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Equity Residential Reports Third Quarter Results

Stocks in this article: EQR

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 418 properties located in 13 states and the District of Columbia, consisting of 118,986 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, October 25, at 9:00 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)
 
Nine Months Ended September 30, Quarter Ended September 30,
2012 2011 2012 2011
REVENUES
Rental income $ 1,602,635 $ 1,417,136 $ 553,092 $ 490,944
Fee and asset management   7,328     6,682     3,052     2,928  
Total revenues   1,609,963     1,423,818     556,144     493,872  
 
EXPENSES
Property and maintenance 325,071 300,362 110,679 101,712
Real estate taxes and insurance 182,222 162,430 64,235 57,109
Property management 62,769 62,191 18,493 19,175
Fee and asset management 3,595 3,207 1,108 1,250
Depreciation 509,338 467,416 167,406 159,691
General and administrative   37,178     32,462     10,096     10,121  
Total expenses   1,120,173     1,028,068     372,017     349,058  
 
Operating income 489,790 395,750 184,127 144,814
 
Interest and other income 70,516 6,598 70,087 5,313
Other expenses (20,678 ) (9,318 ) (4,094 ) (2,528 )
Interest:
Expense incurred, net (347,452 ) (350,957 ) (113,876 ) (112,449 )
Amortization of deferred financing costs   (10,319 )   (11,900 )   (3,338 )   (4,650 )

Income before income and other taxes, (loss) from investments in unconsolidated entities, net gain on sales of land parcels and discontinued operations

181,857 30,173 132,906 30,500
Income and other tax (expense) benefit (627 ) (669 ) (222 ) (283 )
(Loss) from investments in unconsolidated entities (3 ) - (3 ) -
Net gain on sales of land parcels - 4,217 - -
Income from continuing operations 181,227 33,721 132,681 30,217
Discontinued operations, net   315,578     794,075     103,642     82,760  
Net income 496,805 827,796 236,323 112,977
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership (21,646 ) (36,275 ) (10,496 ) (4,742 )
Partially Owned Properties   (457 )   (418 )   312     (387 )
Net income attributable to controlling interests 474,702 791,103 226,139 107,848
Preferred distributions   (9,319 )   (10,399 )   (2,386 )   (3,466 )
Premium on redemption of Preferred Shares

 

(5,150 )

 

-  

 

(5,150 )

 

-  
Net income available to Common Shares $ 460,233   $ 780,704   $ 218,603   $ 104,382  
 
Earnings per share – basic:

Income from continuing operations available to Common Shares

$ 0.53   $ 0.07   $ 0.40   $ 0.09  
Net income available to Common Shares $ 1.53   $ 2.65   $ 0.73   $ 0.35  
Weighted average Common Shares outstanding   300,116     294,474     301,336     295,831  
 
Earnings per share – diluted:

Income from continuing operations available to Common Shares

$ 0.52   $ 0.07   $ 0.39   $ 0.08  
Net income available to Common Shares $ 1.52   $ 2.62   $ 0.72   $ 0.35  
Weighted average Common Shares outstanding   317,265     311,908     318,773     312,844  
 
Distributions declared per Common Share outstanding $ 1.0125   $ 1.0125   $ 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)
         

Nine Months Ended September 30,

Quarter Ended September 30,

2012

2011

2012

2011

Net income $ 496,805 $ 827,796 $ 236,323 $ 112,977

Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties

(457 ) (418 ) 312 (387 )
Preferred distributions (9,319 ) (10,399 ) (2,386 ) (3,466 )
Premium on redemption of Preferred Shares   (5,150 )   -     (5,150 )   -  
Net income available to Common Shares and Units 481,879 816,979 229,099 109,124
 
Adjustments:
Depreciation 509,338 467,416 167,406 159,691
Depreciation – Non-real estate additions (4,211 ) (4,202 ) (1,430 ) (1,297 )
Depreciation – Partially Owned and Unconsolidated Properties (2,395 ) (2,263 ) (798 ) (758 )
Discontinued operations:
Depreciation 7,602 28,879 1,428 5,762
Net (gain) on sales of discontinued operations (307,447 ) (759,100 ) (103,394 ) (76,864 )
Net incremental gain on sales of condominium units 49 2,050 - 935
Gain (loss) on sale of Equity Corporate Housing (ECH)   350     1,022     -     (2 )
FFO available to Common Shares and Units (1) (3) (4) 685,165 550,781 292,311 196,591
Adjustments (see page 24 for additional detail):
Asset impairment and valuation allowances - - - -
Property acquisition costs and write-off of pursuit costs (other expenses) 14,898 9,318 4,004 2,528

Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts

7,491 9,250 6,114 677

(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)

(491 ) (6,554 ) - (1,025 )
Other miscellaneous non-comparable items   (67,687 )   (7,762 )   (69,910 )   (5,662 )
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 639,376   $ 555,033   $ 232,519   $ 193,109  
 
FFO (1) (3) $ 699,634 $ 561,180 $ 299,847 $ 200,057
Preferred distributions (9,319 ) (10,399 ) (2,386 ) (3,466 )
Premium on redemption of Preferred Shares   (5,150 )   -     (5,150 )   -  
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 685,165   $ 550,781   $ 292,311   $ 196,591  
FFO per share and Unit - basic $ 2.18   $ 1.79   $ 0.93   $ 0.64  
FFO per share and Unit - diluted $ 2.16   $ 1.77   $ 0.92   $ 0.63  
 
Normalized FFO (2) (3) $ 648,695 $ 565,432 $ 234,905 $ 196,575
Preferred distributions   (9,319 )   (10,399 )   (2,386 )   (3,466 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 639,376   $ 555,033   $ 232,519   $ 193,109  
Normalized FFO per share and Unit - basic $ 2.04   $ 1.80   $ 0.74   $ 0.63  
Normalized FFO per share and Unit - diluted $ 2.02   $ 1.78   $ 0.73   $ 0.62  
 
