February 5, 2019 - EXHIBIT 99.2 - 8-K: Current report filing

Exhibit 99.2

For Immediate News Release

February 4, 2019

AVALONBAY COMMUNITIES, INC. ANNOUNCES

2018 OPERATING RESULTS, 3.4% DIVIDEND INCREASE

AND INITIAL 2019 FINANCIAL OUTLOOK

(Arlington, VA) AvalonBay Communities, Inc. (NYSE: AVB) (the “Company”) reported today that Net Income Attributable to Common Stockholders for the three months ended December 31, 2018 was $385,734,000. This resulted in an increase in Earnings per Share – diluted (“EPS”) of 62.2% to $2.79 for the three months ended December 31, 2018, from $1.72 for the prior year period.

Funds from Operations attributable to common stockholders - diluted (“FFO”) per share for the three months ended December 31, 2018 decreased 0.5% to $2.17 from $2.18 for the prior year period. Core FFO per share (as defined in this release) for the three months ended December 31, 2018 increased 2.7% to $2.31 from $2.25 for the prior year period.

The following table compares the Company’s actual results for EPS, FFO per share and Core FFO per share for the three months ended December 31, 2018 to its results for the prior year period:




Q4 2018 Results Compared to Q4 2017
	Per Share (1)
	EPS			FFO			Core FFO
Q4 2017 per share reported results	$	1.72		$	2.18		$	2.25
Established and Redevelopment Community NOI	0.07			0.07			0.07
Development and Other Stabilized Community NOI	0.09			0.09			0.08
Capital markets activity	(0.07		)	(0.07		)	(0.06		)
Overhead expense and other	(0.06		)	(0.06		)	(0.04		)
Joint venture income	—			—			0.01
Casualty and impairment loss, net	(0.04		)	(0.04		)	—
Gain on sale of real estate and depreciation expense	1.08			—			—
Q4 2018 per share reported results	$	2.79		$	2.17		$	2.31

(1) For additional detail on reconciling items between EPS, FFO and Core FFO, see Attachment 15, table 3.

The following table compares the Company’s actual results for EPS, FFO per share and Core FFO per share for the fourth quarter of 2018 to the mid-point of its October 2018 outlook:




Fourth Quarter 2018 Results
Comparison to October 2018 Outlook
	Per Share
	EPS			FFO			Core FFO
Projected per share - October 2018 outlook (1)	$	2.86		$	2.21		$	2.31
Established and Redevelopment Community NOI	0.01			0.01			0.01
Capital markets activity (2)	(0.01		)	(0.01		)	0.01
Overhead expense and other	(0.02		)	(0.02		)	(0.02		)
Joint venture income	(0.01		)	(0.01		)	—
Casualty and impairment loss, net	(0.01		)	(0.01		)	—
Gain on sale of real estate and depreciation expense	(0.03		)	—			—
Q4 2018 per share reported results	$	2.79		$	2.17		$	2.31

(1) The mid-point of the Company's October 2018 outlook.
(2) EPS and FFO per share include loss on extinguishment of consolidated debt.

For the year ended December 31, 2018, EPS increased 11.0% to $7.05 from $6.35 for the prior year period, FFO per share increased 4.3% to $8.81 from $8.45 for the prior year period, and Core FFO per share increased 4.4% to $9.00 from $8.62 for the prior year period.

The following table compares the Company’s actual results for EPS, FFO per share and Core FFO per share for the full year 2018 to its results for the full year 2017:




Full Year 2018 Results
Comparison to Full Year 2017
	Per Share (1)
	EPS			FFO			Core FFO
2017 per share reported results	$	6.35		$	8.45		$	8.62
Established and Redevelopment Community NOI	0.21			0.21			0.16
Other Stabilized and Development Community NOI	0.57			0.57			0.57
Capital markets activity	(0.10		)	(0.10		)	(0.23		)
Overhead expense and other	(0.15		)	(0.15		)	(0.12		)
Joint venture income and management fees	(0.19		)	(0.19		)	—
Casualty and impairment loss, net and business interruption insurance proceeds	0.02			0.02			—
Gain on sale of real estate and depreciation expense	0.34			—			—
2018 per share reported results	$	7.05		$	8.81		$	9.00

(1) For additional detail on reconciling items between EPS, FFO and Core FFO, see Attachment 15, table 3.

Operating Results for the Three Months Ended December 31, 2018 Compared to the Prior Year Period

For the Company, total revenue increased by $23,230,000, or 4.2%, to $578,522,000. This increase is primarily due to growth in revenue from stabilized operating communities and Development Communities.

For Established Communities, total revenue increased $10,928,000, or 2.7%, to $412,522,000. Operating expenses for Established Communities increased $2,974,000, or 2.7%, to $114,511,000. NOI for Established Communities increased $7,954,000, or 2.7%, to $298,011,000. Rental revenue for Established Communities increased 2.7% as a result of an increase in Average Rental Rates of 2.7% with Economic Occupancy remaining consistent at 96.1%. If the Company were to include current and previously completed Redevelopment Communities as part of its Established Communities portfolio, the increase in Established Communities' rental revenue would have increased 2.8%.

The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the three months ended December 31, 2018 compared to the three months ended December 31, 2017:




Q4 2018 Compared to Q4 2017
	Rental Revenue (1)		Opex (2)		NOI		% of NOI (3)
New England	3.6	%	5.7	%	2.6	%	13.8	%
Metro NY/NJ	1.8	%	2.9	%	1.4	%	23.5	%
Mid-Atlantic	2.4	%	0.8	%	3.2	%	16.8	%
Pacific NW	2.1	%	2.1	%	2.3	%	6.0	%
No. California	3.0	%	1.8	%	3.4	%	19.9	%
So. California	3.0	%	2.2	%	3.3	%	20.0	%
Total	2.7	%	2.7	%	2.7	%	100.0	%

(1) See Attachment 4, Quarterly Rental Revenue and Occupancy Changes, for additional detail.
(2) See Attachment 7, Operating Expenses ("Opex"), for discussion of variances.
(3) Represents each region's % of total NOI for Q4 2018, including amounts related to communities that have been sold or that are classified as held for sale.

Operating Results for the Year Ended December 31, 2018 Compared to the Prior Year Period

For the Company, total revenue increased by $125,907,000, or 5.8%, to $2,284,535,000. This increase is primarily due to growth in revenue from stabilized operating communities and Development Communities.

For Established Communities, total revenue increased $40,761,000, or 2.6%, to $1,632,426,000. Operating expenses for Established Communities increased $14,513,000, or 3.2% to $466,917,000. NOI for Established Communities increased $26,248,000, or 2.3%, to $1,165,509,000. Rental revenue for Established Communities increased 2.5% as a result of an increase in Average Rental Rates of 2.5% with Economic Occupancy remaining consistent at 96.1%. If the Company were to include current and previously completed Redevelopment Communities as part of its Established Communities portfolio, the increase in Established Communities' rental revenue would have remained consistent at 2.5%.

The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the year ended December 31, 2018 compared to the year ended December 31, 2017:




Full Year 2018 Compared to Full Year 2017
	Rental Revenue (1)		Opex (2)		NOI		% of NOI (3)
New England	3.0	%	2.9	%	3.0	%	13.8	%
Metro NY/NJ	1.7	%	3.5	%	0.9	%	23.6	%
Mid-Atlantic	1.8	%	(0.1	)%	2.6	%	16.6	%
Pacific NW	2.5	%	7.8	%	0.8	%	5.6	%
No. California	2.7	%	3.1	%	2.6	%	20.0	%
So. California	3.6	%	4.6	%	3.2	%	20.4	%
Total	2.5	%	3.2	%	2.3	%	100.0	%

(1) See Attachment 6, Full Year Rental Revenue and Occupancy Changes, for additional detail.
(2) See Attachment 7, Operating Expenses ("Opex"), for discussion of variances.
(3) Represents each region's % of total NOI for full year 2018, including amounts related to communities that have been sold or that are classified as held for sale.

Development Activity

During the three months ended December 31, 2018, the Company started the construction of three communities:


•	Avalon Newcastle Commons II, located in Newcastle, WA;


•	Twinbrook Station, located in Rockville, MD; and


•	Avalon Harrison, located in Harrison, NY.

These communities are expected to contain an aggregate of 674 apartment homes and 27,000 square feet of retail space when completed and will be developed for an aggregate estimated Total Capital Cost of $248,000,000.

During 2018, the Company:


•	completed the development of seven communities containing an aggregate of 1,915 apartment homes and 10,000 square feet of retail space, for an aggregate Total Capital Cost of $742,000,000, or $693,000,000 at share when including only the Company's 55.0% interest in AVA North Point; and


•	commenced the development of eight communities, which in the aggregate are expected to contain 2,154 apartment homes and 57,000 square feet of retail space, and are expected to be completed for an aggregate Total Capital Cost of $718,000,000.

At December 31, 2018, excluding 15 West 61st Street discussed below, the Company had 21 Development Communities under construction that in the aggregate are expected to contain 6,609 apartment homes and 87,000 square feet of retail space. Estimated Total Capital Cost at completion for these Development Communities is $2,383,000,000.

As discussed in the Company's third quarter 2018 earnings release dated October 29, 2018, the Company is pursuing a potential for-sale strategy of individual condominium units for the residential portion of 15 West 61st Street, which is currently under construction. 15 West 61st Street is expected to contain 172 residential units and 67,000 square feet of retail space when completed and is expected to be developed for an estimated Total Capital Cost of $620,000,000.

The projected Total Capital Cost of Development Rights at December 31, 2018 increased to $4.1 billion from $3.6 billion at September 30, 2018.

Acquisition Activity

During the three months ended December 31, 2018, the Company acquired the following three communities:


•	The Alexander Apartments and Lofts, located in West Palm Beach, FL, containing 290 apartment homes for a purchase price of $103,000,000;


•	Ironwood at Red Rocks, located in Littleton, CO, containing 256 apartment homes for a purchase price of $75,400,000; and


•	The Meadows, located in Castle Rock, CO, containing 240 apartment homes for a purchase price of $73,050,000.

During 2018, the Company acquired four communities containing an aggregate of 1,096 apartment homes, for an aggregate purchase price of $334,450,000.

Disposition Activity

Consolidated Apartment Communities

In addition to the NYC Joint Venture discussed below, the Company had the following disposition activity.

During the three months ended December 31, 2018, the Company sold three wholly-owned operating communities:


•	Avalon at Fairway Hills - Fields, located in Columbia, MD;


•	Avalon Fashion Valley, located in San Diego, CA; and


•	Avalon Andover, located in Andover, MA.

In the aggregate, the three communities contain 468 apartment homes and were sold for $142,650,000, resulting in a gain in accordance with GAAP of $62,644,000 and an Economic Gain of $32,742,000.

During the year ended December 31, 2018, the Company sold eight wholly-owned operating communities containing an aggregate of 1,798 apartment homes and 17,000 square feet of retail space. These assets were sold for $618,750,000 and a weighted average Initial Year Market Cap Rate of 4.6%, resulting in a gain in accordance with GAAP of $195,115,000 and an Economic Gain of $92,945,000.

In January 2019, the Company sold Oakwood Arlington, located in Arlington, VA. Oakwood Arlington contains 184 apartment homes and was sold for $70,000,000.

Unconsolidated Real Estate Investments

NYC Joint Venture

In December 2018, the Company contributed five wholly-owned operating communities located in New York, NY, to a newly formed joint venture (the "NYC Joint Venture") for net proceeds of $472,000,000, recognizing a gain in accordance with GAAP of $179,861,000 and an Economic Gain of $37,862,000. The Company retained a 20.0% interest and is acting as the managing member of the NYC Joint Venture, as well as the property manager for the communities. The five communities contain an aggregate of 1,301 apartment homes and 58,000 square feet of retail space.

Prior to the formation of the NYC Joint Venture, two of the five communities were encumbered with $193,800,000 of variable rate debt. In conjunction with the formation of the venture, the Company undertook various refinancing and new borrowing activities, resulting in a consolidated charge of $5,837,000, consisting of a prepayment penalty of $2,874,000 and the non-cash write off of deferred financing fees of $2,963,000. The venture subsequently assumed $395,939,000 of secured fixed rate debt that was the result of the Company's financing activities. This debt has a weighted average effective interest rate of 3.88% for a period of 10 years.

