Equity residential reports full year 2018
results
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter and year ended december 31, 2018. all per share results are reported as available to common shares/units on a diluted basis. earnings per share (eps), funds from operations (ffo) per share and normalized ffo per share for the fourth quarter and full years of 2018 and 2017 are detailed below. “we are pleased to have delivered same store revenue growth at the top end of our original guidance range and solid normalized ffo growth in 2018. we saw a modest acceleration in our same store revenue results in the fourth quarter of 2018 and expect that to continue into 2019. our outlook for 2019 is based on an expectation that continued economic growth will create the demand to absorb the elevated levels of new supply in many of our markets,” said mark j. parrell, equity residential’s president and ceo. “our markets continue to be attractive places for employers to locate and expand their businesses to draw on a diverse and talented pool of workers, resulting in strong demand for our product,” mr. parrell continued. “we expect that our outstanding people and well-positioned portfolio will deliver a superior customer experience to our residents and excellent risk adjusted returns to our shareholders.” highlights the company produced same store revenue growth of 2.3% for the full year 2018, with physical occupancy of 96.2% and renewal rate growth of 4.9%. the company also produced the highest resident retention in its history. the company produced same store revenue growth of 2.6% in the fourth quarter of 2018 with physical occupancy of 96.2% and renewal rate growth of 5.2%. during the fourth quarter of 2018, the company completed the development of its 100k property in washington, d.c. and completed the stabilization of its cascade development property in seattle. during the fourth quarter of 2018, the company issued $400.0 million of 10-year unsecured notes at a coupon of 4.15%. these were issued as “green” bonds and are the first green bond issuance from an apartment reit. fourth quarter 2018 eps for the fourth quarter of 2018 was $0.31 compared to $0.34 in the fourth quarter of 2017. the difference is due primarily to lower property sale gains in the fourth quarter of 2018, the various adjustment items listed on page 24 of this release and the items described below. ffo as defined by nareit (national association of real estate investment trusts) was $0.84 per share for the fourth quarter of 2018 compared to $0.82 per share in the fourth quarter of 2017. the difference is due primarily to the various adjustment items listed on page 24 of this release and the items described below. normalized ffo for the fourth quarter of 2018 was $0.84 per share compared to $0.83 per share in the fourth quarter of 2017. the difference is due primarily to: a positive impact of approximately $0.02 per share from increased same store net operating income (noi); a positive impact of approximately $0.01 per share from lease-up noi offset by a negative impact of approximately $0.01 per share from other non-same store noi primarily driven by the casualty losses described below; a positive impact of approximately $0.01 per share from lower total interest expense; a negative impact of approximately $0.01 per share from lower noi as a result of the company’s 2018 and 2017 transaction activity; and a negative impact of approximately $0.01 per share from higher corporate overhead (property management and general and administrative expenses). the company’s fourth quarter 2018 financial results had a negative impact of approximately $0.01 per share primarily from certain casualty losses driven by rainstorm damage to assets in its washington, d.c. area portfolio. the company has a glossary of defined terms and related reconciliations of non-gaap financial measures on pages 26 through 30 of this release. reconciliations and definitions of ffo and normalized ffo are provided on pages 7, 27 and 28 of this release and the company has included guidance for 2019 normalized ffo per share on page 25 and 2019 ffo per share and 2019 eps on page 28 of this release. year ended december 31, 2018 eps for the year ended december 31, 2018 was $1.77 compared to $1.63 in the year ended december 31, 2017. the difference is due primarily to higher property sale gains offset by higher depreciation expense in the year ended december 31, 2018, the various adjustment items listed on page 24 of this release and the items described below. ffo was $3.14 per share for the year ended december 31, 2018 compared to $3.15 per share in the year ended december 31, 2017. the difference is due primarily to the various adjustment items listed on page 24 of this release and the items described below. normalized ffo for the year ended december 31, 2018 was $3.25 per share compared to $3.13 per share in the year ended december 31, 2017. the difference is due primarily to: a positive impact of approximately $0.07 per share from increased same store noi; a positive impact of approximately $0.10 per share from lease-up noi and other non-same store noi; a negative impact of approximately $0.01 per share from lower noi as a result of the company’s 2018 and 2017 transaction activity; a negative impact of approximately $0.01 per share from higher total interest expense; and a negative impact of approximately $0.03 per share from other items including higher corporate overhead (property management and general and administrative expenses). the company’s full year 2018 financial results had a negative impact of approximately $0.01 per share primarily from certain casualty losses driven by rainstorm damage to assets in its washington, d.c. area portfolio. same store results the following table provides the increases for same store results/statistics for the fourth quarter 2018 to fourth quarter 2017 comparison, which