a final and non-appealable judgment rendered by a court of competent jurisdiction in any such action or proceedings shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by the law of the jurisdiction in which a Project is located.

15.6         Notice.  All notices, requests, demands or other communications required or permitted under this Agreement shall be in writing and delivered personally, by certified mail, return receipt requested, postage prepaid, by overnight courier (such as Federal Express), or by facsimile transmission with a copy to follow by certified mail, return receipt requested, postage paid or by overnight courier, addressed as follows:

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If to Seller:

c/o Equity Residential

Two North Riverside Plaza—Suite 400

Chicago, Illinois 6060

Telephone:   (312) 928-1172

Facsimile:  (312) 526-0680

Attention:   Bruce C. Strohm

With a copy to:

DLA PIPER RUDNICK GRAY CARY US LLP

Attn:  Ross Green, Esq.

203 N.  LaSalle Street

Suite 1900

Chicago, IL 60601

Phone:  (312) 368-2132

Fax:  (312) 630-5307

If to Buyer:

EMPIRE ASSET GROUP LLC

c/o Empire Asset Group LLC

25 Philips Parkway

Montvale, New Jersey 07645

Telephone:  (201) 326-1932

Facsimile:  (201) 326-1634

Attention: Mr. Abe Miller

With a copy to:

DREIER LLP

499 Park Avenue

New York, New York 10022

Telephone:  (212) 328-6110

Facsimile:  (212) 652-3701

Attention: Mark S. Fawer, Esq.

All notices given in accordance with the terms hereof shall be deemed received on the next Business Day if sent by overnight courier, on the same day if sent by facsimile before 5:00 p.m. (Chicago time) on a Business Day (if sent after 5:00 p.m. Chicago time on a Business Day, shall be deemed received on the next Business Day), on the third (3rd) Business Day following deposit with the United States Postal Service as a registered or

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certified mail with postage prepaid, or when delivered personally or otherwise received or refused.  Either party hereto may change the address for receiving notices, requests, demands or other communication by notice sent in accordance with the terms of this Section 15.6.  All respective attorneys for Buyer and Seller may give and receive notices on their behalf.

15.7         Waiver of Trial by Jury.  IN ANY LAWSUIT OR OTHER PROCEEDING INITIATED BY BUYER UNDER OR WITH RESPECT TO THIS AGREEMENT, EACH OF SELLER AND BUYER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY.  IN ADDITION, EACH OF SELLER AND BUYER WAIVES ANY RIGHT TO SEEK RESCISSION OF THE TRANSACTION PROVIDED FOR IN THE AGREEMENT.

15.8         Confidentiality.  Except that which is in the public domain by virtue of Seller’s reporting or press releases, neither party shall, without the prior written consent of the other party, unilaterally issue a press release or other media publicity of any kind whatsoever with respect to Seller, Buyer or this Agreement or disclose to any third party (other than the Buyer Disclosure Parties) the existence of this Agreement or any term or condition of this Agreement (including, without limitation, the Purchase Price) or the results of any inspections or studies undertaken in connection herewith; provided, however, if disclosure is required by law, by SEC rules or regulations, or by the rules or regulations of any stock exchange on which the shares of Equity Residential are traded, such disclosure shall not be subject to the other party’s approval.  Buyer agrees to keep confidential any of the documents, material or information regarding the Properties supplied to Buyer by Seller or by any third party at the request of Seller, including, without limitation, any environmental site assessment reports furnished to Buyer, except Buyer may share such documents, material and information with Buyer Disclosure Parties on a “need to know” basis, unless Buyer is compelled to disclose such documents, material or information by law or regulation or by subpoena or court order or decree.  Buyer agrees to indemnify and hold harmless Seller from and against any and all losses, damages, claims and liabilities of any kind (including, without limitation, reasonable attorney’s fees) arising out of a breach by Buyer or Buyer Disclosure Parties of the provisions of this Section 15.8.  In the event that the Closing does not occur in accordance with the terms of this Agreement, Buyer shall promptly return to Seller all of the documents, materials and information regarding the Property supplied to Buyer by Seller or at the request of Seller.  The provisions of this Section 15.8 shall survive the Closing or the earlier termination of this Agreement; provided, however, that (i) Buyer may retain one copy of any such documents, materials and information for its legal files, subject to the confidentiality obligations set forth herein; and (ii) internal notes, analyses and other proprietary materials may be retained by Buyer and do not need to be provided to Seller (but shall also be subject to the confidentiality restrictions above).

