Maryland | 1-12252 | 13-3675988 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
Two North Riverside Plaza Chicago, Illinois | 60606 | |||
(Address of Principal Executive Offices) | (Zip Code) |
¬ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¬ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¬ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¬ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit Number | Exhibit | ||||
99.1 | Press Release dated January 31, 2017, announcing the results of operations and financial condition of Equity Residential as of December 31, 2016 and for the year and quarter then ended. | ||||
EQUITY RESIDENTIAL | ||||
Date: | January 31, 2017 | By: | /s/ Ian S. Kaufman | |
Name: | Ian S. Kaufman | |||
Its: | Senior Vice President and Chief Accounting Officer | |||
(Principal Accounting Officer) | ||||
Exhibit Number | Exhibit | ||||
99.1 | Press Release dated January 31, 2017, announcing the results of operations and financial condition of Equity Residential as of December 31, 2016 and for the year and quarter then ended. | ||||
• | The Company generated same store revenue growth of 3.7% in 2016 as compared to 2015. |
• | The Company sold 98 consolidated apartment properties, consisting of 29,440 apartment units, for an aggregate sale price of approximately $6.8 billion, generating an Unlevered IRR of 11.8%. These sales produced a net gain on sales of real estate properties of approximately $4.0 billion and an Economic Gain of approximately $2.6 billion. |
• | The Company paid its shareholders special dividends of approximately $4.0 billion, or $11 per share, using proceeds from the above property sales. In addition, the Company paid its shareholders approximately $765.7 million, or $2.015 per share, in regular quarterly dividends. |
• | The Company stabilized six development properties during the year: Prism at Park Avenue South and 170 Amsterdam in New York; Junction 47 and Odin in Seattle; Azure in San Francisco; and Vista 99 in San Jose. These assets had a total development cost of approximately $894.2 million and a weighted average projected yield of 6.0%. |
• | The Company entered into a new $2.0 billion unsecured revolving credit agreement which matures in January 2022 and has a lower cost than the Company’s prior agreement. |
• | A positive impact of approximately $0.02 per share from increased same store net operating income (NOI); |
• | A positive impact of approximately $0.04 per share from Lease-Up NOI; |
• | A positive impact of approximately $0.04 per share from lower total interest expense due to lower debt balances; and |
• | A negative impact of approximately $0.24 per share of lower NOI primarily as a result of the Company’s 2016 disposition activity. |
• | A positive impact of approximately $0.15 per share from increased same store NOI; |
• | A positive impact of approximately $0.13 per share from Lease-Up NOI; |
• | A positive impact of approximately $0.21 per share from lower total interest expense due to lower debt balances; |
• | A negative impact of approximately $0.83 per share of lower NOI primarily as a result of the Company’s 2016 disposition activity; and |
• | A negative impact of approximately $0.03 per share from higher general and administrative expense, lower fee and asset management income and other items. |
• | A negative impact of approximately $0.02 per share from lower same store NOI; |
• | A negative impact of approximately $0.01 per share of lower NOI primarily as a result of the Company’s 2016 disposition activity; and |
• | A negative impact of approximately $0.03 per share from higher overhead costs (general and administrative and property management costs), which are typically front-end loaded for the year. The Company expects total overhead costs to decrease in 2017 from 2016. |
Same Store: | ||||
Physical occupancy | 95.7% | |||
Revenue change | 1.0% to 2.25% | |||
Expense change | 3.0% to 4.0% | |||
NOI change | 0.0% to 2.0% | |||
EPS | $1.92 to $2.02 | |||
FFO per share | $3.01 to $3.11 | |||
Normalized FFO per share | $3.05 to $3.15 | |||
Transactions: | ||||
Consolidated Rental Acquisitions | $500 million | |||
Consolidated Rental Dispositions | $500 million | |||
Acquisition Cap Rate/Disposition Yield Spread | 75 basis points |
• | A positive impact of approximately $0.04 per share from increased same store NOI; |
• | A positive impact of approximately $0.12 per share from NOI from non-same store properties, inclusive of Lease-Up NOI; |
• | A negative impact of approximately $0.12 per share of lower NOI primarily as a result of the Company’s 2016 disposition activity; |
• | A negative impact of approximately $0.02 per share from higher total interest expense due to lower capitalized interest as the Company’s development projects are put into service and higher expected floating rates in 2017, partially offset by the significant debt repayment activity during the first quarter of 2016; and |
• | A negative impact of approximately $0.01 per share from other items including lower fee and asset management income and lower interest and other income partially offset by lower overhead costs (general and administrative and property management costs). |
Year Ended December 31, | Quarter Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
REVENUES | ||||||||||||||||
Rental income | $ | 2,422,233 | $ | 2,736,578 | $ | 605,273 | $ | 701,219 | ||||||||
Fee and asset management | 3,567 | 8,387 | 216 | 1,974 | ||||||||||||
Total revenues | 2,425,800 | 2,744,965 | 605,489 | 703,193 | ||||||||||||
EXPENSES | ||||||||||||||||
Property and maintenance | 406,823 | 479,160 | 97,135 | 114,212 | ||||||||||||
Real estate taxes and insurance | 317,387 | 339,802 | 78,433 | 85,289 | ||||||||||||
Property management | 82,015 | 86,206 | 18,012 | 21,555 | ||||||||||||
General and administrative | 57,840 | 64,664 | 10,432 | 14,046 | ||||||||||||
Depreciation | 705,649 | 765,895 | 177,407 | 181,033 | ||||||||||||
Total expenses | 1,569,714 | 1,735,727 | 381,419 | 416,135 | ||||||||||||
Operating income | 856,086 | 1,009,238 | 224,070 | 287,058 | ||||||||||||
Interest and other income | 65,773 | 7,372 | 681 | 466 | ||||||||||||
Other expenses | (10,368 | ) | (2,942 | ) | 4,112 | (103 | ) | |||||||||
Interest: | ||||||||||||||||
Expense incurred, net | (482,246 | ) | (444,487 | ) | (95,930 | ) | (110,541 | ) | ||||||||
Amortization of deferred financing costs | (12,633 | ) | (10,801 | ) | (2,633 | ) | (3,067 | ) | ||||||||
Income before income and other taxes, income (loss) from investments in unconsolidated entities, net gain (loss) on sales of real estate properties and land parcels and discontinued operations | 416,612 | 558,380 | 130,300 | 173,813 | ||||||||||||
Income and other tax (expense) benefit | (1,613 | ) | (917 | ) | (424 | ) | (219 | ) | ||||||||
Income (loss) from investments in unconsolidated entities | 4,801 | 15,025 | (1,045 | ) | 637 | |||||||||||
Net gain on sales of real estate properties | 4,044,055 | 335,134 | 173,184 | 39,442 | ||||||||||||
Net gain (loss) on sales of land parcels | 15,731 | (1 | ) | (28 | ) | — | ||||||||||
Income from continuing operations | 4,479,586 | 907,621 | 301,987 | 213,673 | ||||||||||||
Discontinued operations, net | 518 | 397 | 394 | 47 | ||||||||||||
Net income | 4,480,104 | 908,018 | 302,381 | 213,720 | ||||||||||||
Net (income) attributable to Noncontrolling Interests: | ||||||||||||||||
Operating Partnership | (171,511 | ) | (34,241 | ) | (11,069 | ) | (8,050 | ) | ||||||||
Partially Owned Properties | (16,430 | ) | (3,657 | ) | (14,062 | ) | (1,184 | ) | ||||||||
Net income attributable to controlling interests | 4,292,163 | 870,120 | 277,250 | 204,486 | ||||||||||||
Preferred distributions | (3,091 | ) | (3,357 | ) | (773 | ) | (800 | ) | ||||||||
Premium on redemption of Preferred Shares | — | (3,486 | ) | — | (697 | ) | ||||||||||
Net income available to Common Shares | $ | 4,289,072 | $ | 863,277 | $ | 276,477 | $ | 202,989 | ||||||||
Earnings per share – basic: | ||||||||||||||||
Income from continuing operations available to Common Shares | $ | 11.75 | $ | 2.37 | $ | 0.76 | $ | 0.56 | ||||||||
Net income available to Common Shares | $ | 11.75 | $ | 2.37 | $ | 0.76 | $ | 0.56 | ||||||||
Weighted average Common Shares outstanding | 365,002 | 363,498 | 365,256 | 363,828 | ||||||||||||
Earnings per share – diluted: | ||||||||||||||||
Income from continuing operations available to Common Shares | $ | 11.68 | $ | 2.36 | $ | 0.75 | $ | 0.55 | ||||||||
Net income available to Common Shares | $ | 11.68 | $ | 2.36 | $ | 0.75 | $ | 0.55 | ||||||||
Weighted average Common Shares outstanding | 381,992 | 380,620 | 381,860 | 381,220 | ||||||||||||
Distributions declared per Common Share outstanding | $ | 13.015 | $ | 2.21 | $ | 0.50375 | $ | 0.5525 |
Year Ended December 31, | Quarter Ended December 31, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Net income | $ | 4,480,104 | $ | 908,018 | $ | 302,381 | $ | 213,720 | |||||||||
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties | (16,430 | ) | (3,657 | ) | (14,062 | ) | (1,184 | ) | |||||||||
Preferred distributions | (3,091 | ) | (3,357 | ) | (773 | ) | (800 | ) | |||||||||
Premium on redemption of Preferred Shares | — | (3,486 | ) | — | (697 | ) | |||||||||||
Net income available to Common Shares and Units | 4,460,583 | 897,518 | 287,546 | 211,039 | |||||||||||||
Adjustments: | |||||||||||||||||
Depreciation | 705,649 | 765,895 | 177,407 | 181,033 | |||||||||||||
