Guidance Updated as Coastal Markets
Experience Continued Strong Demand and Limited New Supply
Equity Residential (NYSE: EQR) today reported results for the
quarter and six months ended June 30, 2023.
Second Quarter 2023 Results
All per share results are reported as available to common
shares/units on a diluted basis.
Quarter Ended June 30,
2023
2022
$ Change
% Change
Earnings Per Share (EPS)
$
0.37
$
0.59
$
(0.22
)
(37.3
%)
Funds from Operations (FFO) per share
$
0.93
$
0.89
$
0.04
4.5
%
Normalized FFO (NFFO) per share
$
0.94
$
0.89
$
0.05
5.6
%
Six Months Ended June
30,
2023
2022
$ Change
% Change
Earnings Per Share (EPS)
$
0.92
$
0.78
$
0.14
17.9
%
Funds from Operations (FFO) per share
$
1.78
$
1.66
$
0.12
7.2
%
Normalized FFO (NFFO) per share
$
1.82
$
1.66
$
0.16
9.6
%
“Same store revenue performance remains strong and in line with
our May 2023 guidance increase. The supply picture in the coastal
markets where we predominantly operate remains favorable, demand is
steady and we see continued progress in mitigating delinquency in
Southern California,” said Mark J. Parrell, Equity Residential’s
President and CEO. “We also are pleased to again update our
guidance as a result of pending favorable refinancing activity as
well as second half same store expenses that we anticipate will be
lower than previously expected.”
Recent Highlights
- Same store revenue increased 5.5% for the second quarter of
2023 compared to the second quarter of 2022. The Company increased
its 2023 annual same store revenue growth guidance midpoint to
5.875% in May 2023.
- Same store expense growth for the second quarter of 2023
compared to the second quarter of 2022 was 5.5%. The Company
expects lower same store expense growth in the second half of the
year and has lowered its full year same store expense guidance
midpoint down 25 basis points to 4.25% from 4.5%.
- The Company lowered its EPS guidance and increased its FFO and
Normalized FFO per share guidance as described on page 2.
- In July 2023, the Company locked the interest rate on secured
loans totaling $530.0 million, which, subject to customary
conditions, are anticipated to close in September 2023. After the
effect of the Company’s hedges, the economic rate on these ten-year
loans will be approximately 4.7%. The proceeds from these loans
will be used, along with funding from the Company’s Commercial
Paper Program, to paydown the $800.0 million secured debt pool that
matures in November 2023 and carries an interest rate of 4.21%.
After this paydown, the Company will have no significant debt
maturities, other than commercial paper, until June 2025.
- During the second quarter of 2023, the Company began the lease
up of its new 312-unit development in Washington, D.C. The property
is expected to stabilize in the third quarter of 2024 at a
Development Yield of 5.7%.
Full Year 2023 Guidance
The Company has revised its guidance for its full year 2023 same
store operating performance, EPS, FFO per share and Normalized FFO
per share as listed below:
Revised
Previous (1)
Change at Midpoint
Same Store (includes Residential and
Non-Residential):
Physical Occupancy
96.0%
96.0%
0.0%
Revenue change
5.5% to 6.25%
5.5% to 6.25%
0.0%
Expense change
4.0% to 4.5%
4.0% to 5.0%
(0.25%)
Net Operating Income (NOI) change
6.3% to 7.0%
6.0% to 7.0%
0.15%
EPS
$1.95 to $2.01
$2.02 to $2.12
$(0.09)
FFO per share
$3.72 to $3.78
$3.69 to $3.79
$0.01
Normalized FFO per share
$3.77 to $3.83
$3.73 to $3.83
$0.02
(1) Represents the updated guidance
provided in the Company's May 30, 2023 press release.
The change in the full year 2023 EPS guidance range is due
primarily to higher expected depreciation expense, lower expected
property sale gains and the items described below.
The change in the full year 2023 FFO per share guidance range is
due primarily to higher expected other expenses and the items
described below.
The change in the full year 2023 Normalized FFO per share
guidance range is due primarily to:
Positive/(Negative)
Impact
Revised Full Year 2023 vs.
Previous Full Year 2023
Residential same store NOI
$
0.01
Interest expense, net
0.02
Other items
(0.01
)
Net
$
0.02
The Company has a glossary of defined terms and related
reconciliations of Non-GAAP financial measures on pages 29 through
34 of this release. Reconciliations and definitions of FFO and
Normalized FFO are provided on pages 7, 31 and 32 of this
release.
Results Per Share
The changes in EPS for the quarter and six months ended June 30,
2023 compared to the same periods of 2022 are due primarily to
lower property sale gains and lower depreciation expense in the
current period, the various adjustment items listed on page 27 of
this release and the items described below.
The per share changes in FFO for the quarter and six months
ended June 30, 2023 compared to the same periods of 2022 are due
primarily to the various adjustment items listed on page 27 of this
release and the items described below.
The per share changes in Normalized FFO are due primarily
to:
Positive/(Negative)
Impact
Second Quarter 2023 vs. Second
Quarter 2022
June YTD 2023 vs. June YTD
2022
Residential same store NOI
$
0.06
$
0.17
Lease-Up NOI
0.01
0.02
2023 and 2022 transaction activity impact
on NOI, net
(0.01
)
(0.02
)
Interest expense, net
0.01
0.03
Corporate overhead (1)
(0.02
)
(0.01
)
Other items (2)
–
(0.03
)
Net
$
0.05
$
0.16
(1)
Corporate overhead includes property
management and general and administrative expenses.
(2)
Primarily represents the negative impact
from property damage associated with the California rain storms
that occurred earlier this year.
Same Store Results
The following table shows the total same store results for the
periods presented.
Second Quarter 2023 vs. Second
Quarter 2022
Second Quarter 2023 vs. First
Quarter 2023
June YTD 2023 vs. June YTD
2022
Apartment Units
77,545
78,531
76,952
Physical Occupancy
95.9% vs. 96.7%
95.9% vs. 95.9%
95.9% vs. 96.6%
Revenues
5.5%
1.7%
7.3%
Expenses
5.5%
(4.3%)
6.4%
NOI
5.4%
4.7%
7.7%
On page 11 of this release, the Company has provided a breakout
of Residential and Non-Residential same store results with
definitions that can be found on page 33 of this release.
Non-Residential operations account for approximately 3.8% of total
revenues for the six months ended June 30, 2023.
The following table reflects the detail of the change in Same
Store Residential Revenues, which is presented on a GAAP basis
showing Leasing Concessions on a straight-line basis.
Second Quarter 2023 vs. Second
Quarter 2022
Second Quarter 2023 vs. First
Quarter 2023
June YTD 2023 vs. June YTD
2022
% Change
% Change
% Change
Same Store Residential Revenues-
comparable period
Lease rates
7.3
%
1.1
%
8.2
%
Leasing Concessions
(0.1
%)
(0.1
%)
0.1
%
Vacancy gain (loss)
(0.9
%)
(0.1
%)
(0.8
%)
Bad Debt, Net (1)
(1.6
%)
0.3
%
(0.9
%)
Other (2)
0.8
%
0.6
%
0.7
%
Same Store Residential Revenues-
current period
5.5
%
1.8
%
7.3
%
(1)
Change in rental income due to bad debt
write-offs and reserves, net of amounts (including governmental
rental assistance payments) collected on previously written-off or
reserved accounts. Comparable period changes in quarterly Bad Debt,
Net will be volatile throughout 2023 primarily due to the timing of
governmental rental assistance received in 2022. See page 13 for
more detail.
(2)
Includes ancillary income, utility
recoveries, early lease termination income, miscellaneous income
and other items.
See page 12 for detail and reconciliations of Same Store
Residential Revenues on a GAAP basis to Same Store Residential
Revenues with Leasing Concessions on a cash basis.
Residential Same Store Operating Statistics
The following table includes select operating metrics for
Residential Same Store Properties (for 76,952 same store apartment
units):
July 2023 (1)
Q2 2023
Q1 2023
Physical Occupancy
95.8%
95.9%
95.9%
Percentage of Residents Renewing by
quarter/month
54.0%
57.0%
59.0%
New Lease Change
2.2%
2.3%
1.3%
Renewal Rate Achieved
5.9%
5.9%
6.1%
Blended Rate
4.2%
4.3%
3.9%
(1) July 2023 results are preliminary.
