News Column

Equity Residential Reports 10% Increase in Normalized FFO per Share for Second Quarter 2014

July 29, 2014

Full Year Guidance Raised on Strong Operations



CHICAGO--(BUSINESS WIRE)-- Equity Residential (NYSE: EQR) today reported results for the quarter and six months ended June 30, 2014. All per share results are reported as available to common shares on a diluted basis.

"Demand for well located, high quality rental housing in our core markets remains exceptionally strong as favorable demographics and an improving economy combine to deliver operating results at the high end of our expectations portfolio wide," said David J. Neithercut, Equity Residential's President and CEO. "As a result, we currently expect full year growth in same store revenues of 4% and Normalized Funds from Operations to increase 9% per share."

Second Quarter 2014

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the second quarter of 2014 was $0.77 per share compared to $0.73 per share in the second quarter of 2013. The difference is due primarily to the items discussed below, partially offset by higher gains on land sales in the second quarter of 2013.

For the second quarter of 2014, the company reported Normalized FFO of $0.78 per share compared to $0.71 per share in the same period of 2013. The following items impacted Normalized FFO per share in the quarter:

  • the positive impact of approximately $0.06 per share from higher same store net operating income (NOI) and approximately $0.01 per share from NOI from non-same store properties currently in lease up; and
  • the negative impact of approximately $0.03 per share from 2013 disposition activity, the proceeds from which were used to repay debt resulting in a positive impact of approximately $0.03 per share from lower total interest expense, along with other items.

    Normalized FFO begins with FFO and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. A reconciliation and definition of Normalized FFO are provided on pages 25 and 28 of this release and the company has included guidance for Normalized FFO on page 26 of this release.

    For the second quarter of 2014, the company reported earnings of $0.31 per share compared to $0.90 per share in the second quarter of 2013. The difference is due primarily to higher gains on property sales in the second quarter of 2013 partially offset by higher depreciation expense in the second quarter of 2013.

    Six Months Ended June 30, 2014

    FFO for the six months ended June 30, 2014 was $1.48 per share compared to $0.97 per share in the same period of 2013. The difference is due primarily to the acquisition expenses and prepayment penalties the company incurred in the first six months of 2013, along with the items described above.

    For the six months ended June 30, 2014, the company reported Normalized FFO of $1.49 per share compared to $1.35 per share for the same period of 2013.

    For the six months ended June 30, 2014, the company reported earnings of $0.52 per share compared to $3.84 per share for the same period of 2013. The difference is due primarily to higher gains on property sales in the first six months of 2013 partially offset by higher depreciation expense, acquisition expenses and prepayment penalties incurred in the first six months of 2013.

    Same Store Results

    The company’s same store results for all periods include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the company.

    On a same store second quarter to second quarter comparison, which includes 100,648 apartment units, revenues increased 4.1%, expenses increased 1.4% and NOI increased 5.5%.

    On a same store six-month to six-month comparison, which includes 100,648 apartment units, revenues increased 4.0%, expenses increased 2.3% and NOI increased 5.0%.

    Investment Activity

    During the second quarter of 2014, the company acquired a 134-unit apartment property in Seattle for a purchase price of approximately $36.1 million pursuant to a contract executed prior to the commencement of construction. The company has recently completed the initial lease up of the asset and expects to achieve a capitalization (cap) rate of 6.4% at stabilization, which will occur in the second year of ownership. The company also acquired a 208-unit apartment property in lease up in Glendale, California for a purchase price of approximately $70.5 million and a cap rate of 4.9% at stabilization, which will occur in the second year of ownership. Also during the quarter, the company acquired a land parcel in Seattle for future development for approximately $10.3 million.

    During the second quarter, the company sold a 336-unit apartment property in Orlando, Florida for approximately $40.9 million and a cap rate of 6.7%. This sale generated an unlevered internal rate of return (IRR), inclusive of management costs, of 7.9%. The company also sold a land parcel in Los Angeles for approximately $8.2 million during the quarter. These were the only property and land sales made by the company during the first six months of 2014.

    For the six months ended June 30, 2014, the company acquired three properties with a total of 772 apartment units for an aggregate purchase price of approximately $249.6 million at a weighted average cap rate of 5.1%.

    Capital Markets Activities

    On June 19, 2014, the company closed two unsecured note offerings totaling $1.2 billion. The company closed a $750 million unsecured note offering maturing July 1, 2044 with a coupon of 4.5% and an all in effective rate of approximately 4.57% including the effect of underwriters’ fees and the termination of certain interest rate hedges. In addition, the company closed a $450 million unsecured note offering maturing July 1, 2019 with a coupon of 2.375% and an all in effective rate of approximately 2.52% including the effect of underwriters’ fees. The company swapped the 5-year notes to a floating rate of 90-Day LIBOR plus 0.61% and an all in effective rate of 90-Day LIBOR plus 0.75%. Proceeds from these issuances were used to repay the company’s $750 million term loan facility that was scheduled to mature in 2015 and its outstanding balance on its revolving line of credit.

    Third Quarter 2014 Guidance

    The company has established a Normalized FFO guidance range of $0.77 to $0.81 per share for the third quarter of 2014. The difference between the company’s second quarter Normalized FFO of $0.78 per share and the midpoint of the third quarter guidance range of $0.79 per share is due primarily to:

  • the positive impact of approximately $0.01 per share from same store and lease up NOI;
  • the positive impact of approximately $0.01 per share from lower G&A expenses; and
  • the negative impact of approximately $0.01 per share from higher total interest expense resulting from the company’s June 2014 debt offerings.

    Full Year 2014 Guidance

    The company has revised its guidance for its full year 2014 same store operating performance and Normalized FFO results as well as other items listed on page 26 of this release. The changes to the full year same store and Normalized FFO guidance are listed below:

     

    Previous

     

    Revised

    Same store:
    Physical occupancy 95.4% 95.5%
    Revenue change 3.0% to 4.0% 3.9% to 4.1%
    Expense change 2.0% to 3.0% 2.25% to 2.75%
    NOI change 3.5% to 4.75% 4.5% to 5.0%
     
    Normalized FFO per share: $3.03 to $3.13$3.08 to $3.12


    The company’s guidance for investment activity remains unchanged at $500 million of acquisitions and $500 million of dispositions with a spread of 100 basis points.

    The difference between the midpoint of the previous Normalized FFO guidance range of $3.08 per share and the midpoint of the revised guidance range of $3.10 per share is due primarily to:

  • the positive impact of approximately $0.04 per share from higher NOI; and
  • the negative impact of approximately $0.02 per share from higher interest expense resulting from the company’s June 2014 debt offerings.

    Third Quarter 2014 Earnings and Conference Call

    Equity Residential expects to announce third quarter 2014 results on Tuesday, October 28, 2014 and host a conference call to discuss those results at 10:00 a.m. CT on Wednesday, October 29, 2014.

    Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 397 properties consisting of 111,491 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

    Forward-Looking Statements

    In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. Other risks and uncertainties are described under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

    A live web cast of the company’s conference call discussing these results will take place tomorrow, Wednesday, July 30, at 10:00 a.m. Central.Please visit the Investor section of the company’s web site at www.equityapartments.com for the link.A replay of the web cast will be available for two weeks at this site.

           
    Equity Residential
    Consolidated Statements of Operations
    (Amounts in thousands except per share data)
    (Unaudited)
     
    Six Months Ended June 30,Quarter Ended June 30,
    2014201320142013
    REVENUES
    Rental income $ 1,280,491 $ 1,117,106 $ 649,766 $ 614,544
    Fee and asset management   5,519     4,833     2,802     2,673  
    Total revenues   1,286,010     1,121,939     652,568     617,217  
     
    EXPENSES
    Property and maintenance 240,961 212,030 115,388 113,501
    Real estate taxes and insurance 165,149 141,837 83,055 76,742
    Property management 42,673 44,520 20,555 22,031
    Fee and asset management 3,040 3,223 1,378 1,577
    Depreciation 375,303 519,526 190,136 323,304
    General and administrative   31,328     32,580     13,752     16,085  
    Total expenses   858,454     953,716     424,264     553,240  
     
