CHICAGO—Second-quarter results for apartment REIT Equity Residential came in at the high end of the company's expectation and also beat analysts' projections. Normalized funds from operations rose 10% from a year ago to 78 cents per share; the consensus estimates by Zacks Equity Research, Cowen & Co. and Thomson Reuters came in a penny per share lower.
“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,” says David J. Neithercut, EQR's president and CEO. Accordingly, the REIT expects full year growth in same store revenues of 4% and normalized FFO to increase 9% per share.
Analysts at Cowen note that EQR's same-store NOI, at $418.7 million, was two cents per share above their estimate. “SSNOI was 100 basis points above our 4.5% estimate, as revenue growth was slightly higher (4.1% vs. our 3.8% estimate) and expense growth was significantly lower (1.4% vs. our 2.5%),” they write.
Zacks analysts offer a mixed take on EQR's Q2 results and near-term direction. “We believe Equity Residential's concerted efforts toward repositioning its portfolio from low barrier-to-entry/non-core markets to high barrier-to-entry/core markets will drive top-line growth going forward,” they wrote Wednesday. “Also, the echo boomers population continues to raise the demand for apartments.”
Conversely, however, they noted that the company has “a decent exposure” to the Washington, DC market, “where conditions remain choppy, thus posing a challenge for rent growth in the near term.” Cowen's report notes that the REIT's SSNOI in the DC market declined by 1.3%, while growing by 5.3% in the New York City metro area, 12.1% in San Francisco, 6.2% in Los Angeles and 4.5% in Boston.
In general, 2014 has been positive for multifamily REITs, according to SNL Financial. “The SNL US REIT Multifamily index posted the highest total return year-to-date through July 9 among all SNL US REIT sector indexes, at 25.42%, followed by the SNL US REIT Residential and the SNL US REIT Manufactured Homes indexes at 23.18% and 22.78%, respectively,” the Charlottesville, VA-based research firm said in a report earlier this month. “The multifamily sector outperformed the broader US REIT sector by 9.03 percentage points.”
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
