Equity Residential Posts Strong Revenue and Sales Metrics in Q2 2024 Earnings Call

Equity Residential revealed same-store revenue — a proxy for sales — increased by 2.9 percent in the second quarter of 2024 compared to the second quarter of 2023, and that net-operating income increased by 3 percent in the same period.  

Equity’s earnings per share — a proxy for profits — increased by 35 percent, rising from 0.92 cents in the second quarter of 2023 to $1.24 in the second quarter of 2024. Funds from operations, also known as. cash flow, increased by about 1 percent. 

Occupancy in the firm’s overall portfolio ended the quarter at 96.2 percent, compared to 95.9 percent at the end of the previous quarter. 

CEO Mark Parrell told shareholders on the July 30 earnings call that his firm was able to increase its expected revenues on rental properties due to various macroeconomic fundamentals including high homeownership costs, which have supported demand in the multifamily sector. 

“Putting all of this in a blender, this let us increase our same store revenue guidance by 70 basis points at the midpoint to 3.2 percent,” said Parrell. “Underlying these positive results and outlook, are several trends that continue to support rental housing performance, including homeownership costs, limited for sale inventory, and a steady, though moderating, employment picture.” 

Besides cash flow metrics, Parrell also highlighted Equity’s aggressive investment strategy. The firm acquired two properties holding 644 apartment units between them in Dallas and Atlanta for $216.8 million; bought a 160-unit apartment complex in Boston for $62.6 million; and has a deal in place to pick up 77 apartment units in Denver for $77 million.

Equity was also busy on the sales side: the firm sold two properties holding a combined 327 units — one in Washington, D.C., and another San Francisco — for a combined price of $85.5 million

“Generally speaking, we’re buying recently built properties in our expansion markets at a basis that compares well to replacement cost, and underwriting a 5 percent forward cap rate,” said Chief Operating Officer Mike Manelis. 

But it wasn’t all roses for Equity. Manelis conceded that the firm’s rents in expansion markets — such as Denver, Atlanta, Dallas and Austin — lagged behind rents in established markets such as Boston, New York, Seattle and San Francisco. 

Equity’s average rents in four expansion markets came out to $3,087 per month, while its average rents in eight established markets came out to $3,177, according to the firm. 

“We acknowledge that while current rent levels are weak in these expansion markets, and are likely to remain so in the near term, in the long term we see relief on the way as starts in these oversupplied markets have collapsed,” explained Manelis. 

Even in an established market like Los Angeles, which Manelis said had posted strong traffic and occupancy numbers on the quarter, the flood of new supply is depressing leases. 

“Our new lease change was negatively impacted by concentrated new supply in Hollywood and Wilshire, as well as shadow supply from Downtown and West L.A. submarkets,” he said. “We expect this statistic to continue to be volatile as the market works through filling these units.” 

Looking forward, Equity did reveal a pair of innovations within the proptech space that the firm hopes will cut expenses into the future. 

During the second quarter, Equity began testing an AI-powered residential assistant that could answer up to 75 percent of resident requests within the portfolio, with a one-day turnaround. Moreover, the firm has already launched a self-guided tour app that increases availability of tours through Equity properties. 

“We are very excited about these initiatives, as they will continue to create future operating efficiencies while providing a more seamless customer experience,” said Manelis. 

Brian Pascus can be reached at bpascus@commercialobserver.com