Equity Residential Reports First Quarter 2019 Results

Press Release

Equity Residential Reports First Quarter 2019 Results

Company Release - 4/30/2019

CHICAGO--(BUSINESS WIRE)-- Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2019. All per share results are reported as available to common shares/units on a diluted basis.


	Quarter Ended March 31,
	2019		2018		$ Change			% Change
Earnings Per Share (EPS)	$	0.28	$	0.57	$	(0.29	)		(50.9	%)
Funds from Operations (FFO) per share	$	0.81	$	0.71	$	0.10			14.1	%
Normalized FFO per share	$	0.82	$	0.77	$	0.05			6.5	%

“We reported operating results that exceeded our expectations driven by strong demand across all our markets combined with reduced new supply in New York and Boston,” said Mark J. Parrell, Equity Residential’s President and CEO. “As we enter the busiest leasing period of the year, we are well positioned to deliver full year results near the top end of our guidance range if current trends continue. The strength of our business currently and our confidence in its long term prospects led our Board of Trustees to increase our common dividend by 5.1% in March 2019.”

Highlights

The Company produced same store revenue growth of 3.1% for the first quarter of 2019, which was above its expectations, with Physical Occupancy of 96.3% and Renewal Rate Achieved growth of 4.9%.
The Company produced Normalized FFO per share growth of 6.5% for the first quarter of 2019.
During the first quarter of 2019, the Company acquired three apartment properties, totaling 579 apartment units, for an aggregate purchase price of approximately $258.7 million.

Results Per Share

The change in EPS is due primarily to lower property sale gains in the first quarter of 2019, the various adjustment items listed on page 23 of this release and the items described below.

The per share change in FFO, as defined by Nareit (National Association of Real Estate Investment Trusts), is due primarily to the various adjustment items listed on page 23 of this release and the items described below.

The per share change in Normalized FFO is due primarily to:

	Positive/(Negative) Impact
	First Quarter 2019 vs.
	First Quarter 2018
Same Store Net Operating Income (NOI)	$	0.03
Lease-Up NOI and other non-same store NOI		0.02
2019 and 2018 transaction activity impact on NOI		0.01
Other items, including corporate overhead ¹		(0.01	)
Net	$	0.05

¹ Corporate overhead includes property management and general and administrative expenses.

The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 25 through 29 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 26 and 27 of this release and the Company has included guidance for 2019 Normalized FFO per share on page 24 and 2019 FFO per share and 2019 EPS on page 27 of this release.

Same Store Results and Lease Pricing Statistics

The following table shows the increases in same store results for the first quarter 2019 compared to the first quarter 2018, which includes 74,166 apartment units. The Company’s Physical Occupancy was 96.3% for the first quarter of 2019 compared to 96.0% for the first quarter of 2018.

		First Quarter 2019 vs.
		First Quarter 2018
Revenues		3.1%
Expenses		4.4%
NOI		2.5%

The Company has added disclosure of Same Store Lease Pricing Statistics (New Lease Change and Renewal Rate Achieved) by market on page 13 of this release.

Investment Activity

The Company acquired three apartment properties during the first quarter of 2019, totaling 579 apartment units, for an aggregate purchase price of approximately $258.7 million at a weighted average Acquisition Capitalization Rate of 4.6%. The properties are located in Jersey City, NJ, Seattle and Denver. Subsequent to the end of the first quarter, the Company acquired a 366-unit apartment property located in suburban Washington, D.C. for approximately $103.5 million at an Acquisition Capitalization Rate of 5.3%.

The Company did not sell any properties during the first quarter of 2019. Subsequent to the end of the first quarter, the Company sold a 266-unit apartment property located in New York City for approximately $237.5 million at a Disposition Yield of 4.4%.

Capital Markets Activity

On February 20, 2019, the Company closed a new $288.1 million secured loan. The loan has a 10 year term, is interest only and carries a fixed interest rate of 3.94%.

Second Quarter 2019 Guidance

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

		Q2 2019
		Guidance
EPS		$0.80 to $0.84
FFO per share		$0.77 to $0.81
Normalized FFO per share		$0.82 to $0.86

The difference between the first quarter 2019 actual EPS of $0.28 and the second quarter 2019 EPS guidance midpoint of $0.82 is due primarily to higher expected property sale gains, offset by higher expected non-cash debt extinguishment costs and the items described below.

The difference between the first quarter 2019 actual FFO of $0.81 per share and the second quarter 2019 FFO guidance midpoint of $0.79 per share is due primarily to higher expected non-cash debt extinguishment costs and the items described below.

The difference between the first quarter 2019 actual Normalized FFO of $0.82 per share and the second quarter 2019 Normalized FFO guidance midpoint of $0.84 per share is due primarily to:

	Positive/(Negative) Impact
	Second Quarter 2019 vs.
	First Quarter 2019
Same Store NOI	$	0.02
2019 and 2018 transaction activity impact on NOI		(0.01	)
Corporate overhead		0.01
Net	$	0.02

Second Quarter 2019 Earnings and Conference Call

Equity Residential expects to announce its second quarter 2019 results on Tuesday, July 30, 2019 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, July 31, 2019.

