Exhibit 99.1
Item 6. | Selected Financial Data |
The following tables set forth selected financial and operating information on a historical basis for the Company and the Operating Partnership. The following information should be read in conjunction with all of the financial statements and notes thereto included elsewhere in this Form 8-K. The historical operating and balance sheet data have been derived from the historical financial statements of the Company and the Operating Partnership. Certain amounts have also been restated in accordance with the guidance on discontinued operations. Certain capitalized terms as used herein are defined in the Notes to Consolidated Financial Statements.
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Equity Residential
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(Financial information in thousands except for per share and property data)
Year Ended December 31, | ||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
OPERATING DATA: | ||||||||||||||||||||
Total revenues from continuing operations | $ | 1,879,882 | $ | 1,653,668 | $ | 1,456,257 | $ | 1,331,458 | $ | 1,330,801 | ||||||||||
Interest and other income | $ | 150,546 | $ | 7,965 | $ | 4,476 | $ | 16,517 | $ | 33,167 | ||||||||||
Income (loss) from continuing operations | $ | 211,055 | $ | (24,826 | ) | $ | (164,135 | ) | $ | (143,578 | ) | $ | (197,557 | ) | ||||||
Discontinued operations, net | $ | 670,149 | $ | 960,023 | $ | 460,118 | $ | 525,607 | $ | 633,970 | ||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | $ | 382,029 | $ | 436,413 | ||||||||||
Net income available to Common Shares | $ | 826,212 | $ | 879,720 | $ | 269,242 | $ | 347,794 | $ | 393,115 | ||||||||||
Earnings per share – basic: | ||||||||||||||||||||
Income (loss) from continuing operations available to Common Shares | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | $ | (0.54 | ) | $ | (0.75 | ) | ||||||
Net income available to Common Shares | $ | 2.73 | $ | 2.98 | $ | 0.95 | $ | 1.27 | $ | 1.46 | ||||||||||
Weighted average Common Shares outstanding | 302,701 | 294,856 | 282,888 | 273,609 | 270,012 | |||||||||||||||
Earnings per share – diluted: | ||||||||||||||||||||
Income (loss) from continuing operations available to Common Shares | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | $ | (0.54 | ) | $ | (0.75 | ) | ||||||
Net income available to Common Shares | $ | 2.70 | $ | 2.98 | $ | 0.95 | $ | 1.27 | $ | 1.46 | ||||||||||
Weighted average Common Shares outstanding | 319,766 | 294,856 | 282,888 | 273,609 | 270,012 | |||||||||||||||
Distributions declared per Common Share outstanding | $ | 1.78 | $ | 1.58 | $ | 1.47 | $ | 1.64 | $ | 1.93 | ||||||||||
BALANCE SHEET DATA (at end of period): | ||||||||||||||||||||
Real estate, before accumulated depreciation | $ | 21,008,429 | $ | 20,407,946 | $ | 19,702,371 | $ | 18,465,144 | $ | 18,690,239 | ||||||||||
Real estate, after accumulated depreciation | $ | 16,096,208 | $ | 15,868,363 | $ | 15,365,014 | $ | 14,587,580 | $ | 15,128,939 | ||||||||||
Total assets | $ | 17,201,000 | $ | 16,659,303 | $ | 16,184,194 | $ | 15,417,515 | $ | 16,535,110 | ||||||||||
Total debt | $ | 8,529,244 | $ | 9,721,061 | $ | 9,948,076 | $ | 9,392,570 | $ | 10,483,942 | ||||||||||
Redeemable Noncontrolling Interests – Operating Partnership | $ | 398,372 | $ | 416,404 | $ | 383,540 | $ | 258,280 | $ | 264,394 | ||||||||||
Total shareholders’ equity | $ | 7,289,813 | $ | 5,669,015 | $ | 5,090,186 | $ | 5,047,339 | $ | 4,905,356 | ||||||||||
Total Noncontrolling Interests | $ | 237,294 | $ | 193,842 | $ | 118,390 | $ | 127,174 | $ | 163,349 | ||||||||||
OTHER DATA: | ||||||||||||||||||||
Total properties (at end of period) | 403 | 427 | 451 | 495 | 548 | |||||||||||||||
Total apartment units (at end of period) | 115,370 | 121,974 | 129,604 | 137,007 | 147,244 | |||||||||||||||
Funds from operations available to Common Shares and Units – basic (1) (3) (4) | $ | 993,217 | $ | 752,153 | $ | 622,786 | $ | 615,505 | $ | 618,372 | ||||||||||
Normalized funds from operations available to Common Shares and Units – basic (2) (3) (4) | $ | 883,269 | $ | 759,665 | $ | 682,422 | $ | 661,542 | $ | 735,062 | ||||||||||
Cash flow provided by (used for): | ||||||||||||||||||||
Operating activities | $ | 1,046,251 | $ | 798,334 | $ | 726,037 | $ | 670,812 | $ | 755,027 | ||||||||||
Investing activities | $ | (261,049 | ) | $ | (194,828 | ) | $ | (639,458 | ) | $ | 105,229 | $ | (343,803 | ) | ||||||
Financing activities | $ | (556,533 | ) | $ | (650,993 | ) | $ | 151,541 | $ | (1,473,547 | ) | $ | 428,739 |
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ERP Operating Limited Partnership
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(Financial information in thousands except for per Unit and property data)
Year Ended December 31, | ||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
OPERATING DATA: | ||||||||||||||||||||
Total revenues from continuing operations | $ | 1,879,882 | $ | 1,653,668 | $ | 1,456,257 | $ | 1,331,458 | $ | 1,330,801 | ||||||||||
Interest and other income | $ | 150,546 | $ | 7,965 | $ | 4,476 | $ | 16,517 | $ | 33,167 | ||||||||||
Income (loss) from continuing operations | $ | 211,055 | $ | (24,826 | ) | $ | (164,135 | ) | $ | (143,578 | ) | $ | (197,557 | ) | ||||||
Discontinued operations, net | $ | 670,149 | $ | 960,023 | $ | 460,118 | $ | 525,607 | $ | 633,970 | ||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | $ | 382,029 | $ | 436,413 | ||||||||||
Net income available to Units | $ | 864,853 | $ | 920,500 | $ | 282,341 | $ | 368,099 | $ | 419,241 | ||||||||||
Earnings per Unit – basic: | ||||||||||||||||||||
Income (loss) from continuing operations available to Units | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | $ | (0.54 | ) | $ | (0.75 | ) | ||||||
Net income available to Units | $ | 2.73 | $ | 2.98 | $ | 0.95 | $ | 1.27 | $ | 1.46 | ||||||||||
Weighted average Units outstanding | 316,554 | 308,062 | 296,527 | 289,167 | 287,631 | |||||||||||||||
Earnings per Unit – diluted: | ||||||||||||||||||||
Income (loss) from continuing operations available to Units | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | $ | (0.54 | ) | $ | (0.75 | ) | ||||||
Net income available to Units | $ | 2.70 | $ | 2.98 | $ | 0.95 | $ | 1.27 | $ | 1.46 | ||||||||||
Weighted average Units outstanding | 319,766 | 308,062 | 296,527 | 289,167 | 287,631 | |||||||||||||||
Distributions declared per Unit outstanding | $ | 1.78 | $ | 1.58 | $ | 1.47 | $ | 1.64 | $ | 1.93 | ||||||||||
BALANCE SHEET DATA (at end of period): | ||||||||||||||||||||
Real estate, before accumulated depreciation | $ | 21,008,429 | $ | 20,407,946 | $ | 19,702,371 | $ | 18,465,144 | $ | 18,690,239 | ||||||||||
Real estate, after accumulated depreciation | $ | 16,096,208 | $ | 15,868,363 | $ | 15,365,014 | $ | 14,587,580 | $ | 15,128,939 | ||||||||||
Total assets | $ | 17,201,000 | $ | 16,659,303 | $ | 16,184,194 | $ | 15,417,515 | $ | 16,535,110 | ||||||||||
Total debt | $ | 8,529,244 | $ | 9,721,061 | $ | 9,948,076 | $ | 9,392,570 | $ | 10,483,942 | ||||||||||
Redeemable Limited Partners | $ | 398,372 | $ | 416,404 | $ | 383,540 | $ | 258,280 | $ | 264,394 | ||||||||||
Total partners' capital | $ | 7,449,419 | $ | 5,788,551 | $ | 5,200,585 | $ | 5,163,459 | $ | 5,043,185 | ||||||||||
Noncontrolling Interests – Partially Owned Properties | $ | 77,688 | $ | 74,306 | $ | 7,991 | $ | 11,054 | $ | 25,520 | ||||||||||
OTHER DATA: | ||||||||||||||||||||
Total properties (at end of period) | 403 | 427 | 451 | 495 | 548 | |||||||||||||||
Total apartment units (at end of period) | 115,370 | 121,974 | 129,604 | 137,007 | 147,244 | |||||||||||||||
Funds from operations available to Units – basic (1) (3) (4) | $ | 993,217 | $ | 752,153 | $ | 622,786 | $ | 615,505 | $ | 618,372 | ||||||||||
Normalized funds from operations available to Units – basic (2) (3) (4) | $ | 883,269 | $ | 759,665 | $ | 682,422 | $ | 661,542 | $ | 735,062 | ||||||||||
Cash flow provided by (used for): | ||||||||||||||||||||
Operating activities | $ | 1,046,251 | $ | 798,334 | $ | 726,037 | $ | 670,812 | $ | 755,027 | ||||||||||
Investing activities | $ | (261,049 | ) | $ | (194,828 | ) | $ | (639,458 | ) | $ | 105,229 | $ | (343,803 | ) | ||||||
Financing activities | $ | (556,533 | ) | $ | (650,993 | ) | $ | 151,541 | $ | (1,473,547 | ) | $ | 428,739 |
(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. |
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(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 (other expenses); |
▪ | gains and losses from early debt extinguishment, including prepayment penalties, preferred share/preference unit 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 / 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 / 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 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. |
Note: See Item 7 for a reconciliation of net income to FFO, FFO available to Common Shares and Units / Units, Normalized FFO and Normalized FFO available to Common Shares and Units / Units.
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of the results of operations and financial condition of the Company and the Operating Partnership should be read in connection with the Consolidated Financial Statements and Notes thereto. Due to the Company's ability to control the Operating Partnership and its subsidiaries, the Operating Partnership and each such subsidiary entity has been consolidated with the Company for financial reporting purposes, except for two unconsolidated developments and our military housing properties. Capitalized terms used herein and not defined are as defined elsewhere in the Annual Report on Form 10-K for the year ended December 31, 2012.
Forward-Looking Statements
Forward-looking statements in this Item 7 as well as elsewhere in the Annual Report on Form 10-K 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. 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. Factors that might cause such differences include, but are not limited to the following:
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▪ | We intend to actively acquire and/or develop multifamily properties for rental operations as market conditions dictate. We may also acquire multifamily properties that are unoccupied or in the early stages of lease up. We may be unable to lease up these apartment properties on schedule, resulting in decreases in expected rental revenues and/or lower yields due to lower occupancy and rates as well as higher than expected concessions. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position or to complete a development property. Additionally, we expect that other real estate investors with capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development and acquisition efforts. This competition (or lack thereof) may increase (or depress) prices for multifamily properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We have acquired in the past and intend to continue to pursue the acquisition of properties and portfolios of properties, including large portfolios, that could increase our size and result in alterations to our capital structure. The total number of apartment units under development, costs of development and estimated completion dates are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation; |
▪ | Debt financing and other capital required by the Company may not be available or may only be available on adverse terms; |
▪ | Labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated; |
▪ | Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction and excess inventory of multifamily and single family housing, rental housing subsidized by the government, other government programs that favor single family rental housing or owner occupied housing over multifamily rental housing, slow or negative employment growth and household formation, the availability of low-interest mortgages for single family home buyers, changes in social preferences and the potential for geopolitical instability, all of which are beyond the Company's control; and |
▪ | Additional factors as discussed in Part I of the Annual Report on Form 10-K, 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.
Overview
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. ERP Operating Limited Partnership (“ERPOP”), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 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 December 31, 2012 owned an approximate 95.9% 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 public equity from time to time 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 are located in Chicago, Illinois and the Company also operates property management offices in each of its markets. As of December 31, 2012, the Company had approximately 3,600 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.
Business Objectives and Operating and Investing Strategies
The Company invests in high quality apartment communities located in strategically targeted markets with the goal of maximizing our risk adjusted total return (operating income plus capital appreciation) on invested capital.
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We seek to maximize the income and capital appreciation of our properties by investing in markets (our core markets) that are characterized by conditions favorable to multifamily property appreciation. We are focused primarily on the six core coastal, high barrier to entry markets of Boston, New York, Washington DC, Southern California, San Francisco and Seattle. These markets generally feature one or more of the following characteristics that allow us to increase rents:
• | High barriers to entry where, because of land scarcity or government regulation, it is difficult or costly to build new apartment properties, creating limits on new supply; |
• | High home ownership costs; |
• | Strong economic growth leading to household formation and job growth, which in turn leads to high demand for our apartments; |
• | Urban core locations with an attractive quality of life and higher wage job categories leading to high resident demand and retention; and |
• | Favorable demographics contributing to a larger pool of target residents with a high propensity to rent apartments. |
Our operating focus is on balancing occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. Revenue is maximized by attracting qualified prospects to our properties, cost-effectively converting these prospects into new residents and keeping our residents satisfied so they will renew their leases upon expiration. While we believe that it is our high-quality, well-located assets that bring our customers to us, it is the customer service and superior value provided by our on-site personnel that keeps them renting with us and recommending us to their friends.
We use technology to engage our customers in the way that they want to be engaged. Many of our residents utilize our web-based resident portal which allows them to sign their leases, review their accounts and make payments, provide feedback and make service requests on-line.
Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt, sales of properties and joint venture agreements. In addition, the Company may acquire properties in transactions that include the issuance of limited partnership interests in the Operating Partnership (“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. The Company may acquire land parcels to hold and/or sell based on market opportunities. The Company may also seek to acquire properties by purchasing defaulted or distressed debt that encumbers desirable properties in the hope of obtaining title to property through foreclosure or deed-in-lieu of foreclosure proceedings. The Company has also, in the past, converted some of its properties and sold them as condominiums but is not currently active in this line of business.
Over the past several years, the Company has done an extensive repositioning of its portfolio from low barrier to entry/non-core markets to high barrier to entry/core markets. Since 2005, the Company has sold over 133,000 apartment units primarily in its non-core markets for an aggregate sales price of approximately $11.1 billion, acquired over 44,000 apartment units in its core markets for approximately $10.3 billion and began approximately $3.0 billion of development projects in its core markets. We are currently seeking to acquire and develop assets primarily in the following targeted metropolitan areas (our core markets): Boston, New York, Washington DC, Southern California, San Francisco and Seattle. We also have investments (in the aggregate about 15.8% of our NOI at December 31, 2012) in other markets including South Florida, Denver and New England (excluding Boston) but do not currently intend to acquire or develop new assets in these markets. Further, we are in the process of exiting Atlanta, Phoenix, Orlando and Jacksonville as we raise capital to complete the Archstone transaction.
As part of its strategy, the Company purchases completed and fully occupied apartment properties, partially completed or partially occupied properties or land on which apartment properties can be constructed. We intend to hold a diversified portfolio of assets across our target markets. As of December 31, 2012, no single metropolitan area accounted for more than 15.9% of our NOI, though no guarantee can be made that NOI concentration may not increase in the future.
We endeavor to attract and retain the best employees by providing them with the education, resources and opportunities to succeed. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and residents as well as extensively train our customer service specialists in maintaining the property and its improvements, equipment and appliances. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees' engagement by surveying them annually and have consistently received high engagement scores.
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We have a commitment to sustainability and consider the environmental impacts of our business activities. We have a dedicated in-house team that initiates and applies sustainable practices in all aspects of our business, including investment activities, development, property operations and property management activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been primarily concentrated in pedestrian-friendly urban locations near public transportation. When developing and renovating our properties, we strive to reduce energy and water usage by investing in energy saving technology while positively impacting the experience of our residents and the value of our assets. We continue to implement a combination of irrigation, lighting, HVAC and renewable energy improvements at our properties that will reduce energy and water consumption.
Current Environment
On November 26, 2012, the Company and AvalonBay Communities, Inc. ("AvalonBay" or "AVB") (NYSE:AVB) entered into a contract with Lehman Brothers Holdings Inc. ("Lehman") to acquire the assets and liabilities of Archstone Enterprise LP ("Archstone"), which consists principally of a portfolio of high-quality apartment properties in major markets in the United States. Under the terms of the agreement, the Company will acquire approximately 60% of Archstone's assets and liabilities and AvalonBay will acquire approximately 40% of Archstone's assets and liabilities. The Company will acquire approximately 75 operating properties, four properties under development and several land parcels to be held for future development for approximately $8.9 billion which will consist of cash of approximately $2.0 billion, 34,468,085 Common Shares and the assumption of the Company's portion of the liabilities related to the Archstone assets (other than certain liabilities owed to Lehman and certain transaction expenses). The Company also expects to assume approximately $3 billion of consolidated Archstone debt. In addition, the Company and AvalonBay will acquire certain assets of Archstone, including Archstone's interests in certain joint ventures, interests in a portfolio of properties located in Germany and certain development land parcels, and will become subject to approximately $179.9 million in preferred interests of Archstone unitholders through various unconsolidated joint ventures expected to be owned 60% by the Company and 40% by AvalonBay. The transaction is expected to close in the first quarter of 2013.
We expect continued growth in 2013 same store revenue (anticipated increase ranging from 4.0% to 5.0%) and 2013 NOI (anticipated increase ranging from 4.5% to 6.0%) and are optimistic that the strength in fundamentals realized in the past couple of years and so far in 2013 will be sustained for the foreseeable future. We believe the key drivers behind the anticipated increase in revenue are base rent pricing for new residents, renewal pricing for existing residents, resident turnover and physical occupancy. Thus far in 2013, base rents are higher as compared with the same period last year and are gradually increasing from normal seasonal lows. We expect base rent growth to average 4.0% to 4.5% with higher growth during the peak leasing season. Renewal rates remain strong and are expected to exceed 5.0% on average throughout the year. The significant disposition activity discussed below, including exiting certain of our non-core markets, will leave a same store set expected to show a decrease in turnover as compared to 2012. Although occupancy is higher than anticipated for this time of the year, it is expected to remain consistent with last year. Despite slow growth in the overall economy, our business continues to perform well because of the combined forces of demographics, household formations and the continued aversion to home ownership, all of which should ensure a continued strong demand for rental housing.
The Company anticipates that 2013 same store expenses will increase 2.5% to 3.5% primarily due to increases in real estate taxes, which are expected to increase over 6% in 2013. This is primarily due to rate and value increases in certain states and municipalities, reflecting those states' and municipalities' continued economic challenges and the dramatic improvement in apartment fundamentals. The other key driver of this increase is the burn off of 421a tax abatements in New York City. Very good expense control in the core property level expenses (excluding real estate taxes) continues as the Company leverages technology to lower costs, which should partially offset the increase in real estate taxes. This exceptional expense control has allowed the Company to realize over five years of same store annual expense growth below 3.0%.
While competition for the properties we are interested in acquiring is significant due to continued strength in market fundamentals, we are focusing our attention in 2013 on closing the Archstone acquisition and integrating its properties and operations. We believe our access to capital, our ability to execute large, complex transactions and our ability to efficiently stabilize large scale lease up properties provide us with a competitive advantage, which is demonstrated in the pending Archstone transaction. The Company acquired nine consolidated properties consisting of 1,896 apartment units for $906.3 million during the year ended December 31, 2012. The Company did not budget for any acquisitions to occur outside of Archstone during the year ending December 31, 2013.
The Company also acquired six land parcels for $141.2 million during the year ended December 31, 2012. The Company started construction on two projects (inclusive of the Company's co-development with Toll Brothers to develop 400 Park Avenue South in New York City) representing 357 apartment units totaling approximately $306.0 million of development costs during the year ended December 31, 2012. The Company currently anticipates starting between $500.0 million and $700.0 million of new developments in 2013, some of which were delayed from 2012 as we worked on funding for the Archstone transaction.
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The Company continues to sell non-core assets and reduce its exposure to non-core markets as we believe these assets will have lower long-term returns and we can sell them for prices that we believe are favorable. The Archstone transaction provides an opportunity to accelerate this strategy and do so efficiently through the use of Section 1031 tax deferred exchanges. The Company sold 35 consolidated properties consisting of 9,012 apartment units for $1.1 billion during the year ended December 31, 2012. These dispositions combined with reinvestment of the cash proceeds in assets with lower cap rates (see definition below) were dilutive to our per share results. The Company defines dilution from transactions as the lost NOI from sales proceeds that were not reinvested in other apartment properties or were reinvested in properties with a lower cap rate. The Company anticipates consolidated dispositions of approximately $4.0 billion during the year ending December 31, 2013. The Company plans to fund a portion of the cash purchase price of the Archstone transaction with capital raised through these significant dispositions of assets. The Company currently anticipates that $3.5 billion of the projected $4.0 billion of dispositions for 2013 will occur in the first half of 2013. While this accelerated disposition program will be dilutive to our per share results, it should reduce the execution risk on the Archstone transaction.
We currently have access to multiple sources of capital including the equity markets as well as both the secured and unsecured debt markets. In December 2012, the Company raised $1.2 billion in equity in a public offering of 21,850,000 Common Shares priced at $54.75 per share. We also raised $192.3 million under our ATM program in 2012. On January 11, 2013, the Company replaced its existing $1.75 billion credit facility with a new $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The Company believes that the new facility contains a diversified and strong bank group which increases its balance sheet flexibility going forward. On January 11, 2013, the Company also entered into a new senior unsecured $750.0 million delayed draw term loan facility which is currently undrawn and may be drawn anytime on or before July 11, 2013. With the completion of these financing activities, along with cash on hand, the Company believes it has sufficient capital available to fund its portion of the Archstone acquisition cash price, transaction costs and required debt paydowns.
We believe that cash and cash equivalents, securities readily convertible to cash, current availability on our revolving credit facility and delayed draw term loan facility and disposition proceeds for 2013 will provide sufficient liquidity to meet our funding obligations relating to asset acquisitions (including Archstone), debt maturities and existing development projects through 2013. We expect that our remaining longer-term funding requirements will be met through some combination of new borrowings, equity issuances (including EQR's ATM Common Share offering program), property dispositions, joint ventures and cash generated from operations.
There is significant uncertainty surrounding the futures of Fannie Mae and Freddie Mac (the “Government Sponsored Enterprises” or “GSEs”). Through their lender originator networks, the GSEs are significant lenders both to the Company and to buyers of the Company's properties. The GSEs have a mandate to support multifamily housing through their financing activities. Any changes to their mandates, reductions in their size or the scale of their activities or loss of key personnel could have a significant impact on the Company and may, among other things, lead to lower values for our disposition assets and higher interest rates on our borrowings. Such changes may also provide an advantage to us by making the cost of financing single family home ownership more expensive and provide us a competitive advantage given the size of our balance sheet and the multiple sources of capital to which we have access.
We believe that the Company is well-positioned as of December 31, 2012 because our properties are geographically diverse, were approximately 94.3% occupied (95.0% on a same store basis) and the long-term demographic picture is positive. With the exception of the Washington, D.C. and Seattle market areas and the San Jose sub-market area of San Francisco, little new multifamily rental supply will be added to our core markets over the next several years. We believe our strong balance sheet and ample liquidity will allow us to fund our debt maturities and development costs in the near term, and should also allow us to take advantage of investment opportunities in the future. As economic conditions continue to improve, the short-term nature of our leases and the limited supply of new rental housing being constructed, along with the customer service and superior value provided by our on-site personnel, should allow us to realize even more revenue growth and improvement in our operating results.
The current environment information presented above is based on current expectations and is forward-looking.
Results of Operations
In conjunction with our business objectives and operating strategy, the Company continued to invest in apartment properties located in strategically targeted markets during the years ended December 31, 2012 and December 31, 2011. In summary, we:
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Year Ended December 31, 2012:
▪ | Acquired $906.3 million of apartment properties consisting of nine consolidated properties and 1,896 apartment units at a weighted average cap rate (see definition below) of 4.7% and acquired six land parcels for $141.2 million, all of which we deem to be in our strategic targeted markets; and |
▪ | Sold $1.1 billion of consolidated apartment properties consisting of 35 properties and 9,012 apartment units at a weighted average cap rate of 6.2%, the majority of which were in exit or less desirable markets. These sales, excluding two leveraged partially-owned assets sold during the third quarter, generated an unlevered internal rate of return (IRR), inclusive of management costs, of 10.6%. |
Year Ended December 31, 2011:
▪ | Acquired $1.3 billion of apartment properties consisting of 20 consolidated properties and 6,103 apartment units at a weighted average cap rate (see definition below) of 5.2% and acquired five land parcels and entered into a long-term ground lease on one land parcel located in New York City for a total of $68.3 million, all of which we deem to be in our strategic targeted markets; |
▪ | Acquired one vacant land parcel in New York City in a joint venture with Toll Brothers for $134.0 million, consisting of contributions by the Company and Toll Brothers of approximately $76.1 million and $57.9 million, respectively, for future development; |
▪ | Acquired one unoccupied property in the San Francisco Bay Area in the third quarter of 2011 for $39.5 million consisting of 95 apartment units that is expected to stabilize at a 6.3% yield on cost; |
▪ | Acquired a 97,000 square foot commercial building adjacent to our Harbor Steps apartment property in downtown Seattle for $11.8 million for potential redevelopment; and |
▪ | Sold $1.5 billion of consolidated apartment properties consisting of 47 properties and 14,345 apartment units at a weighted average cap rate of 6.5% generating an unlevered internal rate of return (IRR), inclusive of management costs, of 11.1% and one land parcel for $22.8 million, the majority of which were in exit or less desirable markets. |
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. The cap rate is generally the first year NOI yield (net of replacements) on the Company's investment.
Properties that the Company owned and were stabilized (see definition below) for all of both 2012 and 2011 (the “2012 Same Store Properties”), which represented 98,577 apartment units, impacted the Company's results of operations. Properties that the Company owned for all of both 2011 and 2010 (the “2011 Same Store Properties”), which represented 101,312 apartment units, also impacted the Company's results of operations. Both the 2012 Same Store Properties and 2011 Same Store Properties are discussed in the following paragraphs.
The following tables provide a rollforward of the apartment units included in Same Store Properties and a reconciliation of apartment units included in Same Store Properties to those included in Total Properties for the year ended December 31, 2012:
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Year Ended | ||||
December 31, 2012 | ||||
Properties | Apartment Units | |||
Same Store Properties at December 31, 2011 | 370 | 101,312 | ||
2010 acquisitions | 16 | 4,445 | ||
2010 acquisitions not stabilized | (2 | ) | (1,238 | ) |
2012 dispositions | (35 | ) | (9,012 | ) |
2012 dispositions not stabilized | 2 | 441 | ||
2012 dispositions not yet included in same store (1) | 2 | 542 | ||
Consolidation of previously unconsolidated properties in 2010 (1) | 2 | 501 | ||
Lease-up properties stabilized | 4 | 1,570 | ||
Other | — | 16 | ||
Same Store Properties at December 31, 2012 | 359 | 98,577 |
Year Ended | ||||
December 31, 2012 | ||||
Properties | Apartment Units | |||
Same Store | 359 | 98,577 | ||
Non-Same Store: | ||||
2012 acquisitions | 9 | 1,896 | ||
2011 acquisitions | 21 | 6,198 | ||
Lease-up properties not yet stabilized (2) | 11 | 3,656 | ||
Other | 1 | 4 | ||
Total Non-Same Store | 42 | 11,754 | ||
Military Housing (not consolidated) | 2 | 5,039 | ||
Total Properties and Apartment Units | 403 | 115,370 |
Note: 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.
(1) | In 2010, the Company consolidated seven properties containing 1,811 apartment units that had previously been categorized as unconsolidated. Of these properties, one containing 208 apartment units was sold in 2010, two containing 560 apartment units were sold in 2011 and two containing 542 apartment units were sold in 2012. |
(2) | Includes properties in various stages of lease-up and properties where lease-up has been completed but the properties were not stabilized for the comparable periods presented. |
The Company's acquisition, disposition and completed development activities also impacted overall results of operations for the years ended December 31, 2012 and 2011. The impacts of these activities are discussed in greater detail in the following paragraphs.
Comparison of the year ended December 31, 2012 to the year ended December 31, 2011
For the year ended December 31, 2012, the Company reported diluted earnings per share of $2.70 compared to $2.98 per share for the year ended December 31, 2011. The difference is primarily due to higher gains from property sales in 2011 vs. 2012, partially offset by higher total property net operating income driven by the positive impact of the Company's same store and lease-up activity and the Company's recognition of $150.0 million in termination fees related to our pursuit of Archstone (see Note 18 in the Notes to Consolidated Financial Statements for further discussion).
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For the year ended December 31, 2012, income from continuing operations increased approximately $235.9 million when compared to the year ended December 31, 2011. The increase in continuing operations is discussed below.
Revenues from the 2012 Same Store Properties increased $97.5 million primarily as a result of an increase in average rental rates charged to residents and slightly higher occupancy, partially offset by increased turnover. Expenses from the 2012 Same Store Properties increased $11.2 million primarily due to increases in real estate taxes and insurance, partially offset by a decrease in utilities. The following tables provide comparative same store results and statistics for the 2012 Same Store Properties:
2012 vs. 2011
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 98,577 Same Store Apartment Units
Results | Statistics | |||||||||||||||||||||
Average Rental Rate (1) | ||||||||||||||||||||||
Description | Revenues | Expenses | NOI | Occupancy | Turnover | |||||||||||||||||
2012 | $ | 1,868,918 | $ | 649,914 | $ | 1,219,004 | $ | 1,658 | 95.4 | % | 58.2 | % | ||||||||||
2011 | $ | 1,771,449 | $ | 638,671 | $ | 1,132,778 | $ | 1,575 | 95.2 | % | 57.3 | % | ||||||||||
Change | $ | 97,469 | $ | 11,243 | $ | 86,226 | $ | 83 | 0.2 | % | 0.9 | % | ||||||||||
Change | 5.5 | % | 1.8 | % | 7.6 | % | 5.3 | % |
(1) | Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period. |
The following table provides comparative same store operating expenses for the 2012 Same Store Properties:
2012 vs. 2011
Same Store Operating Expenses
$ in thousands – 98,577 Same Store Apartment Units
Actual 2012 | Actual 2011 | $ Change | % Change | % of Actual 2012 Operating Expenses | ||||||||||||||
Real estate taxes | $ | 197,316 | $ | 184,773 | $ | 12,543 | 6.8 | % | 30.3 | % | ||||||||
On-site payroll (1) | 146,637 | 145,979 | 658 | 0.5 | % | 22.5 | % | |||||||||||
Utilities (2) | 97,313 | 98,572 | (1,259 | ) | (1.3 | %) | 15.0 | % | ||||||||||
Repairs and maintenance (3) | 88,931 | 89,152 | (221 | ) | (0.2 | %) | 13.7 | % | ||||||||||
Property management costs (4) | 70,084 | 70,858 | (774 | ) | (1.1 | %) | 10.8 | % | ||||||||||
Insurance | 20,629 | 19,257 | 1,372 | 7.1 | % | 3.2 | % | |||||||||||
Leasing and advertising | 10,812 | 11,798 | (986 | ) | (8.4 | %) | 1.7 | % | ||||||||||
Other on-site operating expenses (5) | 18,192 | 18,282 | (90 | ) | (0.5 | %) | 2.8 | % | ||||||||||
Same store operating expenses | $ | 649,914 | $ | 638,671 | $ | 11,243 | 1.8 | % | 100.0 | % |
(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 administrative costs such as office supplies, telephone and data charges, association and business licensing fees and ground lease costs. |
The following table presents a reconciliation of operating income per the consolidated statements of operations included in the original Form 10-K to NOI for the 2012 Same Store Properties (table has not been updated to reflect discontinued operations treatment for properties sold in the first three months of 2013).
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Year Ended December 31, | ||||||||
2012 | 2011 | |||||||
(Amounts in thousands) | ||||||||
Operating income | $ | 667,958 | $ | 541,675 | ||||
Adjustments: | ||||||||
Non-same store operating results | (155,374 | ) | (60,334 | ) | ||||
Fee and asset management revenue | (9,573 | ) | (9,026 | ) | ||||
Fee and asset management expense | 4,663 | 4,279 | ||||||
Depreciation | 664,082 | 612,579 | ||||||
General and administrative | 47,248 | 43,605 | ||||||
Same store NOI | $ | 1,219,004 | $ | 1,132,778 |
For properties that the Company acquired prior to January 1, 2012 and expects to continue to own through December 31, 2013 (which is computed based on the portfolio of approximately 80,000 apartment units that the Company expects to have in its annual same store set after the completion of its planned 2013 dispositions), the Company anticipates the following same store results for the full year ending December 31, 2013:
2013 Same Store Assumptions | ||
Physical occupancy | 95.3% | |
Revenue change | 4.0% to 5.0% | |
Expense change | 2.5% to 3.5% | |
NOI change | 4.5% to 6.0% |
The Company anticipates no consolidated rental acquisitions outside of Archstone and consolidated rental dispositions of $4.0 billion and expects that acquisitions will have a 1.00% lower cap rate than dispositions for the full year ending December 31, 2013.
These 2013 assumptions are based on current expectations and are forward-looking.
Non-same store operating results increased approximately $95.0 million and consist primarily of properties acquired in calendar years 2011 and 2012, as well as operations from the Company’s completed development properties. Although the operations of both the non-same store assets and the same store assets have been positively impacted during the year ended December 31, 2012, the non-same store assets have contributed a greater percentage of total NOI to the Company’s overall operating results primarily due to 2011 and 2012 acquisitions, increasing occupancy for properties in lease-up and a longer ownership period in 2012 than 2011. This increase primarily resulted from:
▪ | Development and other miscellaneous properties in lease-up of $12.3 million; |
▪ | Properties acquired in 2011 and 2012 of $75.1 million; and |
▪ | Newly stabilized development and other miscellaneous properties of $5.9 million. |
See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Fee and asset management revenues, net of fee and asset management expenses, increased approximately $0.2 million or 3.4% primarily as a result of fees earned on management of the Company's unconsolidated development joint ventures, partially offset by lower revenues earned on management of the Company's military housing ventures at Fort Lewis and McChord Air Force Base and higher expenses.
Property management expenses from continuing operations 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 were consistent between the periods under comparison.
Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased approximately $54.5 million or 10.1% primarily as a result of additional depreciation expense on properties acquired in 2011 and 2012, development properties placed in service and capital expenditures for all properties owned, partially offset by a decrease in the amortization of both in-place leases and furniture, fixtures and equipment that were fully depreciated.
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General and administrative expenses from continuing operations, which include corporate operating expenses, increased approximately $3.6 million or 8.3% primarily due to an increase in payroll-related costs, which is largely a result of the acceleration of long-term compensation expense for retirement eligible employees, partially offset by a decrease in office rent. The Company anticipates that general and administrative expenses will approximate $55.0 million to $58.0 million for the year ending December 31, 2013. The above assumption is based on current expectations and is forward-looking.
Interest and other income from continuing operations increased approximately $142.6 million primarily due to the Company recognizing $150.0 million in termination fees related to our pursuit of Archstone during the year ended December 31, 2012, partially offset by lower interest earned on cash and cash equivalents due to lower overall cash invested during the year ended December 31, 2012 as well as forfeited deposits for terminated disposition transactions, proceeds received from the Company's final royalty participation in LRO/Rainmaker (a revenue management system) and litigation settlement proceeds that all occurred during the year ended December 31, 2011 and did not reoccur during the year ended December 31, 2012. The Company anticipates that interest and other income will approximate $0.5 million to $1.5 million for the year ending December 31, 2013. The above assumption is based on current expectations and is forward-looking.
Other expenses from continuing operations increased approximately $13.1 million or 92.3% primarily due to the settlement of a dispute with the owners of a land parcel, an increase in the expensing of overhead (pursuit costs write-offs) as a result of a more active focus on sourcing new development opportunities, an increase in property acquisition costs incurred in conjunction with the Company's 2012 acquisitions and transaction costs related to the pursuit of Archstone.
Interest expense from continuing operations, including amortization of deferred financing costs, decreased approximately $0.3 million or 0.1% primarily as a result of lower interest expense on mortgage notes payable due to lower balances during the year ended December 31, 2012 as compared to the same period in 2011, higher capitalized interest in 2012, the redemption of the Company's $650.0 million of unsecured notes in August 2011 and the repayment of $253.9 million of 6.625% unsecured notes in March 2012, partially offset by interest expense on the $1.0 billion of unsecured notes that closed in December 2011. During the year ended December 31, 2012, the Company capitalized interest costs of approximately $22.5 million as compared to $9.1 million for the year ended December 31, 2011. This capitalization of interest primarily relates to consolidated projects under development. The effective interest cost on all indebtedness for the year ended December 31, 2012 was 5.37% as compared to 5.30% for the year ended December 31, 2011. The Company anticipates that interest expense from continuing operations will approximate $477.3 million to $498.8 million (excluding debt extinguishment costs) for the year ending December 31, 2013. The above assumption is based on current expectations and is forward-looking.
Income and other tax expense from continuing operations decreased approximately $0.2 million or 27.1% primarily due to decreases in all other taxes. The Company anticipates that income and other tax expense will approximate $1.5 million to $2.5 million for the year ending December 31, 2013. The above assumption is based on current expectations and is forward-looking.
Loss from investments in unconsolidated entities increased as a result of the start of operations at one of the Company's unconsolidated development joint ventures.
Net gain on sales of land parcels decreased approximately $4.2 million due to the gain on sale of a land parcel located in suburban Washington, D.C. during the year ended December 31, 2011 as compared to no land sales during the year ended December 31, 2012.
Discontinued operations, net decreased approximately $289.9 million or 30.2% between the periods under comparison. This decrease is primarily due to higher gains on sales from dispositions during the year ended December 31, 2011 compared to the same period in 2012. Properties sold in 2012 reflect operations for a partial period in 2012 in contrast to a full period in 2011. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.
Comparison of the year ended December 31, 2011 to the year ended December 31, 2010
For the year ended December 31, 2011, the Company reported diluted earnings per share of $2.98 compared to $0.95 per share for the year ended December 31, 2010. The difference is primarily due to higher gains from property sales in 2011 vs. 2010, higher total property net operating income driven by the positive impact of the Company's same store and lease-up activity and $45.4 million in impairment losses in 2010 that did not reoccur in 2011, partially offset by dilution as a result of the net impact of the Company's 2010 and 2011 acquisition and disposition activities.
For the year ended December 31, 2011, income from continuing operations increased approximately $139.3 million when compared to the year ended December 31, 2010. The increase in continuing operations is discussed below.
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Revenues from the 2011 Same Store Properties increased $81.9 million primarily as a result of an increase in average rental rates charged to residents and an increase in occupancy. Expenses from the 2011 Same Store Properties increased $3.5 million primarily due to increases in property management costs, real estate taxes and utilities, partially offset by decreases in leasing and advertising costs and insurance. The following tables provide comparative same store results and statistics for the 2011Same Store Properties:
2011 vs. 2010
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) – 101,312 Same Store Apartment Units
Results | Statistics | |||||||||||||||||||||
Average Rental Rate (1) | ||||||||||||||||||||||
Description | Revenues | Expenses | NOI | Occupancy | Turnover | |||||||||||||||||
2011 | $ | 1,712,428 | $ | 617,712 | $ | 1,094,716 | $ | 1,481 | 95.2 | % | 57.8 | % | ||||||||||
2010 | $ | 1,630,482 | $ | 614,210 | $ | 1,016,272 | $ | 1,417 | 94.8 | % | 56.9 | % | ||||||||||
Change | $ | 81,946 | $ | 3,502 | $ | 78,444 | $ | 64 | 0.4 | % | 0.9 | % | ||||||||||
Change | 5.0 | % | 0.6 | % | 7.7 | % | 4.5 | % |
(1) | Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period. |
The following table provides comparative same store operating expenses for the 2011 Same Store Properties:
2011 vs. 2010
Same Store Operating Expenses
$ in thousands – 101,312 Same Store Apartment Units
Actual 2011 | Actual 2010 | $ Change | % Change | % of Actual 2011 Operating Expenses | ||||||||||||||
Real estate taxes | $ | 169,432 | $ | 166,675 | $ | 2,757 | 1.7 | % | 27.4 | % | ||||||||
On-site payroll (1) | 144,346 | 144,878 | (532 | ) | (0.4 | %) | 23.4 | % | ||||||||||
Utilities (2) | 96,702 | 95,083 | 1,619 | 1.7 | % | 15.7 | % | |||||||||||
Repairs and maintenance (3) | 89,549 | 89,128 | 421 | 0.5 | % | 14.5 | % | |||||||||||
Property management costs (4) | 68,497 | 65,219 | 3,278 | 5.0 | % | 11.1 | % | |||||||||||
Insurance | 19,394 | 20,605 | (1,211 | ) | (5.9 | %) | 3.1 | % | ||||||||||
Leasing and advertising | 11,515 | 14,266 | (2,751 | ) | (19.3 | %) | 1.9 | % | ||||||||||
Other on-site operating expenses (5) | 18,277 | 18,356 | (79 | ) | (0.4 | %) | 2.9 | % | ||||||||||
Same store operating expenses | $ | 617,712 | $ | 614,210 | $ | 3,502 | 0.6 | % | 100.0 | % |
(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, 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 administrative costs such as office supplies, telephone, data charges and association and business licensing fees. |
Non-same store operating results increased approximately $110.7 million and consist primarily of properties acquired in calendar years 2010 and 2011, as well as operations from the Company's completed development properties. Although the operations of both the non-same store assets and the same store assets have been positively impacted during the year ended December 31, 2011, the non-same store assets have contributed a greater percentage of total NOI to the Company's overall operating results primarily due to 2010 and 2011 acquisitions, increasing occupancy for properties in lease-up and a longer ownership period in 2011 than 2010. This increase primarily resulted from:
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▪ | Development and other miscellaneous properties in lease-up of $39.1 million; |
▪ | Properties acquired in 2010 and 2011 of $53.1 million; and |
▪ | Newly stabilized development and other miscellaneous properties of $3.0 million. |
See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company's segment disclosures.
Fee and asset management revenues, net of fee and asset management expenses, increased approximately $0.3 million or 6.0% primarily due to revenues earned on management of the Company's unconsolidated development joint ventures, an increase in revenue earned on management of the Company's military housing ventures at Fort Lewis and McChord Air Force Base and lower expenses, partially offset by the unwinding of four institutional joint ventures during 2010.
Property management expenses from continuing operations 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 $2.0 million or 2.5%. This increase is primarily attributable to an increase in payroll-related costs, which is largely a result of the creation of the Company's central business group, which moved administrative functions off-site, and increases in legal and professional fees and education/conference expenses.
Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased approximately $33.8 million or 6.7% primarily as a result of additional depreciation expense on properties acquired in 2011, development properties placed in service and capital expenditures for all properties owned, partially offset by a decrease in the amortization of furniture, fixtures and equipment that were fully depreciated.
General and administrative expenses from continuing operations, which include corporate operating expenses, increased approximately $3.7 million or 9.3% primarily due to an increase in payroll-related costs, which is largely a result of the acceleration of long-term compensation expense for retirement eligible employees.
Impairment from continuing operations decreased approximately $45.4 million due to an impairment charge taken during the fourth quarter of 2010 on land held for development related to two potential development projects that did not reoccur in 2011. See Note 18 in the Notes to Consolidated Financial Statements for further discussion.
Interest and other income from continuing operations increased approximately $3.5 million or 77.9% primarily as a result of interest earned on cash and cash equivalents due to larger overall cash balances during the year ended December 31, 2011 as compared to the same period in 2010, forfeited deposits for terminated disposition transactions and proceeds received from the Company's final royalty participation in LRO/Rainmaker (a revenue management system), partially offset by insurance/litigation settlement proceeds that occurred during the year ended December 31, 2010 and did not reoccur during the year ended December 31, 2011.
Other expenses from continuing operations increased approximately $2.6 million or 22.5% primarily due to an increase in property acquisition costs incurred in conjunction with the Company's 2011 acquisitions as well as transaction costs related to the pursuit of Archstone.
Interest expense from continuing operations, including amortization of deferred financing costs, increased approximately $11.3 million or 2.4% primarily as a result of a full year of interest expense on the $600.0 million of unsecured notes that closed in July 2010 and interest expense on forward starting swaps terminated in conjunction with the issuance of $1.0 billion of unsecured notes, partially offset by lower interest expense on mortgage notes payable due to lower balances during the year ended December 31, 2011 as compared to the same period in 2010. During the year ended December 31, 2011, the Company capitalized interest costs of approximately $9.1 million as compared to $13.0 million for the year ended December 31, 2010. This capitalization of interest primarily relates to consolidated projects under development. The effective interest cost on all indebtedness for the year ended December 31, 2011 was 5.30% as compared to 5.14% for the year ended December 31, 2010.
Income and other tax expense from continuing operations increased approximately $0.4 million primarily due to Tennessee and Texas franchise tax refunds received during the year ended December 31, 2010 that did not reoccur during the year ended December 31, 2011, partially offset by decreases in all other taxes.
Loss from investments in unconsolidated entities decreased approximately $0.7 million compared to the year ended December 31, 2010 primarily due to the unwinding of four institutional joint ventures during 2010.
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Net gain on sales of unconsolidated entities decreased approximately $28.1 million primarily due to the gain on sale and revaluation of seven previously unconsolidated properties that were acquired from the Company's joint venture partner and the gain on sale for 27 unconsolidated properties that occurred during the year ended December 31, 2010 that did not reoccur during the year ended December 31, 2011.
Net gain on sales of land parcels increased approximately $5.6 million primarily due to the gain on sale of a land parcel located in suburban Washington, D.C. during the year ended December 31, 2011 and a loss on sale of a land parcel during the same period in 2010.
Discontinued operations, net increased approximately $499.9 million between the periods under comparison. This increase is primarily due to higher gains from property sales during the year ended December 31, 2011 compared to the same period in 2010, partially offset by properties sold in 2011 which reflect operations for none of or a partial period in 2011 in contrast to a full or partial period in 2010. See Note 11 in the Notes to Consolidated Financial Statements for further discussion.
Liquidity and Capital Resources
For the Year Ended December 31, 2012
EQR issues public equity from time to time and guarantees certain debt of ERPOP. EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.
As of January 1, 2012, the Company had approximately $383.9 million of cash and cash equivalents, its restricted 1031 exchange proceeds totaled $53.7 million and it had $1.22 billion available under its revolving credit facility (net of $31.8 million which was restricted/dedicated to support letters of credit). After taking into effect the various transactions discussed in the following paragraphs and the net cash provided by operating activities, the Company's cash and cash equivalents balance at December 31, 2012 was approximately $612.6 million, its restricted 1031 exchange proceeds totaled $152.2 million and the amount available on its revolving credit facility was $1.72 billion (net of $30.2 million which was restricted/dedicated to support letters of credit).
During the year ended December 31, 2012, the Company generated proceeds from various transactions, which included the following:
▪ | Disposed of 35 consolidated properties, receiving net proceeds of approximately $1.0 billion; |
▪ | Obtained $26.5 million in new mortgage financing; |
▪ | Issued approximately 26.7 million Common Shares (including Common Shares issued in a public equity offering in November/December 2012 and under the ATM program - see further discussion below) and received net proceeds of $1.4 billion, which were contributed to the capital of the Operating Partnership in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis); and |
▪ | Collected $150.0 million in termination fees relating to the pursuit of Archstone. |
During the year ended December 31, 2012, the above proceeds were primarily utilized to:
▪ | Acquire nine rental properties and six land parcels for approximately $844.0 million; |
▪ | Invest $180.4 million primarily in development projects; |
▪ | Repay $364.3 million of mortgage loans and $976.0 million of unsecured notes; and |
▪ | Redeem its Series N Preferred Shares at its liquidation value of $150.0 million. |
On November 28, 2012, EQR priced the issuance of 21,850,000 Common Shares at a price of $54.75 per share for total consideration of approximately $1.2 billion, after deducting underwriting commissions of $35.9 million. Concurrent with the closing of this transaction, ERPOP issued 21,850,000 OP Units to EQR.
