Financial News

Equity Residential Reports First Quarter 2021 Results

Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2021 and has posted a Q1 2021 Management Presentation to its website as referenced below.

First Quarter 2021 Results

All per share results are reported as available to common shares/units on a diluted basis.

Quarter Ended March 31,

2021

2020

$ Change

% Change

Earnings Per Share (EPS)

$

0.15

$

0.83

$

(0.68

)

(81.9

%)

Funds from Operations (FFO) per share

$

0.67

$

0.86

$

(0.19

)

(22.1

%)

Normalized FFO per share

$

0.68

$

0.87

$

(0.19

)

(21.8

%)

“While the first quarter’s results reflect the significant impact of the pandemic on our business, we continue to see substantial signs of improvement as cities begin to reopen and affluent renters return. We are producing occupancy and pricing trends better than our original expectations and are therefore pleased to raise our full year same store revenue guidance range by 100 basis points to -6.0% to -8.0%,” said Mark J. Parrell, Equity Residential’s President and CEO. “As we head into the seasonally highest demand period of the year, we see considerable positive momentum in our operations and we expect to further reduce concessions and increase rental rates in light of the strong demand we see across our markets.”

Highlights

  • The Company has seen a 1.6% improvement in same store Physical Occupancy since the end of the fourth quarter 2020 (94.4% on December 31, 2020 to 96.0% on April 22, 2021).
  • Pricing Trends continue to improve across all markets with an approximately 14% sequential improvement portfolio-wide from December 2020 through April 2021. See the Management Presentation for details.
  • The Company collected approximately 97% of its expected Residential revenues in the first quarter of 2021.
  • The Company expanded its efforts to improve access to affordable housing with a $5.0 million commitment to a fund dedicated to preserving affordable housing.

Results Per Share

The change in EPS for the quarter ended March 31, 2021 compared to the same period of 2020 is due primarily to lower property sale gains in the first quarter of 2021, the various adjustment items listed on page 23 of this release and the items described below.

The per share change in FFO for the quarter ended March 31, 2021 compared to the same period of 2020, is due primarily to the various adjustment items listed on page 23 of this release and the items described below.

The per share change in Normalized FFO is due primarily to:

Positive/(Negative) Impact

First Quarter 2021 vs.
First Quarter 2020

Residential same store Net Operating Income (NOI)

$

(0.20

)

2020 transaction activity impact on NOI, net

(0.03

)

Interest expense, net

0.05

Other items

(0.01

)

Net

$

(0.19

)

The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 25 through 30 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 27 and 28 of this release.

Same Store Results

The Company has provided a breakout of Residential and Non-Residential same store results on page 9 of this release with definitions that can be found on page 29 of this release. Non-Residential operations account for approximately 3.8% of total revenues for the quarter ended March 31, 2021. The table below reflects same store Residential only results for the first quarter 2021 to first quarter 2020 comparison, which includes 77,060 apartment units, as well as for the first quarter 2021 to fourth quarter 2020 comparison, which includes 77,281 apartment units. The Company’s Physical Occupancy was 95.0% for the first quarter of 2021 compared to 94.2% for the fourth quarter of 2020 and 96.4% for the first quarter of 2020.

First Quarter 2021 vs.
First Quarter 2020

First Quarter 2021 vs.
Fourth Quarter 2020

Revenues

(10.6%)

(2.3%)

Expenses

3.9%

5.6%

NOI

(17.1%)

(6.2%)

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. See page 10 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.

First Quarter 2021 vs.
First Quarter 2020

First Quarter 2021 vs.
Fourth Quarter 2020

% Change

% Change

Same Store Residential Revenues-

comparable period

Lease rates

(6.6

%)

(2.3

%)

Leasing Concessions (1)

(1.6

%)

(0.6

%)

Vacancy loss

(1.0

%)

1.1

%

Bad Debt, Net (2)

(1.6

%)

(0.1

%)

Other (3)

0.2

%

(0.4

%)

Same Store Residential Revenues-

current period

(10.6

%)

(2.3

%)

(1)

Reflects upfront discounts on both new move-in and renewal leases on a straight-line basis.

(2)

Reduction in rental income due to bad debt write-offs and reserves, net of amounts collected on previously written-off or reserved accounts.

(3)

Includes ancillary income, utility recoveries, early lease termination income, miscellaneous income and other items.

Residential Same Store Operating Statistics

The following table includes select operating metrics for Residential Same Store Properties:

Q4 2020

Q1 2021

April 2021 (1)

Physical Occupancy (2)

94.4%

95.6%

96.0%

Percentage of Residents Renewing by quarter/month

51.0%

53.0%

56.0%

New Lease Change

(20.5%)

(17.7%)

(11.4%)

Renewal Rate Achieved

(3.4%)

(5.1%)

(2.1%)

Blended Rate

(13.0%)

(12.1%)

(7.2%)

(1)

April 2021 results are preliminary.

(2)

Physical Occupancy is as of month-end December for Q4 2020, month-end March for Q1 2021 and as of April 22 for April 2021.

Investment Activity

The Company did not acquire or sell any assets during the first quarter of 2021.

Second Quarter 2021 Guidance

The Company has established guidance ranges for the second quarter of 2021 EPS, FFO per share and Normalized FFO per share as listed below:

Q2 2021

Guidance

EPS

$0.66 to $0.70

FFO per share

$0.66 to $0.70

Normalized FFO per share

$0.67 to $0.71

The difference between the first quarter 2021 actual EPS of $0.15 and the second quarter of 2021 EPS guidance midpoint of $0.68 is due primarily to higher expected property sale gains and lower expected corporate overhead.

