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Section 1: 10-Q (10-Q)

eqr-10q_20180930.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from        to       

Commission File Number: 1-12252 (Equity Residential)

Commission File Number: 0-24920 (ERP Operating Limited Partnership)

EQUITY RESIDENTIAL

ERP OPERATING LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

 

Maryland (Equity Residential)

 

13-3675988 (Equity Residential)

Illinois (ERP Operating Limited Partnership)

 

36-3894853 (ERP Operating Limited Partnership)

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

Two North Riverside Plaza, Chicago, Illinois 60606

 

(312) 474-1300

(Address of principal executive offices) (Zip Code)

 

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Equity Residential  Yes   No

ERP Operating Limited Partnership  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Equity Residential  Yes   No

ERP Operating Limited Partnership  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Equity Residential:

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

 

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

ERP Operating Limited Partnership:

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

 

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Equity Residential  

ERP Operating Limited Partnership  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Equity Residential  Yes   No

ERP Operating Limited Partnership  Yes   No

The number of EQR Common Shares of Beneficial Interest, $0.01 par value, outstanding on October 26, 2018 was 368,440,623.

 

 


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EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended September 30, 2018 of Equity Residential and ERP Operating Limited Partnership.  Unless stated otherwise or the context otherwise requires, references to “EQR” mean Equity Residential, a Maryland real estate investment trust (“REIT”), and references to “ERPOP” mean ERP Operating Limited Partnership, an Illinois limited partnership.  References to the “Company,” “we,” “us” or “our” mean collectively EQR, ERPOP and those entities/subsidiaries owned or controlled by EQR and/or ERPOP.  References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP.  The following chart illustrates the Company’s and the Operating Partnership’s corporate structure:

 

 

EQR is the general partner of, and as of September 30, 2018 owned an approximate 96.3% ownership interest in, ERPOP.  The remaining 3.7% interest is owned by limited partners.  As the sole general partner of ERPOP, EQR has exclusive control of ERPOP’s day-to-day management. Management operates the Company and the Operating Partnership as one business. The management of EQR consists of the same members as the management of ERPOP.

The Company is structured as an umbrella partnership REIT (“UPREIT”) and EQR contributes all net proceeds from its various equity offerings to ERPOP.  In return for those contributions, EQR receives a number of OP Units (see definition below) in ERPOP equal to the number of Common Shares it has issued in the equity offering. The Company may acquire properties in transactions that include the issuance of OP Units as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales.  This is one of the reasons why the Company is structured in the manner shown above.  Based on the terms of ERPOP’s partnership agreement, OP Units can be exchanged with Common Shares on a one-for-one basis because the Company maintains a one-for-one relationship between the OP Units of ERPOP issued to EQR and the outstanding Common Shares.

The Company believes that combining the reports on Form 10-Q of EQR and ERPOP into this single report provides the following benefits:

 

enhances investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

 

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

 

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

The Company believes it is important to understand the few differences between EQR and ERPOP in the context of how EQR and ERPOP operate as a consolidated company.  All of the Companys property ownership, development and related business operations are conducted through the Operating Partnership and EQR has no material assets or liabilities other than its investment in ERPOP.  EQRs primary function is acting as the general partner of ERPOP.  EQR also issues equity from time to time, the net proceeds of which it is obligated to contribute to ERPOP, and guarantees certain debt of ERPOP, as disclosed in this report.  EQR does not have any indebtedness as all debt is incurred by the Operating Partnership.  The Operating Partnership holds substantially all of the assets of the Company, including the Companys ownership interests in its joint ventures.  The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity.  Except for the net proceeds from equity offerings by EQR, which are contributed to the capital of ERPOP in exchange for additional partnership interests in ERPOP (“OP Units”) (on a one-for-one Common Share per OP Unit basis) or additional preference units in ERPOP (on a one-for-one preferred share per preference unit basis), the Operating Partnership generates all remaining capital required by the Company’s

 


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business.  These sources include the Operating Partnerships working capital, net cash provided by operating activities, borrowings under its revolving credit facility and/or commercial paper program, the issuance of secured and unsecured debt and equity securities and proceeds received from disposition of certain properties and joint venture interests.

Shareholders equity, partners capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership.  The limited partners of the Operating Partnership are accounted for as partners capital in the Operating Partnerships financial statements and as noncontrolling interests in the Companys financial statements.  The noncontrolling interests in the Operating Partnerships financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in the Companys financial statements include the same noncontrolling interests at the Operating Partnership level and limited partner OP Unit holders of the Operating Partnership.  The differences between shareholders equity and partners capital result from differences in the equity issued at the Company and Operating Partnership levels.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of each entitys debt, noncontrolling interests and shareholders equity or partners capital, as applicable; and a combined Managements Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership.  In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company.  Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership.