U.S. Fund

During the year ended December 31, 2018, Multifamily Partners AC LP (the "U.S. Fund"), a private discretionary real estate investment vehicle in which the Company holds an equity interest of 28.6%, sold Avalon Kirkland at Carillon containing 131 apartment homes for a sales price of $85,500,000.

AC JV

During the year ended December 31, 2018, Multifamily Partners AC JV LP (the "AC JV"), a private discretionary real estate investment vehicle in which the Company holds an equity interest of 20.0%, sold Avalon Woodland Park containing 392 apartment homes for a sales price of $94,250,000.

Liquidity and Capital Markets

At December 31, 2018, the Company did not have any borrowings outstanding under its $1,500,000,000 unsecured credit facility, and had $217,864,000 in unrestricted cash and cash in escrow.

The Company’s annualized Net Debt-to-Core EBITDAre (as defined in this release) for the fourth quarter of 2018 was 4.6 times.

Q4 2018 Capital Markets Activity

During the three months ended December 31, 2018, the Company repaid $250,000,000 principal amount of its 6.10% coupon unsecured notes in advance of the March 2020 scheduled maturity, recognizing a charge of $8,926,000, consisting of a prepayment penalty of $8,579,000 and a non-cash write-off of deferred financing costs of $347,000.

In addition, during the three months ended December 31, 2018, the Company sold 244,924 shares of common stock at an average sales price of $189.14 per share, for net proceeds of $45,629,000 under the current continuous equity program established in December 2015.

Full Year 2018 Capital Markets Activity

During 2018, in addition to the debt activity for the NYC Joint Venture and the Q4 2018 capital markets activity discussed above, the Company:

•

issued $300,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement, for net proceeds of $296,210,000. The notes mature in April 2048 and were issued with a 4.35% coupon. The effective interest rate of the notes for the first 10 years is 3.97%, including the impact of an interest rate hedge and offering costs, and for the remainder of the term the effective interest rate is 4.39%;


•	repaid an aggregate $54,887,000 of fixed rate secured mortgage notes with an effective interest rate of 5.88%, recognizing an aggregate charge of $1,039,000, consisting of prepayment penalties of $434,000 and non-cash write-offs of deferred financing costs of $605,000; and


•	repaid an aggregate $95,859,000 of variable rate secured mortgage notes, recognizing a non-cash charge of $1,690,000 for the write-off of unamortized discount and deferred financing costs.

First Quarter 2019 Dividend Declaration

The Company’s Board of Directors declared a dividend for the first quarter of 2019 of $1.52 per share on the Company’s common stock (par value of $0.01 per share). The declared dividend is a 3.4% increase over the Company’s prior quarterly dividend of $1.47 per share. The dividend is payable on April 15, 2019 to common stockholders of record as of March 29, 2019.

In declaring the increased dividend, the Board of Directors evaluated the Company’s past performance and future prospects for earnings growth. Additional factors considered in determining the increase included current common dividend distributions, the relationship of the current common dividend distribution to the Company’s Core FFO, the relationship of dividend distributions to taxable income, distribution requirements under rules governing real estate investment trusts and expected growth in taxable income.

2019 Financial Outlook

The following presents a summary of the Company's financial outlook for 2019, further details for which are provided on Attachment 14.

For its full year 2019 financial outlook, the Company expects the following:




Projected EPS, Projected FFO and Projected Core FFO Outlook (1)
	Full Year 2019
	Low		High
Projected EPS	$5.18	-	$5.68
Projected FFO per share	$9.00	-	$9.50
Projected Core FFO per share	$9.05	-	$9.55

(1) See Attachment 15, table 8, for reconciliations of Projected FFO per share and Projected Core FFO per share to Projected EPS.

The following table compares the 2019 full year outlook for EPS, FFO per share and Core FFO per share to the Company's actual results for the full year 2018:




Full Year 2019 Outlook
Comparison to Full Year 2018 Results

	Per Share
	EPS			FFO			Core FFO

2018 per share reported results	$	7.05		$	8.81		$	9.00
Established and Redevelopment Community NOI	0.32			0.32			0.32
Development and Other Stabilized Community NOI	0.37			0.37			0.33
Capital markets activity	(0.27		)	(0.27		)	(0.34		)
Overhead expense and other	(0.03		)	(0.03		)	(0.06		)
Joint venture income	0.05			0.05			0.05
Gain on sale of real estate and depreciation expense	(2.06		)	—			—
2019 per share outlook (1)	$	5.43		$	9.25		$	9.30

(1) Represents the mid-point of the Company's February 2019 outlook.

First Quarter Conference Schedule

Management is scheduled to present at Citi's Global Property CEO Conference from March 3 - 6, 2019. During this conference, management may discuss the Company's current operating environment; operating trends; development, redevelopment, disposition and acquisition activity; financial outlook; portfolio strategy and other business and financial matters affecting the Company. Details on how to access a webcast of the Company's presentation will be available in advance of the conference event on the Company's website at http:// www.avalonbay.com/events.

Other Matters

The Company will hold a conference call on February 5, 2019 at 11:00 AM ET to review and answer questions about this release, its fourth quarter 2018 results, the Attachments (described below) and related matters. To participate on the call, dial 866-575-6539 and use conference id: 2804430.

To hear a replay of the call, which will be available from February 5, 2019 at 4:00 PM ET to February 12, 2019 at 4:00 PM ET, dial 888-203-1112 and use conference id: 2804430. A webcast of the conference call will also be available at http://www.avalonbay.com/earnings, and an on-line playback of the webcast will be available for at least seven days following the call.

The Company produces Earnings Release Attachments (the "Attachments") that provide detailed information regarding operating, development, redevelopment, disposition and acquisition activity. These Attachments are considered a part of this earnings release and are available in full with this earnings release via the Company's website at http://www.avalonbay.com/earnings. To receive future press releases via e-mail, please submit a request through http://www.avalonbay.com/email.

In addition to the Attachments, the Company is providing a teleconference presentation that will be available on the Company's website at http://www.avalonbay.com/earnings subsequent to this release and before the market opens on February 5, 2019. These supplemental materials will be available on the Company's website for 30 days following the earnings call.

About AvalonBay Communities, Inc.

As of December 31, 2018, the Company owned or held a direct or indirect ownership interest in 291 apartment communities containing 85,158 apartment homes in 12 states and the District of Columbia, of which 21 communities were under development and nine communities were under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas primarily in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. More information may be found on the Company’s website at http://www.avalonbay.com. For additional information, please contact Jason Reilley, Vice President of Investor Relations, at 703-317-4681.

Forward-Looking Statements

This release, including its Attachments, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which you can identify by the Company’s use of words such as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,” “believes,” “outlook” and similar expressions that do not relate to historical matters, are based on the Company’s expectations, forecasts and assumptions at the time of this release, which may not be realized and involve risks and uncertainties that cannot be

predicted accurately or that might not be anticipated. These could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Risks and uncertainties that might cause such differences include the following, among others: we may abandon development or redevelopment opportunities for which we have already incurred costs; adverse capital and credit market conditions may affect our access to various sources of capital and/or cost of capital, which may affect our business activities, earnings and common stock price, among other things; changes in local employment conditions, demand for apartment homes, supply of competitive housing products, and other economic conditions may result in lower than expected occupancy and/or rental rates and adversely affect the profitability of our communities; delays in completing development, redevelopment and/or lease-up may result in increased financing and construction costs and may delay and/or reduce the profitability of a community; debt and/or equity financing for development, redevelopment or acquisitions of communities may not be available or may not be available on favorable terms; we may be unable to obtain, or experience delays in obtaining, necessary governmental permits and authorizations; expenses may result in communities that we develop or redevelop failing to achieve expected profitability; our assumptions concerning risks relating to our lack of control of joint ventures and our abilities to successfully dispose of certain assets may not be realized; and our assumptions and expectations in our financial outlook may prove to be too optimistic. Additional discussions of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements appear in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the heading “Risk Factors” and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements” and in subsequent quarterly reports on Form 10-Q.

The Company does not undertake a duty to update forward-looking statements, including its expected 2019 operating results and other financial data forecasts contained in this release. The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this release.

Definitions and Reconciliations

Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined, reconciled and further explained on Attachment 15, Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms. Attachment 15 is included in the full earnings release available at the Company’s website at http://www.avalonbay.com/earnings.

FOURTH QUARTER 2018

Supplemental Operating and Financial Data

Table of Contents



Company Profile
Condensed Consolidated Operating Information...........................................................................................................		Attachment 1
Condensed Consolidated Balance Sheets....................................................................................................................		Attachment 2
Sequential Operating Information by Business Segment..............................................................................................		Attachment 3

Market Profile - Established Communities
Quarterly Rental Revenue and Occupancy Changes....................................................................................................		Attachment 4
Sequential Quarterly Rental Revenue and Occupancy Changes..................................................................................		Attachment 5
Full Year Rental Revenue and Occupancy Changes.....................................................................................................		Attachment 6
Operating Expenses ("Opex")........................................................................................................................................		Attachment 7

Development, Joint Venture and Debt Profile and Disposition Activity
Expensed Community Maintenance Costs and Capitalized Community Expenditures.................................................		Attachment 8
Development Communities............................................................................................................................................		Attachment 9
Future Development......................................................................................................................................................		Attachment 10
Unconsolidated Real Estate Investments......................................................................................................................		Attachment 11
Debt Structure and Select Debt Metrics.........................................................................................................................		Attachment 12
Summary of Disposition Activity.....................................................................................................................................		Attachment 13

Financial Outlook
2019 Financial Outlook..................................................................................................................................................		Attachment 14

Definitions and Reconciliations
Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms...................................................		Attachment 15

The following is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The projections and estimates contained in the following attachments, including but not limited to Attachments 9, 10, 14 and 15, are forward-looking statements that involve risks and uncertainties, and actual results may differ materially from those projected in such statements. Risks associated with the Company's development, redevelopment, construction, and lease-up activities which could impact the forward-looking statements are discussed in the paragraph titled "Forward-Looking Statements" in the release that accompanies these attachments. Among other risks, development opportunities may be abandoned; Total Capital Cost of a community may exceed original estimates, possibly making the community uneconomical and/or affecting projected returns; construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs; and other risks described in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and the Company's Quarterly Reports on Form 10-Q for subsequent quarters, could cause actual results to differ materially from such projections and estimates.

Attachment 1

AvalonBay Communities, Inc.

Condensed Consolidated Operating Information

December 31, 2018

(Dollars in thousands except per share data)

(unaudited)



	Q4			Q4					Full Year			Full Year
	2018			2017			% Change		2018			2017			% Change
Revenue:
Rental and other income (1)	$	577,702		$	554,435		4.2	%	$	2,280,963		$	2,154,481		5.9	%
Management, development and other fees	820			857			(4.3	)%	3,572			4,147			(13.9	)%
Total	578,522			555,292			4.2	%	2,284,535			2,158,628			5.8	%
Operating expenses:
Direct property operating expenses, excluding property taxes	107,983			105,189			2.7	%	441,155			428,451			3.0	%
Property taxes	60,442			57,180			5.7	%	241,563			221,375			9.1	%
Property management and other indirect operating expenses	21,502			17,780			20.9	%	80,133			69,559			15.2	%
Total operating expenses	189,927			180,149			5.4	%	762,851			719,385			6.0	%

Interest expense, net	(55,180		)	(52,523		)	5.1	%	(220,974		)	(199,661		)	10.7	%
Loss on extinguishment of debt, net	(14,775		)	(1,310		)	1,027.9	%	(17,492		)	(25,472		)	(31.3	)%
General and administrative expense	(14,105		)	(11,904		)	18.5	%	(56,205		)	(50,814		)	10.6	%
Joint venture income (2)	2,710			358			657.0	%	15,270			70,744			(78.4	)%
Investments and investment management	(2,811		)	(1,659		)	69.4	%	(7,709		)	(5,936		)	29.9	%
Expensed transaction, development and other pursuit costs, net of recoveries	(1,599		)	(649		)	146.4	%	(4,309		)	(2,736		)	57.5	%
Depreciation expense	(158,914		)	(157,100		)	1.2	%	(631,196		)	(584,150		)	8.1	%
Casualty and impairment (loss) gain, net (3)	(826		)	5,438			N/A		(215		)	(6,250		)	(96.6	)%
Gain on sale of communities (4)	242,532			92,845			161.2	%	374,976			252,599			48.4	%
Gain (loss) on other real estate transactions (5)	9			(11,153		)	N/A		345			(10,907		)	N/A
Net income	385,636			237,486			62.4	%	974,175			876,660			11.1	%

Net loss attributable to noncontrolling interests	98			87			12.6	%	350			261			34.1	%
Net income attributable to common stockholders	$	385,734		$	237,573		62.4	%	$	974,525		$	876,921		11.1	%

Net income attributable to common stockholders per common share - basic	$	2.79		$	1.72		62.2	%	$	7.05		$	6.36		10.8	%
Net income attributable to common stockholders per common share - diluted	$	2.79		$	1.72		62.2	%	$	7.05		$	6.35		11.0	%

FFO (6)	$	300,032		$	301,208		(0.4	)%	$	1,218,752		$	1,167,218		4.4	%
Per common share - diluted	$	2.17		$	2.18		(0.5	)%	$	8.81		$	8.45		4.3	%

Core FFO (6)	$	319,521		$	310,881		2.8	%	$	1,244,286		$	1,189,976		4.6	%
Per common share - diluted	$	2.31		$	2.25		2.7	%	$	9.00		$	8.62		4.4	%

Dividends declared - common	$	203,750		$	196,094		3.9	%	$	813,722		$	783,912		3.8	%
Per common share	$	1.47		$	1.42		3.5	%	$	5.88		$	5.68		3.5	%

Average shares and participating securities outstanding - basic	138,322,285			138,110,099			0.2	%	138,247,513			137,911,138			0.2	%
Average shares outstanding - diluted	138,463,943			138,245,981			0.2	%	138,289,241			138,066,686			0.2	%
Total outstanding common shares and operating partnership units	138,515,924			138,101,654			0.3	%	138,515,924			138,101,654			0.3	%


(1)	Amount for the year ended December 31, 2017 include business interruption insurance proceeds of $3,495.