Investment Activity
The Company acquired two operating properties during the second
quarter of 2023 - a recently completed 262-unit apartment property
in Atlanta, which is currently in lease up, for approximately $78.6
million at a stabilized Acquisition Cap Rate of 6.6% (5.7% when
removing certain real estate tax benefits that will reduce over
time) and a 287-unit property in suburban Denver built in 2022, for
approximately $108.0 million at an Acquisition Cap Rate of 5.0%.
The Company did not acquire any properties during the first quarter
of 2023.
The Company did not sell any properties during the second
quarter of 2023. During the first quarter of 2023, the Company sold
a small portfolio of seven properties in Los Angeles with an
average age of 25 years, consisting of 247 apartment units, for an
aggregate sale price of approximately $135.3 million at a weighted
average Disposition Yield of 5.3%, generating an Unlevered IRR of
8.7%.
Capital Markets Activity
In July 2023, the Company locked the interest rate on secured
loans totaling $530.0 million, which, subject to customary
conditions, are anticipated to close in September 2023. After the
effect of the Company’s hedges, the economic rate on these ten-year
loans will be approximately 4.7%. The proceeds from these loans
will be used, along with funding from the Company’s Commercial
Paper Program, to paydown the $800.0 million secured debt pool that
matures in November 2023 and carries an interest rate of 4.21%.
After this paydown, the Company will have no significant debt
maturities, other than commercial paper supported by its revolving
credit facility due in 2027, until June 2025.
Third Quarter 2023 Guidance
The Company has established guidance ranges for the third
quarter of 2023 EPS, FFO per share and Normalized FFO per share as
listed below:
Q3 2023 Guidance
EPS
$0.59 to $0.63
FFO per share
$0.94 to $0.98
Normalized FFO per share
$0.95 to $0.99
The difference between the second quarter of 2023 actual EPS of
$0.37 and the third quarter of 2023 EPS guidance midpoint of $0.61
is due primarily to higher expected property sale gains and the
items described below.
The difference between the second quarter of 2023 actual FFO of
$0.93 per share and the third quarter of 2023 FFO guidance midpoint
of $0.96 per share is due primarily to the items described
below.
The difference between the second quarter of 2023 actual
Normalized FFO of $0.94 per share and the third quarter of 2023
Normalized FFO guidance midpoint of $0.97 per share is due
primarily to:
Positive/(Negative)
Impact
Third Quarter 2023 vs. Second
Quarter 2023
Residential same store NOI
$
0.01
Corporate overhead
0.02
Net
$
0.03
About Equity Residential
Equity Residential is committed to creating communities where
people thrive. The Company, a member of the S&P 500, is focused
on the acquisition, development and management of residential
properties located in and around dynamic cities that attract
affluent long-term renters. Equity Residential owns or has
investments in 304 properties consisting of 80,212 apartment units,
with an established presence in Boston, New York, Washington, D.C.,
Seattle, San Francisco and Southern California, and an expanding
presence in Denver, Atlanta, Dallas/Ft. Worth and Austin. 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, government
regulations and competition. These and 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, Friday, July 28, 2023 at
10:00 a.m. CT. Please visit the Investor section of the Company’s
website at www.equityapartments.com for the webcast link.
Equity Residential
Consolidated Statements of
Operations
(Amounts in thousands except per
share data)
(Unaudited)
Six Months Ended June
30,
Quarter Ended June 30,
2023
2022
2023
2022
REVENUES
Rental income
$
1,422,397
$
1,340,378
$
717,309
$
687,030
EXPENSES
Property and maintenance
262,350
241,229
124,771
116,355
Real estate taxes and insurance
209,749
202,538
103,080
101,850
Property management
62,145
57,306
30,679
26,559
General and administrative
35,041
33,661
18,876
16,423
Depreciation
437,185
453,767
221,355
223,806
Total expenses
1,006,470
988,501
498,761
484,993
Net gain (loss) on sales of real estate
properties
100,122
107,795
(87
)
107,897
Operating income
516,049
459,672
218,461
309,934
Interest and other income
3,669
4,124
2,131
596
Other expenses
(15,559
)
(5,436
)
(6,564
)
(2,380
)
Interest:
Expense incurred, net
(131,991
)
(144,681
)
(65,590
)
(71,889
)
Amortization of deferred financing
costs
(3,996
)
(4,201
)
(2,017
)
(2,124
)
Income before income and other taxes,
income (loss) from
investments in unconsolidated entities and
net gain (loss)
on sales of land parcels
368,172
309,478
146,421
234,137
Income and other tax (expense) benefit
(634
)
(573
)
(336
)
(291
)
Income (loss) from investments in
unconsolidated entities
(2,605
)
(2,429
)
(1,223
)
(1,168
)
Net income
364,933
306,476
144,862
232,678
Net (income) loss attributable to
Noncontrolling Interests:
Operating Partnership
(11,613
)
(10,027
)
(4,554
)
(7,633
)
Partially Owned Properties
(2,082
)
(1,583
)
(1,105
)
(944
)
Net income attributable to controlling
interests
351,238
294,866
139,203
224,101
Preferred distributions
(1,545
)
(1,545
)
(773
)
(773
)
Net income available to Common Shares
$
349,693
$
293,321
$
138,430
$
223,328
Earnings per share – basic:
Net income available to Common Shares
$
0.92
$
0.78
$
0.37
$
0.59
Weighted average Common Shares
outstanding
378,492
375,640
378,642
375,769
Earnings per share – diluted:
Net income available to Common Shares
$
0.92
$
0.78
$
0.37
$
0.59
Weighted average Common Shares
outstanding
391,063
389,463
391,187
389,363
Distributions declared per Common Share
outstanding
$
1.325
$
1.25
$
0.6625
$
0.625
Equity Residential
Consolidated Statements of
Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per
share and Unit data)
(Unaudited)
Six Months Ended June
30,
Quarter Ended June 30,
2023
2022
2023
2022
Net income
$
364,933
$
306,476
$
144,862
$
232,678
Net (income) loss attributable to
Noncontrolling Interests – Partially
Owned Properties
(2,082
)
(1,583
)
(1,105
)
(944
)
Preferred distributions
(1,545
)
(1,545
)
(773
)
(773
)
Net income available to Common Shares and
Units
361,306
303,348
142,984
230,961
Adjustments:
Depreciation
437,185
453,767
221,355
223,806
Depreciation – Non-real estate
additions
(2,259
)
(2,114
)
(1,103
)
(1,062
)
Depreciation – Partially Owned
Properties
(1,055
)
(1,554
)
(510
)
(661
)
Depreciation – Unconsolidated
Properties
1,226
1,240
594
620
Net (gain) loss on sales of unconsolidated
entities - operating
assets
—
(9
)
—
—
Net (gain) loss on sales of real estate
properties
(100,122
)
(107,795
)
87
(107,897
)
FFO available to Common Shares and
Units
696,281
646,883
363,407
345,767
Adjustments (see note for additional
detail):
Write-off of pursuit costs
1,993
2,515
661
1,052
Debt extinguishment and preferred share
redemption (gains)
losses
47
469
47
469
Non-operating asset (gains) losses
1,031
(1,330
)
317
312
Other miscellaneous items
11,343
(185
)
5,051
186
Normalized FFO available to Common Shares
and Units
$
710,695
$
648,352
$
369,483
$
347,786
FFO
$
697,826
$
648,428
$
364,180
$
346,540
Preferred distributions
(1,545
)
(1,545
)
(773
)
(773
)
FFO available to Common Shares and
Units
$
696,281
$
646,883
$
363,407
$
345,767
FFO per share and Unit – basic
$
1.79
$
1.67
$
0.93
$
0.89
FFO per share and Unit – diluted
$
1.78
$
1.66
$
0.93
$
0.89
Normalized FFO
$
712,240
$
649,897
$
370,256
$
348,559
Preferred distributions
(1,545
)
(1,545
)
(773
)
(773
)
Normalized FFO available to Common Shares
and Units
$
710,695
$
648,352
$
369,483
$
347,786
Normalized FFO per share and Unit –
basic
$
1.82
$
1.67
$
0.95
$
0.90
Normalized FFO per share and Unit –
diluted
$
1.82
$
1.66
$
0.94
$
0.89
Weighted average Common Shares and Units
outstanding – basic
389,942
387,531
390,032
387,664
Weighted average Common Shares and Units
outstanding – diluted
391,063
389,463
391,187
389,363
Note: See Adjustments from FFO to Normalized FFO for additional
detail regarding the adjustments from FFO to Normalized FFO. See
Additional Reconciliations and Definitions of Non-GAAP Financial
Measures and Other Terms 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,
2023
2022
ASSETS
Land
$
5,579,211
$
5,580,878
Depreciable property
22,697,597
22,334,369
Projects under development
50,916
112,940
Land held for development
61,334
60,567
Investment in real estate
28,389,058
28,088,754
Accumulated depreciation
(9,428,549
)
(9,027,850
)
Investment in real estate, net
18,960,509
19,060,904
Investments in unconsolidated
entities1
304,710
279,024
Cash and cash equivalents
35,701
53,869
Restricted deposits
88,941
83,303
Right-of-use assets
463,704
462,956
Other assets
292,164
278,206
Total assets
$
20,145,729
$
20,218,262
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
1,913,069
$
1,953,438
Notes, net
5,345,373
5,342,329
Line of credit and commercial paper
184,474
129,955
Accounts payable and accrued expenses
118,316
96,028
Accrued interest payable
66,238
66,310
Lease liabilities
313,866
308,748
Other liabilities
294,263
306,941
Security deposits
69,427
68,940
Distributions payable
258,841
244,621
Total liabilities
8,563,867
8,517,310
Commitments and contingencies
Redeemable Noncontrolling Interests –
Operating Partnership
355,319
318,273
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, 2023 and
December 31, 2022
37,280
37,280
Common Shares of beneficial interest,
$0.01 par value;
1,000,000,000 shares authorized;
379,032,722 shares issued
and outstanding as of June 30, 2023 and
378,429,708
shares issued and outstanding as of
December 31, 2022
3,790
3,784
Paid in capital
9,472,628
9,476,085
Retained earnings
1,506,460
1,658,837
Accumulated other comprehensive income
(loss)
3,708
(2,547
)
Total shareholders’ equity
11,023,866
11,173,439
Noncontrolling Interests:
Operating Partnership
207,405
209,961
Partially Owned Properties
(4,728
)
(721
)
Total Noncontrolling Interests
202,677
209,240
Total equity
11,226,543
11,382,679
Total liabilities and equity
$
20,145,729
$
20,218,262
1 Includes $242.4 million and $218.0
million in unconsolidated development projects as of June 30, 2023
and December 31, 2022, respectively. See Development and Lease-Up
Projects for additional detail on unconsolidated projects.
