Equity Residential (NYSE: EQR) today reported results for the
quarter and nine months ended September 30, 2020.
Third Quarter 2020 Results
All per share results are reported as available to common
shares/units on a diluted basis.
Quarter Ended September
30,
2020
2019
$ Change
% Change
Earnings Per Share (EPS)
$
0.24
$
0.71
$
(0.47
)
(66.2
%)
Funds from Operations (FFO) per share
$
0.76
$
0.92
$
(0.16
)
(17.4
%)
Normalized FFO per share
$
0.77
$
0.91
$
(0.14
)
(15.4
%)
Nine Months Ended September
30,
2020
2019
$ Change
% Change
Earnings Per Share (EPS)
$
1.77
$
1.82
$
(0.05
)
(2.7
%)
Funds from Operations (FFO) per share
$
2.48
$
2.53
$
(0.05
)
(2.0
%)
Normalized FFO per share
$
2.49
$
2.58
$
(0.09
)
(3.5
%)
"Operating results in the quarter were challenging and widely
varying. Our suburban portfolio continues to fare relatively well
with occupancy similar to last year, rates down only modestly and
recovery under way in some markets. However, the approximately 23%
of our portfolio located in the urban cores of New York, San
Francisco and Boston continues to struggle with pandemic-related
reductions in economic activity, which have led to declines in
occupancy, lower resident renewal levels and a related drop in
rental rates. While we have seen recent improvements in renewals
and application volume, pricing pressures continue and headwinds
remain," said Mark J. Parrell, Equity Residential's President and
CEO.
"We anticipate that our financial results will weaken over
subsequent quarters as the full effect of the pandemic is felt on
our business. Looking longer term, we expect that positive
developments relating to the pandemic will eventually re-energize
the urban centers which have persevered and thrived through many
decades and in similarly challenging circumstances. We continue to
see the urban locations in our markets as centers of our country’s
knowledge industries and expect them to again attract
disproportionate numbers of affluent renters once the pandemic
ends. Many thanks to my colleagues at our properties and offices
across the country for their hard work and dedication in these
difficult times."
Highlights
- The Company collected approximately 97% of its expected
Residential revenues in the third quarter of 2020; and
- The Company’s balance sheet and liquidity position remains
exceptionally strong, having reduced its total debt by over $600
million during 2020 using proceeds from property dispositions.
Results Per Share
The change in EPS for the quarter ended September 30, 2020
compared to the same period of 2019 is due primarily to lower
property sale gains in the third 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 nine months ended
September 30, 2020 compared to the same period of 2019 is due
primarily to 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 nine
months ended September 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
Third Quarter 2020 vs.
Third Quarter 2019
September YTD 2020 vs.
September YTD 2019
Residential same store Net Operating
Income (NOI)
$
(0.09
)
$
(0.07
)
Non-Residential same store NOI (1)
(0.05
)
(0.07
)
Lease-Up NOI
–
0.01
2020 and 2019 transaction activity impact
on NOI, net
(0.03
)
(0.03
)
Interest expense
0.03
0.08
Other items
–
(0.01
)
Net
$
(0.14
)
$
(0.09
)
(1)
Non-Residential same store NOI was
negatively impacted by a $(0.03) per share non-cash write-off of
Non-Residential straight-line lease receivables during the third
quarter of 2020 and nine months ended September 30, 2020.
The Company has a glossary of defined terms and related
reconciliations of Non-GAAP financial measures on pages 26 through
32 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 account for approximately 2.4%
of total revenues for the nine months ended September 30, 2020. The
table below reflects same store Residential only results for the
third quarter 2020 to third quarter 2019 comparison, which includes
75,596 apartment units, as well as for the nine months ended
September 30, 2020 to nine months ended September 30, 2019
comparison, which includes 74,264 apartment units. The Company’s
Physical Occupancy was 94.8% compared to 96.5% for the third
quarter of 2020 and 2019, respectively, and 95.4% compared to 96.4%
for the first nine months of 2020 and 2019, respectively.
Third Quarter 2020 vs.
Third Quarter 2019
September YTD 2020 vs.
September YTD 2019
Revenues
(5.0%)
(1.0%)
Expenses
3.0%
1.7%
NOI
(8.4%)
(2.2%)
The following table reflects the detail of the change in Same
Store Residential Revenues, which is presented on a GAAP basis
showing Leasing Concessions on a straight-line basis. See pages 30
and 31 for detail and reconciliations of Same Store Residential
Revenues on a GAAP basis to Same Store Residential Revenues with
Leasing Concessions on a cash basis.
Third Quarter 2020 vs. Third
Quarter 2019
September YTD 2020 vs.
September YTD 2019
% Change
% Change
Same Store Residential Revenues-
comparable period
Lease rates
(1.4
%)
1.0
%
Leasing Concessions (1)
(0.6
%)
(0.2
%)
Vacancy loss
(1.7
%)
(1.2
%)
Bad Debt, Net (2)
(2.0
%)
(1.0
%)
Other (3)
0.7
%
0.4
%
Same Store Residential Revenues-
current period
(5.0
%)
(1.0
%)
(1)
Reflects upfront discounts on both new
move-in and renewal leases on a straight-line basis.
(2)
Reduction in rental income due to bad debt
write-offs and reserves, net of amounts collected on previously
written-off or reserved accounts.
(3)
Includes ancillary income, utility
recoveries, miscellaneous income and other items.
Residential Same Store Operating Statistics
The following table includes select statistics for Residential
Same Store Properties presented on a suburban and urban basis.
Statistics for October 2020 are preliminary and Blended Rate is
inclusive of Leasing Concessions.
% of Same Store Residential
Revenues
Physical Occupancy on:
Renewal %
Blended Rate
Change in Applications
Sep YTD 2020
Jun 30, 2020
Sep 30, 2020
Oct 22, 2020
Oct 2019
Sep 2020
Oct 2020 (4)
Q3 2020
Sep 2020
Oct 2020 (4)
Q3 2020 vs. Q3 2019
Oct 2020 (4) vs. Oct
2019
Suburban (1)
44%
96.4%
95.9%
95.8%
59%
54%
57%
(4.8%)
(5.8%)
(6.0%)
10%
32%
Urban (1)(2)
33%
94.7%
94.4%
94.4%
50%
46%
50%
(6.5%)
(8.4%)
(10.7%)
21%
47%
Urban Core (1)(3)
23%
92.5%
89.2%
88.9%
58%
43%
46%
(14.7%)
(17.9%)
(21.4%)
48%
108%
Total
100%
95.1%
94.2%
94.1%
56%
50%
53%
(7.9%)
(9.5%)
(10.6%)
20%
46%
(1)
The Company defines Urban submarkets as
those with 3,500 or more households per square mile with the
remainder defined as Suburban.
(2)
Includes all other Urban properties
excluding Urban Core.
(3)
Includes Urban properties in
Manhattan/Brooklyn, Downtown Boston/Cambridge and Downtown San
Francisco.
(4)
October 2020 results are preliminary.
Investment Activity
The Company acquired a 158-unit apartment property in suburban
Seattle during the third quarter of 2020 for a purchase price of
approximately $48.9 million at an Acquisition Capitalization Rate
of 4.7%. The Company did not sell any assets during the third
quarter of 2020. During the first nine months of 2020, the Company
acquired the property described above and 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%.
Fourth Quarter 2020 Earnings and Conference Call
Equity Residential expects to announce its fourth quarter and
full year 2020 results on Tuesday, February 2, 2021 and host a
conference call to discuss those results at 10:00 a.m. CT on
Wednesday, February 3, 2021.
About Equity Residential
Equity Residential is committed to creating communities where
people thrive. The Company, a member of the S&P 500, is focused
on the acquisition, development and management of residential
properties located in and around dynamic cities that attract high
quality long-term renters. Equity Residential owns or has
investments in 305 properties consisting of 78,568 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 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, October 28, 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.
