10-QPeriod: Q2 FY2022

AVALONBAY COMMUNITIES INC Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 3, 2022For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) reported solid operational performance in the second quarter of 2022, with Same Store Net Operating Income (NOI) increasing by 17.0% year-over-year. This growth was driven by a 12.9% increase in rental revenues, despite a 4.8% rise in operating expenses. The company continues to expand its portfolio, with 16 wholly-owned communities under construction totaling approximately $2.07 billion in projected costs and significant land holdings for future development. However, net income attributable to common stockholders saw a substantial decrease of 69.0% compared to the prior year, primarily due to lower gains from real estate sales. While operational metrics like Same Store NOI show strength, investors should note the significant year-over-year decline in reported net income, largely influenced by asset disposition activity. The company maintains a healthy liquidity position with a $1.75 billion credit facility and a $500 million commercial paper program, although borrowings under the credit facility were minimal at quarter-end.

Financial Highlights

35 data points
Beta

Revenue

$644.56M

Net Income

$138.69M

21.5% Net Margin

EPS (Diluted)

$0.99

Total Assets

$19.77B

Cash & Equivalents

$152.52M

Free Cash Flow

$296.37M

Financial Statements
Beta
Revenue$644.56M
Operating Expenses$509.01M
Operating Income$435.69M
Interest Expense$58.80M
Net Income$138.69M
EPS (Basic)$0.99
EPS (Diluted)$0.99
Shares Outstanding (Basic)139.63M
Shares Outstanding (Diluted)139.93M

Key Highlights

  • 1Same Store Net Operating Income (NOI) grew by 17.0% year-over-year, indicating strong operational performance of existing communities.
  • 2Residential rental revenue increased by 12.9% for Same Store communities, reflecting higher rental rates and improved economic occupancy.
  • 3The company has a robust development pipeline with 16 wholly-owned communities under construction, representing a projected capitalized cost of $2.07 billion.
  • 4Significant land bank for future development, with rights to develop an additional 32 communities comprising 10,913 apartment homes.
  • 5Net income attributable to common stockholders decreased by 69.0% compared to the prior year, largely due to a decrease in real estate sales and related gains.
  • 6Total revenue increased by 14.7% for the quarter, driven by higher rental income.
  • 7The company maintained compliance with its financial covenants and had significant availability under its credit facilities.

Frequently Asked Questions

The primary driver for the significant decrease in net income attributable to common stockholders was a substantial reduction in gains from real estate sales compared to the prior year period. While operational income from communities increased, the large gains recognized in the prior year from property sales were not replicated in the current period.

Operating expenses for Same Store communities increased by 4.8% year-over-year. The company is experiencing increases in utilities and maintenance costs, as well as bad debt associated with resident expense reimbursements. Corporate-level operating expenses also rose due to increased compensation and investments in technology initiatives.

AvalonBay Communities has a significant development pipeline with 16 wholly-owned communities under construction, expected to add 4,919 apartment homes with a projected capitalized cost of $2.07 billion. Additionally, the company controls land for 32 future communities, representing potential for another 10,913 apartment homes.

The company has a $1.75 billion revolving credit facility and a $500 million commercial paper program, providing substantial liquidity. As of July 29, 2022, there were no borrowings outstanding under the credit facility and $175 million outstanding under the commercial paper program. The company was in compliance with its financial covenants and has various debt maturities managed through refinancing or operational cash flows.