includes 73,992 apartment units, and for the full year 2018 to full year 2017 comparison, which includes 71,721 apartment units. the company’s physical occupancy was 96.2% for both the fourth quarter of 2018 and the full year of 2018. investment activity the company did not acquire or sell any apartment properties during the fourth quarter of 2018. during the full year 2018, the company acquired five apartment properties consisting of 1,478 apartment units for an aggregate purchase price of approximately $707.0 million at a weighted average acquisition capitalization rate of 4.4%. during the full year 2018, the company sold five apartment properties consisting of 1,292 apartment units for an aggregate sale price of approximately $706.1 million at a weighted average disposition yield of 4.1%, generating an unlevered irr of 8.7%. during 2018, the company sold a land parcel in suburban maryland for approximately $2.7 million. in january 2019, the company acquired three apartment properties consisting of 579 apartment units for an aggregate purchase price of approximately $258.7 million at a weighted average acquisition capitalization rate of 4.6%. the properties are located in denver, seattle and jersey city, new jersey. capital markets activity on november 30, 2018, the company issued $400.0 million of 10-year unsecured notes at a coupon of 4.15%. after the effect of the termination of certain interest rate hedges, underwriters’ fees and other costs associated with the offering, the all-in effective rate of the notes is approximately 3.85%. these notes were issued as “green” bonds and as a result, the company will allocate an amount equal to the net proceeds of approximately $396.7 million from this issuance to one or more eligible green projects, such as its recently developed 855 brannan community in san francisco, which received leed home platinum certification. first quarter 2019 guidance the company has established guidance ranges for the first quarter of 2019 eps, ffo per share and normalized ffo per share as listed below: the difference between the fourth quarter 2018 eps of $0.31 and the first quarter 2019 guidance midpoint of $0.27 is due primarily to the items described below. the difference between the fourth quarter 2018 ffo of $0.84 per share and the first quarter 2019 guidance midpoint of $0.79 per share is due primarily to the items described below. the difference between the fourth quarter 2018 normalized ffo of $0.84 per share and the first quarter 2019 guidance midpoint of $0.80 per share is due primarily to: a positive impact of approximately $0.01 per share from higher noi as a result of the company’s 2019 and 2018 transaction activity; a negative impact of approximately $0.02 per share from lower same store noi; a negative impact of approximately $0.01 per share from higher total interest expense; and a negative impact of approximately $0.02 per share from other items including higher corporate overhead (property management and general and administrative expenses). full year 2019 guidance the company is providing guidance for its full year 2019 same store operating performance, eps, ffo per share, normalized ffo per share, transactions and debt offerings as listed below: the difference between the company’s full year 2018 eps of $1.77 and the midpoint of the full year 2019 guidance range of $1.93 is due primarily to lower expected property sale gains, lower expected debt extinguishment costs and the items described below. the difference between the company’s full year 2018 ffo of $3.14 per share and the midpoint of the full year 2019 guidance range of $3.31 per share is due primarily to lower expected debt extinguishment costs and the items described below. the difference between the company’s full year 2018 normalized ffo of $3.25 per share and the midpoint of the full year 2019 guidance range of $3.39 per share is due primarily to: a positive impact of approximately $0.10 per share from increased same store noi; a positive impact of approximately $0.04 per share from lease-up noi and other non-same store noi; a positive impact of approximately $0.01 per share from higher noi as a result of the company’s 2019 and 2018 transaction activity; and a negative impact of approximately $0.01 per share from higher total interest expense. first quarter 2019 earnings and conference call equity residential expects to announce its first quarter 2019 results on tuesday, april 30, 2019 and host a conference call to discuss those results at 10:00 a.m. ct on wednesday, may 1, 2019. about equity residential equity residential is an s&p 500 company focused on the acquisition, development and management of rental apartment properties located in urban and high-density suburban markets where today’s renters want to live, work and play. equity residential owns or has investments in 307 properties consisting of 79,482 apartment units, primarily located in boston, new york, washington, d.c., seattle, san francisco, southern california and denver. for more information on equity residential, please visit our website at www.equityapartments.com. forward-looking statements in addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. these statements are based on current expectations, estimates, projections and assumptions made by management. while equity residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. other risks and uncertainties are described under the heading “risk factors” in our annual report on form 10-k and subsequent periodic reports filed with the securities and exchange commission (sec) and available on our website, www.equityapartments.com. many of these uncertainties and risks are difficult to predict and beyond management’s control. forward-looking statements are not guarantees of future performance, results or events. equity residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. a live web cast of the company’s conference