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

“2014 was another exceptional year for Equity Residential in which we delivered year over year growth in Normalized FFO per share of more than 11%, among the best years in our history,” said David J. Neithercut, Equity Residential’s President and CEO. “Improving labor markets, robust household formation and declining single family home ownership levels will keep demand for rental housing high and produce above trend growth for many years to come.”

Fourth Quarter 2014

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the fourth quarter of 2014 was $0.87 per share compared to $0.67 per share in the fourth quarter of 2013. The difference is due primarily to higher prepayment penalties incurred in the fourth quarter of 2013 and the items described below.

For the fourth quarter of 2014, the company reported Normalized FFO of $0.86 per share compared to $0.77 per share in the same period of 2013. The following items impacted Normalized FFO per share in the quarter:

  • a positive impact of approximately $0.07 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;
  • a positive impact of approximately $0.01 per share from lower G&A expenses; and
  • a negative impact of approximately $0.01 per share due to dilution from the timing of the company’s 2014 transaction activity.

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 27 and FFO on page 28 of this release.

For the fourth quarter of 2014, the company reported earnings of $0.59 per share compared to $0.30 per share in the fourth quarter of 2013. The difference is due primarily to higher gains on property sales in the fourth quarter of 2014, higher prepayment penalties incurred in the fourth quarter of 2013 and the items described above.

Year Ended December 31, 2014

FFO for the year ended December 31, 2014 was $3.15 per share compared to $2.35 per share in the same period of 2013. The difference is due primarily to higher acquisition expenses and prepayment penalties incurred during 2013 and improved operations during 2014.

For the year ended December 31, 2014, the company reported Normalized FFO of $3.17 per share compared to $2.85 per share in the same period of 2013.

For the year ended December 31, 2014, the company reported earnings of $1.73 per share compared to $5.16 per share in the same period of 2013. The difference is due primarily to higher gains on property sales during 2013, partially offset by higher depreciation expense, acquisition expenses and prepayment penalties incurred during 2013 and improved operations during 2014.

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 fourth quarter to fourth quarter comparison, which includes 98,421 apartment units, revenues increased 4.9%, expenses increased 2.2% and NOI increased 6.3%.

On a same store year to year comparison, which includes 97,911 apartment units, revenues increased 4.3%, expenses increased 1.8% and NOI increased 5.6%.

Investment Activity

The company acquired two properties during the fourth quarter, both in Seattle, with a total of 273 apartment units for an aggregate purchase price of approximately $94.2 million at a weighted average capitalization (cap) rate of 4.8%. Also during the quarter, the company acquired its joint venture partner’s 95% interest in Parc on Powell, a 176-unit apartment property currently under development in Emeryville, a suburb of San Francisco, for a stabilized value of $87.5 million. The company acquired its original 5% interest in the property as part of the Archstone acquisition. The project is expected to stabilize in the second year of full ownership at a 4.8% yield on cost.

During the fourth quarter, the company sold six consolidated apartment properties, consisting of 1,775 apartment units, for an aggregate sale price of approximately $269.9 million at a weighted average cap rate of 5.9%. These sales generated an unlevered internal rate of return (IRR), inclusive of management costs, of 6.5%. Also during the quarter, the company sold for approximately $62.5 million an unconsolidated 388-unit apartment property located in Phoenix, in which it had an 85% interest acquired as part of the Archstone transaction. In addition, the company sold a land parcel located in Los Angeles for a sale price of $32.1 million during the quarter.

During 2014, the company acquired six properties, consisting of 1,353 apartment units, for an aggregate purchase price of approximately $469.8 million and a weighted average cap rate of 4.9%. In addition, the company acquired two land parcels for an aggregate purchase price of approximately $28.8 million as well as the Parc on Powell transaction described above.

During 2014, the company sold 10 consolidated apartment properties, consisting of 3,092 apartment units, for an aggregate sale price of approximately $467.0 million at a weighted average cap rate of 6.1%. These sales generated an unlevered IRR, inclusive of management costs, of 8.9%. The company also sold three land parcels for an aggregate sale price of $62.6 million during 2014. In addition, the company sold the unconsolidated asset in Phoenix described above.

Revised Executive Compensation Program

In response to input from its shareholders, the company has revised its executive compensation program beginning in 2015. The long term incentive portion of the revised program will be performance based and determined by the company’s absolute and relative total shareholder return over the three year performance period ending December 31, 2017. Accounting rules require the company to expense in 2015 a portion of both the previous program’s time based equity grants for service in 2014 and the performance based grants issued under the revised plan creating a duplicative charge of approximately $11.0 million. This charge will not be included in the company’s Normalized FFO in 2015.

First Quarter 2015 Guidance

The company has established a Normalized FFO guidance range of $0.77 to $0.81 per share for the first quarter of 2015. The difference between the company’s fourth quarter 2014 Normalized FFO of $0.86 per share and the midpoint of the first quarter 2015 guidance range of $0.79 per share is due primarily to:

  • a negative impact of approximately $0.05 per share from lower NOI primarily as a result of higher operating expenses in the first quarter of 2015; and
  • a negative impact of approximately $0.02 per share from other items.

Full Year 2015 Guidance

The company has established a Normalized FFO guidance range of $3.35 to $3.45 per share for the full year 2015. The assumptions underlying this guidance can be found on page 27 of this release. The difference between the company’s full-year 2014 Normalized FFO of $3.17 per share and the midpoint of the full year 2015 guidance range of $3.40 per share is primarily due to:

  • a positive impact of approximately $0.21 per share from higher NOI from same store properties;
  • a positive impact of approximately $0.05 per share from non-same store properties, including properties in lease-up;
  • a negative impact of approximately $0.04 per share from the timing of the company’s 2014 and 2015 transaction activity;
  • a positive impact of approximately $0.03 per share from lower interest expense; and
  • a negative impact of approximately $0.02 per share from other items.

2015 Common Share Dividend

As previously announced, the company’s dividend policy is to pay 65% of the midpoint of the range of Normalized FFO guidance customarily provided as part of the company’s fourth quarter earnings release. Based on the guidance above, the company expects to pay four quarterly dividends of $0.5525 per share for an annual dividend of $2.21 per share in 2015, which represents a 10.5% increase over the 2014 dividend. All future dividends remain subject to the discretion of the company’s Board of Trustees.

First Quarter 2015 Earnings and Conference Call

Equity Residential expects to announce first quarter 2015 results on Tuesday, April 28, 2015 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, April 29, 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 391 properties consisting of 109,225 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

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

A live web cast of the company’s conference call discussing these results will take place tomorrow, Wednesday, February 4, at 10:00 a.m. Central. Please visit the Investor section of the company’s web site at www.equityapartments.com for the link. A replay of the web cast will be available for two weeks at this site.

