10-QPeriod: Q3 FY2019

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 5, 2019For Securities:AVB

Summary

AvalonBay Communities Inc. (AVB) reported strong growth in its third quarter of 2019, driven by significant gains from real estate sales and an increase in Net Operating Income (NOI) from its established communities. Net income attributable to common stockholders saw a substantial increase of 45.3% year-over-year. The company continues to expand its portfolio, with 20 communities under construction and plans for 31 additional apartment communities. AVB also completed the sale of four operating communities, marking an exit from the Texas market, and acquired two new communities in Maryland and Florida. The company's strategic focus on high-growth metropolitan areas with strong employment and affordability challenges continues to yield positive results. Management highlighted disciplined capital allocation and balance sheet management as key to their strategy. Despite a decrease in equity in income from unconsolidated real estate entities, the overall financial performance indicates a healthy operational and investment trajectory for the quarter.

Financial Highlights

35 data points
Beta

Revenue

$587.61M

Net Income

$279.68M

47.6% Net Margin

EPS (Diluted)

$2.00

Total Assets

$19.06B

Cash & Equivalents

$246.43M

Free Cash Flow

$377.19M

Financial Statements
Beta
Revenue$587.61M
Operating Expenses$427.81M
Operating Income$406.58M
Interest Expense$51.49M
Net Income$279.68M
EPS (Basic)$2.00
EPS (Diluted)$2.00
Shares Outstanding (Basic)139.34M
Shares Outstanding (Diluted)139.85M

Key Highlights

  • 1Net income attributable to common stockholders increased by 45.3% to $279,677,000 for Q3 2019 compared to the prior year, primarily due to higher real estate sales gains and increased NOI.
  • 2Established Communities' Net Operating Income (NOI) grew by 2.1% to $327,025,000 for Q3 2019.
  • 3The company sold four wholly-owned operating communities for $259,600,000, generating a GAAP gain of $130,399,000 and exiting the Texas market.
  • 4AVB acquired two new operating communities in Silver Spring, MD, and Hialeah, FL, for a total of $133,450,000.
  • 5As of September 30, 2019, AVB had 20 communities under construction with a projected capitalized cost of $2.5 billion and plans for 31 additional communities representing an estimated $4.2 billion in capitalized costs.
  • 6For the nine months ended September 30, 2019, Net cash provided by operating activities increased to $1,014,922,000.
  • 7The company amended and restated its revolving credit facility to $1.75 billion, providing continued financial flexibility.

Frequently Asked Questions

The significant increase in net income attributable to common stockholders (45.3%) was primarily driven by higher gains on the sale of real estate assets and an increase in Net Operating Income (NOI) from the company's portfolio of established communities. Decreases in interest expense also contributed positively.

AvalonBay has a robust development pipeline with 20 communities under construction (expected to add 6,700 apartment homes) and control over land for 31 future communities (approximately 9,994 homes). The company is strategically deploying capital to develop and acquire communities in attractive metropolitan areas, focusing on markets with growing employment in high-wage sectors and lower housing affordability.

The sale of four wholly-owned operating communities in Q3 2019 generated a substantial gain of $130,399,000, significantly boosting net income. This strategic sale also marked AvalonBay's exit from the Texas market. While asset sales increase immediate gains, management noted that the proceeds will be redeployed into revenue-generating assets to maintain future cash flows.

The company reported positive rental revenue growth across most of its established regions, driven by increases in average rental rates, despite slight decreases in economic occupancy in some areas. The Metro New York/New Jersey, Southern California, Northern California, Mid-Atlantic, New England, and Pacific Northwest regions all saw rental revenue increases. The company also highlighted expansion into Denver and Southeast Florida markets.