eqr-8k_20200728.htm
false 0000906107 0000906107 2020-07-28 2020-07-28

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): July 28, 2020

 

EQUITY RESIDENTIAL

(Exact Name of Registrant as Specified in its Charter)

 

 

Maryland

1-12252

13-3675988

(State or Other Jurisdiction

of Incorporation or Organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

 

 

Two North Riverside Plaza

Chicago, Illinois

60606

 

 

(Address of Principal Executive Offices)

(Zip Code)

 

Registrant's telephone number, including area code: (312) 474-1300

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Shares of Beneficial Interest,
$0.01 Par Value

 

EQR

 

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 


 

Item 2.02.  Results of Operations and Financial Condition.

On July 28, 2020, Equity Residential issued a press release announcing its results of operations and financial condition as of June 30, 2020 and for the six months and quarter then ended. The press release is furnished as Exhibit 99.1. The information contained in this Item 2.02 on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by Equity Residential under the Securities Act of 1933, as amended.

Item 9.01.  Financial Statements and Exhibits.

 

Exhibit

Number

 

Exhibit

 

 

 

99.1

 

Press Release dated July 28, 2020, announcing the results of operations and financial condition of Equity Residential as of June 30, 2020 and for the six months and quarter then ended.

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

EQUITY RESIDENTIAL

 

 

 

 

Date: July 28, 2020

 

By:

/s/ Ian S. Kaufman

 

 

Name:

Ian S. Kaufman

 

 

Its:

Senior Vice President and Chief Accounting Officer

 

 

 

(Principal Accounting Officer)

 

 

eqr-ex991_15.htm

 

i

 

 

 

 


 

 

Second Quarter 2020 Results

Table of Contents

Earnings Release

 

1 - 4

Consolidated Statements of Operations

 

5

Consolidated Statements of Funds From Operations and Normalized
Funds From Operations

 

6

Consolidated Balance Sheets

 

7

Portfolio Summary

 

8

Portfolio Rollforward

 

9

Same Store Results

 

10 - 16

Debt Summary

 

17 - 19

Capital Structure

 

20

Common Share and Unit Weighted Average Amounts Outstanding

 

21

Development and Lease-Up Projects

 

22

Capital Expenditures to Real Estate

 

23

Normalized EBITDAre Reconciliations

 

24

Adjustments from FFO to Normalized FFO

 

25

Additional Reconciliations and Definitions of Non-GAAP
Financial Measures and Other Terms

 

26 - 31



Corporate Headquarters:
Two North Riverside Plaza
Chicago, IL 60606
(312) 474-1300

Information included in this supplemental package is unaudited.

 

 


Table of Contents

 

 

 

 

 

 

NEWS RELEASE - FOR IMMEDIATE RELEASE

 

July 28, 2020

 

Equity Residential Reports Second Quarter 2020 Results

 

Chicago, IL – July 28, 2020 - Equity Residential (NYSE: EQR) today reported results for the quarter and six months ended June 30, 2020.

 

Second Quarter 2020 Results

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended June 30,

 

 

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

 

 

Earnings Per Share (EPS)

 

$

0.70

 

 

$

0.83

 

 

$

(0.13

)

 

 

(15.7

%)

 

 

Funds from Operations (FFO) per share

 

$

0.86

 

 

$

0.80

 

 

$

0.06

 

 

 

7.5

%

 

 

Normalized FFO per share

 

$

0.86

 

 

$

0.86

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

 

 

Earnings Per Share (EPS)

 

$

1.53

 

 

$

1.11

 

 

$

0.42

 

 

 

37.8

%

 

 

Funds from Operations (FFO) per share

 

$

1.72

 

 

$

1.61

 

 

$

0.11

 

 

 

6.8

%

 

 

Normalized FFO per share

 

$

1.72

 

 

$

1.67

 

 

$

0.05

 

 

 

3.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“These challenging times have brought out the best in the Equity Residential team as we serve our fellow employees, residents and communities.  We could not be prouder or more grateful,” said Mark J. Parrell, Equity Residential’s President and CEO. “We see good demand for our apartments, both urban and suburban, but with increased customer price sensitivity, especially in the urban cores of New York, San Francisco and Boston.  Looking forward, we believe the rate of improvement in our business will be dictated by how effectively the virus can be controlled and more normal economic activity restored.  In the meantime, our strong balance sheet, state of the art operating platform and opportunistic mindset leaves us well positioned to weather the storm and to take advantage should conditions allow.”

 

Highlights

 

 

The Company experienced a recovery in demand by late May 2020.  Initial leads, Traffic and applications continue to be in-line with the same time last year;

 

During the second quarter of 2020, the Company collected on average 97% of its total monthly Residential rental income.  July 2020 collections continue to trend on a similar pace to prior months;

 

Strong expense control, along with continued enhancements in our operating platform, led to a decline in same store expenses for the second quarter;

 

Resident retention was the highest for the second quarter in the Company’s history;

 

The Company sold two properties, totaling 655 apartment units, during the second quarter of 2020 for an aggregate sales price of approximately $384.2 million; and

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The Company successfully implemented changes to its leasing and service operations as well as the physical layout of its properties as part of its commitment to health and safety. The Company remains focused on further enhancing its existing health and safety standards during the pandemic.

 

COVID-19

The Company continues to support its residents and employees during the COVID-19 pandemic. The Company is utilizing technology to allow our property teams to interact remotely with current and prospective residents, including a touchless new leasing process and a service process designed to limit contact. We also continue to provide additional paid leave for employees impacted by the pandemic and paid special bonuses to certain on-site employees during the second quarter of 2020 in recognition of their significant efforts.  Among other resident support efforts, we have an extensive outreach process for residents financially impacted by the pandemic and have created payment plans to assist them.

 

Results Per Share

The change in EPS for the quarter ended June 30, 2020 compared to the same period of 2019 is due primarily to lower property sale gains in the second quarter of 2020, the various adjustment items listed on page 25 of this release and the items described below.  The change in EPS for the six months ended June 30, 2020 compared to the same period of 2019 is due primarily to higher property sale gains in the first six months of 2020, the various adjustment items listed on page 25 of this release and the items described below.

 

The per share changes in FFO for both the quarter and six months ended June 30, 2020 compared to the same periods of 2019, are due primarily to the various adjustment items listed on page 25 of this release and the items described below.

 

The per share changes in Normalized FFO are due primarily to:

 

 

 

Positive/(Negative) Impact

 

 

 

Second Quarter 2020 vs.

Second Quarter 2019

 

 

June YTD 2020 vs.

June YTD 2019

 

Same Store Net Operating Income (NOI)

 

$

(0.04

)

 

$

(0.01

)

Lease-Up NOI

 

 

0.01

 

 

 

0.01

 

2020 and 2019 transaction activity impact on NOI, net

 

 

(0.01

)

 

 

(0.01

)

Interest expense

 

 

0.03

 

 

 

0.06

 

Other items

 

 

0.01

 

 

 

 

Net

 

$

 

 

$

0.05

 

 

The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 26 through 31 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 28 and 29 of this release.

 

Same Store Results

The Company has provided a breakout of Residential and Non-Residential same store results on pages 10 and 11 of this release with definitions that can be found on page 30 of this release.  Non-Residential operations historically have accounted for approximately 4.0% of total revenues.  The table below reflects same store Residential only results for the second quarter 2020 to second quarter 2019 comparison, which includes 74,843 apartment units, as well as for the six months ended June 30, 2020 to six months ended June 30, 2019 comparison, which includes 74,264 apartment units. The Company’s Physical Occupancy was 94.9% compared to 96.5% for the second quarter of 2020 and 2019, respectively, and 95.7% compared to 96.4% for the first six months of 2020 and 2019, respectively.  

 

 

 

Second Quarter 2020 vs.

Second Quarter 2019

 

 

June YTD 2020 vs.

June YTD 2019

 

Revenues

 

(0.9%)

 

 

1.0%

 

Expenses

 

(0.1%)

 

 

1.1%

 

NOI

 

(1.2%)

 

 

0.9%

 

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Preliminary July 2020 Residential Same Store Operating Statistics

The following table includes select statistics for the month of July 2020 as well as the second quarter of 2020.

 

 

 

July 2020

 

 

Second Quarter 2020

 

New Lease Change

 

(8.3%)

 

 

(7.0%)

 

Renewal Rate Achieved

 

(0.9%)

 

 

0.7%

 

Blended Rate (1)

 

(4.5%)

 

 

(2.7%)

 

Physical Occupancy

 

95.0%

 

 

94.9%

 

 

(1)

Blended Rate after applying the effect of new move-in and renewal concessions is approximately (5.5%) and (3.5%) for July 2020 and the second quarter of 2020, respectively, driven by higher usage in the urban cores of New York, San Francisco and Boston.  

 

The July 2020 results listed above are approximately equal to the Company's June 2020 results for New Lease Change, Renewal Rate Achieved and Blended Rate.  Concession use is higher in July 2020 than in June 2020.

 

Investment Activity

The Company sold two apartment properties, consisting of 655 apartment units, during the second quarter of 2020 for an aggregate sales price of approximately $384.2 million at a weighted average Disposition Yield of 4.4%, generating an Unlevered IRR of 8.4%. The properties are located in the San Francisco Bay area and the Washington, D.C. area and were placed under contract prior to March 1, 2020.  During the first six months of 2020, the Company sold five properties, consisting of 1,552 apartment units, for an aggregate sales price of approximately $754.4 million at a weighted average Disposition Yield of 4.7%, generating an Unlevered IRR of 10.8%.  The Company did not acquire any apartment properties during the first six months of 2020.