In September 2009, EQR announced the establishment of an At-The-Market (“ATM”) share offering program which would allow EQR to sell up to 17.0 million Common Shares from time to time over the next three years (later increased by 5.7 million Common Shares and extended to February 2014) into the existing trading market at current market prices as well as through negotiated transactions. Per the terms of ERPOP's partnership agreement, EQR contributes the net proceeds from all equity offerings
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to the capital of ERPOP in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis). EQR may, but shall have no obligation to, sell Common Shares through the ATM share offering program in amounts and at times to be determined by EQR. Actual sales will depend on a variety of factors to be determined by EQR from time to time, including (among others) market conditions, the trading price of EQR's Common Shares and determinations of the appropriate sources of funding for EQR. During the year ended December 31, 2012, EQR issued approximately 3.2 million Common Shares at an average price of $60.59 per share for total consideration of approximately $192.3 million through the ATM program. During the year ended December 31, 2011, EQR issued approximately 3.9 million Common Shares at an average price of $52.23 per share for total consideration of approximately $201.9 million through the ATM program. During the year ended December 31, 2010, EQR issued approximately 6.2 million Common Shares at an average price of $47.45 per share for total consideration of approximately $291.9 million through the ATM program. Through February 15, 2013, EQR has cumulatively issued approximately 16.7 million Common Shares at an average price of $48.53 per share for total consideration of approximately $809.9 million. EQR has 6.0 million Common Shares remaining available for issuance under the ATM program as of February 15, 2013.
On June 16, 2011, the shareholders of EQR approved the Company's 2011 Share Incentive Plan, as amended (the “2011 Plan”). The 2011 Plan reserved 12,980,741 Common Shares for issuance. In conjunction with the approval of the 2011 Plan, no further awards may be granted under the 2002 Share Incentive Plan. The 2011 Plan expires on June 16, 2021. See Note 12 in the Notes to Consolidated Financial Statements for further discussion.
Depending on its analysis of market prices, economic conditions and other opportunities for the investment of available capital, EQR may repurchase its Common Shares pursuant to its existing share repurchase program authorized by the Board of Trustees. As of February 15, 2013, EQR had authorization to repurchase an additional $464.6 million of its shares. No shares were repurchased during 2012. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
Depending on its analysis of prevailing market conditions, liquidity requirements, contractual restrictions and other factors, the Company may from time to time seek to repurchase and retire its outstanding debt in open market or privately negotiated transactions.
The Company’s total debt summary and debt maturity schedules as of December 31, 2012 are as follows:
Debt Summary as of December 31, 2012
(Amounts in thousands)
Amounts (1) | % of Total | Weighted Average Rates (1) | Weighted Average Maturities (years) | ||||||||||
Secured | $ | 3,898,369 | 45.7 | % | 4.96 | % | 7.3 | ||||||
Unsecured | 4,630,875 | 54.3 | % | 5.10 | % | 5.1 | |||||||
Total | $ | 8,529,244 | 100.0 | % | 5.04 | % | 6.1 | ||||||
Fixed Rate Debt: | |||||||||||||
Secured – Conventional | $ | 3,517,273 | 41.2 | % | 5.49 | % | 6.2 | ||||||
Unsecured – Public/Private | 4,329,352 | 50.8 | % | 5.70 | % | 5.4 | |||||||
Fixed Rate Debt | 7,846,625 | 92.0 | % | 5.61 | % | 5.8 | |||||||
Floating Rate Debt: | |||||||||||||
Secured – Conventional | 30,516 | 0.4 | % | 3.25 | % | 1.8 | |||||||
Secured – Tax Exempt | 350,580 | 4.1 | % | 0.23 | % | 19.7 | |||||||
Unsecured – Public/Private | 301,523 | 3.5 | % | 1.83 | % | 0.2 | |||||||
Unsecured – Revolving Credit Facility | — | — | 1.35 | % | 1.5 | ||||||||
Floating Rate Debt | 682,619 | 8.0 | % | 1.35 | % | 9.8 | |||||||
Total | $ | 8,529,244 | 100.0 | % | 5.04 | % | 6.1 |
(1) | Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 2012. |
Note: The Company capitalized interest of approximately $22.5 million and $9.1 million during the years ended December 31, 2012 and 2011, respectively.
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Debt Maturity Schedule as of December 31, 2012
(Amounts in thousands)
Fixed Rate (1) | Floating Rate (1) | Weighted Average Rates on Fixed Rate Debt (1) | Weighted Average Rates on Total Debt (1) | ||||||||||||||||||
Year | Total | % of Total | |||||||||||||||||||
2013 | $ | 224,277 | $ | 302,033 | $ | 526,310 | 6.2 | % | 6.93 | % | 4.79 | % | |||||||||
2014 | 564,302 | 22,021 | 586,323 | 6.9 | % | 5.31 | % | 5.24 | % | ||||||||||||
2015 | 417,812 | — | 417,812 | 4.9 | % | 6.30 | % | 6.30 | % | ||||||||||||
2016 | 1,190,538 | — | 1,190,538 | 14.0 | % | 5.34 | % | 5.34 | % | ||||||||||||
2017 | 1,446,120 | 456 | 1,446,576 | 17.0 | % | 5.95 | % | 5.95 | % | ||||||||||||
2018 | 81,450 | 724 | 82,174 | 1.0 | % | 5.70 | % | 5.70 | % | ||||||||||||
2019 | 802,640 | 20,766 | 823,406 | 9.6 | % | 5.49 | % | 5.36 | % | ||||||||||||
2020 | 1,672,482 | 809 | 1,673,291 | 19.6 | % | 5.50 | % | 5.50 | % | ||||||||||||
2021 | 1,188,905 | 856 | 1,189,761 | 13.9 | % | 4.64 | % | 4.64 | % | ||||||||||||
2022 | 2,401 | 905 | 3,306 | — | 5.81 | % | 5.74 | % | |||||||||||||
2023+ | 231,464 | 337,699 | 569,163 | 6.7 | % | 6.76 | % | 3.29 | % | ||||||||||||
Premium/(Discount) | 24,234 | (3,650 | ) | 20,584 | 0.2 | % | N/A | N/A | |||||||||||||
Total | $ | 7,846,625 | $ | 682,619 | $ | 8,529,244 | 100.0 | % | 5.54 | % | 5.25 | % |
(1) | Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2012. |
The following table provides a summary of the Company’s unsecured debt as of December 31, 2012:
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Unsecured Debt Summary as of December 31, 2012
(Amounts in thousands)
Coupon Rate | Due Date | Face Amount | Unamortized Premium/ (Discount) | Net Balance | ||||||||||||||
Fixed Rate Notes: | ||||||||||||||||||
5.200% | 04/01/13 | (1) | $ | 400,000 | $ | (30 | ) | $ | 399,970 | |||||||||
Fair Value Derivative Adjustments | (1) | (300,000 | ) | — | (300,000 | ) | ||||||||||||
5.250% | 09/15/14 | 500,000 | (105 | ) | 499,895 | |||||||||||||
6.584% | 04/13/15 | 300,000 | (248 | ) | 299,752 | |||||||||||||
5.125% | 03/15/16 | 500,000 | (170 | ) | 499,830 | |||||||||||||
5.375% | 08/01/16 | 400,000 | (665 | ) | 399,335 | |||||||||||||
5.750% | 06/15/17 | 650,000 | (2,289 | ) | 647,711 | |||||||||||||
7.125% | 10/15/17 | 150,000 | (311 | ) | 149,689 | |||||||||||||
4.750% | 07/15/20 | 600,000 | (3,433 | ) | 596,567 | |||||||||||||
4.625% | 12/15/21 | 1,000,000 | (3,397 | ) | 996,603 | |||||||||||||
7.570% | 08/15/26 | 140,000 | — | 140,000 | ||||||||||||||
4,340,000 | (10,648 | ) | 4,329,352 | |||||||||||||||
Floating Rate Notes: | ||||||||||||||||||
04/01/13 | (1) | 300,000 | — | 300,000 | ||||||||||||||
Fair Value Derivative Adjustments | (1) | 1,523 | — | 1,523 | ||||||||||||||
301,523 | — | 301,523 | ||||||||||||||||
Revolving Credit Facility: | LIBOR+1.15% | 07/13/14 | (2)(3) | — | — | — | ||||||||||||
Total Unsecured Debt | $ | 4,641,523 | $ | (10,648 | ) | $ | 4,630,875 |
(1) | Fair value interest rate swaps convert $300.0 million of the 5.200% notes due April 1, 2013 to a floating interest rate. |
(2) | Facility is private. All other unsecured debt is public. |
(3) | As of December 31, 2012, there was approximately $1.72 billion available on the Company's unsecured revolving credit facility. On January 11, 2013, the Company replaced its existing $1.75 billion facility with a new $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the new credit facility will 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 January 31, 2013, there was approximately $2.47 billion available on the Company's unsecured revolving credit facility. |
Note: In October 2012, the Company paid off the $222.1 million outstanding of its 5.500% public notes and its $500.0 million term loan facility, both at maturity.
An unlimited amount of equity and debt securities remains available for issuance by EQR and ERPOP under a universal shelf registration statement that automatically became effective upon filing with the SEC in October 2010 and expires on October 15, 2013. However, as of February 15, 2013, issuances under the ATM share offering program are limited to 6.0 million additional shares. 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's “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2012 is presented in the following table. The Company calculates the equity component of its market capitalization as the sum of (i) the total outstanding Common Shares and assumed conversion of all Units at the equivalent market value of the closing price of the Company's Common Shares on the New York Stock Exchange and (ii) the liquidation value of all perpetual preferred shares outstanding.
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Equity Residential
Capital Structure as of December 31, 2012
(Amounts in thousands except for share/unit and per share amounts)
Secured Debt | $ | 3,898,369 | 45.7 | % | |||||||||||||
Unsecured Debt | 4,630,875 | 54.3 | % | ||||||||||||||
Total Debt | 8,529,244 | 100.0 | % | 30.7 | % | ||||||||||||
Common Shares (includes Restricted Shares) | 325,054,654 | 95.9 | % | ||||||||||||||
Units (includes OP Units and LTIP Units) | 13,968,758 | 4.1 | % | ||||||||||||||
Total Shares and Units | 339,023,412 | 100.0 | % | ||||||||||||||
Common Share Price at December 31, 2012 | $ | 56.67 | |||||||||||||||
19,212,457 | 99.7 | % | |||||||||||||||
Perpetual Preferred Equity (see below) | 50,000 | 0.3 | % | ||||||||||||||
Total Equity | 19,262,457 | 100.0 | % | 69.3 | % | ||||||||||||
Total Market Capitalization | $ | 27,791,701 | 100.0 | % |
Equity Residential
Perpetual Preferred Equity as of December 31, 2012
(Amounts in thousands except for share and per share amounts)
Series | Redemption Date | Outstanding Shares | Liquidation Value | Annual Dividend Per Share | Annual Dividend 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 |
On August 20, 2012, the Company redeemed its Series N Cumulative Redeemable Preferred Shares for cash consideration of $150.0 million plus accrued dividends through the redemption date. As a result of this redemption, the Company recorded the write-off of approximately $5.1 million in original issuance costs as a premium on the redemption of Preferred Shares.
The Operating Partnership's “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2012 is presented in the following table. The Operating Partnership calculates the equity component of its market capitalization as the sum of (i) the total outstanding Units at the equivalent market value of the closing price of the Company's Common Shares on the New York Stock Exchange and (ii) the liquidation value of all perpetual preference units outstanding.
ERP Operating Limited Partnership
Capital Structure as of December 31, 2012
(Amounts in thousands except for unit and per unit amounts)
Secured Debt | $ | 3,898,369 | 45.7 | % | ||||||||||||
Unsecured Debt | 4,630,875 | 54.3 | % | |||||||||||||
Total Debt | 8,529,244 | 100.0 | % | 30.7 | % | |||||||||||
Total outstanding Units | 339,023,412 | |||||||||||||||
Common Share Price at December 31, 2012 | $ | 56.67 | ||||||||||||||
19,212,457 | 99.7 | % | ||||||||||||||
Perpetual Preference Units (see below) | 50,000 | 0.3 | % | |||||||||||||
Total Equity | 19,262,457 | 100.0 | % | 69.3 | % | |||||||||||
Total Market Capitalization | $ | 27,791,701 | 100.0 | % |
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ERP Operating Limited Partnership
Perpetual Preference Units as of December 31, 2012
(Amounts in thousands except for unit and per unit amounts)
Series | Redemption Date | Outstanding Units | Liquidation Value | Annual Dividend Per Unit | Annual Dividend Amount | ||||||||||||
Preference Units: | |||||||||||||||||
8.29% Series K | 12/10/26 | 1,000,000 | $ | 50,000 | $ | 4.145 | $ | 4,145 | |||||||||
Total Perpetual Preference Units | 1,000,000 | $ | 50,000 | $ | 4,145 |
On August 20, 2012, the Operating Partnership redeemed its Series N Cumulative Redeemable Preference Units for cash consideration of $150.0 million plus accrued dividends through the redemption date, in conjunction with the concurrent redemption of the corresponding Company Preferred Shares. As a result of this redemption, the Operating Partnership recorded the write-off of approximately $5.1 million in original issuance costs as a premium on the redemption of Preference Units.
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. Under normal operating conditions, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions.
During the fourth quarter of 2010, the Company announced a new dividend policy which it believes will generate payouts more closely aligned with the actual annual operating results of the Company's core business and provide transparency to investors. The Company intends to pay an annual cash dividend equal to approximately 65% of Normalized FFO for the year. During the year ended December 31, 2012, the Company paid $0.3375 per share for each of the first three quarters and $0.7675 per share for the fourth quarter to bring the total payment for the year (an annual rate of $1.78 per share) to approximately 65% of Normalized FFO. The Company expects to pay $0.40 per share for each of the first three quarters of 2013. This represents an increase from the $0.3375 per share paid in each of the first three quarters of 2012. The Company anticipates the expected dividend payout will range from $1.82 to $1.89 per share ($0.40 per share for each of the first three quarters with the balance for the fourth quarter) for the year ending December 31, 2013. All future dividends remain subject to the discretion of the Board of Trustees. The above assumption is based on current expectations and is forward-looking. While our dividend policy makes it less likely we will over distribute, it will also lead to a dividend reduction more quickly than a fixed dividend policy should operating results deteriorate. However, whether due to changes in the dividend policy or otherwise, there may be times when the Company experiences shortfalls in its coverage of distributions, which may cause the Company to consider reducing its distributions and/or using the proceeds from property dispositions or additional financing transactions to make up the difference. Should these shortfalls occur for lengthy periods of time or be material in nature, the Company's financial condition may be adversely affected and it may not be able to maintain its current distribution levels. The Company believes that its expected 2013 operating cash flow will be sufficient to cover capital expenditures and distributions.
The Company also expects to meet its long-term liquidity requirements, such as scheduled unsecured note and mortgage debt maturities, property acquisitions, financing of construction and development activities and capital improvements through the issuance of secured and unsecured debt and equity securities, including additional OP Units, and proceeds received from the disposition of certain properties and joint ventures. In addition, the Company has significant unencumbered properties available to secure additional mortgage borrowings in the event that the public capital markets are unavailable or the cost of alternative sources of capital is too high. The fair 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 $21.0 billion in investment in real estate on the Company's balance sheet at December 31, 2012, $15.1 billion or 71.6% 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.
ERPOP's credit ratings from Standard & Poor's (“S&P”), Moody's and Fitch for its outstanding senior debt are BBB+, Baal and BBB+, respectively. EQR's equity ratings from S&P, Moody's and Fitch for its outstanding preferred equity are BBB+, Baa2 and BBB-, respectively. Following the announcement of the Archstone transaction in November 2012, Fitch placed EQR's and ERPOP's ratings on negative watch.
In July 2011, the Company replaced its then existing unsecured revolving credit facility with a new $1.25 billion unsecured revolving credit facility maturing on July 13, 2014, subject to a one-year extension option exercisable by the Company. The interest rate on advances under the credit facility was generally LIBOR plus a spread (1.15%) and the Company paid an annual facility
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fee of 0.2%. Both the spread and the facility fee were dependent on the credit rating of the Company's long term debt. Effective January 6, 2012, the Company amended this facility to increase available borrowings by $500.0 million to $1.75 billion. The terms did not change, including the July 13, 2014 maturity date. On January 11, 2013, the Company replaced its existing $1.75 billion credit facility with a new $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the new credit facility will 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 February 15, 2013, there was available borrowings of $2.47 billion (net of $30.2 million which was restricted/dedicated to support letters of credit) on the new revolving credit facility. This facility may, among other potential uses, be used to fund property acquisitions (including Archstone), costs for certain properties under development and short-term liquidity requirements.
In 2010, a portion of the parking garage collapsed at one of the Company's rental properties (Prospect Towers in Hackensack, New Jersey). The costs related to the collapse (both expensed and capitalized), including providing for residents' interim needs, lost revenue and garage reconstruction, were approximately $22.8 million, before insurance reimbursements of $13.6 million. The garage has been rebuilt with cumulative costs approximating $13.3 million capitalized as incurred. Other costs approximating $9.5 million, like those to accommodate displaced residents, lost revenue due to a portion of the property being temporarily unavailable for occupancy and legal costs, reduced earnings as they were incurred. Generally, insurance proceeds were recorded as increases to earnings as they were received. During the year ended December 31, 2012, the Company received approximately $3.5 million in insurance proceeds (included in real estate taxes and insurance on the consolidated statements of operations), which represented its final reimbursement of the $13.6 million in cumulative insurance proceeds. During the year ended December 31, 2011, the Company received approximately $6.1 million in insurance proceeds which offset expenses of $1.7 million. During the year ended December 31, 2010, the Company received approximately $4.0 million in insurance proceeds which fully offset the impairment charge recognized to write-off the net book value of the collapsed garage and partially offset expenses of $5.5 million that were recorded relating to this loss. In addition, the Company estimates that its lost revenues approximated $0.7 million and $1.6 million during the years ended December 31, 2011 and 2010, respectively, as a result of lost occupancy in the high-rise tower following the collapse. The Company does not anticipate any remaining costs or additional lost revenues as the project has been stabilized and the garage reconstruction has been completed. None of the amounts referenced above impact same store results.
See Note 18 in the Notes to Consolidated Financial Statements for discussion of the events which occurred subsequent to December 31, 2012.
Capitalization of Fixed Assets and Improvements to Real Estate
Our policy with respect to capital expenditures is generally to capitalize expenditures that improve the value of the property or extend the useful life of the component asset of the property. We track improvements to real estate in two major categories and several subcategories:
▪ | Replacements (inside the apartment unit). These include: |
• | flooring such as carpets, hardwood, vinyl or tile; |
• | appliances; |
• | mechanical equipment such as individual furnace/air units, hot water heaters, etc; |
• | furniture and fixtures such as kitchen/bath cabinets, light fixtures, ceiling fans, sinks, tubs, toilets, mirrors, countertops, etc; and |
• | blinds. |
All replacements are depreciated over a five to ten-year estimated useful life. We expense as incurred all make-ready maintenance and turnover costs such as cleaning, interior painting of individual apartment units and the repair of any replacement item noted above.
▪ | Building improvements (outside the apartment unit). These include: |
• | roof replacement and major repairs; |
• | paving or major resurfacing of parking lots, curbs and sidewalks; |
• | amenities and common areas such as pools, exterior sports and playground equipment, lobbies, clubhouses, laundry rooms, alarm and security systems and offices; |
• | major building mechanical equipment systems; |
• | interior and exterior structural repair and exterior painting and siding; |
• | major landscaping and grounds improvement; and |
• | vehicles and office and maintenance equipment. |
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All building improvements are depreciated over a five to fifteen-year estimated useful life. We capitalize building improvements and upgrades only if the item: (i) exceeds $2,500 (selected projects must exceed $10,000); (ii) extends the useful life of the asset; and (iii) improves the value of the asset.
For the year ended December 31, 2012, our actual improvements to real estate totaled approximately $152.8 million. This includes the following (amounts in thousands except for apartment unit and per apartment unit amounts):
Capital Expenditures to Real Estate
For the Year Ended December 31, 2012
Total Apartment Units (1) | Replacements (2) | Avg. Per Apartment Unit | Building Improvements | Avg. Per Apartment Unit | Total | Avg. Per Apartment Unit | |||||||||||||||||||||
Same Store Properties (3) | 98,577 | $ | 65,490 | $ | 664 | $ | 55,097 | $ | 559 | $ | 120,587 | $ | 1,223 | ||||||||||||||
Non-Same Store Properties (4) | 11,754 | 7,599 | 706 | 21,788 | 2,026 | 29,387 | 2,732 | ||||||||||||||||||||
Other (5) | — | 1,723 | 1,131 | 2,854 | |||||||||||||||||||||||
Total | 110,331 | $ | 74,812 | $ | 78,016 | $ | 152,828 |
(1) | Total Apartment Units – Excludes 5,039 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) | 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 $33.0 million spent in 2012 on apartment unit renovations/rehabs (primarily kitchens and baths) on 4,427 apartment units (equating to about $7,500 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. |
(3) | Same Store Properties – Primarily includes all properties acquired or completed and stabilized prior to January 1, 2011, less properties subsequently sold. |
(4) | Non-Same Store Properties – Primarily includes all properties acquired during 2011 and 2012, plus any properties in lease-up and not stabilized as of January 1, 2011. Per apartment unit amounts are based on a weighted average of 10,754 apartment units. |
(5) | Other – Primarily includes expenditures for properties sold during the period. |
For the year ended December 31, 2011, our actual improvements to real estate totaled approximately $144.5 million. This includes the following (amounts in thousands except for apartment unit and per apartment unit amounts):
Capital Expenditures to Real Estate
For the Year Ended December 31, 2011
Total Apartment Units (1) | Replacements (2) | Avg. Per Apartment Unit | Building Improvements | Avg. Per Apartment Unit | Total | Avg. Per Apartment Unit | |||||||||||||||||||||
Same Store Properties (3) | 101,312 | $ | 70,937 | $ | 700 | $ | 49,674 | $ | 490 | $ | 120,611 | $ | 1,190 | ||||||||||||||
Non-Same Store Properties (4) | 15,761 | 7,505 | 658 | 13,827 | 1,211 | 21,332 | 1,869 | ||||||||||||||||||||
Other (5) | — | 2,147 | 362 | 2,509 | |||||||||||||||||||||||
Total | 117,073 | $ | 80,589 | $ | 63,863 | $ | 144,452 |
(1) | Total Apartment Units – Excludes 4,901 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) | 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 $38.1 million spent in 2011 on apartment unit renovations/ rehabs (primarily kitchens and baths) on 5,416 apartment units (equating to about $7,000 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. |
(3) | Same Store Properties – Primarily includes all properties acquired or completed and stabilized prior to January 1, 2010, less properties subsequently sold. |
(4) | Non-Same Store Properties – Primarily includes all properties acquired during 2010 and 2011, plus any properties in lease-up and not stabilized as of January 1, 2010. Per apartment unit amounts are based on a weighted average of 11,414 apartment units. |
(5) | Other – Primarily includes expenditures for properties sold during the period. |
For 2013, the Company estimates that it will spend approximately $1,500 per apartment unit of capital expenditures for the approximately 80,000 apartment units that the Company expects to have in its annual same store set after the completion of its planned 2013 dispositions, inclusive of apartment unit renovation/rehab costs, or $1,150 per apartment unit excluding apartment unit renovation/rehab costs. For 2013, the Company estimates that it will spend $40.8 million rehabbing 5,000 apartment units (equating to about $8,150 per apartment unit rehabbed). The above assumptions are based on current expectations and are forward-looking.
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During the year ended December 31, 2012, the Company's total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Company's property management offices and its corporate offices, were approximately $8.8 million. The Company expects to fund approximately $4.2 million in total additions to non-real estate property in 2013. The above assumption is based on current expectations and is forward-looking.
Improvements to real estate and additions to non-real estate property are generally funded from net cash provided by operating activities and from investment cash flow.
Derivative Instruments
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks 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 its exposure to foreign exchange rates (should the Archstone transaction close) or manage commodity prices in the daily operations of the business.
The Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives it currently has in place.
See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at December 31, 2012.
Other
Total distributions paid in January 2013 amounted to $260.2 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the fourth quarter ended December 31, 2012.
Off-Balance Sheet Arrangements and Contractual Obligations
The Company admitted an 80% institutional partner to two separate entities/transactions (one in December 2010 and the other in August 2011), each owning a developable land parcel, in exchange for $40.1 million in cash and retained a 20% equity interest in both of these entities. These land parcels are now unconsolidated. Total project costs are approximately $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. While the Company is the managing member of both of the joint ventures, is responsible for constructing both of the projects and has given certain construction cost overrun guarantees, all major decisions are made jointly, the large majority of funding is provided by the partner and the partner has significant involvement in and oversight of the ongoing projects. The Company currently has no further funding obligations related to these projects. The Company's strategy with respect to these ventures was to reduce its financial risk related to the development of the properties. However, management does not believe that these investments have a materially different impact upon the Company's liquidity, cash flows, capital resources, credit or market risk than its other consolidated development activities.
As of December 31, 2012, the Company has six consolidated projects (including 400 Park Avenue South in New York City which the Company is jointly developing with Toll Brothers – see Note 16 in the Notes to Consolidated Financial Statements for further discussion) totaling 1,536 apartment units and two unconsolidated projects totaling 945 apartment units in various stages of development with estimated completion dates ranging through June 30, 2015, as well as other completed development projects that are in various stages of lease up or are stabilized. The development agreements currently in place are discussed in detail in Note 16 of the Company's Consolidated Financial Statements.
See also Notes 2 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company's investments in partially owned entities.
The following table summarizes the Company's contractual obligations for the next five years and thereafter as of December 31, 2012:
31
Payments Due by Year (in thousands) | ||||||||||||||||||||||||||||
Contractual Obligations | 2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | |||||||||||||||||||||
Debt: | ||||||||||||||||||||||||||||
Principal (a) | $ | 526,310 | $ | 586,323 | $ | 417,812 | $ | 1,190,538 | $ | 1,446,576 | $ | 4,361,685 | $ | 8,529,244 | ||||||||||||||
Interest (b) | 432,884 | 409,840 | 371,992 | 322,266 | 246,237 | 751,660 | 2,534,879 | |||||||||||||||||||||
Operating Leases: | ||||||||||||||||||||||||||||
Minimum Rent Payments (c) | 7,462 | 8,862 | 9,501 | 9,462 | 9,415 | 691,304 | 736,006 | |||||||||||||||||||||
Other Long-Term Liabilities: | ||||||||||||||||||||||||||||
Deferred Compensation (d) | 1,179 | 1,691 | 1,691 | 1,691 | 1,692 | 6,529 | 14,473 | |||||||||||||||||||||
Total | $ | 967,835 | $ | 1,006,716 | $ | 800,996 | $ | 1,523,957 | $ | 1,703,920 | $ | 5,811,178 | $ | 11,814,602 |
(a) | Amounts include aggregate principal payments only. |
(b) | Amounts include interest expected to be incurred on the Company's secured and unsecured debt based on obligations outstanding at December 31, 2012 and inclusive of capitalized interest. For floating rate debt, the current rate in effect for the most recent payment through December 31, 2012 is assumed to be in effect through the respective maturity date of each instrument. |
(c) | Minimum basic rent due for various office space the Company leases and fixed base rent due on ground leases for five properties/parcels. |
(d) | Estimated payments to the Company's Chairman, Vice Chairman and two former CEO's based on actual and planned retirement dates. |
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or different presentation of our financial statements.
The Company's significant accounting policies are described in Note 2 in the Notes to Consolidated Financial Statements. These policies were followed in preparing the consolidated financial statements at and for the year ended December 31, 2012 and are consistent with the year ended December 31, 2011.
The Company has identified five significant accounting policies as critical accounting policies. These critical accounting policies are those that have the most impact on the reporting of our financial condition and those requiring significant judgments and estimates. With respect to these critical accounting policies, management believes that the application of judgments and estimates is consistently applied and produces financial information that fairly presents the results of operations for all periods presented. The five critical accounting policies are:
Acquisition of Investment Properties
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets, including its investments in real estate, for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company's ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted.
Depreciation of Investment in Real Estate
The Company depreciates the building component of its investment in real estate over a 30-year estimated useful life, building improvements over a 5-year to 15-year estimated useful life and both the furniture, fixtures and equipment and replacements components over a 5-year to 10-year estimated useful life, all of which are judgmental determinations.
32
Cost Capitalization
See the Capitalization of Fixed Assets and Improvements to Real Estate section for a discussion of the Company's policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Company capitalizes an allocation of the payroll and associated costs of employees directly responsible for and who spend their time on the supervision of major capital and/or renovation projects. These costs are reflected on the balance sheet as an increase to depreciable property.
For all development projects, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Company capitalizes interest, real estate taxes and insurance and payroll and associated costs for those individuals directly responsible for and who spend their time on development activities, with capitalization ceasing no later than 90 days following issuance of the certificate of occupancy. These costs are reflected on the balance sheet as construction-in-progress for each specific property. The Company expenses as incurred all payroll costs of on-site employees working directly at our properties, except as noted above on our development properties prior to certificate of occupancy issuance and on specific major renovations at selected properties when additional incremental employees are hired.
During the years ended December 31, 2012, 2011 and 2010, the Company capitalized $14.3 million, $11.6 million and $10.7 million, respectively, of payroll and associated costs of employees directly responsible for and who spend their time on the supervision of development activities as well as major capital and/or renovation projects.
Fair Value of Financial Instruments, Including Derivative Instruments
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, including its derivative 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.
Funds From Operations and Normalized Funds From Operations
For the year ended December 31, 2012, Funds From Operations (“FFO”) available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units increased $241.1 million, or 32.0%, and $123.6 million, or 16.3%, respectively, as compared to the year ended December 31, 2011. For the year ended December 31, 2011, FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units increased $129.4 million, or 20.8%, and $77.2 million, or 11.3%, respectively, as compared to the year ended December 31, 2010.
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 each of the five years ended December 31, 2012:
33
Funds From Operations and Normalized Funds From Operations
(Amounts in thousands)
Year Ended December 31, | ||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | $ | 382,029 | $ | 436,413 | ||||||||||
Net (income) attributable to Noncontrolling Interests: | ||||||||||||||||||||
Preference Interests and Units | — | — | — | (9 | ) | (15 | ) | |||||||||||||
Partially Owned Properties | (844 | ) | (832 | ) | 726 | 558 | (2,650 | ) | ||||||||||||
Preferred/preference distributions | (10,355 | ) | (13,865 | ) | (14,368 | ) | (14,479 | ) | (14,507 | ) | ||||||||||
Premium on redemption of Preferred Shares/Preference Units | (5,152 | ) | — | — | — | — | ||||||||||||||
Net income available to Common Shares and Units / Units | 864,853 | 920,500 | 282,341 | 368,099 | 419,241 | |||||||||||||||
Adjustments: | ||||||||||||||||||||
Depreciation | 593,884 | 539,351 | 505,516 | 417,813 | 400,650 | |||||||||||||||
Depreciation – Non-real estate additions | (5,346 | ) | (5,519 | ) | (6,566 | ) | (7,122 | ) | (8,034 | ) | ||||||||||
Depreciation – Partially Owned and Unconsolidated Properties | (3,193 | ) | (3,062 | ) | (1,619 | ) | 759 | 4,157 | ||||||||||||
Net (gain) on sales of unconsolidated entities | — | — | (28,101 | ) | (10,689 | ) | (2,876 | ) | ||||||||||||
Discontinued operations: | ||||||||||||||||||||
Depreciation | 91,108 | 124,177 | 167,665 | 182,329 | 202,023 | |||||||||||||||
Net (gain) on sales of discontinued operations | (548,278 | ) | (826,489 | ) | (297,956 | ) | (335,299 | ) | (392,857 | ) | ||||||||||
Net incremental (loss) gain on sales of condominium units | (11 | ) | 1,993 | 1,506 | (385 | ) | (3,932 | ) | ||||||||||||
Gain on sale of Equity Corporate Housing (ECH) | 200 | 1,202 | — | — | — | |||||||||||||||
FFO available to Common Shares and Units / Units (1) (3) (4) | 993,217 | 752,153 | 622,786 | 615,505 | 618,372 | |||||||||||||||
Adjustments: | ||||||||||||||||||||
Asset impairment and valuation allowances | — | — | 45,380 | 11,124 | 116,418 | |||||||||||||||
Property acquisition costs and write-off of pursuit costs (other expenses) | 21,649 | 14,557 | 11,928 | 6,488 | 5,760 | |||||||||||||||
Debt extinguishment (gains) losses, including prepayment penalties, preferred share/ | ||||||||||||||||||||
preference unit redemptions and non-cash convertible debt discounts | 16,293 | 12,300 | 8,594 | 34,333 | (2,784 | ) | ||||||||||||||
(Gains) losses on sales of non-operating assets, net of income and other tax expense | ||||||||||||||||||||
(benefit) | (255 | ) | (6,976 | ) | (80 | ) | (5,737 | ) | (979 | ) | ||||||||||
Other miscellaneous non-comparable items | (147,635 | ) | (12,369 | ) | (6,186 | ) | (171 | ) | (1,725 | ) | ||||||||||
Normalized FFO available to Common Shares and Units / Units (2) (3) (4) | $ | 883,269 | $ | 759,665 | $ | 682,422 | $ | 661,542 | $ | 735,062 | ||||||||||
FFO (1) (3) | $ | 1,008,724 | $ | 766,018 | $ | 637,154 | $ | 629,984 | $ | 632,879 | ||||||||||
Preferred/preference distributions | (10,355 | ) | (13,865 | ) | (14,368 | ) | (14,479 | ) | (14,507 | ) | ||||||||||
Premium on redemption of Preferred Shares/Preference Units | (5,152 | ) | — | — | — | — | ||||||||||||||
FFO available to Common Shares and Units / Units (1) (3) (4) | $ | 993,217 | $ | 752,153 | $ | 622,786 | $ | 615,505 | $ | 618,372 | ||||||||||
Normalized FFO (2) (3) | $ | 893,624 | $ | 773,530 | $ | 696,790 | $ | 676,021 | $ | 749,569 | ||||||||||
Preferred/preference distributions | (10,355 | ) | (13,865 | ) | (14,368 | ) | (14,479 | ) | (14,507 | ) | ||||||||||
Normalized FFO available to Common Shares and Units / Units (2) (3) (4) | $ | 883,269 | $ | 759,665 | $ | 682,422 | $ | 661,542 | $ | 735,062 |
(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 (other expenses); |
▪ | gains and losses from early debt extinguishment, including prepayment penalties, preferred share/preference unit 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. |
34
(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 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 / 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 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. |
Item 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements on page F-1.