(2)	Joint venture income includes amounts related to disposition activity as well as amounts earned for the Company's promoted interest.


(3)	See Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms, table 3, for breakout of casualty and impairment (loss) gain, net.


(4)	Amounts for the three months and year ended December 31, 2018, include 100% of the gain recognized on the contribution of five operating communities to the NYC Joint Venture, in which the Company has retained a 20.0% ownership interest.


(5)	Amounts for the three months and year ended December 31, 2017, include a loss of $11,153 resulting from the non-cash write-off of prepaid rent associated with the purchase of land previously under a ground lease.


(6)	See Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.

Attachment 2

AvalonBay Communities, Inc.

Condensed Consolidated Balance Sheets

December 31, 2018

(Dollars in thousands)

(unaudited)




	December 31,			December 31,
	2018			2017

Real estate	$	20,424,325		$	20,561,272
Less accumulated depreciation	(4,601,447		)	(4,218,379		)

Net operating real estate	15,822,878			16,342,893
Construction in progress, including land	1,768,132			1,306,300
Land held for development	84,712			68,364
Real estate assets held for sale, net	55,208			—

Total real estate, net	17,730,930			17,717,557

Cash and cash equivalents	91,659			67,088
Cash in escrow	126,205			134,818
Resident security deposits	31,816			32,686
Investments in unconsolidated real estate entities	217,432			163,475
Other assets	182,158			299,197

Total assets	$	18,380,200		$	18,414,821

Unsecured notes, net	$	5,905,993		$	5,852,764
Unsecured credit facility	—			—
Notes payable, net	1,134,270			1,476,706
Resident security deposits	58,415			58,473
Other liabilities	645,672			632,776
Total liabilities	7,744,350			8,020,719

Redeemable noncontrolling interests	3,244			6,056
Equity	10,632,606			10,388,046

Total liabilities and equity	$	18,380,200		$	18,414,821

Attachment 3

AvalonBay Communities, Inc.

Sequential Operating Information by Business Segment (1)

December 31, 2018

(Dollars in thousands, except per home data)

(unaudited)



	Total	Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended
	Apartment	December			September			June			March			December
	Homes	31, 2018			30, 2018			30, 2018			31, 2018			31, 2017
RENTAL REVENUE (2)
Established	54,901	$	412,241		$	411,339		$	406,420		$	401,632		$	401,396
Other Stabilized (3)	9,887	69,944			65,174			63,750			62,214			58,868
Redevelopment	7,310	54,086			54,265			53,159			52,779			52,724
Development	9,217	24,123			22,075			18,601			15,112			11,206
Total Consolidated Communities	81,315	$	560,394		$	552,853		$	541,930		$	531,737		$	524,194

OPERATING EXPENSE
Established		$	114,511		$	118,725		$	116,698		$	116,983		$	111,537
Other Stabilized (3)		21,968			21,132			20,026			20,717			17,738
Redevelopment		18,793			18,739			18,180			18,485			17,625
Development		8,051			7,167			6,665			5,633			4,807
Total Consolidated Communities		$	163,323		$	165,763		$	161,569		$	161,818		$	151,707

NOI (4)
Established		$	298,011		$	292,800		$	289,910		$	284,787		$	290,057
Other Stabilized (3)		48,021			44,409			43,799			41,943			41,163
Redevelopment		37,271			36,676			35,190			34,335			35,137
Development		16,088			14,918			11,947			9,481			6,400
Total Consolidated Communities		$	399,391		$	388,803		$	380,846		$	370,546		$	372,757

AVERAGE REVENUE PER OCCUPIED HOME (5)
Established		$	2,605		$	2,599		$	2,564		$	2,537		$	2,536
Other Stabilized (3)		$	2,520		$	2,553		$	2,515		$	2,468		$	2,433
Redevelopment		$	2,701		$	2,713		$	2,650		$	2,624		$	2,622

ECONOMIC OCCUPANCY (5)
Established		96.1		%	96.1		%	96.2		%	96.1		%	96.1		%
Other Stabilized (3)		95.3		%	95.7		%	95.9		%	95.4		%	94.0		%
Redevelopment		94.4		%	94.3		%	94.6		%	94.8		%	94.8		%

ESTABLISHED COMMUNITIES TURNOVER (6)
Current year period / Prior year period		42.3% / 45.3%			67.3% / 64.6%			58.1% / 59.1%			43.9% / 42.9%			45.3% / 45.2%
Current year period YTD / Prior year period YTD		52.9% / 53.0%												53.0% / 52.1%



(1)	Includes consolidated communities and excludes amounts related to communities that have been sold or that are classified as held for sale.
(2)	Rental revenue excludes non-qualified REIT income and business interruption insurance proceeds.
(3)	Results for these communities for quarters prior to January 1, 2018 may reflect community operations prior to stabilization, including periods of lease-up, such that occupancy levels are below what would be considered stabilized.
(4)	See Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
(5)	For per home rent projections and Economic Occupancy for Development Communities currently under construction and/or completed in Q4 2018, see Attachment 9 - Development Communities.
(6)	Turnover represents the annualized number of units turned over during the period, divided by the total number of apartment homes for Established Communities for the respective reporting period.




ESTABLISHED COMMUNITIES LIKE-TERM EFFECTIVE RENT CHANGE (3)

	Q4 2018	Q4 2017
New England	2.7%	0.8%
Metro NY/NJ	2.6%	1.6%
Mid-Atlantic	2.0%	0.1%
Pacific NW	1.4%	(1.4)%
No. California	3.0%	1.3%
So. California	2.3%	2.7%
Total	2.5%	1.3%

Attachment 4

AvalonBay Communities, Inc.

Quarterly Rental Revenue and Occupancy Changes - Established Communities (1)

December 31, 2018

(unaudited)



	Apartment Homes	Average Rental Rates (2)						Economic Occupancy						Rental Revenue ($000s)
																						% Change
		Q4 18		Q4 17		% Change		Q4 18		Q4 17		% Change		Q4 18		Q4 17		% Change			incl. Redev (4)
New England
Boston, MA	6,331	$	2,566	$	2,475	3.7	%	96.1	%	95.6	%	0.5	%	$	46,824	$	44,949	4.2	%			4.1	%
Fairfield, CT	1,970	2,479		2,449		1.2	%	95.8	%	95.2	%	0.6	%	14,031		13,785		1.8	%			1.8	%
New England	8,301	2,545		2,469		3.1	%	96.0	%	95.5	%	0.5	%	60,855		58,734		3.6	%			3.6	%

Metro NY/NJ
New York City, NY	2,732	3,700		3,658		1.1	%	96.5	%	96.2	%	0.3	%	29,264		28,851		1.4	%			0.6	%
New York - Suburban	3,233	3,126		3,043		2.7	%	96.4	%	96.6	%	(0.2	)%	29,213		28,503		2.5	%			2.9	%
New Jersey	4,424	2,524		2,484		1.6	%	96.6	%	96.7	%	(0.1	)%	32,369		31,876		1.5	%			1.8	%
Metro NY/NJ	10,389	3,021		2,967		1.8	%	96.5	%	96.5	%	0.0	%	90,846		89,230		1.8	%			1.8	%

Mid-Atlantic
Washington Metro/Baltimore, MD	9,274	2,235		2,186		2.2	%	96.1	%	95.9	%	0.2	%	59,724		58,299		2.4	%			2.1	%
Mid-Atlantic	9,274	2,235		2,186		2.2	%	96.1	%	95.9	%	0.2	%	59,724		58,299		2.4	%			2.1	%

Pacific Northwest
Seattle, WA	3,256	2,335		2,288		2.1	%	95.8	%	95.8	%	0.0	%	21,861		21,415		2.1	%			1.9	%
Pacific Northwest	3,256	2,335		2,288		2.1	%	95.8	%	95.8	%	0.0	%	21,861		21,415		2.1	%			1.9	%

Northern California
San Jose, CA	4,197	2,855		2,718		5.0	%	95.9	%	96.6	%	(0.7	)%	34,470		33,055		4.3	%			4.9	%
Oakland-East Bay, CA	3,252	2,604		2,557		1.8	%	96.0	%	96.1	%	(0.1	)%	24,383		23,976		1.7	%			1.9	%
San Francisco, CA	3,349	3,497		3,381		3.4	%	96.0	%	96.6	%	(0.6	)%	33,712		32,802		2.8	%			2.8	%
Northern California	10,798	2,979		2,875		3.6	%	95.9	%	96.5	%	(0.6	)%	92,565		89,833		3.0	%			3.4	%

Southern California
Los Angeles, CA	8,374	2,411		2,332		3.4	%	96.0	%	96.1	%	(0.1	)%	58,163		56,328		3.3	%			4.1	%
Orange County, CA	2,443	2,171		2,124		2.2	%	95.7	%	96.4	%	(0.7	)%	15,233		15,001		1.5	%			0.5	%
San Diego, CA	2,066	2,185		2,113		3.4	%	96.0	%	95.9	%	0.1	%	12,994		12,556		3.5	%			3.5	%
Southern California	12,883	2,329		2,259		3.1	%	96.0	%	96.1	%	(0.1	)%	86,390		83,885		3.0	%			3.4	%

Total Established	54,901	$	2,605	$	2,536	2.7	%	96.1	%	96.1	%	0.0	%	$	412,241	$	401,396	2.7	%	(3)		2.8	%


(1)	Established Communities are communities with Stabilized Operations as of January 1, 2017 such that a comparison of Q4 2017 to Q4 2018 is meaningful.


(2)	Reflects the effect of concessions amortized over the average lease term.


(3)	With concessions reflected on a cash basis, rental revenue from Established Communities increased 2.7% from Q4 2017 to Q4 2018.


(4)	Represents the change in rental revenue if the Company were to include planned, current and previously completed Redevelopment Communities as part of its Established Communities portfolio.

Attachment 5

AvalonBay Communities, Inc.

