Equity Residential outlines 2.5% to 3% same-store revenue growth outlook as new supply declines

Earnings Call Insights: Equity Residential (EQR) Q3 2025

MANAGEMENT VIEW

* Mark Parrell, President and CEO, emphasized the resilience of the business amid a mixed macroeconomic picture, highlighting "good demand and excellent resident retention across most of our markets with results strongest in San Francisco and New York, where continuing high demand has meant modest supply." He noted, "We reported the highest third quarter resident retention in our company's history, allowing us to maintain high occupancy rates in the mid-96% range." Parrell identified earlier-than-usual seasonal leasing patterns and noted, "This acceleration of seasonal patterns, weakness in Washington, D.C. and some minor delays in the rollout of an other income initiative...led us to adjust down the midpoint of our annual same-store revenue guidance by 15 basis points to 2.75%."
* Parrell reported the company repurchased approximately $100 million of stock during the quarter and subsequent to quarter end, and closed one acquisition in Arlington, Texas, while lowering full-year acquisitions and dispositions guidance to $750 million each from $1 billion.
* He highlighted San Francisco as "the epicenter of the AI technology revolution" and expects it to be the best-performing market this year.
* Michael Manelis, Executive VP & COO, said, "Our third quarter results reflect solid demand with outsized performance in San Francisco and New York." He detailed record-low turnover and a 4.5% renewal rate increase with nearly 59% of leases renewing. Manelis stated, "New lease rates at negative 1% came in lower than we expected and resulted in a 2.2% blended rate increase for the quarter, which was at the low end of our range."
* Manelis described the rollout of an AI-driven application processing tool delivering a 50% reduction in application time and identified upcoming innovation initiatives focused on resident experience and workforce utilization.
* Bret McLeod, Executive VP & CFO, stated, "The combination of these 2 factors resulted in a revised 2025 same-store revenue range of 2.5% to 3% with a midpoint of 2.75%, which matches the midpoint of the range we guided to at the beginning of this year." McLeod said same-store expenses are held steady at 3.5% to 4% and NFFO per share guidance is $3.98 to $4.02.

OUTLOOK

* Management forecasts 2025 same-store revenue growth of 2.5% to 3% with a midpoint of 2.75%. McLeod stated, "The net result of these same-store revenue and expense adjustments is a revised annual same-store NOI range of 2.1% to 2.6% and a midpoint of 2.35%."
* Parrell indicated expectations for continued solid performance in 2026, citing internal tracking that shows "deliveries of competitive new supply in our markets, declining 35% or by about 40,000 units in 2026 versus 2025 levels."
* Expansion and dispositions guidance for the full year has been reduced to $750 million each, with most transactions already completed.

FINANCIAL RESULTS

* The company achieved a 2.2% blended rate increase for the quarter, with renewal rates up 4.5% and nearly 59% of leases renewing.
* Physical occupancy remained high at 96.3% for the quarter. Manelis stated, "Our same-store portfolios in both Atlanta and Dallas should see improved results and perform better than the broader market next year as we add our recently acquired more suburban assets to the same-store portfolios next year."
* Other income grew 9% quarter-over-quarter, although some of the anticipated bulk WiFi income will be realized in 2026.
* Same-store expenses remain guided at 3.5% to 4%, with an increase of approximately 40 basis points attributed to the bulk WiFi rollout.

Q&A

* Nicholas Joseph, Citigroup: Asked about forecasting next year's growth given earlier-than-usual seasonal declines. Manelis responded that "we do expect to start out next year well occupied with some embedded growth that looks very similar to kind of how we started out this year," but declined to give specific guidance.
* Joseph also inquired about the stock buyback strategy. Parrell replied, "Our lean right now is to continue to do asset sales of these lower return profile assets...and continue to be thoughtful about buying more stock."
* Steve Sakwa, Evercore ISI: Sought color on "earn-in" for next year. Manelis explained, "we now expect 2026 to start out in a relatively similar position than we did this year," though "a little bit lower than what we thought 90 days ago."
* Alexander Goldfarb, Piper Sandler: Asked about AI's impact on job creation in core markets. Manelis noted, "San Francisco clearly saw in migration, 4% more of our move-ins coming to us from outside the state of California, outside kind of that MSA, which basically is telling us there's a lot of kind of excitement going on."
* Jana Galan, BofA Securities: Inquired about San Francisco rent acceleration and bulk WiFi expense impact. Manelis expects continued pricing power with strong demand and low supply; McLeod clarified that WiFi expenses are primarily for this year.

SENTIMENT ANALYSIS

* Analysts expressed slight concern about forecasting future growth amid shifting seasonal patterns, seeking clarity on embedded growth and capital allocation. Questions indicated a cautious but constructive tone.
* Management maintained a confident stance on portfolio resilience, emphasizing strong retention and occupancy, though responses around guidance were measured and avoided specificity for 2026. Phrases such as "we feel pretty good about the setup and the outlook into next year" signaled confidence, while some hesitation was noted in, "I'm going to stay away, like I said, from giving you the guidance."
* Compared to the previous quarter, both analysts and management exhibited slightly more caution and focus on macroeconomic uncertainties, though management continued to highlight the company's strengths and long-term prospects.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year same-store revenue was adjusted down by 15 basis points to a midpoint of 2.75%. In Q2, guidance was increased by 15 basis points, indicating a reversal from a previously more optimistic outlook.
* Management's tone shifted from highlighting "exceeding expectations" in Q2 to focusing on "resilience" and adapting to earlier seasonal slowdowns.
* Analyst focus shifted more toward the durability of embedded growth and the implications of earlier seasonal leasing patterns.
* Both quarters featured discussion on innovation and AI-driven efficiencies, with Q3 highlighting actual deployment and time savings.
* No major strategic changes in portfolio composition or capital allocation priorities, but Q3 saw a reduction in acquisition/disposition guidance.

RISKS AND CONCERNS

* Management cited macroeconomic uncertainty, slower job growth, and government shutdown impacts as current risks, particularly in Washington, D.C.
* High new supply was highlighted as a challenge in Sunbelt and select coastal markets, with elongated recovery expected in markets like Denver, Dallas-Fort Worth, Austin, and Atlanta.
* Delays in rolling out other income initiatives (such as bulk WiFi) were acknowledged as affecting revenue timing.
* Analysts raised concerns about the impact of AI-driven job changes, Amazon layoffs, and the effect of government policy or regulation on core markets.
* Management's mitigation strategies include focusing on retention, leveraging automation, and maintaining portfolio diversification.

FINAL TAKEAWAY

Equity Residential's third quarter 2025 call reflected a stable yet cautious outlook, with management emphasizing strong resident retention, high occupancy, and the resilience of its core markets. The company adjusted its revenue guidance downward due to earlier-than-expected seasonal declines and supply pressures in select markets but maintains confidence in the business setup for 2026 as new supply is projected to decline significantly. Innovation in operations, continued capital recycling, and targeted share repurchases remain key priorities as management navigates macroeconomic headwinds and positions the portfolio for future growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/eqr/earnings/transcripts]

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