Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2014. All per share results are reported as available to common shares on a diluted basis.

“As expected, fundamentals across our core markets, with the exception of Washington DC, remain favorable with continued strong demand and manageable new supply,” said David J. Neithercut, Equity Residential’s President and CEO. “As we approach our primary leasing season with occupancy of 95.9% and renewal rates achieved to date of 5.3%, we are well positioned for yet another year of strong revenue growth.”

First Quarter 2014

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the first quarter of 2014 was $0.71 per share compared to $0.22 per share in the first quarter of 2013. The difference is due primarily to the expenses and prepayment penalties the company incurred in the first quarter of 2013 in connection with the Archstone acquisition, along with the items described below.

For the first quarter of 2014, the company reported Normalized FFO of $0.71 per share compared to $0.64 per share in the same period of 2013. The following items impacted Normalized FFO per share in the quarter:

  • the positive impact of approximately $0.04 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
  • the positive impact of approximately $0.02 per share from lower total interest expense.

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. A reconciliation and definition of Normalized FFO are provided on pages 23 and 25 of this release and the company has included guidance for Normalized FFO on page 24 of this release.

For the first quarter of 2014, the company reported earnings of $0.22 per share compared to $3.01 per share in the first quarter of 2013. The difference is due primarily to approximately $1.2 billion in higher gains on property sales in the first quarter of 2013, partially offset by higher depreciation expense in the first quarter of 2013 as a result of the Archstone acquisition as well as the expenses and prepayment penalties incurred in connection with the Archstone acquisition.

Same Store Results

The company’s same store results include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the company.

On a same store first quarter to first quarter comparison, which includes 100,984 apartment units, revenues increased 4.0%, expenses increased 3.2% and NOI increased 4.4%.

Investment Activity

During the first quarter of 2014, the company acquired a 430-unit apartment property in Los Angeles for a purchase price of approximately $143.0 million and a capitalization (cap) rate of 4.9%. Also during the quarter, the company acquired additional development rights at one of its existing land sites in Manhattan for approximately $5.5 million.

The company sold no properties or land parcels during the first quarter of 2014.

During the first quarter of 2014, the company completed construction on five development projects, consisting of 1,290 apartment units, at a total development cost of approximately $368.3 million. Two of these properties are located in Seattle and one each in Southern California, South Florida and Washington, DC.

Also during the quarter, the company started construction on three development projects, which will consist of a total of 1,145 apartment units, at a total development cost of approximately $614.3 million. Two of these properties are located in San Francisco and one in Southern California.

Second Quarter 2014 Guidance

The company has established a Normalized FFO guidance range of $0.74 to $0.78 per share for the second quarter of 2014. The difference between the company’s first quarter Normalized FFO of $0.71 per share and the midpoint of the second quarter guidance range of $0.76 per share is due primarily to:

  • the positive impact of approximately $0.05 per share from higher NOI from same store properties and properties in lease up;
  • the positive impact of approximately $0.01 per share from other items including lower general and administrative expenses; and
  • the negative impact of approximately $0.01 per share from higher total interest expense.

Second Quarter 2014 Earnings and Conference Call

Equity Residential expects to announce second quarter 2014 results on Tuesday, July 29, 2014 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, July 30, 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 396 properties consisting of 111,537 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, Thursday, May 1, 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.

 
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
   
Quarter Ended March 31,
2014 2013
REVENUES
Rental income $ 630,725 $ 502,562
Fee and asset management   2,717     2,160  
Total revenues   633,442     504,722  
 
EXPENSES
Property and maintenance 125,573 98,529
Real estate taxes and insurance 82,094 65,095
Property management 22,118 22,489
Fee and asset management 1,662 1,646
Depreciation 185,167 196,222
General and administrative   17,576     16,495  
Total expenses   434,190     400,476  
 
Operating income 199,252 104,246
 
Interest and other income 605 320
Other expenses (657 ) (21,719 )
Interest:
Expense incurred, net (113,049 ) (194,467 )
Amortization of deferred financing costs   (2,792 )   (6,948 )
Income (loss) before income and other taxes, (loss) from investments in unconsolidated
entities, net (loss) on sales of land parcels and discontinued operations 83,359 (118,568 )
Income and other tax (expense) benefit (222 ) (405 )
(Loss) from investments in unconsolidated entities (1,409 ) (46,366 )
Net (loss) on sales of land parcels   (30 )    
Income (loss) from continuing operations 81,698 (165,339 )
Discontinued operations, net   1,034     1,226,373  
Net income 82,732 1,061,034
Net (income) attributable to Noncontrolling Interests:
Operating Partnership (3,093 ) (43,323 )
Partially Owned Properties   (504 )   (25 )
Net income attributable to controlling interests 79,135 1,017,686
Preferred distributions   (1,036 )   (1,036 )
Net income available to Common Shares $ 78,099   $ 1,016,650  
 
Earnings per share – basic:
Income (loss) from continuing operations available to Common Shares $ 0.21   $ (0.47 )
Net income available to Common Shares $ 0.22   $ 3.01  
Weighted average Common Shares outstanding   360,470     337,532  
 
Earnings per share – diluted:
Income (loss) from continuing operations available to Common Shares $ 0.21   $ (0.47 )
Net income available to Common Shares $ 0.22   $ 3.01  
Weighted average Common Shares outstanding   376,384     337,532  
 
Distributions declared per Common Share outstanding $ 0.50   $ 0.40  
 
Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
     
Quarter Ended March 31,
2014 2013
Net income $ 82,732 $ 1,061,034
Net (income) attributable to Noncontrolling Interests –
Partially Owned Properties (504 ) (25 )
Preferred distributions   (1,036 )   (1,036 )
Net income available to Common Shares and Units 81,192 1,059,973
 
