Equity residential reports first quarter 2016
results
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter ended march 31, 2016. all per share results are reported as available to common shares on a diluted basis. “west coast apartment fundamentals remain extremely strong while east coast markets continue to lag due to new supply,” said david j. neithercut, equity residential’s president and ceo. “while a return to more normal, seasonal operating trends will likely cause same store revenue growth to fall modestly short of our original guidance midpoint this year, our revised expectations remain well above historical trends, making 2016 another exceptional year for equity residential.” highlights in the quarter: increased same store revenues 4.6%, which, combined with flat same store expenses, produced an increase in same store net operating income (noi) of 6.6%. completed the sale, for $5.365 billion, of 23,262 apartment units to controlled affiliates of starwood capital group (starwood sale), generating an economic gain of approximately $2.0 billion and an unlevered internal rate of return (unlevered irr) of 11.3%. paid a special dividend to shareholders of $8 per common share, totaling approximately $3.0 billion. sold, for $412.5 million, woodland park, a 1,811-unit property in east palo alto, california, which the company purchased in late 2011 for $130.0 million, generating an economic gain of approximately $259.0 million and an unlevered irr of 37.2%. sold, for $390.0 million, river tower, a 323-unit property in new york city, which the company acquired in early 2010 for $217.6 million, generating an economic gain of approximately $152.5 million and an unlevered irr of 14.1%. acquired a property in each of seattle, los angeles and brooklyn, ny for an aggregate purchase price of approximately $204.1 million at a weighted average acquisition capitalization rate of 4.9%. retired approximately $2.0 billion of existing debt, the majority of which was scheduled to mature in 2016 and 2017, using proceeds from the company’s asset sales, improving the company’s already strong credit metrics. first quarter 2016 ffo (funds from operations), as defined by the national association of real estate investment trusts (nareit), for the first quarter of 2016 was $0.47 per share compared to $0.79 per share in the first quarter of 2015. the difference is due primarily to the various non-comparable items listed on page 23 of this release and the items described below. for the first quarter of 2016, the company reported normalized ffo of $0.76 per share compared to $0.79 per share in the same period of 2015. the following items impacted normalized ffo per share in the quarter: a positive impact of approximately $0.06 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 $0.03 per share from lower total interest expense; a positive impact of approximately $0.01 per share from other items; and a negative impact of approximately $0.16 per share of lower noi primarily as a result of the company’s 2016 disposition activity. 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 normalized ffo on page 24 and ffo and eps on page 27 of this release. for the first quarter of 2016, the company reported earnings of $9.76 per share compared to $0.49 per share in the first quarter of 2015. the difference is due primarily to a higher amount of property sale gains due to significantly more property sales in the first quarter of 2016, lower depreciation expense in the first quarter of 2016 as a direct result of these property sales, the various non-comparable items listed on page 23 of this release and the items described above. same store results on a same store first quarter to first quarter comparison, which includes 73,222 apartment units, revenues increased 4.6%, expenses were flat and noi increased 6.6%. investment activity the properties acquired during the quarter were a 61-unit property in seattle for approximately $25.8 million, a 298-unit property in los angeles for approximately $98.6 million, including the assumption of a $42.8 million mortgage, and a 120-unit property in brooklyn, ny, currently in the final stages of lease up, for approximately $79.7 million. during the first quarter of 2016, the company completed the starwood sale for $5.365 billion, or $230,634 per unit on average, generating an unlevered irr of 11.3%. in addition, the company sold eight other consolidated apartment properties, consisting of 2,900 apartment units, for an aggregate sale price of approximately $950.0 million. collectively, these dispositions produced an economic gain of approximately $2.4 billion and an unlevered irr of 11.8%. the weighted average disposition yield on these sales is estimated at 5.3%. also during the first quarter of 2016, the company sold two land parcels for an aggregate sale price of approximately $27.5 million, generating an economic gain and gaap gain of approximately $11.7 million. on april 1, 2016, the company sold, for approximately $63.3 million, its interest in the management contracts and related rights for its military housing business at joint base lewis mcchord in washington state. debt extinguishments in connection with the starwood sale and other completed and anticipated 2016 asset sales, the company retired, in the first quarter of 2016, approximately $2.0 billion in debt principal, the majority of which was scheduled to mature in 2016 and 2017. the debt payoffs included both secured and unsecured debt in order to maintain the company’s existing credit metrics and strong credit profile. the company incurred approximately $112.4 million in prepayment penalties associated with these debt extinguishments. the prepayment penalties, certain related write-offs of unamortized deferred financing costs, premiums/discounts and derivative settlements, reduced eps and ffo in the first quarter of 2016 by approximately $120.1 million but did not impact normalized ffo. second quarter 2016 guidance the company has established a normalized ffo guidance range of $0.74 to $0.78 per share for the second quarter of 2016. the difference between the company’s first quarter 2016 normalized ffo of $0.76 per share and the midpoint of the second quarter 2016 guidance range of $0.76 per share is due primarily to: a positive impact of approximately $0.03 per share from increased same store noi; 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 $0.02 per share from lower total interest expense; a negative impact of approximately $0.05 per share of lower noi primarily as a result of the company’s 2016 disposition activity; and a negative impact of approximately $0.01 per share from other items. full year 2016 guidance the company has revised its guidance for its full year 2016 same store operating performance and normalized ffo per share as listed below: glossary of terms and definitions to improve comparability and enhance disclosure, the company has added a glossary of defined terms and related reconciliations of non-gaap financial measures on pages 25 through 28 of this release. second quarter 2016 earnings and conference call equity residential expects to announce second quarter 2016 results on tuesday, july 26, 2016 and host a conference call to discuss those results at 10:00 a.m. ct on wednesday, july 27, 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. as of april 22, 2016, equity residential owns or has investments in 315 properties consisting of 78,831 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, april 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. (benefit) average rental physical rate occupancy average rental physical rate occupancy q1 2016 q1 2016 q1 2016 weighted % of average average average apartment actual rental physical q1 2016 rental physical units noi rate occupancy % turnover rate occupancy q1 2016 q1 2016 q1 2016 weighted % of average average average apartment actual rental physical q1 2016 rental physical units noi rate occupancy % turnover rate occupancy % of actual q1 2016 actual actual $ % operating q1 2016 q1 2015 change change expenses projects projects under development: completed not stabilized (3): completed and stabilized during the quarter: cascade – the company increased its budgeted total capital cost by approximately $3.9 million due to the decision to increase retail space as well as upgrade certain finishes and fixtures. equity residential repairs and maintenance expenses and capital expenditures to real estate for the quarter ended march 31, 2016 balance sheet items: 2016 normalized ffo guidance (per share diluted) q2 2016 2016 2016 same store assumptions (see note below) 2016 transaction assumptions 2016 debt assumptions 2016 other guidance assumptions funds from operations and normalized funds from operations:
