Equity Residential Reports First Quarter 2009 Results
* Reuters is not responsible for the content in this press release.
CHICAGO--(Business Wire)--
Equity Residential (NYSE: EQR) today reported results for the quarter ended
March 31, 2009. All per share results are reported on a fully-diluted basis.
"Our first quarter performance was in line with our expectations, with good
overall occupancy across the country demonstrating continued demand for our
apartments," said David J. Neithercut, Equity Residential`s President and CEO.
"Although net effective new lease rents have decreased in our markets from a
year ago, we are pleased to see these levels holding steady, on average, since
the beginning of the year. Continuing job losses leave us cautious for the
remainder of the year, yet we believe that steady rents and current occupancy of
94% position us well as we enter our primary leasing season."
First Quarter 2009
For the first quarter of 2009, the company reported earnings per share of $0.28
compared to earnings of $0.50 per share in the first quarter of 2008. The
difference is primarily due to lower property sales gains due to lower property
sales volume in 2009.
Funds from Operations (FFO) for the quarter ended March 31, 2009 were $0.57 per
share compared to $0.58 per share in the same period of 2008. The difference is
due primarily to:
* A net negative impact of approximately $0.01 per share from lower total net
operating income (NOI) from the company`s same store portfolio and dilution from
2008 and 2009 transaction activity, partially offset by the positive impact of
NOI from lease-up activity and property management expense savings;
* A negative impact from higher interest expense of approximately $0.02 per
share as a result of higher debt balances, lower capitalized interest and write
offs of unamortized loan costs from the company`s debt tender and debt
repurchase activities, offset in part by lower floating rates of interest;
* Higher interest and other income of approximately $0.01 per share as a result
of gain from the company`s debt repurchase activities; and
* Lower general and administrative expenses of approximately $0.01 per share.
On January 1, 2009 the company adopted FASB Staff Position APB 14-1, which
requires companies to expense certain implied costs of the option value related
to convertible debt. As a result, the company`s first quarter 2008 and 2009 FFO
per share were both negatively impacted by $0.01 per share.
The difference between the company`s first quarter 2009 FFO of $0.57 per share
and the company`s fourth quarter 2008 FFO of $0.27 per share (as restated for
comparison purposes for the adoption of FASB Staff Position APB 14-1) is
primarily attributable to the following:
* Approximately $0.40 per share higher FFO in the first quarter due to the
impairment charge on land held for development that the company recorded in the
fourth quarter of 2008;
* A negative impact of approximately $0.07 per share as a result of lower NOI
from the company`s same store portfolio and dilution from first quarter 2009
transaction activity;
* A negative impact of approximately $0.06 per share from lower debt
extinguishment gains in the first quarter of 2009;
* A positive impact of approximately $0.02 per share as a result of lower rates
of interest on the company`s debt; and
* A net positive impact of approximately $0.01 per share due to miscellaneous
other activities, including lower general and administrative expenses and lower
transaction expenses offset by higher income taxes.
Same Store Results
On a same store first quarter to first quarter comparison, which includes
123,120 apartment units, revenues decreased 0.2%, expenses increased 2.8% and
NOI decreased 2.0%.
Acquisitions/Dispositions
During the first quarter of 2009, the company sold 11 consolidated properties,
consisting of 1,531 apartment units, for an aggregate sale price of $139.6
million at an average capitalization (cap) rate of 7.1% generating an unlevered
internal rate of return (IRR) of 11.0%.
The company acquired no properties during the first quarter of 2009.
Liquidity
During the first quarter of 2009, the company completed a public tender to
repurchase and retire at par approximately $105.2 million of the principal
amount of its 4.75% Notes due June 15, 2009 and approximately $185.2 of the
million principal amount of its 6.95% Notes due March 2, 2011. Also during the
first quarter, the company repurchased and retired approximately $17.5 million
of the principal amount of its 3.85% Convertible Notes due August 15, 2026,
resulting in debt extinguishment gains to the company of approximately $2.0
million. Details of these transactions can be found on page 15 of this release.
At March 31, 2009, the company had approximately $611 million of unrestricted
cash or securities readily convertible to cash (including approximately $139
million of federally insured notes and deposits classified as "Other assets" and
approximately $43 million of 1031 exchange proceeds classified as
"Deposits-restricted" on the balance sheet) and approximately $1.31 billion
available on its unsecured revolving credit facility. The company has access to
this credit facility, well-priced secured debt, improving public debt markets
and net transaction proceeds from its sale of non-core assets to meet its near
and longer-term funding needs.
Second Quarter 2009 Guidance
The company has established an FFO guidance range of $0.53 to $0.58 per share
for the second quarter of 2009. The difference between the company`s actual
first quarter 2009 FFO of $0.57 per share and the midpoint of the second quarter
2009 guidance range is primarily a result of lower total NOI partially offset by
lower interest expense. The second quarter 2009 guidance midpoint assumes no
additional gains from debt extinguishment.
Second Quarter 2009 Conference Call
Equity Residential expects to announce second quarter 2009 results on Wednesday,
July 29, 2009 and host a conference call to discuss those results at 10:00 a.m.
CT on Thursday, July 30, 2009.
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 537 properties located in 23
states and the District of Columbia, consisting of 146,232 apartment units. For
more information on Equity Residential, please visit our website at
www.equityresidential.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.equityresidential.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 and
outlook for 2009 will take place tomorrow, Thursday, April 30, at 10:00 a.m.
