10-QPeriod: Q2 FY2010

EQUITY RESIDENTIAL Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 5, 2010For Securities:EQR

Summary

Equity Residential (EQR) reported its financial results for the six months and second quarter ended June 30, 2010. The company experienced a year-over-year decline in net income, primarily driven by lower gains from property sales and a decrease in total property net operating income (NOI) for its same-store properties. While revenues showed sequential quarter-over-quarter growth in Q2 2010, indicating a potential stabilization, overall revenues for the period remained flat to declining compared to the prior year due to the continued impact of rent roll-downs in 2009. Despite these challenges, EQR is strategically investing in apartment communities in top U.S. growth markets, acquiring properties and engaging in development. The company maintains a strong liquidity position with access to credit facilities and plans to fund future operations and growth through a combination of cash flow, debt, and equity issuances. Management expresses cautious optimism for the latter half of 2010, contingent on sustained economic improvement and employment growth, while acknowledging potential headwinds from increasing operating expenses and a competitive acquisition market.

Financial Highlights

38 data points
Beta

Revenue

$447.38M

60.7% Gross Margin

Net Income

$9.96M

2.2% Net Margin

EPS (Diluted)

$0.02

Total Assets

$15.63B

Cash & Equivalents

$47.98M

Free Cash Flow

$204.63M

Financial Statements
Beta
Revenue$447.38M
Gross Profit$271.67M
Operating Expenses$347.05M
Operating Income$97.59M
Interest Expense$113.72M
Net Income$9.96M
EPS (Basic)$0.02
EPS (Diluted)$0.02
Shares Outstanding (Basic)282.22M
Shares Outstanding (Diluted)282.22M

Key Highlights

  • 1Net income for the six months ended June 30, 2010, significantly decreased to $67.9 million from $191.4 million in the prior year period.
  • 2Diluted Earnings Per Share (EPS) for the six months decreased to $0.21 from $0.64 in the comparable prior year period.
  • 3Total revenues for the six months increased slightly to $999.0 million from $962.8 million, primarily driven by rental income.
  • 4The company acquired $861.4 million in rental properties and land during the first six months of 2010, indicating an active acquisition strategy.
  • 5Equity Residential's total assets grew to $15.6 billion as of June 30, 2010, from $15.4 billion at the end of 2009.
  • 6The company's revolving credit facility had $1.02 billion available as of June 30, 2010, providing significant liquidity.
  • 7Same-store rental revenue decreased by 2.1% for the six months ended June 30, 2010, compared to the prior year, indicating ongoing pressure on rental rates.

Frequently Asked Questions

For the six months ended June 30, 2010, Equity Residential reported a significant decrease in net income to $67.9 million from $191.4 million in the same period of 2009. Diluted Earnings Per Share also decreased to $0.21 from $0.64. While total revenues saw a modest increase to $999.0 million, this was offset by increased expenses and lower gains from property sales compared to the prior year.

As of June 30, 2010, Equity Residential maintained a strong liquidity position with $48.0 million in cash and cash equivalents and $1.02 billion available under its revolving credit facility. The company actively managed its debt, repaying $408.4 million in mortgage loans and obtaining $105.0 million in new financing during the period. They also issued $600.0 million in unsecured notes in July 2010. Total debt stood at approximately $9.7 billion.

Rental income is the primary revenue driver, but it experienced a 2.1% decrease in same-store properties year-over-year due to lower average rental rates, although occupancy improved. Operating expenses, particularly property and maintenance, real estate taxes, and property management costs, increased, leading to a decline in Net Operating Income (NOI) for same-store properties. The company anticipates continued pressure on revenues and moderate increases in expenses for the remainder of 2010.

Equity Residential remains actively engaged in acquiring and developing multifamily properties in strategic markets. During the first six months of 2010, the company acquired properties totaling $861.4 million. While dispositions also occurred, management expressed an intention to transition from being a net seller in 2009 to a net buyer in 2010, though acquisition pace in the second half of the year might be slower due to increased competition.