CHICAGO--(BUSINESS WIRE)--
Equity Residential (NYSE: EQR) today reported results for the quarter
and year ended December 31, 2008. All per share results are reported on
a fully-diluted basis.
"Our 2008 operating results were in line with our expectations due
mostly to strong property performance in the first nine months of the
year since we did not begin to feel the full impact of the slowing
economy and mounting job losses until later in the year," said David J.
Neithercut, Equity Residential's President and CEO. "2009 will be a
challenging year as job losses are expected to continue, further
weakening pricing power across our markets. Looking longer term,
however, we are excited about our prospects because there is virtually
no new product in the development pipeline and the demographic picture
is very favorable for apartment fundamentals."
Fourth Quarter 2008
For the fourth quarter 2008, the company reported a loss of $0.13 per
share compared to earnings of $0.44 per share in the fourth quarter of
2007. The difference is primarily due to a previously announced
development-related impairment charge of $116.4 million, or $0.40 per
share, as well as lower gains from property sales caused by lower
property sales volume in 2008.
Funds from Operations (FFO) for the quarter ended December 31, 2008 were
$0.29 per share compared to $0.67 per share in the same period of 2007.
The company's pre-impairment FFO was $0.69 per share, approximately
$0.07 per share above the midpoint of the company's guidance range
provided on October 29, 2008 and primarily attributable to the following:
-- Higher property net operating income (NOI) than budgeted of
approximately $0.01 per share due to expense savings;
-- Debt extinguishment gains that were approximately $0.02 per share higher
than the approximately $0.04 per share of gains the company had
budgeted; and
-- Lower interest expense of approximately $0.01 per share due to lower
floating rates than budgeted; and other items, including lower than
budgeted prepayment penalties and income taxes, of approximately $0.03
per share.
Year Ended December 31, 2008
For the year ended December 31, 2008, the company reported earnings of
$1.49 per share compared to $3.39 per share for 2007.
FFO for the year ended December 31, 2008 was $2.18 per share compared to
$2.39 per share in the same period of 2007. The company's pre-impairment
FFO for the full year was $2.58 per share.
Same Store Results
On a same store fourth quarter to fourth quarter comparison, which
includes 123,543 apartment units, revenues increased 2.4%, expenses
increased 1.8% and NOI increased 2.8%. The increase in same store
revenues was driven primarily by an increase in average rental rates.
On a same store year over year comparison, which includes 115,051
apartment units, revenues increased 3.2%, expenses increased 2.2% and
NOI increased 3.8%. The increase in same store revenues was driven
primarily by an increase in average rental rates.
Acquisitions/Dispositions
During the fourth quarter 2008, the company acquired one property,
consisting of 304 units, for a purchase price of $43.8 million at a
stabilized capitalization (cap) rate of 5.6%. The company contracted in
2006 to purchase this recently completed Phoenix, Arizona property in a
pre-sale arrangement.
Also during the quarter, the company sold seven properties, consisting
of 1,332 apartment units, for an aggregate sale price of $89.7 million
at an average cap rate of 6.7% generating an unlevered internal rate of
return (IRR) of 10.3%. In addition, the company sold 32 condominium
units for an aggregate sale price of $4.5 million.
During 2008, the company acquired seven properties, consisting of 2,141
apartment units, for an aggregate purchase price of $380.7 million at an
average cap rate of 5.9%, as well as an uncompleted development property
for a purchase price of $31.7 million.
Also during 2008, the company sold 41 properties, consisting of 10,127
apartment units, for an aggregate sale price of $896.7 million at an
average cap rate of 5.9% generating an unlevered IRR of 10.6%. In
addition, the company sold 130 condominium units for an aggregate sale
price of $26.1 million and one land parcel for $3.3 million.
Liquidity
On December 23, 2008, the company announced that it closed a $543.0
million secured loan from Fannie Mae (NYSE: FNM). The loan is interest
only and matures in eight years with the first seven years fixed and the
last year at a floating rate of interest. The all-in effective interest
rate is approximately 6%. Including the above mentioned loan, during
2008 the company borrowed approximately $1.6 billion in secured debt
proceeds from Fannie Mae and Freddie Mac (NYSE: FRE) at a weighted
average rate of approximately 5.7% for an average fixed rate term of
approximately nine years.
The company used approximately $445.7 million in cash on hand from the
secured loans referenced above to repurchase and retire approximately
$464.4 million of various unsecured notes with maturities through 2011
both through open market transactions and a public tender. This activity
included the company's repurchase of approximately $174.0 million of
these notes through December 31, 2008 and approximately $290.4 million
of these notes during 2009. In total, this resulted in debt
extinguishment gains to the company of approximately $18.7 million, all
of which were recognized in 2008. Details of these transactions can be
found on page 17 of this release.
The agency loans and debt repurchases are a continuation of the
company's strategy to proactively address its debt maturities and
wholly-owned development funding needs. At December 31, 2008, the
company had approximately $1.02 billion of unrestricted cash and
federally insured investment deposits (approximately $129.0 million of
which are classified as "Other assets" on the balance sheet) and
approximately $1.3 billion available on its unsecured revolving credit
facility. After the recent debt repurchases, the company currently has
approximately $515.0 million of unrestricted cash and federally insured
investment deposits and approximately $1.3 billion available on its
unsecured revolving credit facility. The company's total outstanding
indebtedness is currently approximately $10.2 billion. The company has
sufficient liquidity, between its line of credit and cash on hand, to
meet its funding needs into 2011.
First Quarter and Full Year 2009 Guidance
The company has established an FFO guidance range of $0.53 to $0.58 per
share for the first quarter of 2009.
The difference between the company's pre-impairment fourth quarter 2008
FFO of $0.69 per share and the midpoint of the first quarter 2009 FFO
guidance range is primarily a result of the following:
-- Lower same store NOI of approximately $0.06 per share;
-- Lower interest and other income in the first quarter of 2009 due to
lower debt extinguishment gains. The company recorded debt
extinguishment gains of approximately $0.06 per share in the fourth
quarter 2008 and has no gains from debt extinguishment budgeted in the
first quarter 2009; and
-- Higher interest expense of approximately $0.02 per share due to the
company's $543.0 million loan from Fannie Mae discussed above.
The company has established an FFO guidance range of $2.00 to $2.30 per
share for the full year 2009. The assumptions underlying this guidance
can be found on page 26 of this release.
The difference between the company's pre-impairment full year 2008 FFO
of $2.58 per share and the midpoint of the company's guidance range for
full year 2009 FFO is primarily a result of the following:
-- Lower same store NOI of approximately $0.27 per share;
-- Dilution from planned 2009 property sale and purchase activity totaling
approximately $0.06 per share;
-- Lower interest and other income of approximately $0.08 per share due
primarily to the lower debt extinguishment gains mentioned above; and
-- Higher interest expense of approximately $0.02 per share due to the
company's $543.0 million loan from Fannie Mae offset by lower floating
interest rates.
