Equity Residential (NYSE: EQR) today reported results for the quarter and six months ended June 30, 2018. All per share results are reported as available to common shares/units on a diluted basis. Earnings per Share (EPS) was $0.31, Funds From Operations (FFO) was $0.81 per share and Normalized FFO was $0.81 per share for the second quarter of 2018, each as described in further detail below.
“The primary leasing season of 2018 has again demonstrated the resilient and nearly insatiable demand for rental housing across our markets,” said David J. Neithercut, Equity Residential’s President and CEO. “Strong demand and an enterprise wide focus on customer service continue to drive high occupancy and ever improving resident retention despite elevated levels of new supply. As a result, we are pleased to now expect full year same store revenue growth towards the upper end of our initial guidance expectations.”
Highlights
- The Company increased the midpoint of its same store revenue guidance range to 2.1% from 1.6%.
- During the second quarter of 2018, the Company produced Physical Occupancy of 96.2%, new lease rate growth of 1.4% and renewal rate growth of 4.7%, all of which were ahead of the Company’s expectations. The Company also produced the lowest second quarter same store turnover in its history.
- The Company began the development of West End Tower, a 469-unit, 44-story apartment property in Boston’s West End neighborhood. The project is estimated to cost approximately $409.7 million and be completed in 2021.
- On August 12, Equity Residential will celebrate 25 years as a publicly listed company.
Second Quarter 2018
EPS for the second quarter of 2018 was $0.31 compared to $0.53 in the second quarter of 2017. The difference is due primarily to higher property sale gains in the second quarter of 2017, the various adjustment items listed on page 23 of this release and the items described below.
FFO as defined by Nareit (National Association of Real Estate Investment Trusts) was $0.81 per share for the second quarter of 2018 compared to $0.77 per share in the second quarter of 2017. The difference is due primarily to the various adjustment items listed on page 23 of this release and the items described below.
Normalized FFO for the second quarter of 2018 was $0.81 per share compared to $0.77 per share in the second quarter of 2017. The difference is due primarily to:
- A positive impact of approximately $0.02 per share from increased same store net operating income (NOI);
- A positive impact of approximately $0.03 per share from Lease-Up NOI; and
- A negative impact of approximately $0.01 per share from higher total interest expense.
The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 25 through 29 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 26 and 27 of this release and the Company has included guidance for Normalized FFO on page 24 and FFO and EPS on page 27 of this release.
Six Months Ended June 30, 2018
EPS for the six months ended June 30, 2018 was $0.88 compared to $0.92 in the six months ended June 30, 2017. The difference is due primarily to higher depreciation expense and higher property sale gains in the first six months of 2018, the various adjustment items listed on page 23 of this release and the items described below.
FFO was $1.52 per share for the six months ended June 30, 2018 compared to $1.53 per share for the six months ended June 30, 2017. The difference is due primarily to the various adjustment items listed on page 23 of this release and the items described below.
Normalized FFO for the six months ended June 30, 2018 was $1.58 per share compared to $1.51 per share for the six months ended June 30, 2017. The following items impacted Normalized FFO per share in the period:
- A positive impact of approximately $0.03 per share from increased same store NOI;
- A positive impact of approximately $0.06 per share from Lease-Up NOI and other non-same store NOI;
- A negative impact of approximately $0.01 per share from higher total interest expense; and
- A negative impact of approximately $0.01 per share from higher corporate overhead (property management and general and administrative expenses).
Same Store Results
On a same store second quarter to second quarter comparison, which includes 72,629 apartment units, revenues increased 2.2%, expenses increased 3.2% and NOI increased 1.8%. Average Rental Rate increased 1.9% and Physical Occupancy increased by 0.4% to 96.2%.
On a same store six-month to six-month comparison, which includes 72,210 apartment units, revenues increased 2.2%, expenses increased 3.5% and NOI increased 1.6%. Average Rental Rate increased 1.9% and Physical Occupancy increased 0.3% to 96.1%.
Investment Activity
During the second quarter of 2018, the Company acquired a 240-unit apartment property located in Hoboken, New Jersey for a purchase price of approximately $146.0 million at an Acquisition Capitalization Rate of 4.5%. The Company did not sell an apartment property during the second quarter but did sell a land parcel in suburban Maryland for approximately $2.7 million. The Company also began a $409.7 million development project in Boston, as described above, during the second quarter of 2018.
During the first six months of 2018, the Company acquired two apartment properties consisting of 357 apartment units, including the property described above, for an aggregate purchase price of approximately $199.7 million at a weighted average Acquisition Capitalization Rate of 4.5%. Also during the first six months of 2018, the Company sold four apartment properties, consisting of 786 apartment units, for an aggregate sale price of approximately $290.0 million at a weighted average Disposition Yield of 4.4%, generating an Unlevered IRR of 8.1%, as well as the land parcel described above.
Third Quarter 2018 Guidance
The Company has established an EPS guidance range of $0.59 to $0.63 for the third quarter of 2018. The difference between the Company’s second quarter 2018 EPS of $0.31 and the midpoint of the third quarter 2018 guidance range of $0.61 is due primarily to higher expected gains on property sales and the items described below, partially offset by an expected write-off of a non-cash unamortized discount from a debt extinguishment in connection with the planned sale of an apartment property.
The Company has established an FFO guidance range of $0.76 to $0.80 per share for the third quarter of 2018. The difference between the Company’s second quarter 2018 FFO of $0.81 per share and the midpoint of the third quarter 2018 guidance range of $0.78 per share is due primarily to the expected write-off of a non-cash unamortized debt discount described above, partially offset by the items described below.
The Company has established a Normalized FFO guidance range of $0.81 to $0.85 per share for the third quarter of 2018. The difference between the Company’s second quarter 2018 Normalized FFO of $0.81 per share and the midpoint of the third quarter 2018 guidance range of $0.83 per share is due primarily to:
- A positive impact of approximately $0.01 per share from increased same store NOI;
- A positive impact of approximately $0.01 per share from increased NOI as a result of the Company’s 2018 transaction activity;
- A positive impact of approximately $0.01 per share from lower corporate overhead (property management and general and administrative expenses); and
- A negative impact of approximately $0.01 per share from higher total interest expense.
Full Year 2018 Guidance
The Company has revised its guidance for its full year 2018 same store operating performance, EPS, FFO per share, Normalized FFO per share and transactions as listed below:
| Revised | Previous | |||||
| Same Store: | ||||||
| Physical Occupancy | 96.1% | 96.0% | ||||
| Revenue change | 1.9% to 2.3% | 1.0% to 2.25% | ||||
| Expense change | 3.5% to 4.0% | 3.5% to 4.5% | ||||
| NOI change | 1.0% to 1.8% | 0.0% to 1.5% | ||||
| EPS | $1.80 to $1.86 | $1.75 to $1.85 | ||||
| FFO per share | $3.10 to $3.16 | $3.10 to $3.20 | ||||
| Normalized FFO per share | $3.22 to $3.28 | $3.17 to $3.27 | ||||
| Transactions: | ||||||
| Consolidated rental acquisitions | $700.0 million | $500.0 million | ||||
| Consolidated rental dispositions | $700.0 million | $500.0 million | ||||
| Acquisition Cap Rate/Disposition Yield spread | 0 to 25 basis points | 50 basis points | ||||
The change in the full year EPS guidance range is due primarily to higher expected gains on property sales and the items described below, partially offset by the expected write-off of a non-cash unamortized debt discount described above and higher expected depreciation expense.
The change in the full year FFO per share guidance range is due primarily to the expected write-off of a non-cash unamortized debt discount described above, partially offset by the items described below.
The change in the full year Normalized FFO per share guidance range is due primarily to:
- A positive impact of approximately $0.03 per share from increased same store NOI;
- A positive impact of approximately $0.01 per share from increased NOI as a result of the Company’s revised 2018 transaction activity; and
- A negative impact of approximately $0.01 per share from higher total interest expense.
Third Quarter 2018 Earnings and Conference Call
Equity Residential expects to announce its third quarter 2018 results on Tuesday, October 23, 2018 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, October 24, 2018.
About Equity Residential
Equity Residential is an S&P 500 company focused on the acquisition, development and management of rental apartment properties in urban and high-density suburban coastal gateway markets where today’s renters want to live, work and play. Equity Residential owns or has investments in 304 properties consisting of 78,645 apartment units, primarily located in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California. For more information on Equity Residential, please visit our website at www.equityapartments.com.
Forward-Looking Statements
In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. Other risks and uncertainties are described under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
A live web cast of the Company’s conference call discussing these results will take place tomorrow, Wednesday, July 25, at 10:00 a.m. Central. Please visit the Investor section of the Company’s web site at www.equityapartments.com for the link. A replay of the web cast will be available for two weeks at this site.
