Equity Residential's Q1 earnings widen to US$133.1M from US$57.9M a year ago as revenues grow to US$520.6M from US$462.6M; CEO says 2011 should bring 'solid growth in operations'
April 28, 2011
– Equity Residential (NYSE:EQR - News) today reported results for the quarter ended March 31, 2011. All per share results are reported on a fully-diluted basis.
"As expected, fundamentals continued to improve across all of our markets during the first quarter. With high occupancy and low net exposure heading into our primary leasing season, 2011 should produce solid growth in operations,” said David J. Neithercut, Equity Residential’s President and CEO. “We currently expect to achieve same store growth in net operating income in the upper half of our guidance range. However, we have accelerated the disposition pace of non-core assets as a result of the strong demand for apartment properties and sold more than $500 million of assets in April. The incremental dilution from this accelerated activity will likely keep Normalized FFO for the year near the mid-point of our guidance.”
First Quarter 2011
FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the first quarter of 2011 was $0.56 per share compared to $0.49 per share in the first quarter of 2010.
For the first quarter of 2011, the company reported Normalized FFO of $0.56 per share compared to $0.51 per share for the same period of 2010. The difference is due primarily to:
A positive impact of approximately $0.06 per share from higher property net operating income (NOI) from the company’s same store portfolio;
A positive impact of approximately $0.04 per share of NOI from lease-up activity and other non-same store property operations;
A negative impact of approximately $0.02 per share from higher debt costs, excluding debt extinguishment costs; and
A negative impact of approximately $0.03 per share due to dilution from share issuance to fund investment activity and various other items.
The company reports Normalized FFO in order to more accurately reflect the company’s operating performance. Normalized FFO begins with FFO and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. A reconciliation and definition of Normalized FFO are provided on pages 5 and 24 of this release and the company has included guidance for Normalized FFO on page 23 of this release.
For the first quarter of 2011, the company reported earnings of $0.42 per share compared to $0.18 per share in the first quarter of 2010. The difference is due primarily to higher gains from property sales in 2011.
Same Store Results
On a same store first quarter to first quarter comparison, which includes 112,363 apartment units, revenues increased 4.0%, expenses decreased 1.0% and NOI increased 7.3%.
During the first quarter of 2011, the company acquired two apartment properties with a total of 521 apartment units for an aggregate purchase price of $139.0 million at a weighted average capitalization (cap) rate of 5.7%. The company also acquired a 97,000 square foot commercial building adjacent to its Harbor Steps apartment property in downtown Seattle, at a purchase price of $11.8 million, for potential redevelopment.
During the quarter, the company sold 12 consolidated properties, consisting of 2,731 apartment units, for an aggregate sale price of $261.8 million at a weighted average cap rate of 6.7% generating an unlevered internal rate of return (IRR), inclusive of management costs, of 10.8%.
At-The-Market (ATM) Share Offering Program
During the first quarter of 2011, the company issued approximately 3.0 million common shares at an average price of $50.84 per share for total consideration of approximately $154.5 million. The company has not issued any shares under this program since January 13, 2011 and currently has 10 million shares available for future issuance under this program. The company will use the proceeds from share sales primarily to fund its investment activity, including development, and to fund debt repayment.
Second Quarter 2011 Guidance
The company has established a Normalized FFO guidance range of $0.57 to $0.61 per share for the second quarter of 2011. The difference between the company’s first quarter 2011 Normalized FFO of $0.56 per share and the midpoint of the second quarter guidance range of $0.59 per share is primarily due to:
A positive impact of approximately $0.04 per share from higher same store and lease-up property NOI in the second quarter of 2011;
A positive impact of approximately $0.02 per share from lower debt costs and various other items; and
A negative impact of approximately $0.03 per share from dilution from 2011 transaction activity.
Second Quarter 2011 Conference Call
Equity Residential expects to announce second quarter 2011 results on Wednesday, July 27, 2011 and host a conference call to discuss those results at 10:00 a.m. CT on Thursday, July 28, 2011.
Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 442 properties located in 17 states and the District of Columbia, consisting of 127,711 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.
In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. Other risks and uncertainties are described under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
Industry Intelligence Editor's Note: In an omitted table, Equity Residential reported Q1 earnings of US$133.1 million from US$57.9 million in earnings a year ago and revenues of US$520.6 million, compared with revenues of US$462.6 million a year ago.
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