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CHICAGO-After being a net buyer in 2005 to the tune of $1.1 billion, Equity Residential expects to balance sales and acquisitions at $1.5 billion on both sides. The multifamily REIT bought 12,059 rental units in 41 deals totaling $2.5 billion last year while selling 12,848 units in 50 properties for $1.4 billion, exceeding its goals on both counts.

However, Equity Residential's best money-maker continues to be sales of its own rental units converted to condominiums. The REIT sold 2,241 units, 21% more than its 2005 target, for $593.3 million. More importantly, that resulted in a $100-million funds from operations gain, double the REIT's expectation for the year.

"It's been a terrific way for us to create value," said president and chief executive officer David J. Neithercut in his company's earnings conference call Wednesday morning. Meanwhile, the appetite for properties that can be converted to condominiums has helped fuel the REIT's asset sales, which totaled $1.4 billion alone in the fourth quarter at an average capitalization rate of 4.7%. "We've taken advantage of the opportunity to sell assets to converters," he adds.

Among the conversion projects are Four Lakes in Lisle and Chantecleer Lakes in neighboring Naperville. Equity Residential sold 83 units at Four Lakes in the fourth quarter for $12.8 million, and now has closed on all but 46 units in the 942-unit complex. Meanwhile, conversion of the 304-unit Chantecleer Lakes began in the fourth quarter, and the company expects to sell out the project by the end of 2007.

While Four Lakes is the largest apartment complex Equity Residential has converted, it was not the most lucrative for the REIT. While sales averaged $152,000 per unit in 2005, the average price at Atlas in Washington, DC was $565,000. And although Equity Residential recorded a funds from operations gain of $7.4 million there, the company surpassed $10 million each in gains at Grand Marquis in Plantation, FL, where 182 units averaged $178,000; and Tuscany Village in Scottsdale, AZ, where sales of 178 units averaged $172,000.

Instant Insights /

Condo Sales Keep Equity Residential on Roll

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