Adjustments:
Depreciation 185,167 196,222
Depreciation – Non-real estate additions (1,188 ) (1,216 )
Depreciation – Partially Owned Properties (1,068 ) (1,275 )
Depreciation – Unconsolidated Properties 1,603 260
Discontinued operations:
Depreciation 23,816
Net (gain) on sales of discontinued operations (71 ) (1,198,922 )
Gain on sale of Equity Corporate Housing (ECH)       250  
FFO available to Common Shares and Units (1) (3) (4) 265,635 79,108
 
Adjustments (see page 23 for additional detail):
Asset impairment and valuation allowances
Property acquisition costs and write-off of pursuit costs 474 67,668
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts 79,643
(Gains) losses on sales of non-operating assets, net of income and other tax expense
(benefit) 9 (250 )
Other miscellaneous non-comparable items   (463 )    
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 265,655   $ 226,169  
 
FFO (1) (3) $ 266,671 $ 80,144
Preferred distributions   (1,036 )   (1,036 )
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 265,635   $ 79,108  
FFO per share and Unit - basic $ 0.71   $ 0.23  
FFO per share and Unit - diluted $ 0.71   $ 0.22  
 
Normalized FFO (2) (3) $ 266,691 $ 227,205
Preferred distributions   (1,036 )   (1,036 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 265,655   $ 226,169  
Normalized FFO per share and Unit - basic $ 0.71   $ 0.64  
Normalized FFO per share and Unit - diluted $ 0.71   $ 0.64  
 
Weighted average Common Shares and Units outstanding - basic   374,201     351,255  
Weighted average Common Shares and Units outstanding - diluted   376,384     353,656  
 
Note:   See page 23 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 25 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
 
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
   
March 31, December 31,
2014 2013
ASSETS
Investment in real estate
Land $ 6,281,124 $ 6,192,512
Depreciable property 19,623,472 19,226,047
Projects under development 865,177 988,867
Land held for development   295,357     393,522  
Investment in real estate 27,065,130 26,800,948
Accumulated depreciation   (4,992,877 )   (4,807,709 )
Investment in real estate, net 22,072,253 21,993,239
Cash and cash equivalents 37,209 53,534
Investments in unconsolidated entities 205,068 178,526
Deposits – restricted 91,081 103,567
Escrow deposits – mortgage 43,995 42,636
Deferred financing costs, net 55,754 58,486
Other assets   384,271     404,557  
Total assets $ 22,889,631   $ 22,834,545  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 5,167,626 $ 5,174,166
Notes, net 5,477,656 5,477,088
Lines of credit 298,000 115,000
Accounts payable and accrued expenses 161,838 118,791
Accrued interest payable 78,140 78,309
Other liabilities 321,043 347,748
Security deposits 72,735 71,592
Distributions payable   187,759     243,511  
Total liabilities   11,764,797     11,626,205  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   405,276     363,144  
Equity:
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 1,000,000 shares issued and
outstanding as of March 31, 2014 and December 31, 2013 50,000 50,000
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 361,148,189 shares issued and
outstanding as of March 31, 2014 and 360,479,260 shares
issued and outstanding as of December 31, 2013 3,611 3,605
Paid in capital 8,541,046 8,561,500
Retained earnings 1,944,798 2,047,258
Accumulated other comprehensive (loss)   (162,894 )   (155,162 )
Total shareholders’ equity 10,376,561 10,507,201
Noncontrolling Interests:
Operating Partnership 215,339 211,412
Partially Owned Properties   127,658     126,583  
Total Noncontrolling Interests   342,997     337,995  
Total equity   10,719,558     10,845,196  
Total liabilities and equity $ 22,889,631   $ 22,834,545  
 
Equity Residential
Portfolio Summary
As of March 31, 2014
       
% of Average
Apartment Stabilized Rental
Markets/Metro Areas Properties Units NOI (1) Rate (2)
 
Core:
Washington DC 57 18,652 18.6% $ 2,222
New York 38 10,330 16.7% 3,771
San Francisco 51 13,208 13.0% 2,281
Los Angeles 59 12,670 12.1% 2,125
Boston 34 7,816 10.1% 2,806
South Florida 36 11,731 7.4% 1,586
Seattle 40 8,116 6.7% 1,833
Denver 19 6,935 4.4% 1,352
San Diego 13 3,505 3.1% 1,938
Orange County, CA 11 3,490 2.9%   1,738
Subtotal – Core 358 96,453 95.0% 2,231
 
Non-Core:
Inland Empire, CA 10 3,081 2.1% 1,530
Orlando 10 3,383 1.7% 1,143
All Other Markets 16 3,561 1.2%   1,152
Subtotal – Non-Core 36 10,025 5.0%   1,265
Total 394 106,478 100.0%   2,138
 
Military Housing 2 5,059  
 
Grand Total 396 111,537 100.0% $ 2,138
 
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
 
(1) % of Stabilized NOI includes budgeted 2014 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the last month of the period presented.
 
Equity Residential
           
Portfolio as of March 31, 2014
 
Apartment
Properties Units
Wholly Owned Properties 367 99,936
Master-Leased Properties - Consolidated 3 853
Partially Owned Properties - Consolidated 20 4,020
Partially Owned Properties - Unconsolidated 4 1,669
Military Housing 2     5,059
 
396     111,537
 
                       
 
Portfolio Rollforward Q1 2014
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
12/31/2013 390 109,855
Acquisitions:
Rental Properties - Consolidated 1 430 $ 143,000 4.9 %
Land Parcel - Consolidated $ 5,500
Completed Developments - Consolidated 5 1,290
Configuration Changes (38 )
 
3/31/2014 396 111,537  
   
Equity Residential
           
First Quarter 2014 vs. First Quarter 2013
Same Store Results/Statistics for 100,984 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

Average

Rental

Description Revenues Expenses NOI (1)

Rate (2)