    Operating income 427,556 168,223 228,304 63,977
     
    Interest and other income 2,637 752 2,032 432
    Other expenses (2,190 ) (23,350 ) (1,533 ) (1,631 )
    Interest:
    Expense incurred, net (228,973 ) (317,417 ) (115,924 ) (122,950 )
    Amortization of deferred financing costs   (5,926 )   (11,301 )   (3,134 )   (4,353 )
    Income (loss) before income and other taxes, (loss) from investments in unconsolidated

    entities, net gain on sales of land parcels, discontinued operations and net gain on

    sales of real estate properties

    193,104 (183,093 ) 109,745 (64,525 )
    Income and other tax (expense) benefit (886 ) (833 ) (646 ) (428 )
    (Loss) from investments in unconsolidated entities (9,025 ) (54,540 ) (7,616 ) (8,174 )
    Net gain on sales of land parcels   794     14,616     824     14,616  
    Income (loss) from continuing operations 183,987 (223,850 ) 102,307 (58,511 )
    Discontinued operations, net   1,562     1,621,616     510     395,243  
    Income before net gain on sales of real estate properties 185,549 1,397,766 102,817 336,732
    Net gain on sales of real estate properties   14,903     —     14,903     —  
    Net income 200,452 1,397,766 117,720 336,732
    Net (income) loss attributable to Noncontrolling Interests:
    Operating Partnership (7,535 ) (56,111 ) (4,442 ) (12,788 )
    Partially Owned Properties   (1,092 )   790     (588 )   815  
    Net income attributable to controlling interests 191,825 1,342,445 112,690 324,759
    Preferred distributions   (2,072 )   (2,072 )   (1,036 )   (1,036 )
    Net income available to Common Shares $ 189,753   $ 1,340,373   $ 111,654   $ 323,723  
     
    Earnings per share – basic:
    Income (loss) from continuing operations available to Common Shares $ 0.52   $ (0.62 ) $ 0.31   $ (0.16 )
    Net income available to Common Shares $ 0.53   $ 3.84   $ 0.31   $ 0.90  
    Weighted average Common Shares outstanding   360,641     348,654     360,809     359,653  
     
    Earnings per share – diluted:
    Income (loss) from continuing operations available to Common Shares $ 0.52   $ (0.62 ) $ 0.31   $ (0.16 )
    Net income available to Common Shares $ 0.52   $ 3.84   $ 0.31   $ 0.90  
    Weighted average Common Shares outstanding   376,780     348,654     377,118     359,653  
     
    Distributions declared per Common Share outstanding $ 1.00   $ 0.80   $ 0.50   $ 0.40  
             
    Equity Residential
    Consolidated Statements of Funds From Operations and Normalized Funds From Operations
    (Amounts in thousands except per share data)
    (Unaudited)
     
    Six Months Ended June 30,Quarter Ended June 30,
    2014201320142013
    Net income $ 200,452 $ 1,397,766 $ 117,720 $ 336,732
    Net (income) loss attributable to Noncontrolling Interests –
    Partially Owned Properties (1,092 ) 790 (588 ) 815
    Preferred distributions   (2,072 )   (2,072 )   (1,036 )   (1,036 )
    Net income available to Common Shares and Units 197,288 1,396,484 116,096 336,511
     
    Adjustments:
    Depreciation 375,303 519,526 190,136 323,304
    Depreciation – Non-real estate additions (2,348 ) (2,473 ) (1,160 ) (1,257 )
    Depreciation – Partially Owned Properties (2,140 ) (3,550 ) (1,072 ) (2,275 )
    Depreciation – Unconsolidated Properties 3,436 1,042 1,833 782
    Net (gain) on sales of real estate properties (14,903 ) — (14,903 ) —
    Discontinued operations:
    Depreciation — 30,962 — 7,146
    Net (gain) on sales of discontinued operations (224 ) (1,588,874 ) (153 ) (389,952 )
    Net incremental gain on sales of condominium units — 7 — 7
    Gain on sale of Equity Corporate Housing (ECH)   —     601     —     351  
    FFO available to Common Shares and Units (1) (3) (4) 556,412 353,725 290,777 274,617
     
    Adjustments (see page 25 for additional detail):
    Asset impairment and valuation allowances — — — —
    Property acquisition costs and write-off of pursuit costs 7,877 76,116 7,403 8,448
    Debt extinguishment (gains) losses, including prepayment penalties, preferred share
    redemptions and non-cash convertible debt discounts 491 78,820 491 (823 )
    (Gains) losses on sales of non-operating assets, net of income and other tax expense
    (benefit) (851 ) (15,224 ) (860 ) (14,974 )
    Other miscellaneous non-comparable items   (2,390 )   —     (1,927 )   —  
    Normalized FFO available to Common Shares and Units (2) (3) (4) $ 561,539   $ 493,437   $ 295,884   $ 267,268  
     
    FFO (1) (3) $ 558,484 $ 355,797 $ 291,813 $ 275,653
    Preferred distributions   (2,072 )   (2,072 )   (1,036 )   (1,036 )
    FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 556,412   $ 353,725   $ 290,777   $ 274,617  
    FFO per share and Unit - basic $ 1.49   $ 0.98   $ 0.78   $ 0.74  
    FFO per share and Unit - diluted $ 1.48   $ 0.97   $ 0.77   $ 0.73  
     
    Normalized FFO (2) (3) $ 563,611 $ 495,509 $ 296,920 $ 268,304
    Preferred distributions   (2,072 )   (2,072 )   (1,036 )   (1,036 )
    Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 561,539   $ 493,437   $ 295,884   $ 267,268  
    Normalized FFO per share and Unit - basic $ 1.50   $ 1.36   $ 0.79   $ 0.72  
    Normalized FFO per share and Unit - diluted $ 1.49   $ 1.35   $ 0.78   $ 0.71  
     
    Weighted average Common Shares and Units outstanding - basic   374,377     362,390     374,551     373,403  
    Weighted average Common Shares and Units outstanding - diluted   376,780     364,867     377,118     375,910  
    Note:   See page 25 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 28 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
       
    Equity Residential
    Consolidated Balance Sheets
    (Amounts in thousands except for share amounts)
    (Unaudited)
     

    June 30,

    2014

    December 31,

    2013

    ASSETS
    Investment in real estate
    Land $ 6,296,735 $ 6,192,512
    Depreciable property 19,730,737 19,226,047
    Projects under development 1,006,992 988,867
    Land held for development   306,625     393,522  
    Investment in real estate 27,341,089 26,800,948
    Accumulated depreciation   (5,170,438 )   (4,807,709 )
    Investment in real estate, net 22,170,651 21,993,239
    Cash and cash equivalents 76,132 53,534
    Investments in unconsolidated entities 142,318 178,526
    Deposits – restricted 84,408 103,567
    Escrow deposits – mortgage 45,269 42,636
    Deferred financing costs, net 63,441 58,486
    Other assets   409,183     404,557  
    Total assets$22,991,402   $22,834,545  
     
    LIABILITIES AND EQUITY
    Liabilities:
    Mortgage notes payable $ 5,158,091 $ 5,174,166
    Notes, net 5,923,952 5,477,088
    Lines of credit — 115,000
    Accounts payable and accrued expenses 168,225 118,791
    Accrued interest payable 78,389 78,309
    Other liabilities 331,662 347,748
    Security deposits 74,508 71,592
    Distributions payable   187,906     243,511  
    Total liabilities   11,922,733     11,626,205  
     
    Commitments and contingencies
     
    Redeemable Noncontrolling Interests – Operating Partnership   440,050     363,144  
    Equity:
    Shareholders’ equity:
    Preferred Shares of beneficial interest, $0.01 par value;

    100,000,000 shares authorized; 1,000,000 shares issued and

    outstanding as of June 30, 2014 and December 31, 2013

    50,000 50,000
    Common Shares of beneficial interest, $0.01 par value;

    1,000,000,000 shares authorized; 361,562,007 shares issued and

    outstanding as of June 30, 2014 and 360,479,260 shares

    issued and outstanding as of December 31, 2013

    3,616 3,605
    Paid in capital 8,527,380 8,561,500
    Retained earnings 1,875,732 2,047,258
    Accumulated other comprehensive (loss)   (166,990 )   (155,162 )
    Total shareholders’ equity 10,289,738 10,507,201
    Noncontrolling Interests:
    Operating Partnership 213,038 211,412
    Partially Owned Properties   125,843     126,583  
    Total Noncontrolling Interests   338,881     337,995  
    Total equity   10,628,619     10,845,196  
    Total liabilities and equity$22,991,402   $22,834,545  
     
    Equity Residential
    Portfolio Summary
    As of June 30, 2014
           
    % of Average
    Apartment Stabilized Rental
    Markets/Metro Areas Properties Units NOI (1) Rate (2)
     
    Core:
    Washington DC 57 18,652 18.6 % $ 2,236
    New York 38 10,330 16.7 % 3,866
    San Francisco 51 13,208 13.0 % 2,328
    Los Angeles 60 12,878 12.1 % 2,164
    Boston 34 7,816 10.1 % 2,905
    South Florida 36 11,731 7.5 % 1,597
    Seattle 41 8,250 6.8 % 1,866
    Denver 19 6,935 4.4 % 1,382
    San Diego 13 3,505 3.1 % 1,958
    Orange County, CA 11 3,490 2.9 %   1,770
    Subtotal – Core36096,795 95.2 % 2,270
     
    Non-Core:
    Inland Empire, CA 10 3,081 2.1 % 1,555
    Orlando 9 3,047 1.5 % 1,160
    All Other Markets 16 3,561 1.2 %   1,164
    Subtotal – Non-Core359,689 4.8 %   1,287
    Total395106,484 100.0 %   2,180
     
    Military Housing 2 5,007 —     —
     
    Grand Total397111,491100.0%$2,180
     
    Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
     
    (1) % of Stabilized NOI includes budgeted 2014 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
     
    (2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the last month of the period presented.
     
