10-QPeriod: Q1 FY2009

EQUITY RESIDENTIAL Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 7, 2009For Securities:EQR

Summary

Equity Residential (EQR) reported its first-quarter 2009 results, reflecting the ongoing economic slowdown. While total revenues saw a modest increase compared to the prior year, driven by rental income, operating expenses also rose, particularly in real estate taxes, payroll, and utilities. This led to a decrease in Net Operating Income (NOI) for same-store properties, signaling a challenging operating environment. The company demonstrated proactive capital management by selling $160.3 million in properties and repurchasing $307.8 million of its debt, aiming to strengthen its financial position amidst economic headwinds. Despite revenue pressures, EQR maintained a strong occupancy rate of 93.7% as of March 31, 2009. The company also highlighted its solid liquidity position, with substantial cash reserves and an available revolving credit facility, which it expects to be sufficient to meet its obligations through 2011. Management remains cautiously optimistic, believing the company is well-positioned to navigate the downturn due to its geographically diverse portfolio and the resilient demand for apartment rentals.

Financial Highlights

26 data points
Beta

Revenue

$483.08M

Net Income

$80.80M

16.7% Net Margin

EPS (Diluted)

$0.28

Cash & Equivalents

$428.60M

Free Cash Flow

$142.45M

Financial Statements
Beta
Revenue$483.08M
Operating Expenses$350.69M
Operating Income$126.28M
Interest Expense$123.50M
Net Income$80.80M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)272.32M
Shares Outstanding (Diluted)288.85M

Key Highlights

  • 1Total revenues increased slightly to $515.1 million, primarily driven by a 2.4% rise in rental income ($512.3 million).
  • 2Net income available to Common Shares decreased significantly to $77.2 million ($0.28 per diluted share) from $134.5 million ($0.50 per diluted share) in the same period last year, impacted by lower gains on discontinued operations.
  • 3Same-store rental income saw a slight decrease of 0.2%, while same-store operating expenses increased by 2.8%, leading to a 2.0% decline in same-store Net Operating Income (NOI) to $285.3 million.
  • 4The company actively managed its balance sheet by disposing of 13 properties for $160.3 million and repurchasing $307.8 million of its public notes.
  • 5Cash and cash equivalents stood at $428.6 million as of March 31, 2009, down from $890.8 million at the end of 2008, due to debt repurchase activities.
  • 6The occupancy rate remained strong at 93.7% for same-store properties.
  • 7Equity Residential continued its focus on expense control, with G&A expenses decreasing by 16.3% year-over-year.

Frequently Asked Questions

For the quarter ended March 31, 2009, Equity Residential's net income available to common shareholders decreased to $77.2 million ($0.28 per diluted share) compared to $134.5 million ($0.50 per diluted share) in the same period of 2008. While total revenues saw a slight increase, this was offset by higher operating expenses and a significant reduction in gains from discontinued operations.

Management expressed caution regarding the outlook for 2009 due to the ongoing economic slowdown and job losses, which are impacting rental revenue. Expenses are expected to increase at a higher rate than initially anticipated, primarily due to cost pressures in utilities and real estate taxes. The company anticipates same-store revenue to decrease by 1.50% to 4.50% and expenses to increase by 2.50% to 3.50% for the full year 2009.

EQR is actively managing its debt by repurchasing notes and obtained new mortgage loans. The company has a solid liquidity position, with $428.6 million in cash and cash equivalents and $1.31 billion available under its revolving credit facility as of March 31, 2009. They have also been pre-funding maturing debt and intend to sell non-core assets to manage their financial resources through 2011.

The economic slowdown and job losses have led to lower rental rates, especially for new residents, and a decline in occupancy in some markets. However, EQR has generally been able to maintain existing rent levels for renewing residents. The company reported a strong same-store occupancy rate of 93.7% as of March 31, 2009, indicating resilience in demand for apartment rentals despite economic challenges.