Occupancy Turnover
 
Q1 2014 $ 613,878 $ 218,239 $ 395,639 $ 2,133 95.1 % 11.3 %
Q1 2013 $ 590,452   $ 211,485   $ 378,967   $ 2,053   95.0 % 12.1 %
 
Change $ 23,426   $ 6,754   $ 16,672   $ 80   0.1 % (0.8 %)
 
Change 4.0 % 3.2 % 4.4 % 3.9 %
 
                         
 
 
First Quarter 2014 vs. Fourth Quarter 2013
Same Store Results/Statistics for 101,494 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

Average

Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q1 2014 $ 616,874 $ 219,200 $ 397,674 $ 2,132 95.1 % 11.3 %
Q4 2013 $ 613,776   $ 202,649   $ 411,127   $ 2,116   95.3 % 12.2 %
 
Change $ 3,098   $ 16,551   $ (13,453 ) $ 16   (0.2 %) (0.9 %)
 
Change 0.5 % 8.2 % (3.3 %) 0.8 %
 
Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
 
(1) The Company's primary financial measure for evaluating each of its apartment communities is net operating income ("NOI"). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company's apartment communities. See page 25 for reconciliations from operating income.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
Equity Residential
First Quarter 2014 vs. First Quarter 2013
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Year's Quarter

Q1 2014

Q1 2014

Q1 2014

% of

Average

Weighted

Average

Apartment

Actual

Rental

Average

Rental

Markets/Metro Areas

Units

NOI

Rate (1)

Occupancy %

Revenues Expenses NOI

Rate (1)

Occupancy
 
Core:
Washington DC 17,553 18.5 % $ 2,219 94.5 % (0.5 %) 4.2 % (2.8 %) (0.3 %) (0.3 %)
New York 10,330 16.4 % 3,762 95.6 % 3.0 % 7.2 % 0.1 % 2.8 % 0.2 %
San Francisco 12,764 13.8 % 2,238 94.8 % 8.4 % (5.3 %) 16.7 % 8.0 % 0.3 %
Los Angeles 11,139 10.9 % 2,076 95.2 % 4.6 % (1.0 %) 7.9 % 4.6 % (0.1 %)
Boston (2) 7,722 10.1 % 2,812 95.1 % 4.8 % 9.6 % 2.3 % 3.8 % 0.9 %
South Florida 10,834 7.6 % 1,564 95.3 % 4.8 % 3.1 % 5.8 % 4.5 % 0.1 %
Seattle 7,411 6.3 % 1,786 95.0 % 6.7 % 4.3 % 7.9 % 6.4 % 0.2 %
Denver 6,935 4.8 % 1,344 95.2 % 6.6 % 3.2 % 7.9 % 7.1 % (0.5 %)
San Diego 3,505 3.3 % 1,926 95.0 % 4.4 % 2.5 % 5.4 % 3.8 % 0.6 %
Orange County, CA 3,490 3.1 %   1,744 95.1 % 4.5 % (2.8 %) 7.8 % 4.8 % (0.3 %)
Subtotal – Core 91,683 94.8 % 2,221 95.0 % 4.0 % 3.1 % 4.5 % 3.9 % 0.1 %
 
Non-Core:
Inland Empire, CA 3,081 2.3 % 1,536 95.5 % 4.5 % 5.8 % 3.8 % 3.4 % 0.9 %
Orlando 3,383 1.8 % 1,141 94.8 % 1.8 % 0.9 % 2.3 % 3.3 % (1.4 %)
All Other Markets 2,837 1.1 %   1,124 96.0 % 2.8 % 8.3 % (2.7 %) 1.5 % 1.2 %
Subtotal – Non-Core 9,301 5.2 % 1,267 95.4 % 3.1 % 5.1 % 1.9 % 2.9 % 0.2 %
                 
Total 100,984 100.0 % $ 2,133 95.1 % 4.0 % 3.2 % 4.4 % 3.9 % 0.1 %
 
 
Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
(2) Quarter over quarter same store revenues in Boston were positively impacted by non-residential related income. Residential-only same store revenues increased in Boston 3.6% quarter over quarter.
 
Equity Residential
First Quarter 2014 vs. Fourth Quarter 2013
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Quarter
Q1 2014 Q1 2014 Q1 2014
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets/Metro Areas Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
Core:
Washington DC 17,741 18.6 % $ 2,223 94.5 % (0.7 %) 12.7 % (6.4 %) (0.2 %) (0.5 %)
New York 10,330 16.3 % 3,762 95.6 % 0.6 % 14.4 % (7.3 %) 1.1 % (0.4 %)
San Francisco 12,764 13.7 % 2,238 94.8 % 1.2 % 0.6 % 1.5 % 1.8 % (0.6 %)
Los Angeles 11,139 10.8 % 2,076 95.2 % 1.0 % 2.5 % 0.2 % 0.9 % (0.1 %)
Boston (2) 7,722 10.0 % 2,812 95.1 % (0.5 %) 17.4 % (8.3 %) 0.2 % (0.7 %)
South Florida 10,834 7.6 % 1,564 95.3 % 1.9 % 2.9 % 1.4 % 1.9 % 0.0 %
Seattle 7,733 6.6 % 1,785 95.0 % 1.3 % 5.9 % (0.9 %) 1.1 % 0.3 %
Denver 6,935 4.8 % 1,344 95.2 % 1.1 % (0.3 %) 1.6 % 1.1 % (0.1 %)
San Diego 3,505 3.3 % 1,926 95.0 % (0.3 %) 0.2 % (0.5 %) 0.5 % (0.7 %)
Orange County, CA 3,490 3.1 %   1,744 95.1 % 0.2 % 2.6 % (0.7 %) 0.9 % (0.7 %)
Subtotal – Core 92,193 94.8 % 2,220 95.0 % 0.5 % 8.1 % (3.2 %) 0.8 % (0.3 %)
 
