EQUITY RESIDENTIAL (EQR)

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):

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.

13

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.