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TheStreet Open House

Equity Residential Reports Second Quarter Results

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 421 properties located in 14 states and the District of Columbia, consisting of 120,355 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, July 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)
 
Six Months Ended June 30, Quarter Ended June 30,
2012 2011 2012 2011
REVENUES
Rental income $ 1,063,162 $ 939,121 $ 541,569 $ 478,419
Fee and asset management   4,276     3,754     2,212     1,948  
Total revenues   1,067,438     942,875     543,781     480,367  
 
EXPENSES
Property and maintenance 218,004 202,157 107,024 98,571
Real estate taxes and insurance 118,768 106,610 63,126 54,803
Property management 44,417 43,148 21,008 20,767
Fee and asset management 2,487 1,957 1,180 1,009
Depreciation 346,079 311,891 172,338 154,452
General and administrative   27,082     22,341     13,394     10,908  
Total expenses   756,837     688,104     378,070     340,510  
 
Operating income 310,601 254,771 165,711 139,857
 
Interest and other income 431 1,288 259 277
Other expenses (16,584 ) (6,790 ) (9,517 ) (4,630 )
Interest:
Expense incurred, net (234,247 ) (240,443 ) (115,618 ) (119,997 )
Amortization of deferred financing costs   (7,037 )   (7,401 )   (4,063 )   (4,396 )
Income before income and other taxes, net gain on sales
of land parcels and discontinued operations 53,164 1,425 36,772 11,111
Income and other tax (expense) benefit (405 ) (386 ) (214 ) (202 )
Net gain on sales of land parcels       4,217         4,217  
Income from continuing operations 52,759 5,256 36,558 15,126
Discontinued operations, net   207,723     709,563     71,757     566,627  
Net income 260,482 714,819 108,315 581,753
Net (income) attributable to Noncontrolling Interests:
Operating Partnership (11,150 ) (31,533 ) (4,732 ) (25,758 )
Partially Owned Properties   (769 )   (31 )   (319 )   (71 )
Net income attributable to controlling interests 248,563 683,255 103,264 555,924
Preferred distributions   (6,933 )   (6,933 )   (3,467 )   (3,467 )
Net income available to Common Shares $ 241,630   $ 676,322   $ 99,797   $ 552,457  
 
Earnings per share – basic:
Income (loss) from continuing operations available to Common
Shares $ 0.14   $ (0.01 ) $ 0.10   $ 0.04  
Net income available to Common Shares $ 0.81   $ 2.30   $ 0.33   $ 1.88  
Weighted average Common Shares outstanding   299,499     293,784     300,193     294,663  
 
Earnings per share – diluted:
Income (loss) from continuing operations available to Common
Shares $ 0.14   $ (0.01 ) $ 0.10   $ 0.04  
Net income available to Common Shares $ 0.80   $ 2.30   $ 0.33   $ 1.85  
Weighted average Common Shares outstanding   316,457     293,784     317,648     312,199  
 
Distributions declared per Common Share outstanding $ 0.6750   $ 0.6750   $ 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)
 
Six Months Ended June 30, Quarter Ended June 30,
2012 2011 2012 2011
Net income $ 260,482 $ 714,819 $ 108,315 $ 581,753
Adjustments:
Net (income) attributable to Noncontrolling Interests –
Partially Owned Properties (769 ) (31 ) (319 ) (71 )
Depreciation 346,079 311,891 172,338 154,452
Depreciation – Non-real estate additions (2,781 ) (2,905 ) (1,427 ) (1,521 )
Depreciation – Partially Owned and Unconsolidated Properties (1,597 ) (1,505 ) (797 ) (755 )
Discontinued operations:
Depreciation 2,027 18,951 660 7,081
Net (gain) on sales of discontinued operations (204,053 ) (682,236 ) (71,097 ) (558,482 )
Net incremental gain on sales of condominium units 49 1,115 720
Gain on sale of Equity Corporate Housing (ECH)   350     1,024     350     1,024  
FFO (1) (3) 399,787 361,123 208,023 184,201
Adjustments (see page 24 for additional detail):
Asset impairment and valuation allowances
Property acquisition costs and write-off of pursuit costs (other
expenses) 10,894 6,790 8,268 4,626
Debt extinguishment (gains) losses, including prepayment
penalties, preferred share redemptions and non-cash
convertible debt discounts 1,377 8,573 1,418 6,510
(Gains) losses on sales of non-operating assets, net of income and
other tax expense (benefit) (491 ) (5,529 ) (487 ) (5,153 )
Other miscellaneous non-comparable items   2,223     (2,100 )   1,249      
Normalized FFO (2) (3) $ 413,790   $ 368,857   $ 218,471   $ 190,184  
 
FFO (1) (3) $ 399,787 $ 361,123 $ 208,023 $ 184,201
Preferred distributions   (6,933 )   (6,933 )   (3,467 )   (3,467 )
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 392,854   $ 354,190   $ 204,556   $ 180,734  
FFO per share and Unit - basic $ 1.25   $ 1.15   $ 0.65   $ 0.59  
FFO per share and Unit - diluted $ 1.24   $ 1.14   $ 0.64   $ 0.58  
 
Normalized FFO (2) (3) $ 413,790 $ 368,857 $ 218,471 $ 190,184
Preferred distributions   (6,933 )   (6,933 )   (3,467 )   (3,467 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 406,857   $ 361,924   $ 215,004   $ 186,717  
Normalized FFO per share and Unit - basic $ 1.30   $ 1.18   $ 0.68   $ 0.61  
Normalized FFO per share and Unit - diluted $ 1.29   $ 1.16   $ 0.68   $ 0.60  
 
