Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2013. All per share results are reported as available to common shares on a diluted basis.

"The first quarter of 2013 was an historic period for Equity Residential as we completed the $9 billion acquisition and successful integration of nearly 22,000 apartment units across our core markets while selling more than 18,000 non-core apartment units for nearly $3 billion," said David J. Neithercut, Equity Residential's President and CEO. "I am extremely proud of my colleagues across the enterprise for their efforts in successfully completing our portfolio transformation while, at the same time, producing same store revenue growth of 5.1%, which was in line with our operating expectations for the quarter. We currently expect operations for the full year to be consistent with our previous forecast of 4% to 5% same store revenue growth and look forward to the years ahead of owning and operating the finest portfolio of multifamily assets in the best markets for long-term growth."

First Quarter 2013

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the first quarter of 2013 was $0.22 per share compared to $0.60 per share in the first quarter of 2012. The difference is due primarily to the approximately $65.1 million of merger-related expenses and approximately $71.4 million of prepayment penalties the company incurred in the first quarter of 2013 in connection with its acquisition of Archstone. These prepayment penalties had originally been budgeted to occur in the second quarter of 2013.

For the first quarter of 2013, the company reported Normalized FFO of $0.64 per share compared to $0.61 per share in the same period of 2012. The difference is due primarily to:

  • the positive impact of approximately $0.05 per share from higher same store net operating income (NOI);
  • the positive impact of approximately $0.10 per share from the stabilized Archstone properties;
  • the negative impact of approximately $0.04 per share from 2012 and 2013 transaction activity other than Archstone;
  • the negative impact of approximately $0.07 per share from the company's issuance of common shares in connection with its purchase of Archstone; and
  • the negative impact of approximately $0.01 per share from 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 24 and 27 of this release and the company has included guidance for Normalized FFO on page 25 of this release.

For the first quarter of 2013, the company reported earnings of $3.01 per share compared to $0.47 per share in the first quarter of 2012. The difference is due primarily to approximately $1.07 billion in increased gains on property sales between periods as a direct result of the company's portfolio transformation process as well as the items listed above.

Same Store Results

On a same store first quarter to first quarter comparison, which includes 90,350 apartment units, revenues increased 5.1%, expenses increased 2.9% and NOI increased 6.3%.

Archstone

As previously disclosed, on February 27, 2013, the company completed the $9 billion acquisition of approximately 60% of the assets and liabilities of Archstone, which consisted of approximately 22,000 high quality apartment units located primarily in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California as well as fourteen land sites for future development. Six of these sites are located in the company's core markets and will be held for future development. The remaining eight sites will likely be sold. A full list of the names, locations, number of apartment units and average rental rates of the properties acquired are available in the company's Form 8-K filed on February 28, 2013 with the SEC.

Equity Residential paid its portion of the transaction consideration with $2.016 billion in cash and the issuance of 34,468,085 common shares to the seller of the Archstone assets, an affiliate of Lehman Brothers Holdings Inc. In addition, a total of $2.0 billion of Archstone secured mortgage principal was paid off in conjunction with the closing. The company's cash needs at closing were financed through a combination of approximately $575.0 million of cash on hand, approximately $1.6 billion of available borrowings under the company's revolving credit facility, approximately $1.1 billion of proceeds from the disposition of non-core assets and approximately $750.0 million of bank term debt.

In addition, the company has assumed approximately $2.9 billion of consolidated secured debt, including $2.2 billion of Fannie Mae secured debt. A detailed schedule of the debt assumed is available in the company's Form 8-K filed on February 28, 2013 with the SEC.

Acquisitions/Dispositions

The company acquired no operating properties other than the Archstone assets during the first quarter of 2013. Since the end of the first quarter, the company has acquired one property in Redmond, Washington, consisting of 322 apartment units, for a purchase price of $91.5 million and a capitalization (cap) rate of 4.7%.

During the quarter, the company sold 63 consolidated properties, consisting of 18,452 apartment units, for an aggregate sale price of $2.98 billion at a weighted average cap rate of 6.0%. These sales, excluding one Archstone asset that was sold shortly after its acquisition, generated an unlevered internal rate of return (IRR), inclusive of management costs, of 9.4%.

The company sold properties in the following markets:

     

Market

Properties

Units

Sale Price (millions)

Washington, D.C. 10 3,453 $843.9
Phoenix 13 3,592 434.1
Orlando 10 2,574 290.6
Southern California 3 1,056 270.8
Atlanta 7 1,982 241.7
South Florida 4 1,616 240.1
Northern California 3 711 188.5
Denver 5 1,211 180.5
Jacksonville 5 1,637 162.4
Northern New Jersey 2 360 99.2
Seattle 1 260 23.4
63 18,452 $2,975.2
 

Since the end of the first quarter, the company has sold eight properties consisting of 2,786 apartment units for an aggregate sales price of approximately $374.4 million and one land parcel for $29.0 million.

Please see page eight of this release for comparative portfolio summaries for the end of the fourth quarter 2012 and the end of the first quarter 2013.

Financing Activities

On April 10, 2013, the company closed a $500 million unsecured note offering maturing April 15, 2023 with a coupon of 3.0% and an all in effective rate of approximately 4.0% including the effect of fees and the termination of certain interest rate hedges. Proceeds from the issuance are being used to repay outstanding amounts on the company's revolving credit facility, termination costs on interest rate swaps, secured debt and for other corporate purposes.

In order to manage debt maturities and the level of the company's secured indebtedness, the company prepaid in full on March 29, 2013 $543.0 million of secured debt with an interest rate of 5.7%, which would have matured January 1, 2017. In connection with this prepayment, the company incurred, in the first quarter, a penalty of $70.3 million that it previously anticipated incurring in the second quarter of 2013.

Second Quarter 2013 Guidance

The company has established a Normalized FFO guidance range of $0.67 to $0.71 per share for the second quarter of 2013. The difference between the company's first quarter 2013 Normalized FFO of $0.64 per share and the midpoint of the second quarter guidance range of $0.69 per share is primarily due to:

  • the positive impact of approximately $0.04 per share from higher same store NOI;
  • the positive impact of approximately $0.18 per share from the Archstone stabilized properties;
  • the negative impact of approximately $0.11 per share from 2012 and 2013 transaction activity other than Archstone;
  • the negative impact of approximately $0.04 per share from the company's issuance of common shares in connection with its purchase of Archstone; and
  • the negative impact of approximately $0.02 from higher interest expense and other items.

