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What changed in Equity Residential's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Equity Residential's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+265 added−223 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Equity Residential's 2023 10-K

265 paragraphs added · 223 removed · 197 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThis includes the development of our Overcoming Bias in Performance Review Toolkit designed to provide practical bias interrupters and guidelines in the performance evaluation process that interrupt and correct unconscious bias. • We strategically identify opportunities to increase the diversity of our talent pipeline at all levels, including by actively seeking to source a pool of diverse candidates for mid-management and above positions in the communities where we serve, such as from Project Destined, Fannie Mae’s Future Housing Leaders, Howard University, Roosevelt University and Evanston Scholars. • We employ interns from universities across the nation and local colleges to provide pathways for students of various backgrounds interested in real estate. • The Company was named the Gold Nareit 2021 Diversity, Equity and Inclusion award recipient in recognition of the Company’s demonstration of a strong commitment to the advancement of diversity and inclusion both within the Company and in the REIT and publicly traded real estate industry.
Biggest changeThis includes the development of our Overcoming Bias in Performance Review Toolkit, which is designed to provide practical bias interrupters and guidelines to improve fairness in the performance evaluation process. • We strategically identify opportunities to increase the diversity of our talent pipeline at all levels, including by actively seeking to source a pool of diverse candidates for mid-management and above positions in the communities where we serve, such as from Project Destined, Fannie Mae’s Future Housing Leaders, Howard University, Roosevelt University and Evanston Scholars. • We employ interns from universities across the nation and local colleges to provide pathways for students of various backgrounds interested in real estate.
Whether physical, mental, financial, career, social or community wellbeing, Equity Residential offers benefits to help meet our employee needs. • Physical Wellbeing: Equity Residential is focused on providing benefits that help our employees achieve balance and address good health proactively, with coverage for emergencies and ongoing needs that can arise as well.
Whether physical, mental, financial, career, social or community wellbeing, Equity Residential offers benefits to help meet our employee needs. • Physical Wellbeing: Equity Residential is focused on providing benefits that help our employees achieve balance and address good health proactively, with coverage for ongoing needs and emergencies that can arise as well.
This creates the ability to raise rents more readily in good economic times and reduces risk during downturns. Many of these workers are employed in the fields of Science, Technology, Engineering and Mathematics, or STEM jobs, as well as financial services, medical, legal and other higher-earning professions. • Significant apartment demand that meets new apartment supply.
This creates the ability to raise rents more readily in good economic times and reduces risk during downturns. Many of these affluent workers are employed in the fields of Science, Technology, Engineering and Mathematics, or STEM jobs, as well as financial services, medical, legal and other higher-earning professions. • Significant apartment demand that meets new apartment supply.
Our markets attract and create high quality jobs that are often focused in growing areas of the knowledge-based economy. These jobs result in the significant presence and growth in renters that work in the highest earning sectors of the economy, are not rent burdened and are attracted to our type of properties.
Our markets attract and create high quality jobs that are often focused in growing areas of the knowledge-based economy. These jobs result in the significant presence and growth in affluent renters that work in the highest earning sectors of the economy, are not rent burdened and are attracted to our type of properties.
The Company continues to allocate capital in order to optimize performance by balancing current cash flow growth with long-term capital appreciation. We have done so by adding expansion markets to our portfolio when those markets meet many of the same characteristics listed above. Expansion into these markets of Denver, Atlanta, Dallas/Ft.
The Company continues to allocate capital in order to optimize performance by balancing current cash flow growth with long-term capital appreciation. We have done so by adding expansion markets to our portfolio when certain submarkets in those markets meet many of the same characteristics listed above. Expansion into these markets of Denver, Atlanta, Dallas/Ft.
The Company contributes funds to further support employees who experience unforeseen or catastrophic hardship. We are proud that this program allows yet another avenue for us to tangibly demonstrate our One Team culture by ensuring that employees feel safe and supported during extreme circumstances.
The Company contributes funds to further support employees who experience unforeseen or catastrophic hardship. We are proud that this program allows yet another avenue for us to tangibly demonstrate a one team culture by ensuring that employees feel safe and supported during extreme circumstances.
Together, we believe our program drives long-term asset value, responsibly manages risks and engages our communities, residents, employees and shareholders as part of our broader ESG strategy and commitment to good corporate citizenship and maximizing investment performance.
Together, we believe our program drives long-term asset value, responsibly manages risks and engages our communities, residents, employees and shareholders as part of our broader sustainability strategy and commitment to good corporate citizenship and maximizing investment performance.
Investment Strategy The Company’s long-term strategy is to invest in apartment communities located in strategically targeted markets with the goal of maximizing our risk-adjusted total returns and balancing current cash flow generation with long-term capital appreciation. We seek to meet this goal by investing in markets that are characterized by conditions favorable to multifamily property operations over the long-term.
Investment Strategy The Company’s long-term strategy is to invest in apartment properties located in strategically targeted markets with the goal of maximizing our risk-adjusted total returns by balancing current cash flow generation with long-term capital appreciation. We seek to meet this goal by investing in markets that are characterized by conditions favorable to multifamily property operations over the long-term.
The Company remains committed to development as a driver of external growth but acknowledges its incremental risk, particularly in higher inflationary cost environments, when evaluating it as a method of expansion. 7 Table of Contents Competition All of the Company’s properties are located in developed areas with multiple housing choices, including other multifamily properties.
The Company remains committed to development as a driver of external growth but acknowledges its incremental risk, particularly in higher inflationary cost environments, when evaluating it as a method of expansion. Competition All of the Company’s properties are located in developed areas with multiple housing choices, including other multifamily properties.
We utilize technology and other innovative methods of engagement with our residents to foster relationships and community, improve the resident experience and operate our business more efficiently. We pair that with disciplined balance sheet management that enhances returns and value creation while maintaining flexibility to take advantage of future opportunities.
We utilize technology and other innovative methods of engagement with our residents to foster relationships and community, improve the resident experience and operate our business more efficiently. We pair that with disciplined balance sheet management that enhances returns and value creation 6 Table of Contents while maintaining flexibility to take advantage of future opportunities.
Our core principles, affectionately named “ Ten Ways to Be a Winner” , guide our behavior as individuals and collectively as a team, helping us in our goal to deliver market-leading performance.
Our core principles, affectionately named “ Ten Ways to Be a Winner,” guide our behavior as individuals and collectively as a team, helping us in our goal to deliver market-leading performance.
Pay Equity • In order to develop, attract and retain the best employees, we are committed to providing a total compensation package which is market-based, performance driven, fair and internally equitable. • Our goal is to be competitive both within the general employment market as well as with our competitors in the real estate industry, with our strongest performers being paid more. • Base pay is reviewed annually, as is Equity Residential’s compensation framework, by partnering with managers to create and update job descriptions that reflect the duties, skills, experience and education required to perform the role, and then benchmarking the Company’s pay practices and budget as well as our jobs against third-party compensation surveys to determine the market value of the job. • During the year-end performance evaluation process, managers review and calibrate compensation for all employees on their team, in an effort to ensure equity around our pay practices and allow us to reward and motivate our top talent. 9 Table of Contents Employee Engagement • Employee engagement and experience are extremely important at Equity Residential.
Pay Equity • In order to develop, attract and retain the best employees, we are committed to providing a total compensation package which is market-based, performance driven, fair and internally equitable. • Our goal is to be competitive both within the general employment market as well as with our competitors in the real estate industry, with our strongest performers being paid more. • Base pay is reviewed annually, as is Equity Residential’s compensation framework, by partnering with managers to create and update job descriptions that reflect the duties, skills, experience and education required to perform the role, and then benchmarking the Company’s pay practices and budget as well as our jobs against third-party compensation surveys to determine the market value of the job. • During the year-end performance evaluation process, managers review and calibrate compensation for all employees on their team, in an effort to ensure equity around our pay practices and allow us to reward and motivate our top talent.
Our communications are designed to highlight awareness-building and our resources are centered around culturally competent care that scales toward employees’ needs. This includes educational resources for maintaining mental health, online mobile apps to address or discuss ways to improve, and partnerships with virtual care providers and support networks for those who need immediate and critical support.
Our communications are designed to highlight awareness-building and our resources are centered around culturally competent care that scales toward employees’ 10 Table of Contents needs. This includes educational resources for maintaining mental health, online mobile apps to address or discuss ways to improve, and partnerships with virtual care providers and support networks for those who need immediate and critical support.
Regulatory Considerations See Item 1A, Risk Factors , for information concerning the potential effects of governmental regulations, including environmental regulations, on our operations. 10 Table of Contents
Regulatory Considerations See Item 1A, Risk Factors , for information concerning the potential effects of governmental regulations, including environmental regulations, on our operations. 11 Table of Contents
We encourage our employees to Test their Limits, push the boundaries of their comfort zones and seek new challenges through several learning resources and courses, in addition to tuition reimbursement.
We encourage our employees to Test their Limits (one of the Ten Ways), push the boundaries of their comfort zones and seek new challenges through several learning resources and courses, in addition to tuition reimbursement.
Diversity and Inclusion • Our commitment to diversity and inclusion starts with a highly skilled and diverse Board of Trustees. • We are committed to hiring a diverse workforce and also fostering a safe, inclusive and productive workplace for all employees.
Diversity and Inclusion • Our commitment to diversity and inclusion starts with a highly skilled and diverse Board of Trustees. • We are committed to fostering a safe, inclusive and productive workplace for all employees.
Training and Development • We believe a successful workplace is one where employees constantly learn and grow. Our HR Transformation Learning & Development (“L&D”) team is interspersed throughout our markets and works regularly with employees to expand their knowledge and skills.
Training and Development • We believe a successful workplace is one where employees constantly learn and grow. Our HR Transformation Learning & Development (“L&D”) team works regularly with leaders and employees to expand their knowledge and skills.
Our Diversity & Inclusion Index score of 85% demonstrated an increase in employee favorability for the initiatives taking place and a greater sense of belonging. • Executive leaders are assessed annually on their leadership results for diversity and inclusion, engagement and manager completion of Ethics and Positive Workplace training, which for 2022 were measured by an employee experience survey and course completion rates.
Our Diversity & Inclusion Index score of 84% demonstrated significant employee favorability for the initiatives taking place and a greater sense of belonging. • Executive leaders are assessed annually on their leadership results for diversity and inclusion, engagement and manager completion of Ethics and Positive Workplace training, which for 2023 were measured by an employee experience survey and course completion rates.
Worth and Austin. We believe our markets are knowledge centers of the U.S. economy that draw talented workers and employers that drive economic growth in the United States.
We believe our markets are knowledge centers of the U.S. economy that draw employers and their talented affluent workers that drive economic growth in the United States.
References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. EQR is the general partner of, and as of December 31, 2022 owned an approximate 96.8% ownership interest in, ERPOP.
References to the “Operating Partnership” mean collectively ERPOP and those entities/subsidiaries owned or controlled by ERPOP. EQR is the general partner of, and as of December 31, 2023 owned an approximate 97.0% ownership interest in, ERPOP.
Our Employee Experience (EX) Survey measures employee engagement and diversity and inclusion, among other components of the employee experience. • Our 2022 engagement score of 78% favorability is very strong, especially given changes in employee expectations in the wake of the pandemic.
Employee Engagement • Employee engagement and experience are extremely important at Equity Residential. Our Employee Experience (EX) Survey measures employee engagement and diversity and inclusion, among other components of the employee experience. • Our 2023 engagement score of 78% favorability is very strong, especially given changes in employee expectations in the wake of the pandemic.
In recent years, we have created dedicated Diversity and Inclusion staffing to oversee this crucial work. • To further prioritize the importance of our diversity and inclusion efforts, our executives’ annual compensation goals include an evaluation of objective metrics measuring our Company’s progress in this regard. • We have the benefit of a diverse workforce, of which 63.0% currently identify as ethnically diverse.
In recent years, we have created dedicated Diversity and Inclusion staffing to oversee this crucial work. • To further prioritize the importance of our diversity and inclusion efforts, our executives’ annual compensation goals include an evaluation of objective metrics measuring our Company’s progress in this regard. • We have the benefit of a diverse workforce, of which over 60% currently identify as ethnically diverse. 9 Table of Contents • A diversity and inclusion lens is embedded in our talent review processes.
We believe we have created an industry‐leading operating platform and balance sheet to run our properties. Our employees are focused on delivering remarkable customer service to our residents so they will stay with us longer, be willing to pay higher rent for a great experience and will tell others about how much they love living in an Equity Residential property.
Our employees are focused on delivering remarkable customer service to our residents so they will stay with us longer, be willing to pay higher rent for a great experience and will tell others about how much they love living in an Equity Residential property.
We believe that our stakeholders value stability, liquidity, predictability and accountability and that is the mission to which we remain unwaveringly committed. 6 Table of Contents Despite geopolitical and economic uncertainties, demand to live in our apartment communities remains robust and we believe that the long-term prospects for our business remain strong.
We believe that our stakeholders value stability, liquidity, predictability and accountability and that is the mission to which we remain unwaveringly committed. Despite overall economic concerns, demand to live in our apartment communities remains healthy and we believe that the long-term prospects for our business remain strong.
We have assembled a cross-functional employee-led Equity Values Council to lead our efforts on these values by acting as change agents to drive initiatives, create goals and awareness, and encourage colleagues to participate in community service activities and wellness initiatives.
We have assembled the Equity Values Council, a diverse employee group reflective of the broader Company, to lead our efforts on these values by acting as change agents to drive initiatives, create goals and awareness, and encourage colleagues to participate in community service activities and wellness initiatives.
We carry this, our corporate purpose, through our relationships with our customers, our employees, our shareholders and the communities in which we operate. It drives our commitments to sustainability, diversity and inclusion, the total wellbeing of our employees and being a responsible corporate citizen in the communities in which we operate.
It drives our commitments to sustainability, diversity and inclusion, the total wellbeing of our employees and being a responsible corporate citizen in the communities in which we operate.
Furthermore, we believe that demand for rental housing will continue to be driven primarily through household formations from the younger segments of our population, particularly Generation Z, while retaining Millennials for longer and to a lesser extent capturing the aging Baby Boomer generation. • Millennials are comprised of those individuals born between 1981 and 1996, total approximately 72 million people and continue to be a significant portion of the renter population.
Furthermore, we believe that demand for rental housing will continue to be driven primarily through household formations from the younger segments of our population, particularly Generation Z, while retaining Millennials for longer, and to a lesser extent, capturing the aging Baby Boomer generation. • Generation Z is approximately 70 million people born between 1997 and 2012.
Thriving employees are the pinnacle of our efforts throughout all our business functions. When employees bring their whole self to work, perform their best and are well supported in their wellbeing, they can make powerful contributions to the business, culture and our communities.
Having a thriving employee base is the pinnacle of our total wellbeing efforts. When employees bring their whole self to work, perform their best and are well supported, they can make powerful contributions to the business, culture and our communities.
We believe our strategy capitalizes on the preference of renters of all ages to live in the locations where we operate which typically are near transportation (both public transit and convenient highway access), entertainment, employment centers/universities and cultural and outdoor amenities.
Resiliency and regulatory issues also factor into our decisions to dispose of certain properties and/or exit certain submarkets. We believe our strategy capitalizes on the preference of renters of all ages to live in the locations where we operate which typically are near transportation (both public transit and convenient highway access), entertainment, employment centers/universities and cultural and outdoor amenities.
The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in most of its markets. Certain capitalized terms used herein are defined in the Notes to Consolidated Financial Statements.
The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. The Company’s corporate headquarters is located in Chicago, Illinois and the Company also operates regional property management offices in most of its markets.
We believe that our richly diverse work environment captures top talent, cultivates the best ideas and creates the widest possible platform for this success in line with our corporate purpose of “ Creating communities where people thrive”.
Human Capital At Equity Residential, our team of approximately 2,400 employees is the driving force of our success. We believe that our richly diverse work environment captures top talent, cultivates the best ideas and creates the widest possible platform for this success in line with our corporate purpose of “ Creating communities where people thrive”.
This report, which includes Sustainability Accounting Standards Board disclosures and incorporates recommendations from the Task Force on Climate-related Financial Disclosures, was 8 Table of Contents reviewed and approved by the Corporate Governance Committee of our Board of Trustees, which monitors the Company’s ongoing ESG efforts.
The report, which includes Sustainability Accounting Standards Board disclosures and incorporates recommendations from the Task Force on Climate-Related Financial Disclosures, was reviewed and approved by the Corporate Governance Committee of our Board of Trustees, which monitors the Company’s ongoing corporate responsibility efforts. The Environmental, Social and Governance Report is not part of or incorporated into this report.
Our business benefits from a shortage in housing across the country, especially in the areas in which we are investing. Our well-located communities provide an exceptional experience for our residents around dynamic cities that we believe will continue to attract affluent long-term renters.
Our business benefits from elevated single family home ownership costs, positive household formation trends and the overall deficit in housing across the country, especially in the areas in which we are investing. Our well-located communities provide an exceptional experience for our residents around dynamic cities that we believe will continue to attract affluent long-term renters.
We believe the locations of our properties in these markets are attractive to these knowledge workers (who often choose to rent for lifestyle reasons) that we hope to convert into satisfied long-term residents. Equity Residential is committed to creating communities where people thrive.
We believe the locations of our properties in these markets are attractive to these affluent knowledge workers (who often choose to rent for lifestyle reasons) that we hope to convert into satisfied long-term residents. We believe we have created an industry-leading operating platform and balance sheet to run our properties.
Worth and Austin includes investments in both urban and suburban properties and is generally being funded by reducing exposure in selective established markets. Development also plays an important role in our capital allocation. Development activity is focused on our in-house pipeline, our strategic partnership with Toll Brothers, Inc.
Worth and Austin includes investments in both urban and suburban properties in select submarkets and is generally being funded by reducing exposure to older or lower returning assets in selected established markets. Development also plays an important role in our capital allocation.
Operations and Innovation We attempt to balance occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. We focus on the resident experience and leveraging operating efficiency which we believe drives our success in renewing our residents.
Operations and Innovation We attempt to balance occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible cash flow generation to our shareholders.
To further strengthen our commitments to ESG initiatives, we issued two sustainable fixed-income instruments (each a “green bond”) designed to support projects that contribute to environmental sustainability. In 2018, the Company became the first multifamily REIT ever to issue a green bond.