Weighted average Common Shares and Units outstanding - basic   313,133     307,106     314,255     307,954  
Weighted average Common Shares and Units outstanding - diluted   316,457     311,380     317,648     312,199  
 

Note: See page 24 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 26 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)
 
June 30, December 31,
2012 2011
ASSETS
Investment in real estate
Land $ 4,565,646 $ 4,367,816
Depreciable property 15,886,832 15,554,740
Projects under development 198,912 160,190
Land held for development   372,108     325,200  
Investment in real estate 21,023,498 20,407,946
Accumulated depreciation   (4,777,887 )   (4,539,583 )
Investment in real estate, net 16,245,611 15,868,363
Cash and cash equivalents 44,585 383,921
Investments in unconsolidated entities 17,886 12,327
Deposits – restricted 193,892 152,237
Escrow deposits – mortgage 9,139 10,692
Deferred financing costs, net 41,854 44,608
Other assets   161,445     187,155  
Total assets $ 16,714,412   $ 16,659,303  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 4,004,496 $ 4,111,487
Notes, net 5,354,768 5,609,574
Lines of credit 35,000 -
Accounts payable and accrued expenses 72,647 35,206
Accrued interest payable 82,695 88,121
Other liabilities 430,650 291,289
Security deposits 68,265 65,286
Distributions payable   109,463     179,079  
Total liabilities   10,157,984     10,380,042  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   452,203     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
June 30, 2012 and December 31, 2011 200,000 200,000
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 300,961,645 shares issued and outstanding as of
June 30, 2012 and 297,508,185 shares issued and outstanding as of December 31, 2011 3,010 2,975
Paid in capital 5,226,088 5,047,186
Retained earnings 654,235 615,572
Accumulated other comprehensive (loss)   (198,075 )   (196,718 )
Total shareholders’ equity 5,885,258 5,669,015
Noncontrolling Interests:
Operating Partnership 144,521 119,536
Partially Owned Properties   74,446     74,306  
Total Noncontrolling Interests   218,967     193,842  
Total equity   6,104,225     5,862,857  
Total liabilities and equity $ 16,714,412   $ 16,659,303  

                     
Equity Residential
Portfolio Summary
As of June 30, 2012
           
Markets Properties Apartment

Units

% of Total

Apartment

Units

% of

Stabilized

NOI (1)

Average

Rental

Rate (2)

 
1 New York Metro Area 30 8,111 6.7% 13.6% $ 3,333
2 DC Northern Virginia 26 9,381 7.8% 11.2% 2,116
3 Los Angeles 47 9,716 8.1% 9.6% 1,840
4 South Florida 39 12,990 10.8% 9.4% 1,445
5 Boston 26 5,832 4.8% 8.0% 2,494
6 San Francisco Bay Area 38 8,751 7.3% 7.4% 1,779
7 Seattle/Tacoma 44 9,901 8.2% 7.3% 1,476
8 Denver 24 8,138 6.8% 5.1% 1,189
9 San Diego 14 4,963 4.1% 5.0% 1,843
10 Suburban Maryland 17 5,096 4.2% 4.7% 1,657
11 Phoenix 29 8,431 7.0% 4.0% 952
12 Orlando 23 7,013 5.8% 3.7% 1,073
13 Orange County, CA 11 3,490 2.9% 3.2% 1,630
14 Inland Empire, CA 10 3,081 2.6% 2.4% 1,461
15 Atlanta 14 4,190 3.5% 2.2% 1,116
16 All Other Markets (3) 27 6,332 5.3% 3.2% 1,102
 
Total 419 115,416 95.9% 100.0% 1,674
 
Military Housing 2 4,939 4.1% - -
 
Grand Total 421 120,355 100.0% 100.0% $ 1,674
 
 
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 June 2012.
 
(3) All Other Markets - Each individual market is less than 1.5% of stabilized NOI.

                     
Equity Residential
         
Portfolio as of June 30, 2012
 
Properties Apartment

Units

Wholly Owned Properties 398 111,500
Partially Owned Properties - Consolidated 21 3,916
Military Housing 2     4,939  
 
421     120,355  
 
                     
 
Portfolio Rollforward Q2 2012
($ in thousands)
 
Properties Apartment

Units

Purchase/

(Sale) Price

Cap

Rate

3/31/2012 427 121,011
Acquisitions:
Rental Properties - Consolidated 2 812 $ 510,869 5.0 %
Dispositions:
Rental Properties - Consolidated (9 ) (1,662 ) $ (129,900 ) 6.7 %
Completed Developments 1 168
Configuration Changes -   26  
 
6/30/2012 421   120,355  
 
                     
 
Portfolio Rollforward 2012
($ in thousands)
 
Properties Apartment

Units

Purchase/

(Sale) Price

Cap

Rate

12/31/2011 427 121,974
Acquisitions:
Rental Properties - Consolidated 5 1,356 $ 669,969 4.8 %
Land Parcels (two) - - $ 23,740
Dispositions:
Rental Properties - Consolidated (12 ) (3,184 ) $ (336,250 ) 6.4 %
Completed Developments 1 168
Configuration Changes -   41  
 
6/30/2012 421   120,355  

                       
Equity Residential
               
Second Quarter 2012 vs. Second Quarter 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 105,604 Same Store Apartment Units
 
Results Statistics

Average

Rental

Description Revenues Expenses NOI (1)

Rate (2)

Occupancy Turnover
 
Q2 2012 $ 489,865 $ 170,209 $ 319,656 $ 1,626 95.2 % 15.5 %
Q2 2011 $ 464,313   $ 166,862   $ 297,451   $ 1,539   95.4 % 15.1 %
 