    Equity Residential
               
    Portfolio as of June 30, 2014
     
    Properties

    Apartment

    Units

    Wholly Owned Properties 369 100,210
    Master-Leased Properties - Consolidated 3 853
    Partially Owned Properties - Consolidated 19 3,752
    Partially Owned Properties - Unconsolidated 4 1,669

    Military Housing

    2     5,007  
     
    397     111,491  
     
                           
     
    Portfolio Rollforward Q2 2014
    ($ in thousands)
     
    Properties Apartment

    Units

    Purchase/

    (Sale) Price

    Cap Rate
    3/31/2014 396 111,537
    Acquisitions:
    Consolidated:
    Rental Properties - Not Stabilized (1) 2 342 $ 106,610 5.4 %
    Land Parcel — — $ 10,290
    Dispositions:
    Consolidated:
    Rental Properties (1 ) (336 ) $ (40,850 ) 6.7 %
    Land Parcel — — $ (8,200 )
    Configuration Changes —   (52 )
     
    6/30/2014 397   111,491  
     
                           
     
    Portfolio Rollforward 2014
    ($ in thousands)
     
    Properties Apartment

    Units

    Purchase/

    (Sale) Price

    Cap Rate
    12/31/2013 390 109,855
    Acquisitions:
    Consolidated:
    Rental Properties - Stabilized 1 430 $ 143,000 4.9 %
    Rental Properties - Not Stabilized (1) 2 342 $ 106,610 5.4 %
    Land Parcels — — $ 15,790
    Dispositions:
    Consolidated:
    Rental Properties (1 ) (336 ) $ (40,850 ) 6.7 %
    Land Parcel — — $ (8,200 )
    Completed Developments - Consolidated 5 1,290
    Configuration Changes —   (90 )
     
    6/30/2014 397   111,491  
    (1)   The Company acquired two properties in the second quarter of 2014, one that just completed lease up and the other which is still in lease up, both of which are expected to stabilize in their second year of ownership at a 6.4% yield on cost and a 4.9% yield on cost, respectively.
     
    Equity Residential
                 
    Second Quarter 2014 vs. Second Quarter 2013
    Same Store Results/Statistics for 100,648 Same Store Apartment Units
    $ in thousands (except for Average Rental Rate)
     
    Results Statistics

    Average

    Rental

    Description Revenues Expenses NOI (1)

    Rate (2)

    Occupancy   Turnover
     
    Q2 2014 $ 626,746 $ 208,086 $ 418,660 $ 2,168 95.8 % 14.2 %
    Q2 2013 $ 602,046   $ 205,213   $ 396,833   $ 2,088   95.6 % 14.4 %
     
    Change $ 24,700   $ 2,873   $ 21,827   $ 80   0.2 % (0.2 %)
     
    Change 4.1 % 1.4 % 5.5 % 3.8 %
     
                               
     
     
    Second Quarter 2014 vs. First Quarter 2014
    Same Store Results/Statistics for 101,158 Same Store Apartment Units
    $ in thousands (except for Average Rental Rate)
     
    Results Statistics

    Average

    Rental
    Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
     
    Q2 2014 $ 629,808 $ 209,021 $ 420,787 $ 2,167 95.8 % 14.2 %
    Q1 2014 $ 615,756   $ 219,095   $ 396,661   $ 2,136   95.1 % 11.4 %
     
    Change $ 14,052   $ (10,074 ) $ 24,126   $ 31   0.7 % 2.8 %
     
    Change 2.3 % (4.6 %) 6.1 % 1.5 %
     
                               
     
     
    June YTD 2014 vs. June YTD 2013
    Same Store Results/Statistics for 100,648 Same Store Apartment Units
    $ in thousands (except for Average Rental Rate)
     
    Results Statistics

    Average

    Rental

    Description Revenues Expenses NOI (1)

    Rate (2)

    Occupancy Turnover
     
    YTD 2014 $ 1,239,506 $ 426,227 $ 813,279 $ 2,152 95.4 % 25.6 %
    YTD 2013 $ 1,191,430   $ 416,591   $ 774,839   $ 2,072   95.3 % 26.5 %
     
    Change $ 48,076   $ 9,636   $ 38,440   $ 80   0.1 % (0.9 %)
     
    Change 4.0 % 2.3 % 5.0 % 3.9 %
    Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
     
    (1) The Company's primary financial measure for evaluating each of its apartment communities is net operating income ("NOI"). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. 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 communities. See page 28 for reconciliations from operating income.
     
    (2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
     
    Equity Residential
    Second Quarter 2014 vs. Second Quarter 2013
    Same Store Results/Statistics by Market
                     
     
    Increase (Decrease) from Prior Year's Quarter

    Q2 2014

    Q2 2014

    Q2 2014

     

     

    % of

    Average

    Weighted

     

    Average

     

    Apartment

    Actual

    Rental

    Average

    Rental

    Markets/Metro Areas

    Units

    NOI

    Rate (1)

    Occupancy %

    Revenues Expenses NOI

    Rate (1)

    Occupancy
     
    Core:
    Washington DC 17,553 18.3 % $ 2,230 95.2 % (1.0 %) (0.2 %) (1.3 %) (0.8 %) (0.1 %)
    New York 10,330 17.3 % 3,842 96.2 % 4.5 % 3.1 % 5.3 % 4.4 % 0.1 %
    San Francisco 12,764 13.8 % 2,286 96.1 % 8.5 % 1.4 % 12.1 % 7.9 % 0.5 %
    Boston 7,722 10.5 % 2,836 96.1 % 2.8 % (1.0 %) 4.5 % 2.0 % 0.7 %
    Los Angeles 11,139 10.4 % 2,107 95.3 % 4.3 % 0.8 % 6.2 % 4.5 % (0.2 %)
    South Florida 10,834 7.5 % 1,587 95.9 % 5.1 % 2.5 % 6.7 % 4.7 % 0.4 %
    Seattle 7,411 6.2 % 1,828 95.9 % 7.7 % 5.9 % 8.7 % 7.2 % 0.4 %
    Denver 6,935 4.7 % 1,375 96.2 % 7.8 % (1.6 %) 11.9 % 7.3 % 0.4 %
    San Diego 3,505 3.2 % 1,954 96.1 % 4.3 % 3.8 % 4.6 % 4.2 % 0.1 %
    Orange County, CA 3,490 3.0 %   1,769 96.0 % 5.2 % 2.2 % 6.4 % 4.7 % 0.4 %
    Subtotal – Core 91,683 94.9 % 2,254 95.8 % 4.2 % 1.5 % 5.5 % 3.9 % 0.2 %
     
    Non-Core:
    Inland Empire, CA 3,081 2.2 % 1,544 95.7 % 2.7 % 3.0 % 2.6 % 2.4 % 0.3 %
    Orlando 3,047 1.6 % 1,151 95.3 % 2.2 % 1.5 % 2.6 % 2.9 % (0.5 %)
    All Other Markets 2,837 1.3 %   1,144 96.3 % 3.8 % (6.2 %) 12.3 % 2.5 % 1.3 %
    Subtotal – Non-Core 8,965 5.1 % 1,284 95.7 % 2.9 % (0.6 %) 4.9 % 2.6 % 0.3 %
                     
    Total 100,648 100.0 % $ 2,168 95.8 % 4.1 % 1.4 % 5.5 % 3.8 % 0.2 %
    Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
     
    (1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
     
    Equity Residential
    Second Quarter 2014 vs. First Quarter 2014
    Same Store Results/Statistics by Market
                     
     
    Increase (Decrease) from Prior Quarter

    Q2 2014

    Q2 2014

    Q2 2014

    % of

    Average

    Weighted

    Average
    Apartment

    Actual

    Rental

    Average

    Rental
    Markets/Metro Areas Units

    NOI

    Rate (1)

    Occupancy %

    Revenues Expenses NOI Rate (1) Occupancy
     
    Core:
    Washington DC 17,741 18.5 % $ 2,234 95.2 % 1.2 % (6.2 %) 5.0 % 0.5 % 0.7 %
    New York 10,330 17.2 % 3,842 96.2 % 2.7 % (9.3 %) 11.3 % 2.1 % 0.6 %
    San Francisco 12,764 13.8 % 2,286 96.1 % 3.5 % (1.3 %) 5.8 % 2.1 % 1.3 %
    Boston 7,722 10.4 % 2,836 96.1 % 2.0 % (13.1 %) 10.3 % 0.9 % 1.0 %
    Los Angeles 11,139 10.4 % 2,107 95.3 % 1.6 % (0.1 %) 2.5 % 1.5 % 0.1 %
    South Florida 10,834 7.4 % 1,587 95.9 % 2.1 % 0.2 % 3.3 % 1.5 % 0.6 %
    Seattle 7,733 6.4 % 1,826 95.9 % 3.3 % 2.1 % 3.9 % 2.3 % 0.9 %
    Denver 6,935 4.7 % 1,375 96.2 % 3.4 % 2.7 % 3.7 % 2.3 % 1.0 %
    San Diego 3,505 3.2 % 1,954 96.1 % 2.6 % 2.2 % 2.8 % 1.5 % 1.1 %
    Orange County, CA 3,490 3.0 %   1,769 96.0 % 2.3 % 1.0 % 2.9 % 1.4 % 0.9 %
    Subtotal – Core 92,193 95.0 % 2,253 95.8 % 2.3 % (4.5 %) 6.0 % 1.5 % 0.8 %
     
