AvalonBay Communities, Inc. (NYSE: AVB) (the “Company”) reported
Earnings per Share – diluted (“EPS”), Funds from Operations
attributable to common stockholders - diluted (“FFO”) per share and
Core FFO per share (as defined in this release) for the three and
nine months ended September 30, 2024 and 2023 as detailed
below.
Q3 2024
Q3 2023
% Change
EPS
$
2.61
$
1.21
115.7
%
FFO per share (1)
$
2.88
$
2.48
16.1
%
Core FFO per share (1)
$
2.74
$
2.66
3.0
%
YTD 2024
YTD 2023
% Change
EPS
$
5.62
$
4.86
15.6
%
FFO per share (1)
$
8.36
$
7.69
8.7
%
Core FFO per share (1)
$
8.21
$
7.89
4.1
%
(1) For additional detail on reconciling
items between net income attributable to common stockholders, FFO
and Core FFO, see Definitions and Reconciliations, table 3.
The following table compares the Company’s actual results for
EPS, FFO per share and Core FFO per share for the three months
ended September 30, 2024 to its results for the prior year
period:
Q3 2024 Results Compared to Q3
2023
Per Share
EPS
FFO
Core FFO
Q3 2023 per share reported results
$
1.21
$
2.48
$
2.66
Same Store Residential NOI (1)
0.06
0.06
0.06
Other Residential NOI
0.11
0.11
0.11
Overhead and other
(0.02
)
(0.02
)
(0.02
)
Capital markets and transaction
activity
(0.06
)
(0.06
)
(0.06
)
Unconsolidated investment income and
management fees
(0.01
)
(0.01
)
(0.01
)
Non-core items (2)
0.32
0.32
—
Real estate gains, depreciation expense
and other
1.00
—
—
Q3 2024 per share reported results
$
2.61
$
2.88
$
2.74
(1) Consists of increases of $0.14 in
revenue and $0.08 in operating expenses.
(2) For detail of non-core items, see
Definitions and Reconciliations, table 3.
The following table compares the Company’s actual results for
EPS, FFO per share and Core FFO per share for the three months
ended September 30, 2024 to its July 2024 outlook:
Q3 2024 Results Compared to
July 2024 Outlook
Per Share
EPS
FFO
Core FFO
Projected per share (1)
$
2.74
$
2.64
$
2.71
Same Store Residential NOI (2)
0.01
0.01
0.01
Other Residential and Commercial NOI
0.01
0.01
0.01
Capital markets and transaction
activity
0.01
0.01
0.01
Non-core items (3)
0.21
0.21
—
Real estate gains, depreciation expense
and other
(0.37
)
—
—
Q3 2024 per share reported results
$
2.61
$
2.88
$
2.74
(1) The mid-point of the Company's July
2024 outlook.
(2) Consists of favorable operating
expenses of $0.01.
(3) For detail of non-core items, see
Definitions and Reconciliations, table 3.
The following table compares the Company’s actual results for
EPS, FFO per share and Core FFO per share for the nine months ended
September 30, 2024 to its results for the prior year period:
YTD 2024 Results Compared to
YTD 2023
Per Share
EPS
FFO
Core FFO
YTD 2023 per share reported results
$
4.86
$
7.69
$
7.89
Same Store Residential NOI (1)
0.27
0.27
0.27
Other Residential NOI
0.28
0.28
0.28
Overhead and other
(0.07
)
(0.07
)
(0.07
)
Capital markets and transaction
activity
(0.13
)
(0.14
)
(0.14
)
Unconsolidated investment income and
management fees
(0.02
)
(0.02
)
(0.02
)
Non-core items (2)
0.35
0.35
—
Real estate gains, depreciation expense
and other
0.08
—
—
YTD 2024 per share reported results
$
5.62
$
8.36
$
8.21
(1) Consists of increases of $0.47 in
revenue and $0.20 in operating expenses.
(2) For detail of non-core items, see
Definitions and Reconciliations, table 3.
Same Store Operating Results for the Three Months Ended
September 30, 2024 Compared to the Prior Year Period
Same Store Residential revenue increased $20,205,000, or 3.1%,
to $671,508,000. Same Store Residential operating expenses
increased $11,035,000, or 5.4%, to $214,844,000 and Same Store
Residential NOI increased $9,170,000, or 2.0%, to $456,664,000.
The following table presents percentage changes in Same Store
Residential revenue, operating expenses and NOI for the three
months ended September 30, 2024 compared to the three months ended
September 30, 2023:
Q3 2024 Compared to Q3
2023
Same Store Residential
Revenue
(1)
Opex
(2)
% of Q3 2024
NOI
NOI
New England
4.2
%
1.8
%
5.4
%
13.5
%
Metro NY/NJ
2.8
%
5.5
%
1.5
%
19.6
%
Mid-Atlantic
3.5
%
10.4
%
0.4
%
15.5
%
Southeast FL
2.0
%
9.0
%
(1.9
)%
3.2
%
Denver, CO
0.8
%
0.4
%
1.0
%
1.6
%
Pacific NW
4.8
%
2.7
%
5.7
%
6.7
%
N. California
1.7
%
5.1
%
0.4
%
16.5
%
S. California
3.6
%
5.0
%
2.9
%
22.3
%
Other Expansion Regions
(1.6
)%
4.3
%
(5.0
)%
1.1
%
Total
3.1
%
5.4
%
2.0
%
100.0
%
(1) See full release for additional
detail.
(2) See full release for discussion of
variances.
Same Store Operating Results for the Nine Months Ended
September 30, 2024 Compared to the Prior Year Period
Same Store Residential revenue increased $67,094,000, or 3.5%,
to $1,992,789,000. Same Store Residential operating expenses
increased $28,516,000, or 4.8%, to $619,574,000 and Same Store
Residential NOI increased $38,578,000, or 2.9%, to
$1,373,215,000.
