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EQUITY RESIDENTIAL - Quarter Report: 2023 June (Form 10-Q)

10-Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-12252 (Equity Residential)

Commission File Number: 0-24920 (ERP Operating Limited Partnership)

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

 

Maryland (Equity Residential)

 

13-3675988 (Equity Residential)

Illinois (ERP Operating Limited Partnership)

 

36-3894853 (ERP Operating Limited Partnership)

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

Two North Riverside Plaza, Chicago, Illinois 60606

 

(312) 474-1300

(Address of principal executive offices) (Zip Code)

 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Shares of Beneficial Interest,
$0.01 Par Value (Equity Residential)

 

EQR

 

New York Stock Exchange

7.57% Notes due August 15, 2026
(ERP Operating Limited Partnership)

 

N/A

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Equity Residential Yes   No

ERP Operating Limited Partnership Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Equity Residential Yes   No

ERP Operating Limited Partnership Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Equity Residential:

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

l

ERP Operating Limited Partnership:

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Equity Residential

ERP Operating Limited Partnership

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Equity Residential Yes   No

ERP Operating Limited Partnership Yes   No

 

The number of EQR Common Shares of Beneficial Interest, $0.01 par value, outstanding on July 26, 2023 was 379,032,411.

 


Table of Contents

 

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended June 30, 2023 of Equity Residential and ERP Operating Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “EQR” mean Equity Residential, a Maryland real estate investment trust (“REIT”), and references to “ERPOP” mean ERP Operating Limited Partnership, an Illinois limited partnership. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:

 

img136481033_0.jpg 

 

EQR is the general partner of, and as of June 30, 2023 owned an approximate 96.8% ownership interest in, ERPOP. The remaining 3.2% interest is owned by limited partners. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of EQR consists of the same members as the management of ERPOP.

The Company is structured as an umbrella partnership REIT (“UPREIT”) and EQR contributes all net proceeds from its various equity offerings to ERPOP. In return for those contributions, EQR receives a number of OP Units (see definition below) in ERPOP equal to the number of Common Shares it has issued in the equity offering. The Company may acquire properties in transactions that include the issuance of OP Units as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales. This is one of the reasons why the Company is structured in the manner shown above. Based on the terms of ERPOP’s partnership agreement, OP Units can be exchanged with Common Shares on a one-for-one basis because the Company maintains a one-for-one relationship between the OP Units of ERPOP issued to EQR and the outstanding Common Shares.

The Company believes that combining the reports on Form 10-Q of EQR and ERPOP into this single report provides the following benefits:

enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

 


Table of Contents

 

The Company believes it is important to understand the few differences between EQR and ERPOP in the context of how EQR and ERPOP operate as a consolidated company. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR’s primary function is acting as the general partner of ERPOP. EQR also issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by EQR (which are contributed to the capital of ERPOP in exchange for additional partnership interests in ERPOP (“OP Units”) (on a one-for-one Common Share per OP Unit basis) or additional preference units in ERPOP (on a one-for-one preferred share per preference unit basis)), the Operating Partnership generates all remaining capital required by the Company’s business. These sources include the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility and/or commercial paper program, the issuance of secured and unsecured debt and partnership interests, and proceeds received from disposition of certain properties and joint venture interests.

Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements and as noncontrolling interests in the Company’s financial statements. The noncontrolling interests in the Operating Partnership’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in the Company’s financial statements include the same noncontrolling interests at the Operating Partnership level and limited partner OP Unit holders of the Operating Partnership. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at the Company and Operating Partnership levels.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of each entity’s debt, noncontrolling interests and shareholders’ equity or partners’ capital, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.

This report also includes separate Part I, Item 4, Controls and Procedures, sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership.

As general partner with control of ERPOP, EQR consolidates ERPOP for financial reporting purposes, and EQR essentially has no assets or liabilities other than its investment in ERPOP. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

 

 


Table of Contents

 

TABLE OF CONTENTS

 

 

PAGE

 

 

PART I.

 

 

 

Item 1. Financial Statements of Equity Residential:

 

 

 

Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

2

 

 

Consolidated Statements of Operations and Comprehensive Income for the six months and quarters ended June 30, 2023 and 2022

3

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

5

 

 

Consolidated Statements of Changes in Equity for the six months and quarters ended June 30, 2023 and 2022

8

 

 

Financial Statements of ERP Operating Limited Partnership:

 

 

 

Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

10

 

 

Consolidated Statements of Operations and Comprehensive Income for the six months and quarters ended June 30, 2023 and 2022

11

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

13

 

 

Consolidated Statements of Changes in Capital for the six months and quarters ended June 30, 2023 and 2022

16

 

 

Notes to Consolidated Financial Statements of Equity Residential and ERP Operating Limited Partnership

18

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

46

 

 

Item 4. Controls and Procedures

46

 

 

PART II.

 

 

Item 1. Legal Proceedings

47

 

Item 1A. Risk Factors

47

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

47

 

Item 3. Defaults Upon Senior Securities

47

 

Item 4. Mine Safety Disclosures

47

 

Item 5. Other Information

47

 

 

Item 6. Exhibits

47

 

1


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Land

 

$

5,579,211

 

 

$

5,580,878

 

Depreciable property

 

 

22,697,597

 

 

 

22,334,369

 

Projects under development

 

 

50,916

 

 

 

112,940

 

Land held for development

 

 

61,334

 

 

 

60,567

 

Investment in real estate

 

 

28,389,058

 

 

 

28,088,754

 

Accumulated depreciation

 

 

(9,428,549

)

 

 

(9,027,850

)

Investment in real estate, net

 

 

18,960,509

 

 

 

19,060,904

 

Investments in unconsolidated entities

 

 

304,710

 

 

 

279,024

 

Cash and cash equivalents

 

 

35,701

 

 

 

53,869

 

Restricted deposits

 

 

88,941

 

 

 

83,303

 

Right-of-use assets

 

 

463,704

 

 

 

462,956

 

Other assets

 

 

292,164

 

 

 

278,206

 

Total assets

 

$

20,145,729

 

 

$

20,218,262

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Mortgage notes payable, net

 

$

1,913,069

 

 

$

1,953,438

 

Notes, net

 

 

5,345,373

 

 

 

5,342,329

 

Line of credit and commercial paper

 

 

184,474

 

 

 

129,955

 

Accounts payable and accrued expenses

 

 

118,316

 

 

 

96,028

 

Accrued interest payable

 

 

66,238

 

 

 

66,310

 

Lease liabilities

 

 

313,866

 

 

 

308,748

 

Other liabilities

 

 

294,263

 

 

 

306,941

 

Security deposits

 

 

69,427

 

 

 

68,940

 

Distributions payable

 

 

258,841

 

 

 

244,621

 

Total liabilities

 

 

8,563,867

 

 

 

8,517,310

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interests – Operating Partnership

 

 

355,319

 

 

 

318,273

 

Equity:

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Preferred Shares of beneficial interest, $0.01 par value;
   
100,000,000 shares authorized; 745,600 shares issued and
   outstanding as of June 30, 2023 and December 31, 2022

 

 

37,280

 

 

 

37,280

 

Common Shares of beneficial interest, $0.01 par value;
   
1,000,000,000 shares authorized; 379,032,722 shares issued
   and outstanding as of June 30, 2023 and
378,429,708
   shares issued and outstanding as of December 31, 2022

 

 

3,790

 

 

 

3,784

 

Paid in capital

 

 

9,472,628

 

 

 

9,476,085

 

Retained earnings

 

 

1,506,460

 

 

 

1,658,837

 

Accumulated other comprehensive income (loss)

 

 

3,708

 

 

 

(2,547

)

Total shareholders’ equity

 

 

11,023,866

 

 

 

11,173,439

 

Noncontrolling Interests:

 

 

 

 

 

 

Operating Partnership

 

 

207,405

 

 

 

209,961

 

Partially Owned Properties

 

 

(4,728

)

 

 

(721

)

Total Noncontrolling Interests

 

 

202,677

 

 

 

209,240

 

Total equity

 

 

11,226,543

 

 

 

11,382,679

 

Total liabilities and equity

 

$

20,145,729

 

 

$

20,218,262

 

 

See accompanying notes

2


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

1,422,397

 

 

$

1,340,378

 

 

$

717,309

 

 

$

687,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Property and maintenance

 

 

262,350

 

 

 

241,229

 

 

 

124,771

 

 

 

116,355

 

Real estate taxes and insurance

 

 

209,749

 

 

 

202,538

 

 

 

103,080

 

 

 

101,850

 

Property management

 

 

62,145

 

 

 

57,306

 

 

 

30,679

 

 

 

26,559

 

General and administrative

 

 

35,041

 

 

 

33,661

 

 

 

18,876

 

 

 

16,423

 

Depreciation

 

 

437,185

 

 

 

453,767

 

 

 

221,355

 

 

 

223,806

 

Total expenses

 

 

1,006,470

 

 

 

988,501

 

 

 

498,761

 

 

 

484,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on sales of real estate properties

 

 

100,122

 

 

 

107,795

 

 

 

(87

)

 

 

107,897

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

516,049

 

 

 

459,672

 

 

 

218,461

 

 

 

309,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

3,669

 

 

 

4,124

 

 

 

2,131

 

 

 

596

 

Other expenses

 

 

(15,559

)

 

 

(5,436

)

 

 

(6,564

)

 

 

(2,380

)

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

Expense incurred, net

 

 

(131,991

)

 

 

(144,681

)

 

 

(65,590

)

 

 

(71,889

)

Amortization of deferred financing costs

 

 

(3,996

)

 

 

(4,201

)

 

 

(2,017

)

 

 

(2,124

)

Income before income and other taxes, income (loss) from
   investments in unconsolidated entities and net gain (loss)
   on sales of land parcels

 

 

368,172

 

 

 

309,478

 

 

 

146,421

 

 

 

234,137

 

Income and other tax (expense) benefit

 

 

(634

)

 

 

(573

)

 

 

(336

)

 

 

(291

)

Income (loss) from investments in unconsolidated entities

 

 

(2,605

)

 

 

(2,429

)

 

 

(1,223

)

 

 

(1,168

)

Net income

 

 

364,933

 

 

 

306,476

 

 

 

144,862

 

 

 

232,678

 

Net (income) loss attributable to Noncontrolling Interests:

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership

 

 

(11,613

)

 

 

(10,027

)

 

 

(4,554

)

 

 

(7,633

)

Partially Owned Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Net income attributable to controlling interests

 

 

351,238

 

 

 

294,866

 

 

 

139,203

 

 

 

224,101

 

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Net income available to Common Shares

 

$

349,693

 

 

$

293,321

 

 

$

138,430

 

 

$

223,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Common Shares

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

Weighted average Common Shares outstanding

 

 

378,492

 

 

 

375,640

 

 

 

378,642

 

 

 

375,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Common Shares

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

Weighted average Common Shares outstanding

 

 

391,063

 

 

 

389,463

 

 

 

391,187

 

 

 

389,363

 

 

See accompanying notes

3


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per share data)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

 

$

144,862

 

 

$

232,678

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) – derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

4,054

 

 

 

(1,259

)

 

 

13,834

 

 

 

(1,259

)

Losses reclassified into earnings from other comprehensive
   income

 

 

2,201

 

 

 

4,881

 

 

 

1,106

 

 

 

2,456

 

Other comprehensive income (loss)

 

 

6,255

 

 

 

3,622

 

 

 

14,940

 

 

 

1,197

 

Comprehensive income

 

 

371,188

 

 

 

310,098

 

 

 

159,802

 

 

 

233,875

 

Comprehensive (income) attributable to Noncontrolling Interests

 

 

(13,890

)

 

 

(11,730

)

 

 

(6,135

)

 

 

(8,617

)

Comprehensive income attributable to controlling interests

 

$

357,298

 

 

$

298,368

 

 

$

153,667

 

 

$

225,258

 

See accompanying notes

4


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

437,185

 

 

 

453,767

 

Amortization of deferred financing costs

 

 

3,996

 

 

 

4,201

 

Amortization of discounts and premiums on debt

 

 

1,740

 

 

 

2,891

 

Amortization of deferred settlements on derivative instruments

 

 

2,195

 

 

 

4,875

 

Amortization of right-of-use assets

 

 

6,357

 

 

 

6,103

 

Write-off of pursuit costs

 

 

1,993

 

 

 

2,515

 

(Income) loss from investments in unconsolidated entities

 

 

2,605

 

 

 

2,429

 

Distributions from unconsolidated entities – return on capital

 

 

290

 

 

 

164

 

Net (gain) loss on sales of real estate properties

 

 

(100,122

)

 

 

(107,795

)

Realized (gain) loss on sale of investment securities

 

 

87

 

 

 

(2,064

)

Compensation paid with Company Common Shares

 

 

20,845

 

 

 

18,600

 

Changes in assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in other assets

 

 

(13,258

)

 

 

(2,096

)

Increase (decrease) in accounts payable and accrued expenses

 

 

25,424

 

 

 

22,615

 

Increase (decrease) in accrued interest payable

 

 

(72

)

 

 

(473

)

Increase (decrease) in lease liabilities

 

 

(658

)

 

 

(817

)

Increase (decrease) in other liabilities

 

 

(8,047

)

 

 

(23,985

)

Increase (decrease) in security deposits

 

 

487

 

 

 

3,468

 

Net cash provided by operating activities

 

 

745,980

 

 

 

690,874

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Investment in real estate – acquisitions

 

 

(186,676

)

 

 

(113,046

)

Investment in real estate – development/other

 

 

(46,815

)

 

 

(55,491

)

Capital expenditures to real estate

 

 

(135,247

)

 

 

(83,304

)

Non-real estate capital additions

 

 

(1,043

)

 

 

(981

)

Interest capitalized for real estate and unconsolidated entities under development

 

 

(6,979

)

 

 

(2,267

)

Proceeds from disposition of real estate, net

 

 

133,916

 

 

 

255,922

 

Investments in unconsolidated entities – acquisitions

 

 

(989

)

 

 

 

Investments in unconsolidated entities – development/other

 

 

(25,413

)

 

 

(48,577

)

Distributions from unconsolidated entities – return of capital

 

 

15

 

 

 

9

 

Purchase of investment securities and other investments

 

 

(2,500

)

 

 

(1,034

)

Proceeds from sale of investment securities

 

 

452

 

 

 

3,434

 

Net cash provided by (used for) investing activities

 

 

(271,279

)

 

 

(45,335

)

 

See accompanying notes

5


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Debt financing costs

 

$

 

 

$

(228

)

Mortgage notes payable, net:

 

 

 

 

 

 

Proceeds

 

 

22,896

 

 

 

14,586

 

Lump sum payoffs

 

 

(64,722

)

 

 

(260,874

)

Scheduled principal repayments

 

 

(54

)

 

 

(2,985

)

Line of credit and commercial paper:

 

 

 

 

 

 

Commercial paper proceeds

 

 

2,382,619

 

 

 

2,836,037

 

Commercial paper repayments

 

 

(2,328,100

)

 

 

(2,966,121

)

Finance ground lease principal payments

 

 

(1,329

)

 

 

(1,229

)

Proceeds from Employee Share Purchase Plan (ESPP)

 

 

2,124

 

 

 

2,378

 

Proceeds from exercise of options

 

 

11,358

 

 

 

18,928

 

Payment of offering costs

 

 

 

 

 

(487

)

Other financing activities, net

 

 

(31

)

 

 

(31

)

Acquisition of Noncontrolling Interests – Partially Owned Properties

 

 

(3,737

)

 

 

(32,178

)

Contributions – Noncontrolling Interests – Partially Owned Properties

 

 

9

 

 

 

603

 

Contributions – Noncontrolling Interests – Operating Partnership

 

 

1

 

 

 

1

 

Distributions:

 

 

 

 

 

 

Common Shares

 

 

(487,483

)

 

 

(461,605

)

Preferred Shares

 

 

(2,319

)

 

 

(1,545

)

Noncontrolling Interests – Operating Partnership

 

 

(15,233

)

 

 

(15,142

)

Noncontrolling Interests – Partially Owned Properties

 

 

(3,230

)

 

 

(17,232

)

Net cash provided by (used for) financing activities

 

 

(487,231

)

 

 

(887,124

)

Net increase (decrease) in cash and cash equivalents and restricted deposits

 

 

(12,530

)

 

 

(241,585

)

Cash and cash equivalents and restricted deposits, beginning of period

 

 

137,172

 

 

 

360,236

 

Cash and cash equivalents and restricted deposits, end of period

 

$

124,642

 

 