    Non-Core:
    Inland Empire, CA 3,081 2.2 % 1,544 95.7 % 0.8 % 2.3 % 0.1 % 0.5 % 0.2 %
    Orlando 3,047 1.5 % 1,151 95.3 % 1.6 % (1.7 %) 3.6 % 0.9 % 0.8 %
    All Other Markets 2,837 1.3 %   1,144 96.3 % 2.1 % (19.3 %) 25.4 % 1.8 % 0.3 %
    Subtotal – Non-Core 8,965 5.0 % 1,284 95.7 % 1.4 % (7.0 %) 6.8 % 0.9 % 0.4 %
                     
    Total 101,158 100.0 % $ 2,167 95.8 % 2.3 % (4.6 %) 6.1 % 1.5 % 0.7 %
    Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
     
    (1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
     
    Equity Residential
    June YTD 2014 vs. June YTD 2013
    Same Store Results/Statistics by Market
                     
     
    Increase (Decrease) from Prior Year

    June YTD 14

    June YTD 14

    June YTD 14

    % of

    Average

    Weighted

    Average
    Apartment

    Actual

    Rental

    Average

    Rental
    Markets/Metro Areas Units

    NOI

    Rate (1)

    Occupancy %

    Revenues Expenses NOI Rate (1) Occupancy
     
    Core:
    Washington DC 17,553 18.4 % $ 2,225 94.9 % (0.7 %) 2.0 % (2.0 %) (0.5 %) (0.2 %)
    New York 10,330 16.9 % 3,802 95.9 % 3.7 % 5.2 % 2.8 % 3.6 % 0.2 %
    San Francisco 12,764 13.8 % 2,262 95.5 % 8.5 % (2.1 %) 14.3 % 7.9 % 0.4 %
    Los Angeles 11,139 10.6 % 2,092 95.3 % 4.4 % (0.1 %) 7.1 % 4.6 % (0.1 %)
    Boston 7,722 10.3 % 2,824 95.6 % 3.8 % 4.4 % 3.5 % 2.9 % 0.8 %
    South Florida 10,834 7.6 % 1,576 95.6 % 4.9 % 2.8 % 6.2 % 4.6 % 0.3 %
    Seattle 7,411 6.2 % 1,807 95.5 % 7.2 % 5.1 % 8.3 % 6.8 % 0.3 %
    Denver 6,935 4.8 % 1,360 95.7 % 7.2 % 0.7 % 9.9 % 7.3 % 0.0 %
    San Diego 3,505 3.2 % 1,940 95.6 % 4.4 % 3.1 % 5.0 % 4.0 % 0.4 %
    Orange County, CA 3,490 3.1 %   1,757 95.5 % 4.8 % (0.4 %) 7.1 % 4.8 % 0.0 %
    Subtotal – Core 91,683 94.9 % 2,238 95.4 % 4.1 % 2.3 % 5.0 % 3.9 % 0.1 %
     
    Non-Core:
    Inland Empire, CA 3,081 2.3 % 1,540 95.6 % 3.6 % 4.4 % 3.2 % 2.9 % 0.6 %
    Orlando 3,047 1.6 % 1,146 94.9 % 1.8 % 1.3 % 2.2 % 3.1 % (1.2 %)
    All Other Markets 2,837 1.2 %   1,134 96.1 % 3.3 % 1.3 % 5.1 % 2.0 % 1.2 %
    Subtotal – Non-Core 8,965 5.1 % 1,278 95.5 % 3.0 % 2.4 % 3.3 % 2.7 % 0.2 %
                     
    Total 100,648 100.0 % $ 2,152 95.4 % 4.0 % 2.3 % 5.0 % 3.9 % 0.1 %
    Note: Same store results/statistics include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
     
    (1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
     
    Equity Residential
             
     
    Second Quarter 2014 vs. Second Quarter 2013
    Same Store Operating Expenses for 100,648 Same Store Apartment Units
    $ in thousands
     

     

    % of Actual

    Q2 2014

    Actual

    Actual

    $

    %

    Operating

    Q2 2014

    Q2 2013

    Change

    Change

    Expenses

     
    Real estate taxes $ 73,076 $ 68,776 $ 4,300 6.3 % 35.1 %
    On-site payroll (1) 43,933 43,313 620 1.4 % 21.1 %
    Utilities (2) 28,495 28,403 92 0.3 % 13.7 %
    Repairs and maintenance (3) 27,116 26,787 329 1.2 % 13.0 %
    Property management costs (4) 18,802 19,867 (1,065 ) (5.4 %) 9.1 %
    Insurance 6,230 6,305 (75 ) (1.2 %) 3.0 %
    Leasing and advertising 2,500 3,110 (610 ) (19.6 %) 1.2 %
    Other on-site operating expenses (5)   7,934   8,652   (718 ) (8.3 %) 3.8 %
     
    Same store operating expenses $ 208,086 $ 205,213 $ 2,873   1.4 % 100.0 %
     
                         
     
    June YTD 2014 vs. June YTD 2013
    Same Store Operating Expenses for 100,648 Same Store Apartment Units
    $ in thousands
     

    % of Actual

    YTD 2014

    Actual

    Actual

    $

    %

    Operating

    YTD 2014

    YTD 2013

    Change

    Change

    Expenses

     
    Real estate taxes $ 146,077 $ 137,553 $ 8,524 6.2 % 34.3 %
    On-site payroll (1) 87,506 88,704 (1,198 ) (1.4 %) 20.5 %
    Utilities (2) 66,708 61,768 4,940 8.0 % 15.7 %
    Repairs and maintenance (3) 52,991 51,945 1,046 2.0 % 12.4 %
    Property management costs (4) 37,805 39,317 (1,512 ) (3.8 %) 8.9 %
    Insurance 12,459 12,609 (150 ) (1.2 %) 2.9 %
    Leasing and advertising 5,063 6,135 (1,072 ) (17.5 %) 1.2 %
    Other on-site operating expenses (5)   17,618   18,560   (942 ) (5.1 %) 4.1 %
     
    Same store operating expenses $ 426,227 $ 416,591 $ 9,636   2.3 % 100.0 %
    Note: Same store operating results include 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.
     
    (1) On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
     
    (2) Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income.
     
    (3) Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
     
    (4) Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
     
    (5) Other on-site operating expenses - Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
                             
    Equity Residential
               
    Debt Summary as of June 30, 2014
    (Amounts in thousands)
     

    Weighted

    Weighted

    Average

    Average

    Maturities

    Amounts (1) % of Total

    Rates (1)

    (years)

     
    Secured $ 5,158,091 46.5 % 4.23 % 7.9
    Unsecured   5,923,952 53.5 % 4.74 % 7.8
     
    Total $ 11,082,043 100.0 % 4.50 % 7.9
     
    Fixed Rate Debt:

    Secured – Conventional

    $

    4,375,827

    39.5 % 4.85 % 6.4
    Unsecured – Public   5,472,950 49.4 % 5.53 % 8.0
     
    Fixed Rate Debt   9,848,777 88.9 % 5.20 % 7.4
     
    Floating Rate Debt:
    Secured – Conventional 56,738 0.5 % 2.25 % 0.3
    Secured – Tax Exempt 725,526 6.5 % 0.66 % 16.7
    Unsecured – Public (2) 451,002 4.1 % 1.32 % 5.0
    Unsecured – Revolving Credit Facility   — —   0.96 % 3.8
     
    Floating Rate Debt   1,233,266 11.1 % 1.02 % 11.8
     
    Total $ 11,082,043 100.0 % 4.50 % 7.9
    (1) Net of the effect of any derivative instruments. Weighted average rates are for the six months ended June 30, 2014.
     
    (2) Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
     
    Note: The Company capitalized interest of approximately $25.0 million and $20.0 million during the six months ended June 30, 2014 and 2013, respectively. The Company capitalized interest of approximately $12.2 million and $11.6 million during the quarters ended June 30, 2014 and 2013, respectively.
                             
