Equity residential reports full year 2015
results
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter and year ended december 31, 2015. all per share results are reported as available to common shares on a diluted basis. “we are delighted to have delivered a 9.1% increase in normalized ffo in 2015 driven by another very strong year of same store revenue growth,” said david j. neithercut, equity residential’s president and ceo. “we are also pleased to have started the new year very much in line with our original expectations and that 2016 will be yet another year of strong apartment fundamentals and above trend revenue growth.” fourth quarter 2015 ffo (funds from operations), as defined by the national association of real estate investment trusts (nareit), for the fourth quarter of 2015 was $0.92 per share compared to $0.87 per share in the fourth quarter of 2014. the difference is due primarily to the various non-comparable items listed on page 25 of this release and the items described below. for the fourth quarter of 2015, the company reported normalized ffo of $0.93 per share compared to $0.86 per share in the same period of 2014. the following items impacted normalized ffo per share in the quarter: a positive impact of approximately $0.08 per share from higher same store net operating income (noi) and approximately $0.01 per share from noi from non-same store properties currently in lease-up; and a negative impact of approximately $0.02 per share of lower noi due to 2014 and 2015 transaction activity, higher general and administrative costs and other items. normalized ffo begins with ffo and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. reconciliations and definitions of ffo and normalized ffo are provided on pages 7 and 27 of this release and the company has included guidance for normalized ffo on page 26 and ffo on page 27 of this release. for the fourth quarter of 2015, the company reported earnings of $0.55 per share compared to $0.59 per share in the fourth quarter of 2014. the difference is due primarily to lower gains on asset sales in the fourth quarter of 2015 and the items described above. year ended december 31, 2015 ffo for the year ended december 31, 2015 was $3.48 per share compared to $3.15 per share in the same period of 2014. for the year ended december 31, 2015, the company reported normalized ffo of $3.46 per share compared to $3.17 per share for the same period of 2014. for the year ended december 31, 2015, the company reported earnings of $2.36 per share compared to $1.73 per share for the same period of 2014. the difference is due primarily to higher gains on property sales and improved operations during the year ended december 31, 2015. same store results on a same store fourth quarter to fourth quarter comparison, which includes 98,202 apartment units, revenues increased 5.2%, expenses increased 2.0% and noi increased 6.8%. average rental rate increased 5.2% and occupancy remained even at 96.0%. on a same store year to year comparison, which includes 96,286 apartment units, revenues increased 5.1%, expenses increased 2.5% and noi increased 6.5%. average rental rate increased 4.8% and occupancy increased 0.3% to 96.1%. investment activity during the fourth quarter of 2015, the company acquired three properties, two in seattle and one in orange county, california, consisting of 423 apartment units for an aggregate purchase price of approximately $165.8 million at a weighted average capitalization (cap) rate of 4.7%. during the fourth quarter of 2015, the company sold one consolidated apartment property located in seattle, consisting of 150 apartment units, for a sale price of approximately $48.5 million at a cap rate of 4.5% generating an unlevered internal rate of return (irr), inclusive of indirect management costs, of 12.8%. during 2015, the company acquired four properties consisting of 625 apartment units for an aggregate purchase price of approximately $296.0 million at a weighted average cap rate of 4.5% and three contiguous land parcels for an aggregate purchase price of $27.8 million. also during 2015, the company completed seven development projects consisting of 1,546 apartment units for a total development cost of approximately $835.1 million. during 2015, the company sold eight consolidated apartment properties, consisting of 1,857 apartment units, for an aggregate sale price of approximately $390.0 million at a weighted average cap rate of 5.5%. the company also sold a 193,230 square foot medical office building located adjacent to its longfellow place property in boston for approximately $123.3 million at a cap rate of 4.5%. these combined sales generated an unlevered irr, inclusive of indirect management costs, of 13.4%. asset sale to starwood as previously announced on january 27, 2016, the company completed the sale of 72 properties consisting of 23,262 apartment units to controlled affiliates of starwood capital group for $5.365 billion, or approximately $230,634 per unit on average, generating an unlevered irr, inclusive of indirect management costs, of 11.1%. debt extinguishments in connection with the starwood sale and other anticipated 2016 asset sales, the company has retired in 2016 approximately $1.7 billion in debt principal prior to scheduled maturity with an additional $271.2 million anticipated to be retired at par at maturity on march 15, 2016. in addition, no commercial paper or revolving credit facility balances were outstanding as of february 2, 2016. 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, including certain related write-offs of unamortized deferred financing costs, premiums/discounts and derivative settlements, will reduce earnings per share and ffo in the first quarter of 2016 by approximately $120.1 million but will not impact normalized ffo. a summary table of the debt retired is set forth below: amount repaid interest rate (1) penalty first quarter 2016 guidance the company has established a normalized ffo guidance range of $0.73 to $0.77 per share for the first quarter of 2016. the difference between the company’s fourth quarter 2015 normalized ffo of $0.93 per share and the midpoint of the first quarter 2016 guidance range of $0.75 per share is due primarily to: a negative impact of approximately $0.17 per share from lower noi due to 2016 transaction activity including the portfolio sale to starwood; a negative impact of approximately $0.04 per share from lower noi primarily as a result of higher seasonal operating expenses in the first quarter of 2016; a negative impact of approximately $0.01 per share from higher general and administrative and property management costs; and a positive impact of approximately $0.04 per share from lower total interest expense. full year 2016 guidance the company has established a normalized ffo guidance range of $3.00 