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Announcement:

Moody's revises Equity Residential's rating outlook to stable from negative

03 Feb 2011

Approximately $4.9 billion of securities affected.

New York, February 03, 2011 -- Moody's Investors Service affirmed the ratings of ERP Operating Limited Partnership (senior unsecured debt at Baa1) and Equity Residential (preferred stock at Baa2) and revised the outlook to stable from negative.

The outlook revision to stable reflects the improvement in Equity Residential's key credit metrics following the nascent recovery in the multifamily sector and Moody's expectation that these metrics will continue to improve over the near term. The REIT's effective leverage improved to 49.5% at 4Q10 from 52% at 2Q09. While Net Debt/EBITDA remains high at 8.1X for YE10, Moody's expects this metric to decline below 7.5X over the near term as the REIT's NOI continues to benefit from increases in occupancies, coupled with rental rate increases. Secured debt still remains high at 23% for its rating category, but Moody's believes this metric will decline as mortgage debt matures. Importantly, unencumbered assets to gross assets improved to 61% as of 3Q10 vs. 55.1% at 2Q09. Furthermore, Equity Residential was able to maintain stable occupancies and operating metrics throughout the recession and now is poised to take advantage of the market recovery.

Moody's notes that Equity Residential's liquidity position is good with $431 million of cash at 4Q10, and 100% availability on its $1.4 billion credit facility. Given its current liquidity level, the REIT is able to fund its debt maturities and development obligations through 2011, while having the market presence to make opportunistic acquisitions. Equity Residential announced its new dividend policy in December 2010 whereby EQR will distributed 65% of normalized, annual FFO. The new policy allows the REIT to adjust its dividend to be more reflective of existing market conditions and its impact on cash flow.

The ratings also incorporate EQR's leadership position in the multi-family sector as well as its diversified and high-quality property portfolio. Moody's believes that Equity Residential has excellent access to capital, and would expect to see EQR tap diverse sources in the future. Also, at this time, the REIT's development pipeline is small given its size, a credit strength.

Moody's indicated that a rating upgrade would be predicated upon fixed charge coverage above 2.5X on a sustained basis, secured debt closer to 10% of gross assets, effective leverage levels less than 45% and Net Debt/EBITDA closer to 6.0X. A downgrade could result should Net Debt/EBITDA be at or close to 8.5X on a sustainable basis, fixed charge coverage decline below 2.0X or should the REIT engage in a large leveraged transaction.

The following ratings were affirmed with a stable outlook:

Equity Residential -- Preferred stock at Baa2; preferred stock shelf at (P)Baa2

ERP Operating Limited Partnership -- Senior unsecured at Baa1

Moody's last rating action with respect to Equity Residential was on September 25, 2009, when Moody's affirmed the ratings of ERP Operating Limited Partnership (senior unsecured debt at Baa1) and Equity Residential (preferred stock at Baa2) and revised the outlook to negative from stable.

Equity Residential [NYSE: EQR] is the largest publicly traded owner, operator and developer of multifamily housing in the USA, with approximately 130,000 apartments in 17 states and the District of Columbia. At December 31, 2010, the REIT had $16.2 billion in assets and $5.2 billion in equity.

The principal methodology used in rating Equity Residential was the Global Rating Methodology for REITs and Other Commercial Property Firms, published in July 2010 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's web site.

New York
Karen Nickerson
VP - Senior Credit Officer
Commercial Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Griselda Bisono
Analyst
Commercial Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's revises Equity Residential's rating outlook to stable from negative
No Related Data.
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