Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Statements
On October 23, 2015, ERP Operating Limited Partnership, a subsidiary and the operating partnership of Equity Residential through which Equity Residential owns substantially all of its assets, together with certain wholly-owned subsidiaries of ERP Operating Limited Partnership (collectively, the “Company”), entered into ten substantially identical Real Estate Sale Agreements (the “Sale Agreements”) with SCG Atlas Acquisition, L.P., an affiliate of Starwood Global Opportunity Fund X (“Starwood”), pursuant to which the Company agreed to sell to Starwood a portfolio of 72 multifamily assets, comprising 23,262 apartment units across the United States (the “Starwood Portfolio”), for $5.365 billion in cash.
The Company closed on substantially all of the assets in the Starwood Portfolio on January 26, 2016 and on the only remaining asset on January 27, 2016. The closings included the sale of all 72 consolidated operating properties consisting of 23,262 apartment units for $5.365 billion.
The foregoing description of the Sale Agreements is not complete and is subject to and qualified in its entirety by reference to the Sale Agreements, one of which is attached as Exhibit 2.1 to the Company's Current Report on Form 8-K dated October 23, 2015 and filed with the SEC on October 26, 2015.
In addition to this sale, the Company announced its intentions to sell an additional 26 operating properties located in various submarkets, consisting of 4,728 apartment units for approximately $700.0 million in individual and small portfolio sales throughout 2016 to other third parties. The sale of the Starwood Portfolio, combined with these other planned 2016 dispositions, will result in the Company’s exit from the South Florida and Denver markets as well as the New England submarkets. The Pro Forma Financial Statements exclude the approximately $700.0 million in individual and small portfolio sales mentioned above that are expected to occur throughout 2016. There can be no assurance that the other planned 2016 dispositions will be consummated or that the final terms will not differ in material respects from those summarized above.
The Company intends to use the majority of the proceeds from the Starwood Portfolio and these other planned 2016 dispositions to pay special dividends to its shareholders and holders of OP Units. The Company expects to use the majority of the remaining proceeds to reduce aggregate indebtedness in order to make the transaction leverage neutral. The Pro Forma Financial Statements, in accordance with SEC rules and regulations, do not reflect any use of proceeds. All future dividends remain subject to the discretion of Equity Residential's Board of Trustees.
The accompanying unaudited Pro Forma Condensed Consolidated Balance Sheets of Equity Residential and ERP Operating Limited Partnership are presented as if the entire Starwood Portfolio had been disposed of on September 30, 2015. The accompanying unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine-month period ended September 30, 2015 and for the year ended December 31, 2014 of Equity Residential and ERP Operating Limited Partnership are presented as if the entire Starwood Portfolio had been disposed of on January 1, 2014. The unaudited Pro Forma Condensed Consolidated Balance Sheets are segregated into separate components as follows:
| |
| • | the historical Consolidated Balance Sheets of the Company; |
| |
| • | the elimination of the historical combined financial position of the Starwood Portfolio and certain mortgage debt that is required to be paid off prior to closing the transaction; |
| |
| • | the pro forma details of the transaction, including the cash received and estimated gain on sale; and |
| |
| • | the Pro Forma Condensed Consolidated Balance Sheets of the Company. |
The unaudited Pro Forma Condensed Consolidated Statements of Operations are segregated into separate components as follows:
| |
| • | the historical Consolidated Statements of Operations of the Company; |
| |
| • | the elimination of the historical combined revenues and certain expenses of the Starwood Portfolio and interest expense on certain mortgage debt that is required to be paid off prior to closing the transaction; |
| |
| • | the pro forma details of the transaction; and |
| |
| • | the Pro Forma Condensed Consolidated Statements of Operations of the Company. |
These Unaudited Pro Forma Condensed Consolidated Financial Statements should be read in conjunction with:
| |
| • | The Company’s historical consolidated financial statements and notes thereto as of and for the nine-month period ended September 30, 2015, included in the Company’s Combined Form 10-Q filed with the SEC on November 5, 2015; and |
| |
| • | The Company’s historical consolidated financial statements and notes thereto as of and for the year ended December 31, 2014, included in the Company’s Combined Form 10-K filed with the SEC on February 26, 2015. |
In management’s opinion, all adjustments necessary to reflect the disposition of the Starwood Portfolio have been made. The following unaudited Pro Forma Condensed Consolidated Balance Sheets do not purport to represent the future financial position of the Company. The unaudited Pro Forma Condensed Consolidated Statements of Operations are not necessarily indicative of what the actual results of operations would have been for the nine-month period ended September 30, 2015 or for the year ended December 31, 2014 assuming the above transaction had been consummated on January 1, 2014, nor do they purport to represent the future results of operations of the Company.