About Equity Residential

Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 416 properties located in 13 states and the District of Columbia, consisting of 118,778 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, May 1, at 11:00 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,
2013 2012
REVENUES
Rental income $ 537,002 $ 444,384
Fee and asset management   2,160     2,064  
Total revenues   539,162     446,448  
 
EXPENSES
Property and maintenance 107,083 92,952
Real estate taxes and insurance 68,647 52,440
Property management 22,489 23,339
Fee and asset management 1,646 1,307
Depreciation 205,272 148,246
General and administrative   16,496     13,688  
Total expenses   421,633     331,972  
 
Operating income 117,529 114,476
 
Interest and other income 256 169
Other expenses (2,564 ) (5,807 )
Merger expenses (19,092 ) (1,149 )
Interest:
Expense incurred, net (195,685 ) (118,011 )
Amortization of deferred financing costs   (7,023 )   (2,934 )
(Loss) before income and other taxes, (loss) from investments
in unconsolidated entities and discontinued operations (106,579 ) (13,256 )
Income and other tax (expense) benefit (407 ) (170 )
(Loss) from investments in unconsolidated entities due to operations (355 ) --
(Loss) from investments in unconsolidated entities due to merger expenses   (46,011 )   --  
(Loss) from continuing operations (153,352 ) (13,426 )
Discontinued operations, net   1,214,386     165,593  
Net income 1,061,034 152,167
Net (income) attributable to Noncontrolling Interests:
Operating Partnership (43,323 ) (6,418 )
Partially Owned Properties   (25 )   (450 )
Net income attributable to controlling interests   1,017,686     145,299  
Preferred distributions   (1,036 )   (3,466 )
Net income available to Common Shares $ 1,016,650   $ 141,833  
 
Earnings per share - basic:

(Loss) from continuing operations available to Common Shares

$ (0.44 ) $ (0.06 )
Net income available to Common Shares $ 3.01   $ 0.47  
Weighted average Common Shares outstanding   337,532     298,805  
 
Earnings per share - diluted:

(Loss) from continuing operations available to Common Shares

$ (0.44 ) $ (0.06 )
Net income available to Common Shares $ 3.01   $ 0.47  
Weighted average Common Shares outstanding   337,532     298,805  
 
Distributions declared per Common Share outstanding $ 0.40   $ 0.3375  
   
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,
2013 2012
Net income $ 1,061,034 $ 152,167
Net (income) attributable to Noncontrolling Interests -
Partially Owned Properties (25 ) (450 )
Preferred distributions   (1,036 )   (3,466 )
Net income available to Common Shares and Units 1,059,973 148,251
 
Adjustments:
Depreciation 205,272 148,246
Depreciation - Non-real estate additions (1,216 ) (1,354 )
Depreciation - Partially Owned and Unconsolidated Properties (1,015 ) (800 )
Discontinued operations:
Depreciation 14,766 26,862
Net (gain) on sales of discontinued operations (1,198,922 ) (132,956 )
Net incremental gain on sales of condominium units -- 49
Gain on sale of Equity Corporate Housing (ECH)   250     --  
FFO available to Common Shares and Units (1) (3) (4) 79,108 188,298
 
Adjustments (see page 24 for additional detail):
Asset impairment and valuation allowances -- --
Property acquisition costs and write-off of pursuit costs 67,668 2,626
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts 79,643 (41 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense
(benefit) (250 ) (4 )
Other miscellaneous non-comparable items   --     974  
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 226,169   $ 191,853  
 
FFO (1) (3) $ 80,144 $ 191,764
Preferred distributions (1,036 ) (3,466 )
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 79,108   $ 188,298  
FFO per share and Unit - basic $ 0.23   $ 0.60  
FFO per share and Unit - diluted $ 0.22   $ 0.60  
 
Normalized FFO (2) (3) $ 227,205 $ 195,319
Preferred distributions   (1,036 )   (3,466 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 226,169   $ 191,853  
Normalized FFO per share and Unit - basic $ 0.64   $ 0.61  
Normalized FFO per share and Unit - diluted $ 0.64   $ 0.61  
 
Weighted average Common Shares and Units outstanding - basic   351,255     312,011  
Weighted average Common Shares and Units outstanding - diluted   353,656     315,230  
 
Note: See page 24 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 27 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
   
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
 
March 31, December 31,
2013 2012
ASSETS
Investment in real estate
Land $ 6,319,353 $ 4,554,912
Depreciable property 19,966,235 15,711,944
Projects under development 500,829 387,750
Land held for development   577,676     353,823  
Investment in real estate 27,364,093 21,008,429
Accumulated depreciation   (4,434,775 )   (4,912,221 )
Investment in real estate, net 22,929,318 16,096,208
Cash and cash equivalents 56,087 612,590
Investments in unconsolidated entities 193,338 17,877
Deposits - restricted 147,515 250,442
Escrow deposits - mortgage 39,535 9,129
Deferred financing costs, net 71,229 44,382
Other assets   358,136     170,372  
Total assets $ 23,795,158   $ 17,201,000  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 6,380,424 $ 3,898,369
Notes, net 5,379,890 4,630,875
Lines of credit 395,000 --
Accounts payable and accrued expenses 104,836 38,372
Accrued interest payable 88,518 76,223
Other liabilities 401,225 304,518
Security deposits 72,669 66,988
Distributions payable   150,751     260,176  
Total liabilities   12,973,313     9,275,521  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests - Operating Partnership   386,757     398,372  
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, 2013 and December 31, 2012 50,000 50,000
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 360,063,675 shares issued and
outstanding as of March 31, 2013 and 325,054,654 shares
issued and outstanding as of December 31, 2012 3,601 3,251
Paid in capital 8,492,845 6,542,355
Retained earnings 1,759,990 887,355
Accumulated other comprehensive (loss)   (182,508 )   (193,148 )
Total shareholders' equity 10,123,928 7,289,813
Noncontrolling Interests:
Operating Partnership 205,230 159,606
Partially Owned Properties   105,930     77,688  
Total Noncontrolling Interests   311,160     237,294  
Total equity   10,435,088     7,527,107  
Total liabilities and equity $ 23,795,158   $ 17,201,000  
                                 
Equity Residential
               
Portfolio Summary as of December 31, 2012 Portfolio Summary as of March 31, 2013
% of Average % of Average
Apartment Stabilized Rental Apartment Stabilized Rental
Markets/Metro Areas Properties Units NOI (1) Rate (2) Properties Units NOI (1) Rate (2)
 