About Equity Residential

Equity Residential is an S&P 500 company focused on the acquisition, development and management of rental apartment properties located in urban and high-density suburban markets where today’s renters want to live, work and play. Equity Residential owns or has investments in 310 properties consisting of 80,061 apartment units, primarily located in Boston, New York, Washington, D.C., Seattle, San Francisco, Southern California and Denver. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

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

A live web cast of the Company’s conference call discussing these results will take place tomorrow, Wednesday, May 1, at 10:00 a.m. CT.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)

	Quarter Ended March 31,
	2019			2018
REVENUES
Rental income	$	662,302		$	632,831
Fee and asset management		192			185
Total revenues		662,494			633,016

EXPENSES
Property and maintenance		115,070			108,202
Real estate taxes and insurance		91,442			91,914
Property management		26,396			23,444
General and administrative		15,381			16,278
Depreciation		204,215			196,309
Total expenses		452,504			436,147

Net gain (loss) on sales of real estate properties		(21	)		142,213

Operating income		209,969			339,082

Interest and other income		581			5,880
Other expenses		(3,275	)		(3,441	)
Interest:
Expense incurred, net		(94,938	)		(116,104	)
Amortization of deferred financing costs		(2,136	)		(3,679	)
Income before income and other taxes, income (loss) from
investments in unconsolidated entities and net gain (loss)
on sales of land parcels		110,201			221,738
Income and other tax (expense) benefit		(238	)		(213	)
Income (loss) from investments in unconsolidated entities		(707	)		(977	)
Net gain (loss) on sales of land parcels		1			—
Net income		109,257			220,548
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(3,919	)		(8,059	)
Partially Owned Properties		(799	)		(680	)
Net income attributable to controlling interests		104,539			211,809
Preferred distributions		(773	)		(773	)
Net income available to Common Shares	$	103,766		$	211,036

Earnings per share – basic:
Net income available to Common Shares	$	0.28		$	0.57
Weighted average Common Shares outstanding		369,558			367,800

Earnings per share – diluted:
Net income available to Common Shares	$	0.28		$	0.57
Weighted average Common Shares outstanding		385,184			383,018

Distributions declared per Common Share outstanding	$	0.5675		$	0.54

Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)

	Quarter Ended March 31,
	2019			2018
Net income	$	109,257		$	220,548
Net (income) loss attributable to Noncontrolling Interests – Partially
Owned Properties		(799	)		(680	)
Preferred distributions		(773	)		(773	)
Net income available to Common Shares and Units		107,685			219,095

Adjustments:
Depreciation		204,215			196,309
Depreciation – Non-real estate additions		(1,182	)		(1,145	)
Depreciation – Partially Owned Properties		(903	)		(1,032	)
Depreciation – Unconsolidated Properties		922			1,148
Net (gain) loss on sales of real estate properties		21			(142,213	)
FFO available to Common Shares and Units		310,758			272,162

Adjustments (see page 23 for additional detail):
Impairment – non-operating assets		—			—
Write-off of pursuit costs		1,448			931
Debt extinguishment and preferred share redemption (gains)
losses		—			23,539
Non-operating asset (gains) losses		229			213
Other miscellaneous items		1,575			(3,239	)
Normalized FFO available to Common Shares and Units	$	314,010		$	293,606

FFO	$	311,531		$	272,935
Preferred distributions		(773	)		(773	)
FFO available to Common Shares and Units	$	310,758		$	272,162
FFO per share and Unit – basic	$	0.81		$	0.71
FFO per share and Unit – diluted	$	0.81		$	0.71

Normalized FFO	$	314,783		$	294,379
Preferred distributions		(773	)		(773	)
Normalized FFO available to Common Shares and Units	$	314,010		$	293,606
Normalized FFO per share and Unit – basic	$	0.82		$	0.77
Normalized FFO per share and Unit – diluted	$	0.82		$	0.77

Weighted average Common Shares and Units outstanding – basic		382,477			380,663
Weighted average Common Shares and Units outstanding – diluted		385,184			383,018

Note: See page 23 for additional detail regarding the adjustments from FFO to Normalized FFO. See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.


Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)

	March 31,			December 31,
	2019			2018
ASSETS
Land	$	5,918,994		$	5,875,803
Depreciable property		20,691,304			20,435,901
Projects under development		135,191			109,409
Land held for development		91,647			89,909
Investment in real estate		26,837,136			26,511,022
Accumulated depreciation		(6,900,496	)		(6,696,281	)
Investment in real estate, net		19,936,640			19,814,741
Investments in unconsolidated entities		62,853			58,349
Cash and cash equivalents		29,391			47,442
Restricted deposits		64,115			68,871
Right-of-use assets		434,683			—
Other assets		241,129			404,806
Total assets	$	20,768,811		$	20,394,209

LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	2,671,491		$	2,385,470
Notes, net		5,936,335			5,933,286
Line of credit and commercial paper		344,844			499,183
Accounts payable and accrued expenses		152,831			102,471
Accrued interest payable		74,028			62,622
Lease liabilities		282,237			—
Other liabilities		321,172			358,563
Security deposits		68,335			67,258
Distributions payable		218,471			206,601
Total liabilities		10,069,744			9,615,454

Commitments and contingencies

Redeemable Noncontrolling Interests – Operating Partnership		432,562			379,106
Equity:
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 745,600 shares issued and
outstanding as of March 31, 2019 and December 31, 2018		37,280			37,280
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 370,462,401 shares issued
and outstanding as of March 31, 2019 and 369,405,161
shares issued and outstanding as of December 31, 2018		3,705			3,694
Paid in capital		8,925,882			8,935,453
Retained earnings		1,155,032			1,261,763
Accumulated other comprehensive income (loss)		(75,013	)		(64,986	)
Total shareholders’ equity		10,046,886			10,173,204
Noncontrolling Interests:
Operating Partnership		225,081			228,738
Partially Owned Properties		(5,462	)		(2,293	)
Total Noncontrolling Interests		219,619			226,445
Total equity		10,266,505			10,399,649
Total liabilities and equity	$	20,768,811		$	20,394,209