Depreciation – Non-real estate additions | (5,224 | ) | (4,981 | ) | (1,292 | ) | (1,214 | ) | |||||||||
Depreciation – Partially Owned Properties | (3,805 | ) | (4,332 | ) | (909 | ) | (1,084 | ) | |||||||||
Depreciation – Unconsolidated Properties | 4,745 | 4,920 | 1,139 | 1,232 | |||||||||||||
Net (gain) on sales of unconsolidated entities – operating assets | (8,841 | ) | (100 | ) | — | — | |||||||||||
Net (gain) on sales of real estate properties | (4,044,055 | ) | (335,134 | ) | (173,184 | ) | (39,442 | ) | |||||||||
Noncontrolling Interests share of gain on sales | 14,521 | — | 14,521 | — | |||||||||||||
Discontinued operations: | |||||||||||||||||
Net (gain) on sales of discontinued operations | (43 | ) | — | — | — | ||||||||||||
FFO available to Common Shares and Units | 1,123,530 | 1,323,786 | 305,228 | 351,564 | |||||||||||||
Adjustments (see page 25 for additional detail): | |||||||||||||||||
Asset impairment and valuation allowances | — | — | — | — | |||||||||||||
Property acquisition costs and write-off of pursuit costs | 6,478 | (11,706 | ) | 991 | 2,241 | ||||||||||||
Debt extinguishment (gains) losses, including prepayment penalties, preferred | |||||||||||||||||
share redemptions and non-cash convertible debt discounts | 121,694 | 5,704 | 1,418 | 1,203 | |||||||||||||
(Gains) losses on sales of non-operating assets, net of income and other tax | |||||||||||||||||
expense (benefit) | (74,221 | ) | (2,883 | ) | 35 | (2,155 | ) | ||||||||||
Other miscellaneous items | 2,169 | 2,901 | (5,052 | ) | 200 | ||||||||||||
Normalized FFO available to Common Shares and Units | $ | 1,179,650 | $ | 1,317,802 | $ | 302,620 | $ | 353,053 | |||||||||
FFO | $ | 1,126,621 | $ | 1,330,629 | $ | 306,001 | $ | 353,061 | |||||||||
Preferred distributions | (3,091 | ) | (3,357 | ) | (773 | ) | (800 | ) | |||||||||
Premium on redemption of Preferred Shares | — | (3,486 | ) | — | (697 | ) | |||||||||||
FFO available to Common Shares and Units | $ | 1,123,530 | $ | 1,323,786 | $ | 305,228 | $ | 351,564 | |||||||||
FFO per share and Unit - basic | $ | 2.97 | $ | 3.51 | $ | 0.81 | $ | 0.93 | |||||||||
FFO per share and Unit - diluted | $ | 2.94 | $ | 3.48 | $ | 0.80 | $ | 0.92 | |||||||||
Normalized FFO | $ | 1,182,741 | $ | 1,321,159 | $ | 303,393 | $ | 353,853 | |||||||||
Preferred distributions | (3,091 | ) | (3,357 | ) | (773 | ) | (800 | ) | |||||||||
Normalized FFO available to Common Shares and Units | $ | 1,179,650 | $ | 1,317,802 | $ | 302,620 | $ | 353,053 | |||||||||
Normalized FFO per share and Unit - basic | $ | 3.11 | $ | 3.49 | $ | 0.80 | $ | 0.94 | |||||||||
Normalized FFO per share and Unit - diluted | $ | 3.09 | $ | 3.46 | $ | 0.79 | $ | 0.93 | |||||||||
Weighted average Common Shares and Units outstanding - basic | 378,829 | 377,073 | 379,081 | 377,380 | |||||||||||||
Weighted average Common Shares and Units outstanding - diluted | 381,992 | 380,620 | 381,860 | 381,220 | |||||||||||||
Note: | See page 25 for additional detail regarding the adjustments from FFO to Normalized FFO. See pages 27 through 30 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share. |
December 31, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Investment in real estate | ||||||||
Land | $ | 5,899,862 | $ | 5,864,046 | ||||
Depreciable property | 18,730,579 | 18,037,087 | ||||||
Projects under development | 637,168 | 1,122,376 | ||||||
Land held for development | 118,816 | 158,843 | ||||||
Investment in real estate | 25,386,425 | 25,182,352 | ||||||
Accumulated depreciation | (5,360,389 | ) | (4,905,406 | ) | ||||
Investment in real estate, net | 20,026,036 | 20,276,946 | ||||||
Real estate held for sale | — | 2,181,135 | ||||||
Cash and cash equivalents | 77,207 | 42,276 | ||||||
Investments in unconsolidated entities | 60,141 | 68,101 | ||||||
Deposits – restricted | 76,946 | 55,893 | ||||||
Escrow deposits – mortgage | 64,935 | 56,946 | ||||||
Other assets | 398,883 | 428,899 | ||||||
Total assets | $ | 20,704,148 | $ | 23,110,196 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Mortgage notes payable, net | $ | 4,119,181 | $ | 4,685,134 | ||||
Notes, net | 4,848,079 | 5,848,956 | ||||||
Line of credit and commercial paper | 19,998 | 387,276 | ||||||
Accounts payable and accrued expenses | 147,482 | 187,124 | ||||||
Accrued interest payable | 60,946 | 85,221 | ||||||
Other liabilities | 350,466 | 366,387 | ||||||
Security deposits | 62,624 | 77,582 | ||||||
Distributions payable | 192,296 | 209,378 | ||||||
Total liabilities | 9,801,072 | 11,847,058 | ||||||
Commitments and contingencies | ||||||||
Redeemable Noncontrolling Interests – Operating Partnership | 442,092 | 566,783 | ||||||
Equity: | ||||||||
Shareholders’ equity: | ||||||||
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 745,600 shares issued and outstanding as of December 31, 2016 and December 31, 2015 | 37,280 | 37,280 | ||||||
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 365,870,924 shares issued and outstanding as of December 31, 2016 and 364,755,444 shares issued and outstanding as of December 31, 2015 | 3,659 | 3,648 | ||||||
Paid in capital | 8,758,422 | 8,572,365 | ||||||
Retained earnings | 1,543,626 | 2,009,091 | ||||||
Accumulated other comprehensive (loss) | (113,909 | ) | (152,016 | ) | ||||
Total shareholders’ equity | 10,229,078 | 10,470,368 | ||||||
Noncontrolling Interests: | ||||||||
Operating Partnership | 221,297 | 221,379 | ||||||
Partially Owned Properties | 10,609 | 4,608 | ||||||
Total Noncontrolling Interests | 231,906 | 225,987 | ||||||
Total equity | 10,460,984 | 10,696,355 | ||||||
Total liabilities and equity | $ | 20,704,148 | $ | 23,110,196 |
Equity Residential | ||||||||||||||
Portfolio Summary | ||||||||||||||
As of December 31, 2016 | ||||||||||||||
% of | Average | |||||||||||||
Apartment | Stabilized | Rental | ||||||||||||
Markets/Metro Areas | Properties | Units | NOI | Rate | ||||||||||
Los Angeles | 70 | 15,857 | 18.3 | % | $ | 2,382 | ||||||||
Orange County | 12 | 3,684 | 3.9 | % | 2,028 | |||||||||
San Diego | 13 | 3,505 | 3.9 | % | 2,198 | |||||||||
Subtotal – Southern California | 95 | 23,046 | 26.1 | % | 2,295 | |||||||||
San Francisco | 54 | 12,959 | 19.7 | % | 3,064 | |||||||||
New York | 40 | 10,632 | 17.9 | % | 3,751 | |||||||||
Washington DC | 47 | 15,637 | 17.6 | % | 2,341 | |||||||||
Boston | 26 | 7,007 | 10.7 | % | 2,819 | |||||||||
Seattle | 37 | 7,096 | 8.0 | % | 2,161 | |||||||||
Other Markets | 1 | 136 | — | % | 1,146 | |||||||||
Total | 300 | 76,513 | 100.0 | % | 2,674 | |||||||||
Unconsolidated Properties | 2 | 945 | — | — | ||||||||||
Grand Total | 302 | 77,458 | 100.0 | % | $ | 2,674 | ||||||||
Note: Projects under development are not included in the Portfolio Summary until construction has been completed. See pages 27 through 30 for the definitions of non-GAAP financial measures and other terms, such as Average Rental Rate and % of Stabilized NOI. | ||||||||||||||
4th Quarter 2016 Earnings Release | 9 |
Equity Residential | ||||||||||
Portfolio as of December 31, 2016 | ||||||||||
Properties | Apartment Units | |||||||||
Wholly Owned Properties | 280 | 72,445 | ||||||||
Master-Leased Properties - Consolidated | 3 | 853 | ||||||||
Partially Owned Properties - Consolidated | 17 | 3,215 | ||||||||
Partially Owned Properties - Unconsolidated | 2 | 945 | ||||||||
302 | 77,458 |
Portfolio Rollforward Q4 2016 | ||||||||||||||
($ in thousands) | ||||||||||||||
Properties | Apartment Units | Sales Price | Disposition Yield | |||||||||||
9/30/2016 | 308 | 78,826 | ||||||||||||
Dispositions: | ||||||||||||||
Consolidated: | ||||||||||||||
Rental Properties | (7 | ) | (1,609 | ) | $ | (243,500 | ) | (6.6 | %) | |||||
Completed Developments - Consolidated | 1 | 241 | ||||||||||||
12/31/2016 | 302 | 77,458 |
Portfolio Rollforward 2016 | ||||||||||||||
($ in thousands) | ||||||||||||||
Properties | Apartment Units | Purchase Price | Acquisition Cap Rate | |||||||||||
12/31/2015 | 394 | 109,652 | ||||||||||||
Acquisitions: | ||||||||||||||
Consolidated: | ||||||||||||||
Rental Properties | 4 | 573 | $ | 249,334 | 4.8 | % | ||||||||
Sales Price | Disposition Yield | |||||||||||||
Dispositions: | ||||||||||||||
Consolidated: | ||||||||||||||
Rental Properties | (98 | ) | (29,440 | ) | $ | (6,811,503 | ) | (5.4 | %) | |||||
Land Parcels | — | — | $ | (57,455 | ) | |||||||||
Unconsolidated: | ||||||||||||||
Rental Properties (A) | (1 | ) | (336 | ) | $ | (74,500 | ) | (5.6 | %) | |||||
Other: | ||||||||||||||
Military Housing (B) | (2 | ) | (5,161 | ) | $ | (63,250 | ) | |||||||
Completed Developments - Consolidated | 5 | 2,141 | ||||||||||||
Configuration Changes | — | 29 | ||||||||||||
12/31/2016 | 302 | 77,458 | ||||||||||||
Note: See pages 27 through 30 for the definitions of non-GAAP financial measures and other terms, such as Acquisition Cap Rate and Disposition Yield. | ||||||||||||||
(A) | The Company owned a 20% interest in this unconsolidated rental property. Sale price listed is the gross sale price. The Company's share of the net sales proceeds approximated $12.4 million. | |||||||||||||
(B) | The Company sold its entire interest in the management contracts and related rights associated with the military housing ventures at Joint Base Lewis McChord during the second quarter of 2016. |
4th Quarter 2016 Earnings Release | 10 |
Equity Residential | ||||||||||||||||||||||
Fourth Quarter 2016 vs. Fourth Quarter 2015 | ||||||||||||||||||||||
Same Store Results/Statistics for 70,881 Same Store Apartment Units | ||||||||||||||||||||||
