EQUITY RESIDENTIAL - FORM 8-K - EX-99.1

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8-K - 8-K - EQUITY RESIDENTIAL	eqr-8k_20190129.htm

Fourth Quarter 2018 Results

Table of Contents

Earnings Release		1 - 5
Consolidated Statements of Operations		6
Consolidated Statements of Funds From Operations and Normalized Funds From Operations		7
Consolidated Balance Sheets		8
Portfolio Summary		9
Portfolio Rollforward		10
Same Store Results		11 - 15
Debt Summary		16 - 18
Capital Structure		19
Common Share and Unit Weighted Average Amounts Outstanding		20
Development and Lease-Up Projects		21
Capital Expenditures to Real Estate		22
Normalized EBITDAre Reconciliations		23
Adjustments from FFO to Normalized FFO		24
Normalized FFO Guidance and Assumptions		25
Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms.		26 - 30

Corporate Headquarters:
Two North Riverside Plaza
Chicago, IL 60606
(312) 474-1300

Information included in this supplemental package is unaudited.

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NEWS RELEASE - FOR IMMEDIATE RELEASE

January 29, 2019

Equity Residential Reports Full Year 2018 Results

Provides Outlook for 2019

Chicago, IL – January 29, 2019 - Equity Residential (NYSE: EQR) today reported results for the quarter and

year ended December 31, 2018. All per share results are reported as available to common shares/units on a

diluted basis. Earnings Per Share (EPS), Funds From Operations (FFO) per share and Normalized FFO per

share for the fourth quarter and full years of 2018 and 2017 are detailed below.

	Quarter Ended December 31,				Year Ended December 31,
	2018		2017		2018		2017
EPS	$	0.31	$	0.34	$	1.77	$	1.63
FFO per share	$	0.84	$	0.82	$	3.14	$	3.15
Normalized FFO per share	$	0.84	$	0.83	$	3.25	$	3.13

“We are pleased to have delivered same store revenue growth at the top end of our original guidance range and solid Normalized FFO growth in 2018. We saw a modest acceleration in our same store revenue results in the fourth quarter of 2018 and expect that to continue into 2019. Our outlook for 2019 is based on an expectation that continued economic growth will create the demand to absorb the elevated levels of new supply in many of our markets,” said Mark J. Parrell, Equity Residential’s President and CEO.

“Our markets continue to be attractive places for employers to locate and expand their businesses to draw on a diverse and talented pool of workers, resulting in strong demand for our product,” Mr. Parrell continued. “We expect that our outstanding people and well-positioned portfolio will deliver a superior customer experience to our residents and excellent risk adjusted returns to our shareholders.”

Highlights

•

The Company produced same store revenue growth of 2.3% for the full year 2018, with Physical Occupancy of 96.2% and renewal rate growth of 4.9%. The Company also produced the highest resident retention in its history.

•

The Company produced same store revenue growth of 2.6% in the fourth quarter of 2018 with Physical Occupancy of 96.2% and renewal rate growth of 5.2%.

•

During the fourth quarter of 2018, the Company completed the development of its 100K property in Washington, D.C. and completed the stabilization of its Cascade development property in Seattle.

•

During the fourth quarter of 2018, the Company issued $400.0 million of 10-year unsecured notes at a coupon of 4.15%. These were issued as “green” bonds and are the first green bond issuance from an apartment REIT.

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Fourth Quarter 2018

EPS for the fourth quarter of 2018 was $0.31 compared to $0.34 in the fourth quarter of 2017. The difference is due primarily to lower property sale gains in the fourth quarter of 2018, the various adjustment items listed on page 24 of this release and the items described below.

FFO as defined by Nareit (National Association of Real Estate Investment Trusts) was $0.84 per share for the fourth quarter of 2018 compared to $0.82 per share in the fourth quarter of 2017. The difference is due primarily to the various adjustment items listed on page 24 of this release and the items described below.

Normalized FFO for the fourth quarter of 2018 was $0.84 per share compared to $0.83 per share in the fourth quarter of 2017. The difference is due primarily to:

•

A positive impact of approximately $0.02 per share from increased same store net operating income (NOI);

•

A positive impact of approximately $0.01 per share from Lease-Up NOI offset by a negative impact of approximately $0.01 per share from other non-same store NOI primarily driven by the casualty losses described below;

•

A positive impact of approximately $0.01 per share from lower total interest expense;

•

A negative impact of approximately $0.01 per share from lower NOI as a result of the Company’s 2018 and 2017 transaction activity; and

•

A negative impact of approximately $0.01 per share from higher corporate overhead (property management and general and administrative expenses).

The Company’s fourth quarter 2018 financial results had a negative impact of approximately $0.01 per share primarily from certain casualty losses driven by rainstorm damage to assets in its Washington, D.C. area portfolio.

The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 26 through 30 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 7, 27 and 28 of this release and the Company has included guidance for 2019 Normalized FFO per share on page 25 and 2019 FFO per share and 2019 EPS on page 28 of this release.

Year Ended December 31, 2018

EPS for the year ended December 31, 2018 was $1.77 compared to $1.63 in the year ended December 31, 2017. The difference is due primarily to higher property sale gains offset by higher depreciation expense in the year ended December 31, 2018, the various adjustment items listed on page 24 of this release and the items described below.

FFO was $3.14 per share for the year ended December 31, 2018 compared to $3.15 per share in the year ended December 31, 2017. The difference is due primarily to the various adjustment items listed on page 24 of this release and the items described below.

Normalized FFO for the year ended December 31, 2018 was $3.25 per share compared to $3.13 per share in the year ended December 31, 2017. The difference is due primarily to:

•

A positive impact of approximately $0.07 per share from increased same store NOI;

•

A positive impact of approximately $0.10 per share from Lease-Up NOI and other non-same store NOI;

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•

A negative impact of approximately $0.01 per share from lower NOI as a result of the Company’s 2018 and 2017 transaction activity;

•

A negative impact of approximately $0.01 per share from higher total interest expense; and

•

A negative impact of approximately $0.03 per share from other items including higher corporate overhead (property management and general and administrative expenses).

The Company’s full year 2018 financial results had a negative impact of approximately $0.01 per share primarily from certain casualty losses driven by rainstorm damage to assets in its Washington, D.C. area portfolio.

Same Store Results

The following table provides the increases for same store results/statistics for the fourth quarter 2018 to fourth quarter 2017 comparison, which includes 73,992 apartment units, and for the full year 2018 to full year 2017 comparison, which includes 71,721 apartment units. The Company’s Physical Occupancy was 96.2% for both the fourth quarter of 2018 and the full year of 2018.

	Fourth Quarter 2018 vs.	Full Year 2018 vs.
	Fourth Quarter 2017	Full Year 2017
Revenues	2.6%	2.3%
Expenses	4.2%	3.6%
NOI	1.9%	1.7%
Average Rental Rate	2.5%	2.0%

Investment Activity

The Company did not acquire or sell any apartment properties during the fourth quarter of 2018.