               
    Debt Maturity Schedule as of June 30, 2014
    (Amounts in thousands)
     

    Weighted

    Weighted

    Average Rates

    Average

    Fixed

    Floating

    on Fixed

    Rates on

    Year

    Rate (1)

    Rate (1)

    Total % of Total

    Rate Debt (1)

    Total Debt (1)

     
    2014 $ 505,831 $ 48,753 $ 554,584 5.0 % 5.25 % 5.02 %
    2015 420,712 — 420,712 3.8 % 6.28 % 6.28 %
    2016 1,193,107 — 1,193,107 10.8 % 5.34 % 5.34 %
    2017 1,346,581 456 1,347,037 12.1 % 6.16 % 6.16 %
    2018 84,196 97,659 181,855 1.6 % 5.61 % 3.13 %
    2019 806,469 472,218 1,278,687 11.5 % 5.48 % 3.76 %
    2020 1,678,413 809 1,679,222 15.2 % 5.49 % 5.49 %
    2021 1,195,041 856 1,195,897 10.8 % 4.63 % 4.64 %
    2022 228,716 905 229,621 2.1 % 3.17 % 3.18 %
    2023 1,302,847 956 1,303,803 11.8 % 3.75 % 3.75 %
    2024+ 1,046,561 674,988 1,721,549 15.5 % 4.99 % 3.21 %
    Premium/(Discount)   40,303   (64,334 )   (24,031 ) (0.2 %) N/A   N/A  
     
    Total $ 9,848,777 $ 1,233,266   $ 11,082,043   100.0 % 5.14 % 4.63 %
    (1) Net of the effect of any derivative instruments. Weighted average rates are as of June 30, 2014.
     
    Equity Residential
    Unsecured Debt Summary as of June 30, 2014
    (Amounts in thousands)
           

     

    Unamortized

     

    Coupon

    Due

    Face

    Premium/

    Net

    Rate

    Date

    Amount

    (Discount)

    Balance

     
    Fixed Rate Notes:
    5.250 % 09/15/14 $ 500,000 $ (13 ) $ 499,987
    6.584 % 04/13/15 300,000 (83 ) 299,917
    5.125 % 03/15/16 500,000 (90 ) 499,910
    5.375 % 08/01/16 400,000 (386 ) 399,614
    5.750 % 06/15/17 650,000 (1,526 ) 648,474
    7.125 % 10/15/17 150,000 (213 ) 149,787
    2.375 % 07/01/19 (1 ) 450,000 (450 ) 449,550
    Fair Value Derivative Adjustments (1 ) (450,000 ) 450 (449,550 )
    4.750 % 07/15/20 600,000 (2,747 ) 597,253
    4.625 % 12/15/21 1,000,000 (2,826 ) 997,174
    3.000 % 04/15/23 500,000 (3,894 ) 496,106
    7.570 % 08/15/26 140,000 — 140,000
    4.500 % 07/01/44   750,000     (5,272 )   744,728  
     
      5,490,000     (17,050 )   5,472,950  
    Floating Rate Notes:
    07/01/19 (1 ) 450,000 (450 ) 449,550
    Fair Value Derivative Adjustments 07/01/19 (1 )   1,452     —     1,452  
     
      451,452     (450 )   451,002  
     
    Revolving Credit Facility: LIBOR+1.05% 04/01/18 (2 )(3)   —     —     —  
     
    Total Unsecured Debt $ 5,941,452   $ (17,500 ) $ 5,923,952  
    (1)   Fair value interest rate swaps convert the $450.0 million 2.375% notes due July 1, 2019 to a floating interest rate of 90-Day LIBOR plus 0.61%.
     
    (2) Facility is private. All other unsecured debt is public.
     
    (3) Represents the Company's $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the credit facility will generally be LIBOR plus a spread (currently 1.05%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of June 30, 2014, there was approximately $2.47 billion available on the Company's unsecured revolving credit facility.
     
    Equity Residential
         
    Selected Unsecured Public Debt Covenants
     
    June 30, 2014March 31, 2014
     
    Total Debt to Adjusted Total Assets (not to exceed 60%) 40.4 % 40.3 %
     
    Secured Debt to Adjusted Total Assets (not to exceed 40%) 18.8 % 19.0 %
     
    Consolidated Income Available for Debt Service to
    Maximum Annual Service Charges
    (must be at least 1.5 to 1) 3.02 3.12
     
    Total Unsecured Assets to Unsecured Debt 320.1 % 322.5 %
    (must be at least 150%)
    Note:   These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt. Equity Residential is the general partner of ERPOP.
               
         
    Selected Credit Ratios (1)
     
     
    June 30, 2014March 31, 2014
     
    Total debt to Normalized EBITDA 6.87x 6.86x
    Net debt to Normalized EBITDA 6.80x 6.82x
    Note:   See page 27 for the footnote referenced above and the Normalized EBITDA reconciliations.
                                   
    Equity Residential
                       
    Capital Structure as of June 30, 2014
    (Amounts in thousands except for share/unit and per share amounts)
     
    Secured Debt $ 5,158,091 46.5 %
    Unsecured Debt   5,923,952 53.5 %
     
    Total Debt11,082,043100.0%31.8%
     
    Common Shares (includes Restricted Shares) 361,562,007 96.2 %
    Units (includes OP Units and LTIP Units)   14,336,826 3.8 %
     
    Total Shares and Units 375,898,833 100.0 %
    Common Share Price at June 30, 2014 $ 63.00
    23,681,626 99.8 %
    Perpetual Preferred Equity (see below)   50,000 0.2 %
     
    Total Equity23,731,626100.0%68.2%
     
    Total Market Capitalization$34,813,669100.0%
                           
               
    Perpetual Preferred Equity as of June 30, 2014
    (Amounts in thousands except for share and per share amounts)
     

    Annual

    Annual

    Redemption

    Outstanding

    Liquidation

    Dividend

    Dividend

    Series

    Date

    Shares

    Value

    Per Share

    Amount

     
    Preferred Shares:
    8.29% Series K 12/10/26 1,000,000 $ 50,000 $ 4.145 $ 4,145
     
    Total Perpetual Preferred Equity 1,000,000 $ 50,000 $ 4,145
     
    Equity Residential
    Common Share and Unit
    Weighted Average Amounts Outstanding
         
    YTD Q2 2014 YTD Q2 2013 Q2 2014 Q2 2013
     
    Weighted Average Amounts Outstanding for Net Income Purposes:
    Common Shares - basic 360,640,502 348,653,658 360,808,768 359,652,775
    Shares issuable from assumed conversion/vesting of (1):
    - OP Units 13,736,387 — 13,742,133 —
    - long-term compensation shares/units 2,403,285 — 2,567,042 —
     
    Total Common Shares and Units - diluted (1) 376,780,174 348,653,658 377,117,943 359,652,775
     
    Weighted Average Amounts Outstanding for FFO and Normalized

    FFO Purposes:

    Common Shares - basic 360,640,502 348,653,658 360,808,768 359,652,775
    OP Units - basic 13,736,387 13,736,305 13,742,133 13,750,043
     
    Total Common Shares and OP Units - basic 374,376,889 362,389,963 374,550,901 373,402,818
    Shares issuable from assumed conversion/vesting of:
    - long-term compensation shares/units 2,403,285 2,477,194 2,567,042 2,507,261
     
    Total Common Shares and Units - diluted 376,780,174 364,867,157 377,117,943 375,910,079
     
    Period Ending Amounts Outstanding:
    Common Shares (includes Restricted Shares) 361,562,007 360,312,049
    Units (includes OP Units and LTIP Units) 14,336,826 14,214,427
     
    Total Shares and Units 375,898,833 374,526,476
    (1)   Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a loss from continuing operations during the six months and quarter ended June 30, 2013.
                         
    Equity Residential
    Partially Owned Entities as of June 30, 2014
    (Amounts in thousands except for project and apartment unit amounts)
                 
    Consolidated Unconsolidated
    Development Projects Development Projects

     

    Held for

    Held for

    and/or Under

    and/or Under

    Completed, Not

    Development (4)

    Operating   Total

    Development (4)

    Stabilized (5)

    Operating

    Total
     
    Total projects (1)   —     19     19     —     2     2     4  
     
    Total apartment units (1)   —     3,752     3,752     —     945     724     1,669  
     
    Operating information for the six months

    ended 6/30/14 (at 100%):

    Operating revenue $ — $ 43,110 $ 43,110 $ — $ 7,958 $ 5,060 $ 13,018
    Operating expenses   154     12,825     12,979     132     3,287     1,856     5,275  
     
    Net operating (loss) income (154 ) 30,285 30,131 (132 ) 4,671 3,204 7,743
    Depreciation — 10,768 10,768 — 5,299 2,039 7,338
    General and administrative/other   (3 )   26     23     —     1     122     123  
     
    Operating (loss) income (151 ) 19,491 19,340 (132 ) (629 ) 1,043 282
    Interest and other income — 3 3 — — — —
    Other expenses (76 ) (32 ) (108 ) — — — —
    Interest:
    Expense incurred, net — (7,788 ) (7,788 ) — (3,864 ) (926 ) (4,790 )
    Amortization of deferred financing costs   —     (177 )   (177 )   —     —     (7 )   (7 )
     
    (Loss) income before income and other taxes and (loss) from
    investments in unconsolidated entities (227 ) 11,497 11,270 (132 ) (4,493 ) 110 (4,515 )
    Income and other tax (expense) benefit — (45 ) (45 ) — (7 ) — (7 )
    (Loss) from investments in unconsolidated entities — (879 ) (879 ) — — — —
                 
    Net (loss) income $ (227 ) $ 10,573   $ 10,346   $ (132 ) $ (4,500 ) $ 110   $ (4,522 )
     
    Debt - Secured (2):
    EQR Ownership (3) $ — $ 282,011 $ 282,011 $ 1,099 $ 29,003 $ 34,131 $ 64,233
    Noncontrolling Ownership   —     78,294     78,294     20,883     116,013     29,174     166,070  
     
    Total (at 100%) $ —   $ 360,305   $ 360,305   $ 21,982   $ 145,016   $ 63,305   $ 230,303  
    (1)   Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
     
    (2) All debt is non-recourse to the Company with the exception of 50% of the current $22.0 million outstanding debt balance on one unconsolidated development project.
     