| Equity Residential | |||||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||||
(Amounts in thousands except per share data) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Six Months Ended June 30, | Quarter Ended June 30, | ||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| REVENUES | |||||||||||||||||||
| Rental income | $ | 1,272,451 | $ | 1,216,219 | $ | 639,620 | $ | 612,299 | |||||||||||
| Fee and asset management | 373 | 361 | 188 | 181 | |||||||||||||||
| Total revenues | 1,272,824 | 1,216,580 | 639,808 | 612,480 | |||||||||||||||
| EXPENSES | |||||||||||||||||||
| Property and maintenance | 211,946 | 201,924 | 103,744 | 99,316 | |||||||||||||||
| Real estate taxes and insurance | 181,396 | 169,231 | 89,482 | 87,503 | |||||||||||||||
| Property management | 46,928 | 43,841 | 23,484 | 21,589 | |||||||||||||||
| General and administrative | 28,780 | 27,799 | 12,502 | 13,626 | |||||||||||||||
| Depreciation | 389,251 | 358,864 | 192,942 | 179,896 | |||||||||||||||
| Total expenses | 858,301 | 801,659 | 422,154 | 401,930 | |||||||||||||||
| Operating income | 414,523 | 414,921 | 217,654 | 210,550 | |||||||||||||||
| Interest and other income | 6,996 | 1,763 | 1,116 | 1,162 | |||||||||||||||
| Other expenses | (7,210 | ) | (2,132 | ) | (3,769 | ) | (1,042 | ) | |||||||||||
| Interest: | |||||||||||||||||||
| Expense incurred, net | (210,235 | ) | (197,434 | ) | (94,131 | ) | (91,224 | ) | |||||||||||
| Amortization of deferred financing costs | (5,778 | ) | (4,383 | ) | (2,099 | ) | (2,087 | ) | |||||||||||
Income before income and other taxes, income (loss) from | |||||||||||||||||||
investments in unconsolidated entities and net gain (loss) | |||||||||||||||||||
on sales of real estate properties and land parcels | 198,296 | 212,735 | 118,771 | 117,359 | |||||||||||||||
| Income and other tax (expense) benefit | (487 | ) | (482 | ) | (274 | ) | (220 | ) | |||||||||||
| Income (loss) from investments in unconsolidated entities | (2,008 | ) | (1,755 | ) | (1,031 | ) | (682 | ) | |||||||||||
| Net gain (loss) on sales of real estate properties | 142,162 | 124,433 | (51 | ) | 87,726 | ||||||||||||||
| Net gain (loss) on sales of land parcels | 995 | 19,170 | 995 | (23 | ) | ||||||||||||||
| Net income | 338,958 | 354,101 | 118,410 | 204,160 | |||||||||||||||
| Net (income) loss attributable to Noncontrolling Interests: | |||||||||||||||||||
| Operating Partnership | (12,358 | ) | (12,765 | ) | (4,299 | ) | (7,354 | ) | |||||||||||
| Partially Owned Properties | (1,189 | ) | (1,553 | ) | (509 | ) | (765 | ) | |||||||||||
| Net income attributable to controlling interests | 325,411 | 339,783 | 113,602 | 196,041 | |||||||||||||||
| Preferred distributions | (1,545 | ) | (1,546 | ) | (772 | ) | (773 | ) | |||||||||||
| Net income available to Common Shares | $ | 323,866 | $ | 338,237 | $ | 112,830 | $ | 195,268 | |||||||||||
| Earnings per share – basic: | |||||||||||||||||||
| Net income available to Common Shares | $ | 0.88 | $ | 0.92 | $ | 0.31 | $ | 0.53 | |||||||||||
| Weighted average Common Shares outstanding | 367,865 | 366,713 | 367,930 | 366,820 | |||||||||||||||
| Earnings per share – diluted: | |||||||||||||||||||
| Net income available to Common Shares | $ | 0.88 | $ | 0.92 | $ | 0.31 | $ | 0.53 | |||||||||||
| Weighted average Common Shares outstanding | 383,224 | 382,505 | 383,423 | 382,692 | |||||||||||||||
| Distributions declared per Common Share outstanding | $ | 1.08 | $ | 1.0075 | $ | 0.54 | $ | 0.50375 | |||||||||||
| Equity Residential | |||||||||||||||||||
| Consolidated Statements of Funds From Operations and Normalized Funds From Operations | |||||||||||||||||||
(Amounts in thousands except per share data) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
| Six Months Ended June 30, | Quarter Ended June 30, | ||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| Net income | $ | 338,958 | $ | 354,101 | $ | 118,410 | $ | 204,160 | |||||||||||
Net (income) loss attributable to Noncontrolling Interests – Partially | |||||||||||||||||||
Owned Properties | (1,189 | ) | (1,553 | ) | (509 | ) | (765 | ) | |||||||||||
| Preferred distributions | (1,545 | ) | (1,546 | ) | (772 | ) | (773 | ) | |||||||||||
| Net income available to Common Shares and Units | 336,224 | 351,002 | 117,129 | 202,622 | |||||||||||||||
| Adjustments: | |||||||||||||||||||
| Depreciation | 389,251 | 358,864 | 192,942 | 179,896 | |||||||||||||||
| Depreciation – Non-real estate additions | (2,260 | ) | (2,580 | ) | (1,115 | ) | (1,282 | ) | |||||||||||
| Depreciation – Partially Owned Properties | (1,933 | ) | (1,666 | ) | (901 | ) | (834 | ) | |||||||||||
| Depreciation – Unconsolidated Properties | 2,297 | 2,285 | 1,149 | 1,143 | |||||||||||||||
Net (gain) loss on sales of unconsolidated entities - operating | |||||||||||||||||||
assets | — | (68 | ) | — | — | ||||||||||||||
| Net (gain) loss on sales of real estate properties | (142,162 | ) | (124,433 | ) | 51 | (87,726 | ) | ||||||||||||
|
Noncontrolling Interests share of gain (loss) on sales
of real estate properties | (284 | ) | — | (284 | ) | — | |||||||||||||
| FFO available to Common Shares and Units | 581,133 | 583,404 | 308,971 | 293,819 | |||||||||||||||
| Adjustments (see page 23 for additional detail): | |||||||||||||||||||
| Asset impairment and valuation allowances | — | — | — | — | |||||||||||||||
| Write-off of pursuit costs | 2,066 | 1,546 | 1,135 | 831 | |||||||||||||||
|
Debt extinguishment and preferred share redemption (gains)
losses | 23,539 | 12,402 | — | 98 | |||||||||||||||
| Non-operating asset (gains) losses | (478 | ) | (18,950 | ) | (691 | ) | (58 | ) | |||||||||||
| Other miscellaneous items | (1,470 | ) | (790 | ) | 1,769 | (799 | ) | ||||||||||||
| Normalized FFO available to Common Shares and Units | $ | 604,790 | $ | 577,612 | $ | 311,184 | $ | 293,891 | |||||||||||
| FFO | $ | 582,678 | $ | 584,950 | $ | 309,743 | $ | 294,592 | |||||||||||
| Preferred distributions | (1,545 | ) | (1,546 | ) | (772 | ) | (773 | ) | |||||||||||
| FFO available to Common Shares and Units | $ | 581,133 | $ | 583,404 | $ | 308,971 | $ | 293,819 | |||||||||||
| FFO per share and Unit - basic | $ | 1.53 | $ | 1.54 | $ | 0.81 | $ | 0.77 | |||||||||||
| FFO per share and Unit - diluted | $ | 1.52 | $ | 1.53 | $ | 0.81 | $ | 0.77 | |||||||||||
| Normalized FFO | $ | 606,335 | $ | 579,158 | $ | 311,956 | $ | 294,664 | |||||||||||
| Preferred distributions | (1,545 | ) | (1,546 | ) | (772 | ) | (773 | ) | |||||||||||
| Normalized FFO available to Common Shares and Units | $ | 604,790 | $ | 577,612 | $ | 311,184 | $ | 293,891 | |||||||||||
| Normalized FFO per share and Unit - basic | $ | 1.59 | $ | 1.52 | $ | 0.82 | $ | 0.77 | |||||||||||
| Normalized FFO per share and Unit - diluted | $ | 1.58 | $ | 1.51 | $ | 0.81 | $ | 0.77 | |||||||||||
| Weighted average Common Shares and Units outstanding - basic | 380,729 | 379,619 | 380,795 | 379,733 | |||||||||||||||
| Weighted average Common Shares and Units outstanding - diluted | 383,224 | 382,505 | 383,423 | 382,692 | |||||||||||||||
Note: See page 23 for additional detail regarding the adjustments from FFO to Normalized FFO. See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.
| Equity Residential | ||||||||||
| Consolidated Balance Sheets | ||||||||||
(Amounts in thousands except for share amounts) | ||||||||||
(Unaudited) | ||||||||||
| June 30, | December 31, | |||||||||
| 2018 | 2017 | |||||||||
| ASSETS | ||||||||||
| Investment in real estate | ||||||||||
| Land | $ | 5,986,329 | $ | 5,996,024 | ||||||
| Depreciable property | 19,946,606 | 19,768,362 | ||||||||
| Projects under development | 145,564 | 163,547 | ||||||||
| Land held for development | 86,098 | 98,963 | ||||||||
| Investment in real estate | 26,164,597 | 26,026,896 | ||||||||
| Accumulated depreciation | (6,338,043 | ) | (6,040,378 | ) | ||||||
| Investment in real estate, net | 19,826,554 | 19,986,518 | ||||||||
| Cash and cash equivalents | 34,507 | 50,647 | ||||||||
| Investments in unconsolidated entities | 58,124 | 58,254 | ||||||||
| Restricted deposits | 54,370 | 50,115 | ||||||||
| Other assets | 433,027 | 425,065 | ||||||||
| Total assets | $ | 20,406,582 | $ | 20,570,599 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Liabilities: | ||||||||||
| Mortgage notes payable, net | $ | 2,894,325 | $ | 3,618,722 | ||||||
| Notes, net | 5,532,637 | 5,038,812 | ||||||||
| Line of credit and commercial paper | 345,807 | 299,757 | ||||||||
| Accounts payable and accrued expenses | 146,415 | 114,766 | ||||||||
| Accrued interest payable | 63,341 | 58,035 | ||||||||
| Other liabilities | 344,159 | 341,852 | ||||||||
| Security deposits | 66,800 | 65,009 | ||||||||
| Distributions payable | 206,829 | 192,828 | ||||||||
| Total liabilities | 9,600,313 | 9,729,781 | ||||||||
| Commitments and contingencies | ||||||||||
| Redeemable Noncontrolling Interests – Operating Partnership | 366,483 | 366,955 | ||||||||
| Equity: | ||||||||||
| Shareholders’ equity: | ||||||||||
|
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 745,600 shares issued and outstanding as of June 30, 2018 and December 31, 2017 | 37,280 | 37,280 | ||||||||
|
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 368,278,336 shares issued and outstanding as of June 30, 2018 and 368,018,082 shares issued and outstanding as of December 31, 2017 | 3,683 | 3,680 | ||||||||
| Paid in capital | 8,905,184 | 8,886,586 | ||||||||
| Retained earnings | 1,329,600 | 1,403,530 | ||||||||
| Accumulated other comprehensive income (loss) | (67,310 | ) | (88,612 | ) | ||||||
| Total shareholders’ equity | 10,208,437 | 10,242,464 | ||||||||
| Noncontrolling Interests: | ||||||||||
| Operating Partnership | 232,995 | 226,691 | ||||||||
| Partially Owned Properties | (1,646 | ) | 4,708 | |||||||
| Total Noncontrolling Interests | 231,349 | 231,399 | ||||||||
| Total equity | 10,439,786 | 10,473,863 | ||||||||
| Total liabilities and equity | $ | 20,406,582 | $ | 20,570,599 | ||||||
| Equity Residential | |||||||||||||||||||
| Portfolio Summary | |||||||||||||||||||
| As of June 30, 2018 | |||||||||||||||||||
| % of | Average | ||||||||||||||||||
| Apartment | Stabilized | Rental | |||||||||||||||||
| Markets/Metro Areas | Properties | Units | NOI | Rate | |||||||||||||||
| Los Angeles | 70 | 15,968 | 18.2 | % | $ | 2,490 | |||||||||||||
| Orange County | 13 | 4,028 | 4.4 | % | 2,174 | ||||||||||||||
| San Diego | 12 | 3,385 | 3.8 | % | 2,321 | ||||||||||||||
| Subtotal – Southern California | 95 | 23,381 | 26.4 | % | 2,411 | ||||||||||||||
| San Francisco | 55 | 13,424 | 20.3 | % | 3,147 | ||||||||||||||
| Washington DC | 48 | 15,811 | 17.2 | % | 2,386 | ||||||||||||||
| New York | 38 | 10,247 | 16.4 | % | 3,820 | ||||||||||||||
| Seattle | 41 | 8,438 | 10.0 | % | 2,368 | ||||||||||||||
| Boston | 24 | 6,263 | 9.7 | % | 3,021 | ||||||||||||||
| Other Markets | 1 | 136 | — | % | 1,187 | ||||||||||||||
| Total | 302 | 77,700 | 100.0 | % | 2,763 | ||||||||||||||
| Unconsolidated Properties | 2 | 945 | — | — | |||||||||||||||
| Grand Total | 304 | 78,645 | 100.0 | % | $ | 2,763 | |||||||||||||
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
| Equity Residential | |||||||||
| Portfolio as of June 30, 2018 | |||||||||
| Properties | Apartment Units | ||||||||
| Wholly Owned Properties | 284 | 74,003 | |||||||
| Master-Leased Properties - Consolidated | 1 | 162 | |||||||
| Partially Owned Properties - Consolidated | 17 | 3,535 | |||||||
| Partially Owned Properties - Unconsolidated | 2 | 945 | |||||||
| 304 | 78,645 | ||||||||
Note: Effective April 2, 2018, the Company took over management of one of its Master-Leased Properties containing 597 apartment units located in Los Angeles.