$ in thousands (except for Average Rental Rate) | ||||||||||||||||||||||
Results | Statistics | |||||||||||||||||||||
Average Rental Rate | ||||||||||||||||||||||
Physical Occupancy | ||||||||||||||||||||||
Description | Revenues | Expenses | NOI | Turnover | ||||||||||||||||||
Q4 2016 | $ | 558,608 | $ | 159,201 | $ | 399,407 | $ | 2,629 | 96.0 | % | 11.2 | % | ||||||||||
Q4 2015 | $ | 542,833 | $ | 150,720 | $ | 392,113 | $ | 2,552 | 96.1 | % | 11.4 | % | ||||||||||
Change | $ | 15,775 | $ | 8,481 | $ | 7,294 | $ | 77 | (0.1 | %) | (0.2 | %) | ||||||||||
Change | 2.9 | % | 5.6 | % | 1.9 | % | 3.0 | % |
Fourth Quarter 2016 vs. Third Quarter 2016 | ||||||||||||||||||||||
Same Store Results/Statistics for 73,068 Same Store Apartment Units | ||||||||||||||||||||||
$ in thousands (except for Average Rental Rate) | ||||||||||||||||||||||
Results | Statistics | |||||||||||||||||||||
Average Rental Rate | ||||||||||||||||||||||
Physical Occupancy | ||||||||||||||||||||||
Description | Revenues | Expenses | NOI | Turnover | ||||||||||||||||||
Q4 2016 | $ | 579,539 | $ | 164,789 | $ | 414,750 | $ | 2,647 | 96.0 | % | 11.2 | % | ||||||||||
Q3 2016 | $ | 580,395 | $ | 173,780 | $ | 406,615 | $ | 2,648 | 96.0 | % | 17.5 | % | ||||||||||
Change | $ | (856 | ) | $ | (8,991 | ) | $ | 8,135 | $ | (1 | ) | 0.0 | % | (6.3 | %) | |||||||
Change | (0.1 | %) | (5.2 | %) | 2.0 | % | 0.0 | % |
2016 vs. 2015 | ||||||||||||||||||||||
Same Store Results/Statistics for 69,879 Same Store Apartment Units | ||||||||||||||||||||||
$ in thousands (except for Average Rental Rate) | ||||||||||||||||||||||
Results | Statistics | |||||||||||||||||||||
Average Rental Rate | ||||||||||||||||||||||
Physical Occupancy | ||||||||||||||||||||||
Description | Revenues | Expenses | NOI | Turnover | ||||||||||||||||||
2016 | $ | 2,177,304 | $ | 634,120 | $ | 1,543,184 | $ | 2,597 | 96.0 | % | 54.4 | % | ||||||||||
2015 | $ | 2,099,166 | $ | 613,924 | $ | 1,485,242 | $ | 2,504 | 96.1 | % | 54.5 | % | ||||||||||
Change | $ | 78,138 | $ | 20,196 | $ | 57,942 | $ | 93 | (0.1 | %) | (0.1 | %) | ||||||||||
Change | 3.7 | % | 3.3 | % | 3.9 | % | 3.7 | % | ||||||||||||||
Note: Same store operating expenses and same store NOI no longer include an allocation of property management expenses either in the current or comparable periods. The Company has added guidance on property management expense on page 26 of this release. See pages 27 through 30 for the definitions of non-GAAP financial measures and other terms, such as Average Rental Rate, NOI, Physical Occupancy and Turnover. |
4th Quarter 2016 Earnings Release | 11 |
Equity Residential | ||||||||||||||||||||||||||||||||||
Fourth Quarter 2016 vs. Fourth Quarter 2015 | ||||||||||||||||||||||||||||||||||
Same Store Results/Statistics by Market | ||||||||||||||||||||||||||||||||||
Increase (Decrease) from Prior Year's Quarter | ||||||||||||||||||||||||||||||||||
Q4 2016 % of Actual NOI | Q4 2016 Average Rental Rate | Q4 2016 Weighted Average Physical Occupancy % | Q4 2016 Turnover | |||||||||||||||||||||||||||||||
Average Rental Rate | ||||||||||||||||||||||||||||||||||
Apartment Units | Physical Occupancy | |||||||||||||||||||||||||||||||||
Markets/Metro Areas | Revenues | Expenses | NOI | Turnover | ||||||||||||||||||||||||||||||
Los Angeles | 14,038 | 17.4 | % | $ | 2,365 | 95.9 | % | 13.4 | % | 4.8 | % | 3.6 | % | 5.3 | % | 4.7 | % | (0.2 | %) | 0.1 | % | |||||||||||||
San Diego | 3,505 | 4.2 | % | 2,198 | 96.0 | % | 14.3 | % | 5.0 | % | 2.5 | % | 5.9 | % | 4.8 | % | 0.0 | % | 0.1 | % | ||||||||||||||
Orange County | 3,490 | 3.8 | % | 2,011 | 96.2 | % | 11.7 | % | 6.4 | % | 6.4 | % | 6.3 | % | 6.3 | % | 0.1 | % | 0.7 | % | ||||||||||||||
Subtotal – Southern California | 21,033 | 25.4 | % | 2,278 | 96.0 | % | 13.2 | % | 5.1 | % | 3.8 | % | 5.6 | % | 4.9 | % | (0.1 | %) | 0.2 | % | ||||||||||||||
Washington DC | 15,475 | 18.9 | % | 2,341 | 96.0 | % | 10.3 | % | 2.2 | % | 6.5 | % | 0.5 | % | 1.9 | % | 0.3 | % | (0.5 | %) | ||||||||||||||
New York | 10,007 | 18.6 | % | 3,680 | 96.2 | % | 8.4 | % | 0.3 | % | 7.4 | % | (3.1 | %) | 0.8 | % | (0.3 | %) | (0.3 | %) | ||||||||||||||
San Francisco | 11,019 | 18.0 | % | 2,908 | 96.2 | % | 11.2 | % | 3.6 | % | 5.0 | % | 3.2 | % | 3.7 | % | (0.1 | %) | (0.6 | %) | ||||||||||||||
Boston | 6,913 | 11.3 | % | 2,819 | 95.7 | % | 10.1 | % | 1.3 | % | 2.5 | % | 0.9 | % | 2.1 | % | (0.6 | %) | 0.5 | % | ||||||||||||||
Seattle | 6,298 | 7.7 | % | 2,166 | 95.6 | % | 11.9 | % | 5.9 | % | 9.4 | % | 4.7 | % | 5.7 | % | 0.0 | % | (0.5 | %) | ||||||||||||||
Other Markets | 136 | 0.1 | % | 1,146 | 96.9 | % | 14.7 | % | 5.9 | % | 11.8 | % | 3.5 | % | 5.6 | % | 0.3 | % | 0.0 | % | ||||||||||||||
Total | 70,881 | 100.0 | % | $ | 2,629 | 96.0 | % | 11.2 | % | 2.9 | % | 5.6 | % | 1.9 | % | 3.0 | % | (0.1 | %) | (0.2 | %) | |||||||||||||
4th Quarter 2016 Earnings Release | 12 |
Equity Residential | ||||||||||||||||||||||||||||||||||
Fourth Quarter 2016 vs. Third Quarter 2016 | ||||||||||||||||||||||||||||||||||
Same Store Results/Statistics by Market | ||||||||||||||||||||||||||||||||||
Increase (Decrease) from Prior Quarter | ||||||||||||||||||||||||||||||||||
Q4 2016 % of Actual NOI | Q4 2016 Average Rental Rate | Q4 2016 Weighted Average Physical Occupancy % | Q4 2016 Turnover | |||||||||||||||||||||||||||||||
Average Rental Rate | ||||||||||||||||||||||||||||||||||
Apartment Units | Physical Occupancy | |||||||||||||||||||||||||||||||||
Markets/Metro Areas | Revenues | Expenses | NOI | Turnover | ||||||||||||||||||||||||||||||
Los Angeles | 14,336 | 17.0 | % | $ | 2,361 | 95.9 | % | 13.5 | % | 0.3 | % | (4.1 | %) | 2.1 | % | 0.4 | % | (0.3 | %) | (5.5 | %) | |||||||||||||
San Diego | 3,505 | 4.0 | % | 2,198 | 96.0 | % | 14.3 | % | (0.2 | %) | (4.2 | %) | 1.3 | % | 0.4 | % | (0.6 | %) | (4.8 | %) | ||||||||||||||
Orange County | 3,684 | 4.0 | % | 2,028 | 96.2 | % | 11.7 | % | 0.9 | % | (7.6 | %) | 3.8 | % | 0.8 | % | 0.1 | % | (5.4 | %) | ||||||||||||||
Subtotal – Southern California | 21,525 | 25.0 | % | 2,278 | 96.0 | % | 13.3 | % | 0.3 | % | (4.6 | %) | 2.2 | % | 0.5 | % | (0.2 | %) | (5.4 | %) | ||||||||||||||
New York | 10,632 | 19.5 | % | 3,751 | 96.1 | % | 8.5 | % | (0.8 | %) | (6.6 | %) | 2.6 | % | (0.4 | %) | 0.0 | % | (5.3 | %) | ||||||||||||||
Washington DC | 15,475 | 18.2 | % | 2,341 | 96.0 | % | 10.3 | % | (0.6 | %) | (5.8 | %) | 1.7 | % | (0.5 | %) | (0.1 | %) | (6.7 | %) | ||||||||||||||
San Francisco | 11,292 | 18.0 | % | 2,948 | 96.2 | % | 11.2 | % | 0.2 | % | (5.1 | %) | 1.9 | % | (0.4 | %) | 0.6 | % | (8.6 | %) | ||||||||||||||
Boston | 6,913 | 10.9 | % | 2,819 | 95.7 | % | 10.1 | % | 0.9 | % | (4.0 | %) | 2.8 | % | 0.2 | % | (0.1 | %) | (8.4 | %) | ||||||||||||||
Seattle | 7,095 | 8.3 | % | 2,161 | 95.6 | % | 11.7 | % | (0.6 | %) | (2.0 | %) | (0.1 | %) | 0.6 | % | (0.3 | %) | (4.4 | %) | ||||||||||||||
Other Markets | 136 | 0.1 | % | 1,146 | 96.9 | % | 14.7 | % | (0.3 | %) | 1.5 | % | (1.0 | %) | 0.4 | % | (0.7 | %) | (0.7 | %) | ||||||||||||||
Total | 73,068 | 100.0 | % | $ | 2,647 | 96.0 | % | 11.2 | % | (0.1 | %) | (5.2 | %) | 2.0 | % | 0.0 | % | 0.0 | % | (6.3 | %) | |||||||||||||
4th Quarter 2016 Earnings Release | 13 |
Equity Residential | ||||||||||||||||||||||||||||||||||
2016 vs. 2015 | ||||||||||||||||||||||||||||||||||
Same Store Results/Statistics by Market | ||||||||||||||||||||||||||||||||||
Increase (Decrease) from Prior Year | ||||||||||||||||||||||||||||||||||
2016 % of Actual NOI | 2016 Average Rental Rate | 2016 Weighted Average Physical Occupancy % | 2016 Turnover | |||||||||||||||||||||||||||||||
Average Rental Rate | ||||||||||||||||||||||||||||||||||
Apartment Units | Physical Occupancy | |||||||||||||||||||||||||||||||||
Markets/Metro Areas | Revenues | Expenses | NOI | Turnover | ||||||||||||||||||||||||||||||
Los Angeles | 13,698 | 17.0 | % | $ | 2,306 | 96.1 | % | 61.1 | % | 5.6 | % | 2.4 | % | 6.9 | % | 5.3 | % | 0.1 | % | (0.1 | %) | |||||||||||||
San Diego | 3,505 | 4.2 | % | 2,161 | 96.2 | % | 64.1 | % | 5.5 | % | 2.4 | % | 6.6 | % | 5.2 | % | 0.1 | % | (0.9 | %) | ||||||||||||||
Orange County | 3,490 | 3.9 | % | 1,969 | 96.3 | % | 53.1 | % | 6.0 | % | 2.1 | % | 7.3 | % | 5.8 | % | 0.3 | % | (0.9 | %) | ||||||||||||||
Subtotal – Southern California | 20,693 | 25.1 | % | 2,224 | 96.1 | % | 60.2 | % | 5.6 | % | 2.4 | % | 6.9 | % | 5.4 | % | 0.1 | % | (0.5 | %) | ||||||||||||||
New York | 10,007 | 19.3 | % | 3,674 | 96.3 | % | 42.1 | % | 1.6 | % | 5.3 | % | (0.2 | %) | 1.9 | % | (0.3 | %) | 0.5 | % | ||||||||||||||
Washington DC | 15,475 | 19.3 | % | 2,330 | 96.0 | % | 50.7 | % | 1.5 | % | 2.2 | % | 1.1 | % | 1.2 | % | 0.1 | % | 0.3 | % | ||||||||||||||
San Francisco | 10,846 | 17.9 | % | 2,873 | 96.1 | % | 59.0 | % | 6.4 | % | 4.2 | % | 7.1 | % | 6.8 | % | (0.4 | %) | 0.5 | % | ||||||||||||||
Boston | 6,711 | 11.1 | % | 2,773 | 95.6 | % | 53.6 | % | 2.2 | % | (1.4 | %) | 3.7 | % | 2.7 | % | (0.5 | %) | 1.7 | % | ||||||||||||||
Seattle | 6,011 | 7.2 | % | 2,116 | 95.6 | % | 57.5 | % | 6.1 | % | 8.5 | % | 5.2 | % | 5.7 | % | 0.0 | % | (3.8 | %) | ||||||||||||||
Other Markets | 136 | 0.1 | % | 1,118 | 98.0 | % | 54.4 | % | 7.0 | % | 7.4 | % | 6.8 | % | 5.9 | % | 0.9 | % | (7.4 | %) | ||||||||||||||
Total | 69,879 | 100.0 | % | $ | 2,597 | 96.0 | % | 54.4 | % | 3.7 | % | 3.3 | % | 3.9 | % | 3.7 | % | (0.1 | %) | (0.1 | %) |
4th Quarter 2016 Earnings Release | 14 |
Equity Residential | |||||||||||||||||||
Fourth Quarter 2016 vs. Fourth Quarter 2015 | |||||||||||||||||||