The following table presents percentage changes in Same Store
Residential revenue, operating expenses and NOI for the nine months
ended September 30, 2024 compared to the nine months ended
September 30, 2023:
YTD 2024 Compared to YTD
2023
Same Store Residential
Revenue
(1)
Opex
(2)
% of YTD 2024
NOI
NOI
New England
4.4
%
1.8
%
5.7
%
13.4
%
Metro NY/NJ
3.5
%
6.2
%
2.3
%
19.8
%
Mid-Atlantic
3.2
%
8.6
%
0.9
%
15.4
%
Southeast FL
2.1
%
6.3
%
(0.2
)%
3.3
%
Denver, CO
1.6
%
(1.7
)%
3.0
%
1.6
%
Pacific NW
3.8
%
3.2
%
4.0
%
6.6
%
N. California
1.3
%
5.2
%
(0.2
)%
16.4
%
S. California
5.2
%
3.7
%
5.9
%
22.4
%
Other Expansion Regions
(1.2
)%
(0.1
)%
(1.8
)%
1.1
%
Total
3.5
%
4.8
%
2.9
%
100.0
%
(1) See full release for additional
detail.
(2) See full release for discussion of
variances.
Development Activity
During the three months ended September 30, 2024, the Company
completed the development of two communities:
- Avalon Bothell Commons I, located in Bothell, WA; and
- Kanso Milford, located in Milford, MA.
These communities contain an aggregate of 629 apartment homes
and 9,200 square feet of commercial space and were constructed for
an aggregate Total Capital Cost of $299,000,000.
During the three months ended September 30, 2024, the Company
started the construction of four apartment communities:
- Avalon Tech Ridge I, located in Austin, TX;
- Avalon Carmel, located in Charlotte, NC;
- Avalon Plano, located in Plano, TX; and
- Avalon Oakridge I, located in Durham, NC.
These communities are expected to contain an aggregate of 1,418
apartment homes. Estimated Total Capital Cost at completion for
these Development communities is $450,000,000. Avalon Carmel and
Avalon Plano are being developed through the Company's Developer
Funding Program ("DFP").
During the nine months ended September 30, 2024, the
Company:
- completed the development of five wholly-owned communities
containing an aggregate of 1,530 apartment homes and 9,200 square
feet of commercial space for an aggregate Total Capital Cost of
$650,000,000; and
- started the construction of seven apartment communities. These
communities are expected to contain an aggregate of 2,321 apartment
homes. Estimated Total Capital Cost at completion for these
Development communities is $834,000,000.
At September 30, 2024, the Company had 19 wholly-owned
Development communities under construction that are expected to
contain 6,855 apartment homes and 56,000 square feet of commercial
space. Estimated Total Capital Cost at completion for these
Development communities is $2,683,000,000.
Disposition Activity
During the three months ended September 30, 2024, the Company
sold two wholly-owned communities:
- AVA Theater District, located in Boston, MA; and
- Avalon Darien, located in Darien, CT.
In aggregate, these communities contain 587 apartment homes and
were sold for $332,000,000 and a weighted average Market Cap Rate
of 5.0%, resulting in a gain in accordance with GAAP of
$172,986,000 and an Economic Gain of $94,661,000.
During the nine months ended September 30, 2024, the Company
sold five wholly-owned communities containing an aggregate of 1,069
apartment homes and 12,000 square feet of commercial space. These
communities were sold for $513,700,000 and a weighted average
Market Cap Rate of 5.1%, resulting in a gain in accordance with
GAAP of $241,367,000 and an Economic Gain of $116,732,000.
In October 2024, the Company sold Avalon New Canaan, located in
New Canaan, CT. Avalon New Canaan contains 104 apartment homes and
was sold for $75,000,000.
Acquisition Activity
During the three months ended September 30, 2024, the Company
acquired three wholly-owned communities:
- Avalon Perimeter Park, located in Morrisville, NC, containing
262 apartment homes for a purchase price of $66,500,000;
- Avalon Cherry Hills, located in Englewood, CO, containing 306
apartment homes for a purchase price of $95,000,000; and
- AVA Balboa Park, located in San Diego, CA, containing 100
apartment homes and 1,700 square feet of commercial space for a
purchase price of $51,000,000.
During the nine months ended September 30, 2024, the Company
acquired four wholly-owned communities containing 968 apartment
homes and 1,700 square feet of commercial space for a total
purchase price of $274,600,000.
In October 2024, the Company acquired Avalon Townhomes at Bee
Cave, located in Bee Cave, TX, containing 126 townhomes for a
purchase price of $49,000,000.
Structured Investment Program ("SIP") Activity
As of September 30, 2024, the Company had seven commitments to
fund either mezzanine loans or preferred equity investments for the
development of multifamily projects in the Company's markets, up to
$191,585,000 in the aggregate. During the nine months ended
September 30, 2024, the Company did not enter into any new SIP
commitments. At September 30, 2024, the Company's investment
commitments had a weighted average rate of return of 11.5% and a
weighted average initial maturity date of December 2026. As of
September 30, 2024, the Company had funded $162,373,000 of these
commitments.
Liquidity and Capital Markets
At September 30, 2024, the Company had $552,356,000 in
unrestricted cash and cash equivalents.
As of September 30, 2024, the Company did not have any
borrowings outstanding under its $2,250,000,000 unsecured revolving
credit facility (the "Credit Facility") or its $500,000,000
unsecured commercial paper note program. The commercial paper
program is backstopped by the Company's commitment to maintain
available borrowing capacity under its Credit Facility in an amount
equal to actual borrowings under the program.
The Company’s annualized Net Debt-to-Core EBITDAre (as defined
in this release) for the third quarter of 2024 was 4.2 times and
Unencumbered NOI (as defined in this release) for the nine months
ended September 30, 2024 was 95%.
During the three months ended September 30, 2024, under its
current continuous equity program, the Company entered into forward
contracts to sell 203,297 shares of common stock with settlement
expected to occur no later than December 31, 2025 at a gross
weighted average price of $219.92 per share for approximate
proceeds of $44,066,000, net of fees. Subsequently, on September 5,
2024, in connection with an underwritten offering of shares, the
Company entered into forward contracts to sell 3,680,000 shares of
common stock with settlement expected to occur no later than
December 31, 2025 at a discount to the closing price of $226.52 per
share for approximate proceeds of $808,606,000, net of offering
fees and discounts. The proceeds that the Company expects to
receive on the date or dates of settlement are subject to certain
customary adjustments during the term of the forward contract for
the Company's dividends and a daily interest adjustment.
During the nine months ended September 30, 2024, the Company
issued $400,000,000 principal amount of unsecured notes in a public
offering under its existing shelf registration statement for net
proceeds before offering costs of $396,188,000. The notes mature in
June 2034 and were issued with a 5.35% coupon. The effective
interest rate of the notes is 5.05%, including the impact of
offering costs and hedging activity.