The difference between the first quarter 2021 actual FFO of $0.67 per share and the second quarter of 2021 FFO guidance midpoint of $0.68 per share is due primarily to lower expected corporate overhead.

The difference between the first quarter 2021 actual Normalized FFO of $0.68 per share and the second quarter of 2021 Normalized FFO guidance midpoint of $0.69 per share is due primarily to lower expected corporate overhead.

Full Year 2021 Guidance

The Company has revised its guidance for its full year 2021 same store operating performance as well as EPS, FFO per share and Normalized FFO per share as listed below:

Revised

Previous

Same Store (includes Residential and Non-Residential):

Physical Occupancy

95.0% to 96.0%

94.8% to 95.8%

Revenue change

(8.0%) to (6.0%)

(9.0%) to (7.0%)

Expense change

3.0% to 4.0%

3.0% to 4.0%

NOI change

(13.0%) to (11.0%)

(15.0%) to (12.0%)

EPS

$2.57 to $2.67

$2.55 to $2.75

FFO per share

$2.67 to $2.77

$2.58 to $2.78

Normalized FFO per share

$2.70 to $2.80

$2.60 to $2.80

The change in the full year 2021 EPS guidance range is due primarily to lower expected property sale gains and higher expected same store NOI.

The change in the full year 2021 FFO per share guidance range is due primarily to higher expected same store NOI.

The change in the full year 2021 Normalized FFO per share guidance range is due primarily to higher expected same store NOI.

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 high quality long-term renters. Equity Residential owns or has investments in 304 properties consisting of 77,889 apartment units, located in Boston, New York, Washington, D.C., Seattle, San Francisco, Southern California and Denver. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and government regulation. In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration and severity of the pandemic, the extent of the adverse health impact on the general population and on our residents, customers and employees in particular, its impact on the employment rate and the economy and the corresponding impact on our residents’ and tenants’ ability to pay their rent on time or at all, the extent and impact of governmental responses, the rollout and effectiveness of vaccines and the impact of operational changes we have implemented and may implement in response to the pandemic. 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, April 28, 2021 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 web cast link and the presentation.

Equity Residential

Consolidated Statements of Operations

(Amounts in thousands except per share data)

(Unaudited)

 

Quarter Ended March 31,

2021

2020

REVENUES

Rental income

$

597,602

$

682,305

EXPENSES

Property and maintenance

117,054

115,816

Real estate taxes and insurance

103,470

97,732

Property management

26,130

27,709

General and administrative

15,383

14,518

Depreciation

199,962

212,422

Total expenses

461,999

468,197

Net gain (loss) on sales of real estate properties

(43

)

207,977

Operating income

135,560

422,085

Interest and other income

216

1,960

Other expenses

(4,110

)

(2,533

)

Interest:

Expense incurred, net

(67,358

)

(85,590

)

Amortization of deferred financing costs

(2,185

)

(2,041

)

Income before income and other taxes, income (loss) from

investments in unconsolidated entities and net gain (loss)

on sales of land parcels

62,123

333,881

Income and other tax (expense) benefit

(153

)

(53

)

Income (loss) from investments in unconsolidated entities

(1,611

)

(1,157

)

Net gain (loss) on sales of land parcels

5

Net income

60,364

332,671

Net (income) loss attributable to Noncontrolling Interests:

Operating Partnership

(2,143

)

(11,535

)

Partially Owned Properties

(682

)

(12,530

)

Net income attributable to controlling interests

57,539

308,606

Preferred distributions

(773

)

(773

)

Net income available to Common Shares

$

56,766

$

307,833

Earnings per share – basic:

Net income available to Common Shares

$

0.15

$

0.83

Weighted average Common Shares outstanding

372,280

371,582

Earnings per share – diluted:

Net income available to Common Shares

$

0.15

$

0.83

Weighted average Common Shares outstanding

386,916

386,949

Distributions declared per Common Share outstanding

$

0.6025

$

0.6025

Equity Residential

Consolidated Statements of Funds From Operations and Normalized Funds From Operations

(Amounts in thousands except per share data)

(Unaudited)

 

Quarter Ended March 31,

2021

2020

Net income

$

60,364

$

332,671

Net (income) loss attributable to Noncontrolling Interests – Partially

Owned Properties

(682

)

(12,530

)

Preferred distributions

(773

)

(773

)

Net income available to Common Shares and Units

58,909

319,368

Adjustments:

Depreciation

199,962

212,422

Depreciation – Non-real estate additions

(1,100

)

(1,287

)

Depreciation – Partially Owned Properties

(828

)

(856

)

Depreciation – Unconsolidated Properties

617

613

Net (gain) loss on sales of unconsolidated entities - operating

assets

(4

)

Net (gain) loss on sales of real estate properties

43

(207,977

)

Noncontrolling Interests share of gain (loss) on sales

of real estate properties

11,655

FFO available to Common Shares and Units

257,599

333,938

Adjustments (see note for additional detail):

Impairment – non-operating assets

Write-off of pursuit costs

1,331

1,627

Debt extinguishment and preferred share redemption (gains)

losses

264

Non-operating asset (gains) losses

854

441

Other miscellaneous items

2,242

(918

)

Normalized FFO available to Common Shares and Units

$

262,290

$

335,088

FFO

$

258,372

$

334,711

Preferred distributions

(773

)

(773

)

FFO available to Common Shares and Units

$

257,599

$

333,938

FFO per share and Unit – basic

$

0.67

$

0.87

FFO per share and Unit – diluted

$

0.67

$

0.86

Normalized FFO

$

263,063

$

335,861

Preferred distributions

(773

)

(773

)