Core:
Washington DC 43 14,425 15.9% $ 1,992 58 18,894 19.3% $ 2,181
New York 30 8,047 13.9% 3,433 38 10,330 16.5% 3,684
San Francisco 40 9,094 8.6% 1,902 50 12,767 11.4% 2,052
Los Angeles 48 9,815 9.9% 1,879 57 11,960 11.0% 1,998
Boston 26 5,832 8.2% 2,560 34 7,816 10.0% 2,787
South Florida 36 12,253 9.0% 1,463 33 10,833 6.8% 1,497
Seattle 38 7,563 6.4% 1,627 41 8,227 6.0% 1,646
San Diego 14 4,963 5.0% 1,851 15 4,915 4.2% 1,861
Denver 24 8,144 5.5% 1,226 19 6,933 4.1% 1,257
Orange County, CA 11 3,490 3.3%   1,660 11 3,490 2.7%   1,672
Subtotal - Core 310 83,626 85.7% 1,941 356 96,165 92.0% 2,126
 
Non-Core:
Inland Empire, CA 10 3,081 2.4% 1,491 10 3,081 2.1% 1,490
Orlando 21 6,413 3.5% 1,086 11 3,839 1.8% 1,104
Phoenix 25 7,400 3.4% 946 13 4,072 1.5% 930
New England (excluding Boston) 14 2,611 1.3% 1,174 14 2,611 1.1% 1,197
Atlanta 12 3,616 2.0% 1,157 6 1,970 0.8% 1,214
Tacoma, WA 3 1,467 0.6% 951 3 1,467 0.5% 1,023
Jacksonville 6 2,117 1.1%   1,005 1 480 0.2%   1,080
Subtotal - Non-Core 91 26,705 14.3%   1,099 58 17,520 8.0%   1,150
Total 401 110,331 100.0%   1,737 414 113,685 100.0%   1,974
 
Military Housing 2 5,039

--

 

--

2 5,093

--

  --
 
Grand Total 403 115,370 100.0% $ 1,737 416 118,778 100.0% $ 1,974
 
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
 

(1) % of Stabilized NOI includes budgeted 2013 NOI for stabilized properties, budgeted year one (March 2013 to February 2014) NOI for the Archstone 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, 2013
 
Apartment
Properties Units
Wholly Owned Properties 390 108,579
Master-Leased Properties - Consolidated 3 853
Partially Owned Properties - Consolidated 20 3,917
Partially Owned Properties - Unconsolidated 1 336

Military Housing

2

   

5,093

 
416     118,778  
                       
 
Portfolio Rollforward Q1 2013
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
12/31/2012 403 115,370
Acquisitions:
Consolidated:
Archstone Rental Properties 72 20,592 $ 8,424,958 4.9 %
Archstone Master-Leased Properties 3 853 $ 255,969 5.5 %
Archstone Uncompleted Developments (two) -- -- $ 36,583
Archstone Land Parcels (thirteen) -- -- $ 236,918
Unconsolidated (1):
Archstone Rental Properties 1 336

$

5,113 5.8 %
Archstone Uncompleted Developments (two) -- -- $ 18,374
Archstone Land Parcels (one) -- --

$

4,097
Dispositions:
Consolidated:
Rental Properties (63 ) (18,452 ) $ (2,975,187 ) 6.0 %
Configuration Changes --   79  
3/31/2013 416   118,778  
 
(1) EQR owns various equity interests in these unconsolidated rental properties, uncompleted developments and land parcels. Purchase price listed is EQR's net investment price.
                     
Equity Residential
           
First Quarter 2013 vs. First Quarter 2012
Same Store Results/Statistics for 90,350 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 2013 $ 465,653 $ 166,456 $ 299,197 $ 1,809 95.0 % 12.3 %
Q1 2012 $ 443,152   $ 161,767   $ 281,385   $ 1,727   94.7 % 12.1 %
 
Change $ 22,501   $ 4,689   $ 17,812   $ 82   0.3 % 0.2 %
 
Change 5.1 % 2.9 % 6.3 % 4.7 %
                         
 
First Quarter 2013 vs. Fourth Quarter 2012
Same Store Results/Statistics for 92,454 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 2013 $ 483,357 $ 172,678 $ 310,679 $ 1,836 95.0 % 12.4 %
Q4 2012 $ 482,071   $ 161,404   $ 320,667   $ 1,826   95.3 % 12.7 %
 
Change $ 1,286   $ 11,274   $

(9,988

)

$ 10  

(0.3

)%

(0.3

)%

 
Change 0.3 % 7.0 %

(3.1

)%

0.5 %
 
(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 27 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 2013 vs. First Quarter 2012
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Year's Quarter

Q1 2013

Q1 2013

Q1 2013

% 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 11,184 14.9 % $ 2,047 94.5 % 3.6 % (0.2 )% 5.4 % 3.8 % (0.1 )%
New York 7,176 13.6 % 3,448 95.3 % 5.5 % 5.9 % 5.3 % 5.6 % 0.0 %
Los Angeles 8,894 10.6 % 1,888 95.7 % 4.7 % 3.4 % 5.3 % 4.0 % 0.6 %
South Florida 10,637 9.4 % 1,499 95.2 % 4.6 % 1.5 % 6.6 % 4.5 % 0.1 %
Boston (2) 5,832 9.1 % 2,561 94.3 % 3.3 % 8.2 % 0.8 % 3.5 % (0.2 )%
San Francisco 7,822 8.9 % 1,869 94.7 % 9.5 % 2.2 % 14.0 % 8.6 % 0.8 %
Seattle 7,003 7.2 % 1,640 94.9 % 6.2 % 2.2 % 8.4 % 6.4 % (0.2 )%
Denver 6,765 5.8 % 1,253 95.7 % 8.6 % 0.1 % 12.4 % 8.2 % 0.3 %
San Diego 4,627 5.4 % 1,826 93.7 % 3.1 % 2.1 % 3.7 % 2.9 % 0.1 %
Orange County, CA 3,490 3.8 %   1,664 95.4 % 4.6 % 6.8 % 3.6 % 4.1 % 0.3 %
Subtotal - Core 73,430 88.7 % 1,962 95.0 % 5.2 % 3.3 % 6.3 % 5.0 % 0.2 %
 
