<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 6, 1998)
$100,000,000
[GRAPHIC]
ERP OPERATING LIMITED PARTNERSHIP
REMARKETED RESET NOTES DUE AUGUST 21, 2003
------------------
ERP Operating Limited Partnership, an Illinois limited partnership (the
"Operating Partnership"), is offering (the "Offering") $100,000,000 aggregate
principal amount of Remarketed Reset Notes due August 21, 2003 (the "Notes").
During the period from and including August 21, 1998 to but excluding August
23, 1999 (the "Initial Spread Period"), the interest rate on the Notes will be
reset quarterly, and will equal LIBOR plus the applicable Spread. The Spread
during the Initial Spread Period is .45%. After the Initial Spread Period, the
character and duration of the interest rate on the Notes will be agreed to by
the Operating Partnership and the Remarketing Underwriter on each applicable
Duration/Mode Determination Date, and the Spread will be agreed to by the
Operating Partnership and the Remarketing Underwriter on the corresponding
Spread Determination Date. Interest on the Notes during each Subsequent Spread
Period shall be payable, as applicable, either (i) at a floating interest rate
(such Notes being in the "Floating Rate Mode," and such interest being a
"Floating Rate"), or (ii) at a fixed interest rate (such Notes being in the
"Fixed Rate Mode," and such interest rate being a "Fixed Rate"), in each case as
determined by the Operating Partnership and the Remarketing Underwriter in
accordance with a Remarketing Agreement between the Operating Partnership and
the Remarketing Underwriter (the "Remarketing Agreement"). Capitalized terms
used but not defined on this cover page shall have the meanings ascribed to them
under "Description of the Notes" contained herein.
After the Initial Spread Period, the Spread applicable to each Subsequent
Spread Period will be determined on each subsequent Spread Determination Date
that immediately precedes the beginning of the corresponding Subsequent Spread
Period, pursuant to agreement between the Operating Partnership and the
Remarketing Underwriter (except as otherwise provided below), and the interest
rate mode used for each Subsequent Spread Period may be a Floating Rate Mode or
a Fixed Rate Mode, at the discretion of the Operating Partnership and the
Remarketing Underwriter. If the Operating Partnership and the Remarketing
Underwriter are unable to agree on the Spread, (1) the Subsequent Spread Period
will be one year, (2) the Notes will be reset to the Floating Rate Mode, (3) the
Spread for such Subsequent Spread Period will be the Alternate Spread and (4)
the Notes will be redeemable at the option of the Operating Partnership, in
whole or in part, upon at least five
(CONTINUED ON NEXT PAGE)
------------------------
NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The Notes will be sold to the public at varying prices to be determined by
the Underwriters at the time of each sale. The net proceeds to the Operating
Partnership, before deducting expenses payable by the Operating Partnership
(estimated to be approximately $300,000), will be 99.65% of the principal amount
of the Notes sold and the aggregate net proceeds will be $99,650,000. For
further information with respect to the plan of distribution and any discounts,
commissions or profits on resales of Notes that may be deemed underwriting
discounts or commissions, see "Underwriting."
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by them, and subject to certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer and
reject orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of DTC in New York, New York on
or about August 21, 1998.
------------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
----------------
The date of this Prospectus Supplement is August 18, 1998.
<PAGE>
Business Days' notice given by no later than the fifth Business Day after the
relevant Spread Determination Date, at a redemption price equal to 100% of the
principal amount thereof, together with accrued interest to the redemption date,
except that the Notes may not be redeemed prior to the Tender Date, or later
than the last day of such one-year Subsequent Spread Period. During the Initial
Spread Period, interest on the Notes will be payable quarterly in arrears on
November 23, 1998, February 23, 1999, May 24, 1999 and August 23, 1999 (or, if
not a Business Day, on the next succeeding Business Day, except as described
herein). After the Initial Spread Period, (i) if the Notes are in the Floating
Rate Mode, interest on the Notes will be payable, unless otherwise specified on
the applicable Duration/Mode Determination Date, quarterly in arrears on each
February 23, May 23, August 23 and November 23 during the applicable Subsequent
Spread Period, or (ii) if the Notes are in the Fixed Rate Mode, interest on the
Notes will be payable, unless otherwise specified on the applicable
Duration/Mode Determination Date, semiannually in arrears on each February 23
and August 23 during the applicable Subsequent Spread Period. "Interest Payment
Dates" as used herein shall mean any date interest is paid on the Notes. See
"Description of the Notes."
The Notes are not redeemable prior to August 23, 1999. Thereafter, the Notes
may be redeemed, at the option of the Operating Partnership, on such date, on
each Commencement Date and on those Interest Payment Dates that are specified as
redemption dates by the Operating Partnership on the applicable Duration/Mode
Determination Date, in whole or in part, upon notice thereof given at any time
during the 30 calendar day period ending on the tenth Business Day prior to the
redemption date, in accordance with the redemption type selected on the
Duration/Mode Determination Date. Unless previously redeemed, the Notes will
mature on August 21, 2003. See "Description of the Notes--Redemption of the
Notes."
The Notes will be represented by a single Global Note registered in the name
of The Depository Trust Company ("DTC") or its nominee. Beneficial interests in
the Global Note will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its participants. Except as described
herein, Notes in definitive form will not be issued.
If the Operating Partnership and the Remarketing Underwriter agree on the
Spread with respect to any Subsequent Spread Period, each Note may be tendered
to the Remarketing Underwriter for purchase from the tendering holder of Notes
at 100% of its principal amount and for remarketing by the Remarketing
Underwriter on the date immediately following the end of each Subsequent Spread
Period (the "Tender Date"). In the case of the Initial Spread Period, the Notes
may be tendered on August 23, 1999. Notice of a beneficial owner's election to
tender to the Remarketing Underwriter must be received by the Remarketing
Underwriter during the period beginning at 3:00 p.m., New York City time, on the
relevant Spread Determination Date and ending at 12:00 noon, New York City time,
on the second Business Day following the relevant Spread Determination Date. The
obligation of the Remarketing Underwriter to purchase tendered Notes from the
tendering holders of Notes will be subject to certain conditions and termination
events customary in the Operating Partnership's public offerings. If the
Remarketing Underwriter does not purchase all tendered Notes on the relevant
Tender Date, (1) all Tender Notices relating thereto will be null and void, (2)
none of the Notes for which such Tender Notices shall have been given will be
purchased by the Remarketing Underwriter on such Tender Date, (3) the Subsequent
Spread Period will be one year, which Subsequent Spread Period shall be deemed
to have commenced upon the applicable Commencement Date, (4) the Notes will be
reset to the Floating Rate Mode, (5) the Spread for such Subsequent Spread
Period will be the Alternate Spread and (6) the Notes will be redeemable at the
option of the Operating Partnership, in whole or in part, upon at least ten
Business Days' notice given by no later than the fifth Business Day following
the relevant Tender Date, on the date set forth in such notice, which shall be
not later than the last day of such Subsequent Spread Period, at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to the redemption date. No beneficial owner of any Note shall have any
rights or claims against the Operating Partnership or the Remarketing
Underwriter as a result of the Remarketing Underwriter not purchasing such
Notes, except that such beneficial owner shall have the right to receive the
Alternate Spread on such Notes from the Operating Partnership. See "Description
of Notes--Tender at Option of Beneficial Owners."
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED HEREBY. SUCH TRANSACTIONS MAY
INCLUDE STABILIZING TRANSACTIONS AND THE PURCHASE OF NOTES TO COVER SYNDICATE
SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
THE OFFERING
FOR A MORE COMPLETE DESCRIPTION OF THE NOTES SPECIFIED IN THE
FOLLOWING SUMMARY, INCLUDING DEFINITIONS OF CAPITALIZED TERMS NOT OTHERWISE
FOUND THEREIN, SEE "DESCRIPTION OF THE NOTES" IN THIS PROSPECTUS SUPPLEMENT
AND "DESCRIPTION OF DEBT SECURITIES" IN THE ACCOMPANYING PROSPECTUS.
Securities Offered . . . . . . . . $100,000,000 aggregate principal amount
of Remarketed Reset Notes due August 21,
2003.
Maturity . . . . . . . . . . . . . The Notes will mature on August 21,
2003, unless previously redeemed.
