10-QPeriod: Q3 FY2020

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 4, 2020For Securities:AVB

Summary

AvalonBay Communities Inc. (AVB) reported a significant decrease in net income attributable to common stockholders for the third quarter of 2020, down 47.2% year-over-year to $147.7 million. This decline was primarily driven by a substantial reduction in gains from real estate dispositions and a decrease in Net Operating Income (NOI) from Established Communities, which fell 10.1%. The decrease in rental revenue was partly due to $12.5 million in uncollectible lease revenue, a direct impact of the COVID-19 pandemic. Despite these headwinds, the company is actively managing its capital, evidenced by repurchasing nearly one million shares of its common stock. The company's development pipeline remains substantial, with 17 wholly-owned communities under construction, though new construction starts have been paused due to the pandemic's uncertainty. The company acknowledges the ongoing and potentially material adverse impact of the COVID-19 pandemic on its financial condition and results of operations. Management highlights the uncertainty surrounding rent collection, occupancy levels, and development timelines. While rent collection rates for residential properties remained relatively strong (above 95% in Q3 2020), commercial rent collection showed lower rates. AVB is focused on maintaining liquidity through various sources, including existing cash, operating cash flows, and credit facilities, as it navigates the challenging economic environment.

Financial Highlights

35 data points
Beta

Revenue

$567.40M

Net Income

$147.70M

26.0% Net Margin

EPS (Diluted)

$1.05

Total Assets

$19.14B

Cash & Equivalents

$87.53M

Free Cash Flow

$333.16M

Financial Statements
Beta
Revenue$567.40M
Operating Expenses$455.89M
Operating Income$363.71M
Interest Expense$53.25M
Net Income$147.70M
EPS (Basic)$1.05
EPS (Diluted)$1.05
Shares Outstanding (Basic)140.27M
Shares Outstanding (Diluted)140.60M

Key Highlights

  • 1Net income attributable to common stockholders decreased by 47.2% to $147.7 million for Q3 2020 compared to Q3 2019.
  • 2Net Operating Income (NOI) from Established Communities decreased by 10.1% to $342.9 million for Q3 2020.
  • 3Uncollectible lease revenue increased significantly due to the COVID-19 pandemic, impacting rental revenues.
  • 4The company repurchased 912,733 shares of its common stock during the third quarter.
  • 5AVB has 17 wholly-owned communities under construction, but has paused new development starts due to COVID-19 uncertainty.
  • 6Rental collection rates for established residential communities remained robust (95.2% in Q3 2020), though commercial collections were lower.
  • 7The company has a substantial development pipeline with 27 Development Rights representing potential future communities.

Frequently Asked Questions

The primary driver of the decrease in net income for the third quarter of 2020 was a significant reduction in gains from real estate dispositions and a decrease in Net Operating Income (NOI) from Established Communities, exacerbated by increased depreciation and interest expenses.

The COVID-19 pandemic has impacted operations through increased uncollectible lease revenue, reduced rental income from both residential and commercial tenants, and challenges in rent collection. It has also led to a pause in new development starts and adjustments in operating expenses. The company has implemented measures to assist residents with rent payments and manage the financial impact.

AvalonBay maintains a disciplined approach to liquidity and capital management. As of September 30, 2020, the company had $182.4 million in cash, cash equivalents, and escrow. They expect to meet their liquidity needs through a combination of operating cash flows, borrowings under their credit facility, and potential asset dispositions, while navigating ongoing uncertainty related to the pandemic's impact on capital markets.

AvalonBay has a significant development pipeline with 17 wholly-owned communities under construction. However, they have paused new development starts due to the uncertainty caused by the COVID-19 pandemic and are evaluating future starts based on evolving economic and market conditions. They also control land for an additional 27 future communities.