    (3) Represents the Company's current equity ownership interest.
     
    (4) See Projects Under Development - Partially Owned on page 21 for consolidated projects and Projects Under Development - Unconsolidated on page 22 for further information.
     
    (5) Projects included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing. See Projects Completed, Not Stabilized - Unconsolidated on page 22 for further information.
     
    Note: The above table excludes the Company's interests in unconsolidated joint ventures entered into with AvalonBay ("AVB") in connection with the Archstone transaction. These ventures own certain non-core Archstone assets that are held for sale and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests have an aggregate liquidation value of $76.8 million at June 30, 2014. The ventures are owned 60% by the Company and 40% by AVB.
    Equity Residential
    Consolidated Development and Lease-Up Projects as of June 30, 2014
    (Amounts in thousands except for project and apartment unit amounts)
               

    Total

               

    Book

    Value

    Total

    Not

    No. of

    Total

    Book

    Placed

    Estimated

    Estimated

    Apartment

    Capital

    Value

    in

    Total

    Percentage

    Percentage

    Percentage

    Completion

    Stabilization

    Project

    Location

    Units

    Cost (1)

    to Date

    Service

    Debt

    Completed

    Leased

    Occupied

    Date

    Date

    Projects Under Development - Wholly Owned:

    Residences at Westgate I (formerly Westgate II) Pasadena, CA 252 $ 125,293 $ 115,593 $ 115,593 $ - 90 % 38 % 27 % Q3 2014 Q2 2015
    Residences at Westgate II (formerly Westgate III) Pasadena, CA 88 54,037 36,377 36,377 — 54 % — — Q4 2014 Q2 2015
    170 Amsterdam (2) New York, NY 236 110,892 74,325 74,325 — 65 % — — Q1 2015 Q1 2016
    Azure (at Mission Bay) San Francisco, CA 273 189,090 102,668 102,668 — 42 % — — Q3 2015 Q4 2016
    West SeattleSeattle, WA 206 67,112 28,445 28,445 — 24 % — — Q4 2015 Q3 2016
    TallmanSeattle, WA 303 84,277 35,454 35,454 — 25 % — — Q4 2015 Q2 2017
    Village at Howard HughesLos Angeles, CA 545 193,231 63,781 63,781 — 5 % — — Q2 2016 Q2 2017
    Millikan Irvine, CA 344 102,331 31,840 31,840 — 2 % — — Q2 2016 Q3 2017
    PotreroSan Francisco, CA 453 224,474 51,182 51,182 — 2 % — — Q2 2016 Q3 2017
    TasmanSan Jose, CA 554 214,923 86,204 86,204 — 28 % — — Q2 2016 Q2 2018
    340 Fremont (formerly Rincon Hill) San Francisco, CA 348   287,454   72,017   72,017   — 6 % — — Q3 2016 Q1 2018
    Projects Under Development - Wholly Owned 3,602 1,653,114 697,886 697,886 —
     

    Projects Under Development - Partially Owned:

    Prism at Park Avenue South (3) New York, NY 269   251,961   201,683   201,683   — 79 % — — Q2 2015 Q1 2016
    Projects Under Development - Partially Owned 269 251,961 201,683 201,683 —
             
    Projects Under Development3,871   1,905,075   899,569   899,569   —
     

    Completed Not Stabilized - Wholly Owned (4):

     
     
    Breakwater at Marina Del Rey (2) (5) Marina Del Rey, CA 224 87,949 87,613 — 27,000 98 % 97 % Completed Q3 2014
    Oasis at Delray Beach II Delray Beach, FL 128 22,239 21,931 — — 97 % 94 % Completed Q3 2014
    ElevÉ (6) Glendale, CA 208 70,500 70,500 — — 86 % 83 % Completed Q4 2014
    Reserve at Town Center III Mill Creek, WA 95 21,330 21,200 — — 85 % 83 % Completed Q4 2014
    Park Aire (formerly Enclave at Wellington) (7) Wellington, FL 268 49,000 48,609 — — 79 % 74 % Completed Q1 2015
    1111 Belle Pre (formerly The Madison) Alexandria, VA 360 113,072 111,671 — — 80 % 65 % Completed Q2 2015
    Jia (formerly Chinatown Gateway) Los Angeles, CA 280 92,920 88,936 — — 54 % 44 % Completed Q3 2015
    Urbana (formerly Market Street Landing) Seattle, WA 287   90,024   85,002   —   — 52 % 46 % Completed Q3 2015
    Projects Completed Not Stabilized - Wholly Owned 1,850 547,034 535,462 — 27,000
             
    Projects Completed Not Stabilized1,850   547,034   535,462   —   27,000
     

    Completed and Stabilized During the Quarter - Wholly Owned:

    Gaithersburg Station (8) Gaithersburg, MD 389   93,000   92,051   —   89,073 98 % 96 % Completed Stabilized
    Projects Completed and Stabilized During the Quarter - Wholly Owned 389 93,000 92,051 — 89,073
             
    Projects Completed and Stabilized During the Quarter389   93,000   92,051   —   89,073
     
    Total Consolidated Projects6,110$2,545,109$1,527,082$899,569$116,073
     
    Land Held for DevelopmentN/A   N/A$306,625$306,625$—
     

    Total

    Capital

    NOI

    NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

    Cost (1)

    Q2 2014

    Projects Under Development $ 1,905,075 $ 146
    Completed Not Stabilized

    547,034

    2,185
    Completed and Stabilized During the Quarter   93,000     1,221  
    Total Consolidated Development NOI Contribution $ 2,545,109   $ 3,552  
    (1)   Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
     
    (2) 170 Amsterdam and Breakwater at Marina Del Rey – The land under these developments are subject to long term ground leases.
     
    (3) Prism at Park Avenue South – The Company is jointly developing with Toll Brothers (NYSE: TOL) a project at 400 Park Avenue South in New York City with the Company's rental portion on floors 2-22 and Toll's for sale portion on floors 23-40. The total capital cost and total book value to date represent only the Company's portion of the project. Toll Brothers has funded $107.4 million for their allocated share of the project.
     
    (4) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
     
    (5) Breakwater at Marina Del Rey – The Company has substantially completed renovations of this property. The non-recourse loan had an outstanding balance of $27.0 million at June 30, 2014, bore interest at LIBOR plus 1.75% and was due to mature on September 1, 2014. The loan was paid off in full on July 25, 2014.
     
    (6) ElevÉ – The Company acquired this project during the second quarter of 2014, prior to stabilization, and is completing lease-up activities.
     
    (7) Park Aire – The Company acquired its partner's interest during the second quarter of 2014 and now wholly-owns this project.
     
    (8) Gaithersburg Station – This project has a non-recourse loan with a current outstanding balance of $89.1 million, bears interest at 5.24% and matures April 1, 2053.
     
    Equity Residential
    Unconsolidated Development and Lease-Up Projects as of June 30, 2014
    (Amounts in thousands except for project and apartment unit amounts)
                 

    Total

               

    Book

    Value

    Total

    Not

    No. of

    Total

    Book

    Placed

    Estimated

    Estimated

    Percentage

    Apartment

    Capital

    Value

    in

    Total

    Percentage

    Percentage

    Percentage

    Completion

    Stabilization

    Projects

    Location

    Ownership

    Units

    Cost (1)

    to Date

    Service

    Debt

    Completed

    Leased

    Occupied

    Date

    Date

    Projects Under Development - Unconsolidated:

    Parc on Powell (formerly 1333 Powell) (2) Emeryville, CA 5.0 % 176 $ 75,000 $ 55,998 $ 55,998 $ 21,982 66 % — — Q4 2014 Q4 2015
    Projects Under Development - Unconsolidated 176 75,000 55,998 55,998 21,982
             
    Projects Under Development176   75,000   55,998   55,998   21,982
     

    Completed Not Stabilized - Unconsolidated (3):

    Nexus Sawgrass (formerly Sunrise Village) (4) Sunrise, FL 20.0 % 501 79,000 78,414 — 48,633 96 % 90 % Completed Q3 2014
    Domain (4) San Jose, CA 20.0 % 444   155,820   154,908   —   96,383 85 % 81 % Completed Q4 2014
    Projects Completed Not Stabilized - Unconsolidated 945234,820233,322—145,016
             
    Projects Completed Not Stabilized945   234,820   233,322   —   145,016
     

    Completed and Stabilized During the Quarter - Unconsolidated:

    San Norterra (5) Phoenix, AZ 85.0 % 388   52,750   52,643   —   33,030 96 % 95 % Completed Stabilized
    Projects Completed and Stabilized During the Quarter - Unconsolidated 38852,75052,643—33,030
             
    Projects Completed and Stabilized During the Quarter388   52,750   52,643   —   33,030
     
    Total Unconsolidated Projects1,509$362,570$341,963$55,998$200,028
    (1)   Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
     
    (2) Parc on Powell – Construction of this project is being partially funded with a construction loan that has a maximum debt commitment of $39.5 million, bears interest at LIBOR plus 2.25% and matures August 14, 2015. The Company has given a repayment guaranty on the construction loan of 50% of the outstanding balance, up to a maximum of $19.7 million, and has given certain construction cost overrun guarantees.
     