Equity Residential
Pro Forma Condensed Consolidated Balance Sheet
September 30, 2015
(Amounts in thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | (1) | | (2) | | (3) | | |
| | | Equity Residential Historical | | Starwood Portfolio | | Transaction | | Pro Forma Amounts |
| ASSETS | | | | | | | | |
| Investment in real estate | | | | | | | | |
| Land | | $ | 6,424,887 |
| | $ | (602,737 | ) | | $ | — |
| | $ | 5,822,150 |
|
| Depreciable property | | 20,540,247 |
| | (2,749,684 | ) | | — |
| | 17,790,563 |
|
| Projects under development | | 1,039,657 |
| | — |
| | — |
| | 1,039,657 |
|
| Land held for development | | 154,690 |
| | — |
| | — |
| | 154,690 |
|
| Investment in real estate | | 28,159,481 |
| | (3,352,421 | ) | | — |
| | 24,807,060 |
|
| Accumulated depreciation | | (5,914,695 | ) | | 1,170,386 |
| | — |
| | (4,744,309 | ) |
| Investment in real estate, net | | 22,244,786 |
| | (2,182,035 | ) | | — |
| | 20,062,751 |
|
| Cash and cash equivalents | | 37,366 |
| | — |
| | 5,365,000 |
| (3a) | 5,248,684 |
|
| | | | | | | (80,475 | ) | (3b) | |
| | | | | | | (73,207 | ) | (3c) | |
| Investments in unconsolidated entities | | 74,108 |
| | — |
| | — |
| | 74,108 |
|
| Deposits – restricted | | 135,674 |
| | — |
| | — |
| | 135,674 |
|
| Escrow deposits – mortgage | | 54,071 |
| | (283 | ) | (2a) | — |
| | 53,788 |
|
| Deferred financing costs, net | | 57,001 |
| | (1,194 | ) | (2a) | — |
| | 55,807 |
|
| Other assets | | 405,798 |
| | — |
| | — |
| | 405,798 |
|
| Total assets | | $ | 23,008,804 |
| | $ | (2,183,512 | ) | | $ | 5,211,318 |
| | $ | 26,036,610 |
|
| | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Liabilities: | | | | | | | | |
| Mortgage notes payable | | $ | 4,891,529 |
| | $ | (73,475 | ) | (2a) | $ | — |
| | $ | 4,818,054 |
|
| Notes, net | | 5,881,794 |
| | — |
| | — |
| | 5,881,794 |
|
| Line of credit and commercial paper | | 29,996 |
| | — |
| | — |
| | 29,996 |
|
| Accounts payable and accrued expenses | | 253,027 |
| | — |
| | — |
| | 253,027 |
|
| Accrued interest payable | | 86,083 |
| | (15 | ) | (2a) | — |
| | 86,068 |
|
| Other liabilities | | 353,106 |
| | — |
| | — |
| | 353,106 |
|
| Security deposits | | 76,934 |
| | — |
| | — |
| | 76,934 |
|
| Distributions payable | | 209,086 |
| | — |
| | — |
| | 209,086 |
|
| Total liabilities | | 11,781,555 |
| | (73,490 | ) | | — |
| | 11,708,065 |
|
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Redeemable Noncontrolling Interests – Operating Partnership | | 522,585 |
| | (38,773 | ) | (2b) | 95,762 |
| (3d) | 579,574 |
|
| Equity: | | | | | | | | |
| Shareholders’ equity: | | | | | | | | |
| Preferred Shares | | 40,180 |
| | — |
| | — |
| | 40,180 |
|
| Common Shares | | 3,641 |
| | — |
| | — |
| | 3,641 |
|
| Paid in capital | | 8,584,143 |
| | (1,892,403 | ) | (2b) | 1,909,847 |
| (3d) | 8,601,587 |
|
| Retained earnings | | 2,007,590 |
| | (137,053 | ) | (2b) | 3,102,490 |
| (3e) | 4,973,027 |
|
| Accumulated other comprehensive (loss) | | (157,020 | ) | | — |
| | — |
| | (157,020 | ) |
| Total shareholders’ equity | | 10,478,534 |
| | (2,029,456 | ) | | 5,012,337 |
| | 13,461,415 |
|
| Noncontrolling Interests: | | | | | | | | |
| Operating Partnership | | 221,487 |
| | (41,793 | ) | (2b) | 103,219 |
| (3d) | 282,913 |
|
| Partially Owned Properties | | 4,643 |
| | — |
| | — |
| | 4,643 |
|
| Total Noncontrolling Interests | | 226,130 |
| | (41,793 | ) | | 103,219 |
| | 287,556 |
|
| Total equity | | 10,704,664 |
| | (2,071,249 | ) | | 5,115,556 |
| | 13,748,971 |
|
| Total liabilities and equity | | $ | 23,008,804 |
| | $ | (2,183,512 | ) | | $ | 5,211,318 |
| | $ | 26,036,610 |
|
See accompanying notes.