35
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
PAGE | ||
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT | ||
Report of Independent Registered Public Accounting Firm (Equity Residential) | F-2 | |
Report of Independent Registered Public Accounting Firm (ERP Operating Limited Partnership) | F-3 | |
Financial Statements of Equity Residential: | ||
Consolidated Balance Sheets as of December 31, 2012 and 2011 | F-4 | |
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 | F-5 to F-6 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 | F-7 to F-9 | |
Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010 | F-10 to F-11 | |
Financial Statements of ERP Operating Limited Partnership: | ||
Consolidated Balance Sheets as of December 31, 2012 and 2011 | F-12 | |
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 | F-13 to F-14 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 | F-15 to F-17 | |
Consolidated Statements of Changes in Capital for the years ended December 31, 2012, 2011 and 2010 | F-18 to F-19 | |
Notes to Consolidated Financial Statements of Equity Residential and ERP Operating Limited Partnership | F-20 to F-60 | |
SCHEDULE FILED AS PART OF THIS REPORT | ||
Schedule III – Real Estate and Accumulated Depreciation of Equity Residential and ERP Operating Limited Partnership | S-1 to S-14 |
All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the consolidated financial statements or notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
Equity Residential
We have audited the accompanying consolidated balance sheets of Equity Residential (the “Company”) as of December 31, 2012 and 2011 and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedule listed in the accompanying index to the consolidated financial statements and schedule. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equity Residential at December 31, 2012 and 2011 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equity Residential’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2013 (not provided herein) expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP | |
ERNST & YOUNG LLP | |
Chicago, Illinois | |
February 21, 2013, except for Notes 10, 11 and 17, | |
as to which the date is June 14, 2013 |
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
ERP Operating Limited Partnership
We have audited the accompanying consolidated balance sheets of ERP Operating Limited Partnership (the “Operating Partnership”) as of December 31, 2012 and 2011 and the related consolidated statements of operations, changes in capital and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedule listed in the accompanying index to the consolidated financial statements and schedule. These financial statements and schedule are the responsibility of the Operating Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ERP Operating Limited Partnership at December 31, 2012 and 2011 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ERP Operating Limited Partnership's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2013 (not provided herein) expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP | |
ERNST & YOUNG LLP | |
Chicago, Illinois | |
February 21, 2013, except for Notes 10, 11 and 17, | |
as to which the date is June 14, 2013 |
F-3
EQUITY RESIDENTIAL
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share amounts)
December 31, 2012 | December 31, 2011 | |||||||
ASSETS | ||||||||
Investment in real estate | ||||||||
Land | $ | 4,554,912 | $ | 4,367,816 | ||||
Depreciable property | 15,711,944 | 15,554,740 | ||||||
Projects under development | 387,750 | 160,190 | ||||||
Land held for development | 353,823 | 325,200 | ||||||
Investment in real estate | 21,008,429 | 20,407,946 | ||||||
Accumulated depreciation | (4,912,221 | ) | (4,539,583 | ) | ||||
Investment in real estate, net | 16,096,208 | 15,868,363 | ||||||
Cash and cash equivalents | 612,590 | 383,921 | ||||||
Investments in unconsolidated entities | 17,877 | 12,327 | ||||||
Deposits – restricted | 250,442 | 152,237 | ||||||
Escrow deposits – mortgage | 9,129 | 10,692 | ||||||
Deferred financing costs, net | 44,382 | 44,608 | ||||||
Other assets | 170,372 | 187,155 | ||||||
Total assets | $ | 17,201,000 | $ | 16,659,303 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Mortgage notes payable | $ | 3,898,369 | $ | 4,111,487 | ||||
Notes, net | 4,630,875 | 5,609,574 | ||||||
Lines of credit | — | — | ||||||
Accounts payable and accrued expenses | 38,372 | 35,206 | ||||||
Accrued interest payable | 76,223 | 88,121 | ||||||
Other liabilities | 304,518 | 291,289 | ||||||
Security deposits | 66,988 | 65,286 | ||||||
Distributions payable | 260,176 | 179,079 | ||||||
Total liabilities | 9,275,521 | 10,380,042 | ||||||
Commitments and contingencies | ||||||||
Redeemable Noncontrolling Interests – Operating Partnership | 398,372 | 416,404 | ||||||
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 December 31, 2012 and 1,600,000 shares issued and outstanding as of December 31, 2011 | 50,000 | 200,000 | ||||||
Common Shares of beneficial interest, $0.01 par value; | ||||||||
1,000,000,000 shares authorized; 325,054,654 shares issued and outstanding as of December 31, 2012 and 297,508,185 shares issued and outstanding as of December 31, 2011 | 3,251 | 2,975 | ||||||
Paid in capital | 6,542,355 | 5,047,186 | ||||||
Retained earnings | 887,355 | 615,572 | ||||||
Accumulated other comprehensive (loss) | (193,148 | ) | (196,718 | ) | ||||
Total shareholders’ equity | 7,289,813 | 5,669,015 | ||||||
Noncontrolling Interests: | ||||||||
Operating Partnership | 159,606 | 119,536 | ||||||
Partially Owned Properties | 77,688 | 74,306 | ||||||
Total Noncontrolling Interests | 237,294 | 193,842 | ||||||
Total equity | 7,527,107 | 5,862,857 | ||||||
Total liabilities and equity | $ | 17,201,000 | $ | 16,659,303 |
See accompanying notes
F-4
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
REVENUES | ||||||||||||
Rental income | $ | 1,870,309 | $ | 1,644,642 | $ | 1,446,781 | ||||||
Fee and asset management | 9,573 | 9,026 | 9,476 | |||||||||
Total revenues | 1,879,882 | 1,653,668 | 1,456,257 | |||||||||
EXPENSES | ||||||||||||
Property and maintenance | 365,778 | 337,419 | 323,743 | |||||||||
Real estate taxes and insurance | 219,975 | 190,834 | 172,531 | |||||||||
Property management | 81,902 | 81,867 | 79,857 | |||||||||
Fee and asset management | 4,663 | 4,279 | 4,998 | |||||||||
Depreciation | 593,884 | 539,351 | 505,516 | |||||||||
General and administrative | 47,238 | 43,604 | 39,881 | |||||||||
Impairment | — | — | 45,380 | |||||||||
Total expenses | 1,313,440 | 1,197,354 | 1,171,906 | |||||||||
Operating income | 566,442 | 456,314 | 284,351 | |||||||||
Interest and other income | 150,546 | 7,965 | 4,476 | |||||||||
Other expenses | (27,320 | ) | (14,209 | ) | (11,597 | ) | ||||||
Interest: | ||||||||||||
Expense incurred, net | (456,763 | ) | (461,754 | ) | (457,613 | ) | ||||||
Amortization of deferred financing costs | (21,320 | ) | (16,651 | ) | (9,453 | ) | ||||||
Income (loss) before income and other taxes, (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and land parcels and discontinued operations | 211,585 | (28,335 | ) | (189,836 | ) | |||||||
Income and other tax (expense) benefit | (516 | ) | (708 | ) | (270 | ) | ||||||
(Loss) from investments in unconsolidated entities | (14 | ) | — | (735 | ) | |||||||
Net gain on sales of unconsolidated entities | — | — | 28,101 | |||||||||
Net gain (loss) on sales of land parcels | — | 4,217 | (1,395 | ) | ||||||||
Income (loss) from continuing operations | 211,055 | (24,826 | ) | (164,135 | ) | |||||||
Discontinued operations, net | 670,149 | 960,023 | 460,118 | |||||||||
Net income | 881,204 | 935,197 | 295,983 | |||||||||
Net (income) loss attributable to Noncontrolling Interests: | ||||||||||||
Operating Partnership | (38,641 | ) | (40,780 | ) | (13,099 | ) | ||||||
Partially Owned Properties | (844 | ) | (832 | ) | 726 | |||||||
Net income attributable to controlling interests | 841,719 | 893,585 | 283,610 | |||||||||
Preferred distributions | (10,355 | ) | (13,865 | ) | (14,368 | ) | ||||||
Premium on redemption of Preferred Shares | (5,152 | ) | — | — | ||||||||
Net income available to Common Shares | $ | 826,212 | $ | 879,720 | $ | 269,242 | ||||||
Earnings per share – basic: | ||||||||||||
Income (loss) from continuing operations available to Common Shares | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | ||||
Net income available to Common Shares | $ | 2.73 | $ | 2.98 | $ | 0.95 | ||||||
Weighted average Common Shares outstanding | 302,701 | 294,856 | 282,888 | |||||||||
Earnings per share – diluted: | ||||||||||||
Income (loss) from continuing operations available to Common Shares | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | ||||
Net income available to Common Shares | $ | 2.70 | $ | 2.98 | $ | 0.95 | ||||||
Weighted average Common Shares outstanding | 319,766 | 294,856 | 282,888 |
See accompanying notes
F-5
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Amounts in thousands except per share data)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Comprehensive income: | ||||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | ||||||
Other comprehensive income (loss): | ||||||||||||
Other comprehensive income (loss) – derivative instruments: | ||||||||||||
Unrealized holding (losses) arising during the year | (11,772 | ) | (143,598 | ) | (65,894 | ) | ||||||
Losses reclassified into earnings from other comprehensive income | 14,678 | 4,343 | 3,338 | |||||||||
Other comprehensive income – other instruments: | ||||||||||||
Unrealized holding gains arising during the year | 664 | 355 | 57 | |||||||||
Other comprehensive income (loss) | 3,570 | (138,900 | ) | (62,499 | ) | |||||||
Comprehensive income | 884,774 | 796,297 | 233,484 | |||||||||
Comprehensive (income) attributable to Noncontrolling Interests | (39,485 | ) | (41,612 | ) | (12,373 | ) | ||||||
Comprehensive income attributable to controlling interests | $ | 845,289 | $ | 754,685 | $ | 221,111 |
See accompanying notes
F-6
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation | 684,992 | 663,616 | 673,403 | |||||||||
Amortization of deferred financing costs | 21,435 | 17,846 | 10,406 | |||||||||
Amortization of discounts and premiums on debt | (8,181 | ) | (1,478 | ) | (471 | ) | ||||||
Amortization of deferred settlements on derivative instruments | 14,144 | 3,808 | 2,804 | |||||||||
Impairment | — | — | 45,380 | |||||||||
Write-off of pursuit costs | 9,056 | 5,075 | 5,272 | |||||||||
Income from technology investments | — | (4,537 | ) | — | ||||||||
Loss from investments in unconsolidated entities | 14 | — | 735 | |||||||||
Distributions from unconsolidated entities – return on capital | 575 | 319 | 61 | |||||||||
Net (gain) on sales of unconsolidated entities | — | — | (28,101 | ) | ||||||||
Net (gain) loss on sales of land parcels | — | (4,217 | ) | 1,395 | ||||||||
Net (gain) on sales of discontinued operations | (548,278 | ) | (826,489 | ) | (297,956 | ) | ||||||
Loss on debt extinguishments | 272 | — | 2,457 | |||||||||
Unrealized (gain) loss on derivative instruments | (1 | ) | 186 | 1 | ||||||||
Compensation paid with Company Common Shares | 24,832 | 21,177 | 18,875 | |||||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in deposits – restricted | (4,091 | ) | 4,523 | 3,316 | ||||||||
(Increase) in other assets | (20,411 | ) | (2,743 | ) | (9,048 | ) | ||||||
(Decrease) increase in accounts payable and accrued expenses | (2,102 | ) | 332 | (5,454 | ) | |||||||
(Decrease) in accrued interest payable | (11,898 | ) | (10,510 | ) | (4,000 | ) | ||||||
Increase (decrease) in other liabilities | 2,987 | (8,245 | ) | 9,972 | ||||||||
Increase in security deposits | 1,702 | 4,474 | 1,007 | |||||||||
Net cash provided by operating activities | 1,046,251 | 798,334 | 726,037 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Investment in real estate – acquisitions | (843,976 | ) | (1,441,599 | ) | (1,189,210 | ) | ||||||
Investment in real estate – development/other | (180,409 | ) | (120,741 | ) | (131,301 | ) | ||||||
Improvements to real estate | (152,828 | ) | (144,452 | ) | (138,208 | ) | ||||||
Additions to non-real estate property | (8,821 | ) | (7,110 | ) | (2,991 | ) | ||||||
Interest capitalized for real estate and unconsolidated entities under development | (22,509 | ) | (9,108 | ) | (13,008 | ) | ||||||
Proceeds from disposition of real estate, net | 1,049,219 | 1,500,583 | 672,700 | |||||||||
Investments in unconsolidated entities | (5,291 | ) | (2,021 | ) | — | |||||||
Distributions from unconsolidated entities – return of capital | — | — | 26,924 | |||||||||
Proceeds from sale of investment securities | — | — | 25,000 | |||||||||
Proceeds from technology investments | — | 4,537 | — | |||||||||
(Increase) decrease in deposits on real estate acquisitions and investments, net | (97,984 | ) | 7,631 | 137,106 | ||||||||
Decrease in mortgage deposits | 1,563 | 1,901 | 4,699 | |||||||||
Consolidation of previously unconsolidated properties | — | — | (26,854 | ) | ||||||||
Deconsolidation of previously consolidated properties | — | 28,360 | 11,708 | |||||||||
Acquisition of Noncontrolling Interests – Partially Owned Properties | (13 | ) | (12,809 | ) | (16,023 | ) | ||||||
Net cash (used for) investing activities | (261,049 | ) | (194,828 | ) | (639,458 | ) |
See accompanying notes
F-7
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Loan and bond acquisition costs | $ | (21,209 | ) | $ | (20,421 | ) | $ | (8,811 | ) | |||
Mortgage notes payable: | ||||||||||||
Proceeds | 26,495 | 190,905 | 173,561 | |||||||||
Restricted cash | 2,370 | 16,596 | 73,232 | |||||||||
Lump sum payoffs | (350,247 | ) | (974,956 | ) | (635,285 | ) | ||||||
Scheduled principal repayments | (14,088 | ) | (16,726 | ) | (16,769 | ) | ||||||
(Loss) on debt extinguishments | (272 | ) | — | (2,457 | ) | |||||||
Notes, net: | ||||||||||||
Proceeds | — | 996,190 | 595,422 | |||||||||
Lump sum payoffs | (975,991 | ) | (575,641 | ) | — | |||||||
Lines of credit: | ||||||||||||
Proceeds | 5,876,000 | 1,455,000 | 5,513,125 | |||||||||
Repayments | (5,876,000 | ) | (1,455,000 | ) | (5,513,125 | ) | ||||||
(Payments on) settlement of derivative instruments | — | (147,306 | ) | (10,040 | ) | |||||||
Proceeds from sale of Common Shares | 1,417,040 | 173,484 | 329,452 | |||||||||
Proceeds from Employee Share Purchase Plan (ESPP) | 5,399 | 5,262 | 5,112 | |||||||||
Proceeds from exercise of options | 49,039 | 95,322 | 71,596 | |||||||||
Common Shares repurchased and retired | — | — | (1,887 | ) | ||||||||
Redemption of Preferred Shares | (150,000 | ) | — | (877 | ) | |||||||
Premium on redemption of Preferred Shares | (23 | ) | — | — | ||||||||
Payment of offering costs | (39,359 | ) | (3,596 | ) | (4,657 | ) | ||||||
Other financing activities, net | (48 | ) | (48 | ) | (48 | ) | ||||||
Contributions – Noncontrolling Interests – Partially Owned Properties | 8,221 | 75,911 | 222 | |||||||||
Contributions – Noncontrolling Interests – Operating Partnership | 5 | — | — | |||||||||
Distributions: | ||||||||||||
Common Shares | (473,451 | ) | (432,023 | ) | (379,969 | ) | ||||||
Preferred Shares | (13,416 | ) | (12,829 | ) | (14,471 | ) | ||||||
Noncontrolling Interests – Operating Partnership | (21,915 | ) | (20,002 | ) | (18,867 | ) | ||||||
Noncontrolling Interests – Partially Owned Properties | (5,083 | ) | (1,115 | ) | (2,918 | ) | ||||||
Net cash (used for) provided by financing activities | (556,533 | ) | (650,993 | ) | 151,541 | |||||||
Net increase (decrease) in cash and cash equivalents | 228,669 | (47,487 | ) | 238,120 | ||||||||
Cash and cash equivalents, beginning of year | 383,921 | 431,408 | 193,288 | |||||||||
Cash and cash equivalents, end of year | $ | 612,590 | $ | 383,921 | $ | 431,408 |
See accompanying notes
F-8
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
SUPPLEMENTAL INFORMATION: | ||||||||||||
Cash paid for interest, net of amounts capitalized | $ | 464,937 | $ | 477,434 | $ | 475,374 | ||||||
Net cash paid (received) for income and other taxes | $ | 673 | $ | 645 | $ | (2,740 | ) | |||||
Real estate acquisitions/dispositions/other: | ||||||||||||
Mortgage loans assumed | $ | 137,644 | $ | 158,240 | $ | 359,082 | ||||||
Valuation of OP Units issued | $ | 66,606 | $ | — | $ | 8,245 | ||||||
Mortgage loans (assumed) by purchaser | $ | — | $ | — | $ | (39,999 | ) | |||||
Amortization of deferred financing costs: | ||||||||||||
Investment in real estate, net | $ | — | $ | — | $ | (2,768 | ) | |||||
Deferred financing costs, net | $ | 21,435 | $ | 17,846 | $ | 13,174 | ||||||
Amortization of discounts and premiums on debt: | ||||||||||||
Mortgage notes payable | $ | (10,333 | ) | $ | (8,260 | ) | $ | (9,208 | ) | |||
Notes, net | $ | 2,152 | $ | 6,782 | $ | 8,737 | ||||||
Amortization of deferred settlements on derivative instruments: | ||||||||||||
Other liabilities | $ | (534 | ) | $ | (535 | ) | $ | (534 | ) | |||
Accumulated other comprehensive income | $ | 14,678 | $ | 4,343 | $ | 3,338 | ||||||
Unrealized (gain) loss on derivative instruments: | ||||||||||||
Other assets | $ | 7,448 | $ | 6,826 | $ | 13,019 | ||||||
Mortgage notes payable | $ | (2,589 | ) | $ | (612 | ) | $ | (163 | ) | |||
Notes, net | $ | (4,860 | ) | $ | (2,937 | ) | $ | 7,497 | ||||
Other liabilities | $ | 11,772 | $ | 140,507 | $ | 45,542 | ||||||
Accumulated other comprehensive income | $ | (11,772 | ) | $ | (143,598 | ) | $ | (65,894 | ) | |||
Interest capitalized for real estate and unconsolidated entities under development: | ||||||||||||
Investment in real estate, net | $ | (21,661 | ) | $ | (8,785 | ) | $ | (13,008 | ) | |||
Investments in unconsolidated entities | $ | (848 | ) | $ | (323 | ) | $ | — | ||||
Consolidation of previously unconsolidated properties: | ||||||||||||
Investment in real estate, net | $ | — | $ | — | $ | (105,065 | ) | |||||
Investments in unconsolidated entities | $ | — | $ | — | $ | 7,376 | ||||||
Deposits – restricted | $ | — | $ | — | $ | (42,633 | ) | |||||
Mortgage notes payable | $ | — | $ | — | $ | 112,631 | ||||||
Net other assets recorded | $ | — | $ | — | $ | 837 | ||||||
Deconsolidation of previously consolidated properties: | ||||||||||||
Investment in real estate, net | $ | — | $ | 35,495 | $ | 14,875 | ||||||
Investments in unconsolidated entities | $ | — | $ | (7,135 | ) | $ | (3,167 | ) | ||||
(Payments on) settlement of derivative instruments: | ||||||||||||
Other liabilities | $ | — | $ | (147,306 | ) | $ | (10,040 | ) | ||||
Other: | ||||||||||||
Receivable on sale of Common Shares | $ | 28,457 | $ | — | $ | 37,550 | ||||||
Transfer from notes, net to mortgage notes payable | $ | — | $ | — | $ | 35,600 |
See accompanying notes
F-9
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
SHAREHOLDERS’ EQUITY | 2012 | 2011 | 2010 | |||||||||
PREFERRED SHARES | ||||||||||||
Balance, beginning of year | $ | 200,000 | $ | 200,000 | $ | 208,773 | ||||||
Redemption of 6.48% Series N Cumulative Redeemable | (150,000 | ) | — | — | ||||||||
Redemption of 7.00% Series E Cumulative Convertible | — | — | (834 | ) | ||||||||
Conversion of 7.00% Series E Cumulative Convertible | — | — | (7,378 | ) | ||||||||
Conversion of 7.00% Series H Cumulative Convertible | — | — | (561 | ) | ||||||||
Balance, end of year | $ | 50,000 | $ | 200,000 | $ | 200,000 | ||||||
COMMON SHARES, $0.01 PAR VALUE | ||||||||||||
Balance, beginning of year | $ | 2,975 | $ | 2,902 | $ | 2,800 | ||||||
Conversion of Preferred Shares into Common Shares | — | — | 3 | |||||||||
Conversion of OP Units into Common Shares | 7 | 3 | 9 | |||||||||
Issuance of Common Shares | 250 | 39 | 61 | |||||||||
Exercise of share options | 16 | 29 | 25 | |||||||||
Employee Share Purchase Plan (ESPP) | 1 | 1 | 2 | |||||||||
Conversion of restricted shares to LTIP Units | — | (1 | ) | — | ||||||||
Share-based employee compensation expense: | ||||||||||||
Restricted shares | 2 | 2 | 2 | |||||||||
Balance, end of year | $ | 3,251 | $ | 2,975 | $ | 2,902 | ||||||
PAID IN CAPITAL | ||||||||||||
Balance, beginning of year | $ | 5,047,186 | $ | 4,741,521 | $ | 4,477,426 | ||||||
Common Share Issuance: | ||||||||||||
Conversion of Preferred Shares into Common Shares | — | — | 7,936 | |||||||||
Conversion of OP Units into Common Shares | 18,922 | 8,577 | 19,713 | |||||||||
Issuance of Common Shares | 1,388,333 | 201,903 | 291,841 | |||||||||
Exercise of share options | 49,023 | 95,293 | 71,571 | |||||||||
Employee Share Purchase Plan (ESPP) | 5,398 | 5,261 | 5,110 | |||||||||
Conversion of restricted shares to LTIP Units | — | (3,933 | ) | — | ||||||||
Share-based employee compensation expense: | ||||||||||||
Restricted shares | 8,934 | 9,100 | 9,779 | |||||||||
Share options | 11,752 | 9,545 | 7,421 | |||||||||
ESPP discount | 965 | 1,194 | 1,290 | |||||||||
Common Shares repurchased and retired | — | — | (1,887 | ) | ||||||||
Offering costs | (39,359 | ) | (3,596 | ) | (4,657 | ) | ||||||
Premium on redemption of Preferred Shares – original issuance costs | 5,129 | — | — | |||||||||
Supplemental Executive Retirement Plan (SERP) | 282 | 10,765 | 8,559 | |||||||||
Acquisition of Noncontrolling Interests – Partially Owned Properties | 1,293 | (4,784 | ) | (16,888 | ) | |||||||
Change in market value of Redeemable Noncontrolling Interests – Operating Partnership | 38,734 | (22,714 | ) | (129,918 | ) | |||||||
Adjustment for Noncontrolling Interests ownership in Operating Partnership | 5,763 | (946 | ) | (5,775 | ) | |||||||
Balance, end of year | $ | 6,542,355 | $ | 5,047,186 | $ | 4,741,521 |
See accompanying notes
F-10
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
SHAREHOLDERS’ EQUITY (continued) | 2012 | 2011 | 2010 | |||||||||
RETAINED EARNINGS | ||||||||||||
Balance, beginning of year | $ | 615,572 | $ | 203,581 | $ | 353,659 | ||||||
Net income attributable to controlling interests | 841,719 | 893,585 | 283,610 | |||||||||
Common Share distributions | (554,429 | ) | (467,729 | ) | (419,320 | ) | ||||||
Preferred Share distributions | (10,355 | ) | (13,865 | ) | (14,368 | ) | ||||||
Premium on redemption of Preferred Shares – cash charge | (23 | ) | — | — | ||||||||
Premium on redemption of Preferred Shares – original issuance costs | (5,129 | ) | — | — | ||||||||
Balance, end of year | $ | 887,355 | $ | 615,572 | $ | 203,581 | ||||||
ACCUMULATED OTHER COMPREHENSIVE (LOSS) | ||||||||||||
Balance, beginning of year | $ | (196,718 | ) | $ | (57,818 | ) | $ | 4,681 | ||||
Accumulated other comprehensive income (loss) – derivative instruments: | ||||||||||||
Unrealized holding (losses) arising during the year | (11,772 | ) | (143,598 | ) | (65,894 | ) | ||||||
Losses reclassified into earnings from other comprehensive income | 14,678 | 4,343 | 3,338 | |||||||||
Accumulated other comprehensive income – other instruments: | ||||||||||||
Unrealized holding gains arising during the year | 664 | 355 | 57 | |||||||||
Balance, end of year | $ | (193,148 | ) | $ | (196,718 | ) | $ | (57,818 | ) | |||
NONCONTROLLING INTERESTS | ||||||||||||
OPERATING PARTNERSHIP | ||||||||||||
Balance, beginning of year | $ | 119,536 | $ | 110,399 | $ | 116,120 | ||||||
Issuance of OP Units to Noncontrolling Interests | 66,606 | — | 8,245 | |||||||||
Issuance of LTIP Units to Noncontrolling Interests | 5 | — | — | |||||||||
Conversion of OP Units held by Noncontrolling Interests into OP Units held by General Partner | (18,929 | ) | (8,580 | ) | (19,722 | ) | ||||||
Conversion of restricted shares to LTIP Units | — | 3,934 | — | |||||||||
Equity compensation associated with Noncontrolling Interests | 5,307 | 3,641 | 2,524 | |||||||||
Net income attributable to Noncontrolling Interests | 38,641 | 40,780 | 13,099 | |||||||||
Distributions to Noncontrolling Interests | (25,095 | ) | (21,434 | ) | (20,300 | ) | ||||||
Change in carrying value of Redeemable Noncontrolling Interests – Operating Partnership | (20,702 | ) | (10,150 | ) | 4,658 | |||||||
Adjustment for Noncontrolling Interests ownership in Operating Partnership | (5,763 | ) | 946 | 5,775 | ||||||||
Balance, end of year | $ | 159,606 | $ | 119,536 | $ | 110,399 | ||||||
PARTIALLY OWNED PROPERTIES | ||||||||||||
Balance, beginning of year | $ | 74,306 | $ | 7,991 | $ | 11,054 | ||||||
Net income (loss) attributable to Noncontrolling Interests | 844 | 832 | (726 | ) | ||||||||
Contributions by Noncontrolling Interests | 8,221 | 75,911 | 222 | |||||||||
Distributions to Noncontrolling Interests | (5,131 | ) | (1,163 | ) | (2,952 | ) | ||||||
Acquisition of Noncontrolling Interests – Partially Owned Properties | (1,306 | ) | (8,025 | ) | 175 | |||||||
Other | 754 | (1,240 | ) | 218 | ||||||||
Balance, end of year | $ | 77,688 | $ | 74,306 | $ | 7,991 |
See accompanying notes
F-11
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
December 31, 2012 | December 31, 2011 | |||||||
ASSETS | ||||||||
Investment in real estate | ||||||||
Land | $ | 4,554,912 | $ | 4,367,816 | ||||
Depreciable property | 15,711,944 | 15,554,740 | ||||||
Projects under development | 387,750 | 160,190 | ||||||
Land held for development | 353,823 | 325,200 | ||||||
Investment in real estate | 21,008,429 | 20,407,946 | ||||||
Accumulated depreciation | (4,912,221 | ) | (4,539,583 | ) | ||||
Investment in real estate, net | 16,096,208 | 15,868,363 | ||||||
Cash and cash equivalents | 612,590 | 383,921 | ||||||
Investments in unconsolidated entities | 17,877 | 12,327 | ||||||
Deposits – restricted | 250,442 | 152,237 | ||||||
Escrow deposits – mortgage | 9,129 | 10,692 | ||||||
Deferred financing costs, net | 44,382 | 44,608 | ||||||
Other assets | 170,372 | 187,155 | ||||||
Total assets | $ | 17,201,000 | $ | 16,659,303 | ||||
LIABILITIES AND CAPITAL | ||||||||
Liabilities: | ||||||||
Mortgage notes payable | $ | 3,898,369 | $ | 4,111,487 | ||||
Notes, net | 4,630,875 | 5,609,574 | ||||||
Lines of credit | — | — | ||||||
Accounts payable and accrued expenses | 38,372 | 35,206 | ||||||
Accrued interest payable | 76,223 | 88,121 | ||||||
Other liabilities | 304,518 | 291,289 | ||||||
Security deposits | 66,988 | 65,286 | ||||||
Distributions payable | 260,176 | 179,079 | ||||||
Total liabilities | 9,275,521 | 10,380,042 | ||||||
Commitments and contingencies | ||||||||
Redeemable Limited Partners | 398,372 | 416,404 | ||||||
Capital: | ||||||||
Partners' Capital: | ||||||||
Preference Units | 50,000 | 200,000 | ||||||
General Partner | 7,432,961 | 5,665,733 | ||||||
Limited Partners | 159,606 | 119,536 | ||||||
Accumulated other comprehensive (loss) | (193,148 | ) | (196,718 | ) | ||||
Total partners' capital | 7,449,419 | 5,788,551 | ||||||
Noncontrolling Interests – Partially Owned Properties | 77,688 | 74,306 | ||||||
Total capital | 7,527,107 | 5,862,857 | ||||||
Total liabilities and capital | $ | 17,201,000 | $ | 16,659,303 |
See accompanying notes
F-12
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per Unit data)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
REVENUES | ||||||||||||
Rental income | $ | 1,870,309 | $ | 1,644,642 | $ | 1,446,781 | ||||||
Fee and asset management | 9,573 | 9,026 | 9,476 | |||||||||
Total revenues | 1,879,882 | 1,653,668 | 1,456,257 | |||||||||
EXPENSES | ||||||||||||
Property and maintenance | 365,778 | 337,419 | 323,743 | |||||||||
Real estate taxes and insurance | 219,975 | 190,834 | 172,531 | |||||||||
Property management | 81,902 | 81,867 | 79,857 | |||||||||
Fee and asset management | 4,663 | 4,279 | 4,998 | |||||||||
Depreciation | 593,884 | 539,351 | 505,516 | |||||||||
General and administrative | 47,238 | 43,604 | 39,881 | |||||||||
Impairment | — | — | 45,380 | |||||||||
Total expenses | 1,313,440 | 1,197,354 | 1,171,906 | |||||||||
Operating income | 566,442 | 456,314 | 284,351 | |||||||||
Interest and other income | 150,546 | 7,965 | 4,476 | |||||||||
Other expenses | (27,320 | ) | (14,209 | ) | (11,597 | ) | ||||||
Interest: | ||||||||||||
Expense incurred, net | (456,763 | ) | (461,754 | ) | (457,613 | ) | ||||||
Amortization of deferred financing costs | (21,320 | ) | (16,651 | ) | (9,453 | ) | ||||||
Income (loss) before income and other taxes, (loss) from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and land parcels and discontinued operations | 211,585 | (28,335 | ) | (189,836 | ) | |||||||
Income and other tax (expense) benefit | (516 | ) | (708 | ) | (270 | ) | ||||||
(Loss) from investments in unconsolidated entities | (14 | ) | — | (735 | ) | |||||||
Net gain on sales of unconsolidated entities | — | — | 28,101 | |||||||||
Net gain (loss) on sales of land parcels | — | 4,217 | (1,395 | ) | ||||||||
Income (loss) from continuing operations | 211,055 | (24,826 | ) | (164,135 | ) | |||||||
Discontinued operations, net | 670,149 | 960,023 | 460,118 | |||||||||
Net income | 881,204 | 935,197 | 295,983 | |||||||||
Net (income) loss attributable to Noncontrolling Interests – | ||||||||||||
Partially Owned Properties | (844 | ) | (832 | ) | 726 | |||||||
Net income attributable to controlling interests | $ | 880,360 | $ | 934,365 | $ | 296,709 | ||||||
ALLOCATION OF NET INCOME: | ||||||||||||
Preference Units | $ | 10,355 | $ | 13,865 | $ | 14,368 | ||||||
Premium on redemption of Preference Units | $ | 5,152 | $ | — | $ | — | ||||||
General Partner | $ | 826,212 | $ | 879,720 | $ | 269,242 | ||||||
Limited Partners | 38,641 | 40,780 | 13,099 | |||||||||
Net income available to Units | $ | 864,853 | $ | 920,500 | $ | 282,341 | ||||||
Earnings per Unit – basic: | ||||||||||||
Income (loss) from continuing operations available to Units | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | ||||
Net income available to Units | $ | 2.73 | $ | 2.98 | $ | 0.95 | ||||||
Weighted average Units outstanding | 316,554 | 308,062 | 296,527 | |||||||||
Earnings per Unit – diluted: | ||||||||||||
Income (loss) from continuing operations available to Units | $ | 0.61 | $ | (0.13 | ) | $ | (0.60 | ) | ||||
Net income available to Units | $ | 2.70 | $ | 2.98 | $ | 0.95 | ||||||
Weighted average Units outstanding | 319,766 | 308,062 | 296,527 |
See accompanying notes
F-13
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Amounts in thousands except per Unit data)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Comprehensive income: | ||||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | ||||||
Other comprehensive income (loss): | ||||||||||||
Other comprehensive income (loss) – derivative instruments: | ||||||||||||
Unrealized holding (losses) arising during the year | (11,772 | ) | (143,598 | ) | (65,894 | ) | ||||||
Losses reclassified into earnings from other comprehensive income | 14,678 | 4,343 | 3,338 | |||||||||
Other comprehensive income – other instruments: | ||||||||||||
Unrealized holding gains arising during the year | 664 | 355 | 57 | |||||||||
Other comprehensive income (loss) | 3,570 | (138,900 | ) | (62,499 | ) | |||||||
Comprehensive income | 884,774 | 796,297 | 233,484 | |||||||||
Comprehensive (income) loss attributable to Noncontrolling Interests – Partially Owned Properties | (844 | ) | (832 | ) | 726 | |||||||
Comprehensive income attributable to controlling interests | $ | 883,930 | $ | 795,465 | $ | 234,210 |
See accompanying notes
F-14
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 881,204 | $ | 935,197 | $ | 295,983 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation | 684,992 | 663,616 | 673,403 | |||||||||
Amortization of deferred financing costs | 21,435 | 17,846 | 10,406 | |||||||||
Amortization of discounts and premiums on debt | (8,181 | ) | (1,478 | ) | (471 | ) | ||||||
Amortization of deferred settlements on derivative instruments | 14,144 | 3,808 | 2,804 | |||||||||
Impairment | — | — | 45,380 | |||||||||
Write-off of pursuit costs | 9,056 | 5,075 | 5,272 | |||||||||
Income from technology investments | — | (4,537 | ) | — | ||||||||
Loss from investments in unconsolidated entities | 14 | — | 735 | |||||||||
Distributions from unconsolidated entities – return on capital | 575 | 319 | 61 | |||||||||
Net (gain) on sales of unconsolidated entities | — | — | (28,101 | ) | ||||||||
Net (gain) loss on sales of land parcels | — | (4,217 | ) | 1,395 | ||||||||
Net (gain) on sales of discontinued operations | (548,278 | ) | (826,489 | ) | (297,956 | ) | ||||||
Loss on debt extinguishments | 272 | — | 2,457 | |||||||||
Unrealized (gain) loss on derivative instruments | (1 | ) | 186 | 1 | ||||||||
Compensation paid with Company Common Shares | 24,832 | 21,177 | 18,875 | |||||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in deposits – restricted | (4,091 | ) | 4,523 | 3,316 | ||||||||
(Increase) in other assets | (20,411 | ) | (2,743 | ) | (9,048 | ) | ||||||
(Decrease) increase in accounts payable and accrued expenses | (2,102 | ) | 332 | (5,454 | ) | |||||||
(Decrease) in accrued interest payable | (11,898 | ) | (10,510 | ) | (4,000 | ) | ||||||
Increase (decrease) in other liabilities | 2,987 | (8,245 | ) | 9,972 | ||||||||
Increase in security deposits | 1,702 | 4,474 | 1,007 | |||||||||
Net cash provided by operating activities | 1,046,251 | 798,334 | 726,037 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Investment in real estate – acquisitions | (843,976 | ) | (1,441,599 | ) | (1,189,210 | ) | ||||||
Investment in real estate – development/other | (180,409 | ) | (120,741 | ) | (131,301 | ) | ||||||
Improvements to real estate | (152,828 | ) | (144,452 | ) | (138,208 | ) | ||||||
Additions to non-real estate property | (8,821 | ) | (7,110 | ) | (2,991 | ) | ||||||
Interest capitalized for real estate and unconsolidated entities under development | (22,509 | ) | (9,108 | ) | (13,008 | ) | ||||||
Proceeds from disposition of real estate, net | 1,049,219 | 1,500,583 | 672,700 | |||||||||
Investments in unconsolidated entities | (5,291 | ) | (2,021 | ) | — | |||||||
Distributions from unconsolidated entities – return of capital | — | — | 26,924 | |||||||||
Proceeds from sale of investment securities | — | — | 25,000 | |||||||||
Proceeds from technology investments | — | 4,537 | — | |||||||||
(Increase) decrease in deposits on real estate acquisitions and investments, net | (97,984 | ) | 7,631 | 137,106 | ||||||||
Decrease in mortgage deposits | 1,563 | 1,901 | 4,699 | |||||||||
Consolidation of previously unconsolidated properties | — | — | (26,854 | ) | ||||||||
Deconsolidation of previously consolidated properties | — | 28,360 | 11,708 | |||||||||
Acquisition of Noncontrolling Interests – Partially Owned Properties | (13 | ) | (12,809 | ) | (16,023 | ) | ||||||
Net cash (used for) investing activities | (261,049 | ) | (194,828 | ) | (639,458 | ) |
See accompanying notes
F-15
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Loan and bond acquisition costs | $ | (21,209 | ) | $ | (20,421 | ) | $ | (8,811 | ) | |||
Mortgage notes payable: | ||||||||||||
Proceeds | 26,495 | 190,905 | 173,561 | |||||||||
Restricted cash | 2,370 | 16,596 | 73,232 | |||||||||
Lump sum payoffs | (350,247 | ) | (974,956 | ) | (635,285 | ) | ||||||
Scheduled principal repayments | (14,088 | ) | (16,726 | ) | (16,769 | ) | ||||||
(Loss) on debt extinguishments | (272 | ) | — | (2,457 | ) | |||||||
Notes, net: | ||||||||||||
Proceeds | — | 996,190 | 595,422 | |||||||||
Lump sum payoffs | (975,991 | ) | (575,641 | ) | — | |||||||
Lines of credit: | ||||||||||||
Proceeds | 5,876,000 | 1,455,000 | 5,513,125 | |||||||||
Repayments | (5,876,000 | ) | (1,455,000 | ) | (5,513,125 | ) | ||||||
(Payments on) settlement of derivative instruments | — | (147,306 | ) | (10,040 | ) | |||||||
Proceeds from sale of OP Units | 1,417,040 | 173,484 | 329,452 | |||||||||
Proceeds from EQR's Employee Share Purchase Plan (ESPP) | 5,399 | 5,262 | 5,112 | |||||||||
Proceeds from exercise of EQR options | 49,039 | 95,322 | 71,596 | |||||||||
OP Units repurchased and retired | — | — | (1,887 | ) | ||||||||
Redemption of Preference Units | (150,000 | ) | — | (877 | ) | |||||||
Premium on redemption of Preference Units | (23 | ) | — | — | ||||||||
Payment of offering costs | (39,359 | ) | (3,596 | ) | (4,657 | ) | ||||||
Other financing activities, net | (48 | ) | (48 | ) | (48 | ) | ||||||
Contributions – Noncontrolling Interests – Partially Owned Properties | 8,221 | 75,911 | 222 | |||||||||
Contributions – Limited Partners | 5 | — | — | |||||||||
Distributions: | ||||||||||||
OP Units – General Partner | (473,451 | ) | (432,023 | ) | (379,969 | ) | ||||||
Preference Units | (13,416 | ) | (12,829 | ) | (14,471 | ) | ||||||
OP Units – Limited Partners | (21,915 | ) | (20,002 | ) | (18,867 | ) | ||||||
Noncontrolling Interests – Partially Owned Properties | (5,083 | ) | (1,115 | ) | (2,918 | ) | ||||||
Net cash (used for) provided by financing activities | (556,533 | ) | (650,993 | ) | 151,541 | |||||||
Net increase (decrease) in cash and cash equivalents | 228,669 | (47,487 | ) | 238,120 | ||||||||
Cash and cash equivalents, beginning of year | 383,921 | 431,408 | 193,288 | |||||||||
Cash and cash equivalents, end of year | $ | 612,590 | $ | 383,921 | $ | 431,408 |
See accompanying notes
F-16
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
SUPPLEMENTAL INFORMATION: | ||||||||||||
Cash paid for interest, net of amounts capitalized | $ | 464,937 | $ | 477,434 | $ | 475,374 | ||||||
Net cash paid (received) for income and other taxes | $ | 673 | $ | 645 | $ | (2,740 | ) | |||||
Real estate acquisitions/dispositions/other: | ||||||||||||
Mortgage loans assumed | $ | 137,644 | $ | 158,240 | $ | 359,082 | ||||||
Valuation of OP Units issued | $ | 66,606 | $ | — | $ | 8,245 | ||||||
Mortgage loans (assumed) by purchaser | $ | — | $ | — | $ | (39,999 | ) | |||||
Amortization of deferred financing costs: | ||||||||||||
Investment in real estate, net | $ | — | $ | — | $ | (2,768 | ) | |||||
Deferred financing costs, net | $ | 21,435 | $ | 17,846 | $ | 13,174 | ||||||
Amortization of discounts and premiums on debt: | ||||||||||||
Mortgage notes payable | $ | (10,333 | ) | $ | (8,260 | ) | $ | (9,208 | ) | |||
Notes, net | $ | 2,152 | $ | 6,782 | $ | 8,737 | ||||||
Amortization of deferred settlements on derivative instruments: | ||||||||||||
Other liabilities | $ | (534 | ) | $ | (535 | ) | $ | (534 | ) | |||
Accumulated other comprehensive income | $ | 14,678 | $ | 4,343 | $ | 3,338 | ||||||
Unrealized (gain) loss on derivative instruments: | ||||||||||||
Other assets | $ | 7,448 | $ | 6,826 | $ | 13,019 | ||||||
Mortgage notes payable | $ | (2,589 | ) | $ | (612 | ) | $ | (163 | ) | |||
Notes, net | $ | (4,860 | ) | $ | (2,937 | ) | $ | 7,497 | ||||
Other liabilities | $ | 11,772 | $ | 140,507 | $ | 45,542 | ||||||
Accumulated other comprehensive income | $ | (11,772 | ) | $ | (143,598 | ) | $ | (65,894 | ) | |||
Interest capitalized for real estate and unconsolidated entities under development: | ||||||||||||
Investment in real estate, net | $ | (21,661 | ) | $ | (8,785 | ) | $ | (13,008 | ) | |||
Investments in unconsolidated entities | $ | (848 | ) | $ | (323 | ) | $ | — | ||||
Consolidation of previously unconsolidated properties: | ||||||||||||
Investment in real estate, net | $ | — | $ | — | $ | (105,065 | ) | |||||
Investments in unconsolidated entities | $ | — | $ | — | $ | 7,376 | ||||||
Deposits – restricted | $ | — | $ | — | $ | (42,633 | ) | |||||
Mortgage notes payable | $ | — | $ | — | $ | 112,631 | ||||||
Net other assets recorded | $ | — | $ | — | $ | 837 | ||||||
Deconsolidation of previously consolidated properties: | ||||||||||||
Investment in real estate, net | $ | — | $ | 35,495 | $ | 14,875 | ||||||
Investments in unconsolidated entities | $ | — | $ | (7,135 | ) | $ | (3,167 | ) | ||||
(Payments on) settlement of derivative instruments: | ||||||||||||
Other liabilities | $ | — | $ | (147,306 | ) | $ | (10,040 | ) | ||||
Other: | ||||||||||||
Receivable on sale of OP Units | $ | 28,457 | $ | — | $ | 37,550 | ||||||
Transfer from notes, net to mortgage notes payable | $ | — | $ | — | $ | 35,600 |
See accompanying notes
F-17
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
PARTNERS' CAPITAL | 2012 | 2011 | 2010 | |||||||||
PREFERENCE UNITS | ||||||||||||
Balance, beginning of year | $ | 200,000 | $ | 200,000 | $ | 208,773 | ||||||
Redemption of 6.48% Series N Cumulative Redeemable | (150,000 | ) | — | — | ||||||||
Redemption of 7.00% Series E Cumulative Convertible | — | — | (834 | ) | ||||||||
Conversion of 7.00% Series E Cumulative Convertible | — | — | (7,378 | ) | ||||||||
Conversion of 7.00% Series H Cumulative Convertible | — | — | (561 | ) | ||||||||
Balance, end of year | $ | 50,000 | $ | 200,000 | $ | 200,000 | ||||||
GENERAL PARTNER | ||||||||||||
Balance, beginning of year | $ | 5,665,733 | $ | 4,948,004 | $ | 4,833,885 | ||||||
OP Unit Issuance: | ||||||||||||
Conversion of Preference Units into OP Units held by General Partner | — | — | 7,939 | |||||||||
Conversion of OP Units held by Limited Partners into OP Units held by | ||||||||||||
General Partner | 18,929 | 8,580 | 19,722 | |||||||||
Issuance of OP Units | 1,388,583 | 201,942 | 291,902 | |||||||||
Exercise of EQR share options | 49,039 | 95,322 | 71,596 | |||||||||
EQR's Employee Share Purchase Plan (ESPP) | 5,399 | 5,262 | 5,112 | |||||||||
Conversion of EQR restricted shares to LTIP Units | — | (3,934 | ) | — | ||||||||
Share-based employee compensation expense: | ||||||||||||
EQR restricted shares | 8,936 | 9,102 | 9,781 | |||||||||
EQR share options | 11,752 | 9,545 | 7,421 | |||||||||
EQR ESPP discount | 965 | 1,194 | 1,290 | |||||||||
OP Units repurchased and retired | — | — | (1,887 | ) | ||||||||
Offering costs | (39,359 | ) | (3,596 | ) | (4,657 | ) | ||||||
Premium on redemption of Preference Units – original issuance costs | 5,129 | — | — | |||||||||
Net income available to Units – General Partner | 826,212 | 879,720 | 269,242 | |||||||||
OP Units – General Partner distributions | (554,429 | ) | (467,729 | ) | (419,320 | ) | ||||||
Supplemental Executive Retirement Plan (SERP) | 282 | 10,765 | 8,559 | |||||||||
Acquisition of Noncontrolling Interests – Partially Owned Properties | 1,293 | (4,784 | ) | (16,888 | ) | |||||||
Change in market value of Redeemable Limited Partners | 38,734 | (22,714 | ) | (129,918 | ) | |||||||
Adjustment for Limited Partners ownership in Operating Partnership | 5,763 | (946 | ) | (5,775 | ) | |||||||
Balance, end of year | $ | 7,432,961 | $ | 5,665,733 | $ | 4,948,004 | ||||||
LIMITED PARTNERS | ||||||||||||
Balance, beginning of year | $ | 119,536 | $ | 110,399 | $ | 116,120 | ||||||
Issuance of OP Units to Limited Partners | 66,606 | — | 8,245 | |||||||||
Issuance of LTIP Units to Limited Partners | 5 | — | — | |||||||||
Conversion of OP Units held by Limited Partners into OP Units held by General Partner | (18,929 | ) | (8,580 | ) | (19,722 | ) | ||||||
Conversion of EQR restricted shares to LTIP Units | — | 3,934 | — | |||||||||
Equity compensation associated with Units – Limited Partners | 5,307 | 3,641 | 2,524 | |||||||||
Net income available to Units – Limited Partners | 38,641 | 40,780 | 13,099 | |||||||||
Units – Limited Partners distributions | (25,095 | ) | (21,434 | ) | (20,300 | ) | ||||||
Change in carrying value of Redeemable Limited Partners | (20,702 | ) | (10,150 | ) | 4,658 | |||||||
Adjustment for Limited Partners ownership in Operating Partnership | (5,763 | ) | 946 | 5,775 | ||||||||
Balance, end of year | $ | 159,606 | $ | 119,536 | $ | 110,399 |
See accompanying notes
F-18
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Continued)
(Amounts in thousands)
Year Ended December 31, | ||||||||||||
PARTNERS' CAPITAL (continued) | 2012 | 2011 | 2010 | |||||||||
ACCUMULATED OTHER COMPREHENSIVE (LOSS) | ||||||||||||
Balance, beginning of year | $ | (196,718 | ) | $ | (57,818 | ) | $ | 4,681 | ||||
Accumulated other comprehensive income (loss) – derivative instruments: | ||||||||||||
Unrealized holding (losses) arising during the year | (11,772 | ) | (143,598 | ) | (65,894 | ) | ||||||
Losses reclassified into earnings from other comprehensive income | 14,678 | 4,343 | 3,338 | |||||||||
Accumulated other comprehensive income – other instruments: | ||||||||||||
Unrealized holding gains arising during the year | 664 | 355 | 57 | |||||||||
Balance, end of year | $ | (193,148 | ) | $ | (196,718 | ) | $ | (57,818 | ) | |||
NONCONTROLLING INTERESTS | ||||||||||||
NONCONTROLLING INTERESTS – PARTIALLY OWNED PROPERTIES | ||||||||||||
Balance, beginning of year | $ | 74,306 | $ | 7,991 | $ | 11,054 | ||||||
Net income (loss) attributable to Noncontrolling Interests | 844 | 832 | (726 | ) | ||||||||
Contributions by Noncontrolling Interests | 8,221 | 75,911 | 222 | |||||||||
Distributions to Noncontrolling Interests | (5,131 | ) | (1,163 | ) | (2,952 | ) | ||||||
Acquisition of Noncontrolling Interests – Partially Owned Properties | (1,306 | ) | (8,025 | ) | 175 | |||||||
Other | 754 | (1,240 | ) | 218 | ||||||||
Balance, end of year | $ | 77,688 | $ | 74,306 | $ | 7,991 |
See accompanying notes
F-19
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Business |
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. ERP Operating Limited Partnership ("ERPOP"), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential. EQR has elected to be taxed as a REIT. 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 December 31, 2012 owned an approximate 95.9% 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 public equity from time to time 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 December 31, 2012, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 403 properties located in 13 states and the District of Columbia consisting of 115,370 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):
Properties | Apartment Units | |||||
Wholly Owned Properties | 382 | 106,856 | ||||
Partially Owned Properties – Consolidated | 19 | 3,475 | ||||
Military Housing | 2 | 5,039 | ||||
403 | 115,370 |
The “Wholly Owned Properties” are accounted for under the consolidation method of accounting. The Company beneficially owns 100% fee simple title to 378 of the 382 Wholly Owned Properties and all but one of its wholly owned development properties and land parcels. The Company owns the building and improvements and leases the land underlying the improvements under long-term ground leases that expire in 2026, 2077, 2101 and 2104 for the four operating properties, respectively, and 2110 for one land parcel. These properties are consolidated and reflected as real estate assets while the ground leases are accounted for as operating leases.
The “Partially Owned Properties – Consolidated” are controlled by the Company but have partners with noncontrolling interests and are accounted for under the consolidation method of accounting. The “Military Housing” properties consist of investments in limited liability companies that, as a result of the terms of the operating agreements, are accounted for as management contract rights with all fees recognized as fee and asset management revenue.
2. | Summary of Significant Accounting Policies |
Basis of Presentation
Due to the Company’s ability as general partner to control either through ownership or by contract the Operating Partnership and its subsidiaries, the Operating Partnership and each such subsidiary has been consolidated with the Company for financial reporting purposes, except for two unconsolidated developments and our military housing properties. The consolidated financial statements also include all variable interest entities for which the Company is the primary beneficiary.
Noncontrolling interests represented by EQR's indirect 1% interest in various entities are immaterial and have not been accounted for in the Consolidated Financial Statements of the Operating Partnership. In addition, certain amounts due from EQR for its 1% interest in various entities have not been reflected in the Consolidated Balance Sheets of the Operating Partnership since such amounts are immaterial.
F-20
Real Estate Assets and Depreciation of Investment in Real Estate
Effective for business combinations on or after January 1, 2009, an acquiring entity is required to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. In addition, an acquiring entity is required to expense acquisition-related costs as incurred (amounts are included in the other expenses line item in the consolidated statements of operations), value noncontrolling interests at fair value at the acquisition date and expense restructuring costs associated with an acquired business.
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The Company allocates the purchase price of acquired real estate to various components as follows:
▪ | Land - Based on actual purchase price adjusted to fair value (as necessary) if acquired separately or market research/comparables if acquired with an operating property. |
▪ | Furniture, Fixtures and Equipment - Ranges between $8,000 and $13,000 per apartment unit acquired as an estimate of the fair value of the appliances and fixtures inside an apartment unit. The per-apartment unit amount applied depends on the type of apartment building acquired. Depreciation is calculated on the straight-line method over an estimated useful life of five to ten years. |
▪ | Lease Intangibles - The Company considers the value of acquired in-place leases and above/below market leases and the amortization period is the average remaining term of each respective acquired lease. |
▪ | Other Intangible Assets - The Company considers whether it has acquired other intangible assets, including any customer relationship intangibles and the amortization period is the estimated useful life of the acquired intangible asset. |
▪ | Building - Based on the fair value determined on an “as-if vacant” basis. Depreciation is calculated on the straight-line method over an estimated useful life of thirty years. |
Replacements inside an apartment unit such as appliances and carpeting are depreciated over an estimated useful life of five to ten years. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life, generally five to fifteen years. Initial direct leasing costs are expensed as incurred as such expense approximates the deferral and amortization of initial direct leasing costs over the lease terms. Property sales or dispositions are recorded when title transfers to unrelated third parties, contingencies have been removed and sufficient cash consideration has been received by the Company. Upon disposition, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on sale is recognized in accordance with accounting principles generally accepted in the United States.
The Company classifies real estate assets as real estate held for disposition when it is certain a property will be disposed of (see further discussion below).
The Company classifies properties under development and/or expansion and properties in the lease-up phase (including land) as construction-in-progress until construction has been completed and all certificates of occupancy permits have been obtained.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets, including its investments in real estate, for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company’s ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted.
For long-lived assets to be held and used, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, the Company would record an impairment loss for the difference between the estimated fair value and the carrying amount of the asset.
F-21
For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset measured at the time that the Company has determined it will sell the asset. Long-lived assets held for disposition and the related liabilities are separately reported, with the long-lived assets reported at the lower of their carrying amounts or their estimated fair values, less their costs to sell, and are not depreciated after reclassification to real estate held for disposition.
Cost Capitalization
See the Real Estate Assets and Depreciation of Investment in Real Estate section for a discussion of the Company’s policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Company capitalizes an allocation of the payroll and associated costs of employees directly responsible for and who spend their time on the supervision of major capital and/or renovation projects. These costs are reflected on the balance sheet as an increase to depreciable property.
For all development projects, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Company capitalizes interest, real estate taxes and insurance and payroll and associated costs for those individuals directly responsible for and who spend their time on development activities, with capitalization ceasing no later than 90 days following issuance of the certificate of occupancy. These costs are reflected on the balance sheet as construction-in-progress for each specific property. The Company expenses as incurred all payroll costs of on-site employees working directly at our properties, except as noted above on our development properties prior to certificate of occupancy issuance and on specific major renovations at selected properties when additional incremental employees are hired.
During the years ended December 31, 2012, 2011 and 2010, the Company capitalized $14.3 million, $11.6 million and $10.7 million, respectively, of payroll and associated costs of employees directly responsible for and who spend their time on the supervision of development activities as well as major capital and/or renovation projects.
Cash and Cash Equivalents
The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash and cash equivalents at financial institutions. The combined account balances at one or more institutions typically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes that the risk is not significant, as the Company does not anticipate the financial institutions’ non-performance.
Investment Securities
Investment securities are included in other assets in the consolidated balance sheets. These securities are classified as held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. Otherwise, the securities are classified as available-for-sale and carried at estimated fair value with unrealized gains and losses included in accumulated other comprehensive (loss), a separate component of shareholders’ equity/partners' capital.
Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain the Company’s lines of credit and long-term financings. These costs are amortized over the terms of the related debt. Unamortized financing costs are written off when debt is retired before the maturity date. The accumulated amortization of such deferred financing costs was $32.2 million and $37.7 million at December 31, 2012 and 2011, respectively.
Fair Value of Financial Instruments, Including Derivative Instruments
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, including its derivative 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 seeks 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 its exposure to foreign exchange rates (should the Archstone transaction close) or manage commodity prices in the daily operations of the business.
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The Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.
The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. In addition, fair value adjustments will affect either shareholders’ equity/partners' capital or net income depending on whether the derivative instruments qualify as a hedge for accounting purposes and, if so, the nature of the hedging activity. When the terms of an underlying transaction are modified, or when the underlying transaction is terminated or completed, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market each period. The Company does not use derivatives for trading or speculative purposes.
Revenue Recognition
Rental income attributable to residential leases is recorded on a straight-line basis, which is not materially different than if it were recorded when due from residents and recognized monthly as it was earned. Leases entered into between a resident and a property for the rental of an apartment unit are generally year-to-year, renewable upon consent of both parties on an annual or monthly basis. Fee and asset management revenue and interest income are recorded on an accrual basis.
Share-Based Compensation
The Company expenses share-based compensation such as restricted shares and share options. Any common share of beneficial interest, $0.01 par value per share (the "Common Shares") issued pursuant to EQR's incentive equity compensation and employee share purchase plans will result in ERPOP issuing units of limited partnership interest ("OP Units") to EQR on a one-for-one basis, with ERPOP receiving the net cash proceeds of such issuances.
The fair value of the option grants are recognized over the requisite service/vesting period of the options. The fair value for the Company's share options was estimated at the time the share options were granted using the Black-Scholes option pricing model with the primary grant in each year having the following weighted average assumptions:
2012 | 2011 | 2010 | ||||
Expected volatility (1) | 27.4% | 27.1% | 32.4% | |||
Expected life (2) | 5 years | 5 years | 5 years | |||
Expected dividend yield (3) | 4.35% | 4.56% | 4.85% | |||
Risk-free interest rate (4) | 0.71% | 2.27% | 2.29% | |||
Option valuation per share | $8.54 | $8.36 | $6.18 |
(1) | Expected volatility – For 2012 and 2011, estimated based on the historical ten-year volatility of EQR's share price measured on a monthly basis. Prior to 2011, estimated based on the historical volatility of EQR's share price, on a monthly basis, for a period matching the expected life of each grant. This change in estimate reflects the Company's belief that the historical ten-year period provides a better estimate of the expected volatility in EQR shares over the expected life of the options. |
(2) | Expected life – Approximates the actual weighted average life of all share options granted since the Company went public in 1993. |
(3) | Expected dividend yield – Calculated by averaging the historical annual yield on EQR shares for a period matching the expected life of each grant, with the annual yield calculated by dividing actual dividends by the average price of EQR's shares in a given year. |
(4) | Risk-free interest rate – The most current U.S. Treasury rate available prior to the grant date for a period matching the expected life of each grant. |
The valuation method and assumptions are the same as those the Company used in accounting for option expense in its consolidated financial statements. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model is only one method of valuing options. Because the Company's share options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the actual value of the options to the recipient may be significantly different.
Income and Other Taxes
Due to the structure of EQR as a REIT and the nature of the operations of its operating properties, no provision for federal income taxes has been made at the EQR level. In addition, ERPOP generally is not liable for federal income taxes as the partners
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recognize their proportionate 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.
Deferred tax assets and liabilities applicable to the TRS are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates for which the temporary differences are expected to be recovered or settled. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in earnings in the period enacted. The Company’s deferred tax assets are generally the result of tax affected amortization of goodwill, differing depreciable lives on capitalized assets and the timing of expense recognition for certain accrued liabilities. As of December 31, 2012, the Company has recorded a deferred tax asset of approximately $36.1 million, which is fully offset by a valuation allowance due to the uncertainty in forecasting future TRS taxable income.
The Company provided for income, franchise and excise taxes allocated as follows in the consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010 (amounts in thousands):
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Income and other tax expense (benefit) (1) | $ | 516 | $ | 708 | $ | 270 | ||||||
Discontinued operations, net (2) | 32 | (223 | ) | 108 | ||||||||
Provision for income, franchise and excise taxes (3) | $ | 548 | $ | 485 | $ | 378 |
(1) | Primarily includes state and local income, excise and franchise taxes. |
(2) | Primarily represents federal income taxes (recovered) on the gains on sales of condominium units owned by a TRS and included in discontinued operations. Also represents state and local income, excise and franchise taxes on operating properties sold and included in discontinued operations. |
(3) | All provisions for income tax amounts are current and none are deferred. |
The Company’s TRSs have approximately $76.4 million of NOL carryforwards available as of January 1, 2013 that will expire between 2028 and 2031.
During the years ended December 31, 2012, 2011 and 2010, the Company’s tax treatment of dividends and distributions were as follows:
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Tax treatment of dividends and distributions: | ||||||||||||
Ordinary dividends | $ | 1.375 | $ | 0.667 | $ | 0.607 | ||||||
Long-term capital gain | 0.253 | 0.629 | 0.622 | |||||||||
Unrecaptured section 1250 gain | 0.152 | 0.284 | 0.241 | |||||||||
Dividends and distributions declared per | ||||||||||||
Common Share/Unit outstanding | $ | 1.780 | $ | 1.580 | $ | 1.470 |
The cost of land and depreciable property, net of accumulated depreciation, for federal income tax purposes as of December 31, 2012 and 2011 was approximately $11.2 billion and $11.4 billion, respectively.
