Equity Residential Reports First Quarter Results

Same Store Revenues Increase 5.5%; Same Store NOI Increases 7.8%

CHICAGO--()--Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2012. All per share results are reported on a fully-diluted basis.

"As we expected, and as demonstrated by our first quarter operating results, fundamentals continue to be strong across all of our core markets,” said David J. Neithercut, Equity Residential’s President and CEO. “As we enter our primary leasing season, we continue to expect that we will achieve same store revenue growth for the year around the mid-point of our previously provided range of 5% to 6%.”

First Quarter 2012

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the first quarter of 2012 was $0.60 per share compared to $0.56 per share in the first quarter of 2011.

For the first quarter of 2012, the company reported Normalized FFO of $0.61 per share compared to $0.56 per share in the same period of 2011. The difference is due primarily to:

  • the positive impact of $0.07 per share from higher same store net operating income (NOI) and $0.02 per share from higher NOI from properties in lease-up;
  • the negative impact of $0.03 per share from 2011 and 2012 transaction activity; and
  • the negative impact of $0.01 per share from other items.

Normalized FFO begins with FFO and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. A reconciliation and definition of Normalized FFO are provided on pages 6 and 25 of this release and the company has included guidance for Normalized FFO on page 24 of this release.

For the first quarter of 2012, the company reported earnings of $0.47 per share compared to $0.42 per share in the first quarter of 2011. The difference is due primarily to higher gains from property sales as well as the items discussed above.

Same Store Results

On a same store first quarter to first quarter comparison, which includes 105,612 apartment units, revenues increased 5.5%, expenses increased 1.8% and NOI increased 7.8%.

Acquisitions/Dispositions

During the first quarter of 2012, the company acquired three properties with a total of 544 apartment units for an aggregate purchase price of $159.1 million at a weighted average capitalization (cap) rate of 4.4%. Also during the quarter, the company acquired two land parcels, one in Seattle and one in South Florida, for an aggregate purchase price of $23.7 million.

During the quarter, the company sold three consolidated properties, consisting of 1,522 apartment units, for an aggregate sale price of $206.4 million at a weighted average cap rate of 6.2% generating an unlevered internal rate of return (IRR), inclusive of management costs, of 12.6%.

Archstone

As previously disclosed, on December 2, 2011 the company entered into a contract with affiliates of Bank of America and Barclays PLC (“the Sellers”) to acquire, for $1.325 billion, half of their interests - an approximately 26.5% interest overall - in Archstone, a privately-held owner, operator and developer of multifamily apartment properties. On January 20, 2012, Lehman Brothers, the other owner of Archstone, acquired this 26.5% interest pursuant to a right of first offer and the company’s contract with the Sellers was terminated.

Equity Residential then had an exclusive 30-day right to contract to purchase the remaining 26.5% interest in Archstone owned by the Sellers for a price, determined by Equity Residential, equal to $1.325 billion or higher. During the first quarter of 2012, Equity Residential and the Sellers agreed to a 60-day extension of this purchase right at an increased minimum price of $1.485 billion. On April 18, 2012, the parties agreed to an additional extension and increase in the minimum purchase price. Equity Residential now has, until May 21, 2012, the exclusive right to contract to purchase this remaining interest at a price, to be determined by the company, equal to $1.5 billion or higher. Any offer to purchase the remaining interest would also be subject to Lehman’s right of first offer. If Lehman were to exercise such right, the company would be entitled to a break-up fee of $80 million.

Financing Activities

On January 6, 2012, the company amended its $1.25 billion unsecured revolving credit facility to increase the available borrowings by $500 million to $1.75 billion. The expansion was intended to fund a portion of an Archstone acquisition until repaid from property disposition proceeds, but may be used for any corporate purpose. The terms of the facility did not change, including the July 13, 2014 maturity date.

Also on January 6, 2012, the company entered into a new senior unsecured $500 million delayed draw term loan facility with an interest rate of LIBOR plus a spread (currently 1.25%) which is dependent on the credit rating of the company’s long-term debt. The maturity date of the facility is January 4, 2013, subject to two one-year extension options exercisable by the company. The facility provides for a single draw anytime on or before July 4, 2012 and may be used for any corporate purpose including to finance an Archstone acquisition or to repay the company’s existing $500 million term loan that matures in October 2012.

With the completion of these financing activities, the company terminated the $1 billion bridge loan facility that it obtained contemporaneously with entering into the original Archstone contract.

During the first quarter of 2012, utilizing the company’s At-the-Market (ATM) share offering program, the company issued approximately 2.1 million common shares at an average price of $59.47 per share for total consideration of approximately $123.6 million. The company will use the proceeds from these share sales primarily to fund its normal, ongoing investment activity, including development, and for general corporate purposes. The company has approximately 7.1 million common shares available for future issuance under this program. No additional ATM issuances are included in the company’s 2012 guidance.

As of April 24, 2012, the company had cash on hand of approximately $54 million, approximately $1.7 billion available on its revolving credit facility and $500 million available on its delayed draw term loan.

Second Quarter 2012 Guidance

The company has established a Normalized FFO guidance range of $0.65 to $0.69 per share for the second quarter of 2012. The difference between the company’s first quarter 2012 Normalized FFO of $0.61 per share and the midpoint of the second quarter guidance range of $0.67 per share is primarily due to:

  • the positive impact of $0.04 per share from same store and lease-up property NOI in the second quarter of 2012;
  • the positive impact of $0.01 per share from 2011 and 2012 transaction activity; and
  • the positive impact of $0.01 per share from lower total interest expense.

Second Quarter 2012 Earnings and Conference Call

Equity Residential expects to announce second quarter 2012 results on Wednesday, July 25, 2012 and host a conference call to discuss those results at 10:00 a.m. CT on Thursday, July 26, 2012.

Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 427 properties located in 14 states and the District of Columbia, consisting of 121,011 apartment units. 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. 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, Thursday, April 26, at 10:00 a.m. Central. 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)
   
Quarter Ended March 31,
2012 2011
REVENUES
Rental income $ 525,595 $ 464,550
Fee and asset management   2,064     1,806  
 
Total revenues   527,659     466,356  
 
EXPENSES
Property and maintenance 112,379 105,047
Real estate taxes and insurance 55,987 52,139
Property management 23,409 22,381
Fee and asset management 1,307 948
Depreciation 174,737 158,455
General and administrative   13,688     11,433  
 
Total expenses   381,507     350,403  
 
Operating income 146,152 115,953
 
Interest and other income 172 1,011
Other expenses (7,067 ) (2,160 )
Interest:
Expense incurred, net (118,703 ) (120,528 )
Amortization of deferred financing costs   (2,974 )   (3,005 )
 

Income (loss) before income and other taxes and discontinued operations

17,580 (8,729 )
Income and other tax (expense) benefit   (191 )   (184 )
Income (loss) from continuing operations 17,389 (8,913 )
Discontinued operations, net   134,778     141,979  
Net income 152,167 133,066
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership (6,418 ) (5,775 )
Partially Owned Properties   (450 )   40  
Net income attributable to controlling interests 145,299 127,331
Preferred distributions   (3,466 )   (3,466 )
Net income available to Common Shares $ 141,833   $ 123,865  
 
Earnings per share – basic:
Income (loss) from continuing operations available to Common Shares $ 0.04   $ (0.04 )
Net income available to Common Shares $ 0.47   $ 0.42  
Weighted average Common Shares outstanding   298,805     292,895  
 
Earnings per share – diluted:
Income (loss) from continuing operations available to Common Shares $ 0.04   $ (0.04 )
Net income available to Common Shares $ 0.47   $ 0.42  
Weighted average Common Shares outstanding   315,230     292,895  
 
Distributions declared per Common Share outstanding $ 0.3375   $ 0.3375  
 

Equity Residential

Consolidated Statements of Funds From Operations and Normalized Funds From Operations

(Amounts in thousands except per share data)

(Unaudited)

 
 

Quarter Ended March 31,

2012

 

2011

Net income $ 152,167 $ 133,066
Adjustments:
Net (income) loss attributable to Noncontrolling Interests –
Partially Owned Properties (450 ) 40
Depreciation 174,737 158,455
Depreciation – Non-real estate additions (1,354 ) (1,385 )
Depreciation – Partially Owned and Unconsolidated Properties (800 ) (750 )
Discontinued operations:
Depreciation 371 10,855
Net (gain) on sales of discontinued operations (132,956 ) (123,754 )
Net incremental gain on sales of condominium units   49     395  
 
FFO (1) (3) 191,764 176,922
 
Adjustments (see page 23 for additional detail):
Asset impairment and valuation allowances - -
Property acquisition costs and write-off of pursuit costs (other expenses) 2,626 2,164
Debt extinguishment (gains) losses, including prepayment penalties, preferred
share redemptions and non-cash convertible debt discounts (41 ) 2,063
(Gains) losses on sales of non-operating assets, net of income and other
tax expense (benefit) (4 ) (376 )
Other miscellaneous non-comparable items   974     (2,100 )
 
Normalized FFO (2) (3) $ 195,319   $ 178,673  
 
FFO (1) (3) $ 191,764 $ 176,922
Preferred distributions   (3,466 )   (3,466 )
 
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 188,298   $ 173,456  
 
FFO per share and Unit - basic $ 0.60   $ 0.57  
 
FFO per share and Unit - diluted $ 0.60   $ 0.56  
 
Normalized FFO (2) (3) $ 195,319 $ 178,673
Preferred distributions   (3,466 )   (3,466 )
 
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 191,853   $ 175,207  
 
Normalized FFO per share and Unit - basic $ 0.61   $ 0.57  
 
Normalized FFO per share and Unit - diluted $ 0.61   $ 0.56  
 
Weighted average Common Shares and Units outstanding - basic   312,011     306,248  
 
Weighted average Common Shares and Units outstanding - diluted   315,230     310,467  
 

Note:

 

See page 23 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 25 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.

 

Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
   
March 31, December 31,
2012 2011
ASSETS
Investment in real estate
Land $ 4,384,200 $ 4,367,816
Depreciable property 15,606,315 15,554,740
Projects under development 185,621 160,190
Land held for development   360,955     325,200  
Investment in real estate 20,537,091 20,407,946
Accumulated depreciation   (4,658,994 )   (4,539,583 )
Investment in real estate, net 15,878,097 15,868,363
 
Cash and cash equivalents 219,628 383,921
Investments in unconsolidated entities 14,803 12,327
Deposits – restricted 182,182 152,237
Escrow deposits – mortgage 11,428 10,692
Deferred financing costs, net 45,861 44,608
Other assets   129,248     187,155  
Total assets $ 16,481,247   $ 16,659,303  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 4,056,976 $ 4,111,487
Notes, net 5,355,590 5,609,574
Lines of credit - -
Accounts payable and accrued expenses 77,055 35,206
Accrued interest payable 79,489 88,121
Other liabilities 261,448 291,289
Security deposits 65,468 65,286
Distributions payable   109,043     179,079  
Total liabilities   10,005,069     10,380,042  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   457,224     416,404  
 
Equity:
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 1,600,000 shares issued
and outstanding as of March 31, 2012 and December 31, 2011 200,000 200,000
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 300,522,169 shares issued
and outstanding as of March 31, 2012 and 297,508,185
shares issued and outstanding as of December 31, 2011 3,005 2,975
Paid in capital 5,152,975 5,047,186
Retained earnings 656,001 615,572
Accumulated other comprehensive (loss)   (189,973 )   (196,718 )
Total shareholders' equity 5,822,008 5,669,015
Noncontrolling Interests:
Operating Partnership 123,031 119,536
Partially Owned Properties   73,915     74,306  
Total Noncontrolling Interests   196,946     193,842  
Total equity   6,018,954     5,862,857  
Total liabilities and equity $ 16,481,247   $ 16,659,303  
 

