10-QPeriod: Q2 FY2008

EQUITY RESIDENTIAL Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 7, 2008For Securities:EQR

Summary

Equity Residential (EQR) reported its financial results for the quarterly period ended June 30, 2008. The company demonstrated revenue growth driven by higher rental rates across its same-store properties, contributing to an increase in Net Operating Income (NOI). Total revenues for the quarter reached $535.5 million, a notable increase from the prior year's $491.6 million. Despite an overall increase in operating expenses, the company managed to improve its operating income to $165.9 million from $135.8 million in the same quarter of the previous year. Financially, EQR maintained a strong balance sheet with total assets of $16.1 billion. The company actively managed its debt, repaying significant portions of its mortgage loans and continuing to utilize its credit facilities. Cash and cash equivalents saw a substantial increase, reflecting strategic financial management and pre-funding of debt maturities. The company also reported progress on its acquisition and disposition strategies, highlighting ongoing investments in strategic markets and the sale of select properties to optimize its portfolio.

Financial Statements
Beta
Revenue$513.28M
Operating Expenses$354.93M
Operating Income$158.36M
Interest Expense$119.51M
Net Income$130.25M
EPS (Basic)$0.47
EPS (Diluted)$0.46
Shares Outstanding (Basic)269.61M
Shares Outstanding (Diluted)290.44M

Key Highlights

  • 1Total revenues for the quarter ended June 30, 2008, increased to $535.5 million from $491.5 million in the same period last year, driven primarily by higher rental income.
  • 2Net Operating Income (NOI) for the quarter increased to $323.0 million from $290.6 million in the prior year's quarter, reflecting improved property-level performance.
  • 3The company's balance sheet remains robust with total assets of $16.1 billion and shareholders' equity of $5.1 billion as of June 30, 2008.
  • 4Equity Residential actively managed its debt, with outstanding mortgage notes payable at $4.1 billion and notes payable at $5.8 billion as of June 30, 2008.
  • 5Cash and cash equivalents significantly increased to $273.6 million from $50.8 million at the end of the previous year, indicating strong liquidity.
  • 6The company completed strategic acquisitions and dispositions, acquiring properties valued at $368.6 million and disposing of properties generating $494.0 million in proceeds during the six months ended June 30, 2008.
  • 7Diluted Earnings Per Share (EPS) for the quarter was $0.47, compared to $0.95 in the same period last year, impacted by a large gain from discontinued operations in the prior year.

Frequently Asked Questions

The primary driver of revenue growth was higher rental income from existing properties. Rental income for the quarter increased to $532.8 million, up from $489.1 million in the same quarter of the previous year, primarily due to higher rental rates charged to residents across the company's same-store properties.

As of June 30, 2008, Equity Residential had total debt of approximately $9.87 billion, comprising $4.1 billion in mortgage notes payable and $5.8 billion in unsecured notes. The company actively managed its debt during the period, repaying mortgage loans and utilizing its credit facilities. Despite the overall debt level, the weighted average interest rate on its total debt was 5.36%.

Equity Residential maintained a strong liquidity position. Cash and cash equivalents increased significantly to $273.6 million from $50.8 million at the end of 2007. The company also had $1.4 billion available under its revolving credit facility, providing ample resources to meet its short-term and long-term liquidity requirements.

Discontinued operations had a significant impact, particularly in reporting net income. For the quarter ended June 30, 2008, discontinued operations, net of minority interests, contributed $87.5 million to net income. This was substantially lower than the $265.0 million from discontinued operations in the same quarter of 2007, reflecting differences in the number and mix of properties sold between the periods.