Weighted average Common Shares and Units outstanding - basic   313,932     307,705     315,513     308,884  
Weighted average Common Shares and Units outstanding - diluted   317,265     311,908     318,773     312,844  
 

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)
   
September 30, 2012 December 31, 2011
ASSETS
Investment in real estate
Land $ 4,609,337 $ 4,367,816
Depreciable property 15,943,139 15,554,740
Projects under development 194,254 160,190
Land held for development   404,846     325,200  
Investment in real estate 21,151,576 20,407,946
Accumulated depreciation   (4,880,808 )   (4,539,583 )
Investment in real estate, net 16,270,768 15,868,363
Cash and cash equivalents 45,623 383,921
Investments in unconsolidated entities 17,906 12,327
Deposits – restricted 120,440 152,237
Escrow deposits – mortgage 10,462 10,692
Deferred financing costs, net 38,823 44,608
Other assets   164,523     187,155  
Total assets

$

16,668,545

 

$

16,659,303

 
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 3,948,115 $ 4,111,487
Notes, net 5,354,038 5,609,574
Lines of credit 7,000 -
Accounts payable and accrued expenses 105,602 35,206
Accrued interest payable 78,869 88,121
Other liabilities 370,046 291,289
Security deposits 68,758 65,286
Distributions payable   108,048     179,079  

Total liabilities

 

10,040,476

   

10,380,042

 
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership  

414,219

   

416,404

 
Equity:
Shareholders’ equity:

Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 1,000,000 shares issued and outstanding as of September 30, 2012 and 1,600,000 shares issued and outstanding as of December 31, 2011

50,000 200,000

Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 302,674,716 shares issued and outstanding as of September 30, 2012 and 297,508,185 shares issued and outstanding as of December 31, 2011

3,027 2,975
Paid in capital 5,364,802 5,047,186
Retained earnings 770,697 615,572
Accumulated other comprehensive (loss)   (197,754 )   (196,718 )
Total shareholders’ equity 5,990,772 5,669,015
Noncontrolling Interests:
Operating Partnership 147,650 119,536
Partially Owned Properties   75,428     74,306  
Total Noncontrolling Interests   223,078     193,842  
Total equity   6,213,850     5,862,857  
Total liabilities and equity $ 16,668,545   $ 16,659,303  
 
 
 
Equity Residential
Portfolio Summary
As of September 30, 2012
           
Markets Properties

ApartmentUnits

% of TotalApartmentUnits

% ofStabilizedNOI (1)

AverageRentalRate (2)

 
1 New York Metro Area 30 8,047 6.8 % 13.8 %

$

3,422

2 DC Northern Virginia 27 9,569 8.0 % 11.6 % 2,150
3 Los Angeles 48 9,815 8.3 % 9.7 % 1,863
4 South Florida 39 12,990 10.9 % 9.4 % 1,452
5 Boston 26 5,832 4.9 % 8.0 % 2,549
6 San Francisco Bay Area 40 9,094 7.6 % 7.8 % 1,838
7 Seattle/Tacoma 44 9,901 8.3 % 7.3 % 1,491
8 Denver 24 8,141 6.8 % 5.1 % 1,221
9 San Diego 14 4,963 4.2 % 5.0 % 1,846
10 Suburban Maryland 16 4,856 4.1 % 4.5 % 1,689
11 Phoenix 28 8,209 6.9 % 3.9 % 953
12 Orlando 21 6,413 5.4 % 3.4 % 1,083
13 Orange County, CA 11 3,490 2.9 % 3.2 % 1,653
14 Inland Empire, CA 10 3,081 2.6 % 2.4 % 1,474
15 Atlanta 13 3,820 3.2 % 2.0 % 1,129
16 All Other Markets (3) 25 5,774 4.9 % 2.9 %   1,085
 
Total 416 113,995

95.8

% 100.0 % 1,708
 
Military Housing 2 4,991 4.2 % -     -
 
Grand Total 418 118,986 100.0 % 100.0 %

$

1,708

 
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 September 2012.
 
(3) All Other Markets - Each individual market is less than 1.5% of stabilized NOI.
 
 
 
Equity Residential
       
Portfolio as of September 30, 2012
 
Properties

ApartmentUnits

Wholly Owned Properties

 

397 110,520
Partially Owned Properties - Consolidated

 

19 3,475
Military Housing

 

2     4,991  
 
418     118,986  
 
                   
 
Portfolio Rollforward Q3 2012
($ in thousands)
 
Properties Apartment

Units

Purchase/

(Sale) Price

Cap

Rate

6/30/2012 421 120,355
Acquisitions:
Rental Properties - Consolidated 4

540

$ 236,336 4.3 %
Land Parcels (three) - - $ 38,500
Dispositions:
Rental Properties - Consolidated (8 ) (2,153 ) $ (280,654 ) 6.0 %
Completed Developments 1 188
Configuration Changes - 56
 
9/30/2012 418   118,986  
 
                   
 
Portfolio Rollforward 2012
($ in thousands)
 
Properties Apartment

Units

Purchase/

(Sale) Price

Cap

Rate

12/31/2011 427 121,974
Acquisitions:
Rental Properties - Consolidated 9 1,896

$

906,305 4.7 %
Land Parcels (five) - -

$

62,240
Dispositions:
Rental Properties - Consolidated (20 ) (5,337 )

$

(616,904 ) 6.2 %
Completed Developments 2 356
Configuration Changes - 97
 
9/30/2012 418   118,986  
 
 
 
Equity Residential
           
Third Quarter 2012 vs. Third Quarter 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 105,902 Same Store Apartment Units
 
Results Statistics
Description Revenues Expenses NOI (1)

AverageRentalRate (2)

