Equity Residential earnings rise as occupancies climb

Equity Residential, the largest publicly traded U.S. apartment landlord, said third-quarter earnings excluding items increased as apartment occupancies began to rise throughout the U.S.

Funds from operations climbed to $166.2 million, or 55 cents a share, from $154.4 million, or 53 cents, a year earlier, the Chicago-based real estate investment trust said today in a statement. FFO was projected to be 55 cents a share, the average estimate of 21 analysts in a Bloomberg survey.

“What served as a drag on apartments in the last decade is now a boost,” Jonathan Habermann, an analyst with Goldman Sachs Group Inc. in New York, wrote in an Oct. 11 report. “Declining homeownership levels now support a longer-term recovery in demand for apartments.”

Apartment vacancies nationwide dropped for the first time in almost three years in the third quarter, falling to 7.2 percent from 7.9 percent a year earlier, New York-based research firm Reis Inc. said in an Oct. 6 report. It was the first decline since late 2007.

The median price of a new apartment lease in Manhattan rose to $3,000 in third quarter, up 1.7 percent from a year earlier, according to New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. As of June 30, Equity Residential derived 12 percent of its net operating income from apartments in the New York metropolitan area, including Manhattan, the company said in a Sept. 13 presentation.

The company, founded by billionaire Sam Zell, also has apartments in Boston, Seattle, the District of Columbia and Southern California, which contributes the largest portion of its net operating income.

“If you have a broader portfolio you can smooth out some of the ups and downs ,” Haendel St. Juste, a New York-based REIT analyst at Keefe, Bruyette & Woods Inc., said in an interview before earnings were released.

Funds from operations are a measure of cash flow used by REITs. FFO excludes depreciation and other items, and doesn't comply with generally accepted accounting principles.

Earnings were announced after the close of regular U.S. trading. Equity Residential fell 36 cents to $49.79 in New York Stock Exchange composite trading today. Its shares have climbed 47 percent this year, compared with a 36 percent increase in the Bloomberg REIT Apartment Index of 13 publicly traded apartment owners.