10-QPeriod: Q3 FY2018

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 2, 2018For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported its third-quarter 2018 results, showcasing continued growth in Net Operating Income (NOI) from its established communities, which increased by 3.1% year-over-year. This growth was driven by a 2.3% increase in rental revenue, slightly offset by a 0.5% rise in operating expenses. However, the company experienced a notable decrease in net income attributable to common stockholders, down 19.2% to $192.5 million for the quarter. This decline is primarily attributed to a reduction in gains from joint venture real estate sales compared to the prior year, alongside an increase in depreciation expense. The company continues to expand its portfolio, with 19 communities under construction and land secured for an additional 25 future developments, representing significant future investment. Despite the dip in net income, AVB's operational performance, as measured by NOI, remains robust, and the company is actively managing its development pipeline and capital structure.

Financial Highlights

33 data points
Beta

Revenue

$575.98M

Net Income

$192.49M

33.4% Net Margin

EPS (Diluted)

$1.39

Total Assets

$18.66B

Cash & Equivalents

$55.89M

Free Cash Flow

$355.26M

Financial Statements
Beta
Revenue$575.98M
Operating Expenses$420.49M
Operating Income$384.38M
Interest Expense$54.10M
Net Income$192.49M
EPS (Basic)$1.39
EPS (Diluted)$1.39
Shares Outstanding (Basic)137.85M
Shares Outstanding (Diluted)138.32M

Key Highlights

  • 1Net Operating Income (NOI) from established communities increased by 3.1% to $303.1 million for Q3 2018, driven by a 2.3% increase in rental revenue.
  • 2Net income attributable to common stockholders decreased by 19.2% to $192.5 million for Q3 2018, primarily due to lower gains from joint venture real estate sales and increased depreciation.
  • 3The company had 19 communities under construction, with a projected capitalized cost of $2.74 billion, and land secured for 25 additional future communities totaling $3.57 billion in projected capitalized costs.
  • 4AVB completed the sale of Avalon Ballston Place for $169 million, recognizing a GAAP gain of $27.2 million.
  • 5The company acquired Avalon Arundel Crossing for $83 million and has plans to contribute five wholly-owned communities to a new joint venture for approximately $460 million.
  • 6Consolidated communities experienced a 4.7% increase in rental and other income year-over-year for the three months ended September 30, 2018.
  • 7Interest expense increased by 13.3% for the quarter due to reduced capitalized interest and increased outstanding unsecured debt.

Frequently Asked Questions

The decrease in net income attributable to common stockholders by 19.2% was primarily due to a significant reduction in gains from joint venture real estate sales compared to the prior year period, coupled with an increase in depreciation expense.

AvalonBay continues to invest in future growth. As of September 30, 2018, there were 19 communities under construction representing a projected capitalized cost of $2.74 billion. Additionally, the company holds land for 25 future communities with an expected capitalized cost of $3.57 billion.

NOI from established communities showed a healthy increase of 3.1% year-over-year, driven by higher rental revenue. This indicates a strong underlying operational performance despite the decrease in net income, which is more influenced by sales gains and non-cash expenses like depreciation.

During the third quarter, AVB sold Avalon Ballston Place for $169 million and acquired Avalon Arundel Crossing for $83 million. The company also announced plans to contribute five communities to a new joint venture in October/November 2018 for approximately $460 million.