Equity Residential (NYSE: EQR) today reported results for the
quarter and nine months ended September 30, 2023 and has posted a
Q3 2023 Management Presentation to its website as referenced
below.
Third Quarter 2023 Results
All per share results are reported as available to common
shares/units on a diluted basis.
Quarter Ended September
30,
2023
2022
$ Change
% Change
Earnings Per Share (EPS)
$
0.45
$
0.86
$
(0.41
)
(47.7
%)
Funds from Operations (FFO) per share
$
0.96
$
0.90
$
0.06
6.7
%
Normalized FFO (NFFO) per share
$
0.96
$
0.92
$
0.04
4.3
%
Nine Months Ended September
30,
2023
2022
$ Change
% Change
Earnings Per Share (EPS)
$
1.38
$
1.63
$
(0.25
)
(15.3
%)
Funds from Operations (FFO) per share
$
2.74
$
2.56
$
0.18
7.0
%
Normalized FFO (NFFO) per share
$
2.78
$
2.58
$
0.20
7.8
%
Recent Highlights
- Same store revenue increased 4.1% for the third quarter of 2023
compared to the third quarter of 2022 and was negatively impacted
by weaker than expected revenue performance in San Francisco and
Seattle as well as the non-cash write-off of approximately $1.5
million in straight-line receivables due to the recent bankruptcy
of Rite Aid. The Company revised its 2023 annual same store revenue
growth guidance to 5.5% as further described in this release and in
the Management Presentation referenced below.
- Bad debt before the application of governmental rental
assistance has improved substantially for the nine months ended
September 2023 as compared to the same period in 2022, albeit
slightly less than our prior expectations due to the timing
associated with current eviction proceedings. See page 13 for
additional details.
- Same store expense growth for the third quarter of 2023
compared to the third quarter of 2022 was 3.1%. The Company also
reaffirmed its full year 2023 same store expense growth at
4.25%.
- During the third quarter of 2023, the Company acquired two
suburban Atlanta apartment properties, consisting of 634 apartment
units, for an aggregate acquisition price of approximately $179.7
million and sold a 166-unit apartment property in Seattle for
approximately $60.1 million. Subsequent to the end of the quarter,
the Company sold three operating properties for a total of
approximately $184.6 million.
- The Company recently published its tenth annual Environmental,
Social and Governance (ESG) report highlighting Equity
Residential's goals and accomplishments.
“Our East Coast portfolio performed very well in the quarter.
Strong demand combined with low supply in Boston and New York and
rapid absorption of supply in Washington, D.C. position these
markets favorably going forward. While the East Coast outperformed
our expectations, the San Francisco and Seattle markets
underperformed due to lower recent job growth in our target
affluent renter demographic and, together with the Rite Aid
bankruptcy, led us to adjust guidance,” said Mark J. Parrell,
Equity Residential’s President and CEO. “We are pleased with our
progress in reducing our COVID era delinquency but the legal
process is lengthy and uneven and we will likely end the year with
modestly more delinquency than our previous goal. As we think about
2024 operating performance, continued demand from our well-employed
renter demographic and limited new supply in most of our markets
should lead to another year of solid same store revenue
growth.”
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
Change at Midpoint
Same Store (includes Residential and
Non-Residential):
Physical Occupancy
95.9%
96.0%
(0.1%)
Revenue change
5.5%
5.5% to 6.25%
(0.375%)
Expense change
4.25%
4.0% to 4.5%
0.00%
Net Operating Income (NOI) change
6.2%
6.3% to 7.0%
(0.45%)
EPS
$2.20 to $2.22
$1.95 to $2.01
$0.23
FFO per share
$3.74 to $3.76
$3.72 to $3.78
$0.00
Normalized FFO per share
$3.77 to $3.79
$3.77 to $3.83
($0.02)
The change in the full year 2023 EPS guidance range is due
primarily to higher expected property sale gains, partially offset
by lower expected Residential and Non-Residential same store NOI
and higher expected depreciation expense.
The change in the full year 2023 Normalized FFO per share
guidance range is due primarily to lower expected Residential and
Non-Residential same store NOI.
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 nine months ended
September 30, 2023 compared to the same periods of 2022 are due
primarily to lower property sale gains in the current periods, 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 nine months
ended September 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
Third Quarter 2023 vs. Third
Quarter 2022
September YTD 2023 vs.
September YTD 2022
Residential same store NOI
$
0.06
$
0.22
Non-Residential same store NOI (1)
(0.01
)
—
Lease-Up NOI
—
0.02
2023 and 2022 transaction activity impact
on NOI, net
—
(0.02
)
Interest expense, net
—
0.03
Corporate overhead (2)
(0.01
)
(0.02
)
Other items (3)
—
(0.03
)
Net
$
0.04
$
0.20
(1)
During the third quarter of 2023, the
Company recorded a non-cash write-off of approximately $1.5 million
in straight-line receivables due to the recent bankruptcy of Rite
Aid.
(2)
Corporate overhead includes property
management and general and administrative expenses.
(3)
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.
Third Quarter 2023 vs. Third
Quarter 2022
Third Quarter 2023 vs. Second
Quarter 2023
September YTD 2023 vs.
September YTD 2022
Apartment Units
77,698
78,368
76,789
Physical Occupancy
96.0% vs. 96.4%
96.0% vs. 95.9%
95.9% vs. 96.5%
Revenues
4.1%
0.7%
6.2%
Expenses
3.1%
1.9%
5.3%
NOI
4.6%
0.1%
6.6%
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 3.6% of total
revenues for the nine months ended September 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.
Third Quarter 2023 vs. Third
Quarter 2022
Third Quarter 2023 vs. Second
Quarter 2023
September YTD 2023 vs.
September YTD 2022
% Change
% Change
% Change
Same Store Residential Revenues-
comparable period
Lease rates
5.0
%
1.3
%
7.1
%
Leasing Concessions
(0.4
%)
(0.1
%)
(0.1
%)
Vacancy gain (loss)
(0.5
%)
(0.2
%)
(0.7
%)
Bad Debt, Net (1)
(0.3
%)
0.0
%
(0.7
%)
Other (2)
0.6
%
0.0
%
0.7
%
Same Store Residential Revenues-
current period
4.4
%
1.0
%
6.3
%
(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
the current legal processes and 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 76,789 same store apartment
units):
October 2023 (1)
Q3 2023
Q2 2023
Physical Occupancy
96.0%
96.0%
95.9%
Percentage of Residents Renewing by
quarter/month
59.0%
54.0%
57.0%
New Lease Change (2)
(3.1%)
0.5%
2.3%
Renewal Rate Achieved
5.0%
5.5%
5.9%
Blended Rate
1.6%
3.1%
4.3%
(1)
October 2023 results are preliminary as of
October 27th.
(2)
Excluding the impact of San Francisco and
Seattle, New Lease Change would have been (0.3%), 2.1% and 3.6% for
October 2023, Q3 2023 and Q2 2023, respectively, which is in line
with the Company's expectations and consistent with normal seasonal
patterns.