| Portfolio Rollforward Q2 2018 | |||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||
| Apartment | Purchase | Acquisition | |||||||||||||||||||||
| Properties | Units | Price | Cap Rate | ||||||||||||||||||||
| 3/31/2018 | 303 | 78,399 | |||||||||||||||||||||
| Acquisitions: | |||||||||||||||||||||||
| Consolidated: | |||||||||||||||||||||||
| Rental Properties | 1 | 240 | $ | 146,000 | 4.5 | % | |||||||||||||||||
| Disposition | |||||||||||||||||||||||
| Sales Price | Yield | ||||||||||||||||||||||
| Dispositions: | |||||||||||||||||||||||
| Consolidated: | |||||||||||||||||||||||
| Land Parcels | — | — | $ | (2,700 | ) | ||||||||||||||||||
| Configuration Changes | — | 6 | |||||||||||||||||||||
| 6/30/2018 | 304 | 78,645 | |||||||||||||||||||||
| Portfolio Rollforward 2018 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||
| Apartment | Purchase | Acquisition | ||||||||||||||||||||
| Properties | Units | Price | Cap Rate | |||||||||||||||||||
| 12/31/2017 | 305 | 78,611 | ||||||||||||||||||||
| Acquisitions: | ||||||||||||||||||||||
| Consolidated: | ||||||||||||||||||||||
| Rental Properties | 2 | 357 | $ | 199,700 | 4.5 | % | ||||||||||||||||
| Sales Price | Disposition Yield | |||||||||||||||||||||
| Dispositions: | ||||||||||||||||||||||
| Consolidated: | ||||||||||||||||||||||
| Rental Properties | (4 | ) | (786 | ) | $ | (290,020 | ) | (4.4 | %) | |||||||||||||
| Land Parcels | — | — | $ | (2,700 | ) | |||||||||||||||||
| Completed Developments - Consolidated | 1 | 449 | ||||||||||||||||||||
| Configuration Changes | — | 14 | ||||||||||||||||||||
| 6/30/2018 | 304 | 78,645 | ||||||||||||||||||||
| Equity Residential | ||||||||||||||||||||||||||
| Second Quarter 2018 vs. Second Quarter 2017 | ||||||||||||||||||||||||||
| Same Store Results/Statistics for 72,629 Same Store Apartment Units | ||||||||||||||||||||||||||
$ in thousands (except for Average Rental Rate) | ||||||||||||||||||||||||||
| Results | Statistics | |||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||
| Rental | Physical | |||||||||||||||||||||||||
| Description | Revenues | Expenses | NOI | Rate | Occupancy | Turnover | ||||||||||||||||||||
| Q2 2018 | $ | 599,628 | $ | 177,679 | $ | 421,949 | $ | 2,752 | 96.2 | % | 13.4 | % | ||||||||||||||
| Q2 2017 | $ | 586,757 | $ | 172,104 | $ | 414,653 | $ | 2,701 | 95.8 | % | 14.0 | % | ||||||||||||||
| Change | $ | 12,871 | $ | 5,575 | $ | 7,296 | $ | 51 | 0.4 | % | (0.6 | %) | ||||||||||||||
| Change | 2.2 | % | 3.2 | % | 1.8 | % | 1.9 | % | ||||||||||||||||||
| Second Quarter 2018 vs. First Quarter 2018 | ||||||||||||||||||||||||||
| Same Store Results/Statistics for 74,655 Same Store Apartment Units | ||||||||||||||||||||||||||
$ in thousands (except for Average Rental Rate) | ||||||||||||||||||||||||||
| Results | Statistics | |||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||
| Rental | Physical | |||||||||||||||||||||||||
| Description | Revenues | Expenses | NOI | Rate | Occupancy | Turnover | ||||||||||||||||||||
| Q2 2018 | $ | 616,032 | $ | 182,521 | $ | 433,511 | $ | 2,752 | 96.2 | % | 13.5 | % | ||||||||||||||
| Q1 2018 | $ | 610,095 | $ | 186,143 | $ | 423,952 | $ | 2,729 | 96.0 | % | 10.7 | % | ||||||||||||||
| Change | $ | 5,937 | $ | (3,622 | ) | $ | 9,559 | $ | 23 | 0.2 | % | 2.8 | % | |||||||||||||
| Change | 1.0 | % | (1.9 | %) | 2.3 | % | 0.8 | % | ||||||||||||||||||
| June YTD 2018 vs. June YTD 2017 | ||||||||||||||||||||||||||
| Same Store Results/Statistics for 72,210 Same Store Apartment Units | ||||||||||||||||||||||||||
$ in thousands (except for Average Rental Rate) | ||||||||||||||||||||||||||
| Results | Statistics | |||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||
| Rental | Physical | |||||||||||||||||||||||||
| Description | Revenues | Expenses | NOI | Rate | Occupancy | Turnover | ||||||||||||||||||||
| YTD 2018 | $ | 1,183,348 | $ | 355,724 | $ | 827,624 | $ | 2,732 | 96.1 | % | 24.1 | % | ||||||||||||||
| YTD 2017 | $ | 1,158,193 | $ | 343,753 | $ | 814,440 | $ | 2,682 | 95.8 | % | 25.4 | % | ||||||||||||||
| Change | $ | 25,155 | $ | 11,971 | $ | 13,184 | $ | 50 | 0.3 | % | (1.3 | %) | ||||||||||||||
| Change | 2.2 | % | 3.5 | % | 1.6 | % | 1.9 | % | ||||||||||||||||||
Note: See page 28 for reconciliations from operating income.
| Equity Residential | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Second Quarter 2018 vs. Second Quarter 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same Store Results/Statistics by Market | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (Decrease) from Prior Year's Quarter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Q2 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q2 2018 | Q2 2018 | Weighted | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| % of | Average | Average | Average | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Apartment | Actual | Rental | Physical | Q2 2018 | Rental | Physical | ||||||||||||||||||||||||||||||||||||||||||||||||
| Markets/Metro Areas | Units | NOI | Rate | Occupancy % | Turnover | Revenues | Expenses | NOI | Rate | Occupancy | Turnover | |||||||||||||||||||||||||||||||||||||||||||
| Los Angeles (1) | 14,240 | 17.4 | % | $ | 2,487 | 96.0 | % | 14.4 | % | 2.7 | % | 2.6 | % | 2.8 | % | 3.2 | % | 0.3 | % | (1.1 | %) | |||||||||||||||||||||||||||||||||
| Orange County | 3,684 | 4.1 | % | 2,151 | 95.9 | % | 14.4 | % | 3.8 | % | 3.5 | % | 3.9 | % | 4.3 | % | (0.4 | %) | 1.2 | % | ||||||||||||||||||||||||||||||||||
| San Diego | 3,385 | 4.0 | % | 2,321 | 96.4 | % | 14.9 | % | 4.7 | % | 0.9 | % | 6.1 | % | 4.2 | % | 0.1 | % | (0.8 | %) | ||||||||||||||||||||||||||||||||||
| Subtotal – Southern California | 21,309 | 25.5 | % | 2,402 | 96.1 | % | 14.5 | % | 3.2 | % | 2.4 | % | 3.4 | % | 3.5 | % | 0.2 | % | (0.6 | %) | ||||||||||||||||||||||||||||||||||
| San Francisco | 12,734 | 20.8 | % | 3,088 | 96.2 | % | 12.9 | % | 3.1 | % | (3.1 | %) | 5.3 | % | 2.5 | % | 0.5 | % | (0.1 | %) | ||||||||||||||||||||||||||||||||||
| Washington DC | 15,475 | 17.9 | % | 2,382 | 96.3 | % | 13.5 | % | 1.5 | % | 3.1 | % | 0.8 | % | 0.7 | % | 0.8 | % | (0.8 | %) | ||||||||||||||||||||||||||||||||||
| New York | 10,007 | 17.5 | % | 3,826 | 96.8 | % | 9.5 | % | 0.4 | % | 7.3 | % | (3.5 | %) | (0.3 | %) | 0.7 | % | (1.8 | %) | ||||||||||||||||||||||||||||||||||
| Boston | 6,009 | 9.9 | % | 2,998 | 96.3 | % | 13.7 | % | 2.3 | % | 3.8 | % | 1.7 | % | 1.9 | % | 0.6 | % | (0.4 | %) | ||||||||||||||||||||||||||||||||||
| Seattle | 6,959 | 8.3 | % | 2,291 | 95.8 | % | 15.6 | % | 3.0 | % | 5.4 | % | 2.1 | % | 2.9 | % | 0.0 | % | (0.2 | %) | ||||||||||||||||||||||||||||||||||
| Other Markets | 136 | 0.1 | % | 1,187 | 99.0 | % | 21.3 | % | 4.3 | % | 21.8 | % | (3.6 | %) | 3.9 | % | 0.5 | % | 3.7 | % | ||||||||||||||||||||||||||||||||||
| Total | 72,629 | 100.0 | % | $ | 2,752 | 96.2 | % | 13.4 | % | 2.2 | % | 3.2 | % | 1.8 | % | 1.9 | % | 0.4 | % | (0.6 | %) | |||||||||||||||||||||||||||||||||
(1) Quarter over quarter same store revenues in Los Angeles were negatively impacted by non-residential related income. Residential-only same store revenues in Los Angeles increased 3.4% quarter over quarter.