Equity Residential
Consolidated Statements of
Operations
(Amounts in thousands except per
share data)
(Unaudited)
Nine Months Ended September
30,
Quarter Ended September
30,
2020
2019
2020
2019
REVENUES
Rental income
$
1,958,270
$
2,016,796
$
622,433
$
685,120
EXPENSES
Property and maintenance
333,333
338,497
113,065
114,966
Real estate taxes and insurance
288,043
270,434
95,273
87,546
Property management
71,513
72,705
20,196
21,940
General and administrative
37,212
41,127
10,859
11,417
Depreciation
619,003
616,201
200,605
211,478
Total expenses
1,349,104
1,338,964
439,998
447,347
Net gain (loss) on sales of real estate
properties
352,218
269,400
(25
)
130,565
Operating income
961,384
947,232
182,410
368,338
Interest and other income
4,006
2,581
535
656
Other expenses
(8,324
)
(11,205
)
(4,097
)
(2,813
)
Interest:
Expense incurred, net
(248,349
)
(289,776
)
(80,874
)
(85,936
)
Amortization of deferred financing
costs
(6,253
)
(8,664
)
(2,101
)
(2,881
)
Income before income and other taxes,
income (loss) from
investments in unconsolidated entities and
net gain (loss)
on sales of land parcels
702,464
640,168
95,873
277,364
Income and other tax (expense) benefit
(502
)
(749
)
(262
)
(265
)
Income (loss) from investments in
unconsolidated entities
(2,445
)
66,906
(246
)
(1,152
)
Net gain (loss) on sales of land
parcels
—
2,077
—
1,899
Net income
699,517
708,402
95,365
277,846
Net (income) loss attributable to
Noncontrolling Interests:
Operating Partnership
(24,624
)
(25,339
)
(3,376
)
(9,910
)
Partially Owned Properties
(14,113
)
(2,450
)
(703
)
(830
)
Net income attributable to controlling
interests
660,780
680,613
91,286
267,106
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
Net income available to Common Shares
$
658,462
$
678,295
$
90,513
$
266,333
Earnings per share – basic:
Net income available to Common Shares
$
1.77
$
1.83
$
0.24
$
0.72
Weighted average Common Shares
outstanding
371,749
370,227
371,869
370,768
Earnings per share – diluted:
Net income available to Common Shares
$
1.77
$
1.82
$
0.24
$
0.71
Weighted average Common Shares
outstanding
385,973
386,177
385,652
386,896
Distributions declared per Common Share
outstanding
$
1.8075
$
1.7025
$
0.6025
$
0.5675
Equity Residential
Consolidated Statements of
Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per
share data)
(Unaudited)
Nine Months Ended September
30,
Quarter Ended September
30,
2020
2019
2020
2019
Net income
$
699,517
$
708,402
$
95,365
$
277,846
Net (income) loss attributable to
Noncontrolling Interests – Partially
Owned Properties
(14,113
)
(2,450
)
(703
)
(830
)
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
Net income available to Common Shares and
Units
683,086
703,634
93,889
276,243
Adjustments:
Depreciation
619,003
616,201
200,605
211,478
Depreciation – Non-real estate
additions
(3,433
)
(4,235
)
(1,126
)
(1,932
)
Depreciation – Partially Owned
Properties
(2,514
)
(2,700
)
(828
)
(898
)
Depreciation – Unconsolidated
Properties
1,838
2,385
614
613
Net (gain) loss on sales of unconsolidated
entities - operating
assets
(1,000
)
(69,522
)
(1,000
)
—
Net (gain) loss on sales of real estate
properties
(352,218
)
(269,400
)
25
(130,565
)
Noncontrolling Interests share of gain
(loss) on sales
of real estate properties
11,655
—
—
—
FFO available to Common Shares and
Units
956,417
976,363
292,179
354,939
Adjustments (see note for additional
detail):
Impairment – non-operating assets
—
—
—
—
Write-off of pursuit costs
4,864
4,098
1,586
1,111
Debt extinguishment and preferred share
redemption (gains)
losses
37
11,807
5
(4,840
)
Non-operating asset (gains) losses
1,022
(1,200
)
352
(1,452
)
Other miscellaneous items
(514
)
6,539
1,796
2,121
Normalized FFO available to Common Shares
and Units
$
961,826
$
997,607
$
295,918
$
351,879
FFO
$
958,735
$
978,681
$
292,952
$
355,712
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
FFO available to Common Shares and
Units
$
956,417
$
976,363
$
292,179
$
354,939
FFO per share and Unit – basic
$
2.49
$
2.55
$
0.76
$
0.93
FFO per share and Unit – diluted
$
2.48
$
2.53
$
0.76
$
0.92
Normalized FFO
$
964,144
$
999,925
$
296,691
$
352,652
Preferred distributions
(2,318
)
(2,318
)
(773
)
(773
)
Normalized FFO available to Common Shares
and Units
$
961,826
$
997,607
$
295,918
$
351,879
Normalized FFO per share and Unit –
basic
$
2.50
$
2.60
$
0.77
$
0.92
Normalized FFO per share and Unit –
diluted
$
2.49
$
2.58
$
0.77
$
0.91
Weighted average Common Shares and Units
outstanding – basic
384,759
383,142
384,871
383,709
Weighted average Common Shares and Units
outstanding – diluted
385,973
386,177
385,652
386,896
Note: See Adjustments from FFO to Normalized FFO for additional
detail regarding the adjustments from FFO to Normalized FFO. See
Additional Reconciliations and Definitions of Non-GAAP Financial
Measures and Other Terms for the definitions of non-GAAP financial
measures and other terms as well as the reconciliations of EPS to
FFO per share and Normalized FFO per share.
Equity Residential
Consolidated Balance
Sheets
(Amounts in thousands except for
share amounts)
(Unaudited)
September 30,
December 31,
2020
2019
ASSETS
Land
$
5,794,771
$
5,936,188
Depreciable property
21,076,222
21,319,101
Projects under development
337,696
181,630
Land held for development
103,900
96,688
Investment in real estate
27,312,589
27,533,607
Accumulated depreciation
(7,738,318
)
(7,276,786
)
Investment in real estate, net
19,574,271
20,256,821
Investments in unconsolidated entities
54,828
52,238
Cash and cash equivalents
178,333
45,753
Restricted deposits
56,881
71,246
Right-of-use assets
502,184
512,774
Other assets
257,481
233,937
Total assets
$
20,623,978
$
21,172,769
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
2,313,833
$
1,941,610
Notes, net
6,082,897
6,077,513
Line of credit and commercial paper
—
1,017,833
Accounts payable and accrued expenses
158,611
94,350
Accrued interest payable
65,669
66,852
Lease liabilities
329,684
331,334
Other liabilities
331,522
346,963
Security deposits
61,453
70,062
Distributions payable
232,237
218,326
Total liabilities
9,575,906
10,164,843
Commitments and contingencies
Redeemable Noncontrolling Interests –
Operating Partnership
293,706
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 September 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;
372,239,249 shares issued
and outstanding as of September 30, 2020
and 371,670,884
shares issued and outstanding as of
December 31, 2019
3,722
3,717
Paid in capital
9,166,018
8,965,577
Retained earnings
1,371,938
1,386,495
Accumulated other comprehensive income
(loss)
(61,478
)
(77,563
)
Total shareholders’ equity
10,517,480
10,315,506
Noncontrolling Interests:
Operating Partnership
232,516
227,837
Partially Owned Properties
4,370
1,183
Total Noncontrolling Interests
236,886
229,020
Total equity
10,754,366
10,544,526
Total liabilities and equity
$
20,623,978
$
21,172,769
Equity Residential
Portfolio Summary
As of September 30,
2020
% of Stabilized
Average
Apartment
Budgeted
Rental
Markets/Metro Areas
Properties
Units
NOI
Rate
Los Angeles
72
16,603
19.0
%
$
2,488
Orange County
13
4,028
4.4
%
2,243
San Diego
12
3,385
3.8
%
2,405
Subtotal – Southern California
97
24,016
27.2
%
2,435
San Francisco
48
12,707
19.8
%
3,202
Washington DC
47
14,731
15.8
%
2,449
New York
37
9,606
14.6
%
3,805
Seattle
46
9,454
11.0
%
2,422
Boston
25
6,430
10.1
%
3,079
Denver
5
1,624
1.5
%
2,041
Total
305
78,568
100.0
%
$
2,765
Properties
Apartment Units
Wholly Owned Properties
288
75,007
Master-Leased Properties –
Consolidated
1
162
Partially Owned Properties –
Consolidated
16
3,399
305
78,568
Note: Projects under development are not included in the
Portfolio Summary until construction has been completed.
