Key Takeaways U.S. apartment rents fell 0.2% annually in August, the first decline since March 2021.Equity Residential reaffirmed full-year same-store revenue growth and high occupancy guidance.AvalonBay reported NOI growth ahead of projections, with CPT performance tracking expectations.The U.S. apartment market, which had demonstrated resilience in recent years, is beginning to show signs of softening. Mild rent cuts, easing occupancy and regional disparities highlight a shifting environment for landlords ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 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) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Two North Riverside P ...

Core Insights - Equity Residential reported Q2 2025 earnings with GAAP EPS of $0.50, exceeding analyst expectations of $0.34 by $0.16, primarily due to property sale gains [1][5] - Revenue reached $768.8 million, a 4.7% increase from the previous year, but slightly below consensus estimates [1][5] - Funds from operations (FFO) per share increased to $0.98, with normalized FFO at $0.99 per share [1][5] Financial Performance - Q2 2025 GAAP EPS was $0.50, up 6.4% from $0.47 in Q2 2024 [2] - Normalized FFO per share rose 2.1% from $0.97 in Q2 2024 to $0.99 in Q2 2025 [2] - FFO per share increased 4.3% from $0.94 in Q2 2024 to $0.98 in Q2 2025 [2] - Revenue for Q2 2024 was $734.2 million, indicating a year-over-year growth of 4.9% [5] Operational Highlights - Weighted average occupancy rate reached 96.6% in the same-store portfolio, exceeding internal projections [6] - Same-store revenue increased by 2.7%, while expense growth was 3.7%, leading to a net operating income (NOI) growth of 2.3% [6] - Leasing trends showed a blended lease rate increase of 3.0%, driven by a 5.2% growth in renewal rates [9] Geographic Performance - San Francisco reported a revenue growth of 4.5% with occupancy exceeding 97% [7] - New York also experienced strong revenue and occupancy improvements [7] - Expansion markets like Denver faced declines in revenue and occupancy due to new housing supply [7] Strategic Initiatives - The company acquired eight apartment properties in suburban Atlanta for $533.8 million and sold one Seattle property for $121.0 million [8] - Management adjusted guidance to reflect a net-neutral capital allocation approach for FY2025, balancing $1.0 billion in acquisitions with $1.0 billion in sales [8] - The company continues to invest in technology to enhance operational efficiency and streamline the resident experience [12] Outlook and Guidance - Management raised full-year 2025 guidance for EPS, FFO per share, and normalized FFO per share, with FFO per share now expected to range from $4.03 to $4.09 [15] - Same-store NOI growth is expected between 2.2% and 2.8%, with physical occupancy forecasted to be 96.4% [15] - Expense guidance was slightly lowered, with the range revised to 3.5% to 4.0% [16]

Core Insights - Equity Residential (EQR) reported second-quarter 2025 normalized funds from operations (FFO) per share of 99 cents, matching the Zacks Consensus Estimate and reflecting a 2.1% year-over-year improvement [1][10] - The company raised its guidance for 2025 normalized FFO per share, indicating strong rental demand and operational performance [10][11] Financial Performance - Rental income for the quarter was $768.8 million, slightly below the consensus estimate of $769.3 million, but up 4.7% year over year [2] - Same-store revenues increased by 2.7% year over year, surpassing the estimate of 1.8%, while same-store expenses rose by 3.7% [3] - Same-store net operating income (NOI) grew by 2.3% year over year, exceeding the estimate of 1.8% [3] - The average rental rate increased by 2.6% year over year to $3,187, with physical occupancy improving by 20 basis points to 96.6% [4] Portfolio Activity - In Q2 2025, EQR sold a property in Seattle for $121 million and acquired a portfolio of eight properties in suburban Atlanta for approximately $533.8 million [6] - The company completed a joint venture development project in New York with 450 apartment units for around $201.2 million, and two wholly owned projects in San Francisco and Denver totaling 495 units for nearly $237.8 million [7] Balance Sheet - EQR ended Q2 2025 with cash and cash equivalents of $31.3 million, down from $39.8 million at the end of Q1 2025 [8] - The net debt to normalized EBITDAre ratio increased to 4.45X from 4.21X in the previous quarter [8] Future Guidance - For Q3 2025, EQR projects normalized FFO per share between 99 cents and $1.03, with the full-year guidance raised to $3.97-$4.03 from $3.90-$4.00 [10] - The full-year guidance includes projections for same-store revenue growth of 2.6-3.2%, expense increases of 3.5-4.0%, and NOI expansion of 2.2-2.8% [11]

