All things begin equal, Equity Residential is one of the largest apartment owners in the US. The company acquires, develops, and manages multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. A real estate investment trust (REIT), the company wholly owns about 400 garden-style, high-rise, and mid-rise multifamily communities with some 112,000 units in large metropolitan areas. Equity Residential also owns two military housing complexes and partially owns about two dozen other apartment properties totaling around an additional 10,000 units. Its properties are spread across 15 states and Washington, DC.
Based in Chicago, Equity Residential strategically operates property management offices in each of its nearly 20 markets. Its properties are located in 12 US states and Washington, DC.
Equity Residential generates most of its revenue from rental income. It's reported through four segments based on geographic region. They include Northeast (its largest segment), Northwest, Southeast, and Southwest.
Equity Residential has logged positive revenue growth since 2010. In 2013 also the company saw revenue growth of 13% due to higher rental income as a result of an increase in average rental rates charged to residents, slightly higher occupancy and a decrease in turnover, and also due to $377.3 million increase in non-same store returns, as well as from recently completed development properties.
After the decline in net income in 2012 due to rise in expenses, in 2013 Equity Residential's net income grew by 117.5% thanks to higher revenues, lower other expenses, and a net gain on sales of seven land parcels.
In 2013 the company's cash flow decreased by $177 million due to an increase in losses from investments in unconsolidated entities and depreciation.
Sales and Marketing
Equity Residential focuses on growth regions throughout the US that have higher-than-average single-family home prices, employment growth, and high standards of living. Equity Residential's core markets are Boston, New York, Southern California, San Francisco, Seattle, and Washington, DC.
In recent years Equity Residential has repositioned its portfolio from low barrier to entry/non-core markets to high barrier to entry/core markets. The company has sold more than 162,000 apartment units since 2005 primarily in its non-core markets (for an aggregate sales price of approximately $16 billion), acquired 66,000-plus apartment units in its core markets (for about $19 billion), and has begun some $4 billion worth of development projects in its core markets.
Equity Residential is banking on the coming-of-age "Echo Boom" generation -- the children of Baby Boomers -- for whom it believes home ownership is no longer an integral part of the American dream. Echo Boomers typically are more likely to rent than own a home and be renters for longer than previous generations. Members of this generation also value the ability to walk to work, restaurants, coffee shops, public transportation, and parks. Multifamily housing often caters to those needs.
It looks to acquire and develop assets in Boston, New York, Southern California, San Francisco, Seattle, and Washington, DC, while it exits Atlanta, Phoenix, Orlando, and Jacksonville. As part of its strategy, Equity Residential purchases completed and fully occupied apartment properties, as well as partially completed or partially occupied properties or land on which it can construct apartment properties.
In 2013 the company sold a portfolio of assets to a joint venture of the Real Estate Principal Investment Area of Goldman, Sachs & Co. and Greystar Real Estate Partners LLC for $1.5 billion. The transaction, which valued the 27 properties at approximately $187,000 per apartment unit and a capitalization rate in the mid to high 5% range. As part of the deal, Equity Residential made significant progress selling assets in its exit markets and non-core assets in primary markets to fund its share of the acquisition of Archstone.
To raise cash, that year it also sold $4.5 billion of consolidated apartment properties consisting of 94 properties and 29,180 apartment units; seven consolidated land parcels and one commercial building for $130.4 million; and one unconsolidated land parcel for $26.4 million
Mergers and Acquisitions
AvalonBay Communities and Equity Residential completed their $16 billion acquisition of Archstone Enterprise LP from Lehman Brothers Holdings Inc. in 2013. As part of the partnership, AvalonBay gets 40% of Archstone's properties, which equates to 60 apartment communities, including thousands of apartment units in the Washington region. Equity Residential got the remaining 60%, or 78 properties.
In 2013 the company acquired $8.5 billion of apartment properties consisting of 73 consolidated properties and 20,914 apartment units; three consolidated master-leased properties consisting of 853 apartment units (inclusive of one long-term ground lease) for $250.9 million; two consolidated uncompleted developments for $36.6 million, and also two unconsolidated uncompleted developments for $14.9 million.