Equity residential reports second quarter 2016
results
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter and six months ended june 30, 2016. all per share results are reported as available to common shares/units on a diluted basis. “after five consecutive years of exceptional fundamentals, elevated levels of new supply and slowing growth of higher paying jobs in san francisco and new york have created headwinds that cause us to reduce our revenue growth expectations to be more in line with long term historical trends,” said david j. neithercut, equity residential’s president and ceo. highlights in the quarter: increased same store revenues 4.2%, which, combined with same store expense growth of 1.7% produced an increase in same store net operating income (noi) of 5.3%. completed the development of three apartment properties in san francisco, consisting of 1,355 apartment units, for a total capital cost of approximately $726.9 million. started the development, for delivery in late 2018, of a 222-unit apartment property in washington, dc, which has an estimated total capital cost of approximately $88.0 million. sold three consolidated apartment properties, consisting of 728 apartment units, for an aggregate sale price of approximately $112.5 million at a weighted average disposition yield of 5.7% and generating an unlevered internal rate of return (unlevered irr) of 9.3%. sold the company’s entire interest in the management contracts and related rights associated with the military housing ventures at joint base lewis mcchord in washington state, for approximately $63.3 million, generating a gain on sale of approximately $52.4 million. second quarter 2016 earnings per share (eps) for the second quarter of 2016 was $0.59 compared to $0.78 in the second quarter of 2015. the difference is due primarily to lower gains on property sales and lower depreciation expense in the second quarter of 2016. ffo (funds from operations), as defined by the national association of real estate investment trusts (nareit), was $0.90 per share for both the second quarter of 2016 and 2015. normalized ffo for the second quarter of 2016 was $0.76 per share compared to $0.85 per share in the second quarter of 2015. the following items impacted normalized ffo per share in the quarter: a positive impact of approximately $0.05 per share from increased same store noi; a positive impact of approximately $0.03 per share from noi from non-same store properties currently in lease-up; a positive impact of approximately $0.06 per share from lower total interest expense; a negative impact of approximately $0.21 per share of lower noi primarily as a result of the company’s 2016 disposition activity; and a negative impact of approximately $0.02 per share from other items, including higher general and administrative expense. reconciliations and definitions of ffo and normalized ffo are provided on pages 6, 27 and 28 of this release and the company has included guidance for normalized ffo on page 25 and ffo and eps on page 28 of this release. six months ended june 30, 2016 eps for the six months ended june 30, 2016 was $10.36 compared to $1.27 for the same period of 2015. the difference is due primarily to a higher amount of property sale gains due to significantly more property sales in the first six months of 2016 and the various adjustment items listed on page 24 of this release. ffo for the six months ended june 30, 2016 was $1.37 per share compared to $1.68 per share in the same period of 2015. normalized ffo for the six months ended june 30, 2016 was $1.52 per share compared to $1.64 per share for the same period of 2015. same store results on a same store second quarter to second quarter comparison, which includes 72,781 apartment units, revenues increased 4.2%, expenses increased 1.7% and noi increased 5.3%. average rental rate increased 4.0% and occupancy increased 0.1%. on a same store six-month to six-month comparison, which includes 72,494 apartment units, revenues increased 4.4%, expenses increased 0.9% and noi increased 5.9%. average rental rate increased 4.3% and occupancy remained flat at 96.1%. investment activity the company acquired no properties during the second quarter of 2016 and sold the three assets discussed on the first page of this release. during the first six months of 2016, the company acquired three consolidated apartment properties, consisting of 479 apartment units, for an aggregate purchase price of approximately $204.1 million at a weighted average acquisition capitalization rate of 4.9%. during the first six months of 2016, the company sold 83 consolidated apartment properties, consisting of 26,890 apartment units, for an aggregate sale price of approximately $6.43 billion, generating an unlevered irr of 11.8%. the weighted average disposition yield on these sales is estimated at 5.3%. third quarter 2016 guidance the company has established an eps guidance range of $0.62 to $0.66 for the third quarter of 2016. the difference between the company’s second quarter 2016 eps of $0.59 and the midpoint of the third quarter 2016 guidance range of $0.64 is due primarily to higher gains on property sales, lower gains on sales of non-operating assets and the items described below. the company has established an ffo guidance range of $0.82 to $0.86 per share for the third quarter of 2016. the difference between the company’s second quarter 2016 ffo of $0.90 per share and the midpoint of the third quarter 2016 guidance range of $0.84 per share is due primarily to lower gains on sales of non-operating assets and the items described below. the company has established a normalized ffo guidance range of $0.75 to $0.79 per share for the third quarter of 2016. the difference between the company’s second quarter 2016 normalized ffo of $0.76 per share and the midpoint of the third quarter 2016 guidance range of $0.77 per share is due primarily to: a positive impact of