10-QPeriod: Q1 FY2014

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 2, 2014For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported a strong first quarter in 2014, with net income attributable to common stockholders increasing by 87.9% year-over-year to $141.7 million. This significant growth was primarily driven by the successful integration of communities acquired through the Archstone Acquisition and contributions from newly developed properties. The company's Net Operating Income (NOI) from Established Communities saw a 2.6% increase, reflecting a 3.7% rise in rental revenue, though this was partially offset by a 6.5% increase in operating expenses, influenced by weather-related costs. The company continues to execute on its development strategy, completing two communities with 648 homes and commencing construction on four new communities totaling 1,119 homes. Management expresses confidence in the company's liquidity and capital resources, expecting to meet future needs through a combination of operating cash flows, borrowings, and potential capital markets activities. The balance sheet remains robust, with total assets growing to $15.6 billion and equity increasing to $8.6 billion.

Financial Highlights

32 data points
Beta

Revenue

$400.07M

Net Income

$141.74M

35.4% Net Margin

EPS (Diluted)

$1.09

Total Assets

$15.57B

Cash & Equivalents

$386.19M

Free Cash Flow

$220.32M

Financial Statements
Beta
Revenue$400.07M
Operating Expenses$301.88M
Operating Income$263.87M
Interest Expense$42.53M
Net Income$141.74M
EPS (Basic)$1.09
EPS (Diluted)$1.09
Shares Outstanding (Basic)129.29M
Shares Outstanding (Diluted)129.63M

Key Highlights

  • 1Net income attributable to common stockholders rose by 87.9% to $141.7 million for the quarter ended March 31, 2014, compared to the prior year.
  • 2Established Communities' Net Operating Income (NOI) increased by 2.6% year-over-year, driven by a 3.7% increase in rental revenue.
  • 3The company completed two development communities (648 homes) and started construction on four new communities (1,119 homes) in the quarter.
  • 4Total revenue increased by 32.8% to $400.1 million, largely due to contributions from communities acquired in the Archstone Acquisition and new developments.
  • 5Cash provided by operating activities significantly increased to $220.3 million, up from $81.4 million in the prior year period.
  • 6AvalonBay maintains a strong liquidity position, with cash and cash equivalents of $386.2 million at the end of the quarter.
  • 7The company issued new unsecured notes totaling $250 million and drew $250 million on a new Term Loan facility.

Frequently Asked Questions

The primary driver for the significant increase in net income was the strong operating performance from communities acquired in the Archstone Acquisition, coupled with contributions from newly developed communities. A decrease in expensed acquisition costs also positively impacted net income, although this was partially offset by a lower gain on the sale of communities compared to the previous year.

AvalonBay maintains a strong liquidity position with $386.2 million in cash and cash equivalents. The company has access to a $1.3 billion unsecured credit facility and recently secured a $300 million unsecured term loan, from which it drew $250 million. Management expects to meet future liquidity needs through operating cash flows, borrowings, and potential capital markets activities, while also adhering to various financial covenants under its credit facilities and debt agreements.

The company expects continued year-over-year revenue growth for the remainder of 2014, supported by its existing portfolio and newly developed communities. While operating expenses are also expected to increase, the company anticipates a moderating rate of increase over the balance of the year, leading to a slowing growth in operating expenses compared to the prior year period. Specific regions like Northern California and Southern California are noted for strong demand and limited new supply, while other regions like the Mid-Atlantic and Pacific Northwest may face challenges from increased apartment deliveries.

As of March 31, 2014, AvalonBay had 31 development communities under construction, expected to add 9,179 apartment homes. They also control land for an additional 45 future communities. During the quarter, two communities were completed and four new communities were started. Management also noted that the company is actively engaged in redevelopment projects on five communities.