Equity Residential (EQR) SEC Filing 8-K Material Event for the period ending Tuesday, February 1, 2022

 

 

 

 

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Fourth Quarter 2021 Results

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Corporate Headquarters:
Two North Riverside Plaza
Chicago, IL 60606
(312) 474-1300

Information included in this supplemental package is unaudited.

 

 

 

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NEWS RELEASE - FOR IMMEDIATE RELEASE

 

February 1, 2022

 

Equity Residential Reports Full Year 2021 Results and Provides Full Year 2022 Guidance

2022 Guidance Reflects Acceleration in Growth

 

Chicago, IL – February 1, 2022 - Equity Residential (NYSE: EQR) today reported results for the quarter and year ended December 31, 2021. All per share results are reported as available to common shares/units on a diluted basis. For the fourth quarter of 2021, the Company reported earnings per share (EPS), Funds from Operations (FFO) per share and Normalized FFO per share of $1.40, $0.76 and $0.82, respectively. For the full year of 2021, the Company reported EPS, FFO per share and Normalized FFO per share of $3.54, $2.96 and $2.99, respectively.

 

“Robust demand in the fourth quarter drove high occupancy and the lowest resident Turnover in our history, allowing us to continue to increase rents. We expect operations and cash flows in 2022 to accelerate further as we write new leases at significantly higher current market rent levels and benefit from continuing deep demand. Our target affluent renter demographic remains drawn to the attractive lifestyle that our high quality urban and suburban properties and dedicated property teams provide,” said Mark J. Parrell, Equity Residential’s President and CEO. “Our capital allocation plan remains solidly on track as we actively buy and build in our expansion markets and the more desirable suburbs of our established markets where increasing numbers of affluent renters wish to live, work and play.”

 

Recent Highlights

 

Fourth Quarter and Full Year 2021 Results

The change in EPS for both the quarter and year ended December 31, 2021 compared to the same periods of 2020 is due primarily to higher property sale gains in the fourth quarter and year ended December 31, 2021, the various adjustment items listed on page 26 of this release and the items described below.

The per share change in FFO for both the quarter and year ended December 31, 2021 compared to the same periods of 2020 is due primarily to the various adjustment items listed on page 26 of this release and the items described below.

The per share change in Normalized FFO is due primarily to:

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The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 28 through 33 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 7, 30 and 31 of this release.

 

Fourth Quarter and Full Year 2021 Same Store Residential Results

The Company has provided a breakout of Residential and Non-Residential same store results on page 11 of this release with definitions that can be found on page 32 of this release.  Non-Residential operations account for approximately 3.9% of total revenues for the year ended December 31, 2021.  The table below reflects same store Residential only results.

 

 

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.  See page 12 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.

 

 

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Residential Same Store Operating Statistics

The following table includes select operating metrics for Residential Same Store Properties:

 

 

 

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 six properties, consisting of 1,826 apartment units, during the fourth quarter of 2021 for an aggregate purchase price of approximately $689.0 million and a weighted average Acquisition Cap Rate of 3.7%. These properties are located in Austin, TX, Dallas/Ft. Worth, TX (2), Atlanta, GA, and Denver, CO (2).  For the full year of 2021, the Company acquired 17 properties, consisting of 4,747 apartment units, for an aggregate purchase price of approximately $1.7 billion and a weighted average Acquisition Cap Rate of 3.8%.  The average age of the properties acquired in 2021 was two years. Approximately $1.4 billion, or 82.0% of all acquisition activity in 2021, was in expansion markets.

 

The Company funded these acquisitions by selling older assets located within established markets that no longer met our long-term investment criteria. During the fourth quarter of 2021, the Company sold four properties consisting of 1,211 apartment units, for an aggregate sale price of approximately $695.0 million and a weighted average Disposition Yield of 3.6%, generating an Unlevered IRR of 12.1%. Two of the properties are located in suburban San Francisco, CA, one in suburban Los Angeles, CA and one in suburban Washington, D.C. During the full year of 2021, the Company sold 14 properties, consisting of 3,053 apartment units, for an aggregate sale price of approximately $1.7 billion and a weighted average Disposition Yield of 3.7%, generating an Unlevered IRR of 10.4%. The average age of the properties sold in 2021 was approximately 30 years.

 

Finally, the Company remains active in development, both directly and through its joint venture partners. During the fourth quarter of 2021, the Company completed the construction of Alcott, a 470-unit wholly owned apartment property in the urban center of Boston, MA for a total development cost of approximately $409.7 million and an expected stabilized Development Yield of 5.6%. Also during the fourth quarter, the Company entered into four unconsolidated joint ventures for the purpose of developing vacant land parcels into approximately 1,275 apartment units in Texas and Colorado.  Three of the projects are related to the Company’s joint venture development program with Toll Brothers, Inc. During the full year of 2021, the Company completed three development projects, consisting of 824 apartment units, for a total cost of approximately $602.8 million and started four development projects, consisting of 1,241 apartment units, for a total anticipated cost of approximately $452.7 million.

 

First Quarter 2022 Guidance

The Company has established guidance ranges for the first quarter of 2022 EPS, FFO per share and Normalized FFO per share as listed below:

The difference between the fourth quarter 2021 actual EPS of $1.40 and the first quarter of 2022 EPS guidance midpoint of $0.87 is due primarily to lower expected property sale gains and the items described below.

The difference between the fourth quarter 2021 actual FFO of $0.76 per share and the first quarter of 2022 FFO guidance midpoint of $0.77 per share is due primarily to no impairment charges and the items described below. 

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The difference between the fourth quarter 2021 actual Normalized FFO of $0.82 per share and the first quarter of 2022 Normalized FFO guidance midpoint of $0.78 per share is due primarily to:

 

Full Year 2022 Guidance

The Company has provided guidance for its full year 2022 same store operating performance as well as EPS, FFO per share and Normalized FFO per share as listed below:

 

 

The difference between the Company’s full year 2021 actual EPS of $3.54 and the full year 2022 EPS guidance midpoint of $4.23 is due primarily to higher expected property sale gains, higher expected depreciation expense, lower expected non-operating asset gains and the items described below.

 

The difference between the Company’s full year 2021 actual FFO of $2.96 per share and the full year 2022 FFO guidance midpoint of $3.41 per share is due primarily to lower expected non-operating asset gains and the items described below.

 

The difference between the Company’s full year 2021 actual Normalized FFO of $2.99 per share and the full year 2022 Normalized FFO guidance midpoint of $3.45 per share is due primarily to:

 

 

Key assumptions underlying the full year 2022 guidance are outlined on page 27 of this release.

 

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 high quality long-term renters.  Equity Residential owns or has investments in 310 properties consisting of 80,407 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

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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, February 2, 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.

 

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Equity Residential

Consolidated Statements of Operations

(Amounts in thousands except per share data)

(Unaudited)

 

 

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Equity Residential

Consolidated Statements of Funds From Operations and Normalized Funds From Operations

(Amounts in thousands except per share data)

(Unaudited)

 

 

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.

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Equity Residential

Consolidated Balance Sheets

(Amounts in thousands except for share amounts)

(Unaudited)

 

 

 

 

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