Form: 8-K

Current report filing

October 29, 2009

Exhibit 99.2
(AVALONBAY COMMUNITIES lOGO)
For Immediate News Release
October 28, 2009
AVALONBAY COMMUNITIES, INC. ANNOUNCES
THIRD QUARTER 2009 OPERATING RESULTS
(Alexandria, VA) AvalonBay Communities, Inc. (NYSE: AVB) reported today that Net Income Attributable to Common Stockholders (“Net Income”) for the quarter ended September 30, 2009 was $58,154,000. This resulted in Earnings per Share — diluted (“EPS”) of $0.72 for the quarter ended September 30, 2009, compared to EPS of $2.98 for the comparable period of 2008, a decrease of 75.8%. For the nine months ended September 30, 2009, EPS was $1.54 compared to $5.20 for the comparable period of 2008, a per share decrease of 70.4%. These decreases are primarily attributable to the reduced number of communities sold and amount of gains related to these sales in 2009 as compared with the prior year periods. Year to date 2009 results also include impairment and other charges associated with the Company’s reduction in planned development activity recognized in the second quarter of 2009.
Funds from Operations attributable to common stockholders — diluted (“FFO”) for the quarter ended September 30, 2009 decreased 14.8% to $1.09 per share from $1.28 per share for the comparable period of 2008. FFO per share for the nine months ended September 30, 2009 decreased by 14.0% to $3.25 from $3.78 for the comparable period of 2008.
FFO and Net Income per share amounts for the nine months ended September 30, 2009, and for the three and nine months ended September 30, 2008 include certain non-routine items that are detailed in Attachment 14.
Adjusting for these non-routine items, FFO per share for the three and nine months ended September 30, 2009 would have decreased by 16.2% and 9.0%, respectively from the prior year periods.
There were no significant non-routine items in the current quarter.
Operating Results for the Quarter Ended September 30, 2009 Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue increased by $759,000, or 0.3% to $224,192,000. For Established Communities, rental revenue decreased 4.8% due to a decrease in Economic Occupancy of 0.2% and a decrease in Average Rental Rates of 4.6%. As a result, total revenue for Established Communities decreased $7,546,000 to $153,223,000. Operating expenses for Established Communities increased $1,680,000, or 3.2% to $54,318,000. Accordingly, Net Operating Income (“NOI”) for Established Communities decreased by $9,226,000, or 8.5% to $98,905,000.
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities from the third quarter of 2008 to the third quarter of 2009:
 
                                 
3Q 09 Compared to 3Q 08  
 
    Rental     Operating           % of
    Revenue     Expenses   NOI   NOI (1)
 
 
                               
New England
    (4.7% )     1.5 %     (8.0% )     20.6 %
Metro NY/NJ
    (5.7% )     4.0 %     (9.9% )     28.1 %
Mid-Atlantic/Midwest
    (0.7% )     0.9 %     (1.7% )     16.2 %
Pacific NW
    (7.0% )     (1.9 % )   (9.0% )     4.6 %
No. California
    (7.0% )     6.5 %     (11.6% )     19.6 %
So. California
    (6.1% )     9.0 %     (12.3% )     10.9 %
 
                   
Total
    (4.8% )     3.2 %     (8.5% )     100.0 %
 
                   
 
 
(1)   Total represents each region’s % of total NOI from the Company, including discontinued operations.
 
