Equity residential reports full year 2014
results
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter and year ended december 31, 2014. all per share results are reported as available to common shares on a diluted basis. “2014 was another exceptional year for equity residential in which we delivered year over year growth in normalized ffo per share of more than 11%, among the best years in our history,” said david j. neithercut, equity residential’s president and ceo. “improving labor markets, robust household formation and declining single family home ownership levels will keep demand for rental housing high and produce above trend growth for many years to come.” fourth quarter 2014 ffo (funds from operations), as defined by the national association of real estate investment trusts (nareit), for the fourth quarter of 2014 was $0.87 per share compared to $0.67 per share in the fourth quarter of 2013. the difference is due primarily to higher prepayment penalties incurred in the fourth quarter of 2013 and the items described below. for the fourth quarter of 2014, the company reported normalized ffo of $0.86 per share compared to $0.77 per share in the same period of 2013. the following items impacted normalized ffo per share in the quarter: a positive impact of approximately $0.07 per share from higher same store net operating income (noi) and approximately $0.02 per share from noi from non-same store properties currently in lease-up; a positive impact of approximately $0.01 per share from lower g&a expenses; and a negative impact of approximately $0.01 per share due to dilution from the timing of the company’s 2014 transaction activity. 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 6 and 28 of this release and the company has included guidance for normalized ffo on page 27 and ffo on page 28 of this release. for the fourth quarter of 2014, the company reported earnings of $0.59 per share compared to $0.30 per share in the fourth quarter of 2013. the difference is due primarily to higher gains on property sales in the fourth quarter of 2014, higher prepayment penalties incurred in the fourth quarter of 2013 and the items described above. year ended december 31, 2014 ffo for the year ended december 31, 2014 was $3.15 per share compared to $2.35 per share in the same period of 2013. the difference is due primarily to higher acquisition expenses and prepayment penalties incurred during 2013 and improved operations during 2014. for the year ended december 31, 2014, the company reported normalized ffo of $3.17 per share compared to $2.85 per share in the same period of 2013. for the year ended december 31, 2014, the company reported earnings of $1.73 per share compared to $5.16 per share in the same period of 2013. the difference is due primarily to higher gains on property sales during 2013, partially offset by higher depreciation expense, acquisition expenses and prepayment penalties incurred during 2013 and improved operations during 2014. same store results the company’s same store results for all periods include the stabilized apartment units acquired in the archstone acquisition that are owned and managed by the company. on a same store fourth quarter to fourth quarter comparison, which includes 98,421 apartment units, revenues increased 4.9%, expenses increased 2.2% and noi increased 6.3%. on a same store year to year comparison, which includes 97,911 apartment units, revenues increased 4.3%, expenses increased 1.8% and noi increased 5.6%. investment activity the company acquired two properties during the fourth quarter, both in seattle, with a total of 273 apartment units for an aggregate purchase price of approximately $94.2 million at a weighted average capitalization (cap) rate of 4.8%. also during the quarter, the company acquired its joint venture partner’s 95% interest in parc on powell, a 176-unit apartment property currently under development in emeryville, a suburb of san francisco, for a stabilized value of $87.5 million. the company acquired its original 5% interest in the property as part of the archstone acquisition. the project is expected to stabilize in the second year of full ownership at a 4.8% yield on cost. during the fourth quarter, the company sold six consolidated apartment properties, consisting of 1,775 apartment units, for an aggregate sale price of approximately $269.9 million at a weighted average cap rate of 5.9%. these sales generated an unlevered internal rate of return (irr), inclusive of management costs, of 6.5%. also during the quarter, the company sold for approximately $62.5 million an unconsolidated 388-unit apartment property located in phoenix, in which it had an 85% interest acquired as part of the archstone transaction. in addition, the company sold a land parcel located in los angeles for a sale price of $32.1 million during the quarter. during 2014, the company acquired six properties, consisting of 1,353 apartment units, for an aggregate purchase price of approximately $469.8 million and a weighted average cap rate of 4.9%. in addition, the company acquired two land parcels for an aggregate purchase price of approximately $28.8 million as well as the parc on powell transaction described above. during 2014, the company sold 10 consolidated apartment properties, consisting of 3,092 apartment units, for an aggregate sale price of approximately $467.0 million at a weighted average cap rate of 6.1%. these sales generated an unlevered irr, inclusive of management costs, of 8.9%. the company also sold three land parcels for an aggregate sale price of $62.6 million during 2014. in addition, the company sold the unconsolidated asset in phoenix described above. revised executive compensation program in response to input from its shareholders, the company has revised its executive compensation program beginning in 2015. the long term incentive portion of the revised program will be performance based and