Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 3, 2023

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2023

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 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:

142,015,112 shares of common stock, par value $0.01 per share, were outstanding as of October 31, 2023.


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)
  September 30, 2023 December 31, 2022
  (unaudited)  
ASSETS    
Real estate:    
Land and improvements $ 4,671,252  $ 4,640,971 
Buildings and improvements 19,043,489  18,804,510 
Furniture, fixtures and equipment 1,252,247  1,174,135 
  24,966,988  24,619,616 
Less accumulated depreciation (7,349,202) (6,878,556)
Net operating real estate 17,617,786  17,741,060 
Construction in progress, including land 1,317,350  1,072,543 
Land held for development 183,158  179,204 
Real estate assets held for sale, net 24,731   
Total real estate, net 19,143,025  18,992,807 
Cash and cash equivalents 508,571  613,189 
Restricted cash 271,535  121,056 
Unconsolidated investments 217,449  212,084 
Deferred development costs 64,147  58,489 
Prepaid expenses and other assets 362,332  316,808 
Right of use lease assets 135,779  143,331 
Total assets $ 20,702,838  $ 20,457,764 
LIABILITIES AND EQUITY    
Unsecured notes, net $ 7,207,793  $ 7,602,305 
Variable rate unsecured credit facility and commercial paper, net 69,989   
Mortgage notes payable, net 669,212  713,740 
Dividends payable 237,599  226,022 
Payables for construction 95,758  72,802 
Accrued expenses and other liabilities 355,676  306,186 
Lease liabilities 154,451  162,671 
Accrued interest payable 69,174  54,100 
Resident security deposits 63,856  63,700 
Total liabilities 8,923,508  9,201,526 
Commitments and contingencies
Redeemable noncontrolling interests 1,729  2,685 
Equity:    
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at September 30, 2023 and December 31, 2022; zero shares issued and outstanding at September 30, 2023 and December 31, 2022
   
Common stock, $0.01 par value; 280,000,000 shares authorized at September 30, 2023 and December 31, 2022; 142,013,995 and 139,916,864 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
1,420  1,400 
Additional paid-in capital 11,278,650  10,765,431 
Accumulated earnings less dividends 470,980  485,221 
Accumulated other comprehensive income 26,474  1,424 
Total stockholders' equity 11,777,524  11,253,476 
Noncontrolling interests 77  77 
Total equity 11,777,601  11,253,553 
Total liabilities and equity $ 20,702,838  $ 20,457,764 
 
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 September 30, For the nine months ended September 30,
  2023 2022 2023 2022
Revenue:    
Rental and other income $ 695,701  $ 663,889  $ 2,057,492  $ 1,920,721 
Management, development and other fees 1,934  1,399  5,712  3,054 
Total revenue 697,635  665,288  2,063,204  1,923,775 
Expenses:    
Operating expenses, excluding property taxes 175,191  165,580  509,871  473,281 
Property taxes 78,399  75,091  227,882  216,695 
Expensed transaction, development and other pursuit costs, net of recoveries 18,959  6,514  23,212  9,865 
Interest expense, net 48,115  57,290  156,521  172,613 
Loss on extinguishment of debt, net 150  1,646  150  1,646 
Depreciation expense 200,982  206,658  606,271  607,746 
General and administrative expense 20,466  14,611  58,542  53,323 
Casualty loss 3,499    8,550   
Total expenses 545,761  527,390  1,590,999  1,535,169 
Income from unconsolidated investments 1,930  43,777  11,745  46,574 
Gain on sale of communities 22,121  318,289  209,430  467,493 
Other real estate activity 237  319  707  564 
Income before income taxes 176,162  500,283  694,087  903,237 
Income tax expense (4,372) (5,651) (7,715) (7,963)
Net income 171,790  494,632  686,372  895,274 
Net loss attributable to noncontrolling interests 241  115  484  208 
Net income attributable to common stockholders $ 172,031  $ 494,747  $ 686,856  $ 895,482 
Other comprehensive income:    
Gain on cash flow hedges 15,502  8,188  23,988  26,102 
Cash flow hedge losses reclassified to earnings 354  1,013  1,062  3,039 
Comprehensive income $ 187,887  $ 503,948  $ 711,906  $ 924,623 
Earnings per common share - basic:    
Net income attributable to common stockholders $ 1.21  $ 3.54  $ 4.86  $ 6.40 
Earnings per common share - diluted:    
Net income attributable to common stockholders $ 1.21  $ 3.53  $ 4.86  $ 6.40 