Equity Residential
Portfolio Summary
As of March 31, 2012
           
 
% of Total % of Average
Apartment Apartment Stabilized Rental
Markets Properties Units Units NOI (1) Rate (2)
 
1 New York Metro Area 29 7,810 6.5% 12.9% $ 3,257
2 DC Northern Virginia 26 9,381 7.8% 11.4% 2,069
3 Los Angeles 47 9,716 8.0% 9.7% 1,807
4 South Florida 39 12,990 10.7% 9.5% 1,410
5 Boston 30 6,183 5.1% 8.2% 2,398
6 San Francisco Bay Area 38 8,751 7.2% 7.5% 1,728
7 Seattle/Tacoma 44 9,901 8.2% 7.4% 1,426
8 San Diego 14 4,963 4.1% 5.1% 1,823
9 Denver 23 7,970 6.6% 5.0% 1,140
10 Phoenix 31 8,880 7.3% 4.2% 927
11 Suburban Maryland 16 4,584 3.8% 3.9% 1,504
12 Orlando 24 7,265 6.0% 3.8% 1,010
13 Orange County, CA 11 3,490 2.9% 3.2% 1,598
14 Atlanta 16 4,800 4.0% 2.5% 1,054
15 Inland Empire, CA 10 3,081 2.5% 2.4% 1,460
16 All Other Markets (3) 27 6,332 5.2% 3.3% 1,086
 
Total 425 116,097 95.9% 100.0% 1,614
 
Military Housing 2 4,914 4.1% - -
 
Grand Total 427 121,011 100.0% 100.0% $ 1,614
 
Note:   Projects under development are not included in the Portfolio Summary until construction has been completed.
 
(1) % of Stabilized NOI includes budgeted 2012 NOI for properties that are stabilized and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the month of March 2012.
 
(3) All Other Markets - Each individual market is less than 1.5% of stabilized NOI.
 

Equity Residential
             
 
Portfolio as of March 31, 2012
 
Apartment
Properties Units
 
Wholly Owned Properties 404 112,181
Partially Owned Properties - Consolidated 21 3,916
Military Housing 2     4,914  
 
427     121,011  
 
                         
 
Portfolio Rollforward Q1 2012
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
 
12/31/2011 427 121,974
 
Acquisitions:
Rental Properties - Consolidated 3 544 $ 159,100 4.4 %
Land Parcels (two) - - $ 23,740
Dispositions:
Rental Properties - Consolidated (3 ) (1,522 ) $ (206,350 ) 6.2 %
Configuration Changes -   15  
 
3/31/2012 427   121,011  
 

Equity Residential
             
 
First Quarter 2012 vs. First Quarter 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 105,612 Same Store Apartment Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q1 2012 $ 473,957 $ 173,054 $ 300,903 $ 1,578 94.9 % 12.5 %
Q1 2011 $ 449,232   $ 170,017   $ 279,215   $ 1,496   94.9 % 11.5 %
 
Change $ 24,725   $ 3,037   $ 21,688   $ 82   0.0 % 1.0 %
 
Change 5.5 % 1.8 % 7.8 % 5.5 %
 
 
 
 
First Quarter 2012 vs. Fourth Quarter 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 110,557 Same Store Apartment Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q1 2012 $ 503,074 $ 182,778 $ 320,296 $ 1,600 94.9 % 12.4 %
Q4 2011 $ 498,856   $ 174,909   $ 323,947   $ 1,585   95.0 % 13.2 %
 
Change $ 4,218   $ 7,869   $ (3,651 ) $ 15   (0.1 %) (0.8 %)
 
Change 0.8 % 4.5 % (1.1 %) 0.9 %
 
(1)   The Company's primary financial measure for evaluating each of its apartment communities is net operating income ("NOI"). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. 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 communities. See page 25 for reconciliations from operating income.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 

Equity Residential
First Quarter 2012 vs. First Quarter 2011
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year's Quarter
Q1 2012 Q1 2012 Q1 2012
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 New York Metro Area 7,063 12.5 % $ 3,261 95.3 % 7.1 % 2.6 % 10.6 % 6.7 % 0.3 %
2 DC Northern Virginia 7,974 10.2 % 2,022 94.6 % 4.8 % 4.8 % 4.8 % 5.4 % (0.6 %)
3 South Florida 12,114 9.6 % 1,374 95.0 % 4.2 % 4.7 % 3.8 % 3.9 % 0.2 %
4 Los Angeles 7,832 8.8 % 1,764 95.0 % 4.3 % (0.6 %) 6.8 % 3.8 % 0.4 %
5 Boston 5,526 8.2 % 2,405 94.7 % 6.3 % (3.6 %) 12.4 % 6.7 % (0.4 %)
6 San Francisco Bay Area 6,194 7.4 % 1,910 95.1 % 11.0 % 3.7 % 15.2 % 11.4 % (0.4 %)
7 Seattle/Tacoma 9,081 7.4 % 1,402 94.4 % 6.1 % 3.9 % 7.5 % 5.4 % 0.6 %
8 Denver 7,970 6.0 % 1,141 95.3 % 9.3 % 3.3 % 12.2 % 8.9 % 0.3 %
9 Phoenix 8,880 4.9 % 931 95.1 % 4.7 % (3.2 %) 9.9 % 5.0 % (0.3 %)
10 San Diego 4,284 4.7 % 1,722 94.0 % 2.0 % (0.4 %) 3.2 % 2.7 % (0.7 %)
11 Orlando 7,265 4.2 % 1,019 95.2 % 3.2 % 2.5 % 3.7 % 2.9 % 0.2 %
12 Orange County, CA 3,490 3.6 % 1,598 95.1 % 4.3 % 4.2 % 4.4 % 4.4 % (0.1 %)
13 Suburban Maryland 4,005 3.5 % 1,404 94.3 % 2.5 % (1.4 %) 4.7 % 2.6 % (0.1 %)
14 Atlanta 4,800 2.9 % 1,054 95.5 % 5.5 % 0.0 % 9.6 % 5.7 % (0.2 %)
15 Inland Empire, CA 3,081 2.8 % 1,451 94.0 % 2.5 % 2.1 % 2.8 % 3.4 % (0.9 %)
16 All Other Markets 6,053 3.3 %   1,048 94.5 % 4.1 % 1.0 % 6.8 % 4.4 % (0.3 %)
 