| Equity Residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Second Quarter 2018 vs. First Quarter 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same Store Results/Statistics by Market | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (Decrease) from Prior Quarter | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q2 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q2 2018 | Q2 2018 | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| % of | Average | Average | Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Apartment | Actual | Rental | Physical | Q2 2018 | Rental | Physical | |||||||||||||||||||||||||||||||||||||||||||||||||
| Markets/Metro Areas | Units | NOI | Rate | Occupancy % | Turnover | Revenues | Expenses | NOI | Rate | Occupancy | Turnover | ||||||||||||||||||||||||||||||||||||||||||||
| Los Angeles (1) | 15,371 | 18.4 | % | $ | 2,498 | 96.0 | % | 14.7 | % | 0.2 | % | (2.1 | %) | 1.2 | % | 1.0 | % | (0.1 | %) | 2.1 | % | ||||||||||||||||||||||||||||||||||
| Orange County | 4,028 | 4.4 | % | 2,174 | 95.9 | % | 15.3 | % | 1.6 | % | 0.8 | % | 1.8 | % | 2.0 | % | (0.2 | %) | 5.5 | % | |||||||||||||||||||||||||||||||||||
| San Diego | 3,385 | 4.0 | % | 2,321 | 96.4 | % | 14.9 | % | 2.0 | % | (2.9 | %) | 3.7 | % | 1.1 | % | 0.6 | % | 1.2 | % | |||||||||||||||||||||||||||||||||||
| Subtotal – Southern California | 22,784 | 26.8 | % | 2,414 | 96.1 | % | 14.9 | % | 0.7 | % | (1.8 | %) | 1.6 | % | 1.1 | % | 0.0 | % | 2.7 | % | |||||||||||||||||||||||||||||||||||
| San Francisco | 12,975 | 20.7 | % | 3,111 | 96.2 | % | 13.0 | % | 0.9 | % | (3.9 | %) | 2.5 | % | 1.0 | % | (0.2 | %) | 2.5 | % | |||||||||||||||||||||||||||||||||||
| Washington DC | 15,649 | 17.6 | % | 2,386 | 96.3 | % | 13.4 | % | 1.4 | % | (1.1 | %) | 2.6 | % | 1.1 | % | 0.2 | % | 4.1 | % | |||||||||||||||||||||||||||||||||||
| New York | 10,007 | 17.0 | % | 3,826 | 96.8 | % | 9.5 | % | 0.7 | % | (2.4 | %) | 2.8 | % | 0.0 | % | 0.8 | % | 1.2 | % | |||||||||||||||||||||||||||||||||||
| Boston | 6,009 | 9.6 | % | 2,998 | 96.3 | % | 13.7 | % | 1.6 | % | (3.6 | %) | 3.7 | % | 0.7 | % | 0.8 | % | 4.6 | % | |||||||||||||||||||||||||||||||||||
| Seattle | 7,095 | 8.2 | % | 2,290 | 95.8 | % | 15.6 | % | 0.9 | % | 3.0 | % | 0.1 | % | 0.7 | % | 0.1 | % | 1.4 | % | |||||||||||||||||||||||||||||||||||
| Other Markets | 136 | 0.1 | % | 1,187 | 99.0 | % | 21.3 | % | (1.5 | %) | 5.9 | % | (5.3 | %) | (1.8 | %) | 0.5 | % | 9.5 | % | |||||||||||||||||||||||||||||||||||
| Total | 74,655 | 100.0 | % | $ | 2,752 | 96.2 | % | 13.5 | % | 1.0 | % | (1.9 | %) | 2.3 | % | 0.8 | % | 0.2 | % | 2.8 | % | ||||||||||||||||||||||||||||||||||
(1) Sequential same store revenues in Los Angeles were negatively impacted by non-residential related income. Residential-only same store revenues in Los Angeles increased 0.8% sequentially.
| Equity Residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June YTD 2018 vs. June YTD 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same Store Results/Statistics by Market | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (Decrease) from Prior Year | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
June YTD 18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
June YTD 18 | June YTD 18 | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| % of | Average | Average | Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Apartment | Actual | Rental | Physical | June YTD 18 | Rental | Physical | |||||||||||||||||||||||||||||||||||||||||||||||||
| Markets/Metro Areas | Units | NOI | Rate | Occupancy % | Turnover | Revenues | Expenses | NOI | Rate | Occupancy | Turnover | ||||||||||||||||||||||||||||||||||||||||||||
| Los Angeles (1) | 14,240 | 17.7 | % | $ | 2,475 | 96.1 | % | 26.9 | % | 3.3 | % | 3.4 | % | 3.3 | % | 3.3 | % | 0.4 | % | (1.2 | %) | ||||||||||||||||||||||||||||||||||
| Orange County | 3,684 | 4.1 | % | 2,132 | 96.1 | % | 24.3 | % | 3.8 | % | 2.3 | % | 4.3 | % | 4.1 | % | (0.1 | %) | 0.0 | % | |||||||||||||||||||||||||||||||||||
| San Diego | 3,385 | 4.1 | % | 2,308 | 96.1 | % | 28.6 | % | 4.1 | % | 1.9 | % | 4.9 | % | 4.0 | % | (0.1 | %) | (2.8 | %) | |||||||||||||||||||||||||||||||||||
| Subtotal – Southern California | 21,309 | 25.9 | % | 2,389 | 96.1 | % | 26.7 | % | 3.5 | % | 3.0 | % | 3.7 | % | 3.5 | % | 0.2 | % | (1.3 | %) | |||||||||||||||||||||||||||||||||||
| San Francisco | 12,315 | 20.1 | % | 3,036 | 96.3 | % | 23.4 | % | 2.8 | % | (2.2 | %) | 4.4 | % | 2.1 | % | 0.6 | % | (1.7 | %) | |||||||||||||||||||||||||||||||||||
| Washington DC | 15,475 | 18.0 | % | 2,369 | 96.2 | % | 22.9 | % | 1.1 | % | 3.6 | % | 0.0 | % | 0.6 | % | 0.5 | % | (1.2 | %) | |||||||||||||||||||||||||||||||||||
| New York | 10,007 | 17.6 | % | 3,827 | 96.4 | % | 17.8 | % | 0.3 | % | 6.3 | % | (3.2 | %) | (0.1 | %) | 0.4 | % | (2.7 | %) | |||||||||||||||||||||||||||||||||||
| Boston | 6,009 | 9.9 | % | 2,988 | 95.9 | % | 22.8 | % | 2.3 | % | 4.8 | % | 1.3 | % | 1.9 | % | 0.1 | % | (0.8 | %) | |||||||||||||||||||||||||||||||||||
| Seattle | 6,959 | 8.4 | % | 2,284 | 95.8 | % | 29.8 | % | 3.9 | % | 5.3 | % | 3.3 | % | 3.6 | % | 0.0 | % | 0.1 | % | |||||||||||||||||||||||||||||||||||
| Other Markets | 136 | 0.1 | % | 1,198 | 98.8 | % | 33.1 | % | 4.8 | % | 0.2 | % | 7.4 | % | 4.9 | % | 0.0 | % | 10.3 | % | |||||||||||||||||||||||||||||||||||
| Total | 72,210 | 100.0 | % | $ | 2,732 | 96.1 | % | 24.1 | % | 2.2 | % | 3.5 | % | 1.6 | % | 1.9 | % | 0.3 | % | (1.3 | %) | ||||||||||||||||||||||||||||||||||
(1) June year-to-date same store revenues in Los Angeles were negatively impacted by non-residential related income. Residential-only same store revenues in Los Angeles increased 3.6% June year-to-date.