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved

 


 

Operating Results for the Nine Months Ended September 30, 2009 Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue increased by $4,579,000, or 0.7% to $666,015,000. For Established Communities, rental revenue decreased 2.8% due to a decrease in Economic Occupancy of 0.7% and a decrease in Average Rental Rates of 2.1%. As a result, total revenue for Established Communities decreased $13,092,000 to $465,646,000. Operating expenses for Established Communities increased $4,521,000, or 3.0% to $157,263,000. Accordingly, NOI for Established Communities decreased by $17,612,000, or 5.4% to $308,383,000.
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008:
 
                                 
YTD 2009 Compared to YTD 2008  
 
    Rental     Operating           % of
    Revenue     Expenses   NOI     NOI (1)
 
 
                               
New England
    (3.4% )     2.3 %     (6.4% )     20.0 %
Metro NY/NJ
    (3.5% )     2.1 %     (5.9% )     27.5 %
Mid-Atlantic/Midwest
    (0.3% )     2.7 %     (2.1% )     16.5 %
Pacific NW
    (3.1% )     2.1 %     (5.2% )     4.7 %
No. California
    (2.8% )     4.1 %     (5.1% )     20.4 %
So. California
    (4.4% )     6.8 %     (8.8% )     10.9 %
 
                   
Total
    (2.8% )     3.0 %     (5.4% )     100.0 %
 
                   
 
 
(1)   Total represents each region’s % of total NOI from the Company, including discontinued operations.
Cash concessions are recognized in accordance with generally accepted accounting principles (“GAAP”) and are amortized over the approximate lease term, which is generally one year. The following table reflects the percentage changes in rental revenue with concessions on a GAAP basis and Rental Revenue with Concessions on a Cash Basis for our Established Communities:
 
                 
 
            YTD 09 vs
    3Q 09 vs 3Q 08   YTD 08
 
               
Rental Revenue Change with Concessions on a GAAP Basis
    (4.8 %)     (2.8 %)
 
               
Rental Revenue Change with Concessions on a Cash Basis
    (4.1 %)     (2.5 %)
 
 
Development Activity
The Company completed the development of three communities in the third quarter of 2009: Avalon Anaheim Stadium located in Anaheim, CA, Avalon Charles Pond, located in Coram, NY, and Avalon Northborough I, located in Northborough, MA. These communities contain an aggregate 614 apartment homes and were completed for an aggregate Total Capital Cost of $173,000,000.
At September 30, 2009, the Company had nine communities under construction with a Total Capital Cost of $1,218,900,000, down from 15 communities with a Total Capital Cost of $1,608,500,000 at September 30, 2008. The Company has not started any new development activity through September 30, 2009.
During the fourth quarter of 2009, the Company expects to commence the development of two communities containing an aggregate 399 apartment homes, with an expected Total Capital Cost of $66,400,000. The Company expects to complete the development of four communities during the fourth quarter of 2009. The anticipated completions contain an aggregate of 1,382 apartment homes and are expected to be completed for a Total Capital Cost of $470,500,000.
At December 31, 2009, the Company anticipates that it will have seven communities under development, with a Total Capital Cost of $814,800,000, down from the 14 communities with a Total Capital Cost of $1,583,800,000 at December 31, 2008.
Redevelopment Activity
During the third quarter of 2009, the Company completed the redevelopment of Avalon Symphony Woods I and II, located in Columbia, MD. These two communities contain an aggregate of 392 apartment homes and redevelopment was completed for a Total Capital Cost of $10,100,000, excluding costs incurred prior to redevelopment.
During the third quarter of 2009, the Company commenced the redevelopment of one community: Avalon at Cedar Ridge located in Daly City, CA. This community contains an aggregate of 195 apartment homes and will be redeveloped for an estimated Total Capital Cost of $6,600,000, excluding costs incurred prior to redevelopment.
Disposition Activity
During the third quarter of 2009, the Company sold two communities: Avalon at River Oaks, located in San Jose, CA and Avalon at Faxon Park, located in Quincy, MA. These two communities contain an aggregate of 397 apartment homes and were sold for an aggregate sales price of $69,500,000. These dispositions resulted in a gain in accordance with GAAP of $26,670,000 and an Economic Gain of approximately $22,670,000. The weighted average Initial Year Market Cap Rate for these two communities was 6.8% and the Unleveraged IRR over a 12 year holding period was 14.6%.
 