Sequential Quarterly Rental Revenue and Occupancy Changes - Established Communities (1)

December 31, 2018

(unaudited)



	Apartment Homes	Average Rental Rates (2)						Economic Occupancy						Rental Revenue ($000s)
																					% Change
		Q4 18		Q3 18		% Change		Q4 18		Q3 18		% Change		Q4 18		Q3 18		% Change		incl. Redev (3)
New England
Boston, MA	6,331	$	2,566	$	2,548	0.7	%	96.1	%	96.2	%	(0.1	)%	$	46,824	$	46,578	0.5	%		0.7	%
Fairfield, CT	1,970	2,479		2,500		(0.8	)%	95.8	%	96.2	%	(0.4	)%	14,031		14,205		(1.2	)%		(1.2	)%
New England	8,301	2,545		2,537		0.3	%	96.0	%	96.2	%	(0.2	)%	60,855		60,783		0.1	%		0.3	%

Metro NY/NJ
New York City, NY	2,732	3,700		3,684		0.4	%	96.5	%	96.6	%	(0.1	)%	29,264		29,170		0.3	%		(0.7	)%
New York - Suburban	3,233	3,126		3,136		(0.3	)%	96.4	%	96.4	%	0.0	%	29,213		29,319		(0.4	)%		(0.2	)%
New Jersey	4,424	2,524		2,531		(0.3	)%	96.6	%	96.2	%	0.4	%	32,369		32,312		0.2	%		0.4	%
Metro NY/NJ	10,389	3,021		3,022		0.0	%	96.5	%	96.4	%	0.1	%	90,846		90,801		0.0	%		(0.2	)%

Mid-Atlantic
Washington Metro/Baltimore, MD	9,274	2,235		2,233		0.1	%	96.1	%	96.1	%	0.0	%	59,724		59,705		0.0	%		(0.2	)%
Mid-Atlantic	9,274	2,235		2,233		0.1	%	96.1	%	96.1	%	0.0	%	59,724		59,705		0.0	%		(0.2	)%

Pacific Northwest
Seattle, WA	3,256	2,335		2,341		(0.3	)%	95.8	%	96.0	%	(0.2	)%	21,861		21,944		(0.4	)%		(0.5	)%
Pacific Northwest	3,256	2,335		2,341		(0.3	)%	95.8	%	96.0	%	(0.2	)%	21,861		21,944		(0.4	)%		(0.5	)%

Northern California
San Jose, CA	4,197	2,855		2,853		0.1	%	95.9	%	96.0	%	(0.1	)%	34,470		34,474		0.0	%		0.1	%
Oakland-East Bay, CA	3,252	2,604		2,607		(0.1	)%	96.0	%	95.8	%	0.2	%	24,383		24,367		0.1	%		0.3	%
San Francisco, CA	3,349	3,497		3,461		1.0	%	96.0	%	96.0	%	0.0	%	33,712		33,389		1.0	%		1.0	%
Northern California	10,798	2,979		2,968		0.4	%	95.9	%	95.9	%	0.0	%	92,565		92,230		0.4	%		0.4	%

Southern California
Los Angeles, CA	8,374	2,411		2,395		0.7	%	96.0	%	96.0	%	0.0	%	58,163		57,748		0.7	%		1.0	%
Orange County, CA	2,443	2,171		2,165		0.3	%	95.7	%	95.1	%	0.6	%	15,233		15,088		1.0	%		(0.6	)%
San Diego, CA	2,066	2,185		2,175		0.5	%	96.0	%	96.7	%	(0.7	)%	12,994		13,040		(0.4	)%		(0.4	)%
Southern California	12,883	2,329		2,316		0.6	%	96.0	%	95.9	%	0.1	%	86,390		85,876		0.6	%		0.6	%

Total Established	54,901	$	2,605	$	2,599	0.2	%	96.1	%	96.1	%	0.0	%	$	412,241	$	411,339	0.2	%		0.2	%


(1)	Established Communities are communities with Stabilized Operations as of January 1, 2017.


(2)	Reflects the effect of concessions amortized over the average lease term.


(3)	Represents the change in rental revenue if the Company were to include planned, current and previously completed Redevelopment Communities as part of its Established Communities portfolio.

Attachment 6

AvalonBay Communities, Inc.

Full Year Rental Revenue and Occupancy Changes - Established Communities (1)

December 31, 2018



	Apartment Homes	Average Rental Rates (2)						Economic Occupancy						Rental Revenue ($000s)

		Full Year 2018		Full Year 2017		% Change		Full Year 2018		Full Year 2017		% Change		Full Year 2018		Full Year 2017		% Change				% Change incl. Redev (4)
New England
Boston, MA	6,331	$	2,523	$	2,438	3.5	%	95.9	%	96.0	%	(0.1	)%	$	183,870	$	177,845	3.4	%				3.3	%
Fairfield, CT	1,970	2,469		2,437		1.3	%	96.1	%	95.7	%	0.4	%	56,111		55,158		1.7	%				1.7	%
New England	8,301	2,510		2,439		2.9	%	96.0	%	95.9	%	0.1	%	239,981		233,003		3.0	%				3.0	%

Metro NY/NJ
New York City, NY	2,732	3,680		3,628		1.4	%	96.1	%	96.3	%	(0.2	)%	115,916		114,486		1.2	%				0.2	%
New York - Suburban	3,233	3,097		3,034		2.1	%	96.2	%	96.3	%	(0.1	)%	115,638		113,368		2.0	%				2.2	%
New Jersey	4,424	2,514		2,469		1.8	%	96.4	%	96.4	%	0.0	%	128,677		126,386		1.8	%				1.8	%
Metro NY/NJ	10,389	3,002		2,949		1.8	%	96.2	%	96.3	%	(0.1	)%	360,231		354,240		1.7	%				1.4	%

Mid-Atlantic
Washington Metro/Baltimore, MD	9,274	2,218		2,181		1.7	%	96.0	%	95.9	%	0.1	%	236,943		232,857		1.8	%				1.6	%
Mid-Atlantic	9,274	2,218		2,181		1.7	%	96.0	%	95.9	%	0.1	%	236,943		232,857		1.8	%				1.6	%

Pacific Northwest
Seattle, WA	3,256	2,301		2,245		2.5	%	96.0	%	96.0	%	0.0	%	86,290		84,168		2.5	%				2.3	%
Pacific Northwest	3,256	2,301		2,245		2.5	%	96.0	%	96.0	%	0.0	%	86,290		84,168		2.5	%				2.3	%

Northern California
San Jose, CA	4,197	2,809		2,719		3.3	%	96.6	%	96.8	%	(0.2	)%	136,610		132,491		3.1	%				3.8	%
Oakland-East Bay, CA	3,252	2,587		2,531		2.2	%	96.2	%	96.4	%	(0.2	)%	97,089		95,192		2.0	%				2.0	%
San Francisco, CA	3,349	3,435		3,349		2.6	%	96.3	%	96.1	%	0.2	%	132,880		129,302		2.8	%				2.8	%
Northern California	10,798	2,936		2,858		2.7	%	96.4	%	96.4	%	0.0	%	366,579		356,985		2.7	%				3.0	%

Southern California
Los Angeles, CA	8,374	2,380		2,296		3.7	%	96.1	%	96.1	%	0.0	%	229,889		221,673		3.7	%				4.0	%
Orange County, CA	2,443	2,150		2,099		2.4	%	95.7	%	96.0	%	(0.3	)%	60,302		59,088		2.1	%				1.2	%
San Diego, CA	2,066	2,155		2,068		4.2	%	96.2	%	95.7	%	0.5	%	51,418		49,093		4.7	%				4.7	%
Southern California	12,883	2,300		2,222		3.5	%	96.1	%	96.0	%	0.1	%	341,609		329,854		3.6	%				3.6	%

Total Established	54,901	$	2,576	$	2,512	2.5	%	96.1	%	96.1	%	0.0	%	$	1,631,633	$	1,591,107	2.5	%	(3	)		2.5	%


(1)	Established Communities are communities with Stabilized Operations as of January 1, 2017 such that a comparison of full year 2017 to full year 2018 is meaningful.


(2)	Reflects the effect of concessions amortized over the average lease term.

(3)

With concessions reflected on a cash basis, rental revenue from Established Communities increased 2.4% between years. The increase in rental revenue on an accrual basis is greater than the increase on a cash basis from Full Year 2017 to Full Year 2018 due to a decrease in the amount of concessions being amortized as compared to the prior year period, with the amount of concessions amortized in a reporting period typically a function of concessions granted during the preceding 12 month period.


(4)	Represents the change in rental revenue if the Company were to include planned, current and previously completed Redevelopment Communities as part of its Established Communities portfolio.

Attachment 7

AvalonBay Communities, Inc.

Operating Expenses ("Opex") - Established Communities (1)

December 31, 2018

(Dollars in thousands)

(unaudited)



	Q4 2018		Q4 2017		% Change		Q4 2018 % of Total Opex		Full Year 2018		Full Year 2017		% Change		Full Year 2018 % of Total Opex

Property taxes (2)	$	42,198	$	40,464	4.3	%	36.8	%	$	168,432	$	159,912	5.3	%	36.1	%
Payroll (3)	26,253		25,357		3.5	%	22.9	%	106,705		103,730		2.9	%	22.8	%
Repairs & maintenance (4)	18,612		17,534		6.1	%	16.3	%	75,489		72,772		3.7	%	16.2	%
Office operations (5)	11,014		11,587		(4.9	)%	9.6	%	46,029		45,954		0.2	%	9.9	%
Utilities (6)	10,034		9,753		2.9	%	8.8	%	43,029		41,899		2.7	%	9.2	%
Insurance (7)	3,460		4,281		(19.2	)%	3.0	%	16,587		16,954		(2.2	)%	3.5	%
Marketing (8)	2,940		2,561		14.8	%	2.6	%	10,646		11,183		(4.8	)%	2.3	%
Total Established Communities Operating Expenses	$	114,511	$	111,537	2.7	%	100.0	%	$	466,917	$	452,404	3.2	%	100.0	%


(1)	Operating expenses for Established Communities exclude indirect costs for off-site corporate-level property management related expenses and other support-related expenses.


(2)	Property taxes increased for the three and twelve months ended December 31, 2018 over the prior year periods primarily due to increased assessments in the Company's Northeast and Pacific Northwest markets. The increase for the twelve months ended December 31, 2018 over the prior year period is also due to successful appeals in the Company's California markets in the prior year.


(3)	Payroll costs increased for the three and twelve months ended December 31, 2018 over the prior year periods primarily due to merit increases in associate compensation. The increase for the three months ended December 31, 2018 is also due to increased benefits costs.


(4)	Repairs and maintenance increased for the three and twelve months ended December 31, 2018 over the prior year periods primarily due to increased turnover costs and the timing of various maintenance projects.

(5)

Office operations includes administrative costs, land lease expense, bad debt expense and association and license fees. The decrease for the three months ended December 31, 2018 from the prior year period is primarily due to decreased bad debt expense from improved resident screening and collection processes. The increase for the twelve months ended December 31, 2018 over the prior year period is primarily due to an increase in government licenses fees, land lease, third party security and office communication costs, partially offset by a decrease in bad debt expense.

(6)

Utilities represents aggregate utility costs, net of resident reimbursements. The increases for the three and twelve months ended December 31, 2018 over the prior year periods are primarily due to increased trash removal costs primarily in the Company's West Coast markets, higher rates and consumption for gas in the Company’s Northeast market and increased electricity expense due to higher rates, partially offset by decreased water and sewer expense, net of resident reimbursements.

(7)

Insurance costs consist of premiums, expected claims activity and associated reductions from receipt of claims recoveries. The decreases for the three and twelve months ended December 31, 2018 from the prior year periods are primarily due to the timing of claims, partially offset by increased property insurance premiums and deductibles. Insurance costs can be variable due to the amounts and timing of estimated and actual claim activity and the related recoveries received.

(8)

Marketing costs increased for the three months ended December 31, 2018 over the prior year period primarily due to an increase in internet advertising. Marketing costs decreased for the twelve months ended December 31, 2018 from the prior year primarily due to a decrease in call center costs resulting from increased internet based tour scheduling and other initiatives related to centralized lead management, partially offset by an increase in internet advertising.

Attachment 8

AvalonBay Communities, Inc.

