Back on April 27th, Chicago-based real estate investment trust Equity Residential (EQR) lowered its guidance during its Q1 earnings call, namely due to the luxury apartment slowdown in Manhattan. "New York City just turned very quickly and more deeply than we expected; There's some crazy stuff going on in New York" said COO David Santee during the call.
The company admitted on the call that due to a supply glut, it had to give an estimated $600,000 in Q1 concessions in order to secure tenants in Manhattan. CFO Mark Parrell added that weaker than expected performance in New York City properties means the high end of the company's original revenue guidance for the year was "unattainable", and EQR lowered both top and bottom line guidance that day. Full year same store revenue growth estimates went from 4.5% to 5.25%, down to a revised 4.5% to 5%, and funds from operations went from $3 to $3.20 down to $3.05 to $3.15.
Yesterday, for the second time in less than two months, EQR lowered earnings growth estimates yet again. The low end of the revised April 27th guidance of 4.5% to 5% has now become the high end of the range, as EQR now says same store revenue growth will be 4% to 4.5%.
"The revision is being driven by continued weakness in its New York portfolio and recent under performance in the company's San Francisco portfolio. New lease rates are not meeting original projections due to new rental apartment supply" the company said in a statement.
Said another way, major luxury apartment markets have cooled, and the supply glut is only going to continue to drive prices down.
According to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate, Manhattan property owners had to whittle an average of 2.9% from their asking rents to reach a deal, while the inventory of available listings jumped 23% to 6,718 in April.
We've covered the cooling of the luxury real estate market at length in the past, but what's notable in the new guidance from EQR is that San Francisco has now joined the party – a development that clearly caught COO David Santee off guard. On the Q1 call, Santee proclaimed that outside of New York, all was well.
"Other than New York, demand is very robust" Santee said on the call… oops.
Perhaps David Santee should read more Zero Hedge, as we have been pointing out for a long time that the second tech bubble has burst, and that the economic ramifications are now making their way into the real estate market.
More fiction-peddling.
The post EQR Slashes Guidance (Again) As Luxury Real Estate Glut Looms appeared first on crude-oil.top.