Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 4, 2020

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2020
Commission file number 1-12672
AVALONBAY COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
 
Maryland   77-0404318
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
 
4040 Wilson Blvd., Suite 1000
Arlington, Virginia  22203
(Address of principal executive offices, including zip code)
(703) 329-6300
(Registrant's telephone number, including area code)  
(Former name, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.01 per share AVB New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.
Yes                     No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes                     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes                     No

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

139,608,983 shares of common stock, par value $0.01 per share, were outstanding as of October 30, 2020.


Table of Contents
AVALONBAY COMMUNITIES, INC.
FORM 10-Q
INDEX
 
  PAGE
PART I - FINANCIAL INFORMATION  
   
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
     
 
     
 
     
 
     
 
   
   
   
   
 
   
   
   
   
   
   
   
   




Table of Contents


AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
  9/30/2020 12/31/2019
  (unaudited)  
ASSETS    
Real estate:    
Land and improvements $ 4,392,228  $ 4,299,162 
Buildings and improvements 17,093,580  16,668,496 
Furniture, fixtures and equipment 913,687  829,242 
  22,399,495  21,796,900 
Less accumulated depreciation (5,644,219) (5,164,398)
Net operating real estate 16,755,276  16,632,502 
Construction in progress, including land 1,200,502  1,303,751 
Land held for development 43,494   
For-sale condominium inventory 298,429  457,809 
Real estate assets held for sale, net   38,927 
Total real estate, net 18,297,701  18,432,989 
Cash and cash equivalents 87,530  39,687 
Cash in escrow 94,870  87,927 
Resident security deposits 31,949  34,224 
Investments in unconsolidated real estate entities 194,317  165,806 
Deferred development costs 73,748  70,486 
Prepaid expenses and other assets 206,873  164,971 
Right of use lease assets 157,623  124,961 
Total assets $ 19,144,611  $ 19,121,051 
LIABILITIES AND EQUITY    
Unsecured notes, net $ 6,700,250  $ 6,358,648 
Variable rate unsecured credit facility    
Mortgage notes payable, net 863,396  937,642 
Dividends payable 225,025  215,414 
Payables for construction 88,040  92,135 
Accrued expenses and other liabilities 292,275  274,013 
Lease liabilities 182,859  140,468 
Accrued interest payable 62,248  47,154 
Resident security deposits 57,683  61,752 
Liabilities related to real estate assets held for sale   375 
Total liabilities 8,471,776  8,127,601 
Commitments and contingencies
Redeemable noncontrolling interests 2,593  3,252 
Equity:    
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at September 30, 2020 and December 31, 2019; zero shares issued and outstanding at September 30, 2020 and December 31, 2019
   
Common stock, $0.01 par value; 280,000,000 shares authorized at September 30, 2020 and December 31, 2019; 139,828,685 and 140,643,962 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
1,398  1,406 
Additional paid-in capital 10,681,158  10,736,733 
Accumulated earnings less dividends 29,705  282,913 
Accumulated other comprehensive loss (42,617) (31,503)
Total stockholders' equity 10,669,644  10,989,549 
Noncontrolling interests 598  649 
Total equity 10,670,242  10,990,198 
Total liabilities and equity $ 19,144,611  $ 19,121,051 
 
