Equity residential reports full year 2013
results
Chicago--(business wire)--equity residential (nyse: eqr) today reported results for the quarter and year ended december 31, 2013. all per share results are reported as available to common shares on a diluted basis. “2013 was an extraordinary year for equity residential during which we delivered 4.5% same store revenue growth while acquiring and seamlessly integrating nearly $9 billion of new assets and selling $4.5 billion of non-core assets,” said david j. neithercut, equity residential’s president and ceo. “2014 represents the first full year of stabilized operations following the successful completion of our multi-year plan to totally transform our property portfolio and we are pleased to expect an 8% increase in our normalized ffo and dividend.” fourth quarter 2013 ffo (funds from operations), as defined by the national association of real estate investment trusts (nareit), for the fourth quarter of 2013 was $0.67 per share compared to $0.94 per share in the fourth quarter of 2012. the difference is due primarily to the $80.0 million archstone termination fee that the company recognized in the fourth quarter of 2012 as well as the higher debt extinguishment costs incurred in the fourth quarter of 2013 discussed further on page three of this release. for the fourth quarter of 2013, the company reported normalized ffo of $0.77 per share compared to $0.75 per share in the same period of 2012. the following items impacted normalized ffo per share in the quarter: the positive impact of approximately $0.03 per share from higher same store net operating income (noi); the positive impact of approximately $0.28 per share from the archstone properties, offset by the negative impact of approximately $0.28 per share from 2012 and 2013 disposition activity and common share issuance in connection with the company’s purchase of archstone; and the negative impact of approximately $0.01 per share from various 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. merger expenses and prepayment penalties are not included in the company’s normalized ffo. a reconciliation and definition of normalized ffo are provided on pages 26 and 28 of this release and the company has included guidance for normalized ffo on page 27 of this release. for the fourth quarter of 2013, the company reported earnings of $0.30 per share compared to $1.17 per share in the fourth quarter of 2012. the difference is due primarily to higher gains from property sales in the fourth quarter of 2012, as well as the termination fee, debt extinguishment costs and other items described above. year ended december 31, 2013 ffo for the year ended december 31, 2013 was $2.35 per share compared to $3.11 per share in the same period of 2012. the difference is due primarily to merger-related expenses and debt extinguishment costs incurred in 2013 in connection with the company’s acquisition of archstone, as well as $150.0 million in archstone termination fees the company received in 2012. for the year ended december 31, 2013, the company reported normalized ffo of $2.85 per share compared to $2.76 per share in the same period of 2012. for the year ended december 31, 2013, the company reported earnings of $5.16 per share compared to $2.70 per share in the same period of 2012. the difference is due primarily to higher gains from property sales during 2013, partially offset by higher depreciation as a result of the archstone acquisition, as well as the termination fee, debt extinguishment costs and other items described above. same store results on a same store fourth quarter to fourth quarter comparison, which includes 82,352 apartment units, revenues increased 4.0%, expenses increased 3.5% and noi increased 4.3%. on a same store sequential fourth quarter to third quarter comparison, which includes 101,478 apartment units, revenues decreased 0.2%, expenses decreased 4.6% and noi increased 2.0%. on a same store year to year comparison, which includes 80,247 apartment units, revenues increased 4.5%, expenses increased 3.4% and noi increased 5.0%. acquisitions/dispositions the company did not acquire any properties or land sites in the fourth quarter. during 2013, the company acquired 77 properties, consisting of 22,103 apartment units. in addition, the company acquired 15 land parcels for an aggregate purchase price of approximately $267.2 million. fourteen of these land parcels were acquired as part of the archstone transaction and the company intends to develop six of these parcels and has or will sell the remainder. during the fourth quarter, the company sold two apartment properties, consisting of 852 apartment units, for an aggregate sale price of $96.7 million at a weighted average capitalization (cap) rate of 6.3%. these sales generated an unlevered internal rate of return (irr), inclusive of management costs, of 9.5%. also during the quarter, the company sold a land parcel, located in florida, which it acquired as part of the archstone transaction, for a sale price of $22.0 million. during 2013, the company sold 94 apartment properties, consisting of 29,180 apartment units, for an aggregate sale price of $4.46 billion at a weighted average cap rate of 6.0%. these sales, excluding three archstone assets that were sold shortly after their acquisition, generated an unlevered irr, inclusive of management costs, of 10.0%. also during 2013, the company sold eight land parcels for an aggregate sale price of $126.0 million and one office building for $30.7 million. please see page nine of this release for comparative portfolio summaries for the end of the fourth quarter 2012 and the end of the fourth quarter 2013. capital markets activities