Equity Residential Portfolio Summary As of March 31, 2019

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

Los Angeles		70		15,968		18.4	%	$	2,572
Orange County		13		4,028		4.3	%		2,215
San Diego		12		3,385		3.8	%		2,373
Subtotal – Southern California		95		23,381		26.5	%		2,481

San Francisco		55		13,424		20.5	%		3,217
Washington DC		49		16,050		16.9	%		2,401
New York		38		9,872		15.3	%		3,874
Boston		25		6,641		10.1	%		3,078
Seattle		42		8,612		9.7	%		2,383
Denver		3		1,000		1.0	%		2,261
Other Markets		1		136		—	%		1,286
Total		308		79,116		100.0	%		2,799

Unconsolidated Properties		2		945		—			—

Grand Total		310		80,061		100.0	%	$	2,799

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


Equity Residential

Portfolio as of March 31, 2019

	Properties		Apartment Units

Wholly Owned Properties		290		75,419
Master-Leased Properties - Consolidated		1		162
Partially Owned Properties - Consolidated		17		3,535
Partially Owned Properties - Unconsolidated		2		945

		310		80,061


Portfolio Rollforward Q1 2019
($ in thousands)

		Properties		Apartment Units		Purchase Price		Acquisition Cap Rate

	12/31/2018		307		79,482

Acquisitions:
Consolidated:
Rental Properties			2		305	$	148,150		4.6	%
Rental Properties – Not Stabilized (A)			1		274	$	110,500		4.6	%


	3/31/2019		310		80,061

(A)

The Company acquired one property in Denver in the first quarter of 2019 that was in the final stages of completing lease-up and is expected to stabilize in its second year of ownership at an Acquisition Cap Rate of 4.6%.


Equity Residential

First Quarter 2019 vs. First Quarter 2018
Same Store Results/Statistics for 74,166 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)

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

Q1 2019	$	622,603		$	191,323		$	431,280		$	2,796			96.3	%		9.9	%
Q1 2018	$	603,797		$	183,181		$	420,616		$	2,721			96.0	%		10.8	%

Change	$	18,806		$	8,142		$	10,664		$	75			0.3	%		(0.9	%)

Change		3.1	%		4.4	%		2.5	%		2.8	%


First Quarter 2019 vs. Fourth Quarter 2018
Same Store Results/Statistics for 78,152 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)

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

Q1 2019	$	656,208		$	202,538		$	453,670		$	2,797			96.3	%		10.0	%
Q4 2018	$	650,806		$	193,415		$	457,391		$	2,784			96.2	%		10.7	%

Change	$	5,402		$	9,123		$	(3,721	)	$	13			0.1	%		(0.7	%)

Change		0.8	%		4.7	%		(0.8	)%		0.5	%

Note: See page 28 for reconciliations from operating income.


Equity Residential
First Quarter 2019 vs. First Quarter 2018
Same Store Results/Statistics by Market

														Increase (Decrease) from Prior Year's Quarter
Markets/Metro Areas	Apartment Units		Q1 2019 % of Actual NOI			Q1 2019 Average Rental Rate		Q1 2019 Weighted Average Physical Occupancy %			Q1 2019 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Los Angeles		15,371		18.8	%	$	2,577		96.2	%		11.5	%		4.0	%		7.6	%		2.5	%		4.2	%		0.1	%		(1.1	%)
Orange County		4,028		4.6	%		2,215		96.3	%		10.5	%		4.1	%		1.9	%		4.9	%		3.9	%		0.2	%		0.7	%
San Diego		3,385		4.0	%		2,373		96.1	%		12.1	%		3.6	%		2.7	%		3.9	%		3.4	%		0.3	%		(1.6	%)
Subtotal – Southern California		22,784		27.4	%		2,483		96.2	%		11.4	%		3.9	%		6.2	%		3.1	%		4.0	%		0.1	%		(0.8	%)

San Francisco		12,975		21.2	%		3,190		96.6	%		9.5	%		3.8	%		3.4	%		3.9	%		3.5	%		0.2	%		(1.0	%)
Washington DC		15,666		17.6	%		2,395		96.5	%		8.3	%		2.1	%		2.3	%		2.0	%		1.7	%		0.4	%		(1.0	%)
New York		9,501		15.5	%		3,888		96.5	%		7.9	%		2.4	%		7.8	%		(1.2	%)		1.6	%		0.6	%		(0.5	%)
Boston		6,009		9.6	%		3,060		95.8	%		8.8	%		3.6	%		2.5	%		4.0	%		2.8	%		0.3	%		(0.3	%)
Seattle		7,095		8.6	%		2,308		96.2	%		12.9	%		2.2	%		(2.3	%)		4.0	%		1.5	%		0.5	%		(1.3	%)
Other Markets		136		0.1	%		1,286		99.3	%		14.7	%		7.1	%		12.5	%		4.3	%		6.4	%		0.8	%		2.9	%

Total		74,166		100.0	%	$	2,796		96.3	%		9.9	%		3.1	%		4.4	%		2.5	%		2.8	%		0.3	%		(0.9	%)


Equity Residential
First Quarter 2019 vs. Fourth Quarter 2018
Same Store Results/Statistics by Market