Expensed Community Maintenance Costs and Capitalized Community Expenditures

December 31, 2018

(Dollars in thousands except per home data)

(unaudited)




		Full Year 2018 Maintenance Expensed Per Home						Categorization of Full Year 2018 Additional Capitalized Value (2)
Current Communities	Apartment Homes (1)	Carpet Replacement		Other Maintenance (3)		Total		Acquisitions, Construction, Redevelopment & Dispositions (4)				NOI Enhancing (5)(6)		Asset Preservation		2018 Additional Capitalized Value			NOI Enhancing per home (6)		Asset Preservation per home

Established Communities	54,901	$	145	$	2,174	$	2,319	$	—			$	12,168	$	66,301	$	78,469		$	222	$	1,208
Other Stabilized Communities	9,887	104		2,015		2,119		322,628			(7)	2,411		2,727		327,766			$	244	$	276
Redevelopment Communities (8)	7,310	73		2,491		2,564		197,102				—		—		197,102			—		—
Development Communities (8)	9,217	5		665		670		838,181				—		—		838,181			—		—
Dispositions	—	—		—		—		(916,240		)		—		—		(916,240		)	—		—
Total	81,315	$	118	$	2,012	$	2,130	$	441,671			$	14,579	$	69,028	$	525,278		N/A		N/A



(1)	Includes consolidated communities and excludes communities that have been sold or that are classified as held for sale.
(2)	Policy is to capitalize expenditures for the acquisition or development of new assets or expenditures that extend the life of existing assets that will benefit the Company for periods greater than a year.
(3)	Other maintenance includes maintenance, landscaping and redecorating costs.
(4)	Includes the impact of the write-off of impaired assets and additional capitalized spend related to recognized casualty losses.
(5)	Includes $949 in rebates received during the year ended December 31, 2018, primarily related to NOI Enhancing Capex incurred during 2017.
(6)	Established Communities includes $661, or $12 per home, and Other Stabilized Communities includes $1,833, or $185 per home, related to retail space.
(7)	Represents acquired communities, coupled with commitment close-outs and construction true-ups on recently constructed communities.
(8)	Represents communities that were under construction/reconstruction during the period, including communities where construction/reconstruction has been completed.




Other Capitalized Costs
	Interest		Overhead
Q1 2018	$	13,164	$	12,524
Q2 2018	$	14,567	$	11,538
Q3 2018	$	16,277	$	10,878
Q4 2018	$	16,323	$	11,917

Attachment 9

AvalonBay Communities, Inc.

Development Communities as of December 31, 2018

(unaudited)




Community Information			Number	Total			Schedule						%		%		%			%
			of	Capital						Full Qtr	Avg Rent		Complete		Leased		Occupied			Economic
			Apt	Cost				Initial		Stabilized	Per									Occ.
Development Name		Location	Homes	(millions)			Start	Occupancy	Complete	Ops	Home		As of January 18, 2019							Q4 '18

	Communities Under Construction:
1.	Avalon Boonton	Boonton, NJ	350	$	91		Q3 2016	Q1 2019	Q1 2020	Q3 2020	$	2,390	—		3	%		—		—
2.	Avalon Belltown Towers (1)	Seattle, WA	273	147			Q4 2016	Q2 2019	Q4 2019	Q2 2020	3,510		—		—			—		—
3.	Avalon Public Market	Emeryville, CA	289	163			Q4 2016	Q2 2019	Q4 2019	Q2 2020	3,605		—		—			—		—
4.	Avalon Teaneck	Teaneck, NJ	248	73			Q4 2016	Q3 2019	Q1 2020	Q3 2020	2,510		—		—			—		—
5.	AVA Hollywood (1)	Hollywood, CA	695	365			Q4 2016	Q3 2019	Q3 2020	Q1 2021	3,380		—		—			—		—
6.	AVA Esterra Park	Redmond, WA	323	91			Q2 2017	Q4 2018	Q3 2019	Q1 2020	2,060		20	%	4	%		1	%	—
7.	Avalon at the Hingham Shipyard II	Hingham, MA	190	65			Q2 2017	Q3 2018	Q2 2019	Q4 2019	2,760		82	%	49	%		42	%	29	%
8.	Avalon Piscataway	Piscataway, NJ	360	90			Q2 2017	Q3 2018	Q2 2019	Q4 2019	2,210		55	%	43	%		36	%	28	%
9.	Avalon Sudbury	Sudbury, MA	250	85			Q3 2017	Q2 2018	Q2 2019	Q3 2019	2,715		82	%	72	%		64	%	54	%
10.	Avalon Towson	Towson, MD	371	114			Q4 2017	Q1 2020	Q4 2020	Q2 2021	2,065		—		—			—		—
11.	Avalon Yonkers	Yonkers, NY	590	188			Q4 2017	Q3 2019	Q2 2021	Q3 2021	2,750		—		—			—		—
12.	Avalon Walnut Creek II	Walnut Creek, CA	200	109			Q4 2017	Q4 2019	Q2 2020	Q4 2020	3,465		—		—			—		—
13.	Avalon North Creek	Bothell, WA	316	84			Q4 2017	Q2 2019	Q1 2020	Q3 2020	2,105		—		—			—		—
14.	Avalon Saugus (1)	Saugus, MA	280	93			Q2 2018	Q2 2019	Q1 2020	Q3 2020	2,365		—		—			—		—
15.	Avalon Doral	Doral, FL	350	111			Q2 2018	Q2 2020	Q1 2021	Q3 2021	2,215		—		—			—		—
16.	Avalon Norwood	Norwood, MA	198	61			Q2 2018	Q3 2019	Q1 2020	Q3 2020	2,345		—		—			—		—
17.	Avalon Harbor East	Baltimore, MD	400	139			Q3 2018	Q4 2020	Q3 2021	Q1 2022	2,615		—		—			—		—
18.	Avalon Old Bridge	Old Bridge, NJ	252	66			Q3 2018	Q1 2020	Q3 2020	Q1 2021	2,355		—		—			—		—
19.	Avalon Newcastle Commons II	Newcastle, WA	293	106			Q4 2018	Q3 2020	Q1 2021	Q3 2021	2,460		—		—			—		—
20.	Twinbrook Station	Rockville, MD	238	66			Q4 2018	Q2 2020	Q4 2020	Q1 2021	1,710		—		—			—		—
21.	Avalon Harrison (1)	Harrison, NY	143	76			Q4 2018	Q3 2020	Q3 2021	Q4 2021	3,780		—		—			—		—
	Total / Weighted Average Under Construction		6,609	$	2,383						$	2,635

	Total Weighted Average Projected NOI as a % of Total Capital Cost			6.1%

Asset Cost Basis (millions) (2)(3):
	Total Capital Cost, under construction			$	3,003
	Total Capital Cost, disbursed to date			(1,776		)
	Total Capital Cost, remaining to invest			$	1,227



(1)	Developments containing at least 10,000 square feet of retail space include Avalon Belltown Towers (11,000 sf), AVA Hollywood (19,000 sf), Avalon Saugus (23,000 sf) and Avalon Harrison (27,000 sf).

(2)	Includes the communities presented and 15 West 61st Street, which is expected to contain 172 residential units and 67,000 square feet of retail space, and is expected to be developed for an estimated Total Capital Cost of $620,000,000. The Company is pursuing a potential for-sale strategy of individual condominium units for the residential portion, while the Company would maintain ownership of the retail. Initial completion of the first residential units and retail space is expected in Q2 2019 with full completion expected in Q4 2019.

(3)	Q4 2018 NOI for the communities presented on this Attachment was $1 million.

Attachment 10

AvalonBay Communities, Inc.

Future Development as of December 31, 2018

(unaudited)

DEVELOPMENT RIGHTS




			Estimated		Total Capital
	# of Rights		Number		Cost
			of Homes		(millions)

Development Rights as of 12/31/2017	29		9,496		$	3,788

Q1, Q2, & Q3 2018
Q1, Q2, & Q3 Additions	4		1,269		$	395
Q1, Q2, & Q3 Construction starts	(5	)	(1,480	)	(470		)
Q1, Q2, & Q3 Adjustments to existing Development Rights	(3	)	(685	)	(141		)
Development Rights as of 9/30/2018	25		8,600		$	3,572

Q4 2018
Q4 2018 Additions	6		1,839		$	782
Q4 2018 Construction starts	(3	)	(674	)	(248		)
Q4 2018 Adjustments to existing Development Rights	—		4		18
Development Rights as of 12/31/2018	28		9,769		$	4,124

Current Development Rights by Region as of December 31, 2018

New England	6		1,233		$	446
Metro NY/NJ	8		3,955		1,710
Mid-Atlantic	1		437		99
Pacific Northwest	2		552		169
Northern California	5		1,543		829
Southern California	4		1,444		677
Denver	2		605		194
	28		9,769		$	4,124

Current Development Rights by Classification as of December 31, 2018

Conventional	19		6,089		$	2,198
Asset Densification	6		1,888		932
Public-Private Partnership	3		1,792		994
	28		9,769		$	4,124

Attachment 11

AvalonBay Communities, Inc.

Unconsolidated Real Estate Investments

December 31, 2018

(Dollars in thousands)

(unaudited)



						Select Operating Information
		Company		Number of		NOI (1)(2)				Disposition Gains and Other Activity (1)(3)				Debt
Unconsolidated Real Estate	Number of	Ownership		Apartment		Q4		Full Year		Q4		Full Year		Principal			Interest
Investments	Communities	Percentage		Homes		2018		2018		2018		2018		Amount (1)			Rate (4)

NYC Joint Venture (5)	5	20.0	%		1,301	$	1,198	$	1,198	$	—	$	—	$	395,939			3.88	%
U.S. Fund	5	28.6	%		946	5,448		23,488		—		30,640		205,846				3.08	%
AC JV	2	20.0	%		529	3,746		17,461		23,667		23,667		111,653		(6)		6.00	%
North Point II JV, LP (7)	1	55.0	%		265	1,343		2,720		—		—		—				—	%
MVP I, LLC	1	25.0	%		313	2,850		11,314		—		—		103,000				3.24	%
Brandywine Apartments of Maryland, LLC	1	28.7	%		305	1,003		4,747		—		—		22,195				3.40	%
Total Unconsolidated Real Estate Investments	15				3,659	$	15,588	$	60,928	$	23,667	$	54,307	$	838,633			3.87	%


(1)	NOI, outstanding indebtedness and disposition gains and other activity are presented at 100% ownership.


(2)	NOI includes $269 and $6,791 in Q4 and full year 2018, respectively, from one U.S. Fund community and one AC JV community disposed of during the year ended December 31, 2018. NOI excludes property management fees as the Company serves as the property management company for all ventures except Brandywine Apartments of Maryland, LLC.

(3)

Disposition gains and other activity is composed primarily of gains on disposition of unconsolidated real estate investments, of which the Company's portion is included in joint venture income as presented on Attachment 1 - Condensed Consolidated Operating Information. The Company's portion of income from disposition gains and other activity for Q4 and full year 2018 was $2,019 and $10,655, respectively, related to dispositions by the U.S. Fund and the AC JV LP. The Company's portion of income from disposition gains and other activity for Q4 and full year 2017 was a loss $57 and income of $40,053, respectively, related to dispositions by AvalonBay Value Added Fund II, L.P. ("Fund II") and the U.S. Fund.


(4)	Represents the weighted average interest rate as of December 31, 2018.


(5)	In December 2018, the Company contributed five wholly-owned operating communities located in New York, NY, to the NYC Joint Venture. The Company retained a 20.0% interest and is acting as the managing member of the venture, as well as the property manager for the communities. NOI for Q4 and full year 2018 reflect NOI from the date the venture was formed.


(6)	Borrowing is comprised of loans made by the equity investors in the venture in proportion to their equity interests.


(7)	The Company completed the construction of AVA North Point on behalf of the venture during the year ended December 31, 2018.

Attachment 12

AvalonBay Communities, Inc.

Debt Structure and Select Debt Metrics

December 31, 2018

(Dollars in thousands)

(unaudited)




DEBT COMPOSITION AND MATURITIES

				Average Interest Rate (1)		Principal Amortization Payments and Maturities (2)
Debt Composition		Amount				Year	Secured notes amortization and maturities		Unsecured notes maturities		Total
Debt Composition		Amount				Year	Secured notes amortization and maturities		Unsecured notes maturities		Total
Secured notes						2019	$	118,546	$	—	$	118,546
	Fixed rate	$	533,215	3.8	%	2020	143,112		400,000		543,112
	Variable rate	619,140		3.4	%	2021	30,048		550,000		580,048
	Subtotal, secured notes	1,152,355		3.6	%	2022	2,318		550,000		552,318
						2023	2,439		600,000		602,439
Unsecured notes						2024	2,577		450,000		452,577
	Fixed rate	5,400,000		3.7	%	2025	87,543		825,000		912,543
	Variable rate	550,000		3.4	%	2026	2,845		775,000		777,845
	Subtotal, unsecured notes	5,950,000		3.7	%	2027	187,370		400,000		587,370
						2028	912		450,000		450,912
Variable rate facility (3)		—		—		Thereafter	574,645		950,000		1,524,645
Total Debt		$	7,102,355	3.6	%		$	1,152,355	$	5,950,000	$	7,102,355




SELECT DEBT METRICS

Net Debt-to-Core EBITDAre (4)	4.6x	Interest Coverage (4)	6.9x	Unencumbered NOI (4)	91%	Weighted avg years to maturity of total debt (2)	9.7




DEBT COVENANT COMPLIANCE

Unsecured Line of Credit Covenants		December 31, 2018		Requirement

	Total Outstanding Indebtedness to Capitalization Value (5)	27.4	%	<	60%
	Combined EBITDA to Combined Debt Service	5.97x		>	1.50x
	Unsecured Indebtedness to Unencumbered Asset Value	22.1	%	<	65%
	Secured Indebtedness to Capitalization Value (5)	4.7	%	<	40%

Unsecured Senior Notes Covenants (6)		December 31, 2018		Requirement

	Total Outstanding Indebtedness to Total Assets (7)	31.5	%	<	65%
	Secured Indebtedness to Total Assets (7)	5.1	%	<	40%
	Unencumbered Assets to Unsecured Indebtedness	344.5	%	>	150%
	Consolidated Income Available for Debt Service to the Annual Service Charge	7.09x		>	1.50x


(1)	Rates are as of December 31, 2018 and, for secured and unsecured notes, include costs of financing such as credit enhancement fees, trustees' fees, the impact of interest rate hedges and mark-to-market adjustments.


