Equity Residential (NYSE: EQR) today reported results for the quarter and nine months ended September 30, 2014. All per share results are reported as available to common shares on a diluted basis.

“Our primary leasing season clearly demonstrated that strong fundamentals continue across our markets and we are pleased to expect to produce same store revenue growth of 4.1% for 2014, at the high end of our most recent expectations,” said David J. Neithercut, Equity Residential’s President and CEO. “Favorable demographics and changing lifestyles will continue to produce strong demand for rental housing in our high density, urban markets which should deliver same store revenue growth of 3.5% to 4.5% in 2015.”

Third Quarter 2014

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the third quarter of 2014 was $0.81 per share compared to $0.71 per share in the third quarter of 2013. The difference is due primarily to the items discussed below.

For the third quarter of 2014, the company reported Normalized FFO of $0.82 per share compared to $0.73 per share in the same period of 2013. The following items impacted Normalized FFO per share in the quarter:

  • the positive impact of approximately $0.06 per share from higher same store net operating income (NOI) and approximately $0.02 per share from NOI from non-same store properties currently in lease up;
  • the negative impact of approximately $0.01 per share of lower NOI from 2013 and 2014 transaction activity;
  • the positive impact of approximately $0.01 per share from lower total interest expense; and
  • the positive impact of approximately $0.01 per share from other items, including lower general and administrative expenses.

Normalized FFO begins with FFO and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6 and 28 of this release and the company has included guidance for Normalized FFO on page 26 and FFO on page 28 of this release.

For the third quarter of 2014, the company reported earnings of $0.61 per share compared to $1.05 per share in the third quarter of 2013. The difference is due primarily to higher gains on property sales in the third quarter of 2013 partially offset by higher depreciation expense in the third quarter of 2013.

Nine Months Ended September 30, 2014

FFO for the nine months ended September 30, 2014 was $2.29 per share compared to $1.68 per share in the same period of 2013. The difference is due primarily to the acquisition expenses and prepayment penalties the company incurred in the first nine months of 2013, along with the items described above.

For the nine months ended September 30, 2014, the company reported Normalized FFO of $2.31 per share compared to $2.08 per share for the same period of 2013.

For the nine months ended September 30, 2014, the company reported earnings of $1.13 per share compared to $4.87 per share for the same period of 2013. The difference is due primarily to higher gains on property sales in the first nine months of 2013 partially offset by higher depreciation expense, acquisition expenses and prepayment penalties incurred in the first nine months of 2013.

Same Store Results

The company’s same store results for all periods include the stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the company.

On a same store third quarter to third quarter comparison, which includes 100,196 apartment units, revenues increased 4.1%, expenses increased 0.6% and NOI increased 6.0%.

On a same store nine-month to nine-month comparison, which includes 99,686 apartment units, revenues increased 4.1%, expenses increased 1.7% and NOI increased 5.3%.

Investment Activity

During the third quarter of 2014, the company acquired a 308-unit apartment property in Los Angeles for a purchase price of approximately $126.0 million and a capitalization (cap) rate of 4.7%. During the quarter, the company also acquired a land parcel in Los Angeles for future development for approximately $13.0 million.

During the third quarter, the company sold three properties, consisting of 981 apartment units, for an aggregate sale price of approximately $156.3 million at a weighted average cap rate of 6.4%. These sales generated an unlevered internal rate of return (IRR), inclusive of management costs, of 11.8%. The company also sold a land parcel in South Florida for approximately $22.3 million during the quarter.

For the nine months ended September 30, 2014, the company acquired four properties with a total of 1,080 apartment units for an aggregate purchase price of approximately $375.6 million at a weighted average cap rate of 5.0%.

During the first nine months of 2014, the company sold four properties consisting of 1,317 apartment units for an aggregate sales price of approximately $197.1 million and a weighted average cap rate 6.4%. These sales generated an unlevered IRR, inclusive of management costs, of 11.3%. During the first nine months of 2014, the company also sold two land parcels for an aggregate sale price of approximately $30.5 million.

Fourth Quarter 2014 Guidance

The company has established a Normalized FFO guidance range of $0.81 to $0.83 per share for the fourth quarter of 2014. The company expects NOI in the fourth quarter to be similar to the third quarter, total interest expense to be moderately lower and transaction dilution to be slightly higher as we complete our 2014 disposition activity. The net impact of this activity will produce Normalized FFO per share for the fourth quarter similar to that of the third quarter.

Full Year 2014 Guidance

The company has revised its guidance for its full year 2014 same store operating performance and Normalized FFO results as well as other items listed on page 26 of this release. The changes to the full year same store and Normalized FFO guidance are listed below:

   

Previous

    

Revised

Same store:
Physical occupancy 95.5% 95.6%
Revenue change 3.9% to 4.1% 4.1%
Expense change 2.25% to 2.75% 2.2%
NOI change 4.5% to 5.0% 5.1%
 
Normalized FFO per share: $3.08 to $3.12 $3.12 to $3.14
 

The company’s guidance for investment activity remains unchanged at $500 million of acquisitions and $500 million of dispositions with a cap rate spread of 100 basis points.

The difference between the midpoint of the previous Normalized FFO guidance range of $3.10 per share and the midpoint of the revised guidance range of $3.13 per share is due primarily to:

  • a positive impact of approximately $0.01 per share from better than expected growth in same store NOI;
  • a positive impact of approximately $0.01 per share from the timing of transaction activity; and
  • a positive impact of approximately $0.01 per share from lower interest expense and other items.

Fourth Quarter 2014 Earnings and Conference Call

Equity Residential expects to announce fourth quarter 2014 results on Tuesday, February 3, 2015 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, February 4, 2015.

Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 396 properties consisting of 111,087 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. Other risks and uncertainties are described under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

A live web cast of the company’s conference call discussing these results will take place tomorrow, Wednesday, October 29, at 10:00 a.m. Central. Please visit the company’s web site at www.equityapartments.com/corporate for the link. A replay of the web cast will be available for two weeks at this site.

           
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
 
Nine Months Ended September 30, Quarter Ended September 30,
  2014     2013     2014     2013  
REVENUES
Rental income $ 1,942,492 $ 1,741,169 $ 662,001 $ 624,063
Fee and asset management   7,596     7,399     2,077     2,566  
Total revenues   1,950,088     1,748,568     664,078     626,629  
 
EXPENSES
Property and maintenance 361,105 330,812 120,144 118,782
Real estate taxes and insurance 245,717 217,753 80,568 75,916
Property management 61,080 63,395 18,407 18,875
Fee and asset management 4,293 4,739 1,253 1,516
Depreciation 565,772 796,233 190,469 276,707
General and administrative   41,296     47,017     9,968     14,437  
Total expenses   1,279,263     1,459,949     420,809     506,233  
 
