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Equity Residential Issues Q2 Updates & May Rent Collections

Zacks Equity Research
·3 min read

Equity Residential EQR is witnessing a recovery in demand with initial leads, traffic and applications now coming in line with the same period last year. The company also noted that it has witnessed improvements in physical occupancy reaching 94.9% quarter to date, with increased activities, while residential cash collections were strong in May and consistent with April.

However, for its same-store operating properties, quarter-to-date new lease change was down 4.8% compared with the first-quarter decline of 0.7%, while renewal rate came in at 1.5% down from the prior quarter’s 4.2%. Blended rate too was -0.7% as against the first quarter’s 1.8%.

Equity Residential had witnessed significant declines in leasing activity earlier, with the company’s markets becoming subject to shelter-in-place orders amid the coronavirus pandemic. Traffic, initial leads and applications slumped 50% or more in the third week of March 2020 compared with prior-year period.

Nevertheless, in April, the company witnessed a recovery in demand, with traffic, initial leads and applications improving. Also, the company’s rent collections were decent in April, with receipts being approximately 97% of residential cash collections in March.

As the pandemic has been wreaking havoc and resulting in macroeconomic uncertainty and a choppy job-market environment, demand for residential units is getting affected in the prime leasing season, while the rent-paying capability of tenants is being maimed. These are emerging as pressing concerns for residential REITs, including Equity Residential, AvalonBay Communities AVB, Essex Property ESS, UDR Inc. UDR and several others.

Recently, AvalonBay also announced that through May 31, its billed residential rent collections for the month marked 95% of the company’s average billed residential rent collections rate at month end for the 12-month period ending Mar 31, 2020.

However, the residential REIT also noted that for its established communities, average physical occupancy in May was 94.4%, marginally down from April’s 95.3%. Moreover, like-term lease rent change was 0.2% in May compared with April’s 1.9%, while like-term effective rent change was -3.5% in the month versus the -0.2% reported in April.

Nevertheless, Equity Residential has high-quality assets located in some of the premium markets of the country, which enable the company to generate steady rental revenues. The company is also banking on technology and organizational capabilities to drive innovation, rent growth and improve efficiency of its operating platform. This has become all the more essential in this social-distancing era, as the virus outbreak needed a quick shift to virtual operations for the continuity of normal business operations.

Equity Residential currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Equity Residential have declined 25.3%, so far in the year, compared with the industry's fall of 18.1%.

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United Dominion Realty Trust, Inc. (UDR) : Free Stock Analysis Report
AvalonBay Communities, Inc. (AVB) : Free Stock Analysis Report
Equity Residential (EQR) : Free Stock Analysis Report
Essex Property Trust, Inc. (ESS) : Free Stock Analysis Report
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