Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 4, 2022

Documents

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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 March 31, 2022

OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

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 incorporation or organization) (I.R.S. Employer Identification No.)
 
4040 Wilson Blvd., Suite 1000
Arlington, Virginia 22203
(Address of principal executive offices) (Zip Code)
(703) 329-6300
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) 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 Exchange Act).
Yes ☐                    No ☒
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

139,818,224 shares of common stock, par value $0.01 per share, were outstanding as of April 29, 2022.

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)
  3/31/2022 12/31/2021
  (unaudited)  
ASSETS    
Real estate:    
Land and improvements $ 4,593,092  $ 4,564,723 
Buildings and improvements 18,390,979  18,198,584 
Furniture, fixtures and equipment 1,066,224  1,036,640 
  24,050,295  23,799,947 
Less accumulated depreciation (6,389,336) (6,208,610)
Net operating real estate 17,660,959  17,591,337 
Construction in progress, including land 755,274  807,101 
Land held for development 218,852  147,546 
For-sale condominium inventory 110,763  146,535 
Real estate assets held for sale, net —  17,065 
Total real estate, net 18,745,848  18,709,584 
Cash and cash equivalents 343,457  420,251 
Cash in escrow 113,954  123,537 
Resident security deposits 34,512  33,757 
Investments in unconsolidated entities 219,075  216,390 
Deferred development costs 47,165  40,414 
Prepaid expenses and other assets 217,327  211,484 
Right of use lease assets 148,289  146,599 
Total assets $ 19,869,627  $ 19,902,016 
LIABILITIES AND EQUITY    
Unsecured notes, net $ 7,250,902  $ 7,349,394 
Variable rate unsecured credit facility and commercial paper —  — 
Mortgage notes payable, net 754,131  754,153 
Dividends payable 224,552  225,392 
Payables for construction 66,846  63,722 
Accrued expenses and other liabilities 295,806  296,006 
Lease liabilities 167,974  166,497 
Accrued interest payable 67,561  50,300 
Resident security deposits 61,227  59,787 
Liabilities related to real estate assets held for sale —  304 
Total liabilities 8,888,999  8,965,555 
Commitments and contingencies
Redeemable noncontrolling interests 3,336  3,368 
Equity:    
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at March 31, 2022 and December 31, 2021; zero shares issued and outstanding at March 31, 2022 and December 31, 2021
 —  — 
Common stock, $0.01 par value; 280,000,000 shares authorized at March 31, 2022 and December 31, 2021; 139,818,068 and 139,751,926 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
 1,399  1,398 
Additional paid-in capital 10,711,327  10,716,414 
Accumulated earnings less dividends 278,948  240,821 
Accumulated other comprehensive loss (14,938) (26,106)
Total stockholders' equity 10,976,736  10,932,527 
Noncontrolling interests 556  566 
Total equity 10,977,292  10,933,093 
Total liabilities and equity $ 19,869,627  $ 19,902,016 
 
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
  3/31/2022 3/31/2021
Revenue:    
Rental and other income $ 613,175  $ 550,258 
Management, development and other fees 752  877 
Total revenue 613,927  551,135 
Expenses:    
Operating expenses, excluding property taxes 151,312  140,050 
Property taxes 70,738  69,410 
Expensed transaction, development and other pursuit costs, net of recoveries 987  (170)
Interest expense, net 56,526  52,613 
Gain on extinguishment of debt, net —  (122)
Depreciation expense 201,786  183,297 
General and administrative expense 17,421  17,352 
Total expenses 498,770  462,430 
Income (loss) from investments in unconsolidated entities 317  (467)
Gain on sale of communities 148,800  53,727 
Gain on other real estate transactions, net 37  427 
Net for-sale condominium activity 236  (913)
Income before income taxes 264,547  141,479 
Income tax (expense) benefit (2,471) 755 
Net income 262,076  142,234 
Net income attributable to noncontrolling interests (32) (11)
Net income attributable to common stockholders $ 262,044  $ 142,223 
Other comprehensive income (loss):    
Gain on cash flow hedges 10,155  — 
Cash flow hedge losses reclassified to earnings 1,013  2,367 
Comprehensive income $ 273,212  $ 144,590 
Earnings per common share - basic:    
Net income attributable to common stockholders $ 1.87  $ 1.02 
Earnings per common share - diluted:    
Net income attributable to common stockholders $ 1.87  $ 1.02 