Investment Activity
The Company acquired two operating properties, both in suburban
Atlanta, during the third quarter of 2023 - a recently completed
344-unit apartment property in Suwanee, which is currently in lease
up, for approximately $98.0 million at a stabilized Acquisition Cap
Rate of 5.4% and a 290-unit property in Decatur built in 2019, for
approximately $81.7 million at an Acquisition Cap Rate of 5.1%.
During the first nine months of 2023, the Company has acquired four
operating properties, consisting of 1,183 apartment units, for an
aggregate purchase price of approximately $366.3 million at a
weighted average Acquisition Cap Rate of 5.5%.
Also during the third quarter of 2023, the Company sold a
166-unit property in Seattle for approximately $60.1 million at a
Disposition Yield of 5.4%, generating an Unlevered IRR of 7.5%.
During the first nine months of 2023, the Company sold eight
properties, consisting of 413 apartment units, for an aggregate
sale price of approximately $195.4 million at a weighted average
Disposition Yield of 5.3%, generating an Unlevered IRR of 8.5%.
Subsequent to the end of the quarter, the Company sold three
properties located in our West Coast markets (San Francisco,
Seattle and Los Angeles), consisting of 499 apartment units, for an
aggregate sale price of approximately $184.6 million at a weighted
average Disposition Yield of 5.8%.
Capital Markets Activity
In August 2023, the Company closed on secured loans totaling
$550.0 million. The Company previously disclosed the rate lock on
these loans in July 2023. After the effect of the Company’s hedges,
the economic rate on these ten-year loans is approximately 4.7%.
The proceeds from these loans were used, along with funding from
the Company’s Commercial Paper Program, to paydown the $800.0
million secured debt pool that was due to mature in November 2023
and carried an interest rate of 4.21%. After this paydown, the
Company has no significant debt maturities, other than commercial
paper, which is supported by its revolving credit facility due
2027, until June 2025.
Fourth Quarter 2023 Guidance
The Company has established guidance ranges for the fourth
quarter of 2023 EPS, FFO per share and Normalized FFO per share as
listed below:
Q4 2023 Guidance
EPS
$0.82 to $0.84
FFO per share
$1.00 to $1.02
Normalized FFO per share
$0.99 to $1.01
The difference between the third quarter of 2023 actual EPS of
$0.45 and the fourth quarter of 2023 EPS guidance midpoint of $0.83
is due primarily to higher expected property sale gains and the
items described below.
The difference between the third quarter of 2023 actual FFO of
$0.96 per share and the fourth quarter of 2023 FFO guidance
midpoint of $1.01 per share is due primarily to the items described
below.
The difference between the third quarter of 2023 actual
Normalized FFO of $0.96 per share and the fourth quarter of 2023
Normalized FFO guidance midpoint of $1.00 per share is due
primarily to:
Positive/(Negative)
Impact
Fourth Quarter 2023 vs. Third
Quarter 2023
Residential same store NOI
$
0.02
Non-Residential same store NOI
0.01
Corporate overhead
0.01
Net
$
0.04
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 305 properties consisting of 80,683 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, Wednesday, November 1, 2023
at 10:00 a.m. CT. In connection with the conference call, the
Company is also providing a Management Presentation on its website.
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)
Nine Months Ended September
30,
Quarter Ended September
30,
2023
2022
2023
2022
REVENUES
Rental income
$
2,146,464
$
2,035,477
$
724,067
$
695,099
EXPENSES
Property and maintenance
391,437
365,277
129,087
124,048
Real estate taxes and insurance
312,607
302,899
102,858
100,361
Property management
90,314
83,035
28,169
25,729
General and administrative
49,135
47,033
14,094
13,372
Depreciation
661,921
667,896
224,736
214,129
Total expenses
1,505,414
1,466,140
498,944
477,639
Net gain (loss) on sales of real estate
properties
127,034
304,346
26,912
196,551
Operating income
768,084
873,683
252,035
414,011
Interest and other income
11,296
4,844
7,627
720
Other expenses
(20,517
)
(9,191
)
(4,958
)
(3,755
)
Interest:
Expense incurred, net
(200,882
)
(217,093
)
(68,891
)
(72,412
)
Amortization of deferred financing
costs
(7,023
)
(6,421
)
(3,027
)
(2,220
)
Income before income and other taxes,
income (loss) from investments in unconsolidated
entities and net gain (loss) on sales of land
parcels
550,958
645,822
182,786
336,344
Income and other tax (expense) benefit
(892
)
(725
)
(258
)
(152
)
Income (loss) from investments in
unconsolidated entities
(3,847
)
(3,456
)
(1,242
)
(1,027
)
Net income
546,219
641,641
181,286
335,165
Net (income) loss attributable to
Noncontrolling Interests:
Operating Partnership
(17,174
)
(21,024
)
(5,561
)
(10,997
)
Partially Owned Properties
(5,299
)
(2,726
)
(3,217
)
(1,143
)
Net income attributable to controlling
interests
523,746
617,891
172,508
323,025
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
Net income available to Common Shares
$
521,428
$
615,573
$
171,735
$
322,252
Earnings per share – basic:
Net income available to Common Shares
$
1.38
$
1.64
$
0.45
$
0.86
Weighted average Common Shares
outstanding
378,614
375,710
378,853
375,850
Earnings per share – diluted:
Net income available to Common Shares
$
1.38
$
1.63
$
0.45
$
0.86
Weighted average Common Shares
outstanding
391,135
389,394
391,351
389,300
Distributions declared per Common Share
outstanding
$
1.9875
$
1.875
$
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)
Nine Months Ended September
30,
Quarter Ended September
30,
2023
2022
2023
2022
Net income
$
546,219
$
641,641
$
181,286
$
335,165
Net (income) loss attributable to
Noncontrolling Interests – Partially Owned Properties
(5,299
)
(2,726
)
(3,217
)
(1,143
)
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
Net income available to Common Shares and
Units
538,602
636,597
177,296
333,249
Adjustments:
Depreciation
661,921
667,896
224,736
214,129
Depreciation – Non-real estate
additions
(3,291
)
(3,189
)
(1,032
)
(1,075
)
Depreciation – Partially Owned
Properties
(1,599
)
(2,097
)
(544
)
(543
)
Depreciation – Unconsolidated
Properties
1,921
1,897
695
657
Net (gain) loss on sales of unconsolidated
entities - operating assets
—
(9
)
—
—
Net (gain) loss on sales of real estate
properties
(127,034
)
(304,346
)
(26,912
)
(196,551
)
Noncontrolling Interests share of gain
(loss) on sales of real estate properties
2,336
—
2,336
—
FFO available to Common Shares and
Units
1,072,856
996,749
376,575
349,866
Adjustments (see note for additional
detail):
Write-off of pursuit costs
2,739
3,296
746
781
Debt extinguishment and preferred share