														Increase (Decrease) from Prior Quarter
Markets/Metro Areas	Apartment Units		Q1 2019 % of Actual NOI			Q1 2019 Average Rental Rate		Q1 2019 Weighted Average Physical Occupancy %			Q1 2019 Turnover			Revenues			Expenses			NOI			Average Rental Rate			Physical Occupancy			Turnover

Los Angeles		15,968		18.3	%	$	2,572		96.2	%		11.6	%		0.8	%		3.9	%		(0.6	%)		0.8	%		(0.1	%)		(1.2	%)
Orange County		4,028		4.3	%		2,215		96.3	%		10.5	%		0.9	%		2.8	%		0.3	%		0.6	%		0.1	%		0.0	%
San Diego		3,385		3.8	%		2,373		96.1	%		12.1	%		(0.1	%)		1.5	%		(0.7	%)		(0.1	%)		(0.2	%)		(1.7	%)
Subtotal – Southern California		23,381		26.4	%		2,481		96.2	%		11.5	%		0.7	%		3.5	%		(0.4	%)		0.6	%		0.0	%		(1.0	%)

San Francisco		13,424		20.9	%		3,217		96.6	%		9.5	%		1.4	%		6.2	%		(0.1	%)		0.3	%		1.0	%		(1.5	%)
Washington DC		15,666		16.8	%		2,395		96.5	%		8.3	%		0.2	%		4.4	%		(1.5	%)		0.2	%		0.1	%		(1.7	%)
New York		9,741		15.1	%		3,879		96.4	%		7.9	%		0.8	%		6.8	%		(3.1	%)		0.8	%		(0.2	%)		0.4	%
Boston		6,641		10.1	%		3,078		95.8	%		9.0	%		0.5	%		6.0	%		(1.6	%)		0.6	%		(0.2	%)		(0.4	%)
Seattle		8,437		9.9	%		2,363		96.3	%		12.9	%		1.3	%		(0.4	%)		1.9	%		0.0	%		0.3	%		1.6	%
Other Markets		862		0.8	%		1,979		97.1	%		13.0	%		3.5	%		(0.3	%)		5.1	%		1.7	%		2.7	%		0.2	%

Total		78,152		100.0	%	$	2,797		96.3	%		10.0	%		0.8	%		4.7	%		(0.8	%)		0.5	%		0.1	%		(0.7	%)


Equity Residential
Same Store Lease Pricing Statistics by Market
For 74,166 Same Store Apartment Units

	New Lease Change (1)						Renewal Rate Achieved (2)
Markets/Metro Areas	Q1 2019			Q1 2018			Q1 2019			Q1 2018

Los Angeles		0.3	%		0.3	%		5.4	%		5.5	%
Orange County		(0.8	%)		(0.2	%)		5.7	%		6.2	%
San Diego		(1.4	%)		0.5	%		5.2	%		5.7	%
Subtotal – Southern California		(0.1	%)		0.3	%		5.4	%		5.7	%

San Francisco		1.2	%		(1.9	%)		5.0	%		3.9	%
Washington DC		(2.6	%)		(4.8	%)		4.5	%		4.0	%
New York		(1.5	%)		(5.0	%)		4.1	%		3.2	%
Boston		(3.0	%)		(4.2	%)		5.1	%		4.5	%
Seattle		(1.2	%)		(4.6	%)		5.1	%		5.7	%

Total		(0.8	%)		(2.6	%)		4.9	%		4.5	%

(1)		New Lease Change – The change in rent for a lease with a new or transferring resident compared to the rent for the prior lease of the identical apartment unit, regardless of lease term and without concessions or discounts being applied.
(2)		Renewal Rate Achieved – The change in rent for a new lease on an apartment unit where the lease has been renewed as compared to the rent for the prior lease of the identical apartment unit, regardless of lease term.


Equity Residential

First Quarter 2019 vs. First Quarter 2018
Same Store Operating Expenses for 74,166 Same Store Apartment Units
$ in thousands

											% of
											Actual
											Q1 2019
	Actual		Actual		$			%			Operating
	Q1 2019		Q1 2018		Change (1)			Change			Expenses

Real estate taxes	$	80,239	$	77,459	$	2,780			3.6	%		41.9	%
On-site payroll		41,525		39,980		1,545			3.9	%		21.7	%
Utilities		26,186		25,799		387			1.5	%		13.7	%
Repairs and maintenance		23,444		21,752		1,692			7.8	%		12.2	%
Insurance		5,347		4,861		486			10.0	%		2.8	%
Leasing and advertising		2,423		2,499		(76	)		(3.0	%)		1.3	%
Other on-site operating expenses		12,159		10,831		1,328			12.3	%		6.4	%

Same store operating expenses	$	191,323	$	183,181	$	8,142			4.4	%		100.0	%

Note: See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms.

(1)		The changes are due primarily to:
		Real estate taxes – Increase below expectations. Continue to experience growth across most markets, particularly New York. Growth rate is lower than prior expectations due to lower than anticipated rates in Seattle and modestly favorable appeals activity.
		On-site payroll – Increase in line with expectations. Continue to experience payroll pressure given strong employment environment.
		Utilities – Increase in line with expectations.
		Repairs and maintenance – Growth driven primarily by minimum wage pressure on contract labor and various weather related repairs, particularly in California.
		Insurance – Increase due to higher premiums on property insurance renewal due to challenging conditions in the insurance market.
		Other on-site operating expenses – Increase primarily driven by higher ground lease costs due to a contractual revaluation at one property along with higher association fees.