See accompanying notes to Condensed Consolidated Financial Statements.
1

Table of Contents
AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(Dollars in thousands, except per share data)
  For the three months ended For the nine months ended
  9/30/2020 9/30/2019 9/30/2020 9/30/2019
Revenue:    
Rental and other income $ 566,387  $ 586,382  $ 1,742,509  $ 1,727,576 
Management, development and other fees 1,017  1,231  2,950  3,484 
Total revenue 567,404  587,613  1,745,459  1,731,060 
Expenses:    
Operating expenses, excluding property taxes 143,909  133,445  406,991  389,825 
Property taxes 68,934  64,374  202,973  187,890 
Interest expense, net 53,249  51,493  162,562  149,395 
(Gain) loss on extinguishment of debt, net (105) 93  9,333  602 
Depreciation expense 175,348  165,463  529,508  490,213 
General and administrative expense 13,985  12,769  46,878  45,440 
Expensed transaction, development and other pursuit costs, net of recoveries 567  175  4,289  2,562 
Total expenses 455,887  427,812  1,362,534  1,265,927 
Equity in income of unconsolidated real estate entities 5,083  1,643  6,770  780 
Gain on sale of communities 31,607  130,484  91,338  165,849 
Gain on other real estate transactions, net 129  73  328  374 
Gain on for-sale condominiums, net of marketing and administrative costs (646) (1,108) 4,162  (2,526)
Income before income taxes 147,690  290,893  485,523  629,610 
Income tax benefit (expense) 27  (11,184) 1,069  (11,178)
Net income 147,717  279,709  486,592  618,432 
Net income attributable to noncontrolling interests (14) (32) (90) (108)
Net income attributable to common stockholders $ 147,703  $ 279,677  $ 486,502  $ 618,324 
Other comprehensive income (loss):    
Gain (loss) on cash flow hedges 1,333  (13,644) (17,731) (23,763)
Cash flow hedge losses reclassified to earnings 2,367  1,746  6,617  4,825 
Comprehensive income $ 151,403  $ 267,779  $ 475,388  $ 599,386 
Earnings per common share - basic:    
Net income attributable to common stockholders $ 1.05  $ 2.00  $ 3.46  $ 4.44 
Earnings per common share - diluted:    
Net income attributable to common stockholders $ 1.05  $ 2.00  $ 3.46  $ 4.43 

See accompanying notes to Condensed Consolidated Financial Statements.
2

Table of Contents
AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
  For the nine months ended
  9/30/2020 9/30/2019
Cash flows from operating activities:
Net income $ 486,592  $ 618,432 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation expense 529,508  490,213 
Amortization of deferred financing costs 5,617  5,458 
Amortization of debt discount 1,321  1,186 
Loss on extinguishment of debt, net 9,333  602 
Amortization of stock-based compensation 17,753  20,810 
Equity in loss of, and return on, unconsolidated real estate entities and noncontrolling interests, net of eliminations 5,204  10,787 
Abandonment of development pursuits 2,095  1,080 
Cash flow hedge losses reclassified to earnings 6,617  4,825 
Gain on sale of real estate assets (96,823) (166,223)
Gain on for-sale condominiums (8,174)  
Increase in resident security deposits, prepaid expenses and other assets (36,332) (29,804)
Increase in accrued expenses, other liabilities and accrued interest payable 39,363  57,556 
Net cash provided by operating activities 962,074  1,014,922 
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs (562,334) (791,551)
Acquisition of real estate assets, including partnership interest   (286,804)
Capital expenditures - existing real estate assets (76,860) (92,825)
Capital expenditures - non-real estate assets (24,720) (4,223)
Decrease in payables for construction (4,095) (3,390)
Proceeds from sale of real estate, net of selling costs 186,090  421,735 
Proceeds from the sale of for-sale condominiums, net of selling costs 170,604   
Mortgage note receivable lending (260) (565)
Mortgage note receivable payments 3,419  978 
Distributions from unconsolidated real estate entities 9,877  694 
Investments in unconsolidated real estate entities (23,044) (1,253)
Net cash used in investing activities (321,323) (757,204)
Cash flows from financing activities:
Issuance of common stock, net 1,599  207,789 
Repurchase of common stock, net (137,458)  
Dividends paid (661,000) (627,467)
Issuance of mortgage notes payable 51,000  30,250 
Repayments of mortgage notes payable, including prepayment penalties (125,427) (160,709)
Issuance of unsecured notes 1,296,581  449,804 
Repayment of unsecured notes, including prepayment penalties (958,681)  
Payment of deferred financing costs (11,278) (10,910)
Payment for termination of forward interest rate swaps (25,135) (12,309)
(Payment to) contribution from noncontrolling interest (59) 455 
Payments related to tax withholding for share-based compensation (14,752) (15,961)
Distributions to DownREIT partnership unitholders (36) (34)
Distributions to joint venture and profit-sharing partners (319) (336)
Preferred interest obligation redemption and dividends (1,000) (1,400)
Net cash used in financing activities (585,965) (140,828)
Net increase in cash, cash equivalents and cash in escrow 54,786  116,890 
Cash, cash equivalents and cash in escrow, beginning of period 127,614  217,864 
Cash, cash equivalents and cash in escrow, end of period $ 182,400  $ 334,754 
Cash paid during the period for interest, net of amount capitalized $ 133,913  $ 114,400 
See accompanying notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

