Full Year Guidance Ranges Raised as Broad-Based Recovery Continues

Equity Residential (NYSE:EQR) today reported results for the quarter ended March 31, 2021 and has posted a Q1 2021 Management Presentation to its website as referenced below.

First Quarter 2021 Results

All per share results are reported as available to common shares/units on a diluted basis.


	Quarter Ended March 31,
	2021		2020		$ Change			% Change
Earnings Per Share (EPS)	$	0.15	$	0.83	$	(0.68	)		(81.9	%)
Funds from Operations (FFO) per share	$	0.67	$	0.86	$	(0.19	)		(22.1	%)
Normalized FFO per share	$	0.68	$	0.87	$	(0.19	)		(21.8	%)

"While the first quarter's results reflect the significant impact of the pandemic on our business, we continue to see substantial signs of improvement as cities begin to reopen and affluent renters return. We are producing occupancy and pricing trends better than our original expectations and are therefore pleased to raise our full year same store revenue guidance range by 100 basis points to -6.0% to -8.0%," said Mark J. Parrell, Equity Residential's President and CEO. "As we head into the seasonally highest demand period of the year, we see considerable positive momentum in our operations and we expect to further reduce concessions and increase rental rates in light of the strong demand we see across our markets."

Highlights

The Company has seen a 1.6% improvement in same store Physical Occupancy since the end of the fourth quarter 2020 (94.4% on December 31, 2020 to 96.0% on April 22, 2021).
Pricing Trends continue to improve across all markets with an approximately 14% sequential improvement portfolio-wide from December 2020 through April 2021. See the Management Presentation for details.
The Company collected approximately 97% of its expected Residential revenues in the first quarter of 2021.
The Company expanded its efforts to improve access to affordable housing with a $5.0 million commitment to a fund dedicated to preserving affordable housing.

Results Per Share

The change in EPS for the quarter ended March 31, 2021 compared to the same period of 2020 is due primarily to lower property sale gains in the first quarter of 2021, the various adjustment items listed on page 23 of this release and the items described below.

The per share change in FFO for the quarter ended March 31, 2021 compared to the same period of 2020, is due primarily to the various adjustment items listed on page 23 of this release and the items described below.

The per share change in Normalized FFO is due primarily to:

	Positive/(Negative) Impact
	First Quarter 2021 vs. First Quarter 2020
Residential same store Net Operating Income (NOI)	$	(0.20	)
2020 transaction activity impact on NOI, net		(0.03	)
Interest expense, net		0.05
Other items		(0.01	)
Net	$	(0.19	)

The Company has a glossary of defined terms and related reconciliations of Non-GAAP financial measures on pages 25 through 30 of this release. Reconciliations and definitions of FFO and Normalized FFO are provided on pages 6, 27 and 28 of this release.

Same Store Results

The Company has provided a breakout of Residential and Non-Residential same store results on page 9 of this release with definitions that can be found on page 29 of this release. Non-Residential operations account for approximately 3.8% of total revenues for the quarter ended March 31, 2021. The table below reflects same store Residential only results for the first quarter 2021 to first quarter 2020 comparison, which includes 77,060 apartment units, as well as for the first quarter 2021 to fourth quarter 2020 comparison, which includes 77,281 apartment units. The Company's Physical Occupancy was 95.0% for the first quarter of 2021 compared to 94.2% for the fourth quarter of 2020 and 96.4% for the first quarter of 2020.

	First Quarter 2021 vs. First Quarter 2020	First Quarter 2021 vs. Fourth Quarter 2020
Revenues	(10.6%)	(2.3%)
Expenses	3.9%	5.6%
NOI	(17.1%)	(6.2%)

The following table reflects the detail of the change in Same Store Residential Revenues, which is presented on a GAAP basis showing Leasing Concessions on a straight-line basis. See page 10 for detail and reconciliations of Same Store Residential Revenues on a GAAP basis to Same Store Residential Revenues with Leasing Concessions on a cash basis.

	First Quarter 2021 vs. First Quarter 2020			First Quarter 2021 vs. Fourth Quarter 2020
	% Change			% Change
Same Store Residential Revenues-
comparable period
Lease rates		(6.6	%)		(2.3	%)
Leasing Concessions ⁽¹⁾		(1.6	%)		(0.6	%)
Vacancy loss		(1.0	%)		1.1	%
Bad Debt, Net ⁽²⁾		(1.6	%)		(0.1	%)
Other ⁽³⁾		0.2	%		(0.4	%)
Same Store Residential Revenues-
current period		(10.6	%)		(2.3	%)

(1)		Reflects upfront discounts on both new move-in and renewal leases on a straight-line basis.
(2)		Reduction in rental income due to bad debt write-offs and reserves, net of amounts collected on previously written-off or reserved accounts.
(3)		Includes ancillary income, utility recoveries, early lease termination income, miscellaneous income and other items.

Residential Same Store Operating Statistics

The following table includes select operating metrics for Residential Same Store Properties:

	Q4 2020	Q1 2021	April 2021 (1)
Physical Occupancy ⁽²⁾	94.4%	95.6%	96.0%
Percentage of Residents Renewing by quarter/month	51.0%	53.0%	56.0%

New Lease Change	(20.5%)	(17.7%)	(11.4%)
Renewal Rate Achieved	(3.4%)	(5.1%)	(2.1%)
Blended Rate	(13.0%)	(12.1%)	(7.2%)

(1)		April 2021 results are preliminary.
(2)		Physical Occupancy is as of month-end December for Q4 2020, month-end March for Q1 2021 and as of April 22 for April 2021.