redemption (gains) losses
1,143
4,316
1,096
3,847
Non-operating asset (gains) losses
(4,735
)
(1,174
)
(5,766
)
156
Other miscellaneous items
14,831
1,832
3,488
2,017
Normalized FFO available to Common Shares
and Units
$
1,086,834
$
1,005,019
$
376,139
$
356,667
FFO
$
1,075,174
$
999,067
$
377,348
$
350,639
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
FFO available to Common Shares and
Units
$
1,072,856
$
996,749
$
376,575
$
349,866
FFO per share and Unit – basic
$
2.75
$
2.57
$
0.97
$
0.90
FFO per share and Unit – diluted
$
2.74
$
2.56
$
0.96
$
0.90
Normalized FFO
$
1,089,152
$
1,007,337
$
376,912
$
357,440
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
Normalized FFO available to Common Shares
and Units
$
1,086,834
$
1,005,019
$
376,139
$
356,667
Normalized FFO per share and Unit –
basic
$
2.79
$
2.59
$
0.96
$
0.92
Normalized FFO per share and Unit –
diluted
$
2.78
$
2.58
$
0.96
$
0.92
Weighted average Common Shares and Units
outstanding – basic
389,991
387,603
390,087
387,745
Weighted average Common Shares and Units
outstanding – diluted
391,135
389,394
391,351
389,300
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)
September 30,
December 31,
2023
2022
ASSETS
Land
$
5,593,425
$
5,580,878
Depreciable property
22,911,464
22,334,369
Projects under development
61,411
112,940
Land held for development
62,533
60,567
Investment in real estate
28,628,833
28,088,754
Accumulated depreciation
(9,634,013
)
(9,027,850
)
Investment in real estate, net
18,994,820
19,060,904
Investments in unconsolidated
entities1
313,225
279,024
Cash and cash equivalents
39,250
53,869
Restricted deposits
87,477
83,303
Right-of-use assets
460,489
462,956
Other assets
213,714
278,206
Total assets
$
20,108,975
$
20,218,262
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
1,634,726
$
1,953,438
Notes, net
5,346,895
5,342,329
Line of credit and commercial paper
497,636
129,955
Accounts payable and accrued expenses
164,975
96,028
Accrued interest payable
47,519
66,310
Lease liabilities
312,781
308,748
Other liabilities
231,652
306,941
Security deposits
69,498
68,940
Distributions payable
259,624
244,621
Total liabilities
8,565,306
8,517,310
Commitments and contingencies
Redeemable Noncontrolling Interests –
Operating Partnership
277,782
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 September 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;
379,723,838 shares issued and outstanding as of
September 30, 2023 and 378,429,708 shares issued and
outstanding as of December 31, 2022
3,797
3,784
Paid in capital
9,589,057
9,476,085
Retained earnings
1,426,632
1,658,837
Accumulated other comprehensive income
(loss)
5,099
(2,547
)
Total shareholders’ equity
11,061,865
11,173,439
Noncontrolling Interests:
Operating Partnership
205,845
209,961
Partially Owned Properties
(1,823
)
(721
)
Total Noncontrolling Interests
204,022
209,240
Total equity
11,265,887
11,382,679
Total liabilities and equity
$
20,108,975
$
20,218,262
1 Includes $250.9 million and $218.0 million in unconsolidated
development projects as of September 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 September 30, 2023
% of
Stabilized
Average
Apartment
Budgeted
Rental
Markets/Metro Areas
Properties
Units
NOI
Rate
Established Markets:
Los Angeles
59
15,012
17.6
%
$
2,911
Orange County
13
4,028
5.2
%
2,826
San Diego
12
2,878
4.0
%
3,063
Subtotal – Southern California
84
21,918
26.8
%
2,915
San Francisco
44
11,790
15.8
%
3,304
Washington, D.C.
48
15,028
15.6
%
2,647
New York
34
8,536
13.9
%
4,531
Boston
27
7,170
11.4
%
3,525
Seattle
45
9,363
10.7
%
2,571
Subtotal – Established Markets
282
73,805
94.2
%
3,126
Expansion Markets:
Denver
9
2,785
2.8
%
2,409
Atlanta
7
2,111
1.9
%
2,160
Dallas/Ft. Worth
4
1,241
0.7
%
1,897
Austin
3
741
0.4
%
1,855
Subtotal – Expansion Markets
23
6,878
5.8
%
2,182
Total
305
80,683
100.0
%
$
3,046
Properties
Apartment Units
Wholly Owned Properties
291
77,623
Partially Owned Properties –
Consolidated
14
3,060
305
80,683
Note: Projects under development are not included in the
Portfolio Summary until construction has been completed.
Equity Residential
Portfolio Rollforward Q3
2023
($ in thousands)
Properties
Apartment Units
Purchase Price
Acquisition Cap Rate
6/30/2023
304
80,212
Acquisitions:
Consolidated Rental Properties
1
290
$
81,734
5.1
%
Consolidated Rental Properties – Not
Stabilized (1)
1
344
$
98,000
5.4
%
Sales Price
Disposition Yield
Dispositions:
Consolidated Rental Properties
(1
)
(166
)
$
(60,100
)
(5.4
%)
Configuration Changes
—
3
9/30/2023
305
80,683
Portfolio Rollforward
2023
($ in thousands)
Properties
Apartment Units
Purchase Price
Acquisition Cap Rate
12/31/2022
308
79,597
Acquisitions:
Consolidated Rental Properties
2
577
$
189,734
5.1
%
Consolidated Rental Properties – Not
Stabilized (1)
2
606
$
176,600
5.9
%
Sales Price
Disposition Yield
Dispositions:
Consolidated Rental Properties
(8
)
(413
)
$
(195,400
)
(5.3
%)
Completed Developments – Consolidated
1
312
Configuration Changes
—
4
9/30/2023
305
80,683
(1)
The Company acquired two properties in the
Atlanta market during the nine months ended September 30, 2023,
including a property in the third quarter of 2023, that are in
lease-up and are expected to stabilize in their second year of
ownership at the weighted average Acquisition Cap Rates listed
above.
Equity
Residential
Third Quarter 2023 vs. Third
Quarter 2022
Same Store Results/Statistics
Including 77,698 Same Store Apartment Units
($ in thousands except for
Average Rental Rate)
Third Quarter 2023
Third Quarter 2022
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
681,279
(1)
4.4%
$
22,811
(2)
(5.4%)
$
704,090
4.1%
Revenues
$
652,278
$
24,109
$
676,387
Expenses
$
216,943
3.1%
$
6,531
5.0%
$
223,474
3.1%
Expenses
$
210,513
$
6,222
$
216,735
NOI
$
464,336
5.1%
$
16,280
(9.0%)
$
480,616
4.6%
NOI
$
441,765
$
17,887
$
459,652
Average Rental Rate
$
3,048
5.0%
Average Rental Rate
$
2,904
Physical Occupancy
96.0
%
(0.4%)
Physical Occupancy
96.4
%
Turnover
13.8
%
(0.2%)
Turnover
14.0
%
Third Quarter 2023 vs. Second
Quarter 2023
Same Store Results/Statistics
Including 78,368 Same Store Apartment Units
($ in thousands except for
Average Rental Rate)
Third Quarter 2023
Second Quarter 2023
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
689,144
(1)
1.0%
$
23,976
(2)
(9.3%)
$
713,120
0.7%
Revenues
$
682,035
$
26,440
$
708,475
Expenses
$
219,491
2.1%
$
6,907
(6.2%)
$
226,398
1.9%
Expenses
$
214,894
$
7,365
$
222,259
NOI
$
469,653
0.5%
$
17,069
(10.5%)
$
486,722
0.1%
NOI
$
467,141
$
19,075
$
486,216
Average Rental Rate
$
3,057
1.0%
Average Rental Rate
$
3,027
Physical Occupancy
96.0
%
0.1%
Physical Occupancy
95.9
%
Turnover
13.8
%
2.2%
Turnover
11.6
%
September YTD 2023 vs.