15.9         Publicity.  Between the Effective Date and the Closing, Seller and Buyer shall discuss and coordinate with respect to any public filing or announcement concerning the purchase and sale as contemplated hereunder; provided that Buyer acknowledges ERP and its general partner, Equity Residential, are subject to the public company reporting requirements of the Securities Act of 1933 as amended, the Securities Exchange Act of 1934, as amended, and the Rules and Regulations of the U.S.  Securities and Exchange Commission (the “SEC”), promulgated thereunder, which may obligate the Seller to effect public filings or announcements concerning this Agreement and the transactions contemplated hereby.  Buyer understands and

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acknowledges that ERP and its general partner, Equity Residential, are required to file this Agreement, or a form hereof, under cover of Form 8-K with the SEC.

15.10       No Memorandum of Agreement.  This Agreement or any notice or memorandum hereof shall not be recorded in any public record except if a claim is brought for specific performance and a lis pendens or similar instrument is filed in connection therewith.  A violation of this prohibition shall constitute a material breach by Buyer, entitling Seller to terminate this Agreement.

15.11       Counterpart Signatures.  This Agreement may be signed in any number of counterparts each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

15.12       Designation of Escrowee as Reporting Person.  Seller and Buyer hereby designate Escrowee to act as and perform the duties and obligations of the “reporting person” with respect to the transaction contemplated by this Agreement for purposes of 26 C.F.R.  Section 1.6045-4(e)(5) relating to the requirements for information reporting on real estate transaction closed on or after January 1, 1991.  In this regard, Seller and Buyer each agree to execute at Closing, and to cause the Escrowee to execute at Closing, a designation agreement, designating Escrowee as the reporting person with respect to the transaction contemplated by this Agreement.

15.13       Weekends and Legal Holidays.  Whenever the time for performance of a covenant or condition required to be performed pursuant to the terms of this Agreement falls upon a day that is not a Business Day, such time for performance shall be extended to the next Business Day.  Otherwise all references herein to “days” shall mean calendar days.

15.14       Facsimile Signatures.  Signatures to this Agreement transmitted electronically shall be valid and effective to bind the party so signing.  Each party hereto agrees to promptly deliver to the other party an executed original to this Agreement with its actual signature, but a failure to do so shall not affect the enforceability of this Agreement, it being expressly agreed that each party to this Agreement shall be bound by its own telecopied signature and shall accept the telecopied signature of the other party to this Agreement.

15.15       Legal Representation.  Each party hereto has been represented by legal counsel in connection with the negotiation of the transactions herein contemplated and the drafting and negotiation of this Agreement.  Each party hereto and its counsel has had an opportunity to review and suggest revisions to the language of this Agreement.  Accordingly, no provision of this Agreement shall be construed for or against or interpreted to the benefit or disadvantage of any party by reason of any party having or being deemed to have structured or drafted such provision.

15.16       Prevailing Party Attorney Fees.  If either Seller or Buyer files suit to enforce the obligations of the other party under this Agreement, the prevailing party shall be entitled to recover the reasonable fees and expenses of its attorneys from the non-prevailing party.  If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees

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or charges due to Escrowee for holding the Earnest Money as well as any escrow cancellation fees.

15.17       Post-Closing Survival, Generally.  Subject to any provisions of this Agreement expressly governing the survival of specific obligations after Closing, if the Closing occurs, any obligations in this Agreement or in any instrument delivered pursuant to this Agreement which, by their nature, are contemplated to be performed subsequent to Closing, shall be deemed to survive Closing.

15.18       Headings.  The article, section, subsection, paragraph and/or other headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof.

15.19       Invalidity and Waiver.  If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and, to the greatest extent legally possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.  The failure by either party to enforce against the other any term or provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future.