Equity Residential
Portfolio Summary
As of June 30, 2023
% of Stabilized
Average
Apartment
Budgeted
Rental
Markets/Metro Areas
Properties
Units
NOI
Rate
Established Markets:
Los Angeles
59
15,012
17.7
%
$
2,876
Orange County
13
4,028
5.2
%
2,787
San Diego
12
2,878
4.0
%
2,997
Subtotal – Southern California
84
21,918
26.9
%
2,875
San Francisco
44
11,790
15.8
%
3,285
Washington, D.C.
48
15,028
15.6
%
2,592
New York
34
8,536
13.9
%
4,488
Boston
27
7,170
11.5
%
3,477
Seattle
46
9,526
11.0
%
2,587
Subtotal – Established Markets
283
73,968
94.7
%
3,092
Expansion Markets:
Denver
9
2,785
2.8
%
2,417
Atlanta
5
1,477
1.4
%
2,196
Dallas/Ft. Worth
4
1,241
0.7
%
1,875
Austin
3
741
0.4
%
1,831
Subtotal – Expansion Markets
21
6,244
5.3
%
2,189
Total
304
80,212
100.0
%
$
3,022
Properties
Apartment Units
Wholly Owned Properties
289
76,986
Partially Owned Properties –
Consolidated
15
3,226
304
80,212
Note: Projects under development are not
included in the Portfolio Summary until construction has been
completed.
Equity Residential
Portfolio Rollforward Q2
2023
($ in thousands)
Properties
Apartment Units
Purchase Price
Acquisition Cap Rate
3/31/2023
301
79,351
Acquisitions:
Consolidated Rental Properties
1
287
$
108,000
5.0
%
Consolidated Rental Properties – Not
Stabilized (1)
1
262
$
78,600
6.6
%
Completed Developments – Consolidated
1
312
6/30/2023
304
80,212
Portfolio Rollforward
2023
($ in thousands)
Properties
Apartment Units
Purchase Price
Acquisition Cap Rate
12/31/2022
308
79,597
Acquisitions:
Consolidated Rental Properties
1
287
$
108,000
5.0
%
Consolidated Rental Properties – Not
Stabilized (1)
1
262
$
78,600
6.6
%
Sales Price
Disposition Yield
Dispositions:
Consolidated Rental Properties
(7
)
(247
)
$
(135,300
)
(5.3
%)
Completed Developments – Consolidated
1
312
Configuration Changes
—
1
6/30/2023
304
80,212
(1)
The Company acquired one property in the
Atlanta market in the second quarter of 2023 that is in lease-up
and is expected to stabilize in its second year of ownership at the
Acquisition Cap Rate listed above (5.7% when removing certain real
estate tax benefits that will reduce over time).
Equity Residential
Second Quarter 2023 vs. Second
Quarter 2022
Same Store Results/Statistics
Including 77,545 Same Store Apartment Units
($ in thousands except for
Average Rental Rate)
Second Quarter 2023
Second Quarter 2022
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
672,595
(1)
5.5%
$
24,849
4.3%
$
697,444
5.5%
Revenues
$
637,547
$
23,827
$
661,374
Expenses
$
212,114
5.3%
$
6,920
14.2%
$
219,034
5.5%
Expenses
$
201,520
$
6,058
$
207,578
NOI
$
460,481
5.6%
$
17,929
0.9%
$
478,410
5.4%
NOI
$
436,027
$
17,769
$
453,796
Average Rental Rate
$
3,017
6.4%
Average Rental Rate
$
2,836
Physical Occupancy
95.9
%
(0.8%)
Physical Occupancy
96.7
%
Turnover
11.6
%
0.4%
Turnover
11.2
%
Second Quarter 2023 vs. First
Quarter 2023
Same Store Results/Statistics
Including 78,531 Same Store Apartment Units
($ in thousands except for
Average Rental Rate)
Second Quarter 2023
First Quarter 2023
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
683,155
(1)
1.8%
$
26,456
(1.8%)
$
709,611
1.7%
Revenues
$
670,793
$
26,951
$
697,744
Expenses
$
215,239
(4.5%)
$
7,368
2.3%
$
222,607
(4.3%)
Expenses
$
225,376
$
7,202
$
232,578
NOI
$
467,916
5.1%
$
19,088
(3.3%)
$
487,004
4.7%
NOI
$
445,417
$
19,749
$
465,166
Average Rental Rate
$
3,026
1.8%
Average Rental Rate
$
2,972
Physical Occupancy
95.9
%
0.0%
Physical Occupancy
95.9
%
Turnover
11.6
%
2.5%
Turnover
9.1
%
June YTD 2023 vs. June YTD
2022
Same Store Results/Statistics
Including 76,952 Same Store Apartment Units
($ in thousands except for
Average Rental Rate)
June YTD 2023
June YTD 2022
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
1,324,993
(1)
7.3%
$
50,085
7.0%
$
1,375,078
7.3%
Revenues
$
1,235,134
$
46,813
$
1,281,947
Expenses
$
430,638
6.2%
$
13,613
11.6%
$
444,251
6.4%
Expenses
$
405,484
$
12,202
$
417,686
NOI
$
894,355
7.8%
$
36,472
5.4%
$
930,827
7.7%
NOI
$
829,650
$
34,611
$
864,261
Average Rental Rate
$
2,995
8.0%
Average Rental Rate
$
2,772
Physical Occupancy
95.9
%
(0.7%)
Physical Occupancy
96.6
%
Turnover
20.6
%
0.4%
Turnover
20.2
%
(1)
See page 12 for Same Store Residential
Revenues with Leasing Concessions reflected on a cash basis. See
Additional Reconciliations and Definitions of Non-GAAP Financial
Measures and Other Terms for additional detail.
