ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion and analysis of the results of operations and financial condition of the Operating Partnership should be read in connection with the Consolidated Financial Statements and Notes thereto. Due to the Operating Partnership's ability to control the Management Partnerships, the Financing Partnerships and the LLCs, and Merry Land DownREIT I LP, each entity has been consolidated with the Operating Partnership for financial reporting purposes. Capitalized terms used herein and not defined, are as defined in the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 1998.

Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believes", "expects" and "anticipates" and other similar expressions which are predictions of or indicate future events and trends and which do not relate solely to historical matters, identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results, performance, or achievements of the Operating Partnership to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such differences include, but are not limited to, the following:

- the alternative sources of capital to the Operating Partnership are too high;
- occupancy levels and market rents may be adversely affected by local economic and market conditions, which are beyond the Operating Partnership's control; and
- additional factors as discussed in Part I of the Annual Report as filed on Form 10-K.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Operating Partnership undertakes no obligation to publicly release any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

The acquired properties are presented in the Consolidated Financial Statements of the Operating Partnership from the date of each acquisition or the closing dates of the Mergers. During the year ended 1998, the Operating Partnership acquired 207 properties containing 55,143 units and four properties under development representing 1,378 units (the "1998 Acquired Properties"). In addition, during the quarter ended March 31, 1999, the Operating Partnership acquired seven properties containing 1,864 units (the "1999 Acquired Properties").

The Operating Partnership also disposed of twenty properties containing 4,719 units during 1998 (the "1998 Disposed Properties"); and seven properties containing 1,741 units during the quarter ended March 31, 1999 (the "1999 Disposed Properties").

ERP OPERATING LIMITED PARTNERSHIP
PART I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The Operating Partnership's overall results of operations for the quarters ended March 31, 1999 and 1998 have been significantly impacted by the Operating Partnership's acquisition and disposition activity. The significant changes in rental revenues, property and maintenance expenses, real estate taxes and insurance, depreciation expense, property management and interest expense can all primarily be attributed to the acquisition of the 1998 Acquired Properties and the 1999 Acquired Properties. The impact of the 1998 Acquired Properties and the 1999 Acquired Properties is discussed in greater detail in the following paragraphs.

Properties that the Operating Partnership owned for all of the quarter ended March 31, 1999 and March 31, 1998 (the "First Quarter 1999 Same Store Properties"), which represented 127,514 units, also impacted the Operating Partnership's results of operations and are discussed as well in the following paragraphs.

COMPARISON OF QUARTER ENDED MARCH 31, 1999 TO QUARTER ENDED MARCH 31,
1998

For the quarter ended March 31, 1999, income before gain on disposition of properties increased by $19.9 million when compared to the quarter ended March 31, 1998. This increase was primarily due to the acquisition of the 1998 Acquired Properties and the 1999 Acquired Properties as well as increases in rental revenues net of increases in property and maintenance expenses, real estate taxes and insurance, property management expenses, depreciation expense, interest expense and general and administrative expenses.

In regard to the First Quarter 1999 Same Store Properties, rental revenues increased by approximately $10.9 million or 4.2% primarily as a result of higher rental rates charged to new tenants and tenant renewals, a 0.26% increase in average economic occupancy levels and a 0.65% increase in income from billing tenants for their share of utility costs. Overall, property operating expenses which include property and maintenance, real estate taxes and insurance and an allocation of property management expenses increased approximately $1.3 million or 1.3%. This increase was primarily the result of an increase in real estate taxes on certain properties, higher on-site compensation costs, leasing and advertising costs and utility charges.

Property management represents expenses associated with the self-management of the Operating Partnership's Properties. These expenses increased by approximately $2.6 million primarily due to the continued expansion of the Operating Partnership's property management business.

Fee and asset management revenues and fee and asset management expenses are associated with the management of properties not owned by the Operating Partnership that are managed for affiliates. These revenues and expenses decreased due to the Operating Partnership acquiring certain of these properties that were formerly only fee-managed.

ERP OPERATING LIMITED PARTNERSHIP
PART I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Interest expense, including amortization of deferred financing costs, increased by approximately $29.2 million. This increase was primarily the result of an increase in the Operating Partnership's average indebtedness outstanding, which increased by $1.8 billion. However, the Operating Partnership's effective interest costs decreased from 7.27% for the quarter ended March 31, 1998 to 7.09% for the quarter ended March 31, 1999.