Equity Residential
Portfolio Rollforward Q3
2020
($ in thousands)
Properties
Apartment Units
Purchase Price
Acquisition Cap Rate
6/30/2020
304
78,410
Acquisitions:
Consolidated Rental Properties – Not
Stabilized (A)
1
158
$
48,860
4.7
%
9/30/2020
305
78,568
Portfolio Rollforward
2020
($ in thousands)
Properties
Apartment Units
Purchase Price
Acquisition Cap Rate
12/31/2019
309
79,962
Acquisitions:
Consolidated Rental Properties – Not
Stabilized (A)
1
158
$
48,860
4.7
%
Sales Price
Disposition Yield
Dispositions:
Consolidated Rental Properties
(5
)
(1,552
)
$
(754,361
)
(4.7
%)
9/30/2020
305
78,568
(A)
The Company acquired one property in the
Seattle market in the third quarter of 2020 that is in lease-up and
is expected to stabilize in its second year of ownership at an
Acquisition Cap Rate of 4.7%.
Equity Residential
Third Quarter 2020 vs. Third
Quarter 2019
Same Store Results/Statistics
Including 75,596 Same Store Apartment Units
$ in thousands (except for
Average Rental Rate)
Third Quarter 2020
Third Quarter 2019
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
597,210
(1)
(5.0%)
$
5,887
(2)
(75.5%)
$
603,097
(7.5%)
Revenues
$
628,345
$
23,985
$
652,330
Expenses
$
197,440
3.0%
$
5,718
10.3%
$
203,158
3.2%
Expenses
$
191,677
$
5,186
$
196,863
NOI
$
399,770
(8.4%)
$
169
(99.1%)
$
399,939
(12.2%)
NOI
$
436,668
$
18,799
$
455,467
Average Rental Rate
$
2,781
(3.2%)
Average Rental Rate
$
2,874
Physical Occupancy
94.8
%
(1.7%)
Physical Occupancy
96.5
%
Turnover
17.7
%
1.6%
Turnover
16.1
%
Third Quarter 2020 vs. Second
Quarter 2020
Same Store Results/Statistics
Including 78,030 Same Store Apartment Units
$ in thousands (except for
Average Rental Rate)
Third Quarter 2020
Second Quarter 2020
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
613,726
(1)
(2.7%)
$
6,126
(2)
(58.5%)
$
619,852
(4.0%)
Revenues
$
630,951
$
14,766
$
645,717
Expenses
$
202,964
5.9%
$
5,787
9.7%
$
208,751
6.0%
Expenses
$
191,728
$
5,273
$
197,001
NOI
$
410,762
(6.5%)
$
339
(96.4%)
$
411,101
(8.4%)
NOI
$
439,223
$
9,493
$
448,716
Average Rental Rate
$
2,769
(2.6%)
Average Rental Rate
$
2,844
Physical Occupancy
94.8
%
0.0%
Physical Occupancy
94.8
%
Turnover
17.9
%
6.1%
Turnover
11.8
%
(1)
With Leasing Concessions
reflected on a cash basis, Same Store Residential Revenues
decreased 6.2% in the third quarter of 2020 compared to the third
quarter of 2019 and 3.8% in the third quarter of 2020 compared to
the second quarter of 2020. See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional detail and reconciliations.
(2)
Non-Residential operations for
the third quarter of 2020 include a $10.6 million non-cash
write-off of Non-Residential straight-line lease receivables. The
decline in Non-Residential revenues is primarily driven by the
deferral/abatement of rent, higher bad debt (inclusive of the
Non-Residential straight-line write-off), and to a lesser extent,
lower public parking income.
Equity Residential
September YTD 2020 vs.
September YTD 2019
Same Store Results/Statistics
Including 74,264 Same Store Apartment Units
$ in thousands (except for
Average Rental Rate)
September YTD 2020
September YTD 2019
Residential
% Change
Non- Residential
% Change
Total
% Change
Residential
Non- Residential
Total
Revenues
$
1,811,101
(1)
(1.0%)
$
43,282
(2)
(39.0%)
$
1,854,383
(2.4%)
Revenues
$
1,829,896
$
70,924
$
1,900,820
Expenses
$
569,970
1.7%
$
16,737
5.6%
$
586,707
1.8%
Expenses
$
560,225
$
15,845
$
576,070
NOI
$
1,241,131
(2.2%)
$
26,545
(51.8%)
$
1,267,676
(4.3%)
NOI
$
1,269,671
$
55,079
$
1,324,750
Average Rental Rate
$
2,843
0.1%
Average Rental Rate
$
2,841
Physical Occupancy
95.4
%
(1.0%)
Physical Occupancy
96.4
%
Turnover
39.1
%
(0.3%)
Turnover
39.4
%
(1)
With Leasing Concessions reflected on a
cash basis, Same Store Residential Revenues decreased 1.6% in the
nine months ended September 30, 2020 compared to the nine months
ended September 30, 2019. See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional detail and reconciliations.
(2)
Non-Residential operations for the nine
months ended September 30, 2020 include a $12.9 million non-cash
write-off of Non-Residential straight-line lease receivables. The
decline in Non-Residential revenues is primarily driven by the
deferral/abatement of rent, higher bad debt (inclusive of the
Non-Residential straight-line write-off), and to a lesser extent,
lower public parking income.
Same Store Resident/Tenant
Accounts Receivable Balances
Including 74,264 Same Store
Apartment Units
$ in thousands
Residential
Non-Residential
Balance Sheet (Other assets):
September 30, 2020
June 30, 2020
September 30, 2020
June 30, 2020
Resident/tenant accounts receivable
balances
$
23,797
$
18,175
$
7,635
$
4,815
Allowance for doubtful accounts
(15,201
)
(6,518
)
(6,444
)
(2,416
)
Net receivable balances
$
8,596
(1)
$
11,657
$
1,191
$
2,399
Straight-line receivable balances
$
10,536
$
2,990
$
13,727
$
24,161
(1)
The Company held Residential security
deposits approximating 27.5% of the net receivable balance at
September 30, 2020.
Same Store Residential Bad
Debt
Including 74,264 Same Store
Apartment Units
$ in thousands
September
September
Income Statement (Rental
income):
Q3 2020
YTD 2020
YTD 2019
Bad Debt, Net
$
15,064
$
27,301
$
8,261
% of Same Store Residential Revenues
2.6
%
1.5
%
0.5
%
Equity Residential
Third Quarter 2020 vs. Third
Quarter 2019
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Year's Quarter
Markets/Metro Areas
Apartment Units
Q3 2020 % of Actual NOI
Q3 2020 Average Rental Rate
Q3 2020 Weighted Average Physical
Occupancy %
Q3 2020 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
15,968
19.5
%
$
2,497
96.0
%
15.0
%
(5.6
%)
1.5
%
(8.6
%)
(5.0
%)
(0.6
%)
(1.7
%)
Orange County
4,028
4.9
%
2,243
96.8
%
15.9
%
(1.5
%)
2.9
%
(2.8
%)
(1.7
%)
0.2
%
(1.4
%)
San Diego
3,385
4.4
%
2,405
96.8
%
17.4
%
(1.4
%)
(1.9
%)
(1.2
%)
(1.5
%)
0.2
%
(1.1
%)
Subtotal – Southern California
23,381
28.8
%
2,440
96.2
%
15.5
%
(4.4
%)
1.2
%
(6.6
%)
(4.0
%)
(0.4
%)
(1.6
%)
San Francisco
12,570
20.7
%
3,193
94.4
%
18.5
%
(5.8
%)
3.0
%
(8.7
%)
(4.4
%)
(1.5
%)
2.4
%
Washington DC
14,077
16.7
%
2,445
95.6
%
17.5
%
(1.2
%)
2.7
%
(3.0
%)
(0.2
%)
(1.0
%)
0.9
%
New York
9,606
13.0
%
3,805
91.3
%
20.3
%
(9.2
%)
2.6
%
(17.9
%)
(3.7
%)
(5.6
%)
7.0
%
Seattle
8,616
10.3
%
2,431
94.7
%
17.2
%
(2.6
%)
9.1
%
(7.1
%)
(0.7
%)
(1.8
%)
2.1
%
Boston
6,346
9.4
%
3,079
93.6
%
20.6
%
(5.8
%)
3.2
%
(9.4
%)
(3.0
%)
(2.8
%)
4.2
%
Denver
1,000
1.1
%
2,146
94.5
%
24.4
%
(3.8
%)
9.8
%
(9.0
%)
(2.7
%)
(1.2
%)
3.4
%
Total
75,596
100.0
%
$
2,781
94.8
%
17.7
%
(5.0
%)
(1)
3.0
%
(8.4
%)
(3.2
%)
(1.7
%)
1.6
%
(1)
With Leasing Concessions reflected on a
cash basis, Same Store Residential Revenues decreased 6.2% in the
third quarter of 2020 compared to the third quarter of 2019. See
Additional Reconciliations and Definitions of Non-GAAP Financial
Measures and Other Terms for additional detail and
reconciliations.