       
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
 
Year Ended December 31, Quarter Ended December 31,
2014 2013 2014 2013
REVENUES
Rental income $ 2,605,311 $ 2,378,004 $ 662,819 $ 636,835
Fee and asset management   9,437     9,698     1,841     2,299  
Total revenues   2,614,748     2,387,702     664,660     639,134  
 
EXPENSES
Property and maintenance 473,098 449,427 112,011 118,641
Real estate taxes and insurance 325,401 293,999 79,684 76,246
Property management 79,636 84,342 18,556 20,947
Fee and asset management 5,429 6,460 1,136 1,721
Depreciation 758,861 978,973 193,089 182,740
General and administrative   50,948     62,179     9,652     15,162  
Total expenses   1,693,373     1,875,380     414,128     415,457  
 
Operating income 921,375 512,322 250,532 223,677
 
Interest and other income 4,462 5,283 1,249 3,516
Other expenses (9,073 ) (29,630 ) (1,894 ) (1,886 )
Interest:
Expense incurred, net (457,191 ) (586,854 ) (109,967 ) (149,402 )
Amortization of deferred financing costs   (11,088 )   (22,197 )   (2,534 )   (6,561 )
Income (loss) before income and other taxes, (loss) income from investments

in unconsolidated entities, net gain on sales of real estate properties and

land parcels and discontinued operations

448,485 (121,076 ) 137,386 69,344
Income and other tax (expense) benefit (1,394 ) (1,169 ) (248 ) 156
(Loss) income from investments in unconsolidated entities (7,952 ) (58,156 ) 2,249 (407 )
Net gain on sales of real estate properties 212,685 — 84,141 —
Net gain on sales of land parcels   5,277     12,227     3,431     48  
Income (loss) from continuing operations 657,101 (168,174 ) 226,959 69,141
Discontinued operations, net   1,582     2,073,527     82     46,729  
Net income 658,683 1,905,353 227,041 115,870
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership (24,831 ) (75,278 ) (8,558 ) (4,331 )
Partially Owned Properties   (2,544 )   538     (744 )   (563 )
Net income attributable to controlling interests 631,308 1,830,613 217,739 110,976
Preferred distributions   (4,145 )   (4,145 )   (1,036 )   (1,036 )
Net income available to Common Shares $ 627,163   $ 1,826,468   $ 216,703   $ 109,940  
 
Earnings per share – basic:
Income (loss) from continuing operations available to Common Shares $ 1.73   $ (0.47 ) $ 0.60   $ 0.18  
Net income available to Common Shares $ 1.74   $ 5.16   $ 0.60   $ 0.31  
Weighted average Common Shares outstanding   361,181     354,305     362,018     359,919  
 
Earnings per share – diluted:
Income (loss) from continuing operations available to Common Shares $ 1.72   $ (0.47 ) $ 0.59   $ 0.18  
Net income available to Common Shares $ 1.73   $ 5.16   $ 0.59   $ 0.30  
Weighted average Common Shares outstanding   377,735     354,305     378,886     375,860  
 
Distributions declared per Common Share outstanding $ 2.00   $ 1.85   $ 0.50   $ 0.65  
         
Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
 
Year Ended December 31, Quarter Ended December 31,
2014 2013 2014 2013
Net income $ 658,683 $ 1,905,353 $ 227,041 $ 115,870
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties (2,544 ) 538 (744 ) (563 )
Preferred distributions   (4,145 )   (4,145 )   (1,036 )   (1,036 )
Net income available to Common Shares and Units 651,994 1,901,746 225,261 114,271
 
Adjustments:
Depreciation 758,861 978,973 193,089 182,740
Depreciation – Non-real estate additions (4,643 ) (4,806 ) (1,158 ) (1,180 )
Depreciation – Partially Owned Properties (4,285 ) (6,499 ) (1,074 ) (1,094 )
Depreciation – Unconsolidated Properties 6,754 3,661 1,572 1,330
Net (gain) loss on sales of unconsolidated entities – operating assets (4,902 ) (7 ) (4,902 ) 9
Net (gain) on sales of real estate properties (212,685 ) — (84,141 ) —
Discontinued operations:
Depreciation — 34,380 — 516
Net (gain) loss on sales of discontinued operations (179 ) (2,036,505 ) 44 (45,928 )
Net incremental gain on sales of condominium units — 8 — 1
Gain on sale of Equity Corporate Housing (ECH)   —     1,470     —     761  
FFO available to Common Shares and Units (1) (3) (4) 1,190,915 872,421 328,691 251,426
 
Adjustments (see page 26 for additional detail):
Asset impairment and valuation allowances — — — —
Property acquisition costs and write-off of pursuit costs 8,248 79,365 (466 ) 671
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts (1,110 ) 121,730 (1,623 ) 42,910
(Gains) losses on sales of non-operating assets, net of income and other tax expense
(benefit) (1,866 ) (17,908 ) 37 (4,183 )
Other miscellaneous non-comparable items   259     1,465     (932 )   (1,896 )
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 1,196,446   $ 1,057,073   $ 325,707   $ 288,928  
 
FFO (1) (3) $ 1,195,060 $ 876,566 $ 329,727 $ 252,462
Preferred distributions   (4,145 )   (4,145 )   (1,036 )   (1,036 )
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 1,190,915   $ 872,421   $ 328,691   $ 251,426  
FFO per share and Unit - basic $ 3.18   $ 2.37   $ 0.87   $ 0.67  
FFO per share and Unit - diluted $ 3.15   $ 2.35   $ 0.87   $ 0.67  
 
Normalized FFO (2) (3) $ 1,200,591 $ 1,061,218 $ 326,743 $ 289,964
Preferred distributions   (4,145 )   (4,145 )   (1,036 )   (1,036 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 1,196,446   $ 1,057,073   $ 325,707   $ 288,928  
Normalized FFO per share and Unit - basic $ 3.19   $ 2.87   $ 0.87   $ 0.77  
Normalized FFO per share and Unit - diluted $ 3.17   $ 2.85   $ 0.86   $ 0.77  
 
Weighted average Common Shares and Units outstanding - basic   374,899     368,038     375,711     373,643  
Weighted average Common Shares and Units outstanding - diluted   377,735     370,478     378,886     375,860  
Note:   See page 26 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)
 
December 31, December 31,
2014 2013
ASSETS
Investment in real estate
Land $ 6,295,404 $ 6,192,512
Depreciable property 19,851,504 19,226,047
Projects under development 1,343,919 988,867
Land held for development   184,556     393,522  
Investment in real estate 27,675,383 26,800,948
Accumulated depreciation   (5,432,805 )   (4,807,709 )
Investment in real estate, net 22,242,578 21,993,239
Cash and cash equivalents 40,080 53,534
Investments in unconsolidated entities 105,434 178,526
Deposits – restricted 72,303 103,567
Escrow deposits – mortgage 48,085 42,636
Deferred financing costs, net 58,380 58,486
Other assets   383,754     404,557  
Total assets $ 22,950,614   $ 22,834,545  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 5,086,515 $ 5,174,166
Notes, net 5,425,346 5,477,088
Lines of credit 333,000 115,000
Accounts payable and accrued expenses 153,590 118,791
Accrued interest payable 89,540 78,309
Other liabilities 389,915 347,748
Security deposits 75,633 71,592
Distributions payable   188,566     243,511  
Total liabilities   11,742,105     11,626,205  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   500,733     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 December 31, 2014 and December 31, 2013

