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AVALONBAY COMMUNITIES INC Annual Report, Year Ended Dec 31, 2001

Filing Date
Filed March 26, 2002
Period End
December 31, 2001
Security
AVB
In the record · 2016–202610-K1210-Q328-K115

AVB filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 115 current reports (8-K) between 2016 and 2026.

  1. FY2015 annual report10-K · Feb ’16Feb ’16
  2. Leadership change8-K · Feb ’19Feb ’19
  3. Leadership change8-K · Feb ’21Feb ’21
  4. Material agreement8-K · Apr ’25Apr ’25

01—Abstract

Summary

Summary of the 10-K filed March 26, 2002. Cited figures are marked; the original filing is the authoritative source.

AvalonBay Communities (AVB) closed 2001 with strong top- and bottom-line growth, but the 10-K signals a clear shift in tone toward a slower 2002.

Total revenue rose 11.9% to $641.7 milliona and net income available to common stockholders rose 26.7% to $216.5 million ($3.12 diluted EPS, up from $2.53). Growth was driven by a $62.9 million gain on community sales, newly developed and redeveloped communities, and 6.6% rental revenue growth at Established Communities. Net operating income rose 11.4% to $427.6 million.

FFO rose to $283.3 millionb from $252.0 million, a meaningful increase, though it is a non-GAAP measure and the gain on sale is excluded from it. Management's forward-looking commentary is more cautious. The company expects Established Community NOI to decline in the first half of 2002 as the recession takes hold, with modest growth only if the economy recovers in the second half.

Monthly revenue per occupied home and occupancy may fall in 2002. Northern California, roughly 37% of Established rental revenue, saw market rents fall about 22% in 2001. Insurance costs are expected to rise by roughly $9.2 millionc in 2002, and asset sales will be significantly curtailed, which should reduce gains and extend depreciation growth.

Balance sheet and capital position remain conservative. Debt to total market capitalization was 37.1% at year-end, with $1.635 billiond of unsecured notes, a $500 million undrawn credit facility (about $414 million available at March 1, 2002), and $2.08 billion total indebtedness.

Development is substantial: 15 communities (3,963 homes, about $750 million budgeted) are under construction and 30 Development Rights (8,918 homes) are being pursued. Investors should weigh the strong 2001 earnings, which were boosted by asset-sale gains, against the expected 2002 softening in core operating income and the execution risk on the development pipeline.

02—Key points

Key Highlights

  1. Total revenue grew 11.9% to $641.7 million in 2001, and net income available to common stockholders grew 26.7% to $216.5 million, or $3.12 per diluted share, versus $2.53 in 2000.
  2. Gains on sale of communities totaled $62.9 million in 2001, up from $40.8 million, and contributed materially to earnings growth; management expects fewer sales and smaller gains in 2002.
  3. Funds from Operations (FFO) rose to $283.3 million from $252.0 million; dividends were $2.56 per common share, up from $2.24, with 2002 dividends guided to continue quarterly payments.
  4. Management expects Established Community NOI to decline in the first half of 2002 due to the national recession, with total NOI rising only modestly; Northern California market rents fell about 22% in 2001.
  5. Development pipeline is large: 15 communities (3,963 homes, about $750.3 million budgeted) under construction, three redevelopments (1,896 homes), and 30 Development Rights (8,918 homes, about $1.7 billion budgeted).
  6. Conservative capitalization: debt to total market capitalization was 37.1% at year-end 2001; $500 million unsecured credit facility with $414 million available as of March 1, 2002.
  7. Insurance costs are expected to rise about $9.2 million in 2002, and ongoing litigation with York Hunter Construction over the Avalon Willow project is not expected to be material.

03—Questions

Frequently Asked Questions

  1. How did AvalonBay perform financially in 2001?

    Total revenue increased 11.9% to $641.7 million and net income available to common stockholders increased 26.7% to $216.5 million ($3.19 basic, $3.12 diluted EPS). Net operating income grew 11.4% to $427.6 million. Results were helped by $62.9 million in gains on community sales and by new and redeveloped communities coming online.

  2. What is the outlook for 2002?

    Management expects Established Community NOI to decline during the first half of 2002 as the recession affects rents and occupancy, with modest total NOI growth. Growth in Established Communities is expected in the second half only if the economy recovers as anticipated. Monthly revenue per occupied home and occupancy may decline, and insurance costs will rise by about $9.2 million.

  3. How exposed is AvalonBay to Northern California and the technology sector?

    Northern California accounts for about 37.2% of Established Community rental revenue. Market rents there fell about 22% in 2001 and economic occupancy fell from 97.8% to 93.9%. Management warns that further declines are possible as the market resets to more sustainable levels.

  4. What is the company's debt and liquidity position?

    Debt to total market capitalization was 37.1% at December 31, 2001. Total notes payable and unsecured credit facilities were $2.08 billion, including $1.635 billion of unsecured notes. The $500 million unsecured credit facility was undrawn at year-end, with $414.2 million available as of March 1, 2002, and management expects to issue at least $200 million of unsecured debt in 2002.

  5. What development and disposition activity is planned?

    AvalonBay has 15 communities under construction (3,963 homes, about $750.3 million budgeted) and 30 Development Rights (8,918 homes). Asset sales are expected to be significantly curtailed in 2002 after seven communities sold in 2001 for net proceeds of about $230.4 million, which reduces the capital recycling source for development.

04—Continue

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