EQUITY RESIDENTIAL - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 27, 2010

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Exhibit 99.1

Equity Residential Reports Third Quarter 2010 Results

Same Store Revenues Increase 1.3%;
Acquisitions of $549 million

CHICAGO--(BUSINESS WIRE)--October 27, 2010--Equity Residential (NYSE: EQR) today reported results for the quarter and nine months ended September 30, 2010. All per share results are reported on a fully-diluted basis.

“The recovery that began early in the year continued through the summer and delivered quarterly same store revenue growth for the first time since the fourth quarter of 2008,” said David J. Neithercut, Equity Residential’s President and CEO. “Continued strength in retention and rising rates for renewals and new leases combined with favorable demographics and supply limitations indicate that fundamentals in our core markets should remain strong for the foreseeable future.”

Third Quarter 2010

For the third quarter of 2010, the company reported earnings of $0.09 per share compared to $0.48 per share in the third quarter of 2009. The difference is due primarily to lower gains from property sales in 2010.

The company reported FFO (funds from operations) for the quarter at the high end of its guidance range and, as expected, positive quarter over quarter same store revenues and net operating income (NOI) for the first time in six quarters.

FFO for the quarter ended September 30, 2010 was $0.55 per share compared to $0.53 per share for the same period of 2009. The difference is due primarily to:

  • the net positive impact of approximately $0.05 per share from lease-up activity, higher total NOI from the company’s same store portfolio and the volume and timing of 2010 transaction activity, partially offset by the negative impact of dilution from 2009 transaction activity;
  • the negative impact of approximately $0.02 per share from the expenses and lost revenues resulting from the reconstruction of the Prospect Towers garage; and
  • the net negative impact of approximately $0.01 per share due to lower interest and other income and certain other non-comparable items listed on page 24 of this release.

Nine Months Ended September 30, 2010

For the nine months ended September 30, 2010, the company reported earnings of $0.29 per share compared to $1.12 per share in the same period of 2009.

FFO for the nine months ended September 30, 2010 was $1.63 per share compared to $1.69 per share in the same period of 2009.

Same Store Results

On a same store third quarter to third quarter comparison, which includes 117,286 apartment units, revenues increased 1.3%, expenses increased 1.9% and NOI increased 0.9%.

On a same store sequential second quarter to third quarter comparison, which includes 120,931 apartment units, revenues increased 1.4%, expenses increased 2.5% and NOI increased 0.7%.

On a same store nine-month to nine-month comparison, which includes 116,775 apartment units, revenues decreased 1.0%, expenses increased 1.7% and NOI decreased 2.6%.

Acquisitions/Dispositions

During the third quarter of 2010, the company acquired six properties: one located in Los Angeles, one in San Diego, two in the San Francisco Bay Area and two in the Washington, D.C. Metro Area. The properties have a total of 1,955 apartment units and the aggregate purchase price was $548.9 million. Included in this total is the company’s previously announced acquisition of Vantage Pointe, a 679-unit property located in San Diego, California, that is in lease up and is currently 27% occupied. The company expects Vantage Pointe to have stabilized operations in its third year of ownership at a 7.0% yield on cost. The weighted average capitalization (cap) rate on the company’s acquisitions in the quarter, not including Vantage Pointe, was 5.2%.

Also during the third quarter, the company acquired three land parcels, located in the Washington, D.C. Metro Area, San Francisco Bay Area and Southeast Florida, for an aggregate purchase price of $42.3 million.

During the quarter, the company sold three consolidated properties, consisting of 426 apartment units, for an aggregate sale price of $26.1 million at a weighted average cap rate of 7.3% generating an unlevered internal rate of return (IRR), inclusive of management costs, of 10.6%.

Also during the quarter, the company sold the last of its interests in an institutional joint venture which held 24 unconsolidated properties consisting of 5,635 apartment units. The portfolio was valued in its entirety at $375.1 million, which results in an implied weighted average cap rate of 7.6%. The company sold its 25% equity interest to its partner and received, net of debt repayments, $25.4 million, of which $22.5 million was recorded as a gain on the sale of unconsolidated entities. This gain is included in net income but not in FFO and this sale is not part of the company’s guidance of $750.0 million of property sales for the year.

During the first nine months of 2010, the company acquired 14 properties, consisting of 4,164 apartment units, for an aggregate purchase price of $1.4 billion. Included in this total are the acquisitions of 425 Mass and Vantage Pointe, both of which are currently in lease up. The weighted average cap rate on the company’s acquisitions in the first nine months of 2010, not including 425 Mass and Vantage Pointe, was 5.5%.

During the first nine months of 2010, the company sold 11 consolidated properties, consisting of 2,437 apartment units, for an aggregate sale price of $172.0 million at a weighted average cap rate of 7.5% generating an unlevered IRR, inclusive of management costs, of 9.6%.

At-The-Market (ATM) Share Offering Program

During the third quarter of 2010, the company did not issue any common shares under its ATM Share Offering Program. The company has approximately 12.4 million shares available for issuance under this program and has not issued any such shares since January 14, 2010.

Debt Offering

On July 15, 2010, the company closed on a $600.0 million unsecured notes offering maturing July 15, 2020 with a coupon rate of 4.75% and an all-in effective interest rate of 5.09% including the effect of fees and the termination of certain interest rate hedges.

Fourth Quarter 2010 Guidance

The company has established an FFO guidance range of $0.56 to $0.60 per share for the fourth quarter of 2010.

Full Year 2010 Guidance

The company has revised its guidance for its full year 2010 same store operating performance and FFO results as well as other items listed on page 25 of this release. The changes to the full year same store and FFO guidance are listed below:

     

 

Previous

Revised

Same store:
Physical occupancy 95.0% 94.9%
Revenue change (0.5%) to 0.0% (0.25%)
Expense change 1.0% to 2.0% 1.5%
NOI change (2.0%) to (0.5%) (1.25%)
 
FFO per share $2.14 to $2.20 $2.18 to $2.22
 

The difference between the midpoint of the previous FFO guidance range and the midpoint of the revised guidance range is due primarily to the impact on NOI from the company’s 2010 transaction activity and better than expected performance of properties in lease up.

Fourth Quarter 2010 Conference Call

Equity Residential expects to announce fourth quarter 2010 results on Wednesday, February 2, 2011 and host a conference call to discuss those results at 10:00 a.m. CT on Thursday, February 3, 2011.

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 471 properties located in 18 states and the District of Columbia, consisting of 133,029 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

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

A live web cast of the company’s conference call discussing these results will take place tomorrow, Thursday, October 28, at 10:00 a.m. Central. Please visit the Investor Information section of the company’s web site at www.equityapartments.com for the link. A replay of the web cast will be available for two weeks at this site.