on october 1, 2013, the company used cash on hand from dispositions to repay a $963.5 million secured loan assumed in conjunction with the archstone acquisition. this loan was set to mature in november 2014 and carried a cash interest rate of 5.88% and a gaap interest rate of 3.45% due to the amortization of the archstone-related debt premium. on october 31, 2013, the company closed a new $800 million secured loan from a large insurance company. the loan has a 10 year term, is interest only and carries a fixed interest rate of 4.21%. the company used the loan proceeds to repay $825 million of a $1.27 billion secured loan that the company assumed as part of the archstone transaction. the approximately $440 million balance will remain outstanding, continue to mature in november 2017 and continue to carry a cash interest rate of 6.26% and a gaap interest rate of 3.58% due to the amortization of the archstone-related debt premium. the company incurred cash prepayment costs of approximately $151.0 million and a charge to earnings and ffo of approximately $42.9 million in the fourth quarter. the difference is due to the write off of archstone-related debt premiums. normalized ffo was not impacted by this charge. lehman shares on february 27, 2013, the company issued approximately 34.5 million common shares, or approximately 9.6% of the company’s outstanding shares at that time, to the seller of the archstone assets, lehman brothers holdings, inc. and its affiliates (lehman). in a recent filing with the u.s. bankruptcy court, lehman disclosed that it has sold much of those shares and has significantly reduced its holdings in eqr. the company believes that lehman currently holds only approximately 1.5% of its outstanding common shares. first quarter 2014 guidance the company has established a normalized ffo guidance range of $0.68 to $0.72 per share for the first quarter of 2014. the difference between the company’s fourth quarter 2013 normalized ffo of $0.77 per share and the midpoint of the first quarter 2014 guidance range of $0.70 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 2014; and a negative impact of approximately $0.02 per share from other items. full year 2014 guidance the company has established a normalized ffo guidance range of $3.03 to $3.13 for the full year 2014. the assumptions underlying this guidance can be found on page 27 of this release. the difference between the company’s full-year 2013 normalized ffo of $2.85 and the midpoint of the company’s guidance range of $3.08 per share for the full year 2014 normalized ffo is primarily due to: a positive impact of approximately $0.37 per share from higher noi from the company’s properties consisting of approximately $0.20 per share from the addition of the archstone stabilized assets to the company’s same store pool; approximately $0.13 per share from the remaining same store properties and approximately $0.04 per share of noi from properties in lease-up; a negative impact of approximately $0.23 per share from dilution from 2013 disposition activity and the impact of increased share count resulting from the issuance of common shares in connection with the archstone transaction; a positive impact of approximately $0.06 per share from lower interest expense; and a positive impact of approximately $0.03 per share from other items including lower general and administrative expenses. the company’s same store guidance provided on page 27 of this release includes all of the stabilized assets acquired in the archstone transaction that are owned and managed by equity residential. 2014 common share dividend as previously announced, beginning in 2014 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 $0.50 per share for an annual dividend of $2.00 per share in 2014, which represents an 8% increase over the 2013 dividend. all future dividends remain subject to the discretion of the company’s board of trustees. first quarter 2014 earnings and conference call equity residential expects to announce first quarter 2014 results on wednesday, april 30, 2014 and host a conference call to discuss those results at 10:00 a.m. ct on thursday, may 1, 2014. 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 390 properties consisting of 109,855 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 5, 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. shares shares 100,000,000 shares authorized; 1,000,000 shares issued and outstanding as of december 31, 2013 and december 31, 2012 1,000,000,000 shares authorized; 360,479,260 shares issued and outstanding as of december 31, 2013 and 325,054,654 shares issued and outstanding as of december 31, 2012 properties $ (22,000 average average % of actual 2013 operating expenses $ 4,393,341 % of total balance (1)(2) these selected covenants relate to erp operating limited partnership's ("erpop") outstanding unsecured public debt. equity residential is the general partner of erpop. ffo purposes: held forand/or underdevelopment (4) held forand/or underdevelopment (5) completed, notstabilized (6) operating 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 - wholly owned: projects under development - partially owned: completed not stabilized - wholly owned (5): total capital cost (1) q4 2013 noi 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 - unconsolidated: completed not stabilized - unconsolidated (4): repairs and maintenance expenses 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) q1 2014 2014 2014 same store assumptions 2014 transaction assumptions 2014 debt assumptions 2014 other guidance assumptions expected q4 2013 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) definitions and footnotes for pages 7, 26 and 27