Non-Core:
Inland Empire, CA 3,081 2.3 % 1,536 95.5 % 0.9 % (0.4 %) 1.5 % 1.3 % (0.3 %)
Orlando 3,383 1.8 % 1,141 94.8 % 0.3 % 6.9 % (3.2 %) 0.3 % 0.0 %
All Other Markets 2,837 1.1 %   1,124 96.0 % 0.9 % 22.8 % (15.5 %) 0.1 % 0.8 %
Subtotal – Non-Core 9,301 5.2 % 1,267 95.4 % 0.7 % 9.4 % (4.2 %) 0.6 % 0.1 %
                 
Total 101,494 100.0 % $ 2,132 95.1 % 0.5 % 8.2 % (3.3 %) 0.8 % (0.2 %)
 
 
Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
(2) Sequential same store revenues in Boston were positively impacted by non-residential related income. Residential-only same store revenues decreased in Boston 1.2% sequentially.
 
Equity Residential
         
 
First Quarter 2014 vs. First Quarter 2013
Same Store Operating Expenses for 100,984 Same Store Apartment Units
$ in thousands
 
 
% of Actual
Q1 2014
Actual Actual $ % Operating
Q1 2014 Q1 2013 Change Change Expenses
 
Real estate taxes $ 72,828 $ 68,603 $ 4,225 6.2 % 33.4 %
On-site payroll (1) 43,674 45,499 (1,825 ) (4.0 %) 20.0 %
Utilities (2) 38,262 33,414 4,848 14.5 % 17.5 %
Repairs and maintenance (3) 25,940 25,217 723 2.9 % 11.9 %
Property management costs (4) 19,030 19,485 (455 ) (2.3 %) 8.7 %
Insurance 6,246 6,321 (75 ) (1.2 %) 2.9 %
Leasing and advertising 2,568 3,030 (462 ) (15.2 %) 1.2 %
Other on-site operating expenses (5)   9,691   9,916   (225 ) (2.3 %) 4.4 %
 
Same store operating expenses $ 218,239 $ 211,485 $ 6,754   3.2 % 100.0 %
 
Note: Same store operating results include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
 
(1) On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
 
(2) Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income.
 
(3) Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
(4) Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
 
(5) Other on-site operating expenses - Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
 
Equity Residential
           
Debt Summary as of March 31, 2014
(Amounts in thousands)
 

Weighted

Weighted

Average

Average

Maturities

Amounts (1) % of Total

Rates (1)

(years)

 
Secured $ 5,167,626 47.2 % 4.22 % 8.2
Unsecured   5,775,656     52.8 % 4.70 % 4.3  
 
Total $ 10,943,282     100.0 % 4.47 % 6.1  
 
Fixed Rate Debt:

Secured – Conventional

$ 4,386,084 40.1 % 4.84 % 6.7
Unsecured – Public/Private   4,727,656     43.2 % 5.49 % 4.8  
 
Fixed Rate Debt   9,113,740     83.3 % 5.18 % 5.7  
 
Floating Rate Debt:
Secured – Conventional 56,868 0.5 % 2.21 % 0.5
Secured – Tax Exempt 724,674 6.6 % 0.63 % 17.0
Unsecured – Public/Private 750,000 6.9 % 1.33 % 0.8
Unsecured – Revolving Credit Facility   298,000     2.7 % 0.98 % 4.0  
 
Floating Rate Debt   1,829,542     16.7 % 1.02 % 7.9  
 
Total $ 10,943,282     100.0 % 4.47 % 6.1  
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the quarter ended March 31, 2014.
 
Note: The Company capitalized interest of approximately $12.8 million and $8.4 million during the quarters ended March 31, 2014 and 2013, respectively.
 
                           
 
Debt Maturity Schedule as of March 31, 2014
(Amounts in thousands)
 

Weighted

Weighted

Average Rates

Average

Fixed

Floating

on Fixed

Rates on

Year

Rate (1)

Rate (1)

Total % of Total

Rate Debt (1)

Total Debt (1)

 
2014 $ 509,160 $ 48,883 $ 558,043 5.1 % 5.25 % 5.02 %
2015 420,448 750,000 (2) 1,170,448 10.7 % 6.28 % 3.11 %
2016 1,193,250 1,193,250 10.9 % 5.34 % 5.34 %
2017 1,346,734 456 1,347,190 12.3 % 6.16 % 6.16 %
2018 84,359 395,659 (3) 480,018 4.4 % 5.61 % 1.75 %
2019 806,644 20,766 827,410 7.6 % 5.48 % 5.35 %
2020 1,678,601 809 1,679,410 15.3 % 5.49 % 5.49 %
2021 1,195,242 856 1,196,098 10.9 % 4.63 % 4.64 %
2022 228,933 905 229,838 2.1 % 3.17 % 3.18 %
2023 1,303,079 956 1,304,035 11.9 % 3.75 % 3.75 %
2024+ 297,925 674,988 972,913 8.9 % 6.25 % 2.23 %
Premium/(Discount)   49,365   (64,736 )   (15,371 ) (0.1 %) N/A   N/A  
 
Total $ 9,113,740 $ 1,829,542   $ 10,943,282   100.0 % 5.20 % 4.46 %
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of March 31, 2014.
 
(2) Includes the Company's $750.0 million unsecured term loan facility that matures on January 11, 2015 and is subject to a one-year extension option exercisable by the Company.
 
(3) Includes $298.0 million outstanding on the Company's unsecured revolving credit facility. As of March 31, 2014, there was approximately $2.17 billion available on this facility.
 