Equity Residential

Debt Summary as of March 31, 2019
($ in thousands)

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

Secured	$	2,671,491		29.8	%		4.01	%		6.9
Unsecured		6,281,179		70.2	%		4.19	%		9.3

Total	$	8,952,670		100.0	%		4.14	%		8.6
Fixed Rate Debt:
Secured – Conventional	$	2,170,926		24.2	%		4.48	%		4.8
Unsecured – Public		5,487,518		61.3	%		4.39	%		10.7

Fixed Rate Debt		7,658,444		85.5	%		4.42	%		9.0

Floating Rate Debt:
Secured – Conventional		6,259		0.1	%		2.42	%		5.4
Secured – Tax Exempt		494,306		5.5	%		2.11	%		15.3
Unsecured – Public (2)		448,817		5.0	%		3.43	%		0.2
Unsecured – Revolving Credit Facility (3)		—		—			3.25	%		2.8
Unsecured – Commercial Paper Program (4)		344,844		3.9	%		2.75	%		—

Floating Rate Debt		1,294,226		14.5	%		2.79	%		6.2

Total	$	8,952,670		100.0	%		4.14	%		8.6

(1)		Includes the effect of any derivative instruments and amortization of premiums/discounts/OCI on debt and derivatives. Weighted average rates are for the quarter ended March 31, 2019.
(2)		Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
(3)		The Company’s $2.0 billion unsecured revolving credit facility matures January 10, 2022. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.825%), or based on bids received from the lending group, and an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. As of March 31, 2019, there were no borrowings outstanding under the facility and $6.7 million was restricted/dedicated to support letters of credit. In addition, the Company limits its utilization of the facility in order to maintain liquidity to support its $500.0 million commercial paper program along with certain other obligations. As a result, the Company had approximately $1.55 billion available under the facility at March 31, 2019.
(4)		The Company may borrow up to a maximum of $500.0 million under its commercial paper program subject to market conditions. The notes bear interest at various floating rates. At March 31, 2019, the weighted average maturity of commercial paper outstanding was 7 days.

Note: The Company capitalized interest of approximately $1.2 million and $1.7 million during the quarters ended March 31, 2019 and 2018, respectively.


Equity Residential

Debt Maturity Schedule as of March 31, 2019
($ in thousands)

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

2019	$	5,212			$	814,378		(2)	$	819,590			9.1	%		3.65	%		3.06	%
2020		1,128,592		(3)		700				1,129,292			12.5	%		5.20	%		5.20	%
2021		927,506				600				928,106			10.3	%		4.64	%		4.64	%
2022		265,341				800				266,141			3.0	%		3.26	%		3.26	%
2023		1,326,800				4,800				1,331,600			14.7	%		3.74	%		3.73	%
2024		1,272				10,900				12,172			0.1	%		4.79	%		1.95	%
2025		451,334				13,200				464,534			5.1	%		3.38	%		3.33	%
2026		593,424				14,500				607,924			6.7	%		3.59	%		3.54	%
2027		401,468				15,600				417,068			4.6	%		3.26	%		3.19	%
2028		901,540				48,580				950,120			10.5	%		3.79	%		3.68	%
2029+		1,711,549				407,420				2,118,969			23.4	%		4.33	%		3.80	%
Subtotal		7,714,038				1,331,478				9,045,516			100.0	%		4.08	%		3.88	%
Deferred Financing Costs and
Unamortized (Discount)		(55,594	)			(37,252	)			(92,846	)	N/A			N/A			N/A

Total	$	7,658,444			$	1,294,226			$	8,952,670			100.0	%		4.08	%		3.88	%

(1)		Includes the effect of any derivative instruments. Weighted average coupons are as of March 31, 2019.
(2)		Includes $345.0 million in principal outstanding on the Company's commercial paper program.
(3)		Includes a $500.0 million 5.78% mortgage loan with a maturity date of July 1, 2020 that can be repaid at par beginning July 1, 2019. The Company currently intends to prepay this mortgage loan on July 1, 2019.


Equity Residential

Selected Unsecured Public Debt Covenants

	March 31,			December 31,
	2019			2018
Debt to Adjusted Total Assets (not to exceed 60%)	34.3		%	33.4		%

Secured Debt to Adjusted Total Assets (not to exceed 40%)	11.0		%	9.0		%

Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1)		4.60			4.48

Total Unencumbered Assets to Unsecured Debt
(must be at least 125%)	395.4		%	387.8		%

Note: These selected covenants represent the most restrictive financial covenants relating to ERP Operating Limited Partnership's ("ERPOP") outstanding public debt securities. Equity Residential is the general partner of ERPOP.


Selected Credit Ratios

	March 31,	December 31,
	2019	2018
Total debt to Normalized EBITDAre	5.36x	5.34x

Net debt to Normalized EBITDAre	5.33x	5.31x

Unencumbered NOI as a % of total NOI	81.0%	82.2%

Note: See page 22 for the Normalized EBITDAre reconciliations.


