I did a 10-k deep dive on Sam Zell's Equity Residential ($EQR). Here's what I found (A Thread):

- $1 Billion in Net Income
- $831M in Depreciation (a wonderful line item)
- 79,962 apartments located in San Francisco, New York, Boston, DC, Seattle, and Southern California

1/ The Investment thesis is simple:

There's a lot of people in big U.S. cities that want urban living and need to rent apartments. EQR can serve those customers really well.

This group consists of:

- 78MM Millennials
- 70MM Generation Z
- 76MM Baby Boomers

2/ Millennials are disproportionately renters, Gen Z is on the cusp of living on their own and being renters, and Baby Boomers are showing a growing trend towards apartment rentals

3/ EQR chooses markets based upon the following criteria:

1. High single family house prices

2. Growth of "knowledge workers"

3. Walkable urban and high-density suburban areas

4. High barriers to entry for new supply primarily due to land scarcity or government regulation

4/ Of the $2.7B of Revenue in 2019, roughly 95% of that comes from Tier 1 cities - NY, SF, DC, NY, Boston, Seattle.

5/ My personal favorite is the Capex and Depreciation:

$178M spent on Capex during 2019 to upgrade & improve the condition of their properties

$831M on depreciation (a lovely non-cash expense) to reduce their taxable income (which I explain more 2 tweets below in #7)

6/ The $178M on Capex includes:
$99M on Building Improvements such as replacing roofs, paving, building mechanical equipment systems, exterior siding

$40M spent on Renovation expenditures

$39M spent on Replacements which includes items such as appliances & mechanical equipment

7/ The $831M in depreciation is calculated based on the useful life of the properties as well as all of the Capex spend that EQR has invested over the prior years.

8/ A great company with a simple investment thesis and business model. My favorite kind of business.

If you'd like to read the full blog post on this you can find it at this link: https://www.rohunjauhar.com/posts/the-billionaire-with-80-000-apartment-units

And if you'd like to see more 10-k deep dives and other blog posts I write on Real Estate you can sign up here.

https://www.rohunjauhar.com/ 

PS. I haven't truly done a deep dive on a 10-k in over 5 years. I'd rate this one a 3/10. Let me know what questions you have or what you like to see and I'll make the next one better!