Fourth Quarter and Full Year 2024 Financial Outlook
For its fourth quarter and full year 2024 financial outlook, the
Company expects the following:
Projected EPS, Projected FFO and
Projected Core FFO Outlook (1)
Q4 2024
Full Year 2024
Low
High
Low
High
Projected EPS
$
1.61
—
$
1.71
$
7.23
—
$
7.33
Projected FFO per share
$
2.67
—
$
2.77
$
11.03
—
$
11.13
Projected Core FFO per share
$
2.78
—
$
2.88
$
10.99
—
$
11.09
(1) See Definitions and Reconciliations,
table 9, for reconciliations of Projected FFO per share and
Projected Core FFO per share to Projected EPS.
Full Year 2024 Financial
Outlook
Full Year 2024
vs. Full Year 2023
Low
High
Same Store:
Residential revenue change
3.4
%
—
3.6
%
Residential Opex change
4.3
%
—
4.7
%
Residential NOI change
2.8
%
—
3.2
%
The following table compares the Company’s actual results for
EPS, FFO per share and Core FFO per share for the third quarter
2024 to the mid-point of its fourth quarter 2024 financial
outlook:
Q3 2024 Results Compared to Q4
2024 Outlook
Per Share
EPS
FFO
Core FFO
Q3 2024 per share reported results
$
2.61
$
2.88
$
2.74
Same Store Residential revenue
0.02
0.02
0.02
Same Store Residential Opex
0.07
0.07
0.07
Development and Other Stabilized
Residential NOI
0.01
0.01
0.01
Capital markets and transaction
activity
(0.03
)
(0.03
)
(0.03
)
Overhead and other
0.02
0.02
0.02
Non-core items (1)
(0.25
)
(0.25
)
—
Gain on sale of real estate and
depreciation expense
(0.79
)
—
—
Projected per share - Q4 2024 outlook
(2)
$
1.66
$
2.72
$
2.83
(1) For detail of non-core items, see
Definitions and Reconciliations, table 3 and table 9.
(2) Represents the mid-point of the
Company's outlook.
The following table compares the mid-point of the Company’s
October 2024 full year outlook for EPS, FFO per share and Core FFO
per share to its July 2024 outlook:
October 2024 Full Year Outlook
Compared
to July 2024 Full Year
Outlook
Per Share
EPS
FFO
Core FFO
Projected per share - July 2024 outlook
(1)
$
7.44
$
10.94
$
11.02
Same Store Residential revenue
—
—
—
Same Store Residential Opex
0.02
0.02
0.02
Development and Other Stabilized
Residential NOI
(0.01
)
(0.01
)
(0.01
)
Capital markets and transaction
activity
0.01
0.01
0.01
Non-core items (2)
0.12
0.12
—
Gain on sale of real estate and
depreciation expense
(0.30
)
—
—
Projected per share - October 2024 outlook
(1)
$
7.28
$
11.08
$
11.04
(1) Represents the mid-point of the
Company's outlook.
(2) For detail of non-core items, see
Definitions and Reconciliations, table 3 and table 9.
Other Matters
The Company will hold a conference call on November 5, 2024 at
11:00 AM ET to review and answer questions about this release, its
third quarter 2024 results, the Attachments (described below) and
related matters. To participate on the call, dial 877-407-9716.
To hear a replay of the call, which will be available from
November 5, 2024 at 4:00 PM ET to December 5, 2024, dial
844-512-2921 and use replay passcode: 13740500. A webcast of the
conference call will also be available at https://investors.avalonbay.com, and an online
playback of the webcast will be available for at least seven days
following the call.
The Company produces Earnings Release Attachments (the
"Attachments") that provide detailed information regarding
operating, development, redevelopment, disposition and acquisition
activity. These Attachments are considered a part of this earnings
release and are available in full with this earnings release via
the Company's website at https://investors.avalonbay.com. To receive future
press releases via e-mail, please submit a request through
https://investors.avalonbay.com/news-events/email-alerts.
In addition to the Attachments, the Company is providing a
teleconference presentation that will be available on the Company's
website at https://investors.avalonbay.com subsequent to this
release and before the market opens on November 5, 2024.
About AvalonBay Communities, Inc.
AvalonBay Communities, Inc., a member of the S&P 500, is an
equity REIT in the business of developing, redeveloping, acquiring
and managing apartment communities in leading metropolitan areas in
New England, the New York/New Jersey Metro area, the Mid-Atlantic,
the Pacific Northwest, and Northern and Southern California, as
well as in the Company's expansion regions of Raleigh-Durham and
Charlotte, North Carolina, Southeast Florida, Dallas and Austin,
Texas, and Denver, Colorado. As of September 30, 2024, the Company
owned or held a direct or indirect ownership interest in 305
apartment communities containing 92,908 apartment homes in 12
states and the District of Columbia, of which 19 communities were
under development. More information may be found on the Company’s
website at https://www.avalonbay.com.
For additional information, please contact Jason Reilley, Vice
President of Investor Relations, at 703-317-4681.
Forward-Looking Statements
This release, including its Attachments, contains
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. You can identify
forward-looking statements by the Company’s use of the words
“believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,”
“project,” “plan,” “may,” “shall,” “will,” “pursue,” “outlook” and
other similar expressions that predict or indicate future events
and trends and that do not report historical matters. These
statements include, among other things, statements regarding the
Company’s intent, belief, forecasts, assumptions or expectations
with respect to: potential development, redevelopment, acquisition
or disposition of communities; the timing and cost of completion of
communities under construction, reconstruction, development or
redevelopment; the timing of lease-up, occupancy and stabilization
of communities; the pursuit of land for future development; the
anticipated operating performance of communities; cost, yield,
revenue, NOI and earnings estimates; the impact of landlord-tenant
laws and rent regulations; the Company’s expansion into new
regions; declaration or payment of dividends; joint venture
activities; the Company’s policies regarding investments,
indebtedness, acquisitions, dispositions, financings and other
matters; the Company’s qualification as a REIT under the Internal
Revenue Code of 1986, as amended; the real estate markets in
regions where the Company operates and in general; the availability
of debt and equity financing; interest rates, inflation and other
general economic conditions and their potential impacts; trends
affecting the Company’s financial condition or results of
operations; regulatory changes that may affect the Company; and the
impact of legal proceedings.
