David Neithercut, CEO of Chicago-based Equity Residential (EQR), addressed the persistent Archstone questions early in his first quarter earnings call by repeating that the company would be required to bid $1.5 billion for the Denver-based firm’s portfolio.
“We continue to (believe) the Archstone portfolio would fit hand in glove with ours and we’re going to try to make it work,” Neithercut said.
Throughout the call, Neithercut continued to fight off Archstone questions as he jumped off to fundamentals, acquisitions, dispositions and the development pipeline. The conclusion: like most every other REIT, the quarter was good for EQR. It posted 5.5 percent average growth on base rents.
But it did see turnover rise in key markets in January and February. The company attributed the higher turnover rate in Boston, New York, and San Francisco to move outs in highly priced corporate units. But there were other factors at play as well, namely higher rents. “Higher paid premium units were vacated in the slower part of the year,” said Fred Frederick C. Tuomi, president of property management at EQR.
EQR made a concerted effort to keep those units open at higher asking rents rather than lower the price to fill them up. Tuomi said EQR is happy to “wait for the units to (be leased) at higher rents” in the stronger spring leasing season.
EQR saw the number of renters moving out to buy new homes tick up a bit from 11.6 percent in the first quarter of 2011 to 12.6 in the first quarter of 2012. It also saw move outs because of costs. For instance, in San Francisco, price was the reason for 30 percent of move outs. In Boston, it led to 20 percent of move outs.
“In markets where we’ve seen tremendous rent growth, the number two reason for move out is because the rent is too expensive,” Tuomi said.
On the transactions side, the company continued its portfolio pruning by selling three properties in Jacksonville, Orlando, and Phoenix. It bought land parcels in Biscayne, Fla., and Seattle. In all, it plans to start seven developments this year, including two each in New York City and Seattle, and one each in South Florida, Southern California, and Washington, D.C.
“There hasn’t been a lot of product available in the past three or four years,” Neithercut says.