Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-12252 (Equity Residential)
Commission File Number: 0-24920 (ERP Operating Limited Partnership)
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland (Equity Residential)
13-3675988 (Equity Residential)
Illinois (ERP Operating Limited Partnership)
36-3894853 (ERP Operating Limited Partnership)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Two North Riverside Plaza, Chicago, Illinois 60606
(312) 474-1300
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares of Beneficial Interest,$0.01 Par Value (Equity Residential)
EQR
New York Stock Exchange
7.57% Notes due August 15, 2026(ERP Operating Limited Partnership)
N/A
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.
Equity Residential Yes ☒ No ☐
ERP Operating Limited Partnership Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Equity Residential:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
l
ERP Operating Limited Partnership:
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Equity Residential ☐
ERP Operating Limited Partnership ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Equity Residential Yes ☐ No ☒
ERP Operating Limited Partnership Yes ☐ No ☒
The number of EQR Common Shares of Beneficial Interest, $0.01 par value, outstanding on July 24, 2026 was 374,944,409.
EXPLANATORY NOTE
This report combines the reports on Form 10-Q for the quarterly period ended June 30, 2026 of Equity Residential and ERP Operating Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “EQR” mean Equity Residential, a Maryland real estate investment trust (“REIT”), and references to “ERPOP” mean ERP Operating Limited Partnership, an Illinois limited partnership. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:
EQR is the general partner of, and as of June 30, 2026 owned an approximate 97.6% ownership interest in, ERPOP. The remaining 2.4% interest is owned by limited partners. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of EQR consists of the same members as the management of ERPOP.
The Company is structured as an umbrella partnership REIT (“UPREIT”) and EQR contributes all net proceeds from its various equity offerings to ERPOP. In return for those contributions, EQR receives a number of OP Units (see definition below) in ERPOP equal to the number of Common Shares it has issued in the equity offering. The Company may acquire properties in transactions that include the issuance of OP Units as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales. This is one of the reasons why the Company is structured in the manner shown above. Based on the terms of ERPOP’s partnership agreement, OP Units can be exchanged with Common Shares on a one-for-one basis because the Company maintains a one-for-one relationship between the OP Units of ERPOP issued to EQR and the outstanding Common Shares.
The Company believes that combining the reports on Form 10-Q of EQR and ERPOP into this single report provides the following benefits:
•enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
•creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between EQR and ERPOP in the context of how EQR and ERPOP operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR’s primary function is acting as the general partner of ERPOP. EQR also issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by EQR (which are contributed to the capital of ERPOP in exchange for additional partnership interests in ERPOP (“OP Units”) (on a one-for-one Common Share per OP Unit basis) or additional preference units in ERPOP (on a one-for-one preferred share per preference unit basis)), the Operating Partnership generates all remaining capital required by the Company’s business. These sources include the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility and/or commercial paper program, the issuance of secured and unsecured debt and partnership interests, and proceeds received from disposition of certain properties and joint venture interests.
Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in the Company’s financial statements. The noncontrolling interests in the Operating Partnership’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and limited partner OP Unit holders of the Operating Partnership. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.
To help investors understand the differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of each entity’s debt, noncontrolling interests and shareholders’ equity or partners’ capital, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.
This report also includes separate Part I, Item 4, Controls and Procedures, sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.
In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership.
As general partner with control of ERPOP, EQR consolidates ERPOP for financial reporting purposes, and EQR essentially has no assets or liabilities other than its investment in ERPOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
TABLE OF CONTENTS
PAGE
PART I.
Item 1. Financial Statements of Equity Residential:
Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025
2
Consolidated Statements of Operations and Comprehensive Income for the six months and quarters ended June 30, 2026 and 2025
3
Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025
5
Consolidated Statements of Changes in Equity for the six months and quarters ended June 30, 2026 and 2025
9
Financial Statements of ERP Operating Limited Partnership:
11
12
14
Consolidated Statements of Changes in Capital for the six months and quarters ended June 30, 2026 and 2025
18
Notes to Consolidated Financial Statements of Equity Residential and ERP Operating Limited Partnership
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
Item 3. Quantitative and Qualitative Disclosures about Market Risk
48
Item 4. Controls and Procedures
PART II.
Item 1. Legal Proceedings
49
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
56
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
1
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share amounts)
(Unaudited)
June 30,
December 31,
2026
2025
ASSETS
Land
$
5,516,087
5,563,407
Depreciable property
24,808,104
24,705,540
Projects under development
58,312
100,561
Land held for development
58,318
86,341
Investment in real estate
30,440,821
30,455,849
Accumulated depreciation
(11,453,919
)
(11,016,900
Investment in real estate, net
18,986,902
19,438,949
Investments in unconsolidated entities
323,342
325,939
Cash and cash equivalents
36,405
55,904
Restricted deposits
106,975
102,950
Right-of-use assets
450,474
454,916
Other assets
371,479
367,365
Total assets
20,275,577
20,746,023
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
1,591,821
1,589,904
Notes, net
6,002,002
5,998,458
Line of credit and commercial paper
667,846
586,648
Accounts payable and accrued expenses
120,197
109,165
Accrued interest payable
73,450
73,860
Lease liabilities
303,831
304,575
Other liabilities
277,286
324,616
Security deposits
83,076
82,155
Distributions payable
269,489
267,508
Total liabilities
9,388,998
9,336,889
Commitments and contingencies
Redeemable Noncontrolling Interests – Operating Partnership
189,941
176,289
Equity:
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 343,100 shares issued and outstanding as of June 30, 2026 and December 31, 2025
17,155
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 374,893,890 shares issued and outstanding as of June 30, 2026 and 377,806,173 shares issued and outstanding as of December 31, 2025
3,749
3,778
Paid in capital
9,840,190
9,824,460
Retained earnings
651,138
1,193,931
Accumulated other comprehensive income (loss)
2,748
2,175
Total shareholders’ equity
10,514,980
11,041,499
Noncontrolling Interests:
Operating Partnership
182,816
192,135
Partially Owned Properties
(1,158
(789
Total Noncontrolling Interests
181,658
191,346
Total equity
10,696,638
11,232,845
Total liabilities and equity
See accompanying notes
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands except per share data)
Six Months Ended June 30,
Quarter Ended June 30,
REVENUES
Rental income
1,564,895
1,529,637
785,049
768,827
EXPENSES
Property and maintenance
292,410
280,247
142,754
136,274
Real estate taxes and insurance
239,283
224,084
122,257
112,332
Property management
73,290
70,602
38,149
34,786
General and administrative
33,505
36,786
16,640
18,531
Depreciation
493,875
497,635
246,379
240,889
Total expenses
1,132,363
1,109,354
566,179
542,812
Net gain (loss) on sales of real estate properties
(16,776
212,432
(16,744
58,280
Interest and other income
15,192
3,821
12,954
2,129
Other expenses
(50,792
(8,961
(10,004
(4,805
Interest:
Expense incurred, net
(159,832
(147,431
(82,462
(75,317
Amortization of deferred financing costs
(4,290
(4,247
(2,145
(2,103
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels
216,034
475,897
120,469
204,199
Income and other tax (expense) benefit
(833
(829
(411
(407
Income (loss) from investments in unconsolidated entities
(4,360
(11,407
(2,318
(4,996
Net gain (loss) on sales of land parcels
—
(78
(11
Net income
210,841
463,583
117,740
198,785
Net (income) loss attributable to Noncontrolling Interests:
(4,454
(12,328
(2,501
(5,226
(2,173
(2,307
(1,104
(1,203
Net income attributable to controlling interests
204,214
448,948
114,135
192,356
Preferred distributions
(711
(355
Net income available to Common Shares
203,503
448,237
113,780
192,001
Earnings per share – basic:
0.54
1.18
0.30
0.51
Weighted average Common Shares outstanding
374,907
379,359
374,179
379,508
Earnings per share – diluted:
0.50
384,528
391,345
383,878
391,498
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)
Comprehensive income:
Other comprehensive income (loss):
Other comprehensive income (loss) – derivative instruments:
Unrealized holding gains (losses) arising during the period
(3,550
(2,046
Losses reclassified into earnings from other comprehensive income
573
951
288
265
Other comprehensive income (loss)
(2,599
(1,781
Comprehensive income
211,414
460,984
118,028
197,004
Comprehensive (income) attributable to Noncontrolling Interests
(6,640
(14,566
(3,612
(6,382
Comprehensive income attributable to controlling interests
204,774
446,418
114,416
190,622
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash provided by operating activities:
4,290
4,247
Amortization of discounts and premiums on debt
2,608
2,637
Amortization of deferred settlements on derivative instruments
567
945
Amortization of right-of-use assets
6,396
6,395
Write-off of pursuit costs
1,610
2,048
(Income) loss from investments in unconsolidated entities
4,360
11,407
Distributions from unconsolidated entities – return on capital
4,332
243
Net (gain) loss on sales of real estate properties
16,776
(212,432
Net (gain) loss on sales of land parcels
78
Realized (gain) loss on investment securities
(10,116
Unrealized (gain) loss on investment securities
(241
Compensation paid with Company Common Shares
19,174
21,564
Changes in assets and liabilities:
(Increase) decrease in other assets
(16,867
(18,706
Increase (decrease) in accounts payable and accrued expenses
6,404
10,901
Increase (decrease) in accrued interest payable
(410
1,518
Increase (decrease) in lease liabilities
(1,221
(1,106
Increase (decrease) in other liabilities
(40,901
Increase (decrease) in security deposits
921
5,471
Net cash provided by operating activities
702,398
785,070
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions
(1,332
(534,855
Investment in real estate – development/other
(40,096
(59,713
Capital expenditures to real estate
(160,328
(144,368
Non-real estate capital additions
(1,953
(1,019
Interest capitalized for real estate and unconsolidated entities under development
(4,684
(6,663
Proceeds from disposition of real estate, net
153,204
343,064
Investments in unconsolidated entities – development/other
(6,419
(62,050
Distributions from unconsolidated entities – return of capital
2,044
331
Proceeds from sale of investment securities
14,581
359
Consolidation of previously unconsolidated entities
(54,081
Net cash provided by (used for) investing activities
(44,983
(518,995
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs
(4,518
Mortgage notes payable, net:
Lump sum payoffs
(37,940
Notes, net:
Proceeds
498,580
(450,000
Line of credit and commercial paper:
Line of credit proceeds
1,000
Line of credit repayments
(1,000
Commercial paper proceeds
26,916,823
18,803,963
Commercial paper repayments
(26,835,625
(18,565,495
Proceeds from (payments on) settlement of derivative instruments
Finance ground lease principal payments
(1,477
(1,471
Proceeds from Employee Share Purchase Plan (ESPP)
1,526
1,413
Proceeds from exercise of options
6,924
5,357
Common Shares repurchased and retired
(219,385
Payment of offering costs
(481
Other financing activities, net
(53
Contributions – Noncontrolling Interests – Operating Partnership
Distributions:
Common Shares
(525,122
(519,437
Preferred Shares
Noncontrolling Interests – Operating Partnership
(13,302
(15,949
Noncontrolling Interests – Partially Owned Properties
(2,489
(3,999
Net cash provided by (used for) financing activities
(672,889
(294,287
Net increase (decrease) in cash and cash equivalents and restricted deposits
(15,474
(28,212
Cash and cash equivalents and restricted deposits, beginning of period
158,854
160,166
Cash and cash equivalents and restricted deposits, end of period