$

118,651

 

 

 

 

 

 

 

 

Cash and cash equivalents and restricted deposits, end of period

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,701

 

 

$

45,010

 

Restricted deposits

 

 

88,941

 

 

 

73,641

 

Total cash and cash equivalents and restricted deposits, end of period

 

$

124,642

 

 

$

118,651

 

 

See accompanying notes

6


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

125,518

 

 

$

136,787

 

Net cash paid (received) for income and other taxes

 

$

911

 

 

$

687

 

Amortization of deferred financing costs:

 

 

 

 

 

 

Investment in real estate, net

 

$

(211

)

 

$

(253

)

Other assets

 

$

1,392

 

 

$

1,170

 

Mortgage notes payable, net

 

$

895

 

 

$

1,159

 

Notes, net

 

$

1,920

 

 

$

2,125

 

Amortization of discounts and premiums on debt:

 

 

 

 

 

 

Mortgage notes payable, net

 

$

616

 

 

$

1,545

 

Notes, net

 

$

1,124

 

 

$

1,346

 

Amortization of deferred settlements on derivative instruments:

 

 

 

 

 

 

Other liabilities

 

$

(6

)

 

$

(6

)

Accumulated other comprehensive income

 

$

2,201

 

 

$

4,881

 

Write-off of pursuit costs:

 

 

 

 

 

 

Investment in real estate, net

 

$

316

 

 

$

761

 

Investments in unconsolidated entities

 

$

1,111

 

 

$

1,637

 

Other assets

 

$

566

 

 

$

117

 

(Income) loss from investments in unconsolidated entities:

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

1,972

 

 

$

1,797

 

Other liabilities

 

$

633

 

 

$

632

 

Realized/unrealized (gain) loss on derivative instruments:

 

 

 

 

 

 

Other assets

 

$

(3,359

)

 

$

 

Other liabilities

 

$

(695

)

 

$

1,259

 

Accumulated other comprehensive income

 

$

4,054

 

 

$

(1,259

)

Interest capitalized for real estate and unconsolidated entities under development:

 

 

 

 

 

 

Investment in real estate, net

 

$

(2,988

)

 

$

(675

)

Investments in unconsolidated entities

 

$

(3,991

)

 

$

(1,592

)

Investments in unconsolidated entities – development/other:

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

(24,633

)

 

$

(47,887

)

Other liabilities

 

$

(780

)

 

$

(690

)

Debt financing costs:

 

 

 

 

 

 

Mortgage notes payable, net

 

$

 

 

$

(228

)

Right-of-use assets and lease liabilities initial measurement and reclassifications:

 

 

 

 

 

 

Right-of-use assets

 

$

(7,105

)

 

$

(224

)

Lease liabilities

 

$

7,105

 

 

$

224

 

Non-cash share distribution and other transfers from unconsolidated entities:

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

539

 

 

$

4,048

 

Other assets

 

$

(539

)

 

$

(4,048

)

 

See accompanying notes

7


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

PREFERRED SHARES

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

Balance, end of period

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

COMMON SHARES, $0.01 PAR VALUE

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

3,784

 

 

$

3,755

 

 

$

3,789

 

 

$

3,760

 

Conversion of OP Units into Common Shares

 

 

2

 

 

 

 

 

 

 

 

 

 

Exercise of share options

 

 

2

 

 

 

4

 

 

 

 

 

 

1

 

Share-based employee compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted shares

 

 

2

 

 

 

2

 

 

 

1

 

 

 

 

Balance, end of period

 

$

3,790

 

 

$

3,761

 

 

$

3,790

 

 

$

3,761

 

PAID IN CAPITAL

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

9,476,085

 

 

$

9,121,122

 

 

$

9,488,320

 

 

$

9,142,969

 

Common Share Issuance:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of OP Units into Common Shares

 

 

4,657

 

 

 

1,484

 

 

 

986

 

 

 

1,310

 

Exercise of share options

 

 

11,356

 

 

 

18,924

 

 

 

3,246

 

 

 

4,583

 

Employee Share Purchase Plan (ESPP)

 

 

2,124

 

 

 

2,378

 

 

 

672

 

 

 

1,409

 

Share-based employee compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted shares

 

 

7,943

 

 

 

7,359

 

 

 

4,290

 

 

 

3,750

 

Share options

 

 

3,125

 

 

 

1,390

 

 

 

1,628

 

 

 

514

 

ESPP discount

 

 

398

 

 

 

420

 

 

 

138

 

 

 

249

 

Offering costs

 

 

 

 

 

(487

)

 

 

 

 

 

(373

)

Supplemental Executive Retirement Plan (SERP)

 

 

148

 

 

 

(269

)

 

 

(343

)

 

 

(106

)

Acquisition of Noncontrolling Interests – Partially Owned Properties

 

 

(900

)

 

 

(27,355

)

 

 

(900

)

 

 

(27,355

)

Change in market value of Redeemable Noncontrolling Interests –
   Operating Partnership

 

 

(39,123

)

 

 

98,140

 

 

 

(33,177

)

 

 

97,201

 

Adjustment for Noncontrolling Interests ownership in Operating
   Partnership

 

 

6,815

 

 

 

6,632

 

 

 

7,768

 

 

 

5,587

 

Balance, end of period

 

$

9,472,628

 

 

$

9,229,738

 

 

$

9,472,628

 

 

$

9,229,738

 

RETAINED EARNINGS

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

1,658,837

 

 

$

1,827,063

 

 

$

1,619,131

 

 

$

1,661,705

 

Net income attributable to controlling interests

 

 

351,238

 

 

 

294,866

 

 

 

139,203

 

 

 

224,101

 

Common Share distributions

 

 

(502,070

)

 

 

(470,424

)

 

 

(251,101

)

 

 

(235,073

)

Preferred Share distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Balance, end of period

 

$

1,506,460

 

 

$

1,649,960

 

 

$

1,506,460

 

 

$

1,649,960

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(2,547

)

 

$

(34,272

)

 

$

(11,232

)

 

$

(31,847

)

Accumulated other comprehensive income (loss) – derivative
   instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

4,054

 

 

 

(1,259

)

 

 

13,834

 

 

 

(1,259

)

Losses reclassified into earnings from other comprehensive
   income

 

 

2,201

 

 

 

4,881

 

 

 

1,106

 

 

 

2,456

 

Balance, end of period

 

$

3,708

 

 

$

(30,650

)

 

$

3,708

 

 

$

(30,650

)

 

 

 

 

 

 

 

 

 

 

 

 

DISTRIBUTIONS

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per Common Share outstanding

 

$

1.325

 

 

$

1.25

 

 

$

0.6625

 

 

$

0.625

 

 

See accompanying notes

8


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

NONCONTROLLING INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING PARTNERSHIP

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

209,961

 

 

$

214,094

 

 

$

211,718

 

 

$

217,451

 

Issuance of restricted units to Noncontrolling Interests

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

Conversion of OP Units held by Noncontrolling Interests into OP
   Units held by General Partner

 

 

(4,659

)

 

 

(1,484

)

 

 

(986

)

 

 

(1,310

)

Equity compensation associated with Noncontrolling Interests

 

 

10,867

 

 

 

13,159

 

 

 

6,213

 

 

 

5,361

 

Net income attributable to Noncontrolling Interests

 

 

11,613

 

 

 

10,027

 

 

 

4,554

 

 

 

7,633

 

Distributions to Noncontrolling Interests

 

 

(15,640

)

 

 

(15,488

)

 

 

(7,736

)

 

 

(7,593

)

Change in carrying value of Redeemable Noncontrolling Interests –
   Operating Partnership

 

 

2,077

 

 

 

2,649

 

 

 

1,409

 

 

 

371

 

Adjustment for Noncontrolling Interests ownership in Operating
   Partnership

 

 

(6,815

)

 

 

(6,632

)

 

 

(7,768

)

 

 

(5,587

)

Balance, end of period

 

$

207,405

 

 

$

216,326

 

 

$

207,405

 

 

$

216,326

 

PARTIALLY OWNED PROPERTIES

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(721

)

 

$

18,166

 

 

$

(2,553

)

 

$

3,415

 

Net income attributable to Noncontrolling Interests

 

 

2,082

 

 

 

1,583

 

 

 

1,105

 

 

 

944

 

Contributions by Noncontrolling Interests

 

 

9

 

 

 

603

 

 

 

9

 

 

 

157

 

Distributions to Noncontrolling Interests

 

 

(3,261

)

 

 

(17,263

)

 

 

(452

)

 

 

(1,427

)

Acquisition of Noncontrolling Interests – Partially Owned Properties

 

 

(2,837

)

 

 

(4,823

)

 

 

(2,837

)

 

 

(4,823

)

Balance, end of period

 

$

(4,728

)

 

$

(1,734

)

 

$

(4,728

)

 

$

(1,734

)

 

See accompanying notes

9


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Land

 

$

5,579,211

 

 

$

5,580,878

 

Depreciable property

 

 

22,697,597

 

 

 

22,334,369

 

Projects under development

 

 

50,916

 

 

 

112,940

 

Land held for development

 

 

61,334

 

 

 

60,567

 

Investment in real estate

 

 

28,389,058

 

 

 

28,088,754

 

Accumulated depreciation

 

 

(9,428,549

)

 

 

(9,027,850

)

Investment in real estate, net

 

 

18,960,509

 

 

 

19,060,904

 

Investments in unconsolidated entities

 

 

304,710

 

 

 

279,024

 

Cash and cash equivalents

 

 

35,701

 

 

 

53,869

 

Restricted deposits

 

 

88,941

 

 

 

83,303

 

Right-of-use assets

 

 

463,704

 

 

 

462,956

 

Other assets

 

 

292,164

 

 

 

278,206

 

Total assets

 

$

20,145,729

 

 

$

20,218,262

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITAL

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Mortgage notes payable, net

 

$

1,913,069

 

 

$

1,953,438

 

Notes, net

 

 

5,345,373

 

 

 

5,342,329

 

Line of credit and commercial paper

 

 

184,474

 

 

 

129,955

 

Accounts payable and accrued expenses

 

 

118,316

 

 

 

96,028

 

Accrued interest payable

 

 

66,238

 

 

 

66,310

 

Lease liabilities

 

 

313,866

 

 

 

308,748

 

Other liabilities

 

 

294,263

 

 

 

306,941

 

Security deposits

 

 

69,427

 

 

 

68,940

 

Distributions payable

 

 

258,841

 

 

 

244,621

 

Total liabilities

 

 

8,563,867

 

 

 

8,517,310

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Limited Partners

 

 

355,319

 

 

 

318,273

 

Capital:

 

 

 

 

 

 

Partners’ Capital:

 

 

 

 

 

 

Preference Units

 

 

37,280

 

 

 

37,280

 

General Partner

 

 

10,982,878

 

 

 

11,138,706

 

Limited Partners

 

 

207,405

 

 

 

209,961

 

Accumulated other comprehensive income (loss)

 

 

3,708

 

 

 

(2,547

)

Total partners’ capital

 

 

11,231,271

 

 

 

11,383,400

 

Noncontrolling Interests – Partially Owned Properties

 

 

(4,728

)

 

 

(721

)

Total capital

 

 

11,226,543

 

 

 

11,382,679

 

Total liabilities and capital

 

$

20,145,729

 

 

$

20,218,262

 

 

See accompanying notes

10


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per Unit data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

1,422,397

 

 

$

1,340,378

 

 

$

717,309

 

 

$

687,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Property and maintenance

 

 

262,350

 

 

 

241,229

 

 

 

124,771

 

 

 

116,355

 

Real estate taxes and insurance

 

 

209,749

 

 

 

202,538

 

 

 

103,080

 

 

 

101,850

 

Property management

 

 

62,145

 

 

 

57,306

 

 

 

30,679

 

 

 

26,559

 

General and administrative

 

 

35,041

 

 

 

33,661

 

 

 

18,876

 

 

 

16,423

 

Depreciation

 

 

437,185

 

 

 

453,767

 

 

 

221,355

 

 

 

223,806

 

Total expenses

 

 

1,006,470

 

 

 

988,501

 

 

 

498,761

 

 

 

484,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on sales of real estate properties

 

 

100,122

 

 

 

107,795

 

 

 

(87

)

 

 

107,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

516,049

 

 

 

459,672

 

 

 

218,461

 

 

 

309,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

3,669

 

 

 

4,124

 

 

 

2,131

 

 

 

596

 

Other expenses

 

 

(15,559

)

 

 

(5,436

)

 

 

(6,564

)

 

 

(2,380

)

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

Expense incurred, net

 

 

(131,991

)

 

 

(144,681

)

 

 

(65,590

)

 

 

(71,889

)

Amortization of deferred financing costs

 

 

(3,996

)

 

 

(4,201

)

 

 

(2,017

)

 

 

(2,124

)

Income before income and other taxes, income (loss) from
   investments in unconsolidated entities and net gain (loss)
   on sales of land parcels

 

 

368,172

 

 

 

309,478

 

 

 

146,421

 

 

 

234,137

 

Income and other tax (expense) benefit

 

 

(634

)

 

 

(573

)

 

 

(336

)

 

 

(291

)

Income (loss) from investments in unconsolidated entities

 

 

(2,605

)

 

 

(2,429

)

 

 

(1,223

)

 

 

(1,168

)

Net income

 

 

364,933

 

 

 

306,476

 

 

 

144,862

 

 

 

232,678

 

Net (income) loss attributable to Noncontrolling Interests – Partially Owned
   Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Net income attributable to controlling interests

 

$

362,851

 

 

$

304,893

 

 

$

143,757

 

 

$

231,734

 

ALLOCATION OF NET INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

Preference Units

 

$

1,545

 

 

$

1,545

 

 

$

773

 

 

$

773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Partner

 

$

349,693

 

 

$

293,321

 

 

$

138,430

 

 

$

223,328

 

Limited Partners

 

 

11,613

 

 

 

10,027

 

 

 

4,554

 

 

 

7,633

 

Net income available to Units

 

$

361,306

 

 

$

303,348

 

 

$

142,984

 

 

$

230,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Unit – basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Units

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

Weighted average Units outstanding

 

 

389,942

 

 

 

387,531

 

 

 

390,032

 

 

 

387,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Unit – diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Units

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

Weighted average Units outstanding

 

 

391,063

 

 

 

389,463

 

 

 

391,187

 

 

 

389,363

 

 

See accompanying notes

11


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

 

$

144,862

 

 

$

232,678

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) – derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

4,054

 

 

 

(1,259

)

 

 

13,834

 

 

 

(1,259

)

Losses reclassified into earnings from other comprehensive
   income

 

 

2,201

 

 

 

4,881

 

 

 

1,106

 

 

 

2,456

 

Other comprehensive income (loss)

 

 

6,255

 

 

 

3,622

 

 

 

14,940

 

 

 

1,197

 

Comprehensive income

 

 

371,188

 

 

 

310,098

 

 

 

159,802

 

 

 

233,875

 

Comprehensive (income) attributable to Noncontrolling Interests –
   Partially Owned Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Comprehensive income attributable to controlling interests

 

$

369,106

 

 

$

308,515

 

 

$

158,697

 

 

$

232,931

 

 

See accompanying notes

12


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

437,185

 

 

 

453,767

 

Amortization of deferred financing costs

 

 

3,996

 

 

 

4,201

 

Amortization of discounts and premiums on debt

 

 

1,740

 

 

 

2,891

 

Amortization of deferred settlements on derivative instruments

 

 

2,195

 

 

 

4,875

 

Amortization of right-of-use assets

 

 

6,357

 

 

 

6,103

 

Write-off of pursuit costs

 

 

1,993

 

 

 

2,515

 

(Income) loss from investments in unconsolidated entities

 

 

2,605

 

 

 

2,429

 

Distributions from unconsolidated entities – return on capital

 

 

290

 

 

 

164

 

Net (gain) loss on sales of real estate properties

 

 

(100,122

)

 

 

(107,795

)

Realized (gain) loss on sale of investment securities

 

 

87

 

 

 

(2,064

)

Compensation paid with Company Common Shares

 

 

20,845

 

 

 

18,600

 

Changes in assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in other assets

 

 

(13,258

)

 

 

(2,096

)

Increase (decrease) in accounts payable and accrued expenses

 

 

25,424

 

 

 

22,615

 

Increase (decrease) in accrued interest payable

 

 

(72

)

 

 

(473

)

Increase (decrease) in lease liabilities

 

 

(658

)

 

 

(817

)

Increase (decrease) in other liabilities

 

 

(8,047

)

 

 

