Vivmark Residential · 10-Q · Item 2 MD&A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

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.

The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in most of its markets.

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, 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.

Business Objectives and Operating and Investing Strategies

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.

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Pending Merger

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. T1The 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

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)

Properties

Apartment

Units

Sales Price

Disposition

Yield

Dispositions:

Consolidated Rental Properties

(2

)

)

$

)

%)

Completed Developments – Consolidated

1

Completed Developments – Unconsolidated

1

Configuration Changes

—

Dispositions

•

The consolidated properties disposed of were located in the Los Angeles and San Francisco markets.

Developments

•

Consolidated:

•

Completed construction on one partially owned consolidated apartment property, located in the Boston market, consisting of 440 apartment units totaling approximately $232.2 million of development costs.

•

Unconsolidated:

•

Completed construction on one partially owned unconsolidated apartment property, located in the Seattle market, consisting of 369 apartment units totaling approximately $185.3 million of development costs.

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.

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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

Quarter Ended

Diluted earnings per share/unit for period ended 2025

$

$

Property NOI

Interest expense

)

)

Net gain/loss on property sales

)

)

Non-operating asset gains/losses

Depreciation expense

)

)

Other

)

)

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):

Six Months Ended June 30,

Quarter Ended June 30,

$

Change

%

Change

$

Change

%

Change

Net income

$

$

$

)

)%

$

$

$

)

)%

Adjustments:

Property management

%

%

General and administrative

)

)%

)

)%

Depreciation

)

)%

%

Net (gain) loss on sales of real

estate properties

)

)%

)

)%

Interest and other income

)

)

)

%

)

)

)

%

Other expenses

%

%

Interest:

Expense incurred, net

%

%

Amortization of deferred

financing costs

%

%

Income and other tax expense

(benefit)

4

%

4

%

(Income) loss from investments in

unconsolidated entities

)

)%

)

)%

Net (gain) loss on sales of land

parcels

—

)

)%

—

)

)%

Total NOI

$

$

$

%

$

$

$

)

)%

Rental income:

Same store

$

$

$

%

$

$

$

%

Non-same store/other

%

%

Total rental income

%

%

Operating expenses:

Same store

%

%

Non-same store/other

%

%

Total operating expenses

%

%

NOI:

Same store

%

%

Non-same store/other

)

)%

)

)%

Total NOI

$

$

$

%

$

$

$

)

)%

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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:

Same Store Residential Results/Statistics by Market

Increase (Decrease) from Prior Year

Markets/Metro Areas

Apartment

Units

% of

Actual

NOI

Average

Rental

Rate

Weighted

Average

Physical

Occupancy %

Turnover

Revenues

Expenses

NOI

Average

Rental

Rate

Physical

Occupancy

Turnover

Los Angeles

%

$

%

%

%

%

%)

%

%)

%

Orange County

%

%

%

%

%

%

%

%)

%

San Diego

%

%

%

%

%

%

%

%)

%

Subtotal – Southern California

%

%

%

%

%

%)

%

%)

%

San Francisco

%

%

%

%

%)

%

%

%

%)

Washington, D.C.

%

%

%

%

%

%)

%

%)

%

New York

%

%

%

%

%

%

%

%)

%

Boston

%

%

%

%

%

%)

%

%)

%

Seattle

%

%

%

%

%

%

%

%)

%

Denver

%

%

%

%)

%

%)

%)

%

%)

Atlanta

%

%

%

%)

%

%)

%)

%

%

Dallas/Austin

%

%

%

%)

%)

%

%)

%

%

Total

%

$

%

%

%

%

%

%

%)

%

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.

•

The increase in same store rental income is primarily driven by strong Physical Occupancy and better than anticipated renewal rates.

•

T2The increase in same store operating expenses is due primarily to:

•

Real estate taxes – A $4.0 million increase due to escalation in rates and assessed values;

•

Utilities – A $6.0 million increase primarily driven by higher costs for trash removal and higher commodity prices, particularly impacting electricity and gas; and

•

Repairs and maintenance - A $2.7 million increase primarily driven by costs associated with the implementation of various resident technology initiatives (including bulk Wi-Fi programs), which is more than offset by a corresponding increase in same store revenues.