Equity Residential
Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 2015
(Amounts in thousands except per share data)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | (1) | | (2) | | | | |
| | | Equity Residential Historical | | Starwood Portfolio | | Transaction | | Pro Forma Amounts |
| REVENUES | | | | | | | | |
| Rental income | | $ | 2,035,359 |
| | $ | (318,346 | ) | | $ | — |
| | $ | 1,717,013 |
|
| Fee and asset management | | 6,413 |
| | — |
| | — |
| | 6,413 |
|
| Total revenues | | 2,041,772 |
| | (318,346 | ) | | — |
| | 1,723,426 |
|
| | | | | | | | | |
| EXPENSES | | | | | | | | |
| Property and maintenance | | 364,948 |
| | (59,139 | ) | | — |
| | 305,809 |
|
| Real estate taxes and insurance | | 254,513 |
| | (37,292 | ) | | — |
| | 217,221 |
|
| Property management | | 60,887 |
| | (9 | ) | | — |
| | 60,878 |
|
| Fee and asset management | | 3,764 |
| | — |
| | — |
| | 3,764 |
|
| Depreciation | | 584,862 |
| | (78,792 | ) | | — |
| | 506,070 |
|
| General and administrative | | 50,942 |
| | (31 | ) | | — |
| | 50,911 |
|
| Total expenses | | 1,319,916 |
| | (175,263 | ) | | — |
| | 1,144,653 |
|
| | | | | | | | | |
| Operating income | | 721,856 |
| | (143,083 | ) | | — |
| | 578,773 |
|
| | | | | | | | | |
| Interest and other income | | 6,906 |
| | (1 | ) | | — |
| | 6,905 |
|
| Other expenses | | (2,839 | ) | | — |
| | — |
| | (2,839 | ) |
| Interest: | | | | | | | | |
| Expense incurred, net | | (333,622 | ) | | 519 |
| (2a) | — |
| | (333,103 | ) |
| Amortization of deferred financing costs | | (7,734 | ) | | 74 |
| (2a) | — |
| | (7,660 | ) |
Income before income and other taxes, income from investments
in unconsolidated entities, net gain (loss) on sales of real estate
properties and land parcels and discontinued operations | | 384,567 |
| | (142,491 | ) | | — |
| | 242,076 |
|
| Income and other tax (expense) benefit | | (698 | ) | | 1 |
| | — |
| | (697 | ) |
| Income from investments in unconsolidated entities | | 14,388 |
| | — |
| | — |
| | 14,388 |
|
| Net gain on sales of real estate properties | | 295,692 |
| | — |
| | — |
| | 295,692 |
|
| Net (loss) on sales of land parcels | | (1 | ) | | — |
| | — |
| | (1 | ) |
| Income from continuing operations | | 693,948 |
| | (142,490 | ) | | — |
| | 551,458 |
|
| Discontinued operations, net | | 350 |
| | — |
| | — |
| | 350 |
|
| Net income | | 694,298 |
| | (142,490 | ) | | — |
| | 551,808 |
|
| Net (income) attributable to Noncontrolling Interests: | | | | | | | | |
| Operating Partnership | | (26,191 | ) | | 5,437 |
| (2b) | — |
| | (20,754 | ) |
| Partially Owned Properties | | (2,473 | ) | | — |
| | — |
| | (2,473 | ) |
| Net income attributable to controlling interests | | 665,634 |
| | (137,053 | ) | | — |
| | 528,581 |
|
| Preferred distributions | | (2,557 | ) | | — |
| | — |
| | (2,557 | ) |
| Premium on redemption of Preferred Shares | | (2,789 | ) | | — |
| | — |
| | (2,789 | ) |
| Net income available to Common Shares | | $ | 660,288 |
| | $ | (137,053 | ) | | $ | — |
| | $ | 523,235 |
|
| | | | | | | | | |
| Earnings per share – basic: | | | | | | | | |
| Income from continuing operations available to Common Shares | | $ | 1.82 |
| | | | | | $ | 1.44 |
|
| Net income available to Common Shares | | $ | 1.82 |
| | | | | | $ | 1.44 |
|
| Weighted average Common Shares outstanding | | 363,386 |
| | | | | | 363,386 |
|
| | | | | | | | | |
| Earnings per share – diluted: | | | | | | | | |
| Income from continuing operations available to Common Shares | | $ | 1.80 |
| | | | | | $ | 1.43 |
|
| Net income available to Common Shares | | $ | 1.80 |
| | | | | | $ | 1.43 |
|
| Weighted average Common Shares outstanding | | 380,423 |
| | | | | | 380,423 |
|
See accompanying notes.
