UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 |
For the quarterly period ended September 30, 2017
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
For the transition period from to
Commission File Number: 1-12252 (Equity Residential)
Commission File Number: 0-24920 (ERP Operating Limited Partnership)
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland (Equity Residential) |
| 13-3675988 (Equity Residential) |
Illinois (ERP Operating Limited Partnership) |
| 36-3894853 (ERP Operating Limited Partnership) |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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Two North Riverside Plaza, Chicago, Illinois 60606 |
| (312) 474-1300 |
(Address of principal executive offices) (Zip Code) |
| ( |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Shares of Beneficial Interest, | EQR | New York Stock Exchange | ||
7.57% Notes due August 15, 2026 | N/A | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Equity Residential Yes ☒ No ☐ | ERP Operating Limited Partnership Yes ☒ No ☐ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Equity Residential Yes ☒ No ☐ | ERP Operating Limited Partnership Yes ☒ No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Equity Residential:
Large accelerated filer |
| ☒ |
| Accelerated filer |
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Non-accelerated filer |
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Emerging growth company |
| ☐ |
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ERP Operating Limited Partnership:
Large accelerated filer |
| ☐ |
| Accelerated filer |
| ☐ |
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Non-accelerated filer |
| ☒ |
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| ☐ |
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Emerging growth company |
| ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Equity Residential ☐ | ERP Operating Limited Partnership ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Equity Residential Yes ☐ No ☒ | ERP Operating Limited Partnership Yes ☐ No ☒ |
The number of EQR Common Shares of Beneficial Interest, $0.01 par value, outstanding on October 27, 2017April 22, 2022 was 367,484,786.376,041,849.
This report combines the reports on Form 10-Q for the quarterly period ended September 30, 2017March 31, 2022 of Equity Residential and ERP Operating Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “EQR” mean Equity Residential, a Maryland real estate investment trust (“REIT”), and references to “ERPOP” mean ERP Operating Limited Partnership, an Illinois limited partnership. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. The following chart illustrates the Company'sCompany’s and the Operating Partnership'sPartnership’s corporate structure:
EQR is the general partner of, and as of September 30, 2017March 31, 2022owned an approximate 96.4%96.7% ownership interest in, ERPOP. The remaining 3.6%3.3% interest is owned by limited partners. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP'sERPOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of EQR consists of the same members as the management of ERPOP.
The Company is structured as an umbrella partnership REIT (“UPREIT”) and EQR contributes all net proceeds from its various equity offerings to ERPOP. In return for those contributions, EQR receives a number of OP Units (see definition below) in ERPOP equal to the number of Common Shares it has issued in the equity offering. The Company may acquire properties in transactions that include the issuance of OP Units as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales. This is one of the reasons why the Company is structured in the manner shown above. Based on the terms of ERPOP'sERPOP’s partnership agreement, OP Units can be exchanged with Common Shares on a one-for-one basis because the Company maintains a one-for-one relationship between the OP Units of ERPOP issued to EQR and the outstanding Common Shares.
The Company believes that combining the reports on Form 10-Q of EQR and ERPOP into this single report provides the following benefits:
enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
• | enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; |
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
• | eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and |
• | creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. |
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between EQR and ERPOP in the context of how EQR and ERPOP operate as a consolidated company. All of the Company'sCompany’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR'sEQR’s primary function is acting as the general partner of ERPOP. EQR also issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, and guarantees certain debt of ERPOP, as disclosed in this report.ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company'sCompany’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from
equity offerings by EQR which(which are contributed to the capital of ERPOP in exchange for additional partnership interests in ERPOP (“OP Units”) (on a one-for-one Common Share per OP Unit basis) or additional preference units in ERPOP (on a one-for-one preferred share per preference unit basis)), the Operating Partnership generates all remaining capital required by the Company'sCompany’s business. These sources include the Operating Partnership'sPartnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility and/or commercial paper program, the issuance of secured and unsecured debt and equity securitiespartnership interests, and proceeds received from disposition of certain properties and joint venture interests.
Shareholders'Shareholders’ equity, partners'partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners'partners’ capital in the Operating Partnership'sPartnership’s financial statements and as noncontrolling interests in the Company'sCompany’s financial statements. The noncontrolling interests in the Operating Partnership'sPartnership’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in the Company'sCompany’s financial statements include the same noncontrolling interests at the Operating Partnership level and limited partner OP Unit holders of the Operating Partnership. The differences between shareholders'shareholders’ equity and partners'partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.
To help investors understand the differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of each entity'sentity’s debt, noncontrolling interests and shareholders'shareholders’ equity or partners'partners’ capital, as applicable; and a combined Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.
This report also includes separate Part I, Item 4. 4, Controls and Procedures, sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.
In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership.
As general partner with control of ERPOP, EQR consolidates ERPOP for financial reporting purposes, and EQR essentially has no assets or liabilities other than its investment in ERPOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
(Amounts in thousands except for share amounts)
(Unaudited)
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| September 30, |
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| December 31, |
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| March 31, |
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| December 31, |
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| 2017 |
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| 2016 |
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| 2022 |
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| 2021 |
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ASSETS |
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Investment in real estate |
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Land |
| $ | 5,985,004 |
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| $ | 5,899,862 |
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| $ | 5,836,951 |
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| $ | 5,814,790 |
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Depreciable property |
|
| 19,571,402 |
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| 18,730,579 |
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| 22,496,307 |
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| 22,370,811 |
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Projects under development |
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| 293,064 |
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| 637,168 |
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| 36,718 |
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| 24,307 |
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Land held for development |
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| 99,073 |
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| 118,816 |
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| 66,980 |
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| 62,998 |
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Investment in real estate |
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| 25,948,543 |
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| 25,386,425 |
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| 28,436,956 |
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| 28,272,906 |
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Accumulated depreciation |
|
| (5,849,110 | ) |
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| (5,360,389 | ) |
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| (8,578,131 | ) |
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| (8,354,282 | ) |
Investment in real estate, net |
|
| 20,099,433 |
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| 20,026,036 |
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| 19,858,825 |
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| 19,918,624 |
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Investments in unconsolidated entities |
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| 150,092 |
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| 127,448 |
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Cash and cash equivalents |
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| 46,565 |
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| 77,207 |
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| 41,140 |
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| 123,832 |
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Investments in unconsolidated entities |
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| 59,029 |
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| 60,141 |
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Deposits – restricted |
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| 36,639 |
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| 76,946 |
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Escrow deposits – mortgage |
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| 10,972 |
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| 64,935 |
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Restricted deposits |
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| 70,560 |
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| 236,404 |
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Right-of-use assets |
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| 471,667 |
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| 474,713 |
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Other assets |
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| 445,195 |
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| 398,883 |
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| 237,953 |
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| 288,220 |
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Total assets |
| $ | 20,697,833 |
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| $ | 20,704,148 |
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| $ | 20,830,237 |
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| $ | 21,169,241 |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Mortgage notes payable, net |
| $ | 3,619,180 |
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| $ | 4,119,181 |
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| $ | 2,193,199 |
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| $ | 2,191,201 |
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Notes, net |
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| 5,143,248 |
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| 4,848,079 |
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| 5,836,957 |
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| 5,835,222 |
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Line of credit and commercial paper |
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| 229,844 |
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| 19,998 |
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| 129,995 |
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| 315,030 |
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Accounts payable and accrued expenses |
|
| 167,984 |
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| 147,482 |
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| 157,681 |
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| 107,013 |
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Accrued interest payable |
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| 72,811 |
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| 60,946 |
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| 56,876 |
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| 69,510 |
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Lease liabilities |
|
| 311,293 |
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| 312,335 |
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Other liabilities |
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| 332,650 |
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| 350,466 |
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| 303,654 |
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|
| 353,102 |
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Security deposits |
|
| 65,230 |
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| 62,624 |
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|
| 67,515 |
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| 66,141 |
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Distributions payable |
|
| 192,569 |
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| 192,296 |
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|
| 242,574 |
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|
| 233,502 |
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Total liabilities |
|
| 9,823,516 |
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| 9,801,072 |
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| 9,299,744 |
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| 9,483,056 |
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Commitments and contingencies |
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Redeemable Noncontrolling Interests – Operating Partnership |
|
| 380,541 |
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| 442,092 |
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| 495,760 |
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| 498,977 |
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Equity: |
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Shareholders' equity: |
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Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 745,600 shares issued and outstanding as of September 30, 2017 and December 31, 2016 |
|
| 37,280 |
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|
| 37,280 |
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Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 367,462,480 shares issued and outstanding as of September 30, 2017 and 365,870,924 shares issued and outstanding as of December 31, 2016 |
|
| 3,675 |
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|
| 3,659 |
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Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized; 745,600 shares issued and outstanding as of March 31, 2022 and December 31, 2021 |
|
| 37,280 |
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| 37,280 |
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Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares authorized; 375,974,070 shares issued and outstanding as of March 31, 2022 and 375,527,195 shares issued and outstanding as of December 31, 2021 |
|
| 3,760 |
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|
| 3,755 |
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Paid in capital |
|
| 8,848,739 |
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| 8,758,422 |
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| 9,142,969 |
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| 9,121,122 |
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Retained earnings |
|
| 1,464,249 |
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| 1,543,626 |
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| 1,661,705 |
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| �� | 1,827,063 |
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Accumulated other comprehensive (loss) |
|
| (94,674 | ) |
|
| (113,909 | ) | ||||||||
Accumulated other comprehensive income (loss) |
|
| (31,847 | ) |
|
| (34,272 | ) | ||||||||
Total shareholders’ equity |
|
| 10,259,269 |
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| 10,229,078 |
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|
| 10,813,867 |
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| 10,954,948 |
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Noncontrolling Interests: |
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Operating Partnership |
|
| 228,332 |
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|
| 221,297 |
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|
| 217,451 |
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|
| 214,094 |
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Partially Owned Properties |
|
| 6,175 |
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|
| 10,609 |
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|
| 3,415 |
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|
| 18,166 |
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Total Noncontrolling Interests |
|
| 234,507 |
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|
| 231,906 |
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|
| 220,866 |
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|
| 232,260 |
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Total equity |
|
| 10,493,776 |
|
|
| 10,460,984 |
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|
| 11,034,733 |
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|
| 11,187,208 |
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Total liabilities and equity |
| $ | 20,697,833 |
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| $ | 20,704,148 |
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| $ | 20,830,237 |
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| $ | 21,169,241 |
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See accompanying notes
2
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands except per share data)
(Unaudited)
|
| Nine Months Ended September 30, |
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| Quarter Ended September 30, |
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| Quarter Ended March 31, |
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| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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| 2022 |
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| 2021 |
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REVENUES |
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Rental income |
| $ | 1,840,170 |
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| $ | 1,816,960 |
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| $ | 623,951 |
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| $ | 605,856 |
|
| $ | 653,348 |
|
| $ | 597,602 |
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Fee and asset management |
|
| 532 |
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|
| 3,351 |
|
|
| 171 |
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|
| 218 |
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Total revenues |
|
| 1,840,702 |
|
|
| 1,820,311 |
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|
| 624,122 |
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|
| 606,074 |
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EXPENSES |
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|
|
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|
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|
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Property and maintenance |
|
| 306,645 |
|
|
| 309,688 |
|
|
| 104,721 |
|
|
| 104,216 |
|
|
| 124,874 |
|
|
| 117,054 |
|
Real estate taxes and insurance |
|
| 253,318 |
|
|
| 238,954 |
|
|
| 84,087 |
|
|
| 81,343 |
|
|
| 100,688 |
|
|
| 103,470 |
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Property management |
|
| 64,702 |
|
|
| 64,003 |
|
|
| 20,861 |
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|
| 19,517 |
|
|
| 30,747 |
|
|
| 26,130 |
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General and administrative |
|
| 40,366 |
|
|
| 47,408 |
|
|
| 12,567 |
|
|
| 12,395 |
|
|
| 17,238 |
|
|
| 15,383 |
|
Depreciation |
|
| 542,964 |
|
|
| 528,242 |
|
|
| 184,100 |
|
|
| 179,230 |
|
|
| 229,961 |
|
|
| 199,962 |
|
Total expenses |
|
| 1,207,995 |
|
|
| 1,188,295 |
|
|
| 406,336 |
|
|
| 396,701 |
|
|
| 503,508 |
|
|
| 461,999 |
|
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Net gain (loss) on sales of real estate properties |
|
| (102 | ) |
|
| (43 | ) | ||||||||||||||||
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| ||||||||||||||||
Operating income |
|
| 632,707 |
|
|
| 632,016 |
|
|
| 217,786 |
|
|
| 209,373 |
|
|
| 149,738 |
|
|
| 135,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest and other income |
|
| 5,708 |
|
|
| 65,092 |
|
|
| 3,945 |
|
|
| 5,509 |
|
|
| 3,528 |
|
|
| 216 |
|
Other expenses |
|
| (3,160 | ) |
|
| (14,480 | ) |
|
| (1,028 | ) |
|
| (10,420 | ) |
|
| (3,056 | ) |
|
| (4,110 | ) |
Interest: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Expense incurred, net |
|
| (288,579 | ) |
|
| (386,316 | ) |
|
| (91,145 | ) |
|
| (86,352 | ) |
|
| (72,792 | ) |
|
| (67,358 | ) |
Amortization of deferred financing costs |
|
| (6,447 | ) |
|
| (10,000 | ) |
|
| (2,064 | ) |
|
| (2,261 | ) |
|
| (2,077 | ) |
|
| (2,185 | ) |
Income before income and other taxes, (loss) income from investments in unconsolidated entities, net gain on sales of real estate properties and land parcels and discontinued operations |
|
| 340,229 |
|
|
| 286,312 |
|
|
| 127,494 |
|
|
| 115,849 |
| ||||||||
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels |
|
| 75,341 |
|
|
| 62,123 |
| ||||||||||||||||
Income and other tax (expense) benefit |
|
| (710 | ) |
|
| (1,189 | ) |
|
| (228 | ) |
|
| (426 | ) |
|
| (282 | ) |
|
| (153 | ) |
(Loss) income from investments in unconsolidated entities |
|
| (2,153 | ) |
|
| 5,846 |
|
|
| (398 | ) |
|
| 7,750 |
| ||||||||
Net gain on sales of real estate properties |
|
| 141,761 |
|
|
| 3,870,871 |
|
|
| 17,328 |
|
|
| 90,036 |
| ||||||||
Net gain on sales of land parcels |
|
| 19,170 |
|
|
| 15,759 |
|
|
| — |
|
|
| 4,037 |
| ||||||||
Income from continuing operations |
|
| 498,297 |
|
|
| 4,177,599 |
|
|
| 144,196 |
|
|
| 217,246 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| 124 |
|
|
| — |
|
|
| 246 |
| ||||||||
Income (loss) from investments in unconsolidated entities |
|
| (1,261 | ) |
|
| (1,611 | ) | ||||||||||||||||
Net gain (loss) on sales of land parcels |
|
| — |
|
|
| 5 |
| ||||||||||||||||
Net income |
|
| 498,297 |
|
|
| 4,177,723 |
|
|
| 144,196 |
|
|
| 217,492 |
|
|
| 73,798 |
|
|
| 60,364 |
|
Net (income) attributable to Noncontrolling Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net (income) loss attributable to Noncontrolling Interests: |
|
|
|
|
|
|
|
| ||||||||||||||||
Operating Partnership |
|
| (17,931 | ) |
|
| (160,442 | ) |
|
| (5,166 | ) |
|
| (8,353 | ) |
|
| (2,394 | ) |
|
| (2,143 | ) |
Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) |
|
| (639 | ) |
|
| (682 | ) |
Net income attributable to controlling interests |
|
| 478,012 |
|
|
| 4,014,913 |
|
|
| 138,229 |
|
|
| 208,316 |
|
|
| 70,765 |
|
|
| 57,539 |
|
Preferred distributions |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
|
| (772 | ) |
|
| (773 | ) |
Net income available to Common Shares |
| $ | 475,694 |
|
| $ | 4,012,595 |
|
| $ | 137,457 |
|
| $ | 207,543 |
|
| $ | 69,993 |
|
| $ | 56,766 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Earnings per share – basic: | Earnings per share – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income from continuing operations available to Common Shares |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Net income available to Common Shares |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Weighted average Common Shares outstanding |
|
| 366,809 |
|
|
| 364,917 |
|
|
| 366,996 |
|
|
| 365,109 |
| ||||||||
Earnings per share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations available to Common Shares |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
| ||||||||
Net income available to Common Shares |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
|
| $ | 0.19 |
|
| $ | 0.15 |
|
Weighted average Common Shares outstanding |
|
| 382,640 |
|
|
| 382,284 |
|
|
| 382,945 |
|
|
| 382,373 |
|
|
| 375,509 |
|
|
| 372,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared per Common Share outstanding |
| $ | 1.51125 |
|
| $ | 12.51125 |
|
| $ | 0.50375 |
|
| $ | 3.50375 |
| ||||||||
Earnings per share – diluted: |
|
|
|
|
|
|
|
| ||||||||||||||||
Net income available to Common Shares |
| $ | 0.19 |
|
| $ | 0.15 |
| ||||||||||||||||
Weighted average Common Shares outstanding |
|
| 389,628 |
|
|
| 386,916 |
|
See accompanying notes
3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)
(Amounts in thousands except per share data)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
|
| Quarter Ended March 31, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Comprehensive income: |
|
|
|
|
|
|
|
| ||||||||||||||||
Net income |
| $ | 498,297 |
|
| $ | 4,177,723 |
|
| $ | 144,196 |
|
| $ | 217,492 |
|
| $ | 73,798 |
|
| $ | 60,364 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) – derivative instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during the period |
|
| 5,216 |
|
|
| (4,240 | ) |
|
| 1,709 |
|
|
| 227 |
| ||||||||
Losses reclassified into earnings from other comprehensive income |
|
| 14,019 |
|
|
| 37,262 |
|
|
| 4,768 |
|
|
| 4,340 |
|
|
| 2,425 |
|
|
| 2,303 |
|
Other comprehensive income (loss) – foreign currency: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Currency translation adjustments arising during the period |
|
| — |
|
|
| 264 |
|
|
| — |
|
|
| 214 |
| ||||||||
Other comprehensive income |
|
| 19,235 |
|
|
| 33,286 |
|
|
| 6,477 |
|
|
| 4,781 |
| ||||||||
Other comprehensive income (loss) |
|
| 2,425 |
|
|
| 2,303 |
| ||||||||||||||||
Comprehensive income |
|
| 517,532 |
|
|
| 4,211,009 |
|
|
| 150,673 |
|
|
| 222,273 |
|
|
| 76,223 |
|
|
| 62,667 |
|
Comprehensive (income) attributable to Noncontrolling Interests |
|
| (20,983 | ) |
|
| (164,096 | ) |
|
| (6,201 | ) |
|
| (9,362 | ) |
|
| (3,113 | ) |
|
| (2,909 | ) |
Comprehensive income attributable to controlling interests |
| $ | 496,549 |
|
| $ | 4,046,913 |
|
| $ | 144,472 |
|
| $ | 212,911 |
|
| $ | 73,110 |
|
| $ | 59,758 |
|
See accompanying notes
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 498,297 |
|
| $ | 4,177,723 |
|
| $ | 73,798 |
|
| $ | 60,364 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 542,964 |
|
|
| 528,242 |
|
|
| 229,961 |
|
|
| 199,962 |
|
Amortization of deferred financing costs |
|
| 6,447 |
|
|
| 10,000 |
|
|
| 2,077 |
|
|
| 2,185 |
|
Amortization of above/below market lease intangibles |
|
| 2,729 |
|
|
| 2,566 |
|
|
| — |
|
|
| (18 | ) |
Amortization of discounts and premiums on debt |
|
| 4,939 |
|
|
| (18,328 | ) |
|
| 1,358 |
|
|
| 1,294 |
|
Amortization of deferred settlements on derivative instruments |
|
| 14,010 |
|
|
| 37,187 |
|
|
| 2,422 |
|
|
| 2,301 |
|
Amortization of right-of-use assets |
|
| 3,046 |
|
|
| 2,980 |
| ||||||||
Write-off of pursuit costs |
|
| 2,329 |
|
|
| 3,379 |
|
|
| 1,463 |
|
|
| 1,331 |
|
Loss (income) from investments in unconsolidated entities |
|
| 2,153 |
|
|
| (5,846 | ) | ||||||||
(Income) loss from investments in unconsolidated entities |
|
| 1,261 |
|
|
| 1,611 |
| ||||||||
Distributions from unconsolidated entities – return on capital |
|
| 2,031 |
|
|
| 2,165 |
|
|
| 79 |
|
|
| — |
|
Net (gain) on sales of investment securities and other investments |
|
| — |
|
|
| (58,416 | ) | ||||||||
Net (gain) on sales of real estate properties |
|
| (141,761 | ) |
|
| (3,870,871 | ) | ||||||||
Net (gain) on sales of land parcels |
|
| (19,170 | ) |
|
| (15,759 | ) | ||||||||
Net (gain) on sales of discontinued operations |
|
| — |
|
|
| (43 | ) | ||||||||
Net (gain) loss on sales of real estate properties |
|
| 102 |
|
|
| 43 |
| ||||||||
Net (gain) loss on sales of land parcels |
|
| — |
|
|
| (5 | ) | ||||||||
Realized (gain) loss on sale of investment securities |
|
| (2,066 | ) |
|
| 133 |
| ||||||||
Compensation paid with Company Common Shares |
|
| 19,999 |
|
|
| 25,540 |
|
|
| 9,203 |
|
|
| 8,678 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in deposits – restricted |
|
| 788 |
|
|
| 9,992 |
| ||||||||
Decrease in mortgage deposits |
|
| 1,447 |
|
|
| 222 |
| ||||||||
(Increase) decrease in other assets |
|
| (23,024 | ) |
|
| 4,248 |
|
|
| 30,174 |
|
|
| 20,746 |
|
Increase in accounts payable and accrued expenses |
|
| 62,635 |
|
|
| 41,371 |
| ||||||||
Increase (decrease) in accounts payable and accrued expenses |
|
| 54,553 |
|
|
| 59,116 |
| ||||||||
Increase (decrease) in accrued interest payable |
|
| 11,865 |
|
|
| (15,780 | ) |
|
| (12,634 | ) |
|
| (10,407 | ) |
(Decrease) in other liabilities |
|
| (28,250 | ) |
|
| (24,749 | ) | ||||||||
Increase (decrease) in lease liabilities |
|
| (902 | ) |
|
| (868 | ) | ||||||||
Increase (decrease) in other liabilities |
|
| (27,213 | ) |
|
| (3,852 | ) | ||||||||
Increase (decrease) in security deposits |
|
| 2,606 |
|
|
| (13,522 | ) |
|
| 1,374 |
|
|
| 459 |
|
Net cash provided by operating activities |
|
| 963,034 |
|
|
| 819,321 |
|
|
| 368,056 |
|
|
| 346,053 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate – acquisitions |
|
| (466,395 | ) |
|
| (205,881 | ) |
|
| (113,046 | ) |
|
| — |
|
Investment in real estate – development/other |
|
| (227,187 | ) |
|
| (454,502 | ) |
|
| (24,255 | ) |
|
| (64,599 | ) |
Capital expenditures to real estate |
|
| (143,258 | ) |
|
| (124,551 | ) |
|
| (35,285 | ) |
|
| (28,679 | ) |
Non-real estate capital additions |
|
| (776 | ) |
|
| (4,467 | ) |
|
| (971 | ) |
|
| (589 | ) |
Interest capitalized for real estate under development |
|
| (23,164 | ) |
|
| (41,658 | ) | ||||||||
Proceeds from disposition of real estate, net |
|
| 350,000 |
|
|
| 6,584,126 |
| ||||||||
Investments in unconsolidated entities |
|
| (5,324 | ) |
|
| (3,826 | ) | ||||||||
Interest capitalized for real estate and unconsolidated entities under development |
|
| (1,017 | ) |
|
| (3,769 | ) | ||||||||
Investments in unconsolidated entities – other |
|
| (24,897 | ) |
|
| (2,378 | ) | ||||||||
Distributions from unconsolidated entities – return of capital |
|
| 329 |
|
|
| 13,798 |
|
|
| 9 |
|
|
| 4 |
|
Proceeds from sale of investment securities and other investments |
|
| — |
|
|
| 72,815 |
| ||||||||
Decrease (increase) in deposits on real estate acquisitions and investments, net |
|
| 39,519 |
|
|
| (83,668 | ) | ||||||||
(Increase) in mortgage deposits |
|
| (4,541 | ) |
|
| (21 | ) | ||||||||
Net cash (used for) provided by investing activities |
|
| (480,797 | ) |
|
| 5,752,165 |
| ||||||||