Interest Payment Due . . . . . . . During the Initial Spread Period,
interest on the Notes will be payable
quarterly in arrears on November 23,
1998, February 23, 1999, May 24, 1999
and August 23, 1999. During the Initial
Spread Period, the interest rate on the
Notes will be reset quarterly. After
the Initial Spread Period, interest on
the Notes will be payable in arrears (i)
on each February 23, May 23, August 23,
and November 23, during the Subsequent
Spread Period in the case of Notes in
the Floating Rate Mode or (ii) on each
February 23 and August 23 during the
Subsequent Spread Period in the case of
Notes in the Fixed Rate Mode, in either
case unless otherwise specified by the
Operating Partnership and the
Remarketing Underwriter on the
applicable Duration/Mode Determination
Date in connection with the
establishment of each Subsequent Spread
Period. See "Description of the Notes."
Ranking. . . . . . . . . . . . . . The Notes will be direct, unsecured
obligations of the Operating Partnership
and will rank equally with each other
and with all other unsecured and
unsubordinated indebtedness of the
Operating Partnership outstanding from
time to time. The Notes will be
effectively subordinated to the prior
claims of each secured mortgage lender
to any specific property which secures
such lender's mortgage.
Redemption . . . . . . . . . . . . The Notes may not be redeemed by the
Operating Partnership prior to August
23, 1999. On that date, on each
Commencement Date and on those Interest
Payment Dates specified as redemption
dates by the Operating Partnership on
each Duration/Mode Determination Date,
the Notes may be redeemed at the option
of the Operating Partnership, as
described herein. The Notes may also be
redeemed at the option of the Operating
Partnership under certain circumstances,
as described herein. See "Description
of the Notes - Tender at Option of
Beneficial Owners" and "--Redemption of
the Notes."
Form . . . . . . . . . . . . . . . The Notes will be issued and maintained
in book-entry form registered in the
name of the nominee of DTC, except under
the limited circumstances described
herein. See "Description of the Notes -
Tender at Option of Beneficial Owners"
and "--Book-Entry System."
Use of Proceeds. . . . . . . . . . The net proceeds to the Operating
Partnership from the Offering
(approximately $99.35 million) will be
used to pay down existing indebtedness
under its $500 million unsecured line of
credit (the "Line of Credit").
Limitations on Incurrence of
Debt . . . . . . . . . . . . . For a description of certain covenants
applicable to the Notes, see
"Description of Debt Securities--Certain
Covenants" and "--Additional Covenants
and/or Modifications to the Covenants
Described Above" in the accompanying
Prospectus.
S-3
<PAGE>
THE FOLLOWING INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS
QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING IN THE
ACCOMPANYING PROSPECTUS OR INCORPORATED THEREIN BY REFERENCE. AS USED
HEREIN, THE "OPERATING PARTNERSHIP" SHALL BE DEEMED TO MEAN THE OPERATING
PARTNERSHIP AND THOSE ENTITIES OWNED OR CONTROLLED BY IT ON A CONSOLIDATED
BASIS, UNLESS THE CONTEXT INDICATES OTHERWISE. AS USED HEREIN, THE TERM
"COMPANY" INCLUDES EQUITY RESIDENTIAL PROPERTIES TRUST ("EQR") AND THOSE
ENTITIES OWNED OR CONTROLLED BY IT ON A CONSOLIDATED BASIS (THE
"SUBSIDIARIES"), AS THE SURVIVOR OF THE MERGERS BETWEEN EQR AND EACH OF
WELLSFORD RESIDENTIAL PROPERTY TRUST ("WELLSFORD") AND EVANS WITHYCOMBE
RESIDENTIAL, INC. ("EWR") AND EACH OF EQR, WELLSFORD AND EWR AS PREDECESSORS
TO THE COMPANY, UNLESS THE CONTEXT INDICATES OTHERWISE.
THE OPERATING PARTNERSHIP
The Notes offered hereby are being issued by the Operating Partnership
which is managed by its general partner, Equity Residential Properties Trust
(the "Company"). The Company, one of the largest publicly traded real estate
investment trusts ("REITs") (based on the aggregate market value of its
outstanding equity capitalization), is a self-administered and self-managed
equity REIT. EQR was organized in March 1993 and commenced operations as a
publicly traded company on August 18, 1993 upon completion of its initial
public offering (the "EQR IPO"). EQR was formed to continue the multifamily
property business objectives and acquisition strategies of certain affiliated
entities controlled by Mr. Samuel Zell, Chairman of the Board of Trustees of
the Company. These entities had been engaged in the acquisition, ownership
and operation of multifamily properties since 1969. In May 1997, EQR
completed the acquisition of the multifamily property business of Wellsford
through the tax-free merger of EQR and Wellsford. In December 1997, EQR
completed the acquisition of the multifamily property business of EWR through
the tax-free merger of EQR and EWR. The Company's senior executives average
over 24 years of experience in the multifamily property business.
All of the Company's interests in multifamily properties are held or
controlled directly or indirectly by, and substantially all of its operations
relating to multifamily properties are conducted through, the Operating
Partnership. The Company controls the Operating Partnership as the sole
general partner and, as of August 18, 1998, owned approximately 88% of the
Operating Partnership's outstanding partnership interests.
The Operating Partnership is the largest owner of multifamily properties
in the United States (based on the number of apartment units owned and total
revenues earned). As of August 18, 1998, the Operating Partnership owned or
had interests in a portfolio of 569 multifamily properties (individually a
"Property" and collectively the "Properties") containing 159,047 apartment
units and managed 9,295 additional units owned by affiliated entities. Since
the EQR IPO, at which time the Operating Partnership owned 69 Properties, and
through August 18, 1998, the Operating Partnership has acquired, directly or
indirectly, interests in an additional 525 Properties containing 143,805
units for a total purchase price of approximately $8.2 billion, including the
assumption of approximately $2.4 billion of mortgage indebtedness and
unsecured notes. Since the EQR IPO and through August 18, 1998, the
Operating Partnership has disposed of 25 of its properties and a portion of
one of its Properties containing an aggregate of 6,483 units and a vacant
land parcel for a total sales price of approximately $191.7 million and the
release of mortgage indebtedness in the amount of approximately $27.5
million. The Operating Partnership's interest in six of the Properties at
the time of acquisition thereof consisted solely of ownership of the debt
collateralized by such Properties and in 21 of the Properties consisted
solely of investments in partnership interests and subordinated mortgages
collateralized by such Properties. As of August 18, 1998, the Properties had
an average occupancy rate of approximately 95%. The Properties are located
throughout the United States in the following 35 states: Alabama, Arizona,
Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, Nevada,
North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas,
Utah, Virginia, Washington and Wisconsin.
The Operating Partnership's executive offices are located at Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, and its telephone number
is (312) 474-1300. In addition, the Operating Partnership has 30 management
offices in the following cities: Chicago, Illinois; Denver, Colorado;
Seattle, Tukwila and Redmond, Washington; Bethesda, Maryland; Atlanta,
Georgia; Las Vegas, Nevada; Scottsdale and Tucson, Arizona; Portland, Oregon;
Dallas, Houston and San Antonio, Texas; Irvine, Pleasant Hill and Stockton,
California; Ypsilanti, Michigan; Charlotte and Raleigh, North Carolina;
Tampa, Jacksonville and Ft. Lauderdale, Florida; Kansas City, Kansas;
Minneapolis, Minnesota; Louisville, Kentucky; Tulsa, Oklahoma; Boston,
Massachusetts; and Nashville and Memphis, Tennessee.
S-4
<PAGE>
RECENT DEVELOPMENTS
MERGER ACTIVITY
On July 8, 1998, EQR entered into an Agreement and Plan of Merger regarding
the planned acquisition of the multifamily property business of Merry Land &
Investment Company, Inc. ("Merry Land"), a Georgia corporation, through the tax
free merger of EQR and Merry Land (the "Merger"). The transaction was valued at
approximately $2.2 billion and includes 118 multifamily properties containing
34,990 units. In the Merger, each outstanding share of common stock of Merry
Land will be converted to .53 of a common share of EQR. The Merger is subject
to approval of the shareholders of EQR and Merry Land and, therefore, completion
of the Merger is conditioned upon such approval and certain other closing
conditions. Upon completion of the Merger, it is expected that EQR will
contribute the assets of Merry Land to the Operating Partnership in exchange for
additional partnership interests in the Operating Partnership.