 

Capital Markets Activity

On April 30, 2020, the Company closed on a $495.0 million secured loan.  The loan has a ten-year term, is interest only, and carries a fixed interest rate of 2.60%.  Proceeds from the loan were used to pay off outstanding balances under the Company’s revolving line of credit and commercial paper program. As of July 28, 2020, the Company had no outstanding balances under its revolving credit facility or commercial paper program and approximately $2.4 billion in available liquidity.

 

Third Quarter 2020 Earnings and Conference Call

Equity Residential expects to announce its third quarter 2020 results on Tuesday, October 27, 2020 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, October 28, 2020.

 

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 rental apartment properties located in urban and high-density suburban communities where today’s renters want to live, work and play.  Equity Residential owns or has investments in 304 properties consisting of 78,410 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 local 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 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

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Table of Contents

 

or events.  Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

A live web cast of the Company’s conference call discussing these results will take place tomorrow, Wednesday, July 29, 2020 at 10:00 a.m. CT.  Please visit the Investor section of the Company’s web site at www.equityapartments.com for the link.  A replay of the web cast will be available for two weeks at this site.

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Table of Contents

 

Equity Residential

Consolidated Statements of Operations

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

1,335,837

 

 

$

1,331,676

 

 

$

653,532

 

 

$

669,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and maintenance

 

 

220,268

 

 

 

223,531

 

 

 

104,452

 

 

 

108,461

 

Real estate taxes and insurance

 

 

192,770

 

 

 

182,888

 

 

 

95,038

 

 

 

91,446

 

Property management

 

 

51,317

 

 

 

50,765

 

 

 

23,608

 

 

 

24,369

 

General and administrative

 

 

26,353

 

 

 

29,710

 

 

 

11,835

 

 

 

14,329

 

Depreciation

 

 

418,398

 

 

 

404,723

 

 

 

205,976

 

 

 

200,508

 

Total expenses

 

 

909,106

 

 

 

891,617

 

 

 

440,909

 

 

 

439,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on sales of real estate properties

 

 

352,243

 

 

 

138,835

 

 

 

144,266

 

 

 

138,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

778,974

 

 

 

578,894

 

 

 

356,889

 

 

 

369,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

3,471

 

 

 

1,925

 

 

 

1,511

 

 

 

1,152

 

Other expenses

 

 

(4,227

)

 

 

(8,392

)

 

 

(1,694

)

 

 

(5,117

)

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense incurred, net

 

 

(167,475

)

 

 

(203,840

)

 

 

(81,885

)

 

 

(108,902

)

Amortization of deferred financing costs

 

 

(4,152

)

 

 

(5,783

)

 

 

(2,111

)

 

 

(3,647

)

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

   investments in unconsolidated entities and net gain (loss)

   on sales of land parcels

 

 

606,591

 

 

 

362,804

 

 

 

272,710

 

 

 

252,603

 

Income and other tax (expense) benefit

 

 

(240

)

 

 

(484

)

 

 

(187

)

 

 

(246

)

Income (loss) from investments in unconsolidated entities

 

 

(2,199

)

 

 

68,058

 

 

 

(1,042

)

 

 

68,765

 

Net gain (loss) on sales of land parcels

 

 

 

 

 

178

 

 

 

 

 

 

177

 

Net income

 

 

604,152

 

 

 

430,556

 

 

 

271,481

 

 

 

321,299

 

Net (income) loss attributable to Noncontrolling Interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership

 

 

(21,248

)

 

 

(15,429

)

 

 

(9,713

)

 

 

(11,510

)

Partially Owned Properties

 

 

(13,410

)

 

 

(1,620

)

 

 

(880

)

 

 

(821

)

Net income attributable to controlling interests

 

 

569,494

 

 

 

413,507

 

 

 

260,888

 

 

 

308,968

 

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(772

)

 

 

(772

)

Net income available to Common Shares

 

$

567,949

 

 

$

411,962

 

 

$

260,116

 

 

$

308,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Common Shares

 

$

1.53

 

 

$

1.11

 

 

$

0.70

 

 

$

0.83

 

Weighted average Common Shares outstanding

 

 

371,689

 

 

 

369,952

 

 

 

371,795

 

 

 

370,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Common Shares

 

$

1.53

 

 

$

1.11

 

 

$

0.70

 

 

$

0.83

 

Weighted average Common Shares outstanding

 

 

386,272

 

 

 

385,644

 

 

 

385,913

 

 

 

386,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per Common Share outstanding

 

$

1.205

 

 

$

1.135

 

 

$

0.6025

 

 

$

0.5675

 

 

5


Table of Contents

 

Equity Residential

Consolidated Statements of Funds From Operations and Normalized Funds From Operations

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

604,152

 

 

$

430,556

 

 

$

271,481

 

 

$

321,299

 

Net (income) loss attributable to Noncontrolling Interests – Partially

   Owned Properties

 

 

(13,410

)

 

 

(1,620

)

 

 

(880

)

 

 

(821

)

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(772

)

 

 

(772

)

Net income available to Common Shares and Units

 

 

589,197

 

 

 

427,391

 

 

 

269,829

 

 

 

319,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

418,398

 

 

 

404,723

 

 

 

205,976

 

 

 

200,508

 

Depreciation – Non-real estate additions

 

 

(2,307

)

 

 

(2,303

)

 

 

(1,020

)

 

 

(1,121

)

Depreciation – Partially Owned Properties

 

 

(1,686

)

 

 

(1,802

)

 

 

(830

)

 

 

(899

)

Depreciation – Unconsolidated Properties

 

 

1,224

 

 

 

1,772

 

 

 

611

 

 

 

850

 

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

   assets

 

 

 

 

 

(69,522

)

 

 

 

 

 

(69,522

)

Net (gain) loss on sales of real estate properties

 

 

(352,243

)

 

 

(138,835

)

 

 

(144,266

)

 

 

(138,856

)

Noncontrolling Interests share of gain (loss) on sales

   of real estate properties

 

 

11,655

 

 

 

 

 

 

 

 

 

 

FFO available to Common Shares and Units

 

 

664,238

 

 

 

621,424

 

 

 

330,300

 

 

 

310,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments (see note for additional detail):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment non-operating assets

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of pursuit costs

 

 

3,278

 

 

 

2,987

 

 

 

1,651

 

 

 

1,539

 

Debt extinguishment and preferred share redemption (gains)

   losses

 

 

32

 

 

 

16,647

 

 

 

32

 

 

 

16,647

 

Non-operating asset (gains) losses

 

 

670

 

 

 

252

 

 

 

229

 

 

 

23

 

Other miscellaneous items

 

 

(2,310

)

 

 

4,418

 

 

 

(1,392

)

 

 

2,843

 

Normalized FFO available to Common Shares and Units

 

$

665,908

 

 

$

645,728

 

 

$

330,820

 

 

$

331,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO

 

$

665,783

 

 

$

622,969

 

 

$

331,072

 

 

$

311,438

 

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(772

)

 

 

(772

)

FFO available to Common Shares and Units

 

$

664,238

 

 

$

621,424

 

 

$

330,300

 

 

$

310,666

 

FFO per share and Unit basic

 

$

1.73

 

 

$

1.62

 

 

$

0.86

 

 

$

0.81

 

FFO per share and Unit diluted

 

$

1.72

 

 

$

1.61

 

 

$

0.86

 

 

$

0.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized FFO

 

$

667,453

 

 

$

647,273

 

 

$

331,592

 

 

$

332,490

 

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(772

)

 

 

(772

)

Normalized FFO available to Common Shares and Units

 

$

665,908

 

 

$

645,728

 

 

$

330,820

 

 

$

331,718

 

Normalized FFO per share and Unit basic

 

$

1.73

 

 

$

1.69

 

 

$

0.86

 

 

$

0.87

 

Normalized FFO per share and Unit diluted

 

$

1.72

 

 

$

1.67

 

 

$

0.86

 

 

$

0.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average Common Shares and Units outstanding basic

 

 

384,702

 

 

 

382,854

 

 

 

384,818

 

 

 

383,227

 

Weighted average Common Shares and Units outstanding diluted

 

 

386,272

 

 

 

385,644

 

 

 

385,913

 

 

 

386,107

 

 

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.