call discussing these results will take place tomorrow, wednesday, january 30, at 10:00 a.m. central. please visit the investor section of the company’s web site at www.equityapartments.com for the link. a replay of the web cast will be available for two weeks at this site. net (income) loss attributable to noncontrolling interests – partially note: see page 24 for additional detail regarding the adjustments from ffo to normalized ffo. see pages 26 through 30 for the definitions of non-gaap financial measures and other terms as well as the reconciliations of eps to ffo per share and normalized ffo per share. stabilized note: projects under development are not included in the portfolio summary until construction has been completed. equity residential portfolio as of december 31, 2018 units units cap rate yield rental rate occupancy rental rate occupancy rental rate occupancy note: see page 29 for reconciliations from operating income. units % of actual noi average rental rate weighted average physical occupancy % turnover rental rate occupancy units % of actual noi average rental rate weighted average physical occupancy % turnover rental rate occupancy markets/metro areas units % of actual noi average rental rate weighted average physical occupancy % turnover rental rate occupancy q4 2018 q4 2017 change change q4 2018 operating expenses 2018 2017 change change 2018 operating expenses note: see pages 26 through 30 for the definitions of non-gaap financial measures and other terms. average rates (1) average maturities (years) note: the company capitalized interest of approximately $6.3 million and $26.3 million during the years ended december 31, 2018 and 2017, respectively. the company capitalized interest of approximately $1.8 million and $3.1 million during the quarters ended december 31, 2018 and 2017, respectively. rate (1) rate (1) average rates on fixed rate debt (1) average rates on total debt (1) maximum annual service charges (must be at least 1.5 to 1) (must be at least 150%) note: these selected covenants relate to erp operating limited partnership's ("erpop") outstanding unsecured public debt, which represent the company's most restrictive covenants. equity residential is the general partner of erpop. selected credit ratios note: see page 23 for the normalized ebitdare reconciliations. shares value dividend per share dividend amount budgeted capital cost noi 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. properties properties/other same store avg. per apartment unit 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. note: see pages 26 through 30 for the definitions of non-gaap financial measures and other terms as well as the reconciliations of eps to ffo per share and normalized ffo per share. 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 26 through 30 for the definitions of non-gaap financial measures and other terms as well as the reconciliations of eps to ffo per share and normalized ffo per share. 2019 normalized ffo guidance (per share diluted) 2019 same store assumptions 2019 transaction assumptions 2019 debt assumptions (2) 2019 capital expenditures to real estate assumptions for same store properties (3) 2019 other guidance assumptions this earnings release and supplemental information includes certain non-gaap financial measures and other terms that management believes are helpful in understanding our business. the definitions and calculations of these non-gaap financial measures and other terms may differ from the definitions and methodologies used by other reits and, accordingly, may not be comparable. these non-gaap financial measures should not be considered as an alternative to net earnings or any other measurement of performance computed in accordance with accounting principles generally accepted in the united states (“gaap”) or as an alternative to cash flows from specific operating, investing or financing activities. furthermore, these non-gaap financial measures are not intended to be a measure of cash flow or liquidity. acquisition capitalization rate or cap rate – noi that the company anticipates receiving in the next 12 months (or the year two or three stabilized noi for properties that are in lease-up at acquisition) less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross purchase price of the asset. the weighted average acquisition cap rate for acquired properties is weighted based on the projected noi streams and the relative purchase price for each respective property. average rental rate – total residential rental revenues reflected on a straight-line basis in accordance with gaap divided by the weighted average occupied apartment units for the reporting period presented. capital expenditures to real estate: building improvements – includes roof replacement, paving, building mechanical equipment systems, exterior siding and painting, major landscaping, furniture, fixtures and equipment for amenities and common areas, vehicles and office and maintenance equipment. renovation expenditures – apartment unit renovation costs (primarily kitchens and baths) designed to reposition these units for higher rental levels in their respective markets. replacements – includes appliances, mechanical equipment, fixtures and flooring (including hardwood and carpeting). debt covenant compliance – our unsecured debt includes certain financial and operating covenants including, among other things, maintenance of certain financial ratios. these provisions are contained in the indentures applicable to each notes payable or the credit agreement for our line of credit. the debt covenant compliance ratios that are provided show the company's compliance with certain covenants governing our public unsecured debt. these covenants generally reflect our most restrictive financial covenants. the company was in compliance with its unsecured debt covenants for all years presented (the ratios should not