Occupancy Turnover
 
Q3 2012

$

508,063

$

177,463

$

330,600

$

1,670

95.8 % 17.5 %
Q3 2011

$

480,256

 

$

172,382

 

$

307,874

 

$

1,588

  95.3 % 17.7 %
 
Change

$

27,807

 

$

5,081

 

$

22,726

 

$

82

  0.5 % (0.2 )%
 
Change 5.8 % 2.9 % 7.4 % 5.2 %
 
                         
 
 
Third Quarter 2012 vs. Second Quarter 2012
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 112,078 Same Store Apartment Units
 
Results Statistics
Description Revenues Expenses NOI (1)

AverageRentalRate (2)

Occupancy Turnover
 
Q3 2012

$

541,067

$

190,793

$

350,274

$

1,681

95.8 % 17.4 %
Q2 2012

$

528,590

 

$

185,273

 

$

343,317

 

$

1,654

  95.1 % 15.4 %
 
Change

$

12,477

 

$

5,520

 

$

6,957

 

$

27

  0.7 % 2.0 %
 
Change 2.4 % 3.0 % 2.0 % 1.6 %
 
                         
 
 
September YTD 2012 vs. September YTD 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 102,241 Same Store Apartment Units
 
Results Statistics
Description Revenues Expenses NOI (1)

AverageRentalRate (2)

Occupancy Turnover
 
YTD 2012

$

1,428,431

$

505,516

$

922,915

$

1,630

95.3 % 45.3 %
YTD 2011

$

1,353,690

 

$

494,509

 

$

859,181

 

$

1,547

  95.2 % 44.2 %
 
Change

$

74,741

 

$

11,007

 

$

63,734

 

$

83

  0.1 % 1.1 %
 
Change 5.5 % 2.2 % 7.4 % 5.4 %
 
(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
Third Quarter 2012 vs. Third Quarter 2011
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year's Quarter
Markets

ApartmentUnits

Q3 2012% ofActualNOI

Q3 2012AverageRentalRate (1)

Q3 2012WeightedAverageOccupancy %

Revenues Expenses NOI

AverageRentalRate (1)

Occupancy
 
1 New York Metro Area 7,063 12.6 %

$

3,350

96.8 % 6.2 % 3.8 % 7.7 % 5.8 % 0.3 %
2 DC Northern Virginia 8,822 11.2 % 2,081 96.6 % 5.5 % 6.1 % 5.2 % 4.9 % 0.5 %
3 South Florida 12,743 9.7 % 1,448 95.0 % 4.9 % 6.6 % 3.9 % 4.1 % 0.7 %
4 Los Angeles 8,763 9.5 % 1,842 96.2 % 4.8 % (1.5 )% 8.2 % 3.9 % 0.8 %
5 Boston 5,470 8.2 % 2,581 95.7 % 6.6 % 2.9 % 8.6 % 6.9 % (0.3 )%
6 Seattle/Tacoma 9,582 7.7 % 1,465 95.3 % 6.4 % 2.3 % 8.9 % 5.5 % 0.8 %
7 San Francisco Bay Area 6,194 7.4 % 2,018 96.0 % 11.2 % 3.3 % 15.4 % 11.0 % 0.2 %
8 Denver 7,973 5.8 % 1,212 96.1 % 8.9 % 0.8 % 13.1 % 8.2 % 0.5 %
9 San Diego 4,284 4.6 % 1,753 96.2 % 3.0 % 2.2 % 3.3 % 1.9 % 0.9 %
10 Phoenix 8,209 4.3 % 962 95.2 % 3.5 % 3.2 % 3.7 % 2.8 % 0.6 %
11 Suburban Maryland 4,222 3.8 % 1,512 95.5 % 2.7 % (1.3 )% 4.7 % 2.0 % 0.7 %
12 Orlando 6,413 3.7 % 1,092 95.8 % 5.3 % 2.8 % 7.1 % 5.1 % 0.2 %
13 Orange County, CA 3,490 3.5 % 1,650 96.2 % 5.7 % 2.2 % 7.4 % 4.9 % 0.7 %
14 Inland Empire, CA 3,081 2.7 % 1,469 96.0 % 3.8 % (4.2 )% 8.0 % 2.2 % 1.4 %
15 Atlanta 3,820 2.2 % 1,134 96.5 % 6.2 % 3.4 % 8.3 % 5.8 % 0.3 %
16 All Other Markets 5,773 3.1 %   1,094 95.4 % 3.5 % 5.0 % 2.5 % 3.7 % (0.2 )%
 
Total 105,902 100.0 %

$

1,670

95.8 % 5.8 % 2.9 % 7.4 % 5.2 % 0.5 %
 
(1 ) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
 
 
Equity Residential
Third Quarter 2012 vs. Second Quarter 2012
Same Store Results/Statistics by Market
                   
Increase (Decrease) from Prior Quarter
Markets

ApartmentUnits

Q3 2012% ofActualNOI

Q3 2012AverageRentalRate (1)

Q3 2012WeightedAverageOccupancy %

Revenues Expenses NOI

AverageRentalRate (1)

Occupancy
 
1 New York Metro Area 7,536 12.4 % $ 3,301 96.8 % 2.2 % 1.8 % 2.4 % 1.7 % 0.5 %
2 DC Northern Virginia 9,381 11.6 % 2,137 96.5 % 1.8 % 2.7 % 1.4 % 1.1 % 0.6 %
3 Los Angeles 9,716 10.0 % 1,863 96.2 % 3.4 % 3.8 % 3.2 % 1.7 % 1.5 %
4 South Florida 12,990 9.4 % 1,459 94.9 % 1.8 % 5.6 % (0.6)% 1.8 %