September YTD 2022
Same Store Results/Statistics
Including 76,789 Same Store Apartment Units
($ in thousands except for
Average Rental Rate)
September YTD 2023
September YTD 2022
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
1,997,058
(1)
6.3%
$
72,798
(2)
2.8%
$
2,069,856
6.2%
Revenues
$
1,878,918
$
70,830
$
1,949,748
Expenses
$
644,494
5.2%
$
20,113
9.4%
$
664,607
5.3%
Expenses
$
612,892
$
18,389
$
631,281
NOI
$
1,352,564
6.8%
$
52,685
0.5%
$
1,405,249
6.6%
NOI
$
1,266,026
$
52,441
$
1,318,467
Average Rental Rate
$
3,015
7.0%
Average Rental Rate
$
2,819
Physical Occupancy
95.9
%
(0.6%)
Physical Occupancy
96.5
%
Turnover
34.3
%
0.2%
Turnover
34.1
%
(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.
(2)
Includes the negative impact from the
non-cash write-off of approximately $1.5 million in straight-line
receivables during the third quarter of 2023 due to the recent
bankruptcy of Rite Aid.
Equity Residential
Same Store Residential
Revenues – GAAP to Cash Basis (1)
($ in thousands)
Third Quarter 2023 vs. Third
Quarter 2022
Third Quarter 2023 vs. Second
Quarter 2023
Sept. YTD 2023 vs. Sept YTD
2022
77,698 Same Store Apartment
Units
78,368 Same Store Apartment
Units
76,789 Same Store Apartment
Units
Q3 2023
Q3 2022
Q3 2023
Q2 2023
Sept. YTD 2023
Sept. YTD 2022
Same Store Residential Revenues (GAAP
Basis)
$
681,279
$
652,278
$
689,144
$
682,035
$
1,997,058
$
1,878,918
Leasing Concessions amortized
3,743
1,633
4,106
3,233
8,378
7,245
Leasing Concessions granted (2)
(5,190
)
(641
)
(5,433
)
(4,069
)
(12,821
)
(3,443
)
Same Store Residential Revenues with
Leasing Concessions on a cash basis
$
679,832
$
653,270
$
687,817
$
681,199
$
1,992,615
$
1,882,720
% change - GAAP revenue
4.4
%
1.0
%
6.3
%
% change - cash revenue
4.1
%
1.0
%
5.8
%
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional detail.
(2)
Concession usage is primarily concentrated
in San Francisco and Seattle and is expected to continue through
the remainder of 2023.
Same Store Net Operating
Income By Quarter
Including 76,789 Same Store
Apartment Units
($ in thousands)
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Same store revenues
$
697,066
$
692,267
$
680,523
$
674,851
$
669,971
Same store expenses
221,035
217,113
226,459
210,495
214,192
Same store NOI
(includes Residential and Non-Residential)
$
476,031
$
475,154
$
454,064
$
464,356
$
455,779
Equity Residential
Same Store Resident/Tenant
Accounts Receivable Balances
Including 76,789 Same Store
Apartment Units
($ in thousands)
Residential
Non-Residential
Balance Sheet (Other assets):
September 30, 2023
June 30, 2023
September 30, 2023
June 30, 2023
Resident/tenant accounts receivable
balances
$
24,846
$
26,626
$
2,714
$
2,389
Allowance for doubtful accounts
(19,574
)
(22,335
)
(1,703
)
(1,383
)
Net receivable balances
$
5,272
$
4,291
$
1,011
$
1,006
Straight-line receivable balances
$
7,458
(1)
$
6,012
$
11,800
(2)
$
13,546
(1)
Total same store Residential Leasing
Concessions granted in the third quarter of 2023 were approximately
$5.1 million. The straight-line receivable balance of $7.5 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 three quarters of 2024.
(2)
During the third quarter of 2023, the
Company recorded a non-cash write-off of approximately $1.5 million
in straight-line receivables due to the recent bankruptcy of Rite
Aid.
Same Store Residential Bad
Debt
Including 76,789 Same Store
Apartment Units
($ in thousands)
Income Statement (Rental
income):
Q3 2023
Q2 2023
Q3 2022
September YTD 2023
September YTD 2022
Bad debts before governmental rental
assistance
$
8,993
$
9,506
$
13,456
$
30,378
$
45,875
Governmental rental assistance
received
(406
)
(660
)
(7,000
)
(2,245
)
(30,882
)
Bad Debt, Net
$
8,587
$
8,846
$
6,456
$
28,133
$
14,993
Bad Debt, Net as a % of Same Store
Residential Revenues
1.3
%
1.3
%
1.0
%
1.4
%
0.8
%
Equity Residential
Third Quarter 2023 vs. Third
Quarter 2022
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Year's Quarter
Markets/Metro Areas
Apartment Units
Q3 2023 % of Actual NOI
Q3 2023 Average Rental Rate
Q3 2023 Weighted Average Physical
Occupancy %
Q3 2023 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
14,415
17.9
%
$
2,896
95.7
%
12.1
%
3.8
%
(1)
7.8
%
2.2
%
5.2
%
(1.2
%)
1.5
%
Orange County
4,028
5.5
%
2,826
96.7
%
10.9
%
5.7
%
7.7
%
5.1
%
6.1
%
(0.4
%)
0.2
%
San Diego
2,878
4.2
%
3,063
95.3
%
12.5
%
5.8
%
3.1
%
6.7
%
7.3
%
(1.4
%)
1.3
%
Subtotal – Southern California
21,321
27.6
%
2,905
95.9
%
12.0
%
4.5
%
7.2
%
3.4
%
5.6
%
(1.0
%)
1.3
%
Washington, D.C.
14,716
16.5
%
2,643
96.8
%
14.4
%
5.7
%
(1.7
%)
9.6
%
5.8
%
(0.1
%)
0.2
%
San Francisco
11,368
16.3
%
3,308
95.5
%
13.2
%
2.7
%
(1)
2.3
%
2.8
%
3.0
%
(0.4
%)
(0.1
%)
New York
8,536
14.1
%
4,531
96.5
%
12.7
%
6.7
%
3.6
%
9.1
%
7.1
%
(0.4
%)
(2.1
%)
Seattle
9,362
10.4
%
2,571
95.2
%
14.4
%
0.2
%
6.4
%
(2.3
%)
0.5
%
(0.2
%)
(1.5
%)
Boston
6,700
10.3
%
3,452
96.0
%
16.1
%
5.8
%
(0.4
%)
8.5
%
5.8
%
0.1
%
(1.6
%)
Denver
2,498
2.6
%
2,416
96.5
%
18.5
%
3.4
%
4.5
%
2.9
%
3.3
%
0.1
%
(1.6
%)
Other Expansion Markets
3,197
2.2
%
1,994
94.6
%
18.0
%
6.7
%
(0.3
%)
12.7
%
7.5
%
(1.0
%)
1.1
%
Total
77,698
100.0
%
$
3,048
96.0
%
13.8
%
4.4
%
3.1
%
5.1
%
5.0
%
(0.4
%)
(0.2
%)
(1)
Excluding Bad Debt, Net, which includes
the positive impact of governmental rental assistance in the third
quarter of 2022, same store revenue growth would have been 4.6% and
3.5% for Los Angeles and San Francisco, respectively.