143,380
131,954
31,276
100,678
Total cash and cash equivalents and restricted deposits, end of period
6
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized
142,770
133,733
Net cash paid (received) for income and other taxes
1,265
920
Amortization of deferred financing costs:
1,437
1,393
512
611
2,341
2,243
Amortization of discounts and premiums on debt:
1,405
1,404
1,203
1,233
Amortization of deferred settlements on derivative instruments:
(6
Accumulated other comprehensive income
Write-off of pursuit costs:
156
187
1,231
1,740
223
121
(Income) loss from investments in unconsolidated entities:
4,348
10,804
603
Realized/unrealized (gain) loss on derivative instruments:
(89
3,639
Interest capitalized for real estate and unconsolidated entities under development:
(2,232
(3,812
(2,452
(2,851
Investments in unconsolidated entities – development/other:
(60,550
(1,500
Consolidation of previously unconsolidated entities:
(88,356
32,370
1,725
27
97
Debt financing costs:
Proceeds from (payments on) settlement of derivative instruments:
89
(3,639
7
Right-of-use assets and lease liabilities initial measurement and reclassifications:
(1,954
(527
1,954
527
Non-cash share distribution and other transfers from unconsolidated entities:
(487
676
(676
487
Non-cash change in Supplemental Executive Retirement Plan (SERP) balances:
6,786
8,915
(6,922
(8,175
136
(740
8
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SHAREHOLDERS’ EQUITY
PREFERRED SHARES
Balance, beginning of period
Balance, end of period
COMMON SHARES, $0.01 PAR VALUE
3,795
3,747
3,798
Conversion of OP Units into Common Shares
Exercise of share options
Employee Share Purchase Plan (ESPP)
(35
Share-based employee compensation expense:
Restricted shares
3,800
PAID IN CAPITAL
9,611,826
9,846,857
9,622,470
Common Share Issuance:
5,931
8,771
4,237
4,365
6,923
5,356
6,498
996
1,525
439
471
14,250
9,337
7,142
4,901
Share options
2,464
2,656
1,241
1,377
ESPP discount
313
258
96
64
Offering costs
Supplemental Executive Retirement Plan (SERP)
(851
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership
(16,823
19,568
(25,548
18,813
Adjustment for Noncontrolling Interests ownership in Operating Partnership
1,011
(1,692
(772
4,147
9,656,272
RETAINED EARNINGS
1,407,570
800,704
1,400,511
`
Common Share distributions
(526,946
(526,428
(263,346
(263,133
Preferred Share distributions
(219,350
1,329,379
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
4,214
2,460
3,396
Accumulated other comprehensive income (loss) – derivative instruments:
1,615
DISTRIBUTIONS
Distributions declared per Common Share outstanding
1.405
1.385
0.7025
0.6925
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
NONCONTROLLING INTERESTS
OPERATING PARTNERSHIP
201,942
187,137
207,090
Issuance of restricted units to Noncontrolling Interests
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner
(5,932
(8,773
(4,237
(4,366
Equity compensation associated with Noncontrolling Interests
3,456
10,593
1,749
5,492
Net income attributable to Noncontrolling Interests
4,454
12,328
2,501
5,226
Distributions to Noncontrolling Interests
(13,459
(16,159
(6,135
(7,559
Change in book value of Redeemable Noncontrolling Interests – Operating Partnership
3,171
1,090
1,027
981
(1,011
1,692
772
(4,147
202,717
PARTIALLY OWNED PROPERTIES
(718
(1,585
(2,989
2,173
2,307
1,104
(2,542
(4,052
(677
(2,463
10
LIABILITIES AND CAPITAL
Redeemable Limited Partners
Capital:
Partners’ Capital:
Preference Units
General Partner
10,495,077
11,022,169
Limited Partners
Total partners’ capital
10,697,796
11,233,634
Total capital
Total liabilities and capital
(Amounts in thousands except per Unit data)
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties
208,668
461,276
116,636
197,582
ALLOCATION OF NET INCOME:
711
355
Net income available to Units
207,957
460,565
116,281
197,227
Earnings per Unit – basic:
Weighted average Units outstanding
383,109
389,779
382,406
389,837
Earnings per Unit – diluted:
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties
209,241
458,677
116,924
195,801
13
Proceeds from EQR’s Employee Share Purchase Plan (ESPP)
Proceeds from exercise of EQR options
OP Units repurchased and retired
Contributions – Limited Partners
OP Units – General Partner
OP Units – Limited Partners
15
16
17
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
PARTNERS’ CAPITAL
PREFERENCE UNITS
GENERAL PARTNER
11,023,191
10,651,308
11,026,779
OP Unit Issuance:
Conversion of OP Units held by Limited Partners into OP Units held by General Partner
5,932
8,773
4,366
Exercise of EQR share options
6,499
997
EQR’s Employee Share Purchase Plan (ESPP)
440
EQR restricted shares
14,253
9,339
EQR share options
EQR ESPP discount
Net income available to Units – General Partner
OP Units – General Partner distributions
Change in market value of Redeemable Limited Partners
Adjustment for Limited Partners ownership in Operating Partnership
10,989,451
LIMITED PARTNERS
Issuance of restricted units to Limited Partners
Equity compensation associated with Units – Limited Partners
Net income available to Units – Limited Partners
Units – Limited Partners distributions
Change in book value of Redeemable Limited Partners
Distributions declared per Unit outstanding
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equity Residential (“EQR”) is an S&P 500 company that owns and manages rental properties in dynamic metro areas across the U.S., a business that is conducted on its behalf by ERP Operating Limited Partnership (“ERPOP”). EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.
EQR is the general partner of, and as of June 30, 2026 owned an approximate 97.6% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.
As of June 30, 2026, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 312 properties located in 10 states and the District of Columbia consisting of 85,520 apartment units. The ownership breakdown includes (table does not include any uncompleted development properties):
Properties
Apartment Units
Wholly Owned Properties
295
81,039
Partially Owned Properties – Consolidated
3,096
Partially Owned Properties – Unconsolidated
1,385
312
85,520
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) 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 GAAP 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. Operating results for the six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
In preparation of the Company’s financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The balance sheets at December 31, 2025 have been derived from the audited financial statements at that date but do not include all of the information and footnotes required by GAAP for complete financial statements.
For further information, including definitions of capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025.
Income and Other Taxes
EQR has elected to be taxed as a REIT. This, along with the nature of the operations of its operating properties, resulted in no provision for federal income taxes at the EQR level. In addition, ERPOP generally is not liable for federal income taxes as the partners recognize their allocable share of income or loss in their tax returns; therefore no provision for federal income taxes has been made at the ERPOP 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 and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.
Recent Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (“FASB”) issued an amendment to the interim reporting standards which is intended to improve the navigability of the required interim reporting disclosures and clarify when that guidance is applicable. The update provides a comprehensive list of interim disclosures required under GAAP and incorporates a disclosure principle that requires disclosures at interim periods when an event or change that has a material effect on an entity has occurred since the previous year end. The standard will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of the new rules on its disclosures.
In November 2024, the FASB issued a new standard on disaggregation of income statement expenses, which requires an entity to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items in a tabular format in the notes to the financial statements. The standard will be effective for annual reporting periods beginning after December 15, 2026 and for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of the new rules on its disclosures.
In December 2023, the FASB issued an amendment to the income tax standards which requires disclosure enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. The Company adopted the standard when effective for annual periods beginning January 1, 2025 on a prospective basis. Due to the nature of the Company's operations and the immaterial amount of income taxes incurred/paid due to its status as a REIT, adoption of the standard had no impact on its disclosures. See the Income and Other Taxes section above for additional discussion.
In November 2023, the FASB issued an amendment to the segment reporting standards which requires disclosure for each reportable segment, on an interim and annual basis, of the significant expense categories and amounts that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. Additionally, it requires disclosure of the title and position of the individual or the name of the group or committee identified as the chief operating decision maker. The Company adopted the standard when effective for annual periods beginning January 1, 2024 and interim periods beginning January 1, 2025 on a retrospective basis. See Note 12 for further discussion.
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The Company refers to “Common Shares” and “Units” (which refer to both OP Units and restricted units) as equity securities for EQR and “General Partner Units” and “Limited Partner Units” as equity securities for ERPOP. To provide a streamlined and more readable presentation of the disclosures for the Company and the Operating Partnership, several sections below refer to the respective terminology for each with the same financial information and separate sections are provided, where needed, to further distinguish any differences in financial information and terminology.
The following table presents the changes in the Company’s issued and outstanding Common Shares and Units for the six months ended June 30, 2026 and 2025:
Common Shares outstanding at January 1,
377,806,173
379,475,383
Common Shares Issued:
Conversion of OP Units
112,398
224,399
126,702
83,754
28,882
23,090
Restricted share grants, net
278,129
173,814
Common Shares Other:
Repurchased and retired
(3,458,394
Common Shares outstanding at June 30,
374,893,890
379,980,440
Units
Units outstanding at January 1,
9,325,363
11,543,773
Restricted unit grants, net
43,711
286,898
Conversion of OP Units to Common Shares
(112,398
(224,399
Units outstanding at June 30,
9,256,676
11,606,272
Total Common Shares and Units outstanding at June 30,
384,150,566
391,586,712
Units Ownership Interest in Operating Partnership
2.4
%
3.0
The following table presents the changes in the Operating Partnership’s issued and outstanding General Partner Units and Limited Partner Units for the six months ended June 30, 2026 and 2025:
General and Limited Partner Units
General and Limited Partner Units outstanding at January 1,
387,131,536
391,019,156
Issued to General Partner:
EQR’s restricted share grants, net
Issued to Limited Partners:
General Partner Other:
General and Limited Partner Units outstanding at June 30,
Limited Partner Units
Limited Partner Units outstanding at January 1,
Limited Partner restricted unit grants, net
Conversion of Limited Partner OP Units to EQR Common Shares
Limited Partner Units outstanding at June 30,
Limited Partner Units Ownership Interest in Operating Partnership
The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units, as well as the equity positions of the holders of restricted units, are collectively referred to as the “Noncontrolling Interests – Operating Partnership” and “Limited Partners Capital,” respectively, for the Company and the Operating Partnership. Subject to certain exceptions (including the “book-up” requirements of restricted units), the Noncontrolling Interests – Operating Partnership/Limited Partners Capital may exchange their Units with EQR for Common Shares on a one-for-one basis. The book value of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital (including redeemable interests) is allocated based on
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the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total plus the total number of Common Shares/General Partner Units. Net income is allocated to the Noncontrolling Interests – Operating Partnership/Limited Partners Capital based on the weighted average ownership percentage during the period.
The Operating Partnership has the right but not the obligation to make a cash payment instead of issuing Common Shares to any and all holders of Noncontrolling Interests – Operating Partnership/Limited Partners Capital requesting an exchange of their Noncontrolling Interests – Operating Partnership/Limited Partners Capital with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests – Operating Partnership/Limited Partners Capital for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital.