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 three months ended
  3/31/2022 3/31/2021
Cash flows from operating activities:
Net income $ 262,076  $ 142,234 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense 201,786  183,297 
Amortization of deferred financing costs 1,998  1,837 
Amortization of debt discount 693  642 
Gain on extinguishment of debt, net —  (122)
Amortization of stock-based compensation 6,970  5,382 
Equity in loss of, and return on, unconsolidated entities and noncontrolling interests, net of eliminations 913  1,994 
Abandonment of development pursuits 8  246 
Unrealized gain on terminated cash flow hedges —  (2,654)
Cash flow hedge losses reclassified to earnings 1,013  2,367 
Gain on sale of real estate assets (148,837) (54,154)
Gain on for-sale condominiums (1,002) (131)
(Decrease) increase in resident security deposits, prepaid expenses and other assets (1,233) 9,423 
Increase in accrued expenses, other liabilities and accrued interest payable 19,295  39,784 
Net cash provided by operating activities 343,680  330,145 
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs (232,038) (198,373)
Acquisition of real estate assets, including partnership interest (95,426) — 
Capital expenditures - existing real estate assets (29,472) (28,020)
Capital expenditures - non-real estate assets (2,472) (2,234)
Increase (decrease) in payables for construction 3,124  (8,655)
Proceeds from sale of real estate, net of selling costs 230,617  76,543 
Proceeds from the sale of for-sale condominiums, net of selling costs 37,119  13,569 
Mortgage note receivable payments 1,946  1,250 
Investments in unconsolidated entities (3,598) (10,032)
Net cash used in investing activities (90,200) (155,952)
Cash flows from financing activities:
Issuance of common stock, net 459  11 
Dividends paid (223,063) (222,734)
Repayments of mortgage notes payable, including prepayment penalties (362) (28,488)
Repayment of unsecured notes, including prepayment penalties (100,000) — 
Payment of deferred financing costs (421) — 
Receipt for termination of forward interest rate swaps —  6,962 
Payment to noncontrolling interest (16) (22)
Payments related to tax withholding for share-based compensation (16,353) (13,228)
Distributions to DownREIT partnership unitholders (12) (12)
Distributions to joint venture and profit-sharing partners (89) (82)
Preferred interest obligation redemption and dividends —  (400)
Net cash used in financing activities (339,857) (257,993)
Net decrease in cash, cash equivalents and cash in escrow (86,377) (83,800)
Cash, cash equivalents and cash in escrow, beginning of period 543,788  313,532 
Cash, cash equivalents and cash in escrow, end of period $ 457,411  $ 229,732 
Cash paid during the period for interest, net of amount capitalized $ 36,290  $ 37,252 
See accompanying notes to Condensed Consolidated Financial Statements.
3
Table of Contents
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 three months ended
3/31/2022 3/31/2021
Cash and cash equivalents $ 343,457  $ 129,298 
Cash in escrow 113,954  100,434 
Cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows $ 457,411  $ 229,732 

Supplemental disclosures of non-cash investing and financing activities:

During the three months ended March 31, 2022:

•As described in Note 4, "Equity," the Company issued 132,135 shares of common stock as part of the Company's stock-based compensation plans, of which 54,053 shares related to the conversion of performance awards to shares of common stock, and the remaining 78,082 shares valued at $18,441,000 were issued in connection with new stock grants; 605 shares valued at $150,000 were issued through the Company's dividend reinvestment plan; 69,721 shares valued at $16,365,000 were withheld to satisfy employees' tax withholding and other liabilities; and 1,181 restricted shares with an aggregate value of $255,000 previously issued in connection with employee compensation were canceled upon forfeiture.