15.20       Further Assurances.  In addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by either party at Closing, each party agrees to perform, execute and deliver, but without any obligation to incur any additional liability or material expense, on or after the Closing any further deliveries and assurances as may be reasonably necessary to consummate the transactions contemplated hereby or to further perfect the conveyance, transfer and assignment of the Interest to Buyer.

[SIGNATURE PAGE FOLLOWS]

46

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized signatory, effective as of the day and year first above written.

SELLER:
[SELLER ENTITY]
By:
Name:
Its:
BUYER:
[BUYER ENTITY]
By:
	Name:
	Title:
LEXFORD MANAGEMENT COMPANY:
Equity Apartment Management LLC
By:
	Name:
	Title:

47

EXHIBIT K

EMPLOYMENT MATTERS AGREEMENT

This EMPLOYMENT MATTERS AGREEMENT (“Agreement”) is entered into as of the       day of           , 2006 by and among ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (“ERP”), and EMPIRIAN PROPERTY MANAGEMENT, INC., a Delaware corporation (the “Empirian”).

WHEREAS, Seller (or its Affiliates) and Buyer have concurrently entered into the Purchase Agreements (as defined herein), which provides that ERP agrees to sell its sole membership interest in ERP/Lexford, LLC and Lexford OP agrees to (i) sell its sole membership interests in the Lexford OP LLCs (as defined therein); and (ii) cause certain owners of multifamily residential real estate projects to convey title to such projects to Buyer or its affiliates pursuant to the terms and conditions thereof; and

WHEREAS, the Purchase Agreements require the execution and delivery of this Agreement on the Closing Date.  Capitalized terms not otherwise defined herein shall have the meanings employed in the Purchase Agreements.

NOW THEREFORE, in consideration of the promises and mutual undertakings set forth herein, and for other good and valuable consideration, the parties agree as follows:

Section 1.  Employment Matters

1.1           Employment Matters:   Retention and Severance Programs.

1.1.1        Retention and Severance Programs.  ERP has adopted and provided Buyer with a copy of the Summary of Lexford Retention/Severance Program (the “Retention/Severance Program”), for all Lexford employees of its affiliate, Equity Residential Properties Management Corp, (“ERPM”) who are employed at the Properties, at the premises subject to the Reynoldsburg Lease or otherwise dedicated to the Lexford Assets (such as regional and district managers) as of the Closing Date (collectively the “Lexford Employees”).  ERP shall cause ERPM to terminate the employment of all Lexford Employees employed by it as of the Closing Date.  At Closing, Empirian shall offer employment to all the Lexford Employees on substantially similar terms and conditions as their current employment (subject to the eligibility requirements of Empirian’s employee benefit plans’ terms and conditions, and excluding any programs for long-term compensation of stock and options, deferred compensation and employee stock ownership) based on the Lexford Employees current compensation as set forth in the schedule provided to Buyer on June 19, 2006 and the terms and conditions set forth in the summary plan descriptions that Seller provided to Buyer on the Merrill Corp. Datasite-Project Blackbird website for this transaction.

1.1.2        ERP shall maintain full responsibility, without any prorations, for payment of the following benefits due to any of the Lexford Employees on or after the Closing Date:  (i) all salaries, compensation, unused sick time and

K-1

personal time, workers compensation claims and any other employment related claims of any nature (specifically including claims arising out of the failure to follow any “group termination” requirements under the Older Worker Benefits Protection Act (“OWBPA”)), allocable to the period prior to the Closing Date; (ii) a prorated performance bonus and the cash equivalent of a prorated long-term compensation, if applicable, in the amounts determined by ERP, for the period the Lexford Employee worked during 2006 through the Closing Date (it being understood that said proration shall be performed by Seller solely for the purpose of determining the amounts to be paid by Seller to said employees for the period through the Closing Date, is not intended as a proration between Buyer and Seller, and shall not obligate Buyer (or any Affiliate thereof) to pay any portion of said performance bonuses or long-term compensation that is not paid by Seller); (iii) vesting of the unvested stock options and restricted shares held by the Lexford Employee as of the Closing Date, subject to the terms and conditions of any applicable employee benefit plans; and (iv) the Retention Benefits, as defined in the Retention/Severance Program (collectively the “Seller Retained Employee Liabilities”).  ERP will issue checks for any amounts required under this Section 1.1.2 to all eligible employees, less appropriate withholdings and deductions.  The Retention/Severance Program provides that Retention Benefits to be paid to each Lexford Employee by Seller are contingent, in addition to other conditions, upon the employee’s continued employment through a date to be determined by ERP and Empirian, which date will be no later than the last day of the sixth month following the Closing (the “Retention Benefits Date”).