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

1,000,000,000 shares authorized; 362,855,454 shares issued and

outstanding as of December 31, 2014 and 360,479,260 shares

issued and outstanding as of December 31, 2013

3,629 3,605
Paid in capital 8,536,340 8,561,500
Retained earnings 1,950,639 2,047,258
Accumulated other comprehensive (loss)   (172,152 )   (155,162 )
Total shareholders’ equity 10,368,456 10,507,201
Noncontrolling Interests:
Operating Partnership 214,411 211,412
Partially Owned Properties   124,909     126,583  
Total Noncontrolling Interests   339,320     337,995  
Total equity   10,707,776     10,845,196  
Total liabilities and equity $ 22,950,614   $ 22,834,545  
 
Equity Residential
Portfolio Summary
As of December 31, 2014
       
% of Average
Apartment Stabilized Rental
Markets/Metro Areas Properties Units NOI (1) Rate (2)
 
Core:
Washington DC 57 18,652 17.5 % $ 2,196
New York 38 10,330 16.3 % 3,863
San Francisco 51 13,208 14.3 % 2,403
Los Angeles 61 13,403 13.0 % 2,208
Boston 34 7,816 10.1 % 2,889
South Florida 35 11,434 7.4 % 1,629
Seattle 43 8,542 7.2 % 1,896
Denver 19 6,935 4.7 % 1,438
San Diego 13 3,505 3.1 % 1,982
Orange County, CA 11 3,490 2.9 %   1,790
Subtotal – Core 362 97,315 96.5 % 2,291
 
Non-Core:
Inland Empire, CA 10 3,081 2.1 % 1,570
Orlando 3 827 0.4 % 1,218
All Other Markets 14 2,969 1.0 %   1,178
Subtotal – Non-Core 27 6,877 3.5 %   1,357
Total 389 104,192 100.0 %   2,229
 
Military Housing 2 5,033 —     —
 
Grand Total 391 109,225 100.0 % $ 2,229
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
 
(1) % of Stabilized NOI includes budgeted 2015 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 December 31, 2014
 
Apartment
Properties Units
Wholly Owned Properties 364 98,287
Master-Leased Properties - Consolidated 3 853
Partially Owned Properties - Consolidated 19 3,771
Partially Owned Properties - Unconsolidated 3 1,281

Military Housing

2

   

5,033

 
 
391     109,225  
 
                       
 
Portfolio Rollforward Q4 2014
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
9/30/2014 396 111,087
Acquisitions:
Consolidated:
Rental Properties - Stabilized 2 273 $ 94,240 4.8 %
Dispositions:
Consolidated:
Rental Properties (6 ) (1,775 ) $ (269,868 ) 5.9 %
Land Parcel (one) — — $ (32,100 )
Unconsolidated:
Rental Properties (1) (1 ) (388 ) $ (62,500 ) 5.6 %
Configuration Changes —   28  
 
12/31/2014 391   109,225  
 
                       
 
Portfolio Rollforward 2014
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
12/31/2013 390 109,855
Acquisitions:
Consolidated:
Rental Properties - Stabilized 4 1,011 $ 363,240 4.8 %
Rental Properties - Not Stabilized (2) 2 342 $ 106,610 5.4 %
Land Parcels (two) — — $ 28,790
Dispositions:
Consolidated:
Rental Properties (10 ) (3,092 ) $ (466,968 ) 6.1 %
Land Parcels (three) — — $ (62,602 )
Unconsolidated:
Rental Properties (1) (1 ) (388 ) $ (62,500 ) 5.6 %
Completed Developments - Consolidated 6 1,542
Configuration Changes —   (45 )
 
12/31/2014 391   109,225  
 
(1)   The Company owned an 85% interest in this unconsolidated rental property. Sale price listed is the gross sale price.
(2) 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
           
Fourth Quarter 2014 vs. Fourth Quarter 2013
Same Store Results/Statistics for 98,421 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

Average

Rental

Description Revenues Expenses NOI (1)

Rate (2)

Occupancy Turnover
 
Q4 2014 $ 632,740 $ 203,787 $ 428,953 $ 2,233 96.0 % 12.4 %
Q4 2013 $ 603,015   $ 199,463   $ 403,552   $ 2,143   95.4 % 12.2 %
 
Change $ 29,725   $ 4,324   $ 25,401   $ 90   0.6 % 0.2 %
 
Change 4.9 % 2.2 % 6.3 % 4.2 %
 
                         
 
 
Fourth Quarter 2014 vs. Third Quarter 2014
Same Store Results/Statistics for 99,726 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

Average

Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q4 2014 $ 641,086 $ 206,421 $ 434,665 $ 2,233 96.0 % 12.4 %
Q3 2014 $ 638,016   $ 212,764   $ 425,252   $ 2,221   96.1 % 17.2 %
 
Change $ 3,070   $ (6,343 ) $ 9,413   $ 12   (0.1 %) (4.8 %)
 
Change 0.5 %

(3.0

%) 2.2 % 0.5 %
 
                         
 
 
2014 vs. 2013
Same Store Results/Statistics for 97,911 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

Average

Rental

Description Revenues Expenses NOI (1)

Rate (2)

Occupancy Turnover
 
2014 $ 2,475,933 $ 830,697 $ 1,645,236 $ 2,202 95.8 % 55.0 %
2013 $ 2,374,350   $ 815,865   $ 1,558,485   $ 2,119   95.4 % 55.5 %
 
Change $ 101,583   $ 14,832   $ 86,751   $ 83   0.4 % (0.5 %)
 
Change 4.3 % 1.8 % 5.6 % 3.9 %
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
Fourth Quarter 2014 vs. Fourth Quarter 2013
Same Store Results/Statistics by Market
               
 
Increase (Decrease) from Prior Year's Quarter

Q4 2014

Q4 2014

Q4 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 18.0 % $ 2,219 95.3 % (0.1%) 5.2 % (2.4%) (0.4%) 0.3 %
New York 10,330 17.1 % 3,850 96.8 % 4.3 % 3.5 % 4.8 % 3.4 % 0.8 %
San Francisco 12,764 14.5 % 2,387 96.8 % 10.2 % (1.0%) 15.7 % 8.5 % 1.4 %
Los Angeles 11,104 10.7 % 2,152 96.1 % 5.8 % 0.6 % 8.5 % 4.8 % 0.8 %
Boston 7,722 10.5 % 2,890 96.4 % 3.7 % 3.2 % 3.9 % 3.0 % 0.6 %
South Florida 10,537 7.4 % 1,613 95.6 % 5.9 % (1.7%) 10.4 % 5.6 % 0.3 %
Seattle 7,752 6.7 % 1,882 95.5 % 7.7 % 5.1 % 8.9 % 6.8 % 0.8 %
Denver 6,935 4.9 % 1,444 95.8 % 9.4 % 1.0 % 12.7 % 8.7 % 0.5 %
San Diego 3,505 3.3 % 1,990 96.5 % 4.6 % (0.4%) 7.0 % 3.9 % 0.8 %
Orange County, CA 3,490 3.1 % 1,804 96.6 % 5.3 % 0.5 % 7.2 % 4.3 % 0.8 %
Subtotal – Core 91,880 96.2 % 2,295 96.1 % 5.0 % 2.1 % 6.4 % 4.2 % 0.7 %
 
