Equity Residential Q3 FY2025 earnings call

• Macroeconomic commentary: Mixed macroeconomic picture with good demand and excellent resident retention in most markets, but weakness in new customer acquisition traffic, especially in Washington, D.C. starting earlier than usual. - Segment specifics: San Francisco and New York showing strong performance; expansion markets facing supply and job growth challenges. - Capital allocation: Repurchased $100 million of stock, focusing on asset sales of lower return profile assets or over-concentrated submarket assets to arbitrage private public markets. - Innovation initiatives: Deployed AI-driven application processing tool reducing application time by 50%, and testing new service application module to improve service request intake and team efficiency.

Equity Residential's third quarter results reflect the resilience of its business. San Francisco, accounting for 15% of net operating income, has shown strong performance with high demand and modest supply, expected to be the best-performing market in 2025. New York is also a strong performer. Expansion markets (Atlanta, Dallas, Denver, Austin) make up about 11% of NOI, facing high supply, slowing job growth, and lack of pricing power. Third quarter same-store revenue guidance midpoint adjusted down to 2.75% due to factors like weakness in Washington, D.C. and delays in other income initiatives. Renewal rate was strong at 59%, with lowest turnover in history, and occupancy in the mid-96% range.

• Adjusted midpoint of annual same-store revenue guidance down by 15 basis points to 2.75% due to traffic weakness and delays in other income initiative. - Revised 2025 same-store revenue range 2.5% to 3% with midpoint 2.75%. - 2025 same-store expenses held steady at 3.5% to 4%, with sub-inflationary trends on payroll, insurance, and real estate taxes partially offset by higher utility expenses. - Normalized FFO per share estimated at $3.98 to $4.02, midpoint unchanged from Q2 at $4 per share.

• Macroeconomic uncertainty including tariffs, lower job growth, and government shutdowns impacting demand forecasting. - Supply pressure in expansion markets with prolonged absorption of new supply, leading to lack of pricing power for longer. - Impact of events like government shutdowns on markets like Washington, D.C., causing demand and pricing softness.

Q: How does the peak leasing season impact next year's growth forecast?

A: Michael Manelis states there's still seasonality, expects deceleration in back of year but good setup for next year.

Q: On capital allocation, how is buyback considered?

A: Mark Parrell says it's based on attractiveness of other investments vs stock, and using asset sales or debt to fund buyback.

Q: Color on earn-in for 2026?

A: Michael Manelis says 2026 expected to start in similar position as 2025, with expansion markets' assets diluting embedded growth.

Q: Impact of AI on key markets?

A: Mark Parrell and Michael Manelis discuss migration data showing positive impact in San Francisco and New York, with residents being digital natives likely to adapt to AI.

Q: D.C. market outlook?

A: Michael Manelis says D.C. saw hesitancy in renewal and prospect activity, but long-term federal job growth and 2026 supply decline positive.

Q: Market rent growth expectations?

A: Mark Parrell expects coastal markets to have higher growth, expansion markets with elongated recovery.

Q: Impact of Amazon layoffs?

A: Michael Manelis says isolated impact, with limited concentration in specific markets and skilled employees likely to find alternative roles.

Q: Leasing concessions?

A: Michael Manelis says limited concessions in renewals, more in new leases in certain markets.

Q: 4Q '25 blend guide?

A: Michael Manelis says trends likely to continue, with San Francisco and New York better performing, but seasonality affecting all markets.

Q: Expansion markets acquisition pause?

A: Mark Parrell says no immediate pause, focused on arbitraging private public markets and improving portfolio growth.

Q: Transaction market and buyback context?

A: Bob Garechana discusses healthy private transaction volume with bid-ask spread varying by market and asset.

Q: Election impact on markets?

A: Mark Parrell mentions positive zoning and housing supply measures in California and Florida, and focus on New York and Seattle mayoral races.

Q: Operational expense levers?

A: Michael Manelis and Bret McLeod discuss operational excellence, automation, centralization, and utility expense opportunities to contain growth.