Normalized FFO available to Common Shares and Units

$

262,290

$

335,088

Normalized FFO per share and Unit – basic

$

0.68

$

0.87

Normalized FFO per share and Unit – diluted

$

0.68

$

0.87

Weighted average Common Shares and Units outstanding – basic

385,330

384,586

Weighted average Common Shares and Units outstanding – diluted

386,916

386,949

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)

March 31,

December 31,

2021

2020

ASSETS

Land

$

5,785,367

$

5,785,367

Depreciable property

20,952,067

20,920,654

Projects under development

476,010

411,134

Land held for development

88,360

86,170

Investment in real estate

27,301,804

27,203,325

Accumulated depreciation

(8,059,619

)

(7,859,657

)

Investment in real estate, net

19,242,185

19,343,668

Investments in unconsolidated entities

53,274

52,782

Cash and cash equivalents

35,453

42,591

Restricted deposits

62,383

57,137

Right-of-use assets

484,999

499,287

Other assets

290,721

291,426

Total assets

$

20,169,015

$

20,286,891

LIABILITIES AND EQUITY

Liabilities:

Mortgage notes payable, net

$

2,270,700

$

2,293,890

Notes, net

5,337,103

5,335,536

Line of credit and commercial paper

429,753

414,830

Accounts payable and accrued expenses

168,028

107,366

Accrued interest payable

55,489

65,896

Lease liabilities

316,838

329,130

Other liabilities

335,664

345,064

Security deposits

60,939

60,480

Distributions payable

232,737

232,262

Total liabilities

9,207,251

9,184,454

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership

409,523

338,951

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 March 31, 2021 and December 31, 2020

37,280

37,280

Common Shares of beneficial interest, $0.01 par value;

1,000,000,000 shares authorized; 372,917,413 shares issued

and outstanding as of March 31, 2021 and 372,302,000

shares issued and outstanding as of December 31, 2020

3,729

3,723

Paid in capital

9,083,346

9,128,599

Retained earnings

1,231,808

1,399,715

Accumulated other comprehensive income (loss)

(41,363

)

(43,666

)

Total shareholders’ equity

10,314,800

10,525,651

Noncontrolling Interests:

Operating Partnership

234,969

233,162

Partially Owned Properties

2,472

4,673

Total Noncontrolling Interests

237,441

237,835

Total equity

10,552,241

10,763,486

Total liabilities and equity

$

20,169,015

$

20,286,891

Equity Residential

Portfolio Summary

As of March 31, 2021

 

% of

Stabilized

Average

Apartment

Budgeted

Rental

Markets/Metro Areas

Properties

Units

NOI

Rate

Los Angeles

72

16,603

21.5

%

$

2,424

Orange County

13

4,028

5.4

%

2,205

San Diego

11

2,706

3.8

%

2,376

Subtotal – Southern California

96

23,337

30.7

%

2,380

San Francisco

48

12,707

18.3

%

2,903

Washington DC

47

14,731

17.2

%

2,325

Seattle

46

9,454

11.4

%

2,242

New York

37

9,606

11.3

%

3,464

Boston

25

6,430

9.4

%

2,853

Denver

5

1,624

1.7

%

1,984

Total

304

77,889

100.0

%

$

2,597

 

Properties

Apartment Units

Wholly Owned Properties

287

74,328

Master-Leased Properties – Consolidated

1

162

Partially Owned Properties – Consolidated

16

3,399

304

77,889

Note: Projects under development are not included in the Portfolio Summary until construction has been completed.

Note: The Company did not acquire or sell any assets during the first quarter of 2021.

Equity Residential

First Quarter 2021 vs. First Quarter 2020

Same Store Results/Statistics Including 77,060 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

 

First Quarter 2021

First Quarter 2020

Residential

%
Change

Non-
Residential

%
Change

Total

%
Change

Residential

Non-
Residential

Total

Revenues

$

570,927

(1)

(10.6%)

$

21,861

(2)

(6.3%)

$

592,788

(10.5%)

Revenues

$

638,683

$

23,338

$

662,021

Expenses

$

205,959

3.9%

$

6,093

3.4%

$

212,052

3.8%

Expenses

$

198,306

$

5,895

$

204,201

NOI

$

364,968

(17.1%)

$

15,768

(9.6%)

$

380,736

(16.8%)

NOI

$

440,377

$

17,443

$

457,820

Average Rental Rate

$

2,601

(9.3%)

Average Rental Rate

$

2,867

Physical Occupancy

95.0

%

(1.4%)

Physical Occupancy

96.4

%

Turnover

9.9

%

0.2%

Turnover

9.7

%

First Quarter 2021 vs. Fourth Quarter 2020

Same Store Results/Statistics Including 77,281 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

 

First Quarter 2021

Fourth Quarter 2020

Residential

%
Change

Non-
Residential

%
Change

Total

% Change

Residential

Non-
Residential

Total

Revenues

$

572,443

(1)

(2.3%)

$

21,861

(2)

9.4%

$

594,304

(1.9%)

Revenues

$

585,699

$

19,982

$

605,681

Expenses

$

206,342

5.6%

$

6,095

9.2%

$

212,437

5.7%

Expenses

$

195,347

$

5,583

$

200,930

NOI

$

366,101

(6.2%)

$

15,766

9.5%

$

381,867

(5.7%)

NOI

$

390,352

$

14,399

$

404,751

Average Rental Rate

$

2,600

(3.1%)

Average Rental Rate

$

2,683

Physical Occupancy

95.0

%

0.8%

Physical Occupancy

94.2

%

Turnover

10.0

%

(3.4%)

Turnover

13.4

%

(1)

See page 10 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)

Changes in same store Non-Residential revenues for the periods presented are driven by the following:

• First Quarter 2021 vs. First Quarter 2020 – Primarily deferral/abatement of rents, higher bad debt and lower parking income.