Equity Residential
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2014
(Amounts in thousands except per share data)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | (1) | | (2) | | | | |
| | | Equity
Residential
Historical | | Starwood
Portfolio | | Transaction | | Pro Forma
Amounts |
| REVENUES | | | | | | | | |
| Rental income | | $ | 2,605,311 |
| | $ | (401,134 | ) | | $ | — |
| | $ | 2,204,177 |
|
| Fee and asset management | | 9,437 |
| | — |
| | — |
| | 9,437 |
|
| Total revenues | | 2,614,748 |
| | (401,134 | ) | | — |
| | 2,213,614 |
|
| | | | | | | | | |
| EXPENSES | | | | | | | | |
| Property and maintenance | | 473,098 |
| | (76,579 | ) | | — |
| | 396,519 |
|
| Real estate taxes and insurance | | 325,401 |
| | (46,416 | ) | | — |
| | 278,985 |
|
| Property management | | 79,636 |
| | (11 | ) | | — |
| | 79,625 |
|
| Fee and asset management | | 5,429 |
| | — |
| | — |
| | 5,429 |
|
| Depreciation | | 758,861 |
| | (104,104 | ) | | — |
| | 654,757 |
|
| General and administrative | | 50,948 |
| | (24 | ) | | — |
| | 50,924 |
|
| Total expenses | | 1,693,373 |
| | (227,134 | ) | | — |
| | 1,466,239 |
|
| | | | | | | | | |
| Operating income | | 921,375 |
| | (174,000 | ) | | — |
| | 747,375 |
|
| | | | | | | | | |
| Interest and other income | | 4,462 |
| | (1 | ) | | — |
| | 4,461 |
|
| Other expenses | | (9,073 | ) | | 1 |
| | — |
| | (9,072 | ) |
| Interest: | | | | | | | | |
| Expense incurred, net | | (457,191 | ) | | 701 |
| (2a) | — |
| | (456,490 | ) |
| Amortization of deferred financing costs | | (11,088 | ) | | 98 |
| (2a) | — |
| | (10,990 | ) |
Income before income and other taxes, (loss) from investments
in unconsolidated entities, net gain on sales of real estate
properties and land parcels and discontinued operations | | 448,485 |
| | (173,201 | ) | | — |
| | 275,284 |
|
| Income and other tax (expense) benefit | | (1,394 | ) | | 3 |
| | — |
| | (1,391 | ) |
| (Loss) from investments in unconsolidated entities | | (7,952 | ) | | — |
| | — |
| | (7,952 | ) |
| Net gain on sales of real estate properties | | 212,685 |
| | — |
| | — |
| | 212,685 |
|
| Net gain on sales of land parcels | | 5,277 |
| | — |
| | — |
| | 5,277 |
|
| Income from continuing operations | | 657,101 |
| | (173,198 | ) | | — |
| | 483,903 |
|
| Discontinued operations, net | | 1,582 |
| | — |
| | — |
| | 1,582 |
|
| Net income | | 658,683 |
| | (173,198 | ) | | — |
| | 485,485 |
|
| Net (income) attributable to Noncontrolling Interests: | | | | | | | | |
| Operating Partnership | | (24,831 | ) | | 6,598 |
| (2b) | — |
| | (18,233 | ) |
| Partially Owned Properties | | (2,544 | ) | | 14 |
| (2c) | — |
| | (2,530 | ) |
| Net income attributable to controlling interests | | 631,308 |
| | (166,586 | ) | | — |
| | 464,722 |
|
| Preferred distributions | | (4,145 | ) | | — |
| | — |
| | (4,145 | ) |
| Net income available to Common Shares | | $ | 627,163 |
| | $ | (166,586 | ) | | $ | — |
| | $ | 460,577 |
|
| | | | | | | | | |
| Earnings per share – basic: | | | | | | | | |
| Income from continuing operations available to Common Shares | | $ | 1.73 |
| | | | | | $ | 1.27 |
|
| Net income available to Common Shares | | $ | 1.74 |
| | | | | | $ | 1.28 |
|
| Weighted average Common Shares outstanding | | 361,181 |
| | | | | | 361,181 |
|
| | | | | | | | | |
| Earnings per share – diluted: | | | | | | | | |
| Income from continuing operations available to Common Shares | | $ | 1.72 |
| | | | | | $ | 1.26 |
|
| Net income available to Common Shares | | $ | 1.73 |
| | | | | | $ | 1.27 |
|
| Weighted average Common Shares outstanding | | 377,735 |
| | | | | | 377,735 |
|
See accompanying notes.