Equity Residential
Same Store Residential
Revenues – GAAP to Cash Basis (1)
($ in thousands)
Second Quarter 2023 vs. Second
Quarter 2022
Second Quarter 2023 vs. First
Quarter 2023
June YTD 2023 vs. June YTD
2022
77,545 Same Store Apartment
Units
78,531 Same Store Apartment
Units
76,952 Same Store Apartment
Units
Q2 2023
Q2 2022
Q2 2023
Q1 2023
June YTD 2023
June YTD 2022
Same Store Residential Revenues (GAAP
Basis)
$
672,595
$
637,547
$
683,155
$
670,793
$
1,324,993
$
1,235,134
Leasing Concessions amortized
2,705
2,156
3,256
2,846
4,744
6,005
Leasing Concessions granted
(3,921
)
(1,503
)
(4,125
)
(4,241
)
(7,766
)
(3,057
)
Same Store Residential Revenues with
Leasing
Concessions on a cash basis
$
671,379
$
638,200
$
682,286
$
669,398
$
1,321,971
$
1,238,082
% change - GAAP revenue
5.5
%
1.8
%
7.3
%
% change - cash revenue
5.2
%
1.9
%
6.8
%
(1) See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional detail.
Same Store Net Operating
Income By Quarter
Including 76,952 Same Store
Apartment Units
($ in thousands)
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Same store revenues
$
693,403
$
681,675
$
676,011
$
671,160
$
657,582
Same store expenses
217,461
226,790
210,795
214,495
206,152
Same store NOI (includes Residential and
Non-Residential)
$
475,942
$
454,885
$
465,216
$
456,665
$
451,430
Equity Residential
Same Store Resident/Tenant
Accounts Receivable Balances
Including 76,952 Same Store
Apartment Units
($ in thousands)
Residential
Non-Residential
Balance Sheet (Other assets):
June 30, 2023
March 31, 2023
June 30, 2023
March 31, 2023
Resident/tenant accounts receivable
balances
$
26,628
$
32,408
$
2,389
$
2,414
Allowance for doubtful accounts
(22,335
)
(28,430
)
(1,383
)
(1,500
)
Net receivable balances
$
4,293
$
3,978
$
1,006
$
914
Straight-line receivable balances
$
6,067
(1)
$
4,861
$
13,546
$
13,607
(1)
Total same store Residential
Leasing Concessions granted in the second quarter of 2023 were
approximately $3.9 million. The straight-line receivable balance of
$6.1 million reflects Residential Leasing Concessions that the
Company expects will be primarily recognized as a reduction of
rental revenues in the remainder of 2023 and the first half of
2024.
Same Store Residential Bad
Debt
Including 76,952 Same Store
Apartment Units
($ in thousands)
Income Statement (Rental
income):
Q2 2023
Q1 2023
Q2 2022
Bad debts before governmental rental
assistance
$
9,504
$
11,866
$
13,287
Governmental rental assistance
received
(655
)
(1,167
)
(14,398
)
Bad Debt, Net
$
8,849
$
10,699
$
(1,111
)
Bad Debt, Net as a % of Same Store
Residential Revenues
1.3
%
1.6
%
(0.2
%)
Equity Residential
Second Quarter 2023 vs. Second
Quarter 2022
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Year's Quarter
Markets/Metro Areas
Apartment Units
Q2 2023 % of Actual NOI
Q2 2023 Average Rental Rate
Q2 2023 Weighted Average Physical
Occupancy %
Q2 2023 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
14,415
17.8
%
$
2,861
95.0
%
11.2
%
(0.2
%)
(1)
8.5
%
(3.5
%)
1.8
%
(1.9
%)
2.0
%
Orange County
4,028
5.5
%
2,787
95.9
%
10.4
%
3.4
%
(1)
10.9
%
1.5
%
4.8
%
(1.3
%)
1.6
%
San Diego
2,878
4.1
%
2,997
95.8
%
9.9
%
7.6
%
10.2
%
6.9
%
9.2
%
(1.5
%)
0.2
%
Subtotal – Southern California
21,321
27.4
%
2,865
95.3
%
10.9
%
1.5
%
9.0
%
(1.1
%)
3.4
%
(1.7
%)
1.7
%
San Francisco
11,368
16.4
%
3,288
95.6
%
10.9
%
3.1
%
(1)
6.7
%
1.6
%
4.3
%
(1.1
%)
1.5
%
Washington, D.C.
14,400
15.9
%
2,578
96.8
%
10.6
%
6.3
%
1.4
%
8.9
%
6.3
%
0.0
%
(0.8
%)
New York
8,536
14.2
%
4,488
97.1
%
10.1
%
13.3
%
3.6
%
21.2
%
13.4
%
0.0
%
(1.8
%)
Seattle
9,525
10.9
%
2,587
95.1
%
14.4
%
4.2
%
3.7
%
4.4
%
4.4
%
(0.2
%)
(0.2
%)
Boston
6,700
10.3
%
3,405
96.5
%
11.3
%
8.3
%
3.4
%
10.4
%
8.7
%
(0.3
%)
(0.7
%)
Denver
2,498
2.7
%
2,420
96.2
%
17.2
%
5.7
%
6.0
%
5.5
%
6.2
%
(0.5
%)
(0.5
%)
Other Expansion Markets
3,197
2.2
%
1,990
94.9
%
14.6
%
5.1
%
12.7
%
(0.4
%)
7.0
%
(1.9
%)
2.5
%
Total
77,545
100.0
%
$
3,017
95.9
%
11.6
%
5.5
%
5.3
%
5.6
%
6.4
%
(0.8
%)
0.4
%
(1)
Excluding Bad Debt, Net, which includes
the positive impact of governmental rental assistance in the second
quarter of 2022, same store revenue growth would have been 5.6%,
6.9% and 4.6% for Los Angeles, Orange County and San Francisco,
respectively.
Note: The above table reflects Residential same store results
only. Residential operations account for approximately 96.2% of
total revenues for the six months ended June 30, 2023.
Equity Residential
Second Quarter 2023 vs. First
Quarter 2023
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Quarter
Markets/Metro Areas
Apartment Units
Q2 2023 % of Actual NOI
Q2 2023 Average Rental Rate
Q2 2023 Weighted Average Physical
Occupancy %
Q2 2023 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
14,415
17.5
%
$
2,861
95.0
%
11.2
%
2.5
%
(5.3
%)
6.3
%
3.1
%
(0.5
%)
1.3
%
Orange County
4,028
5.3
%
2,787
95.9
%
10.4
%
2.3
%
0.0
%
3.0
%
2.6
%
(0.3
%)
3.1
%
San Diego
2,878
4.1
%
2,997
95.8
%
9.9
%
2.5
%
(1.3
%)
3.7
%
2.1
%
0.4
%
0.2
%
Subtotal – Southern California
21,321
26.9
%
2,865
95.3
%
10.9
%
2.5
%
(4.1
%)
5.2
%
2.9
%
(0.3
%)
1.5
%
San Francisco
11,568
16.4
%
3,283
95.5
%
10.9
%
1.3
%
(5.4
%)
4.4
%
1.3
%
(0.1
%)
1.3
%
Washington, D.C.
14,716
16.1
%
2,587
96.8
%
10.6
%
2.2
%
(4.7
%)
5.7
%
1.9
%
0.2
%
3.2
%
New York
8,536
14.0
%
4,488
97.1
%
10.1
%
1.6
%
(3.9
%)
5.8
%
1.3
%
0.3
%
2.6
%
Seattle
9,525
10.7
%
2,587
95.1
%
14.4
%
0.3
%
2.8
%
(0.7
%)
0.3
%
0.0
%
3.3
%
Boston
7,170
11.1
%
3,477
96.5
%
11.6
%
3.0
%
(9.2
%)
8.8
%
2.0
%
1.0
%
3.6
%
Denver
2,498
2.7
%
2,420
96.2
%
17.2
%
1.4
%
(9.1
%)
6.2
%
1.5
%
(0.1
%)
6.1
%
Other Expansion Markets
3,197
2.1
%
1,990
94.9
%
14.6
%
1.0
%
(7.3
%)
9.1
%
1.0
%
0.0
%
2.2
%
Total
78,531
100.0
%
$
3,026
95.9
%
11.6
%
1.8
%
(4.5
%)
5.1
%
1.8
%
0.0
%
2.5
%
Note: The above table reflects Residential same store results
only. Residential operations account for approximately 96.2% of
total revenues for the six months ended June 30, 2023.
