10-QPeriod: Q2 FY2020

EQUITY RESIDENTIAL Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 3, 2020For Securities:EQR

Summary

Equity Residential (EQR) reported its second quarter 2020 results amidst the ongoing COVID-19 pandemic. The company demonstrated resilience with strong rent collection rates, averaging 97% for residential rent income in the second quarter, and a record high resident retention rate for the period. Demand for apartments showed a recovery by late May, with lead, traffic, and application numbers returning to prior-year levels. However, the company noted increased customer price sensitivity, particularly in urban cores like New York City, San Francisco, and Boston/Cambridge. EQR is strategically managing its portfolio, disposing of properties in markets like Phoenix, San Francisco, and Washington D.C., while continuing development spending, though at a moderated pace due to pandemic-related uncertainties. The company maintains a strong liquidity position with approximately $2.4 billion in readily available liquidity, providing confidence in its ability to meet obligations and navigate the current economic climate. EQR has suspended issuing future guidance due to the uncertainty surrounding the pandemic's impact.

Financial Highlights

31 data points
Beta

Net Income

$260.89M

EPS (Diluted)

$0.70

Total Assets

$20.71B

Cash & Equivalents

$187.42M

Free Cash Flow

$252.63M

Financial Statements
Beta
Operating Expenses$440.91M
Operating Income$356.89M
Interest Expense$81.89M
Net Income$260.89M
EPS (Basic)$0.70
EPS (Diluted)$0.70
Shares Outstanding (Basic)371.80M
Shares Outstanding (Diluted)385.91M

Key Highlights

  • 1Collected an average of 97% of total monthly Residential rental income in Q2 2020, with July collections trending similarly.
  • 2Achieved the highest resident retention rate for the second quarter in company history.
  • 3Experienced a recovery in apartment demand by late May 2020, with leads, traffic, and applications in line with the prior year.
  • 4Maintains a strong liquidity position with approximately $2.4 billion in readily available liquidity.
  • 5Disposed of five consolidated rental properties for approximately $747.6 million in net proceeds during the first six months of 2020.
  • 6Acknowledges increased price sensitivity and pressure on average rental rates in urban core markets (NYC, SF, Boston/Cambridge), while suburban properties show more resilience.
  • 7Suspended full-year 2020 guidance and will not issue future guidance until greater certainty exists regarding the pandemic's impact.

Frequently Asked Questions

Equity Residential collected an average of 97% of its total monthly residential rental income in the second quarter of 2020, indicating strong collection rates despite the pandemic. While demand has recovered and resident retention is high, the company notes increased price sensitivity and pressure on rental rates, particularly in urban core markets like New York City, San Francisco, and Boston/Cambridge. Suburban properties are showing more resilience.

The company continues to invest in apartment properties in urban and high-density suburban communities and has disposed of properties that are expected to have inferior long-term returns, including properties in Phoenix, San Francisco, and Washington D.C. Development spending is ongoing, though subject to COVID-19 related uncertainties.

Equity Residential reported approximately $2.4 billion in readily available liquidity as of June 30, 2020, supported by a strong balance sheet, limited near-term maturities, and access to capital markets. Due to the ongoing uncertainty surrounding the COVID-19 pandemic, the company has withdrawn its full-year 2020 guidance and will suspend issuing future guidance until more certainty exists.

Total same-store operating expenses increased by 1.2% year-over-year for the first six months of 2020. Key changes include an increase in real estate taxes (3.9%), insurance (17.6%), and utilities (1.7%), offset by a decrease in repairs and maintenance (-7.4%) and on-site payroll (-0.6%), partly due to pandemic-related adjustments and operational efficiencies.