We continue to enhance our environmental disclosure efforts by calculating and disclosing our Scope 3 emissions. We also issued two sustainable fixed-income instruments (each a “green bond”) designed to support projects that contribute to environmental sustainability, becoming the first multifamily REIT to ever issue a green bond.
Our Commitment to Environmental, Social and Governance (“ESG”) At Equity Residential, we believe a focus on ESG is a key way to programmatically address stakeholder concerns as part of our corporate purpose.
Our Commitment to Corporate Responsibility At Equity Residential, we believe focusing on corporate responsibility is a key way to programmatically address stakeholder concerns as part of our corporate purpose as we recognize the profound impact that the real estate industry can have on our environment and society as a whole.
See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Certain capitalized terms used herein are defined in the Notes to Consolidated Financial Statements or the Definitions section of Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations . See also Note 17 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Our multi-pronged investment strategy featuring acquisitions, new stand-alone and expansion developments, densifying developments and accretive renovations of existing properties is focused on optimizing our portfolio in terms of quality and location. The markets we focus on generally feature one or more of the following characteristics that allow us to drive performance: • Large and diverse economic drivers .
Our multi-pronged investment strategy featuring acquisitions, new stand-alone and expansion developments, densifying developments and accretive renovations of existing properties is focused on optimizing and balancing our portfolio in terms of location, including between our established and expansion markets and between urban and suburban submarkets within those markets.
In 2021, the Company began funding its $10.0 million investment in a new fund focused on early stage sustainability and climate change mitigation technology relevant to the built environment. We are also intensely focused on the “Social” and “Governance” aspects of ESG.
The Company also has a $10.0 million investment in a fund focused on early stage sustainability and climate change mitigation technology relevant to the built environment. As detailed below, we have a commitment to our employees’ engagement, diversity and inclusion and wellness that serves as the foundation of our corporate purpose.
We consider building locations based on walkability, accessibility, neighborhoods and parks. We also design our communities to support amenities such as fitness centers and we select locations near shops, restaurants, outdoor amenities such as bike/running paths and health clubs, enabling a low carbon footprint lifestyle for our residents to live, work and play.
Our properties support amenities such as fitness centers and we select locations near shops, restaurants, outdoor amenities such as bike/running paths and health clubs, enabling a low carbon footprint lifestyle for our residents to live, work and play. 8 Table of Contents Equity Residential’s sustainability program actively manages environmental impacts and climate-related risks and opportunities through optimized, financially responsible capital investments and technologies.
Such annual proxy statements and the information contained therein are not part of nor incorporated into this report, except as otherwise provided herein. Human Capital At Equity Residential, our team of approximately 2,400 employees is the driving force behind our success.
Furthermore, our annual proxy statements contain additional information on our corporate responsibility efforts, including detailed information regarding our corporate governance practices. Such annual proxy statements and the information contained therein are not part of nor incorporated into this report, except as otherwise provided herein.
This cohort is entering prime renter age and is expected to continue to be an important source of demand. • Baby Boomers, a demographic of more than 71 million people born between 1946 and 1964, also trend toward apartment rentals.
This cohort is entering prime renter age and is expected to continue to be an important source of demand. • Millennials are individuals born between 1981 and 1996, totaling approximately 72 million people, and continue to be a significant portion of the renter population.
Having a history as a first mover in such important areas as online leasing, we are focused on technology that drives superior margins and improves customer experience. We use a standardized purchasing system to control our operating expenses and a business intelligence platform that allows all our team members to quickly identify and address issues and opportunities.
We use a standardized purchasing system to control our operating expenses and a business intelligence platform and other data analytics that allow our team members to quickly identify and address issues and opportunities.
We remain focused on owning and operating properties in markets or submarkets where the supply of apartments is balanced with strong demand that supports superior long-term returns. • Other favorable performance drivers including high single-family housing prices that support longer term rentership and manageable resiliency/environmental risk.
We remain focused on owning and operating properties in markets and submarkets where the supply of apartments is met with strong demand. While at times supply and demand imbalances may occur, over the long-term we believe that the dynamics in our markets will support superior long-term returns.
Our markets are some of the largest cities in the United States. They are markets that generally attract a variety of large and diverse industries and businesses. They include a number of submarkets that are attractive for long-term multifamily ownership. • Strong high quality job growth.
The markets we focus on generally feature one or more of the following characteristics that allow us to drive performance: • Large and diverse economic drivers . Our markets are some of the largest cities in the United States. They are markets that generally attract a variety of large and diverse industries and businesses.
This focus has driven strong occupancy and a high percentage of residents renewing while achieving strong renewal rate growth. Rapidly evolving technology continues to drive innovation in the rental industry. We have been and continue to be a leader in deploying and investing in property technology to serve our customers better and operate more efficiently.
Our focus on operating efficiency and delivery of an exceptional resident living experience has driven strong Physical Occupancy and a high Percentage of Residents Renewing while achieving strong renewal rate growth. We deliver this performance through rapidly evolving technology and innovation that is increasingly prevalent in our industry.
As detailed below, we have a commitment to our employees’ engagement, diversity and inclusion and wellness that is the foundation of our corporate purpose. We also recognize that a successful company must incorporate the best corporate governance practices in order to better serve its stakeholders.
We celebrate differences and are committed to cultivating an inclusive environment of belonging for all employees, driving excellence through shared perspectives and collaborative innovation. We also recognize that a successful company must incorporate the best corporate governance practices in order to better serve its stakeholders.
They also tend to remain renters longer due to the cost of single family home ownership and societal trends favoring delays in marriage and having children. • Generation Z is comprised of the approximately 67 million people born between 1997 and 2012.
They also tend to remain renters longer due to the high cost of single family home ownership, societal trends favoring delays in marriage and having children and caution around making large financial commitments during uncertain economic times. 7 Table of Contents • Baby Boomers, a demographic of more than 68 million people born between 1946 and 1964, also may trend toward apartment rentals as they downsize and enter retirement in vibrant cities.
(“Toll”) and joint ventures with other third-party developers in both established and expansion markets.
Development activity is focused on our in-house pipeline and redevelopment of some existing operating properties and our strategic partnerships and joint-ventures with third-party developers in both established and expansion markets.
Executive compensation includes an ESG goal and our Board of Trustees, primarily through its Compensation Committee, takes an active role in overseeing our efforts in this regard. For additional information regarding our ESG efforts, see our 2022 Environmental, Social and Governance Report at our website, www.equityapartments.com.
For additional information regarding our corporate responsibility efforts, see our 2023 Environmental, Social and Governance Report at our website, www.equityapartments.com, which includes third-party limited assurance covering some of the environmental metrics included in the report.
Equity Residential’s sustainability program actively manages environmental impacts and climate-related risks and opportunities through optimized, financially responsible capital investments and technologies. We methodically focus on energy, water, waste and emissions to advance the program’s policies, targets and resilience outcomes.
We methodically focus on energy, water, waste and emissions to advance the program’s policies, targets and resilience outcomes as well as our shareholders' long-term financial interests.
These resources are in addition to up to five free counseling sessions for all employees and their family members (per year per presenting matter) through our Employee Assistance Program. • Financial Wellbeing: These benefits and resources help our employees manage their money better today, while preparing for financial milestones and retirement in the future.
Our dedication to mental wellness is reflected in providing tools like this, fostering a culture that values self-care and effective mental health practices. • Financial Wellbeing: These benefits and resources help our employees manage their money better today, while preparing for financial milestones and retirement in the future.
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This needs to be a continuous endeavor, in which we invest in resilient properties that will stand the test of time and remain attractive to our customers and the community without negatively impacting the environment.
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On May 18, 2023, the Company announced that Samuel Zell, its Founder and Chairman of the Board of Trustees, had passed away earlier that same day. David J. Neithercut, the Company’s former Chief Executive Officer and a member of the Company’s Board of Trustees since 2006, has been appointed as Chairman.
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In 2021, the Company issued a second green bond, and the net proceeds of approximately $494.2 million from this offering were fully allocated to the development of one property in Seattle certified as LEED Platinum, one property in Boston certified as LEED Gold and one property in Washington, D.C. certified as LEED Silver.
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Worth and Austin. Through our ownership in these markets, we seek to optimize our portfolio by balancing risk and maximizing returns. We believe that this portfolio will allow us to produce more consistent cash flows in a volatile world where local market conditions may cause operating fundamentals to change rapidly.
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We continue to enhance our ESG disclosure efforts, including by obtaining third-party assurance covering certain of the results outlined in the above report. Furthermore, our annual proxy statements contain additional information on our ESG efforts, including detailed information regarding our corporate governance practices.
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Equity Residential is committed to creating communities where people thrive. We carry this, our corporate purpose, through our relationships with our customers, our employees, our shareholders and the communities in which we operate.
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We also continue to focus on improving our female representation, which is now 36.0% of our workforce. • A diversity and inclusion lens is embedded in our talent review process.
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They include a number of submarkets that are attractive for long-term multifamily ownership and are positioned to capture future demand. • High costs of single family home ownership.
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Elevated single family home ownership costs (large down payments, high interest rates, etc.), low for sale inventory and existing homeowners that are reluctant to sell given favorable locked-in financing all support renting in the long-term, especially in the markets in which we operate. • Strong high quality job growth.
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We also focus on resiliency/environmental and regulatory issues when choosing which markets/submarkets in which to concentrate our investment efforts. We conduct climate resilience analyses and assess the regulatory climate to identify potential risks and opportunities as part of our due diligence process for new acquisitions and developments, as well as potential markets for portfolio expansion.
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We have been and continue to be a leader in deploying and investing in property technology to serve our customers better and operate more efficiently. Having a history as a first mover in such important areas as online leasing, we are focused on technology that drives superior margins and improves customer experience.
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We strive to create and maintain a sustainable portfolio that not only has a low environmental footprint, but also one that is attractive to our customers and the community and resilient to the changing climate. We apply best practices for sustainability across all aspects of our real estate business.
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We consider building locations based on walkability, accessibility, neighborhoods and communities.
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Our expertise has shown that as real estate owners, developers and managers, we have the ability to make a positive impact on the environment while also enhancing our financial performance and strengthening our organization’s sense of purpose.
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To further strengthen our commitments to sustainability initiatives, we set ambitious targets to reduce our environmental impact across the portfolio aligned with global climate change initiatives. For example, we recently set a science-based target to reduce our absolute Scope 1, 2, and 3 greenhouse gas emissions (from our two biggest categories) by 30% by 2030 from a 2018 base year.
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Consistent with the Company's purpose and commitment to the incorporation of corporate responsibility concepts in all aspects of its business, executive compensation includes a goal which focuses on environmental, social and governance factors.
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All employees and their family members have access to five free counseling sessions (per year per presenting matter) through our Employee Assistance Program. Understanding the importance of a mentally healthy workforce, we also added an industry-leading meditation app, free to all employees and their family members, designed to promote mental health.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

59 edited+31 added−5 removed101 unchanged
Biggest changeWe are subject to risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments. We may not be able to refinance existing debt and if we can, the terms of such refinancing may be less favorable than the terms of existing indebtedness.
Biggest changeInsufficient cash flow could affect our ability to service existing debt and create refinancing risk. We are subject to risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments.
While the Company has previously purchased incremental insurance coverage in the event of multiple non-catastrophic occurrences within the same policy year, these substantial deductible and self-insured retention amounts do expose the Company to greater potential for uninsured losses and this additional multiple occurrences coverage may not be available at all or on commercially reasonable terms in the future.
While the Company has previously purchased incremental insurance coverage in the event of multiple non-catastrophic occurrences within the same policy year, these substantial deductible and self-insured retention amounts do expose the Company to greater potential for uninsured losses and this additional coverage may not be available at all or on commercially reasonable terms in the future.
Substantial inflationary pressures can adversely affect us by increasing the costs of land, materials, labor and other costs needed to operate our business. In a highly inflationary environment, we may not be able to raise rental rates at or above the rate of inflation, which could reduce our profit margins.
Substantial inflationary pressures can adversely affect us by disproportionately increasing the costs of land, materials, labor and other costs needed to operate our business. In a highly inflationary environment, we may not be able to raise rental rates at or above the rate of inflation, which could reduce our profit margins.
In addition, investors may decide to refrain from investing in us as a result of their assessment of our approach to and consideration of ESG factors. We may face reputational damage in the event our corporate responsibility procedures or standards do not meet the standards set by various constituencies.
In addition, investors may decide to refrain from investing in us as a result of their assessment of our approach to and consideration of corporate responsibility factors. We may face reputational damage in the event our corporate responsibility procedures or standards do not meet the standards set by various constituencies.
Investing in real estate is subject to varying degrees and types of risk. While we seek to mitigate these risks through various strategies, including geographic diversification, market research and proactive asset management, among other techniques, these risks cannot be eliminated.
Investing in real estate is subject to varying degrees and types of risk. While we seek to mitigate these risks through various strategies, including geographic diversification, market research and proactive asset management, among other techniques, these risks cannot be eliminated entirely.
If one or more of these markets is unfavorably impacted by specific geopolitical and/or economic conditions, local real estate conditions, increases in social unrest, increases in real estate and other taxes, reduced quality of life, deterioration of local or state government health, rent control or stabilization laws or localized environmental and climate issues, the impact of such conditions may have a more negative impact on our results of operations than if our properties were more geographically diverse.
If one or more of these markets is unfavorably impacted by specific geopolitical and/or economic conditions, local real estate conditions, increases in social unrest, increases in real estate and other taxes, reduced quality of life, deterioration of local or state government health, rent control or rent stabilization laws, other similar regulations, or localized environmental and climate issues, the impact of such conditions may have a more negative impact on our results of operations than if our properties were more geographically diverse.
Certain provisions of Maryland law applicable to REITs prohibit “business combinations” (including certain issuances of equity securities) with any person who beneficially owns ten percent or more of the voting power of outstanding securities, or with an affiliate 17 Table of Contents who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the Company’s outstanding voting securities (an “Interested Shareholder”), or with an affiliate of an Interested Shareholder.
Certain provisions of Maryland law applicable to REITs prohibit “business combinations” (including certain issuances of equity securities) with any person who beneficially owns ten percent or more of the voting power of outstanding securities, or with an affiliate 19 Table of Contents who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the Company’s outstanding voting securities (an “Interested Shareholder”), or with an affiliate of an Interested Shareholder.
If we are unable to increase our rental prices to offset the effects of inflation, our business, results of operations, cash flows and financial condition could be adversely affected. In addition, interest rate increases enacted to combat inflation have caused market disruption and could continue to prevent us from acquiring or disposing of assets on favorable terms.
If we are unable to increase our rental prices to offset the effects of inflation, our business, results of operations, cash flows and financial condition could be adversely affected. In addition, interest rate increases enacted to combat inflation have caused market disruption and could continue to prevent us from acquiring or disposing of assets on favorable terms or at all.
Factors that may impact cash flows and real estate values include, but are not limited to: • Local economic conditions, particularly oversupply or reductions in demand; • National, regional and local political and regulatory climates, governmental fiscal health and governmental policies; • The inability or unwillingness of residents to pay rent increases; • Increases in our operating expenses due to inflationary or other pressures; • Cost and availability of labor and materials required to maintain our properties at acceptable standards; • Availability of attractive financing opportunities; • Changes in social preferences; and • Additional risks that are discussed below.
Factors that may impact cash flows and real estate values include, but are not limited to: • Local economic conditions, particularly oversupply or reductions in demand; • National, regional and local political and regulatory climates, governmental fiscal health and governmental policies; • The inability or unwillingness of residents to pay rent increases; • Increases in our operating expenses due to inflationary or other pressures; • Cost and availability of labor and materials required to maintain our properties at acceptable standards; • Availability of attractive financing opportunities; • Changes in social preferences, demographics or migration patterns; and • Additional risks that are discussed below.
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, phishing attempts, ransomware or other scams, persons inside our organization or persons/vendors with access to our systems and other significant disruptions of our information technology networks and related systems, including property infrastructure.
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, phishing attempts, social engineering, ransomware or other scams, persons inside our organization or persons/vendors with access to our systems and other significant disruptions of our information technology networks and related systems, including property infrastructure.
Evolving compliance and operational requirements under the CCPA and the privacy laws of other jurisdictions in which we operate may impose significant costs that are likely to increase over time. Our failure to comply with laws, rules, and regulations related to privacy and data protection could harm our business or reputation or subject us to fines and penalties.
Evolving compliance and operational requirements under the CPRA and the privacy laws of other jurisdictions in which we operate may impose significant costs that are likely to increase over time. Our failure to comply with laws, rules and regulations related to privacy and data protection could harm our business or reputation or subject us to fines and penalties.
We may abandon opportunities that we have already begun to explore for a number of reasons, and as a result, we may fail to recover expenses already incurred in exploring those opportunities. We may also be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third-party permits and authorizations.
We may abandon opportunities that we have already begun to explore for a number of reasons, and as a result, we may fail to recover costs already incurred in exploring those opportunities. We may also be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third-party permits and authorizations.
In addition, operating expenses associated with each property, such as real estate taxes, insurance, utilities, maintenance costs and employee wages and benefits, may not decline as quickly or at the same rate as revenues when circumstances might cause a reduction of those revenues at our properties.
In addition, operating expenses associated with each property, such as real estate taxes, insurance, utilities, maintenance costs and employee wages and benefits, may not decline at all or decline at the same rate as revenues when circumstances might cause a reduction of those revenues at our properties.
This inability to reallocate our capital promptly could negatively affect our financial condition, including our ability to make distributions to our security holders. Competition for acquisitions may prevent us from acquiring properties on favorable terms. We may not be successful in pursuing acquisition and development opportunities.
This inability to reallocate our capital promptly could negatively affect our financial condition, including our ability to make distributions to our security holders. Competition may prevent us from acquiring properties on favorable terms. We may not be successful in pursuing acquisition and development opportunities.
These regulations limit or could continue to limit our ability to raise rents or charge certain fees (either of which could have a retroactive effect), enforce residents’ or tenants’ contractual rent obligations or pursue collections, all of which could have an adverse impact on our operations and property values.