Noncontrolling Interests
A noncontrolling interest in a subsidiary (minority interest) is in most cases an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and separate from the parent company's equity. In addition, consolidated net income is required to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and the amount of consolidated net income attributable to the parent and the noncontrolling interest are required to be disclosed on the face of the Consolidated Statements of Operations. See Note 3 for further discussion.
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Operating Partnership: Net income is allocated to noncontrolling interests based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and EQR. Issuance of additional Common Shares and OP Units changes the ownership interests of both the noncontrolling interests and EQR. Such transactions and the related proceeds are treated as capital transactions.
Partially Owned Properties: The Company reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Company that are not wholly owned by the Company. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statements of operations.
Partners' Capital
The "Limited Partners" of ERPOP include various individuals and entities that contributed their properties to ERPOP in exchange for OP Units. The "General Partner" of ERPOP is EQR. Net income is allocated to the Limited Partners based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the Limited Partners by the total OP Units held by the Limited Partners and the General Partner. Issuance of additional Common Shares and OP Units changes the ownership interests of both the Limited Partners and EQR. Such transactions and the related proceeds are treated as capital transactions.
Redeemable Noncontrolling Interests – Operating Partnership / Redeemable Limited Partners
The Company classifies Redeemable Noncontrolling Interests – Operating Partnership / Redeemable Limited Partners in the mezzanine section of the consolidated balance sheets for the portion of OP Units that EQR is required, either by contract or securities law, to deliver registered Common Shares to the exchanging OP Unit holder. The redeemable noncontrolling interest units / redeemable limited partner units 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.
Use of Estimates
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.
Reclassifications
Certain reclassifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications have not changed the results of operations or equity/capital.
Other
The Company is the controlling partner in various consolidated partnerships owning 19 properties and 3,475 apartment units and various completed and uncompleted development properties having a noncontrolling interest book value of $77.7 million at December 31, 2012. The Company is required to make certain disclosures regarding noncontrolling interests in consolidated limited-life subsidiaries. Of the consolidated entities described above, the Company is the controlling partner in limited-life partnerships owning six properties having a noncontrolling interest deficit balance of $7.4 million. These six partnership agreements contain provisions that require the partnerships to be liquidated through the sale of their assets upon reaching a date specified in each respective partnership agreement. The Company, as controlling partner, has an obligation to cause the property owning partnerships to distribute the proceeds of liquidation to the Noncontrolling Interests in these Partially Owned Properties only to the extent that the net proceeds received by the partnerships from the sale of their assets warrant a distribution based on the partnership agreements. As of December 31, 2012, the Company estimates the value of Noncontrolling Interest distributions for these six properties would have been approximately $34.2 million (“Settlement Value”) had the partnerships been liquidated. This Settlement Value is based on estimated third party consideration realized by the partnerships upon disposition of the six Partially Owned Properties and is net of all other assets and liabilities, including yield maintenance on the mortgages encumbering the properties, that would have been due on December 31, 2012 had those mortgages been prepaid. Due to, among other things, the inherent uncertainty in the sale of real estate assets, the amount of any potential distribution to the Noncontrolling Interests in the Company's Partially Owned Properties is subject to change. To the extent that the partnerships' underlying assets are worth less
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than the underlying liabilities, the Company has no obligation to remit any consideration to the Noncontrolling Interests in these Partially Owned Properties.
Effective January 1, 2010, in an effort to improve financial standards for transfers of financial assets, more stringent conditions for reporting a transfer of a portion of a financial asset as a sale (e.g. loan participations) are required, the concept of a “qualifying special-purpose entity” and special guidance for guaranteed mortgage securitizations are eliminated, other sale-accounting criteria is clarified and the initial measurement of a transferor’s interest in transferred financial assets is changed. This does not have a material effect on the Company’s consolidated results of operations or financial position.
Effective January 1, 2010, the analysis for identifying the primary beneficiary of a Variable Interest Entity (“VIE”) has been simplified by replacing the previous quantitative-based analysis with a framework that is based more on qualitative judgments. The analysis requires the primary beneficiary of a VIE to be identified as the party that both (a) has the power to direct the activities of a VIE that most significantly impact its economic performance and (b) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE. For the Company, these requirements affected only disclosures and had no impact on the Company’s consolidated results of operations or financial position. See Note 6 for further discussion.
Effective January 1, 2011, companies are required to separately disclose purchases, sales, issuances and settlements on a gross basis in the reconciliation of recurring Level 3 fair value measurements. This does not have a material effect on the Company’s consolidated results of operations or financial position. See Note 9 for further discussion.
Effective January 1, 2012, companies are required to separately disclose the amounts and reasons for any transfers of assets and liabilities into and out of Level 1 and Level 2 of the fair value hierarchy. For fair value measurements using significant unobservable inputs (Level 3), companies are required to disclose quantitative information about the significant unobservable inputs used for all Level 3 measurements and a description of the Company's valuation processes in determining fair value. In addition, companies are required to provide a qualitative discussion about the sensitivity of recurring Level 3 measurements to changes in the unobservable inputs disclosed, including the interrelationship between inputs. Companies are also required to disclose information about when the current use of a non-financial asset measured at fair value differs from its highest and best use and the hierarchy classification for items whose fair value is not recorded on the balance sheet but is disclosed in the notes. This does not have a material effect on the Company's consolidated results of operations or financial position. See Note 9 for further discussion.
Effective January 1, 2013, companies are required to report, in one place, information about reclassifications out of accumulated other comprehensive income ("AOCI"). Companies will also be required to report changes in AOCI balances. For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting is required about the effect of the reclassifications on the respective line items in the statement where net income is presented. For items that are not reclassified to net income in their entirety in the same reporting period, a cross reference to other disclosures currently required under US GAAP is required in the notes. The Company does not expect this will have a material effect on its consolidated results of operations or financial position.
Effective January 1, 2009, issuers of certain convertible debt instruments that may be settled in cash on conversion were required to separately account for the liability and equity components of the instrument in a manner that reflects each issuer's nonconvertible debt borrowing rate. As the Company was required to apply this retrospectively, the accounting for its $650.0 million 3.85% convertible unsecured notes that were issued in August 2006 with a final maturity in August 2026 was affected. On August 18, 2011, the Company redeemed these notes at par ($482.5 million was outstanding on August 18, 2011) and no premium was paid. The Company recognized $11.8 million and $18.6 million in interest expense related to the stated coupon rate of 3.85% for the years ended December 31, 2011, and 2010, respectively. The amount of the conversion option as of the date of issuance calculated by the Company using a 5.80% effective interest rate was $44.3 million and was amortized to interest expense over the expected life of the convertible notes (through the first put date on August 18, 2011). Total amortization of the cash discount and conversion option discount on the unsecured notes resulted in a reduction to earnings of approximately $5.0 million and $7.8 million, respectively, or $0.02 per share/Unit and $0.03 per share/Unit, respectively, for the years ended December 31, 2011 and 2010. In addition, the Company decreased the January 1, 2009 balance of retained earnings (included in general partner's capital in the Operating Partnership's financial statements) by $27.0 million, decreased the January 1, 2009 balance of notes by $17.3 million and increased the January 1, 2009 balance of paid in capital (included in general partner's capital in the Operating Partnership's financial statements) by $44.3 million. The carrying amount of the conversion option remaining in paid in capital (included in general partner's capital in the Operating Partnership's financial statements) was $44.3 million at December 31, 2011. The cash and conversion option discounts were fully amortized at December 31, 2011.
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3. | Equity, Capital and Other Interests |
Equity and Redeemable Noncontrolling Interests of Equity Residential
The following tables present the changes in the Company’s issued and outstanding Common Shares and “Units” (which includes OP Units and Long-Term Incentive Plan (“LTIP”) Units) for the years ended December 31, 2012, 2011 and 2010:
2012 | 2011 | 2010 | |||||||
Common Shares | |||||||||
Common Shares outstanding at January 1, | 297,508,185 | 290,197,242 | 279,959,048 | ||||||
Common Shares Issued: | |||||||||
Conversion of Series E Preferred Shares | — | — | 328,363 | ||||||
Conversion of Series H Preferred Shares | — | — | 32,516 | ||||||
Conversion of OP Units | 675,817 | 341,594 | 884,472 | ||||||
Issuance of Common Shares | 25,023,919 | 3,866,666 | 6,151,198 | ||||||
Exercise of share options | 1,608,427 | 2,945,948 | 2,506,645 | ||||||
Employee Share Purchase Plan (ESPP) | 110,054 | 113,107 | 157,363 | ||||||
Restricted share grants, net | 128,252 | 145,616 | 235,767 | ||||||
Common Shares Other: | |||||||||
Conversion of restricted shares to LTIP Units | — | (101,988 | ) | — | |||||
Repurchased and retired | — | — | (58,130 | ) | |||||
Common Shares outstanding at December 31, | 325,054,654 | 297,508,185 | 290,197,242 | ||||||
Units | |||||||||
Units outstanding at January 1, | 13,492,543 | 13,612,037 | 14,197,969 | ||||||
LTIP Units, net | 70,235 | 120,112 | 92,892 | ||||||
OP Units issued through acquisitions/consolidations | 1,081,797 | — | 205,648 | ||||||
Conversion of restricted shares to LTIP Units | — | 101,988 | — | ||||||
Conversion of OP Units to Common Shares | (675,817 | ) | (341,594 | ) | (884,472 | ) | |||
Units outstanding at December 31, | 13,968,758 | 13,492,543 | 13,612,037 | ||||||
Total Common Shares and Units outstanding at December 31, | 339,023,412 | 311,000,728 | 303,809,279 | ||||||
Units Ownership Interest in Operating Partnership | 4.1 | % | 4.3 | % | 4.5 | % | |||
Acquisitions/consolidations – per unit | $61.57 | — | $40.09 | ||||||
Acquisitions/consolidations – valuation | $66.6 million | — | $8.2 million |
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 LTIP Units, are collectively referred to as the “Noncontrolling Interests – Operating Partnership”. Subject to certain exceptions (including the “book-up” requirements of LTIP Units), the Noncontrolling Interests – Operating Partnership may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Noncontrolling Interests – Operating Partnership (including redeemable interests) is allocated based on the number of Noncontrolling Interests – Operating Partnership Units in total in proportion to the number of Noncontrolling Interests – Operating Partnership Units in total plus the number of Common Shares. Net income is allocated to the Noncontrolling Interests – Operating Partnership 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 Units requesting an exchange of their OP Units with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests – Operating Partnership Units for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests – Operating Partnership Units.
The Noncontrolling Interests – Operating Partnership Units 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 are differentiated and referred to as “Redeemable Noncontrolling Interests – Operating Partnership”. Instruments that require settlement in registered shares can not 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
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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 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 Units that are classified in permanent equity at December 31, 2012 and 2011.
The carrying value of the Redeemable Noncontrolling Interests – Operating Partnership is allocated based on the number of Redeemable Noncontrolling Interests – Operating Partnership Units in proportion to the number of Noncontrolling Interests – Operating Partnership Units in total. Such percentage of the total carrying value of Units which is ascribed to the Redeemable Noncontrolling Interests – Operating Partnership is then adjusted to the greater of carrying value or fair market value as described above. As of December 31, 2012, the Redeemable Noncontrolling Interests – Operating Partnership have a redemption value of approximately $398.4 million, which represents the value of Common Shares that would be issued in exchange with the Redeemable Noncontrolling Interests – Operating Partnership Units.
The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests – Operating Partnership for the years ended December 31, 2012, 2011 and 2010, respectively (amounts in thousands):
2012 | 2011 | 2010 | ||||||||||
Balance at January 1, | $ | 416,404 | $ | 383,540 | $ | 258,280 | ||||||
Change in market value | (38,734 | ) | 22,714 | 129,918 | ||||||||
Change in carrying value | 20,702 | 10,150 | (4,658 | ) | ||||||||
Balance at December 31, | $ | 398,372 | $ | 416,404 | $ | 383,540 |
Net proceeds from EQR Common Share and Preferred Share (see definition below) offerings 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 offering proceeds from Common Shares and Preferred Shares are allocated between shareholders’ equity and Noncontrolling Interests – Operating Partnership to account for the change in their respective percentage ownership of the underlying equity of ERPOP.
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 as of December 31, 2012 and 2011:
Amounts in thousands | ||||||||||||||
Redemption Date (1) | Annual Dividend per Share (2) | December 31, 2012 | December 31, 2011 | |||||||||||
Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares authorized | ||||||||||||||
8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at December 31, 2012 and December 31, 2011 | 12/10/26 | $4.145 | $ | 50,000 | $ | 50,000 | ||||||||
6.48% Series N Cumulative Redeemable Preferred; liquidation value $250 per share; 0 and 600,000 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively (3) (4) | 06/19/08 | $16.20 | — | 150,000 | ||||||||||
$ | 50,000 | $ | 200,000 |
(1) | On or after the redemption date, redeemable preferred shares (Series K and N) may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation price per share, plus accrued and unpaid distributions, if any. |
(2) | Dividends on all series of Preferred Shares are payable quarterly at various pay dates. The dividend listed for Series N is a Preferred Share rate and the equivalent Depositary Share annual dividend is $1.62 per share. |
(3) | The Series N Preferred Shares had a corresponding depositary share that consisted of ten times the number of shares and one-tenth the liquidation value and dividend per share. |
(4) | On August 20, 2012, the Company redeemed its Series N Cumulative Redeemable Preferred Shares for cash consideration of $150.0 million plus accrued dividends through the redemption date. As a result of this redemption, the Company recorded the write-off of approximately $5.1 million in original issuance costs as a premium on the redemption of Preferred Shares. |
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Capital and Redeemable Limited Partners of ERP Operating Limited Partnership
The following tables present the changes in the Operating Partnership's issued and outstanding Units and in the limited partners' Units for the years ended December 31, 2012, 2011 and 2010:
2012 | 2011 | 2010 | |||||||
General and Limited Partner Units | |||||||||
General and Limited Partner Units outstanding at January 1, | 311,000,728 | 303,809,279 | 294,157,017 | ||||||
Issued to General Partner: | |||||||||
Conversion of Series E Preference Units | — | — | 328,363 | ||||||
Conversion of Series H Preference Units | — | — | 32,516 | ||||||
Issuance of OP Units | 25,023,919 | 3,866,666 | 6,151,198 | ||||||
Exercise of EQR share options | 1,608,427 | 2,945,948 | 2,506,645 | ||||||
EQR's Employee Share Purchase Plan (ESPP) | 110,054 | 113,107 | 157,363 | ||||||
EQR's restricted share grants, net | 128,252 | 145,616 | 235,767 | ||||||
Issued to Limited Partners: | |||||||||
LTIP Units, net | 70,235 | 120,112 | 92,892 | ||||||
OP Units issued through acquisitions/consolidations | 1,081,797 | — | 205,648 | ||||||
OP Units Other: | |||||||||
Repurchased and retired | — | — | (58,130 | ) | |||||
General and Limited Partner Units outstanding at December 31, | 339,023,412 | 311,000,728 | 303,809,279 | ||||||
Limited Partner Units | |||||||||
Limited Partner Units outstanding at January 1, | 13,492,543 | 13,612,037 | 14,197,969 | ||||||
Limited Partner LTIP Units, net | 70,235 | 120,112 | 92,892 | ||||||
Limited Partner OP Units issued through acquisitions/consolidations | 1,081,797 | — | 205,648 | ||||||
Conversion of EQR restricted shares to LTIP Units | — | 101,988 | — | ||||||
Conversion of Limited Partner OP Units to EQR Common Shares | (675,817 | ) | (341,594 | ) | (884,472 | ) | |||
Limited Partner Units outstanding at December 31, | 13,968,758 | 13,492,543 | 13,612,037 | ||||||
Limited Partner Units Ownership Interest in Operating Partnership | 4.1 | % | 4.3 | % | 4.5 | % | |||
Limited Partner OP Units Issued: | |||||||||
Acquisitions/consolidations – per unit | $61.57 | — | $40.09 | ||||||
Acquisitions/consolidations – valuation | $66.6 million | — | $8.2 million |
The Limited Partners of the Operating Partnership as of December 31, 2012 include 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 LTIP Units. Subject to certain exceptions (including the “book-up” requirements of LTIP Units), Limited Partners may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Limited Partner Units (including redeemable interests) is allocated based on the number of Limited Partner Units in total in proportion to the number of Limited Partner Units in total plus the number of General Partner Units. Net income is allocated to the Limited Partner Units 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 Limited Partner Units requesting an exchange of their OP Units with EQR. Once the Operating Partnership elects not to redeem the Limited Partner Units for cash, EQR is obligated to deliver Common Shares to the exchanging limited partner.
The Limited Partner Units 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 Limited Partner Units are differentiated and referred to as “Redeemable Limited Partner Units”. Instruments that require settlement in registered shares can not 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 Limited Partner Units 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 Limited Partner Units that are classified in permanent equity at December 31, 2012 and 2011.
F-29
The carrying value of the Redeemable Limited Partner Units is allocated based on the number of Redeemable Limited Partner Units in proportion to the number of Limited Partner Units in total. Such percentage of the total carrying value of Limited Partner Units which is ascribed to the Redeemable Limited Partner Units is then adjusted to the greater of carrying value or fair market value as described above. As of December 31, 2012, the Redeemable Limited Partner Units have a redemption value of approximately $398.4 million, which represents the value of Common Shares that would be issued in exchange with the Redeemable Limited Partner Units.
The following table presents the changes in the redemption value of the Redeemable Limited Partners for the years ended December 31, 2012, 2011 and 2010, respectively (amounts in thousands):
2012 | 2011 | 2010 | ||||||||||
Balance at January 1, | $ | 416,404 | $ | 383,540 | $ | 258,280 | ||||||
Change in market value | (38,734 | ) | 22,714 | 129,918 | ||||||||
Change in carrying value | 20,702 | 10,150 | (4,658 | ) | ||||||||
Balance at December 31, | $ | 398,372 | $ | 416,404 | $ | 383,540 |
EQR contributes all net proceeds from its various equity offerings (including proceeds from exercise of options for Common Shares) 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).
The following table presents the Operating Partnership's issued and outstanding “Preference Units” as of December 31, 2012 and 2011:
Amounts in thousands | ||||||||||||||
Redemption Date (1) | Annual Dividend per Unit (2) | December 31, 2012 | December 31, 2011 | |||||||||||
Preference Units: | ||||||||||||||
8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at December 31, 2012 and December 31, 2011 | 12/10/26 | $4.145 | $ | 50,000 | $ | 50,000 | ||||||||
6.48% Series N Cumulative Redeemable Preference Units; liquidation value $250 per unit; 0 and 600,000 units issued and outstanding at December 31, 2012 and December 31, 2011, respectively (3) (4) | 06/19/08 | $16.20 | — | 150,000 | ||||||||||
$ | 50,000 | $ | 200,000 |
(1) | On or after the redemption date, redeemable preference units (Series K and N) may be redeemed for cash at the option of the Operating Partnership, in whole or in part, at a redemption price equal to the liquidation price per unit, plus accrued and unpaid distributions, if any, in conjunction with the concurrent redemption of the corresponding Company Preferred Shares. |
(2) | Dividends on all series of Preference Units are payable quarterly at various pay dates. The dividend listed for Series N is a Preference Unit rate and the equivalent depositary unit annual dividend is $1.62 per unit. |
(3) | The Series N Preference Units had a corresponding depositary unit that consisted of ten times the number of units and one-tenth the liquidation value and dividend per unit. |
(4) | On August 20, 2012, the Operating Partnership redeemed its Series N Cumulative Redeemable Preference Units for cash consideration of $150.0 million plus accrued dividends through the redemption date, in conjunction with the concurrent redemption of the corresponding Company Preferred Shares. As a result of this redemption, the Operating Partnership recorded the write-off of approximately $5.1 million in original issuance costs as a premium on the redemption of Preference Units. |
Other
An unlimited amount of equity and debt securities remains available for issuance by EQR and ERPOP under a universal shelf registration statement that automatically became effective upon filing with the SEC in October 2010 and expires on October 15, 2013. As of December 31, 2012, issuances under the ATM (see definition below) share offering program are limited to 6.0 million additional shares. 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).
F-30
On November 28, 2012, EQR priced the issuance of 21,850,000 Common Shares at a price of $54.75 per share for total consideration of approximately $1.2 billion, after deducting underwriting commissions of $35.9 million. Concurrent with this transaction, ERPOP issued 21,850,000 OP Units to EQR.
In September 2009, the Company announced the establishment of an At-The-Market (“ATM”) share offering program which would allow EQR to sell up to 17.0 million Common Shares from time to time over the next three years (later increased by 5.7 million Common Shares and extended to February 2014) into the existing trading market at current market prices as well as through negotiated transactions. Per the terms of ERPOP's partnership agreement, EQR contributes the net proceeds from 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). EQR has 6.0 million Common Shares remaining available for issuance under the ATM program as of December 31, 2012.
During the year ended December 31, 2012, EQR issued approximately 3.2 million Common Shares at an average price of $60.59 per share for total consideration of approximately $192.3 million through the ATM program. Concurrent with these transactions, ERPOP issued approximately 3.2 million OP Units to EQR. During the year ended December 31, 2011, EQR issued approximately 3.9 million Common Shares at an average price of $52.23 per share for total consideration of approximately $201.9 million through the ATM program. Concurrent with these transactions, ERPOP issued approximately 3.9 million OP Units to EQR. As of December 31, 2011, transactions to issue approximately 0.5 million of the 3.9 million Common Shares had not yet settled. As of December 31, 2011, the Company increased the number of Common Shares issued and outstanding by this amount and recorded a receivable of approximately $28.5 million included in other assets on the consolidated balance sheets. During the year ended December 31, 2010, EQR issued approximately 6.2 million Common Shares at an average price of $47.45 per share for total consideration of approximately $291.9 million through the ATM program. Concurrent with these transactions, ERPOP issued approximately 6.2 million OP Units to EQR.
On June 16, 2011, the shareholders of EQR approved the Company's 2011 Share Incentive Plan, as amended (the “2011 Plan”). The 2011 Plan reserved 12,980,741 Common Shares for issuance. In conjunction with the approval of the 2011 Plan, no further awards may be granted under the 2002 Share Incentive Plan. The 2011 Plan expires on June 16, 2021. See Note 12 for further discussion.
EQR has a share repurchase program authorized by the Board of Trustees under which it has authorization to repurchase up to $464.6 million of its shares as of December 31, 2012. No shares were repurchased during the years ended December 31, 2012 and 2011. During the year ended December 31, 2010, EQR repurchased 58,130 of its Common Shares at an average price of $32.46 per share for total consideration of $1.9 million. These shares were retired subsequent to the repurchases. Concurrent with these transactions, ERPOP repurchased and retired 58,130 OP Units previously issued to EQR. All of the shares repurchased during the year ended December 31, 2010 were repurchased from employees at the then current market prices to cover the minimum statutory tax withholding obligations related to the vesting of employees' restricted shares.
On April 18, 2012, the Operating Partnership issued 1,081,797 OP Units having a value of $66.6 million (based on the closing price for Common Shares of $61.57 on such date) as partial consideration for the acquisition of one rental property.
On March 31, 2010, the Operating Partnership issued 188,571 OP Units at a price of $39.15 per OP Unit for total valuation of $7.4 million as partial consideration for the acquisition of one rental property.
During the year ended December 31, 2012, the Company acquired all of its partner's interest in one consolidated partially owned land parcel for no cash consideration. In conjunction with this transaction, the Company increased paid in capital (included in general partner's capital in the Operating Partnership's financial statements) by $1.3 million and reduced Noncontrolling Interests – Partially Owned Properties by $1.3 million.
During the year ended December 31, 2011, the Company acquired all of its partners' interests in three consolidated partially owned properties consisting of 1,351 apartment units for $12.8 million. In conjunction with these transactions, the Company reduced paid in capital (included in general partner's capital in the Operating Partnership's financial statements) by $4.8 million and Noncontrolling Interests – Partially Owned Properties by $8.0 million.
During the year ended December 31, 2010, the Company acquired all of its partners' interests in two consolidated partially owned properties consisting of 432 apartment units, one consolidated partially owned development project and one consolidated partially owned land parcel for $0.7 million. One of these partially owned property buyouts was funded through the issuance of 1,129 OP Units valued at $50,000. The Company also increased its ownership in three consolidated partially owned properties through the buyout of certain equity interests which were funded through the issuance of 15,948 OP Units valued at $0.8 million and cash payments of $15.3 million. In conjunction with these transactions, the Company reduced paid in capital (included in general partner's capital in the Operating Partnership's financial statements) by $16.9 million and other liabilities by $0.2 million and increased Noncontrolling Interests – Partially Owned Properties by $0.2 million.
F-31
4. | Real Estate |
The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of December 31, 2012 and 2011 (amounts in thousands):
2012 | 2011 | |||||||
Land | $ | 4,554,912 | $ | 4,367,816 | ||||
Depreciable property: | ||||||||
Buildings and improvements | 14,368,179 | 14,262,616 | ||||||
Furniture, fixtures and equipment | 1,343,765 | 1,292,124 | ||||||
Projects under development: | ||||||||
Land | 210,632 | 75,646 | ||||||
Construction-in-progress | 177,118 | 84,544 | ||||||
Land held for development: | ||||||||
Land | 294,868 | 299,096 | ||||||
Construction-in-progress | 58,955 | 26,104 | ||||||
Investment in real estate | 21,008,429 | 20,407,946 | ||||||
Accumulated depreciation | (4,912,221 | ) | (4,539,583 | ) | ||||
Investment in real estate, net | $ | 16,096,208 | $ | 15,868,363 |
During the year ended December 31, 2012, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):
Properties | Apartment Units | Purchase Price | ||||||||
Rental Properties – Consolidated | 9 | 1,896 | $ | 906,305 | ||||||
Land Parcels (six) | — | — | 141,240 | |||||||
Total | 9 | 1,896 | $ | 1,047,545 |
During the year ended December 31, 2011, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):
Properties | Apartment Units | Purchase Price | ||||||||
Rental Properties – Consolidated | 21 | 6,198 | $ | 1,383,048 | ||||||
Land Parcels (seven) (1) (2) | — | — | 202,313 | |||||||
Other (3) | — | — | 11,750 | |||||||
Total | 21 | 6,198 | $ | 1,597,111 |
(1) | Includes a vacant land parcel at 400 Park Avenue South in New York City acquired jointly by the Company and Toll Brothers (NYSE: TOL). The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. Until the core and shell of the building is complete, the building and land will be owned jointly and are required to be consolidated on the Company's balance sheet. Thereafter, the Company will solely own and control the rental portion of the building (floors 2-22) and Toll Brothers will solely own and control the for sale portion of the building (floors 23-40). Once the core and shell are complete, the Toll Brothers' portion of the property will be deconsolidated from the Company's balance sheet. |
(2) | Includes entry into a long-term ground lease for a land parcel at 170 Amsterdam Avenue in New York City. |
(3) | Represents the acquisition of a 97,000 square foot commercial building adjacent to our Harbor Steps apartment property in downtown Seattle for potential redevelopment. |
During the year ended December 31, 2012, the Company disposed of the following to unaffiliated parties (sales price in thousands):
Properties | Apartment Units | Sales Price | ||||||||
Rental Properties – Consolidated | 35 | 9,012 | $ | 1,061,334 | ||||||
Total | 35 | 9,012 | $ | 1,061,334 |
F-32
The Company recognized a net gain on sales of discontinued operations of approximately $548.3 million on the above sales.
During the year ended December 31, 2011, the Company disposed of the following to unaffiliated parties (sales price in thousands):
Properties | Apartment Units | Sales Price | ||||||||
Rental Properties – Consolidated | 47 | 14,345 | $ | 1,482,239 | ||||||
Land Parcel (one) (1) | — | — | 22,786 | |||||||
Total | 47 | 14,345 | $ | 1,505,025 |
(1) | Represents the sale of a land parcel, on which the Company no longer planned to develop, in suburban Washington, D.C. |
The Company recognized a net gain on sales of discontinued operations of approximately $826.5 million and a net gain on sales of land parcels of approximately $4.2 million on the above sales.
5. | Commitments to Acquire/Dispose of Real Estate |
The Company and AvalonBay Communities, Inc. (NYSE: AVB) entered into an agreement to acquire the assets and liabilities of Archstone Enterprise LP, of which the Company will acquire approximately 60%, which includes approximately 75 operating properties, four properties under development and several land parcels for approximately $8.9 billion.
In addition, the Company has entered into separate agreements to acquire the following (purchase price in thousands):
Properties | Apartment Units | Purchase Price | |||||||
Land Parcels (three) | — | — | $ | 45,500 | |||||
Total | — | — | $ | 45,500 |
In addition to the properties that were subsequently disposed of as discussed in Note 18, the Company has entered into separate agreements to dispose of the following (sales price in thousands):
Properties | Apartment Units | Sales Price | |||||||
Rental Properties | 50 | 13,772 | $ | 1,983,960 | |||||
Land Parcel (one) | — | — | 29,000 | ||||||
Total | 50 | 13,772 | $ | 2,012,960 |
The closings of these pending transactions are subject to certain conditions and restrictions, therefore, there can be no assurance that these transactions will be consummated or that the final terms will not differ in material respects from those summarized in the preceding paragraphs.
6. | Investments in Partially Owned Entities |
The Company has co-invested in various properties with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated). The following tables and information summarize the Company’s investments in partially owned entities as of December 31, 2012 (amounts in thousands except for project and apartment unit amounts):
F-33
Consolidated | Unconsolidated | |||||||||||||||
Development Projects | ||||||||||||||||
Held for and/or Under Development (4) | Other | Total | Institutional Joint Ventures (5) | |||||||||||||
Total projects (1) | — | 19 | 19 | — | ||||||||||||
Total apartment units (1) | — | 3,475 | 3,475 | — | ||||||||||||
Balance sheet information at 12/31/12 (at 100%): | ||||||||||||||||
ASSETS | ||||||||||||||||
Investment in real estate | $ | 161,820 | $ | 453,235 | $ | 615,055 | $ | 171,041 | ||||||||
Accumulated depreciation | — | (159,651 | ) | (159,651 | ) | — | ||||||||||
Investment in real estate, net | 161,820 | 293,584 | 455,404 | 171,041 | ||||||||||||
Cash and cash equivalents | 3,884 | 17,221 | 21,105 | 214 | ||||||||||||
Deposits – restricted | 43,609 | 5 | 43,614 | — | ||||||||||||
Deferred financing costs, net | — | 1,019 | 1,019 | 6 | ||||||||||||
Other assets | 5,839 | 171 | 6,010 | 22 | ||||||||||||
Total assets | $ | 215,152 | $ | 312,000 | $ | 527,152 | $ | 171,283 | ||||||||
LIABILITIES AND EQUITY/CAPITAL | ||||||||||||||||
Mortgage notes payable | $ | — | $ | 200,337 | $ | 200,337 | $ | 76,634 | ||||||||
Accounts payable & accrued expenses | 686 | 693 | 1,379 | 6,550 | ||||||||||||
Accrued interest payable | — | 782 | 782 | 342 | ||||||||||||
Other liabilities | 1,238 | 1,096 | 2,334 | 108 | ||||||||||||
Security deposits | — | 1,483 | 1,483 | 3 | ||||||||||||
Total liabilities | 1,924 | 204,391 | 206,315 | 83,637 | ||||||||||||
Noncontrolling Interests – Partially Owned Properties | 85,006 | (7,318 | ) | 77,688 | 70,428 | |||||||||||
Company equity/General and Limited Partners' Capital | 128,222 | 114,927 | 243,149 | 17,218 | ||||||||||||
Total equity/capital | 213,228 | 107,609 | 320,837 | 87,646 | ||||||||||||
Total liabilities and equity/capital | $ | 215,152 | $ | 312,000 | $ | 527,152 | $ | 171,283 | ||||||||
Debt – Secured (2): | ||||||||||||||||
Company/Operating Partnership Ownership (3) | $ | — | $ | 159,068 | $ | 159,068 | $ | 15,327 | ||||||||
Noncontrolling Ownership | — | 41,269 | 41,269 | 61,307 | ||||||||||||
Total (at 100%) | $ | — | $ | 200,337 | $ | 200,337 | $ | 76,634 |
F-34
Consolidated | Unconsolidated | |||||||||||||||
Development Projects | ||||||||||||||||
Held for and/or Under Development (4) | Other | Total | Institutional Joint Ventures (5) | |||||||||||||
Operating information for the year ended 12/31/12 (at 100%): | ||||||||||||||||
Operating revenue | $ | — | $ | 62,405 | $ | 62,405 | $ | 7 | ||||||||
Operating expenses | 170 | 19,480 | 19,650 | 244 | ||||||||||||
Net operating (loss) income | (170 | ) | 42,925 | 42,755 | (237 | ) | ||||||||||
Depreciation | — | 15,346 | 15,346 | — | ||||||||||||
General and administrative/other | 213 | 157 | 370 | — | ||||||||||||
Operating (loss) income | (383 | ) | 27,422 | 27,039 | (237 | ) | ||||||||||
Interest and other income | 2 | 100 | 102 | — | ||||||||||||
Other expenses | (264 | ) | — | (264 | ) | — | ||||||||||
Interest: | ||||||||||||||||
Expense incurred, net | — | (9,386 | ) | (9,386 | ) | — | ||||||||||
Amortization of deferred financing costs | — | (160 | ) | (160 | ) | — | ||||||||||
(Loss) income before income and other taxes and net gain on sales of discontinued operations | (645 | ) | 17,976 | 17,331 | (237 | ) | ||||||||||
Income and other tax (expense) benefit | (25 | ) | (75 | ) | (100 | ) | — | |||||||||
Net gain on sales of discontinued operations | 15 | — | 15 | — | ||||||||||||
Net (loss) income | $ | (655 | ) | $ | 17,901 | $ | 17,246 | $ | (237 | ) |
(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. |
(3) | Represents the Company’s/Operating Partnership's current equity ownership interest. |
(4) | Includes 400 Park Avenue South in New York City which the Company is jointly developing with Toll Brothers. |
(5) | These development projects (Nexus Sawgrass and Domain) are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. Total project costs are approximately $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company is responsible for constructing the projects and has given certain construction cost overrun guarantees but currently has no further funding obligations. Nexus Sawgrass has a maximum debt commitment of $48.7 million and a current unconsolidated outstanding balance of $29.8 million; the loan bears interest at 5.60% and matures January 1, 2021. Domain has a maximum debt commitment of $98.6 million and a current unconsolidated outstanding balance of $46.9 million; the loan bears interest at 5.75% and matures January 1, 2022. |
During the year ended December 31, 2012, the Company and its joint venture partner sold two consolidated partially owned properties consisting of 441 apartment units and recognized a net gain on the sales of approximately $21.3 million.
The Company is the controlling partner in various consolidated partnership properties and development properties having a noncontrolling interest book value of $77.7 million at December 31, 2012. The Company has identified one development partnership, consisting of a land parcel with a book value of $5.0 million, as a VIE. The Company does not have any unconsolidated VIEs.
In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The Company is the managing member and Toll Brothers does not have substantive kick-out or participating rights. Until the core and shell of the building is complete, the building and land will be owned jointly and are required to be consolidated on the Company's balance sheet (not a VIE). Thereafter, the Company will solely own and control the rental portion of the building (floors 2-22) and Toll Brothers will solely own and control the for sale portion of the building (floors 23-40). Once the core and shell are complete, the Toll Brothers' portion of the property will be deconsolidated from the Company's balance sheet. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. As of December 31, 2012, the Company's and Toll Brothers' consolidated contributions to the joint venture were approximately $203.5 million, of which Toll Brothers' noncontrolling interest balance totaled $84.0 million.
F-35
The Company admitted an 80% institutional partner to two separate entities/transactions (one in December 2010 and the other in August 2011), each owning a developable land parcel, in exchange for $40.1 million in cash and retained a 20% equity interest in both of these entities. These land parcels are now unconsolidated. Total project costs are approximately $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. While the Company is the managing member of both of the joint ventures, is responsible for constructing both of the projects and has given certain construction cost overrun guarantees, all major decisions are made jointly, the large majority of funding is provided by the partner and the partner has significant involvement in and oversight of the ongoing projects, neither of which is a VIE. The Company currently has no further funding obligations related to these projects.
7. | Deposits – Restricted |
The following table presents the Company’s restricted deposits as of December 31, 2012 and 2011 (amounts in thousands):
December 31, 2012 | December 31, 2011 | |||||||
Tax – deferred (1031) exchange proceeds | $ | 152,182 | $ | 53,668 | ||||
Earnest money on pending acquisitions | 5,613 | 7,882 | ||||||
Restricted deposits on debt | — | 2,370 | ||||||
Restricted deposits on real estate investments | 44,209 | 43,970 | ||||||
Resident security and utility deposits | 44,199 | 40,403 | ||||||
Other | 4,239 | 3,944 | ||||||
Totals | $ | 250,442 | $ | 152,237 |
8. | Debt |
EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. EQR guaranteed the Operating Partnership's $500.0 million unsecured senior term loan, which was repaid at maturity on October 5, 2012, and also guarantees the Operating Partnership's revolving credit facility up to the maximum amount and for the full term of the facility.
Mortgage Notes Payable
As of December 31, 2012, the Company had outstanding mortgage debt of approximately $3.9 billion.
During the year ended December 31, 2012, the Company:
▪ | Repaid $364.3 million of mortgage loans; |
▪ | Obtained $26.5 million of new mortgage loan proceeds; and |
▪ | Assumed $137.6 million of mortgage debt on two acquired properties. |
The Company recorded approximately $0.3 million and $1.6 million of prepayment penalties and write-offs of unamortized deferred financing costs, respectively, during the year ended December 31, 2012 as additional interest expense related to debt extinguishment of mortgages.
As of December 31, 2012, the Company had $362.2 million of secured debt subject to third party credit enhancement.
As of December 31, 2012, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through June 15, 2051. At December 31, 2012, the interest rate range on the Company’s mortgage debt was 0.11% to 11.25%. During the year ended December 31, 2012, the weighted average interest rate on the Company’s mortgage debt was 4.96%.
The historical cost, net of accumulated depreciation, of encumbered properties was $4.4 billion and $4.9 billion at December 31, 2012 and 2011, respectively.
As of December 31, 2011, the Company had outstanding mortgage debt of approximately $4.1 billion.
During the year ended December 31, 2011, the Company:
▪ | Repaid $991.7 million of mortgage loans; |
▪ | Obtained $190.9 million of new mortgage loan proceeds; and |
▪ | Assumed $158.2 million of mortgage debt on five acquired properties. |
F-36
The Company recorded approximately $4.4 million of write-offs of unamortized deferred financing costs during the year ended December 31, 2011 as additional interest expense related to debt extinguishment of mortgages.
As of December 31, 2011, the Company had $455.6 million of secured debt subject to third party credit enhancement.
As of December 31, 2011, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through September 1, 2048. At December 31, 2011, the interest rate range on the Company’s mortgage debt was 0.05% to 11.25%. During the year ended December 31, 2011, the weighted average interest rate on the Company’s mortgage debt was 4.84%.
Notes
The following tables summarize the Company’s unsecured note balances and certain interest rate and maturity date information as of and for the years ended December 31, 2012 and 2011, respectively:
December 31, 2012 (Amounts are in thousands) | Net Principal Balance | Interest Rate Ranges | Weighted Average Interest Rate | Maturity Date Ranges | ||||||
Fixed Rate Public/Private Notes (1) | $ | 4,329,352 | 4.625% - 7.57% | 5.70% | 2013 - 2026 | |||||
Floating Rate Public/Private Notes (1) | 301,523 | (1) | 1.83% | 2013 | ||||||
Totals | $ | 4,630,875 |
December 31, 2011 (Amounts are in thousands) | Net Principal Balance | Interest Rate Ranges | Weighted Average Interest Rate | Maturity Date Ranges | ||||||
Fixed Rate Public/Private Notes (1) | $ | 4,803,191 | 4.625% - 7.57% | 5.84% | 2012 - 2026 | |||||
Floating Rate Public/Private Notes (1) | 806,383 | (1) | 1.67% | 2012 - 2013 | ||||||
Totals | $ | 5,609,574 |
(1) | At December 31, 2012 and 2011, $300.0 million in fair value interest rate swaps converts a portion of the $400.0 million face value 5.200% notes due April 1, 2013 to a floating interest rate. |
The Company’s unsecured public debt contains 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 both the years ended December 31, 2012 and 2011.
An unlimited amount of equity and debt securities remains available for issuance by EQR and ERPOP under a universal shelf registration statement that became automatically effective upon filing with the SEC in October 2010 and expires on October 15, 2013. 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).
During the year ended December 31, 2012, the Company:
▪ | Repaid $253.9 million of 6.625% unsecured notes at maturity; |
▪ | Repaid $222.1 million of 5.500% unsecured notes at maturity; |
▪ | Repaid its $500.0 million term loan facility at maturity; and |
▪ | Entered into a new senior unsecured $500.0 million delayed draw term loan facility that could have been drawn anytime on or before July 4, 2012. The Company elected not to draw on this facility and subject to the terms of the agreement, the facility expired undrawn. The Company recorded approximately $1.0 million of write-offs of unamortized deferred financing costs at termination. |
During the year ended December 31, 2011, the Company:
▪ | Repaid $93.1 million of 6.95% unsecured notes at maturity; |
▪ | Exercised the second of its two one-year extension options for its $500.0 million term loan facility resulting in a maturity date of October 5, 2012; |
▪ | Redeemed $482.5 million of its 3.85% unsecured notes with a final maturity of 2026 at par and no premium was paid; and |
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▪ | Issued $1.0 billion of ten-year 4.625% fixed rate public notes in a public offering, receiving net proceeds of $996.2 million before underwriting fees and other expenses. The notes are at an all-in effective interest rate of approximately 6.2% after termination of various forward starting swaps in conjunction with the issuance (see Note 9 for further discussion). |
On November 26, 2012, the Company obtained a commitment for a senior unsecured bridge loan facility in an aggregate principal amount not to exceed $2.5 billion to finance the acquisition of 60% of the assets and liabilities of Archstone Enterprise LP ("Archstone"), a privately-held owner, operator and developer of multifamily apartment properties (see Note 18 for further discussion). The Company incurred fees totaling $16.3 million to structure this facility, of which $8.4 million was written off in 2012 in conjunction with additional capital raising activities which curtailed amounts available on this facility. See Note 18 for discussion on the cancellation of this facility.
In December 2011, the Company obtained a commitment for a senior unsecured bridge loan facility in an aggregate principal amount not to exceed $1.0 billion to finance the potential acquisition of an ownership interest in Archstone. The Company paid fees of $2.6 million to structure this facility, which were recorded as deferred financing costs and amortized in 2011. On January 6, 2012, the Company terminated this $1.0 billion bridge loan facility in connection with an amendment to the Company's revolving credit facility (see below for further discussion) and the execution of the $500.0 million delayed draw term loan facility discussed above.
On October 11, 2007, the Company closed on a $500.0 million senior unsecured term loan. Effective April 5, 2011, the Company exercised the second of its two one-year extension options, resulting in a maturity date of October 5, 2012. The Company paid off this term loan at maturity. The loan bore interest at variable rates based upon LIBOR plus a spread (0.50%) dependent upon the credit rating on the Company’s long-term senior unsecured debt.
On August 23, 2006, the Company issued $650.0 million of exchangeable notes that were to mature on August 15, 2026. The notes bore interest at a fixed rate of 3.85%. The notes were exchangeable into Common Shares, at the option of the holders, under specific circumstances or on or after August 15, 2025, at an exchange rate of 16.3934 shares per $1,000 principal amount of notes (equivalent to an exchange price of $61.00 per share). On August 18, 2011 (the "Redemption Date"), the Operating Partnership redeemed all of the outstanding notes for $482.5 million in cash, which was equal to 100% of the principal amount of such notes, plus accrued and unpaid interest up to but excluding the Redemption Date. See Note 2 for more information on the change in the recognition of interest expense for these notes.
Lines of Credit
In July 2011, the Company replaced its then existing unsecured revolving credit facility with a new $1.25 billion unsecured revolving credit facility maturing on July 13, 2014, subject to a one-year extension option exercisable by the Company. The Company had the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. On January 6, 2012, the Company amended this credit facility to increase available borrowings by an additional $500.0 million to $1.75 billion with all other terms, including the July 13, 2014 maturity date, remaining the same. The interest rate on advances under the credit facility was generally LIBOR plus a spread (1.15%) and the Company paid an annual facility fee of 0.2%. Both the spread and the facility fee were dependent on the credit rating of the Company's long-term debt. See Note 18 for discussion on the Company's replacement of this unsecured revolving credit facility. The facility had replaced the Company's previous $1.425 billion facility which was scheduled to mature in February 2012. The Company wrote-off $0.2 million in unamortized deferred financing costs related to the old facility.
As of December 31, 2012, the amount available on the credit facility was $1.72 billion (net of $30.2 million which was restricted/dedicated to support letters of credit) and there was no amount outstanding. See Note 18 for amounts available on the Company's replacement facility. During the year ended December 31, 2012, the weighted average interest rate was 1.35%. As of December 31, 2011, the amount available on the credit facility was $1.22 billion (net of $31.8 million which was restricted/dedicated to support letters of credit) and there was no amount outstanding. During the year ended December 31, 2011, the weighted average interest rate was 1.42%.
Other
The following table provides a summary of the aggregate payments of principal on all debt for each of the next five years and thereafter (amounts in thousands):
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Year | Total (1) | ||
2013 | $ | 526,310 | |
2014 | 586,323 | ||
2015 | 417,812 | ||
2016 | 1,190,538 | ||
2017 | 1,446,576 | ||
Thereafter | 4,341,101 | ||
Net Unamortized Premium | 20,584 | ||
Total | $ | 8,529,244 |
(1) | Premiums and discounts are amortized over the life of the debt. |
9. | Derivative and Other Fair Value Instruments |
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, including its derivative 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.
The carrying values of the Company’s mortgage notes payable and unsecured notes were approximately $3.9 billion and $4.6 billion, respectively, at December 31, 2012. The fair values of the Company’s mortgage notes payable and unsecured notes were approximately $4.3 billion (Level 2) and $5.2 billion (Level 2), respectively, at December 31, 2012. The carrying values of the Company’s mortgage notes payable and unsecured notes were approximately $4.1 billion and $5.6 billion, respectively, at December 31, 2011. The fair values of the Company’s mortgage notes payable and unsecured notes were approximately $4.3 billion (Level 2) and $6.0 billion (Level 2), respectively, at December 31, 2011. The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, derivative instruments and investment securities), including cash and cash equivalents and other financial instruments, approximate their carrying or contract values.
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks 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 its exposure to foreign exchange rates (should the Archstone transaction close) or manage commodity prices in the daily operations of the business.
The following table summarizes the Company’s consolidated derivative instruments at December 31, 2012 (dollar amounts are in thousands):
Fair Value Hedges (1) | Forward Starting Swaps (2) | ||||||
Current Notional Balance | $ | 300,000 | $ | 200,000 | |||
Lowest Possible Notional | $ | 300,000 | $ | 200,000 | |||
Highest Possible Notional | $ | 300,000 | $ | 200,000 | |||
Lowest Interest Rate | 2.009 | % | 3.478 | % | |||
Highest Interest Rate | 2.637 | % | 4.695 | % | |||
Earliest Maturity Date | 2013 | 2023 | |||||
Latest Maturity Date | 2013 | 2023 |
(1) | Fair Value Hedges – Converts outstanding fixed rate debt to a floating interest rate. |
(2) | Forward Starting Swaps – Designed to partially fix the interest rate in advance of a planned future debt issuance. These swaps have mandatory counterparty terminations in 2014, and are targeted to 2013 issuances. |
In June 2011, the Company's remaining development cash flow hedge matured.
