Investor Relations

Press Release

Equity Residential Reports Full Year 2012 Results

Company Release - 2/5/2013

Same Store Revenues Increased 5.5%; Same Store NOI Increased 7.6%;

Provides Outlook for 2013 Performance

CHICAGO--(BUSINESS WIRE)-- Equity Residential (NYSE: EQR) today reported results for the quarter and year ended December 31, 2012. All per share results are reported as available to common shares on a diluted basis.

“Operating fundamentals were very strong in 2012 and we delivered same store revenue growth of 5.5% and NOI growth of 7.6%, among the best numbers in our history,” said David J. Neithercut, Equity Residential’s President and CEO. “Market conditions remain favorable and we currently expect to achieve 4% to 5% same store revenue growth in 2013, yet another year above historical trend.”

Fourth Quarter 2012

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the fourth quarter of 2012 was $0.94 per share compared to $0.64 per share in the fourth quarter of 2011. The difference is primarily due to a termination fee of $80 million, or $0.24 per share, that the company received in connection with its pursuit of Archstone as well as the items discussed below.

For the fourth quarter of 2012, the company reported Normalized FFO of $0.75 per share compared to $0.65 per share in the same period of 2011. The difference is due primarily to:

  • a positive impact of approximately $0.08 per share from higher net operating income (NOI) from the company’s same store portfolio;
  • a positive impact of approximately $0.02 per share from lower total debt costs;
  • a positive impact of approximately $0.01 per share from 2011 and 2012 transaction activity; and
  • a negative impact of $0.01 per share from increased share count resulting from the approximately 21.9 million common shares sold in the company’s December 2012 public offering.

Normalized FFO begins with FFO and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. A reconciliation and definition of Normalized FFO are provided on pages 26 and 29 of this release and the company has included guidance for Normalized FFO on page 27 of this release. The company has also included some additional guidance on forecasted 2013 non-comparable items, primarily Archstone-related costs, on page 28 of this release.

For the fourth quarter of 2012, the company reported earnings of $1.17 per share compared to $0.33 per share in the fourth quarter of 2011. The difference is due primarily to higher gains on property sales, the Archstone-related fee and the other items discussed above.

Year Ended December 31, 2012

FFO for the year ended December 31, 2012 was $3.11 per share compared to $2.41 per share in the same period of 2011.

For the year ended December 31, 2012, the company reported Normalized FFO of $2.76 per share compared to $2.43 per share in the same period of 2011.

For the year ended December 31, 2012, the company reported earnings of $2.70 per share compared to $2.95 per share in the same period of 2011.

Same Store Results

On a same store fourth quarter to fourth quarter comparison, which includes 103,522 apartment units, revenues increased 5.4%, expenses increased 0.5% and NOI increased 8.1%.

On a same store year to year comparison, which includes 98,577 apartment units, revenues increased 5.5%, expenses increased 1.8% and NOI increased 7.6%.

Acquisitions/Dispositions

The company did not acquire any operating properties during the fourth quarter of 2012 but did purchase, for approximately $79.0 million, four adjacent land parcels in Los Angeles for future development of as many as 970 apartment units.

During the fourth quarter, the company sold 15 properties, consisting of 3,675 apartment units, for an aggregate sale price of $444.4 million at a weighted average capitalization (cap) rate of 6.1%. These sales generated an unlevered internal rate of return (IRR), inclusive of management costs, of 10.4%.

During 2012, the company acquired nine properties with a total of 1,896 apartment units for an aggregate purchase price of $906.3 million at a weighted average cap rate of 4.7% and six land parcels for $141.2 million.

During 2012, the company sold 35 properties with a total of 9,012 apartment units for an aggregate sale price of $1.06 billion at a weighted average cap rate of 6.2%. These sales, excluding two leveraged, partially-owned assets sold during the third quarter, generated an unlevered IRR, inclusive of management costs, of 10.6%.

The Archstone Acquisition

On November 26, 2012, Equity Residential announced that the company and AvalonBay Communities, Inc. had entered into an agreement with Lehman Brothers Holdings Inc. to acquire, for approximately $16 billion, the assets and liabilities of Archstone Enterprise LP (“Archstone”), which consists principally of a portfolio of high-quality apartment properties in major markets in the United States. Under the terms of the agreement, Equity Residential will acquire approximately 60% of Archstone’s assets and liabilities. At closing, the company expects to assume, net of payoffs, approximately $3.3 billion of consolidated Archstone debt, plus a mark-to-market of approximately $225 million. The transaction is expected to close in late February. Please see the company’s November 26, 2012 press release for details of the transaction.

Archstone-related Financing Activities

On December 4, 2012, the company completed the public offering of 21.9 million common shares at a price of $54.75 per share for net proceeds of approximately $1.16 billion.

On January 11, 2013, the company entered into a new $2.5 billion unsecured revolving credit agreement with a group of 25 financial institutions. The new facility matures in April 2018 and has an interest rate of LIBOR plus a spread and an annual facility fee that are dependent on the company’s then current credit rating. At the company’s current rating, the interest rate spread is 1.05% and the annual facility fee is 15 basis points. This facility replaced the company’s existing $1.75 billion facility which was scheduled to mature in July 2014.

Also on January 11, 2013, the company entered into a new senior unsecured $750 million delayed draw term loan facility with an interest rate of LIBOR plus a spread which is dependent on the company’s then current credit rating. At the company’s current rating, the interest rate spread is 1.20%. The maturity date of the facility is January 11, 2015, subject to a one year extension option exercisable by the company. The facility is currently undrawn and is available in one draw made on or before July 11, 2013 and may be used to fund the Archstone acquisition or for other corporate purposes.

With the completion of these financing activities, along with cash on hand, the company has sufficient capital available to completely fund its portion of the Archstone acquisition cash price, transaction costs and required debt pay downs. Therefore, the company terminated the $2.5 billion bridge loan facility commitment that it obtained contemporaneously with entering into the Archstone acquisition contract in November 2012.

Property Sale Update

Equity Residential has previously announced its intention to fund a significant portion of the Archstone acquisition with the proceeds from the sale of assets that are not part of the company’s long-term strategic plans and expects to sell approximately $4.0 billion of its non-core assets in 2013. Because of the great demand for these assets, the company has been able to sell more assets sooner and quickly mitigate much of the execution risk of the Archstone acquisition. The company now expects approximately $2.8 billion of these asset sales to occur before the end of the first quarter. Because the majority of the company’s disposition activity will now occur much earlier in the year than had been previously planned, the current outlook for the company’s 2013 Normalized FFO has been reduced by $0.13 per share below the company’s original projections.

The properties that have been sold since the Archstone transaction announcement on November 26, 2012 or are currently under contract for sale, including the previously announced asset sale to the Goldman Sachs/Greystar entity, are located in the following markets:

           

Market

Properties

Units

Sale Price (millions)

Phoenix 15 4,241 $536.3
Washington DC Metro 10 3,085 $608.2
Atlanta 9 2,590 $356.2
Orlando 10 2,574 $290.6
South Florida 7 2,353 $357.4
Jacksonville 5 1,637 $162.4

Southern California

3

1,056

$270.8

Denver 4 1,003 $156.0
Seattle/Tacoma 4 802 $ 81.9
Northern California 3 711 $188.5
New York Metro 2 360 $ 99.2
Suburban New England

2

331

$ 39.5

Total

74

20,743

$3,147.0

 

“The strategic benefits of acquiring the Archstone portfolio included the ability to fund much of the acquisition with proceeds from the exit of non-core markets such as Phoenix, Atlanta, Orlando and Jacksonville,” said Mr. Neithercut. “In addition, the acquisition has created the opportunity to dispose of assets located in certain sub-markets that are not part of our long term strategy such as far Suburban Washington, DC submarkets in Virginia and Maryland, Tacoma, Washington and parts of Northern New Jersey. We are pleased that the market reception to our asset sales has been strong and that our sales pace is ahead of plan at pricing that is consistent with our expectations.”