Merry Land is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"), including Merry Land's Annual Report on
Form 10-K for the year ended December 31, 1997. Reports, proxy statements and
other information filed by Merry Land can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at its Regional Offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's web site is: http://www.sec.gov. The shares of
common stock of Merry Land are currently listed on the New York Stock Exchange
("NYSE") and such reports, proxy statements and other information concerning
Merry Land can be inspected at the offices of NYSE, 20 Broad Street, New York,
New York 10005.
ACQUISITIONS
From January 1, 1998 through August 18, 1998, the Operating Partnership
acquired 92 Properties containing an aggregate of 21,399 units at a total
purchase price of approximately $1.5 billion (including the assumption of
mortgage indebtedness of approximately $423.9 million). The Operating
Partnership funded the cash portion of these acquisitions primarily with
proceeds from previous securities issuances by the Company, its Line of Credit
and working capital. See "Securities Issuances" below.
PROBABLE ACQUISITIONS
As of August 18, 1998, the Operating Partnership had entered into contracts
with sellers to acquire 13 additional properties containing 3,735 units which
are located in seven states (collectively, the "Properties Under Contract").
The total combined purchase price for the Properties Under Contract is
approximately $230 million, including the assumption of approximately $85.2
million of mortgage indebtedness. There can be no assurance that these 13
Properties Under Contract will be acquired or, if acquired, that the terms of
such acquisitions will not change from the terms presently contemplated. The
Operating Partnership anticipates that the acquisition of the Properties Under
Contract will be funded with its working capital and/or its Line of Credit. The
Operating Partnership believes that the Properties Under Contract can be
integrated into its system of management offices without any significant
corresponding increase in the costs of operations of such offices.
PENDING ACQUISITIONS
ADDITIONAL PROPERTIES UNDER CONTRACT
As of August 18, 1998, the Operating Partnership had not entered into
contracts with sellers to acquire any other additional properties under contract
(the "Additional Properties Under Contract").
PROPERTIES UNDER NEGOTIATION
As of August 18, 1998, the Operating Partnership was also negotiating with
various sellers for the acquisition of four additional properties (the
"Properties Under Negotiation") containing 680 units for a purchase price of
approximately $42.8 million, including the assumption of approximately $9.5
million of mortgage indebtedness. With respect to the Properties Under
Negotiation, the Operating Partnership was negotiating the significant terms of
the purchase contracts for such properties.
S-5
<PAGE>
The Operating Partnership anticipates that, if and when entered into, the
purchase contracts for the Properties Under Negotiation will contain due
diligence contingency provisions that will allow the Operating Partnership to
conduct extensive investigations of such properties and will give the
Operating Partnership flexibility to terminate such contracts with a full
refund of earnest money if the Operating Partnership becomes dissatisfied
with the Properties Under Negotiation in any way, in its sole discretion,
during such review period. If the Operating Partnership acquires the
Properties Under Negotiation, it is expected that the terms and conditions of
such acquisitions will be similar to other acquisitions of Properties made by
the Operating Partnership. The purchase price for the Properties Under
Negotiation is expected to be funded primarily with the Operating
Partnership's Line of Credit. In addition, the Company or the Operating
Partnership may consider issuing additional equity or debt securities to
finance some or all of such potential acquisitions. There can be no
assurance, however, that the Properties Under Negotiation will be acquired
or, if acquired, that the terms of such acquisitions will not change from the
terms presently contemplated.
DISPOSITIONS
From January 1, 1998 through August 18, 1998, the Operating Partnership
disposed of its interests in seven properties containing 1,448 units for an
aggregate sales price of approximately $61.9 million, including the release of
approximately $7 million of mortgage indebtedness. The net proceeds of these
dispositions were or will be used for the acquisition of additional properties.
SECURITIES ISSUANCES
Since January 1, 1998, the Operating Partnership has raised approximately
$306 million pursuant to one public offering of its Debt Securities. Since
January 1, 1998, the Company has raised an aggregate of approximately $358
million pursuant to six separate public offerings of EQR's common shares of
beneficial interest. In addition, from January 1, 1998, through August 18,
1998, the Company has raised approximately $50.1 million pursuant to its
Distribution Reinvestment and Share Purchase Plan.
AGREEMENT OF LIMITED PARTNERSHIP
The Operating Partnership adopted its Fifth Amended and Restated Agreement
of Limited Partnership as of August 1, 1998.
S-6
<PAGE>
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the Offering are
estimated at $99,350,000 after the deduction of the underwriting discount and
the estimated expenses payable by the Operating Partnership. The Operating
Partnership intends to use the net proceeds of this offering to pay down
existing indebtedness on its Line of Credit, which bears interest at a weighted
average rate of 6.05% and matures in November 1999. As of August 18, 1998, $340
million was outstanding under the Line of Credit.
BUSINESS AND PROPERTIES
The Operating Partnership is managed by the Company. The Company is a
self-administered and self-managed equity REIT. EQR was established in 1993 to
continue the multifamily property business objectives and acquisition strategies
of certain affiliated entities controlled by Mr. Zell, Chairman of the Board of
Trustees of the Company. These entities had been engaged in the multifamily
property business since 1969. The Company is a fully integrated real estate
concern that acquires, improves, operates and manages its Properties. The
Operating Partnership has benefited, and expects to benefit, from the following
elements:
DIVERSIFIED PORTFOLIO
As of August 18, 1998, the Operating Partnership owned or had interests in
a portfolio of 569 Properties containing 159,047 apartment units located in 35
states. As of such date, the Operating Partnership was the largest owner of
multifamily properties in the United States (based on the number of apartment
units owned and total revenues earned). The Operating Partnership's interest in
six of the Properties at the time of acquisition thereof consisted solely of
ownership of the debt collateralized by such Properties and in 21 of the
Properties consisted solely of investments in partnership interests and
subordinated mortgages collateralized by such Properties. No single Property
represents more than approximately 1.0% of total apartment units. The
distribution of the Properties throughout the United States reflects the
Operating Partnership's belief that geographic diversification helps insulate
the portfolio from regional and local economic influences. At the same time,
the Operating Partnership has sought to create clusters of Properties within
each of its primary markets to achieve economies of scale in management and
operation. The Operating Partnership has 30 management offices in the following
cities: Chicago, Illinois; Denver, Colorado; Seattle, Tukwila and Redmond,
Washington; Bethesda, Maryland; Atlanta, Georgia; Las Vegas, Nevada; Scottsdale
and Tucson, Arizona; Portland, Oregon; Dallas, Houston and San Antonio, Texas;
Irvine, Pleasant Hill and Stockton, California; Ypsilanti, Michigan; Charlotte
and Raleigh, North Carolina; Tampa, Jacksonville and Ft. Lauderdale, Florida;
Kansas City, Kansas; Minneapolis, Minnesota; Louisville, Kentucky; Tulsa,
Oklahoma; Boston, Massachusetts; and Nashville and Memphis, Tennessee.
EXPERIENCED MANAGEMENT
The Company's senior executives average over 24 years of experience in the
multifamily property business. The Operating Partnership has a fully integrated
management team: an Acquisitions Department that is dedicated exclusively to
the property acquisition function and is in constant contact with principals and
brokers nationwide; an Asset Management Department that establishes strategic
plans with respect to the portfolio including the development and implementation
of long-term business plans, asset financings, property repositionings,
expansions, and property disposition decisions; a Property Management Department
that aggressively manages the portfolio through significant interaction with
on-site property managers at each Property; an Accounting and Finance Department
that maintains the books and records of the Properties and generates timely
financial reports; a Capital Markets Department that manages investor relations
and capital raising; and a Legal Department that oversees all of the Operating
Partnership's legal affairs.
SOPHISTICATED MANAGEMENT INFORMATION SYSTEMS
The Operating Partnership makes extensive use of management information
systems. The Operating Partnership has installed on-site computers at every
Property, except for the newly acquired Properties at which such computers will
be installed, that are capable of compiling and forwarding to the Operating
Partnership's Regional Operations Centers on a daily basis numerous standardized
reports including daily occupancy, lease expiration and renewals, prospective
tenants and rental rate information. Quality controls are maintained through
the Operating Partnership's practice of (i) conducting resident
S-7
<PAGE>
satisfaction surveys, (ii) surveying residents that move out of the
Properties, and (iii) surveying prospective tenants who select alternative
housing.