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:
F-39
• | 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 developed internally by the Company that use as their basis readily observable market parameters (such as forward yield curves and credit default swap data). Employee holdings other than Common Shares within the supplemental executive retirement plan (the “SERP”) are valued using quoted market prices for identical assets and are included in other assets and other liabilities on the consolidated balance sheet. The Company’s investment securities are valued using quoted market prices or readily available market interest rate data. Redeemable Noncontrolling Interests – Operating Partnership/Redeemable Limited Partners are valued using the quoted market price of Common Shares. The fair values disclosed for mortgage notes payable and unsecured notes were calculated using indicative rates provided by lenders of similar loans in the case of mortgage notes payable and the private unsecured notes and quoted market prices for each underlying issuance in the case of the public unsecured notes.
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 December 31, 2012 and 2011, respectively (amounts in thousands):
Fair Value Measurements at Reporting Date Using | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||||
Balance Sheet | Identical Assets/Liabilities | Observable Inputs | Unobservable Inputs | |||||||||||||||
Description | Location | 12/31/2012 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets | ||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||||
Fair Value Hedges | Other Assets | $ | 1,524 | $ | — | $ | 1,524 | $ | — | |||||||||
Supplemental Executive Retirement Plan | Other Assets | 70,655 | 70,655 | — | — | |||||||||||||
Available-for-Sale Investment Securities | Other Assets | 2,214 | 2,214 | — | — | |||||||||||||
Total | $ | 74,393 | $ | 72,869 | $ | 1,524 | $ | — | ||||||||||
Liabilities | ||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||||
Forward Starting Swaps | Other Liabilities | $ | 44,050 | $ | — | $ | 44,050 | $ | — | |||||||||
Supplemental Executive Retirement Plan | Other Liabilities | 70,655 | 70,655 | — | — | |||||||||||||
Total | $ | 114,705 | $ | 70,655 | $ | 44,050 | $ | — | ||||||||||
Redeemable Noncontrolling Interests – | ||||||||||||||||||
Operating Partnership/Redeemable | ||||||||||||||||||
Limited Partners | Mezzanine | $ | 398,372 | $ | — | $ | 398,372 | $ | — |
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Fair Value Measurements at Reporting Date Using | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||||
Balance Sheet | Identical Assets/Liabilities | Observable Inputs | Unobservable Inputs | |||||||||||||||
Description | Location | 12/31/2011 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets | ||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||||
Fair Value Hedges | Other Assets | $ | 8,972 | $ | — | $ | 8,972 | $ | — | |||||||||
Supplemental Executive Retirement Plan | Other Assets | 71,426 | 71,426 | — | — | |||||||||||||
Available-for-Sale Investment Securities | Other Assets | 1,550 | 1,550 | — | — | |||||||||||||
Total | $ | 81,948 | $ | 72,976 | $ | 8,972 | $ | — | ||||||||||
Liabilities | ||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||||
Forward Starting Swaps | Other Liabilities | $ | 32,278 | $ | — | $ | 32,278 | $ | — | |||||||||
Supplemental Executive Retirement Plan | Other Liabilities | 71,426 | 71,426 | — | — | |||||||||||||
Total | $ | 103,704 | $ | 71,426 | $ | 32,278 | $ | — | ||||||||||
Redeemable Noncontrolling Interests – | ||||||||||||||||||
Operating Partnership/Redeemable | ||||||||||||||||||
Limited Partners | Mezzanine | $ | 416,404 | $ | — | $ | 416,404 | $ | — |
The following tables provide a summary of the effect of fair value hedges on the Company’s accompanying Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010, respectively (amounts in thousands):
December 31, 2012 | Location of Gain/(Loss) Recognized in Income on Derivative | Amount of Gain/(Loss) Recognized in Income on Derivative | Income Statement Location of Hedged Item Gain/(Loss) | Amount of Gain/(Loss)Recognized in Income on Hedged Item | ||||||||||
Type of Fair Value Hedge | Hedged Item | |||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||
Interest Rate Contracts: | ||||||||||||||
Interest Rate Swaps | Interest expense | $ | (7,448 | ) | Fixed rate debt | Interest expense | $ | 7,448 | ||||||
Total | $ | (7,448 | ) | $ | 7,448 |
December 31, 2011 | Location of Gain/(Loss) Recognized in Income on Derivative | Amount of Gain/(Loss) Recognized in Income on Derivative | Income Statement Location of Hedged Item Gain/(Loss) | Amount of Gain/(Loss)Recognized in Income on Hedged Item | ||||||||||
Type of Fair Value Hedge | Hedged Item | |||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||
Interest Rate Contracts: | ||||||||||||||
Interest Rate Swaps | Interest expense | $ | (3,549 | ) | Fixed rate debt | Interest expense | $ | 3,549 | ||||||
Total | $ | (3,549 | ) | $ | 3,549 |
December 31, 2010 | Location of Gain/(Loss) Recognized in Income on Derivative | Amount of Gain/(Loss) Recognized in Income on Derivative | Income Statement Location of Hedged Item Gain/(Loss) | Amount of Gain/(Loss)Recognized in Income on Hedged Item | ||||||||||
Type of Fair Value Hedge | Hedged Item | |||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||
Interest Rate Contracts: | ||||||||||||||
Interest Rate Swaps | Interest expense | $ | 7,335 | Fixed rate debt | Interest expense | $ | (7,335 | ) | ||||||
Total | $ | 7,335 | $ | (7,335 | ) |
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The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010, respectively (amounts in thousands):
Effective Portion | Ineffective Portion | |||||||||||||||
December 31, 2012 | 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 | Location of Gain/(Loss) Recognized in Income on Derivative | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income | |||||||||||
Type of Cash Flow Hedge | ||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||
Forward Starting Swaps/Treasury Locks | $ | (11,772 | ) | Interest expense | $ | (14,678 | ) | N/A | $ | — | ||||||
Total | $ | (11,772 | ) | $ | (14,678 | ) | $ | — |
Effective Portion | Ineffective Portion | |||||||||||||||
December 31, 2011 | 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 | Location of Gain/(Loss) Recognized in Income on Derivative | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income | |||||||||||
Type of Cash Flow Hedge | ||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||
Forward Starting Swaps/Treasury Locks | $ | (145,090 | ) | Interest expense | $ | (4,343 | ) | Interest expense | $ | (170 | ) | |||||
Development Interest Rate Swaps/Caps | 1,322 | Interest expense | — | N/A | — | |||||||||||
Total | $ | (143,768 | ) | $ | (4,343 | ) | $ | (170 | ) |
Effective Portion | Ineffective Portion | |||||||||||||||
December 31, 2010 | 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 | Location of Gain/(Loss) Recognized in Income on Derivative | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income | |||||||||||
Type of Cash Flow Hedge | ||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||
Interest Rate Contracts: | ||||||||||||||||
Forward Starting Swaps/Treasury Locks | $ | (68,149 | ) | Interest expense | $ | (3,338 | ) | N/A | $ | — | ||||||
Development Interest Rate Swaps/Caps | 2,255 | Interest expense | — | N/A | — | |||||||||||
Total | $ | (65,894 | ) | $ | (3,338 | ) | $ | — |
As of December 31, 2012 and 2011, there were approximately $194.7 million and $197.6 million in deferred losses, net, included in accumulated other comprehensive (loss), respectively, related to derivative instruments. Based on the estimated fair values of the net derivative instruments at December 31, 2012, the Company may recognize an estimated $18.9 million of accumulated other comprehensive (loss) as additional interest expense during the year ending December 31, 2013.
In December 2011, the Company paid approximately $153.2 million to settle various forward starting swaps in conjunction with the issuance of $1.0 billion of ten-year fixed rate public notes. The ineffective portion of $0.2 million and accrued interest of $5.9 million were recorded as interest expense. The remaining amount of $147.1 million will be deferred as a component of accumulated other comprehensive (loss) and is recognized as an increase to interest expense over the approximate term of the notes.
In July 2010, the Company paid approximately $10.0 million to settle a forward starting swap in conjunction with the issuance of $600.0 million of ten-year fixed rate public notes. The entire amount was deferred as a component of accumulated other comprehensive (loss) and is being recognized as an increase to interest expense over the term of the notes.
The following tables set forth the maturity, amortized cost, gross unrealized gains and losses, book/fair value and interest and other income of the various investment securities held as of December 31, 2012 and 2011, respectively (amounts in thousands):
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Other Assets | ||||||||||||||||||||||
December 31, 2012 | Maturity | Amortized Cost | Unrealized Gains | Unrealized Losses | Book/ Fair Value | Interest and Other Income | ||||||||||||||||
Security | ||||||||||||||||||||||
Available-for-Sale Investment Securities | N/A | $ | 675 | $ | 1,539 | $ | — | $ | 2,214 | $ | — | |||||||||||
Total | $ | 675 | $ | 1,539 | $ | — | $ | 2,214 | $ | — |
Other Assets | ||||||||||||||||||||||
December 31, 2011 Security | Maturity | Amortized Cost | Unrealized Gains | Unrealized Losses | Book/ Fair Value | Interest and Other Income | ||||||||||||||||
Security | ||||||||||||||||||||||
Available-for-Sale Investment Securities | N/A | $ | 675 | $ | 875 | $ | — | $ | 1,550 | $ | — | |||||||||||
Total | $ | 675 | $ | 875 | $ | — | $ | 1,550 | $ | — |
10. | 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):
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Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | |||||||||
Numerator for net income per share – basic: | |||||||||||
Income (loss) from continuing operations | $ | 211,055 | $ | (24,826 | ) | $ | (164,135 | ) | |||
Allocation to Noncontrolling Interests – Operating Partnership, net | (8,685 | ) | 1,749 | 8,250 | |||||||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties | (844 | ) | (832 | ) | 726 | ||||||
Preferred distributions | (10,355 | ) | (13,865 | ) | (14,368 | ) | |||||
Premium on redemption of Preferred Shares | (5,152 | ) | — | — | |||||||
Income (loss) from continuing operations available to Common Shares, net of Noncontrolling Interests | 186,019 | (37,774 | ) | (169,527 | ) | ||||||
Discontinued operations, net of Noncontrolling Interests | 640,193 | 917,494 | 438,769 | ||||||||
Numerator for net income per share – basic | $ | 826,212 | $ | 879,720 | $ | 269,242 | |||||
Numerator for net income per share – diluted (1): | |||||||||||
Income from continuing operations | $ | 211,055 | |||||||||
Net (income) attributable to Noncontrolling Interests – Partially Owned Properties | (844 | ) | |||||||||
Preferred distributions | (10,355 | ) | |||||||||
Premium on redemption of Preferred Shares | (5,152 | ) | |||||||||
Income from continuing operations available to Common Shares | 194,704 | ||||||||||
Discontinued operations, net | 670,149 | ||||||||||
Numerator for net income per share – diluted (1) | $ | 864,853 | $ | 879,720 | $ | 269,242 | |||||
Denominator for net income per share – basic and diluted (1): | |||||||||||
Denominator for net income per share – basic | 302,701 | 294,856 | 282,888 | ||||||||
Effect of dilutive securities: | |||||||||||
OP Units | 13,853 | ||||||||||
Long-term compensation shares/units | 3,212 | ||||||||||
Denominator for net income per share – diluted (1) | 319,766 | 294,856 | 282,888 | ||||||||
Net income per share – basic | $ | 2.73 | $ | 2.98 | $ | 0.95 | |||||
Net income per share – diluted | $ | 2.70 | $ | 2.98 | $ | 0.95 | |||||
Net income per share – basic: | |||||||||||
Income (loss) from continuing operations available to Common Shares, net of Noncontrolling Interests | $ | 0.614 | $ | (0.128 | ) | $ | (0.599 | ) | |||
Discontinued operations, net of Noncontrolling Interests | 2.115 | 3.112 | 1.551 | ||||||||
Net income per share – basic | $ | 2.729 | $ | 2.984 | $ | 0.952 | |||||
Net income per share – diluted (1): | |||||||||||
Income (loss) from continuing operations available to Common Shares | $ | 0.609 | $ | (0.128 | ) | $ | (0.599 | ) | |||
Discontinued operations, net | 2.096 | 3.112 | 1.551 | ||||||||
Net income per share – diluted | $ | 2.705 | $ | 2.984 | $ | 0.952 | |||||
Distributions declared per Common Share outstanding | $ | 1.78 | $ | 1.58 | $ | 1.47 |
(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 for the years ended December 31, 2011 and 2010. |
Convertible preferred shares/units that could be converted into 0, 0 and 325,103 weighted average Common Shares for the years ended December 31, 2012, 2011 and 2010, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effects would be anti-dilutive. In addition, the effect of the Common Shares that could ultimately be issued upon the conversion/exchange of the Company’s $650.0 million exchangeable senior notes ($482.5 million outstanding were redeemed on August 18, 2011) was not included in the computation of diluted earnings per share because the effects would be anti-dilutive.
For additional disclosures regarding the employee share options and restricted shares, see Notes 2 and 12.
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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):
Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | |||||||||
Numerator for net income per Unit – basic and diluted (1): | |||||||||||
Income (loss) from continuing operations | $ | 211,055 | $ | (24,826 | ) | $ | (164,135 | ) | |||
Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties | (844 | ) | (832 | ) | 726 | ||||||
Allocation to Preference Units | (10,355 | ) | (13,865 | ) | (14,368 | ) | |||||
Allocation to premium on redemption of Preference Units | (5,152 | ) | — | — | |||||||
Income (loss) from continuing operations available to Units | 194,704 | (39,523 | ) | (177,777 | ) | ||||||
Discontinued operations, net | 670,149 | 960,023 | 460,118 | ||||||||
Numerator for net income per Unit – basic and diluted (1) | $ | 864,853 | $ | 920,500 | $ | 282,341 | |||||
Denominator for net income per Unit – basic and diluted (1): | |||||||||||
Denominator for net income per Unit – basic | 316,554 | 308,062 | 296,527 | ||||||||
Effect of dilutive securities: | |||||||||||
Dilution for Units issuable upon assumed exercise/vesting of the Company's long-term compensation shares/units | 3,212 | ||||||||||
Denominator for net income per Unit – diluted (1) | 319,766 | 308,062 | 296,527 | ||||||||
Net income per Unit – basic | $ | 2.73 | $ | 2.98 | $ | 0.95 | |||||
Net income per Unit – diluted | $ | 2.70 | $ | 2.98 | $ | 0.95 | |||||
Net income per Unit – basic: | |||||||||||
Income (loss) from continuing operations available to Units | $ | 0.614 | $ | (0.128 | ) | $ | (0.599 | ) | |||
Discontinued operations, net | 2.115 | 3.112 | 1.551 | ||||||||
Net income per Unit – basic | $ | 2.729 | $ | 2.984 | $ | 0.952 | |||||
Net income per Unit – diluted (1): | |||||||||||
Income (loss) from continuing operations available to Units | $ | 0.609 | $ | (0.128 | ) | $ | (0.599 | ) | |||
Discontinued operations, net | 2.096 | 3.112 | 1.551 | ||||||||
Net income per Unit – diluted | $ | 2.705 | $ | 2.984 | $ | 0.952 | |||||
Distributions declared per Unit outstanding | $ | 1.78 | $ | 1.58 | $ | 1.47 |
(1) | Potential Units issuable from the assumed exercise/vesting of the Company's long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per Unit calculation as the Operating Partnership had a loss from continuing operations for the years ended December 31, 2011 and 2010. |
Convertible preference interests/units that could be converted into 0, 0, and 325,103 weighted average Common Shares (which would be contributed to the Operating Partnership in exchange for OP Units) for the years ended December 31, 2012, 2011 and 2010, respectively, were outstanding but were not included in the computation of diluted earnings per Unit because the effects would be anti-dilutive. In addition, the effect of the Common Shares/OP Units that could ultimately be issued upon the conversion/exchange of the Company's $650.0 million exchangeable senior notes ($482.5 million outstanding were redeemed on August 18, 2011) was not included in the computation of diluted earnings per Unit because the effects would be anti-dilutive.
For additional disclosures regarding the employee share options and restricted shares, see Notes 2 and 12.
11. | Discontinued Operations |
The Company has presented separately as discontinued operations in all periods the results of operations for all consolidated assets disposed of and all properties held for sale, if any. Results are reflective of dispositions through March 31, 2013.
The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets during each of the years ended December 31, 2012, 2011 and 2010 (amounts in thousands).
F-45
Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | |||||||||
REVENUES | |||||||||||
Rental income | $ | 313,452 | $ | 431,951 | $ | 606,932 | |||||
Total revenues | 313,452 | 431,951 | 606,932 | ||||||||
EXPENSES (1) | |||||||||||
Property and maintenance | 69,783 | 127,276 | 193,550 | ||||||||
Real estate taxes and insurance | 27,956 | 37,745 | 62,396 | ||||||||
Property management | 211 | 266 | 230 | ||||||||
Depreciation | 91,108 | 124,265 | 167,887 | ||||||||
General and administrative | 87 | 55 | 42 | ||||||||
Total expenses | 189,145 | 289,607 | 424,105 | ||||||||
Discontinued operating income | 124,307 | 142,344 | 182,827 | ||||||||
Interest and other income | 156 | 196 | 1,490 | ||||||||
Other expenses | (161 | ) | (348 | ) | (331 | ) | |||||
Interest (2): | |||||||||||
Expense incurred, net | (2,284 | ) | (7,686 | ) | (20,763 | ) | |||||
Amortization of deferred financing costs | (115 | ) | (1,195 | ) | (953 | ) | |||||
Income and other tax (expense) benefit | (32 | ) | 223 | (108 | ) | ||||||
Discontinued operations | 121,871 | 133,534 | 162,162 | ||||||||
Net gain on sales of discontinued operations | 548,278 | 826,489 | 297,956 | ||||||||
Discontinued operations, net | $ | 670,149 | $ | 960,023 | $ | 460,118 |
(1) | Includes expenses paid in the current period for properties sold or held for sale 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 and/or held for sale. |
For the properties sold during 2012 and the first three months of 2013, the investment in real estate, net of accumulated depreciation, and the mortgage notes payable balances at December 31, 2011 were $2.0 billion and $147.6 million, respectively. For the properties sold during the first three months of 2013, the investment in real estate, net of accumulated depreciation, and the mortgage notes payable balances at December 31, 2012 were $1.4 billion and $8.4 million, respectively.
12. | Share Incentive Plans |
Any Common Shares issued pursuant to EQR's incentive equity compensation and employee share purchase plans will result in ERPOP issuing OP Units to EQR on a one-for-one basis with ERPOP receiving the net cash proceeds of such issuances.
On June 16, 2011, the shareholders of EQR approved the Company's 2011 Plan. The 2011 Plan reserved 12,980,741 Common Shares for issuance. In conjunction with the approval of the 2011 Plan, no further awards may be granted under the 2002 Share Incentive Plan. The 2011 Plan expires on June 16, 2021. As of December 31, 2012, 11,097,881 shares were available for future issuance.
Pursuant to the 2011 Plan, the 2002 Share Incentive Plan, as restated, and the Amended and Restated 1993 Share Option and Share Award Plan, as amended (collectively the “Share Incentive Plans”), officers, trustees and key employees of the Company may be granted share options to acquire Common Shares (“Options”) including non-qualified share options (“NQSOs”), incentive share options (“ISOs”) and share appreciation rights (“SARs”), or may be granted restricted or non-restricted shares (including performance-based awards), subject to conditions and restrictions as described in the Share Incentive Plans. Options, SARs, restricted shares, performance shares and LTIP Units (see discussion below) are sometimes collectively referred to herein as “Awards”.
The Options are generally granted at the fair market value of the Company’s Common Shares at the date of grant, vest in three equal installments over a three-year period, are exercisable upon vesting and expire ten years from the date of grant. The exercise price for all Options under the Share Incentive Plans is equal to the fair market value of the underlying Common Shares
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at the time the Option is granted. Options exercised result in new Common Shares being issued on the open market. The 2002 Share Incentive Plan and the Amended and Restated 1993 Share Option and Share Award Plan, as amended, will terminate at such time as all outstanding Awards have expired or have been exercised/vested. The Board of Trustees may at any time amend or terminate the Share Incentive Plans, but termination will not affect Awards previously granted. Any Options which had vested prior to such a termination would remain exercisable by the holder.
Restricted shares that have been awarded through December 31, 2012 generally vest three years from the award date. In addition, the Company’s unvested restricted shareholders have the same voting rights as any other Common Share holder. During the three-year period of restriction, the Company’s unvested restricted shareholders receive quarterly dividend payments on their shares at the same rate and on the same date as any other Common Share holder. As a result, dividends paid on unvested restricted shares are included as a component of retained earnings (included in general partner's capital in the Operating Partnership's financial statements) and have not been considered in reducing net income available to Common Shares/Units in a manner similar to the Company’s preferred share/preference unit dividends for the earnings per share/Unit calculation. If employment is terminated prior to the lapsing of the restriction, the shares are generally canceled.
In December 2008, the Company’s then existing 2002 Share Incentive Plan was amended to allow for the issuance of long-term incentive plan units (“LTIP Units”) to officers of the Company as an alternative to the Company’s restricted shares. The 2011 Plan also allows for the issuance of LTIP Units. LTIP Units are a class of partnership interests that under certain conditions, including vesting, are convertible by the holder into an equal number of OP Units, which are redeemable by the holder for Common Shares on a one-for-one basis or the cash value of such shares at the option of the Company. In connection with the grant of long-term incentive compensation for services provided during a year, officers of the Company are allowed to choose, on a one-for-one basis, between restricted shares and LTIP Units. In January 2011, certain holders of restricted shares converted these shares into LTIP Units. Similar to restricted shares, LTIP Units generally vest three years from the award date. In addition, LTIP Unit holders receive quarterly dividend payments on their LTIP Units at the same rate and on the same date as any other OP Unit holder. As a result, dividends paid on LTIP Units are included as a component of Noncontrolling Interests – Operating Partnership/Limited Partners' capital and have not been considered in reducing net income available to Common Shares/Units in a manner similar to the Company’s preferred share/preference unit dividends for the earnings per share/Unit calculation. If employment is terminated prior to vesting, the LTIP Units are generally canceled. An LTIP Unit will automatically convert to an OP Unit when the capital account of each LTIP Unit increases (“books-up”) to a specified target. If the capital target is not attained within ten years following the date of issuance, the LTIP Unit will automatically be canceled and no compensation will be payable to the holder of such canceled LTIP Unit.
All Trustees, with the exception of the Company's non-executive Chairman and employee Trustees, are granted options and restricted shares that vest one-year from the grant date that corresponds to the term for which he or she has been elected to serve. The non-executive Chairman's grants vest over the same term or period as all other employees.
The Company's Share Incentive Plans provide for certain benefits upon retirement. For employees hired prior to January 1, 2009, retirement generally means the termination of employment (other than for cause): (i) on or after age 62; or (ii) prior to age 62 after meeting the requirements of the Rule of 70 (described below). For employees hired after January 1, 2009, retirement generally means the termination of employment (other than for cause) after meeting the requirements of the Rule of 70. For Trustees, retirement generally means termination of service on the Board (other than for cause) on or after age 72.
The Rule of 70 is met when an employee’s years of service with the Company (which must be at least 15 years) plus his or her age (which must be at least 55 years) on the date of termination equals or exceeds 70 years. In addition, the employee must give the Company at least 6 months’ advance written notice of his or her intention to retire and sign a release upon termination of employment, releasing the Company from customary claims and agreeing to ongoing non-competition and employee non-solicitation provisions.
Under the Company's definitions of retirement, several of its executive officers, including its Chief Executive Officer, are retirement eligible. The Company's non-executive Chairman is retirement eligible in 2013.
For employees hired prior to January 1, 2009 who retire at or after age 62 or for Trustees who retire at or after age 72, such employee’s or Trustee's unvested restricted shares, LTIP Units and share options would immediately vest, and share options would continue to be exercisable for the balance of the applicable ten-year option period, as is provided under the Share Incentive Plans. For all other employees (those hired after January 1, 2009 and those hired before such date who choose to retire prior to age 62), upon such retirement under the Rule of 70 definition of retirement of employees, such employee’s unvested restricted shares, LTIP Units and share options would continue to vest per the original vesting schedule (subject to immediate vesting upon the occurrence of a subsequent change in control of the Company or the employee’s death), and options would continue to be exercisable for the balance of the applicable ten-year option period, subject to the employee’s compliance with the non-competition and employee non-solicitation provisions. If an employee violates these provisions after such retirement, all unvested restricted shares, unvested LTIP Units and unvested and vested share options at the time of the violation would be void, unless otherwise determined by the Compensation Committee of the Board of Trustees.
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The following tables summarize compensation information regarding the restricted shares, LTIP Units, share options and Employee Share Purchase Plan (“ESPP”) for the three years ended December 31, 2012, 2011 and 2010 (amounts in thousands):
Year Ended December 31, 2012 | |||||||||||||||
Compensation Expense | Compensation Capitalized | Compensation Equity | Dividends Incurred | ||||||||||||
Restricted shares | $ | 8,014 | $ | 922 | $ | 8,936 | $ | 949 | |||||||
LTIP Units | 5,004 | 303 | 5,307 | 234 | |||||||||||
Share options | 10,970 | 782 | 11,752 | — | |||||||||||
ESPP discount | 844 | 121 | 965 | — | |||||||||||
Total | $ | 24,832 | $ | 2,128 | $ | 26,960 | $ | 1,183 |
Year Ended December 31, 2011 | |||||||||||||||
Compensation Expense | Compensation Capitalized | Compensation Equity | Dividends Incurred | ||||||||||||
Restricted shares | $ | 8,041 | $ | 1,061 | $ | 9,102 | $ | 1,121 | |||||||
LTIP Units | 3,344 | 297 | 3,641 | 199 | |||||||||||
Share options | 8,711 | 834 | 9,545 | — | |||||||||||
ESPP discount | 1,081 | 113 | 1,194 | — | |||||||||||
Total | $ | 21,177 | $ | 2,305 | $ | 23,482 | $ | 1,320 |
Year Ended December 31, 2010 | |||||||||||||||
Compensation Expense | Compensation Capitalized | Compensation Equity | Dividends Incurred | ||||||||||||
Restricted shares | $ | 8,603 | $ | 1,178 | $ | 9,781 | $ | 1,334 | |||||||
LTIP Units | 2,334 | 190 | 2,524 | 138 | |||||||||||
Share options | 6,707 | 714 | 7,421 | — | |||||||||||
ESPP discount | 1,231 | 59 | 1,290 | — | |||||||||||
Total | $ | 18,875 | $ | 2,141 | $ | 21,016 | $ | 1,472 |
Compensation expense is generally recognized for Awards as follows:
• | Restricted shares, LTIP Units and share options – Straight-line method over the vesting period of the options or shares regardless of cliff or ratable vesting distinctions. |
• | ESPP discount – Immediately upon the purchase of common shares each quarter. |
The Company accelerates the recognition of compensation expense for all Awards for those individuals approaching or meeting the retirement age criteria discussed above. The total compensation expense related to Awards not yet vested at December 31, 2012 is $18.6 million, (excluding the accelerated expenses for individuals approaching or meeting the retirement age criteria discussed above) which is expected to be recognized over a weighted average term of 2.12 years.
See Note 2 for additional information regarding the Company’s share-based compensation.
The table below summarizes the Award activity of the Share Incentive Plans for the three years ended December 31, 2012, 2011 and 2010:
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Common Shares Subject to Options | Weighted Average Exercise Price per Option | Restricted Shares | Weighted Average Fair Value per Restricted Share | LTIP Units | Weighted Average Fair Value per LTIP Unit | |||||||||||||||
Balance at December 31, 2009 | 11,349,750 | $32.03 | 954,366 | $37.10 | 154,616 | $21.11 | ||||||||||||||
Awards granted (1) | 1,436,115 | $33.59 | 270,805 | $34.85 | 94,096 | $32.97 | ||||||||||||||
Awards exercised/vested (2) (3) | (2,506,645 | ) | $28.68 | (278,183 | ) | $52.25 | — | — | ||||||||||||
Awards forfeited | (76,275 | ) | $29.43 | (35,038 | ) | $30.84 | (1,204 | ) | $21.11 | |||||||||||
Awards expired | (96,457 | ) | $42.69 | — | — | — | — | |||||||||||||
Balance at December 31, 2010 | 10,106,488 | $33.00 | 911,950 | $32.05 | 247,508 | $25.62 | ||||||||||||||
Awards granted (1) | 1,491,311 | $53.70 | 170,588 | $53.99 | 223,452 | $46.64 | ||||||||||||||
Awards exercised/vested (2) (3) (4) | (2,945,950 | ) | $32.27 | (258,068 | ) | $38.32 | (101,988 | ) | $38.57 | |||||||||||
Awards forfeited | (41,559 | ) | $35.14 | (126,960 | ) | $37.19 | (1,352 | ) | $27.79 | |||||||||||
Awards expired | (16,270 | ) | $44.13 | — | — | — | — | |||||||||||||
Balance at December 31, 2011 | 8,594,020 | $36.81 | 697,510 | $34.17 | 367,620 | $34.80 | ||||||||||||||
Awards granted (1) | 1,164,484 | $60.22 | 140,980 | $60.20 | 70,235 | $57.24 | ||||||||||||||
Awards exercised/vested (2) (3) (4) | (1,608,425 | ) | $30.87 | (300,809 | ) | $23.79 | (152,821 | ) | $21.11 | |||||||||||
Awards forfeited | (23,795 | ) | $51.55 | (12,728 | ) | $46.25 | — | — | ||||||||||||
Awards expired | (11,029 | ) | $35.53 | — | — | — | — | |||||||||||||
Balance at December 31, 2012 | 8,115,255 | $41.31 | 524,953 | $46.81 | 285,034 | $48.41 |
(1) | The weighted average grant date fair value for Options granted during the years ended December 31, 2012, 2011 and 2010 was $8.55 per share, $8.18 per share and $6.18 per share, respectively. |
(2) | The aggregate intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $46.7 million, $74.8 million and $39.6 million, respectively. These values were calculated as the difference between the strike price of the underlying awards and the per share price at which each respective award was exercised. |
(3) | The fair value of restricted shares vested during the years ended December 31, 2012, 2011 and 2010 was $18.0 million, $14.0 million and $9.1 million, respectively. |
(4) | The fair value of LTIP Units vested during the year ended December 31, 2012 and 2011 was $9.1 million and $5.5 million, respectively. |
The following table summarizes information regarding options outstanding and exercisable at December 31, 2012:
Options Outstanding (1) | Options Exercisable (2) | |||||||||||||||
Range of Exercise Prices | Options | Weighted Average Remaining Contractual Life in Years | Weighted Average Exercise Price | Options | Weighted Average Exercise Price | |||||||||||
$18.70 to $24.93 | 1,516,051 | 5.20 | $23.14 | 1,516,051 | $23.14 | |||||||||||
$24.94 to $31.16 | 408,342 | 1.07 | $29.21 | 408,342 | $29.21 | |||||||||||
$31.17 to $37.39 | 1,559,825 | 5.50 | $32.59 | 1,128,606 | $32.45 | |||||||||||
$37.40 to $43.62 | 1,389,121 | 4.20 | $40.46 | 1,389,121 | $40.46 | |||||||||||
$43.63 to $49.86 | 61,187 | 7.55 | $48.41 | 3,992 | $45.33 | |||||||||||
$49.87 to $56.09 | 1,983,188 | 7.07 | $53.52 | 891,250 | $53.58 | |||||||||||
$56.10 to $62.32 | 1,197,541 | 9.08 | $60.18 | 48,545 | $59.33 | |||||||||||
$18.70 to $62.32 | 8,115,255 | 5.92 | $41.31 | 5,385,907 | $35.40 | |||||||||||
Vested and expected to vest as of December 31, 2012 | 7,801,412 | 5.82 | $40.66 |
(1) | The aggregate intrinsic value of options outstanding that are vested and expected to vest as of December 31, 2012 is $128.4 million. |
(2) | The aggregate intrinsic value and weighted average remaining contractual life in years of options exercisable as of December 31, 2012 is $114.7 million and 4.6 years, respectively. |
Note: The aggregate intrinsic values in Notes (1) and (2) above were both calculated as the excess, if any, between the Company’s closing share price of $56.67 per share on December 31, 2012 and the strike price of the underlying awards.
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As of December 31, 2011 and 2010, 5,415,550 Options (with a weighted average exercise price of $34.64) and 6,786,651 Options (with a weighted average exercise price of $34.89) were exercisable, respectively.
13. | Employee Plans |
The Company established an Employee Share Purchase Plan to provide each employee and trustee the ability to annually acquire up to $100,000 of Common Shares of EQR. In 2003, EQR's shareholders approved an increase in the aggregate number of Common Shares available under the ESPP to 7,000,000 (from 2,000,000). The Company has 3,180,809 Common Shares available for purchase under the ESPP at December 31, 2012. The Common Shares may be purchased quarterly at a price equal to 85% of the lesser of: (a) the closing price for a share on the last day of such quarter; and (b) the greater of: (i) the closing price for a share on the first day of such quarter, and (ii) the average closing price for a share for all the business days in the quarter. The following table summarizes information regarding the Common Shares issued under the ESPP (the net proceeds noted below were contributed to ERPOP in exchange for OP Units):
Year Ended December 31, | |||||
2012 | 2011 | 2010 | |||
(Amounts in thousands except share and per share amounts) | |||||
Shares issued | 110,054 | 113,107 | 157,363 | ||
Issuance price ranges | $46.33 – $51.78 | $44.04 – $51.19 | $28.26 – $41.16 | ||
Issuance proceeds | $5,399 | $5,262 | $5,112 |
The Company established a defined contribution plan (the “401(k) Plan”) to provide retirement benefits for employees that meet minimum employment criteria. The Company matches dollar for dollar up to the first 3% of eligible compensation that a participant contributes to the 401(k) Plan. Participants are vested in the Company’s contributions over five years. The Company recognized an expense in the amount of $4.4 million, $3.7 million and $4.0 million for the years ended December 31, 2012, 2011 and 2010, respectively.
The Company established a supplemental executive retirement plan (the “SERP”) to provide certain officers and trustees an opportunity to defer a portion of their eligible compensation in order to save for retirement. The SERP is restricted to investments in Common Shares, certain marketable securities that have been specifically approved and cash equivalents. The deferred compensation liability represented in the SERP and the securities issued to fund such deferred compensation liability are consolidated by the Company and carried on the Company’s balance sheet, and the Company’s Common Shares held in the SERP are accounted for as a reduction to paid in capital (included in general partner's capital in the Operating Partnership's financial statements).
14. | Distribution Reinvestment and Share Purchase Plan |
On December 16, 2008, the Company filed with the SEC a Form S-3 Registration Statement to register 5,000,000 Common Shares pursuant to a Distribution Reinvestment and Share Purchase Plan (the "DRIP Plan"). The registration statement was automatically declared effective the same day and was to expire at the earlier of the date on which all 5,000,000 shares had been issued or December 16, 2011. On November 18, 2011, the Company filed with the SEC a Form S-3 Registration Statement to register 4,850,000 Common Shares under the DRIP Plan, which included the remaining shares available for issuance under the 2008 registration, which terminated as of such date. The registration statement was automatically declared effective the same day and expires at the earlier of the date on which all 4,850,000 shares have been issued or November 18, 2014. The Company has 4,833,763 Common Shares available for issuance under the DRIP Plan at December 31, 2012.
The DRIP Plan provides holders of record and beneficial owners of Common Shares and Preferred Shares with a simple and convenient method of investing cash distributions in additional Common Shares (which is referred to herein as the “Dividend Reinvestment – DRIP Plan”). Common Shares may also be purchased on a monthly basis with optional cash payments made by participants in the DRIP Plan and interested new investors, not currently shareholders of EQR, at the market price of the Common Shares less a discount ranging between 0% and 5%, as determined in accordance with the DRIP Plan (which is referred to herein as the “Share Purchase – DRIP Plan”). Common Shares purchased under the DRIP Plan may, at the option of EQR, be directly issued by EQR or purchased by EQR's transfer agent in the open market using participants’ funds. The net proceeds from any Common Share issuances are contributed to ERPOP in exchange for OP Units.
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15. | Transactions with Related Parties |
Pursuant to the terms of the partnership agreement for the Operating Partnership, ERPOP is required to reimburse EQR for all expenses incurred by EQR in excess of income earned by EQR through its indirect 1% ownership of various entities. Amounts paid on behalf of EQR are reflected in the consolidated statements of operations as general and administrative expenses.
The Company leases its corporate headquarters from an entity controlled by EQR’s Chairman of the Board of Trustees. The lease terminates on January 31, 2022. Amounts incurred for such office space for the years ended December 31, 2012, 2011 and 2010, respectively, were approximately $1.3 million, $2.2 million and $2.7 million. The Company believes these amounts equal market rates for such rental space.
16. | Commitments and Contingencies |
The Company, as an owner of real estate, is subject to various Federal, state and local environmental 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 is party to a housing discrimination lawsuit brought by a non-profit civil rights organization in April 2006 in the U.S. District Court for the District of Maryland. The suit alleges that the Company designed and built approximately 300 of its properties in violation of the accessibility requirements of the Fair Housing Act and Americans With Disabilities Act. The suit seeks actual and punitive damages, injunctive relief (including modification of non-compliant properties), costs and attorneys' fees. The Company believes it has a number of viable defenses, including that a majority of the named properties were completed before the operative dates of the statutes in question and/or were not designed or built by the Company. Accordingly, the Company is defending the suit vigorously. Due to the pendency of the Company's defenses and the uncertainty of many other critical factual and legal issues, it is not possible to determine or predict the outcome of the suit or a possible loss or a range of loss, and no amounts have been accrued at December 31, 2012. While no assurances can be given, the Company does not believe that the suit, if adversely determined, would have a material adverse effect on the Company.
The Company does not believe there is any other 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.
As of December 31, 2012, the Company has six consolidated projects (including 400 Park Avenue South in New York City which the Company is jointly developing with Toll Brothers – see further discussion below) totaling 1,536 apartment units in various stages of development with commitments to fund of approximately $406.0 million and estimated completion dates ranging through June 30, 2015, as well as other completed development projects that are in various stages of lease up or are stabilized. Five of these projects under development are being developed solely by the Company and one is being co-developed with a third party development partner.
As of December 31, 2012, the Company has two unconsolidated projects totaling 945 apartment units under development with estimated completion dates ranging through December 31, 2013. The Company currently has no further funding obligations related to these projects. While the Company is the managing member of both of the joint ventures, is responsible for constructing both projects and has given certain construction cost overrun guarantees, all major decisions are made jointly, the large majority of funding is provided by the partner and the partner has significant involvement in and oversight of the ongoing projects. The buy-sell arrangements contain provisions that provide the right, but not the obligation, for the Company to acquire the partner's interests or sell its interests at any time following the occurrence of certain pre-defined events (including at stabilization) described in the development venture agreements.
In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The Company is the managing member and Toll Brothers does not have substantive kick-out or participating rights. Until the core and shell of the building is complete, the building and land will be owned jointly and are required to be consolidated on the Company's balance sheet. Thereafter, the Company will solely own and control the rental portion of the building (floors 2-22) and Toll Brothers will solely own and control the for sale portion of the building (floors 23-40). Once the core and shell are complete, the Toll Brothers' portion of the property will be deconsolidated from the Company's balance sheet. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. As of December 31, 2012, the Company's and Toll Brothers' consolidated contributions to the joint venture were approximately $203.5 million, of which Toll Brothers' noncontrolling interest balance totaled $84.0 million.
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During the years ended December 31, 2012, 2011 and 2010, total operating lease payments expensed for office space, including a portion of real estate taxes, insurance, repairs and utilities, and including rent due under four ground leases, aggregated $8.1 million, $7.1 million and $7.6 million, respectively.
The Company has entered into a retirement benefits agreement with its Chairman of the Board of Trustees and deferred compensation agreements with its Vice Chairman and two former chief executive officers. During the years ended December 31, 2012, 2011 and 2010, the Company recognized compensation expense of $1.0 million, $1.0 million and $0.9 million, respectively, related to these agreements.
The following table summarizes the Company’s contractual obligations for minimum rent payments under operating leases and deferred compensation for the next five years and thereafter as of December 31, 2012:
Payments Due by Year (in thousands) | ||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | ||||||||||||||||||||||
Operating Leases: | ||||||||||||||||||||||||||||
Minimum Rent Payments (a) | $ | 7,462 | $ | 8,862 | $ | 9,501 | $ | 9,462 | $ | 9,415 | $ | 691,304 | $ | 736,006 | ||||||||||||||
Other Long-Term Liabilities: | ||||||||||||||||||||||||||||
Deferred Compensation (b) | 1,179 | 1,691 | 1,691 | 1,691 | 1,692 | 6,529 | 14,473 |
(a) | Minimum basic rent due for various office space the Company leases and fixed base rent due on ground leases for five properties/parcels. |
(b) | Estimated payments to EQR's Chairman, Vice Chairman and two former CEOs based on actual and planned retirement dates. |
17. | 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. The Company's operating segments (geographic markets) have been aggregated into four reportable segments based upon the geographic region in which they are located.
The Company's fee and asset management and development (including its partially owned properties) 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 three years ended December 31, 2012, 2011 or 2010.
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; 2) real estate taxes and insurance expense; and 3) property management expense (all as reflected in the accompanying consolidated statements of operations). 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. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. The following tables present NOI for each segment from our rental real estate specific to continuing operations for the years ended December 31, 2012, 2011 and 2010, respectively, as well as total assets and capital expenditures at December 31, 2012 and 2011, respectively (amounts in thousands):
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Year Ended December 31, 2012 | |||||||||||||||||||||||
Northeast | Northwest | Southeast | Southwest | Other (3) | Total | ||||||||||||||||||
Rental income: | |||||||||||||||||||||||
Same store (1) | $ | 708,009 | $ | 386,813 | $ | 332,185 | $ | 441,911 | $ | — | $ | 1,868,918 | |||||||||||
Non-same store/other (2) (3) | 110,060 | 54,414 | 19,853 | 60,962 | (65 | ) | 245,224 | ||||||||||||||||
Properties sold – March YTD 2013 (4) | — | — | — | — | (243,833 | ) | (243,833 | ) | |||||||||||||||
Total rental income | 818,069 | 441,227 | 352,038 | 502,873 | (243,898 | ) | 1,870,309 | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Same store (1) | 251,538 | 127,213 | 127,279 | 143,884 | — | 649,914 | |||||||||||||||||
Non-same store/other (2) (3) | 33,423 | 24,755 | 7,550 | 20,837 | 3,285 | 89,850 | |||||||||||||||||
Properties sold – March YTD 2013 (4) | — | — | — | — | (72,109 | ) | (72,109 | ) | |||||||||||||||
Total operating expenses | 284,961 | 151,968 | 134,829 | 164,721 | (68,824 | ) | 667,655 | ||||||||||||||||
NOI: | |||||||||||||||||||||||
Same store (1) | 456,471 | 259,600 | 204,906 | 298,027 | — | 1,219,004 | |||||||||||||||||
Non-same store/other (2) (3) | 76,637 | 29,659 | 12,303 | 40,125 | (3,350 | ) | 155,374 | ||||||||||||||||
Properties sold – March YTD 2013 (4) | — | — | — | — | (171,724 | ) | (171,724 | ) | |||||||||||||||
Total NOI | $ | 533,108 | $ | 289,259 | $ | 217,209 | $ | 338,152 | $ | (175,074 | ) | $ | 1,202,654 | ||||||||||
Total assets | $ | 6,972,992 | $ | 2,953,700 | $ | 2,268,805 | $ | 3,191,403 | $ | 1,814,100 | $ | 17,201,000 | |||||||||||
Capital expenditures | $ | 58,298 | $ | 35,650 | $ | 27,521 | $ | 28,505 | $ | 2,854 | $ | 152,828 |
(1) | Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2011, less properties subsequently sold, which represented 98,577 apartment units. |
(2) | Non-same store primarily includes properties acquired after January 1, 2011, plus any properties in lease-up and not stabilized as of January 1, 2011. |
(3) | Other includes development and other corporate operations. |
(4) | Properties sold – March YTD 2013 reflects discontinued operations for properties sold during the first three months of 2013. |
Year Ended December 31, 2011 | |||||||||||||||||||||||
Northeast | Northwest | Southeast | Southwest | Other (3) | Total | ||||||||||||||||||
Rental income: | |||||||||||||||||||||||
Same store (1) | $ | 671,633 | $ | 356,822 | $ | 317,205 | $ | 425,789 | $ | — | $ | 1,771,449 | |||||||||||
Non-same store/other (2) (3) | 51,566 | 9,900 | 14,488 | 30,539 | (3,477 | ) | 103,016 | ||||||||||||||||
Properties sold – March YTD 2013 (4) | — | — | — | — | (229,823 | ) | (229,823 | ) | |||||||||||||||
Total rental income | 723,199 | 366,722 | 331,693 | 456,328 | (233,300 | ) | 1,644,642 | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Same store (1) | 245,166 | 125,008 | 123,720 | 144,777 | — | 638,671 | |||||||||||||||||
Non-same store/other (2) (3) | 14,101 | 3,946 | 5,165 | 12,144 | 7,326 | 42,682 | |||||||||||||||||
Properties sold – March YTD 2013 (4) | — | — | — | — | (71,233 | ) | (71,233 | ) | |||||||||||||||
Total operating expenses | 259,267 | 128,954 | 128,885 | 156,921 | (63,907 | ) | 610,120 | ||||||||||||||||
NOI: | |||||||||||||||||||||||
Same store (1) | 426,467 | 231,814 | 193,485 | 281,012 | — | 1,132,778 | |||||||||||||||||
Non-same store/other (2) (3) | 37,465 | 5,954 | 9,323 | 18,395 | (10,803 | ) | 60,334 | ||||||||||||||||
Properties sold – March YTD 2013 (4) | — | — | — | — | (158,590 | ) | (158,590 | ) | |||||||||||||||
Total NOI | $ | 463,932 | $ | 237,768 | $ | 202,808 | $ | 299,407 | $ | (169,393 | ) | $ | 1,034,522 | ||||||||||
Total assets | $ | 6,550,979 | $ | 2,816,078 | $ | 2,340,902 | $ | 3,238,164 | $ | 1,713,180 | $ | 16,659,303 | |||||||||||
Capital expenditures | $ | 51,203 | $ | 32,522 | $ | 24,813 | $ | 27,792 | $ | 8,122 | $ | 144,452 |
(1) | Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2011, less properties subsequently sold, which represented 98,577 apartment units. |
F-53
(2) | Non-same store primarily includes properties acquired after January 1, 2011, plus any properties in lease-up and not stabilized as of January 1, 2011. |
(3) | Other includes development, condominium conversion overhead of $0.4 million and other corporate operations. |
(4) | Properties sold – March YTD 2013 reflects discontinued operations for properties sold during the first three months of 2013. |
Year Ended December 31, 2010 | |||||||||||||||||||||||
Northeast | Northwest | Southeast | Southwest | Other (3) | Total | ||||||||||||||||||
Rental income: | |||||||||||||||||||||||
Same store (1) | $ | 553,561 | $ | 322,427 | $ | 342,080 | $ | 412,414 | $ | — | $ | 1,630,482 | |||||||||||
Non-same store/other (2) (3) | 95,493 | 18,825 | 9,009 | 13,587 | (3,604 | ) | 133,310 | ||||||||||||||||
Properties sold in 2012 (4) | — | — | — | — | (98,559 | ) | (98,559 | ) | |||||||||||||||
Properties sold – March YTD 2013 (5) | — | — | — | — | (218,452 | ) | (218,452 | ) | |||||||||||||||
Total rental income | 649,054 | 341,252 | 351,089 | 426,001 | (320,615 | ) | 1,446,781 | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Same store (1) | 207,131 | 119,797 | 139,550 | 147,732 | — | 614,210 | |||||||||||||||||
Non-same store/other (2) (3) | 48,119 | 8,300 | 3,729 | 7,198 | 12,230 | 79,576 | |||||||||||||||||
Properties sold in 2012 (4) | — | — | — | — | (39,015 | ) | (39,015 | ) | |||||||||||||||
Properties sold – March YTD 2013 (5) | — | — | — | — | (78,640 | ) | (78,640 | ) | |||||||||||||||
Total operating expenses | 255,250 | 128,097 | 143,279 | 154,930 | (105,425 | ) | 576,131 | ||||||||||||||||
NOI: | |||||||||||||||||||||||
Same store (1) | 346,430 | 202,630 | 202,530 | 264,682 | — | 1,016,272 | |||||||||||||||||
Non-same store/other (2) (3) | 47,374 | 10,525 | 5,280 | 6,389 | (15,834 | ) | 53,734 | ||||||||||||||||
Properties sold in 2012 (4) | — | — | — | — | (59,544 | ) | (59,544 | ) | |||||||||||||||
Properties sold – March YTD 2013 (5) | — | — | — | — | (139,812 | ) | (139,812 | ) | |||||||||||||||
Total NOI | $ | 393,804 | $ | 213,155 | $ | 207,810 | $ | 271,071 | $ | (215,190 | ) | $ | 870,650 |
(1) | Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2010, less properties subsequently sold, which represented 101,312 apartment units. |
(2) | Non-same store primarily includes properties acquired after January 1, 2010, plus any properties in lease-up and not stabilized as of January 1, 2010. |
(3) | Other includes development, condominium conversion overhead of $0.6 million and other corporate operations. |
(4) | Reflects discontinued operations for properties sold during 2012. |
(5) | Properties sold – March YTD 2013 reflects discontinued operations for properties sold during the first three months of 2013. |
Note: Markets included in the above geographic segments are as follows:
(a) Northeast – New England (excluding Boston), Boston, New York Metro, DC Northern Virginia and Suburban Maryland.