First Quarter 2009 Conference Call
Equity Residential expects to announce first quarter 2009 results on
Wednesday, April 29, 2009 and host a conference call to discuss those
results at 10:00 a.m. CT on Thursday, April 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 548
properties located in 23 states and the District of Columbia, consisting
of 147,244 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,
February 5, 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)
Year Ended December 31, Quarter Ended December 31,
2008 2007 2008 2007
REVENUES
Rental income $ 2,092,489 $ 1,937,874 $ 530,027 $ 502,771
Fee and asset 10,715 9,183 3,318 2,246
management
Total revenues 2,103,204 1,947,057 533,345 505,017
EXPENSES
Property and 542,371 505,899 132,670 128,697
maintenance
Real estate taxes and 217,461 195,359 55,519 46,530
insurance
Property management 77,063 87,476 17,476 18,499
Fee and asset 7,981 8,412 1,827 1,808
management
Depreciation 591,162 562,290 154,639 143,277
General and 44,951 46,767 10,911 13,585
administrative
Impairment 122,103 1,726 119,247 706
Total expenses 1,603,092 1,407,929 492,289 353,102
Operating income 500,112 539,128 41,056 151,915
Interest and other 33,540 20,144 22,481 7,815
income
Interest:
Expense incurred, (479,101 ) (482,819 ) (124,065 ) (122,612 )
net
Amortization of
deferred financing (9,701 ) (10,121 ) (2,950 ) (2,268 )
costs
Income (loss) before
income and other
taxes, allocation to
Minority Interests,
(loss) income from
investments in
unconsolidated
entities, net gain on
sales
of unconsolidated
entities and land
parcels and 44,850 66,332 (63,478 ) 34,850
discontinued
operations
Income and other tax (5,286 ) (2,520 ) 653 (1,053 )
(expense) benefit
Allocation to Minority
Interests:
Operating (1,735 ) (2,663 ) 3,773 (1,935 )
Partnership, net
Preference Interests (15 ) (441 ) (4 ) (4 )
and Units
Partially Owned (2,650 ) (2,200 ) (885 ) (1,203 )
Properties
(Loss) income from
investments in (107 ) 332 (167 ) 147
unconsolidated
entities
Net gain on sales of
unconsolidated 2,876 2,629 2,876 -
entities
Net gain on sales of 2,976 6,360 - 1,130
land parcels
Income (loss) from
continuing operations, 40,909 67,829 (57,232 ) 31,932
net of minority
interests
Discontinued
operations, net of 379,183 921,793 25,989 91,345
minority interests
Net income (loss) 420,092 989,622 (31,243 ) 123,277
Preferred (14,507 ) (22,792 ) (3,620 ) (3,635 )
distributions
Premium on redemption - (6,154 ) - (10 )
of Preferred Shares
Net income (loss)
available to Common $ 405,585 $ 960,676 $ (34,863 ) $ 119,632
Shares
Earnings per share -
basic:
Income (loss) from
continuing operations $ 0.10 $ 0.14 $ (0.22 ) $ 0.11
available to Common
Shares
Net income (loss)
available to Common $ 1.50 $ 3.44 $ (0.13 ) $ 0.44
Shares
Weighted average
Common Shares 270,012 279,406 271,293 269,197
outstanding
Earnings per share -
diluted:
Income (loss) from
continuing operations $ 0.10 $ 0.14 $ (0.22 ) $ 0.10
available to Common
Shares
Net income (loss)
available to Common $ 1.49 $ 3.39 $ (0.13 ) $ 0.44
Shares
Weighted average
Common Shares 290,060 302,235 271,293 290,658
outstanding
Distributions declared
per Common Share $ 1.93 $ 1.87 $ 0.4825 $ 0.4825
outstanding
Equity Residential
Consolidated Statements of Funds From Operations
(Amounts in thousands except per share data)
Year Ended December 31, Quarter Ended December 31,
2008 2007 2008 2007
Net income (loss) $ 420,092 $ 989,622 $ (31,243 ) $ 123,277
Allocation to Minority
Interests - Operating 1,735 2,663 (3,773 ) 1,935
Partnership, net
Adjustments:
Depreciation 591,162 562,290 154,639 143,277
Depreciation -
Non-real estate (8,269 ) (8,279 ) (2,212 ) (2,142 )
additions
Depreciation -
Partially Owned and 4,157 4,379 1,054 1,117
Unconsolidated
Properties
Net gain on sales
of unconsolidated (2,876 ) (2,629 ) (2,876 ) -
entities
Discontinued
operations:
Depreciation 11,746 54,124 333 7,102
Gain on sales of
discontinued (368,382 ) (873,767 ) (26,181 ) (80,041 )
operations, net of
minority interests
Net incremental
(loss) gain on (3,932 ) 20,771 (1,289 ) 1,998
sales of
condominium units
Minority Interests
- Operating 718 3,256 (12 ) 774
Partnership
FFO (1) (2) 646,151 752,430 88,440 197,297
Preferred distributions (14,507 ) (22,792 ) (3,620 ) (3,635 )
Premium on redemption of - (6,154 ) - (10 )
Preferred Shares
FFO available to Common
Shares and OP Units - $ 631,644 $ 723,484 $ 84,820 $ 193,652
basic (1) (2)
FFO available to Common
Shares and OP Units - $ 632,307 $ 724,255 $ 84,820 $ 193,835
diluted (1) (2)
FFO per share and OP $ 2.20 $ 2.42 $ 0.29 $ 0.67
Unit - basic
FFO per share and OP $ 2.18 $ 2.39 $ 0.29 $ 0.67
Unit - diluted
Weighted average Common
Shares and
OP Units 287,630 298,392 288,251 287,728
outstanding - basic
Weighted average Common
Shares and
OP Units
outstanding - 290,487 302,732 289,511 291,129
diluted
The National Association of Real Estate Investment Trusts ("NAREIT")
defines funds from operations ("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 of depreciable property, 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. Once the
(1 ) Company commences the conversion of units to condominiums, it
simultaneously discontinues depreciation of such property. FFO available to
Common Shares and OP Units is 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 accounting principles generally accepted in the United
States. 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 "Minority Interests -
Operating Partnership". Subject to certain restrictions, the Minority
Interests - Operating Partnership may exchange their OP Units for EQR
Common Shares on a one-for-one basis.
The Company believes that FFO and FFO available to Common Shares and OP
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 OP Units can help compare the
operating performance of a company's real estate between periods or as
(2 ) compared to different companies. FFO and FFO available to Common Shares and
OP 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 and FFO available to Common Shares and OP 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 and FFO available to Common Shares and OP 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.
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
December 31, December 31,
2008 2007
ASSETS
Investment in real estate
Land $ 3,671,299 $ 3,607,305
Depreciable property 13,908,594 13,556,681
Projects under development 855,473 828,530
Land held for development 254,873 340,834
Investment in real estate 18,690,239 18,333,350
Accumulated depreciation (3,561,300 ) (3,170,125 )
Investment in real estate, net 15,128,939 15,163,225
Cash and cash equivalents 890,794 50,831
Investments in unconsolidated entities 5,795 3,547
Deposits - restricted 152,372 253,276
Escrow deposits - mortgage 19,729 20,174
Deferred financing costs, net 53,817 56,271
Other assets 283,664 142,453
Total assets $ 16,535,110 $ 15,689,777
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 5,036,930 $ 3,605,971
Notes, net 5,464,316 5,763,762
Lines of credit - 139,000
Accounts payable and accrued expenses 108,463 109,385
Accrued interest payable 113,846 124,717
Other liabilities 289,562 322,975
Security deposits 64,355 62,159
Distributions payable 141,843 141,244
Total liabilities 11,219,315 10,269,213
Commitments and contingencies
Minority Interests:
Operating Partnership 292,797 331,626
Preference Interests and Units 184 184
Partially Owned Properties 25,520 26,236
Total Minority Interests 318,501 358,046
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01
par value;
100,000,000 shares authorized; 1,951,475
shares issued
and outstanding as of December 31, 2008 and
1,986,475
shares issued and outstanding as of December 208,786 209,662
31, 2007
Common Shares of beneficial interest, $0.01 par
value;
1,000,000,000 shares authorized; 272,786,760
shares issued
and outstanding as of December 31, 2008 and
269,554,661
shares issued and outstanding as of December 2,728 2,696
31, 2007
Paid in capital 4,340,138 4,266,538
Retained earnings 481,441 599,504
Accumulated other comprehensive loss (35,799 ) (15,882 )
Total shareholders' equity 4,997,294 5,062,518
Total liabilities and shareholders' equity $ 16,535,110 $ 15,689,777
Equity Residential
Portfolio Summary
As of December 31, 2008
% of 2009 Average
% of Stabilized Rental
Markets Properties Units Total Units NOI Rate (1)
1 New York Metro Area 22 6,246 4.2% 10.0% $ 2,748
2 DC Northern Virginia 26 8,781 6.0% 8.8% 1,637
3 South Florida 39 12,897 8.8% 8.4% 1,270
4 Los Angeles 38 7,749 5.3% 7.8% 1,777
5 Seattle/Tacoma 49 11,138 7.6% 7.5% 1,330
6 San Francisco Bay 34 6,731 4.6% 6.5% 1,709
Area
7 Boston 37 6,217 4.2% 6.4% 1,962
8 Phoenix 42 12,084 8.2% 5.3% 902
9 Denver 25 8,606 5.8% 5.0% 1,019
10 San Diego 14 4,491 3.1% 4.4% 1,655
11 Orlando 26 8,042 5.5% 4.3% 1,021
12 Atlanta 29 8,882 6.0% 3.9% 944
13 Inland Empire, CA 15 4,655 3.2% 3.7% 1,362
14 Suburban Maryland 21 5,559 3.8% 3.4% 1,180
15 Orange County, CA 10 3,307 2.2% 3.3% 1,597
16 New England 32 4,769 3.2% 2.5% 1,106
(excluding Boston)
17 Portland, OR 11 3,713 2.5% 1.9% 959
18 Jacksonville 12 3,951 2.7% 1.7% 868
19 Dallas/Ft. Worth 14 3,427 2.3% 1.4% 936
20 Tampa 11 3,414 2.3% 1.3% 909
Top 20 Total 507 134,659 91.5% 97.5% 1,344
21 Raleigh/Durham 12 3,058 2.1% 1.3% 818
22 Central Valley, CA 8 1,343 0.9% 0.6% 1,090
23 Other EQR 15 3,318 2.2% 0.6% 907
Total 542 142,378 96.7% 100.0% 1,320
Condominium 4 157 0.1% - -
Conversion
Military Housing 2 4,709 3.2% - -
Grand Total 548 147,244 100.0% 100.0% $ 1,320
(1) Average rental rate is defined as total rental revenues divided by the
weighted average occupied units for the month of December 2008.