to $3.20 per share for the full year 2016. the assumptions underlying this guidance can be found on page 26 of this release. the difference between the company’s full-year 2015 normalized ffo of $3.46 per share and the midpoint of the full year 2016 guidance range of $3.10 per share is primarily due to: a negative impact of approximately $0.90 per share from lower noi due to 2016 transaction activity including the portfolio sale to starwood; a positive impact of approximately $0.23 per share from higher noi from the company’s full year 2016 same store pool of approximately 70,000 apartment units; a positive impact of approximately $0.12 per share from higher noi from development properties in lease-up; a positive impact of approximately $0.21 per share from lower total interest expense; and a negative impact of approximately $0.02 per share from other items. special dividends and 2016 common share dividend in addition to regular quarterly dividends, equity residential anticipates paying two special dividends to its common shareholders in 2016 totaling $10.00 to $12.00 per share. the company expects to pay, in the second quarter of 2016, a special dividend of approximately $8.00 per share from proceeds from the asset sales closed in the first few months of 2016, including the sale to starwood, and an additional special dividend of approximately $2.00 to $4.00 per share later in the year from the proceeds of additional asset sales. in regards to the company’s regular quarterly common share dividend, as previously announced, the company’s dividend policy is to pay 65% of the midpoint of the range of normalized ffo guidance customarily provided as part of the company’s fourth quarter earnings release. based on the guidance above, the company expects to pay four quarterly common share dividends of $0.50375 per share for an annual common share dividend of $2.015 per share in 2016. all future dividends remain subject to the discretion of the company’s board of trustees. first quarter 2016 earnings and conference call equity residential expects to announce first quarter 2016 results on tuesday, april 26, 2016 and host a conference call to discuss those results at 10:00 a.m. ct on wednesday, april 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 january 31, 2016, equity residential owns or has investments in 316 properties consisting of 85,391 apartment units located primarily in boston, new york, washington dc, seattle, san francisco and southern california. for more information on equity residential, please visit our website at www.equityapartments.com. forward-looking statements in addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. these statements are based on current expectations, estimates, projections and assumptions made by management. while equity residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. other risks and uncertainties are described under the heading “risk factors” in our annual report on form 10-k and subsequent periodic reports filed with the securities and exchange commission (sec) and available on our website, www.equityapartments.com. many of these uncertainties and risks are difficult to predict and beyond management’s control. forward-looking statements are not guarantees of future performance, results or events. equity residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. a live web cast of the company’s conference call discussing these results will take place tomorrow, wednesday, february 3, 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 note: see page 25 for additional detail regarding the adjustments from ffo to normalized ffo. see page 27 for the definitions, the footnotes referenced above and the reconciliations of eps to ffo and normalized ffo. 2015 2014 100,000,000 shares authorized; 745,600 shares issued and outstanding as of december 31, 2015 and 1,000,000 shares issued and outstanding as of december 31, 2014 1,000,000,000 shares authorized; 364,755,444 shares issued and outstanding as of december 31, 2015 and 362,855,454 shares issued and outstanding as of december 31, 2014 units units (sale) price units (sale) price average rental rate (2) average rental rate (2) average rental rate (2) apartment units q4 2015 % of actual noi q4 2015 average rental rate (1) q4 2015 weighted average occupancy % average rental rate (1) apartment units q4 2015 % of actual noi q4 2015 average rental rate (1) q4 2015 weighted average occupancy % average rental rate (1) apartment units 2015 % of actual noi 2015 average rental rate (1) 2015 weighted average occupancy % average rental rate (1) actual q4 2015 actual q4 2014 $ change % change % of actual q4 2015 operating expenses actual 2015 actual 2014 $ change % change % of actual 2015 operating expenses 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) coupon rate due date face amount unamortized premium/ (discount) net balance 2015 2015 2015 2015 redemption date outstanding shares liquidation value annual dividend per share annual dividend amount operating operating (1) all debt is non-recourse to the company. (2) represents the company's current equity ownership interest. apartment units capital cost (1) book value to date value not placed in service debt completed leased occupied completion date stabilization date projects under development: completed not stabilized (3): completed and stabilized during the quarter: total capital cost (1) q4 2015 noi note: all development projects listed are wholly owned by the company. apartment units (1) apartment unit apartment unit apartment unit (4) apartment unit improvements (5) apartment unit apartment unit total apartment unit balance sheet items: redemptions and non-cash convertible debt discounts equity residential normalized ffo guidance and assumptions the guidance/projections provided below are based on current expectations and are forward-looking. all guidance is given on a normalized ffo basis. therefore, certain items excluded from normalized ffo, such as debt extinguishment costs/prepayment penalties, property acquisition costs and the write-off of pursuit costs, are not included in the estimates provided on this page. all proposed dividends provided below remain subject to the discretion of the company's board of trustees. the proposed special dividends provided below may vary materially due to, among other items, the amount and timing of 2016 dispositions. see page 27 for the definitions, the footnotes referenced below and the reconciliations of eps to ffo and normalized ffo. 2016 normalized ffo guidance (per share diluted) 2016 same store assumptions (see note below) 2016 transaction assumptions 2016 debt assumptions (see note below) 2016 other guidance assumptions expected expected q1 2016 2016 per share per share preferred share redemptions and non-cash convertible debt discounts expense (benefit)