6


Table of Contents

 

Equity Residential

Consolidated Balance Sheets

(Amounts in thousands except for share amounts)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Land

 

$

5,789,307

 

 

$

5,936,188

 

Depreciable property

 

 

20,997,903

 

 

 

21,319,101

 

Projects under development

 

 

274,825

 

 

 

181,630

 

Land held for development

 

 

102,361

 

 

 

96,688

 

Investment in real estate

 

 

27,164,396

 

 

 

27,533,607

 

Accumulated depreciation

 

 

(7,537,713

)

 

 

(7,276,786

)

Investment in real estate, net

 

 

19,626,683

 

 

 

20,256,821

 

Investments in unconsolidated entities

 

 

55,310

 

 

 

52,238

 

Cash and cash equivalents

 

 

187,416

 

 

 

45,753

 

Restricted deposits

 

 

58,117

 

 

 

71,246

 

Right-of-use assets

 

 

505,077

 

 

 

512,774

 

Other assets

 

 

282,348

 

 

 

233,937

 

Total assets

 

$

20,714,951

 

 

$

21,172,769

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Mortgage notes payable, net

 

$

2,340,757

 

 

$

1,941,610

 

Notes, net

 

 

6,081,102

 

 

 

6,077,513

 

Line of credit and commercial paper

 

 

 

 

 

1,017,833

 

Accounts payable and accrued expenses

 

 

109,776

 

 

 

94,350

 

Accrued interest payable

 

 

67,589

 

 

 

66,852

 

Lease liabilities

 

 

330,135

 

 

 

331,334

 

Other liabilities

 

 

315,208

 

 

 

346,963

 

Security deposits

 

 

64,005

 

 

 

70,062

 

Distributions payable

 

 

232,208

 

 

 

218,326

 

Total liabilities

 

 

9,540,780

 

 

 

10,164,843

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interests – Operating Partnership

 

 

336,695

 

 

 

463,400

 

Equity:

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred Shares of beneficial interest, $0.01 par value;

   100,000,000 shares authorized; 745,600 shares issued and

   outstanding as of June 30, 2020 and December 31, 2019

 

 

37,280

 

 

 

37,280

 

Common Shares of beneficial interest, $0.01 par value;

   1,000,000,000 shares authorized; 372,209,012 shares issued

   and outstanding as of June 30, 2020 and 371,670,884

   shares issued and outstanding as of December 31, 2019

 

 

3,722

 

 

 

3,717

 

Paid in capital

 

 

9,118,332

 

 

 

8,965,577

 

Retained earnings

 

 

1,505,694

 

 

 

1,386,495

 

Accumulated other comprehensive income (loss)

 

 

(67,355

)

 

 

(77,563

)

Total shareholders’ equity

 

 

10,597,673

 

 

 

10,315,506

 

Noncontrolling Interests:

 

 

 

 

 

 

 

 

Operating Partnership

 

 

235,169

 

 

 

227,837

 

Partially Owned Properties

 

 

4,634

 

 

 

1,183

 

Total Noncontrolling Interests

 

 

239,803

 

 

 

229,020

 

Total equity

 

 

10,837,476

 

 

 

10,544,526

 

Total liabilities and equity

 

$

20,714,951

 

 

$

21,172,769

 

 

 

 

7


Table of Contents

 

 

Equity Residential

Portfolio Summary

As of June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

% of

Stabilized

 

 

Average

 

 

 

 

 

 

 

Apartment

 

 

Budgeted

 

 

Rental

 

Markets/Metro Areas

 

Properties

 

 

Units

 

 

NOI

 

 

Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

72

 

 

 

16,603

 

 

 

19.1

%

 

$

2,590

 

Orange County

 

 

13

 

 

 

4,028

 

 

 

4.4

%

 

 

2,263

 

San Diego

 

 

12

 

 

 

3,385

 

 

 

3.8

%

 

 

2,426

 

Subtotal – Southern California

 

 

97

 

 

 

24,016

 

 

 

27.3

%

 

 

2,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

48

 

 

 

12,707

 

 

 

19.8

%

 

 

3,320

 

Washington DC

 

 

47

 

 

 

14,731

 

 

 

15.8

%

 

 

2,458

 

New York

 

 

37

 

 

 

9,606

 

 

 

14.6

%

 

 

3,909

 

Seattle

 

 

45

 

 

 

9,296

 

 

 

10.9

%

 

 

2,466

 

Boston

 

 

25

 

 

 

6,430

 

 

 

10.1

%

 

 

3,173

 

Denver

 

 

5

 

 

 

1,624

 

 

 

1.5

%

 

 

2,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

304

 

 

 

78,410

 

 

 

100.0

%

 

$

2,841

 

 

 

 

 

 

 

Properties

 

 

Apartment Units

 

 

 

 

 

 

 

 

 

 

Wholly Owned Properties

 

 

287

 

 

 

74,849

 

Master-Leased Properties – Consolidated

 

 

1

 

 

 

162

 

Partially Owned Properties – Consolidated

 

 

16

 

 

 

3,399

 

 

 

 

 

 

 

 

 

 

 

 

 

304

 

 

 

78,410

 

 

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

 

 

2nd Quarter 2020 Earnings Release

 

8

 


Table of Contents

 

 

Equity Residential

 

 

Portfolio Rollforward Q2 2020

($ in thousands)

 

 

 

 

 

Properties

 

 

Apartment

Units

 

 

Sales Price

 

 

Disposition

Yield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3/31/2020

 

 

306

 

 

 

79,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dispositions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Properties

 

 

 

 

(2

)

 

 

(655

)

 

$

(384,161

)

 

 

(4.4

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6/30/2020

 

 

304

 

 

 

78,410

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Rollforward 2020

($ in thousands)

 

 

 

 

 

Properties

 

 

Apartment

Units

 

 

Sales Price

 

 

Disposition

Yield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12/31/2019

 

 

309

 

 

 

79,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dispositions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Properties

 

 

 

 

(5

)

 

 

(1,552

)

 

$

(754,361

)

 

 

(4.7

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6/30/2020

 

 

304

 

 

 

78,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd Quarter 2020 Earnings Release

 

9

 


Table of Contents

 

 

Equity Residential

 

 

Second Quarter 2020 vs. Second Quarter 2019

Same Store Results/Statistics Including 74,843 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

 

 

Second Quarter 2020

 

 

Second Quarter 2019

 

 

 

Residential

 

 

% Change

 

 

Non-

Residential

 

 

% Change

 

 

Total

 

 

% Change

 

 

 

 

Residential

 

 

Non-

Residential

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

608,739

 

 

(0.9%)

 

 

$

14,536

 

(1)

(39.1%)

 

 

$

623,275

 

 

(2.3%)

 

 

Revenues

 

$

614,049

 

 

$

23,866

 

 

$

637,915

 

Expenses

 

$

184,824

 

 

(0.1%)

 

 

$

5,197

 

 

  (1.0%)

 

 

$

190,021

 

 

(0.1%)

 

 

Expenses

 

$

185,025

 

 

$

5,252

 

 

$

190,277

 

NOI

 

$

423,915

 

 

(1.2%)

 

 

$

9,339

 

 

(49.8%)

 

 

$

433,254

 

 

(3.2%)

 

 

NOI

 

$

429,024

 

 

$

18,614

 

 

$

447,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,860

 

 

0.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,836

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

94.9

%

 

(1.6%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

96.5

%

 

 

 

 

 

 

 

 

Turnover

 

11.8

%

 

(1.3%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turnover

 

13.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2020 vs. First Quarter 2020

Same Store Results/Statistics Including 77,809 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

 

 

Second Quarter 2020

 

 

First Quarter 2020

 

 

 

Residential

 

 

% Change

 

 

Non-

Residential

 

 

% Change

 

 

Total

 

 

% Change

 

 

 

 

Residential

 

 

Non-

Residential

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

629,340

 

 

(2.4%)

 

 

$

14,766

 

(1)

(37.1%)

 

 

$

644,106

 

 

(3.6%)

 

 

Revenues

 

$

644,487

 

 

$

23,487

 

 

$

667,974

 

Expenses

 

$

191,372

 

 

(4.5%)

 

 

$

5,271

 

 

(11.1%)

 

 

$

196,643

 

 

(4.7%)

 

 

Expenses

 

$

200,347

 

 

$

5,932

 

 

$

206,279

 

NOI

 

$

437,968

 

 

(1.4%)

 

 

$

9,495

 

 

(45.9%)

 

 

$

447,463

 

 

(3.1%)

 

 

NOI

 

$

444,140

 

 

$

17,555

 

 

$

461,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,845

 

 

(0.7%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,866

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

94.8

%

 

(1.6%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

96.4

%

 

 

 

 

 

 

 

 

Turnover

 

11.9

%

 

2.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turnover

 

9.8

%

 

 

 

 

 

 

 

 

 

 

(1)

Non-Residential operations have been more significantly impacted by the COVID-19 pandemic than the Company’s core Residential business.  The decline in Non-Residential revenues is primarily driven by lower public parking income, deferral/abatement of rent and higher bad debt expense.

 

Note:  See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for reconciliations from operating income.


 

 

2nd Quarter 2020 Earnings Release

 

10

 


Table of Contents

 

 

Equity Residential

 

 

June YTD 2020 vs. June YTD 2019

Same Store Results/Statistics Including 74,264 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

 

June YTD 2020

 

 

June YTD 2019

 

 

 

Residential

 

 

% Change

 

 

Non-

Residential

 

 

% Change

 

 

Total

 

 

% Change

 

 

 

 

Residential

 

 

Non-

Residential

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

1,223,361

 

 

1.0%

 

 

$

37,464

 

(1)

(20.4%)

 

 

$

1,260,825

 

 

0.2%

 

 

Revenues

 

$

1,211,210

 

 

$

47,051

 

 

$

1,258,261

 

Expenses

 

$

375,710

 

 

1.1%

 

 

$

11,032

 

 

3.4%

 

 

$

386,742

 

 

1.2%

 

 

Expenses

 

$

371,517

 

 

$

10,671

 

 

$

382,188

 

NOI

 

$

847,651

 

 

0.9%

 

 

$

26,432

 

 

(27.3%)

 

 

$

874,083

 

 

(0.2%)

 

 

NOI

 

$

839,693

 

 

$

36,380

 

 

$

876,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,871

 

 

1.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,821

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

95.7

%

 

(0.7%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

96.4

%

 

 

 

 

 

 

 

 

Turnover

 

21.4

%

 

(1.9%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turnover

 

23.3

%

 

 

 

 

 

 

 

 

 

 

(1)

Non-Residential operations have been more significantly impacted by the COVID-19 pandemic than the Company’s core Residential business.  The decline in Non-Residential revenues is primarily driven by lower public parking income, deferral/abatement of rent and higher bad debt expense.  

 

Note:  See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for reconciliations from operating income.