Equity Residential

Capital Structure as of March 31, 2019
(Amounts in thousands except for share/unit and per share amounts)

Secured Debt					$	2,671,491	29.8	%
Unsecured Debt						6,281,179	70.2	%

Total Debt						8,952,670	100.0	%	23.6	%

Common Shares (includes Restricted Shares)		370,462,401	96.4	%
Units (includes OP Units and Restricted Units)		13,852,371	3.6	%

Total Shares and Units		384,314,772	100.0	%
Common Share Price at March 31, 2019	$	75.32
						28,946,589	99.9	%
Perpetual Preferred Equity (see below)						37,280	0.1	%

Total Equity						28,983,869	100.0	%	76.4	%

Total Market Capitalization					$	37,936,539			100.0	%

Perpetual Preferred Equity as of March 31, 2019

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

Series

Call Date

Outstanding

Shares

Liquidation

Value

Annual

Dividend

Per Share

Annual

Dividend

Amount

Preferred Shares:

8.29% Series K

12/10/26

745,600

37,280

4.145

3,091


Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding

	Q1 2019		Q1 2018

Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic		369,557,650		367,799,738
Shares issuable from assumed conversion/vesting of:
- OP Units		12,919,717		12,862,923
- long-term compensation shares/units		2,706,811		2,355,562

Total Common Shares and Units - diluted		385,184,178		383,018,223

Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes:
Common Shares - basic		369,557,650		367,799,738
OP Units - basic		12,919,717		12,862,923

Total Common Shares and OP Units - basic		382,477,367		380,662,661
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units		2,706,811		2,355,562

Total Common Shares and Units - diluted		385,184,178		383,018,223

Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares)		370,462,401		368,211,911
Units (includes OP Units and Restricted Units)		13,852,371		14,026,486

Total Shares and Units		384,314,772		382,238,397


Equity Residential
Development and Lease-Up Projects as of March 31, 2019
(Amounts in thousands except for project and apartment unit amounts)

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

Projects Under Development:
1401 E. Madison	Seattle, WA		137	$	62,352	$	40,525	$	40,525	$	—	54		%	Q3 2019		Q3 2019	Q1 2020		—			—
249 Third Street	Cambridge, MA		84		51,447		30,365		30,365		—	51		%	Q3 2019		Q4 2019	Q2 2020		—			—
West End Tower	Boston, MA		470		409,749		64,301		64,301		—	11		%	Q2 2021		Q3 2021	Q1 2023		—			—

Projects Under Development			691		523,548		135,191		135,191		—

Completed Not Stabilized (A):
100K Apartments	Washington DC		222		88,023		84,792		—		—				Q3 2018		Q4 2018	Q4 2019	65		%	53		%

Projects Completed Not Stabilized			222		88,023		84,792		—		—

Total Development Projects			913	$	611,571	$	219,983	$	135,191	$	—

Land Held for Development		N/A		N/A		$	91,647	$	91,647	$	—

NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS												Total Budgeted Capital Cost			Q1 2019 NOI
Projects Under Development												$	523,548		$	—
Completed Not Stabilized													88,023			541
Total Development NOI Contribution												$	611,571		$	541

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

(A)

Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.


Equity Residential
Capital Expenditures to Real Estate
For the Quarter Ended March 31, 2019
(Amounts in thousands except for apartment unit and per apartment unit amounts)

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

Total Apartment Units (1)		74,166		4,950		79,116

Building Improvements	$	16,722	$	1,316	$	18,038	$	225

Renovation Expenditures (2)		7,756		640		8,396		105

Replacements		7,320		264		7,584		99

Total Capital Expenditures	$	31,798	$	2,220	$	34,018	$	429

(1)		Total Apartment Units - Excludes 945 unconsolidated apartment units for which capital expenditures to real estate are self-funded and do not consolidate into the Company's results.
(2)		Renovation Expenditures on 550 same store apartment units for the quarter ended March 31, 2019 approximated $14,100 per apartment unit renovated.


Equity Residential
Normalized EBITDAre Reconciliations
(Amounts in thousands)

Normalized EBITDAre Reconciliations for Page 17

	Trailing Twelve Months						2019			2018
	March 31,			December 31,
	2019			2018			Q1			Q4			Q3			Q2			Q1
Net income	$	573,901		$	685,192		$	109,257		$	122,388		$	223,846		$	118,410		$	220,548
Interest expense incurred, net		392,194			413,360			94,938			91,906			111,219			94,131			116,104
Amortization of deferred financing costs		9,767			11,310			2,136			2,256			3,276			2,099			3,679
Amortization of above/below market lease intangibles		4,392			4,392			1,098			1,098			1,098			1,098			1,098
Depreciation		793,631			785,725			204,215			201,856			194,618			192,942			196,309
Income and other tax expense (benefit)		903			878			238			111			280			274			213

EBITDA		1,774,788			1,900,857			411,882			419,615			534,337			408,954			537,951

Net (gain) loss on sales of real estate properties		(114,576	)		(256,810	)		21			24			(114,672	)		51			(142,213	)
Impairment – operating assets		702			702			—			—			702			—			—

EBITDAre		1,660,914			1,644,749			411,903			419,639			420,367			409,005			395,738

Write-off of pursuit costs (other expenses)		4,967			4,450			1,448			1,325			1,059			1,135			931
(Income) loss from investments in unconsolidated entities		3,397			3,667			707			674			985			1,031			977
Net (gain) loss on sales of land parcels		(988	)		(987	)		(1	)		8			—			(995	)		—
Insurance/litigation settlement or reserve income (interest and other income)		(7,928	)		(13,286	)		—			—			(7,400	)		(528	)		(5,358	)
Insurance/litigation/environmental settlement or reserve expense (other expenses)		5,189			6,862			250			(226	)		4,202			963			1,923
Advocacy contributions (other expenses)		4,041			4,406			—			671			2,092			1,278			365
Other		1,731			237			1,325			382			(32	)		56			(169	)

Normalized EBITDAre	$	1,671,323		$	1,650,098		$	415,632		$	422,473		$	421,273		$	411,945		$	394,407