Note: The above table reflects Residential same store results
only, which account for approximately 97.6% of total revenues.
Equity Residential
Third Quarter 2020 vs. Second
Quarter 2020
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Quarter
Markets/Metro Areas
Apartment Units
Q3 2020 % of Actual NOI
Q3 2020 Average Rental Rate
Q3 2020 Weighted Average Physical
Occupancy %
Q3 2020 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
16,603
19.6
%
$
2,488
95.9
%
15.4
%
(2.5
%)
5.3
%
(5.9
%)
(3.9
%)
1.3
%
3.3
%
Orange County
4,028
4.8
%
2,243
96.8
%
15.9
%
(0.3
%)
9.8
%
(3.3
%)
(0.9
%)
0.5
%
6.1
%
San Diego
3,385
4.2
%
2,405
96.8
%
17.4
%
(0.1
%)
4.2
%
(1.6
%)
(0.9
%)
0.8
%
5.6
%
Subtotal – Southern California
24,016
28.6
%
2,435
96.2
%
15.8
%
(1.9
%)
5.7
%
(4.8
%)
(3.0
%)
1.1
%
4.2
%
San Francisco
12,707
20.4
%
3,202
94.4
%
18.6
%
(4.0
%)
4.2
%
(6.8
%)
(3.6
%)
(0.4
%)
6.9
%
Washington DC
14,569
16.8
%
2,449
95.6
%
17.6
%
(0.1
%)
10.2
%
(4.4
%)
(0.4
%)
0.2
%
6.3
%
New York
9,606
12.7
%
3,805
91.3
%
20.3
%
(5.6
%)
3.5
%
(12.8
%)
(2.7
%)
(2.8
%)
8.8
%
Seattle
9,078
10.6
%
2,438
94.6
%
17.5
%
(2.3
%)
4.3
%
(5.0
%)
(1.5
%)
(0.8
%)
5.9
%
Boston
6,430
9.3
%
3,079
93.5
%
20.7
%
(3.0
%)
9.3
%
(7.6
%)
(3.0
%)
0.0
%
7.1
%
Denver
1,624
1.6
%
2,041
95.1
%
22.7
%
0.8
%
10.1
%
(2.9
%)
(0.3
%)
1.0
%
5.6
%
Total
78,030
100.0
%
$
2,769
94.8
%
17.9
%
(2.7
%)
(1)
5.9
%
(6.5
%)
(2.6
%)
0.0
%
6.1
%
(1)
With Leasing Concessions reflected on a
cash basis, Same Store Residential Revenues decreased 3.8% in the
third quarter of 2020 compared to the second quarter of 2020. See
Additional Reconciliations and Definitions of Non-GAAP Financial
Measures and Other Terms for additional detail and
reconciliations.
Note: The above table reflects Residential same store results
only, which account for approximately 97.6% of total revenues.
Equity Residential
September YTD 2020 vs.
September YTD 2019
Same Store Residential
Results/Statistics by Market
Increase (Decrease) from Prior
Year
Markets/Metro Areas
Apartment Units
Sept. YTD 20 % of Actual NOI
Sept. YTD 20 Average Rental
Rate
Sept. YTD 20 Weighted Average
Physical Occupancy %
Sept. YTD 20 Turnover
Revenues
Expenses
NOI
Average Rental Rate
Physical Occupancy
Turnover
Los Angeles
15,968
19.8
%
$
2,575
95.5
%
38.2
%
(1.8
%)
0.3
%
(2.8
%)
(1.0
%)
(0.8
%)
(4.3
%)
Orange County
4,028
4.9
%
2,262
96.6
%
34.7
%
1.0
%
1.1
%
0.9
%
0.7
%
0.2
%
(6.7
%)
San Diego
3,385
4.2
%
2,425
96.5
%
41.2
%
0.8
%
0.7
%
0.9
%
0.8
%
0.0
%
(3.6
%)
Subtotal – Southern California
23,381
28.9
%
2,499
95.9
%
38.0
%
(1.0
%)
0.5
%
(1.6
%)
(0.5
%)
(0.5
%)
(4.6
%)
San Francisco
12,183
20.6
%
3,292
95.4
%
39.7
%
(1.3
%)
2.8
%
(2.6
%)
(0.3
%)
(0.9
%)
0.7
%
Washington DC
13,711
16.2
%
2,461
95.8
%
37.4
%
0.4
%
0.9
%
0.2
%
1.4
%
(0.8
%)
0.1
%
New York
9,475
13.6
%
3,891
94.0
%
39.1
%
(3.3
%)
2.5
%
(7.7
%)
(0.5
%)
(2.8
%)
7.6
%
Seattle
8,442
10.2
%
2,456
95.8
%
40.0
%
1.6
%
4.7
%
0.3
%
2.3
%
(0.7
%)
(3.2
%)
Boston
6,346
9.7
%
3,145
94.3
%
43.3
%
(1.3
%)
(0.2
%)
(1.7
%)
0.7
%
(1.9
%)
5.3
%
Denver
726
0.8
%
2,123
94.5
%
54.5
%
(1.8
%)
3.7
%
(3.7
%)
(0.1
%)
(1.8
%)
3.3
%
Total
74,264
100.0
%
$
2,843
95.4
%
39.1
%
(1.0
%)
(1)
1.7
%
(2.2
%)
0.1
%
(1.0
%)
(0.3
%)
(1)
With Leasing Concessions reflected on a
cash basis, Same Store Residential Revenues decreased 1.6% in the
nine months ended September 30, 2020 compared to the nine months
ended September 30, 2019. See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional detail and reconciliations.
Note: The above table reflects Residential same store results
only, which account for approximately 97.6% of total revenues.
Equity Residential
Same Store Residential Net
Effective Lease Pricing Statistics
For 74,264 Same Store
Apartment Units
New Lease Change (1)
Renewal Rate Achieved (2)
Blended Rate (3)
Markets/Metro Areas
Q3 2020
Q3 2019
Q3 2020
Q3 2019
Q3 2020
Q3 2019
Los Angeles
(8.3
%)
(0.1
%)
(0.1
%)
5.3
%
(4.7
%)
2.4
%
Orange County
(4.6
%)
(0.2
%)
1.2
%
5.6
%
(1.5
%)
2.6
%
San Diego
(3.9
%)
(0.8
%)
1.6
%
5.8
%
(1.3
%)
2.0
%
Subtotal – Southern California
(7.1
%)
(0.2
%)
0.4
%
5.4
%
(3.6
%)
2.4
%
San Francisco
(19.0
%)
0.0
%
(5.3
%)
5.4
%
(12.7
%)
2.7
%
Washington DC
(8.3
%)
2.6
%
0.0
%
4.7
%
(4.3
%)
3.7
%
New York
(20.1
%)
2.0
%
(1.9
%)
3.9
%
(11.5
%)
3.1
%
Seattle
(13.6
%)
3.6
%
(1.7
%)
7.3
%
(7.8
%)
5.5
%
Boston
(15.2
%)
3.8
%
(1.9
%)
5.7
%
(9.1
%)
4.8
%
Denver
(10.2
%)
(2.1
%)
1.0
%
5.6
%
(6.2
%)
0.6
%
Total
(13.5
%)
1.3
%
(1.6
%)
5.2
%
(7.9
%)
3.3
%
(1)
New Lease Change – The net effective
change in rent (inclusive of Leasing Concessions) for a lease with
a new or transferring resident compared to the rent for the prior
lease of the identical apartment unit, regardless of lease
term.
