(Source: Business Wire)
Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2009. All per share results are reported on a fully-diluted basis.
"Our first quarter performance was in line with our expectations, with good overall occupancy across the country demonstrating continued demand for our apartments," said David J. Neithercut, Equity Residential's President and CEO. "Although net effective new lease rents have decreased in our markets from a year ago, we are pleased to see these levels holding steady, on average, since the beginning of the year. Continuing job losses leave us cautious for the remainder of the year, yet we believe that steady rents and current occupancy of 94% position us well as we enter our primary leasing season."
First Quarter 2009
For the first quarter of 2009, the company reported earnings per share of $0.28 compared to earnings of $0.50 per share in the first quarter of 2008. The difference is primarily due to lower property sales gains due to lower property sales volume in 2009.
Funds from Operations (FFO) for the quarter ended March 31, 2009 were $0.57 per share compared to $0.58 per share in the same period of 2008. The difference is due primarily to:
A net negative impact of approximately $0.01 per share from lower total net operating income (NOI) from the company's same store portfolio and dilution from 2008 and 2009 transaction activity, partially offset by the positive impact of NOI from lease-up activity and property management expense savings;
A negative impact from higher interest expense of approximately $0.02 per share as a result of higher debt balances, lower capitalized interest and write offs of unamortized loan costs from the company's debt tender and debt repurchase activities, offset in part by lower floating rates of interest;
Higher interest and other income of approximately $0.01 per share as a result of gain from the company's debt repurchase activities; and
Lower general and administrative expenses of approximately $0.01 per share.
On January 1, 2009 the company adopted FASB Staff Position APB 14-1, which requires companies to expense certain implied costs of the option value related to convertible debt. As a result, the company's first quarter 2008 and 2009 FFO per share were both negatively impacted by $0.01 per share.
The difference between the company's first quarter 2009 FFO of $0.57 per share and the company's fourth quarter 2008 FFO of $0.27 per share (as restated for comparison purposes for the adoption of FASB Staff Position APB 14-1) is primarily attributable to the following:
Approximately $0.40 per share higher FFO in the first quarter due to the impairment charge on land held for development that the company recorded in the fourth quarter of 2008;
A negative impact of approximately $0.07 per share as a result of lower NOI from the company's same store portfolio and dilution from first quarter 2009 transaction activity;
A negative impact of approximately $0.06 per share from lower debt extinguishment gains in the first quarter of 2009;
A positive impact of approximately $0.02 per share as a result of lower rates of interest on the company's debt; and
A net positive impact of approximately $0.01 per share due to miscellaneous other activities, including lower general and administrative expenses and lower transaction expenses offset by higher income taxes.
Same Store Results
On a same store first quarter to first quarter comparison, which includes 123,120 apartment units, revenues decreased 0.2%, expenses increased 2.8% and NOI decreased 2.0%.
Acquisitions/Dispositions
During the first quarter of 2009, the company sold 11 consolidated properties, consisting of 1,531 apartment units, for an aggregate sale price of $139.6 million at an average capitalization (cap) rate of 7.1% generating an unlevered internal rate of return (IRR) of 11.0%.
The company acquired no properties during the first quarter of 2009.
Liquidity
During the first quarter of 2009, the company completed a public tender to repurchase and retire at par approximately $105.2 million of the principal amount of its 4.75% Notes due June 15, 2009 and approximately $185.2 of the million principal amount of its 6.95% Notes due March 2, 2011. Also during the first quarter, the company repurchased and retired approximately $17.5 million of the principal amount of its 3.85% Convertible Notes due August 15, 2026, resulting in debt extinguishment gains to the company of approximately $2.0 million. Details of these transactions can be found on page 15 of this release.
At March 31, 2009, the company had approximately $611 million of unrestricted cash or securities readily convertible to cash (including approximately $139 million of federally insured notes and deposits classified as "Other assets" and approximately $43 million of 1031 exchange proceeds classified as "Deposits-restricted" on the balance sheet) and approximately $1.31 billion available on its unsecured revolving credit facility. The company has access to this credit facility, well-priced secured debt, improving public debt markets and net transaction proceeds from its sale of non-core assets to meet its near and longer-term funding needs.