Equity Residential
June YTD 2023 vs. June YTD
2022
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Year
Markets/Metro Areas
Apartment Units
June YTD 23 % of Actual NOI
June YTD 23 Average Rental
Rate
June YTD 23 Weighted Average
Physical Occupancy %
June YTD 23 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
14,415
17.8
%
$
2,818
95.2
%
21.1
%
2.8
%
(1)
9.6
%
0.0
%
4.6
%
(1.7
%)
3.5
%
Orange County
4,028
5.5
%
2,752
96.1
%
17.8
%
6.5
%
(1)
10.5
%
5.4
%
7.7
%
(1.1
%)
2.7
%
San Diego
2,706
3.9
%
2,931
95.6
%
19.1
%
7.2
%
7.7
%
7.0
%
8.8
%
(1.5
%)
0.7
%
Subtotal – Southern California
21,149
27.2
%
2,820
95.4
%
20.2
%
4.1
%
9.5
%
2.0
%
5.7
%
(1.6
%)
2.9
%
San Francisco
11,368
16.5
%
3,265
95.6
%
20.4
%
4.8
%
(1)
7.0
%
3.9
%
5.9
%
(1.0
%)
1.6
%
Washington, D.C.
14,400
16.0
%
2,555
96.7
%
17.9
%
6.6
%
3.7
%
8.0
%
6.7
%
(0.1
%)
(1.7
%)
New York
8,536
14.3
%
4,459
96.9
%
17.6
%
16.2
%
3.7
%
27.5
%
16.4
%
(0.2
%)
(2.5
%)
Seattle
9,525
11.3
%
2,583
95.1
%
25.6
%
6.3
%
3.3
%
7.6
%
6.2
%
0.1
%
(0.3
%)
Boston
6,700
10.2
%
3,374
96.1
%
19.2
%
9.0
%
5.4
%
10.6
%
9.3
%
(0.2
%)
(0.5
%)
Denver
2,498
2.7
%
2,402
96.3
%
28.3
%
6.8
%
12.1
%
4.7
%
6.7
%
0.0
%
0.0
%
Other Expansion Markets
2,776
1.8
%
1,984
94.7
%
25.4
%
5.2
%
17.5
%
(4.0
%)
7.0
%
(1.9
%)
1.1
%
Total
76,952
100.0
%
$
2,995
95.9
%
20.6
%
7.3
%
6.2
%
7.8
%
8.0
%
(0.7
%)
0.4
%
(1)
Excluding Bad Debt, Net, which includes
the positive impact of governmental rental assistance in the six
months ended June 30, 2022, same store revenue growth would have
been 6.1%, 7.7% and 5.4% for Los Angeles, Orange County and San
Francisco, respectively.
Note: The above table reflects Residential same store results
only. Residential operations account for approximately 96.2% of
total revenues for the six months ended June 30, 2023.
Equity Residential
Same Store Residential Net
Effective Lease Pricing Statistics
For 76,952 Same Store
Apartment Units
New Lease Change (1)
Renewal Rate Achieved (1)
Blended Rate (1)
Markets/Metro Areas
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Southern California
3.5
%
4.6
%
6.9
%
6.2
%
5.4
%
5.4
%
San Francisco
1.4
%
2.0
%
6.0
%
6.1
%
3.8
%
4.3
%
Washington, D.C.
4.8
%
2.4
%
6.5
%
6.0
%
5.7
%
4.4
%
New York
4.2
%
2.4
%
5.1
%
6.3
%
4.7
%
4.6
%
Seattle
(3.8
%)
(5.8
%)
4.5
%
5.6
%
0.4
%
(0.2
%)
Boston
4.4
%
0.6
%
6.1
%
6.9
%
5.4
%
3.8
%
Denver
0.9
%
(2.4
%)
5.0
%
5.8
%
2.6
%
0.8
%
Other Expansion Markets
(4.8
%)
(5.3
%)
4.4
%
5.5
%
(0.8
%)
(0.8
%)
Total
2.3
%
1.3
%
5.9
%
6.1
%
4.3
%
3.9
%
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
definitions. See page 4 for July 2023 preliminary data.
Equity Residential
Second Quarter 2023 vs. Second
Quarter 2022
Total Same Store Operating
Expenses Including 77,545 Same Store Apartment Units
($ in thousands)
Q2 2023
Q2 2022
$ Change (1)
% Change
% of Q2 2023 Operating
Expenses
Real estate taxes
$
90,898
$
88,963
$
1,935
2.2
%
41.5
%
On-site payroll
42,504
39,022
3,482
8.9
%
19.4
%
Utilities
31,578
31,501
77
0.2
%
14.4
%
Repairs and maintenance
31,233
27,421
3,812
13.9
%
14.3
%
Insurance
8,455
7,397
1,058
14.3
%
3.9
%
Leasing and advertising
2,528
2,619
(91
)
(3.5
%)
1.1
%
Other on-site operating expenses
11,838
10,655
1,183
11.1
%
5.4
%
Total Same Store Operating Expenses (2)
(includes Residential and Non-Residential)
$
219,034
$
207,578
$
11,456
5.5
%
100.0
%
June YTD 2023 vs. June YTD
2022
Total Same Store Operating
Expenses Including 76,952 Same Store Apartment Units
($ in thousands)
YTD 2023
YTD 2022
$ Change (1)
% Change
% of YTD 2023 Operating
Expenses
Real estate taxes
$
180,521
$
176,328
$
4,193
2.4
%
40.6
%
On-site payroll
84,629
80,021
4,608
5.8
%
19.1
%
Utilities
69,925
65,520
4,405
6.7
%
15.7
%
Repairs and maintenance
61,120
53,077
8,043
15.2
%
13.8
%
Insurance
16,830
14,719
2,111
14.3
%
3.8
%
Leasing and advertising
5,003
4,949
54
1.1
%
1.1
%
Other on-site operating expenses
26,223
23,072
3,151
13.7
%
5.9
%
Total Same Store Operating Expenses (2)
(includes Residential and Non-Residential)
$
444,251
$
417,686
$
26,565
6.4
%
100.0
%
(1)
The quarter-over-quarter and
year-over-year changes were primarily driven by the following
factors:
Real estate taxes – Increase due to modest
escalation in rates and assessed values.
On-site payroll – Increase due primarily
to challenging comparable period and elevated employee benefit
costs, partially offset by the impact of innovation
initiatives.
Utilities – Moderation in the
quarter-over-quarter rate of increase is primarily driven by lower
commodity prices for gas and electric. Year-over-year increase
primarily driven by higher commodity prices for gas and electric
and higher trash expense.
Repairs and maintenance –
Quarter-over-quarter increase primarily driven by continued wage
pressure, particularly due to higher minimum wage on contracted
services. Year-over-year increase was also impacted by increased
outsourcing due to higher internal staffing utilization to address
issues from California rain storms that occurred earlier this
year.
Insurance – Increase due to higher
premiums on property insurance renewal due to challenging
conditions in the insurance market.
Other on-site operating expenses –
Increase primarily driven by higher property-related legal
expenses.
(2)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
Equity Residential
Debt Summary as of June 30,
2023
($ in thousands)
Debt Balances (1)
% of Total
Weighted Average Rates (1)
Weighted Average Maturities
(years)
Secured
$
1,913,069
25.7
%
3.63
%
4.4
Unsecured
5,529,847
74.3
%
3.59
%
9.0
Total
$
7,442,916
100.0
%
3.60
%
7.8
Fixed Rate Debt:
Secured – Conventional
$
1,609,298
21.6
%
3.45
%
3.4
Unsecured – Public
5,345,373
71.8
%
3.54
%
9.3
Fixed Rate Debt
6,954,671
93.4
%
3.52
%
8.0
Floating Rate Debt:
Secured – Conventional
66,863
0.9
%
7.17
%
2.0
Secured – Tax Exempt
236,908
3.2
%
3.47
%
11.0
Unsecured – Revolving Credit Facility
—
—
—
4.3
Unsecured – Commercial Paper Program
(2)
184,474
2.5
%
5.12
%
—
Floating Rate Debt
488,245
6.6
%
4.71
%
5.8
Total
$
7,442,916
100.0
%
3.60
%
7.8
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
(2)
At June 30, 2023, the weighted average
maturity of commercial paper outstanding was 26 days. The weighted
average amount outstanding for the six months ended June 30, 2023
was approximately $164.5 million.
Note: The Company capitalized interest of approximately $7.0
million and $2.3 million during the six months ended June 30, 2023
and 2022, respectively. The Company capitalized interest of
approximately $3.6 million and $1.3 million during the quarters
ended June 30, 2023 and 2022, respectively.