Note: The above table reflects Residential same store results
only. Residential operations account for approximately 96.4% of
total revenues for the nine months ended September 30, 2023.
Equity Residential
Third Quarter 2023 vs. Second
Quarter 2023
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Quarter
Markets/Metro Areas
Apartment Units
Q3 2023 % of Actual NOI
Q3 2023 Average Rental Rate
Q3 2023 Weighted Average Physical
Occupancy %
Q3 2023 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
14,415
17.7
%
$
2,896
95.7
%
12.1
%
2.0
%
2.9
%
1.6
%
1.2
%
0.7
%
0.9
%
Orange County
4,028
5.5
%
2,826
96.7
%
10.9
%
2.2
%
1.8
%
2.3
%
1.4
%
0.8
%
0.5
%
San Diego
2,878
4.1
%
3,063
95.3
%
12.5
%
1.7
%
1.0
%
1.9
%
2.2
%
(0.5
%)
2.6
%
Subtotal – Southern California
21,321
27.3
%
2,905
95.9
%
12.0
%
2.0
%
2.5
%
1.8
%
1.4
%
0.6
%
1.1
%
Washington, D.C.
14,716
16.4
%
2,643
96.8
%
14.4
%
2.1
%
2.5
%
1.9
%
2.2
%
0.0
%
3.8
%
San Francisco
11,568
16.2
%
3,303
95.5
%
13.2
%
0.5
%
2.7
%
(0.4
%)
0.6
%
0.0
%
2.3
%
New York
8,536
13.9
%
4,531
96.5
%
12.7
%
0.4
%
1.2
%
(0.1
%)
0.9
%
(0.6
%)
2.6
%
Seattle
9,362
10.3
%
2,571
95.2
%
14.4
%
(0.7
%)
3.8
%
(2.5
%)
(0.7
%)
0.1
%
0.0
%
Boston
7,170
11.1
%
3,525
96.1
%
16.0
%
0.9
%
1.5
%
0.7
%
1.4
%
(0.4
%)
4.4
%
Denver
2,498
2.6
%
2,416
96.5
%
18.5
%
0.2
%
7.8
%
(2.8
%)
(0.1
%)
0.3
%
1.3
%
Other Expansion Markets
3,197
2.2
%
1,994
94.6
%
18.0
%
0.0
%
(4.5
%)
3.6
%
0.2
%
(0.3
%)
3.4
%
Total
78,368
100.0
%
$
3,057
96.0
%
13.8
%
1.0
%
2.1
%
0.5
%
1.0
%
0.1
%
2.2
%
Note: The above table reflects Residential same store results
only. Residential operations account for approximately 96.4% of
total revenues for the nine months ended September 30, 2023.
Equity Residential
September YTD 2023 vs.
September YTD 2022
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Year
Markets/Metro Areas
Apartment Units
Sept. YTD 23 % of Actual NOI
Sept. YTD 23 Average Rental
Rate
Sept. YTD 23 Weighted Average
Physical Occupancy %
Sept. YTD 23 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
14,415
17.9
%
$
2,844
95.4
%
33.3
%
3.2
%
(1)
9.0
%
0.7
%
4.8
%
(1.5
%)
5.0
%
Orange County
4,028
5.6
%
2,777
96.3
%
28.7
%
6.2
%
9.5
%
5.3
%
7.2
%
(0.8
%)
2.9
%
San Diego
2,706
3.9
%
2,965
95.5
%
31.1
%
6.8
%
6.4
%
6.9
%
8.3
%
(1.5
%)
1.8
%
Subtotal – Southern California
21,149
27.4
%
2,847
95.6
%
32.1
%
4.2
%
8.8
%
2.5
%
5.7
%
(1.4
%)
4.2
%
San Francisco
11,368
16.5
%
3,280
95.6
%
33.6
%
4.1
%
5.4
%
3.5
%
4.9
%
(0.7
%)
1.5
%
Washington, D.C.
14,400
16.1
%
2,581
96.7
%
32.3
%
6.2
%
2.0
%
8.4
%
6.3
%
(0.1
%)
(1.6
%)
New York
8,536
14.3
%
4,483
96.8
%
30.3
%
12.8
%
3.6
%
20.6
%
13.1
%
(0.2
%)
(4.6
%)
Seattle
9,362
10.9
%
2,581
95.1
%
39.8
%
4.2
%
4.2
%
4.2
%
4.3
%
(0.1
%)
(1.9
%)
Boston
6,700
10.2
%
3,400
96.0
%
35.3
%
7.9
%
3.4
%
9.8
%
8.1
%
(0.2
%)
(2.1
%)
Denver
2,498
2.7
%
2,406
96.3
%
46.7
%
5.6
%
9.4
%
4.1
%
5.5
%
(0.1
%)
(1.7
%)
Other Expansion Markets
2,776
1.9
%
1,989
94.6
%
44.6
%
5.4
%
10.7
%
1.2
%
6.9
%
(1.6
%)
1.9
%
Total
76,789
100.0
%
$
3,015
95.9
%
34.3
%
6.3
%
5.2
%
6.8
%
7.0
%
(0.6
%)
0.2
%
(1)
Excluding Bad Debt, Net, which includes
the positive impact of governmental rental assistance in the nine
months ended September 30, 2022, same store revenue growth would
have been 5.6%.
Note: The above table reflects Residential same store results
only. Residential operations account for approximately 96.4% of
total revenues for the nine months ended September 30, 2023.
Equity Residential
Same Store Residential Net
Effective Lease Pricing Statistics
For 76,789 Same Store
Apartment Units
New Lease Change (1)
Renewal Rate Achieved (1)
Blended Rate (1)
Markets/Metro Areas
Q3 2023
Q2 2023
Q3 2023
Q2 2023
Q3 2023
Q2 2023
Southern California
2.0
%
3.5
%
6.5
%
7.0
%
4.2
%
5.4
%
San Francisco
(3.8
%)
1.4
%
4.4
%
6.0
%
0.0
%
3.8
%
Washington, D.C.
4.3
%
4.8
%
6.7
%
6.5
%
5.5
%
5.7
%
New York
1.4
%
4.2
%
5.3
%
5.1
%
3.7
%
4.7
%
Seattle
(4.4
%)
(3.8
%)
2.5
%
4.5
%
(0.9
%)
0.4
%
Boston
3.7
%
4.4
%
6.1
%
6.1
%
5.0
%
5.3
%
Denver
0.1
%
0.9
%
5.3
%
5.0
%
2.4
%
2.6
%
Other Expansion Markets
(8.5
%)
(4.9
%)
3.4
%
4.5
%
(3.8
%)
(0.8
%)
Total
0.5
%
(2)
2.3
%
5.5
%
5.9
%
3.1
%
4.3
%
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
definitions. See page 3 for October 2023 preliminary data.