THE PROPERTIES
As of August 18, 1998, the Operating Partnership owned or had interests in
a portfolio of 569 Properties located in 35 states containing 159,047 apartment
units with the largest having 1,420 units and the smallest having 40 units. The
average number of units per Property was approximately 280. The units are
typically contained in a series of two-story buildings. As of August 18, 1998,
the Properties had an average occupancy rate of approximately 95%. Tenant
leases are generally year-to-year and require security deposits. The Properties
typically provide residents with attractive amenities, including a clubhouse,
swimming pool, laundry facilities and cable television access. Certain
Properties offer additional amenities such as saunas, whirlpools, spas, sports
courts and exercise rooms.
S-8
<PAGE>
The following chart sets forth certain information regarding
the Properties on a state-by-state basis.
<TABLE>
<CAPTION>
PROPERTIES BY STATE
(AS OF AUGUST 18, 1998)
NUMBER OF NUMBER OF % OF UNITS
STATE PROPERTIES UNITS IN PORTFOLIO
<S> <C> <C> <C>
Alabama 3 814 0.512%
Arizona 74 21,802 13.708%
Arkansas 4 1,039 0.653%
California 67 17,431 10.959%
Colorado 30 7,880 4.955%
Connecticut 3 563 0.354%
Florida 41 11,072 6.961%
Georgia 27 8,119 5.105%
Idaho 1 120 0.075%
Illinois 7 3,322 2.089%
Indiana 1 320 0.201%
Iowa 2 386 0.243%
Kansas 6 2,392 1.504%
Kentucky 8 2,169 1.364%
Maine 5 672 0.422%
Maryland 15 3,977 2.500%
Massachusetts 6 1,520 0.956%
Michigan 11 4,084 2.568%
Minnesota 18 3,803 2.391%
Missouri 7 1,576 0.991%
Nevada 13 4,035 2.537%
New Hampshire 1 390 0.245%
New Jersey 3 1,388 0.873%
New Mexico 4 1,073 0.675%
North Carolina 21 5,636 3.544%
Ohio 6 2,683 1.687%
Oklahoma 14 3,981 2.503%
Oregon 11 3,448 2.168%
South Carolina 6 1,045 0.657%
Tennessee 15 4,232 2.661%
Texas 70 21,054 13.238%
Utah 4 1,426 0.896%
Virginia 10 3,133 1.970%
Washington 51 11,181 7.030%
Wisconsin 4 1,281 0.805%
------ ----------- --------
TOTAL 569 (1) 159,047 100.000%
------ ----------- --------
------ ----------- --------
</TABLE>
_________________________
(1) The Operating Partnership's interest in six of the Properties at the time
of acquisition thereof consisted solely of ownership of the debt
collateralized by such Properties and in 21 Properties consists solely of
investments in partnership interests and subordinated mortgages
collateralized by such Properties.
For additional information with respect to the Properties, see the
Operating Partnership's Annual Report on Form 10-K, as amended by Form 10-K/A,
for the year ended December 31, 1997, and its Quarterly Reports on Form 10-Q for
the three- and six-month periods ended March 31, 1998 and June 30, 1998,
respectively, which reports are incorporated by reference into the accompanying
Prospectus.
S-9
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial and operating information
on a historical basis for the Operating Partnership. The following information
should be read in conjunction with all of the financial statements and notes
thereto included in the Operating Partnership's Annual Report on Form 10-K, as
amended by Form 10-K/A, for the year ended December 31, 1997, the Operating
Partnership's Quarterly Report on Form 10-Q for the six-month period ended
June 30, 1998, and the Current Reports on Form 8-K dated June 25, 1998 and July
23, 1998 (as amended by Form 8-K/A), which documents are incorporated by
reference into the accompanying Prospectus. In the opinion of management, the
operating data for the periods presented include all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the
information set forth therein.
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS EXCEPT PER PARTNERSHIP INTEREST/UNIT DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUES
Rental income $ 571,370 $ 290,799 $ 707,733 $ 454,412 $ 373,919 $ 220,727
Fee and asset management 2,790 3,110 5,697 6,749 7,030 4,739
Interest income-investment
in mortgage notes 10,221 8,011 20,366 12,819 4,862 -
Interest and other income 9,010 4,404 13,525 4,405 4,573 5,568
----------- ---------- ---------- ---------- ----------- ----------
Total revenues 593,391 306,324 747,321 478,385 390,384 231,034
----------- ---------- ---------- ---------- ----------- ----------
EXPENSES
Property and maintenance 137,910 70,760 176,075 127,172 112,186 66,534
Real estate taxes and insurance 56,484 29,667 69,520 44,128 37,002 23,028
Property management 25,110 11,819 26,793 17,512 15,213 10,249
Property management-non-recurring - - - - - 879
Fee and asset management 2,240 1,569 3,364 3,837 3,887 2,056
Depreciation 131,910 62,775 156,644 93,253 72,410 37,273
Interest:
Expense incurred 105,651 50,924 121,324 81,351 78,375 37,044
Amortization of deferred
financing costs 1,275 1,220 2,523 4,242 3,444 1,930
General and administrative 10,271 6,206 15,064 9,857 8,129 6,053
----------- ---------- ---------- ---------- ----------- ----------
Total expenses 470,851 234,940 571,307 381,352 330,646 185,046
----------- ---------- ---------- ---------- ----------- ----------
Income before gain on disposition of
properties and extraordinary items 122,540 71,384 176,014 97,033 59,738 45,988
Gain on disposition of properties 11,092 3,632 13,838 22,402 21,617 -
----------- ---------- ---------- ---------- ----------- ----------
Income before extraordinary items 133,632 75,016 189,852 119,435 81,355 45,988
Extraordinary items:
Write-off of unamortized costs
on refinanced debt - - - (3,512) - -
Gain on early extinguishment
of debt - - - - 2,000 -
----------- ---------- ---------- ---------- ----------- ----------
Net income $ 133,632 $ 75,016 $ 189,852 $ 115,923 $ 83,355 $ 45,988
----------- ---------- ---------- ---------- ----------- ----------
----------- ---------- ---------- ---------- ----------- ----------
Net income per weighted average
partnership interest outstanding $ 0.86 $ 0.86 $ 1.79 $ 1.70 $ 1.68 $ 1.34
----------- ---------- ---------- ---------- ----------- ----------
----------- ---------- ---------- ---------- ----------- ----------
Weighted average partnership
interests outstanding 105,077 62,787 73,182 51,108 42,749 34,150
----------- ---------- ---------- ---------- ----------- ----------
----------- ---------- ---------- ---------- ----------- ----------
Net income per weighted average
partnership interest outstanding- $ 0.85 $ 0.85 $ 1.76 $ 1.69 $ 1.67 $ 1.34
assuming dilution
----------- ---------- ---------- ---------- ----------- ----------
----------- ---------- ---------- ---------- ----------- ----------
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before accumulated
Depreciation $ 7,968,121 $ 4,482,434 $ 7,121,435 $ 2,983,510 $ 2,188,939 $ 1,963,476
Real estate, after accumulated
Depreciation $ 7,394,762 $ 4,124,835 $ 6,676,673 $ 2,681,998 $ 1,970,600 $ 1,770,735
Total assets $ 8,000,039 $ 4,738,734 $ 7,094,631 $ 2,986,127 $ 2,141,260 $ 1,847,685
Total debt $ 3,378,860 $ 1,758,388 $ 2,948,323 $ 1,254,274 $ 1,002,219 $ 994,746
9 3/8% Series A Cumulative
Redeemable Preference Units $ 153,000 $ 153,000 $ 153,000 $ 153,000 $ 153,000 $ -
9 1/8% Series B Cumulative
Redeemable Preference Units $ 125,000 $ 125,000 $ 125,000 $ 125,000 $ 125,000 $ -
9 1/8% Series C Cumulative
Redeemable Preference Units $ 115,000 $ 115,000 $ 115,000 $ 115,000 $ - $ -
8.60% Series D Cumulative
Redeemable Preference Units $ 175,000 $ 175,000 $ 175,000 $ - $ - $ -
Series E Cumulative
Convertible Preference Units $ 99,950 $ 99,995 $ 99,963 $ - $ - $ -
9.65% Series F Cumulative
Redeemable Preference Units $ 57,500 $ 57,500 $ 57,500 $ - $ - $ -
7 1/4% Series G Convertible
Cumulative Preference Units $ 316,250 $ - $ 316,250 $ - $ - $ -
Partners' capital $ 3,300,072 $ 2,116,411 $ 2,921,682 $ 1,216,467 $ 750,902 $ 761,373
</TABLE>
S-11
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes constitute a separate series of securities (which are more
fully described in the accompanying Prospectus) to be issued pursuant to an
indenture, dated as of October 1, 1994 (the "Indenture") between the
Operating Partnership and The First National Bank of Chicago, as trustee (the
"Trustee"). The terms of the Notes include those provisions contained in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
description of the particular terms of the Notes offered hereby (referred to
herein as the "Notes" and in the Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith, replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made. The
following summary of the Notes is qualified in its entirety by reference to
the Indenture referred to in the Prospectus and to the Notes to be issued
thereunder and to the Remarketing Agreement and the Remarketing Underwriting
Agreement (the forms of which will be filed, pursuant to a Current Report on
Form 8-K, as exhibits to the Registration Statement of which the accompanying
Prospectus forms a part). Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the accompanying Prospectus or
the Indenture, as the case may be.