Financial Data and Key Metrics Changes - The average household income of residents who moved in during the second quarter increased by 8.5% year-over-year, while rent as a percentage of income remains low at 20% [12] - The blended rate growth was 3%, driven by a strong renewal rate of 5.2%, with 60% of residents renewing their leases [13] - Physical occupancy was reported at 96.6%, although new lease rates were slightly negative due to price sensitivity and continued use of concessions in several markets [14] Business Line Data and Key Metrics Changes - The company experienced strong revenue results in urban markets like New York City and Downtown San Francisco, where supply has declined significantly [7] - The acquisition of an eight-property portfolio in Atlanta was completed, expanding the company's presence in a market expected to see quicker supply declines [9] - The company lowered its acquisition expectations for the year from $1.5 billion to $1 billion, reflecting a competitive transaction market [10] Market Data and Key Metrics Changes - The unemployment rate for the college-educated demographic is at 2.7%, contributing to high resident retention rates [6] - New York continues to show high occupancy and minimal competitive supply, leading to strong blended rate growth [15] - The Washington DC market has seen strong performance but is experiencing a slowdown due to job market uncertainties [16][17] Company Strategy and Development Direction - The company aims to maintain a balanced portfolio of urban and suburban assets to capture changing renter demographics [8] - The focus remains on occupancy and renewal rates, with a strategy to prioritize these over new lease growth in uncertain economic conditions [7] - The company is optimistic about future revenue growth due to declining apartment supply and societal trends favoring renting [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business setup for 2026, expecting normal embedded growth and strong renewal performance against less competitive supply [25] - The company anticipates blended rates to moderate in the third quarter, with expected growth between 2.2% and 2.8% [25] - Management noted that the transaction market is competitive, with cap rates for desirable assets often in the high 4% range, which is lower than the cost of debt [10] Other Important Information - The company is implementing AI technology to improve operational efficiency and customer experience, with pilots showing a reduction in application completion time by over 50% [24] - The company is focused on maintaining strong occupancy and retention rates, with record low resident turnover levels [25] Q&A Session Summary Question: Supply picture and job market impact on growth - Management indicated that reduced competitive supply will likely offset a slowing job market, enhancing pricing power for 2026 [33][34] Question: Portfolio mix and expansion markets - Management confirmed that the portfolio is well-positioned for the next year and a half, with a balanced approach between established and expansion markets [36][38] Question: Concessions usage and future setup - Concessions were used more than expected in the second quarter, but management anticipates a positive setup for next spring due to strong retention [44][47] Question: Differentiation between DC and Northern Virginia - Management noted that while DC is experiencing some softness, Northern Virginia is facing isolated pressures, but demand has rebounded with rate adjustments [48][49] Question: Pricing power and market dynamics - Management stated that improved consumer confidence and job growth are necessary for pricing power, with expectations for easier comps in the second half of the year [85] Question: Impact of algorithmic pricing ban in San Francisco - Management confirmed compliance with regulations and emphasized that supply and demand dynamics are the primary drivers of rent fluctuations, not algorithmic pricing [88][90] Question: Capital allocation strategy - Management remains disciplined in acquisitions, focusing on opportunities that align with their balanced portfolio strategy, while also considering buybacks funded by asset sales [100][102]