During the full year 2018, the Company acquired five apartment properties consisting of 1,478 apartment units for an aggregate purchase price of approximately $707.0 million at a weighted average Acquisition Capitalization Rate of 4.4%. During the full year 2018, the Company sold five apartment properties consisting of 1,292 apartment units for an aggregate sale price of approximately $706.1 million at a weighted average Disposition Yield of 4.1%, generating an Unlevered IRR of 8.7%. During 2018, the Company sold a land parcel in suburban Maryland for approximately $2.7 million.

In January 2019, the Company acquired three apartment properties consisting of 579 apartment units for an aggregate purchase price of approximately $258.7 million at a weighted average Acquisition Capitalization Rate of 4.6%. The properties are located in Denver, Seattle and Jersey City, New Jersey.

Capital Markets Activity

On November 30, 2018, the Company issued $400.0 million of 10-year unsecured notes at a coupon of 4.15%. After the effect of the termination of certain interest rate hedges, underwriters’ fees and other costs associated with the offering, the all-in effective rate of the notes is approximately 3.85%. These notes were issued as “green” bonds and as a result, the Company will allocate an amount equal to the net proceeds of approximately $396.7 million from this issuance to one or more eligible green projects, such as its recently developed 855 Brannan community in San Francisco, which received LEED Home Platinum certification.

First Quarter 2019 Guidance

The Company has established guidance ranges for the first quarter of 2019 EPS, FFO per share and Normalized FFO per share as listed below:

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		Q1 2019
		Guidance
EPS		$0.25 to $0.29
FFO per share		$0.77 to $0.81
Normalized FFO per share		$0.78 to $0.82

The difference between the fourth quarter 2018 EPS of $0.31 and the first quarter 2019 guidance midpoint of $0.27 is due primarily to the items described below.

The difference between the fourth quarter 2018 FFO of $0.84 per share and the first quarter 2019 guidance midpoint of $0.79 per share is due primarily to the items described below.

The difference between the fourth quarter 2018 Normalized FFO of $0.84 per share and the first quarter 2019 guidance midpoint of $0.80 per share is due primarily to:

•

A positive impact of approximately $0.01 per share from higher NOI as a result of the Company’s 2019 and 2018 transaction activity;

•

A negative impact of approximately $0.02 per share from lower same store NOI;

•

A negative impact of approximately $0.01 per share from higher total interest expense; and

•

A negative impact of approximately $0.02 per share from other items including higher corporate overhead (property management and general and administrative expenses).

Full Year 2019 Guidance

The Company is providing guidance for its full year 2019 same store operating performance, EPS, FFO per share, Normalized FFO per share, transactions and debt offerings as listed below:

Same Store:
Physical Occupancy		96.2%
Revenue change		2.2% to 3.2%
Expense change		3.5% to 4.5%
NOI change		1.5% to 3.0%

EPS		$1.88 to $1.98
FFO per share		$3.26 to $3.36
Normalized FFO per share		$3.34 to $3.44

Transactions:
Consolidated rental acquisitions		$700.0 million
Consolidated rental dispositions		$700.0 million
Transaction Accretion (Dilution)		(25 basis points)

Debt Offerings		$700.0 million to $900.0 million

The difference between the Company’s full year 2018 EPS of $1.77 and the midpoint of the full year 2019 guidance range of $1.93 is due primarily to lower expected property sale gains, lower expected debt extinguishment costs and the items described below.

The difference between the Company’s full year 2018 FFO of $3.14 per share and the midpoint of the full year 2019 guidance range of $3.31 per share is due primarily to lower expected debt extinguishment costs and the items described below.

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The difference between the Company’s full year 2018 Normalized FFO of $3.25 per share and the midpoint of the full year 2019 guidance range of $3.39 per share is due primarily to:

•

A positive impact of approximately $0.10 per share from increased same store NOI;

•

A positive impact of approximately $0.04 per share from Lease-Up NOI and other non-same store NOI;

•

A positive impact of approximately $0.01 per share from higher NOI as a result of the Company’s 2019 and 2018 transaction activity; and

•

A negative impact of approximately $0.01 per share from higher total interest expense.

First Quarter 2019 Earnings and Conference Call

Equity Residential expects to announce its first quarter 2019 results on Tuesday, April 30, 2019 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, May 1, 2019.

About Equity Residential

Equity Residential is an S&P 500 company focused on the acquisition, development and management of rental apartment properties located in urban and high-density suburban markets where today’s renters want to live, work and play. Equity Residential owns or has investments in 307 properties consisting of 79,482 apartment units, primarily located in Boston, New York, Washington, D.C., Seattle, San Francisco, Southern California and Denver. 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, January 30, 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.

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Equity Residential

Consolidated Statements of Operations

(Amounts in thousands except per share data)

(Unaudited)

	Year Ended December 31,						Quarter Ended December 31,
	2018			2017			2018			2017
REVENUES
Rental income	$	2,577,681		$	2,470,689		$	652,553		$	630,519
Fee and asset management		753			717			190			185
Total revenues		2,578,434			2,471,406			652,743			630,704

EXPENSES
Property and maintenance		429,335			405,281			106,848			98,636
Real estate taxes and insurance		357,814			335,495			89,030			82,177
Property management		92,485			85,493			23,310			20,791
General and administrative		53,813			52,224			12,393			11,858
Depreciation		785,725			743,749			201,856			200,785
Impairment		702			1,693			—			1,693
Total expenses		1,719,874			1,623,935			433,437			415,940

Operating income		858,560			847,471			219,306			214,764

Interest and other income		15,317			6,136			457			428
Other expenses		(17,267	)		(5,186	)		(2,396	)		(2,026	)
Interest:
Expense incurred, net		(413,360	)		(383,890	)		(91,906	)		(95,311	)
Amortization of deferred financing costs		(11,310	)		(8,526	)		(2,256	)		(2,079	)
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of real estate properties and land parcels		431,940			456,005			123,205			115,776
Income and other tax (expense) benefit		(878	)		(478	)		(111	)		232
Income (loss) from investments in unconsolidated entities		(3,667	)		(3,370	)		(674	)		(1,217	)
Net gain (loss) on sales of real estate properties		256,810			157,057			(24	)		15,296
Net gain (loss) on sales of land parcels		987			19,167			(8	)		(3	)
Net income		685,192			628,381			122,388			130,084
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(24,939	)		(22,604	)		(4,422	)		(4,673	)
Partially Owned Properties		(2,718	)		(2,323	)		(779	)		31
Net income attributable to controlling interests		657,535			603,454			117,187			125,442
Preferred distributions		(3,090	)		(3,091	)		(772	)		(773	)
Net income available to Common Shares	$	654,445		$	600,363		$	116,415		$	124,669

Earnings per share – basic:
Net income available to Common Shares	$	1.78		$	1.64		$	0.32		$	0.34
Weighted average Common Shares outstanding		368,052			366,968			368,445			367,442

Earnings per share – diluted:
Net income available to Common Shares	$	1.77		$	1.63		$	0.31		$	0.34
Weighted average Common Shares outstanding		383,695			382,678			384,296			383,105

Distributions declared per Common Share outstanding	$	2.16		$	2.015		$	0.54		$	0.50375

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Equity Residential

Consolidated Statements of Funds From Operations and Normalized Funds From Operations

(Amounts in thousands except per share data)