Equity Residential
Debt Maturity Schedule as of
June 30, 2023
($ in thousands)
Year
Fixed Rate
Floating Rate
Total
% of Total
Weighted Average Coupons on Fixed
Rate Debt (1)
Weighted Average Coupons on Total
Debt (1)
2023 (2)
$
800,000
$
188,487
(3)
$
988,487
13.2
%
4.21
%
4.45
%
2024
—
6,200
6,200
0.1
%
N/A
3.86
%
2025
450,000
75,976
525,976
7.0
%
3.38
%
3.96
%
2026
592,025
9,000
601,025
8.0
%
3.58
%
3.58
%
2027
400,000
9,800
409,800
5.4
%
3.25
%
3.26
%
2028
900,000
10,700
910,700
12.1
%
3.79
%
3.79
%
2029
888,120
11,500
899,620
12.0
%
3.30
%
3.31
%
2030
1,095,000
12,700
1,107,700
14.7
%
2.55
%
2.56
%
2031
528,500
39,800
568,300
7.6
%
1.94
%
2.08
%
2032
—
28,000
28,000
0.4
%
N/A
3.64
%
2033+
1,350,850
110,900
1,461,750
19.5
%
4.39
%
4.28
%
Subtotal
7,004,495
503,063
7,507,558
100.0
%
3.48
%
3.57
%
Deferred Financing Costs and
Unamortized (Discount)
(49,824
)
(14,818
)
(64,642
)
N/A
N/A
N/A
Total
$
6,954,671
$
488,245
$
7,442,916
100.0
%
3.48
%
3.57
%
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
(2)
As of June 30, 2023, the Company had
$450.0 million of ten-year forward starting SOFR swaps outstanding
at a weighted average rate of 2.90% (currently equivalent to a
ten-year U.S. Treasury of approximately 3.15%) to hedge the U.S.
Treasury risk for the refinancing of 2023 maturities. See the
Capital Markets Activity on page 4 of this release for details of
subsequent activity related to these swaps.
(3)
Includes $185.2 million in principal
outstanding on the Company's Commercial Paper Program.
Equity Residential
Selected Unsecured Public Debt
Covenants
June 30,
March 31,
2023
2023
Debt to Adjusted Total Assets (not to
exceed 60%)
26.9%
26.7%
Secured Debt to Adjusted Total Assets (not
to exceed 40%)
7.7%
8.0%
Consolidated Income Available for Debt
Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1)
6.21
6.30
Total Unencumbered Assets to Unsecured
Debt
(must be at least 125%)
518.6%
528.9%
Note: These selected covenants represent
the most restrictive financial covenants relating to ERP Operating
Limited Partnership's ("ERPOP") outstanding public debt securities.
Equity Residential is the general partner of ERPOP.
Selected Credit Ratios
June 30,
March 31,
2023
2023
Total debt to Normalized EBITDAre
4.30x
4.27x
Net debt to Normalized EBITDAre
4.27x
4.17x
Unencumbered NOI as a % of total NOI
88.5%
88.3%
Note: See Normalized EBITDAre
Reconciliations for detail.
Equity Residential
Capital Structure as of June
30, 2023
(Amounts in thousands except for
share/unit and per share amounts)
Secured Debt
$
1,913,069
25.7
%
Unsecured Debt
5,529,847
74.3
%
Total Debt
7,442,916
100.0
%
22.3
%
Common Shares (includes Restricted
Shares)
379,032,722
96.8
%
Units (includes OP Units and Restricted
Units)
12,415,452
3.2
%
Total Shares and Units
391,448,174
100.0
%
Common Share Price at June 30, 2023
$
65.97
25,823,836
99.9
%
Perpetual Preferred Equity (see below)
37,280
0.1
%
Total Equity
25,861,116
100.0
%
77.7
%
Total Market Capitalization
$
33,304,032
100.0
%
Perpetual Preferred Equity as
of June 30, 2023
(Amounts in thousands except for
share and per share amounts)
Series
Call Date
Outstanding Shares
Liquidation Value
Annual Dividend Per
Share
Annual Dividend 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
June YTD 2023
June YTD 2022
Q2 2023
Q2 2022
Weighted Average Amounts Outstanding
for Net Income Purposes:
Common Shares - basic
378,492,171
375,639,505
378,641,804
375,768,632
Shares issuable from assumed
conversion/vesting of:
- OP Units
11,449,790
11,891,583
11,390,569
11,895,086
- long-term compensation shares/units
1,121,169
1,862,666
1,155,127
1,697,634
- ATM forward sales
—
68,823
—
1,470
Total Common Shares and Units -
diluted
391,063,130
389,462,577
391,187,500
389,362,822
Weighted Average Amounts Outstanding
for FFO and Normalized FFO Purposes:
Common Shares - basic
378,492,171
375,639,505
378,641,804
375,768,632
OP Units - basic
11,449,790
11,891,583
11,390,569
11,895,086
Total Common Shares and OP Units -
basic
389,941,961
387,531,088
390,032,373
387,663,718
Shares issuable from assumed
conversion/vesting of:
- long-term compensation shares/units
1,121,169
1,862,666
1,155,127
1,697,634
- ATM forward sales
—
68,823
—
1,470
Total Common Shares and Units -
diluted
391,063,130
389,462,577
391,187,500
389,362,822
Period Ending Amounts
Outstanding:
Common Shares (includes Restricted
Shares)
379,032,722
376,118,433
Units (includes OP Units and Restricted
Units)
12,415,452
12,851,180
Total Shares and Units
391,448,174
388,969,613
Equity Residential
Development and Lease-Up
Projects as of June 30, 2023
(Amounts in thousands except for
project and apartment unit amounts)
Estimated/Actual
Projects
Location
Ownership Percentage
No. of Apartment Units
Total Budgeted Capital
Cost
Total Book Value to
Date
Total Debt (1)
Percentage Completed
Start Date
Initial Occupancy
Completion Date
Stabilization Date
Percentage Leased /
Occupied
CONSOLIDATED:
Projects Under
Development:
Laguna Clara II
Santa Clara, CA
100%
225
$
152,621
$
50,916
$
—
31%
Q2 2022
Q4 2024
Q1 2025
Q4 2025
– / –
Projects Under Development -
Consolidated
225
152,621
50,916
—
Projects
Completed Not Stabilized:
Reverb (fka 9th and W) (2)
Washington, D.C.
92%
312
108,027
103,675
66,863
99%
Q3 2021
Q2 2023
Q2 2023
Q3 2024
47% / 39%
Projects Completed Not Stabilized -
Consolidated
312
108,027
103,675
66,863
UNCONSOLIDATED:
Projects Under
Development:
Alloy Sunnyside
Denver, CO
80%
209
66,004
52,878
19,028
79%
Q3 2021
Q4 2023
Q2 2024
Q1 2025
– / –
Alexan Harrison
Harrison, NY
62%
450
198,664
140,799
38,549
69%
Q3 2021
Q1 2024
Q4 2024
Q2 2026
– / –
Solana Beeler Park
Denver, CO
90%
270
81,206
42,820
7,263
44%
Q4 2021
Q4 2023
Q2 2024
Q1 2025
– / –
Remy (Toll)
Frisco, TX
75%
357
96,937
61,366
18,338
58%
Q1 2022
Q1 2024
Q4 2024
Q3 2025
– / –
Settler (Toll)
Fort Worth, TX
75%
362
81,775
41,518
955
48%
Q2 2022
Q2 2024
Q3 2024
Q3 2025
– / –
Lyle (Toll) (2)
Dallas, TX
75%
334
86,332
28,244
7,680
34%
Q3 2022
Q4 2024
Q2 2025
Q1 2026
– / –
Projects Under Development -
Unconsolidated
1,982
610,918
367,625
91,813
Total Development Projects -
Consolidated
537
260,648
154,591
66,863
Total Development Projects -
Unconsolidated
1,982
610,918
367,625
91,813
Total Development Projects
2,519
$
871,566
$
522,216
$
158,676
NOI CONTRIBUTION FROM DEVELOPMENT
PROJECTS
Total Budgeted Capital Cost
Q2 2023 NOI
Projects Under Development -
Consolidated
$
152,621
$
—
Projects Completed Not Stabilized -
Consolidated
108,027
(16
)
Projects Under Development -
Unconsolidated
610,918
—
$
871,566
$
(16
)
(1)
All non-wholly owned projects are being
partially funded with project-specific construction loans. None of
these loans are recourse to the Company.
(2)
The land parcels under these projects are
subject to long-term ground leases.
