10-QPeriod: Q2 FY2019

AVALONBAY COMMUNITIES INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 6, 2019For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported its second quarter 2019 results, indicating a notable decrease in net income attributable to common stockholders, down 33.9% year-over-year to $168.3 million. This decline was primarily driven by reduced gains from real estate sales and increased depreciation expenses, partially offset by growth in Net Operating Income (NOI) from the existing portfolio and lower interest expenses. Despite the dip in net income, the company demonstrated positive operational trends. Established Communities saw a 2.8% increase in NOI, reaching $326.8 million for the quarter. AVB continues to actively manage its portfolio, with 21 communities under construction and plans for an additional 28 future development communities. The company also highlighted its strong liquidity position and compliance with financial covenants, supported by a substantial credit facility and ongoing equity programs.

Financial Highlights

34 data points
Beta

Revenue

$577.26M

Net Income

$168.28M

29.2% Net Margin

EPS (Diluted)

$1.21

Total Assets

$18.93B

Cash & Equivalents

$243.58M

Free Cash Flow

$275.95M

Financial Statements
Beta
Revenue$577.26M
Operating Expenses$428.77M
Operating Income$400.10M
Interest Expense$50.01M
Net Income$168.28M
EPS (Basic)$1.21
EPS (Diluted)$1.21
Shares Outstanding (Basic)139.11M
Shares Outstanding (Diluted)139.62M

Key Highlights

  • 1Net income attributable to common stockholders decreased by 33.9% to $168.3 million for Q2 2019 compared to the prior year, mainly due to lower real estate sale gains and higher depreciation.
  • 2Net Operating Income (NOI) from Established Communities increased by 2.8% to $326.8 million for Q2 2019.
  • 3The company had 21 communities under construction with a projected capitalized cost of $2.58 billion and land for 28 future development communities with an estimated cost of $3.84 billion.
  • 4Rental and other income increased by 1.4% to $576.1 million for Q2 2019, driven by new developments, acquisitions, and rental rate increases in established communities.
  • 5Direct property operating expenses, excluding property taxes, decreased by 1.3% for Q2 2019, partly due to a change in accounting for uncollectible lease revenue.
  • 6Interest expense decreased by 11.6% for Q2 2019, primarily due to increased capitalized interest and lower outstanding debt.
  • 7As of June 30, 2019, AVB had $330.0 million in cash and cash equivalents, an increase from December 31, 2018.

Frequently Asked Questions

The primary driver for the decrease in net income attributable to common stockholders (-33.9% YoY) was a reduction in gains from real estate sales and an increase in depreciation expense. These factors were partially offset by an increase in Net Operating Income (NOI) from the company's portfolio and a decrease in interest expense.

The company's operational performance is showing strength, with NOI from Established Communities increasing by 2.8% in the second quarter. Rental and other income also saw a 1.4% increase, supported by new developments, acquisitions, and rising rental rates in established communities. The company is also actively expanding its pipeline with 21 communities under construction and significant land reserves for future development.

AvalonBay maintains a strong liquidity position with $330.0 million in cash and cash equivalents as of June 30, 2019. The company has a $1.75 billion credit facility with no outstanding borrowings as of July 31, 2019, and remains in compliance with its financial covenants. Financing activities during the first six months of 2019 included significant proceeds from unsecured note issuances and common stock sales, while also managing dividend payments and debt repayments.

AvalonBay's strategy focuses on developing, redeveloping, acquiring, owning, and operating multifamily apartment communities in select high-growth metropolitan areas. The company has a robust pipeline, with 21 communities under construction representing a significant capital investment, and land secured for 28 future development communities. This pipeline is designed to add a substantial number of apartment homes to its portfolio in the coming years.