ERP Operating Limited Partnership
Pro Forma Condensed Consolidated Balance Sheet
September 30, 2015
(Amounts in thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | (1) | | (2) | | (3) | | |
| | | ERP Operating
Limited Partnership
Historical | | Starwood
Portfolio | | Transaction | | Pro Forma
Amounts |
| ASSETS | | | | | | | | |
| Investment in real estate | | | | | | | | |
| Land | | $ | 6,424,887 |
| | $ | (602,737 | ) | | $ | — |
| | $ | 5,822,150 |
|
| Depreciable property | | 20,540,247 |
| | (2,749,684 | ) | | — |
| | 17,790,563 |
|
| Projects under development | | 1,039,657 |
| | — |
| | — |
| | 1,039,657 |
|
| Land held for development | | 154,690 |
| | — |
| | — |
| | 154,690 |
|
| Investment in real estate | | 28,159,481 |
| | (3,352,421 | ) | | — |
| | 24,807,060 |
|
| Accumulated depreciation | | (5,914,695 | ) | | 1,170,386 |
| | — |
| | (4,744,309 | ) |
| Investment in real estate, net | | 22,244,786 |
| | (2,182,035 | ) | | — |
| | 20,062,751 |
|
| Cash and cash equivalents | | 37,366 |
| | — |
| | 5,365,000 |
| (3a) | 5,248,684 |
|
| | | | | | | (80,475 | ) | (3b) | |
| | | | | | | (73,207 | ) | (3c) | |
| Investments in unconsolidated entities | | 74,108 |
| | — |
| | — |
| | 74,108 |
|
| Deposits – restricted | | 135,674 |
| | — |
| | — |
| | 135,674 |
|
| Escrow deposits – mortgage | | 54,071 |
| | (283 | ) | (2a) | — |
| | 53,788 |
|
| Deferred financing costs, net | | 57,001 |
| | (1,194 | ) | (2a) | — |
| | 55,807 |
|
| Other assets | | 405,798 |
| | — |
| | — |
| | 405,798 |
|
| Total assets | | $ | 23,008,804 |
| | $ | (2,183,512 | ) | | $ | 5,211,318 |
| | $ | 26,036,610 |
|
| | | | | | | | | |
| LIABILITIES AND CAPITAL | | | | | | | | |
| Liabilities: | | | | | | | | |
| Mortgage notes payable | | $ | 4,891,529 |
| | $ | (73,475 | ) | (2a) | $ | — |
| | $ | 4,818,054 |
|
| Notes, net | | 5,881,794 |
| | — |
| | — |
| | 5,881,794 |
|
| Line of credit and commercial paper | | 29,996 |
| | — |
| | — |
| | 29,996 |
|
| Accounts payable and accrued expenses | | 253,027 |
| | — |
| | — |
| | 253,027 |
|
| Accrued interest payable | | 86,083 |
| | (15 | ) | (2a) | — |
| | 86,068 |
|
| Other liabilities | | 353,106 |
| | — |
| | — |
| | 353,106 |
|
| Security deposits | | 76,934 |
| | — |
| | — |
| | 76,934 |
|
| Distributions payable | | 209,086 |
| | — |
| | — |
| | 209,086 |
|
| Total liabilities | | 11,781,555 |
| | (73,490 | ) | | — |
| | 11,708,065 |
|
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Redeemable Limited Partners | | 522,585 |
| | (38,773 | ) | (2b) | 95,762 |
| (3d) | 579,574 |
|
| Capital: | | | | | | | | |
| Partners’ Capital: | | | | | | | | |
| Preference Units | | 40,180 |
| | — |
| | — |
| | 40,180 |
|
| General Partner | | 10,595,374 |
| | (1,892,403 | ) | (2b) | 1,909,847 |
| (3d) | 13,578,255 |
|
| | | | | (137,053 | ) | (2b) | 3,102,490 |
| (3e) | |
| Limited Partners | | 221,487 |
| | (41,793 | ) | (2b) | 103,219 |
| (3d) | 282,913 |
|
| Accumulated other comprehensive (loss) | | (157,020 | ) | | — |
| | — |
| | (157,020 | ) |
| Total partners’ capital | | 10,700,021 |
| | (1,934,196 | ) | | 5,115,556 |
| | 13,744,328 |
|
| Noncontrolling Interests – Partially Owned Properties | | 4,643 |
| | — |
| | — |
| | 4,643 |
|
| Total capital | | 10,704,664 |
| | (1,934,196 | ) | | 5,115,556 |
| | 13,748,971 |
|
| Total liabilities and capital | | $ | 23,008,804 |
| | $ | (2,046,459 | ) | | $ | 5,211,318 |
| | $ | 26,036,610 |
|
See accompanying notes.