 
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
           
Nine Months Ended September 30, Quarter Ended September 30,
2010 2009 2010 2009
REVENUES
Rental income $ 1,517,302 $ 1,433,865 $ 525,228 $ 477,588
Fee and asset management   7,596     7,928     2,128     2,653  
 
Total revenues   1,524,898     1,441,793     527,356     480,241  
 
EXPENSES
Property and maintenance 386,518 363,354 135,000 122,305
Real estate taxes and insurance 175,491 158,306 61,189 54,579
Property management 60,548 56,457 19,401 18,725
Fee and asset management 4,364 5,916 704 1,931
Depreciation 500,173 428,751 173,642 144,165
General and administrative 31,035 30,476 10,224 9,881
Impairment   -     11,124     -     -  
 
Total expenses   1,158,129     1,054,384     400,160     351,586  
 
Operating income 366,769 387,409 127,196 128,655
 
Interest and other income 5,325 15,850 208 3,214
Other expenses (9,513 ) (2,228 ) (3,487 ) (1,922 )
Interest:
Expense incurred, net (353,652 ) (360,021 ) (122,854 ) (121,166 )
Amortization of deferred financing costs   (7,970 )   (9,311 )   (2,457 )   (3,101 )
 
Income (loss) before income and other taxes,
(loss) income from investments in unconsolidated
entities, net gain (loss) on sales of
unconsolidated entities and land parcels and
discontinued operations 959 31,699 (1,394 ) 5,680
Income and other tax (expense) benefit (311 ) (2,844 ) (293 ) (459 )
(Loss) income from investments in unconsolidated entities (735 ) (2,372 ) 188 (151 )
Net gain on sales of unconsolidated entities 28,101 6,718 22,544 3,959
Net (loss) on sales of land parcels   (1,161 )   -     (1,161 )   -  
Income from continuing operations 26,853 33,201 19,884 9,029
Discontinued operations, net   70,918     301,517     9,942     134,336  
Net income 97,771 334,718 29,826 143,365
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership (4,167 ) (18,119 ) (1,231 ) (7,699 )
Preference Interests and Units - (9 ) - (2 )
Partially Owned Properties   623     391     188     317  
Net income attributable to controlling interests 94,227 316,981 28,783 135,981
Preferred distributions   (10,855 )   (10,859 )   (3,617 )   (3,619 )
Net income available to Common Shares $ 83,372   $ 306,122   $ 25,166   $ 132,362  
 
Earnings per share – basic:
Income from continuing operations available to Common Shares $ 0.06   $ 0.08   $ 0.06   $ 0.02  
Net income available to Common Shares $ 0.30   $ 1.12   $ 0.09   $ 0.48  
Weighted average Common Shares outstanding   281,867     272,966     282,717     273,658  
 
Earnings per share – diluted:
Income from continuing operations available to Common Shares $ 0.06   $ 0.08   $ 0.05   $ 0.02  
Net income available to Common Shares $ 0.29   $ 1.12   $ 0.09   $ 0.48  
Weighted average Common Shares outstanding   299,031     289,518     300,379     290,215  
 
Distributions declared per Common Share outstanding $ 1.0125   $ 1.3025   $ 0.3375   $ 0.3375  
 
Equity Residential
Consolidated Statements of Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
           
Nine Months Ended September 30,   Quarter Ended September 30,
2010 2009 2010 2009
 
Net income $ 97,771

 

$ 334,718 $ 29,826

 

$ 143,365
Adjustments:
Net (income) loss attributable to Noncontrolling Interests:
Preference Interests and Units - (9 ) - (2 )
Partially Owned Properties 623 391 188 317
Depreciation 500,173 428,751 173,642 144,165
Depreciation – Non-real estate additions (5,009 ) (5,569 ) (1,640 ) (1,777 )
Depreciation – Partially Owned and Unconsolidated Properties (849 ) 656 (856 ) 225
Net (gain) on sales of unconsolidated entities (28,101 ) (6,718 ) (22,544 ) (3,959 )
Discontinued operations:
Depreciation 1,522 22,736 377 5,487
Net (gain) on sales of discontinued operations (69,538 ) (274,933 ) (9,285 ) (129,135 )
Net incremental gain (loss) on sales of condominium units   619     (450 )   (12 )   (785 )
 
FFO (1) (2) 497,211 499,573 169,696 157,901
Preferred distributions   (10,855 )   (10,859 )   (3,617 )   (3,619 )
 
FFO available to Common Shares and Units – basic (1) (2) $ 486,356   $ 488,714   $ 166,079   $ 154,282  
 
FFO available to Common Shares and Units – diluted (1) (2) $ 486,814   $ 489,183   $ 166,231   $ 154,436  
 
FFO per share and Unit – basic $ 1.65   $ 1.69   $ 0.56   $ 0.53  
 
FFO per share and Unit – diluted $ 1.63   $ 1.69   $ 0.55   $ 0.53  
 
Weighted average Common Shares and
Units outstanding – basic   295,572     288,990     296,348     289,263  
 
Weighted average Common Shares and
Units outstanding – diluted   299,427     289,922     300,773     290,616  
 
(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 of depreciable property, 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 units to condominiums, it simultaneously discontinues depreciation of such property.  FFO available to Common Shares and Units is 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 EQR Common Shares on a one-for-one basis.

 
(2)

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.  FFO and 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 and 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 and 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.

 
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
         
September 30, December 31,
2010 2009
ASSETS
Investment in real estate
Land $ 4,093,508 $ 3,650,324
Depreciable property 15,161,007 13,893,521
Projects under development 499,037 668,979
Land held for development   290,819     252,320  
Investment in real estate 20,044,371 18,465,144
Accumulated depreciation   (4,313,502 )   (3,877,564 )
Investment in real estate, net 15,730,869 14,587,580
 
Cash and cash equivalents 43,660 193,288
Investments in unconsolidated entities - 6,995
Deposits – restricted 109,608 352,008
Escrow deposits – mortgage 19,632 17,292
Deferred financing costs, net 44,488 46,396
Other assets   138,572     213,956  
Total assets $ 16,086,829   $ 15,417,515  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 4,845,244 $ 4,783,446
Notes, net 5,185,283 4,609,124
Lines of credit 146,000 -
Accounts payable and accrued expenses 111,121 58,537
Accrued interest payable 71,374 101,849
Other liabilities 341,209 272,236
Security deposits 62,549 59,264
Distributions payable   102,653     100,266  
Total liabilities   10,865,433     9,984,722  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   357,702     258,280  
 
Equity:
Shareholders' equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 1,946,125 shares issued
and outstanding as of September 30, 2010 and 1,950,925
shares issued and outstanding as of December 31, 2009 208,653 208,773
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 283,971,112 shares issued
and outstanding as of September 30, 2010 and 279,959,048
shares issued and outstanding as of December 31, 2009 2,840 2,800
Paid in capital 4,503,250 4,477,426
Retained earnings 150,344 353,659
Accumulated other comprehensive (loss) income   (116,464 )   4,681  
Total shareholders' equity 4,748,623 5,047,339
Noncontrolling Interests:
Operating Partnership 106,531 116,120
Partially Owned Properties   8,540     11,054  
Total Noncontrolling Interests   115,071     127,174  
Total equity   4,863,694     5,174,513  
Total liabilities and equity $ 16,086,829   $ 15,417,515  
 
 
Equity Residential
Portfolio Summary
As of September 30, 2010
           
 
% of Average
% of Stabilized Rental
Markets Properties   Units Total Units   NOI Rate (1)
 
