10-QPeriod: Q1 FY2012

EQUITY RESIDENTIAL Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 3, 2012For Securities:EQR

Summary

Equity Residential (EQR) reported solid performance in the first quarter of 2012, demonstrating revenue growth driven by increased rental rates and a strategic shift towards high-barrier-to-entry markets. The company is actively managing its portfolio through property acquisitions and dispositions, aiming to enhance long-term returns. EQR is also focused on disciplined cost control to maximize profitability. The company anticipates continued strong performance throughout 2012, with projected same-store revenue growth of 5.0% to 6.0% and NOI growth of 6.5% to 8.5%. EQR is strategically positioning itself to capitalize on favorable demographic trends and a sustained aversion to homeownership, which should support demand for rental housing. The company maintains a strong balance sheet and ample liquidity to fund its strategic initiatives and operational needs.

Financial Highlights

35 data points
Beta

Revenue

$446.45M

Net Income

$145.30M

32.5% Net Margin

EPS (Diluted)

$0.47

Total Assets

$16.48B

Cash & Equivalents

$219.63M

Free Cash Flow

$234.25M

Financial Statements
Beta
Revenue$446.45M
Operating Expenses$331.97M
Operating Income$102.11M
Interest Expense$118.01M
Net Income$145.30M
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)298.81M
Shares Outstanding (Diluted)298.81M

Key Highlights

  • 1For Q1 2012, same-store revenue increased by 5.5% ($24.7 million) year-over-year, primarily due to higher average rental rates.
  • 2Same-store Net Operating Income (NOI) grew by 7.8% ($21.7 million) in Q1 2012 compared to Q1 2011, reflecting strong revenue growth and controlled expense increases.
  • 3The company acquired $159.1 million in apartment properties and two land parcels for $23.7 million in Q1 2012, focused on strategic, high-barrier-to-entry markets.
  • 4EQR completed $206.4 million in property dispositions during Q1 2012, primarily in exit or less desirable markets, aligning with its portfolio repositioning strategy.
  • 5For the full year 2012, EQR forecasts same-store revenue growth of 5.0% to 6.0% and same-store NOI growth of 6.5% to 8.5%.
  • 6The company reported diluted earnings per share of $0.47 for Q1 2012, an increase from $0.423 in Q1 2011, driven by higher gains from property sales and increased NOI.
  • 7EQR has secured significant liquidity, with $1.72 billion available under its revolving credit facility as of March 31, 2012, ensuring financial flexibility for acquisitions, development, and debt obligations.

Frequently Asked Questions

Equity Residential's strategy is to acquire and develop high-quality apartment properties in top United States growth markets. They prioritize markets with high barriers to entry, strong economic growth, high single-family home prices making apartments more economical, and attractive quality of life. The company is actively repositioning its portfolio from non-core to core markets, divesting from less desirable locations and investing in targeted metropolitan areas like Boston, New York, Washington D.C., South Florida, Southern California, San Francisco, and Seattle.

In the first quarter of 2012, Equity Residential showed improved performance. Diluted earnings per share rose to $0.47 from $0.423 in the prior year. Same-store revenues increased by 5.5% driven by higher rental rates, and same-store Net Operating Income (NOI) grew by 7.8%. The company also saw an increase in property sales, contributing to higher earnings.

Equity Residential anticipates strong performance for the full year 2012. They project same-store revenue growth between 5.0% and 6.0% and same-store NOI growth between 6.5% and 8.5%. The company expects to continue its acquisition and disposition strategy, with planned consolidated dispositions and acquisitions of approximately $1.25 billion each for the year.

The company has a robust liquidity position, with significant availability under its revolving credit facility and substantial cash reserves. EQR utilizes a mix of capital sources, including retained cash flow, equity issuances (like its ATM program), debt financing, and property sales. It has also recently secured a new, larger unsecured revolving credit facility to support its funding needs for acquisitions, development projects, and debt maturities.