General and administrative expenses, which include corporate operating expenses, increased approximately $1.0 million between the periods under comparison. This increase was primarily due to the addition of corporate personnel in the Operating Partnership's Human Resources, Accounting, Legal and Information Systems groups as well as higher compensation costs, shareholder reporting costs and professional fees. However, by gaining certain economies of scale with a much larger operation, these expenses as a percentage of total revenues were 1.41% for the quarter ended March 31, 1999 compared to 1.70% of total revenues for the quarter ended March 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES

As of January 1, 1999, the Operating Partnership had approximately $4 million of cash and cash equivalents and $330 million available on its lines of credit, of which $12 million was restricted. After taking into effect the various transactions discussed in the following paragraphs, the Operating Partnership's cash and cash equivalents balance at March 31, 1999 was approximately $10.7 million and the amount available on the Operating Partnership's lines of credit was $455 million, of which $12 million was restricted. The following discussion also explains the changes in net cash provided by operating activities, net cash (used for) investing activities and net cash (used for) financing activities, all of which are presented in the Operating Partnership's Statements of Cash Flows.

With respect to Property acquisitions during the quarter, the Operating Partnership purchased seven Properties containing 1,864 units for a total purchase price of approximately $124.5 million, including the assumption of mortgage indebtedness of approximately $16.9 million and the issuance of OP Units with a value of $8.9 million. These acquisitions were primarily funded from the disposition of certain properties and working capital.

Subsequent to March 31, 1999 and through May 12, 1999, the Operating Partnership acquired four additional properties containing 890 units for a total purchase price of approximately $53.2 million and the assumption of mortgage indebtedness of approximately $22.3 million. These acquisitions were primarily funded with proceeds from the disposition of certain properties, the lines of credit and working capital.

During the quarter ended March 31, 1999, the Operating Partnership disposed of seven properties that generated net proceeds of $76 million. These proceeds were or will be ultimately applied to purchase additional properties.

ERP OPERATING LIMITED PARTNERSHIP
PART I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Subsequent to March 31, 1999 and through May 12, 1999, the Operating Partnership disposed of one property for a total sales price of $2.1 million. These proceeds will be utilized to purchase additional properties. The Operating Partnership anticipates that it will continue to sell certain properties in the portfolio.

In regards to the joint venture agreement with a multifamily residential real estate developer during the quarter ended March 31, 1999, the Operating Partnership funded a total of $15.9 million and during the remainder of 1999 the Operating Partnership expects to fund approximately $48.2 million in connection with this agreement.

In regards to certain other properties that were under development and/or expansion during the quarter ended March 31, 1999, the Operating Partnership funded $5.1 million. During the remainder of 1999, the Operating Partnership expects to fund $52.9 million related to the continued development and/or expansion of as many as five Properties.

In regards to certain properties that are under earnout/development agreements, during the quarter ended March 31, 1999, $16.2 million was funded relating to the completion/acquisition of Copper Canyon. In addition, the Operating Partnership may be required to fund an additional $1 million earnout payment to the developer of Copper Canyon if certain specified operation levels are met. During the remainder of 1999, the Operating Partnership expects to fund approximately $43.7 million related to other earnout/development projects. Subsequent to March 31, 1999, the Operating Partnership has funded $22.7 million relating to the completion/acquisition of Skyview, which included a $1.0 million advance of the earnout payment to the developer of Skyview.

As of March 31, 1999, the Operating Partnership had total indebtedness of approximately $4.6 billion, which included mortgage indebtedness of $2.4 billion (including premiums of $4.2 million), of which $930.4 million represented tax-exempt bond indebtedness, and unsecured debt of $2.0 billion, including net discounts and premiums in the amount of $3.6 million.

In May 1999, the Operating Partnership expects to repay its 1999 Notes that mature on May 15, 1999. The $125 million repayment will be initially funded from borrowings under the Operating Partnership's lines of credit. In addition, on June 1, 1999, the Operating Partnership anticipates repaying the principal balance on one of its mortgage notes in the amount of $8.0 million. This repayment will also be primarily funded from additional borrowings under the lines of credit.

The Operating Partnership has a policy of capitalizing expenditures made for new assets, including newly acquired properties and the costs associated with placing these assets into service. Expenditures for improvements and renovations that significantly enhance the value of existing assets or substantially extend the useful life of an asset are also capitalized. Capital spent for replacement-type items such as appliances, draperies, carpeting and floor coverings, mechanical equipment and certain furniture and fixtures is also capitalized. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. With respect to

ERP OPERATING LIMITED PARTNERSHIP
PART I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

acquired properties, the Operating Partnership has determined that it generally spends $1,000 per unit during its first three years of ownership to fully improve and enhance these properties to meet the Operating Partnership's standards. In regard to replacement-type items described above, the Operating Partnership generally expects to spend $250 per unit on an annual recurring basis.

