“Rent control is a risk, just like climate change:” Equity Residential unbowed by affordable advocates

The Chicago-based REIT reported strong Q1; has 80K units in markets including NY, SoCal

Mark Parrell
Mark Parrell

Multifamily investor Equity Residential reported higher earnings in the first quarter thanks to continued demand for rentals and a “sizeable drop in new competitive supply” in its properties in the New York and Boston markets.

The Chicago-based REIT reported first-quarter revenue of $662.3 million, up from $632.8 million in the first quarter of 2018. It was also an increase from the fourth quarter’s $652.6 million.

Funds from operations per share were up 14.1 percent and net operating income per share was up 6.5 percent year over year.

Mark Parrell, who took over as the firm’s CEO Dec. 31, said during a Wednesday earnings call that New York and Boston were particularly strong markets in the first quarter.

“We’re really bullish on New York long term,” he said.

But he added he is optimistic about the outlook in all of the REIT’s markets.

“We like the demand picture across the board. We feel really good,” he said.

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While it didn’t acquire any new properties during the first quarter, Equity has since closed on the sale of a 266-unit building at 800 Sixth Avenue in New York to Greystar for $237.5 million, Parrell said.

Equity did spend nearly $259 million on three properties totaling 579 units in Jersey City, N.J., Seattle and Denver. In April, after the quarter closed, it picked up a 366-unit property in Rockville, Maryland, for $103.5 million.

Founded by Sam Zell, Equity Residential has a portfolio of more than 80,000 apartments in 310 properties primarily in New York, Southern California, Boston, Washington, D.C., Seattle and San Francisco.

Occupancy was at 96.6 percent at the end of the quarter, up from 96.3 percent during the same period last year.

Parrell said the firm is not deterred by the growing chorus of affordable housing advocates pushing for greater rent control across the country. The company is taking a wait-and-see approach on potential changes, he said. That is particularly the case in New York, where lawmakers are debating revisions to the rent regulation laws.

“Rent control is a risk, just like climate change, just like the financial strength of the municipality,” Parrell said, He added that Equity focuses more on demand, quality of potential tenants and the ability to build when assessing where to invest.

Still, the industry has a vested interest in being part of the rent control debate, he said.

“We need to continue to get the point across that continuing to limit the incentives for the private side to create new housing will not solve the problem,” Parrell said.