The Company cannot assure the future results or outcome of the
matters described in these statements; rather, these statements
merely reflect the Company’s current expectations of the
approximate outcomes of the matters discussed. The Company does not
undertake a duty to update these forward-looking statements, and
therefore they may not represent the Company’s estimates and
assumptions after the date of this release. You should not rely on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, some of which are beyond
the Company’s control. These risks, uncertainties and other factors
may cause the Company’s actual results, performance or achievements
to differ materially from the anticipated future results,
performance or achievements expressed or implied by these
forward-looking statements. You should carefully review the
discussion under Part I, Item 1A. “Risk Factors” of the Company’s
Form 10-K for the year ended December 31, 2023 and Part II, Item
1A. “Risk Factors” in subsequent quarterly reports on Form 10-Q for
further discussion of risks associated with forward-looking
statements.
Some of the factors that could cause the Company’s actual
results, performance or achievements to differ materially from
those expressed or implied by these forward-looking statements
include, but are not limited to, the following: the Company may
fail to secure development opportunities due to an inability to
reach agreements with third parties to obtain land at attractive
prices or to obtain desired zoning and other local approvals; the
Company may abandon or defer development opportunities for a number
of reasons, including changes in local market conditions which make
development less desirable, increases in costs of development,
increases in the cost of capital or lack of capital availability,
resulting in losses; construction costs of a community may exceed
original estimates; the Company may not complete construction and
lease-up of communities under development or redevelopment on
schedule, resulting in increased interest costs and construction
costs and a decrease in expected rental revenues; occupancy rates
and market rents may be adversely affected by competition and local
economic and market conditions which are beyond the Company’s
control; the Company’s cash flows from operations and access to
cost-effective capital may be insufficient for the development of
the Company’s pipeline, which could limit the Company’s pursuit of
opportunities; an outbreak of disease or other public health event
may affect the multifamily industry and general economy; the
Company’s cash flows may be insufficient to meet required payments
of principal and interest, and the Company may be unable to
refinance existing indebtedness or the terms of such refinancing
may not be as favorable as the terms of existing indebtedness; the
Company may be unsuccessful in its management of joint ventures and
the REIT vehicles that are used with certain joint ventures; new or
existing laws and regulations implementing rent control or rent
stabilization, or otherwise limiting the Company’s ability to
increase rents, charge fees or evict tenants, may impact its
revenue or increase costs; the Company’s expectations, estimates
and assumptions as of the date of this filing regarding legal
proceedings are subject to change; the Company’s assumptions and
expectations in its financial outlook may prove to be too
optimistic; the possibility that the Company may choose to pay
dividends in its stock instead of cash, which may result in
stockholders having to pay taxes with respect to such dividends in
excess of the cash received, if any; and investments made under the
SIP may not be repaid as expected or the development may not be
completed on schedule, which could require the Company to engage in
litigation, foreclosure actions, and/or first party project
completion to recover its investment, which may not be recovered in
full or at all in such event.
Definitions and Reconciliations
Non-GAAP financial measures and other capitalized terms, as used
in this earnings release, are defined, reconciled and further
explained on Attachment 12, Definitions and Reconciliations of
Non-GAAP Financial Measures and Other Terms. Attachment 12 is
included in the full earnings release available at the Company’s
website at https://investors.avalonbay.com. This wire
distribution includes only the following definitions and
reconciliations.
Average Monthly Revenue per Occupied
Home is calculated by the Company as Residential revenue in
accordance with GAAP, divided by the weighted average number of
occupied apartment homes.
Commercial represents results
attributable to the non-apartment components of the Company's
mixed-use communities and other non-residential operations.
Development is composed of
consolidated communities that are either currently under
construction, or were under construction and were completed during
the current year. These communities may be partially or fully
complete and operating.
EBITDA, EBITDAre and Core EBITDAre
are considered by management to be supplemental measures of our
financial performance. EBITDA is defined by the Company as net
income or loss computed in accordance with GAAP before interest
expense, income taxes, depreciation and amortization. EBITDAre is
calculated by the Company in accordance with the definition adopted
by the Board of Governors of the National Association of Real
Estate Investment Trusts (“Nareit”), as EBITDA plus or minus losses
and gains on the disposition of depreciated property, plus
impairment write-downs of depreciated property, with adjustments to
reflect the Company's share of EBITDAre of unconsolidated entities.
Core EBITDAre is the Company’s EBITDAre as adjusted for non-core
items outlined in the table below. By further adjusting for items
that are not considered part of the Company’s core business
operations, Core EBITDAre can help one compare the core operating
and financial performance of the Company between periods. A
reconciliation of EBITDA, EBITDAre and Core EBITDAre to net income
is as follows (dollars in thousands):
TABLE 1
Q3
2024
Net income
$
372,519
Interest expense and loss on
extinguishment of debt
65,640
Income tax expense
782
Depreciation expense
212,122
EBITDA
$
651,063
Gain on sale of communities
(172,973
)
Unconsolidated entity EBITDAre adjustments
(1)
4,129
EBITDAre
$
482,219
Unconsolidated entity gains, net
(25,261
)
Structured Investment Program loan
reserve
(813
)
Advocacy contributions
3,732
Hedge accounting activity
25
Executive transition compensation
costs
200
Severance related costs
738
Expensed transaction, development and
other pursuit costs, net of recoveries
252
Other real estate activity
(314
)
Legal settlements and costs
781
Core EBITDAre
$
461,559
(1) Includes joint venture interest,
taxes, depreciation, gain on dispositions of depreciated real
estate and impairment losses, if applicable, included in net
income.