During the quarter ended March 31, 1999, total capital expenditures for the Operating Partnership approximated $27.4 million. Of this amount, approximately $8.8 million, or $73 per unit, related to capital improvements and major repairs for the 1997, 1998 and 1999 Acquired Properties. Capital improvements and major repairs for all of the Operating Partnership's pre-EQR IPO properties and 1993, 1994, 1995 and 1996 Acquired Properties approximated $5.9 million, or $92 per unit. Capital spent for replacement-type items approximated $10.2 million, or $55 per unit. Also included in total capital expenditures was approximately $2.5 million expended for non-real estate additions such as computer software, computer equipment, furniture and fixtures and leasehold improvements for the Operating Partnership's management offices and its corporate headquarters. Such capital expenditures were primarily funded from working capital reserves and from net cash provided by operating activities. Total capital expenditures for the remaining portion of 1999 are budgeted to be approximately $90 million.

Total distributions paid in April 1999 amounted to approximately $115.2 million, which included distributions declared for the quarter ended March 31, 1999.

In April 1999, the Company issued 1,936 Common Shares pursuant to the Share Purchase - DRIP Plan. The Company contributed to the Operating Partnership net proceeds of $88,168 in connection therewith.

The Operating Partnership expects to meet its short-term liquidity requirements, including capital expenditures relating to maintaining its existing Properties and certain scheduled unsecured note and mortgage note repayments, generally through its working capital, net cash provided by operating activities and borrowings under its lines of credit. The Operating Partnership considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. The Operating Partnership also expects to meet its long-term liquidity requirements, such as scheduled unsecured note and mortgage debt maturities, reduction of outstanding amounts under its lines of credit, property acquisitions, financing of construction and development activities and capital improvements through the issuance of unsecured notes and equity securities including additional OP Units as well as from undistributed FFO and proceeds received from the disposition of certain properties. In addition, the Operating Partnership has certain uncollateralized Properties available for additional mortgage borrowings in the event that the public capital markets are unavailable to the Operating Partnership or the cost of alternative sources of capital to the Operating Partnership is too high.

ERP OPERATING LIMITED PARTNERSHIP
PART I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The Operating Partnership has a revolving credit facility with Morgan Guaranty and Bank of America as co-agents to provide the Operating Partnership, with potential borrowings of up to $500 million. This credit facility matures in November 1999 and will continue to be used to fund property acquisitions and short term liquidity requirements. As of May 11, 1999, $175 million was outstanding under this facility.

In connection with the MRY Merger, the Operating Partnership assumed a second revolving credit facility with First Union Bank as agent with potential borrowings of up to $120 million. This credit facility matures in September 2000 and will also be used to fund property acquisitions, costs for certain Properties under development and short term liquidity requirements. As of May 11, 1999, $27 million was outstanding under this facility.

In connection with the Wellsford Merger, the Operating Partnership provided a $14.8 million credit enhancement with respect to bonds issued to finance certain public improvements at a multifamily development project. Pursuant to the terms of a Stock Purchase Agreement with Wellsford Real Properties, Inc. ("WRP Newco"), the Operating Partnership has agreed to purchase up to 1,000,000 shares of WRP Newco Series A Preferred at $25.00 per share on a standby basis over a three-year period ending on May 30, 2000. As of May 12, 1999, no shares of WRP Newco Series A Preferred had been acquired by the Operating Partnership.

In conjunction with the MRY Merger in October 1998, the Operating Partnership entered into six joint venture agreements with MRYP Spinco, the entity spun-off in the MRY Merger. The Operating Partnership contributed six properties with an initial value of $52.7 million in return for a 50% ownership interest in each joint venture. In return for the spin-off of certain assets and liabilities to MRYP Spinco, the Operating Partnership received (from MRYP Spinco) a Subordinated Note receivable totaling $20 million, a preferred stock investment with an initial value of $5 million and a $25 million, one year, non-revolving Senior Note receivable. At March 31, 1999 approximately $18.3 million was outstanding on the Senior Note, bearing interest at LIBOR plus 250 basis points. The Operating Partnership has a potential obligation to fund up to an additional $6.7 million under the Senior Note.

YEAR 2000 ISSUE

The year 2000 issue ("Year 2000") is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Operating Partnership's computer programs that have time-sensitive hardware and software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, collect rents, or engage in similar normal business activities.