Non-Core:
Inland Empire, CA 3,081 3.0 % 1,485 94.6 % 2.9 % (1.7 )% 5.1 % 2.3 % 0.6 %
Orlando 3,839 2.5 % 1,098 95.9 % 5.8 % (0.4 )% 10.1 % 5.0 % 0.8 %
Phoenix 3,808 2.1 % 932 95.7 % 3.9 % (0.6 )% 6.7 % 2.9 % 1.0 %
New England (excluding Boston) 2,611 1.5 % 1,201 94.5 % 3.8 % 8.0 % (0.2 )% 3.2 % 0.5 %
Atlanta 1,634 1.1 % 1,211 95.6 % 5.2 % (2.9 )% 11.7 % 5.7 % (0.5 )%
Tacoma, WA 1,467 0.8 % 1,003 94.6 % 3.3 % (1.1 )% 7.5 % 0.6 % 2.5 %
Jacksonville 480 0.3 %   1,080 95.5 % 3.0 % (11.5 )% 13.0 % 1.3 % 1.4 %
Subtotal - Non-Core 16,920 11.3 % 1,149 95.2 % 4.1 % 0.3 % 6.7 % 3.3 % 0.8 %
                 
Total 90,350 100.0 % $ 1,809 95.0 % 5.1 % 2.9 % 6.3 % 4.7 % 0.3 %
 
 
(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 negatively impacted by garage related income. Residential-only revenues increased in Boston 6.0% quarter over quarter.
                                     
Equity Residential
First Quarter 2013 vs. Fourth Quarter 2012
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Quarter

Q1 2013

Q1 2013

Q1 2013

% 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 11,696 15.3 % $ 2,090 94.4 % (0.4 )% 6.5 % (3.3 )% 0.5 % (1.0 )%
New York 7,687 14.5 % 3,546 95.3 % 1.0 % 10.4 % (4.9 )% 2.0 % (0.9 )%
Los Angeles 9,095 10.5 % 1,896 95.7 % 0.2 % 7.0 % (3.0 )% 0.4 % (0.1 )%
San Francisco 8,383 9.3 % 1,887 94.5 % 0.0 % 6.0 % (3.0 )% 0.4 % (0.3 )%
South Florida 10,637 9.1 % 1,499 95.2 % 1.0 % 4.2 % (0.9 )% 0.9 % 0.1 %
Boston (2) 5,832 8.8 % 2,561 94.3 % (0.9 )% 12.1 % (6.9 )% 0.5 % (1.4 )%
Seattle 7,322 7.2 % 1,646 94.9 % 1.0 % 8.6 % (2.6 )% 1.0 % 0.0 %
Denver 6,765 5.6 % 1,253 95.7 % 1.0 % 2.3 % 0.4 % 0.6 % 0.3 %
San Diego 4,627 5.2 % 1,826 93.7 % (0.9 )% (1.3 )% (0.7 )% (0.4 )% (0.5 )%
Orange County, CA 3,490 3.6 %   1,664 95.4 % (0.4 )% 6.9 % (3.5 )% 0.1 % (0.5 )%
Subtotal - Core 75,534 89.1 % 1,991 94.9 % 0.2 % 7.1 % (3.2 )% 0.7 % (0.4 )%
 
Non-Core:
Inland Empire, CA 3,081 2.9 % 1,485 94.6 % (0.6 )% 0.7 % (1.2 )% (0.1 )% (0.4 )%
Orlando 3,839 2.4 % 1,098 95.9 % 1.7 % 6.4 % (1.0 )% 1.0 % 0.7 %
Phoenix 3,808 2.1 % 932 95.7 % 1.1 % 6.6 % (1.9 )% 0.5 % 0.6 %
New England (excluding Boston) 2,611 1.4 % 1,201 94.5 % 0.0 % 14.6 % (11.3 )% 0.8 % (0.8 )%
Atlanta 1,634 1.1 % 1,211 95.6 % (0.8 )% (0.1 )% (1.2 )% (0.9 )% 0.1 %
Tacoma, WA 1,467 0.7 % 1,003 94.6 % 5.1 % 6.0 % 4.4 % 2.1 % 2.6 %
Jacksonville 480 0.3 %   1,080 95.5 % (0.5 )% 2.7 % (2.2 )% (0.9 )% 0.3 %
Subtotal - Non-Core 16,920 10.9 % 1,149 95.2 % 0.7 % 6.0 % (2.4 )% 0.4 % 0.3 %
                 
Total 92,454 100.0 % $ 1,836 95.0 % 0.3 % 7.0 % (3.1 )% 0.5 % (0.3 )%
 
 
(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 garage related income. Residential-only revenues decreased in Boston 1.3% sequentially.
                     
Equity Residential
         
First Quarter 2013 vs. First Quarter 2012
Same Store Operating Expenses for 90,350 Same Store Apartment Units
$ in thousands
 
% of Actual
Q1 2013
Actual Actual $ % Operating
Q1 2013 Q1 2012 Change Change Expenses
 
Real estate taxes $ 52,501 $ 49,301 $ 3,200 6.5 % 31.5 %
On-site payroll (1) 35,987 36,202 (215 ) (0.6 )% 21.6 %
Utilities (2) 26,745 25,534 1,211 4.7 % 16.1 %
Repairs and maintenance (3) 21,871 20,843 1,028 4.9 % 13.1 %
Property management costs (4) 15,832 16,618 (786 ) (4.7 )% 9.5 %
Insurance 5,583 4,971 612 12.3 % 3.4 %
Leasing and advertising 2,522 2,404 118 4.9 % 1.5 %
Other on-site operating expenses (5)   5,415   5,894   (479 ) (8.1 )% 3.3 %
 
Same store operating expenses $ 166,456 $ 161,767 $ 4,689   2.9 % 100.0 %
 
(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, 2013
(Amounts in thousands)
 
Weighted
Weighted Average
Average Maturities
Amounts (1) % of Total Rates (1) (years)
 
Secured $ 6,380,424 52.5 % 4.86 % 7.1
Unsecured   5,774,890     47.5 % 5.05 % 4.5  
 
Total $ 12,155,314     100.0 % 4.96 % 5.8  
 
Fixed Rate Debt:

Secured - Conventional

$ 5,698,704 46.9 % 5.33 % 5.6
Unsecured - Public/Private   4,329,837     35.6 % 5.76 % 5.2  
 
Fixed Rate Debt   10,028,541     82.5 % 5.54 % 5.4  
 
Floating Rate Debt:
Secured - Conventional 57,387 0.5 % 2.35 % 1.5
Secured - Tax Exempt 624,333 5.1 % 0.39 % 19.9
Unsecured - Public/Private 1,050,053 8.6 % 2.37 % 1.3
Unsecured - Revolving Credit Facility   395,000     3.3 % 1.24 % 5.0  
 
Floating Rate Debt   2,126,773     17.5 % 1.45 % 7.6  
 
Total $ 12,155,314     100.0 % 4.96 % 5.8  
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the quarter ended March 31, 2013.
 
