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Analyst Says Equity Residential’s Solid Q2 Performance is “Not Surprising”

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Chicago-based Equity Residential recently reported results for the quarter and six months ended June 30, 2017. According to David Neithercut, the REIT’s president and CEO, strong and steady demand for rental housing in the REIT’s gateway, coastal markets continues to drive high occupancy, retention and renewal pricing despite elevated levels of new supply.

“We are pleased to now expect full year same store revenue growth towards the upper end of our original guidance driven by Seattle, San Francisco and New York City which should meet our most optimistic projections for the year,” he said. “This, combined with slightly higher than expected expense growth, should produce same store net operating income growth for the year in the upper half of our original range of expectations.”

Earnings Per Share for the second quarter of 2017 was $0.53 compared to $0.59 in the second quarter of 2016. The difference is due primarily to higher property sale gains in the second quarter of 2017, the various adjustment items listed on page 24 of this release and the items described below. And funds from operations was $0.77 per share for the second quarter of 2017 compared to $0.90 per share in the second quarter of 2016. The difference is due primarily to the various adjustment items listed on page 24 of this release and the items described below.

During the second quarter of 2017, the company acquired one consolidated apartment property in Seattle, consisting of 136 apartment units, for a purchase price of approximately $57 million at an Acquisition Capitalization Rate of 5.0%. Also during the second quarter, the company sold two consolidated apartment properties, consisting of 600 apartment units, for an aggregate sale price of approximately $219.1 million at a weighted average Disposition Yield of 5.0% and generating an Unlevered IRR of 12.5%. Also during the quarter, the company stabilized its 348-unit 340 Fremont development in San Francisco at a Development Yield of 4.7%.

Drew Babin, a senior research analyst at Baird Equity Research, says that the REIT’s numbers are “not surprising.”

He explains that investors generally expected a pass-through of YTD relative strength to FY guidance and expect the focus to now shift to how 2H17 expectations have changed in recent months.