Financial Data and Key Metrics Changes - The average household income of residents moving in during Q2 increased by 8.5% year-over-year, while rent as a percentage of income remains low at 20% [11] - The blended rate growth was 3%, driven by a strong renewal rate of 5.2% with 60% of residents renewing [12] - Physical occupancy was reported at 96.6%, with new lease rates slightly negative due to price sensitivity and continued concession use in several markets [12] Business Line Data and Key Metrics Changes - The company experienced strong revenue results in urban markets like New York City and Downtown San Francisco, where supply has declined significantly [6] - The acquisition of an eight-property portfolio in Atlanta was completed, expanding the company's presence in a market expected to see quicker supply declines [8] - The company lowered its acquisition expectations for the year from $1.5 billion to $1 billion, reflecting a competitive transaction market [9] Market Data and Key Metrics Changes - New York continues to show high occupancy and minimal competitive supply, leading to strong blended rate growth [13] - Washington DC has seen high occupancy and good retention, but recent job market uncertainties have led to a slight slowdown [14] - San Francisco reported the best blended rate growth in the portfolio at 5.8%, driven by strong demand and favorable migration patterns [17] Company Strategy and Development Direction - The company aims to maintain a balanced portfolio of urban and suburban assets to capture changing renter demographics [7] - The focus remains on higher-earning renters, with a strategy to prioritize occupancy and renewal rates over new lease growth in uncertain environments [6] - The company is optimistic about future revenue growth due to declining apartment supply and societal trends favoring renting [6] Management's Comments on Operating Environment and Future Outlook - Management noted that the overall unemployment rate is 4.2%, with a lower rate of 2.7% for college-educated individuals, supporting demand for rentals [5] - The company expects blended rates to moderate in the third quarter, with continued strong retention and occupancy [25] - For 2026, management anticipates normal embedded growth and strong renewal performance against a backdrop of reduced competitive supply [25] Other Important Information - The company is implementing AI technology to improve operational efficiency and customer experience, with full deployment expected by the end of the year [23][24] - The company is also focusing on maintaining occupancy in markets like DC and LA, with expectations of increased concession use in certain submarkets [61] Q&A Session Summary Question: What are the growth prospects considering supply and job market conditions? - Management highlighted that reduced competitive supply will enhance pricing power, even with a slowing job market [34][35] Question: How does the company view its portfolio mix between expansion and established markets? - The company remains committed to a balanced portfolio, with a focus on higher-earning customers and a cautious approach to expansion markets [36][39] Question: Can you elaborate on concession use this leasing season? - Concession use was higher than expected, averaging about seven days per move-in, but management anticipates a reduction as markets stabilize [44][46] Question: What are the expectations for the DC and LA markets in the second half of the year? - Management plans to maintain occupancy in DC while expecting continued concession use in LA, particularly in certain submarkets [60][62] Question: How does the company view pricing power and market dynamics? - Management indicated that improved consumer confidence and job growth are necessary for pricing power, with expectations of easier comps in the second half of the year [87][88] Question: What is the impact of AI on demand and job creation? - The company sees potential benefits from AI in tech hubs like San Francisco, but the overall impact on entry-level jobs remains uncertain [99][100] Question: How does the company prioritize capital allocation? - The company is focused on acquisitions if priced correctly, while also considering buybacks funded by asset sales, and maintaining a small development platform [102][106]

