Item 1. Business

General

Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. ERP Operating Limited Partnership (“ERPOP”), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 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.

EQR is the general partner of, and as of December 31, 2015 owned an approximate 96.2% 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 public equity from time to time 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 December 31, 2015, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 394 properties located in 12 states and the District of Columbia consisting of 109,652 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):

		Properties			Apartment Units
Wholly Owned Properties		367			98,608
Master-Leased Properties – Consolidated		3			853
Partially Owned Properties – Consolidated		19			3,771
Partially Owned Properties – Unconsolidated		3			1,281
Military Housing		2			5,139
		394			109,652

The Company's corporate headquarters is located in Chicago, Illinois and as of December 31, 2015, the Company also operated property management offices in each of its core markets and two of its non-core markets. As of December 31, 2015, the Company had approximately 3,500 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.

Certain capitalized terms used herein are defined in the Notes to Consolidated Financial Statements. See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.

Available Information

You may access our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to any of those reports we file with the SEC free of charge at our website, www.equityresidential.com. These reports are made available at our website as soon as reasonably practicable after we file them with 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.

Business Objectives and Operating and Investing Strategies

The Company invests in high quality apartment communities located in strategically targeted markets with the goal of maximizing our risk adjusted total return (operating income plus capital appreciation) on invested capital.

We seek to maximize the income and capital appreciation of our properties by investing in markets that are characterized by conditions favorable to multifamily property operations and appreciation. We are focused on the six core coastal, high barrier to entry markets of Boston, New York, Washington D.C., Southern California (including Los Angeles, Orange County and San Diego), San Francisco and Seattle. These markets generally feature one or more of the following characteristics that allow us to increase rents:

▪	High barriers to entry where, because of land scarcity or government regulation, it is difficult or costly to build new apartment properties, creating limits on new supply;

▪	High home ownership costs;

▪	Strong economic growth leading to job growth and household formation, which in turn leads to high demand for our apartments;

▪	Urban core locations with an attractive quality of life leading to high resident demand and retention; and

▪	Favorable demographics contributing to a larger pool of target residents with a high propensity to rent apartments.

Our operating focus is on balancing occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. Revenue is maximized by attracting qualified prospects to our properties, cost-effectively converting these prospects into new residents and keeping our residents satisfied so they will renew their leases upon expiration. While we believe that it is our high-quality, well-located assets that bring our customers to us, it is the customer service and superior value provided by our on-site personnel that keeps them renting with us and recommending us to their friends.

We use technology to engage our customers in the way that they want to be engaged. Many of our residents utilize our web-based resident portal which allows them to sign and renew their leases, review their accounts and make payments, provide feedback and make service requests on-line.

Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt, sales of properties and joint venture agreements. In addition, the Company may acquire properties in transactions that include the issuance of partnership interests in the Operating Partnership (“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. The Company may acquire land parcels to hold and/or sell based on market opportunities as well as options to buy more land in the future. The Company may also seek to acquire properties by purchasing defaulted or distressed debt that encumbers desirable properties in the hope of obtaining title to property through foreclosure or deed-in-lieu of foreclosure proceedings.

Over the past several years, the Company has done an extensive repositioning of its portfolio from low barrier to entry/non-core markets to high barrier to entry/core markets. Since 2005, the Company has sold nearly 168,000 apartment units primarily in its non-core markets for an aggregate sales price of approximately $16.6 billion, acquired over 68,000 apartment units primarily in its core markets for approximately $19.8 billion and began approximately $5.7 billion of development projects primarily in its core markets. We are currently seeking to acquire and develop assets in the following six core coastal metropolitan areas: Boston, New York, Washington D.C., Southern California, San Francisco and Seattle. The sale of the Starwood portfolio described below combined with the other 2016 dispositions will complete the Company's planned exit from the South Florida, Denver and Phoenix markets as well as certain New England submarkets. See further discussion below regarding the Company's 2016 disposition activity.