ERP Operating Limited Partnership
Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 2015
(Amounts in thousands except per Unit data)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | (1) | | (2) | |
| | |
| | | ERP Operating Limited Partnership Historical | | Starwood
Portfolio | | Transaction | | Pro Forma Amounts |
| REVENUES | | | | | | | | |
| Rental income | | $ | 2,035,359 |
| | $ | (318,346 | ) | | $ | — |
|
| $ | 1,717,013 |
|
| Fee and asset management | | 6,413 |
| | — |
| | — |
| | 6,413 |
|
| Total revenues | | 2,041,772 |
| | (318,346 | ) | | — |
| | 1,723,426 |
|
| | | | | | | | | |
| EXPENSES | | | | | | | | |
| Property and maintenance | | 364,948 |
| | (59,139 | ) | | — |
|
| 305,809 |
|
| Real estate taxes and insurance | | 254,513 |
| | (37,292 | ) | | — |
| | 217,221 |
|
| Property management | | 60,887 |
| | (9 | ) | | — |
| | 60,878 |
|
| Fee and asset management | | 3,764 |
| | — |
| | — |
| | 3,764 |
|
| Depreciation | | 584,862 |
| | (78,792 | ) | | — |
|
| 506,070 |
|
| General and administrative | | 50,942 |
| | (31 | ) | | — |
| | 50,911 |
|
| Total expenses | | 1,319,916 |
| | (175,263 | ) | | — |
| | 1,144,653 |
|
| | | | | | | | | |
| Operating income | | 721,856 |
| | (143,083 | ) | | — |
| | 578,773 |
|
| | | | | | | | | |
| Interest and other income | | 6,906 |
| | (1 | ) | | — |
| | 6,905 |
|
| Other expenses | | (2,839 | ) | | — |
| | — |
| | (2,839 | ) |
| Interest: | | | | | | | | |
| Expense incurred, net | | (333,622 | ) | | 519 |
| (2a) | — |
|
| (333,103 | ) |
| Amortization of deferred financing costs | | (7,734 | ) | | 74 |
| (2a) | — |
|
| (7,660 | ) |
Income before income and other taxes, income from investments
in unconsolidated entities, net gain (loss) on sales of real estate
properties and land parcels and discontinued operations | | 384,567 |
| | (142,491 | ) | | — |
| | 242,076 |
|
| Income and other tax (expense) benefit | | (698 | ) | | 1 |
| | — |
| | (697 | ) |
| Income from investments in unconsolidated entities | | 14,388 |
| | — |
|
| — |
|
| 14,388 |
|
| Net gain on sales of real estate properties | | 295,692 |
| | — |
| | — |
|
| 295,692 |
|
| Net (loss) on sales of land parcels | | (1 | ) | | — |
| | — |
| | (1 | ) |
| Income from continuing operations | | 693,948 |
| | (142,490 | ) | | — |
| | 551,458 |
|
| Discontinued operations, net | | 350 |
| | — |
| | — |
| | 350 |
|
| Net income | | 694,298 |
| | (142,490 | ) | | — |
| | 551,808 |
|
| Net (income) attributable to Noncontrolling Interests – Partially | | | | | | | | |
| Owned Properties | | (2,473 | ) | | — |
| | — |
| | (2,473 | ) |
| Net income attributable to controlling interests | | $ | 691,825 |
| | $ | (142,490 | ) | | $ | — |
| | $ | 549,335 |
|
| | | | | | | | | |
| ALLOCATION OF NET INCOME: | | | | | | | | |
| Preference Units | | $ | 2,557 |
| | $ | — |
| | $ | — |
| | $ | 2,557 |
|
| Premium on redemption of Preference Units | | $ | 2,789 |
| | $ | — |
| | $ | — |
| | $ | 2,789 |
|
| | | | | | | | | |
| General Partner | | $ | 660,288 |
| | $ | (137,053 | ) | | $ | — |
| | $ | 523,235 |
|
| Limited Partners | | 26,191 |
| | (5,437 | ) | (2b) | — |
| | 20,754 |
|
| Net income available to Units | | $ | 686,479 |
| | $ | (142,490 | ) | | $ | — |
| | $ | 543,989 |
|
| | | | | | | | | |
| Earnings per Unit – basic: | | | | | | | | |
| Income from continuing operations available to Units | | $ | 1.82 |
| | | | | | $ | 1.44 |
|
| Net income available to Units | | $ | 1.82 |
| | | | | | $ | 1.44 |
|
| Weighted average Units outstanding | | 376,970 |
| | | | | | 376,970 |
|
| | | | | | | | | |
| Earnings per Unit – diluted: | | | | | | | | |
| Income from continuing operations available to Units | | $ | 1.80 |
| | | | | | $ | 1.43 |
|
| Net income available to Units | | $ | 1.80 |
| | | | | | $ | 1.43 |
|
| Weighted average Units outstanding | | 380,423 |
| | | | | | 380,423 |
|
See accompanying notes.
