10-QPeriod: Q3 FY2000

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2000

Filed November 14, 2000For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported its third-quarter 2000 financial results, showcasing continued growth in its rental income and a significant increase in net income compared to the prior year. The company's strategy of disposing of non-core assets and reinvesting proceeds into development and redevelopment is showing positive traction, evidenced by a substantial gain on the sale of communities. Total assets grew to $4.33 billion, with net operating real estate holding strong at $3.72 billion. The balance sheet reflects a strategic increase in unsecured notes, indicating active management of the company's debt structure. Operationally, rental income increased by 11.6% for the quarter and 13.0% for the nine months ended September 30, 2000, driven by higher rental rates and economic occupancy. Net income available to common stockholders saw a substantial increase of 99.5% for the quarter and 53.8% for the nine months, bolstered by a significant gain on the sale of communities and growth from stabilized assets. The company is actively expanding its portfolio through development and redevelopment, with substantial investments underway, signaling a positive outlook for future revenue streams.

Key Highlights

  • 1Rental income increased by 11.6% in Q3 2000 and 13.0% year-to-date, indicating strong operational performance.
  • 2Net income available to common stockholders surged by 99.5% for the quarter and 53.8% year-to-date, driven by gains on asset sales and improved property performance.
  • 3The company sold six communities for net proceeds of approximately $101.4 million in the first nine months of 2000, as part of its strategy to focus on high-barrier-to-entry markets.
  • 4Total assets grew to $4.33 billion as of September 30, 2000, up from $4.15 billion at year-end 1999, reflecting portfolio expansion.
  • 5The company is actively engaged in development and redevelopment, with ten communities under construction and 34 development rights identified, indicating future growth potential.
  • 6Operating expenses, excluding property taxes, saw a modest increase of 1.1% in Q3 and 2.6% year-to-date, demonstrating effective cost management relative to revenue growth.

Frequently Asked Questions

AvalonBay's strategy involves focusing on owning and operating upscale apartment communities in high barrier-to-entry markets. The company is actively disposing of assets in markets that do not align with its long-term strategic direction and redeploying those proceeds to fund development and redevelopment activities in core markets.

The company increased its unsecured notes significantly, from $985 million at the end of 1999 to $1.135 billion by September 30, 2000. This suggests a strategic shift towards longer-term, fixed-rate financing to mitigate interest rate risk and fund growth, while also reducing reliance on its variable rate unsecured credit facility.

The company is heavily invested in development and redevelopment. As of September 30, 2000, it had ten communities under construction with a projected total capitalized cost of $507.8 million, and identified 34 development rights representing an estimated 8,825 apartment homes. Two communities are also under redevelopment with significant investment planned, indicating a strong focus on future portfolio growth.

Asset sales are a key component of AvalonBay's capital redeployment strategy. While sales remove existing income streams, they generate proceeds that are reinvested into higher-yielding development and redevelopment projects. The company reported significant gains on sales of communities in the nine months ended September 30, 2000, contributing to the overall increase in net income.