• First Quarter 2021 vs. Fourth Quarter 2020 – Primarily higher receipts from retail tenants, lower bad debt and higher parking income.

Equity Residential

Same Store Residential Revenues – GAAP to Cash Basis (1)

$ in thousands

 

First Quarter 2021 vs. First Quarter 2020

First Quarter 2021 vs. Fourth Quarter 2020

77,060 Same Store Apartment Units

77,281 Same Store Apartment Units

Q1 2021

Q1 2020

Q1 2021

Q4 2020

Same Store Residential Revenues (GAAP Basis)

$

570,927

$

638,683

$

572,443

$

585,699

Leasing Concessions amortized

11,640

1,147

11,703

8,302

Leasing Concessions granted (2)

(16,989

)

(1,904

)

(17,038

)

(16,762

)

Same Store Residential Revenues with Leasing

Concessions on a cash basis

$

565,578

$

637,926

$

567,108

$

577,239

% change - GAAP revenue

(10.6

%)

(2.3

%)

% change - cash revenue

(11.3

%)

(1.8

%)

(1)

See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for additional detail.

(2)

Monthly Leasing Concessions granted began to decline in March 2021. Leasing Concessions granted in February, March and April (preliminary) 2021 are $6.1 million, $4.9 million and $3.6 million, respectively.

Same Store Resident/Tenant Accounts Receivable Balances

Including 77,060 Same Store Apartment Units

$ in thousands

 

Residential

Non-Residential

Balance Sheet (Other assets):

March 31, 2021

December 31, 2020

March 31, 2021

December 31, 2020

Resident/tenant accounts receivable balances

$

37,590

$

31,180

$

6,554

$

7,340

Allowance for doubtful accounts

(31,596

)

(23,873

)

(5,724

)

(6,527

)

Net receivable balances

$

5,994

(1)

$

7,307

$

830

$

813

Straight-line receivable balances

$

25,096

(2)

$

19,747

$

13,392

$

13,399

(1)

The Company held same store Residential security deposits approximating 31.9% of the net receivable balance at March 31, 2021.

(2)

Total same store Residential Leasing Concessions granted in the first quarter of 2021 were approximately $17.0 million. The straight-line receivable balance of $25.1 million reflects Residential Leasing Concessions that the Company expects will be primarily recognized as a reduction of rental revenues for the remainder of 2021 and the first quarter of 2022.

 

Same Store Residential Bad Debt

Including 77,060 Same Store Apartment Units

$ in thousands

Income Statement (Rental income):

Q1 2021

Q4 2020

Q1 2020

Bad Debt, Net

$

13,689

$

13,199

$

3,687

% of Same Store Residential Revenues

2.4

%

2.3

%

0.6

%

Equity Residential

First Quarter 2021 vs. First Quarter 2020

Same Store Residential Results/Statistics by Market

 

Increase (Decrease) from Prior Year's Quarter

Markets/Metro Areas

Apartment
Units

Q1 2021
% of
Actual
NOI

Q1 2021
Average
Rental
Rate

Q1 2021
Weighted
Average
Physical
Occupancy %

Q1 2021
Turnover

Revenues

Expenses

NOI

Average
Rental
Rate

Physical
Occupancy

Turnover

Los Angeles

16,533

20.9

%

$

2,423

95.8

%

10.1

%

(8.1

%)

1.1

%

(12.2

%)

(7.9

%)

(0.2

%)

(1.0

%)

Orange County

4,028

5.3

%

2,205

97.0

%

7.8

%

(3.2

%)

2.7

%

(4.9

%)

(3.3

%)

0.2

%

(1.2

%)

San Diego

2,706

3.9

%

2,376

97.2

%

10.5

%

(0.2

%)

1.2

%

(0.6

%)

(0.6

%)

0.4

%

(0.8

%)

Subtotal – Southern California

23,267

30.1

%

2,380

96.2

%

9.7

%

(6.5

%)

1.3

%

(9.6

%)

(6.4

%)

(0.1

%)

(1.1

%)

San Francisco

12,707

19.5

%

2,903

93.8

%

11.4

%

(15.7

%)

4.7

%

(22.6

%)

(13.1

%)

(2.9

%)

1.7

%

Washington DC

14,569

17.6

%

2,325

95.9

%

9.7

%

(5.5

%)

4.0

%

(9.6

%)

(5.2

%)

(0.3

%)

1.1

%

New York

9,606

11.0

%

3,464

91.4

%

8.3

%

(16.9

%)

4.4

%

(34.0

%)

(12.2

%)

(5.3

%)

1.1

%

Seattle

8,941

10.7

%

2,258

95.7

%

11.1

%

(10.3

%)

6.0

%

(16.5

%)

(9.0

%)

(1.4

%)

0.0

%

Boston

6,346

9.4

%

2,852

95.3

%

8.9

%

(10.8

%)

4.9

%

(17.2

%)

(10.3

%)

(0.5

%)

(0.2

%)

Denver

1,624

1.7

%

1,984

96.1

%

12.3

%

(2.7

%)

9.5

%

(7.7

%)

(3.4

%)

0.6

%

(2.1

%)

Total

77,060

100.0

%

$

2,601

95.0

%

9.9

%

(10.6

%)

(1)

3.9

%

(17.1

%)

(9.3

%)

(1.4

%)

0.2

%

(1)

With Leasing Concessions reflected on a cash basis, Same Store Residential Revenues decreased 11.3% in the first quarter of 2021 compared to the first quarter of 2020. See page 10 for additional detail and reconciliations.

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.2% of total revenues for the quarter ended March 31, 2021.

