EQUITY RESIDENTIAL - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 26, 2016

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8-K - 8-K - EQUITY RESIDENTIALa8-kcoverpage2q16.htm
                                            

Exhibit 99.1
    
                                            
NEWS RELEASE - FOR IMMEDIATE RELEASE    

JULY 26, 2016

Equity Residential Reports Second Quarter 2016 Results
Revises Full Year Financial and Operating Guidance

Chicago, IL - July 26, 2016 - Equity Residential (NYSE: EQR) today reported results for the quarter and six months ended June 30, 2016. All per share results are reported as available to common shares/units on a diluted basis.

“After five consecutive years of exceptional fundamentals, elevated levels of new supply and slowing growth of higher paying jobs in San Francisco and New York have created headwinds that cause us to reduce our revenue growth expectations to be more in line with long term historical trends,” said David J. Neithercut, Equity Residential’s President and CEO. 

Highlights in the Quarter:

•
Increased same store revenues 4.2%, which, combined with same store expense growth of 1.7% produced an increase in same store net operating income (NOI) of 5.3%.

•
Completed the development of three apartment properties in San Francisco, consisting of 1,355 apartment units, for a total capital cost of approximately $726.9 million.

•
Started the development, for delivery in late 2018, of a 222-unit apartment property in Washington, DC, which has an estimated total capital cost of approximately $88.0 million.

•
Sold three consolidated apartment properties, consisting of 728 apartment units, for an aggregate sale price of approximately $112.5 million at a weighted average Disposition Yield of 5.7% and generating an Unlevered Internal Rate of Return (Unlevered IRR) of 9.3%.

•
Sold the Company’s entire interest in the management contracts and related rights associated with the military housing ventures at Joint Base Lewis McChord in Washington State, for approximately $63.3 million, generating a gain on sale of approximately $52.4 million.

Second Quarter 2016
Earnings Per Share (EPS) for the second quarter of 2016 was $0.59 compared to $0.78 in the second quarter of 2015. The difference is due primarily to lower gains on property sales and lower depreciation expense in the second quarter of 2016.

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), was $0.90 per share for both the second quarter of 2016 and 2015.



1
                                            


Normalized FFO for the second quarter of 2016 was $0.76 per share compared to $0.85 per share in the second quarter of 2015. The following items impacted Normalized FFO per share in the quarter:

•
a positive impact of approximately $0.05 per share from increased same store NOI;

•
a positive impact of approximately $0.03 per share from NOI from non-same store properties currently in lease-up;

•
a positive impact of approximately $0.06 per share from lower total interest expense;

•
a negative impact of approximately $0.21 per share of lower NOI primarily as a result of the Company’s 2016 disposition activity; and

•
a negative impact of approximately $0.02 per share from other items, including higher general and administrative expense.

Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 27 and 28 of this release and the Company has included guidance for Normalized FFO on page 25 and FFO and EPS on page 28 of this release.

Six Months Ended June 30, 2016
EPS for the six months ended June 30, 2016 was $10.36 compared to $1.27 for the same period of 2015. The difference is due primarily to a higher amount of property sale gains due to significantly more property sales in the first six months of 2016 and the various adjustment items listed on page 24 of this release.

FFO for the six months ended June 30, 2016 was $1.37 per share compared to $1.68 per share in the same period of 2015.

Normalized FFO for the six months ended June 30, 2016 was $1.52 per share compared to $1.64 per share for the same period of 2015.

Same Store Results
On a same store second quarter to second quarter comparison, which includes 72,781 apartment units, revenues increased 4.2%, expenses increased 1.7% and NOI increased 5.3%. Average Rental Rate increased 4.0% and occupancy increased 0.1%.

On a same store six-month to six-month comparison, which includes 72,494 apartment units, revenues increased 4.4%, expenses increased 0.9% and NOI increased 5.9%. Average Rental Rate increased 4.3% and occupancy remained flat at 96.1%.

Investment Activity
The Company acquired no properties during the second quarter of 2016 and sold the three assets discussed on the first page of this release.
 
During the first six months of 2016, the Company acquired three consolidated apartment properties, consisting of 479 apartment units, for an aggregate purchase price of approximately $204.1 million at a weighted average Acquisition Capitalization Rate of 4.9%. During the first six months of 2016, the Company sold 83 consolidated apartment properties, consisting of 26,890 apartment units, for an aggregate sale price of approximately $6.43 billion, generating an Unlevered IRR of 11.8%. The weighted average Disposition Yield on these sales is estimated at 5.3%.


2
                                            


Third Quarter 2016 Guidance
The Company has established an EPS guidance range of $0.62 to $0.66 for the third quarter of 2016. The difference between the Company’s second quarter 2016 EPS of $0.59 and the midpoint of the third quarter 2016 guidance range of $0.64 is due primarily to higher gains on property sales, lower gains on sales of non-operating assets and the items described below.

The Company has established an FFO guidance range of $0.82 to $0.86 per share for the third quarter of 2016. The difference between the Company’s second quarter 2016 FFO of $0.90 per share and the midpoint of the third quarter 2016 guidance range of $0.84 per share is due primarily to lower gains on sales of non-operating assets and the items described below.

The Company has established a Normalized FFO guidance range of $0.75 to $0.79 per share for the third quarter of 2016. The difference between the Company’s second quarter 2016 Normalized FFO of $0.76 per share and the midpoint of the third quarter 2016 guidance range of $0.77 per share is due primarily to:

•
a positive impact of approximately $0.01 per share from NOI from non-same store properties currently in lease-up;

•
a positive impact of approximately $0.01 per share from lower general and administrative expense; and

•
a negative impact of approximately $0.01 per share from lower same store NOI driven by an increase in revenues offset by a larger increase in operating expenses.

Full Year 2016 Guidance
The Company has revised its guidance for its full year 2016 same store operating performance, EPS, FFO per share, Normalized FFO per share and transactions as listed below:

    
 
 
Previous
 
Revised
Same store:
 
 
 
 
Physical occupancy
 
95.9%
 
95.9%
Revenue change
 
4.0% to 4.5%
 
3.5% to 4.0%
Expense change
 
2.5% to 3.0%
 
2.5% to 3.0%
NOI change
 
4.5% to 5.5%
 
3.75% to 4.25%
 
 
 
 
 
EPS
 
$12.60 to $12.70
 
$11.84 to $11.90
FFO per share
 
$2.96 to $3.06
 
$2.96 to $3.02
Normalized FFO per share
 
$3.05 to $3.15
 
$3.05 to $3.11
 
 
 
 
 
Transactions:
 
 
 
 
Consolidated Rental Acquisitions
 
$600 million
 
$350 million
Consolidated Rental Dispositions
 
$7.4 billion
 
$6.9 billion
Acquisition Cap Rate/Disposition Yield Spread
 
75 basis points
 
75 basis points

The change in the full year EPS guidance range is due primarily to lower gains on property sales as a result of the Company’s reduced disposition guidance and the items described below.

The change in the full year FFO per share guidance range is due primarily to the items described below.

3
                                            

                            
The change in the full year Normalized FFO per share guidance range is due primarily to:

•
a negative impact of approximately $0.06 per share from lower same store NOI; and

•
a positive impact of approximately $0.01 per share of higher NOI from the amount and timing of 2016 disposition activity.

Glossary of Terms and Definitions
To improve comparability and enhance disclosure, the Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 26 through 29 of this release.

Third Quarter 2016 Earnings and Conference Call
Equity Residential expects to announce third quarter 2016 results on Tuesday, October 25, 2016 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, October 26, 2016.

About Equity Residential
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 315 properties consisting of 79,458 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements
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.

A live web cast of the Company’s conference call discussing these results will take place tomorrow, Wednesday, July 27, at 10:00 a.m. Central. Please visit the Investor section of the Company’s web site at www.equityapartments.com for the link. A replay of the web cast will be available for two weeks at this site.