 

 

 

 

Same Store Resident/Tenant Accounts Receivable Balances

Including 74,264 Same Store Apartment Units

$ in thousands

 

 

 

Residential

 

 

Non-Residential

 

 

 

June 30, 2020

 

 

March 31, 2020

 

 

June 30, 2020

 

 

March 31, 2020

 

Resident/tenant accounts receivable balances

$

18,175

 

 

$

5,358

 

 

$

4,815

 

 

$

2,270

 

Allowance for doubtful accounts

 

(6,518

)

 

 

(1,850

)

 

 

(2,416

)

 

 

(1,532

)

Net receivable balances

$

11,657

 

(2)

$

3,508

 

 

$

2,399

 

 

$

738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line receivable balances

 

$

2,990

 

 

$

1,633

 

 

$

24,161

 

 

$

26,154

 

 

 

(2)

The Company held Residential security deposits approximating 20% of the net receivable balance at June 30, 2020.

 

Note: See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for other definitions.

 

 

 

2nd Quarter 2020 Earnings Release

 

11

 


Table of Contents

 

 

Equity Residential

Second Quarter 2020 vs. Second Quarter 2019

Same Store Residential Results/Statistics by Market

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) from Prior Year's Quarter

 

Markets/Metro Areas

 

Apartment

Units

 

 

Q2 2020

% of

Actual

NOI

 

 

Q2 2020

Average

Rental

Rate

 

 

Q2 2020

Weighted

Average

Physical

Occupancy %

 

 

Q2 2020

Turnover

 

 

Revenues

 

 

Expenses

 

 

NOI

 

 

Average

Rental

Rate

 

 

Physical

Occupancy

 

 

Turnover

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

15,968

 

 

 

19.5

%

 

$

2,596

 

 

 

94.7

%

 

 

11.9

%

 

 

(1.9

%)

 

 

(1.7

%)

 

 

(1.9

%)

 

 

(0.2

%)

 

 

(1.6

%)

 

 

(2.2

%)

Orange County

 

 

4,028

 

 

 

4.8

%

 

 

2,263

 

 

 

96.3

%

 

 

9.8

%

 

 

1.0

%

 

 

(0.2

%)

 

 

1.4

%

 

 

1.2

%

 

 

(0.1

%)

 

 

(3.9

%)

San Diego

 

 

3,385

 

 

 

4.2

%

 

 

2,426

 

 

 

96.0

%

 

 

11.8

%

 

 

0.4

%

 

 

1.8

%

 

 

(0.1

%)

 

 

1.2

%

 

 

(0.7

%)

 

 

(2.5

%)

Subtotal – Southern California

 

 

23,381

 

 

 

28.5

%

 

 

2,513

 

 

 

95.1

%

 

 

11.5

%

 

 

(1.1

%)

 

 

(1.1

%)

 

 

(1.1

%)

 

 

0.1

%

 

 

(1.3

%)

 

 

(2.6

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

12,183

 

 

 

20.4

%

 

 

3,324

 

 

 

94.9

%

 

 

11.6

%

 

 

(0.8

%)

 

 

2.0

%

 

 

(1.7

%)

 

 

0.5

%

 

 

(1.2

%)

 

 

(1.7

%)

Washington DC

 

 

13,711

 

 

 

16.1

%

 

 

2,465

 

 

 

95.4

%

 

 

11.3

%

 

 

0.1

%

 

 

(2.4

%)

 

 

1.1

%

 

 

1.5

%

 

 

(1.4

%)

 

 

(0.9

%)

New York

 

 

9,606

 

 

 

14.1

%

 

 

3,909

 

 

 

94.1

%

 

 

11.5

%

 

 

(2.7

%)

 

 

1.0

%

 

 

(5.4

%)

 

 

0.4

%

 

 

(3.0

%)

 

 

1.2

%

Seattle

 

 

8,616

 

 

 

10.2

%

 

 

2,469

 

 

 

95.4

%

 

 

11.6

%

 

 

2.2

%

 

 

3.1

%

 

 

1.8

%

 

 

3.4

%

 

 

(1.2

%)

 

 

(3.5

%)

Boston

 

 

6,346

 

 

 

9.6

%

 

 

3,174

 

 

 

93.5

%

 

 

13.7

%

 

 

(1.2

%)

 

 

(2.8

%)

 

 

(0.6

%)

 

 

1.9

%

 

 

(2.9

%)

 

 

1.3

%

Denver

 

 

1,000

 

 

 

1.1

%

 

 

2,173

 

 

 

93.2

%

 

 

17.1

%

 

 

(3.7

%)

 

 

(5.6

%)

 

 

(2.9

%)

 

 

(1.2

%)

 

 

(2.4

%)

 

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

74,843

 

 

 

100.0

%

 

$

2,860

 

 

 

94.9

%

 

 

11.8

%

 

 

(0.9

%)

 

 

(0.1

%)

 

 

(1.2

%)

 

 

0.8

%

 

 

(1.6

%)

 

 

(1.3

%)

 

 

Note: The above table reflects Residential same store results only, which historically account for approximately 96.0% of total revenues.


 

 

2nd Quarter 2020 Earnings Release

 

12


Table of Contents

 

 

Equity Residential

Second Quarter 2020 vs. First Quarter 2020

Same Store Residential Results/Statistics by Market

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) from Prior Quarter

 

Markets/Metro Areas

 

Apartment

Units

 

 

Q2 2020

% of

Actual

NOI

 

 

Q2 2020

Average

Rental

Rate

 

 

Q2 2020

Weighted

Average

Physical

Occupancy %

 

 

Q2 2020

Turnover

 

 

Revenues

 

 

Expenses

 

 

NOI

 

 

Average

Rental

Rate

 

 

Physical

Occupancy

 

 

Turnover

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

16,603

 

 

 

19.5

%

 

$

2,590

 

 

 

94.6

%

 

 

12.1

%

 

 

(3.1

%)

 

 

(5.1

%)

 

 

(2.3

%)

 

 

(1.7

%)

 

 

(1.3

%)

 

 

0.8

%

Orange County

 

 

4,028

 

 

 

4.7

%

 

 

2,263

 

 

 

96.3

%

 

 

9.8

%

 

 

(1.4

%)

 

 

(4.2

%)

 

 

(0.5

%)

 

 

(0.8

%)

 

 

(0.5

%)

 

 

0.8

%

San Diego

 

 

3,385

 

 

 

4.0

%

 

 

2,426

 

 

 

96.0

%

 

 

11.8

%

 

 

(1.4

%)

 

 

(3.3

%)

 

 

(0.8

%)

 

 

(0.7

%)

 

 

(0.8

%)

 

 

(0.2

%)

Subtotal – Southern California

 

 

24,016

 

 

 

28.2

%

 

 

2,511

 

 

 

95.1

%

 

 

11.6

%

 

 

(2.6

%)

 

 

(4.8

%)

 

 

(1.8

%)

 

 

(1.5

%)

 

 

(1.1

%)

 

 

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

12,707

 

 

 

20.5

%

 

 

3,320

 

 

 

94.8

%

 

 

11.7

%

 

 

(2.5

%)

 

 

(3.5

%)

 

 

(2.2

%)

 

 

(0.6

%)

 

 

(1.9

%)

 

 

2.0

%

Washington DC

 

 

14,569

 

 

 

16.5

%

 

 

2,458

 

 

 

95.4

%

 

 

11.3

%

 

 

(0.6

%)

 

 

(6.0

%)

 

 

1.8

%

 

 

0.3

%

 

 

(0.8

%)

 

 

2.7

%

New York

 

 

9,606

 

 

 

13.6

%

 

 

3,909

 

 

 

94.1

%

 

 

11.5

%

 

 

(3.5

%)

 

 

(6.2

%)

 

 

(1.3

%)

 

 

(0.9

%)

 

 

(2.6

%)

 

 

4.3

%

Seattle

 

 

8,941

 

 

 

10.3

%

 

 

2,480

 

 

 

95.3

%

 

 

11.7

%

 

 

(1.9

%)

 

 

3.4

%

 

 

(3.8

%)

 

 

(0.1

%)

 

 

(1.8

%)

 

 

0.6

%

Boston

 

 

6,346

 

 

 

9.3

%

 

 

3,174

 

 

 

93.5

%

 

 

13.7

%

 

 

(2.7

%)

 

 

(5.7

%)

 

 

(1.4

%)

 

 

(0.2

%)

 

 

(2.3

%)

 

 

4.6

%

Denver

 

 

1,624

 

 

 

1.6

%

 

 

2,048

 

 

 

94.1

%

 

 

17.1

%

 

 

(1.8

%)

 

 

(5.6

%)

 

 

(0.3

%)

 

 

(0.3

%)

 

 

(1.4

%)

 

 

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

77,809

 

 

 

100.0

%

 

$

2,845

 

 

 

94.8

%

 

 

11.9

%

 

 

(2.4

%)

 

 

(4.5

%)

 

 

(1.4

%)

 

 

(0.7

%)

 

 

(1.6

%)

 

 

2.1

%

 

 

Note: The above table reflects Residential same store results only, which historically account for approximately 96.0% of total revenues.


