Equity Residential Q4 FY2025 earnings call

• Mark Parrell noted 2025 was challenging for the rental housing industry, but San Francisco and New York were bright spots. For 2026, there's uncertainty in the U.S. economy, especially job growth, with a wide same-store revenue guidance range. The company remains committed to a diversified portfolio strategy, plans to invest in all 12 markets, and sees stock buybacks as a good use of shareholder capital. • Michael Manelis discussed 2025 revenue results, high occupancy, muted growth in some markets, low resident turnover, and innovation initiatives like centralization, automation, and AI in leasing process, aiming for 5%-10% reduction in on-site payroll. Focus on new competitive supply and job growth for 2026, with San Francisco and New York driving performance, and D.C. potentially outperforming expectations. • Bret McLeod covered same-store expense guidance (3%-4% growth), norm FFO outlook ($4.08 per share midpoint, 2.25% improvement from 2025), and capital markets activity, noting one significant maturity in 2026 and plans to refinance, with net debt to normalized EBITDAre at 4.3x.

In 2025, Equity Residential faced challenges in the rental housing industry. New York and San Francisco markets were notable bright spots, constituting about 30% of NOI. Expansion markets represented just under 11% of total NOI. The fourth quarter revenue results had a physical occupancy of 96.4%, a blended rate of 0.5% (midpoint of the range provided), and other income growth was slightly less than expected. The 2025 same-store NOI matched initial guidance, but there was a deceleration in revenue momentum in many markets, especially highly supplied ones, due to policy and geopolitical uncertainty affecting consumer and employer confidence.

• Revenue guidance for 2026 is a range of 1.5%-3% blended rate growth, midpoint includes improved renewal rates and pricing power. • Same-store expense growth expected to range between 3%-4%, midpoint 20 basis points lower than 2025. • Norm FFO per share midpoint is $4.08, a 2.25% improvement over 2025. • Anticipate $500 million to $1 billion of debt issuance in 2026, with one significant maturity to refinance.

• Policy and geopolitical uncertainty impacting consumer and employer confidence, leading to job and rent growth slowdown. • Litigation costs in certain markets, especially California, affecting operating costs. • Supply issues in some markets, like prolonged poor performance in the Sunbelt due to excess supply.

Q: Talk about the assets being sold to fund repurchases, specifically CapEx and growth profiles of those assets, and accretion from trades.

A: Bob Garechana said these are typically older, noncore assets with higher CapEx flows, lower growth, and concentration risk. Mark Parrell added timing matters, as selling assets and doing share buybacks affects FFO accretion.

Q: Provide more color on renewals at 4.5%, where notices are sent vs take rate, and consumer impact.

A: Michael Manelis said renewals for next 3 months are around 6%, with confidence in landing around 4.5% give or take, no significant consumer impact or job market stress seen.

Q: Background on how competitive supply set is determined.

A: Bob Garechana said they use data providers as a guardrail and do boots-on-the-ground approach, evaluating shovels in the ground and permitting data, confident of significant supply decline in 2026.

Q: Factor in legal, advocacy, settlements in underwriting markets and cap rates.

A: Mark Parrell said they factor in litigation costs in California, add to per unit costs in pro formas, and bias portfolio allocation away from markets with excessive regulatory costs.

Q: Strength in San Francisco and New York, rent relative to market, loss to lease.

A: Michael Manelis said portfolio starts 2026 with a 1.2% gain to lease, San Francisco has opportunity for rent rise, starting in moderate loss to lease position but changing through spring.

Q: Pace of deploying capital into Sunbelt, accelerate or throttle back.

A: Bob Garechana said it depends on cost of capital, as right now share buybacks are the priority due to challenging cost of capital and attractive private market pricing.

Q: 2026 revenue guidance, job growth assumption.

A: Michael Manelis said guidance assumes current demand level, flat demand curve, with less supply pressure allowing pricing power.

Q: Rent growth acceleration in markets, where peaked.

A: Michael Manelis said all markets expected to see growth, with acceleration through spring, some markets like Atlanta and D.C. potential for better performance, no markets with rent growth peaked.

Q: Issues in L.A. being structural, rotation to repurchase.

A: Mark Parrell said issues in L.A. are structural (quality of life, business climate, job growth), but capital rotation may occur over time, with opportunity to sell product as conditions improve.

Q: Expected cadence of same-store revenue growth, WiFi rollout impact.

A: Bret McLeod said second half expected stronger due to reduced competitive supply, other income back-end loaded, steady cadence overall.

Q: Development restart, what needs to change and development economics.

A: Bob Garechana said they expect some starts in 2026, acquired land parcels in Atlanta, development costs steady, yields improved, and will be thoughtful about development based on cost of capital.

Q: Difference in transaction market and private buyers, underwriting assumptions.

A: Robert Garechana said it's a mix of cost of capital, different underwriting assumptions (growth rates, cap rates) due to different objectives (long-term vs short-term holders).

Q: Tech employment impact on San Francisco and Seattle, blends by region.

A: Mark Parrell said residents are employable, tech layoffs don't significantly impact due to employability and company's ability to hire displaced workers. Michael Manelis discussed blends by region, with San Francisco and New York having best blends, expansion markets lowest, rest clustered.

Q: Technology initiatives, use of AI for move-out likelihood.

A: Michael Manelis said they use data and automation in renewal process but not fully AI-driven for move-out likelihood.