Equity Residential
Portfolio as of December 31, 2008
Properties Units
Wholly Owned 477 127,002
Properties
Partially Owned
Properties:
Consolidated 28 5,757
Unconsolidated 41 9,776
Military
Housing (Fee 2 4,709
Managed)
548 147,244
Portfolio Rollforward Q4 2008
($ in thousands)
Purchase/
(Sale) Cap
Properties Units Price Rate
9/30/2008 554 147,326
Acquisitions:
Rental Properties 1 304 $ 43,820 5.6 %
Military Housing (Fee 1 978
Managed) (1)
Dispositions:
Rental Properties:
Consolidated (4 ) (662 ) $ (55,100 ) 6.7 %
Unconsolidated (2) (3 ) (670 ) $ (34,600 ) 6.7 %
Condominium Conversion (1 ) (32 ) $ (4,457 )
Properties
12/31/2008 548 147,244
Portfolio Rollforward 2008
($ in thousands)
Purchase/
(Sale) Cap
Properties Units Price Rate
12/31/2007 579 152,821
Acquisitions:
Rental Properties 7 2,141 $ 380,683 5.9 %
Uncompleted Developments - - $ 31,705
(3)
Military Housing (Fee 1 978
Managed) (1)
Dispositions:
Rental Properties:
Consolidated (38 ) (9,457 ) $ (862,099 ) 5.8 %
} 5.9%
Unconsolidated (2) (3 ) (670 ) $ (34,600 ) 6.7 % combined
Condominium Conversion (4 ) (130 ) $ (26,101 )
Properties
Land Parcel (one) - - $ (3,300 )
Completed Developments 6 1,558
Configuration Changes - 3
12/31/2008 548 147,244
The Company assumed management of 978 housing units at McChord Air Force Base in
(1 ) Washington state and invested $2.4 million towards its redevelopment. McChord
AFB adjoins Ft. Lewis, a U.S. Army base at which the Company already manages
3,731 units.
(2 ) ERPOP owned a 25% interest in these unconsolidated rental properties. Sale price
listed is the gross sale price.
(3 ) Represents the acquisition of Mosaic at Metro in Hyattsville, Maryland. See the
Consolidated Development Projects schedule for further information.
Equity Residential
Fourth Quarter 2008 vs. Fourth Quarter 2007
Quarter over Quarter Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 123,543 Same Store Units
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
Q4 2008 $ 475,375 $ 171,320 $ 304,055 $ 1,362 94.3 % 15.4 %
Q4 2007 $ 464,102 $ 168,340 $ 295,762 $ 1,329 94.4 % 14.7 %
Change $ 11,273 $ 2,980 $ 8,293 $ 33 (0.1 %) 0.7 %
Change 2.4 % 1.8 % 2.8 % 2.5 %
Fourth Quarter 2008 vs. Third Quarter 2008
Sequential Quarter over Quarter Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 128,104 Same Store Units
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
Q4 2008 $ 492,717 $ 178,803 $ 313,914 $ 1,363 94.2 % 15.4 %
Q3 2008 $ 495,049 $ 182,548 $ 312,501 $ 1,366 94.4 % 18.6 %
Change $ (2,332 ) $ (3,745 ) $ 1,413 $ (3 ) (0.2 %) (3.2 %)
Change (0.5 %) (2.1 %) 0.5 % (0.2 %)
2008 vs. 2007
Year over Year Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 115,051 Same Store Units
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
2008 $ 1,739,004 $ 632,366 $ 1,106,638 $ 1,334 94.5 % 63.5 %
2007 $ 1,685,196 $ 618,882 $ 1,066,314 $ 1,292 94.6 % 63.6 %
Change $ 53,808 $ 13,484 $ 40,324 $ 42 (0.1 %) (0.1 %)
Change 3.2 % 2.2 % 3.8 % 3.3 %
The Company's primary financial measure for evaluating each of its apartment
communities is net operating income ("NOI"). NOI represents rental income less
property and maintenance expense, real estate tax and insurance expense, and
(1 ) property management expense. The Company believes that NOI is helpful to investors
as a supplemental measure of the operating performance of a real estate company
because it is a direct measure of the actual operating results of the Company's
apartment communities.
(2 ) Average rental rate is defined as total rental revenues divided by the weighted
average occupied units for the period.
Equity Residential
Same Store NOI Reconciliation
Fourth Quarter 2008 vs. Fourth Quarter 2007
The following table presents a reconciliation of operating income per
the consolidated statements of
operations to NOI for the Fourth Quarter 2008 Same Store Properties:
Quarter Ended December 31,
2008 2007
(Amounts in thousands)
Operating income $ 41,056 $ 151,915
Adjustments:
Non-same store operating results (20,307 ) (13,283 )
Fee and asset management revenue (3,318 ) (2,246 )
Fee and asset management expense 1,827 1,808
Depreciation 154,639 143,277
General and administrative 10,911 13,585
Impairment 119,247 706
Same store NOI $ 304,055 $ 295,762
Same Store NOI Reconciliation
2008 vs. 2007
The following table presents a reconciliation of operating income per
the consolidated statements of
operations to NOI for the 2008 Same Store Properties:
Year Ended December 31,
2008 2007
(Amounts in thousands)
Operating income $ 500,112 $ 539,128
Adjustments:
Non-same store operating results (148,956 ) (82,826 )
Fee and asset management revenue (10,715 ) (9,183 )
Fee and asset management expense 7,981 8,412
Depreciation 591,162 562,290
General and administrative 44,951 46,767
Impairment 122,103 1,726
Same store NOI $ 1,106,638 $ 1,066,314
Equity Residential
Fourth Quarter 2008 vs. Fourth Quarter 2007
Same Store Results by Market
Increase (Decrease) from Prior Year's Quarter
Q4 2008 Q4 2008 Q4 2008
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate Occupancy Revenues Expenses NOI Rate Occupancy
(1) % (1)
1 New York Metro 6,246 10.6 % $ 2,773 95.9 % 3.9 % 5.9 % 2.9 % 3.1 % 0.9 %
Area
2 South Florida 11,761 8.3 % 1,294 93.0 % 0.2 % (4.0 %) 3.3 % (0.6 %) 0.7 %
3 DC Northern 7,661 8.2 % 1,672 95.2 % 3.6 % 4.1 % 3.4 % 3.2 % 0.3 %
Virginia
4 Los Angeles 6,863 7.7 % 1,779 94.1 % 3.1 % 3.9 % 2.7 % 3.3 % (0.2 %)
5 Seattle/Tacoma 8,708 7.5 % 1,399 94.2 % 6.9 % 3.8 % 8.5 % 6.8 % 0.1 %
6 San Francisco 6,364 6.9 % 1,728 94.9 % 6.7 % 4.7 % 7.7 % 7.2 % (0.4 %)
Bay Area
7 Boston 5,805 6.5 % 1,909 94.8 % 2.5 % (2.0 %) 5.4 % 3.5 % (0.9 %)
8 Phoenix 10,238 5.3 % 903 93.9 % (3.2 %) 3.6 % (6.9 %) (3.0 %) (0.2 %)
9 Denver 8,059 5.1 % 1,023 94.0 % 3.9 % 1.9 % 4.8 % 5.1 % (1.1 %)
10 San Diego 4,262 4.4 % 1,681 93.1 % 2.8 % 7.2 % 0.6 % 5.0 % (1.9 %)
11 Orlando 7,525 4.3 % 1,020 93.4 % (2.6 %) 0.6 % (4.5 %) (2.2 %) (0.3 %)
12 Atlanta 7,698 4.2 % 982 94.6 % 0.4 % 0.4 % 0.3 % 0.6 % (0.3 %)
13 Inland Empire, 4,355 3.7 % 1,380 94.6 % 2.0 % 2.2 % 1.9 % 1.0 % 1.0 %
CA
14 Orange County, 3,175 3.4 % 1,616 95.4 % 2.8 % (4.0 %) 5.9 % 2.4 % 0.3 %
CA
New England
15 (excluding 4,769 2.7 % 1,116 94.1 % 1.0 % 2.9 % (0.5 %) 1.0 % 0.0 %
Boston)
16 Suburban 3,687 2.6 % 1,192 94.1 % 5.1 % (5.4 %) 12.2 % 5.0 % 0.0 %
Maryland
17 Portland, OR 3,409 2.0 % 987 95.4 % 4.8 % 0.2 % 7.7 % 5.2 % (0.4 %)
18 Jacksonville 3,231 1.5 % 878 93.2 % (5.5 %) 1.8 % (10.0 %) (4.3 %) (1.2 %)
19 Dallas/Ft. 2,601 1.4 % 1,010 95.0 % 5.0 % 3.1 % 6.4 % 4.0 % 0.9 %
Worth
20 Raleigh/Durham 2,666 1.3 % 843 95.1 % 2.4 % 1.3 % 3.1 % 2.1 % 0.2 %
Top 20 Markets 119,083 97.6 % 1,376 94.3 % 2.5 % 1.8 % 2.9 % 2.6 % (0.1 %)
All Other 4,460 2.4 % 996 94.0 % 0.6 % 1.8 % (0.3 %) 0.1 % 0.4 %
Markets
Total 123,543 100.0 % $ 1,362 94.3 % 2.4 % 1.8 % 2.8 % 2.5 % (0.1 %)
(1 ) Average rental rate is defined as total rental revenues divided by the weighted average occupied units
for the period.