These regulations specifically and/or effectively limit or could continue to limit our ability to raise rents or charge certain fees (either of which could have a retroactive effect), enforce residents’ or tenants’ contractual rent obligations or pursue collections, all of which could have an adverse impact on our operations and property values.
In addition, income from a prohibited transaction might adversely affect our ability to satisfy the income tests for qualification as a REIT. 16 Table of Contents We may be subject to legislative or regulatory tax changes that could negatively impact our financial condition.
In addition, income from a prohibited transaction might adversely affect our ability to satisfy the income tests for qualification as a REIT. 18 Table of Contents We may be subject to legislative or regulatory tax changes that could negatively impact our financial condition.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements, building and zoning codes, environmental and other ESG regulations, and federal, state and local accessibility requirements, including and in addition to those imposed by the Americans with Disabilities Act and the Fair Housing Act.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements, building and zoning codes, environmental and other related regulations, and federal, state and local accessibility requirements, including and in addition to those imposed by the Americans with Disabilities Act and the Fair Housing Act.
These and other risks inherent in development projects, including the joint venture risks noted below, could result in increased costs or the delay or abandonment of opportunities. 12 Table of Contents We are subject to risks involved in real estate activity through joint ventures.
These and other risks inherent in development projects, including the joint venture risks noted below, could result in increased costs or the delay or abandonment of opportunities. 13 Table of Contents We are subject to risks involved in real estate activity through joint ventures.
Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.
Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted depreciated cost of such assets at the time of sale.
Joint ventures create risks including the following: • The possibility that our partners might refuse or be financially unable to make capital contributions when due or may fail to meet contractual obligations to cover development cost overruns and therefore we may be forced to make contributions to protect our investments; • These projects generally use mortgage debt (including variable rate constructions loans) to finance their activities at a higher leverage level than how we finance the Company as a whole; • We may be responsible to our partners for indemnifiable losses; • Our partners might at any time have business, tax planning or economic goals that are inconsistent with ours; and • Our partners may be in a position to take action or withhold consent contrary to our recommendations, instructions or requests.
Joint ventures create risks including the following: • The possibility that our partners might refuse or be financially unable to make capital contributions when due or may fail to meet contractual obligations to cover development cost overruns and therefore we may be forced to make contributions to protect our investments; • These projects generally use mortgage debt (including variable rate constructions loans) to finance their activities at a higher leverage level than how we finance the Company as a whole; • We may be responsible to our partners for indemnifiable losses; • Our partners might at any time have business, tax planning or economic goals that are inconsistent with ours; • Our partners may be in a position to take action or withhold consent contrary to our recommendations, instructions or requests; and • The possibility that our partner is either unable to or unwilling to complete their contractual development activities.
Many investors focus on positive ESG-related business practices and scores when choosing to allocate their capital and may consider a company's score as a reputational or other factor in making an investment decision. Government regulators' and investors' increased focus and activism related to ESG and similar matters may constrain our business operations or increase expenses or capital expenditures.
Many investors focus on positive corporate responsibility-related business practices and scores when choosing to allocate their capital and may consider a company's score as a reputational or other factor in making an investment decision. Government regulators' and investors' increased focus and activism related to corporate responsibility and similar matters may constrain our business operations or increase expenses or capital expenditures.
Dislocations and disruptions in capital markets could result in increased costs or lack of availability of debt financing (including under our commercial paper program) and equity financing. Such events may affect our ability to refinance existing debt, require us to utilize higher cost alternatives and/or impair our ability to adjust to changing economic and business conditions.
Dislocations and disruptions in capital markets could result in increased costs or lack of availability of debt financing (including under our commercial paper program) and equity financing. Such events may affect our ability to refinance existing debt, require us to 15 Table of Contents utilize higher cost alternatives and/or impair our ability to adjust to changing economic and business conditions.
Noncompliance could result in fines, subject us to lawsuits and require us to remediate or repair the noncompliance. Existing requirements could change and compliance with future requirements may require significant unanticipated expenditures that could adversely affect our financial condition or results of operations. 15 Table of Contents Environmental problems are possible and can be costly.
Noncompliance could result in fines, subject us to lawsuits and require us to remediate or repair the noncompliance. Existing requirements could change and compliance with future requirements may require significant unanticipated expenditures that could adversely affect our financial condition or results of operations. Environmental problems are possible and can be costly.
Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. Third parties may also sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site.
Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. Third parties may also sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from 17 Table of Contents that site.
While our existing preferred shares/preference units do not have all of these provisions, any future series of preferred shares/preference units may have certain voting provisions that could delay or prevent a change in control or other transactions that might otherwise be in the interest of 20 Table of Contents our security holders.
While our existing preferred shares/preference units do not have all of these provisions, any future series of preferred shares/preference units may have certain voting provisions that could delay or prevent a change in control or other transactions that might otherwise be in the interest of our security holders.
Certain organizations that provide corporate governance and other corporate risk advisory services to investors have developed scores and ratings to evaluate companies and investment funds based upon ESG metrics.
Certain organizations that provide corporate governance and other corporate risk advisory services to investors have developed scores and ratings to evaluate companies and investment funds based upon corporate responsibility metrics.
In addition, the criteria by which companies are rated for ESG efforts may change, which could cause us to receive lower scores than in previous years.
In addition, the criteria by which companies are rated for their efforts may change, which could cause us to receive lower scores than in previous years.
A significant downgrade in our credit ratings, while not affecting our ability to draw proceeds under the Company’s revolving credit facility, would cause the corresponding borrowing costs to increase, impact our ability to borrow secured and unsecured debt, and 14 Table of Contents potentially impair our ability to access the commercial paper market or otherwise limit our access to capital.
A significant downgrade in our credit ratings, while not affecting our ability to draw proceeds under the Company’s revolving credit facility, would cause the corresponding borrowing costs to increase, impact our ability to borrow secured and unsecured debt, and potentially impair our ability to access the commercial paper market or otherwise limit our access to capital.
Therefore, we may not be able to retain residents or attract new residents if we are unable to identify and cost effectively implement new, relevant technologies and keep up with constantly changing resident demand for the latest innovations. 11 Table of Contents The short-term nature of apartment leases exposes us more quickly to the effects of declining market rents, potentially making our results of operations and cash flows more volatile.
Therefore, we may not be able to retain residents or attract new residents if we are unable to identify and cost effectively implement new, relevant technologies/amenities and keep up with constantly changing resident demand for the latest innovations in these areas. 12 Table of Contents The short-term nature of apartment leases exposes us more quickly to the effects of declining market rents, potentially making our results of operations and cash flows more volatile.
If we are required to recognize material asset impairment charges, these charges could adversely affect our financial condition and results of operations. Corporate social responsibility, specifically related to ESG, may impose additional costs and expose us to new risks. Environmental sustainability, social and governance evaluations remain highly important to some investors and other stakeholders.
If we are required to recognize material asset impairment charges, these charges could adversely affect our financial condition and results of operations. Corporate responsibility, specifically related to sustainability efforts, may impose additional costs and expose us to new risks. Corporate responsibility evaluations remain highly important to some investors and other stakeholders.
We are also subject to laws, rules, and regulations in the United States, such as the California Consumer Privacy Act (“CCPA”), relating to the collection, use, and security of resident, customer, employee and other data.
We are also subject to laws, rules, and regulations in the United States, such as the California Privacy Rights Act (“CPRA”), relating to the collection, use, and security of resident, customer, employee and other data.
These systems often are developed and hosted by third-party vendors whom we rely upon for ongoing maintenance, upgrades and enhancements. While we maintain a rigorous process around selecting appropriate information technology systems and partnering with vendors, our failure to adequately do so could negatively impact our operations and competitive position. 19 Table of Contents We depend on our key personnel.
These systems often are developed and hosted by third-party vendors whom we rely upon for ongoing maintenance, upgrades and enhancements. While we maintain a rigorous process around selecting appropriate information technology systems and partnering with vendors, our failure to adequately do so could negatively impact our operations and competitive position.
To the extent our partners do not meet their obligations to us or our joint ventures, or they take actions inconsistent with the interests of the joint venture, it could have a negative effect on our results of operations and financial condition, including distributions to our security holders. The Company’s real estate assets may be subject to impairment charges.
To the extent our partners do not meet their obligations to us or our joint ventures, or they take actions inconsistent with the interests of the joint venture, it could have a negative effect on our results of operations and financial condition, including distributions to our security holders.
A cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt payment collections and operations, corrupt data or steal confidential information, including information regarding our residents, prospective residents, employees and employees’ dependents. 18 Table of Contents Despite system redundancy, the implementation of security measures, required employee awareness training and the existence of a disaster recovery plan for our internal information technology systems, our systems and systems maintained by third-party vendors with which we do business are vulnerable to damage from any number of sources.
These events can include gaining unauthorized access to systems to disrupt operations, corrupt data or steal confidential information, including information regarding our residents, prospective residents, employees and employees’ dependents. 20 Table of Contents Despite system redundancy, the implementation of security measures, required employee awareness training and the existence of a disaster recovery plan for our internal information technology systems, our systems and systems maintained by third-party vendors with which we do business are vulnerable to damage from any number of sources.
In addition, a downgrade below investment grade would likely cause us to lose access to the commercial paper markets and would require us to post cash collateral and/or letters of credit in favor of some of our secured lenders to cover our self-insured property and liability insurance deductibles or to obtain lower deductible insurance compliant with the lenders’ requirements at the lower ratings level.
In addition, a downgrade below investment grade would likely cause us to lose access to the commercial paper markets and would require us to post cash collateral and/or letters of credit in favor of some of our secured lenders to cover our self-insured property and liability insurance deductibles or to obtain lower deductible insurance compliant with the lenders’ requirements at the lower ratings level. 16 Table of Contents Financial covenants could limit operational flexibility and affect our overall financial position.
Financial covenants could limit operational flexibility and affect our overall financial position. The terms of our credit agreements, including our revolving credit facility and the indentures under which a substantial portion of our unsecured debt was issued, require us to comply with a number of financial covenants.
The terms of our credit agreements, including our revolving credit facility and the indentures under which a substantial portion of our unsecured debt was issued, require us to comply with a number of financial covenants.
At times we have entered into agreements providing for joint and several liability with our partners. We also have in the past and could choose in the future to guarantee part of or all of certain joint venture debt.
At times we have entered into agreements providing for joint and several liability with our partners. We have in the past and may in the future choose to guarantee part of or all of certain joint venture debt or to act as a lender to the joint venture itself.
The issuance of additional Common Shares by the Company, or the perception that such issuances might occur, could also cause significant volatility and decreases in the value of our shares. Our financial counterparties may not perform their obligations.
The issuance of additional Common Shares by the Company, or the perception that such issuances might occur, could also cause significant volatility and decreases in the value of our shares.
The Company relies on third-party insurance providers for its property, general liability, workers compensation and other insurance, and should any of them experience liquidity issues or other financial distress, it could negatively impact their ability to pay claims under the Company’s policies.
As a result, our financial results could be adversely affected and may vary significantly from period to period. The Company relies on third-party insurance providers for its property, general liability, workers compensation and other insurance, and should any of them experience liquidity issues or other financial distress, it could negatively impact their ability to pay claims under the Company’s policies.
Insurance policies can be costly and may not cover all losses, which may adversely affect our financial condition or results of operations. The Company’s property, general liability and workers compensation insurance policies provide coverage with substantial per occurrence deductibles and/or self-insured retentions. These self-insurance retentions can be a material portion of insurance losses in excess of the base deductibles.
The Company’s property, general liability and workers compensation insurance policies provide coverage with substantial per occurrence deductibles and/or self-insured retentions. These self-insurance retentions can be a material portion of insurance losses in excess of the base deductibles.
In addition, we often engage third-party service providers that may have access to such personally identifiable information in connection with providing necessary information technology, security and other business services to us. The systems of these third-party service providers may contain defects in design or other problems that could unexpectedly compromise personally identifiable information.
In addition, we often engage third-party service providers that may have access to such personally identifiable information in connection with providing necessary information technology, security and other business services to us.
A low ESG score could result in a negative perception of the Company, exclusion of our securities from consideration by certain investors who may elect to invest with our competition instead and/or cause investors to reallocate their capital away from the Company, all of which could have an adverse impact on the price of our securities. 13 Table of Contents Our various technology-related initiatives to improve our operating margins and customer experience may fail to perform as expected.
A low rating could result in a negative perception of the Company, exclusion of our securities from consideration by certain investors who may elect to invest with our competition instead and/or cause investors to reallocate their capital away from the Company, all of which could have an adverse impact on the price of our securities.
Our financial condition or results of operations may be adversely affected. In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could adversely impact the value of our properties or result in increased capital expenditures or operating expenses on our existing properties and our new development properties.
In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could adversely impact the value of our properties or result in increased capital expenditures or operating expenses on our existing properties and our new development properties. 22 Table of Contents Provisions of our Declaration of Trust and Bylaws could inhibit changes in control.
Construction risks on our development projects could affect our profitability. We intend to continue to develop multifamily properties through both wholly owned and joint venture arrangements as part of our business strategy. Development often includes long planning and entitlement timelines, subjecting the projects to changes in market conditions.
We intend to continue to develop multifamily properties through both wholly owned and joint venture arrangements as part of our business strategy. Development often includes long planning and entitlement timelines, subjecting the projects to changes in market conditions. It can involve complex and costly activities, including significant environmental remediation or construction work in our markets.
It can involve complex and costly activities, including significant environmental remediation or construction work in our markets. We may also experience an increase in costs due to general disruptions that affect the cost of labor and/or materials, such as supply chain disruptions, trade disputes, tariffs, labor unrest, geopolitical conflicts or other factors that create inflationary pressures.
We have experienced and may continue to experience an increase in costs due to general disruptions that affect the cost of labor and/or materials, such as supply chain disruptions, trade disputes, tariffs, labor unrest, geopolitical conflicts or other factors that create inflationary pressures.
As permitted by Maryland law, however, the Board of Trustees of the Company has opted out of these restrictions with respect to any business combination involving Samuel Zell and certain of his affiliates and persons acting in concert with them.
As permitted by Maryland law, however, the Board of Trustees of the Company has opted out of these restrictions with respect to any business combination involving certain of Samuel Zell's affiliates and persons acting in concert with them. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to a business combination involving us and/or any of them.
Rising interest rates increased and may continue to increase our interest expense and the costs of refinancing existing debt. Higher interest rates also increased and could continue to increase capitalization rates, which may lead to reduced valuations of the Company’s assets. Insufficient cash flow could affect our ability to service existing debt and create refinancing risk.
Rising interest rates increased and may continue to increase our interest expense and the costs of refinancing existing debt. Higher interest rates also increased and could continue to increase capitalization rates, which may lead to reduced valuations of the Company’s assets. Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
Additionally, we have and may in the future acquire large portfolios of properties or companies that could increase our size and result in alterations to our capital structure. We may be unable to integrate the operations of newly acquired large portfolios or companies and realize the anticipated synergies and other benefits or do so within the anticipated time frame.
We may be unable to integrate the operations of newly acquired large portfolios or companies and realize the anticipated synergies and other benefits or do so within the anticipated time frame.
We have developed and may continue to develop initiatives that are intended to serve our customers better and operate more efficiently, including “smart home” technology and self-service options that are accessible to residents through smart devices or otherwise. Such initiatives have involved and may involve our employees having new or different responsibilities and processes.
Our various technology-related initiatives to improve our operating margins and customer experience may fail to perform as expected. We have developed and may continue to develop initiatives that are intended to serve our customers better and operate more efficiently, including “smart home” technology and self-service options that are accessible to residents through smart devices or otherwise.
Additionally, our properties face competition for residents as a result of technological innovation.
Additionally, our properties face competition for residents as a result of innovations in technology and amenities.
Pandemics, epidemics or other health crises, including the novel coronavirus (“COVID-19”), have and could in the future disrupt our business. Both global and locally targeted health events could materially affect areas where our properties, corporate/regional offices or major service providers are located.
Both global and locally targeted health events could materially affect areas where our properties, corporate/regional offices or major service providers are located.
We depend on the efforts of our trustees and executive officers. If one or more of them resign or otherwise cease to be employed by us, our business and results of operations and financial condition could be adversely affected. Litigation risk could affect our business.
If one or more of them resign or otherwise cease to be employed by us, our business and results of operations and financial condition could be adversely affected. Litigation risk could affect our business. We are involved and may continue to be involved in legal proceedings, claims, class actions, inquiries and governmental investigations in the ordinary course of business.
Litigation can be lengthy and expensive, and it can divert management's attention and resources. Results cannot be predicted with certainty, and an unfavorable outcome in litigation could result in liability material to our financial condition or results of operations.
Results cannot be predicted with certainty, and an unfavorable outcome in litigation could result in liability material to our financial condition or results of operations. Insurance policies can be costly and may not cover all losses, which may adversely affect our financial condition or results of operations.
Our inability to refinance, extend or repay debt with proceeds from other capital market transactions would negatively impact our financial condition. If the debt is secured, the mortgage holder may also foreclose on the property. A significant downgrade in our credit ratings could adversely affect our performance.
If the debt is secured, the mortgage holder may also foreclose on the property. A significant downgrade in our credit ratings could adversely affect our performance.
We are involved and may continue to be involved in legal proceedings, claims, class actions, inquiries and investigations in the ordinary course of business. These legal proceedings may include, but are not limited to, proceedings related to consumer, shareholder, securities, antitrust, employment, environmental, development, condominium conversion, tort, eviction and commercial legal issues.
These legal proceedings may include, but are not limited to, proceedings related to consumer, shareholder, securities, antitrust, employment, environmental, development, condominium conversion, tort, eviction and commercial legal issues. Litigation can be lengthy and expensive, and it can divert management's attention and resources.
Consequently, the five-year prohibition and the super-majority vote requirements will not apply to a business combination involving us and/or any of them. Such business combinations may not be in the best interest of our security holders. General Risk Factors Risk of Pandemics or Other Health Crises.
Such business combinations may not be in the best interest of our security holders. General Risk Factors Risk of Pandemics or Other Health Crises. Pandemics, epidemics or other health crises have and could in the future disrupt our business.
The occupancy and rental rates at these properties may also fail to meet our expectations for these investments. We may also underestimate the costs necessary to operate an acquired or developed property to the standards established for its intended market position. Land parcels acquired for development may lose significant value prior to the start of construction.
