Equity Residential sees profits drop 58%

Occupancy, rents are down across Sam Zell-owned REIT’s portfolio

National /
Oct.October 28, 2020 03:21 PM
Equity Residential chairman Sam Zell (Getty)

Equity Residential chairman Sam Zell (Getty)

Sam Zell’s Equity Residential was hit with a 58 percent decline in income in the third quarter, with urban flight severely impacting its apartment portfolio.

The REIT’s net income in the third quarter was $95.4 million, down from $227.8 million in the same period last year, the company reported Wednesday. That’s a significant drop from the second quarter, when the company recorded $271.5 million in income. Its total revenue during the third quarter was $622.4 million, down by 9 percent year-over-year.

Equity Residential CEO Mark Parrell

Equity Residential CEO Mark Parrell

On the earnings call, the real estate investment trust’s CEO Mark Parrell told analysts that renters decided to leave their apartments as employers delayed plans to bring workers back to offices.

“This occupancy pressure in turn caused further rent declines and increased concessions,” Parrell said.

About 23 percent of the company’s rental portfolio is located in cities like San Francisco and New York, which continue to be impacted by suburban migration.

The portfolio-wide occupancy rate was 94.8 percent, down by 1.7 percentage points compared to a year ago. But it’s lower for urban properties: The occupancy rate for Equity’s New York units is just below 90 percent, said COO Michael Manelis.

The portfolio-wide average rent as of September was $2,765, down by 3 percent from June. The average rent in New York also slipped by 3 percent, from $3,909 in June to $3,805 in September. The landlord has been offering concessions of up to two months of free rent, depending on the market, Manelis said.

The number of tenant applications during the third quarter was 12,700, up about 20 percent compared to a year ago, mainly from renters who opted to move into larger apartments, said Manelis. But the spike was not enough to compensate the number of tenants leaving.

The uptick in applications has continued into October, although the peak rental season typically ends by now in normal years, Manelis said.

“Given the amount of inventory we have available in our urban portfolio, we will need to maintain this velocity through the fourth quarter or reduce turnover in order to continue to hold portfolio-wide occupancy at 94 percent,” he said. “Stabilization and then improvement of our occupancy is what would allow us to dial back concessions and begin increasing rates.”





    Related Articles

    arrow_forward_ios
    Thor Equities Group Chairman Joseph J. Sitt. (Thor)
    Thor facing foreclosure on Harlem rental building
    Thor facing foreclosure on Harlem rental building
    Photo illustration of Vornado CEO Steven Roth and Hotel Pennsylvania at 401 Seventh Avenue (Getty, iStock, Vornado)
    “Inevitable”: Vornado will demolish Hotel Pennsylvania
    “Inevitable”: Vornado will demolish Hotel Pennsylvania
    The rate of loans sent to special servicers continued to fall in March. (Unsplash)
    CMBS special servicing rate declines in March
    CMBS special servicing rate declines in March
    JLL CEO Christian Ulbrich. (Getty)
    JLL explores sale of China property management wing
    JLL explores sale of China property management wing
    BHS CEO Bess Friedman, Sotheby’s CEO Philip White REBNY head James Whelan, Douglas Elliman executive chairman Howard Lorber and Corcoran CEO Pamela Liebman (Getty, iStock)
    Broker fee ban an “error,” court rules
    Broker fee ban an “error,” court rules
    Dollar General CEO Todd Vasos (Retail Industry Leaders Association, iStock)
    Dollar General thrives amid retail apocalypse
    Dollar General thrives amid retail apocalypse
    Bill Lee (Lee & Associates/YouTube)
    Lee & Associates founder Bill Lee dies
    Lee & Associates founder Bill Lee dies
    The vacancy rate for regional and superregional malls is at an all-time high.  (Getty)
    Mall vacancy rate hits all-time high
    Mall vacancy rate hits all-time high
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...