Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 3, 2022

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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 June 30, 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 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 (§ 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, a 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:

139,830,922 shares of common stock, par value $0.01 per share, were outstanding as of July 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)
  6/30/2022 12/31/2021
  (unaudited)  
ASSETS    
Real estate:    
Land and improvements $ 4,604,654  $ 4,564,723 
Buildings and improvements 18,467,287  18,198,584 
Furniture, fixtures and equipment 1,093,649  1,036,640 
  24,165,590  23,799,947 
Less accumulated depreciation (6,542,795) (6,208,610)
Net operating real estate 17,622,795  17,591,337 
Construction in progress, including land 800,663  807,101 
Land held for development 194,458  147,546 
For-sale condominium inventory 73,622  146,535 
Real estate assets held for sale, net 107,118  17,065 
Total real estate, net 18,798,656  18,709,584 
Cash and cash equivalents 152,522  420,251 
Cash in escrow 107,669  123,537 
Resident security deposits 36,252  33,757 
Investments in unconsolidated entities 222,438  216,390 
Deferred development costs 51,227  40,414 
Prepaid expenses and other assets 252,839  211,484 
Right of use lease assets 147,174  146,599 
Total assets $ 19,768,777  $ 19,902,016 
LIABILITIES AND EQUITY    
Unsecured notes, net $ 7,252,785  $ 7,349,394 
Variable rate unsecured credit facility and commercial paper    
Mortgage notes payable, net 748,408  754,153 
Dividends payable 225,014  225,392 
Payables for construction 58,698  63,722 
Accrued expenses and other liabilities 279,985  296,006 
Lease liabilities 166,519  166,497 
Accrued interest payable 52,249  50,300 
Resident security deposits 62,951  59,787 
Liabilities related to real estate assets held for sale 1,227  304 
Total liabilities 8,847,836  8,965,555 
Commitments and contingencies
Redeemable noncontrolling interests 2,930  3,368 
Equity:    
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at June 30, 2022 and December 31, 2021; zero shares issued and outstanding at June 30, 2022 and December 31, 2021
   
Common stock, $0.01 par value; 280,000,000 shares authorized at June 30, 2022 and December 31, 2021; 139,829,896 and 139,751,926 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
1,399  1,398 
Additional paid-in capital 10,727,193  10,716,414 
Accumulated earnings less dividends 195,035  240,821 
Accumulated other comprehensive loss (6,166) (26,106)
Total stockholders' equity 10,917,461  10,932,527 
Noncontrolling interests 550  566 
Total equity 10,918,011  10,933,093 
Total liabilities and equity $ 19,768,777  $ 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 For the six months ended
  6/30/2022 6/30/2021 6/30/2022 6/30/2021
Revenue:    
Rental and other income $ 643,655  $ 560,935  $ 1,256,830  $ 1,111,194 
Management, development and other fees 904  808  1,656  1,685 
Total revenue 644,559  561,743  1,258,486  1,112,879 
Expenses:    
Operating expenses, excluding property taxes 156,389  141,622  307,701  281,673 
Property taxes 70,865  70,776  141,603  140,186 
Expensed transaction, development and other pursuit costs, net of recoveries 2,364  1,653  3,351  1,483 
Interest expense, net 58,797  56,104  115,323  108,717 
Gain on extinguishment of debt, net       (122)
Depreciation expense 199,302  184,472  401,088  367,769 
General and administrative expense 21,291  18,465  38,712  35,817 
Casualty and impairment loss   1,177    1,177 
Total expenses 509,008  474,269  1,007,778  936,700 
Income from investments in unconsolidated entities 2,480  26,559  2,797  26,092 
Gain on sale of communities 404  334,569  149,204  388,296 
Gain on other real estate transactions, net 43  32  80  459 
Net for-sale condominium activity (71) (647) 165  (1,560)
Income before income taxes 138,407  447,987  402,954  589,466 
Income tax benefit (expense) 159  (10) (2,312) 745 
Net income 138,566  447,977  400,642  590,211 
Net loss (income) attributable to noncontrolling interests 125  (24) 93  (35)
Net income attributable to common stockholders $ 138,691  $ 447,953  $ 400,735  $ 590,176 
Other comprehensive income (loss):    
Gain (loss) on cash flow hedges 7,759  (822) 17,914  (822)
Cash flow hedge losses reclassified to earnings 1,013  2,366  2,026  4,733 
Comprehensive income $ 147,463  $ 449,497  $ 420,675  $ 594,087 
Earnings per common share - basic:    
Net income attributable to common stockholders $ 0.99  $ 3.21  $ 2.87  $ 4.23 
Earnings per common share - diluted:    
Net income attributable to common stockholders $ 0.99  $ 3.21  $ 2.86  $ 4.23 