Group 1 - Equity Residential (NYSE: EQR) has underperformed over the past year, with a loss of 11% in stock value due to rising concerns about rental inflation [1] - The stock market has shown recovery from previous losses, indicating a potential shift in investor sentiment [1] - The article emphasizes a contrarian investment approach based on macroeconomic views and specific stock turnaround stories to achieve favorable risk/reward profiles [1]

Core Viewpoint - Equity Residential (EQR) reported quarterly funds from operations (FFO) of $0.99 per share, matching the Zacks Consensus Estimate and showing an increase from $0.97 per share a year ago [1] - The company’s revenues for the quarter ended June 2025 were $768.83 million, slightly missing the Zacks Consensus Estimate by 0.06%, but up from $734.16 million year-over-year [2] Group 1: Financial Performance - The FFO of $0.99 per share is consistent with the previous quarter's expectations, where the company had a surprise of +2.15% by reporting $0.95 instead of the expected $0.93 [1] - Over the last four quarters, Equity Residential has exceeded consensus FFO estimates only once [1] - The company has surpassed consensus revenue estimates two times in the last four quarters [2] Group 2: Market Performance - Equity Residential shares have declined approximately 12.6% since the beginning of the year, contrasting with the S&P 500's gain of 6.1% [3] - The outlook for the stock's immediate price movement will largely depend on management's commentary during the earnings call [3] Group 3: Future Expectations - The current consensus FFO estimate for the upcoming quarter is $1.00, with projected revenues of $777.83 million, and for the current fiscal year, the estimate is $3.97 on $3.09 billion in revenues [7] - The estimate revisions trend for Equity Residential was favorable prior to the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Group 4: Industry Context - The REIT and Equity Trust - Residential industry is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

[Earnings Release](index=4&type=section&id=Earnings%20Release) [Second Quarter 2025 Results & Highlights](index=4&type=section&id=Second%20Quarter%202025%20Results%20%26%20Highlights) Equity Residential reported strong Q2 2025 results, with diluted EPS of $0.50 and Normalized FFO per share of $0.99, raising full-year guidance | | Quarter Ended June 30, | | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | | | | **Earnings Per Share (EPS)** | $0.50 | $0.47 | $0.03 | 6.4% | | **Funds from Operations (FFO) per share** | $0.98 | $0.94 | $0.04 | 4.3% | | **Normalized FFO (NFFO) per share** | $0.99 | $0.97 | $0.02 | 2.1% | | | **Six Months Ended June 30,** | | | | | | **2025** | **2024** | | | | **Earnings Per Share (EPS)** | $1.18 | $1.24 | $(0.06) | (4.8%) | | **Funds from Operations (FFO) per share** | $1.92 | $1.80 | $0.12 | 6.7% | | **Normalized FFO (NFFO) per share** | $1.94 | $1.91 | $0.03 | 1.6% | - CEO Mark J. Parrell highlighted sustained demand and a financially resilient customer base, with the company's unique exposure to low-supply urban centers like New York and San Francisco driving current results[10](index=10&type=chunk) - For Q2 2025 vs. Q2 2024, same-store revenues increased **2.7%**, expenses increased **3.7%**, and Net Operating Income (NOI) increased **2.3%**[11](index=11&type=chunk) - During Q2 2025, the company acquired a portfolio of eight properties (2,064 units) in suburban Atlanta for approximately **$533.8 million** and sold one property in Seattle for **$121.0 million**[11](index=11&type=chunk) [Full Year 2025 Guidance](index=5&type=section&id=Full%20Year%202025%20Guidance) Full-year 2025 guidance was updated, raising same-store revenue and NOI midpoints, increasing Normalized FFO per share, and lowering EPS | | Revised | Previous | Change at Midpoint | | :--- | :--- | :--- | :--- | | **Same Store Revenue change** | 2.6% to 3.2% | 2.25% to 3.25% | 0.15% | | **Same Store Expense change** | 3.5% to 4.0% | 3.5% to 4.5% | (0.25%) | | **Same Store NOI change** | 2.2% to 2.8% | 1.4% to 3.0% | 0.3% | | **EPS** | $2.96 to $3.02 | $3.00 to $3.10 | $(0.06) | | **FFO per share** | $4.03 to $4.09 | $3.87 to $3.97 | $0.14 | | **Normalized FFO per share** | $3.97 to $4.03 | $3.90 to $4.00 | $0.05 | Factors Contributing to $0.05 Increase in Normalized FFO per Share Midpoint | Factor | Expected Positive/(Negative) Impact (dollars) | | :--- | :--- | | Residential same store NOI | $0.02 | | Lease-Up NOI | $0.01 | | 2025 and 2024 transaction activity impact on NOI, net | $(0.02) | | Interest expense, net | $0.03 | | Other items | $0.01 | | **Net** | **$0.05** | [Investment and Capital Markets