approximately $0.01 per share from noi from non-same store properties currently in lease-up; a positive impact of approximately $0.01 per share from lower general and administrative expense; and a negative impact of approximately $0.01 per share from lower same store noi driven by an increase in revenues offset by a larger increase in operating expenses. full year 2016 guidance the company has revised its guidance for its full year 2016 same store operating performance, eps, ffo per share, normalized ffo per share and transactions as listed below: previous revised consolidated rental acquisitions $600 million $350 million consolidated rental dispositions the change in the full year eps guidance range is due primarily to lower gains on property sales as a result of the company’s reduced disposition guidance and the items described below. the change in the full year ffo per share guidance range is due primarily to the items described below. the change in the full year normalized ffo per share guidance range is due primarily to: a negative impact of approximately $0.06 per share from lower same store noi; and a positive impact of approximately $0.01 per share of higher noi from the amount and timing of 2016 disposition activity. glossary of terms and definitions to improve comparability and enhance disclosure, the company has a glossary of defined terms and related reconciliations of non-gaap financial measures on pages 26 through 29 of this release. third quarter 2016 earnings and conference call equity residential expects to announce third quarter 2016 results on tuesday, october 25, 2016 and host a conference call to discuss those results at 10:00 a.m. ct on wednesday, october 26, 2016. about equity residential equity residential is an s&p 500 company focused on the acquisition, development and management of high quality apartment properties in top u.s. growth markets. equity residential owns or has investments in 315 properties consisting of 79,458 apartment units. for more information on equity residential, please visit our website at www.equityapartments.com. forward-looking statements in addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. these statements are based on current expectations, estimates, projections and assumptions made by management. while equity residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. other risks and uncertainties are described under the heading “risk factors” in our annual report on form 10-k and subsequent periodic reports filed with the securities and exchange commission (sec) and available on our website, www.equityapartments.com. many of these uncertainties and risks are difficult to predict and beyond management’s control. forward-looking statements are not guarantees of future performance, results or events. equity residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. a live web cast of the company’s conference call discussing these results will take place tomorrow, wednesday, july 27, 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. unconsolidated entities, net gain (loss) on sales of real estate properties and land parcels and discontinued operations 100,000,000 shares authorized; 745,600 shares issued and outstanding as of june 30, 2016 and december 31, 2015 1,000,000,000 shares authorized; 365,550,636 shares issued and outstanding as of june 30, 2016 and 364,755,444 shares issued and outstanding as of december 31, 2015 units units yield units cap rate yield note: see pages 26 through 29 for the definitions of non-gaap financial measures and other terms, such as acquisition cap rate and disposition yield. the company acquired one property in the first quarter of 2016 which was in the final stages of completing lease-up and is expected to stabilize in its second year of ownership at a 4.8% yield on cost. average rental rate physical occupancy average rental rate physical occupancy average rental rate physical occupancy apartment units q2 2016 % of actual noi q2 2016 average rental rate q2 2016 weighted average physical occupancy % q2 2016 turnover average rental rate physical occupancy apartment units q2 2016 % of actual noi q2 2016 average rental rate q2 2016 weighted average physical occupancy % q2 2016 turnover average rental rate physical occupancy apartment units june ytd 16 % of actual noi june ytd 16 average rental rate june ytd 16 weighted average physical occupancy % june ytd 16 turnover average rental rate physical occupancy weighted average rates (1) weighted average maturities (years) fixed rate (1) floating rate (1) weighted average rates on fixed rate debt (1) weighted average rates on total debt (1) equity residential interest rate due date amount equity residential redemption date outstanding shares liquidation value annual dividend per share annual dividend amount apartment units capital cost book value to date value not placed in service debt completed leased occupied completion date stabilization date projects under development: completed not stabilized (1): completed and stabilized during the quarter: total capital cost q2 2016 noi apartment units (1) apartment unit apartment unit apartment unit (4) apartment unit improvements (5) apartment unit apartment unit total apartment unit (8) balance sheet items: preferred share redemptions and non-cash convertible debt discounts other income) (b) expense (benefit) 2016 normalized ffo guidance (per share diluted) q3 2016 2016 2016 same store assumptions (see note below) 2016 transaction assumptions 2016 debt assumptions 2016 other guidance assumptions depreciation gain of real estate properties funds from operations and normalized funds from operations: actual june ytd 2016 per share actual june ytd 2015 per share actual q2 2016 per share actual q2 2015 per share expected q3 2016 per share expected 2016 per share debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts (gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)
