CHICAGO–(BUSINESS WIRE)–Equity Residential (NYSE: EQR) today reported results for the quarter ended March 31, 2022. All per share results are reported as available to common shares/units on a diluted basis. For the first quarter of 2022, the Company reported earnings per share (EPS), Funds from Operations (FFO) per share and Normalized FFO per share of $0.19, $0.77 and $0.77, respectively.
“We delivered very good revenue growth in the first quarter driven by lease rates that accelerated faster than we expected due to exceptionally strong demand partially offset by higher than anticipated levels of new delinquency in Southern California,” said Mark J. Parrell, Equity Residential’s President and CEO. “Operating expense growth remains in check due to a combination of muted property tax increases and continuing efficiencies from our innovation initiatives, leading to 10.7% same store NOI growth for the quarter. As we head into our primary leasing season, we remain well positioned to generate excellent cash flow growth for our shareholders.”
Recent Highlights
Strong demand drove a 26.7% increase in EPS, 14.9% increase in FFO per share and 13.2% increase in Normalized FFO per share during the first quarter of 2022 compared to the same period of 2021.
The Company reported a 7.8% increase in same store revenue for the first quarter of 2022 compared to the same period of 2021, driven by strong Physical Occupancy and significant growth in pricing power.
The Company reported a 2.5% increase in same store expenses for the first quarter of 2022, reflecting the Company’s continued success in managing controllable expenses and modest growth in real estate tax expense.
The Company reported same store Turnover of 8.7% for the first quarter of 2022, the lowest in the Company’s history, reflecting a continued trend of historically high resident retention.
The Company acquired one operating property in the first quarter of 2022, a 172-unit apartment property in San Diego, for a purchase price of $113.0 million. The Company did not sell any properties during the first quarter of 2022, but sold a 354-unit apartment property in New York for approximately $265.7 million in April 2022.
First Quarter 2022 Results
The change in EPS for the quarter ended March 31, 2022 compared to the same period of 2021 is due primarily to higher depreciation expense, offset by the various adjustment items listed on page 25 of this release and the items described below.
The per share change in FFO for the quarter ended March 31, 2022 compared to the same period of 2021 is due primarily to the various adjustment items listed on page 25 of this release and the items described below.
The per share change in Normalized FFO is due primarily to:
Positive/(Negative) Impact
First Quarter 2022 vs.
First Quarter 2021
Residential same store Net Operating Income (NOI)
$
0.10
Lease-Up NOI
0.01
2022 and 2021 transaction activity impact on NOI, net
0.01
Interest expense, net
(0.02
)
Other items
(0.01
)
Net
$
0.09
The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 27 through 32 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 29 and 30 of this release.
First Quarter 2022 Same Store Results
The following table shows the total same store results for the periods presented.
First Quarter 2022 vs.
First Quarter 2021
First Quarter 2022 vs.
Fourth Quarter 2021
Apartment Units
74,675
77,276
Physical Occupancy
96.4% vs. 95.0%
96.4% vs. 96.6%
Revenues
7.8%
0.9%
Expenses
2.5%
5.7%
NOI
10.7%
(1.5%)
On page 10 of this release, the Company has provided a breakout of Residential and Non-Residential same store results with definitions that can be found on page 31 of this release. Non-Residential operations account for approximately 3.8% of total revenues for the quarter ended March 31, 2022.
The following table reflects the detail of the change in Same Store Residential Revenues, which is presented on a GAAP basis showing Leasing Concessions on a straight-line basis.
First Quarter 2022 vs.
First Quarter 2021
First Quarter 2022 vs.
Fourth Quarter 2021
% Change
% Change
Same Store Residential Revenues-
comparable period
Lease rates
4.2
%
1.9
%
Leasing Concessions
1.5
%
0.6
%
Vacancy gain (loss)
1.2
%
(0.2
%)
Bad Debt, Net (1)
0.6
%
(1.2
%)
Other (2)
0.3
%
0.0
%
Same Store Residential Revenues-
current period
7.8
%
1.1
%
(1)
Change in rental income due to bad debt write-offs and reserves, net of amounts (including governmental rental assistance payments) collected on previously written-off or reserved accounts.