Activity](index=7&type=section&id=Investment%20and%20Capital%20Markets%20Activity) Q2 2025 saw significant transaction activity, including a $533.8 million Atlanta acquisition and $500.0 million unsecured note issuance - Acquired a portfolio of eight properties (2,064 units) in Atlanta for approximately **$533.8 million** at a weighted average Acquisition Cap Rate of **5.1%**[22](index=22&type=chunk) - Sold one property (289 units) in Seattle for approximately **$121.0 million** at a Disposition Yield of **4.9%**[23](index=23&type=chunk) - Completed two wholly-owned development projects in San Francisco and Denver (495 units total) and one joint venture project in New York (450 units)[24](index=24&type=chunk) - Issued **$500.0 million** of 7-year unsecured notes at a **4.95%** coupon, using proceeds to pay off **$450.0 million** of **3.375%** notes that matured in June 2025[25](index=25&type=chunk) [Third Quarter 2025 Guidance](index=7&type=section&id=Third%20Quarter%202025%20Guidance) Q3 2025 guidance projects Normalized FFO per share between $0.99 and $1.03, driven by same-store NOI growth and transaction impacts | | Q3 2025 Guidance | | :--- | :--- | | **EPS** | $0.78 to $0.82 | | **FFO per share** | $1.08 to $1.12 | | **Normalized FFO per share** | $0.99 to $1.03 | Factors Contributing to $0.02 Increase in NFFO per Share from Q2 2025 Actuals to Q3 2025 Guidance Midpoint | Factor | Expected Positive/(Negative) Impact (dollars) | | :--- | :--- | | Residential same store NOI | $0.01 | | 2025 and 2024 transaction activity impact on NOI, net | $0.01 | | Interest expense, net | $(0.01) | | Corporate overhead | $0.01 | | **Net** | **$0.02** | [Financial Statements](index=9&type=section&id=Financial%20Statements) [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2025 total revenues increased to $768.8 million, with net income available to common shares rising to $192.0 million ($0.50 per diluted share) | (In thousands) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | | :--- | :--- | :--- | | **Rental income** | $768,827 | $734,163 | | **Total expenses** | $542,812 | $508,609 | | **Net gain on sales of real estate** | $58,280 | $39,809 | | **Net income** | $198,785 | $183,555 | | **Net income available to Common Shares** | $192,001 | $177,128 | | **Earnings per share – diluted** | $0.50 | $0.47 | [Consolidated Statements of FFO and NFFO](index=10&type=section&id=Consolidated%20Statements%20of%20FFO%20and%20NFFO) Q2 2025 FFO increased to $382.6 million ($0.98 per share), and NFFO rose to $386.8 million ($0.99 per share), with detailed reconciliations provided | (In thousands except per share data) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | | :--- | :--- | :--- | | **Net income** | $198,785 | $183,555 | | **FFO available to Common Shares and Units** | $382,633 | $366,348 | | **FFO per share – diluted** | $0.98 | $0.94 | | **Normalized FFO available to Common Shares and Units** | $386,790 | $380,142 | | **Normalized FFO per share – diluted** | $0.99 | $0.97 | [Consolidated Balance Sheets](index=11&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $21.0 billion, with $9.5 billion in liabilities and $11.2 billion in total equity | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Investment in real estate, net** | $19,760,201 | $19,558,328 | | **Total assets** | $21,027,514 | $20,834,176 | | **Total liabilities** | $9,501,134 | $9,249,829 | | **Total equity** | $11,208,475 | $11,245,784 | | **Total liabilities and equity** | $21,027,514 | $20,834,176 | [Portfolio and Operations](index=12&type=section&id=Portfolio%20and%20Operations) [Portfolio Summary & Rollforward](index=12&type=section&id=Portfolio%20Summary%20%26%20Rollforward) As of June 30, 2025, the portfolio included 319 properties and 86,422 units, with established markets contributing 89% of stabilized NOI - The total portfolio consists of **319 properties** with **86,422 apartment units**. Established Markets account for **89.0%** of stabilized budgeted NOI, while Expansion Markets account for **11.0%**[40](index=40&type=chunk) | Market | Properties | Apartment Units | % of Stabilized Budgeted NOI | Average Rental Rate | | :--- | :--- | :--- | :--- | :--- | | **Southern California** | 80 | 20,660 | 24.2% | $3,006 | | **San Francisco** | 41 | 11,540 | 15.0% | $3,451 | | **Washington, D.C.