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Form 8-K EQUITY RESIDENTIAL For: Oct 26

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October 26, 2015 8:02 AM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


Date of Report (Date of Earliest Event Reported): October 26, 2015


EQUITY RESIDENTIAL
(Exact Name of Registrant as Specified in its Charter)

 
 
 
 
 
Maryland
 
1-12252
 
13-3675988
(State or Other Jurisdiction
of Incorporation or Organization)
 
(Commission
 File Number)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
Two North Riverside Plaza
Chicago, Illinois
 
 
60606
 
(Address of Principal Executive Offices)
 
 
(Zip Code)
 

Registrant's telephone number, including area code: (312) 474-1300

Not applicable
(Former Name or Former Address, if Changed Since Last Report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02. Results of Operations and Financial Condition.

On October 26, 2015, Equity Residential issued a press release announcing its results of operations and financial condition as of September 30, 2015 and for the nine months and quarter then ended. The press release is furnished as Exhibit 99.1. The information contained in this Item 2.02 on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by Equity Residential under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

Exhibit
Number
 
Exhibit
99.1
 
Press Release dated October 26, 2015, announcing the results of operations and financial condition of Equity Residential as of September 30, 2015 and for the nine months and quarter then ended.
 
 















































SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


                        
 
 
 
 
EQUITY RESIDENTIAL
 
 
 
 
 
Date:
October 26, 2015
 
By:
/s/ Ian S. Kaufman
 
 
 
 
 
 
 
 
Name:
Ian S. Kaufman
 
 
 
 
 
 
 
 
Its:
Senior Vice President and Chief Accounting Officer
 
 
 
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
 
 
 







































EXHIBIT INDEX


Exhibit
Number
 
Exhibit
99.1
 
Press Release dated October 26, 2015, announcing the results of operations and financial condition of Equity Residential as of September 30, 2015 and for the nine months and quarter then ended.
 
 













































                                            

Exhibit 99.1
                    
            
NEWS RELEASE - FOR IMMEDIATE RELEASE    

OCTOBER 26, 2015


Equity Residential Reports Third Quarter 2015 Results
Same Store Revenue Increased 5.4%
Same Store NOI Increased 6.7%
Normalized FFO per Share Increased 8.5%

Chicago, IL - October 26, 2015 - Equity Residential (NYSE: EQR) today reported results for the quarter and nine months ended September 30, 2015. All per share results are reported as available to common shares on a diluted basis.

“It remains a very good time to be in the apartment business as continued strong demand for our high quality, well located rental apartments has made 2015 another exceptional year for Equity Residential.  For the full year, we expect to deliver same store revenue growth of 5.2%, one of the best results in our history as a public company,” said David J. Neithercut, Equity Residential’s President and CEO.  “We believe this success will continue in 2016, when we expect to produce yet another terrific year of same store revenue growth in the range of 4.5% to 5.25%.”     

Third Quarter 2015
FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the third quarter of 2015 was $0.87 per share compared to $0.81 per share in the third quarter of 2014. The difference is due primarily to the various non-comparable items listed on page 24 of this release and the items described below.

For the third quarter of 2015, the company reported Normalized FFO of $0.89 per share compared to $0.82 per share in the same period of 2014. 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 negative impact of approximately $0.02 per share of lower NOI from 2014 and 2015 transaction activity;

•
a positive impact of approximately $0.02 per share from lower total interest expense; and

•
a negative impact of approximately $0.02 per share from other items.



1
                                            

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 26 of this release and the company has included guidance for Normalized FFO on page 25 and FFO on page 26 of this release.

For the third quarter of 2015, the company reported earnings of $0.53 per share compared to $0.61 per share in the third quarter of 2014. The difference is due primarily to higher gains on property sales in the third quarter of 2014 and the items described above.
  
Nine Months Ended September 30, 2015
FFO for the nine months ended September 30, 2015 was $2.56 per share compared to $2.29 per share in the same period of 2014.

For the nine months ended September 30, 2015, the company reported Normalized FFO of $2.54 per share compared to $2.31 per share for the same period of 2014.

For the nine months ended September 30, 2015, the company reported earnings of $1.80 per share compared to $1.13 per share for the same period of 2014. The difference is due primarily to higher gains on property sales and improved operations during the nine months ended September 30, 2015.

Same Store Results
On a same store third quarter to third quarter comparison, which includes 97,737 apartment units, revenues increased 5.4%, expenses increased 2.8% and NOI increased 6.7%.

On a same store nine-month to nine-month comparison, which includes 96,432 apartment units, revenues increased 5.1%, expenses increased 2.7% and NOI increased 6.3%.

Investment Activity
During the third quarter of 2015, the company acquired two land parcels in San Francisco, for approximately $21.8 million, which will be combined with an additional land parcel acquired earlier in the year for future development. The company did not acquire any consolidated apartment properties during the quarter. Also during the quarter, the company completed five development projects, consisting of 1,222 apartment units in San Francisco (Azure, Parc on Powell), New York (Prism) and Seattle (Junction 47, Odin) for a total development cost of approximately $675.9 million.

During the third quarter of 2015, the company sold one consolidated apartment property located in the Inland Empire of California, consisting of 330 apartment units, for a sale price of approximately $78.2 million at a capitalization (cap) rate of 5.9% generating an unlevered internal rate of return (IRR), inclusive of indirect management costs, of 15.5%.
   
During the first nine months of 2015, the company acquired a 202-unit apartment property located in Boston for a total purchase price of approximately $130.3 million at a cap rate of 4.2% and the land parcels described above. Also during the first nine months of 2015, the company completed seven development projects consisting of 1,546

2
                                            

apartment units (including the projects listed above as well as 170 Amsterdam in New York and Residences at Westgate II in Southern California) for a total development cost of approximately $842.5 million.

During the first nine months of 2015, the company sold seven consolidated apartment properties, consisting of 1,707 apartment units, for an aggregate sale price of approximately $341.5 million at a weighted average cap rate of 5.7%. The company also sold a 193,230 square foot medical office building located adjacent to its Longfellow Place property in Boston for approximately $123.3 million at a cap rate of 4.5%. These combined sales generated an unlevered IRR, inclusive of indirect management costs, of 13.5%.

Fourth Quarter 2015 Guidance
The company has established a Normalized FFO guidance range of $0.89 to $0.93 per share for the fourth quarter of 2015. The difference between the company’s third quarter 2015 Normalized FFO of $0.89 per share and the midpoint of the fourth quarter 2015 guidance range of $0.91 per share is due primarily to a positive impact of approximately $0.02 per share from higher same store NOI.

Full Year 2015 Guidance
The company has revised its guidance for its full year 2015 same store operating performance, Normalized FFO per share and transactions as listed below:

 
Previous
Revised
Same store:
 
 
     Physical occupancy
96.0%
96.0%
     Revenue change
4.75% to 5.0%
5.2%
     Expense change
3.0% to 3.25%
3.1%
     NOI change
5.5% to 6.0%
6.2%
 
 
 
Normalized FFO per share
$3.39 to $3.45
$3.43 to $3.47
 
 
 
Transactions:
 
 
     Consolidated Rental Acquisitions
$350 million
$350 million
     Consolidated Rental Dispositions
$450 million*
$500 million*
     Capitalization Rate Spread
100 basis points
100 basis points

*The company’s consolidated rental disposition guidance includes the sale of the medical office building in Boston described above.

About Equity Residential
Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 392 properties consisting of 109,347 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.



3
                                            

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 today, Monday, October 26, 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.


4
                                            

Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
 
 
Nine Months Ended September 30,
 
Quarter Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
REVENUES
 
 
 
 
 
 
 
 
Rental income
 
$
2,035,359

 
$
1,942,492

 
$
694,245

 
$
662,001

Fee and asset management
 
6,413

 
7,596

 
2,044

 
2,077

Total revenues
 
2,041,772

 
1,950,088

 
696,289

 
664,078

 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
Property and maintenance
 
364,948

 
361,087

 
122,383

 
120,139

Real estate taxes and insurance
 
254,513

 
245,717

 
84,962

 
80,568

Property management
 
60,887

 
61,080

 
18,925

 
18,407

Fee and asset management
 
3,764

 
4,293

 
1,169

 
1,253

Depreciation
 
584,862

 
565,772

 
196,059

 
190,469

General and administrative
 
50,942

 
41,296

 
15,290

 
9,968

Total expenses
 
1,319,916

 
1,279,245

 
438,788

 
420,804

 
 
 
 
 
 
 
 
 
Operating income
 
721,856

 
670,843

 
257,501

 
243,274

 
 
 
 
 
 
 
 
 
Interest and other income
 
6,906

 
3,213

 
256

 
576

Other expenses
 
(2,839
)
 
(7,179
)
 
(1,139
)
 
(4,976
)
Interest:
 
 
 
 
 
 
 
 
Expense incurred, net
 
(333,622
)
 
(347,224
)
 
(114,205
)
 
(118,251
)
Amortization of deferred financing costs
 
(7,734
)
 
(8,554
)
 
(2,607
)
 
(2,628
)
Income before income and other taxes, income (loss) from investments in
unconsolidated entities, net gain (loss) on sales of real estate properties
and land parcels and discontinued operations
 
384,567

 
311,099

 
139,806

 
117,995

Income and other tax (expense) benefit
 
(698
)
 
(1,146
)
 
(329
)
 
(260
)
Income (loss) from investments in unconsolidated entities
 
14,388

 
(10,201
)
 
(1,041
)
 
(1,176
)
Net gain on sales of real estate properties
 
295,692

 
128,544

 
66,939

 
113,641

Net (loss) gain on sales of land parcels
 
(1
)
 
