EQUITY RESIDENTIAL (EQR) Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered steady fundamentals: EPS $0.50, FFO/share $0.98, Normalized FFO/share $0.99; same-store revenue +2.7%, expenses +3.7%, NOI +2.3% YoY, with occupancy at 96.6% .
• Guidance raised for same-store revenue (2.6–3.2%) and NOI (2.2–2.8%), lowered for same-store expenses (3.5–4.0%); full-year FFO/share raised to $4.03–$4.09 and Normalized FFO to $3.97–$4.03, while EPS trimmed to $2.96–$3.02 due to lower sale gains and higher depreciation .
• Management highlighted momentum in San Francisco and resilient East Coast demand; acquired 8 properties in suburban Atlanta ($533.8M, 5.1% cap rate) and sold one Seattle asset ($121.0M, 4.9% yield), adding portfolio balance amid Sunbelt supply pressure .
• Q3 2025 guidance implies higher EPS ($0.78–$0.82) and FFO/share ($1.08–$1.12) versus Q2 actuals, driven by expected non-operating gains and asset sales, while Normalized FFO is guided roughly flat at $0.99–$1.03 .
• Potential stock catalysts: raised same-store revenue/NOI guidance, urban strength (SF/NY), and Q3 non-operating gains; watch headwinds in LA and expansion markets where concessions remain elevated .

What Went Well and What Went Wrong

What Went Well

• Raised midpoints for same-store revenue and NOI and lowered expense guidance; “sustained demand and a financially resilient customer” with low supply in SF/NY supporting results .
• San Francisco led performance with blended rate growth and concessions pullback; occupancy gains and tech job steadiness with “continued AI focus in the market” supporting demand .
• Portfolio optimization: $533.8M suburban Atlanta acquisition (2,064 units, 5.1% cap), and Seattle sale ($121.0M, 4.9% yield) aligns with balancing urban strength and future Sunbelt recovery .

What Went Wrong

• Same-store expenses up 3.7% YoY, led by utilities (+8.3%) and repairs/maintenance (+5.7%), partly due to resident technology initiatives and higher commodity rates; taxes also up with NYC 421‑a burnoffs .
• LA underperformed modest expectations; weak entertainment sector and quality-of-life issues pressured rents, shifting focus to retention and renewals over new lease pricing .
• Elevated concessions persisted in expansion markets (Denver, parts of LA), more than expected on a cash basis in Q2; management expects continued use in impacted submarkets near term .

Financial Results

Core Financials and Per-Share Metrics

Same-Store Operating KPIs

Same-Store Results (Amounts)

Market/Segment Exposure

Actuals vs Wall Street Consensus (S&P Global)

Values retrieved from S&P Global.*

Guidance Changes

Note: Full-year EPS lowered primarily due to lower expected property sale gains and higher depreciation; FFO/NFFO raised on higher expected non-operating asset gains and other income .

Earnings Call Themes & Trends

Management Commentary

• “We are pleased to raise the midpoints for our same store revenue and net operating income guidance… unique exposure to low supply urban centers of New York and San Francisco are driving current period results.” — Mark J. Parrell, President & CEO .
• “Our blended rate growth… the best in our portfolio… robust seasonal price acceleration, including the pullback on concessions… tech jobs are steady with a lot of continued AI focus in the market.” — Michael Manelis, COO (on San Francisco) .
• “Goal… to build that all‑weather portfolio… lack of supply… San Francisco and New York feel great… expansion markets are suffering from supply… recovery is about absorption… balance urban/suburban.” — Mark J. Parrell .
• “We like using joint venture partners… leverage their overhead instead of adding to our own… development overhead… less than $4,000,000 a year.” — Mark J. Parrell .
• “We used more concessions in Q2 than expected… about seven days per move‑in… elevated concession use to continue in expansion markets and some LA submarkets; pullback expected in Seattle/SF.” — Michael Manelis .

