Equity Residential (EQR) yesterday reported revenues of $492.7 million, down 3.6% year over year.
 
On a same store basis (third quarter 2009 vs. third quarter 2008 comparison which includes 119,121 apartment units), revenues decreased 3.9% due to a 3.2% decrease in average rental rates and a 0.7% decrease in occupancy to 93.7%.

Fund from operations (FFO), a widely used metric to gauge the performance of REITs and obtained after adding depreciation and other non-cash expenses to net income, was 53 cents per share during the quarter compared to 64 cents per share in the year-ago quarter. The year-over-year decrease in FFO was primarily due to a decline in operating income.

During the reported quarter, the company sold 24 consolidated properties, consisting of 4,620 apartment units, for an aggregate sale price of $381.1 million. Management expects to raise approximately $900 million from disposal of properties. The company plans to use the proceeds from these asset sales along with $1.36 billion under its revolving credit facility to add high quality properties to its portfolio.

Last month, Equity announced that it will issue 17 million common shares from time to time but the company has not raised any shares yet through this program.

Going forward, management expects FFO per share between 49 cents and 53 cents in the fourth quarter. Management also revised its guidance for full year. The company now expects revenues on a same store basis to decline 3% compared to the earlier guidance of a decline between 3.5% and 3%. FFO per share is now projected to come between $2.18 and $2.22 compared to the previous guidance of $2.10 – $2.20.

We expect multi-family fundamentals to continue to deteriorate in 2009 due to massive job losses across the country. In this recessionary environment, we like the larger, well-capitalized and geographically diverse companies, who are better equipped to withstand the economic downturn. EQR has a diverse portfolio of properties located in some of the best long-term apartment markets in the country. We think EQR’s geographic diversification will help the company better withstand the recession that will continue well into 2010.
 
Additionally, EQR has a strong balance sheet with plenty of cash and full availability on its line. The company has enough liquidity to fund debt maturities through 2010. Hence, we maintain our buy rating on EQR due to strong liquidity position. In addition, we think multi family is one of the safest real estate sectors in 2009.

Based in Chicago, Illinois, EQR is a fully integrated real estate investment trust (REIT). It is the largest publicly traded multi-family real estate operator in the U.S.

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