1.1.3        Empirian shall assume full responsibility, without any prorations, for payment of the Severance Benefits, as defined in (and subject to the contingencies in) the Retention/Severance Program, due to any of the Lexford Employees on or after the Closing Date (but in no event after the Retention Benefits Date), subject to a maximum total cap of Four Million and No/100 Dollars ($4,000,000) in severance payments to be allocated to the employees entitled to such payments on a first come/first serve basis.  Empirian will issue checks for any amounts required under this Section 1.1.3 to all eligible employees, less appropriate withholdings and deductions.

1.1.4        As a condition to receiving any benefit from ERP or Empirian under the Retention/Severance Program, each Lexford Employee shall execute and deliver to ERP and Empirian a Release releasing ERP, Buyer, Empirian and their Affiliates from any claims arising out of or relating to their employment and/or termination of employment with ERP, Buyer, Empirian and/or their Affiliates in the form attached hereto as Attachment K-1 as same shall be appropriately modified to reference each such entity and to include, where appropriate, language (to be reasonably agreed upon by counsel to ERP and Empirian) which will be effective to release claims by workers over 40 and/or claims by workers terminated pursuant to a “group termination,” in each case under the OWBPA and any similar state or local legislation.  Notwithstanding anything to the contrary set forth in the Retention/Severance Benefits Program, neither ERP nor Empirian shall be obligated to make any payment of Retention Benefits or Severance Benefits until the expiration of any waiting period or

K-2

rescission period required by statute or reasonably recommended by counsel to ERP and/or Empirian.  Without limitation of the Retention/Severance Program, neither ERP nor Empirian shall be obligated to make any payment of Retention Benefits or Severance Benefits to an employee terminated by Empirian for cause (as defined in the Retention/Severance Benefits Program).

1.1.5        ERP shall maintain the Retention/Severance Program in accordance with the terms thereof as of the date hereof.  In no event shall ERP amend, modify or alter in any manner the Retention/Severance Program or adopt or agree to any other severance programs, agreements or arrangements unless any such changes are not binding upon Empirian, and ERP assumes full responsibility for all costs and expenses relating to such changes.

1.2           Intentionally Omitted.

Section 2.  Miscellaneous

2.1           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

2.2           Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be effective for purposes of binding the parties hereto, but all of which shall together constitute one and the same instrument.

2.3           Headings Descriptive.  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

2.4           Severability.  In case any provision in, or obligation under, this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

2.5           Amendment, Waiver.  Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified except by an instrument in writing signed by all parties hereto.

2.6           No Third Party Beneficiaries.  Except as may be specifically set forth in this Agreement, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any Persons other than the parties hereto and their respective permitted successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third Persons to any party, nor give any third Persons any right of subrogation or action against any Party.

2.7           Purchase Agreements.  As used herein, “Purchase Agreements” means, collectively, all of those certain (i) Lexford LLC Membership Interest Transfer

K-3

Agreements by and between Lexford OP, as Seller, and one of the Buyer Parties, as Buyer; (ii) Lexford LLC Membership Interest Transfer Agreement by and between ERP and an affiliate of Buyer; and (iii) Agreement for Sale of Real Estate and Related Property, each by and between the Property Owners, as Seller, and a Buyer Party, as Buyer, each of even date herewith.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ERP:		BUYER:
ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership		EMPIRIAN PROPERTY MANAGEMENT, INC., a Delaware corporation
By:	Equity Residential, a Maryland real estate	By:
	investment trust, its general partner	Name:	Henry Heinemann
		Title:	President
By:
Name:
Title:

K-4

EXHIBIT M

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT (“Agreement”) is entered into as of the       day of                , 2006 by and among ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (“ERP”), and LEXFORD PROPERTIES, L.P., an Ohio limited partnership (“Lexford OP”, and, together with ERP, the “Sellers”), and EMPIRE GROUP HOLDINGS LLC, a Delaware limited liability company (the “Buyer”).