be used for any other purpose, including without limitation, to evaluate the company's financial condition or results of operations, nor do they indicate the company's covenant compliance as of any other date or for any other period). development yield – noi that the company anticipates receiving in the next 12 months following stabilization less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $50-$150 per apartment unit depending on the type of asset) divided by the total budgeted capital cost of the asset. the weighted average development yield for development properties is weighted based on the projected noi streams and the relative total budgeted capital cost for each respective property. disposition yield – noi that the company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sale price of the asset. the weighted average disposition yield for sold properties is weighted based on the projected noi streams and the relative sales price for each respective property. earnings per share ("eps") – net income per share calculated in accordance with gaap. expected eps is calculated on a basis consistent with actual eps. due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual eps could differ materially from expected eps. ebitda for real estate and normalized ebitda for real estate: earnings before interest, taxes, depreciation and amortization for real estate (“ebitdare”) – the national association of real estate investment trusts (“nareit”) defines ebitdare (september 2017 white paper) as net income (computed in accordance with gaap) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, impairment write-downs of depreciated operating properties, impairment write-downs of investments in unconsolidated entities caused by a decrease in value of depreciated operating properties within the joint venture and adjustments to reflect the company’s share of ebitdare of investments in unconsolidated entities. the company believes that ebitdare is useful to investors, creditors and rating agencies as a supplemental measure of the company’s ability to incur and service debt because it is a recognized measure of performance by the real estate industry, and by excluding gains or losses related to sales or impairment of depreciated operating properties, ebitdare can help compare the company’s credit strength between periods or as compared to different companies. normalized earnings before interest, taxes, depreciation and amortization for real estate (“normalized ebitdare”) – represents net income (computed in accordance with gaap) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for non-comparable items. normalized ebitdare, total debt to normalized ebitdare and net debt to normalized ebitdare are important metrics in evaluating the credit strength of the company and its ability to service its debt obligations. the company believes that normalized ebitdare, total debt to normalized ebitdare, and net debt to normalized ebitdare are useful to investors, creditors and rating agencies because they allow investors to compare the company’s credit strength to prior reporting periods and to other companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the company’s actual credit quality. economic gain – economic gain is calculated as the net gain (loss) on sales of real estate properties in accordance with gaap, excluding accumulated depreciation. the company generally considers economic gain to be an appropriate supplemental measure to net gain (loss) on sales of real estate properties in accordance with gaap because it is one indication of the gross value created by the company's acquisition, development, renovation, management and ultimate sale of a property and because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold property. the following table presents a reconciliation of net gain (loss) on sales of real estate properties in accordance with gaap to economic gain: ffo and normalized ffo: funds from operations (“ffo”) – nareit defines ffo (april 2002 white paper) as net income (computed in accordance with gaap), excluding gains (or losses) from sales and impairment write-downs of depreciated operating properties, plus depreciation and amortization expense, and after adjustments for unconsolidated partnerships and joint ventures. adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. the april 2002 white paper states that gain or loss on sales of property is excluded from ffo for previously depreciated operating properties only. expected ffo per share is calculated on a basis consistent with actual ffo per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected eps. the company believes that ffo and ffo available to common shares and units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), ffo and ffo available to common shares and units can help compare the operating performance of a company’s real estate between periods or as compared to different companies. normalized funds from operations ("normalized ffo") – normalized ffo begins with ffo and excludes: the impact of any expenses relating to non-operating asset impairment; pursuit cost write-offs; gains and losses from early debt extinguishment and preferred share redemptions; gains and losses from non-operating assets; and other miscellaneous items. expected normalized ffo per share is calculated on a basis consistent with actual normalized ffo per share and is considered an appropriate supplemental measure of expected operating performance when compared to expected eps. the company believes that normalized ffo and normalized ffo available to common shares and units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the company's actual operating results. ffo, ffo available to common shares and units, normalized ffo and normalized ffo available to common shares and units do not represent net income, net income available to common shares or net cash flows from operating