10-QPeriod: Q1 FY2014

EQUITY RESIDENTIAL Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 8, 2014For Securities:EQR

Summary

Equity Residential (EQR) reported its first-quarter 2014 results, demonstrating continued strategic portfolio repositioning towards high-barrier, coastal markets. The company achieved a 4.0% increase in same-store revenues year-over-year, driven by rental rate growth and stable occupancy, though this was partially offset by a projected 1% revenue decline in the Washington D.C. market due to increased supply and economic pressures. EQR is actively managing its portfolio, acquiring properties in core markets while disposing of non-core assets, with plans to invest approximately $500 million in acquisitions and a similar amount in dispositions for 2014. Financially, the company continues to focus on strengthening its balance sheet, with available liquidity sufficient to cover near-term obligations. Significant debt management activities were undertaken in late 2013 to extend maturity profiles. While the reported diluted EPS saw a substantial decrease from the prior year, this was largely attributable to one-time gains from property sales in Q1 2013 and merger-related expenses. The company anticipates continued growth in same-store Net Operating Income (NOI) for the full year 2014.

Financial Highlights

35 data points
Beta

Revenue

$633.44M

Net Income

$79.14M

12.5% Net Margin

EPS (Diluted)

$0.22

Total Assets

$22.89B

Cash & Equivalents

$37.21M

Free Cash Flow

$336.88M

Financial Statements
Beta
Revenue$633.44M
Operating Expenses$434.18M
Operating Income$199.26M
Interest Expense$113.05M
Net Income$79.14M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)360.47M
Shares Outstanding (Diluted)376.38M

Key Highlights

  • 1Same-store revenues increased by 4.0% in Q1 2014 compared to Q1 2013, driven by a 3.9% increase in average rental rates and a slight improvement in occupancy.
  • 2The company acquired one consolidated property with 430 apartment units for $143.0 million and started construction on three projects totaling 1,145 units with approximately $614.3 million in development costs during Q1 2014.
  • 3Equity Residential anticipates 2014 same-store revenue growth between 3.0% and 4.0%, and same-store Net Operating Income (NOI) growth between 3.50% and 4.75%.
  • 4Despite overall positive trends, the Washington D.C. market is showing signs of stress with an expected 1% decline in same-store revenues for 2014 due to new supply and economic factors.
  • 5The company reported diluted earnings per share of $0.22 for Q1 2014, a significant decrease from $3.01 in Q1 2013, primarily due to substantial gains on property sales in the prior year.
  • 6Total debt stood at $10.94 billion as of March 31, 2014, with a weighted average interest rate of 4.47% and a weighted average maturity of 6.1 years.
  • 7The company maintains substantial liquidity with $2.17 billion available on its revolving credit facility as of March 31, 2014.

Frequently Asked Questions

Same-store revenues increased by 4.0% year-over-year, primarily driven by an increase in average rental rates (up 3.9%) and slightly higher occupancy levels, along with a decrease in resident turnover.

The company is strategically acquiring, developing, and repositioning high-quality apartment properties in top U.S. growth markets, focusing on six core coastal markets. For 2014, they plan to acquire approximately $500 million in properties and dispose of a similar amount, while also increasing development activity with a budget of $750 million for new construction starts in 2014 and 2015.

Equity Residential anticipates same-store expenses to increase by 2.0% to 3.0% in 2014. This is largely due to anticipated increases in real estate taxes (expected to rise 6.2%) and utilities (expected to increase over 8.0%). However, controllable property-level expenses (excluding taxes and utilities) declined by 2.1% due to operational efficiencies.

As of March 31, 2014, the company had $37.2 million in cash and cash equivalents and $2.17 billion available on its revolving credit facility, providing ample liquidity to meet near-term obligations. The total debt was approximately $10.94 billion, with a weighted average interest rate of 4.47% and a maturity profile that has been actively managed to extend.