See accompanying notes to Condensed Consolidated Financial Statements.
2

Table of Contents
AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
  For the nine months ended September 30,
  2023 2022
Cash flows from operating activities:
Net income $ 686,372  $ 895,274 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense 606,271  607,746 
Amortization of deferred financing costs and debt discount 9,450  8,102 
Loss on extinguishment of debt, net 150  1,646 
Amortization of stock-based compensation 21,849  26,774 
Equity in loss (income) of, and return on, unconsolidated investments and noncontrolling interests, net of eliminations 2,895  (4,180)
Casualty loss 4,173   
Abandonment of development pursuits 23,212  4,069 
Cash flow hedge losses reclassified to earnings 1,062  3,039 
Gain on sale of real estate assets (210,409) (507,763)
Decrease in prepaid expenses and other assets (3,206) (22,511)
Increase in accrued expenses, other liabilities and accrued interest payable 72,023  68,244 
Net cash provided by operating activities 1,213,842  1,080,440 
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs (691,543) (681,937)
Acquisition of real estate assets (83,348) (459,695)
Capital expenditures - existing real estate assets (121,644) (117,812)
Capital expenditures - non-real estate assets (13,116) (5,667)
Increase in payables for construction 22,956  8,863 
Proceeds from sale of real estate and for-sale condominiums, net of selling costs 359,477  879,828 
Note receivable lending (47,616) (15,584)
Note receivable payments 230  4,021 
Distributions from unconsolidated entities 5,385  50,990 
Unconsolidated investments (13,645) (11,496)
Net cash used in investing activities (582,864) (348,489)
Cash flows from financing activities:
Issuance of common stock, net 494,810  1,962 
Repurchase of common stock, net (1,911)  
Dividends paid (688,486) (667,393)
Net borrowings under unsecured credit facility and commercial paper 69,989  49,985 
Repayments of mortgage notes payable, including prepayment penalties (45,700) (43,131)
Repayment of unsecured notes (400,000) (100,000)
Payment of deferred financing costs (662) (11,953)
Redemption of noncontrolling interest and units for cash by minority partners (1,355)  
Payments to noncontrolling interest   (38)
Payments related to tax withholding for share-based compensation (10,529) (16,872)
Distributions to DownREIT partnership unitholders (25) (36)
Distributions to joint venture and profit-sharing partners (308) (277)
Preferred interest obligation redemption and dividends (940) (860)
Net cash used in financing activities (585,117) (788,613)
Net increase (decrease) in cash, cash equivalents and restricted cash 45,861  (56,662)
Cash, cash equivalents and restricted cash, beginning of period 734,245  543,788 
Cash, cash equivalents and restricted cash, end of period $ 780,106  $ 487,126 
Cash paid during the period for interest, net of amount capitalized $ 130,680  $ 144,833 
See accompanying notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows (dollars in thousands):
September 30, 2023 September 30, 2022
Cash and cash equivalents $ 508,571  $ 200,999 
Restricted cash 271,535  286,127 
Cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statements of Cash Flows $ 780,106  $ 487,126 

Supplemental disclosures of non-cash investing and financing activities:

During the nine months ended September 30, 2023:

As described in Note 4, "Equity," the Company issued 152,894 shares of common stock as part of the Company's stock-based compensation plans, of which 60,016 shares related to the conversion of performance awards to shares of common stock, and the remaining 92,878 shares valued at $16,507,000 were issued in connection with new stock grants; 2,577 shares valued at $463,000 were issued through the Company's dividend reinvestment plan; 62,482 shares valued at $10,559,000 were withheld to satisfy employees' tax withholding and other liabilities; and 2,119 forfeited restricted shares with an aggregate value of $413,000.

Common stock dividends declared but not paid totaled $235,659,000.