Economic Gain is calculated by the
Company as the gain on sale in accordance with GAAP, less
accumulated depreciation through the date of sale and any other
adjustments that may be required under GAAP accounting. Management
generally considers Economic Gain to be an appropriate supplemental
measure to gain on sale in accordance with GAAP because it helps
investors to understand the relationship between the cash proceeds
from a sale and the cash invested in the sold community. The
Economic Gain for disposed communities is based on their respective
final settlement statements. A reconciliation of the aggregate
Economic Gain to the aggregate gain on sale in accordance with GAAP
for the wholly-owned communities disposed of during the three and
nine months ended September 30, 2024 is as follows (dollars in
thousands):
TABLE 2
Q3 2024
YTD 2024
Gain on sale in accordance with GAAP
$
172,986
$
241,367
Accumulated Depreciation and Other
(78,325
)
(124,635
)
Economic Gain
$
94,661
$
116,732
Economic Occupancy is defined as
total possible Residential revenue less vacancy loss as a
percentage of total possible Residential revenue. Total possible
Residential revenue (also known as “gross potential”) is determined
by valuing occupied units at contract rates and vacant units at
Market Rents. Vacancy loss is determined by valuing vacant units at
current Market Rents. By measuring vacant apartments at their
Market Rents, Economic Occupancy takes into account the fact that
apartment homes of different sizes and locations within a community
have different economic impacts on a community’s gross revenue.
FFO and Core FFO are generally
considered by management to be appropriate supplemental measures of
our operating and financial performance. FFO is calculated by the
Company in accordance with the definition adopted by Nareit. FFO is
calculated by the Company as Net income or loss attributable to
common stockholders computed in accordance with GAAP, adjusted for
gains or losses on sales of previously depreciated operating
communities, cumulative effect of a change in accounting principle,
impairment write-downs of depreciable real estate assets,
write-downs of investments in affiliates due to a decrease in the
value of depreciable real estate assets held by those affiliates
and depreciation of real estate assets, including similar
adjustments for unconsolidated partnerships and joint ventures,
including those from a change in control. FFO can help one compare
the operating and financial performance of a real estate company
between periods or as compared to different companies because
adjustments such as (i) gains or losses on sales of previously
depreciated property or (ii) real estate depreciation may impact
comparability between companies as the amount and timing of these
or similar items can vary among owners of identical assets in
similar condition based on historical cost accounting and useful
life estimates. Core FFO is the Company's FFO as adjusted for
non-core items outlined in the table below. By further adjusting
for items that we do not consider be part of our core business
operations, Core FFO can help with the comparison of core operating
performance of the Company between periods. A reconciliation of Net
income attributable to common stockholders to FFO and to Core FFO
is as follows (dollars in thousands):
TABLE 3
Q3
Q3
YTD
YTD
2024
2023
2024
2023
Net income attributable to common
stockholders
$
372,519
$
172,031
$
799,902
$
686,856
Depreciation - real estate assets,
including joint venture adjustments
210,992
199,546
628,677
602,023
Distributions to noncontrolling
interests
—
—
—
25
Gain on sale of previously depreciated
real estate
(172,973
)
(22,121
)
(241,459
)
(209,430
)
Casualty loss on real estate
—
3,499
2,935
8,550
FFO attributable to common
stockholders
410,538
352,955
1,190,055
1,088,024
Adjusting items:
Unconsolidated entity (gains) losses, net
(1)
(25,261
)
827
(34,823
)
(4,024
)
Joint venture promote (2)
—
(424
)
—
(1,496
)
Structured Investment Program loan reserve
(3)
(813
)
539
(771
)
415
Loss on extinguishment of consolidated
debt
—
150
—
150
Hedge accounting activity
25
65
80
256
Advocacy contributions
3,732
—
5,914
200
Executive transition compensation
costs
200
300
304
944
Severance related costs
738
993
1,979
2,493
Expensed transaction, development and
other pursuit costs, net of recoveries (4)
252
18,070
3,857
21,318
Other real estate activity
(314
)
(237
)
(636
)
(707
)
For-sale condominium imputed carry cost
(5)
21
110
62
534
Legal settlements and costs
781
14
2,289
64
Income tax expense (6)
782
4,372
698
7,715
Core FFO attributable to common
stockholders
$
390,681
$
377,734
$
1,169,008
$
1,115,886
Weighted average common shares outstanding
- diluted
142,516,684
142,198,099
142,376,434
141,448,675
Earnings per common share - diluted
$
2.61
$
1.21
$
5.62
$
4.86
FFO per common share - diluted
$
2.88
$
2.48
$
8.36
$
7.69
Core FFO per common share - diluted
$
2.74
$
2.66
$
8.21
$
7.89
(1) Amounts consist primarily of net
unrealized gains on technology investments.
(2) Amount for 2023 is for the Company's
recognition of its promoted interest in Archstone Multifamily
Partners AC LP.
(3) Changes are the expected credit losses
associated with the Company's lending commitments primarily under
its SIP. The timing and amount of any actual losses that will be
incurred, if any, is to be determined.
(4) Amounts for 2023 include write-offs of
$17,111 for three development opportunities in Northern and
Southern California and the Mid-Atlantic that the Company
determined are no longer probable.
(5) Represents the imputed carry cost of
the for-sale residential condominiums at The Park Loggia. The
Company computes this adjustment by multiplying the Total Capital
Cost of completed and unsold for-sale residential condominiums by
the Company's weighted average unsecured debt effective interest
rate.
(6) Amounts for 2023 are primarily for the
recognition of taxes associated with The Park Loggia
dispositions.
Interest Coverage is calculated by
the Company as Core EBITDAre divided by interest expense. Interest
Coverage is presented by the Company because it provides rating
agencies and investors an additional means of comparing our ability
to service debt obligations to that of other companies. A
calculation of Interest Coverage for the three months ended
September 30, 2024 is as follows (dollars in thousands):
TABLE 4
Core EBITDAre (1)
$
461,559
Interest expense (2)
$
65,640
Interest Coverage
7.0 times
(1) For additional detail, see Definitions
and Reconciliations, table 1.
(2) Excludes the impact of non-core hedge
accounting activity.
Market Cap Rate is defined by the
Company as Projected NOI of a single community for the first 12
months of operations (assuming no repositioning), less an estimate
of typical capital expenditure allowance per apartment home,
divided by the gross sales price for the community. Projected NOI,
as referred to above, represents management’s estimate of projected
rental revenue minus projected operating expenses before interest,
income taxes (if any), depreciation and amortization. For this
purpose, management’s projection of operating expenses for the
community includes a management fee of 2.5% and an estimate of
typical market costs for insurance, payroll and other operating
expenses for which the Company may have proprietary advantages not
available to a typical buyer. The Market Cap Rate, which may be
determined in a different manner by others, is a measure frequently
used in the real estate industry when determining the appropriate
purchase price for a property or estimating the value for a
property. Buyers may assign different Market Cap Rates to different
communities when determining the appropriate value because they (i)
may project different rates of change in operating expenses and
capital expenditure estimates and (ii) may project different rates
of change in future rental revenue due to different estimates for
changes in rent and occupancy levels. The weighted average Market
Cap Rate is weighted based on the gross sales price of each
community.
