10-QPeriod: Q3 FY2010

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 4, 2010For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported its third-quarter and nine-month results for the period ending September 30, 2010. The company experienced a decrease in net income attributable to common stockholders for the quarter due to a lack of comparable property disposition gains seen in the prior year. However, for the nine-month period, net income attributable to common stockholders saw an increase, primarily driven by higher gains from property dispositions and the absence of a significant impairment charge recorded in the prior year. Rental and other income showed growth, reflecting contributions from newly developed communities and improved rental rates, although slightly offset by decreased occupancy in established communities. The company continues to actively manage its portfolio, with significant ongoing development and redevelopment projects, and maintains a strong liquidity position with substantial cash on hand and available credit facilities.

Financial Highlights

28 data points
Beta

Revenue

$222.22M

Net Income

$24.65M

11.1% Net Margin

EPS (Diluted)

$0.29

Total Assets

$7.67B

Cash & Equivalents

$229.11M

Free Cash Flow

$62.66M

Financial Statements
Beta
Revenue$222.22M
Operating Expenses$199.02M
Operating Income$25.58M
Net Income$24.65M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)84.97M
Shares Outstanding (Diluted)85.77M

Key Highlights

  • 1Net income attributable to common stockholders decreased by 57.6% to $24.7 million for Q3 2010 compared to Q3 2009, primarily due to lower gains from property dispositions.
  • 2For the nine months ended September 30, 2010, net income attributable to common stockholders increased by 20.3% to $148.3 million, benefiting from higher disposition gains and the absence of a prior year impairment charge.
  • 3Total revenue increased by 5.8% to $227.6 million for Q3 2010 and by 4.2% to $663.4 million for the nine months ended September 30, 2010, driven by rental income growth.
  • 4Established Communities' Net Operating Income (NOI) saw a slight decrease of 1.5% for Q3 2010, marking an improvement from previous quarters, with rental revenue showing its first year-over-year growth since 2008.
  • 5The company started construction on five new communities totaling 920 apartment homes with an aggregate capitalized cost of $232.5 million during the quarter.
  • 6As of September 30, 2010, AVB had $229.1 million in cash and cash equivalents, an increase of $123.4 million from the end of 2009, and maintained strong liquidity with $952.3 million available under its credit facility.
  • 7The company settled litigation with the U.S. Attorney's Office for the Southern District of New York regarding accessibility at Avalon Chrystie Place, with no material expected impact on financial condition or results of operations.

Frequently Asked Questions

The primary reason for the 57.6% decrease in net income attributable to common stockholders for the third quarter of 2010 compared to the same period in 2009 was the absence of significant gains from property dispositions, which were a notable contributor in the prior year's third quarter. While rental income saw some growth, it was not enough to offset the decrease in disposition gains.

AvalonBay is actively developing its portfolio. During the third quarter of 2010, they started construction on five new communities. As of September 30, 2010, twelve communities were under construction with a total projected capitalized cost of approximately $1.07 billion. The company believes it has sufficient liquidity from cash on hand, credit facilities, and potential future financing to fund these activities.

The company reported $229.1 million in cash and cash equivalents as of September 30, 2010, a substantial increase from the prior year-end. They also have significant borrowing capacity available under their $1 billion credit facility, with $952.3 million available at the end of the quarter. This indicates a strong liquidity position to meet short-term needs and fund ongoing development projects.

The Net Operating Income (NOI) for Established Communities saw a modest year-over-year decline of 1.5% in the third quarter of 2010, representing an improvement compared to earlier quarters. Notably, rental revenue for these communities experienced its first year-over-year growth since 2008, increasing by 0.2%, suggesting a stabilization and potential recovery in rental rates, although overall occupancy saw a slight decrease due to redevelopments and prior dispositions.