Change $ 25,552   $ 3,347   $ 22,205   $ 87   (0.2 %) 0.4 %
 
Change 5.5 % 2.0 % 7.5 % 5.7 %
                             
 
Second Quarter 2012 vs. First Quarter 2012
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 113,243 Same Store Apartment Units
 
Results Statistics

Average

Rental

Description Revenues Expenses NOI (1)

Rate (2)

Occupancy Turnover
 
Q2 2012 $ 530,496 $ 185,963 $ 344,533 $ 1,643 95.1 % 15.4 %
Q1 2012 $ 518,249   $ 189,874   $ 328,375   $ 1,611   94.8 % 12.3 %
 
Change $ 12,247   $ (3,911 ) $ 16,158   $ 32   0.3 % 3.1 %
 
Change 2.4 % (2.1 %) 4.9 % 2.0 %
 
                             
 
June YTD 2012 vs. June YTD 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 103,950 Same Store Apartment Units
 
Results Statistics

Average

Rental

Description Revenues Expenses NOI (1)

Rate (2)

Occupancy Turnover
 
YTD 2012 $ 950,505 $ 338,380 $ 612,125 $ 1,605 95.1 % 27.9 %
YTD 2011 $ 901,181   $ 331,925   $ 569,256   $ 1,520   95.2 % 26.6 %
 
Change $ 49,324   $ 6,455   $ 42,869   $ 85   (0.1 %) 1.3 %
 
Change 5.5 % 1.9 % 7.5 % 5.6 %
 
(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 26 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
Second Quarter 2012 vs. Second Quarter 2011
Same Store Results/Statistics by Market
                   
Increase (Decrease) from Prior Year's Quarter

 

Markets

Apartment

Units

Q2 2012

% of

Actual

NOI

Q2 2012

Average

Rental

Rate (1)

Q2 2012

Weighted

Average

Occupancy %

Revenues Expenses NOI

Average

Rental

Rate (1)

Occupancy
 
1 New York Metro Area 7,063 12.7 % $ 3,295 96.3 % 5.9 % 4.4 % 6.9 % 6.3 % (0.4 %)
2 DC Northern Virginia 7,974 10.4 % 2,063 96.0 % 4.7 % 4.8 % 4.7 % 4.8 % (0.1 %)
3 South Florida 12,743 10.1 % 1,423 95.0 % 4.8 % 1.2 % 7.1 % 4.1 % 0.6 %
4 Los Angeles 8,312 9.1 % 1,796 94.7 % 4.0 % (4.0 %) 8.1 % 3.8 % 0.0 %
5 Boston 5,470 8.4 % 2,551 95.4 % 6.8 % 1.6 % 9.5 % 7.4 % (0.6 %)
6 Seattle/Tacoma 9,331 7.5 % 1,442 93.9 % 4.8 % 2.6 % 6.1 % 5.9 % (0.9 %)
7 San Francisco Bay Area 6,194 7.4 % 1,962 95.4 % 11.3 % 4.1 % 15.1 % 11.9 % (0.5 %)
8 Denver 7,970 5.8 % 1,176 95.4 % 9.2 % 2.4 % 12.6 % 9.2 % 0.0 %
9 Phoenix 8,431 4.6 % 946 94.9 % 4.0 % (4.1 %) 9.1 % 4.3 % (0.4 %)
10 San Diego 4,284 4.5 % 1,732 95.1 % 2.6 % 3.1 % 2.4 % 2.7 % (0.2 %)
11 Orlando 7,013 4.1 % 1,055 95.0 % 4.6 % 4.5 % 4.7 % 4.7 % (0.1 %)
12 Orange County, CA 3,490 3.5 % 1,632 95.4 % 5.9 % 4.7 % 6.5 % 5.9 % (0.1 %)
13 Suburban Maryland 4,005 3.4 % 1,429 94.6 % 2.2 % 0.8 % 2.9 % 3.0 % (0.8 %)
14 Inland Empire, CA 3,081 2.7 % 1,456 94.7 % 2.5 % 3.3 % 2.1 % 2.9 % (0.5 %)
15 Atlanta 4,190 2.4 % 1,106 96.0 % 6.2 % 2.2 % 9.3 % 6.4 % (0.2 %)
16 All Other Markets 6,053 3.4 %   1,067 95.6 % 5.3 % (0.2 %) 9.5 % 4.9 % 0.3 %
 
Total 105,604 100.0 % $ 1,626 95.2 % 5.5 % 2.0 % 7.5 % 5.7 % (0.2 %)
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.

 
Equity Residential
Second Quarter 2012 vs. First Quarter 2012
Same Store Results/Statistics by Market
                     
Increase (Decrease) from Prior Quarter

 

Markets

Apartment

Units

Q2 2012

% of

Actual

NOI

Q2 2012

Average

Rental

Rate (1)

Q2 2012

Weighted

Average

Occupancy %

Revenues Expenses NOI

Average

Rental

Rate (1)