Note: The Company capitalized interest of approximately $8.4 million and $5.0 million during the quarters ended March 31, 2013 and 2012, respectively.
 
                             
 
Debt Maturity Schedule as of March 31, 2013
(Amounts in thousands)

 

 

Weighted Weighted
Average Rates Average
Fixed Floating % of on Fixed Rates on
Year Rate (1) Rate (1) Total Total Rate Debt (1) Total Debt (1)
 
2013 $ 222,459 $ 300,434 $ 522,893 (2) 4.3 %

6.92

%

4.77

%
2014 1,517,354 49,020 1,566,374 12.9 %

5.67

%

5.57

%
2015 419,785 750,000 (3) 1,169,785 9.6 %

6.29

%

3.17

%
2016 1,192,559 -- 1,192,559 9.8 %

5.34

%

5.34

%
2017 2,171,013 (4) 456 2,171,469 17.9 %

6.20

%

6.20

%
2018 83,599 395,725 (5) 479,324 3.9 %

5.63

%

2.46

%
2019 805,844 20,766 826,610 6.8 %

5.48

%

5.35

%
2020 1,677,783 809 1,678,592 13.8 %

5.49

%

5.49

%
2021 1,194,390 856 1,195,246 9.8 %

4.64

%

4.64

%
2022 228,045 905 228,950 1.9 %

3.17

%

3.18

%
2023+ 306,183 675,944 982,127 8.1 %

6.23

%

2.33

%
Premium/(Discount)   209,527   (68,142 )   141,385   1.2 % N/A   N/A  
 
Total $ 10,028,541 $ 2,126,773   $ 12,155,314   100.0 %

5.59

%

4.84

%
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of March 31, 2013.
 
(2) On April 1, 2013, the Company paid off the $400.0 million outstanding of its 5.200% public notes at maturity, of which $300.0 million was swapped to a floating interest rate.
 
(3) Includes the Company's new senior unsecured $750.0 million delayed draw term loan facility that matures on January 11, 2015 and is subject to a one-year extension option exercisable by the Company.
 
(4) Includes $1.27 billion in Archstone mortgage notes payable of which all or a portion of can be modified and extended to mature in 2023 under certain circumstances, including the Company's election no later than June 1, 2013. On March 29, 2013, $543.0 million in unrelated mortgage notes payable due in 2017 were retired early.
 
(5) Includes $395.0 million outstanding on the Company's unsecured revolving credit facility. As of March 31, 2013, there was approximately $2.07 billion available on this facility.
                         
Equity Residential
Unsecured Debt Summary as of March 31, 2013
(Amounts in thousands)
           

 

 
Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
 
Fixed Rate Notes:
5.200 % 04/01/13 (1) $ 400,000 $ -- $ 400,000
Fair Value Derivative Adjustments (1) (300,000 ) -- (300,000 )
5.250 % 09/15/14 500,000 (90 ) 499,910
6.584 % 04/13/15 300,000 (221 ) 299,779
5.125 % 03/15/16 500,000 (157 ) 499,843
5.375 % 08/01/16 400,000 (618 ) 399,382
5.750 % 06/15/17 650,000 (2,161 ) 647,839
7.125 % 10/15/17 150,000 (295 ) 149,705
4.750 % 07/15/20 600,000 (3,319 ) 596,681
4.625 % 12/15/21 1,000,000 (3,302 ) 996,698
7.570 % 08/15/26   140,000     --     140,000  
 
  4,340,000     (10,163 )   4,329,837  
Floating Rate Notes:
04/01/13 (1) 300,000 -- 300,000
Fair Value Derivative Adjustments (1) 53 -- 53
Delayed Draw Term Loan Facility LIBOR+1.20% 01/11/15 (2)(3)   750,000     --     750,000  
 
  1,050,053     --     1,050,053  
 
Revolving Credit Facility: LIBOR+1.05% 04/01/18 (2)(4)   395,000     --     395,000  
 
Total Unsecured Debt $ 5,785,053   $ (10,163 ) $ 5,774,890  
 
(1) Fair value interest rate swaps convert $300.0 million of the 5.200% notes due April 1, 2013 to a floating interest rate. On April 1, 2013, the Company paid off these 5.200% public notes at maturity and the related fair value interest rate swaps matured.
 
(2) Facilities are private. All other unsecured debt is public.
 
(3) On January 11, 2013, the Company entered into a new senior unsecured $750.0 million delayed draw term loan facility which was fully drawn on February 27, 2013 in connection with the Archstone acquisition. 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 new 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.
 
(4) On January 11, 2013, the Company replaced its existing $1.75 billion facility with a new $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, 2013, there was approximately $2.07 billion available on the Company's unsecured revolving credit facility.
         
Equity Residential
   
Selected Unsecured Public Debt Covenants
 

March 31,

December 31,

2013

2012

 
Total Debt to Adjusted Total Assets (not to exceed 60%) 44.2 % 38.6 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 23.2 % 17.6 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.70 3.00
 
Total Unsecured Assets to Unsecured Debt 297.7 % 346.3 %
(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, 2013
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 6,380,424 52.5%
Unsecured Debt   5,774,890 47.5%
 
Total Debt 12,155,314 100.0%

37.0%

 
Common Shares (includes Restricted Shares) 360,063,675 96.2%
Units (includes OP Units and LTIP Units)   14,226,725   3.8%
 
Total Shares and Units 374,290,400 100.0%
Common Share Price at March 31, 2013 $ 55.06

20,608,429

99.8%

Perpetual Preferred Equity (see below)   50,000

0.2%

 
Total Equity

20,658,429

100.0%

63.0%

 
Total Market Capitalization $

32,813,743

100.0%
 
                               
 
Perpetual Preferred Equity as of March 31, 2013
(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 12/10/2026 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
   
Q113 Q112
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 337,532,330 298,805,362
Shares issuable from assumed conversion/vesting of (1):
- OP Units -- --
- long-term compensation shares/units -- --
 
Total Common Shares and Units - diluted (1) 337,532,330 298,805,362
 
Weighted Average Amounts Outstanding for FFO and Normalized
FFO Purposes:
Common Shares - basic 337,532,330 298,805,362
OP Units - basic 13,722,414 13,205,300
 
Total Common Shares and OP Units - basic 351,254,744 312,010,662
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 2,400,834 3,219,011
 
Total Common Shares and Units - diluted 353,655,578 315,229,673
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 360,063,675 300,522,169
Units (includes OP Units and LTIP Units) 14,226,725 13,531,417
 
Total Shares and Units 374,290,400 314,053,586
 
(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 quarters ended March 31, 2013 and 2012.
                           