As general partner with control of ERPOP, EQR consolidates ERPOP for financial reporting purposes, and EQR essentially has no assets or liabilities other than its investment in ERPOP.  Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements.  The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

 

 

 


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TABLE OF CONTENTS

 

 

PAGE

 

 

PART I.

 

 

 

Item 1. Financial Statements of Equity Residential:

 

 

 

Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017

2

 

 

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2018 and 2017

3 to 4

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017

5 to 7

 

 

Consolidated Statement of Changes in Equity for the nine months ended September 30, 2018

8 to 9

 

 

Financial Statements of ERP Operating Limited Partnership:

 

 

 

Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017

10

 

 

Consolidated Statements of Operations and Comprehensive Income for the nine months and quarters ended September 30, 2018 and 2017

11 to 12

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017

13 to 15

 

 

Consolidated Statement of Changes in Capital for the nine months ended September 30, 2018

16 to 17

 

 

Notes to Consolidated Financial Statements of Equity Residential and ERP Operating Limited Partnership

18 to 39

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

40 to 55

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

55

 

 

Item 4. Controls and Procedures

55 to 56

 

 

PART II.

 

 

Item 1. Legal Proceedings

56

 

Item 1A. Risk Factors

56

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

56

 

Item 3. Defaults Upon Senior Securities

56

 

Item 4. Mine Safety Disclosures

56

 

Item 5. Other Information

56

 

 

Item 6. Exhibits

56

 

 

 


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EQUITY RESIDENTIAL

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share amounts)

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Land

 

$

5,866,457

 

 

$

5,996,024

 

Depreciable property

 

 

20,336,747

 

 

 

19,768,362

 

Projects under development

 

 

134,961

 

 

 

163,547

 

Land held for development

 

 

87,335

 

 

 

98,963

 

Investment in real estate

 

 

26,425,500

 

 

 

26,026,896

 

Accumulated depreciation

 

 

(6,494,770

)

 

 

(6,040,378

)

Investment in real estate, net

 

 

19,930,730

 

 

 

19,986,518

 

Investments in unconsolidated entities

 

 

57,576

 

 

 

58,254

 

Cash and cash equivalents

 

 

32,995

 

 

 

50,647

 

Restricted deposits

 

 

55,755

 

 

 

50,115

 

Other assets

 

 

465,094

 

 

 

425,065

 

Total assets

 

$

20,542,150

 

 

$

20,570,599

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Mortgage notes payable, net

 

$

2,789,436

 

 

$

3,618,722

 

Notes, net

 

 

5,534,990

 

 

 

5,038,812

 

Line of credit and commercial paper

 

 

499,367

 

 

 

299,757

 

Accounts payable and accrued expenses

 

 

182,446

 

 

 

114,766

 

Accrued interest payable

 

 

69,132

 

 

 

58,035

 

Other liabilities

 

 

344,373

 

 

 

341,852

 

Security deposits

 

 

67,177

 

 

 

65,009

 

Distributions payable

 

 

206,899

 

 

 

192,828

 

Total liabilities

 

 

9,693,820

 

 

 

9,729,781

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Noncontrolling Interests – Operating Partnership

 

 

381,239

 

 

 

366,955

 

Equity:

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred Shares of beneficial interest, $0.01 par value; 100,000,000 shares

   authorized; 745,600 shares issued and outstanding as of September 30, 2018 and

   December 31, 2017

 

 

37,280

 

 

 

37,280

 

Common Shares of beneficial interest, $0.01 par value; 1,000,000,000 shares

   authorized; 368,409,586 shares issued and outstanding as of September 30, 2018 and

   368,018,082 shares issued and outstanding as of December 31, 2017

 

 

3,684

 

 

 

3,680

 

Paid in capital

 

 

8,900,324

 

 

 

8,886,586

 

Retained earnings

 

 

1,344,825

 

 

 

1,403,530

 

Accumulated other comprehensive income (loss)

 

 

(50,689

)

 

 

(88,612

)

Total shareholders’ equity

 

 

10,235,424

 

 

 

10,242,464

 

Noncontrolling Interests:

 

 

 

 

 

 

 

 

Operating Partnership

 

 

233,825

 

 

 

226,691

 

Partially Owned Properties

 

 

(2,158

)

 

 

4,708

 

Total Noncontrolling Interests

 

 

231,667

 

 

 

231,399

 

Total equity

 

 

10,467,091

 

 

 

10,473,863

 

Total liabilities and equity

 