Non-Core:
Inland Empire, CA 3,081 2.3 % 1,576 95.4 % 3.4 % (1.9%) 6.0 % 3.9 % (0.4%)
Orlando 827 0.4 % 1,225 95.9 % 3.8 % 10.4 % (0.2%) 1.7 % 2.0 %
All Other Markets 2,633 1.1 % 1,141 96.0 % 4.1 % 6.3 % 2.4 % 3.6 % 0.4 %
Subtotal – Non-Core 6,541 3.8 % 1,356 95.7 % 3.7 % 2.8 % 4.2 % 3.4 % 0.2 %
                 
Total 98,421 100.0 % $ 2,233 96.0 % 4.9 % 2.2 % 6.3 % 4.2 % 0.6 %
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
Fourth Quarter 2014 vs. Third Quarter 2014
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Quarter

Q4 2014

Q4 2014

Q4 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 18.1 % $ 2,209 95.4 % (1.7 %) (4.7 %) (0.3 %) (1.1 %) (0.5 %)
New York 10,330 16.9 % 3,850 96.8 % 0.2 % 0.8 % (0.1 %) 0.0 % 0.2 %
San Francisco 12,764 14.3 % 2,387 96.8 % 2.3 % (2.7 %) 4.5 % 1.7 % 0.6 %
Los Angeles 11,758 11.3 % 2,183 96.0 % 0.5 % (5.9 %) 3.9 % 0.6 % (0.1 %)
Boston 7,722 10.4 % 2,890 96.4 % 1.6 % (1.5 %) 3.1 % 1.4 % 0.2 %
South Florida 10,665 7.4 % 1,614 95.6 % 1.1 % (5.0 %) 4.6 % 1.0 % 0.1 %
Seattle 7,886 6.7 % 1,880 95.5 % 0.4 % (1.8 %) 1.5 % 0.9 % (0.5 %)
Denver 6,935 4.9 % 1,444 95.8 % 1.9 % (7.5 %) 5.7 % 2.0 % (0.2 %)
San Diego 3,505 3.2 % 1,990 96.5 % 0.5 % (3.6 %) 2.4 % 0.5 % 0.1 %
Orange County, CA 3,490 3.1 %   1,804 96.6 % 1.1 % (5.5 %) 3.8 % 0.7 % 0.3 %
Subtotal – Core 93,185 96.3 % 2,294 96.1 % 0.5 % (3.1 %) 2.3 % 0.5 % 0.0 %
 
Non-Core:
Inland Empire, CA 3,081 2.2 % 1,576 95.4 % (0.8 %) (5.8 %) 1.7 % (0.1 %) (0.6 %)
Orlando 827 0.4 % 1,225 95.9 % (0.8 %) 1.0 % (2.0 %) (1.0 %) 0.2 %
All Other Markets 2,633 1.1 %   1,141 96.0 % 0.6 % 4.1 % (2.0 %) 0.9 % (0.2 %)
Subtotal – Non-Core 6,541 3.7 % 1,356 95.7 % (0.3 %) (1.1 %) 0.2 % 0.1 % (0.4 %)
                 
Total 99,726 100.0 % $ 2,233 96.0 % 0.5 % (3.0 %) 2.2 % 0.5 % (0.1 %)
Note: Same store results/statistics include 19,206 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
2014 vs. 2013
Same Store Results/Statistics by Market
                 
 
Increase (Decrease) from Prior Year

2014

2014

2014

 

% of

Average

Weighted

Average

Apartment

Actual

Rental

Average

Rental

Markets/Metro Areas

Units

NOI

Rate (1)

Occupancy %

Revenues Expenses NOI

Rate (1)

Occupancy
 
Core:
Washington DC 17,553 18.4 % $ 2,225 95.2 % (0.5 %) 2.2 % (1.8 %) (0.6 %) 0.0 %
New York 10,330 17.3 % 3,826 96.3 % 3.9 % 3.6 % 4.1 % 3.5 % 0.4 %
San Francisco 12,764 14.2 % 2,315 96.0 % 8.9 % (1.7 %) 14.5 % 8.1 % 0.7 %
Los Angeles 11,104 10.7 % 2,117 95.7 % 4.8 % 0.4 % 7.3 % 4.5 % 0.2 %
Boston 7,722 10.5 % 2,847 96.0 % 3.5 % 3.1 % 3.8 % 2.8 % 0.7 %
South Florida 10,537 7.4 % 1,587 95.6 % 5.0 % 1.2 % 7.3 % 4.6 % 0.3 %
Seattle 7,430 6.4 % 1,839 95.6 % 7.3 % 4.3 % 8.7 % 6.9 % 0.3 %
Denver 6,935 4.9 % 1,395 95.8 % 7.8 % 0.8 % 10.8 % 7.7 % 0.1 %
San Diego 3,505 3.3 % 1,963 96.0 % 4.4 % 2.4 % 5.4 % 4.0 % 0.4 %
Orange County, CA 3,490 3.1 %   1,777 96.0 % 5.0 % 0.1 % 7.1 % 4.7 % 0.3 %
Subtotal – Core 91,370 96.2 % 2,264 95.8 % 4.3 % 1.8 % 5.6 % 3.9 % 0.4 %
 
Non-Core:
Inland Empire, CA 3,081 2.3 % 1,558 95.7 % 3.7 % 2.4 % 4.4 % 3.5 % 0.3 %
Orlando 827 0.4 % 1,223 95.0 % 1.8 % 3.3 % 0.8 % 2.3 % (0.5 %)
All Other Markets 2,633 1.1 %   1,124 96.2 % 3.5 % 2.7 % 4.2 % 2.5 % 1.0 %
Subtotal – Non-Core 6,541 3.8 % 1,341 95.8 % 3.4 % 2.7 % 3.9 % 3.0 % 0.4 %
                 
Total 97,911 100.0 % $ 2,202 95.8 % 4.3 % 1.8 % 5.6 % 3.9 % 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
         
Fourth Quarter 2014 vs. Fourth Quarter 2013
Same Store Operating Expenses for 98,421 Same Store Apartment Units
$ in thousands

 

% of Actual

Q4 2014

Actual Actual $ %

Operating

Q4 2014 Q4 2013 Change Change

Expenses

 
Real estate taxes $ 72,118 $ 68,299 $ 3,819 5.6 % 35.4 %
On-site payroll (1) 41,140 42,049 (909 ) (2.2 %) 20.2 %
Utilities (2) 29,757 28,273 1,484 5.2 % 14.6 %
Repairs and maintenance (3) 24,296 24,001 295 1.2 % 11.9 %
Property management costs (4) 18,982 19,900 (918 ) (4.6 %) 9.3 %
Insurance 6,111 6,180 (69 ) (1.1 %) 3.0 %
Leasing and advertising 3,059 3,059 — — 1.5 %
Other on-site operating expenses (5)   8,324   7,702   622   8.1 % 4.1 %
 
Same store operating expenses $ 203,787 $ 199,463 $ 4,324   2.2 % 100.0 %
 
                     
 
2014 vs. 2013
Same Store Operating Expenses for 97,911 Same Store Apartment Units
$ in thousands
 