Central.Please visit the Investor Information section of the company`s web site
at www.equityresidential.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,
2009 2008
REVENUES
Rental income $ 512,281 $ 500,347
Fee and asset management 2,863 2,294
Total revenues 515,144 502,641
EXPENSES
Property and maintenance 133,543 132,837
Real estate taxes and insurance 55,964 53,327
Property management 19,014 21,176
Fee and asset management 2,003 2,180
Depreciation 150,045 141,195
General and administrative 10,394 12,417
Total expenses 370,963 363,132
Operating income 144,181 139,509
Interest and other income 6,021 3,369
Other expenses (292 ) (176 )
Interest:
Expense incurred, (123,897 ) (119,518 )
net
Amortization of (2,965 ) (2,160 )
deferred financing
costs
Income before income and other taxes, (loss) from
investments in
unconsolidated entities, net gain on
sales of unconsolidated entities
and discontinued operations 23,048 21,024
Income and other tax (expense) benefit (2,131 ) (2,995 )
(Loss) from investments in unconsolidated entities (195 ) (95 )
Net gain on sales of unconsolidated entities 2,765 -
Income from continuing operations 23,487 17,934
Discontinued operations, net 61,934 129,594
Net income 85,421 147,528
Net (income) loss attributable to Noncontrolling
Interests:
Operating Partnership (4,691 ) (9,133 )
Preference Interests and Units (4 ) (4 )
Partially Owned Properties 69 (268 )
Net income attributable to controlling interests 80,795 138,123
Preferred distributions (3,620 ) (3,633 )
Net income available to Common Shares $ 77,175 $ 134,490
Earnings per share - basic:
Income from continuing operations available to Common $ 0.07 $ 0.05
Shares
Net income available to Common Shares $ 0.28 $ 0.50
Weighted average Common Shares outstanding 272,324 268,784
Earnings per share - diluted:
Income from continuing operations available to Common $ 0.07 $ 0.05
Shares
Net income available to Common Shares $ 0.28 $ 0.50
Weighted average Common Shares outstanding 288,853 289,317
Distributions declared per Common Share outstanding $ 0.4825 $ 0.4825
Equity Residential
Consolidated Statements of Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
Quarter Ended March 31,
2009 2008 (3)
Net income $ 85,421 $ 147,528
Adjustments:
Net (income) loss attributable to Noncontrolling Interests:
Preference Interests and Units (4 ) (4 )
Partially Owned Properties 69 (268 )
Depreciation 150,045 141,195
Depreciation - Non-real estate additions (1,898 ) (2,051 )
Depreciation - Partially Owned and Unconsolidated Properties 183 1,034
Net gain on sales of unconsolidated entities (2,765 ) -
Discontinued operations:
Depreciation 443 6,385
Net gain on sales of discontinued operations (61,871 ) (122,517 )
Net incremental (loss) gain on sales of condominium units (64 ) 366
FFO (1) (2) 169,559 171,668
Preferred distributions (3,620 ) (3,633 )
FFO available to Common Shares and Units - basic (1) (2) $ 165,939 $ 168,035
FFO available to Common Shares and Units - diluted (1) (2) $ 166,096 $ 168,208
FFO per share and Unit - basic $ 0.57 $ 0.59
FFO per share and Unit - diluted $ 0.57 $ 0.58
Weighted average Common Shares and
Units outstanding - basic 288,710 287,079
Weighted average Common Shares and
Units outstanding - diluted 289,259 289,761
(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 of depreciable property, 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 units to condominiums, it simultaneously discontinues depreciation of such property. FFO available to Common Shares and Units is 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 EQR Common Shares on a one-for-one basis.
(2) 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. FFO and 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 and 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 and 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.
(3) Net income, FFO and FFO available to Common Shares and Units - basic and diluted have all been reduced by approximately $2.5 million in the first quarter of 2008 for the retrospective application of FSP APB 14-1 on convertible debt, which the Company adopted as required on January 1, 2009.
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
March 31, December 31,
2009 2008
ASSETS
Investment in real estate
Land $ 3,675,048 $ 3,671,299
Depreciable property 14,002,717 13,908,594
Projects under development 762,641 855,473
Land held for development 258,923 254,873
Investment in real estate 18,699,329 18,690,239
Accumulated depreciation (3,674,402 ) (3,561,300 )
Investment in real estate, net 15,024,927 15,128,939
Cash and cash equivalents 428,596 890,794
Investments in unconsolidated entities 8,196 5,795
Deposits - restricted 187,176 152,372
Escrow deposits - mortgage 19,483 19,729
Deferred financing costs, net 55,905 53,817
Other assets 311,373 283,664
Total assets $ 16,035,656 $ 16,535,110
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 4,941,277 $ 5,036,930
Notes, net 5,141,358 5,447,012
Lines of credit - -
Accounts payable and accrued expenses 128,008 108,463
Accrued interest payable 75,268 113,846
Other liabilities 243,541 289,562
Security deposits 63,484 64,355
Distributions payable 142,209 141,843
Total liabilities 10,735,145 11,202,011
Commitments and contingencies
Redeemable Noncontrolling Interests - Operating Partnership 153,617 264,394
Equity:
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares
authorized; 1,950,925 shares
issued
and outstanding as of March
31, 2009 and 1,951,475
shares issued and outstanding 208,773 208,786
as of December 31, 2008
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares
authorized; 273,843,970
shares issued
and outstanding as of March
31, 2009 and 272,786,760
shares issued and outstanding 2,738 2,728
as of December 31, 2008
Paid in capital 4,399,559 4,273,489
Retained earnings 401,262 456,152
Accumulated other comprehensive loss (29,289 ) (35,799 )
Total shareholders' equity 4,983,043 4,905,356
Noncontrolling Interests:
Operating Partnership 138,165 137,645
Preference Interests and Units 184 184
Partially Owned Properties 25,502 25,520
Total Noncontrolling 163,851 163,349
Interests
Total equity 5,146,894 5,068,705
Total liabilities and equity $ 16,035,656 $ 16,535,110
Equity Residential
Portfolio Summary
As of March 31, 2009
% of 2009 Average
% of Stabilized Rental
Markets Properties Units Total Units NOI Rate (1)
1 New York Metro Area 22 6,246 4.3% 10.0% $ 2,692
2 DC Northern Virginia 26 8,781 6.0% 8.8% 1,635
3 South Florida 39 12,897 8.8% 8.4% 1,277
4 Los Angeles 39 7,841 5.4% 8.1% 1,759
5 Seattle/Tacoma 49 11,138 7.6% 7.5% 1,304
6 Boston 38 6,699 4.6% 6.6% 1,931
7 San Francisco Bay Area 34 6,731 4.6% 6.5% 1,703
8 Phoenix 42 12,084 8.3% 5.4% 891
9 Denver 25 8,606 5.9% 5.0% 1,013
10 San Diego 14 4,491 3.1% 4.4% 1,656
11 Orlando 26 8,042 5.5% 4.3% 1,018
12 Atlanta 29 8,882 6.1% 3.9% 950
13 Inland Empire, CA 15 4,655 3.2% 3.7% 1,351
14 Suburban Maryland 22 5,819 4.0% 3.5% 1,204
15 Orange County, CA 10 3,307 2.3% 3.3% 1,593
16 New England (excluding Boston) 25 4,121 2.8% 2.1% 1,098
17 Portland, OR 11 3,713 2.5% 1.9% 957
18 Jacksonville 12 3,951 2.7% 1.7% 883
19 Raleigh/Durham 12 3,058 2.1% 1.3% 812
20 Tampa 10 3,158 2.1% 1.2% 928
Top 20 Total 500 134,220 91.9% 97.6% 1,336
21 Dallas/Ft. Worth 12 2,963 2.0% 1.2% 915
22 Central Valley, CA 8 1,343 0.9% 0.7% 1,070
23 Other EQR 13 2,939 2.0% 0.5% 866
Total 533 141,465 96.8% 100.0% 1,315
Condominium Conversion 2 64 - - -
Military Housing 2 4,703 3.2% - -
Grand Total 537 146,232 100.0% 100.0% $ 1,315
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the month of March 2009.