    (3) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
     
    (4) Nexus Sawgrass and Domain – These development projects are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. Total project costs are approximately $234.8 million and construction was predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company was responsible for constructing the projects and had given certain construction cost overrun guarantees but currently has no further funding obligations. Nexus Sawgrass has a maximum debt commitment of $48.7 million, the loan bears interest at 5.60% and matures January 1, 2021. Domain has a maximum debt commitment of $98.6 million, the loan bears interest at 5.75% and matures January 1, 2022.
     
    (5) San Norterra – Construction of this project was partially funded with a non-recourse construction loan. San Norterra has a maximum debt commitment of $34.8 million, the loan bears interest at LIBOR plus 2.00% and matures January 6, 2015.
     
    Equity Residential
    Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
    For the Six Months Ended June 30, 2014
    (Amounts in thousands except for apartment unit and per apartment unit amounts)    
                                 
     
    Repairs and Maintenance Expenses Capital Expenditures to Real Estate Total Expenditures
    Total

    Apartment

    Units (1)

    Expense (2) Avg. Per

    Apartment

    Unit

    Payroll (3) Avg. Per

    Apartment

    Unit

    Total Avg. Per

    Apartment

    Unit

    Replacements

    (4)

    Avg. Per

    Apartment

    Unit

    Building

    Improvements

    (5)

    Avg. Per

    Apartment

    Unit

    Total Avg. Per

    Apartment

    Unit

    Grand

    Total

    Avg. Per

    Apartment

    Unit

     
    Same Store Properties (6) 100,648 $ 52,991 $ 526 $ 42,131 $ 419 $ 95,122 $ 945 $ 34,742 $ 345 $ 39,656 $ 394 $ 74,398 $ 739 (9 ) $ 169,520 $ 1,684
     
    Non-Same Store Properties (7) 4,167 1,197 361 740 223 1,937 584 112 34 2,312 698 2,424 732 4,361 1,316
     
    Other (8) —   140   246   386   86   4   90   476
     
    Total 104,815 $ 54,328 $ 43,117 $ 97,445 $ 34,940 $ 41,972 $ 76,912 $ 174,357
    (1)   Total Apartment Units - Excludes 1,669 unconsolidated apartment units and 5,007 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company's results.
     

    (2)

    Repairs and Maintenance Expenses - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.

     

    (3)

    Maintenance Payroll - Includes payroll and related expenses for maintenance staff.

     

    (4)

    Replacements - Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting.  Replacements for same store properties also include $19.6 million spent during the six months ended June 30, 2014 on apartment unit renovations/rehabs (primarily kitchens and baths) on 2,253 same store apartment units (equating to about $8,700 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2014, the Company expects to spend approximately $45.0 million for all unit renovation/rehab costs (primarily on same store properties) at a weighted average cost of $8,500 per apartment unit rehabbed.

     

    (5)

    Building Improvements - Includes roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment.

     

    (6)

    Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2013, less properties subsequently sold. Also includes 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company.

     

    (7)

    Non-Same Store Properties - Primarily includes all properties acquired during 2013 and 2014, plus any properties in lease-up and not stabilized as of January 1, 2013, but excludes 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company. Per apartment unit amounts are based on a weighted average of 3,313 apartment units.

     

    (8)

    Other - Primarily includes expenditures for properties sold.

     

    (9)

    For 2014, the Company estimates that it will spend approximately $1,700 per apartment unit of capital expenditures, inclusive of apartment unit renovation/rehab costs, or $1,250 per apartment unit excluding apartment unit renovation/rehab costs.

     
    Equity Residential
    Discontinued Operations
    (Amounts in thousands)
           

    Six Months Ended

    June 30,

    Quarter Ended

    June 30,

    2014 2013 2014 2013
     
    REVENUES
    Rental income $ 1,275   $ 107,956   $ 252   $ 26,174  
     
    Total revenues   1,275     107,956     252     26,174  
     
    EXPENSES (1)
    Property and maintenance (41 ) 31,449 (89 ) 11,025
    Real estate taxes and insurance (6 ) 10,867 (19 ) 2,273
    Property management — 1 — —
    Depreciation — 30,962 — 7,146
    General and administrative   51     73     46     65  
     
    Total expenses   4     73,352     (62 )   20,509  
     
    Discontinued operating income 1,271 34,604 314 5,665
     
    Interest and other income 80 90 45 38
    Other expenses — (3 ) — (1 )
    Interest (2):
    Expense incurred, net — (1,258 ) — (6 )
    Amortization of deferred financing costs — (228 ) — —
    Income and other tax (expense) benefit   (13 )   (463 )   (2 )   (405 )
     
    Discontinued operations 1,338 32,742 357 5,291
    Net gain on sales of discontinued operations   224     1,588,874     153     389,952  
     
    Discontinued operations, net $ 1,562   $ 1,621,616   $ 510   $ 395,243  
    Note: The amounts included in discontinued operations for the six months and quarter ended June 30, 2014 represent trailing activity for properties sold in 2013 and prior years.
     
    (1) Includes expenses paid in the current period for properties sold in prior periods related to the Company's period of ownership.
     
    (2) Includes only interest expense specific to secured mortgage notes payable for properties sold.
     
    Equity Residential
    Normalized FFO Guidance Reconciliations and Non-Comparable Items
    (Amounts in thousands except per share data)
    (All per share data is diluted)
           
    Normalized FFO Guidance Reconciliations
     
    Normalized
    FFO Reconciliations
    Guidance Q2 2014
    to Actual Q2 2014
    Amounts Per Share
    Guidance Q2 2014 Normalized FFO - Diluted (2) (3) $ 287,133 $ 0.762
    Property NOI 8,779 0.023
    Other   (28 )   —
     
    Actual Q2 2014 Normalized FFO - Diluted (2) (3) $ 295,884   $ 0.785
    Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
               
    Six Months Ended June 30, Quarter Ended June 30,
      2014     2013   Variance   2014     2013   Variance
    Impairment $ —   $ —   $ —   $ —   $ —   $ —  
    Asset impairment and valuation allowances   —     —     —     —     —     —  
     
    Archstone direct acquisition costs (other expenses) (A) (7 ) 19,559 (19,566 ) 23 467 (444 )
    Archstone indirect costs (loss from investments in unconsolidated entities) (B) 6,249 53,010 (46,761 ) 6,246 6,999 (753 )
    Property acquisition costs (other expenses) 143 182 (39 ) 94 150 (56 )
    Write-off of pursuit costs (other expenses)   1,492     3,365     (1,873 )   1,040     832     208  
    Property acquisition costs and write-off of pursuit costs   7,877     76,116     (68,239 )   7,403     8,448     (1,045 )
     
    Prepayment premiums/penalties (interest expense) — 71,443 (71,443 ) — — —
    Write-off of unamortized deferred financing costs (interest expense) 582 4,126 (3,544 ) 582 3 579
    Write-off of unamortized (premiums)/discounts/OCI (interest expense) — 3,251 (3,251 ) — (826 ) 826
    (Gain) due to ineffectiveness of forward starting swaps (interest expense)   (91 )   —     (91 )   (91 )   —     (91 )
    Debt extinguishment (gains) losses, including prepayment penalties, preferred share

    redemptions and non-cash convertible debt discounts

      491     78,820     (78,329 )   491     (823 )   1,314  
     
    Net (gain) on sales of land parcels (794 ) (14,616 ) 13,822 (824 ) (14,616 ) 13,792
    Net incremental (gain) on sales of condominium units — (7 ) 7 — (7 ) 7
    (Gain) on sale of Equity Corporate Housing (ECH) — (601 ) 601 — (351 ) 351
    (Gain) on sale of investment securities   (57 )   —     (57 )   (36 )   —     (36 )
    (Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (851 )   (15,224 )   14,373     (860 )   (14,974 )   14,114  
     
    Write-off of unamortized retail lease intangibles (rental income) (147 ) — (147 ) (147 ) — (147 )
    Insurance/litigation settlement proceeds (interest and other income) (2,342 ) — (2,342 ) (1,879 ) — (1,879 )
    Insurance/litigation settlement expense (other expenses)   99     —     99     99     —     99  
    Other miscellaneous non-comparable items   (2,390 )   —     (2,390 )   (1,927 )   —     (1,927 )
               
    Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 5,127   $ 139,712   $ (134,585 ) $ 5,107   $ (7,349 ) $ 12,456  
    (A) Archstone direct acquisition costs primarily includes items such as investment banking and legal/accounting fees that were incurred directly by the Company.
     
