10-QPeriod: Q1 FY2016

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 3, 2016For Securities:AVB

Summary

AvalonBay Communities Inc. (AVB) reported a strong first quarter of 2016, demonstrating robust operational performance and significant net income growth. Net income attributable to common stockholders increased by 14.3% year-over-year, driven primarily by enhanced Net Operating Income (NOI) from both existing and newly developed communities, including positive contributions from business interruption insurance proceeds and a net casualty and impairment gain related to the Edgewater event. The company continues to expand its portfolio, completing three new communities and starting construction on another, while maintaining a substantial development pipeline. Financially, AVB exhibits healthy revenue growth and controlled operating expenses. Established Communities saw a notable 7.9% increase in NOI, fueled by a 5.5% rise in rental revenue, indicating strong underlying demand and effective rental rate management. The company also actively manages its capital structure, extending its credit facility and demonstrating a disciplined approach to liquidity, positioning itself well for continued growth and shareholder value creation.

Financial Highlights

33 data points
Beta

Revenue

$508.50M

Net Income

$237.93M

46.8% Net Margin

EPS (Diluted)

$1.73

Total Assets

$17.04B

Cash & Equivalents

$97.54M

Free Cash Flow

$277.78M

Financial Statements
Beta
Revenue$508.50M
Operating Expenses$349.98M
Operating Income$350.88M
Interest Expense$43.41M
Net Income$237.93M
EPS (Basic)$1.73
EPS (Diluted)$1.73
Shares Outstanding (Basic)136.79M
Shares Outstanding (Diluted)137.38M

Key Highlights

  • 1Net income attributable to common stockholders grew 14.3% to $237.9 million, largely due to increased NOI and insurance proceeds.
  • 2Established Communities' NOI rose 7.9%, driven by a 5.5% increase in rental revenue and a 0.1% rise in operating expenses.
  • 3The company completed construction on three communities with 732 apartment homes and began construction on one new community.
  • 4AVB has a substantial development pipeline with 24 communities under construction, representing 7,670 apartment homes and an estimated capitalized cost of $2.7 billion.
  • 5Rental revenue from Established Communities increased by 5.5% year-over-year, with average rental rates up 5.9%, despite a slight decrease in economic occupancy.
  • 6The company successfully extended its Credit Facility maturity to April 2020 and increased its size to $1.5 billion.
  • 7Net cash provided by operating activities increased to $277.8 million, up from $236.4 million in the prior year period.

Frequently Asked Questions

The primary drivers for the 14.3% increase in net income attributable to common stockholders were a rise in Net Operating Income (NOI) from newly developed and existing operating communities, which included business interruption insurance proceeds. Additionally, a net casualty and impairment gain from insurance proceeds related to the Edgewater loss, exceeding land impairments, contributed positively, partially offset by a decrease in real estate sales and related gains.

AvalonBay is actively managing its growth through a significant development pipeline. In the first quarter of 2016, they completed three communities (732 homes) and started construction on another. As of March 31, 2016, there were 24 communities under construction (7,670 homes) with a projected capitalized cost of $2.7 billion. They also control land for an additional 30 future communities. The company also has a robust program for acquiring land and initiating new developments.

AvalonBay maintains a disciplined approach to liquidity and capital management. They had $97.5 million in unrestricted cash and cash equivalents as of March 31, 2016. Net cash provided by operating activities increased to $277.8 million in Q1 2016, up from $236.4 million in Q1 2015, indicating strong operational cash generation. The company also extended its revolving credit facility to April 2020 and increased its size to $1.5 billion, providing ample borrowing capacity. They also have a continuous equity offering program in place.

Performance varied by region. Northern California and Southern California showed strong rental revenue growth (9.6% and 7.6%, respectively) driven by robust rental rate increases. Metro New York/New Jersey also saw revenue growth (3.2%), though slightly tempered by occupancy. The Mid-Atlantic and New England regions showed more modest rental revenue increases (1.2% and 4.9%, respectively). The Pacific Northwest region experienced solid growth as well (6.5%). Across all established communities, average rental rates generally increased, though economic occupancy saw slight decreases in most regions.