0.0 %

5 Boston 5,832 8.2 % 2,547 95.7 % 1.6 % 2.7 % 1.1 % 1.3 % 0.3 %
6 San Francisco Bay Area 8,656 8.2 % 1,801 95.9 % 3.4 % 2.5 % 4.0 % 2.7 % 0.7 %
7 Seattle/Tacoma 9,901 7.6 % 1,471 95.3 % 3.3 % 2.0 % 4.0 % 1.8 % 1.4 %
8 Denver 7,973 5.4 % 1,212 96.1 % 3.9 % 7.4 % 2.3 % 3.1 % 0.7 %
9 San Diego 4,963 5.1 % 1,814 95.9 % 2.4 % (2.5)% 4.7 % 1.1 % 1.1 %
10 Phoenix 8,209 4.0 % 962 95.2 % 1.5 % 6.8 % (1.3)% 1.2 % 0.3 %
11 Suburban Maryland 4,344 3.7 % 1,543 95.5 % 1.4 % 1.9 % 1.1 % 0.3 % 1.0 %
12 Orlando 6,413 3.5 % 1,092 95.8 % 2.9 % 4.1 % 2.1 % 2.1 % 0.8 %
13 Orange County, CA 3,490 3.3 % 1,650 96.2 % 1.9 % 3.3 % 1.2 % 1.1 % 0.8 %
14 Inland Empire, CA 3,081 2.5 % 1,469 96.0 % 2.2 % 0.4 % 3.1 % 0.9 % 1.3 %
15 Atlanta 3,820 2.1 % 1,134 96.5 % 2.0 % (0.7)% 4.0 % 1.4 % 0.5 %
16 All Other Markets 5,773 3.0 % 1,094 95.4 % 0.9 % 3.1 % (0.6)% 1.2 % (0.2)%
 
Total 112,078 100.0 % $ 1,681 95.8 % 2.4 % 3.0 % 2.0 % 1.6 % 0.7 %
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
 
 
Equity Residential
September YTD 2012 vs. September YTD 2011
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year
Markets

ApartmentUnits

Sept. YTD 12% ofActualNOI

Sept. YTD 12AverageRentalRate (1)

Sept. YTD 12WeightedAverageOccupancy %

Revenues Expenses NOI

AverageRentalRate (1)

Occupancy
 
1 New York Metro Area 7,063 13.0 %

$

3,302

96.2 % 6.4 % 3.6 % 8.3 % 6.3 % 0.1 %
2 DC Northern Virginia 7,974 10.6 % 2,060 95.7 % 4.7 % 5.0 % 4.6 % 4.8 % (0.1 )%
3 South Florida 12,114 9.7 % 1,394 95.1 % 4.3 % 4.1 % 4.5 % 3.6 % 0.5 %
4 Los Angeles 7,832 8.8 % 1,786 95.3 % 4.0 % (2.4 )% 7.5 % 3.6 % 0.4 %
5 Boston 5,175 8.2 % 2,546 95.5 % 6.6 % 0.1 % 10.2 % 6.9 % (0.3 )%
6 San Francisco Bay Area 6,194 7.6 % 1,964 95.5 % 11.2 % 3.7 % 15.2 % 11.5 % (0.2 )%
7 Seattle/Tacoma 9,081 7.5 % 1,432 94.5 % 5.5 % 3.0 % 7.0 % 5.4 % 0.1 %
8 Denver 7,973 6.0 % 1,176 95.6 % 9.1 % 2.1 % 12.6 % 8.8 % 0.3 %
9 San Diego 4,284 4.7 % 1,736 95.1 % 2.5 % 1.6 % 3.0 % 2.4 %

0.0

%

10 Phoenix 8,209 4.6 % 951 95.1 % 4.1 % (1.3 )% 7.4 % 4.0 %

0.0

%

11 Orlando 6,413 3.9 % 1,068 95.4 % 4.4 % 2.9 % 5.3 % 4.2 % 0.1 %
12 Orange County, CA 3,490 3.7 % 1,627 95.6 % 5.3 % 3.7 % 6.1 % 5.1 % 0.2 %
13 Suburban Maryland 3,765 3.3 % 1,437 94.8 % 2.5 % (0.5 )% 4.0 % 2.6 % (0.2 )%
14 Inland Empire, CA 3,081 2.8 % 1,459 94.9 % 2.9 % 0.3 % 4.3 % 2.9 %

0.0

%

15 Atlanta 3,820 2.3 % 1,114 96.1 % 5.9 % 2.2 % 8.7 % 6.0 %

0.0

%

16 All Other Markets 5,773 3.3 %   1,079 95.2 % 4.4 % 2.0 % 6.2 % 4.4 %

0.0

%

 
Total 102,241   100.0 %

$

1,630

95.3 % 5.5 % 2.2 % 7.4 % 5.4 % 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
         
 
Third Quarter 2012 vs. Third Quarter 2011
Same Store Operating Expenses
$ in thousands – 105,902 Same Store Apartment Units
 

ActualQ3 2012

ActualQ3 2011

$Change

%Change

% of ActualQ3 2012OperatingExpenses

 
Real estate taxes

$

52,973

$

48,452

$

4,521 9.3 % 29.9 %
On-site payroll (1) 39,675 39,922 (247 ) (0.6 )% 22.4 %
Utilities (2) 26,861 26,366 495 1.9 % 15.1 %
Repairs and maintenance (3) 25,792 25,082 710 2.8 % 14.5 %
Property management costs (4) 18,544 19,210 (666 ) (3.5 )% 10.4 %
Insurance 5,572 5,179 393 7.6 % 3.1 %
Leasing and advertising 3,109 3,180 (71 ) (2.2 )% 1.8 %
Other on-site operating expenses (5)   4,937   4,991   (54 ) (1.1 )% 2.8 %
 
Same store operating expenses

$

177,463

$

172,382

$

5,081   2.9 % 100.0 %
 
                     
 