Equity Residential
Portfolio as of March 31, 2009
Properties Units
Wholly Owned Properties 469 126,563
Partially Owned Properties:
Consolidated 26 5,406
Unconsolidated 40 9,560
Military Housing (Fee Managed) 2 4,703
537 146,232
Portfolio Rollforward Q1 2009
($ in thousands)
Properties Units Sale Price Cap Rate
12/31/2008 548 147,244
Dispositions:
Rental Properties:
Consolidated (11 ) (1,531 ) $ (139,573 ) 7.1 %
Unconsolidated (1) (1 ) (216 ) $ (20,700 ) 8.0 %
Condominium Conversion Properties (1 ) (1 ) $ (146 )
Completed Developments 2 742
Configuration Changes - (6 )
3/31/2009 537 146,232
(1) ERPOP owned a 25% interest in this unconsolidated rental property. Sale price listed is the gross sale price.
Equity Residential
First Quarter 2009 vs. First Quarter 2008
Quarter over Quarter Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 123,120 Same Store Units
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
Q1 2009 $ 463,845 $ 178,497 $ 285,348 $ 1,341 93.7 % 13.5 %
Q1 2008 $ 464,702 $ 173,678 $ 291,024 $ 1,337 94.2 % 13.7 %
Change $ (857 ) $ 4,819 $ (5,676 ) $ 4 (0.5 %) (0.2 %)
Change (0.2 %) 2.8 % (2.0 %) 0.3 %
First Quarter 2009 vs. Fourth Quarter 2008
Sequential Quarter over Quarter Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 127,205 Same Store Units
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
Q1 2009 $ 480,107 $ 184,915 $ 295,192 $ 1,344 93.7 % 13.5 %
Q4 2008 $ 489,662 $ 176,099 $ 313,563 $ 1,364 94.2 % 15.3 %
Change $ (9,555 ) $ 8,816 $ (18,371 ) $ (20 ) (0.5 %) (1.8 %)
Change (2.0 %) 5.0 % (5.9 %) (1.5 %)
(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 the operating performance of a real estate company because it is a direct measure of
the actual operating results of the Company's apartment communities.
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
Equity Residential
Same Store NOI Reconciliation
First Quarter 2009 vs. First Quarter 2008
The following table presents a reconciliation of operating income per the
consolidated statements of operations to NOI for the First Quarter 2009 Same Store
Properties:
Quarter Ended March 31,
2009 2008
(Amounts in thousands)
Operating income $ 144,181 $ 139,509
Adjustments:
Non-same store operating results (18,412 ) (1,983 )
Fee and asset management revenue (2,863 ) (2,294 )
Fee and asset management expense 2,003 2,180
Depreciation 150,045 141,195
General and administrative 10,394 12,417
Same store NOI $ 285,348 $ 291,024
Equity Residential
First Quarter 2009 vs. First Quarter 2008
Same Store Results by Market
Increase (Decrease) from Prior Year's Quarter
Q1 2009 Q1 2009 Q1 2009
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
1 New York Metro Area 6,246 10.3 % $ 2,720 93.8 % 0.5 % 2.0 % (0.3 %) (0.1 %) 0.6 %
2 South Florida 11,761 8.4 % 1,287 93.3 % (1.5 %) 4.8 % (5.9 %) (1.4 %) (0.1 %)
3 DC Northern Virginia 7,661 8.3 % 1,653 94.6 % 1.1 % 2.3 % 0.5 % 1.3 % (0.3 %)
4 Los Angeles 6,863 7.8 % 1,744 93.7 % 0.0 % 3.0 % (1.4 %) (0.1 %) 0.1 %
5 Seattle/Tacoma 8,708 7.3 % 1,356 93.2 % 1.0 % 4.0 % (0.7 %) 2.0 % (0.9 %)
6 San Francisco Bay Area 6,200 6.8 % 1,716 93.5 % 2.4 % 2.6 % 2.3 % 4.7 % (2.1 %)
7 Boston 5,805 6.4 % 1,901 94.3 % 1.4 % 3.1 % 0.2 % 2.7 % (1.3 %)
8 Phoenix 10,238 5.3 % 886 93.9 % (6.2 %) 3.7 % (11.9 %) (4.8 %) (1.4 %)
9 Denver 8,059 5.3 % 1,006 93.6 % 1.1 % 0.4 % 1.5 % 2.6 % (1.4 %)
10 San Diego 4,491 4.8 % 1,650 93.3 % 1.1 % 1.7 % 0.9 % 1.8 % (0.6 %)
11 Orlando 7,525 4.4 % 1,004 92.8 % (4.4 %) (1.3 %) (6.5 %) (3.7 %) (0.7 %)
12 Atlanta 7,698 4.1 % 981 93.5 % (0.3 %) 3.8 % (3.4 %) 0.4 % (0.7 %)
13 Inland Empire, CA 4,355 3.8 % 1,349 94.5 % (0.1 %) 2.4 % (1.4 %) (1.8 %) 1.6 %
14 Orange County, CA 3,175 3.5 % 1,596 94.1 % 0.1 % 1.5 % (0.5 %) 0.1 % 0.0 %