 

 

2nd Quarter 2020 Earnings Release

 

13


Table of Contents

 

 

Equity Residential

June YTD 2020 vs. June YTD 2019

Same Store Residential Results/Statistics by Market

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) from Prior Year

 

Markets/Metro Areas

 

Apartment

Units

 

 

June YTD 20

% of

Actual

NOI

 

 

June YTD 20

Average

Rental

Rate

 

 

June YTD 20

Weighted

Average

Physical

Occupancy %

 

 

June YTD 20

Turnover

 

 

Revenues

 

 

Expenses

 

 

NOI

 

 

Average

Rental

Rate

 

 

Physical

Occupancy

 

 

Turnover

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

15,968

 

 

 

19.7

%

 

$

2,615

 

 

 

95.3

%

 

 

23.2

%

 

 

0.1

%

 

 

(0.3

%)

 

 

0.2

%

 

 

1.0

%

 

 

(0.9

%)

 

 

(2.6

%)

Orange County

 

 

4,028

 

 

 

4.8

%

 

 

2,272

 

 

 

96.6

%

 

 

18.8

%

 

 

2.2

%

 

 

0.2

%

 

 

2.8

%

 

 

2.0

%

 

 

0.2

%

 

 

(5.4

%)

San Diego

 

 

3,385

 

 

 

4.2

%

 

 

2,435

 

 

 

96.4

%

 

 

23.7

%

 

 

1.9

%

 

 

2.1

%

 

 

1.9

%

 

 

2.0

%

 

 

0.0

%

 

 

(2.7

%)

Subtotal – Southern California

 

 

23,381

 

 

 

28.7

%

 

 

2,529

 

 

 

95.7

%

 

 

22.5

%

 

 

0.7

%

 

 

0.1

%

 

 

0.9

%

 

 

1.3

%

 

 

(0.6

%)

 

 

(3.1

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

12,183

 

 

 

20.7

%

 

 

3,334

 

 

 

95.8

%

 

 

21.1

%

 

 

1.1

%

 

 

2.9

%

 

 

0.5

%

 

 

1.7

%

 

 

(0.6

%)

 

 

(1.9

%)

Washington DC

 

 

13,711

 

 

 

16.0

%

 

 

2,463

 

 

 

95.9

%

 

 

19.8

%

 

 

1.3

%

 

 

(0.1

%)

 

 

1.9

%

 

 

2.1

%

 

 

(0.7

%)

 

 

(0.8

%)

New York

 

 

9,475

 

 

 

14.0

%

 

 

3,930

 

 

 

95.4

%

 

 

18.7

%

 

 

(0.3

%)

 

 

2.4

%

 

 

(2.4

%)

 

 

1.1

%

 

 

(1.3

%)

 

 

0.4

%

Seattle

 

 

8,442

 

 

 

10.2

%

 

 

2,469

 

 

 

96.3

%

 

 

22.9

%

 

 

3.8

%

 

 

2.7

%

 

 

4.2

%

 

 

3.9

%

 

 

(0.1

%)

 

 

(5.1

%)

Boston

 

 

6,346

 

 

 

9.7

%

 

 

3,178

 

 

 

94.7

%

 

 

22.7

%

 

 

1.0

%

 

 

(1.9

%)

 

 

2.2

%

 

 

2.6

%

 

 

(1.4

%)

 

 

1.2

%

Denver

 

 

726

 

 

 

0.7

%

 

 

2,133

 

 

 

94.5

%

 

 

30.6

%

 

 

(1.2

%)

 

 

(0.3

%)

 

 

(1.5

%)

 

 

0.6

%

 

 

(1.9

%)

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

74,264

 

 

 

100.0

%

 

$

2,871

 

 

 

95.7

%

 

 

21.4

%

 

 

1.0

%

 

 

1.1

%

 

 

0.9

%

 

 

1.8

%

 

 

(0.7

%)

 

 

(1.9

%)

 

 

Note: The above table reflects Residential same store results only, which historically account for approximately 96.0% of total revenues.

 

 

 

 

2nd Quarter 2020 Earnings Release

 

14


Table of Contents

 

 

Equity Residential

Same Store Residential Lease Pricing Statistics

For 74,264 Same Store Apartment Units

 

 

 

 

New Lease Change (1)

 

 

Renewal Rate Achieved (1)

 

 

Blended Rate (1)

 

Markets/Metro Areas

 

Q2 2020

 

 

Q2 2019

 

 

Q2 2020

 

 

Q2 2019

 

 

Q2 2020

 

 

Q2 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

 

(6.7

%)

 

 

0.4

%

 

 

0.4

%

 

 

5.2

%

 

 

(3.0

%)

 

 

2.7

%

Orange County

 

 

(5.1

%)

 

 

1.8

%

 

 

0.9

%

 

 

6.0

%

 

 

(1.5

%)

 

 

4.0

%

San Diego

 

 

(3.5

%)

 

 

3.4

%

 

 

0.1

%

 

 

6.0

%

 

 

(1.5

%)

 

 

4.6

%

Subtotal – Southern California

 

 

(6.0

%)

 

 

1.1

%

 

 

0.5

%

 

 

5.4

%

 

 

(2.6

%)

 

 

3.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

(9.6

%)

 

 

4.5

%

 

 

(0.5

%)

 

 

5.6

%

 

 

(4.6

%)

 

 

5.1

%

Washington DC

 

 

(5.3

%)

 

 

2.5

%

 

 

1.2

%

 

 

4.5

%

 

 

(1.6

%)

 

 

3.5

%

New York

 

 

(8.0

%)

 

 

0.7

%

 

 

1.2

%

 

 

4.0

%

 

 

(2.0

%)

 

 

2.7

%

Seattle

 

 

(3.4

%)

 

 

2.9

%

 

 

0.7

%

 

 

5.6

%

 

 

(0.8

%)

 

 

4.3

%

Boston

 

 

(9.6

%)

 

 

3.1

%

 

 

1.4

%

 

 

5.3

%

 

 

(3.9

%)

 

 

4.2

%

Denver

 

 

(2.8

%)

 

 

2.5

%

 

 

1.1

%

 

 

4.4

%

 

 

(1.3

%)

 

 

3.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

(7.0

%)

 

 

2.3

%

 

 

0.7

%

 

 

5.0

%

 

 

(2.7

%)

(2)

 

3.7

%

 

 

(1)

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

 

(2)

Blended Rate after applying the effect of new move-in and renewal concessions is approximately (3.5%) for Q2 2020, driven by higher usage in the urban cores of New York, San Francisco and Boston.  The effect of new move-in and renewal concessions in Q2 2019 was immaterial.

 

 

 

 

2nd Quarter 2020 Earnings Release

 

15


Table of Contents

 

 

 

Equity Residential

 

 

Second Quarter 2020 vs. Second Quarter 2019

Total Same Store Operating Expenses Including 74,843 Same Store Apartment Units

$ in thousands

 

 

 

Actual

Q2 2020

 

 

Actual

Q2 2019

 

 

$

Change (1)

 

 

%

Change

 

 

% of Actual

Q2 2020

Operating

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate taxes

 

$

85,433

 

 

$

82,534

 

 

$

2,899

 

 

 

3.5

%

 

 

45.0

%

On-site payroll

 

 

39,861

 

 

 

40,827

 

 

 

(966

)

 

 

(2.4

%)

 

 

21.0

%

Utilities

 

 

24,018

 

 

 

23,756

 

 

 

262

 

 

 

1.1

%

 

 

12.6

%

Repairs and maintenance

 

 

21,977

 

 

 

24,799

 

 

 

(2,822

)

 

 

(11.4

%)

 

 

11.6

%

Insurance

 

 

6,125

 

 

 

5,209

 

 

 

916

 

 

 

17.6

%

 

 

3.2

%

Leasing and advertising

 

 

2,150

 

 

 

2,473

 

 

 

(323

)

 

 

(13.1

%)

 

 

1.1

%

Other on-site operating expenses

 

 

10,457

 

 

 

10,679

 

 

 

(222

)

 

 

(2.1

%)

 

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Same Store Operating Expenses (2)

(includes Residential and Non-Residential)

 

$

190,021

 

 

$

190,277

 

 

$

(256

)

 

 

(0.1

%)

 

 

100.0

%

 

 

 

 

June YTD 2020 vs. June YTD 2019

Total Same Store Operating Expenses Including 74,264 Same Store Apartment Units

$ in thousands

 

 

 

Actual

YTD 2020

 

 

Actual

YTD 2019

 

 

$

Change (1)

 

 

%

Change

 

 

% of Actual

YTD 2020

Operating

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate taxes

 

$

170,416

 

 

$

164,075

 

 

$

6,341

 

 

 

3.9

%

 

 

44.1

%

On-site payroll

 

 

81,249

 

 

 

81,757

 

 

 

(508

)

 

 

(0.6

%)

 

 

21.0

%

Utilities

 

 

50,654

 

 

 

49,787

 

 

 

867

 

 

 

1.7

%

 

 

13.1

%

Repairs and maintenance

 

 

44,497

 

 

 

48,027

 

 

 

(3,530

)

 

 

(7.4

%)

 

 

11.5

%

Insurance

 

 

12,187

 

 

 

10,365

 

 

 

1,822

 

 

 

17.6

%

 

 

3.2

%

Leasing and advertising

 

 

4,385

 

 

 

4,917

 

 

 

(532

)

 

 

(10.8

%)

 

 

1.1

%

Other on-site operating expenses

 

 

23,354

 

 

 

23,260

 

 

 

94

 

 

 

0.4

%

 

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Same Store Operating Expenses (2)

(includes Residential and Non-Residential)

 

$

386,742

 

 

$

382,188

 

 

$

4,554

 

 

 

1.2

%

 

 

100.0

%

 

 

 

 

(1)

The quarter over quarter and YTD over YTD changes are due primarily to:

 

Real estate taxes – Higher rates and assessed values continue to drive real estate tax growth across most markets with a slight improvement from previous expectations caused by successful appeals activity and lower than expected rate growth in New York.

 

On-site payroll – Results better than expectations due to faster than anticipated progress in transition to enhanced operating platform, lower than expected employee benefit-related costs and less overtime, partially offset by one-time frontline worker bonuses.

 

Utilities – Growth lower than expected due to warmer winter weather and energy rate decreases.