    (B) Archstone indirect costs primarily includes the Company's 60% share of items such as severance and retention obligations, office leases and German operations/sales that were incurred indirectly through the Company's interest in unconsolidated joint ventures with AvalonBay.
     
     
    Note: See page 28 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
     
    Equity Residential
    Normalized FFO Guidance and Assumptions
     
    The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties, property acquisition costs and the write-off of pursuit costs, are not included in the estimates provided on this page. See page 28 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
       
     

    2014 Normalized FFO Guidance (per share diluted)

     

    Q3 2014

    2014

     
    Expected Normalized FFO (2) (3) $0.77 to $0.81$3.08 to $3.12
     

    2014 Same Store Assumptions

     
    Physical occupancy 95.5 %
    Revenue change 3.9% to 4.1%
    Expense change 2.25% to 2.75%
    NOI change 4.5% to 5.0%
    (Note: The same store guidance above includes 18,465 stabilized apartment units acquired in the Archstone acquisition that are owned and managed by the Company. 25 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
     

    2014 Transaction Assumptions

     
    Consolidated rental acquisitions $500.0 million
    Consolidated rental dispositions $500.0 million
    Capitalization rate spread 100 basis points
     

    2014 Debt Assumptions

     
    Weighted average debt outstanding $10.9 billion to $11.1 billion
    Weighted average interest rate (reduced for capitalized interest) 4.19 %
    Interest expense $456.7 million to $465.1 million
     

    2014 Other Guidance Assumptions

     
    General and administrative expense $50.0 million to $52.0 million
    Interest and other income $0.5 million
    Income and other tax expense $1.0 million to $2.0 million
    Debt offerings No additional amounts budgeted
    Equity ATM share offerings No amounts budgeted
    Preferred share offerings No amounts budgeted
    Weighted average Common Shares and Units - Diluted 377.3 million
     
    Equity Residential
    Normalized EBITDA Reconciliations
    (Amounts in thousands)
                 
    Normalized EBITDA Reconciliations for Page 17
                         
    Trailing Twelve Months2014   2013  
    June 30, 2014March 31, 2014Q2Q1Q4Q3Q2
    Net income $ 708,039 $ 927,051 $ 117,720 $ 82,732 $ 115,870 $ 391,717 $ 336,732
    Interest expense incurred, net (includes discontinued operations) 498,448 505,480 115,924 113,049 149,422 120,053 122,956
    Amortization of deferred financing costs (includes discontinued operations) 16,822 18,041 3,134 2,792 6,561 4,335 4,353
    Depreciation (includes discontinued operations) 838,168 978,482 190,136 185,167 183,256 279,609 330,450
    Income and other tax expense (benefit) (includes discontinued operations) 1,221 1,406 648 251 (211 ) 533 833
    Archstone direct acquisition costs (other expenses) 298 742 23 (30 ) 123 182 467
    Property acquisition costs (other expenses) 274 330 94 49 110 21 150
    Write-off of pursuit costs (other expenses) 3,311 3,103 1,040 452 1,215 604 832
    Loss from investments in unconsolidated entities 12,641 13,199 7,616 1,409 407 3,209 8,174
    Net loss (gain) on sales of land parcels 1,595 (12,197 ) (824 ) 30 (48 ) 2,437 (14,616 )
    (Gain) on sale of investment securities (4,260 ) (4,224 ) (36 ) (21 ) (3,373 ) (830 ) —
    Write-off of unamortized retail lease intangibles (rental income) (2,293 ) (2,146 ) (147 ) — (2,146 ) — —
    Insurance/litigation settlement proceeds (interest and other income) (2,342 ) (463 ) (1,879 ) (463 ) — — —
    Insurance/litigation settlement expense (other expenses) 3,710 3,611 99 — 250 3,361 —
    Net (gain) on sales of discontinued operations (447,855 ) (837,654 ) (153 ) (71 ) (45,928 ) (401,703 ) (389,952 )
    Net (gain) on sales of real estate properties   (14,903 )   —     (14,903 )   —     —     —     —  
    Normalized EBITDA (1)$1,612,874   $1,594,761   $418,492   $385,346   $405,508   $403,528   $400,379  
     

    Balance Sheet Items:

    June 30, 2014March 31, 2014
    Total debt (1) $ 11,082,043 $ 10,943,282
    Cash and cash equivalents (76,132 ) (37,209 )
    Mortgage principal reserves/sinking funds   (37,448 )   (35,511 )
    Net debt (1) $ 10,968,463   $ 10,870,562  
    (1) Normalized EBITDA, total debt to Normalized EBITDA and net debt to Normalized EBITDA are important metrics in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Normalized EBITDA, total debt to Normalized EBITDA and net debt to Normalized EBITDA are useful to investors, creditors and rating agencies because they allow investors to compare the Company's credit strength to prior reporting periods and to other 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 credit quality.
                       
    Equity Residential
    Additional Reconciliations, Definitions and Footnotes
    (Amounts in thousands except per share data)
    (All per share data is diluted)
             
     
    The guidance/projections provided below are based on current expectations and are forward-looking.
     
     
    Reconciliations of EPS to FFO and Normalized FFO for Pages 6, 25 and 26
     
     

    Expected

    Expected

    Expected Q2 2014

    Q3 2014

    2014

    Amounts Per Share

    Per Share

    Per Share

     
    Expected Earnings - Diluted (5) $ 153,136 $ 0.406 $0.68 to $0.72$1.63 to $1.67
    Add: Expected depreciation expense 175,333 0.465 0.50 2.03
    Less: Expected net gain on sales (5)   (44,105 )   (0.117 ) (0.41) (0.60)
     
    Expected FFO - Diluted (1) (3) 284,364 0.754 0.77 to 0.81 3.06 to 3.10
     
    Asset impairment and valuation allowances — — — —
    Property acquisition costs and write-off of pursuit costs 2,975 0.008 — 0.03
    Debt extinguishment (gains) losses, including prepayment penalties,

    preferred share redemptions and non-cash convertible debt discounts

    — — — —
    (Gains) losses on sales of non-operating assets, net of income and other tax

    expense (benefit)

    — — — —
    Other miscellaneous non-comparable items   (206 )   —   — (0.01)
     
    Expected Normalized FFO - Diluted (2) (3) $ 287,133   $ 0.762   $0.77 to $0.81   $3.08 to $3.12
    Definitions and Footnotes for Pages 6, 25 and 26
       
    (1) The National Association of Real Estate Investment Trusts ("NAREIT") defines funds from operations ("FFO") (April 2002 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 operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
     
    (2) Normalized funds from operations ("Normalized FFO") begins with FFO and excludes:
    • the impact of any expenses relating to non-operating asset impairment and valuation allowances;
    • property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs;
    • gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
    • gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
    • other miscellaneous non-comparable items.
     
    (3) The Company believes that FFO and FFO available to Common Shares and 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 related to dispositions of depreciable property and excluding real estate depreciation (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 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 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, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares 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, Normalized FFO and Normalized FFO available to Common Shares and 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 and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with accounting principles generally accepted in the United States. 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.
     
    (5) Earnings represents net income per share calculated in accordance with accounting principles generally accepted in the United States. Expected earnings is calculated on a basis consistent with actual earnings. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual earnings could differ materially from expected earnings.
    Same Store NOI Reconciliation for Page 10
             
    The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for the June YTD 2014 and the Second Quarter 2014 Same Store Properties:
     
    Six Months Ended June 30, Quarter Ended June 30,
    2014 2013 2014 2013
     
    Operating income $ 427,556 $ 168,223 $ 228,304 $ 63,977
    Adjustments:
    Archstone pre-ownership operating results — 55,694 — —
    Non-same store operating results (18,429 ) 426 (12,108 ) (5,437 )
    Fee and asset management revenue (5,519 ) (4,833 ) (2,802 ) (2,673 )
    Fee and asset management expense 3,040 3,223 1,378 1,577
    Depreciation 375,303 519,526 190,136 323,304
    General and administrative   31,328     32,580     13,752     16,085  
     
    Same store NOI $ 813,279   $ 774,839   $ 418,660   $ 396,833  





    Equity Residential

    Marty McKenna, 312-928-1901

    Source: Equity Residential


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    Source: Business Wire


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