Operating income 670,825 288,619 243,269 120,396
 
Interest and other income 3,213 1,767 576 1,015
Other expenses (7,161 ) (27,718 ) (4,971 ) (4,368 )
Interest:
Expense incurred, net (347,224 ) (437,452 ) (118,251 ) (120,035 )
Amortization of deferred financing costs   (8,554 )   (15,636 )   (2,628 )   (4,335 )
Income (loss) before income and other taxes, (loss) from investments in

unconsolidated entities, net gain (loss) on sales of land parcels,

discontinued operations and net gain on sales of real estate

properties

311,099 (190,420 ) 117,995 (7,327 )
Income and other tax (expense) benefit (1,146 ) (1,325 ) (260 ) (492 )
(Loss) from investments in unconsolidated entities (10,201 ) (57,749 ) (1,176 ) (3,209 )
Net gain (loss) on sales of land parcels   1,846     12,179     1,052     (2,437 )
Income (loss) from continuing operations 301,598 (237,315 ) 117,611 (13,465 )
Discontinued operations, net   1,500     2,026,798     (62 )   405,182  
Income before net gain on sales of real estate properties 303,098 1,789,483 117,549 391,717
Net gain on sales of real estate properties   128,544     —     113,641     —  
Net income 431,642 1,789,483 231,190 391,717
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership (16,273 ) (70,947 ) (8,738 ) (14,836 )
Partially Owned Properties   (1,800 )   1,101     (708 )   311  
Net income attributable to controlling interests 413,569 1,719,637 221,744 377,192
Preferred distributions   (3,109 )   (3,109 )   (1,037 )   (1,037 )
Net income available to Common Shares $ 410,460   $ 1,716,528   $ 220,707   $ 376,155  
 
Earnings per share – basic:
Income (loss) from continuing operations available to Common Shares $ 1.13   $ (0.65 ) $ 0.61   $ (0.04 )
Net income available to Common Shares $ 1.14   $ 4.87   $ 0.61   $ 1.05  
Weighted average Common Shares outstanding   360,900     352,414     361,409     359,811  
 
Earnings per share – diluted:
Income (loss) from continuing operations available to Common Shares $ 1.13   $ (0.65 ) $ 0.61   $ (0.04 )
Net income available to Common Shares $ 1.13   $ 4.87   $ 0.61   $ 1.05  
Weighted average Common Shares outstanding   377,228     352,414     377,954     359,811  
 
Distributions declared per Common Share outstanding $ 1.50   $ 1.20   $ 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)
           
Nine Months Ended September 30, Quarter Ended September 30,
  2014     2013     2014     2013  
Net income $ 431,642 $ 1,789,483 $ 231,190 $ 391,717
Net (income) loss attributable to Noncontrolling Interests –
Partially Owned Properties (1,800 ) 1,101 (708 ) 311
Preferred distributions   (3,109 )   (3,109 )   (1,037 )   (1,037 )
Net income available to Common Shares and Units 426,733 1,787,475 229,445 390,991
 
Adjustments:
Depreciation 565,772 796,233 190,469 276,707
Depreciation – Non-real estate additions (3,485 ) (3,626 ) (1,137 ) (1,153 )
Depreciation – Partially Owned Properties (3,211 ) (5,405 ) (1,071 ) (1,855 )
Depreciation – Unconsolidated Properties 5,182 2,331 1,746 1,289
Net (gain) on sales of unconsolidated entities — (16 ) — (16 )
Net (gain) on sales of real estate properties (128,544 ) — (113,641 ) —
Discontinued operations:
Depreciation — 33,864 — 2,902
Net (gain) loss on sales of discontinued operations (223 ) (1,990,577 ) 1 (401,703 )
Net incremental gain on sales of condominium units — 7 — —
Gain on sale of Equity Corporate Housing (ECH)   —     709     —     108  
FFO available to Common Shares and Units (1) (3) (4) 862,224 620,995 305,812 267,270
 
Adjustments (see page 25 for additional detail):
Asset impairment and valuation allowances — — — —
Property acquisition costs and write-off of pursuit costs 8,714 78,694 837 2,578
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts 513 78,820 22 —
(Gains) losses on sales of non-operating assets, net of income and other tax expense
(benefit) (1,903 ) (13,725 ) (1,052 ) 1,499
Other miscellaneous non-comparable items   1,191     3,361     3,581     3,361  
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 870,739   $ 768,145   $ 309,200   $ 274,708  
 
FFO (1) (3) $ 865,333 $ 624,104 $ 306,849 $ 268,307
Preferred distributions   (3,109 )   (3,109 )   (1,037 )   (1,037 )
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 862,224   $ 620,995   $ 305,812   $ 267,270  
FFO per share and Unit - basic $ 2.30   $ 1.70   $ 0.82   $ 0.72  
FFO per share and Unit - diluted $ 2.29   $ 1.68   $ 0.81   $ 0.71  
 
Normalized FFO (2) (3) $ 873,848 $ 771,254 $ 310,237 $ 275,745
Preferred distributions   (3,109 )   (3,109 )   (1,037 )   (1,037 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 870,739   $ 768,145   $ 309,200   $ 274,708  
Normalized FFO per share and Unit - basic $ 2.32   $ 2.10   $ 0.82   $ 0.74  
Normalized FFO per share and Unit - diluted $ 2.31   $ 2.08   $ 0.82   $ 0.73  
 
Weighted average Common Shares and Units outstanding - basic   374,626     366,150     375,116     373,547  
Weighted average Common Shares and Units outstanding - diluted   377,228     368,611     377,954     375,883  
 

Note:

  

See page 25 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 28 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.

 

 
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
       
September 30, December 31,
2014 2013
ASSETS
Investment in real estate
Land $ 6,329,907 $ 6,192,512
Depreciable property 19,919,609 19,226,047
Projects under development 1,046,210 988,867
Land held for development   279,139     393,522  
Investment in real estate 27,574,865 26,800,948
Accumulated depreciation   (5,314,260 )   (4,807,709 )
Investment in real estate, net 22,260,605 21,993,239
Cash and cash equivalents 31,478 53,534
Investments in unconsolidated entities 128,100 178,526
Deposits – restricted 84,945 103,567
Escrow deposits – mortgage 45,995 42,636
Deferred financing costs, net 60,530 58,486
Other assets   396,441     404,557  
Total assets $ 23,008,094   $ 22,834,545  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 5,090,960 $ 5,174,166
Notes, net 5,420,646 5,477,088
Lines of credit 446,000 115,000
Accounts payable and accrued expenses 203,070 118,791
Accrued interest payable 86,472 78,309
Other liabilities 349,371 347,748
Security deposits 75,738 71,592
Distributions payable   188,266     243,511  
Total liabilities   11,860,523     11,626,205  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   430,149     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 September 30, 2014 and December 31, 2013

50,000 50,000
Common Shares of beneficial interest, $0.01 par value;

1,000,000,000 shares authorized; 362,208,087 shares issued and

outstanding as of September 30, 2014 and 360,479,260 shares

issued and outstanding as of December 31, 2013

3,622 3,605
Paid in capital 8,574,176 8,561,500
Retained earnings 1,915,344 2,047,258
Accumulated other comprehensive (loss)   (164,806 )   (155,162 )
Total shareholders’ equity 10,378,336 10,507,201
Noncontrolling Interests:
Operating Partnership 213,889 211,412
Partially Owned Properties   125,197     126,583  
Total Noncontrolling Interests   339,086     337,995  
Total equity   10,717,422     10,845,196  
Total liabilities and equity $ 23,008,094   $ 22,834,545  
 