As part of its strategy, the Company purchases completed and fully occupied apartment properties, partially completed or partially occupied properties and takes options on land or acquires land on which apartment properties can be constructed. We intend to hold a diversified portfolio of assets across our target markets. As of December 31, 2015, no single market/metropolitan area accounted for more than 17.6% of our NOI, though NOI concentration has increased in 2016 following the sale of the Starwood portfolio.

We endeavor to attract and retain the best employees by providing them with the education, resources and opportunities to succeed. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and residents as well as extensively train our customer service specialists in maintaining our properties and improvements, equipment and appliances. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees' engagement by surveying them annually and have consistently received high engagement scores.

We have a commitment to sustainability and consider the environmental impacts of our business activities. Sustainability and social responsibility are key drivers of our focus on creating the best apartment communities for residents to live, work and play. We have a dedicated in-house team that initiates and applies sustainable practices in all aspects of our business, including investment activities, development, property operations and property management activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been primarily concentrated in pedestrian-friendly urban locations near public transportation. When developing and renovating our

properties, we strive to reduce energy and water usage by investing in energy saving technology while positively impacting the experience of our residents and the value of our assets. We continue to implement a combination of irrigation, lighting, HVAC and renewable energy improvements at our properties that will reduce energy and water consumption. The Company was named the 2015 Global Residential Sector Leader by the Global Real Estate Sustainability Benchmark ("GRESB") survey, a globally recognized analysis of the sustainability indicators of more than 700 real estate portfolios worldwide. For additional information regarding our sustainability efforts, see our December 2015 Corporate Social Responsibility and Sustainability Report at our website, www.equityresidential.com. For 2016, we have added an express company-wide goal regarding enhanced sustainability efforts. Employees, including our executives, will have their performance against this goal evaluated as part of our annual performance review process.

Competition

All of the Company's properties are located in developed areas that include other multifamily properties. The number of competitive multifamily properties in a particular area could have a material effect on the Company's ability to lease apartment units at its properties and on the rents charged. The Company may be competing with other entities that have greater resources than the Company and whose managers have more experience than the Company's managers. In addition, other forms of rental properties and single family housing provide housing alternatives to potential residents of multifamily properties. See Item 1A. Risk Factors for additional information with respect to competition.

Starwood Transaction

Following the approval by the Company's Board of Trustees, the Company executed an agreement with controlled affiliates of Starwood Capital Group ("Starwood") on October 23, 2015 to sell a portfolio of 72 operating properties consisting of 23,262 apartment units located in five markets across the United States for $5.365 billion (the "Starwood Transaction"). On January 26 and 27, 2016, the Company closed on the sale of all of the portfolio described above. The sale of the Starwood portfolio, combined with other planned 2016 dispositions, will result in the Company's planned exit from the South Florida, Denver and Phoenix markets as well as certain New England submarkets. The Company intends to use the majority of the proceeds from the Starwood Transaction and other planned 2016 dispositions to pay two special dividends to its shareholders and holders of OP Units of between $10.00 and $12.00 per share/unit in the aggregate. On February 22, 2016, the Board of Trustees declared a special dividend of $8.00 per share/unit to be paid on March 10, 2016 to shareholders/unitholders of record as of March 3, 2016. The Company expects to pay an additional special dividend of approximately $2.00 to $4.00 per share/unit later in 2016. All future dividends remain subject to the discretion of the Company's Board of Trustees. The Company used and expects to use the majority of the remaining proceeds to reduce aggregate indebtedness in order to make the transaction leverage neutral. The Company has retired approximately $1.7 billion in secured and unsecured debt prior to scheduled maturity in early 2016 and expects to retire an additional $271.2 million at par at maturity in March 2016 using cash from these sales. See Notes 4, 11 and 18 in the Notes to Consolidated Financial Statements for further discussion.