Equity Residential
Capital Expenditures to Real
Estate
For the Six Months Ended June
30, 2023
(Amounts in thousands except for
apartment unit and per apartment unit amounts)
Same Store Properties
Non-Same Store
Properties/Other
Total
Same Store Avg. Per Apartment
Unit
Total Apartment Units
76,952
3,260
80,212
Building Improvements
$
53,622
$
4,626
(2)
$
58,248
$
697
Renovation Expenditures
31,400
(1)
11,241
(2)
42,641
408
Replacements
33,474
884
34,358
435
Capital Expenditures to Real Estate
(3)
$
118,496
$
16,751
$
135,247
$
1,540
(1)
Renovation Expenditures on 1,050 same
store apartment units for the six months ended June 30, 2023
approximated $29,904 per apartment unit renovated.
(2)
Includes expenditures for two properties
that have been removed from same store while undergoing major
renovations requiring a significant number of apartment units to be
vacated to accommodate the extensive planned improvements. The
renovations are expected to continue through at least the end of
2023 at both properties.
(3)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
Equity Residential
Normalized EBITDAre
Reconciliations
(Amounts in thousands)
Trailing Twelve Months
2023
2022
June 30, 2023
March 31, 2023
Q2
Q1
Q4
Q3
Q2
Net income
$
865,452
$
953,268
$
144,862
$
220,071
$
165,354
$
335,165
$
232,678
Interest expense incurred, net
270,230
276,529
65,590
66,401
65,827
72,412
71,889
Amortization of deferred financing
costs
8,524
8,631
2,017
1,979
2,308
2,220
2,124
Amortization of above/below market lease
intangibles
4,464
4,464
1,116
1,116
1,116
1,116
1,116
Depreciation
865,586
868,037
221,355
215,830
214,272
214,129
223,806
Income and other tax expense (benefit)
961
916
336
298
175
152
291
EBITDA
2,015,217
2,111,845
435,276
505,695
449,052
625,194
531,904
Net (gain) loss on sales of real estate
properties
(296,652
)
(404,636
)
87
(100,209
)
21
(196,551
)
(107,897
)
EBITDAre
1,718,565
1,707,209
435,363
405,486
449,073
428,643
424,007
Write-off of pursuit costs (other
expenses)
4,258
4,649
661
1,332
1,484
781
1,052
(Income) loss from investments in
unconsolidated entities - operations
5,207
5,152
1,223
1,382
1,575
1,027
1,168
Realized (gain) loss on investment
securities (interest and other income)
3,315
3,317
—
87
3,225
3
2
Insurance/litigation settlement or reserve
income (interest and other income)
(1,105
)
(1,223
)
(193
)
(800
)
(12
)
(100
)
(311
)
Insurance/litigation/environmental
settlement or reserve expense (other expenses)
9,257
5,744
3,513
4,999
745
—
—
Advocacy contributions (other
expenses)
1,097
1,344
320
7
50
720
567
Data transformation project (other
expenses)
4,605
3,200
1,405
2,080
1,120
—
—
Real estate tax transaction adjustment
(real estate taxes)
(18,072
)
(18,072
)
—
—
(18,072
)
—
—
Other
1,845
1,769
6
6
436
1,397
(70
)
Normalized EBITDAre
$
1,728,972
$
1,713,089
$
442,298
$
414,579
$
439,624
$
432,471
$
426,415
Balance Sheet
Items:
June 30, 2023
March 31, 2023
Total debt
$
7,442,916
$
7,312,094
Cash and cash equivalents
(35,701
)
(133,460
)
Mortgage principal reserves/sinking
funds
(28,802
)
(27,017
)
Net debt
$
7,378,413
$
7,151,617
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,
2023
2022
Variance
2023
2022
Variance
Impairment – non-operating real estate
assets
$
—
$
—
$
—
$
—
$
—
$
—
Write-off of pursuit costs (other
expenses)
1,993
2,515
(522
)
661
1,052
(391
)
Write-off of unamortized deferred
financing costs (interest expense)
47
92
(45
)
47
92
(45
)
Write-off of unamortized
(premiums)/discounts/OCI (interest expense)
—
377
(377
)
—
377
(377
)
Debt extinguishment and preferred share
redemption (gains) losses
47
469
(422
)
47
469
(422
)
(Income) loss from investments in
unconsolidated entities ─ non-operating assets
944
734
210
317
310
7
Realized (gain) loss on investment
securities (interest and other income)
87
(2,064
)
2,151
—
2
(2
)
Non-operating asset (gains) losses
1,031
(1,330
)
2,361
317
312
5
Insurance/litigation settlement or reserve
income (interest and other income)
(993
)
(1,538
)
545
(193
)
(311
)
118
Insurance/litigation/environmental
settlement or reserve expense (other expenses)
8,512
750
7,762
3,513
—
3,513
Advocacy contributions (other
expenses)
327
742
(415
)
320
567
(247
)
Data transformation project (other
expenses)
3,485
—
3,485
1,405
—
1,405
Other
12
(139
)
151
6
(70
)
76
Other miscellaneous items
11,343
(185
)
11,528
5,051
186
4,865
Adjustments from FFO to Normalized FFO
$
14,414
$
1,469
$
12,945
$
6,076
$
2,019
$
4,057
Note: See Additional Reconciliations and Definitions of Non-GAAP
Financial Measures and Other Terms 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 Additional
Reconciliations and Definitions of Non-GAAP Financial Measures and
Other Terms 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 2023
Revised Full Year 2023
Previous Full Year
2023
2023 Normalized
FFO Guidance (per share diluted)
Expected Normalized FFO Per Share
$0.95 to $0.99
$3.77 to $3.83
$3.73 to $3.83 (3)
2023 Same Store
Assumptions (includes Residential and
Non-Residential)
Physical Occupancy
96.0%
96.0% (3)
Revenue change
5.5% to 6.25%
5.5% to 6.25% (3)
Expense change
4.0% to 4.5%
4.0% to 5.0% (3)
NOI change (1)
6.3% to 7.0%
6.0% to 7.0% (3)
2023 Transaction
Assumptions
Consolidated rental acquisitions
$300.0M
$300.0M
Consolidated rental dispositions
$300.0M
$300.0M
Transaction Accretion (Dilution)
–
–
2023 Debt
Assumptions
Weighted average debt outstanding
$7.35B to $7.55B
$7.375B to $7.575B
Interest expense, net (on a Normalized FFO
basis)
$265.5M to $271.5M
$274.5M to $280.5M
Capitalized interest
$11.0M to $14.0M
$10.0M to $14.0M
2023 Capital
Expenditures to Real Estate Assumptions for Same Store Properties
(2)
Capital Expenditures to Real Estate for
Same Store Properties
$255.0M
$240.0M
Capital Expenditures to Real Estate per
Same Store Apartment Unit
$3,315
$3,100
2023 Other
Guidance Assumptions
Property management expense
$116.5M to $119.5M
$119.0M to $122.0M
General and administrative expense
$59.5M to $63.5M
$55.5M to $59.5M
Debt offerings
$530.0M
$400.0M to $600.0M
Weighted average Common Shares and Units -
Diluted
391.3M
391.3M
(1)
Approximately 20 basis point change in NOI
percentage = $0.01 per share change in EPS/FFO per share/Normalized
FFO per share.
(2)
During 2023, the Company expects to spend
approximately $75.0 million for apartment unit Renovation
Expenditures on approximately 2,500 same store apartment units at
an average cost of approximately $30,000 per apartment unit
renovated, which is included in the Capital Expenditures to Real
Estate assumptions noted above.
(3)
Represents the updated guidance provided
in the Company's May 30, 2023 press release. All other Previous
Full Year 2023 items represent the guidance provided in the
Company's first quarter 2023 earnings release.
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 Financial 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 real estate investment trusts (“REIT”) 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.
Bad Debt, Net – Change in rental income due to bad debt
write-offs and reserves, net of amounts collected on previously
written-off or reserved accounts.
Blended Rate – The weighted average of New Lease Change
and Renewal Rate Achieved.
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 Balances:
Commercial Paper Program – The Company
may borrow up to a maximum of $1.0 billion under its Commercial
Paper Program subject to market conditions. The notes bear interest
at various floating rates.
Revolving Credit Facility – The
Company’s $2.5 billion unsecured revolving credit facility matures
October 26, 2027. The interest rate on advances under the facility
will generally be SOFR plus a spread (currently 0.725%), or based
on bids received from the lending group, and an annual facility fee
(currently 0.125%). Both the spread and the facility fee are
dependent on the Company’s senior unsecured credit rating. In
addition, the Company limits its utilization of the facility in
order to maintain liquidity to support its $1.0 billion Commercial
Paper Program along with certain other obligations. The following
table presents the availability on the Company’s unsecured
revolving credit facility:
June 30, 2023
Unsecured revolving credit facility
commitment
$
2,500,000
Commercial paper balance outstanding
(185,187
)
Unsecured revolving credit facility
balance outstanding
—
Other restricted amounts
(3,484
)
Unsecured revolving credit facility
availability
$
2,311,329
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 periods presented.