The occupancy and rental rates at these properties may also fail to meet our expectations for these investments. Land parcels acquired for development may lose significant value prior to the start of construction. Development and renovations are subject to even greater uncertainties and risks due to the complexities and lead time to build or complete these projects.
Should the impact of climate change be material in nature, significant property damage or destruction of our properties could result. In addition, climate change could cause a significant increase in insurance premiums and deductibles or a decrease in the availability of coverage, either of which could expose the Company to even greater uninsured losses.
Should the impact of climate change be material in nature, significant property damage or destruction of our properties could result. Our financial condition or results of operations may be adversely affected.
We believe the policy specifications and insured limits of these policies are adequate and appropriate; however, there are certain types of extraordinary losses which may not be adequately covered under our insurance program. As a result, our financial results could be adversely affected and may vary significantly from period to period.
We believe the policy specifications and insured limits of these policies are adequate and appropriate; however, we may not always be able to place the desired amount of third-party coverage due to a significant increase in insurance premiums and deductibles or a decrease in the availability of coverage, a combination of which have exposed and could further expose the Company to uninsured losses.
Removed
Development and renovations are subject to even greater uncertainties and risks due to the complexities and lead time to build or complete these projects. We may also underestimate the costs to complete a development property or to complete a renovation.
Added
We may also underestimate the costs to complete a development property or to complete a renovation. Additionally, we have and may in the future acquire large portfolios of properties or companies that could increase our size and result in alterations to our capital structure.
Removed
We address potential breaches or disclosure of this confidential personally identifiable information by implementing a variety of security measures intended to protect the confidentiality and security of this information including (among others): (a) engaging reputable, recognized firms to help us design and maintain our information technology and data security systems; (b) conducting periodic testing and verification of information and data security systems, including performing ethical hacks of our systems to discover where any vulnerabilities may exist; (c) providing periodic employee awareness training around phishing and other scams, malware and other cyber risks; (d) implementing a corrective cybersecurity awareness policy that impacts an employee’s performance and compensation to articulate the potential implications of failed phishing tests; and (e) systematically deleting personally identifiable information that no longer is required.
Added
Furthermore, we have in the past and may in the future decide to invest in expansion markets outside of our existing established markets by acquiring and/or developing properties in accordance with the Company's long-term investment strategy.
Removed
The Company also has a cyber liability insurance policy to provide some coverage for certain risks arising out of data and network breaches and data privacy regulations which provides a policy aggregate limit and a per occurrence deductible.
Added
Our historical experience in our established markets does not ensure that we will be able to operate successfully in new markets, should we choose to enter them.
Removed
Cyber liability insurance generally covers, among other things, costs associated with the wrongful release, through inadvertent breach or network attack, of personally identifiable information. However, there can be no assurance that these measures will prevent a cyber incident or that our cyber liability insurance coverage will be sufficient to cover our losses in the event of a cyber incident.
Added
Entering into new markets may expose us to a variety of risks, including an inability to accurately evaluate local market conditions and local economies, to identify appropriate acquisition and/or development opportunities, to hire and retain key personnel and a lack of familiarity with local governmental regulations. Construction risks on our development projects could affect our profitability.
Removed
Provisions of our Declaration of Trust and Bylaws could inhibit changes in control.
Added
We are subject to risks involved in activity through real estate technology and other real estate fund investments. We have entered into, and may continue in the future to enter into, real estate technology and other real estate fund investments. Noncontrolling interests and passive investments are inherently risky because we have limited ability to influence business decisions.
Added
The managers of such investments have autonomy over the day-to-day operations of the business and may make business, financial or management decisions with which we do not agree or take risks or otherwise act in a manner that does not serve our interests.
Added
In addition, the market for the technologies or products these companies are developing are typically in the early stages and may not materialize to the expected scale, causing these companies to abandon, modify or alter their product, service or overall strategy.
Added
Further, there is no assurance that these companies can obtain additional capital or resources or generate sufficient cash flow to sustain operations and successfully execute their strategy. The performance of these investments may also rely on the services of a limited number of key individuals, the loss of whom could significantly adversely affect such investments’ performance.
Added
As a result, we may recognize an impairment of our investment or be unable to sell or otherwise monetize any of the investments we have acquired or may acquire in the future. We are subject to risks related to our properties that are subject to ground leases.
Added
We have entered into, and may continue in the future to enter into, long-term ground leases with respect to assets that may restrict our ability to finance, sell or otherwise transfer our interests in these properties, limit our use and expose us to loss of the properties if such agreements are breached by us or terminated.
Added
These restrictions may limit our ability to timely sell or exchange the properties, impair the properties’ value or negatively impact our ability to operate the properties. In addition, as we get closer to the lease termination dates, the values of the properties could decrease if we are unable to agree upon an extension of the lease with the lessor.
Added
Certain of these ground leases have payments subject to annual escalations and/or periodic fair market value adjustments which could adversely affect our financial condition or results of operations. 14 Table of Contents We face certain risks related to our Non-Residential operating activities.
Added
The Non-Residential space (includes retail and public parking garage operations) at our properties primarily serves as an additional amenity for our residents and neighbors. The longer-term nature of our Non-Residential leases (generally five to ten years with market based renewal options) and the characteristics of many of our Non-Residential tenants (generally small, local businesses) may subject us to certain risks.
Added
We may not be able to lease new space for rents that are consistent with our projections or for market rates. Also, when leases for our existing Non-Residential space expire, the space may not be relet or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the current lease terms.
Added
The presence of competitive alternatives and other market conditions (including online shopping) may affect our ability to lease our Non-Residential space and impact the level of rents we can obtain.
Added
If our Non-Residential tenants experience financial distress or bankruptcy, they may fail to comply with their contractual obligations, seek concessions, such as rent abatements and deferrals, in order to continue operations or cease their operations, any or all of which could lead us to record a non-cash write-off of a tenant's straight-line rent receivable (like we did in 2023 due to the Rite Aid bankruptcy) and could adversely impact our results of operations and financial condition.

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Item 2. Properties

Properties — owned and leased real estate

12 edited+1 added−2 removed6 unchanged
Biggest changeThe properties in various stages of development and lease-up at December 31, 2022 are included in the following table: Development and Lease-Up Projects as of December 31, 2022 (Amounts in thousands except for project and apartment unit amounts) Estimated/Actual Projects Location Ownership Percentage No. of Apartment Units Total Budgeted Capital Cost (1) Total Book Value to Date Total Debt (2) Percentage Completed Start Date Initial Occupancy Completion Date Stabilization Date Percentage Leased / Occupied CONSOLIDATED: Projects Under Development: Reverb (fka 9th and W) (3) Washington, D.C. 92% 312 $ 108,027 $ 88,378 $ 43,714 88% Q3 2021 Q1 2023 Q3 2023 Q3 2024 – / – Laguna Clara II Santa Clara, CA 100% 225 152,621 24,562 — 14% Q2 2022 Q4 2024 Q1 2025 Q4 2025 – / – Projects Under Development - Consolidated 537 260,648 112,940 43,714 Projects Completed Not Stabilized: Aero Apartments Alameda, CA 90% 200 117,794 113,610 64,664 100% Q3 2019 Q2 2021 Q2 2021 Q1 2023 97% / 95% Projects Completed Not Stabilized - Consolidated 200 117,794 113,610 64,664 Projects Completed and Stabilized During the Quarter: Alcott Apartments (fka West End Tower) Boston, MA 100% 470 409,164 408,114 — 100% Q2 2018 Q3 2021 Q4 2021 Q4 2022 95% / 95% Projects Completed and Stabilized During the Quarter - Consolidated 470 409,164 408,114 — UNCONSOLIDATED: Projects Under Development: Alloy Sunnyside Denver, CO 80% 209 66,004 38,309 5,931 53% Q3 2021 Q4 2023 Q2 2024 Q1 2025 – / – Alexan Harrison Harrison, NY 62% 450 198,664 100,922 2,809 39% Q3 2021 Q3 2023 Q2 2024 Q4 2025 – / – Solana Beeler Park Denver, CO 90% 270 81,206 27,008 — 19% Q4 2021 Q4 2023 Q2 2024 Q1 2025 – / – Remy (Toll) Frisco, TX 75% 357 96,937 46,214 4,892 37% Q1 2022 Q1 2024 Q4 2024 Q3 2025 – / – Settler (Toll) Fort Worth, TX 75% 362 81,775 26,456 — 24% Q2 2022 Q2 2024 Q3 2024 Q3 2025 – / – Lyle (Toll) (3) Dallas, TX 75% 334 86,332 13,732 — 13% Q3 2022 Q4 2024 Q2 2025 Q1 2026 – / – Projects Under Development - Unconsolidated 1,982 610,918 252,641 13,632 Total Development Projects - Consolidated 1,207 787,606 634,664 108,378 Total Development Projects - Unconsolidated 1,982 610,918 252,641 13,632 Total Development Projects 3,189 $ 1,398,524 $ 887,305 $ 122,010 (1) Total Budgeted Capital Cost – Estimated remaining cost for projects under development and/or developed plus all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
Biggest changeThe properties in various stages of development and lease-up at December 31, 2023 are included in the following table: Development and Lease-Up Projects as of December 31, 2023 (Amounts in thousands except for project and apartment unit amounts) Estimated/Actual Projects Location Ownership Percentage No. of Apartment Units Total Budgeted Capital Cost (1) Total Book Value to Date Total Debt (2) Percentage Completed Start Date Initial Occupancy Completion Date Stabilization Date Percentage Leased / Occupied CONSOLIDATED: Projects Under Development: Laguna Clara II Santa Clara, CA 100% 225 $ 152,621 $ 78,036 $ — 53% Q2 2022 Q4 2024 Q1 2025 Q4 2025 – / – Projects Under Development - Consolidated 225 152,621 78,036 — Projects Completed Not Stabilized: Reverb (fka 9th and W) (3) Washington, D.C. 92% 312 108,027 104,651 — 100% Q3 2021 Q2 2023 Q2 2023 Q3 2024 82% / 79% Projects Completed Not Stabilized - Consolidated 312 108,027 104,651 — UNCONSOLIDATED: Projects Under Development: Alloy Sunnyside (4) Denver, CO 80% 209 70,004 62,071 27,304 94% Q3 2021 Q2 2024 Q2 2024 Q1 2025 – / – Alexan Harrison (4) Harrison, NY 62% 450 200,664 175,135 77,058 92% Q3 2021 Q1 2024 Q4 2024 Q2 2026 – / – Solana Beeler Park (4) Denver, CO 90% 270 85,206 56,178 22,858 64% Q4 2021 Q2 2024 Q3 2024 Q1 2025 – / – Remy (Toll) (4) Frisco, TX 75% 357 98,937 77,170 31,494 80% Q1 2022 Q1 2024 Q4 2024 Q3 2025 – / – Sadie (fka Settler) (Toll) (4) Fort Worth, TX 75% 362 82,775 55,522 14,944 69% Q2 2022 Q2 2024 Q3 2024 Q3 2025 – / – Lyle (Toll) (3) Dallas, TX 75% 334 86,332 52,914 21,962 66% Q3 2022 Q2 2024 Q3 2024 Q1 2026 – / – Projects Under Development - Unconsolidated 1,982 623,918 478,990 195,620 Total Development Projects - Consolidated 537 260,648 182,687 — Total Development Projects - Unconsolidated 1,982 623,918 478,990 195,620 Total Development Projects 2,519 $ 884,566 $ 661,677 $ 195,620 (1) Total Budgeted Capital Cost – Estimated remaining cost for projects under development and/or developed plus all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
Pearl MDR located in Marina Del Rey, CA containing 597 apartment units was removed from the same store portfolio in the third quarter of 2022 due to a large scale repiping and renovation project in which significant portions of the property are being taken offline for extended time periods.
Pearl MDR located in Marina Del Rey, CA containing 597 apartment units was removed from the same store portfolio in the third quarter of 2022 due to a large scale re-piping and renovation project in which significant portions of the property are being taken offline for extended time periods.
(1) % of Stabilized Budgeted NOI - Represents original budgeted 2023 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
(1) % of Stabilized Budgeted NOI - Represents original budgeted 2024 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
Laguna Clara located in Santa Clara, CA containing 222 apartment units was removed from the same store portfolio in the second quarter of 2022 due to a major renovation and redevelopment project, including the demolition of 42 apartment units. As of December 31, 2022, the property had an occupancy of 65.2%.
Laguna Clara located in Santa Clara, CA containing 222 apartment units was removed from the same store portfolio in the second quarter of 2022 due to a major renovation and redevelopment project, including the demolition of 42 apartment units. As of December 31, 2023, the property had a Physical Occupancy of 67.4%.
Item 2. P roperties As of December 31, 2022, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 308 properties located in 10 states and the District of Columbia consisting of 79,597 apartment units.
Item 2. P roperties As of December 31, 2023, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 302 properties located in 10 states and the District of Columbia consisting of 80,191 apartment units.
As of December 31, 2022, the Company’s same store occupancy was 95.7% and its total portfolio-wide occupancy, which includes completed development properties in various stages of lease-up, was 95.6%. Certain of the Company’s properties are encumbered by mortgages and additional detail can be found on Schedule III – Real Estate and Accumulated Depreciation.
For the year ended December 31, 2023, the Company’s same store Physical Occupancy was 95.9% and its total portfolio-wide Physical Occupancy, which includes completed development properties in various stages of lease-up, was 95.4%. Certain of the Company’s properties are encumbered by mortgages and additional detail can be found on Schedule III – Real Estate and Accumulated Depreciation.
As of December 31, 2022, the property had an occupancy of 79.6%. This property will not return to the same store portfolio until it is stabilized for all of the current and comparable periods presented.
As of December 31, 2023, the property had a Physical Occupancy of 64.5%. This property will not return to the same store portfolio until it is stabilized for all of the current and comparable periods presented.
The following tables provide a rollforward of the apartment units included in Same Store Properties (please refer to the Definitions section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations ) and a reconciliation of apartment units included in Same Store Properties to those included in Total Properties for the year ended December 31, 2022: Year Ended December 31, 2022 Properties Apartment Units Same Store Properties at December 31, 2021 284 74,077 2019 acquisitions (not stabilized until 2020) 1 217 2020 acquisitions 1 158 2022 dispositions (3 ) (945 ) Lease-up properties stabilized 2 221 Properties removed from same store (1) (2 ) (819 ) Other — (37 ) Same Store Properties at December 31, 2022 283 72,872 Year Ended December 31, 2022 Properties Apartment Units Same Store 283 72,872 Non-Same Store: 2022 acquisitions 1 172 2021 acquisitions 17 4,747 Properties removed from same store (1) 2 819 Lease-up properties not yet stabilized (2) 4 986 Other 1 1 Total Non-Same Store 25 6,725 Total Properties and Apartment Units 308 79,597 22 Table of Contents Note: Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months.
The following tables provide a rollforward of the apartment units included in Same Store Properties (please refer to the Definitions section in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations ) and a reconciliation of apartment units included in Same Store Properties to those included in Total Properties for the year ended December 31, 2023: Year Ended December 31, 2023 Properties Apartment Units Same Store Properties at December 31, 2022 283 72,872 2021 acquisitions 16 4,326 2023 dispositions (11 ) (912 ) Other — 11 Same Store Properties at December 31, 2023 288 76,297 Year Ended December 31, 2023 Properties Apartment Units Same Store 288 76,297 Non-Same Store: 2023 acquisitions 4 1,183 2022 acquisitions 1 172 2021 acquisitions not yet stabilized 1 421 Properties removed from same store (1) 2 819 Lease-up properties not yet stabilized (2) 5 1,298 Other 1 1 Total Non-Same Store 14 3,894 Total Properties and Apartment Units 302 80,191 25 Table of Contents Note: Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months.
The Company’s properties are summarized by building type in the following table: Type Properties Apartment Units Average Apartment Units Garden 96 24,449 255 Mid/High-Rise 212 55,148 260 308 79,597 258 Garden is generally defined as properties with two and/or three story buildings while mid/high-rise is generally defined as properties with greater than three story buildings.
The Company’s properties are summarized by building type in the following table: Type Properties Apartment Units Average Apartment Units Garden 90 24,553 273 Mid/High-Rise 212 55,638 262 302 80,191 266 Garden is generally defined as properties with two and/or three story buildings while mid/high-rise is generally defined as properties with greater than three story buildings.
Worth 4 1,241 0.7 % 1,904 Austin 3 741 0.4 % 1,853 Subtotal – Expansion Markets 19 5,695 4.9 % 2,153 Total 308 79,597 100.0 % $ 2,956 Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
Worth 4 1,241 0.7 % 1,935 Austin 3 741 0.4 % 1,819 Subtotal – Expansion Markets 23 6,885 5.5 % 2,188 Total 302 80,191 100.0 % $ 3,063 Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
Amounts for partially owned consolidated and unconsolidated properties are presented at 100% of the project. (2) All non-wholly owned projects are being partially funded with project-specific construction loans. None of these loans are recourse to the Company. As of December 31, 2022, three projects have begun drawing on their construction loans for the unconsolidated joint venture projects under development.
Amounts for partially owned consolidated and unconsolidated properties are presented at 100% of the project. (2) Except for Reverb where the Company paid off the third-party construction loan during the year ended December 31, 2023, all non-wholly owned projects are being partially funded with project-specific construction loans. None of these loans are recourse to the Company.
The Company’s properties are summarized by ownership type in the following table: Properties Apartment Units Wholly Owned Properties 293 76,483 Partially Owned Properties – Consolidated 15 3,114 308 79,597 21 Table of Contents The following table sets forth certain information by market relating to the Company’s properties at December 31, 2022: Portfolio Summary Markets/Metro Areas Properties Apartment Units % of Stabilized Budgeted NOI (1) Average Rental Rate (2) Established Markets: Los Angeles 66 15,259 18.2 % $ 2,773 Orange County 13 4,028 5.2 % 2,685 San Diego 12 2,878 4.0 % 2,894 Subtotal – Southern California 91 22,165 27.4 % 2,772 San Francisco 44 11,790 15.9 % 3,229 Washington, D.C. 47 14,716 15.3 % 2,531 New York 34 8,536 14.0 % 4,378 Boston 27 7,170 11.5 % 3,373 Seattle 46 9,525 11.0 % 2,575 Subtotal – Established Markets 289 73,902 95.1 % 3,016 Expansion Markets: Denver 8 2,498 2.7 % 2,372 Atlanta 4 1,215 1.1 % 2,120 Dallas/Ft.