Archstone Transaction

On February 27, 2013, the Company, AvalonBay Communities, Inc. (“AVB”) and certain of their respective subsidiaries completed their previously announced acquisition (the "Archstone Acquisition" or the "Archstone Transaction") from Archstone Enterprise LP ("Archstone" or "Enterprise") (which subsequently changed its name to Jupiter Enterprise LP), an affiliate of Lehman Brothers Holdings Inc. (“Lehman”) and its affiliates, of all of the assets of Enterprise (including interests in various entities affiliated with Enterprise), constituting a portfolio of apartment properties and other assets (the “Archstone Portfolio”). As a result of the Archstone Acquisition, the Company owns assets representing approximately 60% of the Archstone Portfolio. The consideration paid by the Company in connection with the Archstone Acquisition consisted of cash of approximately $4.0 billion (inclusive of $2.0 billion of Archstone secured mortgage principal paid off in conjunction with the closing), 34,468,085 Common Shares (which shares had a total value of $1.9 billion based on the February 27, 2013 closing price of EQR common shares of $55.99 per share) issued to the seller and the assumption of approximately $3.1 billion of mortgage debt (inclusive of a net mark-to-market premium of $127.9 million) and approximately 60% of all of the other assets and liabilities related to the Archstone Portfolio. See Note 4 in the Notes to Consolidated Financial Statements for further discussion.

Debt and Equity Activity

EQR issues public equity from time to time and guarantees certain debt of ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. In addition, ERPOP issues OP Units and preference interests ("Preference Units") from time to time.

Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the Company’s and the Operating Partnership's Capital Structure charts as of December 31, 2015.

Major Debt and Equity Activities for the Years Ended December 31, 2015, 2014 and 2013

During 2015:

▪	The Company repaid $368.5 million of mortgage debt.

▪	The Company repaid $300.0 million of 6.584% unsecured notes at maturity.

▪

The Company issued $450.0 million of ten-year 3.375% fixed rate public notes, receiving net proceeds of $447.5 million before underwriting fees, hedge termination costs and other expenses, at an all-in effective interest rate of 3.81% after termination of various forward starting swaps in conjunction with the issuance (see Note 9 in the Notes to Consolidated Financial Statements for further discussion).

▪	The Company issued $300.0 million of thirty-year 4.50% fixed rate public notes, receiving net proceeds of $298.9 million before underwriting fees and other expenses, at an all-in effective interest rate of 4.55%.

▪	The Company issued 1,456,363 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $59.5 million.

▪	The Company issued 68,462 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $4.4 million.

▪	The Company repurchased and retired 254,400 of its Series K Cumulative Redeemable Preferred Shares with a par value of $12.7 million for total cash consideration of approximately $16.3 million inclusive of premiums and accrued dividends through the redemption date.

During 2014:

▪	The Company assumed $28.9 million of mortgage debt on one property.

▪	The Company repaid $100.7 million of mortgage debt.

▪	The Company repaid $500.0 million of 5.250% unsecured notes at maturity.

▪	The Company repaid its $750.0 million unsecured term loan facility in conjunction with the note issuances discussed below.

▪	The Company issued $450.0 million of five-year 2.375% fixed rate public notes, receiving net proceeds of $449.6 million before underwriting fees and other expenses, at an all-in effective interest rate of 2.52% and swapped the notes to a floating interest rate in conjunction with the issuance (see Note 9 in the Notes to Consolidated Financial Statements for further discussion).

▪

The Company issued $750.0 million of thirty-year 4.50% fixed rate public notes, receiving net proceeds of $744.7 million before underwriting fees, hedge termination costs and other expenses, at an all-in effective interest rate of 4.57% after termination of various forward starting swaps in conjunction with the issuance (see Note 9 in the Notes to Consolidated Financial Statements for further discussion).

▪	The Company issued 2,086,380 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $82.6 million.

▪	The Company issued 68,807 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $3.4 million.

▪	The Company repurchased and retired 31,240 of its Common Shares at a price of $56.87 per share for total consideration of $1.8 million (all related to the vesting of employee restricted shares). See Note 3 in the Notes to Consolidated Financial Statements for further discussion.