The Company recorded (i) an increase to prepaid expenses and other assets of $23,988,000 and a corresponding adjustment to accumulated other comprehensive income; and (ii) reclassified $1,062,000 of cash flow hedge losses from other comprehensive income to interest expense, net, to record the impact of the Company's derivative and hedging activity.

During the nine months ended September 30, 2022:

The Company issued 136,115 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 82,062 shares valued at $19,286,000 were issued in connection with new stock grants; 2,057 shares valued at $461,000 were issued through the Company's dividend reinvestment plan; 72,132 shares valued at $16,872,000 were withheld to satisfy employees' tax withholding and other liabilities; and 3,235 forfeited restricted shares with an aggregate value of $689,000.

Common stock dividends declared but not paid totaled $223,638,000.

The Company recorded an increase of $33,000 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 $26,102,000 and a corresponding adjustment to accumulated other comprehensive income and (ii) reclassified $3,039,000 of cash flow hedge losses from other comprehensive income to interest expense, net, to record the impact of the Company's derivative and hedging 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 regions of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado.

At September 30, 2023, the Company owned or held a direct or indirect ownership interest in 296 operating apartment communities containing 89,240 apartment homes in 12 states and the District of Columbia, of which 17 communities were under development and one was under redevelopment. 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 38 communities that, if developed as expected, will contain an estimated 13,449 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 year ended December 31, 2022. The results of operations for the three and nine months ended September 30, 2023 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.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents includes all cash and liquid investments with an original maturity of three months or less from the date acquired. Restricted cash includes principal reserve funds that are restricted for the repayment of specified secured financing, amounts the Company has designated for planned 1031 exchange activity and resident security deposits. The majority of the Company's cash, cash equivalents and restricted cash are held at major commercial banks.

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 September 30, For the nine months ended September 30,
  2023 2022 2023 2022
Basic and diluted shares outstanding    
Weighted average common shares - basic 141,838,841  139,640,421  141,128,506  139,610,205 
Weighted average DownREIT units outstanding   7,500  4,670  7,500 
Effect of dilutive securities 359,258  334,038  315,499  346,467 
Weighted average common shares - diluted 142,198,099  139,981,959  141,448,675  139,964,172 
Calculation of Earnings per Share - basic    
Net income attributable to common stockholders $ 172,031  $ 494,747  $ 686,856  $ 895,482 
Net income allocated to unvested restricted shares (309) (888) (1,229) (1,662)
Net income attributable to common stockholders - basic $ 171,722  $ 493,859  $ 685,627  $ 893,820 
Weighted average common shares - basic 141,838,841  139,640,421  141,128,506  139,610,205 
Earnings per common share - basic $ 1.21  $ 3.54  $ 4.86  $ 6.40 
Calculation of Earnings per Share - diluted    
Net income attributable to common stockholders $ 172,031  $ 494,747  $ 686,856  $ 895,482 
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships, including discontinued operations   12  25  36 
Net income attributable to common stockholders - diluted $ 172,031  $ 494,759  $ 686,881  $ 895,518 
Weighted average common shares - diluted 142,198,099  139,981,959  141,448,675  139,964,172 
Earnings per common share - diluted $ 1.21  $ 3.53  $ 4.86  $ 6.40 
 
Certain options to purchase shares of common stock in the amounts of 25,537 and 9,793 were outstanding as of September 30, 2023 and 2022, 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 ongoing basis. 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. 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 income. Amounts recorded in accumulated other comprehensive income 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

As of September 30, 2023, the Company was involved in various claims and/or administrative proceedings that arise in the ordinary course of its business. The Company recognizes a loss associated with contingent legal matters when the loss is probable and estimable. While no assurances can be given, the Company does not currently believe that any of such matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations. See Note 12, "Subsequent Events," for further discussion of legal and other contingencies.

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Acquisitions of Investments in Real Estate

The Company accounts for real estate acquisitions by first determining if the real estate investment is the acquisition of an asset or a business combination. Under either model, the Company identifies and determines 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. The Company utilizes various sources to determine fair value, 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 purchase price is allocated 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' financial statements and notes to the financial statements to conform to current year presentations as a result of changes in held for sale classification, disposition activity, segment classification and classification of for-sale condominium inventory and activity.