Equity Residential | |||||||||||||||||||||||||
| Second Quarter 2018 vs. Second Quarter 2017 | |||||||||||||||||||||||||
| Same Store Operating Expenses for 72,629 Same Store Apartment Units | |||||||||||||||||||||||||
$ in thousands | |||||||||||||||||||||||||
% of Actual | |||||||||||||||||||||||||
| Q2 2018 | |||||||||||||||||||||||||
| Actual | Actual | $ | % | Operating | |||||||||||||||||||||
| Q2 2018 | Q2 2017 | Change | Change | Expenses | |||||||||||||||||||||
| Real estate taxes | $ | 76,695 | $ | 73,601 | $ | 3,094 | 4.2 | % | 43.2 | % | |||||||||||||||
| On-site payroll (1) | 38,936 | 38,742 | 194 | 0.5 | % | 21.9 | % | ||||||||||||||||||
| Utilities (2) | 22,853 | 21,737 | 1,116 | 5.1 | % | 12.9 | % | ||||||||||||||||||
| Repairs and maintenance (3) | 23,481 | 22,199 | 1,282 | 5.8 | % | 13.2 | % | ||||||||||||||||||
| Insurance | 4,663 | 4,435 | 228 | 5.1 | % | 2.6 | % | ||||||||||||||||||
| Leasing and advertising | 2,388 | 2,320 | 68 | 2.9 | % | 1.3 | % | ||||||||||||||||||
| Other on-site operating expenses (4) | 8,663 | 9,070 | (407 | ) | (4.5 | %) | 4.9 | % | |||||||||||||||||
| Same store operating expenses | $ | 177,679 | $ | 172,104 | $ | 5,575 | 3.2 | % | 100.0 | % | |||||||||||||||
| June YTD 2018 vs. June YTD 2017 | |||||||||||||||||||||||||
| Same Store Operating Expenses for 72,210 Same Store Apartment Units | |||||||||||||||||||||||||
$ in thousands | |||||||||||||||||||||||||
% of Actual | |||||||||||||||||||||||||
| YTD 2018 | |||||||||||||||||||||||||
| Actual | Actual | $ | % | Operating | |||||||||||||||||||||
| YTD 2018 | YTD 2017 | Change | Change | Expenses | |||||||||||||||||||||
| Real estate taxes | $ | 152,034 | $ | 145,535 | $ | 6,499 | 4.5 | % | 42.7 | % | |||||||||||||||
| On-site payroll (1) | 78,088 | 76,528 | 1,560 | 2.0 | % | 22.0 | % | ||||||||||||||||||
| Utilities (2) | 47,944 | 45,583 | 2,361 | 5.2 | % | 13.5 | % | ||||||||||||||||||
| Repairs and maintenance (3) | 44,471 | 42,761 | 1,710 | 4.0 | % | 12.5 | % | ||||||||||||||||||
| Insurance | 9,196 | 8,737 | 459 | 5.3 | % | 2.6 | % | ||||||||||||||||||
| Leasing and advertising | 4,816 | 4,826 | (10 | ) | (0.2 | %) | 1.3 | % | |||||||||||||||||
| Other on-site operating expenses (4) | 19,175 | 19,783 | (608 | ) | (3.1 | %) | 5.4 | % | |||||||||||||||||
| Same store operating expenses | $ | 355,724 | $ | 343,753 | $ | 11,971 | 3.5 | % | 100.0 | % | |||||||||||||||
| (1) | On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff. | ||
| (2) | Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income. | ||
| (3) | Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair and maintenance costs. | ||
| (4) | Other on-site operating expenses - Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees. | ||
| Equity Residential | |||||||||||||||||||
| Debt Summary as of June 30, 2018 | |||||||||||||||||||
($ in thousands) | |||||||||||||||||||
| Weighted | |||||||||||||||||||
| Weighted | Average | ||||||||||||||||||
| Average | Maturities | ||||||||||||||||||
Amounts (1) | % of Total | Rates (1) | (years) | ||||||||||||||||
| Secured | $ | 2,894,325 | 33.0 | % | 4.22 | % | 5.9 | ||||||||||||
| Unsecured | 5,878,444 | 67.0 | % | 4.14 | % | 10.0 | |||||||||||||
| Total | $ | 8,772,769 | 100.0 | % | 4.17 | % | 8.7 | ||||||||||||
| Fixed Rate Debt: | |||||||||||||||||||
| Secured – Conventional | $ | 2,387,042 | 27.2 | % | 4.71 | % | 4.0 | ||||||||||||
| Unsecured – Public | 5,087,027 | 58.0 | % | 4.41 | % | 11.5 | |||||||||||||
| Fixed Rate Debt | 7,474,069 | 85.2 | % | 4.51 | % | 9.1 | |||||||||||||
| Floating Rate Debt: | |||||||||||||||||||
| Secured – Conventional | 6,751 | 0.1 | % | 1.74 | % | 6.5 | |||||||||||||
| Secured – Tax Exempt | 500,532 | 5.7 | % | 2.13 | % | 14.0 | |||||||||||||
| Unsecured – Public (2) | 445,610 | 5.1 | % | 2.64 | % | 1.0 | |||||||||||||
| Unsecured – Revolving Credit Facility (3) | — | — | 2.29 | % | 3.5 | ||||||||||||||
| Unsecured – Commercial Paper Program (4) | 345,807 | 3.9 | % | 2.16 | % | — | |||||||||||||
| Floating Rate Debt | 1,298,700 | 14.8 | % | 2.31 | % | 6.1 | |||||||||||||
| Total | $ | 8,772,769 | 100.0 | % | 4.17 | % | 8.7 | ||||||||||||
| (1) | Net of the effect of any derivative instruments. Weighted average rates are for the six months ended June 30, 2018. | ||
| (2) | Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%. | ||
| (3) | The Company’s $2.0 billion unsecured revolving credit facility matures January 10, 2022. The interest rate on advances under the credit facility will generally be LIBOR plus a spread (currently 0.825%), or based on bids received from the lending group, and an annual facility fee (currently 12.5 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company’s long-term debt. As of June 30, 2018, there was approximately $1.65 billion available on the Company’s unsecured revolving credit facility (net of $6.7 million which was restricted/dedicated to support letters of credit and net of $347.0 million in principal outstanding on the commercial paper program). | ||
| (4) | The Company may borrow up to a maximum of $500.0 million on the commercial paper program subject to market conditions. The notes bear interest at various floating rates with a weighted average of 2.16% for the six months ended June 30, 2018 and a weighted average maturity of 48 days as of June 30, 2018. | ||
Note: The Company capitalized interest of approximately $2.9 million and $16.6 million during the six months ended June 30, 2018 and 2017, respectively. The Company capitalized interest of approximately $1.2 million and $8.4 million during the quarters ended June 30, 2018 and 2017, respectively.
| Equity Residential | ||||||||||||||||||||||||||||||
| Debt Maturity Schedule as of June 30, 2018 | ||||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||
| Weighted | Weighted | |||||||||||||||||||||||||||||
Average Rates | Average | |||||||||||||||||||||||||||||
| Fixed | Floating | on Fixed | Rates on | |||||||||||||||||||||||||||
| Year | Rate (1) | Rate (1) | Total | % of Total | Rate Debt (1) | Total Debt (1) | ||||||||||||||||||||||||
| 2018 | $ | 2,957 | $ | 297,400 | (2) | $ | 300,357 | 3.4 | % | 4.01 | % | 2.32 | % | |||||||||||||||||
| 2019 | 506,731 | (3) | 516,752 | (2) | 1,023,483 | 11.5 | % | 5.17 | % | 4.01 | % | |||||||||||||||||||
| 2020 | 1,128,592 | (4) | 700 | 1,129,292 | 12.7 | % | 5.20 | % | 5.20 | % | ||||||||||||||||||||
| 2021 | 927,506 | 600 | 928,106 | 10.4 | % | 4.64 | % | 4.64 | % | |||||||||||||||||||||
| 2022 | 265,341 | 800 | 266,141 | 3.0 | % | 3.26 | % | 3.26 | % | |||||||||||||||||||||
| 2023 | 1,326,800 | 4,800 | 1,331,600 | 15.0 | % | 3.74 | % | 3.73 | % | |||||||||||||||||||||
| 2024 | 1,272 | 10,900 | 12,172 | 0.1 | % | 4.79 | % | 1.94 | % | |||||||||||||||||||||
| 2025 | 451,334 | 13,200 | 464,534 | 5.2 | % | 3.38 | % | 3.33 | % | |||||||||||||||||||||
| 2026 | 593,424 | 14,500 | 607,924 | 6.9 | % | 3.59 | % | 3.54 | % | |||||||||||||||||||||
| 2027 | 401,468 | 15,600 | 417,068 | 4.7 | % | 3.26 | % | 3.19 | % | |||||||||||||||||||||
| 2028+ | 1,924,969 | 481,365 | 2,406,334 | 27.1 | % | 4.17 | % | 3.64 | % | |||||||||||||||||||||
| Subtotal | 7,530,394 | 1,356,617 | 8,887,011 | 100.0 | % | 4.23 | % | 3.90 | % | |||||||||||||||||||||
| Deferred Financing Costs and Unamortized (Discount) | (56,325 | ) | (57,917 | ) | (114,242 | ) | N/A | N/A | N/A | |||||||||||||||||||||
| Total | $ | 7,474,069 | $ | 1,298,700 | $ | 8,772,769 | 100.0 | % | 4.23 | % | 3.90 | % | ||||||||||||||||||
| (1) | Net of the effect of any derivative instruments. Weighted average rates are as of June 30, 2018. | ||
| (2) | Includes $347.0 million in principal outstanding on the Company's commercial paper program, of which $297.0 million matures in 2018 and $50.0 million matures in 2019. | ||
| (3) | Includes a $500.0 million 5.19% mortgage loan with a maturity date of October 1, 2019 that can be prepaid at par beginning October 1, 2018. The Company currently intends to prepay this mortgage loan on October 1, 2018. | ||
| (4) | Includes a $500.0 million 5.78% mortgage loan with a maturity date of July 1, 2020 that can be prepaid at par beginning July 1, 2019. | ||
Equity Residential | |||||||||
| Selected Unsecured Public Debt Covenants | |||||||||
| June 30, | March 31, | ||||||||
| 2018 | 2018 | ||||||||
| Total Debt to Adjusted Total Assets (not to exceed 60%) | 33.7% | 33.5% | |||||||
| Secured Debt to Adjusted Total Assets (not to exceed 40%) | 11.1% | 11.2% | |||||||
Consolidated Income Available for Debt Service to Maximum Annual Service Charges (must be at least 1.5 to 1) | 4.40 | 4.37 | |||||||
Total Unsecured Assets to Unsecured Debt (must be at least 150%) | 362.3% | 366.3% | |||||||
Note: These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt, which represent the Company's most restrictive covenants. Equity Residential is the general partner of ERPOP.