1,846

 
—

 
1,052

Income from continuing operations
 
693,948

 
430,142

 
205,375

 
231,252

Discontinued operations, net
 
350

 
1,500

 
81

 
(62
)
Net income
 
694,298

 
431,642

 
205,456

 
231,190

Net (income) attributable to Noncontrolling Interests:
 
 
 
 
 
 
 
 
Operating Partnership
 
(26,191
)
 
(16,273
)
 
(7,778
)
 
(8,738
)
Partially Owned Properties
 
(2,473
)
 
(1,800
)
 
(986
)
 
(708
)
Net income attributable to controlling interests
 
665,634

 
413,569

 
196,692

 
221,744

Preferred distributions
 
(2,557
)
 
(3,109
)
 
(833
)
 
(1,037
)
Premium on redemption of Preferred Shares
 
(2,789
)
 
—

 
—

 
—

Net income available to Common Shares
 
$
660,288

 
$
410,460

 
$
195,859

 
$
220,707

 
 
 
 
 
 
 
 
 
Earnings per share – basic:
 
 
 
 
 
 
 
 
Income from continuing operations available to Common Shares
 
$
1.82

 
$
1.13

 
$
0.54

 
$
0.61

Net income available to Common Shares
 
$
1.82

 
$
1.14

 
$
0.54

 
$
0.61

Weighted average Common Shares outstanding
 
363,386

 
360,900

 
363,579

 
361,409

 
 
 
 
 
 
 
 
 
Earnings per share – diluted:
 
 
 
 
 
 
 
 
Income from continuing operations available to Common Shares
 
$
1.80

 
$
1.13

 
$
0.53

 
$
0.61

Net income available to Common Shares
 
$
1.80

 
$
1.13

 
$
0.53

 
$
0.61

Weighted average Common Shares outstanding
 
380,423

 
377,228

 
380,663

 
377,954

 
 
 
 
 
 
 
 
 
Distributions declared per Common Share outstanding
 
$
1.6575

 
$
1.50

 
$
0.5525

 
$
0.50








5
                                            

Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
Quarter Ended September 30,
 
 
 
2015
 
2014
 
2015
 
2014
Net income
 
$
694,298

 
$
431,642

 
$
205,456

 
$
231,190

Net (income) attributable to Noncontrolling Interests – Partially Owned Properties
 
(2,473
)
 
(1,800
)
 
(986
)
 
(708
)
Preferred distributions
 
(2,557
)
 
(3,109
)
 
(833
)
 
(1,037
)
Premium on redemption of Preferred Shares
 
(2,789
)
 
—

 
—

 
—

Net income available to Common Shares and Units
 
686,479

 
426,733

 
203,637

 
229,445

 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Depreciation
 
584,862

 
565,772

 
196,059

 
190,469

Depreciation – Non-real estate additions
 
(3,767
)
 
(3,485
)
 
(1,243
)
 
(1,137
)
Depreciation – Partially Owned Properties
 
(3,248
)
 
(3,211
)
 
(1,086
)
 
(1,071
)
Depreciation – Unconsolidated Properties
 
3,688

 
5,182

 
1,231

 
1,746

Net (gain) on sales of unconsolidated entities – operating assets
 
(100
)
 
—

 
(100
)
 
—

Net (gain) on sales of real estate properties
 
(295,692
)
 
(128,544
)
 
(66,939
)
 
(113,641
)
Discontinued operations:
 
 
 
 
 
 
 
 
Net (gain) loss on sales of discontinued operations
 
—

 
(223
)
 
—

 
1

FFO available to Common Shares and Units (1) (3) (4)
 
972,222

 
862,224

 
331,559

 
305,812

 
 
 
 
 
 
 
 
 
Adjustments (see page 24 for additional detail):
 
 
 
 
 
 
 
 
Asset impairment and valuation allowances
 
—

 
—

 
—

 
—

Property acquisition costs and write-off of pursuit costs
 
(13,947
)
 
8,714

 
943

 
837

Debt extinguishment (gains) losses, including prepayment penalties, preferred share
 
 
 
 
 
 
 
 
    redemptions and non-cash convertible debt discounts
 
4,501

 
513

 
3,032

 
22

(Gains) losses on sales of non-operating assets, net of income and other tax expense
 
 
 
 
 
 
 
 
    (benefit)
 
(728
)
 
(1,903
)
 
72

 
(1,052
)
Other miscellaneous non-comparable items
 
2,701

 
1,191

 
4,880

 
3,581

Normalized FFO available to Common Shares and Units (2) (3) (4)
 
$
964,749

 
$
870,739

 
$
340,486

 
$
309,200

 
 
 
 
 
 
 
 
 
 
FFO (1) (3)
 
$
977,568

 
$
865,333

 
$
332,392

 
$
306,849

Preferred distributions
 
(2,557
)
 
(3,109
)
 
(833
)
 
(1,037
)
Premium on redemption of Preferred Shares
 
(2,789
)
 
—

 
—

 
—

FFO available to Common Shares and Units - basic and diluted (1) (3) (4)
 
$
972,222

 
$
862,224

 
$
331,559

 
$
305,812

FFO per share and Unit - basic
 
$
2.58

 
$
2.30

 
$
0.88

 
$
0.82

FFO per share and Unit - diluted
 
$
2.56

 
$
2.29

 
$
0.87

 
$
0.81

 
 
 
 
 
 
 
 
 
 
Normalized FFO (2) (3)
 
$
967,306

 
$
873,848

 
$
341,319

 
$
310,237

Preferred distributions
 
(2,557
)
 
(3,109
)
 
(833
)
 
(1,037
)
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4)
 
$
964,749

 
$
870,739

 
$
340,486

 
$
309,200

Normalized FFO per share and Unit - basic
 
$
2.56

 
$
2.32

 
$
0.90

 
$
0.82

Normalized FFO per share and Unit - diluted
 
$
2.54

 
$
2.31

 
$
0.89

 
$
0.82

 
 
 
 
 
 
 
 
 
 
Weighted average Common Shares and Units outstanding - basic
 
376,970

 
374,626

 
377,147

 
375,116

Weighted average Common Shares and Units outstanding - diluted
 
380,423

 
377,228

 
380,663

 
377,954

 
 
 
 
 
 
 
 
 
 
Note:
See page 24 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 26 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.








6
                                            

Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
 
 
September 30,
2015
 
December 31,
2014
ASSETS
 
 
 
 
Investment in real estate
 
 
 
 
Land
 
$
6,424,887

 
$
6,295,404

Depreciable property
 
20,540,247

 
19,851,504

Projects under development
 
1,039,657

 
1,343,919

Land held for development
 
154,690

 
184,556

Investment in real estate
 
28,159,481

 
27,675,383

Accumulated depreciation
 
(5,914,695
)
 
(5,432,805
)
Investment in real estate, net
 
22,244,786

 
22,242,578

Cash and cash equivalents
 
37,366

 
40,080

Investments in unconsolidated entities
 
74,108

 
105,434

Deposits – restricted
 
135,674

 
72,303

Escrow deposits – mortgage
 
54,071

 
48,085

Deferred financing costs, net
 
57,001

 
58,380

Other assets
 
405,798

 
383,754

Total assets
 
$
23,008,804

 
$
22,950,614

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Mortgage notes payable
 
$
4,891,529

 
$
5,086,515

Notes, net
 
5,881,794

 
5,425,346

Line of credit and commercial paper
 
29,996

 
333,000

Accounts payable and accrued expenses
 
253,027

 
153,590

Accrued interest payable
 
86,083

 
89,540

Other liabilities
 
353,106

 
389,915

Security deposits
 
76,934

 
75,633

Distributions payable
 
209,086

 
188,566

Total liabilities
 
11,781,555

 
11,742,105

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests – Operating Partnership
 
522,585

 
500,733

Equity:
 
 
 
 
Shareholders’ equity:
 
 
 
 
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 803,600 shares issued and
outstanding as of September 30, 2015 and 1,000,000 shares
issued and outstanding as of December 31, 2014
 
40,180

 
50,000

Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 364,140,040 shares issued and
outstanding as of September 30, 2015 and 362,855,454 shares
issued and outstanding as of December 31, 2014
 
3,641

 
3,629

Paid in capital
 
8,584,143

 
8,536,340

Retained earnings
 
2,007,590

 
1,950,639

Accumulated other comprehensive (loss)
 
(157,020
)
 
(172,152
)
Total shareholders’ equity
 
10,478,534

 
10,368,456

Noncontrolling Interests:
 
 
 
 
Operating Partnership
 
221,487

 
214,411

Partially Owned Properties
 
4,643

 
124,909

Total Noncontrolling Interests
 
226,130

 
339,320

Total equity
 
10,704,664

 
10,707,776

Total liabilities and equity
 
$
23,008,804

 
$
22,950,614


7
                                            

Equity Residential
Portfolio Summary
As of September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of
 
Average
 
 
 
 
Apartment
 
Stabilized
 
Rental
Markets/Metro Areas
 
Properties
 
Units
 
NOI (1)
 
Rate (2)
 
 
 
 
 
 
 
 
 
Core:
 
 
 
 
 
 
 
 
New York
 
40

 
10,835

 
17.5
%
 
$
4,119

Washington DC
 
57

 
18,654

 
17.1
%
 
2,220

San Francisco
 
53

 
13,654

 
15.0
%
 
2,707

Los Angeles
 
61

 
13,313

 
12.4
%
 
2,359

Boston
 
35

 
8,018

 
9.8
%
 
2,860

Seattle
 
43

 
8,677

 
7.4
%
 
2,047

San Diego
 
13

 
3,505

 
3.1
%
 
2,099

Orange County, CA
 
11

 
3,490

 
2.9
%
 
1,899

Subtotal – Core
 
313

 
80,146

 
85.2
%
 
2,613

 
 
 
 
 
 
 
 
 
Non-Core:
 
 
 
 
 
 
 
 
South Florida
 
35

 
11,435

 
7.3
%
 
1,700

Denver
 
19

 
6,935

 
4.6
%
 
1,544

Inland Empire, CA
 
9

 
2,751

 
1.9
%
 
1,635

All Other Markets
 
14

 
2,969

 
1.0
%
 
1,210

Subtotal – Non-Core
 
77

 
24,090

 
14.8
%
 
1,587

Total
 
390

 
104,236

 
100.0
%
 
2,374

 
 
 
 
 
 
 
 
 
Military Housing
 
2

 
5,111

 
—

 
—

 
 
 
 
 
 
 
 
 
Grand Total
 
392

 
109,347

 
100.0
%
 
$
2,374

 
 
 
 
 
 
 
 
 
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.