The Noncontrolling Interests – Operating Partnership/Limited Partners Capital are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests – Operating Partnership/Limited Partners Capital are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership” and “Redeemable Limited Partners,” respectively. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are adjusted to the greater of book value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital that are classified in permanent equity at June 30, 2026 and December 31, 2025.
The book value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total. Such percentage of the total book value of Units/Limited Partner Units which is ascribed to the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is then adjusted to the greater of book value or fair market value as described above. As of June 30, 2026 and 2025, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $189.9 million and $317.9 million, respectively, which represents the value of Common Shares that would be issued in exchange for the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners.
The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners for the six months ended June 30, 2026 and 2025, respectively (amounts in thousands):
Balance at January 1,
338,563
Change in market value
16,823
(19,568
Change in book value
(3,171
(1,090
Balance at June 30,
317,905
Net proceeds from EQR Common Share and Preferred Share (see definition below) offerings and proceeds from exercise of options for Common Shares are contributed by EQR to ERPOP. In return for those contributions, EQR receives a number of OP Units in ERPOP 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 ERPOP equal in number and having the same terms as the Preferred Shares issued in the equity offering). As a result, the net proceeds from Common Shares and Preferred Shares are allocated for the Company between shareholders’ equity and Noncontrolling Interests – Operating Partnership and for the Operating Partnership between General Partner’s Capital and Limited Partners Capital to account for the change in their respective percentage ownership of the underlying equity.
The Company’s declaration of trust authorizes it 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.
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The following table presents the Company’s issued and outstanding Preferred Shares/Preference Units as of June 30, 2026 and December 31, 2025:
Amounts in thousands
Annual
Call
Dividend Per
Date (1)
Share/Unit (2)
Preferred Shares/Preference Units of beneficial interest, $0.01 par value; 100,000,000 shares authorized:
8.29% Series K Cumulative Redeemable Preferred Shares/Preference Units; liquidation value $50 per share/unit; 343,100 shares/units issued and outstanding as of June 30, 2026 and December 31, 2025
12/10/2026
4.145
Other
EQR and ERPOP currently have an active universal shelf registration statement for the issuance of equity and debt securities that automatically became effective upon filing with the SEC in May 2025 and expires in May 2028. Per the terms of ERPOP’s partnership agreement, EQR contributes the net proceeds of all equity offerings to the capital of ERPOP in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis) or preference units (on a one-for-one preferred share per preference unit basis).
The Company has an At-The-Market (“ATM”) share offering program which allows EQR to issue Common Shares from time to time into the existing trading market at current market prices or through negotiated transactions, including under forward sale arrangements. The current program matures in May 2028 and gives us the authority to issue up to 13.0 million shares, all of which remain available for issuance as of June 30, 2026.
During the six months ended June 30, 2026, the Company repurchased and subsequently retired approximately $219.4 million (3,458,394 shares at a weighted average price per share of $63.42) of its Common Shares in the open market under its share repurchase program. Concurrent with these transactions, ERPOP repurchased and retired the same amount of OP Units previously issued to EQR. As of June 30, 2026, 8,156,451 shares remained available for repurchase under this program.
The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of June 30, 2026 and December 31, 2025 (amounts in thousands):
June 30, 2026
December 31, 2025
Depreciable property:
Buildings and improvements
21,070,953
21,057,954
Furniture, fixtures and equipment
3,171,152
3,074,470
In-Place lease intangibles
565,999
573,116
Projects under development:
22,419
19,278
Construction-in-progress
35,893
81,283
Land held for development:
42,538
64,856
15,780
21,485
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During the six months ended June 30, 2026, the Company disposed of the following to unaffiliated parties (sales price and net gain (loss) in thousands):
Sales Price
Net Gain (Loss)
Rental Properties – Consolidated
515
164,000
The Company has invested in various entities with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated).
Consolidated Variable Interest Entities (“VIEs”)
In accordance with accounting standards for consolidation of VIEs, the Company consolidates ERPOP on EQR’s financial statements. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. The limited partners are not able to exercise substantive kick-out or participating rights. As a result, ERPOP qualifies as a VIE. EQR has a controlling financial interest in ERPOP and, thus, is ERPOP’s primary beneficiary. EQR has the power to direct the activities of ERPOP that most significantly impact ERPOP’s economic performance as well as the obligation to absorb losses or the right to receive benefits from ERPOP that could potentially be significant to ERPOP.
The Company has various equity interests in certain joint ventures that have been deemed to be VIEs, and the Company is the VIEs’ primary beneficiary. As a result, the joint ventures are required to be consolidated on the Company’s financial statements. The following table summarizes the Company’s consolidated joint ventures as of June 30, 2026:
Consolidated Joint Ventures (VIE)
Properties/Projects
Operating Properties
Development Lease-Up Projects
Total
The following table provides consolidated assets and liabilities related to the Company's VIEs as of June 30, 2026 and December 31, 2025 (amounts in thousands):
Consolidated Assets
595,586
596,013
Consolidated Liabilities
44,630
46,821
Investments in Unconsolidated Entities
The Company has various equity interests in certain joint ventures that are unconsolidated and accounted for using the equity method of accounting. Most of these have been deemed to be VIEs and the Company is not the VIEs' primary beneficiary. The remaining have been deemed not to be VIEs and the Company does not have a controlling voting interest.
The following table summarizes the Company’s investments in unconsolidated entities as of June 30, 2026 and December 31, 2025 (amounts in thousands except for ownership percentage):
Ownership Percentage
Investments in Unconsolidated Entities:
Various Real Estate Holdings (VIE)
34,262
34,356
Varies
Operating Properties (VIE)
110,977
115,180
62% - 80% (1)
Development and Lease-Up Projects and Land Held for Development (VIE)
145,978
146,247
95% (1)
Real Estate Technology Funds/Companies (VIE)
31,922
30,420
203
(264
25
The following table summarizes the Company’s unconsolidated real estate joint ventures that were deemed to be VIEs as of June 30, 2026:
Unconsolidated Joint Ventures (VIE)
Properties/Projects/Entities
1,016
369
Real Estate Holdings (1)
Projects Under Development (2)
270
(3)
1,655
The following table presents the Company’s restricted deposits as of June 30, 2026 and December 31, 2025 (amounts in thousands):
Mortgage escrow deposits:
351
198
Mortgage principal reserves/sinking funds
37,659
33,143
Mortgage escrow deposits
38,010
33,341
Restricted cash:
Restricted deposits on real estate investments
4,027
5,483
Resident security and utility deposits
47,883
48,533
Replacement reserves
14,012
12,803
3,043
2,790
Restricted cash
68,965
69,609
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Lessor Accounting
The Company is the lessor for its residential and non-residential leases and these leases are accounted for as operating leases under the lease standard.
The following table presents the lease income types relating to total lease revenue along with the total other rental income for the six months ended June 30, 2026 and 2025 (amounts in thousands):
Income Type
June 30, 2025
Residential and non-residential rent
1,424,788
1,399,450
Utility recoveries (RUBS income) (1)
54,938
51,432
Parking rent
23,872
24,640
Other lease revenue, net (2)
15,061
6,219
Total lease revenue
1,518,659
1,481,741
Parking revenue
22,032
21,551
Other revenue
24,204
26,345
Total other rental income (3)
46,236
47,896
The following table presents the lease income types relating to total lease revenue along with the total other rental income for the quarters ended June 30, 2026 and 2025 (amounts in thousands):
712,831
702,341
27,944
25,934
11,750
12,377
8,904
3,932
761,429
744,584
11,388
10,877
12,232
13,366
23,620
24,243
EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. Weighted average interest rates noted below for the six months ended June 30, 2026 include the effect of any derivative instruments and amortization of premiums/discounts/OCI (other comprehensive income) on debt and derivatives.
Mortgage Notes Payable
The following table summarizes the Company’s mortgage notes payable activity for the six months ended June 30, 2026 (amounts in thousands):
Mortgage notes payable, net as of December 31, 2025
Scheduled principal repayments
Amortization of premiums/discounts
Amortization of deferred financing costs, net (1)
Mortgage notes payable, net as of June 30, 2026
Fixed Rate Debt:
Secured – Conventional
1,403,671
789
442
1,404,902
Floating Rate Debt:
Secured – Tax Exempt
186,233
616
70
186,919
The following table summarizes certain interest rate and maturity date information as of and for the six months ended June 30, 2026:
Interest Rate Ranges (ending)
0.10% - 5.25%
Weighted Average Interest Rate
3.72%
Maturity Date Ranges
2029-2061
As of June 30, 2026, the Company had $195.9 million of secured tax-exempt bonds subject to third-party credit enhancement.
Notes
The following table summarizes the Company’s notes activity for the six months ended June 30, 2026 (amounts in thousands):
Notes, net as of December 31, 2025
Notes, net as of June 30, 2026
Unsecured – Public
1.85% - 7.57%
3.77%
2026-2047
The Company’s unsecured public notes contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for the six months ended June 30, 2026.
Line of Credit and Commercial Paper
The Company has a $2.5 billion unsecured revolving credit facility maturing on December 3, 2030. The Company has the ability to increase available borrowings by an additional $1.0 billion by adding lenders to the facility, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be the Secured Overnight Financing Rate ("SOFR") plus a spread (currently 0.725%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. The weighted average interest rate on the revolving credit facility was 4.40% for the six months ended June 30, 2026.
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The Company has an unsecured commercial paper note program under which it may borrow up to a maximum of $1.5 billion subject to market conditions. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of the Company’s other unsecured senior indebtedness.
The following table summarizes certain weighted average interest rate, maturity and amount outstanding information for the commercial paper program as of and for the six months ended June 30, 2026:
Weighted Average Interest Rate (1)
3.96%
Weighted Average Maturity (in days)
Weighted Average Amount Outstanding
$718.3 million
The Company limits its utilization of the revolving credit facility in order to maintain liquidity to support its $1.5 billion commercial paper program along with certain other obligations. The following table presents the availability on the Company’s unsecured revolving credit facility as of June 30, 2026 (amounts in thousands):
Unsecured revolving credit facility commitment
2,500,000
Commercial paper balance outstanding
(668,000
Unsecured revolving credit facility balance outstanding
Other restricted amounts
(3,464
Unsecured revolving credit facility availability
1,828,536
On May 20, 2026, the Company entered into a commitment letter for a senior unsecured bridge loan facility of up to $2.0 billion to fund potential transaction costs and refinancings of existing debt in connection with its pending merger with AvalonBay Communities, Inc. ("AvalonBay"). No amounts were drawn under the bridge loan facility during the six months ended June 30, 2026. See Note 11 for additional discussion.
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A three-level valuation hierarchy exists for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
The following table summarizes the inputs to the valuations for each type of fair value measurement:
Fair Value Measurement Type
Valuation Inputs
Employee holdings (other than Common Shares) within the supplemental executive retirement plan (the “SERP”)
Quoted market prices for identical assets. These holdings are included in other assets and other liabilities on the consolidated balance sheets.
Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners
Quoted market price of Common Shares.
Mortgage notes payable and private unsecured debt (including its commercial paper and line of credit, if applicable)
Indicative rates provided by lenders of similar loans.
Public unsecured notes
Quoted market prices for each underlying issuance.
Derivatives
Readily observable market parameters such as forward yield curves and credit default swap data.