(2)
Includes ancillary income, utility recoveries, early lease termination income, miscellaneous income and other items.
See page 11 for detail and reconciliations of Same Store Residential Revenues on a GAAP basis to Same Store Residential Revenues with Leasing Concessions on a cash basis.
As indicated in our March 2022 Investor Update1, both quarter-over-quarter and sequential Same Store Residential Revenues in the first quarter of 2022 were impacted by higher than expected delinquency in Southern California caused by residents that were previously in good standing failing to pay their rent as they applied for funds under the California rental assistance program as it was expanded and extended into 2022. The Company continues to actively pursue payment and is seeing early signs of improved resident payment behavior in April 2022 with the expiration of the program’s eligibility period on March 31, 2022.
For the first quarter of 2022, better than expected lease rates partially offset this increased delinquency. For the full year of 2022, we expect these higher lease rates to more than fully offset the increased delinquency, which we now expect to moderate later in the second half of 2022.
1 The March 2022 Investor Update is included in the Investor section on the Company’s website.
Residential Same Store Operating Statistics
The following table includes select operating metrics for Residential Same Store Properties:
Q4 2021
Q1 2022
April 2022 (1)
Physical Occupancy (2)
96.4%
96.3%
96.6%
Percentage of Residents Renewing by quarter/month
61.2%
60.0%
60.0%
New Lease Change
10.6%
15.3%
17.6%
Renewal Rate Achieved
10.7%
11.9%
12.5%
Blended Rate
10.7%
13.3%
14.7%
(1)
April 2022 results are preliminary.
(2)
Physical Occupancy is as of month-end December for Q4 2021, month-end March for Q1 2022 and as of April 21st for April 2022.
Investment Activity and Portfolio Strategy
The Company continues to optimize its portfolio by allocating capital to desirable suburban locations within its established markets and through expansion into certain new markets that attract a renter demographic that values our exceptional product offering. In support of this strategy, the Company acquired a 172-unit apartment property in San Diego, built in 2020, during the first quarter of 2022 for $113.0 million at an Acquisition Cap Rate of 3.5%.
The Company did not sell any properties in the first quarter of 2022, but subsequent to the quarter, sold a 354-unit apartment property in New York, built in 2003, for approximately $265.7 million at a Disposition Yield of 3.3%.
Second Quarter 2022 Guidance
The Company has established guidance ranges for the second quarter of 2022 EPS, FFO per share and Normalized FFO per share as listed below:
Q2 2022
Guidance
EPS
$1.00 to $1.04
FFO per share
$0.82 to $0.86
Normalized FFO per share
$0.82 to $0.86
The difference between the first quarter of 2022 actual EPS of $0.19 and the second quarter of 2022 EPS guidance midpoint of $1.02 is due primarily to higher expected same store NOI and property sale gains.
The difference between the first quarter of 2022 actual FFO and Normalized FFO of $0.77 per share and the second quarter of 2022 FFO and Normalized FFO guidance midpoint of $0.84 per share is due primarily to higher expected same store NOI.
About Equity Residential
Equity Residential is committed to creating communities where people thrive. The Company, a member of the S&P 500, is focused on the acquisition, development and management of residential properties located in and around dynamic cities that attract affluent long-term renters. Equity Residential owns or has investments in 311 properties consisting of 80,581 apartment units, with an established presence in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California, and an expanding presence in Denver, Atlanta, Dallas/Ft. Worth and Austin. 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 government regulation. In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration and severity of the pandemic, the extent of the adverse health impact on the general population and on our residents, customers and employees in particular, its impact on the employment rate and the economy and the corresponding impact on our residents’ and tenants’ ability to pay their rent on time or at all, the extent and impact of governmental responses, the rollout and effectiveness of vaccines and the impact of operational changes we have implemented and may implement in response to the pandemic. 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, April 27, 2022 at 10:00 a.m. CT. Please visit the Investor section of the Company’s website at www.equityapartments.com for the webcast link.