% of Actual

2014

Actual Actual $ %

Operating

2014 2013 Change Change

Expenses

 
Real estate taxes $ 287,214 $ 271,888 $ 15,326 5.6 % 34.6 %
On-site payroll (1) 174,273 174,589 (316 ) (0.2 %) 21.0 %
Utilities (2) 125,235 119,253 5,982 5.0 % 15.1 %
Repairs and maintenance (3) 100,496 100,319 177 0.2 % 12.1 %
Property management costs (4) 74,278 78,354 (4,076 ) (5.2 %) 8.9 %
Insurance 24,354 24,626 (272 ) (1.1 %) 2.9 %
Leasing and advertising 10,802 12,072 (1,270 ) (10.5 %) 1.3 %
Other on-site operating expenses (5)   34,045   34,764   (719 ) (2.1 %) 4.1 %
 
Same store operating expenses $ 830,697 $ 815,865 $ 14,832   1.8 % 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 December 31, 2014
(Amounts in thousands)

 

 

Weighted

Weighted

Average

Average

Maturities

Amounts (1) % of Total

Rates (1)

(years)

 
Secured $ 5,086,515 46.9 % 4.21 % 7.5
Unsecured   5,758,346 53.1 % 4.79 % 7.7
 
Total $ 10,844,861 100.0 % 4.52 % 7.6
 
Fixed Rate Debt:

Secured – Conventional

$ 4,351,301 40.1 % 4.82 % 5.9
Unsecured – Public   4,974,154 45.9 % 5.45 % 8.3
 
Fixed Rate Debt   9,325,455 86.0 % 5.15 % 7.2
 
Floating Rate Debt:
Secured – Conventional 7,985 0.1 % 2.08 % 19.1
Secured – Tax Exempt 727,229 6.7 % 0.66 % 16.2
Unsecured – Public (2) 451,192 4.1 % 1.15 % 4.5
Unsecured – Revolving Credit Facility   333,000 3.1 % 0.95 % 3.3
 
Floating Rate Debt   1,519,406

14.0

% 0.92 % 9.9
 
Total $ 10,844,861 100.0 % 4.52 % 7.6
(1) Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 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 $52.8 million and $47.3 million during the years ended December 31, 2014 and 2013, respectively. The Company capitalized interest of approximately $14.7 million and $14.4 million during the quarters ended December 31, 2014 and 2013, respectively.
 
Debt Maturity Schedule as of December 31, 2014
(Amounts in thousands)
           

Weighted

Weighted

 

 

Average Rates

Average

Fixed

Floating

on Fixed

Rates on

Year

Rate (1)

Rate (1)

Total % of Total

Rate Debt (1)

Total Debt (1)

 
2015 $ 408,420 $ — $ 408,420 3.8 % 6.32 % 6.32 %
2016 1,192,798 — 1,192,798 11.0 % 5.34 % 5.34 %
2017 1,346,252 456 1,346,708 12.4 % 6.16 % 6.16 %
2018 83,851 430,659 (2 ) 514,510 4.7 % 5.61 % 1.72 %
2019 806,106 472,363 1,278,469 11.8 % 5.48 % 3.76 %
2020 1,678,020 809 1,678,829 15.5 % 5.49 % 5.49 %
2021 1,194,624 856 1,195,480 11.0 % 4.63 % 4.63 %
2022 228,273 905 229,178 2.1 % 3.16 % 3.17 %
2023 1,331,497 956 1,332,453 12.3 % 3.74 % 3.74 %
2024 2,497 1,011 3,508 0.0 % 4.97 % 5.14 %
2025+ 1,022,417 673,977 1,696,394 15.7 % 4.97 % 3.17 %
Premium/(Discount)   30,700   (62,586 )   (31,886 ) (0.3 %) N/A   N/A  
 
Total $ 9,325,455 $ 1,519,406   $ 10,844,861   100.0 % 5.13 % 4.49 %
(1) Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2014.
 
(2) Includes $333.0 million outstanding on the Company's unsecured revolving credit facility. As of December 31, 2014, there was approximately $2.12 billion available on this facility.
 
Equity Residential
Unsecured Debt Summary as of December 31, 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 $ (27 ) $ 299,973
5.125 % 03/15/16 500,000 (63 ) 499,937
5.375 % 08/01/16 400,000 (294 ) 399,706
5.750 % 06/15/17 650,000 (1,272 ) 648,728
7.125 % 10/15/17 150,000 (181 ) 149,819
2.375 % 07/01/19 (1 ) 450,000 (405 ) 449,595
Fair Value Derivative Adjustments (1 ) (450,000 ) 405 (449,595 )
4.750 % 07/15/20 600,000 (2,518 ) 597,482
4.625 % 12/15/21 1,000,000 (2,635 ) 997,365
3.000 % 04/15/23 500,000 (3,671 ) 496,329
7.570 % 08/15/26 140,000 — 140,000
4.500 % 07/01/44   750,000     (5,185 )   744,815  
 
  4,990,000     (15,846 )   4,974,154  
Floating Rate Notes:
07/01/19 (1 ) 450,000 (405 ) 449,595
Fair Value Derivative Adjustments 07/01/19 (1 )   1,597     —     1,597  
 
  451,597     (405 )   451,192  
 
Revolving Credit Facility: LIBOR+1.05% 04/01/18 (2 )(3)   333,000     —     333,000  
 
Total Unsecured Debt $ 5,774,597   $ (16,251 ) $ 5,758,346  
(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 December 31, 2014, there was approximately $2.12 billion available on this facility.
 
Equity Residential
     
Selected Unsecured Public Debt Covenants
 
December 31, 2014 September 30, 2014
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 39.2 % 39.7 %
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 18.4 % 18.4 %
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 3.38 3.23
 
Total Unsecured Assets to Unsecured Debt 336.5 % 329.5 %
(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)
 
 
December 31, 2014 September 30, 2014
 
Total debt to Normalized EBITDA 6.45x 6.67x
Net debt to Normalized EBITDA 6.40x 6.63x
Note:   See page 25 for the footnote referenced above and the Normalized EBITDA reconciliations.
                               
Equity Residential
                   
Capital Structure as of December 31, 2014
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 5,086,515 46.9 %
Unsecured Debt   5,758,346 53.1 %
 
Total Debt 10,844,861 100.0 % 28.5 %
 
Common Shares (includes Restricted Shares) 362,855,454 96.2 %
Units (includes OP Units and Restricted Units)   14,298,691 3.8 %
 
Total Shares and Units 377,154,145 100.0 %
Common Share Price at December 31, 2014 $ 71.84
27,094,754 99.8 %
Perpetual Preferred Equity (see below)   50,000 0.2 %
 
Total Equity 27,144,754 100.0 % 71.5 %
 
Total Market Capitalization $ 37,989,615 100.0 %
                       
Perpetual Preferred Equity as of December 31, 2014
(Amounts in thousands except for share and per share amounts)
           

Annual

Annual

Redemption Outstanding Liquidation

Dividend

Dividend

Series

Date Shares Value

Per Share

Amount

 
Preferred Shares:
8.29% Series K 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145
 
Total Perpetual Preferred Equity 1,000,000 $ 50,000 $ 4,145
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
       
2014 2013 Q4 2014 Q4 2013
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 361,181,497 354,305,373 362,017,851 359,918,500
Shares issuable from assumed conversion/vesting of (1):
- OP Units 13,717,844 — 13,692,848 13,724,142
- long-term compensation shares/units 2,836,034 — 3,174,890 2,217,058
 
Total Common Shares and Units - diluted (1) 377,735,375 354,305,373 378,885,589 375,859,700
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 361,181,497 354,305,373 362,017,851 359,918,500
OP Units - basic 13,717,844 13,733,055 13,692,848 13,724,142
 
Total Common Shares and OP Units - basic 374,899,341 368,038,428 375,710,699 373,642,642
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 2,836,034 2,439,738 3,174,890 2,217,058
 
Total Common Shares and Units - diluted 377,735,375 370,478,166 378,885,589 375,859,700
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 362,855,454 360,479,260
Units (includes OP Units and Restricted Units) 14,298,691 14,180,376
 
Total Shares and Units 377,154,145 374,659,636
(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 year ended December 31, 2013.
   
