Equity residential reports 12% increase in
normalized ffo per share for third quarter 2014
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter and nine months ended september 30, 2014. all per share results are reported as available to common shares on a diluted basis. “our primary leasing season clearly demonstrated that strong fundamentals continue across our markets and we are pleased to expect to produce same store revenue growth of 4.1% for 2014, at the high end of our most recent expectations,” said david j. neithercut, equity residential’s president and ceo. “favorable demographics and changing lifestyles will continue to produce strong demand for rental housing in our high density, urban markets which should deliver same store revenue growth of 3.5% to 4.5% in 2015.” third quarter 2014 ffo (funds from operations), as defined by the national association of real estate investment trusts (nareit), for the third quarter of 2014 was $0.81 per share compared to $0.71 per share in the third quarter of 2013. the difference is due primarily to the items discussed below. for the third quarter of 2014, the company reported normalized ffo of $0.82 per share compared to $0.73 per share in the same period of 2013. the following items impacted normalized ffo per share in the quarter: the positive impact of approximately $0.06 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; the negative impact of approximately $0.01 per share of lower noi from 2013 and 2014 transaction activity; the positive impact of approximately $0.01 per share from lower total interest expense; and the positive impact of approximately $0.01 per share from other items, including lower general and administrative expenses. 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 26 and ffo on page 28 of this release. for the third quarter of 2014, the company reported earnings of $0.61 per share compared to $1.05 per share in the third quarter of 2013. the difference is due primarily to higher gains on property sales in the third quarter of 2013 partially offset by higher depreciation expense in the third quarter of 2013. nine months ended september 30, 2014 ffo for the nine months ended september 30, 2014 was $2.29 per share compared to $1.68 per share in the same period of 2013. the difference is due primarily to the acquisition expenses and prepayment penalties the company incurred in the first nine months of 2013, along with the items described above. for the nine months ended september 30, 2014, the company reported normalized ffo of $2.31 per share compared to $2.08 per share for the same period of 2013. for the nine months ended september 30, 2014, the company reported earnings of $1.13 per share compared to $4.87 per share for the same period of 2013. the difference is due primarily to higher gains on property sales in the first nine months of 2013 partially offset by higher depreciation expense, acquisition expenses and prepayment penalties incurred in the first nine months of 2013. 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 third quarter to third quarter comparison, which includes 100,196 apartment units, revenues increased 4.1%, expenses increased 0.6% and noi increased 6.0%. on a same store nine-month to nine-month comparison, which includes 99,686 apartment units, revenues increased 4.1%, expenses increased 1.7% and noi increased 5.3%. investment activity during the third quarter of 2014, the company acquired a 308-unit apartment property in los angeles for a purchase price of approximately $126.0 million and a capitalization (cap) rate of 4.7%. during the quarter, the company also acquired a land parcel in los angeles for future development for approximately $13.0 million. during the third quarter, the company sold three properties, consisting of 981 apartment units, for an aggregate sale price of approximately $156.3 million at a weighted average cap rate of 6.4%. these sales generated an unlevered internal rate of return (irr), inclusive of management costs, of 11.8%. the company also sold a land parcel in south florida for approximately $22.3 million during the quarter. for the nine months ended september 30, 2014, the company acquired four properties with a total of 1,080 apartment units for an aggregate purchase price of approximately $375.6 million at a weighted average cap rate of 5.0%. during the first nine months of 2014, the company sold four properties consisting of 1,317 apartment units for an aggregate sales price of approximately $197.1 million and a weighted average cap rate 6.4%. these sales generated an unlevered irr, inclusive of management costs, of 11.3%. during the first nine months of 2014, the company also sold two land parcels for an aggregate sale price of approximately $30.5 million. fourth quarter 2014 guidance the company has established a normalized ffo guidance range of $0.81 to $0.83 per share for the fourth quarter of 2014. the company expects noi in the fourth quarter to be similar to the third quarter, total interest expense to be moderately lower and transaction dilution to be slightly higher as we complete our 2014 disposition activity. the net impact of this activity will produce normalized ffo per share for the fourth quarter similar to that of the third quarter. full year 2014 guidance the company has revised its guidance for its full year 2014 same store operating performance and normalized ffo results as well as other items listed on page 26 of this release. the changes to the full year same store and normalized ffo guidance are listed below: previous revised the company’s guidance for investment activity remains unchanged at $500 million of acquisitions and $500 million of dispositions with a cap rate spread of 100 basis points. the difference between the midpoint of the previous normalized ffo guidance range of $3.10 per share and the midpoint of the revised guidance range of $3.13 per share is due primarily to: a positive impact of approximately $0.01 per share from better than expected growth in same store noi; a positive impact of approximately $0.01 per share from the timing of transaction activity; and a positive impact of approximately $0.01 per share from lower interest expense and other items. fourth quarter 2014 earnings and conference call equity residential expects to announce fourth quarter 2014 results on tuesday, february 3, 2015 and host a conference call to discuss those results at 10:00 a.m. ct on wednesday, february 4, 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 396 properties consisting of 111,087 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, october 29, at 10:00 a.m. central. please visit the company’s web site at www.equityapartments.com/corporate 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 land parcels, discontinued operations and net gain on sales of real estate properties note: see page 25 for additional detail regarding the adjustments from ffo to normalized ffo. see page 28 for the definitions, the footnotes referenced above and the reconciliations of eps to ffo and normalized ffo. 100,000,000 shares authorized; 1,000,000 shares issued and outstanding as of september 30, 2014 and december 31, 2013 1,000,000,000 shares authorized; 362,208,087 shares issued and outstanding as of september 30, 2014 and 360,479,260 shares issued and outstanding as of december 31, 2013 average average 6.67 x 6.87 x 6.63 x 6.80 x ffo purposes: development projects development projects ended 9/30/14 (at 100%): total book value total not book placed value in projects projects under development - wholly owned: projects under development - partially owned: completed not stabilized - wholly owned (5): completed and stabilized during the quarter - wholly owned: total capital cost (1) q3 2014 noi 170 amsterdam and breakwater at marina del rey – the land under these projects are subject to long term ground leases. total book value total not book placed value in projects projects under development - unconsolidated: completed not stabilized - unconsolidated (3): 444 155,820 155,362 — 96,793 completed and stabilized during the quarter - unconsolidated: projects completed and stabilized during the quarter - unconsolidated 501 78,640 78,622 — 48,633 projects completed and stabilized during the quarter apartment units (1) apartment unit apartment unit apartment unit (4) apartment unit improvements (5) apartment unit apartment unit total apartment unit (9) debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts 2014 normalized ffo guidance (per share diluted) q4 2014 2014 2014 same store assumptions 2014 transaction assumptions 2014 debt assumptions 2014 other guidance assumptions balance sheet items: expected q3 2014 preferred share redemptions and non-cash convertible debt discounts expense (benefit)