4
                                            

Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
 
 
Six Months Ended June 30,
 
Quarter Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
REVENUES
 
 
 
 
 
 
 
 
Rental income
 
$
1,211,104

 
$
1,341,114

 
$
594,939

 
$
676,508

Fee and asset management
 
3,133

 
4,369

 
215

 
2,604

Total revenues
 
1,214,237

 
1,345,483

 
595,154

 
679,112

 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
Property and maintenance
 
205,472

 
242,565

 
96,307

 
118,005

Real estate taxes and insurance
 
157,611

 
169,551

 
77,415

 
83,119

Property management
 
44,486

 
44,557

 
20,991

 
21,792

General and administrative
 
35,013

 
35,421

 
18,296

 
15,659

Depreciation
 
349,012

 
388,803

 
176,127

 
194,282

Total expenses
 
791,594

 
880,897

 
389,136

 
432,857

 
 
 
 
 
 
 
 
 
Operating income
 
422,643

 
464,586

 
206,018

 
246,255

 
 
 
 
 
 
 
 
 
Interest and other income
 
59,583

 
6,650

 
56,525

 
6,481

Other expenses
 
(4,060
)
 
(1,700
)
 
(1,504
)
 
(1,770
)
Interest:
 
 
 
 
 
 
 
 
Expense incurred, net
 
(299,964
)
 
(219,648
)
 
(86,472
)
 
(110,866
)
Amortization of deferred financing costs
 
(7,739
)
 
(5,127
)
 
(2,345
)
 
(2,538
)
Income before income and other taxes, (loss) income from investments in
unconsolidated entities, net gain (loss) on sales of real estate properties and land
parcels and discontinued operations
 
170,463

 
244,761

 
172,222

 
137,562

Income and other tax (expense) benefit
 
(763
)
 
(369
)
 
(413
)
 
(326
)
(Loss) income from investments in unconsolidated entities
 
(1,904
)
 
15,429

 
(800
)
 
12,466

Net gain on sales of real estate properties
 
3,780,835

 
228,753

 
57,356

 
148,802

Net gain (loss) on sales of land parcels
 
11,722

 
(1
)
 
—

 
—

Income from continuing operations
 
3,960,353

 
488,573

 
228,365

 
298,504

Discontinued operations, net
 
(122
)
 
269

 
35

 
114

Net income
 
3,960,231

 
488,842

 
228,400

 
298,618

Net (income) attributable to Noncontrolling Interests:
 
 
 
 
 
 
 
 
Operating Partnership
 
(152,089
)
 
(18,413
)
 
(8,780
)
 
(11,354
)
Partially Owned Properties
 
(1,545
)
 
(1,487
)
 
(781
)
 
(844
)
Net income attributable to controlling interests
 
3,806,597

 
468,942

 
218,839

 
286,420

Preferred distributions
 
(1,545
)
 
(1,724
)
 
(772
)
 
(833
)
Premium on redemption of Preferred Shares
 
—

 
(2,789
)
 
—

 
—

Net income available to Common Shares
 
$
3,805,052

 
$
464,429

 
$
218,067

 
$
285,587

 
 
 
 
 
 
 
 
 
Earnings per share – basic:
 
 
 
 
 
 
 
 
Income from continuing operations available to Common Shares
 
$
10.43

 
$
1.28

 
$
0.60

 
$
0.79

Net income available to Common Shares
 
$
10.43

 
$
1.28

 
$
0.60

 
$
0.79

Weighted average Common Shares outstanding
 
364,820

 
363,288

 
365,047

 
363,476

 
 
 
 
 
 
 
 
 
Earnings per share – diluted:
 
 
 
 
 
 
 
 
Income from continuing operations available to Common Shares
 
$
10.36

 
$
1.27

 
$
0.59

 
$
0.78

Net income available to Common Shares
 
$
10.36

 
$
1.27

 
$
0.59

 
$
0.78

Weighted average Common Shares outstanding
 
382,012

 
380,346

 
382,065

 
380,491

 
 
 
 
 
 
 
 
 
Distributions declared per Common Share outstanding
 
$
9.0075

 
$
1.105

 
$
0.50375

 
$
0.5525








5
                                            

Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
 
 
 
Six Months Ended June 30,
 
Quarter Ended June 30,
 
 
 
2016
 
2015
 
2016
 
2015
Net income
 
$
3,960,231

 
$
488,842

 
$
228,400

 
$
298,618

Net (income) attributable to Noncontrolling Interests – Partially Owned Properties
 
(1,545
)
 
(1,487
)
 
(781
)
 
(844
)
Preferred distributions
 
(1,545
)
 
(1,724
)
 
(772
)
 
(833
)
Premium on redemption of Preferred Shares
 
—

 
(2,789
)
 
—

 
—

Net income available to Common Shares and Units
 
3,957,141

 
482,842

 
226,847

 
296,941

 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Depreciation
 
349,012

 
388,803

 
176,127

 
194,282

Depreciation – Non-real estate additions
 
(2,635
)
 
(2,524
)
 
(1,227
)
 
(1,263
)
Depreciation – Partially Owned Properties
 
(1,943
)
 
(2,162
)
 
(949
)
 
(1,083
)
Depreciation – Unconsolidated Properties
 
2,467

 
2,457

 
1,234

 
1,229

Net (gain) on sales of real estate properties
 
(3,780,835
)
 
(228,753
)
 
(57,356
)
 
(148,802
)
Discontinued operations:
 
 
 
 
 
 
 
 
Net (gain) on sales of discontinued operations
 
(15
)
 
—

 
—

 
—

FFO available to Common Shares and Units
 
523,192

 
640,663

 
344,676

 
341,304

 
 
 
 
 
 
 
 
 
Adjustments (see page 24 for additional detail):
 
 
 
 
 
 
 
 
Asset impairment and valuation allowances
 
—

 
—

 
—

 
—

Property acquisition costs and write-off of pursuit costs
 
4,259

 
(14,890
)
 
1,175

 
(10,065
)
Debt extinguishment (gains) losses, including prepayment penalties, preferred
 
 
 
 
 
 
 
 
share redemptions and non-cash convertible debt discounts
 
120,164

 
1,469

 
67

 
(4
)
(Gains) losses on sales of non-operating assets, net of income and other tax
 
 
 
 
 
 
 
 
expense (benefit)
 
(66,878
)
 
(800
)
 
(54,600
)
 
(2,458
)
Other miscellaneous items
 
(897
)
 
(2,179
)
 
(959
)
 
(3,516
)
Normalized FFO available to Common Shares and Units
 
$
579,840

 
$
624,263

 
$
290,359

 
$
325,261

 
 
 
 
 
 
 
 
 
 
FFO
 
$
524,737

 
$
645,176

 
$
345,448

 
$
342,137

Preferred distributions
 
(1,545
)
 
(1,724
)
 
(772
)
 
(833
)
Premium on redemption of Preferred Shares
 
—

 
(2,789
)
 
—

 
—

FFO available to Common Shares and Units
 
$
523,192

 
$
640,663

 
$
344,676

 
$
341,304

FFO per share and Unit - basic
 
$
1.38

 
$
1.70

 
$
0.91

 
$
0.91

FFO per share and Unit - diluted
 
$
1.37

 
$
1.68

 
$
0.90

 
$
0.90

 
 
 
 
 
 
 
 
 
 
Normalized FFO
 
$
581,385

 
$
625,987

 
$
291,131

 
$
326,094

Preferred distributions
 
(1,545
)
 
(1,724
)
 
(772
)
 
(833
)
Normalized FFO available to Common Shares and Units
 
$
579,840

 
$
624,263

 
$
290,359

 
$
325,261

Normalized FFO per share and Unit - basic
 
$
1.53

 
$
1.66

 
$
0.77

 
$
0.86

Normalized FFO per share and Unit - diluted
 
$
1.52

 
$
1.64

 
$
0.76

 
$
0.85

 
 
 
 
 
 
 
 
 
 
Weighted average Common Shares and Units outstanding - basic
 
378,612

 
376,880

 
378,934

 
377,063

Weighted average Common Shares and Units outstanding - diluted
 
382,012

 
380,346

 
382,065

 
380,491

 
 
 
 
 
 
 
 
 
 
Note:
See page 24 for additional detail regarding the adjustments from FFO to Normalized FFO. See pages 26 through 29 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.








6
                                            

Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
 
 
June 30,
2016
 
December 31,
2015
ASSETS
 
 
 
 
Investment in real estate
 
 
 
 
Land
 
$
5,835,195

 
$
5,864,046

Depreciable property
 
18,474,391

 
18,037,087

Projects under development
 
799,947

 
1,122,376

Land held for development
 
138,221

 
158,843

Investment in real estate
 
25,247,754

 
25,182,352

Accumulated depreciation
 
(5,119,342
)
 
(4,905,406
)
Investment in real estate, net
 
20,128,412

 
20,276,946

Real estate held for sale
 
—

 
2,181,135

Cash and cash equivalents
 
497,843

 
42,276

Investments in unconsolidated entities
 
65,952

 
68,101

Deposits – restricted
 
77,587

 
55,893

Escrow deposits – mortgage
 
61,711

 
56,946

Other assets
 
398,417

 
428,899

Total assets
 
$
21,229,922

 
$
23,110,196

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Mortgage notes payable, net
 
$
4,147,999

 
$
4,685,134

Notes, net
 
4,362,995

 
5,848,956

Line of credit and commercial paper
 
—

 
387,276

Accounts payable and accrued expenses
 
186,629

 
187,124

Accrued interest payable
 
58,175

 
85,221

Other liabilities
 
333,551

 
366,387

Security deposits
 
64,242

 
77,582

Distributions payable
 
191,403

 
209,378

Total liabilities
 
9,344,994

 
11,847,058

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests – Operating Partnership
 
478,324

 
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 June 30, 2016 and December 31, 2015
 
37,280

 
37,280

Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 365,550,636 shares issued
and outstanding as of June 30, 2016 and 364,755,444
shares issued and outstanding as of December 31, 2015
 
3,656

 
3,648

Paid in capital
 
8,718,365

 
8,572,365

Retained earnings
 
2,524,788

 
2,009,091

Accumulated other comprehensive (loss)
 