Income Taxes

The Company recognized income tax expense of $4,372,000 and $7,715,000 for the three and nine months ended September 30, 2023, respectively, and $5,651,000 and $7,963,000 for the three and nine months ended September 30, 2022, respectively, primarily related to 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 that are based on an index or rate such as the consumer price index (CPI) or percentage rents based on total sales. Variable lease payments that are not based on an index or rate are not included in the measurement of the lease liability, but will be recognized as variable lease expense in the period in which they are incurred.

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. For leases that are 12 months or less, the Company has elected the practical expedient to not assess these leases under Accounting Standards Codification ("ASC") 842, Leases, and recognize the lease payments on a straight line basis.

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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 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) non-lease related revenue 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 nine months ended September 30, 2023 and 2022. Segment information for total revenue excludes real estate assets that were sold from January 1, 2022 through September 30, 2023, or otherwise qualify as held for sale as of September 30, 2023, 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 September 30, 2023
Management, development and other fees and other ancillary items $   $   $   $ 1,934  $ 1,934 
Non-lease related revenue (2) 2,917  1,430  80    4,427 
Total non-lease revenue (3) 2,917  1,430  80  1,934  6,361 
Lease income (4) 639,176  31,811  17,229    688,216 
Total revenue $ 642,093  $ 33,241  $ 17,309  $ 1,934  $ 694,577 
For the three months ended September 30, 2022
Management, development and other fees and other ancillary items $   $   $   $ 1,399  $ 1,399 
Non-lease related revenue (2) 2,477  811  32    3,320 
Total non-lease revenue (3) 2,477  811  32  1,399  4,719 
Lease income (4) 609,311  27,335  7,681    644,327 
Total revenue $ 611,788  $ 28,146  $ 7,713  $ 1,399  $ 649,046 
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Same Store Other
Stabilized
Development/
Redevelopment
Non-
allocated (1)
Total
For the nine months ended September 30, 2023
Management, development and other fees and other ancillary items $   $   $   $ 5,712  $ 5,712 
Non-lease related revenue (2) 8,121  3,830  195    12,146 
Total non-lease revenue (3) 8,121  3,830  195  5,712  17,858 
Lease income (4) 1,890,920  93,380  40,644    2,024,944 
Total revenue $ 1,899,041  $ 97,210  $ 40,839  $ 5,712  $ 2,042,802 
For the nine months ended September 30, 2022
Management, development and other fees and other ancillary items $   $   $   $ 3,054  $ 3,054 
Non-lease related revenue (2) 7,493  1,777  78    9,348 
Total non-lease revenue (3) 7,493  1,777  78  3,054  12,402 
Lease income (4) 1,770,815  60,702  20,193    1,851,710 
Total revenue $ 1,778,308  $ 62,479  $ 20,271  $ 3,054  $ 1,864,112 
__________________________________
(1)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, and revenue streams not related to leasing activities including, but not limited to, application fees, renters insurance fees and vendor revenue sharing.
(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 September 30, 2023.

Uncollectible Lease Revenue Reserves

The Company assesses the collectability of its lease revenue and receivables on an ongoing basis by (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, net of amounts received from government rent relief programs, for its residential and commercial portfolios of $13,363,000 and $10,607,000 for the three months ended September 30, 2023 and 2022, respectively, and $43,667,000 and $31,267,000 for the nine months ended September 30, 2023 and 2022, respectively, under ASC 842 and ASC 450.

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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 $12,170,000 and $9,131,000 for the three months ended September 30, 2023 and 2022, respectively, and $34,794,000 and $24,424,000 for the nine months ended September 30, 2023 and 2022, respectively.