The Company’s properties are summarized by ownership type in the following table: Properties Apartment Units Wholly Owned Properties 288 77,131 Partially Owned Properties – Consolidated 14 3,060 302 80,191 24 Table of Contents The following table sets forth certain information by market relating to the Company’s properties at December 31, 2023: Portfolio Summary Markets/Metro Areas Properties Apartment Units % of Stabilized Budgeted NOI (1) Average Rental Rate (2) Established Markets: Los Angeles 58 14,732 17.1 % $ 2,929 Orange County 13 4,028 5.4 % 2,873 San Diego 12 2,878 4.0 % 3,108 Subtotal – Southern California 83 21,638 26.5 % 2,942 Washington, D.C. 48 15,028 16.3 % 2,657 San Francisco 43 11,667 15.4 % 3,303 New York 34 8,536 14.1 % 4,566 Boston 27 7,170 11.8 % 3,574 Seattle 44 9,267 10.4 % 2,561 Subtotal – Established Markets 279 73,306 94.5 % 3,145 Expansion Markets: Denver 9 2,792 2.8 % 2,411 Atlanta 7 2,111 1.6 % 2,169 Dallas/Ft.
Removed
(3) The land parcels under these projects are subject to long-term ground leases. Item 3. Lega l Proceedings As of December 31, 2022, the Company does not believe there is any litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company. Item 4.
Added
(3) The land parcels under these projects are subject to long-term ground leases. (4) The Total Budgeted Capital Cost on these projects increased by an aggregate of $13.0 million or 2.5% of initial budget primarily due to higher than budgeted interest incurred on construction loans.
Removed
Mine Sa fety Disclosures Not applicable. 23 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+4 added−0 removed3 unchanged
Biggest changeAt February 10, 2023, the number of record holders of Common Shares was approximately 1,790 and 378,602,684 Common Shares were outstanding. At February 10, 2023, the number of record holders of Units in the Operating Partnership was approximately 465 and 391,169,119 Units were outstanding.
Biggest changeAt February 8, 2024, the number of record holders of Common Shares was approximately 1,710 and 379,553,591 Common Shares were outstanding. At February 8, 2024, the number of record holders of Units in the Operating Partnership was approximately 450 and 391,291,526 Units were outstanding.
Unregistered Common Shares Issued in the Quarter Ended December 31, 2022 (Equity Residential) During the quarter ended December 31, 2022, EQR issued 414,871 Common Shares in exchange for 414,871 OP Units held by various limited partners of ERPOP.
Unregistered Common Shares Issued in the Quarter Ended December 31, 2023 (Equity Residential) During the quarter ended December 31, 2023, EQR issued 151,199 Common Shares in exchange for 151,199 OP Units held by various limited partners of ERPOP.
In light of the manner of the sale and information obtained by EQR from the limited partners in connection with these transactions, EQR believes it may rely on these exemptions. Item 6. Reserved 24 Table of Contents
In light of the manner of the sale and information obtained by EQR from the limited partners in connection with these transactions, EQR believes it may rely on these exemptions.
Added
Common Shares Repurchased in the Quarter Ended December 31, 2023 The Company repurchased and retired the following Common Shares during the quarter ended December 31, 2023: Period Total Number of Common Shares Purchased (1) Weighted Average Price Paid Per Share (1), (2) Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Common Shares that May Yet Be Purchased Under the Plans or Programs (1), (3) October 1, 2023 - October 31, 2023 — $ — — 13,000,000 November 1, 2023 - November 30, 2023 664,696 $ 55.44 664,696 12,335,304 December 1, 2023 - December 31, 2023 199,690 $ 61.28 199,690 12,135,614 Total 864,386 $ 56.79 864,386 (1) The Common Shares repurchased during the quarter ended December 31, 2023 represent Common Shares repurchased under the Company’s publicly announced share repurchase program approved by its Board of Trustees.
Added
The Company's share repurchase program was publicly announced on July 30, 2013 and the increase to its 13.0 million shares capacity was publicly announced on August 4, 2016. The program does not have an expiration date and may be suspended or discontinued at any time and does not obligate the Company to make any repurchases of its Common Shares.
Added
In January 2024, the Company’s Board of Trustees approved replenishing the Company’s share repurchase program authorization back to its original 13.0 million shares. (2) Weighted average price paid per share excludes costs associated with the repurchases. (3) The number of shares available for purchase under the Company’s publicly announced share repurchase program authorized by the Board of Trustees.
Added
The Company may repurchase Common Shares under its share repurchase program in open market or privately negotiated transactions. The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions and other investment opportunities. Item 6. Reserved 28 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+19 added−14 removed43 unchanged
Biggest changeNon-same store/other NOI results consist primarily of properties acquired in calendar years 2021 and 2022, operations from the Company’s development properties and operations prior to disposition from 2021 and 2022 sold properties. • The increase in same store rental income is primarily driven by strong Physical Occupancy and continued growth in pricing. • The increase in same store operating expenses is due primarily to: • Utilities – A $13.9 million increase from gas and electric, primarily driven by higher commodity prices; and • Repairs and maintenance – A $9.8 million increase primarily driven by volume and timing of maintenance and repairs along with increases in minimum wage on contracted services. • The increase in non-same store/other NOI is due primarily to a positive impact of higher NOI from properties acquired during 2021 and 2022 of $54.5 million and higher NOI from development properties in lease-up of $20.6 million, partially offset by a negative impact of lost NOI from 2021 and 2022 dispositions of $52.2 million and a negative impact of $1.2 million in lower NOI from one former master-leased property and two properties that have been removed from same store while undergoing major renovations. • The increase in consolidated total NOI is primarily a result of the Company’s higher NOI from same store properties, largely due to improvement in same store revenues as noted above.
Biggest changeNon-same store/other NOI results consist primarily of properties acquired in calendar years 2022 and 2023, operations from the Company’s development properties, other corporate operations and operations prior to disposition from 2022 and 2023 sold properties. • The increase in same store rental income is primarily driven by strong demand and limited new supply, partially offset by a non-cash write-off of approximately $1.5 million in straight-line receivables due to the bankruptcy of Rite Aid. • The increase in same store operating expenses is due primarily to: • Repairs and maintenance – A $9.9 million increase primarily driven by greater outsourcing due to higher internal staffing utilization to address issues from California rain storms that occurred earlier in 2023; • Real estate taxes – A $5.8 million increase due to modest escalation in rates and assessed values; and • On-site payroll – An $8.0 million increase due primarily to fewer staffing vacancies as compared to 2022 and elevated employee benefit costs, partially offset by the impact of innovation initiatives. • The decrease in non-same store/other NOI is due primarily to: • A negative impact of lost NOI from 2022 and 2023 dispositions of $20.2 million; • A negative impact of $2.8 million in lower NOI from two properties that have been removed from same store while undergoing major renovations; • A negative impact of $18.1 million from a real estate tax transaction adjustment in 2022 that did not reoccur in 2023; and • A positive impact of higher NOI from non-stabilized properties acquired during 2021, 2022 and 2023 of $11.2 million and higher NOI from development and other properties in lease-up of $10.9 million. • The increase in consolidated total NOI is a result of the Company’s higher NOI from same store properties, largely due to improvement in same store revenues as noted above.
Amounts for partially owned consolidated and unconsolidated properties are presented at 100% of the project. • Turnover – Total Residential move-outs (including inter-property and intra-property transfers) divided by total Residential apartment units. • Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs. 37 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to use judgment in the application of accounting policies, including making estimates and assumptions.
Amounts for partially owned consolidated and unconsolidated properties are presented at 100% of the project. • Turnover – Total Residential move-outs (including inter-property and intra-property transfers) divided by total Residential apartment units. • Unlevered Internal Rate of Return (“IRR”) – The Unlevered IRR on sold properties is the compound annual rate of return calculated by the Company based on the timing and amount of: (i) the gross purchase price of the property plus any direct acquisition costs incurred by the Company; (ii) total revenues earned during the Company’s ownership period; (iii) total direct property operating expenses (including real estate taxes and insurance) incurred during the Company’s ownership period; (iv) capital expenditures incurred during the Company’s ownership period; and (v) the gross sales price of the property net of selling costs. 41 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to use judgment in the application of accounting policies, including making estimates and assumptions.
(2) Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes: • the impact of any expenses relating to non-operating real estate asset impairment; • pursuit cost write-offs; • gains and losses from early debt extinguishment and preferred share redemptions; • gains and losses from non-operating assets; and • other miscellaneous items. 39 Table of Contents (3) The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses from sales and impairment write-downs of depreciable real estate and excluding depreciation related to real estate (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units / Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies.
(2) Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes: • the impact of any expenses relating to non-operating real estate asset impairment; • pursuit cost write-offs; • gains and losses from early debt extinguishment and preferred share redemptions; • gains and losses from non-operating assets; and • other miscellaneous items. 43 Table of Contents (3) The Company believes that FFO and FFO available to Common Shares and Units / Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses from sales and impairment write-downs of depreciable real estate and excluding depreciation related to real estate (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units / Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies.
Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented. • Same Store Residential Revenues – Revenues from our Same Store Properties presented on a GAAP basis which reflects the impact of Leasing Concessions on a straight-line basis. • % of Stabilized Budgeted NOI – Represents original budgeted 2023 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up. • Total Budgeted Capital Cost – Estimated remaining cost for projects under development and/or developed plus all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
Properties are included in Same Store when they are stabilized for all of the current and comparable periods presented. • Same Store Residential Revenues – Revenues from our Same Store Properties presented on a GAAP basis which reflects the impact of Leasing Concessions on a straight-line basis. • % of Stabilized Budgeted NOI – Represents original budgeted 2024 NOI for stabilized properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up. • Total Budgeted Capital Cost – Estimated remaining cost for projects under development and/or developed plus all capitalized costs incurred to date, including land acquisition costs, construction costs, capitalized real estate taxes and insurance, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property. • Average Rental Rate – Total Residential rental revenues reflected on a straight-line basis in accordance with GAAP divided by the weighted average occupied apartment units for the reporting period presented. • Building Improvements – Includes roof replacement, paving, building mechanical equipment systems, exterior siding and painting, major landscaping, furniture, fixtures and equipment for amenities and common areas, vehicles and office and maintenance equipment. • Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $150-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sales price of the asset.
The weighted average Acquisition Cap Rate for acquired properties is weighted based on the projected NOI streams and the relative purchase price for each respective property. • Average Rental Rate – Total Residential rental revenues reflected on a straight-line basis in accordance with GAAP divided by the weighted average occupied apartment units for the reporting period presented. 40 Table of Contents • Building Improvements – Includes roof replacement, paving, building mechanical equipment systems, exterior siding and painting, major landscaping, furniture, fixtures and equipment for amenities and common areas, vehicles and office and maintenance equipment. • Disposition Yield – NOI that the Company anticipates giving up in the next 12 months less an estimate of property management costs/management fees allocated to the project (generally ranging from 2.0% to 4.0% of revenues depending on the size and income streams of the asset) and less an estimate for in-the-unit replacement capital expenditures (generally ranging from $150-$450 per apartment unit depending on the age and condition of the asset) divided by the gross sales price of the asset.
The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property. • Leasing Concessions – Reflects upfront discounts on both new move-in and renewal leases on a straight-line basis. • Non-Residential – Consists of revenues and expenses from retail and public parking garage operations. 36 Table of Contents • Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2021 and 2022, plus any properties in lease-up and not stabilized as of January 1, 2021. • Percentage of Residents Renewing – Leases renewed expressed as a percentage of total renewal offers extended during the reporting period. • Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period. • Renovation Expenditures – Apartment unit renovation costs (primarily kitchens and baths) designed to reposition these units for higher rental levels in their respective markets. • Replacements – Includes appliances, mechanical equipment, fixtures and flooring (including hardwood and carpeting). • Residential – Consists of multifamily apartment revenues and expenses. • Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2021, less properties subsequently sold.
The weighted average Disposition Yield for sold properties is weighted based on the projected NOI streams and the relative sales price for each respective property. • Leasing Concessions – Reflects upfront discounts on both new move-in and renewal leases on a straight-line basis. • Non-Residential – Consists of revenues and expenses from retail and public parking garage operations. • Non-Same Store Properties – For annual comparisons, primarily includes all properties acquired during 2022 and 2023, plus any properties in lease-up and not stabilized as of January 1, 2022. • Percentage of Residents Renewing – Leases renewed expressed as a percentage of total renewal offers extended during the reporting period. • Physical Occupancy – The weighted average occupied apartment units for the reporting period divided by the average of total apartment units available for rent for the reporting period. • Renovation Expenditures – Apartment unit renovation costs (primarily kitchens and baths) designed to reposition these units for higher rental levels in their respective markets. • Replacements – Includes appliances, mechanical equipment, fixtures and flooring (including hardwood and carpeting). • Residential – Consists of multifamily apartment revenues and expenses. • Same Store Properties – For annual comparisons, primarily includes all properties acquired or completed that are stabilized prior to January 1, 2022, less properties subsequently sold.
Financing Activities Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions/dividends to shareholders and other Common Share activity.
Financing Activities Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions/dividends to shareholders/unitholders and other Common Share activity.
Forward sale agreements under the ATM program allow the Company, at its election, to settle the agreements by issuing Common Shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the 35 Table of Contents agreements in whole or in part through the delivery or receipt of Common Shares or cash.
Forward sale agreements under the ATM program allow the Company, at its election, to settle the agreements by issuing Common Shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the 39 Table of Contents agreements in whole or in part through the delivery or receipt of Common Shares or cash.
See the Same Store Results section below for additional discussion of those results. 28 Table of Contents Property management expenses include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third-party management companies.
See the Same Store Results section below for additional discussion of those results. 32 Table of Contents Property management expenses include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third-party management companies.
For floating rate debt, the current rate in effect for the most recent payment through December 31, 2022 is assumed to be in effect through the respective maturity date of each instrument. See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of debt at December 31, 2022.
For floating rate debt, the current rate in effect for the most recent payment through December 31, 2023 is assumed to be in effect through the respective maturity date of each instrument. See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of debt at December 31, 2023.
For comparison of the year ended December 31, 2021 to the year ended December 31, 2020, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021.
For comparison of the year ended December 31, 2022 to the year ended December 31, 2021, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , included in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.
The Company’s significant accounting policies are described in Note 2 in the Notes to Consolidated Financial Statements. These policies were followed in preparing the consolidated financial statements at and for the year ended December 31, 2022. The Company has identified the significant accounting policies below as critical accounting policies.
The Company’s significant accounting policies are described in Note 2 in the Notes to Consolidated Financial Statements. These policies were followed in preparing the consolidated financial statements at and for the year ended December 31, 2023. The Company has identified the significant accounting policies below as critical accounting policies.
As of February 10, 2023, the ratings are as follows: Standard & Poor’s Moody's ERPOP's long-term senior debt rating A- A3 ERPOP's short-term commercial paper rating A-2 P-2 EQR's long-term preferred equity rating BBB Baa1 See Note 18 in the Notes to Consolidated Financial Statements for discussion of the events, if any, which occurred subsequent to December 31, 2022.
As of February 8, 2024, the ratings are as follows: Standard & Poor’s Moody's ERPOP's long-term senior debt rating A- A3 ERPOP's short-term commercial paper rating A-2 P-2 EQR's long-term preferred equity rating BBB Baa1 See Note 18 in the Notes to Consolidated Financial Statements for discussion of the events, if any, which occurred subsequent to December 31, 2023.
See also Notes 8 and 16 in the Notes to Consolidated Financial Statements for additional discussion of contractual obligations and commitments as of December 31, 2022. 34 Table of Contents Capital Structure The Company’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2022 is presented in the following table.
See also Notes 8 and 16 in the Notes to Consolidated Financial Statements for additional discussion of contractual obligations and commitments as of December 31, 2023. 38 Table of Contents Capital Structure The Company’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2023 is presented in the following table.
Cash provided by operating activities for the year ended December 31, 2022 as compared to 2021, increased by approximately $194.6 million as a direct result of the NOI and other changes discussed above in Results of Operations . Investing Activities Our investing cash flows are primarily impacted by our transaction activity (acquisitions/dispositions), development spend and capital expenditures.
Cash provided by operating activities for the year ended December 31, 2023 as compared to 2022, increased by approximately $78.0 million as a direct result of the NOI and other changes discussed above in Results of Operations . Investing Activities Our investing cash flows are primarily impacted by our transaction activity (acquisitions/dispositions), development spend and capital expenditures.
Liquidity and Capital Resources With approximately $2.4 billion in readily available liquidity, a strong balance sheet, limited near-term maturities, very strong credit metrics and ample access to capital markets, the Company believes it is well positioned to meet its future obligations and opportunities. See further discussion below.
Liquidity and Capital Resources With approximately $2.1 billion in readily available liquidity, a strong balance sheet, limited near-term debt maturities, very strong credit metrics and ample access to capital markets, the Company believes it is well positioned to meet its future obligations and take advantage of opportunities. See further discussion below.
Interest expected to be incurred on the Company’s secured and unsecured debt based on obligations outstanding at December 31, 2022, inclusive of capitalized interest, approximates $210.0 million annually for the next five years, with total remaining obligations of approximately $2.3 billion.
Interest expected to be incurred on the Company’s secured and unsecured debt based on obligations outstanding at December 31, 2023, inclusive of capitalized interest, approximates $223.0 million annually for the next five years, with total remaining obligations of approximately $2.4 billion.
All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees. Total dividends/distributions paid in January 2023 amounted to $244.6 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended December 31, 2022.
All future dividends/distributions remain subject to the discretion of the Company’s Board of Trustees. Total dividends/distributions paid in January 2024 amounted to $259.2 million (excluding distributions on Partially Owned Properties), which consisted of certain distributions declared during the quarter ended December 31, 2023.
For the year ended December 31, 2022, our actual capital expenditures to real estate included the following (amounts in thousands except for apartment unit and per apartment unit amounts): Capital Expenditures to Real Estate For the Year Ended December 31, 2022 Same Store Properties Non-Same Store Properties/Other Total Same Store Avg.