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 $150-$450 per apartment unit depending on the age and
condition of the asset) divided by the gross sales 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.
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 (Loss) – Economic Gain
(Loss) 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 (Loss)
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, renovation, 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 (Loss):
Six Months Ended June 30,
2023
Quarter Ended June 30,
2023
Net Gain (Loss) on Sales of Real Estate
Properties
$
100,122
$
(87
)
Accumulated Depreciation Gain
(36,486
)
—
Economic Gain (Loss)
$
63,636
$
(87
)
Forecasted Embedded Growth – The positive or negative
contribution to growth implied by annualizing total lease income
anticipated for the last month of the current year (without regard
to vacancy) compared to anticipated actual full year lease income
for the current year (without regard to vacancy) and excluding the
impact of Leasing Concessions and other income. This metric is a
helpful data point in that it captures the impact of leases in
existence at the end of the current year and their impact on rental
income for the following year.
FFO and Normalized FFO:
Funds From Operations (“FFO”) – Nareit
defines FFO (December 2018 White Paper) as net income (computed in
accordance with GAAP), excluding gains or losses from sales and
impairment write-downs of depreciable real estate and land when
connected to the main business of a REIT, impairment write-downs of
investments in entities when the impairment is directly
attributable to decreases in the value of depreciable real estate
held by the entity and depreciation and amortization related to
real estate. Adjustments for partially owned consolidated and
unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis. 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 from sales
and impairment write-downs of depreciable real estate and excluding
depreciation related to real estate (which can vary among owners of
identical assets in similar condition based on historical cost
accounting and useful life estimates), FFO and FFO available to
Common Shares and Units 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" or
"NFFO") – Normalized FFO begins with FFO and excludes:
- the impact of any expenses relating to non-operating real
estate asset impairment;
- pursuit cost write-offs;
- gains and losses from early debt extinguishment and preferred
share 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 Consolidated Statements of
Funds From Operations and Normalized Funds From Operations.
Actual June
Actual June
Actual
Actual
Expected
Expected
YTD 2023
YTD 2022
Q2 2023
Q2 2022
Q3 2023
2023
Per Share
Per Share
Per Share
Per Share
Per Share
Per Share
EPS – Diluted
$
0.92
$
0.78
$
0.37
$
0.59
$0.59 to $0.63
$1.95 to $2.01
Depreciation expense
1.11
1.16
0.56
0.58
0.56
2.23
Net (gain) loss on sales
(0.25
)
(0.28
)
—
(0.28
)
(0.21
)
(0.46
)
Impairment – operating real estate
assets
—
—
—
—
—
—
FFO per share – Diluted
1.78
1.66
0.93
0.89
0.94 to 0.98
3.72 to 3.78
Impairment – non-operating real estate
assets
—
—
—
—
—
—
Write-off of pursuit costs
0.01
—
—
—
—
0.01
Debt extinguishment and preferred
share
redemption (gains) losses
—
—
—
—
—
—
Non-operating asset (gains) losses
—
—
—
—
—
—
Other miscellaneous items
0.03
—
0.01
—
0.01
0.04
Normalized FFO per share – Diluted
$
1.82
$
1.66
$
0.94
$
0.89
$0.95 to $0.99
$3.77 to $3.83
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.
Leasing Concessions – Reflects upfront discounts on both
new move-in and renewal leases on a straight-line basis.
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 Same Store Results):
Six Months Ended June
30,
Quarter Ended June 30,
2023
2022
2023
2022
Operating income
$
516,049
$
459,672
$
218,461
$
309,934
Adjustments:
Property management
62,145
57,306
30,679
26,559
General and administrative
35,041
33,661
18,876
16,423
Depreciation
437,185
453,767
221,355
223,806
Net (gain) loss on sales of real
estate
properties
(100,122
)
(107,795
)
87
(107,897
)
Total NOI
$
950,298
$
896,611
$
489,458
$
468,825
Rental income:
Same store
$
1,375,078
$
1,281,947
$
697,444
$
661,374
Non-same store/other
47,319
58,431
19,865
25,656
Total rental income
1,422,397
1,340,378
717,309
687,030
Operating expenses:
Same store
444,251
417,686
219,034
207,578
Non-same store/other
27,848
26,081
8,817
10,627
Total operating expenses
472,099
443,767
227,851
218,205
NOI:
Same store
930,827
864,261
478,410
453,796
Non-same store/other
19,471
32,350
11,048
15,029
Total NOI
$
950,298
$
896,611
$
489,458
$
468,825
New Lease Change – The net effective change in rent
(inclusive of Leasing Concessions) for a lease with a new or
transferring resident compared to the rent for the prior lease of
the identical apartment unit, regardless of lease term.
Non-Residential – Consists of revenues and expenses from
retail and public parking garage operations.
Non-Same Store Properties – For annual comparisons,
primarily includes all properties acquired during 2022 and 2023,
plus any properties in lease-up and not stabilized as of January 1,
2022.
Percentage of Residents Renewing – Leases renewed
expressed as a percentage of total renewal offers extended during
the reporting period.
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.
Pricing Trend – Weighted average of 12-month base rent
including amenity amount less Leasing Concessions on 12-month
signed leases for the reporting period.
Renewal Rate Achieved – The net effective change in rent
(inclusive of Leasing Concessions) for a new lease on an apartment
unit where the lease has been renewed as compared to the rent for
the prior lease of the identical apartment unit, regardless of
lease term.
Residential – Consists of multifamily apartment revenues
and expenses.
Same Store Operating
Expenses:
On-site Payroll – Includes payroll and
related expenses for on-site personnel including property managers,
leasing consultants and maintenance staff.
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.
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.
Utilities – Represents gross expenses
prior to any recoveries under the Resident Utility Billing System
(“RUBS”). Recoveries are reflected in rental income.
Same Store Properties – For annual comparisons, primarily
includes all properties acquired or completed that are stabilized
prior to January 1, 2022, less properties subsequently sold.
Properties are included in Same Store when they are stabilized for
all of the current and comparable periods presented.
Same Store Residential Revenues – Revenues from our Same
Store Properties presented on a GAAP basis which reflects the
impact of Leasing Concessions on a straight-line basis.
Same Store Residential Revenues with Leasing Concessions on a
cash basis is presented in Same Store Results and is considered by
the Company to be a supplemental measure to Same Store Residential
Revenues in conformity with GAAP to help investors evaluate the
impact of both current and historical Leasing Concessions on
GAAP-based Same Store Residential Revenues and to more readily
enable comparisons to revenue as reported by other companies. Same
Store Residential Revenues with Leasing Concessions on a cash basis
reflects the impact of Leasing Concessions used in the period and
allows an investor to understand the historical trend in cash
Leasing Concessions.
% of Stabilized Budgeted NOI – Represents original
budgeted 2023 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 remaining cost
for projects under development and/or developed plus 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. Amounts for
partially owned consolidated and unconsolidated properties are
presented at 100% of the project.
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.
Traffic – Consists of an expression of interest in an
apartment by completing an in-person tour, self-guided tour or
virtual tour that may result in an application to lease.
Transaction Accretion (Dilution) – Represents the spread
between the Acquisition Cap Rate and the Disposition Yield.
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.
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 property management expense, general
and administrative expense or interest expense (including loan
assumption costs and other loan-related costs). 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, renovation, 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.
Weighted Average Coupons – Contractual interest rate for
each debt instrument weighted by principal balances as of June 30,
2023. In case of debt for which fair value hedges are in place, the
rate payable under the corresponding derivatives is used in lieu of
the contractual interest rate.
Weighted Average Rates – Interest expense for each debt
instrument for the six months ended June 30, 2023 weighted by its
average principal balance for the same period. Interest expense
includes amortization of premiums, discounts and other
comprehensive income on debt and related derivative instruments. In
case of debt for which derivatives are in place, the income or
expense recognized under the corresponding derivatives is included
in the total interest expense for the period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230727298360/en/
Marty McKenna 312-928-1901 mmckenna@eqr.com
Equity Residential (NYSE:EQR)
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