Same Store Operating Expenses for 70,881 Same Store Apartment Units | |||||||||||||||||||
$ in thousands | |||||||||||||||||||
% of Actual Q4 2016 Operating Expenses | |||||||||||||||||||
Actual Q4 2016 | Actual Q4 2015 | $ Change | % Change | ||||||||||||||||
Real estate taxes | $ | 67,209 | $ | 63,367 | $ | 3,842 | 6.1 | % | 42.2 | % | |||||||||
On-site payroll (1) | 35,275 | 33,804 | 1,471 | 4.4 | % | 22.2 | % | ||||||||||||
Utilities (2) | 22,212 | 21,665 | 547 | 2.5 | % | 14.0 | % | ||||||||||||
Repairs and maintenance (3) | 19,742 | 18,085 | 1,657 | 9.2 | % | 12.4 | % | ||||||||||||
Insurance | 4,350 | 4,217 | 133 | 3.2 | % | 2.7 | % | ||||||||||||
Leasing and advertising | 2,569 | 2,156 | 413 | 19.2 | % | 1.6 | % | ||||||||||||
Other on-site operating expenses (4) | 7,844 | 7,426 | 418 | 5.6 | % | 4.9 | % | ||||||||||||
Same store operating expenses | $ | 159,201 | $ | 150,720 | $ | 8,481 | 5.6 | % | 100.0 | % | |||||||||
2016 vs. 2015 | |||||||||||||||||||
Same Store Operating Expenses for 69,879 Same Store Apartment Units | |||||||||||||||||||
$ in thousands | |||||||||||||||||||
% of Actual 2016 Operating Expenses | |||||||||||||||||||
Actual 2016 | Actual 2015 | $ Change | % Change | ||||||||||||||||
Real estate taxes | $ | 264,689 | $ | 249,916 | $ | 14,773 | 5.9 | % | 41.7 | % | |||||||||
On-site payroll (1) | 141,996 | 137,731 | 4,265 | 3.1 | % | 22.4 | % | ||||||||||||
Utilities (2) | 88,261 | 91,586 | (3,325 | ) | (3.6 | %) | 13.9 | % | |||||||||||
Repairs and maintenance (3) | 81,600 | 79,366 | 2,234 | 2.8 | % | 12.9 | % | ||||||||||||
Insurance | 17,055 | 16,428 | 627 | 3.8 | % | 2.7 | % | ||||||||||||
Leasing and advertising | 9,928 | 8,341 | 1,587 | 19.0 | % | 1.6 | % | ||||||||||||
Other on-site operating expenses (4) | 30,591 | 30,556 | 35 | 0.1 | % | 4.8 | % | ||||||||||||
Same store operating expenses | $ | 634,120 | $ | 613,924 | $ | 20,196 | 3.3 | % | 100.0 | % | |||||||||
Note: Same store operating expenses no longer include an allocation of property management expenses either in the current or comparable periods. The Company has added guidance on property management expense on page 26 of this release. | |||||||||||||||||||
(1) | On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff. | ||||||||||||||||||
(2) | Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income. | ||||||||||||||||||
(3) | Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair and maintenance costs. | ||||||||||||||||||
(4) | Other on-site operating expenses - Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees. |
4th Quarter 2016 Earnings Release | 15 |
Equity Residential | |||||||||||||
Debt Summary as of December 31, 2016 | |||||||||||||
($ in thousands) | |||||||||||||
Weighted Average Maturities (years) | |||||||||||||
Weighted Average Rates (1) | |||||||||||||
Amounts (1) | % of Total | ||||||||||||
Secured | $ | 4,119,181 | 45.8 | % | 4.34 | % | 6.0 | ||||||
Unsecured | 4,868,077 | 54.2 | % | 4.48 | % | 10.0 | |||||||
Total | $ | 8,987,258 | 100.0 | % | 4.42 | % | 8.2 | ||||||
Fixed Rate Debt: | |||||||||||||
Secured – Conventional | $ | 3,483,389 | 38.7 | % | 4.95 | % | 4.9 | ||||||
Unsecured – Public | 4,397,829 | 49.0 | % | 4.90 | % | 10.8 | |||||||
Fixed Rate Debt | 7,881,218 | 87.7 | % | 4.92 | % | 8.2 | |||||||
Floating Rate Debt: | |||||||||||||
Secured – Conventional | 7,042 | 0.1 | % | 0.56 | % | 16.9 | |||||||
Secured – Tax Exempt | 628,750 | 7.0 | % | 1.06 | % | 11.8 | |||||||
Unsecured – Public (2) | 450,250 | 5.0 | % | 1.28 | % | 2.5 | |||||||
Unsecured – Revolving Credit Facility | — | — | 1.37 | % | 5.0 | ||||||||
Unsecured – Commercial Paper Program (3) | 19,998 | 0.2 | % | 0.90 | % | — | |||||||
Floating Rate Debt | 1,106,040 | 12.3 | % | 1.13 | % | 8.0 | |||||||
Total | $ | 8,987,258 | 100.0 | % | 4.42 | % | 8.2 | ||||||
(1) Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 2016. | |||||||||||||
(2) Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%. | |||||||||||||
(3) As of December 31, 2016, the weighted average maturity on the Company's outstanding commercial paper was 4 days. | |||||||||||||
Note: The Company capitalized interest of approximately $51.5 million and $59.9 million during the years ended December 31, 2016 and 2015, respectively. The Company capitalized interest of approximately $9.8 million and $14.1 million during the quarters ended December 31, 2016 and 2015, respectively. | |||||||||||||
Note: The Company recorded approximately $24.3 million and $8.6 million of net debt discount/deferred derivative settlement amortization as additional interest expense during the years ended December 31, 2016 and 2015, respectively. The Company recorded approximately $5.4 million and $2.8 million of net debt discount/deferred derivative settlement amortization as additional interest expense during the quarters ended December 31, 2016 and 2015, respectively. |
Debt Maturity Schedule as of December 31, 2016 | |||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||
Weighted Average Rates on Fixed Rate Debt (1) | Weighted Average Rates on Total Debt (1) | ||||||||||||||||||||
Fixed Rate (1) | Floating Rate (1) | ||||||||||||||||||||
Year | Total | % of Total | |||||||||||||||||||
2017 | $ | 605,158 | $ | 23,300 | (2) | $ | 628,458 | 6.9 | % | 6.19 | % | 5.99 | % | ||||||||
2018 | 83,634 | 100,735 | 184,369 | 2.0 | % | 5.57 | % | 3.24 | % | ||||||||||||
2019 | 807,680 | 478,357 | 1,286,037 | 14.1 | % | 5.47 | % | 3.96 | % | ||||||||||||
2020 | 1,679,590 | 10,500 | 1,690,090 | 18.6 | % | 5.49 | % | 5.46 | % | ||||||||||||
2021 | 928,557 | 12,600 | 941,157 | 10.3 | % | 4.64 | % | 4.59 | % | ||||||||||||
2022 | 266,447 | 13,800 | 280,247 | 3.1 | % | 3.27 | % | 3.14 | % | ||||||||||||
2023 | 1,327,965 | 15,300 | 1,343,265 | 14.8 | % | 3.74 | % | 3.71 | % | ||||||||||||
2024 | 2,498 | 17,100 | 19,598 | 0.2 | % | 4.97 | % | 1.23 | % | ||||||||||||
2025 | 452,625 | 19,600 | 472,225 | 5.2 | % | 3.38 | % | 3.27 | % | ||||||||||||
2026 | 594,783 | 21,700 | 616,483 | 6.8 | % | 3.59 | % | 3.49 | % | ||||||||||||
2027+ | 1,177,033 | 457,665 | 1,634,698 | 18.0 | % | 4.54 | % | 3.46 | % | ||||||||||||
Subtotal | 7,925,970 | 1,170,657 | 9,096,627 | 100.0 | % | 4.72 | % | 4.20 | % | ||||||||||||
Deferred Financing Costs | (33,605 | ) | (9,012 | ) | (42,617 | ) | N/A | N/A | N/A | ||||||||||||
Premium/(Discount) | (11,147 | ) | (55,605 | ) | (66,752 | ) | N/A | N/A | N/A | ||||||||||||
Total | $ | 7,881,218 | $ | 1,106,040 | $ | 8,987,258 | 100.0 | % | 4.72 | % | 4.20 | % | |||||||||
(1) Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2016. | |||||||||||||||||||||
(2) Includes $20.0 million in principal outstanding on the Company's unsecured commercial paper program. The Company may borrow up to a maximum of $500.0 million on the program subject to market conditions. |
4th Quarter 2016 Earnings Release | 16 |
Equity Residential | ||||||||
Unsecured Debt Summary as of December 31, 2016 | ||||||||
($ in thousands) | ||||||||
Interest Rate | Due Date | Amount | ||||||
Fixed Rate Notes: | ||||||||
5.750% | 06/15/17 | $ | 394,077 | |||||
7.125% | 10/15/17 | 103,898 | ||||||
4.750% | 07/15/20 | 600,000 | ||||||
4.625% | 12/15/21 | 750,000 | ||||||
3.000% | 04/15/23 | 500,000 | ||||||
3.375% | 06/01/25 | 450,000 | ||||||
7.570% | 08/15/26 | 92,025 | ||||||
2.850% | 11/01/26 | 500,000 | ||||||
4.500% | 07/01/44 | 750,000 | ||||||
4.500% | 06/01/45 | 300,000 | ||||||
Deferred Financing Costs and Unamortized (Discount) | (42,171 | ) | ||||||
4,397,829 | ||||||||
Floating Rate Notes: | ||||||||
(1) | 07/01/19 | 450,000 | ||||||
Fair Value Derivative Adjustments | (1) | 07/01/19 | 1,857 | |||||
Deferred Financing Costs and Unamortized (Discount) | (1,607 | ) | ||||||
450,250 | ||||||||
Line of Credit and Commercial Paper: | ||||||||
Revolving Credit Facility (2) (3) | LIBOR+0.825% | 01/10/22 | — | |||||
Commercial Paper Program (2) (4) | 20,000 | |||||||
Unamortized Commercial Paper (Discount) | (2 | ) | ||||||
19,998 | ||||||||
Total Unsecured Debt | $ | 4,868,077 |
(1 | ) | Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%. | ||||||||||
(2 | ) | Facility/program is private. All other unsecured debt is public. | ||||||||||
(3 | ) | On November 3, 2016, the Company replaced its existing $2.5 billion facility with a new $2.0 billion unsecured revolving credit facility maturing January 10, 2022. The interest rate on advances under the new credit facility will generally be LIBOR plus a spread (currently 0.825%) and an annual facility fee (currently 12.5 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long term debt. As of December 31, 2016, there was approximately $1.96 billion available on the Company's unsecured revolving credit facility (net of $20.6 million which was restricted/dedicated to support letters of credit and $20.0 million outstanding on the commercial paper program). | ||||||||||
(4 | ) | The Company may borrow up to a maximum of $500.0 million on the commercial paper program subject to market conditions. The notes bear interest at various floating rates with a weighted average of 0.90% for the year ended December 31, 2016 and a weighted average maturity of 4 days as of December 31, 2016. |
4th Quarter 2016 Earnings Release | 17 |
Equity Residential | |||||
Selected Unsecured Public Debt Covenants | |||||
December 31, 2016 | September 30, 2016 | ||||
Total Debt to Adjusted Total Assets (not to exceed 60%) | 35.4% | 32.8% | |||