The following table provides a reconciliation of cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows (dollars in thousands):
For the nine months ended
9/30/2020 9/30/2019
Cash and cash equivalents $ 87,530  $ 246,425 
Cash in escrow 94,870  88,329 
Cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows $ 182,400  $ 334,754 

Supplemental disclosures of non-cash investing and financing activities:

During the nine months ended September 30, 2020:

As described in Note 4, "Equity," 165,426 shares of common stock were issued as part of the Company's stock-based compensation plans, of which 96,317 shares related to the conversion of performance awards to restricted shares, and the remaining 69,109 shares valued at $15,285,000 were issued in connection with new stock grants; 1,967 shares valued at $339,000 were issued through the Company's dividend reinvestment plan; 73,103 shares valued at $14,752,000 were withheld to satisfy employees' tax withholding and other liabilities; and 7,421 restricted shares with an aggregate value of $1,187,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $223,391,000.

The Company recorded a decrease of $387,000 in redeemable noncontrolling interest with a corresponding increase to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units. For further discussion of the nature and valuation of these items, see Note 11, "Fair Value."

The Company recorded an increase in prepaid expenses and other assets of $1,413,000 and a corresponding adjustment to accumulated other comprehensive loss, and reclassified $6,617,000 of cash flow hedge losses from other comprehensive income (loss) to interest expense, net, to record the impact of the Company's derivative and hedge accounting activity.

The Company recorded $46,875,000 of lease liabilities and offsetting right of use lease assets related to the execution of two new office leases.

During the nine months ended September 30, 2019:

The Company issued 150,359 shares of common stock as part of the Company's stock-based compensation plans, of which 73,072 shares related to the conversion of performance awards to restricted shares, and the remaining 77,287 shares valued at $15,145,000 were issued in connection with new stock grants; 1,594 shares valued at $314,000 were issued through the Company's dividend reinvestment plan; 83,602 shares valued at $15,961,000 were withheld to satisfy employees' tax withholding and other liabilities; and 1,730 restricted shares with an aggregate value of $305,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $213,070,000.

The Company recorded an increase of $382,000 in redeemable noncontrolling interest with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

The Company recorded an increase to accrued expenses and other liabilities of $17,824,000 and a corresponding adjustment to accumulated other comprehensive loss, and reclassified $4,825,000 of cash flow hedge losses from other comprehensive income (loss) to interest expense, net, to record the impact of the Company's derivative and hedge accounting activity.
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The Company recorded $122,276,000 of lease liabilities and offsetting right of use lease assets for its ground and office leases, upon the adoption of ASU 2016-02, Leases, as of January 1, 2019.


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AVALONBAY COMMUNITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.  Organization, Basis of Presentation and Significant Accounting Policies

Organization and Basis of Presentation

AvalonBay Communities, Inc. (the "Company," which term, unless the context otherwise requires, refers to AvalonBay Communities, Inc. together with its subsidiaries), is a Maryland corporation that has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes under the Internal Revenue Code of 1986 (the "Code"). The Company focuses on the development, redevelopment, acquisition, ownership and operation of multifamily communities in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion markets in Southeast Florida and Denver, Colorado (the "Expansion Markets").

At September 30, 2020, the Company owned or held a direct or indirect ownership interest in 275 operating apartment communities containing 80,292 apartment homes in 11 states and the District of Columbia, of which one community containing 344 apartment homes was under redevelopment. In addition, the Company owned or held a direct or indirect ownership interest in 19 communities under development that are expected to contain an aggregate of 6,384 apartment homes when completed, as well as The Park Loggia, which contains 172 for-sale residential condominiums, of which 59 have been sold as of September 30, 2020, and 67,000 square feet of commercial space, of which 64% has been leased as of September 30, 2020. The Company also owned or held a direct or indirect ownership interest in land or rights to land on which the Company expects to develop an additional 27 communities that, if developed as expected, will contain an estimated 9,320 apartment homes.

The interim unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements required by GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company's 2019 Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year. Management believes the disclosures are adequate to ensure the information presented is not misleading. In the opinion of management, all adjustments and eliminations, consisting only of normal, recurring adjustments necessary for a fair presentation of the financial statements for the interim periods, have been included.