Market Rents as reported by the
Company are based on the current market rates set by the Company
based on its experience in renting apartments and publicly
available market data. Market Rents for a period are based on the
average Market Rents during that period and do not reflect any
impact for cash concessions.
Net Debt-to-Core EBITDAre is
calculated by the Company as total debt (secured and unsecured
notes, and the Company's Credit Facility and commercial paper
program) that is consolidated for financial reporting purposes,
less consolidated cash and restricted cash, divided by annualized
third quarter 2024 Core EBITDAre. A calculation of Net Debt-to-Core
EBITDAre is as follows (dollars in thousands):
TABLE 5
Total debt principal (1)
$
8,434,910
Cash and cash equivalents and restricted
cash
(753,414
)
Net debt
$
7,681,496
Core EBITDAre (2)
$
461,559
Core EBITDAre, annualized
$
1,846,236
Net Debt-to-Core EBITDAre
4.2 times
(1) Balance at September 30, 2024 excludes
$43,090 of debt discount and deferred financing costs as reflected
in unsecured notes, net, and $16,558 of debt discount and deferred
financing costs as reflected in notes payable, net, on the
Condensed Consolidated Balance Sheets.
(2) For additional detail, see Definitions
and Reconciliations, table 1.
NOI is defined by the Company as
total property revenue less direct property operating expenses
(including property taxes), and excluding corporate-level income
(including management, development and other fees), property
management and other indirect operating expenses, net of corporate
income, expensed transaction, development and other pursuit costs,
net of recoveries, interest expense, net, loss on extinguishment of
debt, net, general and administrative expense, income from
unconsolidated investments, depreciation expense, income tax
(benefit) expense, casualty loss, (gain) loss on sale of
communities, other real estate activity and net operating income
from real estate assets sold or held for sale. The Company
considers NOI to be an important and appropriate supplemental
performance measure to net income because it helps both investors
and management to understand the core operations of a community or
communities prior to the allocation of any corporate-level property
management overhead or financing-related costs. NOI reflects the
operating performance of a community and allows for an easier
comparison of the operating performance of individual assets or
groups of assets. In addition, because prospective buyers of real
estate have different financing and overhead structures, with
varying marginal impact to overhead as a result of acquiring real
estate, NOI is considered by many in the real estate industry to be
a useful measure for determining the value of a real estate asset
or group of assets.
Residential NOI represents results attributable to the Company's
apartment rental operations, including parking and other ancillary
Residential revenue. Reconciliations of NOI and Residential NOI to
net income, as well as a breakdown of Residential NOI by operating
segment, are as follows (dollars in thousands):
TABLE 6
Q3
Q3
Q2
Q1
Q4
YTD
YTD
2024
2023
2024
2024
2023
2024
2023
Net income
$
372,519
$
171,790
$
254,007
$
173,557
$
242,066
$
800,083
$
686,372
Property management and other indirect
operating expenses, net of corporate income
40,149
33,554
37,553
35,204
34,706
112,906
99,606
Expensed transaction, development and
other pursuit costs, net of recoveries
1,573
18,959
1,417
4,245
10,267
7,235
23,212
Interest expense, net
55,769
48,115
57,078
54,766
49,471
167,613
156,521
Loss on extinguishment of debt, net
—
150
—
—
—
—
150
General and administrative expense
20,089
20,466
19,586
20,331
17,992
60,006
58,542
Income from unconsolidated investments
(30,720
)
(1,930
)
(4,822
)
(10,847
)
(1,709
)
(46,389
)
(11,745
)
Depreciation expense
212,122
200,982
206,923
212,269
210,694
631,314
606,271
Income tax expense (benefit)
782
4,372
(62
)
(22
)
2,438
698
7,715
Casualty loss
—
3,499
—
2,935
568
2,935
8,550
(Gain) loss on sale of communities
(172,973
)
(22,121
)
(68,556
)
70
(77,994
)
(241,459
)
(209,430
)
Other real estate activity
(314
)
(237
)
(181
)
(141
)
533
(636
)
(707
)
NOI from real estate assets sold or held
for sale
(2,036
)
(10,537
)
(7,997
)
(8,468
)
(9,173
)
(18,501
)
(39,005
)
NOI
496,960
467,062
494,946
483,899
479,859
1,475,805
1,386,052
Commercial NOI
(7,906
)
(7,959
)
(8,844
)
(8,024
)
(8,564
)
(24,774
)
(24,582
)
Residential NOI
$
489,054
$
459,103
$
486,102
$
475,875
$
471,295
$
1,451,031
$
1,361,470
Residential NOI
Same Store:
New England
$
61,564
$
58,383
$
62,269
$
59,921
$
59,358
$
183,754
$
173,787
Metro NY/NJ
89,631
88,323
91,551
90,054
89,866
271,236
265,083
Mid-Atlantic
70,439
70,125
70,448
70,678
71,565
211,565
209,667
Southeast FL
14,771
15,055
15,530
15,491
14,441
45,792
45,868
Denver, CO
7,254
7,185
7,249
7,353
7,213
21,856
21,210
Pacific NW
30,519
28,866
30,593
29,927
29,764
91,039
87,505
N. California
75,494
75,219
74,590
74,699
75,353
224,783
225,192
S. California
102,016
99,098
103,005
102,586
101,144
307,607
290,461
Other Expansion Regions
4,976
5,240
5,357
5,250
5,259
15,583
15,864
Total Same Store
456,664
447,494
460,592
455,959
453,963
1,373,215
1,334,637
Other Stabilized
18,416
11,619
16,422
15,563
15,150
50,401
27,698
Development/Redevelopment
13,974
(10
)
9,088
4,353
2,182
27,415
(865
)
Residential NOI
$
489,054
$
459,103
$
486,102
$
475,875
$
471,295
$
1,451,031
$
1,361,470
NOI as reported by the Company does not include the operating
results from assets sold or classified as held for sale. A
reconciliation of NOI from communities sold or classified as held
for sale is as follows (dollars in thousands):
TABLE 7
Q3
Q3
Q2
Q1
Q4
YTD
YTD
2024
2023
2024
2024
2023
2024
2023
Revenue from real estate assets sold or
held for sale
$
3,258
$
15,787
$
12,162
$
12,882
$
13,612
$
28,300
$
58,154
Operating expenses from real estate assets
sold or held for sale
(1,222
)
(5,250
)
(4,165
)
(4,414
)
(4,439
)
(9,799
)
(19,149
)
NOI from real estate assets sold or held
for sale
$
2,036
$
10,537
$
7,997
$
8,468
$
9,173
$
18,501
$
39,005
Commercial NOI is composed of the following components (in
thousands):
TABLE 8
Q3
Q3
Q2
Q1
Q4
YTD
YTD
2024
2023
2024
2024
2023
2024
2023
Commercial Revenue
$
9,748
$
9,769
$
10,677
$
9,835
$
10,371
$
30,260
$
29,650
Commercial Operating Expenses
(1,842
)
(1,810
)
(1,833
)
(1,811
)
(1,807
)
(5,486
)
(5,068
)
Commercial NOI
$
7,906
$
7,959
$
8,844
$
8,024
$
8,564
$
24,774
$
24,582
Other Stabilized is composed of
completed consolidated communities that the Company owns, which
have Stabilized Operations as of January 1, 2024, or which were
acquired subsequent to January 1, 2023. Other Stabilized excludes
communities that are conducting or are probable to conduct
substantial redevelopment activities.