Selected Credit Ratios | ||||||||
| June 30, | March 31, | |||||||
| 2018 | 2018 | |||||||
| Total debt to Normalized EBITDAre | 5.39x | 5.39x | ||||||
| Net debt to Normalized EBITDAre | 5.36x | 5.36x | ||||||
| Unencumbered NOI as a % of total NOI | 78.9% | 78.9% | ||||||
Note: See page 22 for the Normalized EBITDAre reconciliations.
| Equity Residential | ||||||||||||||||||||
Capital Structure as of June 30, 2018 | ||||||||||||||||||||
(Amounts in thousands except for share/unit and per share amounts) | ||||||||||||||||||||
| Secured Debt | $ | 2,894,325 | 33.0 | % | ||||||||||||||||
| Unsecured Debt | 5,878,444 | 67.0 | % | |||||||||||||||||
| Total Debt | 8,772,769 | 100.0 | % | 26.5 | % | |||||||||||||||
| Common Shares (includes Restricted Shares) | 368,278,336 | 96.3 | % | |||||||||||||||||
| Units (includes OP Units and Restricted Units) | 14,024,018 | 3.7 | % | |||||||||||||||||
| Total Shares and Units | 382,302,354 | 100.0 | % | |||||||||||||||||
| Common Share Price at June 30, 2018 | $ | 63.69 | ||||||||||||||||||
| 24,348,837 | 99.8 | % | ||||||||||||||||||
| Perpetual Preferred Equity (see below) | 37,280 | 0.2 | % | |||||||||||||||||
| Total Equity | 24,386,117 | 100.0 | % | 73.5 | % | |||||||||||||||
| Total Market Capitalization | $ | 33,158,886 | 100.0 | % | ||||||||||||||||
| Perpetual Preferred Equity as of June 30, 2018 | ||||||||||||||||||||||
(Amounts in thousands except for share and per share amounts) | ||||||||||||||||||||||
| Annual | Annual | |||||||||||||||||||||
| Outstanding | Liquidation | Dividend | Dividend | |||||||||||||||||||
| Series | Call Date | Shares | Value | Per Share | Amount | |||||||||||||||||
| Preferred Shares: | ||||||||||||||||||||||
| 8.29% Series K | 12/10/26 | 745,600 | $ | 37,280 | $ | 4.145 | $ | 3,091 | ||||||||||||||
| Equity Residential | |||||||||||||||||||
| Common Share and Unit | |||||||||||||||||||
| Weighted Average Amounts Outstanding | |||||||||||||||||||
| YTD Q2 2018 | YTD Q2 2017 | Q2 2018 | Q2 2017 | ||||||||||||||||
| Weighted Average Amounts Outstanding for Net Income Purposes: | |||||||||||||||||||
| Common Shares - basic | 367,865,479 | 366,713,268 | 367,930,497 | 366,819,902 | |||||||||||||||
| Shares issuable from assumed conversion/vesting of: | |||||||||||||||||||
| - OP Units | 12,863,844 | 12,905,975 | 12,864,756 | 12,913,250 | |||||||||||||||
| - long-term compensation shares/units | 2,494,962 | 2,886,010 | 2,627,326 | 2,958,466 | |||||||||||||||
| Total Common Shares and Units - diluted | 383,224,285 | 382,505,253 | 383,422,579 | 382,691,618 | |||||||||||||||
| Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes: | |||||||||||||||||||
| Common Shares - basic | 367,865,479 | 366,713,268 | 367,930,497 | 366,819,902 | |||||||||||||||
| OP Units - basic | 12,863,844 | 12,905,975 | 12,864,756 | 12,913,250 | |||||||||||||||
| Total Common Shares and OP Units - basic | 380,729,323 | 379,619,243 | 380,795,253 | 379,733,152 | |||||||||||||||
| Shares issuable from assumed conversion/vesting of: | |||||||||||||||||||
| - long-term compensation shares/units | 2,494,962 | 2,886,010 | 2,627,326 | 2,958,466 | |||||||||||||||
| Total Common Shares and Units - diluted | 383,224,285 | 382,505,253 | 383,422,579 | 382,691,618 | |||||||||||||||
| Period Ending Amounts Outstanding: | |||||||||||||||||||
| Common Shares (includes Restricted Shares) | 368,278,336 | 367,298,765 | |||||||||||||||||
| Units (includes OP Units and Restricted Units) | 14,024,018 | 13,816,133 | |||||||||||||||||
| Total Shares and Units | 382,302,354 | 381,114,898 | |||||||||||||||||
| Equity Residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development and Lease-Up Projects as of June 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(Amounts in thousands except for project and apartment unit amounts) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total Book | |||||||||||||||||||||||||||||||||||||||||||||||||||
| No. of | Budgeted | Book | Value Not | Estimated | Estimated | Estimated | |||||||||||||||||||||||||||||||||||||||||||||||
| Apartment | Capital | Value | Placed in | Total | Percentage | Initial | Completion | Stabilization | Percentage | Percentage | |||||||||||||||||||||||||||||||||||||||||||
| Projects | Location | Units | Cost | to Date | Service | Debt | Completed | Occupancy | Date | Date | Leased | Occupied | |||||||||||||||||||||||||||||||||||||||||
Projects Under Development: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 100K Apartments | Washington, DC | 222 | $ | 88,023 | $ | 74,221 | $ | 74,221 | $ | — | 87% | Q3 2018 | Q4 2018 | Q4 2019 | 1% | — | |||||||||||||||||||||||||||||||||||||
| 1401 E. Madison | Seattle, WA | 137 | 62,352 | 25,125 | 25,125 | — | 18% | Q2 2019 | Q3 2019 | Q1 2020 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 249 Third Street | Cambridge, MA | 84 | 51,447 | 16,491 | 16,491 | — | 9% | Q3 2019 | Q4 2019 | Q2 2020 | — | — | |||||||||||||||||||||||||||||||||||||||||
| West End Tower | Boston, MA | 469 | 409,749 | 29,727 | 29,727 | — | 2% | Q2 2021 | Q3 2021 | Q1 2023 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Projects Under Development | 912 | 611,571 | 145,564 | 145,564 | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Completed Not Stabilized (A): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 855 Brannan | San Francisco, CA | 449 | 322,235 | 318,145 | — | — | Completed | Q3 2018 | 95% | 93% | |||||||||||||||||||||||||||||||||||||||||||
| Helios (formerly 2nd & Pine) | Seattle, WA | 398 | 226,287 | 223,912 | — | — | Completed | Q3 2018 | 94% | 92% | |||||||||||||||||||||||||||||||||||||||||||
| Cascade | Seattle, WA | 477 | 175,378 | 171,597 | — | — | Completed | Q4 2018 | 87% | 83% | |||||||||||||||||||||||||||||||||||||||||||
| Projects Completed Not Stabilized | 1,324 | 723,900 | 713,654 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total Development Projects | 2,236 | $ | 1,335,471 | $ | 859,218 | $ | 145,564 | $ | — | ||||||||||||||||||||||||||||||||||||||||||||
| Land Held for Development | N/A | N/A | $ | 86,098 | $ | 86,098 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Budgeted | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital | Q2 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS | Cost | NOI | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Projects Under Development | $ | 611,571 | $ | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Completed Not Stabilized | 723,900 | 6,221 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Development NOI Contribution | $ | 1,335,471 | $ | 6,220 | |||||||||||||||||||||||||||||||||||||||||||||||||
Note: All development projects are wholly owned by the Company.
(A) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
| Equity Residential | ||||||||||||||||||||
| Capital Expenditures to Real Estate | ||||||||||||||||||||
| For the Six Months Ended June 30, 2018 | ||||||||||||||||||||
(Amounts in thousands except for apartment unit and per apartment unit amounts) | ||||||||||||||||||||
| Same Store | Non-Same Store | Same Store Avg. | ||||||||||||||||||
| Properties | Properties/Other | Total | Per Apartment Unit | |||||||||||||||||
| Total Apartment Units (1) | 72,210 | 5,490 | 77,700 | |||||||||||||||||
| Building Improvements | $ | 45,533 | $ | 1,370 | $ | 46,903 | $ | 631 | ||||||||||||
| Renovation Expenditures (2) | 16,928 | 509 | 17,437 | 234 | ||||||||||||||||
| Replacements | 21,198 | 449 | 21,647 | 294 | ||||||||||||||||
| Total Capital Expenditures | $ | 83,659 | $ | 2,328 | $ | 85,987 | $ | 1,159 | ||||||||||||
| (1) | Total Apartment Units - Excludes 945 unconsolidated apartment units for which capital expenditures to real estate are self-funded and do not consolidate into the Company's results. | ||
| (2) | Renovation Expenditures on 1,269 same store apartment units for the six months ended June 30, 2018 approximated $13,340 per apartment unit renovated. | ||
| Equity Residential | |||||||||||||||||||||||||||||||||||||
| Normalized EBITDAre Reconciliations | |||||||||||||||||||||||||||||||||||||
(Amounts in thousands) | |||||||||||||||||||||||||||||||||||||
| Normalized EBITDAre Reconciliations for Page 17 | |||||||||||||||||||||||||||||||||||||
| Trailing Twelve Months | 2018 | 2017 | |||||||||||||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | Q2 | Q1 | Q4 | Q3 | Q2 | |||||||||||||||||||||||||||||||
| Net income | $ | 613,238 | $ | 698,988 | $ | 118,410 | $ | 220,548 | $ | 130,084 | $ | 144,196 | $ | 204,160 | |||||||||||||||||||||||
| Interest expense incurred, net | 396,691 | 393,784 | 94,131 | 116,104 | 95,311 | 91,145 | 91,224 | ||||||||||||||||||||||||||||||
| Amortization of deferred financing costs | 9,921 | 9,909 | 2,099 | 3,679 | 2,079 | 2,064 | 2,087 | ||||||||||||||||||||||||||||||
| Amortization of above/below market lease intangibles | 4,307 | 4,070 | 1,098 | 1,098 | 1,099 | 1,012 | 861 | ||||||||||||||||||||||||||||||
| Depreciation | 774,136 | 761,090 | 192,942 | 196,309 | 200,785 | 184,100 | 179,896 | ||||||||||||||||||||||||||||||
| Income and other tax expense (benefit) | 483 | 429 | 274 | 213 | (232 | ) | 228 | 220 | |||||||||||||||||||||||||||||
| EBITDA | 1,798,776 | 1,868,270 | 408,954 | 537,951 | 429,126 | 422,745 | 478,448 | ||||||||||||||||||||||||||||||
| Net (gain) loss on sales of real estate properties | (174,786 | ) | (262,563 | ) | 51 | (142,213 | ) | (15,296 | ) | (17,328 | ) | (87,726 | ) | ||||||||||||||||||||||||
| EBITDAre | 1,623,990 | 1,605,707 | 409,005 | 395,738 | 413,830 | 405,417 | 390,722 | ||||||||||||||||||||||||||||||
| Impairment – non-operating assets | 1,693 | 1,693 | — | — | 1,693 | — | — | ||||||||||||||||||||||||||||||
| Write-off of pursuit costs (other expenses) | 3,626 | 3,322 | 1,135 | 931 | 777 | 783 | 831 | ||||||||||||||||||||||||||||||
| (Income) loss from investments in unconsolidated entities | 3,623 | 3,274 | 1,031 | 977 | 1,217 | 398 | 682 | ||||||||||||||||||||||||||||||
| Net (gain) loss on sales of land parcels | (992 | ) | 26 | (995 | ) | — | 3 | — | 23 | ||||||||||||||||||||||||||||
| Insurance/litigation settlement or reserve income (interest and other income) | (9,523 | ) | (9,831 | ) | (528 | ) | (5,358 | ) | (137 | ) | (3,500 | ) | (836 | ) | |||||||||||||||||||||||
| Insurance/litigation/environmental settlement or reserve expense (other expenses) | 2,886 | 1,867 | 963 | 1,923 | — | — | (56 | ) | |||||||||||||||||||||||||||||
| Advocacy contributions (other expenses) | 1,643 | 365 | 1,278 | 365 | — | — | — | ||||||||||||||||||||||||||||||
| Other | 943 | 980 | 56 | (169 | ) | 961 | 95 | 93 | |||||||||||||||||||||||||||||
| Normalized EBITDAre | $ | 1,627,889 | $ | 1,607,403 | $ | 411,945 | $ | 394,407 | $ | 418,344 | $ | 403,193 | $ | 391,459 | |||||||||||||||||||||||
Balance Sheet Items: | June 30, 2018 | March 31, 2018 | |||||||||||||||||||||||||||||||||||
| Total debt | $ | 8,772,769 | $ | 8,659,477 | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | (34,507 | ) | (44,453 | ) | |||||||||||||||||||||||||||||||||
| Mortgage principal reserves/sinking funds | (6,544 | ) | (4,778 | ) | |||||||||||||||||||||||||||||||||
| Net debt | $ | 8,731,718 | $ | 8,610,246 | |||||||||||||||||||||||||||||||||
Note: EBITDA, EBITDAre and Normalized EBITDAre do not include any adjustments for the Company’s share of partially owned unconsolidated entities or the minority partner’s share of partially owned consolidated entities due to the immaterial size of the Company’s partially owned portfolio.