(123,511
)
 
(152,016
)
Total shareholders’ equity
 
11,160,578

 
10,470,368

Noncontrolling Interests:
 
 
 
 
Operating Partnership
 
241,748

 
221,379

Partially Owned Properties
 
4,278

 
4,608

Total Noncontrolling Interests
 
246,026

 
225,987

Total equity
 
11,406,604

 
10,696,355

Total liabilities and equity
 
$
21,229,922

 
$
23,110,196


7
                                            

Equity Residential
 
 
 
Portfolio Summary as of December 31, 2015
 
Portfolio Summary as of June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of
 
Average
 
 
 
 
 
% of
 
Average
 
 
 
 
Apartment
 
Stabilized
 
Rental
 
 
 
Apartment
 
Stabilized
 
Rental
Markets/Metro Areas
 
Properties
 
Units
 
NOI
 
Rate
 
Properties
 
Units
 
NOI
 
Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
70

 
16,064

 
14.5
%
 
$
2,209

 
68

 
15,218

 
17.1
%
 
$
2,317

Orange County
 
12

 
3,684

 
3.1
%
 
1,918

 
12

 
3,684

 
3.7
%
 
1,966

San Diego
 
13

 
3,505

 
3.1
%
 
2,097

 
13

 
3,505

 
3.7
%
 
2,141

Subtotal – Southern California
 
95

 
23,253

 
20.7
%
 
2,144

 
93

 
22,407

 
24.5
%
 
2,229

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco
 
52

 
13,212

 
14.9
%
 
2,661

 
54

 
12,756

 
19.8
%
 
3,020

New York
 
40

 
10,835

 
17.3
%
 
3,835

 
40

 
10,632

 
19.0
%
 
3,769

Washington DC
 
57

 
18,656

 
17.1
%
 
2,182

 
47

 
15,637

 
17.2
%
 
2,325

Boston
 
35

 
8,018

 
9.6
%
 
2,632

 
30

 
7,588

 
11.0
%
 
2,690

Seattle
 
44

 
8,756

 
7.6
%
 
1,955

 
37

 
7,096

 
7.6
%
 
2,100

South Florida
 
34

 
10,934

 
7.2
%
 
1,682

 
—

 
—

 
—

 
—

Denver
 
19

 
6,935

 
4.6
%
 
1,556

 
—

 
—

 
—

 
—

All Other Markets
 
13

 
2,633

 
1.0
%
 
1,183

 
11

 
2,061

 
0.9
%
 
1,251

Total
 
389

 
103,232

 
100.0
%
 
2,306

 
312

 
78,177

 
100.0
%
 
2,598

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Properties
 
3

 
1,281

 
—

 
—

 
3

 
1,281

 
—

 
—

Military Housing
 
2

 
5,139

 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grand Total
 
394

 
109,652

 
100.0
%
 
$
2,306

 
315

 
79,458

 
100.0
%
 
$
2,598

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Projects under development are not included in the Portfolio Summary until construction has been completed. See pages 26 through 29 for the definitions of non-GAAP financial measures and other terms, such as Average Rental Rate and % of Stabilized NOI.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



2nd Quarter 2016 Earnings Release
 
8
                                            

Equity Residential
 
 
 
 
 
 
 
 
 
Portfolio as of June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties
 
Apartment
Units
 
 
 
 
 
 
 
 
 
 
 
 
Wholly Owned Properties
 
291

 
73,853

 
 
 
Master-Leased Properties - Consolidated
 
3

 
853

 
 
 
Partially Owned Properties - Consolidated
 
18

 
3,471

 
 
 
Partially Owned Properties - Unconsolidated
 
3

 
1,281

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
315

 
79,458

 
 
 
 
 
 
 
 
 
 
 
______________________________________________________________________________________________________
Portfolio Rollforward Q2 2016
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties
 
Apartment
Units
 
Sales Price
 
Disposition
Yield
 
 
 
 
 
 
 
 
 
 
 
 
3/31/2016
317

 
83,992

 
 
 
 
 
 
 
 
 
 
 
 
Dispositions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Rental Properties
(3
)
 
(728
)
 
$
(112,450
)
 
(5.7
%)
Other:
 
 
 
 
 
 
 
Military Housing (A)
(2
)
 
(5,161
)
 
$
(63,250
)
 
 
Completed Developments - Consolidated
3

 
1,355

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/30/2016
315

 
79,458

 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________________________________________________________________________
Portfolio Rollforward 2016
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties
 
Apartment
Units
 
Purchase Price
 
Acquisition
Cap Rate
 
 
 
 
 
 
 
 
 
 
 
 
12/31/2015
394

 
109,652

 
 
 
 
Acquisitions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Rental Properties – Stabilized
2

 
359

 
$
124,461

 
4.9
%
Rental Properties – Not Stabilized (B)
1

 
120

 
$
79,673

 
4.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales Price
 
Disposition
Yield
Dispositions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Rental Properties
(83
)
 
(26,890
)
 
$
(6,427,403
)
 
(5.3
%)
Land Parcels
—

 
—

 
$
(27,455
)
 
 
Other:
 
 
 
 
 
 
 
Military Housing (A)
(2
)
 
(5,161
)
 
$
(63,250
)
 
 
Completed Developments - Consolidated
3

 
1,355

 
 
 
 
Configuration Changes
—

 
23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/30/2016
315

 
79,458

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: See pages 26 through 29 for the definitions of non-GAAP financial measures and other terms, such as Acquisition Cap Rate and Disposition Yield.
(A)
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.
(B)
The Company acquired one property in the first quarter of 2016 which was in the final stages of completing lease-up and is expected to stabilize in its second year of ownership at a 4.8% yield on cost.

2nd Quarter 2016 Earnings Release
 
9
                                            

Equity Residential
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter 2016 vs. Second Quarter 2015
Same Store Results/Statistics for 72,781 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical
Occupancy
 
 
Description
 
Revenues
 
Expenses
 
NOI
 
 
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2016
 
$
556,022

 
$
159,569

 
$
396,453

 
$
2,544

 
96.3
%
 
14.8
%
Q2 2015
 
$
533,482

 
$
156,886

 
$
376,596

 
$
2,445

 
96.2
%
 
14.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
$
22,540

 
$
2,683

 
$
19,857

 
$
99

 
0.1
%
 
0.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
4.2
%
 
1.7
%
 
5.3
%
 
4.0
%
 
 
 
 
____________________________________________________________________________________________

Second Quarter 2016 vs. First Quarter 2016
Same Store Results/Statistics for 73,919 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical
Occupancy
 
 
Description
 
Revenues
 
Expenses
 
NOI
 
 
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2016
 
$
565,453

 
$
162,247

 
$
403,206

 
$
2,549

 
96.2
%
 
14.8
%
Q1 2016
 
$
556,407

 
$
164,996

 
$
391,411

 
$
2,517

 
95.9
%
 
10.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
$
9,046

 
$
(2,749
)
 
$
11,795

 
$
32

 
0.3
%
 
4.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
1.6
%
 
(1.7
%)
 
3.0
%
 
1.3
%
 
 
 
 
____________________________________________________________________________________________

June YTD 2016 vs. June YTD 2015
Same Store Results/Statistics for 72,494 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical
Occupancy
 
 
Description
 
Revenues
 
Expenses
 
NOI
 
 
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
YTD 2016
 
$
1,099,117

 
$
320,884

 
$
778,233

 
$
2,529

 
96.1
%
 
25.5
%
YTD 2015
 
$
1,053,117

 
$
318,166

 
$
734,951

 
$
2,425

 
96.1
%
 
25.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
$
46,000

 
$
2,718

 
$
43,282

 
$
104

 
0.0
%
 
0.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
4.4
%
 
0.9
%
 
5.9
%
 
4.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 25 of this release. See pages 26 through 29 for the definitions of non-GAAP financial measures and other terms, such as Average Rental Rate, NOI, Physical Occupancy and Turnover.