(23,985

)

Increase (decrease) in security deposits

 

 

487

 

 

 

3,468

 

Net cash provided by operating activities

 

 

745,980

 

 

 

690,874

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Investment in real estate – acquisitions

 

 

(186,676

)

 

 

(113,046

)

Investment in real estate – development/other

 

 

(46,815

)

 

 

(55,491

)

Capital expenditures to real estate

 

 

(135,247

)

 

 

(83,304

)

Non-real estate capital additions

 

 

(1,043

)

 

 

(981

)

Interest capitalized for real estate and unconsolidated entities under development

 

 

(6,979

)

 

 

(2,267

)

Proceeds from disposition of real estate, net

 

 

133,916

 

 

 

255,922

 

Investments in unconsolidated entities – acquisitions

 

 

(989

)

 

 

 

Investments in unconsolidated entities – development/other

 

 

(25,413

)

 

 

(48,577

)

Distributions from unconsolidated entities – return of capital

 

 

15

 

 

 

9

 

Purchase of investment securities and other investments

 

 

(2,500

)

 

 

(1,034

)

Proceeds from sale of investment securities

 

 

452

 

 

 

3,434

 

Net cash provided by (used for) investing activities

 

 

(271,279

)

 

 

(45,335

)

 

See accompanying notes

13


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Debt financing costs

 

$

 

 

$

(228

)

Mortgage notes payable, net:

 

 

 

 

 

 

Proceeds

 

 

22,896

 

 

 

14,586

 

Lump sum payoffs

 

 

(64,722

)

 

 

(260,874

)

Scheduled principal repayments

 

 

(54

)

 

 

(2,985

)

Line of credit and commercial paper:

 

 

 

 

 

 

Commercial paper proceeds

 

 

2,382,619

 

 

 

2,836,037

 

Commercial paper repayments

 

 

(2,328,100

)

 

 

(2,966,121

)

Finance ground lease principal payments

 

 

(1,329

)

 

 

(1,229

)

Proceeds from EQR’s Employee Share Purchase Plan (ESPP)

 

 

2,124

 

 

 

2,378

 

Proceeds from exercise of EQR options

 

 

11,358

 

 

 

18,928

 

Payment of offering costs

 

 

 

 

 

(487

)

Other financing activities, net

 

 

(31

)

 

 

(31

)

Acquisition of Noncontrolling Interests – Partially Owned Properties

 

 

(3,737

)

 

 

(32,178

)

Contributions – Noncontrolling Interests – Partially Owned Properties

 

 

9

 

 

 

603

 

Contributions – Limited Partners

 

 

1

 

 

 

1

 

Distributions:

 

 

 

 

 

 

OP Units – General Partner

 

 

(487,483

)

 

 

(461,605

)

Preference Units

 

 

(2,319

)

 

 

(1,545

)

OP Units – Limited Partners

 

 

(15,233

)

 

 

(15,142

)

Noncontrolling Interests – Partially Owned Properties

 

 

(3,230

)

 

 

(17,232

)

Net cash provided by (used for) financing activities

 

 

(487,231

)

 

 

(887,124

)

Net increase (decrease) in cash and cash equivalents and restricted deposits

 

 

(12,530

)

 

 

(241,585

)

Cash and cash equivalents and restricted deposits, beginning of period

 

 

137,172

 

 

 

360,236

 

Cash and cash equivalents and restricted deposits, end of period

 

$

124,642

 

 

$

118,651

 

 

 

 

 

 

 

 

Cash and cash equivalents and restricted deposits, end of period

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,701

 

 

$

45,010

 

Restricted deposits

 

 

88,941

 

 

 

73,641

 

Total cash and cash equivalents and restricted deposits, end of period

 

$

124,642

 

 

$

118,651

 

 

See accompanying notes

14


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

125,518

 

 

$

136,787

 

Net cash paid (received) for income and other taxes

 

$

911

 

 

$

687

 

Amortization of deferred financing costs:

 

 

 

 

 

 

Investment in real estate, net

 

$

(211

)

 

$

(253

)

Other assets

 

$

1,392

 

 

$

1,170

 

Mortgage notes payable, net

 

$

895

 

 

$

1,159

 

Notes, net

 

$

1,920

 

 

$

2,125

 

Amortization of discounts and premiums on debt:

 

 

 

 

 

 

Mortgage notes payable, net

 

$

616

 

 

$

1,545

 

Notes, net

 

$

1,124

 

 

$

1,346

 

Amortization of deferred settlements on derivative instruments:

 

 

 

 

 

 

Other liabilities

 

$

(6

)

 

$

(6

)

Accumulated other comprehensive income

 

$

2,201

 

 

$

4,881

 

Write-off of pursuit costs:

 

 

 

 

 

 

Investment in real estate, net

 

$

316

 

 

$

761

 

Investments in unconsolidated entities

 

$

1,111

 

 

$

1,637

 

Other assets

 

$

566

 

 

$

117

 

(Income) loss from investments in unconsolidated entities:

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

1,972

 

 

$

1,797

 

Other liabilities

 

$

633

 

 

$

632

 

Realized/unrealized (gain) loss on derivative instruments:

 

 

 

 

 

 

Other assets

 

$

(3,359

)

 

$

 

Other liabilities

 

$

(695

)

 

$

1,259

 

Accumulated other comprehensive income

 

$

4,054

 

 

$

(1,259

)

Interest capitalized for real estate and unconsolidated entities under development:

 

 

 

 

 

 

Investment in real estate, net

 

$

(2,988

)

 

$

(675

)

Investments in unconsolidated entities

 

$

(3,991

)

 

$

(1,592

)

Investments in unconsolidated entities – development/other:

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

(24,633

)

 

$

(47,887

)

Other liabilities

 

$

(780

)

 

$

(690

)

Debt financing costs:

 

 

 

 

 

 

Mortgage notes payable, net

 

$

 

 

$

(228

)

Right-of-use assets and lease liabilities initial measurement and reclassifications:

 

 

 

 

 

 

Right-of-use assets

 

$

(7,105

)

 

$

(224

)

Lease liabilities

 

$

7,105

 

 

$

224

 

Non-cash share distribution and other transfers from unconsolidated entities:

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

539

 

 

$

4,048

 

Other assets

 

$

(539

)

 

$

(4,048

)

 

See accompanying notes

15


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Amounts in thousands except per Unit data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

 

 

 

 

PREFERENCE UNITS

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

Balance, end of period

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

 

$

37,280

 

GENERAL PARTNER

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

11,138,706

 

 

$

10,951,940

 

 

$

11,111,240

 

 

$

10,808,434

 

OP Unit Issuance:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of OP Units held by Limited Partners into OP Units
   held by General Partner

 

 

4,659

 

 

 

1,484

 

 

 

986

 

 

 

1,310

 

Exercise of EQR share options

 

 

11,358

 

 

 

18,928

 

 

 

3,246

 

 

 

4,584

 

EQR’s Employee Share Purchase Plan (ESPP)

 

 

2,124

 

 

 

2,378

 

 

 

672

 

 

 

1,409

 

Share-based employee compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

EQR restricted shares

 

 

7,945

 

 

 

7,361

 

 

 

4,291

 

 

 

3,750

 

EQR share options

 

 

3,125

 

 

 

1,390

 

 

 

1,628

 

 

 

514

 

EQR ESPP discount

 

 

398

 

 

 

420

 

 

 

138

 

 

 

249

 

Net income available to Units – General Partner

 

 

349,693

 

 

 

293,321

 

 

 

138,430

 

 

 

223,328

 

OP Units – General Partner distributions

 

 

(502,070

)

 

 

(470,424

)

 

 

(251,101

)

 

 

(235,073

)

Offering costs

 

 

 

 

 

(487

)

 

 

 

 

 

(373

)

Supplemental Executive Retirement Plan (SERP)

 

 

148

 

 

 

(269

)

 

 

(343

)

 

 

(106

)

Acquisition of Noncontrolling Interests – Partially Owned Properties

 

 

(900

)

 

 

(27,355

)

 

 

(900

)

 

 

(27,355

)

Change in market value of Redeemable Limited Partners

 

 

(39,123

)

 

 

98,140

 

 

 

(33,177

)

 

 

97,201

 

Adjustment for Limited Partners ownership in Operating Partnership

 

 

6,815

 

 

 

6,632

 

 

 

7,768

 

 

 

5,587

 

Balance, end of period

 

$

10,982,878

 

 

$

10,883,459

 

 

$

10,982,878

 

 

$

10,883,459

 

LIMITED PARTNERS

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

209,961

 

 

$

214,094

 

 

$

211,718

 

 

$

217,451

 

Issuance of restricted units to Limited Partners

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

Conversion of OP Units held by Limited Partners into OP Units held
   by General Partner

 

 

(4,659

)

 

 

(1,484

)

 

 

(986

)

 

 

(1,310

)

Equity compensation associated with Units – Limited Partners

 

 

10,867

 

 

 

13,159

 

 

 

6,213

 

 

 

5,361

 

Net income available to Units – Limited Partners

 

 

11,613

 

 

 

10,027

 

 

 

4,554

 

 

 

7,633

 

Units – Limited Partners distributions

 

 

(15,640

)

 

 

(15,488

)

 

 

(7,736

)

 

 

(7,593

)

Change in carrying value of Redeemable Limited Partners

 

 

2,077

 

 

 

2,649

 

 

 

1,409

 

 

 

371

 

Adjustment for Limited Partners ownership in Operating Partnership

 

 

(6,815

)

 

 

(6,632

)

 

 

(7,768

)

 

 

(5,587

)

Balance, end of period

 

$

207,405

 

 

$

216,326

 

 

$

207,405

 

 

$

216,326

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(2,547

)

 

$

(34,272

)

 

$

(11,232

)

 

$

(31,847

)

Accumulated other comprehensive income (loss) – derivative
   instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

4,054

 

 

 

(1,259

)

 

 

13,834

 

 

 

(1,259

)

Losses reclassified into earnings from other comprehensive
   income

 

 

2,201

 

 

 

4,881

 

 

 

1,106

 

 

 

2,456

 

Balance, end of period

 

$

3,708

 

 

$

(30,650

)

 

$

3,708

 

 

$

(30,650

)

 

 

 

 

 

 

 

 

 

 

 

 

 

DISTRIBUTIONS

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per Unit outstanding

 

$

1.325

 

 

$

1.25

 

 

$

0.6625

 

 

$

0.625

 

 

See accompanying notes

16


Table of Contents

 

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)

(Amounts in thousands except per Unit data)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

NONCONTROLLING INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

NONCONTROLLING INTERESTS – PARTIALLY OWNED
   PROPERTIES

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

(721

)

 

$

18,166

 

 

$

(2,553

)

 

$

3,415

 

Net income attributable to Noncontrolling Interests

 

 

2,082

 

 

 

1,583

 

 

 

1,105

 

 

 

944

 

Contributions by Noncontrolling Interests

 

 

9

 

 

 

603

 

 

 

9

 

 

 

157

 

Distributions to Noncontrolling Interests

 

 

(3,261

)

 

 

(17,263

)

 

 

(452

)

 

 

(1,427

)

Acquisition of Noncontrolling Interests – Partially Owned Properties

 

 

(2,837

)

 

 

(4,823

)

 

 

(2,837

)

 

 

(4,823

)

Balance, end of period

 

$

(4,728

)

 

$

(1,734

)

 

$

(4,728

)

 

$

(1,734

)

 

See accompanying notes

17


Table of Contents

 

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Business

Equity Residential (“EQR”) is an S&P 500 company focused on the acquisition, development and management of residential properties located in and around dynamic cities that attract affluent long-term renters, a business that is conducted on its behalf by ERP Operating Limited Partnership (“ERPOP”). EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.

EQR is the general partner of, and as of June 30, 2023 owned an approximate 96.8% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.

As of June 30, 2023, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 304 properties located in 10 states and the District of Columbia consisting of 80,212 apartment units. The ownership breakdown includes (table does not include any uncompleted development properties):

 

 

 

Properties

 

 

Apartment Units

 

Wholly Owned Properties

 

 

289

 

 

 

76,986

 

Partially Owned Properties – Consolidated

 

 

15

 

 

 

3,226

 

 

 

 

304

 

 

 

80,212

 

 

2.
Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

In preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The balance sheets at December 31, 2022 have been derived from the audited financial statements at that date but do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, including definitions of capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

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Income and Other Taxes

EQR has elected to be taxed as a REIT. This, along with the nature of the operations of its operating properties, resulted in no provision for federal income taxes at the EQR level. In addition, ERPOP generally is not liable for federal income taxes as the partners recognize their allocable share of income or loss in their tax returns; therefore no provision for federal income taxes has been made at the ERPOP level. Historically, the Company has generally only incurred certain state and local income, excise and franchise taxes. The Company has elected taxable REIT subsidiary (“TRS”) status for certain of its corporate subsidiaries and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued an amendment to the debt and equity financial instruments standards which simplifies the accounting for convertible instruments and accounting for contracts in an entity’s own equity. The Company adopted the standard when effective on January 1, 2022 and it had no impact on its consolidated results of operations and financial position.

In March 2020, the FASB issued an amendment to the reference rate reform standard which provides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. The new standard was effective for the Company upon issuance and elections could be made through December 31, 2024. The Company elected to apply the hedge accounting expedients and application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

3.
Equity, Capital and Other Interests

The Company refers to “Common Shares” and “Units” (which refer to both OP Units and restricted units) as equity securities for EQR and “General Partner Units” and “Limited Partner Units” as equity securities for ERPOP. To provide a streamlined and more readable presentation of the disclosures for the Company and the Operating Partnership, several sections below refer to the respective terminology for each with the same financial information and separate sections are provided, where needed, to further distinguish any differences in financial information and terminology.

The following table presents the changes in the Company’s issued and outstanding Common Shares and Units for the six months ended June 30, 2023 and 2022:

 

 

2023

 

 

2022

 

Common Shares

 

 

 

 

 

 

Common Shares outstanding at January 1,

 

 

378,429,708

 

 

 

375,527,195

 

Common Shares Issued:

 

 

 

 

 

 

Conversion of OP Units

 

 

180,629

 

 

 

31,089

 

Exercise of share options

 

 

232,317

 

 

 

348,510

 

Employee Share Purchase Plan (ESPP)

 

 

40,346

 

 

 

35,669

 

Restricted share grants, net

 

 

149,722

 

 

 

175,970

 

Common Shares outstanding at June 30,

 

 

379,032,722

 

 

 

376,118,433

 

Units

 

 

 

 

 

 

Units outstanding at January 1,

 

 

12,429,737

 

 

 

12,659,027

 

Restricted unit grants, net

 

 

166,344

 

 

 

223,242

 

Conversion of OP Units to Common Shares

 

 

(180,629

)

 

 

(31,089

)

Units outstanding at June 30,

 

 

12,415,452

 

 

 

12,851,180

 

Total Common Shares and Units outstanding at June 30,

 

 

391,448,174

 

 

 

388,969,613

 

Units Ownership Interest in Operating Partnership

 

 

3.2

%

 

 

3.3

%

 

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The following table presents the changes in the Operating Partnership’s issued and outstanding General Partner Units and Limited Partner Units for the six months ended June 30, 2023 and 2022:

 

 

2023

 

 

2022

 

General and Limited Partner Units

 

 

 

 

 

 

General and Limited Partner Units outstanding at January 1,

 

 

390,859,445

 

 

 

388,186,222

 

Issued to General Partner:

 

 

 

 

 

 

Exercise of EQR share options

 

 

232,317

 

 

 

348,510

 

EQR’s Employee Share Purchase Plan (ESPP)

 

 

40,346

 

 

 

35,669

 

EQR’s restricted share grants, net

 

 

149,722

 

 

 

175,970

 

Issued to Limited Partners:

 

 

 

 

 

 

Restricted unit grants, net

 

 

166,344

 

 

 

223,242

 

General and Limited Partner Units outstanding at June 30,

 

 

391,448,174

 

 

 

388,969,613

 

Limited Partner Units

 

 

 

 

 

 

Limited Partner Units outstanding at January 1,

 

 

12,429,737

 

 

 

12,659,027

 

Limited Partner restricted unit grants, net

 

 

166,344

 

 

 

223,242

 

Conversion of Limited Partner OP Units to EQR Common Shares

 

 

(180,629

)

 

 

(31,089

)

Limited Partner Units outstanding at June 30,

 

 

12,415,452

 

 

 

12,851,180

 

Limited Partner Units Ownership Interest in Operating Partnership

 

 

3.2

%

 

 

3.3

%

 

The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units, as well as the equity positions of the holders of restricted units, are collectively referred to as the “Noncontrolling Interests – Operating Partnership” and “Limited Partners Capital,” respectively, for the Company and the Operating Partnership. Subject to certain exceptions (including the “book-up” requirements of restricted units), the Noncontrolling Interests – Operating Partnership/Limited Partners Capital may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital (including redeemable interests) is allocated based on the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total plus the total number of Common Shares/General Partner Units. Net income is allocated to the Noncontrolling Interests – Operating Partnership/Limited Partners Capital based on the weighted average ownership percentage during the period.