For the year ended December 31, 2023, our actual capital expenditures to real estate included the following (amounts in thousands except for apartment unit and per apartment unit amounts): 35 Table of Contents Capital Expenditures to Real Estate For the Year Ended December 31, 2023 Same Store Properties Non-Same Store Properties/Other Total Same Store Avg.
Long-term, we expect elevated single family home ownership costs, positive household formation trends and the overall deficit in housing across the country to buffer the impact on our business from the risks of potential economic weakness.
Long-term, we expect elevated single family home ownership costs, positive household formation trends, manageable competitive new supply in our established coastal markets and the overall deficit in housing across the country to buffer the impact on our business from the risks of potential economic weakness.
The value of and cash flow from these unencumbered properties are in excess of the requirements the Company must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $28.1 billion in investment in real estate on the Company’s balance sheet at December 31, 2022, $24.5 billion or 87.1% was unencumbered.
The value of and cash flow from these unencumbered properties are in excess of the requirements the Company must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $28.7 billion in investment in real estate on the Company’s balance sheet at December 31, 2023, $25.6 billion or 89.1% was unencumbered.
Same Store Results Properties that the Company owned and were stabilized for all of both 2022 and 2021 (the “2022 Same Store Properties”), which represented 72,872 apartment units, drove the Company’s results of operations. Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months.
Same Store Results Properties that the Company owned and were stabilized for all of both 2023 and 2022 (the “2023 Same Store Properties”), which represented 76,297 apartment units, drove the Company’s results of operations. Properties are considered “stabilized” when they have achieved 90% occupancy for three consecutive months.
Depreciation expense, which includes depreciation on non-real estate assets, increased approximately $43.9 million or 5.2% during the year ended December 31, 2022 as compared to 2021, primarily as a result of additional depreciation expense on properties acquired in 2021 and 2022 and development properties placed in service during 2021, partially offset by lower depreciation from properties sold in 2021 and 2022.
Depreciation expense, which includes depreciation on non-real estate assets, increased approximately $6.5 million or 0.7% during the year ended December 31, 2023 as compared to 2022, primarily as a result of additional depreciation expense on properties acquired in 2023 and 2022, partially offset by lower depreciation from properties sold in 2022 and 2023.
Statements of Cash Flows The following table sets forth our sources and uses of cash flows for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands): Year Ended December 31, 2022 2021 2020 Cash flows provided by (used for): Operating activities $ 1,454,756 $ 1,260,184 $ 1,265,536 Investing activities $ 107,792 $ (434,620 ) $ 663,586 Financing activities $ (1,785,612 ) $ (565,056 ) $ (1,946,393 ) The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the year ended December 31, 2022.
Statements of Cash Flows The following table sets forth our sources and uses of cash flows for the years ended December 31, 2023, 2022 and 2021 (amounts in thousands): Year Ended December 31, 2023 2022 2021 Cash flows provided by (used for): Operating activities $ 1,532,798 $ 1,454,756 $ 1,260,184 Investing activities $ (409,504 ) $ 107,792 $ (434,620 ) Financing activities $ (1,120,471 ) $ (1,785,612 ) $ (565,056 ) The following provides information regarding the Company’s cash flows from operating, investing and financing activities for the year ended December 31, 2023.
The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible and intangible assets/liabilities acquired. 38 Table of Contents Funds From Operations and Normalized Funds From Operations The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for each of the three years ended December 31, 2022: Funds From Operations and Normalized Funds From Operations (Amounts in thousands) Year Ended December 31, 2022 2021 2020 Net income $ 806,995 $ 1,396,714 $ 962,501 Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties (3,774 ) (17,964 ) (14,855 ) Preferred/preference distributions (3,090 ) (3,090 ) (3,090 ) Net income available to Common Shares and Units / Units 800,131 1,375,660 944,556 Adjustments: Depreciation 882,168 838,272 820,832 Depreciation – Non-real estate additions (4,306 ) (4,277 ) (4,564 ) Depreciation – Partially Owned Properties (2,640 ) (3,673 ) (3,345 ) Depreciation – Unconsolidated Properties 2,898 2,487 2,454 Net (gain) loss on sales of unconsolidated entities - operating assets (9 ) (1,304 ) (1,636 ) Net (gain) loss on sales of real estate properties (304,325 ) (1,072,183 ) (531,807 ) Noncontrolling Interests share of gain (loss) on sales of real estate properties — 15,650 11,655 FFO available to Common Shares and Units / Units (1) (3) (4) 1,373,917 1,150,632 1,238,145 Adjustments: Impairment – non-operating real estate assets — 16,769 — Write-off of pursuit costs 4,780 6,526 6,869 Debt extinguishment and preferred share redemption (gains) losses 4,664 744 39,292 Non-operating asset (gains) losses 2,368 (22,283 ) (32,590 ) Other miscellaneous items (13,901 ) 8,976 4,652 Normalized FFO available to Common Shares and Units / Units (2) (3) (4) $ 1,371,828 $ 1,161,364 $ 1,256,368 FFO (1) (3) $ 1,377,007 $ 1,153,722 $ 1,241,235 Preferred/preference distributions (3,090 ) (3,090 ) (3,090 ) FFO available to Common Shares and Units / Units (1) (3) (4) $ 1,373,917 $ 1,150,632 $ 1,238,145 Normalized FFO (2) (3) $ 1,374,918 $ 1,164,454 $ 1,259,458 Preferred/preference distributions (3,090 ) (3,090 ) (3,090 ) Normalized FFO available to Common Shares and Units / Units (2) (3) (4) $ 1,371,828 $ 1,161,364 $ 1,256,368 (1) The National Association of Real Estate Investment Trusts (“Nareit”) defines funds from operations (“FFO”) (December 2018 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains or losses from sales and impairment write-downs of depreciable real estate and land when connected to the main business of a REIT, impairment write-downs of investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and depreciation and amortization related to real estate.
The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible and intangible assets/liabilities acquired. 42 Table of Contents Funds From Operations and Normalized Funds From Operations The following is the Company’s and the Operating Partnership’s reconciliation of net income to FFO available to Common Shares and Units / Units and Normalized FFO available to Common Shares and Units / Units for each of the three years ended December 31, 2023: Funds From Operations and Normalized Funds From Operations (Amounts in thousands) Year Ended December 31, 2023 2022 2021 Net income $ 868,488 $ 806,995 $ 1,396,714 Net (income) loss attributable to Noncontrolling Interests – Partially Owned Properties (6,340 ) (3,774 ) (17,964 ) Preferred/preference distributions (3,090 ) (3,090 ) (3,090 ) Net income available to Common Shares and Units / Units 859,058 800,131 1,375,660 Adjustments: Depreciation 888,709 882,168 838,272 Depreciation – Non-real estate additions (4,268 ) (4,306 ) (4,277 ) Depreciation – Partially Owned Properties (2,130 ) (2,640 ) (3,673 ) Depreciation – Unconsolidated Properties 2,860 2,898 2,487 Net (gain) loss on sales of unconsolidated entities - operating assets — (9 ) (1,304 ) Net (gain) loss on sales of real estate properties (282,539 ) (304,325 ) (1,072,183 ) Noncontrolling Interests share of gain (loss) on sales of real estate properties 2,336 — 15,650 FFO available to Common Shares and Units / Units (1) (3) (4) 1,464,026 1,373,917 1,150,632 Adjustments: Impairment – non-operating real estate assets — — 16,769 Write-off of pursuit costs 3,647 4,780 6,526 Debt extinguishment and preferred share redemption (gains) losses 1,143 4,664 744 Non-operating asset (gains) losses (13,323 ) 2,368 (22,283 ) Other miscellaneous items 21,588 (13,901 ) 8,976 Normalized FFO available to Common Shares and Units / Units (2) (3) (4) $ 1,477,081 $ 1,371,828 $ 1,161,364 FFO (1) (3) $ 1,467,116 $ 1,377,007 $ 1,153,722 Preferred/preference distributions (3,090 ) (3,090 ) (3,090 ) FFO available to Common Shares and Units / Units (1) (3) (4) $ 1,464,026 $ 1,373,917 $ 1,150,632 Normalized FFO (2) (3) $ 1,480,171 $ 1,374,918 $ 1,164,454 Preferred/preference distributions (3,090 ) (3,090 ) (3,090 ) Normalized FFO available to Common Shares and Units / Units (2) (3) (4) $ 1,477,081 $ 1,371,828 $ 1,161,364 (1) The National Association of Real Estate Investment Trusts (“Nareit”) defines funds from operations (“FFO”) (December 2018 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains or losses from sales and impairment write-downs of depreciable real estate and land when connected to the main business of a REIT, impairment write-downs of investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and depreciation and amortization related to real estate.
Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 The following table presents a reconciliation of diluted earnings per share/unit for the year ended December 31, 2022 as compared to the same period in 2021: Year Ended December 31 Diluted earnings per share/unit for full year 2021 $ 3.54 Property NOI 0.60 Interest expense (0.02 ) Corporate overhead (1) (0.03 ) Net gain/loss on property sales (1.95 ) Non-operating asset gains/losses (0.07 ) Impairment – non-operating real estate assets 0.04 Depreciation expense (0.11 ) Other 0.05 Diluted earnings per share/unit for full year 2022 $ 2.05 (1) Corporate overhead includes property management and general and administrative expenses.
Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 The following table presents a reconciliation of diluted earnings per share/unit for the year ended December 31, 2023 as compared to the same period in 2022: Year Ended December 31 Diluted earnings per share/unit for full year 2022 $ 2.05 Property NOI 0.29 Interest expense 0.02 Corporate overhead (1) (0.03 ) Net gain/loss on property sales (0.06 ) Non-operating asset gains/losses 0.04 Depreciation expense (0.01 ) Other (0.10 ) Diluted earnings per share/unit for full year 2023 $ 2.20 (1) Corporate overhead includes property management and general and administrative expenses.
The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of December 31, 2022 and 2021 (amounts in thousands): December 31, 2022 December 31, 2021 Cash and cash equivalents $ 53,869 $ 123,832 Restricted deposits $ 83,303 $ 236,404 Unsecured revolving credit facility availability $ 2,366,537 $ 2,181,372 32 Table of Contents Credit Facility and Commercial Paper Program The Company has a $2.5 billion unsecured revolving credit facility maturing October 26, 2027.
The following table presents the Company’s balances for cash and cash equivalents, restricted deposits and the available borrowing capacity on its revolving credit facility as of December 31, 2023 and 2022 (amounts in thousands): December 31, 2023 December 31, 2022 Cash and cash equivalents $ 50,743 $ 53,869 Restricted deposits $ 89,252 $ 83,303 Unsecured revolving credit facility availability $ 2,086,585 $ 2,366,537 36 Table of Contents Credit Facility and Commercial Paper Program The Company has a $2.5 billion unsecured revolving credit facility maturing October 26, 2027.
The following table presents the availability on the Company’s unsecured revolving credit facility as of February 10, 2023 (amounts in thousands): February 10, 2023 Unsecured revolving credit facility commitment $ 2,500,000 Commercial paper balance outstanding (130,000 ) Unsecured revolving credit facility balance outstanding — Other restricted amounts (3,484 ) Unsecured revolving credit facility availability $ 2,366,516 Dividend Policy The Company declared a dividend/distribution for each quarter in 2022 of $0.625 per share/unit, an annualized increase of 3.7% over the amount paid in 2021.
The following table presents the availability on the Company’s unsecured revolving credit facility as of February 8, 2024 (amounts in thousands): February 8, 2024 Unsecured revolving credit facility commitment $ 2,500,000 Commercial paper balance outstanding (354,000 ) Unsecured revolving credit facility balance outstanding — Other restricted amounts (3,438 ) Unsecured revolving credit facility availability $ 2,142,562 Dividend Policy The Company declared a dividend/distribution for each quarter in 2023 of $0.6625 per share/unit, an annualized increase of 6.0% over the amount paid in 2022.
General and administrative expenses, which include corporate operating expenses, increased approximately $2.2 million or 3.9% during the year ended December 31, 2022 as compared to 2021, primarily due to increases in payroll-related costs, legal and professional fees and training/conference costs.
General and administrative expenses, which include corporate operating expenses, increased approximately $2.0 million or 3.4% during the year ended December 31, 2023 as compared to 2022, primarily due to increases in payroll-related costs and public company expenses, partially offset by decreases in legal and professional fees and training/marketing costs.
We also see our affluent resident base as being more resilient to rising inflation due to higher levels of disposable income and lower relative rent-to-income ratios.
We also see our affluent 34 Table of Contents resident base as being resilient to economic uncertainty, including elevated inflation, due to higher levels of disposable income and lower relative rent-to-income ratios.
Worth (3) markets, consisting of 1,278 apartment units totaling approximately $417.7 million of expected development costs; • The Company stabilized two consolidated apartment properties during 2022, located in the Washington, D.C. and Boston markets, consisting of 624 apartment units totaling approximately $482.1 million of development costs; and • The Company spent approximately $203.6 million during 2022, primarily for consolidated and unconsolidated development projects.
Worth (3) markets, consisting of 1,278 apartment units totaling approximately $417.7 million of expected development costs; • The Company stabilized two consolidated apartment properties during 2022, located in the Washington, D.C. and Boston markets, consisting of 624 apartment units totaling approximately $482.1 million of development costs; • The Company spent approximately $203.6 million during 2022, primarily for consolidated and unconsolidated development projects; • The Company stabilized one consolidated apartment property during 2023, located in the San Francisco market, consisting of 200 apartment units totaling approximately $116.4 million of development costs; • The Company completed construction on one consolidated apartment property during 2023, located in the Washington, D.C. market, consisting of 312 apartment units totaling approximately $108.0 million of development costs; and • The Company spent approximately $118.2 million during 2023, primarily for consolidated and unconsolidated development projects.
Net gain on sales of real estate properties decreased approximately $767.9 million or 71.6% during the year ended December 31, 2022 as compared to 2021, primarily as a result of a lower sales volume with the sale of three consolidated apartment properties in 2022 as compared to the sale of fourteen consolidated apartment properties in the same period in 2021.
Net gain on sales of real estate properties decreased approximately $21.8 million or 7.2% during the year ended December 31, 2023 as compared to 2022, primarily as a result of the sale of eleven consolidated apartment properties for a lower gain in 2023 as compared to the sale of three consolidated apartment properties in the same period in 2022.
(2) Includes expenditures for two properties that have been removed from same store while undergoing major renovations requiring a significant number of apartment units to be vacated to accommodate the extensive planned improvements. The renovations are expected to continue through at least the end of 2023 at both properties.
(2) Includes expenditures for two properties that have been removed from same store while undergoing major renovations requiring a significant number of apartment units to be vacated to accommodate the extensive planned improvements. The renovation at one property is expected to continue through the second quarter of 2024 with the other continuing into 2025.
The Revolving Credit Agreement also contains a sustainability-linked pricing component which provides for interest rate margin reductions upon achieving certain sustainability ratings. See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of the Company’s credit facility. The Company may borrow up to a maximum of $1.0 billion under its commercial paper program subject to market conditions.
See Note 9 in the Notes to Consolidated Financial Statements for additional discussion of the Company’s credit facility. The Company may borrow up to a maximum of $1.0 billion under its commercial paper program subject to market conditions.
As of February 10, 2023, EQR has remaining authorization to repurchase up to 13.0 million of its shares. We believe our ability to access capital markets is enhanced by ERPOP’s long-term senior debt ratings and short-term commercial paper ratings, as well as EQR’s long-term preferred equity ratings.
We believe our ability to access capital markets is enhanced by ERPOP’s long-term senior debt ratings and short-term commercial paper ratings, as well as EQR’s long-term preferred equity ratings.
The Percentage of Residents Renewing has been strong at 56.5% for the fourth quarter of 2022. Turnover has been the lowest in the Company’s history at 42.8% for the full year of 2022, reflecting a healthy and consistent trend of historically high resident retention.
The Percentage of Residents Renewing was strong at 59.0% for the fourth quarter of 2023. Turnover remained at some of the lowest levels in the Company's history at 43.7% for the full year of 2023, reflecting a healthy and consistent trend of historically high resident retention.
Investments in Unconsolidated Entities • The Company entered into six separate unconsolidated joint ventures during 2021 for the purpose of developing vacant land parcels in Texas (3), Colorado (2) and New York. The Company’s total investment in these six joint ventures was approximately $72.2 million and $150.4 million as of December 31, 2021 and 2022, respectively.
Investments in Unconsolidated Entities • The Company entered into three separate unconsolidated joint ventures during 2022 for the purpose of developing vacant land parcels in the Dallas/Ft. Worth and Boston (2) markets. The Company’s total investment in these three joint ventures was approximately $66.8 million as of December 31, 2022.
These expenses increased approximately $12.1 million or 12.4% during the year ended December 31, 2022 as compared to 2021. This increase is primarily attributable to increases in payroll-related costs, training/conference costs, temporary help/contractors costs and third-party management fees.
These expenses increased approximately $9.5 million or 8.6% during the year ended December 31, 2023 as compared to 2022. This increase is primarily attributable to increases in payroll-related costs, workforce/contractors costs and information technology expenses, partially offset by decreases in training/marketing costs and third-party management fees.
ERP Operating Limited Partnership Capital Structure as of December 31, 2022 (Amounts in thousands except for unit and per unit amounts) Secured Debt $ 1,953,438 26.3 % Unsecured Debt 5,472,284 73.7 % Total Debt 7,425,722 100.0 % 24.3 % Total Outstanding Units 390,859,445 Common Share Price at December 31, 2022 $ 59.00 23,060,707 99.8 % Perpetual Preference Units 37,280 0.2 % Total Equity 23,097,987 100.0 % 75.7 % Total Market Capitalization $ 30,523,709 100.0 % Financial Flexibility EQR and ERPOP currently have an active universal shelf registration statement for the issuance of equity and debt securities that automatically became effective upon filing with the SEC in May 2022 and expires in May 2025.