The Notes will be limited to $100,000,000 in aggregate principal amount
and will mature, unless previously redeemed, on August 21, 2003. The Notes
will be direct, unsecured obligations of the Operating Partnership and will
rank equally with each other and with all other unsecured and unsubordinated
indebtedness of the Operating Partnership outstanding from time to time. The
Notes will be effectively subordinated to the prior claims of each secured
mortgage lender to any specific Property which secures such lender's
mortgage. As of June 30, 1998, such mortgages aggregated approximately $1.8
billion. As of June 30, 1998, the outstanding indebtedness of the Operating
Partnership with which the Notes will rank equally was approximately $1.4
billion (net of a $4.1 million discount and including a $7.4 million
premium). As of June 30, 1998, the Operating Partnership's total debt was
approximately $3.4 billion, and on a pro forma basis giving effect to this
Offering, the total outstanding indebtedness of the Operating Partnership was
approximately $3.5 billion. Subject to certain limitations set forth in the
Indenture, and as described under "Description of Debt Securities--Certain
Covenants--Limitations on Incurrence of Indebtedness" and "--Additional
Covenants and/or Modifications to the Covenants Described Above" in the
accompanying Prospectus, the Indenture permits the Operating Partnership to
incur additional secured and unsecured indebtedness.
The Notes will be issued only in fully registered, book-entry form. See
"--Book-Entry System" below.
The Notes will not be subject to a sinking fund.
CERTAIN COVENANTS
Reference is made to the sections entitled "Description of Debt
Securities--Certain Covenants" and "--Additional Covenants and/or
Modifications to the Covenants Described Above" in the accompanying
Prospectus for a description of the covenants applicable to the Notes.
Compliance with such covenants with respect to the Notes generally may not be
waived by the Board of Trustees of the Company, as general partner of the
Operating Partnership, or the Trustee unless the Holders of at least a
majority in principal amount of all outstanding Notes of such series consent
to such waiver.
FLOATING RATE MODE
During the period from and including August 21, 1998 to but excluding
August 23, 1999 (the "Initial Spread Period"), interest on the Notes will be
payable quarterly in arrears, on November 23, 1998, February 23, 1999, May 24,
1999 and August 23, 1999 and, for subsequent spread periods, on February 23, May
23, August 23 and November 23 unless otherwise specified on the applicable
Duration/Mode Determination Date (or, if any such days are not a Business Day
(as defined below), on the next succeeding Business Day (except as described
below)), to the persons in whose names the Notes are registered at the close of
business on the applicable record date (in the case of Notes in either the
Floating Rate Mode or the Fixed Rate Mode, the 15th calendar day, whether or not
a Business Day, next preceding the applicable Interest Payment Date) next
preceding such Interest Payment Date. During the Initial Spread Period and any
Subsequent Spread Period during which the Notes are in the Floating Rate Mode,
the interest rate on the Notes will be reset quarterly and the Notes will bear
interest at a per annum rate (computed on the basis of the actual number of days
elapsed over a 360-day year) equal to LIBOR (as defined below) for the
applicable Quarterly Period (as defined below), plus the applicable Spread (as
defined
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<PAGE>
below). Interest on the Notes will accrue from and including each Interest
Payment Date (or in the case of the Initial Quarterly Period (as defined
below), August 21, 1998) to but excluding the next succeeding Interest
Payment Date or maturity date, as the case may be. The Initial Quarterly
Period will be the period from and including August 21, 1998 to but excluding
the first Interest Payment Date (November 23, 1998) (the "Initial Quarterly
Period"). Thereafter, each Quarterly Period during the Initial Spread Period
or any Subsequent Spread Period (as defined below) (each, a "Quarterly
Period") will be from and including the most recent Interest Payment Date to
which interest has been paid to but excluding the next Interest Payment Date;
the first day of a Quarterly Period is referred to herein as an "Interest
Reset Date."
The Spread applicable during the Initial Spread Period will be .45% (the
"Initial Spread"), and the interest rate mode used for the Initial Spread
Period will be the Floating Rate Mode. Thus, the interest rate per annum
during the Initial Quarterly Period will be equal to LIBOR, determined as of
August 21, 1998, plus .45%. The interest rate per annum for each succeeding
Quarterly Period during the Initial Spread Period will equal LIBOR for such
Quarterly Period plus the Initial Spread. Thereafter, the Spread will be
determined in the manner described below for each subsequent Spread period
from and including each Commencement Date to but excluding each next
succeeding Commencement Date (a "Subsequent Spread Period"), which will be
one or more periods of at least six months and not more than four years (or
any integral-multiple of six months therein), designated by the Operating
Partnership, commencing on a February 23 or August 23 (or as otherwise
specified by the Operating Partnership and the Remarketing Underwriter (as
defined below) on the applicable Duration/Mode Determination Date (as defined
below) in connection with the establishment of each Subsequent Spread
Period), as applicable (a "Commencement Date"), through and including August
21, 2003 (no Subsequent Spread Period may end after August 21, 2003). The
first Commencement Date will be August 21, 1999.
If any Interest Payment Date (other than at maturity), redemption date,
Interest Reset Date, Commencement Date or Tender Date (as defined below)
would otherwise be a day that is not a Business Day, such Interest Payment
Date, redemption date, Interest Reset Date, Commencement Date or Tender Date
will be postponed to the next succeeding day that is a Business Day, except
that if such Business Day is in the next succeeding calendar month, such
Interest Payment Date, redemption date, Interest Reset Date, Commencement
Date or Tender Date shall be the next preceding Business Day.
LIBOR applicable for a Quarterly Period will be determined by the Rate
Agent (as defined under "--Tender at Option of Beneficial Owners" below) as
of the second London Business Day (as defined below) preceding each Interest
Reset Date (the "LIBOR Determination Date") in accordance with the following
provisions:
(i) LIBOR will be determined on the basis of the offered rates for
three-month deposits in U.S. dollars, commencing on the second London
Business Day immediately following such LIBOR Determination Date, which
appears on Telerate Page 3750 (as defined below) as of approximately
11:00 a.m., London time, on such LIBOR Determination Date. "Telerate
Page 3750" means the display designated on page "3750" on Dow Jones Markets
Limited (or such other page as may replace the 3750 page on that service,
any successor service or such other service or services as may be nominated
by the British Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits). If no rate appears on
Telerate Page 3750, LIBOR for such LIBOR Determination Date will be
determined in accordance with the provisions of paragraph (ii) below.
(ii) With respect to a LIBOR Determination Date on which no rate
appears on Telerate Page 3750 as of approximately 11:00 a.m., London time,
on such LIBOR Determination Date, the Rate Agent shall request the
principal London offices of each of four major reference banks in the
London interbank market selected by the Rate Agent to provide the Rate
Agent with a quotation of the rate at which three-month deposits in U.S.
dollars, commencing on the second London Business Day immediately following
such LIBOR Determination Date, are offered by it to prime banks in the
London interbank market as of approximately 11:00 a.m., London time, on
such LIBOR Determination Date in a principal amount equal to an amount of
not less than U.S. $1,000,000 that is representative for a single
transaction in such market at such time. If at least two such quotations
are provided, LIBOR for such LIBOR Determination Date will be the
arithmetic mean of such quotations as calculated by the Rate Agent. If
fewer than two quotations are provided, LIBOR for such LIBOR Determination
Date will be the arithmetic mean of the rates quoted as of approximately
11:00 a.m., New York City time, on such LIBOR Determination Date by three
major banks in The City of New York selected by the Rate Agent (after
consultation with the Operating Partnership) for loans in U.S. dollars to
leading European banks, having a three-month maturity commencing on the
second London Business Day immediately following such LIBOR Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Rate Agent are not quoting as mentioned in this sentence, LIBOR for
such LIBOR Determination Date will be LIBOR determined with
S-13
<PAGE>
respect to the immediately preceding LIBOR Determination Date, or in the
case of the first LIBOR Determination Date, LIBOR for the Initial Quarterly
Period.