Purchase of investment securities and other investments |
|
| (1,009 | ) |
|
| (26,335 | ) | ||||||||
Proceeds from sale of investment securities |
|
| 3,434 |
|
|
| — |
| ||||||||
Net cash provided by (used for) investing activities |
|
| (197,037 | ) |
|
| (126,345 | ) |
See accompanying notes
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing costs |
| $ | (6,272 | ) |
| $ | (507 | ) |
| $ | — |
|
| $ | (318 | ) |
Mortgage deposits |
|
| 57,057 |
|
|
| (6,249 | ) | ||||||||
Mortgage notes payable, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds |
|
| 2,689 |
|
|
| 37,492 |
| ||||||||
Lump sum payoffs |
|
| (493,420 | ) |
|
| (565,084 | ) |
|
| — |
|
|
| (59,880 | ) |
Scheduled principal repayments |
|
| (8,771 | ) |
|
| (6,644 | ) |
|
| (1,933 | ) |
|
| (1,871 | ) |
Notes, net: |
|
|
|
|
|
|
|
| ||||||||
Proceeds |
|
| 692,466 |
|
| — |
| |||||||||
Lump sum payoffs |
|
| (394,077 | ) |
|
| (1,500,000 | ) | ||||||||
Line of credit and commercial paper: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit proceeds |
|
| 1,845,000 |
|
|
| 246,000 |
| ||||||||
Line of credit repayments |
|
| (1,845,000 | ) |
|
| (246,000 | ) | ||||||||
Commercial paper proceeds |
|
| 3,888,675 |
|
|
| 1,324,784 |
|
|
| 1,424,086 |
|
|
| 1,184,923 |
|
Commercial paper repayments |
|
| (3,681,750 | ) |
|
| (1,712,472 | ) |
|
| (1,609,121 | ) |
|
| (1,170,000 | ) |
Proceeds from settlement of derivative instruments |
|
| 1,296 |
|
| — |
| |||||||||
Finance ground lease principal payments |
|
| (140 | ) |
|
| (116 | ) | ||||||||
Proceeds from Employee Share Purchase Plan (ESPP) |
|
| 2,963 |
|
|
| 2,778 |
|
|
| 969 |
|
|
| 1,731 |
|
Proceeds from exercise of options |
|
| 12,967 |
|
|
| 26,939 |
|
|
| 14,344 |
|
|
| 22,882 |
|
Payment of offering costs |
|
| (36 | ) |
|
| (304 | ) |
|
| (114 | ) |
|
| — |
|
Other financing activities, net |
|
| (40 | ) |
|
| (33 | ) | ||||||||
Contributions – Noncontrolling Interests – Partially Owned Properties |
|
| 125 |
|
| — |
|
|
| 446 |
|
|
| — |
| |
Contributions – Noncontrolling Interests – Operating Partnership |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
|
Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
| (554,267 | ) |
|
| (3,490,838 | ) |
|
| (226,639 | ) |
|
| (224,308 | ) |
Preferred Shares |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
Noncontrolling Interests – Operating Partnership |
|
| (20,604 | ) |
|
| (137,641 | ) |
|
| (7,535 | ) |
|
| (8,479 | ) |
Noncontrolling Interests – Partially Owned Properties |
|
| (6,873 | ) |
|
| (28,588 | ) |
|
| (15,836 | ) |
|
| (2,883 | ) |
Net cash (used for) financing activities |
|
| (512,879 | ) |
|
| (6,096,176 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents |
|
| (30,642 | ) |
|
| 475,310 |
| ||||||||
Cash and cash equivalents, beginning of period |
|
| 77,207 |
|
|
| 42,276 |
| ||||||||
Cash and cash equivalents, end of period |
| $ | 46,565 |
|
| $ | 517,586 |
| ||||||||
Net cash provided by (used for) financing activities |
|
| (419,555 | ) |
|
| (221,600 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents and restricted deposits |
|
| (248,536 | ) |
|
| (1,892 | ) | ||||||||
Cash and cash equivalents and restricted deposits, beginning of period |
|
| 360,236 |
|
|
| 99,728 |
| ||||||||
Cash and cash equivalents and restricted deposits, end of period |
| $ | 111,700 |
|
| $ | 97,836 |
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents and restricted deposits, end of period |
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents |
| $ | 41,140 |
|
| $ | 35,453 |
| ||||||||
Restricted deposits |
|
| 70,560 |
|
|
| 62,383 |
| ||||||||
Total cash and cash equivalents and restricted deposits, end of period |
| $ | 111,700 |
|
| $ | 97,836 |
|
See accompanying notes
6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
| $ | 257,805 |
|
| $ | 383,374 |
|
| $ | 81,391 |
|
| $ | 74,058 |
|
Net cash paid for income and other taxes |
| $ | 964 |
|
| $ | 1,333 |
| ||||||||
Real estate acquisitions/dispositions/other: |
|
|
|
|
|
|
|
| ||||||||
Mortgage loans assumed |
| $ | — |
|
| $ | 43,400 |
| ||||||||
Net cash paid (received) for income and other taxes |
| $ | 350 |
|
| $ | 752 |
| ||||||||
Amortization of deferred financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate, net |
| $ | (127 | ) |
| $ | (60 | ) | ||||||||
Other assets |
| $ | 1,810 |
|
| $ | 2,291 |
|
| $ | 585 |
|
| $ | 585 |
|
Mortgage notes payable, net |
| $ | 1,943 |
|
| $ | 3,320 |
|
| $ | 557 |
|
| $ | 703 |
|
Notes, net |
| $ | 2,694 |
|
| $ | 4,389 |
|
| $ | 1,062 |
|
| $ | 957 |
|
Amortization of discounts and premiums on debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable, net |
| $ | 247 |
|
| $ | (21,318 | ) |
| $ | 685 |
|
| $ | 684 |
|
Notes, net |
| $ | 1,771 |
|
| $ | 2,578 |
|
| $ | 673 |
|
| $ | 610 |
|
Line of credit and commercial paper |
| $ | 2,921 |
|
| $ | 412 |
| ||||||||
Amortization of deferred settlements on derivative instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
| $ | (9 | ) |
| $ | (75 | ) |
| $ | (3 | ) |
| $ | (2 | ) |
Accumulated other comprehensive income |
| $ | 14,019 |
|
| $ | 37,262 |
|
| $ | 2,425 |
|
| $ | 2,303 |
|
Write-off of pursuit costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate, net |
| $ | 2,292 |
|
| $ | 2,876 |
|
| $ | 375 |
|
| $ | 1,209 |
|
Investments in unconsolidated entities |
| $ | 1,070 |
|
| $ | — |
| ||||||||
Other assets |
| $ | 17 |
|
| $ | 399 |
|
| $ | 18 |
|
| $ | 114 |
|
Accounts payable and accrued expenses |
| $ | 20 |
|
| $ | 104 |
|
| $ | — |
|
| $ | 8 |
|
Loss (income) from investments in unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
(Income) loss from investments in unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
Investments in unconsolidated entities |
| $ | 1,076 |
|
| $ | (6,999 | ) |
| $ | 946 |
|
| $ | 1,282 |
|
Other liabilities |
| $ | 1,077 |
|
| $ | 1,153 |
|
| $ | 315 |
|
| $ | 329 |
|
Realized/unrealized (gain) loss on derivative instruments: |
|
|
|
|
|
|
|
| ||||||||
Other assets |
| $ | (3,803 | ) |
| $ | (4,563 | ) | ||||||||
Notes, net |
| $ | (1,413 | ) |
| $ | 4,563 |
| ||||||||
Other liabilities |
| $ | — |
|
| $ | 4,240 |
| ||||||||
Accumulated other comprehensive income |
| $ | 5,216 |
|
| $ | (4,240 | ) | ||||||||
Investments in unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
Interest capitalized for real estate and unconsolidated entities under development: |
|
|
|
|
|
|
|
| ||||||||
Investment in real estate, net |
| $ | (307 | ) |
| $ | (3,769 | ) | ||||||||
Investments in unconsolidated entities |
| $ | (710 | ) |
| $ | — |
| ||||||||
Investments in unconsolidated entities – other: |
|
|
|
|
|
|
|
| ||||||||
Investments in unconsolidated entities |
| $ | (2,324 | ) |
| $ | (1,726 | ) |
| $ | (24,897 | ) |
| $ | (1,778 | ) |
Other liabilities |
| $ | (3,000 | ) |
| $ | (2,100 | ) |
| $ | — |
|
| $ | (600 | ) |
Distributions from unconsolidated entities - return of capital: |
|
|
|
|
|
|
|
| ||||||||
Debt financing costs: |
|
|
|
|
|
|
|
| ||||||||
Mortgage notes payable, net |
| $ | — |
|
| $ | (318 | ) | ||||||||
Right-of-use assets and lease liabilities initial measurement and reclassifications: |
|
|
|
|
|
|
|
| ||||||||
Right-of-use assets |
| $ | — |
|
| $ | 11,308 |
| ||||||||
Lease liabilities |
| $ | — |
|
| $ | (11,308 | ) | ||||||||
Non-cash share distribution from unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
Investments in unconsolidated entities |
| $ | 329 |
|
| $ | 14,014 |
|
| $ | 859 |
|
| $ | — |
|
Other assets |
| $ | — |
|
| $ | (216 | ) |
| $ | (859 | ) |
| $ | — |
|
Debt financing costs: |
|
|
|
|
|
|
|
| ||||||||
Mortgage notes payable, net |
| $ | — |
|
| $ | (507 | ) | ||||||||
Notes, net |
| $ | (6,272 | ) |
| $ | — |
| ||||||||
Other: |
|
|
|
|
|
|
|
| ||||||||
Foreign currency translation adjustments |
| $ | — |
|
| $ | (264 | ) |
See accompanying notes
7
CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)thousands except per share data)
(Unaudited)
|
| Nine Months Ended |
|
| Quarter Ended March 31, |
| ||||||
|
| September 30, 2017 |
|
| 2022 |
|
| 2021 |
| |||
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED SHARES |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 37,280 |
| ||||||||
Balance, beginning of period |
| $ | 37,280 |
|
| $ | 37,280 |
| ||||
Balance, end of period |
| $ | 37,280 |
|
| $ | 37,280 |
|
| $ | 37,280 |
|
COMMON SHARES, $0.01 PAR VALUE |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 3,659 |
| ||||||||
Conversion of OP Units into Common Shares |
|
| 11 |
| ||||||||
Balance, beginning of period |
| $ | 3,755 |
|
| $ | 3,723 |
| ||||
Exercise of share options |
|
| 3 |
|
|
| 3 |
|
|
| 5 |
|
Employee Share Purchase Plan (ESPP) |
|
| 1 |
| ||||||||
Share-based employee compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares |
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
Balance, end of period |
| $ | 3,675 |
|
| $ | 3,760 |
|
| $ | 3,729 |
|
PAID IN CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 8,758,422 |
| ||||||||
Balance, beginning of period |
| $ | 9,121,122 |
|
| $ | 9,128,599 |
| ||||
Common Share Issuance: |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of OP Units into Common Shares |
|
| 14,706 |
|
|
| 174 |
|
|
| — |
|
Exercise of share options |
|
| 12,964 |
|
|
| 14,341 |
|
|
| 22,877 |
|
Employee Share Purchase Plan (ESPP) |
|
| 2,962 |
|
|
| 969 |
|
|
| 1,731 |
|
Share-based employee compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares |
|
| 7,488 |
|
|
| 3,609 |
|
|
| 2,273 |
|
Share options |
|
| 6,384 |
|
|
| 876 |
|
|
| 988 |
|
ESPP discount |
|
| 586 |
|
|
| 171 |
|
|
| 444 |
|
Offering costs |
|
| (36 | ) |
|
| (114 | ) |
|
| — |
|
Supplemental Executive Retirement Plan (SERP) |
|
| (594 | ) |
|
| (163 | ) |
|
| (1,229 | ) |
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership |
|
| 29,551 |
|
|
| 939 |
|
|
| (72,956 | ) |
Adjustment for Noncontrolling Interests ownership in Operating Partnership |
|
| 16,306 |
|
|
| 1,045 |
|
|
| 619 |
|
Balance, end of period |
| $ | 8,848,739 |
|
| $ | 9,142,969 |
|
| $ | 9,083,346 |
|
RETAINED EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 1,543,626 |
| ||||||||
Balance, beginning of period |
| $ | 1,827,063 |
|
| $ | 1,399,715 |
| ||||
Net income attributable to controlling interests |
|
| 478,012 |
|
|
| 70,765 |
|
|
| 57,539 |
|
Common Share distributions |
|
| (555,071 | ) |
|
| (235,351 | ) |
|
| (224,673 | ) |
Preferred Share distributions |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
Balance, end of period |
| $ | 1,464,249 |
|
| $ | 1,661,705 |
|
| $ | 1,231,808 |
|
ACCUMULATED OTHER COMPREHENSIVE (LOSS) |
|
|
|
| ||||||||
Balance, beginning of year |
| $ | (113,909 | ) | ||||||||
Accumulated other comprehensive income – derivative instruments: |
|
|
|
| ||||||||
Unrealized holding gains arising during the period |
|
| 5,216 |
| ||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
| ||||
Balance, beginning of period |
| $ | (34,272 | ) |
| $ | (43,666 | ) | ||||
Accumulated other comprehensive income (loss) – derivative instruments: |
|
|
|
|
|
|
|
| ||||
Losses reclassified into earnings from other comprehensive income |
|
| 14,019 |
|
|
| 2,425 |
|
|
| 2,303 |
|
Balance, end of period |
| $ | (94,674 | ) |
| $ | (31,847 | ) |
| $ | (41,363 | ) |
|
|
|
|
|
|
|
|
| ||||
DISTRIBUTIONS |
|
|
|
|
|
|
|
| ||||
Distributions declared per Common Share outstanding |
| $ | 0.625 |
|
| $ | 0.6025 |
|
See accompanying notes
8
CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN EQUITY (Continued)
(Amounts in thousands)thousands except per share data)
(Unaudited)
|
| Nine Months Ended |
|
| Quarter Ended March 31, |
| ||||||
|
| September 30, 2017 |
|
| 2022 |
|
| 2021 |
| |||
NONCONTROLLING INTERESTS |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING PARTNERSHIP |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 221,297 |
| ||||||||
Balance, beginning of period |
| $ | 214,094 |
|
| $ | 233,162 |
| ||||
Issuance of restricted units to Noncontrolling Interests |
|
| 1 |
|
|
| — |
| ||||
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner |
|
| (14,717 | ) |
|
| (174 | ) |
|
| — |
|
Equity compensation associated with Noncontrolling Interests |
|
| 8,200 |
|
|
| 7,798 |
|
|
| 6,488 |
|
Net income attributable to Noncontrolling Interests |
|
| 17,931 |
|
|
| 2,394 |
|
|
| 2,143 |
|
Distributions to Noncontrolling Interests |
|
| (20,073 | ) |
|
| (7,895 | ) |
|
| (8,589 | ) |
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership |
|
| 32,000 |
|
|
| 2,278 |
|
|
| 2,384 |
|
Adjustment for Noncontrolling Interests ownership in Operating Partnership |
|
| (16,306 | ) |
|
| (1,045 | ) |
|
| (619 | ) |
Balance, end of period |
| $ | 228,332 |
|
| $ | 217,451 |
|
| $ | 234,969 |
|
PARTIALLY OWNED PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 10,609 |
| ||||||||
Balance, beginning of period |
| $ | 18,166 |
|
| $ | 4,673 |
| ||||
Net income attributable to Noncontrolling Interests |
|
| 2,354 |
|
|
| 639 |
|
|
| 682 |
|
Contributions by Noncontrolling Interests |
|
| 125 |
|
|
| 446 |
|
|
| — |
|
Distributions to Noncontrolling Interests |
|
| (6,913 | ) |
|
| (15,836 | ) |
|
| (2,883 | ) |
Balance, end of period |
| $ | 6,175 |
|
| $ | 3,415 |
|
| $ | 2,472 |
|
See accompanying notes
9
ERP OPERATING LIMITEDLIMITED PARTNERSHIP
(Amounts in thousands)
(Unaudited)
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate |
|
|
|
|
|
|
|
| ||||||||
Land |
| $ | 5,985,004 |
|
| $ | 5,899,862 |
|
| $ | 5,836,951 |
|
| $ | 5,814,790 |
|
Depreciable property |
|
| 19,571,402 |
|
|
| 18,730,579 |
|
|
| 22,496,307 |
|
|
| 22,370,811 |
|
Projects under development |
|
| 293,064 |
|
|
| 637,168 |
|
|
| 36,718 |
|
|
| 24,307 |
|
Land held for development |
|
| 99,073 |
|
|
| 118,816 |
|
|
| 66,980 |
|
|
| 62,998 |
|
Investment in real estate |
|
| 25,948,543 |
|
|
| 25,386,425 |
|
|
| 28,436,956 |
|
|
| 28,272,906 |
|
Accumulated depreciation |
|
| (5,849,110 | ) |
|
| (5,360,389 | ) |
|
| (8,578,131 | ) |
|
| (8,354,282 | ) |
Investment in real estate, net |
|
| 20,099,433 |
|
|
| 20,026,036 |
|
|
| 19,858,825 |
|
|
| 19,918,624 |
|
Investments in unconsolidated entities |
|
| 150,092 |
|
|
| 127,448 |
| ||||||||
Cash and cash equivalents |
|
| 46,565 |
|
|
| 77,207 |
|
|
| 41,140 |
|
|
| 123,832 |
|
Investments in unconsolidated entities |
|
| 59,029 |
|
|
| 60,141 |
| ||||||||
Deposits – restricted |
|
| 36,639 |
|
|
| 76,946 |
| ||||||||
Escrow deposits – mortgage |
|
| 10,972 |
|
|
| 64,935 |
| ||||||||
Restricted deposits |
|
| 70,560 |
|
|
| 236,404 |
| ||||||||
Right-of-use assets |
|
| 471,667 |
|
|
| 474,713 |
| ||||||||
Other assets |
|
| 445,195 |
|
|
| 398,883 |
|
|
| 237,953 |
|
|
| 288,220 |
|
Total assets |
| $ | 20,697,833 |
|
| $ | 20,704,148 |
|
| $ | 20,830,237 |
|
| $ | 21,169,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: | Liabilities: |
|
|
|
|
|
|
|
|
| ||||||
Mortgage notes payable, net |
| $ | 3,619,180 |
|
| $ | 4,119,181 |
|
| $ | 2,193,199 |
|
| $ | 2,191,201 |
|
Notes, net |
|
| 5,143,248 |
|
|
| 4,848,079 |
|
|
| 5,836,957 |
|
|
| 5,835,222 |
|
Line of credit and commercial paper |
|
| 229,844 |
|
|
| 19,998 |
|
|
| 129,995 |
|
|
| 315,030 |
|
Accounts payable and accrued expenses |
|
| 167,984 |
|
|
| 147,482 |
|
|
| 157,681 |
|
|
| 107,013 |
|
Accrued interest payable |
|
| 72,811 |
|
|
| 60,946 |
|
|
| 56,876 |
|
|
| 69,510 |
|
Lease liabilities |
|
| 311,293 |
|
|
| 312,335 |
| ||||||||
Other liabilities |
|
| 332,650 |
|
|
| 350,466 |
|
|
| 303,654 |
|
|
| 353,102 |
|
Security deposits |
|
| 65,230 |
|
|
| 62,624 |
|
|
| 67,515 |
|
|
| 66,141 |
|
Distributions payable |
|
| 192,569 |
|
|
| 192,296 |
|
|
| 242,574 |
|
|
| 233,502 |
|
Total liabilities |
|
| 9,823,516 |
|
|
| 9,801,072 |
|
|
| 9,299,744 |
|
|
| 9,483,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Limited Partners |
|
| 380,541 |
|
|
| 442,092 |
|
|
| 495,760 |
|
|
| 498,977 |
|
Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' Capital: |
|
|
|
|
|
|
|
| ||||||||
Partners’ Capital: |
|
|
|
|
|
|
|
| ||||||||
Preference Units |
|
| 37,280 |
|
|
| 37,280 |
|
|
| 37,280 |
|
|
| 37,280 |
|
General Partner |
|
| 10,316,663 |
|
|
| 10,305,707 |
|
|
| 10,808,434 |
|
|
| 10,951,940 |
|
Limited Partners |
|
| 228,332 |
|
|
| 221,297 |
|
|
| 217,451 |
|
|
| 214,094 |
|
Accumulated other comprehensive (loss) |
|
| (94,674 | ) |
|
| (113,909 | ) | ||||||||
Total partners' capital |
|
| 10,487,601 |
|
|
| 10,450,375 |
| ||||||||
Accumulated other comprehensive income (loss) |
|
| (31,847 | ) |
|
| (34,272 | ) | ||||||||
Total partners’ capital |
|
| 11,031,318 |
|
|
| 11,169,042 |
| ||||||||
Noncontrolling Interests – Partially Owned Properties |
|
| 6,175 |
|
|
| 10,609 |
|
|
| 3,415 |
|
|
| 18,166 |
|
Total capital |
|
| 10,493,776 |
|
|
| 10,460,984 |
|
|
| 11,034,733 |
|
|
| 11,187,208 |
|
Total liabilities and capital |
| $ | 20,697,833 |
|
| $ | 20,704,148 |
|
| $ | 20,830,237 |
|
| $ | 21,169,241 |
|
See accompanying notes
10
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands except per Unit data)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
|
| Quarter Ended March 31, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
| $ | 1,840,170 |
|
| $ | 1,816,960 |
|
| $ | 623,951 |
|
| $ | 605,856 |
|
| $ | 653,348 |
|
| $ | 597,602 |
|
Fee and asset management |
|
| 532 |
|
|
| 3,351 |
|
|
| 171 |
|
|
| 218 |
| ||||||||
Total revenues |
|
| 1,840,702 |
|
|
| 1,820,311 |
|
|
| 624,122 |
|
|
| 606,074 |
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and maintenance |
|
| 306,645 |
|
|
| 309,688 |
|
|
| 104,721 |
|
|
| 104,216 |
|
|
| 124,874 |
|
|
| 117,054 |
|
Real estate taxes and insurance |
|
| 253,318 |
|
|
| 238,954 |
|
|
| 84,087 |
|
|
| 81,343 |
|
|
| 100,688 |
|
|
| 103,470 |
|
Property management |
|
| 64,702 |
|
|
| 64,003 |
|
|
| 20,861 |
|
|
| 19,517 |
|
|
| 30,747 |
|
|
| 26,130 |
|
General and administrative |
|
| 40,366 |
|
|
| 47,408 |
|
|
| 12,567 |
|
|
| 12,395 |
|
|
| 17,238 |
|
|
| 15,383 |
|
Depreciation |
|
| 542,964 |
|
|
| 528,242 |
|
|
| 184,100 |
|
|
| 179,230 |
|
|
| 229,961 |
|
|
| 199,962 |
|
Total expenses |
|
| 1,207,995 |
|
|
| 1,188,295 |
|
|
| 406,336 |
|
|
| 396,701 |
|
|
| 503,508 |
|
|
| 461,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on sales of real estate properties |
|
| (102 | ) |
|
| (43 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||
Operating income |
|
| 632,707 |
|
|
| 632,016 |
|
|
| 217,786 |
|
|
| 209,373 |
|
|
| 149,738 |
|
|
| 135,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
| 5,708 |
|
|
| 65,092 |
|
|
| 3,945 |
|
|
| 5,509 |
|
|
| 3,528 |
|
|
| 216 |
|
Other expenses |
|
| (3,160 | ) |
|
| (14,480 | ) |
|
| (1,028 | ) |
|
| (10,420 | ) |
|
| (3,056 | ) |
|
| (4,110 | ) |
Interest: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense incurred, net |
|
| (288,579 | ) |
|
| (386,316 | ) |
|
| (91,145 | ) |
|
| (86,352 | ) |
|
| (72,792 | ) |
|
| (67,358 | ) |
Amortization of deferred financing costs |
|
| (6,447 | ) |
|
| (10,000 | ) |
|
| (2,064 | ) |
|
| (2,261 | ) |
|
| (2,077 | ) |
|
| (2,185 | ) |
Income before income and other taxes, (loss) income from investments in unconsolidated entities, net gain on sales of real estate properties and land parcels and discontinued operations |
|
| 340,229 |
|
|
| 286,312 |
|
|
| 127,494 |
|
|
| 115,849 |
| ||||||||
Income before income and other taxes, income (loss) from investments in unconsolidated entities and net gain (loss) on sales of land parcels |
|
| 75,341 |
|
|
| 62,123 |
| ||||||||||||||||
Income and other tax (expense) benefit |
|
| (710 | ) |
|
| (1,189 | ) |
|
| (228 | ) |
|
| (426 | ) |
|
| (282 | ) |
|
| (153 | ) |
(Loss) income from investments in unconsolidated entities |
|
| (2,153 | ) |
|
| 5,846 |
|
|
| (398 | ) |
|
| 7,750 |
| ||||||||
Net gain on sales of real estate properties |
|
| 141,761 |
|
|
| 3,870,871 |
|
|
| 17,328 |
|
|
| 90,036 |
| ||||||||
Net gain on sales of land parcels |
|
| 19,170 |
|
|
| 15,759 |
|
|
| — |
|
|
| 4,037 |
| ||||||||
Income from continuing operations |
|
| 498,297 |
|
|
| 4,177,599 |
|
|
| 144,196 |
|
|
| 217,246 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| 124 |
|
|
| — |
|
|
| 246 |
| ||||||||
Income (loss) from investments in unconsolidated entities |
|
| (1,261 | ) |
|
| (1,611 | ) | ||||||||||||||||
Net gain (loss) on sales of land parcels |
|
| — |
|
|
| 5 |
| ||||||||||||||||
Net income |
|
| 498,297 |
|
|
| 4,177,723 |
|
|
| 144,196 |
|
|
| 217,492 |
|
|
| 73,798 |
|
|
| 60,364 |
|
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) | ||||||||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (639 | ) |
|
| (682 | ) | ||||||||||||||||
Net income attributable to controlling interests |
| $ | 495,943 |
|
| $ | 4,175,355 |
|
| $ | 143,395 |
|
| $ | 216,669 |
|
| $ | 73,159 |
|
| $ | 59,682 |
|
ALLOCATION OF NET INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preference Units |
| $ | 2,318 |
|
| $ | 2,318 |
|
| $ | 772 |
|
| $ | 773 |
|
| $ | 772 |
|
| $ | 773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner |
| $ | 475,694 |
|
| $ | 4,012,595 |
|
| $ | 137,457 |
|
| $ | 207,543 |
|
| $ | 69,993 |
|
| $ | 56,766 |
|
Limited Partners |
|
| 17,931 |
|
|
| 160,442 |
|
|
| 5,166 |
|
|
| 8,353 |
|
|
| 2,394 |
|
|
| 2,143 |
|
Net income available to Units |
| $ | 493,625 |
|
| $ | 4,173,037 |
|
| $ | 142,623 |
|
| $ | 215,896 |
|
| $ | 72,387 |
|
| $ | 58,909 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Earnings per Unit – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to Units |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Net income available to Units |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Weighted average Units outstanding |
|
| 379,716 |
|
|
| 378,745 |
|
|
| 379,906 |
|
|
| 379,008 |
| ||||||||
Earnings per Unit – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations available to Units |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
| ||||||||
Net income available to Units |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
|
| $ | 0.19 |
|
| $ | 0.15 |
|
Weighted average Units outstanding |
|
| 382,640 |
|
|
| 382,284 |
|
|
| 382,945 |
|
|
| 382,373 |
|
|
| 387,397 |
|
|
| 385,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared per Unit outstanding |
| $ | 1.51125 |
|
| $ | 12.51125 |
|
| $ | 0.50375 |
|
| $ | 3.50375 |
| ||||||||
Earnings per Unit – diluted: |
|
|
|
|
|
|
|
| ||||||||||||||||
Net income available to Units |
| $ | 0.19 |
|
| $ | 0.15 |
| ||||||||||||||||
Weighted average Units outstanding |
|
| 389,628 |
|
|
| 386,916 |
|
See accompanying notes
11
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)
(Amounts in thousands except per Unit data)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
|
| Quarter Ended March 31, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Comprehensive income: |
|
|
|
|
|
|
|
| ||||||||||||||||
Net income |
| $ | 498,297 |
|
| $ | 4,177,723 |
|
| $ | 144,196 |
|
| $ | 217,492 |
|
| $ | 73,798 |
|
| $ | 60,364 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) – derivative instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during the period |
|
| 5,216 |
|
|
| (4,240 | ) |
|
| 1,709 |
|
|
| 227 |
| ||||||||
Losses reclassified into earnings from other comprehensive income |
|
| 14,019 |
|
|
| 37,262 |
|
|
| 4,768 |
|
|
| 4,340 |
|
|
| 2,425 |
|
|
| 2,303 |
|
Other comprehensive income (loss) – foreign currency: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Currency translation adjustments arising during the period |
|
| — |
|
|
| 264 |
|
|
| — |
|
|
| 214 |
| ||||||||
Other comprehensive income |
|
| 19,235 |
|
|
| 33,286 |
|
|
| 6,477 |
|
|
| 4,781 |
| ||||||||
Other comprehensive income (loss) |
|
| 2,425 |
|
|
| 2,303 |
| ||||||||||||||||
Comprehensive income |
|
| 517,532 |
|
|
| 4,211,009 |
|
|
| 150,673 |
|
|
| 222,273 |
|
|
| 76,223 |
|
|
| 62,667 |
|
Comprehensive (income) attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) |
|
| (639 | ) |
|
| (682 | ) |
Comprehensive income attributable to controlling interests |
| $ | 515,178 |
|
| $ | 4,208,641 |
|
| $ | 149,872 |
|
| $ | 221,450 |
|
| $ | 75,584 |
|
| $ | 61,985 |
|
See accompanying notes
12
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 498,297 |
|
| $ | 4,177,723 |
|
| $ | 73,798 |
|
| $ | 60,364 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 542,964 |
|
|
| 528,242 |
|
|
| 229,961 |
|
|
| 199,962 |
|
Amortization of deferred financing costs |
|
| 6,447 |
|
|
| 10,000 |
|
|
| 2,077 |
|
|
| 2,185 |
|
Amortization of above/below market lease intangibles |
|
| 2,729 |
|
|
| 2,566 |
|
|
| — |
|
|
| (18 | ) |
Amortization of discounts and premiums on debt |
|
| 4,939 |
|
|
| (18,328 | ) |
|
| 1,358 |
|
|
| 1,294 |
|
Amortization of deferred settlements on derivative instruments |
|
| 14,010 |
|
|
| 37,187 |
|
|
| 2,422 |
|
|
| 2,301 |
|
Amortization of right-of-use assets |
|
| 3,046 |
|
|
| 2,980 |
| ||||||||
Write-off of pursuit costs |
|
| 2,329 |
|
|
| 3,379 |
|
|
| 1,463 |
|
|
| 1,331 |
|
Loss (income) from investments in unconsolidated entities |
|
| 2,153 |
|
|
| (5,846 | ) | ||||||||
(Income) loss from investments in unconsolidated entities |
|
| 1,261 |
|
|
| 1,611 |
| ||||||||
Distributions from unconsolidated entities – return on capital |
|
| 2,031 |
|
|
| 2,165 |
|
|
| 79 |
|
|
| — |
|
Net (gain) on sales of investment securities and other investments |
|
| — |
|
|
| (58,416 | ) | ||||||||
Net (gain) on sales of real estate properties |
|
| (141,761 | ) |
|
| (3,870,871 | ) | ||||||||
Net (gain) on sales of land parcels |
|
| (19,170 | ) |
|
| (15,759 | ) | ||||||||
Net (gain) on sales of discontinued operations |
|
| — |
|
|
| (43 | ) | ||||||||
Net (gain) loss on sales of real estate properties |
|
| 102 |
|
|
| 43 |
| ||||||||
Net (gain) loss on sales of land parcels |
|
| — |
|
|
| (5 | ) | ||||||||
Realized (gain) loss on sale of investment securities |
|
| (2,066 | ) |
|
| 133 |
| ||||||||
Compensation paid with Company Common Shares |
|
| 19,999 |
|
|
| 25,540 |
|
|
| 9,203 |
|
|
| 8,678 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in deposits – restricted |
|
| 788 |
|
|
| 9,992 |
| ||||||||
Decrease in mortgage deposits |
|
| 1,447 |
|
|
| 222 |
| ||||||||
(Increase) decrease in other assets |
|
| (23,024 | ) |
|
| 4,248 |
|
|
| 30,174 |
|
|
| 20,746 |
|
Increase in accounts payable and accrued expenses |
|
| 62,635 |
|
|
| 41,371 |
| ||||||||
Increase (decrease) in accounts payable and accrued expenses |
|
| 54,553 |
|
|
| 59,116 |
| ||||||||
Increase (decrease) in accrued interest payable |
|
| 11,865 |
|
|
| (15,780 | ) |
|
| (12,634 | ) |
|
| (10,407 | ) |
(Decrease) in other liabilities |
|
| (28,250 | ) |
|
| (24,749 | ) | ||||||||
Increase (decrease) in lease liabilities |
|
| (902 | ) |
|
| (868 | ) | ||||||||
Increase (decrease) in other liabilities |
|
| (27,213 | ) |
|
| (3,852 | ) | ||||||||
Increase (decrease) in security deposits |
|
| 2,606 |
|
|
| (13,522 | ) |
|
| 1,374 |
|
|
| 459 |
|
Net cash provided by operating activities |
|
| 963,034 |
|
|
| 819,321 |
|
|
| 368,056 |
|
|
| 346,053 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate – acquisitions |
|
| (466,395 | ) |
|
| (205,881 | ) |
|
| (113,046 | ) |
|
| — |
|
Investment in real estate – development/other |
|
| (227,187 | ) |
|
| (454,502 | ) |
|
| (24,255 | ) |
|
| (64,599 | ) |
Capital expenditures to real estate |
|
| (143,258 | ) |
|
| (124,551 | ) |
|
| (35,285 | ) |
|
| (28,679 | ) |
Non-real estate capital additions |
|
| (776 | ) |
|
| (4,467 | ) |
|
| (971 | ) |
|
| (589 | ) |
Interest capitalized for real estate under development |
|
| (23,164 | ) |
|
| (41,658 | ) | ||||||||
Proceeds from disposition of real estate, net |
|
| 350,000 |
|
|
| 6,584,126 |
| ||||||||
Investments in unconsolidated entities |
|
| (5,324 | ) |
|
| (3,826 | ) | ||||||||
Interest capitalized for real estate and unconsolidated entities under development |
|
| (1,017 | ) |
|
| (3,769 | ) | ||||||||
Investments in unconsolidated entities – other |
|
| (24,897 | ) |
|
| (2,378 | ) | ||||||||
Distributions from unconsolidated entities – return of capital |
|
| 329 |
|
|
| 13,798 |
|
|
| 9 |
|
|
| 4 |
|
Proceeds from sale of investment securities and other investments |
|
| — |
|
|
| 72,815 |
| ||||||||
Decrease (increase) in deposits on real estate acquisitions and investments, net |
|
| 39,519 |
|
|
| (83,668 | ) | ||||||||
(Increase) in mortgage deposits |
|
| (4,541 | ) |
|
| (21 | ) | ||||||||
Net cash (used for) provided by investing activities |
|
| (480,797 | ) |
|
| 5,752,165 |
| ||||||||
Purchase of investment securities and other investments |
|
| (1,009 | ) |
|
| (26,335 | ) | ||||||||
Proceeds from sale of investment securities |
|
| 3,434 |
|
|
| — |
| ||||||||
Net cash provided by (used for) investing activities |
|
| (197,037 | ) |
|
| (126,345 | ) |
See accompanying notes
13
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing costs |
| $ | (6,272 | ) |
| $ | (507 | ) |
| $ | — |
|
| $ | (318 | ) |
Mortgage deposits |
|
| 57,057 |
|
|
| (6,249 | ) | ||||||||
Mortgage notes payable, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds |
|
| 2,689 |
|
|
| 37,492 |
| ||||||||
Lump sum payoffs |
|
| (493,420 | ) |
|
| (565,084 | ) |
|
| — |
|
|
| (59,880 | ) |
Scheduled principal repayments |
|
| (8,771 | ) |
|
| (6,644 | ) |
|
| (1,933 | ) |
|
| (1,871 | ) |
Notes, net: |
|
|
|
|
|
|
|
| ||||||||
Proceeds |
|
| 692,466 |
|
| — |
| |||||||||
Lump sum payoffs |
|
| (394,077 | ) |
|
| (1,500,000 | ) | ||||||||
Line of credit and commercial paper: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit proceeds |
|
| 1,845,000 |
|
|
| 246,000 |
| ||||||||
Line of credit repayments |
|
| (1,845,000 | ) |
|
| (246,000 | ) | ||||||||
Commercial paper proceeds |
|
| 3,888,675 |
|
|
| 1,324,784 |
|
|
| 1,424,086 |
|
|
| 1,184,923 |
|
Commercial paper repayments |
|
| (3,681,750 | ) |
|
| (1,712,472 | ) |
|
| (1,609,121 | ) |
|
| (1,170,000 | ) |
Proceeds from settlement of derivative instruments |
|
| 1,296 |
|
| — |
| |||||||||
Proceeds from EQR's Employee Share Purchase Plan (ESPP) |
|
| 2,963 |
|
|
| 2,778 |
| ||||||||
Finance ground lease principal payments |
|
| (140 | ) |
|
| (116 | ) | ||||||||
Proceeds from EQR’s Employee Share Purchase Plan (ESPP) |
|
| 969 |
|
|
| 1,731 |
| ||||||||
Proceeds from exercise of EQR options |
|
| 12,967 |
|
|
| 26,939 |
|
|
| 14,344 |
|
|
| 22,882 |
|
Payment of offering costs |
|
| (36 | ) |
|
| (304 | ) |
|
| (114 | ) |
|
| — |
|
Other financing activities, net |
|
| (40 | ) |
|
| (33 | ) | ||||||||
Contributions – Noncontrolling Interests – Partially Owned Properties |
|
| 125 |
|
| — |
|
|
| 446 |
|
|
| — |
| |
Contributions – Limited Partners |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
|
Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OP Units – General Partner |
|
| (554,267 | ) |
|
| (3,490,838 | ) |
|
| (226,639 | ) |
|
| (224,308 | ) |
Preference Units |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
OP Units – Limited Partners |
|
| (20,604 | ) |
|
| (137,641 | ) |
|
| (7,535 | ) |
|
| (8,479 | ) |
Noncontrolling Interests – Partially Owned Properties |
|
| (6,873 | ) |
|
| (28,588 | ) |
|
| (15,836 | ) |
|
| (2,883 | ) |
Net cash (used for) financing activities |
|
| (512,879 | ) |
|
| (6,096,176 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents |
|
| (30,642 | ) |
|
| 475,310 |
| ||||||||
Cash and cash equivalents, beginning of period |
|
| 77,207 |
|
|
| 42,276 |
| ||||||||
Cash and cash equivalents, end of period |
| $ | 46,565 |
|
| $ | 517,586 |
| ||||||||
Net cash provided by (used for) financing activities |
|
| (419,555 | ) |
|
| (221,600 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents and restricted deposits |
|
| (248,536 | ) |
|
| (1,892 | ) | ||||||||
Cash and cash equivalents and restricted deposits, beginning of period |
|
| 360,236 |
|
|
| 99,728 |
| ||||||||
Cash and cash equivalents and restricted deposits, end of period |
| $ | 111,700 |
|
| $ | 97,836 |
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents and restricted deposits, end of period |
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents |
| $ | 41,140 |
|
| $ | 35,453 |
| ||||||||
Restricted deposits |
|
| 70,560 |
|
|
| 62,383 |
| ||||||||
Total cash and cash equivalents and restricted deposits, end of period |
| $ | 111,700 |
|
| $ | 97,836 |
|
See accompanying notes
14
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
| $ | 257,805 |
|
| $ | 383,374 |
|
| $ | 81,391 |
|
| $ | 74,058 |
|
Net cash paid for income and other taxes |
| $ | 964 |
|
| $ | 1,333 |
| ||||||||
Real estate acquisitions/dispositions/other: |
|
|
|
|
|
|
|