2nd Quarter 2016 Earnings Release
 
10
                                            

Equity Residential
Second Quarter 2016 vs. Second Quarter 2015
Same Store Results/Statistics by Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) from Prior Year's Quarter
 
 
 
 
Q2 2016
% of
Actual
NOI
 
Q2 2016
Average
Rental
Rate
 
Q2 2016
Weighted
Average
Physical
Occupancy %
 
Q2 2016
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Rental
Rate
 
 
 
 
 
 
Apartment
Units
 
 
 
 
 
 
 
 
 
 
 
 
Physical
Occupancy
 
 
Markets/Metro Areas
 
 
 
 
 
 
Revenues
 
Expenses
 
 NOI
 
 
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
13,698

 
16.4
%
 
$
2,294

 
96.1
%
 
17.0
%
 
6.0
%
 
2.3
%
 
7.6
%
 
5.7
%
 
0.2
%
 
0.7
%
San Diego
 
3,505

 
4.0
%
 
2,141

 
96.5
%
 
16.7
%
 
6.0
%
 
1.8
%
 
7.6
%
 
5.3
%
 
0.5
%
 
(0.3
%)
Orange County
 
3,490

 
3.8
%
 
1,949

 
96.7
%
 
13.9
%
 
6.5
%
 
(0.9
%)
 
8.9
%
 
5.7
%
 
0.6
%
 
(0.1
%)
Subtotal – Southern California
 
20,693

 
24.2
%
 
2,209

 
96.3
%
 
16.5
%
 
6.1
%
 
1.8
%
 
7.8
%
 
5.5
%
 
0.3
%
 
0.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York
 
10,007

 
19.2
%
 
3,671

 
96.6
%
 
11.5
%
 
2.4
%
 
2.0
%
 
2.5
%
 
2.3
%
 
(0.2
%)
 
1.1
%
Washington DC
 
15,475

 
19.0
%
 
2,325

 
96.2
%
 
13.9
%
 
1.2
%
 
0.9
%
 
1.3
%
 
0.7
%
 
0.2
%
 
1.2
%
San Francisco
 
10,955

 
17.6
%
 
2,857

 
96.2
%
 
15.8
%
 
7.7
%
 
3.9
%
 
9.0
%
 
8.1
%
 
(0.3
%)
 
0.9
%
Boston
 
7,292

 
11.5
%
 
2,676

 
96.3
%
 
13.0
%
 
3.0
%
 
(3.6
%)
 
5.6
%
 
2.9
%
 
(0.2
%)
 
0.0
%
Seattle
 
6,298

 
7.3
%
 
2,107

 
95.7
%
 
17.5
%
 
6.0
%
 
7.4
%
 
5.5
%
 
5.7
%
 
0.3
%
 
0.2
%
All Other Markets
 
2,061

 
1.2
%
 
1,251

 
96.5
%
 
13.5
%
 
4.8
%
 
(0.3
%)
 
8.2
%
 
5.0
%
 
(0.3
%)
 
(0.3
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
72,781

 
100.0
%
 
$
2,544

 
96.3
%
 
14.8
%
 
4.2
%
 
1.7
%
 
5.3
%
 
4.0
%
 
0.1
%
 
0.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




2nd Quarter 2016 Earnings Release
 
11
                                            

Equity Residential
Second Quarter 2016 vs. First Quarter 2016
Same Store Results/Statistics by Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) from Prior Quarter
 
 
 
 
Q2 2016
% of
Actual
NOI
 
Q2 2016
Average
Rental
Rate
 
Q2 2016
Weighted
Average
Physical
Occupancy %
 
Q2 2016
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Rental
Rate
 
 
 
 
 
 
Apartment
Units
 
 
 
 
 
 
 
 
 
 
 
 
Physical
Occupancy
 
 
Markets/Metro Areas
 
 
 
 
 
 
Revenues
 
Expenses
 
 NOI
 
 
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
14,038

 
16.8
%
 
$
2,319

 
96.1
%
 
17.1
%
 
1.7
%
 
0.6
%
 
2.2
%
 
1.6
%
 
0.0
%
 
5.4
%
Orange County
 
3,684

 
4.0
%
 
1,966

 
96.4
%
 
14.4
%
 
2.6
%
 
(2.3
%)
 
4.2
%
 
1.7
%
 
0.7
%
 
3.8
%
San Diego
 
3,505

 
3.9
%
 
2,141

 
96.5
%
 
16.7
%
 
2.1
%
 
0.4
%
 
2.7
%
 
1.2
%
 
0.7
%
 
2.7
%
Subtotal – Southern California
 
21,227

 
24.7
%
 
2,228

 
96.2
%
 
16.6
%
 
1.9
%
 
0.2
%
 
2.6
%
 
1.5
%
 
0.3
%
 
4.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York
 
10,007

 
18.9
%
 
3,671

 
96.6
%
 
11.5
%
 
1.2
%
 
(4.1
%)
 
4.1
%
 
0.9
%
 
0.4
%
 
2.8
%
Washington DC
 
15,475

 
18.7
%
 
2,325

 
96.2
%
 
13.9
%
 
1.8
%
 
(1.8
%)
 
3.3
%
 
1.1
%
 
0.4
%
 
4.4
%
San Francisco
 
11,128

 
17.5
%
 
2,863

 
96.2
%
 
15.9
%
 
1.3
%
 
0.2
%
 
1.6
%
 
1.3
%
 
(0.2
%)
 
3.8
%
Boston
 
7,494

 
11.6
%
 
2,690

 
96.2
%
 
12.9
%
 
1.1
%
 
(3.2
%)
 
2.8
%
 
0.7
%
 
1.1
%
 
2.3
%
Seattle
 
6,527

 
7.5
%
 
2,103

 
95.6
%
 
17.5
%
 
3.0
%
 
2.2
%
 
3.3
%
 
2.5
%
 
0.2
%
 
5.2
%
All Other Markets
 
2,061

 
1.1
%
 
1,251

 
96.5
%
 
13.5
%
 
2.8
%
 
(9.9
%)
 
12.6
%
 
2.2
%
 
0.5
%
 
4.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
73,919

 
100.0
%
 
$
2,549

 
96.2
%
 
14.8
%
 
1.6
%
 
(1.7
%)
 
3.0
%
 
1.3
%
 
0.3
%
 
4.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



2nd Quarter 2016 Earnings Release
 
12
                                            

Equity Residential
June YTD 2016 vs. June YTD 2015
Same Store Results/Statistics by Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) from Prior Year
 
 
 
 
June YTD 16
% of
Actual
NOI
 
June YTD 16
Average
Rental
Rate
 
June YTD 16
Weighted
Average
Physical
Occupancy %
 
June YTD 16
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Rental
Rate
 
 
 
 
 
 
Apartment
Units
 
 
 
 
 
 
 
 
 
 
 
 
Physical
Occupancy
 
 
Markets/Metro Areas
 
 
 
 
 
 
Revenues
 
Expenses
 
 NOI
 
 
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
13,698

 
16.6
%
 
$
2,277

 
96.0
%
 
28.8
%
 
6.2
%
 
1.5
%
 
8.3
%
 
5.9
%
 
0.2
%
 
0.4
%
San Diego
 
3,505

 
4.1
%
 
2,128

 
96.1
%
 
30.8
%
 
5.9
%
 
2.4
%
 
7.3
%
 
5.6
%
 
0.1
%
 
(0.2
%)
Orange County
 
3,490

 
3.8
%
 
1,933

 
96.4
%
 
24.2
%
 
5.9
%
 
0.1
%
 
7.9
%
 
5.7
%
 
0.3
%
 
(0.9
%)
Subtotal – Southern California
 
20,693

 
24.5
%
 
2,193

 
96.1
%
 
28.3
%
 
6.1
%
 
1.4
%
 
8.1
%
 
5.8
%
 
0.2
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York
 
10,007

 
19.2
%
 
3,656

 
96.4
%
 
20.1
%
 
2.5
%
 
1.8
%
 
2.8
%
 
2.6
%
 
(0.2
%)
 
1.1
%
Washington DC
 
15,475

 
19.0
%
 
2,313

 
96.0
%
 
23.4
%
 
1.0
%
 
(0.6
%)
 
1.7
%
 
0.7
%
 
0.1
%
 
0.8
%
San Francisco
 
10,955

 
17.7
%
 
2,838

 
96.3
%
 
27.9
%
 
8.6
%
 
3.5
%
 
10.3
%
 
9.1
%
 
(0.3
%)
 
0.6
%
Boston
 
7,292

 
11.5
%
 
2,665

 
95.7
%
 
23.6
%
 
3.0
%
 
(5.6
%)
 
6.7
%
 
3.0
%
 
(0.4
%)
 
1.7
%
Seattle
 
6,011

 
7.0
%
 
2,076

 
95.6
%
 
29.5
%
 
6.1
%
 
7.7
%
 
5.4
%
 
6.0
%
 
0.0
%
 
(0.3
%)
All Other Markets
 
2,061

 
1.1
%
 
1,238

 
96.2
%
 
22.6
%
 
4.6
%
 
(6.0
%)
 
13.4
%
 
4.6
%
 
(0.2
%)
 
(0.7
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
72,494

 
100.0
%
 
$
2,529

 
96.1
%
 
25.5
%
 
4.4
%
 
0.9
%
 
5.9
%
 
4.3
%
 
0.0
%
 
0.5
%


2nd Quarter 2016 Earnings Release
 
13
                                            

Equity Residential
 
Second Quarter 2016 vs. Second Quarter 2015
Same Store Operating Expenses for 72,781 Same Store Apartment Units
$ in thousands
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Actual
Q2 2016
Operating
Expenses
 
 
 
Actual
Q2 2016
 
Actual
Q2 2015
 
$
Change
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate taxes
 
$
66,655

 
$
63,237

 
$
3,418

 
5.4
%
 
41.8
%
On-site payroll (1)
 
35,667

 
35,401

 
266

 
0.8
%
 
22.3
%
Utilities (2)
 
21,317

 
22,888

 
(1,571
)
 
(6.9
%)
 
13.4
%
Repairs and maintenance (3)
 