(b) Northwest – Denver, San Francisco Bay Area and Seattle/Tacoma.
(c) Southeast – Atlanta, Jacksonville, Orlando and South Florida.
(d) Southwest – Inland Empire, Los Angeles, Orange County, Phoenix and San Diego.
The following table presents a reconciliation of NOI from our rental real estate specific to continuing operations for the years ended December 31, 2012, 2011 and 2010, respectively (amounts in thousands):
Year Ended December 31, | |||||||||||
2012 | 2011 | 2010 | |||||||||
Rental income | $ | 1,870,309 | $ | 1,644,642 | $ | 1,446,781 | |||||
Property and maintenance expense | (365,778 | ) | (337,419 | ) | (323,743 | ) | |||||
Real estate taxes and insurance expense | (219,975 | ) | (190,834 | ) | (172,531 | ) | |||||
Property management expense | (81,902 | ) | (81,867 | ) | (79,857 | ) | |||||
Total operating expenses | (667,655 | ) | (610,120 | ) | (576,131 | ) | |||||
Net operating income | $ | 1,202,654 | $ | 1,034,522 | $ | 870,650 |
F-54
18. | Subsequent Events/Other |
Subsequent Events
Subsequent to December 31, 2012, the Company:
• | Sold 16 properties consisting of 4,798 apartment units for $779.7 million; |
• | Entered into an agreement to sell a portfolio of assets including 8,010 units to a joint venture of Greystar and Goldman Sachs for $1.5 billion, of which the Company has sold ten properties, consisting of 2,911 apartment units for $557.8 million that are included in the bullet above; |
• | Terminated its $2.5 billion bridge loan commitment in connection with the execution of the new revolving credit facility and term loan facility discussed below; |
• | Replaced its existing $1.75 billion facility with a new $2.5 billion unsecured revolving credit facility maturing April 1, 2018, with an interest rate on advances under the facility of LIBOR plus a spread (currently 1.05%) and an annual facility fee (currently 15 basis points), which are dependent on the credit rating of the Company's long-term debt. The Company has the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments; and |
• | Entered into a new senior unsecured $750.0 million delayed draw term loan facility which is currently undrawn and may be drawn anytime on or before July 11, 2013. If the Company elects to draw on this facility, the full amount of the principal will be funded in a single borrowing and the maturity date will be January 11, 2015, subject to a one-year extension option exercisable by the Company. The interest rate on advances under the new term loan facility will generally be LIBOR plus a spread (currently 1.20%), which is dependent on the credit rating of the Company's long-term debt. |
Other
During the years ended December 31, 2012, 2011 and 2010, the Company incurred charges of $12.6 million, $9.5 million and $6.6 million, respectively, related to property acquisition costs, such as survey, title and legal fees, on the acquisition of operating properties and $9.0 million, $5.1 million and $5.3 million, respectively, related to the write-off of various pursuit and out-of-pocket costs for terminated acquisition, disposition and development transactions. These costs, totaling $21.6 million, $14.6 million and $11.9 million, respectively, are included in other expenses in the accompanying consolidated statements of operations.
During the year ended December 31, 2012, the Company settled a dispute with the owners of a land parcel for $4.2 million, which is included in other expenses in the accompanying consolidated statements of operations.
During the year ended December 31, 2011, the Company received $4.5 million for the termination of its royalty participation in LRO/Rainmaker, a revenue management system, which is included in interest and other income in the accompanying consolidated statements of operations. During the year ended December 31, 2010, an arbitration panel awarded commissions, interest and costs in the amount of $1.7 million to the listing and marketing agent related to 38 potential condo sales at one of the Company’s properties. In addition, during 2011 and 2010, the Company received $0.8 million and $5.2 million, respectively, for the settlement of litigation/insurance claims, which are included in interest and other income in the accompanying consolidated statements of operations.
During the year ended December 31, 2011, the Company disposed of its corporate housing business for a sales price of approximately $4.0 million, of which the Company provided $2.0 million of seller financing to the buyer. At the time of sale, the full amount of the seller financing was reserved against and the related gain was deferred. During the years ended December 31, 2012 and 2011, the Company collected $0.3 million and $0.2 million, respectively, on this note receivable and has recognized a cumulative net gain on the sale of approximately $1.4 million.
On November 26, 2012, the Company and AvalonBay Communities, Inc. ("AvalonBay" or "AVB") (NYSE:AVB) entered into a contract with Lehman Brothers Holdings Inc. ("Lehman") to acquire the assets and liabilities of Archstone Enterprise LP ("Archstone"), which consists principally of a portfolio of high-quality apartment properties in major markets in the United States. Under the terms of the agreement, the Company will acquire approximately 60% of Archstone's assets and liabilities and AvalonBay will acquire approximately 40% of Archstone's assets and liabilities. The Company will acquire approximately 75 operating properties, four properties under development and several land parcels to be held for future development for approximately $8.9 billion which will consist of cash of approximately $2.0 billion, 34,468,085 Common Shares and the assumption of the Company's portion of the liabilities related to the Archstone assets (other than certain liabilities owed to Lehman and certain transaction expenses). The Company also expects to assume approximately $3 billion of consolidated Archstone debt. In addition, the
F-55
Company and AvalonBay will acquire certain assets of Archstone, including Archstone’s interests in certain joint ventures, interests in a portfolio of properties located in Germany and certain development land parcels, and will become subject to approximately $179.9 million in preferred interests of Archstone unitholders through various unconsolidated joint ventures expected to be owned 60% by the Company and 40% by AvalonBay. The transaction is expected to close in the first quarter of 2013.
On December 2, 2011, the Company entered into a contract with affiliates of Bank of America and Barclays PLC to acquire, for $1.325 billion, half of their interests - an approximately 26.5% interest overall - in Archstone, a privately-held owner, operator and developer of multifamily apartment properties. On January 20, 2012, Lehman, the other owner of Archstone, acquired this 26.5% interest pursuant to a right of first offer and as a result, the Company's contract with the sellers was terminated. The Company had the exclusive right, exercisable on or before May 24, 2012, to contract to purchase the remaining 26.5% interest in Archstone owned by the same sellers for a price, determined by the Company, equal to $1.5 billion or higher. On May 24, 2012, the Company entered into a contract to purchase the remaining 26.5% interest in Archstone for $1.58 billion and Lehman exercised its right of first offer and acquired this 26.5% interest for $1.58 billion on June 6, 2012. As a result, the Company's contract was terminated and by the terms of the contract, the Company received $150.0 million in termination fees subject to certain contingencies. Consistent with the resolution of these contingencies, the Company recognized $70.0 million of these fees as interest and other income in July 2012 and recognized the remaining $80.0 million in October 2012.
During the year ended December 31, 2010, the Company recorded a $45.4 million non-cash asset impairment charge on two parcels of land held for development as a result of changes in the Company’s future plans for those parcels. The Company planned to sell one parcel in the near term and contemplated a joint venture structure for the other, necessitating this impairment charge. This charge was the result of an analysis of each parcel’s estimated fair value (determined using internally developed models that were based on market assumptions and comparable sales data) compared to its current capitalized carrying value. The market assumptions used as inputs to the Company’s fair value model include construction costs, leasing assumptions, growth rates, discount rates, terminal capitalization rates and development yields, along with the Company’s current plans for each individual asset. The Company uses data on its existing portfolio of properties and its recent acquisition and development properties, as well as similar market data from third party sources, when available, in determining these inputs. The valuation techniques used to measure fair value are consistent with how similar assets were measured in prior periods.
During the year ended December 31, 2012, the Company incurred Archstone-related expenses of approximately $14.0 million. Cumulative to date, the Company incurred Archstone-related expenses of approximately $18.4 million, of which approximately $11.0 million of this total was financing-related and $7.4 million was pursuit costs.
In 2010, a portion of the parking garage collapsed at one of the Company’s rental properties (Prospect Towers in Hackensack, New Jersey). The costs related to the collapse (both expensed and capitalized), including providing for residents' interim needs, lost revenue and garage reconstruction, were approximately $22.8 million, before insurance reimbursements of $13.6 million. The garage has been rebuilt with costs capitalized as incurred. Other costs, like those to accommodate displaced residents, lost revenue due to a portion of the property being temporarily unavailable for occupancy and legal costs, reduced earnings as they were incurred. Generally, insurance proceeds were recorded as increases to earnings as they were received. During the year ended December 31, 2012, the Company received approximately $3.5 million in insurance proceeds (included in real estate taxes and insurance on the consolidated statements of operations), which represented its final reimbursement of the $13.6 million in cumulative insurance proceeds. During the year ended December 31, 2011, the Company received approximately $6.1 million in insurance proceeds which offset expenses of $1.7 million that were recorded relating to this loss and are included in real estate taxes and insurance on the consolidated statements of operations. During the year ended December 31, 2010, the Company received approximately $4.0 million in insurance proceeds which fully offset the impairment charge recognized to write-off the net book value of the collapsed garage and partially offset expenses of $5.5 million that were recorded relating to this loss and are included in real estate taxes and insurance on the consolidated statements of operations.
19. | Quarterly Financial Data (Unaudited) |
Equity Residential
The following unaudited quarterly data has been prepared on the basis of a December 31 year-end. All amounts have also been restated in accordance with the guidance on discontinued operations and reflect dispositions and/or properties held for sale through March 31, 2013. Amounts are in thousands, except for per share amounts.
F-56
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2012 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues (1) | $ | 446,448 | $ | 464,918 | $ | 482,648 | $ | 485,868 | ||||||||
Operating income (1) | 114,476 | 134,698 | 155,159 | 162,109 | ||||||||||||
(Loss) income from continuing operations (1) | (13,426 | ) | 6,222 | 104,020 | 114,239 | |||||||||||
Discontinued operations, net (1) | 165,593 | 102,093 | 132,303 | 270,160 | ||||||||||||
Net income * | 152,167 | 108,315 | 236,323 | 384,399 | ||||||||||||
Net income available to Common Shares | 141,833 | 99,797 | 218,603 | 365,979 | ||||||||||||
Earnings per share – basic: | ||||||||||||||||
Net income available to Common Shares | $ | 0.47 | $ | 0.33 | $ | 0.73 | $ | 1.18 | ||||||||
Weighted average Common Shares outstanding | 298,805 | 300,193 | 301,336 | 310,398 | ||||||||||||
Earnings per share – diluted: | ||||||||||||||||
Net income available to Common Shares | $ | 0.47 | $ | 0.33 | $ | 0.72 | $ | 1.17 | ||||||||
Weighted average Common Shares outstanding | 298,805 | 317,648 | 318,773 | 327,108 |
(1) | The amounts presented for 2012 are not equal to the same amounts previously reported in the Form 10-K filed with the SEC on February 21, 2013 as a result of changes in discontinued operations due to additional property sales which occurred throughout the first three months of 2013. Below is a reconciliation to the amounts previously reported in the Form 10-K: |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2012 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues previously reported in 2012 Form 10-K | $ | 505,761 | $ | 525,630 | $ | 544,674 | $ | 547,650 | ||||||||
Total revenues subsequently reclassified to discontinued operations | (59,313 | ) | (60,712 | ) | (62,026 | ) | (61,782 | ) | ||||||||
Total revenues disclosed in Form 8-K | $ | 446,448 | $ | 464,918 | $ | 482,648 | $ | 485,868 | ||||||||
Operating income previously reported in 2012 Form 10-K | $ | 140,889 | $ | 158,988 | $ | 179,867 | $ | 188,214 | ||||||||
Operating income subsequently reclassified to discontinued operations | (26,413 | ) | (24,290 | ) | (24,708 | ) | (26,105 | ) | ||||||||
Operating income disclosed in Form 8-K | $ | 114,476 | $ | 134,698 | $ | 155,159 | $ | 162,109 | ||||||||
Income from continuing operations previously reported in 2012 Form 10-K | $ | 12,654 | $ | 30,213 | $ | 128,433 | $ | 140,255 | ||||||||
Income from continuing operations subsequently reclassified to discontinued operations | (26,080 | ) | (23,991 | ) | (24,413 | ) | (26,016 | ) | ||||||||
(Loss) income from continuing operations disclosed in Form 8-K | $ | (13,426 | ) | $ | 6,222 | $ | 104,020 | $ | 114,239 | |||||||
Discontinued operations, net previously reported in 2012 Form 10-K | $ | 139,513 | $ | 78,102 | $ | 107,890 | $ | 244,144 | ||||||||
Discontinued operations, net from properties sold subsequent to the respective reporting period | 26,080 | 23,991 | 24,413 | 26,016 | ||||||||||||
Discontinued operations, net disclosed in Form 8-K | $ | 165,593 | $ | 102,093 | $ | 132,303 | $ | 270,160 |
F-57
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2011 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues (2) | $ | 389,708 | $ | 405,975 | $ | 424,300 | $ | 433,685 | ||||||||
Operating income (2) | 90,801 | 115,234 | 121,285 | 128,994 | ||||||||||||
(Loss) income from continuing operations (2) | (31,876 | ) | (7,935 | ) | 7,489 | 7,496 | ||||||||||
Discontinued operations, net (2) | 164,942 | 589,688 | 105,488 | 99,905 | ||||||||||||
Net income * | 133,066 | 581,753 | 112,977 | 107,401 | ||||||||||||
Net income available to Common Shares | 123,865 | 552,457 | 104,382 | 99,016 | ||||||||||||
Earnings per share – basic: | ||||||||||||||||
Net income available to Common Shares | $ | 0.42 | $ | 1.88 | $ | 0.35 | $ | 0.33 | ||||||||
Weighted average Common Shares outstanding | 292,895 | 294,663 | 295,831 | 295,990 | ||||||||||||
Earnings per share – diluted: | ||||||||||||||||
Net income available to Common Shares | $ | 0.42 | $ | 1.88 | $ | 0.35 | $ | 0.33 | ||||||||
Weighted average Common Shares outstanding | 292,895 | 294,663 | 312,844 | 312,731 |
(2) | The amounts presented for 2011 are not equal to the same amounts previously reported in the Form 10-K filed with the SEC on February 21, 2013 as a result of changes in discontinued operations due to additional property sales which occurred throughout the first three months of 2013. Below is a reconciliation to the amounts previously reported in the Form 10-K: |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2011 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues previously reported in 2012 Form 10-K | $ | 445,408 | $ | 462,881 | $ | 482,852 | $ | 492,350 | ||||||||
Total revenues subsequently reclassified to discontinued operations | (55,700 | ) | (56,906 | ) | (58,552 | ) | (58,665 | ) | ||||||||
Total revenues disclosed in Form 8-K | $ | 389,708 | $ | 405,975 | $ | 424,300 | $ | 433,685 | ||||||||
Operating income previously reported in 2012 Form 10-K | $ | 110,042 | $ | 134,130 | $ | 142,781 | $ | 154,722 | ||||||||
Operating income subsequently reclassified to discontinued operations | (19,241 | ) | (18,896 | ) | (21,496 | ) | (25,728 | ) | ||||||||
Operating income disclosed in Form 8-K | $ | 90,801 | $ | 115,234 | $ | 121,285 | $ | 128,994 | ||||||||
(Loss) income from continuing operations previously reported in 2012 Form 10-K | $ | (13,322 | ) | $ | 10,336 | $ | 28,274 | $ | 32,506 | |||||||
Income from continuing operations subsequently reclassified to discontinued operations | (18,554 | ) | (18,271 | ) | (20,785 | ) | (25,010 | ) | ||||||||
(Loss) income from continuing operations disclosed in Form 8-K | $ | (31,876 | ) | $ | (7,935 | ) | $ | 7,489 | $ | 7,496 | ||||||
Discontinued operations, net previously reported in 2012 Form 10-K | $ | 146,388 | $ | 571,417 | $ | 84,703 | $ | 74,895 | ||||||||
Discontinued operations, net from properties sold subsequent to the respective reporting period | 18,554 | 18,271 | 20,785 | 25,010 | ||||||||||||
Discontinued operations, net disclosed in Form 8-K | $ | 164,942 | $ | 589,688 | $ | 105,488 | $ | 99,905 |
* The Company did not have any extraordinary items or cumulative effect of change in accounting principle during the years ended December 31, 2012 and 2011. Therefore, income before extraordinary items and cumulative effect of change in accounting principle is not shown as it was equal to the net income amounts disclosed above.
ERP Operating Limited Partnership
The following unaudited quarterly data has been prepared on the basis of a December 31 year-end. All amounts have also been restated in accordance with the guidance on discontinued operations and reflect dispositions and/or properties held for sale through March 31, 2013. Amounts are in thousands, except for per Unit amounts.
F-58
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2012 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues (1) | $ | 446,448 | $ | 464,918 | $ | 482,648 | $ | 485,868 | ||||||||
Operating income (1) | 114,476 | 134,698 | 155,159 | 162,109 | ||||||||||||
(Loss) income from continuing operations (1) | (13,426 | ) | 6,222 | 104,020 | 114,239 | |||||||||||
Discontinued operations, net (1) | 165,593 | 102,093 | 132,303 | 270,160 | ||||||||||||
Net income * | 152,167 | 108,315 | 236,323 | 384,399 | ||||||||||||
Net income available to Units | 148,251 | 104,529 | 229,099 | 382,974 | ||||||||||||
Earnings per Unit – basic: | ||||||||||||||||
Net income available to Units | $ | 0.47 | $ | 0.33 | $ | 0.73 | $ | 1.18 | ||||||||
Weighted average Units outstanding | 312,011 | 314,255 | 315,513 | 324,364 | ||||||||||||
Earnings per Unit – diluted: | ||||||||||||||||
Net income available to Units | $ | 0.47 | $ | 0.33 | $ | 0.72 | $ | 1.17 | ||||||||
Weighted average Units outstanding | 312,011 | 317,648 | 318,773 | 327,108 |
(1) | The amounts presented for 2012 are not equal to the same amounts previously reported in the Form 10-K filed with the SEC on February 21, 2013 as a result of changes in discontinued operations due to additional property sales which occurred throughout the first three months of 2013. Below is a reconciliation to the amounts previously reported in the Form 10-K: |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2012 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues previously reported in 2012 Form 10-K | $ | 505,761 | $ | 525,630 | $ | 544,674 | $ | 547,650 | ||||||||
Total revenues subsequently reclassified to discontinued operations | (59,313 | ) | (60,712 | ) | (62,026 | ) | (61,782 | ) | ||||||||
Total revenues disclosed in Form 8-K | $ | 446,448 | $ | 464,918 | $ | 482,648 | $ | 485,868 | ||||||||
Operating income previously reported in 2012 Form 10-K | $ | 140,889 | $ | 158,988 | $ | 179,867 | $ | 188,214 | ||||||||
Operating income subsequently reclassified to discontinued operations | (26,413 | ) | (24,290 | ) | (24,708 | ) | (26,105 | ) | ||||||||
Operating income disclosed in Form 8-K | $ | 114,476 | $ | 134,698 | $ | 155,159 | $ | 162,109 | ||||||||
Income from continuing operations previously reported in 2012 Form 10-K | $ | 12,654 | $ | 30,213 | $ | 128,433 | $ | 140,255 | ||||||||
Income from continuing operations subsequently reclassified to discontinued operations | (26,080 | ) | (23,991 | ) | (24,413 | ) | (26,016 | ) | ||||||||
(Loss) income from continuing operations disclosed in Form 8-K | $ | (13,426 | ) | $ | 6,222 | $ | 104,020 | $ | 114,239 | |||||||
Discontinued operations, net previously reported in 2012 Form 10-K | $ | 139,513 | $ | 78,102 | $ | 107,890 | $ | 244,144 | ||||||||
Discontinued operations, net from properties sold subsequent to the respective reporting period | 26,080 | 23,991 | 24,413 | 26,016 | ||||||||||||
Discontinued operations, net disclosed in Form 8-K | $ | 165,593 | $ | 102,093 | $ | 132,303 | $ | 270,160 |
F-59
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2011 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues (2) | $ | 389,708 | $ | 405,975 | $ | 424,300 | $ | 433,685 | ||||||||
Operating income (2) | 90,801 | 115,234 | 121,285 | 128,994 | ||||||||||||
(Loss) income from continuing operations (2) | (31,876 | ) | (7,935 | ) | 7,489 | 7,496 | ||||||||||
Discontinued operations, net (2) | 164,942 | 589,688 | 105,488 | 99,905 | ||||||||||||
Net income * | 133,066 | 581,753 | 112,977 | 107,401 | ||||||||||||
Net income available to Units | 129,640 | 578,215 | 109,124 | 103,521 | ||||||||||||
Earnings per Unit – basic: | ||||||||||||||||
Net income available to Units | $ | 0.42 | $ | 1.88 | $ | 0.35 | $ | 0.33 | ||||||||
Weighted average Units outstanding | 306,248 | 307,954 | 308,884 | 309,120 | ||||||||||||
Earnings per Unit – diluted: | ||||||||||||||||
Net income available to Units | $ | 0.42 | $ | 1.88 | $ | 0.35 | $ | 0.33 | ||||||||
Weighted average Units outstanding | 306,248 | 307,954 | 312,844 | 312,731 |
(2) | The amounts presented for 2011 are not equal to the same amounts previously reported in the Form 10-K filed with the SEC on February 21, 2013 as a result of changes in discontinued operations due to additional property sales which occurred throughout the first three months of 2013. Below is a reconciliation to the amounts previously reported in the Form 10-K: |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
2011 | 3/31 | 6/30 | 9/30 | 12/31 | ||||||||||||
Total revenues previously reported in 2012 Form 10-K | $ | 445,408 | $ | 462,881 | $ | 482,852 | $ | 492,350 | ||||||||
Total revenues subsequently reclassified to discontinued operations | (55,700 | ) | (56,906 | ) | (58,552 | ) | (58,665 | ) | ||||||||
Total revenues disclosed in Form 8-K | $ | 389,708 | $ | 405,975 | $ | 424,300 | $ | 433,685 | ||||||||
Operating income previously reported in 2012 Form 10-K | $ | 110,042 | $ | 134,130 | $ | 142,781 | $ | 154,722 | ||||||||
Operating income subsequently reclassified to discontinued operations | (19,241 | ) | (18,896 | ) | (21,496 | ) | (25,728 | ) | ||||||||
Operating income disclosed in Form 8-K | $ | 90,801 | $ | 115,234 | $ | 121,285 | $ | 128,994 | ||||||||
(Loss) income from continuing operations previously reported in 2012 Form 10-K | $ | (13,322 | ) | $ | 10,336 | $ | 28,274 | $ | 32,506 | |||||||
Income from continuing operations subsequently reclassified to discontinued operations | (18,554 | ) | (18,271 | ) | (20,785 | ) | (25,010 | ) | ||||||||
(Loss) income from continuing operations disclosed in Form 8-K | $ | (31,876 | ) | $ | (7,935 | ) | $ | 7,489 | $ | 7,496 | ||||||
Discontinued operations, net previously reported in 2012 Form 10-K | $ | 146,388 | $ | 571,417 | $ | 84,703 | $ | 74,895 | ||||||||
Discontinued operations, net from properties sold subsequent to the respective reporting period | 18,554 | 18,271 | 20,785 | 25,010 | ||||||||||||
Discontinued operations, net disclosed in Form 8-K | $ | 164,942 | $ | 589,688 | $ | 105,488 | $ | 99,905 |
* The Operating Partnership did not have any extraordinary items or cumulative effect of change in accounting principle during the years ended December 31, 2012 and 2011. Therefore, income before extraordinary items and cumulative effect of change in accounting principle is not shown as it was equal to the net income amounts disclosed above.
F-60
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
Overall Summary
December 31, 2012
Properties (H) | Units (H) | Investment in Real Estate, Gross | Accumulated Depreciation | Investment in Real Estate, Net | Encumbrances | ||||||||||||||||
Wholly Owned Unencumbered | 269 | 73,732 | $ | 14,676,449,487 | $ | (3,266,454,538 | ) | $ | 11,409,994,949 | $ | — | ||||||||||
Wholly Owned Encumbered | 113 | 33,124 | 5,716,925,544 | (1,486,115,893 | ) | 4,230,809,651 | 2,392,135,994 | ||||||||||||||
Portfolio/Entity Encumbrances (1) | — | — | — | — | — | 1,305,895,707 | |||||||||||||||
Wholly Owned Properties | 382 | 106,856 | 20,393,375,031 | (4,752,570,431 | ) | 15,640,804,600 | 3,698,031,701 | ||||||||||||||
Partially Owned Unencumbered | 9 | 1,639 | 375,326,934 | (72,825,847 | ) | 302,501,087 | — | ||||||||||||||
Partially Owned Encumbered | 10 | 1,836 | 239,727,289 | (86,824,773 | ) | 152,902,516 | 200,337,000 | ||||||||||||||
Partially Owned Properties | 19 | 3,475 | 615,054,223 | (159,650,620 | ) | 455,403,603 | 200,337,000 | ||||||||||||||
Total Unencumbered Properties | 278 | 75,371 | 15,051,776,421 | (3,339,280,385 | ) | 11,712,496,036 | — | ||||||||||||||
Total Encumbered Properties | 123 | 34,960 | 5,956,652,833 | (1,572,940,666 | ) | 4,383,712,167 | 3,898,368,701 | ||||||||||||||
Total Consolidated Investment in Real Estate | 401 | 110,331 | $ | 21,008,429,254 | $ | (4,912,221,051 | ) | $ | 16,096,208,203 | $ | 3,898,368,701 |
(1) | See attached Encumbrances Reconciliation. |
S-1
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
Encumbrances Reconciliation
December 31, 2012
Portfolio/Entity Encumbrances | Number of Properties Encumbered by | See Properties With Note: | Amount | ||||||
EQR-Fanwell 2007 LP | 6 | I | $ | 212,895,707 | |||||
EQR-Wellfan 2008 LP (R) | 15 | J | 550,000,000 | ||||||
EQR-SOMBRA 2008 LP | 16 | K | 543,000,000 | ||||||
Portfolio/Entity Encumbrances | 37 | 1,305,895,707 | |||||||
Individual Property Encumbrances | 2,592,472,994 | ||||||||
Total Encumbrances per Financial Statements | $ | 3,898,368,701 |
S-2
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III – Real Estate and Accumulated Depreciation
(Amounts in thousands)
The changes in total real estate for the years ended December 31, 2012, 2011 and 2010 are as follows:
2012 | 2011 | 2010 | |||||||||
Balance, beginning of year | $ | 20,407,946 | $ | 19,702,371 | $ | 18,465,144 | |||||
Acquisitions and development | 1,250,633 | 1,721,895 | 1,789,948 | ||||||||
Improvements | 161,460 | 151,476 | 141,199 | ||||||||
Dispositions and other | (811,610 | ) | (1,167,796 | ) | (693,920 | ) | |||||
Balance, end of year | $ | 21,008,429 | $ | 20,407,946 | $ | 19,702,371 |
The changes in accumulated depreciation for the years ended December 31, 2012, 2011 and 2010 are as follows:
2012 | 2011 | 2010 | |||||||||
Balance, beginning of year | $ | 4,539,583 | $ | 4,337,357 | $ | 3,877,564 | |||||
Depreciation | 684,992 | 663,616 | 673,403 | ||||||||
Dispositions and other | (312,354 | ) | (461,390 | ) | (213,610 | ) | |||||
Balance, end of year | $ | 4,912,221 | $ | 4,539,583 | $ | 4,337,357 |
S-3
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | |||||||||||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | ||||||||||||||||||||||||||||||
Wholly Owned Unencumbered: | ||||||||||||||||||||||||||||||||||||||||||
1111 Belle Pre (fka The Madison) | Alexandria, VA | (F) | — | $ | 18,937,702 | $ | 37,877,314 | $ | — | $ | 18,937,702 | $ | 37,877,314 | $ | 56,815,016 | $ | — | $ | 56,815,016 | $ | — | |||||||||||||||||||||
1210 Mass | Washington, D.C. (G) | 2004 | 144 | 9,213,512 | 36,559,189 | 369,571 | 9,213,512 | 36,928,760 | 46,142,272 | (10,194,139 | ) | 35,948,133 | — | |||||||||||||||||||||||||||||
1401 Joyce on Pentagon Row | Arlington, VA | 2004 | 326 | 9,780,000 | 89,668,165 | 342,173 | 9,780,000 | 90,010,338 | 99,790,338 | (15,192,413 | ) | 84,597,925 | — | |||||||||||||||||||||||||||||
1500 Mass Ave | Washington, D.C. (G) | 1951 | 556 | 54,638,298 | 40,361,702 | 8,795,872 | 54,638,298 | 49,157,574 | 103,795,872 | (7,649,140 | ) | 96,146,732 | — | |||||||||||||||||||||||||||||
1660 Peachtree | Atlanta, GA | 1999 | 355 | 7,924,126 | 23,533,831 | 2,389,186 | 7,924,126 | 25,923,017 | 33,847,143 | (9,230,807 | ) | 24,616,336 | — | |||||||||||||||||||||||||||||
170 Amsterdam | New York, NY | (F) | — | — | 13,963,833 | — | — | 13,963,833 | 13,963,833 | — | 13,963,833 | — | ||||||||||||||||||||||||||||||
175 Kent | Brooklyn, NY (G) | 2011 | 113 | 22,037,831 | 53,962,169 | 243,898 | 22,037,831 | 54,206,067 | 76,243,898 | (4,216,749 | ) | 72,027,149 | — | |||||||||||||||||||||||||||||
200 N Lemon Street | Anaheim, CA | (F) | — | 5,865,235 | 1,101,382 | — | 5,865,235 | 1,101,382 | 6,966,617 | — | 6,966,617 | — | ||||||||||||||||||||||||||||||
204-206 Pine Street/1610 2nd Avenue | Seattle, WA | (F) | — | 22,106,464 | 649,599 | — | 22,106,464 | 649,599 | 22,756,063 | — | 22,756,063 | — | ||||||||||||||||||||||||||||||
2201 Pershing Drive | Arlington, VA (G) | 2012 | 188 | 11,321,198 | 44,765,635 | — | 11,321,198 | 44,765,635 | 56,086,833 | (450,254 | ) | 55,636,579 | — | |||||||||||||||||||||||||||||
2400 M St | Washington, D.C. (G) | 2006 | 359 | 30,006,593 | 114,013,785 | 1,000,694 | 30,006,593 | 115,014,479 | 145,021,072 | (29,680,867 | ) | 115,340,205 | — | |||||||||||||||||||||||||||||
420 East 80th Street | New York, NY | 1961 | 155 | 39,277,000 | 23,026,984 | 3,147,355 | 39,277,000 | 26,174,339 | 65,451,339 | (8,443,786 | ) | 57,007,553 | — | |||||||||||||||||||||||||||||
425 Mass | Washington, D.C. (G) | 2009 | 559 | 28,150,000 | 138,600,000 | 2,576,004 | 28,150,000 | 141,176,004 | 169,326,004 | (17,049,061 | ) | 152,276,943 | — | |||||||||||||||||||||||||||||
51 University | Seattle, WA (G) | 1918 | — | 3,640,000 | 8,110,000 | 2,701,350 | 3,640,000 | 10,811,350 | 14,451,350 | (712,398 | ) | 13,738,952 | — | |||||||||||||||||||||||||||||
600 Washington | New York, NY (G) | 2004 | 135 | 32,852,000 | 43,140,551 | 265,843 | 32,852,000 | 43,406,394 | 76,258,394 | (12,277,937 | ) | 63,980,457 | — | |||||||||||||||||||||||||||||
70 Greene | Jersey City, NJ (G) | 2010 | 480 | 28,108,899 | 236,965,465 | 354,235 | 28,108,899 | 237,319,700 | 265,428,599 | (24,275,876 | ) | 241,152,723 | — | |||||||||||||||||||||||||||||
71 Broadway | New York, NY (G) | 1997 | 238 | 22,611,600 | 77,492,171 | 9,556,159 | 22,611,600 | 87,048,330 | 109,659,930 | (24,557,822 | ) | 85,102,108 | — | |||||||||||||||||||||||||||||
77 Bluxome | San Francisco, CA | 2007 | 102 | 5,249,124 | 18,609,876 | 3,000 | 5,249,124 | 18,612,876 | 23,862,000 | (800,641 | ) | 23,061,359 | — | |||||||||||||||||||||||||||||
777 Sixth | New York, NY (G) | 2002 | 294 | 65,352,706 | 65,747,294 | 963,284 | 65,352,706 | 66,710,578 | 132,063,284 | (14,064,378 | ) | 117,998,906 | — | |||||||||||||||||||||||||||||
88 Hillside | Daly City, CA (G) | 2011 | 95 | 7,786,800 | 31,587,325 | 1,199,160 | 7,786,800 | 32,786,485 | 40,573,285 | (1,729,297 | ) | 38,843,988 | — | |||||||||||||||||||||||||||||
Abington Glen | Abington, MA | 1968 | 90 | 553,105 | 3,697,396 | 2,451,825 | 553,105 | 6,149,221 | 6,702,326 | (3,503,755 | ) | 3,198,571 | — | |||||||||||||||||||||||||||||
Acacia Creek | Scottsdale, AZ | 1988-1994 | 304 | 3,663,473 | 21,172,386 | 3,212,070 | 3,663,473 | 24,384,456 | 28,047,929 | (13,038,183 | ) | 15,009,746 | — | |||||||||||||||||||||||||||||
Arboretum (MA) | Canton, MA | 1989 | 156 | 4,685,900 | 10,992,751 | 2,314,573 | 4,685,900 | 13,307,324 | 17,993,224 | (7,050,395 | ) | 10,942,829 | — | |||||||||||||||||||||||||||||
Arches, The | Sunnyvale, CA | 1974 | 410 | 26,650,000 | 62,850,000 | 260,963 | 26,650,000 | 63,110,963 | 89,760,963 | (6,891,107 | ) | 82,869,856 | — | |||||||||||||||||||||||||||||
Arden Villas | Orlando, FL | 1999 | 336 | 5,500,000 | 28,600,796 | 3,597,034 | 5,500,000 | 32,197,830 | 37,697,830 | (10,746,048 | ) | 26,951,782 | — | |||||||||||||||||||||||||||||
Artisan on Second | Los Angeles, CA | 2008 | 118 | 8,000,400 | 36,074,600 | 82,421 | 8,000,400 | 36,157,021 | 44,157,421 | (3,559,876 | ) | 40,597,545 | — | |||||||||||||||||||||||||||||
Ashton, The | Corona Hills, CA | 1986 | 492 | 2,594,264 | 33,042,398 | 6,518,162 | 2,594,264 | 39,560,560 | 42,154,824 | (21,978,074 | ) | 20,176,750 | — | |||||||||||||||||||||||||||||
Auvers Village | Orlando, FL | 1991 | 480 | 3,808,823 | 29,322,243 | 6,786,446 | 3,808,823 | 36,108,689 | 39,917,512 | (19,110,881 | ) | 20,806,631 | — | |||||||||||||||||||||||||||||
Avenue Royale | Jacksonville, FL | 2001 | 200 | 5,000,000 | 17,785,388 | 1,124,183 | 5,000,000 | 18,909,571 | 23,909,571 | (5,937,852 | ) | 17,971,719 | — | |||||||||||||||||||||||||||||
Avenue Two | Redwood City, CA | 1972 | 123 | 7,995,000 | 18,005,000 | 489,020 | 7,995,000 | 18,494,020 | 26,489,020 | (1,575,938 | ) | 24,913,082 | — | |||||||||||||||||||||||||||||
Ball Park Lofts | Denver, CO (G) | 2003 | 352 | 5,481,556 | 51,658,741 | 3,893,128 | 5,481,556 | 55,551,869 | 61,033,425 | (17,157,845 | ) | 43,875,580 | — | |||||||||||||||||||||||||||||
Barrington Place | Oviedo, FL | 1998 | 233 | 6,990,000 | 15,740,825 | 2,730,072 | 6,990,000 | 18,470,897 | 25,460,897 | (7,843,278 | ) | 17,617,619 | — | |||||||||||||||||||||||||||||
Bay Hill | Long Beach, CA | 2002 | 160 | 7,600,000 | 27,437,239 | 865,963 | 7,600,000 | 28,303,202 | 35,903,202 | (9,024,015 | ) | 26,879,187 | — | |||||||||||||||||||||||||||||
Beatrice, The | New York, NY | 2010 | 302 | 114,351,405 | 165,648,595 | 62,962 | 114,351,405 | 165,711,557 | 280,062,962 | (11,236,427 | ) | 268,826,535 | — | |||||||||||||||||||||||||||||
Bella Terra I | Mukilteo, WA (G) | 2002 | 235 | 5,686,861 | 26,070,540 | 857,703 | 5,686,861 | 26,928,243 | 32,615,104 | (9,102,006 | ) | 23,513,098 | — | |||||||||||||||||||||||||||||
Bella Vista | Phoenix, AZ | 1995 | 248 | 2,978,879 | 20,641,333 | 3,502,271 | 2,978,879 | 24,143,604 | 27,122,483 | (13,556,807 | ) | 13,565,676 | — | |||||||||||||||||||||||||||||
Bella Vista I, II, III Combined | Woodland Hills, CA | 2003-2007 | 579 | 31,682,754 | 121,095,786 | 1,958,281 | 31,682,754 | 123,054,067 | 154,736,821 | (32,592,195 | ) | 122,144,626 | — | |||||||||||||||||||||||||||||
Bellagio Apartment Homes | Scottsdale, AZ | 1995 | 202 | 2,626,000 | 16,025,041 | 1,187,110 | 2,626,000 | 17,212,151 | 19,838,151 | (5,794,129 | ) | 14,044,022 | — | |||||||||||||||||||||||||||||
Belle Arts Condominium Homes, LLC | Bellevue, WA | 2000 | 1 | 63,158 | 248,929 | (5,320 | ) | 63,158 | 243,609 | 306,767 | — | 306,767 | — | |||||||||||||||||||||||||||||
Belle Fontaine | Marina del Ray, CA | 2003 | 102 | 9,098,808 | 28,701,192 | 99,785 | 9,098,808 | 28,800,977 | 37,899,785 | (2,069,640 | ) | 35,830,145 | — | |||||||||||||||||||||||||||||
Berkeley Land | Berkeley, CA | (F) | — | 13,908,910 | 3,695,312 | — | 13,908,910 | 3,695,312 | 17,604,222 | — | 17,604,222 | — | ||||||||||||||||||||||||||||||
Bishop Park | Winter Park, FL | 1991 | 324 | 2,592,000 | 17,990,436 | 3,865,598 | 2,592,000 | 21,856,034 | 24,448,034 | (11,979,910 | ) | 12,468,124 | — | |||||||||||||||||||||||||||||
Bradford Apartments | Newington, CT | 1964 | 64 | 401,091 | 2,681,210 | 683,876 | 401,091 | 3,365,086 | 3,766,177 | (1,585,948 | ) | 2,180,229 | — | |||||||||||||||||||||||||||||
Briar Knoll Apts | Vernon, CT | 1986 | 150 | 928,972 | 6,209,988 | 1,520,407 | 928,972 | 7,730,395 | 8,659,367 | (3,687,102 | ) | 4,972,265 | — | |||||||||||||||||||||||||||||
Briarwood (CA) | Sunnyvale, CA | 1985 | 192 | 9,991,500 | 22,247,278 | 1,938,816 | 9,991,500 | 24,186,094 | 34,177,594 | (11,992,871 | ) | 22,184,723 | — | |||||||||||||||||||||||||||||