1 DC Northern Virginia 31 10,393 7.8% 11.8% $ 1,777
2 New York Metro Area 27 7,800 5.9% 11.8% 2,760
3 South Florida 38 12,869 9.7% 8.6% 1,315
4 Boston 36 6,503 4.9% 7.9% 2,080
5 Los Angeles 37 7,688 5.8% 7.6% 1,694
6 Seattle/Tacoma 43 9,748 7.3% 6.4% 1,315
7 San Francisco Bay Area 35 6,784 5.1% 5.8% 1,625
8 San Diego 14 4,963 3.7% 5.6% 1,795
9 Phoenix 38 11,201 8.4% 4.8% 837
10 Denver 23 7,967 6.0% 4.7% 1,042
11 Suburban Maryland 21 5,782 4.4% 4.4% 1,334
12 Orlando 26 8,042 6.0% 4.1% 974
13 Inland Empire, CA 14 4,519 3.4% 3.4% 1,315
14 Orange County, CA 11 3,490 2.6% 3.3% 1,515
15 Atlanta 20 6,183 4.7% 2.9% 954
16 All Other Markets (2) 55 14,417 10.8% 6.9% 978
 
Total 469 128,349 96.5% 100.0% 1,407
 
Military Housing 2 4,680 3.5% - -
 
Grand Total 471 133,029 100.0% 100.0% $ 1,407
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the month of September 2010.
 
(2) All Other Markets - Each individual market is less than 2.0% of stabilized NOI.
 
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
                         
Equity Residential
           
Portfolio as of September 30, 2010
 
Properties Units
 
Wholly Owned Properties 445 123,327
Partially Owned Properties:
Consolidated 24 5,022
Unconsolidated - -
Military Housing 2     4,680  
 
471     133,029  
                         
 
Portfolio Rollforward Q3 2010
($ in thousands)
 
Purchase/
Properties Units (Sale) Price Cap Rate
 
6/30/2010 492 137,091
 
Acquisitions:
Rental Properties:
Consolidated - Stabilized 5 1,276 $ 348,900 5.2 %
Consolidated - Not Stabilized (1) 1 679 $ 200,000
Land Parcels (three) - - $ 42,300
Dispositions:
Rental Properties:
Consolidated (3 ) (426 ) $ (26,050 ) 7.3 %
Unconsolidated (2) (24 ) (5,635 ) $ (375,129 ) 7.6 %
Land Parcel (one) - - $ (4,000 )
Configuration Changes -   44  
 
9/30/2010 471   133,029  
                         
 
Portfolio Rollforward 2010
($ in thousands)
 
Purchase/
Properties Units (Sale) Price Cap Rate
 
12/31/2009 495 137,007
 
Acquisitions:
Rental Properties:
Consolidated - Stabilized 12 2,926 $ 1,031,501 5.5 %
Consolidated - Not Stabilized (1) 2 1,238 $ 366,750
Land Parcels (four) - - $ 54,300
Dispositions:
Rental Properties:
Consolidated (11 ) (2,437 ) $ (171,990 ) 7.5 %
Unconsolidated (2) (27 ) (6,275 ) $ (417,779 ) 7.5 %
Land Parcel (one) - - $ (4,000 )
Condominium Conversion Properties (1 ) (2 ) $ (360 )
Completed Developments 1 480
Configuration Changes -   92  
 
9/30/2010 471   133,029   (3 )
 
(1)   EQR acquired one property in the third quarter of 2010 (Vantage Pointe) that was in the early stages of lease up and is expected to stabilize in its third year of ownership at a 7.0% yield on cost and acquired one unoccupied property in the second quarter of 2010 (425 Mass) that is expected to stabilize in its third year of ownership at an 8.5% yield on cost.
 
(2) EQR owned a 25% interest in these unconsolidated rental properties. Sale price listed is the gross sale price. See the Partially Owned Entities schedule for additional discussion.
 
(3) During the second quarter of 2010, EQR acquired the 75% equity interest it did not own in seven previously unconsolidated properties containing 1,811 units with a real estate value of $105.1 million at an implied cap rate of 8.4%. One of these properties was subsequently sold while the remaining properties continue to be included in the Company's portfolio counts above. See the Partially Owned Entities schedule for additional discussion.
                           
Equity Residential
             
 
Third Quarter 2010 vs. Third Quarter 2009
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 117,286 Same Store Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q3 2010 $ 454,060 $ 173,051 $ 281,009 $ 1,360 95.0% 17.6%
Q3 2009 $ 448,409 $ 169,815 $ 278,594 $ 1,362 93.7% 18.5%
 
Change $ 5,651 $ 3,236 $ 2,415 $ (2) 1.3% (0.9%)
 
Change 1.3% 1.9% 0.9% (0.1%)
 
                           
 
 
Third Quarter 2010 vs. Second Quarter 2010
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 120,931 Same Store Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q3 2010 $ 480,110 $ 183,722 $ 296,388 $ 1,392 95.0% 17.7%
Q2 2010 $ 473,570 $ 179,269 $ 294,301 $ 1,375 95.1% 14.3%
 
Change $ 6,540 $ 4,453 $ 2,087 $ 17 (0.1%) 3.4%
 
Change 1.4% 2.5% 0.7% 1.2%
 
                           
 
 
September YTD 2010 vs. September YTD 2009
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 116,775 Same Store Units
 
Results Statistics
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
YTD 2010 $ 1,338,659 $ 515,549 $ 823,110 $ 1,344 94.9% 43.7%
YTD 2009 $ 1,351,788 $ 506,910 $ 844,878 $ 1,375 93.7% 47.2%
 
Change $ (13,129) $ 8,639 $ (21,768) $ (31) 1.2% (3.5%)
 
Change (1.0%) 1.7% (2.6%) (2.3%)
 
(1)   The Company's primary financial measure for evaluating each of its apartment communities is net operating income ("NOI"). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. The Company believes that NOI is helpful to investors as a supplemental measure of the operating performance of a real estate company because it is a direct measure of the actual operating results of the Company's apartment communities.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
 
Equity Residential
Third Quarter 2010 vs. Third Quarter 2009
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year's Quarter
Q3 2010 Q3 2010 Q3 2010
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 DC Northern Virginia 8,781 10.4 % $ 1,688 96.4 % 4.3 % 0.6 % 6.1 % 2.8 % 1.4 %
2 New York Metro Area 5,887 9.8 % 2,623 96.4 % 1.1 % 2.1 % 0.4 % (0.1 %) 1.1 %
3 South Florida 12,465 9.7 % 1,304 94.2 % 2.9 % (2.7 %) 7.1 % 1.7 % 1.1 %
4 Los Angeles 7,191 7.9 % 1,698 94.8 % 0.4 % 1.9 % (0.4 %) (1.1 %) 1.5 %
5 Boston 6,021 7.8 % 2,027 96.4 % 2.8 % 6.0 % 0.9 % 2.0 % 0.7 %
6 Seattle/Tacoma 8,540 6.7 % 1,325 92.9 % (0.1 %) 4.5 % (3.0 %) (1.9 %) 1.7 %
7 San Francisco Bay Area 6,239 6.4 % 1,638 94.1 % (1.2 %) 0.5 % (2.2 %) (2.5 %) 1.2 %
8 Denver 7,759 5.3 % 1,045 95.7 % 3.2 % 3.6 % 3.0 % 1.5 % 1.6 %
9 Phoenix 10,647 5.1 % 839 94.4 % 0.7 % 1.7 % 0.0 % (2.7 %) 3.2 %
10 Orlando 8,042 4.8 % 982 94.7 % (0.1 %) (1.3 %) 0.7 % (1.0 %) 0.9 %
11 San Diego 4,103 4.6 % 1,668 94.7 % 0.7 % 6.1 % (1.8 %) 0.7 % 0.1 %
12 Suburban Maryland 4,823 3.8 % 1,223 95.8 % 3.7 % 5.5 % 2.7 % 2.7 % 0.9 %
13 Inland Empire, CA 4,219 3.6 % 1,317 94.4 % (1.3 %) 3.0 % (3.6 %) (1.1 %) (0.3 %)
14 Atlanta 5,979 3.3 % 964 96.2 % 0.1 % (0.2 %) 0.4 % (1.4 %) 1.5 %
15 Orange County, CA 3,175 3.3 % 1,510 95.2 % (1.7 %) 1.9 % (3.4 %) (2.9 %) 1.3 %
16 All Other Markets 13,415 7.5 % 975 95.0 % 0.6 % 2.8 % (1.0 %) (0.5 %) 1.1 %
 