determined by the company’s absolute and relative total shareholder return over the three year performance period ending december 31, 2017. accounting rules require the company to expense in 2015 a portion of both the previous program’s time based equity grants for service in 2014 and the performance based grants issued under the revised plan creating a duplicative charge of approximately $11.0 million. this charge will not be included in the company’s normalized ffo in 2015. first quarter 2015 guidance the company has established a normalized ffo guidance range of $0.77 to $0.81 per share for the first quarter of 2015. the difference between the company’s fourth quarter 2014 normalized ffo of $0.86 per share and the midpoint of the first quarter 2015 guidance range of $0.79 per share is due primarily to: a negative impact of approximately $0.05 per share from lower noi primarily as a result of higher operating expenses in the first quarter of 2015; and a negative impact of approximately $0.02 per share from other items. full year 2015 guidance the company has established a normalized ffo guidance range of $3.35 to $3.45 per share for the full year 2015. the assumptions underlying this guidance can be found on page 27 of this release. the difference between the company’s full-year 2014 normalized ffo of $3.17 per share and the midpoint of the full year 2015 guidance range of $3.40 per share is primarily due to: a positive impact of approximately $0.21 per share from higher noi from same store properties; a positive impact of approximately $0.05 per share from non-same store properties, including properties in lease-up; a negative impact of approximately $0.04 per share from the timing of the company’s 2014 and 2015 transaction activity; a positive impact of approximately $0.03 per share from lower interest expense; and a negative impact of approximately $0.02 per share from other items. 2015 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 dividends of $0.5525 per share for an annual dividend of $2.21 per share in 2015, which represents a 10.5% increase over the 2014 dividend. all future dividends remain subject to the discretion of the company’s board of trustees. first quarter 2015 earnings and conference call equity residential expects to announce first quarter 2015 results on tuesday, april 28, 2015 and host a conference call to discuss those results at 10:00 a.m. ct on wednesday, april 29, 2015. 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 391 properties consisting of 109,225 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, february 4, 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. in unconsolidated entities, net gain on sales of real estate properties and land parcels and discontinued operations 100,000,000 shares authorized; 1,000,000 shares issued and outstanding as of december 31, 2014 and december 31, 2013 1,000,000,000 shares authorized; 362,855,454 shares issued and outstanding as of december 31, 2014 and 360,479,260 shares issued and outstanding as of december 31, 2013 military housing 2 5,033 average rental rate (2) average (3.0 average rental rate (2) q4 2014 q4 2014 q4 2014 % of average weighted average apartment actual rental average rental units noi rate (1) occupancy % rate (1) q4 2014 q4 2014 q4 2014 % of average weighted average apartment actual rental average rental units noi rate (1) occupancy % rate (1) 2014 2014 2014 % of average weighted average apartment actual rental average rental units noi rate (1) occupancy % rate (1) % of actual q4 2014 operating expenses % of actual 2014 operating expenses weighted weighted average average maturities rates (1) (years) secured – conventional 14.0 weighted weighted average rates average fixed floating on fixed rates on rate (1) rate (1) rate debt (1) total debt (1) unamortized premium/ (discount) annual annual dividend dividend series per share amount ffo purposes: development development projects projects held for and/or under completed, development (4) not stabilized (5) operating ended 12/31/14 (at 100%): (loss) income before income and other taxes and (loss) from investments in unconsolidated entities unconsolidated entities projects under development - wholly owned: projects under development - partially owned: completed not stabilized - wholly owned (6): completed and stabilized during the quarter - wholly owned: noi contribution from consolidated development projects totalcapitalcost (1) q4 2014noi prism at park avenue south – the company is jointly developing with toll brothers (nyse: tol) a project at 400 park avenue south in new york city with the company's rental portion on floors 2-22 and toll's for sale portion on floors 23-40. the total capital cost and total book value to date represent only the company's portion of the project. toll brothers has funded $113.8 million for their allocated share of the project. total book total value not book value placed in projects completed not stabilized - unconsolidated (2): payroll (3) replacements - includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. replacements for same store properties also include $51.4 million spent in 2014 on apartment unit renovations/rehabs (primarily kitchens and baths) on 6,111 same store apartment units (equating to approximately $8,400 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. in 2015, the company expects to spend approximately $60.0 million for all unit renovation/rehab costs (primarily on same store properties) at a weighted average cost of $9,000 per apartment unit rehabbed. 2014 balance sheet items: redemptions and non-cash convertible debt discounts 2015 normalized ffo guidance (per share diluted) q1 2015 2015 2015 same store assumptions 2015 transaction assumptions 2015 debt assumptions 2015 other guidance assumptions expected expected q1 2015 2015 per share per share preferred share redemptions and non-cash convertible debt discounts expense (benefit)