Equity Residential
Partially Owned Entities as of December 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
           
Consolidated Unconsolidated

Development

Development

Projects

Projects

 

Held for

and/or Under

Completed,

Development (4)

Operating Total

Not Stabilized (5)

Operating

Total
 
Total projects (1)   —     19     19     1     2     3  
 
Total apartment units (1)   —     3,771     3,771     444     837     1,281  
 
Operating information for the year

ended 12/31/14 (at 100%):

Operating revenue $ 22 $ 88,157 $ 88,179 $ 10,182 $ 15,160 $ 25,342
Operating expenses   91     25,674     25,765     3,781     6,818     10,599  
 
Net operating (loss) income (69 ) 62,483 62,414 6,401 8,342 14,743
Depreciation — 21,679 21,679 6,512 5,800 12,312
General and administrative/other   1     116     117     1     209     210  
 
Operating (loss) income (70 ) 40,688 40,618 (112 ) 2,333 2,221
Interest and other income — 11 11 — — —
Other expenses — (54 ) (54 ) — — —
Interest:
Expense incurred, net — (15,626 ) (15,626 ) (5,296 ) (3,831 ) (9,127 )
Amortization of deferred financing costs   —     (355 )   (355 )   —     (2 )   (2 )
 
 

(Loss) income before income and other

taxes and (loss) from investments in

unconsolidated entities

(70 ) 24,664 24,594 (5,408 ) (1,500 ) (6,908 )
Income and other tax (expense) benefit — (36 ) (36 ) (7 ) — (7 )
(Loss) from investments in

unconsolidated entities

  —     (1,593 )   (1,593 )   —     —     —  
Net (loss) income $ (70 ) $ 23,035   $ 22,965   $ (5,415 ) $ (1,500 ) $ (6,915 )
 
Debt - Secured (2):
EQR Ownership (3) $ — $ 282,084 $ 282,084 $ 19,359 $ 15,726 $ 35,085
Noncontrolling Ownership   —     78,395     78,395     77,434     62,902     140,336  
 
Total (at 100%) $ —   $ 360,479   $ 360,479   $ 96,793   $ 78,628   $ 175,421  
(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.
 
(3) Represents the Company's current equity ownership interest.
 
(4) See Consolidated Projects Under Development - Partially Owned on page 21 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 $74.6 million at December 31, 2014. The ventures are owned 60% by the Company and 40% by AVB.
 
Equity Residential
Consolidated Development and Lease-Up Projects as of December 31, 2014
(Amounts in thousands except for project and apartment unit amounts)
                       
Total Book
No. of Total Total Value Not Estimated Estimated
Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 

Projects Under Development - Wholly Owned:

 
Residences at Westgate II (formerly Westgate III) Pasadena, CA 88 $ 55,037 $ 45,661 $ 45,661 $ — 86 % — — Q1 2015 Q3 2015
170 Amsterdam (2) New York, NY 236 110,892 97,372 97,372 — 88 % — — Q1 2015 Q1 2016
Parc on Powell (formerly 1333 Powell) (3) Emeryville, CA 176 87,500 71,765 71,765 — 85 % 13 % — Q2 2015 Q4 2015
Azure (at Mission Bay) San Francisco, CA 273 189,090 146,609 146,609 — 75 % — — Q3 2015 Q4 2016
Junction 47 (formerly West Seattle) Seattle, WA 206 67,112 44,514 44,514 — 62 % — — Q4 2015 Q3 2016
Tallman Seattle, WA 303 84,277 55,794 55,794 — 62 % — — Q4 2015 Q2 2017
Village at Howard Hughes Los Angeles, CA 545 193,231 86,642 86,642 — 26 % — — Q2 2016 Q2 2017
Potrero San Francisco, CA 453 224,474 72,354 72,354 — 14 % — — Q2 2016 Q3 2017
Millikan Irvine, CA 344 102,331 41,367 41,367 — 13 % — — Q2 2016 Q3 2017
Tasman San Jose, CA 554 214,923 119,554 119,554 — 46 % — — Q2 2016 Q2 2018
340 Fremont (formerly Rincon Hill) San Francisco, CA 348 287,454 106,972 106,972 — 24 % — — Q3 2016 Q1 2018
One Henry Adams San Francisco, CA 241 164,434 39,923 39,923 — 1 % — — Q4 2016 Q4 2017
Cascade Seattle, WA 483 158,494 34,543 34,543 — 1 % — — Q2 2017 Q1 2019
2nd & Pine (4) Seattle, WA 398   214,742   40,122   40,122   — 4 % — — Q3 2017 Q2 2019
Projects Under Development - Wholly Owned 4,648 2,153,991 1,003,192 1,003,192 —
 

Projects Under Development - Partially Owned:

Prism at Park Avenue South (5) New York, NY 269   251,961   226,959   226,959   — 91 % 5 % 3 % Q2 2015 Q1 2016
Projects Under Development - Partially Owned 269 251,961 226,959 226,959 —
         
Projects Under Development 4,917   2,405,952   1,230,151   1,230,151   —
 

Completed Not Stabilized - Wholly Owned (6):

 
Jia (formerly Chinatown Gateway) Los Angeles, CA 280 92,920 89,611 — — 98 % 97 % Completed Q1 2015
1111 Belle Pre (formerly The Madison) Alexandria, VA 360 112,072 111,433 — — 97 % 96 % Completed Q1 2015
Park Aire (formerly Enclave at Wellington) Wellington, FL 268 49,000 48,917 — — 95 % 93 % Completed Q1 2015
Urbana (formerly Market Street Landing) Seattle, WA 287 88,774 86,789 — — 90 % 86 % Completed Q2 2015
Residences at Westgate I (formerly Westgate II) Pasadena, CA 252   127,292   124,606   —   — 68 % 67 % Completed Q2 2015
Projects Completed Not Stabilized - Wholly Owned 1,447 470,058 461,356 — —
         
Projects Completed Not Stabilized 1,447   470,058   461,356   —   —
 

Completed and Stabilized During the Quarter - Wholly Owned:

Elevé (7) Glendale, CA 208 70,500 70,500 — — 99 % 96 % Completed Stabilized
Reserve at Town Center III Mill Creek, WA 95   21,280   21,264   —   — 95 % 94 % Completed Stabilized
Projects Completed and Stabilized During the Quarter - Wholly Owned 303 91,780 91,764 — —
         
Projects Completed and Stabilized During the Quarter 303   91,780   91,764   —   —
 
Total Consolidated Projects 6,667 $ 2,967,790 $ 1,783,271 $ 1,230,151 $ —
 
Land Held for Development N/A   N/A $ 184,556 $ 184,556 $ —
 

 

 

 

NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Total
Capital
Cost (1)

Q4 2014
NOI

Projects Under Development $ 2,405,952 $ (73 )
Completed Not Stabilized 470,058 5,871
Completed and Stabilized During the Quarter   91,780     1,128  
Total Consolidated Development NOI Contribution $ 2,967,790   $ 6,926  
(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 – The land under this project is subject to a long term ground lease.
 