Bridford Lakes II | Greensboro, NC | (F) | — | 1,100,564 | 792,509 | — | 1,100,564 | 792,509 | 1,893,073 | — | 1,893,073 | — |
S-4
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Bridgewater at Wells Crossing | Orange Park, FL | 1986 | 288 | 2,160,000 | 13,347,549 | 2,603,916 | 2,160,000 | 15,951,465 | 18,111,465 | (7,851,493 | ) | 10,259,972 | — | ||||||||||||||||||||
Brooklyner (fka 111 Lawrence) | Brooklyn, NY (G) | 2010 | 490 | 40,099,922 | 221,419,489 | 189,673 | 40,099,922 | 221,609,162 | 261,709,084 | (15,391,373 | ) | 246,317,711 | — | ||||||||||||||||||||
Butterfield Ranch | Chino Hills, CA | (F) | — | 15,617,709 | 4,506,944 | — | 15,617,709 | 4,506,944 | 20,124,653 | — | 20,124,653 | — | |||||||||||||||||||||
Camellero | Scottsdale, AZ | 1979 | 348 | 1,924,900 | 17,324,593 | 5,915,408 | 1,924,900 | 23,240,001 | 25,164,901 | (15,447,692 | ) | 9,717,209 | — | ||||||||||||||||||||
Carlyle Mill | Alexandria, VA | 2002 | 317 | 10,000,000 | 51,367,913 | 4,229,928 | 10,000,000 | 55,597,841 | 65,597,841 | (19,536,666 | ) | 46,061,175 | — | ||||||||||||||||||||
Cascade | Seattle, WA | (F) | — | 12,198,278 | 1,602,237 | — | 12,198,278 | 1,602,237 | 13,800,515 | — | 13,800,515 | — | |||||||||||||||||||||
Cascade II | Seattle, WA | (F) | — | 11,553,286 | 772,881 | — | 11,553,286 | 772,881 | 12,326,167 | — | 12,326,167 | — | |||||||||||||||||||||
Centennial Court | Seattle, WA (G) | 2001 | 187 | 3,800,000 | 21,280,039 | 452,440 | 3,800,000 | 21,732,479 | 25,532,479 | (6,504,886 | ) | 19,027,593 | — | ||||||||||||||||||||
Centennial Tower | Seattle, WA (G) | 1991 | 221 | 5,900,000 | 48,800,339 | 4,069,977 | 5,900,000 | 52,870,316 | 58,770,316 | (15,340,520 | ) | 43,429,796 | — | ||||||||||||||||||||
Centre Club | Ontario, CA | 1994 | 312 | 5,616,000 | 23,485,891 | 2,851,599 | 5,616,000 | 26,337,490 | 31,953,490 | (11,942,486 | ) | 20,011,004 | — | ||||||||||||||||||||
Centre Club II | Ontario, CA | 2002 | 100 | 1,820,000 | 9,528,898 | 627,661 | 1,820,000 | 10,156,559 | 11,976,559 | (3,957,095 | ) | 8,019,464 | — | ||||||||||||||||||||
Chandlers Bay | Kent, WA | 1980 | 293 | 3,700,000 | 18,961,895 | 486,234 | 3,700,000 | 19,448,129 | 23,148,129 | (4,202,932 | ) | 18,945,197 | — | ||||||||||||||||||||
Chatelaine Park | Duluth, GA | 1995 | 303 | 1,818,000 | 24,489,671 | 2,215,846 | 1,818,000 | 26,705,517 | 28,523,517 | (13,461,549 | ) | 15,061,968 | — | ||||||||||||||||||||
Chesapeake Glen Apts (fka Greentree I, II & III) | Glen Burnie, MD | 1973 | 796 | 8,993,411 | 27,301,052 | 21,983,212 | 8,993,411 | 49,284,264 | 58,277,675 | (28,112,967 | ) | 30,164,708 | — | ||||||||||||||||||||
City View (GA) | Atlanta, GA (G) | 2003 | 202 | 6,440,800 | 19,993,460 | 1,357,198 | 6,440,800 | 21,350,658 | 27,791,458 | (6,775,978 | ) | 21,015,480 | — | ||||||||||||||||||||
Cleo, The | Los Angeles, CA | 1989 | 92 | 6,615,467 | 14,829,335 | 3,732,712 | 6,615,467 | 18,562,047 | 25,177,514 | (5,799,503 | ) | 19,378,011 | — | ||||||||||||||||||||
Coconut Palm Club | Coconut Creek, FL | 1992 | 301 | 3,001,700 | 17,678,928 | 3,500,954 | 3,001,700 | 21,179,882 | 24,181,582 | (11,053,062 | ) | 13,128,520 | — | ||||||||||||||||||||
Country Club Lakes | Jacksonville, FL | 1997 | 555 | 15,000,000 | 41,055,786 | 5,887,825 | 15,000,000 | 46,943,611 | 61,943,611 | (15,159,712 | ) | 46,783,899 | — | ||||||||||||||||||||
Cove at Boynton Beach I | Boynton Beach, FL | 1996 | 252 | 12,600,000 | 31,469,651 | 3,957,990 | 12,600,000 | 35,427,641 | 48,027,641 | (12,461,783 | ) | 35,565,858 | — | ||||||||||||||||||||
Cove at Boynton Beach II | Boynton Beach, FL | 1998 | 296 | 14,800,000 | 37,874,719 | — | 14,800,000 | 37,874,719 | 52,674,719 | (12,409,067 | ) | 40,265,652 | — | ||||||||||||||||||||
Crown Court | Scottsdale, AZ | 1987 | 416 | 3,156,600 | 28,414,599 | 10,072,349 | 3,156,600 | 38,486,948 | 41,643,548 | (20,831,754 | ) | 20,811,794 | — | ||||||||||||||||||||
Crowntree Lakes | Orlando, FL | 2008 | 352 | 12,009,630 | 44,407,977 | 305,763 | 12,009,630 | 44,713,740 | 56,723,370 | (9,115,128 | ) | 47,608,242 | — | ||||||||||||||||||||
Cypress Lake at Waterford | Orlando, FL | 2001 | 316 | 7,000,000 | 27,654,816 | 1,953,814 | 7,000,000 | 29,608,630 | 36,608,630 | (10,070,172 | ) | 26,538,458 | — | ||||||||||||||||||||
Dartmouth Woods | Lakewood, CO | 1990 | 201 | 1,609,800 | 10,832,754 | 2,181,749 | 1,609,800 | 13,014,503 | 14,624,303 | (7,463,095 | ) | 7,161,208 | — | ||||||||||||||||||||
Dean Estates | Taunton, MA | 1984 | 58 | 498,080 | 3,329,560 | 726,694 | 498,080 | 4,056,254 | 4,554,334 | (1,974,667 | ) | 2,579,667 | — | ||||||||||||||||||||
Deerwood (Corona) | Corona, CA | 1992 | 316 | 4,742,200 | 20,272,892 | 4,131,619 | 4,742,200 | 24,404,511 | 29,146,711 | (13,644,933 | ) | 15,501,778 | — | ||||||||||||||||||||
Defoor Village | Atlanta, GA | 1997 | 156 | 2,966,400 | 10,570,210 | 2,070,269 | 2,966,400 | 12,640,479 | 15,606,879 | (6,901,037 | ) | 8,705,842 | — | ||||||||||||||||||||
Del Mar Ridge | San Diego, CA | 1998 | 181 | 7,801,824 | 36,948,176 | 2,986,046 | 7,801,824 | 39,934,222 | 47,736,046 | (6,689,182 | ) | 41,046,864 | — | ||||||||||||||||||||
Eagle Canyon | Chino Hills, CA | 1985 | 252 | 1,808,900 | 16,274,361 | 6,999,462 | 1,808,900 | 23,273,823 | 25,082,723 | (12,868,469 | ) | 12,214,254 | — | ||||||||||||||||||||
Edgemont at Bethesda Metro | Bethesda, MD | 1989 | 122 | 13,092,552 | 43,907,448 | 179,743 | 13,092,552 | 44,087,191 | 57,179,743 | (3,377,214 | ) | 53,802,529 | — | ||||||||||||||||||||
Element | Miami, FL | (F) | — | 11,723,423 | 2,155,330 | — | 11,723,423 | 2,155,330 | 13,878,753 | — | 13,878,753 | — | |||||||||||||||||||||
Ellipse at Government Center | Fairfax, VA | 1989 | 404 | 19,433,000 | 56,816,266 | 4,717,129 | 19,433,000 | 61,533,395 | 80,966,395 | (13,750,349 | ) | 67,216,046 | — | ||||||||||||||||||||
Emerson Place | Boston, MA (G) | 1962 | 444 | 14,855,000 | 57,566,636 | 15,786,843 | 14,855,000 | 73,353,479 | 88,208,479 | (42,084,610 | ) | 46,123,869 | — | ||||||||||||||||||||
Enclave at Lake Underhill | Orlando, FL | 1989 | 312 | 9,359,750 | 29,539,650 | 3,076,979 | 9,359,750 | 32,616,629 | 41,976,379 | (10,291,752 | ) | 31,684,627 | — | ||||||||||||||||||||
Enclave at Waterways | Deerfield Beach, FL | 1998 | 300 | 15,000,000 | 33,194,576 | 1,293,880 | 15,000,000 | 34,488,456 | 49,488,456 | (11,250,991 | ) | 38,237,465 | — | ||||||||||||||||||||
Enclave at Winston Park | Coconut Creek, FL | 1995 | 278 | 5,560,000 | 19,939,324 | 3,400,119 | 5,560,000 | 23,339,443 | 28,899,443 | (9,389,059 | ) | 19,510,384 | — | ||||||||||||||||||||
Enclave, The | Tempe, AZ | 1994 | 204 | 1,500,192 | 19,281,399 | 1,516,466 | 1,500,192 | 20,797,865 | 22,298,057 | (10,989,851 | ) | 11,308,206 | — | ||||||||||||||||||||
Encore at Sherman Oaks, The | Sherman Oaks, CA | 1988 | 174 | 8,700,000 | 25,446,003 | 389,062 | 8,700,000 | 25,835,065 | 34,535,065 | (2,648,575 | ) | 31,886,490 | — | ||||||||||||||||||||
Estates at Wellington Green | Wellington, FL | 2003 | 400 | 20,000,000 | 64,790,850 | 2,115,788 | 20,000,000 | 66,906,638 | 86,906,638 | (20,447,332 | ) | 66,459,306 | — | ||||||||||||||||||||
Eye Street | Washington, D.C. | (F) | — | 13,530,054 | 4,444,434 | — | 13,530,054 | 4,444,434 | 17,974,488 | — | 17,974,488 | — | |||||||||||||||||||||
Four Winds | Fall River, MA | 1987 | 168 | 1,370,843 | 9,163,804 | 2,158,526 | 1,370,843 | 11,322,330 | 12,693,173 | (5,314,789 | ) | 7,378,384 | — | ||||||||||||||||||||
Fox Hill Apartments | Enfield, CT | 1974 | 168 | 1,129,018 | 7,547,256 | 1,701,722 | 1,129,018 | 9,248,978 | 10,377,996 | (4,262,702 | ) | 6,115,294 | — | ||||||||||||||||||||
Fox Run (WA) | Federal Way, WA | 1988 | 144 | 626,637 | 5,765,018 | 1,914,735 | 626,637 | 7,679,753 | 8,306,390 | (5,103,904 | ) | 3,202,486 | — | ||||||||||||||||||||
Fox Run II (WA) | Federal Way, WA | 1988 | 18 | 80,000 | 1,286,139 | 53,086 | 80,000 | 1,339,225 | 1,419,225 | (480,480 | ) | 938,745 | — | ||||||||||||||||||||
Gables Grand Plaza | Coral Gables, FL (G) | 1998 | 195 | — | 44,601,000 | 6,506,000 | — | 51,107,000 | 51,107,000 | (16,603,792 | ) | 34,503,208 | — | ||||||||||||||||||||
Gallery, The | Hermosa Beach,CA | 1971 | 169 | 18,144,000 | 46,567,941 | 1,988,058 | 18,144,000 | 48,555,999 | 66,699,999 | (13,251,854 | ) | 53,448,145 | — | ||||||||||||||||||||
Gatehouse at Pine Lake | Pembroke Pines, FL | 1990 | 296 | 1,896,600 | 17,070,795 | 5,831,636 | 1,896,600 | 22,902,431 | 24,799,031 | (12,299,850 | ) | 12,499,181 | — | ||||||||||||||||||||
Gatehouse on the Green | Plantation, FL | 1990 | 312 | 2,228,200 | 20,056,270 | 7,415,699 | 2,228,200 | 27,471,969 | 29,700,169 | (15,076,225 | ) | 14,623,944 | — |
S-5
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Gates of Redmond | Redmond, WA | 1979 | 180 | 2,306,100 | 12,064,015 | 4,790,524 | 2,306,100 | 16,854,539 | 19,160,639 | (9,066,338 | ) | 10,094,301 | — | ||||||||||||||||||||
Gatewood | Pleasanton, CA | 1985 | 200 | 6,796,511 | 20,249,392 | 4,458,452 | 6,796,511 | 24,707,844 | 31,504,355 | (9,049,646 | ) | 22,454,709 | — | ||||||||||||||||||||
Geary Court Yard | San Francisco, CA | 1990 | 164 | 1,722,400 | 15,471,429 | 2,259,837 | 1,722,400 | 17,731,266 | 19,453,666 | (9,678,667 | ) | 9,774,999 | — | ||||||||||||||||||||
Governors Green | Bowie, MD | 1999 | 478 | 19,845,000 | 73,335,916 | 860,934 | 19,845,000 | 74,196,850 | 94,041,850 | (17,692,561 | ) | 76,349,289 | — | ||||||||||||||||||||
Greenfield Village | Rocky Hill , CT | 1965 | 151 | 911,534 | 6,093,418 | 682,573 | 911,534 | 6,775,991 | 7,687,525 | (3,145,760 | ) | 4,541,765 | — | ||||||||||||||||||||
Hamilton Villas | Beverly Hills, CA | 1990 | 35 | 7,772,000 | 16,864,269 | 1,314,747 | 7,772,000 | 18,179,016 | 25,951,016 | (3,695,640 | ) | 22,255,376 | — | ||||||||||||||||||||
Hammocks Place | Miami, FL | 1986 | 296 | 319,180 | 12,513,467 | 4,001,341 | 319,180 | 16,514,808 | 16,833,988 | (11,158,128 | ) | 5,675,860 | — | ||||||||||||||||||||
Hampshire Place | Los Angeles, CA | 1989 | 259 | 10,806,000 | 30,335,330 | 2,061,399 | 10,806,000 | 32,396,729 | 43,202,729 | (10,534,087 | ) | 32,668,642 | — | ||||||||||||||||||||
Heritage Ridge | Lynwood, WA | 1999 | 197 | 6,895,000 | 18,983,597 | 692,162 | 6,895,000 | 19,675,759 | 26,570,759 | (6,788,252 | ) | 19,782,507 | — | ||||||||||||||||||||
Heritage, The | Phoenix, AZ | 1995 | 204 | 1,209,705 | 13,136,903 | 1,533,783 | 1,209,705 | 14,670,686 | 15,880,391 | (7,898,088 | ) | 7,982,303 | — | ||||||||||||||||||||
Heron Pointe | Boynton Beach, FL | 1989 | 192 | 1,546,700 | 7,774,676 | 2,257,726 | 1,546,700 | 10,032,402 | 11,579,102 | (5,862,536 | ) | 5,716,566 | — | ||||||||||||||||||||
High Meadow | Ellington, CT | 1975 | 100 | 583,679 | 3,901,774 | 1,090,107 | 583,679 | 4,991,881 | 5,575,560 | (2,211,945 | ) | 3,363,615 | — | ||||||||||||||||||||
Highland Glen | Westwood, MA | 1979 | 180 | 2,229,095 | 16,828,153 | 2,582,562 | 2,229,095 | 19,410,715 | 21,639,810 | (8,691,869 | ) | 12,947,941 | — | ||||||||||||||||||||
Highland Glen II | Westwood, MA | 2007 | 102 | — | 19,875,857 | 127,705 | — | 20,003,562 | 20,003,562 | (4,417,064 | ) | 15,586,498 | — | ||||||||||||||||||||
Highlands at Cherry Hill | Cherry Hills, NJ | 2002 | 170 | 6,800,000 | 21,459,108 | 721,505 | 6,800,000 | 22,180,613 | 28,980,613 | (6,430,879 | ) | 22,549,734 | — | ||||||||||||||||||||
Highlands at South Plainfield | South Plainfield, NJ | 2000 | 252 | 10,080,000 | 37,526,912 | 838,515 | 10,080,000 | 38,365,427 | 48,445,427 | (10,558,268 | ) | 37,887,159 | — | ||||||||||||||||||||
Highlands, The | Scottsdale, AZ | 1990 | 272 | 11,823,840 | 31,990,970 | 2,979,673 | 11,823,840 | 34,970,643 | 46,794,483 | (10,411,726 | ) | 36,382,757 | — | ||||||||||||||||||||
Hikari | Los Angeles, CA (G) | 2007 | 128 | 9,435,760 | 32,564,240 | 88,324 | 9,435,760 | 32,652,564 | 42,088,324 | (2,734,058 | ) | 39,354,266 | — | ||||||||||||||||||||
Hudson Crossing | New York, NY (G) | 2003 | 259 | 23,420,000 | 70,086,976 | 1,319,280 | 23,420,000 | 71,406,256 | 94,826,256 | (21,008,820 | ) | 73,817,436 | — | ||||||||||||||||||||
Hudson Pointe | Jersey City, NJ | 2003 | 182 | 5,350,000 | 41,114,074 | 1,815,270 | 5,350,000 | 42,929,344 | 48,279,344 | (13,426,393 | ) | 34,852,951 | — | ||||||||||||||||||||
Hunt Club II | Charlotte, NC | (F) | — | 100,000 | — | — | 100,000 | — | 100,000 | — | 100,000 | — | |||||||||||||||||||||
Huntington Park | Everett, WA | 1991 | 381 | 1,597,500 | 14,367,864 | 4,453,829 | 1,597,500 | 18,821,693 | 20,419,193 | (12,472,448 | ) | 7,946,745 | — | ||||||||||||||||||||
Indian Bend | Scottsdale, AZ | 1973 | 278 | 1,075,700 | 9,900,330 | 3,365,023 | 1,075,700 | 13,265,353 | 14,341,053 | (8,998,786 | ) | 5,342,267 | — | ||||||||||||||||||||
Iron Horse Park | Pleasant Hill, CA | 1973 | 252 | 15,000,000 | 24,335,549 | 7,833,581 | 15,000,000 | 32,169,130 | 47,169,130 | (11,452,261 | ) | 35,716,869 | — | ||||||||||||||||||||
Jia (fka Chinatown Gateway) | Los Angeles, CA (G) | (F) | — | 14,791,831 | 38,203,310 | — | 14,791,831 | 38,203,310 | 52,995,141 | — | 52,995,141 | — | |||||||||||||||||||||
Kenwood Mews | Burbank, CA | 1991 | 141 | 14,100,000 | 24,662,883 | 2,326,483 | 14,100,000 | 26,989,366 | 41,089,366 | (7,360,534 | ) | 33,728,832 | — | ||||||||||||||||||||
Key Isle at Windermere | Ocoee, FL | 2000 | 282 | 8,460,000 | 31,761,470 | 1,584,992 | 8,460,000 | 33,346,462 | 41,806,462 | (10,598,954 | ) | 31,207,508 | — | ||||||||||||||||||||
Key Isle at Windermere II | Ocoee, FL | 2008 | 165 | 3,306,286 | 24,519,644 | 21,547 | 3,306,286 | 24,541,191 | 27,847,477 | (3,843,424 | ) | 24,004,053 | — | ||||||||||||||||||||
Kings Colony (FL) | Miami, FL | 1986 | 480 | 19,200,000 | 48,379,586 | 3,358,871 | 19,200,000 | 51,738,457 | 70,938,457 | (16,535,050 | ) | 54,403,407 | — | ||||||||||||||||||||
La Mirage | San Diego, CA | 1988/1992 | 1,070 | 28,895,200 | 95,567,943 | 17,187,998 | 28,895,200 | 112,755,941 | 141,651,141 | (60,753,002 | ) | 80,898,139 | — | ||||||||||||||||||||
La Mirage IV | San Diego, CA | 2001 | 340 | 6,000,000 | 47,449,353 | 3,967,334 | 6,000,000 | 51,416,687 | 57,416,687 | (20,107,727 | ) | 37,308,960 | — | ||||||||||||||||||||
Laguna Clara | Santa Clara, CA | 1972 | 264 | 13,642,420 | 29,707,475 | 3,986,277 | 13,642,420 | 33,693,752 | 47,336,172 | (11,877,090 | ) | 35,459,082 | — | ||||||||||||||||||||
Lake Buena Vista Combined | Orlando, FL | 2000/2002 | 672 | 23,520,000 | 75,068,206 | 4,377,399 | 23,520,000 | 79,445,605 | 102,965,605 | (23,051,890 | ) | 79,913,715 | — | ||||||||||||||||||||
Landings at Pembroke Lakes | Pembroke Pines, FL | 1989 | 358 | 17,900,000 | 24,460,989 | 5,250,659 | 17,900,000 | 29,711,648 | 47,611,648 | (10,597,498 | ) | 37,014,150 | — | ||||||||||||||||||||
Landings at Port Imperial | W. New York, NJ | 1999 | 276 | 27,246,045 | 37,741,050 | 6,986,943 | 27,246,045 | 44,727,993 | 71,974,038 | (19,275,613 | ) | 52,698,425 | — | ||||||||||||||||||||
Las Colinas at Black Canyon | Phoenix, AZ | 2008 | 304 | 9,000,000 | 35,917,811 | 407,802 | 9,000,000 | 36,325,613 | 45,325,613 | (8,178,418 | ) | 37,147,195 | — | ||||||||||||||||||||
Legacy at Highlands Ranch | Highlands Ranch, CO | 1999 | 422 | 6,330,000 | 37,557,013 | 2,030,961 | 6,330,000 | 39,587,974 | 45,917,974 | (12,636,413 | ) | 33,281,561 | — | ||||||||||||||||||||
Legacy Park Central | Concord, CA | 2003 | 259 | 6,469,230 | 46,745,854 | 1,113,450 | 6,469,230 | 47,859,304 | 54,328,534 | (14,033,317 | ) | 40,295,217 | — | ||||||||||||||||||||
Lexington Farm | Alpharetta, GA | 1995 | 352 | 3,521,900 | 22,888,305 | 2,738,949 | 3,521,900 | 25,627,254 | 29,149,154 | (13,144,265 | ) | 16,004,889 | — | ||||||||||||||||||||
Little Cottonwoods | Tempe, AZ | 1984 | 379 | 3,049,133 | 26,991,689 | 5,116,785 | 3,049,133 | 32,108,474 | 35,157,607 | (16,979,333 | ) | 18,178,274 | — | ||||||||||||||||||||
Longacre House | New York, NY (G) | 2000 | 293 | 73,170,045 | 53,962,510 | 1,002,447 | 73,170,045 | 54,964,957 | 128,135,002 | (12,370,230 | ) | 115,764,772 | — | ||||||||||||||||||||
Longfellow Place | Boston, MA (G) | 1975 | 710 | 53,164,160 | 185,610,210 | 68,694,424 | 53,164,160 | 254,304,634 | 307,468,794 | (119,111,846 | ) | 188,356,948 | — | ||||||||||||||||||||
Longwood | Decatur, GA | 1992 | 268 | 1,454,048 | 13,087,393 | 2,124,966 | 1,454,048 | 15,212,359 | 16,666,407 | (9,987,844 | ) | 6,678,563 | — | ||||||||||||||||||||
Mantena | New York, NY (G) | 2012 | 98 | 22,346,513 | 61,653,487 | 5,835 | 22,346,513 | 61,659,322 | 84,005,835 | (1,532,832 | ) | 82,473,003 | — | ||||||||||||||||||||
Mariners Wharf | Orange Park, FL | 1989 | 272 | 1,861,200 | 16,744,951 | 3,664,192 | 1,861,200 | 20,409,143 | 22,270,343 | (11,393,039 | ) | 10,877,304 | — | ||||||||||||||||||||
Market Street Landing | Seattle, WA | (F) | — | 12,542,418 | 25,777,026 | — | 12,542,418 | 25,777,026 | 38,319,444 | — | 38,319,444 | — | |||||||||||||||||||||
Marquessa | Corona Hills, CA | 1992 | 336 | 6,888,500 | 21,604,584 | 2,936,753 | 6,888,500 | 24,541,337 | 31,429,837 | (13,567,993 | ) | 17,861,844 | — | ||||||||||||||||||||
Martine, The | Bellevue, WA | 1984 | 67 | 3,200,000 | 9,616,264 | 2,695,117 | 3,200,000 | 12,311,381 | 15,511,381 | (3,472,519 | ) | 12,038,862 | — |
S-6
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Midtown 24 | Plantation, FL (G) | 2010 | 247 | 10,129,900 | 58,770,100 | 973,238 | 10,129,900 | 59,743,338 | 69,873,238 | (5,787,079 | ) | 64,086,159 | — | ||||||||||||||||||||
Milano Lofts | Los Angeles, CA (G) | 1925/2006 | 99 | 8,125,216 | 27,378,784 | 41,701 | 8,125,216 | 27,420,485 | 35,545,701 | (967,630 | ) | 34,578,071 | — | ||||||||||||||||||||
Millikan | Irvine, CA | (F) | — | 10,743,027 | 2,579,535 | — | 10,743,027 | 2,579,535 | 13,322,562 | — | 13,322,562 | — | |||||||||||||||||||||
Mission Bay | Orlando, FL | 1991 | 304 | 2,432,000 | 21,623,560 | 3,212,827 | 2,432,000 | 24,836,387 | 27,268,387 | (12,760,346 | ) | 14,508,041 | — | ||||||||||||||||||||
Mission Bay-Block 13 | San Francisco, CA | (F) | — | 32,855,115 | 8,197,322 | — | 32,855,115 | 8,197,322 | 41,052,437 | — | 41,052,437 | — | |||||||||||||||||||||
Mission Verde, LLC | San Jose, CA | 1986 | 108 | 5,190,700 | 9,679,109 | 3,291,432 | 5,190,700 | 12,970,541 | 18,161,241 | (7,127,846 | ) | 11,033,395 | — | ||||||||||||||||||||
Morningside | Scottsdale, AZ | 1989 | 160 | 670,470 | 12,607,976 | 1,848,593 | 670,470 | 14,456,569 | 15,127,039 | (7,837,012 | ) | 7,290,027 | — | ||||||||||||||||||||
Mosaic at Largo Station | Hyattsville, MD | 2008 | 242 | 4,120,800 | 42,477,297 | 460,542 | 4,120,800 | 42,937,839 | 47,058,639 | (8,013,492 | ) | 39,045,147 | — | ||||||||||||||||||||
Mozaic at Union Station | Los Angeles, CA | 2007 | 272 | 8,500,000 | 52,529,446 | 1,195,354 | 8,500,000 | 53,724,800 | 62,224,800 | (13,012,582 | ) | 49,212,218 | — | ||||||||||||||||||||
New River Cove | Davie, FL | 1999 | 316 | 15,800,000 | 46,142,895 | 1,343,769 | 15,800,000 | 47,486,664 | 63,286,664 | (14,262,218 | ) | 49,024,446 | — | ||||||||||||||||||||
Northampton 1 | Largo, MD | 1977 | 344 | 1,843,200 | 17,518,161 | 6,276,106 | 1,843,200 | 23,794,267 | 25,637,467 | (16,077,097 | ) | 9,560,370 | — | ||||||||||||||||||||
Northampton 2 | Largo, MD | 1988 | 276 | 1,513,500 | 14,257,210 | 4,037,606 | 1,513,500 | 18,294,816 | 19,808,316 | (12,066,075 | ) | 7,742,241 | — | ||||||||||||||||||||
Northglen | Valencia, CA | 1988 | 234 | 9,360,000 | 20,778,553 | 1,888,759 | 9,360,000 | 22,667,312 | 32,027,312 | (9,931,177 | ) | 22,096,135 | — | ||||||||||||||||||||
Northlake (MD) | Germantown, MD | 1985 | 304 | 15,000,000 | 23,142,302 | 10,139,271 | 15,000,000 | 33,281,573 | 48,281,573 | (13,418,251 | ) | 34,863,322 | — | ||||||||||||||||||||
Northridge | Pleasant Hill, CA | 1974 | 221 | 5,527,800 | 14,691,705 | 9,627,638 | 5,527,800 | 24,319,343 | 29,847,143 | (12,360,184 | ) | 17,486,959 | — | ||||||||||||||||||||
Oak Mill I | Germantown, MD | 1984 | 208 | 10,000,000 | 13,155,522 | 7,424,527 | 10,000,000 | 20,580,049 | 30,580,049 | (8,600,153 | ) | 21,979,896 | — | ||||||||||||||||||||
Oak Park North | Agoura Hills, CA | 1990 | 220 | 1,706,900 | 15,362,666 | 3,868,037 | 1,706,900 | 19,230,703 | 20,937,603 | (11,198,439 | ) | 9,739,164 | — | ||||||||||||||||||||
Oak Park South | Agoura Hills, CA | 1989 | 224 | 1,683,800 | 15,154,608 | 3,913,374 | 1,683,800 | 19,067,982 | 20,751,782 | (11,171,569 | ) | 9,580,213 | — | ||||||||||||||||||||
Oaks at Falls Church | Falls Church, VA | 1966 | 176 | 20,240,000 | 20,152,616 | 3,675,805 | 20,240,000 | 23,828,421 | 44,068,421 | (7,774,342 | ) | 36,294,079 | — | ||||||||||||||||||||
Ocean Crest | Solana Beach, CA | 1986 | 146 | 5,111,200 | 11,910,438 | 2,279,108 | 5,111,200 | 14,189,546 | 19,300,746 | (7,615,611 | ) | 11,685,135 | — | ||||||||||||||||||||
Ocean Walk | Key West, FL | 1990 | 297 | 2,838,749 | 25,545,009 | 3,492,832 | 2,838,749 | 29,037,841 | 31,876,590 | (15,788,732 | ) | 16,087,858 | — | ||||||||||||||||||||
Orchard Ridge | Lynnwood, WA | 1988 | 104 | 480,600 | 4,372,033 | 1,416,465 | 480,600 | 5,788,498 | 6,269,098 | (3,731,392 | ) | 2,537,706 | — | ||||||||||||||||||||
Palm Trace Landings | Davie, FL | 1995 | 768 | 38,400,000 | 105,693,432 | 3,667,268 | 38,400,000 | 109,360,700 | 147,760,700 | (32,542,144 | ) | 115,218,556 | — | ||||||||||||||||||||
Panther Ridge | Federal Way, WA | 1980 | 260 | 1,055,800 | 9,506,117 | 2,140,710 | 1,055,800 | 11,646,827 | 12,702,627 | (6,713,735 | ) | 5,988,892 | — | ||||||||||||||||||||
Parc 77 | New York, NY (G) | 1903 | 137 | 40,504,000 | 18,025,679 | 4,589,070 | 40,504,000 | 22,614,749 | 63,118,749 | (7,304,745 | ) | 55,814,004 | — | ||||||||||||||||||||
Parc Cameron | New York, NY (G) | 1927 | 166 | 37,600,000 | 9,855,597 | 5,715,000 | 37,600,000 | 15,570,597 | 53,170,597 | (6,182,777 | ) | 46,987,820 | — | ||||||||||||||||||||
Parc Coliseum | New York, NY (G) | 1910 | 177 | 52,654,000 | 23,045,751 | 7,389,493 | 52,654,000 | 30,435,244 | 83,089,244 | (9,968,139 | ) | 73,121,105 | — | ||||||||||||||||||||
Parc East Towers | New York, NY (G) | 1977 | 324 | 102,163,000 | 108,989,402 | 6,303,791 | 102,163,000 | 115,293,193 | 217,456,193 | (27,730,132 | ) | 189,726,061 | — | ||||||||||||||||||||
Park at Turtle Run, The | Coral Springs, FL | 2001 | 257 | 15,420,000 | 36,064,629 | 1,138,034 | 15,420,000 | 37,202,663 | 52,622,663 | (12,013,061 | ) | 40,609,602 | — | ||||||||||||||||||||
Park West (CA) | Los Angeles, CA | 1987/1990 | 444 | 3,033,500 | 27,302,383 | 5,986,542 | 3,033,500 | 33,288,925 | 36,322,425 | (20,597,273 | ) | 15,725,152 | — | ||||||||||||||||||||
Parkfield | Denver, CO | 2000 | 476 | 8,330,000 | 28,667,617 | 2,635,179 | 8,330,000 | 31,302,796 | 39,632,796 | (13,637,129 | ) | 25,995,667 | — | ||||||||||||||||||||
Parkside | Union City, CA | 1979 | 208 | 6,246,700 | 11,827,453 | 3,773,395 | 6,246,700 | 15,600,848 | 21,847,548 | (8,946,852 | ) | 12,900,696 | — | ||||||||||||||||||||
Pegasus | Los Angeles, CA (G) | 1949/2003 | 322 | 18,094,052 | 81,905,948 | 1,010,419 | 18,094,052 | 82,916,367 | 101,010,419 | (8,883,859 | ) | 92,126,560 | — | ||||||||||||||||||||
Phillips Park | Wellesley, MA | 1988 | 49 | 816,922 | 5,460,955 | 1,006,754 | 816,922 | 6,467,709 | 7,284,631 | (3,029,012 | ) | 4,255,619 | — | ||||||||||||||||||||
Playa Pacifica | Hermosa Beach,CA | 1972 | 285 | 35,100,000 | 33,473,822 | 7,816,545 | 35,100,000 | 41,290,367 | 76,390,367 | (14,648,914 | ) | 61,741,453 | — | ||||||||||||||||||||
Portofino | Chino Hills, CA | 1989 | 176 | 3,572,400 | 14,660,994 | 3,163,077 | 3,572,400 | 17,824,071 | 21,396,471 | (9,213,621 | ) | 12,182,850 | — | ||||||||||||||||||||
Portofino (Val) | Valencia, CA | 1989 | 216 | 8,640,000 | 21,487,126 | 2,535,302 | 8,640,000 | 24,022,428 | 32,662,428 | (10,638,272 | ) | 22,024,156 | — | ||||||||||||||||||||
Portside Towers | Jersey City, NJ (G) | 1992-1997 | 527 | 22,487,006 | 96,842,913 | 17,976,757 | 22,487,006 | 114,819,670 | 137,306,676 | (56,764,558 | ) | 80,542,118 | — | ||||||||||||||||||||
Preserve at Deer Creek | Deerfield Beach, FL | 1997 | 540 | 13,500,000 | 60,011,208 | 7,352,553 | 13,500,000 | 67,363,761 | 80,863,761 | (21,754,541 | ) | 59,109,220 | — | ||||||||||||||||||||
Prime, The | Arlington, VA | 2002 | 256 | 32,000,000 | 64,436,539 | 793,019 | 32,000,000 | 65,229,558 | 97,229,558 | (16,925,622 | ) | 80,303,936 | — | ||||||||||||||||||||
Promenade at Aventura | Aventura, FL | 1995 | 296 | 13,320,000 | 30,353,748 | 5,730,061 | 13,320,000 | 36,083,809 | 49,403,809 | (15,402,153 | ) | 34,001,656 | — | ||||||||||||||||||||
Promenade at Town Center I | Valencia, CA | 2001 | 294 | 14,700,000 | 35,390,279 | 2,077,005 | 14,700,000 | 37,467,284 | 52,167,284 | (12,733,454 | ) | 39,433,830 | — | ||||||||||||||||||||
Promenade at Town Center II | Valencia, CA | 2001 | 270 | 13,500,000 | 34,405,636 | 1,866,780 | 13,500,000 | 36,272,416 | 49,772,416 | (12,208,570 | ) | 37,563,846 | — | ||||||||||||||||||||
Promenade at Wyndham Lakes | Coral Springs, FL | 1998 | 332 | 6,640,000 | 26,743,760 | 4,847,063 | 6,640,000 | 31,590,823 | 38,230,823 | (13,633,783 | ) | 24,597,040 | — | ||||||||||||||||||||
Promenade Terrace | Corona, CA | 1990 | 330 | 2,272,800 | 20,546,289 | 5,449,007 | 2,272,800 | 25,995,296 | 28,268,096 | (15,684,738 | ) | 12,583,358 | — | ||||||||||||||||||||
Promontory Pointe I & II | Phoenix, AZ | 1984/1996 | 424 | 2,355,509 | 30,421,840 | 4,007,789 | 2,355,509 | 34,429,629 | 36,785,138 | (18,808,607 | ) | 17,976,531 | — | ||||||||||||||||||||
Prospect Towers | Hackensack, NJ | 1995 | 157 | 3,926,600 | 31,674,675 | 4,376,379 | 3,926,600 | 36,051,054 | 39,977,654 | (16,205,927 | ) | 23,771,727 | — |
S-7
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Prospect Towers II | Hackensack, NJ | 2002 | 203 | 4,500,000 | 40,617,715 | 3,929,623 | 4,500,000 | 44,547,338 | 49,047,338 | (14,091,202 | ) | 34,956,136 | — | ||||||||||||||||||||
Red 160 (fka Redmond Way) | Redmond , WA (G) | 2011 | 250 | 15,546,376 | 65,320,310 | 346,281 | 15,546,376 | 65,666,591 | 81,212,967 | (4,144,236 | ) | 77,068,731 | — | ||||||||||||||||||||
Red Road Commons | Miami, FL (G) | 2009 | 404 | 27,383,547 | 99,656,440 | 559,718 | 27,383,547 | 100,216,158 | 127,599,705 | (10,565,079 | ) | 117,034,626 | — | ||||||||||||||||||||
Regency Palms | Huntington Beach, CA | 1969 | 310 | 1,857,400 | 16,713,254 | 5,000,624 | 1,857,400 | 21,713,878 | 23,571,278 | (13,274,225 | ) | 10,297,053 | — | ||||||||||||||||||||
Registry | Northglenn, CO | 1986 | 208 | 2,000,000 | 10,925,007 | 259,859 | 2,000,000 | 11,184,866 | 13,184,866 | (2,566,137 | ) | 10,618,729 | — | ||||||||||||||||||||
Renaissance Villas | Berkeley, CA (G) | 1998 | 34 | 2,458,000 | 4,542,000 | 100,280 | 2,458,000 | 4,642,280 | 7,100,280 | (997,805 | ) | 6,102,475 | — | ||||||||||||||||||||
Reserve at Ashley Lake | Boynton Beach, FL | 1990 | 440 | 3,520,400 | 23,332,494 | 6,350,302 | 3,520,400 | 29,682,796 | 33,203,196 | (16,035,666 | ) | 17,167,530 | — | ||||||||||||||||||||
Reserve at Town Center II (WA) | Mill Creek, WA | 2009 | 100 | 4,310,418 | 17,165,442 | 38,373 | 4,310,418 | 17,203,815 | 21,514,233 | (1,876,908 | ) | 19,637,325 | — | ||||||||||||||||||||
Reserve at Town Center III | Mill Creek, WA | (F) | — | 2,089,388 | 3,490,084 | — | 2,089,388 | 3,490,084 | 5,579,472 | — | 5,579,472 | — | |||||||||||||||||||||
Residences at Bayview | Pompano Beach, FL (G) | 2004 | 225 | 5,783,545 | 39,334,455 | 752,433 | 5,783,545 | 40,086,888 | 45,870,433 | (5,299,161 | ) | 40,571,272 | — | ||||||||||||||||||||
Retreat, The | Phoenix, AZ | 1999 | 480 | 3,475,114 | 27,265,252 | 2,976,118 | 3,475,114 | 30,241,370 | 33,716,484 | (14,672,647 | ) | 19,043,837 | — | ||||||||||||||||||||
Reunion at Redmond Ridge (fka Remond Ridge) | Redmond, WA | 2008 | 321 | 6,975,705 | 46,175,001 | 184,695 | 6,975,705 | 46,359,696 | 53,335,401 | (8,224,105 | ) | 45,111,296 | — | ||||||||||||||||||||
Rianna I | Seattle, WA (G) | 2000 | 78 | 2,268,160 | 14,864,482 | 191,086 | 2,268,160 | 15,055,568 | 17,323,728 | (2,529,256 | ) | 14,794,472 | — | ||||||||||||||||||||
Ridgewood Village I&II | San Diego, CA | 1997 | 408 | 11,809,500 | 34,004,048 | 3,421,687 | 11,809,500 | 37,425,735 | 49,235,235 | (16,980,968 | ) | 32,254,267 | — | ||||||||||||||||||||
River Tower | New York, NY (G) | 1982 | 323 | 118,669,441 | 98,880,559 | 2,622,133 | 118,669,441 | 101,502,692 | 220,172,133 | (20,197,403 | ) | 199,974,730 | — | ||||||||||||||||||||
Riverpark | Redmond, WA (G) | 2009 | 319 | 14,355,000 | 80,894,049 | 67,518 | 14,355,000 | 80,961,567 | 95,316,567 | (5,035,285 | ) | 90,281,282 | — | ||||||||||||||||||||
Rivers Bend (CT) | Windsor, CT | 1973 | 373 | 3,325,517 | 22,573,825 | 2,927,622 | 3,325,517 | 25,501,447 | 28,826,964 | (11,668,318 | ) | 17,158,646 | — | ||||||||||||||||||||
Riverview Condominiums | Norwalk, CT | 1991 | 92 | 2,300,000 | 7,406,730 | 2,296,446 | 2,300,000 | 9,703,176 | 12,003,176 | (4,819,131 | ) | 7,184,045 | — | ||||||||||||||||||||
Rosecliff II | Quincy, MA | 2005 | 130 | 4,922,840 | 30,202,160 | 309,921 | 4,922,840 | 30,512,081 | 35,434,921 | (2,615,953 | ) | 32,818,968 | — | ||||||||||||||||||||
Sabal Palm at Lake Buena Vista | Orlando, FL | 1988 | 400 | 2,800,000 | 23,687,893 | 6,464,030 | 2,800,000 | 30,151,923 | 32,951,923 | (14,714,652 | ) | 18,237,271 | — | ||||||||||||||||||||
Sabal Palm at Metrowest II | Orlando, FL | 1997 | 456 | 4,560,000 | 33,907,283 | 3,163,494 | 4,560,000 | 37,070,777 | 41,630,777 | (18,621,155 | ) | 23,009,622 | — | ||||||||||||||||||||
Sabal Pointe | Coral Springs, FL | 1995 | 275 | 1,951,600 | 17,570,508 | 5,371,496 | 1,951,600 | 22,942,004 | 24,893,604 | (13,656,091 | ) | 11,237,513 | — | ||||||||||||||||||||
Sage | Everett, WA | 2002 | 123 | 2,500,000 | 12,021,256 | 509,255 | 2,500,000 | 12,530,511 | 15,030,511 | (3,881,499 | ) | 11,149,012 | — | ||||||||||||||||||||
Sakura Crossing | Los Angeles, CA (G) | 2009 | 230 | 14,641,990 | 42,858,010 | 67,668 | 14,641,990 | 42,925,678 | 57,567,668 | (4,308,500 | ) | 53,259,168 | — | ||||||||||||||||||||
Savannah at Park Place | Atlanta, GA | 2001 | 416 | 7,696,095 | 34,034,000 | 3,030,294 | 7,696,095 | 37,064,294 | 44,760,389 | (12,902,641 | ) | 31,857,748 | — | ||||||||||||||||||||
Savoy at Dayton Station III (fka Savoy III) | Aurora, CO | 2012 | 168 | 659,165 | 20,801,301 | 4,871 | 659,165 | 20,806,172 | 21,465,337 | (493,651 | ) | 20,971,686 | — | ||||||||||||||||||||
Scarborough Square | Rockville, MD | 1967 | 121 | 1,815,000 | 7,608,125 | 2,636,140 | 1,815,000 | 10,244,265 | 12,059,265 | (5,777,402 | ) | 6,281,863 | — | ||||||||||||||||||||
Sedona Ridge | Phoenix, AZ | 1989 | 250 | 3,750,000 | 14,750,000 | 594,723 | 3,750,000 | 15,344,723 | 19,094,723 | (3,754,639 | ) | 15,340,084 | — | ||||||||||||||||||||
Seeley Lake | Lakewood, WA | 1990 | 522 | 2,760,400 | 24,845,286 | 4,919,610 | 2,760,400 | 29,764,896 | 32,525,296 | (16,810,786 | ) | 15,714,510 | — | ||||||||||||||||||||
Seventh & James | Seattle, WA | 1992 | 96 | 663,800 | 5,974,803 | 3,169,294 | 663,800 | 9,144,097 | 9,807,897 | (5,556,778 | ) | 4,251,119 | — | ||||||||||||||||||||
Shadow Creek | Winter Springs, FL | 2000 | 280 | 6,000,000 | 21,719,768 | 1,723,693 | 6,000,000 | 23,443,461 | 29,443,461 | (8,121,736 | ) | 21,321,725 | — | ||||||||||||||||||||
Sheridan Lake Club | Dania Beach, FL | 2001 | 240 | 12,000,000 | 23,170,580 | 1,577,555 | 12,000,000 | 24,748,135 | 36,748,135 | (7,699,328 | ) | 29,048,807 | — | ||||||||||||||||||||
Sheridan Ocean Club combined | Dania Beach, FL | 1991 | 648 | 18,313,414 | 47,091,594 | 15,399,729 | 18,313,414 | 62,491,323 | 80,804,737 | (27,296,479 | ) | 53,508,258 | — | ||||||||||||||||||||
Siena Terrace | Lake Forest, CA | 1988 | 356 | 8,900,000 | 24,083,024 | 4,002,133 | 8,900,000 | 28,085,157 | 36,985,157 | (13,747,923 | ) | 23,237,234 | — | ||||||||||||||||||||
Skycrest | Valencia, CA | 1999 | 264 | 10,560,000 | 25,574,457 | 2,123,434 | 10,560,000 | 27,697,891 | 38,257,891 | (12,044,811 | ) | 26,213,080 | — | ||||||||||||||||||||
Skylark | Union City, CA | 1986 | 174 | 1,781,600 | 16,731,916 | 1,791,961 | 1,781,600 | 18,523,877 | 20,305,477 | (9,490,193 | ) | 10,815,284 | — | ||||||||||||||||||||
Skyline Terrace | Burlingame, CA | 1967 & 1987 | 138 | 16,836,000 | 35,414,000 | 2,475,480 | 16,836,000 | 37,889,480 | 54,725,480 | (4,706,514 | ) | 50,018,966 | — | ||||||||||||||||||||
Skyline Towers | Falls Church, VA (G) | 1971 | 939 | 78,278,200 | 91,485,591 | 29,934,636 | 78,278,200 | 121,420,227 | 199,698,427 | (43,347,611 | ) | 156,350,816 | — | ||||||||||||||||||||
Skyview | Rancho Santa Margarita, CA | 1999 | 260 | 3,380,000 | 21,952,863 | 2,009,739 | 3,380,000 | 23,962,602 | 27,342,602 | (11,496,938 | ) | 15,845,664 | — | ||||||||||||||||||||
Sonoran | Phoenix, AZ | 1995 | 429 | 2,361,922 | 31,841,724 | 3,264,621 | 2,361,922 | 35,106,345 | 37,468,267 | (18,709,220 | ) | 18,759,047 | — | ||||||||||||||||||||
Southwood | Palo Alto, CA | 1985 | 100 | 6,936,600 | 14,324,069 | 2,939,857 | 6,936,600 | 17,263,926 | 24,200,526 | (8,779,798 | ) | 15,420,728 | — | ||||||||||||||||||||
Springbrook Estates | Riverside, CA | (F) | — | 18,200,000 | — | — | 18,200,000 | — | 18,200,000 | — | 18,200,000 | — | |||||||||||||||||||||
Springs Colony | Altamonte Springs, FL | 1986 | 188 | 630,411 | 5,852,157 | 2,551,306 | 630,411 | 8,403,463 | 9,033,874 | (5,810,262 | ) | 3,223,612 | — | ||||||||||||||||||||
St. Andrews at Winston Park | Coconut Creek, FL | 1997 | 284 | 5,680,000 | 19,812,090 | 3,443,096 | 5,680,000 | 23,255,186 | 28,935,186 | (9,387,233 | ) | 19,547,953 | — | ||||||||||||||||||||
Stoney Creek | Lakewood, WA | 1990 | 231 | 1,215,200 | 10,938,134 | 2,533,940 | 1,215,200 | 13,472,074 | 14,687,274 | (7,802,275 | ) | 6,884,999 | — | ||||||||||||||||||||
Stonybrook | Boynton Beach, FL | 2001 | 264 | 10,500,000 | 24,967,638 | 1,476,723 | 10,500,000 | 26,444,361 | 36,944,361 | (8,081,289 | ) | 28,863,072 | — | ||||||||||||||||||||
Summerset Village II | Chatsworth, CA | (F) | — | 260,646 | — | — | 260,646 | — | 260,646 | — | 260,646 | — | |||||||||||||||||||||
Summit & Birch Hill | Farmington, CT | 1967 | 186 | 1,757,438 | 11,748,112 | 3,150,829 | 1,757,438 | 14,898,941 | 16,656,379 | (7,116,571 | ) | 9,539,808 | — |
S-8
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Sycamore Creek | Scottsdale, AZ | 1984 | 350 | 3,152,000 | 19,083,727 | 3,524,641 | 3,152,000 | 22,608,368 | 25,760,368 | (12,645,066 | ) | 13,115,302 | — | ||||||||||||||||||||
Ten23 (fka 500 West 23rd Street) | New York, NY (G) | 2011 | 111 | — | 55,094,616 | 73,313 | — | 55,167,929 | 55,167,929 | (1,930,538 | ) | 53,237,391 | — | ||||||||||||||||||||
Terraces, The | San Francisco, CA (G) | 1975 | 117 | 14,087,610 | 16,321,570 | 339,496 | 14,087,610 | 16,661,066 | 30,748,676 | (1,669,806 | ) | 29,078,870 | — | ||||||||||||||||||||
Third Square | Cambridge, MA (G) | 2008/2009 | 471 | 26,767,171 | 218,745,109 | 2,565,835 | 26,767,171 | 221,310,944 | 248,078,115 | (31,817,136 | ) | 216,260,979 | — | ||||||||||||||||||||
Tortuga Bay | Orlando, FL | 2004 | 314 | 6,280,000 | 32,121,779 | 1,197,577 | 6,280,000 | 33,319,356 | 39,599,356 | (10,233,609 | ) | 29,365,747 | — | ||||||||||||||||||||
Toscana | Irvine, CA | 1991/1993 | 563 | 39,410,000 | 50,806,072 | 7,320,599 | 39,410,000 | 58,126,671 | 97,536,671 | (26,096,607 | ) | 71,440,064 | — | ||||||||||||||||||||
Townes at Herndon | Herndon, VA | 2002 | 218 | 10,900,000 | 49,216,125 | 776,855 | 10,900,000 | 49,992,980 | 60,892,980 | (14,084,769 | ) | 46,808,211 | — | ||||||||||||||||||||
Trump Place, 140 Riverside | New York, NY (G) | 2003 | 354 | 103,539,100 | 94,082,725 | 2,566,988 | 103,539,100 | 96,649,713 | 200,188,813 | (26,637,468 | ) | 173,551,345 | — | ||||||||||||||||||||
Trump Place, 160 Riverside | New York, NY (G) | 2001 | 455 | 139,933,500 | 190,964,745 | 7,898,524 | 139,933,500 | 198,863,269 | 338,796,769 | (52,832,992 | ) | 285,963,777 | — | ||||||||||||||||||||
Trump Place, 180 Riverside | New York, NY (G) | 1998 | 516 | 144,968,250 | 138,346,681 | 6,980,980 | 144,968,250 | 145,327,661 | 290,295,911 | (40,639,020 | ) | 249,656,891 | — | ||||||||||||||||||||
Uwajimaya Village | Seattle, WA | 2002 | 176 | 8,800,000 | 22,188,288 | 320,211 | 8,800,000 | 22,508,499 | 31,308,499 | (7,306,208 | ) | 24,002,291 | — | ||||||||||||||||||||
Valencia Plantation | Orlando, FL | 1990 | 194 | 873,000 | 12,819,377 | 2,264,564 | 873,000 | 15,083,941 | 15,956,941 | (7,679,299 | ) | 8,277,642 | — | ||||||||||||||||||||