Equity Residential
Fourth Quarter 2008 vs. Third Quarter 2008
Sequential Same Store Results by Market
Increase (Decrease) from Prior Quarter
Q4 2008 Q4 2008 Q4 2008
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate Occupancy Revenues Expenses NOI Rate Occupancy
(1) % (1)
1 New York Metro 6,246 10.2 % $ 2,773 95.9 % (0.7 %) 3.9 % (3.0 %) (0.8 %) 0.2 %
Area
2 DC Northern 8,781 9.0 % 1,656 94.9 % (0.5 %) 0.7 % (1.1 %) 0.2 % (0.7 %)
Virginia
3 South Florida 12,465 8.5 % 1,294 93.0 % (1.0 %) (2.1 %) (0.2 %) (0.8 %) (0.2 %)
4 Los Angeles 7,442 7.9 % 1,794 94.2 % 0.3 % (1.0 %) 0.9 % 0.1 % 0.1 %
5 Seattle/Tacoma 8,708 7.2 % 1,399 94.2 % (1.4 %) (4.9 %) 0.5 % (0.8 %) (0.6 %)
6 San Francisco 6,364 6.7 % 1,728 94.9 % 0.4 % (3.1 %) 2.2 % 0.5 % (0.2 %)
Bay Area
7 Boston 5,805 6.3 % 1,909 94.8 % 1.0 % 0.5 % 1.2 % 2.0 % (1.0 %)
8 Phoenix 10,646 5.4 % 906 93.8 % (0.8 %) (5.3 %) 2.2 % (1.6 %) 0.8 %
9 Denver 8,059 5.0 % 1,023 94.0 % (0.7 %) (8.0 %) 3.2 % 0.2 % (0.9 %)
10 San Diego 4,491 4.4 % 1,677 93.1 % (0.6 %) 3.3 % (2.4 %) 1.1 % (1.6 %)
11 Orlando 7,525 4.2 % 1,020 93.4 % (1.4 %) (4.9 %) 1.1 % (1.1 %) (0.2 %)
12 Atlanta 7,698 4.0 % 982 94.6 % (1.0 %) (6.3 %) 3.1 % (0.8 %) (0.2 %)
13 Inland Empire, 4,355 3.6 % 1,380 94.6 % 1.7 % (5.7 %) 6.0 % 0.0 % 1.6 %
CA
14 Orange County, 3,175 3.3 % 1,616 95.4 % 0.3 % (4.7 %) 2.5 % (0.8 %) 1.0 %
CA
15 Suburban 4,455 2.9 % 1,192 93.5 % (1.6 %) 1.5 % (3.5 %) (0.8 %) (0.8 %)
Maryland
New England
16 (excluding 4,769 2.6 % 1,116 94.1 % (0.4 %) 1.1 % (1.6 %) (0.1 %) (0.3 %)
Boston)
17 Portland, OR 3,409 1.9 % 987 95.4 % 0.8 % (5.0 %) 4.4 % 0.0 % 0.7 %
18 Jacksonville 3,711 1.8 % 895 93.2 % (2.7 %) (5.0 %) (1.1 %) (1.9 %) (0.8 %)
19 Dallas/Ft. 2,601 1.4 % 1,010 95.0 % (0.9 %) (3.7 %) 1.3 % 0.0 % (0.8 %)
Worth
20 Tampa 2,854 1.3 % 929 93.9 % (2.3 %) (2.6 %) (2.0 %) (2.2 %) 0.0 %
Top 20 Markets 123,559 97.6 % 1,378 94.2 % (0.5 %) (2.1 %) 0.4 % (0.3 %) (0.2 %)
All Other 4,545 2.4 % 952 94.7 % 0.5 % (1.9 %) 2.0 % 0.3 % 0.2 %
Markets
Total 128,104 100.0 % $ 1,363 94.2 % (0.5 %) (2.1 %) 0.5 % (0.2 %) (0.2 %)
(1 ) Average rental rate is defined as total rental revenues divided by the weighted average occupied units
for the period.
Equity Residential
2008 vs. 2007
Same Store Results by Market
Increase (Decrease) from Prior Year
2008 2008 2008
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate Occupancy Revenues Expenses NOI Rate Occupancy
(1) % (1)
1 New York Metro 5,443 10.2 % $ 2,718 95.6 % 3.8 % 5.2 % 3.1 % 4.1 % (0.3 %)
Area
2 Los Angeles 6,748 8.1 % 1,752 94.2 % 3.5 % 3.1 % 3.6 % 4.3 % (0.7 %)
3 Seattle/Tacoma 8,402 7.7 % 1,373 94.5 % 8.2 % 4.2 % 10.4 % 8.5 % (0.3 %)
4 DC Northern 6,870 7.4 % 1,547 95.6 % 4.4 % 1.0 % 6.1 % 3.5 % 0.7 %
Virginia
5 South Florida 9,027 7.0 % 1,291 93.6 % (0.3 %) 0.0 % (0.6 %) (0.9 %) 0.5 %
6 Boston 5,649 6.8 % 1,888 95.5 % 3.2 % 2.6 % 3.6 % 2.8 % 0.4 %
7 San Francisco 5,793 6.6 % 1,646 95.1 % 7.4 % 1.3 % 10.6 % 8.0 % (0.5 %)
Bay Area
8 Phoenix 9,350 5.5 % 920 94.1 % (1.2 %) 2.1 % (3.1 %) (1.4 %) 0.2 %
9 Denver 7,309 4.9 % 991 94.8 % 5.9 % 2.0 % 8.0 % 6.4 % (0.5 %)
10 Orlando 6,931 4.4 % 1,031 93.6 % (1.9 %) 1.3 % (3.8 %) (1.6 %) (0.3 %)
11 San Diego 3,822 4.4 % 1,663 94.1 % 3.2 % 3.2 % 3.1 % 4.1 % (0.8 %)
12 Atlanta 7,516 4.4 % 982 94.7 % 2.6 % 2.3 % 2.8 % 3.1 % (0.5 %)
13 Inland Empire, 4,355 4.0 % 1,373 93.9 % 2.0 % 0.9 % 2.6 % 1.6 % 0.3 %
CA
14 Orange County, 3,013 3.5 % 1,616 94.5 % 3.1 % (0.1 %) 4.6 % 4.1 % (0.9 %)
CA
New England
15 (excluding 4,769 2.9 % 1,111 94.5 % 1.7 % 3.5 % 0.2 % 1.8 % (0.2 %)
Boston)
16 Suburban 3,687 2.8 % 1,175 94.4 % 8.0 % (0.8 %) 14.1 % 6.4 % 1.4 %
Maryland
17 Portland, OR 3,409 2.1 % 976 95.0 % 4.9 % 1.6 % 7.0 % 5.5 % (0.6 %)
18 Jacksonville 3,231 1.7 % 897 93.6 % (2.9 %) 2.8 % (6.5 %) (1.8 %) (1.0 %)
19 Dallas/Ft. 2,601 1.5 % 996 95.6 % 5.1 % 5.0 % 5.1 % 4.3 % 0.7 %
Worth
20 Tampa 2,581 1.4 % 932 94.0 % (0.6 %) 0.5 % (1.4 %) (0.8 %) 0.2 %
Top 20 Markets 110,506 97.3 % 1,350 94.5 % 3.2 % 2.2 % 3.8 % 3.3 % (0.1 %)
All Other 4,545 2.7 % 942 94.8 % 3.1 % 0.4 % 4.9 % 2.9 % 0.1 %
Markets
Total 115,051 100.0 % $ 1,334 94.5 % 3.2 % 2.2 % 3.8 % 3.3 % (0.1 %)
(1 ) Average rental rate is defined as total rental revenues divided by the weighted average occupied units
for the period.