Total 105,612 100.0 % $ 1,578 94.9 % 5.5 % 1.8 % 7.8 % 5.5 % 0.0 %
 

(1)

  Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 

Equity Residential  
First Quarter 2012 vs. Fourth Quarter 2011
Same Store Results/Statistics by Market    
                   
 
Increase (Decrease) from Prior Quarter    
Q1 2012 Q1 2012 Q1 2012
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 New York Metro Area 7,423 12.1 % $ 3,207 95.3 % 0.7 % 6.9 % (3.5 %) 1.6 % (0.9 %)
2 DC Northern Virginia 9,381 11.6 % 2,066 94.7 % 0.2 % 8.6 % (3.3 %) 0.6 % (0.3 %)
3 South Florida 12,990 10.0 % 1,410 95.0 % 1.6 % 3.4 % 0.5 % 0.9 % 0.6 %
4 Los Angeles 8,881 9.5 % 1,797 95.0 % 0.1 % (1.4 %) 0.9 % 0.8 % (0.7 %)
5 Boston 5,821 8.1 % 2,410 94.7 % 1.3 % 6.8 % (1.3 %) 2.8 % (1.3 %)
6 Seattle/Tacoma 9,582 7.4 % 1,404 94.4 % 1.5 % 6.9 % (1.5 %) 1.1 % 0.4 %
7 San Francisco Bay Area 6,194 6.9 % 1,910 95.1 % 2.2 % 7.0 % (0.1 %) 2.0 % 0.1 %
8 Denver 7,970 5.6 % 1,141 95.3 % 0.7 % (0.3 %) 1.1 % 0.4 % 0.2 %
9 Phoenix 8,880 4.7 % 931 95.1 % 0.5 % 2.8 % (0.9 %) 0.2 % 0.1 %
10 San Diego 4,284 4.4 % 1,722 94.0 % (0.6 %) (0.6 %) (0.6 %) (0.1 %) (0.4 %)
11 Orlando 7,265 4.0 % 1,019 95.2 % 1.2 % 7.8 % (2.7 %) 0.7 % 0.5 %
12 Suburban Maryland 4,462 3.9 % 1,469 94.3 % 0.9 % 0.7 % 1.0 % 1.2 % (0.3 %)
13 Orange County, CA 3,490 3.4 % 1,598 95.1 % 0.1 % 1.7 % (0.6 %) 0.8 % (0.7 %)
14 Atlanta 4,800 2.7 % 1,054 95.5 % 0.8 % 3.6 % (0.9 %) 1.3 % (0.5 %)
15 Inland Empire, CA 3,081 2.6 % 1,451 94.0 % 0.8 % 0.7 % 0.9 % 1.3 % (0.5 %)
16 All Other Markets 6,053 3.1 %   1,048 94.5 % 0.4 % 5.7 % (3.6 %) 0.5 % (0.1 %)
 
Total 110,557 100.0 % $ 1,600 94.9 % 0.8 % 4.5 % (1.1 %) 0.9 % (0.1 %)
 
(1)   Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 

Equity Residential
         
 
First Quarter 2012 vs. First Quarter 2011
Same Store Operating Expenses
$ in thousands - 105,612 Same Store Apartment Units
 
% of Actual
Q1 2012
Actual Actual $ % Operating
Q1 2012 Q1 2011 Change Change Expenses
 
Real estate taxes $ 50,167 $ 47,730 $ 2,437 5.1 % 29.0 %
On-site payroll (1) 39,913 39,168 745 1.9 % 23.1 %
Utilities (2) 27,160 28,531 (1,371 ) (4.8 %) 15.7 %
Repairs and maintenance (3) 23,129 22,638 491 2.2 % 13.4 %
Property management costs (4) 18,247 17,969 278 1.5 % 10.5 %
Insurance 5,436 5,095 341 6.7 % 3.1 %
Leasing and advertising 2,700 3,354 (654 ) (19.5 %) 1.6 %
Other on-site operating expenses (5)   6,302   5,532   770   13.9 % 3.6 %
 
Same store operating expenses $ 173,054 $ 170,017 $ 3,037   1.8 % 100.0 %
 
(1)   On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
 
(2) Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income.
 
(3) 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 costs.
 
(4) Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
 
(5) Other on-site operating expenses - Includes administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
 

Equity Residential

 

Debt Summary as of March 31, 2012

(Amounts in thousands)

 
        Weighted
Weighted Average
Average Maturities
Amounts (1) % of Total Rates (1) (years)
 
Secured $ 4,056,976 43.1 % 4.88 % 8.1
Unsecured   5,355,590 56.9 % 5.14 % 5.1
 
Total $ 9,412,566 100.0 % 5.03 % 6.4
 
Fixed Rate Debt:
Secured - Conventional $ 3,527,819 37.5 % 5.53 % 6.7
Unsecured - Public/Private   4,549,919 48.3 % 5.73 % 5.9
 
Fixed Rate Debt   8,077,738 85.8 % 5.64 % 6.3
 
Floating Rate Debt:
Secured - Conventional 64,061 0.7 % 3.33 % 1.2
Secured - Tax Exempt 465,096 4.9 % 0.15 % 20.6
Unsecured - Public/Private 805,671 8.6 % 1.68 % 0.7
Unsecured - Revolving Credit Facility   - -   -   2.3
 
Floating Rate Debt   1,334,828 14.2 % 1.23 % 7.3
 
Total $ 9,412,566 100.0 % 5.03 % 6.4
 
(1)   Net of the effect of any derivative instruments. Weighted average rates are for the quarter ended March 31, 2012.
 