(Unaudited)

	Year Ended December 31,						Quarter Ended December 31,
	2018			2017			2018			2017
Net income	$	685,192		$	628,381		$	122,388		$	130,084
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties		(2,718	)		(2,323	)		(779	)		31
Preferred distributions		(3,090	)		(3,091	)		(772	)		(773	)
Net income available to Common Shares and Units		679,384			622,967			120,837			129,342

Adjustments:
Depreciation		785,725			743,749			201,856			200,785
Depreciation – Non-real estate additions		(4,561	)		(5,023	)		(1,164	)		(1,215	)
Depreciation – Partially Owned Properties		(3,740	)		(4,526	)		(903	)		(2,026	)
Depreciation – Unconsolidated Properties		4,451			4,577			1,004			1,147
Net (gain) loss on sales of unconsolidated entities - operating assets		—			(73	)		—			(5	)
Net (gain) loss on sales of real estate properties		(256,810	)		(157,057	)		24			(15,296	)
Noncontrolling Interests share of gain (loss) on sales of real estate properties		(284	)		290			—			290
Impairment – operating assets		702			—			—			—
FFO available to Common Shares and Units		1,204,867			1,204,904			321,654			313,022

Adjustments (see page 24 for additional detail):
Impairment – non-operating assets		—			1,693			—			1,693
Write-off of pursuit costs		4,450			3,106			1,325			777
Debt extinguishment and preferred share redemption (gains) losses		41,335			11,789			193			—
Non-operating asset (gains) losses		(161	)		(18,884	)		94			471
Other miscellaneous items		(1,781	)		(3,371	)		827			824
Normalized FFO available to Common Shares and Units	$	1,248,710		$	1,199,237		$	324,093		$	316,787

FFO	$	1,207,957		$	1,207,995		$	322,426		$	313,795
Preferred distributions		(3,090	)		(3,091	)		(772	)		(773	)
FFO available to Common Shares and Units	$	1,204,867		$	1,204,904		$	321,654		$	313,022
FFO per share and Unit – basic	$	3.16		$	3.17		$	0.84		$	0.82
FFO per share and Unit – diluted	$	3.14		$	3.15		$	0.84		$	0.82

Normalized FFO	$	1,251,800		$	1,202,328		$	324,865		$	317,560
Preferred distributions		(3,090	)		(3,091	)		(772	)		(773	)
Normalized FFO available to Common Shares and Units	$	1,248,710		$	1,199,237		$	324,093		$	316,787
Normalized FFO per share and Unit – basic	$	3.28		$	3.16		$	0.85		$	0.83
Normalized FFO per share and Unit – diluted	$	3.25		$	3.13		$	0.84		$	0.83

Weighted average Common Shares and Units outstanding – basic		380,921			379,870			381,306			380,325
Weighted average Common Shares and Units outstanding – diluted		383,695			382,678			384,296			383,105

Note: See page 24 for additional detail regarding the adjustments from FFO to Normalized FFO. See pages 26 through 30 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.

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Equity Residential

Consolidated Balance Sheets

(Amounts in thousands except for share amounts)

(Unaudited)

	December 31,			December 31,
	2018			2017
ASSETS
Land	$	5,875,803		$	5,996,024
Depreciable property		20,435,901			19,768,362
Projects under development		109,409			163,547
Land held for development		89,909			98,963
Investment in real estate		26,511,022			26,026,896
Accumulated depreciation		(6,696,281	)		(6,040,378	)
Investment in real estate, net		19,814,741			19,986,518
Investments in unconsolidated entities		58,349			58,254
Cash and cash equivalents		47,442			50,647
Restricted deposits		68,871			50,115
Other assets		404,806			425,065
Total assets	$	20,394,209		$	20,570,599

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	2,385,470		$	3,618,722
Notes, net		5,933,286			5,038,812
Line of credit and commercial paper		499,183			299,757
Accounts payable and accrued expenses		102,471			114,766
Accrued interest payable		62,622			58,035
Other liabilities		358,563			341,852
Security deposits		67,258			65,009
Distributions payable		206,601			192,828
Total liabilities		9,615,454			9,729,781

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		379,106			366,955
Equity:
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 745,600 shares issued and outstanding as of December 31, 2018 and December 31, 2017		37,280			37,280
Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 369,405,161 shares issued and outstanding as of December 31, 2018 and 368,018,082 shares issued and outstanding as of December 31, 2017		3,694			3,680
Paid in capital		8,935,453			8,886,586
Retained earnings		1,261,763			1,403,530
Accumulated other comprehensive income (loss)		(64,986	)		(88,612	)
Total shareholders’ equity		10,173,204			10,242,464
Noncontrolling Interests:
Operating Partnership		228,738			226,691
Partially Owned Properties		(2,293	)		4,708
Total Noncontrolling Interests		226,445			231,399
Total equity		10,399,649			10,473,863
Total liabilities and equity	$	20,394,209		$	20,570,599

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Equity Residential

Portfolio Summary

As of December 31, 2018

					% of Stabilized
					% of Stabilized			Average
			Apartment		Budgeted			Rental
Markets/Metro Areas	Properties		Units		NOI			Rate

Los Angeles		70		15,968		18.5	%	$	2,551
Orange County		13		4,028		4.3	%		2,202
San Diego		12		3,385		3.8	%		2,376
Subtotal – Southern California		95		23,381		26.6	%		2,465

San Francisco		55		13,424		20.6	%		3,219
Washington DC		49		16,050		17.1	%		2,396
New York		37		9,741		15.2	%		3,848
Boston		25		6,641		10.2	%		3,061
Seattle		41		8,438		9.6	%		2,387
Denver		2		726		0.7	%		2,088
Other Markets		1		136		—	%		1,217
Total		305		78,537		100.0	%		2,789

Unconsolidated Properties		2		945		—			—

Grand Total		307		79,482		100.0	%	$	2,789

Note: Projects under development are not included in the Portfolio Summary until construction has been completed.

4th Quarter 2018 Earnings Release

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Equity Residential

Portfolio as of December 31, 2018

	Properties		Apartment Units

Wholly Owned Properties		287		74,840
Master-Leased Properties - Consolidated		1		162
Partially Owned Properties - Consolidated		17		3,535
Partially Owned Properties - Unconsolidated		2		945

		307		79,482

Portfolio Rollforward Q4 2018

($ in thousands)

		Properties		Apartment Units

	9/30/2018		306		79,260


Completed Developments - Consolidated			1		222


	12/31/2018		307		79,482

Portfolio Rollforward 2018

($ in thousands)

		Properties			Apartment Units			Purchase Price			Acquisition Cap Rate

	12/31/2017		305			78,611

Acquisitions:
Consolidated:
Rental Properties			5			1,478		$	707,005			4.4	%

								Sales Price			Disposition Yield

Dispositions:
Consolidated:
Rental Properties			(5	)		(1,292	)	$	(706,120	)		(4.1	%)
Land Parcels			—			—		$	(2,700	)


Completed Developments - Consolidated			2			671
Configuration Changes			—			14

	12/31/2018		307			79,482

4th Quarter 2018 Earnings Release

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Equity Residential

Fourth Quarter 2018 vs. Fourth Quarter 2017

Same Store Results/Statistics for 73,992 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