15 Suburban Maryland 3,977 2.7 % 1,154 93.7 % 3.0 % 3.8 % 2.5 % 2.5 % 0.4 %
16 New England (excluding Boston) 4,121 2.1 % 1,088 94.1 % (0.9 %) 6.2 % (8.0 %) (0.9 %) 0.0 %
17 Portland, OR 3,409 2.0 % 977 94.6 % 1.4 % 1.5 % 1.2 % 1.6 % (0.2 %)
18 Jacksonville 3,711 1.8 % 885 93.2 % (4.9 %) 2.2 % (9.7 %) (4.5 %) (0.3 %)
19 Tampa 2,598 1.3 % 951 94.4 % (2.4 %) 2.6 % (6.2 %) (2.8 %) 0.4 %
20 Raleigh/Durham 2,666 1.3 % 826 95.2 % (0.2 %) 2.6 % (2.0 %) 0.2 % (0.4 %)
Top 20 Markets 119,267 97.7 % 1,352 93.7 % (0.2 %) 2.8 % (2.0 %) 0.3 % (0.5 %)
All Other Markets 3,853 2.3 % 1,007 94.1 % 1.8 % 1.7 % 1.8 % 1.7 % 0.0 %
Total 123,120 100.0 % $ 1,341 93.7 % (0.2 %) 2.8 % (2.0 %) 0.3 % (0.5 %)
(1 ) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
Equity Residential
First Quarter 2009 vs. Fourth Quarter 2008
Sequential Same Store Results by Market
Increase (Decrease) from Prior Quarter
Q1 2009 Q1 2009 Q1 2009
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
1 New York Metro Area 6,246 9.9 % $ 2,720 93.8 % (4.0 %) 5.3 % (9.0 %) (1.9 %) (2.1 %)
2 DC Northern Virginia 8,781 9.1 % 1,639 94.6 % (1.3 %) 6.4 % (4.9 %) (1.0 %) (0.3 %)
3 South Florida 12,465 8.6 % 1,289 93.3 % (0.1 %) 5.3 % (4.0 %) (0.4 %) 0.3 %
4 Los Angeles 7,442 8.2 % 1,760 93.7 % (2.4 %) 0.8 % (3.9 %) (1.9 %) (0.4 %)
5 Seattle/Tacoma 8,708 7.0 % 1,356 93.2 % (4.1 %) 5.4 % (9.0 %) (3.0 %) (1.1 %)
6 San Francisco Bay Area 6,200 6.6 % 1,716 93.5 % (2.2 %) 5.9 % (6.1 %) (0.6 %) (1.6 %)
7 Boston 5,805 6.2 % 1,901 94.3 % (1.0 %) 11.3 % (8.1 %) (0.4 %) (0.6 %)
8 Phoenix 10,646 5.4 % 889 94.0 % (1.7 %) 3.5 % (5.0 %) (1.9 %) 0.2 %
9 Denver 8,059 5.2 % 1,006 93.6 % (2.1 %) (0.5 %) (2.8 %) (1.7 %) (0.4 %)
10 San Diego 4,491 4.6 % 1,650 93.3 % (1.4 %) 0.5 % (2.4 %) (1.7 %) 0.2 %
11 Orlando 7,525 4.2 % 1,004 92.8 % (2.2 %) 5.1 % (6.7 %) (1.5 %) (0.7 %)
12 Atlanta 7,698 4.0 % 981 93.5 % (1.3 %) 5.8 % (6.4 %) (0.2 %) (1.1 %)
13 Inland Empire, CA 4,355 3.7 % 1,349 94.5 % (2.3 %) 1.1 % (4.1 %) (2.3 %) (0.1 %)
14 Suburban Maryland 5,251 3.5 % 1,189 93.1 % 0.1 % 4.5 % (2.7 %) 0.0 % 0.0 %
15 Orange County, CA 3,175 3.3 % 1,596 94.1 % (2.6 %) 1.4 % (4.3 %) (1.2 %) (1.3 %)
16 New England (excluding Boston) 4,121 2.0 % 1,088 94.1 % (2.2 %) 17.0 % (17.7 %) (2.0 %) (0.2 %)
17 Portland, OR 3,409 1.9 % 977 94.6 % (1.8 %) 4.9 % (5.7 %) (1.0 %) (0.7 %)
18 Jacksonville 3,711 1.8 % 885 93.2 % (1.0 %) 6.8 % (6.3 %) (1.1 %) 0.1 %
19 Tampa 2,598 1.3 % 951 94.4 % 1.2 % 6.7 % (2.9 %) 0.6 % 0.5 %
20 Raleigh/Durham 2,666 1.3 % 826 95.2 % (1.9 %) 2.3 % (4.4 %) (1.9 %) 0.1 %
Top 20 Markets 123,352 97.8 % 1,355 93.7 % (1.9 %) 5.1 % (5.9 %) (1.5 %) (0.5 %)
All Other Markets 3,853 2.2 % 1,007 94.1 % (2.5 %) 1.8 % (5.2 %) (1.7 %) (0.7 %)
Total 127,205 100.0 % $ 1,344 93.7 % (2.0 %) 5.0 % (5.9 %) (1.5 %) (0.5 %)
(1 ) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
Equity Residential
Debt Summary as of March 31, 2009
(Amounts in thousands)
Weighted
Weighted Average
% of Average Maturities
Amounts (1) Total Rates (1) (years)
Secured $ 4,941,277 49.0% 4.84% 8.3
Unsecured 5,141,358 51.0% 5.42% 5.5
Total $10,082,635 100.0% 5.14% 6.8
Fixed Rate Debt:
Secured - Conventional $ 3,681,350 36.5% 5.97% 7.2
Unsecured - Public/Private 4,429,508 43.9% 5.99% 5.7
Unsecured - Tax Exempt 75,790 0.8% 5.20% 20.2
Fixed Rate Debt 8,186,648 81.2% 5.97% 6.5
Floating Rate Debt:
Secured - Conventional 624,022 6.2% 2.11% 2.1
Secured - Tax Exempt 635,905 6.3% 0.79% 21.3
Unsecured - Public/Private 600,460 6.0% 1.49% 1.3
Unsecured - Tax Exempt 35,600 0.3% 0.46% 19.7
Unsecured - Revolving Credit Facility - - - 2.8
Floating Rate Debt 1,895,987 18.8% 1.43% 8.3
Total $10,082,635 100.0% 5.14% 6.8
(1) Net of the effect of any derivative instruments. Weighted average rates are for the quarter ended March 31, 2009.