Projected FFO and Projected Core
FFO, as provided within this release in the Company’s
outlook, are calculated on a basis consistent with historical FFO
and Core FFO, and are therefore considered to be appropriate
supplemental measures to projected net income from projected
operating performance. A reconciliation of the ranges provided for
Projected FFO per share (diluted) for the fourth quarter and full
year 2024 to the ranges provided for projected EPS (diluted) and
corresponding reconciliation of the ranges for Projected FFO per
share to the ranges for Projected Core FFO per share are as
follows:
TABLE 9
Low
Range
High
Range
Projected EPS (diluted) - Q4 2024
$
1.61
$
1.71
Depreciation (real estate related)
1.53
1.53
Gain on sale of communities
(0.47
)
(0.47
)
Projected FFO per share (diluted) - Q4
2024
2.67
2.77
Expensed transaction, development and
other pursuit costs, net of recoveries
0.01
0.01
Advocacy contributions
0.10
0.10
Projected Core FFO per share (diluted) -
Q4 2024
$
2.78
$
2.88
Projected EPS (diluted) - Full Year
2024
$
7.23
$
7.33
Depreciation (real estate related)
5.94
5.94
Gain on sale of communities
(2.16
)
(2.16
)
Casualty loss on real estate
0.02
0.02
Projected FFO per share (diluted) - Full
Year 2024
11.03
11.13
Unconsolidated entity gains, net
(0.24
)
(0.24
)
Structured Investment Program loan
reserve
(0.01
)
(0.01
)
Severance related costs
0.02
0.02
Expensed transaction, development and
other pursuit costs, net of recoveries
0.04
0.04
Legal settlements and costs
0.02
0.02
Advocacy contributions
0.13
0.13
Projected Core FFO per share (diluted) -
Full Year 2024
$
10.99
$
11.09
Projected NOI, as used within this
release for certain Development communities and in calculating the
Market Cap Rate for dispositions, represents management’s estimate,
as of the date of this release (or as of the date of the buyer’s
valuation in the case of dispositions), of projected stabilized
rental revenue minus projected stabilized operating expenses. For
Development communities, Projected NOI is calculated based on the
first twelve months of Stabilized Operations following the
completion of construction. In calculating the Market Cap Rate,
Projected NOI for dispositions is calculated for the first twelve
months following the date of the buyer’s valuation. Projected
stabilized rental revenue represents management’s estimate of
projected gross potential minus projected stabilized economic
vacancy and adjusted for projected stabilized concessions plus
projected stabilized other rental revenue. Projected stabilized
operating expenses do not include interest, income taxes (if any),
depreciation or amortization, or any allocation of corporate-level
property management overhead or general and administrative costs.
In addition, projected stabilized operating expenses for
Development communities do not include property management fee
expense. Projected gross potential for Development communities and
dispositions is generally based on leased rents for occupied homes
and management’s best estimate of rental levels for homes which are
currently unleased, as well as those homes which will become
available for lease during the twelve-month forward period used to
develop Projected NOI. The weighted average Projected NOI as a
percentage of Total Capital Cost is weighted based on the Company’s
share of the Total Capital Cost of each community, based on its
percentage ownership.
Management believes that Projected NOI of the Development
communities, on an aggregated weighted average basis, assists
investors in understanding management's estimate of the likely
impact on operations of the Development communities when the assets
are complete and achieve stabilized occupancy (before allocation of
any corporate-level property management overhead, general and
administrative costs or interest expense). However, in this release
the Company has not given a projection of NOI on a company-wide
basis. Given the different dates and fiscal years for which NOI is
projected for these communities, the projected allocation of
corporate-level property management overhead, general and
administrative costs and interest expense to communities under
development is complex, impractical to develop, and may not be
meaningful. Projected NOI of these communities is not a projection
of the Company's overall financial performance or cash flow. There
can be no assurance that the communities under development will
achieve the Projected NOI as described in this release.
Redevelopment is composed of
consolidated communities where substantial redevelopment is in
progress or is probable to begin during the current year.
Redevelopment is considered substantial when (i) capital invested
during the reconstruction effort is expected to exceed the lesser
of $5,000,000 or 10% of the community’s pre-redevelopment basis and
(ii) physical occupancy is below or is expected to be below 90%
during or as a result of the redevelopment activity.
Residential represents results
attributable to the Company's apartment rental operations,
including parking and other ancillary Residential revenue.
Residential Revenue with Concessions on a
Cash Basis is considered by the Company to be a supplemental
measure to Residential revenue in conformity with GAAP to help
investors evaluate the impact of both current and historical
concessions on GAAP-based Residential revenue and to more readily
enable comparisons to revenue as reported by other companies. In
addition, Residential Revenue with Concessions on a Cash Basis
allows an investor to understand the historical trend in cash
concessions.