| ||||||||
Mortgage loans assumed |
| $ | — |
|
| $ | 43,400 |
| ||||||||
Net cash paid (received) for income and other taxes |
| $ | 350 |
|
| $ | 752 |
| ||||||||
Amortization of deferred financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate, net |
| $ | (127 | ) |
| $ | (60 | ) | ||||||||
Other assets |
| $ | 1,810 |
|
| $ | 2,291 |
|
| $ | 585 |
|
| $ | 585 |
|
Mortgage notes payable, net |
| $ | 1,943 |
|
| $ | 3,320 |
|
| $ | 557 |
|
| $ | 703 |
|
Notes, net |
| $ | 2,694 |
|
| $ | 4,389 |
|
| $ | 1,062 |
|
| $ | 957 |
|
Amortization of discounts and premiums on debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable, net |
| $ | 247 |
|
| $ | (21,318 | ) |
| $ | 685 |
|
| $ | 684 |
|
Notes, net |
| $ | 1,771 |
|
| $ | 2,578 |
|
| $ | 673 |
|
| $ | 610 |
|
Line of credit and commercial paper |
| $ | 2,921 |
|
| $ | 412 |
| ||||||||
Amortization of deferred settlements on derivative instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
| $ | (9 | ) |
| $ | (75 | ) |
| $ | (3 | ) |
| $ | (2 | ) |
Accumulated other comprehensive income |
| $ | 14,019 |
|
| $ | 37,262 |
|
| $ | 2,425 |
|
| $ | 2,303 |
|
Write-off of pursuit costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate, net |
| $ | 2,292 |
|
| $ | 2,876 |
|
| $ | 375 |
|
| $ | 1,209 |
|
Investments in unconsolidated entities |
| $ | 1,070 |
|
| $ | — |
| ||||||||
Other assets |
| $ | 17 |
|
| $ | 399 |
|
| $ | 18 |
|
| $ | 114 |
|
Accounts payable and accrued expenses |
| $ | 20 |
|
| $ | 104 |
|
| $ | — |
|
| $ | 8 |
|
Loss (income) from investments in unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
(Income) loss from investments in unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
Investments in unconsolidated entities |
| $ | 1,076 |
|
| $ | (6,999 | ) |
| $ | 946 |
|
| $ | 1,282 |
|
Other liabilities |
| $ | 1,077 |
|
| $ | 1,153 |
|
| $ | 315 |
|
| $ | 329 |
|
Realized/unrealized (gain) loss on derivative instruments: |
|
|
|
|
|
|
|
| ||||||||
Other assets |
| $ | (3,803 | ) |
| $ | (4,563 | ) | ||||||||
Notes, net |
| $ | (1,413 | ) |
| $ | 4,563 |
| ||||||||
Other liabilities |
| $ | — |
|
| $ | 4,240 |
| ||||||||
Accumulated other comprehensive income |
| $ | 5,216 |
|
| $ | (4,240 | ) | ||||||||
Investments in unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
Interest capitalized for real estate and unconsolidated entities under development: |
|
|
|
|
|
|
|
| ||||||||
Investment in real estate, net |
| $ | (307 | ) |
| $ | (3,769 | ) | ||||||||
Investments in unconsolidated entities |
| $ | (710 | ) |
| $ | — |
| ||||||||
Investments in unconsolidated entities – other: |
|
|
|
|
|
|
|
| ||||||||
Investments in unconsolidated entities |
| $ | (2,324 | ) |
| $ | (1,726 | ) |
| $ | (24,897 | ) |
| $ | (1,778 | ) |
Other liabilities |
| $ | (3,000 | ) |
| $ | (2,100 | ) |
| $ | — |
|
| $ | (600 | ) |
Distributions from unconsolidated entities - return of capital: |
|
|
|
|
|
|
|
| ||||||||
Debt financing costs: |
|
|
|
|
|
|
|
| ||||||||
Mortgage notes payable, net |
| $ | — |
|
| $ | (318 | ) | ||||||||
Right-of-use assets and lease liabilities initial measurement and reclassifications: |
|
|
|
|
|
|
|
| ||||||||
Right-of-use assets |
| $ | — |
|
| $ | 11,308 |
| ||||||||
Lease liabilities |
| $ | — |
|
| $ | (11,308 | ) | ||||||||
Non-cash share distribution from unconsolidated entities: |
|
|
|
|
|
|
|
| ||||||||
Investments in unconsolidated entities |
| $ | 329 |
|
| $ | 14,014 |
|
| $ | 859 |
|
| $ | — |
|
Other assets |
| $ | — |
|
| $ | (216 | ) |
| $ | (859 | ) |
| $ | — |
|
Debt financing costs: |
|
|
|
|
|
|
|
| ||||||||
Mortgage notes payable, net |
| $ | — |
|
| $ | (507 | ) | ||||||||
Notes, net |
| $ | (6,272 | ) |
| $ | — |
| ||||||||
Other: |
|
|
|
|
|
|
|
| ||||||||
Foreign currency translation adjustments |
| $ | — |
|
| $ | (264 | ) |
See accompanying notes
15
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT STATEMENTS OF CHANGES IN CAPITAL
(Amounts in thousands)thousands except per Unit data)
(Unaudited)
|
| Nine Months Ended |
|
| Quarter Ended March 31, |
| ||||||
|
| September 30, 2017 |
|
| 2022 |
|
| 2021 |
| |||
PARTNERS' CAPITAL |
|
|
|
| ||||||||
PARTNERS’ CAPITAL |
|
|
|
|
|
|
|
| ||||
PREFERENCE UNITS |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 37,280 |
| ||||||||
Balance, beginning of period |
| $ | 37,280 |
|
| $ | 37,280 |
| ||||
Balance, end of period |
| $ | 37,280 |
|
| $ | 37,280 |
|
| $ | 37,280 |
|
GENERAL PARTNER |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 10,305,707 |
| ||||||||
Balance, beginning of period |
| $ | 10,951,940 |
|
| $ | 10,532,037 |
| ||||
OP Unit Issuance: |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of OP Units held by Limited Partners into OP Units held by General Partner |
|
| 14,717 |
|
|
| 174 |
|
|
| — |
|
Exercise of EQR share options |
|
| 12,967 |
|
|
| 14,344 |
|
|
| 22,882 |
|
EQR's Employee Share Purchase Plan (ESPP) |
|
| 2,963 |
| ||||||||
EQR’s Employee Share Purchase Plan (ESPP) |
|
| 969 |
|
|
| 1,731 |
| ||||
Share-based employee compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
EQR restricted shares |
|
| 7,489 |
|
|
| 3,611 |
|
|
| 2,274 |
|
EQR share options |
|
| 6,384 |
|
|
| 876 |
|
|
| 988 |
|
EQR ESPP discount |
|
| 586 |
|
|
| 171 |
|
|
| 444 |
|
Net income available to Units – General Partner |
|
| 475,694 |
|
|
| 69,993 |
|
|
| 56,766 |
|
OP Units – General Partner distributions |
|
| (555,071 | ) |
|
| (235,351 | ) |
|
| (224,673 | ) |
Offering costs |
|
| (36 | ) |
|
| (114 | ) |
|
| — |
|
Supplemental Executive Retirement Plan (SERP) |
|
| (594 | ) |
|
| (163 | ) |
|
| (1,229 | ) |
Change in market value of Redeemable Limited Partners |
|
| 29,551 |
|
|
| 939 |
|
|
| (72,956 | ) |
Adjustment for Limited Partners ownership in Operating Partnership |
|
| 16,306 |
|
|
| 1,045 |
|
|
| 619 |
|
Balance, end of period |
| $ | 10,316,663 |
|
| $ | 10,808,434 |
|
| $ | 10,318,883 |
|
LIMITED PARTNERS |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 221,297 |
| ||||||||
Balance, beginning of period |
| $ | 214,094 |
|
| $ | 233,162 |
| ||||
Issuance of restricted units to Limited Partners |
|
| 1 |
|
|
| — |
| ||||
Conversion of OP Units held by Limited Partners into OP Units held by General Partner |
|
| (14,717 | ) |
|
| (174 | ) |
|
| — |
|
Equity compensation associated with Units – Limited Partners |
|
| 8,200 |
|
|
| 7,798 |
|
|
| 6,488 |
|
Net income available to Units – Limited Partners |
|
| 17,931 |
|
|
| 2,394 |
|
|
| 2,143 |
|
Units – Limited Partners distributions |
|
| (20,073 | ) |
|
| (7,895 | ) |
|
| (8,589 | ) |
Change in carrying value of Redeemable Limited Partners |
|
| 32,000 |
|
|
| 2,278 |
|
|
| 2,384 |
|
Adjustment for Limited Partners ownership in Operating Partnership |
|
| (16,306 | ) |
|
| (1,045 | ) |
|
| (619 | ) |
Balance, end of period |
| $ | 228,332 |
|
| $ | 217,451 |
|
| $ | 234,969 |
|
ACCUMULATED OTHER COMPREHENSIVE (LOSS) |
|
|
|
| ||||||||
Balance, beginning of year |
| $ | (113,909 | ) | ||||||||
Accumulated other comprehensive income – derivative instruments: |
|
|
|
| ||||||||
Unrealized holding gains arising during the period |
|
| 5,216 |
| ||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
| ||||
Balance, beginning of period |
| $ | (34,272 | ) |
| $ | (43,666 | ) | ||||
Accumulated other comprehensive income (loss) – derivative instruments: |
|
|
|
|
|
|
|
| ||||
Losses reclassified into earnings from other comprehensive income |
|
| 14,019 |
|
|
| 2,425 |
|
|
| 2,303 |
|
Balance, end of period |
| $ | (94,674 | ) |
| $ | (31,847 | ) |
| $ | (41,363 | ) |
|
|
|
|
|
|
|
|
| ||||
DISTRIBUTIONS |
|
|
|
|
|
|
|
| ||||
Distributions declared per Unit outstanding |
| $ | 0.625 |
|
| $ | 0.6025 |
|
See accompanying notes
16
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATEDSTATEMENTSTATEMENTSOFCHANGESINCAPITAL(Continued)
(Amounts in thousands)thousands except per Unit data)
(Unaudited)
|
| Nine Months Ended |
|
| Quarter Ended March 31, |
| ||||||
|
| September 30, 2017 |
|
| 2022 |
|
| 2021 |
| |||
NONCONTROLLING INTERESTS |
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| $ | 10,609 |
| ||||||||
Balance, beginning of period |
| $ | 18,166 |
|
| $ | 4,673 |
| ||||
Net income attributable to Noncontrolling Interests |
|
| 2,354 |
|
|
| 639 |
|
|
| 682 |
|
Contributions by Noncontrolling Interests |
|
| 125 |
|
|
| 446 |
|
|
| — |
|
Distributions to Noncontrolling Interests |
|
| (6,913 | ) |
|
| (15,836 | ) |
|
| (2,883 | ) |
Balance, end of period |
| $ | 6,175 |
|
| $ | 3,415 |
|
| $ | 2,472 |
|
See accompanying notes
17
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of rental apartmentresidential properties located in urban and high-density suburban coastal gateway markets.around dynamic cities that attract affluent long-term renters, a business that is conducted on its behalf by ERP Operating Limited Partnership ("ERPOP"(“ERPOP”),. EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 1993.References to the "Company," "we," "us"“Company,” “we,” “us” or "our"“our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the "Operating Partnership"“Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.
EQR is the general partner of, and as of September 30, 2017March 31, 2022 owned an approximate 96.4%96.7% ownership interest in, ERPOP. All of the Company'sCompany’s property ownership, development and related business operations are conducted through the Operating PartnershipandEQRhasnomaterialassetsorliabilitiesotherthanitsinvestmentinERPOP. EQRissues public equityfromtime totime,thenetproceedsofwhichitisobligatedtocontributetoERPOP,butdoesnothaveanyindebtednessasalldebtisincurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company'sCompany’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.
As of September 30, 2017,March 31, 2022, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 305311 properties located in 10 states and the District of Columbia consisting of 78,30280,581 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):
|
| Properties |
|
| Apartment Units |
|
| Properties |
|
| Apartment Units |
| ||||
Wholly Owned Properties |
|
| 283 |
|
|
| 73,289 |
|
|
| 295 |
|
|
| 77,035 |
|
Master-Leased Properties – Consolidated |
|
| 3 |
|
|
| 853 |
| ||||||||
Partially Owned Properties – Consolidated |
|
| 17 |
|
|
| 3,215 |
|
|
| 16 |
|
|
| 3,546 |
|
Partially Owned Properties – Unconsolidated |
|
| 2 |
|
|
| 945 |
| ||||||||
|
|
| 305 |
|
|
| 78,302 |
|
|
| 311 |
|
|
| 80,581 |
|
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included. Certain reclassifications have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications did not have an impact on net income previously reported. Operating results for the nine monthsquarter ended September 30, 2017March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022.
In preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The balance sheets at December 31, 20162021 have been derived from the audited financial statements at that date but do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
18
For further information, including definitions of capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company’s and the Operating Partnership'sPartnership’s Annual Report on Form 10-K for the year ended December 31, 2016.2021.
Income and Other Taxes
DueEQR has elected to the structure of EQRbe taxed as a REIT andREIT. This, along with the nature of the operations of its operating properties, noresulted in 0 provision for federal income taxes has been made at the EQR level. In addition, ERPOP generally is not liable for federal income taxes as the partners recognize their proportionateallocable share of income or loss in their tax returns; therefore no provision for federal income taxes has been made at the ERPOP level. Historically, the Company has generally only incurred certain state and local income, excise and franchise taxes. The Company has elected Taxabletaxable REIT Subsidiarysubsidiary (“TRS”) status for certain of its corporate subsidiaries and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.
Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates for which the temporary differences are expected to be recovered or settled. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in earnings in the period enacted. The Company’s deferred tax assets were generally the result of tax affected suspended interest deductions, net operating losses, differing depreciable lives on capitalized assets and the timing of expense recognition for certain accrued liabilities. As of September 30, 2017, the Company has elected REIT status for its primary TRS upon filing the 2016 tax return in the third quarter of 2017, with the election retroactive to January 1, 2016. As a result, the Company wrote-off its deferred tax assets, which were fully reserved, as of September 30, 2017.
Recently IssuedRecent Accounting Pronouncements
In May 2014,August 2020, the Financial Accounting Standards Board (the "FASB"(“FASB”) issued a comprehensive new revenue recognition standard entitled Revenue from Contracts with Customers that will supersede nearly all existing revenue recognition guidance. The new standard specifically excludes lease revenue. The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or servicesan amendment to customersthe debt and equity financial instruments standards which simplifies the accounting for convertible instruments and accounting for contracts in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Companies will likely need to use more judgment and make more estimates than under current revenue recognition guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration, if any, to include in the transaction price and allocating the transaction price to each separate performance obligation. The new standard may be applied retrospectively to each prior period presented or prospectively with the cumulative effect, if any, recognized as of the date of adoption.entity’s own equity. The Company anticipates selectingadopted the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and will adopt the new standard effective January 1, 2018, when effective. The Company is continuing to evaluate the standard; however, we do not expect its adoption to have a significant impact on the consolidated financial statements, as approximately 95% of total revenues consist of rental income from leasing arrangements, which is specifically excluded from the standard. In addition, the Company's fee and asset management activities are immaterial now that it sold its interest in Joint Base Lewis McChord in 2016 and given the nature of its disposition transactions, there should be no changes in accounting under the new standard.
In January 2016, the FASB issued a new standard which requires companies to measure all equity securities with readily determinable fair values at fair value on the balance sheet, with changes in fair value recognized in net income. The new standard will be effective for the Company beginning on January 1, 2018. The Company does not expect that this will have a material effect on its consolidated results of operations or financial position.
In February 2016, the FASB issued a new leases standard which sets out principles for the recognition, measurement, presentation2022 and disclosure of leases for both parties to a contract (i.e. lessors and lessees). The new standard requires the following:
Lessors – Leases will be accounted for using an approach that is substantially equivalent to existing guidance for operating, sales-type and financing leases, but aligned with the new revenue recognition standard. Lessors will be required to allocate lease payments to separate lease and non-lease components of each lease agreement, with the non-lease components evaluated under the new revenue recognition standard.
19
The new standard will be effective for the Company beginning on January 1, 2019, with early adoption permitted, though the Company currently anticipates adopting the new standard on the effective date. The new standard must be adopted using a modified retrospective method, which requires application of the new guidance at the beginning of the earliest comparative period presented and provides for certain practical expedients, which the Company currently anticipates electing. The Company anticipates that its residential and retail/commercial leases where it is the lessor will continue to be accounted for as operating leases under the new standard. Therefore, the Company does not currently anticipate significant changes in the accounting for its lease revenues. The Company is also the lessee under various corporate office and ground leases, which it will be required to recognize right of use assets and related lease liabilities on its consolidated balance sheets upon adoption. The Company currently anticipates that its corporate office leases where it is the lessee will continue to be accounted for as operating leases under the new standard. Based on its anticipated election of the practical expedients, the Company would not be required to reassess the classification of existing ground leases and therefore these leases would continue to be accounted for as operating leases. However, in the event we modify existing ground leases and/or enter into new ground leases after adoption of the new standard, such leases will likely be classified as finance leases. The Company will continue to evaluate the impact of adopting the new leases standard on its consolidated results of operations and financial position.
In June 2016, the FASB issued a new standard which requires companies to adopt a new approach for estimating credit losses on certain types of financial instruments, such as trade and other receivables and loans. The standard will require entities to estimate a lifetime expected credit loss for most financial instruments, including trade receivables. The new standard will be effective for the Company beginning on January 1, 2020, with early adoption permitted beginning January 1, 2019. The Company is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.
In August 2016 and October 2016, the FASB issued new standards to clarify how specific transactions are classified and presented on the statement of cash flows. Among other clarifications, the new standards specifically provide guidance for the following items within the statement of cash flows which have required significant judgment in the past:
Cash payments related to debt prepayments or extinguishment costs are to be classified within financing activities;
The portion of the cash payment made to settle a zero-coupon bond or a bond with an insignificant cash coupon attributable to accreted interest related to a debt discount is to be classified as a cash outflow within operating activities, and the portion attributable to the principal is to be classified within financing activities;
Insurance settlement proceeds are to be classified based on the nature of the loss;
Companies must elect to classify distributions received from equity method investees using either a cumulative earnings approach or a look-through approach and the election must be disclosed; and
Restricted cash will be included with cash and cash equivalents on the statement of cash flows. Total cash and cash equivalents and restricted cash are to be reconciled to the related line items on the balance sheet.
The new standards must be applied retrospectively to all periods presented in the consolidated financial statements and they will be effective for the Company beginning on January 1, 2018, with early adoption permitted. The Company currently anticipates adopting the new standards in the fourth quarter of 2017 and plans to continue to apply the look-through approach for distributions received from equity method investees. The Company does not expect overall cash flows to change; however, there will be material changes between cash flow classifications due to the substantial debt prepayment penalties that the Company has incurred in the comparative period.
In February 2017, the FASB issued a new standard which clarifies the accounting treatment for partial sales of nonfinancial assets (i.e. real estate). The standard clarifies that partial sales transactions include contributions of nonfinancial assets to a joint venture or other noncontrolled investee. Companies must recognize a full gain or loss on transfers of nonfinancial assets to equity method investees. The standard requires companies to derecognize distinct nonfinancial assets or distinct in substance nonfinancial assets in partial sale transactions when it does not have a controlling financial interest in the legal entity that holds the asset and transfers control of the asset. Once the distinct nonfinancial asset is transferred, the company is required to measure any non-controlling interest it receives or retains at fair value and
20
recognize a full gain or loss on the transaction. If a company transfers ownership interests in a consolidated subsidiary and continues to maintain a controlling financial interest, the company does not derecognize the assets or liabilities, and accounts for the transaction as an equity transaction andhad no gain or loss is recognized. The new standard will be effective for the Company beginning on January 1, 2018 and early adoption was permitted beginning on January 1, 2017. The Company anticipates adopting the new standard concurrently with the new revenue recognition standard. The new standard may be applied retrospectively to each prior period presented or prospectively with the cumulative effect recognized as of the date of adoption. The Company has not had a partial sale of nonfinancial assets in the current or comparative periods. Therefore, the Company does not currently believe that the adoption of this standard will have a material impact on its consolidated results of operations and financial position.
In August 2017,March 2020, the FASB issued a finalan amendment to the reference rate reform standard which makes changesprovides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. An example of such reform is the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. Entities that make this optional expedient election would not have to remeasure the contracts at the modification date or reassess the accounting treatment if certain criteria are met and would continue applying hedge accounting model to enable entities to better portray their risk management activities in the financial statements.for relationships affected by reference rate reform. The new standard expands an entity’s ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk and eases certain documentation and assessment requirements. The new standard also eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of any hedging instrument to be presented in the same income statement line as the hedged instrument. The new standard will bewas effective for the Company beginning on January 1, 2019upon issuance and early adoption is permitted.elections can be made through December 31, 2022. The Company is currently evaluatingelected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of adopting the new standard on its consolidated results of operationsguidance and financial position.
Recently Adopted Accounting Pronouncements
In February 2015, the FASB issued new consolidation guidance which mademay apply other elections as applicable as additional changes to both the variable interest model and the voting model. Among other changes, the new standard specifically eliminated the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. The Company adopted this new standard as required effective January 1, 2016. While adoption of the new standard did not result in any changes to conclusions about whether a joint venture was consolidated or unconsolidated, the Company has determined that certain of its joint ventures and the Operating Partnership will now qualify as variable interest entities ("VIEs") and therefore will require additional disclosures. See Note 6 for further discussion.
In March 2016, the FASB issued a new standard which simplified several aspects of the accounting for employee share-based payment transactions, including income tax consequences, classification of awards as equity or liability, statement of cash flows classification and policy election options for forfeitures. The Company adopted this new standard as required effective January 1, 2017. The Company will continue to estimate the number of awards expected to be forfeited and adjust the estimate when it is no longer probable that the employee will fulfill the service condition, as was required under the old standard. The adoption of this standard did not have a material impact on our consolidated results of operations or financial position.
In January 2017, the FASB issued a new standard which clarified the definition of a business. The standard's objective was to add additional guidance that assists companies in determining whether transactions should be accounted for as an asset acquisition or a business combination. The new standard first requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If this threshold is not met, the entity next evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. Among other differences, transaction costs associated with asset acquisitions are capitalized while those associated with business combinations are expensed as incurred. In addition, purchase price in an asset acquisition is allocated on a relative fair value basis while in a business combination it is generally measured at fair value. The new standard will be applied prospectively to any transactions occurring within the period of adoption. The Company early adopted the new standard as allowed effective January 1, 2017. The Company anticipates that substantially all of its transactions will now be accounted for as asset acquisitions, which means transaction costs will largely be capitalized as noted above.
Other
The Company is the controlling partner in various consolidated partnerships owning 17 properties and 3,215 apartment units having a noncontrolling interest book value of $6.2 million at September 30, 2017. The Company is required to make certain disclosures regarding noncontrolling interests in consolidated limited-life subsidiaries. Of the consolidated entities described above, the Company is the controlling partner in limited-life partnerships owning four properties having a noncontrolling interest deficit balance of $7.3 million. These four partnership agreements contain provisions that require the partnerships to be liquidated through the sale of their assets upon reaching a date specified in each respective partnership agreement. The Company, as controlling partner, has an obligation to cause the property owning partnerships to distribute the proceeds of liquidation to the Noncontrolling Interests in these Partially Owned Properties only to the extent that the net proceeds received by the partnerships from the sale of their assets warrant a distribution based on the partnership agreements. As of September 30, 2017, the Company estimates the value of
21
Noncontrolling Interest distributions for these four properties would have been approximately $65.8 million (“Settlement Value”) had the partnerships been liquidated. This Settlement Value is based on estimated third party consideration realized by the partnerships upon disposition of the four Partially Owned Properties and is net of all other assets and liabilities, including yield maintenance on the mortgages encumbering the properties, that would have been due on September 30, 2017 had those mortgages been prepaid. Due to, among other things, the inherent uncertainty in the sale of real estate assets, the amount of any potential distribution to the Noncontrolling Interests in the Company's Partially Owned Properties is subject to change. To the extent that the partnerships' underlying assets are worth less than the underlying liabilities, the Company has no obligation to remit any consideration to the Noncontrolling Interests in these Partially Owned Properties.market occur.
3. | Equity, Capital and Other Interests |
EquityThe Company refers to “Common Shares” and Redeemable Noncontrolling Interests“Units” (which refer to both OP Units and restricted units) as equity securities for EQR and “General Partner Units” and “Limited Partner Units” as equity securities for ERPOP. To provide a streamlined and more readable presentation of Equity Residentialthe disclosures for the Company and the Operating Partnership, several sections below refer to the respective terminology for each with the same financial information and separate sections are provided, where needed, to further distinguish any differences in financial information and terminology.
The following tables presenttable presents the changes in the Company’s issued and outstanding Common Shares and “Units” (which includes OPUnits for the quarters ended March 31, 2022 and 2021:
|
| 2022 |
|
| 2021 |
| ||
Common Shares |
|
|
|
|
|
|
|
|
Common Shares outstanding at January 1, |
|
| 375,527,195 |
|
|
| 372,302,000 |
|
Common Shares Issued: |
|
|
|
|
|
|
|
|
Conversion of OP Units |
|
| 6,756 |
|
|
| — |
|
Exercise of share options |
|
| 269,665 |
|
|
| 506,342 |
|
Employee Share Purchase Plan (ESPP) |
|
| 13,374 |
|
|
| 32,572 |
|
Restricted share grants, net |
|
| 157,080 |
|
|
| 76,499 |
|
Common Shares outstanding at March 31, |
|
| 375,974,070 |
|
|
| 372,917,413 |
|
Units |
|
|
|
|
|
|
|
|
Units outstanding at January 1, |
|
| 12,659,027 |
|
|
| 13,858,073 |
|
Restricted unit grants, net |
|
| 220,333 |
|
|
| 184,301 |
|
Conversion of OP Units to Common Shares |
|
| (6,756 | ) |
|
| — |
|
Units outstanding at March 31, |
|
| 12,872,604 |
|
|
| 14,042,374 |
|
Total Common Shares and Units outstanding at March 31, |
|
| 388,846,674 |
|
|
| 386,959,787 |
|
Units Ownership Interest in Operating Partnership |
|
| 3.3 | % |
|
| 3.6 | % |
The following table presents the changes in the Operating Partnership’s issued and outstanding General Partner Units and restricted units)Limited Partner Units for the nine monthsquarters ended September 30, 2017:March 31, 2022 and 2021:
| ||||
| ||||
|
| |||
| ||||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
| ||||
|
| |||
|
| |||
|
|
| ||
|
| |||
|
| |||
|
|
|
|
| 2022 |
|
| 2021 |
| ||
General and Limited Partner Units |
|
|
|
|
|
|
|
|
General and Limited Partner Units outstanding at January 1, |
|
| 388,186,222 |
|
|
| 386,160,073 |
|
Issued to General Partner: |
|
|
|
|
|
|
|
|
Exercise of EQR share options |
|
| 269,665 |
|
|
| 506,342 |
|
EQR’s Employee Share Purchase Plan (ESPP) |
|
| 13,374 |
|
|
| 32,572 |
|
EQR’s restricted share grants, net |
|
| 157,080 |
|
|
| 76,499 |
|
Issued to Limited Partners: |
|
|
|
|
|
|
|
|
Restricted unit grants, net |
|
| 220,333 |
|
|
| 184,301 |
|
General and Limited Partner Units outstanding at March 31, |
|
| 388,846,674 |
|
|
| 386,959,787 |
|
Limited Partner Units |
|
|
|
|
|
|
|
|
Limited Partner Units outstanding at January 1, |
|
| 12,659,027 |
|
|
| 13,858,073 |
|
Limited Partner restricted unit grants, net |
|
| 220,333 |
|
|
| 184,301 |
|
Conversion of Limited Partner OP Units to EQR Common Shares |
|
| (6,756 | ) |
|
| — |
|
Limited Partner Units outstanding at March 31, |
|
| 12,872,604 |
|
|
| 14,042,374 |
|
Limited Partner Units Ownership Interest in Operating Partnership |
|
| 3.3 | % |
|
| 3.6 | % |
The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units, as well as the equity positions of the holders of restricted units, are collectively referred to as the “Noncontrolling Interests – Operating Partnership”. and “Limited Partners Capital,” respectively, for the Company and the Operating Partnership. Subject to certain exceptions (including the “book-up” requirements of restricted units), the Noncontrolling Interests – Operating PartnershipPartnership/Limited Partners Capital may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Noncontrolling Interests – Operating PartnershipPartnership/Limited Partners Capital (including redeemable interests) is allocated based on the number of Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital in total in proportion to the number of Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital in total plus the total number of Common Shares.Shares/General Partner Units. Net income is allocated to the Noncontrolling Interests – Operating PartnershipPartnership/Limited Partners Capital based on the weighted average ownership percentage during the period.