Secured Debt to Adjusted Total Assets (not to exceed 40%) | 16.2% | 16.0% | |||
Consolidated Income Available for Debt Service to | |||||
Maximum Annual Service Charges | |||||
(must be at least 1.5 to 1) | 3.73 | 3.88 | |||
Total Unsecured Assets to Unsecured Debt | |||||
(must be at least 150%) | 390.8% | 447.4% | |||
Note: | These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt, which represent the Company's most restrictive covenants. Equity Residential is the general partner of ERPOP. | ||||
Selected Credit Ratios | |||||
December 31, 2016 | September 30, 2016 | ||||
Total debt to Normalized EBITDA | 5.74x | 5.20x | |||
Net debt to Normalized EBITDA | 5.65x | 4.85x | |||
Unencumbered NOI as a % of total NOI | 71.1% | 70.9% | |||
Note: | See page 24 for the Normalized EBITDA reconciliations. |
4th Quarter 2016 Earnings Release | 18 |
Equity Residential | |||||||||||||||||
Capital Structure as of December 31, 2016 | |||||||||||||||||
(Amounts in thousands except for share/unit and per share amounts) | |||||||||||||||||
Secured Debt | $ | 4,119,181 | 45.8 | % | |||||||||||||
Unsecured Debt | 4,868,077 | 54.2 | % | ||||||||||||||
Total Debt | 8,987,258 | 100.0 | % | 26.8 | % | ||||||||||||
Common Shares (includes Restricted Shares) | 365,870,924 | 96.2 | % | ||||||||||||||
Units (includes OP Units and Restricted Units) | 14,626,075 | 3.8 | % | ||||||||||||||
Total Shares and Units | 380,496,999 | 100.0 | % | ||||||||||||||
Common Share Price at December 31, 2016 | $ | 64.36 | |||||||||||||||
24,488,787 | 99.8 | % | |||||||||||||||
Perpetual Preferred Equity (see below) | 37,280 | 0.2 | % | ||||||||||||||
Total Equity | 24,526,067 | 100.0 | % | 73.2 | % | ||||||||||||
Total Market Capitalization | $ | 33,513,325 | 100.0 | % |
Perpetual Preferred Equity as of December 31, 2016 | |||||||||||||||||
(Amounts in thousands except for share and per share amounts) | |||||||||||||||||
Annual Dividend Per Share | Annual Dividend Amount | ||||||||||||||||
Redemption Date | Outstanding Shares | Liquidation Value | |||||||||||||||
Series | |||||||||||||||||
Preferred Shares: | |||||||||||||||||
8.29% Series K | 12/10/26 | 745,600 | $ | 37,280 | $ | 4.145 | $ | 3,091 | |||||||||
Total Perpetual Preferred Equity | 745,600 | $ | 37,280 | $ | 3,091 | ||||||||||||
4th Quarter 2016 Earnings Release | 19 |
Equity Residential | |||||||||||||
Common Share and Unit | |||||||||||||
Weighted Average Amounts Outstanding | |||||||||||||
2016 | 2015 | Q4 2016 | Q4 2015 | ||||||||||
Weighted Average Amounts Outstanding for Net Income Purposes: | |||||||||||||
Common Shares - basic | 365,002,012 | 363,497,518 | 365,255,902 | 363,827,809 | |||||||||
Shares issuable from assumed conversion/vesting of: | |||||||||||||
- OP Units | 13,827,099 | 13,575,927 | 13,824,671 | 13,552,095 | |||||||||
- long-term compensation shares/units | 3,163,201 | 3,546,058 | 2,779,631 | 3,839,809 | |||||||||
Total Common Shares and Units - diluted | 381,992,312 | 380,619,503 | 381,860,204 | 381,219,713 | |||||||||
Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes: | |||||||||||||
Common Shares - basic | 365,002,012 | 363,497,518 | 365,255,902 | 363,827,809 | |||||||||
OP Units - basic | 13,827,099 | 13,575,927 | 13,824,671 | 13,552,095 | |||||||||
Total Common Shares and OP Units - basic | 378,829,111 | 377,073,445 | 379,080,573 | 377,379,904 | |||||||||
Shares issuable from assumed conversion/vesting of: | |||||||||||||
- long-term compensation shares/units | 3,163,201 | 3,546,058 | 2,779,631 | 3,839,809 | |||||||||
Total Common Shares and Units - diluted | 381,992,312 | 380,619,503 | 381,860,204 | 381,219,713 | |||||||||
Period Ending Amounts Outstanding: | |||||||||||||
Common Shares (includes Restricted Shares) | 365,870,924 | 364,755,444 | |||||||||||
Units (includes OP Units and Restricted Units) | 14,626,075 | 14,427,164 | |||||||||||
Total Shares and Units | 380,496,999 | 379,182,608 | |||||||||||
4th Quarter 2016 Earnings Release | 20 |
Equity Residential | ||||||||
Partially Owned Entities as of December 31, 2016 | ||||||||
(Amounts in thousands except for property and apartment unit amounts) | ||||||||
Consolidated | Unconsolidated | |||||||
Total properties | 17 | 2 | ||||||
Total apartment units | 3,215 | 945 | ||||||
Operating information for the year ended 12/31/16 (at 100%): | ||||||||
Operating revenue | $ | 90,634 | $ | 31,829 | ||||
Operating expenses | 21,647 | 11,111 | ||||||
Net operating income | 68,987 | 20,718 | ||||||
Property management | 3,190 | 851 | ||||||
General and administrative/other | 328 | 83 | ||||||
Depreciation | 20,764 | 16,011 | ||||||
Operating income | 44,705 | 3,773 | ||||||
Interest and other income | 53 | — | ||||||
Other expenses | (8 | ) | — | |||||
Interest: | ||||||||
Expense incurred, net | (13,857 | ) | (8,289 | ) | ||||
Amortization of deferred financing costs | (345 | ) | (1 | ) | ||||
Income (loss) before income and other taxes and (loss) | ||||||||
from investments in unconsolidated entities | 30,548 | (4,517 | ) | |||||
Income and other tax (expense) benefit | (73 | ) | (13 | ) | ||||
(Loss) from investments in unconsolidated entities | (1,439 | ) | — | |||||
Net income (loss) | $ | 29,036 | $ | (4,530 | ) | |||
Debt - Secured (1): | ||||||||
EQR Ownership (2) | $ | 236,357 | $ | 29,085 | ||||
Noncontrolling Ownership | 64,753 | 116,339 | ||||||
Total (at 100%) | $ | 301,110 | $ | 145,424 |
(1) | All debt is non-recourse to the Company. | ||||||||
(2) | Represents the Company's current equity ownership interest. |
4th Quarter 2016 Earnings Release | 21 |
Equity Residential | |||||||||||||||||||||||||||||||||||||
Development and Lease-Up Projects as of December 31, 2016 | |||||||||||||||||||||||||||||||||||||
(Amounts in thousands except for project and apartment unit amounts) | |||||||||||||||||||||||||||||||||||||
Projects | Location | No. of Apartment Units | Total Capital Cost | Total Book Value to Date | Total Book Value Not Placed in Service | Total Debt | Percentage Completed | Percentage Leased | Percentage Occupied | Estimated Completion Date | Estimated Stabilization Date | ||||||||||||||||||||||||||
Projects Under Development: | |||||||||||||||||||||||||||||||||||||
The Alton (formerly Millikan) | Irvine, CA | 344 | $ | 102,331 | $ | 101,907 | $ | 39,993 | $ | — | 96 | % | 23 | % | 17 | % | Q1 2017 | Q1 2018 | |||||||||||||||||||
455 Eye Street | Washington, DC | 174 | 73,157 | 58,558 | 58,558 | — | 72 | % | — | — | Q3 2017 | Q2 2018 | |||||||||||||||||||||||||
855 Brannan (formerly 801 Brannan) | San Francisco, CA | 449 | 304,035 | 208,268 | 208,268 | — | 66 | % | — | — | Q3 2017 | Q1 2019 | |||||||||||||||||||||||||
Helios (formerly 2nd & Pine) | Seattle, WA | 398 | 215,787 | 180,505 | 180,505 | — | 81 | % | — | — | Q3 2017 | Q2 2019 | |||||||||||||||||||||||||
Cascade | Seattle, WA | 477 | 176,378 | 123,462 | 123,462 | — | 68 | % | — | — | Q3 2017 | Q2 2019 | |||||||||||||||||||||||||
100 K Street | Washington, DC | 222 | 88,023 | 26,382 | 26,382 | — | 9 | % | — | — | Q4 2018 | Q4 2019 | |||||||||||||||||||||||||
Projects Under Development | 2,064 | 959,711 | 699,082 | 637,168 | — | ||||||||||||||||||||||||||||||||
Completed Not Stabilized (1): | |||||||||||||||||||||||||||||||||||||
Potrero 1010 | San Francisco, CA | 453 | 224,474 | 219,668 | — | — | 97 | % | 96 | % | Completed | Q1 2017 | |||||||||||||||||||||||||
340 Fremont (formerly Rincon Hill) | San Francisco, CA | 348 | 292,054 | 286,996 | — | — | 80 | % | 73 | % | Completed | Q2 2017 | |||||||||||||||||||||||||
One Henry Adams | San Francisco, CA | 241 | 172,337 | 162,647 | — | — | 26 | % | 22 | % | Completed | Q4 2017 | |||||||||||||||||||||||||
Altitude (formerly Village at Howard Hughes) | Los Angeles, CA | 545 | 193,231 | 191,702 | — | — | 54 | % | 52 | % | Completed | Q1 2018 | |||||||||||||||||||||||||
Projects Completed Not Stabilized | 1,587 | 882,096 | 861,013 | — | — | ||||||||||||||||||||||||||||||||
Completed and Stabilized During the Quarter: | |||||||||||||||||||||||||||||||||||||
Vista 99 (formerly Tasman) | San Jose, CA | 554 | 204,223 | 202,884 | — | — | 94 | % | 93 | % | Completed | Stabilized | |||||||||||||||||||||||||
Projects Completed and Stabilized During the Quarter | 554 | 204,223 | 202,884 | — | — | ||||||||||||||||||||||||||||||||
Total Development Projects | 4,205 | $ | 2,046,030 | $ | 1,762,979 | $ | 637,168 | $ | — | ||||||||||||||||||||||||||||
Land Held for Development | N/A | N/A | $ | 118,816 | $ | 118,816 | $ | — | |||||||||||||||||||||||||||||
Total Capital Cost | Q4 2016 NOI | ||||||||||||||||||||||||||||||||||||
NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS | |||||||||||||||||||||||||||||||||||||
Projects Under Development | $ | 959,711 | $ | (94 | ) | ||||||||||||||||||||||||||||||||
Completed Not Stabilized | 882,096 | 4,653 | |||||||||||||||||||||||||||||||||||
Completed and Stabilized During the Quarter | 204,223 | 3,757 | |||||||||||||||||||||||||||||||||||
Total Development NOI Contribution | $ | 2,046,030 | $ | 8,316 | |||||||||||||||||||||||||||||||||
Note: All development projects listed are wholly owned by the Company. | |||||||||||||||||||||||||||||||||||||
(1) | Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing. |
4th Quarter 2016 Earnings Release | 22 |