Capitalized terms used without definition have meanings provided elsewhere in this Form 10-Q.

Earnings per Common Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares outstanding during the period. All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share ("EPS"). Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company's earnings per common share are determined as follows (dollars in thousands, except per share data):
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  For the three months ended For the nine months ended
  9/30/2020 9/30/2019 9/30/2020 9/30/2019
Basic and diluted shares outstanding    
Weighted average common shares - basic 140,271,574  139,340,142  140,366,438  138,931,955 
Weighted average DownREIT units outstanding 7,500  7,500  7,500  7,500 
Effect of dilutive securities 324,648  505,032  328,865  498,609 
Weighted average common shares - diluted 140,603,722  139,852,674  140,702,803  139,438,064 
Calculation of Earnings per Share - basic    
Net income attributable to common stockholders $ 147,703  $ 279,677  $ 486,502  $ 618,324 
Net income allocated to unvested restricted shares (342) (704) (1,158) (1,655)
Net income attributable to common stockholders, adjusted $ 147,361  $ 278,973  $ 485,344  $ 616,669 
Weighted average common shares - basic 140,271,574  139,340,142  140,366,438  138,931,955 
Earnings per common share - basic $ 1.05  $ 2.00  $ 3.46  $ 4.44 
Calculation of Earnings per Share - diluted    
Net income attributable to common stockholders $ 147,703  $ 279,677  $ 486,502  $ 618,324 
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships 12  11  36  34 
Adjusted net income attributable to common stockholders $ 147,715  $ 279,688  $ 486,538  $ 618,358 
Weighted average common shares - diluted 140,603,722  139,852,674  140,702,803  139,438,064 
Earnings per common share - diluted $ 1.05  $ 2.00  $ 3.46  $ 4.43 
 

All options to purchase shares of common stock outstanding as of September 30, 2020 and 2019 are included in the computation of diluted earnings per share.

Derivative Instruments and Hedging Activities

The Company enters into interest rate swap and interest rate cap agreements (collectively, "Hedging Derivatives") for interest rate risk management purposes and in conjunction with certain variable rate secured debt to satisfy lender requirements. The Company does not enter into Hedging Derivative transactions for trading or other speculative purposes. The Company assesses the effectiveness of qualifying cash flow and fair value hedges, both at inception and on an on-going basis. Hedge ineffectiveness is reported as a component of interest expense, net. The fair values of Hedging Derivatives that are in an asset position are recorded in prepaid expenses and other assets. The fair value of Hedging Derivatives that are in a liability position are included in accrued expenses and other liabilities. The Company does not present or disclose the fair value of Hedging Derivatives on a net basis. Fair value changes for derivatives that are not in qualifying hedge relationships are reported as a component of interest expense, net. For the Hedging Derivative positions that the Company has determined qualify as effective cash flow hedges, the Company has recorded the cumulative changes in the fair value of Hedging Derivatives in other comprehensive loss. Amounts recorded in accumulated other comprehensive loss will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flow. The effective portion of the change in fair value of the Hedging Derivatives that the Company has determined qualified as effective fair value hedges is reported as an adjustment to the carrying amount of the corresponding debt being hedged. See Note 11, "Fair Value," for further discussion of derivative financial instruments.

Legal and Other Contingencies

The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of its business. While no assurances can be given, the Company does not currently believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.

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Acquisitions of Investments in Real Estate

The Company accounts for acquisitions of investments in real estate in accordance with the authoritative guidance for the initial measurement, which first requires that the Company determine if the real estate investment is the acquisition of an asset or a business combination. Under either model, the Company must identify and determine the fair value of any assets acquired, liabilities assumed and any noncontrolling interest in the acquiree. Typical assets acquired and liabilities assumed include land, building, furniture, fixtures and equipment, debt and identified intangible assets and liabilities, consisting of the value of above or below market leases and in-place leases. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes various sources, including its own analysis of recently acquired and existing comparable properties in its portfolio and other market data. Consideration for acquisitions is typically in the form of cash unless otherwise disclosed. For a business combination, the Company records the assets acquired and liabilities assumed based on the fair value of each respective item. For an asset acquisition, the allocation of the purchase price is based on the relative fair value of the net assets. The Company expenses all applicable acquisition costs for a business combination and capitalizes all applicable acquisition costs for an asset acquisition. The Company expects that acquisitions of individual operating communities will generally be viewed as asset acquisitions.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to amounts in prior years' notes to financial statements to conform to current year presentations as a result of changes in held for sale classification, disposition activity and segment classification.

