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Neithercut Says Equity Residential Cutting Back on Transactions

06/10/2014 | By Allen Kenney

David Neithercut, president and CEO of Equity Residential (NYSE: EQR), joined REIT.com for a CEO Spotlight video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.

Neithercut was asked about the traits shared by the top-performing markets for his company: Denver, San Francisco and Seattle. He cited job growth as a key factor.

“Our business is all about supply and demand,” he said. “These are three markets that have produced some very strong job growth over the past three or four years.”

Neithercut also discussed the geographic markets that show the best potential for growth in the near future. He noted that Orange County in California is performing well.

The Washington, D.C. market, which Neithercut said has typically been “fantastic,” continues to straggle behind other markets in Equity Residential’s portfolio. Neithercut said new supply in the region is taking away landlords’ market power. More than 30,000 apartment units are expected to come online in the area in the next two years.

“There’s just a lot of uncertainty going on right now in that city about job growth and what’s happening in the government. It has been impacted a little bit on the demand side at a time in which we’re getting a great deal of new supply,” he said. “That being said, our occupancies there remain very strong. We’re getting positive renewal rents with our residents there.”

In the long term, Equity Residential is anticipating that Washington will return to form, according to Neithercut.

Neithercut offered some insight into the company’s acquisitions and dispositions in 2014.

“After many years of elevated activity as we went about transforming our portfolio… that number will be significantly less,” he said. “In the past, that has really created a lot of earnings dilution for us. We’re pleased to say that going forward now, that amount of dilution is behind us.

Neithercut projected that Equity Residential’s normalized funds from operations will be “a couple points above” its net operating income.

“We’re very excited about where our trajectory is going forward,” he said.