	March 31,			December 31,
Balance Sheet Items:	2019			2018

Total debt	$	8,952,670		$	8,817,939
Cash and cash equivalents		(29,391	)		(47,442	)
Mortgage principal reserves/sinking funds		(11,514	)		(9,754	)
Net debt	$	8,911,765		$	8,760,743

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


Equity Residential
Adjustments from FFO to Normalized FFO
(Amounts in thousands)

	Quarter Ended March 31,
	2019			2018			Variance

Impairment – non-operating assets	$	—		$	—		$	—

Write-off of pursuit costs (other expenses)		1,448			931			517

Prepayment premiums/penalties (interest expense)		—			22,110			(22,110	)
Write-off of unamortized deferred financing costs (interest expense)		—			1,580			(1,580	)
Write-off of unamortized (premiums)/discounts/OCI (interest expense)		—			(151	)		151
Debt extinguishment and preferred share redemption (gains) losses		—			23,539			(23,539	)

Net (gain) loss on sales of land parcels		(1	)		—			(1	)
(Income) loss from investments in unconsolidated entities ─ non-operating assets		230			213			17
Non-operating asset (gains) losses		229			213			16

Insurance/litigation settlement or reserve income (interest and other income)		—			(5,358	)		5,358
Insurance/litigation/environmental settlement or reserve expense (other expenses)		250			1,923			(1,673	)
Advocacy contributions (other expenses)		—			365			(365	)
Other		1,325			(169	)		1,494
Other miscellaneous items		1,575			(3,239	)		4,814

Adjustments from FFO to Normalized FFO	$	3,252		$	21,444		$	(18,192	)

Note: See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.

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 and the write-off of pursuit costs, are not included in the estimates provided on this page. See pages 25 through 29 for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.


	Q2 2019	Full Year 2019
		(no change from previous Full Year 2019)
2019 Normalized FFO Guidance (per share diluted)

Expected Normalized FFO Per Share	$0.82 to $0.86	$3.34 to $3.44

2019 Same Store Assumptions

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

2019 Transaction Assumptions

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

2019 Debt Assumptions (2)

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

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

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

2019 Other Guidance Assumptions

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

(1)		Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO per share/Normalized FFO per share.
(2)		All 2019 debt assumptions are shown on a Normalized FFO basis and therefore exclude an approximately $16.8 million impact from anticipated debt extinguishment costs in connection with all planned debt repayment activities in 2019, all of which represents non-cash write-offs of unamortized debt discounts and deferred financing costs.
(3)		During 2019, the Company expects to spend approximately $40.0 million for apartment unit Renovation Expenditures on approximately 3,000 same store apartment units at an average cost of approximately $13,300 per apartment unit renovated, which is included in the Capital Expenditures to Real Estate assumptions noted above.

Equity Residential

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

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

(All per share data is diluted)

This Earnings Release and Supplemental Financial Information includes certain non-GAAP financial measures and other terms that management believes are helpful in understanding our business. The definitions and calculations of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other real estate investment trusts (“REIT”) and, accordingly, may not be comparable. These non-GAAP financial measures should not be considered as an alternative to net earnings or any other measurement of performance computed in accordance with accounting principles generally accepted in the United States (“GAAP”) or as an alternative to cash flows from specific operating, investing or financing activities. Furthermore, these non-GAAP financial measures are not intended to be a measure of cash flow or liquidity.

Acquisition Capitalization Rate or Cap Rate – NOI that the Company anticipates receiving in the next 12 months (or the year two or three stabilized NOI for properties that are in lease-up at acquisition) less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross purchase price of the asset. The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property.

Average Rental Rate – Total residential rental revenues reflected on a straight-line basis in accordance with GAAP divided by the weighted average occupied apartment units for the reporting period presented.

Capital Expenditures to Real Estate:

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

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

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

Debt Covenant Compliance – Our unsecured debt includes certain financial and operating covenants including, among other things, maintenance of certain financial ratios. These provisions are contained in the indentures applicable to each notes payable or the credit agreement for our line of credit. The Debt Covenant Compliance ratios that are provided show the Company's compliance with certain covenants governing our public unsecured debt. These covenants generally reflect our most restrictive financial covenants. The Company was in compliance with its unsecured debt covenants for all periods presented (the ratios should not be used for any other purpose, including without limitation, to evaluate the Company's financial condition or results of operations, nor do they indicate the Company's covenant compliance as of any other date or for any other period).

Development Yield – NOI that the Company anticipates receiving in the next 12 months following stabilization less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $50-$150 per apartment unit depending on the type of asset) divided by the Total Budgeted Capital Cost of the asset. The weighted average Development Yield for development properties is weighted based on the projected NOI streams and the relative Total Budgeted Capital Cost for each respective property.

Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sales price of the asset. The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property.

Earnings Per Share ("EPS") –Net income per share calculated in accordance with GAAP. Expected EPS is calculated on a basis consistent with actual EPS. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual EPS could differ materially from expected EPS.

Equity Residential

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

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

(All per share data is diluted)

EBITDA for Real Estate and Normalized EBITDA for Real Estate:

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

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

Normalized Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“Normalized EBITDAre”) – Represents net income (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for non-comparable items. Normalized EBITDAre, total debt to Normalized EBITDAre and net debt to Normalized EBITDAre are important metrics in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Normalized EBITDAre, total debt to Normalized EBITDAre, and net debt to Normalized EBITDAre are useful to investors, creditors and rating agencies because they allow investors to compare the Company’s credit strength to prior reporting periods and to other companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual credit quality.