** | 43 | 13,845 | 14.9% | $2,842 | | **New York** | 35 | 8,986 | 14.4% | $4,730 | | **Boston** | 27 | 7,237 | 11.1% | $3,659 | | **Seattle** | 40 | 8,459 | 9.4% | $2,676 | | **Expansion Markets** | 53 | 15,695 | 11.0% | $2,064 | Q2 2025 Portfolio Rollforward | | Properties | Apartment Units | | :--- | :--- | :--- | | **3/31/2025** | 312 | 84,648 | | **Acquisitions** | 8 | 2,064 | | **Dispositions** | (1) | (289) | | **6/30/2025** | 319 | 86,422 | [Same Store Results](index=14&type=section&id=Same%20Store%20Results) Q2 2025 same-store NOI grew 2.3% year-over-year, driven by revenue increases and improved occupancy, with varied market performance [Overall Same Store Performance](index=14&type=section&id=Overall%20Same%20Store%20Performance) Overall same-store performance showed Q2 2025 revenues up 2.7% and NOI up 2.3% year-over-year, with occupancy at 96.6% Same Store Results (Q2 2025 vs. Q2 2024) | Metric | % Change | | :--- | :--- | | Revenues | 2.7% | | Expenses | 3.7% | | NOI | 2.3% | | Physical Occupancy | 96.6% vs. 96.3% | Same Store Results (Q2 2025 vs. Q1 2025) | Metric | % Change | | :--- | :--- | | Revenues | 1.0% | | Expenses | (2.7%) | | NOI | 2.8% | | Physical Occupancy | 96.5% vs. 96.4% | - Same-store residential bad debt, net of governmental assistance, was **1.0%** of revenues in Q2 2025, an improvement from **1.1%** in Q2 2024[61](index=61&type=chunk) [Same Store Residential Results by Market](index=17&type=section&id=Same%20Store%20Residential%20Results%20by%20Market) Q2 2025 same-store residential NOI growth was strong in Washington, D.C., New York, and San Francisco, with a total blended lease rate growth of 3.0% Same Store Residential NOI Growth by Market (Q2 2025 vs. Q2 2024) | Markets/Metro Areas | Revenue Growth | Expense Growth | NOI Growth | | :--- | :--- | :--- | :--- | | Washington, D.C. | 4.5% | 1.9% | 5.7% | | New York | 4.3% | 3.4% | 4.9% | | San Francisco | 4.5% | 6.0% | 3.9% | | Seattle | 3.1% | 2.0% | 3.5% | | Southern California | 1.6% | 5.0% | 0.4% | | Denver | (3.8%) | (0.8%) | (5.0%) | | **Total** | **2.9%** | **3.7%** | **2.5%** | Same Store Residential Net Effective Lease Pricing Statistics | | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | New Lease Change | (0.1%) | (2.2%) | 0.1% | | Renewal Rate Achieved | 5.2% | 4.9% | 5.0% | | Blended Rate | 3.0% | 1.8% | 2.9% | [Same Store Operating Expenses](index=21&type=section&id=Same%20Store%20Operating%20Expenses) Total same-store operating expenses increased 3.7% in Q2 2025, primarily driven by higher utilities, repairs and maintenance, and other on-site costs Total Same Store Operating Expenses Breakdown (Q2 2025 vs. Q2 2024) | Expense Category | $ Change (thousands) | % Change | % of Q2 2025 Expenses | | :--- | :--- | :--- | :--- | | Real estate taxes | $1,600 | 1.7% | 41.0% | | On-site payroll | $975 | 2.3% | 18.7% | | Utilities | $2,633 | 8.3% | 15.0% | | Repairs and maintenance | $1,761 | 5.7% | 14.2% | | Insurance | $68 | 0.7% | 4.0% | | **Total** | **$8,116** | **3.7%** | **100.0%** | - The increase in utilities was driven by higher commodity prices and usage, while repairs and maintenance costs rose due to the implementation of resident technology initiatives like bulk Wi-Fi[79](index=79&type=chunk) [Debt and Capital](index=22&type=section&id=Debt%20and%20Capital) [Debt Summary & Covenants](index=22&type=section&id=Debt%20Summary%20%26%20Covenants) As of June 30, 2025, total debt was $8.37 billion with an average rate of 3.74%, and the company remained compliant with all debt covenants | Debt Type | Balance (thousands) | % of Total | Weighted Average Rate | Weighted Average Maturities (years) | | :--- | :--- | :--- | :--- | :--- | | Secured | $1,594,765 | 19.0% | 3.77% | 6.4 | | Unsecured | $6,777,061 | 81.0% | 3.73% | 7.1 | | **Total** | **$8,371,826** | **100.0%** | **3.74%** | **7.0** | | Selected Credit Ratios | June 30, 2025 | | :--- | :--- | | Total debt to Normalized EBITDAre | 4.49x | | Net debt to Normalized EBITDAre | 4.45x | | Unencumbered NOI as a % of total NOI | 90.4% | - The company is in compliance with its most restrictive financial covenants, including Debt to Adjusted Total Assets at **28.0%** (vs. a limit of 60%) and Total Unencumbered Assets to Unsecured Debt at **464.8%** (vs. a requirement of at least 125%)[91](index=91&type=chunk) [Capital Structure](index=25&type=section&id=Capital%20Structure) As of June 30, 2025, total market capitalization was $34.8 billion, comprising $8.4 billion in debt and $26.4 billion in equity | Capital Component | Value (thousands) | % of Total Market Cap | | :--- | :--- | :--- | | Total Debt | $8,371,826 | 24.0% | | Total Equity | $26,445,342 | 76.0% | | **Total Market