The Operating Partnership has the right but not the obligation to make a cash payment instead of issuing Common Shares to any and all holders of Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital requesting an exchange of their OP UnitsNoncontrolling Interests – Operating Partnership/Limited Partners Capital with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests – Operating Partnership Units.Partnership/Limited Partners Capital.
The Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests – Operating PartnershipPartnership/Limited Partners Capital are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership”. and “Redeemable Limited Partners,” respectively. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests – Operating PartnershipPartnership/Redeemable Limited Partners are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital that are
22
classified in permanent equity at September 30, 2017 March 31, 2022 and December 31, 2016.2021.
The carrying value of the Redeemable Noncontrolling Interests – Operating PartnershipPartnership/Redeemable Limited Partners is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership UnitsPartnership/Redeemable Limited Partners in proportion to the number of Noncontrolling Interests – Operating Partnership UnitsPartnership/Limited Partners Capital in total. Such percentage of the total carrying value of Units/Limited Partner Units which is ascribed to the Redeemable Noncontrolling Interests – Operating PartnershipPartnership/Redeemable Limited Partners is then adjusted to the greater of carrying value or fair market value as described above. As of September 30, 2017,March 31, 2022 and 2021, the Redeemable Noncontrolling Interests – Operating PartnershipPartnership/Redeemable Limited Partners have a redemption value of approximately $380.5$495.8 million and $409.5 million, respectively,which represents the value of Common Shares that would be issued in exchange for the Redeemable Noncontrolling Interests – Operating Partnership Units.Partnership/Redeemable Limited Partners.
The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating PartnershipPartnership/Redeemable Limited Partners for the nine monthsquarters ended September 30, 2017March 31, 2022 and 2021, respectively (amounts inthousands):
|
| 2017 |
|
| 2022 |
|
| 2021 |
| |||
Balance at January 1, |
| $ | 442,092 |
|
| $ | 498,977 |
|
| $ | 338,951 |
|
Change in market value |
|
| (29,551 | ) |
|
| (939 | ) |
|
| 72,956 |
|
Change in carrying value |
|
| (32,000 | ) |
|
| (2,278 | ) |
|
| (2,384 | ) |
Balance at September 30, |
| $ | 380,541 |
| ||||||||
Balance at March 31, |
| $ | 495,760 |
|
| $ | 409,523 |
|
Net proceeds from EQR Common Share and Preferred Share (see definition below) offerings and proceeds from exercise of options for Common Shares are contributed by EQR to ERPOP. In return for those contributions, EQR receives a number of OP Units in ERPOP equal to the number of Common Shares it has issued in the equity offering (or in the case of a preferred equity offering, a number of preference units in ERPOP equal in number and having the same terms as the Preferred Shares issued in the equity offering). As a result, the net offering proceeds from Common Shares and Preferred Shares are allocated for the Company between shareholders’ equity and Noncontrolling Interests – Operating Partnership and for the Operating Partnership between General Partner’s Capital and Limited Partners Capital to account for the change in their respective percentage ownership of the underlying equity of ERPOP.equity.
TheCompany’sdeclarationoftrustauthorizesittoissueupto 100,000,000preferredsharesofbeneficialinterest, $0.01$0.01 par value per share (the “Preferred Shares”), with specific rights, preferences and other attributes as the Board of Trustees may determine, which may include preferences, powers and rights that are senior to the rights of holders of the Company’s Common Shares.
The following table presents the Company’s issued and outstanding Preferred SharesShares/Preference Units asof September 30, 2017 March 31, 2022 and December 31, 2016:
2021:
|
|
|
|
|
|
|
| Amounts in thousands |
| |||||
|
|
|
| Annual |
|
|
|
|
|
|
|
|
| |
|
| Call |
| Dividend per |
|
| September 30, |
|
| December 31, |
| |||
|
| Date (1) |
| Share (2) |
|
| 2017 |
|
| 2016 |
| |||
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 745,600 shares issued and outstanding at September 30, 2017 and December 31, 2016 |
| 12/10/26 |
| $ | 4.145 |
|
| $ | 37,280 |
|
| $ | 37,280 |
|
|
|
|
|
|
|
|
| $ | 37,280 |
|
| $ | 37,280 |
|
|
|
|
|
|
|
|
| Amounts in thousands |
| |||||
|
|
|
| Annual |
|
|
|
|
|
|
|
|
| |
|
| Call |
| Dividend Per |
|
| March 31, |
|
| December 31, |
| |||
|
| Date (1) |
| Share/Unit (2) |
|
| 2022 |
|
| 2021 |
| |||
Preferred Shares/Preference Units of beneficial interest, $0.01 par value; 100,000,000 shares authorized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.29% Series K Cumulative Redeemable Preferred Shares/Preference Units; liquidation value $50 per share/unit; 745,600 shares/units issued and outstanding as of March 31, 2022 and December 31, 2021 |
| 12/10/26 |
| $ | 4.145 |
|
| $ | 37,280 |
|
| $ | 37,280 |
|
|
|
|
|
|
|
|
| $ | 37,280 |
|
| $ | 37,280 |
|
(1) | On or after the call date, redeemable |
(2) | Dividends on Preferred |
23
Capital and Redeemable Limited Partners of ERP Operating Limited Partnership
The following tables present the changes in the Operating Partnership’s issued and outstanding Units and in the limited partners’ Units for the nine months ended September 30, 2017:
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| |||
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|
The Limited Partners of the Operating Partnership as of September 30, 2017 include various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units, as well as the equity positions of the holders of restricted units. Subject to certain exceptions (including the “book-up” requirements of restricted units), Limited Partners may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Limited Partner Units (including redeemable interests) is allocated based on the number of Limited Partner Units in total in proportion to the number of Limited Partner Units in total plus the number of General Partner Units. Net income is allocated to the Limited Partner Units based on the weighted average ownership percentage during the period.
The Operating Partnership has the right but not the obligation to make a cash payment instead of issuing Common Shares to any and all holders of Limited Partner Units requesting an exchange of their OP Units with EQR. Once the Operating Partnership elects not to redeem the Limited Partner Units for cash, EQR is obligated to deliver Common Shares to the exchanging limited partner.
The Limited Partner Units are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Limited Partner Units are differentiated and referred to as “Redeemable Limited Partner Units”. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer's control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Limited Partner Units are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Limited Partner Units that are classified in permanent equity at September 30, 2017 and December 31, 2016.
The carrying value of the Redeemable Limited Partner Units is allocated based on the number of Redeemable Limited Partner Units in proportion to the number of Limited Partner Units in total. Such percentage of the total carrying value of Limited Partner Units which is ascribed to the Redeemable Limited Partner Units is then adjusted to the greater of carrying value or fair market value as described above. As of September 30, 2017, the Redeemable Limited Partner Units have a redemption value of approximately $380.5 million, which represents the value of Common Shares that would be issued in exchange for the Redeemable Limited Partner Units.
24
The following table presents the changes in the redemption value of the Redeemable Limited Partners for the nine months ended September 30, 2017 (amounts in thousands):
|
| 2017 |
| |
Balance at January 1, |
| $ | 442,092 |
|
Change in market value |
|
| (29,551 | ) |
Change in carrying value |
|
| (32,000 | ) |
Balance at September 30, |
| $ | 380,541 |
|
EQR contributes all net proceeds from its various equity offerings (including proceeds from exercise of options for Common Shares) to ERPOP. In return for those contributions, EQR receives a number of OP Units in ERPOP equal to the number of Common Shares it has issued in the equity offering (or in the case of a preferred equity offering, a number of preference units in ERPOP equal in number and having the same terms as the preferred shares issued in the equity offering).
The following table presents the Operating Partnership's issued and outstanding “Preference Units” as of September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
| Amounts in thousands |
| |||||
|
|
|
| Annual |
|
|
|
|
|
|
|
|
| |
|
| Call |
| Dividend Per |
|
| September 30, |
|
| December 31, |
| |||
|
| Date (1) |
| Unit (2) |
|
| 2017 |
|
| 2016 |
| |||
Preference Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 745,600 units issued and outstanding at September 30, 2017 and December 31, 2016 |
| 12/10/26 |
| $ | 4.145 |
|
| $ | 37,280 |
|
| $ | 37,280 |
|
|
|
|
|
|
|
|
| $ | 37,280 |
|
| $ | 37,280 |
|
|
|
|
|
Other
In September 2009,EQR and ERPOP currently have an active universal shelf registration statement for the Company announcedissuance of equity and debt securities that automatically became effective upon filing with the establishment of an At-The-Market (“ATM”) share offering program which would allow EQR to sell Common Shares from time to time into the existing trading market at current market prices as well as through negotiated transactions.SEC in June 2019 and expires in June 2022. Per the terms of ERPOP'sERPOP’s partnership agreement, EQR contributes the net proceeds fromof all equity offerings to the capital of ERPOP in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis) or preference units (on a one-for-one preferred share per preference unit basis).
The Company has an At-The-Market (“ATM”) share offering program currently has a maturity ofwhich allows EQR to issue Common Shares from time to time into the existing trading market at current market prices or through negotiated transactions, including under forward sale arrangements. The current program matures in June 2019.2022 and gives EQR has the authority to issue up to 13.0 million shares, but has not issuedof which approximately 11.3 million shares remain available for issuance under the program as of March 31, 2022. Forward sale agreements under the ATM program allow the Company, at its election, to settle the agreements by issuing Common Shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the agreements in whole or in part through the delivery or receipt of Common Shares or cash. Issuances of shares under these forward sale agreements are classified as equity transactions. Accordingly, 0 amounts relating to the forward sale agreements are recorded in the consolidated financial statements until settlement occurs. Prior to any settlements, the only impact to the consolidated financial statements is the inclusion of incremental shares, if any, within the calculation of diluted net income per share using the treasury stock method (see Note 11 for additional discussion). The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current overnight federal funds rate and the amount of dividends paid to holders of the Company’s Common Shares over the term of the forward sale agreement.
As of March 31, 2022, the Company had entered into forward sale agreements under this program sincefor a total of approximately 1.7 million Common Shares at a weighted average initial forward price per share of $83.25. All of these forward sale agreements were entered into during the quarter ended September 2012.30, 2021. As of March 31, 2022, these forward sale agreements have not been settled and must be settled by March 2023.
The Company may repurchase up to 13.0 million Common Shares under its share repurchase program. No shares were repurchased during the nine months ended September 30, 2017NaN open market repurchases have occurred since 2008, and as a result,0 repurchases of any kind have occurred since February 2014. As of March 31, 2022, EQR has remaining authorization to repurchase up to 13.0 million of its shares under the repurchase program as of September 30, 2017.
25
shares.
The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of September 30, 2017March 31, 2022 and December 31, 20162021 (amounts in thousands):
|
| September 30, 2017 |
|
| December 31, 2016 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||
Land |
| $ | 5,985,004 |
|
| $ | 5,899,862 |
|
| $ | 5,836,951 |
|
| $ | 5,814,790 |
|
Depreciable property: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
| 17,601,348 |
|
|
| 16,913,430 |
|
|
| 19,723,056 |
|
|
| 19,632,284 |
|
Furniture, fixtures and equipment |
|
| 1,500,963 |
|
|
| 1,346,300 |
|
|
| 2,252,146 |
|
|
| 2,220,203 |
|
In-Place lease intangibles |
|
| 469,091 |
|
|
| 470,849 |
|
|
| 521,105 |
|
|
| 518,324 |
|
Projects under development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
| 61,047 |
|
|
| 115,876 |
| ||||||||
Construction-in-progress |
|
| 232,017 |
|
|
| 521,292 |
|
|
| 36,718 |
|
|
| 24,307 |
|
Land held for development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
| 63,439 |
|
|
| 84,440 |
|
|
| 49,360 |
|
|
| 46,160 |
|
Construction-in-progress |
|
| 35,634 |
|
|
| 34,376 |
|
|
| 17,620 |
|
|
| 16,838 |
|
Investment in real estate |
|
| 25,948,543 |
|
|
| 25,386,425 |
|
|
| 28,436,956 |
|
|
| 28,272,906 |
|
Accumulated depreciation |
|
| (5,849,110 | ) |
|
| (5,360,389 | ) |
|
| (8,578,131 | ) |
|
| (8,354,282 | ) |
Investment in real estate, net |
| $ | 20,099,433 |
|
| $ | 20,026,036 |
|
| $ | 19,858,825 |
|
| $ | 19,918,624 |
|
The following table summarizes the carrying amounts for the Company's above and below market ground and retail lease intangibles as of September 30, 2017 and December 31, 2016 (amounts in thousands):
Description |
| Balance Sheet Location |
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Assets |
|
|
|
|
|
|
|
|
|
|
Ground lease intangibles – below market |
| Other Assets |
| $ | 191,918 |
|
| $ | 178,251 |
|
Retail lease intangibles – above market |
| Other Assets |
|
| 1,260 |
|
|
| 1,260 |
|
Lease intangible assets |
|
|
|
| 193,178 |
|
|
| 179,511 |
|
Accumulated amortization |
|
|
|
| (21,305 | ) |
|
| (17,972 | ) |
Lease intangible assets, net |
|
|
| $ | 171,873 |
|
| $ | 161,539 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Ground lease intangibles – above market |
| Other Liabilities |
| $ | 2,400 |
|
| $ | 2,400 |
|
Retail lease intangibles – below market |
| Other Liabilities |
|
| 5,270 |
|
|
| 5,270 |
|
Lease intangible liabilities |
|
|
|
| 7,670 |
|
|
| 7,670 |
|
Accumulated amortization |
|
|
|
| (5,113 | ) |
|
| (4,509 | ) |
Lease intangible liabilities, net |
|
|
| $ | 2,557 |
|
| $ | 3,161 |
|
The following table provides a summary of the effect of the amortization for above and below market ground and retail lease intangibles on the Company’s accompanying consolidated statements of operations and comprehensive income for the nine months and quarters ended September 30, 2017 and 2016 respectively (amounts in thousands):
|
|
|
| Nine Months Ended |
|
| Quarter Ended |
| ||||||||||
|
|
|
| September 30, |
|
| September 30, |
| ||||||||||
Description |
| Income Statement Location |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Ground lease intangible amortization |
| Property and Maintenance |
| $ | (3,253 | ) |
| $ | (3,241 | ) |
| $ | (1,092 | ) |
| $ | (1,080 | ) |
Retail lease intangible amortization |
| Rental Income |
|
| 524 |
|
|
| 675 |
|
|
| 80 |
|
|
| 222 |
|
Total amortization of above/below market lease intangibles |
|
|
| $ | (2,729 | ) |
| $ | (2,566 | ) |
| $ | (1,012 | ) |
| $ | (858 | ) |
26
The following table provides a summary of the aggregate amortization for above and below market ground and retail lease intangibles for each of the next five years (amounts in thousands):
|
| Remaining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
| ||||||
Ground lease intangibles |
| $ | (1,116 | ) |
| $ | (4,463 | ) |
| $ | (4,463 | ) |
| $ | (4,463 | ) |
| $ | (4,463 | ) |
| $ | (4,463 | ) |
Retail lease intangibles |
|
| 16 |
|
|
| 71 |
|
|
| 71 |
|
|
| 71 |
|
|
| 71 |
|
|
| 27 |
|
Total |
| $ | (1,100 | ) |
| $ | (4,392 | ) |
| $ | (4,392 | ) |
| $ | (4,392 | ) |
| $ | (4,392 | ) |
| $ | (4,436 | ) |
During the nine monthsquarter ended September 30, 2017,March 31, 2022, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):
|
| Properties |
|
| Apartment Units |
|
| Purchase Price |
|
| Properties |
|
| Apartment Units |
|
| Purchase Price |
| ||||||
Rental Properties – Consolidated (1) |
|
| 4 |
|
|
| 947 |
|
| $ | 468,050 |
|
|
| 1 |
|
|
| 172 |
|
| $ | 113,000 |
|
Total |
|
| 4 |
|
|
| 947 |
|
| $ | 468,050 |
|
|
| 1 |
|
|
| 172 |
|
| $ | 113,000 |
|
(1) |
| Purchase price includes an allocation of approximately |
During the nine months ended September 30, 2017, the Company disposed of the following to unaffiliated parties (sales price in thousands):
|
| Properties |
|
| Apartment Units |
|
| Sales Price |
| |||
Rental Properties – Consolidated |
|
| 4 |
|
|
| 1,024 |
|
| $ | 319,700 |
|
Land Parcels (one) |
|
| — |
|
|
| — |
|
|
| 33,450 |
|
Total |
|
| 4 |
|
|
| 1,024 |
|
| $ | 353,150 |
|
The Company recognized a net gain on sales of real estate properties of approximately $141.8 million and a net gain on sales of land parcels of approximately $19.2 million on the above sales.
The Company has not entered into any separate agreements to acquire rental properties or land parcels as of October 27, 2017.
the date of filing.
The Company has entered into a separate agreementagreements to dispose of the following (sales price and net book value in thousands):
|
| Properties |
|
| Apartment Units |
|
| Sales Price |
|
| Properties |
|
| Apartment Units |
|
| Sales Price |
|
| Net Book Value at March 31, 2022 |
| |||||||
Land Parcels (one) |
|
| — |
|
|
| — |
|
| $ | 2,700 |
| ||||||||||||||||
Rental Properties - Consolidated |
|
| 2 |
|
|
| 591 |
|
| $ | 480,500 |
|
| $ | 270,189 |
| ||||||||||||
Total |
|
| — |
|
|
| — |
|
| $ | 2,700 |
|
|
| 2 |
|
|
| 591 |
|
| $ | 480,500 |
|
| $ | 270,189 |
|
The closing of this pending transactiontransactions is subject to certain conditions and restrictions,restrictions; therefore, there can be no assurance that this transactionthe transactions will be consummated or that the final terms will not differ in material respects from thoseany agreements summarized above.
27
Table See Note 14 for discussion of Contents
the properties acquired or disposed of, if any, subsequent to March 31, 2022.
TheCompanyhas co-invested investedinvarious properties entities withunrelatedthirdpartieswhichareeitherconsolidatedoraccounted for under the equity method of accounting (unconsolidated).
Consolidated Variable Interest Entities (“VIEs”)
In accordance with accounting standards for consolidation of VIEs, the Company consolidates ERPOP on EQR’s financial statements. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. The following tables and information summarize the Company’s investments in partially owned entitieslimited partners are not able to exercise substantive kick-out or participating rights. As a result, ERPOP qualifies as of September 30, 2017 (amounts in thousands except for property and apartment unit amounts):
|
| Consolidated |
|
| Unconsolidated |
| ||||||||||
|
| (VIE) |
|
| (Non-VIE) |
|
| (VIE) (1) |
|
| Total |
| ||||
Total properties |
|
| 17 |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Total apartment units |
|
| 3,215 |
|
|
| 945 |
|
|
| — |
|
|
| 945 |
|
Balance sheet information at 9/30/2017 (at 100%): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate |
| $ | 648,839 |
|
| $ | 236,630 |
|
| $ | 172,995 |
|
| $ | 409,625 |
|
Accumulated depreciation |
|
| (226,607 | ) |
|
| (40,840 | ) |
|
| (48,670 | ) |
|
| (89,510 | ) |
Investment in real estate, net |
|
| 422,232 |
|
|
| 195,790 |
|
|
| 124,325 |
|
|
| 320,115 |
|
Cash and cash equivalents |
|
| 22,914 |
|
|
| 7,194 |
|
|
| 139 |
|
|
| 7,333 |
|
Investments in unconsolidated entities |
|
| 45,035 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Deposits – restricted |
|
| 385 |
|
|
| 258 |
|
|
| — |
|
|
| 258 |
|
Other assets |
|
| 26,246 |
|
|
| 450 |
|
|
| 105 |
|
|
| 555 |
|
Total assets |
| $ | 516,812 |
|
| $ | 203,692 |
|
| $ | 124,569 |
|
| $ | 328,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY/CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable, net (2) |
| $ | 302,037 |
|
| $ | 145,424 |
|
| $ | — |
|
| $ | 145,424 |
|
Accounts payable & accrued expenses |
|
| 2,975 |
|
|
| 2,644 |
|
|
| 150 |
|
|
| 2,794 |
|
Accrued interest payable |
|
| 1,024 |
|
|
| 691 |
|
|
| — |
|
|
| 691 |
|
Other liabilities |
|
| 453 |
|
|
| 308 |
|
|
| 27 |
|
|
| 335 |
|
Security deposits |
|
| 2,037 |
|
|
| 488 |
|
|
| — |
|
|
| 488 |
|
Total liabilities |
|
| 308,526 |
|
|
| 149,555 |
|
|
| 177 |
|
|
| 149,732 |
|
Noncontrolling Interests – Partially Owned Properties/Partners' equity |
|
| 6,175 |
|
|
| 54,336 |
|
|
| 84,682 |
|
|
| 139,018 |
|
Company equity/General and Limited Partners' Capital |
|
| 202,111 |
|
|
| (199 | ) |
|
| 39,710 |
|
|
| 39,511 |
|
Total equity/capital |
|
| 208,286 |
|
|
| 54,137 |
|
|
| 124,392 |
|
|
| 178,529 |
|
Total liabilities and equity/capital |
| $ | 516,812 |
|
| $ | 203,692 |
|
| $ | 124,569 |
|
| $ | 328,261 |
|
|
| Consolidated |
|
| Unconsolidated |
| ||||||||||
|
| (VIE) |
|
| (Non-VIE) |
|
| (VIE) (1) |
|
| Total |
| ||||
Operating information for the nine months ended 9/30/2017 (at 100%): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 69,917 |
|
| $ | 20,050 |
|
| $ | 3,805 |
|
| $ | 23,855 |
|
Operating expenses |
|
| 17,056 |
|
|
| 6,746 |
|
|
| 1,573 |
|
|
| 8,319 |
|
Net operating income |
|
| 52,861 |
|
|
| 13,304 |
|
|
| 2,232 |
|
|
| 15,536 |
|
Property management |
|
| 2,463 |
|
|
| 584 |
|
|
| 56 |
|
|
| 640 |
|
General and administrative/other |
|
| 239 |
|
|
| 1 |
|
|
| 127 |
|
|
| 128 |
|
Depreciation |
|
| 15,569 |
|
|
| 7,960 |
|
|
| 4,126 |
|
|
| 12,086 |
|
Operating income (loss) |
|
| 34,590 |
|
|
| 4,759 |
|
|
| (2,077 | ) |
|
| 2,682 |
|
Interest and other income |
|
| 45 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Interest: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense incurred, net |
|
| (9,977 | ) |
|
| (6,217 | ) |
|
| — |
|
|
| (6,217 | ) |
Amortization of deferred financing costs |
|
| (203 | ) |
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Income (loss) before income and other taxes and (loss) from investments in unconsolidated entities |
|
| 24,455 |
|
|
| (1,459 | ) |
|
| (2,077 | ) |
|
| (3,536 | ) |
Income and other tax (expense) benefit |
|
| (34 | ) |
|
| (13 | ) |
|
| — |
|
|
| (13 | ) |
(Loss) from investments in unconsolidated entities |
|
| (1,155 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Net income (loss) |
| $ | 23,266 |
|
| $ | (1,472 | ) |
| $ | (2,077 | ) |
| $ | (3,549 | ) |
|
|
|
|
28
Note: The above tables exclude EQR's ownershipa VIE. EQR has a controlling financial interest in ERPOP private equity fund investments, and, thus, is ERPOP’s primary beneficiary. EQR has the Company's interests in unconsolidated joint ventures established in connection withpower to direct the acquisitionactivities of certain real estate related assets from Archstone Enterprise LP ("Archstone"). These ventures owned certain Archstone assets and succeeded to certain residual Archstone liabilities/litigation,ERPOP that most significantly impact ERPOP’s economic performance as well as responsibility for tax protection arrangements and third-party preferredthe obligation to absorb losses or the right to receive benefits from ERPOP that could potentially be significant to ERPOP.
The Company has various equity interests in former Archstone subsidiaries. The preferred interests had an aggregate liquidation value of $37.4 million at September 30, 2017. Thecertain joint ventures that have been deemed to be VIEs, and the Company is the VIEs’ primary beneficiary. As a result, the joint ventures are owned 60% byrequired to be consolidated on the Company. See below for further discussion. Company’s financial statements. The following table summarizes the Company’s consolidated joint ventures as of March 31, 2022:
|
| Operating Properties | Project Under Development (1) | |||||||||||||
Properties | Apartment Units | Project | Apartment Units | |||||||||||||
Consolidated Joint Ventures (VIE) | 16 | 3,546 | 1 | 312 |
(1) | The |
The following table provides consolidated assets and liabilities related to the VIEs discussed above as of March 31, 2022 and December 31, 2021 (amounts in thousands):
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Consolidated Assets |
| $ | 819,692 |
|
| $ | 912,955 |
|
Consolidated Liabilities |
| $ | 255,326 |
|
| $ | 251,424 |
|
Certain consolidated joint ventures in which we have investments obtained mortgage debt to finance a portion of their activities. The following table and information summarizes the variable rate construction mortgage debt that is non-recourse to the Company at March 31, 2022 (aggregate and amounts borrowed under loan commitments in thousands):
|
| Recently Completed Operating Property |
|
| Project Under Development |
| ||
Number of joint ventures with debt financing |
|
| 1 |
|
|
| 1 |
|
Aggregate loan commitments |
| $ | 67,589 |
|
| $ | 73,344 |
|
Amounts borrowed under loan commitments (1) |
| $ | 64,333 |
|
| $ | 140 |
|
Maturity dates |
| 2022 |
|
| 2025 |
|
(1) | See Note 9 for the |
Investments in Unconsolidated Entities
The following table and information summarizes the Company’s investments in unconsolidated entities, which are accounted for under the equity method of accounting as the requirements for consolidation are not met, as of March 31, 2022 and December 31, 2021 (amounts in thousands except for ownership percentage):
|
| March 31, 2022 |
|
| December 31, 2021 |
|
| Ownership Percentage |
| |||
Investments in Unconsolidated Entities: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Property (VIE) (1) |
| $ | 35,496 |
|
| $ | 36,024 |
|
| 33.3% |
| |
Unconsolidated Development Joint Ventures (VIE) (2) |
|
| 89,680 |
|
|
| 72,488 |
|
| 62% - 90% (4) |
| |
Real Estate Technology (3) |
|
| 25,147 |
|
|
| 19,347 |
|
| Varies |
| |
Other |
|
| (231 | ) |
|
| (411 | ) |
| Varies |
| |
Investments in Unconsolidated Entities |
| $ | 150,092 |
|
| $ | 127,448 |
|
|
|
|
|
|
|
| Represents unconsolidated interests in |
(3) | Represents unconsolidated investments in |
The following table summarizes the Company’s unconsolidated joint ventures that were deemed to be VIEs as of March 31, 2022:
|
| Operating Property (1) |
|
| Projects Under Development (2) |
|
| Land Held for Development (2), (3) |
| |||||||||||
|
| Entity |
|
| Projects |
|
| Apartment Units (4) |
|
| Projects |
|
| Apartment Units (4) |
| |||||
Unconsolidated Joint Ventures (VIE) |
|
| 1 |
|
|
| 3 |
|
|
| 929 |
|
|
| 3 |
|
|
| 1,005 |
|
(1) | Represents the operating property that owns and operates a related parking facility noted in the |
(2) | Represents separate unconsolidated joint ventures for the purpose of developing multifamily rental properties. |
(3) | Represents separate unconsolidated joint ventures that have not yet started but are expected to start construction in 2022. NaN parcel is subject to a long-term ground lease. |
(4) | Represents the intended number of apartment units to be developed. |
7. | Restricted Deposits |
The following table presents the Company’s restricted deposits as of March 31, 2022 and December 31, 2021 (amounts in thousands):
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Mortgage escrow deposits: |
|
|
|
|
|
|
|
|
Replacement reserves |
| $ | 11,489 |
|
| $ | 11,156 |
|
Mortgage principal reserves/sinking funds |
|
| 20,409 |
|
|
| 19,104 |
|
Mortgage escrow deposits |
|
| 31,898 |
|
|
| 30,260 |
|
Restricted cash: |
|
|
|
|
|
|
|
|
Tax-deferred (1031) exchange proceeds |
|
| — |
|
|
| 166,362 |
|
Earnest money on pending acquisitions |
|
| — |
|
|
| 2,000 |
|
Restricted deposits on real estate investments |
|
| 279 |
|
|
| 284 |
|
Resident security and utility deposits |
|
| 36,559 |
|
|
| 35,663 |
|
Other |
|
| 1,824 |
|
|
| 1,835 |
|
Restricted cash |
|
| 38,662 |
|
|
| 206,144 |
|
Restricted deposits |
| $ | 70,560 |
|
| $ | 236,404 |
|
8. | Leases |
Lessor Accounting
The Company is the lessor for its residential and non-residential leases and these leases are accounted for as operating leases under the lease standard.