Equity Residential
Partially Owned Entities as of March 31, 2013
(Amounts in thousands except for project and apartment unit amounts)
           
Consolidated Unconsolidated

Development Projects

Development Projects

 
Held for Held for
and/or Under and/or Under
Development (4) Operating Total Development (5) Operating Total
 
Total projects (1)   --     20     20     --     1     1  
 
Total apartment units (1)   --     3,917     3,917     --     336     336  
 
Operating information for the quarter ended 3/31/13 (at 100%):
Operating revenue $ -- $ 17,485 $ 17,485 $ 219 $ 453 $ 672
Operating expenses   52     5,602     5,654     256     185     441  
 
Net operating (loss) income (52 ) 11,883 11,831 (37 ) 268 231
Depreciation -- 6,094 6,094 -- 540 540
General and administrative/other   122     13     135     --     --     --  
 
Operating (loss) income (174 ) 5,776 5,602 (37 ) (272 ) (309 )
Interest and other income 1 3 4 -- -- --
Other expenses (86 ) -- (86 ) -- (49 ) (49 )
Interest:
Expense incurred, net -- (2,854 ) (2,854 ) (16 ) (87 ) (103 )
Amortization of deferred financing costs   --     (50 )   (50 )   --     --     --  
 
(Loss) income before income and other taxes, (loss) from
investments in unconsolidated entities and net gain
on sales of discontinued operations (259 ) 2,875 2,616 (53 ) (408 ) (461 )
Income and other tax (expense) benefit (11 ) (39 ) (50 ) -- -- --
(Loss) from investments in unconsolidated entities -- (97 ) (97 ) -- -- --
Net gain on sales of discontinued operations -- 2,807 2,807 -- -- --
           
Net (loss) income $ (270 ) $ 5,546   $ 5,276   $ (53 ) $ (408 ) $ (461 )
 
Debt - Secured (2):
EQR Ownership (3) $ -- $ 266,228 $ 266,228 $ 39,120 $ 6,110 $ 45,230
Noncontrolling Ownership   --     76,990     76,990     78,568     24,440     103,008  
 
Total (at 100%) $ --   $ 343,218   $ 343,218   $ 117,688   $ 30,550   $ 148,238  
 
(1) Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
 
(2) All outstanding debt is non-recourse to the Company.
 
(3) Represents the Company's current equity ownership interest.
 
(4) See Projects Under Development - Partially Owned on page 20 for further information.
 
(5) See Projects Under Development - Unconsolidated on page 21 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 $167.2 million at March 31, 2013. The ventures are owned 60% by the Company and 40% by AVB.
                                             
Equity Residential
Consolidated Development and Lease-Up Projects as of March 31, 2013
(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:
Jia (formerly Chinatown Gateway) Los Angeles, CA 280 $ 92,920 $ 60,300 $ 60,300 $ -- 60% -- -- Q3 2013 Q2 2015
Breakwater at Marina Del Rey (2) (3) Marina Del Rey, CA 224 90,449 85,392 445 27,000 79% 46% 39% Q4 2013 Q1 2014
Delray Beach II (4) Delray Beach, FL 128 23,739 10,632 10,632 -- 53% -- -- Q1 2014 Q2 2014
Westgate II Pasadena, CA 252 125,293 69,454 69,454 -- 38% -- -- Q1 2014 Q1 2015
1111 Belle Pre (formerly The Madison) Alexandria, VA 360 115,072 70,545 70,545 -- 60% -- -- Q1 2014 Q2 2015
Urbana (formerly Market Street Landing) Seattle, WA 287 90,024 46,677 46,677 -- 51% -- -- Q1 2014 Q3 2015
Reserve at Town Center III Mill Creek, WA 95 21,330 7,513 7,513 -- 23% -- -- Q2 2014 Q4 2014
Westgate III Pasadena, CA 88 54,037 23,624 23,624 -- 9% -- -- Q2 2014 Q1 2015
170 Amsterdam (2) New York, NY 237 110,892 17,604 17,604 -- 5% -- -- Q1 2015 Q1 2016
Projects Under Development - Wholly Owned 1,951 723,756 391,741 306,794 27,000
 
Projects Under Development - Partially Owned:
Enclave at Wellington (4) Wellington, FL 268 50,000 26,798 26,798 -- 48% -- -- Q1 2014 Q1 2015
400 Park Avenue South (5) New York, NY 269 251,961 99,522 99,522 -- 13% -- -- Q2 2015 Q1 2016
Projects Under Development - Partially Owned 537 301,961 126,320 126,320 --
         
Projects Under Development 2,488 1,025,717 518,061 433,114 27,000
 
Completed Not Stabilized - Wholly Owned (6):
2201 Pershing Drive Arlington, VA 188 63,242 58,133 -- -- 98% 92% Completed Q3 2013
Gaithersburg Station (7) Gaithersburg, MD 389 103,700 102,001 -- 94,694 50% 47% Completed Q1 2014
Projects Completed Not Stabilized - Wholly Owned 577 166,942 160,134 -- 94,694
         
Projects Completed Not Stabilized 577 166,942 160,134 -- 94,694
 
Completed and Stabilized During the Quarter - Wholly Owned:
The Savoy at Dayton Station III (formerly Savoy III) Aurora, CO 168 22,356 22,356 -- -- 99% 97% Completed Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned 168 22,356 22,356 -- --
         
Projects Completed and Stabilized During the Quarter 168 22,356 22,356 -- --
 
Total Consolidated Projects 3,233 $ 1,215,015 $ 700,551 $ 433,114 $ 121,694
 
Land Held for Development N/A N/A $ 577,676 $ 577,676 $ --
 

Total Capital

Q1 2013

NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Cost (1)

NOI

Projects Under Development $ 1,025,717 $ (46)
Completed Not Stabilized 166,942 841
Completed and Stabilized During the Quarter 22,356 430
Total Consolidated Development NOI Contribution $ 1,215,015 $ 1,225
 
(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) The land under this development in subject to a long term ground lease.
(3) The Company acquired this property, part of which is currently being renovated, in connection with the Archstone transaction. The non-recourse loan on this property has a current outstanding balance of $27.0 million, bears interest at LIBOR plus 1.75% and matures September 1, 2014.
(4) The Company acquired this development project in connection with the Archstone transaction and is continuing development activities. The Company has a 95.0% ownership interest in Enclave at Wellington.
(5) The Company is jointly developing with Toll Brothers (NYSE: TOL) a vacant land parcel 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 $67.7 million for their allocated share of the project.
(6) 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.
(7) The Company acquired this completed development project prior to stabilization in connection with the Archstone transaction and is continuing lease-up activities. This project has a non-recourse loan with a current outstanding balance of $84.0 million (excluding the unamortized portion of a mark to market premium), bears interest at 5.24% and matures April 1, 2053.
                                                 