For-Sale Condominium Inventory

The Company presents for-sale condominium inventory at historical cost and evaluates the condominium inventory for impairment when potential indicators exist, as further discussed in Note 6, "Real Estate Disposition Activities." 

Leases

The Company is party to leases as both a lessor and a lessee, primarily as follows:

lessor of residential and commercial space within its apartment communities; and
lessee under (i) ground leases for land underlying current operating or development communities and (ii) office leases for its corporate headquarters and regional offices.

Lessee Considerations

The Company assesses whether a contract is or contains a lease based on whether the contract conveys the right to control the use of an identified asset, including specified portions of larger assets, for a period of time in exchange for consideration. The Company’s leases include both fixed and variable lease payments, which are based on an index or rate such as the consumer price index (CPI) or percentage rents based on total sales. Lease payments included in the lease liability include only payments that depend on an index or rate. For leases that have options to extend the term or terminate the lease early, the Company only factored the impact of such options into the lease term if the option was considered reasonably certain to be exercised. The Company determined the discount rate associated with its ground and office leases on a lease by lease basis using the Company’s actual borrowing rates as well as indicative market pricing for longer term rates and taking into consideration the remaining term of each of the lease agreements.

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Lessor Considerations

The Company evaluates leases in which it is the lessor, which are composed of residential and commercial leases at its apartment communities, and determined these leases to be operating leases. For lease agreements that provide for rent concessions and/or scheduled fixed and determinable rent increases, rental income is recognized on a straight-line basis over the noncancellable term of the lease, which, for residential leases, is generally one year. Some of the Company’s commercial leases have fixed-price renewal options, and the lessee may be able to exercise its renewal option at an amount less than the fair value of the rent at such time. The Company only includes renewal options in the lease term if, at the commencement of the lease, it is reasonably certain that the lessee will exercise this option.

Revenue and Gain Recognition

Revenue from contracts with customers is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration that the Company expects to be entitled to for those goods and services. The majority of the Company’s revenue is derived from residential and commercial rental income and other lease income, which are accounted for under ASC 842, Leases, discussed above. The Company's revenue streams that are not accounted for under ASC 842 include (i) management fees, (ii) rental and non-rental related income and (iii) gains or losses on the sale of real estate.

The following table provides details of the Company’s revenue streams disaggregated by the Company’s reportable operating segments, further discussed in Note 8, “Segment Reporting,” for the three and nine months ended September 30, 2020 and 2019. Segment information for total revenue has been adjusted to exclude the real estate assets that were sold from January 1, 2019 through September 30, 2020, or otherwise qualify as held for sale as of September 30, 2020, as described in Note 6, "Real Estate Disposition Activities" (dollars in thousands):
  For the three months ended
Established
Communities
Other
Stabilized
Communities
Development/
Redevelopment
Communities
Non-
allocated (1)
Total
For the period ended September 30, 2020
Management, development and other fees $   $   $   $ 1,017  $ 1,017 
Rental and non-rental related income (2) 1,959  477  337    2,773 
Total non-lease revenue (3) 1,959  477  337  1,017  3,790 
Lease income (4) 506,587  34,333  20,963    561,883 
Business interruption insurance proceeds 12  270      282 
Total revenue $ 508,558  $ 35,080  $ 21,300  $ 1,017  $ 565,955 
For the period ended September 30, 2019
Management, development and other fees $   $   $   $ 1,231  $ 1,231 
Rental and non-rental related income (2) 1,796  445  133    2,374 
Total non-lease revenue (3) 1,796  445  133  1,231  3,605 
Lease income (4) 539,634  29,754  8,219    577,607 
Business interruption insurance proceeds 307        307 
Total revenue $ 541,737  $ 30,199  $ 8,352  $ 1,231  $ 581,519 
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  For the nine months ended
Established
Communities
Other
Stabilized
Communities
Development/
Redevelopment
Communities
Non-
allocated (1)
Total
For the period ended September 30, 2020
Management, development and other fees $   $   $   $ 2,950  $ 2,950 
Rental and non-rental related income (2) 5,416  1,271  884    7,571 
Total non-lease revenue (3) 5,416  1,271  884  2,950  10,521 
Lease income (4) 1,567,170  103,705  57,519    1,728,394 
Business interruption insurance proceeds 115  270      385 
Total revenue $ 1,572,701  $ 105,246  $ 58,403  $ 2,950  $ 1,739,300 
For the period ended September 30, 2019
Management, development and other fees $   $   $   $ 3,484  $ 3,484 
Rental and non-rental related income (2) 5,753  1,078  224    7,055 
Total non-lease revenue (3) 5,753  1,078  224  3,484  10,539 
Lease income (4) 1,599,224  76,671  15,596    1,691,491 
Business interruption insurance proceeds 914        914 
Total revenue $ 1,605,891  $ 77,749  $ 15,820  $ 3,484  $ 1,702,944 
__________________________________
(1)Revenue represents third-party management, asset management and developer fees and miscellaneous income which are not allocated to a reportable segment.
(2)Amounts include revenue streams related to leasing activities that are not considered components of a lease, including but not limited to, apartment hold fees and application fees, as well as revenue streams not related to leasing activities, including but not limited to, vendor revenue sharing, building advertising, vending and dry cleaning revenue.
(3)Represents all revenue accounted for under ASU 2014-09.
(4)Amounts include all revenue streams derived from residential and commercial rental income and other lease income, which are accounted for under ASC 842.

