Bloomberg News

Equity Residential FFO Rises 18% as Apartment Rents Increase

October 26, 2011

(Updates with rental income in sixth paragraph, forecast for normalized FFO in eighth.)

Oct. 26 (Bloomberg) -- Equity Residential, the largest publicly traded U.S. apartment landlord, said third-quarter funds from operations climbed 18 percent as the nation’s rents increased amid fewer vacancies.

FFO, which gauges a property company’s ability to generate cash, climbed to $196.6 million, or 63 cents a share, from $166.1 million, or 55 cents, a year earlier, the Chicago-based real estate investment trust said today in a statement. It was expected to have FFO of 61 cents a share, the average estimate of 21 analysts in a Bloomberg survey.

Apartment owners are benefiting from a limited supply of units as mounting foreclosures and tighter credit for homebuyers increase demand for leasing. U.S. vacancies fell to a five-year low in third quarter, allowing landlords to boost rents, according to property-research company Reis Inc. The period is usually one of the strongest for apartments because people tend to move during warmer-weather months and family vacations.

“The summer leasing season saw very good year-over-year rent growth,” Alexander Goldfarb, an analyst at Sandler O’Neill & Partners with a “buy” on Equity Residential, said in a telephone interview before the report. The company “certainly is going to benefit from Boston, New York. Seattle has been strong,” he said.

Effective Rents

The average U.S. monthly effective rent, or what tenants paid after landlord giveaways are included, rose to $1,004 in the third quarter, from $997 a year earlier, New York-based Reis said on Oct. 6. The vacancy rate dropped to 5.6 percent, the lowest since the third quarter of 2006.

Equity Residential’s rental income rose 13 percent from a year earlier, to $509 million. Same-store revenue gained 5.5 percent.

So-called normalized FFO was 62 cents a share, compared with 57 cents a year earlier. Normalized FFO excludes items that are not comparable from period to period, such as asset impairments or penalties for early payment of debt, according to the company.

The REIT raised the lower end of its forecast for full-year normalized FFO. The company expects $2.41 to $2.45 a share, up from July’s projection of $2.40 to $2.45.

Third-quarter results were announced after the close of regular U.S. trading. Equity Residential rose 1.1 percent to $57.01 today in New York. The shares have gained 9.7 percent this year, matching the advance in the Bloomberg REIT Apartment Index of 16 companies.

(Equity Residential will hold a conference call tomorrow at 11 a.m. New York time. See EQR US <Equity> EVT <GO>.

--With assistance from Hui-yong Yu in Seattle. Editors: Christine Maurus, Daniel Taub

-0- Oct/26/2011 21:50 GMT

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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