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
Quarter Ended March 31,
2022
2021
REVENUES
Rental income
$
653,348
$
597,602
EXPENSES
Property and maintenance
124,874
117,054
Real estate taxes and insurance
100,688
103,470
Property management
30,747
26,130
General and administrative
17,238
15,383
Depreciation
229,961
199,962
Total expenses
503,508
461,999
Net gain (loss) on sales of real estate properties
(102
)
(43
)
Operating income
149,738
135,560
Interest and other income
3,528
216
Other expenses
(3,056
)
(4,110
)
Interest:
Expense incurred, net
(72,792
)
(67,358
)
Amortization of deferred financing costs
(2,077
)
(2,185
)
Income before income and other taxes, income (loss) from
investments in unconsolidated entities and net gain (loss)
on sales of land parcels
75,341
62,123
Income and other tax (expense) benefit
(282
)
(153
)
Income (loss) from investments in unconsolidated entities
(1,261
)
(1,611
)
Net gain (loss) on sales of land parcels
—
5
Net income
73,798
60,364
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership
(2,394
)
(2,143
)
Partially Owned Properties
(639
)
(682
)
Net income attributable to controlling interests
70,765
57,539
Preferred distributions
(772
)
(773
)
Net income available to Common Shares
$
69,993
$
56,766
Earnings per share – basic:
Net income available to Common Shares
$
0.19
$
0.15
Weighted average Common Shares outstanding
375,509
372,280
Earnings per share – diluted:
Net income available to Common Shares
$
0.19
$
0.15
Weighted average Common Shares outstanding
389,628
386,916
Distributions declared per Common Share outstanding
$
0.625
$
0.6025
Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
Quarter Ended March 31,
2022
2021
Net income
$
73,798
$
60,364
Net (income) loss attributable to Noncontrolling Interests – Partially
Owned Properties
(639
)
(682
)
Preferred distributions
(772
)
(773
)
Net income available to Common Shares and Units
72,387
58,909
Adjustments:
Depreciation
229,961
199,962
Depreciation – Non-real estate additions
(1,052
)
(1,100
)
Depreciation – Partially Owned Properties
(893
)
(828
)
Depreciation – Unconsolidated Properties
620
617
Net (gain) loss on sales of unconsolidated entities – operating
assets
(9
)
(4
)
Net (gain) loss on sales of real estate properties
102
43
FFO available to Common Shares and Units
301,116
257,599
Adjustments (see note for additional detail):
Impairment – non-operating assets
—
—
Write-off of pursuit costs
1,463
1,331
Debt extinguishment and preferred share redemption (gains)
losses
—
264
Non-operating asset (gains) losses
(1,642
)
854
Other miscellaneous items
(371
)
2,242
Normalized FFO available to Common Shares and Units
$
300,566
$
262,290
FFO
$
301,888
$
258,372
Preferred distributions
(772
)
(773
)
FFO available to Common Shares and Units
$
301,116
$
257,599
FFO per share and Unit – basic
$
0.78
$
0.67
FFO per share and Unit – diluted
$
0.77
$
0.67
Normalized FFO
$
301,338
$
263,063
Preferred distributions
(772
)
(773
)
Normalized FFO available to Common Shares and Units
$
300,566
$
262,290
Normalized FFO per share and Unit – basic
$
0.78
$
0.68
Normalized FFO per share and Unit – diluted
$
0.77
$
0.68
Weighted average Common Shares and Units outstanding – basic
387,397
385,330
Weighted average Common Shares and Units outstanding – diluted
389,628
386,916
Note: See Adjustments from FFO to Normalized FFO for additional detail regarding the adjustments from FFO to Normalized FFO. See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for the definitions of non-GAAP financial measures and other terms as well as the reconciliations of EPS to FFO per share and Normalized FFO per share.