(2)
Renewal Rate Achieved – The net effective
change in rent (inclusive of Leasing Concessions) for a new lease
on an apartment unit where the lease has been renewed as compared
to the rent for the prior lease of the identical apartment unit,
regardless of lease term.
(3)
Blended Rate – The weighted average of New
Lease Change and Renewal Rate Achieved.
Equity Residential
Third Quarter 2020 vs. Third
Quarter 2019
Total Same Store Operating
Expenses Including 75,596 Same Store Apartment Units
$ in thousands
Q3 2020
Q3 2019
$ Change (1)
% Change
% of Q3 2020 Operating
Expenses
Real estate taxes
$
87,334
$
83,337
$
3,997
4.8
%
43.0
%
On-site payroll
42,503
42,565
(62
)
(0.1
%)
20.9
%
Utilities
27,282
26,789
493
1.8
%
13.4
%
Repairs and maintenance
26,602
25,457
1,145
4.5
%
13.1
%
Insurance
6,246
5,268
978
18.6
%
3.1
%
Leasing and advertising
3,024
2,792
232
8.3
%
1.5
%
Other on-site operating expenses
10,167
10,655
(488
)
(4.6
%)
5.0
%
Total Same Store Operating Expenses
(2)
(includes Residential and
Non-Residential)
$
203,158
$
196,863
$
6,295
3.2
%
100.0
%
September YTD 2020 vs.
September YTD 2019
Total Same Store Operating
Expenses Including 74,264 Same Store Apartment Units
$ in thousands
September YTD 2020
September YTD 2019
$ Change (1)
% Change
% of September YTD 2020 Operating
Expenses
Real estate taxes
$
256,320
$
246,112
$
10,208
4.1
%
43.7
%
On-site payroll
123,061
123,653
(592
)
(0.5
%)
21.0
%
Utilities
77,545
76,183
1,362
1.8
%
13.2
%
Repairs and maintenance
70,635
73,079
(2,444
)
(3.3
%)
12.0
%
Insurance
18,345
15,547
2,798
18.0
%
3.1
%
Leasing and advertising
7,366
7,649
(283
)
(3.7
%)
1.3
%
Other on-site operating expenses
33,435
33,847
(412
)
(1.2
%)
5.7
%
Total Same Store Operating Expenses
(2)
(includes Residential and
Non-Residential)
$
586,707
$
576,070
$
10,637
1.8
%
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. Lower than anticipated appeals activity also impacted
growth, particularly during the third quarter of 2020.
On-site payroll – Year over year decrease
driven by the transition to an enhanced operating platform, lower
employee benefit-related costs and less overtime, partially offset
by one-time frontline worker bonuses.
Repairs and maintenance – Quarter over
quarter increase primarily driven by COVID-19-related cleaning
expenses and higher turnover expenses. Year over year 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 due to challenging
conditions in the insurance market.
Leasing and advertising – Quarter over
quarter increase primarily driven by the write-off of a
Non-Residential deferred leasing cost. Year over year decrease
primarily due to suspension of in-person resident social activities
sponsored by the Company.
(2)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
Equity Residential
Debt Summary as of September
30, 2020
($ in thousands)
Debt Balances (1)
% of Total
Weighted Average Rates (1)
Weighted Average Maturities
(years)
Secured
$
2,313,833
27.6
%
3.39
%
6.9
Unsecured
6,082,897
72.4
%
3.91
%
10.1
Total
$
8,396,730
100.0
%
3.78
%
9.2
Fixed Rate Debt:
Secured – Conventional
$
1,935,286
23.1
%
3.84
%
5.3
Unsecured – Public
6,082,897
72.4
%
4.04
%
10.1
Fixed Rate Debt
8,018,183
95.5
%
4.00
%
8.9
Floating Rate Debt:
Secured – Conventional
17,605
0.2
%
3.02
%
1.7
Secured – Tax Exempt
360,942
4.3
%
1.17
%
15.2
Unsecured – Revolving Credit Facility
—
—
1.47
%
4.1
Unsecured – Commercial Paper Program
(2)
—
—
1.81
%
—
Floating Rate Debt
378,547
4.5
%
1.50
%
14.6
Total
$
8,396,730
100.0
%
3.78
%
9.2
(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 nine months
ended September 30, 2020 was approximately $347.2 million.
Note: The Company capitalized interest of approximately $6.9
million and $4.8 million during the nine months ended September 30,
2020 and 2019, respectively. The Company capitalized interest of
approximately $2.8 million and $2.1 million during the quarters
ended September 30, 2020 and 2019, respectively.
Equity Residential
Debt Maturity Schedule as of
September 30, 2020
($ 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
$
1,991
$
—
$
1,991
0.0
%
3.40
%
3.40
%
2021
818,366
—
818,366
9.7
%
4.62
%
4.62
%
2022
264,185
18,026
282,211
3.3
%
3.25
%
3.19
%
2023
1,325,588
3,500
1,329,088
15.7
%
3.74
%
3.73
%
2024
—
6,100
6,100
0.1
%
N/A
0.13
%
2025
450,000
8,200
458,200
5.4
%
3.38
%
3.32
%
2026
592,025
9,000
601,025
7.1
%
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
32.2
%
3.56
%
3.21
%
Subtotal
8,086,125
396,641
8,482,766
100.0
%
3.66
%
3.50
%
Deferred Financing Costs and
Unamortized (Discount)
(67,942
)
(18,094
)
(86,036
)
N/A
N/A
N/A
Total
$
8,018,183
$
378,547
$
8,396,730
100.0
%
3.66
%
3.50
%
(1) See Additional Reconciliations and Definitions of Non-GAAP
Financial Measures and Other Terms for additional details.
Equity Residential
Selected Unsecured Public Debt
Covenants
September 30,
June 30,
2020
2020
Debt to Adjusted Total Assets (not to
exceed 60%)
31.6%
31.8%
Secured Debt to Adjusted Total Assets (not
to exceed 40%)
9.6%
9.7%
Consolidated Income Available for Debt
Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1)
4.99
4.94
Total Unencumbered Assets to Unsecured
Debt
(must be at least 125%)
437.4%
439.5%
Note: These selected covenants represent the most restrictive
financial covenants relating to ERP Operating Limited Partnership's
("ERPOP") outstanding public debt securities. Equity Residential is
the general partner of ERPOP.
Selected Credit Ratios
September 30,
June 30,
2020
2020
Total debt to Normalized EBITDAre
5.00x
4.82x
Net debt to Normalized EBITDAre
4.89x
4.71x
Unencumbered NOI as a % of total NOI
86.1%
85.8%
Note: See Normalized EBITDAre Reconciliations for detail.
