10-QPeriod: Q2 FY2001

EQUITY RESIDENTIAL Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 13, 2001For Securities:EQR

Summary

Equity Residential (EQR) reported mixed results for the six months ended June 30, 2001, compared to the same period in 2000. While overall income before certain items increased by $23.1 million, this was driven significantly by acquisition and disposition activities, including the acquisition of Globe and other properties, offset by property sales. Same-store rental income showed healthy growth of 5.4% due to higher rental rates and ancillary services, with expectations for continued growth in the remainder of 2001. However, property operating expenses for same-store properties also increased by 4.8%, primarily due to higher utility and payroll costs. The company engaged in substantial portfolio management, disposing of 28 properties and contributing 11 to a joint venture, while acquiring 8 new properties. Liquidity remains solid, with cash and cash equivalents increasing to $26.6 million and available credit lines expanding to $567.0 million. EQR utilized its lines of credit and successfully raised significant capital through debt and equity issuances to fund its operations and acquisitions, while also repaying substantial debt. The company anticipates meeting its short-term and long-term liquidity needs through a combination of operating cash flow, debt and equity markets, and potentially additional mortgage borrowings.

Key Highlights

  • 1Rental income from 'same store' properties increased by 5.4% for the first six months of 2001, driven by higher rental rates and ancillary services.
  • 2The company disposed of 28 properties and contributed 11 to a joint venture, while acquiring 8 new properties during the first six months of 2001.
  • 3Total debt as of June 30, 2001, was $5.59 billion, with a weighted average interest rate of 6.77%.
  • 4Cash and cash equivalents increased to $26.6 million as of June 30, 2001, and available credit lines expanded to $567.0 million.
  • 5The company raised $300.0 million in unsecured debt and $48.5 million in preference interests during the first six months of 2001.
  • 6Net gain on sales of real estate decreased significantly ($41.1 million for six months, $62.9 million for the quarter) due to fewer property dispositions.
  • 7Equity Residential expects rental income growth of 4.75% to 5.0% from same-store properties for the remainder of 2001, with an occupancy rate target of 94.5%.

Frequently Asked Questions

The primary driver was significant acquisition and disposition activity, including the acquisition of Globe and other properties, which was partially offset by the disposition of other properties. "Same store" property performance also contributed to the results.

The company maintains a strategy of using lines of credit to fund property acquisitions and development, subsequently repaying these lines through property dispositions or issuance of new debt and equity. They also have substantial cash on hand and available credit facilities. For the first six months of 2001, they successfully issued $300 million in unsecured debt and $48.5 million in preference interests.

Equity Residential expects continued rental income growth of 4.75% to 5.0% from same-store properties, assuming an average occupancy rate of 94.5%. They aim to maintain expense growth for same-store properties at no more than 4.0% to 4.5%.

The company's total debt was $5.59 billion as of June 30, 2001. While the overall debt level is substantial, the company's effective interest cost on indebtedness decreased slightly compared to the prior year. They also have a significant portion of fixed-rate debt and are managing upcoming maturities through refinancing and capital markets.