•Common stock dividends declared but not paid totaled $222,754,000.

•The Company recorded an increase of $43,000 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 (i) an increase to prepaid expenses and other assets of $10,155,000 and a corresponding adjustment to accumulated other comprehensive loss and (ii) reclassified $1,013,000 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.

During the three months ended March 31, 2021:

•The Company issued 149,520 shares of common stock as part of the Company's stock-based compensation plans, of which 56,545 shares related to the conversion of performance awards to shares of common stock, and the remaining 92,975 shares valued at $16,347,000 were issued in connection with new stock grants; 839 shares valued at $138,000 were issued through the Company's dividend reinvestment plan; 74,726 shares valued at $13,228,000 were withheld to satisfy employees' tax withholding and other liabilities; and 343 restricted shares with an aggregate value of $69,000 previously issued in connection with employee compensation were canceled upon forfeiture.

•Common stock dividends declared but not paid totaled $222,424,000.

•The Company recorded an increase of $273,000 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 reclassified $2,367,000 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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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, as amended (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 of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado.

At March 31, 2022, the Company owned or held a direct or indirect ownership interest in 296 operating apartment communities containing 87,918 apartment homes in 12 states and the District of Columbia, of which 18 communities were under development and two were under redevelopment, as well as The Park Loggia, which contains 172 for-sale residential condominiums, of which 138 have been sold as of March 31, 2022, and 66,000 square feet of commercial space, of which 87% has been leased as of March 31, 2022. 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 29 communities that, if developed as expected, will contain an estimated 10,122 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The results of operations for the three months ended March 31, 2022 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
  3/31/2022 3/31/2021
Basic and diluted shares outstanding    
Weighted average common shares - basic 139,559,904  139,291,187 
Weighted average DownREIT units outstanding 7,500  7,500 
Effect of dilutive securities 408,678  253,726 
Weighted average common shares - diluted 139,976,082  139,552,413 
Calculation of Earnings per Share - basic    
Net income attributable to common stockholders $ 262,044  $ 142,223 
Net income allocated to unvested restricted shares (523) (324)
Net income attributable to common stockholders, adjusted $ 261,521  $ 141,899 
Weighted average common shares - basic 139,559,904  139,291,187 
Earnings per common share - basic $ 1.87  $ 1.02 
Calculation of Earnings per Share - diluted    
Net income attributable to common stockholders $ 262,044  $ 142,223 
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships, including discontinued operations 12  12 
Adjusted net income attributable to common stockholders $ 262,056  $ 142,235 
Weighted average common shares - diluted 139,976,082  139,552,413 
Earnings per common share - diluted $ 1.87  $ 1.02 
 
Certain options to purchase shares of common stock in the amount of 9,793 and 294,115 were outstanding as of March 31, 2022 and 2021, respectively, but were not included in the computation of diluted earnings per share because such options were anti-dilutive for the period.

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 Derivatives 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 Derivatives that qualify as effective cash flow hedges, the Company has recorded the cumulative changes in the fair value of Hedging Derivatives in accumulated 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 qualify as effective fair value hedges is reported as an adjustment to the carrying amount of the corresponding hedged item. 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 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 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 condominiums for impairment when potential indicators exist, as further discussed in Note 5, "Investments." 

Income Taxes

During the three months ended March 31, 2022, the Company recognized income tax expense of $2,471,000 primarily related to the condominium dispositions at The Park Loggia.

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 certain commercial and parking facilities 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. Lease payments included in the lease liability include only fixed lease payments. 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 the lease agreements.

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Lessor Considerations

The Company has determined that the residential and commercial leases at its apartment communities are operating leases. For leases that include rent concessions and/or 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 renewal options which the Company will only include in the lease term if, at the commencement of the lease, it is reasonably certain that the lessee will exercise this option.