Note: The Company capitalized interest of approximately $5.0 million and $1.7 million during the quarters ended March 31, 2012 and 2011, respectively.
 
 
Debt Maturity Schedule as of March 31, 2012
(Amounts in thousands)
           
Weighted Weighted
Average Rates Average
Fixed Floating on Fixed Rates on
Year Rate (1) Rate (1) Total % of Total Rate Debt (1) Total Debt (1)
 
2012 $ 315,756 $ 535,546 (2) $ 851,302 9.0 % 5.62 % 2.69 %
2013 267,869 306,182 574,051 6.1 % 6.70 % 4.86 %
2014 564,477 22,019 586,496 6.2 % 5.31 % 5.24 %
2015 418,012 - 418,012 4.4 % 6.31 % 6.31 %
2016 1,190,610 - 1,190,610 12.7 % 5.34 % 5.34 %
2017 1,355,806 456 1,356,262 14.4 % 5.87 % 5.87 %
2018 80,901 18,419 99,320 1.1 % 5.71 % 4.82 %
2019 802,043 20,766 822,809 8.7 % 5.49 % 5.36 %
2020 1,671,868 809 1,672,677 17.8 % 5.50 % 5.50 %
2021 1,165,475 856 1,166,331 12.4 % 4.64 % 4.64 %
2022+ 233,860 435,539 669,399 7.1 % 6.75 % 2.88 %
Premium/(Discount)   11,061   (5,764 )   5,297 0.1 % N/A   N/A  
 
Total $ 8,077,738 $ 1,334,828   $ 9,412,566 100.0 % 5.52 % 4.95 %
 
(1)   Net of the effect of any derivative instruments. Weighted average rates are as of March 31, 2012.
 
(2) Effective April 5, 2011, the Company exercised the second of its two one-year extension options for its $500.0 million term loan facility and as a result, the maturity date is now October 5, 2012.
 

Equity Residential

Unsecured Debt Summary as of March 31, 2012

(Amounts in thousands)

 
          Unamortized  
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
 
Fixed Rate Notes:
5.500 % 10/01/12 $ 222,133 $ (109 ) $ 222,024
5.200 % 04/01/13 (1) 400,000 (118 ) 399,882
Fair Value Derivative Adjustments (1) (300,000 ) - (300,000 )
5.250 % 09/15/14 500,000 (151 ) 499,849
6.584 % 04/13/15 300,000 (331 ) 299,669
5.125 % 03/15/16 500,000 (211 ) 499,789
5.375 % 08/01/16 400,000 (804 ) 399,196
5.750 % 06/15/17 650,000 (2,670 ) 647,330
7.125 % 10/15/17 150,000 (360 ) 149,640
4.750 % 07/15/20 600,000 (3,777 ) 596,223
4.625 % 12/15/21 1,000,000 (3,683 ) 996,317
7.570 % 08/15/26   140,000     -     140,000  
 
  4,562,133     (12,214 )   4,549,919  
 
Floating Rate Notes:
04/01/13 (1) 300,000 - 300,000
Fair Value Derivative Adjustments (1) 5,671 - 5,671
Term Loan Facility LIBOR+0.50% 10/05/12 (2)(3) 500,000 - 500,000
Delayed Draw Term Loan Facility LIBOR+1.25% 01/04/13 (2)(4)   -     -     -  
 
  805,671     -     805,671  
 
Revolving Credit Facility: LIBOR+1.15% 07/13/14 (2)(5)   -     -     -  
 
Total Unsecured Debt $ 5,367,804   $ (12,214 ) $ 5,355,590  
 
(1)   Fair value interest rate swaps convert $300.0 million of the 5.200% notes due April 1, 2013 to a floating interest rate.
 
(2) Facilities are private. All other unsecured debt is public.
 
(3) Effective April 5, 2011, the Company exercised the second of its two one-year extension options for its $500.0 million term loan facility and as a result, the maturity date is now October 5, 2012.
 
(4)

On January 6, 2012, the Company entered into a new senior unsecured $500.0 million delayed draw term loan facility that may be drawn anytime on or before July 4, 2012 and is currently undrawn. If the Company elects to draw on this facility, up to the full amount of the principal will be funded in a single borrowing and the maturity date will be January 4, 2013, subject to two one-year extension options exercisable by the Company. The interest rate on advances under the new term loan facility will generally be LIBOR plus a spread (currently 1.25%), which is dependent on the credit rating of the Company's long term debt.

 
(5) As of March 31, 2012, there was approximately $1.72 billion available on the Company's unsecured revolving credit facility.
 

Equity Residential

   
 
Selected Unsecured Public Debt Covenants
 
March 31, December 31,
2012 2011
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 44.6 % 46.0 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 19.2 % 19.4 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.76 2.59
 
Total Unsecured Assets to Unsecured Debt 273.5 % 259.9 %
(must be at least 150%)

 

These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt. Equity Residential is the general partner of ERPOP.
 