Occupancy
 
1 New York Metro Area 7,536 12.3 % $ 3,247 96.3 % 2.1 % (5.3 %) 7.6 % 1.1 % 0.9 %
2 DC Northern Virginia 9,381 11.6 % 2,113 95.9 % 3.6 % (4.4 %) 7.5 % 2.3 % 1.2 %
3 Los Angeles 9,614 9.8 % 1,827 94.7 % 1.2 % (2.5 %) 3.0 % 1.6 % (0.3 %)
4 South Florida 12,990 9.6 % 1,433 94.9 % 1.6 % (0.1 %) 2.6 % 1.6 % (0.1 %)
5 Boston 5,832 8.2 % 2,515 95.4 % 2.6 % (2.0 %) 5.0 % 1.6 % 0.9 %
6 San Francisco Bay Area 8,533 7.9 % 1,758 95.2 % 3.8 % (3.5 %) 8.4 % 2.5 % 1.1 %
7 Seattle/Tacoma 9,582 7.2 % 1,441 94.0 % 2.2 % (2.1 %) 4.8 % 2.6 % (0.4 %)
8 Denver 7,970 5.4 % 1,176 95.4 % 3.1 % 2.2 % 3.5 % 3.1 % 0.1 %
9 San Diego 4,963 4.9 % 1,794 94.8 % 2.4 % 1.6 % 2.8 % 1.2 % 1.1 %
10 Phoenix 8,431 4.3 % 946 94.9 % 1.0 % (2.1 %) 2.9 % 1.2 % (0.2 %)
11 Suburban Maryland 4,584 3.9 % 1,520 94.6 % 2.1 % (0.6 %) 3.4 % 1.7 % 0.3 %
12 Orlando 7,013 3.8 % 1,055 95.0 % 2.4 % 0.1 % 4.0 % 2.6 % (0.2 %)
13 Orange County, CA 3,490 3.3 % 1,632 95.4 % 2.5 % 0.9 % 3.2 % 2.1 % 0.3 %
14 Inland Empire, CA 3,081 2.5 % 1,456 94.7 % 1.1 % (1.6 %) 2.4 % 0.3 % 0.7 %
15 Atlanta 4,190 2.2 % 1,106 96.0 % 3.0 % 6.5 % 0.6 % 2.5 % 0.4 %
16 All Other Markets 6,053 3.1 %   1,067 95.6 % 2.9 % (5.2 %) 9.6 % 1.8 % 1.0 %
 
Total 113,243 100.0 % $ 1,643 95.1 % 2.4 % (2.1 %) 4.9 % 2.0 % 0.3 %
 

(1)

 

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

                                     
Equity Residential
June YTD 2012 vs. June YTD 2011
Same Store Results/Statistics by Market
                   
Increase (Decrease) from Prior Year

 

Markets

Apartment

Units

June YTD 12

% of

Actual

NOI

June YTD 12

Average

Rental

Rate (1)

June YTD 12

Weighted

Average

Occupancy %

Revenues Expenses NOI

Average

Rental

Rate (1)

Occupancy
 
1 New York Metro Area 7,063 12.8 % $ 3,278 95.8 % 6.5 % 3.5 % 8.7 % 6.5 % (0.1 %)
2 DC Northern Virginia 7,974 10.5 % 2,043 95.3 % 4.7 % 4.8 % 4.7 % 5.1 % (0.4 %)
3 South Florida 12,114 9.7 % 1,385 95.1 % 4.3 % 3.1 % 4.9 % 3.7 % 0.4 %
4 Los Angeles 7,832 8.7 % 1,774 94.8 % 4.0 % (2.5 %) 7.5 % 3.7 % 0.2 %
5 Boston 5,175 8.2 % 2,532 95.2 % 6.7 % (1.2 %) 11.1 % 7.0 % (0.3 %)
6 San Francisco Bay Area 6,194 7.5 % 1,936 95.3 % 11.2 % 3.9 % 15.1 % 11.6 % (0.4 %)
7 Seattle/Tacoma 9,081 7.4 % 1,418 94.1 % 5.3 % 3.4 % 6.5 % 5.4 % (0.2 %)
8 Denver 7,970 6.0 % 1,159 95.3 % 9.3 % 2.8 % 12.4 % 9.1 % 0.1 %
9 Phoenix 8,431 4.7 % 941 95.0 % 4.3 % (3.5 %) 9.3 % 4.7 % (0.4 %)
10 San Diego 4,284 4.6 % 1,727 94.6 % 2.3 % 1.3 % 2.8 % 2.7 % (0.4 %)
11 Orlando 7,013 4.1 % 1,042 95.1 % 3.9 % 3.5 % 4.2 % 3.9 % 0.0 %
12 Orange County, CA 3,490 3.6 % 1,615 95.3 % 5.1 % 4.5 % 5.5 % 5.2 % (0.1 %)
13 Suburban Maryland 4,005 3.5 % 1,416 94.4 % 2.4 % (0.3 %) 3.7 % 2.8 % (0.5 %)
14 Inland Empire, CA 3,081 2.8 % 1,454 94.4 % 2.5 % 2.7 % 2.4 % 3.2 % (0.6 %)
15 Atlanta 4,190 2.5 % 1,093 95.8 % 5.8 % 1.5 % 9.1 % 6.1 % (0.2 %)
16 All Other Markets 6,053 3.4 % 1,058 95.1 % 4.7 % 0.4 % 8.2 % 4.6 % 0.0 %
 
Total 103,950 100.0 % $ 1,605 95.1 % 5.5 % 1.9 % 7.5 % 5.6 % (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
             
 
Second Quarter 2012 vs. Second Quarter 2011
Same Store Operating Expenses
$ in thousands - 105,604 Same Store Apartment Units
 