(2)
Excluding the impact of San Francisco and
Seattle, New Lease Change would have been 2.1% for the third
quarter of 2023.
Equity Residential
Third Quarter 2023 vs. Third
Quarter 2022
Total Same Store Operating
Expenses Including 77,698 Same Store Apartment Units
($ in thousands)
Q3 2023
Q3 2022
$ Change (1)
% Change
% of Q3 2023 Operating
Expenses
Real estate taxes
$
90,840
$
89,113
$
1,727
1.9
%
40.7
%
On-site payroll
44,288
41,613
2,675
6.4
%
19.8
%
Utilities
34,261
35,427
(1,166
)
(3.3
%)
15.3
%
Repairs and maintenance
31,093
29,239
1,854
6.3
%
13.9
%
Insurance
8,406
7,432
974
13.1
%
3.8
%
Leasing and advertising
2,713
2,991
(278
)
(9.3
%)
1.2
%
Other on-site operating expenses
11,873
10,920
953
8.7
%
5.3
%
Total Same Store Operating Expenses (2)
(includes Residential and Non-Residential)
$
223,474
$
216,735
$
6,739
3.1
%
100.0
%
September YTD 2023 vs.
September YTD 2022
Total Same Store Operating
Expenses Including 76,789 Same Store Apartment Units
($ in thousands)
YTD 2023
YTD 2022
$ Change (1)
% Change
% of YTD 2023 Operating
Expenses
Real estate taxes
$
270,055
$
264,117
$
5,938
2.2
%
40.6
%
On-site payroll
128,291
120,976
7,315
6.0
%
19.3
%
Utilities
103,709
100,418
3,291
3.3
%
15.6
%
Repairs and maintenance
91,709
81,926
9,783
11.9
%
13.8
%
Insurance
25,149
22,043
3,106
14.1
%
3.8
%
Leasing and advertising
7,652
7,874
(222
)
(2.8
%)
1.2
%
Other on-site operating expenses
38,042
33,927
4,115
12.1
%
5.7
%
Total Same Store Operating Expenses (2)
(includes Residential and Non-Residential)
$
664,607
$
631,281
$
33,326
5.3
%
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 fewer staffing vacancies compared to the same periods of 2022
and elevated employee benefit costs, partially offset by the impact
of innovation initiatives.
Utilities – Quarter-over-quarter decrease
primarily driven by lower commodity prices for gas and electric.
Year-over-year increase primarily driven by higher commodity prices
for gas earlier in the year and higher water, sewer and 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 September
30, 2023
($ in thousands)
Debt Balances (1)
% of Total
Weighted Average Rates (1)
Weighted Average Maturities
(years)
Secured
$
1,634,726
21.9
%
3.64
%
8.1
Unsecured
5,844,531
78.1
%
3.60
%
8.3
Total
$
7,479,257
100.0
%
3.61
%
8.3
Fixed Rate Debt:
Secured – Conventional
$
1,397,970
18.7
%
3.52
%
7.7
Unsecured – Public
5,346,895
71.5
%
3.52
%
9.1
Fixed Rate Debt
6,744,865
90.2
%
3.52
%
8.8
Floating Rate Debt:
Secured – Conventional
—
—
7.18
%
—
Secured – Tax Exempt
236,756
3.2
%
3.49
%
10.7
Unsecured – Revolving Credit Facility
—
—
—
4.1
Unsecured – Commercial Paper Program
(2)
497,636
6.6
%
5.36
%
—
Floating Rate Debt
734,392
9.8
%
4.75
%
3.6
Total
$
7,479,257
100.0
%
3.61
%
8.3
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
(2)
At September 30, 2023, the weighted
average maturity of commercial paper outstanding was 31 days. The
weighted average amount outstanding for the nine months ended
September 30, 2023 was approximately $236.4 million.
Note: The Company capitalized interest of approximately $9.6
million and $4.2 million during the nine months ended September 30,
2023 and 2022, respectively. The Company capitalized interest of
approximately $2.6 million and $1.9 million during the quarters
ended September 30, 2023 and 2022, respectively.
Equity Residential
Debt Maturity Schedule as of
September 30, 2023
($ 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
$
—
$
502,805
(2)
$
502,805
6.7
%
N/A
5.61
%
2024
—
6,200
6,200
0.1
%
N/A
4.01
%
2025
450,000
8,100
458,100
6.1
%
3.38
%
3.38
%
2026
592,025
9,000
601,025
7.9
%
3.58
%
3.58
%
2027
400,000
9,800
409,800
5.4
%
3.25
%
3.26
%
2028
900,000
10,700
910,700
12.0
%
3.79
%
3.79
%
2029
888,120
11,500
899,620
11.9
%
3.30
%
3.31
%
2030
1,148,462
12,700
1,161,162
15.4
%
2.53
%
2.54
%
2031
528,500
39,800
568,300
7.5
%
1.94
%
2.08
%
2032
—
28,000
28,000
0.4
%
N/A
3.73
%
2033+
1,900,850
110,900
2,011,750
26.6
%
4.63
%
4.50
%
Subtotal
6,807,957
749,505
7,557,462
100.0
%
3.53
%
3.65
%
Deferred Financing Costs and
Unamortized (Discount)
(63,092
)
(15,113
)
(78,205
)
N/A
N/A
N/A
Total
$
6,744,865
$
734,392
$
7,479,257
100.0
%
3.53
%
3.65
%
(1)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
(2)
Includes $500.0 million in principal
outstanding on the Company's Commercial Paper Program.
Equity Residential
Selected Unsecured Public Debt
Covenants
September 30,
June 30,
2023
2023
Debt to Adjusted Total Assets (not to
exceed 60%)
26.9%
26.9%
Secured Debt to Adjusted Total Assets (not
to exceed 40%)
6.7%
7.7%
Consolidated Income Available for Debt
Service to Maximum Annual Service Charges
(must be at least 1.5 to 1)
6.08
6.21
Total Unencumbered Assets to Unsecured
Debt (must be at least 125%)
502.3%
518.6%
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
September 30,
June 30,
2023
2023
Total debt to Normalized EBITDAre
4.28x
4.30x
Net debt to Normalized EBITDAre
4.24x
4.27x
Unencumbered NOI as a % of total NOI
89.8%
88.5%
Note: See Normalized EBITDAre Reconciliations for detail.