ERP Operating Limited Partnership
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2014
(Amounts in thousands except per Unit data)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | | (1) | | (2) | | | | |
| | | ERP Operating
Limited Partnership
Historical | | Starwood Portfolio | | Transaction | | Pro Forma Amounts |
| REVENUES | | | | | | | | |
| Rental income | | $ | 2,605,311 |
| | $ | (401,134 | ) | | $ | — |
| | $ | 2,204,177 |
|
| Fee and asset management | | 9,437 |
| | — |
| | — |
| | 9,437 |
|
| Total revenues | | 2,614,748 |
| | (401,134 | ) | | — |
| | 2,213,614 |
|
| | | | | | | | | |
| EXPENSES | | | | | | | | |
| Property and maintenance | | 473,098 |
| | (76,579 | ) | | — |
| | 396,519 |
|
| Real estate taxes and insurance | | 325,401 |
| | (46,416 | ) | | — |
| | 278,985 |
|
| Property management | | 79,636 |
| | (11 | ) | | — |
| | 79,625 |
|
| Fee and asset management | | 5,429 |
| | — |
| | — |
| | 5,429 |
|
| Depreciation | | 758,861 |
| | (104,104 | ) | | — |
| | 654,757 |
|
| General and administrative | | 50,948 |
| | (24 | ) | | — |
| | 50,924 |
|
| Total expenses | | 1,693,373 |
| | (227,134 | ) | | — |
| | 1,466,239 |
|
| | | | | | | | | |
| Operating income | | 921,375 |
| | (174,000 | ) | | — |
| | 747,375 |
|
| | | | | | | | | |
| Interest and other income | | 4,462 |
| | (1 | ) | | — |
| | 4,461 |
|
| Other expenses | | (9,073 | ) | | 1 |
| | — |
| | (9,072 | ) |
| Interest: | | | | | | | | |
| Expense incurred, net | | (457,191 | ) | | 701 |
| (2a) | — |
| | (456,490 | ) |
| Amortization of deferred financing costs | | (11,088 | ) | | 98 |
| (2a) | — |
| | (10,990 | ) |
Income before income and other taxes, (loss) from investments
in unconsolidated entities, net gain on sales of real estate
properties and land parcels and discontinued operations | | 448,485 |
| | (173,201 | ) | | — |
| | 275,284 |
|
| Income and other tax (expense) benefit | | (1,394 | ) | | 3 |
| | — |
| | (1,391 | ) |
| (Loss) from investments in unconsolidated entities | | (7,952 | ) | | — |
| | — |
| | (7,952 | ) |
| Net gain on sales of real estate properties | | 212,685 |
| | — |
| | — |
| | 212,685 |
|
| Net gain on sales of land parcels | | 5,277 |
| | — |
| | — |
| | 5,277 |
|
| Income from continuing operations | | 657,101 |
| | (173,198 | ) | | — |
| | 483,903 |
|
| Discontinued operations, net | | 1,582 |
| | — |
| | — |
| | 1,582 |
|
| Net income | | 658,683 |
| | (173,198 | ) | | — |
| | 485,485 |
|
| Net (income) attributable to Noncontrolling Interests – Partially | | | | | | | | |
| Owned Properties | | (2,544 | ) | | 14 |
| (2c) | — |
| | (2,530 | ) |
| Net income attributable to controlling interests | | $ | 656,139 |
| | $ | (173,184 | ) | | $ | — |
| | $ | 482,955 |
|
| | | | | | | | | |
| ALLOCATION OF NET INCOME: | | | | | | | | |
| Preference Units | | $ | 4,145 |
| | $ | — |
| | $ | — |
| | $ | 4,145 |
|
| | | | | | | | | |
| General Partner | | $ | 627,163 |
| | $ | (166,586 | ) | | $ | — |
| | $ | 460,577 |
|
| Limited Partners | | 24,831 |
| | (6,598 | ) | (2b) | — |
| | 18,233 |
|
| Net income available to Units | | $ | 651,994 |
| | $ | (173,184 | ) | | $ | — |
| | $ | 478,810 |
|
| | | | | | | | | |
| Earnings per Unit – basic: | | | | | | | | |
| Income from continuing operations available to Units | | $ | 1.73 |
| | | | | | $ | 1.27 |
|
| Net income available to Units | | $ | 1.74 |
| | | | | | $ | 1.28 |
|
| Weighted average Units outstanding | | 374,899 |
| | | | | | 374,899 |
|
| | | | | | | | | |
| Earnings per Unit – diluted: | | | | | | | | |
| Income from continuing operations available to Units | | $ | 1.72 |
| | | | | | $ | 1.26 |
|
| Net income available to Units | | $ | 1.73 |
| | | | | | $ | 1.27 |
|
| Weighted average Units outstanding | | 377,735 |
| | | | | | 377,735 |
|
See accompanying notes.
