Apartment giant Equity Residential is blaming urban flight and
COVID lockdowns for weak third quarter results.
The company just reported that difficult coronavirus
conditions in core cities including New York, Boston and San Francisco dragged FFO
down 15 percent during the quarter.
As a result, the REIT has seen its share price slide and its stock has fallen over 40 percent since the halcyon pre-COVID days of January 2020.
Mark J. Parrell, Equity Residential’s president and CEO,
said he doesn’t see things getter better soon. “We anticipate that our
financial results will weaken over subsequent quarters as the full effect of
the pandemic is felt on our business,” he said in a press release announcing
the third quarter results.
Equity Residential owns 37 properties in New York with nearly
10,000 apartments. However, after managing to hold relatively steady through
the pandemic, rental rates there are down 20.1 percent compared to the same
time last year. Upfront discounts and concessions compounded reduction in
rental income, said the company.
Parrell called the situation “challenging.”
“Our suburban portfolio continues to fare relatively
well with occupancy similar to last year, rates down only modestly and recovery
under way in some markets,” he said.
“However, the approximately 23 percent of our portfolio
located in the urban cores of New York, San Francisco and Boston continues to
struggle with pandemic-related reductions in economic activity, which have led
to declines in occupancy, lower resident renewal levels and a related drop in
rental rates.
“While we have seen recent improvements in renewals and application volume, pricing pressures continue and headwinds remain,” said Mark J. Parrell, Equity Residential’s President and CEO.
However, the REIT boss does have faith that the big city
markets will bounce back one a vaccine is found and the world tries to get back
to normal
“Looking longer term, we expect that positive developments
relating to the pandemic will eventually re-energize the urban centers which
have persevered and thrived through many decades and in similarly challenging
circumstances,” said Parrell.
“We continue to see the urban locations in our markets as
centers of our country’s knowledge industries and expect them to again attract
disproportionate numbers of affluent renters once the pandemic ends.”