The Operating Partnership has the right but not the obligation to make a cash payment instead of issuing Common Shares to any and all holders of Noncontrolling Interests – Operating Partnership/Limited Partners Capital requesting an exchange of their Noncontrolling Interests – Operating Partnership/Limited Partners Capital with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests – Operating Partnership/Limited Partners Capital for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital.

The Noncontrolling Interests – Operating Partnership/Limited Partners Capital are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests – Operating Partnership/Limited Partners Capital are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership” and “Redeemable Limited Partners,” respectively. Instruments that require settlement in registered shares cannot be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests – Operating Partnership/Limited Partners Capital that are classified in permanent equity at June 30, 2023 and December 31, 2022.

The carrying value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners in proportion to the number of Noncontrolling Interests – Operating Partnership/Limited Partners Capital in total. Such percentage of the total carrying value of Units/Limited Partner Units which is ascribed to the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners is then adjusted to the greater of carrying value or fair market value as described above. As of June 30, 2023 and 2022, the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners have a redemption value of approximately $355.3 million and $398.2 million, respectively, which represents the value of Common Shares that would be issued in exchange for the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners.

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The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners for the six months ended June 30, 2023 and 2022, respectively (amounts in thousands):

 

 

2023

 

 

2022

 

Balance at January 1,

 

$

318,273

 

 

$

498,977

 

Change in market value

 

 

39,123

 

 

 

(98,140

)

Change in carrying value

 

 

(2,077

)

 

 

(2,649

)

Balance at June 30,

 

$

355,319

 

 

$

398,188

 

Net proceeds from EQR Common Share and Preferred Share (see definition below) offerings and proceeds from exercise of options for Common Shares are contributed by EQR to ERPOP. In return for those contributions, EQR receives a number of OP Units in ERPOP equal to the number of Common Shares it has issued in the equity offering (or in the case of a preferred equity offering, a number of preference units in ERPOP equal in number and having the same terms as the Preferred Shares issued in the equity offering). As a result, the net proceeds from Common Shares and Preferred Shares are allocated for the Company between shareholders’ equity and Noncontrolling Interests – Operating Partnership and for the Operating Partnership between General Partner’s Capital and Limited Partners Capital to account for the change in their respective percentage ownership of the underlying equity.

The Company’s declaration of trust authorizes it to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (the “Preferred Shares”), with specific rights, preferences and other attributes as the Board of Trustees may determine, which may include preferences, powers and rights that are senior to the rights of holders of the Company’s Common Shares.

The following table presents the Company’s issued and outstanding Preferred Shares/Preference Units as of June 30, 2023 and December 31, 2022:

 

 

 

 

 

 

 

Amounts in thousands

 

 

 

 

 

Annual

 

 

 

 

 

 

 

 

 

Call

 

Dividend Per

 

 

June 30,

 

 

December 31,

 

 

 

Date (1)

 

Share/Unit (2)

 

 

2023

 

 

2022

 

Preferred Shares/Preference Units of beneficial interest, $0.01 par value;
   
100,000,000 shares authorized:

 

 

 

 

 

 

 

 

 

 

 

8.29% Series K Cumulative Redeemable Preferred Shares/Preference
   Units; liquidation value $
50 per share/unit; 745,600 shares/units issued
   and outstanding as of June 30, 2023 and December 31, 2022

 

12/10/2026

 

$

4.145

 

 

$

37,280

 

 

$

37,280

 

 

 

 

 

 

 

$

37,280

 

 

$

37,280

 

 

(1)
On or after the call date, redeemable Preferred Shares/Preference Units may be redeemed for cash at the option of the Company or the Operating Partnership, respectively, in whole or in part, at a redemption price equal to the liquidation price per share/unit, plus accrued and unpaid distributions, if any.
(2)
Dividends on Preferred Shares/Preference Units are payable quarterly.

Other

EQR and ERPOP currently have an active universal shelf registration statement for the issuance of equity and debt securities that automatically became effective upon filing with the SEC in May 2022 and expires in May 2025. Per the terms of ERPOP’s partnership agreement, EQR contributes the net proceeds of all equity offerings to the capital of ERPOP in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis) or preference units (on a one-for-one preferred share per preference unit basis).

The Company has an At-The-Market (“ATM”) share offering program which allows EQR to issue Common Shares from time to time into the existing trading market at current market prices or through negotiated transactions, including under forward sale arrangements. The current program matures in May 2025 and gives us the authority to issue up to 13.0 million shares, all of which remain available for issuance as of June 30, 2023.

The Company may repurchase up to 13.0 million Common Shares under its share repurchase program. No open market repurchases have occurred since 2008. As of June 30, 2023, EQR has remaining authorization to repurchase up to 13.0 million of its shares.

ERPOP issued $0.9 million of 3.00% Series Q Cumulative Redeemable Preference Units (the "Series Q Preference Units") in the second quarter of 2023 in connection with the buyout of the noncontrolling interest in a consolidated operating property (see Note 6 for additional discussion). The 933,454 Series Q Preference Units have a liquidation value of $1.00 per unit and pay distributions quarterly

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at the annual rate of $0.03 per unit. The Series Q Preference Units can be redeemed for, at EQR's/ERPOP's option, Common Shares, OP Units and/or cash upon the occurrence of specific events laid out in the agreement. If redeemed for Common Shares or OP Units, the number of shares/units issued is based on the Common Share price. The Series Q Preference Units increased the balance of Noncontrolling Interests - Partially Owned Properties in the consolidated balance sheets.

4.
Real Estate

The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of June 30, 2023 and December 31, 2022 (amounts in thousands):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Land

 

$

5,579,211

 

 

$

5,580,878

 

Depreciable property:

 

 

 

 

 

 

Buildings and improvements

 

 

19,702,354

 

 

 

19,471,503

 

Furniture, fixtures and equipment

 

 

2,479,945

 

 

 

2,352,050

 

In-Place lease intangibles

 

 

515,298

 

 

 

510,816

 

Projects under development:

 

 

 

 

 

 

Land

 

 

3,200

 

 

 

3,201

 

Construction-in-progress

 

 

47,716

 

 

 

109,739

 

Land held for development:

 

 

 

 

 

 

Land

 

 

46,160

 

 

 

46,160

 

Construction-in-progress

 

 

15,174

 

 

 

14,407

 

Investment in real estate

 

 

28,389,058

 

 

 

28,088,754

 

Accumulated depreciation

 

 

(9,428,549

)

 

 

(9,027,850

)

Investment in real estate, net

 

$

18,960,509

 

 

$

19,060,904

 

 

During the six months ended June 30, 2023, the Company acquired the following from unaffiliated parties (purchase price in thousands):

 

 

 

Properties

 

 

Apartment Units

 

 

Purchase Price

 

Rental Properties – Consolidated (1)

 

 

2

 

 

 

549

 

 

$

186,600

 

Total

 

 

2

 

 

 

549

 

 

$

186,600

 

 

(1)
Purchase price includes an allocation of approximately $19.3 million to land and $167.4 million to depreciable property (inclusive of capitalized closing costs).

 

During the six months ended June 30, 2023, the Company disposed of the following to unaffiliated parties (sales price and net gain in thousands):

 

 

 

Properties

 

 

Apartment Units

 

 

Sales Price

 

 

Net Gain

 

Rental Properties – Consolidated

 

 

7

 

 

 

247

 

 

$

135,300

 

 

$

100,122

 

Total

 

 

7

 

 

 

247

 

 

$

135,300

 

 

$

100,122

 

 

5.
Commitments to Acquire/Dispose of Real Estate

The Company has entered into an agreement to acquire the following (purchase price in thousands):

 

 

 

Properties

 

 

Apartment Units

 

 

Purchase Price

 

Rental Properties – Consolidated

 

 

1

 

 

 

290

 

 

$

93,000

 

Total

 

 

1

 

 

 

290

 

 

$

93,000

 

 

The Company has entered into an agreement to dispose of the following (sales price and net book value in thousands):

 

 

Properties

 

 

Apartment Units

 

 

Sales Price

 

 

Net Book Value at
June 30, 2023

 

Rental Properties - Consolidated

 

 

1

 

 

 

166

 

 

$

60,100

 

 

$

31,305

 

Total

 

 

1

 

 

 

166

 

 

$

60,100

 

 

$

31,305

 

 

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The closing of pending transactions is subject to certain conditions and restrictions; therefore there can be no assurance that the transactions will be consummated or that the final terms will not differ in material respects from any agreements summarized above. See Note 14 for discussion of the properties acquired or disposed of, if any, subsequent to June 30, 2023.

6.
Investments in Partially Owned Entities

The Company has invested in various entities with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated).

Consolidated Variable Interest Entities (“VIEs”)

In accordance with accounting standards for consolidation of VIEs, the Company consolidates ERPOP on EQR’s financial statements. As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. The limited partners are not able to exercise substantive kick-out or participating rights. As a result, ERPOP qualifies as a VIE. EQR has a controlling financial interest in ERPOP and, thus, is ERPOP’s primary beneficiary. EQR has the power to direct the activities of ERPOP that most significantly impact ERPOP’s economic performance as well as the obligation to absorb losses or the right to receive benefits from ERPOP that could potentially be significant to ERPOP.

The Company has various equity interests in certain joint ventures that have been deemed to be VIEs, and the Company is the VIEs’ primary beneficiary. As a result, the joint ventures are required to be consolidated on the Company’s financial statements. The following table summarizes the Company’s consolidated joint ventures as of June 30, 2023:

 

 

 

Operating Properties (1), (2)

 

 

 

 

Properties

 

 

Apartment Units

 

 

Consolidated Joint Ventures (VIE)

 

 

15

 

 

 

3,226

 

 

 

(1)
During the second quarter of 2023, the Company acquired its joint venture partner's 10% interest in a 200-unit apartment property for $4.6 million, of which the Company paid $3.7 million in cash and ERPOP issued $0.9 million of 3.00% Series Q Preference Units (see Note 3 for additional discussion). The property is now wholly owned. In connection with the buyout, the carrying amount of the Noncontrolling Interests – Partially Owned Properties totaling $3.7 million was reduced to zero and the remaining $0.9 million was recorded to paid in capital/general partner capital. The Company also repaid $64.7 million of mortgage debt at par prior to maturity in conjunction with the buyout.
(2)
The land parcel under one of the projects is subject to a long-term ground lease.

The following table provides consolidated assets and liabilities related to the Company's VIEs as of June 30, 2023 and December 31, 2022 (amounts in thousands):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Consolidated Assets

 

$

579,832

 

 

$

691,880

 

Consolidated Liabilities

 

$

107,228

 

 

$

158,932

 

 

Certain consolidated joint ventures in which we have investments obtained mortgage debt to finance a portion of their activities. The following table and information summarizes the variable rate construction mortgage debt that is non-recourse to the Company at June 30, 2023 (aggregate and amounts borrowed under loan commitments in thousands):

 

 

 

Recently Completed Operating Property

 

 

Number of joint ventures with debt financing

 

 

1

 

 

Aggregate loan commitments

 

$

73,344

 

 

Amounts borrowed under loan commitments (1)

 

$

67,876

 

 

Maturity dates

 

2025

 

 

 

(1)
See Note 9 for the proceeds of secured conventional floating rate debt under Mortgage Notes Payable and Note 14 for discussion of the loan repayment subsequent to June 30, 2023.

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Investments in Unconsolidated Entities

The Company has various equity interests in certain joint ventures that are unconsolidated and accounted for using the equity method of accounting. Most of these have been deemed to be VIEs and the Company is not the VIEs' primary beneficiary. The remaining have been deemed not to be VIEs and the Company does not have a controlling voting interest.

The following table and information summarizes the Company’s investments in unconsolidated entities as of June 30, 2023 and December 31, 2022 (amounts in thousands except for ownership percentage):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

Ownership Percentage

Investments in Unconsolidated Entities:

 

 

 

 

 

 

 

 

Various Real Estate Holdings (VIE)

 

$

36,873

 

 

$

35,974

 

 

Varies

Projects Under Development and Land Held for Development (VIE)

 

 

242,391

 

 

 

218,043

 

 

62% - 95% (1)

Real Estate Technology Funds/Companies (VIE)

 

 

25,695

 

 

 

25,249

 

 

Varies

Other

 

 

(249

)

 

 

(242

)

 

Varies

Investments in Unconsolidated Entities

 

$

304,710

 

 

$

279,024

 

 

 

 

(1)
In certain instances, the joint venture agreements contain provisions for promoted interests in favor of our joint venture partner. If the terms of the promoted interest are attained, then our share of the proceeds from a sale or other capital event of the unconsolidated entity may be less than the indicated ownership percentage.

The following table summarizes the Company’s unconsolidated joint ventures that were deemed to be VIEs as of June 30, 2023:

 

 

 

Real Estate Holdings (1)

 

 

Projects Under Development (2), (5)

 

 

Projects Held for Development (2), (3)

 

 

 

Entities

 

 

Projects

 

 

Apartment Units (4)

 

 

Projects

 

 

Apartment Units (4)

 

Unconsolidated Joint Ventures (VIE)

 

 

2

 

 

 

6

 

 

 

1,982

 

 

 

4

 

 

 

1,334

 

(1)
Represents entities that hold various real estate investments.
(2)
Represents separate unconsolidated joint ventures for the purpose of developing multifamily rental properties.
(3)
Represents separate unconsolidated joint ventures that have not yet started.
(4)
Represents the intended number of apartment units to be developed.
(5)
The land parcel under one of the projects is subject to a long-term ground lease.

New Development Joint Ventures

The following table provides information on total unconsolidated development joint ventures entered into during the six months ended June 30, 2023 (amounts in thousands except for number of unconsolidated joint ventures and apartment units):

 


 

Number of unconsolidated joint ventures (1)

 

 

1

 

Apartment units (2)

 

 

368

 

Investments in unconsolidated entities – acquisitions

 

$

989

 

 

(1)
The entities qualify as VIEs, but the Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIE’s performance. Therefore, the entities are unconsolidated and recorded using the equity method of accounting. See Note 2 of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional discussion.
(2)
Represents the intended number of apartment units to be developed.

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7.
Restricted Deposits

The following table presents the Company’s restricted deposits as of June 30, 2023 and December 31, 2022 (amounts in thousands):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Mortgage escrow deposits:

 

 

 

 

 

 

Replacement reserves

 

$

13,440

 

 

$

12,549

 

Mortgage principal reserves/sinking funds

 

 

28,802

 

 

 

25,304

 

Mortgage escrow deposits

 

 

42,242

 

 

 

37,853

 

Restricted cash:

 

 

 

 

 

 

Earnest money on pending acquisitions

 

 

4,000

 

 

 

4,500

 

Restricted deposits on real estate investments

 

 

225

 

 

 

229

 

Resident security and utility deposits

 

 

39,504

 

 

 

38,432

 

Other

 

 

2,970

 

 

 

2,289

 

Restricted cash

 

 

46,699

 

 

 

45,450

 

Restricted deposits

 

$

88,941

 

 

$

83,303

 

 

8.
Leases

Lessor Accounting

The Company is the lessor for its residential and non-residential leases and these leases are accounted for as operating leases under the lease standard.