For the Company’s leases, which are comprised of a lease component and common area maintenance as a non-lease component, the Company determined that (i) the leases are operating leases, (ii) the lease component is the predominant component and (iii) all components of its operating leases share the same timing and pattern of transfer.

Revenue and Gain Recognition

Under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, the Company recognizes revenue for the transfer of goods and services to customers for consideration that the Company expects to receive. The majority of the Company’s revenue is derived from residential and commercial rental and other lease income, which are accounted for as discussed above, under "Leases". The Company's revenue streams that are not accounted for under ASC 842, Leases, include (i) management, development and other fees, (ii) rental and non-rental related income and (iii) gains or losses on the sale of real estate.

The following table details the Company’s revenue disaggregated by reportable operating segment, further discussed in Note 8, “Segment Reporting,” for the three months ended March 31, 2022 and 2021. Segment information for total revenue excludes real estate assets that were sold from January 1, 2021 through March 31, 2022, or otherwise qualify as held for sale as of March 31, 2022, as described in Note 6, "Real Estate Disposition Activities" (dollars in thousands):
  For the three months ended
Same Store Other
Stabilized 		Development/
Redevelopment 		Non-
allocated (1)		 Total
For the period ended March 31, 2022
Management, development and other fees and other ancillary items $ —  $ —  $ —  $ 752  $ 752 
Rental and non-rental related income (2) 2,060  587  57  —  2,704 
Total non-lease revenue (3) 2,060  587  57  752  3,456 
Lease income (4) 544,779  45,012  17,461  —  607,252 
Total revenue $ 546,839  $ 45,599  $ 17,518  $ 752  $ 610,708 
For the period ended March 31, 2021
Management, development and other fees and other ancillary items $ —  $ —  $ —  $ 877  $ 877 
Rental and non-rental related income (2) 1,684  447  47  —  2,178 
Total non-lease revenue (3) 1,684  447  47  877  3,055 
Lease income (4) 501,509  20,511  7,026  —  529,046 
Total revenue $ 503,193  $ 20,958  $ 7,073  $ 877  $ 532,101 

__________________________________
(1)Revenue represents third-party property management, developer fees and miscellaneous income and other ancillary items 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 revenue accounted for under ASC 606.
(4)Represents residential and commercial rental and other lease income, which are accounted for under ASC 842.

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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 March 31, 2022.

Uncollectible Lease Revenue Reserves

The Company assesses the collectability of its lease revenue and receivables on an on-going basis, (i) assessing the probability of receiving all lease amounts due on a lease by lease basis, (ii) reserving all amounts for those leases where collection of substantially all of the remaining lease payments is not probable and (iii) subsequently, will only recognize revenue to the extent cash is received. If the Company determines that collection of the remaining lease payments becomes probable at a future date, the Company will recognize the cumulative revenue that would have been recorded under the original lease agreement.

In addition to the specific reserves recognized under ASC 842, the Company also evaluates its lease receivables for collectability at a portfolio level under ASC 450, Contingencies – Loss Contingencies. The Company recognizes a reserve under ASC 450 when the uncollectible revenue is probable and reasonably estimable. The Company applies this reserve to the population of the Company’s revenue and receivables not specifically addressed as part of the specific ASC 842 reserve.

COVID-19 Pandemic

In March 2020, the World Health Organization designated COVID-19 as a pandemic (the "Pandemic"). While the Company has taken actions in response to the Pandemic, the ultimate impact on its consolidated results of operations, cash flows, financial condition and liquidity will depend on, among other factors, (i) the effect of the Pandemic on the multifamily industry and the general economy, including from measures taken by businesses and the government, such as governmental limitations on multifamily owners' ability to evict residents who are delinquent in the payment of their rent and (ii) consumer and business preferences for living and working arrangements both during and after the Pandemic.

As of March 31, 2022, the Company assessed the collectibility of outstanding lease receivables considering the impact of the Pandemic, and recorded an aggregate offset to income for uncollectible lease revenue for its residential and commercial portfolios of $13,600,000 and $18,645,000 for the three months ended March 31, 2022 and 2021, respectively.