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
March 31,
December 31,
2022
2021
ASSETS
Land
$
5,836,951
$
5,814,790
Depreciable property
22,496,307
22,370,811
Projects under development
36,718
24,307
Land held for development
66,980
62,998
Investment in real estate
28,436,956
28,272,906
Accumulated depreciation
(8,578,131
)
(8,354,282
)
Investment in real estate, net
19,858,825
19,918,624
Investments in unconsolidated entities (1)
150,092
127,448
Cash and cash equivalents
41,140
123,832
Restricted deposits
70,560
236,404
Right-of-use assets
471,667
474,713
Other assets
237,953
288,220
Total assets
$
20,830,237
$
21,169,241
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$
2,193,199
$
2,191,201
Notes, net
5,836,957
5,835,222
Line of credit and commercial paper
129,995
315,030
Accounts payable and accrued expenses
157,681
107,013
Accrued interest payable
56,876
69,510
Lease liabilities
311,293
312,335
Other liabilities
303,654
353,102
Security deposits
67,515
66,141
Distributions payable
242,574
233,502
Total liabilities
9,299,744
9,483,056
Commitments and contingencies
Redeemable Noncontrolling Interests – Operating Partnership
495,760
498,977
Equity:
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 745,600 shares issued and
outstanding as of March 31, 2022 and December 31, 2021
37,280
37,280
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 375,974,070 shares issued
and outstanding as of March 31, 2022 and 375,527,195
shares issued and outstanding as of December 31, 2021
3,760
3,755
Paid in capital
9,142,969
9,121,122
Retained earnings
1,661,705
1,827,063
Accumulated other comprehensive income (loss)
(31,847
)
(34,272
)
Total shareholders’ equity
10,813,867
10,954,948
Noncontrolling Interests:
Operating Partnership
217,451
214,094
Partially Owned Properties
3,415
18,166
Total Noncontrolling Interests
220,866
232,260
Total equity
11,034,733
11,187,208
Total liabilities and equity
$
20,830,237
$
21,169,241
(1)
Includes $89.7 million and $72.5 million in unconsolidated development projects as of March 31, 2022 and December 31, 2021, respectively. See Development and Lease-Up Projects for additional details on unconsolidated development projects.
Equity Residential
Portfolio Summary
As of March 31, 2022
% of
Stabilized
Average
Apartment
Budgeted
Rental
Markets/Metro Areas
Properties
Units
NOI
Rate
Established Markets:
Los Angeles
66
15,259
18.5
%
$
2,584
Orange County
13
4,028
5.3
%
2,450
San Diego
12
2,878
4.0
%
2,697
Subtotal – Southern California
91
22,165
27.8
%
2,575
San Francisco
44
11,830
16.0
%
3,013
Washington DC
48
14,851
15.5
%
2,380
New York
36
9,345
13.7
%
3,741
Boston
27
7,170
11.3
%
3,131
Seattle
46
9,525
11.0
%
2,388
Subtotal – Established Markets
292
74,886
95.3
%
2,781
Expansion Markets:
Denver
8
2,498
2.6
%
2,228
Atlanta
4
1,215
0.9
%
1,952
Dallas/Ft. Worth
4
1,241
0.8
%
1,837
Austin
3
741
0.4
%
1,723
Subtotal – Expansion Markets
19
5,695
4.7
%
2,020
Total
311
80,581
100.0
%
$
2,728
Properties
Apartment Units
Wholly Owned Properties
295
77,035
Partially Owned Properties – Consolidated
16
3,546
311
80,581