3rd Quarter 2015 Earnings Release
 
8
                                            

Equity Residential
 
 
 
 
 
 
 
 
 
Portfolio as of September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties
 
Apartment
Units
 
 
 
 
 
 
 
 
 
 
 
 
Wholly Owned Properties
 
365

 
98,331

 
 
 
Master-Leased Properties - Consolidated
 
3

 
853

 
 
 
Partially Owned Properties - Consolidated
 
19

 
3,771

 
 
 
Partially Owned Properties - Unconsolidated
 
3

 
1,281

 
 
 
Military Housing
 
2

 
5,111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
392

 
109,347

 
 

__________________________________________________________________________________________________

Portfolio Rollforward Q3 2015
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties
 
Apartment
Units
 
Purchase/
(Sale) Price
 
Cap Rate
 
 
 
 
 
 
 
 
 
 
 
 
6/30/2015
388

 
108,430

 
 
 
 
Acquisitions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Land Parcels (1)
—

 
—

 
$
21,832

 
 
Dispositions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Rental Properties
(1
)
 
(330
)
 
$
(78,150
)
 
5.9
%
Completed Developments - Consolidated
5

 
1,222

 
 
 
 
Configuration Changes
—

 
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9/30/2015
392

 
109,347

 
 
 
 

______________________________________________________________________________________________________

Portfolio Rollforward 2015
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties
 
Apartment
Units
 
Purchase/
(Sale) Price
 
Cap Rate
 
 
12/31/2014
391

 
109,225

 
 
 
 
Acquisitions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Rental Properties
1

 
202

 
$
130,275

 
4.2
%
Land Parcels (1)
—

 
—

 
$
27,800

 
 
Dispositions:
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
Rental Properties (2)
(7
)
 
(1,707
)
 
$
(464,812
)
 
5.3
%
Completed Developments - Consolidated
7

 
1,546

 
 
 
 
Configuration Changes
—

 
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9/30/2015
392

 
109,347

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
During the third quarter of 2015, the Company acquired two land parcels in San Francisco which will be combined with an additional land parcel acquired earlier in the year for future development.
(2)
Includes a 193,230 square foot medical office building adjacent to our Longfellow Place property in Boston (sales price of approximately $123.3 million) which is included in our consolidated rental dispositions guidance but not included in our property and apartment unit counts.

3rd Quarter 2015 Earnings Release
 
9
                                            

Equity Residential
 
 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter 2015 vs. Third Quarter 2014
Same Store Results/Statistics for 97,737 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description
 
Revenues
 
Expenses
 
NOI (1)
 
 
Occupancy
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
$
660,728

 
$
215,606

 
$
445,122

 
$
2,345

 
96.1
%
 
17.6
%
Q3 2014
 
$
626,979

 
$
209,658

 
$
417,321

 
$
2,227

 
96.1
%
 
17.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
$
33,749

 
$
5,948

 
$
27,801

 
$
118

 
0.0
%
 
0.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
5.4
%
 
2.8
%
 
6.7
%
 
5.3
%
 
 
 
 
_______________________________________________________________________________________________________

Third Quarter 2015 vs. Second Quarter 2015
Same Store Results/Statistics for 99,816 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description
 
Revenues
 
Expenses
 
NOI (1)
 
 
Occupancy
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
$
674,363

 
$
219,908

 
$
454,455

 
$
2,344

 
96.1
%
 
17.6
%
Q2 2015
 
$
660,463

 
$
216,093

 
$
444,370

 
$
2,296

 
96.1
%
 
14.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
$
13,900

 
$
3,815

 
$
10,085

 
$
48

 
0.0
%
 
3.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
2.1
%
 
1.8
%
 
2.3
%
 
2.1
%
 
 
 
 
_______________________________________________________________________________________________________

September YTD 2015 vs. September YTD 2014
Same Store Results/Statistics for 96,432 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Results
 
Statistics
 
 
 
 
 
 
 
 
Average
Rental
Rate (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description
 
Revenues
 
Expenses
 
NOI (1)
 
 
Occupancy
 
Turnover
 
 
 
 
 
 
 
 
 
 
 
 
 
YTD 2015
 
$
1,915,727

 
$
635,123

 
$
1,280,604

 
$
2,299

 
96.1
%
 
43.2
%
YTD 2014
 
$
1,822,727

 
$
618,532

 
$
1,204,195

 
$
2,197

 
95.7
%
 
42.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
$
93,000

 
$
16,591

 
$
76,409

 
$
102

 
0.4
%
 
0.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Change
 
5.1
%
 
2.7
%
 
6.3
%
 
4.6
%
 
 
 
 

(1)
The Company's primary financial measure for evaluating each of its apartment communities is net operating income ("NOI"). NOI represents rental income less direct property operating expenses (including real estate taxes and insurance) as well as an allocation of indirect property management costs. 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 26 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.


3rd Quarter 2015 Earnings Release
 
10
                                            

Equity Residential
Third Quarter 2015 vs. Third Quarter 2014
Same Store Results/Statistics by Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) from Prior Year's Quarter
 
 
 
 
Q3 2015
% of
Actual
NOI
 
Q3 2015
Average
Rental
Rate (1)
 
Q3 2015
Weighted
Average
Occupancy %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Rental
Rate (1)
 
 
 
 
Apartment
Units
 
 
 
 
 
 
 
 
 
 
 
 
Markets/Metro Areas
 
 
 
 
 
 Revenues
 
Expenses
 
 NOI
 
 
Occupancy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Washington DC
 
18,132

 
17.6
%
 
$
2,236

 
96.2
%
 
0.4
%
 
2.4
%
 
(0.6
%)
 
0.1
%
 
0.3
%
New York
 
10,330

 
17.2
%
 
4,019

 
96.7
%
 
4.5
%
 
3.9
%
 
4.9
%
 
4.4
%
 
0.1
%
San Francisco
 
12,764

 
15.4
%
 
2,601

 
96.5
%
 
11.2
%
 
1.4
%
 
15.6
%
 
10.8
%
 
0.3
%
Los Angeles
 
11,295

 
11.3
%
 
2,313

 
96.1
%
 
6.1
%
 
0.3
%
 
9.3
%
 
6.2
%
 
(0.1
%)
Boston
 
7,722

 
9.8
%
 
2,852

 
96.4
%
 
3.7
%
 
5.8
%
 
2.7
%
 
3.4
%
 
0.2
%
Seattle
 
7,514

 
6.8
%
 
2,018

 
95.6
%
 
7.3
%
 
1.0
%
 
10.3
%
 
7.7
%
 
(0.4
%)
San Diego
 
3,505

 
3.3
%
 
2,103

 
96.5
%
 
6.2
%
 
1.9
%
 
8.2
%
 
6.2
%
 
0.1
%
Orange County, CA
 
3,490

 
3.1
%
 
1,900

 
95.8
%
 
5.5
%
 
2.9
%
 
6.6
%
 
6.1
%
 
(0.5
%)
Subtotal – Core
 
74,752

 
84.5
%
 
2,577

 
96.3
%
 
5.1
%
 
2.6
%
 
6.4
%
 
5.0
%
 
0.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Core:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
South Florida
 
10,666

 
7.4
%
 
1,698

 
95.7
%
 
6.4
%
 
4.0
%
 
7.8
%
 
6.3
%
 
0.2
%
Denver
 
6,935

 
5.0
%
 
1,552

 
95.7
%
 
9.3
%
 
5.8
%
 
10.7
%
 
9.7
%
 
(0.3
%)
Inland Empire, CA
 
2,751

 
2.0
%
 
1,633

 
96.1
%
 
4.5
%
 
(2.2
%)
 
7.7
%
 
4.5
%
 
0.0
%
All Other Markets
 
2,633

 
1.1
%
 
1,177

 
96.0
%
 
3.9
%
 
9.5
%
 
(0.2
%)
 
4.1
%
 
(0.2
%)
Subtotal – Non-Core
 
22,985

 
15.5
%
 
1,586

 
95.8
%
 
6.8
%
 
4.3
%
 
8.1
%
 
6.8
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
97,737

 
100.0
%
 
$
2,345

 
96.1
%
 
5.4
%
 
2.8
%
 
6.7
%
 
5.3
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.