Equity Residential
Capital Structure as of
September 30, 2023
(Amounts in thousands except for
share/unit and per share amounts)
Secured Debt
$
1,634,726
21.9
%
Unsecured Debt
5,844,531
78.1
%
Total Debt
7,479,257
100.0
%
24.5
%
Common Shares (includes Restricted
Shares)
379,723,838
97.0
%
Units (includes OP Units and Restricted
Units)
11,733,485
3.0
%
Total Shares and Units
391,457,323
100.0
%
Common Share Price at September 30,
2023
$
58.71
22,982,459
99.8
%
Perpetual Preferred Equity (see below)
37,280
0.2
%
Total Equity
23,019,739
100.0
%
75.5
%
Total Market Capitalization
$
30,498,996
100.0
%
Perpetual Preferred Equity as
of September 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
Sept. YTD 2023
Sept. YTD 2022
Q3 2023
Q3 2022
Weighted Average Amounts Outstanding
for Net Income Purposes:
Common Shares - basic
378,613,604
375,710,361
378,852,510
375,849,762
Shares issuable from assumed
conversion/vesting of:
- OP Units
11,377,365
11,892,922
11,234,877
11,895,558
- long-term compensation shares/units
1,144,517
1,784,035
1,263,254
1,554,258
- ATM forward sales
—
6,276
—
—
Total Common Shares and Units -
diluted
391,135,486
389,393,594
391,350,641
389,299,578
Weighted Average Amounts Outstanding
for FFO and Normalized FFO Purposes:
Common Shares - basic
378,613,604
375,710,361
378,852,510
375,849,762
OP Units - basic
11,377,365
11,892,922
11,234,877
11,895,558
Total Common Shares and OP Units -
basic
389,990,969
387,603,283
390,087,387
387,745,320
Shares issuable from assumed
conversion/vesting of:
- long-term compensation shares/units
1,144,517
1,784,035
1,263,254
1,554,258
- ATM forward sales
—
6,276
—
—
Total Common Shares and Units -
diluted
391,135,486
389,393,594
391,350,641
389,299,578
Period Ending Amounts
Outstanding:
Common Shares (includes Restricted
Shares)
379,723,838
376,169,253
Units (includes OP Units and Restricted
Units)
11,733,485
12,844,608
Total Shares and Units
391,457,323
389,013,861
Equity Residential
Development and Lease-Up
Projects as of September 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
$
61,411
$
—
39%
Q2 2022
Q4 2024
Q1 2025
Q4 2025
– / –
Projects Under Development -
Consolidated
225
152,621
61,411
—
Projects Completed Not
Stabilized:
Reverb (fka 9th and W) (2)
Washington, D.C.
92%
312
108,027
104,311
—
100%
Q3 2021
Q2 2023
Q2 2023
Q3 2024
67% / 61%
Projects Completed Not Stabilized -
Consolidated
312
108,027
104,311
—
UNCONSOLIDATED:
Projects Under Development:
Alloy Sunnyside
Denver, CO
80%
209
66,004
58,196
22,961
88%
Q3 2021
Q2 2024
Q2 2024
Q1 2025
– / –
Alexan Harrison
Harrison, NY
62%
450
198,664
159,127
64,740
81%
Q3 2021
Q1 2024
Q4 2024
Q2 2026
– / –
Solana Beeler Park
Denver, CO
90%
270
81,206
49,879
16,902
55%
Q4 2021
Q2 2024
Q3 2024
Q1 2025
– / –
Remy (Toll)
Frisco, TX
75%
357
96,937
68,775
23,035
69%
Q1 2022
Q1 2024
Q4 2024
Q3 2025
– / –
Settler (Toll)
Fort Worth, TX
75%
362
81,775
48,552
11,468
59%
Q2 2022
Q2 2024
Q3 2024
Q3 2025
– / –
Lyle (Toll) (2)
Dallas, TX
75%
334
86,332
40,017
14,059
50%
Q3 2022
Q2 2024
Q3 2024
Q1 2026
– / –
Projects Under Development -
Unconsolidated
1,982
610,918
424,546
153,165
Total Development Projects -
Consolidated
537
260,648
165,722
—
Total Development Projects -
Unconsolidated
1,982
610,918
424,546
153,165
Total Development Projects
2,519
$
871,566
$
590,268
$
153,165
NOI CONTRIBUTION FROM DEVELOPMENT
PROJECTS
Total Budgeted Capital Cost
Q3 2023 NOI
Projects Under Development -
Consolidated
$
152,621
$
—
Projects Completed Not Stabilized -
Consolidated
108,027
425
Projects Under Development -
Unconsolidated
610,918
(17
)
$
871,566
$
408
(1)
All non-wholly owned projects are being
partially funded with project-specific construction loans. None of
these loans are recourse to the Company. The Company paid off the
remaining $67.9 million of the third party construction loan on
Reverb in the third quarter of 2023.
(2)
The land parcels under these projects are
subject to long-term ground leases.
Equity Residential
Capital Expenditures to Real
Estate
For the Nine Months Ended
September 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
76,789
3,894
80,683
Building Improvements
$
90,612
$
8,133
(2)
$
98,745
$
1,180
Renovation Expenditures
58,194
(1)
18,356
(2)
76,550
758
Replacements
53,401
1,067
54,468
695
Capital Expenditures to Real Estate
(3)
$
202,207
$
27,556
$
229,763
$
2,633
(1)
Renovation Expenditures on 2,031 same
store apartment units for the nine months ended September 30, 2023
approximated $28,653 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 the second quarter of
2024 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
September 30, 2023
June 30, 2023
Q3
Q2
Q1
Q4
Q3
Net income
$
711,573
$
865,452
$
181,286
$
144,862
$
220,071
$
165,354
$
335,165
Interest expense incurred, net
266,709
270,230
68,891
65,590
66,401
65,827
72,412
Amortization of deferred financing
costs
9,331
8,524
3,027
2,017
1,979
2,308
2,220
Amortization of above/below market lease
intangibles
4,464
4,464
1,116
1,116
1,116
1,116
1,116
Depreciation
876,193
865,586
224,736
221,355
215,830
214,272
214,129
Income and other tax expense (benefit)
1,067
961
258
336
298
175
152
EBITDA
1,869,337
2,015,217
479,314
435,276
505,695
449,052
625,194
Net (gain) loss on sales of real estate
properties
(127,013
)
(296,652
)
(26,912
)
87
(100,209
)
21
(196,551
)
EBITDAre
1,742,324
1,718,565
452,402
435,363
405,486
449,073
428,643
Write-off of pursuit costs (other
expenses)
4,223
4,258
746
661
1,332
1,484
781
(Income) loss from investments in
unconsolidated entities - operations
5,422
5,207
1,242
1,223
1,382
1,575
1,027
Realized (gain) loss on investment
securities (interest and other income)
1,714
3,315
(1,598
)
—
87
3,225
3
Unrealized (gain) loss on investment
securities (interest and other income)
(4,461
)
—
(4,461
)
—
—
—
—
Insurance/litigation settlement or reserve
income (interest and other income)
(1,067
)
(1,105
)
(62
)
(193
)
(800
)
(12
)
(100
)
Insurance/litigation/environmental
settlement or reserve expense (other expenses)
12,361
9,257
3,104
3,513
4,999
745
—
Advocacy contributions (other
expenses)
527
1,097
150
320
7
50
720
Data transformation project (other
expenses)
4,900
4,605
295
1,405
2,080
1,120
—
Real estate tax transaction adjustment
(real estate taxes)
(18,072
)