For the quarter ended March 31, 2022, approximately 97% of the Company’s total lease revenue is generated from residential apartment leases that are generally twelve months or less in length. The residential apartment leases may include lease income related to such items as utility recoveries, parking rent, storage rent and pet rent that the Company treats as a single lease component because the amenities cannot be leased on their own and the timing and pattern of revenue recognition are the same. The collection of lease payments at lease commencement is probable and therefore the Company subsequently recognizes lease income over the lease term on a straight-line basis. Residential leases are renewable upon consent of both parties on an annual or monthly basis.
For the quarter ended March 31, 2022, approximately 3% of the Company’s total lease revenue is generated by non-residential leases that are generally for terms ranging between five to ten years. The non-residential leases generally consist of ground floor retail spaces and master-leased parking garages that serve as additional amenities for our residents. The non-residential leases may include lease income related to such items as utility recoveries, parking rent and storage rent that the Company treats as a single lease component because the amenities cannot be leased on their own and the timing and pattern of revenue recognition are the same. The collection of lease payments at lease commencement is probable and therefore the Company subsequently recognizes lease income over the lease term on a straight-line basis. Non-residential leases are renewable with market-based renewal options.
The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the quarters ended March 31, 2022 and 2021 (amounts in thousands):
|
| Quarter Ended March 31, 2022 |
|
| Quarter Ended March 31, 2021 |
| ||||||||||||||||||
Income Type |
| Residential Leases |
|
| Non-Residential Leases |
|
| Total |
|
| Residential Leases |
|
| Non-Residential Leases |
|
| Total |
| ||||||
Residential and non-residential rent |
| $ | 586,890 |
|
| $ | 15,874 |
|
| $ | 602,764 |
|
| $ | 539,655 |
|
| $ | 15,839 |
|
| $ | 555,494 |
|
Utility recoveries (RUBS income) (1) |
|
| 19,598 |
|
|
| 181 |
|
|
| 19,779 |
|
|
| 17,954 |
|
|
| 178 |
|
|
| 18,132 |
|
Parking rent |
|
| 10,783 |
|
|
| 98 |
|
|
| 10,881 |
|
|
| 9,734 |
|
|
| 267 |
|
|
| 10,001 |
|
Other lease revenue (2) |
|
| (6,301 | ) |
|
| (43 | ) |
|
| (6,344 | ) |
|
| (10,262 | ) |
|
| 609 |
|
|
| (9,653 | ) |
Total lease revenue |
| $ | 610,970 |
|
| $ | 16,110 |
|
|
| 627,080 |
|
| $ | 557,081 |
|
| $ | 16,893 |
|
|
| 573,974 |
|
Parking revenue |
|
|
|
|
|
|
|
|
|
| 8,808 |
|
|
|
|
|
|
|
|
|
|
| 5,433 |
|
Other revenue |
|
|
|
|
|
|
|
|
|
| 17,460 |
|
|
|
|
|
|
|
|
|
|
| 18,195 |
|
Total other rental income (3) |
|
|
|
|
|
|
|
|
|
| 26,268 |
|
|
|
|
|
|
|
|
|
|
| 23,628 |
|
Rental income |
|
|
|
|
|
|
|
|
| $ | 653,348 |
|
|
|
|
|
|
|
|
|
| $ | 597,602 |
|
(1) | RUBS income primarily consists of variable payments representing the recovery of utility costs from residents. |
(2) | Other lease revenue consists of the |
(3) | Other rental income is accounted for under the revenue recognition standard. |
The following table presents residential and non-residential accounts receivable and straight-line receivable balances for the Company’s properties as of March 31, 2022 and December 31, 2021 (amounts in thousands):
|
| Residential |
|
| Non-Residential |
| ||||||||||
Balance Sheet (Other assets): |
| March 31, 2022 |
|
| December 31, 2021 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||
Resident/tenant accounts receivable balances |
| $ | 43,267 |
|
| $ | 37,959 |
|
| $ | 3,639 |
|
| $ | 3,218 |
|
Allowance for doubtful accounts |
|
| (38,774 | ) |
|
| (33,121 | ) |
|
| (2,379 | ) |
|
| (2,365 | ) |
Net receivable balances |
| $ | 4,493 |
| (1) | $ | 4,838 |
|
| $ | 1,260 |
|
| $ | 853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Straight-line receivable balances |
| $ | 5,542 |
|
| $ | 7,460 |
|
| $ | 13,301 |
|
| $ | 13,021 |
|
(1) | The Company
|
The following table presents residential bad debt for the Company’s properties for the quarters ended March 31, 2022 and 2021 (amounts in thousands):
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Tax-deferred (1031) exchange proceeds |
| $ | — |
|
| $ | 38,847 |
|
Restricted deposits on real estate investments |
|
| 61 |
|
|
| 733 |
|
Resident security and utility deposits |
|
| 35,667 |
|
|
| 37,007 |
|
Other |
|
| 911 |
|
|
| 359 |
|
Totals |
| $ | 36,639 |
|
| $ | 76,946 |
|
The following table presents the Company’s escrow deposits for mortgages as of September 30, 2017 and December 31, 2016 (amounts in thousands):
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Real estate taxes and insurance |
| $ | 556 |
|
| $ | 2,003 |
|
Replacement reserves |
|
| 7,969 |
|
|
| 3,428 |
|
Mortgage principal reserves/sinking funds |
|
| 1,595 |
|
|
| 58,652 |
|
Other |
|
| 852 |
|
|
| 852 |
|
Totals |
| $ | 10,972 |
|
| $ | 64,935 |
|
During the nine months ended September 30, 2017, the Company received approximately $60.5 million from the return of various mortgage principal reserves/sinking funds on certain tax-exempt mortgage bond deals.
|
| Quarter Ended March 31, |
| |||||
Income Statement (Rental income): |
|
| 2022 |
|
|
| 2021 |
|
Bad debt, net (1) |
| $ | 9,895 |
|
| $ | 13,693 |
|
% of rental income |
|
| 1.6 | % |
|
| 2.4 | % |
EQR does not have any indebtedness as all(1)
Bad debt, is incurred by the Operating Partnership. EQR guarantees the Operating Partnership’s revolving credit facility upnet benefited from additional resident payments due to the maximum amount andgovernmental rental assistance programs of approximately $9.8 million for the full termquarter ended March 31, 2022.
9. | Debt |
EQRdoesnothaveanyindebtednessasalldebtisincurredbytheOperatingPartnership. Weighted average interest rates noted below for the quarter ended March 31, 2022 include the effect of any derivative instruments and amortization of premiums/discounts/OCI (other comprehensive income) on debt and derivatives.
Mortgage Notes Payable
The following table summarizes the Company’s mortgage notes payable activity for the quarter ended March 31, 2022 (amounts in thousands):
|
| Mortgage notes payable, net as of December 31, 2021 |
|
| Proceeds |
|
| Lump sum payoffs |
|
| Scheduled principal repayments |
|
| Amortization of premiums/ discounts |
|
| Amortization of deferred financing costs, net (1) |
|
| Mortgage notes payable, net as of March 31, 2022 |
| |||||||
Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – Conventional |
| $ | 1,896,472 |
|
| $ | — |
|
| $ | — |
|
| $ | (1,933 | ) |
| $ | 378 |
|
| $ | 334 |
|
| $ | 1,895,251 |
|
Floating Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – Conventional |
|
| 59,890 |
|
|
| 2,689 |
| (2) |
| — |
|
|
| — |
|
|
| — |
|
|
| 188 |
|
|
| 62,767 |
|
Secured – Tax Exempt |
|
| 234,839 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 307 |
|
|
| 35 |
|
|
| 235,181 |
|
Floating Rate Debt |
|
| 294,729 |
|
|
| 2,689 |
|
|
| — |
|
|
| — |
|
|
| 307 |
|
|
| 223 |
|
|
| 297,948 |
|
Total |
| $ | 2,191,201 |
|
| $ | 2,689 |
|
| $ | — |
|
| $ | (1,933 | ) |
| $ | 685 |
|
| $ | 557 |
|
| $ | 2,193,199 |
|
(1) | Represents amortization of
|
(2) | See Note 6 for additional discussion of the |
The following table summarizes certain interest rate and maturity date information as of and for the quarter ended March 31, 2022:
March 31, 2022 | |||
Interest Rate Ranges | 0.10% - 4.21% | ||
Weighted Average Interest Rate | 3.33% | ||
Maturity Date Ranges | 2022-2061 |
As of March 31, 2022, the Company had $250.0 million of secured debt (primarily tax-exempt bonds) subject to third-party credit enhancement.
Notes
The following table summarizes the Company’s notes activity for the quarter ended March 31, 2022 (amounts in thousands):
|
| Notes, net as of December 31, 2021 |
|
| Proceeds |
|
| Lump sum payoffs |
|
| Amortization of premiums/ discounts |
|
| Amortization of deferred financing costs, net (1) |
|
| Notes, net as of March 31, 2022 |
| ||||||
Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured – Public |
| $ | 5,835,222 |
|
| $ | — |
|
| $ | — |
|
| $ | 673 |
|
| $ | 1,062 |
|
| $ | 5,836,957 |
|
(1) | Represents amortization of deferred financing costs, net of debt
|
The following table summarizes certain interest rate and maturity date information as of and for the quarter ended March 31, 2022:
|
|
|
|
Interest Rate Ranges | 1.85% - 7.57% | ||
Weighted Average Interest Rate | 3.61% | ||
Maturity Date Ranges | 2023-2047 |
The Company’s unsecured public notes contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for the quarter ended March 31, 2022.
Line of Credit and Commercial Paper
On November 3, 2016, theThe Company replaced its existinghas a $2.5 billion facility with a $2.0 billion unsecured revolving credit facility maturing January 10, 2022.November 1, 2024. The Company has the ability to increase available borrowings by an additional $750.0 million by adding additional bankslenders to the facility, or obtaining the agreement of existing bankslenders to increase their commitments.commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be LIBOR plus a spread (currently 0.825%0.775%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 12.5 basis points)0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating of the Company’s long term debt.
31
OnFebruary2,2015,theCompanyenteredintoanunsecuredcommercialpapernoteprogramintheUnitedStates.rating. The Company did 0t borrow any amounts under its revolving credit facility during the quarter ended March 31, 2022.
The Company has an unsecured commercial paper note program under which it may borrow up to a maximum of $500.0 million under this program$1.0 billion subject to market conditions. The notes will be soldundercustomarytermsintheUnitedStatescommercialpapernotemarketandwillrankparipassuwithalloftheCompany's Company’s otherunsecuredseniorindebtedness. Asof September 30, 2017, there was a balance of$229.8 million outstanding on thecommercialpaperprogram ($230.0 million in principal outstanding net of an unamortized discount of $0.2 million). Thenotesbearinterest at various floating rates with a weighted average interest rate of 1.37%0.35% for the nine monthsquarter ended September 30, 2017March 31, 2022 and a weighted average maturity of 183 days as of September 30, 2017.March 31, 2022. The weighted average amount outstanding for the quarter ended March 31, 2022 was approximately $260.9 million.
AsThe Company limits its utilization of September 30, 2017, the amount available on the revolving credit facility was $1.76 billion (net of $11.1 million which was restricted/dedicatedin order to maintain liquidity to support letters of credit and net of $230.0 million in principal outstanding on theits $1.0 billion commercial paper program).
Other
On April 24, 2017,program along with certain other obligations. The following table presents the Company executed a new letter of credit facility with a third party financial institution which is not backed by or collateralized by borrowingsavailability on the Company’s unsecured revolving credit facility. Asfacility as of September 30, 2017, there was $9.0 millionMarch 31, 2022 (amounts in letters of credit outstanding on this facility.thousands):
|
| March 31, 2022 |
| |
Unsecured revolving credit facility commitment |
| $ | 2,500,000 |
|
Commercial paper balance outstanding |
|
| (130,000 | ) |
Unsecured revolving credit facility balance outstanding |
|
| — |
|
Other restricted amounts |
|
| (3,507 | ) |
Unsecured revolving credit facility availability |
| $ | 2,366,493 |
|
The valuation of financial instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments including its derivative instruments, on listed market prices and third partythird-party quotes. Where these are not available, the Company bases its estimates on current instruments with similar terms and maturities or on other factors relevant to the financial instruments.
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeksmay seek to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments. The Company may also use derivatives to manage commodity prices in the daily operations of the business.
Athree-levelvaluationhierarchyexistsfordisclosureoffairvaluemeasurements. Thevaluationhierarchyisbasedupon thetransparencyofinputstothevaluationofanassetorliabilityasofthemeasurementdate. Afinancialinstrument’scategorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined asfollows:
Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
• | Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
• | Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
• | Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair valuemeasurement. |
The Company’s derivative positions are valued using models developed by the respective counterparty as well as models developedapplied internally by the Company that use as their basisinputs readily observable market parameters (such as forward yield curves and credit default swap data). Employee holdings other than Common Shares withinThe following table summarizes the supplemental executive retirement plan (the “SERP”) are valued using quoted market prices for identical assets and are included in other assets and other liabilities oninputs to the consolidated balance sheets. Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are valued using the quoted market price of Common Shares. The fair values disclosed for mortgage notes payable and unsecured debt (including its commercial paper) were calculated using indicative rates provided by lenders of similar loans in the case of mortgage notes payable and the private unsecured debt (including its commercial paper) and quoted market pricesvaluations for each underlying issuance in the casetype of the public unsecured notes.
32
Table of Contentsfair value measurement:
Fair Value Measurement Type | Valuation Inputs | |
Employee holdings (other than Common Shares) within the supplemental executive retirement plan (the “SERP”) | Quoted market prices for identical assets. These holdings are included in other assets and other liabilities on the consolidated balance sheets. | |
Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners | Quoted market price of Common Shares. | |
Mortgage notes payable and private unsecured debt (including its commercial paper and line of credit, if applicable) | Indicative rates provided by lenders of similar loans. | |
Public unsecured notes | Quoted market prices for each underlying issuance. |
The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, commercial paper, line of credit and derivative instruments), including cash and cash equivalents and other financial instruments, approximate their carrying or contract value. Thefollowingtableprovidesasummaryofthe carrying andfairvaluesforthe Company’s mortgage notes payable and unsecured debt (including its commercial paper and line of credit, if applicable) at September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively (amounts inthousands):
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||
|
| Estimated Fair Value (Level 2) |
|
| Carrying Value |
|
| Estimated Fair Value (Level 2) |
|
| Carrying Value |
| ||||
Mortgage notes payable, net |
| $ | 3,630,477 |
|
| $ | 3,619,180 |
|
| $ | 4,161,001 |
|
| $ | 4,119,181 |
|
Unsecured debt, net |
|
| 5,640,095 |
|
|
| 5,373,092 |
|
|
| 5,030,330 |
|
|
| 4,868,077 |
|
Total debt, net |
| $ | 9,270,572 |
|
| $ | 8,992,272 |
|
| $ | 9,191,331 |
|
| $ | 8,987,258 |
|
The following table summarizes the Company’s consolidated derivative instruments at September 30, 2017 (dollar amounts are in thousands):
| Fair Value Hedges (1) |
|
| Forward Starting Swaps (2) |
| ||
Current Notional Balance | $ | 450,000 |
|
| $ | 250,000 |
|
Lowest Interest Rate |
| 2.375 | % |
|
| 2.1478 | % |
Highest Interest Rate |
| 2.375 | % |
|
| 2.2895 | % |
Earliest Maturity Date |
| 2019 |
|
|
| 2028 |
|
Latest Maturity Date |
| 2019 |
|
|
| 2029 |
|
|
|
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||
|
| Carrying Value |
|
| Estimated Fair Value (Level 2) |
|
| Carrying Value |
|
| Estimated Fair Value (Level 2) |
| ||||
Mortgage notes payable, net |
| $ | 2,193,199 |
|
| $ | 2,122,178 |
|
| $ | 2,191,201 |
|
| $ | 2,193,689 |
|
Unsecured debt, net |
|
| 5,966,952 |
|
|
| 6,066,975 |
|
|
| 6,150,252 |
|
|
| 6,798,309 |
|
Total debt, net |
| $ | 8,160,151 |
|
| $ | 8,189,153 |
|
| $ | 8,341,453 |
|
| $ | 8,991,998 |
|
Thefollowingtablesprovideasummaryofthefairvaluemeasurementsforeachmajorcategoryofassetsandliabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively (amounts inthousands):
|
|
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
| |||||||||
Description |
| Balance Sheet Location |
| 9/30/2017 |
|
| Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hedges |
| Other Assets |
| $ | 444 |
|
| $ | — |
|
| $ | 444 |
|
| $ | — |
|
Forward Starting Swaps |
| Other Assets |
|
| 3,921 |
|
|
| — |
|
|
| 3,921 |
|
|
| — |
|
Supplemental Executive Retirement Plan |
| Other Assets |
|
| 136,774 |
|
|
| 136,774 |
|
|
| — |
|
|
| — |
|
Total |
|
|
| $ | 141,139 |
|
| $ | 136,774 |
|
| $ | 4,365 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan |
| Other Liabilities |
| $ | 136,774 |
|
| $ | 136,774 |
|
| $ | — |
|
| $ | — |
|
Total |
|
|
| $ | 136,774 |
|
| $ | 136,774 |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Partnership/Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners |
| Mezzanine |
| $ | 380,541 |
|
| $ | — |
|
| $ | 380,541 |
|
| $ | — |
|
33
|
|
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
| ||||||||||||||||||
Description |
| Balance Sheet Location |
| 12/31/2016 |
|
| Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Balance Sheet Location |
| 3/31/2022 |
|
| Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Interest Rate Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Fair Value Hedges |
| Other Assets |
| $ | 1,857 |
|
| $ | — |
|
| $ | 1,857 |
|
| $ | — |
| ||||||||||||||||||
Supplemental Executive Retirement Plan |
| Other Assets |
|
| 124,420 |
|
|
| 124,420 |
|
|
| — |
|
|
| — |
|
| Other Assets |
| $ | 144,732 |
|
| $ | 144,732 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
|
| $ | 126,277 |
|
| $ | 124,420 |
|
| $ | 1,857 |
|
| $ | — |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan |
| Other Liabilities |
| $ | 124,420 |
|
| $ | 124,420 |
|
| $ | — |
|
| $ | — |
|
| Other Liabilities |
| $ | 144,732 |
|
| $ | 144,732 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
|
| $ | 124,420 |
|
| $ | 124,420 |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Partnership/Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners |
| Mezzanine |
| $ | 442,092 |
|
| $ | — |
|
| $ | 442,092 |
|
| $ | — |
|
| Mezzanine |
| $ | 495,760 |
|
| $ | 0 |
|
| $ | 495,760 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
| Fair Value Measurements at Reporting Date Using |
| |||||||||
Description |
| Balance Sheet Location |
| 12/31/2021 |
|
| Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan |
| Other Assets |
| $ | 164,650 |
|
| $ | 164,650 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan |
| Other Liabilities |
| $ | 164,650 |
|
| $ | 164,650 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Partnership/Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners |
| Mezzanine |
| $ | 498,977 |
|
| $ | 0 |
|
| $ | 498,977 |
|
| $ | 0 |
|
Thefollowingtablesprovideasummaryoftheeffectof fair value cashflowhedgesontheCompany’saccompanyingconsolidated statements of operations and comprehensive income for the nine monthsquarters ended September 30, 2017March 31, 2022 and 2016,2021, respectively (amounts in thousands):
September 30, 2017 Type of Fair Value Hedge |
| Location of Gain/(Loss) Recognized in Income on Derivative |
| Amount of Gain/(Loss) Recognized in Income on Derivative |
|
| Hedged Item |
| Income Statement Location of Hedged Item Gain/(Loss) |
| Amount of Gain/(Loss) Recognized in Income on Hedged Item |
| ||||||||||||
March 31, 2022 Type of Cash Flow Hedge |
| Amount of Gain/(Loss) Recognized in OCI on Derivative |
|
| Location of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| ||||||||||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
| Interest expense |
| $ | (1,413 | ) |
| Fixed rate debt |
| Interest expense |
| $ | 1,413 |
| ||||||||||
Forward Starting Swaps |
| $ | 0 |
|
| Interest expense |
| $ | (2,425 | ) | ||||||||||||||
Total |
|
|
| $ | (1,413 | ) |
|
|
|
|
| $ | 1,413 |
|
| $ | 0 |
|
|
|
| $ | (2,425 | ) |
September 30, 2016 Type of Fair Value Hedge |
| Location of Gain/(Loss) Recognized in Income on Derivative |
| Amount of Gain/(Loss) Recognized in Income on Derivative |
|
| Hedged Item |
| Income Statement Location of Hedged Item Gain/(Loss) |
| Amount of Gain/(Loss) Recognized in Income on Hedged Item |
| ||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
| Interest expense |
| $ | 4,563 |
|
| Fixed rate debt |
| Interest expense |
| $ | (4,563 | ) |
Total |
|
|
| $ | 4,563 |
|
|
|
|
|
| $ | (4,563 | ) |
34
The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying consolidated statements of operations and comprehensive income for the nine months ended September 30, 2017 and 2016, respectively (amounts in thousands):
|
| Effective Portion |
|
| Ineffective Portion |
| ||||||||||
September 30, 2017 Type of Cash Flow Hedge |
| Amount of Gain/(Loss) Recognized in OCI on Derivative |
|
| Location of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |
|
| Location of Gain/(Loss) Recognized in Income on Derivative |
| Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| |||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Starting Swaps |
| $ | 5,216 |
|
| Interest expense |
| $ | (14,019 | ) |
| N/A |
| $ | — |
|
Total |
| $ | 5,216 |
|
|
|
| $ | (14,019 | ) |
|
|
| $ | — |
|
|
| Effective Portion |
|
| Ineffective Portion |
| ||||||||||||||||||||
September 30, 2016 Type of Cash Flow Hedge |
| Amount of Gain/(Loss) Recognized in OCI on Derivative |
|
| Location of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |
|
| Location of Gain/(Loss) Recognized in Income on Derivative |
| Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| |||||||||||||
March 31, 2021 Type of Cash Flow Hedge |
| Amount of Gain/(Loss) Recognized in OCI on Derivative |
|
| Location of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |
| ||||||||||||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Starting Swaps |
| $ | (4,240 | ) |
| Interest expense |
| $ | (37,262 | ) |
| N/A |
| $ | — |
|
| $ | 0 |
|
| Interest expense |
| $ | (2,303 | ) |
Total |
| $ | (4,240 | ) |
|
|
| $ | (37,262 | ) |
|
|
| $ | — |
|
| $ | 0 |
|
|
|
| $ | (2,303 | ) |
Asof September 30, 2017 March 31, 2022 and December 31, 2016, 2021,therewereapproximately $94.7 $31.8millionand $113.9 $34.3millionindeferred losses, net, included in accumulated other comprehensive income (loss), respectively, related to derivative instruments. Based on the estimated fair values of the netpreviously settled derivative instruments, at September 30, 2017, the Company may recognizeof which an estimated $21.4$10.2 million of accumulated other comprehensive (loss)may be recognized as additional interest expense during the twelve months ending September 30, 2018.
In August 2017, the Company received $1.3 million to settle four forward starting ten-year swaps in conjunction with the issuance of $400.0 million of ten-year fixed rate public notes. The entire $1.3 million was initially deferred as a component of accumulated other comprehensive (loss) and will be recognized as a decrease to interest expense over the ten-year term of the notes.
35
March 31, 2023.
Equity Residential
Thefollowingtablessetforththecomputationofnetincomepershare–basicandnetincomepershare–dilutedforthe Company (amounts in thousands except per shareamounts):
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
|
| Quarter Ended March 31, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||
Numerator for net income per share – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
| $ | 498,297 |
|
| $ | 4,177,599 |
|
| $ | 144,196 |
|
| $ | 217,246 |
| ||||||||
Allocation to Noncontrolling Interests – Operating Partnership, net |
|
| (17,931 | ) |
|
| (160,437 | ) |
|
| (5,166 | ) |
|
| (8,344 | ) | ||||||||
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) | ||||||||
Net income |
| $ | 73,798 |
|
| $ | 60,364 |
| ||||||||||||||||
Allocation to Noncontrolling Interests – Operating Partnership |
|
| (2,394 | ) |
|
| (2,143 | ) | ||||||||||||||||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (639 | ) |
|
| (682 | ) | ||||||||||||||||
Preferred distributions |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
|
| (772 | ) |
|
| (773 | ) |
Income from continuing operations available to Common Shares, net of Noncontrolling Interests |
|
| 475,694 |
|
|
| 4,012,476 |
|
|
| 137,457 |
|
|
| 207,306 |
| ||||||||
Discontinued operations, net of Noncontrolling Interests |
|
| — |
|
|
| 119 |
|
|
| — |
|
|
| 237 |
| ||||||||
Numerator for net income per share – basic |
| $ | 475,694 |
|
| $ | 4,012,595 |
|
| $ | 137,457 |
|
| $ | 207,543 |
|
| $ | 69,993 |
|
| $ | 56,766 |
|
Numerator for net income per share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
| $ | 498,297 |
|
| $ | 4,177,599 |
|
| $ | 144,196 |
|
| $ | 217,246 |
| ||||||||
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) | ||||||||
Net income |
| $ | 73,798 |
|
| $ | 60,364 |
| ||||||||||||||||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (639 | ) |
|
| (682 | ) | ||||||||||||||||
Preferred distributions |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
|
| (772 | ) |
|
| (773 | ) |
Income from continuing operations available to Common Shares |
|
| 493,625 |
|
|
| 4,172,913 |
|
|
| 142,623 |
|
|
| 215,650 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| 124 |
|
|
| — |
|
|
| 246 |
| ||||||||
Numerator for net income per share – diluted |
| $ | 493,625 |
|
| $ | 4,173,037 |
|
| $ | 142,623 |
|
| $ | 215,896 |
|
| $ | 72,387 |
|
| $ | 58,909 |
|
Denominator for net income per share – basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for net income per share – basic |
|
| 366,809 |
|
|
| 364,917 |
|
|
| 366,996 |
|
|
| 365,109 |
|
|
| 375,509 |
|
|
| 372,280 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OP Units |
|
| 12,907 |
|
|
| 13,828 |
|
|
| 12,910 |
|
|
| 13,899 |
|
|
| 11,888 |
|
|
| 13,050 |
|
Long-term compensation shares/units |
|
| 2,924 |
|
|
| 3,539 |
|
|
| 3,039 |
|
|
| 3,365 |
|
|
| 2,090 |
|
|
| 1,586 |
|
ATM forward sales |
|
| 141 |
|
|
| — |
| ||||||||||||||||
Denominator for net income per share – diluted |
|
| 382,640 |
|
|
| 382,284 |
|
|
| 382,945 |
|
|
| 382,373 |
|
|
| 389,628 |
|
|
| 386,916 |
|
Net income per share – basic |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
|
| $ | 0.19 |
|
| $ | 0.15 |
|
Net income per share – diluted |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
|
| $ | 0.19 |
|
| $ | 0.15 |
|
Net income per share – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations available to Common Shares, net of Noncontrolling Interests |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Discontinued operations, net of Noncontrolling Interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Net income per share – basic |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Net income per share – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations available to Common Shares |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Net income per share – diluted |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
|
36
ERP Operating Limited Partnership
The following tables set forth the computation of net income per Unit – basic and net income per Unit – diluted for the Operating Partnership (amounts in thousands except per Unit amounts):
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
|
| Quarter Ended March 31, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||
Numerator for net income per Unit – basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
| $ | 498,297 |
|
| $ | 4,177,599 |
|
| $ | 144,196 |
|
| $ | 217,246 |
| ||||||||
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) | ||||||||
Net income |
| $ | 73,798 |
|
| $ | 60,364 |
| ||||||||||||||||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (639 | ) |
|
| (682 | ) | ||||||||||||||||
Allocation to Preference Units |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
|
| (772 | ) |
|
| (773 | ) |
Income from continuing operations available to Units |
|
| 493,625 |
|
|
| 4,172,913 |
|
|
| 142,623 |
|
|
| 215,650 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| 124 |
|
|
| — |
|
|
| 246 |
| ||||||||
Numerator for net income per Unit – basic and diluted |
| $ | 493,625 |
|
| $ | 4,173,037 |
|
| $ | 142,623 |
|
| $ | 215,896 |
|
| $ | 72,387 |
|
| $ | 58,909 |
|
Denominator for net income per Unit – basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for net income per Unit – basic |
|
| 379,716 |
|
|
| 378,745 |
|
|
| 379,906 |
|
|
| 379,008 |
|
|
| 387,397 |
|
|
| 385,330 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution for Units issuable upon assumed exercise/vesting of the Company’s long-term compensation shares/units |
|
| 2,924 |
|
|
| 3,539 |
|
|
| 3,039 |
|
|
| 3,365 |
|
|
| 2,090 |
|
|
| 1,586 |
|
ATM forward sales |
|
| 141 |
|
|
| 0 |
| ||||||||||||||||
Denominator for net income per Unit – diluted |
|
| 382,640 |
|
|
| 382,284 |
|
|
| 382,945 |
|
|
| 382,373 |
|
|
| 389,628 |
|
|
| 386,916 |
|
Net income per Unit – basic |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
|
| $ | 0.19 |
|
| $ | 0.15 |
|
Net income per Unit – diluted |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
|
| $ | 0.19 |
|
| $ | 0.15 |
|
Net income per Unit – basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations available to Units |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Net income per Unit – basic |
| $ | 1.30 |
|
| $ | 11.00 |
|
| $ | 0.37 |
|
| $ | 0.57 |
| ||||||||
Net income per Unit – diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations available to Units |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
| ||||||||
Discontinued operations, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Net income per Unit – diluted |
| $ | 1.29 |
|
| $ | 10.92 |
|
| $ | 0.37 |
|
| $ | 0.56 |
|
The Company executed an agreement with controlled affiliatesCommitments
Real Estate Development Commitments
As of Starwood Capital Group ("Starwood") on October 23, 2015 to sell a portfolio of 72 operating properties consisting of 23,262 apartment units located in five markets across the United States for $5.365 billion (the "Starwood Transaction" or “Starwood Portfolio”). The Starwood Portfolio represented substantially all of the assets in the Company’s South Florida and Denver markets and certain suburban assets in the Washington D.C., Seattle and Los Angeles markets. On January 26 and 27, 2016, the Company closed on the sale of the entire portfolio described above.