3rd Quarter 2015 Earnings Release
 
11
                                            

Equity Residential
Third Quarter 2015 vs. Second Quarter 2015
Same Store Results/Statistics by Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) from Prior Quarter
 
 
 
 
Q3 2015
% of
Actual
NOI
 
Q3 2015
Average
Rental
Rate (1)
 
Q3 2015
Weighted
Average
Occupancy %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Rental
Rate (1)
 
 
 
 
Apartment Units
 
 
 
 
 
 
 
 
 
 
 
 
Markets/Metro Areas
 
 
 
 
 
 Revenues
 
Expenses
 
 NOI
 
 
Occupancy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Washington DC
 
18,492

 
17.6
%
 
$
2,239

 
96.2
%
 
0.7
%
 
3.3
%
 
(0.6
%)
 
0.4
%
 
0.2
%
New York
 
10,330

 
16.8
%
 
4,019

 
96.7
%
 
1.4
%
 
(1.2
%)
 
2.9
%
 
1.5
%
 
(0.1
%)
San Francisco
 
12,764

 
15.1
%
 
2,601

 
96.5
%
 
3.9
%
 
2.4
%
 
4.4
%
 
3.8
%
 
0.1
%
Los Angeles
 
12,091

 
11.9
%
 
2,322

 
96.1
%
 
2.6
%
 
2.3
%
 
2.8
%
 
2.6
%
 
0.1
%
Boston
 
7,722

 
9.6
%
 
2,852

 
96.4
%
 
1.8
%
 
0.5
%
 
2.4
%
 
2.0
%
 
(0.2
%)
Seattle
 
8,169

 
7.3
%
 
2,040

 
95.5
%
 
3.0
%
 
1.1
%
 
3.9
%
 
3.1
%
 
0.0
%
San Diego
 
3,505

 
3.3
%
 
2,103

 
96.5
%
 
3.3
%
 
1.1
%
 
4.3
%
 
2.8
%
 
0.5
%
Orange County, CA
 
3,490

 
3.0
%
 
1,900

 
95.8
%
 
2.4
%
 
3.6
%
 
1.9
%
 
2.8
%
 
(0.3
%)
Subtotal – Core
 
76,563

 
84.6
%
 
2,572

 
96.3
%
 
2.1
%
 
1.4
%
 
2.5
%
 
2.0
%
 
0.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Core:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
South Florida
 
10,934

 
7.4
%
 
1,698

 
95.7
%
 
1.5
%
 
3.0
%
 
0.7
%
 
1.5
%
 
0.0
%
Denver
 
6,935

 
4.9
%
 
1,552

 
95.7
%
 
3.6
%
 
5.5
%
 
2.8
%
 
3.5
%
 
0.1
%
Inland Empire, CA
 
2,751

 
2.0
%
 
1,633

 
96.1
%
 
2.5
%
 
1.3
%
 
3.0
%
 
1.9
%
 
0.6
%
All Other Markets
 
2,633

 
1.1
%
 
1,177

 
96.0
%
 
0.1
%
 
6.6
%
 
(4.6
%)
 
0.9
%
 
(0.8
%)
Subtotal – Non-Core
 
23,253

 
15.4
%
 
1,588

 
95.8
%
 
2.1
%
 
3.8
%
 
1.2
%
 
2.1
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
99,816

 
100.0
%
 
$
2,344

 
96.1
%
 
2.1
%
 
1.8
%
 
2.3
%
 
2.1
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.



3rd Quarter 2015 Earnings Release
 
12
                                            

Equity Residential
September YTD 2015 vs. September YTD 2014
Same Store Results/Statistics by Market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) from Prior Year
 
 
 
 
Sept. YTD 15
% of
Actual
NOI
 
Sept. YTD 15
Average
Rental
Rate (1)
 
Sept. YTD 15
Weighted
Average
Occupancy %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Rental
Rate (1)
 
 
 
 
Apartment Units
 
 
 
 
 
 
 
 
 
 
 
 
Markets/Metro Areas
 
 
 
 
 
 Revenues
 
Expenses
 
 NOI
 
 
Occupancy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Washington DC
 
17,743

 
17.8
%
 
$
2,232

 
95.9
%
 
0.7
%
 
2.9
%
 
(0.4
%)
 
(0.1
%)
 
0.7
%
New York
 
10,330

 
17.3
%
 
3,958

 
96.6
%
 
4.2
%
 
3.4
%
 
4.7
%
 
3.7
%
 
0.5
%
San Francisco
 
12,764

 
15.4
%
 
2,512

 
96.5
%
 
10.6
%
 
1.7
%
 
14.7
%
 
9.6
%
 
0.8
%
Los Angeles
 
10,641

 
10.7
%
 
2,225

 
96.1
%
 
5.9
%
 
0.3
%
 
8.9
%
 
5.4
%
 
0.5
%
Boston
 
7,722

 
9.8
%
 
2,814

 
96.2
%
 
3.3
%
 
5.3
%
 
2.3
%
 
2.9
%
 
0.4
%
Seattle
 
7,380

 
6.7
%
 
1,963

 
95.6
%
 
7.1
%
 
0.0
%
 
10.7
%
 
7.1
%
 
0.0
%
San Diego
 
3,505

 
3.4
%
 
2,052

 
96.1
%
 
5.4
%
 
1.9
%
 
6.9
%
 
5.0
%
 
0.3
%
Orange County, CA
 
3,490

 
3.1
%
 
1,856

 
96.0
%
 
5.2
%
 
3.1
%
 
6.1
%
 
5.0
%
 
0.2
%
Subtotal – Core
 
73,575

 
84.2
%
 
2,531

 
96.2
%
 
4.9
%
 
2.6
%
 
6.1
%
 
4.3
%
 
0.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Core:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
South Florida
 
10,538

 
7.5
%
 
1,664

 
95.8
%
 
5.7
%
 
3.3
%
 
7.1
%
 
5.4
%
 
0.2
%
Denver
 
6,935

 
5.1
%
 
1,502

 
95.7
%
 
8.9
%
 
4.3
%
 
10.7
%
 
9.0
%
 
(0.1
%)
Inland Empire, CA
 
2,751

 
2.1
%
 
1,604

 
95.6
%
 
4.3
%
 
0.4
%
 
6.1
%
 
4.5
%
 
(0.2
%)
All Other Markets
 
2,633

 
1.1
%
 
1,162

 
96.3
%
 
3.9
%
 
4.6
%
 
3.4
%
 
3.9
%
 
0.0
%
Subtotal – Non-Core
 
22,857

 
15.8
%
 
1,550

 
95.8
%
 
6.3
%
 
3.4
%
 
7.8
%
 
6.2
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
96,432

 
100.0
%
 
$
2,299

 
96.1
%
 
5.1
%
 
2.7
%
 
6.3
%
 
4.6
%
 
0.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.



3rd Quarter 2015 Earnings Release
 
13
                                            

Equity Residential
 
Third Quarter 2015 vs. Third Quarter 2014
Same Store Operating Expenses for 97,737 Same Store Apartment Units
$ in thousands
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Actual
Q3 2015
Operating
Expenses
 
 
 
Actual
Q3 2015
 
Actual
Q3 2014
 
$
Change
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate taxes
 
$
75,504

 
$
71,831

 
$
3,673

 
5.1
%
 
35.0
%
On-site payroll (1)
 
44,547

 
45,223

 
(676
)
 
(1.5
%)
 
20.7
%
Utilities (2)
 
30,185

 
29,959

 
226

 
0.8
%
 
14.0
%
Repairs and maintenance (3)
 
28,634

 
26,303

 
2,331

 
8.9
%
 
13.3
%
Property management costs (4)
 
19,822

 
18,809

 
1,013

 
5.4
%
 
9.2
%
Insurance
 
5,425

 
6,082

 
(657
)
 
(10.8
%)
 
2.5
%
Leasing and advertising
 
2,738

 
2,809

 
(71
)
 
(2.5
%)
 
1.3
%
Other on-site operating expenses (5)
 
8,751

 
8,642

 
109

 
1.3
%
 
4.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Same store operating expenses
 
$
215,606

 
$
209,658

 
$
5,948

 
2.8
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September YTD 2015 vs. September YTD 2014
Same Store Operating Expenses for 96,432 Same Store Apartment Units
$ in thousands
 
 
 
 
 
 
 
 
 
 
 
% of Actual
YTD 2015
Operating
Expenses
 
 
 
Actual
YTD 2015
 
Actual
YTD 2014
 
$
Change
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate taxes
 
$
223,004

 
$
212,106

 
$
10,898

 
5.1
%
 
35.1
%
On-site payroll (1)
 
132,694

 
131,581

 
1,113

 
0.8
%
 
20.9
%
Utilities (2)
 
90,962

 
94,270

 
(3,308
)
 
(3.5
%)
 
14.3
%
Repairs and maintenance (3)
 
80,694

 
74,653

 
6,041

 
8.1
%
 
12.7
%
Property management costs (4)
 
57,472

 
54,682

 
2,790

 
5.1
%
 
9.1
%
Insurance
 
16,036

 
17,950

 
(1,914
)
 
(10.7
%)
 
2.5
%
Leasing and advertising
 
7,822

 
7,626

 
196

 
2.6
%
 
1.2
%
Other on-site operating expenses (5)
 
26,439

 
25,664

 
775

 
3.0
%
 
4.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Same store operating expenses
 
$
635,123

 
$
618,532

 
$
16,591

 
2.7
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
 
 
 
 
 
 
 
 
 
 
 
 
(2)
Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income.
 
 
 
 
 
 
 
 
 
 
 
 
(3)
Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
 
 
 
 
 
 
 
 
 
 
 
(4)
Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
 
 
 
 
 
 
 
 
 
 
 
 
(5)
Other on-site operating expenses - Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.

