10-QPeriod: Q3 FY2014

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 4, 2014For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported a significant increase in net income attributable to common stockholders for the third quarter of 2014, reaching $241.1 million, a substantial rise from a net loss in the prior year period. This surge was primarily driven by substantial gains from the sale of communities within various joint ventures and an increase in Net Operating Income (NOI) from newly developed and operating communities. The company continues to execute its growth strategy by developing, acquiring, owning, and operating apartment communities in high barrier-to-entry markets. During the quarter, AVB completed the construction of eight communities and started construction on three more, underscoring its commitment to expanding its portfolio. Established Communities also demonstrated strong performance, with a 5.5% increase in NOI year-over-year, driven by a 3.7% rise in rental revenue.

Financial Highlights

32 data points
Beta

Revenue

$430.52M

Net Income

$241.10M

56.0% Net Margin

EPS (Diluted)

$1.83

Total Assets

$15.88B

Cash & Equivalents

$440.03M

Free Cash Flow

$231.72M

Financial Statements
Beta
Revenue$430.52M
Operating Expenses$320.12M
Operating Income$290.43M
Interest Expense$46.38M
Net Income$241.10M
EPS (Basic)$1.83
EPS (Diluted)$1.83
Shares Outstanding (Basic)131.33M
Shares Outstanding (Diluted)131.91M

Key Highlights

  • 1Net income attributable to common stockholders surged to $241.1 million for Q3 2014, a significant improvement from a loss in Q3 2013.
  • 2Established Communities' Net Operating Income (NOI) increased by 5.5% year-over-year, driven by a 3.7% increase in rental revenue.
  • 3The company completed construction on 8 new communities (1,595 homes) and started construction on 3 new communities (1,165 homes) in Q3 2014.
  • 4Significant gains were realized from the sale of communities in various joint ventures, contributing to the improved net income.
  • 5Total revenue increased by 10.6% for the quarter compared to the prior year period.
  • 6The company's development pipeline remains robust, with 27 communities under construction representing approximately $3.2 billion in projected capitalized cost.
  • 7Cash provided by operating activities increased by over 14% for the nine months ended September 30, 2014, compared to the prior year period.

Frequently Asked Questions

The substantial increase in net income was primarily due to gains from the sale of communities in unconsolidated real estate entities, an increase in NOI from newly developed and operating communities, and the absence of losses from an interest rate contract that occurred in the prior year period. Additionally, a decrease in depreciation expense related to in-place leases acquired from the Archstone Acquisition also contributed.

AvalonBay is actively expanding its portfolio. In the third quarter of 2014, they completed eight communities with 1,595 apartment homes and started construction on three new communities totaling 1,165 homes. As of September 30, 2014, there were 27 communities under construction with a projected total capitalized cost of approximately $3.2 billion.

The company's strategy focuses on developing, acquiring, owning, and operating apartment communities in high barrier-to-entry markets. They aim to create long-term shareholder value by accessing capital cost-effectively, deploying it into development and acquisition, operating communities efficiently, and strategically selling assets when they no longer align with long-term investment strategy or when pricing is attractive.

Established Communities showed positive momentum, with NOI increasing by 5.5% year-over-year, largely driven by a 3.7% increase in rental revenue. This performance was supported by increased rental rates, although operating expenses also saw a slight increase.