10-QPeriod: Q1 FY2011

EQUITY RESIDENTIAL Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 5, 2011For Securities:EQR

Summary

Equity Residential (EQR) reported a strong first quarter for 2011, demonstrating significant year-over-year improvement in net income and earnings per share. The company's core rental operations showed robust growth, with same-store revenues increasing by 4.0% and Net Operating Income (NOI) rising by 7.3%. This performance was driven by higher average rental rates, increased occupancy, and reduced resident turnover. EQR also strategically accelerated its property disposition program, selling non-strategic assets to capitalize on favorable market pricing. While this will cause some dilution to Normalized Funds From Operations, management believes it maximizes long-term shareholder value. The company maintains a solid liquidity position and access to capital markets to fund its ongoing development projects and potential acquisitions.

Financial Highlights

35 data points
Beta

Revenue

$466.36M

66.9% Gross Margin

Net Income

$127.33M

27.3% Net Margin

EPS (Diluted)

$0.42

Total Assets

$16.08B

Cash & Equivalents

$306.07M

Free Cash Flow

$187.53M

Financial Statements
Beta
Revenue$466.36M
Gross Profit$312.06M
Operating Expenses$350.40M
Operating Income$110.04M
Interest Expense$120.53M
Net Income$127.33M
EPS (Basic)$0.42
EPS (Diluted)$0.42
Shares Outstanding (Basic)292.89M
Shares Outstanding (Diluted)292.89M

Key Highlights

  • 1Net income attributable to controlling interests increased to $127.3 million, a substantial rise from $55.5 million in the prior year's quarter.
  • 2Diluted Earnings Per Share (EPS) rose to $0.42 from $0.18 in the comparable period, driven by improved operating performance and property sale gains.
  • 3Same-store rental revenue grew by 4.0% year-over-year, reflecting strong pricing power and occupancy gains in key markets.
  • 4Same-store Net Operating Income (NOI) increased by 7.3%, indicating effective cost management alongside revenue growth.
  • 5The company accelerated its disposition program, selling $261.8 million in rental properties to capitalize on favorable market conditions.
  • 6EQR maintained a strong liquidity position with $306.1 million in cash and cash equivalents and significant availability under its revolving credit facility.
  • 7The company provided guidance for full-year 2011, anticipating continued growth in same-store revenue (4.0%-5.0%) and NOI (5.0%-7.5%).

Frequently Asked Questions

The primary drivers were a significant increase in gains from property sales compared to the prior year's quarter and growth in total property Net Operating Income (NOI), boosted by strong same-store performance and lease-up activities, partially offset by dilution from 2010 and 2011 transaction activity.

The same-store portfolio showed strong performance. Revenues increased by 4.0% to $447.9 million due to higher rental rates, increased occupancy, and lower turnover. Expenses decreased by 1.0% to $168.2 million, primarily due to reductions in repairs and maintenance and on-site payroll. This resulted in a 7.3% increase in same-store NOI to $279.7 million.

EQR has accelerated its disposition program in 2011, selling non-strategic assets in exit or less desirable markets at favorable pricing. The company plans to dispose of approximately $1.25 billion in properties during 2011, primarily in the first half of the year, to maximize long-term shareholder value, despite potential dilution to Normalized Funds From Operations.

As of March 31, 2011, EQR had total debt of approximately $9.7 billion, with a Debt-to-Total Market Capitalization Ratio of 35.5%. The company maintained a strong liquidity position with $306.1 million in cash and cash equivalents and $1.34 billion available on its revolving credit facility. EQR plans to meet its liquidity needs through operating cash flow, disposition proceeds, and access to debt and equity markets.