Note: The Company capitalized interest of approximately $10.6 million and $14.7 million during the quarters ended March 31, 2009 and 2008, respectively.
Debt Maturity Schedule as of March 31, 2009
(Amounts in thousands)
Weighted Weighted
Average Rates Average
Fixed Floating % of on Fixed Rates on
Year Rate (1) Rate (1) Total Total Rate Debt (1) Total Debt (1)
2009 $ 155,979 $ 463,187 $ 619,166 6.1% 7.53% 4.03%
2010 (2) 274,993 670,053 945,046 9.4% 7.23% 3.22%
2011 (3) 1,253,533 78,417 1,331,950 13.2% 5.56% 5.35%
2012 924,579 3,673 928,252 9.2% 6.01% 6.01%
2013 565,865 - 565,865 5.6% 5.93% 5.93%
2014 516,959 - 516,959 5.1% 5.28% 5.28%
2015 355,081 - 355,081 3.5% 6.41% 6.41%
2016 1,088,709 - 1,088,709 10.8% 5.32% 5.32%
2017 1,345,997 456 1,346,453 13.4% 5.87% 5.87%
2018 335,500 44,677 380,177 3.8% 5.96% 5.61%
2019+ 1,369,453 635,524 2,004,977 19.9% 5.85% 4.91%
Total $ 8,186,648 $ 1,895,987 $10,082,635 100.0% 5.83% 5.18%
(1) Net of the effect of any derivative instruments. Weighted average rates are as of March 31, 2009.
(2) Includes the Company's $500.0 million floating rate term loan facility, which matures on October 5, 2010, subject to two one-year extension options exercisable by the Company.
(3) Includes $531.1 million face value of 3.85% convertible unsecured debt with a final maturity of 2026. The notes are callable by the Company on or after August 18, 2011. The notes are putable by the holders on August 18, 2011, August 15, 2016 and August 15,
2021.
Equity Residential
Unsecured Debt Summary as of March 31, 2009
(Amounts in thousands)
Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
Fixed Rate Notes:
4.750 % 06/15/09 (1 ) $ 122,239 $ (26 ) $ 122,213
6.950 % 03/02/11 (2 ) 114,806 1,914 116,720
6.625 % 03/15/12 400,000 (868 ) 399,132
5.500 % 10/01/12 350,000 (1,208 ) 348,792
5.200 % 04/01/13 400,000 (473 ) 399,527
5.250 % 09/15/14 500,000 (337 ) 499,663
6.584 % 04/13/15 300,000 (672 ) 299,328
5.125 % 03/15/16 500,000 (372 ) 499,628
5.375 % 08/01/16 400,000 (1,360 ) 398,640
5.750 % 06/15/17 650,000 (4,196 ) 645,804
7.125 % 10/15/17 150,000 (554 ) 149,446
7.570 % 08/15/26 140,000 - 140,000
3.850 % 08/15/26 (3 ) 531,092 (20,477 ) 510,615
Floating Rate Adjustments (1 ) (100,000 ) - (100,000 )
4,458,137 (28,629 ) 4,429,508
Fixed Rate Tax Exempt Notes:
5.200 % 06/15/29 (4 ) 75,790 - 75,790
Floating Rate Tax Exempt Notes:
7-Day SIFMA 12/15/28 (4 ) 35,600 - 35,600
Floating Rate Notes:
06/15/09 (1 ) 100,000 - 100,000
FAS 133 Adjustments - net (1 ) 460 - 460
Term Loan Facility LIBOR+0.50% 10/05/10 (4 ) (5) 500,000 - 500,000
600,460 - 600,460
Revolving Credit Facility: LIBOR+0.50% 02/28/12 (6 ) - - -
Total Unsecured Debt $ 5,169,987 $ (28,629 ) $ 5,141,358
Note: SIFMA stands for the Securities Industry and Financial Markets Association and is the tax-exempt index equivalent of LIBOR.
(1 ) $100.0 million in fair value interest rate swaps converts a portion of the 4.750% notes due June 15, 2009 to a floating interest rate. On January 27, 2009, the Company repurchased $105.2 million of these notes at par pursuant to a cash tender offer announced on January 16, 2009. In conjunction with the tender offer, the Company terminated $50.0 million of the $150.0 million in fair value swaps outstanding at January 1, 2009 and received approximately $0.4 million.
(2 ) On January 27, 2009, the Company repurchased $185.2 million of these notes at par pursuant to a cash tender offer announced on January 16, 2009.
(3 ) Convertible notes mature on August 15, 2026. The notes are callable by the Company on or after August 18, 2011. The notes are putable by the holders on August 18, 2011, August 15, 2016 and August 15, 2021. During the quarter ended March 31, 2009, the Company repurchased $17.5 million of these notes at a discount to par of approximately 11.6% and recognized a gain on early debt extinguishment of $2.0 million. Effective January 1, 2009, the Company adopted FSP APB 14-1, which requires companies to expense the implied option value inherent in convertible debt. In conjunction with this adoption, the Company recorded an adjustment of $17.3 million to the beginning balance of the
discount on its convertible notes.
(4 ) Notes are private. All other unsecured debt is public.
(5 ) Represents the Company's $500.0 million term loan facility, which matures on October 5, 2010, subject to two one-year extension options exercisable by the Company.