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
Notes to Pro Forma Condensed Consolidated Balance Sheets
| |
| (1) | Historical Balances – Reflects the consolidated balance sheet of the Company as contained in its historical consolidated financial statements included in the Form 10-Q as of and for the nine months ended September 30, 2015 previously filed with the SEC. |
| |
| (2) | Starwood Portfolio – Reflects the financial position of the Starwood Portfolio as of September 30, 2015. |
| |
| a. | Reflects certain mortgage debt that is required to be paid off prior to closing the transaction and associated accrued interest, deferred financing costs and mortgage escrow deposits. |
| |
| b. | Reflects the adjustment to eliminate the historical equity and retained earnings of the Starwood Portfolio. |
Reflects the reallocation of total equity and Noncontrolling Interests – Operating Partnership based on the Noncontrolling Interests – Operating Partnership ownership of Equity Residential.
Reflects the reallocation of total capital and limited partners' interest based on the limited partners' ownership of ERP Operating Limited Partnership.
| |
| (3) | Transaction – In connection with completing the transaction, the following adjustments were made to account for the cash received, transaction-related cash uses and the estimated gain on sale. |
| |
| a. | Reflects the sales price received from the disposition of the Starwood Portfolio. |
| |
| b. | Reflects the estimated transaction costs the Company will incur at or near closing in order to complete the dispositions. The estimated transaction costs approximate 1.5% of the sales price. These costs are not included in the pro forma condensed consolidated statement of operations for the year ended December 31, 2014 because they represent non-recurring charges that result directly from the transaction and will be included in the consolidated financial results of the Company within twelve months of the transaction. |
| |
| c. | Reflects certain mortgage debt and associated accrued interest, net of mortgage escrow deposits to be returned, that is required to be paid off prior to closing the transaction. |
| |
| d. | Reflects the net book value of the Starwood Portfolio, adjusted for the reallocation of Noncontrolling Interests. |
Reflects the reallocation of total equity and Noncontrolling Interests – Operating Partnership based on the Noncontrolling Interests – Operating Partnership ownership of Equity Residential.
Reflects the reallocation of total capital and limited partners' interest based on the limited partners' ownership of ERP Operating Limited Partnership.
| |
| e. | Reflects the estimated gain on sale of the Starwood Portfolio, which is reduced by the estimated transaction costs discussed above. The estimated gain is not included in the pro forma condensed |
consolidated statement of operations for the year ended December 31, 2014 as it represents a non-recurring item that results directly from the transaction and will be included in the consolidated financial results of the Company within twelve months of the transaction.
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2015 AND YEAR ENDED DECEMBER 31, 2014
(Unaudited)
Notes to Pro Forma Condensed Consolidated Statements of Operations
| |
| (1) | Historical Balances – Represents the consolidated statements of operations of the Company as contained in the historical consolidated financial statements included in its Form 10-Q as of and for the nine months ended September 30, 2015 and its Form 10-K as of and for the year ended December 31, 2014 previously filed with the SEC on November 5, 2015 and February 26, 2015, respectively. |
| |
| (2) | Starwood Portfolio – Represents the historical combined revenues and certain expenses of the Starwood Portfolio for the nine months ended September 30, 2015 and for the year ended December 31, 2014 as if the disposition had occurred on January 1, 2014. |
| |
| a. | Reflects only the interest expense and amortization of deferred financing costs related to certain mortgage debt that is required to be paid off prior to closing the transaction. |
| |
| b. | Reflects the allocation of results between the controlling interests and the Noncontrolling Interests – Operating Partnership based on the Noncontrolling Interests – Operating Partnership weighted average ownership of 3.82% and 3.81% of Equity Residential for the nine months ended September 30, 2015 and for the year ended December 31, 2014, respectively. |
| |
| c. | Reflects the adjustment to eliminate the Noncontrolling Interest for one Starwood Portfolio property that was partially owned for part of 2014. |