The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the six months ended June 30, 2023 and 2022 (amounts in thousands):

 

 

 

Six Months Ended June 30, 2023

 

 

Six Months Ended June 30, 2022

 

Income Type

 

Residential
Leases

 

 

Non-Residential
Leases

 

 

Total

 

 

Residential
Leases

 

 

Non-Residential
Leases

 

 

Total

 

Residential and non-residential rent

 

$

1,276,338

 

 

$

31,973

 

 

$

1,308,311

 

 

$

1,194,087

 

 

$

32,095

 

 

$

1,226,182

 

Utility recoveries (RUBS income) (1)

 

 

42,786

 

 

 

419

 

 

 

43,205

 

 

 

39,583

 

 

 

369

 

 

 

39,952

 

Parking rent

 

 

21,893

 

 

 

225

 

 

 

22,118

 

 

 

21,706

 

 

 

202

 

 

 

21,908

 

Other lease revenue (2)

 

 

(13,420

)

 

 

734

 

 

 

(12,686

)

 

 

(889

)

 

 

(197

)

 

 

(1,086

)

Total lease revenue

 

$

1,327,597

 

 

$

33,351

 

 

 

1,360,948

 

 

$

1,254,487

 

 

$

32,469

 

 

 

1,286,956

 

Parking revenue

 

 

 

 

 

 

 

 

20,395

 

 

 

 

 

 

 

 

 

18,431

 

Other revenue

 

 

 

 

 

 

 

 

41,054

 

 

 

 

 

 

 

 

 

34,991

 

Total other rental income (3)

 

 

 

 

 

 

 

 

61,449

 

 

 

 

 

 

 

 

 

53,422

 

Rental income

 

 

 

 

 

 

 

$

1,422,397

 

 

 

 

 

 

 

 

$

1,340,378

 

 

(1)
RUBS income primarily consists of variable payments representing the recovery of utility costs from residents.
(2)
Other lease revenue consists of the revenue adjustment related to bad debt and other miscellaneous lease revenue.
(3)
Other rental income is accounted for under the revenue recognition standard.

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Table of Contents

 

The following table presents the lease income types relating to lease payments for residential and non-residential leases along with the total other rental income for the quarters ended June 30, 2023 and 2022 (amounts in thousands):

 

 

 

Quarter Ended June 30, 2023

 

 

Quarter Ended June 30, 2022

 

Income Type

 

Residential
Leases

 

 

Non-Residential
Leases

 

 

Total

 

 

Residential
Leases

 

 

Non-Residential
Leases

 

 

Total

 

Residential and non-residential rent

 

$

641,586

 

 

$

15,987

 

 

$

657,573

 

 

$

606,307

 

 

$

16,221

 

 

$

622,528

 

Utility recoveries (RUBS income) (1)

 

 

21,403

 

 

 

212

 

 

 

21,615

 

 

 

19,985

 

 

 

188

 

 

 

20,173

 

Parking rent

 

 

11,011

 

 

 

116

 

 

 

11,127

 

 

 

10,923

 

 

 

104

 

 

 

11,027

 

Other lease revenue (2)

 

 

(5,831

)

 

 

65

 

 

 

(5,766

)

 

 

5,412

 

 

 

(154

)

 

 

5,258

 

Total lease revenue

 

$

668,169

 

 

$

16,380

 

 

 

684,549

 

 

$

642,627

 

 

$

16,359

 

 

 

658,986

 

Parking revenue

 

 

 

 

 

 

 

 

10,192

 

 

 

 

 

 

 

 

 

9,623

 

Other revenue

 

 

 

 

 

 

 

 

22,568

 

 

 

 

 

 

 

 

 

18,421

 

Total other rental income (3)

 

 

 

 

 

 

 

 

32,760

 

 

 

 

 

 

 

 

 

28,044

 

Rental income

 

 

 

 

 

 

 

$

717,309

 

 

 

 

 

 

 

 

$

687,030

 

 

(1)
RUBS income primarily consists of variable payments representing the recovery of utility costs from residents.
(2)
Other lease revenue consists of the revenue adjustment related to bad debt and other miscellaneous lease revenue.
(3)
Other rental income is accounted for under the revenue recognition standard.

The following table presents residential and non-residential accounts receivable and straight-line receivable balances for the Company’s properties as of June 30, 2023 and December 31, 2022 (amounts in thousands):

 

 

 

Residential

 

 

Non-Residential

 

Balance Sheet (Other assets):

 

June 30, 2023

 

 

December 31, 2022

 

 

June 30, 2023

 

 

December 31, 2022

 

Resident/tenant accounts receivable balances

 

$

27,098

 

 

$

35,688

 

 

$

2,382

 

 

$

2,820

 

Allowance for doubtful accounts

 

 

(22,609

)

 

 

(31,405

)

 

 

(1,383

)

 

 

(2,152

)

Net receivable balances

 

$

4,489

 

 

$

4,283

 

 

$

999

 

 

$

668

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line receivable balances

 

$

7,072

 

 

$

4,398

 

 

$

13,562

 

 

$

13,795

 

 

The following table presents residential bad debt for the Company’s properties for the six months and quarters ended June 30, 2023 and 2022 (amounts in thousands):

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

Income Statement (Rental income):

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Bad debt, net (1)

 

$

19,820

 

 

$

8,147

 

 

$

9,065

 

 

$

(1,748

)

% of rental income

 

 

1.4

%

 

 

0.6

%

 

 

1.3

%

 

 

(0.3

%)

 

(1)
Bad debt, net benefited from additional resident payments due to governmental rental assistance programs of approximately $1.8 million and $25.1 million for the six months ended June 30, 2023 and 2022, respectively, and $0.7 million and $15.0 million for the quarters ended June 30, 2023 and 2022, respectively.
 
9.
Debt

EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. Weighted average interest rates noted below for the six months ended June 30, 2023 include the effect of any derivative instruments and amortization of premiums/discounts/OCI (other comprehensive income) on debt and derivatives.

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Table of Contents

 

Mortgage Notes Payable

The following table summarizes the Company’s mortgage notes payable activity for the six months ended June 30, 2023 (amounts in thousands):

 

 

 

Mortgage notes
payable, net as of
December 31, 2022

 

 

Proceeds

 

 

Lump sum
payoffs

 

 

Scheduled
principal
repayments

 

 

Amortization
of premiums/
discounts

 

 

Amortization
of deferred
financing
costs, net (1)

 

 

Mortgage notes
payable, net as of
June 30, 2023

 

Fixed Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – Conventional

 

$

1,608,838

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

460

 

 

$

1,609,298

 

Floating Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – Conventional

 

 

108,378

 

 

 

22,896

 

(2)

 

(64,722

)

 

 

(54

)

 

 

 

 

 

365

 

 

 

66,863

 

Secured – Tax Exempt

 

 

236,222

 

 

 

 

 

 

 

 

 

 

 

 

616

 

 

 

70

 

 

 

236,908

 

Floating Rate Debt

 

 

344,600

 

 

 

22,896

 

 

 

(64,722

)

 

 

(54

)

 

 

616

 

 

 

435

 

 

 

303,771

 

Total

 

$

1,953,438

 

 

$

22,896

 

 

$

(64,722

)

 

$

(54

)

 

$

616

 

 

$

895

 

 

$

1,913,069

 

 

(1)
Represents amortization of deferred financing costs, net of debt financing costs.
(2)
See Note 6 for additional discussion of the variable rate construction mortgage debt.

The following table summarizes certain interest rate and maturity date information as of and for the six months ended June 30, 2023:

 

 

 

June 30, 2023

Interest Rate Ranges

 

0.10% - 7.91%

Weighted Average Interest Rate

 

3.63%

Maturity Date Ranges

 

2023-2061

 

As of June 30, 2023, the Company had $250.0 million of secured tax-exempt bonds subject to third-party credit enhancement.

Notes

The following table summarizes the Company’s notes activity for the six months ended June 30, 2023 (amounts in thousands):

 

 

 

Notes, net as of
December 31, 2022

 

 

Proceeds

 

 

Lump sum
payoffs

 

 

Amortization
of premiums/
discounts

 

 

Amortization
of deferred
financing
costs, net (1)

 

 

Notes, net as of
June 30, 2023

 

Fixed Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured – Public

 

$

5,342,329

 

 

$

 

 

$

 

 

$

1,124

 

 

$

1,920

 

 

$

5,345,373

 

 

(1)
Represents amortization of deferred financing costs, net of debt financing costs.

The following table summarizes certain interest rate and maturity date information as of and for the six months ended June 30, 2023:

 

 

 

June 30, 2023

Interest Rate Ranges

 

1.85% - 7.57%

Weighted Average Interest Rate

 

3.54%

Maturity Date Ranges

 

2025-2047

 

The Company’s unsecured public notes contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for the six months ended June 30, 2023.

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Table of Contents

 

Line of Credit and Commercial Paper

The Company has a $2.5 billion unsecured revolving credit facility maturing on October 26, 2027. The Company has the ability to increase available borrowings by an additional $750.0 million by adding lenders to the facility, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be the Secured Overnight Financing Rate ("SOFR") plus a spread (currently 0.725%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. The Company did not borrow any amounts under its revolving credit facility during the six months ended June 30, 2023.

The Company has an unsecured commercial paper note program under which it may borrow up to a maximum of $1.0 billion subject to market conditions. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of the Company’s other unsecured senior indebtedness.

The following table summarizes certain weighted average interest rate, maturity and amount outstanding information for the commercial paper program as of and for the six months ended June 30, 2023:

 

 

 

June 30, 2023

 

Weighted Average Interest Rate (1)

 

5.12%

 

Weighted Average Maturity (in days)

 

26

 

Weighted Average Amount Outstanding

 

$164.5 million

 

 

(1)
The notes bear interest at various floating rates.

The Company limits its utilization of the revolving credit facility in order to maintain liquidity to support its $1.0 billion commercial paper program along with certain other obligations. The following table presents the availability on the Company’s unsecured revolving credit facility as of June 30, 2023 (amounts in thousands):

 

 

June 30, 2023

 

Unsecured revolving credit facility commitment

 

$

2,500,000

 

Commercial paper balance outstanding

 

 

(185,187

)

Unsecured revolving credit facility balance outstanding

 

 

 

Other restricted amounts

 

 

(3,484

)

Unsecured revolving credit facility availability

 

$

2,311,329

 

Other

The following table summarizes the Company's total debt extinguishment costs recorded as additional expense for the six months and quarters ended June 30, 2023 and 2022 (amounts in thousands):

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Write-offs of unamortized deferred financing costs

 

$

47

 

 

$

92

 

 

$

47

 

 

$

92

 

Write-offs of unamortized (premiums)/discounts/OCI

 

 

 

 

 

377

 

 

 

 

 

 

377

 

Total

 

$

47

 

 

$

469

 

 

$

47

 

 

$

469

 

 

10.
Fair Value Measurements

The valuation of financial instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments on listed market prices and third-party quotes. Where these are not available, the Company bases its estimates on current instruments with similar terms and maturities or on other factors relevant to the financial instruments.

In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company may seek to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments. The Company may also use derivatives to manage commodity prices in the daily operations of the business.

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Table of Contents

 

A three-level valuation hierarchy exists for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s derivative positions are valued using models developed by the respective counterparty as well as models applied internally by the Company that use as their inputs readily observable market parameters (such as forward yield curves and credit default swap data). The following table summarizes the inputs to the valuations for each type of fair value measurement:

 

Fair Value Measurement Type

 

Valuation Inputs

Employee holdings (other than Common Shares) within the supplemental executive retirement plan (the “SERP”)

 

Quoted market prices for identical assets. These holdings are included in other assets and other liabilities on the consolidated balance sheets.

Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners

 

Quoted market price of Common Shares.

Mortgage notes payable and private unsecured debt (including its commercial paper and line of credit, if applicable)

 

Indicative rates provided by lenders of similar loans.

Public unsecured notes

 

Quoted market prices for each underlying issuance.

 

The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, commercial paper, line of credit and derivative instruments), including cash and cash equivalents and other financial instruments, approximate their carrying or contract value. The following table provides a summary of the carrying and fair values for the Company’s mortgage notes payable and unsecured debt (including its commercial paper and line of credit, if applicable) at June 30, 2023 and December 31, 2022, respectively (amounts in thousands):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

Carrying Value

 

 

Estimated Fair
Value (Level 2)

 

 

Carrying Value

 

 

Estimated Fair
Value (Level 2)

 

Mortgage notes payable, net

 

$

1,913,069

 

 

$

1,773,555

 

 

$

1,953,438

 

 

$

1,803,525

 

Unsecured debt, net

 

 

5,529,847

 

 

 

4,975,013

 

 

 

5,472,284

 

 

 

4,874,490

 

Total debt, net

 

$

7,442,916

 

 

$

6,748,568

 

 

$

7,425,722

 

 

$

6,678,015

 

 

The following table summarizes the Company’s consolidated derivative instruments at June 30, 2023 (dollar amounts are in thousands):

 

 

 

Forward Starting
Swaps (1)

 

Current Notional Balance

 

$

450,000

 

Lowest Interest Rate

 

 

2.4470

%

Highest Interest Rate

 

 

3.6995

%

Maturity Date

 

 

2033

 

 

(1)
Forward Starting Swaps – Designed to partially fix interest rates in advance of planned future debt issuances. These swaps have mandatory counterparty terminations in 2024 and are targeted for certain 2023 debt issuances. All of these forward starting swaps settled subsequent to June 30, 2023. See Note 14 for additional discussion.

29


Table of Contents

 

The following tables provide a summary of the fair value measurements for each major category of assets and liabilities measured at fair value on a recurring basis and the location within the accompanying consolidated balance sheets at June 30, 2023 and December 31, 2022, respectively (amounts in thousands):

 

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

Balance Sheet
Location

 

6/30/2023

 

 

Quoted Prices in
Active Markets for
Identical Assets/Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Starting Swaps

 

Other Assets

 

$

25,224

 

 

$

 

 

$

25,224

 

 

$

 

Supplemental Executive Retirement Plan

 

Other Assets

 

 

130,135

 

 

 

130,135

 

 

 

 

 

 

 

Total

 

 

 

$

155,359

 

 

$

130,135

 

 

$

25,224

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Starting Swaps

 

Other Liabilities

 

$

515

 

 

$

 

 

$

515

 

 

$

 

Supplemental Executive Retirement Plan

 

Other Liabilities

 

 

130,135

 

 

 

130,135

 

 

 

 

 

 

 

Total

 

 

 

$

130,650

 

 

$

130,135

 

 

$

515

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interests –

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership/Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited Partners

 

Mezzanine

 

$

355,319

 

 

$

 

 

$

355,319

 

 

$

 

 

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

Balance Sheet
Location

 

12/31/2022

 

 

Quoted Prices in
Active Markets for
Identical Assets/Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Starting Swaps

 

Other Assets

 

$

21,864

 

 

$

 

 

$

21,864

 

 

$

 

Supplemental Executive Retirement Plan

 

Other Assets

 

 

133,245

 

 

 

133,245

 

 

 

 

 

 

 

Total

 

 

 

$

155,109

 

 

$

133,245

 

 

$

21,864

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Starting Swaps

 

Other Liabilities

 

$

1,210

 

 

$

 

 

$

1,210

 

 

$

 

Supplemental Executive Retirement Plan

 

Other Liabilities

 

 

133,245

 

 

 

133,245

 

 

 

 

 

 

 

Total

 

 

 

$

134,455

 

 

$

133,245

 

 

$

1,210

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interests –

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership/Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited Partners

 

Mezzanine

 

$

318,273

 

 

$

 

 

$

318,273

 

 

$

 

 

30


Table of Contents

 

The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying consolidated statements of operations and comprehensive income for the six months ended June 30, 2023 and 2022, respectively (amounts in thousands):

 

June 30, 2023
Type of Cash Flow Hedge

 

Amount of
Gain/(Loss)
Recognized in OCI
on Derivative

 

 

Location of
Gain/(Loss)
Reclassified from
Accumulated OCI
into Income

 

Amount of
Gain/(Loss)
Reclassified from
Accumulated
OCI into Income

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

Interest Rate Contracts:

 

 

 

 

 

 

 

 

Forward Starting Swaps

 

$

4,054

 

 

Interest expense

 

$

(2,201

)

Total

 

$

4,054

 

 

 

 

$

(2,201

)

 

June 30, 2022
Type of Cash Flow Hedge

 

Amount of
Gain/(Loss)
Recognized in OCI
on Derivative

 

 

Location of
Gain/(Loss)
Reclassified from
Accumulated OCI
into Income

 

Amount of
Gain/(Loss)
Reclassified from
Accumulated
OCI into Income

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

Interest Rate Contracts:

 

 

 

 

 

 

 

 

Forward Starting Swaps

 

$

(1,259

)

 

Interest expense

 

$

(4,881

)

Total

 

$

(1,259

)

 

 

 

$

(4,881

)

 

As of June 30, 2023 and December 31, 2022, there were approximately $3.7 million in deferred gains, net, and $2.5 million in deferred losses, net, included in accumulated other comprehensive income (loss), respectively, related to previously settled and unsettled derivative instruments, of which an estimated $2.4 million may be recognized as additional interest expense during the twelve months ending June 30, 2024.