37
The Company concluded that the Starwood Transaction did not qualify for discontinued operations reporting as it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. The Company has been investing only in its six coastal markets (Boston, New York, Washington D.C., Southern California, San Francisco and Seattle) and has not been acquiring or developing any new assets in its other markets. Over the past several years,March 31, 2022, the Company has been repositioning its portfolio by selling its suburban assets locatedboth consolidated and unconsolidated real estate projects under development. We have entered into, and may continue in markets outside its six core coastal markets.the future to enter into, joint venture agreements with third-party partners for the development of multifamily rental properties. The sale ofjoint venture agreements with each development partner include buy-sell provisions that provide the Starwood Portfolio representedright, but not the continuation of the above strategy. However,obligation, for the Company concluded thatto acquire each respective partner’s interests or sell its interests at any time following the Starwood Transaction did qualify as an individually significant componentoccurrence of certain pre-defined events described in the Company as the amount received upon disposal exceeded 10% of total assets, and NOI (see definition injoint venture agreements. See Note 13) of the Starwood Portfolio represented approximately 1.6% of consolidated NOI (for the approximate one-month period owned in 2016)6 for the nine months ended September 30, 2016 and approximately 15.7% of consolidated NOI for the year ended December 31, 2015. As a result, theadditional discussion.
The following table summarizes the results of operations attributable to the Starwood Transactiongross remaining total project costs for the nine months and quarter ended September 30, 2016 (amountsCompany’s projects under development at March 31, 2022 (total project costs remaining in thousands):
|
| Nine Months Ended |
|
| Quarter Ended |
| ||
|
| September 30, 2016 |
|
| September 30, 2016 |
| ||
REVENUES |
|
|
|
|
|
|
|
|
Rental income |
| $ | 30,660 |
|
| $ | 239 |
|
Total revenues |
|
| 30,660 |
|
|
| 239 |
|
EXPENSES |
|
|
|
|
|
|
|
|
Property and maintenance |
|
| 7,839 |
|
|
| (84 | ) |
Real estate taxes and insurance |
|
| 2,933 |
|
|
| 1 |
|
Property management |
|
| 2 |
|
|
| — |
|
General and administrative |
|
| 19 |
|
|
| 4 |
|
Total expenses |
|
| 10,793 |
|
|
| (79 | ) |
Operating income |
|
| 19,867 |
|
|
| 318 |
|
Interest and other income |
|
| 21 |
|
|
| 10 |
|
Interest: |
|
|
|
|
|
|
|
|
Expense incurred, net |
|
| (380 | ) |
|
| (6 | ) |
Amortization of deferred financing costs |
|
| (707 | ) |
|
| — |
|
Income and other tax (expense) benefit |
|
| (1 | ) |
|
| — |
|
Net gain (loss) on sales of real estate properties |
|
| 3,161,097 |
|
|
| (103 | ) |
Income from operations attributable to controlling interests – Operating Partnership |
|
| 3,179,897 |
|
|
| 219 |
|
Income from operations attributable to Noncontrolling Interests – Operating Partnership |
|
| (122,146 | ) |
|
| (8 | ) |
Income from operations attributable to controlling interests – Company |
| $ | 3,057,751 |
|
| $ | 211 |
|
|
| Projects |
|
| Apartment Units |
|
| Total Project Costs Remaining (1) |
| |||
Projects Under Development |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
| 1 |
|
|
| 312 |
|
| $ | 71,309 |
|
Unconsolidated |
|
| 3 |
|
|
| 929 |
|
|
| 247,498 |
|
Total Projects Under Development |
|
| 4 |
|
|
| 1,241 |
|
| $ | 318,807 |
|
Real Estate Technology Fund Commitments
We have entered into, and may continue in the future to enter into, real estate technology fund investments. At March 31, 2022, the Company has invested in 10 real estate technology investment funds with remaining commitments of approximately $27.0 million.
Contingencies
Litigation and Legal Matters
The Company, as an owner of real estate, is subject to various Federal,federal, state and local environmental laws. Compliance by the Company with
existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new or changed laws or regulations on its current properties or on properties that it may acquire in the future. As of September 30, 2017, the Company does have environmental reserves totaling approximately $5.7 million related to two of its properties.
The Company has established a reserve related to various litigation matters associated with its Massachusetts properties and periodically assesses the adequacy of the reserve and makes adjustments as necessary. As of September 30, 2017, the reserve totaled approximately $0.9 million. While no assurances can be given, the Company does not believe that the ultimate resolution of any of these remaining litigation matters, if adversely determined, would have a material adverse effect on the Company.
The Company does not believe there is any other litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.
As of September 30, 2017, the Company has four wholly owned projects totaling 1,285 apartment units in various stages of development with commitments to fund of approximately $127.3 million and estimated completion dates ranging through September 30, 2019, as well as other completed development projects that are in various stages of lease up or are stabilized.
As of September 30, 2017, the Company has two unconsolidated operating properties (Nexus Sawgrass and Domain) that are owned with the same third party joint venture partner. The joint venture agreements with this partner are primarily deal-specific
38
regardingprofit-sharing,equitycontributions,returnsoninvestment,buy-sell agreements and other customary provisions. Thebuy-sellarrangementscontainprovisionsthatprovide the right, but not the obligation, for the Company to acquire the partner’s interests or sell its interests at any time following the occurrence of certain pre-defined events described in the joint venture agreements. See Note 6 for further discussion.
Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses and about which discrete financial information is available that is evaluated regularly by the chiefoperatingdecisionmaker. Thechiefoperatingdecisionmakerdecideshowresourcesareallocatedandassessesperformance on a recurring basis at leastquarterly.
The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company'sCompany’s operating performance geographically by market and both on a same store and non-same store basis. While the Company does maintain a non-residential presence, it accounts for approximately 3.8% of total revenues for the quarter ended March 31, 2022 and is designed as an amenity for our residential residents. The chief operating decision maker evaluates the performance of each property on a consolidated residential and non-residential basis. The Company’s geographic consolidated same store operating segments located in its coastal markets represent its reportable segments. The Company's operating segments located in its other markets (Phoenix) that are not material have also been included in the tables presented below.
The Company’s fee and asset management and development activities are other business activities that do not constitute an operating segment and as such, have been aggregated in the "Other"“Other” category in the tables presented below.
Allrevenuesarefromexternalcustomersandthereis no 0customerwhocontributed10%ormoreoftheCompany’stotal revenues during the nine months and quarters ended September 30, 2017March 31, 2022 and 2016,2021, respectively.
The primary financial measure for the Company’s rental real estate segment is net operating income (“NOI”), which representsrentalincomeless:1) propertyandmaintenanceexpenseand2) realestatetaxesandinsuranceexpense (all (allasreflected in the accompanying consolidated statements of operations and comprehensive income). TheCompanybelievesthat 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 properties. Revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.
ThefollowingtablepresentsareconciliationofNOIfromourrentalrealestateforthe quarters ended March 31, 2022 and 2021, respectively (amounts inthousands):
|
| Quarter Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Rental income |
| $ | 653,348 |
|
| $ | 597,602 |
|
Property and maintenance expense |
|
| (124,874 | ) |
|
| (117,054 | ) |
Real estate taxes and insurance expense |
|
| (100,688 | ) |
|
| (103,470 | ) |
Total operating expenses |
|
| (225,562 | ) |
|
| (220,524 | ) |
Net operating income |
| $ | 427,786 |
|
| $ | 377,078 |
|
The following table presents a reconciliation oftables present NOI from our rental real estate specific to continuing operationsfor each segment for the nine months and quarters ended September 30, 2017March 31, 2022 and 2016,2021, respectively, as well as total assets and capital expenditures at March 31, 2022 (amounts in thousands):
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Rental income |
| $ | 1,840,170 |
|
| $ | 1,816,960 |
|
| $ | 623,951 |
|
| $ | 605,856 |
|
Property and maintenance expense |
|
| (306,645 | ) |
|
| (309,688 | ) |
|
| (104,721 | ) |
|
| (104,216 | ) |
Real estate taxes and insurance expense |
|
| (253,318 | ) |
|
| (238,954 | ) |
|
| (84,087 | ) |
|
| (81,343 | ) |
Total operating expenses |
|
| (559,963 | ) |
|
| (548,642 | ) |
|
| (188,808 | ) |
|
| (185,559 | ) |
Net operating income |
| $ | 1,280,207 |
|
| $ | 1,268,318 |
|
| $ | 435,143 |
|
| $ | 420,297 |
|
39
The following tables present NOI for each segment from our rental real estate specific to continuing operations for the nine months and quarters ended September 30, 2017 and 2016,respectively,aswellastotalassetsandcapitalexpendituresat September 30, 2017(amounts inthousands):
|
| Nine Months Ended September 30, 2017 |
|
| Nine Months Ended September 30, 2016 |
|
| Quarter Ended March 31, 2022 |
|
| Quarter Ended March 31, 2021 |
| ||||||||||||||||||||||||||||||||||||
|
| Rental Income |
|
| Operating Expenses |
|
| NOI |
|
| Rental Income |
|
| Operating Expenses |
|
| NOI |
|
| Rental Income |
|
| Operating Expenses |
|
| NOI |
|
| Rental Income |
|
| Operating Expenses |
|
| NOI |
| ||||||||||||
Same store (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles |
| $ | 296,345 |
|
| $ | 83,927 |
|
| $ | 212,418 |
|
| $ | 285,463 |
|
| $ | 83,459 |
|
| $ | 202,004 |
|
| $ | 115,353 |
|
| $ | 36,775 |
|
| $ | 78,578 |
|
| $ | 106,418 |
|
| $ | 35,693 |
|
| $ | 70,725 |
|
Orange County |
|
| 66,081 |
|
|
| 16,355 |
|
|
| 49,726 |
|
|
| 63,005 |
|
|
| 15,529 |
|
|
| 47,476 |
|
|
| 28,767 |
|
|
| 6,425 |
|
|
| 22,342 |
|
|
| 25,841 |
|
|
| 6,314 |
|
|
| 19,527 |
|
San Diego |
|
| 66,052 |
|
|
| 17,386 |
|
|
| 48,666 |
|
|
| 63,171 |
|
|
| 16,884 |
|
|
| 46,287 |
|
|
| 20,940 |
|
|
| 4,929 |
|
|
| 16,011 |
|
|
| 18,740 |
|
|
| 4,633 |
|
|
| 14,107 |
|
Subtotal - Southern California |
|
| 428,478 |
|
|
| 117,668 |
|
|
| 310,810 |
|
|
| 411,639 |
|
|
| 115,872 |
|
|
| 295,767 |
|
|
| 165,060 |
|
|
| 48,129 |
|
|
| 116,931 |
|
|
| 150,999 |
|
|
| 46,640 |
|
|
| 104,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington DC |
|
| 322,307 |
|
|
| 98,043 |
|
|
| 224,264 |
|
|
| 317,879 |
|
|
| 95,187 |
|
|
| 222,692 |
| ||||||||||||||||||||||||
San Francisco |
|
| 102,440 |
|
|
| 32,119 |
|
|
| 70,321 |
|
|
| 96,728 |
|
|
| 30,985 |
|
|
| 65,743 |
| ||||||||||||||||||||||||
Washington D.C. |
|
| 100,472 |
|
|
| 33,901 |
|
|
| 66,571 |
|
|
| 97,487 |
|
|
| 32,607 |
|
|
| 64,880 |
| ||||||||||||||||||||||||
New York |
|
| 345,656 |
|
|
| 126,226 |
|
|
| 219,430 |
|
|
| 345,434 |
|
|
| 120,390 |
|
|
| 225,044 |
|
|
| 110,086 |
|
|
| 53,071 |
|
|
| 57,015 |
|
|
| 98,034 |
|
|
| 51,854 |
|
|
| 46,180 |
|
San Francisco |
|
| 283,654 |
|
|
| 69,053 |
|
|
| 214,601 |
|
|
| 277,666 |
|
|
| 68,246 |
|
|
| 209,420 |
| ||||||||||||||||||||||||
Seattle |
|
| 67,127 |
|
|
| 19,325 |
|
|
| 47,802 |
|
|
| 63,848 |
|
|
| 20,436 |
|
|
| 43,412 |
| ||||||||||||||||||||||||
Boston |
|
| 170,545 |
|
|
| 47,538 |
|
|
| 123,007 |
|
|
| 168,118 |
|
|
| 47,308 |
|
|
| 120,810 |
|
|
| 62,594 |
|
|
| 20,438 |
|
|
| 42,156 |
|
|
| 57,312 |
|
|
| 19,547 |
|
|
| 37,765 |
|
Seattle |
|
| 133,279 |
|
|
| 37,205 |
|
|
| 96,074 |
|
|
| 125,910 |
|
|
| 34,979 |
|
|
| 90,931 |
| ||||||||||||||||||||||||
Other Markets |
|
| 1,384 |
|
|
| 499 |
|
|
| 885 |
|
|
| 1,342 |
|
|
| 428 |
|
|
| 914 |
| ||||||||||||||||||||||||
Denver |
|
| 10,578 |
|
|
| 3,008 |
|
|
| 7,570 |
|
|
| 9,344 |
|
|
| 2,821 |
|
|
| 6,523 |
| ||||||||||||||||||||||||
Total same store |
|
| 1,685,303 |
|
|
| 496,232 |
|
|
| 1,189,071 |
|
|
| 1,647,988 |
|
|
| 482,410 |
|
|
| 1,165,578 |
|
|
| 618,357 |
|
|
| 209,991 |
|
|
| 408,366 |
|
|
| 573,752 |
|
|
| 204,890 |
|
|
| 368,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-same store/other (2) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-same store |
|
| 144,975 |
|
|
| 53,367 |
|
|
| 91,608 |
|
|
| 78,287 |
|
|
| 29,173 |
|
|
| 49,114 |
|
|
| 34,694 |
|
|
| 14,182 |
|
|
| 20,512 |
|
|
| 1 |
|
|
| 58 |
|
|
| (57 | ) |
Other (3) |
|
| 9,892 |
|
|
| 10,364 |
|
|
| (472 | ) |
|
| 90,685 |
|
|
| 37,059 |
|
|
| 53,626 |
|
|
| 297 |
|
|
| 1,389 |
|
|
| (1,092 | ) |
|
| 23,849 |
|
|
| 15,576 |
|
|
| 8,273 |
|
Total non-same store/other |
|
| 154,867 |
|
|
| 63,731 |
|
|
| 91,136 |
|
|
| 168,972 |
|
|
| 66,232 |
|
|
| 102,740 |
|
|
| 34,991 |
|
|
| 15,571 |
|
|
| 19,420 |
|
|
| 23,850 |
|
|
| 15,634 |
|
|
| 8,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
| $ | 1,840,170 |
|
| $ | 559,963 |
|
| $ | 1,280,207 |
|
| $ | 1,816,960 |
|
| $ | 548,642 |
|
| $ | 1,268,318 |
|
| $ | 653,348 |
|
| $ | 225,562 |
|
| $ | 427,786 |
|
| $ | 597,602 |
|
| $ | 220,524 |
|
| $ | 377,078 |
|
(1) | For the |
(2) | For the |
(3) | Other includes development, other corporate operations and operations prior to |
|
| Quarter Ended September 30, 2017 |
|
| Quarter Ended September 30, 2016 |
| ||||||||||||||||||
|
| Rental Income |
|
| Operating Expenses |
|
| NOI |
|
| Rental Income |
|
| Operating Expenses |
|
| NOI |
| ||||||
Same store (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles |
| $ | 102,566 |
|
| $ | 27,768 |
|
| $ | 74,798 |
|
| $ | 98,542 |
|
| $ | 29,362 |
|
| $ | 69,180 |
|
Orange County |
|
| 22,427 |
|
|
| 5,500 |
|
|
| 16,927 |
|
|
| 21,455 |
|
|
| 5,362 |
|
|
| 16,093 |
|
San Diego |
|
| 22,432 |
|
|
| 5,867 |
|
|
| 16,565 |
|
|
| 21,516 |
|
|
| 5,740 |
|
|
| 15,776 |
|
Subtotal - Southern California |
|
| 147,425 |
|
|
| 39,135 |
|
|
| 108,290 |
|
|
| 141,513 |
|
|
| 40,464 |
|
|
| 101,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York |
|
| 125,351 |
|
|
| 46,219 |
|
|
| 79,132 |
|
|
| 124,709 |
|
|
| 44,223 |
|
|
| 80,486 |
|
Washington DC |
|
| 108,763 |
|
|
| 33,459 |
|
|
| 75,304 |
|
|
| 107,340 |
|
|
| 32,817 |
|
|
| 74,523 |
|
San Francisco |
|
| 98,805 |
|
|
| 24,875 |
|
|
| 73,930 |
|
|
| 97,259 |
|
|
| 24,487 |
|
|
| 72,772 |
|
Boston |
|
| 57,071 |
|
|
| 16,351 |
|
|
| 40,720 |
|
|
| 56,368 |
|
|
| 16,399 |
|
|
| 39,969 |
|
Seattle |
|
| 49,268 |
|
|
| 13,647 |
|
|
| 35,621 |
|
|
| 46,948 |
|
|
| 12,493 |
|
|
| 34,455 |
|
Other Markets |
|
| 459 |
|
|
| 158 |
|
|
| 301 |
|
|
| 457 |
|
|
| 136 |
|
|
| 321 |
|
Total same store |
|
| 587,142 |
|
|
| 173,844 |
|
|
| 413,298 |
|
|
| 574,594 |
|
|
| 171,019 |
|
|
| 403,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-same store/other (2) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-same store |
|
| 33,974 |
|
|
| 10,371 |
|
|
| 23,603 |
|
|
| 14,128 |
|
|
| 6,120 |
|
|
| 8,008 |
|
Other (3) |
|
| 2,835 |
|
|
| 4,593 |
|
|
| (1,758 | ) |
|
| 17,134 |
|
|
| 8,420 |
|
|
| 8,714 |
|
Total non-same store/other |
|
| 36,809 |
|
|
| 14,964 |
|
|
| 21,845 |
|
|
| 31,262 |
|
|
| 14,540 |
|
|
| 16,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
| $ | 623,951 |
|
| $ | 188,808 |
|
| $ | 435,143 |
|
| $ | 605,856 |
|
| $ | 185,559 |
|
| $ | 420,297 |
|
40
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, 2022 |
| ||||||||||
|
| Total Assets |
|
| Capital Expenditures |
|
| Total Assets |
|
| Capital Expenditures |
| ||||
Same store (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles |
| $ | 2,620,672 |
|
| $ | 18,952 |
|
| $ | 2,773,359 |
|
| $ | 6,880 |
|
Orange County |
|
| 330,580 |
|
|
| 6,671 |
|
|
| 367,316 |
|
|
| 919 |
|
San Diego |
|
| 425,241 |
|
|
| 3,776 |
|
|
| 230,718 |
|
|
| 849 |
|
Subtotal - Southern California |
|
| 3,376,493 |
|
|
| 29,399 |
|
|
| 3,371,393 |
|
|
| 8,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington DC |
|
| 3,836,992 |
|
|
| 26,308 |
| ||||||||
San Francisco |
|
| 3,165,308 |
|
|
| 5,330 |
| ||||||||
Washington D.C. |
|
| 3,149,802 |
|
|
| 5,681 |
| ||||||||
New York |
|
| 4,181,890 |
|
|
| 23,547 |
|
|
| 3,851,201 |
|
|
| 6,232 |
|
San Francisco |
|
| 2,480,069 |
|
|
| 25,896 |
| ||||||||
Seattle |
|
| 2,123,848 |
|
|
| 2,867 |
| ||||||||
Boston |
|
| 1,670,467 |
|
|
| 18,906 |
|
|
| 1,724,548 |
|
|
| 4,034 |
|
Seattle |
|
| 1,172,356 |
|
|
| 15,499 |
| ||||||||
Other Markets |
|
| 12,778 |
|
|
| 83 |
| ||||||||
Denver |
|
| 487,546 |
|
|
| 208 |
| ||||||||
Total same store |
|
| 16,731,045 |
|
|
| 139,638 |
|
|
| 17,873,646 |
|
|
| 33,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-same store/other (2) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-same store |
|
| 3,080,697 |
|
|
| 3,206 |
|
|
| 2,413,693 |
|
|
| 2,274 |
|
Other (3) |
|
| 886,091 |
|
|
| 414 |
|
|
| 542,898 |
|
|
| 11 |
|
Total non-same store/other |
|
| 3,966,788 |
|
|
| 3,620 |
|
|
| 2,956,591 |
|
|
| 2,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
| $ | 20,697,833 |
|
| $ | 143,258 |
|
| $ | 20,830,237 |
|
| $ | 35,285 |
|
(1) | Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, |
(2) | Non-same store primarily includes properties acquired after January 1, |
(3) | Other includes development, other corporate operations and capital expenditures for propertiessold. |
Subsequent to September 30, 2017,March 31, 2022, the Company repaid $103.9 million of 7.125% unsecured notes at maturity.Company:
• | Sold 1 property consisting of 354 apartment units for approximately $265.7 million; and |
• | Acquired a third-party joint venture partner’s 25% interest in a consolidated operating property for approximately $32.2 million. |
41
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For further information including definitions for capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company’s and the Operating Partnership'sPartnership’s Annual Report on Form 10-K for the year ended December 31, 2016.2021. In addition, please refer to the Definitions section below for various capitalized terms not immediately defined in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, projections and assumptions made by management. While the Company'sCompany’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, which could cause actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Many of these uncertainties and risks are difficult to predict and beyond management's control.management’s control, such as the current novel coronavirus (“COVID-19”) pandemic. Forward-looking statements are not guarantees of future performance, results or events. The forward-looking statements contained herein are made as of the date hereof and the Company undertakes no obligation to update or supplement these forward-looking statements. Factors
In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic and its accompanying variants, many of which are unknown, including the duration, severity and the extent of the adverse health impact on the general population, our residents and employees, the distribution, effectiveness and acceptance of vaccines and testing, the overall reopening progress in the cities in which we operate, the potential long-term changes in customer preferences for living in our communities and the impact of operational changes we have implemented and may implement in response to the pandemic.
Additional factors that might cause such differences include, but are not limited to the following:
We intend to actively acquire, develop and rehab multifamily properties for rental operations as market conditions dictate. We may also acquire multifamily properties that are unoccupied or in the early stages of lease up. We may be unable to lease up these apartment properties on schedule, resulting in decreases in expected rental revenues and/or lower yields due to lower occupancy and rental rates as well as higher than expected concessions or higher than expected operating expenses. We may not be able to achieve rents that are consistent with expectations for acquired, developed or rehabbed properties. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position, to complete a development property or to complete a rehab. Additionally, we expect that other real estate investors with capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development and acquisition efforts. This competition (or lack thereof) may increase (or depress) prices for multifamily properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We have acquired in the past and intend to continue to pursue the acquisition of properties, including large portfolios of properties, that could increase our size and result in alterations to our capital structure. The total number of apartment units under development, costs of development and estimated completion dates are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation;
Debt financing and other capital required by the Company may not be available or may only be available on adverse terms;
Labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated;
Occupancy levels and market rents may be adversely affected by national and local political, economic and market conditions including, without limitation, new construction and excess inventory of multifamily and owned housing/ condominiums, increasing portions of owned housing/condominium stock being converted to rental use, rental housing subsidized by the government, other government programs that favor single family rental housing or owner occupied housing over multifamily rental housing, slow or negative employment growth and household formation, the availability of low-interest mortgages or the availability of mortgages requiring little or no down payment for single family home buyers, changes in social preferences, governmental regulations (including rent control legislation and restrictions) and the potential for geopolitical instability, all of which are beyond the Company's control; and
Additional factors as discussed in Part I of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021, particularly those under “ItemItem 1A,Risk Factors”.Factors.
Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report.
42
Equity Residential (“EQR”), is committed to creating communities where people thrive. The Company, a member of the S&P 500, is focused on the acquisition, development and management of residential properties located in and around dynamic cities that attract affluent long-term renters. ERP Operating Limited Partnership (“ERPOP”) is focused on conducting the multifamily property business of EQR. EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 is an S&P 500 company focused on the acquisition, development and management of rental apartment properties in urban and high-density suburban coastal gateway markets where today's renters want to live, work and play. ERP Operating Limited Partnership (“ERPOP”),ERPOP is an Illinois limited partnership was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT.1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP.
EQR is the general partner of, and as of September 30, 2017March 31, 2022 owned an approximate 96.4%96.7% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.
The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in eachmost of its six core coastal markets. As of September 30, 2017, the Company had approximately 2,700 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.
Available Information
You may access our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8- K8-K, our proxy statements and any amendments to any of those reportsreports/statements we file with or furnish to the SECSecurities and Exchange Commission (“SEC”) free of charge aton our website, www.equityapartments.com. These reportsreports/statements are made available aton our website as soon as reasonably practicable after we file them with or furnish them to the SEC. The information contained on our website, including any information referred to in this report as being available on our website, is not a part of or incorporated into this report.
Business Objectives and Operating and Investing Strategies
The Company’s and the Operating Partnership’s overall business objectives and operating and investing strategies have not changed from the information included in the Company’s and the Operating Partnership'sPartnership’s Annual Report on Form 10-K for the year ended December 31, 2016.2021.
Results of Operations
Third Quarter 20172022 Transactions
In conjunction with our business objectives and operating strategy,and investing strategies, the Company continued to invest in apartment properties located in our six coastal markets and sell apartment properties located primarily infollowing table provides a rollforward of the less dense portion of suburban markets and/or propertiestransactions that are functionally or locationally challengedoccurred during the quarter ended September 30, 2017 as follows:March 31, 2022:
Portfolio Rollforward
($ in thousands)
|
| Properties |
|
| Apartment Units |
|
| Purchase Price |
|
| Acquisition Cap Rate |
| ||||
12/31/2021 |
|
| 310 |
|
|
| 80,407 |
|
|
|
|
|
|
|
|
|
Acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Rental Properties |
|
| 1 |
|
|
| 172 |
|
| $ | 113,000 |
|
|
| 3.5 | % |
Configuration Changes |
|
| — |
|
|
| 2 |
|
|
|
|
|
|
|
|
|
3/31/2022 |
|
| 311 |
|
|
| 80,581 |
|
|
|
|
|
|
|
|
|
Real Estate Transaction Highlights
• | The Company acquired one operating property in the first quarter of 2022, a 172-unit apartment property located in San Diego for a purchase price of $113.0 million; |
• | The Company did not sell any properties during the first quarter of 2022, but subsequent to March 31, 2022, the Company sold a 354-unit apartment property located in New York City for approximately $265.7 million; and |
• | The Company spent approximately $41.9 million during the quarter ended March 31, 2022, primarily for consolidated and unconsolidated development projects. |
Acquired three consolidated apartment properties, located in Boston, Los AngelesSee Notes 4 and Bellevue, Washington, consisting of 811 apartment units for approximately $411.0 million, at a weighted average Acquisition Cap Rate (see Definitions section below) of 4.8%;
Sold one consolidated apartment property in San Diego consisting of 120 apartment units for approximately $53.0 million, at a Disposition Yield (see Definitions section below) of 4.3% and generating an Unlevered IRR (see Definitions section below) of 10.1%; and
Substantially completed construction on two projects in Washington, D.C. and Seattle consisting of 572 apartment units totaling approximately $300.4 million of development costs.
See also Note 414 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate transactions.
43Comparison of the quarter ended March 31, 2022 to the quarter ended March 31, 2021
The following table presents a reconciliation of diluted earnings per share/unit for the quarter ended March 31, 2022 as compared to the same period in 2021:
|
| Quarter Ended March 31 |
| |
Diluted earnings per share/unit for period ended 2021 |
| $ | 0.15 |
|
Property NOI |
|
| 0.12 |
|
Interest expense |
|
| (0.02 | ) |
Depreciation expense |
|
| (0.06 | ) |
Diluted earnings per share/unit for period ended 2022 |
| $ | 0.19 |
|
Properties that the Company owned and were stabilized (see definition below) for all of both of the nine months ended September 30, 2017 and 2016 (the “Nine-Month 2017 Same Store Properties”), which represented 70,285 apartment units, and properties that the Company owned and were stabilized for all of both of the quarters ended September 30, 2017 and 2016 (the “Third Quarter 2017 Same Store Properties”), which represented 72,049 apartment units, impacted theThe Company’s results of operations. Both the Nine-Month 2017 Same Store Properties and the Third Quarter 2017 Same Store Properties are discussed in the following paragraphs.
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). 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 properties.