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 six months ended
  6/30/2022 6/30/2021
Cash flows from operating activities:
Net income $ 400,642  $ 590,211 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense 401,088  367,769 
Amortization of deferred financing costs 3,950  3,675 
Amortization of debt discount 1,387  1,320 
Gain on extinguishment of debt, net   (122)
Amortization of stock-based compensation 17,681  13,185 
Equity in (income) loss of, and return on, unconsolidated entities and noncontrolling interests, net of eliminations (1) 2,989 
Real estate casualty loss   831 
Abandonment of development pursuits 738  685 
Unrealized gain on terminated cash flow hedges   (2,654)
Cash flow hedge losses reclassified to earnings 2,026  4,733 
Gain on sale of real estate assets (149,284) (412,060)
Gain on sale of for-sale condominiums (1,469) (706)
Decrease in resident security deposits, prepaid expenses and other assets (31,336) (16,329)
(Decrease) increase in accrued expenses, other liabilities and accrued interest payable (5,374) 15,102 
Net cash provided by operating activities 640,048  568,629 
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs (414,107) (325,692)
Acquisition of real estate assets, including partnership interest (165,117) (118,572)
Capital expenditures - existing real estate assets (64,356) (57,157)
Capital expenditures - non-real estate assets (5,665) (2,584)
Decrease in payables for construction (5,024) (27,294)
Proceeds from sale of real estate, net of selling costs 230,660  575,431 
Proceeds from the sale of for-sale condominiums, net of selling costs 75,182  48,655 
Note receivable lending (6,055) (113)
Note receivable payments 4,021  1,556 
Distributions from unconsolidated entities 2,000  22,331 
Investments in unconsolidated entities (8,047) (27,356)
Net cash (used in) provided by investing activities (356,508) 89,205 
Cash flows from financing activities:
Issuance of common stock, net 2,010  2,372 
Dividends paid (445,226) (444,572)
Repayments of mortgage notes payable, including prepayment penalties (6,427) (34,734)
Repayment of unsecured notes (100,000)  
Payment of deferred financing costs (421)  
Receipt for termination of forward interest rate swaps   6,962 
Payment to noncontrolling interest (29) (33)
Payments related to tax withholding for share-based compensation (16,379) (13,228)
Distributions to DownREIT partnership unitholders (24) (24)
Distributions to joint venture and profit-sharing partners (181) (164)
Preferred interest obligation redemption and dividends (460) (840)
Net cash used in financing activities (567,137) (484,261)
Net (decrease) increase in cash, cash equivalents and cash in escrow (283,597) 173,573 
Cash, cash equivalents and cash in escrow, beginning of period 543,788  313,532 
Cash, cash equivalents and cash in escrow, end of period $ 260,191  $ 487,105 
Cash paid during the period for interest, net of amount capitalized $ 106,443  $ 101,703 
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 six months ended
6/30/2022 6/30/2021
Cash and cash equivalents $ 152,522  $ 297,036 
Cash in escrow 107,669  190,069 
Cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows $ 260,191  $ 487,105 

Supplemental disclosures of non-cash investing and financing activities:

During the six months ended June 30, 2022:

As described in Note 4, "Equity," the Company issued 135,860 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 81,807 shares valued at $19,236,000 were issued in connection with new stock grants; 1,211 shares valued at $298,000 were issued through the Company's dividend reinvestment plan; 69,834 shares valued at $16,389,000 were withheld to satisfy employees' tax withholding and other liabilities; and 2,878 restricted shares with an aggregate value of $610,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $223,215,000.