 
September YTD 2012 vs. September YTD 2011
Same Store Operating Expenses
$ in thousands – 102,241 Same Store Apartment Units

 

ActualYTD 2012

ActualYTD 2011

$Change

%Change

% of ActualYTD 2012OperatingExpenses

 
Real estate taxes

$

150,745

$

141,365

$

9,380 6.6 % 29.8 %
On-site payroll (1) 114,836 113,798 1,038 0.9 % 22.7 %
Utilities (2) 76,423 77,136 (713 ) (0.9 )% 15.1 %
Repairs and maintenance (3) 70,369 69,209 1,160 1.7 % 13.9 %
Property management costs (4) 53,566 54,148 (582 ) (1.1 )% 10.6 %
Insurance 15,955 14,906 1,049 7.0 % 3.2 %
Leasing and advertising 8,382 9,224 (842 ) (9.1 )% 1.7 %
Other on-site operating expenses (5)   15,240   14,723   517   3.5 % 3.0 %
 
Same store operating expenses

$

505,516

$

494,509

$

11,007   2.2 % 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 September 30, 2012
(Amounts in thousands)
 
Amounts (1) % of Total

WeightedAverageRates (1)

WeightedAverageMaturities(years)

 
Secured $ 3,948,115 42.4 % 4.95 % 7.3
Unsecured   5,361,038     57.6 % 5.09 % 4.6  
 
Total $ 9,309,153     100.0 % 5.03 % 5.7  

 

Fixed Rate Debt:
Secured – Conventional

 

$ 3,566,932 38.3 % 5.50 % 6.4
Unsecured – Public/Private   4,550,999     48.9 % 5.70 % 5.4  
 
Fixed Rate Debt   8,117,931     87.2 % 5.61 % 5.8  
 
Floating Rate Debt:
Secured – Conventional 30,641 0.3 % 3.35 % 2.0
Secured – Tax Exempt 350,542 3.8 % 0.22 % 17.9
Unsecured – Public/Private 803,039 8.6 % 1.67 % 0.2
Unsecured – Revolving Credit Facility   7,000     0.1 % 1.34 % 1.8  
 
Floating Rate Debt   1,191,222     12.8 % 1.30 % 5.0  
 
Total $ 9,309,153     100.0 % 5.03 % 5.7  
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the nine months ended September 30, 2012.
 
Note: The Company capitalized interest of approximately $15.8 million and $5.9 million during the nine months ended September 30, 2012 and 2011, respectively. The Company capitalized interest of approximately $5.7 million and $2.2 million during the quarters ended September 30, 2012 and 2011, respectively.
 
                           
 
Debt Maturity Schedule as of September 30, 2012
(Amounts in thousands)

 

 

Year

FixedRate (1)

FloatingRate (1)

Total % of Total

WeightedAverage Rateson FixedRate Debt (1)

WeightedAverageRates onTotal Debt (1)

 

2012

$ 225,280 $ 500,125 $ 725,405 (2) 7.8 % 5.51 % 2.20 %

2013

267,888 303,548 571,436 6.1 % 6.69 % 4.84 %

2014

564,302 29,022 (3) 593,324 6.4 % 5.31 % 5.19 %

2015

417,812 - 417,812 4.5 % 6.30 % 6.30 %

2016

1,190,538 - 1,190,538 12.8 % 5.34 % 5.34 %

2017

1,446,121 456 1,446,577 15.5 % 5.95 % 5.95 %

2018

81,448 724 82,172 0.9 % 5.70 % 5.70 %

2019

802,635 20,766 823,401 8.8 % 5.49 % 5.36 %

2020

1,672,482 809 1,673,291 18.0 % 5.50 % 5.50 %

2021

1,188,906 856 1,189,762 12.8 % 4.64 % 4.64 %
2022+ 233,862 338,604 572,466 6.2 % 6.75 % 3.33 %
Premium/(Discount)   26,657   (3,688 )   22,969   0.2 % N/A   N/A  
 
Total $ 8,117,931 $ 1,191,222   $ 9,309,153   100.0 % 5.54 % 5.01 %
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of September 30, 2012.
 
(2) In October 2012, the Company paid off the $222.1 million outstanding of its 5.500% public notes and its $500.0 million term loan facility, both at maturity.
 
(3) Includes $7.0 million outstanding on the Company's unsecured revolving credit facility. As of September 30, 2012, there was approximately $1.71 billion available on this facility.
 
 
 
Equity Residential
Unsecured Debt Summary as of September 30, 2012
(Amounts in thousands)
     

 

Coupon

Rate

Due

Date

Face

Amount

Unamortized

Premium/

(Discount)

  Net

Balance

 
Fixed Rate Notes:
5.500 %

10/1/12

(1)

$

222,133

$

-

$

222,133

5.200 %

04/1/13

(2) 400,000 (59 ) 399,941
Fair Value Derivative Adjustments (2) (300,000 ) - (300,000 )
5.250 %

09/15/14

500,000 (120 ) 499,880
6.584 %

04/13/15

300,000 (276 ) 299,724
5.125 %

03/15/16

500,000 (184 ) 499,816
5.375 %

08/1/16

400,000 (711 ) 399,289
5.750 %

06/15/17

650,000 (2,416 ) 647,584
7.125 %

10/15/17

150,000 (327 ) 149,673
4.750 %

07/15/20

600,000 (3,548 ) 596,452
4.625 %

12/15/21

1,000,000 (3,493 ) 996,507
7.570 %

08/15/26

  140,000     -     140,000  
 
  4,562,133     (11,134 )   4,550,999  
 
Floating Rate Notes:

04/1/13

(2) 300,000 - 300,000
Fair Value Derivative Adjustments (2) 3,039 - 3,039
Term Loan Facility LIBOR+0.50%

10/5/12

(3)(4)   500,000     -     500,000  
 
  803,039     -     803,039  
 
Revolving Credit Facility: LIBOR+1.15%

07/13/14

(3)(5)   7,000     -     7,000  
 
Total Unsecured Debt

$

5,372,172

 

$

(11,134

)

$

5,361,038

 
 
 
(1) On October 1, 2012, the Company paid off its 5.500% public notes at maturity.
 