21,798

 
21,010

 
788

 
3.8
%
 
13.7
%
Insurance
 
4,350

 
4,191

 
159

 
3.8
%
 
2.7
%
Leasing and advertising
 
2,111

 
2,145

 
(34
)
 
(1.6
%)
 
1.3
%
Other on-site operating expenses (4)
 
7,671

 
8,014

 
(343
)
 
(4.3
%)
 
4.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Same store operating expenses
 
$
159,569

 
$
156,886

 
$
2,683

 
1.7
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June YTD 2016 vs. June YTD 2015
Same Store Operating Expenses for 72,494 Same Store Apartment Units
$ in thousands
 
 
 
 
 
 
 
 
 
 
 
% of Actual
YTD 2016
Operating
Expenses
 
 
 
Actual
YTD 2016
 
Actual
YTD 2015
 
$
Change
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate taxes
 
$
132,938

 
$
126,017

 
$
6,921

 
5.5
%
 
41.4
%
On-site payroll (1)
 
71,975

 
71,752

 
223

 
0.3
%
 
22.4
%
Utilities (2)
 
45,281

 
49,277

 
(3,996
)
 
(8.1
%)
 
14.1
%
Repairs and maintenance (3)
 
40,924

 
41,402

 
(478
)
 
(1.2
%)
 
12.8
%
Insurance
 
8,673

 
8,354

 
319

 
3.8
%
 
2.7
%
Leasing and advertising
 
4,228

 
4,211

 
17

 
0.4
%
 
1.3
%
Other on-site operating expenses (4)
 
16,865

 
17,153

 
(288
)
 
(1.7
%)
 
5.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Same store operating expenses
 
$
320,884

 
$
318,166

 
$
2,718

 
0.9
%
 
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 25 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.

2nd Quarter 2016 Earnings Release
 
14
                                            

Equity Residential
 
Debt Summary as of June 30, 2016
(Amounts in thousands)
 
 
 
 
 
 
 
 
Weighted
Average
Maturities
(years)
 
 
 
 
 
 
Weighted
Average
Rates (1)
 
 
 
 
 
 
 
 
 
 
Amounts (1)
 
% of Total
 
 
 
 
 
 
 
 
 
 
 
Secured
 
$
4,147,999

 
48.7
%
 
4.34
%
 
6.9

Unsecured
 
4,362,995

 
51.3
%
 
4.55
%
 
10.6

 
 
 
 
 
 
 
 
 
Total
$
8,510,994

 
100.0
%
 
4.45
%
 
8.8

 
 
 
 
 
 
 
 
 
Fixed Rate Debt:
 
 
 
 
 
 
 
 
Secured – Conventional
 
$
3,505,691

 
41.2
%
 
4.97
%
 
5.4

Unsecured – Public
 
3,902,878

 
45.9
%
 
4.99
%
 
11.4

 
 
 
 
 
 
 
 
 
Fixed Rate Debt
7,408,569

 
87.1
%
 
4.98
%
 
8.6

 
 
 
 
 
 
 
 
 
Floating Rate Debt:
 
 
 
 
 
 
 
 
Secured – Conventional
 
7,894

 
0.1
%
 
0.47
%
 
16.0

Secured – Tax Exempt
 
634,414

 
7.4
%
 
0.88
%
 
14.8

Unsecured – Public (2)
 
460,117

 
5.4
%
 
1.21
%
 
3.1

Unsecured – Revolving Credit Facility
 
—

 
—

 
1.34
%
 
1.8

Unsecured – Commercial Paper Program (3)
 
—

 
—

 
0.96
%
 
—

 
 
 
 
 
 
 
 
 
Floating Rate Debt
 
1,102,425

 
12.9
%
 
1.01
%
 
10.2

 
 
 
 
 
 
 
 
 
Total
 
$
8,510,994

 
100.0
%
 
4.45
%
 
8.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the six months ended June 30, 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 June 30, 2016, there was no commercial paper outstanding.
Note: The Company capitalized interest of approximately $28.4 million and $30.4 million during the six months ended June 30, 2016 and 2015, respectively. The Company capitalized interest of approximately $14.2 million and $15.1 million during the quarters ended June 30, 2016 and 2015, respectively.
Note: The Company recorded approximately $13.8 million and $3.1 million of net debt discount/deferred derivative settlement amortization as additional interest expense during the six months ended June 30, 2016 and 2015, respectively. The Company recorded approximately $4.8 million and $2.6 million of net debt discount/deferred derivative settlement amortization as additional interest expense during the quarters ended June 30, 2016 and 2015, respectively.

 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Maturity Schedule as of June 30, 2016
(Amounts 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
$
3,842

 
$
—

 
$
3,842

 
0.1
%
 
4.69
%
 
4.69
%
2017
 
605,397

 
456

 
605,853

 
7.1
%
 
6.19
%
 
6.18
%
2018
 
83,695

 
97,660

 
181,355

 
2.1
%
 
5.57
%
 
3.58
%
2019
 
807,680

 
482,811

 
1,290,491

 
15.2
%
 
5.47
%
 
3.86
%
2020
 
1,679,590

 
809

 
1,680,399

 
19.8
%
 
5.49
%
 
5.49
%
2021
 
946,257

 
856

 
947,113

 
11.1
%
 
4.63
%
 
4.63
%
2022
 
266,447

 
905

 
267,352

 
3.2
%
 
3.27
%
 
3.26
%
2023
 
1,327,965

 
956

 
1,328,921

 
15.6
%
 
3.74
%
 
3.74
%
2024
 
2,498

 
1,010

 
3,508

 
0.0
%
 
4.97
%
 
3.67
%
2025
 
452,625

 
1,069

 
453,694

 
5.3
%
 
3.38
%
 
3.38
%
2026+
 
1,271,816

 
582,898

 
1,854,714

 
21.8
%
 
4.76
%
 
3.41
%
Deferred Financing Costs
 
(31,712
)
 
(9,645
)
 
(41,357
)
 
(0.5
%)
 
N/A

 
N/A

Premium/(Discount)
 
(7,531
)
 
(57,360
)
 
(64,891
)
 
(0.8
%)
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
7,408,569

 
$
1,102,425

 
$
8,510,994

 
100.0
%
 
4.79
%
 
4.26
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of June 30, 2016.

2nd Quarter 2016 Earnings Release
 
15
                                            

Equity Residential
Unsecured Debt Summary as of June 30, 2016
(Amounts 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

 
 
4.500%
 
07/01/44
 
750,000

 
 
4.500%
 
06/01/45
 
300,000

Deferred Financing Costs and Unamortized (Discount)
 
 
 
 
 
(37,122
)
 
 
 
 
 
 
 
 
 
 
 
 
 
3,902,878

 
 
 
 
 
 
 
Floating Rate Notes:
 
 
 
 
 
 
 
 
(1)
 
07/01/19
 
450,000

Fair Value Derivative Adjustments
 
(1)
 
07/01/19
 
12,045

Deferred Financing Costs and Unamortized (Discount)
 
 
 
 
 
(1,928
)
 
 
 
 
 
 
 
 
 
 
 
 
 
460,117

 
 
 
 
 
 
 
Line of Credit and Commercial Paper:
 
 
 
 
 
 
Revolving Credit Facility (2) (3)
 
LIBOR+0.95%
 
04/01/18
 
—

Commercial Paper Program (2) (4)
 
 
 
 
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
—

 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
 
$
4,362,995


(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
)
The interest rate on advances under the $2.5 billion revolving credit facility maturing April 1, 2018 will generally be LIBOR plus a spread (currently 0.95%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of June 30, 2016, there was approximately $2.48 billion available on this facility (net of $24.6 million which was restricted/dedicated to support letters of credit).
 
 
(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 0.96% for the six months ended June 30, 2016. No amounts were outstanding at June 30, 2016.

2nd Quarter 2016 Earnings Release
 
16
                                            

 
Equity Residential
 
 
 
Selected Unsecured Public Debt Covenants
 
 
 
June 30,
2016
 
March 31,
2016
 
 
 
 
 
 
 
 
 
 
 
Total Debt to Adjusted Total Assets (not to exceed 60%)
 
33.1%
 
33.5%
 
 
 
 
 
 
 
Secured Debt to Adjusted Total Assets (not to exceed 40%)
 
16.2%
 
16.5%
 
 
 
 
 
 
 
Consolidated Income Available for Debt Service to
 
 
 
 
 
Maximum Annual Service Charges
 
 
 
 
 
(must be at least 1.5 to 1)
 
3.86
 
3.84
 
 
 
 
 
 
 
Total Unsecured Assets to Unsecured Debt
 
 
 
 
 
(must be at least 150%)
 
442.6%
 
437.0%
 
 
 
 
 
 
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
 
 
 
June 30,
2016
 
March 31,
2016
 
 
 
 
 
 
 
 
 
 
 
Total debt to Normalized EBITDA
 
5.00x
 
4.87x
 
 
 
 
 
 
 
Net debt to Normalized EBITDA
 
4.67x
 
4.63x
 
 
 
 
 
 
 
Unencumbered NOI as a % of total NOI
 
71.0%
 
70.8%
 
 
 
 
 
 
Note:
See page 23 for the Normalized EBITDA reconciliations.