First Quarter 2013 Guidance

The company has established a Normalized FFO guidance range of $0.62 to $0.66 per share for the first quarter of 2013. The difference between the company’s fourth quarter 2012 Normalized FFO of $0.75 per share and the midpoint of the first quarter 2013 guidance range of $0.64 per share is primarily due to:

  • a positive impact of approximately $0.10 per share of NOI from approximately one month of income from the Archstone stabilized properties;
  • a negative impact of approximately $0.05 per share of lower NOI from Equity Residential same store properties as a result of higher operating expenses in the first quarter of 2013;
  • a negative impact of approximately $0.05 per share from 2012 and 2013 disposition activity;
  • a negative impact of approximately $0.06 per share from increased share count resulting from a combination of the approximately 21.9 million common shares sold in the company’s December 2012 public offering and the expected issuance of approximately 34.5 million common shares to Lehman Brothers Holdings, Inc. upon closing of the Archstone acquisition;
  • a negative impact of approximately $0.02 per share from higher interest expense, primarily as a result of the increased debt associated with the Archstone acquisition; and
  • a negative impact of approximately $0.03 per share of other various expenses.

Full Year 2013 Guidance

The company’s 2013 same store operating guidance on page 27 of this release is computed based on the portfolio of approximately 80,000 apartment units that the company expects to have in its annual same store set after the completion of its planned 2013 dispositions.

The company has established a Normalized FFO guidance range of $2.80 to $2.90 per share for the full year 2013. The assumptions underlying this guidance can be found on page 27 of this release. The difference between the company’s full-year 2012 Normalized FFO of $2.76 per share and the midpoint of the company’s guidance range of $2.85 per share for full year 2013 Normalized FFO is primarily due to:

  • a positive impact of approximately $0.95 per share of NOI from approximately ten months of income from the Archstone stabilized properties;
  • a positive impact of approximately $0.19 per share of higher NOI from Equity Residential properties consisting of $0.18 per share from same store NOI and $0.01 per share of NOI from properties in lease-up;
  • a positive impact of approximately $0.06 per share from NOI from 2012 acquisition activity;
  • a negative impact of approximately $0.63 per share from disposition activity with $0.11 coming from 2012 activity and $0.52 from 2013 activity;
  • a negative impact of approximately $0.36 per share from increased share count resulting from a combination of the approximately 21.9 million common shares sold in the company’s December 2012 public offering and the expected issuance of approximately 34.5 million common shares to Lehman Brothers Holdings, Inc. upon closing of the Archstone acquisition;
  • a negative impact of approximately $0.08 per share from higher interest expense, primarily as a result of the increased debt associated with the Archstone acquisition; and
  • a negative impact of approximately $0.04 per share of other various expenses.

First Quarter 2013 Earnings and Conference Call

Equity Residential expects to announce first quarter 2013 results on Tuesday, April 30, 2013 and host a conference call to discuss those results at 11:00 a.m. CT on Wednesday, May 1, 2013.

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 403 properties located in 13 states and the District of Columbia, consisting of 115,370 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. Other risks and uncertainties are described under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

A live web cast of the company’s conference call discussing these results will take place tomorrow, Wednesday, February 6, at 9:00 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.

 
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
 
  Year Ended December 31,   Quarter Ended December 31,
2012   20112012   2011
REVENUES
Rental income $ 2,114,142 $ 1,874,465 $ 545,405 $ 490,006
Fee and asset management   9,573     9,026     2,245     2,344  
Total revenues   2,123,715     1,883,491     547,650     492,350  
 
EXPENSES
Property and maintenance 415,986 387,968 99,971 96,467
Real estate taxes and insurance 241,876 211,518 62,996 52,331
Property management 81,902 81,867 19,133 19,676
Fee and asset management 4,663 4,279 1,068 1,072
Depreciation 664,082 612,579 166,196 156,938
General and administrative   47,248     43,605     10,072     11,144  
Total expenses   1,455,757     1,341,816     359,436     337,628  
 
Operating income 667,958 541,675 188,214 154,722
 
Interest and other income 150,547 7,965 80,032 1,368
Other expenses (27,361 ) (14,292 ) (6,803 ) (5,166 )
Interest:
Expense incurred, net (457,666 ) (464,277 ) (110,214 ) (113,525 )
Amortization of deferred financing costs   (21,370 )   (16,766 )   (11,051 )   (4,833 )

Income before income and other taxes, (loss) from investments in unconsolidated entities, net gain on sales of land parcels and discontinued operations

312,108 54,305 140,178 32,566
Income and other tax (expense) benefit (539 ) (728 ) 88 (60 )
(Loss) from investments in unconsolidated entities (14 ) — (11 ) —
Net gain on sales of land parcels   —     4,217     —     —  
Income from continuing operations 311,555 57,794 140,255 32,506
Discontinued operations, net   569,649     877,403     244,144     74,895  
Net income 881,204 935,197 384,399 107,401
Net (income) attributable to Noncontrolling Interests:
Operating Partnership (38,641 ) (40,780 ) (16,995 ) (4,505 )
Partially Owned Properties   (844 )   (832 )   (387 )   (414 )
Net income attributable to controlling interests 841,719 893,585 367,017 102,482
Preferred distributions (10,355 ) (13,865 ) (1,036 ) (3,466 )
Premium on redemption of Preferred Shares   (5,152 )   —     (2 )   —  
Net income available to Common Shares $ 826,212   $ 879,720   $ 365,979   $ 99,016  
 
Earnings per share – basic:

Income from continuing operations available to Common Shares

$ 0.93   $ 0.14   $ 0.43   $ 0.09  
Net income available to Common Shares $ 2.73   $ 2.98   $ 1.18   $ 0.33  
Weighted average Common Shares outstanding   302,701     294,856     310,398     295,990  
 
Earnings per share – diluted:

Income from continuing operations available to Common Shares

$ 0.92   $ 0.14   $ 0.42   $ 0.09  
Net income available to Common Shares $ 2.70   $ 2.95   $ 1.17   $ 0.33  
Weighted average Common Shares outstanding   319,766     312,065     327,108     312,731  
 
Distributions declared per Common Share outstanding $ 1.78   $ 1.58   $ 0.7675   $ 0.5675  
 
 
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,
2012   20112012   2011
Net Income $ 881,204 $ 935,197 $ 384,399 $ 107,401
Net (income) attributable to Noncontrolling Interests –
Partially Owned Properties (844 ) (832 ) (387 ) (414 )
Preferred Distributions (10,355 ) (13,865 ) (1,036 ) (3,466 )
Premium on redemption of Preferred Shares   (5,152 )   —     (2 )   —  
Net income available to Common Shares and Units 864,853 920,500 382,974 103,521
 
Adjustments:
Depreciation 664,082 612,579 166,196 156,938
Depreciation – Non-real estate additions (5,346 ) (5,519 ) (1,135 ) (1,317 )
Depreciation – Partially Owned and Unconsolidated Properties (3,193 ) (3,062 ) (798 ) (799 )
Discontinued operations:
Depreciation 20,910 50,949 1,856 10,295
Net (gain) on sales of discontinued operations (548,278 ) (826,489 ) (240,831 ) (67,389 )
Net incremental (loss) gain on sales of condominium units (11 ) 1,993 (60 ) (57 )
Gain (loss) on sale of Equity Corporate Housing (ECH)   200     1,202     (150 )   180  
FFO available to Common Shares and Units (1) (3) (4) 993,217 752,153 308,052 201,372
 