(2) Fair value interest rate swaps convert $300.0 million of the 5.200% notes due April 1, 2013 to a floating interest rate.
 
(3) Facilities are private. All other unsecured debt is public.
 
(4) On October 5, 2012, the Company paid off its $500.0 million term loan facility at maturity.
 
(5) As of September 30, 2012, there was approximately $1.71 billion available on the Company's unsecured revolving credit facility.
 
 
 
Equity Residential
   
Selected Unsecured Public Debt Covenants
 
September 30, 2012 June 30, 2012
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 43.2 % 43.8 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 18.3 % 18.7 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.95 2.85
 
Total Unsecured Assets to Unsecured Debt 286.5 % 280.0 %
(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 September 30, 2012
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 3,948,115 42.4 %
Unsecured Debt   5,361,038 57.6 %
 
Total Debt 9,309,153 100.0 % 33.7 %
 
Common Shares (includes Restricted Shares) 302,674,716 95.5 %
Units (includes OP Units and LTIP Units)   14,399,790   4.5 %
 
Total Shares and Units 317,074,506 100.0 %
Common Share Price at September 30, 2012 $ 57.53
18,241,296 99.7 %
Perpetual Preferred Equity (see below) 50,000 0.3 %
 
Total Equity 18,291,296 100.0 % 66.3 %
 
Total Market Capitalization $ 27,600,449 100.0 %
 
                             
 
Perpetual Preferred Equity as of September 30, 2012
(Amounts in thousands except for share and per share amounts)
 

 

 

 

Series

RedemptionDate

OutstandingShares

LiquidationValue

AnnualDividendPer Share

AnnualDividendAmount

 

 
Preferred Shares:
8.29% Series K

12/10/26

1,000,000

$

50,000

$

4.145

$

4,145
 
Total Perpetual Preferred Equity 1,000,000

$

50,000

$

4,145

 

 

 
Note: The Series N Preferred Shares ($150.0 million liquidation value) were redeemed on August 20, 2012.
 
 
 
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
       
YTD Q312 YTD Q311 Q312 Q311
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 300,116,136 294,473,642 301,336,325 295,830,970
Shares issuable from assumed conversion/vesting of:
- OP Units 13,815,887 13,231,470 14,176,635 13,053,174
- long-term compensation shares/units 3,332,695 4,203,347 3,260,210 3,960,089
 
Total Common Shares and Units - diluted 317,264,718 311,908,459 318,773,170 312,844,233
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 300,116,136 294,473,642 301,336,325 295,830,970
OP Units - basic 13,815,887 13,231,470 14,176,635 13,053,174
 
Total Common Shares and OP Units - basic 313,932,023 307,705,112 315,512,960 308,884,144
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 3,332,695 4,203,347 3,260,210 3,960,089
 
Total Common Shares and Units - diluted 317,264,718 311,908,459 318,773,170 312,844,233
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 302,674,716 296,620,833
Units (includes OP Units and LTIP Units) 14,399,790 13,509,488
 
Total Shares and Units 317,074,506 310,130,321
 
 
 
Equity Residential
Partially Owned Entities as of September 30, 2012
(Amounts in thousands except for project and apartment unit amounts)
       
Consolidated Unconsolidated
Development Projects

Held forand/or UnderDevelopment

Other Total

InstitutionalJointVentures (4)

 
Total projects (1)   -  

 

  19     19     -  
 
Total apartment units (1)   -  

 

  3,475     3,475     -  
 
Operating information for the nine months ended 9/30/12 (at 100%):
Operating revenue $ -

 

$ 46,432 $ 46,432 $ 2
Operating expenses   121  

 

  14,789     14,910     112  
 
Net operating (loss) income (121 )

 

31,643 31,522 (110 )
Depreciation -

 

11,516 11,516 -
General and administrative/other   93  

 

  39     132     -  
 
Operating (loss) income (214 )

 

20,088 19,874 (110 )
Interest and other income 2

 

100 102 -
Other expenses (248 )

 

- (248 ) -
Interest:
Expense incurred, net -

 

(7,040 ) (7,040 ) -
Amortization of deferred financing costs   -  

 

  (125 )   (125 )   -  
 
(Loss) income before income and other taxes (460 )

 

13,023 12,563 (110 )
Income and other tax (expense) benefit   (25 )

 

  (75 )   (100 )   -  
 
Net (loss) income $ (485 )

 

$ 12,948   $ 12,463   $ (110 )
 
Debt - Secured (2):
EQR Ownership (3) $ -

 

$ 159,068 $ 159,068 $ 10,187
Noncontrolling Ownership   -  

 

  41,269     41,269     40,747  
 
Total (at 100%) $ -  

 

$ 200,337   $ 200,337   $ 50,934  
 
(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 equity ownership interest.
 
(4) See Projects Under Development - Unconsolidated on page 21 for further information.
 
