10-QPeriod: Q1 FY2020

EQUITY RESIDENTIAL Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:EQR

Summary

Equity Residential (EQR) reported its first quarter 2020 results amidst the burgeoning COVID-19 pandemic. The company has withdrawn its full-year 2020 guidance and is suspending future guidance until greater certainty surrounding the pandemic's impact emerges. Despite the challenging environment, EQR's same-store residential properties showed a 2.9% increase in Net Operating Income (NOI) year-over-year, driven by a 2.7% rise in revenues and a 2.4% increase in operating expenses. The average rental rate for same-store properties grew by 2.7% to $2,885, and physical occupancy remained strong at 96.5%. However, the company is experiencing increased residential delinquency, with balances rising to 5.4% of total residential rental income by the end of April 2020, up from 2.6% at the end of March. Non-residential operations, including retail and parking, are more significantly impacted, with delinquency and deferred payment balances reaching $5.0 million by the end of April. EQR has taken proactive steps to support residents and employees, including offering flexible lease renewals, payment plans, and pausing evictions for impacted residents. The company also highlights strong liquidity, with over $2.2 billion in readily available liquidity, positioning it to navigate the uncertain economic climate.

Financial Highlights

32 data points
Beta

Revenue

$682.33M

Net Income

$308.61M

45.2% Net Margin

EPS (Diluted)

$0.83

Total Assets

$20.92B

Cash & Equivalents

$82.33M

Free Cash Flow

$382.45M

Financial Statements
Beta
Revenue$682.33M
Operating Expenses$468.20M
Operating Income$422.08M
Interest Expense$85.59M
Net Income$308.61M
EPS (Basic)$0.83
EPS (Diluted)$0.83
Shares Outstanding (Basic)371.58M
Shares Outstanding (Diluted)386.95M

Key Highlights

  • 1Same-store Net Operating Income (NOI) increased by 2.9% to $448.4 million for the first quarter of 2020 compared to the prior year, demonstrating portfolio resilience.
  • 2Average rental rates for same-store properties increased by 2.7% to $2,885, and physical occupancy remained robust at 96.5%.
  • 3The company experienced a significant increase in residential delinquency in April 2020, reaching 5.4% of rental income, up from 2.6% in March, indicating potential future revenue pressure.
  • 4Non-residential operations (retail, parking) are more severely impacted by COVID-19, with significant delinquency and deferred payments noted.
  • 5EQR has withdrawn its 2020 financial guidance and will suspend future guidance due to the uncertainty surrounding the COVID-19 pandemic.
  • 6The company reported strong liquidity, with over $2.2 billion in readily available liquidity as of May 4, 2020, enabling it to meet its obligations.
  • 7A development project in Boston was halted due to a COVID-19 related construction moratorium, impacting projected spending.

Frequently Asked Questions

While same-store NOI showed growth in Q1 2020, the company withdrew its 2020 guidance and is suspending future guidance due to the pandemic's uncertainty. The most immediate financial impact is seen in increased residential delinquency rates in April 2020 and a more pronounced negative effect on non-residential operations. The company is actively implementing measures to support residents and mitigate these impacts.

Equity Residential maintains a strong liquidity position with over $2.2 billion in readily available liquidity. The company is evaluating its investments and capital projects to ensure strategic spending. It has also taken steps to strengthen its financial flexibility, including disposing of properties and obtaining new mortgage financing, with proceeds used to repay debt. The company remains compliant with its debt covenants.

EQR is focused on supporting its residents and employees. This includes implementing touchless leasing and service processes, offering flexible lease renewals with no rent increases, creating payment plans, waiving late fees, and halting evictions for impacted residents. Employees are provided with extended emergency leave and resources for well-being. The company is also making donations to local food banks and supporting frontline responders.

The report indicates varied market performance. Seattle has shown resilience with limited delinquency and good revenue growth in April. New York shows increased retention but slow recovery in leasing activity. Los Angeles is facing challenges exacerbated by pre-existing high new supply, compounded by COVID-19 impacts.