10-QPeriod: Q1 FY2002

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 15, 2002For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) filed its Q1 2002 10-Q report, revealing a mixed operational landscape. While total revenue saw a modest increase of 2.8% year-over-year to $160.1 million, driven by a significant surge in 'Other Income' (largely due to insurance proceeds and construction management fees), net income available to common stockholders declined by 14.3% to $35.7 million. This decline was primarily attributed to the absence of property sales compared to the prior year and an increase in depreciation and interest expenses. The company continues its focus on developing and acquiring upscale apartment communities in high-barrier-to-entry markets. The company is actively managing its portfolio amidst a challenging economic environment, characterized by a national recession impacting job growth in its key markets. Despite a slight decrease in Net Operating Income (NOI) for 'Established Communities' due to occupancy declines, the overall NOI saw a marginal increase, bolstered by performance in 'Other Stabilized Communities' and 'Development/Redevelopment Communities'. AVB remains committed to its development pipeline, with significant investments in new construction, while also carefully managing its liquidity and capital resources, which include a substantial credit facility.

Key Highlights

  • 1Total revenue increased by 2.8% to $160.1 million, driven by a significant rise in 'Other Income' (attributed to insurance proceeds and construction management fees), although rental income saw a slight decrease.
  • 2Net income available to common stockholders decreased by 14.3% to $35.7 million, primarily due to the absence of property sales and increased depreciation and interest expenses compared to the prior year.
  • 3Net Operating Income (NOI) for Established Communities experienced a 6.3% decline, largely due to occupancy decreases attributed to the national recession and unique market conditions, while overall company NOI saw a modest 1.4% increase.
  • 4The company is actively engaged in development and redevelopment, with 16 communities under construction representing a significant future investment, and has commenced development on two new communities in Maryland and California.
  • 5Liquidity remains a focus, with cash and cash equivalents decreasing significantly to $3.1 million from $73.0 million, primarily due to substantial investments in real estate development and debt repayments, while maintaining a $500 million unsecured credit facility with substantial availability.
  • 6Interest expense increased by 19.1% to $27.5 million, largely due to the issuance of $300 million in unsecured notes in September 2001, with plans for further debt issuance.
  • 7Economic occupancy in Established Communities for the portfolio decreased from 97.0% in Q1 2001 to 92.8% in Q1 2002, with notable declines in Northern California and Northeast sub-markets.

Frequently Asked Questions

AvalonBay Communities shows a mixed financial picture. While revenue is up due to non-recurring items, profitability available to common stockholders has declined year-over-year, impacted by a challenging economic environment affecting occupancy and rental income in established communities. However, the company continues to invest heavily in its development pipeline and maintains a significant credit facility for liquidity.

The national recession is impacting AvalonBay's operations, particularly in its 'Established Communities.' This has led to decreased occupancy and a decline in Net Operating Income (NOI) in these segments, especially in sub-markets like Northern California and the Northeast, which are sensitive to the technology and financial services sectors. The company anticipates continued weak demand in the near term.

AvalonBay's strategy remains focused on developing and acquiring upscale apartment communities in high-barrier-to-entry markets. The company is actively investing in a pipeline of 16 communities under construction and has commenced development on two new projects. They are also exploring 33 additional development rights, though financing and approvals remain key considerations.

The company's cash position has decreased significantly, largely due to investments in real estate. However, it has a $500 million unsecured credit facility, of which a substantial portion remains available, to manage its liquidity needs. Interest expenses have risen due to recent debt issuances, and the company plans to refinance maturing debt and potentially issue more debt.