Actual

Q2 2012

Actual

Q2 2011

$

Change

%

Change

% of Actual

Q2 2012

Operating

Expenses

 
Real estate taxes $ 51,110 $ 48,219 $ 2,891 6.0 % 30.0 %
On-site payroll (1) 38,804 38,371 433 1.1 % 22.8 %
Utilities (2) 25,049 24,761 288 1.2 % 14.7 %
Repairs and maintenance (3) 24,081 23,975 106 0.4 % 14.2 %
Property management costs (4) 18,370 18,573 (203 ) (1.1 %) 10.8 %
Insurance 5,528 5,137 391 7.6 % 3.2 %
Leasing and advertising 2,877 3,092 (215 ) (7.0 %) 1.7 %
Other on-site operating expenses (5)   4,390   4,734   (344 ) (7.3 %) 2.6 %
 
Same store operating expenses $ 170,209 $ 166,862 $ 3,347   2.0 % 100.0 %
 
                           
 
 
June YTD 2012 vs. June YTD 2011
Same Store Operating Expenses
$ in thousands - 103,950 Same Store Apartment Units
 
Actual

YTD 2012

Actual

YTD 2011

$

Change

%

Change

% of Actual

YTD 2012

Operating

Expenses

 
Real estate taxes $ 100,173 $ 94,906 $ 5,267 5.5 % 29.6 %
On-site payroll (1) 77,526 76,323 1,203 1.6 % 22.9 %
Utilities (2) 51,263 52,307 (1,044 ) (2.0 %) 15.2 %
Repairs and maintenance (3) 46,468 45,902 566 1.2 % 13.7 %
Property management costs (4) 36,119 36,047 72 0.2 % 10.7 %
Insurance 10,768 10,062 706 7.0 % 3.2 %
Leasing and advertising 5,492 6,307 (815 ) (12.9 %) 1.6 %
Other on-site operating expenses (5)   10,571   10,071   500   5.0 % 3.1 %
 
Same store operating expenses $ 338,380 $ 331,925 $ 6,455   1.9 % 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 June 30, 2012
(Amounts in thousands)
 
Amounts (1) % of Total

Weighted

Average

Rates (1)

Weighted

Average

Maturities

(years)

 
Secured $ 4,004,496 42.6 % 4.94 % 7.4
Unsecured   5,389,768     57.4 % 5.11 % 4.9  
 
Total $ 9,394,264     100.0 % 5.03 % 5.9  
 
Fixed Rate Debt:

Secured - Conventional

$ 3,590,277 38.2 % 5.51 % 6.5
Unsecured - Public/Private   4,550,459     48.4 % 5.70 % 5.7  
 
Fixed Rate Debt   8,140,736     86.6 % 5.62 % 6.0  
 
Floating Rate Debt:
Secured - Conventional 63,714 0.7 % 3.33 % 1.0
Secured - Tax Exempt 350,505 3.7 % 0.23 % 18.1
Unsecured - Public/Private 804,309 8.6 % 1.67 % 0.4
Unsecured - Revolving Credit Facility   35,000     0.4 % 1.35 % 2.0  
 
Floating Rate Debt   1,253,528     13.4 % 1.29 % 5.1  
 
Total $ 9,394,264     100.0 % 5.03 % 5.9  
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the six months ended June 30, 2012.
 
Note: The Company capitalized interest of approximately $10.1 million and $3.7 million during the six months ended June 30, 2012 and 2011, respectively. The Company capitalized interest of approximately $5.1 million and $2.0 million during the quarters ended June 30, 2012 and 2011, respectively.
                         
 

Debt Maturity Schedule as of June 30, 2012

(Amounts in thousands)

 

 

Year

Fixed

Rate (1)

Floating

Rate (1)

Total % of Total

Weighted

Average Rates

on Fixed

Rate Debt (1)

Weighted

Average

Rates on

Total Debt (1)

 
2012 $ 276,867 $ 533,198 (2) $ 810,065 8.6 % 5.52 % 2.50 %
2013 267,283 304,819 572,102 6.1 % 6.69 % 4.85 %
2014 563,844 57,021 (3) 620,865 6.6 % 5.31 % 5.02 %
2015 417,330 - 417,330 4.4 % 6.30 % 6.30 %
2016 1,190,036 - 1,190,036 12.7 % 5.34 % 5.34 %
2017 1,445,589 456 1,446,045 15.4 % 5.95 % 5.95 %
2018 80,887 724 81,611 0.9 % 5.71 % 5.71 %
2019 802,044 20,766 822,810 8.8 % 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+ 233,861 338,604 572,465 6.1 % 6.75 % 3.33 %
Premium/(Discount)   25,652   (3,725 )   21,927   0.2 % N/A   N/A  
 
Total $ 8,140,736 $ 1,253,528   $ 9,394,264   100.0 % 5.54 % 5.00 %
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of June 30, 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.
 

(3) Includes $35.0 million outstanding on the Company's unsecured revolving credit facility. As of June 30, 2012, there was approximately $1.68 billion available on this facility.

                         
Equity Residential
Unsecured Debt Summary as of June 30, 2012
(Amounts in thousands)
             

 

Coupon

Rate

Due

Date

Face

Amount

Unamortized

Premium/

(Discount)

Net

Balance

 
 
Fixed Rate Notes:
5.500% 10/01/12

$

222,133

$

(55

) $ 222,078
5.200% 04/01/13 (1) 400,000 (89 ) 399,911
Fair Value Derivative Adjustments (1) (300,000 ) - (300,000 )
5.250% 09/15/14 500,000 (136 ) 499,864
6.584% 04/13/15 300,000 (303 ) 299,697
5.125% 03/15/16 500,000 (197 ) 499,803
5.375% 08/01/16 400,000 (758 ) 399,242
5.750% 06/15/17 650,000 (2,543 ) 647,457
7.125% 10/15/17 150,000 (343 ) 149,657
4.750% 07/15/20 600,000 (3,662 ) 596,338
4.625% 12/15/21 1,000,000 (3,588 ) 996,412
7.570% 08/15/26   140,000     -     140,000  
 