(2)	Excludes the Company's unsecured credit facility and any associated issuance discount, mark-to-market discounts and deferred financing costs if applicable.


(3)	Represents amounts outstanding at December 31, 2018 under the Company's $1.5 billion unsecured credit facility.


(4)	See Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.

(5)

Capitalization Value represents the Company’s Combined EBITDA for operating communities that the Company has owned for at least 12 months as of December 31, 2018, capitalized at a rate of 6% per annum, plus the book value of Development Communities and real estate communities acquired. For discussion of other defined terms, see "Debt Covenant Compliance" in Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.

(6)

The information about the Company’s unsecured senior notes covenants shows compliance with selected covenants under the Company’s 1998 Indenture, under which debt securities are outstanding with maturity dates through 2047, subject to prepayment or redemption at the Company’s election. See “Debt Covenant Compliance” in Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms. Different covenants apply to debt securities outstanding under the Company’s 2018 Indenture.


(7)	Total Assets represents the sum of the Company's undepreciated real estate assets and other assets, excluding accounts receivable. See "Debt Covenant Compliance" in Attachment 15 - Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.

Attachment 13

AvalonBay Communities, Inc.

Summary of Disposition Activity (1)

December 31, 2018

(Dollars in thousands)

(unaudited)



	Weighted Average					Accumulated				Weighted Average	Weighted Average
Number of	Investment Period	Gross Sales				Depreciation		Economic		Initial Year Mkt.	Unleveraged
Communities Sold	(Years)	Price		GAAP Gain		and Other		Gain (Loss)		Cap Rate	IRR

2009 - 2013:
22 Communities (2)(3)	13.2	$	1,755,915	$	698,152	$	235,050	$	463,102	5.2%	12.3%

2014:
4 Communities (3)	10.9	$	296,200	$	106,138	$	38,367	$	67,771	5.0%	12.6%

2015:
3 Communities	11.5	$	265,500	$	115,625	$	47,451	$	68,174	5.3%	10.1%

2016:
7 Communities (4)	15.3	$	522,850	$	370,301	$	112,492	$	257,809	5.3%	13.0%

2017:
6 Communities	9.6	$	475,500	$	251,163	$	88,082	$	163,081	5.3%	11.0%

2018:
8 Communities (5)	6.7	$	618,750	$	195,115	$	102,170	$	92,945	4.6%	7.5%

2009 - 2018 Total
50 Communities	11.6	$	3,934,715	$	1,736,494	$	623,612	$	1,112,882	5.1%	11.8%


(1)	Provides disposition activity for consolidated communities for the most recent 10 year period.


(2)	Communities sold during this period include the following considerations:


i.	2009 and 2010 GAAP and Economic Gains include the recognition of $2,770 and $2,675, respectively, in deferred gains for prior year dispositions, recognition of which occurred in conjunction with settlement of associated legal matters.


ii.	2010 Gross Sales Price and GAAP and Economic Gains include the disposition of Avalon on the Sound, a consolidated community that was previously held in a joint venture for a portion of the Company's investment period. This community is not included in the calculation of Weighted Average Investment Period, Weighted Average Initial Year Market Cap Rate, or Weighted Average Unleveraged IRR.


iii.	2011 results exclude the Company's proportionate GAAP gain of $7,675 associated with an asset exchange.


iv.	2012 GAAP and Economic Gains include the recognition of $1,225 and $496, respectively, in deferred gains for prior year dispositions and gains for current year dispositions, which occurred in conjunction with settlement of associated legal matters.


(3)	2013 and 2014 results include the sale of four and two Archstone communities, respectively, for Gross Sales Price and Weighted Average Initial Year Market Cap Rate, but exclude these dispositions for other metrics due to the short investment period.


(4)	2016 GAAP and Economic Gains exclude the impact of the consolidation of Avalon Clarendon, for which the Company recognized a gain of $4,322.


(5)	2018 results exclude the five communities the Company contributed to the NYC Joint Venture.

Attachment 14

AvalonBay Communities, Inc.

2019 Financial Outlook

As of February 4, 2019

(dollars in millions, except per share and apartment home data)

(unaudited)



Key Outputs (1)								Key Capital Items (7)

		2018 Actual	2019 Projected				Projected Growth (2)	New capital sourced from asset and condominium sales and capital markets activity			$	1,000
		2018 Actual	2019 Projected				Projected Growth (2)
EPS		$7.05		$5.18	to	$5.68	(23.0)%	Capital used for development and redevelopment activity, including land			$	1,325
FFO per share		$8.81		$9.00	to	$9.50	5.0%
Core FFO per share		$9.00		$9.05	to	$9.55	3.3%	Capital used for debt redemptions and amortization			$	125
Core FFO per share		$9.00		$9.05	to	$9.55	3.3%	Capital used for debt redemptions and amortization
								Projected decrease in cash and cash equivalents during 2019*			$	90
Assumptions
								* Represents the difference between cash and cash equivalents as of December 31, 2018 of $91 and projected cash and cash equivalents as of December 31, 2019 of $0.
2019 Growth Assumptions - AvalonBay markets (3)
	Expected job growth						1.2%
	Expected total personal income growth						3.5%	Additional Information
	Expected apartment deliveries						2.3%			Apartment Homes	Q4 2018 NOI (1)
							2019 Projected			Apartment Homes	Q4 2018 NOI (1)
2019 Established Communities assumptions:							2019 Projected	Q4 2018 NOI - restated for 2019 segments
	Revenue change						2.5% to 3.5%		Established	60,732	$	330,326
	Operating expense change						2.5% to 3.5%		Other Stabilized	9,725	45,750
	NOI change						2.5% to 3.5%		Redevelopment	4,249	22,202
									Development	6,609	1,113
Expensed overhead (4)							$143 to $153		Total consolidated communities	81,315	$	399,391

Capitalized interest							$55 to $65	Core FFO adjustment related to 15 West 61st Street

Expected capital cost for Development Communities:								Expensed costs incurred related to condominium homes (8)			$6
	Started in 2019 (AVB share/gross)						$850 to $1,050/ $900 to $1,100	Gains on sale of condominium homes (9)			$(8)
	Started in 2019 (AVB share/gross)						$850 to $1,050/ $900 to $1,100	Estimated carrying costs of unsold inventory (10)			$8
	Completed in 2019 (5)						$640	Total Core FFO adjustments			$6

Development homes completed and delivered in 2019							2,875	Total Core FFO adjustments (per share, midpoint)			$0.04
Development homes occupied in 2019							2,525
2019 Projected NOI - Development (6)							$22 to $32


(1)	See Attachment 15 for Definitions and Reconciliations of Non-GAAP Financial Measures, including the reconciliation of Projected EPS to Projected FFO per share and Projected FFO per share to Projected Core FFO per share.


(2)	Data generally represents the mid-point of management's expected ranges for 2019.


(3)	Sources: AVB Market Research Group, Moody's Analytics, National Association for Business Economics and Axiometrics. Expected apartment deliveries reflect new market rate apartment deliveries as a percentage of existing market rate apartment stock. AVB markets exclude expansion markets (Southeast Florida and Denver).


(4)	Includes general and administrative expense, property management and investment overhead.


(5)	Excludes Total Capital Cost for 15 West 61st Street of $620.


(6)	Includes Projected NOI of $3.5 to $4.5 related to the retail portion of 15 West 61st Street.


(7)	2019 data represents mid-points of management's expected ranges for 2019.


(8)	Operating expenses incurred for condominium homes includes property taxes, marketing expenses, sales staff and other operating costs.


(9)	Reflects gain after taxes and costs of sales on condominium homes sold during 2019. Projected gross proceeds from sales are expected to be $70 to $80.

(10)

Represents the estimated carrying costs of unsold residential condominium inventory in 2019, depending on the timing of construction completion and related residential condominium sales and settlement activity. The Company computes this adjustment by multiplying the Total Capital Cost of completed and unsold residential condominium inventory for a reporting period by the Company's weighted average unsecured corporate debt rate.

Attachment 15

AvalonBay Communities, Inc.

Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

December 31, 2018

(unaudited)

This release, including its attachments, contains certain non-GAAP financial measures and other terms. The definitions and calculations of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. The non-GAAP financial measures referred to below should not be considered an alternative to net income as an indication of our performance. In addition, these non-GAAP financial measures do not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered as an alternative measure of liquidity or as indicative of cash available to fund cash needs.

Asset Preservation Capex represents capital expenditures that the Company does not expect will directly result in increased revenue or expense savings.

Average Rent per Home, as calculated for certain Development Communities in lease-up, reflects management’s projected stabilized rents net of estimated stabilized concessions, including estimated stabilized other rental revenue and excluding projected commercial revenue. Projected stabilized rents are based on one or more of the following: (i) actual average leased rents on apartments leased through quarter end, (ii) projected rollover rents on apartments leased through quarter end where the lease term expires within the first twelve months of Stabilized Operations and (iii) Market Rents on unleased homes.

Average Rental Rates are calculated by the Company as rental revenue in accordance with GAAP, divided by the weighted average number of occupied apartment homes.

Debt Covenant Compliance ratios for the Unsecured Line of Credit Covenants show the Company's compliance with selected covenants provided in the Company’s Fourth Amended and Restated Revolving Loan Agreement dated as of January 14, 2016 and the Company’s Term Loan Agreement dated February 28, 2017, which have been filed as exhibits to the Company’s SEC reports. The ratios for the Unsecured Senior Notes Covenants show the Company's compliance with selected covenants provided in the Company’s Indenture dated as of January 16, 1998, as supplemented by the First Supplemental Indenture dated as of January 20, 1998, Second Supplemental Indenture dated as of July 7, 1998, Amended and Restated Third Supplemental Indenture dated as of July 20, 2000, Fourth Supplemental Indenture dated as of September 18, 2006 and Fifth Supplemental Indenture dated as of November 21, 2014 (collectively, the “1998 Indenture"), which have been filed as exhibits to the Company’s SEC reports. Different covenants apply to debt securities outstanding under the Company’s Indenture dated as of February 23, 2018, as supplemented by the First Supplemental Indenture dated as of March 26, 2018 and the Second Supplemental Indenture dated as of May 29, 2018 (collectively, the “2018 Indenture”), which have been filed as exhibits to the Company's SEC reports.

The Debt Covenant Compliance ratios are provided only to show the Company’s compliance with certain covenants contained in the Indenture governing its unsecured debt securities and in the Company’s Credit Facility and Term Loans, as of the date reported. These ratios should not be used for any other purpose, including without limitation to evaluate the Company’s financial condition or results of operations, nor do they indicate the Company’s covenant compliance as of any other date or for any other period. The capitalized terms in the disclosure are defined in the Indenture or the Credit Facility and the Term Loans, and may differ materially from similar terms (a) used elsewhere in this release and the Attachments and (b) used by other companies that present information about their covenant compliance. For risks related to failure to comply with these covenants, see “Risk Factors – Risks related to indebtedness” and other risks discussed in the Company’s Annual Report on Form 10-K and the Company’s other reports filed with the SEC.

Development Communities are communities that are either currently under construction, or were under construction and were completed during the current year. These communities may be partially or fully complete and operating.