Economic Gain (Loss) – Economic Gain (Loss) is calculated as the net gain (loss) on sales of real estate properties in accordance with GAAP, excluding accumulated depreciation. The Company generally considers Economic Gain (Loss) to be an appropriate supplemental measure to net gain (loss) on sales of real estate properties in accordance with GAAP because it is one indication of the gross value created by the Company's acquisition, development, renovation, management and ultimate sale of a property and because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold property. The following table presents a reconciliation of net gain (loss) on sales of real estate properties in accordance with GAAP to Economic Gain (Loss):

	Quarter Ended
	March 31, 2019

Net Gain (Loss) on Sales of Real Estate Properties	$	(21	)
Accumulated Depreciation Gain		—

Economic Gain (Loss)	$	(21	)

FFO and Normalized FFO:

Funds From Operations (“FFO”) –Nareit defines FFO (December 2018White Paper) as net income (computed in accordance with GAAP),excluding gains or losses from sales and impairment write-downs of depreciable real estate and land when connected to the main business of a REIT, impairment write-downs of investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and depreciation andamortization related to real estate. Adjustments for partially owned consolidated and unconsolidated partnershipsand joint ventures are calculated to reflect FFO on the same basis. Expected FFO per share is calculated on a basis consistent with actual FFO per share and is considered an appropriate supplemental measure of expectedoperating performance when compared to expected EPS.

The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses from sales and impairment write-downs of depreciable real estate and excluding depreciation related to real estate (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies.

Normalized Funds From Operations ("Normalized FFO") – Normalized FFObegins with FFO and excludes:

the impact of any expenses relating to non-operating asset impairment;
pursuit cost write-offs;
gains and losses from early debt extinguishment and preferred share redemptions;
gains and losses from non-operating assets; and
other miscellaneous items.

Expected Normalized FFO per share is calculated on a basis consistent with actual Normalized FFO per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected EPS.

The Company believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual operating results.

FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company's calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.

FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with GAAP. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the "Noncontrolling Interests – Operating Partnership". Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.

The following table presents reconciliations of EPS to FFO per share and Normalized FFO per share for pages 6 and 23 (the expected guidance/projections provided below are based on current expectations and are forward-looking):

	Actual		Actual			Expected	Expected
	Q1 2019		Q1 2018			Q2 2019	2019
	Per Share		Per Share			Per Share	Per Share
EPS – Diluted	$	0.28	$	0.57		$0.80 to $0.84	$1.94 to $2.04
Depreciation expense		0.53		0.51		0.52	2.04
Net (gain) loss on sales		—		(0.37	)	(0.55)	(0.72)
Impairment – operating assets	—			—		—	—

FFO per share – Diluted		0.81		0.71		0.77 to 0.81	3.26 to 3.36

Impairment – non-operating assets		—		—		—	—
Write-off of pursuit costs		—		—		—	0.01
Debt extinguishment and preferred share
redemption (gains) losses		—		0.06		0.04	0.05
Non-operating asset (gains) losses		—		—		—	—
Other miscellaneous items		0.01		—		0.01	0.02

Normalized FFO per share – Diluted	$	0.82	$	0.77		$0.82 to $0.86	$3.34 to $3.44

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

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

The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (see page 10):


	Quarter Ended March 31,
	2019			2018
Operating income	$	209,969		$	339,082
Adjustments:
Fee and asset management revenue		(192	)		(185	)
Property management		26,396			23,444
General and administrative		15,381			16,278
Depreciation		204,215			196,309
Net (gain) loss on sales of real estate properties		21			(142,213	)
Total NOI	$	455,790		$	432,715
Rental income:
Same store	$	622,603		$	603,797
Non-same store/other		39,699			29,034
Total rental income		662,302			632,831
Operating expenses:
Same store		191,323			183,181
Non-same store/other		15,189			16,935
Total operating expenses		206,512			200,116
NOI:
Same store		431,280			420,616
Non-same store/other		24,510			12,099
Total NOI	$	455,790		$	432,715

Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2018 and 2019, plus any properties in lease-up and not stabilized as of January 1, 2018.

Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period.

Same Store Operating Expenses:

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

Other on-site operating expenses –Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.

Repairs and maintenance –Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair and maintenance costs.

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

Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2018, less properties subsequently sold. Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented.

% of Stabilized Budgeted NOI – Represents budgeted 2019 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.

Total Budgeted Capital Cost – Estimated remaining cost for projects under development and/or developed plus all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.

Total Market Capitalization – The aggregate of the market value of the Company’s outstanding common shares, including restricted shares, the market value of the Company’s operating partnership units outstanding, including restricted units (based on the market value of the Company’s common shares) and the outstanding principal balance of debt. The Company believes this is a useful measure of a real estate operating company’s long-term liquidity and balance sheet strength, because it shows an approximate relationship between a company’s total debt and the current total market value of its assets based on the current price at which the Company’s common shares trade. However, because this measure of leverage changes with fluctuations in the Company’s share price, which occur regularly, this measure may change even when the Company’s earnings, interest and debt levels remain stable.

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

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

Unencumbered NOI % – Represents NOI generated by consolidated real estate assets unencumbered by outstanding secured debt as a percentage of total NOI generated by all of the Company's consolidated real estate assets.

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

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

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Equity Residential
Marty McKenna, (312) 928-1901

Source: Equity Residential

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Equity Residential Reports First Quarter 2019 Results