3rd Quarter 2015 Earnings Release
 
14
                                            

Equity Residential
 
Debt Summary as of September 30, 2015
(Amounts in thousands)
 
 
 
 
 
 
 
 
Weighted
Average
Maturities
(years)
 
 
 
 
 
 
Weighted
Average
Rates (1)
 
 
 
 
 
 
 
 
 
 
Amounts (1)
 
% of Total
 
 
 
 
 
 
 
 
 
 
 
Secured
 
$
4,891,529

 
45.3
%
 
4.22
%
 
6.9

Unsecured
 
5,911,790

 
54.7
%
 
4.78
%
 
8.9

 
 
 
 
 
 
 
 
 
Total
$
10,803,319

 
100.0
%
 
4.53
%
 
8.1

 
 
 
 
 
 
 
 
 
Fixed Rate Debt:
 
 
 
 
 
 
 
 
Secured – Conventional
 
$
4,153,761

 
38.4
%
 
4.85
%
 
5.3

Unsecured – Public
 
5,422,372

 
50.2
%
 
5.36
%
 
9.4

 
 
 
 
 
 
 
 
 
Fixed Rate Debt
9,576,133

 
88.6
%
 
5.13
%
 
7.7

 
 
 
 
 
 
 
 
 
Floating Rate Debt:
 
 
 
 
 
 
 
 
Secured – Conventional
 
7,985

 
0.1
%
 
0.12
%
 
18.3

Secured – Tax Exempt
 
729,783

 
6.8
%
 
0.64
%
 
15.5

Unsecured – Public (2)
 
459,422

 
4.2
%
 
0.91
%
 
3.8

Unsecured – Revolving Credit Facility
 
—

 
—

 
1.07
%
 
2.5

Unsecured – Commercial Paper Program (3)
 
29,996

 
0.3
%
 
0.57
%
 
—

 
 
 
 
 
 
 
 
 
Floating Rate Debt
 
1,227,186

 
11.4
%
 
0.76
%
 
10.8

 
 
 
 
 
 
 
 
 
Total
 
$
10,803,319

 
100.0
%
 
4.53
%
 
8.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the nine months ended September 30, 2015.
 
(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%.
 
(3) As of September 30, 2015, the weighted average maturity on the Company's outstanding commercial paper was 12 days.
 
 
 
 
 
 
 
 
 
Note: The Company capitalized interest of approximately $45.8 million and $38.1 million during the nine months ended September 30, 2015 and 2014, respectively. The Company capitalized interest of approximately $15.4 million and $13.1 million during the quarters ended September 30, 2015 and 2014, respectively.
 
Note: The Company recorded approximately $5.8 million and $3.5 million of net debt discount/deferred derivative settlement amortization as additional interest expense during the nine months ended September 30, 2015 and 2014, respectively. The Company recorded approximately $2.7 million and $1.3 million of net debt discount/deferred derivative settlement amortization as additional interest expense during the quarters ended September 30, 2015 and 2014, respectively.
______________________________________________________________________________________________________
Debt Maturity Schedule as of September 30, 2015
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
 
Weighted
Average Rates
on Fixed
Rate Debt (1)
 
Weighted
Average
Rates on
Total Debt (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
Rate (1)
 
Floating
Rate (1)
 
 
 
 
 
 
Year
 
 
Total
 
% of Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
$
2,121

 
$
30,000

(2)
$
32,121

 
0.3
%
 
5.23
%
 
0.75
%
2016
 
1,115,342

 
—

 
1,115,342

 
10.3
%
 
5.33
%
 
5.33
%
2017
 
1,347,390

 
456

 
1,347,846

 
12.5
%
 
6.16
%
 
6.16
%
2018
 
82,799

 
97,659

 
180,458

 
1.7
%
 
5.59
%
 
3.07
%
2019
 
806,701

 
480,525

 
1,287,226

 
11.9
%
 
5.48
%
 
3.75
%
2020
 
1,678,623

 
809

 
1,679,432

 
15.5
%
 
5.49
%
 
5.49
%
2021
 
1,195,251

 
856

 
1,196,107

 
11.1
%
 
4.63
%
 
4.63
%
2022
 
228,924

 
905

 
229,829

 
2.1
%
 
3.16
%
 
3.17
%
2023
 
1,327,965

 
956

 
1,328,921

 
12.3
%
 
3.74
%
 
3.74
%
2024
 
2,497

 
1,011

 
3,508

 
0.0
%
 
4.97
%
 
5.14
%
2025+
 
1,772,417

 
673,977

 
2,446,394

 
22.7
%
 
4.49
%
 
3.36
%
Premium/(Discount)
 
16,103

 
(59,968
)
 
(43,865
)
 
(0.4
%)
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
9,576,133

 
$
1,227,186

 
$
10,803,319

 
100.0
%
 
4.97
%
 
4.46
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of September 30, 2015.
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Represents the principal outstanding on the Company's unsecured commercial paper program. The Company may borrow up to a maximum of $500.0 million on the program subject to market conditions.

3rd Quarter 2015 Earnings Release
 
15
                                            

Equity Residential
Unsecured Debt Summary as of September 30, 2015
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized
Premium/
(Discount)
 
 
 
 
Coupon
Rate
 
Due
Date
 
Face
Amount
 
 
Net
Balance
 
 
 
 
 
 
Fixed Rate Notes:
 
 
 
 
 
 
 
 
 
 
 
 
5.125%
 
03/15/16
 
$
500,000

 
$
(22
)
 
$
499,978

 
 
5.375%
 
08/01/16
 
400,000

 
(155
)
 
399,845

 
 
5.750%
 
06/15/17
 
650,000

 
(890
)
 
649,110

 
 
7.125%
 
10/15/17
 
150,000

 
(132
)
 
149,868

 
 
2.375%
 
07/01/19
(1)
450,000

 
(337
)
 
449,663

Fair Value Derivative Adjustments
 
 
 
 
(1)
(450,000
)
 
337

 
(449,663
)
 
 
4.750%
 
07/15/20
 
600,000

 
(2,175
)
 
597,825

 
 
4.625%
 
12/15/21
 
1,000,000

 
(2,349
)
 
997,651

 
 
3.000%
 
04/15/23
 
500,000

 
(3,338
)
 
496,662

 
 
3.375%
 
06/01/25
 
450,000

 
(2,393
)
 
447,607

 
 
7.570%
 
08/15/26
 
140,000

 
—

 
140,000

 
 
4.500%
 
07/01/44
 
750,000

 
(5,053
)
 
744,947

 
 
4.500%
 
06/01/45
 
300,000

 
(1,121
)
 
298,879

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,440,000

 
(17,628
)
 
5,422,372

Floating Rate Notes:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
07/01/19
(1)
450,000

 
(337
)
 
449,663

Fair Value Derivative Adjustments
 
 
 
07/01/19
(1)
9,759

 
—

 
9,759

 
 
 
 
 
 
459,759

 
(337
)
 
459,422

 
 
 
 
 
 
 
 
 
 
 
Line of Credit and Commercial Paper:
 
 
 
 
 
 
 
 
 
 
Revolving Credit Facility
 
LIBOR+0.95%
 
04/01/18
(2)(3) 
—

 
—

 
—

Commercial Paper Program
 
(4)
 
(4)
(2)
30,000

 
(4
)
 
29,996

 
 
 
 
 
 
30,000

 
(4
)
 
29,996

 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
 
$
5,929,759

 
$
(17,969
)
 
$
5,911,790


(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/program 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 0.95%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of September 30, 2015, there was approximately $2.42 billion available on this facility (net of $45.1 million which was restricted/dedicated to support letters of credit and net of $30.0 million outstanding on the commercial paper program).
 
 
(4
)
Represents the Company's unsecured commercial paper program. The Company may borrow up to a maximum of $500.0 million on this program subject to market conditions. The notes bear interest at various floating rates with a weighted average of 0.57% for the nine months ended September 30, 2015 and a weighted average maturity of 12 days as of September 30, 2015.

3rd Quarter 2015 Earnings Release
 
16
                                            

 
Equity Residential
 
 
 
Selected Unsecured Public Debt Covenants
 
 
 
September 30,
2015
 
June 30,
2015
 
 
 
 
 
 
 
 
 
 
 
Total Debt to Adjusted Total Assets (not to exceed 60%)
 
38.3
%
 
38.5
%
 
 
 
 
 
 
 
Secured Debt to Adjusted Total Assets (not to exceed 40%)
 
17.3
%
 
17.6
%
 
 
 
 
 
 
 
Consolidated Income Available for Debt Service to
 
 
 
 
 
Maximum Annual Service Charges
 
 
 
 
 
(must be at least 1.5 to 1)
 
3.56

 
3.49

 
 
 
 
 
 
 
Total Unsecured Assets to Unsecured Debt
 
 
 
 
 
(must be at least 150%)
 
342.8
%
 
341.8
%
 
 
 
 
 
 
Note:
These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt, which represent the Company's most restrictive covenants. Equity Residential is the general partner of ERPOP.
 
 
 
 
 
 
 
 
 
 
 
 
Selected Credit Ratios (1)
 
 
 
September 30,
2015
 
June 30,
2015
 
 
 
 
 
 
 
 
 
 
 
Total debt to Normalized EBITDA
 
6.14x
 
6.24x
 
 
 
 
 
 
 
Net debt to Normalized EBITDA
 
6.09x
 
6.16x
 
 
 
 
 
 
Note:
See page 23 for the footnote referenced above and the Normalized EBITDA reconciliations.