Attachment 15

Development Rights are development opportunities in the early phase of the development process for which the Company either has an option to acquire land or enter into a leasehold interest, for which the Company is the buyer under a long-term conditional contract to purchase land, where the Company controls the land through a ground lease or owns land to develop a new community, or where the Company is the designated developer in a public-private partnership. The Company capitalizes related pre-development costs incurred in pursuit of new developments for which the Company currently believes future development is probable.


•	Asset Densification Development Rights are when the Company develops additional apartment homes at existing stabilized operating communities the Company owns, and will be constructed on land currently associated with those operating communities.


•	Conventional Development Rights are when the Company either has an option to acquire the land or enter into a leasehold interest, for which the Company is the buyer under a long-term conditional contract to purchase land, where the Company controls the land through a ground lease or owns the land to develop a new community.


•	Public-Private Partnership Development Rights are when the Company has (i) an option to acquire the land, (ii) an option to enter into a leasehold interest or (iii) entered into a long-term conditional contract to purchase the land, where the Company is the designated developer in a public-private partnership with a local government entity.

Economic Occupancy (“Ec Occ”) is defined as total possible revenue less vacancy loss as a percentage of total possible revenue. Total possible revenue (also known as “gross potential”) is determined by valuing occupied units at contract rates and vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant apartments at their Market Rents, Economic Occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community’s gross revenue.

Economic Gain (Loss) is calculated by the Company as the gain (loss) on sale in accordance with GAAP, less accumulated depreciation through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers Economic Gain (Loss) to be an appropriate supplemental measure to gain (loss) on sale in accordance with GAAP because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain (Loss) for disposed communities is based on their respective final settlement statements. A reconciliation of the aggregate Economic Gain (Loss) to the gain on sale in accordance with GAAP for consolidated dispositions the year ended December 31, 2018 as well as prior years' activities is presented elsewhere on Attachment 13. The following table reconciles the Economic Gain (Loss) of the communities contributed by the Company to the NYC Joint Venture during 2018:



TABLE 1
	2018
GAAP Gain - NYC Joint Venture	$	179,861
Accumulated Depreciation	(132,533		)
Non-cash adjustments (1)	(9,466		)
Economic Gain (Loss) - NYC Joint Venture	$	37,862

(1) The portion of the GAAP gain less accumulated depreciation for the Company's 20.0% ownership interest in the venture.

Established Communities are consolidated communities in the markets where the Company has a significant presence (New England, New York/New Jersey, Mid-Atlantic, Pacific Northwest, and Northern and Southern California) and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had Stabilized Operations, as defined below, as of the beginning of the respective prior year period. Therefore, for 2018 operating results, Established Communities are consolidated communities that have Stabilized Operations as of January 1, 2017, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year.

EBITDA, EBITDAre and Core EBITDAre are considered by management to be supplemental measures of our financial performance. EBITDA is defined by the Company as net income or loss attributable to the Company before interest income and expense, income taxes, depreciation and amortization. EBITDAre is calculated by the Company in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), as EBITDA plus or minus losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property, with adjustments to reflect the Company's share of EBITDAre of unconsolidated entities. Core EBITDAre is the Company’s EBITDAre as adjusted for non-core items outlined in the table below. By further adjusting for items that are not considered part of the Company’s core business operations, Core EBITDAre can help one compare the core operating and financial performance of the Company between periods. A reconciliation of EBITDA, EBITDAre and Core EBITDAre to net income is as follows (dollars in thousands):

Attachment 15



TABLE 2
	Q4			Q4
	2018			2017
Net income	$	385,636		$	237,486
Interest expense, net, inclusive of loss on extinguishment of debt, net	69,955			53,833
Income tax (refund) expense	(247		)	39
Depreciation expense	158,914			157,100
EBITDA	$	614,258		$	448,458

Gain on sale of communities	(242,532		)	(92,845		)
Joint venture EBITDAre adjustments (1)	1,413			2,925
EBITDAre	$	373,139		$	358,538

(Gain) loss on other real estate transactions	(9		)	11,153
Casualty and impairment loss (gain)	826			(5,438		)
Lost NOI from casualty losses covered by business interruption insurance	—			1,662
Business interruption insurance proceeds	(26		)	—
Advocacy contributions	2,040			—
Severance related costs	884			(66		)
Development pursuit write-offs and expensed transaction costs, net	566			232
Asset management fee intangible write-off	538			—
Legal settlements	146			589
Core EBITDAre	$	378,104		$	366,670

(1) Includes joint venture interest, taxes, depreciation, gain on dispositions of depreciated real estate and impairment losses, if applicable, included in net income attributable to common stockholders.

FFO and Core FFO are considered by management to be supplemental measures of our operating and financial performance. FFO is calculated by the Company in accordance with the definition adopted by NAREIT. FFO is calculated by the Company as Net income or loss attributable to common stockholders computed in accordance with GAAP, adjusted for gains or losses on sales of previously depreciated operating communities, cumulative effect of a change in accounting principle, impairment write-downs of depreciable real estate assets, write-downs of investments in affiliates which are driven by a decrease in the value of depreciable real estate assets held by the affiliate and depreciation of real estate assets, including adjustments for unconsolidated partnerships and joint ventures. By excluding gains or losses related to dispositions of previously depreciated operating communities and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating and financial performance of a company’s real estate between periods or as compared to different companies. Core FFO is the Company's FFO as adjusted for non-core items outlined in the table below. By further adjusting for items that are not considered part of our core business operations, Core FFO can help one compare the core operating and financial performance of the Company between periods. A reconciliation of Net income attributable to common stockholders to FFO and to Core FFO is as follows (dollars in thousands):

Attachment 15



TABLE 3
	Q4			Q4			Full Year			Full Year
	2018			2017			2018			2017
Net income attributable to common stockholders	$	385,734		$	237,573		$	974,525		$	876,921
Depreciation - real estate assets, including joint venture adjustments	158,838			156,413			629,814			582,907
Distributions to noncontrolling interests	11			10			44			42
(Gain) loss on sale of unconsolidated entities holding previously depreciated real estate	(2,019		)	57			(10,655		)	(40,053		)
Gain on sale of previously depreciated real estate	(242,532		)	(92,845		)	(374,976		)	(252,599		)
FFO attributable to common stockholders	300,032			301,208			1,218,752			1,167,218

Adjusting items:
Joint venture losses (1)	538			139			852			950
Joint venture promote (2)	—			—			(925		)	(26,742		)
Impairment loss on real estate (3)(5)	826			—			826			9,350
Casualty gain, net on real estate (4)(5)	—			(5,438		)	(612		)	(3,100		)
Business interruption insurance proceeds (6)	(26		)	—			(26		)	(3,495		)
Lost NOI from casualty losses covered by business interruption insurance (7)	—			1,662			1,730			7,904
Loss on extinguishment of consolidated debt	14,775			1,310			17,492			25,472
Advocacy contributions	2,040			—			3,489			—
Hedge ineffectiveness	—			—			—			(753		)
Severance related costs	884			(66		)	1,466			87
Development pursuit write-offs and expensed transaction costs, net	566			232			1,324			1,406
(Gain) loss on other real estate transactions (8)	(9		)	11,153			(344		)	10,907
Acquisition costs	—			92			—			92
Legal settlements	146			589			513			680
Income taxes	(251		)	—			(251		)	—
Core FFO attributable to common stockholders	$	319,521		$	310,881		$	1,244,286		$	1,189,976

Average shares outstanding - diluted	138,463,943			138,245,981			138,289,241			138,066,686

Earnings per share - diluted	$	2.79		$	1.72		$	7.05		$	6.35
FFO per common share - diluted	$	2.17		$	2.18		$	8.81		$	8.45
Core FFO per common share - diluted	$	2.31		$	2.25		$	9.00		$	8.62

(1) Amounts for full year 2017 and for Q4 and full year 2018 are primarily composed of (i) the write-off of asset management fee intangibles primarily associated with the disposition of communities in the U.S. Fund and the AC JV and (ii) the Company's portion of yield maintenance charges incurred for the early repayment of debt associated with joint venture disposition activity.
(2) Represents the Company's promoted interest in Fund II.
(3) Amounts include impairment charges for land parcels the Company had originally acquired for development. In 2017, the Company sold the land parcel impaired in 2017.
(4) Amounts include legal settlement proceeds for construction defects at communities acquired as part of the Archstone acquisition. Amount for full year 2017 also includes $19,481 for the casualty loss at Avalon Maplewood ("Maplewood"), partially offset by $17,143 of property damage insurance proceeds.
(5) Aggregate impact of (i) Impairment loss on real estate and (ii) Casualty gain, net on real estate, is a loss of $826 and $215 for Q4 and full year 2018, respectively, and a gain of $5,438 for Q4 2017 and a loss of $6,250 for full year 2017 as shown on Attachment 1 - Condensed Consolidated Operating Information.
(6) Amount for full year 2017 is composed of business interruption insurance proceeds resulting from the final insurance settlement of the Maplewood casualty loss.
(7) Amount for full year 2018 is for the Maplewood casualty loss, which occurred in Q1 2017, and for which the Company recognized $3,495 in business interruption insurance proceeds in Q3 2017. Amounts for 2017 are primarily for a casualty event at Avalon at Edgewater ("Edgewater"), which occurred in Q1 2015, and for which the Company received $20,306 in business interruption insurance proceeds in Q1 2016, and amounts related to the Maplewood casualty loss.
(8) Amounts for 2017 are primarily composed of a loss resulting from the non-cash write-off of prepaid rent associated with the purchase of land previously under a ground lease.

Attachment 15

Initial Year Market Cap Rate is defined by the Company as Projected NOI of a single community for the first 12 months of operations (assuming no repositioning), less estimates for non-routine allowance of approximately $300 - $500 per apartment home, divided by the gross sales price for the community. Projected NOI, as referred to above, represents management’s estimate of projected rental revenue minus projected operating expenses before interest, income taxes (if any), depreciation and amortization. For this purpose, management’s projection of operating expenses for the community includes a management fee of 2.5% - 3.5%. The Initial Year Market Cap Rate, which may be determined in a different manner by others, is a measure frequently used in the real estate industry when determining the appropriate purchase price for a property or estimating the value for a property. Buyers may assign different Initial Year Market Cap Rates to different communities when determining the appropriate value because they (i) may project different rates of change in operating expenses and capital expenditure estimates and (ii) may project different rates of change in future rental revenue due to different estimates for changes in rent and occupancy levels. The weighted average Initial Year Market Cap Rate is weighted based on the gross sales price of each community.

Interest Coverage is calculated by the Company as Core EBITDAre, divided by the sum of interest expense, net, and preferred dividends, if applicable. Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our ability to service debt obligations to that of other companies. A calculation of Interest Coverage for the three months ended December 31, 2018 is as follows (dollars in thousands):



TABLE 4

Core EBITDAre	$	378,104

Interest expense, net	$	55,180

Interest Coverage	6.9 times

Like-Term Effective Rent Change represents the percentage change in effective rent between two leases of the same lease term category for the same apartment. The Company defines effective rent as the contractual rent for an apartment less amortized concessions and discounts. Average Like-Term Effective Rent Change is weighted based on the number of leases meeting the criteria for new move-in and renewal like-term effective rent change. New move-in like-term effective rent change is the change in effective rent between the contractual rent for a resident who moves out of an apartment, and the contractual rent for a resident who moves into the same apartment with the same lease term category. Renewal like-term effective rent change is the change in effective rent between two consecutive leases of the same lease term category for the same resident occupying the same apartment.

Market Rents as reported by the Company are based on the current market rates set by the Company based on its experience in renting apartments and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

Net Debt-to-Core EBITDAre is calculated by the Company as total debt that is consolidated for financial reporting purposes, less consolidated cash and cash in escrow, divided by annualized fourth quarter 2018 Core EBITDAre, as adjusted. A calculation of Net Debt-to-Core EBITDAre is as follows (dollars in thousands):



TABLE 5

Total debt principal (1)	$	7,102,355
Cash and cash in escrow	(217,864		)
Net debt	$	6,884,491

Core EBITDAre	$	378,104

Core EBITDAre, annualized	$	1,512,416

Net Debt-to-Core EBITDAre	4.6 times

(1) Balance at December 31, 2018 excludes $9,879 of debt discount and $34,128 of deferred financing costs as reflected in unsecured notes, net, and $14,590 of debt discount and $3,495 of deferred financing costs as reflected in notes payable on the Condensed Consolidated Balance Sheets.