3.  Debt

The Company's debt, which consists of unsecured notes, the variable rate unsecured term loan (the "Term Loan"), mortgage notes payable, the Credit Facility and the Commercial Paper Program, each as defined below, as of September 30, 2023 and December 31, 2022 is summarized below. The following amounts and discussion do not include the mortgage notes related to the communities classified as held for sale, if any, as of September 30, 2023 and December 31, 2022, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities"). The weighted average interest rates in the following table for secured and unsecured notes include costs of financing such as credit enhancement fees, trustees' fees, the impact of interest rate hedges and mark-to-market adjustments.
  September 30, 2023 December 31, 2022
Fixed rate unsecured notes $ 7,250,000  3.3  % $ 7,500,000  3.3  %
Term Loan     % 150,000  5.4  %
Fixed rate mortgage notes payable - conventional and tax-exempt 270,851  3.4  % 270,677  3.4  %
Variable rate mortgage notes payable - conventional and tax-exempt 411,450  5.6  % 457,150  5.3  %
Total mortgage notes payable and unsecured notes and Term Loan 7,932,301  3.4  % 8,377,827  3.4  %
Credit Facility     %     %
Commercial paper 70,000  5.9  %     %
Total principal outstanding 8,002,301  3.4  % 8,377,827  3.4  %
Less deferred financing costs and debt discount (1) (55,296) (61,782)
Total $ 7,947,005  $ 8,316,045 
_____________________________________
(1)Excludes deferred financing costs and debt discount associated with the Credit Facility and the Commercial Paper Program which are included in prepaid expenses and other assets on the accompanying Condensed Consolidated Balance Sheets.

The Company has a $2,250,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the "Credit Facility") which matures in September 2026. The interest rate that would be applicable to borrowings under the Credit Facility was 6.12% at September 30, 2023 and was composed of (i) the Secured Overnight Financing Rate ("SOFR") plus (ii) the current borrowing spread to SOFR of 0.805% per annum, which consisted of a 0.10% SOFR adjustment plus 0.705% per annum, assuming a daily SOFR borrowing rate. The borrowing spread to SOFR can vary from SOFR plus 0.63% to SOFR plus 1.38% based upon the rating of the Company's unsecured and unsubordinated long-term indebtedness. There is also an annual facility commitment fee of 0.12% of the borrowing capacity under the facility, which can vary from 0.095% to 0.295% based upon the rating of the Company's unsecured and unsubordinated long-term indebtedness. The Credit Facility contains a sustainability-linked pricing component which provides for interest rate margin and commitment fee reductions or increases by meeting or missing targets related to environmental sustainability, specifically greenhouse gas emission reductions, with the adjustment determined annually. The first determination under the sustainability-linked pricing component occurred in July 2023, resulting in reductions of approximately 0.02% to the interest rate margin and 0.005% to the commitment fee due to our achievement of sustainability targets.

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The availability on the Company's Credit Facility as of September 30, 2023 and December 31, 2022, respectively, was as follows (dollars in thousands):
  September 30, 2023 December 31, 2022
Credit Facility commitment $ 2,250,000  $ 2,250,000 
Credit Facility outstanding    
Commercial paper outstanding (70,000)  
Letters of credit outstanding (1) (1,914) (1,914)
Total Credit Facility available $ 2,178,086  $ 2,248,086 
_____________________________________
(1)In addition, the Company had $50,418 and $48,740 outstanding in additional letters of credit unrelated to the Credit Facility as of September 30, 2023 and December 31, 2022, respectively.

The Company has an unsecured commercial paper note program (the “Commercial Paper Program”) 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 following debt activity occurred during the nine months ended September 30, 2023:

In March 2023, the Company repaid $250,000,000 principal amount of its 2.85% unsecured notes at its maturity.

In September 2023, the Company repaid its $150,000,000 Term Loan at par in advance of its February 2024 scheduled maturity.

In September 2023, the Company utilized $37,600,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding secured variable rate indebtedness of Avalon Clinton North and Avalon Clinton South.

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 $1,159,639,000, excluding communities classified as held for sale, as of September 30, 2023).