WHEREAS, Sellers and Affiliates of Sellers, on the one hand, and Buyer and Affiliates of Buyer, on the other hand, have concurrently entered into the Purchase Agreements (as defined herein), which provides that ERP agrees to sell its sole membership interest in ERP/Lexford, LLC and Lexford OP agrees to (i) sell its sole membership interests in each Owner LLC (as defined therein and, together with ERP/Lexford LLC, the “Owner LLCs”); and (ii) cause certain owners of multifamily residential real estate projects to convey title to such projects to Buyer or its affiliates pursuant to the terms and conditions thereof; and

WHEREAS, the Purchase Agreements require the execution and delivery of this Agreement on the closing date.  Capitalized terms not otherwise defined herein shall have the meanings employed in the Purchase Agreements or in the Employment Matters Agreement referred to therein.

NOW THEREFORE, in consideration of the promises and mutual undertakings set forth herein, and for other good and valuable consideration, the parties agree as follows:

Section 1.  INDEMNIFICATION.

1.1           Sellers’ Indemnity.

1.1.1        Sellers shall defend, indemnify and hold harmless Buyer and its respective officers, directors, principals, shareholders, employees, affiliates, successors and assigns (each a “Buyer Indemnified Party” and, collectively, the “Buyer Indemnified Parties”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements of whatever kind or nature, including but not limited to, reasonable attorney’s fees and expenses (collectively “Damages”) incurred or required to be paid by any of them as a result of, or arising out of any of the following (specifically excluding, however, any such amounts for which the Buyer Parties received a credit at Closing):  (a) a breach of Sections 5.1.9 and 5.1.14 of each Purchase Agreement; (b) Sellers’ failure to timely pay the Seller Retained Employee Liabilities and at or before Closing, pay all secured and unsecured third party indebtedness for borrowed money or otherwise of a liquidated amount encumbering or relating to any of the Properties; (c) Sellers’ failure to pay when due  (or to reimburse Buyer promptly for the payment of) all federal, state and local income, sales, use, property, intangible and franchise taxes and any interest and penalties relating thereto (collectively “Taxes”) of the Owner LLCs, any of the Property Owners or any other entity through which any Owner

M-1

LLC holds its interest in a Property Owner applicable to any period or portion thereof ending on or prior to the Closing Date; (d) the litigation disclosed on the Master Disclosure Schedule; any claim by a third party that is not an Affiliate of Buyer for Damages suffered by said third party prior to Closing, if said claim is similar in nature to any litigation disclosed on the Master Disclosure Schedule and is based on a set of facts of a substantially similar nature made by the other plaintiffs; and any litigation arising out of a securities or related claim brought by any limited partner of ERP or any trust unit owner of Equity Residential (EQR); (e) a breach of any representation or warranty of any of the Seller Parties or non-fulfillment of any covenant to be performed or complied with by any of the Seller Parties prior to the Closing Date under the Purchase Agreements (but only to the extent the liabilities and damages attributable thereto in the aggregate exceed $1,000,000); (f) a non-fulfillment of any covenant to be performed or complied with by any of the Seller Parties from and after the Closing Date under the Purchase Agreements; or (g) except for matters included in (d) above, liability to third parties in connection with any Seller’s or Property Owner’s original acquisition of any of the Properties or any Seller’s original acquisition of the Interest, as applicable, or the operation and management of any of the Properties or Lexford Management Company prior to the Closing Date (specifically excluding any Damages relating in any way to Hazardous Materials or the physical condition of the Properties, other than Damages of said nature suffered prior to Closing by a third party that is not an Affiliate of Buyer), but only to the extent such liabilities and Damages in this subsection 1.1.1(g) (except to the extent related to the Reynoldsburg Lease, the Service Contracts or any obligations of Seller that are subject to proration or reproration under Section 2.3) in the aggregate exceed $250,000.  Notwithstanding the foregoing, in no event shall Sellers’ liability under subsection 1.1.1(e) in the aggregate, exceed $20,000,000.  If the Sellers fail to make any payment otherwise required within fifteen (15) days after proper demand therefore, the amount of such payment will accrue interest payable by the Sellers at the rate of ten percent (10%) per annum, beginning with the 16th day after the date of demand through and including the date actually paid to the Buyer Indemnified Party entitled to payment.