 

Repairs and maintenance – Decrease primarily driven by deferral and cancellation of some projects as a result of COVID-19-related delays.

 

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

 

Leasing and advertising – Decrease greater than expectations due in part to suspension of resident activities.

 

(2)

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

 

 

2nd Quarter 2020 Earnings Release

 

16


Table of Contents

 

 

Equity Residential

 

 

Debt Summary as of June 30, 2020

($ in thousands)

 

 

 

Debt

Balances (1)

 

 

% of Total

 

 

Weighted

Average

Rates (1)

 

 

Weighted

Average

Maturities

(years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured

 

$

2,340,757

 

 

 

27.8

%

 

 

3.51

%

 

 

7.0

 

Unsecured

 

 

6,081,102

 

 

 

72.2

%

 

 

3.85

%

 

 

10.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

8,421,859

 

 

 

100.0

%

 

 

3.77

%

 

 

9.4

 

Fixed Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – Conventional

 

$

1,972,862

 

 

 

23.4

%

 

 

3.94

%

 

 

5.4

 

Unsecured – Public

 

 

6,081,102

 

 

 

72.2

%

 

 

4.06

%

 

 

10.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Rate Debt

 

 

8,053,964

 

 

 

95.6

%

 

 

4.03

%

 

 

9.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Floating Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – Conventional

 

 

7,315

 

 

 

0.1

%

 

 

3.35

%

 

 

2.0

 

Secured – Tax Exempt

 

 

360,580

 

 

 

4.3

%

 

 

1.49

%

 

 

15.5

 

Unsecured – Revolving Credit Facility

 

 

 

 

 

 

 

 

1.47

%

 

 

4.3

 

Unsecured – Commercial Paper Program (2)

 

 

 

 

 

 

 

 

1.81

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Floating Rate Debt

 

 

367,895

 

 

 

4.4

%

 

 

1.68

%

 

 

15.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

8,421,859

 

 

 

100.0

%

 

 

3.77

%

 

 

9.4

 

 

 

(1)

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

(2)

The weighted average amount outstanding for the six months ended June 30, 2020 was approximately $522.7 million.

Note: The Company capitalized interest of approximately $4.1 million and $2.7 million during the six months ended June 30, 2020 and 2019, respectively.  The Company capitalized interest of approximately $2.3 million and $1.5 million during the quarters ended June 30, 2020 and 2019, respectively.

 

 

2nd Quarter 2020 Earnings Release

 

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Table of Contents

 

 

Equity Residential

 

 

 

Debt Maturity Schedule as of June 30, 2020

($ 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

$

23,669

 

 

$

 

 

$

23,669

 

 

 

0.3

%

 

 

4.75

%

 

 

4.75

%

2021

 

 

834,904

 

 

 

 

 

 

834,904

 

 

 

9.8

%

 

 

4.63

%

 

 

4.63

%

2022

 

 

264,185

 

 

 

7,796

 

 

 

271,981

 

 

 

3.2

%

 

 

3.25

%

 

 

3.22

%

2023

 

 

1,325,588

 

 

 

3,500

 

 

 

1,329,088

 

 

 

15.6

%

 

 

3.74

%

 

 

3.73

%

2024

 

 

 

 

 

6,100

 

 

 

6,100

 

 

 

0.1

%

 

N/A

 

 

 

0.15

%

2025

 

 

450,000

 

 

 

8,200

 

 

 

458,200

 

 

 

5.4

%

 

 

3.38

%

 

 

3.32

%

2026

 

 

592,025

 

 

 

9,000

 

 

 

601,025

 

 

 

7.0

%

 

 

3.58

%

 

 

3.53

%

2027

 

 

400,000

 

 

 

9,800

 

 

 

409,800

 

 

 

4.8

%

 

 

3.25

%

 

 

3.18

%

2028

 

 

900,000

 

 

 

42,380

 

 

 

942,380

 

 

 

11.1

%

 

 

3.79

%

 

 

3.62

%

2029

 

 

888,120

 

 

 

11,500

 

 

 

899,620

 

 

 

10.6

%

 

 

3.30

%

 

 

3.26

%

2030+

 

 

2,445,850

 

 

 

288,135

 

 

 

2,733,985

 

 

 

32.1

%

 

 

3.56

%

 

 

3.21

%

Subtotal

 

 

8,124,341

 

 

 

386,411

 

 

 

8,510,752

 

 

 

100.0

%

 

 

3.67

%

 

 

3.51

%

Deferred Financing Costs and Unamortized (Discount)

 

 

(70,377

)

 

 

(18,516

)

 

 

(88,893

)

 

N/A

 

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

8,053,964

 

 

$

367,895

 

 

$

8,421,859

 

 

 

100.0

%

 

 

3.67

%

 

 

3.51

%

 

(1)

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

 

 

2nd Quarter 2020 Earnings Release

 

18


Table of Contents

 

 

Equity Residential

 

 

 

Selected Unsecured Public Debt Covenants

 

 

 

June 30,

 

 

March 31,

 

 

 

2020

 

 

2020

 

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

 

31.8%

 

 

32.5%

 

 

 

 

 

 

 

 

 

 

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

 

9.7%

 

 

8.2%

 

 

 

 

 

 

 

 

 

 

Consolidated Income Available for Debt Service to

   Maximum Annual Service Charges

   (must be at least 1.5 to 1)

 

 

4.96

 

 

 

5.09

 

 

 

 

 

 

 

 

 

 

Total Unencumbered Assets to Unsecured Debt

   (must be at least 125%)

 

439.5%

 

 

408.3%

 

 

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

 

 

 

June 30,

 

 

March 31,

 

 

 

2020

 

 

2020

 

Total debt to Normalized EBITDAre

 

4.82x

 

 

4.91x

 

 

 

 

 

 

 

 

 

 

Net debt to Normalized EBITDAre

 

4.71x

 

 

4.86x

 

 

 

 

 

 

 

 

 

 

Unencumbered NOI as a % of total NOI

 

85.8%

 

 

87.2%

 

 

Note: See Normalized EBITDAre Reconciliations for detail.

 

 

 

 

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Equity Residential

 

 

Capital Structure as of June 30, 2020

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

 

Secured Debt

 

 

 

 

 

 

 

 

 

$

2,340,757

 

 

 

27.8

%

 

 

 

 

Unsecured Debt

 

 

 

 

 

 

 

 

 

 

6,081,102

 

 

 

72.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Debt

 

 

 

 

 

 

 

 

 

 

8,421,859

 

 

 

100.0

%

 

 

27.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares (includes Restricted Shares)

 

 

372,209,012

 

 

 

96.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Units (includes OP Units and Restricted Units)

 

 

13,879,951

 

 

 

3.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Shares and Units

 

 

386,088,963

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Common Share Price at June 30, 2020

 

$

58.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,709,753

 

 

 

99.8

%

 

 

 

 

Perpetual Preferred Equity (see below)

 

 

 

 

 

 

 

 

 

 

37,280

 

 

 

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity

 

 

 

 

 

 

 

 

 

 

22,747,033

 

 

 

100.0

%

 

 

73.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Market Capitalization

 

 

 

 

 

 

 

 

 

$

31,168,892

 

 

 

 

 

 

 

100.0

%

 

 

 

 

Perpetual Preferred Equity as of June 30, 2020

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd Quarter 2020 Earnings Release

 

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Table of Contents

 

 

Equity Residential

Common Share and Unit

Weighted Average Amounts Outstanding

 

 

 

 

June YTD 2020

 

 

June YTD 2019

 

 

Q2 2020

 

 

Q2 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Amounts Outstanding for Net Income Purposes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares - basic

 

 

371,688,567

 

 

 

369,952,087

 

 

 

371,795,049

 

 

 

370,342,189

 

Shares issuable from assumed conversion/vesting of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- OP Units

 

 

13,013,343

 

 

 

12,902,350

 

 

 

13,022,786

 

 

 

12,885,175

 

- long-term compensation shares/units

 

 

1,570,149

 

 

 

2,789,234

 

 

 

1,095,436

 

 

 

2,879,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Shares and Units - diluted

 

 

386,272,059

 

 

 

385,643,671

 

 

 

385,913,271

 

 

 

386,106,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares - basic

 

 

371,688,567

 

 

 

369,952,087

 

 

 

371,795,049

 

 

 

370,342,189

 

OP Units - basic

 

 

13,013,343

 

 

 

12,902,350

 

 

 

13,022,786

 

 

 

12,885,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Shares and OP Units - basic

 

 

384,701,910

 

 

 

382,854,437

 

 

 

384,817,835

 

 

 

383,227,364

 

Shares issuable from assumed conversion/vesting of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- long-term compensation shares/units

 

 

1,570,149

 

 

 

2,789,234

 

 

 

1,095,436

 

 

 

2,879,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Common Shares and Units - diluted

 

 

386,272,059

 

 

 

385,643,671

 

 

 

385,913,271

 

 

 

386,106,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period Ending Amounts Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares (includes Restricted Shares)

 

 

372,209,012

 

 

 

370,838,810

 

 

 

 

 

 

 

 

 

Units (includes OP Units and Restricted Units)

 

 

13,879,951

 

 

 

13,855,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Shares and Units

 

 

386,088,963

 

 

 

384,694,494

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd Quarter 2020 Earnings Release

 

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Table of Contents

 

 

Equity Residential

Development and Lease-Up Projects as of June 30, 2020

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

 

 

 

 

 

 

No. of

 

 

Total

Budgeted

 

 

Total

Book

 

 

Total Book

Value Not

 

 

 

 

 

 

 

 

 

 

Estimated/Actual (A)

 

 

 

 

 

 

 

 