$

20,542,150

 

 

$

20,570,599

 

See accompanying notes

2


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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

Quarter Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

1,925,128

 

 

$

1,840,170

 

 

$

652,677

 

 

$

623,951

 

Fee and asset management

 

 

563

 

 

 

532

 

 

 

190

 

 

 

171

 

Total revenues

 

 

1,925,691

 

 

 

1,840,702

 

 

 

652,867

 

 

 

624,122

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and maintenance

 

 

322,487

 

 

 

306,645

 

 

 

110,541

 

 

 

104,721

 

Real estate taxes and insurance

 

 

268,784

 

 

 

253,318

 

 

 

87,388

 

 

 

84,087

 

Property management

 

 

69,175

 

 

 

64,702

 

 

 

22,247

 

 

 

20,861

 

General and administrative

 

 

41,420

 

 

 

40,366

 

 

 

12,640

 

 

 

12,567

 

Depreciation

 

 

583,869

 

 

 

542,964

 

 

 

194,618

 

 

 

184,100

 

Impairment

 

 

702

 

 

 

 

 

 

702

 

 

 

 

Total expenses

 

 

1,286,437

 

 

 

1,207,995

 

 

 

428,136

 

 

 

406,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

639,254

 

 

 

632,707

 

 

 

224,731

 

 

 

217,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

14,860

 

 

 

5,708

 

 

 

7,864

 

 

 

3,945

 

Other expenses

 

 

(14,871

)

 

 

(3,160

)

 

 

(7,661

)

 

 

(1,028

)

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense incurred, net

 

 

(321,454

)

 

 

(288,579

)

 

 

(111,219

)

 

 

(91,145

)

Amortization of deferred financing costs

 

 

(9,054

)

 

 

(6,447

)

 

 

(3,276

)

 

 

(2,064

)

Income before income and other taxes, income (loss) from investments in

   unconsolidated entities and net gain (loss) on sales of real estate properties

   and land parcels

 

 

308,735

 

 

 

340,229

 

 

 

110,439

 

 

 

127,494

 

Income and other tax (expense) benefit

 

 

(767

)

 

 

(710

)

 

 

(280

)

 

 

(228

)

Income (loss) from investments in unconsolidated entities

 

 

(2,993

)

 

 

(2,153

)

 

 

(985

)

 

 

(398

)

Net gain (loss) on sales of real estate properties

 

 

256,834

 

 

 

141,761

 

 

 

114,672

 

 

 

17,328

 

Net gain (loss) on sales of land parcels

 

 

995

 

 

 

19,170

 

 

 

 

 

 

 

Net income

 

 

562,804

 

 

 

498,297

 

 

 

223,846

 

 

 

144,196

 

Net (income) loss attributable to Noncontrolling Interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership

 

 

(20,517

)

 

 

(17,931

)

 

 

(8,159

)

 

 

(5,166

)

Partially Owned Properties

 

 

(1,939

)

 

 

(2,354

)

 

 

(750

)

 

 

(801

)

Net income attributable to controlling interests

 

 

540,348

 

 

 

478,012

 

 

 

214,937

 

 

 

138,229

 

Preferred distributions

 

 

(2,318

)

 

 

(2,318

)

 

 

(773

)

 

 

(772

)

Net income available to Common Shares

 

$

538,030

 

 

$

475,694

 

 

$

214,164

 

 

$

137,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Common Shares

 

$

1.46

 

 

$

1.30

 

 

$

0.58

 

 

$

0.37

 

Weighted average Common Shares outstanding

 

 

367,920

 

 

 

366,809

 

 

 

368,028

 

 

 

366,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Common Shares

 

$

1.46

 

 

$

1.29

 

 

$

0.58

 

 

$

0.37

 

Weighted average Common Shares outstanding

 

 

383,433

 

 

 

382,640

 

 

 

383,884

 

 

 

382,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per Common Share outstanding

 

$

1.62

 

 

$

1.51125

 

 

$

0.54

 

 

$

0.50375

 

See accompanying notes

3


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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Continued)

(Amounts in thousands except per share data)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

Quarter Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

562,804

 

 

$

498,297

 

 

$

223,846

 

 

$

144,196

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) – derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

24,021

 

 

 

5,216

 

 

 

12,026

 

 

 

1,709

 

Losses reclassified into earnings from other comprehensive

   income

 

 

13,902

 

 

 

14,019

 

 

 

4,595

 

 

 

4,768

 

Other comprehensive income (loss)

 

 

37,923

 

 

 

19,235

 

 

 

16,621

 

 

 

6,477

 

Comprehensive income

 

 

600,727

 