Equity Residential
Unconsolidated Development and Lease-Up Projects as of March 31, 2013
(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:
Nexus Sawgrass (formerly Sunrise Village) (2) Sunrise, FL 20.0 % 501 $ 78,212 $ 67,735 $ 67,735 $ 36,345 90% 24% 14% Q3 2013 Q3 2014
San Norterra (3) Phoenix, AZ 85.0 % 388 56,250 46,107 46,107 23,973 80% 28% 17% Q4 2013 Q2 2014
Domain (2) San Jose, CA 20.0 % 444 154,570 120,139 120,139 57,370 77% -- -- Q4 2013 Q4 2015
Parkside at Emeryville (4) Emeryville, CA 5.0 % 180   75,000   28,473   28,473   -- 13% -- -- Q3 2014 Q4 2015
Projects Under Development - Unconsolidated 1,513 364,032 262,454 262,454 117,688
         
Projects Under Development 1,513   364,032   262,454   262,454   117,688
 
Total Unconsolidated Projects 1,513 $ 364,032 $ 262,454 $ 262,454 $ 117,688
 
Unconsolidated Land Held for Development N/A   N/A $ 17,863 $ 17,863 $ --
 
(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) 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 $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company is 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.
 
(3) The Company acquired this development project in connection with the Archstone transaction. Total project costs are approximately $56.3 million and construction is being partially funded with a long-term, non-recourse loan. San Norterra has a maximum debt commitment of $34.8 million, the loan bears interest at LIBOR plus 2.25% and matures January 6, 2015.
 
(4) The Company acquired this development project in connection with the Archstone transaction. Total project costs are approximately $75.0 million and construction will be partially funded with a long-term loan. Parkside at Emeryville has a maximum debt commitment of $39.5 million which as of March 31, 2013 has not yet been drawn; the loan will bear 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.
                                                                 
Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Quarter Ended March 31, 2013
(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

 

Apartment Apartment Replacements Apartment Improvements Apartment Apartment Grand Apartment
Units (1) Expense (2) Unit

Payroll (3)

Unit Total Unit (4) Unit (5) Unit Total Unit Total

Unit

 
Same Store Properties (6) 90,350 $ 21,871 $ 242 $ 17,847 $ 198 $ 39,718 $ 440 $ 12,466 $ 138 $ 9,805 $ 108 $ 22,271 $ 246 (9) $ 61,989 $ 686
 
Non-Same Store Properties (7) 22,999 1,802 180 696 70 2,498 250 1,126 113 1,561 156 2,687 269 5,185 519
 
Other (8) --   2,564   3,434   5,998   1,273   368   1,641   7,639
 
Total 113,349 $ 26,237 $ 21,977 $ 48,214 $ 14,865 $ 11,734 $ 26,599 $ 74,813
 
(1) Total Apartment Units - Excludes 336 unconsolidated apartment units and 5,093 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 $5.0 million spent in Q1 2013 on apartment unit renovations/rehabs (primarily kitchens and baths) on 649 apartment units (equating to about $7,700 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2013, the Company expects to spend approximately $40.8 million rehabbing 5,000 apartment units (equating to about $8,150 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, 2012, less properties subsequently sold.
 
(7) Non-Same Store Properties - Primarily includes all properties acquired during 2012 and 2013, plus any properties in lease-up and not stabilized as of January 1, 2012. Per apartment unit amounts are based on a weighted average of 9,991 apartment units. Includes only approximately one month of activity for the Archstone properties.
 
(8) Other - Primarily includes expenditures for properties sold during the period.
 
(9) For 2013, the Company estimates that it will spend approximately $1,500 per apartment unit of capital expenditures for the approximately 80,000 apartment units that the Company expects to have in its annual same store set, inclusive of apartment unit renovation/rehab costs, or $1,150 per apartment unit excluding apartment unit renovation/rehab costs.
         
Equity Residential
Discontinued Operations
(Amounts in thousands)
   
Quarter Ended
March 31,
2013 2012
 
REVENUES
Rental income $ 47,342   $ 84,142  
 
Total revenues   47,342     84,142  
 
EXPENSES (1)
Property and maintenance 11,870 19,849
Real estate taxes and insurance 5,042 3,797
Property management 1 70
Depreciation 14,766 26,862
General and administrative   7     4  
 
Total expenses   31,686     50,582  
 
Discontinued operating income 15,656 33,560
 
Interest and other income 52 28
Other expenses (1 ) (111 )
Interest (2):
Expense incurred, net (34 ) (699 )
Amortization of deferred financing costs (153 ) (40 )
Income and other tax (expense) benefit   (56 )   (101 )
 
Discontinued operations 15,464 32,637
Net gain on sales of discontinued operations   1,198,922     132,956  
 
Discontinued operations, net $ 1,214,386   $ 165,593  
 
(1) Includes expenses paid in the current period for properties sold or held for sale 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 and/or held for sale.
               
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 2013
to Actual Q1 2013
Amounts Per Share
Guidance Q1 2013 Normalized FFO - Diluted (2) (3) $ 226,299 $ 0.641
Property NOI 1,474 0.004
Other (1,604 ) (0.005 )
 
Actual Q1 2013 Normalized FFO - Diluted (2) (3) $ 226,169   $ 0.640  
 
               
 
 
Non-Comparable Items - Adjustments from FFO to Normalized FFO (2) (3)
 
Quarter Ended March 31,
2013 2012 Variance
 
Impairment $ --   $ --   $ --  
Asset impairment and valuation allowances   --     --     --  
 
Archstone merger costs (merger expenses) 19,092 1,149 17,943
Archstone merger costs (loss from investments in unconsolidated entities due to merger expenses) 46,011 -- 46,011
Property acquisition costs (other expenses) 32 443 (411 )
Write-off of pursuit costs (other expenses)   2,533     1,034     1,499  
Property acquisition costs and write-off of pursuit costs   67,668     2,626     65,042  
 
Prepayment premiums/penalties (interest expense) 71,443 -- 71,443
Write-off of unamortized deferred financing costs (interest expense) (A) 4,123 1 4,122
Write-off of unamortized (premiums)/discounts/OCI (interest expense)   4,077     (42 )   4,119  
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts   79,643     (41 )   79,684  
 
Net incremental (gain) on sales of condominium units -- (49 ) 49
Income and other tax expense (benefit) - Condo sales -- 45 (45 )
(Gain) on sale of Equity Corporate Housing (ECH)   (250 )   --     (250 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (250 )   (4 )   (246 )
 
 
Insurance/litigation settlement expense (other expenses) -- 4,186 (4,186 )
Prospect Towers garage insurance proceeds (real estate taxes and insurance) -- (3,467 ) 3,467
Other (other expenses)   --     255     (255 )
Other miscellaneous non-comparable items   --     974     (974 )
     
Non-comparable items - Adjustments from FFO to Normalized FFO (2) (3) $ 147,061   $ 3,555   $ 143,506  
 
(A) For the quarter ended March 31, 2013, includes $2.5 million of bridge loan costs related to the Archstone transaction.
 
