10-QPeriod: Q3 FY2021

AVALONBAY COMMUNITIES INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 4, 2021For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported its third-quarter 2021 results, showing a year-over-year decrease in net income attributable to common stockholders primarily due to lower gains on real estate dispositions and increased depreciation and debt extinguishment costs. However, the company continues to expand its portfolio, with significant development projects underway and strategic acquisitions in new markets like Dallas and Charlotte. Rental revenue saw a modest increase for the quarter, driven by higher occupancy, though tempered by increased operating expenses and the ongoing impact of rent concessions related to the COVID-19 pandemic. Despite the year-over-year decline in quarterly net income, AVB's performance for the nine months ended September 30, 2021, showed a substantial increase compared to the prior year, largely attributed to higher gains from real estate dispositions. The company maintains a strong focus on strategic market positioning in desirable metropolitan areas, characterized by high-wage employment and a high cost of homeownership, aiming for long-term shareholder value through disciplined capital allocation and operational efficiency. Key financial metrics like Same Store Net Operating Income (NOI) showed a slight decrease for the quarter, indicating pressures from rising operating expenses that are partially offsetting modest revenue growth.

Financial Highlights

35 data points
Beta

Revenue

$580.77M

Net Income

$78.91M

13.6% Net Margin

EPS (Diluted)

$0.56

Total Assets

$19.48B

Cash & Equivalents

$322.29M

Free Cash Flow

$343.11M

Financial Statements
Beta
Revenue$580.77M
Operating Expenses$508.37M
Operating Income$371.91M
Interest Expense$55.99M
Net Income$78.91M
EPS (Basic)$0.57
EPS (Diluted)$0.56
Shares Outstanding (Basic)139.39M
Shares Outstanding (Diluted)139.74M

Key Highlights

  • 1Net income attributable to common stockholders decreased by 46.6% for Q3 2021 compared to Q3 2020, primarily due to lower gains on property sales and increased expenses.
  • 2Same Store Net Operating Income (NOI) for apartment rental operations decreased by 0.3% in Q3 2021 year-over-year, driven by a 3.5% increase in operating expenses outpacing a 1.0% rise in rental revenues.
  • 3AVB acquired three consolidated communities in Dallas and Charlotte, expanding its geographic footprint into new growth markets.
  • 4The company has a robust development pipeline with 15 wholly-owned communities under construction, totaling 4,645 apartment homes, and land for an additional 22 planned communities.
  • 5Collected residential revenue remained strong, with 95.8% of base rent collected in Q3 2021, and government rental assistance programs contributed $14.1 million.
  • 6Interest expense increased by 5.1% for the quarter, partly due to a decrease in capitalized interest and an increase in unsecured debt, alongside a notable loss on debt extinguishment.
  • 7Funds From Operations (FFO) attributable to common stockholders decreased to $2.03 per diluted share in Q3 2021 from $2.06 in Q3 2020, while Core FFO per diluted share remained flat at $2.06.

Frequently Asked Questions

The decrease in net income for the third quarter of 2021, compared to the same period in 2020, was primarily attributed to a significant reduction in gains from the sale of consolidated real estate assets, an increase in depreciation expense, and a loss recognized from the extinguishment of debt. These factors were partially offset by an increase in Net Operating Income (NOI) from development communities.

Same Store NOI for the three months ended September 30, 2021, decreased by 0.3% ($923,000) compared to the prior year period. This was due to a 3.5% increase in operating expenses, which outpaced a 1.0% increase in rental revenues for these stabilized properties.

AvalonBay is strategically expanding into new markets, evidenced by the acquisition of three communities in Dallas, TX, and Charlotte, NC, during the third quarter. The company has a significant development pipeline with 15 wholly-owned communities under construction and plans for an additional 22 communities on owned land, focusing on leading metropolitan areas with strong employment and high homeownership costs.

Rent collections remained relatively stable, with 95.8% of residential rent collected in Q3 2021. The company received $14.1 million in aggregate rent relief payments from government programs. The ongoing impact of the pandemic continues to influence rental revenues and expenses, including the amortization of concessions granted to residents.