	Results									Statistics
Description	Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Q4 2018	$	616,496		$	180,218		$	436,278		$	2,784			96.2	%		10.6	%
Q4 2017	$	601,061		$	173,033		$	428,028		$	2,717			95.9	%		11.2	%

Change	$	15,435		$	7,185		$	8,250		$	67			0.3	%		(0.6	%)

Change		2.6	%		4.2	%		1.9	%		2.5	%

Fourth Quarter 2018 vs. Third Quarter 2018

Same Store Results/Statistics for 76,477 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

	Results									Statistics
Description	Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Q4 2018	$	638,695		$	187,979		$	450,716		$	2,791			96.2	%		10.7	%
Q3 2018	$	639,995		$	193,320		$	446,675		$	2,789			96.2	%		16.4	%

Change	$	(1,300	)	$	(5,341	)	$	4,041		$	2			0.0	%		(5.7	%)

Change		(0.2	%)		(2.8	%)		0.9	%		0.1	%

2018 vs. 2017

Same Store Results/Statistics for 71,721 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

	Results									Statistics
Description	Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

2018	$	2,363,491		$	705,890		$	1,657,601		$	2,748			96.2	%		51.1	%
2017	$	2,311,240		$	681,198		$	1,630,042		$	2,693			96.0	%		53.4	%

Change	$	52,251		$	24,692		$	27,559		$	55			0.2	%		(2.3	%)

Change		2.3	%		3.6	%		1.7	%		2.0	%

Note: See page 29 for reconciliations from operating income.

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Equity Residential

Fourth Quarter 2018 vs. Fourth Quarter 2017

Same Store Results/Statistics by Market

														Increase (Decrease) from Prior Year's Quarter
Markets/Metro Areas	Apartment Units		Q4 2018 % of Actual NOI			Q4 2018 Average Rental Rate		Q4 2018 Weighted Average Physical Occupancy %			Q4 2018 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Los Angeles		15,371		18.7	%	$	2,558		96.2	%		12.7	%		4.4	%		7.5	%		3.2	%		4.1	%		0.5	%		(0.4	%)
Orange County		4,028		4.5	%		2,202		96.2	%		10.5	%		3.9	%		3.1	%		4.2	%		3.7	%		0.3	%		(0.1	%)
San Diego		3,385		4.0	%		2,376		96.3	%		13.8	%		3.9	%		6.7	%		2.9	%		3.8	%		0.3	%		(0.3	%)
Subtotal – Southern California		22,784		27.2	%		2,468		96.2	%		12.5	%		4.3	%		6.8	%		3.4	%		4.0	%		0.4	%		(0.3	%)

San Francisco		12,975		21.1	%		3,183		95.6	%		11.1	%		3.2	%		(4.7	%)		5.8	%		3.5	%		(0.2	%)		(0.5	%)
Washington DC		15,492		17.5	%		2,386		96.4	%		10.0	%		1.2	%		3.6	%		0.2	%		1.4	%		(0.1	%)		0.2	%
New York		9,501		16.0	%		3,857		96.7	%		7.4	%		1.3	%		8.0	%		(2.6	%)		1.0	%		0.3	%		(0.4	%)
Boston		6,009		9.7	%		3,043		96.1	%		9.0	%		2.6	%		4.1	%		2.0	%		2.1	%		0.3	%		(1.3	%)
Seattle		7,095		8.4	%		2,316		96.1	%		11.3	%		1.5	%		4.7	%		0.4	%		1.0	%		1.1	%		(2.4	%)
Other Markets		136		0.1	%		1,217		97.8	%		6.6	%		6.9	%		(1.9	%)		11.4	%		5.2	%		1.7	%		(5.2	%)

Total		73,992		100.0	%	$	2,784		96.2	%		10.6	%		2.6	%		4.2	%		1.9	%		2.5	%		0.3	%		(0.6	%)

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Equity Residential

Fourth Quarter 2018 vs. Third Quarter 2018

Same Store Results/Statistics by Market

														Increase (Decrease) from Prior Quarter
Markets/Metro Areas	Apartment Units		Q4 2018 % of Actual NOI			Q4 2018 Average Rental Rate		Q4 2018 Weighted Average Physical Occupancy %			Q4 2018 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Los Angeles		15,968		18.6	%	$	2,551		96.3	%		12.8	%		(0.2	%)		(0.1	%)		(0.3	%)		0.6	%		(0.4	%)		(4.3	%)
Orange County		4,028		4.4	%		2,202		96.2	%		10.5	%		0.0	%		(2.3	%)		0.7	%		0.1	%		0.0	%		(6.4	%)
San Diego		3,385		3.8	%		2,376		96.3	%		13.8	%		0.5	%		(3.1	%)		1.8	%		1.2	%		(0.4	%)		(4.3	%)
Subtotal – Southern California		23,381		26.8	%		2,465		96.2	%		12.5	%		(0.1	%)		(0.8	%)		0.2	%		0.6	%		(0.4	%)		(4.8	%)

San Francisco		13,424		21.2	%		3,207		95.6	%		11.0	%		0.1	%		(7.3	%)		2.7	%		0.3	%		(0.1	%)		(5.6	%)
Washington DC		15,666		17.2	%		2,390		96.4	%		10.0	%		(0.5	%)		(5.8	%)		1.9	%		(0.5	%)		0.1	%		(6.8	%)
New York		9,741		15.8	%		3,848		96.6	%		7.5	%		(0.5	%)		0.8	%		(1.4	%)		(0.2	%)		(0.2	%)		(5.4	%)
Boston		6,169		9.6	%		3,059		96.0	%		9.1	%		0.7	%		(2.5	%)		2.0	%		0.0	%		0.4	%		(9.1	%)
Seattle		7,960		9.3	%		2,365		96.0	%		11.6	%		(0.9	%)		(3.3	%)		0.0	%		(0.2	%)		0.4	%		(4.1	%)
Other Markets		136		0.1	%		1,217		97.8	%		6.6	%		0.4	%		(8.7	%)		5.1	%		1.2	%		(0.7	%)		(5.9	%)

Total		76,477		100.0	%	$	2,791		96.2	%		10.7	%		(0.2	%)		(2.8	%)		0.9	%		0.1	%		0.0	%		(5.7	%)

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Equity Residential

2018 vs. 2017

Same Store Results/Statistics by Market

														Increase (Decrease) from Prior Year
Markets/Metro Areas	Apartment Units		2018 % of Actual NOI			2018 Average Rental Rate		2018 Weighted Average Physical Occupancy %			2018 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Los Angeles		14,240		17.9	%	$	2,507		96.2	%		56.5	%		3.6	%		4.7	%		3.2	%		3.6	%		0.2	%		(2.8	%)
Orange County		3,684		4.2	%		2,153		96.1	%		50.2	%		3.5	%		2.4	%		3.9	%		3.7	%		(0.1	%)		(2.0	%)
San Diego		3,385		4.1	%		2,335		96.3	%		60.5	%		3.9	%		4.1	%		3.8	%		3.8	%		0.0	%		(3.7	%)
Subtotal – Southern California		21,309		26.2	%		2,418		96.2	%		56.1	%		3.6	%		4.3	%		3.4	%		3.6	%		0.1	%		(2.8	%)