Total 117,286 100.0 % $ 1,360 95.0 % 1.3 % 1.9 % 0.9 % (0.1 %) 1.3 %
 
(1)   Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
 
Equity Residential
Third Quarter 2010 vs. Second Quarter 2010
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Quarter
Q3 2010 Q3 2010 Q3 2010
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 New York Metro Area 6,797 11.3 % $ 2,865 96.4 % 1.5 % (0.4 %) 2.7 % 1.4 % 0.2 %
2 DC Northern Virginia 9,327 10.9 % 1,743 96.4 % 2.2 % 3.0 % 1.9 % 2.0 % 0.2 %
3 South Florida 12,465 9.3 % 1,304 94.2 % 1.5 % 4.3 % (0.2 %) 2.2 % (0.6 %)
4 Boston 6,313 7.9 % 2,050 96.3 % 0.6 % 1.8 % (0.1 %) (0.3 %) 0.8 %
5 Los Angeles 7,463 7.9 % 1,707 94.7 % 2.0 % 1.8 % 2.1 % 1.3 % 0.7 %
6 Seattle/Tacoma 8,796 6.6 % 1,335 92.9 % 1.3 % 2.4 % 0.6 % 2.7 % (1.3 %)
7 San Francisco Bay Area 6,239 6.1 % 1,638 94.1 % 0.0 % 1.9 % (1.1 %) 1.2 % (1.1 %)
8 Phoenix 11,201 5.1 % 842 94.4 % 1.0 % 4.9 % (1.7 %) 1.2 % (0.1 %)
9 Denver 7,759 5.0 % 1,045 95.7 % 3.2 % 9.9 % (0.2 %) 3.0 % 0.2 %
10 Orlando 8,042 4.5 % 982 94.7 % 1.9 % 3.3 % 1.0 % 1.6 % 0.3 %
11 San Diego 4,284 4.5 % 1,674 94.5 % 0.5 % 1.7 % (0.2 %) 0.8 % (0.4 %)
12 Suburban Maryland 5,325 4.2 % 1,280 95.6 % 0.7 % 2.5 % (0.3 %) 0.7 % 0.0 %
13 Inland Empire, CA 4,219 3.4 % 1,317 94.4 % 0.2 % 3.0 % (1.4 %) 1.5 % (1.2 %)
14 Orange County, CA 3,307 3.2 % 1,514 95.2 % 1.0 % (0.8 %) 1.9 % 0.7 % 0.4 %
15 Atlanta 5,979 3.2 % 964 96.2 % 2.1 % 1.6 % 2.5 % 1.5 % 0.6 %
16 All Other Markets 13,415 6.9 %   960 94.8 % (0.4 %) 7.2 % (6.0 %) (1.2 %) 0.7 %
 
Total 120,931 100.0 % $ 1,392 95.0 % 1.4 % 2.5 % 0.7 % 1.2 % (0.1 %)
 
(1)   Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
 
Equity Residential
September YTD 2010 vs. September YTD 2009
Same Store Results/Statistics by Market
                   
 
Increase (Decrease) from Prior Year
Sept. YTD 10 Sept. YTD 10 Sept. YTD 10
% of Average Weighted Average
Actual Rental Average Rental
Markets Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
1 DC Northern Virginia 8,781 10.2 % $ 1,654 95.8 % 2.1 % 0.5 % 2.9 % 0.8 % 1.2 %
2 South Florida 12,465 9.8 % 1,283 94.6 % 1.3 % (1.1 %) 3.0 % (0.1 %) 1.3 %
3 New York Metro Area 5,887 9.5 % 2,586 95.9 % (2.7 %) 5.3 % (7.6 %) (4.1 %) 1.3 %
4 Los Angeles 7,099 7.9 % 1,683 94.6 % (2.2 %) 0.4 % (3.5 %) (3.4 %) 1.2 %
5 Boston 6,021 7.9 % 2,024 95.6 % 2.3 % 0.7 % 3.4 % 1.5 % 0.7 %
6 Seattle/Tacoma 8,473 6.7 % 1,296 93.4 % (4.1 %) 3.4 % (8.6 %) (5.2 %) 1.1 %
7 San Francisco Bay Area 6,239 6.6 % 1,625 94.8 % (3.3 %) 1.8 % (6.0 %) (4.9 %) 1.6 %
8 Denver 7,759 5.4 % 1,021 95.4 % 0.3 % 2.5 % (0.9 %) (1.3 %) 1.5 %
9 Phoenix 10,647 5.3 % 833 94.4 % (3.0 %) 1.9 % (6.3 %) (4.8 %) 1.8 %
10 San Diego 4,103 4.7 % 1,654 94.8 % 0.5 % 3.1 % (0.8 %) (0.5 %) 0.9 %
11 Orlando 7,690 4.5 % 965 94.4 % (2.0 %) 0.5 % (3.7 %) (3.3 %) 1.3 %
12 Suburban Maryland 4,823 3.8 % 1,213 95.3 % 2.7 % 2.8 % 2.6 % 1.5 % 1.1 %
13 Inland Empire, CA 4,219 3.7 % 1,304 94.8 % (2.4 %) 1.1 % (4.2 %) (2.8 %) 0.4 %
14 Orange County, CA 3,175 3.3 % 1,504 94.8 % (3.7 %) 2.2 % (6.4 %) (4.6 %) 0.9 %
15 Atlanta 5,979 3.3 % 955 95.8 % (2.9 %) 2.1 % (6.7 %) (4.6 %) 1.6 %
16 All Other Markets 13,415 7.4 %   964 95.0 % (0.9 %) 1.7 % (2.8 %) (2.0 %) 1.1 %
 
Total 116,775 100.0 % $ 1,344 94.9 % (1.0 %) 1.7 % (2.6 %) (2.3 %) 1.2 %
 
(1)   Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
 
Equity Residential
           
 
Third Quarter 2010 vs. Third Quarter 2009
Same Store Operating Expenses
$ in thousands - 117,286 Same Store Units
 
% of Actual
Q3 2010
Actual Actual $ % Operating
Q3 2010 Q3 2009 Change Change Expenses
 