Equity Residential | ||||||||||||||||||||||||||||||
Adjustments from FFO to Normalized FFO | ||||||||||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||||||||
| Six Months Ended June 30, | Quarter Ended June 30, | |||||||||||||||||||||||||||||
| 2018 | 2017 | Variance | 2018 | 2017 | Variance | |||||||||||||||||||||||||
| Impairment | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Asset impairment and valuation allowances | — | — | — | — | — | — | ||||||||||||||||||||||||
| Write-off of pursuit costs (other expenses) | 2,066 | 1,546 | 520 | 1,135 | 831 | 304 | ||||||||||||||||||||||||
| Write-off of pursuit costs | 2,066 | 1,546 | 520 | 1,135 | 831 | 304 | ||||||||||||||||||||||||
| Prepayment premiums/penalties (interest expense) | 22,110 | 12,258 | 9,852 | — | 560 | (560 | ) | |||||||||||||||||||||||
| Write-off of unamortized deferred financing costs (interest expense) | 1,580 | 243 | 1,337 | — | 26 | (26 | ) | |||||||||||||||||||||||
| Write-off of unamortized (premiums)/discounts/OCI (interest expense) | (151 | ) | (99 | ) | (52 | ) | — | (488 | ) | 488 | ||||||||||||||||||||
| Debt extinguishment and preferred share redemption (gains) losses | 23,539 | 12,402 | 11,137 | — | 98 | (98 | ) | |||||||||||||||||||||||
| Net (gain) loss on sales of land parcels | (995 | ) | (19,170 | ) | 18,175 | (995 | ) | 23 | (1,018 | ) | ||||||||||||||||||||
| (Income) loss from investments in unconsolidated entities ─ non-operating assets | 517 | 220 | 297 | 304 | (81 | ) | 385 | |||||||||||||||||||||||
| Non-operating asset (gains) losses | (478 | ) | (18,950 | ) | 18,472 | (691 | ) | (58 | ) | (633 | ) | |||||||||||||||||||
| Insurance/litigation settlement or reserve income (interest and other income) | (5,886 | ) | (1,216 | ) | (4,670 | ) | (528 | ) | (836 | ) | 308 | |||||||||||||||||||
| Insurance/litigation/environmental settlement or reserve expense (other expenses) | 2,886 | 237 | 2,649 | 963 | (56 | ) | 1,019 | |||||||||||||||||||||||
| Advocacy contributions (other expenses) | 1,643 | — | 1,643 | 1,278 | — | 1,278 | ||||||||||||||||||||||||
| Other | (113 | ) | 189 | (302 | ) | 56 | 93 | (37 | ) | |||||||||||||||||||||
| Other miscellaneous items | (1,470 | ) | (790 | ) | (680 | ) | 1,769 | (799 | ) | 2,568 | ||||||||||||||||||||
| Adjustments from FFO to Normalized FFO | $ | 23,657 | $ | (5,792 | ) | $ | 29,449 | $ | 2,213 | $ | 72 | $ | 2,141 | |||||||||||||||||
Note: See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.
Equity Residential |
Normalized FFO Guidance and Assumptions |
| The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties and the write-off of pursuit costs, are not included in the estimates provided on this page. See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share. |
| Q3 2018 | Revised Full Year 2018 | Previous Full Year 2018 | |||||||||
2018 Normalized FFO Guidance (per share diluted) | |||||||||||
| Expected Normalized FFO Per Share | $0.81 to $0.85 | $3.22 to $3.28 | $3.17 to $3.27 | ||||||||
2018 Same Store Assumptions | |||||||||||
| Physical Occupancy | 96.1% | 96.0% | |||||||||
| Revenue change | 1.9% to 2.3% | 1.0% to 2.25% | |||||||||
| Expense change | 3.5% to 4.0% | 3.5% to 4.5% | |||||||||
| NOI change (1) | 1.0% to 1.8% | 0.0% to 1.5% | |||||||||
2018 Transaction Assumptions | |||||||||||
| Consolidated rental acquisitions | $700.0M | $500.0M | |||||||||
| Consolidated rental dispositions | $700.0M | $500.0M | |||||||||
| Spread between Acquisition Cap Rate and Disposition Yield | 0 to 25 basis points | 50 basis points | |||||||||
2018 Debt Assumptions (2) | |||||||||||
| Weighted average debt outstanding | $8.8B to $9.0B | $8.8B to $9.1B | |||||||||
| Weighted average interest rate (reduced for capitalized interest) | 4.27% | 4.21% | |||||||||
| Interest expense, net (on a Normalized FFO basis) | $375.8M to $384.3M | $370.5M to $383.1M | |||||||||
| Capitalized interest | $6.0M to $7.0M | $4.0M to $8.0M | |||||||||
2018 Capital Expenditures to Real Estate Assumptions | |||||||||||
| Per Same Store | |||||||||||
| Apartment Unit | |||||||||||
| Total Capital Expenditures to Real Estate (3) | $2,900 | $210.0M | $210.0M | ||||||||
2018 Other Guidance Assumptions | |||||||||||
| Property management expense | $89.5M to $91.5M | $88.5M to $90.5M | |||||||||
| General and administrative expense | $52.0M to $54.0M | $53.0M to $55.0M | |||||||||
| Interest and other income | $1.5M | $0.5M to $1.0M | |||||||||
| Income and other tax expense | $1.0M | $0.5M to $1.0M | |||||||||
| Debt offerings | $800.0M to $1.0B | $800.0M to $1.0B | |||||||||
| Equity ATM share offerings | No amounts budgeted | No amounts budgeted | |||||||||
| Preferred share offerings | No amounts budgeted | No amounts budgeted | |||||||||
| Weighted average Common Shares and Units - Diluted | 383.4M | 383.8M | |||||||||
| (1) | Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO per share/Normalized FFO per share. | ||
| (2) | All 2018 debt assumptions are shown on a Normalized FFO basis and therefore exclude an approximately $41.3 million impact from anticipated debt extinguishment costs/prepayment penalties in connection with all debt repayment activities in 2018, of which $22.1 million represents cash prepayment penalties and $19.2 million represents non-cash write-offs of unamortized debt discounts and deferred financing costs. This represents a $17.6 million increase from the previous estimate of $23.7 million due to additional non-cash write-offs of unamortized debt discounts and deferred financing costs anticipated from a debt extinguishment associated with the planned sale of an apartment property. | ||
| (3) | During 2018, the Company expects to spend approximately $43.0 million for apartment unit Renovation Expenditures on approximately 3,200 same store apartment units at an average cost of approximately $13,300 per apartment unit renovated, which is included in the Total Capital Expenditures to Real Estate amounts noted above. | ||
| Equity Residential |
| Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms |
(Amounts in thousands except per share and per apartment unit data) |
(All per share data is diluted) |
This Earnings Release and Supplemental Information includes certain non-GAAP financial measures and other terms that management believes are helpful in understanding our business. The definitions and calculations of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial measures should not be considered as an alternative to net earnings or any other measurement of performance computed in accordance with accounting principles generally accepted in the United States (“GAAP”) or as an alternative to cash flows from specific operating, investing or financing activities. Furthermore, these non-GAAP financial measures are not intended to be a measure of cash flow or liquidity.
Acquisition Capitalization Rate or Cap Rate – NOI that the Company anticipates receiving in the next 12 months (or the year two or three stabilized NOI for properties that are in lease-up at acquisition) less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross purchase price of the asset. The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property.
Average Rental Rate – Total residential rental revenues reflected on a straight-line basis in accordance with GAAP divided by the weighted average occupied apartment units for the reporting period presented.
Capital Expenditures to Real Estate:
Building Improvements – Includes roof replacement, paving, building mechanical equipment systems, exterior siding and painting, major landscaping, furniture, fixtures and equipment for amenities and common areas, vehicles and office and maintenance equipment.
Renovation Expenditures – Apartment unit renovation costs (primarily kitchens and baths) designed to reposition these units for higher rental levels in their respective markets.
Replacements – Includes appliances, mechanical equipment, fixtures and flooring (including hardwood and carpeting).
Debt Covenant Compliance – Our unsecured debt includes certain financial and operating covenants including, among other things, maintenance of certain financial ratios. These provisions are contained in the indentures applicable to each notes payable or the credit agreement for our line of credit. The Debt Covenant Compliance ratios that are provided show the Company's compliance with certain covenants governing our public unsecured debt. These covenants generally reflect our most restrictive financial covenants. The Company was in compliance with its unsecured debt covenants for all years presented (the ratios should not be used for any other purpose, including without limitation, to evaluate the Company's financial condition or results of operations, nor do they indicate the Company's covenant compliance as of any other date or for any other period).