3rd Quarter 2015 Earnings Release
 
17
                                            

Equity Residential
 
Capital Structure as of September 30, 2015
(Amounts in thousands except for share/unit and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
Secured Debt
 
 
 
 
 
$
4,891,529

 
45.3
%
 
 
Unsecured Debt
 
 
 
 
 
5,911,790

 
54.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
 
10,803,319

 
100.0
%
 
27.5
%
 
 
 
 
 
 
 
 
 
 
 
Common Shares (includes Restricted Shares)
 
364,140,040

 
96.2
%
 
 
 
 
 
 
Units (includes OP Units and Restricted Units)
 
14,455,727

 
3.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Shares and Units
 
378,595,767

 
100.0
%
 
 
 
 
 
 
Common Share Price at September 30, 2015
 
$
75.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
28,440,114

 
99.9
%
 
 
Perpetual Preferred Equity (see below)
 
 
 
 
 
40,180

 
0.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Equity
 
 
 
 
 
28,480,294

 
100.0
%
 
72.5
%
 
 
 
 
 
 
 
 
 
 
 
Total Market Capitalization
 
 
 
 
 
$
39,283,613

 
 
 
100.0
%

__________________________________________________________________________________________________________________________________________

Perpetual Preferred Equity as of September 30, 2015
(Amounts in thousands except for share and per share amounts)
 
 
 
 
 
 
 
 
Annual
Dividend
Per Share
 
Annual
Dividend
Amount
 
 
Redemption
Date
 
Outstanding
Shares
 
Liquidation
Value
 
 
Series
 
 
 
 
 
Preferred Shares:
 
 
 
 
 
 
 
 
 
 
8.29% Series K
 
12/10/26
 
803,600

 
$
40,180

 
$
4.145

 
$
3,331

 
 
 
 
 
 
 
 
 
 
 
Total Perpetual Preferred Equity
 
 
 
803,600

 
$
40,180

 
 
 
$
3,331

 
 
 
 
 
 
 
 
 
 
 



3rd Quarter 2015 Earnings Release
 
18
                                            

Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
YTD Q3 2015
 
YTD Q3 2014
 
Q3 2015
 
Q3 2014
 
 
 
 
 
 
 
 
 
 
Weighted Average Amounts Outstanding for Net Income Purposes:
 
 
 
 
 
 
 
 
Common Shares - basic
 
363,386,211

 
360,899,649

 
363,578,666

 
361,409,492

Shares issuable from assumed conversion/vesting of:
 
 
 
 
 
 
 
 
- OP Units
 
13,583,959

 
13,726,267

 
13,568,180

 
13,706,359

- long-term compensation shares/units
 
3,452,974

 
2,602,231

 
3,516,096

 
2,838,523

 
 
 
 
 
 
 
 
 
 
Total Common Shares and Units - diluted
 
380,423,144

 
377,228,147

 
380,662,942

 
377,954,374

 
 
 
 
 
 
 
 
 
Weighted Average Amounts Outstanding for FFO and Normalized FFO Purposes:
 
 
 
 
 
 
 
 
Common Shares - basic
 
363,386,211

 
360,899,649

 
363,578,666

 
361,409,492

OP Units - basic
 
13,583,959

 
13,726,267

 
13,568,180

 
13,706,359

 
 
 
 
 
 
 
 
 
 
Total Common Shares and OP Units - basic
 
376,970,170

 
374,625,916

 
377,146,846

 
375,115,851

Shares issuable from assumed conversion/vesting of:
 
 
 
 
 
 
 
 
- long-term compensation shares/units
 
3,452,974

 
2,602,231

 
3,516,096

 
2,838,523

 
 
 
 
 
 
 
 
 
 
Total Common Shares and Units - diluted
 
380,423,144

 
377,228,147

 
380,662,942

 
377,954,374

 
 
 
 
 
 
 
 
 
 
Period Ending Amounts Outstanding:
 
 
 
 
 
 
 
 
Common Shares (includes Restricted Shares)
 
364,140,040

 
362,208,087

 
 
 
 
Units (includes OP Units and Restricted Units)
 
14,455,727

 
14,325,066

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Shares and Units
 
378,595,767

 
376,533,153

 
 
 
 
 
 
 
 
 
 
 
 
 
 






3rd Quarter 2015 Earnings Release
 
19
                                            

Equity Residential
Partially Owned Entities as of September 30, 2015
(Amounts in thousands except for project and apartment unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
Unconsolidated
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
Operating
 
 
 
 
 
 
Total projects
 
19

 
3

 
 
 
 
 
Total apartment units
 
3,771

 
1,281

 
 
 
 
 
Operating information for the nine months ended 9/30/15 (at 100%):
 
 
 
 
Operating revenue
 
$
70,142

 
$
24,125

Operating expenses
 
20,208

 
8,949

 
 
 
 
 
Net operating income
 
49,934

 
15,176

Depreciation
 
16,638

 
9,251

General and administrative/other
 
44

 
178

 
 
 
 
 
Operating income
 
33,252

 
5,747

Interest and other income
 
8

 
2

Other expenses
 
(50
)
 
—

Interest:
 
 
 
 
Expense incurred, net
 
(11,704
)
 
(7,047
)
Amortization of deferred financing costs
 
(266
)
 
(1
)
 
 
 
 
 
Income (loss) before income and other taxes and (loss)
 
 
 
 
    from investments in unconsolidated entities
 
21,240

 
(1,299
)
Income and other tax (expense) benefit
 
(35
)
 
(18
)
(Loss) from investments in unconsolidated entities
 
(1,104
)
 
—

Net income (loss)
 
$
20,101

 
$
(1,317
)
 
 
 
 
 
Debt - Secured (1):
 
 
 
 
EQR Ownership (2)
 
$
266,377

 
$
34,998

Noncontrolling Ownership
 
76,964

 
139,994

 
 
 
 
 
Total (at 100%)
 
$
343,341

 
$
174,992

(1)
All debt is non-recourse to the Company.
 
 
 
 
 
 
 
 
 
 
(2)
Represents the Company's current equity ownership interest.
 
 
 
 
 
 
 
 
 
 
Note:
The above table excludes the Company's interests in unconsolidated joint ventures entered into with AvalonBay Communities, Inc. ("AVB") in connection with the acquisition of certain real estate related assets from Archstone Enterprise LP (such assets are referred to herein as "Archstone"). These ventures own certain non-core Archstone assets that are held for sale and succeeded to certain residual Archstone liabilities/litigation, as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests had an aggregate liquidation value of $42.8 million at September 30, 2015. The ventures are owned 60% by the Company and 40% by AVB.

3rd Quarter 2015 Earnings Release
 
20

Equity Residential
Development and Lease-Up Projects as of September 30, 2015
(Amounts in thousands except for project and apartment unit amounts)
Projects
 
Location
 
No. of
Apartment
Units
 
Total
Capital
Cost (1)
 
Total
Book Value
to Date
 
Total Book
Value Not
Placed in
Service
 
Total
Debt
 
Percentage
Completed
 
Percentage
Leased
 
Percentage
Occupied
 
Estimated
Completion
Date
 
Estimated
Stabilization
Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Altitude (formerly Village at Howard Hughes)
 
Los Angeles, CA
 
545

 
$
193,231

 
$
139,854

 
$
139,854

 
$
—

 
63
%
 
—

 
—

 
Q2 2016
 
Q2 2017
Potrero 1010
 
San Francisco, CA
 
453

 
224,474

 
144,830

 
144,830

 
—

 
65
%
 
—

 
—

 
Q2 2016
 
Q3 2017
The Alton (formerly Millikan)
 
Irvine, CA
 
344

 
102,331

 
66,460

 
66,460

 
—

 
48
%
 
—

 
—

 
Q2 2016
 
Q3 2017
Vista 99 (formerly Tasman)
 
San Jose, CA
 
554

 
214,923

 
180,057

 
180,057

 
—

 
84
%
 
3
%
 
—

 
Q2 2016
 
Q2 2018
340 Fremont (formerly Rincon Hill)
 
San Francisco, CA
 
348

 
287,454

 
191,424

 
191,424

 
—

 
69
%
 
—

 
—

 
Q3 2016
 
Q1 2018
One Henry Adams
 
San Francisco, CA
 
241

 
172,337

 
71,299

 
71,299

 
—

 
28
%
 
—

 
—

 
Q1 2017
 
Q4 2017
455 I St
 
Washington, DC
 
174

 
73,157

 
24,535

 
24,535

 
—

 
5
%
 
—

 
—

 
Q3 2017
 
Q2 2018
855 Brannan (formerly 801 Brannan)
 
San Francisco, CA
 
449

 
304,035

 
85,800

 
85,800

 
—

 
10
%
 
—

 
—

 
Q3 2017
 
Q1 2019
2nd & Pine (2)
 
Seattle, WA
 
398

 
214,742

 
78,784

 
78,784

 
—

 
22
%
 
—

 
—

 
Q3 2017
 
Q2 2019
Cascade
 
Seattle, WA
 
483

 
172,486

 
56,614

 
56,614

 
—

 
18
%
 
—

 
—

 
Q3 2017
 
Q2 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development
 
 
 
3,989

 
1,959,170

 
1,039,657

 
1,039,657

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completed Not Stabilized (3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residences at Westgate II (formerly Westgate III)
 
Pasadena, CA
 
88

 
55,037

 
52,063

 
—

 
—

 
 
 
100
%
 
98
%
 
Completed
 
Q4 2015
Parc on Powell (formerly 1333 Powell)
 
Emeryville, CA
 
173

 
87,500

 
82,202

 
—

 
—

 
 
 
94
%
 
92
%
 
Completed
 
Q4 2015
Prism at Park Avenue South (4)
 
New York, NY
 
269

 
247,961

 
238,826

 
—

 
—

 
 
 
81
%
 
76
%
 
Completed
 
Q1 2016
170 Amsterdam (5)
 
New York, NY
 
236

 
111,492

 
111,410

 
—

 
—

 
 
 
64
%
 
59
%
 
Completed
 
Q1 2016
Junction 47 (formerly West Seattle)
 
Seattle, WA
 
206

 
67,112

 
64,773

 
—

 
—

 
 
 
56
%
 
35
%
 
Completed
 
Q3 2016
Azure (at Mission Bay)
 