Adjustments (see page 26 for additional detail):
Asset impairment and valuation allowances — — — —
Property acquisition costs and write-off of pursuit costs (other expenses) 21,649 14,557 6,751 5,239

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

16,293 12,300 8,802 3,050

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

(255 ) (6,976 ) 236 (422 )
Other miscellaneous non-comparable items   (147,635 )   (12,369 )   (79,948 )   (4,607 )
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 883,269   $ 759,665   $ 243,893   $ 204,632  
 
FFO (1) (3) $ 1,008,724 $ 766,018 $ 309,090 $ 204,838
Preferred distributions (10,355 ) (13,865 ) (1,036 ) (3,466 )
Premium on redemption of Preferred Shares   (5,152 )   —     (2 )   —  
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 993,217   $ 752,153   $ 308,052   $ 201,372  
FFO per share and Unit - basic $ 3.14   $ 2.44   $ 0.95   $ 0.65  
FFO per share and Unit - diluted $ 3.11   $ 2.41   $ 0.94   $ 0.64  
 
Normalized FFO (2) (3) $ 893,624 $ 773,530 $ 244,929 $ 208,098
Preferred distributions   (10,355 )   (13,865 )   (1,036 )   (3,466 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 883,269   $ 759,665   $ 243,893   $ 204,632  
Normalized FFO per share and Unit - basic $ 2.79   $ 2.47   $ 0.75   $ 0.66  
Normalized FFO per share and Unit - diluted $ 2.76   $ 2.43   $ 0.75   $ 0.65  
 
Weighted average Common Shares and Units outstanding - basic   316,554     308,062     324,364     309,120  
Weighted average Common Shares and Units outstanding - diluted   319,766     312,065     327,108     312,731  
 

Note: See page 26 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 29 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.

 
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
   
December 31,December 31,
20122011
ASSETS
Investment in real estate
Land $ 4,554,912 $ 4,367,816
Depreciable property 15,711,944 15,554,740
Projects under development 387,750 160,190
Land held for development   353,823     325,200  
Investment in real estate 21,008,429 20,407,946
Accumulated depreciation   (4,912,221 )   (4,539,583 )
Investment in real estate, net 16,096,208 15,868,363
Cash and cash equivalents 612,590 383,921
Investments in unconsolidated entities 17,877 12,327
Deposits – restricted 250,442 152,237
Escrow deposits – mortgage 9,129 10,692
Deferred financing costs, net 44,382 44,608
Other assets   170,372     187,155  
Total assets$17,201,000   $16,659,303  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 3,898,369 $ 4,111,487
Notes, net 4,630,875 5,609,574
Lines of credit — —
Accounts payable and accrued expenses 38,372 35,206
Accrued interest payable 76,223 88,121
Other liabilities 304,518 291,289
Security deposits 66,988 65,286
Distributions payable   260,176     179,079  
Total liabilities   9,275,521     10,380,042  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   398,372     416,404  
Equity:
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value;

100,000,000 shares authorized; 1,000,000 shares issued

and outstanding as of December 31, 2012 and 1,600,000

shares issued and outstanding as of December 31, 2011

 50,000 200,000
Common Shares of beneficial interest, $0.01 par value;

1,000,000,000 shares authorized; 325,054,654 shares issued

and outstanding as of December 31, 2012 and 297,508,185

shares issued and outstanding as of December 31, 2011

 3,251 2,975
Paid in capital 6,542,355 5,047,186
Retained earnings 887,355 615,572
Accumulated other comprehensive (loss)   (193,148 )   (196,718 )
Total shareholders’ equity 7,289,813 5,669,015
Noncontrolling Interests:
Operating Partnership 159,606 119,536
Partially Owned Properties   77,688     74,306  
Total Noncontrolling Interests   237,294     193,842  
Total equity   7,527,107     5,862,857  
Total liabilities and equity$17,201,000   $16,659,303  
 
Equity Residential
Portfolio Summary
As of December 31, 2012
           
% of Total % of Average
Apartment Apartment Stabilized Rental
Markets Properties Units Units NOI (1) Rate (2)
 
1 New York Metro Area 30 8,047 7.0 % 13.9 % $ 3,433
2 DC Northern Virginia 27 9,569 8.3 % 11.5 % 2,136
3 Los Angeles 48 9,815 8.5 % 9.9 % 1,879
4 South Florida 36 12,253 10.6 % 9.0 % 1,463
5 San Francisco Bay Area 40 9,094 7.9 % 8.6 % 1,902
6 Boston 26 5,832 5.0 % 8.2 % 2,560
7 Seattle/Tacoma 40 9,029 7.8 % 7.0 % 1,520
8 Denver 24 8,144 7.1 % 5.5 % 1,226
9 San Diego 14 4,963 4.3 % 5.0 % 1,851
10 Suburban Maryland 16 4,856 4.2 % 4.4 % 1,711
11 Orlando 21 6,413 5.6 % 3.5 % 1,086
12 Phoenix 25 7,400 6.4 % 3.4 % 946
13 Orange County, CA 11 3,490 3.0 % 3.3 % 1,660
14 Inland Empire, CA 10 3,081 2.7 % 2.4 % 1,491
15 Atlanta 12 3,616 3.1 % 2.0 % 1,157
16 All Other Markets (3) 21 4,729 4.1 % 2.4 %   1,098
 
Total401110,33195.6%100.0%1,737
 
Military Housing 2 5,039 4.4 % —     —
 
Grand Total403115,370100.0%100.0%$1,737
 
Note:   Projects under development are not included in the Portfolio Summary until construction has been completed.
 
(1) % of Stabilized NOI includes budgeted 2013 NOI for properties that are stabilized and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the month of December 2012.
 
(3) All Other Markets - Each individual market is less than 1.5% of stabilized NOI.
 
Equity Residential
 
Portfolio as of December 31, 2012
 
     

 

  Apartment  

Properties

Units
Wholly Owned Properties

 

382 106,856
Partially Owned Properties - Consolidated

 

19 3,475
Military Housing

 

2     5,039  
 
403     115,370  
 
 
 
Portfolio Rollforward Q4 2012
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
9/30/2012 418 118,986
Acquisitions:
Land Parcel (one) — — $ 79,000
Dispositions:
Rental Properties - Consolidated (15 ) (3,675 ) $ (444,430 ) 6.1 %
Configuration Changes —   59  
 
12/31/2012 403   115,370  
 
 
 
Portfolio Rollforward 2012
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
12/31/2011 427 121,974
Acquisitions:
Rental Properties - Consolidated 9 1,896 $ 906,305 4.7 %
Land Parcels (six) — — $ 141,240
Dispositions:
Rental Properties - Consolidated (35 ) (9,012 ) $ (1,061,334 ) 6.2 %
Completed Developments 2 356
Configuration Changes —   156  
 
12/31/2012 403   115,370  
 
Equity Residential
             
Fourth Quarter 2012 vs. Fourth Quarter 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 103,522 Same Store Apartment Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q4 2012 $ 505,296 $ 167,964 $ 337,332 $ 1,707 95.4 % 12.9 %
Q4 2011 $ 479,299   $ 167,116   $ 312,183   $ 1,626   95.0 % 13.1 %
 
Change $ 25,997   $ 848   $ 25,149   $ 81   0.4 % (0.2 )%
 
Change 5.4 % 0.5 % 8.1 % 5.0 %
 
 
 
 
Fourth Quarter 2012 vs. Third Quarter 2012
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 109,323 Same Store Apartment Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q4 2012 $ 539,044 $ 178,468 $ 360,576 $ 1,725 95.3 % 12.8 %
Q3 2012 $ 538,845   $ 188,894   $ 349,951   $ 1,716   95.8 % 17.3 %
 