 
Equity Residential
Portfolio Summary
As of September 30, 2014
               
% of Average
Apartment Stabilized Rental
Markets/Metro Areas Properties Units NOI (1) Rate (2)
 
Core:
Washington DC 57 18,652 18.6% $ 2,213
New York 38 10,330 16.8% 3,856
San Francisco 51 13,208 13.0% 2,387
Los Angeles 62 13,438 12.6% 2,196
Boston 34 7,816 10.1% 2,839
South Florida 35 11,434 7.2% 1,600
Seattle 41 8,269 6.8% 1,902
Denver 19 6,935 4.4% 1,422
San Diego 13 3,505 3.1% 1,982
Orange County, CA 11 3,490 2.9% 1,787
Subtotal – Core 361 97,077 95.5% 2,283
 
Non-Core:
Inland Empire, CA 10 3,081 2.1% 1,573
Orlando 8 2,567 1.3% 1,166
All Other Markets 15 3,357 1.1% 1,142
Subtotal – Non-Core 33 9,005 4.5% 1,296
Total 394 106,082 100.0% 2,198
 
Military Housing 2 5,005 0.0% —
 
Grand Total 396 111,087 100.0% $ 2,198
 
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 September 30, 2014
 
Apartment
Properties Units
Wholly Owned Properties 368 99,789
Master-Leased Properties - Consolidated 3 853
Partially Owned Properties - Consolidated 19 3,771
Partially Owned Properties - Unconsolidated 4 1,669
Military Housing 2     5,005  
 
396     111,087  
 
 
 
Portfolio Rollforward Q3 2014
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
6/30/2014 397 111,491
Acquisitions:
Consolidated:
Rental Properties - Stabilized 1 308 $ 126,000 4.7 %
Land Parcel (one) — — $ 13,000
Dispositions:
Consolidated:
Rental Properties (3 ) (981 ) $ (156,250 ) 6.4 %
Land Parcel (one) — — $ (22,302 )
Completed Developments - Consolidated 1 252
Configuration Changes —   17  
 
9/30/2014 396   111,087  
 
 
 
Portfolio Rollforward 2014
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
12/31/2013 390 109,855
Acquisitions:
Consolidated:
Rental Properties - Stabilized 2 738 $ 269,000 4.8 %
Rental Properties - Not Stabilized (1) 2 342 $ 106,610 5.4 %
Land Parcels (two) — — $ 28,790
Dispositions:
Consolidated:
Rental Properties (4 ) (1,317 ) $ (197,100 ) 6.4 %
Land Parcels (two) — — $ (30,502 )
Completed Developments - Consolidated 6 1,542
Configuration Changes —   (73 )
 
9/30/2014 396   111,087  
(1)   The Company acquired two properties in the second quarter of 2014, one that had just completed lease up and the other which was still in lease up, both of which are expected to stabilize in their second year of ownership at a 6.4% yield on cost and a 4.9% yield on cost, respectively.
 
Equity Residential
               
Third Quarter 2014 vs. Third Quarter 2013
Same Store Results/Statistics for 100,196 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics
 
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q3 2014 $ 635,853 $ 211,344 $ 424,509 $ 2,203 96.1 % 17.3 %
Q3 2013 $ 610,610   $ 210,081   $ 400,529   $ 2,123   95.7 % 17.0 %
 
Change $ 25,243   $ 1,263   $ 23,980   $ 80   0.4 % 0.3 %
 
Change 4.1 % 0.6 % 6.0 % 3.8 %
 
 
 
 
Third Quarter 2014 vs. Second Quarter 2014
Same Store Results/Statistics for 101,015 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

 

Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q3 2014 $ 640,667 $ 213,062 $ 427,605 $ 2,202 96.1 % 17.3 %
Q2 2014 $ 630,573   $ 209,472   $ 421,101   $ 2,173   95.8 % 14.2 %
 
Change $ 10,094   $ 3,590   $ 6,504   $ 29   0.3 % 3.1 %
 
Change 1.6 % 1.7 % 1.5 % 1.3 %
 
 
 
 
September YTD 2014 vs. September YTD 2013
Same Store Results/Statistics for 99,686 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics
 
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
YTD 2014 $ 1,864,729 $ 634,076 $ 1,230,653 $ 2,174 95.7 % 42.8 %
YTD 2013 $ 1,792,122   $ 623,298   $ 1,168,824   $ 2,094   95.4 % 43.5 %
 
Change $ 72,607   $ 10,778   $ 61,829   $ 80   0.3 % (0.7 %)
 
Change 4.1 % 1.7 % 5.3 % 3.8 %
Note: Same store results/statistics include the 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 28 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
Third Quarter 2014 vs. Third Quarter 2013
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Year's Quarter
Q3 2014 Q3 2014 Q3 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 18.3 % $ 2,244 95.9 % (0.3 %) (0.2 %) (0.3 %) (0.6 %) 0.3 %
New York 10,330 17.3 % 3,851 96.6 % 4.0 % 0.6 % 6.0 % 3.5 % 0.4 %
San Francisco 12,764 14.0 % 2,348 96.2 % 8.6 % (1.4 %) 13.8 % 7.9 % 0.7 %
Los Angeles 11,139 10.6 % 2,145 96.1 % 4.3 % 0.9 % 6.2 % 4.2 % 0.1 %
Boston 7,722 10.3 % 2,850 96.2 % 2.9 % 0.3 % 4.1 % 2.3 % 0.5 %
South Florida 10,537 7.2 % 1,598 95.5 % 4.6 % 0.7 % 7.0 % 4.1 % 0.4 %
Seattle 7,752 6.6 % 1,864 95.9 % 7.2 % 3.4 % 9.1 % 7.3 % (0.2 %)
Denver 6,935 4.8 % 1,415 96.0 % 7.5 % 0.7 % 10.5 % 7.4 % 0.0 %
San Diego 3,505 3.2 % 1,981 96.4 % 4.4 % 3.8 % 4.6 % 4.0 % 0.3 %
Orange County, CA 3,490 3.0 %   1,791 96.3 % 5.0 % 0.7 % 6.9 % 4.6 % 0.4 %
Subtotal – Core 91,915 95.3 % 2,283 96.1 % 4.2 % 0.5 % 6.1 % 3.8 % 0.3 %
 
Non-Core:
Inland Empire, CA 3,081 2.2 % 1,578 96.0 % 4.4 % 3.0 % 5.0 % 4.3 % 0.1 %
Orlando 2,567 1.3 % 1,195 95.7 % 3.0 % 3.8 % 2.6 % 2.8 % 0.2 %
All Other Markets 2,633 1.2 %   1,131 96.2 % 3.0 % 1.2 % 4.4 % 2.1 % 0.9 %
Subtotal – Non-Core 8,281 4.7 % 1,317 96.0 % 3.6 % 2.7 % 4.2 % 3.2 % 0.4 %
                 
Total 100,196 100.0 % $ 2,203 96.1 % 4.1 % 0.6 % 6.0 % 3.8 % 0.4 %
 
 
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.
 
