EQUITY RESIDENTIAL (EQR)

PLAYA PACIFICA
Notes to Statements of Revenue and Certain Expenses

1. Basis of Presentation

On June 21, 2006, ERP Operating Limited Partnership (collectively with Equity Residential, its general partner, the “Company”) indirectly acquired an apartment building in Hermosa Beach, California known as Playa Pacifica (the “Property”).

The statements of revenue and certain expenses relate to the operations of Playa Pacifica and were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, including Rule 3-14 of Regulation S-X. Accordingly, the accompanying statements of revenue and certain expenses have been prepared using the accrual method of accounting, and certain expenses such as depreciation, amortization, income taxes, mortgage interest expense and entity expenses are not reflected in the statements of revenue and certain expenses, as required by Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Consequently, the statements of revenue and certain expenses for the periods presented are not representative of the actual operations for the periods presented, as certain revenues and expenses which may not be in the proposed future operations of Playa Pacifica have been excluded in accordance with Rule 3-14 of Regulation S-X.

The accompanying unaudited interim statement of revenue and certain expenses has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and was prepared on the same basis as the statement of revenue and certain expenses for the year ended December 31, 2005. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the information for this interim period have been made. The revenue in excess of certain expenses for such interim period is not necessarily indicative of the excess of revenue over certain expenses for the full year.

2. Summary of Significant Accounting Policies

Revenue Recognition

The residential apartments are leased under operating leases with terms of generally one year or less.  Rental income is recognized on a straight-line basis over the life of the lease.

Repairs and Maintenance

Repairs and maintenance costs are expensed as incurred, while significant improvements, renovations and replacements are capitalized.

Estimates

The preparation of the statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Advertising Costs

All advertising costs are expensed as incurred and included as operating expenses on the accompanying statements of revenue and certain expenses.  For the year ended December 31, 2005 and the period from January 1, 2006 to June 21, 2006 (unaudited), advertising expenses were approximately $4,100 and $2,000, respectively.

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PLAYA PACIFICA
Notes to Statements of Revenue and Certain Expenses (Continued)

3. Related Party Transactions

An affiliate of Playa Pacifica performed the property management function and charged total management fees of approximately $152,000 and $81,000 during 2005 and the period from January 1, 2006 to June 21, 2006 (unaudited), respectively.

An affiliate of Playa Pacifica allocated insurance expense under a master policy to the Property and various affiliated properties.  Insurance expense for the year ended December 31, 2005 and the period from January 1, 2006 to June 21, 2006 (unaudited) is approximately $89,000 and $60,000, respectively and is included in real estate taxes and insurance in the accompanying statements.

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Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Equity Residential

The Partners
ERP Operating Limited Partnership

We have audited the accompanying statement of revenue and certain expenses of Kings Colony for the year ended December 31, 2005. This statement is the responsibility of the management of Kings Colony (the “Property”). Our responsibility is to express an opinion on this statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free of material misstatement. We were not engaged to perform an audit of the Property’s internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a Current Report on Form 8-K of Equity Residential and ERP Operating Limited Partnership, as described in Note 1, and is not intended to be a complete presentation of the Property’s revenue and expenses.

In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses of Kings Colony for the year ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

Chicago, Illinois

February 22, 2007

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