Equity Residential
Capital Structure as of
September 30, 2020
(Amounts in thousands except for
share/unit and per share amounts)
Secured Debt
$
2,313,833
27.6
%
Unsecured Debt
6,082,897
72.4
%
Total Debt
8,396,730
100.0
%
29.7
%
Common Shares (includes Restricted
Shares)
372,239,249
96.4
%
Units (includes OP Units and Restricted
Units)
13,879,400
3.6
%
Total Shares and Units
386,118,649
100.0
%
Common Share Price at September 30,
2020
$
51.33
19,819,470
99.8
%
Perpetual Preferred Equity (see below)
37,280
0.2
%
Total Equity
19,856,750
100.0
%
70.3
%
Total Market Capitalization
$
28,253,480
100.0
%
Perpetual Preferred Equity as
of September 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
Equity Residential
Common Share and Unit
Weighted Average Amounts
Outstanding
Sept. YTD 2020
Sept. YTD 2019
Q3 2020
Q3 2019
Weighted Average Amounts Outstanding
for Net Income Purposes:
Common Shares - basic
371,749,243
370,226,966
371,869,274
370,767,761
Shares issuable from assumed
conversion/vesting of:
- OP Units
13,009,281
12,915,512
13,001,245
12,941,406
- long-term compensation shares/units
1,214,047
3,034,089
781,405
3,186,671
Total Common Shares and Units -
diluted
385,972,571
386,176,567
385,651,924
386,895,838
Weighted Average Amounts Outstanding
for FFO and Normalized FFO Purposes:
Common Shares - basic
371,749,243
370,226,966
371,869,274
370,767,761
OP Units - basic
13,009,281
12,915,512
13,001,245
12,941,406
Total Common Shares and OP Units -
basic
384,758,524
383,142,478
384,870,519
383,709,167
Shares issuable from assumed
conversion/vesting of:
- long-term compensation shares/units
1,214,047
3,034,089
781,405
3,186,671
Total Common Shares and Units -
diluted
385,972,571
386,176,567
385,651,924
386,895,838
Period Ending Amounts
Outstanding:
Common Shares (includes Restricted
Shares)
372,239,249
371,327,332
Units (includes OP Units and Restricted
Units)
13,879,400
13,749,690
Total Shares and Units
386,118,649
385,077,022
Equity Residential
Development and Lease-Up
Projects as of September 30, 2020
(Amounts in thousands except for
project and apartment unit amounts)
No. of
Total Budgeted
Total Book
Total Book Value Not
Estimated/Actual
Projects
Location
Apartment Units
Capital Cost
Value to Date
Placed in Service
Total Debt
Percentage Completed
Initial Occupancy
Completion Date
Stabilization Date
Percentage Leased
Percentage Occupied
Projects Under
Development - Wholly Owned:
Alcott Apartments (fka West End Tower)
Boston, MA
470
$
409,749
$
225,141
$
225,141
$
—
56%
Q2 2021
Q3 2021
Q1 2023
—
—
The Edge (fka 4885 Edgemoor Lane) (A)
Bethesda, MD
154
75,271
38,450
38,450
—
50%
Q3 2021
Q3 2021
Q3 2022
—
—
Projects Under Development - Wholly
Owned
624
485,020
263,591
263,591
—
Projects Under
Development - Partially Owned:
Aero Apartments (B)
Alameda, CA
200
117,794
74,105
74,105
17,605
59%
Q1 2021
Q2 2021
Q2 2022
—
—
Projects Under Development - Partially
Owned
200
117,794
74,105
74,105
17,605
Total Projects Under
Development
824
$
602,814
$
337,696
$
337,696
$
17,605
Land Held for Development
N/A
N/A
$
103,900
$
103,900
$
—
NOI CONTRIBUTION FROM DEVELOPMENT
PROJECTS
Total Budgeted Capital Cost
Q3 2020 NOI
Projects Under Development
$
602,814
$
—
(A)
The Edge – The land under this project is
subject to a long-term ground lease. This project is adjacent to an
existing apartment property owned by the Company.
(B)
Aero Apartments – This development project
is owned 90% by the Company and 10% by a third party partner in a
joint venture consolidated by the Company. Construction is being
partially funded with a construction loan that is non-recourse to
the Company. The joint venture partner has funded $4.7 million for
its allocated share of the project equity and serves as the
developer of the project.
Equity Residential
Capital Expenditures to Real
Estate
For the Nine Months Ended
September 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
4,304
78,568
Building Improvements
$
47,977
$
1,977
$
49,954
$
646
Renovation Expenditures (1)
17,682
6
17,688
238
Replacements
24,148
333
24,481
325
Capital Expenditures to Real Estate
(2)
$
89,807
$
2,316
$
92,123
$
1,209
(1)
Renovation Expenditures on 782 same store
apartment units for the nine months ended September 30, 2020
approximated $22,612 per apartment unit renovated.
(2)
See Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms for
additional details.
Equity Residential
Normalized EBITDAre
Reconciliations
(Amounts in thousands)
Trailing Twelve Months
2020
2019
September 30, 2020
June 30, 2020
Q3
Q2
Q1
Q4
Q3
Net income
$
1,000,823
$
1,183,304
$
95,365
$
271,481
$
332,671
$
301,306
$
277,846
Interest expense incurred, net
348,649
353,711
80,874
81,885
85,590
100,300
85,936
Amortization of deferred financing
costs
9,259
10,039
2,101
2,111
2,041
3,006
2,881
Amortization of above/below market lease
intangibles
4,391
4,391
1,098
1,098
1,097
1,098
1,098
Depreciation
833,885
844,758
200,605
205,976
212,422
214,882
211,478
Income and other tax expense (benefit)
(2,528
)
(2,525
)
262
187
53
(3,030
)
265
EBITDA
2,194,479
2,393,678
380,305
562,738
633,874
617,562
579,504
Net (gain) loss on sales of real estate
properties
(530,455
)
(661,045
)
25
(144,266
)
(207,977
)
(178,237
)
(130,565
)
Net (gain) loss on sales of unconsolidated
entities - operating assets
(1,000
)
—
(1,000
)
—
—
—
—
EBITDAre
1,663,024
1,732,633
379,330
418,472
425,897
439,325
448,939
Write-off of pursuit costs (other
expenses)
6,295
5,820
1,586
1,651
1,627
1,431
1,111
(Income) loss from investments in
unconsolidated entities - operations
4,406
4,312
1,246
1,042
1,157
961
1,152
Net (gain) loss on sales of land
parcels
33
(1,866
)
—
—
—
33
(1,899
)
Insurance/litigation settlement or reserve
income (interest and other income)
(2,353
)
(2,350
)
(3
)
(767
)
(1,582
)
(1
)
—
Insurance/litigation/environmental
settlement or reserve expense (other expenses)
3,936
3,454
500
(1,956
)
163
5,229
18
Advocacy contributions (other
expenses)
4,146
2,423
1,728
1,852
501
65
5
Data analytics project (other
expenses)
—
1,416
—
—
—
—
1,416
Other
(1,108
)
3
(429
)
(521
)
—
(158
)
682
Normalized EBITDAre
$
1,678,379
$
1,745,845
$
383,958
$
419,773
$
427,763
$
446,885
$
451,424
Balance Sheet
Items:
September 30, 2020
June 30, 2020
Total debt
$
8,396,730
$
8,421,859
Cash and cash equivalents
(178,333
)
(187,416
)
Mortgage principal reserves/sinking
funds
(13,013
)
(11,895
)
Net debt
$
8,205,384
$
8,222,548
Note:
EBITDA, EBITDAre and Normalized EBITDAre
do not include any adjustments for the Company’s share of partially
owned unconsolidated entities or the minority partner’s share of
partially owned consolidated entities due to the immaterial size of
the Company’s partially owned portfolio.
Equity Residential
Adjustments from FFO to Normalized FFO (Amounts in
thousands)
Nine Months Ended September
30,
Quarter Ended September
30,
2020
2019
Variance
2020
2019
Variance
Impairment – non-operating assets
$
—
$
—
$
—
$
—
$
—
$
—
Write-off of pursuit costs (other
expenses)
4,864
4,098
766
1,586
1,111
475
Prepayment premiums/penalties (interest
expense)
—
3,381
(3,381
)
—
3,381
(3,381
)
Write-off of unamortized deferred
financing costs (interest expense)
37
2,273
(2,236
)
5
767
(762
)
Write-off of unamortized
(premiums)/discounts/OCI (interest expense)
—
6,153
(6,153
)
—
(8,988
)
8,988
Debt extinguishment and preferred share
redemption (gains) losses
37
11,807
(11,770
)
5
(4,840
)
4,845
Net (gain) loss on sales of land
parcels
—
(2,077
)
2,077
—
(1,899
)
1,899
(Income) loss from investments in
unconsolidated entities ─ non-operating assets
1,022
877
145
352
447
(95
)
Non-operating asset (gains) losses
1,022
(1,200
)
2,222
352
(1,452
)
1,804
Insurance/litigation settlement or reserve
income (interest and other income)
(2,352
)
(383
)
(1,969
)
(3
)
—
(3
)
Insurance/litigation/environmental
settlement or reserve expense (other expenses)
(1,293
)
1,969
(3,262
)
500
18
482
Advocacy contributions (other
expenses)
4,081
205
3,876
1,728
5
1,723
Data analytics project (other
expenses)
—
4,199
(4,199
)
—
1,416
(1,416
)
Other
(950
)
549
(1,499
)
(429
)
682
(1,111
)
Other miscellaneous items
(514
)
6,539
(7,053
)
1,796
2,121
(325
)
Adjustments from FFO to Normalized FFO
$
5,409
$
21,244
$
(15,835
)
$
3,739
$
(3,060
)
$
6,799
Note: See Additional Reconciliations and Definitions of Non-GAAP
Financial Measures and Other Terms for the definitions of non-GAAP
financial measures and other terms as well as the reconciliations
of EPS to FFO per share and Normalized FFO per share.