San Francisco		12,315		20.4	%		3,074		96.0	%		51.2	%		2.9	%		(2.8	%)		4.7	%		2.6	%		0.2	%		(2.8	%)
Washington DC		15,492		18.1	%		2,379		96.3	%		49.6	%		1.0	%		3.6	%		(0.1	%)		0.8	%		0.2	%		(0.7	%)
New York		9,501		16.7	%		3,844		96.5	%		38.3	%		0.8	%		6.5	%		(2.7	%)		0.3	%		0.3	%		(3.4	%)
Boston		6,009		10.0	%		3,015		95.9	%		50.0	%		2.5	%		4.0	%		1.9	%		2.1	%		0.1	%		(2.2	%)
Seattle		6,959		8.5	%		2,301		95.8	%		56.9	%		2.8	%		5.1	%		2.0	%		2.4	%		0.3	%		(2.6	%)
Other Markets		136		0.1	%		1,203		98.5	%		52.2	%		5.5	%		0.8	%		8.1	%		4.6	%		0.9	%		7.3	%

Total		71,721		100.0	%	$	2,748		96.2	%		51.1	%		2.3	%		3.6	%		1.7	%		2.0	%		0.2	%		(2.3	%)

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Equity Residential

Fourth Quarter 2018 vs. Fourth Quarter 2017

Same Store Operating Expenses for 73,992 Same Store Apartment Units

$ in thousands

	Actual Q4 2018		Actual Q4 2017		$ Change			% Change			% of Actual Q4 2018 Operating Expenses

Real estate taxes	$	75,596	$	74,758	$	838			1.1	%		41.9	%
On-site payroll		40,935		37,904		3,031			8.0	%		22.7	%
Utilities		24,623		23,382		1,241			5.3	%		13.7	%
Repairs and maintenance		22,604		20,891		1,713			8.2	%		12.5	%
Insurance		4,816		4,587		229			5.0	%		2.7	%
Leasing and advertising		2,663		2,473		190			7.7	%		1.5	%
Other on-site operating expenses		8,981		9,038		(57	)		(0.6	%)		5.0	%

Same store operating expenses	$	180,218	$	173,033	$	7,185			4.2	%		100.0	%

2018 vs. 2017

Same Store Operating Expenses for 71,721 Same Store Apartment Units

$ in thousands

	Actual 2018		Actual 2017		$ Change			% Change			% of Actual 2018 Operating Expenses

Real estate taxes	$	297,734	$	287,999	$	9,735			3.4	%		42.2	%
On-site payroll		156,859		150,924		5,935			3.9	%		22.2	%
Utilities		95,761		91,630		4,131			4.5	%		13.6	%
Repairs and maintenance		90,424		85,685		4,739			5.5	%		12.8	%
Insurance		18,272		17,359		913			5.3	%		2.6	%
Leasing and advertising		9,959		9,726		233			2.4	%		1.4	%
Other on-site operating expenses		36,881		37,875		(994	)		(2.6	%)		5.2	%

Same store operating expenses	$	705,890	$	681,198	$	24,692			3.6	%		100.0	%

Note: See pages 26 through 30 for the definitions of non-GAAP financial measures and other terms.

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Equity Residential

Debt Summary as of December 31, 2018

($ in thousands)

	Amounts (1)		% of Total			Weighted Average Rates (1)			Weighted Average Maturities (years)

Secured	$	2,385,470		27.1	%		4.15	%		6.7
Unsecured		6,432,469		72.9	%		4.10	%		9.3

Total	$	8,817,939		100.0	%		4.12	%		8.6
Fixed Rate Debt:
Secured – Conventional	$	1,885,407		21.4	%		4.61	%		4.3
Unsecured – Public		5,485,884		62.2	%		4.37	%		10.9

Fixed Rate Debt		7,371,291		83.6	%		4.45	%		9.2

Floating Rate Debt:
Secured – Conventional		6,357		0.1	%		1.93	%		5.6
Secured – Tax Exempt		493,706		5.6	%		2.14	%		15.6
Unsecured – Public (2)		447,402		5.1	%		2.84	%		0.5
Unsecured – Revolving Credit Facility (3)		—		—			2.97	%		3.0
Unsecured – Commercial Paper Program (4)		499,183		5.6	%		2.35	%		—

Floating Rate Debt		1,446,648		16.4	%		2.46	%		5.8

Total	$	8,817,939		100.0	%		4.12	%		8.6

(1)	Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 2018.

(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)

The Company’s $2.0 billion unsecured revolving credit facility matures January 10, 2022. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.825%), or based on bids received from the lending group, and an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. As of December 31, 2018, there were no borrowings outstanding under the facility and $6.7 million was restricted/dedicated to support letters of credit. In addition, the Company limits its utilization of the facility in order to maintain liquidity to support its $500.0 million commercial paper program along with certain other obligations. As a result, the Company had approximately $1.40 billion available under the facility at December 31, 2018.

(4)	The Company may borrow up to a maximum of $500.0 million under its commercial paper program subject to market conditions. The notes bear interest at various floating rates. At December 31, 2018, the weighted average maturity of commercial paper outstanding was 22 days.

Note: The Company capitalized interest of approximately $6.3 million and $26.3 million during the years ended December 31, 2018 and 2017, respectively. The Company capitalized interest of approximately $1.8 million and $3.1 million during the quarters ended December 31, 2018 and 2017, respectively.

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Equity Residential

Debt Maturity Schedule as of December 31, 2018

($ in thousands)

Year	Fixed Rate (1)				Floating Rate (1)				Total			% of Total			Weighted Average Rates on Fixed Rate Debt (1)			Weighted Average Rates on Total Debt (1)

2019	$	6,731			$	968,223		(2)	$	974,954			10.9	%		3.73	%		2.86	%
2020		1,128,592		(3)		700				1,129,292			12.7	%		5.20	%		5.20	%
2021		927,506				600				928,106			10.4	%		4.64	%		4.64	%
2022		265,341				800				266,141			3.0	%		3.26	%		3.26	%
2023		1,326,800				4,800				1,331,600			14.9	%		3.74	%		3.73	%
2024		1,272				10,900				12,172			0.1	%		4.79	%		2.13	%
2025		451,334				13,200				464,534			5.2	%		3.38	%		3.33	%
2026		593,424				14,500				607,924			6.8	%		3.59	%		3.54	%
2027		401,468				15,600				417,068			4.7	%		3.26	%		3.20	%
2028		901,540				48,580				950,120			10.7	%		3.79	%		3.69	%
2029+		1,423,430				407,420				1,830,850			20.6	%		4.41	%		3.83	%
Subtotal		7,427,438				1,485,323				8,912,761			100.0	%		4.11	%		3.86	%
Deferred Financing Costs and Unamortized (Discount)		(56,147	)			(38,675	)			(94,822	)	N/A			N/A			N/A

Total	$	7,371,291			$	1,446,648			$	8,817,939			100.0	%		4.11	%		3.86	%

(1)	Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2018.

