10-QPeriod: Q1 FY2018

AVALONBAY COMMUNITIES INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 4, 2018For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported its first quarter 2018 results, showing a significant year-over-year decrease in net income attributable to common stockholders, primarily driven by a substantial reduction in real estate sales and related gains. Despite this, Net Operating Income (NOI) for Established Communities saw a modest increase of 1.2%, reflecting growth in rental revenue that was partially offset by higher operating expenses. The company continues to expand its portfolio, with three communities and 770 apartment homes completed in the quarter and a substantial pipeline of 18 communities under construction, representing 5,774 apartment homes. Management expressed confidence in the company's ability to meet its liquidity needs through various sources, including cash on hand, operating cash flows, and debt facilities.

Financial Highlights

33 data points
Beta

Revenue

$560.79M

Net Income

$141.64M

25.3% Net Margin

EPS (Diluted)

$1.03

Total Assets

$18.65B

Cash & Equivalents

$137.24M

Free Cash Flow

$315.91M

Financial Statements
Beta
Revenue$560.79M
Operating Expenses$420.89M
Operating Income$369.29M
Interest Expense$55.11M
Net Income$141.64M
EPS (Basic)$1.03
EPS (Diluted)$1.03
Shares Outstanding (Basic)137.76M
Shares Outstanding (Diluted)138.15M

Key Highlights

  • 1Net income attributable to common stockholders decreased by 39.9% to $141.6 million, largely due to lower real estate sales gains.
  • 2Established Communities' Net Operating Income (NOI) increased by 1.2% to $295.4 million, driven by a 2.4% rise in rental revenue, though offset by a 5.3% increase in operating expenses.
  • 3The company completed construction on three communities totaling 770 apartment homes with a capitalized cost of $287 million.
  • 4As of March 31, 2018, AVB had 18 communities under construction representing 5,774 apartment homes and a projected capitalized cost of $2.7 billion.
  • 5AVB's total revenue increased by 7.4% to $560.8 million, while total expenses rose by 6.5%, leading to a 39.9% decrease in net income.
  • 6Funds From Operations (FFO) attributable to common stockholders increased by 7.1% to $300.1 million, or $2.17 per diluted share.
  • 7Core FFO attributable to common stockholders increased by 5.0% to $301.8 million, or $2.18 per diluted share.

Frequently Asked Questions

The primary driver for the decrease in net income attributable to common stockholders was a significant reduction in real estate sales and related gains. This was partially offset by an increase in Net Operating Income (NOI) and a net casualty and impairment loss in the prior year period.

AvalonBay is actively developing its pipeline, having completed three communities in the first quarter of 2018. As of March 31, 2018, the company had 18 communities under construction totaling 5,774 apartment homes with a projected capitalized cost of $2.7 billion. Additionally, they have identified 28 future development opportunities representing 9,268 apartment homes.

Rental revenue increased by 2.4% in the Established Communities segment, driven by a 2.5% increase in average rental rates, which was slightly offset by a 0.1% decrease in economic occupancy. The company expects varied operating conditions across its key regions, with some areas like Northern California facing challenges due to slower job growth and new deliveries, while others like Southern California and the Pacific Northwest are expected to benefit from strong job and income growth.

AvalonBay believes it has sufficient liquidity through a combination of cash on hand, operating cash flows, its $1.5 billion credit facility, and potential debt or equity issuances. In March 2018, the company issued $300 million in unsecured notes. Debt maturities are managed, with the company having repaid certain secured notes ahead of schedule and indicating plans to manage upcoming maturities through refinancing or other available sources.