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.”