10-QPeriod: Q1 FY2015

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 4, 2015For Securities:AVB

Summary

AvalonBay Communities Inc. (AVB) reported strong first-quarter 2015 results, with net income attributable to common stockholders increasing by a significant 46.9% year-over-year to $208.1 million. This robust performance was driven by higher real estate sales and related gains, increased income from unconsolidated real estate entities, and growth in Net Operating Income (NOI) from both established and newly developed communities. Established Communities saw a 5.3% increase in NOI, primarily due to a 4.3% rise in rental revenue, indicating effective rent growth outpacing expense increases. The company continues to execute its growth strategy by actively developing and acquiring new properties. During the quarter, AVB completed three communities totaling 1,357 homes and started construction on two more. The development pipeline remains substantial, with 25 communities under construction and plans for an additional 35 communities. The sale of Avalon on Stamford Harbor contributed a gain of $70.9 million, highlighting the company's ability to generate value through strategic asset dispositions. AVB also reported solid liquidity and affirmed its ability to meet financial obligations, supported by a strong balance sheet and access to capital markets.

Financial Highlights

33 data points
Beta

Revenue

$442.37M

Net Income

$208.14M

47.1% Net Margin

EPS (Diluted)

$1.56

Total Assets

$16.26B

Cash & Equivalents

$194.93M

Free Cash Flow

$236.38M

Financial Statements
Beta
Revenue$442.37M
Operating Expenses$339.82M
Operating Income$295.63M
Interest Expense$45.57M
Net Income$208.14M
EPS (Basic)$1.57
EPS (Diluted)$1.56
Shares Outstanding (Basic)131.88M
Shares Outstanding (Diluted)133.18M

Key Highlights

  • 1Net income attributable to common stockholders surged 46.9% to $208.1 million in Q1 2015, driven by real estate sales, income from unconsolidated entities, and higher NOI.
  • 2Net Operating Income (NOI) from Established Communities increased by 5.3%, fueled by a 4.3% rise in rental revenue and a 2.5% increase in operating expenses.
  • 3The company completed construction on three communities (1,357 homes) and started two new ones during the quarter, with a robust development pipeline of 25 communities under construction.
  • 4A significant gain of $70.9 million was realized from the sale of Avalon on Stamford Harbor, demonstrating effective asset management and value realization.
  • 5Funds From Operations (FFO) per diluted share increased to $1.88 from $1.64 in the prior year period, indicating strong core operating performance.
  • 6Liquidity remains strong, with $194.9 million in unrestricted cash and cash equivalents, and the company expects to meet its short-term liquidity needs through various sources.
  • 7The company reported full compliance with its financial covenants as of March 31, 2015.

Frequently Asked Questions

The primary drivers of the significant increase in net income were higher gains from real estate sales, increased income from unconsolidated real estate entities, and an overall improvement in Net Operating Income (NOI) from both existing and newly developed operating communities.

AvalonBay is actively managing its development pipeline by completing existing projects and initiating new ones. In Q1 2015, they completed three communities and started two. They have a substantial pipeline with 25 communities currently under construction and plans for an additional 35 future communities, indicating a strong commitment to expanding their portfolio.

The company reported $194.9 million in unrestricted cash and cash equivalents as of March 31, 2015. They are confident in their ability to meet short-term liquidity needs through a combination of operating cash flows, available borrowing capacity under their credit facility, proceeds from real estate dispositions, and potential equity issuances.

A fire occurred at the Avalon at Edgewater community in January 2015, leading to property damage claims and lawsuits. While the company believes insurance will cover most liabilities, subject to deductibles, they are also reviewing their maintenance policies and cooperating with potential governmental investigations. The company does not currently believe this will have a material adverse effect on its financial condition or results of operations, but it is an ongoing situation to monitor.