1.1.2        Notwithstanding anything to the contrary herein, promptly following the presentation or commencement of prosecution of a claim, action or proceeding against a Buyer Indemnified Party in respect of which indemnity may be sought hereunder, such Buyer Indemnified Party will promptly notify the Sellers with respect thereto.  In addition, a Buyer Indemnified Party will promptly notify the Sellers after any action is commenced (by way of service of summons or other legal process giving information as to the nature and basis of the claim) against such Buyer Indemnified Party in respect of which indemnity may be sought hereunder.  In any event, failure or delay to notify the Sellers will not relieve the Sellers from their indemnification obligations hereunder, except to the extent the Sellers are prejudiced or harmed by such failure or delay.  The Sellers may choose to or will, if requested by a Buyer Indemnified Party, assume the defense of any litigation or proceeding in respect of which indemnity may be sought hereunder, including the employment of counsel reasonably satisfactory to such Buyer Indemnified Party and the payment of the fees and expenses of such counsel, in which event, except as provided below, Sellers will not be liable for

M-2

the fees and expenses of any other counsel retained by any Buyer Indemnified Party in connection with such litigation or proceeding.  Should Sellers assume the defense of any litigation or proceeding, Buyer will make the employees of it or any of its affiliates available to Sellers to provide testimony and otherwise provide reasonable assistance to Sellers, and Buyer will also preserve and make all documents and other items specified by Sellers as evidentiary material available to Sellers for inspection, copying and production in connection with any such litigation or proceeding.  Sellers will not be liable for any settlement of any litigation or proceeding effected without their prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

1.2           Buyer’s Indemnity.

1.2.1        Buyer shall defend, indemnify and hold harmless Sellers and their respective officers, directors, partners, principals, shareholders, employees, affiliates, successors and assigns (each a “Seller Indemnified Party” and, collectively the “Seller Indemnified Parties”) from and against any and all Damages incurred or required to be paid by any of them as a result of, or arising out of any of the following (specifically excluding, however, any such amounts for any of the Seller Parties received a credit at Closing):   (a) Buyer’s failure to timely pay the Buyer Assumed Employee Liabilities; (b) Buyer’s failure to timely pay all Taxes of any Owner LLC, any of the Property Owners or any other entity through which any Owner LLC holds its interest in a Property Owner applicable to any period or portion thereof after the Closing Date; (c) a breach of representation or warranty of any of the Buyer Parties in any material respect under the Purchase Agreement (but only to the extent that the damages and liabilities attributable thereto in the aggregate exceed $1,000,000, but in no event shall such liabilities exceed $20,000,000); (d) non-fulfillment of any material covenant in any material request to be performed or complied with by any of the Buyer Parties under the Purchase Agreements; (e) the operation and management of the Lexford Assets prior to the Closing Date, not to exceed $250,000; provided that Buyer shall not be responsible for any liabilities or obligations accruing prior to Closing under the Reynoldsburg Lease, the Service Contracts, or any obligations of Seller that are subject to proration or reproration under Section 2.3, (f) Hazardous Materials or the physical condition of the Properties first present post-Closing, or (g) the operation and management of the Properties on or after the Closing Date.  If the Buyer fails to make any payment otherwise required within fifteen (15) days after proper demand therefore, the amount of such payment will accrue interest payable by the Buyer at the rate of ten percent (10%) per annum, beginning with the 16th day after the date of demand through and including the date actually paid to the Seller Indemnified Party entitled to payment.

