The pandemic hit the bottom line of Sam Zell’s Equity Residential pretty hard, but the worst is finally in the rear-view mirror, executives of the real estate investment trust said Wednesday.
“We acknowledge how badly our operations declined over the last 16 months,” said Michael Manelis, the chief operating officer, during an earnings call. “But the current recovery appears to be strong enough to both quickly recapture all that was lost in the pandemic and take us into a new period of strong operating fundamentals.”
The REIT, whose 75,000-unit apartment portfolio is dominated by luxury rentals in coastal cities such as New York City and San Francisco, had a tough time filling apartments when renters, untethered from offices, fled pricey urban environments.
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Generous concessions became routine. At the end of the first quarter, about 20 percent of the firm’s renters were still receiving four weeks of free rent on average, Manelis said. But as vaccination progressed and cities reopened, demand picked up and the need for concessions declined. As of July, less than 3 percent of new tenants got a break — about two weeks’ of free rent, on average, he said.
Equity Residential’s portfolio-wide occupancy had dipped to 94.2 percent in September. But it is back up to 96.4 percent in July, almost where it was in 2019, according to the company.
As tenants come back to apartments, Equity Residential resumed its portfolio diversification efforts in the second quarter and into July, acquiring seven rental apartment properties totaling about 1,900 units for $645.7 million.
The additions included complexes in Austin and Atlanta — the two cities that the company identified as new target markets because of their affluent renter demographics. The acquisitions were funded by the proceeds from selling older properties in California, said the company’s president and CEO, Mark Parrell.
The firm reported funds from operations of $302.9 million or $0.78 per share in the second quarter, down 9 percent from a year ago. But earnings per share rose 20 percent to $0.84 from the same period last year, boosted partly by proceeds from property sales.