(18,072
)
—
—
—
(18,072
)
—
Other
449
1,845
1
6
6
436
1,397
Normalized EBITDAre
$
1,748,320
$
1,728,972
$
451,819
$
442,298
$
414,579
$
439,624
$
432,471
Balance Sheet Items:
September 30, 2023
June 30, 2023
Total debt
$
7,479,257
$
7,442,916
Cash and cash equivalents
(39,250
)
(35,701
)
Mortgage principal reserves/sinking
funds
(30,234
)
(28,802
)
Net debt
$
7,409,773
$
7,378,413
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)
Nine Months Ended September
30,
Quarter Ended September
30,
2023
2022
Variance
2023
2022
Variance
Impairment – non-operating real estate
assets
$
—
$
—
$
—
$
—
$
—
$
—
Write-off of pursuit costs (other
expenses)
2,739
3,296
(557
)
746
781
(35
)
Write-off of unamortized deferred
financing costs (interest expense)
1,143
369
774
1,096
277
819
Write-off of unamortized
(premiums)/discounts/OCI (interest expense)
—
3,947
(3,947
)
—
3,570
(3,570
)
Debt extinguishment and preferred share
redemption (gains) losses
1,143
4,316
(3,173
)
1,096
3,847
(2,751
)
(Income) loss from investments in
unconsolidated entities ─ non-operating assets
1,237
887
350
293
153
140
Realized (gain) loss on investment
securities (interest and other income)
(1,511
)
(2,061
)
550
(1,598
)
3
(1,601
)
Unrealized (gain) loss on investment
securities (interest and other income)
(4,461
)
—
(4,461
)
(4,461
)
—
(4,461
)
Non-operating asset (gains) losses
(4,735
)
(1,174
)
(3,561
)
(5,766
)
156
(5,922
)
Insurance/litigation settlement or reserve
income (interest and other income)
(1,055
)
(1,638
)
583
(62
)
(100
)
38
Insurance/litigation/environmental
settlement or reserve expense (other expenses)
11,616
750
10,866
3,104
—
3,104
Advocacy contributions (other
expenses)
477
1,462
(985
)
150
720
(570
)
Data transformation project (other
expenses)
3,780
—
3,780
295
—
295
Other
13
1,258
(1,245
)
1
1,397
(1,396
)
Other miscellaneous items
14,831
1,832
12,999
3,488
2,017
1,471
Adjustments from FFO to Normalized FFO
$
13,978
$
8,270
$
5,708
$
(436
)
$
6,801
$
(7,237
)
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.
Q4 2023
Revised Full Year 2023
Previous Full Year
2023
2023 Normalized
FFO Guidance (per share diluted)
Expected Normalized FFO Per Share
$0.99 to $1.01
$3.77 to $3.79
$3.77 to $3.83
2023 Same Store
Assumptions (includes Residential and
Non-Residential)
Physical Occupancy
95.9%
96.0%
Revenue change
5.5%
5.5% to 6.25%
Expense change
4.25%
4.0% to 4.5%
NOI change (1)
6.2%
6.3% to 7.0%
2023 Transaction
Assumptions
Consolidated rental acquisitions
$366.3M
$300.0M
Consolidated rental dispositions
$380.0M
$300.0M
Transaction Accretion (Dilution)
–
–
2023 Debt
Assumptions
Weighted average debt outstanding
$7.45B to $7.5B
$7.35B to $7.55B
Interest expense, net (on a Normalized FFO
basis)
$267.5M to $271.5M
$265.5M to $271.5M
Capitalized interest
$12.0M to $13.0M
$11.0M to $14.0M
2023 Capital
Expenditures to Real Estate Assumptions for Same Store Properties
(2)
Capital Expenditures to Real Estate for
Same Store Properties
$276.4M
$255.0M
Capital Expenditures to Real Estate per
Same Store Apartment Unit
$3,600
$3,315
2023 Other
Guidance Assumptions
Property management expense
$118.0M to $119.0M
$116.5M to $119.5M
General and administrative expense
$60.0M to $61.0M
$59.5M to $63.5M
Debt offerings
$550.0M
$530.0M
Weighted average Common Shares and Units -
Diluted
391.2M
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.
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:
September 30, 2023
Unsecured revolving credit facility
commitment
$
2,500,000
Commercial paper balance outstanding
(500,005
)
Unsecured revolving credit facility
balance outstanding
—
Other restricted amounts
(3,415
)
Unsecured revolving credit facility
availability
$
1,996,580
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):
Nine Months Ended September
30, 2023
Quarter Ended September 30,
2023
Net Gain (Loss) on Sales of Real Estate
Properties
$
127,034
$
26,912
Accumulated Depreciation Gain
(55,757
)
(19,271
)
Economic Gain (Loss)
$
71,277
$
7,641
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 Sept.
Actual Sept.
Actual
Actual
Expected
Expected
YTD 2023
YTD 2022
Q3 2023
Q3 2022
Q4 2023
2023
Per Share
Per Share
Per Share
Per Share
Per Share
Per Share
EPS – Diluted
$
1.38
$
1.63
$
0.45
$
0.86
$0.82 to $0.84
$2.20 to $2.22
Depreciation expense
1.68
1.71
0.57
0.55
0.58
2.26
Net (gain) loss on sales
(0.32
)
(0.78
)
(0.06
)
(0.51
)
(0.40
)
(0.72
)
Impairment – operating real estate
assets
—
—
—
—
—
—
FFO per share – Diluted
2.74
2.56
0.96
0.90
1.00 to 1.02
3.74 to 3.76
Impairment – non-operating real estate
assets
—
—
—
—
—
—
Write-off of pursuit costs
0.01
0.01
—
—
—
0.01
Debt extinguishment and preferred share
redemption (gains) losses
—
0.01
—
0.01
—
—
Non-operating asset (gains) losses
(0.01
)
—
(0.01
)
—
(0.01
)
(0.02
)
Other miscellaneous items
0.04
—
0.01
0.01
—
0.04
Normalized FFO per share – Diluted
$
2.78
$
2.58
$
0.96
$
0.92
$0.99 to $1.01
$3.77 to $3.79
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):
Nine Months Ended September
30,
Quarter Ended September
30,
2023
2022
2023
2022
Operating income
$
768,084
$
873,683
$
252,035
$
414,011
Adjustments:
Property management
90,314
83,035
28,169
25,729
General and administrative
49,135
47,033
14,094
13,372
Depreciation
661,921
667,896
224,736
214,129
Net (gain) loss on sales of real estate
properties
(127,034
)
(304,346
)
(26,912
)
(196,551
)
Total NOI
$
1,442,420
$
1,367,301
$
492,122
$
470,690
Rental income:
Same store
$
2,069,856
$
1,949,748
$
704,090
$
676,387
Non-same store/other
76,608
85,729
19,977
18,712
Total rental income
2,146,464
2,035,477
724,067
695,099
Operating expenses:
Same store
664,607
631,281
223,474
216,735
Non-same store/other
39,437
36,895
8,471
7,674
Total operating expenses
704,044
668,176
231,945
224,409
NOI:
Same store
1,405,249
1,318,467
480,616
459,652
Non-same store/other
37,171
48,834
11,506
11,038
Total NOI
$
1,442,420
$
1,367,301
$
492,122
$
470,690
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 September
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 nine months ended September 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/20231031551873/en/
Marty McKenna 312-928-1901 mmckenna@eqr.com
Equity Residential (NYSE:EQR)
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