The Operating Partnership believes that it has identified all of its information technology ("IT") and non-IT systems to assess their Year 2000 readiness. Critical systems include, but are not

ERP OPERATING LIMITED PARTNERSHIP
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

limited to: accounts receivable and rent collections, accounts payable and general ledger, human resources and payroll (both property and corporate levels), cash management, fixed assets, all IT hardware (such as desktop/laptop computers, data networking equipment, telephone systems, fax machines, copy machines, etc.) and software, and property environmental, health safety and security systems (such as elevators and alarm systems).

The Operating Partnership anticipates that previously scheduled system upgrades to many of its IT systems will remediate any existing Year 2000 problems. The Operating Partnership is currently in the process of testing and implementing the majority of its Year 2000 IT and non-IT system projects with completion anticipated during the second or third quarter of 1999. The Operating Partnership has estimated that the total Year 2000 project cost will approximate $1 million, of which approximately 80% has been incurred as of March 31, 1999. During the first quarter of 1999, the primary focus of the Year 2000 remediation efforts has been on implementing and testing the previously scheduled upgrades and Year 2000 compliant versions of existing IT systems as well as continuing the assessment of the Operating Partnership's exposure regarding non-IT systems at property sites. Of the remaining $200,000 budgeted to complete the Operating Partnership's Year 2000 remediation project, approximately $50,000 has been allocated to engage Year 2000 consultants to help the Operating Partnership monitor its IT compliance progress and to complete final IT testing and implementation. The remaining $150,000 has been allocated to remediate non-IT systems at various property sites. The estimates are based on management's best estimates, which were derived utilizing numerous assumptions of future events, and there can be no guarantees that these estimates will be achieved.

In some cases, various third party vendors have been queried on their Year 2000 readiness. The Operating Partnership continues to query its significant suppliers and vendors to determine the extent to which the Operating Partnership's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. To date, the Operating Partnership is not aware of any significant suppliers or vendors with a Year 2000 issue that would materially impact the Operating Partnership's results of operations, liquidity, or capital resources. However, there can be no assurances that the systems of other companies, on which the Operating Partnership's systems rely, will be timely converted and would not have an adverse effect on the Operating Partnership's systems.

Management of the Operating Partnership believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. In addition, the Operating Partnership is developing its contingency plans for critical operational areas that might be affected by the Year 2000 issue if compliance by the Operating Partnership is delayed. Aside from catastrophic failure of utility companies, banks or governmental agencies, the Operating Partnership believes that it could continue its normal business operations if compliance by the Operating Partnership is delayed. The Operating Partnership does not believe that the Year 2000 issue will materially impact its results of operations, liquidity or capital resources.

ERP OPERATING LIMITED PARTNERSHIP
PART I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

FUNDS FROM OPERATIONS

The Operating Partnership generally considers Funds From Operations ("FFO") to be one measure of the performance of real estate companies. The resolution adopted by the Board of Governors of NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. The Operating Partnership believes that FFO is helpful to investors as a measure of the performance of a real estate company because, along with cash flows from operating activities, financing activities and investing activities it provides investors with an understanding of the ability of the Operating Partnership to incur and service debt and to make capital expenditures. FFO in and of itself does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indication of the Operating Partnership's performance or to net cash flows from operating activities as determined by GAAP as a measure of liquidity and is not necessarily indicative of cash available to fund cash needs. The Operating Partnership's calculation of FFO represents net income, excluding gains on dispositions of properties and extraordinary items, plus depreciation on real estate assets, amortization of deferred financing costs related to the Predecessor Business and the allocation of net income to Cumulative Redeemable Preference Units. The Operating Partnership's calculation of FFO may differ from the methodology for calculating FFO utilized by other companies and, accordingly, may not be comparable to such other companies.

For the quarter ended March 31, 1999, FFO increased $44.4 million, representing a 44% increase when compared to the quarter ended March 31, 1998.

The following is a reconciliation of net income to FFO for the quarters ended March 31, 1999 and 1998:

------------------------------------------------------------------------------------------------
                                                           Quarter Ended           Quarter Ended
                                                              3/31/99                 3/31/98
------------------------------------------------------------------------------------------------
Net income                                                   $100,680                $ 61,275
Adjustments:
         Depreciation on real estate assets*                   95,472                  63,225
         Amortization of deferred financing costs
           related to predecessor business                        -                        12
         Allocation of net income to
           Preference Unit holders                            (29,377)                (21,692)
         Gain on disposition of properties                    (21,416)                 (1,869)
------------------------------------------------------------------------------------------------
FFO                                                          $145,359                $100,951
                                                             --------                --------
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* Includes $275,603 related to the Operating Partnership's share of depreciation from unconsolidated joint ventures for the quarter ended March 31, 1999.