How did EQR's earnings and FFO perform in 2000?

Net income available to common shares rose to $437.5M ($3.34 diluted EPS) from $280.7M ($2.29). FFO available to common shares and OP units grew 17.2% to $726.2M, or $5.00 per diluted share and OP unit. Results were helped by a $198.4M net gain on property sales, so investors should separate recurring operating growth from gains that may not repeat.

How leveraged is the company and what are its debt maturities?

Total debt was $5.7B at December 31, 2000: $3.2B of secured mortgage debt and $2.5B of unsecured debt, with a 6.98% weighted average rate. About 85.6% is fixed rate. Near-term principal payments include $294M of mortgage debt and $154M of unsecured notes in 2001. The debt-to-total-market-capitalization ratio was about 37.8%, below the company's 50% policy ceiling.

What drove revenue growth and what is the outlook for same-store performance?

Total revenues rose to $2.03B from $1.74B, mainly from acquisitions including LFT, Grove, and Globe. Same-store revenue grew about 4.6% to $1.5B, supported by higher rents on new leases and renewals and RUBS utility billing. Same-store property operating expenses rose about 2.5%. The filing does not give a formal 2001 revenue forecast, and it flags that occupancy and market rents are subject to local economic conditions.

What are the main risks for shareholders?

Key risks include rising interest rates on about $821M of floating-rate debt (a 10% rate move is roughly $5M of annual interest), refinancing risk on maturing debt, and significant influence by Chairman Samuel Zell and his affiliates. The REIT must distribute at least 90% of taxable income starting in 2001, and failure to qualify would trigger corporate-level tax. Potential changes in laws and environmental liabilities are also disclosed as risks.

How is the company funding growth and what capital is still available?

In 2000, EQR issued five series of convertible preference units ($142.4M net), sold $631.2M of properties, and obtained $484.4M of mortgage financing. About $1.1B of equity and $1.43B of debt securities remained available under existing shelf registrations at year end. Management expects to fund 2001 improvements of about $140M from operating cash flow, with access to capital markets used for larger acquisitions and development.

VMRK 10-K FY2000 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed February 20, 2001. Cited figures are marked; the original filing is the authoritative source.

Equity Residential (EQR) closed 2000 with a larger, more diversified apartment portfolio and continued growth in earnings and FFO.

The company owned or had interests in 1,104 multifamily properties with 227,704 units across 36 states at December 31, 2000, including 998 wholly owned properties. Net income rose to $549.5 million^a from $393.9 million, and net income available to common shares increased to $437.5 million, or $3.34 per diluted share, versus $2.29 in 1999. FFO available to common shares and OP units rose 17.2% to $726.2 million ($5.00 per diluted share and OP unit).

Growth was driven by the 1999 LFT merger, the 2000 Grove and Globe acquisitions, and property dispositions that generated a $198.4 million^b net gain. Same-store revenue grew about 4.6%, while property operating expenses rose about 2.5%. The balance sheet remains moderately leveraged.

Total debt was $5.7 billion^c at a weighted average rate of 6.98%, with about 14.4% floating-rate exposure. Management reports a debt-to-total-market-capitalization ratio of about 37.8%, below its 50% policy ceiling. Total assets were $12.3 billion and shareholders' equity was $5.6 billion.

The company raised $142 million^d of new preference units across five series during 2000, and it has $1.1 billion of equity and $1.43 billion of debt securities still available under shelf registrations. Investors should weigh the company's scale and FFO growth against several risks flagged in the filing.

These include rising interest rates, dependence on Samuel Zell's significant influence, the 5% ownership limit exemptions for Zell-affiliated holders, REIT qualification requirements, and potential pressure from competition for acquisitions. Looking forward, management expects 2001 capital improvements of about $140 million and continued acquisition and development activity, which will depend on access to capital at acceptable costs.

02—Key points

Key Highlights

Portfolio of 1,104 properties with 227,704 apartment units across 36 states; 998 wholly owned properties account for 207,610 units
Net income of $549.5M (up 40% from $393.9M); diluted EPS of $3.34 vs. $2.29 in 1999
FFO available to common shares and OP units of $726.2M, up 17.2%; diluted FFO per share of $5.00 vs. $4.50
Total revenues of $2.03B, up 16.5%, driven by acquisitions (LFT, Grove, Globe) and same-store rent growth of about 4.6%
Total debt of $5.7B at a 6.98% weighted average rate; debt-to-total-market-capitalization of about 37.8% vs. a 50% policy limit
$726M in property dispositions and $1.4B-plus of debt shelf capacity; $142M of new preferred preference units issued in 2000
Samuel Zell and affiliates retain significant influence, with 2.7% common ownership plus Partnership Agreement consent rights and 5% ownership limit exemptions

03—Questions

Frequently Asked Questions

How did EQR's earnings and FFO perform in 2000?
Net income available to common shares rose to $437.5M ($3.34 diluted EPS) from $280.7M ($2.29). FFO available to common shares and OP units grew 17.2% to $726.2M, or $5.00 per diluted share and OP unit. Results were helped by a $198.4M net gain on property sales, so investors should separate recurring operating growth from gains that may not repeat.
How leveraged is the company and what are its debt maturities?
Total debt was $5.7B at December 31, 2000: $3.2B of secured mortgage debt and $2.5B of unsecured debt, with a 6.98% weighted average rate. About 85.6% is fixed rate. Near-term principal payments include $294M of mortgage debt and $154M of unsecured notes in 2001. The debt-to-total-market-capitalization ratio was about 37.8%, below the company's 50% policy ceiling.
What drove revenue growth and what is the outlook for same-store performance?
Total revenues rose to $2.03B from $1.74B, mainly from acquisitions including LFT, Grove, and Globe. Same-store revenue grew about 4.6% to $1.5B, supported by higher rents on new leases and renewals and RUBS utility billing. Same-store property operating expenses rose about 2.5%. The filing does not give a formal 2001 revenue forecast, and it flags that occupancy and market rents are subject to local economic conditions.
What are the main risks for shareholders?
Key risks include rising interest rates on about $821M of floating-rate debt (a 10% rate move is roughly $5M of annual interest), refinancing risk on maturing debt, and significant influence by Chairman Samuel Zell and his affiliates. The REIT must distribute at least 90% of taxable income starting in 2001, and failure to qualify would trigger corporate-level tax. Potential changes in laws and environmental liabilities are also disclosed as risks.
How is the company funding growth and what capital is still available?
In 2000, EQR issued five series of convertible preference units ($142.4M net), sold $631.2M of properties, and obtained $484.4M of mortgage financing. About $1.1B of equity and $1.43B of debt securities remained available under existing shelf registrations at year end. Management expects to fund 2001 improvements of about $140M from operating cash flow, with access to capital markets used for larger acquisitions and development.

04—Continue

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