The fair values of the Company’s financial instruments (other than the items listed above and the investments disclosed below) approximate their carrying or contract value. The following table provides a summary of the carrying and fair values for the Company’s mortgage notes payable and unsecured debt (including its commercial paper and line of credit, if applicable) at June 30, 2026 and December 31, 2025, respectively (amounts in thousands):
Carrying Value
Estimated FairValue (Level 2)
1,535,522
1,532,421
Unsecured debt, net
6,669,848
6,355,634
6,585,106
6,333,952
Total debt, net
8,261,669
7,891,156
8,175,010
7,866,373
The following tables provide a summary of the fair value measurements for each major category of assets and liabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at June 30, 2026 and December 31, 2025, respectively (amounts in thousands):
Fair Value Measurements at Reporting Date Using
Description
Balance SheetLocation
6/30/2026
Quoted Prices inActive Markets forIdentical Assets/Liabilities(Level 1)
Significant OtherObservable Inputs(Level 2)
SignificantUnobservable Inputs(Level 3)
Assets
Supplemental Executive Retirement Plan
Other Assets
100,579
Liabilities
Other Liabilities
Redeemable Noncontrolling Interests –
Operating Partnership/Redeemable
Mezzanine
30
12/31/2025
Significant Other Observable Inputs (Level 2)
Significant UnobservableInputs(Level 3)
107,365
The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying consolidated statements of operations and comprehensive income for the six months ended June 30, 2026 and 2025, respectively (amounts in thousands):
June 30, 2026Type of Cash Flow Hedge
Amount ofGain/(Loss) Recognized in OCI on Derivative
Location ofGain/(Loss) Reclassified from Accumulated OCI into Income
Amount ofGain/(Loss) Reclassified from Accumulated OCI into Income
Derivatives designated as hedging instruments:
Interest Rate Contracts:
Forward Starting Swaps
Interest expense
(573
June 30, 2025Type of Cash Flow Hedge
Amount of Gain/(Loss) Recognized in OCI on Derivative
(951
As of June 30, 2026 and December 31, 2025, there were approximately $2.7 million and $2.2 million in deferred gains, net, included in accumulated other comprehensive income (loss), respectively, related to previously settled and/or unsettled derivative instruments, of which an estimated $0.8 million may be recognized as additional interest expense during the twelve months ending June 30, 2027.
The Company has invested in various equity securities without readily determinable fair values and has elected to measure them using the measurement alternative in accordance with the applicable accounting standards for equity securities. These investments are carried at cost less any impairment and adjusted to fair value if there are observable price changes for an identical or similar investment of the same issuer.
The following table summarizes the Company’s real estate technology investment securities included in other assets as of June 30, 2026 and December 31, 2025 (amounts in thousands):
Real Estate Technology Investments
43,185
47,409
During the six months ended June 30, 2026, the Company sold one of these investment securities for proceeds of approximately $14.6 million and realized a gain on sale of approximately $10.1 million, which is included in interest and other income in the consolidated statements of operations.
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Equity Residential
The following tables set forth the computation of net income per share – basic and net income per share – diluted for the Company (amounts in thousands except per share amounts):
Numerator for net income per share – basic:
Allocation to Noncontrolling Interests – Operating Partnership
Numerator for net income per share – basic
Numerator for net income per share – diluted:
Numerator for net income per share – diluted
Denominator for net income per share – basic and diluted:
Denominator for net income per share – basic
Effect of dilutive securities:
OP Units
8,202
10,420
8,227
10,329
Long-term compensation shares/units
1,419
1,566
1,472
1,661
Denominator for net income per share – diluted
Net income per share – basic
Net income per share – diluted
ERP Operating Limited Partnership
The following tables set forth the computation of net income per Unit – basic and net income per Unit – diluted for the Operating Partnership (amounts in thousands except per Unit amounts):
Numerator for net income per Unit – basic and diluted:
Allocation to Preference Units
Numerator for net income per Unit – basic and diluted
Denominator for net income per Unit – basic and diluted:
Denominator for net income per Unit – basic
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units
Denominator for net income per Unit – diluted
Net income per Unit – basic
Net income per Unit – diluted
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Pending Merger
On May 20, 2026, EQR, ERPOP, AvalonBay and Canopy Merger Sub LLC, a direct, wholly owned subsidiary of EQR (“Merger Sub”), entered into an agreement and plan of merger (the “Merger Agreement”), which provides for the combination of EQR and AvalonBay in a merger of equals transaction.
Upon the terms and subject to the conditions set forth in the Merger Agreement, (i) on the closing date but prior to the effective time of the Merger (the “Effective Time”), AvalonBay will contribute certain assets (the “Asset Contribution”) in exchange for units of partnership interest in ERPOP that have, in the aggregate, a value equal to the fair market value of such contributed assets and (ii) following the Asset Contribution and at the Effective Time, AvalonBay will merge with and into Merger Sub, with Merger Sub surviving as a direct, wholly owned subsidiary of EQR (the “Merger”). Each of the Board of Trustees of EQR and the Board of Directors of AvalonBay has unanimously approved or adopted, as applicable, the Merger Agreement and the transactions contemplated by the Merger Agreement.
The Merger Agreement provides that each share of common stock, par value $0.01 per share, of AvalonBay (“AvalonBay Common Stock”), issued and outstanding immediately prior to the Effective Time (other than certain excluded shares described in the Merger Agreement) will be converted into the right to receive 2.793 Common Shares and cash in lieu of fractional shares, if any (the “Merger Consideration”). Upon completion, legacy EQR shareholders are expected to own approximately 49% of the combined company, and legacy AvalonBay stockholders are expected to own approximately 51%.
The transaction will be accounted for as a reverse acquisition under the business combination accounting rules in which EQR is considered the legal acquirer because EQR issues Common Shares to AvalonBay stockholders, while AvalonBay is designated as the accounting acquirer based primarily on post-merger relative ownership percentage and the composition of senior executive leadership. Consequently, EQR’s historical assets and liabilities will be recorded at estimated fair value as of the closing date, and the combined financial statements will present AvalonBay’s historical balances and results.
The preliminary purchase price and the amount of expected transaction costs are both subject to change until the closing date. To fund the expected transaction costs and planned refinancing of existing debt, ERPOP entered into a commitment letter on May 20, 2026 for a senior unsecured bridge loan facility of up to $2.0 billion. Borrowings under the facility will initially bear interest at a variable rate of SOFR plus 0.725% per annum (subject to adjustments based on credit ratings and time outstanding) plus additional fees, with a maturity of 364 days following the closing of the Merger. The exact timing and amount of any borrowings remain undetermined. The completion of the Merger is not conditioned upon the availability of the bridge facility or any other financing. See Note 8 for additional discussion.
Following the closing, the combined company will operate under a new name and will have dual headquarters in Chicago, Illinois and Arlington, Virginia. The Board of Trustees of the combined company will consist of 14 members, composed of seven members from each of the Board of Trustees of EQR and the Board of Directors of AvalonBay.
EQR and AvalonBay expect to complete the Merger in the second half of 2026, subject to the satisfaction or waiver of customary closing conditions, including the approval of the issuance of shares of the Company in connection with the Merger (the “Share Issuance”) by the Company’s shareholders, the approval of the Merger by the AvalonBay stockholders and the absence of any injunction or order by any court or other governmental entity prohibiting or making illegal the Merger. However, EQR and AvalonBay cannot predict the actual date on which the Merger will be completed because completion is subject to conditions beyond their control, and it is possible that such conditions could result in the Merger being completed later or not being completed at all.
In connection with the pending Merger, the Company has engaged financial advisors whose compensation is substantially success-based and substantially contingent upon the closing of the transaction.
The Merger Agreement also contains a reciprocal termination fee framework. Under specified circumstances, EQR may be required to pay AvalonBay a termination fee of approximately $1.005 billion, and under specified circumstances AvalonBay may be required to pay EQR a termination fee of approximately $1.070 billion.
The pending Merger will constitute a change in control under the Company’s employee benefit and share incentive plans. The Company maintains change in control agreements with its executive officers that provide for lump-sum cash severance, prorated incentive grants and continuous welfare benefits if the executive experiences a qualifying termination within 24 to 36 months following
33
the change in control. Certain post-closing management retention equity awards and cash transaction bonuses have also been authorized under the terms of the Merger Agreement.
Commitments
Real Estate Development Commitments
As of June 30, 2026, the Company has both consolidated and unconsolidated real estate projects under development. The following table summarizes the gross remaining total project costs for the Company’s projects under development at June 30, 2026 (total project costs remaining in thousands):
Projects
Total Project Costs Remaining (1)
Projects Under Development
Consolidated
520
116,149
Unconsolidated
9,905
Total Projects Under Development
790
126,054
We have entered into, and may continue in the future to enter into, joint venture agreements with third-party partners for the development of multifamily rental properties. The joint venture agreements with each development partner include buy-sell provisions that provide the right, but not the obligation, for the Company to acquire each respective partner’s interests or sell its interests at any time following the occurrence of certain pre-defined events described in the joint venture agreements. See Note 5 for additional discussion.
Other Commitments
We have entered into, and may continue in the future to enter into, real estate technology and other real estate fund investments. As of June 30, 2026, the Company has invested in eleven separate such investments totaling $53.0 million with aggregate remaining commitments of approximately $15.0 million.
Contingencies
Litigation and Legal Matters
The Company, as an owner of real estate, is subject to various federal, state and local 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 involved in various pending and threatened legal proceedings which arise in the ordinary course of business. The Company evaluates these litigation matters on an ongoing basis, but in no event less than quarterly, in assessing the adequacy of its accruals and disclosures. For legal proceedings in which it has been determined that a loss is both probable and reasonably estimable, the Company records new accruals and/or adjusts existing accruals that represent its best estimate of the loss incurred based on the facts and circumstances known at that time. As of June 30, 2026 and December 31, 2025, the Company’s litigation accruals approximated $43.1 million and $70.6 million, respectively, and are included in other liabilities in the consolidated balance sheets. Actual losses may differ materially from the amounts noted above and the ultimate outcome of these legal proceedings is generally not yet determinable. As of June 30, 2026 and December 31, 2025, the Company does not believe there is any litigation pending or threatened against it that, either individually or in the aggregate and inclusive of the matters accrued for as noted above and the matters discussed below, may reasonably be expected to have a material adverse effect on the Company and its financial condition.
The Company has been named as a defendant in a number of cases filed by private plaintiffs in late 2022 and 2023 alleging antitrust violations by RealPage, Inc., a seller of revenue management software products, and various owners and/or operators of multifamily housing, including us, that have utilized these products. The complaints allege collusion among the defendants to illegally fix and inflate the pricing of multifamily rents and seek monetary damages, injunctive relief, fees and costs. All of the cases except for two have been consolidated into a single putative class action in the United States District Court for the Middle District of Tennessee. On December 28, 2023, motions to dismiss this consolidated action, filed by RealPage, Inc. as well as us and our multifamily co-defendants, were denied by the Court and the case is proceeding. On April 13, 2026, the Company entered into a settlement agreement to fully resolve the consolidated putative class action litigation at an amount totaling $56.0 million. On May 12, 2026, the Company funded the $56.0 million to the claims administrator in accordance with the terms of the settlement agreement, and on May 22, 2026,
34
the settlement received preliminary approval from the court. It remains subject to final court approval. The Company also continues to vigorously defend two other cases with similar allegations filed by the District of Columbia and the State of Maryland, respectively, against RealPage, Inc. and a number of multifamily owners and/or operators, including us, and no assurance can be given that similar additional cases will not be filed in the future. The resolution of these proceedings cannot be predicted with certainty.