Equity Residential

                 
Capital Structure as of March 31, 2012
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 4,056,976 43.1 %
Unsecured Debt   5,355,590 56.9 %
 
Total Debt 9,412,566 100.0 % 32.1 %
 
Common Shares (includes Restricted Shares) 300,522,169 95.7 %
Units (includes OP Units and LTIP Units)   13,531,417   4.3 %
 
Total Shares and Units 314,053,586 100.0 %
Common Share Price at March 31, 2012 $ 62.62
19,666,036 99.0 %
Perpetual Preferred Equity (see below)   200,000 1.0 %
 
Total Equity 19,866,036 100.0 % 67.9 %
 
Total Market Capitalization $ 29,278,602 100.0 %
                                   
 
Perpetual Preferred Equity as of March 31, 2012
(Amounts in thousands except for share and per share amounts)
 
Annual Annual Weighted
Redemption Outstanding Liquidation Dividend Dividend Average
Series Date Shares Value Per Share Amount Rate
 
Preferred Shares:
8.29% Series K 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145
6.48% Series N 6/19/08 600,000   150,000 16.20   9,720
 
Total Perpetual Preferred Equity 1,600,000 $ 200,000 $ 13,865 6.93 %
 

Equity Residential

Common Share and Unit

Weighted Average Amounts Outstanding

   
 
Q112 Q111
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 298,805,362 292,895,122
Shares issuable from assumed conversion/vesting of (1):
- OP Units 13,205,300 -
- long-term compensation shares/units 3,219,011 -
 
Total Common Shares and Units - diluted (1) 315,229,673 292,895,122
 
Weighted Average Amounts Outstanding for FFO and Normalized
FFO Purposes:
Common Shares - basic 298,805,362 292,895,122
OP Units - basic 13,205,300 13,353,331
 
Total Common Shares and OP Units - basic 312,010,662 306,248,453
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 3,219,011 4,218,062
 
Total Common Shares and Units - diluted 315,229,673 310,466,515
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 300,522,169 294,522,273
Units (includes OP Units and LTIP Units) 13,531,417 13,749,066
 
Total Shares and Units 314,053,586 308,271,339
 
(1)   Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a loss from continuing operations for the quarter ended March 31, 2011.
 

Equity Residential

Partially Owned Entities as of March 31, 2012

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

       
 
Consolidated
Development Projects
Held for
and/or Under Completed
Development and Stabilized Other Total
 
Total projects (1)   -     2     19     21  
 
Total apartment units (1)   -     441     3,475     3,916  
 
Operating information for the quarter ended 3/31/12 (at 100%):
Operating revenue $ - $ 2,349 $ 15,045 $ 17,394
Operating expenses   (18 )   375     4,871     5,228  
 
Net operating income 18 1,974 10,174 12,166
Depreciation - 1,042 3,872 4,914
General and administrative/other   4     2     13     19  
 
Operating income 14 930 6,289 7,233
Interest and other income 1 1 - 2
Other expenses (61 ) - - (61 )
Interest:
Expense incurred, net - (337 ) (2,346 ) (2,683 )
Amortization of deferred financing costs   -     (107 )   (54 )   (161 )
 
(Loss) income before income and other taxes (46 ) 487 3,889 4,330
Income and other tax (expense) benefit   (26 )   -     (21 )   (47 )
 
Net (loss) income $ (72 ) $ 487   $ 3,868   $ 4,283  
 
 
Debt - Secured (2):
EQR Ownership (3) $ - $ 33,175 $ 159,068 $ 192,243
Noncontrolling Ownership   -     -     41,269     41,269  
 
Total (at 100%) $ -   $ 33,175   $ 200,337   $ 233,512  
 
(1) Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
 
(2) All debt is non-recourse to the Company.
 
(3) Represents the Company's current economic ownership interest.
 
Note: See page 20 for the discussion of the Company's unconsolidated Nexus Sawgrass and Domain developments.
 

Equity Residential

Development and Lease-Up Projects as of March 31, 2012

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

                     

Total Book

No. of Total Total Value Not Estimated Estimated
Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 
Consolidated
 

Projects Under Development - Wholly Owned:

The Savoy at Dayton Station III (formerly Savoy III) Aurora, CO 168 $ 23,856 $ 19,793 $ 19,793 $ - 90 % 26 % 17 % Q2 2012 Q2 2013
2201 Pershing Drive Arlington, VA 188 64,242 38,943 38,943 - 62 % 4 % - Q3 2012 Q3 2013
Chinatown Gateway Los Angeles, CA 280 92,920 38,374 38,374 - 17 % - - Q3 2013 Q2 2015
Westgate Block 2 Pasadena, CA 252 125,293 37,139 37,139 - 4 % - - Q1 2014 Q1 2015
The Madison Alexandria, VA 360 115,072 30,990 30,990 - 4 % - - Q1 2014 Q2 2015
Market Street Landing Seattle, WA 287   90,024   20,382   20,382   - 6 % - - Q1 2014 Q3 2015
 
Projects Under Development - Wholly Owned 1,535 511,407 185,621 185,621 -
         
Projects Under Development 1,535   511,407   185,621   185,621   -
 

Completed Not Stabilized - Wholly Owned (2):

88 Hillside (3) Daly City, CA 95 39,374 39,374 - - 89 % 85 % Completed Q3 2012
Ten23 (formerly 500 West 23rd Street) (4) New York, NY 111   55,555   54,431   -   - 44 % 29 % Completed Q4 2012
 
Projects Completed Not Stabilized - Wholly Owned 206 94,929 93,805 - -
         
Projects Completed Not Stabilized 206   94,929   93,805   -   -
 
Total Consolidated Projects 1,741 $ 606,336 $ 279,426 $ 185,621 $ -
 
Land Held for Development (5) N/A   N/A $ 360,955 $ 360,955 $ -
 
Unconsolidated
 

Projects Under Development - Unconsolidated:

Nexus Sawgrass (formerly Sunrise Village) (6) Sunrise, FL 501 $ 78,212 $ 28,267 $ 28,267 $ - 22 % - - Q3 2013 Q3 2014
Domain (6) San Jose, CA 444   154,570   45,696   45,696   - 10 % - - Q4 2013 Q4 2015
 
Projects Under Development - Unconsolidated 945 232,782 73,963 73,963 -
         
Projects Under Development 945   232,782   73,963   73,963   -
 
Total Unconsolidated Projects 945 $ 232,782 $ 73,963 $ 73,963 $ -
 
 
Total Capital Q1 2012
NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS Cost (1) NOI
Projects Under Development $ 511,407 $ (5 )
Completed Not Stabilized   94,929     (391 )
Total Consolidated Development NOI Contribution $ 606,336   $ (396 )
 
(1)   Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
 
(2) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
 
(3) The Company acquired this project prior to stabilization and is completing lease-up activities.
 