  4,562,133     (11,674 )   4,550,459  
 
Floating Rate Notes:
04/01/13 (1) 300,000 - 300,000
Fair Value Derivative Adjustments (1) 4,309 - 4,309
Term Loan Facility LIBOR+0.50% 10/05/12 (2)(3)   500,000     -     500,000  
 
  804,309     -     804,309  
 
Revolving Credit Facility: LIBOR+1.15% 07/13/14 (2)(4)   35,000     -     35,000  
 
Total Unsecured Debt $ 5,401,442  

$

(11,674

) $ 5,389,768  
 
(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) As of June 30, 2012, there was approximately $1.68 billion available on the Company's unsecured revolving credit facility.

         
Equity Residential
   
Selected Unsecured Public Debt Covenants
 
June 30, March 31,
2012 2012
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 43.8% 44.6%
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 18.7% 19.2%
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.85 2.76
 
Total Unsecured Assets to Unsecured Debt 280.0% 273.5%
(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 June 30, 2012
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 4,004,496 42.6 %
Unsecured Debt   5,389,768 57.4 %
 
Total Debt 9,394,264 100.0 % 32.1 %
 
Common Shares (includes Restricted Shares) 300,961,645 95.4 %
Units (includes OP Units and LTIP Units)   14,508,752   4.6 %
 
Total Shares and Units 315,470,397 100.0 %
Common Share Price at June 30, 2012 $ 62.36
19,672,734 99.0 %
Perpetual Preferred Equity (see below)   200,000 1.0 %
 
Total Equity 19,872,734 100.0 % 67.9 %
 
Total Market Capitalization $ 29,266,998 100.0 %
 
                               
 
Perpetual Preferred Equity as of June 30, 2012
(Amounts in thousands except for share and per share amounts)

 

 

 

Series

Redemption

Date

Outstanding

Shares

Liquidation

Value

Annual

Dividend

Per Share

Annual

Dividend

Amount

Weighted

Average

Rate

 
Preferred Shares:
8.29% Series K 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145

6.48% Series N (1)

6/19/08 600,000   150,000 16.20   9,720
 
Total Perpetual Preferred Equity 1,600,000 $ 200,000 $ 13,865 6.93 %
 

(1) The Series N Preferred Shares have been called for redemption effective August 20, 2012.

                     
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
       
YTD Q212 YTD Q211 Q212 Q211
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 299,499,337 293,783,729 300,193,311 294,662,571
Shares issuable from assumed conversion/vesting of (1):
- OP Units 13,633,531 - 14,061,763 13,291,204
- long-term compensation shares/units 3,324,096 - 3,392,527 4,245,599
 
Total Common Shares and Units - diluted (1) 316,456,964 293,783,729 317,647,601 312,199,374
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 299,499,337 293,783,729 300,193,311 294,662,571
OP Units - basic 13,633,531 13,322,096 14,061,763 13,291,204
 
Total Common Shares and OP Units - basic 313,132,868 307,105,825 314,255,074 307,953,775
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 3,324,096 4,274,215 3,392,527 4,245,599
 
Total Common Shares and Units - diluted 316,456,964 311,380,040 317,647,601 312,199,374
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 300,961,645 296,280,085
Units (includes OP Units and LTIP Units) 14,508,752 13,488,276
 
Total Shares and Units 315,470,397 309,768,361
 
(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 six months ended June 30, 2011.

                     
Equity Residential

Partially Owned Entities as of June 30, 2012

(Amounts in thousands except for project and apartment unit amounts)
         
Consolidated Unconsolidated
Development Projects

 

Held for

and/or Under

Development

Completed

and Stabilized

Other Total

Institutional JointVentures (4)

 
Total projects (1)   -     2     19     21     -
 
Total apartment units (1)   -     441     3,475     3,916     -
 
Operating information for the six months ended 6/30/12 (at 100%):
Operating revenue $ - $ 4,733 $ 30,467 $ 35,200 $ -
Operating expenses   75     1,358     9,711     11,144     -
 
Net operating (loss) income (75 ) 3,375 20,756 24,056 -
Depreciation - 2,085 7,683 9,768 -
General and administrative/other   42     3     30     75     -
 
Operating (loss) income (117 ) 1,287 13,043 14,213 -
Interest and other income 1 2 - 3 -
Other expenses (126 ) - - (126 ) -
Interest:
Expense incurred, net - (671 ) (4,694 ) (5,365 ) -
Amortization of deferred financing costs   -     (135 )   (89 )   (224 )   -
 
(Loss) income before income and other taxes (242 ) 483 8,260 8,501 -
Income and other tax (expense) benefit   (25 )   -     (21 )   (46 )   -
 
Net (loss) income $ (267 ) $ 483   $ 8,239   $ 8,455   $ -
 
Debt - Secured (2):
EQR Ownership (3) $ - $ 32,950 $ 159,068 $ 192,018 $ 2,594
Noncontrolling Ownership   -     -     41,269     41,269     10,374
 
Total (at 100%) $ -   $ 32,950   $ 200,337   $ 233,287   $ 12,968
 
(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.
 
(4)

These development projects (Nexus Sawgrass and Domain) are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. 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. See page 21 for further discussion.