Equity Residential
Debt Summary as of December 31, 2008
(Amounts in thousands)
Weighted
Weighted Average
Average Maturities
Amounts (1) % of Rates (years)
Total (1)
Secured $ 5,036,930 48.0 % 5.18 % 8.3
Unsecured 5,464,316 52.0 % 5.46 % 5.5
Total $ 10,501,246 100.0 % 5.34 % 6.9
Fixed Rate Debt:
Secured - Conventional $ 3,805,652 36.2 % 6.00 % 7.2
Unsecured - Public/Private 4,701,372 44.8 % 5.69 % 5.7
Unsecured - Tax Exempt 75,790 0.7 % 5.07 % 20.5
Fixed Rate Debt 8,582,814 81.7 % 5.80 % 6.5
Floating Rate Debt:
Secured - Conventional 595,388 5.7 % 3.78 % 2.4
Secured - Tax 635,890 6.1 % 2.50 % 21.6
Exempt
Unsecured - Public/Private 651,554 6.2 % 3.89 % 1.5
Unsecured - Tax Exempt 35,600 0.3 % 1.05 % 20.0
Unsecured - Revolving Credit - - 4.31 % 3.1
Facility
Floating Rate Debt 1,918,432 18.3 % 3.39 % 8.5
Total $ 10,501,246 100.0 % 5.34 % 6.9
(1 ) Net of the effect of any derivative instruments. Weighted average rates are
for the year ended December 31, 2008.
Note: The Company capitalized interest of approximately $60.1 million and
$45.1 million during the years ended December 31, 2008 and 2007,
respectively. The Company capitalized interest of approximately $15.0
million and $14.3 million during the quarters ended December 31, 2008 and
2007, respectively.
Debt Maturity Schedule as of December 31, 2008
(Amounts in thousands)
Weighted Weighted
Average Average
Rates
Fixed Floating % of on Fixed Rates on
Year Rate (1) Rate (1) Total Total Rate Debt Total Debt
(1) (1)
2009 (2) $ 350,974 $ 512,424 $ 863,398 8.2 % 6.79 % 4.62 %
2010 (3) 294,968 658,515 953,483 9.1 % 7.01 % 4.42 %
2011 (2) 1,451,164 63,178 1,514,342 14.4 % 5.71 % 5.57 %
(4)
2012 908,196 3,658 911,854 8.7 % 6.08 % 6.08 %
2013 566,333 - 566,333 5.4 % 5.93 % 5.93 %
2014 517,470 - 517,470 4.9 % 5.28 % 5.28 %
2015 355,620 - 355,620 3.4 % 6.41 % 6.41 %
2016 1,089,317 - 1,089,317 10.4 % 5.32 % 5.32 %
2017 1,346,649 456 1,347,105 12.8 % 5.87 % 5.87 %
2018 335,496 44,677 380,173 3.6 % 5.96 % 5.63 %
2019+ 1,366,627 635,524 2,002,151 19.1 % 5.85 % 4.98 %
Total $ 8,582,814 $ 1,918,432 $ 10,501,246 100.0 % 5.86 % 5.37 %
(1 ) Net of the effect of any derivative instruments. Weighted average rates are
as of December 31, 2008.
On January 27, 2009, the Company repurchased at par $105.2 million of its
(2 ) 4.75% unsecured notes due June 15, 2009 and $185.2 million of its 6.95%
unsecured notes due March 2, 2011 pursuant to a cash tender offer announced
on January 16, 2009.
Includes the Company's $500.0 million floating rate term loan facility,
(3 ) which matures on October 5, 2010, subject to two one-year extension options
exercisable by the Company.
Includes $548.6 million face value of 3.85% convertible unsecured debt with
(4 ) a final maturity of 2026. The notes are callable by the Company on or after
August 18, 2011. The notes are putable by the holders on August 18, 2011,
August 15, 2016 and August 15, 2021.
Equity Residential
Unsecured Debt Summary as of December 31, 2008
(Amounts in thousands)
Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
Fixed Rate
Notes:
4.750 % 06/15/09 (1) $ 227,400 $ (98 ) $ 227,302
6.950 % 03/02/11 (2) 300,000 2,047 302,047
6.625 % 03/15/12 400,000 (942 ) 399,058
5.500 % 10/01/12 350,000 (1,295 ) 348,705
5.200 % 04/01/13 400,000 (503 ) 399,497
5.250 % 09/15/14 500,000 (351 ) 499,649
6.584 % 04/13/15 300,000 (700 ) 299,300
5.125 % 03/15/16 500,000 (386 ) 499,614
5.375 % 08/01/16 400,000 (1,407 ) 398,593
5.750 % 06/15/17 650,000 (4,323 ) 645,677
7.125 % 10/15/17 150,000 (570 ) 149,430
7.570 % 08/15/26 140,000 - 140,000
3.850 % 08/15/26 (3) 548,557 (6,057 ) 542,500
Floating
Rate (1) (150,000 ) - (150,000 )
Adjustments
4,715,957 (14,585 ) 4,701,372
Fixed Rate
Tax Exempt
Notes:
5.200 % 06/15/29 (4) 75,790 - 75,790
Floating
Rate Tax
Exempt
Notes:
7-Day SIFMA 12/15/28 (4) 35,600 - 35,600
Floating
Rate Notes:
06/15/09 (1) 150,000 - 150,000
FAS 133
Adjustments (1) 1,554 - 1,554
- net
Term Loan LIBOR+0.50% 10/05/10 (4) 500,000 - 500,000
Facility (5)
651,554 - 651,554
Revolving
Credit LIBOR+0.50% 02/28/12 (6) - - -
Facility:
Total
Unsecured $ 5,478,901 $ (14,585 ) $ 5,464,316
Debt
Note: SIFMA stands for the Securities Industry and Financial Markets Association
and is the tax-exempt index equivalent of LIBOR.
$150.0 million in fair value interest rate swaps converts a portion of the 4.750%
notes due June 15, 2009 to a floating interest rate. During the year ended
December 31, 2008, the Company repurchased $72.6 million of these notes at a
discount to par of approximately 1.0% and recognized a gain on early debt
(1 ) extinguishment of $0.7 million. During the quarter ended December 31, 2008, the
Company repurchased $44.1 million of these notes at a discount to par of
approximately 1.1% and recognized a gain on early debt extinguishment of $0.4
million. On January 27, 2009, the Company repurchased $105.2 million of these
notes at par pursuant to a cash tender offer announced on January 16, 2009.
(2 ) On January 27, 2009, the Company repurchased $185.2 million of these notes at par
pursuant to a cash tender offer announced on January 16, 2009.
Convertible notes mature on August 15, 2026. The notes are callable by the
Company on or after August 18, 2011. The notes are putable by the holders on
(3 ) August 18, 2011, August 15, 2016 and August 15, 2021. During the year and quarter
ended December 31, 2008, the Company repurchased $101.4 million of these notes at
a discount to par of approximately 17.7% and recognized a gain on early debt
extinguishment of $18.0 million.
(4 ) Notes are private. All other unsecured debt is public.
Represents the Company's $500.0 million term loan facility, which matures on
(5 ) October 5, 2010, subject to two one-year extension options exercisable by the
Company.
(6 ) As of December 31, 2008, there was no amount outstanding and approximately $1.29
billion available on the Company's unsecured revolving credit facility.
Equity Residential
Selected Unsecured Public Debt Covenants
December September 30,
31,
2008 2008
Total Debt to Adjusted Total 52.3 % 51.2 %
Assets (not to exceed 60%)
Secured Debt to Adjusted Total 25.1 % 22.8 %
Assets (not to exceed 40%)
Consolidated Income Available
for Debt Service to
Maximum Annual Service
Charges
(must be at least 1.5 to 1) 2.21 2.23
Total Unsecured Assets to
Unsecured Debt
(must be at least 150%) 218.8 % 220.4 %
These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP")
outstanding unsecured public debt. Equity Residential is the general partner of
ERPOP.
Debt Repurchases
(Amounts in thousands)
Third Quarter 2008 Activity
Write-off of
Bonds Price % Extinguishment Unamortized
Security Retired Paid Discount Gain Discount/Fees
2009 4.75% Public $ 28,480 $ 28,214 0.9 % $ 266 $ 70
Notes
Total $ 28,480 $ 28,214 0.9 % $ 266 $ 70
Fourth Quarter 2008 Activity
Write-off of
Bonds Price % Extinguishment Unamortized
Security Retired Paid Discount Gain Discount/Fees
2009 4.75% Public $ 44,120 $ 43,639 1.1 % $ 481 $ 80
Notes
2026 3.85%
Convertible Notes 101,443 83,453 17.7 % 17,990 1,929
(1)
Total $ 145,563 $ 127,092 12.7 % $ 18,471 $ 2,009
First Quarter 2009 Activity
Write-off of
Bonds Price % Extinguishment Unamortized
Security Retired Paid Discount Gain Discount/Fees
2009 4.75% Public $ 105,161 $ 105,161 0.0 % $ - $ 125
Notes
2011 6.95% Public 185,194 185,194 0.0 % - 1,379
Notes
Total $ 290,355 $ 290,355 0.0 % $ - $ 1,504
(1) 2026 3.85% Convertible Notes are putable to the Company in 2011.