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 $7,100,000 and $8,799,000 for the three months ended March 31, 2022 and 2021, respectively.

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3.  Debt

The Company's debt, which consists of unsecured notes, variable rate unsecured term loans (the "Term Loans"), mortgage notes payable, the Credit Facility and the Commercial Paper Program, as defined below, as of March 31, 2022 and December 31, 2021 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 March 31, 2022 and December 31, 2021, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities").
  3/31/2022 12/31/2021
Fixed rate unsecured notes (1) $ 7,150,000  $ 7,150,000 
Term Loans (1) 150,000  250,000 
Fixed rate mortgage notes payable - conventional and tax-exempt (2) 306,118  306,281 
Variable rate mortgage notes payable - conventional and tax-exempt (2) 463,950  464,150 
Total mortgage notes payable and unsecured notes and Term Loans 8,070,068  8,170,431 
Credit Facility —  — 
Commercial paper —  — 
Total $ 8,070,068  $ 8,170,431 
_____________________________________
(1)Balances at March 31, 2022 and December 31, 2021 exclude $9,617 and $10,033, respectively, of debt discount, and $39,481 and $40,573, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.
(2)Balances at March 31, 2022 and December 31, 2021 exclude $13,251 and $13,528, respectively, of debt discount, and $2,686 and $2,750, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2022, the Company repaid its $100,000,000 variable rate unsecured term loan at par upon maturity.

At March 31, 2022, 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 for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (1.23% at March 31, 2022), assuming a one month borrowing rate. The annual facility fee for the Credit Facility remained at 0.125%, resulting in a fee of $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 and had $6,914,000 and $11,969,000 outstanding in letters of credit that reduced the borrowing capacity as of March 31, 2022 and December 31, 2021, respectively. In addition, the Company had $39,831,000 and $39,581,000 outstanding in additional letters of credit unrelated to the Credit Facility as of March 31, 2022 and December 31, 2021, respectively.

In March 2022, the Company established an unsecured commercial paper note program (the “Commercial Paper Program”). Under the terms of the Commercial Paper Program, the Company may issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year. Amounts available under the Commercial Paper Program may be issued, repaid and re-issued from time to time, with the maximum aggregate face or principal amount outstanding at any one time not to exceed $500,000,000. The Commercial Paper Program is backstopped by liquidity under the Credit Facility, with the principal amount of the notes outstanding under the Commercial Paper Program effectively reducing the borrowing capacity under the Credit Facility by an amount equal to the value of such notes. The Company had no amounts outstanding under the Commercial Paper Program as of March 31, 2022.

In the aggregate, secured notes payable mature at various dates from March 2027 through July 2066, and are secured by certain apartment communities (with a net carrying value of $1,248,432,000, excluding communities classified as held for sale, as of March 31, 2022).

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The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was 3.7% at both March 31, 2022 and December 31, 2021. 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 2.1% and 1.7% at March 31, 2022 and December 31, 2021, respectively.

In addition to the Commercial Paper Program, scheduled payments and maturities of secured notes payable and unsecured notes outstanding at March 31, 2022 are as follows (dollars in thousands):
Year Secured notes
principal payments		 Secured notes maturities Unsecured notes and Term Loan maturities Stated interest rate of unsecured notes and Term Loan
2022 $ 7,901  $ —  $ —  — 
2023 8,999  —  350,000  4.200  %
250,000  2.850  %
2024 9,837  —  300,000  3.500  %
150,000 
LIBOR + 0.85%
2025 10,478  —  525,000  3.450  %
300,000  3.500  %
2026 11,420  —  475,000  2.950  %
300,000  2.900  %
2027 13,765  236,100  400,000  3.350  %
2028 18,512  —  450,000  3.200  %
400,000  1.900  %
2029 9,462  66,250  450,000  3.300  %
2030 10,014  —  700,000  2.300  %
2031 10,669  —  600,000  2.450  %
Thereafter 111,538  245,123  700,000  2.050  %
350,000  3.900  %
300,000  4.150  %
300,000  4.350  %
  $ 222,595  $ 547,473  $ 7,300,000   

The Company was in compliance at March 31, 2022 with customary covenants under the Credit Facility and the Commercial Paper Program, the Term Loan and the Company's fixed rate unsecured notes.