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) (B)

 

Boston, MA

 

 

470

 

 

$

409,749

 

 

$

190,391

 

 

$

190,391

 

 

$

 

 

46%

 

 

Q2 2021

 

 

Q3 2021

 

Q1 2023

 

 

 

 

 

 

The Edge (fka 4885 Edgemoor Lane) (C)

 

Bethesda, MD

 

 

154

 

 

 

75,271

 

 

 

25,306

 

 

 

25,306

 

 

 

 

 

28%

 

 

Q3 2021

 

 

Q3 2021

 

Q3 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Under Development - Wholly Owned

 

 

624

 

 

 

485,020

 

 

 

215,697

 

 

 

215,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Under Development - Partially Owned:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aero Apartments (D)

 

Alameda, CA

 

 

200

 

 

 

117,794

 

 

 

59,128

 

 

 

59,128

 

 

 

7,315

 

 

41%

 

 

Q4 2020

 

 

Q2 2021

 

Q2 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Under Development - Partially Owned

 

 

200

 

 

 

117,794

 

 

 

59,128

 

 

 

59,128

 

 

 

7,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Under Development

 

 

 

 

824

 

 

 

602,814

 

 

 

274,825

 

 

 

274,825

 

 

 

7,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Completed and Stabilized During the Quarter - Wholly Owned:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lofts at Kendall Square II (fka 249 Third Street)

 

Cambridge, MA

 

 

84

 

 

 

47,447

 

 

 

46,789

 

 

 

 

 

 

 

 

 

 

 

 

Q3 2019

 

 

Q3 2019

 

Q2 2020

 

93%

 

 

88%

 

Chloe on Madison (fka 1401 E. Madison)

 

Seattle, WA

 

 

137

 

 

 

64,791

 

 

 

64,097

 

 

 

 

 

 

 

 

 

 

 

 

Q3 2019

 

 

Q3 2019

 

Q2 2020

 

99%

 

 

99%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Completed and Stabilized During the Quarter - Wholly Owned

 

 

221

 

 

 

112,238

 

 

 

110,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Development Projects

 

 

 

 

1,045

 

 

$

715,052

 

 

$

385,711

 

 

$

274,825

 

 

$

7,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land Held for Development

 

 

 

N/A

 

 

N/A

 

 

$

102,361

 

 

$

102,361

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Budgeted

Capital

Cost

 

 

Q2 2020

NOI

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Under Development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

602,814

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects Completed and Stabilized During the Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

112,238

 

 

 

1,252

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Development NOI Contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

715,052

 

 

$

1,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(A)

Estimated dates and Total Budgeted Capital Costs for projects under development currently remain unchanged from the Company’s first quarter 2020 Earnings Release.  The Company will reevaluate these dates and costs as the impact from the COVID-19 pandemic becomes clearer.

 

 

(B)

Alcott Apartments – Work at this project resumed on May 19, 2020 after a nine-week suspension due to the city of Boston’s COVID-19-related temporary construction moratorium.  

 

 

(C)

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.

 

 

(D)

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 $4.6 million for its allocated share of the project equity and serves as the developer of the project.

 

 

 

 

2nd Quarter 2020 Earnings Release

 

22


Table of Contents

 

 

Equity Residential

Capital Expenditures to Real Estate

For the Six Months Ended June 30, 2020

(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

 

 

 

74,264

 

 

 

4,146

 

 

 

78,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Improvements

 

 

$

29,657

 

 

$

1,387

 

 

$

31,044

 

 

$

399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renovation Expenditures (1)

 

 

 

15,022

 

 

 

6

 

 

 

15,028

 

 

 

202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Replacements

 

 

 

14,955

 

 

 

238

 

 

 

15,193

 

 

 

202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures to Real Estate (2)

 

 

$

59,634

 

 

$

1,631

 

 

$

61,265

 

 

$

803

 

 

 

 

(1)

Renovation Expenditures on 658 same store apartment units for the six months ended June 30, 2020 approximated $22,830 per apartment unit renovated.

 

 

(2)

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

 

 

 

 

2nd Quarter 2020 Earnings Release

 

23


Table of Contents

 

 

Equity Residential

Normalized EBITDAre Reconciliations

(Amounts in thousands)

 

 

 

 

 

 

Trailing Twelve Months

 

 

2020

 

 

2019

 

 

 

June 30, 2020

 

 

March 31, 2020

 

 

Q2

 

 

Q1

 

 

Q4

 

 

Q3

 

 

Q2

 

Net income

 

$

1,183,304

 

 

$

1,233,122

 

 

$

271,481

 

 

$

332,671

 

 

$

301,306

 

 

$

277,846

 

 

$

321,299

 

Interest expense incurred, net

 

 

353,711

 

 

 

380,728

 

 

 

81,885

 

 

 

85,590

 

 

 

100,300

 

 

 

85,936

 

 

 

108,902

 

Amortization of deferred financing costs

 

 

10,039

 

 

 

11,575

 

 

 

2,111

 

 

 

2,041

 

 

 

3,006

 

 

 

2,881

 

 

 

3,647

 

Amortization of above/below market lease intangibles

 

 

4,391

 

 

 

4,391

 

 

 

1,098

 

 

 

1,097

 

 

 

1,098

 

 

 

1,098

 

 

 

1,098

 

Depreciation

 

 

844,758

 

 

 

839,290

 

 

 

205,976

 

 

 

212,422

 

 

 

214,882

 

 

 

211,478

 

 

 

200,508

 

Income and other tax expense (benefit)

 

 

(2,525

)

 

 

(2,466

)

 

 

187

 

 

 

53

 

 

 

(3,030

)

 

 

265

 

 

 

246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

2,393,678

 

 

 

2,466,640

 

 

 

562,738

 

 

 

633,874

 

 

 

617,562

 

 

 

579,504

 

 

 

635,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (gain) loss on sales of real estate properties

 

 

(661,045

)

 

 

(655,635

)

 

 

(144,266

)

 

 

(207,977

)

 

 

(178,237

)

 

 

(130,565

)

 

 

(138,856

)

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

 

 

 

 

 

(69,522

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(69,522

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDAre

 

 

1,732,633

 

 

 

1,741,483

 

 

 

418,472

 

 

 

425,897

 

 

 

439,325

 

 

 

448,939

 

 

 

427,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of pursuit costs (other expenses)

 

 

5,820

 

 

 

5,708

 

 

 

1,651

 

 

 

1,627

 

 

 

1,431

 

 

 

1,111

 

 

 

1,539

 

(Income) loss from investments in unconsolidated entities - operations

 

 

4,312

 

 

 

4,027

 

 

 

1,042

 

 

 

1,157

 

 

 

961

 

 

 

1,152

 

 

 

757

 

Net (gain) loss on sales of land parcels

 

 

(1,866

)

 

 

(2,043

)

 

 

 

 

 

 

 

 

33

 

 

 

(1,899

)

 

 

(177

)

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

 

 

(2,350

)

 

 

(1,966

)

 

 

(767

)

 

 

(1,582

)

 

 

(1

)

 

 

 

 

 

(383

)

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

 

 

3,454

 

 

 

7,111

 

 

 

(1,956

)

 

 

163

 

 

 

5,229

 

 

 

18

 

 

 

1,701

 

Advocacy contributions (other expenses)

 

 

2,423

 

 

 

771

 

 

 

1,852

 

 

 

501

 

 

 

65

 

 

 

5

 

 

 

200

 

Data analytics project (other expenses)

 

 

1,416

 

 

 

2,824

 

 

 

 

 

 

 

 

 

 

 

 

1,416

 

 

 

1,408

 

Other

 

 

3

 

 

 

441

 

 

 

(521

)

 

 

 

 

 

(158

)

 

 

682

 

 

 

(83

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDAre

 

$

1,745,845

 

 

$

1,758,356

 

 

$

419,773

 

 

$

427,763

 

 

$

446,885

 

 

$

451,424

 

 

$

432,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Items:

 

June 30, 2020

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

8,421,859

 

 

$

8,632,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

(187,416

)

 

 

(82,335

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage principal reserves/sinking funds

 

 

(11,895

)

 

 

(10,755

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt

 

$

8,222,548

 

 

$

8,539,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

 

2nd Quarter 2020 Earnings Release

 

24


Table of Contents

 

430

Equity Residential

Adjustments from FFO to Normalized FFO

(Amounts in thousands)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2020

 

 

2019

 

 

Variance

 

 

2020

 

 

2019

 

 

Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment non-operating assets

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of pursuit costs (other expenses)

 

 

3,278

 

 

 

2,987

 

 

 

291

 

 

 

1,651

 

 

 

1,539

 

 

 

112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

32

 

 

 

1,506

 

 

 

(1,474

)

 

 

32

 

 

 

1,506

 

 

 

(1,474

)

Write-off of unamortized (premiums)/discounts/OCI (interest expense)

 

 

 

 

 

15,141

 

 

 

(15,141

)

 

 

 

 

 

15,141

 

 

 

(15,141

)

Debt extinguishment and preferred share redemption (gains) losses

 

 

32

 

 

 

16,647

 

 

 

(16,615

)

 

 

32

 

 

 

16,647

 

 

 

(16,615

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (gain) loss on sales of land parcels

 

 

 

 

 

(178

)

 

 

178

 

 

 

 

 

 

(177

)

 

 

177

 

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

 

 

670

 

 

 

430

 

 

 

240

 

 

 

229

 

 

 

200

 

 

 

29

 

Non-operating asset (gains) losses

 

 

670

 

 

 

252

 

 

 

418

 

 

 

229

 

 

 

23

 

 

 

206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(2,349

)

 

 

(383

)

 

 

(1,966

)

 

 

(767

)

 

 

(383

)

 

 

(384

)

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

 

 

(1,793

)

 

 

1,951

 

 

 

(3,744

)

 

 

(1,956

)

 

 

1,701

 

 

 

(3,657

)

Advocacy contributions (other expenses)

 

 

2,353

 

 

 

200

 

 

 

2,153

 

 

 

1,852

 

 

 

200

 

 

 

1,652

 

Data analytics project (other expenses)

 

 

 

 

 

2,783

 

 

 

(2,783

)

 

 

 

 

 

1,408

 

 

 

(1,408

)

Other

 

 

(521

)

 

 

(133

)

 

 

(388

)

 

 

(521

)

 

 

(83

)

 

 

(438

)

Other miscellaneous items

 

 

(2,310

)

 

 

4,418

 

 

 

(6,728

)

 

 

(1,392

)

 

 

2,843

 

 

 

(4,235

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments from FFO to Normalized FFO

 

$

1,670

 

 

$

24,304

 

 

$

(22,634

)

 

$

520

 

 

$

21,052

 

 

$

(20,532

)

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.