Equity Residential
Unsecured Debt Summary as of March 31, 2014
(Amounts in thousands)
             

 

Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
 
Fixed Rate Notes:
5.250% 09/15/14 $ 500,000 $ (28) $ 499,972
6.584% 04/13/15 300,000 (110) 299,890
5.125% 03/15/16 500,000 (103) 499,897
5.375% 08/01/16 400,000 (433) 399,567
5.750% 06/15/17 650,000 (1,653) 648,347
7.125% 10/15/17 150,000 (230) 149,770
4.750% 07/15/20 600,000 (2,861) 597,139
4.625% 12/15/21 1,000,000 (2,921) 997,079
3.000% 04/15/23 500,000 (4,005) 495,995
7.570% 08/15/26   140,000     140,000
 
  4,740,000   (12,344)   4,727,656
Floating Rate Notes:
Term Loan Facility LIBOR+1.20% 01/11/15 (1)(2)   750,000     750,000
 
  750,000     750,000
 
Revolving Credit Facility: LIBOR+1.05% 04/01/18 (1)(3)   298,000     298,000
 
Total Unsecured Debt $ 5,788,000 $ (12,344) $ 5,775,656
 
(1) Facilities are private. All other unsecured debt is public.
 
(2) Represents the Company's $750.0 million unsecured term loan facility. The maturity date of January 11, 2015 is subject to a one-year extension option exercisable by the Company. The interest rate on advances under the term loan facility will generally be LIBOR plus a spread (currently 1.20%), which is dependent on the credit rating of the Company's long-term debt.
 
(3) Represents the Company's $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the new credit facility will generally be LIBOR plus a spread (currently 1.05%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of March 31, 2014, there was approximately $2.17 billion available on the Company's unsecured revolving credit facility.
 
Equity Residential
       
Selected Unsecured Public Debt Covenants
 

March 31,

December 31,

2014

2013

 
Total Debt to Adjusted Total Assets (not to exceed 60%) 40.3 % 40.0 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 19.0 % 19.2 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 3.12 3.07
 
Total Unsecured Assets to Unsecured Debt 322.5 % 326.9 %
(must be at least 150%)
 
These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt. Equity Residential is the general partner of ERPOP.
 
Equity Residential
               
Capital Structure as of March 31, 2014
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 5,167,626 47.2%
Unsecured Debt   5,775,656 52.8%
 
Total Debt 10,943,282 100.0% 33.4%
 
Common Shares (includes Restricted Shares) 361,148,189 96.2%
Units (includes OP Units and LTIP Units)   14,375,319   3.8%
 
Total Shares and Units 375,523,508 100.0%
Common Share Price at March 31, 2014 $ 57.99
21,776,608 99.8%
Perpetual Preferred Equity (see below)   50,000 0.2%
 
Total Equity 21,826,608 100.0% 66.6%
 
Total Market Capitalization $ 32,769,890 100.0%
 
                               
 
Perpetual Preferred Equity as of March 31, 2014
(Amounts in thousands except for share and per share amounts)
 

Annual

Annual

Redemption

Outstanding

Liquidation

Dividend

Dividend

Series

Date

Shares

Value

Per Share

Amount

 
Preferred Shares:
8.29% Series K 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145
 
Total Perpetual Preferred Equity 1,000,000 $ 50,000 $ 4,145
 
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
   
Q1 2014 Q1 2013
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 360,470,366 337,532,330
Shares issuable from assumed conversion/vesting of (1):
- OP Units 13,730,577
- long-term compensation shares/units 2,183,239
 
Total Common Shares and Units - diluted (1) 376,384,182 337,532,330
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 360,470,366 337,532,330
OP Units - basic 13,730,577 13,722,414
 
Total Common Shares and OP Units - basic 374,200,943 351,254,744
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 2,183,239 2,400,834
 
Total Common Shares and Units - diluted 376,384,182 353,655,578
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 361,148,189 360,063,675
Units (includes OP Units and LTIP Units) 14,375,319 14,226,725
 
Total Shares and Units 375,523,508 374,290,400
 
(1) Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a loss from continuing operations during the quarter ended March 31, 2013.
 
Equity Residential
Partially Owned Entities as of March 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
                 
Consolidated Unconsolidated
Development Projects Development Projects

Held for

Held for

 

 

and/or Under

Completed, Not

and/or Under

Completed, Not

Development (4)

Stabilized (5)

Operating

Total

Development (4)

Stabilized (5)

Operating

Total

 
Total projects (1)       1   19     20         3     1     4  
 
Total apartment units (1)       268   3,752     4,020         1,333     336     1,669  
 
Operating information for the quarter ended 3/31/14 (at 100%):
Operating revenue $ $ 468 $ 21,308 $ 21,776 $ $ 4,528 $ 1,353 $ 5,881
Operating expenses   77     204   6,453     6,734     44     1,917     559     2,520  
Net operating (loss) income (77 ) 264 14,855 15,042 (44 ) 2,611 794 3,361
Depreciation 5,363 5,363 2,782 447 3,229
General and administrative/other   (9 )   116   12     119         12     43     55  
Operating (loss) income (68 ) 148 9,480 9,560 (44 ) (183 ) 304 77
Interest and other income 3 3
Other expenses (42 ) (7 ) (49 )
Interest:
Expense incurred, net (3,887 ) (3,887 ) (1,992 ) (279 ) (2,271 )
Amortization of deferred financing costs         (88 )   (88 )       (3 )       (3 )
 
(Loss) income before income and other taxes and (loss) from
investments in unconsolidated entities (110 ) 148 5,501 5,539 (44 ) (2,178 ) 25 (2,197 )
Income and other tax (expense) benefit (36 ) (36 )
(Loss) from investments in unconsolidated entities (419 ) (419 )
               
Net (loss) income $ (110 ) $ 148 $ 5,046   $ 5,084   $ (44 ) $ (2,178 ) $ 25   $ (2,197 )
 
Debt - Secured (2):
EQR Ownership (3) $ $ $ 281,974 $ 281,974 $ 808 $ 56,716 $ 6,082 $ 63,606
Noncontrolling Ownership         78,243     78,243     15,346     119,516     24,328     159,190  
 
Total (at 100%) $   $ $ 360,217   $ 360,217   $ 16,154   $ 176,232   $ 30,410   $ 222,796  
 
(1) Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
 
(2) All debt is non-recourse to the Company with the exception of 50% of the current $16.2 million outstanding debt balance on one unconsolidated development project.
 