(6 ) As of March 31, 2009, there was no amount outstanding and approximately $1.31 billion available on the Company's unsecured revolving credit facility.
Equity Residential
Selected Unsecured Public Debt Covenants
March 31, December 31,
2009 2008
Total Debt to Adjusted Total Assets (not to exceed 60%) 51.2 % 52.3 %
Secured Debt to Adjusted Total Assets (not to exceed 40%) 25.1 % 25.1 %
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.34 2.21
Total Unsecured Assets to Unsecured Debt
(must be at least 150%) 231.1 % 218.8 %
These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt. Equity Residential is the general partner of ERPOP.
Debt Repurchases
(Amounts in thousands)
First Quarter 2009 Activity
Write-off of
Unamortized
Bonds Price % Extinguishment Discount/
Security Retired Paid Discount Gain Fees/OCI
2009 4.75% Public Notes $ 105,161 $ 105,161 - $ - $ 125
2011 6.95% Public Notes 185,194 185,194 - - 1,379
2026 3.85% Convertible Notes (1) 17,465 15,445 11.6 % 2,020 879
Total $ 307,820 $ 305,800 0.7 % $ 2,020 $ 2,383
(1) 2026 3.85% Convertible Notes are putable to the Company in 2011.
Equity Residential
Capital Structure as of March 31, 2009
(Amounts in thousands except for share/unit and per share amounts)
Secured Debt $ 4,941,277 49.0%
Unsecured Debt 5,141,358 51.0%
Total Debt 10,082,635 100.0% 64.6%
Common Shares (includes Restricted Shares) 273,843,970 94.4%
Units 16,283,376 5.6%
Total Shares and Units 290,127,346 100.0%
Common Share Equivalents (see below) 405,555
Total outstanding at quarter-end 290,532,901
Common Share Price at March 31, 2009 $ 18.35
5,331,279 96.4%
Perpetual Preferred Equity (see below) 200,000 3.6%
Total Equity 5,531,279 100.0% 35.4%
Total Market Capitalization $15,613,914 100.0%
Convertible Preferred Equity as of March 31, 2009
(Amounts in thousands except for share/unit and per share/unit amounts)
Annual Annual Weighted Common
Redemption Outstanding Liquidation Dividend Dividend Average Conversion Share
Series Date Shares/Units Value Per Share/Unit Amount Rate Ratio Equivalents
Preferred Shares:
7.00% Series E 11/1/98 328,466 $ 8,212 $ 1.75 $ 575 1.1128 365,517
7.00% Series H 6/30/98 22,459 561 1.75 39 1.4480 32,521
Junior Preference Units:
8.00% Series B 7/29/09 7,367 184 2.00 15 1.020408 7,517
Total Convertible Preferred Equity 358,292 $ 8,957 $ 629 7.02% 405,555
Perpetual Preferred Equity as of March 31, 2009
(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
Q109 Q108
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 272,323,545 268,784,258
Shares issuable from assumed conversion/vesting of:
- OP Units 16,386,489 18,294,706
- long-term compensation award shares/units 142,870 2,237,869
Total Common Shares and Units - diluted 288,852,904 289,316,833
Weighted Average Amounts Outstanding for FFO Purposes:
Common Shares - basic 272,323,545 268,784,258
OP Units - basic 16,386,489 18,294,706
Total Common Shares and OP Units - basic 288,710,034 287,078,964
Shares issuable from assumed conversion/vesting of:
- convertible preferred shares/units 406,031 444,474
- long-term compensation award shares/units 142,870 2,237,869
Total Common Shares and Units - diluted 289,258,935 289,761,307
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 273,843,970
Units 16,283,376
Total Shares and Units 290,127,346
Equity Residential
Partially Owned Entities as of March 31, 2009
(Amounts in thousands except for project and unit amounts)
Consolidated Unconsolidated
Development Projects
Held for Institutional
and/or Under Completed, Not Completed Joint
Development Stabilized (4) and Stabilized Other Total Ventures (5)
Total projects (1 ) - 2 3 21 26 40
Total units (1 ) - 760 704 3,942 5,406 9,560
Operating information for the quarter
ended 3/31/09 (at 100%):
Operating revenue $ 401 $ 1,716 $ 3,129 $ 14,478 $ 19,724 $ 24,383
Operating expenses 534 1,306 1,252 5,057 8,149 11,367
Net operating (loss) income (133 ) 410 1,877 9,421 11,575 13,016
Depreciation 93 1,662 1,488 3,714 6,957 5,097
General and 375 6 178 6 565 94
administrative/other
Operating (loss) income (601 ) (1,258 ) 211 5,701 4,053 7,825
Interest and other income 12 - - 43 55 61
Other expenses (81 ) - - - (81 ) -
Interest:
Expense (553 ) (546 ) (830 ) (5,036 ) (6,965 ) (9,375 )
incurred, net
Amortization of deferred financing costs (20 ) (38 ) (53 ) (41 ) (152 ) (154 )
Income and other tax (expense) (18 ) - - (34 ) (52 ) (265 )
benefit
Net (loss) income $ (1,261 ) $ (1,842 ) $ (672 ) $ 633 $ (3,142 ) $ (1,908 )
Debt - Secured (2):
EQR Ownership $ 400,041 $ 220,779 $ 108,466 $ 215,820 $ 945,106 $ 121,200
(3)
Noncontrolling - - - 86,310 86,310 363,600
Ownership
Total (at 100%) $ 400,041 $ 220,779 $ 108,466 $ 302,130 $ 1,031,416 $ 484,800
(1) Project and unit counts exclude all uncompleted development projects until those projects are substantially completed. See the Consolidated Development Projects schedule for more detail.
(2) All debt is non-recourse to the Company with the exception of $125.8 million in mortgage debt on various development projects.
(3) Represents the Company's current economic ownership interest.
(4) Projects included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing.
(5) Mortgage debt is also partially collateralized by $52.9 million in unconsolidated restricted cash set aside from the net proceeds of property sales.