Vantage Pointe | San Diego, CA (G) | 2009 | 679 | 9,403,960 | 190,596,040 | 3,629,681 | 9,403,960 | 194,225,721 | 203,629,681 | (19,966,728 | ) | 183,662,953 | — | ||||||||||||||||||||
Veridian (fka Silver Spring) | Silver Spring, MD (G) | 2009 | 457 | 18,539,817 | 130,407,365 | 440,675 | 18,539,817 | 130,848,040 | 149,387,857 | (16,158,435 | ) | 133,229,422 | — | ||||||||||||||||||||
Versailles (K-Town) | Los Angeles, CA | 2008 | 225 | 10,590,975 | 44,409,025 | 239,807 | 10,590,975 | 44,648,832 | 55,239,807 | (6,926,468 | ) | 48,313,339 | — | ||||||||||||||||||||
Victor on Venice | Los Angeles, CA (G) | 2006 | 115 | 10,350,000 | 35,433,437 | 237,130 | 10,350,000 | 35,670,567 | 46,020,567 | (8,859,582 | ) | 37,160,985 | — | ||||||||||||||||||||
Villa Solana | Laguna Hills, CA | 1984 | 272 | 1,665,100 | 14,985,677 | 8,132,584 | 1,665,100 | 23,118,261 | 24,783,361 | (14,288,430 | ) | 10,494,931 | — | ||||||||||||||||||||
Village at Bear Creek | Lakewood, CO | 1987 | 472 | 4,519,700 | 40,676,390 | 4,997,870 | 4,519,700 | 45,674,260 | 50,193,960 | (24,795,219 | ) | 25,398,741 | — | ||||||||||||||||||||
Village at Howard Hughes (Lots 1 & 2/3 & 4) | Los Angeles, CA | (F) | — | 79,140,504 | 759,769 | — | 79,140,504 | 759,769 | 79,900,273 | — | 79,900,273 | — | |||||||||||||||||||||
Village at Lakewood | Phoenix, AZ | 1988 | 240 | 3,166,411 | 13,859,090 | 2,489,757 | 3,166,411 | 16,348,847 | 19,515,258 | (8,961,390 | ) | 10,553,868 | — | ||||||||||||||||||||
Vista Del Largo | Mission Viejo, CA | 1986-1988 | 608 | 4,525,800 | 40,736,293 | 14,798,953 | 4,525,800 | 55,535,246 | 60,061,046 | (34,665,902 | ) | 25,395,144 | — | ||||||||||||||||||||
Vista Montana - Residential | San Jose, CA | (F) | — | 27,410,280 | 1,199,671 | — | 27,410,280 | 1,199,671 | 28,609,951 | — | 28,609,951 | — | |||||||||||||||||||||
Vista on Courthouse | Arlington, VA | 2008 | 220 | 15,550,260 | 69,449,740 | 397,975 | 15,550,260 | 69,847,715 | 85,397,975 | (10,744,482 | ) | 74,653,493 | — | ||||||||||||||||||||
Walden Park | Cambridge, MA | 1966 | 232 | 12,448,888 | 52,044,448 | 1,594,732 | 12,448,888 | 53,639,180 | 66,088,068 | (5,239,651 | ) | 60,848,417 | — | ||||||||||||||||||||
Waterford Place (CO) | Thornton, CO | 1998 | 336 | 5,040,000 | 29,946,419 | 1,637,326 | 5,040,000 | 31,583,745 | 36,623,745 | (11,886,541 | ) | 24,737,204 | — | ||||||||||||||||||||
Waterside | Reston, VA | 1984 | 276 | 20,700,000 | 27,474,387 | 8,220,602 | 20,700,000 | 35,694,989 | 56,394,989 | (12,496,308 | ) | 43,898,681 | — | ||||||||||||||||||||
Webster Green | Needham, MA | 1985 | 77 | 1,418,893 | 9,485,006 | 1,114,670 | 1,418,893 | 10,599,676 | 12,018,569 | (4,715,170 | ) | 7,303,399 | — | ||||||||||||||||||||
Welleby Lake Club | Sunrise, FL | 1991 | 304 | 3,648,000 | 17,620,879 | 5,597,514 | 3,648,000 | 23,218,393 | 26,866,393 | (11,549,224 | ) | 15,317,169 | — | ||||||||||||||||||||
West End Apartments (fka Emerson Place/ CRP II) | Boston, MA (G) | 2008 | 310 | 469,546 | 163,123,022 | 494,911 | 469,546 | 163,617,933 | 164,087,479 | (27,681,291 | ) | 136,406,188 | — | ||||||||||||||||||||
West Seattle | Seattle, WA | (F) | — | 11,726,305 | 2,490,247 | — | 11,726,305 | 2,490,247 | 14,216,552 | — | 14,216,552 | — | |||||||||||||||||||||
Westerly at Worldgate | Herndon, VA | 1995 | 320 | 14,568,000 | 43,620,057 | 1,427,763 | 14,568,000 | 45,047,820 | 59,615,820 | (10,109,303 | ) | 49,506,517 | — | ||||||||||||||||||||
Westgate I (fka Westgate Pasadena Apartments) | Pasadena, CA | 2010 | 480 | 22,898,848 | 133,521,009 | 119,567 | 22,898,848 | 133,640,576 | 156,539,424 | (9,242,093 | ) | 147,297,331 | — | ||||||||||||||||||||
Westgate II (fka Westgate Block 2) | Pasadena, CA | (F) | — | 17,859,785 | 44,087,554 | — | 17,859,785 | 44,087,554 | 61,947,339 | — | 61,947,339 | — | |||||||||||||||||||||
Westgate III (fka Westgate Block 1) | Pasadena, CA | (F) | — | 12,118,061 | 8,735,107 | — | 12,118,061 | 8,735,107 | 20,853,168 | — | 20,853,168 | — | |||||||||||||||||||||
Westridge | Tacoma, WA | 1987 -1991 | 714 | 3,501,900 | 31,506,082 | 7,594,870 | 3,501,900 | 39,100,952 | 42,602,852 | (22,336,808 | ) | 20,266,044 | — | ||||||||||||||||||||
Westside Villas I | Los Angeles, CA | 1999 | 21 | 1,785,000 | 3,233,254 | 292,332 | 1,785,000 | 3,525,586 | 5,310,586 | (1,566,348 | ) | 3,744,238 | — | ||||||||||||||||||||
Westside Villas II | Los Angeles, CA | 1999 | 23 | 1,955,000 | 3,541,435 | 179,368 | 1,955,000 | 3,720,803 | 5,675,803 | (1,581,322 | ) | 4,094,481 | — | ||||||||||||||||||||
Westside Villas III | Los Angeles, CA | 1999 | 36 | 3,060,000 | 5,538,871 | 265,521 | 3,060,000 | 5,804,392 | 8,864,392 | (2,460,640 | ) | 6,403,752 | — | ||||||||||||||||||||
Westside Villas IV | Los Angeles, CA | 1999 | 36 | 3,060,000 | 5,539,390 | 273,968 | 3,060,000 | 5,813,358 | 8,873,358 | (2,464,903 | ) | 6,408,455 | — | ||||||||||||||||||||
Westside Villas V | Los Angeles, CA | 1999 | 60 | 5,100,000 | 9,224,485 | 471,533 | 5,100,000 | 9,696,018 | 14,796,018 | (4,123,174 | ) | 10,672,844 | — | ||||||||||||||||||||
Westside Villas VI | Los Angeles, CA | 1989 | 18 | 1,530,000 | 3,023,523 | 262,936 | 1,530,000 | 3,286,459 | 4,816,459 | (1,430,776 | ) | 3,385,683 | — | ||||||||||||||||||||
Westside Villas VII | Los Angeles, CA | 2001 | 53 | 4,505,000 | 10,758,900 | 452,331 | 4,505,000 | 11,211,231 | 15,716,231 | (4,173,724 | ) | 11,542,507 | — | ||||||||||||||||||||
Wimberly at Deerwood | Jacksonville, FL | 2000 | 322 | 8,000,000 | 30,057,214 | 1,762,941 | 8,000,000 | 31,820,155 | 39,820,155 | (9,410,511 | ) | 30,409,644 | — | ||||||||||||||||||||
Winchester Park | Riverside, RI | 1972 | 416 | 2,822,618 | 18,868,626 | 7,266,563 | 2,822,618 | 26,135,189 | 28,957,807 | (13,008,087 | ) | 15,949,720 | — | ||||||||||||||||||||
Winchester Wood | Riverside, RI | 1989 | 62 | 683,215 | 4,567,154 | 1,011,098 | 683,215 | 5,578,252 | 6,261,467 | (2,491,362 | ) | 3,770,105 | — | ||||||||||||||||||||
Windridge (CA) | Laguna Niguel, CA | 1989 | 344 | 2,662,900 | 23,985,497 | 7,370,121 | 2,662,900 | 31,355,618 | 34,018,518 | (18,946,445 | ) | 15,072,073 | — | ||||||||||||||||||||
Windsor at Fair Lakes | Fairfax, VA | 1988 | 250 | 10,000,000 | 28,587,109 | 6,701,806 | 10,000,000 | 35,288,915 | 45,288,915 | (12,650,207 | ) | 32,638,708 | — | ||||||||||||||||||||
Winston, The (FL) | Pembroke Pines, FL | 2001/2003 | 464 | 18,561,000 | 49,527,569 | 2,297,064 | 18,561,000 | 51,824,633 | 70,385,633 | (14,329,842 | ) | 56,055,791 | — |
S-9
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Wood Creek (CA) | Pleasant Hill, CA | 1987 | 256 | 9,729,900 | 23,009,768 | 6,108,839 | 9,729,900 | 29,118,607 | 38,848,507 | (15,172,018 | ) | 23,676,489 | — | ||||||||||||||||||||
Woodbridge (CT) | Newington, CT | 1968 | 73 | 498,377 | 3,331,548 | 1,021,950 | 498,377 | 4,353,498 | 4,851,875 | (2,034,470 | ) | 2,817,405 | — | ||||||||||||||||||||
Woodland Park | East Palo Alto, CA (G) | 1953 | 1,812 | 72,314,518 | 57,267,661 | 4,000,424 | 72,314,518 | 61,268,085 | 133,582,603 | (14,050,014 | ) | 119,532,589 | — | ||||||||||||||||||||
Management Business | Chicago, IL | (D) | — | — | — | 93,750,517 | — | 93,750,517 | 93,750,517 | (70,059,419 | ) | 23,691,098 | — | ||||||||||||||||||||
Operating Partnership | Chicago, IL | (F) | — | — | 4,528,494 | — | — | 4,528,494 | 4,528,494 | — | 4,528,494 | — | |||||||||||||||||||||
Wholly Owned Unencumbered | 73,732 | 3,731,343,610 | 9,953,052,315 | 992,053,562 | 3,731,343,610 | 10,945,105,877 | 14,676,449,487 | (3,266,454,538 | ) | 11,409,994,949 | — | ||||||||||||||||||||||
Wholly Owned Encumbered: | |||||||||||||||||||||||||||||||||
4701 Willard Ave | Chevy Chase, MD (G) | 1966 | 512 | 76,921,130 | 153,947,682 | 1,061,755 | 76,921,130 | 155,009,437 | 231,930,567 | (11,597,683 | ) | 220,332,884 | 104,556,923 | ||||||||||||||||||||
55 West Fifth I & II (fka Townhouse Plaza and Gardens) | San Mateo, CA | 1964/1972 | 241 | 21,041,710 | 71,931,323 | 215,831 | 21,041,710 | 72,147,154 | 93,188,864 | (2,686,429 | ) | 90,502,435 | 30,778,664 | ||||||||||||||||||||
929 House | Cambridge, MA (G) | 1975 | 127 | 3,252,993 | 21,745,595 | 4,792,140 | 3,252,993 | 26,537,735 | 29,790,728 | (11,377,564 | ) | 18,413,164 | 2,464,147 | ||||||||||||||||||||
Academy Village | North Hollywood, CA | 1989 | 248 | 25,000,000 | 23,593,194 | 6,492,522 | 25,000,000 | 30,085,716 | 55,085,716 | (11,470,719 | ) | 43,614,997 | 20,000,000 | ||||||||||||||||||||
Acappella | Pasadena, CA | 2002 | 143 | 5,839,548 | 29,360,452 | 277,755 | 5,839,548 | 29,638,207 | 35,477,755 | (3,824,665 | ) | 31,653,090 | 20,389,637 | ||||||||||||||||||||
Acton Courtyard | Berkeley, CA (G) | 2003 | 71 | 5,550,000 | 15,785,509 | 126,430 | 5,550,000 | 15,911,939 | 21,461,939 | (4,051,110 | ) | 17,410,829 | 9,920,000 | ||||||||||||||||||||
Alborada | Fremont, CA | 1999 | 442 | 24,310,000 | 59,214,129 | 2,626,742 | 24,310,000 | 61,840,871 | 86,150,871 | (27,444,903 | ) | 58,705,968 | (I) | ||||||||||||||||||||
Alexander on Ponce | Atlanta, GA | 2003 | 330 | 9,900,000 | 35,819,022 | 1,617,126 | 9,900,000 | 37,436,148 | 47,336,148 | (10,925,726 | ) | 36,410,422 | 30,889,928 | ||||||||||||||||||||
Arbor Terrace | Sunnyvale, CA | 1979 | 175 | 9,057,300 | 18,483,642 | 2,414,658 | 9,057,300 | 20,898,300 | 29,955,600 | (10,784,419 | ) | 19,171,181 | (K) | ||||||||||||||||||||
Artech Building | Berkeley, CA (G) | 2002 | 21 | 1,642,000 | 9,152,518 | 108,579 | 1,642,000 | 9,261,097 | 10,903,097 | (2,117,964 | ) | 8,785,133 | 3,200,000 | ||||||||||||||||||||
Artisan Square | Northridge, CA | 2002 | 140 | 7,000,000 | 20,537,359 | 805,318 | 7,000,000 | 21,342,677 | 28,342,677 | (7,724,759 | ) | 20,617,918 | 22,779,715 | ||||||||||||||||||||
Avanti | Anaheim, CA | 1987 | 162 | 12,960,000 | 18,497,683 | 1,168,149 | 12,960,000 | 19,665,832 | 32,625,832 | (5,822,854 | ) | 26,802,978 | 18,169,458 | ||||||||||||||||||||
Bachenheimer Building | Berkeley, CA (G) | 2004 | 44 | 3,439,000 | 13,866,379 | 76,376 | 3,439,000 | 13,942,755 | 17,381,755 | (3,327,186 | ) | 14,054,569 | 8,585,000 | ||||||||||||||||||||
Bella Vista Apartments at Boca Del Mar | Boca Raton, FL | 1985 | 392 | 11,760,000 | 20,190,252 | 14,210,692 | 11,760,000 | 34,400,944 | 46,160,944 | (17,113,970 | ) | 29,046,974 | 26,134,010 | ||||||||||||||||||||
Berkeleyan | Berkeley, CA (G) | 1998 | 56 | 4,377,000 | 16,022,110 | 301,952 | 4,377,000 | 16,324,062 | 20,701,062 | (4,008,100 | ) | 16,692,962 | 8,290,000 | ||||||||||||||||||||
Brookside (CO) | Boulder, CO | 1993 | 144 | 3,600,400 | 10,211,159 | 2,457,688 | 3,600,400 | 12,668,847 | 16,269,247 | (6,141,451 | ) | 10,127,796 | (K) | ||||||||||||||||||||
Canterbury | Germantown, MD | 1986 | 544 | 2,781,300 | 32,942,531 | 14,663,505 | 2,781,300 | 47,606,036 | 50,387,336 | (29,231,534 | ) | 21,155,802 | 31,680,000 | ||||||||||||||||||||
Cape House I | Jacksonville, FL | 1998 | 240 | 4,800,000 | 22,484,240 | 699,067 | 4,800,000 | 23,183,307 | 27,983,307 | (7,222,093 | ) | 20,761,214 | 13,325,916 | ||||||||||||||||||||
Cape House II | Jacksonville, FL | 1998 | 240 | 4,800,000 | 22,229,836 | 1,882,338 | 4,800,000 | 24,112,174 | 28,912,174 | (7,720,133 | ) | 21,192,041 | 12,705,475 | ||||||||||||||||||||
Carmel Terrace | San Diego, CA | 1988-1989 | 384 | 2,288,300 | 20,596,281 | 10,197,424 | 2,288,300 | 30,793,705 | 33,082,005 | (19,654,063 | ) | 13,427,942 | (J) | ||||||||||||||||||||
Cascade at Landmark | Alexandria, VA | 1990 | 277 | 3,603,400 | 19,657,554 | 8,058,058 | 3,603,400 | 27,715,612 | 31,319,012 | (15,450,921 | ) | 15,868,091 | 31,921,089 | ||||||||||||||||||||
Chelsea Square | Redmond, WA | 1991 | 113 | 3,397,100 | 9,289,074 | 1,650,412 | 3,397,100 | 10,939,486 | 14,336,586 | (5,456,865 | ) | 8,879,721 | (K) | ||||||||||||||||||||
Church Corner | Cambridge, MA (G) | 1987 | 85 | 5,220,000 | 16,744,643 | 1,461,569 | 5,220,000 | 18,206,212 | 23,426,212 | (5,666,620 | ) | 17,759,592 | 12,000,000 | ||||||||||||||||||||
Cierra Crest | Denver, CO | 1996 | 480 | 4,803,100 | 34,894,898 | 4,883,250 | 4,803,100 | 39,778,148 | 44,581,248 | (21,390,229 | ) | 23,191,019 | (K) | ||||||||||||||||||||
City Pointe | Fullerton, CA (G) | 2004 | 183 | 6,863,792 | 36,476,208 | 549,414 | 6,863,792 | 37,025,622 | 43,889,414 | (5,887,612 | ) | 38,001,802 | 22,530,961 | ||||||||||||||||||||
CityView at Longwood | Boston, MA (G) | 1970 | 295 | 14,704,898 | 79,195,102 | 6,560,442 | 14,704,898 | 85,755,544 | 100,460,442 | (9,856,238 | ) | 90,604,204 | 25,604,094 | ||||||||||||||||||||
Clarendon, The | Arlington, VA (G) | 2005 | 292 | 30,400,340 | 103,824,660 | 992,382 | 30,400,340 | 104,817,042 | 135,217,382 | (10,223,134 | ) | 124,994,248 | 45,588,729 | ||||||||||||||||||||
Colorado Pointe | Denver, CO | 2006 | 193 | 5,790,000 | 28,815,607 | 520,224 | 5,790,000 | 29,335,831 | 35,125,831 | (8,636,396 | ) | 26,489,435 | (J) | ||||||||||||||||||||
Copper Canyon | Highlands Ranch, CO | 1999 | 222 | 1,442,212 | 16,251,114 | 1,458,531 | 1,442,212 | 17,709,645 | 19,151,857 | (8,646,200 | ) | 10,505,657 | (J) | ||||||||||||||||||||
Country Brook | Chandler, AZ | 1986-1996 | 396 | 1,505,219 | 29,542,535 | 6,179,246 | 1,505,219 | 35,721,781 | 37,227,000 | (18,250,640 | ) | 18,976,360 | (J) | ||||||||||||||||||||
Creekside (San Mateo) | San Mateo, CA | 1985 | 192 | 9,606,600 | 21,193,232 | 3,217,228 | 9,606,600 | 24,410,460 | 34,017,060 | (11,822,291 | ) | 22,194,769 | (K) | ||||||||||||||||||||
Crescent at Cherry Creek | Denver, CO | 1994 | 216 | 2,594,000 | 15,149,470 | 3,570,821 | 2,594,000 | 18,720,291 | 21,314,291 | (9,687,890 | ) | 11,626,401 | (J) | ||||||||||||||||||||
Deerwood (SD) | San Diego, CA | 1990 | 316 | 2,082,095 | 18,739,815 | 13,582,795 | 2,082,095 | 32,322,610 | 34,404,705 | (20,753,292 | ) | 13,651,413 | (J) | ||||||||||||||||||||
Estates at Maitland Summit | Orlando, FL | 1998 | 272 | 9,520,000 | 28,352,160 | 1,081,473 | 9,520,000 | 29,433,633 | 38,953,633 | (9,786,728 | ) | 29,166,905 | (K) | ||||||||||||||||||||
Estates at Tanglewood | Westminster, CO | 2003 | 504 | 7,560,000 | 51,256,538 | 2,353,728 | 7,560,000 | �� | 53,610,266 | 61,170,266 | (16,136,747 | ) | 45,033,519 | (I) | |||||||||||||||||||
Fairfield | Stamford, CT (G) | 1996 | 263 | 6,510,200 | 39,690,120 | 5,842,540 | 6,510,200 | 45,532,660 | 52,042,860 | (23,653,659 | ) | 28,389,201 | 34,595,000 | ||||||||||||||||||||
Fine Arts Building | Berkeley, CA (G) | 2004 | 100 | 7,817,000 | 26,462,772 | 126,659 | 7,817,000 | 26,589,431 | 34,406,431 | (6,531,190 | ) | 27,875,241 | 16,215,000 | ||||||||||||||||||||
Gaia Building | Berkeley, CA (G) | 2000 | 91 | 7,113,000 | 25,623,826 | 182,302 | 7,113,000 | 25,806,128 | 32,919,128 | (6,314,824 | ) | 26,604,304 | 14,630,000 | ||||||||||||||||||||
Gateway at Malden Center | Malden, MA (G) | 1988 | 203 | 9,209,780 | 25,722,666 | 8,897,576 | 9,209,780 | 34,620,242 | 43,830,022 | (14,086,455 | ) | 29,743,567 | 14,970,000 | ||||||||||||||||||||
Glen Meadow | Franklin, MA | 1971 | 288 | 2,339,330 | 16,133,588 | 3,738,664 | 2,339,330 | 19,872,252 | 22,211,582 | (9,797,743 | ) | 12,413,839 | 73,023 | ||||||||||||||||||||
Glo | Los Angeles, CA (G) | 2008 | 201 | 16,047,022 | 48,650,963 | 79,365 | 16,047,022 | 48,730,328 | 64,777,350 | (3,923,877 | ) | 60,853,473 | 31,639,508 | ||||||||||||||||||||
Grandeville at River Place | Oviedo, FL | 2002 | 280 | 6,000,000 | 23,114,693 | 2,003,967 | 6,000,000 | 25,118,660 | 31,118,660 | (8,753,388 | ) | 22,365,272 | 23,789,381 |
S-10
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Greenwood Park | Centennial, CO | 1994 | 291 | 4,365,000 | 38,372,440 | 1,506,405 | 4,365,000 | 39,878,845 | 44,243,845 | (10,442,337 | ) | 33,801,508 | (K) | ||||||||||||||||||||
Greenwood Plaza | Centennial, CO | 1996 | 266 | 3,990,000 | 35,846,708 | 2,104,789 | 3,990,000 | 37,951,497 | 41,941,497 | (10,056,365 | ) | 31,885,132 | (K) | ||||||||||||||||||||
Harbor Steps | Seattle, WA (G) | 2000 | 738 | 59,900,000 | 158,829,432 | 10,108,872 | 59,900,000 | 168,938,304 | 228,838,304 | (47,176,332 | ) | 181,661,972 | 116,707,586 | ||||||||||||||||||||
Hathaway | Long Beach, CA | 1987 | 385 | 2,512,500 | 22,611,912 | 6,999,887 | 2,512,500 | 29,611,799 | 32,124,299 | (18,254,266 | ) | 13,870,033 | 46,517,800 | ||||||||||||||||||||
Heights on Capitol Hill | Seattle, WA (G) | 2006 | 104 | 5,425,000 | 21,138,028 | 156,462 | 5,425,000 | 21,294,490 | 26,719,490 | (5,561,995 | ) | 21,157,495 | 28,180,585 | ||||||||||||||||||||
Heritage at Stone Ridge | Burlington, MA | 2005 | 180 | 10,800,000 | 31,808,335 | 811,286 | 10,800,000 | 32,619,621 | 43,419,621 | (9,708,789 | ) | 33,710,832 | 27,554,850 | ||||||||||||||||||||
Heronfield | Kirkland, WA | 1990 | 202 | 9,245,000 | 27,017,749 | 1,390,613 | 9,245,000 | 28,408,362 | 37,653,362 | (7,709,518 | ) | 29,943,844 | (J) | ||||||||||||||||||||
Ivory Wood | Bothell, WA | 2000 | 144 | 2,732,800 | 13,888,282 | 623,037 | 2,732,800 | 14,511,319 | 17,244,119 | (4,834,547 | ) | 12,409,572 | 8,020,000 | ||||||||||||||||||||
Kelvin Court (fka Alta Pacific) | Irvine, CA | 2008 | 132 | 10,752,145 | 34,647,190 | 120,472 | 10,752,145 | 34,767,662 | 45,519,807 | (5,995,083 | ) | 39,524,724 | 26,495,000 | ||||||||||||||||||||
La Terrazza at Colma Station | Colma, CA (G) | 2005 | 153 | — | 41,251,044 | 527,066 | — | 41,778,110 | 41,778,110 | (10,146,352 | ) | 31,631,758 | 25,175,000 | ||||||||||||||||||||
Liberty Park | Brain Tree, MA | 2000 | 202 | 5,977,504 | 26,749,111 | 2,460,232 | 5,977,504 | 29,209,343 | 35,186,847 | (10,761,276 | ) | 24,425,571 | 24,980,280 | ||||||||||||||||||||
Liberty Tower | Arlington, VA (G) | 2008 | 235 | 16,382,822 | 83,817,078 | 742,901 | 16,382,822 | 84,559,979 | 100,942,801 | (10,769,392 | ) | 90,173,409 | 48,013,044 | ||||||||||||||||||||
Lincoln Heights | Quincy, MA | 1991 | 336 | 5,928,400 | 33,595,262 | 10,858,842 | 5,928,400 | 44,454,104 | 50,382,504 | (23,578,128 | ) | 26,804,376 | (K) | ||||||||||||||||||||
Lindley | Encino, CA | 2004 | 129 | 5,805,000 | 25,705,000 | 514,251 | 5,805,000 | 26,219,251 | 32,024,251 | (2,872,823 | ) | 29,151,428 | 21,774,431 | ||||||||||||||||||||
Longview Place | Waltham, MA | 2004 | 348 | 20,880,000 | 90,255,509 | 2,585,682 | 20,880,000 | 92,841,191 | 113,721,191 | (24,878,084 | ) | 88,843,107 | 60,073,423 | ||||||||||||||||||||
Market Street Village | San Diego, CA | 2006 | 229 | 13,740,000 | 40,757,301 | 663,637 | 13,740,000 | 41,420,938 | 55,160,938 | (10,928,473 | ) | 44,232,465 | (J) | ||||||||||||||||||||
Marks | Englewood, CO (G) | 1987 | 616 | 4,928,500 | 44,622,314 | 10,289,760 | 4,928,500 | 54,912,074 | 59,840,574 | (29,539,822 | ) | 30,300,752 | 19,195,000 | ||||||||||||||||||||
Metro on First | Seattle, WA (G) | 2002 | 102 | 8,540,000 | 12,209,981 | 355,218 | 8,540,000 | 12,565,199 | 21,105,199 | (3,611,780 | ) | 17,493,419 | 22,843,410 | ||||||||||||||||||||
Mill Creek | Milpitas, CA | 1991 | 516 | 12,858,693 | 57,168,503 | 3,411,695 | 12,858,693 | 60,580,198 | 73,438,891 | (21,470,962 | ) | 51,967,929 | 69,312,259 | ||||||||||||||||||||
Miramar Lakes | Miramar, FL | 2003 | 344 | 17,200,000 | 51,487,235 | 1,841,780 | 17,200,000 | 53,329,015 | 70,529,015 | (15,869,408 | ) | 54,659,607 | (L) | ||||||||||||||||||||
Missions at Sunbow | Chula Vista, CA | 2003 | 336 | 28,560,000 | 59,287,595 | 1,474,195 | 28,560,000 | 60,761,790 | 89,321,790 | (18,989,124 | ) | 70,332,666 | 49,466,827 | ||||||||||||||||||||
Moda | Seattle, WA (G) | 2009 | 251 | 12,649,228 | 36,842,012 | 575,003 | 12,649,228 | 37,417,015 | 50,066,243 | (4,262,856 | ) | 45,803,387 | (M) | ||||||||||||||||||||
Monte Viejo | Phoenix, AZ | 2004 | 480 | 12,700,000 | 45,926,784 | 1,167,397 | 12,700,000 | 47,094,181 | 59,794,181 | (15,568,004 | ) | 44,226,177 | 40,046,245 | ||||||||||||||||||||
Montecito | Valencia, CA | 1999 | 210 | 8,400,000 | 24,709,146 | 1,943,224 | 8,400,000 | 26,652,370 | 35,052,370 | (11,538,714 | ) | 23,513,656 | (J) | ||||||||||||||||||||
Montierra (CA) | San Diego, CA | 1990 | 272 | 8,160,000 | 29,360,938 | 6,924,642 | 8,160,000 | 36,285,580 | 44,445,580 | (17,100,722 | ) | 27,344,858 | (J) | ||||||||||||||||||||
Mosaic at Metro | Hyattsville, MD | 2008 | 260 | — | 59,582,698 | 225,848 | — | 59,808,546 | 59,808,546 | (8,905,855 | ) | 50,902,691 | 44,242,551 | ||||||||||||||||||||
Mountain Terrace | Stevenson Ranch, CA | 1992 | 510 | 3,966,500 | 35,814,995 | 11,880,404 | 3,966,500 | 47,695,399 | 51,661,899 | (26,027,707 | ) | 25,634,192 | 57,428,472 | ||||||||||||||||||||
North Pier at Harborside | Jersey City, NJ (I) | 2003 | 297 | 4,000,159 | 94,290,590 | 2,270,783 | 4,000,159 | 96,561,373 | 100,561,532 | (29,127,561 | ) | 71,433,971 | 87,104,293 | ||||||||||||||||||||
Northpark | Burlingame, CA | 1972 | 510 | 38,607,000 | 77,477,449 | 8,188,935 | 38,607,000 | 85,666,384 | 124,273,384 | (12,263,687 | ) | 112,009,697 | 66,848,062 | ||||||||||||||||||||
Oak Mill II | Germantown, MD | 1985 | 192 | 854,133 | 10,233,947 | 6,407,089 | 854,133 | 16,641,036 | 17,495,169 | (10,175,811 | ) | 7,319,358 | 9,600,000 | ||||||||||||||||||||
Oaks | Santa Clarita, CA | 2000 | 520 | 23,400,000 | 61,020,438 | 3,172,779 | 23,400,000 | 64,193,217 | 87,593,217 | (22,524,758 | ) | 65,068,459 | 39,300,896 | ||||||||||||||||||||
Olde Redmond Place | Redmond, WA | 1986 | 192 | 4,807,100 | 14,126,038 | 4,272,420 | 4,807,100 | 18,398,458 | 23,205,558 | (10,211,706 | ) | 12,993,852 | (K) | ||||||||||||||||||||
Olympus Towers | Seattle, WA (G) | 2000 | 328 | 14,752,034 | 73,335,425 | 3,733,218 | 14,752,034 | 77,068,643 | 91,820,677 | (24,854,720 | ) | 66,965,957 | 49,875,780 | ||||||||||||||||||||
Promenade at Peachtree | Chamblee, GA | 2001 | 406 | 10,120,250 | 31,219,739 | 1,879,804 | 10,120,250 | 33,099,543 | 43,219,793 | (11,135,840 | ) | 32,083,953 | (J) | ||||||||||||||||||||
Providence | Bothell, WA | 2000 | 200 | 3,573,621 | 19,055,505 | 649,064 | 3,573,621 | 19,704,569 | 23,278,190 | (6,712,762 | ) | 16,565,428 | (I) | ||||||||||||||||||||
Reserve at Clarendon Centre, The | Arlington, VA (G) | 2003 | 252 | 10,500,000 | 52,812,935 | 3,274,267 | 10,500,000 | 56,087,202 | 66,587,202 | (18,267,935 | ) | 48,319,267 | (J) | ||||||||||||||||||||
Reserve at Eisenhower, The | Alexandria, VA | 2002 | 226 | 6,500,000 | 34,585,060 | 1,269,401 | 6,500,000 | 35,854,461 | 42,354,461 | (12,633,606 | ) | 29,720,855 | (J) | ||||||||||||||||||||
Reserve at Empire Lakes | Rancho Cucamonga, CA | 2005 | 467 | 16,345,000 | 73,080,670 | 1,720,059 | 16,345,000 | 74,800,729 | 91,145,729 | (20,699,538 | ) | 70,446,191 | (I) | ||||||||||||||||||||
Reserve at Fairfax Corner | Fairfax, VA | 2001 | 652 | 15,804,057 | 63,129,051 | 3,830,832 | 15,804,057 | 66,959,883 | 82,763,940 | (24,763,444 | ) | 58,000,496 | 84,778,875 | ||||||||||||||||||||
Reserve at Potomac Yard | Alexandria, VA | 2002 | 588 | 11,918,917 | 68,862,641 | 5,048,808 | 11,918,917 | 73,911,449 | 85,830,366 | (23,292,875 | ) | 62,537,491 | 66,470,000 | ||||||||||||||||||||
Reserve at Town Center (WA) | Mill Creek, WA | 2001 | 389 | 10,369,400 | 41,172,081 | 1,984,196 | 10,369,400 | 43,156,277 | 53,525,677 | (13,983,352 | ) | 39,542,325 | 29,160,000 | ||||||||||||||||||||
Rianna II | Seattle, WA (G) | 2002 | 78 | 2,161,840 | 14,433,614 | 63,293 | 2,161,840 | 14,496,907 | 16,658,747 | (2,395,149 | ) | 14,263,598 | 10,102,987 | ||||||||||||||||||||
Rockingham Glen | West Roxbury, MA | 1974 | 143 | 1,124,217 | 7,515,160 | 1,873,296 | 1,124,217 | 9,388,456 | 10,512,673 | (4,475,844 | ) | 6,036,829 | 1,110,388 | ||||||||||||||||||||
Rolling Green (Amherst) | Amherst, MA | 1970 | 204 | 1,340,702 | 8,962,317 | 3,729,768 | 1,340,702 | 12,692,085 | 14,032,787 | (6,558,871 | ) | 7,473,916 | 1,820,672 | ||||||||||||||||||||
Rolling Green (Milford) | Milford, MA | 1970 | 304 | 2,012,350 | 13,452,150 | 4,991,894 | 2,012,350 | 18,444,044 | 20,456,394 | (8,987,510 | ) | 11,468,884 | 2,136,972 | ||||||||||||||||||||
Savannah Lakes | Boynton Beach, FL | 1991 | 466 | 7,000,000 | 30,263,310 | 6,874,423 | 7,000,000 | 37,137,733 | 44,137,733 | (14,707,744 | ) | 29,429,989 | 38,440,808 | ||||||||||||||||||||
Savannah Midtown | Atlanta, GA | 2000 | 322 | 7,209,873 | 29,371,164 | 2,886,793 | 7,209,873 | 32,257,957 | 39,467,830 | (11,031,647 | ) | 28,436,183 | 17,800,000 | ||||||||||||||||||||
Savoy at Dayton Station I & II (fka Savoy I) | Aurora, CO | 2001 | 444 | 5,450,295 | 38,765,670 | 2,866,964 | 5,450,295 | 41,632,634 | 47,082,929 | (14,134,433 | ) | 32,948,496 | (K) |
S-11
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | ||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | |||||||||||||||||||||
Sheffield Court | Arlington, VA | 1986 | 597 | 3,342,381 | 31,337,332 | 11,837,473 | 3,342,381 | 43,174,805 | 46,517,186 | (25,591,749 | ) | 20,925,437 | (K) | ||||||||||||||||||||
Sonata at Cherry Creek | Denver, CO | 1999 | 183 | 5,490,000 | 18,130,479 | 1,441,097 | 5,490,000 | 19,571,576 | 25,061,576 | (8,409,698 | ) | 16,651,878 | 21,776,367 | ||||||||||||||||||||
Sonterra at Foothill Ranch | Foothill Ranch, CA | 1997 | 300 | 7,503,400 | 24,048,507 | 1,768,695 | 7,503,400 | 25,817,202 | 33,320,602 | (13,328,413 | ) | 19,992,189 | (K) | ||||||||||||||||||||
South Winds | Fall River, MA | 1971 | 404 | 2,481,821 | 16,780,359 | 4,484,858 | 2,481,821 | 21,265,217 | 23,747,038 | (10,380,323 | ) | 13,366,715 | 3,315,913 | ||||||||||||||||||||
Stonegate (CO) | Broomfield, CO | 2003 | 350 | 8,750,000 | 32,950,375 | 2,950,758 | 8,750,000 | 35,901,133 | 44,651,133 | (11,460,761 | ) | 33,190,372 | (I) | ||||||||||||||||||||
Stoney Ridge | Dale City, VA | 1985 | 264 | 8,000,000 | 24,147,091 | 5,550,155 | 8,000,000 | 29,697,246 | 37,697,246 | (10,749,305 | ) | 26,947,941 | 14,329,477 | ||||||||||||||||||||
Summerset Village | Chatsworth, CA | 1985 | 280 | 2,629,804 | 23,670,889 | 5,392,452 | 2,629,804 | 29,063,341 | 31,693,145 | (16,036,741 | ) | 15,656,404 | 38,039,912 | ||||||||||||||||||||
Summit at Lake Union | Seattle, WA | 1995 -1997 | 150 | 1,424,700 | 12,852,461 | 4,033,614 | 1,424,700 | 16,886,075 | 18,310,775 | (9,120,808 | ) | 9,189,967 | (K) | ||||||||||||||||||||
Sunforest | Davie, FL | 1989 | 494 | 10,000,000 | 32,124,850 | 4,773,222 | 10,000,000 | 36,898,072 | 46,898,072 | (14,182,647 | ) | 32,715,425 | (K) | ||||||||||||||||||||
Sunforest II | Davie, FL | (F) | — | — | 355,718 | — | — | 355,718 | 355,718 | — | 355,718 | (K) | |||||||||||||||||||||
Talleyrand | Tarrytown, NY | 1997-1998 | 300 | 12,000,000 | 49,838,160 | 3,921,135 | 12,000,000 | 53,759,295 | 65,759,295 | (21,857,136 | ) | 43,902,159 | 35,000,000 | ||||||||||||||||||||
Teresina | Chula Vista, CA | 2000 | 440 | 28,600,000 | 61,916,670 | 2,124,429 | 28,600,000 | 64,041,099 | 92,641,099 | (18,916,638 | ) | 73,724,461 | 42,711,912 | ||||||||||||||||||||
Touriel Building | Berkeley, CA (G) | 2004 | 35 | 2,736,000 | 7,810,027 | 146,325 | 2,736,000 | 7,956,352 | 10,692,352 | (2,017,170 | ) | 8,675,182 | 5,050,000 | ||||||||||||||||||||
Town Square at Mark Center I (fka Millbrook I) | Alexandria, VA | 1996 | 406 | 24,360,000 | 86,178,714 | 2,656,749 | 24,360,000 | 88,835,463 | 113,195,463 | (25,894,801 | ) | 87,300,662 | 77,353,222 | ||||||||||||||||||||
Town Square at Mark Center Phase II | Alexandria, VA | 2001 | 272 | 15,568,464 | 55,029,607 | 362,128 | 15,568,464 | 55,391,735 | 70,960,199 | (8,064,284 | ) | 62,895,915 | 44,328,445 | ||||||||||||||||||||
Tradition at Alafaya | Oviedo, FL | 2006 | 253 | 7,590,000 | 31,881,505 | 509,046 | 7,590,000 | 32,390,551 | 39,980,551 | (10,140,996 | ) | 29,839,555 | (J) | ||||||||||||||||||||
Tuscany at Lindbergh | Atlanta, GA | 2001 | 324 | 9,720,000 | 40,874,023 | 2,004,881 | 9,720,000 | 42,878,904 | 52,598,904 | (14,424,459 | ) | 38,174,445 | 29,826,475 | ||||||||||||||||||||
Uptown Square | Denver, CO (G) | 1999/2001 | 696 | 17,492,000 | 100,696,541 | 2,796,860 | 17,492,000 | 103,493,401 | 120,985,401 | (31,715,087 | ) | 89,270,314 | 99,190,116 | ||||||||||||||||||||
Versailles | Woodland Hills, CA | 1991 | 253 | 12,650,000 | 33,656,292 | 4,596,760 | 12,650,000 | 38,253,052 | 50,903,052 | (14,048,807 | ) | 36,854,245 | 30,372,953 | ||||||||||||||||||||
Via Ventura | Scottsdale, AZ | 1980 | 328 | 1,351,786 | 13,382,006 | 8,275,544 | 1,351,786 | 21,657,550 | 23,009,336 | (15,714,893 | ) | 7,294,443 | (J) | ||||||||||||||||||||
Vintage | Ontario, CA | 2005-2007 | 300 | 7,059,230 | 47,677,762 | 317,138 | 7,059,230 | 47,994,900 | 55,054,130 | (12,659,564 | ) | 42,394,566 | 33,000,000 | ||||||||||||||||||||
Warwick Station | Westminster, CO | 1986 | 332 | 2,274,121 | 21,113,974 | 3,260,943 | 2,274,121 | 24,374,917 | 26,649,038 | (13,454,735 | ) | 13,194,303 | 8,355,000 | ||||||||||||||||||||
Westwood Glen | Westwood, MA | 1972 | 156 | 1,616,505 | 10,806,004 | 1,944,100 | 1,616,505 | 12,750,104 | 14,366,609 | (5,538,830 | ) | 8,827,779 | 45,194 | ||||||||||||||||||||
Whisper Creek | Denver, CO | 2002 | 272 | 5,310,000 | 22,998,558 | 1,153,349 | 5,310,000 | 24,151,907 | 29,461,907 | (7,741,554 | ) | 21,720,353 | 13,580,000 | ||||||||||||||||||||
Woodlake (WA) | Kirkland, WA | 1984 | 288 | 6,631,400 | 16,735,484 | 3,050,123 | 6,631,400 | 19,785,607 | 26,417,007 | (10,524,036 | ) | 15,892,971 | (K) | ||||||||||||||||||||
Woodleaf | Campbell, CA | 1984 | 178 | 8,550,600 | 16,988,183 | 3,462,069 | 8,550,600 | 20,450,252 | 29,000,852 | (9,684,687 | ) | 19,316,165 | 17,858,854 | ||||||||||||||||||||
Wholly Owned Encumbered | 33,124 | 1,111,832,021 | 4,225,841,241 | 379,252,282 | 1,111,832,021 | 4,605,093,523 | 5,716,925,544 | (1,486,115,893 | ) | 4,230,809,651 | 2,392,135,994 | ||||||||||||||||||||||
Partially Owned Unencumbered: | |||||||||||||||||||||||||||||||||
2300 Elliott | Seattle, WA | 1992 | 92 | 796,800 | 7,173,725 | 6,092,622 | 796,800 | 13,266,347 | 14,063,147 | (8,767,366 | ) | 5,295,781 | — | ||||||||||||||||||||
400 Park Avenue South (EQR) | New York, NY | (F) | — | 76,292,169 | 16,082,096 | — | 76,292,169 | 16,082,096 | 92,374,265 | — | 92,374,265 | — | |||||||||||||||||||||
400 Park Avenue South (Toll) | New York, NY | (F) | — | 58,090,357 | 6,354,921 | — | 58,090,357 | 6,354,921 | 64,445,278 | — | 64,445,278 | — | |||||||||||||||||||||
Canyon Ridge | San Diego, CA | 1989 | 162 | 4,869,448 | 11,955,063 | 1,901,202 | 4,869,448 | 13,856,265 | 18,725,713 | (7,602,815 | ) | 11,122,898 | — | ||||||||||||||||||||
Copper Creek | Tempe, AZ | 1984 | 144 | 1,017,400 | 9,158,259 | 2,047,476 | 1,017,400 | 11,205,735 | 12,223,135 | (6,469,568 | ) | 5,753,567 | — | ||||||||||||||||||||
Country Oaks | Agoura Hills, CA | 1985 | 256 | 6,105,000 | 29,561,865 | 3,379,334 | 6,105,000 | 32,941,199 | 39,046,199 | (13,229,506 | ) | 25,816,693 | — | ||||||||||||||||||||
Fox Ridge | Englewood, CO | 1984 | 300 | 2,490,000 | 17,522,114 | 3,894,256 | 2,490,000 | 21,416,370 | 23,906,370 | (9,920,955 | ) | 13,985,415 | — | ||||||||||||||||||||
Hudson Crossing II | New York, NY | (F) | — | 5,000,000 | — | — | 5,000,000 | — | 5,000,000 | — | 5,000,000 | — | |||||||||||||||||||||
Monterra in Mill Creek | Mill Creek, WA | 2003 | 139 | 2,800,000 | 13,255,122 | 338,019 | 2,800,000 | 13,593,141 | 16,393,141 | (4,144,398 | ) | 12,248,743 | — | ||||||||||||||||||||
Preserve at Briarcliff | Atlanta, GA | 1994 | 182 | 6,370,000 | 17,766,322 | 830,627 | 6,370,000 | 18,596,949 | 24,966,949 | (5,411,770 | ) | 19,555,179 | — | ||||||||||||||||||||
Strayhorse at Arrowhead Ranch | Glendale, AZ | 1998 | 136 | 4,400,000 | 12,968,002 | 313,368 | 4,400,000 | 13,281,370 | 17,681,370 | (3,953,471 | ) | 13,727,899 | — | ||||||||||||||||||||
Willow Brook (CA) | Pleasant Hill, CA | 1985 | 228 | 5,055,000 | 38,388,672 | 3,057,695 | 5,055,000 | 41,446,367 | 46,501,367 | (13,325,998 | ) | 33,175,369 | — | ||||||||||||||||||||
Partially Owned Unencumbered | 1,639 | 173,286,174 | 180,186,161 | 21,854,599 | 173,286,174 | 202,040,760 | 375,326,934 | (72,825,847 | ) | 302,501,087 | — | ||||||||||||||||||||||
Partially Owned Encumbered: | |||||||||||||||||||||||||||||||||
Bellevue Meadows | Bellevue, WA | 1983 | 180 | 4,507,100 | 12,574,814 | 4,203,115 | 4,507,100 | 16,777,929 | 21,285,029 | (8,891,561 | ) | 12,393,468 | 16,538,000 | ||||||||||||||||||||
Canyon Creek (CA) | San Ramon, CA | 1984 | 268 | 5,425,000 | 18,812,121 | 6,276,196 | 5,425,000 | 25,088,317 | 30,513,317 | (10,527,427 | ) | 19,985,890 | 28,200,000 | ||||||||||||||||||||
Isle at Arrowhead Ranch | Glendale, AZ | 1996 | 256 | 1,650,237 | 19,593,123 | 1,918,104 | 1,650,237 | 21,511,227 | 23,161,464 | (11,451,766 | ) | 11,709,698 | 17,700,000 | ||||||||||||||||||||
Lantern Cove | Foster City, CA | 1985 | 232 | 6,945,000 | 23,064,976 | 4,671,523 | 6,945,000 | 27,736,499 | 34,681,499 | (11,224,944 | ) | 23,456,555 | 36,455,000 | ||||||||||||||||||||
Rosecliff | Quincy, MA | 1990 | 156 | 5,460,000 | 15,721,570 | 2,123,007 | 5,460,000 | 17,844,577 | 23,304,577 | (8,282,174 | ) | 15,022,403 | 17,400,000 | ||||||||||||||||||||
Schooner Bay I | Foster City, CA | 1985 | 168 | 5,345,000 | 20,390,618 | 4,297,996 | 5,345,000 | 24,688,614 | 30,033,614 | (9,829,193 | ) | 20,204,421 | 28,870,000 |
S-12
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
Description | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition(Improvements, net) (E) | Gross Amount Carried at Close of Period 12/31/12 | |||||||||||||||||||||||||||||||||||||||
Apartment Name | Location | Date of Construction | Units (H) | Land | Building & Fixtures | Building & Fixtures | Land | Building & Fixtures (A) | Total (B) | Accumulated Depreciation (C) | Investment in Real Estate, Net at 12/31/12 (B) | Encumbrances | ||||||||||||||||||||||||||||||
Schooner Bay II | Foster City, CA | 1985 | 144 | 4,550,000 | 18,064,764 | 3,954,034 | 4,550,000 | 22,018,798 | 26,568,798 | (8,871,676 | ) | 17,697,122 | 26,175,000 | |||||||||||||||||||||||||||||
Scottsdale Meadows | Scottsdale, AZ | 1984 | 168 | 1,512,000 | 11,423,349 | 1,769,044 | 1,512,000 | 13,192,393 | 14,704,393 | (7,271,988 | ) | 7,432,405 | 9,270,000 | |||||||||||||||||||||||||||||
Surrey Downs | Bellevue, WA | 1986 | 122 | 3,057,100 | 7,848,618 | 2,247,834 | 3,057,100 | 10,096,452 | 13,153,552 | (5,160,232 | ) | 7,993,320 | 9,829,000 | |||||||||||||||||||||||||||||
Virgil Square | Los Angeles, CA | 1979 | 142 | 5,500,000 | 15,216,613 | 1,604,433 | 5,500,000 | 16,821,046 | 22,321,046 | (5,313,812 | ) | 17,007,234 | 9,900,000 | |||||||||||||||||||||||||||||
Partially Owned Encumbered | 1,836 | 43,951,437 | 162,710,566 | 33,065,286 | 43,951,437 | 195,775,852 | 239,727,289 | (86,824,773 | ) | 152,902,516 | 200,337,000 | |||||||||||||||||||||||||||||||
Portfolio/Entity Encumbrances (1) | 1,305,895,707 | |||||||||||||||||||||||||||||||||||||||||
Total Consolidated Investment in Real Estate | 110,331 | $ | 5,060,413,242 | $ | 14,521,790,283 | $ | 1,426,225,729 | $ | 5,060,413,242 | $ | 15,948,016,012 | $ | 21,008,429,254 | $ | (4,912,221,051 | ) | $ | 16,096,208,203 | $ | 3,898,368,701 |
(1) | See attached Encumbrances Reconciliation |
S-13
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2012
NOTES:
(A) | The balance of furniture & fixtures included in the total investment in real estate amount was $1,343,765,180 as of December 31, 2012. |
(B) | The cost, net of accumulated depreciation, for Federal Income Tax purposes as of December 31, 2012 was approximately $11.2 billion. |
(C) | The life to compute depreciation for building is 30 years, for building improvements ranges from 5 to 15 years, for furniture & fixtures and replacements is 5 to 10 years, and for lease intangibles is the average remaining term of each respective lease. |
(D) | This asset consists of various acquisition dates and largely represents furniture, fixtures and equipment, leasehold improvements and capitalized software costs owned by the Management Business, which are generally depreciated over periods ranging from 3 to 7 years. |
(E) | Primarily represents capital expenditures for major maintenance and replacements incurred subsequent to each property’s acquisition date. |
(F) | Represents land and/or construction-in-progress on projects either held for future development or projects currently under development. |
(G) | A portion or all of these properties includes commercial space (retail, parking and/or office space). |
(H) | Total properties and units exclude the Military Housing consisting of 2 properties and 5,039 units. |
(I) | through (K) See Encumbrances Reconciliation schedule. |
(L) | Boot property for Freddie Mac mortgage pool. |
(M) | Boot Property for Bond Partnership mortgage pool. |
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