4.  Equity

The following summarizes the changes in equity for the three months ended March 31, 2022 (dollars in thousands):
Common
stock		 Additional
paid-in
capital		 Accumulated
earnings
less
dividends		 Accumulated
other
comprehensive
loss		 Total stockholder's equity Noncontrolling interests Total
equity
Balance at December 31, 2021 $ 1,398  $ 10,716,414  $ 240,821  $ (26,106) $ 10,932,527  $ 566  $ 10,933,093 
Net income attributable to common stockholders —  —  262,044  —  262,044  —  262,044 
Gain on cash flow hedges, net —  —  —  10,155  10,155  —  10,155 
Cash flow hedge losses reclassified to earnings —  —  —  1,013  1,013  —  1,013 
Change in redemption value of redeemable noncontrolling interest —  —  (43) —  (43) —  (43)
Noncontrolling interest distribution and income allocation —  —  —  —  —  (10) (10)
Dividends declared to common stockholders ($1.59 per share)
 —  —  (222,373) —  (222,373) —  (222,373)
Issuance of common stock, net of withholdings 1  (14,263) (1,501) —  (15,763) —  (15,763)
Amortization of deferred compensation —  9,176  —  —  9,176  —  9,176 
Balance at March 31, 2022 $ 1,399  $ 10,711,327  $ 278,948  $ (14,938) $ 10,976,736  $ 556  $ 10,977,292 
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The following summarizes the changes in equity for the three months ended March 31, 2021 (dollars in thousands):
Common
stock		 Additional
paid-in
capital		 Accumulated
earnings
less
dividends		 Accumulated
other
comprehensive
loss		 Total stockholder's equity Noncontrolling interests Total
equity
Balance at December 31, 2020 $ 1,395  $ 10,664,416  $ 126,022  $ (40,250) $ 10,751,583  $ 591  $ 10,752,174 
Net income attributable to common stockholders —  —  142,223  —  142,223  —  142,223 
Cash flow hedge losses reclassified to earnings —  —  —  2,367  2,367  —  2,367 
Change in redemption value of redeemable noncontrolling interest —  —  (273) —  (273) —  (273)
Noncontrolling interest distribution and income allocation —  —  —  —  —  (16) (16)
Dividends declared to common stockholders ($1.59 per share)
 —  —  (221,779) —  (221,779) —  (221,779)
Issuance of common stock, net of withholdings 1  (14,037) 958  —  (13,078) —  (13,078)
Amortization of deferred compensation —  7,286  —  —  7,286  —  7,286 
Balance at March 31, 2021 $ 1,396  $ 10,657,665  $ 47,151  $ (37,883) $ 10,668,329  $ 575  $ 10,668,904 

As of March 31, 2022 and December 31, 2021, the Company's charter had authorized for issuance a total of 280,000,000 shares of common stock and 50,000,000 shares of preferred stock.

During the three months ended March 31, 2022, the Company:

i.issued 4,304 shares of common stock in connection with stock options exercised;
ii.issued 605 shares of common stock through the Company's dividend reinvestment plan;
iii.issued 132,135 shares of common stock in connection with restricted stock grants and the conversion of performance awards to shares of common stock;
iv.withheld 69,721 shares of common stock to satisfy employees' tax withholding and other liabilities; and
v.canceled 1,181 shares of restricted common stock upon forfeiture.

Deferred compensation granted under the Company's Second Amended and Restated 2009 Equity Incentive Plan (the "2009 Plan") during the three months ended March 31, 2022 is not reflected on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2022, and will not be reflected until recognized as compensation cost.