 
Equity Residential
Third Quarter 2014 vs. Second Quarter 2014
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Quarter

 

 

Q3 2014 Q3 2014 Q3 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 18,130 18.4 % $ 2,234 95.9 % 1.2 % 3.8 % 0.0 % 0.5 % 0.7 %
New York 10,330 17.2 % 3,851 96.6 % 0.7 % (1.1 %) 1.6 % 0.2 % 0.4 %
San Francisco 12,764 13.9 % 2,348 96.2 % 2.8 % 2.4 % 3.0 % 2.7 % 0.1 %
Los Angeles 11,569 11.0 % 2,149 96.2 % 2.8 % 2.3 % 3.0 % 1.9 % 0.9 %
Boston 7,722 10.2 % 2,850 96.2 % 0.6 % 2.7 % (0.4 %) 0.5 % 0.1 %
South Florida 10,537 7.1 % 1,598 95.5 % 0.8 % 0.1 % 1.2 % 1.3 % (0.5 %)
Seattle 7,752 6.6 % 1,864 95.9 % 2.4 % (1.0 %) 4.1 % 2.4 % 0.0 %
Denver 6,935 4.7 % 1,415 96.0 % 2.8 % 6.7 % 1.2 % 2.9 % (0.2 %)
San Diego 3,505 3.2 % 1,981 96.4 % 1.7 % 0.9 % 2.1 % 1.4 % 0.3 %
Orange County, CA 3,490 3.0 %   1,791 96.3 %   1.6 %   2.5 %   1.2 %   1.2 %   0.3 %
Subtotal – Core 92,734 95.3 % 2,281 96.1 % 1.6 % 1.6 % 1.6 % 1.3 % 0.3 %
 
Non-Core:
Inland Empire, CA 3,081 2.2 % 1,578 96.0 % 2.5 % 2.3 % 2.7 % 2.2 % 0.3 %
Orlando 2,567 1.3 % 1,195 95.7 % 1.8 % 4.5 % 0.3 % 1.4 % 0.4 %
All Other Markets 2,633 1.2 %   1,131 96.2 % 0.6 % 3.3 % (1.4 %) 0.9 % (0.3 %)
Subtotal – Non-Core 8,281 4.7 % 1,317 96.0 % 1.8 % 3.2 % 1.0 % 1.6 % 0.2 %
                 
Total 101,015 100.0 % $ 2,202 96.1 % 1.6 % 1.7 % 1.5 % 1.3 % 0.3 %
 
 
Note: Same store results/statistics include 18,854 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.
 
 
Equity Residential
September YTD 2014 vs. September YTD 2013
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year
Sept. YTD 14 Sept. YTD 14 Sept. YTD 14
% 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 18.4 % $ 2,230 95.2 % (0.6 %) 1.3 % (1.5 %) (0.5 %) (0.1 %)
New York 10,330 17.1 % 3,818 96.1 % 3.8 % 3.7 % 3.9 % 3.5 % 0.2 %
San Francisco 12,764 14.0 % 2,291 95.7 % 8.5 % (1.9 %) 14.1 % 7.9 % 0.5 %
Los Angeles 11,139 10.7 % 2,109 95.6 % 4.4 % 0.2 % 6.8 % 4.4 % 0.0 %
Boston 7,722 10.3 % 2,833 95.8 % 3.5 % 3.1 % 3.7 % 2.7 % 0.7 %
South Florida 10,537 7.3 % 1,578 95.6 % 4.7 % 2.1 % 6.3 % 4.3 % 0.3 %
Seattle 7,430 6.3 % 1,823 95.6 % 7.2 % 4.2 % 8.7 % 7.0 % 0.1 %
Denver 6,935 4.8 % 1,378 95.8 % 7.3 % 0.7 % 10.1 % 7.3 % 0.0 %
San Diego 3,505 3.3 % 1,954 95.8 % 4.4 % 3.3 % 4.9 % 4.0 % 0.3 %
Orange County, CA 3,490 3.1 %   1,768 95.8 % 4.9 %   0.0 % 7.0 % 4.7 % 0.1 %
Subtotal – Core 91,405 95.3 % 2,254 95.6 % 4.1 % 1.7 % 5.4 % 3.9 % 0.2 %
 
Non-Core:
Inland Empire, CA 3,081 2.3 % 1,552 95.7 % 3.8 % 3.9 % 3.8 % 3.3 % 0.4 %
Orlando 2,567 1.3 % 1,180 95.3 % 2.0 % 2.3 % 1.9 % 2.8 % (0.7 %)
All Other Markets 2,633 1.1 %   1,118 96.3 % 3.3 % 1.6 % 4.9 % 2.1 % 1.2 %
Subtotal – Non-Core 8,281 4.7 % 1,299 95.8 % 3.2 % 2.7 % 3.5 % 2.9 % 0.3 %
                 
Total 99,686 100.0 % $ 2,174 95.7 % 4.1 % 1.7 % 5.3 % 3.8 % 0.3 %
 
 
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.
 
Equity Residential
           
 
Third Quarter 2014 vs. Third Quarter 2013
Same Store Operating Expenses for 100,196 Same Store Apartment Units
$ in thousands
 
% of Actual
Q3 2014
Actual Actual $ % Operating
Q3 2014 Q3 2013 Change Change Expenses
 
Real estate taxes $ 72,075 $ 68,851 $ 3,224 4.7 % 34.1 %
On-site payroll (1) 46,022 44,860 1,162 2.6 % 21.8 %
Utilities (2) 30,377 30,778 (401 ) (1.3 %) 14.4 %
Repairs and maintenance (3) 27,075 27,393 (318 ) (1.2 %) 12.8 %
Property management costs (4) 18,440 20,150 (1,710 ) (8.5 %) 8.7 %
Insurance 6,199 6,271 (72 ) (1.1 %) 2.9 %
Leasing and advertising 2,861 3,070 (209 ) (6.8 %) 1.4 %
Other on-site operating expenses (5)   8,295   8,708   (413 ) (4.7 %) 3.9 %
 
Same store operating expenses $ 211,344 $ 210,081 $ 1,263   0.6 % 100.0 %
 
 
 
September YTD 2014 vs. September YTD 2013
Same Store Operating Expenses for 99,686 Same Store Apartment Units
$ in thousands

 

 

 

 

% of Actual
YTD 2014
Actual Actual $ % Operating
YTD 2014 YTD 2013 Change Change Expenses
 
Real estate taxes $ 217,227 $ 205,572 $ 11,655 5.7 % 34.3 %
On-site payroll (1) 134,810 134,225 585 0.4 % 21.3 %
Utilities (2) 96,469 91,946 4,523 4.9 % 15.2 %
Repairs and maintenance (3) 77,368 77,320 48 0.1 % 12.2 %
Property management costs (4) 55,942 59,140 (3,198 ) (5.4 %) 8.8 %
Insurance 18,532 18,741 (209 ) (1.1 %) 2.9 %
Leasing and advertising 7,862 9,142 (1,280 ) (14.0 %) 1.2 %
Other on-site operating expenses (5)   25,866   27,212   (1,346 ) (4.9 %) 4.1 %
 