                                               
Equity Residential
Development and Lease-Up Projects as of June 30, 2012
(Amounts in thousands except for project and apartment unit amounts)
                     
Projects Location No. of

Apartment

Units

Total

Capital

Cost (1)

Total

Book Value

to Date

Total Book

Value Not

Placed in

Service

Total

Debt

Percentage

Completed

Percentage

Leased

Percentage

Occupied

Estimated

Completion

Date

Estimated

Stabilization

Date

 
Consolidated
 

Projects Under Development - Wholly Owned:

2201 Pershing Drive Arlington, VA 188 $ 64,242 $ 45,126 $ 45,126 $ - 83 % 25 % - Q3 2012 Q3 2013
Jia (formerly Chinatown Gateway) Los Angeles, CA 280 92,920 42,562 42,562 - 25 % - - Q3 2013 Q2 2015
Westgate Block 2 Pasadena, CA 252 125,293 49,983 49,983 - 9 % - - Q1 2014 Q1 2015
The Madison Alexandria, VA 360 115,072 35,416 35,416 - 9 % - - Q1 2014 Q2 2015
Market Street Landing Seattle, WA 287   90,024   25,825   25,825   - 17 % - - Q1 2014 Q3 2015
Projects Under Development - Wholly Owned 1,367 487,551 198,912 198,912 -
         
Projects Under Development 1,367   487,551   198,912   198,912   -
 

Completed Not Stabilized - Wholly Owned (2):

88 Hillside (3) Daly City, CA 95 39,374 39,374 - - 98 % 98 % Completed Q3 2012
Ten23 (formerly 500 West 23rd Street) (4) New York, NY 111 55,555 54,843 - - 83 % 77 % Completed Q4 2012
The Savoy at Dayton Station III (formerly Savoy III) Aurora, CO 168   23,856   21,070   -   - 56 % 52 % Completed Q1 2013
Projects Completed Not Stabilized - Wholly Owned 374 118,785 115,287 - -
         
Projects Completed Not Stabilized 374   118,785   115,287   -   -
 
Total Consolidated Projects 1,741 $ 606,336 $ 314,199 $ 198,912 $ -
 
Land Held for Development (5) N/A   N/A $ 372,108 $ 372,108 $ -
 
Unconsolidated
 

Projects Under Development - Unconsolidated:

Nexus Sawgrass (formerly Sunrise Village) (6) Sunrise, FL 501 $ 78,212 $ 38,376 $ 38,376 $ 7,851 42 % 1 % - Q3 2013 Q3 2014
Domain (6) San Jose, CA 444   154,570   65,340   65,340   5,117 35 % - - Q4 2013 Q4 2015
 
Projects Under Development - Unconsolidated 945 232,782 103,716 103,716 12,968
         
Projects Under Development 945   232,782   103,716   103,716   12,968
 
Total Unconsolidated Projects 945 $ 232,782 $ 103,716 $ 103,716 $ 12,968
 
NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Total Capital

Cost (1)

Q2 2012

NOI

Projects Under Development $ 487,551 $ (34 )
Completed Not Stabilized   118,785     278  
Total Consolidated Development NOI Contribution $ 606,336   $ 244  
 

(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 $59.7 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 but currently has no further funding obligations.

                                                             
Equity Residential

Repairs and Maintenance Expenses and Capital Expenditures to Real Estate

For the Six Months Ended June 30, 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

Apartment

Units (1)

Expense (2) Avg. Per

Apartment

Unit

Payroll (3) Avg. Per

Apartment

Unit

Total Avg. Per

Apartment

Unit

Replacements

(4)

Avg. Per

Apartment

Unit

Building

Improvements

(5)

Avg. Per

Apartment

Unit

Total Avg. Per

Apartment

Unit

Grand

Total

Avg. Per

Apartment

Unit

 

Same Store Properties (6)

103,950 $ 46,468 $ 447 $ 39,052 $ 376 $ 85,520 $ 823 $ 32,501 $ 313 $ 23,856 $ 229 $ 56,357 $ 542

(9)

$ 141,877 $ 1,365
 
Non-Same Store Properties (7) 11,466 6,150 588 3,428 328 9,578 916 2,940 281 8,636 825 11,576 1,106 21,154 2,022
 
Other (8) -   562   1,320   1,882   288   98   386   2,268
 
Total 115,416 $ 53,180 $ 43,800 $ 96,980 $ 35,729 $ 32,590 $ 68,319 $ 165,299
 
(1) Total Apartment Units - Excludes 4,939 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 $15.9 million spent during the six months ended June 30, 2012 on apartment unit renovations/rehabs (primarily kitchens and baths) on 2,254 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 10,463 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)
       
Six Months Ended Quarter Ended
June 30, June 30,
2012 2011 2012 2011
REVENUES
Rental income $ 10,131   $ 105,762   $ 3,198   $ 41,757  
Total revenues   10,131     105,762     3,198     41,757  
 
EXPENSES (1)
Property and maintenance 3,197 49,951 1,376 22,471
Real estate taxes and insurance 920 7,581 325 2,887
Depreciation 2,027 19,039 660 7,115
General and administrative   40     47     36     36  
Total expenses   6,184     76,618     2,397     32,509  
 
Discontinued operating income 3,947 29,144 801 9,248
 
Interest and other income 43 101 18 96
Other expenses - - - 4
Interest (2):
Expense incurred, net (369 ) (1,209 ) (288 ) (605 )
Amortization of deferred financing costs - (647 ) - (578 )
Income and other tax (expense) benefit   49     (62 )   129     (20 )
 
Discontinued operations 3,670 27,327 660 8,145
Net gain on sales of discontinued operations   204,053     682,236     71,097     558,482  
 
Discontinued operations, net $ 207,723   $ 709,563   $ 71,757   $ 566,627  
 
(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 Q2 2012
to Actual Q2 2012
Amounts Per Share
 