The Company is named as a defendant in a class action in the United States District Court for the Northern District of California filed in 2016 which alleges that the amount of late fees charged by the Company were improperly determined under California law. The plaintiffs are seeking monetary damages and other relief. On April 8, 2024, the Court issued certain findings of facts and conclusions of law that are adverse to the Company’s legal position. During the fourth quarter of 2025, the parties reached a settlement in principle to fully resolve these matters at an amount approximating $42.7 million, of which $2.7 million was funded to the claims administrator following final court approval of one portion of this case. The remaining $40.0 million is included in the litigation accruals noted above. In February 2026, the court granted preliminary approval of the remaining settlement but it is subject to final court approval.
Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses and about which discrete financial information is available that is evaluated regularly by the chief operating decision maker. The chief operating decision maker, who is the Company’s chief executive officer, decides how resources are allocated and assesses performance on a recurring basis at least quarterly.
The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company’s operating performance of our apartment communities geographically by market on a same store basis and in total on a non-same store basis, which represent our operating segments.
The Company has aggregated its geographic same store operating segments into one reportable segment called same store. Management believes the properties in the same store reportable segment have similar economic characteristics, facilities, services and residents, which is in alignment with the required aggregation criteria. The following reflects the two reportable segments for the Company:
The Company has non-residential activities included in each of its reportable segments, which account for less than 4.0% of total revenues for the six months ended June 30, 2026 and 2025, respectively, and serve as an amenity for our residential residents. 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 and quarters ended June 30, 2026 and 2025, respectively.
The primary financial measure for the Company’s reportable segments is net operating income (“NOI”), which represents rental income less: 1) property and maintenance expense and 2) real estate taxes and insurance expense (all as reflected in the accompanying consolidated statements of operations and comprehensive income). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. Revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.
35
The following table presents a reconciliation of net income per the consolidated statements of operations to NOI for the six months and quarters ended June 30, 2026 and 2025, respectively (amounts in thousands):
Adjustments:
16,744
(58,280
(15,192
(3,821
(12,954
(2,129
50,792
8,961
10,004
4,805
159,832
147,431
82,462
75,317
2,145
2,103
Income and other tax expense (benefit)
833
829
411
407
2,318
4,996
Total NOI
1,033,202
1,025,306
520,038
520,221
The following tables present NOI from our rental real estate for the six months and quarters ended June 30, 2026 and 2025, respectively (amounts in thousands):
Six Months Ended June 30, 2026
Six Months Ended June 30, 2025
Rental Income
Operating Expenses
NOI
Same store (1)
Los Angeles
232,920
75,760
157,160
230,831
72,267
158,564
Orange County
65,230
14,743
50,487
63,811
14,174
49,637
San Diego
42,953
9,747
33,206
42,392
9,275
33,117
Subtotal - Southern California
341,103
100,250
240,853
337,034
95,716
241,318
San Francisco
241,171
67,020
174,151
226,105
67,347
158,758
New York
255,095
104,994
150,101
245,386
101,945
143,441
Washington, D.C.
219,603
71,567
148,036
217,225
68,689
148,536
Boston
162,902
52,073
110,829
160,645
48,863
111,782
Seattle
134,186
40,027
94,159
132,887
38,026
94,861
Denver
51,406
17,284
34,122
54,594
16,963
37,631
Atlanta
47,522
17,019
30,503
48,535
16,153
32,382
Dallas/Austin
37,287
15,912
21,375
38,022
16,499
21,523
Total same store
1,490,275
486,146
1,004,129
1,460,433
470,201
990,232
Non-same store
67,564
27,708
39,856
24,395
11,057
13,338
Total reportable segments
1,557,839
513,854
1,043,985
1,484,828
481,258
1,003,570
Other (2)
7,056
17,839
(10,783
44,809
23,073
21,736
Totals
531,693
504,331
36
Quarter Ended June 30, 2026
Quarter Ended June 30, 2025
116,796
37,427
79,369
115,731
35,725
80,006
32,724
7,389
25,335
31,964
6,940
25,024
21,576
4,963
16,613
21,287
4,605
16,682
171,096
49,779
121,317
168,982
47,270
121,712
121,811
32,076
89,735
113,781
32,930
80,851
127,934
52,167
75,767
123,589
50,293
73,296
109,975
35,147
74,828
109,392
33,949
75,443
81,827
25,076
56,751
80,924
23,708
57,216
67,134
20,046
47,088
66,642
19,263
47,379
27,215
9,145
18,070
29,092
9,072
20,020
23,767
8,482
15,285
23,989
8,138
15,851
18,658
8,010
10,648
19,135
8,320
10,815
749,417
239,928
509,489
735,526
232,943
502,583
32,947
13,417
19,530
12,301
5,230
7,071
782,364
253,345
529,019
747,827
238,173
509,654
2,685
11,666
(8,981
21,000
10,433
10,567
265,011
248,606
The following tables present reconciliations of operating expenses for each reportable segment for the six months and quarters ended June 30, 2026 and 2025, respectively (amounts in thousands):
Same Store (1)
Non-Same Store
Operating expenses:
Real estate taxes
194,352
10,290
204,642
190,359
3,068
193,427
On-site payroll
89,279
5,318
94,597
87,801
2,112
89,913
Utilities
80,328
3,839
84,167
74,349
1,870
76,219
Repairs and maintenance
66,105
4,315
70,420
63,361
1,760
65,121
56,082
3,946
60,028
54,331
2,247
56,578
96,632
5,037
101,669
95,437
1,477
96,914
45,024
2,579
47,603
43,655
953
44,608
37,911
1,678
39,589
34,577
858
35,435
34,056
2,190
36,246
841
34,346
26,305
1,933
28,238
25,769
1,101
26,870
37
The following table presents a reconciliation of total assets and capital expenditures as of and for the six months ended June 30, 2026 (amounts in thousands):
17,833,984
1,844,005
597,588
Capital expenditures
146,109
14,081
138
160,328
There have been no material subsequent events occurring since June 30, 2026.
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For further information including definitions for capitalized terms not defined herein, refer to the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025.
Forward-Looking Statements
Forward-looking statements 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, including, without limitation, with respect to our ability to realize the anticipated benefits of our pending Merger with AvalonBay or to complete the pending Merger on the terms or timing contemplated or at all. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Additional factors that might cause such differences are discussed in Part I of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025, particularly those under Item 1A, Risk Factors. Additional factors are also included in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q. Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report. Forward-looking statements are not guarantees of future performance, results or events. The forward-looking statements contained herein are made as of the date hereof, and the Company undertakes no obligation to update or supplement these forward-looking statements.
Overview
Equity Residential (“EQR”) is committed to creating communities where people thrive. The Company, a member of the S&P 500, owns and manages rental properties in dynamic metro areas across the U.S. ERP Operating Limited Partnership (“ERPOP”) is focused on conducting the multifamily property business of EQR. EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP.
The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in most of its markets.
You may access our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and any amendments to any of those reports/statements we file with or furnish to the Securities and Exchange Commission (“SEC”) free of charge on our website, www.equityapartments.com. These reports/statements are made available on our website as soon as reasonably practicable after we file them with or furnish them to the SEC. The information contained on our website, including any information referred to in this report as being available on our website, is not a part of or incorporated into this report.
The Company’s and the Operating Partnership’s overall business objectives and operating and investing strategies have not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025, except as it relates to the potential Merger transaction with AvalonBay as discussed further below.
On May 20, 2026, EQR, ERPOP, AvalonBay and Merger Sub entered into the Merger Agreement, which provides for the combination of EQR and AvalonBay in a merger of equals transaction. Each of the Board of Trustees of EQR and the Board of Directors of AvalonBay has unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement. Under the terms of the Merger Agreement, at the Effective Time, stockholders of AvalonBay will receive 2.793 Common Shares for each share of AvalonBay Common Stock if the Merger is completed. The Merger, which is currently expected to be completed in the second half of 2026, is subject to the approval of the issuance of shares of the Company in connection with the Merger by the Company’s shareholders, the approval of the Merger by the AvalonBay stockholders and other customary closing conditions. See Note 11 in the Notes to Consolidated Financial Statements for additional discussion regarding the structural, accounting and conditional commitments associated with the pending Merger.
Results of Operations
2026 Transactions
In conjunction with our business objectives and operating and investing strategies, the following table provides a rollforward of the transactions that occurred during the six months ended June 30, 2026:
Portfolio Rollforward
($ in thousands)
ApartmentUnits
DispositionYield
85,190
Dispositions:
Consolidated Rental Properties
(2
(515
(164,000
(5.3
%)
Completed Developments – Consolidated
Completed Developments – Unconsolidated
Configuration Changes
Dispositions
Developments
See Notes 4 and 5 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate investments and investments in partially owned entities.
40
Comparison of the six months and quarter ended June 30, 2026 to the six months and quarter ended June 30, 2025
The following table presents a reconciliation of diluted earnings per share/unit for the six months and quarter ended June 30, 2026 as compared to the same periods in 2025:
Six Months Ended June 30
Quarter Ended June 30
Diluted earnings per share/unit for period ended 2025
Property NOI
0.04
0.02
(0.03
(0.01
Net gain/loss on property sales
(0.59
(0.20
Non-operating asset gains/losses
0.03
Depreciation expense
(0.02
(0.08
Diluted earnings per share/unit for period ended 2026
The Company’s primary financial measure for evaluating each of its apartment communities is net operating income (“NOI”). NOI represents rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties.
The following tables present reconciliations of net income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (amounts in thousands):
$Change
%Change
(252,742
(54.5
)%
(81,045
(40.8
2,688
3.8
3,363
9.7
(3,281
(8.9
(1,891
(10.2
(3,760
(0.8
5,490
2.3
229,208
(107.9
75,024
(128.7
(11,371
297.6
(10,825
508.5
41,831
466.8
5,199
108.2
12,401
8.4
7,145
9.5
43
1.0
42
2.0
0.5
(7,047
(61.8
(2,678
(53.6
(100.0
7,896
0.8
(183
(0.0
Rental income:
Same store
29,842
13,891
1.9
Non-same store/other
74,620
69,204
5,416
7.8
35,632
33,301
2,331
7.0
Total rental income
35,258
16,222
2.1
15,945
3.4
6,985
45,547
34,130
11,417
33.5
25,083
15,663
9,420
60.1
Total operating expenses
27,362
5.4
16,405
6.6
NOI:
13,897
1.4
6,906
29,073
35,074
(6,001
(17.1
10,549
17,638
(7,089
(40.2
41
Properties that the Company owned and were stabilized for all of both of the six months ended June 30, 2026 and 2025, which represented 78,385 apartment units, drove the Company’s results of operations. Properties are considered “stabilized” when they have achieved 90% Physical Occupancy for three consecutive months.