Same store operating expenses $ 634,076 $ 623,298 $ 10,778   1.7 % 100.0 %
Note: Same store operating results include the 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 September 30, 2014
(Amounts in thousands)
 
Weighted
Weighted Average
Average Maturities
Amounts (1) % of Total Rates (1) (years)
 
Secured $ 5,090,960 46.5 % 4.24 % 7.8
Unsecured   5,866,646 53.5 % 4.81 % 7.9
 
Total $ 10,957,606 100.0 % 4.55 % 7.8
 
Fixed Rate Debt:
Secured – Conventional $ 4,356,597 39.8 % 4.86 % 6.2
Unsecured – Public   4,973,559 45.3 % 5.47 % 8.6
 
Fixed Rate Debt   9,330,156 85.1 % 5.18 % 7.5
 
Floating Rate Debt:
Secured – Conventional 7,985 0.1 % 2.19 % 19.3
Secured – Tax Exempt 726,378 6.6 % 0.66 % 16.5
Unsecured – Public (2) 447,087 4.1 % 1.22 % 4.8
Unsecured – Revolving Credit Facility   446,000 4.1 % 0.99 % 3.5
 
Floating Rate Debt   1,627,450 14.9 % 0.97 % 9.7
 
Total $ 10,957,606 100.0 % 4.55 % 7.8
(1) Net of the effect of any derivative instruments. Weighted average rates are for the nine months ended September 30, 2014.
 
(2) Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
 
Note: The Company capitalized interest of approximately $38.1 million and $32.9 million during the nine months ended September 30, 2014 and 2013, respectively. The Company capitalized interest of approximately $13.1 million and $12.9 million during the quarters ended September 30, 2014 and 2013, respectively.
 
 
Debt Maturity Schedule as of September 30, 2014
(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)
 
2014 $ 2,956 $ — $ 2,956 0.0 % 5.39 % 5.39 %
2015 408,712 — 408,712 3.7 % 6.32 % 6.32 %
2016 1,193,107 — 1,193,107 10.9 % 5.34 % 5.34 %
2017 1,346,581 456 1,347,037 12.3 % 6.16 % 6.16 %
2018 84,197 543,659 (2) 627,856 5.7 % 5.61 % 1.59 %
2019 806,471 468,281 1,274,752 11.7 % 5.48 % 3.76 %
2020 1,678,413 809 1,679,222 15.3 % 5.49 % 5.49 %
2021 1,195,041 856 1,195,897 10.9 % 4.63 % 4.64 %
2022 228,716 905 229,621 2.1 % 3.17 % 3.18 %
2023 1,302,847 956 1,303,803 11.9 % 3.75 % 3.75 %
2024+ 1,046,561 674,988 1,721,549 15.7 % 4.99 % 3.22 %
Premium/(Discount)   36,554   (63,460 )   (26,906 ) (0.2 %) N/A   N/A  
 
Total $ 9,330,156 $ 1,627,450   $ 10,957,606   100.0 % 5.14 % 4.46 %
  (1) Net of the effect of any derivative instruments. Weighted average rates are as of September 30, 2014.
 
(2) Includes $446.0 million outstanding on the Company's unsecured revolving credit facility. As of September 30, 2014, there was approximately $2.01 billion available on this facility.
 
Equity Residential
Unsecured Debt Summary as of September 30, 2014
(Amounts in thousands)
                   
Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
 
Fixed Rate Notes:
6.584 % 04/13/15 $ 300,000 $ (55 ) $ 299,945
5.125 % 03/15/16 500,000 (76 ) 499,924
5.375 % 08/01/16 400,000 (340 ) 399,660
5.750 % 06/15/17 650,000 (1,399 ) 648,601
7.125 % 10/15/17 150,000 (197 ) 149,803
2.375 % 07/01/19 (1) 450,000 (428 ) 449,572
Fair Value Derivative Adjustments (1) (450,000 ) 428 (449,572 )
4.750 % 07/15/20 600,000 (2,632 ) 597,368
4.625 % 12/15/21 1,000,000 (2,731 ) 997,269
3.000 % 04/15/23 500,000 (3,782 ) 496,218
7.570 % 08/15/26 140,000 — 140,000
4.500 % 07/01/44   750,000     (5,229 )   744,771  
 
  4,990,000     (16,441 )   4,973,559  
Floating Rate Notes:
07/01/19 (1) 450,000 (428 ) 449,572
Fair Value Derivative Adjustments 07/01/19 (1)   (2,485 )   —     (2,485 )
 
  447,515     (428 )   447,087  
 
Revolving Credit Facility: LIBOR+1.05% 04/01/18 (2)(3)   446,000     —     446,000  
 
Total Unsecured Debt $ 5,883,515   $ (16,869 ) $ 5,866,646  
(1)   Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
 
(2) Facility is private. All other unsecured debt is public.
 
(3) Represents the Company's $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the 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 September 30, 2014, there was approximately $2.01 billion available on this facility.
 
Equity Residential
         
Selected Unsecured Public Debt Covenants
 
September 30, 2014   June 30, 2014  
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 39.7 % 40.4 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 18.4 % 18.8 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 3.23 3.02
 
Total Unsecured Assets to Unsecured Debt 329.5 % 320.1 %
(must be at least 150%)
 
Note: These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt. Equity Residential is the general partner of ERPOP.
                     
 
Selected Credit Ratios (1)
 
 
September 30, 2014   June 30, 2014  
 
Total debt to Normalized EBITDA

6.67

x

6.87

x

Net debt to Normalized EBITDA

6.63

x

6.80

x

 
 
 
Note: See page 27 for the footnote referenced above and the Normalized EBITDA reconciliations.
 
Equity Residential
             
Capital Structure as of September 30, 2014
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 5,090,960 46.5 %
Unsecured Debt   5,866,646 53.5 %
 
Total Debt 10,957,606 100.0 % 32.0 %
 
Common Shares (includes Restricted Shares) 362,208,087 96.2 %
Units (includes OP Units and LTIP Units)   14,325,066   3.8 %
 
Total Shares and Units 376,533,153 100.0 %
Common Share Price at September 30, 2014 $ 61.58
23,186,912 99.8 %
Perpetual Preferred Equity (see below)   50,000 0.2 %
 
Total Equity 23,236,912 100.0 % 68.0 %
 
Total Market Capitalization $ 34,194,518 100.0 %
 
           
 
Perpetual Preferred Equity as of September 30, 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
                   
YTD Q3 2014 YTD Q3 2013 Q3 2014 Q3 2013
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 360,899,649 352,413,769 361,409,492 359,811,378
Shares issuable from assumed conversion/vesting of (1):
- OP Units 13,726,267 — 13,706,359 —
- long-term compensation shares/units 2,602,231 — 2,838,523 —
 
Total Common Shares and Units - diluted (1) 377,228,147 352,413,769 377,954,374 359,811,378
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 360,899,649 352,413,769 361,409,492 359,811,378
OP Units - basic 13,726,267 13,736,059 13,706,359 13,735,575
 
Total Common Shares and OP Units - basic 374,625,916 366,149,828 375,115,851 373,546,953
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 2,602,231 2,461,479 2,838,523 2,336,330
 
Total Common Shares and Units - diluted 377,228,147 368,611,307 377,954,374 375,883,283
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 362,208,087 360,395,959
Units (includes OP Units and LTIP Units) 14,325,066 14,200,376
 
Total Shares and Units 376,533,153 374,596,335
(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 nine months and quarter ended September 30, 2013.
 