The following tables provide a rollforward of the apartment units included in Same Store Properties and a reconciliation of apartment units included in Same Store Properties to those included in Total Properties for the nine months and quarter ended September 30, 2017:
| Nine Months Ended |
|
| Quarter Ended |
| ||||||||||
| September 30, 2017 |
|
| September 30, 2017 |
| ||||||||||
| Properties |
|
| Apartment Units |
|
| Properties |
|
| Apartment Units |
| ||||
Same Store Properties at Beginning of Period |
| 272 |
|
|
| 69,879 |
|
|
| 282 |
|
|
| 71,354 |
|
2015 acquisitions |
| 4 |
|
|
| 625 |
|
|
| — |
|
|
| — |
|
2017 dispositions |
| (4 | ) |
|
| (1,024 | ) |
|
| (1 | ) |
|
| (120 | ) |
Lease-up properties stabilized |
| 4 |
|
|
| 800 |
|
|
| 3 |
|
|
| 810 |
|
Other |
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
Same Store Properties at September 30, 2017 |
| 276 |
|
|
| 70,285 |
|
|
| 284 |
|
|
| 72,049 |
|
|
| Nine Months Ended |
|
| Quarter Ended |
| ||||||||||
|
| September 30, 2017 |
|
| September 30, 2017 |
| ||||||||||
|
| Properties |
|
| Apartment Units |
|
| Properties |
|
| Apartment Units |
| ||||
Same Store |
|
| 276 |
|
|
| 70,285 |
|
|
| 284 |
|
|
| 72,049 |
|
Non-Same Store: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 acquisitions - stabilized |
|
| 2 |
|
|
| 437 |
|
|
| 2 |
|
|
| 437 |
|
2017 acquisitions - not stabilized |
|
| 2 |
|
|
| 510 |
|
|
| 2 |
|
|
| 510 |
|
2016 acquisitions |
|
| 4 |
|
|
| 573 |
|
|
| 1 |
|
|
| 94 |
|
Properties removed from same store (1) |
|
| 2 |
|
|
| 356 |
|
|
| 2 |
|
|
| 356 |
|
Master-Leased properties (2) |
|
| 3 |
|
|
| 853 |
|
|
| 3 |
|
|
| 853 |
|
Lease-up properties not yet stabilized (3) |
|
| 13 |
|
|
| 4,342 |
|
|
| 8 |
|
|
| 3,057 |
|
Other |
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
Total Non-Same Store |
|
| 27 |
|
|
| 7,072 |
|
|
| 19 |
|
|
| 5,308 |
|
Unconsolidated properties |
|
| 2 |
|
|
| 945 |
|
|
| 2 |
|
|
| 945 |
|
Total Properties and Apartment Units |
|
| 305 |
|
|
| 78,302 |
|
|
| 305 |
|
|
| 78,302 |
|
Note: Properties are considered "stabilized" when they have achieved 90% occupancy for three consecutive months. Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented.
|
|
|
|
|
|
44
Revenues from the Nine-Month 2017 Same Store Properties increased $37.3 million primarily as a result of an increase in average rental rates charged to residents. Expenses from the Nine-Month 2017 Same Store Properties increased $13.8 million primarily as a result of an increase in real estate taxes, on-site payroll costs, utilities and repairs and maintenance expenses. The following tables provide comparative same store results and statistics for the Nine-Month 2017 Same Store Properties:
September YTD 2017 vs. September YTD 2016
Same Store Results/Statistics for 70,285 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
|
| Results |
|
| Statistics |
| ||||||||||||||||||
Description |
| Revenues |
|
| Expenses |
|
| NOI |
|
| Average Rental Rate (1) |
|
| Physical Occupancy (2) |
|
| Turnover (3) |
| ||||||
YTD 2017 |
| $ | 1,685,303 |
|
| $ | 496,232 |
|
| $ | 1,189,071 |
|
| $ | 2,662 |
|
|
| 96.0 | % |
|
| 41.9 | % |
YTD 2016 |
| $ | 1,647,988 |
|
| $ | 482,410 |
|
| $ | 1,165,578 |
|
| $ | 2,601 |
|
|
| 96.0 | % |
|
| 43.6 | % |
Change |
| $ | 37,315 |
|
| $ | 13,822 |
|
| $ | 23,493 |
|
| $ | 61 |
|
|
| 0.0 | % |
|
| (1.7 | )% |
Change |
|
| 2.3 | % |
|
| 2.9 | % |
|
| 2.0 | % |
|
| 2.3 | % |
|
|
|
|
|
|
|
|
Note: Same store revenues for all leases are reflected on a straight line basis in accordance with GAAP for the current and comparable periods.
|
|
|
|
|
|
The following table provides comparative same store operating expenses for the Nine-Month 2017 Same Store Properties:
September YTD 2017 vs. September YTD 2016
Same Store Operating Expenses for 70,285 Same Store Apartment Units
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| % of Actual |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| YTD 2017 |
| |
|
| Actual |
|
| Actual |
|
| $ |
|
| % |
|
| Operating |
| |||||
|
| YTD 2017 |
|
| YTD 2016 |
|
| Change |
|
| Change |
|
| Expenses |
| |||||
Real estate taxes |
| $ | 208,482 |
|
| $ | 201,645 |
|
| $ | 6,837 |
|
|
| 3.4 | % |
|
| 42.0 | % |
On-site payroll (1) |
|
| 112,607 |
|
|
| 107,514 |
|
|
| 5,093 |
|
|
| 4.7 | % |
|
| 22.7 | % |
Utilities (2) |
|
| 67,788 |
|
|
| 66,472 |
|
|
| 1,316 |
|
|
| 2.0 | % |
|
| 13.7 | % |
Repairs and maintenance (3) |
|
| 64,170 |
|
|
| 62,952 |
|
|
| 1,218 |
|
|
| 1.9 | % |
|
| 12.9 | % |
Insurance |
|
| 12,526 |
|
|
| 13,024 |
|
|
| (498 | ) |
|
| (3.8 | )% |
|
| 2.5 | % |
Leasing and advertising |
|
| 7,034 |
|
|
| 7,579 |
|
|
| (545 | ) |
|
| (7.2 | )% |
|
| 1.4 | % |
Other on-site operating expenses (4) |
|
| 23,625 |
|
|
| 23,224 |
|
|
| 401 |
|
|
| 1.7 | % |
|
| 4.8 | % |
Same store operating expenses |
| $ | 496,232 |
|
| $ | 482,410 |
|
| $ | 13,822 |
|
|
| 2.9 | % |
|
| 100.0 | % |
|
|
|
|
|
|
|
|
45
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/otherstore results for the nine months ended September 30, 2017 and 2016 (amounts in thousands):
|
| Nine Months Ended September 30, |
|
| Quarter Ended March 31, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||||
Operating income |
| $ | 632,707 |
|
| $ | 632,016 |
|
| $ | 149,738 |
|
| $ | 135,560 |
|
| $ | 14,178 |
|
|
| 10.5 | % |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee and asset management revenue |
|
| (532 | ) |
|
| (3,351 | ) | ||||||||||||||||
Property management |
|
| 64,702 |
|
|
| 64,003 |
|
|
| 30,747 |
|
|
| 26,130 |
|
|
| 4,617 |
|
|
| 17.7 | % |
General and administrative |
|
| 40,366 |
|
|
| 47,408 |
|
|
| 17,238 |
|
|
| 15,383 |
|
|
| 1,855 |
|
|
| 12.1 | % |
Depreciation |
|
| 542,964 |
|
|
| 528,242 |
|
|
| 229,961 |
|
|
| 199,962 |
|
|
| 29,999 |
|
|
| 15.0 | % |
Net (gain) loss on sales of real estate properties |
|
| 102 |
|
|
| 43 |
|
|
| 59 |
|
|
| 137.2 | % | ||||||||
Total NOI |
| $ | 1,280,207 |
|
| $ | 1,268,318 |
|
| $ | 427,786 |
|
| $ | 377,078 |
|
| $ | 50,708 |
|
|
| 13.4 | % |
Rental income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store |
| $ | 1,685,303 |
|
| $ | 1,647,988 |
|
| $ | 618,357 |
|
| $ | 573,752 |
|
| $ | 44,605 |
|
|
| 7.8 | % |
Non-same store/other |
|
| 154,867 |
|
|
| 168,972 |
|
|
| 34,991 |
|
|
| 23,850 |
|
|
| 11,141 |
|
|
| 46.7 | % |
Total rental income |
|
| 1,840,170 |
|
|
| 1,816,960 |
|
|
| 653,348 |
|
|
| 597,602 |
|
|
| 55,746 |
|
|
| 9.3 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store |
|
| 496,232 |
|
|
| 482,410 |
|
|
| 209,991 |
|
|
| 204,890 |
|
|
| 5,101 |
|
|
| 2.5 | % |
Non-same store/other |
|
| 63,731 |
|
|
| 66,232 |
|
|
| 15,571 |
|
|
| 15,634 |
|
|
| (63 | ) |
|
| (0.4 | )% |
Total operating expenses |
|
| 559,963 |
|
|
| 548,642 |
|
|
| 225,562 |
|
|
| 220,524 |
|
|
| 5,038 |
|
|
| 2.3 | % |
NOI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store |
|
| 1,189,071 |
|
|
| 1,165,578 |
|
|
| 408,366 |
|
|
| 368,862 |
|
|
| 39,504 |
|
|
| 10.7 | % |
Non-same store/other |
|
| 91,136 |
|
|
| 102,740 |
|
|
| 19,420 |
|
|
| 8,216 |
|
|
| 11,204 |
|
|
| 136.4 | % |
Total NOI |
| $ | 1,280,207 |
|
| $ | 1,268,318 |
|
| $ | 427,786 |
|
| $ | 377,078 |
|
| $ | 50,708 |
|
|
| 13.4 | % |
For properties that the Company acquired or completed that were stabilized prior to January 1, 2016 and that the Company expects to continue to own through December 31, 2017, the Company anticipates the following same store results for the full year ending December 31, 2017:
| ||||
|
| |||
|
| |||
|
| |||
|
|
The Company anticipates consolidated rental acquisitions of $468.0 million and consolidated rental dispositions of $500.0 million and expects that the Acquisition Cap Rate will be 0.50% lower than the Disposition Yield for the full year ending December 31, 2017. These 2017 assumptions are based on current expectations and are forward-looking.
Same store revenues increased 2.3% during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, which was ahead of our expectations primarily driven by gains in occupancy. As a result, the Company now anticipates same store revenue growth of approximately 2.2% for 2017, as compared to the most recent updated guidance range of 1.75% to 2.25% that was provided in July 2017. The Company’s primary goal in 2017 continues to focus on retaining existing residents to drive renewal rate growth, which came in at 4.6% for the nine months ended September 30, 2017 as compared to the same period in 2016. Same store turnover declined by 1.7% for the nine months ended September 30, 2017 as compared to the same period in 2016. With same store occupancy of 96.0% for the nine months ended September 30, 2017, we also increased our occupancy expectations for full year 2017 from 95.8% to 95.9%.
Washington D.C. was originally expected to post improved same store revenue results for 2017 as compared to 2016 because we expected continuing job growth to allow the elevated levels of new supply in this market to be absorbed. During the second quarter of 2017, this job growth weakened, though it has modestly improved recently, with the impact from potential government spending initiatives still remaining unclear. Same store revenues increased 1.4% in the nine months ended September 30, 2017 as compared to the same period in 2016, which was lower than our original February 2017 expectations. We now expect to produce same store revenue growth of approximately 1.5% in 2017, which is relatively consistent with the prior year and slightly higher than our most recent expectation provided in July 2017 of an increase of 1.4% for this market.
46
In the New York market, elevated deliveries of new luxury supply both in established residential areas and newer residential areas like Long Island City are having an impact on our ability to raise rents as renters begin to let go of neighborhood loyalty. There has also been a reduction in the rate of job growth in the financial services sector and technology sector, which are important demand drivers in the market. Due in part to our strong same store occupancy levels (96.1% for the nine months ended September 30, 2017), we have used fewer concessions during the nine months of 2017 than we originally expected and anticipate that trend to continue in the remaining three months of 2017. As a result, same store revenues increased 0.1% in the nine months ended September 30, 2017 as compared to the same period in 2016, which was slightly above our expectations. We still expect there to be a decline in same store revenues of approximately 0.1% for full year 2017, which is better than our most recent expectation provided in July 2017 of a decline of 0.3% for this market.
We have a cautious outlook for Boston as the market continues to feel the impact from an elevated level of deliveries of new supply in the downtown and Cambridge submarkets with approximately 50% of this new supply competing with our properties. Job growth has continued to improve in the market which is a positive sign that the additional supply may be absorbed without significant disruption. Same store revenues increased 1.4% in the nine months ended September 30, 2017 as compared to the same period in 2016, which was consistent with our expectations. We expect to produce same store revenue growth of approximately 1.6% in 2017, which is slightly higher than our most recent expectation provided in July 2017 of an increase of 1.5% for this market.
Seattle is producing solid rental rate growth driven by the continued growth in technology jobs in the market, but showed signs of slowing rent growth during the quarter. While new supply remains elevated in this market, until recently strong job growth has enabled that supply to be quickly absorbed with little market disruption. Same store revenues increased 5.9% in the nine months ended September 30, 2017 as compared to the same period in 2016, which exceeded our expectations. We expect Seattle to produce same store revenue growth of approximately 5.7% in 2017, which is slightly lower than our most recent expectation provided in July 2017 of an increase of 5.75% for this market.
San Francisco is producing a slower rate of job growth in the technology sector compared to previous years. However, we continue to see strong demand throughout the market, although the rate at which we can increase rents remains somewhat modest due to new supply and a slower rate of job growth. Same store revenues increased 2.2% in the nine months ended September 30, 2017 as compared to the same period in 2016, which was ahead of our expectations. We expect to produce same store revenue growth of approximately 2.1% in 2017, which is better than our most recent expectation provided in July 2017 of an increase of 1.8% for this market.
Southern California, which includes Los Angeles, Orange County and San Diego, is performing well and is positioned to be one of our better performing markets in 2017. Widely dispersed new supply, very good economic growth and adequate levels of job growth in the market are driving strong revenue growth. Same store revenues increased 4.1% in the nine months ended September 30, 2017 as compared to the same period in 2016, which was above our expectations. We expect to produce same store revenue growth of approximately 4.0% in 2017, which is slightly higher than our most recent expectation provided in July 2017 of an increase of 3.8% for this market. We expect Orange County and San Diego to perform slightly better than Los Angeles for full year 2017 as compared to 2016.
Same store expenses increased 2.9% during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The Company now anticipates that 2017 same store expenses will increase 3.2%, as compared to the most recent guidance range of 3.25% to 4.0% that was provided in July 2017, significantly impacted by the following items:
Real estate taxes increased 3.4% during the nine months ended September 30, 2017 as compared to the same period in 2016 and are now estimated to increase 3.4% for the full year 2017 as compared to 2016 (lower than the most recent guidance of 4.0% to 4.5% provided in July 2017), primarily driven by favorable real estate tax appeal results;
Payroll costs increased 4.7% during the nine months ended September 30, 2017 as compared to the same period in 2016 and are estimated to increase 6.0% for the full year 2017 as compared to 2016 (consistent with the most recent guidance provided in July 2017), primarily due to an increase in on-site staffing to assure the service levels necessary to remain competitive with new supply, higher on-site wages due to competition from new supply and higher medical and workers compensation costs; and
Utilities increased 2.0% during the nine months ended September 30, 2017 as compared to the same period in 2016 and are estimated to increase approximately 2.0% for the full year 2017 as compared to 2016 (consistent with the most recent guidance provided in July 2017), primarily due to moderate increases in natural gas costs, partially offset by lower gas usage and lower prices for electricity.
47
Same store NOI increased 2.0% during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, which was ahead of our expectations. As a result, the Company now anticipates same store NOI growth of approximately 1.8%, as compared to the most recent guidance range of 0.75% to 1.75% that was provided in July 2017, for the full year 2017 as a result of the above same store revenue and expense expectations.
For the quarter ended September 30, 2017, same store revenue increased $12.5 million or 2.2%, same store expenses increased $2.8 million or 1.7% and same store NOI increased $9.7 million or 2.4% when compared to the prior year period. See alsoNote: See Note 13 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Non-Same Store/Other Results
detail by reportable segment/market. Non-same store/other NOI results for the nine months ended September 30, 2017 decreased approximately $11.6 million compared to the same period of 2016 and consist primarily of properties acquired in calendar years 20162021 and 2017,2022, operations from the Company’s development properties and operations prior to disposition from 2016 and 20172021 sold properties. This difference is due primarily to:
• | The increase in same store rental income is primarily driven by strong Physical Occupancy and significant growth in pricing. |
• | The increase in same store operating expenses is due primarily to: |
• | Utilities – A $3.7 million increase primarily from gas and electric due to higher commodity prices; |
• | Repairs and maintenance – A $1.5 million increase primarily driven by volume and timing of maintenance repairs along with increases in minimum wage on contracted services; and |
• | On-site payroll – A $1.4 million decrease due to improved sales and service staff utilization from various technology initiatives and higher than usual staffing vacancies during the current period. |
• | The increase in non-same store/other NOI is due primarily to a positive impact of higher NOI from properties acquired during 2021 and 2022 of $17.0 million and higher NOI from development properties in lease-up of $2.4 million, partially offset by a negative impact of lost NOI from 2021 dispositions of $12.3 million and a negative impact of lower NOI from one former master-leased property of $0.6 million. |
• | The increase in consolidated total NOI is primarily a result of the Company’s higher NOI from same store properties, largely due to improvement in same store revenues as noted above. Operating expense growth remains modest due to a combination of continued success in managing controllable expenses and modest growth in real estate tax expense (increased by only $0.5 million), leading to 10.7% same store NOI growth for the quarter ended March 31, 2022 as compared to the same period in 2021. |
See the Same Store Results section below for additional discussion of higher NOI from development and newly stabilized development properties in lease-up of $30.5 million;those results.
A positive impact of higher NOI from properties acquired in 2016 and 2017 of $6.6 million;
A positive impact of higher NOI from other non-same store properties (including three master leased properties) of $1.8 million; and
A negative impact of lost NOI from 2016 and 2017 dispositions of $48.4 million.
Comparison of the nine months and quarter ended September 30, 2017 to the nine months and quarter ended September 30, 2016
For the nine months ended September 30, 2017, the Company reported diluted earnings per share/unit of $1.29 compared to $10.92 per share/unit in the same period of 2016. The difference is primarily due to approximately $9.78 per share/unit in higher gains on property sales and $0.14 per share/unit in higher gains on sales of non-operating assets in 2016 compared to 2017 as a direct result of the significant sales activity in 2016 compared to 2017, partially offset by $0.28 per share/unit in higher debt extinguishment costs incurred in 2016 as compared to 2017. For the quarter ended September 30, 2017, the Company reported diluted earnings per share/unit of $0.37 compared to $0.56 per share/unit in the same period of 2016. The difference is primarily due to approximately $0.22 per share/unit in higher gains on property sales in the third quarter of 2016 compared to the same period in 2017, partially offset by improved operations in the third quarter of 2017 as compared to the third quarter of 2016.
Income from continuing operations decreased approximately $3.7 billion and $73.1 million for the nine months and quarter ended September 30, 2017, respectively, compared to the prior periods. The decrease in continuing operations is discussed below.
The guidance/projections provided below are based on current projections and are forward-looking.
For the nine months ended September 30, 2017, consolidated rental income increased 1.3%, consolidated operating expenses (comprised of property and maintenance and real estate taxes and insurance) increased 2.1% and consolidated NOI increased 0.9% when compared to the nine months ended September 30, 2016. The increase in NOI is primarily a result of the Company’s improved NOI from same store and lease-up properties. For the quarter ended September 30, 2017, consolidated rental income increased 3.0%, consolidated operating expenses (comprised of property and maintenance and real estate taxes and insurance) increased 1.8% and consolidated NOI increased 3.5% when compared to the quarter ended September 30, 2016. The increase in NOI is primarily a result of improved NOI from same store and lease-up properties.
For the nine months ended September 30, 2017, fee and asset management revenues decreased approximately $2.8 million or 84.1% primarily as a result of lower revenue earned on management of the Company's military housing ventures at Joint Base Lewis McChord due to the sale of the Company's entire interest in the management contracts and related rights associated with these ventures in the second quarter of 2016.
Property management expenses include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third partythird-party management companies. These expenses increased approximately $0.7$4.6 million or 1.1% and approximately $1.3 million or 6.9% for17.7% during the nine months and quartersquarter ended September 30, 2017, respectively,March 31, 2022 as compared to the prior year periods. These increases areperiod. This increase is primarily attributable to increases in education/payroll-related costs, training/conference costs and legal fees. The Company anticipatesinformation technology-related costs. A portion of these costs are associated with the various operating initiatives such as sales-focused improvements and service enhancements that property management expenses will approximate $85.0 million for the year ending December 31, 2017.facilitate lower onsite expense growth.
48
General and administrative expenses, which includeincludes corporate operating expenses, decreasedincreased approximately $7.0$1.9 million or 14.9% for12.1% during the nine monthsquarter ended September 30, 2017March 31, 2022 as compared to the prior year period, primarily due to a decreaseincreases in payroll-related costs, in 2017 compared to 2016. Generallegal and administrative expenses increased approximately $0.2 million or 1.4% for the quarter ended September 30, 2017 compared to the prior year period, primarily due to an increase in payroll-related costs in 2017. The Company anticipates that generalprofessional fees and administrative expenses will approximate $52.0 million for the year ending December 31, 2017, excluding charges of approximately $0.4 million related to the overlap of accounting costs for the Company's current and former executive compensation programs.training/conference costs.
Depreciation expense, which includes depreciation on non-real estate assets, increased approximately $14.7$30.0 million or 2.8% and $4.9 million or 2.7% for15.0% during the nine months and quartersquarter ended September 30, 2017, respectively,March 31, 2022 as compared to the prior year periods,period, primarily as a result of additional depreciation expense on properties acquired in 20162021 and 20172022 and development properties placed in service during 2021, partially offset by lower depreciation from properties sold in 2016 and 2017.2021.
Interest and other income decreasedincreased approximately $59.4$3.3 million or 91.2% and $1.6 million or 28.4% forduring the nine months and quartersquarter ended September 30, 2017, respectively,March 31, 2022 as compared to the prior year periods.period. The year to date decreaseincrease is primarily attributable due to the approximate $52.4a gain of $2.1 million gain fromon the sale of the Company's entire interest in the management contractsvarious investment securities and related rights associated with the military housing ventures at Joint Base Lewis McChord during the nine months ended September 30, 2016 which did not reoccur in 2017. The year to date and quarterly decreases are also a result of the sale of the Company’s 421-a real estate tax certificates during the third quarter of 2016 which did not reoccur in 2017. The Company anticipates that interest and other income will approximate $1.2 million for the year ending December 31, 2017, excluding certain non-comparable insurance/of litigation settlement proceeds.proceeds that occurred during 2022 but not during 2021.
Other expenses decreased approximately $11.3 million or 78.2% and $9.4 million or 90.1% for the nine months and quarters ended September 30, 2017, respectively, compared to the prior year periods, primarily due to a decrease in litigation settlements in 2017 as compared to 2016, as well as a decrease in annual transaction costs of approximately $1.5 million. In addition, the Company anticipates that substantially all of its transactions will now be accounted for as asset acquisitions, which means that transaction costs will largely be capitalized, as a result of its adoption of the new definition of a business standard effective January 1, 2017. See Note 2 in the Notes to Consolidated Financial Statements for further discussion.
Interest expense, including amortization of deferred financing costs, decreased approximately $101.3$1.1 million or 25.6% forduring the nine monthsquarter ended September 30, 2017March 31, 2022 as compared to the prior year period, primarily asdue to a result of $108.5$1.5 million decline in lower debt extinguishment costs in 2017 as compared to 2016. The effective interest cost on all indebtedness for the nine months ended September 30, 2017 was 4.47% as compared to 4.69% for the prior year period. construction defect and litigation reserves recorded between 2022 and 2021.
Interest expense, including amortization of deferred financing costs, increased approximately $4.6$5.3 million or 5.2%7.7% for the quarter ended September 30, 2017March 31, 2022 as compared to the prior year period. The increase is primarily due to a result of lower capitalized interest for the current periodhigher overall debt balances outstanding as compared to the prior period.year period, higher overall interest rates and lower capitalized interest. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the quarter ended September 30, 2017March 31, 2022 was 4.35%3.65% as compared to 4.67%3.60% for the prior year period. The Company capitalized interest of approximately $23.2$1.0 million and $41.7 million during the nine months ended September 30, 2017 and 2016, respectively, and $6.6 million and $13.3$3.8 million during the quarters ended September 30, 2017March 31, 2022 and 2016,2021, respectively.
Same Store Results
Properties that the Company owned and were stabilized for all of both of the quarters ended March 31, 2022 and 2021 (the “First Quarter 2022 Same Store Properties”), which represented 74,675 apartment units, drove the Company’s results of operations. Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months. Properties are included in same store when they are stabilized for all of the current and comparable periods presented.
The Company anticipates that interest expense from continuing operations, excluding debt extinguishment costs/prepayment penalties, will approximate $370.5 million to $374.7 millionfollowing table provides comparative total same store results and capitalized interest will approximate $25.0 million to $27.0 millionstatistics for the year ending December 31, 2017.First Quarter 2022 Same Store Properties:
Income and other tax expense decreased approximately $0.5 million or 40.3% and $0.2 million or 46.5%
First Quarter 2022 vs. First Quarter 2021
Same Store Results/Statistics Including 74,675 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
First Quarter 2022 |
|
| First Quarter 2021 |
| ||||||||||||||||||||||||||||||||||
|
| Residential |
|
| % Change |
|
| Non- Residential |
|
| % Change |
|
| Total |
|
| % Change |
|
|
|
| Residential |
|
| Non- Residential |
|
| Total |
| |||||||||
Revenues |
| $ | 595,325 |
|
|
| 7.8 | % |
| $ | 23,032 |
|
|
| 6.4 | % |
| $ | 618,357 |
|
|
| 7.8 | % |
| Revenues |
| $ | 552,111 |
|
| $ | 21,641 |
|
| $ | 573,752 |
|
Expenses |
| $ | 203,752 |
|
|
| 2.5 | % |
| $ | 6,239 |
|
|
| 2.2 | % |
| $ | 209,991 |
|
|
| 2.5 | % |
| Expenses |
| $ | 198,784 |
|
| $ | 6,106 |
|
| $ | 204,890 |
|
NOI |
| $ | 391,573 |
|
|
| 10.8 | % |
| $ | 16,793 |
|
|
| 8.1 | % |
| $ | 408,366 |
|
|
| 10.7 | % |
| NOI |
| $ | 353,327 |
|
| $ | 15,535 |
|
| $ | 368,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Rental Rate |
| $ | 2,757 |
|
|
| 6.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average Rental Rate |
| $ | 2,597 |
|
|
|
|
|
|
|
|
|
Physical Occupancy |
|
| 96.4 | % |
|
| 1.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Physical Occupancy |
|
| 95.0 | % |
|
|
|
|
|
|
|
|
Turnover |
|
| 8.7 | % |
|
| (1.3 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Turnover |
|
| 10.0 | % |
|
|
|
|
|
|
|
|
Note: Same store revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the nine monthscurrent and comparable periods.
The following table provides results and statistics related to our Residential same store operations for the quarters ended September 30, 2017, respectively, compared to the prior year periods, primarily due to decreases in various stateMarch 31, 2022 and local taxes related to the Company's elevated disposition activity in 20162021:
First Quarter 2022 vs. 2017.First Quarter 2021
Same Store Residential Results/Statistics by Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase (Decrease) from Prior Year |
| ||||||||||
Markets/Metro Areas |
| Apartment Units |
|
| Q1 2022 % of Actual NOI |
|
| Q1 2022 Average Rental Rate |
|
| Q1 2022 Weighted Average Physical Occupancy % |
|
| Q1 2022 Turnover |
|
| Average Rental Rate |
|
| Physical Occupancy |
|
| Turnover |
| ||||||||
Los Angeles |
|
| 15,259 |
|
|
| 19.9 | % |
| $ | 2,584 |
|
|
| 96.7 | % |
|
| 8.3 | % |
|
| 7.6 | % |
|
| 0.9 | % |
|
| (1.6 | %) |
Orange County |
|
| 4,028 |
|
|
| 5.7 | % |
|
| 2,450 |
|
|
| 97.1 | % |
|
| 6.3 | % |
|
| 11.1 | % |
|
| 0.1 | % |
|
| (1.5 | %) |
San Diego |
|
| 2,706 |
|
|
| 4.1 | % |
|
| 2,662 |
|
|
| 96.9 | % |
|
| 8.9 | % |
|
| 12.1 | % |
|
| (0.3 | %) |
|
| (1.6 | %) |
Subtotal – Southern California |
|
| 21,993 |
|
|
| 29.7 | % |
|
| 2,569 |
|
|
| 96.8 | % |
|
| 8.0 | % |
|
| 8.8 | % |
|
| 0.6 | % |
|
| (1.6 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco |
|
| 11,630 |
|
|
| 17.7 | % |
|
| 3,004 |
|
|
| 96.4 | % |
|
| 9.5 | % |
|
| 2.9 | % |
|
| 2.8 | % |
|
| (2.2 | %) |
Washington D.C. |
|
| 14,322 |
|
|
| 16.6 | % |
|
| 2,371 |
|
|
| 96.9 | % |
|
| 8.2 | % |
|
| 2.0 | % |
|
| 1.0 | % |
|
| (1.4 | %) |
New York |
|
| 9,345 |
|
|
| 13.0 | % |
|
| 3,741 |
|
|
| 97.0 | % |
|
| 8.2 | % |
|
| 6.8 | % |
|
| 5.7 | % |
|
| (0.1 | %) |
Seattle |
|
| 9,331 |
|
|
| 11.4 | % |
|
| 2,385 |
|
|
| 94.6 | % |
|
| 11.5 | % |
|
| 6.2 | % |
|
| (1.0 | %) |
|
| 0.3 | % |
Boston |
|
| 6,430 |
|
|
| 9.7 | % |
|
| 3,054 |
|
|
| 95.9 | % |
|
| 7.6 | % |
|
| 7.0 | % |
|
| 0.6 | % |
|
| (1.3 | %) |
Denver |
|
| 1,624 |
|
|
| 1.9 | % |
|
| 2,207 |
|
|
| 97.4 | % |
|
| 10.5 | % |
|
| 11.2 | % |
|
| 1.3 | % |
|
| (1.8 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| 74,675 |
|
|
| 100.0 | % |
| $ | 2,757 |
|
|
| 96.4 | % |
|
| 8.7 | % |
|
| 6.2 | % |
|
| 1.4 | % |
|
| (1.3 | %) |
Note: The Company anticipates that income and other tax expense will approximate $1.0 millionabove table reflects Residential same store results only. Residential operations account for the year ending December 31, 2017.
Income from investments in unconsolidated entities decreased approximately $8.0 million and $8.1 million96.2% of total revenues for the nine months and quarters ended September 30, 2017, respectively, compared to the prior year periods, primarily due to the gain on the sale of one unconsolidated apartment property in the prior year that did not occur in 2017.
Net gain on sales of real estate properties decreased approximately $3.7 billion or 96.3% as a result of the sale of 91 consolidated apartment properties (including the Starwood Portfolio) during the nine months ended September 30, 2016 as compared to only four consolidated apartment property sales during the nine months ended September 30, 2017, all of which did not meet the criteria for reporting discontinued operations. Net gain on sales of real estate properties decreased approximately $72.7 million and 80.8% during the quarter ended September 30, 2017 comparedMarch 31, 2022.
Strong demand for our apartments in all of our markets has led to high Physical Occupancy, increased pricing power and a material reduction in Leasing Concessions. Key operating drivers for this performance during 2022 include:
• | Pricing – There has been significant growth in pricing (net of Leasing Concessions) compared to the same period of 2021 across all of our markets. The use of Leasing Concessions has also declined significantly from its peak in February 2021, outside of some elevated use in Seattle during the first quarter of 2022. |
• | Physical Occupancy – Physical Occupancy of 96.4% for the first quarter of 2022 remained strong, exceeding first quarter of 2021 levels and contributing to growth in Same Store Residential Revenues. |
• | Percentage of Residents Renewing and Turnover – Our continued strategy of focusing on resident renewals delivered strong results. We reported Turnover of 8.7% for the first quarter of 2022, the lowest in the Company’s history, reflecting a strong trend of historically high resident retention. Results have been positive to date with the Percentage of Residents Renewing of 60% for the first quarter of 2022. |
Same Store Residential Revenues in the prior periodfirst quarter of 2022 were impacted by higher than expected delinquency in Southern California caused by residents that were previously in good standing failing to pay their rent as a resultthey applied for funds under the California rental assistance program as it was expanded and extended into 2022. The Company continues to actively pursue payment and is seeing early signs of improved resident payment behavior in April 2022 following the expiration of the sale of one consolidated apartment property compared to the sale of eight consolidated properties in the prior year. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.
49
Net gainprogram’s eligibility period on sales of land parcels increased approximately $3.4 million or 21.6% due to the gain on sale of one land parcel with a low basis during the nine months ended September 30, 2017 as compared to the gain on sales of four land parcels during the nine months ended September 30, 2016. Net gain on sales of land parcels decreased approximately $4.0 million during the quarter ended September 30, 2017 as compared to the prior period as a result of the gain on sale of one land parcel in the prior year that did not occur in 2017.March 31, 2022.
