Equity Residential (NYSE:EQR) announced today that the company will
reduce the number of planned development projects it will undertake and,
as a result, will incur a non-cash charge in the fourth quarter of 2008
of approximately $115 million, or $0.39 per share.
The charge reflects impairments in the value of land holdings for five
potential development projects that the company no longer plans to
pursue. The impairment charge is the difference between each parcel’s
estimated fair value and current capitalized carrying value, which
includes pursuit costs. The impairment charge does not affect the
company’s continued compliance with its financial or debt covenants.
"We have said for some time that maintaining ample liquidity and credit
capacity are our foremost priorities and as a result we would be very
cautious regarding new development projects,” said David J. Neithercut,
Equity Residential’s President and CEO. "Our decision to take these
charges is a result of our annual review of the company’s investment
activities and operating strategy in light of current and anticipated
conditions in the economy and capital and real estate markets. Our view
on development was solidified by the significant acceleration last fall
in the deterioration in the credit markets and economy as a whole. While
development of high quality assets in our core markets will continue to
be an important part of Equity Residential’s growth, we will not start
any new projects for our own account until capital markets and the
economy show signs of improvement.”
The company has already reduced its development staff and may continue
to make adjustments as conditions warrant. Severance and other charges
relating to these actions are not material and have not been included in
this impairment charge.
After this charge, the company will have land held for development of
approximately $250 million, representing approximately 1.5% of the
company’s total assets.
Equity Residential currently has 10 apartment properties under
construction which are not impacted by these actions. The company plans
to complete the construction and lease-up of these communities as
planned, with amounts remaining to fund current construction activities
totaling approximately $623 million, of which $418 million of these
fundings will come from existing construction loans and the remaining
$205 million will be funded from the company’s capital. The company
currently has approximately $1.0 billion of unrestricted cash and
approximately $1.33 billion available on its unsecured revolving credit
facility.
Equity Residential is an S&P 500 company focused on the acquisition,
development and management of high quality apartment properties in top
U.S. growth markets. Equity Residential owns or has investments in 552
properties totaling 148,115 units in 23 states and the District of
Columbia. For more information on Equity Residential, please visit our
website at www.equityresidential.com.
Forward-Looking Statements
In addition to historical information, this press release contains
forward-looking statements and information within the meaning of the
federal securities laws. These statements are based on current
expectations, estimates, projections and assumptions made by management.
While Equity Residential’s management believes the assumptions
underlying its forward-looking statements are reasonable, such
information is inherently subject to uncertainties and may involve
certain risks, including, without limitation, changes in general market
conditions, including the rate of job growth and cost of labor and
construction material, the level of new multifamily construction and
development, competition and local government regulation. Other risks
and uncertainties are described under the heading "Risk Factors” in our
Annual Report on Form 10-K and subsequent periodic reports filed with
the Securities and Exchange Commission (SEC) and available on our
website, www.equityresidential.com.
Many of these uncertainties and risks are difficult to predict and
beyond management’s control. Forward-looking statements are not
guarantees of future performance, results or events. Equity Residential
assumes no obligation to update or supplement forward-looking statements
that become untrue because of subsequent events.