Equity Residential
Partially Owned Entities as of September 30, 2014
(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 Completed, Not
Development (4) Operating Total Development (4) Stabilized (5) Operating Total
 
Total projects (1)   —     19     19     —     1     3     4  
 
Total apartment units (1)   —     3,771     3,771     —     444     1,225     1,669  
 
Operating information for the nine months

ended 9/30/14 (at 100%):

Operating revenue $ — $ 65,565 $ 65,565 $ — $ 6,874 $ 14,499 $ 21,373
Operating expenses   —     19,390     19,390     159     2,486     5,442     8,087  
 
Net operating income (loss) — 46,175 46,175 (159 ) 4,388 9,057 13,286
Depreciation — 16,202 16,202 — 4,903 6,102 11,005
General and administrative/other   1     34     35     —     1     205     206  
 
Operating (loss) income (1 ) 29,939 29,938 (159 ) (516 ) 2,750 2,075
Interest and other income — 10 10 — — — —
Other expenses — (54 ) (54 ) — — — —
Interest:
Expense incurred, net — (11,708 ) (11,708 ) — (3,905 ) (3,422 ) (7,327 )
Amortization of deferred financing costs   —     (266 )   (266 )   —     —     (81 )   (81 )
 
(Loss) income before income and other taxes and (loss) from
investments in unconsolidated entities (1 ) 17,921 17,920 (159 ) (4,421 ) (753 ) (5,333 )
Income and other tax (expense) benefit — (45 ) (45 ) — (7 ) — (7 )
(Loss) from investments in unconsolidated entities — (1,273 ) (1,273 ) — — — —
             
Net (loss) income $ (1 ) $ 16,603   $ 16,602   $ (159 ) $ (4,428 ) $ (753 ) $ (5,340 )
 
Debt - Secured (2):
EQR Ownership (3) $ — $ 282,048 $ 282,048 $ 1,282 $ 19,359 $ 43,830 $ 64,471
Noncontrolling Ownership   —     78,344     78,344     24,349     77,434     67,970     169,753  
 
Total (at 100%) $ —   $ 360,392   $ 360,392   $ 25,631   $ 96,793   $ 111,800   $ 234,224  
(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 $25.6 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 21 for consolidated projects and Projects Under Development - Unconsolidated on page 22 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 - Unconsolidated on page 22 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 $73.5 million at September 30, 2014. The ventures are owned 60% by the Company and 40% by AVB.
 
Equity Residential
Consolidated Development and Lease-Up Projects as of September 30, 2014
(Amounts in thousands except for project and apartment unit amounts)
                     

Total

Book

Value

 

Total

Not

No. of Total

Book

Placed

Estimated Estimated
Apartment Capital

Value

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 $ 40,563 $ 40,563 $ — 70 % — — Q1 2015 Q3 2015
170 Amsterdam (2) New York, NY 236 110,892 86,175 86,175 — 80 % — — Q1 2015 Q1 2016
Azure (at Mission Bay) San Francisco, CA 273 189,090 125,001 125,001 — 57 % — — Q3 2015 Q4 2016
West Seattle Seattle, WA 206 67,112 34,967 34,967 — 38 % — — Q4 2015 Q3 2016
Tallman Seattle, WA 303 84,277 45,597 45,597 — 43 % — — Q4 2015 Q2 2017
Village at Howard Hughes Los Angeles, CA 545 193,231 74,459 74,459 — 11 % — — Q2 2016 Q2 2017
Millikan Irvine, CA 344 102,331 35,807 35,807 — 8 % — — Q2 2016 Q3 2017
Potrero San Francisco, CA 453 224,474 58,787 58,787 — 5 % — — Q2 2016 Q3 2017
Tasman San Jose, CA 554 214,923 100,255 100,255 — 35 % — — Q2 2016 Q2 2018
340 Fremont (formerly Rincon Hill) San Francisco, CA 348 287,454 87,990 87,990 — 16 % — — Q3 2016 Q1 2018
2nd & Pine (3) Seattle, WA 398   214,742   31,612   31,612   — 1 % — — Q3 2017 Q2 2019
Projects Under Development - Wholly Owned 3,748 1,742,563 721,213 721,213 —
 

Projects Under Development - Partially Owned:

Prism at Park Avenue South (4) New York, NY 269   251,961   215,039   215,039   — 87 % — — Q2 2015 Q1 2016
Projects Under Development - Partially Owned 269 251,961 215,039 215,039 —
         
Projects Under Development 4,017   1,994,524   936,252   936,252   —
 

Completed Not Stabilized - Wholly Owned (5):

Reserve at Town Center III Mill Creek, WA 95 21,330 21,251 — — 99 % 98 % Completed Q4 2014
Elevé (6) Glendale, CA 208 70,500 70,500 — — 97 % 93 % Completed Q4 2014
Park Aire (formerly Enclave at Wellington) Wellington, FL 268 49,000 48,713 — — 88 % 85 % Completed Q1 2015
1111 Belle Pre (formerly The Madison) Alexandria, VA 360 113,072 111,433 — — 93 % 89 % Completed Q2 2015
Jia (formerly Chinatown Gateway) Los Angeles, CA 280 92,920 89,062 — — 91 % 85 % Completed Q2 2015
Urbana (formerly Market Street Landing) Seattle, WA 287 89,024 86,914 — — 79 % 77 % Completed Q2 2015
Residences at Westgate I (formerly Westgate II) Pasadena, CA 252   127,292   123,073   —   — 58 % 50 % Completed Q2 2015
Projects Completed Not Stabilized - Wholly Owned 1,750 563,138 550,946 — —
 
         
Projects Completed Not Stabilized 1,750   563,138   550,946   —   —
 

Completed and Stabilized During the Quarter - Wholly Owned:

Breakwater at Marina Del Rey (2) Marina Del Rey, CA 224 87,669 87,613 — — 99 % 98 % Completed Stabilized
Oasis at Delray Beach II Delray Beach, FL 128     21,979     21,960     —     — 95 % 93 % Completed Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned 352 109,648 109,573 — —
         
Projects Completed and Stabilized During the Quarter 352   109,648   109,573   —   —
 
Total Consolidated Projects 6,119 $ 2,667,310 $ 1,596,771 $ 936,252 $ —
 
Land Held for Development N/A   N/A $ 279,139 $ 279,139 $ —
 

 

 

NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Total Capital

Cost (1)

Q3 2014

NOI

Projects Under Development $ 1,994,524 $ 125
Completed Not Stabilized 563,138 4,916
Completed and Stabilized During the Quarter   109,648     1,537  
Total Consolidated Development NOI Contribution $ 2,667,310   $ 6,578  
(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 projects are subject to long term ground leases.