Equity Residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Amounts in thousands except for apartment unit and per apartment unit amounts) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repairs and Maintenance Expenses | Capital Expenditures to Real Estate | Total Expenditures | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Apartment Units (1) | Expense (2) | Avg. Per Apartment Unit | Payroll (3) | Avg. Per Apartment Unit | Total | Avg. Per Apartment Unit | Replacements (4) | Avg. Per Apartment Unit | Building Improvements (5) | Avg. Per Apartment Unit | Total | Avg. Per Apartment Unit | Grand Total | Avg. Per Apartment Unit | |||||||||||||||||||||||||||||||||||||||||||||
Same Store Properties | 69,879 | $ | 81,600 | $ | 1,168 | $ | 65,294 | $ | 934 | $ | 146,894 | $ | 2,102 | $ | 75,298 | $ | 1,077 | $ | 80,890 | $ | 1,158 | $ | 156,188 | $ | 2,235 | (8) | $ | 303,082 | $ | 4,337 | |||||||||||||||||||||||||||||
Non-Same Store Properties (6) | 6,634 | 4,920 | 932 | 3,667 | 695 | 8,587 | 1,627 | 4,494 | 851 | 7,685 | 1,456 | 12,179 | 2,307 | 20,766 | 3,934 | ||||||||||||||||||||||||||||||||||||||||||||
Other (7) | — | 4,875 | 5,535 | 10,410 | 2,744 | 1,066 | 3,810 | 14,220 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 76,513 | $ | 91,395 | $ | 74,496 | $ | 165,891 | $ | 82,536 | $ | 89,641 | $ | 172,177 | $ | 338,068 | ||||||||||||||||||||||||||||||||||||||||||||
(1) | Total Apartment Units - Excludes 945 unconsolidated apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company's results. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) | Repairs and Maintenance Expenses - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair and maintenance costs. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) | Maintenance Payroll - Includes payroll and related expenses for maintenance staff. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(4) | Replacements - Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $47.0 million spent during 2016 on apartment unit renovations/rehabs (primarily kitchens and baths) on approximately 4,200 same store apartment units (equating to approximately $11,200 per apartment unit rehabbed) designed to reposition these units for higher rental levels in their respective markets. During 2017, the Company expects to spend approximately $50.0 million for all unit renovation/rehab costs (primarily on same store properties) at a weighted average cost of $11,000 per apartment unit rehabbed. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(5) | Building Improvements - Includes roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(6) | Per apartment unit amounts are based on a weighted average of 5,279 apartment units. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(7) | Other - Primarily includes expenditures for properties sold and properties under development. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(8) | The Company estimates that during 2017 it will spend approximately $2,600 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,900 per apartment unit excluding apartment unit renovation/rehab costs. |
4th Quarter 2016 Earnings Release | 23 |
Equity Residential | |||||||||||||||||||||||||||||||
Normalized EBITDA Reconciliations | |||||||||||||||||||||||||||||||
(Amounts in thousands) | |||||||||||||||||||||||||||||||
Normalized EBITDA Reconciliations for Page 18 | |||||||||||||||||||||||||||||||
Trailing Twelve Months | 2016 | 2015 | |||||||||||||||||||||||||||||
December 31, 2016 | September 30, 2016 | Q4 | Q3 | Q2 | Q1 | Q4 | |||||||||||||||||||||||||
Net income | $ | 4,480,104 | $ | 4,391,443 | $ | 302,381 | $ | 217,492 | $ | 228,400 | $ | 3,731,831 | $ | 213,720 | |||||||||||||||||
Interest expense incurred, net | 482,246 | 496,857 | 95,930 | 86,352 | 86,472 | 213,492 | 110,541 | ||||||||||||||||||||||||
Amortization of deferred financing costs | 12,633 | 13,067 | 2,633 | 2,261 | 2,345 | 5,394 | 3,067 | ||||||||||||||||||||||||
Depreciation | 705,649 | 709,275 | 177,407 | 179,230 | 176,127 | 172,885 | 181,033 | ||||||||||||||||||||||||
Income and other tax expense (benefit) (includes discontinued operations) | 1,625 | 1,419 | 425 | 426 | 416 | 358 | 219 | ||||||||||||||||||||||||
EBITDA | 5,682,257 | 5,612,061 | 578,776 | 485,761 | 493,760 | 4,123,960 | 508,580 | ||||||||||||||||||||||||
Property acquisition costs (other expenses) | 1,466 | 2,256 | 14 | 41 | 76 | 1,335 | 804 | ||||||||||||||||||||||||
Write-off of pursuit costs (other expenses) | 4,092 | 4,265 | 713 | 816 | 1,115 | 1,448 | 886 | ||||||||||||||||||||||||
(Income) loss from investments in unconsolidated entities | (4,801 | ) | (6,483 | ) | 1,045 | (7,750 | ) | 800 | 1,104 | (637 | ) | ||||||||||||||||||||
Net (gain) loss on sales of land parcels | (15,731 | ) | (15,759 | ) | 28 | (4,037 | ) | — | (11,722 | ) | — | ||||||||||||||||||||
(Gain) loss on sale of investment securities and other investments (interest and other income) | (58,409 | ) | (58,555 | ) | 7 | (3,260 | ) | (54,600 | ) | (556 | ) | (139 | ) | ||||||||||||||||||
Executive compensation program duplicative costs and retirement benefit obligations | 1,436 | 3,413 | 359 | 359 | 359 | 359 | 2,336 | ||||||||||||||||||||||||
Insurance/litigation settlement or reserve income (interest and other income) | (3,228 | ) | (3,098 | ) | (337 | ) | (1,517 | ) | (1,321 | ) | (53 | ) | (207 | ) | |||||||||||||||||
Insurance/litigation/environmental settlement or reserve expense (other expenses) | 4,024 | 7,169 | (5,074 | ) | 9,339 | 3 | (244 | ) | (1,929 | ) | |||||||||||||||||||||
Other (interest and other income) | (63 | ) | (63 | ) | — | (63 | ) | — | — | — | |||||||||||||||||||||
Net (gain) on sales of discontinued operations | (43 | ) | (43 | ) | — | (28 | ) | — | (15 | ) | — | ||||||||||||||||||||
Net (gain) on sales of real estate properties | (4,044,055 | ) | (3,910,313 | ) | (173,184 | ) | (90,036 | ) | (57,356 | ) | (3,723,479 | ) | (39,442 | ) | |||||||||||||||||
Normalized EBITDA | $ | 1,566,945 | $ | 1,634,850 | $ | 402,347 | $ | 389,625 | $ | 382,836 | $ | 392,137 | $ | 470,252 | |||||||||||||||||
Balance Sheet Items: | December 31, 2016 | September 30, 2016 | |||||||||||||||||||||||||||||
Total debt | $ | 8,987,258 | $ | 8,498,787 | |||||||||||||||||||||||||||
Cash and cash equivalents | (77,207 | ) | (517,586 | ) | |||||||||||||||||||||||||||
Mortgage principal reserves/sinking funds | (58,652 | ) | (56,404 | ) | |||||||||||||||||||||||||||
Net debt | $ | 8,851,399 | $ | 7,924,797 | |||||||||||||||||||||||||||
4th Quarter 2016 Earnings Release | 24 |
Equity Residential | ||||||||||||||||||||||||
Adjustments from FFO to Normalized FFO | ||||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||
Year Ended December 31, | Quarter Ended December 31, | |||||||||||||||||||||||
2016 | 2015 | Variance | 2016 | 2015 | Variance | |||||||||||||||||||
Impairment | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Asset impairment and valuation allowances | — | — | — | — | — | — | ||||||||||||||||||
Archstone indirect costs ((income) loss from investments in unconsolidated entities) (A) | 920 | (15,922 | ) | 16,842 | 264 | 551 | (287 | ) | ||||||||||||||||
Property acquisition costs (other expenses) | 1,466 | 1,008 | 458 | 14 | 804 | (790 | ) | |||||||||||||||||
Write-off of pursuit costs (other expenses) | 4,092 | 3,208 | 884 | 713 | 886 | (173 | ) | |||||||||||||||||
Property acquisition costs and write-off of pursuit costs | 6,478 | (11,706 | ) | 18,184 | 991 | 2,241 | (1,250 | ) | ||||||||||||||||
Prepayment premiums/penalties (interest expense) | 114,666 | — | 114,666 | 2,247 | — | 2,247 | ||||||||||||||||||
Write-off of unamortized deferred financing costs (interest expense) | 3,854 | 594 | 3,260 | 491 | 506 | (15 | ) | |||||||||||||||||
Write-off of unamortized (premiums)/discounts/OCI (interest expense) | 4,494 | (1,379 | ) | 5,873 | — | — | — | |||||||||||||||||
Noncontrolling Interests share of debt extinguishment costs | (1,394 | ) | — | (1,394 | ) | (1,394 | ) | — | (1,394 | ) | ||||||||||||||
Loss due to ineffectiveness of forward starting swaps (interest expense) | 74 | 3,003 | (2,929 | ) | 74 | — | 74 | |||||||||||||||||
Premium on redemption of Preferred Shares | — | 3,486 | (3,486 | ) | — | 697 | (697 | ) | ||||||||||||||||
Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts | 121,694 | 5,704 | 115,990 | 1,418 | 1,203 | 215 | ||||||||||||||||||
Net (gain) loss on sales of land parcels | (15,731 | ) | 1 | (15,732 | ) | 28 | — | 28 | ||||||||||||||||
Net (gain) loss on sales of unconsolidated entities – non-operating assets | (81 | ) | (2,358 | ) | 2,277 | — | (2,016 | ) | 2,016 | |||||||||||||||
(Gain) loss on sale of investment securities and other investments (interest and other income) (B) | (58,409 | ) | (526 | ) | (57,883 | ) | 7 | (139 | ) | 146 | ||||||||||||||
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit) | (74,221 | ) | (2,883 | ) | (71,338 | ) | 35 | (2,155 | ) | 2,190 | ||||||||||||||
Executive compensation program duplicative costs and retirement benefit obligations (C) | 1,436 | 11,976 | (10,540 | ) | 359 | 2,336 | (1,977 | ) | ||||||||||||||||
Insurance/litigation settlement or reserve income (interest and other income) | (3,228 | ) | (5,977 | ) | 2,749 | (337 | ) | (207 | ) | (130 | ) | |||||||||||||
Insurance/litigation/environmental settlement or reserve expense (other expenses) (D) | 4,024 | (2,796 | ) | 6,820 | (5,074 | ) | (1,929 | ) | (3,145 | ) | ||||||||||||||
Other (interest and other income) | (63 | ) | (302 | ) | 239 | — | — | — | ||||||||||||||||
Other miscellaneous items | 2,169 | 2,901 | (732 | ) | (5,052 | ) | 200 | (5,252 | ) | |||||||||||||||
Adjustments from FFO to Normalized FFO | $ | 56,120 | $ | (5,984 | ) | $ | 62,104 | $ | (2,608 | ) | $ | 1,489 | $ | (4,097 | ) | |||||||||