(4) Ten23 - The land under this development is subject to a long term ground lease.
 
(5) Includes $58.6 million funded by Toll Brothers (NYSE: TOL) for their allocated share of a vacant land parcel at 400 Park Avenue South in New York City.
 
(6) These development projects are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. Total project costs are approximately $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company is responsible for constructing the projects and has given certain construction cost overrun guarantees. The Company's remaining funding obligations are currently estimated at $3.0 million.
 

Equity Residential

Repairs and Maintenance Expenses and Capital Expenditures to Real Estate

For the Quarter Ended March 31, 2012

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

                           
 
Repairs and Maintenance Expenses Capital Expenditures to Real Estate Total Expenditures
 
Total Avg. Per Avg. Per Avg. Per Avg. Per Building Avg. Per Avg. Per Avg. Per
Apartment Apartment Apartment Apartment Replacements Apartment Improvements Apartment Apartment Grand Apartment
Units (1) Expense (2) Unit Payroll (3) Unit Total Unit (4) Unit (5) Unit Total Unit Total Unit
 
Same Store Properties (6) 105,612 $ 23,129 $ 219 $ 22,647 $ 214 $ 45,776 $ 433 $ 15,185 $ 144 $ 9,949 $ 94 $ 25,134 $ 238 (9 ) $ 70,910 $ 671
 
Non-Same Store Properties (7) 10,485 2,777 278 1,808 181 4,585 459 1,299 130 3,682 369 4,981 499 9,566 958
 
Other (8) -   34   502   536   83     27     110   646
 
Total 116,097 $ 25,940 $ 24,957 $ 50,897 $ 16,567   $ 13,658   $ 30,225 $ 81,122
 
(1)   Total Apartment Units - Excludes 4,914 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company's results.
 
(2) Repairs and Maintenance Expenses - 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 costs.
 
(3) Maintenance Payroll - Includes payroll and related expenses for maintenance staff.
 
(4) Replacements - Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $7.3 million spent in Q1 2012 on apartment unit renovations/rehabs (primarily kitchens and baths) on 1,027 apartment units (equating to about $7,100 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2012, the Company expects to spend approximately $39.2 million rehabbing 4,700 apartment units (equating to about $8,300 per apartment unit rehabbed).
 
(5) Building Improvements - Includes roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment.
 
(6) Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2011, less properties subsequently sold.
 
(7) Non-Same Store Properties - Primarily includes all properties acquired during 2011 and 2012, plus any properties in lease-up and not stabilized as of January 1, 2011. Per apartment unit amounts are based on a weighted average of 9,988 apartment units.
(8) Other - Primarily includes expenditures for properties sold during the period.
 
(9) For 2012, the Company estimates that it will spend approximately $1,225 per apartment unit of capital expenditures for its same store properties inclusive of apartment unit renovation/rehab costs, or $850 per apartment unit excluding apartment unit renovation/rehab costs.
 

Equity Residential

Discontinued Operations

(Amounts in thousands)
   
 
Quarter Ended
March 31,
2012 2011
 
REVENUES
Rental income $ 2,931   $ 60,157  
 
Total revenues   2,931     60,157  
 
EXPENSES (1)
Property and maintenance 422 26,019
Real estate taxes and insurance 250 4,362
Depreciation 371 10,908
General and administrative   4     11  
 
Total expenses   1,047     41,300  
 
Discontinued operating income 1,884 18,857
 
Interest and other income 25 5
Other expenses - (4 )
Interest (2):
Expense incurred, net (7 ) (522 )
Amortization of deferred financing costs - (69 )
Income and other tax (expense) benefit   (80 )   (42 )
 
Discontinued operations 1,822 18,225
Net gain on sales of discontinued operations   132,956     123,754  
 
Discontinued operations, net $ 134,778   $ 141,979  
 
(1)   Includes expenses paid in the current period for properties sold or held for sale in prior periods related to the Company’s period of ownership.
 
(2) Includes only interest expense specific to secured mortgage notes payable for properties sold and/or held for sale.
 

Equity Residential

Normalized FFO Guidance Reconciliations and Non-Comparable Items

(Amounts in thousands except per share data)

(All per share data is diluted)

 

Normalized FFO Guidance Reconciliations

 
              Normalized
FFO Reconciliations
Guidance Q1 2012
to Actual Q1 2012
Amounts   Per Share
 
Guidance Q1 2012 Normalized FFO - Diluted (2) (3) $ 188,993 $ 0.600
Property NOI 2,656 0.008
Other   204     0.001  
 
Actual Q1 2012 Normalized FFO - Diluted (2) (3) $ 191,853   $ 0.609  
 
                         
 
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
 
Quarter Ended March 31,
2012 2011 Variance
 
 
Impairment $ -   $ -   $ -  
Asset impairment and valuation allowances   -     -     -  
 
Property acquisition costs (other expenses) (A) 1,592 481 1,111
Write-off of pursuit costs (other expenses)   1,034     1,683     (649 )
Property acquisition costs and write-off of pursuit costs (other expenses)   2,626     2,164     462  
 