ERP Operating Limited Partnership Capital Structure as of December 31, 2023 (Amounts in thousands except for unit and per unit amounts) Secured Debt $ 1,632,902 22.1 % Unsecured Debt 5,757,548 77.9 % Total Debt 7,390,450 100.0 % 23.6 % Total Outstanding Units 390,872,723 Common Share Price at December 31, 2023 $ 61.16 23,905,776 99.8 % Perpetual Preference Units 37,280 0.2 % Total Equity 23,943,056 100.0 % 76.4 % Total Market Capitalization $ 31,333,506 100.0 % Financial Flexibility EQR and ERPOP currently have an active universal shelf registration statement for the issuance of equity and debt securities that automatically became effective upon filing with the SEC in May 2022 and expires in May 2025.
During the quarter ended September 30, 2021, the Company entered into forward sale agreements under the prior program for a total of approximately 1.7 million Common Shares at a weighted average initial forward price per share of $83.25.
During the year ended December 31, 2021 and part of the year ended December 31, 2022, the Company had forward sale agreements outstanding for approximately 1.7 million Common Shares at a weighted average initial forward price per share of $83.25.
In May 2022, the Company replaced the prior program with a new program which extended the maturity to May 2025 and gives us the authority to issue up to 13.0 million shares, all of which remain available for issuance as of December 31, 2022.
The current program matures in May 2025 and gives us the authority to issue up to 13.0 million shares, all of which remain available for issuance as of February 8, 2024.
See Notes 4 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate investments and investments in partially owned entities.
The Company’s total investment in these two joint ventures was approximately $4.9 million as of December 31, 2023. See Notes 4 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s real estate investments and investments in partially owned entities.
For 2022, key drivers were: • Acquired one consolidated rental property for approximately $113.0 million in cash; • Disposed of three consolidated rental properties, receiving net proceeds of approximately $720.3 million; • Invested $109.3 million primarily in development projects; 31 Table of Contents • Invested $159.7 million primarily in unconsolidated development joint venture entities as well as unconsolidated investments in real estate technology funds/companies for various technology initiatives; and • Invested $221.1 million in capital expenditures to real estate presented in the table below.
For the year ended December 31, 2023, key drivers were: • Acquired four consolidated rental properties for approximately $324.5 million in cash, inclusive of $53.5 million in assumed mortgage debt with a discount of approximately $11.2 million on one acquired property; • Disposed of eleven consolidated rental properties, receiving net proceeds of approximately $374.0 million; • Invested $78.2 million primarily in consolidated development projects; • Invested $50.0 million primarily in unconsolidated development joint venture entities as well as unconsolidated investments in real estate technology funds/companies for various technology initiatives; and • Invested $319.3 million in capital expenditures to real estate presented in the table below.
The following table provides results and statistics related to our Residential same store operations for the years ended December 31, 2022 and 2021: 2022 vs. 2021 Same Store Residential Results/Statistics by Market Increase (Decrease) from Prior Year Markets/Metro Areas Apartment Units 2022 % of Actual NOI 2022 Average Rental Rate 2022 Weighted Average Physical Occupancy % 2022 Turnover Average Rental Rate Physical Occupancy Turnover Los Angeles 14,662 19.8 % $ 2,733 96.6 % 38.4 % 9.0 % (0.2 %) (3.1 %) Orange County 4,028 5.8 % 2,614 97.0 % 34.5 % 12.8 % (0.7 %) (0.1 %) San Diego 2,706 4.0 % 2,766 96.7 % 38.1 % 11.4 % (0.9 %) (5.0 %) Subtotal – Southern California 21,396 29.6 % 2,715 96.7 % 37.6 % 10.0 % (0.4 %) (2.8 %) San Francisco 11,368 17.4 % 3,152 96.1 % 41.5 % 8.3 % 0.9 % (6.5 %) Washington, D.C. 14,187 16.2 % 2,456 96.8 % 43.1 % 5.5 % 0.3 % (2.2 %) New York 8,536 13.5 % 4,068 96.9 % 42.4 % 17.6 % 1.8 % 4.2 % Seattle 9,331 11.4 % 2,497 95.1 % 51.6 % 10.7 % (0.5 %) 0.7 % Boston 6,430 10.0 % 3,208 96.2 % 45.3 % 11.2 % 0.5 % (1.8 %) Denver 1,624 1.9 % 2,299 96.7 % 60.3 % 11.3 % 0.1 % 0.1 % Total 72,872 100.0 % $ 2,898 96.4 % 42.8 % 10.4 % 0.3 % (1.9 %) Note: The above table reflects Residential same store results only.
The following table provides results and statistics related to our Residential same store operations for the years ended December 31, 2023 and 2022: 2023 vs. 2022 Same Store Residential Results/Statistics by Market Increase (Decrease) from Prior Year Markets/Metro Areas Apartment Units 2023 % of Actual NOI 2023 Average Rental Rate 2023 Weighted Average Physical Occupancy % 2023 Turnover Average Rental Rate Physical Occupancy Turnover Los Angeles 14,135 17.6 % $ 2,861 95.3 % 44.5 % 5.1 % (1.3 %) 5.8 % Orange County 4,028 5.6 % 2,801 96.3 % 37.4 % 7.1 % (0.7 %) 2.9 % San Diego 2,706 4.0 % 2,993 95.4 % 42.3 % 8.2 % (1.3 %) 4.2 % Subtotal – Southern California 20,869 27.2 % 2,867 95.5 % 42.9 % 5.9 % (1.2 %) 5.1 % San Francisco 11,245 16.4 % 3,290 95.6 % 44.1 % 4.2 % (0.6 %) 2.4 % Washington, D.C. 14,400 16.3 % 2,597 96.8 % 40.5 % 5.9 % 0.0 % (2.6 %) New York 8,536 14.4 % 4,504 96.8 % 37.2 % 10.7 % (0.1 %) (5.2 %) Seattle 9,266 10.8 % 2,579 95.2 % 48.0 % 2.9 % 0.1 % (3.6 %) Boston 6,700 10.3 % 3,422 96.0 % 43.9 % 7.4 % (0.1 %) (1.5 %) Denver 2,505 2.7 % 2,404 96.3 % 58.1 % 4.6 % 0.0 % (2.2 %) Other Expansion Markets 2,776 1.9 % 1,987 94.7 % 57.1 % 5.1 % (0.6 %) 1.8 % Total 76,297 100.0 % $ 3,029 95.9 % 43.7 % 6.2 % (0.4 %) 0.1 % Note: The above table reflects Residential same store results only.
Residential operations account for approximately 96.3% of total revenues for the year ended December 31, 2022. Despite geopolitical and economic uncertainties, demand to live in our apartment communities remained healthy, which our financial results reflected, as we continued to capture the gap between in-place rent levels and market rent levels.
Residential operations account for approximately 96.4% of total revenues for the year ended December 31, 2023. During 2023, demand to live in our apartment communities remained healthy, which our financial results reflected.
For additional details, see Item 1A, Risk Factors . 25 Table of Contents Results of Operations 2021 and 2022 Transactions In conjunction with our business objectives and operating and investing strategies, the following table provides a rollforward of the transactions that occurred during the years ended December 31, 2021 and 2022: Portfolio Rollforward ($ in thousands) Properties Apartment Units Purchase Price Acquisition Cap Rate 12/31/2020 304 77,889 Acquisitions: Consolidated Rental Properties 13 3,533 $ 1,249,679 3.7 % Consolidated Rental Properties – Not Stabilized (1) 4 1,214 $ 459,700 4.0 % Sales Price Disposition Yield Dispositions: Consolidated Rental Properties (14 ) (3,053 ) $ (1,716,775 ) (3.7 )% Completed Developments – Consolidated 3 824 12/31/2021 310 80,407 Purchase Price Acquisition Cap Rate Acquisitions: Consolidated Rental Properties 1 172 $ 113,000 3.5 % Unconsolidated Land Parcels (2) — — $ 56,886 Sales Price Disposition Yield Dispositions: Consolidated Rental Properties (3 ) (945 ) $ (746,150 ) (3.4 )% Configuration Changes — (37 ) 12/31/2022 308 79,597 (1) The Company acquired four properties during the year ended December 31, 2021, one each in the Denver, Atlanta, Seattle and Dallas/Ft.
Business Objectives and Operating and Investing Strategies See Item 1, Business , for discussion regarding the Company’s business objectives and operating and investing strategies. 29 Table of Contents Results of Operations 2022 and 2023 Transactions In conjunction with our business objectives and operating and investing strategies, the following table provides a rollforward of the transactions that occurred during the years ended December 31, 2022 and 2023: Portfolio Rollforward ($ in thousands) Properties Apartment Units Purchase Price Acquisition Cap Rate 12/31/2021 310 80,407 Acquisitions: Consolidated Rental Properties 1 172 $ 113,000 3.5 % Unconsolidated Land Parcels (1) — — $ 56,886 Sales Price Disposition Yield Dispositions: Consolidated Rental Properties (3 ) (945 ) $ (746,150 ) (3.4 )% Configuration Changes — (37 ) 12/31/2022 308 79,597 Purchase Price Acquisition Cap Rate Acquisitions: Consolidated Rental Properties 2 577 $ 189,734 (3) 5.1 % Consolidated Rental Properties – Not Stabilized (2) 2 606 $ 176,600 5.9 % Sales Price Disposition Yield Dispositions: Consolidated Rental Properties (11 ) (912 ) $ (379,893 ) (5.5 )% Completed Developments – Consolidated 1 312 Configuration Changes — 11 12/31/2023 302 80,191 (1) The purchase price listed represents the total consideration for the closing of the respective joint ventures.
Three of the projects are related to the Company’s joint venture development program with Toll, two of which commenced construction during the second and third quarters of 2022; and • The Company entered into three separate unconsolidated joint ventures during 2022 for the purpose of developing vacant land parcels in the Dallas/Ft. Worth and Boston (2) markets.
("Toll"), which commenced construction during the first quarter of 2022 prior to our entrance into the joint venture; and • The Company entered into two separate unconsolidated joint ventures during 2023 for the purpose of developing vacant land parcels in the Boston and Seattle markets.
EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. 33 Table of Contents The Company’s total debt summary schedule as of December 31, 2022 is as follows: Debt Summary as of December 31, 2022 ($ in thousands) Debt Balances % of Total Secured $ 1,953,438 26.3 % Unsecured 5,472,284 73.7 % Total $ 7,425,722 100.0 % Fixed Rate Debt: Secured – Conventional $ 1,608,838 21.7 % Unsecured – Public 5,342,329 71.9 % Fixed Rate Debt 6,951,167 93.6 % Floating Rate Debt: Secured – Conventional 108,378 1.4 % Secured – Tax Exempt 236,222 3.2 % Unsecured – Revolving Credit Facility — — Unsecured – Commercial Paper Program 129,955 1.8 % Floating Rate Debt 474,555 6.4 % Total $ 7,425,722 100.0 % The following table summarizes the Company’s debt maturity schedule as of December 31, 2022: Debt Maturity Schedule as of December 31, 2022 ($ in thousands) Year Fixed Rate Floating Rate Total % of Total 2023 (2) $ 800,000 $ 198,275 (1) $ 998,275 13.3 % 2024 — 6,100 6,100 0.1 % 2025 450,000 53,180 503,180 6.7 % 2026 592,025 9,000 601,025 8.0 % 2027 400,000 9,800 409,800 5.5 % 2028 900,000 10,700 910,700 12.1 % 2029 888,120 11,500 899,620 12.0 % 2030 1,095,000 12,600 1,107,600 14.8 % 2031 528,500 39,700 568,200 7.6 % 2032 — 28,000 28,000 0.4 % 2033+ 1,350,850 110,900 1,461,750 19.5 % Subtotal 7,004,495 489,755 7,494,250 100.0 % Deferred Financing Costs and Unamortized (Discount) (53,328 ) (15,200 ) (68,528 ) N/A Total $ 6,951,167 $ 474,555 $ 7,425,722 100.0 % (1) Includes $130.0 million in principal outstanding on the Company’s commercial paper program.
EQR does not have any indebtedness as all debt is incurred by the Operating Partnership. 37 Table of Contents The Company’s total debt summary schedule as of December 31, 2023 is as follows: Debt Summary as of December 31, 2023 ($ in thousands) Debt Balances % of Total Secured $ 1,632,902 22.1 % Unsecured 5,757,548 77.9 % Total $ 7,390,450 100.0 % Fixed Rate Debt: Secured – Conventional $ 1,398,598 18.9 % Unsecured – Public 5,348,417 72.4 % Fixed Rate Debt 6,747,015 91.3 % Floating Rate Debt: Secured – Conventional — — Secured – Tax Exempt 234,304 3.2 % Unsecured – Revolving Credit Facility — — Unsecured – Commercial Paper Program 409,131 5.5 % Floating Rate Debt 643,435 8.7 % Total $ 7,390,450 100.0 % The following table summarizes the Company’s debt maturity schedule as of December 31, 2023: Debt Maturity Schedule as of December 31, 2023 ($ in thousands) Year Fixed Rate Floating Rate Total % of Total 2024 $ — $ 416,200 (1) $ 416,200 5.6 % 2025 450,000 8,100 458,100 6.1 % 2026 592,025 9,000 601,025 8.0 % 2027 400,000 9,800 409,800 5.5 % 2028 900,000 10,700 910,700 12.2 % 2029 888,120 11,500 899,620 12.1 % 2030 1,148,462 12,700 1,161,162 15.6 % 2031 528,500 39,800 568,300 7.6 % 2032 — 28,000 28,000 0.4 % 2033 550,000 2,300 552,300 7.4 % 2034+ 1,350,850 108,600 1,459,450 19.5 % Subtotal 6,807,957 656,700 7,464,657 100.0 % Deferred Financing Costs and Unamortized (Discount) (60,942 ) (13,265 ) (74,207 ) N/A Total $ 6,747,015 $ 643,435 $ 7,390,450 100.0 % (1) Includes $410.0 million in principal outstanding on the Company’s commercial paper program.
Equity Residential Capital Structure as of December 31, 2022 (Amounts in thousands except for share/unit and per share amounts) Secured Debt $ 1,953,438 26.3 % Unsecured Debt 5,472,284 73.7 % Total Debt 7,425,722 100.0 % 24.3 % Common Shares (includes Restricted Shares) 378,429,708 96.8 % Units (includes OP Units and Restricted Units) 12,429,737 3.2 % Total Shares and Units 390,859,445 100.0 % Common Share Price at December 31, 2022 $ 59.00 23,060,707 99.8 % Perpetual Preferred Equity 37,280 0.2 % Total Equity 23,097,987 100.0 % 75.7 % Total Market Capitalization $ 30,523,709 100.0 % The Operating Partnership’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2022 is presented in the following table.
Equity Residential Capital Structure as of December 31, 2023 (Amounts in thousands except for share/unit and per share amounts) Secured Debt $ 1,632,902 22.1 % Unsecured Debt 5,757,548 77.9 % Total Debt 7,390,450 100.0 % 23.6 % Common Shares (includes Restricted Shares) 379,291,417 97.0 % Units (includes OP Units and Restricted Units) 11,581,306 3.0 % Total Shares and Units 390,872,723 100.0 % Common Share Price at December 31, 2023 $ 61.16 23,905,776 99.8 % Perpetual Preferred Equity 37,280 0.2 % Total Equity 23,943,056 100.0 % 76.4 % Total Market Capitalization $ 31,333,506 100.0 % The Operating Partnership’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2023 is presented in the following table.
Interest expense, including amortization of deferred financing costs, increased approximately $10.4 million or 3.7% during the year ended December 31, 2022 as compared to 2021. The increase is primarily due to higher overall interest rates and lower capitalized interest.
Other expenses increased approximately $15.8 million during the year ended December 31, 2023 as compared to 2022, primarily due to increases in litigation reserves and data transformation project costs. Interest expense, including amortization of deferred financing costs, decreased approximately $13.2 million or 4.5% during the year ended December 31, 2023 as compared to 2022.
For 2022, key drivers were: • Obtained $48.1 million in variable rate construction mortgage debt that is non-recourse to the Company; • Repaid $289.9 million of mortgage loans (inclusive of scheduled principal repayments); • Repaid $500.0 million of unsecured notes by using disposition proceeds; • Settled all 1.7 million Common Shares under the ATM forward sale agreements for cash proceeds of $139.6 million; • Acquired our joint venture partner’s 25% interest in an apartment property for $32.2 million; • Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $29.2 million; and • Paid dividends/distributions on Common Shares, Preferred Shares, Units (including OP Units and restricted units) and noncontrolling interests in partially owned properties totaling approximately $982.8 million.
For the year ended December 31, 2023, key drivers were: • Obtained $550.0 million in fixed rate mortgage debt; • Obtained $22.9 million in variable rate construction mortgage debt; • Repaid $936.0 million on mortgage loans (inclusive of scheduled principal repayments); • Received $25.2 million to settle nine forward starting swaps in conjunction with an interest rate lock of $530.0 million of secured notes; • Acquired our joint venture partner’s 10% interest in an apartment property for $3.7 million in cash (remaining $0.9 million was funded by ERPOP's issuance of 3.00% Series Q Preference Units); • Issued Common Shares related to share option exercises and ESPP purchases and received net proceeds of $27.1 million; • Paid dividends/distributions on Common Shares, Preferred Shares, Units (including OP Units and restricted units) and noncontrolling interests in partially owned properties totaling approximately $1.0 billion; and • Repurchased and retired 864,386 Common Shares, at a weighted average purchase price of $56.79 per share, for an aggregate purchased amount of approximately $49.1 million.
Dispositions • The consolidated properties disposed of in 2021 were located in the Los Angeles (6), New York, San Francisco (5), Seattle and Washington, D.C. markets and the sales generated an Unlevered IRR of 10.4%; and • The consolidated properties disposed of in 2022 were located in the New York (2) and Washington, D.C. markets and the sales generated an Unlevered IRR of 5.3%. 26 Table of Contents Developments • The Company completed construction on three consolidated apartment properties during 2021, located in the San Francisco, Washington, D.C. and Boston markets, consisting of 824 apartment units totaling approximately $602.8 million of development costs; • The Company commenced construction on one consolidated and three unconsolidated apartment properties during 2021, located in the Denver (2), New York and Washington, D.C. markets, consisting of 1,241 apartment units totaling approximately $452.7 million of expected development costs; • The Company commenced construction on one consolidated and three unconsolidated apartment properties during 2022, located in the San Francisco and Dallas/Ft.