San Francisco, CA
 
273

 
189,090

 
180,419

 
—

 
—

 
 
 
51
%
 
49
%
 
Completed
 
Q4 2016
Odin (formerly Tallman)
 
Seattle, WA
 
301

 
84,277

 
78,341

 
—

 
—

 
 
 
40
%
 
35
%
 
Completed
 
Q2 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed Not Stabilized
 
 
 
1,546

 
842,469

 
808,034

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completed and Stabilized During the Quarter:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residences at Westgate I (formerly Westgate II)
 
Pasadena, CA
 
252

 
126,292

 
125,545

 
—

 
—

 
 
 
98
%
 
97
%
 
Completed
 
Stabilized
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Completed and Stabilized During the Quarter
 
 
 
252

 
126,292

 
125,545

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Development Projects
 
 
 
5,787

 
$
2,927,931

 
$
1,973,236

 
$
1,039,657

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land Held for Development
 
 
 
N/A
 
N/A
 
$
154,690

 
$
154,690

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Capital
Cost (1)
 
Q3 2015
NOI
 
 
 
 
 
 
NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects Under Development
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,959,170

 
$
(72
)
 
 
 
 
 
 
Completed Not Stabilized
 
 
 
 
 
 
 
 
 
 
 
 
 
842,469

 
2,875

 
 
 
 
 
 
Completed and Stabilized During the Quarter
 
 
 
 
 
 
 
 
 
 
 
126,292

 
1,696

 
 
 
 
 
 
Total Development NOI Contribution
 
 
 
 
 
 
 
 
 
 
 
$
2,927,931

 
$
4,499

 
 
 
 
 
 
 
 
Note: All development projects listed are wholly owned by the Company.
(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)
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.
(3)
Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
(4)
Prism at Park Avenue South – The Company jointly developed 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. During the third quarter of 2015, the Company recorded the master condominium declaration and as a result, the Toll Brothers' portion of the property was deconsolidated from the Company's balance sheet and the Company now wholly owns its portion of the project.
(5)
170 Amsterdam – The land under this project is subject to a long term ground lease.

3rd Quarter 2015 Earnings Release
 
21
                                            

Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Nine Months Ended September 30, 2015
(Amounts in thousands except for apartment unit and per apartment unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repairs and Maintenance Expenses
 
Capital Expenditures to Real Estate
 
Total Expenditures
 
 
Total
Apartment
Units (1)
 
Expense (2)
 
Avg. Per
Apartment
Unit
 
Payroll (3)
 
Avg. Per
Apartment
Unit
 
Total
 
Avg. Per
Apartment
Unit
 
Replacements
(4)
 
Avg. Per
Apartment
Unit
 
Building
Improvements
(5)
 
Avg. Per
Apartment
Unit
 
Total
 
Avg. Per
Apartment
Unit
 
Grand
Total
 
Avg. Per
Apartment
Unit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Properties (6)
96,432

 
$
80,694

 
$
837

 
$
62,956

 
$
653

 
$
143,650

 
$
1,490

 
$
77,432

 
$
803

 
$
51,892

 
$
538

 
$
129,324

 
$
1,341

(9)
$
272,974

 
$
2,831

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Same Store Properties (7)
6,523

 
3,310

 
641

 
2,480

 
480

 
5,790

 
1,121

 
1,053

 
204

 
3,627

 
702

 
4,680

 
906

 
10,470

 
2,027

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other (8)
—

 
949

 
 
 
668

 
 
 
1,617

 
 
 
274

 
 
 
160

 
 
 
434

 
 
 
2,051

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
102,955

 
$
84,953

 
 
 
$
66,104

 
 
 
$
151,057

 
 
 
$
78,759

 
 
 
$
55,679

 
 
 
$
134,438

 
 
 
$
285,495

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Total Apartment Units - Excludes 1,281 unconsolidated apartment units and 5,111 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 $47.3 million spent during the nine months ended September 30, 2015 on apartment unit renovations/rehabs (primarily kitchens and baths) on 5,122 same store apartment units (equating to approximately $9,200 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, 2014, less properties subsequently sold.
 
 
(7)
Non-Same Store Properties - Primarily includes all properties acquired during 2014 and 2015, plus any properties in lease-up and not stabilized as of January 1, 2014. Per apartment unit amounts are based on a weighted average of 5,166 apartment units.
 
 
(8)
Other - Primarily includes expenditures for properties sold and properties under development.
 
 
(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.



3rd Quarter 2015 Earnings Release
 
22
                                            

Equity Residential
Normalized EBITDA Reconciliations
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Normalized EBITDA Reconciliations for Page 17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trailing Twelve Months
 
2015
 
2014
 
 
 
September 30, 2015
 
June 30, 2015
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
Net income
$
921,339

 
$
947,073

 
$
205,456

 
$
298,618

 
$
190,224

 
$
227,041

 
$
231,190

Interest expense incurred, net (includes discontinued operations)
443,589

 
447,635

 
114,205

 
110,795

 
108,622

 
109,967

 
118,251

Amortization of deferred financing costs (includes discontinued operations)
10,268

 
10,289

 
2,607

 
2,538

 
2,589

 
2,534

 
2,628

Depreciation (includes discontinued operations)
777,951

 
772,361

 
196,059

 
194,282

 
194,521

 
193,089

 
190,469

Income and other tax expense (benefit) (includes discontinued operations)
956

 
887

 
329

 
326

 
58

 
243

 
260

Archstone direct acquisition costs (other expenses)
—

 
6

 
—

 
—

 
—

 
—

 
6

Property acquisition costs (other expenses)
281

 
389

 
27

 
78

 
99

 
77

 
135

Write-off of pursuit costs (other expenses)
3,862

 
3,766

 
671

 
1,158

 
493

 
1,540

 
575

(Income) loss from investments in unconsolidated entities
(16,637
)
 
(16,502
)
 
1,041

 
(12,466
)
 
(2,963
)
 
(2,249
)
 
1,176

Net (gain) loss on sales of land parcels
(3,430
)
 
(4,482
)
 
—

 
—

 
1

 
(3,431
)
 
(1,052
)
(Gain) on sale of investment securities (interest and other income)
(387
)
 
(387
)
 
—

 
(387
)
 
—

 
—

 
—

Executive compensation program duplicative costs and retirement benefit obligations
9,640

 
4,673

 
4,967

 
2,336

 
2,337

 
—

 
—

Forfeited deposits (interest and other income)
(150
)
 
(150
)
 
—

 
—

 
—

 
(150
)
 
—

Insurance/litigation settlement or reserve income (interest and other income)
(5,802
)
 
(6,221
)
 
—

 
(5,770
)
 
—

 
(32
)
 
(419
)
Insurance/litigation settlement or reserve expense (other expenses)
(867
)
 
3,112

 
21

 
112

 
(1,000
)
 
—

 
4,000

Other (interest and other income)
(1,052
)
 
(944
)
 
(108
)
 
(194
)
 
—

 
(750
)
 
—

Net loss on sales of discontinued operations
44

 
45

 
—

 
—

 
—

 
44

 
1

Net (gain) on sales of real estate properties
(379,833
)
 
(426,535
)
 
(66,939
)
 
(148,802
)
 
(79,951
)
 
(84,141
)
 
(113,641
)
Normalized EBITDA (1)
$
1,759,772

 
$
1,735,015

 
$
458,336

 
$
442,624

 
$
415,030

 
$
443,782

 
$
433,579

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Items:
 
 
September 30, 2015
 
June 30, 2015
 
 
 
 
 
 
 
 
 
 
Total debt (1)
 
 
$
10,803,319

 
$
10,827,907

 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
(37,366
)
 
(92,109
)
 
 
 
 
 
 
 
 
 
 
Mortgage principal reserves/sinking funds
 
(47,902
)
 
(45,736
)
 
 
 
 
 
 
 
 
 
Net debt (1)
 
 
$
10,718,051

 
$
10,690,062

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

3rd Quarter 2015 Earnings Release
 
23
                                            

Equity Residential
Normalized FFO Guidance Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
Normalized FFO Guidance Reconciliations
 
 
 
Normalized
 
 
 
FFO Reconciliations
 
 
 
Guidance Q3 2015
 
 
 
to Actual Q3 2015
 
 
 
Amounts
 
Per Share
 
 
Guidance Q3 2015 Normalized FFO - Diluted (2) (3)
$
332,593

 
$
0.874

 

Property NOI
8,307

 
0.022

 

Other
(414
)
 
(0.001
)
 

Actual Q3 2015 Normalized FFO - Diluted (2) (3)
$
340,486

 
$
0.895

 

_____________________________________________________________________________________________________
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
 
Nine Months Ended September 30,
 
Quarter Ended September 30,
 
 
2015
 
2014
 
Variance
 
2015
 
2014
 
Variance
Impairment
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Asset impairment and valuation allowances
 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Archstone direct acquisition costs (other expenses) (A)
 
—

 
(1
)
 
1

 
—

 
6

 
(6
)
Archstone indirect costs ((income) loss from investments in unconsolidated entities) (B)
 
(16,473
)
 
6,370

 
(22,843
)
 
245

 
121

 
124

Property acquisition costs (other expenses)
 
204

 
278

 
(74
)
 
27

 
135

 
(108
)
Write-off of pursuit costs (other expenses)
 
2,322

 
2,067

 
255

 
671

 
575

 
96

Property acquisition costs and write-off of pursuit costs
 
(13,947
)
 
8,714

 
(22,661
)
 
943

 
837

 
106

 
 
 
 
 
 
 
 
 
 
 
 
 
Write-off of unamortized deferred financing costs (interest expense)
 
88

 
604

 
(516
)
 