Write-off of unamortized deferred financing costs (interest expense) 1 118 (117 )
Write-off of unamortized (premiums)/discounts/OCI (interest expense) (42 ) - (42 )
Non-cash convertible debt discount (interest expense)   -     1,945     (1,945 )
Debt extinguishment (gains) losses, including prepayment penalties, preferred
share redemptions and non-cash convertible debt discounts   (41 )   2,063     (2,104 )
 
Net incremental (gain) on sales of condominium units (49 ) (395 ) 346
Income and other tax expense (benefit) - Condo sales   45     19     26  
(Gains) losses on sales of non-operating assets, net of income and other
tax expense (benefit)   (4 )   (376 )   372  
 
Insurance/litigation settlement expense (other expenses) 4,186 - 4,186
Prospect Towers garage insurance proceeds (real estate taxes and insurance) (3,467 ) (1,600 ) (1,867 )
Forfeited deposits (interest and other income) - (500 ) 500
Other (other expenses)   255     -     255  
Other miscellaneous non-comparable items   974     (2,100 )   3,074  
     
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 3,555   $ 1,751   $ 1,804  
 
(A)   For the quarter ended March 31, 2012, includes $1.1 million of transaction costs related to the potential Archstone transaction.
 
Note: See page 25 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
 

Equity Residential

Normalized FFO Guidance and Assumptions

 
The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis.
   
 

2012 Normalized FFO Guidance (per share diluted)

 

Q2 2012

2012

 
Expected Normalized FFO (2) (3) $0.65 to $0.69 $2.68 to $2.78
 
 

2012 Same Store Assumptions

 
Physical occupancy 95.2%
Revenue change 5.0% to 6.0%
Expense change 1.5% to 2.5%
NOI change 6.5% to 8.5%
 
(Note: 30 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2012 Transaction Assumptions

 
Consolidated rental acquisitions $1.25 billion
Consolidated rental dispositions $1.25 billion
Capitalization rate spread 125 basis points
 
 

2012 Debt Assumptions (see Note)

 
Weighted average debt outstanding $9.4 billion to $9.6 billion
Weighted average interest rate (reduced for capitalized interest) 4.88%
Interest expense $458.0 million to $468.0 million
 
(Note: Debt guidance assumes the delayed draw term loan is drawn in July 2012 and assumes no other debt offerings during 2012)
 

2012 Other Guidance Assumptions (see Note)

 
General and administrative expense $47.0 million to $48.0 million
Interest and other income $0.5 million to $1.0 million
Income and other tax expense $0.5 million to $1.5 million
Equity ATM share offerings No additional amounts budgeted
Weighted average Common Shares and Units - Diluted 317.7 million
 

Note: All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties and the write-off of pursuit and property acquisition costs, are not included in the estimates provided on this page. See page 25 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.

 

Equity Residential
Additional Reconciliations, Definitions and Footnotes
(Amounts in thousands except per share data)
(All per share data is diluted)
       
 
The guidance/projections provided below are based on current expectations and are forward-looking.
 
 
Reconciliations of EPS to FFO and Normalized FFO for Pages 6, 23 and 24
 
 
Expected Expected
Expected Q1 2012 Q2 2012 2012
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $ 180,378 $ 0.572 $0.22 to $0.26 $2.53 to $2.63
Add: Expected depreciation expense 179,550 0.570 0.57 2.37
Less: Expected net gain on sales (5)   (173,828 )   (0.551 ) (0.16) (2.25)
 
Expected FFO - Diluted (1) (3) 186,100 0.591 0.63 to 0.67 2.65 to 2.75
 
Asset impairment and valuation allowances - - - -
Property acquisition costs and write-off of pursuit costs (other expenses) 3,398 0.010 0.02 0.04
Debt extinguishment (gains) losses, including prepayment penalties, preferred
share redemptions and non-cash convertible debt discounts (41 ) - - -
(Gains) losses on sales of non-operating assets, net of income and other
tax expense (benefit) - - - (0.01)
Other miscellaneous non-comparable items   (464 )   (0.001 ) -   -  
 
Expected Normalized FFO - Diluted (2) (3) $ 188,993   $ 0.600   $0.65 to $0.69 $2.68 to $2.78
 
Definitions and Footnotes for Pages 6, 23 and 24
 
(1)

The National Association of Real Estate Investment Trusts ("NAREIT") defines funds from operations ("FFO") (April 2002 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding gains (or losses) from sales and impairment write-downs of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.  The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only.  Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.

 
(2) Normalized funds from operations ("Normalized FFO") begins with FFO and excludes:
• the impact of any expenses relating to non-operating asset impairment and valuation allowances;
• property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs (other expenses);
• gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
• gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
• other miscellaneous non-comparable items.
 

(3)

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 related to dispositions of depreciable property and excluding real estate depreciation (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. The company also 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.

 

(4)

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 accounting principles generally accepted in the United States. 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.

 

(5)

Earnings represents net income per share calculated in accordance with accounting principles generally accepted in the United States. Expected earnings is calculated on a basis consistent with actual earnings.  Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual earnings could differ materially from expected earnings.

 
Same Store NOI Reconciliation for Page 10
 
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for the First Quarter 2012 Same Store Properties:
 
Quarter Ended March 31,
2012 2011
 
Operating income $ 146,152 $ 115,953
Adjustments:
Non-same store operating results (32,917 ) (5,768 )
Fee and asset management revenue (2,064 ) (1,806 )
Fee and asset management expense 1,307 948
Depreciation 174,737 158,455
General and administrative   13,688     11,433  
 
Same store NOI $ 300,903   $ 279,215  

Contacts

Equity Residential
Marty McKenna, (312) 928-1901

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Contacts

Equity Residential
Marty McKenna, (312) 928-1901