Bloomberg News

Equity Residential, AvalonBay FFO Climbs on Apartment Demand

February 01, 2012

(Updates with Equity Residential comment in seventh paragraph.)

Feb. 1 (Bloomberg) -- Equity Residential and AvalonBay Communities Inc., the two biggest publicly traded apartment owners in the U.S., said funds from operations climbed in the fourth quarter as rising demand allowed for rent increases.

FFO, which gauges a property company’s ability to generate cash, at Equity Residential rose to $201.4 million, or 64 cents a share, from $136.4 million, or 45 cents, a year earlier, the Chicago-based real estate investment trust founded by Sam Zell said today in a statement. Analysts expected FFO of 65 cents a share, the average of 21 estimates in a Bloomberg survey.

At Alexandria, Virginia-based AvalonBay, FFO increased to $113.4 million, or $1.19 a share, from $86.8 million, or $1.01. The company was expected to have FFO of $1.22 a share, the average of 21 analysts’ estimates.

Demand for rental apartments has soared in the face of an improving job market that’s prompted college graduates to seek their own housing, according to Alexander Goldfarb, an analyst with Sandler O’Neill & Partners LP in New York. Apartment rents in the U.S. climbed 4.1 percent in the 12 months through December, according to Axiometrics Inc. The Dallas-based research firm projects a 6.7 percent increase in landlords’ rental revenue for the year from 2011.

With the economy growing slowly and little new supply, “apartment landlords have been in a very good spot,” Goldfarb, who has a “hold” rating on AvalonBay and a “buy” rating on Equity Residential, said in an interview before earnings were announced.

Rental Revenue Rises

Rental revenue at Equity Residential, the largest U.S. apartment REIT, climbed 13 percent to $516.9 million. AvalonBay’s rental revenue rose 6.2 percent to $176.8 million.

“We are confident that multifamily fundamentals will remain strong as we see no let up in demand and little new supply which will keep retention high, vacancy low and rental rates on the rise,” David J. Neithercut, Equity Residential’s chief executive officer, said in the company’s statement today.

Fourth-quarter results were released after the close of regular U.S. trading. Equity Residential rose 0.8 percent to $60.02 today in New York. The shares have gained 9.9 percent in the past 12 months, compared with a 14 percent increase in the Bloomberg REIT Apartment Index of 16 companies.

AvalonBay rose 0.7 percent to $136.92. Its shares have gained 19 percent in the past 12 months.

(Equity Residential will hold a conference call tomorrow at 11 a.m. New York time. See EQR US <Equity> EVT <GO>. AvalonBay will hold a conference call tomorrow at 1 p.m. New York time. See AVB US <Equity> EVT <GO>.)

--Editors: Christine Maurus, Daniel Taub

To contact the reporter on this story: Oshrat Carmiel in New York at

To contact the editor responsible for this story: Daniel Taub at

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