(3) Represents the Company's current equity ownership interest.
 
(4) See Projects Under Development - Partially Owned on page 19 for consolidated projects and Projects Under Development - Unconsolidated on page 20 for further information.
 
(5) Projects included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing. See Projects Completed, Not Stabilized - Partially Owned on page 19 for consolidated projects and Projects Completed, Not Stabilized - Unconsolidated on page 20 for further information.
 
Note: The above table excludes the Company's interests in unconsolidated joint ventures entered into with AvalonBay ("AVB") in connection with the Archstone transaction. These ventures own certain non-core Archstone assets that are held for sale and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests have an aggregate liquidation value of $79.3 million at March 31, 2014. The ventures are owned 60% by the Company and 40% by AVB.
 
Equity Residential
Consolidated Development and Lease-Up Projects as of March 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
                       
Total Book
No. of Total Total Value Not Estimated Estimated
Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 

Projects Under Development - Wholly Owned:

Residences at Westgate II (formerly Westgate III) Pasadena, CA 88 $ 54,037 $ 33,514 $ 33,514 $ 44% Q3 2014 Q1 2015
Residences at Westgate I (formerly Westgate II) Pasadena, CA 252 125,293 108,583 108,583 81% 9% 6% Q3 2014 Q2 2015
170 Amsterdam (2) New York, NY 236 110,892 58,457 58,457 50% Q1 2015 Q1 2016
Azure (at Mission Bay) San Francisco, CA 273 189,090 80,257 80,257 35% Q3 2015 Q4 2016
West Seattle Seattle, WA 206 67,112 20,745 20,745 8% Q4 2015 Q3 2016
Tallman Seattle, WA 303 84,277 29,241 29,241 14% Q4 2015 Q2 2017
Village at Howard Hughes Los Angeles, CA 545 193,231 56,006 56,006 2% Q2 2016 Q2 2017
Millikan Irvine, CA 344 102,331 17,490 17,490 1% Q2 2016 Q3 2017
Potrero San Francisco, CA 453 224,474 46,094 46,094 1% Q2 2016 Q3 2017
Tasman San Jose, CA 554 214,923 70,287 70,287 19% Q2 2016 Q2 2018
Rincon Hill San Francisco, CA 348   287,454   54,885   54,885   1% Q3 2016 Q1 2018
Projects Under Development - Wholly Owned 3,602 1,653,114 575,559 575,559
 

Projects Under Development - Partially Owned:

400 Park Avenue South (3) New York, NY 269   251,961   186,731   186,731   70% Q2 2015 Q1 2016
Projects Under Development - Partially Owned 269 251,961 186,731 186,731
         
Projects Under Development 3,871   1,905,075   762,290   762,290  
 

Completed Not Stabilized - Wholly Owned (4):

Gaithersburg Station (5) Gaithersburg, MD 389 93,000 92,044 89,269 96% 95% Completed Q2 2014
Breakwater at Marina Del Rey (2) (6) Marina Del Rey, CA 224 87,949 87,595 27,000 91% 89% Completed Q3 2014
Oasis at Delray Beach II Delray Beach, FL 128 22,239 21,960 77% 70% Completed Q3 2014
Reserve at Town Center III Mill Creek, WA 95 21,330 20,874 39% 26% Completed Q4 2014
1111 Belle Pre (formerly The Madison) Alexandria, VA 360 114,072 108,438 48% 39% Completed Q2 2015
Jia (formerly Chinatown Gateway) Los Angeles, CA 280 92,920 88,403 17% 13% Completed Q3 2015
Urbana (formerly Market Street Landing) Seattle, WA 287   90,024   82,807     18% 13% Completed Q3 2015
Projects Completed Not Stabilized - Wholly Owned 1,763 521,534 502,121 116,269
 

Completed Not Stabilized - Partially Owned (4):

Park Aire (formerly Enclave at Wellington) (7) Wellington, FL 268   50,000   48,319     56% 51% Completed Q1 2015
Projects Completed Not Stabilized - Partially Owned 268 50,000 48,319
         
Projects Completed Not Stabilized 2,031   571,534   550,440     116,269
 
Total Consolidated Projects 5,902 $ 2,476,609 $ 1,312,730 $ 762,290 $ 116,269
 
Land Held for Development N/A   N/A $ 295,357 $ 295,357 $
 

Total Capital

Q1 2014
NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Cost (1)

NOI

Projects Under Development $ 1,905,075 $ (60)
Completed Not Stabilized 571,534 2,109
Completed and Stabilized During the Quarter    
Total Consolidated Development NOI Contribution $

2,476,609

$

2,049

 
(1) Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
 
(2) 170 Amsterdam and Breakwater at Marina Del Rey – The land under these developments are subject to long term ground leases.
 
(3) 400 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 $102.9 million for their allocated share of the project.
 
(4) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
 
(5) Gaithersburg Station – This project has a non-recourse loan with a current outstanding balance of $89.3 million, bears interest at 5.24% and matures April 1, 2053.
 
(6) Breakwater at Marina Del Rey – The Company has substantially completed renovations of this property. The non-recourse loan has a current outstanding balance of $27.0 million, bears interest at LIBOR plus 1.75% and matures September 1, 2014.
 
(7) Park Aire – The Company has a 95.0% ownership interest in this project.
 