Equity Residential

First Quarter 2021 vs. Fourth Quarter 2020

Same Store Residential Results/Statistics by Market

 

Increase (Decrease) from Prior Quarter

Markets/Metro Areas

Apartment
Units

Q1 2021
% of
Actual
NOI

Q1 2021
Average
Rental
Rate

Q1 2021
Weighted
Average
Physical
Occupancy %

Q1 2021
Turnover

Revenues

Expenses

NOI

Average
Rental
Rate

Physical
Occupancy

Turnover

Los Angeles

16,533

20.8

%

$

2,423

95.8

%

10.1

%

(1.4

%)

3.5

%

(3.7

%)

(1.4

%)

0.0

%

(3.6

%)

Orange County

4,028

5.3

%

2,205

97.0

%

7.8

%

(0.6

%)

5.5

%

(2.4

%)

(0.8

%)

0.2

%

(2.9

%)

San Diego

2,706

3.9

%

2,376

97.2

%

10.5

%

0.0

%

3.3

%

(1.0

%)

0.1

%

(0.1

%)

(0.9

%)

Subtotal – Southern California

23,267

30.0

%

2,380

96.2

%

9.7

%

(1.1

%)

3.7

%

(3.1

%)

(1.1

%)

0.1

%

(3.2

%)

San Francisco

12,707

19.4

%

2,903

93.8

%

11.4

%

(3.7

%)

6.6

%

(7.8

%)

(4.9

%)

1.1

%

(4.3

%)

Washington DC

14,569

17.6

%

2,325

95.9

%

9.7

%

(2.1

%)

6.1

%

(5.8

%)

(2.6

%)

0.5

%

(3.1

%)

New York

9,606

11.0

%

3,464

91.4

%

8.3

%

(2.4

%)

5.8

%

(11.3

%)

(4.2

%)

1.6

%

(3.5

%)

Seattle

9,078

10.8

%

2,255

95.7

%

11.1

%

(3.4

%)

5.6

%

(7.2

%)

(4.6

%)

1.2

%

(3.0

%)

Boston

6,430

9.5

%

2,853

95.3

%

8.9

%

(2.1

%)

6.8

%

(6.1

%)

(3.6

%)

1.4

%

(4.0

%)

Denver

1,624

1.7

%

1,984

96.1

%

12.3

%

0.1

%

11.6

%

(4.6

%)

(0.9

%)

1.0

%

(3.6

%)

Total

77,281

100.0

%

$

2,600

95.0

%

10.0

%

(2.3

%)

(1)

5.6

%

(6.2

%)

(3.1

%)

0.8

%

(3.4

%)

(1)

With Leasing Concessions reflected on a cash basis, Same Store Residential Revenues decreased 1.8% in the first quarter of 2021 compared to the fourth quarter of 2020. See page 10 for additional detail and reconciliations.

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.2% of total revenues for the quarter ended March 31, 2021.

Equity Residential

Same Store Residential Net Effective Lease Pricing Statistics

For 77,060 Same Store Apartment Units

 

New Lease Change (1)

Renewal Rate Achieved (1)

Blended Rate (1)

Markets/Metro Areas

Q1 2021

Q4 2020

Q1 2021

Q4 2020

Q1 2021

Q4 2020

Los Angeles

(7.6

%)

(8.9

%)

(0.2

%)

(0.5

%)

(4.0

%)

(4.6

%)

Orange County

0.1

%

(2.8

%)

3.0

%

2.1

%

1.7

%

0.0

%

San Diego

2.1

%

(0.1

%)

3.9

%

2.5

%

3.1

%

1.4

%

Subtotal – Southern California

(5.5

%)

(7.3

%)

0.8

%

0.3

%

(2.3

%)

(3.3

%)

San Francisco

(22.0

%)

(26.8

%)

(9.9

%)

(7.2

%)

(17.3

%)

(19.1

%)

Washington DC

(14.4

%)

(18.6

%)

(2.9

%)

(1.9

%)

(9.0

%)

(11.5

%)

New York

(28.0

%)

(27.1

%)

(9.3

%)

(6.5

%)

(20.5

%)

(18.5

%)

Seattle

(20.7

%)

(26.8

%)

(10.1

%)

(6.6

%)

(15.9

%)

(19.2

%)

Boston

(20.4

%)

(27.0

%)

(7.6

%)

(5.0

%)

(14.8

%)

(18.3

%)

Denver

(7.1

%)

(10.4

%)

3.5

%

1.6

%

(3.5

%)

(6.2

%)

Total

(17.7

%)

(20.5

%)

(5.1

%)

(3.4

%)

(12.1

%)

(13.0

%)

(1)

See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for definitions. See page 3 for April 2021 preliminary data.

Equity Residential

First Quarter 2021 vs. First Quarter 2020

Total Same Store Operating Expenses Including 77,060 Same Store Apartment Units

$ in thousands

 

Q1 2021

Q1 2020

$
Change (1)

%
Change

% of
Q1 2021
Operating
Expenses

Real estate taxes

$

90,767

$

88,323

$

2,444

2.8

%

42.8

%

On-site payroll

42,993

43,009

(16

)

0.0

%

20.3

%

Utilities

29,945

27,674

2,271

8.2

%

14.1

%

Repairs and maintenance

25,835

23,439

2,396

10.2

%

12.2

%

Insurance

7,040

6,321

719

11.4

%

3.3

%

Leasing and advertising

2,803

2,337

466

19.9

%

1.3

%

Other on-site operating expenses

12,669

13,098

(429

)

(3.3

%)

6.0

%

Total Same Store Operating Expenses (2)

(includes Residential and Non-Residential)

$

212,052

$

204,201

$

7,851

3.8

%

100.0

%

(1)

The quarter-over-quarter changes were primarily affected by the following factors:

Real estate taxes – Increase is lower than prior expectations due to lower rates and assessed values.