Equity Residential
Consolidated Development Projects as of March 31, 2009
(Amounts in thousands except for project and unit amounts)
Total Book
Total Total Value Not Estimated Estimated
No. of 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
Projects Under Development - Wholly Owned:
70 Greene (a.k.a. 77 Hudson) Jersey City, NJ 480 $ 269,958 $ 222,582 $ 222,582 $ - 88% 7% - Q4 2009 Q1 2011
Reserve at Town Center II Mill Creek, WA 100 24,464 11,713 11,713 - 44% - - Q1 2010 Q3 2010
Redmond Way Redmond, WA 250 84,382 28,970 28,970 - 19% - - Q1 2011 Q1 2012
Projects Under Development - Wholly Owned 830 378,804 263,265 263,265 -
Projects Under Development - Partially Owned:
Veridian (a.k.a. Silver Spring) Silver Spring, MD 457 148,705 145,314 145,314 104,322 97% 43% 33% Q2 2009 Q3 2010
Montclair Metro Montclair, NJ 163 48,730 33,011 33,011 17,056 78% - - Q3 2009 Q1 2010
Red Road Commons South Miami, FL 404 128,816 110,458 110,458 54,267 84% 20% - Q1 2010 Q3 2011
111 Lawrence Street Brooklyn, NY 492 283,968 130,481 130,481 16,829 47% - - Q2 2010 Q3 2011
Westgate Pasadena, CA 480 170,558 80,112 80,112 163,160 (2) 33% - - Q2 2011 Q2 2012
Projects Under Development - Partially Owned 1,996 780,777 499,376 499,376 355,634
Projects Under Development 2,826 1,159,581 762,641 762,641 355,634 (3)
Land Held for Development N/A - 258,923 258,923 44,407
Land/Projects Held for and/or Under Development 2,826 1,159,581 1,021,564 1,021,564 400,041
Completed Not Stabilized - Wholly Owned (4):
West End Apartments (a.k.a. Emerson/CRP II) Boston, MA 310 164,981 163,284 - - 98% 97% Completed Q2 2009
Highland Glen II Westwood, MA 102 19,888 19,868 - - 95% 94% Completed Q2 2009
Crowntree Lakes Orlando, FL 352 56,618 56,618 - - 91% 81% Completed Q4 2009
Mosaic at Metro Hyattsville, MD 260 61,483 57,041 - 41,252 35% 27% Completed Q1 2010
Reunion at Redmond Ridge Redmond, WA 321 53,175 53,142 - - 35% 31% Completed Q3 2010
Projects Completed Not Stabilized - Wholly Owned 1,345 356,145 349,953 - 41,252
Completed Not Stabilized - Partially Owned (4):
1401 South State (a.k.a. City Lofts) Chicago, IL 278 69,952 69,575 - 50,726 75% 60% Completed Q4 2009
Third Square (a.k.a. 303 Third Street) (5) Cambridge, MA 482 254,523 249,000 - 170,053 72% 53% Completed Q2 2010
Projects Completed Not Stabilized - Partially Owned 760 324,475 318,575 - 220,779
Projects Completed Not Stabilized 2,105 680,620 668,528 - 262,031
Completed and Stabilized During the Quarter - Wholly Owned:
Key Isle at Windermere II Orlando, FL 165 27,881 27,833 - - 93% 91% Completed Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned 165 27,881 27,833 - -
Completed and Stabilized During the Quarter - Partially Owned:
Alta Pacific Irvine, CA 132 45,402 45,377 - 28,260 96% 95% Completed Stabilized
Projects Completed and Stabilized During the Quarter - Partially Owned 132 45,402 45,377 - 28,260
Projects Completed and Stabilized During the Quarter 297 73,283 73,210 - 28,260
Total Projects 5,228 $ 1,913,484 $ 1,763,302 $ 1,021,564 $ 690,332
Total Capital Q1 2009
NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS Cost (1) NOI
Projects Under Development $ 1,159,581 $ (269)
Completed Not Stabilized 680,620 2,279
Completed and Stabilized During the Quarter 73,283 836
Total Development NOI Contribution $ 1,913,484 $ 2,846
(1) Total capital cost represents estimated development cost for projects under development 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) Debt is primarily tax-exempt bonds that are entirely outstanding with $86.9 million held in escrow by the lender and released as draw requests are made. This escrowed amount is classified as "Deposits - restricted"
in the consolidated balance sheets at 3/31/09.
(3) Of the approximately $396.9 million of capital cost remaining to be funded at 3/31/09 for projects under development, $277.9 million will be funded by fully committed third party bank loans and the remaining $119.0
million will be funded by cash on hand.
(4) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing.
(5) Third Square - Both the percentage leased and percentage occupied reflect only the 292 units included in phase one.
Equity Residential
Maintenance Expenses and Capitalized Improvements to Real Estate
For the Quarter Ended March 31, 2009
(Amounts in thousands except for unit and per unit amounts)
Maintenance Expenses Capitalized Improvements to Real Estate Total Expenditures
Building
Total Avg. Avg. Avg. Replacements Avg. Improvements Avg. Avg. Grand Avg.
Units (1) Expense (2) Per Unit Payroll (3) Per Unit Total Per Unit (4) Per Unit (5) Per Unit Total Per Unit Total Per Unit
Established Properties (6) 112,050 $ 21,795 $ 195 $ 19,737 $ 176 $ 41,532 $ 371 $ 8,556 $ 76 $ 6,398 $ 57 $ 14,954 $ 133 (9) $ 56,486 $ 504
New Acquisition Properties (7) 13,784 2,667 197 2,305 171 4,972 368 724 54 1,642 121 2,366 175 7,338 543
Other (8) 6,135 1,920 1,654 3,574 8,125 1,199 9,324 12,898
Total 131,969 $ 26,382 $ 23,696 $ 50,078 $ 17,405 $ 9,239 $ 26,644 $ 76,722
(1) Total Units - Excludes 9,560 unconsolidated units and 4,703 military housing (fee managed) units, for which maintenance expenses and capitalized improvements to real estate are self-funded and do not consolidate into
the Company's results.
(2) Maintenance Expenses - Includes general maintenance costs, unit turnover costs including interior painting, regularly scheduled landscaping and tree trimming costs, security, exterminating, fire protection, snow and
ice removal, elevator repairs and other miscellaneous building repair costs.