 

 

 

 

2nd Quarter 2020 Earnings Release

 

25


Table of Contents

 

 

 

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.

 

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:

 

 

 

June 30, 2020

 

Unsecured revolving credit facility commitment

 

$

2,500,000

 

 

 

 

 

 

Commercial paper balance outstanding

 

 

 

 

 

 

 

 

Unsecured revolving credit facility balance outstanding

 

 

 

 

 

 

 

Other restricted amounts

 

 

(100,949

)

 

 

 

 

 

Unsecured revolving credit facility availability

 

$

2,399,051

 

 

 

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.

 

 

 

2nd Quarter 2020 Earnings Release

 

26


Table of Contents

 

 

Equity Residential

Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued

(Amounts in thousands except per share and per apartment unit data)

(All per share data is diluted)

 

 

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):

 

 

 

Six Months Ended June 30, 2020

 

 

Quarter Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

Net Gain (Loss) on Sales of Real Estate Properties

 

$

352,243

 

 

$

144,266

 

Accumulated Depreciation Gain

 

 

(157,471

)

 

 

(88,555

)

 

 

 

 

 

 

 

 

 

Economic Gain (Loss)

 

$

194,772

 

 

$

55,711

 

 

 

2nd Quarter 2020 Earnings Release

 

27

 


Table of Contents

 

 

Equity Residential

Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued

(Amounts in thousands except per share and per apartment unit data)

(All per share data is diluted)

 

 

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.  

 

 

2nd Quarter 2020 Earnings Release

 

28


Table of Contents

 

 

Equity Residential

Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued

(Amounts in thousands except per share and per apartment unit data)

(All per share data is diluted)

 

 

The following table presents reconciliations of EPS to FFO per share and Normalized FFO per share for Consolidated Statements of Funds From Operations and Normalized Funds From Operations.

 

 

 

Actual June

 

 

Actual June

 

 

Actual

 

 

Actual

 

 

 

YTD 2020

 

 

YTD 2019

 

 

Q2 2020

 

 

Q2 2019

 

 

 

Per Share

 

 

Per Share

 

 

Per Share

 

 

Per Share

 

EPS Diluted

 

$

1.53

 

 

$

1.11

 

 

$

0.70

 

 

$

0.83

 

Depreciation expense

 

 

1.07

 

 

 

1.04

 

 

 

0.53

 

 

 

0.51

 

Net (gain) loss on sales

 

 

(0.88

)

 

 

(0.54

)

 

 

(0.37

)

 

 

(0.54

)

Impairment operating assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share Diluted

 

 

1.72

 

 

 

1.61

 

 

 

0.86

 

 

 

0.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment non-operating assets

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of pursuit costs

 

 

0.01

 

 

 

0.01

 

 

 

 

 

 

0.01

 

Debt extinguishment and preferred share

   redemption (gains) losses

 

 

 

 

 

0.04

 

 

 

 

 

 

0.04

 

Non-operating asset (gains) losses

 

 

 

 

 

 

 

 

 

 

 

 

Other miscellaneous items

 

 

(0.01

)

 

 

0.01

 

 

 

 

 

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized FFO per share Diluted

 

$

1.72

 

 

$

1.67

 

 

$

0.86

 

 

$

0.86

 

 

Lease-Up NOI – Represents NOI for development properties: (i) in various stages of lease-up; and (ii) where lease-up has been completed but the properties were not stabilized (defined as having achieved 90% occupancy for three consecutive months) for all of the current and comparable periods presented.

 

Net Operating Income (“NOI”) – NOI is the Company’s primary financial measure for evaluating each of its apartment properties.  NOI is defined as rental income less direct property operating expenses (including real estate taxes and insurance).  The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company's apartment properties.  NOI does not include an allocation of property management expenses either in the current or comparable periods.  Rental income for all leases and operating expense for ground leases (for both same store and non-same store properties) are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (see Same Store Results):

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating income

 

$

778,974

 

 

$

578,894

 

 

$

356,889

 

 

$

369,117

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property management

 

 

51,317

 

 

 

50,765

 

 

 

23,608

 

 

 

24,369

 

General and administrative

 

 

26,353

 

 

 

29,710

 

 

 

11,835

 

 

 

14,329

 

Depreciation

 

 

418,398

 

 

 

404,723

 

 

 

205,976

 

 

 

200,508

 

Net (gain) loss on sales of real estate

   properties

 

 

(352,243

)

 

 

(138,835

)

 

 

(144,266

)

 

 

(138,856

)

Total NOI

 

$

922,799

 

 

$

925,257

 

 

$

454,042

 

 

$

469,467

 

Rental income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same store

 

$

1,260,825

 

 

$

1,258,261

 

 

$

623,275

 

 

$

637,915

 

Non-same store/other

 

 

75,012

 

 

 

73,415

 

 

 

30,257

 

 

 

31,459

 

Total rental income

 

 

1,335,837

 

 

 

1,331,676

 

 

 

653,532

 

 

 

669,374

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same store

 

 

386,742

 

 

 

382,188

 

 

 

190,021

 

 

 

190,277

 

Non-same store/other

 

 

26,296

 

 

 

24,231

 

 

 

9,469

 

 

 

9,630

 

Total operating expenses

 

 

413,038

 

 

 

406,419

 

 

 

199,490

 

 

 

199,907

 

NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same store

 

 

874,083

 

 

 

876,073

 

 

 

433,254

 

 

 

447,638

 

Non-same store/other

 

 

48,716

 

 

 

49,184

 

 

 

20,788

 

 

 

21,829

 

Total NOI

 

$

922,799

 

 

$

925,257

 

 

$

454,042

 

 

$

469,467

 

 

 

 

2nd Quarter 2020 Earnings Release

 

29


Table of Contents

 

 

Equity Residential

Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued

(Amounts in thousands except per share and per apartment unit data)

(All per share data is diluted)

 

 

New Lease Change The change in rent 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 and without concessions or discounts being applied.

 

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 2019 and 2020, plus any properties in lease-up and not stabilized as of January 1, 2019.

 

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.

 

Renewal Rate Achieved The change in rent 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 and without concessions or discounts being applied.

 

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, 2019, less properties subsequently sold.  Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented.

 

% of Stabilized Budgeted NOI – Represents original budgeted 2020 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.

 

 

 

2nd Quarter 2020 Earnings Release

 

30


Table of Contents

 

 

Equity Residential

Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued

(Amounts in thousands except per share and per apartment unit data)

(All per share data is diluted)

 

 

Unencumbered NOI % – Represents NOI generated by consolidated real estate assets unencumbered by outstanding secured debt as a percentage of total NOI generated by all of the Company's consolidated real estate assets.

 

Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs.

 

The calculation of the Unlevered IRR does not include an adjustment for the Company’s property management expense, general and administrative expense or interest expense (including loan assumption costs and other loan-related costs).  Therefore, the Unlevered IRR is not a substitute for net income as a measure of our performance.  Management believes that the Unlevered IRR achieved during the period a property is owned by the Company is useful because it is one indication of the gross value created by the Company’s acquisition, development, renovation, management and ultimate sale of a property, before the impact of Company overhead.  The Unlevered IRR achieved on the properties as cited in this release should not be viewed as an indication of the gross value created with respect to other properties owned by the Company, and the Company does not represent that it will achieve similar Unlevered IRRs upon the disposition of other properties.  The weighted average Unlevered IRR for sold properties is weighted based on all cash flows over the investment period for each respective property, including net sales proceeds.

 

Weighted Average Coupons – Contractual interest rate for each debt instrument weighted by principal balances as of June 30, 2020.  In case of debt for which fair value hedges are in place, the rate payable under the corresponding derivatives is used in lieu of the contractual interest rate.

 

Weighted Average Rates – Interest expense for each debt instrument for the six months ended June 30, 2020 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.

 

 

2nd Quarter 2020 Earnings Release

 

31

v3.20.2
Document and Entity Information
Jul. 28, 2020
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Jul. 28, 2020
Entity Registrant Name EQUITY RESIDENTIAL
Entity Central Index Key 0000906107
Entity File Number 1-12252
Entity Tax Identification Number 13-3675988
Entity Address, Address Line One Two North Riverside Plaza
Entity Address, City or Town Chicago
Entity Address, State or Province IL
Entity Address, Postal Zip Code 60606
City Area Code 312
Local Phone Number 474-1300
Entity Incorporation State or Country Code MD
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Security 12b Title Common Shares of Beneficial Interest, $0.01 Par Value
Trading Symbol EQR
Security Exchange Name NYSE