10-QPeriod: Q1 FY2013

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 10, 2013For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) filed its Form 10-Q for the quarterly period ended March 31, 2013, reporting significant activity, most notably the completion of the Archstone Acquisition on February 27, 2013. This strategic acquisition, conducted in partnership with Equity Residential, involved AVB acquiring approximately 40% of Archstone's assets and liabilities, significantly expanding AVB's portfolio. The company reported a substantial increase in net income attributable to common stockholders, primarily driven by gains from real estate asset dispositions, improved Net Operating Income (NOI) from existing and newly acquired/developed communities, and the inclusion of Archstone assets. Despite the large-scale acquisition, AVB demonstrated strong operational performance with a notable increase in rental revenue and NOI for its established communities. The company continues its development pipeline, with 27 communities under construction. Liquidity remains robust, supported by substantial cash reserves and an undrawn credit facility, positioning AVB to fund ongoing development and integration activities.

Financial Highlights

32 data points
Beta

Revenue

$301.36M

Net Income

$75.43M

25.0% Net Margin

EPS (Diluted)

$0.63

Total Assets

$15.19B

Cash & Equivalents

$447.46M

Free Cash Flow

$81.39M

Financial Statements
Beta
Revenue$301.36M
Operating Expenses$297.56M
Operating Income$207.68M
Interest Expense$38.17M
Net Income$75.43M
EPS (Basic)$0.63
EPS (Diluted)$0.63
Shares Outstanding (Basic)119.68M
Shares Outstanding (Diluted)120.11M

Key Highlights

  • 1Completion of the Archstone Acquisition on February 27, 2013, significantly expanding AVB's real estate portfolio by approximately 40% of Archstone's assets and liabilities.
  • 2Net income attributable to common stockholders increased by 30.6% to $75.4 million for the quarter ended March 31, 2013, compared to the prior year, largely due to real estate disposition gains and improved operational NOI.
  • 3Established Communities' Net Operating Income (NOI) grew by 5.6% to $143.0 million, driven by a 4.9% increase in rental revenue from higher rental rates and economic occupancy.
  • 4Total revenue increased by 26.9% to $312.1 million, reflecting the contribution from newly acquired properties and ongoing development completions.
  • 5The company had $541.1 million in unrestricted cash and cash in escrow at March 31, 2013, ensuring ample liquidity for ongoing operations and development.
  • 627 development communities were under construction, representing a significant pipeline for future growth, with an expected total capitalized cost of approximately $2.2 billion.
  • 7The company's $1.3 billion revolving credit facility remained largely undrawn, providing substantial borrowing capacity.

Frequently Asked Questions

The primary driver was the significant increase in net income, largely due to the substantial gains from the disposition of real estate assets and the inclusion of operating income from the recently acquired Archstone communities. Operational improvements, as reflected in NOI growth, also contributed positively.

The Archstone Acquisition significantly increased the company's total assets and liabilities. On the operational side, it expanded the portfolio with 58 apartment communities (before subsequent dispositions) and added to the development pipeline. The acquisition also resulted in increased depreciation expense and transaction-related costs, which were partially offset by higher revenues and NOI from the new assets.

The company expects continued year-over-year revenue growth for the remainder of 2013, supported by the newly acquired Archstone communities and ongoing leasing activity for new developments. Established Communities are expected to see continued rental revenue growth, though this may be moderated by increasing operating expenses and new supply in certain markets. Occupancy rates remained strong in most regions.

Following the acquisition, AVB assumed significant debt from Archstone, increasing its total debt. The company repaid a portion of its existing unsecured notes and made substantial principal repayments on secured notes. Despite increased leverage, AVB's liquidity remains strong, supported by cash on hand and its credit facility, and it was in compliance with its financial covenants.