(3) 2nd & Pine – Includes an adjacent land parcel on which certain improvements including a portion of a parking structure will be constructed as part of the development of this project. The Company may eventually construct an additional apartment tower on this site or sell a portion of the garage and the related air rights.
(4) Prism at Park Avenue South – The Company is jointly developing with Toll Brothers (NYSE: TOL) a project at 400 Park Avenue South in New York City with the Company's rental portion on floors 2-22 and Toll's for sale portion on floors 23-40. The total capital cost and total book value to date represent only the Company's portion of the project. Toll Brothers has funded $110.0 million for their allocated share of the project.
(5) 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.
(6) Elevé – The Company acquired this project during the second quarter of 2014, prior to stabilization, and has completed lease-up activities, with stabilization expected to occur in the fourth quarter of 2014.
 
Equity Residential
Unconsolidated Development and Lease-Up Projects as of September 30, 2014
(Amounts in thousands except for project and apartment unit amounts)
                       

Total

Book

Value

Total

Not

No. of Total

Book

Placed

Estimated Estimated
Percentage Apartment Capital

Value

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:

Parc on Powell (formerly 1333 Powell) (2) Emeryville, CA 5.0 % 176 $ 75,000 $ 61,037 $ 61,037 $ 25,631 77 % — — Q1 2015 Q4 2015
Projects Under Development - Unconsolidated 176 75,000 61,037 61,037 25,631
         
Projects Under Development 176   75,000   61,037   61,037   25,631
 

Completed Not Stabilized - Unconsolidated (3):

Domain (4) San Jose, CA 20.0 % 444   155,820   155,362   —   96,793 89 % 87 % Completed Q1 2015
Projects Completed Not Stabilized - Unconsolidated

444

155,820

155,362

—

96,793

         
Projects Completed Not Stabilized 444   155,820   155,362   —   96,793
 

Completed and Stabilized During the Quarter - Unconsolidated:

Nexus Sawgrass (formerly Sunrise Village) (4) Sunrise, FL 20.0 % 501   78,640   78,622   —   48,633 97 % 95 % Completed Stabilized

Projects Completed and Stabilized During the Quarter - Unconsolidated

501

78,640

78,622

—

48,633

         

Projects Completed and Stabilized During the Quarter

501   78,640   78,622   —   48,633
 
Total Unconsolidated Projects 1,121 $ 309,460 $ 295,021 $ 61,037 $ 171,057
(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) Parc on Powell – Construction of this project is being partially funded with a construction loan that has a maximum debt commitment of $39.5 million, 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) 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 $234.5 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 had 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 Nine Months Ended September 30, 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

Apartment

Units (1)

Expense (2) Avg. Per

Apartment

Unit

Payroll (3) Avg. Per

Apartment

Unit

Total Avg. Per

Apartment

Unit

Replacements

(4)

Avg. Per

Apartment

Unit

Building

Improvements

(5)

Avg. Per

Apartment

Unit

Total Avg. Per

Apartment

Unit

Grand

Total

Avg. Per

Apartment

Unit

 
Same Store Properties (6) 99,686 $ 77,368 $ 776 $ 62,306 $ 625 $ 139,674 $ 1,401 $ 63,691 $ 639 $ 65,546 $ 658 $ 129,237 $ 1,297

(9)

$ 268,911 $ 2,698
 
Non-Same Store Properties (7) 4,727 1,943 537 1,249 345 3,192 882 182 50 3,165 875 3,347 925 6,539 1,807
 
Other (8) —   885   753   1,638   408   189   597   2,235
 
Total 104,413 $ 80,196 $ 64,308 $ 144,504 $ 64,281 $ 68,900 $ 133,181 $ 277,685
(1)   Total Apartment Units - Excludes 1,669 unconsolidated apartment units and 5,005 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 $37.5 million spent during the nine months ended September 30, 2014 on apartment unit renovations/rehabs (primarily kitchens and baths) on 4,416 same store apartment units (equating to about $8,500 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 $50.0 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 3,618 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 $1,200 per apartment unit excluding apartment unit renovation/rehab costs.
 
Equity Residential
Discontinued Operations
(Amounts in thousands)
           
Nine Months Ended Quarter Ended
September 30,   September 30,
  2014     2013     2014     2013  
 
REVENUES
Rental income $ 1,218   $ 119,191   $ (57 ) $ 11,235  
 
Total revenues   1,218     119,191     (57 )   11,235  
 
EXPENSES (1)
Property and maintenance (125 ) 35,571 (84 ) 4,122
Real estate taxes and insurance 146 11,602 152 735
Property management — 1 — —
Depreciation — 33,864 — 2,902
General and administrative   59     77     8     4  
 
Total expenses   80     81,115     76     7,763  
 
Discontinued operating income (loss) 1,138 38,076 (133 ) 3,472
 
Interest and other income 152 156 72 66
Other expenses — (3 ) — —
Interest (2):
Expense incurred, net — (1,276 ) — (18 )
Amortization of deferred financing costs — (228 ) — —
Income and other tax (expense) benefit   (13 )   (504 )   —     (41 )
 
Discontinued operations 1,277 36,221 (61 ) 3,479
Net gain on sales of discontinued operations   223     1,990,577     (1 )   401,703  
 
Discontinued operations, net $ 1,500   $ 2,026,798   $ (62 ) $ 405,182  
Note: The amounts included in discontinued operations for the nine months and quarter ended September 30, 2014 represent trailing activity for properties sold in 2013 and prior years.
 
(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 Q3 2014
to Actual Q3 2014
Amounts Per Share
Guidance Q3 2014 Normalized FFO - Diluted (2) (3) $ 299,727 $ 0.794
Property NOI 8,966 0.023
Other   507     0.001  
 
Actual Q3 2014 Normalized FFO - Diluted (2) (3) $ 309,200   $ 0.818  
 
 
               
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
Nine Months Ended September 30, Quarter Ended September 30,
  2014     2013   Variance   2014     2013   Variance
Impairment $ —   $ —   $ —   $ —   $ —   $ —  
Asset impairment and valuation allowances   —     —     —     —     —     —  
 
Archstone direct acquisition costs (other expenses) (A) (1 ) 19,741 (19,742 ) 6 182 (176 )
Archstone indirect costs (loss from investments in unconsolidated entities) (B) 6,370 54,781 (48,411 ) 121 1,771 (1,650 )
Property acquisition costs (other expenses) 278 203 75 135 21 114
Write-off of pursuit costs (other expenses)   2,067     3,969     (1,902 )   575     604     (29 )
Property acquisition costs and write-off of pursuit costs   8,714     78,694     (69,980 )   837     2,578     (1,741 )
 