Real estate taxes $ 43,973 $ 45,936 $ (1,963 ) (4.3 %) 25.4 %
On-site payroll (1) 42,324 40,414 1,910 4.7 % 24.4 %
Utilities (2) 26,954 26,050 904 3.5 % 15.6 %
Repairs and maintenance (3) 26,974 25,866 1,108 4.3 % 15.6 %
Property management costs (4) 18,253 16,591 1,662 10.0 % 10.5 %
Insurance 5,637 5,634 3 0.1 % 3.3 %
Leasing and advertising 4,460 4,694 (234 ) (5.0 %) 2.6 %
Other operating expenses (5)   4,476   4,630   (154 ) (3.3 %) 2.6 %
 
Same store operating expenses $ 173,051 $ 169,815 $ 3,236   1.9 % 100.0 %
 
 
 
September YTD 2010 vs. September YTD 2009
Same Store Operating Expenses
$ in thousands - 116,775 Same Store Units
 
% of Actual
YTD 2010
Actual Actual $ % Operating
YTD 2010 YTD 2009 Change Change Expenses
Real estate taxes $ 135,169 $ 137,170 $ (2,001 ) (1.5 %) 26.2 %
On-site payroll (1) 125,363 122,276 3,087 2.5 % 24.3 %
Utilities (2) 80,692 79,099 1,593 2.0 % 15.7 %
Repairs and maintenance (3) 77,346 74,262 3,084 4.2 % 15.0 %
Property management costs (4) 53,814 50,016 3,798 7.6 % 10.4 %
Insurance 16,785 16,774 11 0.1 % 3.3 %
Leasing and advertising 11,823 12,240 (417 ) (3.4 %) 2.3 %
Other operating expenses (5)   14,557   15,073   (516 ) (3.4 %) 2.8 %
 
Same store operating expenses $ 515,549 $ 506,910 $ 8,639   1.7 % 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, 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 operating expenses - Includes administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
 
Equity Residential
     
Debt Summary as of September 30, 2010
(Amounts in thousands)
Weighted
Weighted Average
Average Maturities
Amounts (1) % of Total Rates (1) (years)
 
Secured $ 4,845,244 47.6 % 4.84 % 8.4
Unsecured   5,331,283 52.4 % 4.95 % 4.7  
 
Total $ 10,176,527 100.0 % 4.90 % 6.4  
 
Fixed Rate Debt:
Secured - Conventional $ 3,885,690 38.2 % 5.75 % 7.0
Unsecured - Public/Private   4,373,624 43.0 % 5.80 % 5.3  
 
Fixed Rate Debt   8,259,314 81.2 % 5.77 % 6.1  
 
Floating Rate Debt:
Secured - Conventional 353,892 3.5 % 2.50 % 3.5
Secured - Tax Exempt 605,662 5.9 % 0.50 % 20.6
Unsecured - Public/Private 811,659 8.0 % 1.73 % 1.6
Unsecured - Revolving Credit Facility   146,000 1.4 % 0.67 % 1.4  
 
Floating Rate Debt   1,917,213 18.8 % 1.39 % 7.7  
 
Total $ 10,176,527 100.0 % 4.90 % 6.4  
 
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the nine months ended September 30, 2010.
 
Note: The Company capitalized interest of approximately $10.2 million and $28.7 million during the nine months ended September 30, 2010 and 2009, respectively. The Company capitalized interest of approximately $2.3 million and $7.7 million during the quarters ended September 30, 2010 and 2009, respectively.
 
                           
 
Debt Maturity Schedule as of September 30, 2010
(Amounts in thousands)
 
Weighted Weighted
Average Rates Average
Fixed Floating on Fixed Rates on
Year Rate (1) Rate (1) Total % of Total Rate Debt (1) Total Debt (1)
 
2010 $ 4,087 $ 17,812 $ 21,899 0.2 % 7.35 % 3.39 %
2011 999,622 (2 ) 741,382 (3 ) 1,741,004 17.1 % 5.43 % 3.69 %
2012 774,807 184,537 (4 ) 959,344 9.4 % 5.68 % 4.85 %
2013 270,415 312,160 582,575 5.7 % 6.75 % 4.91 %
2014 562,456 22,054 584,510 5.8 % 5.32 % 5.25 %
2015 358,167 - 358,167 3.5 % 6.40 % 6.40 %
2016 1,150,352 - 1,150,352 11.3 % 5.35 % 5.35 %
2017 1,355,863 456 1,356,319 13.4 % 5.87 % 5.87 %
2018 80,782 44,677 125,459 1.2 % 5.73 % 4.28 %
2019 801,786 20,766 822,552 8.1 % 5.49 % 5.37 %
2020+   1,900,977   573,369   2,474,346 24.3 % 5.68 % 4.54 %
 
Total $ 8,259,314 $ 1,917,213 $ 10,176,527 100.0 % 5.77 % 4.88 %
 
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of September 30, 2010.
 
(2) Includes $482.5 million face value of 3.85% convertible unsecured debt with a final maturity of 2026. The notes are callable by the Company on or after August 18, 2011. The notes are putable by the holders on August 18, 2011, August 15, 2016 and August 15, 2021.
 
(3) Includes the Company's $500.0 million term loan facility, which originally matured on October 5, 2010. Effective April 12, 2010, the Company exercised the first of its two one-year extension options. As a result, the maturity date is now October 5, 2011 and there is one remaining one-year extension option exercisable by the Company.
 
(4) Includes $146.0 million outstanding on the Company's unsecured revolving credit facility. As of September 30, 2010, there was approximately $1.2 billion available on this facility.
 
Equity Residential
Unsecured Debt Summary as of September 30, 2010
(Amounts in thousands)
             
Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
 
Fixed Rate Notes:
6.950 % 03/02/11 $ 93,096 $ 404 $ 93,500
6.625 % 03/15/12 253,858 (275 ) 253,583
5.500 % 10/01/12 222,133 (438 ) 221,695
5.200 % 04/01/13 (1) 400,000 (296 ) 399,704
Fair Value Derivative Adjustments (1) (300,000 ) - (300,000 )
5.250 % 09/15/14 500,000 (244 ) 499,756
6.584 % 04/13/15 300,000 (496 ) 299,504
5.125 % 03/15/16 500,000 (291 ) 499,709
5.375 % 08/01/16 400,000 (1,082 ) 398,918
5.750 % 06/15/17 650,000 (3,433 ) 646,567
7.125 % 10/15/17 150,000 (457 ) 149,543
4.750 % 07/15/20 600,000 (4,464 ) 595,536
7.570 % 08/15/26 140,000 - 140,000
3.850 % 08/15/26 (2)   482,545     (6,936 )   475,609  
 
  4,391,632     (18,008 )   4,373,624  
 
Floating Rate Notes:
04/01/13 (1) 300,000 - 300,000
Fair Value Derivative Adjustments (1) 11,659 - 11,659
Term Loan Facility LIBOR+0.50% 10/05/11 (3)(4)   500,000     -     500,000  
 
  811,659     -     811,659  
 
Revolving Credit Facility: LIBOR+0.50% 02/28/12 (3)(5)   146,000     -     146,000  
 
Total Unsecured Debt $ 5,349,291   $ (18,008 ) $ 5,331,283  
 
(1)   $300.0 million in fair value interest rate swaps converts a portion of the 5.200% notes due April 1, 2013 to a floating interest rate.
 