(2)	Includes $500.0 million in principal outstanding on the Company's commercial paper program.

(3)	Includes a $500.0 million 5.78% mortgage loan with a maturity date of July 1, 2020 that can be repaid at par beginning July 1, 2019. The Company currently intends to prepay this mortgage loan on July 1, 2019.

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Equity Residential

Selected Unsecured Public Debt Covenants

	December 31,		September 30,
	2018		2018
Total Debt to Adjusted Total Assets (not to exceed 60%)	33.4%		33.5%

Secured Debt to Adjusted Total Assets (not to exceed 40%)	9.0%		10.6%

Consolidated Income Available for Debt Service to Maximum Annual Service Charges (must be at least 1.5 to 1)		4.48		4.46

Total Unsecured Assets to Unsecured Debt (must be at least 150%)	348.2%		362.9%

Note: These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt, which represent the Company's most restrictive covenants. Equity Residential is the general partner of ERPOP.

Selected Credit Ratios

	December 31,	September 30,
	2018	2018
Total debt to Normalized EBITDAre	5.34x	5.36x

Net debt to Normalized EBITDAre	5.31x	5.34x

Unencumbered NOI as a % of total NOI	82.2%	79.8%

Note: See page 23 for the Normalized EBITDAre reconciliations.

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Equity Residential

Capital Structure as of December 31, 2018

(Amounts in thousands except for share/unit and per share amounts)

Secured Debt					$	2,385,470	27.1	%
Unsecured Debt						6,432,469	72.9	%

Total Debt						8,817,939	100.0	%	25.8	%

Common Shares (includes Restricted Shares)		369,405,161	96.4	%
Units (includes OP Units and Restricted Units)		13,904,035	3.6	%

Total Shares and Units		383,309,196	100.0	%
Common Share Price at December 31, 2018	$	66.01
						25,302,240	99.9	%
Perpetual Preferred Equity (see below)						37,280	0.1	%

Total Equity						25,339,520	100.0	%	74.2	%

Total Market Capitalization					$	34,157,459			100.0	%

Perpetual Preferred Equity as of December 31, 2018

(Amounts in thousands except for share and per share amounts)

Series	Call Date	Outstanding Shares		Liquidation Value		Annual Dividend Per Share		Annual Dividend Amount
Preferred Shares:
8.29% Series K	12/10/26		745,600	$	37,280	$	4.145	$	3,091

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Equity Residential

Common Share and Unit

Weighted Average Amounts Outstanding

	2018		2017		Q4 2018		Q4 2017

Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic		368,052,312		366,968,358		368,444,736		367,442,352
Shares issuable from assumed conversion/vesting of:
- OP Units		12,868,188		12,901,219		12,860,819		12,882,935
- long-term compensation shares/units		2,774,227		2,808,917		2,990,518		2,780,028

Total Common Shares and Units - diluted		383,694,727		382,678,494		384,296,073		383,105,315

Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes:
Common Shares - basic		368,052,312		366,968,358		368,444,736		367,442,352
OP Units - basic		12,868,188		12,901,219		12,860,819		12,882,935

Total Common Shares and OP Units - basic		380,920,500		379,869,577		381,305,555		380,325,287
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units		2,774,227		2,808,917		2,990,518		2,780,028

Total Common Shares and Units - diluted		383,694,727		382,678,494		384,296,073		383,105,315

Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares)		369,405,161		368,018,082
Units (includes OP Units and Restricted Units)		13,904,035		13,768,438

Total Shares and Units		383,309,196		381,786,520

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Equity Residential

Development and Lease-Up Projects as of December 31, 2018

(Amounts in thousands except for project and apartment unit amounts)

				Total		Total		Total Book
		No. of		Budgeted		Book		Value Not						Estimated/Actual
		Apartment		Capital		Value		Placed in		Total		Percentage		Initial		Completion	Stabilization	Percentage		Percentage
Projects	Location	Units		Cost		to Date		Service		Debt		Completed		Occupancy		Date	Date	Leased		Occupied

Projects Under Development:
1401 E. Madison	Seattle, WA		137	$	62,352	$	34,523	$	34,523	$	—	45%		Q2 2019		Q3 2019	Q1 2020		—		—
249 Third Street	Cambridge, MA		84		51,447		26,168		26,168		—	38%		Q3 2019		Q4 2019	Q2 2020		—		—
West End Tower	Boston, MA		469		409,749		48,718		48,718		—	7%		Q2 2021		Q3 2021	Q1 2023		—		—

Projects Under Development			690		523,548		109,409		109,409		—

Completed Not Stabilized (A):
100K Apartments	Washington, DC		222		88,023		85,116		—		—			Q3 2018		Q4 2018	Q4 2019	39%		35%

Projects Completed Not Stabilized			222		88,023		85,116		—		—

Completed and Stabilized During the Quarter:
Cascade	Seattle, WA		477		174,378		171,902		—		—			Q2 2017		Q4 2017	Q4 2018	98%		97%

Projects Completed and Stabilized During the Quarter			477		174,378		171,902		—		—

Total Development Projects			1,389	$	785,949	$	366,427	$	109,409	$	—

Land Held for Development		N/A		N/A		$	89,909	$	89,909	$	—

NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS												Total Budgeted Capital Cost		Q4 2018 NOI
Projects Under Development												$	523,548	$	—
Completed Not Stabilized													88,023		260
Completed and Stabilized During the Quarter													174,378		2,320
Total Development NOI Contribution												$	785,949	$	2,580

Note: All development projects are wholly owned by the Company.

(A)

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.

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Equity Residential

Capital Expenditures to Real Estate

For the Year Ended December 31, 2018

(Amounts in thousands except for apartment unit and per apartment unit amounts)

	Same Store Properties		Non-Same Store Properties/Other		Total		Same Store Avg. Per Apartment Unit

Total Apartment Units (1)		71,721		6,816		78,537

Building Improvements	$	100,382	$	3,830	$	104,212	$	1,399

Renovation Expenditures (2)		39,431		1,922		41,353		550

Replacements		41,746		1,190		42,936		582

Total Capital Expenditures	$	181,559	$	6,942	$	188,501	$	2,531

(1)

Total Apartment Units - Excludes 945 unconsolidated apartment units for which capital expenditures to real estate are self-funded and do not consolidate into the Company's results.

(2)

Renovation Expenditures on 2,850 same store apartment units for the year ended December 31, 2018 approximated $13,800 per apartment unit renovated.

