EQR - Embedded Expectations Analysis - 2021 01 14
Equity Residential (EQR:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 42.5x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about California and New York political uncertainty, high tenant turnover, and low occupancy ratesSpecifically, management may have concerns about the pace of the market recovery and political uncertainty in California and New York, particularly concerning business re openings. In addition, they may be concerned about their decision to delay stock buybacks, high urban asset turnover, and weakness in the Ney York City market. Moreover, management may be concerned about the sustainability of increased apartment applications, their urban and suburban portfolio mix, and upcoming debt maturities. Furthermore, they may lack confidence in their ability to improve studio occupancy rates, increase rental rates in the near-term, and sustain lease renewal rates across markets
Equity Residential is a real estate investment trust. The company focuses on the acquisition, development and management of rental apartment properties. The company is the general partner of, and owns an ownership interest in ERP Operating Limited Partnership (ERPOP). All of the company's property ownership, development and related business operations are conducted through ERPOP and those entities/subsidiaries owned or controlled by ERPOP (collectively, Operating Partnership). The Operating Partnership holds substantially all of the assets of the company The company, directly or indirectly through investments in title holding entities, owns all or a portion of its properties located in several states and the District of Columbia.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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