On-site payroll – Improved sales and service staff utilization from various technology initiatives offset other general payroll pressures.

Utilities – Increase driven by higher usage of water, sewer and trash.

Repairs and maintenance – Increase primarily driven by non-comparable items like greater snowfall on the East Coast and higher turnover expense from accelerated leasing as well as increases in minimum wage on contract services.

Insurance – Increase due to higher premiums on property insurance renewal due to challenging conditions in the insurance market.

Leasing and advertising – Increase due primarily to increased digital advertising and selective use of outside broker fees on targeted leasing activity.

Other on-site operating expenses – Decrease primarily driven by lower ground lease costs due to a lease modification at one property.

(2)

See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for additional details.

Equity Residential

Debt Summary as of March 31, 2021

($ in thousands)

 

Debt

Balances (1)

% of Total

Weighted

Average

Rates (1)

Weighted

Average

Maturities

(years)

Secured

$

2,270,700

28.3

%

3.18

%

6.1

Unsecured

5,766,856

71.7

%

3.49

%

10.0

Total

$

8,037,556

100.0

%

3.40

%

8.9

Fixed Rate Debt:

Secured – Conventional

$

1,899,917

23.7

%

3.70

%

4.7

Unsecured – Public

5,337,103

66.4

%

3.77

%

10.8

Fixed Rate Debt

7,237,020

90.1

%

3.75

%

9.1

Floating Rate Debt:

Secured – Conventional

40,546

0.5

%

2.38

%

1.2

Secured – Tax Exempt

330,237

4.1

%

0.45

%

15.4

Unsecured – Revolving Credit Facility

3.6

Unsecured – Commercial Paper Program (2)

429,753

5.3

%

0.30

%

Floating Rate Debt

800,536

9.9

%

0.45

%

6.7

Total

$

8,037,556

100.0

%

3.40

%

8.9

(1)

See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for additional details.

(2)

At March 31, 2021, the weighted average maturity of commercial paper outstanding was 69 days. The weighted average amount outstanding for the quarter ended March 31, 2021 was approximately $457.3 million.

Note: The Company capitalized interest of approximately $3.8 million and $1.8 million during the quarters ended March 31, 2021 and 2020, respectively.

Equity Residential

Debt Maturity Schedule as of March 31, 2021

($ 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)

2021

$

5,593

$

430,000

(2)

$

435,593

5.4

%

3.27

%

0.32

%

2022

264,185

40,846

305,031

3.8

%

3.25

%

3.12

%

2023

1,325,588

3,500

1,329,088

16.4

%

3.74

%

3.73

%

2024

6,100

6,100

0.1

%

N/A

0.06

%

2025

450,000

8,200

458,200

5.6

%

3.38

%

3.32

%

2026

592,025

9,000

601,025

7.4

%

3.58

%

3.53

%

2027

400,000

9,800

409,800

5.0

%

3.25

%

3.17

%

2028

900,000

10,700

910,700

11.2

%

3.79

%

3.75

%

2029

888,120

11,500

899,620

11.1

%

3.30

%

3.26

%

2030

1,095,000

12,600

1,107,600

13.6

%

2.55

%

2.52

%

2031+

1,379,350

275,535

1,654,885

20.4

%

4.37

%

3.66

%

Subtotal

7,299,861

817,781

8,117,642

100.0

%

3.55

%

3.23

%

Deferred Financing Costs and Unamortized (Discount)

(62,841

)

(17,245

)

(80,086

)

N/A

N/A

N/A

Total

$

7,237,020

$

800,536

$

8,037,556

100.0

%

3.55

%

3.23

%

(1)

See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for additional details.

(2)

Represents principal outstanding on the Company’s commercial paper program.

Equity Residential

Selected Unsecured Public Debt Covenants

 

March 31,

December 31,

2021

2020

Debt to Adjusted Total Assets (not to exceed 60%)

30.4%

30.5%

Secured Debt to Adjusted Total Assets (not to exceed 40%)

9.4%

9.6%

Consolidated Income Available for Debt Service to

Maximum Annual Service Charges

(must be at least 1.5 to 1)

5.30

5.42

Total Unencumbered Assets to Unsecured Debt

(must be at least 125%)

454.1%

458.3%

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

 

March 31,

December 31,

2021

2020

Total debt to Normalized EBITDAre

5.29x

4.99x

Net debt to Normalized EBITDAre

5.25x

4.96x

Unencumbered NOI as a % of total NOI

87.5%

86.6%

Note: See Normalized EBITDAre Reconciliations for detail.

Equity Residential

Capital Structure as of March 31, 2021

(Amounts in thousands except for share/unit and per share amounts)

 

Secured Debt

$

2,270,700

28.3

%

Unsecured Debt

5,766,856

71.7

%

Total Debt

8,037,556

100.0

%

22.5

%

Common Shares (includes Restricted Shares)

372,917,413

96.4

%

Units (includes OP Units and Restricted Units)

14,042,374

3.6

%

Total Shares and Units

386,959,787

100.0

%

Common Share Price at March 31, 2021

$

71.63

27,717,930

99.9

%

Perpetual Preferred Equity (see below)

37,280

0.1

%

Total Equity

27,755,210

100.0

%

77.5

%

Total Market Capitalization

$

35,792,766

100.0

%

Perpetual Preferred Equity as of March 31, 2021

(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

 

Q1 2021

Q1 2020

Weighted Average Amounts Outstanding for Net Income Purposes:

