Equity Residential Q2 FY2025 earnings call

• Top-of-the-house: Sustained demand, high retention rates, full employment, and societal trends favoring rentership. Full employment with 4.2% overall unemployment, 2.7% for college-educated. High retention rates with fewer residents moving to buy homes.
• Market performance: Varying regional performances; New York benefits from low supply, San Francisco recovering, Boston faces job market softness, Washington D.C. has strong growth but recent softening, Los Angeles faces challenges, expansion markets like Atlanta and Dallas have mixed performances.
• AI initiatives: Accelerated rollout of AI leasing applications (reduced application completion time by over 50%) and delinquency management AI, aiming for full deployment by end of year.
• Transaction activity: Lowered acquisition expectations to $1B from $1.5B due to competitive pricing, focusing on Atlanta and other expansion markets.
• Portfolio composition: Balanced urban and suburban assets, focusing on higher-earning renters, with a diversified portfolio across coastal urban centers and Sunbelt markets.

Equity Residential's performance is tied to regional market dynamics. Markets like New York benefit from low supply and strong demand, with blended rate growth among the best. San Francisco shows recovery with 5.8% blended rate growth. Boston faces softening job market impacts, while Washington D.C. has strong growth but recent softening. Los Angeles faces challenges from job growth and quality of life issues. Expansion markets like Atlanta and Dallas have mixed performances with some facing supply and price sensitivity. Suburban acquisitions in these markets are performing as expected, with urban areas in Atlanta experiencing new supply and concession use.

• Same-store revenue: Midpoint increased due to better retention and occupancy.
• Same-store expenses: Midpoint revised down due to better-than-anticipated real estate tax, insurance, and payroll growth.
• NFFO: Midpoint increased by $0.05 to the top end of the prior range.
• Acquisition guidance: Lowered to $1B from $1.5B, expecting to match sales and acquisitions.

• Market uncertainties: Varying job growth and supply dynamics across regions, impacting rent growth and occupancy.
• Regulatory issues: Potential impacts of policies on rent control and housing supply in markets like New York, which could discourage capital and limit housing creation.
• Transaction market challenges: Competitive pricing and slower acquisition activity, making it difficult to meet initial acquisition targets.

Q: Steve Sakwa from Evercore ISI asked about the supply picture and growth into next year.

A: Michael Manelis responded that the setup for 2026 is good with less competitive new supply pressure, and any job growth will add pricing power.

Q: Jana Galan with Bank of America asked about EQR's use of concessions.

A: Michael Manelis said concession use was higher than expected in Q2, driven by occupancy focus and supply-impacted submarkets, with elevated use expected in expansion markets and some L.A. submarkets.

Q: Eric Wolfe with Citi asked about Sunbelt recovery.

A: Alec Brackenridge responded that it's property-by-property and submarket-by-submarket, with some pockets seeing little supply but other markets having overhangs.

Q: Alexander Goldfarb with Piper Sandler asked about New York rent freezes.

A: Mark Parrell discussed engaging with policymakers about the impact of rent freezes on housing supply and private sector investment.

Q: Adam Kramer with Morgan Stanley asked about AI impact on renter demand.

A: Mark Parrell mentioned AI benefits in tech hubs like San Francisco but early to tell on broader impact.

Q: Jamie Feldman with Wells Fargo asked about new developments.

A: Alec Brackenridge and Mark Parrell discussed balancing development in expansion and legacy markets, using JVs and on-balance sheet, targeting 6% yields.