Note: See page 27 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 26 for estimates of property acquisition costs, prepayment premiums/penalties and other amounts not included in 2013 Normalized FFO guidance. See page 27 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
 
 

2013 Normalized FFO Guidance (per share diluted)

 

Q2 2013

2013

 
Expected Normalized FFO (2) (3)

$0.67 to $0.71

$2.80 to $2.90
 

2013 Same Store Assumptions

 
Physical occupancy 95.3 %
Revenue change 4.0% to 5.0%
Expense change 2.5% to 3.5%
NOI change 4.5% to 6.0%
 
(Note: The same store guidance above is computed based on the portfolio of approximately 80,000 apartment units that the Company expects to have in its annual same store set after the completion of its planned 2013 dispositions. 30 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2013 Transaction Assumptions

 
Consolidated rental acquisitions (excluding Archstone) $100.0 million
Consolidated rental dispositions - EQR assets $4.0 billion
Consolidated rental dispositions - Archstone assets (pre-closing) $500.0 million
Capitalization rate spread 100 basis points
 

2013 Debt Assumptions, Includes Impact of Archstone Debt Premium (see Note below)

 
Weighted average debt outstanding $11.1 billion to $11.6 billion
Weighted average interest rate (reduced for capitalized interest) 4.30 %
Interest expense $477.3 million to $498.8 million
 

2013 Other Guidance Assumptions

 
General and administrative expense $55.0 million to $58.0 million
Interest and other income $0.5 million to $1.5 million
Income and other tax expense $1.5 million to $2.5 million
Debt offerings No additional amounts budgeted
Equity ATM share offerings No amounts budgeted
Preferred share offerings No amounts budgeted
Weighted average Common Shares and Units - Diluted 370.9 million
 
Note: All debt assumptions include the impact of a mark-to-market non-cash adjustment relating to Archstone's debt that the Company assumed. Excluding the impact of the Archstone net debt premium, the Company's debt assumptions would be as follows:
 
Weighted average debt outstanding without Archstone net premium $11.0 billion to $11.5 billion
Weighted average interest rate (reduced for capitalized interest) without Archstone net premium 4.71 %
Interest expense without Archstone net premium $518.1 million to $541.7 million
                 
Equity Residential
2013 Non-Comparable Items Guidance
(Amounts in thousands)
       
The Non-Comparable Items provided below are based on current expectations and are forward looking.
 
Midpoint of Forecasted 2013 Non-Comparable Items - Adjustments from FFO to Normalized FFO (2) (3)
 
Expected Q2 2013 Expected 2013
Amounts Per Share Amounts Per Share
       
Asset impairment and valuation allowances $ --     --   $ --     --  
 
Archstone merger costs (merger expenses) -- -- 19,092 0.05
Archstone merger costs (loss from investments in unconsolidated entities due to merger expenses) 5,494 0.02 56,601 0.16
Property acquisition costs (other expenses) 73 -- 165 --
Write-off of pursuit costs (other expenses)   1,700     --     7,633     0.02  
Property acquisition costs and write-off of pursuit costs   7,267     0.02     83,491     0.23  
 
Prepayment premiums/penalties -- -- 71,443 0.19
Write-off of unamortized deferred financing costs 4 -- 4,138 0.01
Write-off of unamortized (premiums)/discounts/OCI   (827 )   --     3,075     0.01  
Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions
and non-cash convertible debt discounts   (823 )   --     78,656     0.21  
 
Net (gain) on sales of land parcels (12,073 ) (0.03 ) (12,073 ) (0.03 )
(Gain) on sale of Equity Corporate Housing (ECH)   (352 )   --     (1,470 )   (0.01 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (12,425 )   (0.03 )   (13,543 )   (0.04 )
       
Other miscellaneous non-comparable items   --     --     --     --  
       
Non-comparable items - Adjustments from FFO to Normalized FFO (2) (3) $ (5,981 ) $ (0.01 ) $ 148,604   $ 0.40  
 
Note: See page 27 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
                 
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 6, 24 and 26

 

 

 

Expected Q1 2013

Expected Expected
Q2 2013 2013
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $ 1,290,247 $ 3.653

$1.50 to $1.54

$4.26 to $4.36
Add: Expected depreciation expense 172,200 0.488 0.83 3.09
Less: Expected net gain on sales (5)   (1,319,274 )   (3.735 ) (1.65 ) (4.95 )
 
Expected FFO - Diluted (1) (3) 143,173 0.406

0.68 to 0.72

2.40 to 2.50
 
Asset impairment and valuation allowances -- -- -- --
Property acquisition costs and write-off of pursuit costs 27,170 0.076 0.02 0.23
Debt extinguishment (gains) losses, including prepayment penalties,
preferred share redemptions and non-cash convertible debt discounts 9,429 0.027 -- 0.21
(Gains) losses on sales of non-operating assets, net of income and other tax
expense (benefit) -- -- (0.03 )

 

(0.04 )
Other miscellaneous non-comparable items   46,527     0.132   --   --  
 
Expected Normalized FFO - Diluted (2) (3) $ 226,299   $ 0.641  

$0.67 to $0.71

$2.80 to $2.90
 
Definitions and Footnotes for Pages 6, 24 and 26
 
(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 10

 
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for the First Quarter 2013 Same Store Properties:
     
Quarter Ended March 31,
2013 2012
 
Operating income $ 117,529 $ 114,476
Adjustments:
Non-same store operating results (39,586 ) 5,732
Fee and asset management revenue (2,160 ) (2,064 )
Fee and asset management expense 1,646 1,307
Depreciation 205,272 148,246
General and administrative   16,496     13,688  
 
Same store NOI $ 299,197   $ 281,385  
 

Equity Residential
Marty McKenna, 312-928-1901