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
Equity Residential
Portfolio Rollforward Q1 2022
($ in thousands)
Properties
Apartment
Units
Purchase
Price
Acquisition
Cap Rate
12/31/2021
310
80,407
Acquisitions:
Consolidated Rental Properties
1
172
$
113,000
3.5
%
Configuration Changes
—
2
3/31/2022
311
80,581
Equity Residential
First Quarter 2022 vs. First Quarter 2021
Same Store Results/Statistics Including 74,675 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
First Quarter 2022
First Quarter 2021
Residential
%
Change
Non-
Residential
%
Change
Total
%
Change
Residential
Non-
Residential
Total
Revenues
$
595,325
(1)
7.8%
$
23,032
6.4%
$
618,357
7.8%
Revenues
$
552,111
$
21,641
$
573,752
Expenses
$
203,752
2.5%
$
6,239
2.2%
$
209,991
2.5%
Expenses
$
198,784
$
6,106
$
204,890
NOI
$
391,573
10.8%
$
16,793
8.1%
$
408,366
10.7%
NOI
$
353,327
$
15,535
$
368,862
Average Rental Rate
$
2,757
6.2%
Average Rental Rate
$
2,597
Physical Occupancy
96.4
%
1.4%
Physical Occupancy
95.0
%
Turnover
8.7
%
(1.3%)
Turnover
10.0
%
First Quarter 2022 vs. Fourth Quarter 2021
Same Store Results/Statistics Including 77,276 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
First Quarter 2022
Fourth Quarter 2021
Residential
%
Change
Non-
Residential
%
Change
Total
%
Change
Residential
Non-
Residential
Total
Revenues
$
610,398
(1)
1.1%
$
23,243
(4.0%)
$
633,641
0.9%
Revenues
$
604,020
$
24,219
$
628,239
Expenses
$
209,841
5.9%
$
6,308
0.0%
$
216,149
5.7%
Expenses
$
198,153
$
6,308
$
204,461
NOI
$
400,557
(1.3%)
$
16,935
(5.4%)
$
417,492
(1.5%)
NOI
$
405,867
$
17,911
$
423,778
Average Rental Rate
$
2,732
1.2%
Average Rental Rate
$
2,699
Physical Occupancy
96.4
%
(0.2%)
Physical Occupancy
96.6
%
Turnover
8.8
%
(0.7%)
Turnover
9.5
%
(1)
See page 11 for Same Store Residential Revenues with Leasing Concessions reflected on a cash basis. See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for additional detail.
Equity Residential
Same Store Residential Revenues – GAAP to Cash Basis (1)
$ in thousands
First Quarter 2022 vs. First Quarter 2021
First Quarter 2022 vs. Fourth Quarter 2021
74,675 Same Store Apartment Units
77,276 Same Store Apartment Units
Q1 2022
Q1 2021
Q1 2022
Q4 2021
Same Store Residential Revenues (GAAP Basis)
$
595,325
$
552,111
$
610,398
$
604,020
Leasing Concessions amortized
3,677
11,726
3,881
7,306
Leasing Concessions granted
(1,350
)
(17,058
)
(1,440
)
(570
)
Same Store Residential Revenues with Leasing
Concessions on a cash basis
$
597,652
$
546,779
$
612,839
$
610,756
% change – GAAP revenue
7.8
%
1.1
%
% change – cash revenue
9.3
%
0.3
%
(1)
See Additional Reconciliations and Definitions of Non-GAAP Financial Measures and Other Terms for additional detail.
Same Store Net Operating Income By Quarter
Including 74,675 Same Store Apartment Units
$ in thousands
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Same store revenues
$
618,357
$
613,703
$
595,207
$
573,916
$
573,752
Same store expenses
209,991
199,218
204,865
197,700
204,890
Same store NOI
(includes Residential and Non-Residential)
$
408,366
$
414,485
$
390,342
$
376,216
$
368,862
Contacts
Marty McKenna (312) 928-1901