Equity Residential Earnings: Property Expenses Lower Than Anticipated but Corporate Expenses Higher

Second-quarter results for Equity Residential were relatively in line with our expectations, leading us to reaffirm our $79 fair value estimate for the no-moat company. Same-store occupancy improved 10 basis points sequentially to 96.4%, higher than our 95.9% estimate. Average rental rates for the same-store portfolio were up 2.5% year over year in the second quarter, in line with our 2.6% estimate, leading to same-store revenue growth of 2.9% that matched our estimate for the quarter. Meanwhile, same-store operating expenses were up 2.7%, which was below our estimate of 4.0% expense growth. As a result, Equity Residential reported same-store net operating income, or NOI, growth of 3.0% that was slightly better than our 2.5% growth estimate. However, general and administrative costs were about $6 million higher than we anticipated. Therefore, Equity Residential reported normalized funds from operations, or FFO, of $0.97 per share in the second quarter that came in a penny below our $0.98 estimate.