activities in accordance with gaap. therefore, ffo, ffo available to common shares and units, normalized ffo and normalized ffo available to common shares and units should not be exclusively considered as alternatives to net income, net income available to common shares or net cash flows from operating activities as determined by gaap or as a measure of liquidity. the company's calculation of ffo, ffo available to common shares and units, normalized ffo and normalized ffo available to common shares and units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies. ffo available to common shares and units and normalized ffo available to common shares and units are calculated on a basis consistent with net income available to common shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with gaap. the equity positions of various individuals and entities that contributed their properties to the operating partnership in exchange for op units are collectively referred to as the "noncontrolling interests – operating partnership". subject to certain restrictions, the noncontrolling interests – operating partnership may exchange their op units for common shares on a one-for-one basis. the following table presents reconciliations of eps to ffo per share and normalized ffo per share for pages 7 and 24 (the expected guidance/projections provided below are based on current expectations and are forward-looking): debt extinguishment and preferred share redemption (gains) losses 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 11): non-same store properties – for annual comparisons, primarily includes all properties acquired during 2017 and 2018, plus any properties in lease-up and not stabilized as of january 1, 2017. physical occupancy – the weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period. same store operating expenses: on-site payroll – includes payroll and related expenses for on-site personnel including property managers, leasing consultants, and maintenance staff. other on-site operating expenses – includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees. repairs and maintenance – includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair and maintenance costs. utilities – represents gross expenses prior to any recoveries under the resident utility billing system (“rubs”). recoveries are reflected in rental income. same store properties – for annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to january 1, 2017, less properties subsequently sold. properties are included in same store when they are stabilized for all of the current and comparable periods presented. % of stabilized budgeted noi – represents budgeted 2019 noi for stabilized properties and projected annual noi at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up. total budgeted capital cost – estimated cost for projects under development and/or developed and all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with gaap. total market capitalization – the aggregate of the market value of the company’s outstanding common shares, including restricted shares, the market value of the company’s operating partnership units outstanding, including restricted units (based on the market value of the company’s common shares) and the outstanding principal balance of debt. the company believes this is a useful measure of a real estate operating company’s long-term liquidity and balance sheet strength, because it shows an approximate relationship between a company’s total debt and the current total market value of its assets based on the current price at which the company’s common shares trade. however, because this measure of leverage changes with fluctuations in the company’s share price, which occur regularly, this measure may change even when the company’s earnings, interest and debt levels remain stable. transaction accretion (dilution) – represents the spread between the acquisition cap rate and the disposition yield. turnover – total residential move-outs (including inter-property and intra-property transfers) divided by total residential apartment units. unencumbered noi % – represents noi generated by consolidated real estate assets unencumbered by outstanding secured debt as a percentage of total noi generated by all of the company's consolidated real estate assets. unlevered internal rate of return (“irr”) – the unlevered irr on sold properties is the compound annual rate of return calculated by the company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the company; (ii) total revenues earned during the company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the company’s ownership period; (iv) capital expenditures incurred during the company’s ownership period; and (v) the gross sales price of the property net of selling costs. the calculation of the unlevered irr does not include an adjustment for the company’s general and administrative expense, interest expense (including loan assumption costs and other loan-related costs) or property management expense. therefore, the unlevered irr is not a substitute for net income as a measure of our performance. management believes that the unlevered irr achieved during the period a property is owned by the company is useful because it is one indication of the gross value created by the company’s acquisition, development, renovation, management and ultimate sale of a property, before the impact of company overhead. the unlevered irr achieved on the properties as cited in this release should not be viewed as an indication of the gross value created with respect to other properties owned by the company, and the company does not represent that it will achieve similar unlevered irrs upon the disposition of other properties. the weighted average unlevered irr for sold properties is weighted based on all cash flows over the investment period for each respective property, including net sales proceeds.