11.
Earnings Per Share and Earnings Per Unit

Equity Residential

The following tables set forth the computation of net income per share – basic and net income per share – diluted for the Company (amounts in thousands except per share amounts):

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator for net income per share – basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

 

$

144,862

 

 

$

232,678

 

Allocation to Noncontrolling Interests – Operating Partnership

 

 

(11,613

)

 

 

(10,027

)

 

 

(4,554

)

 

 

(7,633

)

Net (income) loss attributable to Noncontrolling
   Interests – Partially Owned Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Numerator for net income per share – basic

 

$

349,693

 

 

$

293,321

 

 

$

138,430

 

 

$

223,328

 

Numerator for net income per share – diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

 

$

144,862

 

 

$

232,678

 

Net (income) loss attributable to Noncontrolling
   Interests – Partially Owned Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Preferred distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Numerator for net income per share – diluted

 

$

361,306

 

 

$

303,348

 

 

$

142,984

 

 

$

230,961

 

Denominator for net income per share – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for net income per share – basic

 

 

378,492

 

 

 

375,640

 

 

 

378,642

 

 

 

375,769

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

OP Units

 

 

11,450

 

 

 

11,891

 

 

 

11,390

 

 

 

11,895

 

Long-term compensation shares/units

 

 

1,121

 

 

 

1,863

 

 

 

1,155

 

 

 

1,698

 

ATM forward sales

 

 

 

 

 

69

 

 

 

 

 

 

1

 

Denominator for net income per share – diluted

 

 

391,063

 

 

 

389,463

 

 

 

391,187

 

 

 

389,363

 

Net income per share – basic

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

Net income per share – diluted

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

 

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ERP Operating Limited Partnership

The following tables set forth the computation of net income per Unit – basic and net income per Unit – diluted for the Operating Partnership (amounts in thousands except per Unit amounts):

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator for net income per Unit – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

364,933

 

 

$

306,476

 

 

$

144,862

 

 

$

232,678

 

Net (income) loss attributable to Noncontrolling
   Interests – Partially Owned Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Allocation to Preference Units

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Numerator for net income per Unit – basic and diluted

 

$

361,306

 

 

$

303,348

 

 

$

142,984

 

 

$

230,961

 

Denominator for net income per Unit – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for net income per Unit – basic

 

 

389,942

 

 

 

387,531

 

 

 

390,032

 

 

 

387,664

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Dilution for Units issuable upon assumed exercise/vesting
   of the Company’s long-term compensation shares/units

 

 

1,121

 

 

 

1,863

 

 

 

1,155

 

 

 

1,698

 

ATM forward sales

 

 

 

 

 

69

 

 

 

 

 

 

1

 

Denominator for net income per Unit – diluted

 

 

391,063

 

 

 

389,463

 

 

 

391,187

 

 

 

389,363

 

Net income per Unit – basic

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

Net income per Unit – diluted

 

$

0.92

 

 

$

0.78

 

 

$

0.37

 

 

$

0.59

 

 

12.
Commitments and Contingencies

Commitments

Real Estate Development Commitments

As of June 30, 2023, the Company has both consolidated and unconsolidated real estate projects under development. The following table summarizes the gross remaining total project costs for the Company’s projects under development at June 30, 2023 (total project costs remaining in thousands):

 

 

 

Projects

 

 

Apartment Units

 

 

Total Project Costs Remaining (1)

 

Projects Under Development

 

 

 

 

 

 

 

 

 

Consolidated

 

 

1

 

 

 

225

 

 

$

101,705

 

Unconsolidated

 

 

6

 

 

 

1,982

 

 

 

243,293

 

Total Projects Under Development

 

 

7

 

 

 

2,207

 

 

$

344,998

 

 

(1)
The Company’s share of the $345.0 million in total project costs remaining approximates $109.7 million, with the balance funded by the Company’s joint venture partners (approximately $2.7 million) and/or applicable construction loans (approximately $232.6 million).

We have entered into, and may continue in the future to enter into, joint venture agreements with third-party partners for the development of multifamily rental properties. The joint venture agreements with each development partner include buy-sell provisions that provide the right, but not the obligation, for the Company to acquire each respective partner’s interests or sell its interests at any time following the occurrence of certain pre-defined events described in the joint venture agreements. See Note 6 for additional discussion.

Other Commitments

We have entered into, and may continue in the future to enter into, real estate technology and other real estate fund investments. As of June 30, 2023, the Company has invested in nine separate such investments totaling $36.9 million with aggregate remaining commitments of approximately $16.1 million.

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Table of Contents

 

Contingencies

Litigation and Legal Matters

The Company, as an owner of real estate, is subject to various federal, state and local laws. Compliance by the Company with existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new or changed laws or regulations on its current properties or on properties that it may acquire in the future.

The Company does not believe there is any litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.

 

13.
Reportable Segments

Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses and about which discrete financial information is available that is evaluated regularly by the chief operating decision maker. The chief operating decision maker decides how resources are allocated and assesses performance on a recurring basis at least quarterly.

The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company’s operating performance geographically by market and both on a same store and non-same store basis. While the Company does maintain a non-residential presence, it accounts for approximately 3.8% of total revenues for the six months ended June 30, 2023 and is designed as an amenity for our residential residents. The chief operating decision maker evaluates the performance of each property on a consolidated residential and non-residential basis. The Company’s geographic consolidated same store operating segments represent its reportable segments.

The Company’s development activities are other business activities that do not constitute an operating segment and as such, have been aggregated in the “Other” category in the tables presented below.

All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the six months and quarters ended June 30, 2023 and 2022, respectively.

The primary financial measure for the Company’s rental real estate segment is net operating income (“NOI”), which represents rental income less: 1) property and maintenance expense and 2) real estate taxes and insurance expense (all as reflected in the accompanying consolidated statements of operations and comprehensive income). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. Revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

The following table presents a reconciliation of NOI from our rental real estate for the six months and quarters ended June 30, 2023 and 2022, respectively (amounts in thousands):

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Rental income

 

$

1,422,397

 

 

$

1,340,378

 

 

$

717,309

 

 

$

687,030

 

Property and maintenance expense

 

 

(262,350

)

 

 

(241,229

)

 

 

(124,771

)

 

 

(116,355

)

Real estate taxes and insurance expense

 

 

(209,749

)

 

 

(202,538

)

 

 

(103,080

)

 

 

(101,850

)

Total operating expenses

 

 

(472,099

)

 

 

(443,767

)

 

 

(227,851

)

 

 

(218,205

)

Net operating income

 

$

950,298

 

 

$

896,611

 

 

$

489,458

 

 

$

468,825

 

 

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Table of Contents

 

The following tables present NOI from our rental real estate for each segment for the six months and quarters ended June 30, 2023 and 2022, respectively, as well as total assets and capital expenditures at June 30, 2023 (amounts in thousands):

 

 

 

Six Months Ended June 30, 2023

 

 

Six Months Ended June 30, 2022

 

 

 

Rental
Income

 

 

Operating
Expenses

 

 

NOI

 

 

Rental
Income

 

 

Operating
Expenses

 

 

NOI

 

Same store (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

$

234,243

 

 

$

73,597

 

 

$

160,646

 

 

$

227,809

 

 

$

67,243

 

 

$

160,566

 

Orange County

 

 

63,904

 

 

 

14,372

 

 

 

49,532

 

 

 

60,018

 

 

 

13,013

 

 

 

47,005

 

San Diego

 

 

45,452

 

 

 

10,348

 

 

 

35,104

 

 

 

42,410

 

 

 

9,605

 

 

 

32,805

 

Subtotal - Southern California

 

 

343,599

 

 

 

98,317

 

 

 

245,282

 

 

 

330,237

 

 

 

89,861

 

 

 

240,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

216,121

 

 

 

66,067

 

 

 

150,054

 

 

 

206,019

 

 

 

61,753

 

 

 

144,266

 

Washington, D.C.

 

 

217,282

 

 

 

71,075

 

 

 

146,207

 

 

 

203,973

 

 

 

68,523

 

 

 

135,450

 

New York

 

 

237,830

 

 

 

97,859

 

 

 

139,971

 

 

 

206,162

 

 

 

93,941

 

 

 

112,221

 

Seattle

 

 

149,291

 

 

 

41,726

 

 

 

107,565

 

 

 

140,114

 

 

 

40,195

 

 

 

99,919

 

Boston

 

 

143,127

 

 

 

43,383

 

 

 

99,744

 

 

 

131,779

 

 

 

41,074

 

 

 

90,705

 

Denver

 

 

35,469

 

 

 

10,500

 

 

 

24,969

 

 

 

33,065

 

 

 

9,331

 

 

 

23,734

 

Other Expansion Markets

 

 

32,359

 

 

 

15,324

 

 

 

17,035

 

 

 

30,598

 

 

 

13,008

 

 

 

17,590

 

Total same store

 

 

1,375,078

 

 

 

444,251

 

 

 

930,827

 

 

 

1,281,947

 

 

 

417,686

 

 

 

864,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-same store/other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-same store (2)

 

 

44,677

 

 

 

17,236

 

 

 

27,441

 

 

 

33,690

 

 

 

15,357

 

 

 

18,333

 

Other (3)

 

 

2,642

 

 

 

10,612

 

 

 

(7,970

)

 

 

24,741

 

 

 

10,724

 

 

 

14,017

 

Total non-same store/other

 

 

47,319

 

 

 

27,848

 

 

 

19,471

 

 

 

58,431

 

 

 

26,081

 

 

 

32,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

1,422,397

 

 

$

472,099

 

 

$

950,298

 

 

$

1,340,378

 

 

$

443,767

 

 

$

896,611

 

 

(1)
For the six months ended June 30, 2023 and 2022, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2022, less properties subsequently sold, which represented 76,952 apartment units.
(2)
For the six months ended June 30, 2023 and 2022, non-same store primarily includes properties acquired after January 1, 2022, plus any properties in lease-up and not stabilized as of January 1, 2022, and any properties undergoing major renovations.
(3)
Other includes development, other corporate operations and operations prior to disposition for properties sold.

 

 

 

Quarter Ended June 30, 2023

 

 

Quarter Ended June 30, 2022

 

 

 

Rental
Income

 

 

Operating
Expenses

 

 

NOI

 

 

Rental
Income

 

 

Operating
Expenses

 

 

NOI

 

Same store (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Los Angeles

 

$

118,562

 

 

$

35,795

 

 

$

82,767

 

 

$

118,840

 

 

$

33,060

 

 

$

85,780

 

Orange County

 

 

32,316

 

 

 

7,186

 

 

 

25,130

 

 

 

31,252

 

 

 

6,482

 

 

 

24,770

 

San Diego

 

 

24,691

 

 

 

5,747

 

 

 

18,944

 

 

 

23,067

 

 

 

5,220

 

 

 

17,847

 

Subtotal - Southern California

 

 

175,569

 

 

 

48,728

 

 

 

126,841

 

 

 

173,159

 

 

 

44,762

 

 

 

128,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

108,641

 

 

 

32,062

 

 

 

76,579

 

 

 

105,403

 

 

 

30,081

 

 

 

75,322

 

Washington, D.C.

 

 

109,660

 

 

 

34,807

 

 

 

74,853

 

 

 

103,268

 

 

 

34,311

 

 

 

68,957

 

New York

 

 

119,785

 

 

 

48,088

 

 

 

71,697

 

 

 

106,332

 

 

 

46,067

 

 

 

60,265

 

Seattle

 

 

74,729

 

 

 

21,246

 

 

 

53,483

 

 

 

71,577

 

 

 

20,269

 

 

 

51,308

 

Boston

 

 

72,469

 

 

 

20,747

 

 

 

51,722

 

 

 

67,117

 

 

 

20,016

 

 

 

47,101

 

Denver

 

 

17,873

 

 

 

5,010

 

 

 

12,863

 

 

 

16,833

 

 

 

4,697

 

 

 

12,136

 

Other Expansion Markets

 

 

18,718

 

 

 

8,346

 

 

 

10,372

 

 

 

17,685

 

 

 

7,375

 

 

 

10,310

 

Total same store

 

 

697,444

 

 

 

219,034

 

 

 

478,410

 

 

 

661,374

 

 

 

207,578

 

 

 

453,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-same store/other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-same store (2)

 

 

19,664

 

 

 

7,219

 

 

 

12,445

 

 

 

14,848

 

 

 

6,064

 

 

 

8,784

 

Other (3)

 

 

201

 

 

 

1,598

 

 

 

(1,397

)

 

 

10,808

 

 

 

4,563

 

 

 

6,245

 

Total non-same store/other

 

 

19,865

 

 

 

8,817

 

 

 

11,048

 

 

 

25,656

 

 

 

10,627

 

 

 

15,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

717,309

 

 

$

227,851

 

 

$

489,458

 

 

$

687,030

 

 

$

218,205

 

 

$

468,825

 

 

(1)
For the quarters ended June 30, 2023 and 2022, same store primarily includes all properties acquired or completed that were stabilized prior to April 1, 2022, less properties subsequently sold, which represented 77,545 apartment units.

34


Table of Contents

 

(2)
For the quarters ended June 30, 2023 and 2022, non-same store primarily includes properties acquired after April 1, 2022, plus any properties in lease-up and not stabilized as of April 1, 2022, and any properties undergoing major renovations.
(3)
Other includes development, other corporate operations and operations prior to disposition for properties sold.

 

 

 

Six Months Ended June 30, 2023

 

 

 

Total Assets

 

 

Capital Expenditures

 

Same store (1)

 

 

 

 

 

 

Los Angeles

 

$

2,522,130

 

 

$

23,582

 

Orange County

 

 

349,363

 

 

 

4,230

 

San Diego

 

 

229,569

 

 

 

7,907

 

Subtotal - Southern California

 

 

3,101,062

 

 

 

35,719

 

 

 

 

 

 

 

 

San Francisco

 

 

3,023,790

 

 

 

19,750

 

Washington, D.C.

 

 

3,039,410

 

 

 

23,142

 

New York

 

 

3,375,622

 

 

 

10,072

 

Seattle

 

 

2,141,765

 

 

 

14,237

 

Boston

 

 

1,773,166

 

 

 

11,998

 

Denver

 

 

840,581

 

 

 

1,773

 

Other Expansion Markets

 

 

796,218

 

 

 

1,805

 

Total same store

 

 

18,091,614

 

 

 

118,496

 

 

 

 

 

 

 

 

Non-same store/other

 

 

 

 

 

 

Non-same store (2)

 

 

1,321,994

 

 

 

16,682

 

Other (3)

 

 

732,121

 

 

 

69

 

Total non-same store/other

 

 

2,054,115

 

 

 

16,751

 

 

 

 

 

 

 

 

Totals

 

$

20,145,729

 

 

$

135,247

 

 

(1)
Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2022, less properties subsequently sold, which represented 76,952 apartment units.
(2)
Non-same store primarily includes properties acquired after January 1, 2022, plus any properties in lease-up and not stabilized as of January 1, 2022, and any properties undergoing major renovations.
(3)
Other includes development, other corporate operations and capital expenditures for properties sold.
14.
Subsequent Events

Subsequent to June 30, 2023, the Company:

Repaid $67.9 million of mortgage debt at par prior to maturity;
Locked the interest rate on secured notes totaling $530.0 million, which, subject to customary conditions, are anticipated to close in September 2023, at an all-in effective interest rate of approximately 4.7%; and
Received approximately $27.1 million to settle nine forward starting swaps in conjunction with the interest rate lock of the $530.0 million of secured notes discussed above.

 

35


Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For further information including definitions for capitalized terms not defined herein, refer to the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

Forward-Looking Statements

 

Forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, projections and assumptions made by management. While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, which could cause actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Additional factors that might cause such differences are discussed in Part I of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022, particularly those under Item 1A, Risk Factors. Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report. Forward-looking statements are not guarantees of future performance, results or events. The forward-looking statements contained herein are made as of the date hereof and the Company undertakes no obligation to update or supplement these forward-looking statements.

Overview

 

Equity Residential (“EQR”) 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 affluent long-term renters. ERP Operating Limited Partnership (“ERPOP”) is focused on conducting the multifamily property business of EQR. EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and ERPOP is an Illinois limited partnership formed in May 1993. References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP. References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP.

EQR is the general partner of, and as of June 30, 2023 owned an approximate 96.8% ownership interest in, ERPOP. All of the Company’s property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP. EQR issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, but does not have any indebtedness as all debt is incurred by the Operating Partnership. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.

The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in most of its markets.