Guidance Q2 2012 Normalized FFO - Diluted (2) (3) $ 213,056 $ 0.670
Property NOI 2,719 0.009
Other   (771 )   (0.002 )
 
Actual Q2 2012 Normalized FFO - Diluted (2) (3) $ 215,004   $ 0.677  
 
                         
 
 

Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)

 
Six Months Ended June 30, Quarter Ended June 30,
2012 2011 Variance 2012 2011 Variance
 
Impairment $ -   $ -   $ -   $ -   $ -   $ -  
Asset impairment and valuation allowances   -     -     -     -     -     -  
 
Property acquisition costs (other expenses) (A) 7,329 3,752 3,577 5,737 3,271 2,466
Write-off of pursuit costs (other expenses)   3,565     3,038     527     2,531     1,355     1,176  
Property acquisition costs and write-off of pursuit costs (other expenses)   10,894     6,790     4,104     8,268     4,626     3,642  
 
Prepayment premiums/penalties (interest expense) 272 - 272 272 - 272
Write-off of unamortized deferred financing costs (interest expense) 1,147 2,114 (967 ) 1,146 1,996 (850 )

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

(42 ) - (42 ) - - -
Non-cash convertible debt discount (interest expense) - 3,890 (3,890 ) - 1,945 (1,945 )
Unrealized loss due to ineffectiveness of forward starting swaps (interest expense)   -     2,569     (2,569 )   -     2,569     (2,569 )
Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions
and non-cash convertible debt discounts   1,377     8,573     (7,196 )   1,418     6,510     (5,092 )
 
Net (gain) loss on sales of land parcels - (4,217 ) 4,217 - (4,217 ) 4,217
Net incremental (gain) on sales of condominium units (49 ) (1,115 ) 1,066 - (720 ) 720
Income and other tax expense (benefit) - Condo sales (92 ) 26 (118 ) (137 ) 7 (144 )

(Gain) on sale of Equity Corporate Housing (ECH), net of severance

  (350 )   (223 )   (127 )   (350 )   (223 )   (127 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (491 )   (5,529 )   5,038     (487 )   (5,153 )   4,666  
 
Insurance/litigation settlement expense (other expenses) 4,714 - 4,714 528 - 528
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)   976     -     976     721     -     721  
Other miscellaneous non-comparable items   2,223     (2,100 )   4,323     1,249     -     1,249  
           
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 14,003   $ 7,734   $ 6,269   $ 10,448   $ 5,983   $ 4,465  
 
 
(A) For the six months and quarter ended June 30, 2012, includes $1.8 million and $0.7 million, respectively, of transaction costs related to the potential Archstone transaction.
 
Note: See page 26 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)

 

Q3 2012

2012

 
Expected Normalized FFO (2) (3) $0.70 to $0.74 $2.73 to $2.78
 

2012 Same Store Assumptions

 
Physical occupancy 95.2 %
Revenue change 5.4% to 5.6%
Expense change 1.5% to 2.5%
NOI change 7.0% to 8.0%
 
(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 130 basis points
 

2012 Debt Assumptions (see Note)

 
Weighted average debt outstanding $9.4 billion to $9.5 billion
Weighted average interest rate (reduced for capitalized interest) 4.88 %
Interest expense $458.0 million to $463.0 million
 

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 318.1 million
 
 
(Note: Guidance assumes no preferred share or debt offerings during 2012)
 

Note: All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties, property acquisition costs, the write-off of pursuit costs and the $150.0 million in Archstone-related termination fees that the Company received in the second quarter of 2012, are not included in the estimates provided on this page. See page 28 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, 24 and 25
 
Expected Expected
Expected Q2 2012 Q3 2012 2012
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $ 74,260 $ 0.234 $0.80 to $0.84 $2.93 to $2.98
Add: Expected depreciation expense 180,519 0.568 0.56 2.25
Less: Expected net gain on sales (5)   (50,323 )   (0.159 ) (0.49) (2.08)
 
Expected FFO - Diluted (1) (3) 204,456 0.643 0.87 to 0.91 3.10 to 3.15
 
Asset impairment and valuation allowances - - - -
Property acquisition costs and write-off of pursuit costs (other expenses) 6,963 0.022 0.03 0.08
Debt extinguishment (gains) losses, including prepayment penalties,
preferred share redemptions and non-cash convertible debt discounts 1,404 0.004 0.02 0.02
(Gains) losses on sales of non-operating assets, net of income and other tax
expense (benefit) (347 ) (0.001 ) - (0.01)
Other miscellaneous non-comparable items   580     0.002   (0.22) (0.46)
 
Expected Normalized FFO - Diluted (2) (3) $ 213,056   $ 0.670   $0.70 to $0.74 $2.73 to $2.78
 
Definitions and Footnotes for Pages 6, 24 and 25
 
(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 June YTD 2012 and the Second Quarter 2012 Same Store Properties:
 
Six Months Ended June 30, Quarter Ended June 30,
2012 2011 2012 2011
 
Operating income $ 310,601 $ 254,771 $ 165,711 $ 139,857
Adjustments:
Non-same store operating results (69,848 ) (17,950 ) (30,755 ) (6,827 )
Fee and asset management revenue (4,276 ) (3,754 ) (2,212 ) (1,948 )
Fee and asset management expense 2,487 1,957 1,180 1,009
Depreciation 346,079 311,891 172,338 154,452
General and administrative   27,082     22,341     13,394     10,908  
 
Same store NOI $ 612,125   $ 569,256   $ 319,656   $ 297,451  




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