The following table provides results and statistics related to our Residential same store operations for the six months ended June 30, 2026 and 2025:
June YTD 2026 vs. June YTD 2025
Same Store Residential Results/Statistics by Market
Increase (Decrease) from Prior Year
Markets/Metro Areas
June YTD 26 % of Actual NOI
June YTD 26 Average Rental Rate
June YTD 26 Weighted Average Physical Occupancy %
June YTD 26 Turnover
Revenues
Expenses
AverageRental Rate
PhysicalOccupancy
Turnover
13,438
16.1
3,007
95.5
20.0
4.6
(0.9
(0.2
0.3
3,718
5.2
3,048
96.0
17.1
2.2
4.0
1.7
2.8
(0.4
0.4
2,225
3,327
20.4
1.3
5.1
(0.6
0.7
Subtotal – Southern California
19,381
24.7
3,052
95.7
19.5
1.2
1.5
(0.3
11,241
17.7
3,597
97.7
6.7
9.9
6.0
0.6
(1.4
12,928
14.9
2,893
18.6
4.1
(0.1
(1.1
8,235
14.3
4,954
97.6
16.5
4.2
3.1
5.0
4.3
6,908
10.6
3,748
95.9
19.3
1.6
6.4
(0.5
8,050
9.1
2,733
95.8
22.6
4.9
0.2
(0.7
3,972
2,139
96.9
21.9
(6.1
(10.0
(7.6
(2.6
4,126
1,963
22.8
(1.2
(4.4
(1.6
3,544
1,819
23.7
(1.3
(3.8
(1.9
78,385
100.0
3,177
96.3
3.3
Note: The above table reflects Residential same store results only. Residential operations account for more than 96.0% of total revenues for the six months ended June 30, 2026.
See Note 12 in the Notes to Consolidated Financial Statements for our disclosure of reportable segments.
The comparison discussions provided below detail the changes in results for the six months ended June 30, 2026 as compared to the prior year period.
See the reconciliation table of net income per the consolidated statements of operations to NOI above for the dollar and percentage changes related to the comparison discussions provided below.
Property management expenses 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. The increases during the six months and quarter ended June 30, 2026 as compared to the prior year periods are primarily attributable to increases in legal and professional fees and information technology expenses, partially offset by decreases in training and marketing expenses.
General and administrative expenses, which include corporate operating expenses, decreased during the six months and quarter ended June 30, 2026 as compared to the prior year periods, primarily due to decreases in payroll-related costs, partially offset by increases in legal and professional fees and other public company costs.
Depreciation expense decreased during the six months ended June 30, 2026 as compared to the prior year period, primarily as a result of in-place leases for 2024 acquisitions still being depreciated in 2025 and lower depreciation from properties sold in 2025 and 2026, partially offset by additional depreciation expense on properties acquired in 2025 and development properties placed in service during 2025 and 2026. Depreciation expense increased during the quarter ended June 30, 2026 as compared to the prior year period, primarily as a result of additional depreciation expense on properties acquired in 2025 and development properties placed in service during 2025 and 2026, partially offset by lower depreciation from properties sold in 2025 and 2026.
Net gain on sales of real estate properties decreased during the six months and quarter ended June 30, 2026 as compared to the prior year periods, primarily due to a net loss on sale of two consolidated properties in 2026 as compared to a gain on sale of three consolidated properties in 2025.
Interest and other income increased during the six months and quarter ended June 30, 2026 as compared to the prior year periods, primarily due to a net increase in realized/unrealized gains on various investment securities and interest income on mortgages receivable.
Other expenses increased during the six months and quarter ended June 30, 2026 as compared to the prior year periods, primarily due to increases in litigation accruals (year-to-date period only), advocacy contributions and Merger transaction costs.
Interest expense, including amortization of deferred financing costs, increased during the six months and quarter ended June 30, 2026 as compared to the prior year periods, primarily due to higher overall rates and debt balances, Merger financing costs and lower capitalized interest. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties and Merger financing costs, for the six months ended June 30, 2026 was 3.96% as compared to 3.93% for the prior year period, and for the quarter ended June 30, 2026 was 3.95% as compared to 3.93% for the prior year period. The Company capitalized interest of approximately $4.7 million and $6.7 million during the six months ended June 30, 2026 and 2025, respectively, and $2.1 million and $2.8 million during the quarters ended June 30, 2026 and 2025, respectively.
Loss from investments in unconsolidated entities decreased during the six months and quarter ended June 30, 2026 as compared to the prior year periods, primarily as a result of lower net losses incurred on our unconsolidated development properties that recently stabilized, partially offset by losses incurred on our unconsolidated development properties which recently started lease-up activities.
Liquidity and Capital Resources
With approximately $1.8 billion in readily available liquidity, a strong balance sheet, well-staggered debt maturities, very strong credit metrics and ample access to capital markets, the Company believes it is well positioned to meet its future obligations and take advantage of opportunities. See further discussion below.
Statements of Cash Flows
The following table sets forth our sources and uses of cash flows for the six months ended June 30, 2026 and 2025 (amounts in thousands):
Cash flows provided by (used for):
Operating activities
Investing activities
Financing activities
The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the six months ended June 30, 2026.
Operating Activities
Our operating cash flows are primarily impacted by NOI and its components, such as Average Rental Rates, Physical Occupancy levels and operating expenses related to our properties. Cash provided by operating activities for the six months ended June 30, 2026 as compared to the prior year period decreased by approximately $82.7 million primarily as a result of the NOI and other changes, as well as higher interest payments, discussed above in Results of Operations, the payment of approximately $58.7 million towards the settlement of various litigation proceedings (see Note 11 in the Consolidated Financial Statements for further discussion), the payment of Merger-related costs as well as the timing of certain other expense payments.
Investing Activities
Our investing cash flows are primarily impacted by our transaction activity (acquisitions/dispositions), development spend and capital expenditures. For the six months ended June 30, 2026, key drivers were:
Financing Activities
Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions/dividends to shareholders/unitholders and other Common Share activity. For the six months ended June 30, 2026, key drivers were:
Short-Term Liquidity and Cash Proceeds
The Company generally expects to meet its short-term liquidity requirements, including capital expenditures related to maintaining its existing properties and scheduled unsecured note and mortgage note repayments, through its working capital, net cash provided by operating activities and borrowings under the Company’s revolving credit facility and commercial paper program. Currently, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions.
The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of June 30, 2026 and December 31, 2025 (amounts in thousands):
1,909,127
Credit Facility and Commercial Paper Program
The Company has a $2.5 billion unsecured revolving credit facility maturing December 3, 2030. The Company has the ability to increase available borrowings by an additional $1.0 billion by adding lenders to the facility, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be the Secured Overnight Financing Rate ("SOFR") plus a spread (currently 0.725%), or based on bids received from the lending group,
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and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. See Note 8 in the Notes to Consolidated Financial Statements for additional discussion of the Company’s credit facility.
The Company limits its utilization of the revolving credit facility in order to maintain liquidity to support its $1.5 billion commercial paper program along with certain other obligations. The following table presents the availability on the Company’s unsecured revolving credit facility as of July 24, 2026 (amounts in thousands):
July 24, 2026
(792,000
1,704,536
On May 20, 2026, the Company entered into a commitment letter for a senior unsecured bridge loan facility of up to $2.0 billion to fund potential transaction costs and refinancings of existing debt in connection with its pending Merger with AvalonBay. No amounts were drawn under the bridge loan facility during the six months ended June 30, 2026. See Note 11 in the Notes to Consolidated Financial Statements for additional discussion.
Dividend Policy
The Company declared a dividend/distribution for the first and second quarters of 2026 of $0.7025 per share/unit in each quarter, an annualized increase of 1.4% over the amount paid in 2025. All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees.
Total dividends/distributions paid in July 2026 amounted to $269.5 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended June 30, 2026.
Long-Term Financing and Capital Needs
The Company expects to meet its long-term liquidity requirements, such as lump sum unsecured note and mortgage debt maturities, property acquisitions and financing of development activities, through the issuance of secured and unsecured debt and equity securities (including additional OP Units), proceeds received from the disposition of certain properties and joint ventures, along with cash generated from operations after all distributions. The Company has a significant number of unencumbered properties available to secure additional mortgage borrowings should unsecured capital be unavailable or the cost of alternative sources of capital be too high. The 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 $30.4 billion in investment in real estate on the Company’s balance sheet at June 30, 2026, $27.4 billion or 90.0% was unencumbered. However, there can be no assurances that these sources of capital will be available to the Company in the future on acceptable terms or otherwise. For additional details, see Item 1A, Risk Factors, of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025, and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q.
EQR issues equity and guarantees certain debt of the Operating Partnership from time to time. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.
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The Company’s total debt summary schedule as of June 30, 2026 is as follows:
Debt Summary as of June 30, 2026
DebtBalances
% of Total
Secured
Unsecured
80.7
17.0
72.7
Fixed Rate Debt
7,406,904
89.7
Unsecured – Revolving Credit Facility
Unsecured – Commercial Paper Program
8.0
Floating Rate Debt
854,765
10.3
The Company’s long-term financing and capital needs and sources have not changed materially from the information included in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2025, except as it relates to the potential Merger transaction with AvalonBay as discussed further above.
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Critical Accounting Policies and Estimates
The Company’s and the Operating Partnership’s critical accounting policies and estimates have not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025.
Funds From Operations and Normalized Funds From Operations
The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for the six months and quarters ended June 30, 2026 and 2025:
Preferred/preference distributions
Net income available to Common Shares and Units / Units
Depreciation – Non-real estate additions
(2,023
(1,834
(1,014
(884
Depreciation – Partially Owned Properties
(1,293
(963
(485
Depreciation – Unconsolidated Properties
8,080
8,735
4,748
4,340
Net (gain) loss on sales of unconsolidated entities - operating assets
(138
(174
FFO available to Common Shares and Units / Units (1) (3) (4)
723,372
751,568
382,461
382,633
656
727
Debt extinguishment and preferred share/preference unit redemption (gains) losses
Non-operating asset (gains) losses
(10,960
624
(11,376
186
Other miscellaneous items
60,439
4,971
21,628
3,244
Normalized FFO available to Common Shares and Units / Units (2) (3) (4)
774,461
759,308
393,369
386,790
FFO (1) (3)
724,083
752,279
382,816
382,988
Normalized FFO (2) (3)
775,172
760,019
393,724
387,145
•the impact of any expenses relating to non-operating real estate asset impairment;
•pursuit cost write-offs;
•gains and losses from early debt extinguishment and preferred share/preference unit redemptions;
•gains and losses from non-operating assets; and
•other miscellaneous items.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company’s and the Operating Partnership’s market risk has not changed materially from the amounts and information reported in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, to the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025.
Effective as of June 30, 2026, 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 time periods specified in the SEC’s rules and forms.
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 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Effective as of June 30, 2026, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the Operating Partnership’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 Operating Partnership in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes to the internal control over financial reporting of the Operating Partnership identified in connection with the Operating Partnership’s evaluation referred to above that occurred during the second quarter of 2026 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
PART II. OTHER INFORMATION
As of June 30, 2026, the Company does not believe there is any litigation pending or threatened against it that, either individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company and its financial condition. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.
There have been no material changes to the risk factors that were discussed in Part I, Item 1A of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2025, except for the following:
The Merger is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the Merger could have material adverse effects on the Company.