Change $ 199   $ (10,426 ) $ 10,625   $ 9   (0.5 )% (4.5 )%
 
Change 0.0 % (5.5 )% 3.0 % 0.5 %
 
 
 
 
2012 vs. 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 98,577 Same Store Apartment Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
2012 $ 1,868,918 $ 649,914 $ 1,219,004 $ 1,658 95.4 % 58.2 %
2011 $ 1,771,449   $ 638,671   $ 1,132,778   $ 1,575   95.2 % 57.3 %
 
Change $ 97,469   $ 11,243   $ 86,226   $ 83   0.2 % 0.9 %
 
Change 5.5 % 1.8 % 7.6 % 5.3 %
 
(1)   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 property management expense. 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 communities. See page 29 for reconciliations from operating income.
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
Equity Residential
Fourth Quarter 2012 vs. Fourth Quarter 2011
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year's Quarter
 
Q4 2012 Q4 2012 Q4 2012
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 New York Metro Area 7,423 12.7 % $ 3,325 96.3 % 5.4 % 3.5 % 6.7 % 5.3 % 0.1 %
2 DC Northern Virginia 9,381 12.0 % 2,134 95.5 % 4.4 % 2.8 % 5.1 % 3.9 % 0.5 %
3 Los Angeles 8,881 9.7 % 1,857 95.9 % 4.5 % (3.2 )% 8.3 % 4.2 % 0.2 %
4 South Florida 12,253 9.6 % 1,464 95.2 % 5.4 % 1.3 % 7.9 % 4.4 % 0.8 %
5 Boston 5,470 8.2 % 2,579 95.6 % 5.2 % 4.1 % 5.8 % 5.5 % (0.3 )%
6 San Francisco Bay Area 6,194 7.6 % 2,055 95.4 % 10.3 % 0.3 % 15.2 % 9.8 % 0.4 %
7 Seattle/Tacoma 8,710 7.3 % 1,502 94.5 % 6.2 % (0.9 )% 10.2 % 5.7 % 0.5 %
8 Denver 7,976 6.0 % 1,226 95.5 % 8.4 % (3.0 )% 13.6 % 8.0 % 0.4 %
9 San Diego 4,284 4.3 % 1,754 94.7 % 2.1 % 0.2 % 3.0 % 1.7 % 0.3 %
10 Phoenix 7,400 4.0 % 952 95.3 % 3.3 % (4.0 )% 7.5 % 3.0 % 0.4 %
11 Orlando 6,413 3.8 % 1,085 95.4 % 5.6 % 1.3 % 8.1 % 4.8 % 0.8 %
12 Suburban Maryland 4,222 3.8 % 1,521 95.2 % 4.2 % (3.4 )% 7.8 % 3.6 % 0.6 %
13 Orange County, CA 3,490 3.5 % 1,662 95.9 % 5.1 % 2.4 % 6.3 % 4.8 % 0.1 %
14 Inland Empire, CA 3,081 2.7 % 1,487 95.0 % 4.4 % (4.9 )% 9.1 % 3.8 % 0.5 %
15 Atlanta 3,616 2.2 % 1,159 95.9 % 6.9 % 1.9 % 10.2 % 6.9 % (0.1 )%
16 All Other Markets 4,728 2.6 %   1,108 95.4 % 3.5 % (2.3 )% 7.7 % 2.7 % 0.7 %
 
Total 103,522 100.0 % $ 1,707 95.4 % 5.4 % 0.5 % 8.1 % 5.0 % 0.4 %
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
Equity Residential
Fourth Quarter 2012 vs. Third Quarter 2012
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Quarter
 
Q4 2012 Q4 2012 Q4 2012
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 New York Metro Area 7,838 13.2 % $ 3,390 96.3 % 0.4 % (1.4 )% 1.6 % 1.0 % (0.6 )%
2 DC Northern Virginia 9,381 11.2 % 2,134 95.5 % (1.2 )% (3.3 )% (0.3 )% (0.1 )% (1.0 )%
3 Los Angeles 9,716 10.0 % 1,869 95.8 % 0.0 % (4.9 )% 2.3 % 0.3 % (0.4 )%
4 South Florida 12,253 9.0 % 1,464 95.2 % 0.1 % (7.2 )% 4.8 % (0.2 )% 0.3 %
5 San Francisco Bay Area 8,751 8.9 % 1,867 95.0 % 2.1 % (11.4 )% 9.7 % 3.1 % (0.9 )%
6 Boston 5,832 8.0 % 2,547 95.7 % (0.1 )% (2.5 )% 1.1 % 0.0 % 0.0 %
7 Seattle/Tacoma 9,029 7.1 % 1,511 94.5 % (0.8 )% (7.1 )% 2.7 % 0.2 % (0.9 )%
8 Denver 7,976 5.6 % 1,226 95.5 % 0.5 % (11.4 )% 6.0 % 1.2 % (0.6 )%
9 San Diego 4,963 4.8 % 1,828 94.3 % (1.0 )% 2.8 % (2.7 )% 0.8 % (1.6 )%
10 Suburban Maryland 4,856 4.6 % 1,708 95.1 % 0.7 % (7.1 )% 4.4 % 0.9 % (0.3 )%
11 Phoenix 7,400 3.7 % 952 95.3 % 0.4 % (10.7 )% 7.0 % 0.3 % 0.1 %
12 Orlando 6,413 3.6 % 1,085 95.4 % (1.1 )% (10.1 )% 4.6 % (0.6 )% (0.4 )%
13 Orange County, CA 3,490 3.2 % 1,662 95.9 % 0.5 % (3.4 )% 2.3 % 0.7 % (0.3 )%
14 Inland Empire, CA 3,081 2.5 % 1,487 95.0 % 0.1 % (4.4 )% 2.3 % 1.2 % (1.0 )%
15 Atlanta 3,616 2.1 % 1,159 95.9 % 0.4 % (6.3 )% 5.0 % 1.1 % (0.7 )%
16 All Other Markets 4,728 2.5 %   1,108 95.4 % (0.6 )% (5.5 )% 3.0 % (0.5 )% (0.1 )%
 
Total 109,323 100.0 % $ 1,725 95.3 % 0.0 % (5.5 )% 3.0 % 0.5 % (0.5 )%
 

(1)

Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
Equity Residential
2012 vs. 2011
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year
 
2012 2012 2012
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 New York Metro Area 7,063 13.3 % $ 3,322 96.2 % 6.1 % 3.7 % 7.8 % 6.0 % 0.1 %
2 DC Northern Virginia 7,974 10.8 % 2,068 95.7 % 4.6 % 4.2 % 4.8 % 4.6 % 0.1 %
3 South Florida 11,377 9.3 % 1,404 95.1 % 4.4 % 3.5 % 5.0 % 3.8 % 0.5 %
4 Los Angeles 7,832 8.9 % 1,794 95.4 % 4.1 % (2.5 )% 7.5 % 3.7 % 0.3 %
5 Boston 5,175 8.4 % 2,552 95.6 % 6.2 % 0.8 % 9.1 % 6.5 % (0.2 )%
6 San Francisco Bay Area 6,194 7.9 % 1,986 95.5 % 11.0 % 2.9 % 15.2 % 11.0 % 0.0 %
7 Seattle/Tacoma 8,209 7.2 % 1,476 94.6 % 5.8 % 1.7 % 8.3 % 5.6 % 0.2 %
8 Denver 7,976 6.2 % 1,188 95.6 % 8.9 % 0.8 % 12.9 % 8.5 % 0.3 %
9 San Diego 4,284 4.8 % 1,740 95.0 % 2.4 % 1.3 % 3.0 % 2.2 % 0.1 %
10 Phoenix 7,400 4.2 % 941 95.1 % 3.8 % (1.8 )% 7.3 % 3.7 % 0.0 %
11 Orlando 6,413 4.0 % 1,072 95.4 % 4.7 % 2.6 % 6.1 % 4.3 % 0.3 %
12 Orange County, CA 3,490 3.7 % 1,636 95.7 % 5.3 % 3.4 % 6.1 % 5.1 % 0.2 %
13 Suburban Maryland 3,765 3.4 % 1,441 94.9 % 2.9 % (1.7 )% 5.3 % 2.9 % 0.0 %
14 Inland Empire, CA 3,081 2.8 % 1,466 94.9 % 3.3 % (1.0 )% 5.5 % 3.1 % 0.1 %
15 Atlanta 3,616 2.3 % 1,134 96.1 % 6.2 % 2.0 % 9.3 % 6.3 % 0.0 %
16 All Other Markets 4,728 2.8 %   1,102 95.3 % 4.1 % 1.3 % 6.2 % 4.0 % 0.1 %
 
