10-QPeriod: Q1 FY2004

EQUITY RESIDENTIAL Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 7, 2004For Securities:EQR

Summary

Equity Residential (EQR) reported its first quarter 2004 results, showcasing a dynamic period of property acquisitions and dispositions, alongside the consolidation of previously unconsolidated development projects due to the adoption of FIN No. 46. Total assets grew to $12.46 billion from $11.47 billion at the end of 2003, largely driven by substantial real estate investments. The company generated total revenues of $462.66 million for the quarter, a modest increase from the prior year's $438.29 million. While "same store" property revenues saw a slight decrease, overall rental income growth was supported by strategic acquisitions. Net income for the quarter was $117.07 million, down from $135.35 million in the same period last year, impacting diluted EPS to $0.35 from $0.41. The company actively managed its portfolio, disposing of 22 properties totaling 5,990 units while acquiring 5 properties with 1,671 units. A significant event was the consolidation of several development projects under FIN No. 46, which will impact future reporting. EQR also maintained a strong liquidity position, with cash and cash equivalents of $71.5 million and significant availability under its revolving credit facility. The company continues to focus on managing its debt levels, maintaining a debt-to-total market capitalization ratio below its 50% policy, currently at 39% as of March 31, 2004.

Key Highlights

  • 1Total assets increased to $12.46 billion as of March 31, 2004, up from $11.47 billion at December 31, 2003, driven by real estate acquisitions and development.
  • 2Total revenues for Q1 2004 were $462.66 million, a 5.6% increase compared to $438.29 million in Q1 2003, primarily due to portfolio growth.
  • 3Net income decreased to $117.07 million in Q1 2004 from $135.35 million in Q1 2003, resulting in diluted EPS of $0.35 compared to $0.41.
  • 4Equity Residential actively managed its real estate portfolio, disposing of 22 properties (5,990 units) and acquiring 5 properties (1,671 units) during the quarter.
  • 5The company adopted FIN No. 46 effective March 31, 2004, leading to the consolidation of previously unconsolidated development projects, impacting the balance sheet but not significantly affecting Q1 net income.
  • 6Despite a slight decrease in 'same store' revenue (-0.2%), overall rental income grew due to acquisitions and property development activities.
  • 7Liquidity remains strong with $71.5 million in cash and cash equivalents and significant availability under its $700 million revolving credit facility.

Frequently Asked Questions

Equity Residential demonstrated growth in its asset base and total revenues compared to the previous year, indicating continued expansion. However, net income and earnings per share saw a decline, suggesting increased expenses or other factors impacting profitability. The company actively managed its property portfolio through acquisitions and dispositions, and adopted new accounting standards (FIN 46) that will affect future reporting. Liquidity remains robust, and debt levels are managed within policy limits.

The most significant accounting change was the adoption of FIN No. 46, 'Consolidation of Variable Interest Entities,' effective March 31, 2004. This required the company to consolidate previously unconsolidated development projects onto its balance sheet. While this impacts asset and liability figures, management stated it would not have a material effect on net income for the quarter, as the results of these projects were already accounted for under the equity method. Future periods will reflect the full consolidation of operations.

The 'same store' properties, which represent properties owned for both periods, showed a slight decrease in revenue of 0.2% and an increase in expenses of 3.0%, leading to a 2.3% decrease in Net Operating Income (NOI). This contrasts with the overall portfolio, where total revenues increased due to acquisitions and development activities that offset the 'same store' decline. This suggests that portfolio growth through acquisitions is a key driver of overall revenue increases.

Equity Residential is actively managing its real estate portfolio. During the quarter, it acquired five properties with 1,671 units for $224.4 million and disposed of 22 properties totaling 5,990 units for $301.3 million. Additionally, the company had agreements in place for further acquisitions and dispositions, indicating an ongoing strategy of portfolio optimization and growth through strategic real estate transactions.