Equity Residential
Capital Structure as of December 31, 2008
(Amounts in thousands except for share and per share amounts)
Secured Debt $ 5,036,930 48.0 %
Unsecured Debt 5,464,316 52.0 %
Total 10,501,246 100.0 % 54.3 %
Debt
Common Shares 272,786,760 94.2 %
OP Units 16,679,777 5.8 %
Total Shares and OP Units 289,466,537 100.0 %
Common Share Equivalents (see 406,167
below)
Total outstanding at quarter-end 289,872,704
Common Share Price at December 31, $ 29.82
2008
8,644,004 97.7 %
Perpetual Preferred Equity (see 200,000 2.3 %
below)
Total 8,844,004 100.0 % 45.7 %
Equity
Total Market Capitalization $ 19,345,250 100.0 %
Convertible Preferred Equity as of December 31, 2008
(Amounts in thousands except for share/unit and per share/unit amounts)
Annual Annual Weighted Common
Redemption Outstanding Liquidation Dividend Dividend Average Conversion Share
Series Date Shares/Units Value Per Amount Rate Ratio Equivalents
Share/Unit
Preferred
Shares:
7.00% 11/1/98 329,016 $ 8,225 $ 1.75 $ 576 1.1128 366,129
Series E
7.00% 6/30/98 22,459 561 1.75 39 1.4480 32,521
Series H
Junior
Preference
Units:
8.00% 7/29/09 7,367 184 2.00 15 1.020408 7,517
Series B
Total Convertible 358,842 $ 8,970 $ 630 7.02 % 406,167
Preferred Equity
Perpetual Preferred Equity as of December 31, 2008
(Amounts in thousands except for share and per share amounts)
Annual Annual Weighted
Redemption Outstanding Liquidation Dividend Dividend Average
Series Date Shares Value Per Share Amount Rate
Preferred
Shares:
8.29% 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145
Series K
6.48% 6/19/08 600,000 150,000 16.20 9,720
Series N
Total
Perpetual 1,600,000 $ 200,000 $ 13,865 6.93 %
Preferred
Equity
Equity Residential
Common Share and Operating Partnership Unit (OP Unit)
Weighted Average Amounts Outstanding
2008 2007 Q408 (1) Q407
Weighted Average Amounts
Outstanding for Net Income
Purposes:
Common
Shares - 270,011,946 279,406,365 271,292,534 269,197,434
basic
Shares issuable from
assumed
conversion/vesting of:
- OP 17,618,514 18,985,960 - 18,530,596
Units
- share
options/restricted 2,429,163 3,842,868 - 2,929,623
shares
Total Common Shares and 290,059,623 302,235,193 271,292,534 290,657,653
OP Units - diluted
Weighted Average Amounts
Outstanding for FFO
Purposes:
Common
Shares - 270,011,946 279,406,365 271,292,534 269,197,434
basic
OP Units 17,618,514 18,985,960 16,958,491 18,530,596
- basic
Total Common Shares and 287,630,460 298,392,325 288,251,025 287,728,030
OP Units - basic
Shares issuable from
assumed
conversion/vesting of:
- convertible 427,090 496,959 - 471,314
preferred shares/units
- share
options/restricted 2,429,163 3,842,868 1,260,145 2,929,623
shares
Total Common Shares and 290,486,713 302,732,152 289,511,170 291,128,967
OP Units - diluted
Period Ending
Amounts Outstanding:
Common
Shares - 272,786,760
basic
OP Units 16,679,777
- basic
Total Common Shares and 289,466,537
OP Units - basic
In accordance with SFAS No. 128, Earnings Per Share, potential common shares
issuable from the assumed conversion of OP Units, the exercise of share
(1) options and the vesting of restricted shares are automatically anti-dilutive
and therefore excluded from the diluted earnings per share calculation as
the Company had a loss from continuing operations for the fourth quarter
ended December 31, 2008.
Equity Residential
Partially Owned Entities as of December 31, 2008
(Amounts in thousands except for project and unit amounts)
Consolidated Unconsolidated
Development Projects
Held for Institutional
and/or Completed, Completed Joint
Under Not
Development Stabilized and Other Total Ventures (5)
(4) Stabilized
Total projects (1 ) - 2 5 21 28 41
Total units (1 ) - 410 1,405 3,942 5,757 9,776
Operating
information for
the year
ended
12/31/08 (at
100%):
Operating $ 958 $ 2,310 $ 24,111 $ 58,528 $ 85,907 $ 104,128
revenue
Operating 1,245 2,693 10,965 19,624 34,527 46,845
expenses
Net operating (287 ) (383 ) 13,146 38,904 51,380 57,283
(loss) income
Depreciation 370 2,065 9,427 14,737 26,599 21,523
Other 311 - 2,189 71 2,571 408
Operating (968 ) (2,448 ) 1,530 24,096 22,210 35,352
(loss) income
Interest and 50 11 61 390 512 516
other income
Interest:
Expense
incurred, (564 ) (1,157 ) (7,522 ) (20,257 ) (29,500 ) (37,470 )
net
Amortization
of deferred - (94 ) (180 ) (141 ) (415 ) (617 )
financing
costs
Income and
other tax (146 ) - - (30 ) (176 ) (417 )
(expense)
benefit
Net (loss) $ (1,628 ) $ (3,688 ) $ (6,111 ) $ 4,058 $ (7,369 ) $ (2,636 )
income
Debt - Secured
(2):
EQR
Ownership $ 517,543 $ 76,708 $ 141,206 $ 287,986 $ 1,023,443 $ 121,200
(3)
Minority - - - 14,228 14,228 363,600
Ownership
Total (at 100%) $ 517,543 $ 76,708 $ 141,206 $ 302,214 $ 1,037,671 $ 484,800
(1 ) Project and unit counts exclude all uncompleted development projects until those projects are
substantially completed. See the Consolidated Development Projects schedule for more detail.
(2 ) All debt is non-recourse to the Company with the exception of $111.8 million in mortgage debt on
various development projects.
(3 ) Represents the Company's current economic ownership interest.
(4 ) Projects included here are substantially complete. However, they may still require additional
exterior and interior work for all units to be available for leasing.
(5 ) Mortgage debt is also partially collateralized by $33.4 million in unconsolidated restricted cash
set aside from the net proceeds of property sales.