Equity Residential
Unconsolidated Development and Lease-Up Projects as of March 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
                         
Total Book
No. of Total Total Value Not Estimated Estimated
Percentage Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Ownership Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 

Projects Under Development - Unconsolidated:

1333 Powell (formerly Parkside at Emeryville) (2) Emeryville, CA 5.0% 176 $ 75,000 $ 49,332 $ 49,332 $ 16,154 58% Q4 2014 Q4 2015
Projects Under Development - Unconsolidated 176 75,000 49,332 49,332 16,154
         
Projects Under Development 176   75,000   49,332   49,332   16,154
 

Completed Not Stabilized - Unconsolidated (3):

San Norterra (4) Phoenix, AZ 85.0% 388 53,250 52,643 33,030 100% 97% Completed Q2 2014
Nexus Sawgrass (formerly Sunrise Village) (5) Sunrise, FL 20.0% 501 79,000 78,506 48,189 84% 78% Completed Q3 2014
Domain (5) San Jose, CA 20.0% 444   154,570   154,114     95,013 64% 59% Completed Q3 2015
Projects Completed Not Stabilized - Unconsolidated 1,333 286,820 285,263 176,232
         
Projects Completed Not Stabilized 1,333   286,820   285,263     176,232
 
Total Unconsolidated Projects 1,509 $ 361,820 $ 334,595 $ 49,332 $ 192,386
 
(1) Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
 
(2) 1333 Powell – Construction of this project is being partially funded with a construction loan. 1333 Powell has a maximum debt commitment of $39.5 million, the loan bears interest at LIBOR plus 2.25% and matures August 14, 2015. The Company has given a repayment guaranty on the construction loan of 50% of the outstanding balance, up to a maximum of $19.7 million, and has given certain construction cost overrun guarantees.
 
(3) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
 
(4) San Norterra – Construction of this project was partially funded with a non-recourse construction loan. San Norterra has a maximum debt commitment of $34.8 million, the loan bears interest at LIBOR plus 2.00% and matures January 6, 2015.
 
(5) Nexus Sawgrass and Domain – These development projects are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. Total project costs are approximately $233.6 million and construction was predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company was responsible for constructing the projects and has given certain construction cost overrun guarantees but currently has no further funding obligations. Nexus Sawgrass has a maximum debt commitment of $48.7 million, the loan bears interest at 5.60% and matures January 1, 2021. Domain has a maximum debt commitment of $98.6 million, the loan bears interest at 5.75% and matures January 1, 2022.
 
Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Quarter Ended March 31, 2014
(Amounts in thousands except for apartment unit and per apartment unit amounts)
                                 
 
Repairs and Maintenance Expenses Capital Expenditures to Real Estate Total Expenditures
Total Avg. Per Avg. Per Avg. Per Avg. Per Building Avg. Per Avg. Per Avg. Per
Apartment Apartment Payroll Apartment Apartment Replacements Apartment Improvements Apartment Apartment Grand Apartment
Units (1) Expense (2) Unit (3) Unit Total Unit (4) Unit (5) Unit Total Unit Total Unit
 
Same Store Properties (6) 100,984 $ 25,940 $ 257 $ 21,067 $ 209 $ 47,007 $ 466 $ 14,926 $ 148 $ 16,220 $ 160 $ 31,146 $ 308 (9) $ 78,153 $ 774
 
Non-Same Store Properties (7) 3,825 530 197 308 114 838 311 45 17 999 370 1,044 387 1,882 698
 
Other (8)     143   143   1     1   144
 
Total 104,809 $ 26,470 $ 21,518 $ 47,988 $ 14,972 $ 17,219 $ 32,191 $ 80,179
 
(1) Total Apartment Units - Excludes 1,669 unconsolidated apartment units and 5,059 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company's results.
 
(2) Repairs and Maintenance Expenses - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
(3) Maintenance Payroll - Includes payroll and related expenses for maintenance staff.
 
(4)

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 $7.9 million spent in Q1 2014 on apartment unit renovations/rehabs (primarily kitchens and baths) on 980 same store apartment units (equating to about $8,100 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2014, the Company expects to spend approximately $45.0 million for all unit renovation/rehab costs (primarily on same store properties) at a weighted average cost of $8,500 per apartment unit rehabbed.

 
(5) Building Improvements - Includes roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment.
 
(6) Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2013, less properties subsequently sold. Also includes 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
 
(7) Non-Same Store Properties - Primarily includes all properties acquired during 2013 and 2014, plus any properties in lease-up and not stabilized as of January 1, 2013, but excludes 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company. Per apartment unit amounts are based on a weighted average of 2,698 apartment units.
 
(8) Other - Primarily includes expenditures for properties sold.
 
(9) For 2014, the Company estimates that it will spend approximately $1,700 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,250 per apartment unit excluding apartment unit renovation/rehab costs.
 
Equity Residential
Discontinued Operations
(Amounts in thousands)
   
Quarter Ended
March 31,
2014 2013
 
REVENUES
Rental income $ 1,023   $ 81,782  
 
Total revenues   1,023     81,782  
 
EXPENSES (1)
Property and maintenance 48 20,424
Real estate taxes and insurance 13 8,594
Property management 1
Depreciation 23,816
General and administrative   5     8  
 
Total expenses   66     52,843  
 
Discontinued operating income 957 28,939
 
Interest and other income 35 52
Other expenses (2 )
Interest (2):
Expense incurred, net (1,252 )
Amortization of deferred financing costs (228 )
Income and other tax (expense) benefit   (29 )   (58 )
 
Discontinued operations 963 27,451
Net gain on sales of discontinued operations   71     1,198,922  
 
Discontinued operations, net $ 1,034   $ 1,226,373  
 
(1) Includes expenses paid in the current period for properties sold in prior periods related to the Company's period of ownership.
 
(2) Includes only interest expense specific to secured mortgage notes payable for properties sold.
 
