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Competitor Analysis From the Perspective of Qthos, Research Paper Example

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Research Paper

Equity Residential

Equity Residential is a publicly listed real estate firm that ventures in the sale and rent of apartments. As of December 2019 financial period, the firm owned or had ventured in 309 properties comprising of 79,960 apartment units in southern California, deriver, San Francisco, Boston, and Washington D.C

Last quarter financial performance of Equity Residential  

Total Revenue

Equity Residential revenue depicts a decline in total revenue amounting to $0.654B, equivalent to a 2.37% change. The nonpresidential operation in the past has accounted for nearly 3.9% of its net income. The effect of a decline in revenue is that the stocks of the company will lag behind the wider market by a big margin, as investors are mainly keen on Equity Residential retail portfolio, and a probable change in tenant partiality to moving out of extremely density housing units (AnnualReports.com, 2020).

Net income

From the financial statement of Equity Residential, it is evident that the company reported an income of $260,888 in the 2nd quarter of 2020 as compared to $308,968 in the previous quarter. This because, during the 2nd quarter of 2020, the firm collected on average 97.9% of its monthly residentially rental income. The July 2020 collection persists to increase at the same rate as in past months.

Understanding the profitability is important since, it evaluates how many profits, a company makes in contrast with its entire income and expenditure. In so doing, it permits an investor to understand the firm’s financial performance, and how good a firm is doing.

Earnings before interest, taxes, depreciation, and amortization (EBITDA)

From the Normalized EBITDA Reconciliations account of Equity Residential, it is evident that the EBITDA was $745,845 in the 2nd quarter as compared to $446,885 in the last quarter of 2019. Equity Residential believes that EBITDA is important for investors, creditors, and rating agencies as a supplemental measure of the firm’s ability to incur and service debt. This is because it is a recognized appraisal of performance by the real estate industry, and by excluding gain or loss connected to revenue or impairments of depreciated operating property, EBITDA may aid in contrast the firm’s credit strength between financial periods or as contrasted to diverse firms.

Quarterly Dividend

The quarterly dividend of $1.04 per share was paid in the 2nd quarter of 2020 to its shareholders. The main justification of understanding the divided policy of Equity Residential is that they considerably increase the stocks investment profit, provide extra metrics for elementary assessment, reducing overall portfolio risks.

Liquidity/Unrestricted Cash

On April 30th, 2020, the firms closed on a $496 million secured loan. The loan has a 10-year term interest-only and carries a fixed interest rate of 2.7%. Proceed from the loan is used to pay outstanding balance under the firm’s line of credit as well as a commercial paper plan (Scharfstein, 1990).  It is important to understand the Equity Residential unrestricted cash since; it is part of the firm’s liquid funds. Elasticity and convenience are just two of the approach that liquid assets may aid Equity Residential to be at the forefront in the financial market hence ensuring that its stock is attractive in the market.

Three sectors specific KPI

Occupancy

The firm’s physical occupancy was 95% contrasted to 97% for the 2nd quarter of 2020 and 2019, correspondingly. The weighted average occupied unit for the 2nd quarter is arrived by dividing the average of net unit existing for rent during the 2nd financial period.

It is paramount to comprehend the occupancy rate of Equity Residential since the occupancy rate aids in understanding the change in the residential as well as commercial real estate markets and is at times used in apprising hotels as well as resorts properties.

Average daily rate

Throughout the 2nd quarter of 2020, the firm collected on average 96.9% of its net monthly residential rental income. Strong cost control, along with continued improvements in its operations platform led to a reduction in similar store costs for the 2nd quarter.

It is vital to appraise the average daily rate since the rate depicts the extent to which income is made per room on average. A higher average daily rate is ideal for the company. A growing average daily rate implies that the hotel is realizing an increase in revenue from renting the rooms.

Revenue per available room (RevPAR)

Equity Residential saw a decline in revenue per room by 220% to $13,415 in the 2nd quarter from the past year’s financial performance. The revenue per available room declined by 118% as compared to the last quarter performance (Rezaee, 2005). This implies that the firm’s profitability ratio is declining hence may result in loss of clients or markdown on prices.

Three qualitative points from the last quarter

  • The Equity Residential retention rate was high for the 2nd quarter in the firm’s history.
  • The firm sold properties netting 656-apartment unit, during the 2nd quarter of 2020 for combined revenue of roughly $384 Million.
  • The firm triumphantly executed change to its leasing and service operations and the physical structure of its operations as part of a dedication to health and safety.

Key performance index (KPI)

The Equity Residential 2nd quarter 2020 standardized Funds from Operations (FFO) per share of 85% exceeded the agreement approximate of 83%. The accounted figure remained flat for a long time (Rezaee, 2005). The Equity Residential retention rate was higher for the 2nd quarter of Equity Residential history. Nonetheless, the net income in the 2nd quarter was $654 million.

Bibliography

AnnualReports.com, 2020. Equity Residential; 2019/2020 Annual Report and Form 10K. AnnualReports.com.

Booker, 2004. Financial Management and Analysis, New Delhi: Prentice-Hall of India.

Gericke, R., 2018. Corporate Governance and Risk Management in Financial. London: Cengage Learning.

Margaret, F., 2010. The handbook of financial Management. New York: Cengage Learning.

Rezaee, Z., 2005. Financial Statement Fraud. Critical Perspectives on Accounting, pp. 277-298.

Scharfstein, B., 1990. A Theory of Predation Based on Agency Problems in Financial Contracting. American Economic Review, Volume 80(1), pp. 94-106.

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