Equity Residential
Consolidated Development Projects as of December 31, 2008
(Amounts in thousands except for project and unit amounts)
No. Total Total Total Book Estimated Estimated
Projects Location of Capital Book Value VaTotalot Percentage Percentage Percentage Completion Stabilization
Units Cost (1) to Date PlDebt in Completed Leased Occupied Date Date
Se
Projects
Under
Development -
Wholly Owned:
Mosaic at Hyattsville, 260 $ 61,483 $ 53,329 $ 53,329 $ 38,425 94 % 21 % 14 % Q1 2009 Q1 2010
Metro MD
70 Greene Jersey City,
(a.k.a. 77 NJ 480 269,958 196,126 196,126 - 79 % - - Q4 2009 Q1 2011
Hudson)
Reserve at Mill Creek,
Town Center WA 100 24,464 9,324 9,324 - 27 % - - Q1 2010 Q3 2010
II
Redmond Way Redmond, WA 250 84,382 22,434 22,434 - 7 % - - Q1 2011 Q1 2012
Projects
Under 1,090 440,287 281,213 281,213 38,425
Development -
Wholly Owned
Projects
Under
Development -
Partially
Owned:
Third Square Cambridge,
(a.k.a. 303 MA 482 254,523 250,629 126,437 158,515 98 % 36 % 29 % Q1 2009 Q2 2010
Third Street)
Veridian
(a.k.a. Silver 457 148,705 139,904 139,904 98,674 95 % 22 % 5 % Q1 2009 Q3 2010
Silver Spring, MD
Spring)
Montclair Montclair, 163 48,730 29,326 29,326 14,540 64 % - - Q3 2009 Q1 2010
Metro NJ
Red Road South Miami, 404 128,816 96,600 96,600 39,028 71 % - - Q1 2010 Q3 2011
Commons FL
111 Lawrence Brooklyn, NY 492 283,968 108,727 108,727 - 32 % - - Q2 2010 Q3 2011
Street
Westgate Pasadena, CA 480 170,558 73,266 73,266 163,160 (2) 24 % - - Q2 2011 Q2 2012
Projects
Under
Development - 2,478 1,035,300 698,452 574,260 473,917
Partially
Owned
Projects
Under 3,568 1,475,587 979,665 855,473 512,342 (3)
Development
Land Held for N/A - 254,873 (5) 254,873 43,626
Development
Land/Projects
Held for 3,568 1,475,587 1,234,538 1,110,346 555,968
and/or Under
Development
Completed Not
Stabilized -
Wholly Owned
(4):
Key Isle at Orlando, FL 165 27,955 27,825 - - 93 % 89 % Completed Q1 2009
Windermere II
West End
Apartments
(a.k.a. Boston, MA 310 164,981 163,145 - - 92 % 86 % Completed Q2 2009
Emerson/CRP
II)
Highland Glen Westwood, MA 102 19,888 19,868 - - 86 % 86 % Completed Q2 2009
II
Crowntree Orlando, FL 352 57,376 56,680 - - 81 % 69 % Completed Q4 2009
Lakes
Reunion at Redmond, WA 321 54,418 52,909 - - 31 % 28 % Completed Q3 2010
Redmond Ridge
Projects
Completed Not 1,250 324,618 320,427 - -
Stabilized -
Wholly Owned
Completed Not
Stabilized -
Partially
Owned (4):
Alta Pacific Irvine, CA 132 45,342 45,317 - 28,260 95 % 89 % Completed Q1 2009
1401 South
State (a.k.a. Chicago, IL 278 69,952 68,247 - 48,448 63 % 53 % Completed Q3 2009
City Lofts)
Projects
Completed Not
Stabilized - 410 115,294 113,564 - 76,708
Partially
Owned
Projects
Completed Not 1,660 439,912 433,991 - 76,708
Stabilized
Total 5,228 $ 1,915,499 $ 1,668,529 $ 1,110,346 $ 632,676
Projects
Total Capital Q4 2008
NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS Cost (1) NOI
Projects Under Development $ 1,475,587 $ (233 )
Completed Not Stabilized 439,912 2,789
Total Development NOI Contribution $ 1,915,499 $ 2,556
(1) Total capital cost represents estimated development cost for projects under development and all capitalized costs incurred to date plus any estimates of
costs remaining to be funded for all projects, all in accordance with GAAP.
(2) Debt is primarily tax-exempt bonds that are entirely outstanding with $94.1 million held in escrow by the lender and released as draw requests are made.
This escrowed amount is classified as "Deposits - restricted" in the consolidated balance sheets at 12/31/08.
(3) Of the approximately $495.9 million of capital cost remaining to be funded at 12/31/08 for projects under development, $341.4 million will be funded by
fully committed third party bank loans and the remaining $154.5 million will be funded by cash on hand.
(4) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available
for leasing.
(5) Total book value to date of land held for development declined significantly since 9/30/08 primarily as a result of the $116.4 million impairment charge
that the Company announced on January 9, 2009.
Equity Residential
Consolidated Condominium Conversion Projects as of December 31, 2008
(Amounts in thousands except for project and unit amounts)
Units 2008 YTD Activity Q4 2008
Available for
Sale/Other
FFO FFO
Project Estimated Incremental Incremental
Start Close Out Units Sold Available/ Units Sales (Loss) Gain Units Sales (Loss) Gain
Not
Projects Location Date Date Total Closed Closed Other Closed Price on Sale (2) Closed Price on Sale (2)
(1)
For Sale
Park Bloomingdale, Q2 2006 Q1 2009 250 249 1 - 69 $ 10,948 $ (923 ) 29 $ 3,913 $ (979 )
Bloomingdale IL
Arrington Issaquah, Q1 2007 Q4 2009 130 67 - 63 22 5,886 384 - - (5 )
Place WA
380 316 1 63 91 16,834 (539 ) 29 3,913 (984 )
Closed
Out/Other
Belle Arts Bellevue, Q4 2006 N/A 128 127 - 1 - - (10 ) - - (11 )
(3) WA
The Cleo (The Los Angeles,
Alexandria) CA Q3 2007 N/A 104 12 - 92 12 3,530 378 2 442 (86 )
(4)
South Palm Tamarac, FL Q2 2005 Q4 2008 208 208 - - 6 848 (507 ) 1 102 (180 )
Place
Chantecleer Naperville, Q4 2005 Q1 2008 304 304 - - 2 326 (12 ) - - (4 )
Lakes IL
Pacific Cove Playa Del Q3 2006 Q1 2008 80 80 - - 1 520 (97 ) - - (7 )
Ray, CA
Milano Scottsdale, Q2 2005 Q2 2008 224 224 - - 18 4,043 215 - - (5 )
Terrace AZ
Projects closed out prior 4,289 4,289 - - - - (3,360 ) - - (12 )
to 2008 (2)
5,337 5,244 - 93 39 9,267 (3,393 ) 3 544 (305 )
Totals 4 5,717 5,560 1 156 130 $ 26,101 $ (3,932 ) 32 $ 4,457 $ (1,289 )
Net incremental (loss) on sales of condominium units $ (3,932 ) $ (1,289 )
(2)
Corporate overhead (property management expense) (2,755 ) (694 )
Other expenses (2,289 ) (849 )
Discontinued operating loss of active conversions (3,737 ) (878 )
Income of halted conversions (5) 561 392
Pre-tax net loss - Condominium division (6) $ (12,152 ) $ (3,318 )
(1) Project start date represents the date that each respective property was acquired by the taxable REIT subsidiary and included in
discontinued operations.
(2) Amounts are net of $313,000 and $67,000 in reserves for potential homeowners disputes for the year and quarter ended December 31, 2008,
respectively. The Company recorded an additional reserve of $3,197,000 in the second quarter of 2008 on various projects closed out prior to
2008.
(3) Belle Arts - In order to retain certain development rights, the remaining unit is not available for sale at this time.
(4) The Cleo (The Alexandria) - The Company halted the sales effort during the fourth quarter of 2008 and will operate the remaining 92 units
as a rental property.
(5) Halted conversions includes the results of Sheridan Lake Club (Dania Beach Club), Sage, The Martine (Crosspointe), The Hamilton, Verde
(Mission Verde) and The Cleo (The Alexandria).
(6) Excludes interest income, interest expense and certain other items specific to condominium conversion projects that ultimately eliminate
in consolidation.
Also excludes depreciation expense on halted conversions (active conversions are not depreciated) and excludes income and other taxes on
condominium sales and operations, if any.
Equity Residential
Maintenance Expenses and Capitalized Improvements to Real Estate
For the Year Ended December 31, 2008
(Amounts in thousands except for unit and per unit amounts)
Maintenance Expenses Capitalized Improvements to Real Estate Total Expenditures
Total Expense Avg. Payroll Avg. Avg. Replacements Avg. BuAvg. Avg. Grand Avg.
Units (2) Per (3) PeTotal Per (4) Per ImPer UniTotal Per Unit Total Per
(1) Unit Un Unit Unit (5 Unit
Established
Properties 105,607 $ 83,558 $ 791 $ 72,531 $ 687 $ 156,089 $ 1,478 $ 38,003 $ 360 $ 53,195 $ 504 $ 91,198 $ 864 (9) $ 247,287 $ 2,342
(6)
New
Acquisition 20,665 15,636 823 13,513 712 29,149 1,535 5,409 285 18,243 961 23,652 1,246 52,801 2,781
Properties
(7)
Other 6,487 10,883 9,127 20,010 43,497 11,491 54,988 74,998
(8)
Total 132,759 $ 110,077 $ 95,171 $ 205,248 $ 86,909 $ 82,929 $ 169,838 $ 375,086
(1) Total Units - Excludes 9,776 unconsolidated units and 4,709 military housing (fee managed) units, for which maintenance expenses and
capitalized improvements to real estate are self-funded and do not consolidate into the Company's results.
(2) Maintenance Expenses - Includes general maintenance costs, unit turnover costs including interior painting, regularly scheduled landscaping and tree
trimming costs, security, exterminating, fire protection, snow and ice removal, elevator repairs, and other miscellaneous building repair costs.
(3) Maintenance Payroll - Includes employee costs for maintenance, cleaning, housekeeping, and landscaping.
(4) Replacements - Includes new expenditures inside the units such as appliances, mechanical equipment, fixtures and flooring, including carpeting.
(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) Established Properties - Wholly Owned Properties acquired prior to January 1, 2006.
(7) New Acquisition Properties - Wholly Owned Properties acquired during 2006, 2007 and 2008. Per unit amounts are based on a weighted average of 18,983 units.