Common Shares - basic

372,279,711

371,582,086

Shares issuable from assumed conversion/vesting of:

- OP Units

13,050,142

13,003,900

- long-term compensation shares/units

1,586,077

2,363,095

Total Common Shares and Units - diluted

386,915,930

386,949,081

Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes:

Common Shares - basic

372,279,711

371,582,086

OP Units - basic

13,050,142

13,003,900

Total Common Shares and OP Units - basic

385,329,853

384,585,986

Shares issuable from assumed conversion/vesting of:

- long-term compensation shares/units

1,586,077

2,363,095

Total Common Shares and Units - diluted

386,915,930

386,949,081

Period Ending Amounts Outstanding:

Common Shares (includes Restricted Shares)

372,917,413

372,104,054

Units (includes OP Units and Restricted Units)

14,042,374

13,932,433

Total Shares and Units

386,959,787

386,036,487

Equity Residential

Development and Lease-Up Projects as of March 31, 2021

(Amounts in thousands except for project and apartment unit amounts)

 

No. of

Total
Budgeted

Total
Book

Total Book
Value Not

Estimated/Actual

Projects

Location

Apartment
Units

Capital
Cost

Value
to Date

Placed in
Service

Total
Debt

Percentage
Completed

Initial
Occupancy

Completion
Date

Stabilization
Date

Percentage
Leased

Percentage
Occupied

Projects Under Development - Wholly Owned:

Alcott Apartments (fka West End Tower)

Boston, MA

470

$

409,749

$

310,132

$

310,132

$

78%

Q3 2021

Q4 2021

Q1 2023

The Edge (fka 4885 Edgemoor Lane) (A)

Bethesda, MD

154

75,271

62,007

62,007

86%

Q3 2021

Q3 2021

Q3 2022

Projects Under Development - Wholly Owned

624

485,020

372,139

372,139

Projects Under Development - Partially Owned:

Aero Apartments (B)

Alameda, CA

200

117,794

103,871

103,871

40,546

92%

Q2 2021

Q2 2021

Q2 2022

3%

Projects Under Development - Partially Owned

200

117,794

103,871

103,871

40,546

Total Projects Under Development

824

$

602,814

$

476,010

$

476,010

$

40,546

Land Held for Development

N/A

N/A

$

88,360

$

88,360

$

NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS

Total
Budgeted
Capital
Cost

Q1 2021
NOI

Projects Under Development

$

602,814

$

(57

)

(A)

The Edge – The land under this project is subject to a long-term ground lease. This project is adjacent to an existing apartment property owned by the Company.

(B)

Aero Apartments – This development project is owned 90% by the Company and 10% by a third party partner in a joint venture consolidated by the Company. Construction is being partially funded with a construction loan that is non-recourse to the Company. The joint venture partner has funded $4.7 million for its allocated share of the project equity and serves as the developer of the project.

Equity Residential

Capital Expenditures to Real Estate

For the Quarter Ended March 31, 2021

(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

77,060

829

77,889

Building Improvements

$

15,976

$

38

$

16,014

$

207

Renovation Expenditures (1)

5,261

5,261

68

Replacements

7,381

23

7,404

96

Capital Expenditures to Real Estate (2)

$

28,618

$

61

$

28,679

$

371

(1)

Renovation Expenditures on 222 same store apartment units for the quarter ended March 31, 2021 approximated $23,701 per apartment unit renovated.

(2)

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

2021

2020

March 31, 2021

December 31, 2020

Q1

Q4

Q3

Q2

Q1

Net income

$

690,194

$

962,501

$

60,364

$

262,984

$

95,365

$

271,481

$

332,671

Interest expense incurred, net

346,841

365,073

67,358

116,724

80,874

81,885

85,590

Amortization of deferred financing costs

9,083

8,939

2,185

2,686

2,101

2,111

2,041

Amortization of above/below market lease intangibles

4,392

4,391

1,098

1,098

1,098

1,098

1,097

Depreciation

808,372

820,832

199,962

201,829

200,605

205,976

212,422

Income and other tax expense (benefit)

952

852

153

350

262

187

53

EBITDA

1,859,834

2,162,588

331,120

585,671

380,305

562,738

633,874

Net (gain) loss on sales of real estate properties

(323,787

)

(531,807

)

43

(179,589

)

25

(144,266

)

(207,977

)

Net (gain) loss on sales of unconsolidated entities - operating assets

(1,640

)

(1,636

)

(4

)

(636

)

(1,000

)

EBITDAre

1,534,407

1,629,145

331,159

405,446

379,330

418,472

425,897

Write-off of pursuit costs (other expenses)

6,573

6,869

1,331

2,005

1,586

1,651

1,627

(Income) loss from investments in unconsolidated entities - operations

5,378

4,920

1,615

1,475

1,246

1,042

1,157

Net (gain) loss on sales of land parcels

(34,239

)

(34,234

)

(5

)

(34,234

)

Insurance/litigation settlement or reserve income (interest and other income)

(2,570

)

(4,152

)

(1,800

)

(3

)

(767

)

(1,582

)

Insurance/litigation/environmental settlement or reserve expense (other expenses)

756

(1,293

)

2,212

500

(1,956

)

163

Advocacy contributions (other expenses)

10,591

11,062

30

6,981

1,728

1,852

501

Other

(832

)

(965

)

133

(15

)

(429

)

(521

)

Normalized EBITDAre

$

1,520,064

$

1,611,352

$

336,475

$

379,858

$

383,958

$

419,773

$

427,763

Balance Sheet Items:

March 31, 2021

December 31, 2020

Total debt

$

8,037,556

$

8,044,256

Cash and cash equivalents

(35,453

)

(42,591

)

