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Equity Residential’s Management Paints a Bullish Picture for 2016

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Equity Residential’s conference call

Equity Residential’s (EQR) management scheduled a conference call to discuss its 4Q15 earnings as well as to provide an outlook for the future.

The company upwardly revised its guidance for its 2016 same-store operating performance, normalized FFO (funds from operations) per share, and some of its transactions.

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Higher dividends

Equity Residential is expected to pay two special dividends in 2016 totaling $10–$12 per share. In 2Q16, the company is expected to pay a special dividend of ~$8 per share from asset sales, including the sale to Starwood, and another special dividend of ~$2–$4 per share. This is in addition to its regular quarterly dividends.

2016 guidance

Equity Residential has maintained its same-store physical occupancy level for 2016 at 96%. In addition, its guidance for same-store revenue growth in 2016 has been set in the range of 4.5%–5.3%.

EQR’s guidance for the change in its same-store net operating income is 5%–6.5%. Its guidance for the change in its same-store expenses is 2.5%–3.5%. Its normalized FFO are expected to be in the range of $3–$3.2 per share. Its consolidated rental dispositions are expected to be $7.4 billion for 2016, while its rental acquisitions are expected to be $600 million.

Outlook

EQR’s management has painted a bullish picture on the future performance of the company. David Santee, Equity Residential’s chief operating officer, said, “We continue to see favorable fundamentals across all of our markets. At this point in the apartment rental cycle it is much too early to be influenced by the negative headlines that we all read each and every day. We remain focused on what the data tells us and we will respond appropriately.”

Santee continued, “Today our dashboards tell us that not much has changed and that apartment fundamentals, at least for the first quarter, remain strong, leading us to believe that 2016 will be yet another year of performance above long-term trend.”

Equity Residential constitutes 3.4% of the iShares US Real Estate ETF (IYR). Peers AvalonBay Communities (AVB), Essex Property Trust (ESS), and UDR (UDR) have weights of 2.9%, 1.7%, and 1.2%, respectively, in the same portfolio.

Continue to the next part of the series for a discussion on EQR’s valuation.

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