EQUITY RESIDENTIAL (EQR)

Company Performance in 2006

      The Company’s performance in 2006 included these notable achievements:

• Strong Financial Results. The Company had a total shareholder return of approximately 35%, with its total revenues from continuing operations increasing by $300 million to $2 billion. The Company increased its earnings per share to $3.50 compared to $2.79 in 2005, increased its net operating income from its same store properties by 7% and was pleased to increase its dividend by 4.5%, to $1.85 per share.
   
• Portfolio Transformation. The Company continued the transformation of its portfolio by selling assets, typically in smaller, second-tier markets, such as Detroit, Minneapolis and San Antonio, and buying assets in core markets, such as Manhattan, Southern California and Seattle. These core markets share our target characteristics of high barriers to entry, higher than average job growth, large renter populations, an attractive quality of life, and high single-family home costs. In 2006, the Company acquired 35 properties with 8,768 units, for $1.75 billion, while selling 335 properties with 39,608 units for $2.26 billion. By far, the single largest transaction was the $1.09 billion sale of the Lexford Housing Division, generating an unleveraged internal rate of return of 15%.
   
• Increased Development. The Company continued to grow its development business with $831 million in new starts, up from $223 million in 2005. More than half the dollar value of those new construction starts are directly developed by the Company for its own account with the balance developed with joint venture partners. The Company currently has $1.2 billion in assets under construction and a pipeline of $1.8 billion of potential development deals in twelve major metropolitan markets, such as Southern California, New York and San Francisco.
   
• Transformation of Property Operations. The Company transformed its operations with new technologies and systems to enable it to manage properties more efficiently and operate at a higher level. The Company implemented a new automated pricing system and an enterprise wide operating platform, giving it new ways to monitor and improve its operations and service. The Company also launched several procurement initiatives that produced $14 million in savings for the year.
   
• Strong Employee Engagement. The Company enhanced its award-winning training programs, refined pay and performance systems and introduced new career development tools. The Company also achieved a score of 83% on its 2006 employee engagement survey, up from 79% in 2005. This score is substantially higher than the average of other national companies.