 

 

517,532

 

 

 

240,467

 

 

 

150,673

 

Comprehensive (income) attributable to Noncontrolling Interests

 

 

(23,848

)

 

 

(20,983

)

 

 

(9,519

)

 

 

(6,201

)

Comprehensive income attributable to controlling interests

 

$

576,879

 

 

$

496,549

 

 

$

230,948

 

 

$

144,472

 

 

See accompanying notes

4


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EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

562,804

 

 

$

498,297

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

583,869

 

 

 

542,964

 

Amortization of deferred financing costs

 

 

9,054

 

 

 

6,447

 

Amortization of above/below market lease intangibles

 

 

3,294

 

 

 

2,729

 

Amortization of discounts and premiums on debt

 

 

21,360

 

 

 

2,018

 

Amortization of deferred settlements on derivative instruments

 

 

13,893

 

 

 

14,010

 

Impairment

 

 

702

 

 

 

 

Write-off of pursuit costs

 

 

3,125

 

 

 

2,329

 

(Income) loss from investments in unconsolidated entities

 

 

2,993

 

 

 

2,153

 

Distributions from unconsolidated entities – return on capital

 

 

1,885

 

 

 

2,031

 

Net (gain) loss on sales of real estate properties

 

 

(256,834

)

 

 

(141,761

)

Net (gain) loss on sales of land parcels

 

 

(995

)

 

 

(19,170

)

Net (gain) loss on debt extinguishment

 

 

22,110

 

 

 

12,258

 

Compensation paid with Company Common Shares

 

 

22,270

 

 

 

19,999

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in other assets

 

 

(18,550

)

 

 

(23,024

)

Increase (decrease) in accounts payable and accrued expenses

 

 

58,756

 

 

 

62,635

 

Increase (decrease) in accrued interest payable

 

 

11,097

 

 

 

11,865

 

Increase (decrease) in other liabilities

 

 

1,190

 

 

 

(28,250

)

Increase (decrease) in security deposits

 

 

2,168

 

 

 

2,606

 

Net cash provided by operating activities

 

 

1,044,191

 

 

 

970,136

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Investment in real estate – acquisitions

 

 

(708,092

)

 

 

(466,395

)

Investment in real estate – development/other

 

 

(101,573

)

 

 

(227,187

)

Capital expenditures to real estate

 

 

(138,119

)

 

 

(143,258

)

Non-real estate capital additions

 

 

(3,155

)

 

 

(776

)

Interest capitalized for real estate under development

 

 

(4,547

)

 

 

(23,164

)

Proceeds from disposition of real estate, net

 

 

691,526

 

 

 

350,000

 

Investments in unconsolidated entities

 

 

(4,860

)

 

 

(5,324

)

Distributions from unconsolidated entities – return of capital

 

 

 

 

 

329

 

Net cash provided by (used for) investing activities

 

 

(268,820

)

 

 

(515,775

)

See accompanying notes

5


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Debt financing costs

 

$

(4,355

)

 

$

(6,272

)

Mortgage notes payable, net:

 

 

 

 

 

 

 

 

Lump sum payoffs

 

 

(847,939

)

 

 

(493,420

)

Scheduled principal repayments

 

 

(4,938

)

 

 

(8,771

)

Net gain (loss) on debt extinguishment

 

 

(22,110

)

 

 

(12,258

)

Notes, net:

 

 

 

 

 

 

 

 

Proceeds

 

 

497,010

 

 

 

692,466

 

Lump sum payoffs

 

 

 

 

 

(394,077

)

Line of credit and commercial paper:

 

 

 

 

 

 

 

 

Line of credit proceeds

 

 

1,635,000

 

 

 

1,845,000

 

Line of credit repayments

 

 

(1,635,000

)

 

 

(1,845,000

)

Commercial paper proceeds

 

 

9,624,610

 

 

 

3,891,596

 

Commercial paper repayments

 

 

(9,425,000

)

 

 

(3,681,750

)

Proceeds from (payments on) settlement of derivative instruments

 

 

1,638

 

 

 

1,296

 

Proceeds from Employee Share Purchase Plan (ESPP)

 

 

3,074

 

 

 

2,963

 

Proceeds from exercise of options

 

 

6,000

 

 

 

12,967

 

Payment of offering costs

 

 

(27

)

 

 

(36

)

Other financing activities, net

 

 

(48

)

 

 

(40

)

Contributions – Noncontrolling Interests – Partially Owned Properties

 

 

125

 

 

 

125

 

Contributions – Noncontrolling Interests – Operating Partnership

 

 

1

 

 

 

 

Distributions:

 

 

 