2nd Quarter 2016 Earnings Release
 
17
                                            

Equity Residential
 
Capital Structure as of June 30, 2016
(Amounts in thousands except for share/unit and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
Secured Debt
 
 
 
 
 
$
4,147,999

 
48.7
%
 
 
Unsecured Debt
 
 
 
 
 
4,362,995

 
51.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
 
8,510,994

 
100.0
%
 
24.5
%
 
 
 
 
 
 
 
 
 
 
 
Common Shares (includes Restricted Shares)
 
365,550,636

 
96.1
%
 
 
 
 
 
 
Units (includes OP Units and Restricted Units)
 
14,706,597

 
3.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Shares and Units
 
380,257,233

 
100.0
%
 
 
 
 
 
 
Common Share Price at June 30, 2016
 
$
68.88

 
 
 
 
 
 
 
 
 
 
 
 
 
 
26,192,118

 
99.9
%
 
 
Perpetual Preferred Equity (see below)
 
 
 
 
 
37,280

 
0.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Equity
 
 
 
 
 
26,229,398

 
100.0
%
 
75.5
%
 
 
 
 
 
 
 
 
 
 
 
Total Market Capitalization
 
 
 
 
 
$
34,740,392

 
 
 
100.0
%

__________________________________________________________________________________________________________________________________________

Perpetual Preferred Equity as of June 30, 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

 
 
 
 
 
 
 
 
 
 
 



2nd Quarter 2016 Earnings Release
 
18
                                            

Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
YTD Q2 2016
 
YTD Q2 2015
 
Q2 2016
 
Q2 2015
 
 
 
 
 
 
 
 
 
 
Weighted Average Amounts Outstanding for Net Income Purposes:
 
 
 
 
 
 
 
 
Common Shares - basic
 
364,819,546

 
363,288,389

 
365,046,813

 
363,476,488

Shares issuable from assumed conversion/vesting of:
 
 
 
 
 
 
 
 
- OP Units
 
13,792,153

 
13,591,979

 
13,887,484

 
13,586,338

- long-term compensation shares/units
 
3,400,342

 
3,465,215

 
3,130,701

 
3,427,786

 
 
 
 
 
 
 
 
 
 
Total Common Shares and Units - diluted
 
382,012,041

 
380,345,583

 
382,064,998

 
380,490,612

 
 
 
 
 
 
 
 
 
Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes:
 
 
 
 
 
 
 
 
Common Shares - basic
 
364,819,546

 
363,288,389

 
365,046,813

 
363,476,488

OP Units - basic
 
13,792,153

 
13,591,979

 
13,887,484

 
13,586,338

 
 
 
 
 
 
 
 
 
 
Total Common Shares and OP Units - basic
 
378,611,699

 
376,880,368

 
378,934,297

 
377,062,826

Shares issuable from assumed conversion/vesting of:
 
 
 
 
 
 
 
 
- long-term compensation shares/units
 
3,400,342

 
3,465,215

 
3,130,701

 
3,427,786

 
 
 
 
 
 
 
 
 
 
Total Common Shares and Units - diluted
 
382,012,041

 
380,345,583

 
382,064,998

 
380,490,612

 
 
 
 
 
 
 
 
 
 
Period Ending Amounts Outstanding:
 
 
 
 
 
 
 
 
Common Shares (includes Restricted Shares)
 
365,550,636

 
364,050,890

 
 
 
 
Units (includes OP Units and Restricted Units)
 
14,706,597

 
14,466,127

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Shares and Units
 
380,257,233

 
378,517,017

 
 
 
 
 
 
 
 
 
 
 
 
 
 






2nd Quarter 2016 Earnings Release
 
19
                                            

Equity Residential
Partially Owned Entities as of June 30, 2016
(Amounts in thousands except for property and apartment unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
Unconsolidated
 
 
 
 
 
Total properties
 
18

 
3

 
 
 
 
 
Total apartment units
 
3,471

 
1,281

 
 
 
 
 
Operating information for the six months ended 6/30/16 (at 100%):
 
 
 
 
Operating revenue
 
$
46,331

 
$
18,933

Operating expenses
 
11,319

 
6,685

 
 
 
 
 
Net operating income
 
35,012

 
12,248

Property management
 
1,633

 
421

General and administrative/other
 
40

 
166

Depreciation
 
10,755

 
8,962

 
 
 
 
 
Operating income
 
22,584

 
2,699

Interest and other income
 
37

 
—

Interest:
 
 
 
 
Expense incurred, net
 
(7,549
)
 
(4,690
)
Amortization of deferred financing costs
 
(218
)
 
—

 
 
 
 
 
Income (loss) before income and other taxes and (loss)
 
 
 
 
    from investments in unconsolidated entities
 
14,854

 
(1,991
)
Income and other tax (expense) benefit
 
(44
)
 
(13
)
(Loss) from investments in unconsolidated entities
 
(731
)
 
—

Net income (loss)
 
$
14,079

 
$
(2,004
)
 
 
 
 
 
Debt - Secured (1):
 
 
 
 
EQR Ownership (2)
 
$
242,911

 
$
34,909

Noncontrolling Ownership
 
75,203

 
139,637

 
 
 
 
 
Total (at 100%)
 
$
318,114

 
$
174,546


(1)
All debt is non-recourse to the Company.
 
 
(2)
Represents the Company's current equity ownership interest.
 
 
 
 
 
 
 
 
 
 
Note:
The above table excludes the Company's interests in unconsolidated joint ventures entered into with AvalonBay Communities, Inc. ("AVB") in connection with the acquisition of certain real estate related assets from Archstone Enterprise LP (such assets are referred to herein as "Archstone"). These ventures owned certain non-core Archstone assets and succeeded to certain residual Archstone liabilities/litigation, as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests had an aggregate liquidation value of $42.1 million at June 30, 2016. The ventures are owned 60% by the Company and 40% by AVB.

2nd Quarter 2016 Earnings Release
 
20

Equity Residential
Development and Lease-Up Projects as of June 30, 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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Altitude (formerly Village at Howard Hughes)
 
Los Angeles, CA
 
545

 
$
193,231

 
$
184,417

 
$
150,579

 
$
—

 
97
%
 
11
%
 
5
%
 
Q3 2016
 
Q2 2017
The Alton (formerly Millikan)
 
Irvine, CA
 
344

 
102,331

 
87,595

 
87,595

 
—

 
77
%
 
—

 
—

 
Q4 2016
 
Q3 2017
One Henry Adams
 
San Francisco, CA
 
241

 
172,337

 
128,457

 
128,457

 
—

 
69
%
 
—

 
—

 
Q1 2017
 
Q4 2017
455 I St
 
Washington, DC
 
174

 
73,157

 
38,555

 
38,556

 
—

 
34
%
 
—

 
—

 
Q3 2017
 
Q2 2018
855 Brannan (formerly 801 Brannan)
 
San Francisco, CA
 
449

 
304,035

 
150,923

 
150,923

 
—

 
41
%
 
—

 
—

 
Q3 2017
 
Q1 2019
2nd & Pine
 
Seattle, WA
 
398

 
215,787

 
130,918

 
130,918

 
—

 
55
%
 
—

 
—

 
Q3 2017
 
Q2 2019
Cascade
 
Seattle, WA
 
477

 
176,378

 
92,594

 
92,594

 
—

 
46
%
 
—

 
—

 
Q3 2017
 
Q2 2019
100 K Street
 
Washington, DC
 
222

 
88,023

 
20,325

 
20,325

 
—

 
1
%
 
—

 
—

 
Q4 2018
 
Q4 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development
 
 
 
2,850

 
1,325,279

 
833,784

 
799,947

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completed Not Stabilized (1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Azure (at Mission Bay)
 
San Francisco, CA
 
273

 
187,390

 
185,094

 
—

 
—

 
 
 
99
%
 
96
%
 
Completed
 
Q3 2016
Odin (formerly Tallman)
 
Seattle, WA
 
301

 
80,677

 
80,459

 
—

 
—

 
 
 
98
%
 
98
%
 
Completed
 
Q3 2016
170 Amsterdam (2)
 
New York, NY
 
236

 
111,892

 
111,855

 
—

 
—

 
 
 
93
%
 
92
%
 
Completed
 
Q3 2016
Vista 99 (formerly Tasman)
 
San Jose, CA
 
554

 
214,923

 
200,587

 
—

 
—

 
 
 
80
%
 
76
%
 
Completed
 
Q2 2017
Potrero 1010
 
San Francisco, CA
 
453

 
224,474

 
213,422

 
—

 
—

 
 
 
59
%
 
46
%
 
Completed
 
Q2 2017
340 Fremont (formerly Rincon Hill)
 
San Francisco, CA
 
348

 
287,454

 
276,117

 
—

 
—

 
 
 
26
%
 
2
%
 
Completed
 
Q1 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed Not Stabilized
 
 
 
2,165

 
1,106,810

 
1,067,534

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completed and Stabilized During the Quarter:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Junction 47 (formerly West Seattle)
 
Seattle, WA
 
206

 
68,180

 
66,686

 
—

 
—

 
 
 
98
%
 
96
%
 
Completed
 
Stabilized
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed and Stabilized During the Quarter
 
 
 
206

 
68,180

 
66,686

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Development Projects
 
 
 
5,221

 
$
2,500,269

 
$
1,968,004

 
$
799,947

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land Held for Development
 
 
 
N/A
 
N/A
 
$
138,221

 
$
138,221

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Capital
Cost
 
Q2 2016
NOI
 
 
 
 
 
 
NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,325,279

 
$
(228
)
 
 
 
 
 
 
Completed Not Stabilized
 
 
 
 
 
 
 
 
 
 
 
 
 
1,106,810

 
6,858

 
 
 
 
 
 
Completed and Stabilized During the Quarter
 
 
 
 
 
 
 
 
 
 
 
68,180

 
1,072

 
 
 
 
 
 
Total Development NOI Contribution
 
 
 
 
 
 
 
 
 
 
 
$
2,500,269

 
$
7,702

 
 
 
 
 
 
 
 
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.
(2)
170 Amsterdam - The land under this project is subject to a long term ground lease.