Equity Residential
Additional Reconciliations and
Definitions of Non-GAAP Financial Measures and Other Terms
(Amounts in thousands except per
share and per apartment unit data)
(All per share data is
diluted)
This Earnings Release and Supplemental Financial Information
includes certain non-GAAP financial measures and other terms that
management believes are helpful in understanding our business. The
definitions and calculations of these non-GAAP financial measures
and other terms may differ from the definitions and methodologies
used by other real estate investment trusts (“REIT”) and,
accordingly, may not be comparable. These non-GAAP financial
measures should not be considered as an alternative to net earnings
or any other measurement of performance computed in accordance with
accounting principles generally accepted in the United States
(“GAAP”) or as an alternative to cash flows from specific
operating, investing or financing activities. Furthermore, these
non-GAAP financial measures are not intended to be a measure of
cash flow or liquidity.
Acquisition Capitalization Rate or Cap Rate – NOI that
the Company anticipates receiving in the next 12 months (or the
year two or three stabilized NOI for properties that are in
lease-up at acquisition) less an estimate of property management
costs/management fees allocated to the project (generally ranging
from 2.0% to 4.0% of revenues depending on the size and income
streams of the asset) and less an estimate for in-the-unit
replacement capital expenditures (generally ranging from $100-$450
per apartment unit depending on the age and condition of the asset)
divided by the gross purchase price of the asset. The weighted
average Acquisition Cap Rate for acquired properties is weighted
based on the projected NOI streams and the relative purchase price
for each respective property.
Average Rental Rate – Total Residential rental revenues
reflected on a straight-line basis in accordance with GAAP divided
by the weighted average occupied apartment units for the reporting
period presented.
Bad Debt, Net – Reduction in rental income due to bad
debt write-offs and reserves, net of amounts collected on
previously written-off or reserved accounts.
Blended Rate – The weighted average of New Lease Change
and Renewal Rate Achieved.
Capital Expenditures to Real
Estate:
Building Improvements – Includes roof
replacement, paving, building mechanical equipment systems,
exterior siding and painting, major landscaping, furniture,
fixtures and equipment for amenities and common areas, vehicles and
office and maintenance equipment.
Renovation Expenditures – Apartment
unit renovation costs (primarily kitchens and baths) designed to
reposition these units for higher rental levels in their respective
markets.
Replacements – Includes appliances,
mechanical equipment, fixtures and flooring (including hardwood and
carpeting).
Debt Balances:
Commercial Paper Program – The Company
may borrow up to a maximum of $1.0 billion under its commercial
paper program subject to market conditions. The notes bear interest
at various floating rates.
Revolving Credit Facility – The
Company’s $2.5 billion unsecured revolving credit facility matures
November 1, 2024. The interest rate on advances under the facility
will generally be LIBOR plus a spread (currently 0.775%), or based
on bids received from the lending group, and an annual facility fee
(currently 0.125%). Both the spread and the facility fee are
dependent on the Company’s senior unsecured credit rating. In
addition, the Company limits its utilization of the facility in
order to maintain liquidity to support its $1.0 billion commercial
paper program along with certain other obligations. The following
table presents the availability on the Company’s unsecured
revolving credit facility:
September 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.
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):
Nine Months Ended September
30, 2020
Quarter Ended September 30,
2020
Net Gain (Loss) on Sales of Real Estate
Properties
$
352,218
$
(25
)
Accumulated Depreciation Gain
(157,471
)
-
Economic Gain (Loss)
$
194,747
$
(25
)
FFO and Normalized FFO:
Funds From Operations (“FFO”) – Nareit
defines FFO (December 2018 White Paper) as net income (computed in
accordance with GAAP), excluding gains or losses from sales and
impairment write-downs of depreciable real estate and land when
connected to the main business of a REIT, impairment write-downs of
investments in entities when the impairment is directly
attributable to decreases in the value of depreciable real estate
held by the entity and depreciation and amortization related to
real estate. Adjustments for partially owned consolidated and
unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis. Expected FFO per share is calculated
on a basis consistent with actual FFO per share and is considered
an appropriate supplemental measure of expected operating
performance when compared to expected EPS.
The Company believes that FFO and FFO
available to Common Shares and Units are helpful to investors as
supplemental measures of the operating performance of a real estate
company, because they are recognized measures of performance by the
real estate industry and by excluding gains or losses from sales
and impairment write-downs of depreciable real estate and excluding
depreciation related to real estate (which can vary among owners of
identical assets in similar condition based on historical cost
accounting and useful life estimates), FFO and FFO available to
Common Shares and Units can help compare the operating performance
of a company’s real estate between periods or as compared to
different companies.
Normalized Funds From Operations
("Normalized FFO") – Normalized FFO begins with FFO and
excludes:
• the impact of any expenses relating to
non-operating asset impairment;
• pursuit cost write-offs;
• gains and losses from early debt
extinguishment and preferred share redemptions;
• gains and losses from non-operating assets;
and
• other miscellaneous items.
Expected Normalized FFO per share is
calculated on a basis consistent with actual Normalized FFO per
share and is considered an appropriate supplemental measure of
expected operating performance when compared to expected EPS.
The Company believes that Normalized FFO and
Normalized FFO available to Common Shares and Units are helpful to
investors as supplemental measures of the operating performance of
a real estate company because they allow investors to compare the
Company's operating performance to its performance in prior
reporting periods and to the operating performance of other real
estate companies without the effect of items that by their nature
are not comparable from period to period and tend to obscure the
Company's actual operating results.
FFO, FFO available to Common Shares and
Units, Normalized FFO and Normalized FFO available to Common Shares
and Units do not represent net income, net income available to
Common Shares or net cash flows from operating activities in
accordance with GAAP. Therefore, FFO, FFO available to Common
Shares and Units, Normalized FFO and Normalized FFO available to
Common Shares and Units should not be exclusively considered as
alternatives to net income, net income available to Common Shares
or net cash flows from operating activities as determined by GAAP
or as a measure of liquidity. The Company's calculation of FFO, FFO
available to Common Shares and Units, Normalized FFO and Normalized
FFO available to Common Shares and Units may differ from other real
estate companies due to, among other items, variations in cost
capitalization policies for capital expenditures and, accordingly,
may not be comparable to such other real estate companies.
FFO available to Common Shares and Units and
Normalized FFO available to Common Shares and Units are calculated
on a basis consistent with net income available to Common Shares
and reflects adjustments to net income for preferred distributions
and premiums on redemption of preferred shares in accordance with
GAAP. The equity positions of various individuals and entities that
contributed their properties to the Operating Partnership in
exchange for OP Units are collectively referred to as the
"Noncontrolling Interests – Operating Partnership". Subject to
certain restrictions, the Noncontrolling Interests – Operating
Partnership may exchange their OP Units for Common Shares on a
one-for-one basis.
The following table presents reconciliations of EPS to FFO per
share and Normalized FFO per share for Consolidated Statements of
Funds From Operations and Normalized Funds From Operations.
Actual Sept.
Actual Sept.