 
 
Equity Residential
Development and Lease-Up Projects as of September 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:

Jia (formerly Chinatown Gateway) Los Angeles, CA 280 $ 92,920 $ 47,420 $ 47,420 $ - 32 % - - Q3 2013 Q2 2015
Westgate II Pasadena, CA 252 125,293 55,711 55,711 - 17 % - - Q1 2014 Q1 2015
The Madison Alexandria, VA 360 115,072 41,245 41,245 - 21 % - - Q1 2014 Q2 2015
Market Street Landing Seattle, WA 287 90,024 32,102 32,102 - 23 % - - Q1 2014 Q3 2015
Westgate III Pasadena, CA 88   54,037   17,776   17,776   - 1 % - - Q2 2014 Q1 2015
Projects Under Development - Wholly Owned 1,267 477,346 194,254 194,254 -
         
Projects Under Development 1,267   477,346   194,254   194,254   -
 

Completed Not Stabilized - Wholly Owned (2):

Ten23 (formerly 500 West 23rd Street) (3) New York, NY 111 55,555 55,048 - - 99 % 99 % Completed Q4 2012
The Savoy at Dayton Station III (formerly Savoy III) Aurora, CO 168 23,856 21,288 - - 77 % 74 % Completed Q1 2013
2201 Pershing Drive Arlington, VA 188   64,242   51,961   -   - 48 % 8 % Completed Q3 2013
Projects Completed Not Stabilized - Wholly Owned 467 143,653 128,297 - -
         
Projects Completed Not Stabilized 467   143,653   128,297   -   -
 

Completed and Stabilized During the Quarter - Wholly Owned:

88 Hillside (4) Daly City, CA 95 39,374 39,374 - - 100 % 100 % Completed Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned 95 39,374 39,374 - -
         
Projects Completed and Stabilized During the Quarter 95   39,374   39,374   -   -
 
Total Consolidated Projects 1,829 $ 660,373 $ 361,925 $ 194,254 $ -
 
Land Held for Development (5) N/A   N/A $ 404,846 $ 404,846 $ -
 
Unconsolidated
 

Projects Under Development - Unconsolidated:

Nexus Sawgrass (formerly Sunrise Village) (6) Sunrise, FL 501 $ 78,212 $ 50,551 $ 50,551 $ 19,119 63 % 3 % - Q3 2013 Q3 2014
Domain (6) San Jose, CA 444   154,570   93,445   93,445   31,815 51 % - - Q4 2013 Q4 2015
Projects Under Development - Unconsolidated 945 232,782 143,996 143,996 50,934
         
Projects Under Development 945   232,782   143,996   143,996   50,934
 
Total Unconsolidated Projects 945 $ 232,782 $ 143,996 $ 143,996 $ 50,934
 

 

 

NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Total CapitalCost (1)

Q3 2012NOI

Projects Under Development $ 477,346 $ (60 )
Completed Not Stabilized 143,653 735
Completed and Stabilized During the Quarter   39,374     515  
Total Consolidated Development NOI Contribution $ 660,373   $ 1,190  
 
(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) Ten23 - The land under this development is subject to a long term ground lease.
(4) The Company acquired this project prior to stabilization and has completed lease-up activities.
(5) Includes $60.5 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. Nexus Sawgrass has a maximum debt commitment of $47.1 million and a current unconsolidated outstanding balance of $19.1 million; the loan bears interest at 5.60% and matures January 1, 2021. Domain has a maximum debt commitment of $98.6 million and a current unconsolidated outstanding balance of $31.8 million; the loan bears interest at 5.75% and matures January 1, 2022.
 
 
 
Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Nine Months Ended September 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

ApartmentUnits (1)

Expense (2) Avg. Per

Apartment

Unit

Payroll (3)

Avg. Per

Apartment

Unit

Total Avg. Per

Apartment

Unit

Replacements (4)

Avg. Per

Apartment

Unit

BuildingImprovements

(5)

Avg. Per

Apartment

Unit

Total Avg. Per

Apartment

Unit

Grand

Total

Avg. Per

Apartment

Unit

 
Same Store Properties (6) 102,241 $ 70,369 $ 688 $ 57,831 $ 566 $ 128,200 $ 1,254 $ 52,719 $ 516 $ 39,723 $ 388 $ 92,442 $ 904

(9)

 

$ 220,642 $ 2,158
 
Non-Same Store Properties (7) 11,754 9,815 942 5,216 501 15,031 1,443 5,572 535 15,594 1,496 21,166 2,031 36,197 3,474
 
Other (8) - 1,682 2,690 4,372 636 291 927 5,299
 
Total 113,995 $ 81,866 $ 65,737 $ 147,603 $ 58,927 $ 55,608 $ 114,535 $ 262,138
 
(1)   Total Apartment Units - Excludes 4,991 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 $26.0 million spent during the nine months ended September 30, 2012 on apartment unit renovations/rehabs (primarily kitchens and baths) on 3,497 apartment units (equating to about $7,400 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 $35.0 million rehabbing 4,600 apartment units (equating to about $7,600 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 10,418 apartment units.
 
(8) Other - Primarily includes expenditures for properties sold during the period.
 
(9) For 2012, the Company estimates that it will spend approximately $1,200 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)
       

Nine Months EndedSeptember 30,

Quarter EndedSeptember 30,

2012 2011 2012 2011
 
REVENUES
Rental income

$

27,764

 

$

140,541

 

$

4,014

 

$

21,850

 
 
Total revenues   27,764     140,541     4,014     21,850  
 
EXPENSES (1)
Property and maintenance 8,420 60,583 1,611 7,125
Real estate taxes and insurance 2,010 10,995 309 2,125
Property management 211 198 70 66
Depreciation 7,602 28,967 1,428 5,762
General and administrative   71     49     31     2  
 
Total expenses   18,314     100,792     3,449     15,080  
 
Discontinued operating income 9,450 39,749 565 6,770
 
Interest and other income 79 150 34 46
Interest (2):
Expense incurred, net (1,381 ) (4,086 ) (341 ) (942 )
Amortization of deferred financing costs (65 ) (869 ) (9 ) (71 )
Income and other tax (expense) benefit   48     31     (1 )   93  
 
Discontinued operations 8,131 34,975 248 5,896
Net gain on sales of discontinued operations   307,447     759,100     103,394     76,864  
 
Discontinued operations, net

$

315,578

 

$

794,075

 

$

103,642

 

$

82,760

 
 