Due to the nature and timing of the Company’s identified revenue streams, there are no material amounts of outstanding or unsatisfied performance obligations as of September 30, 2020.

COVID-19 Pandemic

In March 2020, the World Health Organization designated COVID-19 as a pandemic. While the Company has taken various actions in response to the COVID-19 pandemic, the ultimate impact on its consolidated results of operations, cash flows, financial condition and liquidity will depend on (i) the duration and severity of the pandemic, (ii) the duration and nature of governmental responses to contain the spread of the disease and assist consumers and businesses, (iii) consumer and business responses to the pandemic, including preference for where and how to live and work, and (iv) how quickly and to what extent normal economic and operating conditions can resume. Because of this uncertainty, the Company is not able to estimate the expected impact of the COVID-19 pandemic on its results of operations, cash flows, financial condition, or liquidity for the year ending December 31, 2020 at this time.

As of September 30, 2020, the Company assessed the collectibility of the outstanding lease income receivables as a result of the impact of the COVID-19 pandemic on its residential and commercial lease portfolios. The Company recorded an aggregate offset to income for uncollectible lease revenue for its residential and commercial portfolios of $18,755,000 and $43,034,000 for the three and nine months ended September 30, 2020, respectively, under ASC 842 and ASC 450, Contingencies.

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Recently Issued and Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This ASU requires entities to estimate a lifetime expected credit loss for most financial assets, including (i) trade and other receivables, (ii) other long term financings including available for sale and held-to-maturity debt securities and (iii) loans. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which amends the scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the standard and should continue to be accounted for in accordance with the leases standard (Topic 842). The new standard was adopted on January 1, 2020 and does not have a material effect on the Company’s financial position or results of operations.

2.  Interest Capitalized

The Company capitalizes interest during the development and redevelopment of real estate assets. Capitalized interest associated with the Company's development or redevelopment activities totaled $11,221,000 and $15,443,000 for the three months ended September 30, 2020 and 2019, respectively, and $33,738,000 and $50,159,000 for the nine months ended September 30, 2020 and 2019, respectively.

3.  Mortgage Notes Payable, Unsecured Notes, Term Loans and Credit Facility

The Company's mortgage notes payable, unsecured notes, variable rate unsecured term loans (the "Term Loans") and Credit Facility, as defined below, as of September 30, 2020 and December 31, 2019 are summarized below. The following amounts and discussion do not include the mortgage notes related to the communities classified as held for sale, if any, as of September 30, 2020 and December 31, 2019, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities").
  9/30/2020 12/31/2019
Fixed rate unsecured notes (1) $ 6,500,000  $ 5,850,000 
Variable rate unsecured notes (1)   300,000 
Term Loans (1) 250,000  250,000 
Fixed rate mortgage notes payable - conventional and tax-exempt (2) 409,649  479,221 
Variable rate mortgage notes payable - conventional and tax-exempt (2) 471,450  476,150 
Total mortgage notes payable and unsecured notes and Term Loans 7,631,099  7,355,371 
Credit Facility    
Total mortgage notes payable, unsecured notes, Term Loans and Credit Facility $ 7,631,099  $ 7,355,371 
_____________________________________
(1)Balances at September 30, 2020 and December 31, 2019 exclude $10,782 and $8,610, respectively, of debt discount, and $38,968 and $32,742, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.
(2)Balances at September 30, 2020 and December 31, 2019 exclude $14,636 and $14,464, respectively, of debt discount, and $3,067 and $3,265, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Condensed Consolidated Balance Sheets.

