10-QPeriod: Q1 FY2017

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 2, 2017For Securities:AVB

Summary

AvalonBay Communities Inc. (AVB) reported a slight decrease in net income attributable to common stockholders for the first quarter of 2017, down 0.9% year-over-year to $235,875,000. This was primarily due to a casualty and impairment loss in the current period compared to a gain in the prior year, alongside increased depreciation and interest expenses. However, the company saw growth in Net Operating Income (NOI) from its established communities, rising 3.9% to $276,106,000, driven by a 3.2% increase in rental revenue. The company also completed the development of three new communities totaling 1,548 homes and maintained a robust development pipeline, with 24 communities under construction and plans for 28 additional future developments. AVB continues to focus on high-growth metropolitan areas with strong employment and limited housing affordability. Despite a net income dip, the company's core operating performance, as indicated by a 4.3% increase in Core FFO per diluted share to $2.09, remains positive. Management highlighted strong performance in the Southern California and Pacific Northwest regions, while acknowledging tempered growth expectations for Northern California due to slower job growth and new apartment deliveries. The company also reported a significant gain on the sale of one community and has a solid liquidity position, with cash and cash equivalents of $121.7 million and ample capacity under its credit facility.

Financial Highlights

33 data points
Beta

Revenue

$522.33M

Net Income

$235.88M

45.2% Net Margin

EPS (Diluted)

$1.72

Total Assets

$17.98B

Cash & Equivalents

$121.70M

Free Cash Flow

$299.89M

Financial Statements
Beta
Revenue$522.33M
Operating Expenses$391.51M
Operating Income$355.87M
Interest Expense$49.30M
Net Income$235.88M
EPS (Basic)$1.72
EPS (Diluted)$1.72
Shares Outstanding (Basic)137.07M
Shares Outstanding (Diluted)137.53M

Key Highlights

  • 1Net income attributable to common stockholders decreased by 0.9% to $235.9 million, primarily impacted by casualty/impairment losses and higher expenses.
  • 2Established Communities NOI increased by 3.9% to $276.1 million, driven by a 3.2% rise in rental revenue.
  • 3Completed construction of three communities with 1,548 apartment homes, and has 24 communities under construction with a projected cost of $3.4 billion.
  • 4Reported a gain of $87.9 million on the sale of one wholly-owned operating community (Avalon Pines).
  • 5Core FFO per diluted share increased by 6.1% to $2.09, indicating strong core operational performance.
  • 6Southern California and Pacific Northwest regions showed particularly strong rental revenue growth (4.0% and 6.1% respectively).
  • 7The company maintained compliance with its financial covenants and had $121.7 million in unrestricted cash and cash equivalents as of March 31, 2017.

Frequently Asked Questions

The decrease in net income was primarily attributed to a net casualty and impairment loss in the current year period, contrasting with a net gain in the prior year period. Additionally, increases in depreciation and interest expenses also contributed to the decline.

AvalonBay completed construction on three communities with 1,548 homes in the first quarter of 2017. As of March 31, 2017, 24 communities were under construction, totaling 7,581 homes with a projected capitalized cost of $3.4 billion. The company also controls land for an additional 28 future communities.

The company expects continued growth in the Metro New York/New Jersey and Mid-Atlantic regions, supported by job growth. Southern California is anticipated to maintain favorable operating results due to steady job growth and limited new supply. Northern California growth is expected to be tempered by slower job growth and new apartment deliveries. The Pacific Northwest is projected to see favorable results driven by healthy job growth.

AvalonBay has a disciplined approach to liquidity and capital management. As of March 31, 2017, the company had $121.7 million in unrestricted cash and cash equivalents. It has access to a $1.5 billion revolving credit facility and stated its expectation to meet liquidity needs through operating cash flows, dispositions, and potential debt and equity financings.