The Company recorded a decrease of $125,000 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.

The Company recorded (i) an increase to prepaid expenses and other assets of $17,914,000 and a corresponding adjustment to accumulated other comprehensive loss and (ii) reclassified $2,026,000 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 six months ended June 30, 2021:

The Company issued 151,186 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 94,641 shares valued at $16,687,000 were issued in connection with new stock grants; 1,561 shares valued at $274,000 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 709 restricted shares with an aggregate value of $140,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $222,901,000.

The Company recorded an increase of $528,000 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 $822,000 and a corresponding adjustment to accumulated other comprehensive loss, and reclassified $4,733,000 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 June 30, 2022, the Company owned or held a direct or indirect ownership interest in 299 operating apartment communities containing 89,037 apartment homes in 12 states and the District of Columbia, of which 17 communities were under development and two were under redevelopment. The Company also has an ownership interest in The Park Loggia. The Park Loggia contains 172 for-sale residential condominiums and 66,000 square feet of commercial space, of which 151 condominiums have been sold and the leasing of the commercial space has been completed as of June 30, 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 32 communities that, if developed as expected, will contain an estimated 10,913 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 and six months ended June 30, 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 For the six months ended
  6/30/2022 6/30/2021 6/30/2022 6/30/2021
Basic and diluted shares outstanding    
Weighted average common shares - basic 139,630,291  139,373,963  139,595,098  139,332,575 
Weighted average DownREIT units outstanding 7,500  7,500  7,500  7,500 
Effect of dilutive securities 296,687  269,176  352,682  261,451 
Weighted average common shares - diluted 139,934,478  139,650,639  139,955,280  139,601,526 
Calculation of Earnings per Share - basic    
Net income attributable to common stockholders $ 138,691  $ 447,953  $ 400,735  $ 590,176 
Net income allocated to unvested restricted shares (247) (902) (756) (1,267)
Net income attributable to common stockholders, adjusted $ 138,444  $ 447,051  $ 399,979  $ 588,909 
Weighted average common shares - basic 139,630,291  139,373,963  139,595,098  139,332,575 
Earnings per common share - basic $ 0.99  $ 3.21  $ 2.87  $ 4.23 
Calculation of Earnings per Share - diluted    
Net income attributable to common stockholders $ 138,691  $ 447,953  $ 400,735  $ 590,176 
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships, including discontinued operations 12  12  24  24 
Adjusted net income attributable to common stockholders $ 138,703  $ 447,965  $ 400,759  $ 590,200 
Weighted average common shares - diluted 139,934,478  139,650,639  139,955,280  139,601,526 
Earnings per common share - diluted $ 0.99  $ 3.21  $ 2.86  $ 4.23 
 
Certain options to purchase shares of common stock in the amount of 8,222 and 292,544 were outstanding as of June 30, 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 values 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 six months ended June 30, 2022, the Company recognized income tax expense of $2,312,000 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 and six months ended June 30, 2022 and 2021. Segment information for total revenue excludes real estate assets that were sold from January 1, 2021 through June 30, 2022, or otherwise qualify as held for sale as of June 30, 2022, as described in Note 6, "Real Estate Disposition Activities" (dollars in thousands):
Same Store Other
Stabilized
Development/
Redevelopment
Non-
allocated (1)
Total
For the three months ended June 30, 2022
Management, development and other fees and other ancillary items $   $   $   $ 904  $ 904 
Rental and non-rental related income (2) 2,534  762  88    3,384 
Total non-lease revenue (3) 2,534  762  88  904  4,288 
Lease income (4) 565,642  47,946  20,984    634,572 
Total revenue $ 568,176  $ 48,708  $ 21,072  $ 904  $ 638,860 
For the three months ended June 30, 2021
Management, development and other fees and other ancillary items $   $   $   $ 808  $ 808 
Rental and non-rental related income (2) 1,954  427  66    2,447 
Total non-lease revenue (3) 1,954  427  66  808  3,255 
Lease income (4) 500,257  26,459  8,885    535,601 
Total revenue $ 502,211  $ 26,886  $ 8,951  $ 808  $ 538,856 