•

Non-same store/other NOI results consist primarily of properties acquired in 2025, operations from the Company’s development properties, other corporate operations and operations prior to disposition from 2025 and 2026 sold properties. The decrease in NOI is primarily a result of the Company's 2025 and 2026 net disposition activity, partially offset by the lease-up activity from the Company's development activities and 2025 acquisition activity.

•

The increase in consolidated total NOI is a result of the Company’s higher NOI from same store properties, largely due to improvement in same store revenues and the Company's continued focus on same store expense efficiency, partially offset by lower NOI from non-same store properties as noted above.

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.

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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

T3With 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

$

)

$

)

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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:

•

Disposed of two consolidated rental properties, receiving net proceeds of approximately $153.2 million;

•

Invested $40.1 million primarily in consolidated development projects; and

•

Invested $160.3 million in capital expenditures to real estate.

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:

•

Received net proceeds of $81.2 million from our unsecured commercial paper note program;

•

Paid dividends/distributions on Common Shares, Preferred Shares, Units (including OP Units and restricted units) and noncontrolling interests in partially owned properties totaling approximately $541.6 million; and

•

T4Repurchased and retired 3,458,394 Common Shares, at a weighted average purchase price of $63.42 per share, for an aggregate purchased amount of approximately $219.4 million. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.

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):

Cash and cash equivalents

$

$

Restricted deposits

$

$

Unsecured revolving credit facility availability

$

$

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 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 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):

Unsecured revolving credit facility commitment

$

Commercial paper balance outstanding

)

Unsecured revolving credit facility balance outstanding

—

Other restricted amounts

)

Unsecured revolving credit facility availability

$

Other

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:

($ in thousands)

Debt

Balances

% of Total

Secured

$

%

Unsecured

%

Total

$

%

Fixed Rate Debt:

Secured – Conventional

$

%

Unsecured – Public

%

Fixed Rate Debt

%

Floating Rate Debt:

Secured – Tax Exempt

%

Unsecured – Revolving Credit Facility

—

—

Unsecured – Commercial Paper Program

%

Floating Rate Debt

%

Total

$

%

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:

Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)

Six Months Ended June 30,

Quarter Ended June 30,

Net income

$

$

$

$

Net (income) loss attributable to Noncontrolling

Interests – Partially Owned Properties

)

)

)

)

Preferred/preference distributions

)

)

)

)

Net income available to Common Shares and Units / Units

Adjustments:

Depreciation

Depreciation – Non-real estate additions

)

)

)

)

Depreciation – Partially Owned Properties

)

)

)

)

Depreciation – Unconsolidated Properties

Net (gain) loss on sales of unconsolidated entities - operating assets

—

)

—

)

Net (gain) loss on sales of real estate properties

)

)

FFO available to Common Shares and Units / Units (1) (3) (4)

Adjustments:

Write-off of pursuit costs

Debt extinguishment and preferred share/preference unit redemption

(gains) losses

—

—

—

Non-operating asset (gains) losses

)

)

Other miscellaneous items

Normalized FFO available to Common Shares and Units / Units (2) (3) (4)

$

$

$

$

$

$

$

$

Preferred/preference distributions

)

)

)

)

FFO available to Common Shares and Units / Units (1) (3) (4)

$

$

$

$

Normalized FFO (2) (3)

$

$

$

$

Preferred/preference distributions

)

)

)

)

Normalized FFO available to Common Shares and Units / Units (2) (3) (4)

$

$

$

$

(1)

The National Association of Real Estate Investment Trusts (“Nareit”) defines funds from operations (“FFO”) (December 2018 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains or losses from sales and impairment write-downs of depreciable real estate and land when connected to the main business of a REIT, impairment write-downs of investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and depreciation and amortization related to real estate. Adjustments for partially owned consolidated and unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis.

(2)

Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:

• 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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(3)

The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses from sales and impairment write-downs of depreciable real estate and excluding depreciation related to real estate (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units / Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies.

The Company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company’s operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units do not represent net income, net income available to Common Shares / Units or net cash flows from operating activities in accordance with GAAP.

Therefore, FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units should not be exclusively considered as alternatives to net income, net income available to Common Shares / Units or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company’s calculation of FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.

(4)

FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units are calculated on a basis consistent with net income available to Common Shares / Units and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares/preference units in accordance with GAAP. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the “Noncontrolling Interests – Operating Partnership.” Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.