2nd Quarter 2016 Earnings Release
 
21
                                            

Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Six Months Ended June 30, 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
72,494

 
$
40,924

 
$
565

 
$
33,288

 
$
459

 
$
74,212

 
$
1,024

 
$
33,251

 
$
459

 
$
31,631

 
$
436

 
$
64,882

 
$
895

(8)
$
139,094

 
$
1,919

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Same Store Properties (6)
5,683

 
1,871

 
444

 
1,389

 
330

 
3,260

 
774

 
2,616

 
621

 
4,604

 
1,092

 
7,220

 
1,713

 
10,480

 
2,487

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other (7)
—

 
2,937

 
 
 
3,394

 
 
 
6,331

 
 
 
1,689

 
 
 
659

 
 
 
2,348

 
 
 
8,679

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
78,177

 
$
45,732

 
 
 
$
38,071

 
 
 
$
83,803

 
 
 
$
37,556

 
 
 
$
36,894

 
 
 
$
74,450

 
 
 
$
158,253

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Total Apartment Units - Excludes 1,281 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 $20.7 million spent during the six months ended June 30, 2016 on apartment unit renovations/rehabs (primarily kitchens and baths) on 1,806 same store apartment units (equating to approximately $11,400 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2016, 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 4,214 apartment units.
 
 
(7)
Other - Primarily includes expenditures for properties sold and properties under development.
 
 
(8)
Based on the approximately 70,000 apartment units expected to be included in same store properties by December 31, 2016, the Company estimates that it will spend approximately $2,300 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,600 per apartment unit excluding apartment unit renovation/rehab costs during 2016.



2nd Quarter 2016 Earnings Release
 
22
                                            

Equity Residential
Normalized EBITDA Reconciliations
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Normalized EBITDA Reconciliations for Page 17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trailing Twelve Months
 
2016
 
2015
 
 
 
June 30, 2016
 
March 31, 2016
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
Net income
$
4,379,407

 
$
4,449,625

 
$
228,400

 
$
3,731,831

 
$
213,720

 
$
205,456

 
$
298,618

Interest expense incurred, net
524,802

 
549,196

 
86,472

 
213,492

 
110,540

 
114,298

 
110,866

Amortization of deferred financing costs
13,413

 
13,606

 
2,345

 
5,394

 
3,067

 
2,607

 
2,538

Depreciation
726,104

 
744,259

 
176,127

 
172,885

 
181,033

 
196,059

 
194,282

Income and other tax expense (benefit) (includes discontinued operations)
1,322

 
1,232

 
416

 
358

 
219

 
329

 
326

EBITDA
5,645,048

 
5,757,918

 
493,760

 
4,123,960

 
508,579

 
518,749

 
606,630

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property acquisition costs (other expenses)
2,242

 
2,244

 
76

 
1,335

 
804

 
27

 
78

Write-off of pursuit costs (other expenses)
4,120

 
4,163

 
1,115

 
1,448

 
886

 
671

 
1,158

Loss (income) from investments in unconsolidated entities
2,308

 
(10,958
)
 
800

 
1,104

 
(637
)
 
1,041

 
(12,466
)
Net (gain) on sales of land parcels
(11,722
)
 
(11,722
)
 
—

 
(11,722
)
 
—

 
—

 
—

(Gain) on sale of investment securities and other investments (interest and other income)
(55,295
)
 
(1,082
)
 
(54,600
)
 
(556
)
 
(139
)
 
—

 
(387
)
Executive compensation program duplicative costs and retirement benefit obligations
8,021

 
9,998

 
359

 
359

 
2,336

 
4,967

 
2,336

Insurance/litigation settlement or reserve income (interest and other income)
(1,581
)
 
(6,030
)
 
(1,321
)
 
(53
)
 
(207
)
 
—

 
(5,770
)
Insurance/litigation settlement or reserve expense (other expenses)
(2,149
)
 
(2,040
)
 
3

 
(244
)
 
(1,929
)
 
21

 
112

Other (interest and other income)
(108
)
 
(302
)
 
—

 
—

 
—

 
(108
)
 
(194
)
Net (gain) on sales of discontinued operations
(15
)
 
(15
)
 
—

 
(15
)
 
—

 
—

 
—

Net (gain) on sales of real estate properties
(3,887,216
)
 
(3,978,662
)
 
(57,356
)
 
(3,723,479
)
 
(39,442
)
 
(66,939
)
 
(148,802
)
Normalized EBITDA
$
1,703,653

 
$
1,763,512

 
$
382,836

 
$
392,137

 
$
470,251

 
$
458,429

 
$
442,695

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Items:
 
 
June 30, 2016
 
March 31, 2016
 
 
 
 
 
 
 
 
 
 
Total debt
 
 
$
8,510,994

 
$
8,583,818

 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
(497,843
)
 
(368,049
)
 
 
 
 
 
 
 
 
 
 
Mortgage principal reserves/sinking funds
 
(54,126
)
 
(52,305
)
 
 
 
 
 
 
 
 
 
Net debt
 
 
$
7,959,025

 
$
8,163,464

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2nd Quarter 2016 Earnings Release
 
23
                                            

Equity Residential
Adjustments from FFO to Normalized FFO
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
Quarter Ended June 30,
 
 
2016
 
2015
 
Variance
 
2016
 
2015
 
Variance
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Asset impairment and valuation allowances
 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Archstone indirect costs (loss (income) from investments in unconsolidated entities (A)
 
285

 
(16,718
)
 
17,003

 
(16
)
 
(11,301
)
 
11,285

Property acquisition costs (other expenses)
 
1,411

 
177

 
1,234

 
76

 
78

 
(2
)
Write-off of pursuit costs (other expenses)
 
2,563

 
1,651

 
912

 
1,115

 
1,158

 
(43
)
Property acquisition costs and write-off of pursuit costs
 
4,259

 
(14,890
)
 
19,149

 
1,175

 
(10,065
)
 
11,240

 
 
 
 
 
 
 
 
 
 
 
 
 
Prepayment premiums/penalties (interest expense)
 
112,419

 
—

 
112,419

 
—

 
—

 
—

Write-off of unamortized deferred financing costs (interest expense)
 
3,251

 
75

 
3,176

 
152

 
1

 
151

Write-off of unamortized (premiums)/discounts/OCI (interest expense)
 
4,494

 
(1,395
)
 
5,889

 
(85
)
 
(5
)
 
(80
)
Premium on redemption of Preferred Shares
 
—

 
2,789

 
(2,789
)
 
—

 
—

 
—

Debt extinguishment (gains) losses, including prepayment penalties,
preferred share redemptions and non-cash convertible debt discounts
 
120,164

 
1,469

 
118,695

 
67

 
(4
)
 
71

 
 
 
 
 
 
 
 
 
 
 
 
 
Net (gain) loss on sales of land parcels
 
(11,722
)
 
1

 
(11,723
)
 
—

 
—

 
—

Net (gain) on sales of unconsolidated entities – non-operating assets
 
—

 
(414
)
 
414

 
—

 
(2,071
)
 
2,071

(Gain) on sale of investment securities and other investments (interest and
other income) (B)
(55,156
)
 
(387
)
 
(54,769
)
 
(54,600
)
 
(387
)
 
(54,213
)
(Gains) losses on sales of non-operating assets, net of income and other tax
expense (benefit)
 
(66,878
)
 
(800
)
 
(66,078
)
 
(54,600
)
 
(2,458
)
 
(52,142
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Executive compensation program duplicative costs (C)
 
718

 
4,673

 
(3,955
)
 
359

 
2,336

 
(1,977
)
Insurance/litigation settlement or reserve income (interest and other income)
 
(1,374
)
 
(5,770
)
 
4,396

 
(1,321
)
 
(5,770
)
 
4,449

Insurance/litigation settlement or reserve expense (other expenses)
(241
)
 
(888
)
 
647

 
3

 
112

 
(109
)
Other (interest and other income)
—

 
(194
)
 
194

 
—

 
(194
)
 
194

Other miscellaneous items
(897
)
 
(2,179
)
 
1,282

 
(959
)
 
(3,516
)
 
2,557

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments from FFO to Normalized FFO
$
56,648

 
$
(16,400
)
 
$
73,048

 
$
(54,317
)
 
$
(16,043
)
 
$
(38,274
)
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 unconsolidated joint ventures with AVB. During the six months and quarter ended June 30, 2015, the amounts also include approximately $18.6 million and $11.7 million, respectively, received related to the favorable settlement of a lawsuit.
(B) The six months and quarter ended June 30, 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 Lews 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 six months and quarter ended June 30, 2016, the entire amounts have been recorded to general and administrative expense. For the six months ended June 30, 2015, $0.7 million and $4.0 million has been recorded to property management expense and general and administrative expense, respectively. For the quarter ended June 30, 2015, $0.3 million and $2.0 million has been recorded to property management expense and general and administrative expense, respectively.
Note: See pages 26 through 29 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.