In July 2020, the Company’s Board of Directors approved a stock repurchase program under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000 (the "2020 Stock Repurchase Program"). Purchases of common stock under the 2020 Stock Repurchase Program may be exercised at the Company’s discretion with the timing and number of shares repurchased depending on a variety of factors, including price, corporate and regulatory requirements and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. During the three months ended March 31, 2022, the Company had no repurchases of shares under this program. As of March 31, 2022, the Company had $316,148,000 remaining authorized for purchase under this program.

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In May 2019, the Company commenced a fifth continuous equity program ("CEP V") under which the Company may sell (and/or enter into forward sale agreements for the sale of) up to $1,000,000,000 of its common stock from time to time. Actual sales will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company's common stock and the Company's determinations of the appropriate funding sources. The Company engaged sales agents for CEP V who receive compensation of up to 1.5% of the gross sales price for shares sold. The Company expects that, if entered into, it will physically settle each forward sale agreement on one or more dates specified by the Company on or prior to the maturity date of that particular forward sale agreement, in which case the Company will receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward agreement multiplied by the forward sale price. However, the Company may also elect to cash settle or net share settle a forward sale agreement. In connection with each forward sale agreement, the Company will pay the forward seller, in the form of a reduced initial forward sale price, a commission of up to 1.5% of the sales prices of all borrowed shares of common stock sold. During the three months ended March 31, 2022, the Company had no sales under this program. In December 2021, the Company entered into a forward contract under CEP V to sell 68,577 shares of common stock for approximate proceeds of $16,000,000 net of offering fees and discounts and based on the initial forward price, with settlement of the forward contract to occur on one or more dates not later than December 31, 2022. The final proceeds will be determined on the date(s) of settlement after adjustments for the Company's dividends and a daily interest factor. As of March 31, 2022, the Company had $705,961,000 remaining authorized for issuance under CEP V, after consideration of the forward contract.

5.  Investments

Unconsolidated Investments

As of March 31, 2022, the Company had investments in seven unconsolidated real estate entities with ownership interest percentages ranging from 20.0% to 50.0% and other unconsolidated investments including property technology investment funds. The Company accounts for its investments in unconsolidated entities under the equity method of accounting or under the measurement alternative with the carrying amount of the investment adjusted to fair value when there is an observable transaction for the same or similar investment of the same issuer indicating a change in fair value. The significant accounting policies of the Company's unconsolidated investments are consistent with those of the Company in all material respects. Certain of these investments are subject to various buy‑sell provisions or other rights which are customary in real estate joint venture agreements. The Company and its partners in these entities may initiate these provisions to either sell the Company's interest or acquire the interest from the Company's partner.

The following is a combined summary of the financial position of the Company's unconsolidated investments discussed above, accounted for using the equity method and presented on the accompanying Condensed Consolidated Balance Sheets as of the dates presented, including development joint ventures and unconsolidated communities sold during the respective periods (dollars in thousands):
  3/31/2022 12/31/2021
  (unaudited)
Assets:    
Real estate, net $ 1,198,088  $ 1,184,041 
Other assets (1) 409,751  399,591 
Total assets $ 1,607,839  $ 1,583,632 
Liabilities and partners' capital:    
Mortgage notes payable, net (2) $ 660,210  $ 645,235 
Other liabilities 166,097  168,403 
Partners' capital 781,532  769,994 
Total liabilities and partners' capital $ 1,607,839  $ 1,583,632 
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(1)    Consists primarily of property technology investment management funds, in-place leases and cash and cash equivalents.
(2)    Other than a construction loan on the AVA Arts District development, with $27,333 currently outstanding as of March 31, 2022 and reflected in the table above, the Company has not guaranteed any other outstanding debt, nor does the Company have any obligation to fund any debt that it has not guaranteed, should the unconsolidated entity be unable to do so.