On May 18, 2023, the Company announced that Samuel Zell, its Founder and Chairman of the Board of Trustees, had passed away earlier that same day. David J. Neithercut, the Company’s former Chief Executive Officer and a member of the Company’s Board of Trustees since 2006, has been appointed as Chairman.

Available Information

You may access our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and any amendments to any of those reports/statements we file with or furnish to the Securities and Exchange Commission (“SEC”) free of charge on our website, www.equityapartments.com. These reports/statements are made available on our website as soon as reasonably practicable after we file them with or furnish them to the SEC. The information contained on our website, including any information referred to in this report as being available on our website, is not a part of or incorporated into this report.

Business Objectives and Operating and Investing Strategies

The Company’s and the Operating Partnership’s overall business objectives and operating and investing strategies have not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

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Results of Operations

2023 Transactions

In conjunction with our business objectives and operating and investing strategies, the following table provides a rollforward of the transactions that occurred during the six months ended June 30, 2023:

 

Portfolio Rollforward

($ in thousands)

 

 

 

Properties

 

 

Apartment
Units

 

 

Purchase
Price

 

 

Acquisition
Cap Rate

 

12/31/2022

 

 

308

 

 

 

79,597

 

 

 

 

 

 

 

Acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Properties

 

 

1

 

 

 

287

 

 

$

108,000

 

 

 

5.0

%

Consolidated Rental Properties – Not Stabilized (1)

 

 

1

 

 

 

262

 

 

$

78,600

 

 

 

6.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Price

 

 

Disposition
Yield

 

Dispositions:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Properties

 

 

(7

)

 

 

(247

)

 

$

(135,300

)

 

 

(5.3

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Completed Developments – Consolidated

 

 

1

 

 

 

312

 

 

 

 

 

 

 

Configuration Changes

 

 

 

 

 

1

 

 

 

 

 

 

 

6/30/2023

 

 

304

 

 

 

80,212

 

 

 

 

 

 

 

 

(1)
The Company acquired one property in the Atlanta market in the second quarter of 2023 that is in lease-up and is expected to stabilize in its second year of ownership at the Acquisition Cap Rate listed above.

Acquisitions

The consolidated properties acquired during the six months ended June 30, 2023 are located in the Atlanta and Denver markets; and
During the second quarter of 2023, the Company acquired its joint venture partner's 10% interest in a 200-unit apartment property in Alameda, CA for $4.6 million, of which the Company paid $3.7 million in cash and ERPOP issued $0.9 million of 3.00% Series Q Preference Units. The property is now wholly owned. The Company also repaid $64.7 million of mortgage debt at par prior to maturity in conjunction with the buyout.

Dispositions

The consolidated properties disposed of during the six months ended June 30, 2023 were located in the Los Angeles market and the sales generated an Unlevered IRR of 8.7%.

Developments

The Company stabilized one consolidated apartment property during the six months ended June 30, 2023, located in the San Francisco market, consisting of 200 apartment units totaling approximately $116.4 million of development costs;
The Company completed construction on one consolidated apartment property during the six months ended June 30, 2023, located in the Washington, D.C. market, consisting of 312 apartment units totaling approximately $108.0 million of development costs; and
The Company spent approximately $67.6 million during the six months ended June 30, 2023, primarily for consolidated and unconsolidated development projects.

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See Notes 4 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate investments and investments in partially owned entities.

Comparison of the six months and quarter ended June 30, 2023 to the six months and quarter ended June 30, 2022

The following table presents a reconciliation of diluted earnings per share/unit for the six months and quarter ended June 30, 2023 as compared to the same periods in 2022:

 

 

Six Months Ended
June 30

 

 

Quarter Ended
June 30

 

Diluted earnings per share/unit for period ended 2022

$

0.78

 

 

$

0.59

 

Property NOI

 

 

0.17

 

 

 

0.06

 

Interest expense

 

 

0.03

 

 

 

0.01

 

Corporate overhead (1)

 

 

(0.01

)

 

 

(0.02

)

Net gain/loss on property sales

 

 

(0.03

)

 

 

(0.28

)

Depreciation expense

 

 

0.05

 

 

 

0.02

 

Other

 

(0.07

)

 

 

(0.01

)

Diluted earnings per share/unit for period ended 2023

$

0.92

 

 

$

0.37

 

 

(1)
Corporate overhead includes property management and general and administrative expenses.

The Company’s primary financial measure for evaluating each of its apartment communities is net operating income (“NOI”). NOI represents rental income less direct property operating expenses (including real estate taxes and insurance). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties.

The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (amounts in thousands):

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

Operating income

 

$

516,049

 

 

$

459,672

 

 

$

56,377

 

 

 

12.3

%

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Property management

 

 

62,145

 

 

 

57,306

 

 

 

4,839

 

 

 

8.4

%

General and administrative

 

 

35,041

 

 

 

33,661

 

 

 

1,380

 

 

 

4.1

%

Depreciation

 

 

437,185

 

 

 

453,767

 

 

 

(16,582

)

 

 

(3.7

)%

Net (gain) loss on sales of real estate properties

 

 

(100,122

)

 

 

(107,795

)

 

 

7,673

 

 

 

(7.1

)%

Total NOI

 

$

950,298

 

 

$

896,611

 

 

$

53,687

 

 

 

6.0

%

Rental income:

 

 

 

 

 

 

 

 

 

 

 

 

Same store

 

$

1,375,078

 

 

$

1,281,947

 

 

$

93,131

 

 

 

7.3

%

Non-same store/other

 

 

47,319

 

 

 

58,431

 

 

 

(11,112

)

 

 

(19.0

)%

Total rental income

 

 

1,422,397

 

 

 

1,340,378

 

 

 

82,019

 

 

 

6.1

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Same store

 

 

444,251

 

 

 

417,686

 

 

 

26,565

 

 

 

6.4

%

Non-same store/other

 

 

27,848

 

 

 

26,081

 

 

 

1,767

 

 

 

6.8

%

Total operating expenses

 

 

472,099

 

 

 

443,767

 

 

 

28,332

 

 

 

6.4

%

NOI:

 

 

 

 

 

 

 

 

 

 

 

 

Same store

 

 

930,827

 

 

 

864,261

 

 

 

66,566

 

 

 

7.7

%

Non-same store/other

 

 

19,471

 

 

 

32,350

 

 

 

(12,879

)

 

 

(39.8

)%

Total NOI

 

$

950,298

 

 

$

896,611

 

 

$

53,687

 

 

 

6.0

%

 

Note: See Note 13 in the Notes to Consolidated Financial Statements for detail by reportable segment/market. Non-same store/other NOI results consist primarily of properties acquired in calendar years 2022 and 2023, operations from the Company’s development properties and operations prior to disposition from 2022 and 2023 sold properties.

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The increase in same store rental income is primarily driven by healthy demand, limited new supply and lower than anticipated bad debt, net.
The increase in same store operating expenses is due primarily to:
Utilities – A $4.4 million increase primarily driven by higher commodity prices for gas and electric and higher trash expense;
Repairs and maintenance – An $8.0 million increase primarily driven by increased outsourcing due to higher internal staffing utilization to address issues from California rain storms during the first quarter of 2023 and wage pressure on contract services;
Real estate taxes – A $4.2 million increase due to modest escalation in rates and assessed values; and
On-site Payroll – A $4.6 million increase due primarily to a challenging comparable period and elevated employee benefit costs, partially offset by the impact of innovation initiatives.

 

The decrease in non-same store/other NOI is due primarily to a negative impact of lost NOI from 2022 and 2023 dispositions of $11.9 million, a negative impact of $1.6 million in lower NOI from one former master-leased property and two properties that have been removed from same store while undergoing major renovations and a negative impact of $6.8 million from property damage associated with the California rain storms, partially offset by a positive impact of higher NOI from properties acquired during 2021, 2022 and 2023 of $2.7 million and higher NOI from development properties in lease-up of $8.0 million.
The increase in consolidated total NOI is a result of the Company’s higher NOI from same store properties, largely due to improvement in same store revenues as noted above.

See the Same Store Results section below for additional discussion of those results.

Property management expenses include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third-party management companies. These expenses increased approximately $4.8 million or 8.4% and approximately $4.1 million or 15.5% for the six months and quarter ended June 30, 2023, respectively, as compared to the prior year periods. These increases are primarily attributable to increases in payroll-related costs, workforce/contractors costs and legal and professional fees, partially offset by decreases in training/marketing costs and third-party management fees.

General and administrative expenses, which include corporate operating expenses, increased approximately $1.4 million or 4.1% and approximately $2.5 million or 14.9% for the six months and quarter ended June 30, 2023, respectively, as compared to the prior year periods, primarily due to increases in payroll-related costs, partially offset by legal and professional fees and training/marketing costs.

Depreciation expense, which includes depreciation on non-real estate assets, decreased approximately $16.6 million or 3.7% and approximately $2.5 million or 1.1% for the six months and quarter ended June 30, 2023, respectively, as compared to the prior year periods. These decreases are primarily due to in-place leases for 2021 and 2022 acquisitions being fully depreciated as of December 31, 2022 and lower depreciation from properties sold in 2022 and 2023.

Net gain on sales of real estate properties decreased approximately $7.7 million or 7.1% during the six months ended June 30, 2023 as compared to the prior year period, primarily as a result of the sale of seven consolidated apartment properties for a lower gain in 2023 as compared to the sale of one consolidated apartment property in the same period in 2022. Net gain on sales of real estate properties decreased approximately $108.0 million for the quarter ended June 30, 2023 as compared to the prior year period, primarily as a result of no consolidated property sales in the second quarter of 2023 as compared to the sale of one consolidated apartment property in the same period in 2022.

Other expenses increased approximately $10.1 million and approximately $4.2 million for the six months and quarter ended June 30, 2023, respectively, as compared to the prior year periods, primarily due to increases in litigation reserves and data transformation project costs that occurred during 2023 but not during 2022.

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Table of Contents

 

Interest expense, including amortization of deferred financing costs, decreased approximately $12.9 million or 8.7% and approximately $6.4 million or 8.7% for the six months and quarter ended June 30, 2023, respectively, as compared to the prior year periods. These decreases are primarily due to lower overall debt balances outstanding as compared to prior year periods and higher capitalized interest, partially offset by higher rates on floating debt. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the six months ended June 30, 2023 was 3.81% as compared to 3.66% for the prior year period, and for the quarter ended June 30, 2023 was 3.75% as compared to 3.68% for the prior year period. The Company capitalized interest of approximately $7.0 million and $2.3 million during the six months ended June 30, 2023 and 2022, respectively, and $3.6 million and $1.3 million during the quarters ended June 30, 2023 and 2022, respectively.

Same Store Results

Properties that the Company owned and were stabilized for all of both of the six months ended June 30, 2023 and 2022 (the “Six-Month 2023 Same Store Properties”), which represented 76,952 apartment units, drove the Company’s results of operations. Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months. Properties are included in same store when they are stabilized for all of the current and comparable periods presented.

The following table provides comparative total same store results and statistics for the Six-Month 2023 Same Store Properties:

 

June YTD 2023 vs. June YTD 2022

Same Store Results/Statistics Including 76,952 Same Store Apartment Units

$ in thousands (except for Average Rental Rate)

 

June YTD 2023

 

 

June YTD 2022

 

 

Residential

 

%
Change

 

Non-
Residential

 

%
Change

 

Total

 

%
Change

 

 

 

Residential

 

Non-
Residential

 

Total

 

Revenues

$

1,324,993

 

 

7.3

%

$

50,085

 

 

7.0

%

$

1,375,078

 

 

7.3

%

 

Revenues

$

1,235,134

 

$

46,813

 

$

1,281,947

 

Expenses

$

430,638

 

 

6.2

%

$

13,613

 

 

11.6

%

$

444,251

 

 

6.4

%

 

Expenses

$

405,484

 

$

12,202

 

$

417,686

 

NOI

$

894,355

 

 

7.8

%

$

36,472

 

 

5.4

%

$

930,827

 

 

7.7

%

 

NOI

$

829,650

 

$

34,611

 

$

864,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,995

 

 

8.0

%

 

 

 

 

 

 

 

 

 

Average Rental Rate

$

2,772

 

 

 

 

 

Physical Occupancy

 

95.9

%

 

(0.7

%)

 

 

 

 

 

 

 

 

 

Physical Occupancy

 

96.6

%

 

 

 

 

Turnover

 

20.6

%

 

0.4

%

 

 

 

 

 

 

 

 

 

Turnover

 

20.2

%

 

 

 

 

 

Note: Same store revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

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Table of Contents

 

The following table provides results and statistics related to our Residential same store operations for the six months ended June 30, 2023 and 2022:

 

June YTD 2023 vs. June YTD 2022

Same Store Residential Results/Statistics by Market

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) from Prior Year

 

Markets/Metro Areas

 

Apartment
Units

 

 

June YTD 23
% of
Actual
NOI

 

 

June YTD 23
Average
Rental
Rate

 

 

June YTD 23
Weighted
Average
Physical
Occupancy %

 

 

June YTD 23
Turnover

 

 

Average
Rental
Rate

 

 

Physical
Occupancy

 

 

Turnover

 

Los Angeles

 

 

14,415

 

 

 

17.8

%

 

$

2,818

 

 

 

95.2

%

 

 

21.1

%

 

 

4.6

%

 

 

(1.7

%)

 

 

3.5

%

Orange County

 

 

4,028

 

 

 

5.5

%

 

 

2,752

 

 

 

96.1

%

 

 

17.8

%

 

 

7.7

%

 

 

(1.1

%)

 

 

2.7

%

San Diego

 

 

2,706

 

 

 

3.9

%

 

 

2,931

 

 

 

95.6

%

 

 

19.1

%

 

 

8.8

%

 

 

(1.5

%)

 

 

0.7

%

Subtotal – Southern California

 

 

21,149

 

 

 

27.2

%

 

 

2,820

 

 

 

95.4

%

 

 

20.2

%

 

 

5.7

%

 

 

(1.6

%)

 

 

2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco

 

 

11,368

 

 

 

16.5

%

 

 

3,265

 

 

 

95.6

%

 

 

20.4

%

 

 

5.9

%

 

 

(1.0

%)

 

 

1.6

%

Washington, D.C.

 

 

14,400

 

 

 

16.0

%

 

 

2,555

 

 

 

96.7

%

 

 

17.9

%

 

 

6.7

%

 

 

(0.1

%)

 

 

(1.7

%)

New York

 

 

8,536

 

 

 

14.3

%

 

 

4,459

 

 

 

96.9

%

 

 

17.6

%

 

 

16.4

%

 

 

(0.2

%)

 

 

(2.5

%)

Seattle

 

 

9,525

 

 

 

11.3

%

 

 

2,583

 

 

 

95.1

%

 

 

25.6

%

 

 

6.2

%

 

 

0.1

%

 

 

(0.3

%)

Boston

 

 

6,700

 

 

 

10.2

%

 

 

3,374

 

 

 

96.1

%

 

 

19.2

%

 

 

9.3

%

 

 

(0.2

%)

 

 

(0.5

%)

Denver

 

 

2,498

 

 

 

2.7

%

 

 

2,402

 

 

 

96.3

%

 

 

28.3

%

 

 

6.7

%

 

 

0.0

%

 

 

0.0

%

Other Expansion Markets

 

 

2,776

 

 

 

1.8

%

 

 

1,984

 

 

 

94.7

%

 

 

25.4

%

 

 

7.0

%

 

 

(1.9

%)

 

 

1.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

76,952

 

 

 

100.0

%

 

$

2,995

 

 

 

95.9

%

 

 

20.6

%

 

 

8.0

%

 

 

(0.7

%)

 

 

0.4

%

 

Note: The above table reflects Residential same store results only. Residential operations account for approximately 96.2% of total revenues for the six months ended June 30, 2023.

Despite geopolitical and economic uncertainties, demand to live in our apartment communities remained healthy, which our financial results reflected, as we continued to capture the gap between in-place rent levels and market rent levels. This steady demand for our apartments continues to support Physical Occupancy with pricing that is largely in-line with our improved expectations updated in May 2023, with our East Coast markets continuing to outperform our West Coast markets, as we expected. Key operating drivers for this performance during 2023 include:

Pricing – Pricing (net of Leasing Concessions) has continued to be healthy, particularly driven by strength in New York, our top performing market with very limited competitive new supply. Washington, D.C. has also shown stronger resilience despite high levels of new supply. Pricing remained positive during the six months ended June 30, 2023, following typical, albeit slightly muted, seasonal patterns.
Physical Occupancy – Physical Occupancy of 95.9% for the six months ended June 30, 2023 remained strong, despite increased move-out activity (see further discussion below).
Percentage of Residents Renewing and Turnover – We continue to see a high Percentage of Residents Renewing in our portfolio, which we believe reflects both the strength of demand and quality of our product. The Percentage of Residents Renewing has been strong at 57.0% for the second quarter of 2023. Turnover remains low at 20.6% for the six months ended June 30, 2023, reflecting a healthy and consistent trend of historically high resident retention.

