10-QPeriod: Q2 FY2013

EQUITY RESIDENTIAL Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 8, 2013For Securities:EQR

Summary

Equity Residential (EQR) reported significant activity in the second quarter of 2013, largely driven by the acquisition of the Archstone Portfolio. This strategic move substantially reshaped the company's asset base, shifting its focus more definitively towards high-barrier, core coastal markets. The company actively managed its portfolio by divesting non-core assets to fund acquisitions and strengthen its balance sheet. While the integration of Archstone presented some merger-related expenses and higher depreciation, the overall operational performance, particularly within same-store properties, showed positive trends in rental rates and occupancy. EQR also maintained a strong liquidity position and access to capital markets, positioning it to navigate future opportunities and obligations.

Financial Highlights

36 data points
Beta

Revenue

$617.22M

Net Income

$323.72M

52.4% Net Margin

EPS (Diluted)

$0.90

Total Assets

$23.48B

Cash & Equivalents

$152.56M

Free Cash Flow

$224.31M

Financial Statements
Beta
Revenue$617.22M
Operating Expenses$553.24M
Operating Income$63.98M
Interest Expense$122.95M
Net Income$323.72M
EPS (Basic)$0.90
EPS (Diluted)$0.90
Shares Outstanding (Basic)359.65M
Shares Outstanding (Diluted)359.65M

Key Highlights

  • 1Completed a significant portion of the Archstone acquisition, integrating approximately 60% of its portfolio and substantially increasing EQR's asset base.
  • 2Actively repositioned its portfolio by selling approximately $3.8 billion in non-core assets during the first six months of 2013, primarily to fund the Archstone acquisition and reduce debt.
  • 3Same-store rental revenues increased by 4.9% to 5.0% and same-store NOI increased by 5.8% to 5.6% for the quarter and year-to-date periods respectively, indicating strong underlying operational performance.
  • 4Secured access to significant capital, including a $500 million note offering and an expanded $2.5 billion revolving credit facility, ensuring liquidity for operations and future investments.
  • 5Experienced a substantial increase in diluted EPS to $0.90 for the quarter and $3.84 for the year-to-date period, primarily due to higher gains from property sales and increased NOI.
  • 6Maintained a conservative leverage ratio, with Total Debt to Adjusted Total Assets at 42.9% as of June 30, 2013, well within covenant limits.

Frequently Asked Questions

The Archstone acquisition significantly altered Equity Residential's financial profile. While it contributed to increased revenue and NOI through the addition of substantial properties, it also resulted in merger-related expenses, increased depreciation, and the issuance of new shares. Diluted EPS saw a substantial increase, largely driven by gains from property sales and the contribution of the acquired assets.

Equity Residential is actively repositioning its portfolio by divesting non-core assets in less desirable markets and reinvesting proceeds into high-barrier, core coastal markets. This strategy aims to enhance long-term returns and includes significant dispositions of apartment units and land parcels.

The company anticipates continued growth in same-store revenue, projecting an increase of 4.4% to 4.6% for the full year 2013. This is supported by strong demand in its core markets, favorable demographics, and an increase in average rental rates for new leases and renewals. Occupancy levels remained high across its portfolio.

EQR has a strong liquidity position, bolstered by its $2.5 billion revolving credit facility and proceeds from asset sales. The company continues to access capital markets through debt and equity offerings. While total debt increased due to the Archstone acquisition and new financing, leverage ratios remain within prudent levels, and debt maturities are well-staggered.