Capitalization** | **$34,817,168** | **100.0%** | [Common Share and Unit Weighted Average Amounts Outstanding](index=26&type=section&id=Common%20Share%20and%20Unit%20Weighted%20Average%20Amounts%20Outstanding) The weighted average diluted common shares and units outstanding for Q2 2025 was 391.5 million, used for FFO and NFFO calculations | | Q2 2025 | | :--- | :--- | | **Weighted Average Common Shares - basic** | 379,507,960 | | **Total Common Shares and Units - diluted (for FFO)** | 391,497,694 | [Other Disclosures](index=27&type=section&id=Other%20Disclosures) [Development and Lease-Up Projects](index=28&type=section&id=Development%20and%20Lease-Up%20Projects) The total development pipeline includes 3,286 apartment units with a budgeted capital cost of $1.32 billion, contributing to future growth | Project Status | No. of Apartment Units | Total Budgeted Capital Cost (thousands) | | :--- | :--- | :--- | | **Consolidated** | 935 | $469,999 | | **Unconsolidated** | 2,351 | $846,407 | | **Total Development Projects** | **3,286** | **$1,316,406** | - The total development pipeline contributed **$8.2 million** in NOI during the first six months of 2025, primarily from projects that have completed construction but are not yet stabilized[104](index=104&type=chunk) [Residential Capital Expenditures](index=29&type=section&id=Residential%20Capital%20Expenditures) Total consolidated residential capital expenditures for H1 2025 were $138.4 million, including recurring and NOI-enhancing investments For the Six Months Ended June 30, 2025 (Total Consolidated Properties) | Expenditure Type | Amount (thousands) | | :--- | :--- | | Recurring Capital Expenditures | $81,855 | | NOI-Enhancing Expenditures | $56,588 | | **Total Capital Expenditures** | **$138,443** | - Renovation expenditures on **1,355** same-store apartment units during the first half of 2025 averaged approximately **$30,000 per unit**[108](index=108&type=chunk) [Reconciliations and Definitions](index=30&type=section&id=Reconciliations%20and%20Definitions) This section provides detailed reconciliations for non-GAAP financial measures and definitions for key industry and company-specific terms - Provides a reconciliation of Net Income to Normalized EBITDAre, showing a trailing twelve-month Normalized EBITDAre of **$1.86 billion** as of June 30, 2025[113](index=113&type=chunk) - Details the specific adjustments made to reconcile FFO to Normalized FFO, such as excluding pursuit cost write-offs and non-operating asset gains/losses[116](index=116&type=chunk) - Includes a reconciliation of reported and expected EPS to FFO and Normalized FFO per share, clarifying the impact of depreciation and gains on sales[155](index=155&type=chunk) - Offers definitions for key performance indicators and non-GAAP measures, including FFO, NOI, EBITDAre, Same Store Results, and various leasing metrics, to provide context for the report's data[126](index=126&type=chunk)[146](index=146&type=chunk)[157](index=157&type=chunk)

Core Insights - The concept of "return to the office" is misleading as many returning workers are not the same individuals who left during COVID, indicating a significant shift in the workforce [2] - Major cities are experiencing a resurgence in office attendance, with June being the fourth-best month for in-office visits since COVID, although visits are still down about 27% compared to June 2019 [4] Company Analysis - Many companies that are mandating a return to the office lack sufficient space due to lease cancellations in 2021, such as Pinterest and Meta Platforms [3] - Easterly Government Properties REIT (DEA) is identified as a poor investment choice due to its high long-term debt of $1.6 billion, which exceeds its market cap by approximately $600 million, and a recent 32% dividend cut [6][8] - SL Green Realty (SLG) is a more appealing option, with a 5.1% dividend yield and a well-covered payout at 53% of the forecasted funds from operations for 2025, although its focus on New York and occupancy rate of around 91% raise some concerns [9][11] - Equity Residential (EQR) is highlighted as a top investment choice, yielding 4.1% and managing nearly 85,000 units in major markets, with a strong occupancy rate of 96.2% and rising rental rates expected to increase by 2% to 3% this year [12][15] - EQR has effectively reduced its long-term debt to $7.85 billion, which is only 31% of its market cap, and is strategically upgrading its portfolio by selling older properties and acquiring newer ones [16][17]