Prepayment premiums/penalties (interest expense) — 71,443 (71,443 ) — — —
Write-off of unamortized deferred financing costs (interest expense) 604 4,126 (3,522 ) 22 — 22
Write-off of unamortized (premiums)/discounts/OCI (interest expense) — 3,251 (3,251 ) — — —
(Gain) due to ineffectiveness of forward starting swaps (interest expense)   (91 )   —     (91 )   —     —     —  

Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions and non-cash convertible debt discounts

  513     78,820     (78,307 )   22     —     22  
 
Net (gain) loss on sales of land parcels (1,846 ) (12,179 ) 10,333 (1,052 ) 2,437 (3,489 )
Net incremental (gain) on sales of condominium units — (7 ) 7 — — —
(Gain) on sale of Equity Corporate Housing (ECH) — (709 ) 709 — (108 ) 108
(Gain) on sale of investment securities   (57 )   (830 )   773     —     (830 )   830  
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (1,903 )   (13,725 )   11,822     (1,052 )   1,499     (2,551 )
 
Write-off of unamortized retail lease intangibles (rental income) (147 ) — (147 ) — — —
Insurance/litigation settlement or reserve income (interest and other income) (2,761 ) — (2,761 ) (419 ) — (419 )
Insurance/litigation settlement or reserve expense (other expenses)   4,099     3,361     738     4,000     3,361     639  
Other miscellaneous non-comparable items   1,191     3,361     (2,170 )   3,581     3,361     220  
           
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 8,515   $ 147,150   $ (138,635 ) $ 3,388   $ 7,438   $ (4,050 )
(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 28 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 28 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
 
 
 

2014 Normalized FFO Guidance (per share diluted)

 

Q4 2014

2014

 
Expected Normalized FFO (2) (3) $0.81 to $0.83 $3.12 to $3.14
 

2014 Same Store Assumptions

 
Physical occupancy 95.6%
Revenue change 4.1%
Expense change 2.2%
NOI change 5.1%
 
(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. 25 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 $11.0 billion
Weighted average interest rate (reduced for capitalized interest) 4.18%
Interest expense $460 million
 

2014 Other Guidance Assumptions

 
General and administrative expense $51.0 million
Interest and other income $0.7 million
Income and other tax expense $2.0 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 377.5 million
 
Equity Residential
Normalized EBITDA Reconciliations
(Amounts in thousands)
             
Normalized EBITDA Reconciliations for Page 17
                     
Trailing Twelve Months 2014 2013
September 30, 2014 June 30, 2014 Q3 Q2 Q1 Q4 Q3
Net income $ 547,512 $ 708,039 $ 231,190 $ 117,720 $ 82,732 $ 115,870 $ 391,717
Interest expense incurred, net (includes discontinued operations) 496,646 498,448 118,251 115,924 113,049 149,422 120,053
Amortization of deferred financing costs (includes discontinued operations) 15,115 16,822 2,628 3,134 2,792 6,561 4,335
Depreciation (includes discontinued operations) 749,028 838,168 190,469 190,136 185,167 183,256 279,609
Income and other tax expense (benefit) (includes discontinued operations) 948 1,221 260 648 251 (211 ) 533
Archstone direct acquisition costs (other expenses) 122 298 6 23 (30 ) 123 182
Property acquisition costs (other expenses) 388 274 135 94 49 110 21
Write-off of pursuit costs (other expenses) 3,282 3,311 575 1,040 452 1,215 604
Loss from investments in unconsolidated entities 10,608 12,641 1,176 7,616 1,409 407 3,209
Net (gain) loss on sales of land parcels (1,894 ) 1,595 (1,052 ) (824 ) 30 (48 ) 2,437
(Gain) on sale of investment securities (3,430 ) (4,260 ) — (36 ) (21 ) (3,373 ) (830 )
Write-off of unamortized retail lease intangibles (rental income) (2,293 ) (2,293 ) — (147 ) — (2,146 ) —
Insurance/litigation settlement or reserve income (interest and other income) (2,761 ) (2,342 ) (419 ) (1,879 ) (463 ) — —
Insurance/litigation settlement or reserve expense (other expenses) 4,349 3,710 4,000 99 — 250 3,361
Net (gain) loss on sales of discontinued operations (46,151 ) (447,855 ) 1 (153 ) (71 ) (45,928 ) (401,703 )
Net (gain) on sales of real estate properties   (128,544 )   (14,903 )   (113,641 )   (14,903 )   —     —     —  
Normalized EBITDA (1) $ 1,642,925   $ 1,612,874   $ 433,579   $ 418,492   $ 385,346   $ 405,508   $ 403,528  
 

Balance Sheet Items:

September 30, 2014 June 30, 2014
Total debt (1) $ 10,957,606 $ 11,082,043
Cash and cash equivalents (31,478 ) (76,132 )
Mortgage principal reserves/sinking funds   (39,425 )   (37,448 )
Net debt (1) $ 10,886,703   $ 10,968,463  
 
(1) Normalized EBITDA, total debt to Normalized EBITDA and net debt to Normalized EBITDA are important metrics in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Normalized EBITDA, total debt to Normalized EBITDA and net debt to Normalized EBITDA are useful to investors, creditors and rating agencies because they allow investors to compare the Company's credit strength to prior reporting periods and to other 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 credit quality.
 
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, 25 and 26

 

 

 

Expected Q3 2014

Expected Expected
Q4 2014 2014
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $ 262,377 $ 0.695 $0.57 to $0.59 $1.71 to $1.73
Add: Expected depreciation expense 190,200 0.504 0.51 2.00
Less: Expected net gain on sales (5)   (154,315 )   (0.409 ) (0.27 ) (0.61 )
 
Expected FFO - Diluted (1) (3) 298,262 0.790 0.81 to 0.83 3.10 to 3.12
 
Asset impairment and valuation allowances — — — —
Property acquisition costs and write-off of pursuit costs 1,442 0.004 — 0.03
Debt extinguishment (gains) losses, including prepayment penalties,

preferred share redemptions and non-cash convertible debt discounts

23 — — —
(Gains) losses on sales of non-operating assets, net of income and other tax

expense (benefit)

— — — (0.01 )
Other miscellaneous non-comparable items   —     —   —   —  
 
Expected Normalized FFO - Diluted (2) (3) $ 299,727   $ 0.794   $0.81 to $0.83 $3.12 to $3.14
 
Definitions and Footnotes for Pages 6, 25 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 September YTD 2014 and the Third Quarter 2014 Same Store Properties:
 
Nine Months Ended September 30, Quarter Ended September 30,
2014 2013 2014 2013
 
Operating income $ 670,825 $ 288,619 $ 243,269 $ 120,396
Adjustments:
Archstone pre-ownership operating results — 55,694 — —
Non-same store operating results (43,937 ) (16,079 ) (18,373 ) (9,961 )
Fee and asset management revenue (7,596 ) (7,399 ) (2,077 ) (2,566 )
Fee and asset management expense 4,293 4,739 1,253 1,516
Depreciation 565,772 796,233 190,469 276,707
General and administrative   41,296     47,017     9,968     14,437  
 
Same store NOI $ 1,230,653   $ 1,168,824   $ 424,509   $ 400,529