(8) Other - Includes properties either partially owned or sold during the period, commercial space, corporate housing and condominium conversions. Also includes
$34.2 million included in replacements spent on various assets related to major renovations and repositioning of these assets.
(9) For 2009, the Company estimates an annual stabilized run rate of approximately $925 per unit of capital expenditures for its established
properties.
Equity Residential
Discontinued Operations
(Amounts in thousands)
Year Ended Quarter Ended
December 31, December 31,
2008 2007 2008 2007
REVENUES
Rental income $ 45,708 $ 200,131 $ 1,627 $ 26,961
Total revenues 45,708 200,131 1,627 26,961
EXPENSES (1)
Property and maintenance 18,537 69,391 2,194 9,849
Real estate taxes and 5,974 26,845 134 3,945
insurance
Property management (62 ) 266 - (4 )
Depreciation 11,746 54,124 333 7,102
General and 29 15 5 1
administrative
Total expenses 36,224 150,641 2,666 20,893
Discontinued operating 9,484 49,490 (1,039 ) 6,068
income (loss)
Interest and other 224 221 12 30
income
Interest (2):
Expense incurred, net (37 ) (4,010 ) (9 ) (285 )
Amortization of
deferred financing - (1,728 ) - (61 )
costs
Income and other tax 1,848 7,309 832 6,326
benefit (expense)
Discontinued operations 11,519 51,282 (204 ) 12,078
Minority Interests - (718 ) (3,256 ) 12 (774 )
Operating Partnership
Discontinued operations,
net of minority 10,801 48,026 (192 ) 11,304
interests
Net gain on sales of 392,857 933,013 27,805 85,523
discontinued operations
Minority Interests - (24,475 ) (59,246 ) (1,624 ) (5,482 )
Operating Partnership
Gain on sales of discontinued
operations, net of minority 368,382 873,767 26,181 80,041
interests
Discontinued operations,
net of minority $ 379,183 $ 921,793 $ 25,989 $ 91,345
interests
(1) Includes expenses paid in the current period for properties sold or held for
sale in prior periods related to the Company's period of ownership.
(2) Includes only interest expense specific to secured mortgage notes payable
for properties sold and/or held for sale.
Equity Residential
Additional Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
FFO Reconciliations
FFO Reconciliations
Guidance Midpoint Q4
2008 to Actual Q4 2008
Amounts Per Share
Guidance midpoint Q4 2008 FFO $ 181,533 $ 0.625
- Diluted (1) (2)
Impairment (including (117,132 ) (0.405 )
discontinued operations)
Debt extinguishment gains 4,529 0.016
(interest and other income)
Property NOI (including 3,669 0.013
reserve adjustments)
Interest expense 3,045 0.011
Income and other tax expense 2,418 0.008
Other 6,758 0.025
Actual Q4 2008 FFO - Diluted $ 84,820 $ 0.293
(1) (2)
Non-Comparable Items (3)
Year Ended December 31, Quarter Ended December 31,
2008 2007 Variance 2008 2007 Variance
Severance
charges:
Property
management $ (810 ) $ (1,606 ) $ 796 $ (528 ) $ (1,129 ) $ 601
expense
General and
administrative (4,330 ) (3,944 ) (386 ) (2,168 ) (3,021 ) 853
expense
Impairment
(including (122,103 ) (1,726 ) (120,377 ) (119,247 ) (706 ) (118,541 )
discontinued
operations)
Debt
extinguishment
gains (interest 18,737 - 18,737 18,471 - 18,471
and other
income)
Debt
extinguishment
costs
(interest):
Prepayment (81 ) (3,339 ) 3,258 (40 ) - (40 )
penalties
Write-off of
unamortized
deferred (1,020 ) (4,032 ) 3,012 (851 ) (197 ) (654 )
financing
costs
Write-off of
unamortized (1,189 ) - (1,189 ) (1,164 ) - (1,164 )
premiums/
(discounts)
Premium on
redemption of - (6,154 ) 6,154 - (10 ) 10
Preferred
Shares
Net gain on
sales of land 2,976 6,360 (3,384 ) - 1,130 (1,130 )
parcels
Net incremental
(loss) gain on
sales of (3,932 ) 20,771 (24,703 ) (1,289 ) 1,998 (3,287 )
condominium
units
Income and
other tax
(expense) 1,935 7,319 (5,384 ) 846 6,127 (5,281 )
benefit - Condo
sales
Other 3,288 5,709 (2,421 ) 691 3,668 (2,977 )
Net
non-comparable $ (106,529 ) $ 19,358 $ (125,887 ) $ (105,279 ) $ 7,860 $ (113,139 )
items (3)
Note: See page 27 for definitions, footnotes and reconciliations of EPS to FFO.
Equity Residential
The earnings guidance/projections provided below are based on current
expectations and are forward-looking.
2009 Earnings Guidance (per share diluted)
Q1 2009 2009
Expected FFO (1) (2) $0.53 to $0.58 $2.00 to $2.30
2009 Same Store Assumptions
Physical occupancy 93.5%
Revenue change (4.50%) to (1.50%)
Expense change 2.50% to 3.50%
NOI change (9.25%) to (3.75%)
(Note: 25 basis point change in NOI percentage = $0.01 per share change in
EPS/FFO)
2009 Transaction Assumptions
Rental acquisitions $250.0 million
Rental dispositions $700.0 million
Capitalization rate 125 basis points
spread
2009 Debt Assumptions
Weighted average debt $9.7 billion to $10.1
outstanding billion
Weighted average interest rate (reduced for
capitalized interest and
including prepayment 4.93%
penalties)
Interest expense $475.0 million to $495.0
million
Unrestricted cash at $50.0 million
12/31/09
Note: Debt guidance assumes no debt offerings and no debt extinguishment
gains, but does include approximately $9.0 million of interest expense for
the mandatory adoption of FASB Staff Position APB 14-1, which requires
companies to expense the implied option value inherent in convertible debt.
This change does not affect the Company's continued compliance with its
financial or debt covenants.
2009 Other Guidance Assumptions
General and $40.0 million to $42.0
administrative expense million
Interest and other income $9.0 million to $12.0
million
Income and other tax $1.0 million to $2.0
expense million
Net gain on sales of land No amounts budgeted
parcels
Preferred share No amounts budgeted
redemptions
Weighted average Common Shares and OP Units - 291.1 million
Diluted
Note: See page 27 for definitions, footnotes and
reconciliations of EPS to FFO.
Equity Residential
The earnings guidance/projections provided below are based on current
expectations and are forward-looking.
Reconciliations of EPS to FFO for Pages 25 and 26
(Amounts in thousands except per share data)
(All per share data is diluted)
Expected Expected
Expected Q4 2008 Q1 2009 2009
Amounts Per Share Per Share Per Share
Expected Earnings - $ 110,466 $ 0.380 $0.22 to $0.27 $0.92 to $1.22
Diluted (4)
Add: Expected depreciation 150,827 0.520 0.52 2.12
expense
Less: Expected net gain on (79,760) (0.275) (0.21) (1.04)
sales (4)
Expected FFO - Diluted (1) $ 181,533 $ 0.625 $0.53 to $0.58 $2.00 to $2.30
(2)
Definitions and Footnotes for Pages 25 and 26
(1) The National Association of Real Estate Investment Trusts ("NAREIT") defines
funds from operations ("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 of depreciable property, 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. Once
the Company commences the conversion of units to condominiums, it simultaneously
discontinues depreciation of such property. FFO available to Common Shares and
OP Units is 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 accounting
principles generally accepted in the United States. 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 "Minority Interests - Operating Partnership". Subject to certain
restrictions, the Minority Interests - Operating Partnership may exchange their
OP Units for EQR Common Shares on a one-for-one basis.
(2) The Company believes that FFO and FFO available to Common Shares and OP
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 OP Units can help compare the operating performance of a
company's real estate between periods or as compared to different companies. FFO
and FFO available to Common Shares and OP 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 and FFO available to Common Shares and OP
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 and FFO available to Common Shares and OP 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.
(3) Non-comparable items are those items included in FFO that by their nature
are not comparable from period to period, such as net incremental gain on sales
of condominium units, impairment charges, debt extinguishment costs and
redemption premiums on Preferred Shares/Preference Interests.
(4) Earnings represents net income per share calculated in accordance with
accounting principles generally accepted in the United States. Expected earnings
is calculated on a basis consistent with actual earnings. Due to the uncertain
timing and extent of property dispositions and the resulting gains/losses on
sales, actual earnings could differ materially from expected earnings.
Source: Equity Residential
Contact: Equity Residential
Marty McKenna, 312-928-1901
mmckenna@eqrworld.com