Dispositions • The consolidated properties disposed of in 2022 were located in the New York (2) and Washington, D.C. markets and the sales generated an Unlevered IRR of 5.3%; and • The consolidated properties disposed of in 2023 were located in the Los Angeles (8), Seattle (2) and San Francisco markets 30 Table of Contents and the sales generated an Unlevered IRR of 11.4%.
Concurrent with this transaction, ERPOP issued the same amount of OP Units to EQR in exchange for the net proceeds. The Company may repurchase up to 13.0 million Common Shares under its share repurchase program. No open market repurchases have occurred since 2008.
Concurrent with this transaction, ERPOP issued the same amount of OP Units to EQR in exchange for the net proceeds. During the year ended December 31, 2023, the Company repurchased and subsequently retired approximately $49.1 million (864,386 shares at a weighted average price per share of $56.79) of its Common Shares in the open market under its share repurchase program.
The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the year ended December 31, 2022 was 3.68% as compared to 3.52% in 2021. The Company capitalized interest of approximately $7.1 million and $15.9 million during the years ended December 31, 2022 and 2021, respectively.
The decrease is primarily due to lower overall debt balances outstanding as compared to the prior year period and higher capitalized interest, partially offset by higher rates on floating debt. The effective interest cost on all indebtedness, excluding debt extinguishment costs/prepayment penalties, for the year ended December 31, 2023 was 3.82% as compared to 3.68% in 2022.
The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. 27 Table of Contents The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (amounts in thousands): Year Ended December 31, 2022 vs. 2021 2022 2021 $ Change % Change Operating income $ 1,116,046 $ 1,675,841 $ (559,795 ) (33.4 )% Adjustments: Property management 110,304 98,155 12,149 12.4 % General and administrative 58,710 56,506 2,204 3.9 % Depreciation 882,168 838,272 43,896 5.2 % Net (gain) loss on sales of real estate properties (304,325 ) (1,072,183 ) 767,858 (71.6 )% Impairment — 16,769 (16,769 ) (100.0 )% Total NOI $ 1,862,903 $ 1,613,360 $ 249,543 15.5 % Rental income: Same store $ 2,533,577 $ 2,291,604 $ 241,973 10.6 % Non-same store/other 201,603 172,393 29,210 16.9 % Total rental income 2,735,180 2,463,997 271,183 11.0 % Operating expenses: Same store 802,291 774,504 27,787 3.6 % Non-same store/other 69,986 76,133 (6,147 ) (8.1 )% Total operating expenses 872,277 850,637 21,640 2.5 % NOI: Same store 1,731,286 1,517,100 214,186 14.1 % Non-same store/other 131,617 96,260 35,357 36.7 % Total NOI $ 1,862,903 $ 1,613,360 $ 249,543 15.5 % Note: See Note 17 in the Notes to Consolidated Financial Statements for detail by reportable segment/market.
The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. 31 Table of Contents The following tables present reconciliations of operating income per the consolidated statements of operations to NOI, along with rental income, operating expenses and NOI per the consolidated statements of operations allocated between same store and non-same store/other results (amounts in thousands): Year Ended December 31, 2023 vs. 2022 2023 2022 $ Change % Change Operating income $ 1,160,585 $ 1,116,046 $ 44,539 4.0 % Adjustments: Property management 119,804 110,304 9,500 8.6 % General and administrative 60,716 58,710 2,006 3.4 % Depreciation 888,709 882,168 6,541 0.7 % Net (gain) loss on sales of real estate properties (282,539 ) (304,325 ) 21,786 (7.2 )% Total NOI $ 1,947,275 $ 1,862,903 $ 84,372 4.5 % Rental income: Same store $ 2,754,711 $ 2,609,766 $ 144,945 5.6 % Non-same store/other 119,253 125,414 (6,161 ) (4.9 )% Total rental income 2,873,964 2,735,180 138,784 5.1 % Operating expenses: Same store 873,448 837,602 35,846 4.3 % Non-same store/other 53,241 34,675 18,566 53.5 % Total operating expenses 926,689 872,277 54,412 6.2 % NOI: Same store 1,881,263 1,772,164 109,099 6.2 % Non-same store/other 66,012 90,739 (24,727 ) (27.3 )% Total NOI $ 1,947,275 $ 1,862,903 $ 84,372 4.5 % Note: See Note 17 in the Notes to Consolidated Financial Statements for detail by reportable segment/market.
Properties are included in same store when they are stabilized for all of the current and comparable periods presented. 29 Table of Contents The following table provides comparative total same store results and statistics for the 2022 Same Store Properties: 2022 vs. 2021 Same Store Results/Statistics Including 72,872 Same Store Apartment Units $ in thousands (except for Average Rental Rate) 2022 2021 Residential % Change Non- Residential % Change Total % Change Residential Non- Residential Total Revenues $ 2,441,522 10.7 % $ 92,055 5.8 % $ 2,533,577 10.6 % Revenues $ 2,204,625 $ 86,979 $ 2,291,604 Expenses $ 778,206 3.6 % $ 24,085 3.6 % $ 802,291 3.6 % Expenses $ 751,250 $ 23,254 $ 774,504 NOI $ 1,663,316 14.4 % $ 67,970 6.7 % $ 1,731,286 14.1 % NOI $ 1,453,375 $ 63,725 $ 1,517,100 Average Rental Rate $ 2,898 10.4 % Average Rental Rate $ 2,625 Physical Occupancy 96.4 % 0.3 % Physical Occupancy 96.1 % Turnover 42.8 % (1.9 %) Turnover 44.7 % Note: Same store revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.
The following table provides comparative total same store results and statistics for the 2023 Same Store Properties: 2023 vs. 2022 Same Store Results/Statistics Including 76,297 Same Store Apartment Units ($ in thousands except for Average Rental Rate) 2023 2022 Residential % Change Non- Residential % Change Total % Change Residential Non- Residential Total Revenues $ 2,657,868 5.7 % $ 96,843 (1) 1.9 % $ 2,754,711 5.6 % Revenues $ 2,514,711 $ 95,055 $ 2,609,766 Expenses $ 846,546 4.1 % $ 26,902 8.9 % $ 873,448 4.3 % Expenses $ 812,894 $ 24,708 $ 837,602 NOI $ 1,811,322 6.4 % $ 69,941 (0.6 %) $ 1,881,263 6.2 % NOI $ 1,701,817 $ 70,347 $ 1,772,164 Average Rental Rate $ 3,029 6.2 % Average Rental Rate $ 2,853 Physical Occupancy 95.9 % (0.4 %) Physical Occupancy 96.3 % Turnover 43.7 % 0.1 % Turnover 43.6 % 33 Table of Contents Note: Same store revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.
Worth markets, that were in lease-up and are expected to stabilize in their second year of ownership at the combined Acquisition Cap Rate listed above. (2) The purchase price listed represents the total consideration for the closing of the respective joint ventures. Acquisitions • The consolidated properties acquired in 2021 are located in the Atlanta (4), Austin (3), Boston, Dallas/Ft.
(2) The Company acquired two properties in the Atlanta market during the year ended December 31, 2023 that are in lease-up and are expected to stabilize in their second year of ownership at the weighted average Acquisition Cap Rate listed above.
Regardless, pricing remained positive during the fourth quarter of 2022 which is stronger than historical trends. • Physical Occupancy – Physical Occupancy of 96.4% for the year ended December 31, 2022 remained strong, contributing to growth in Same Store Residential Revenues. 30 Table of Contents • Percentage of Residents Renewing and Turnover – We continue to see a high Percentage of Residents Renewing in our portfolio, which we believe reflects both the strength of demand and quality of our product.
In most of our markets, pricing peaked in early August 2023, which was typical pre-pandemic, and began to moderate thereafter through the fourth quarter of 2023. • Physical Occupancy – Physical Occupancy was 95.9% for the year ended December 31, 2023, which remained strong despite some increased move-out activity (see further discussion below). • Percentage of Residents Renewing and Turnover – We continued to see a high Percentage of Residents Renewing in our portfolio, which we believe reflects both the strength of demand and quality of our product and team.
Worth acquisitions marked the Company’s re-entry into these markets; • Approximately $1.4 billion, or 82.0% of all acquisition activity in 2021, was in expansion markets; • The Company funded the 2021 acquisitions by selling older assets located within established markets that no longer met our long-term investment criteria; • The consolidated property acquired in 2022 is located in the San Diego market; and • In 2022, the Company acquired its joint venture partner’s 25% interest in a 432-unit apartment property located in the Washington, D.C. market for $32.2 million, and the property is now wholly owned.
Acquisitions • The consolidated property acquired in 2022 is located in the San Diego market; • In 2022, the Company acquired its joint venture partner’s 25% interest in a 432-unit apartment property located in the Washington, D.C. market for $32.2 million, and the property is now wholly owned; • The consolidated properties acquired in 2023 are located in the Atlanta (3) and Denver markets; and • In 2023, the Company acquired its joint venture partner's 10% interest in a 200-unit apartment property located in the San Francisco market for $4.6 million, of which the Company paid $3.7 million in cash and ERPOP issued $0.9 million of 3.00% Series Q Preference Units.
Impairment decreased approximately $16.8 million during the year ended December 31, 2022 as compared to 2021, due to an impairment charge in 2021 on one land parcel held for development compared to no impairment charges taken during 2022. Interest and other income decreased approximately $23.5 million or 91.5% during the year ended December 31, 2022 as compared to 2021.
Interest and other income increased approximately $20.2 million during the year ended December 31, 2023 as compared to 2022.
Removed
Business Objectives and Operating and Investing Strategies See Item 1, Business , for discussion regarding the Company’s business objectives and operating and investing strategies. COVID-19 Impact The Company continues to monitor and respond to the ongoing effects of the COVID-19 pandemic.
Added
(3) Purchase price is net of a mark-to-market discount of approximately $11.2 million on a mortgage assumed in connection with the purchase of a property.
Removed
Worth (4), Denver (3), Seattle and Washington, D.C. markets. The Atlanta, Austin and Dallas/Ft.
Added
The property is now wholly owned. The Company also repaid $64.7 million of mortgage debt at par prior to maturity in conjunction with the buyout.
Removed
The Company’s total investment in these three joint ventures was approximately $66.8 million as of December 31, 2022. One of the projects is related to the Company’s joint venture development program with Toll, which commenced construction during the first quarter of 2022 prior to our entrance into the joint venture.
Added
Developments • The Company commenced construction on one consolidated and three unconsolidated apartment properties during 2022, located in the San Francisco and Dallas/Ft.
Removed
Operating expense growth remains modest due to a combination of continued success in managing controllable expenses, favorable growth in real estate tax expense (increased by only $3.2 million) and declines in payroll expense (decreased by $3.1 million) primarily due to the Company's various innovation and centralization initiatives, leading to 14.1% same store NOI growth for the year ended December 31, 2022 as compared to the prior year period.
Added
One of the projects is related to the Company’s joint venture development program with Toll Brothers, Inc.
Removed
The decrease is primarily due to a gain of $23.6 million on the sale of various investment securities that occurred during 2021 but not during 2022.
Added
The increase is primarily due to an increase in unrealized gains of $13.5 million and realized gains of $2.7 million on various investment securities as well as short-term investment income on cash and restricted deposit accounts due to a higher rate environment and higher overall invested balances, partially offset by decreases in insurance/litigation settlement proceeds received during 2022 that did not occur in 2023.
Removed
Other expenses decreased approximately $5.6 million or 29.1% during the year ended December 31, 2022 as compared to 2021, primarily due to a decline in construction defect and litigation reserves and pursuit costs recorded between 2022 and 2021, partially offset by increases in advocacy contributions, demolition/abatement costs and data transformation project costs.
Added
The Company capitalized interest of approximately $12.3 million and $7.1 million during the years ended December 31, 2023 and 2022, respectively.
Removed
Net (income) loss attributable to Noncontrolling Interests in partially owned properties decreased approximately $14.2 million or 79.0% during the year ended December 31, 2022 as compared to 2021, primarily as a result of noncontrolling interest allocations related to the sale of one partially owned apartment property in 2021 as compared to no sales in 2022.
Added
Properties are included in same store when they are stabilized for all of the current and comparable periods presented.
Removed
Demand for our apartments continues to support strong Physical Occupancy with pricing that is largely in-line with expectations, including modest use of Leasing Concessions. Key operating drivers for this performance during 2022 include: • Pricing – Pricing (net of Leasing Concessions) in 2022 was strong, driven by continued improvement across the portfolio, especially in New York.
Added
(1) Includes the negative impact from the non-cash write-off of approximately $1.5 million in straight-line receivables during the year ended December 31, 2023 due to the bankruptcy of Rite Aid.
Removed
After unprecedented growth earlier in the year, pricing began to moderate in late August 2022, which is typical, but slightly more pronounced than we had expected.
Added
This steady demand for our apartments supported healthy Physical Occupancy with pricing that was largely in-line with our expectations, with the exceptions of the San Francisco and Seattle markets where pricing pressure during the second half of the year led to a greater than originally anticipated seasonal deceleration. The East Coast markets outperformed our West Coast markets, as we expected.
Removed
In addition to these stronger fundamentals, bad debt, net moderated during the first half of 2022 with improvement in resident collections primarily driven by receipt of governmental rental assistance payments on behalf of our residents. Bad debt, net increased in the second half of 2022 primarily due to the governmental rental assistance programs winding down.
Added
Key operating drivers for this performance during 2023 included: • Pricing – Pricing (net of Leasing Concessions) generally continued to be healthy and consistent with expectations in most of our major markets except San Francisco and Seattle.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−1 removed9 unchanged
Biggest changeShort-term interest rates also indirectly affect the discount on notes issued under our commercial paper program. Additionally, we have exposure to long-term interest rates, particularly U.S. Treasuries, as they are utilized to price our long-term borrowings and therefore affect the cost of refinancing existing debt or incurring additional debt.
Biggest changeAdditionally, we have exposure to long-term interest rates, particularly U.S. Treasuries, as they are utilized to price our long-term borrowings and therefore affect the cost of refinancing existing debt or incurring additional debt. The Alternative Reference Rates Committee (the “ARRC”) identified SOFR as the preferred alternative rate for USD LIBOR, which was discontinued in June 2023.
If interest rates increased by 35 basis points across the curve relative to market quotes as of December 31, 2022 (a 10% upward “parallel shift”), the net asset fair value of the Company’s derivative instruments would be approximately $39.4 million.
As of December 31, 2022, the Company’s derivative instruments had a net asset fair value of approximately $20.7 million. If interest rates increased by 35 basis points across the curve relative to market quotes as of December 31, 2022 (a 10% upward “parallel shift”), the net asset fair value of the Company’s derivative instruments would be approximately $39.4 million.
If interest rates had been 100 basis points higher in 2022 and 2021 and average balances coincided with year end balances, our annual interest expense would have been $4.7 million and $6.1 million higher, respectively.
If interest rates had been 100 basis points higher in 2023 and 2022 and average balances coincided with year end balances, our annual interest expense would have been $6.4 million and $4.7 million higher, respectively.
Changes in interest rates also affect the estimated fair market value of our fixed rate debt, computed using a discounted cash flow model. As of December 31, 2022, the Company had total outstanding fixed rate debt of $7.0 billion, or 93.6% of total debt, with an estimated fair market value of $6.2 billion.
Changes in interest rates also affect the estimated fair market value of our fixed rate debt, computed using a discounted cash flow model. As of December 31, 2023, the Company had total outstanding fixed rate debt of $6.7 billion, or 91.3% of total debt, with an estimated fair market value of $6.2 billion.
The Company had total variable rate debt of $0.5 billion, representing 6.4% of total debt, and $0.6 billion, representing 7.3% of total debt, as of December 31, 2022 and 2021, respectively.
The Company had total variable rate debt of $0.6 billion, representing 8.7% of total debt, and $0.5 billion, representing 6.4% of total debt, as of December 31, 2023 and 2022, respectively.
If interest rates had been 100 basis points lower as of December 31, 2022, the estimated fair market value would have increased by approximately $397.5 million. As of December 31, 2021, the Company had total outstanding fixed rate debt of $7.7 billion, or 92.7% of total debt, with an estimated fair market value of $8.4 billion.
If interest rates had been 100 basis points lower as of December 31, 2023, the estimated fair market value would have increased by approximately $411.2 million. As of December 31, 2022, the Company had total outstanding fixed rate debt of $7.0 billion, or 93.6% of total debt, with an estimated fair market value of $6.2 billion.
Our operating results are, therefore, affected by changes in short-term interest rates, primarily SOFR, London Interbank Offered Rate ("LIBOR") and Securities Industry and Financial Markets Association (“SIFMA”) indices, which directly impact borrowings under our revolving credit facility and/or interest on secured and unsecured borrowings contractually tied to such rates.
Our operating results are, therefore, affected by changes in short-term interest rates, primarily SOFR and Securities Industry and Financial Markets Association (“SIFMA”) indices, which directly impact borrowings under our revolving credit facility and/or interest on secured and unsecured borrowings contractually tied to such rates. Short-term interest rates also indirectly affect the discount on notes issued under our commercial paper program.
If interest rates had been 100 basis points lower as of December 31, 2021, the estimated fair market value would have increased by approximately $637.2 million. 40 Table of Contents As of December 31, 2022, the Company’s derivative instruments had a net asset fair value of approximately $20.7 million.
If interest rates had been 100 basis points lower as of December 31, 2022, the estimated fair market value would have increased by approximately $397.5 million. 44 Table of Contents As of December 31, 2023, the Company did not have any outstanding derivative instruments used for hedging purposes.
SOFR is now the primary basis for determining interest payments on borrowings on the Company’s $2.5 billion revolving credit facility. We are closely monitoring the evolution of practices in the credit markets and we do not expect such transition to have a material impact on the Company’s financial position or cash flows.
During the year ended December 31, 2022, SOFR became the primary basis for determining interest payments on borrowings on the Company’s $2.5 billion revolving credit facility. The transition did not have a material impact on the Company's financial position or cash flows.
Removed
The Alternative Reference Rates Committee (the “ARRC”) has identified SOFR as the preferred alternative rate for USD LIBOR. As part of the transition process that is now under way, LIBOR is no longer published for certain tenors and key USD settings are expected to be discontinued by June 2023.

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