10-QPeriod: Q2 FY2018

AVALONBAY COMMUNITIES INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 3, 2018For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported strong growth in net income attributable to common stockholders for the second quarter of 2018, driven primarily by an increase in real estate sales and related gains, alongside improved Net Operating Income (NOI) across its portfolio. The company's strategy continues to focus on developing, redeveloping, and acquiring high-quality multifamily apartment communities in desirable metropolitan areas characterized by strong employment and limited housing affordability. Looking ahead, AVB is actively managing its development pipeline, with 19 communities under construction and plans for 25 additional communities. While the company demonstrates robust operational performance and a healthy cash flow position, investors should note the ongoing investments in development and redevelopment, which are capital intensive. The company's liquidity remains strong, supported by operating cash flows, a revolving credit facility, and strategic capital markets activities.

Financial Highlights

33 data points
Beta

Revenue

$569.24M

Net Income

$254.66M

44.7% Net Margin

EPS (Diluted)

$1.84

Total Assets

$18.67B

Cash & Equivalents

$101.56M

Free Cash Flow

$309.38M

Financial Statements
Beta
Revenue$569.24M
Operating Expenses$421.00M
Operating Income$378.41M
Interest Expense$56.59M
Net Income$254.66M
EPS (Basic)$1.84
EPS (Diluted)$1.84
Shares Outstanding (Basic)137.84M
Shares Outstanding (Diluted)138.22M

Key Highlights

  • 1Net income attributable to common stockholders increased by 54.1% to $254,662,000 for Q2 2018 compared to the prior year, largely due to increased real estate sales and gains, and improved NOI.
  • 2Established Communities NOI grew by 2.9% to $299,075,000 for Q2 2018, driven by a 2.5% increase in rental revenue and a 1.8% increase in operating expenses.
  • 3The company had 19 communities under construction (6,048 apartment homes) with a projected capitalized cost of $2.819 billion, and plans for 25 additional communities (8,511 apartment homes) with an estimated cost of $3.531 billion.
  • 4During Q2 2018, AVB sold four wholly-owned operating communities for $307.1 million, generating a GAAP gain of $105.2 million.
  • 5The company's total revenue for the quarter increased by 7.3% to $569.2 million, reflecting growth across its portfolio.
  • 6Net cash provided by operating activities increased to $309.4 million for Q2 2018 compared to $275.8 million in the prior year.
  • 7AVB maintained compliance with its financial covenants as of June 30, 2018, indicating a stable balance sheet.

Frequently Asked Questions

The primary drivers for the 54.1% increase in net income were higher gains from real estate sales, increased Net Operating Income (NOI) across the portfolio, and a significant loss on extinguishment of debt in the prior year period. These were partially offset by increases in depreciation and interest expenses.

As of June 30, 2018, AVB had 19 communities under construction, representing 6,048 apartment homes with a projected total capitalized cost of $2.819 billion. Additionally, the company held rights for 25 future development communities, projected to add 8,511 apartment homes at an estimated cost of $3.531 billion. This indicates a substantial ongoing investment in future growth.

AVB focuses on developing, redeveloping, acquiring, owning, and operating multifamily apartment communities in key metropolitan areas. Their strategy involves targeting markets with strong employment in high-wage sectors, low housing affordability, and desirable quality of life. They actively manage their portfolio by selling communities that no longer fit their long-term strategy or when market pricing is attractive, and redeploying those proceeds into new development and redevelopment projects.

The company reported $349.9 million in cash and cash equivalents and restricted cash as of June 30, 2018, an increase from the end of 2017. Net cash provided by operating activities also increased year-over-year. AVB has a $1.5 billion revolving credit facility and was in compliance with its financial covenants, suggesting a strong liquidity position to meet its short-term and long-term obligations.