Liquidity and Capital Resources
With approximately $2.4 billion in readily available liquidity, a strong balance sheet, limited near-term maturities, very strong credit metrics and ample access to capital markets, the Company believes it is well positioned to meet its future obligations and opportunities. See further discussion below.
Statements of Cash Flows
The following table sets forth our sources and uses of cash flows for the quarters ended March 31, 2022 and 2021 (amounts in thousands):
|
| Quarter Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flow provided by (used for): |
|
|
|
|
|
|
|
|
Operating activities |
| $ | 368,056 |
|
| $ | 346,053 |
|
Investing activities |
| $ | (197,037 | ) |
| $ | (126,345 | ) |
Financing activities |
| $ | (419,555 | ) |
| $ | (221,600 | ) |
The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the quarter ended March 31, 2022.
Operating Activities
Our operating cash flows are primarily impacted by NOI and its components, such as Average Rental Rates, Physical Occupancy levels and operating expenses related to our properties. Cash provided by operating activities for the quarter ended March 31, 2022 as compared to the prior year period, increased by approximately $22.0 million as a direct result of the NOI and other changes discussed above in Results of Operations.
Investing Activities
Our investing cash flows are primarily impacted by our transaction activity (acquisitions/dispositions), development spend, capital expenditures and unconsolidated joint venture activity. For the quarter ended March 31, 2022, key drivers were:
• | Acquired one consolidated rental property for approximately $113.0 million in cash; |
• | Invested $24.3 million primarily in development projects; |
• | Invested $35.3 million in capital expenditures to real estate; and |
• | Invested $24.9 million primarily in unconsolidated development joint venture entities as well as unconsolidated investments in real estate technology funds/companies for various technology initiatives. |
Financing Activities
Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions/dividends to shareholders and other Common Share activity. For the quarter ended March 31, 2022, key drivers were:
• | Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $15.3 million, which were contributed to the capital of the Operating Partnership in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis); and |
• | Paid dividends/distributions on Common Shares, Preferred Shares, Units (including OP Units and restricted units) and noncontrolling interests in partially owned properties totaling approximately $250.8 million. |
Short-Term Liquidity and Cash Proceeds
The Company generally expects to meet its short-term liquidity requirements, including capital expenditures related to maintaining its existing properties and scheduled unsecured note and mortgage note repayments, through its working capital, net cash provided by operating activities and borrowings under the Company’s revolving credit facility and commercial paper program. Under normal operating conditions,Currently, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions.
As of January 1, 2017,
The following table presents the Company had approximately $77.2 million ofCompany’s balances for cash and cash equivalents, restricted deposits and the amount available borrowing capacity on its revolving credit facility was $1.96 billion (netas of $20.6 million which was restricted/dedicated to support letters of creditMarch 31, 2022 and net of $20.0 millionDecember 31, 2021 (amounts in principal outstanding on the commercial paper program). After taking into effect the various transactions discussed in the following paragraphs and the net cash provided by operating activities, the Company's cash and cash equivalents balance at September 30, 2017 was approximately $46.6 million and the amount available on its revolving credit facility was $1.76 billion (net of $11.1 million which was restricted/dedicated to support letters of credit and net of $230.0 million in principal outstanding on the commercial paper program).thousands):
During the nine months ended September 30, 2017, the Company generated proceeds from various transactions, which included the following:
Disposed of four consolidated rental properties and one land parcel, receiving net proceeds of approximately $350.0 million;
Issued $400.0 million of ten-year 3.25% fixed rate public notes, receiving net proceeds of approximately $399.3 million before underwriting fees, hedge termination costs and other expenses;
Issued $300.0 million of thirty-year 4.00% fixed rate public notes, receiving net proceeds of approximately $293.2 million before underwriting fees and other expenses; and
Issued approximately 0.4 million Common Shares related to share option exercises and ESPP purchases and received net proceeds of $15.9 million, which were contributed to the capital of the Operating Partnership in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis).
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Cash and cash equivalents |
| $ | 41,140 |
|
| $ | 123,832 |
|
Restricted deposits |
| $ | 70,560 |
|
| $ | 236,404 |
|
Unsecured revolving credit facility availability |
| $ | 2,366,493 |
|
| $ | 2,181,372 |
|
During the nine months ended September 30, 2017, the above proceeds along with net cash flow from operations and borrowings from the Company's revolving line of credit and commercial paper program were primarily utilized to:
Acquire four consolidated rental properties for approximately $466.4 million in cash;
Invest $227.2 million primarily in development projects;
Repay $502.2 million of mortgage loans and incur prepayment penalties of approximately $12.3 million; and
Repay $394.1 million of 5.750% unsecured notes at maturity.
Credit Facility and Commercial Paper Program
On November 3, 2016, theThe Company replaced its existinghas a $2.5 billion facility with a $2.0 billion unsecured revolving credit facility maturing January 10, 2022.November 1, 2024. The Company has the ability to increase available borrowings by an additional $750.0 million by adding additional bankslenders to the facility, or obtaining the agreement of existing bankslenders to increase their commitments.commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be LIBORthe London Interbank Offered Rate (“LIBOR”) plus a spread (currently 0.825%0.775%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 12.5 basis points)0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating of the Company's long-term debt.rating.
On February 2, 2015, the Company enteredThe unsecured revolving credit agreement contains provisions that establish a process for entering into an unsecured commercial paper note program inamendment to replace LIBOR under certain circumstances, such as the United States. Theanticipated phase-out of LIBOR.
50
The Company may borrow up to a maximum of $500.0 million$1.0 billion under thisits commercial paper program subject to market conditions. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of the Company'sCompany’s other unsecured senior indebtedness. As
The Company limits its utilization of October 27, 2017, there was a balance of $440.0 million outstanding on the commercial paper program.
As of October 27, 2017, no amounts were outstanding and the amount available on the revolving credit facility was $1.55 billion (net of $6.6 million which was restricted/dedicatedin order to maintain liquidity to support letters of credit and net of $440.0 million in principal outstandingits $1.0 billion commercial paper program along with certain other obligations. The following table presents the availability on the commercial paper program). ThisCompany’s unsecured revolving credit facility may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short-term liquidity requirements.as of April 22, 2022 (amounts in thousands):
|
| April 22, 2022 |
| |
Unsecured revolving credit facility commitment |
| $ | 2,500,000 |
|
Commercial paper balance outstanding |
|
| (50,000 | ) |
Unsecured revolving credit facility balance outstanding |
|
| — |
|
Other restricted amounts |
|
| (3,507 | ) |
Unsecured revolving credit facility availability |
| $ | 2,446,493 |
|
Dividend Policy
The Company’s andCompany declared a dividend/distribution for the Operating Partnership’s dividend policy has not changed fromfirst quarter of 2022 of $0.625 per share/unit, an annualized increase of 3.7% over the information includedamount paid in 2021. All future dividends/distributions remain subject to the discretion of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016. Board of Trustees.
Total dividends/distributions paid in October 2017April 2022 amounted to $192.6$242.6 million (excluding distributions on Partially Owned Properties), which includedconsisted of certain distributions declared during the third quarter ended September 30, 2017.March 31, 2022.
Long-Term Financing and Capital Needs
The Company expects to meet its long-term liquidity requirements, such as lump sum unsecured note and mortgage debt maturities, property acquisitions and financing of construction and development activities, through the issuance of secured and unsecured debt and equity securities including(including additional OP Units,Units), proceeds received from the disposition of certain properties and joint ventures, andalong with cash generated from operations after all distributions. In addition, theThe Company has a significant number of unencumbered properties available to secure additional mortgage borrowings in the event that the publicshould unsecured capital markets arebe unavailable or the cost of alternative sources of capital isbe too high. The fair value of and cash flow from these unencumbered properties are in excess of the requirements the Company must maintain in order to comply with covenants under its unsecured notes and line of credit and commercial paper program. credit. Of the $25.9$28.4 billion in investment in real estate on the Company’s balance sheet at September 30, 2017, $20.0March 31, 2022, $24.6 billion or 77.1%86.4% was unencumbered.unencumbered. However,, there can be no assurances that these sources of capital will be available to the Company in the future on acceptable terms or otherwise.
EQR issues public equity from time to time and guarantees certain debt of the Operating Partnership.Partnership from time to time. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.
The Company’s total debt summary and debt maturity schedulesschedule as of September 30, 2017 areMarch 31, 2022 is as follows:
Debt Summary as of September 30, 2017March 31, 2022
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
| |
|
|
|
|
|
|
|
|
|
| Weighted |
|
| Average |
| ||
|
|
|
|
|
|
|
|
|
| Average |
|
| Maturities |
| ||
|
| Amounts (1) |
|
| % of Total |
|
| Rates (1) |
|
| (years) |
| ||||
Secured |
| $ | 3,619,180 |
|
|
| 40.2 | % |
|
| 4.33 | % |
|
| 5.8 |
|
Unsecured |
|
| 5,373,092 |
|
|
| 59.8 | % |
|
| 4.22 | % |
|
| 10.8 |
|
Total |
| $ | 8,992,272 |
|
|
| 100.0 | % |
|
| 4.27 | % |
|
| 8.8 |
|
Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – Conventional |
| $ | 2,983,680 |
|
|
| 33.2 | % |
|
| 4.91 | % |
|
| 4.3 |
|
Unsecured – Public |
|
| 4,693,929 |
|
|
| 52.2 | % |
|
| 4.68 | % |
|
| 12.2 |
|
Fixed Rate Debt |
|
| 7,677,609 |
|
|
| 85.4 | % |
|
| 4.77 | % |
|
| 9.1 |
|
Floating Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – Conventional |
|
| 7,046 |
|
|
| 0.1 | % |
|
| 0.98 | % |
|
| 16.1 |
|
Secured – Tax Exempt |
|
| 628,454 |
|
|
| 6.9 | % |
|
| 1.49 | % |
|
| 12.4 |
|
Unsecured – Public (2) |
|
| 449,319 |
|
|
| 5.0 | % |
|
| 1.77 | % |
|
| 1.7 |
|
Unsecured – Revolving Credit Facility |
|
| — |
|
|
| — |
|
|
| 2.00 | % |
|
| 4.2 |
|
Unsecured – Commercial Paper Program |
|
| 229,844 |
|
|
| 2.6 | % |
|
| 1.37 | % |
|
| — |
|
Floating Rate Debt |
|
| 1,314,663 |
|
|
| 14.6 | % |
|
| 1.57 | % |
|
| 6.9 |
|
Total |
| $ | 8,992,272 |
|
|
| 100.0 | % |
|
| 4.27 | % |
|
| 8.8 |
|
51
|
|
|
|
Debt Maturity Schedule as of September 30, 2017
($ in thousands)
Year |
| Fixed Rate (1) |
|
| Floating Rate (1) |
|
| Total |
|
| % of Total |
|
| Weighted Average Rates on Fixed Rate Debt (1) |
|
| Weighted Average Rates on Total Debt (1) |
| ||||||
2017 |
| $ | 105,731 |
|
| $ | 230,100 |
| (2) | $ | 335,831 |
|
|
| 3.7 | % |
|
| 7.08 | % |
|
| 3.20 | % |
2018 |
|
| 49,734 |
|
|
| 97,235 |
|
|
| 146,969 |
|
|
| 1.6 | % |
|
| 5.55 | % |
|
| 2.99 | % |
2019 |
|
| 506,731 |
| (3) |
| 470,644 |
|
|
| 977,375 |
|
|
| 10.7 | % |
|
| 5.17 | % |
|
| 3.58 | % |
2020 |
|
| 1,678,592 |
| (4) |
| 400 |
|
|
| 1,678,992 |
|
|
| 18.5 | % |
|
| 5.49 | % |
|
| 5.49 | % |
2021 |
|
| 927,506 |
|
|
| 300 |
|
|
| 927,806 |
|
|
| 10.2 | % |
|
| 4.64 | % |
|
| 4.64 | % |
2022 |
|
| 265,341 |
|
|
| 400 |
|
|
| 265,741 |
|
|
| 2.9 | % |
|
| 3.26 | % |
|
| 3.26 | % |
2023 |
|
| 1,326,800 |
|
|
| 4,400 |
|
|
| 1,331,200 |
|
|
| 14.6 | % |
|
| 3.74 | % |
|
| 3.73 | % |
2024 |
|
| 1,272 |
|
|
| 10,500 |
|
|
| 11,772 |
|
|
| 0.1 | % |
|
| 4.79 | % |
|
| 1.39 | % |
2025 |
|
| 451,334 |
|
|
| 12,800 |
|
|
| 464,134 |
|
|
| 5.1 | % |
|
| 3.38 | % |
|
| 3.31 | % |
2026 |
|
| 593,424 |
|
|
| 14,000 |
|
|
| 607,424 |
|
|
| 6.7 | % |
|
| 3.59 | % |
|
| 3.53 | % |
2027+ |
|
| 1,826,437 |
|
|
| 535,265 |
|
|
| 2,361,702 |
|
|
| 25.9 | % |
|
| 4.15 | % |
|
| 3.43 | % |
Subtotal |
|
| 7,732,902 |
|
|
| 1,376,044 |
|
|
| 9,108,946 |
|
|
| 100.0 | % |
|
| 4.39 | % |
|
| 3.97 | % |
Deferred Financing Costs and Unamortized (Discount) |
|
| (55,293 | ) |
|
| (61,381 | ) |
|
| (116,674 | ) |
| N/A |
|
| N/A |
|
| N/A |
| |||
Total |
| $ | 7,677,609 |
|
| $ | 1,314,663 |
|
| $ | 8,992,272 |
|
|
| 100.0 | % |
|
| 4.39 | % |
|
| 3.97 | % |
|
| Debt Balances |
|
| % of Total |
| ||
Secured |
| $ | 2,193,199 |
|
|
| 26.9 | % |
Unsecured |
|
| 5,966,952 |
|
|
| 73.1 | % |
Total |
| $ | 8,160,151 |
|
|
| 100.0 | % |
Fixed Rate Debt: |
|
|
|
|
|
|
|
|
Secured – Conventional |
| $ | 1,895,251 |
|
|
| 23.2 | % |
Unsecured – Public |
|
| 5,836,957 |
|
|
| 71.5 | % |
Fixed Rate Debt |
|
| 7,732,208 |
|
|
| 94.7 | % |
Floating Rate Debt: |
|
|
|
|
|
|
|
|
Secured – Conventional |
|
| 62,767 |
|
|
| 0.8 | % |
Secured – Tax Exempt |
|
| 235,181 |
|
|
| 2.9 | % |
Unsecured – Revolving Credit Facility |
|
| — |
|
|
| — |
|
Unsecured – Commercial Paper Program |
|
| 129,995 |
|
|
| 1.6 | % |
Floating Rate Debt |
|
| 427,943 |
|
|
| 5.3 | % |
Total |
| $ | 8,160,151 |
|
|
| 100.0 | % |
|
|
|
|
|
|
|
|
See Note 8 in the Notes to Consolidated Financial Statements for additional discussion of debt at September 30, 2017.
ERPOP's long-term senior debt ratings and short-term commercial paper ratings as well as EQR's long-term preferred equity ratings, which all have a stable outlook, as of October 27, 2017 are as follows:
|
|
| ||||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
|
|
See Note 14 in the Notes to Consolidated Financial Statements for discussion of the events which occurred subsequent to September 30, 2017.
Capitalization of Fixed Assets and Improvements to Real Estate
The Company’s long-term financing and the Operating Partnership’s capital expenditures policy hasneeds have not changed materially from the information included in the Company’sCompany's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2016.2021.
For the nine months ended September 30, 2017, our actual capital expenditures to real estate included the following (amounts in thousands except for apartment unit and per apartment unit amounts):Definitions
52
TableThe definition of Contents
Capital Expenditures to Real Estate
For the Nine Months Ended September 30, 2017
|
| Same Stores Properties (5) |
|
| Non-Same Store Properties/Other (6) |
|
| Total |
|
| Same Store Avg. Per Apartment Unit |
| ||||
Total Apartment Units (1) |
|
| 70,285 |
|
|
| 7,072 |
|
|
| 77,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building Improvements (2) |
| $ | 75,369 |
|
| $ | 2,379 |
|
| $ | 77,748 |
|
| $ | 1,072 |
|
Rehab Expenditures (3) |
|
| 35,698 |
|
|
| 889 |
|
|
| 36,587 |
|
|
| 508 |
|
Replacements (4) |
|
| 28,571 |
|
|
| 352 |
|
|
| 28,923 |
|
|
| 407 |
|
Total Capital Expenditures |
| $ | 139,638 |
|
| $ | 3,620 |
|
| $ | 143,258 |
|
| $ | 1,987 |
|
certain terms described above or below are as follows:
|
| Acquisition Cap Rate – |
|
| Average Rental Rate– |
|
| Leasing Concessions – |
|
| Non-Residential – |
| • | Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2021 and 2022, plus any properties in lease-up and not stabilized as of January 1, 2021. |
• | Percentage of Residents Renewing – Leases renewed expressed as a percentage of total renewal offers extended during the reporting period. |
• | Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period. |
• | Residential – Consists of multifamily apartment revenues and expenses. |
• | Same Store Properties – |
• | Same Store Residential Revenues – Revenues from our same store properties presented on a GAAP basis which reflects the impact of Leasing Concessions on a straight-line basis. |
|
| Turnover– |
Critical Accounting Policies and Estimates
The Company estimates that during 2017 it will spend approximately $2,500 per same store apartment unit or $176.0 million of total capital expenditures to real estate. During 2017,Company’s and the Company expects to spend approximately $43.0 million for apartment unit rehab expenditures on same store properties at an average cost of approximately $13,000 per apartment unit rehabbed. The anticipated total capital expenditures to real estate amounts represent an increase as a percentage of rental revenues, in the cost per unit and in the absolute dollar amounts over 2016. We will continue to create value from our properties by doing those rehabs that meet our investment criteria. The above assumptions are based on current expectations and are forward-looking.
During the nine months ended September 30, 2017, the Company’s total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Company’s property management offices and its corporate offices, were approximately $0.8 million. The Company expects to fund approximately $0.6 million in total non-real estate capital additions for the remainder of 2017. These anticipated fundings represent a decrease over 2016, which is primarily driven by the substantial completion of the implementation of new systems during 2016. The above assumption is based on current expectations and is forward-looking.
Capital expenditures to real estate and non-real estate capital additions are generally funded from net cash provided by operating activities and from investment cash flow.
Derivative Instruments
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks to manage these risks by following established risk managementOperating Partnership’s critical accounting policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments. The Company may also use derivatives to manage commodity prices in the daily operations of the business.
The Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives it currently has in place.
See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at September 30, 2017.
53
The definition of certain terms described above or below are as follows:
Acquisition Cap Rate – NOI that the Company anticipates receiving in the next 12 months (or the year two or three stabilized NOI for properties that are in lease-up at acquisition) less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross purchase price of the asset. The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property.
Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $100-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sale price of the asset. The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property.
Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs. Each of the items (i) through (v) is calculated in accordance with generally accepted accounting principles (“GAAP”).
Off-Balance Sheet Arrangements and Contractual Obligations
The Company has various unconsolidated interests in certain joint ventures. The Company does not believe that these unconsolidated investments have a materially different impact on its liquidity, cash flows, capital resources, credit or market risk than its consolidated operating and/or other activities. See Notes 2 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s investments in partially owned entities. See also Note 12 in the Notes to Consolidated Financial Statements for discussion regarding the Company’s development projects.
The Company’s contractual obligations for the next five years and thereafterestimates have not changed materially from the amounts and disclosuresinformation included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016. See the updated debt maturity schedule included in Liquidity and Capital Resources for further discussion.2021.
Critical Accounting Policies and Estimates
The Company’s and the Operating Partnership’s critical accounting policies and estimates have not changed materially from the information included in the Company’s and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2016.
Funds From Operations and Normalized Funds From Operations
The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for the nine months and quarters ended September 30, 2017March 31, 2022 and 2016.2021:
54
Funds From Operations and Normalized Funds From Operations
(Amounts in thousands)
|
| Nine Months Ended September 30, |
|
| Quarter Ended September 30, |
|
| Quarter Ended March 31, |
| |||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2022 |
|
| 2021 |
| ||||||
Net income |
| $ | 498,297 |
|
| $ | 4,177,723 |
|
| $ | 144,196 |
|
| $ | 217,492 |
|
| $ | 73,798 |
|
| $ | 60,364 |
|
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (2,354 | ) |
|
| (2,368 | ) |
|
| (801 | ) |
|
| (823 | ) | ||||||||
Preferred distributions |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) | ||||||||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties |
|
| (639 | ) |
|
| (682 | ) | ||||||||||||||||
Preferred/preference distributions |
|
| (772 | ) |
|
| (773 | ) | ||||||||||||||||
Net income available to Common Shares and Units / Units |
|
| 493,625 |
|
|
| 4,173,037 |
|
|
| 142,623 |
|
|
| 215,896 |
|
|
| 72,387 |
|
|
| 58,909 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 542,964 |
|
|
| 528,242 |
|
|
| 184,100 |
|
|
| 179,230 |
|
|
| 229,961 |
|
|
| 199,962 |
|
Depreciation – Non-real estate additions |
|
| (3,808 | ) |
|
| (3,932 | ) |
|
| (1,228 | ) |
|
| (1,297 | ) |
|
| (1,052 | ) |
|
| (1,100 | ) |
Depreciation – Partially Owned Properties |
|
| (2,500 | ) |
|
| (2,896 | ) |
|
| (834 | ) |
|
| (953 | ) |
|
| (893 | ) |
|
| (828 | ) |
Depreciation – Unconsolidated Properties |
|
| 3,430 |
|
|
| 3,606 |
|
|
| 1,145 |
|
|
| 1,139 |
|
|
| 620 |
|
|
| 617 |
|
Net (gain) on sales of unconsolidated entities - operating assets |
|
| (68 | ) |
|
| (8,841 | ) |
|
| — |
|
|
| (8,841 | ) | ||||||||
Net (gain) on sales of real estate properties |
|
| (141,761 | ) |
|
| (3,870,871 | ) |
|
| (17,328 | ) |
|
| (90,036 | ) | ||||||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net (gain) on sales of discontinued operations |
|
| — |
|
|
| (43 | ) |
|
| — |
|
|
| (28 | ) | ||||||||
Net (gain) loss on sales of unconsolidated entities - operating assets |
|
| (9 | ) |
|
| (4 | ) | ||||||||||||||||
Net (gain) loss on sales of real estate properties |
|
| 102 |
|
|
| 43 |
| ||||||||||||||||
FFO available to Common Shares and Units / Units (1) (3) (4) |
|
| 891,882 |
|
|
| 818,302 |
|
|
| 308,478 |
|
|
| 295,110 |
|
|
| 301,116 |
|
|
| 257,599 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment and valuation allowances |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Impairment – non-operating assets |
|
| — |
|
|
| — |
| ||||||||||||||||
Write-off of pursuit costs |
|
| 2,329 |
|
|
| 3,379 |
|
|
| 783 |
|
|
| 816 |
|
|
| 1,463 |
|
|
| 1,331 |
|
Debt extinguishment (gains) losses, including prepayment penalties, preferred share/preference unit redemptions and non-cash convertible debt discounts |
|
| 11,789 |
|
|
| 120,276 |
|
|
| (613 | ) |
|
| 112 |
| ||||||||
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit) |
|
| (19,355 | ) |
|
| (73,600 | ) |
|
| (405 | ) |
|
| (7,007 | ) | ||||||||
Debt extinguishment and preferred share redemption (gains) losses |
|
| — |
|
|
| 264 |
| ||||||||||||||||
Non-operating asset (gains) losses |
|
| (1,642 | ) |
|
| 854 |
| ||||||||||||||||
Other miscellaneous items |
|
| (4,195 | ) |
|
| 8,673 |
|
|
| (3,405 | ) |
|
| 8,159 |
|
|
| (371 | ) |
|
| 2,242 |
|
Normalized FFO available to Common Shares and Units / Units (2) (3) (4) |
| $ | 882,450 |
|
| $ | 877,030 |
|
| $ | 304,838 |
|
| $ | 297,190 |
|
| $ | 300,566 |
|
| $ | 262,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO (1) (3) |
| $ | 894,200 |
|
| $ | 820,620 |
|
| $ | 309,250 |
|
| $ | 295,883 |
|
| $ | 301,888 |
|
| $ | 258,372 |
|
Preferred/preference distributions |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
|
| (772 | ) |
|
| (773 | ) |
FFO available to Common Shares and Units / Units (1) (3) (4) |
| $ | 891,882 |
|
| $ | 818,302 |
|
| $ | 308,478 |
|
| $ | 295,110 |
|
| $ | 301,116 |
|
| $ | 257,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO (2) (3) |
| $ | 884,768 |
|
| $ | 879,348 |
|
| $ | 305,610 |
|
| $ | 297,963 |
|
| $ | 301,338 |
|
| $ | 263,063 |
|
Preferred/preference distributions |
|
| (2,318 | ) |
|
| (2,318 | ) |
|
| (772 | ) |
|
| (773 | ) |
|
| (772 | ) |
|
| (773 | ) |
Normalized FFO available to Common Shares and Units / Units (2) (3) (4) |
| $ | 882,450 |
|
| $ | 877,030 |
|
| $ | 304,838 |
|
| $ | 297,190 |
|
| $ | 300,566 |
|
| $ | 262,290 |
|
(1) | The National Association of Real Estate Investment Trusts (“ |
(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;
pursuit cost write-offs;
gains and losses from early debt extinguishment, including prepayment penalties, preferred share/preference unit 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 sales, net of the effect of income tax benefits or expenses; and
other miscellaneous items.
55
| • | the impact of any expenses relating to non-operating asset impairment; |
• | gains and losses from early debt extinguishment and preferred share redemptions; |
• | gains and losses from non-operating assets; and |
• | other miscellaneous items. |
(3) | The Company believes that FFO and FFO available to Common Shares and Units / 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 from sales and impairment write-downs of depreciable real estate and excluding depreciation related to |
and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the |
(4) | FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units are calculated on a basis consistent with net income available to Common Shares / Units and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares/preference units in accordance with GAAP. 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 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company’s and the Operating Partnership’s market risk has not changed materially from the amounts and information reported in Part II, Item 7A. 7A, Quantitative and Qualitative Disclosures About Market Risk, to the Company’s and the Operating Partnership'sPartnership’s Annual Report on Form 10-K for the year ended December 31, 2016.2021. See Note 910 in the Notes to Consolidated Financial Statements for additional discussion of derivative and other fair value instruments.measurements.
Item 4. Controls and Procedures
Equity Residential
| (a) | Evaluation of Disclosure Controls and Procedures: |
Effective as of September 30, 2017,March 31, 2022, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
| (b) | Changes in Internal Control over Financial Reporting: |
There were no changes to the internal control over financial reporting of the Company identified in connection with the Company’s evaluation referred to in Item 4(a) above that occurred during the thirdfirst quarter of 20172022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ERP Operating Limited Partnership
| (a) | Evaluation of Disclosure Controls and Procedures: |
Effective as of September 30, 2017,March 31, 2022, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the Operating Partnership’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
| (b) | Changes in Internal Control over Financial Reporting: |
There were no changes to the internal control over financial reporting of the Operating Partnership identified in connection with
56
the Operating Partnership’s evaluation referred to in Item 4(a) above that occurred during the thirdfirst quarter of 20172022 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
PART II. OTHER INFORMATION
As of September 30, 2017,March 31, 2022, the Company does not believe there is any litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.
There have been no material changes to the risk factors that were discussed in Part I, Item 1A of the Company’s and the Operating Partnership'sPartnership’s Annual Report on Form 10-K for the year ended December 31, 2016.2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Common Shares Issued in the Quarter Ended September 30, 2017 - Equity Residential
During the quarter ended September 30, 2017,March 31, 2022, EQR issued 6,1466,756 Common Shares in exchange for 6,1466,756 OP Units held by various limited partners of ERPOP. OP Units are generally exchangeable into Common Shares on a one-for-one basis or, at the option of ERPOP, the cash equivalent thereof, at any time one year after the date of issuance. These shares were either registered under the Securities Act of 1933, as amended (the “Securities Act”), or issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder, as these were transactions by an issuer not involving a public offering. In light of the manner of the sale and information obtained by EQR from the limited partners in connection with these transactions, EQR believes it may rely on these exemptions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
Item 6. Exhibits – See the Exhibit Index.
57
Theexhibitslistedbelowarefiledaspartofthisreport. Referencestoexhibitsorotherfilingsunderthecaption “Location” “Location”indicate thattheexhibitorotherfilinghasbeenfiled,thattheindexedexhibitandtheexhibitreferredtoarethesameandthattheexhibit referredto are the same and that the exhibit referred to isincorporatedbyreference. TheCommissionfilenumbersforourExchangeActfilingsreferencedbeloware1-12252 (Equity Residential) and 0-24920 (ERP Operating LimitedPartnership).
Exhibit |
| Description |
| Location |
|
| |||
|
| |||
10.1 |
|
|
| |
|
|
| Attached herein. | |
|
|
|
|
|
31.1 |
| Equity Residential – Certification of |
| Attached herein. |
|
|
|
|
|
31.2 |
| Equity Residential – Certification of |
| Attached herein. |
|
|
|
|
|
31.3 |
|
| Attached herein. | |
|
|
|
|
|
31.4 |
|
| Attached herein. | |
|
|
|
|
|
32.1 |
|
| Attached herein. | |
|
|
|
|
|
32.2 |
|
| Attached herein. | |
|
|
|
|
|
32.3 |
|
| ||
|
| Attached herein. | ||
|
|
|
|
|
|
|
|
| Attached herein. |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||
58
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| EQUITY RESIDENTIAL | ||
|
|
|
|
|
Date: |
| By: |
| /s/ |
|
|
|
|
|
|
|
|
| Executive Vice President and Chief Financial Officer |
|
|
|
| (Principal Financial Officer) |
|
|
|
|
|
Date: |
| By: |
| /s/ Ian S. Kaufman |
|
|
|
| Ian S. Kaufman |
|
|
|
| Senior Vice President and Chief Accounting Officer |
|
|
|
| (Principal Accounting Officer) |
|
| ERP OPERATING LIMITED PARTNERSHIP ITS GENERAL PARTNER | ||
|
|
|
|
|
Date: |
| By: |
| /s/ |
|
|
|
|
|
|
|
|
| Executive Vice President and Chief Financial Officer |
|
|
|
| (Principal Financial Officer) |
|
|
|
|
|
Date: |
| By: |
| /s/ Ian S. Kaufman |
|
|
|
| Ian S. Kaufman |
|
|
|
| Senior Vice President and Chief Accounting Officer |
|
|
|
| (Principal Accounting Officer) |