Scheduled payments and maturities of secured notes payable and unsecured notes outstanding at September 30, 2023 were as follows (dollars in thousands):

Year Secured notes principal
payments and maturities
Unsecured notes maturities Stated interest rate of
 unsecured notes
2023 $ 200  $ 350,000  4.20  %
2024 9,100  300,000  3.50  %
2025 9,700  525,000  3.45  %
300,000  3.50  %
2026 10,600  475,000  2.95  %
300,000  2.90  %
2027 249,000  400,000  3.35  %
2028 17,600  450,000  3.20  %
400,000  1.90  %
2029 74,750  450,000  3.30  %
2030 9,000  700,000  2.30  %
2031 9,600  600,000  2.45  %
2032 10,300  700,000  2.05  %
Thereafter 282,451  350,000  5.00  %
350,000  3.90  %
300,000  4.15  %
300,000  4.35  %
  $ 682,301  $ 7,250,000   
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The Company was in compliance at September 30, 2023 with customary covenants under the Credit Facility and the Commercial Paper Program and the indentures under which the Company's unsecured notes were issued.

4.  Equity

The following summarizes the changes in equity for the nine months ended September 30, 2023 and 2022 (dollars in thousands):
Common
stock
Additional
paid-in
capital
Accumulated
earnings
less
dividends
Accumulated
other
comprehensive
income (loss)
Total stockholder's equity Noncontrolling interests Total
equity
Balance at December 31, 2022 $ 1,400  $ 10,765,431  $ 485,221  $ 1,424  $ 11,253,476  $ 77  $ 11,253,553 
Net income attributable to common stockholders —  —  146,902  —  146,902  —  146,902 
Loss on cash flow hedges, net —  —  —  (340) (340) —  (340)
Cash flow hedge losses reclassified to earnings —  —  —  354  354  —  354 
Change in redemption value of redeemable noncontrolling interest —  —  (286) —  (286) —  (286)
Dividends declared to common stockholders ($1.65 per share)
—  —  (230,958) —  (230,958) —  (230,958)
Issuance of common stock, net of withholdings 1  (11,554) 1,590  —  (9,963) —  (9,963)
Repurchase of common stock, including repurchase costs —  (539) (590) —  (1,129) —  (1,129)
Amortization of deferred compensation —  11,123  —  —  11,123  —  11,123 
Balance at March 31, 2023 $ 1,401  $ 10,764,461  $ 401,879  $ 1,438  $ 11,169,179  $ 77  $ 11,169,256 
Net income attributable to common stockholders —  —  367,923  —  367,923  —  367,923 
Gain on cash flow hedges, net —  —  —  8,826  8,826  —  8,826 
Cash flow hedge losses reclassified to earnings —  —  —  354  354  —  354 
Change in redemption value of redeemable noncontrolling interest —  —  (367) —  (367) —  (367)
Dividends declared to common stockholders ($1.65 per share)
—  —  (234,774) —  (234,774) —  (234,774)
Issuance of common stock, net of withholdings 19  494,643  43  —  494,705  —  494,705 
Repurchase of common stock, including repurchase costs —  (369) (413) —  (782) —  (782)
Amortization of deferred compensation —  10,424  —  —  10,424  —  10,424 
Balance at June 30, 2023 $ 1,420  $ 11,269,159  $ 534,291  $ 10,618  $ 11,815,488  $ 77  $ 11,815,565 
Net income attributable to common stockholders —  —  172,031  —  172,031  —  172,031 
Gain on cash flow hedges, net —  —  —  15,502  15,502  —  15,502 
Cash flow hedge losses reclassified to earnings —  —  —  354  354  —  354 
Change in redemption value of redeemable noncontrolling interest —  —  (564) —  (564) —  (564)
Dividends declared to common stockholders ($1.65 per share)
—  —  (234,777) —  (234,777) —  (234,777)
Issuance of common stock, net of withholdings   (28) (1) —  (29) —  (29)
Amortization of deferred compensation —  9,519  —  —  9,519  —  9,519 
Balance at September 30, 2023 $ 1,420  $ 11,278,650  $ 470,980  $ 26,474  $ 11,777,524  $ 77  $ 11,777,601 