Second Quarter 2009 Guidance
The company has established an FFO guidance range of $0.53 to $0.58 per share for the second quarter of 2009. The difference between the company's actual first quarter 2009 FFO of $0.57 per share and the midpoint of the second quarter 2009 guidance range is primarily a result of lower total NOI partially offset by lower interest expense. The second quarter 2009 guidance midpoint assumes no additional gains from debt extinguishment.
Second Quarter 2009 Conference Call
Equity Residential expects to announce second quarter 2009 results on Wednesday, July 29, 2009 and host a conference call to discuss those results at 10:00 a.m. CT on Thursday, July 30, 2009.
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 537 properties located in 23 states and the District of Columbia, consisting of 146,232 apartment units. For more information on Equity Residential, please visit our website at www.equityresidential.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.equityresidential.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 and outlook for 2009 will take place tomorrow, Thursday, April 30, at 10:00 a.m. Central. Please visit the Investor Information section of the company's web site at www.equityresidential.com for the link. A replay of the web cast will be available for two weeks at this site.
Equity Residential Consolidated Statements of Operations (Amounts in thousands except per share data) (Unaudited) Quarter Ended March 31, 2009 2008 REVENUES Rental income $ 512,281 $ 500,347 Fee and asset management 2,863 2,294 Total revenues 515,144 502,641 EXPENSES Property and maintenance 133,543 132,837 Real estate taxes and insurance 55,964 53,327 Property management 19,014 21,176 Fee and asset management 2,003 2,180 Depreciation 150,045 141,195 General and administrative 10,394 12,417 Total expenses 370,963 363,132 Operating income 144,181 139,509 Interest and other income 6,021 3,369 Other expenses (292 ) (176 ) Interest: Expense incurred, net (123,897 ) (119,518 ) Amortization of deferred financing costs (2,965 ) (2,160 ) Income before income and other taxes, (loss) from investments in unconsolidated entities, net gain on sales of unconsolidated entities and discontinued operations 23,048 21,024 Income and other tax (expense) benefit (2,131 ) (2,995 ) (Loss) from investments in unconsolidated entities (195 ) (95 ) Net gain on sales of unconsolidated entities 2,765 - Income from continuing operations 23,487 17,934 Discontinued operations, net 61,934 129,594 Net income 85,421 147,528 Net (income) loss attributable to Noncontrolling Interests: Operating Partnership (4,691 ) (9,133 ) Preference Interests and Units (4 ) (4 ) Partially Owned Properties 69 (268 ) Net income attributable to controlling interests 80,795 138,123 Preferred distributions (3,620 ) (3,633 ) Net income available to Common Shares $ 77,175 $ 134,490 Earnings per share -- basic: Income from continuing operations available to Common Shares $ 0.07 $ 0.05 Net income available to Common Shares $ 0.28 $ 0.50 Weighted average Common Shares outstanding 272,324 268,784 Earnings per share -- diluted: Income from continuing operations available to Common Shares $ 0.07 $ 0.05 Net income available to Common Shares $ 0.28 $ 0.50 Weighted average Common Shares outstanding 288,853 289,317 Distributions declared per Common Share outstanding $ 0.4825 $ 0.4825 -------------------------------------------------------------------------------
Equity Residential Consolidated Statements of Funds From Operations (Amounts in thousands except per share data) (Unaudited) Quarter Ended March 31, 2009 2008 (3) Net income $ 85,421 $ 147,528 Adjustments: Net (income) loss attributable to Noncontrolling Interests: Preference Interests and Units (4 ) (4 ) Partially Owned Properties 69 (268 ) Depreciation 150,045 141,195 Depreciation -- Non-real estate additions (1,898 ) (2,051 ) Depreciation -- Partially Owned and Unconsolidated Properties 183 1,034 Net gain on sales of unconsolidated entities (2,765 ) - Discontinued operations: Depreciation 443 6,385 Net gain on sales of discontinued operations (61,871 ) (122,517 ) Net incremental (loss) gain on sales of condominium units (64 ) 366 FFO (1) (2) 169,559 171,668 Preferred distributions (3,620 ) (3,633 ) FFO available to Common Shares and Units -- basic (1) (2) $ 165,939 $ 168,035 FFO available to Common Shares and Units -- diluted (1) (2) $ 166,096 $ 168,208 FFO per share and Unit -- basic $ 0.57 $ 0.59 FFO per share and Unit -- diluted $ 0.57 $ 0.58 A service of YellowBrix, Inc.
