Equity Residential Q3 FFO Declines; Lifts FY09 FFO Outlook

Look up the PowerRating of EQR and see how it has performed over the past week as well as the current proprietary PowerRating.

(RTTNews) - Wednesday, real estate investment trust Equity Residential (EQR | Quote | Chart | News | PowerRating) reported a year-over-year decline in its third-quarter fund from operations or FFO, hurt by lower net operating income from its same store portfolio and dilution from its 2008 and 2009 transaction activity. Looking ahead, the company raised its fiscal 2009 guidance, besides issuing fourth quarter FFO forecast.

The Chicago, Illinois-based company reported FFO available to common shares and units for the third quarter of $154.44 million or $0.53 per share, down from $186.59 million, $0.64 per share in the corresponding period last year.

On average, twenty-one analysts polled by Thomson Reuters expected the company to earn $0.52 per share for the quarter. Analysts' estimates typically exclude special items.

The company attributed the lower FFO to a $0.06 per share negative impact from lower net operating income from its same store portfolio and a $0.05 per share negative impact of from dilution from the company's 2008 and 2009 transaction activity.

Third quarter net income available to common shares declined to $132.36 million or $0.48 per share, compared to $172.25 million or $0.63 per share in the year-ago quarter, with the decline primarily due to lower gains from property sales in 2009 and lower property NOI.

Income from continuing operations declined to $12.82 million from $26.09 million in the prior year period. Discontinued operations contributed $130.54 million to net earnings, compared to $161.03 million in the comparable period of fiscal year 2008.

Total revenues for the quarter decreased to $492.76 million from $511.01 million in the prior-year quarter. Eight analysts had a revenue consensus of $486.51 million for the third quarter.

On a same store third quarter to third quarter comparison, which includes 119,121 apartment units, revenues decreased 3.9%, expenses decreased 0.6% and NOI decreased 5.8%. The revenue decrease was due to a 3.2% decrease in average rental rates and a 0.7% decrease in occupancy to 93.7%.

In the preceding quarter, the company's second quarter FFO declined to $168.7 million or $0.58 per share from $185 million, $0.64 per share in the corresponding period last year. Net income available to common stock holders fell to $96.6 million or $0.35 per share from $126.6 million or $0.46 per share in the same period last year. Total revenues declined to $505.2 million from $513.3 million in the corresponding period last year.

Among the others in the industry, Highlands Ranch, Colorado-based self-administered equity real estate investment trust UDR, Inc. (UDR | Quote | Chart | News | PowerRating), reported a drop in funds from operations for the third quarter, due a non-cash equity loss as well as charges.

Commenting on the results, David Neithercut, Equity Residential's president and chief executive officer said, "We have spent the year focused on the basics - keeping our customers satisfied and maintaining the quality of our assets while controlling our expenses. As a result of these efforts, our third quarter performance was better than anticipated and we expect to deliver same store operating results for the year that are very much in line with our expectations at the beginning of the year."

During the third quarter of 2009, the company sold 24 consolidated properties, consisting of 4,620 apartment units, for an aggregate sale price of $381.1 million at an average capitalization (CAP | Quote | Chart | News | PowerRating) rate of 7.7% generating an unlevered internal rate of return (IRR | Quote | Chart | News | PowerRating) of 9.5%.

On September 29, the company announced the creation of an At-The-Market share offering program which would allow the company to sell up to 17 million common shares from time to time. To date, the company has not issued any shares through this program.

For the nine-month period, FFO declined to $489.18 million or $1.69 per share from $539.77 million or $1.86 per share in the same period last year.

Net income available to common shareholders was $306.12 million or $1.12 per share, down from $433.36 million or $1.59 per share in the similar period of 2008.

Total revenues for the period decreased to $1.48 billion from $1.49 billion for the prior-year period.

Looking forward for the fourth quarter, The company has established an FFO guidance range of $0.49-$0.53 per share.

Analysts currently expect FFO of $0.49 per share for the fourth quarter.

The company has revised its guidance for full year 2009 same store operating performance and funds from operations. FFO per share is now expected to be in the range of $2.18-$2.22, compared to the prior range of $2.10-$2.20. Same store revenue change is expected to be down 3.0%, an improvement from its earlier guidance of a 3%-3.5% decline.

Analysts currently expect FFO of $2.16 per share, on revenues of $1.97 billion for the full year.

Neithercut also said, "We continue to execute our portfolio transformation strategy, achieving good prices for non-core assets that we are selling in secondary markets and, as a result, have increased our dispositions guidance for the year to $900 million. The proceeds from these asset sales, combined with $1.36 billion of availability under our revolving credit facility and our access to the capital markets, strongly position us to take advantage of any future opportunities to add high quality properties to our portfolio."

EQR declined $1.18 or 4.11% and closed Wednesday's regular trading session at $27.56 on volume of 4.83 million shares. In the past 52 weeks, the stock trended in a broad range of $15.68- $35.56, with a three-month average volume of 4.64 million shares.

For comments and feedback: contact editorial@rttnews.com Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index