(3) Parc on Powell – During the fourth quarter of 2014, the Company acquired its partner's 95% interest in this unconsolidated development project which was valued at $87.5 million. In conjunction with the buyout, the outstanding construction loan of $27.2 million was paid off. The project is now wholly-owned.
 
(4) 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.
 
(5)

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 $113.8 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) Elevé – The Company acquired this project during the second quarter of 2014, prior to stabilization, and has completed lease-up activities.
 
Equity Residential  
Unconsolidated Development and Lease-Up Projects as of December 31, 2014
(Amounts in thousands except for project and apartment unit amounts)    
         

 

 

Total Book

         
No. of Total

Total

Value Not

Estimated Estimated
Percentage Apartment Capital

Book Value

Placed in

Total Percentage Percentage Percentage Completion Stabilization

Projects

Location Ownership Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 

Completed Not Stabilized - Unconsolidated (2):

Domain (3) San Jose, CA 20.0 % 444 $ 155,820 $ 155,274 $ - $ 96,793 93 % 91 % Completed Q1 2015
Projects Completed Not Stabilized - Unconsolidated 444 155,820 155,274 — 96,793
         
Projects Completed Not Stabilized 444   155,820   155,274   —   96,793
 
Total Unconsolidated Projects 444 $ 155,820 $ 155,274 $ - $ 96,793
(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) 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.
 
(3) Domain – This development project is owned 20% by the Company and 80% by an institutional partner in an unconsolidated joint venture. Total project cost is approximately $155.8 million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The Company was responsible for constructing the project and had given certain construction cost overrun guarantees but currently has no further funding obligations. 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 Year Ended December 31, 2014
(Amounts in thousands except for apartment unit and per apartment unit amounts)
                           
Repairs and Maintenance Expenses Capital Expenditures to Real Estate Total Expenditures
Total Avg. Per Avg. Per Avg. Per Avg. Per Building Avg. Per Avg. Per Avg. Per
Apartment Apartment

 

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) 97,911 $ 100,496 $ 1,026 $ 87,745 $ 896 $ 188,241 $ 1,922 $ 85,045 $ 869 $ 93,988 $ 960 $ 179,033 $ 1,829 (9) $ 367,274 $ 3,751
 
Non-Same Store Properties (7) 5,000 2,714 694 1,961 501 4,675 1,195 236 60 5,513 1,410 5,749 1,470 10,424 2,665
 
Other (8) —   2,247   1,933     4,180   920     255     1,175   5,355
 
Total 102,911 $ 105,457 $ 91,639   $ 197,096 $ 86,201   $ 99,756   $ 185,957 $ 383,053
(1)   Total Apartment Units - Excludes 1,281 unconsolidated apartment units and 5,033 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 $51.4 million spent in 2014 on apartment unit renovations/rehabs (primarily kitchens and baths) on 6,111 same store apartment units (equating to approximately $8,400 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2015, the Company expects to spend approximately $60.0 million for all unit renovation/rehab costs (primarily on same store properties) at a weighted average cost of $9,000 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 3,911 apartment units.
 
(8) Other - Primarily includes expenditures for properties sold.
 
(9) For 2015, the Company estimates that it will spend approximately $1,850 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,250 per apartment unit excluding apartment unit renovation/rehab costs.
 
Equity Residential
Discontinued Operations
(Amounts in thousands)
       
Year Ended Quarter Ended
December 31, December 31,
2014 2013 2014 2013
 
REVENUES
Rental income $ 1,309   $ 121,942   $ 91   $ 2,751  
 
Total revenues   1,309     121,942     91     2,751  
 
EXPENSES (1)
Property and maintenance (141 ) 36,792 (16 ) 1,221
Real estate taxes and insurance 267 11,903 121 301
Property management — 1 — —
Depreciation — 34,380 — 516
General and administrative   89     85     30     8  
 
Total expenses   215     83,161     135     2,046  
 
Discontinued operating income (loss) 1,094 38,781 (44 ) 705
 
Interest and other income 317 217 165 61
Other expenses — (3 ) — —
Interest (2):
Expense incurred, net — (1,296 ) — (20 )
Amortization of deferred financing costs — (228 ) — —
Income and other tax (expense) benefit   (8 )   (449 )   5     55  
 
Discontinued operations 1,403 37,022 126 801
Net gain (loss) on sales of discontinued operations   179     2,036,505     (44 )   45,928  
 
Discontinued operations, net $ 1,582   $ 2,073,527   $ 82   $ 46,729  
Note: The amounts included in discontinued operations for the year and quarter ended December 31, 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 EBITDA Reconciliations
(Amounts in thousands)
             
Normalized EBITDA Reconciliations for Page 17
                     
Trailing Twelve Months

2014

  2013
December 31, 2014 September 30, 2014 Q4 Q3 Q2 Q1 Q4
Net income $ 658,683 $ 547,512 $ 227,041 $ 231,190 $ 117,720 $ 82,732 $ 115,870
Interest expense incurred, net (includes discontinued operations) 457,191 496,646 109,967 118,251 115,924 113,049 149,422
Amortization of deferred financing costs (includes discontinued operations) 11,088 15,115 2,534 2,628 3,134 2,792 6,561
Depreciation (includes discontinued operations) 758,861 749,028 193,089 190,469 190,136 185,167 183,256
Income and other tax expense (benefit) (includes discontinued operations) 1,402 948 243 260 648 251 (211 )
Archstone direct acquisition costs (other expenses) (1 ) 122 — 6 23 (30 ) 123
Property acquisition costs (other expenses) 355 388 77 135 94 49 110
Write-off of pursuit costs (other expenses) 3,607 3,282 1,540 575 1,040 452 1,215
Loss (income) from investments in unconsolidated entities 7,952 10,608 (2,249 ) 1,176 7,616 1,409 407
Net (gain) loss on sales of land parcels (5,277 ) (1,894 ) (3,431 ) (1,052 ) (824 ) 30 (48 )
(Gain) on sale of investment securities (interest and other income) (57 ) (3,430 ) — — (36 ) (21 ) (3,373 )
Write-off of unamortized retail lease intangibles (rental income) (147 ) (2,293 ) — — (147 ) — (2,146 )
Forfeited deposits (interest and other income) (150 ) — (150 ) — — — —
Insurance/litigation settlement or reserve income (interest and other income) (2,793 ) (2,761 ) (32 ) (419 ) (1,879 ) (463 ) —
Insurance/litigation settlement or reserve expense (other expenses) 4,099 4,349 — 4,000 99 — 250
Other (interest and other income) (750 ) — (750 ) — — — —
Net (gain) loss on sales of discontinued operations (179 ) (46,151 ) 44 1 (153 ) (71 ) (45,928 )
Net (gain) on sales of real estate properties   (212,685 )   (128,544 )   (84,141 )     (113,641 )   (14,903 )   —     —  
Normalized EBITDA (1) $ 1,681,199   $ 1,642,925   $ 443,782     $ 433,579   $ 418,492   $ 385,346   $ 405,508  
 