The completion of the Merger is subject to a number of conditions, including, among others, the approval of the issuance of shares of the Company in connection with the Merger by the Company’s shareholders, the approval of the Merger by the AvalonBay stockholders and the absence of a law or order restraining, enjoining, rendering illegal or otherwise prohibiting the consummation of the Merger, which makes the completion of the Merger and timing thereof uncertain. In addition, the Company and AvalonBay are entitled to terminate the Merger Agreement under certain circumstances.
If the Merger is not completed, the Company’s ongoing business may be materially adversely affected and, without realizing any of the benefits of having completed the Merger, the Company will be subject to a number of risks, including the following:
In addition, if the Merger is not completed, the Company could be subject to litigation related to any failure to complete the Merger or to any enforcement proceeding commenced against the Company to perform its obligations under the Merger Agreement, and whether or not any such litigation has any merit, the cost of defending such litigation may be significant. The materialization of any of these risks could adversely impact the Company’s ongoing business.
Similarly, delays in the completion of the Merger could, among other things, result in additional transaction costs, loss of revenue, or other negative effects associated with uncertainty about completion of the Merger.
The exchange ratio will not be adjusted in the event of any change in either the Company’s or AvalonBay’s stock price. As a result, the Merger Consideration payable to AvalonBay’s stockholders may be subject to change if the Company’s stock price fluctuates.
Upon completion of the Merger, each eligible share of AvalonBay Common Stock will be converted into the right to receive 2.793 Common Shares, plus the right to receive cash in lieu of fractional Common Shares, if any, into which such AvalonBay Common Stock would have been converted. The exchange ratio will not be adjusted for changes in the market price of either Common Shares or AvalonBay Common Stock between the date the Merger Agreement was signed and completion of the Merger. Due to the fixed nature
of the exchange ratio, fluctuations in the price of Common Shares will drive corresponding changes in the value of the Merger Consideration payable to each AvalonBay stockholder, and accordingly, at the time of the AvalonBay special meeting, AvalonBay stockholders will not know or be able to determine the market value of the consideration they will receive upon completion of the Merger. Factors influencing stock prices include:
The price of Common Shares has fluctuated since the date the Merger Agreement was executed, and may continue to fluctuate through the date of each of the Company’s special meeting and the AvalonBay special meeting and the date the Merger is completed. For example, based on the range of closing prices of Common Shares during the period from May 20, 2026, the last trading day before the public announcement of the Merger Agreement, through July 24, 2026, the exchange ratio resulted in an implied value of the Merger Consideration ranging from a high of approximately $195.93 to a low of approximately $179.00 for each share of AvalonBay Common Stock. The actual market value of the Common Shares received by AvalonBay stockholders upon completion of the Merger may result in an implied value of the Merger Consideration outside this range.
The Merger Agreement contains provisions that limit the Company’s ability to pursue alternatives to the Merger, which could discourage a potential competing acquirer of the Company from making an alternative proposal and, in specified circumstances, could require the Company to pay substantial termination fees to AvalonBay.
The Merger Agreement contains certain provisions that restrict the Company’s ability to initiate, solicit, knowingly encourage or, subject to certain exceptions, engage in discussions or negotiations with respect to, or to approve or recommend, any alternative proposal. Further, even if the Board of Trustees withdraws or qualifies its recommendation with respect to the Share Issuance, the Company will still be required to submit the Share Issuance to a vote at its special meeting. In addition, AvalonBay generally has an opportunity to offer to modify the terms of the transactions contemplated by the Merger Agreement in response to any alternative proposal before the Board of Trustees may withdraw or qualify its recommendation with respect to the Share Issuance.
In some circumstances, upon termination of the Merger Agreement in connection with an alternative proposal, the Company may be required to pay a termination fee of approximately $1.005 billion to AvalonBay. This provision could discourage a potential third-party acquirer or merger partner that might have an interest in acquiring all or a significant portion of the Company, or pursuing an alternative acquisition transaction, from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per-share value than the per-share value proposed to be received or realized in the Merger. In particular, a termination fee, if applicable, could result in a potential third-party acquirer or merger partner proposing to pay a lower price to the Company’s shareholders than it might otherwise have proposed to pay absent such a fee.
If the Merger Agreement is terminated in accordance with its terms, and the Company determines to seek another business combination, the Company may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.
The Merger will result in changes to the Board of Trustees that may affect the strategy of the combined company as compared to that of the Company independently.
If the Merger is completed, the composition of the Board of Trustees will change. Immediately following the Merger, the Board of Trustees will consist of fourteen (14) members, seven (7) of whom are current trustees of the Company and seven (7) of whom are current directors of AvalonBay. The composition of the Board of Trustees may affect the business strategy and operating decisions of the combined company upon the completion of the Merger.
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The Company is subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect the Company’s business and operations.
In connection with the pendency of the Merger, some customers, suppliers and other persons with whom the Company has a business relationship have delayed or deferred or may delay or defer certain business decisions or terminate, change, or renegotiate their relationships with the Company as a result of the Merger, which could negatively affect the Company’s revenues, earnings, and cash flows, as well as the market price of the Common Shares, regardless of whether the Merger is completed.
Under the terms of the Merger Agreement, the Company is subject to certain restrictions on the conduct of its business prior to completing the Merger, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness, incur capital expenditures, settle litigation, amend organizational documents, declare dividends, enter new business lines and invest in third parties. Such limitations could adversely affect the Company’s businesses and operations prior to the completion of the Merger.
Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Merger.
Uncertainties associated with the Merger may cause a loss of management personnel and other key employees, and the Company and AvalonBay may have difficulty attracting and motivating management personnel and other key employees, which could adversely affect the future business and operations of the combined company or, in the event the Merger is not completed, the Company.
The Company and AvalonBay are dependent on the experience and industry knowledge of their respective management personnel and other key employees to execute their business plans. The combined company’s success after the completion of the Merger will depend in part upon the ability of the Company and AvalonBay to attract, motivate, and retain key management personnel and other key employees. Prior to completion of the Merger, current and prospective employees of the Company and AvalonBay may experience uncertainty about their roles within the combined company following the completion of the Merger, which may have an adverse effect on the ability of each of the Company and AvalonBay to attract, motivate or retain management personnel and other key employees. In addition, no assurance can be given that the combined company will be able to attract, motivate or retain management personnel and other key employees to the same extent that the Company and AvalonBay have previously been able to attract or retain their own employees. These same risks apply to the ability of the Company to retain its key management personnel and other key employees, in the event the Merger is not completed.
If the Merger is not consummated by the outside date, either the Company or AvalonBay may terminate the Merger Agreement.
Either the Company or AvalonBay may terminate the Merger Agreement if the Merger has not been consummated by the outside date in the Merger Agreement. However, this termination right will not be available to a party if that party materially breached any of its obligations under the Merger Agreement and that breach resulted in the failure to consummate the Merger before such date. Any termination of the Merger Agreement may adversely affect the Company’s business, financial condition, results of operations and growth prospects.
The Company has been and may continue to be the target of securities class action and derivative lawsuits that could result in substantial costs and may delay or prevent the Merger from being completed, whether or not such lawsuits have any merit.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against or otherwise resolving these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on the Company’s or the combined company’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, or from being completed within the expected timeframe, which may adversely affect the Company’s business, financial position and results of operations.
The Company’s shareholders will not have appraisal rights or dissenters’ rights in the Merger.
Appraisal rights (also known as dissenters’ rights) are statutory rights that, if applicable under law, enable shareholders todissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares asdetermined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with theextraordinary transaction.
Under Maryland law, dissenting shareholders may have, subject to satisfying certain procedures, the right to demand and receivepayment of the fair value of their shares of stock in connection with certain transactions (often referred to as appraisal rights),
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including a proposed merger, share exchange or sale of substantially all of the assets of the corporation. Under Maryland Real EstateInvestment Trust Law and the Company’s declaration of trust, the Company’s shareholders are not entitled to appraisal or dissenters’rights in connection with the Merger, the Share Issuance or any other transactions contemplated by the Merger Agreement.
Completion of the Merger may trigger change in control or other provisions in certain agreements to which Equity Residential, AvalonBay or their respective subsidiaries are a party, which may have an adverse impact on the combined company’s business and results of operations.
The completion of the Merger may trigger change in control or other provisions in certain agreements to which Equity Residential, AvalonBay or their respective subsidiaries are a party. If Equity Residential and AvalonBay are unable to obtain certain consents or waivers from the applicable counterparties, the counterparties may exercise their rights and remedies under the applicable agreements, potentially resulting in defaults, accelerations of indebtedness, termination of the applicable agreements, or claims for monetary damages. Even if Equity Residential and AvalonBay are able to negotiate the required consents or waivers, the counterparties may require a fee for such consents or waivers or seek to renegotiate the agreements on terms less favorable to Equity Residential, AvalonBay or the combined company. Any of the foregoing or similar developments may have an adverse impact on the combined company’s business, financial condition and results of operations.
The combined company may be unable to successfully integrate the businesses of the Company and AvalonBay and realize the anticipated benefits of the Merger.
The success of the Merger will depend, in part, on the combined company’s ability to successfully combine the businesses of the Company and AvalonBay, which currently operate as independent public companies, and realize the anticipated benefits, including synergies, cost savings, innovation, operational efficiencies and reduced cost of capital, from the combination. If the combined company is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully, or at all, or may take longer to realize than expected and the value of the Common Shares may be harmed. Additionally, as a result of the Merger, rating agencies may take negative actions against the combined company’s credit ratings, which may increase the combined company’s financing costs, including in connection with any financing of the Merger.
The Merger involves the integration of the Company’s and AvalonBay’s businesses, which is a complex, costly, and time-consuming process. Neither the Company nor AvalonBay has previously completed a transaction comparable in size or scope to the Merger. The integration of the two companies may result in material challenges, including, without limitation:
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Many of these factors will be outside of the combined company’s control and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially affect the combined company’s financial position, results of operations and cash flows.
The Company and AvalonBay have operated, and until completion of the Merger will continue to operate, independently. The Company and AvalonBay have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the Merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. In particular, the integration of two large multifamily REIT platforms—each with its own property management systems, technology platforms, employee benefit plans, and corporate cultures—presents significant operational challenges. Integration costs may exceed current estimates, and the combined company may incur significant one-time charges in connection with the integration.
The Company’s shareholders will have a reduced ownership and voting interest after the Merger and will exercise less influence over the policies of the combined company than they now have on the policies of the Company.
The Company’s shareholders presently have the right to vote in the election of the Board of Trustees and on other matters affecting the Company. Immediately after the Merger is completed, it is expected that the Company’s legacy shareholders will own approximately 49% of the combined company’s common shares outstanding and AvalonBay’s legacy stockholders will own approximately 51% of the combined company’s common shares outstanding.
As a result, the Company’s current shareholders will have less influence on the policies of the combined company than they now have on the policies of the Company as an individual company.
The future results of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following the completion of the Merger.
Following the completion of the Merger, the size of the combined company’s business will be significantly larger than the current size of either the Company’s or AvalonBay’s respective businesses. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement operational, managerial, financial and strategic initiatives that address not only the integration of two independent stand-alone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, synergies, cost savings and other benefits currently anticipated from the Merger.
The combined company is expected to incur substantial expenses related to the completion of the Merger and the integration of the Company and AvalonBay.