A reconciliation of Same Store Residential revenue in conformity
with GAAP to Residential Revenue with Concessions on a Cash Basis
is as follows (dollars in thousands):
TABLE 10
Q3
Q3
Q2
YTD
YTD
2024
2023
2024
2024
2023
Residential revenue (GAAP basis)
$
671,508
$
651,303
$
663,970
$
1,992,789
$
1,925,695
Residential concessions amortized
3,719
4,142
4,172
12,129
10,969
Residential concessions granted
(5,087
)
(6,170
)
(2,484
)
(10,940
)
(12,516
)
Residential Revenue with Concessions on a
Cash Basis
$
670,140
$
649,275
$
665,658
$
1,993,978
$
1,924,148
Q3 2024 vs. Q3
2023
Q3 2024 vs. Q2
2024
YTD 2024 vs. YTD
2023
% change -- GAAP revenue
3.1
%
1.1
%
3.5
%
% change -- cash revenue
3.2
%
0.7
%
3.6
%
Same Store is composed of
consolidated communities where a comparison of operating results
from the prior year to the current year is meaningful as these
communities were owned and had Stabilized Operations, as defined
below, as of the beginning of the respective prior year period.
Therefore, for 2024 operating results, Same Store is composed of
consolidated communities that have Stabilized Operations as of
January 1, 2023, are not conducting or are not probable to conduct
substantial redevelopment activities and are not held for sale or
probable for disposition within the current year.
Stabilized Operations is defined as
operations of a community that occur after the earlier of (i)
attainment of 90% physical occupancy or (ii) the one-year
anniversary of completion of development or redevelopment.
Total Capital Cost includes all
capitalized costs projected to be or actually incurred to develop
the respective Development or Redevelopment community, including
land acquisition costs, construction costs, real estate taxes,
capitalized interest and loan fees, permits, professional fees,
allocated development overhead and other regulatory fees and a
contingency estimate, offset by proceeds from the sale of any
associated land or improvements, all as determined in accordance
with GAAP. Total Capital Cost also includes costs incurred related
to first generation commercial tenants, such as tenant improvements
and leasing commissions. For Redevelopment communities, Total
Capital Cost excludes costs incurred prior to the start of
redevelopment when indicated. With respect to communities where
development or redevelopment was completed in a prior period or the
current period, Total Capital Cost reflects the actual cost
incurred, plus any contingency estimate made by management. Total
Capital Cost for communities identified as having joint venture
ownership, either during construction or upon construction
completion, represents the total projected joint venture
contribution amount. For joint ventures not in construction, Total
Capital Cost is equal to gross real estate cost.
Uncollectible lease revenue and government
rent relief
The following table provides uncollectible Residential lease
revenue as a percentage of total Residential revenue in the
aggregate and excluding amounts recognized from government rent
relief programs in each respective period. Government rent relief
reduces the amount of uncollectible Residential lease revenue. The
Company expects the amount of rent relief recognized to continue to
decline in 2024 absent funding from the Federal government.
TABLE 11
Same Store Uncollectible
Residential Lease Revenue
Q3
Q3
Q2
Q1
2024
2023
2024
2024
Total
Excluding Rent Relief
Total
Excluding Rent Relief
Total
Excluding Rent Relief
Total
Excluding Rent Relief
New England
0.3
%
0.7
%
0.9
%
1.2
%
0.5
%
0.9
%
0.2
%
0.7
%
Metro NY/NJ
2.2
%
2.2
%
2.3
%
2.7
%
2.1
%
2.2
%
2.1
%
2.3
%
Mid-Atlantic
2.0
%
2.1
%
2.2
%
2.3
%
2.3
%
2.3
%
2.3
%
2.6
%
Southeast FL
2.2
%
2.3
%
3.3
%
3.5
%
1.7
%
1.8
%
2.4
%
2.4
%
Denver, CO
0.6
%
0.7
%
1.3
%
1.4
%
1.0
%
1.0
%
1.2
%
1.4
%
Pacific NW
1.0
%
1.1
%
1.6
%
1.9
%
1.4
%
1.4
%
0.9
%
1.0
%
N. California
0.9
%
1.0
%
1.2
%
1.3
%
1.3
%
1.3
%
1.1
%
1.2
%
S. California
1.9
%
1.9
%
2.4
%
2.5
%
2.2
%
2.4
%
2.1
%
2.4
%
Other Expansion Regions
2.4
%
2.5
%
0.8
%
0.8
%
1.5
%
1.5
%
1.2
%
1.2
%
Total Same Store
1.6
%
1.6
%
1.9
%
2.1
%
1.7
%
1.9
%
1.6
%
1.9
%
Unconsolidated Development is
composed of communities that are either currently under
construction, or were under construction and were completed during
the current year, in which we have an indirect ownership interest
through our investment interest in an unconsolidated joint venture.
These communities may be partially or fully complete and
operating.
Unencumbered NOI as calculated by
the Company represents NOI generated by real estate assets
unencumbered by outstanding secured notes payable as of September
30, 2024 as a percentage of total NOI generated by real estate
assets. The Company believes that current and prospective unsecured
creditors of the Company view Unencumbered NOI as one indication of
the borrowing capacity of the Company. Therefore, when reviewed
together with the Company’s Interest Coverage, EBITDA and cash flow
from operations, the Company believes that investors and creditors
view Unencumbered NOI as a useful supplemental measure for
determining the financial flexibility of an entity. A calculation
of Unencumbered NOI for the nine months ended September 30, 2024 is
as follows (dollars in thousands):
TABLE 12
YTD 2024
NOI
Residential NOI:
Same Store
$
1,373,215
Other Stabilized
50,401
Development/Redevelopment
27,415
Total Residential NOI
1,451,031
Commercial NOI
24,774
NOI from real estate assets sold or held
for sale
18,501
Total NOI generated by real estate
assets
1,494,306
Less NOI on encumbered assets
(73,420
)
NOI on unencumbered assets
$
1,420,886
Unencumbered NOI
95
%
Copyright © 2024 AvalonBay Communities, Inc.
All Rights Reserved
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241101881964/en/
Jason Reilley Vice President of Investor Relations
703-317-4681
Avalonbay Communities (NYSE:AVB)
Historical Stock Chart
From Nov 2024 to Dec 2024
Avalonbay Communities (NYSE:AVB)
Historical Stock Chart
From Dec 2023 to Dec 2024
