), a real estate investment trust (REIT), reported third quarter
2012 funds from operations (FFO) of $292.3 million or 92 cents
per share, compared to $196.6 million or 63 cents in the year-ago
The steep rise in year over year FFO was primarily due to a
termination fee of $70 million or $0.22 per share received by the
company in correlation with its failed acquisition bid for
Archstone. Reported FFO for third quarter 2012 well exceeded the
Zacks Consensus Estimate of 76 cents.
Excluding certain one-time items, recurring FFO for the reported
quarter was $232.5 million or 73 cents per share, compared to
$193.1 million or 62 cents in the year-earlier quarter. Total
revenues during the quarter were $556.1 million, compared to
$493.9 million in the year-earlier period - an increase of 12.6%.
Total revenues during the reported quarter exceeded the Zacks
Consensus Estimate of $554 million.
Equity Residential benefited from strengthening apartment
fundamentals and superior execution of pricing and expense
control measures. Management further expects to continue
delivering strong growth in operating income and earnings in the
remainder of 2012.
Same-store (third quarter 2012 versus third quarter 2011
comparison, which includes 105,902 apartment units) quarterly
revenues increased 5.8% to $508.1 million. Same-store net
operating income (NOI) during the quarter increased 7.4% year
over year to $330.6 million, primarily due to a 5.2% increase in
average rental rates to $1,670 per apartment unit.
During the quarter, Equity Residential acquired four properties
totaling 540 apartment units for $236.3 million at a weighted
average cap rate of 4.3%. The company also acquired two land
parcels for future development in Seattle and one in Southern
California for a total of $38.5 million.
Equity Residential is likely to start construction in 2014 on
the land parcels, erecting about 640 apartment units on the
Seattle land parcels for $226.0 million, and 154 apartment units
on the Southern California land parcel for $43.2 million.
The company sold eight consolidated properties during third
quarter 2012 (2,153 apartment units) for $280.7 million at a
weighted average cap rate of 6.0%. Year-to-date, Equity
Residential has acquired nine properties (1,896 apartment units)
for $906.3 million at a weighted average cap rate of 4.7% and
five land parcels for $62.2 million. Also during the first nine
months of 2012, the company sold 20 properties (5,337 apartment
units) for $616.9 million at a weighted average cap rate of 6.2%.
As a part of the final settlement, Equity Residential received
$150 million in termination fees during second quarter 2012 from
ank of America Corporation
), and Lehman Brothers Holdings Inc. for being unable to acquire
a 26.5% ownership interest in Archstone - a privately held owner,
operator and developer of multifamily apartment properties.
Archstone was previously owned by Bank of America, Barclays, and
Lehman Brothers. While the banks collectively held a 53% stake in
the company, Lehman held the remaining 47%.
Equity Residential entered into a contract with the affiliates of
Bank of America and Barclays PLC to acquire half of their
combined ownership interests. However, Lehman had the 'right to
first offer,' under which the banks were obliged to present it
with any offer they would like to accept and give the estate a
chance to either match or beat it.
Subsequently, as Lehman exercised this right and acquired the
bank's ownership stake, Equity Residential's contract with the
banks was terminated. Equity Residential recognized $70 million
of the termination fees as interest and other income during the
reported quarter and the balance $80 million would be recorded in
the next quarter.
BANK OF AMER CP (BAC): Free Stock Analysis
BARCLAY PLC-ADR (BCS): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
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During the reported quarter, the company issued over 1 million
shares under its At-the-Market (ATM) share offering program at
$62.70 per share for total proceeds of approximately $68.7
million. Year-to-date, the company had issued approximately 3.2
million shares at $60.59 each for total proceeds of $192.3
million. The company currently has approximately 6.0 million
shares available for offer under this ATM share offering program.
At quarter-end, the company had $45.6 million of cash and cash
equivalents, and $870 million available on its revolving credit
facility. For fourth quarter 2012, recurring FFO is expected in
the range of 72 cents to 76 cents per share. For full year 2012,
Equity Residential has revised its recurring FFO guidance in the
range of $2.74 to $2.78 from the earlier range of $2.73 to $2.78
We maintain our Neutral recommendation on the stock, which
presently has a Zacks #3 Rank that translates into a short-term
Note: FFO, a widely used metric to gauge the performance of
REITs, are obtained after adding depreciation and amortization
and other non-cash expenses to net income.