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Common
stock
Additional
paid-in
capital
Accumulated
earnings
less
dividends
Accumulated
other
comprehensive
income (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 
Net income attributable to common stockholders —  —  138,691  —  138,691  —  138,691 
Gain on cash flow hedges, net —  —  —  7,759  7,759  —  7,759 
Cash flow hedge losses reclassified to earnings —  —  —  1,013  1,013  —  1,013 
Change in redemption value of redeemable noncontrolling interest —  —  168  —  168  —  168 
Noncontrolling interest distribution and income allocation —  —  —  —  —  (6) (6)
Dividends declared to common stockholders ($1.59 per share)
—  —  (222,772) —  (222,772) —  (222,772)
Issuance of common stock, net of withholdings —  1,683    —  1,683  —  1,683 
Amortization of deferred compensation —  14,183  —  —  14,183  —  14,183 
Balance at June 30, 2022 $ 1,399  $ 10,727,193  $ 195,035  $ (6,166) $ 10,917,461  $ 550  $ 10,918,011 
Net income attributable to common stockholders —  —  494,747  —  494,747  —  494,747 
Gain on cash flow hedges, net —  —  —  8,188  8,188  —  8,188 
Cash flow hedge losses reclassified to earnings —  —  —  1,013  1,013  —  1,013 
Change in redemption value of redeemable noncontrolling interest —  —  (158) —  (158) —  (158)
Noncontrolling interest distribution and income allocation —  —  —  —  —  1  1 
Dividends declared to common stockholders ($1.59 per share)
—  —  (222,753) —  (222,753) —  (222,753)
Issuance of common stock, net of withholdings —  (384) 17  —  (367) —  (367)
Amortization of deferred compensation —  11,906  —  —  11,906  —  11,906 
Balance at September 30, 2022 $ 1,399  $ 10,738,715  $ 466,888  $ 3,035  $ 11,210,037  $ 551  $ 11,210,588 

As of September 30, 2023 and December 31, 2022, 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.

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During the nine months ended September 30, 2023, the Company:

i.issued 5,773 shares of common stock in connection with stock options exercised;
ii.issued 2,577 shares of common stock through the Company's dividend reinvestment plan;
iii.issued 152,894 shares of common stock in connection with restricted stock grants and the conversion of performance awards to shares of common stock;
iv.issued 2,000,000 shares of common stock in the settlement of the forward contracts, as discussed below;
v.issued 12,288 shares of common stock through the Employee Stock Purchase Plan;
vi.withheld 62,482 shares of common stock to satisfy employees' tax withholding and other liabilities;
vii.canceled 2,119 shares of restricted common stock upon forfeiture; and
viii.repurchased 11,800 shares of common stock through the Stock Repurchase Program (as defined below).

Deferred compensation granted under the Company's Second Amended and Restated 2009 Equity Incentive Plan (the "2009 Plan") for the nine months ended September 30, 2023 does not impact the Company's Condensed Consolidated Financial Statements until recognized as compensation cost.

The Company has a continuous equity program ("CEP") 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. During the three and nine months ended September 30, 2023, the Company had no sales under this program. As of September 30, 2023, the Company had $705,961,000 remaining authorized for issuance under the CEP.

In addition to the CEP, during the nine months ended September 30, 2023, the Company settled the outstanding forward contracts entered into in April 2022 (the "Equity Forward"), issuing 2,000,000 shares of common stock, net of offering fees and discounts for $491,912,000 or $245.96 per share.

The Company has 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 "Stock Repurchase Program"). During the nine months ended September 30, 2023, the Company repurchased 11,800 shares of common stock at an average price of $161.96 per share. As of September 30, 2023, the Company had $314,237,000 remaining authorized for purchase under this program.

5.  Investments

Unconsolidated Investments

As of September 30, 2023, the Company had investments in five unconsolidated entities with real estate entities holdings, with ownership interest percentages ranging from 20.0% to 50.0%, coupled with other unconsolidated investments including property technology and environmentally focused companies and investment management funds. For one of the investments which is under development and in which the Company has an investment of 25.0%, the Company has guaranteed a construction loan on behalf of the venture, which had an outstanding balance of $127,803,000 as of September 30, 2023. Any amounts under the guarantee of this construction loan are obligations of the venture partners in proportion to their ownership interest. The Company accounts for its unconsolidated investments 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 Company also has an equity interest of 28.6% in the Archstone Multifamily Partners AC LP (the "U.S. Fund") and upon achievement of a threshold return, which has been met, the Company has a right to incentive distributions for its promoted interest based on the returns earned by the U.S. Fund. The Company recognized income of $424,000 and $1,496,000