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(To read more on the multifamily market, click here, and to read more on the debt and equity markets, click here.)

CHICAGO-As chief executive officer Bruce W. Duncan prepares to begin his retirement early next year, Equity Residential’s multifamily rental portfolio continues to get smaller, and younger. During Duncan’s three-year run, the portfolio has been pared by about 35,000 units, to 195,575, with a larger concentration in the company’s larger, high-barrier-to-entry markets.

“Our portfolio is much, much, much better than we had three years ago,” said Duncan, who will turn the reins over to president David J. Neithercut.

“Bruce’s retirement in January won’t change things very much,” Neithercut said during the company’s earnings conference call.

Equity Residential sold 4,218 units in 15 properties during the third quarter for $433 million, at an average capitalization rate of 5.2%. Separately, the REIT sold 817 condominiums for $229.8 million. Six new properties totaling 2,294 units were added to the portfolio at a price of $416 million, at a capitalization rate of 5.7%. The company still expects to hit its 2005 acquisition target of $2 billion, Neithercut told investors, thanks to the expected fourth-quarter closing on the 1,325-unit Trump Place on New York City’s Upper West Side, for $816 million.

So far this year, sales and acquisitions of rental units balance out at $1.1 billion each. However, the sales of 10,212 units have been at a 5% cap rate, while the purchases of 7,168 units have averaged out to a 5.6% cap rate. In addition, though, condominium sales have totaled 1,589 units for $428.1 million. While the third-quarter acquisitions included properties averaging six years in age, the sales involved properties averaging 28 years.

The condo sales include a 248-unit property in Coconut Creek, FL that Equity Residential intended to convert itself, Neithercut noted, before the company received an unsolicited bid from a converter. The $45.9-million bid was accepted because it included 50% of the potential profit of converting Riviera Palms without any financial risk, he explained.

Condominium sales contributed $27.8 million to the company’s funds from operations during the third quarter, chief financial officer Donna Brandin reported during the call, compared to $7 million during the same three months in 2004. Condominium sales already have contributed $56 million to funds from operations during the first nine months of 2005, surpassing the budget for the entire year, Neithercut said, and will likely hit $72 million by the end of the year.

Neithercut noted the company will lose a joint venture partner next year, which could reduce condominium sale profits. “We’ll have to work hard to get back to that level,” he said during the company’s earnings conference call.

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