During 2013:

▪	The Company assumed as part of the Archstone Transaction, $2.2 billion of mortgage debt held in two Fannie Mae loan pools, consisting of $1.2 billion collateralized by 16 properties with an interest rate of 6.256% and a maturity date of November 1, 2017 ("Pool 3") and $963.5 million collateralized by 15 properties with an interest rate of 5.883% and a maturity date of November 1, 2014 ("Pool 4").

▪	The Company paid down $825.0 million of Pool 3 mortgage debt and repaid $963.5 million of Pool 4 mortgage debt.

▪	The Company assumed as part of the Archstone Transaction, $346.6 million of tax-exempt bonds on four properties with interest rates ranging from SIFMA plus 0.860% to SIFMA plus 1.402% and maturity dates through November 15, 2036.

▪	The Company assumed as part of the Archstone Transaction, $339.0 million of other mortgage debt on three properties with fixed interest rates ranging from 0.100% to 5.240% and maturity dates through May 1, 2061.

▪	The Company assumed as part of the Archstone Transaction, $34.1 million of other mortgage debt on one property with a variable rate of LIBOR plus 1.75% and a maturity date of September 1, 2014.

▪	The Company obtained an $800.0 million secured loan from a large insurance company which matures on November 10, 2023, is interest only and carries a fixed interest rate of 4.21% and was used in part to pay down Pool 3.

▪	The Company repaid $400.0 million of 5.200% unsecured notes at maturity.

▪	The Company issued $500.0 million of ten-year 3.00% fixed rate public notes, receiving net proceeds of $495.6 million before underwriting fees and other expenses, at an all-in effective interest rate of 3.998%.

▪

The Company entered into a senior unsecured $750.0 million delayed draw term loan facility which was fully drawn on February 27, 2013 in connection with the Archstone Acquisition. The maturity date of January 11, 2015 was subject to a one-year extension option exercisable by the Company. The interest rate on advances under the term loan facility generally was LIBOR plus a spread (1.20%), which was dependent on the credit rating of the Company's long-term debt. The facility was paid off in the second quarter of 2014.

▪	The Company issued 34,468,085 Common Shares to an affiliate of Lehman having a value of $1.9 billion (based on the February 27, 2013 closing price of EQR Common Shares of $55.99 per share) as partial consideration for the portion of the Archstone Portfolio acquired by the Company. Lehman has since sold all of these Common Shares.

▪	The Company issued 586,017 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $17.3 million.

▪	The Company issued 73,468 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $3.4 million.

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 on July 30, 2013 and expires on July 30, 2016. 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).

Credit Facilities

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. EQR guarantees the Operating Partnership’s revolving credit facility up to the maximum amount and for the full term of the facility.

On January 11, 2013, the Company replaced its existing $1.75 billion facility with a $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The Company has the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.95%) and the Company pays an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt.

On February 2, 2015 the Company entered into an unsecured commercial paper note program in the United States. The Company may borrow up to a maximum of $500.0 million under this program 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. As of February 19, 2016, no amounts were outstanding under this program. As of December 31, 2015, there was a balance of $387.3 million on the commercial paper program ($387.5 million in principal outstanding net of an unamortized discount of $0.2 million). The notes bear interest at various floating rates with a weighted average of 0.56% for the year ended December 31, 2015 and a weighted average maturity of 19 days as of December 31, 2015.

As of February 19, 2016, no amounts were outstanding and the amount available on the revolving credit facility was $2.44 billion (net of $64.5 million which was restricted/dedicated to support letters of credit). As of December 31, 2015, the amount available on the revolving credit facility was $2.07 billion (net of $45.1 million which was restricted/dedicated to support letters of credit and net of $387.5 million outstanding on the commercial paper program). During the year ended December 31, 2015, the weighted average interest rate on the revolving credit facility was 1.07%. As of December 31, 2014, the amount available on the revolving credit facility was $2.12 billion (net of $43.8 million which was restricted/dedicated to support letters of credit and net of the $333.0 million outstanding on the revolving credit facility). During the year ended December 31, 2014, the weighted average interest rate on the revolving credit facility was 0.95%.

Environmental Considerations

See Item 1A. Risk Factors for information concerning the potential effects of environmental regulations on our operations.