Feb. 1 (Bloomberg) -- Equity Residential, the largest publicly traded U.S. apartment landlord, said fourth-quarter funds from operations climbed as the nation’s rents increased amid a 10-year low in vacancies.
FFO, which gauges a property company’s ability to generate cash, increased 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.
Rising foreclosures and stricter mortgage-lending standards have helped make rental housing the best-performing segment of commercial real estate for the past two years, according to Reis Inc. In the fourth quarter, the U.S. apartment vacancy rate dropped to 5.2 percent, the lowest since the end of 2001, the New York-based property-research firm said. The average monthly effective rent, or what tenants paid after landlord giveaways, climbed 2.3 percent from a year earlier to $1,009.
“We expect apartments to produce strong results and offer 2012 guidance that demonstrates the recovery continues to accelerate,” Alexander Goldfarb, an analyst with Sandler O’Neill & Partners LP in New York, said in a Jan. 13 report.
Few new apartments will be delivered to the market until 2013 at the earliest, giving landlords at existing properties the flexibility to push rents higher in the face of increasing tenant demand, said Goldfarb, who has a “buy” rating on Equity Residential.
Fourth-quarter results were announced 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 percent in the past 12 months, compared with a 14 percent increase 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>.
--Editors: Christine Maurus, Daniel Taub
To contact the reporter on this story: Oshrat Carmiel in New York at firstname.lastname@example.org.
To contact the editor responsible for this story: Daniel Taub at email@example.com