Total 98,577 100.0 % $ 1,658 95.4 % 5.5 % 1.8 % 7.6 % 5.3 % 0.2 %
 

(1)

Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
Equity Residential
         
Fourth Quarter 2012 vs. Fourth Quarter 2011
Same Store Operating Expenses
$ in thousands – 103,522 Same Store Apartment Units
 
 
% of Actual
Q4 2012
Actual Actual $ % Operating
Q4 2012 Q4 2011 Change Change Expenses
 
Real estate taxes $ 52,980 $ 48,982 $ 3,998 8.2 % 31.5 %
On-site payroll (1) 37,054 37,358 (304 ) (0.8 )% 22.1 %
Utilities (2) 24,399 25,241 (842 ) (3.3 )% 14.5 %
Repairs and maintenance (3) 22,092 23,305 (1,213 ) (5.2 )% 13.2 %
Property management costs (4) 18,949 19,172 (223 ) (1.2 )% 11.3 %
Insurance 5,497 5,097 400 7.8 % 3.3 %
Leasing and advertising 2,870 3,126 (256 ) (8.2 )% 1.7 %
Other on-site operating expenses (5)   4,123   4,835   (712 ) (14.7 )% 2.4 %
 
Same store operating expenses $ 167,964 $ 167,116 $ 848   0.5 % 100.0 %
 
 
 
 
2012 vs. 2011
Same Store Operating Expenses
$ in thousands – 98,577 Same Store Apartment Units
 

 

% of Actual
2012
Actual Actual $ % Operating
2012 2011 Change Change Expenses
 
Real estate taxes $ 197,316 $ 184,773 $ 12,543 6.8 % 30.3 %
On-site payroll (1) 146,637 145,979 658 0.5 % 22.5 %
Utilities (2) 97,313 98,572 (1,259 ) (1.3 )% 15.0 %
Repairs and maintenance (3) 88,931 89,152 (221 ) (0.2 )% 13.7 %
Property management costs (4) 70,084 70,858 (774 ) (1.1 )% 10.8 %
Insurance 20,629 19,257 1,372 7.1 % 3.2 %
Leasing and advertising 10,812 11,798 (986 ) (8.4 )% 1.7 %
Other on-site operating expenses (5)   18,192   18,282   (90 ) (0.5 )% 2.8 %
 
Same store operating expenses $ 649,914 $ 638,671 $ 11,243   1.8 % 100.0 %
 
(1)   On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
 
(2) Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income.
 
(3) Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
(4) Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
 
(5) Other on-site operating expenses - Includes administrative costs such as office supplies, telephone and data charges, association and business licensing fees and ground lease costs.
 
Equity Residential
Debt Summary as of December 31, 2012
(Amounts in thousands)
           
 
Weighted
Weighted Average
Average Maturities
Amounts (1) % of Total Rates (1) (years)
 
Secured $ 3,898,369 45.7 % 4.96 % 7.3
Unsecured   4,630,875     54.3 % 5.10 % 5.1  
 
Total $ 8,529,244     100.0 % 5.04 % 6.1  
 
Fixed Rate Debt:
Secured – Conventional

 

$ 3,517,273 41.2 % 5.49 % 6.2
Unsecured – Public/Private   4,329,352     50.8 % 5.70 % 5.4  
 
Fixed Rate Debt   7,846,625     92.0 % 5.61 % 5.8  
 
Floating Rate Debt:
Secured – Conventional 30,516 0.4 % 3.25 % 1.8
Secured – Tax Exempt 350,580 4.1 % 0.23 % 19.7
Unsecured – Public/Private 301,523 3.5 % 1.83 % 0.2
Unsecured – Revolving Credit Facility   —     —   1.35 % 1.5  
 
Floating Rate Debt   682,619     8.0 % 1.35 % 9.8  
 
Total $ 8,529,244     100.0 % 5.04 % 6.1  
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 2012.
 
Note: The Company capitalized interest of approximately $22.5 million and $9.1 million during the years ended December 31, 2012 and 2011, respectively. The Company capitalized interest of approximately $6.7 million and $3.2 million during the quarters ended December 31, 2012 and 2011, respectively.
 
     
 
Debt Maturity Schedule as of December 31, 2012
(Amounts in thousands)
 

 

 

Weighted Weighted
Average Rates Average
Fixed Floating on Fixed Rates on
Year Rate (1) Rate (1) Total % of Total Rate Debt (1) Total Debt (1)
 
2013 $ 224,277 $ 302,033 $ 526,310 6.2 % 6.93 % 4.79 %
2014 564,302 22,021 586,323 6.9 % 5.31 % 5.24 %
2015 417,812 — 417,812 4.9 % 6.30 % 6.30 %
2016 1,190,538 — 1,190,538 14.0 % 5.34 % 5.34 %
2017 1,446,120 456 1,446,576 17.0 % 5.95 % 5.95 %
2018 81,450 724 82,174 1.0 % 5.70 % 5.70 %
2019 802,640 20,766 823,406 9.6 % 5.49 % 5.36 %
2020 1,672,482 809 1,673,291 19.6 % 5.50 % 5.50 %
2021 1,188,905 856 1,189,761 13.9 % 4.64 % 4.64 %
2022 2,401 905 3,306 — 5.81 % 5.74 %
2023+ 231,464 337,699 569,163 6.7 % 6.76 % 3.29 %
Premium/(Discount)   24,234   (3,650 )   20,584   0.2 % N/A   N/A  
 
Total $ 7,846,625 $ 682,619   $ 8,529,244   100.0 % 5.54 % 5.25 %
 

(1) Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2012.

 
Equity Residential
Unsecured Debt Summary as of December 31, 2012
(Amounts in thousands)
           

 

Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount)

Balance

 
Fixed Rate Notes:
5.200 % 04/01/13 (1) $ 400,000 $ (30 ) $ 399,970
Fair Value Derivative Adjustments (1) (300,000 ) — (300,000 )
5.250 % 09/15/14 500,000 (105 ) 499,895
6.584 % 04/13/15 300,000 (248 ) 299,752
5.125 % 03/15/16 500,000 (170 ) 499,830
5.375 % 08/01/16 400,000 (665 ) 399,335
5.750 % 06/15/17 650,000 (2,289 ) 647,711
7.125 % 10/15/17 150,000 (311 ) 149,689
4.750 % 07/15/20 600,000 (3,433 ) 596,567
4.625 % 12/15/21 1,000,000 (3,397 ) 996,603
7.570 % 08/15/26   140,000     —     140,000  
 
  4,340,000     (10,648 )   4,329,352  
Floating Rate Notes:
04/01/13 (1) 300,000 — 300,000
Fair Value Derivative Adjustments (1)   1,523     —     1,523  
 
  301,523     —     301,523  
 
Revolving Credit Facility: LIBOR+1.15% 07/13/14 (2)(3)   —     —     —  
 
Total Unsecured Debt $ 4,641,523   $ (10,648 ) $ 4,630,875  
 
(1)   Fair value interest rate swaps convert $300.0 million of the 5.200% notes due April 1, 2013 to a floating interest rate.
 
