Equity Residential(US:EQR)2022-02-02 20:47Financial Data and Key Metrics Changes - The company anticipates a 9% growth in same-store revenue at the midpoint for 2022, with normalized funds from operations expected to grow by about 15%, marking the best performance in its history [5][6] - Cash flow is projected to grow strongly, driven by leases signed at higher rates and the ability to reset leases to current market levels [6][7] - The company reported the lowest resident turnover in its history, with record levels of lease renewals averaging nearly 11% increases in the fourth quarter [16][19] Business Line Data and Key Metrics Changes - The company had a very active year with $1.7 billion in acquisitions and dispositions, focusing on optimizing its portfolio by selling older assets and acquiring newer ones [7][8] - The average age of acquired properties is two years, compared to 30 years for disposed assets, indicating a strategic shift towards newer, less capital-intensive properties [8][12] - Development activities included $450 million in new projects commenced in 2021, with expectations to deliver high-quality properties in key markets [9][10] Market Data and Key Metrics Changes - The company is currently 96.5% occupied, with expectations of achieving 13.5% new lease growth in January [16][19] - Boston is expected to produce approximately 10% same-store revenue growth in 2022, while New York is projected to be the best-performing market with around 13% growth [20][21] - Seattle and San Francisco are slower to recover, with occupancy rates at 93% and 96% respectively, and expected revenue growth of 10% and 7% in 2022 [22][25] Company Strategy and Development Direction - The company is reshaping its portfolio to reflect demand trends, focusing on urban and suburban markets where affluent renters are moving [10][12] - The refined portfolio is expected to have about one-third of its assets in the Northeastern markets, one-third in California, and the remaining third in a diagonal from Seattle to Atlanta [12] - The company aims to balance its investments between urban and suburban markets while continuing to attract high-quality renters [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges potential economic challenges such as high inflation and supply chain disruptions but remains optimistic about revenue growth due to signed leases at higher rates [6][7] - The company expects to continue capturing rental rate increases through lease resets, providing a natural hedge against inflation [7][19] - Management is confident in the demand for apartment living, particularly from Generation Z and millennials, as they seek affordable rental options [5][6] Other Important Information - The company has implemented innovative technologies to enhance operational efficiency, including AI for communication and self-guided tours, which have contributed to minimizing expense growth [28][30] - The company expects to see a reduction in bad debt, projecting a level around 1.5% for the year, down from higher levels during the pandemic [81][82] Q&A Session Summary Question: How does the company view the $2 billion in acquisitions and dispositions? - The company believes that the assets being acquired will yield higher IRRs over time due to better rent growth and lower capital demands [35][36] Question: What is the expectation for government rental assistance in 2022? - The company expects to receive about half of the rental assistance it received in 2021, which was approximately $34 million [39] Question: How does the company approach underwriting growth in different markets? - The company sees varying growth potential in Sunbelt versus Coastal markets, with a focus on balancing risks and opportunities [44][45] Question: What is the expected impact of concessions on new and renewal leases? - The company anticipates that new lease rates will outperform renewal rates in the early part of the year, with a convergence expected later [52][54] Question: How does the company view bad debt moving forward? - The company expects bad debt to be lower in 2022 compared to 2021, projecting a range of $15 million to $20 million in bad debt [82]