Q&A Highlights

• Portfolio balance and Sunbelt strategy: Management reaffirmed SF/NY strength amid low supply and expects Sunbelt recovery via absorption over time; maintaining a balanced urban/suburban mix targeting higher‑earning customers .
• Concessions and leasing setup: Concessions were higher than planned in Q2; expected to remain elevated in certain submarkets; reduced concessions in SF/Seattle set up better renewal dynamics next spring .
• AI impact and demand: Early benefits visible in SF via tech demand; broader job impacts uncertain; potential new roles (AI governance) may emerge; EQR is levered to tech hubs .
• Capital allocation and JV approach: Preference for JV development to limit overhead and preserve flexibility; trade-offs in returns offset by overhead savings and selective deal entry .
• Same-store composition and expansion acquisitions: CFO detailed same-store sets and noted 2025 additions will be mostly expansion market units; modestly dilutive in 2025 but balancing portfolios and positioning for better 2026–27 performance as supply wanes .

Estimates Context

• Q2 2025 EPS missed consensus ($0.50 vs $0.3724*) due to higher depreciation and lower sale gains in period versus modeled assumptions; revenue was slightly below consensus ($768.8M vs $770.1M*) .
• Street may lift FY 2025 FFO/NFFO assumptions following raised guidance (FFO $4.03–$4.09; NFFO $3.97–$4.03), while EPS could be trimmed given lower expected sale gains and higher depreciation .
• Near-term (Q3) Street expectations should reflect company guidance for EPS/FFO (EPS $0.78–$0.82; FFO $1.08–$1.12), supported by non-operating asset gains and property sale gains .

Values retrieved from S&P Global.*

Key Takeaways for Investors

• Urban strength (SF/NY) and resilient East Coast underpin raised same-store revenue/NOI guidance; occupancy exceeded expectations and renewal pricing remains healthy .
• FFO/NFFO guidance raised for FY25; focus on operational efficiency and other income/non-operating gains offsets expense pressures (utilities, repairs/maintenance) .
• Sunbelt/exansion markets still face supply-driven concessions; Atlanta acquisitions add balance but are modestly dilutive near term, with better setup into 2026 as supply fades .
• Q3 setup is constructive for EPS/FFO on expected non-operating gains and asset sales; watch execution on dispositions and transactional timing .
• LA remains a watch item: softer demand and QoL issues pressuring pricing; management prioritizing retention and renewals over price to protect occupancy .
• Cost headwinds (utilities, repairs/maintenance) reflect tech and service rollouts; long-term margin benefits hinge on innovation initiatives and AI-related customer/operations efficiency .
• Balance sheet remains strong with predominantly unsecured, long-dated debt (weighted avg maturity ~7 years) and covenant headroom; commercial paper usage manageable .

Appendices

Transaction and Capital Markets Activity

• Acquired eight suburban Atlanta properties (2,064 units) for ~$533.8M at 5.1% cap; sold one Seattle property (289 units) for ~$121.0M at 4.9% yield .
• Issued $500M 7-year unsecured notes (4.95% coupon; 5.23% effective yield); repaid $450M notes due June 2025 .

Dividend

• Distributions declared per common share: $0.6925 in Q2 2025 .

Supplemental Operating Trends

• Same-store expenses composition (Q2 YoY): taxes 41.0%, payroll 18.7%, utilities 15.0%, repairs/maintenance 14.2%, insurance 4.0%, leasing/advertising 1.3%, other 5.8% .
• Same-store residential bad debt remained ~1.0% of revenue in Q2 2025 .

Full-Year Guidance Drivers

• NFFO change vs prior guidance: +$0.05/share net from higher same-store NOI (+$0.02), lease-up (+$0.01), lower net NOI from transactions (−$0.02), lower net interest expense (+$0.03), other (+$0.01) .

Note: All per-share figures are diluted unless noted. All data cited to Equity Residential’s Q2 2025 8‑K/press release and current/past period releases/call transcripts as referenced.