(2) Facility is private. All other unsecured debt is public.
 
(3) As of December 31, 2012, there was approximately $1.72 billion available on the Company's unsecured revolving credit facility. On January 11, 2013, the Company replaced its existing $1.75 billion facility with a new $2.5 billion unsecured revolving credit facility maturing in April 2018. The interest rate on advances under the new credit facility will be LIBOR plus a spread (currently 1.05%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of January 31, 2013, there was approximately $2.47 billion available on the Company's unsecured revolving credit facility.
 
Note: In October 2012, the Company paid off the $222.1 million outstanding of its 5.500% public notes and its $500.0 million term loan facility, both at maturity.
 
Equity Residential
       
Selected Unsecured Public Debt Covenants
 
December 31, September 30,
2012 2012
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 38.6 % 43.2 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 17.6 % 18.3 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 3.00 2.95
 
Total Unsecured Assets to Unsecured Debt 346.3 % 286.5 %
(must be at least 150%)
 

These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding
unsecured public debt. Equity Residential is the general partner of ERPOP.

 
Equity Residential
             
Capital Structure as of December 31, 2012
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 3,898,369 45.7 %
Unsecured Debt   4,630,875 54.3 %
 
Total Debt8,529,244100.0%30.7%
 
Common Shares (includes Restricted Shares) 325,054,654 95.9 %
Units (includes OP Units and LTIP Units)   13,968,758   4.1 %
 
Total Shares and Units 339,023,412 100.0 %
Common Share Price at December 31, 2012 $ 56.67
19,212,457 99.7 %
Perpetual Preferred Equity (see below)   50,000 0.3 %
 
Total Equity19,262,457100.0%69.3%
 
Total Market Capitalization$27,791,701100.0%
 
   
 
Perpetual Preferred Equity as of December 31, 2012
(Amounts in thousands except for share and per share amounts)
 
 
Annual Annual
Redemption Outstanding Liquidation Dividend Dividend
Series Date Shares Value Per Share Amount
 
Preferred Shares:
8.29% Series K 12/10/2026 1,000,000 $ 50,000 $ 4.145 $ 4,145
 
Total Perpetual Preferred Equity 1,000,000 $ 50,000 $ 4,145
 
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
       
2012 2011 Q412 Q411
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 302,700,630 294,855,772 310,397,925 295,989,703
Shares issuable from assumed conversion/vesting of:
- OP Units 13,853,526 13,205,924 13,965,627 13,130,118
- long-term compensation shares/units 3,211,722 4,003,066 2,744,518 3,611,022
 
Total Common Shares and Units - diluted 319,765,878 312,064,762 327,108,070 312,730,843
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 302,700,630 294,855,772 310,397,925 295,989,703
OP Units - basic 13,853,526 13,205,924 13,965,627 13,130,118
 
Total Common Shares and OP Units - basic 316,554,156 308,061,696 324,363,552 309,119,821
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 3,211,722 4,003,066 2,744,518 3,611,022
 
Total Common Shares and Units - diluted 319,765,878 312,064,762 327,108,070 312,730,843
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 325,054,654 297,508,185
Units (includes OP Units and LTIP Units) 13,968,758 13,492,543
 
Total Shares and Units 339,023,412 311,000,728
 
Equity Residential
Partially Owned Entities as of December 31, 2012
(Amounts in thousands except for project and apartment unit amounts)
       
Consolidated Unconsolidated
Development Projects

 

 

 
Held for Institutional
and/or Under Joint
Development (4) Other Total Ventures (5)
 
Total projects (1)   —     19     19     —  
 
Total apartment units (1)   —     3,475     3,475     —  
 
Operating information for the year ended 12/31/12 (at 100%):
Operating revenue $ — $ 62,405 $ 62,405 $ 7
Operating expenses   170     19,480     19,650     244  
 
Net operating (loss) income (170 ) 42,925 42,755 (237 )
Depreciation — 15,346 15,346 —
General and administrative/other   213     157     370     —  
 
Operating (loss) income (383 ) 27,422 27,039 (237 )
Interest and other income 2 100 102 —
Other expenses (264 ) — (264 ) —
Interest:
Expense incurred, net — (9,386 ) (9,386 ) —
Amortization of deferred financing costs   —     (160 )   (160 )   —  
 

(Loss) income before income and other taxes and net gain on sales of discontinued operations

(645 ) 17,976 17,331 (237 )
Income and other tax (expense) benefit (25 ) (75 ) (100 ) —
Net gain on sales of discontinued operations   15     —     15     —  
 
Net (loss) income $ (655 ) $ 17,901   $ 17,246   $ (237 )
 
Debt - Secured (2):
EQR Ownership (3) $ — $ 159,068 $ 159,068 $ 15,327
Noncontrolling Ownership   —     41,269     41,269     61,307  
 
Total (at 100%) $ —   $ 200,337   $ 200,337   $ 76,634  
 
(1)   Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
 
(2) All debt is non-recourse to the Company.
 
(3) Represents the Company's current equity ownership interest.
 
(4) See Projects Under Development - Partially Owned on page 23 for further information.
 
(5) See Projects Under Development - Unconsolidated on page 23 for further information.
 
Equity Residential
Development and Lease-Up Projects as of December 31, 2012
(Amounts in thousands except for project and apartment unit amounts)
                     
Total Book
No. of Total Total Value Not Estimated Estimated
Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 
Consolidated
 

Projects Under Development - Wholly Owned:

Jia (formerly Chinatown Gateway) Los Angeles, CA 280 $ 92,920 $ 52,995 $ 52,995 $ — 47 % — — Q3 2013 Q2 2015
Westgate II Pasadena, CA 252 125,293 61,947 61,947 — 25 % — — Q1 2014 Q1 2015
1111 Belle Pre (formerly The Madison) Alexandria, VA 360 115,072 56,815 56,815 — 42 % — — Q1 2014 Q2 2015
Market Street LandingSeattle, WA 287 90,024 38,320 38,320 — 35 % — — Q1 2014 Q3 2015
Westgate III Pasadena, CA 88   54,037   20,853   20,853   — 2 % — — Q2 2014 Q1 2015
Projects Under Development - Wholly Owned 1,267 477,346 230,930 230,930 —
 

Projects Under Development - Partially Owned:

400 Park Avenue South (2) New York, NY 269   251,961   92,374   92,374   — 12 % — — Q2 2015 Q1 2016
Projects Under Development - Partially Owned 269 251,961 92,374 92,374 —
         
Projects Under Development1,536   729,307   323,304   323,304   —
 

Completed Not Stabilized - Wholly Owned (3):

The Savoy at Dayton Station III (formerly Savoy III) Aurora, CO 168 22,356 21,460 — — 93 % 91 % Completed Q1 2013
2201 Pershing DriveArlington, VA 188   63,242   56,087   —   — 72 % 67 % Completed Q3 2013
Projects Completed Not Stabilized - Wholly Owned 356 85,598 77,547 — —
         
Projects Completed Not Stabilized356   85,598   77,547   —   —
 

Completed and Stabilized During the Quarter - Wholly Owned:

Ten23 (formerly 500 West 23rd Street) (4) New York, NY 111   55,113   55,095   —   — 97 % 97 % Completed Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned 111 55,113 55,095 — —
         
Projects Completed and Stabilized During the Quarter111   55,113   55,095   —   —
 
Total Consolidated Projects2,003$870,018$455,946$323,304$—
 
Land Held for DevelopmentN/A   N/A$353,823$353,823$—
 
Unconsolidated
 

Projects Under Development - Unconsolidated:

Nexus Sawgrass (formerly Sunrise Village) (5) Sunrise, FL 501 $ 78,212 $ 61,901 $ 61,901 $ 29,769 80 % 9 % 2 % Q3 2013 Q3 2014
Domain (5) San Jose, CA 444   154,570   109,141   109,141   46,865 67 % — — Q4 2013 Q4 2015
Projects Under Development - Unconsolidated 945 232,782 171,042 171,042 76,634
         
Projects Under Development945   232,782   171,042   171,042   76,634
 
Total Unconsolidated Projects945$232,782$171,042$171,042$76,634
 

 

 

 

Total Capital Q4 2012

NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

 Cost (1) NOI
Projects Under Development $ 729,307 $ —
Completed Not Stabilized 85,598 747
Completed and Stabilized During the Quarter   55,113     714  
Total Consolidated Development NOI Contribution $ 870,018   $ 1,461  
 
(1)   Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
(2) The Company is jointly developing with Toll Brothers (NYSE: TOL) a vacant land parcel at 400 Park Avenue South in New York City with the Company's rental portion on floors 2-22 and Toll's for sale portion on floors 23-40. The total capital cost and total book value to date represent only the Company's portion of the project. Toll Brothers has funded $64.4 million for their allocated share of the project.
(3) 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.
(4) Ten23 - The land under this development is subject to a long term ground lease.
(5) These development projects are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. Total project costs are approximately $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company is responsible for constructing the projects and has given certain construction cost overrun guarantees but currently has no further funding obligations. Nexus Sawgrass has a maximum debt commitment of $48.7 million and a current unconsolidated outstanding balance of $29.8 million; the loan bears interest at 5.60% and matures January 1, 2021. Domain has a maximum debt commitment of $98.6 million and a current unconsolidated outstanding balance of $46.9 million; the loan bears interest at 5.75% and matures January 1, 2022.
 
Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Year Ended December 31, 2012
(Amounts in thousands except for apartment unit and per apartment unit amounts)
 
 
    Repairs and Maintenance Expenses   Capital Expenditures to Real Estate Total Expenditures
Total

Apartment

Units (1)

Expense (2)   Avg. Per

Apartment

Unit

  Payroll (3)   Avg. Per

Apartment

Unit

  Total   Avg. Per

Apartment

Unit

Replacements

(4)

  Avg. Per

Apartment

Unit

  Building

Improvements

(5)

  Avg. Per

Apartment

Unit

  Total   Avg. Per

Apartment

Unit

Grand

Total

  Avg. Per

Apartment

Unit

 
Same Store Properties (6) 98,577 $ 88,931$ 902$ 74,763$ 759$ 163,694$ 1,661$ 65,490$ 664$ 55,097$ 559$ 120,587$ 1,223 (9) $ 284,281$ 2,884
 
Non-Same Store Properties (7) 11,754 13,805 1,284 7,355 684 21,160 1,968 7,599 706 21,788 2,026 29,387 2,732 50,547 4,700
 
Other (8) — 4,084 5,197 9,281 1,723 1,131 2,854 12,135
 
Total 110,331 $ 106,820$ 87,315$ 194,135$ 74,812$ 78,016$ 152,828$ 346,963
 
(1)   Total Apartment Units - Excludes 5,039 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company's results.
 
(2) Repairs and Maintenance Expenses - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
(3) Maintenance Payroll - Includes payroll and related expenses for maintenance staff.
 
(4) Replacements - Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $33.0 million spent in 2012 on apartment unit renovations/rehabs (primarily kitchens and baths) on 4,427 apartment units (equating to about $7,500 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2013, the Company expects to spend approximately $40.8 million rehabbing 5,000 apartment units (equating to about $8,150 per apartment unit rehabbed).
 
(5) Building Improvements - Includes roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment.
 
(6) Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2011, less properties subsequently sold.
 
(7) Non-Same Store Properties - Primarily includes all properties acquired during 2011 and 2012, plus any properties in lease-up and not stabilized as of January 1, 2011. Per apartment unit amounts are based on a weighted average of 10,754 apartment units.
 
(8) Other - Primarily includes expenditures for properties sold during the period.
 
(9) For 2013, the Company estimates that it will spend approximately $1,500 per apartment unit of capital expenditures for the approximately 80,000 apartment units that the Company expects to have in its annual same store set, inclusive of apartment unit renovation/rehab costs, or $1,150 per apartment unit excluding apartment unit renovation/rehab costs.
 
Equity Residential
Discontinued Operations
(Amounts in thousands)
       
Year Ended Quarter Ended
December 31, December 31,
2012 2011 2012 2011
 
REVENUES
Rental income $ 69,619   $ 202,128   $ 7,957   $ 28,910  
 
Total revenues   69,619     202,128     7,957     28,910  
 
EXPENSES (1)
Property and maintenance 19,575 76,727 2,099 7,283
Real estate taxes and insurance 6,055 17,061 703 2,823
Property management 211 266 — 68
Depreciation 20,910 51,037 1,856 10,295
General and administrative   77     54     4     4  
 
Total expenses   46,828     145,145     4,662     20,473  
 
Discontinued operating income 22,791 56,983 3,295 8,437
 
Interest and other income 155 196 75 45
Other expenses (120 ) (265 ) — (73 )
Interest (2):
Expense incurred, net (1,381 ) (5,163 ) — (872 )
Amortization of deferred financing costs (65 ) (1,080 ) — (244 )
Income and other tax (expense) benefit   (9 )   243     (57 )   213  
 
Discontinued operations 21,371 50,914 3,313 7,506
Net gain on sales of discontinued operations   548,278     826,489     240,831     67,389  
 
Discontinued operations, net $ 569,649   $ 877,403   $ 244,144   $ 74,895  
 
(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
Normalized FFO Guidance Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
             
Normalized FFO Guidance Reconciliations
 
Normalized
FFO Reconciliations
Guidance Q4 2012
to Actual Q4 2012
Amounts Per Share
 
Guidance Q4 2012 Normalized FFO - Diluted (2) (3) $ 239,213 $ 0.749
Property NOI 3,265 0.010
Other 1,415 0.004
Effect of equity issuance   —     (0.017 )
 
Actual Q4 2012 Normalized FFO - Diluted (2) (3) $ 243,893   $ 0.746  
 
 
 
 
 
 
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
Year Ended December 31, Quarter Ended December 31,
2012 2011 Variance 2012 2011 Variance
 
Impairment $ —   $ —   $ —   $ —   $ —   $ —  
Asset impairment and valuation allowances   —     —     —     —     —     —  
 
Property acquisition costs (other expenses) (A) 12,593 9,482 3,111 3,836 4,216 (380 )
Write-off of pursuit costs (other expenses)   9,056     5,075     3,981     2,915     1,023     1,892  
Property acquisition costs and write-off of pursuit costs (other expenses)   21,649     14,557     7,092     6,751     5,239     1,512  
 
Prepayment premiums/penalties (interest expense) 272 — 272 — — —
Write-off of unamortized deferred financing costs (interest expense) (B) 10,965 7,227 3,738 8,854 2,880 5,974
Write-off of unamortized (premiums)/discounts/OCI (interest expense) (96 ) (89 ) (7 ) (54 ) — (54 )
Non-cash convertible debt discount (interest expense) — 4,992 (4,992 ) — — —
Loss due to ineffectiveness of forward starting swaps (interest expense) — 170 (170 ) — 170 (170 )
Premium on redemption of Preferred Shares (C)   5,152     —     5,152     2     —     2  