The following is a combined summary of the operating results of the entities accounted for using the equity method discussed above and presented on the accompanying Condensed Consolidated Statements of Comprehensive Income, for the periods presented (dollars in thousands):
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For the three months ended
  3/31/2022 3/31/2021
(unaudited)
Rental and other income (1) $ 26,450  $ 26,398 
Operating and other expenses (11,383) (13,631)
Gain on sale of communities 58  — 
Interest expense, net (6,026) (7,668)
Depreciation expense (7,318) (8,478)
Net income $ 1,781  $ (3,379)
Company's share of net income $ 416  $ 61 
Direct investment gains, amortization of excess investment and other (2) (99) (528)
Income from investments in unconsolidated entities $ 317  $ (467)
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(1)    Includes unrealized gains on the Company's indirect investments in property technology ventures accounted for under the equity method of accounting during the three months ended March 31, 2022.
(2) Includes unrealized gains on the Company’s direct investment in equity securities of property technology investments during the three months ended March 31, 2022.

Investments in Consolidated Real Estate Entities

During the three months ended March 31, 2022, the Company acquired Avalon Flatirons, located in Lafayette, CO, which contains 207 apartment homes and 16,000 square feet of commercial space and was acquired for a purchase price of $95,000,000.

The Company accounted for this purchase as an asset acquisition and recorded the acquired assets and assumed liabilities, including identifiable intangibles, at their relative fair values based on the purchase price and acquisition costs incurred. The Company used third party pricing or internal models for the value of the land, a valuation model for the value of the building, and an internal model to determine the fair value of the remaining real estate assets and in-place leases. Given the heterogeneous nature of multifamily real estate, the fair values for the land, debt, real estate assets and in-place leases incorporated significant unobservable inputs and therefore are considered to be Level 3 prices within the fair value hierarchy.

Expensed Transaction, Development and Other Pursuit Costs

The Company capitalizes pre-development costs incurred in pursuit of new development opportunities when future development is probable ("Development Rights"). Future development of these Development Rights is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and the availability of capital. Costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development by the Company no longer probable, any non-recoverable capitalized pre-development costs are expensed. The Company expensed costs related to development pursuits not yet considered probable for development and the abandonment of Development Rights, as well as costs incurred in pursuing the acquisition or disposition of assets for which such acquisition and disposition activity did not occur. The amount for the three months ended March 31, 2022 was a net expense of $987,000. The amount for the three months ended March 31, 2021 was a net recovery of $170,000. These costs are included in expensed transaction, development and other pursuit costs, net of recoveries on the accompanying Condensed Consolidated Statements of Comprehensive Income. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Casualty and Impairment of Long-Lived Assets

In the Company's evaluation of its real estate portfolio for impairment, as discussed below, it considered the impact of the Pandemic and did not identify any indicators of impairment as a result.

The Company evaluates its real estate and other long-lived assets for impairment when potential indicators of impairment exist. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property or long-lived asset may not be recoverable, the Company assesses its recoverability by comparing the carrying amount of the property or long-lived asset to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, the
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Company recognizes an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property or long-lived asset. Based on periodic tests of recoverability of long-lived assets, the Company did not recognize any impairment losses for the three months ended March 31, 2022 and 2021.

The Company evaluates its for-sale condominium inventory for potential indicators of impairment, considering whether the fair value of the individual for-sale condominium units exceeds the carrying value of those units. For-sale condominium inventory is stated at cost, unless the carrying amount of the inventory is not recoverable when compared to the fair value of each unit. The Company determines the fair value of its for-sale condominium inventory as the estimated sales price less direct costs to sell. For the three months ended March 31, 2022 and 2021, the Company did not recognize any impairment losses on its for-sale condominium inventory.

The Company assesses its portfolio of land held for both development and investment for impairment if the intent of the Company changes with respect to either the development of, or the expected holding period for, the land. During the three months ended March 31, 2022 and 2021, the Company did not recognize any impairment charges on its investment in land.

The Company evaluates its unconsolidated investments for other than temporary impairment, considering both the extent and amount by which the carrying value of the investment exceeds the fair value, and the Company's intent and ability to hold the investment to recover its carrying value. The Company also evaluates its proportionate share of any impairment of assets held by unconsolidated invest