Actual
Actual
YTD 2020
YTD 2019
Q3 2020
Q3 2019
Per Share
Per Share
Per Share
Per Share
EPS – Diluted
$
1.77
$
1.82
$
0.24
$
0.71
Depreciation expense
1.59
1.59
0.52
0.54
Net (gain) loss on sales
(0.88
)
(0.88
)
—
(0.33
)
Impairment – operating assets
—
—
—
—
FFO per share – Diluted
2.48
2.53
0.76
0.92
Impairment – non-operating assets
—
—
—
—
Write-off of pursuit costs
0.01
0.01
—
—
Debt extinguishment and preferred
share
redemption (gains) losses
—
0.03
—
(0.01
)
Non-operating asset (gains) losses
—
—
—
—
Other miscellaneous items
—
0.01
0.01
—
Normalized FFO per share – Diluted
$
2.49
$
2.58
$
0.77
$
0.91
Lease-Up NOI – Represents NOI for development properties:
(i) in various stages of lease-up; and (ii) where lease-up has been
completed but the properties were not stabilized (defined as having
achieved 90% occupancy for three consecutive months) for all of the
current and comparable periods presented.
Leasing Concessions – Reflects upfront discounts on both
new move-in and renewal leases on a straight-line basis.
Net Operating Income (“NOI”) – NOI is the Company’s
primary financial measure for evaluating each of its apartment
properties. NOI is defined as rental income less direct property
operating expenses (including real estate taxes and insurance). The
Company believes that NOI is helpful to investors as a supplemental
measure of its operating performance because it is a direct measure
of the actual operating results of the Company's apartment
properties. NOI does not include an allocation of property
management expenses either in the current or comparable periods.
Rental income for all leases and operating expense for ground
leases (for both same store and non-same store properties) are
reflected on a straight-line basis in accordance with GAAP for the
current and comparable periods.
The following tables present reconciliations of operating income
per the consolidated statements of operations to NOI, along with
rental income, operating expenses and NOI per the consolidated
statements of operations allocated between same store and non-same
store/other results (see Same Store Results):
Nine Months Ended September
30,
Quarter Ended September
30,
2020
2019
2020
2019
Operating income
$
961,384
$
947,232
$
182,410
$
368,338
Adjustments:
Property management
71,513
72,705
20,196
21,940
General and administrative
37,212
41,127
10,859
11,417
Depreciation
619,003
616,201
200,605
211,478
Net (gain) loss on sales of real
estate
properties
(352,218
)
(269,400
)
25
(130,565
)
Total NOI
$
1,336,894
$
1,407,865
$
414,095
$
482,608
Rental income:
Same store
$
1,854,383
$
1,900,820
$
603,097
$
652,330
Non-same store/other
103,887
115,976
19,336
32,790
Total rental income
1,958,270
2,016,796
622,433
685,120
Operating expenses:
Same store
586,707
576,070
203,158
196,863
Non-same store/other
34,669
32,861
5,180
5,649
Total operating expenses
621,376
608,931
208,338
202,512
NOI:
Same store
1,267,676
1,324,750
399,939
455,467
Non-same store/other
69,218
83,115
14,156
27,141
Total NOI
$
1,336,894
$
1,407,865
$
414,095
$
482,608
New Lease Change – The net effective change in rent
(inclusive of Leasing Concessions) for a lease with a new or
transferring resident compared to the rent for the prior lease of
the identical apartment unit, regardless of lease term.
Non-Residential – Consists of revenues and expenses from
retail and public parking garage operations.
Non-Same Store Properties – For annual comparisons,
primarily includes all properties acquired during 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 % – Leases renewed expressed as a percentage of
total renewal offers extended during the reporting period.
Renewal Rate Achieved – The net effective change in rent
(inclusive of Leasing Concessions) for a new lease on an apartment
unit where the lease has been renewed as compared to the rent for
the prior lease of the identical apartment unit, regardless of
lease term.
Residential – Consists of multifamily apartment revenues
and expenses.
Same Store Operating
Expenses:
On-site Payroll – Includes payroll and
related expenses for on-site personnel including property managers,
leasing consultants, and maintenance staff.
Other On-site Operating Expenses –
Includes ground lease costs and administrative costs such as office
supplies, telephone and data charges and association and business
licensing fees.
Repairs and Maintenance – Includes
general maintenance costs, apartment unit turnover costs including
interior painting, routine landscaping, security, exterminating,
fire protection, snow removal, elevator, roof and parking lot
repairs and other miscellaneous building repair and maintenance
costs.
Utilities – Represents gross expenses
prior to any recoveries under the Resident Utility Billing System
(“RUBS”). Recoveries are reflected in rental income.
Same Store Properties – For annual comparisons, primarily
includes all properties acquired or completed that are stabilized
prior to January 1, 2019, less properties subsequently sold.
Properties are included in Same Store when they are stabilized for
all of the current and comparable periods presented.
Same Store Residential Revenues – Revenues from our Same
Store Properties presented on a GAAP basis which reflects the
impact of Leasing Concessions on a straight-line basis.
Same Store Residential Revenues with Leasing Concessions on a
cash basis is considered by the Company to be a supplemental
measure to Same Store Residential Revenues in conformity with GAAP
to help investors evaluate the impact of both current and
historical Leasing Concessions on GAAP-based Same Store Residential
Revenues and to more readily enable comparisons to revenue as
reported by other companies. Same Store Residential Revenues with
Leasing Concessions on a cash basis reflects the impact of Leasing
Concessions used in the period and allows an investor to understand
the historical trend in cash Leasing Concessions.
The following table presents reconciliations of Same Store
Residential Revenues on a GAAP basis to Same Store Residential
Revenues with Leasing Concessions on a cash basis:
Quarter over Quarter
Sequential
Year over Year
Q3 2020
Q3 2019
Q3 2020
Q2 2020
Sept. YTD 2020
Sept. YTD 2019
Same Store Residential
Revenues (GAAP Basis)
$
597,210
$
628,345
$
613,726
$
630,951
$
1,811,101
$
1,829,896
Leasing Concessions amortized
3,973
675
4,376
1,666
5,821
2,665
Leasing Concessions granted
(11,585
)
(529
)
(12,183
)
(2,861
)
(15,329
)
(1,278
)
Same Store Residential
Revenues with Leasing
Concessions on a cash basis
$
589,598
$
628,491
$
605,919
$
629,756
$
1,801,593
$
1,831,283
% change - GAAP revenue
(5.0
%)
(2.7
%)
(1.0
%)
% change - cash revenue
(6.2
%)
(3.8
%)
(1.6
%)
% 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.
Unencumbered NOI % – Represents NOI generated by
consolidated real estate assets unencumbered by outstanding secured
debt as a percentage of total NOI generated by all of the Company's
consolidated real estate assets.
Unlevered Internal Rate of Return (“IRR”) – The Unlevered
IRR on sold properties is the compound annual rate of return
calculated by the Company based on the timing and amount of: (i)
the gross purchase price of the property plus any direct
acquisition costs incurred by the Company; (ii) total revenues
earned during the Company’s ownership period; (iii) total direct
property operating expenses (including real estate taxes and
insurance) incurred during the Company’s ownership period; (iv)
capital expenditures incurred during the Company’s ownership
period; and (v) the gross sales price of the property net of
selling costs.
The calculation of the Unlevered IRR does not include an
adjustment for the Company’s property management expense, general
and administrative expense or interest expense (including loan
assumption costs and other loan-related costs). Therefore, the
Unlevered IRR is not a substitute for net income as a measure of
our performance. Management believes that the Unlevered IRR
achieved during the period a property is owned by the Company is
useful because it is one indication of the gross value created by
the Company’s acquisition, development, renovation, management and
ultimate sale of a property, before the impact of Company overhead.
The Unlevered IRR achieved on the properties as cited in this
release should not be viewed as an indication of the gross value
created with respect to other properties owned by the Company, and
the Company does not represent that it will achieve similar
Unlevered IRRs upon the disposition of other properties. The
weighted average Unlevered IRR for sold properties is weighted
based on all cash flows over the investment period for each
respective property, including net sales proceeds.
Weighted Average Coupons – Contractual interest rate for
each debt instrument weighted by principal balances as of September
30, 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 nine months ended September 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201027006190/en/
Marty McKenna (312) 474-1300 investorrelations@eqr.com
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