2nd Quarter 2016 Earnings Release
 
24
                                            

    
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, property acquisition costs and the write-off of pursuit costs, are not included in the estimates provided on this page. The special dividend to be paid later in 2016 remains subject to the discretion of the Company's Board of Trustees and may vary materially due to, among other items, the amount and timing of 2016 dispositions. See pages 26 through 29 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.
 
 
 
2016 Normalized FFO Guidance (per share diluted)
 
 
 
 
 
 
 
 
 
 
 
Q3 2016
 
2016

 
 
 
 
 
 
 
Expected Normalized FFO Per Share
 
 
$0.75 to $0.79
 
$3.05 to $3.11
 
 
 
 
 
 
 
 
2016 Same Store Assumptions (see Note below)
 
 
 
 
 
 
 
 
Physical occupancy
 
 
 
 
95.9%
 
Revenue change
 
 
 
 
3.50% to 4.00%
 
Expense change
 
 
 
 
2.50% to 3.00%
 
NOI change
 
 
 
 
3.75% to 4.25%
 
 
 
 
 
 
 
 
Note: The same store guidance provided above is based on the approximately 70,000 apartment units expected to be included in same store properties by December 31, 2016. Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO per share/Normalized FFO per share.
 
 
 
2016 Transaction Assumptions
 
 
 
 
 
 
 
 
Consolidated rental acquisitions
 
$350.0 million
 
Consolidated rental dispositions
 
 
 
$6.9 billion
 
Spread between Acquisition Cap Rate and Disposition Yield
 
 
 
75 basis points
 
 
 
 
 
 
 
 
2016 Debt Assumptions
 
 
 
 
 
 
 
 
Weighted average debt outstanding
 
 
 
$8.9 billion to $9.2 billion
 
Weighted average interest rate (reduced for capitalized interest)
 
4.02%
 
Interest expense, net (on a Normalized FFO basis)
 
 
$357.8 million to $369.8 million
 
Capitalized interest
 
 
 
 
$49.0 million to $53.0 million
 
 
 
 
 
 
 
 
Note: All 2016 debt assumptions are shown on a Normalized FFO basis and therefore exclude the impact of the debt extinguishment costs/prepayment premiums/penalties shown on page 24.
 
 
 
 
 
 
 
 
2016 Other Guidance Assumptions
 
 
 
 
 
 
 
 
Property management expense
 
$82.0 million to $84.0 million
 
General and administrative expense (see Note below)
 
$58.0 million to $60.0 million
 
Interest and other income
 
$3.2 million to $4.0 million
 
Income and other tax expense
 
$1.0 million to $2.0 million
 
Debt offerings
 
$200.0 million to $250.0 million
 
Equity ATM share offerings
 
No amounts budgeted
 
Preferred share offerings
 
No amounts budgeted
 
Special dividend paid in Q1 2016
 
$8.00 per share
 
Special dividend to be paid later in 2016
 
$2.00 to $4.00 per share
 
Regular annual dividend (paid in four equal quarterly installments)
 
$2.015 per share
 
Weighted average Common Shares and Units - Diluted
 
382.4 million
 
 
 
 
 
 
 
 
Note: Normalized FFO guidance excludes a duplicative charge of approximately $1.4 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.
 

2nd Quarter 2016 Earnings Release
 
25
                                            

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 include 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 Economic Gain to net gain on sales of real estate properties in accordance with GAAP:
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Economic Gain
 
Accumulated
Depreciation Gain
 
Net Gain on Sales
of Real Estate
Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
Starwood sale
$
1,981,990

 
$
1,179,210

 
$
3,161,200

 
 
 
Woodland Park sale
258,896

 
30,442

 
289,338

 
 
 
River Tower sale
152,342

 
32,076

 
184,418

 
 
 
Other sales
75,509

 
70,370

 
145,879

 
 
 
 
 
 
 
 
 
 
 
 
Totals
$
2,468,737

 
$
1,312,098

 
$
3,780,835

 
 
 

2nd Quarter 2016 Earnings Release
 
26
                                            

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.


2nd 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)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table presents reconciliations of EPS to FFO per share and Normalized FFO per share for pages 6 and 25 (the expected guidance/projections provided below are based on current expectations and are forward-looking):
 
 
Actual June
YTD 2016
Per Share
 
Actual June
YTD 2015
Per Share
 
Actual
Q2 2016
Per Share
 
Actual
Q2 2015
Per Share
 
Expected
Q3 2016
Per Share
 
Expected
2016
Per Share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EPS - Diluted
$
10.36

 
$
1.27

 
$
0.59

 
$
0.78

 
$0.62 to $0.66
 
$11.84 to $11.90

Add: Depreciation expense
0.91

 
1.01

 
0.46

 
0.51

 
0.46
 
1.82

Less: Net gain on sales
(9.90
)
 
(0.60
)
 
(0.15
)
 
(0.39
)
 
(0.26)
 
(10.70)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share - Diluted
1.37

 
1.68

 
0.90

 
0.90

 
0.82 to 0.86
 
2.96 to 3.02

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset impairment and valuation allowances
—

 
—

 
—

 
—

 
—
 
—

Property acquisition costs and write-off of pursuit costs
0.01

 
(0.04
)
 
—

 
(0.03
)
 
—
 
0.02

Debt extinguishment (gains) losses, including prepayment
penalties, preferred share redemptions and non-cash
convertible debt discounts
0.31

 
—

 
—

 
—

 
—
 
0.32

(Gains) losses on sales of non-operating assets, net of
income and other tax expense (benefit)
(0.17
)
 
—

 
(0.14
)
 
(0.01
)
 
(0.07)
 
(0.25)

Other miscellaneous items
—

 
—

 
—

 
(0.01
)
 
—
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Normalized FFO per share - Diluted
$
1.52

 
$
1.64

 
$
0.76

 
$
0.85

 
$0.75 to $0.79
 
$3.05 to $3.11

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 rental income, operating expenses and NOI for the June YTD 2016 and the Second Quarter 2016 Same Store Properties (see page 10) to rental income, operating expenses and NOI per the consolidated statements of operations and NOI to operating income per the consolidated statements of operations:
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
Quarter Ended June 30,
 
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income:
 
 
 
 
 
 
 
 
 
 
Same store
 
$
1,099,117

 
$
1,053,117

 
$
556,022

 
$
533,482

 
 
Non-same store
 
111,987

 
287,997

 
38,917

 
143,026

 
 
Total rental income
 
1,211,104

 
1,341,114

 
594,939

 
676,508

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
Same store
 
320,884

 
318,166

 
159,569

 
156,886

 
 
Non-same store
 
42,199

 
93,950

 
14,153

 
44,238

 
 
Total operating expenses
 
363,083

 
412,116

 
173,722

 
201,124

 
 
 
 
 
 
 
 
 
 
 
 
 
NOI:
 
 
 
 
 
 
 
 
 
 
Same store
 
778,233

 
734,951

 
396,453

 
376,596

 
 
Non-same store
 
69,788

 
194,047

 
24,764

 
98,788

 
 
Total NOI
 
848,021

 
928,998

 
421,217

 
475,384

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Fee and asset management revenue
 
3,133

 
4,369

 
215

 
2,604

 
 
Property management
 
(44,486
)
 
(44,557
)
 
(20,991
)
 
(21,792
)
 
 
General and administrative
 
(35,013
)
 
(35,421
)
 
(18,296
)
 
(15,659
)
 
 
Depreciation
 
(349,012
)
 
(388,803
)
 
(176,127
)
 
(194,282
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
422,643

 
$
464,586

 
$
206,018

 
$
246,255

 

2nd 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)
 
 
 
 
 
 
 
 
 
 
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 – For the June 30, 2016 Portfolio Summary, represents budgeted 2016 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. For the December 31, 2015 Portfolio Summary, represents actual 2015 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.


2nd Quarter 2016 Earnings Release
 
29

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