The following debt activity occurred during the nine months ended September 30, 2020:

In February 2020, the Company issued $700,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $694,701,000. The notes mature in March 2030 and were issued at a 2.30% interest rate.

In February 2020, the Company refinanced the secured borrowing for Avalon San Bruno III. The secured borrowing had a fixed interest rate of 3.08% and was refinanced for a principal balance of $51,000,000, with a fixed interest rate of 2.38% and maturity date of March 2027.

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In March 2020, the Company repaid (i) $400,000,000 principal amount of its 3.625% unsecured notes in advance of the October 2020 scheduled maturity and (ii) $250,000,000 principal amount of its 3.95% unsecured notes in advance of the January 2021 scheduled maturity. In conjunction with these repayments, the Company recognized a loss on debt extinguishment of $9,170,000 for prepayment penalties and the non-cash write-off of unamortized deferred financing costs.

In May 2020, the Company issued $600,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $593,430,000. The notes mature in January 2031 and were issued at a 2.45% interest rate.

In May 2020, the Company repaid $300,000,000 principal amount of its variable rate unsecured notes in advance of the January 2021 scheduled maturity, recognizing a charge of $268,000 for the non-cash write-off of deferred financing costs.

In August 2020, the Company repaid $67,904,000 principal amount of 4.18% fixed rate debt secured by Avalon Hoboken at par in advance of its December 2020 maturity date.

At September 30, 2020, the Company had a $1,750,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the “Credit Facility”) which matures in February 2024. The Credit Facility bears interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.) and (ii) the rating levels issued for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (0.92% at September 30, 2020), assuming a one month borrowing rate. The annual facility fee is 0.125% (or approximately $2,188,000 annually based on the $1,750,000,000 facility size and based on the Company's current credit rating).

The Company had no borrowings outstanding under the Credit Facility as of September 30, 2020 and December 31, 2019. The Company had $3,752,000 and $11,488,000 outstanding in letters of credit that reduced the borrowing capacity as of September 30, 2020 and December 31, 2019, respectively. In addition, the Company had $31,822,000 and $24,939,000 outstanding in additional letters of credit on a separate facility unrelated to the Credit Facility as of September 30, 2020 and December 31, 2019, respectively.

In the aggregate, secured notes payable mature at various dates from April 2021 through July 2066, and are secured by certain apartment communities (with a net carrying value of $1,455,524,000, excluding communities classified as held for sale, as of September 30, 2020).

The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was 3.8% and 3.9% at September 30, 2020 and December 31, 2019, respectively. The weighted average interest rate of the Company's variable rate secured notes payable (conventional and tax-exempt) including the effect of certain financing related fees, was 1.7% and 3.2% at September 30, 2020 and December 31, 2019, respectively.

Scheduled payments and maturities of secured notes payable and unsecured notes outstanding at September 30, 2020 are as follows (dollars in thousands):
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Year Secured notes
principal payments
Secured notes maturities Unsecured notes and Term Loans maturities Stated interest rate of unsecured notes and Term Loans
2020 $ 1,285  $   $ —  N/A
2021 9,304  27,844  —  N/A
2022 9,918  —  450,000  2.950  %
100,000 
LIBOR + 0.90%
2023 10,739  —  350,000  4.200  %
250,000  2.850  %
2024 11,677  —  300,000  3.500  %
150,000 
LIBOR + 0.85%
2025 12,408  —  525,000  3.450  %
300,000  3.500  %
2026 13,445  —  475,000  2.950  %
300,000  2.900  %
2027 15,080  236,100  400,000  3.350  %
2028 20,607  —  450,000  3.200  %
2029