In addition to these stronger fundamentals, the Company had increased move-out activity related to delinquent residents, especially in Los Angeles, during the six months ended June 30, 2023. This improved activity reduced bad debt, net, while putting modest pressure on Physical Occupancy during the six months ended June 30, 2023, but was not sufficient to offset the decline in governmental rental assistance payments received on behalf of our residents during the six months ended June 30, 2023 as compared to the prior year period.

Overall, the fundamentals of our business remain strong. Long-term, we expect elevated single family home ownership costs, positive household formation trends, favorable competitive new supply in most of our major markets and the overall deficit in housing across the country to buffer the impact on our business from the risks of potential economic weakness. We also see our affluent resident base as being more resilient to rising inflation due to higher levels of disposable income and lower relative rent-to-income ratios.

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Table of Contents

 

Liquidity and Capital Resources

 

With approximately $2.3 billion in readily available liquidity, a strong balance sheet, limited near-term maturities, very strong credit metrics and ample access to capital markets, the Company believes it is well positioned to meet its future obligations and take advantage of opportunities. See further discussion below.

Statements of Cash Flows

The following table sets forth our sources and uses of cash flows for the six months ended June 30, 2023 and 2022 (amounts in thousands):

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows provided by (used for):

 

 

 

 

 

 

Operating activities

 

$

745,980

 

 

$

690,874

 

Investing activities

 

$

(271,279

)

 

$

(45,335

)

Financing activities

 

$

(487,231

)

 

$

(887,124

)

 

The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the six months ended June 30, 2023.

Operating Activities

Our operating cash flows are primarily impacted by NOI and its components, such as Average Rental Rates, Physical Occupancy levels and operating expenses related to our properties. Cash provided by operating activities for the six months ended June 30, 2023 as compared to the prior year period, increased by approximately $55.1 million as a direct result of the NOI and other changes discussed above in Results of Operations.

Investing Activities

Our investing cash flows are primarily impacted by our transaction activity (acquisitions/dispositions), development spend and capital expenditures. For the six months ended June 30, 2023, key drivers were:

Acquired two consolidated rental properties for approximately $186.7 million in cash;
Disposed of seven consolidated rental properties, receiving net proceeds of approximately $133.9 million;
Invested $46.8 million primarily in development projects;
Invested $135.2 million in capital expenditures to real estate; and
Invested $26.4 million primarily in unconsolidated development joint venture entities as well as unconsolidated investments in real estate technology funds/companies for various technology initiatives.

Financing Activities

Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions/dividends to shareholders/unitholders and other Common Share activity. For the six months ended June 30, 2023, key drivers were:

Obtained $22.9 million in variable rate construction mortgage debt that is non-recourse to the Company;
Repaid $64.8 million on mortgage loans (inclusive of scheduled principal repayments);
Acquired our joint venture partner’s 10% interest in an apartment property for $3.7 million in cash (remaining $0.9 million was funded by ERPOP's issuance of 3.00% Series Q Preference Units);
Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $13.5 million; and
Paid dividends/distributions on Common Shares, Preferred Shares, Units (including OP Units and restricted units) and noncontrolling interests in partially owned properties totaling approximately $508.3 million.

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Table of Contents

 

Short-Term Liquidity and Cash Proceeds

The Company generally expects to meet its short-term liquidity requirements, including capital expenditures related to maintaining its existing properties and scheduled unsecured note and mortgage note repayments, through its working capital, net cash provided by operating activities and borrowings under the Company’s revolving credit facility and commercial paper program. Currently, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions.

The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of June 30, 2023 and December 31, 2022 (amounts in thousands):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Cash and cash equivalents

 

$

35,701

 

 

$

53,869

 

Restricted deposits

 

$

88,941

 

 

$

83,303

 

Unsecured revolving credit facility availability

 

$

2,311,329

 

 

$

2,366,537

 

 

Credit Facility and Commercial Paper Program

The Company has a $2.5 billion unsecured revolving credit facility maturing October 26, 2027. The Company has the ability to increase available borrowings by an additional $750.0 million by adding lenders to the facility, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under the facility will generally be the Secured Overnight Financing Rate (“SOFR”) plus a spread (currently 0.725%), or based on bids received from the lending group, and the Company pays an annual facility fee (currently 0.125%). Both the spread and the facility fee are dependent on the Company’s senior unsecured credit rating. See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of the Company’s credit facility.

The Company may borrow up to a maximum of $1.0 billion under its commercial paper program subject to market conditions. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of the Company’s other unsecured senior indebtedness.

The Company limits its utilization of the revolving credit facility in order to maintain liquidity to support its $1.0 billion commercial paper program along with certain other obligations. The following table presents the availability on the Company’s unsecured revolving credit facility as of July 26, 2023 (amounts in thousands):

 

 

 

July 26, 2023

 

Unsecured revolving credit facility commitment

 

$

2,500,000

 

Commercial paper balance outstanding

 

 

(388,070

)

Unsecured revolving credit facility balance outstanding

 

 

 

Other restricted amounts

 

 

(3,484

)

Unsecured revolving credit facility availability

 

$

2,108,446

 

 

Dividend Policy

The Company declared a dividend/distribution for the first and second quarters of 2023 of $0.6625 per share/unit in each quarter, an annualized increase of 6.0% over the amount paid in 2022. All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees.

Total dividends/distributions paid in July 2023 amounted to $258.8 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended June 30, 2023.

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Long-Term Financing and Capital Needs

The Company expects to meet its long-term liquidity requirements, such as lump sum unsecured note and mortgage debt maturities, property acquisitions and financing of development activities, through the issuance of secured and unsecured debt and equity securities (including additional OP Units), proceeds received from the disposition of certain properties and joint ventures, along with cash generated from operations after all distributions. The Company has a significant number of unencumbered properties available to secure additional mortgage borrowings should unsecured capital be unavailable or the cost of alternative sources of capital be too high. The value of and cash flow from these unencumbered properties are in excess of the requirements the Company must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $28.4 billion in investment in real estate on the Company’s balance sheet at June 30, 2023, $24.9 billion or 87.6% was unencumbered. However, there can be no assurances that these sources of capital will be available to the Company in the future on acceptable terms or otherwise. For additional details, see Item 1A, Risk Factors of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

EQR issues equity and guarantees certain debt of the Operating Partnership from time to time. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.

The Company’s total debt summary schedule as of June 30, 2023 is as follows:

Debt Summary as of June 30, 2023

($ in thousands)

 

 

 

Debt
Balances

 

 

% of Total

 

Secured

 

$

1,913,069

 

 

 

25.7

%

Unsecured

 

 

5,529,847

 

 

 

74.3

%

Total

 

$

7,442,916

 

 

 

100.0

%

Fixed Rate Debt:

 

 

 

 

 

 

Secured – Conventional

 

$

1,609,298

 

 

 

21.6

%

Unsecured – Public

 

 

5,345,373

 

 

 

71.8

%

Fixed Rate Debt

 

 

6,954,671

 

 

 

93.4

%

Floating Rate Debt:

 

 

 

 

 

 

Secured – Conventional

 

 

66,863

 

 

 

0.9

%

Secured – Tax Exempt

 

 

236,908

 

 

 

3.2

%

Unsecured – Revolving Credit Facility

 

 

 

 

 

 

Unsecured – Commercial Paper Program

 

 

184,474

 

 

 

2.5

%

Floating Rate Debt

 

 

488,245

 

 

 

6.6

%

Total

 

$

7,442,916

 

 

 

100.0

%

 

The Company’s long-term financing and capital needs and sources have not changed materially from the information included in the Company's and the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2022.

Critical Accounting Policies and Estimates

The Company’s and the Operating Partnership’s critical accounting policies and estimates have not changed from the information included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

 

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Funds From Operations and Normalized Funds From Operations

The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for the six months and quarters ended June 30, 2023 and 2022:

 

Funds From Operations and Normalized Funds From Operations

(Amounts in thousands)

 

 

 

Six Months Ended June 30,

 

 

Quarter Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

364,933

 

 

$

306,476

 

 

$

144,862

 

 

$

232,678

 

Net (income) loss attributable to Noncontrolling
   Interests – Partially Owned Properties

 

 

(2,082

)

 

 

(1,583

)

 

 

(1,105

)

 

 

(944

)

Preferred/preference distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Net income available to Common Shares and Units / Units

 

 

361,306

 

 

 

303,348

 

 

 

142,984

 

 

 

230,961

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

437,185

 

 

 

453,767

 

 

 

221,355

 

 

 

223,806

 

Depreciation – Non-real estate additions

 

 

(2,259

)

 

 

(2,114

)

 

 

(1,103

)

 

 

(1,062

)

Depreciation – Partially Owned Properties

 

 

(1,055

)

 

 

(1,554

)

 

 

(510

)

 

 

(661

)

Depreciation – Unconsolidated Properties

 

 

1,226

 

 

 

1,240

 

 

 

594

 

 

 

620

 

Net (gain) loss on sales of unconsolidated entities - operating assets

 

 

 

 

 

(9

)

 

 

 

 

 

 

Net (gain) loss on sales of real estate properties

 

 

(100,122

)

 

 

(107,795

)

 

 

87

 

 

 

(107,897

)

FFO available to Common Shares and Units / Units (1) (3) (4)

 

 

696,281

 

 

 

646,883

 

 

 

363,407

 

 

 

345,767

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Write-off of pursuit costs

 

 

1,993

 

 

 

2,515

 

 

 

661

 

 

 

1,052

 

Debt extinguishment and preferred share redemption (gains) losses

 

 

47

 

 

 

469

 

 

 

47

 

 

 

469

 

Non-operating asset (gains) losses

 

 

1,031

 

 

 

(1,330

)

 

 

317

 

 

 

312

 

Other miscellaneous items

 

 

11,343

 

 

 

(185

)

 

 

5,051

 

 

 

186

 

Normalized FFO available to Common Shares and Units / Units (2) (3) (4)

 

$

710,695

 

 

$

648,352

 

 

$

369,483

 

 

$

347,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO (1) (3)

 

$

697,826

 

 

$

648,428

 

 

$

364,180

 

 

$

346,540

 

Preferred/preference distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

FFO available to Common Shares and Units / Units (1) (3) (4)

 

$

696,281

 

 

$

646,883

 

 

$

363,407

 

 

$

345,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized FFO (2) (3)

 

$

712,240

 

 

$

649,897

 

 

$

370,256

 

 

$

348,559

 

Preferred/preference distributions

 

 

(1,545

)

 

 

(1,545

)

 

 

(773

)

 

 

(773

)

Normalized FFO available to Common Shares and Units / Units (2) (3) (4)

 

$

710,695

 

 

$

648,352

 

 

$

369,483

 

 

$

347,786

 

 

(1)
The National Association of Real Estate Investment Trusts (“Nareit”) defines funds from operations (“FFO”) (December 2018 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains or losses from sales and impairment write-downs of depreciable real estate and land when connected to the main business of a REIT, impairment write-downs of investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and depreciation and amortization related to real estate. Adjustments for partially owned consolidated and unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis.
(2)
Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:

the impact of any expenses relating to non-operating real estate asset impairment;

pursuit cost write-offs;

gains and losses from early debt extinguishment and preferred share redemptions;

gains and losses from non-operating assets; and

other miscellaneous items.

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(3)
The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses from sales and impairment write-downs of depreciable real estate and excluding depreciation related to real estate (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units / Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies. The Company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the Company’s operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units do not represent net income, net income available to Common Shares / Units or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units should not be exclusively considered as alternatives to net income, net income available to Common Shares / Units or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company’s calculation of FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.
(4)
FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units are calculated on a basis consistent with net income available to Common Shares / Units and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares/preference units in accordance with GAAP. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the “Noncontrolling Interests – Operating Partnership”. Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s and the Operating Partnership’s market risk has not changed materially from the amounts and information reported in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, to the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 4. Controls and Procedures

Equity Residential

(a)
Evaluation of Disclosure Controls and Procedures:

Effective as of June 30, 2023, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)
Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Company identified in connection with the Company’s evaluation referred to above that occurred during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ERP Operating Limited Partnership

(a)
Evaluation of Disclosure Controls and Procedures:

Effective as of June 30, 2023, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the Operating Partnership’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Operating Partnership in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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Table of Contents

 

(b)
Changes in Internal Control over Financial Reporting:

There were no changes to the internal control over financial reporting of the Operating Partnership identified in connection with the Operating Partnership’s evaluation referred to above that occurred during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION

As of June 30, 2023, the Company does not believe there is any litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.

Item 1A. Risk Factors

There have been no material changes to the risk factors that were discussed in Part I, Item 1A of the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended June 30, 2023, EQR issued 36,062 Common Shares in exchange for 36,062 OP Units held by various limited partners of ERPOP. OP Units are generally exchangeable into Common Shares on a one-for-one basis or, at the option of ERPOP, the cash equivalent thereof, at any time one year after the date of issuance. These shares were either registered under the Securities Act of 1933, as amended (the “Securities Act”), or issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder, as these were transactions by an issuer not involving a public offering. In light of the manner of the sale and information obtained by EQR from the limited partners in connection with these transactions, EQR believes it may rely on these exemptions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On June 15, 2023, Alexander Brackenridge, Executive Vice President and Chief Investment Officer of EQR, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act for the sale of up to 20,133 Common Shares and the exercise (and subsequent sale of underlying Common Shares) of up to 15,516 options through and including September 14, 2024.

Item 6. Exhibits – See the Exhibit Index.

 

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Table of Contents

 

EXHIBIT INDEX

The exhibits listed below are filed as part of this report. References to exhibits or other filings under the caption “Location” indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. The Commission file numbers for our Exchange Act filings referenced below are 1-12252 (Equity Residential) and 0-24920 (ERP Operating Limited Partnership).

 

Exhibit

Description

Location

3.1

 

Form of Preference Unit Term Sheet for 3.00% Series Q Cumulative Redeemable Preference Units.

 

Included as Exhibit 3.1 to ERP Operating Limited Partnership's Form 8-K dated April 13, 2023.

 

 

 

 

 

31.1

Equity Residential – Certification of Mark J. Parrell, Chief Executive Officer.

Attached herein.

31.2

Equity Residential – Certification of Robert A. Garechana, Chief Financial Officer.

Attached herein.

31.3

ERP Operating Limited Partnership – Certification of Mark J. Parrell, Chief Executive Officer of Registrant’s General Partner.

Attached herein.

31.4

ERP Operating Limited Partnership – Certification of Robert A. Garechana, Chief Financial Officer of Registrant’s General Partner.

Attached herein.

32.1

Equity Residential – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Mark J. Parrell, Chief Executive Officer of the Company.

Attached herein.

32.2

Equity Residential – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Robert A. Garechana, Chief Financial Officer of the Company.

Attached herein.

32.3

ERP Operating Limited Partnership – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Mark J. Parrell, Chief Executive Officer of Registrant’s General Partner.

Attached herein.

32.4

ERP Operating Limited Partnership – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Robert A. Garechana, Chief Financial Officer of Registrant’s General Partner.

Attached herein.

 

 

 

 

 

101.INS

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

 

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

 

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

 

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

EQUITY RESIDENTIAL

 

 

 

 

 

Date:

August 2, 2023

By:

 

/s/ Robert A. Garechana

 

 

 

 

Robert A. Garechana

 

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

 

(Principal Financial Officer)

 

 

 

 

 

Date:

August 2, 2023

By:

 

/s/ Ian S. Kaufman

 

 

 

 

Ian S. Kaufman

 

 

 

 

Senior Vice President and Chief Accounting Officer

 

 

 

 

(Principal Accounting Officer)

 

 

 

ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL

ITS GENERAL PARTNER

 

 

 

 

 

Date:

August 2, 2023

By:

 

/s/ Robert A. Garechana

 

 

 

 

Robert A. Garechana

 

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

 

(Principal Financial Officer)

 

 

 

 

 

Date:

August 2, 2023

By:

 

/s/ Ian S. Kaufman

 

 

 

 

Ian S. Kaufman

 

 

 

 

Senior Vice President and Chief Accounting Officer

 

 

 

 

(Principal Accounting Officer)