FIXED RATE MODE
If the Notes are to be reset to the Fixed Rate Mode, as agreed to by the
Operating Partnership and the Remarketing Underwriter on a Duration/Mode
Determination Date, then the applicable Fixed Rate for the corresponding
Subsequent Spread Period will be determined by 1:00 p.m., New York City time,
on the third Business Day prior to the Commencement Date for such Subsequent
Spread Period (the "Fixed Rate Determination Date"), in accordance with the
following provisions: the Fixed Rate will be determined by adding (i) the
applicable Spread (as agreed to by the Operating Partnership and the
Remarketing Underwriter on the preceding Spread Determination Date (as
defined below)) to (ii) the yield to maturity determined by 1:00 p.m., New
York City time, on the Fixed Rate Determination Date (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the applicable United States Treasury security,
selected by the Rate Agent after consultation with the Remarketing
Underwriter, as having a maturity comparable to the duration selected for the
following Subsequent Spread Period, which would be used in accordance with
customary financial practice in pricing new issues of corporate debt
securities of comparable maturity to the duration selected for the following
Subsequent Spread Period.
Interest in the Fixed Rate Mode will be computed on the basis of a
360-day year of twelve 30-day months. Such interest will be payable
semiannually in arrears on the Interest Payment Dates (February 23 and August
23, unless otherwise specified by the Operating Partnership and the
Remarketing Underwriter on the applicable Duration/Mode Determination Date)
at the applicable Fixed Rate, as determined by the Operating Partnership and
the Remarketing Underwriter on the Fixed Rate Determination Date, beginning
on the Commencement Date and for the duration of the relevant Subsequent
Spread Period. Interest on the Notes will accrue from and including each
Interest Payment Date to but excluding the next succeeding Interest Payment
Date or maturity date, as the case may be. See "--Additional Terms of the
Notes" below for other provisions applicable to Notes in the Fixed Rate Mode.
If any Interest Payment Date or any redemption date in the Fixed Rate
Mode falls on a day that is not a Business Day (in either case, other than
any Interest Payment Date or redemption date that falls on a Commencement
Date, in which case such date will be postponed to the next day that is a
Business Day), the related payment of principal and interest will be made on
the next succeeding Business Day as if it were made on the date such payment
was due, and no interest will accrue on the amounts so payable for the period
from and after such dates.
ADDITIONAL TERMS OF THE NOTES
The Spread that will be applicable during each Subsequent Spread Period
will be the percentage (a) recommended by the Remarketing Underwriter (as
defined under "--Tender at Option of Beneficial Owners" below) so as to
result in a rate that, in the opinion of the Remarketing Underwriter, will
enable tendered Notes to be remarketed by the Remarketing Underwriter at 100%
of the principal amount thereof, as described under "--Tender at Option of
Beneficial Owners" below, and (b) agreed to by the Operating Partnership. The
interest rate mode during each Subsequent Spread Period shall be either the
Floating Rate Mode or the Fixed Rate Mode, as determined by the Operating
Partnership and the Remarketing Underwriter.
If the maturity date for the Notes falls on a day that is not a Business
Day, the related payment of principal and interest will be made on the next
succeeding Business Day as if it were made on the date such payment was due, and
no interest will accrue on the amounts so payable for the period from and after
such date.
Unless notice of redemption of the Notes as a whole has been given, the
duration, redemption dates, redemption type (I.E., par, premium or make-whole),
redemption prices (if applicable), Commencement Date, Interest Payment Dates,
interest rate mode (I.E., Fixed Rate Mode or Floating Rate Mode) and any other
relevant terms for each Subsequent Spread Period will be established by
3:00 p.m., New York City time, on the tenth Business Day prior to the
Commencement Date of each Subsequent Spread Period (the "Duration/Mode
Determination Date"). In addition, the Spread for each Subsequent Spread Period
will be established by 1:00 p.m., New York City time, on the fifth Business Day
prior to the Commencement Date of such Subsequent Spread Period (the "Spread
Determination Date"). The Operating Partnership will request not less than five
nor more than ten Business Days prior to any Spread Determination Date, that DTC
notify its Participants (as defined below) of such Spread Determination Date and
of the procedures that must be followed if any beneficial owner of a Note wishes
to tender such Note as described under "--Tender at Option of Beneficial Owners"
below. In the event that DTC or its nominee is no longer the holder of record of
the Notes, the Operating Partnership will notify the holders of Notes of such
information
S-14
<PAGE>
within such period of time. This will be the only notice given by the
Operating Partnership or the Remarketing Underwriter with respect to such
Spread Determination Date and procedures for tendering Notes. The term
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in The City of New York are required or authorized
to close and, in the case of Notes in the Floating Rate Mode, that is also a
London Business Day. The term "London Business Day" means any day on which
dealings in deposits in U.S. dollars are transacted in the London interbank
market.
In the event that the Operating Partnership and the Remarketing
Underwriter do not agree on the Spread for any Subsequent Spread Period, then
(1) the Subsequent Spread Period will be one year, (2) the Notes will be
reset to the Floating Rate Mode, (3) the Spread for such Subsequent Spread
Period will be the Alternate Spread (as defined below) and (4) the Notes will
be redeemable at the option of the Operating Partnership, in whole or in
part, upon at least five Business Days' notice given by no later than the
fifth Business Day after the Spread Determination Date in the manner
described under "--Redemption of the Notes" below, at a redemption price
equal to 100% of the principal amount thereof, together with accrued interest
to the redemption date, except that Notes may not be redeemed prior to the
Tender Date or later than the last day of such one-year Subsequent Spread
Period. The Alternate Spread will be the percentage equal to LIBOR
(determined as described above) for the Quarterly Period beginning on the
Commencement Date for such Subsequent Spread Period.
All percentages resulting from any calculation of any interest rate for
the Notes will be rounded, if necessary, to the nearest one hundred
thousandth of a percentage point, with five one millionths of a percentage
point rounded upward and all dollar amounts will be rounded to the nearest
cent, with one-half cent being rounded upward.
TENDER AT OPTION OF BENEFICIAL OWNERS
In the event the Operating Partnership and the Remarketing Underwriter
agree on the Spread on the Spread Determination Date with respect to any
Subsequent Spread Period, the Operating Partnership and the Remarketing
Underwriter will enter into a Remarketing Underwriting Agreement (the
"Remarketing Underwriting Agreement") on such Spread Determination Date,
under which the Remarketing Underwriter will agree, subject to the terms and
conditions set forth therein, to purchase from tendering holders of Notes on
the date immediately following the end of such Subsequent Spread Period (the
"Tender Date") all Notes with respect to which the Remarketing Underwriter
receives a Tender Notice as described below at 100% of the principal amount
thereof (the "Purchase Price"). In such event (except as otherwise provided
in the next succeeding paragraph), each beneficial owner of a Note may, at
such owner's option, upon giving notice as provided below (the "Tender
Notice"), tender such Note for purchase by the Remarketing Underwriter on the
Tender Date at the Purchase Price. The Purchase Price will be paid by the
Remarketing Underwriter in accordance with the standard procedures of DTC,
which currently provide for payments in same-day funds. Interest accrued on
the Notes with respect to the preceding interest period will be paid by the
Operating Partnership in the manner described under "--Book-Entry System"
below and "--Additional Terms of the Notes" above. If such beneficial owner
has an account at the Remarketing Underwriter and tenders such Note through
such account, such beneficial owner will not be required to pay any fee or
commission to the Remarketing Underwriter. If such Note is tendered through
a broker, dealer, commercial bank, trust company or other institution, other
than the Remarketing Underwriter, such holder may be required to pay fees or
commissions to such other institution. It is currently anticipated that
Notes so purchased by the Remarketing Underwriter will be remarketed by it.