 

 

 

 

 

Common Shares

 

 

(583,184

)

 

 

(554,267

)

Preferred Shares

 

 

(2,318

)

 

 

(2,318

)

Noncontrolling Interests – Operating Partnership

 

 

(21,040

)

 

 

(20,604

)

Noncontrolling Interests – Partially Owned Properties

 

 

(8,882

)

 

 

(6,873

)

Net cash provided by (used for) financing activities

 

 

(787,383

)

 

 

(579,273

)

Net increase (decrease) in cash and cash equivalents and restricted deposits

 

 

(12,012

)

 

 

(124,912

)

Cash and cash equivalents and restricted deposits, beginning of period

 

 

100,762

 

 

 

219,088

 

Cash and cash equivalents and restricted deposits, end of period

 

$

88,750

 

 

$

94,176

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents and restricted deposits, end of period

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,995

 

 

$

46,565

 

Restricted deposits

 

 

55,755

 

 

 

47,611

 

Total cash and cash equivalents and restricted deposits, end of period

 

$

88,750

 

 

$

94,176

 

See accompanying notes

6


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

268,966

 

 

$

257,805

 

Net cash paid for income and other taxes

 

$

934

 

 

$

964

 

Amortization of deferred financing costs:

 

 

 

 

 

 

 

 

Other assets

 

$

1,809

 

 

$

1,810

 

Mortgage notes payable, net

 

$

4,197

 

 

$

1,943

 

Notes, net

 

$

3,048

 

 

$

2,694

 

Amortization of discounts and premiums on debt:

 

 

 

 

 

 

 

 

Mortgage notes payable, net

 

$

19,394

 

 

$

247

 

Notes, net

 

$

1,966

 

 

$

1,771

 

Amortization of deferred settlements on derivative instruments:

 

 

 

 

 

 

 

 

Other liabilities

 

$

(9

)

 

$

(9

)

Accumulated other comprehensive income

 

$

13,902

 

 

$

14,019

 

Write-off of pursuit costs:

 

 

 

 

 

 

 

 

Investment in real estate, net

 

$

3,079

 

 

$

2,292

 

Other assets

 

$

13

 

 

$

17

 

Accounts payable and accrued expenses

 

$

33

 

 

$

20

 

(Income) loss from investments in unconsolidated entities:

 

 

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

1,973

 

 

$

1,076

 

Other liabilities

 

$

1,020

 

 

$

1,077

 

Realized/unrealized (gain) loss on derivative instruments:

 

 

 

 

 

 

 

 

Other assets

 

$

(24,021

)

 

$

(3,803

)

Notes, net

 

$

(1,491

)

 

$

(1,413

)

Other liabilities

 

$

1,491

 

 

$

 

Accumulated other comprehensive income

 

$

24,021

 

 

$

5,216

 

Investments in unconsolidated entities:

 

 

 

 

 

 

 

 

Investments in unconsolidated entities

 

$

(3,180

)

 

$

(2,324

)

Other liabilities

 

$

(1,680

)

 

$

(3,000

)

 

See accompanying notes

7


Table of Contents

 

EQUITY RESIDENTIAL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts in thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30, 2018

 

SHAREHOLDERS’ EQUITY

 

 

 

 

PREFERRED SHARES

 

 

 

 

Balance, beginning of year

 

$

37,280

 

Balance, end of period

 

$

37,280

 

COMMON SHARES, $0.01 PAR VALUE

 

 

 

 

Balance, beginning of year

 

$

3,680

 

Exercise of share options

 

 

2

 

Employee Share Purchase Plan (ESPP)

 

 

1

 

Share-based employee compensation expense:

 

 

 

 

Restricted shares

 

 

1

 

Balance, end of period

 

$

3,684

 

PAID IN CAPITAL

 

 

 

 

Balance, beginning of year

 

$

8,886,586

 

Common Share Issuance:

 

 

 

 

Conversion of OP Units into Common Shares

 

 

356

 

Exercise of share options

 

 

5,998

 

Employee Share Purchase Plan (ESPP)

 

 

3,073

 

Share-based employee compensation expense:

 

 

 

 

Restricted shares

 

 

6,803

 

Share options

 

 

9,206

 

ESPP discount

 

 

604

 

Offering costs

 

 

(27

)

Supplemental Executive Retirement Plan (SERP)

 

 

(533

)

Change in market value of Redeemable Noncontrolling Interests – Operating Partnership

 

 

(14,361

)

Adjustment for Noncontrolling Interests ownership in Operating Partnership

 

 

2,619

 

Balance, end of period

 

$

8,900,324

 

RETAINED EARNINGS