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Normalized EBITDAre Reconciliations

(Amounts in thousands)

Normalized EBITDAre Reconciliations for Page 18

	Trailing Twelve Months						2018												2017
	December 31, 2018			September 30, 2018			Q4			Q3			Q2			Q1			Q4
Net income	$	685,192		$	692,888		$	122,388		$	223,846		$	118,410		$	220,548		$	130,084
Interest expense incurred, net		413,360			416,765			91,906			111,219			94,131			116,104			95,311
Amortization of deferred financing costs		11,310			11,133			2,256			3,276			2,099			3,679			2,079
Amortization of above/below market lease intangibles		4,392			4,393			1,098			1,098			1,098			1,098			1,099
Depreciation		785,725			784,654			201,856			194,618			192,942			196,309			200,785
Income and other tax expense (benefit)		878			535			111			280			274			213			(232	)

EBITDA		1,900,857			1,910,368			419,615			534,337			408,954			537,951			429,126

Net (gain) loss on sales of real estate properties		(256,810	)		(272,130	)		24			(114,672	)		51			(142,213	)		(15,296	)
Impairment – operating assets		702			702			—			702			—			—			—

EBITDAre		1,644,749			1,638,940			419,639			420,367			409,005			395,738			413,830

Impairment – non-operating assets		—			1,693			—			—			—			—			1,693
Write-off of pursuit costs (other expenses)		4,450			3,902			1,325			1,059			1,135			931			777
(Income) loss from investments in unconsolidated entities		3,667			4,210			674			985			1,031			977			1,217
Net (gain) loss on sales of land parcels		(987	)		(992	)		8			—			(995	)		—			3
Insurance/litigation settlement or reserve income (interest and other income)		(13,286	)		(13,423	)		—			(7,400	)		(528	)		(5,358	)		(137	)
Insurance/litigation/environmental settlement or reserve expense (other expenses)		6,862			7,088			(226	)		4,202			963			1,923			—
Advocacy contributions (other expenses)		4,406			3,735			671			2,092			1,278			365			—
Other		237			816			382			(32	)		56			(169	)		961

Normalized EBITDAre	$	1,650,098		$	1,645,969		$	422,473		$	421,273		$	411,945		$	394,407		$	418,344

Balance Sheet Items:	December 31, 2018			September 30, 2018

Total debt	$	8,817,939		$	8,823,793
Cash and cash equivalents		(47,442	)		(32,995	)
Mortgage principal reserves/sinking funds		(9,754	)		(8,363	)
Net debt	$	8,760,743		$	8,782,435

Note:

EBITDA, EBITDAre and Normalized EBITDAre do not include any adjustments for the Company’s share of partially owned unconsolidated entities or the minority partner’s share of partially owned consolidated entities due to the immaterial size of the Company’s partially owned portfolio.

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Adjustments from FFO to Normalized FFO

(Amounts in thousands)

	Year Ended December 31,									Quarter Ended December 31,
	2018			2017			Variance			2018			2017			Variance

Impairment – non-operating assets	$	—		$	1,693		$	(1,693	)	$	—		$	1,693		$	(1,693	)

Write-off of pursuit costs (other expenses)		4,450			3,106			1,344			1,325			777			548

Prepayment premiums/penalties (interest expense)		22,110			12,258			9,852			—			—			—
Write-off of unamortized deferred financing costs (interest expense)		2,957			251			2,706			193			—			193
Write-off of unamortized (premiums)/discounts/OCI (interest expense)		16,268			(720	)		16,988			—			—			—
Debt extinguishment and preferred share redemption (gains) losses		41,335			11,789			29,546			193			—			193

Net (gain) loss on sales of land parcels		(987	)		(19,167	)		18,180			8			3			5
Net (gain) loss on sales of unconsolidated entities - non-operating assets		—			(205	)		205			—			—			—
(Income) loss from investments in unconsolidated entities ─ non-operating assets		826			488			338			86			468			(382	)
Non-operating asset (gains) losses		(161	)		(18,884	)		18,723			94			471			(377	)

Insurance/litigation settlement or reserve income (interest and other income)		(13,286	)		(4,853	)		(8,433	)		—			(137	)		137
Insurance/litigation/environmental settlement or reserve expense (other expenses)		6,862			237			6,625			(226	)		—			(226	)
Advocacy contributions (other expenses)		4,406			—			4,406			671			—			671
Other		237			1,245			(1,008	)		382			961			(579	)
Other miscellaneous items		(1,781	)		(3,371	)		1,590			827			824			3

Adjustments from FFO to Normalized FFO	$	43,843		$	(5,667	)	$	49,510		$	2,439		$	3,765		$	(1,326	)

Note: See pages 26 through 30 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.

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Normalized FFO Guidance and Assumptions

The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties and the write-off of pursuit costs, are not included in the estimates provided on this page. See pages 26 through 30 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.

	Q1 2019	Full Year 2019
2019 Normalized FFO Guidance (per share diluted)

Expected Normalized FFO Per Share	$0.78 to $0.82	$3.34 to $3.44

2019 Same Store Assumptions

Physical Occupancy		96.2%
Revenue change		2.2% to 3.2%
Expense change		3.5% to 4.5%
NOI change (1)		1.5% to 3.0%

2019 Transaction Assumptions

Consolidated rental acquisitions		$700.0M
Consolidated rental dispositions		$700.0M
Transaction Accretion (Dilution)		(25 basis points)

2019 Debt Assumptions (2)

Weighted average debt outstanding		$8.8B to $9.0B
Weighted average interest rate (reduced for capitalized interest)		4.25%
Interest expense, net (on a Normalized FFO basis)		$374.0M to $382.5M
Capitalized interest		$4.5M to $8.5M

2019 Capital Expenditures to Real Estate Assumptions for Same Store Properties (3)

Capital Expenditures to Real Estate for Same Store Properties		$190.0M
Capital Expenditures to Real Estate per Same Store Apartment Unit			$2,600

2019 Other Guidance Assumptions

Property management expense		$96.0M to $98.0M
General and administrative expense		$49.0M to $51.0M
Interest and other income		$1.2M to $1.7M
Income and other tax expense		$0.7M to $1.2M
Debt offerings		$700.0M to $900.0M
Equity ATM share offerings		No amounts budgeted
Preferred share offerings		No amounts budgeted
Weighted average Common Shares and Units - Diluted		385.1M

(1)	Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO per share/Normalized FFO per share.

(2)

All 2019 debt assumptions are shown on a Normalized FFO basis and therefore exclude an approximately $16.8 million impact from anticipated debt extinguishment costs in connection with all planned debt repayment activities in 2019, all of which represents non-cash write-offs of unamortized debt discounts and deferred financing costs.

(3)

During 2019, the Company expects to spend approximately $40.0 million for apartment unit Renovation Expenditures on approximately 3,000 same store apartment units at an average cost of approximately $13,300 per apartment unit renovated, which is included in the Capital Expenditures to Real Estate assumptions noted above.

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Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms

(Amounts in thousands except per share and per apartment unit data)

(All per share data is diluted)

This Earnings Release and Supplemental Information includes certain non-GAAP financial measures and other terms that management believes are helpful in understanding our business. The definitions and calculations of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial measures should not be considered as an alternative to net earnings or any other measurement of performance computed in accordance with accounting principles generally accepted in the United States (“GAAP”) 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 reflected on a straight-line basis in accordance with GAAP divided by the weighted average occupied apartment units for the reporting period presented.

Capital Expenditures to Real Estate:

Building Improvements – Includes roof replacement, paving, building mechanical equipment systems, exterior siding and painting, major landscaping, furniture, fixtures and equipment for amenities and common areas, vehicles and office and maintenance equipment.

Renovation Expenditures – Apartment unit renovation costs (primarily kitchens and baths) designed to reposition these units for higher rental levels in their respective markets.