(2) Convertible notes mature on August 15, 2026. The notes are callable by the Company on or after August 18, 2011. The notes are putable by the holders on August 18, 2011, August 15, 2016 and August 15, 2021.
 
(3) Facilities are private. All other unsecured debt is public.
 
(4) Represents the Company's $500.0 million term loan facility, which originally matured on October 5, 2010. Effective April 12, 2010, the Company exercised the first of its two one-year extension options. As a result, the maturity date is now October 5, 2011 and there is one remaining one-year extension option exercisable by the Company.
 
(5) Represents amount outstanding on the Company's unsecured revolving credit facility which matures on February 28, 2012. As of September 30, 2010, there was approximately $1.2 billion available on this facility.
   
Equity Residential
   
 
Selected Unsecured Public Debt Covenants
 
September 30, June 30,
2010 2010
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 49.9% 48.9%
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 23.8% 24.1%
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.43 2.54
 
Total Unsecured Assets to Unsecured Debt 238.5% 251.6%
(must be at least 150%)
 

These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding

unsecured public debt. Equity Residential is the general partner of ERPOP.
 
 
Equity Residential
 
Capital Structure as of September 30, 2010
(Amounts in thousands except for share/unit and per share amounts)
                 
Secured Debt $ 4,845,244 47.6 %
Unsecured Debt   5,331,283 52.4 %
 
Total Debt 10,176,527 100.0 % 41.4 %
 
Common Shares (includes Restricted Shares) 283,971,112 95.3 %
Units (includes OP Units and LTIP Units)   13,859,444   4.7 %
 
Total Shares and Units 297,830,556 100.0 %
Common Share Equivalents (see below)   392,697
 
Total outstanding at quarter-end 298,223,253
Common Share Price at September 30, 2010 $ 47.57
14,186,480 98.6 %
Perpetual Preferred Equity (see below)   200,000 1.4 %
 
Total Equity 14,386,480 100.0 % 58.6 %
 
Total Market Capitalization $ 24,563,007 100.0 %
 
 
Convertible Preferred Equity as of September 30, 2010
(Amounts in thousands except for share and per share amounts)
 
Annual Annual Weighted Common
Redemption Outstanding Liquidation Dividend Dividend Average Conversion Share
Series Date Shares Value Per Share Amount Rate Ratio Equivalents
 
Preferred Shares:
7.00% Series E (1) 11/1/98 323,666 $ 8,091 $ 1.75 $ 567 1.1128 360,176
7.00% Series H (1) 6/30/98 22,459   562 1.75   39 1.4480 32,521
 
Total Convertible Preferred Equity 346,125 $ 8,653 $ 606 7.00 % 392,697
 
(1) Both the Series E and the Series H Preferred Shares have been called for redemption effective November 1, 2010.
 
 
Perpetual Preferred Equity as of September 30, 2010
(Amounts in thousands except for share and per share amounts)
 
Annual Annual Weighted
Redemption Outstanding Liquidation Dividend Dividend Average
Series Date Shares Value Per Share Amount Rate
 
Preferred Shares:
8.29% Series K 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145
6.48% Series N 6/19/08 600,000   150,000 16.20   9,720
 
Total Perpetual Preferred Equity 1,600,000 $ 200,000 $ 13,865 6.93 %
 
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
                     
 
YTD Q310 YTD Q309 Q310 Q309
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 281,867,105 272,965,818 282,717,105 273,658,165
Shares issuable from assumed conversion/vesting of:
- OP Units 13,704,927 16,023,881 13,631,198 15,604,484
- long-term compensation award shares/units 3,458,727 527,805 4,031,120 952,568
 
Total Common Shares and Units - diluted 299,030,759 289,517,504 300,379,423 290,215,217
 
Weighted Average Amounts Outstanding for FFO Purposes:
Common Shares - basic 281,867,105 272,965,818 282,717,105 273,658,165
OP Units - basic 13,704,927 16,023,881 13,631,198 15,604,484
 
Total Common Shares and OP Units - basic 295,572,032 288,989,699 296,348,303 289,262,649
Shares issuable from assumed conversion/vesting of:
- convertible preferred shares/units 396,098 404,004 393,724 400,489
- long-term compensation award shares/units 3,458,727 527,805 4,031,120 952,568
 
Total Common Shares and Units - diluted 299,426,857 289,921,508 300,773,147 290,615,706
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 283,971,112 276,147,420
Units (includes OP Units and LTIP Units) 13,859,444 14,432,942
 
Total Shares and Units 297,830,556 290,580,362
 
Equity Residential
Partially Owned Entities as of September 30, 2010
(Amounts in thousands except for project and unit amounts)
             
 
Consolidated Unconsolidated
Development Projects
Held for Institutional
and/or Under Completed Joint
Development and Stabilized Other Total Ventures (4)
 
Total projects (1)   -     4     20     24     -  
 
Total units (1)   -     1,302     3,720     5,022     -  
 
Operating information for the nine months
ended 9/30/10 (at 100%):
Operating revenue $ 3,507 $ 18,946 $ 41,885 $ 64,338 $ 44,179
Operating expenses   3,032     7,069     14,974     25,075     22,036  
 
Net operating income 475 11,877 26,911 39,263 22,143
Depreciation - 9,174 11,125 20,299 11,189
General and administrative/other   52     107     34     193     141  
 
Operating income 423 2,596 15,752 18,771 10,813
Interest and other income 21 8 20 49 73
Other expenses (342 ) - (493 ) (835 ) -
Interest:
Expense incurred, net (2,382 ) (4,804 ) (15,258 ) (22,444 ) (16,482 )
Amortization of deferred financing costs   -     (566 )   (172 )   (738 )   (573 )
 

(Loss) before income and other taxes

and discontinued operations (2,280 ) (2,766 ) (151 ) (5,197 ) (6,169 )
Income and other tax (expense) benefit (30 ) - (24 ) (54 ) (153 )
Net gain on sales of discontinued operations   711     -     7,997     8,708     9,967  
 
Net (loss) income $ (1,599 ) $ (2,766 ) $ 7,822   $ 3,457   $ 3,645  
 
 
Debt - Secured (2):
EQR Ownership (3) $ 154,324 $ 275,600 $ 221,858 $ 651,782 $ -
Noncontrolling Ownership   -     -     80,111     80,111     -  
 
Total (at 100%) $ 154,324   $ 275,600   $ 301,969   $ 731,893   $ -  
 
(1) Project and unit counts exclude all uncompleted development projects until those projects are substantially completed. See the Consolidated Development and Lease-Up Projects schedule for more detail.
 
(2) All debt is non-recourse to the Company with the exception of $14.0 million in mortgage debt on various development projects.
 
(3) Represents the Company's current economic ownership interest.
 
(4) On April 30, 2010, the Company acquired the 75% equity interest it did not own in seven previously unconsolidated properties containing 1,811 units in exchange for an approximate $30.0 million payment to its partner. In addition, the Company repaid the net $70.0 million mortgage loan, which was to mature on May 1, 2010, concurrent with closing using proceeds drawn from the Company's line of credit. The total consideration paid by the Company represents an implied 8.4% cap rate. During the third quarter of 2010, the Company sold its 25% equity interest in the remaining 24 unconsolidated properties containing 5,635 units in exchange for an approximate $25.4 million payment from its partner and the related $264.8 million in non-recourse mortgage debt was extinguished by the partner at closing. The total consideration received by the Company represents an implied 7.6% cap rate. As of September 30, 2010, the Company no longer held an interest in these unconsolidated institutional joint ventures.
 