The Tender Notice must be received by the Remarketing Underwriter during
the period commencing at 3:00 p.m., New York City time, on the Spread
Determination Date and ending at 12:00 noon, New York City time, on the
second Business Day following such Spread Determination Date for such
Subsequent Spread Period (the "Notice Date"). In order to ensure that a
Tender Notice is received on a particular day, the beneficial owner of Notes
must direct his broker or other designated Participant or Indirect
Participant to give such Tender Notice before the broker's cut-off time for
accepting instructions for that day. Different firms may have different
cut-off times for accepting instructions from their customers. Accordingly,
beneficial owners should consult the brokers or other Participants or
Indirect Participants through which they own their interests in the Notes for
the cut-off times for such brokers, other Participants or Indirect
Participants. See "--Book-Entry System" below. Except as otherwise provided
below, a Tender Notice shall be irrevocable. If a Tender Notice is not
received for any reason by the Remarketing Underwriter with respect to any
Note by 5:00 p.m., New York City time, on the Notice Date, the beneficial
owner of such Note shall be deemed to have elected not to tender such Note
for purchase by the Remarketing Underwriter.
The Remarketing Underwriter will attempt, on a reasonable best efforts
basis, to remarket the tendered Notes at a price equal to 100% of the aggregate
principal amount so tendered. There is no assurance that the Remarketing
Underwriter will be able to remarket the entire principal amount of Notes
tendered in a remarketing. The obligation of the Remarketing
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<PAGE>
Underwriter to purchase Notes from tendering holders of Notes will be subject
to several conditions precedent set forth in the Remarketing Underwriting
Agreement that are customary in the Operating Partnership's public offerings,
including a condition that no material adverse change in the condition,
financial or otherwise, or in the earnings, assets, business affairs or
business prospects, of the Operating Partnership and its subsidiaries,
considered as a single enterprise, shall have occurred since the Spread
Determination Date. In addition, the Remarketing Underwriting Agreement will
provide for the termination thereof by the Remarketing Underwriter upon the
occurrence of certain events that are also customary in the Operating
Partnership's public securities offerings. In the event that, due to such
events with respect to any Subsequent Spread Period, the Remarketing
Underwriter does not purchase on the relevant Tender Date all of the Notes
for which a Tender Notice shall have been given, (1) all such Tender Notices
will be null and void, (2) none of the Notes for which such Tender Notices
shall have been given will be purchased by the Remarketing Underwriter on
such Tender Date, (3) the Subsequent Spread Period will be one year, which
Subsequent Spread Period shall be deemed to have commenced upon the
applicable Commencement Date, (4) the Notes will be reset to the Floating
Rate Mode, (5) the Spread for such Subsequent Spread Period will be the
Alternate Spread and (6) the Notes will be redeemable at the option of the
Operating Partnership, in whole or in part, upon at least ten Business Days'
notice given by no later than the fifth Business Day following the relevant
Tender Date in the manner described under "--Redemption of the Notes" below,
on the date set forth in such notice, which shall be no later than the last
day of such one-year Subsequent Spread Period, at a redemption price equal to
100% of the principal amount thereof, together with accrued interest to the
redemption date.
No beneficial owner of any Note shall have any rights or claims against
the Operating Partnership or the Remarketing Underwriter as a result of the
Remarketing Underwriter not purchasing such Notes, except that such
beneficial owner shall have the right to receive the Alternate Spread on such
Notes from the Operating Partnership. The Operating Partnership will have no
obligation under any circumstance to repurchase any Notes, except in the case
of Notes called for redemption as described below.
If the Remarketing Underwriter does not purchase all Notes tendered for
purchase on any Tender Date, it will promptly notify the Operating
Partnership and the Trustee. As soon as practicable after receipt of such
notice, the Operating Partnership will cause a notice to be given to holders
of Notes specifying (1) the one-year duration of the Subsequent Spread
Period, (2) that the Notes will be reset to the Floating Rate Mode, (3) the
Spread for such Subsequent Spread Period (which shall be the Alternate
Spread) and (4) LIBOR for the initial Quarterly Period of such Subsequent
Spread Period.
The term "Remarketing Underwriter" means the nationally recognized
broker-dealer selected by the Operating Partnership to act as Remarketing
Underwriter. The term "Rate Agent" means the entity selected by the
Operating Partnership as its agent to determine (i) LIBOR and the interest
rate on the Notes for any Quarterly Period and/or (ii) the yield to maturity
on the applicable United States Treasury security that is used in connection
with the determination of the applicable Fixed Rate, and the ensuing
applicable Fixed Rate. Pursuant to the Remarketing Agreement, Merrill Lynch,
Pierce, Fenner & Smith Incorporated has agreed to act as Remarketing
Underwriter and Rate Agent. The Operating Partnership, in its sole
discretion, may change the Remarketing Underwriter and the Rate Agent for any
Subsequent Spread Period at any time on or prior to 3:00 p.m., New York City
time, on the Duration/Mode Determination Date relating thereto.
Each of the Rate Agent and the Remarketing Underwriter, in its
individual or any other capacity, may buy, sell, hold and deal in any of the
Notes. Either of such parties may exercise any vote or join in any action
which any beneficial owner of Notes may be entitled to exercise or take with
like effect as if it did not act in any capacity under the Remarketing
Agreement. Either of such parties, in its individual capacity, either as
principal or agent, may also engage in or have an interest in any financial
or other transaction with the Operating Partnership as freely as if it did
not act in any capacity under the Remarketing Agreement.
REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to August 23, 1999. On that date,
on each Commencement Date and on those Interest Payment Dates specified as
redemption dates by the Operating Partnership on the Duration/Mode
Determination Date in connection with any Subsequent Spread Period, the Notes
may be redeemed, at the option of the Operating Partnership, in whole or in
part, upon notice thereof given at any time during the 30 calendar day period
ending on the tenth Business Day prior to the redemption date, in accordance
with the redemption type selected on the Duration/Mode Determination Date.
In the event that less than all of the outstanding Notes are to be redeemed,
the Notes to be redeemed shall be selected by such method as the Operating
Partnership shall deem fair and appropriate. So long as the Global Note is
held by DTC, the Operating Partnership will give notice to DTC, whose nominee
is the record holder of all of the Notes, and DTC will determine the
principal amount to be redeemed from the account of each Participant. A
Participant may determine to redeem from some beneficial owners (which may
include a Participant holding Notes for its own account) without
S-16
<PAGE>
redeeming from the accounts of other beneficial owners. The Notes are also
subject to redemption as provided under "--Tender at Option of Beneficial
Owners" above.
The redemption type to be chosen by the Operating Partnership and the
Remarketing Underwriter on the Duration/Mode Determination Date may be one of
the following as defined herein: (i) Par Redemption; (ii) Premium Redemption or
(iii) Make-Whole Redemption. "Par Redemption" means redemption at a redemption
price equal to 100% of the principal amount thereof, plus accrued interest
thereon, if any, to the redemption date. "Premium Redemption" means redemption
at a redemption price or prices greater than 100% of the principal amount
thereof, plus accrued interest thereon, if any, to the redemption date, as
determined on the Duration/Mode Determination Date. "Make-Whole Redemption"
means redemption at a redemption price equal to the sum of (A) the principal
amount of the Notes being redeemed plus accrued interest thereof, if any, to the
redemption date and (B) the Make-Whole Amount (as defined below) if any, with
respect to such Notes.
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of
each dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have
been payable if such redemption or accelerated payment had not been made,
over (ii) the aggregate principal amount of the Notes being redeemed or paid.
"REINVESTMENT RATE" means .25% plus the yield on treasury securities at
constant maturity under the heading "Week Ending" published in the
Statistical Release (as defined below) under the caption "Treasury Constant
Maturities" for the maturity (rounded to the nearest month) corresponding to
the remaining life to maturity, as of the payment date of the principal being
redeemed or paid. If no maturity exactly corresponds to such maturity,
yields for the two published maturities most closely corresponding to such
maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding in each of such relevant periods to
the nearest month. For purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of determination
of the Make-Whole Amount shall be used.
"STATISTICAL RELEASE" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under
the Indenture, then such other reasonably comparable index which shall be
designated by the Rate Agent, after consultation with the Operating
Partnership.
BOOK-ENTRY SYSTEM
Upon issuance, the Notes will be issued only in the form of a Global
Note which will be deposited with, or on behalf of, DTC and registered in the
name of Cede & Co., as nominee of DTC. Unless and until it is exchanged in
whole or in part for Note in definitive form under the limited circumstances
described below, the Global Note may not be transferred except as a whole (i)
by DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or another
nominee of DTC, or (iii) by DTC or any such nominee to a successor of DTC or
a nominee of such successor. See "Description of Debt Securities Book
Entry Registration" in the accompanying Prospectus.
