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Equity Residential Reports Third Quarter Results

Stocks in this article: EQR

During the quarter, the company sold eight properties, consisting of 2,153 apartment units, for an aggregate sale price of $280.7 million at a weighted average cap rate of 6.0%. These sales, excluding two leveraged, partially-owned assets sold during the quarter, generated an unlevered internal rate of return (IRR), inclusive of management costs, of 10.2%.

During the first nine months of 2012, the company acquired nine properties with a total of 1,896 apartment units for an aggregate purchase price of $906.3 million at a weighted average cap rate of 4.7% and five land parcels for $62.2 million.

Also during the first nine months of 2012, the company sold 20 properties with a total of 5,337 apartment units for an aggregate sale price of $616.9 million at a weighted average cap rate of 6.2%. These sales, excluding two leveraged, partially-owned assets sold during the third quarter, generated an unlevered IRR, inclusive of management costs, of 10.8%.

Archstone

As previously disclosed, on June 6, 2012, Equity Residential received $150 million in termination fees from Bank of America, Barclays Bank PLC (together, the “Sellers”) and Lehman Brothers Holdings Inc. (“Lehman”) as a result of Lehman’s acquisition of the Sellers’ remaining 26.5% interest in Archstone, a privately-held owner, operator and developer of multifamily apartment properties. The company recognized $70 million of these fees in interest and other income in the third quarter of 2012 and will recognize $80 million of these fees in interest and other income in the fourth quarter of 2012. These termination fees will not be included in the company’s Normalized FFO.

Financing Activities

On August 20, 2012, the company redeemed all of its outstanding Series N Depositary Shares (with a liquidation value of $150 million) each representing 1/10 of a 6.48% Series N Cumulative Redeemable Preferred Share of Beneficial Interest. As a result of this redemption, the company recorded a non-cash charge of approximately $5.1 million, or approximately $0.02 per share, in the third quarter of 2012 for the write-off of the original issuance costs. This charge reduced earnings per share and FFO but did not impact Normalized FFO.

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