Equity Residential
Normalized FFO Guidance Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
       
Normalized FFO Guidance Reconciliations
 
Normalized
FFO Reconciliations
Guidance Q1 2014
to Actual Q1 2014
Amounts Per Share
Guidance Q1 2014 Normalized FFO - Diluted (2) (3) $ 264,638 $ 0.704
Property NOI 807 0.002
Other   210      
 
Actual Q1 2014 Normalized FFO - Diluted (2) (3) $ 265,655   $ 0.706  
 
               
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
Quarter Ended March 31,
2014 2013 Variance
 
Impairment $   $   $  
Asset impairment and valuation allowances            
 
Archstone direct acquisition costs (other expenses) (A) (30 ) 19,092 (19,122 )
Archstone indirect costs (loss from investments in unconsolidated entities) (B) 3 46,011 (46,008 )
Property acquisition costs (other expenses) 49 32 17
Write-off of pursuit costs (other expenses)   452     2,533     (2,081 )
Property acquisition costs and write-off of pursuit costs   474     67,668     (67,194 )
 
Prepayment premiums/penalties (interest expense) 71,443 (71,443 )
Write-off of unamortized deferred financing costs (interest expense) 4,123 (4,123 )
Write-off of unamortized (premiums)/discounts/OCI (interest expense)       4,077     (4,077 )
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts       79,643     (79,643 )
 
Net loss on sales of land parcels 30 30
(Gain) on sale of Equity Corporate Housing (ECH) (250 ) 250
(Gain) on sale of investment securities   (21 )       (21 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   9     (250 )   259  
 
 
Insurance/litigation settlement proceeds (interest and other income)   (463 )       (463 )
Other miscellaneous non-comparable items   (463 )       (463 )
     
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 20   $ 147,061   $ (147,041 )
 
(A) Archstone direct acquisition costs primarily includes items such as investment banking and legal/accounting fees that were incurred directly by the Company.
 
(B) Archstone indirect costs primarily includes the Company's 60% share of items such as severance and retention obligations, office leases and German operations/sales that were incurred indirectly through the Company's interest in unconsolidated joint ventures with AvalonBay.
 
Note: See page 25 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
 
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. See page 25 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
 
 
 

2014 Normalized FFO Guidance (per share diluted)

 

Q2 2014

2014

 
Expected Normalized FFO (2) (3) $0.74 to $0.78 $3.03 to $3.13
 

2014 Same Store Assumptions

 
Physical occupancy 95.4 %
Revenue change 3.0% to 4.0%
Expense change 2.0% to 3.0%
NOI change 3.50% to 4.75%
 
(Note: The same store guidance above includes 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company. 30 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2014 Transaction Assumptions

 
Consolidated rental acquisitions $500.0 million
Consolidated rental dispositions $500.0 million
Capitalization rate spread 100 basis points
 

2014 Debt Assumptions

 
Weighted average debt outstanding $10.9 billion to $11.2 billion
Weighted average interest rate (reduced for capitalized interest) 4.12 %
Interest expense $449.1 million to $461.4 million
 

2014 Other Guidance Assumptions

 
General and administrative expense $50.0 million to $52.0 million
Interest and other income $0.5 million
Income and other tax expense $1.0 million to $2.0 million
Debt offerings $500.0 million
Equity ATM share offerings No amounts budgeted
Preferred share offerings No amounts budgeted
Weighted average Common Shares and Units - Diluted 376.8 million
 
Equity Residential
Additional Reconciliations, Definitions and Footnotes
(Amounts in thousands except per share data)
(All per share data is diluted)
         
 
The guidance/projections provided below are based on current expectations and are forward-looking.
 
 
Reconciliations of EPS to FFO and Normalized FFO for Pages 5, 23 and 24
 

Expected

Expected

Expected Q1 2014

Q2 2014

2014

Amounts Per Share

Per Share

Per Share

 
Expected Earnings - Diluted (5) $ 93,769 $ 0.249 $0.38 to $0.42 $1.55 to $1.65
Add: Expected depreciation expense 171,127 0.455 0.47 1.95
Less: Expected net gain on sales (5)         (0.12 ) (0.49 )
 
Expected FFO - Diluted (1) (3) 264,896 0.704 0.73 to 0.77 $3.01 to $3.11
 
Asset impairment and valuation allowances
Property acquisition costs and write-off of pursuit costs (258 ) 0.01 0.02
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)

Other miscellaneous non-comparable items            
 
Expected Normalized FFO - Diluted (2) (3) $ 264,638   $ 0.704   $0.74 to $0.78 $3.03 to $3.13
 
Definitions and Footnotes for Pages 5, 23 and 24
 
(1) The National Association of Real Estate Investment Trusts ("NAREIT") defines funds from operations ("FFO") (April 2002 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding gains (or losses) from sales and impairment write-downs of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
 
(2) Normalized funds from operations ("Normalized FFO") begins with FFO and excludes:
• the impact of any expenses relating to non-operating asset impairment and valuation allowances;
• property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs;
• gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
• gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
• other miscellaneous non-comparable items.
 
(3) The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company's real estate between periods or as compared to different companies. The Company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual operating results. FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company's calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.
 
(4) FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with accounting principles generally accepted in the United States. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the "Noncontrolling Interests – Operating Partnership". Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.
 
(5) Earnings represents net income per share calculated in accordance with accounting principles generally accepted in the United States. Expected earnings is calculated on a basis consistent with actual earnings. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual earnings could differ materially from expected earnings.
 
Same Store NOI Reconciliation for Page 9
 
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for the First Quarter 2014 Same Store Properties:
 
Quarter Ended March 31,
2014 2013
 
Operating income $ 199,252 $ 104,246
Adjustments:
Archstone pre-ownership operating results 55,694
Non-same store operating results (5,301 ) 6,824
Fee and asset management revenue (2,717 ) (2,160 )
Fee and asset management expense 1,662 1,646
Depreciation 185,167 196,222
General and administrative   17,576     16,495  
 
Same store NOI $ 395,639   $ 378,967