(3) Maintenance Payroll - Includes employee costs for maintenance, cleaning, housekeeping and landscaping.
(4) Replacements - Includes new expenditures inside the units such as appliances, mechanical equipment, fixtures and flooring, including carpeting.
(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) Established Properties - Wholly Owned Properties acquired prior to January 1, 2007.
(7) New Acquisition Properties - Wholly Owned Properties acquired during 2007, 2008 and 2009. Per unit amounts are based on a weighted average of 13,524 units.
(8) Other - Primarily includes properties either partially owned or sold during the period, commercial space and corporate housing. Also includes $7.4 million included in replacements spent on various assets related to
major renovations and repositioning of these assets.
(9) For 2009, the Company estimates an annual stabilized run rate of approximately $925 per unit of capital expenditures for its established properties.
Equity Residential
Discontinued Operations
(Amounts in thousands)
Quarter Ended
March 31,
2009 2008
REVENUES
Rental income $ 3,945 $ 25,501
Total revenues 3,945 25,501
EXPENSES (1)
Property and maintenance 2,796 8,777
Real estate taxes and insurance 528 3,235
Property management - (65 )
Depreciation 443 6,385
General and administrative 5 3
Total expenses 3,772 18,335
Discontinued operating income 173 7,166
Interest and other income 3 (18 )
Interest (2):
Expense incurred, (35 ) (269 )
net
Amortization of (32 ) (1 )
deferred financing
costs
Income and other tax (expense) benefit (46 ) 199
Discontinued operations 63 7,077
Net gain on sales of discontinued operations 61,871 122,517
Discontinued operations, net $ 61,934 $ 129,594
(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
Additional Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
FFO Reconciliations
FFO Reconciliations
Guidance Midpoint Q1
2009 to Actual Q1 2009
Amounts Per Share
Guidance midpoint Q1 2009 FFO - Diluted (1) (2) $ 159,237 $ 0.549
Property NOI (including reserve adjustments) 6,436 0.022
Debt extinguishment gains (interest and other income) 2,020 0.007
Income and other tax expense (1,792 ) (0.006 )
Other 195 0.002
Actual Q1 2009 FFO - Diluted (1) (2) $ 166,096 $ 0.574
Non-Comparable Items (3)
Quarter Ended March 31,
2009 2008 Variance
Debt extinguishment gains (interest and other income) $ 2,020 $ - $ 2,020
FSP APB 14-1 convertible debt discount (includes extinguishment write-offs) (2,884 ) (2,518 ) (366 )
Debt extinguishment costs (interest):
Prepayment penalties (35 ) - (35 )
Write-off of unamortized deferred financing costs (655 ) (6 ) (649 )
Write-off of unamortized premiums/(discounts)/(OCI) (805 ) - (805 )
Other (1,078 ) (726 ) (352 )
Net non-comparable items (3) $ (3,437 ) $ (3,250 ) $ (187 )
Note: See page 24 for definitions, footnotes and reconciliations of EPS to FFO.
Equity Residential
The earnings guidance/projections provided below are based on current expectations
and are forward-looking.
2009 Earnings Guidance (per share diluted)
Q2 2009 2009
Expected FFO (1) (2) $0.53 to $0.58 $2.00 to $2.30
2009 Same Store Assumptions
Physical occupancy 93.5%
Revenue change (4.50%) to
(1.50%)
Expense change 2.50% to 3.50%
NOI change (9.25%) to
(3.75%)
(Note: 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO)
2009 Transaction Assumptions
Rental acquisitions $250.0 million
Rental dispositions $700.0 million
Capitalization rate spread 125 basis
points
2009 Debt Assumptions
Weighted average debt outstanding $9.7 billion
to $10.1
billion
Weighted average interest rate (reduced for capitalized interest and
including prepayment 4.93%
penalties)
Interest expense $475.0 million
to $495.0
million
Unrestricted cash at 12/31/09 $50.0 million
Note: Debt guidance assumes no debt offerings and no additional debt
extinguishments, but does include approximately $9.3 million of interest expense
for the mandatory adoption of FSP APB 14-1, which requires companies to expense
the implied option value inherent in convertible debt. This change does not affect
the Company's continued compliance with its financial or debt covenants.
2009 Other Guidance Assumptions
General and administrative expense $40.0 million
to $42.0
million
Interest and other income $11.0 million
to $14.0
million
Income and other tax expense $3.0 million
to $4.0
million
Net gain on sales of land parcels No amounts
budgeted
Preferred share redemptions No amounts
budgeted
Weighted average Common Shares and Units 291.1 million
- Diluted
Note: See page 24 for definitions, footnotes and reconciliations of EPS to FFO.
Equity Residential
The earnings guidance/projections provided below are based on current expectations and are forward-looking.
Reconciliations of EPS to FFO for Pages 22 and 23
(Amounts in thousands except per share data)
(All per share data is diluted)
Expected Expected
Expected Q1 2009 Q2 2009 2009
Amounts Per Share Per Share Per Share
Expected Earnings - Diluted (4) $ 68,257 $ 0.235 $0.13 to $0.18 $0.96 to $1.26
Add: Expected depreciation expense 151,145 0.522 0.51 2.09
Less: Expected net gain on sales (4) (60,165 ) (0.208 ) (0.11 ) (1.05 )
Expected FFO - Diluted (1) (2) $ 159,237 $ 0.549 $0.53 to $0.58 $2.00 to $2.30
Definitions and Footnotes for Pages 22 and 23
(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 of depreciable property, 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 units to condominiums, it simultaneously discontinues depreciation of such property. FFO available to Common Shares and Units is 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 EQR Common Shares on a one-for-one basis.
(2) 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. FFO and 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 and 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 and 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.
(3) Non-comparable items are those items included in FFO that by their nature are not comparable from period to period, such as net incremental gain on sales of condominium units, impairment charges, debt extinguishment costs and redemption premiums on Preferred Shares/Preference Interests.
(4) 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.
Equity Residential
Marty McKenna, 312-928-1901
mmckenna@eqrworld.com
Copyright Business Wire 2009
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