Mortgage principal reserves/sinking funds

(15,360

)

(14,168

)

Net debt

$

7,986,743

$

7,987,497

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)

 

Quarter Ended March 31,

2021

2020

Variance

Impairment – non-operating assets

$

$

$

Write-off of pursuit costs (other expenses)

1,331

1,627

(296

)

Write-off of unamortized deferred financing costs (interest expense)

264

264

Debt extinguishment and preferred share redemption (gains) losses

264

264

Net (gain) loss on sales of land parcels

(5

)

(5

)

(Income) loss from investments in unconsolidated entities ─ non-operating assets

726

441

285

Other

133

133

Non-operating asset (gains) losses

854

441

413

Insurance/litigation settlement or reserve income (interest and other income)

(1,582

)

1,582

Insurance/litigation/environmental settlement or reserve expense (other expenses)

2,212

163

2,049

Advocacy contributions (other expenses)

30

501

(471

)

Other miscellaneous items

2,242

(918

)

3,160

Adjustments from FFO to Normalized FFO

$

4,691

$

1,150

$

3,541

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.

Q2 2021

Revised Full Year 2021

Previous Full Year 2021

2021 Normalized FFO Guidance (per share diluted)

Expected Normalized FFO Per Share

$0.67 to $0.71

$2.70 to $2.80

$2.60 to $2.80

2021 Same Store Assumptions (includes Residential and Non-Residential)

Physical Occupancy

95.0% to 96.0%

94.8% to 95.8%

Revenue change (1)

(8.0%) to (6.0%)

(9.0%) to (7.0%)

Expense change

3.0% to 4.0%

3.0% to 4.0%

NOI change (2)

(13.0%) to (11.0%)

(15.0%) to (12.0%)

2021 Transaction Assumptions

The Company expects consolidated rental acquisitions to approximately equal consolidated rental dispositions.

2021 Debt Assumptions

Weighted average debt outstanding

$8.1B to $8.3B

$8.1B to $8.3B

Interest expense, net (on a Normalized FFO basis)

$270.0M to $276.5M

$270.0M to $276.5M

Capitalized interest

$14.5M to $16.5M

$14.5M to $16.5M

2021 Capital Expenditures to Real Estate Assumptions for Same Store Properties (3)

Capital Expenditures to Real Estate for Same Store Properties

$150.0M

$150.0M

Capital Expenditures to Real Estate per Same Store Apartment Unit

$1,950

$1,950

2021 Other Guidance Assumptions

Property management expense

$96.5M to $98.5M

$96.5M to $98.5M

General and administrative expense

$53.0M to $55.0M

$53.0M to $55.0M

Debt offerings

No amounts budgeted

No amounts budgeted

Weighted average Common Shares and Units - Diluted

386.8M

386.8M

(1)

Revenue change is reflected on a GAAP basis. Revenue change would be approximately (7.0%) to (5.0%) on a cash basis.

(2)

Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO per share/Normalized FFO per share.

(3)

During 2021, the Company expects to spend approximately $25.0 million for apartment unit Renovation Expenditures on approximately 1,250 same store apartment units at an average cost of approximately $20,000 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 – Reduction 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 November 1, 2024. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.775%), 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:

March 31, 2021

Unsecured revolving credit facility commitment

$

2,500,000

Commercial paper balance outstanding

(430,000

)

Unsecured revolving credit facility balance outstanding

Other restricted amounts

(100,699

)

Unsecured revolving credit facility availability

$

1,969,301

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 $100-$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):

Quarter Ended March 31, 2021

Net Gain (Loss) on Sales of Real Estate Properties

$

(43

)

Accumulated Depreciation Gain

Economic Gain (Loss)

$

(43

)

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") – Normalized FFO begins with FFO and excludes:

• the impact of any expenses relating to non-operating 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

Actual

Expected

Expected

Q1 2021

Q1 2020

Q2 2021

2021

Per Share

Per Share

Per Share

Per Share

EPS – Diluted

$

0.15

$

0.83

$0.66 to $0.70

$2.57 to $2.67

Depreciation expense

0.52

0.54

0.51

2.03

Net (gain) loss on sales

(0.51

)

(0.51)

(1.93)

Impairment – operating assets

FFO per share – Diluted

0.67

0.86

0.66 to 0.70

2.67 to 2.77

Impairment – non-operating assets

Write-off of pursuit costs

0.01

0.01

0.01

Debt extinguishment and preferred share

redemption (gains) losses

Non-operating asset (gains) losses

0.01

Other miscellaneous items

0.01

0.01

Normalized FFO per share – Diluted

$

0.68

$

0.87

$0.67 to $0.71

$2.70 to $2.80

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):

Quarter Ended March 31,

2021

2020

Operating income

$

135,560

$

422,085

Adjustments:

Property management

26,130

27,709

General and administrative

15,383

14,518

Depreciation

199,962

212,422

Net (gain) loss on sales of real estate

properties

43

(207,977

)

Total NOI

$

377,078

$

468,757

Rental income:

Same store

$

592,788

$

662,021

Non-same store/other

4,814

20,284

Total rental income

597,602

682,305

Operating expenses:

Same store

212,052

204,201

Non-same store/other

8,472

9,347

Total operating expenses

220,524

213,548

NOI:

Same store

380,736

457,820

Non-same store/other

(3,658

)

10,937

Total NOI

$

377,078

$

468,757

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 2020 and 2021, plus any properties in lease-up and not stabilized as of January 1, 2020.

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, 2020, 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 2021 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.

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 March 31, 2021. 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 quarter ended March 31, 2021 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.

Contacts:

Marty McKenna
(312) 474-1300
investorrelations@eqr.com

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