Equity Residential
Consolidated Development and Lease-Up Projects as of September 30, 2010
(Amounts in thousands except for project and unit amounts)
                 
Total Book
Total Total Value Not Estimated Estimated
No. of Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Units Cost (1) to Date Service Debt Completed   Leased Occupied Date Date
 

Projects Under Development - Wholly Owned:

Red 160 (formerly Redmond Way) Redmond, WA 250 $ 84,382 $ 73,731 $ 73,731 $ - 96 % 60 % 48 % Q1 2011 Q1 2012
Westgate Pasadena, CA 480 170,558 147,260 147,260 163,160 (2) 91 % 67 % 60 % Q2 2011 Q2 2012
500 West 23rd Street (formerly 10 Chelsea) (5) New York, NY 111 55,555 19,171 19,171 - 12 % - - Q4 2011 Q4 2012
Savoy III Aurora, CO 168   23,856   4,753   4,753   - 3 % - - Q3 2012 Q2 2013
 
Projects Under Development - Wholly Owned 1,009 334,351 244,915 244,915 163,160
 

Projects Under Development - Partially Owned:

The Brooklyner (formerly 111 Lawrence Street) Brooklyn, NY 490   280,868   253,581   253,581   136,627 98 % 80 % 79 % Q4 2010 Q3 2011
 
Projects Under Development - Partially Owned 490 280,868 253,581 253,581 136,627
         
Projects Under Development 1,499   615,219   498,496   498,496   299,787

(3)

 

 

Completed Not Stabilized - Wholly Owned (4):

Third Square (formerly 303 Third) Cambridge, MA 482 257,457 256,492 - - 94 % 93 % Completed Q4 2010
70 Greene (formerly 77 Hudson) Jersey City, NJ 480 269,958 267,036 - - 94 % 92 % Completed Q4 2010
Reunion at Redmond Ridge Redmond, WA 321 53,175 53,151 - - 87 % 84 % Completed Q1 2011
425 Mass (6) Washington, D.C. 559 166,750 166,750 - - 50 % 46 % Completed Q1 2012
Vantage Pointe (6) San Diego, CA 679   200,000   200,000   -   - 28 % 27 % Completed Q3 2012
 
Projects Completed Not Stabilized - Wholly Owned 2,521 947,340 943,429 - -
         
Projects Completed Not Stabilized 2,521   947,340   943,429   -   -
 

Completed and Stabilized During the Quarter - Partially Owned:

Montclair Metro Montclair, NJ 163   46,230   45,972   -   34,686 99 % 97 % Completed Stabilized
 
Projects Completed and Stabilized During the Quarter - Partially Owned 163 46,230 45,972 - 34,686
         
Projects Completed and Stabilized During the Quarter 163   46,230   45,972   -   34,686
 
Total Projects 4,183 $ 1,608,789 $ 1,487,897 $ 498,496 (7 ) $ 334,473
 
Land Held for Development N/A   N/A $ 290,819 $ 290,819 $ 17,697
 
 
Total Capital Q3 2010
NOI CONTRIBUTION FROM DEVELOPMENT PROJECTS Cost (1) NOI
Projects Under Development $ 615,219 $ 2,216
Completed Not Stabilized 947,340 4,110
Completed and Stabilized During the Quarter   46,230     598  
Total Development NOI Contribution $ 1,608,789   $ 6,924  
 
(1)   Total capital cost represents estimated development 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) Debt is primarily tax-exempt bonds that are entirely outstanding, with $25.4 million held in escrow by the lender and released as draw requests are made. This escrowed amount is classified as "Deposits – restricted" in the consolidated balance sheets at September 30, 2010.
 
(3) Of the approximately $116.7 million of capital cost remaining to be funded at 9/30/10 for projects under development, $50.6 million will be funded by fully committed third party bank loans and the remaining $66.1 million will be funded by cash on hand.
 
(4) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing.
 
(5) 500 West 23rd Street - The land under this development is subject to a long term ground lease.
 
(6) The Company acquired these completed development projects prior to stabilization and has begun/continued lease-up activities.
 
(7) Total book value not placed in service excludes $0.5 million of construction-in-progress related to the reconstruction of the Prospect Towers garage.
 
Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Nine Months Ended September 30, 2010
(Amounts in thousands except for unit and per unit amounts)
                                 
 
Repairs and Maintenance Expenses Capital Expenditures to Real Estate Total Expenditures
 
Building
Total Avg. Avg. Avg. Replacements Avg. Improvements Avg. Avg. Grand Avg.
Units (1) Expense (2) Per Unit Payroll (3) Per Unit Total Per Unit (4) Per Unit (5) Per Unit Total Per Unit Total Per Unit
 
Same Store Properties (6) 116,775 $ 77,346 $ 662 $ 61,825 $ 530 $ 139,171 $ 1,192 $ 54,840 $ 469 $ 37,577 $ 322 $ 92,417 $ 791 (9) $ 231,588 $ 1,983
 
Non-Same Store Properties (7) 11,574 6,306 757 4,645 557 10,951 1,314 2,409 289 3,595 431 6,004 720 16,955 2,034
 
Other (8) - - 1,638 1,638 292 246 538 2,176
 
Total 128,349 $ 83,652 $ 68,108 $ 151,760 $ 57,541 $ 41,418 $ 98,959 $ 250,719
 
(1)   Total Units - Excludes 4,680 military housing 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, 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 units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $23.0 million spent on various assets related to unit renovations/rehabs (primarily kitchens and baths) designed to reposition these assets for higher rental levels in their respective markets.
 
(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, 2009, less properties subsequently sold.
 
(7) Non-Same Store Properties - Primarily includes all properties acquired during 2009 and 2010, plus any properties in lease-up and not stabilized as of January 1, 2009. Per unit amounts are based on a weighted average of 8,336 units.
 
(8) Other - Primarily includes expenditures for properties sold during the period.
 
(9) For 2010, the Company estimates that it will spend approximately $1,075 per unit of capital expenditures for its same store properties inclusive of unit renovation/rehab costs, or $825 per unit excluding unit renovation/rehab costs.
 
Equity Residential
Discontinued Operations
(Amounts in thousands)
         
 
Nine Months Ended Quarter Ended
September 30, September 30,
2010 2009 2010 2009
 
REVENUES
Rental income $ 7,296   $ 90,113   $ 1,914   $ 21,018  
 
Total revenues   7,296     90,113     1,914     21,018  
 
EXPENSES (1)
Property and maintenance 2,942 29,420 310 7,456
Real estate taxes and insurance 1,078 9,565 223 2,209
Depreciation 1,522 22,736 377 5,487
General and administrative   26     29     10     4  
 
Total expenses   5,568     61,750     920     15,156  
 
Discontinued operating income 1,728 28,363 994 5,862
 
Interest and other income 360 16 - 3
Interest (2):
Expense incurred, net (659 ) (1,372 ) (318 ) (352 )
Amortization of deferred financing costs (11 ) (335 ) (8 ) (293 )
Income and other tax (expense) benefit   (38 )   (88 )   (11 )   (19 )
 
Discontinued operations 1,380 26,584 657 5,201
Net gain on sales of discontinued operations   69,538     274,933     9,285     129,135  
 
Discontinued operations, net $ 70,918   $ 301,517   $ 9,942   $ 134,336  
 
(1)   Includes expenses paid in the current period for properties sold or held for sale in prior periods related to the Company’s period of ownership.
 