Balance Sheet Items:

December 31, 2014 September 30, 2014
Total debt (1) $ 10,844,861 $ 10,957,606
Cash and cash equivalents (40,080 ) (31,478 )
Mortgage principal reserves/sinking funds   (41,567 )   (39,425 )
Net debt (1) $ 10,763,214   $ 10,886,703  
(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
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 Q4 2014
to Actual Q4 2014
Amounts Per Share
Guidance Q4 2014 Normalized FFO - Diluted (2) (3) $ 311,882 $ 0.824
Property NOI 12,715 0.034
Other   1,110   0.002
 
Actual Q4 2014 Normalized FFO - Diluted (2) (3) $ 325,707 $ 0.860
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
           
Year Ended December 31, Quarter Ended December 31,
2014 2013 Variance 2014 2013 Variance
Impairment $ —   $ —   $ —   $ —   $ —   $ —  
Asset impairment and valuation allowances   —     —     —     —     —     —  
 
Archstone direct acquisition costs (other expenses) (A) (1 ) 19,864 (19,865 ) — 123 (123 )
Archstone indirect costs (loss (income) from investments in unconsolidated entities) (B) 4,287 54,004 (49,717 ) (2,083 ) (777 ) (1,306 )
Property acquisition costs (other expenses) 355 313 42 77 110 (33 )
Write-off of pursuit costs (other expenses)   3,607     5,184     (1,577 )   1,540     1,215     325  
Property acquisition costs and write-off of pursuit costs   8,248     79,365     (71,117 )   (466 )   671     (1,137 )
 
Prepayment premiums/penalties (interest expense) 250 222,415 (222,165 ) 250 150,972 (150,722 )
Write-off of unamortized deferred financing costs (interest expense) 614 9,853 (9,239 ) 10 5,727 (5,717 )
Write-off of unamortized (premiums)/discounts/OCI (interest expense) (1,883 ) (110,538 ) 108,655 (1,883 ) (113,789 ) 111,906
(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

  (1,110 )   121,730     (122,840 )   (1,623 )   42,910     (44,533 )
 
Net (gain) on sales of land parcels (5,277 ) (12,227 ) 6,950 (3,431 ) (48 ) (3,383 )
Net loss on sales of unconsolidated entities – non-operating assets 3,468 — 3,468 3,468 — 3,468
Net incremental (gain) on sales of condominium units — (8 ) 8 — (1 ) 1
(Gain) on sale of Equity Corporate Housing (ECH) — (1,470 ) 1,470 — (761 ) 761
(Gain) on sale of investment securities (interest and other income)   (57 )   (4,203 )   4,146     —     (3,373 )   3,373  
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (1,866 )   (17,908 )   16,042     37     (4,183 )   4,220  
 
Write-off of unamortized retail lease intangibles (rental income) (147 ) (2,146 ) 1,999 — (2,146 ) 2,146
Forfeited deposits (interest and other income) (150 ) — (150 ) (150 ) — (150 )
Insurance/litigation settlement or reserve income (interest and other income) (2,793 ) — (2,793 ) (32 ) — (32 )
Insurance/litigation settlement or reserve expense (other expenses) 4,099 3,611 488 — 250 (250 )
Other (interest and other income)   (750 )   —     (750 )   (750 )   —     (750 )
Other miscellaneous non-comparable items   259     1,465     (1,206 )   (932 )   (1,896 )   964  
           
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 5,531   $ 184,652   $ (179,121 ) $ (2,984 ) $ 37,502   $ (40,486 )
(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.
 

2015 Normalized FFO Guidance (per share diluted)

 

Q1 2015

2015

 
Expected Normalized FFO (2) (3) $0.77 to $0.81 $3.35 to $3.45
 

2015 Same Store Assumptions

 
Physical occupancy 95.8%
Revenue change 3.75% to 4.5%
Expense change 2.5% to 3.5%
NOI change 4.0% to 5.5%
 
(Note: Approximately 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2015 Transaction Assumptions

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

2015 Debt Assumptions

 
Weighted average debt outstanding $10.8 billion to $11.1 billion
Weighted average interest rate (reduced for capitalized interest) 4.10%
Interest expense, net $442.8 million to $455.1 million
 

2015 Other Guidance Assumptions

 
General and administrative expense (see Note below) $51.0 million to $53.0 million
Interest and other income $0.5 million
Income and other tax expense $1.0 million to $1.5 million
Debt offerings $950.0 million
Equity ATM share offerings No amounts budgeted
Preferred share offerings No amounts budgeted
Weighted average Common Shares and Units - Diluted 380.6 million
Note: Normalized FFO guidance excludes a duplicative charge of approximately $11.0 million, of which $9.7 million will be recorded to general and administrative expense and $1.3 million will be recorded to property management expense, related to the Company's revised executive compensation program.
                 
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, 26 and 27
 

Expected

Expected

Expected Q4 2014

Q1 2015

2015

Amounts Per Share

Per Share

Per Share

 
Expected Earnings - Diluted (5) $ 220,095 $ 0.582 $0.70 to $0.74 $1.86 to $1.96
Add: Expected depreciation expense 192,181 0.508 0.51 2.12
Less: Expected net gain on sales (5) (101,557) (0.269) (0.41) (0.64)
 
Expected FFO - Diluted (1) (3) 310,719 0.821 0.80 to 0.84 3.34 to 3.44
 
Asset impairment and valuation allowances — — — —
Property acquisition costs and write-off of pursuit costs 1,163 0.003 (0.04) (0.02)
Debt extinguishment (gains) losses, including prepayment penalties,

preferred share redemptions and non-cash convertible debt discounts

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

expense (benefit)

— — — —
Other miscellaneous non-comparable items — — 0.01 0.03
 
Expected Normalized FFO - Diluted (2) (3) $ 311,882 $ 0.824 $0.77 to $0.81 $3.35 to $3.45
Definitions and Footnotes for Pages 6, 26 and 27
 
(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 2014 and the Fourth Quarter 2014 Same Store Properties:
 
Year Ended December 31,   Quarter Ended December 31,
2014 2013 2014 2013
 
Operating income $ 921,375 $ 512,322 $ 250,532 $ 223,677
Adjustments:
Archstone pre-ownership operating results — 55,694 — —
Non-same store operating results (81,940 ) (47,445 ) (23,615 ) (17,449 )
Fee and asset management revenue (9,437 ) (9,698 ) (1,841 ) (2,299 )
Fee and asset management expense 5,429 6,460 1,136 1,721
Depreciation 758,861 978,973 193,089 182,740
General and administrative   50,948     62,179     9,652     15,162  
 
Same store NOI $ 1,645,236   $ 1,558,485   $ 428,953   $ 403,552