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

  16,293     12,300     3,993     8,802     3,050     5,752  
 
Net (gain) loss on sales of land parcels — (4,217 ) 4,217 — — —
Net incremental loss (gain) on sales of condominium units 11 (1,993 ) 2,004 60 57 3
Income and other tax expense (benefit) - Condo sales (66 ) (365 ) 299 26 (299 ) 325
(Gain) loss on sale of Equity Corporate Housing (ECH), net of severance   (200 )   (401 )   201     150     (180 )   330  
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (255 )   (6,976 )   6,721     236     (422 )   658  
 
 
Insurance/litigation settlement expense (other expenses) 4,714 — 4,714 — — —
Prospect Towers garage insurance proceeds (real estate taxes and insurance) (3,467 ) (6,103 ) 2,636 — (3,378 ) 3,378
Archstone termination fees (interest and other income) (150,000 ) — (150,000 ) (80,000 ) — (80,000 )
Forfeited deposits (interest and other income) — (729 ) 729 — (229 ) 229
Final profit participation in third-party management company (interest and other income) — (200 ) 200 — (200 ) 200
Termination of royalty participation in LRO (interest and other income) — (4,537 ) 4,537 — — —
Insurance/litigation settlement proceeds (interest and other income) — (800 ) 800 — (800 ) 800
Other (other expenses)   1,118     —     1,118     52     —     52  
Other miscellaneous non-comparable items   (147,635 )   (12,369 )   (135,266 )   (79,948 )   (4,607 )   (75,341 )
           
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ (109,948 ) $ 7,512   $ (117,460 ) $ (64,159 ) $ 3,260   $ (67,419 )
 
(A) For the year and quarter ended December 31, 2012, includes $5.6 million and $3.7 million, respectively, of transaction costs related to the potential Archstone transaction.
 
(B) For both the year and quarter ended December 31, 2012, includes $8.4 million of bridge loan costs related to the potential Archstone transaction.
 
(C) Includes $5.13 million of original issuance costs previously deferred.
 
Note: See page 29 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
 
Equity Residential
Normalized FFO Guidance and Assumptions
       
The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties, property acquisition costs and the write-off of pursuit costs, are not included in the estimates provided on this page. See page 28 for estimates of property acquisition costs, prepayment premiums/penalties and other amounts not included in 2013 Normalized FFO guidance. See page 29 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
 
 
 

2013 Normalized FFO Guidance (per share diluted)

 

Q1 2013

2013

 
Expected Normalized FFO (2) (3) $0.62 to $0.66$2.80 to $2.90
 

2013 Same Store Assumptions

 
Physical occupancy 95.3 %
Revenue change 4.0% to 5.0%
Expense change 2.5% to 3.5%
NOI change 4.5% to 6.0%
 
(Note: The same store guidance above is computed based on the portfolio of approximately 80,000 apartment units that the company expects to have in its annual same store set after the completion of its planned 2013 dispositions. 30 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2013 Transaction Assumptions

 
Consolidated rental acquisitions None except Archstone assets
Consolidated rental dispositions - EQR assets $4.0 billion
Consolidated rental dispositions - Archstone assets (pre-closing) $500.0 million
Capitalization rate spread 100 basis points
 

2013 Debt Assumptions, Includes Impact of Archstone Debt Premium (see Note below)

 
Weighted average debt outstanding $11.1 billion to $11.6 billion
Weighted average interest rate (reduced for capitalized interest) 4.30 %
Interest expense $477.3 million to $498.8 million
 

2013 Other Guidance Assumptions

 
General and administrative expense $55.0 million to $58.0 million
Interest and other income $0.5 million to $1.5 million
Income and other tax expense $1.5 million to $2.5 million
Debt offerings No amounts budgeted
Equity ATM share offerings No amounts budgeted
Preferred share offerings No amounts budgeted
Weighted average Common Shares and Units - Diluted 370.9 million
 

Note: All debt assumptions include the impact of a mark-to-market non-cash adjustment relating to Archstone's debt that the Company is assuming. Our estimate is based on current interest rates and the expected timing of the Archstone closing. Excluding the impact of the Archstone debt premium, the Company's debt assumptions would be as follows:

 
Weighted average debt outstanding without Archstone premium

$11.0 billion to $11.5 billion

Weighted average interest rate (reduced for capitalized interest) without Archstone premium4.71 %
Interest expense without Archstone premium$518.1 million to $541.7 million
 
Equity Residential
2013 Non-Comparable Items
(Amounts in thousands)
       
The Non-Comparable Items provided below are based on current expectations and are forward looking.
 
Midpoint of Forecasted 2013 Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
       
Q1 2013     2013
   
Asset impairment and valuation allowances $ —   $ —  
 
Archstone property acquisition costs 25,940 25,940
Write-off of pursuit costs   1,230     4,920  
Property acquisition costs and write-off of pursuit costs   27,170     30,860  
 
Prepayment premiums/penalties 1,860 185,860
Write-off of unamortized deferred financing costs 7,925 11,304
Write-off of unamortized (premiums)/discounts/OCI   (356 )   (98,196 )

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

  9,429     98,968  
   

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

  —     —  
 
Archstone wind down costs, including severance   46,527     59,989  
Other miscellaneous non-comparable items   46,527     59,989  
   
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 83,126   $ 189,817  
 
Note: See page 29 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
 
Equity Residential
Additional Reconciliations, Definitions and Footnotes
(Amounts in thousands except per share data)
(All per share data is diluted)
         
 
The guidance/projections provided below are based on current expectations and are forward-looking.
 
 
Reconciliations of EPS to FFO and Normalized FFO for Pages 8, 26 and 27
 
 

 

 

 

Expected Expected

Expected Q4 2012

Q1 2013 2013
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $ 418,258 $ 1.310 $3.64 to $3.68$5.49 to $5.59
Add: Expected depreciation expense 167,200 0.524 0.49 1.86
Less: Expected net gain on sales (5)   (275,405 )   (0.862 ) (3.74 ) (5.06 )
 
Expected FFO - Diluted (1) (3) 310,053 0.972 0.39 to 0.43 2.29 to 2.39
 
Asset impairment and valuation allowances — — — —
Property acquisition costs and write-off of pursuit costs (other expenses) 8,385 0.026 0.07 0.08

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

444 0.001 0.03 0.27
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit) 331 0.001 — —
Other miscellaneous non-comparable items   (80,000 )   (0.251 ) 0.13   0.16  
 
Expected Normalized FFO - Diluted (2) (3) $ 239,213   $ 0.749   $0.62 to $0.66$2.80 to $2.90
 

Definitions and Footnotes for Pages 8, 26 and 27

   
(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 and impairment write-downs of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
 
(2) Normalized funds from operations ("Normalized FFO") begins with FFO and excludes:
• the impact of any expenses relating to non-operating asset impairment and valuation allowances;
• property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs (other expenses);
• gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
• gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
• other miscellaneous non-comparable items.
 
(3) The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company's real estate between periods or as compared to different companies. The company also 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.
 
(4) 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 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 "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.
 
(5) 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.
 
Same Store NOI Reconciliation for Page 12
       
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for 2012 and Fourth Quarter 2012 Same Store Properties:
 
Year Ended December 31, Quarter Ended December 31,
2012 2011 2012 2011
 
Operating income $ 667,958 $ 541,675 $ 188,214 $ 154,722
Adjustments:
Non-same store operating results (155,374 ) (60,334 ) (25,973 ) (9,349 )
Fee and asset management revenue (9,573 ) (9,026 ) (2,245 ) (2,344 )
Fee and asset management expense 4,663 4,279 1,068 1,072
Depreciation 664,082 612,579 166,196 156,938
General and administrative   47,248     43,605     10,072     11,144  
 
Same store NOI $ 1,219,004   $ 1,132,778   $ 337,332   $ 312,183  
 

Equity Residential
Marty McKenna, 312-928-1901

Source: Equity Residential
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