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Same Store Other
Stabilized
Development/
Redevelopment
Non-
allocated (1)
Total
For the six months ended June 30, 2022
Management, development and other fees and other ancillary items $   $   $   $ 1,656  $ 1,656 
Rental and non-rental related income (2) 4,588  1,348  145    6,081 
Total non-lease revenue (3) 4,588  1,348  145  1,656  7,737 
Lease income (4) 1,104,835  92,960  38,444    1,236,239 
Total revenue $ 1,109,423  $ 94,308  $ 38,589  $ 1,656  $ 1,243,976 
For the six months ended June 30, 2021
Management, development and other fees and other ancillary items $   $   $   $ 1,685  $ 1,685 
Rental and non-rental related income (2) 3,630  874  112    4,616 
Total non-lease revenue (3) 3,630  874  112  1,685  6,301 
Lease income (4) 996,531  46,970  15,912    1,059,413 
Total revenue $ 1,000,161  $ 47,844  $ 16,024  $ 1,685  $ 1,065,714 
__________________________________
(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, accounted for under ASC 842.

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

The Company recorded an aggregate offset to income for uncollectible lease revenue for its residential and commercial portfolios of $7,061,000 and $15,065,000 for the three months ended June 30, 2022 and 2021, respectively, and $20,660,000 and $33,710,000 for the six months ended June 30, 2022 and 2021, respectively, under ASC 842 and ASC 450.

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COVID-19 Pandemic

In March 2020, the World Health Organization designated COVID-19 as a pandemic (the "Pandemic"). The ultimate impact of the Pandemic on the Company's 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.

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 $8,193,000 and $8,362,000 for the three months ended June 30, 2022 and 2021, respectively, and $15,293,000 and $17,161,000 for the six months ended June 30, 2022 and 2021, respectively.

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, each as defined below, as of June 30, 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 June 30, 2022 and December 31, 2021, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities").
  6/30/2022 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) 305,953  306,281 
Variable rate mortgage notes payable - conventional and tax-exempt (2) 458,050  464,150 
Total mortgage notes payable and unsecured notes and Term Loans 8,064,003  8,170,431 
Credit Facility    
Commercial paper    
Total $ 8,064,003  $ 8,170,431 
_____________________________________
(1)Balances at June 30, 2022 and December 31, 2021 exclude $9,201 and $10,033, respectively, of debt discount, and $38,014 and $40,573, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.
(2)Balances at June 30, 2022 and December 31, 2021 exclude $12,973 and $13,528, respectively, of debt discount, and $2,622 and $2,750, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Condensed Consolidated Balance Sheets.

During the six months ended June 30, 2022, the Company repaid its $100,000,000 variable rate unsecured term loan at par upon maturity.

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At June 30, 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 (2.56% at June 30, 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 June 30, 2022 and December 31, 2021, respectively. In addition, the Company had $42,181,000 and $39,581,000 outstanding in additional letters of credit unrelated to the Credit Facility as of June 30, 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 the Company's commitment to maintain available borrowing capacity under the Credit Facility in an amount equal to actual borrowings under the Commercial Paper Program. The Company had no amounts outstanding under the Commercial Paper Program as of June 30, 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 $1,240,598,000, excluding communities classified as held for sale, as of June 30, 2022).

The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was 3.7% at both June 30, 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 2.5% and 1.7% at June 30, 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 June 30, 2022 were 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 $ 1,837  $   $   — 
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 111,537  245,123  700,000  2.050  %
350,000  3.900  %
300,000  4.150  %
300,000  4.350  %
  $ 216,530  $ 547,473  $ 7,300,000   

The Company was in compliance at June 30, 2022 with customary covenants under the Credit Facility and the Commercial Paper Program, the Term Loan and the Company's fixed rate unsecured notes.
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4.  Equity

The following summarizes the changes in equity for the six months ended June 30, 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  $