Attachment 15

NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed transaction, development and other pursuit costs, net of recoveries, interest expense, net, loss (gain) on extinguishment of debt, net, general and administrative expense, joint venture income, depreciation expense, corporate income tax expense, casualty and impairment loss (gain), net, gain on sale of communities, loss (gain) on other real estate transactions and net operating income from real estate assets sold or held for sale. The Company considers NOI to be an important and appropriate supplemental performance measure to Net Income of operating performance of a community or communities because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any corporate-level property management overhead or financing-related costs. NOI reflects the operating performance of a community, and allows for an easier comparison of the operating performance of individual assets or groups of assets. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impact to overhead as a result of acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or groups of assets.

A reconciliation of NOI to Net Income, as well as a breakdown of NOI by operating segment, is as follows (dollars in thousands):



TABLE 6
	Q4			Q4			Q3			Q2			Q1			Full Year			Full Year
	2018			2017			2018			2018			2018			2018			2017
Net income	$	385,636		$	237,486		$	192,407		$	254,543		$	141,590		$	974,175		$	876,660
Indirect operating expenses, net of corporate income	20,671			16,926			18,855			18,913			18,082			76,522			65,398
Investments and investment management expense	2,811			1,659			1,726			1,529			1,643			7,709			5,936
Expensed transaction, development and other pursuit costs, net of recoveries	1,599			649			1,020			889			800			4,309			2,736
Interest expense, net	55,180			52,523			54,097			56,585			55,113			220,974			199,661
Loss on extinguishment of debt, net	14,775			1,310			1,678			642			397			17,492			25,472
General and administrative expense	14,105			11,904			13,934			14,502			13,664			56,205			50,814
Joint venture income	(2,710		)	(358		)	(10,031		)	(789		)	(1,740		)	(15,270		)	(70,744		)
Depreciation expense	158,914			157,100			156,538			156,685			159,059			631,196			584,150
Casualty and impairment loss (gain), net	826			(5,438		)	(554		)	—			(58		)	215			6,250
Gain on sale of communities	(242,532		)	(92,845		)	(27,243		)	(105,201		)	—			(374,976		)	(252,599		)
(Gain) loss on other real estate transactions	(9		)	11,153			(12		)	(370		)	47			(345		)	10,907
NOI from real estate assets sold or held for sale	(9,875		)	(19,312		)	(13,612		)	(17,082		)	(18,051		)	(58,620		)	(84,650		)
NOI	$	399,391		$	372,757		$	388,803		$	380,846		$	370,546		$	1,539,586		$	1,419,991

Established:
New England	$	40,102		$	39,092		$	40,005		$	38,864		$	38,138		$	157,109		$	152,514
Metro NY/NJ	65,192			64,290			64,286			62,797			61,857			254,132			251,760
Mid-Atlantic	42,667			41,360			41,432			41,162			40,462			165,724			161,546
Pacific NW	16,441			16,073			15,681			15,234			14,838			62,194			61,705
No. California	71,128			68,772			70,465			70,342			69,059			280,994			273,940
So. California	62,481			60,470			60,931			61,511			60,433			245,356			237,796
Total Established	298,011			290,057			292,800			289,910			284,787			1,165,509			1,139,261
Other Stabilized	48,021			41,163			44,409			43,799			41,943			178,172			127,678
Redevelopment	37,271			35,137			36,676			35,190			34,335			143,471			141,188
Development (1)	16,088			6,400			14,918			11,947			9,481			52,434			11,864
NOI	$	399,391		$	372,757		$	388,803		$	380,846		$	370,546		$	1,539,586		$	1,419,991

(1) Development NOI for Full Year 2017 includes $3,495 of business interruption insurance proceeds related to the Maplewood casualty loss.

NOI as reported by the Company does not include the operating results from assets sold or classified as held for sale. A reconciliation of NOI from communities sold or classified as held for sale is as follows (dollars in thousands):

Attachment 15



TABLE 7
	Q4			Q4			Full Year			Full Year
	2018			2017			2018			2017

Revenue from real estate assets sold or held for sale	$	14,977		$	29,975		$	88,865		$	133,956
Operating expenses from real estate assets sold or held for sale	(5,102		)	(10,663		)	(30,245		)	(49,306		)
NOI from real estate assets sold or held for sale	$	9,875		$	19,312		$	58,620		$	84,650

NOI Enhancing Capex represents capital expenditures that the Company expects will directly result in increased revenue or expense savings, and excludes any capital expenditures for Redevelopment Communities.

Other Stabilized Communities are completed consolidated communities that the Company owns, which have Stabilized Operations as of January 1, 2018, or which we acquired during the year ended December 31, 2018. Other Stabilized Communities includes stabilized operating communities in the Company's expansion markets of Denver, Colorado, and Southeast Florida, but excludes communities that are conducting or planning to conduct substantial redevelopment activities.

Projected FFO and Projected Core FFO, as provided within this release in the Company’s outlook, are calculated on a basis consistent with historical FFO and Core FFO, and are therefore considered to be appropriate supplemental measures to projected Net Income from projected operating performance. A reconciliation of the ranges provided for Projected FFO per share (diluted) for the full year 2019 to the ranges provided for projected EPS (diluted) and corresponding reconciliation of the ranges for Projected FFO per share to the ranges for Projected Core FFO per share are as follows:



TABLE 8
		Low Range			High Range
Projected EPS (diluted) - Full Year 2019		$	5.18		$	5.68
	Depreciation (real estate related)	4.61			4.81
	Gain on sale of communities	(0.79		)	(0.99		)
Projected FFO per share (diluted) - Full Year 2019		9.00			9.50

	Joint venture promote and other income, development pursuit and other write-offs	0.01			0.01
	Adjustments related to condominium activities at 15 West 61st Street (1)	0.04			0.04
Projected Core FFO per share (diluted) - Full Year 2019		$	9.05		$	9.55

(1) See Attachment 14 - 2019 Financial Outlook for additional detail.

Attachment 15

Projected NOI, as used within this release for certain Development Communities and in calculating the Initial Year Market Cap Rate for dispositions, represents management’s estimate, as of the date of this release (or as of the date of the buyer’s valuation in the case of dispositions), of projected stabilized rental revenue minus projected stabilized operating expenses. For Development Communities, Projected NOI is calculated based on the first twelve months of Stabilized Operations following the completion of construction. In calculating the Initial Year Market Cap Rate, Projected NOI for dispositions is calculated for the first twelve months following the date of the buyer’s valuation. Projected stabilized rental revenue represents management’s estimate of projected gross potential minus projected stabilized economic vacancy and adjusted for projected stabilized concessions plus projected stabilized other rental revenue. Projected stabilized operating expenses do not include interest, income taxes (if any), depreciation or amortization, or any allocation of corporate-level property management overhead or general and administrative costs. In addition, projected stabilized operating expenses for Development Communities do not include property management fee expense. Projected gross potential for Development Communities and dispositions is generally based on leased rents for occupied homes and management’s best estimate of rental levels for homes which are currently unleased, as well as those homes which will become available for lease during the twelve month forward period used to develop Projected NOI. The weighted average Projected NOI as a percentage of Total Capital Cost is weighted based on the Company’s share of the Total Capital Cost of each community, based on its percentage ownership.

Management believes that Projected NOI of the Development Communities, on an aggregated weighted average basis, assists investors in understanding management's estimate of the likely impact on operations of the Development Communities when the assets are complete and achieve stabilized occupancy (before allocation of any corporate-level property management overhead, general and administrative costs or interest expense). However, in this release the Company has not given a projection of NOI on a company-wide basis. Given the different dates and fiscal years for which NOI is projected for these communities, the projected allocation of corporate-level property management overhead, general and administrative costs and interest expense to communities under development is complex, impractical to develop, and may not be meaningful. Projected NOI of these communities is not a projection of the Company's overall financial performance or cash flow. There can be no assurance that the communities under development will achieve the Projected NOI as described in this release.

Redevelopment Communities are consolidated communities where substantial redevelopment is in progress or is planned to begin during the current year. Redevelopment is considered substantial when capital invested during the reconstruction effort is expected to exceed the lesser of $5,000,000 or 10% of the community’s pre-redevelopment basis and is expected to have a material impact on the operations of the community, including occupancy levels and future rental rates.

Redevelopment Communities include nine communities containing 3,648 apartment homes that are currently under active redevelopment as of December 31, 2018, with an expected Total Capital Cost of $177,000,000, of which $104,000,000 is remaining to invest.

Rental Revenue with Concessions on a Cash Basis is considered by the Company to be a supplemental measure to rental revenue in conformity with GAAP to help investors evaluate the impact of both current and historical concessions on GAAP-based rental revenue and to more readily enable comparisons to revenue as reported by other companies. In addition, Rental Revenue with Concessions on a Cash Basis allows an investor to understand the historical trend in cash concessions.

A reconciliation of rental revenue from Established Communities in conformity with GAAP to Rental Revenue with Concessions on a Cash Basis is as follows (dollars in thousands):

Attachment 15



TABLE 9
	Q4			Q4			Full Year			Full Year
	2018			2017			2018			2017
Rental revenue (GAAP basis)	$	412,241		$	401,396		$	1,631,633		$	1,591,107
Concessions amortized	230			486			1,139			4,401
Concessions granted	(202		)	(361		)	(851		)	(1,639		)

Rental Revenue with Concessions
on a Cash Basis	$	412,269		$	401,521		$	1,631,921		$	1,593,869

% change -- GAAP revenue				2.7		%				2.5		%

% change -- cash revenue				2.7		%				2.4		%

Stabilized Operations/Restabilized Operations is defined as the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

Total Capital Cost includes all capitalized costs projected to be or actually incurred to develop the respective Development or Redevelopment Community, or Development Right, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, offset by proceeds from the sale of any associated land or improvements, all as determined in accordance with GAAP. Total Capital Cost also includes costs incurred related to first generation retail tenants, such as tenant improvements and leasing commissions. For Redevelopment Communities, Total Capital Cost excludes costs incurred prior to the start of redevelopment when indicated. With respect to communities where development or redevelopment was completed in a prior or the current period, Total Capital Cost reflects the actual cost incurred, plus any contingency estimate made by management. Total Capital Cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the total projected joint venture contribution amount. For joint ventures not in construction, Total Capital Cost is equal to gross real estate cost.

Unencumbered NOI as calculated by the Company represents NOI generated by real estate assets unencumbered by outstanding secured debt as of December 31, 2018 as a percentage of total NOI generated by real estate assets. The Company believes that current and prospective unsecured creditors of the Company view Unencumbered NOI as one indication of the borrowing capacity of the Company. Therefore, when reviewed together with the Company’s Interest Coverage, EBITDA and cash flow from operations, the Company believes that investors and creditors view Unencumbered NOI as a useful supplemental measure for determining the financial flexibility of an entity. A calculation of Unencumbered NOI for the year ended December 31, 2018 is as follows (dollars in thousands):



TABLE 10
	Full Year
	NOI
NOI for Established Communities	$	1,165,509
NOI for Other Stabilized Communities	178,172
NOI for Redevelopment Communities	143,471
NOI for Development Communities	52,434
NOI from real estate assets sold or held for sale	58,620
Total NOI generated by real estate assets	1,598,206
NOI on encumbered assets	142,271
NOI on unencumbered assets	$	1,455,935

Unencumbered NOI	91		%

Attachment 15

Unleveraged IRR on sold communities refers to the internal rate of return calculated by the Company considering the timing and amounts of (i) total revenue during the period owned by the Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated capital cost of the communities at the time of sale and (iv) total direct operating expenses during the period owned by the Company. Each of the items (i), (ii), (iii) and (iv) is calculated in accordance with GAAP.

The calculation of Unleveraged IRR does not include an adjustment for the Company’s general and administrative expense, interest expense, or corporate-level property management and other indirect operating expenses. Therefore, Unleveraged IRR is not a substitute for Net Income as a measure of our performance. Management believes that the Unleveraged IRR achieved during the period a community is owned by the Company is useful because it is one indication of the gross value created by the Company’s acquisition, development or redevelopment, management and sale of a community, before the impact of indirect expenses and Company overhead. The Unleveraged IRR achieved on the communities as cited in this release should not be viewed as an indication of the gross value created with respect to other communities owned by the Company, and the Company does not represent that it will achieve similar Unleveraged IRRs upon the disposition of other communities. The weighted average Unleveraged IRR for sold communities is weighted based on all cash flows over the investment period for each respective community, including net sales proceeds.

Form: 8-K

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