1.2.2        Notwithstanding anything to the contrary herein, promptly following the presentation or commencement of prosecution of a claim, action or proceeding against a Seller Indemnified Party in respect of which indemnity may be sought hereunder, such Seller Indemnified Party will promptly notify the Buyer with respect thereto.  In addition, a Seller Indemnified Party will promptly notify the Buyer after any action is commenced (by way of service of summons or

M-3

other legal process giving information as to the nature and basis of the claim) against such Seller Indemnified Party in respect of which indemnity may be sought hereunder.  In any event, failure or delay to notify the Buyer will not relieve the Buyer from its indemnification obligations hereunder, except to the extent the Buyer is prejudiced or harmed by such failure of delay.  The Buyer will, if requested by a Seller Indemnified Party, assume the defense of any litigation or proceeding in respect of which indemnity may be sought hereunder, including the employment of counsel reasonably satisfactory to such Seller Indemnified Party and the payment of the fees and expenses of such counsel, in which event, Buyer will not be liable for the fees and expenses of any other counsel retained by any Seller Indemnified Party in connection with such litigation or proceeding.  Buyer will not be liable for any settlement of any litigation or proceeding effected without its prior written consent.

Section 2.  MISCELLANEOUS.

2.1           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

2.2           Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be effective for purposes of binding the parties hereto, but all of which shall together constitute one and the same instrument.

2.3           Headings Descriptive.  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

2.4           Severability.  In case any provision in, or obligation under, this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

2.5           Amendment, Waiver.  Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified except by an instrument in writing signed by all parties hereto.

2.6           No Third Party Beneficiaries.  Except as may be specifically set forth in this Agreement, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any Persons other than the Indemnifying and Indemnified Parties and their respective permitted successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third Persons to any party, nor give any third Persons any right of subrogation or action against any Party.

2.7           Purchase Agreements.  As used herein, “Purchase Agreements” means, collectively, all of those certain (i) Lexford LLC Membership Interest Transfer Agreements by and between Lexford OP, as seller, and one of the Buyer affiliates, as

M-4

buyer; (ii) Lexford LLC Membership Interest Transfer Agreement by and between ERP and Buyer; and (iii) Agreement for the Purchase and Sale of Real Estate by and between the Property Owners and a Buyer Party, each of even date herewith.

2.8           Prevailing Party Attorney Fees.  If either Seller or Buyer files suit to enforce the obligations of the other party under this Agreement, the prevailing party shall be entitled to recover the reasonable fees and expenses of its attorneys from the non-prevailing party.  If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees or charges due to Escrowee for holding the Earnest Money as well as any escrow cancellation fees.

2.9           ERP Representations and Warranties.  ERP represents and warrants that (i) each of ERP and its general partner was duly formed, is in good standing, is duly authorized to execute and deliver this Agreement, (ii) there is no conflict between this Agreement and either of ERP’s or its general partner’s performance of ERP’s or its general partner’s obligations hereunder, and (iii) there is no conflict between this Agreement and either of ERP’s or its general partner’s organizational documents or any agreement, order or decree by which either ERP or its general partner is bound.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

SELLERS:		BUYER:
ERP OPERATING LIMITED PARTNERSHIP,		EMPIRE GROUP HOLDINGS LLC,
an Illinois limited partnership		a Delaware limited liability company
By:	Equity Residential, a Maryland real estate	By:
	investment trust, its general partner	Name:
		Title:
By:
Name:
Title:
LEXFORD PROPERTIES, L.P., an Ohio limited partnership
By:	Lexford Partners, L.L.C., its general partner
By:
Name:
Title:	Manager

M-5

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, David J. Neithercut, Chief Executive Officer of Equity Residential, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Equity Residential;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2006
	/s/ David J. Neithercut
	David J. Neithercut
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Donna Brandin, Chief Financial Officer of Equity Residential, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Equity Residential;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2006
	/s/	Donna Brandin
		Donna Brandin
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Equity Residential (the “Company”) on Form 10-Q for the period ending June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Neithercut, Chief Executive Officer of the Company, certify, pursuant to 18.U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/	David J. Neithercut
David J. Neithercut
Chief Executive Officer
August 7, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Equity Residential (the “Company”) on Form 10-Q for the period ending June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donna Brandin, Chief Financial Officer of the Company, certify, pursuant to 18.U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/	Donna Brandin
Donna Brandin
Chief Financial Officer
August 7, 2006