(A) Archstone indirect costs primarily includes the Company's 60% share of winddown costs for such items as office leases, litigation and German operations/sales that were incurred indirectly through the Company's interest in various Archstone-related unconsolidated joint ventures. During the year ended December 31, 2015, the amount also includes approximately $18.6 million received related to the favorable settlement of a lawsuit. | ||||||||||||||||||||||||
(B) For the year ended December 31, 2016, includes a $52.4 million gain related to the sale of the Company's entire interest in the management contracts and related rights associated with the military housing ventures at Joint Base Lewis McChord. | ||||||||||||||||||||||||
(C) Represents the accounting cost associated with the overlap of the Company's current and former performance based executive compensation programs. The Company is required to expense in 2016 and 2015 a portion of both the previous program's time based equity grants for service in 2014 or 2015 and the performance based grants issued under the current program, creating a duplicative charge. For the year and quarter ended December 31, 2016, the entire amounts have been recorded to general and administrative expense. For the year ended December 31, 2015, $1.3 million and $8.0 million has been recorded to property management expense and general and administrative expense, respectively. For the quarter ended December 31, 2015, $0.3 million and $2.0 million has been recorded to property management expense and general and administrative expense, respectively. Also includes $2.6 million recorded to general and administrative expense during the year ended December 31, 2015 as a result of certain adjustments for retirement benefit obligations. | ||||||||||||||||||||||||
(D) For the year ended December 31, 2016, includes a $3.1 million litigation reserve and a $4.7 million environmental reserve, partially offset by a $3.5 million reversal of certain Archstone non-cash purchase accounting reserves. | ||||||||||||||||||||||||
Note: See pages 27 through 30 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share. |
4th Quarter 2016 Earnings Release | 25 |
Equity Residential | ||||||
Normalized FFO Guidance and Assumptions | ||||||
The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties and the write-off of pursuit costs, are not included in the estimates provided on this page. See pages 27 through 30 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share. | ||||||
2017 Normalized FFO Guidance (per share diluted) | ||||||
Q1 2017 | 2017 | |||||
Expected Normalized FFO Per Share | $0.71 to $0.75 | $3.05 to $3.15 | ||||
2017 Same Store Assumptions (see Note below) | ||||||
Physical occupancy | 95.7% | |||||
Revenue change | 1.0% to 2.25% | |||||
Expense change | 3.0% to 4.0% | |||||
NOI change | 0.0% to 2.0% | |||||
Note: Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO per share/Normalized FFO per share. | ||||||
2017 Transaction Assumptions | ||||||
Consolidated rental acquisitions | $500.0 million | |||||
Consolidated rental dispositions | $500.0 million | |||||
Spread between Acquisition Cap Rate and Disposition Yield | 75 basis points | |||||
2017 Debt Assumptions | ||||||
Weighted average debt outstanding | $8.8 billion to $9.2 billion | |||||
Weighted average interest rate (reduced for capitalized interest) | 4.12% | |||||
Interest expense, net (on a Normalized FFO basis) | $362.6 million to $379.0 million | |||||
Capitalized interest | $23.0 million to $28.0 million | |||||
2017 Other Guidance Assumptions | ||||||
Property management expense | $83.0 million to $85.0 million | |||||
General and administrative expense (see Note below) | $50.0 million to $52.0 million | |||||
Interest and other income | $0.5 million | |||||
Income and other tax expense | $0.5 million to $1.5 million | |||||
Debt offerings | $300.0 million to $500.0 million | |||||
Equity ATM share offerings | No amounts budgeted | |||||
Preferred share offerings | No amounts budgeted | |||||
Weighted average Common Shares and Units - Diluted | 383.2 million | |||||
Note: Normalized FFO guidance excludes a duplicative charge of approximately $0.4 million, which will be recorded to general and administrative expense, related to the overlap of accounting costs for the Company's current and former executive compensation programs. |
4th Quarter 2016 Earnings Release | 26 |
Equity Residential | |||||||||||||||
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms | |||||||||||||||
(Amounts in thousands except per share and per apartment unit data) | |||||||||||||||
(All per share data is diluted) | |||||||||||||||
This Earnings Release and Supplemental Information includes certain non-GAAP financial measures and other terms that management believes are helpful in understanding our business. The definitions and calculations of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial measures should not be considered as an alternative to net earnings or any other GAAP measurement of performance or as an alternative to cash flows from specific operating, investing or financing activities. Furthermore, these non-GAAP financial measures are not intended to be a measure of cash flow or liquidity. | |||||||||||||||
Acquisition Capitalization Rate or Cap Rate – NOI that the Company anticipates receiving in the next 12 months (or the year two or three stabilized NOI for properties that are in lease-up at acquisition) less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross purchase price of the asset. The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property. | |||||||||||||||
Average Rental Rate – Total residential rental revenues divided by the weighted average occupied apartment units for the reporting period presented. | |||||||||||||||
Debt Covenant Compliance – Our unsecured debt includes certain financial and operating covenants including, among other things, maintenance of certain financial ratios. These provisions are contained in the indentures applicable to each notes payable or the credit agreement for our line of credit. The Debt Covenant Compliance ratios that are provided show the Company's compliance with certain covenants governing our public unsecured debt. These covenants generally reflect our most restrictive financial covenants. The Company was in compliance with its unsecured debt covenants for all years presented (the ratios should not be used for any other purpose, including without limitation, to evaluate the Company's financial condition or results of operations, nor do they indicate the Company's covenant compliance as of any other date or for any other period). | |||||||||||||||
Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sale price of the asset. The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property. | |||||||||||||||
Earnings Per Share ("EPS") – Net income per share calculated in accordance with GAAP. Expected EPS is calculated on a basis consistent with actual EPS. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual EPS could differ materially from expected EPS. | |||||||||||||||
Economic Gain – Economic Gain is calculated as the net gain on sales of real estate properties in accordance with GAAP, excluding accumulated depreciation. The Company generally considers Economic Gain to be an appropriate supplemental measure to net gain on sales of real estate properties in accordance with GAAP because it is one indication of the gross value created by the Company's acquisition, development, rehab, management and ultimate sale of a property and because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold property. The following table presents a reconciliation of net gain on sales of real estate properties in accordance with GAAP to Economic Gain: | |||||||||||||||
Year Ended December 31, 2016 | |||||||||||||||
Net Gain on Sales of Real Estate Properties | Accumulated Depreciation Gain | Economic Gain | |||||||||||||
Starwood sale | $ | 3,161,097 | $ | (1,179,210 | ) | $ | 1,981,887 | ||||||||
Woodland Park sale | 289,329 | (30,442 | ) | 258,887 | |||||||||||
River Tower sale | 184,389 | (32,076 | ) | 152,313 | |||||||||||
Other sales | 409,240 | (185,222 | ) | 224,018 | |||||||||||
Totals | $ | 4,044,055 | $ | (1,426,950 | ) | $ | 2,617,105 |
4th Quarter 2016 Earnings Release | 27 |
Equity Residential | |||||||||
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued | |||||||||
(Amounts in thousands except per share and per apartment unit data) | |||||||||
(All per share data is diluted) | |||||||||
Funds From Operations and Normalized Funds From Operations: | |||||||||
Funds From Operations (“FFO”) – The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO (April 2002 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains (or losses) from sales and impairment write-downs of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Expected FFO per share is calculated on a basis consistent with actual FFO per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected EPS. | |||||||||
The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies. | |||||||||
Normalized Funds From Operations ("Normalized FFO") – Normalized FFO begins with FFO and excludes: | |||||||||
• the impact of any expenses relating to non-operating asset impairment and valuation allowances; | |||||||||
• property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs; | |||||||||
• gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts; | |||||||||
• gains and losses on the sales of non-operating assets, including gains and losses from land parcel sales, net of the effect of income tax benefits or expenses; and | |||||||||
• other miscellaneous items. | |||||||||
Expected Normalized FFO per share is calculated on a basis consistent with actual Normalized FFO per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected EPS. | |||||||||
The Company believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual operating results. | |||||||||
FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company's calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies. | |||||||||
FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with GAAP. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the "Noncontrolling Interests – Operating Partnership". Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis. |
4th Quarter 2016 Earnings Release | 28 |
Equity Residential | |||||||||||||||||||||
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued | |||||||||||||||||||||
(Amounts in thousands except per share and per apartment unit data) | |||||||||||||||||||||
(All per share data is diluted) | |||||||||||||||||||||
The following table presents reconciliations of EPS to FFO per share and Normalized FFO per share for pages 7 and 26 (the expected guidance/projections provided below are based on current expectations and are forward-looking): | |||||||||||||||||||||
Actual 2016 Per Share | Actual 2015 Per Share | Actual Q4 2016 Per Share | Actual Q4 2015 Per Share | Expected Q1 2017 Per Share | Expected 2017 Per Share | ||||||||||||||||
EPS - Diluted | $ | 11.68 | $ | 2.36 | $ | 0.75 | $ | 0.55 | $0.32 to $0.36 | $1.92 to $2.02 | |||||||||||
Add: Depreciation expense | 1.83 | 2.00 | 0.46 | 0.47 | 0.46 | 1.93 | |||||||||||||||
Less: Net gain on sales | (10.57 | ) | (0.88 | ) | (0.41 | ) | (0.10 | ) | (0.10) | (0.84) | |||||||||||
FFO per share - Diluted | 2.94 | 3.48 | 0.80 | 0.92 | 0.68 to 0.72 | 3.01 to 3.11 | |||||||||||||||
Asset impairment and valuation allowances | — | — | — | — | — | — | |||||||||||||||
Property acquisition costs and write-off of pursuit costs | 0.02 | (0.03 | ) | — | 0.01 | — | 0.01 | ||||||||||||||
Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts | 0.31 | 0.01 | — | — | 0.03 | 0.03 | |||||||||||||||
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit) | (0.19 | ) | (0.01 | ) | — | — | — | — | |||||||||||||
Other miscellaneous items | 0.01 | 0.01 | (0.01 | ) | — | — | — | ||||||||||||||
Normalized FFO per share - Diluted | $ | 3.09 | $ | 3.46 | $ | 0.79 | $ | 0.93 | $0.71 to $0.75 | $3.05 to $3.15 |
Lease-Up NOI – Represents NOI for development properties (i) in various stages of lease-up and (ii) where lease-up has been completed but the properties were not stabilized (defined as having achieved 90% occupancy for three consecutive months) for all of the current and comparable periods presented. | ||||||||||||||||||
Net Operating Income (“NOI”) – NOI is the Company’s primary financial measure for evaluating each of its apartment properties. NOI is defined as rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company's apartment properties. NOI does not include an allocation of property management expenses. | ||||||||||||||||||
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store results (see page 11): | ||||||||||||||||||
Year Ended December 31, | Quarter Ended December 31, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Operating income | $ | 856,086 | $ | 1,009,238 | $ | 224,070 | $ | 287,058 | ||||||||||
Adjustments: | ||||||||||||||||||
Fee and asset management revenue | (3,567 | ) | (8,387 | ) | (216 | ) | (1,974 | ) | ||||||||||
Property management | 82,015 | 86,206 | 18,012 | 21,555 | ||||||||||||||
General and administrative | 57,840 | 64,664 | 10,432 | 14,046 | ||||||||||||||
Depreciation | 705,649 | 765,895 | 177,407 | 181,033 | ||||||||||||||
Total NOI | $ | 1,698,023 | $ | 1,917,616 | $ | 429,705 | $ | 501,718 | ||||||||||
Rental income: | ||||||||||||||||||
Same store | $ | 2,177,304 | $ | 2,099,166 | $ | 558,608 | $ | 542,833 | ||||||||||
Non-same store | 244,929 | 637,412 | 46,665 | 158,386 | ||||||||||||||
Total rental income | 2,422,233 | 2,736,578 | 605,273 | 701,219 | ||||||||||||||
Operating expenses: | ||||||||||||||||||
Same store | 634,120 | 613,924 | 159,201 | 150,720 | ||||||||||||||
Non-same store | 90,090 | 205,038 | 16,367 | 48,781 | ||||||||||||||
Total operating expenses | 724,210 | 818,962 | 175,568 | 199,501 | ||||||||||||||
NOI: | ||||||||||||||||||
Same store | 1,543,184 | 1,485,242 | 399,407 | 392,113 | ||||||||||||||
Non-same store | 154,839 | 432,374 | 30,298 | 109,605 | ||||||||||||||
Total NOI | $ | 1,698,023 | $ | 1,917,616 | $ | 429,705 | $ | 501,718 |
4th Quarter 2016 Earnings Release | 29 |
Equity Residential | |||||||||
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms – Continued | |||||||||
(Amounts in thousands except per share and per apartment unit data) | |||||||||
(All per share data is diluted) | |||||||||
Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2015 and 2016, plus any properties in lease-up and not stabilized as of January 1, 2015. | |||||||||
Normalized Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA") – Represents net income in accordance with GAAP before interest expense, income taxes, depreciation expense and amortization expense and further adjusted for non-comparable items. Normalized EBITDA, total debt to Normalized EBITDA and net debt to Normalized EBITDA are important metrics in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Normalized EBITDA, total debt to Normalized EBITDA and net debt to Normalized EBITDA are useful to investors, creditors and rating agencies because they allow investors to compare the Company's credit strength to prior reporting periods and to other companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual credit quality. | |||||||||
Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period. | |||||||||
Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2015, less properties subsequently sold. Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented. | |||||||||
% of Stabilized NOI – Represents budgeted 2017 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up. | |||||||||
Total Capital Cost – Estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, all in accordance with GAAP. | |||||||||
Total Market Capitalization – The aggregate of the market value of the Company’s outstanding common shares, including restricted shares, the market value of the Company’s operating partnership units outstanding, including restricted units (based on the market value of the Company’s common shares) and the outstanding principal balance of debt. The Company believes this is a useful measure of a real estate operating company’s long-term liquidity and balance sheet strength, because it shows an approximate relationship between a company’s total debt and the current total market value of its assets based on the current price at which the Company’s common shares trade. However, because this measure of leverage changes with fluctuations in the Company’s share price, which occur regularly, this measure may change even when the Company’s earnings, interest and debt levels remain stable. | |||||||||
Turnover – Total residential move-outs divided by total residential apartment units, including inter-property and intra-property transfers. | |||||||||
Unencumbered NOI % – Represents NOI generated by consolidated real estate assets unencumbered by outstanding secured debt as a percentage of total NOI generated by all of the Company's consolidated real estate assets. | |||||||||
Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties refers to the internal rate of return calculated by the Company based on the timing and amount of (i) total revenue earned during the period owned by the Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated capital cost of the properties at the time of sale and (iv) total direct property operating expenses (including real estate taxes and insurance) incurred during the period owned by the Company. Each of the items (i), (ii), (iii) and (iv) is calculated in accordance with GAAP. | |||||||||
The calculation of the Unlevered IRR does not include an adjustment for the Company’s general and administrative expense, interest expense or property management expense. Therefore, the Unlevered IRR is not a substitute for net income as a measure of our performance. Management believes that the Unlevered IRR achieved during the period a property is owned by the Company is useful because it is one indication of the gross value created by the Company’s acquisition, development, rehab, management and ultimate sale of a property, before the impact of Company overhead. The Unlevered IRR achieved on the properties as cited in this release should not be viewed as an indication of the gross value created with respect to other properties owned by the Company, and the Company does not represent that it will achieve similar Unlevered IRRs upon the disposition of other properties. The weighted average Unlevered IRR for sold properties is weighted based on all cash flows over the investment period for each respective property, including net sales proceeds. |
4th Quarter 2016 Earnings Release | 30 |
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