S-17
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), regulations
promulgated thereunder ("Treasury Regulations"), and rulings and decisions
now in effect, all of which are subject to change (prospectively or
retroactively). The following discussion deals only with Notes held as
capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, banks, insurance companies,
regulated investment companies, dealers in securities or currencies, persons
holding Notes as a hedge against currency risks or as a position in a
"straddle" for tax purposes, or persons whose functional currency is not the
United States dollar. It also does not deal with holders other than original
purchasers buying the Notes at the original offering price (except where
otherwise specifically noted). It does not discuss any state, local or
foreign tax consequences and does not discuss all aspects of Federal income
taxation that might be relevant to a specific holder in light of its
particular investment or tax circumstances.
PERSONS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any state thereof, (iii) an estate the income of which is subject to United
States Federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust. As used
herein, the term "Non-U.S. Holder" means a beneficial owner of a Note that is
not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. The Notes should constitute "variable rate debt
instruments" ("VRDI") and the interest payments received should be considered
"qualified stated interest" under section 1.1275-5 of the Treasury
Regulations. The interest received will thus be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or received in
accordance with the U.S. Holder's regular method of tax accounting.
DISPOSITION OF A NOTE. Based on the foregoing treatment, upon the sale,
exchange or retirement of a Note, a U.S. Holder generally will recognize
taxable gain or loss in an amount equal to the difference, if any, between
the amount realized upon the sale, exchange or retirement (other than amounts
representing accrued and unpaid interest which will be taxable as interest
income) and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note is generally equal to such U.S.
Holder's initial investment in such Note. Any such gain or loss generally
will be capital gain or loss, and generally will be a long-term capital gain
or loss if the Notes have been held for more than one year prior to the date
of disposition. Tax rates on capital gains received by individual U.S.
Holders vary depending on each U.S. Holder's income and holding period for
the Notes. U.S. Holders who are individuals should contact their own tax
advisors for more information or for the capital gains rate applicable to a
specific Note. The deduction of capital losses is subject to certain
limitations.
OTHER POSSIBLE TREATMENT OF THE NOTES. While the Operating Partnership
intends to treat the Notes as VRDIs issued without original issue discount
("OID"), it is possible that the Internal Revenue Service ("IRS") will take
the position that the Notes are either (i) VRDIs issued with OID, or (ii)
contingent payment debt instruments. In the event the IRS were successful in
either assertion, holders of Notes could experience U.S. Federal income tax
consequences significantly different from those discussed herein.
Prospective purchasers of Notes are urged to consult their tax advisors as to
the potential application of, and the consequences of applying, the
regulations governing VRDIs issued with OID and contingent payment
obligations.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to Federal income taxes on payment of
principal, premium (if any) or interest of a Note, unless such non-U.S. Holder
is a direct or indirect 10% or greater partner of the Operating Partnership, a
controlled foreign corporation related to the Operating Partnership or a bank
receiving interest described in section 881(c)(3)(A) of the
S-18
<PAGE>
Code, and provided that the interest is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
To qualify for the exemption from taxation, the last United States payor in
the chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a
statement that (i) is signed by the beneficial owner of the Note under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder and
(iii) provides the name and address of the beneficial owner. The statement
may be made on an IRS Form W-8 or a substantially similar form, and the
beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must
be accompanied by a copy of the IRS Form W-8 or the substitute form provided
by the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification
requirements aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes gain upon retirement or disposition of a Note,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
If a non-U.S. Holder is engaged in a trade or business in the United States
and interest or gain on the Note is effectively connected with the conduct of
such trade or business, such holder, although exempt from U.S. Federal
withholding tax as discussed above (or by reason of the delivery of a properly
completed Form 4224), is subject to U.S. Federal income tax on such interest and
on any gain realized on the sale, exchange or other disposition of a Note in the
same manner as if it were a U.S. Holder. In addition, if such non-U.S. Holder
is a foreign corporation, it may be subject to a branch profits tax equal to 30%
of its effectively connected earnings and profits for that taxable year, unless
it qualifies for a lower rate under an applicable income tax treaty.
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater partner of the
Operating Partnership or, at the time of such individual's death, payments in
respect of the Notes would have been effectively connected with the conduct
by such individual of a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the Notes to registered owners who
are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number)
in the required manner. Generally, individuals are not exempt recipients,
whereas corporations and certain other entities generally are exempt
recipients. Payments made in respect of the Notes to a U.S. Holder must be
reported to the IRS, unless the U.S. Holder is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in the preceding section would establish an exemption from backup
withholding for those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller
is a non-U.S. Holder (and certain other conditions are met). Such a sale
must also be reported by the broker to the IRS, unless either (i) the broker
determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status would normally be
made on an IRS Form W-8 under penalties of perjury, although in certain cases
it may be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's Federal income tax provided the required information is
furnished to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The IRS has announced that the New Regulations will generally be
effective for payments made after December 31, 1999, subject to certain
transition rules. Valid
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<PAGE>
withholding certificates that are held on December 31, 1999 will remain valid
until the earlier of December 31, 2000 or the expiration of the certificate
under rules currently in effect (unless otherwise invalidated due to changes
in circumstances of the person whose name is on such certificate).
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.
S-20
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Terms Agreement, dated
August 18 , 1998, incorporating by reference the related Purchase Agreement,
dated December 13, 1994, as amended (collectively, the "Purchase Agreement"),
the Operating Partnership has agreed to sell to each of the Underwriters named
below, and each of the Underwriters named below has severally agreed to purchase
from the Operating Partnership, at a price equal to 99.65% of the principal
amount thereof, the respective principal amount of Notes set forth opposite its
name below.
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
Merrill Lynch, Pierce, Fenner & Smith
Incorporated $ 75,000,000
Goldman, Sachs & Co. 25,000,000
----------------
TOTAL $ 100,000,000
----------------
----------------
The Underwriters have advised the Operating Partnership that the
Underwriters propose to offer the Notes from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of
sale. The Underwriters may effect such transactions by selling Notes to or
through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriters and
any purchasers of Notes for whom they may act as agent. The Underwriters and
any dealers that participate with the Underwriters in the distribution of the
Notes may be deemed to be underwriters, and any discounts or commissions
received by them and any profit on the resale of Notes by them may be deemed
to be underwriting compensation.
The Notes are a new issue of securities with no established trading
market. The Operating Partnership does not intend to apply for listing of the
Notes on a national securities exchange. The Operating Partnership has been
advised by the Underwriters that they intend to make a market in the Notes as
permitted by applicable laws and regulations, but are not obligated to do so
and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Notes.
Until the distribution of the Notes is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase
the Notes. As an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Notes. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection
with the offering, I.E., if they sell more of the Notes than are set forth on
the cover page of this Prospectus Supplement, the Underwriters may reduce
that short position by purchasing Notes in the open market.
In general, purchasers of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Operating Partnership nor the Underwriters make any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the Notes.
In addition, neither the Operating Partnership nor the Underwriters make any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Operating Partnership has agreed to indemnify the Underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"), or to contribute to payments
the Underwriters may be required to make in respect thereof.
The Underwriters from time to time provides investment banking and
financial advisory services to the Company and other entities owned or
controlled by Mr. Zell, and affiliates of the Underwriters from time to time
provide financing to such entities.
The Operating Partnership has purchased, and may purchase in the future,
multifamily properties from affiliates of Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
S-21
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH
THE OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE NOTES, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
The Offering................................... S-3
The Operating Partnership...................... S-4
Recent Developments............................ S-5
Use of Proceeds................................ S-7
Business and Properties........................ S-7
Selected Financial and Operating Information... S-10
Description of the Notes....................... S-12
Certain United States Federal Income Tax
Considerations............................... S-18
Underwriting................................... S-21
PROSPECTUS
Special Note Regarding Forward-Looking
Statements................................... 2
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Operating Partnership...................... 4
Use of Proceeds................................ 6
Ratios of Earnings to Combined Fixed Charges
and Preference Unit Distributions............ 6
Description of Debt Securities................. 7
Plan of Distribution........................... 19
Experts........................................ 20
Legal Matters.................................. 20
</TABLE>
$100,000,000
ERP OPERATING
LIMITED PARTNERSHIP
REMARKETED RESET NOTES DUE
AUGUST 21, 2003
------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
AUGUST 18, 1998
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