13

 
22

 
(9
)
Write-off of unamortized (premiums)/discounts/OCI (interest expense)
 
(1,379
)
 
—

 
(1,379
)
 
16

 
—

 
16

Loss (gain) due to ineffectiveness of forward starting swaps (interest expense)
 
3,003

 
(91
)
 
3,094

 
3,003

 
—

 
3,003

Premium on redemption of Preferred Shares
 
2,789

 
—

 
2,789

 
—

 
—

 
—

Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts
 
4,501

 
513

 
3,988

 
3,032

 
22

 
3,010

 
 
 
 
 
 
 
 
 
 
 
 
Net loss (gain) on sales of land parcels
 
1

 
(1,846
)
 
1,847

 
—

 
(1,052
)
 
1,052

Net (gain) loss on sales of unconsolidated entities – non-operating assets
 
(342
)
 
—

 
(342
)
 
72

 
—

 
72

(Gain) on sale of investment securities (interest and other income)
(387
)
 
(57
)
 
(330
)
 
—

 
—

 
—

(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)
 
(728
)
 
(1,903
)
 
1,175

 
72

 
(1,052
)
 
1,124

 
 
 
 
 
 
 
 
 
 
 
 
 
Write-off of unamortized retail lease intangibles (rental income)
 
—

 
(147
)
 
147

 
—

 
—

 
—

Executive compensation program duplicative costs and retirement benefit obligations (C)
 
9,640

 
—

 
9,640

 
4,967

 
—

 
4,967

Insurance/litigation settlement or reserve income (interest and other income)
 
(5,770
)
 
(2,761
)
 
(3,009
)
 
—

 
(419
)
 
419

Insurance/litigation settlement or reserve expense (other expenses)
(867
)
 
4,099

 
(4,966
)
 
21

 
4,000

 
(3,979
)
Other (interest and other income)
(302
)
 
—

 
(302
)
 
(108
)
 
—

 
(108
)
Other miscellaneous non-comparable items
2,701

 
1,191

 
1,510

 
4,880

 
3,581

 
1,299

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3)
$
(7,473
)
 
$
8,515

 
$
(15,988
)
 
$
8,927

 
$
3,388

 
$
5,539

 
 
 
 
 
 
 
 
 
 
 
 
 
(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 winddown costs for such items as office leases, litigation and German operations/sales that were incurred indirectly through the Company's interest in various unconsolidated joint ventures with AVB. During the nine months ended September 30, 2015, the amount also includes approximately $18.6 million related to the favorable settlement of a lawsuit.
(C) Primarily represents the accounting cost associated with the Company's new performance based executive compensation program. The Company is required 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 new program, creating a duplicative charge. Of this amount, $1.0 million and $6.0 million has been recorded to property management expense and general and administrative expense, respectively, for the nine months ended September 30, 2015 and $0.3 million and $2.0 million has been recorded to property management expense and general and administrative expense, respectively, for the quarter ended September 30, 2015. Also includes $2.6 million recorded to general and administrative expense during the nine months and quarter ended September 30, 2015 as a result of certain adjustments for retirement benefit obligations.
Note: See page 26 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.

3rd Quarter 2015 Earnings Release
 
24
                                            

    
Equity Residential
Normalized FFO Guidance and Assumptions
 
 
The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties, property acquisition costs and the write-off of pursuit costs, are not included in the estimates provided on this page. See page 26 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
 
 
2015 Normalized FFO Guidance (per share diluted)
 
 
 
 
 
 
 
 
 
 
 
Q4 2015
 
2015
 
 
 
 
 
 
 
 
Expected Normalized FFO (2) (3)
 
$0.89 to $0.93
 
$3.43 to $3.47

 
 
 
 
 
 
 
2015 Same Store Assumptions
 
 
 
 
 
 
 
 
Physical occupancy
 
 
 
 
96.0%
 
Revenue change
 
 
 
 
5.2%
 
Expense change
 
 
 
 
3.1%
 
NOI change
 
 
 
 
6.2%
 
 
 
 
 
 
 
 
(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
 
 
 
$350.0 million
 
Consolidated rental dispositions
 
 
 
$500.0 million*
 
Capitalization rate spread
 
 
 
100 basis points
 
 
 
 
 
 
 
 
* The Company's consolidated rental disposition guidance includes the sale of the medical office building in Boston described on page 9.
 
 
 
 
 
 
 
2015 Debt Assumptions
 
 
 
 
 
 
 
 
Weighted average debt outstanding
 
 
 
$10.9 billion
 
Weighted average interest rate (reduced for capitalized interest)
 
4.07%
 
Interest expense, net
 
 
 
 
$443.6 million
 
Capitalized interest
 
 
 
 
$60.0 million
 
 
 
2015 Other Guidance Assumptions
 
 
 
 
 
 
 
 
General and administrative expense (see Note below)
 
 
 
$53.0 million
 
Interest and other income
 
 
 
$0.6 million
 
Income and other tax expense
 
 
 
$1.0 million
 
Debt offerings
 
 
 
No additional amounts budgeted
 
Equity ATM share offerings
 
 
 
No amounts budgeted
 
Preferred share offerings
 
 
No amounts budgeted
 
Weighted average Common Shares and Units - Diluted
 
 
380.6 million
 
 
 
 
 
 
 
 
Note: Normalized FFO guidance excludes a duplicative charge of approximately $9.3 million, of which $8.0 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. Normalized FFO guidance also excludes $2.6 million recorded to general and administrative expense in the third quarter of 2015 as a result of certain adjustments for retirement benefit obligations.






3rd Quarter 2015 Earnings Release
 
25
                                            

Equity Residential
Additional Reconciliations, Definitions and Footnotes
(Amounts in thousands except per share data)
(All per share data is diluted)
 
 
 
 
 
 
 
 
 
 
The guidance/projections provided below are based on current expectations and are forward-looking.
 
 
 
 
 
 
 
 
 
 
 
Reconciliations of EPS to FFO and Normalized FFO for Pages 6, 24 and 25
 
 
 
 
 
 
 
Expected
Q4 2015
Per Share
 
Expected
2015
Per Share
 
 
 
Expected Q3 2015
 
 
 
 
 
Amounts
 
Per Share
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected Earnings - Diluted (5)
$
202,388

 
$
0.532

 
$0.47 to $0.51
 
$2.28 to $2.32
 
Add: Expected depreciation expense
200,491

 
0.527

 
0.52
 
2.04
 
Less: Expected net gain on sales (5)
(67,716
)
 
(0.178
)
 
(0.11)
 
(0.88)
 
 
 
 
 
 
 
 
 
 
 
Expected FFO - Diluted (1) (3)
335,163

 
0.881

 
$0.88 to $0.92
 
$3.44 to $3.48
 
 
 
 
 
 
 
 
 
 
 
Asset impairment and valuation allowances
—

 
—

 
—
 
—
 
Property acquisition costs and write-off of pursuit costs
1,173

 
0.003

 
0.01
 
(0.03)
 
Debt extinguishment (gains) losses, including prepayment penalties,
preferred share redemptions and non-cash convertible debt discounts
29

 
—

 
—
 
0.01
 
(Gains) losses on sales of non-operating assets, net of income and other tax
expense (benefit)
(6,109
)
 
(0.016
)
 
—
 
—
 
Other miscellaneous non-comparable items
2,337

 
0.006

 
—
 
0.01
 
 
 
 
 
 
 
 
 
 
 
Expected Normalized FFO - Diluted (2) (3)
$
332,593

 
$
0.874

 
$0.89 to $0.93
 
$3.43 to $3.47
 

Definitions and Footnotes for Pages 6, 24 and 25
 
 
 
 
 
 
 
 
 
(1
)
The National Association of Real Estate Investment Trusts ("NAREIT") defines funds from operations ("FFO") (April 2002 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding gains (or losses) from sales and impairment write-downs of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
 
 
(2
)
Normalized funds from operations ("Normalized FFO") begins with FFO and excludes:
 
• the impact of any expenses relating to non-operating asset impairment and valuation allowances;
 
• property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs;
 
• gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
 
• gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
 
• other miscellaneous non-comparable items.
 
 
 
 
 
 
 
 
 
(3
)
The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company's real estate between periods or as compared to different companies. The Company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual operating results. FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company's calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.
 
 
 
 
 
 
 
 
 
(4
)
FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with accounting principles generally accepted in the United States. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the "Noncontrolling Interests – Operating Partnership". Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.
 
 
 
 
 
 
 
 
 
(5
)
Earnings represents net income per share calculated in accordance with accounting principles generally accepted in the United States. Expected earnings is calculated on a basis consistent with actual earnings. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual earnings could differ materially from expected earnings.

       
Same Store NOI Reconciliation for Page 10
 
 
 
 
 
 
 
 
 
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for the September YTD 2015 and the Third Quarter 2015 Same Store Properties:
 
 
Nine Months Ended September 30,
 
Quarter Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Operating income
$
721,856

 
$
670,843

 
$
257,501

 
$
243,274

Adjustments:
 
 
 
 
 
 
 
Non-same store operating results
(74,407
)
 
(70,413
)
 
(22,853
)
 
(25,566
)
Fee and asset management revenue
(6,413
)
 
(7,596
)
 
(2,044
)
 
(2,077
)
Fee and asset management expense
3,764

 
4,293

 
1,169

 
1,253

Depreciation
584,862

 
565,772

 
196,059

 
190,469

General and administrative
50,942

 
41,296

 
15,290

 
9,968

 
 
 
 
 
 
 
 
 
Same store NOI
$
1,280,604

 
$
1,204,195

 
$
445,122

 
$
417,321


3rd Quarter 2015 Earnings Release
 
26

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