10-QPeriod: Q3 FY2021

EQUITY RESIDENTIAL Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 29, 2021For Securities:EQR

Summary

Equity Residential (EQR) reported its third-quarter 2021 results, demonstrating a strong recovery trajectory post-pandemic, exceeding prior expectations. The company has actively managed its portfolio through strategic acquisitions and dispositions, aiming to diversify into dynamic urban and dense suburban markets. While the overall impact of COVID-19 has not materially changed, operational improvements and robust economic growth have led to increased demand for EQR's apartment communities, characterized by high physical occupancy and a significant reduction in leasing concessions. The company's same-store net operating income (NOI) saw a year-over-year decline but is improving faster than previously anticipated, driven by strong pricing power and increased resident renewals, particularly in key markets like San Francisco, New York, and Boston. Despite persistent elevated bad debt reserves due to a small subset of resident non-payments, EQR maintains a strong liquidity position with significant readily available cash and access to capital markets, enabling it to meet financial obligations and pursue its growth strategies.

Financial Highlights

31 data points
Beta

Net Income

$431.95M

EPS (Diluted)

$1.15

Total Assets

$20.66B

Cash & Equivalents

$39.71M

Free Cash Flow

$402.09M

Financial Statements
Beta
Operating Expenses$465.58M
Operating Income$521.55M
Interest Expense$68.25M
Net Income$431.95M
EPS (Basic)$1.15
EPS (Diluted)$1.15
Shares Outstanding (Basic)374.31M
Shares Outstanding (Diluted)388.37M

Key Highlights

  • 1Strong recovery in the apartment rental market, with pricing and occupancy rates improving significantly and leasing concessions substantially reduced from their peak.
  • 2Portfolio optimization through strategic acquisitions ($684.7 million in consolidated rental properties) and dispositions ($1.0 billion in net proceeds from sales).
  • 3Same-store rental revenues decreased by 6.0% year-over-year for the first nine months of 2021, but NOI saw a substantial increase of 73.3% in non-residential segments, indicating a rebound in certain areas.
  • 4Launched a strategic partnership with Toll Brothers, Inc. to develop apartment communities in key markets, focusing on expansion and diversification.
  • 5Maintained strong liquidity with approximately $2.4 billion in readily available liquidity, bolstered by a $500 million unsecured note issuance (a green bond) and active debt management.
  • 6Full-year 2021 guidance anticipates a narrower decline in same-store NOI (7.0% decrease) compared to previous expectations, driven by revenue improvements.
  • 7Dividends remained stable, with $0.6025 per share declared for each quarter of 2021, consistent with 2020.

Frequently Asked Questions

Equity Residential is experiencing a robust recovery in its portfolio. Pricing for rentals has significantly improved, reaching or exceeding pre-pandemic levels, and monthly leasing concessions have declined dramatically. Physical occupancy was strong at 96.6% in Q3 2021 and is expected to remain high. The percentage of residents renewing leases is also improving, surpassing 2019 levels in key markets.

During the first nine months of 2021, EQR acquired eight consolidated rental properties for $684.7 million and three non-stabilized properties for $335.7 million, while also acquiring land parcels for future development. Concurrently, the company disposed of ten consolidated rental properties for $1.02 billion, generating significant proceeds and repositioning the portfolio towards growth markets. EQR anticipates full-year acquisitions and dispositions to be around $1.5 billion each.

EQR has revised its full-year 2021 guidance, now expecting same-store NOI to decline by approximately 7.0% (narrower than the previous 8.5%-7.5% range). This improvement is driven by better-than-expected revenue performance, particularly in pricing. Same-store expenses are expected to increase by approximately 3.25%, largely due to utilities and repairs and maintenance.

The company is well-positioned with approximately $2.4 billion in readily available liquidity, supported by its revolving credit facility and commercial paper program. EQR also successfully issued $500 million in 1.85% unsecured notes, which were green bonds, demonstrating access to capital markets at favorable rates. Debt covenants are being met, and the company's credit ratings remain stable, indicating a solid financial footing.