Investment Activity

The Company did not acquire or sell any assets during the first quarter of 2021.

Second Quarter 2021 Guidance

The Company has established guidance ranges for the second quarter of 2021 EPS, FFO per share and Normalized FFO per share as listed below:

		Q2 2021 Guidance
EPS		$0.66 to $0.70
FFO per share		$0.66 to $0.70
Normalized FFO per share		$0.67 to $0.71

The difference between the first quarter 2021 actual EPS of $0.15 and the second quarter of 2021 EPS guidance midpoint of $0.68 is due primarily to higher expected property sale gains and lower expected corporate overhead.

The difference between the first quarter 2021 actual FFO of $0.67 per share and the second quarter of 2021 FFO guidance midpoint of $0.68 per share is due primarily to lower expected corporate overhead.

The difference between the first quarter 2021 actual Normalized FFO of $0.68 per share and the second quarter of 2021 Normalized FFO guidance midpoint of $0.69 per share is due primarily to lower expected corporate overhead.

Full Year 2021 Guidance

The Company has revised its guidance for its full year 2021 same store operating performance as well as EPS, FFO per share and Normalized FFO per share as listed below:

	Revised	Previous
Same Store (includes Residential and Non-Residential):
Physical Occupancy	95.0% to 96.0%	94.8% to 95.8%
Revenue change	(8.0%) to (6.0%)	(9.0%) to (7.0%)
Expense change	3.0% to 4.0%	3.0% to 4.0%
NOI change	(13.0%) to (11.0%)	(15.0%) to (12.0%)

EPS	$2.57 to $2.67	$2.55 to $2.75
FFO per share	$2.67 to $2.77	$2.58 to $2.78
Normalized FFO per share	$2.70 to $2.80	$2.60 to $2.80

The change in the full year 2021 EPS guidance range is due primarily to lower expected property sale gains and higher expected same store NOI.

The change in the full year 2021 FFO per share guidance range is due primarily to higher expected same store NOI.

The change in the full year 2021 Normalized FFO per share guidance range is due primarily to higher expected same store NOI.

About Equity Residential

Equity Residential 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 high quality long-term renters. Equity Residential owns or has investments in 304 properties consisting of 77,889 apartment units, located in Boston, New York, Washington, D.C., Seattle, San Francisco, Southern California and Denver. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential's management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and government regulation. In addition, these forward-looking statements are subject to risks related to the COVID-19 pandemic, many of which are unknown, including the duration and severity of the pandemic, the extent of the adverse health impact on the general population and on our residents, customers and employees in particular, its impact on the employment rate and the economy and the corresponding impact on our residents' and tenants' ability to pay their rent on time or at all, the extent and impact of governmental responses, the rollout and effectiveness of vaccines and the impact of operational changes we have implemented and may implement in response to the pandemic. Other risks and uncertainties are described under the heading "Risk Factors" in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management's control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

A live web cast of the Company's conference call discussing these results will take place tomorrow, Wednesday, April 28, 2021 at 10:00 a.m. CT. In connection with the conference call, the Company is also providing a Management Presentation on its website. Please visit the Investor section of the Company's website at www.equityapartments.com for the web cast link and the presentation.

Equity Residential Consolidated Statements of Operations (Amounts in thousands except per share data) (Unaudited)

	Quarter Ended March 31,
	2021			2020
REVENUES
Rental income	$	597,602		$	682,305

EXPENSES
Property and maintenance		117,054			115,816
Real estate taxes and insurance		103,470			97,732
Property management		26,130			27,709
General and administrative		15,383			14,518
Depreciation		199,962			212,422
Total expenses		461,999			468,197

Net gain (loss) on sales of real estate properties		(43	)		207,977

Operating income		135,560			422,085

Interest and other income		216			1,960
Other expenses		(4,110	)		(2,533	)
Interest:
Expense incurred, net		(67,358	)		(85,590	)
Amortization of deferred financing costs		(2,185	)		(2,041	)
Income before income and other taxes, income (loss) from
investments in unconsolidated entities and net gain (loss)
on sales of land parcels		62,123			333,881
Income and other tax (expense) benefit		(153	)		(53	)
Income (loss) from investments in unconsolidated entities		(1,611	)		(1,157	)
Net gain (loss) on sales of land parcels		5			—
Net income		60,364			332,671
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership		(2,143	)		(11,535	)
Partially Owned Properties		(682	)		(12,530	)
Net income attributable to controlling interests		57,539			308,606
Preferred distributions		(773	)		(773	)
Net income available to Common Shares	$	56,766		$	307,833

Earnings per share – basic:
Net income available to Common Shares	$	0.15		$	0.83
Weighted average Common Shares outstanding		372,280			371,582

Earnings per share – diluted:
Net income available to Common Shares	$	0.15		$	0.83
Weighted average Common Shares outstanding		386,916			386,949

Distributions declared per Common Share outstanding	$	0.6025		$	0.6025

Equity Residential Consolidated Statements of Funds From Operations and Normalized Funds From Operations (Amounts in thousands except per share data) (Unaudited)

	Quarter Ended March 31,
	2021			2020
Net income	$	60,364		$	332,671
Net (income) loss attributable to Noncontrolling Interests – Partially
Owned Properties		(682	)		(12,530	)
Preferred distributions		(773	)

Equity Residential Reports First Quarter 2021 Results