Replacements – Includes appliances, mechanical equipment, fixtures and flooring (including hardwood and carpeting).

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).

Development Yield – NOI that the Company anticipates receiving in the next 12 months following stabilization 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 $50-$150 per apartment unit depending on the type of asset) divided by the Total Budgeted Capital Cost of the asset. The weighted average Development Yield for development properties is weighted based on the projected NOI streams and the relative Total Budgeted Capital Cost for each respective property.

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.

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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)

EBITDA for Real Estate and Normalized EBITDA for Real Estate:

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) – The National Association of Real Estate Investment Trusts (“Nareit”) defines EBITDAre (September 2017 White Paper) as net income (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, impairment write-downs of depreciated operating properties, impairment write-downs of investments in unconsolidated entities caused by a decrease in value of depreciated operating properties within the joint venture and adjustments to reflect the Company’s share of EBITDAre of investments in unconsolidated entities.

The Company believes that EBITDAre is useful to investors, creditors and rating agencies as a supplemental measure of the Company’s ability to incur and service debt because it is a recognized measure of performance by the real estate industry, and by excluding gains or losses related to sales or impairment of depreciated operating properties, EBITDAre can help compare the Company’s credit strength between periods or as compared to different companies.

Normalized Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“Normalized EBITDAre”) – Represents net income (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for non-comparable items. Normalized EBITDAre, total debt to Normalized EBITDAre and net debt to Normalized EBITDAre are important metrics in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Normalized EBITDAre, total debt to Normalized EBITDAre, and net debt to Normalized EBITDAre 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.

Economic Gain – Economic Gain is calculated as the net gain (loss) 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 (loss) 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, renovation, management and ultimate sale of a property and because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold property. The following table presents a reconciliation of net gain (loss) on sales of real estate properties in accordance with GAAP to Economic Gain:

	Year Ended December 31, 2018			Quarter Ended December 31, 2018

Net Gain (Loss) on Sales of Real Estate Properties	$	256,810		$	(24	)
Accumulated Depreciation Gain		(100,655	)		—

Economic Gain	$	156,155		$	(24	)

FFO and Normalized FFO:

Funds From Operations (“FFO”) – Nareit defines FFO (April 2002 White Paper) as net income (computed in accordance with GAAP), excluding gains (or losses) from sales and impairment write-downs of depreciated operating properties, plus depreciation and amortization expense, 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 sales of depreciated operating properties 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;

•

pursuit cost write-offs;

•

gains and losses from early debt extinguishment and preferred share redemptions;

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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)

•

gains and losses from non-operating assets; 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.

The following table presents reconciliations of EPS to FFO per share and Normalized FFO per share for pages 7 and 24 (the expected guidance/projections provided below are based on current expectations and are forward-looking):

							Actual		Actual			Expected		Expected
	Actual 2018			Actual 2017			Q4 2018		Q4 2017			Q1 2019		2019
	Per Share			Per Share			Per Share		Per Share			Per Share		Per Share
EPS – Diluted	$	1.77		$	1.63		$	0.31	$	0.34		$0.25 to $0.29		$1.88 to $1.98
Add: Depreciation expense		2.04			1.93			0.53		0.52		0.52		2.00
Less: Net (gain) loss on sales		(0.67	)		(0.41	)		—		(0.04	)		—	(0.62)
Add: Impairment – operating assets		—			—			—		—			—		—

FFO per share – Diluted		3.14			3.15			0.84		0.82		0.77 to 0.81		3.26 to 3.36

Impairment – non-operating assets		—			—			—		—			—		—
Write-off of pursuit costs		0.01			0.01			—		—			—		0.01
Debt extinguishment and preferred share redemption (gains) losses		0.11			0.03			—		—			—		0.05
Non-operating asset (gains) losses		—			(0.05	)		—		—			—		—
Other miscellaneous items		(0.01	)		(0.01	)		—		0.01			0.01		0.02

Normalized FFO per share – Diluted	$	3.25		$	3.13		$	0.84	$	0.83		$0.78 to $0.82		$3.34 to $3.44

Lease-Up NOI – Represents NOI for development properties: (i) in various stages of lease-up; and (ii) where lease-up has been completed but the properties were not stabilized (defined as having achieved 90% occupancy for three consecutive months) for all of the current and comparable periods presented.

Net Operating Income (“NOI”) – NOI is the Company’s primary financial measure for evaluating each of its apartment properties. NOI is defined as rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company's apartment properties. NOI does not include an allocation of property management expenses either in the current or comparable periods. Rental income for all leases and operating expense for ground leases (for both same store and non-same store properties) are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

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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 tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (see page 11):

	Year Ended December 31,						Quarter Ended December 31,
	2018			2017			2018			2017
Operating income	$	858,560		$	847,471		$	219,306		$	214,764
Adjustments:
Fee and asset management revenue		(753	)		(717	)		(190	)		(185	)
Property management		92,485			85,493			23,310			20,791
General and administrative		53,813			52,224			12,393			11,858
Depreciation		785,725			743,749			201,856			200,785
Impairment		702			1,693			—			1,693
Total NOI	$	1,790,532		$	1,729,913		$	456,675		$	449,706
Rental income:
Same store	$	2,363,491		$	2,311,240		$	616,496		$	601,061
Non-same store/other		214,190			159,449			36,057			29,458
Total rental income		2,577,681			2,470,689			652,553			630,519
Operating expenses:
Same store		705,890			681,198			180,218			173,033
Non-same store/other		81,259			59,578			15,660			7,780
Total operating expenses		787,149			740,776			195,878			180,813
NOI:
Same store		1,657,601			1,630,042			436,278			428,028
Non-same store/other		132,931			99,871			20,397			21,678
Total NOI	$	1,790,532		$	1,729,913		$	456,675		$	449,706

Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2017 and 2018, plus any properties in lease-up and not stabilized as of January 1, 2017.

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 Operating Expenses:

On-site payroll – Includes payroll and related expenses for on-site personnel including property managers, leasing consultants, and maintenance staff.

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.

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.

Utilities – Represents gross expenses prior to any recoveries under the Resident Utility Billing System (“RUBS”). Recoveries are reflected in rental income.

Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2017, 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 Budgeted NOI – Represents budgeted 2019 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 Budgeted Capital Cost – Estimated cost for projects under development and/or developed and all capitalized costs incurred to date, 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, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.

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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)

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.

Transaction Accretion (Dilution) – Represents the spread between the Acquisition Cap Rate and the Disposition Yield.

Turnover – Total residential move-outs (including inter-property and intra-property transfers) divided by total residential apartment units.

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 is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs.

The calculation of the Unlevered IRR does not include an adjustment for the Company’s general and administrative expense, interest expense (including loan assumption costs and other loan-related costs) 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, renovation, management and ultimate sale of a property, before the impact of Company overhead. The Unlevered IRR achieved on the properties as cited in this release should not be viewed as an indication of the gross value created with respect to other properties owned by the Company, and the Company does not represent that it will achieve similar Unlevered IRRs upon the disposition of other properties. The weighted average Unlevered IRR for sold properties is weighted based on all cash flows over the investment period for each respective property, including net sales proceeds.

4th Quarter 2018 Earnings Release

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