(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 Q3 2012
to Actual Q3 2012
Amounts Per Share
 
Guidance Q3 2012 Normalized FFO - Diluted (2) (3) $ 231,552 $ 0.726
Property NOI 283 0.001
Other   684     0.002  
 
Actual Q3 2012 Normalized FFO - Diluted (2) (3) $ 232,519   $ 0.729  
                         
 
 
 
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
Nine Months Ended September 30, Quarter Ended September 30,
2012 2011 Variance

2012

2011 Variance
 
Impairment $ -   $ -   $ -   $ -   $ -   $ -  
Asset impairment and valuation allowances   -     -     -     -     -     -  
 
Property acquisition costs (other expenses) (A) 8,757 5,266 3,491 1,428 1,514 (86 )
Write-off of pursuit costs (other expenses)   6,141     4,052     2,089     2,576     1,014     1,562  
Property acquisition costs and write-off of pursuit costs (other expenses)   14,898     9,318     5,580     4,004     2,528     1,476  
 
Prepayment premiums/penalties (interest expense) 272 - 272 - - -
Write-off of unamortized deferred financing costs (interest expense) 2,111 4,347 (2,236 ) 964 2,233 (1,269 )
Write-off of unamortized (premiums)/discounts/OCI (interest expense) (42 ) (89 ) 47 - (89 ) 89
Non-cash convertible debt discount (interest expense) - 4,992 (4,992 ) - 1,102 (1,102 )
Unrealized loss due to ineffectiveness of forward starting swaps (interest expense) - - - - (2,569 ) 2,569
Premium on redemption of Preferred Shares (B)   5,150     -     5,150     5,150     -     5,150  

Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts

  7,491     9,250     (1,759 )   6,114     677     5,437  
 
Net (gain) loss on sales of land parcels - (4,217 ) 4,217 - - -
Net incremental (gain) on sales of condominium units (49 ) (2,050 ) 2,001 - (935 ) 935
Income and other tax expense (benefit) - Condo sales (92 ) (66 ) (26 ) - (92 ) 92
(Gain) on sale of Equity Corporate Housing (ECH), net of severance   (350 )   (221 )   (129 )   -     2     (2 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (491 )   (6,554 )   6,063     -     (1,025 )   1,025  
 
Insurance/litigation settlement expense (other expenses) 4,714 - 4,714 - - -
Prospect Towers garage insurance proceeds (real estate taxes and insurance) (3,467 ) (2,725 ) (742 ) - (1,125 ) 1,125
Archstone termination fees (interest and other income) (70,000 ) - (70,000 ) (70,000 ) - (70,000 )
Forfeited deposits (interest and other income) - (500 ) 500 - - -
Termination of royalty participation in LRO (interest and other income) - (4,537 ) 4,537 - (4,537 ) 4,537
Other (other expenses)   1,066     -     1,066     90     -     90  
Other miscellaneous non-comparable items   (67,687 )   (7,762 )   (59,925 )   (69,910 )   (5,662 )   (64,248 )
           
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ (45,789 ) $ 4,252   $ (50,041 ) $ (59,792 ) $ (3,482 ) $ (56,310 )
 
(A) For the nine months and quarter ended September 30, 2012, includes $1.9 million and $0.1 million, respectively, of transaction costs related to the potential Archstone transaction.
 
(B) Includes $5.13 million of original issuance costs previously deferred.
 
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)

 

Q4 2012

2012

 
Expected Normalized FFO (2) (3) $0.72 to $0.76 $2.74 to $2.78
 

2012 Same Store Assumptions

 
Physical occupancy 95.3 %
Revenue change 5.6 %
Expense change 2.3 %
NOI change 7.5 %
 
(Note: 30 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2012 Transaction Assumptions

 
Consolidated rental acquisitions $1.1 billion
Consolidated rental dispositions $1.1 billion
Capitalization rate spread 150 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) 4.87 %
Interest expense $458.0 million to $463.0 million
 

2012 Other Guidance Assumptions (see Note)

 
General and administrative expense $47.8 million
Interest and other income $0.7 million
Income and other tax expense $1.0 million
Equity ATM share offerings No additional amounts budgeted
Weighted average Common Shares and Units - Diluted 318.0 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 26 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 Q3 2012

Q4 2012

2012

Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $ 262,520 $ 0.823 $1.28 to $1.32 $2.81 to $2.85
Add: Expected depreciation expense 177,684 0.557 0.52 2.13
Less: Expected net gain on sales (5)   (155,290 )   (0.487 ) (0.86 ) (1.83 )
 
Expected FFO - Diluted (1) (3) 284,914 0.893 0.94 to 0.98 3.11 to 3.15
 
Asset impairment and valuation allowances - - - -
Property acquisition costs and write-off of pursuit costs (other expenses) 9,867 0.031 0.03 0.07

Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts

6,553 0.021 - 0.02

(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)

3 - - -
Other miscellaneous non-comparable items   (69,785 )   (0.219 ) (0.25 ) (0.46 )
 
Expected Normalized FFO - Diluted (2) (3)

$

231,552  

$

0.726   $0.72 to $0.76 $2.74 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 September YTD 2012 and Third Quarter 2012 Same Store Properties:
 
Nine Months Ended September 30, Quarter Ended September 30,
2012 2011 2012 2011
 
Operating income

$

489,790

$

395,750

$

184,127

$

144,814

Adjustments:
Non-same store operating results (109,658 ) (32,972 ) (29,085 ) (5,074 )
Fee and asset management revenue (7,328 ) (6,682 ) (3,052 ) (2,928 )
Fee and asset management expense 3,595 3,207 1,108 1,250
Depreciation 509,338 467,416 167,406 159,691
General and administrative   37,178     32,462     10,096     10,121  
 
Same store NOI

$

922,915

 

$

859,181

 

$

330,600

 

$

307,874

 




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