Development Yield – NOI that the Company anticipates receiving in the next 12 months following stabilization less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $50-$150 per apartment unit depending on the type of asset) divided by the Total Budgeted Capital Cost of the asset. The weighted average Development Yield for development properties is weighted based on the projected NOI streams and the relative Total Budgeted Capital Cost for each respective property.
Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sale price of the asset. The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property.
Earnings Per Share ("EPS") – Net income per share calculated in accordance with GAAP. Expected EPS is calculated on a basis consistent with actual EPS. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual EPS could differ materially from expected EPS.
| Equity Residential |
| Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued |
| (Amounts in thousands except per share and per apartment unit data) |
| (All per share data is diluted) |
EBITDA for Real Estate and Normalized EBITDA for Real Estate:
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) – The National Association of Real Estate Investment Trusts (“Nareit”) defines EBITDAre (September 2017 White Paper) as net income (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, impairment write-downs of depreciated operating properties, impairment write-downs of investments in unconsolidated entities caused by a decrease in value of depreciated operating properties within the joint venture and adjustments to reflect the Company’s share of EBITDAre of investments in unconsolidated entities.
The Company believes that EBITDAre is useful to investors, creditors and rating agencies as a supplemental measure of the Company’s ability to incur and service debt because it is a recognized measure of performance by the real estate industry, and by excluding gains or losses related to sales or impairment of depreciated operating properties, EBITDAre can help compare the Company’s credit strength between periods or as compared to different companies.
Normalized Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“Normalized EBITDAre”) – Represents net income (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for non-comparable items. Normalized EBITDAre, total debt to Normalized EBITDAre and net debt to Normalized EBITDAre are important metrics in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Normalized EBITDAre, total debt to Normalized EBITDAre, and net debt to Normalized EBITDAre are useful to investors, creditors and rating agencies because they allow investors to compare the Company’s credit strength to prior reporting periods and to other companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual credit quality.
Economic Gain – Economic Gain is calculated as the net gain (loss) on sales of real estate properties in accordance with GAAP, excluding accumulated depreciation. The Company generally considers Economic Gain to be an appropriate supplemental measure to net gain (loss) on sales of real estate properties in accordance with GAAP because it is one indication of the gross value created by the Company's acquisition, development, rehab, management and ultimate sale of a property and because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold property. The following table presents a reconciliation of net gain (loss) on sales of real estate properties in accordance with GAAP to Economic Gain:
| Six Months Ended June 30, 2018 | Quarter Ended June 30, 2018 | |||||||||
| Net Gain (Loss) on Sales of Real Estate Properties | $ | 142,162 | $ | (51 | ) | |||||
| Accumulated Depreciation Gain | (63,640 | ) | — | |||||||
| Economic Gain | $ | 78,522 | $ | (51 | ) | |||||
FFO and Normalized FFO:
Funds From Operations (“FFO”) – Nareit defines FFO (April 2002 White Paper) as net income (computed in accordance with GAAP), excluding gains (or losses) from sales and impairment write-downs of depreciated operating properties, plus depreciation andamortization expense, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Expected FFO per share is calculated on a basis consistent with actual FFO per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected EPS.
The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies.
Normalized Funds From Operations ("Normalized FFO") – Normalized FFO begins with FFO and excludes:
- the impact of any expenses relating to non-operating asset impairment and valuation allowances;
- pursuit cost write-offs;
- gains and losses from early debt extinguishment and preferred share redemptions;
- gains and losses from non-operating assets; and
- other miscellaneous items.
Expected Normalized FFO per share is calculated on a basis consistent with actual Normalized FFO per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected EPS.
The Company believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual operating results.
FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company's calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.
FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with GAAP. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the "Noncontrolling Interests – Operating Partnership". Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.
The following table presents reconciliations of EPS to FFO per share and Normalized FFO per share for pages 6 and 23 (the expected guidance/projections provided below are based on current expectations and are forward-looking):
| Actual June | Actual June | Actual | Actual | Expected | Expected | ||||||||||||||||||||||||
| YTD 2018 | YTD 2017 | Q2 2018 | Q2 2017 | Q3 2018 | 2018 | ||||||||||||||||||||||||
| Per Share | Per Share | Per Share | Per Share | Per Share | Per Share | ||||||||||||||||||||||||
| EPS - Diluted | $ | 0.88 | $ | 0.92 | $ | 0.31 | $ | 0.53 | $0.59 to $0.63 | $1.80 to $1.86 | |||||||||||||||||||
| Add: Depreciation expense | 1.01 | 0.93 | 0.50 | 0.47 | 0.50 | 2.00 | |||||||||||||||||||||||
| Less: Net (gain) loss on sales | (0.37 | ) | (0.32 | ) | — | (0.23 | ) | (0.33) | (0.70) | ||||||||||||||||||||
| FFO per share - Diluted | 1.52 | 1.53 | 0.81 | 0.77 | 0.76 to 0.80 | 3.10 to 3.16 | |||||||||||||||||||||||
| Asset impairment and valuation allowances | — | — | — | — | — | — | |||||||||||||||||||||||
| Write-off of pursuit costs | — | — | — | — | — | 0.01 | |||||||||||||||||||||||
|
Debt extinguishment and preferred share
redemption (gains) losses | 0.06 | 0.03 | — | — | 0.05 | 0.11 | |||||||||||||||||||||||
| Non-operating asset (gains) losses | — | (0.05 | ) | — | — | — | — | ||||||||||||||||||||||
| Other miscellaneous items | — | — | — | — | — | — | |||||||||||||||||||||||
| Normalized FFO per share - Diluted | $ | 1.58 | $ | 1.51 | $ | 0.81 | $ | 0.77 | $0.81 to $0.85 | $3.22 to $3.28 | |||||||||||||||||||
Lease-Up NOI – Represents NOI for development properties: (i) in various stages of lease-up; and (ii) where lease-up has been completed but the properties were not stabilized (defined as having achieved 90% occupancy for three consecutive months) for all of the current and comparable periods presented.
Net Operating Income (“NOI”) – NOI is the Company’s primary financial measure for evaluating each of its apartment properties. NOI is defined as rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company's apartment properties. NOI does not include an allocation of property management expenses either in the current or comparable periods. Rental income for all leases and operating expense for ground leases (for both same store and non-same store properties) are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (see page 10):
Equity Residential |
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued |
| (Amounts in thousands except per share and per apartment unit data) |
| (All per share data is diluted) |
| Six Months Ended June 30, | Quarter Ended June 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Operating income | $ | 414,523 | $ | 414,921 | $ | 217,654 | $ | 210,550 | ||||||||||||
| Adjustments: | ||||||||||||||||||||
| Fee and asset management revenue | (373 | ) | (361 | ) | (188 | ) | (181 | ) | ||||||||||||
| Property management | 46,928 | 43,841 | 23,484 | 21,589 | ||||||||||||||||
| General and administrative | 28,780 | 27,799 | 12,502 | 13,626 | ||||||||||||||||
| Depreciation | 389,251 | 358,864 | 192,942 | 179,896 | ||||||||||||||||
| Total NOI | $ | 879,109 | $ | 845,064 | $ | 446,394 | $ | 425,480 | ||||||||||||
| Rental income: | ||||||||||||||||||||
| Same store | $ | 1,183,348 | $ | 1,158,193 | $ | 599,628 | $ | 586,757 | ||||||||||||
| Non-same store/other | 89,103 | 58,026 | 39,992 | 25,542 | ||||||||||||||||
| Total rental income | 1,272,451 | 1,216,219 | 639,620 | 612,299 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Same store | 355,724 | 343,753 | 177,679 | 172,104 | ||||||||||||||||
| Non-same store/other | 37,618 | 27,402 | 15,547 | 14,715 | ||||||||||||||||
| Total operating expenses | 393,342 | 371,155 | 193,226 | 186,819 | ||||||||||||||||
| NOI: | ||||||||||||||||||||
| Same store | 827,624 | 814,440 | 421,949 | 414,653 | ||||||||||||||||
| Non-same store/other | 51,485 | 30,624 | 24,445 | 10,827 | ||||||||||||||||
| Total NOI | $ | 879,109 | $ | 845,064 | $ | 446,394 | $ | 425,480 | ||||||||||||
Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2017 and 2018, plus any properties in lease-up and not stabilized as of January 1, 2017.
Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period.
Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2017, less properties subsequently sold. Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented.
% of Stabilized NOI – Represents budgeted 2018 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
Total Budgeted Capital Cost – Estimated cost for projects under development and/or developed and all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
Total Market Capitalization – The aggregate of the market value of the Company’s outstanding common shares, including restricted shares, the market value of the Company’s operating partnership units outstanding, including restricted units (based on the market value of the Company’s common shares) and the outstanding principal balance of debt. The Company believes this is a useful measure of a real estate operating company’s long-term liquidity and balance sheet strength, because it shows an approximate relationship between a company’s total debt and the current total market value of its assets based on the current price at which the Company’s common shares trade. However, because this measure of leverage changes with fluctuations in the Company’s share price, which occur regularly, this measure may change even when the Company’s earnings, interest and debt levels remain stable.
Turnover – Total residential move-outs (including inter-property and intra-property transfers) divided by total residential apartment units.
Unencumbered NOI % – Represents NOI generated by consolidated real estate assets unencumbered by outstanding secured debt as a percentage of total NOI generated by all of the Company's consolidated real estate assets.
Equity Residential |
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued |
| (Amounts in thousands except per share and per apartment unit data) |
| (All per share data is diluted) |
Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs.
The calculation of the Unlevered IRR does not include an adjustment for the Company’s general and administrative expense, interest expense (including loan assumption costs and other loan-related costs) or property management expense. Therefore, the Unlevered IRR is not a substitute for net income as a measure of our performance. Management believes that the Unlevered IRR achieved during the period a property is owned by the Company is useful because it is one indication of the gross value created by the Company’s acquisition, development, rehab, management and ultimate sale of a property, before the impact of Company overhead. The Unlevered IRR achieved on the properties as cited in this release should not be viewed as an indication of the gross value created with respect to other properties owned by the Company, and the Company does not represent that it will achieve similar Unlevered IRRs upon the disposition of other properties. The weighted average Unlevered IRR for sold properties is weighted based on all cash flows over the investment period for each respective property, including net sales proceeds.
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Contacts:
Marty McKenna, (312) 928-1901
