UPDATE 2-Equity Residential FFO falls 9 percent

(Adds detail on net operating income, outlook)

NEW YORK, July 29 (Reuters) - Equity Residential (EQR.N), one of the biggest U.S. owners and managers of apartments, said quarterly funds from operations fell 9 percent, as a weak jobs market depressed rents and occupancy rates, but reported lower operating costs and higher-than-expected renewal rents.

The real estate investment fund (REIT), led by real estate mogul and media investor Sam Zell, also kept the midpoint of its 2009 forecast unchanged but said it was cutting its dividend, citing reduced cash flow.

Equity Residential posted quarterly FFO of $168.7 million, or 58 cents per share, down from $185 million, or 64 cents per share, a year ago.

It was not immediately clear whether the FFO was directly comparable with the 54 cents analysts expected.

FFO is a key performance measure for REITs because it excludes the profit-reducing effect of depreciation.

Chicago-based Equity Residential narrowed its 2009 forecast by 10 cents on either end to $2.10 to $2.20 per share, keeping its midpoint unchanged. For the third quarter, it forecast FFO of 49 cents to 53 cents, compared with 52 cents estimated by analysts.

For the 121,256 units the company has operated at least a year, net operating income fell 3.4 percent. Rents and occupancy rates each fell 1.2 percent, while expenses fell 0.6 percent, largely reflecting lower utility costs.

Equity Residential said it closed a $500.0 million secured loan with Freddie Mac FRE.N, and said its current cash was enough to meet all of its debt obligations for this year and next.

The company, which owns or has investments in 526 properties in 23 states and the District of Columbia, said it was cutting its annual dividend to $1.35 per share from $1.93 per share.

The results come as the vacancy rate for U.S. apartments stands at its highest level since 1987, according to real estate research firm Reis Inc, which predicts vacancies could soon top their 1986 record of 7.8 percent.

The recession has taken a toll on the U.S. apartment market, which relies on employment growth to feed demand. Its largest tenant group, 18- to 24-year-olds, has been hard hit by rising unemployment.

The U.S. jobless rate, at 9,5 percent, is the highest in a quarter century, and is forecast to reach 9.7 percent in next week's monthly jobs report.

The company reported after the closing bell. In regular trading, its shares fell 33 cents to $21.87. (Reporting by Nick Zieminski; editing by Andre Grenon, Bernard Orr)