The combined company is expected to incur substantial expenses in connection with the completion of the Merger and the integration of the Company and AvalonBay. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits. The substantial majority of these costs will be non-recurring expenses related to the Merger (including any financing of the Merger), facilities and systems consolidation costs. The combined company may incur additional costs to retain employees and/or maintain employee morale and to attract, motivate or retain management personnel and other key employees. The Company and AvalonBay will also incur transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs. Additionally, as a result of the Merger, rating agencies may take negative actions with regard to the combined company’s credit ratings, which may increase the combined company’s financing costs, including in connection with any financing of the Merger. These incremental transaction and Merger-related costs may exceed the savings the combined company expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term, and in the event there are material unanticipated costs.
In connection with the Merger, the combined company may refinance a significant amount of indebtedness and cannot guarantee that it will be able to obtain the necessary funds on favorable terms or at all.
In connection with the Merger, the combined company may seek to refinance some or all of the indebtedness of each of the Company and AvalonBay or, alternatively, seek any waivers or amendments that may be necessary or advisable to permit certain indebtedness to remain outstanding following the Merger. The combined company’s ability to obtain such refinancing, waivers or amendments will depend on, among other factors, prevailing market conditions and other factors beyond the control of the combined company. The Company cannot assure you that the combined company will be able to obtain financing on terms acceptable to the combined company or at all, and any such failure could materially adversely affect the operations and financial conditions of the
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combined company. If the combined company is not able to obtain such refinancing, waivers or amendments, it may be required to repay some or all of such indebtedness upon consummation of the Merger. Under such circumstances, the combined company may not have sufficient resources to repay such indebtedness. Completion of the Merger is not conditioned on completing such financing transactions.
The combined company will have significantly greater indebtedness than the Company on a standalone basis, which may adversely affect the combined company’s financial flexibility and increase its exposure to interest rate risk.
The significantly increased level of indebtedness of the combined company following the closing of the Merger may limit the combined company’s financial flexibility, increase its exposure to interest rate fluctuations, and require a greater portion of the combined company’s cash flows to be dedicated to debt service. A significant portion of the combined company’s indebtedness may bear interest at variable rates, and increases in interest rates could materially increase the combined company’s interest expense and adversely affect its financial condition and results of operations.
Following the Merger, the combined company’s indebtedness, under certain circumstances, contains restrictions and limitations that could significantly impact the combined company’s ability to operate its business and increase its borrowing costs.
Following the Merger, the combined company’s consolidated indebtedness may have the effect of, among other things, increasing borrowing costs. In addition, the amount of cash required to service the indebtedness levels will be greater than the amount of cash flows required to service the indebtedness of Equity Residential and AvalonBay individually prior to completion of the Merger. The level of indebtedness of the combined company following the Merger could also reduce or limit dividend payments, share repurchases, and other activities and may create competitive disadvantages relative to other companies with lower debt levels. The combined company may be required to raise additional financing for working capital, capital expenditures, acquisitions, or other general corporate purposes. Following the Merger, the combined company’s ability to arrange additional financing or refinancing will depend on, among other factors, its financial condition and performance, as well as prevailing market conditions, the terms of third-party debt financing incurred in connection with the consummation of the Merger (if any), and other factors beyond its control. There can be no assurance that the combined company will be able to obtain additional financing or arrange refinancing on terms acceptable to it or at all, and any such failure could materially adversely affect its operations and financial condition.
Additionally, the combined company expects that the agreements that will govern the terms of its indebtedness will contain a number of restrictive covenants (including, without limitation, financial maintenance covenants) that impose significant operating and financial restrictions on the combined company and may limit its ability to engage in acts that may be in its long-term best interest. Moreover, the combined company’s ability to satisfy any financial maintenance covenants may be affected by events beyond its control and, as a result, it cannot provide assurance that it will be able to satisfy any such covenants.
Following the Merger, a breach of the covenants under the agreements that will govern the terms of any of the combined company’s indebtedness could result in a default or an event of default under the applicable indebtedness agreement. Such an event of default or a default that matures into an event of default may allow the applicable creditors to foreclose on any collateral for such debt, accelerate the related debt, and/or terminate any related commitments to extend further credit and may result in a default or an event of default under or the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event debtholders accelerate the repayment of the combined company’s indebtedness, the combined company may not have sufficient resources to repay such indebtedness.
Following the Merger, the combined company cannot assure you that it will be able to pay dividends at or above the rate currently paid by the Company or AvalonBay.
Following the Merger, the combined company is expected to pay an initial annualized dividend equivalent to the Company’s existing dividend per share, which is higher than AvalonBay’s current dividend yield per share. However, there can be no guarantee that shareholders of the combined company will receive dividends at the same rate, or any rate, that they received as shareholders of the Company or stockholders of AvalonBay prior to the Merger. Dividend payments are subject to the discretion of the Board of Trustees, which reserves the right to change the combined company’s dividend policy at any time and for any reason, including as a result of the other risk factors discussed in this section.
The combined company may incur adverse tax consequences if the Company or AvalonBay has failed or fails to qualify as a REIT.
Each of the Company and AvalonBay has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and intends to continue to do so through the time of the Merger. The combined company intends to continue operating in such a manner following the Merger. Neither the Company nor AvalonBay has requested or plans to request a ruling from the U.S. Internal Revenue Service (the “IRS”) that it qualifies
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as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within the control of the Company or AvalonBay may affect each company’s ability to qualify as a REIT. In order to qualify as a REIT, each of the Company and AvalonBay must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.
The closing of the Merger is conditioned on receipt by the Company of an opinion from Goodwin Procter LLP (or other nationally recognized tax counsel reasonably acceptable to the Company), dated as of the closing date of the Merger, substantially in the form attached to the Merger Agreement, to the effect that, beginning with its taxable year ended December 31, 1994 and through its taxable year ending immediately prior to the Effective Time, AvalonBay has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and receipt by AvalonBay of an opinion from DLA Piper LLP (US) (or other nationally recognized tax counsel as may be reasonably acceptable to AvalonBay), dated as of the closing date of the Merger, substantially in the form attached to the Merger Agreement, to the effect that, beginning with its taxable year ended December 31, 1992, the Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and the Company’s proposed method of organization and operation will enable it to continue to satisfy the requirements for qualification and taxation as a REIT under the Code for its taxable year which includes the closing date of the Merger and thereafter. The foregoing REIT opinions, however, will be based on the factual representations provided by the Company and AvalonBay to counsel and limited by the exceptions, assumptions and qualifications set forth therein, and if any such representations are or become inaccurate or incomplete, such opinions may be invalid and the conclusions reached therein could be jeopardized. The foregoing REIT opinions are not a guarantee that the Company or AvalonBay, in fact, has qualified, or, in the case of the combined company, will continue to qualify, as a REIT, nor are such opinions binding on the IRS and there can be no assurance that the IRS will not take a contrary position or that such position would not be sustained.
If, notwithstanding the opinions described above, the Company (or, following the Merger, the combined company) loses its REIT status, or is determined to have failed to qualify as a REIT in a prior year, it will face serious tax consequences that would substantially reduce the funds available for distribution to its shareholders, because:
Even if the Company (or, following the Merger, the combined company) retains its REIT status, if AvalonBay is determined to have lost its REIT status for a taxable year ending on or before the Merger, AvalonBay would be subject to adverse tax consequences similar to those described above. This could substantially reduce the combined company’s funds available for distributions to shareholders, because, assuming that the combined company otherwise maintains its REIT qualification:
If there is an adjustment to AvalonBay’s taxable income or dividends paid deductions, the combined company could elect to use the deficiency dividend procedure in order to maintain AvalonBay’s REIT status. That deficiency dividend procedure could require the
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combined company to make significant distributions to its shareholders and to pay significant interest to the IRS.
As a result of all these factors, the Company’s or AvalonBay’s (or, following the Merger, the combined company’s) failure to qualify as a REIT could impair the combined company’s ability to expand its business and raise capital, and would materially adversely affect the value of its common shares.
Unregistered Common Shares Issued in the Quarter Ended June 30, 2026 (Equity Residential)
During the quarter ended June 30, 2026, EQR issued 83,116 Common Shares in exchange for 83,116 OP Units held by various limited partners of ERPOP. OP Units are generally exchangeable into Common Shares on a one-for-one basis or, at the option of ERPOP, the cash equivalent thereof, at any time one year after the date of issuance. These shares were either registered under the Securities Act of 1933, as amended (the “Securities Act”), or issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act 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 the sale and information obtained by EQR from the limited partners in connection with these transactions, EQR believes it may rely on these exemptions.
None.
Not applicable.
During the quarter ended June 30, 2026, no trustee or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits – See the Exhibit Index.
EXHIBIT INDEX
The exhibits listed below are filed as part of this report. References to exhibits or other filings under the caption “Location” indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. The Commission file numbers for our Exchange Act filings referenced below are 1-12252 (Equity Residential) and 0-24920 (ERP Operating Limited Partnership).
Exhibit
Location
Agreement and Plan of Merger, dated as of May 20, 2026, by and among AvalonBay Communities, Inc., Equity Residential, ERP Operating Limited Partnership and Canopy Merger Sub LLC.*
Included as Exhibit 2.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated May 20, 2026, filed on May 21, 2026.
Amendment to Ninth Amended and Restated Bylaws of Equity Residential, dated May 20, 2026.
Included as Exhibit 3.1 to Equity Residential's and ERP Operating Limited Partnership's Form 8-K dated May 20, 2026, filed on May 21, 2026.
10.1
Amended and Restated Change in Control Agreement by and between Mark J. Parrell and Equity Residential, dated as of May 20, 2026.
Attached herein.
10.2
Offer letter by and between Benjamin W. Schall and Equity Residential, dated as of May 20, 2026.
Offer letter (compensation term sheet) for Benjamin W. Schall.
10.4
Offer letter (compensation term sheet) for Michael Manelis.
10.5
Offer letter (compensation term sheet) for Kevin P. O’Shea.
Offer letter (compensation term sheet) for Scott Fenster.
31.1
Equity Residential – Certification of Mark J. Parrell, Chief Executive Officer.
31.2
Equity Residential – Certification of Bret D. McLeod, Chief Financial Officer.
31.3
ERP Operating Limited Partnership – Certification of Mark J. Parrell, Chief Executive Officer of Registrant’s General Partner.
31.4
ERP Operating Limited Partnership – Certification of Bret D. McLeod, Chief Financial Officer of Registrant’s General Partner.
32.1
Equity Residential – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Mark J. Parrell, Chief Executive Officer of the Company.
32.2
Equity Residential – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Bret D. McLeod, Chief Financial Officer of the Company.
32.3
ERP Operating Limited Partnership – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Mark J. Parrell, Chief Executive Officer of Registrant’s General Partner.
32.4
ERP Operating Limited Partnership – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Bret D. McLeod, Chief Financial Officer of Registrant’s General Partner.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
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*Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Equity Residential agrees to furnish supplementally a copy of such schedules and exhibits, or any section thereof, to the SEC upon request; provided, however, that Equity Residential may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, for any schedules so furnished.
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Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date:
July 30, 2026
By:
/s/ Bret D. McLeod
Bret D. McLeod
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Ian S. Kaufman
Ian S. Kaufman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
ERP OPERATING LIMITED PARTNERSHIP BY: EQUITY RESIDENTIAL
ITS GENERAL PARTNER