(2) Includes only interest expense specific to secured mortgage notes payable for properties sold and/or held for sale.
 
Equity Residential
FFO Guidance Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
               
 
FFO Guidance Reconciliations
 
FFO Reconciliations
Guidance Q3 2010
to Actual Q3 2010
Amounts Per Share
 
Guidance Q3 2010 FFO - Diluted (1) (2) $ 160,355 $ 0.534
Property NOI 4,685 0.015
Interest expense 2,642 0.009
Property acquisition costs (other expenses) (531 ) (0.002 )
Other   (920 )   (0.003 )
 
Actual Q3 2010 FFO - Diluted (1) (2) $ 166,231   $ 0.553  
                               
 
 
Non-Comparable Items (3)
 
 
Nine Months Ended September 30, Quarter Ended September 30,
2010 2009 Variance 2010 2009 Variance
 
Impairment $ - $ (11,124 ) $ 11,124 $ - $ - $ -
Prospect Towers garage loss:
Lost revenues (rental income) (835 ) - (835 ) (835 ) - (835 )
Expenses (real estate taxes and insurance) (3,538 ) - (3,538 ) (3,538 ) - (3,538 )
Insurance/litigation settlement proceeds (interest and other income) 5,192 171 5,021 - - -
Debt extinguishment gains (interest and other income) - 4,455 (4,455 ) - 2,435 (2,435 )
Gain on sale of investment securities (interest and other income) - 4,943 (4,943 ) - - -
Write-off of pursuit costs (other expenses) (3,512 ) (1,973 ) (1,539 ) (1,450 ) (1,811 ) 361
Property acquisition costs (other expenses) (6,001 ) (255 ) (5,746 ) (2,037 ) (111 ) (1,926 )
Non-cash convertible debt discount (includes extinguishment write-offs) (5,835 ) (7,165 ) 1,330 (1,945 ) (2,140 ) 195
Debt extinguishment costs (interest):
Prepayment premiums/penalties (158 ) (35 ) (123 ) (158 ) - (158 )
Write-off of unamortized deferred financing costs (1,004 ) (2,328 ) 1,324 (75 ) (893 ) 818
Write-off of unamortized premiums/(discounts)/(OCI) 324 (758 ) 1,082 324 - 324
EQR 25% share of unconsolidated defeasance costs
((loss) from investments in unconsolidated entities) - (1,775 ) 1,775 - - -
Net (loss) on sales of land parcels (1,161 ) - (1,161 ) (1,161 ) - (1,161 )
Net incremental gain (loss) on sales of condominium units 619 (450 ) 1,069 (12 ) (785 ) 773
Other   (1,057 )   (2,490 )   1,433     (537 )   (822 )   285  
 
Net non-comparable items (3) $ (16,966 ) $ (18,784 ) $ 1,818   $ (11,424 ) $ (4,127 ) $ (7,297 )
 
 
Note: See page 26 for definitions, footnotes and reconciliations of EPS to FFO.
 
 
Equity Residential
Earnings Guidance and Assumptions
     
 
The earnings guidance/projections provided below are based on current expectations and are forward-looking.
 
 

2010 Earnings Guidance (per share diluted)

 

Q4 2010

2010

 
Expected FFO (1) (2) $0.56 to $0.60 $2.18 to $2.22
 
 

2010 Same Store Assumptions

 
Physical occupancy 94.9%
Revenue change (0.25%)
Expense change 1.50%
NOI change (1.25%)
 
(Note: 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO)
 

2010 Transaction Assumptions

 
Consolidated rental acquisitions $1.5 billion
Consolidated rental dispositions $750.0 million
Capitalization rate spread 110 basis points
 

2010 Debt Assumptions

 
Weighted average debt outstanding $9.8 billion to $9.9 billion

 

Weighted average interest rate (reduced for capitalized
interest and including prepayment penalties) 4.86%
Interest expense $476.3 million to $481.1 million
 
Note: Debt guidance assumes no additional debt offerings beyond the $600.0 million unsecured offering that closed on 7/15/10 but does include approximately $7.8 million of interest expense for the requirement to expense the implied option value inherent in convertible debt. The terms of the Company's debt covenants do not include this charge as interest expense.
 
 
 
 

2010 Other Guidance Assumptions

 
General and administrative expense $41.0 million
Interest and other income $5.0 million to $6.0 million
Other expenses (write-off of pursuit and property acquisition costs) $11.0 million to $12.0 million
Income and other tax expense $1.0 million
Net gain (loss) on sales of land parcels No additional amounts budgeted
Preferred share redemption charges $0.0 million
Equity ATM share offerings No additional amounts budgeted
Weighted average Common Shares and Units - Diluted 300.1 million
 
 
Note: See page 26 for definitions, footnotes and reconciliations of EPS to FFO.
 
Equity Residential
Additional Reconciliations
(Amounts in thousands except per share data)
(All per share data is diluted)
           
 
The earnings guidance/projections provided below are based on current expectations and are forward-looking.
 
 
Reconciliations of EPS to FFO for Pages 24 and 25
 
 
Expected Expected
Expected Q3 2010 Q4 2010 2010
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (4) $ 35,202 $ 0.117 $0.70 to $0.74 $0.99 to $1.03
Add: Expected depreciation expense 175,048 0.583 0.57 2.23
Less: Expected net gain on sales (4)   (49,895 )   (0.166 ) (0.71) (1.04)
 
Expected FFO - Diluted (1) (2) $ 160,355   $ 0.534   $0.56 to $0.60 $2.18 to $2.22
 
 
Definitions and Footnotes for Pages 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 of depreciable property, 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 units to condominiums, it simultaneously discontinues depreciation of such property. FFO available to Common Shares and Units is 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 EQR Common Shares on a one-for-one basis.

 
(2)

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.  FFO and 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 and 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 and 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.

 
(3)

Non-comparable items are those items included in FFO that by their nature are not comparable from period to period, such as net incremental gain on sales of condominium units, impairment charges, debt extinguishment costs and redemption premiums on Preferred Shares/Preference Interests.

 
(4)

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 2010 and Third Quarter 2010 Same Store Properties:
 
Nine Months Ended September 30,   Quarter Ended September 30,
2010 2009 2010 2009
 
Operating income $ 366,769 $ 387,409 $ 127,196 $ 128,655
Adjustments:
Non-same store operating results (71,635 ) (10,870 ) (28,629 ) (3,385 )
Fee and asset management revenue (7,596 ) (7,928 ) (2,128 ) (2,653 )
Fee and asset management expense 4,364 5,916 704 1,931
Depreciation 500,173 428,751 173,642 144,165
General and administrative 31,035 30,476 10,224 9,881
Impairment   -     11,124     -     -  
 
Same store NOI $ 823,110   $ 844,878   $ 281,009   $ 278,594  

CONTACT:
Equity Residential
Marty McKenna, 312/928-1901

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