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved

 


 

In October 2009, the Company sold Avalon Parkside, a 192 apartment home community, located in Sunnyvale, CA for $43,800,000.
Investment Management Fund Activity
The Company currently has investments in and serves as the manager for two private, discretionary investment management vehicles. There was no acquisition or disposition activity by either investment fund during the current quarter.
Financing, Liquidity and Balance Sheet Statistics
At September 30, 2009, the Company had no amounts outstanding under its $1,000,000,000 unsecured credit facility and the Company had $777,456,000 in unrestricted cash and cash in escrow. The cash in escrow is available for development activity and includes $93,440,000 in bond proceeds related to an existing Development Right that the Company expects to develop in the future. Unencumbered NOI as a percentage of total NOI generated by real estate assets for the nine months ended September 30, 2009 was 64.8%. Interest Coverage for the third quarter of 2009 was 3.1 times.
New Financing Activity
In August 2009, the Company commenced a continuous equity offering program, under which the Company can issue up to $400 million common stock until September 2012. The Company may sell common stock in amounts and at times to be determined by the Company. During the third quarter of 2009, the Company sold 1,467,000 shares at an average price of approximately $70 per share, for gross proceeds of $102,000,000.
In September 2009, the Company issued $500,000,000 of unsecured notes under its existing shelf registration statement. The offering consisted of two separate $250,000,000 tranches with effective interest rates of 5.72% and 6.12%, maturing in 2017 and 2020, respectively.
Debt Repayment Activity
In August 2009, the Company repaid $102,562,000 of unsecured notes with an annual interest rate of 7.50% pursuant to their scheduled maturity.
Also in August 2009, the Company repaid $112,200,000 in unsecured debt, representing the second tranche of its $330,000,000 unsecured variable rate term loan (the “Term Loan”), in advance of the scheduled maturity in January 2010.
In October 2009, the Company completed a cash tender offer commenced in September 2009. The Company purchased $300,000,000 principal amount of its unsecured notes at a weighted average purchase price of 108% of par. Also in October 2009, the Company purchased an additional $10,100,000 principal amount of its unsecured notes at a price of 107% of par. The Company will recognize a charge for the purchase premium and the accelerated recognition of certain deferred issuance costs of approximately $26,000,000 in the fourth quarter of 2009. All of the notes purchased by the Company were cancelled.
Also in October 2009, the Company repaid the final $112,200,000 outstanding of its Term Loan in advance of the scheduled maturity in January 2011.
Fourth Quarter and Full Year 2009 Financial Outlook
The Company anticipates that revenues from Established Communities will decline by 5.75% to 6.25%, and NOI from Established Communities will decline by 11.0% to 12.0% for the fourth quarter 2009 as compared to the prior year period. For the full year 2009, Established Community revenue and NOI are anticipated to decline 3.50% to 3.75% and 6.50% to 7.50%, respectively. These ranges are consistent with the previous financial outlook provided in July 2009.
For the fourth quarter of 2009, the Company expects EPS to be in the range of $0.53 to $0.57. The Company expects EPS for the full year 2009 to be in the range of $2.07 to $2.11.
The Company expects Projected FFO per share to be in the range of $0.61 to $0.65 for the fourth quarter of 2009 and Projected FFO per share for the full year 2009 to be in the range of $3.86 to $3.90.
The Company’s expected fourth quarter and full year 2009 results include approximately $26,000,000 related to the tender offer the Company completed in October 2009. The Company’s fourth quarter and full year 2008 and 2009 results also include the non-routine items detailed in Attachment 14. Adjusting for these non-routine items in both years, the Company expects fourth quarter and full year 2009 Projected FFO per share to decline by 20% and 12%, respectively, from the prior year periods.
An analysis of the revised full year 2009 financial outlook compared to financial outlook provided in July 2009 follows:
 
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved

 


 

 
         
Full Year 2009 Outlook  
As of September 2009  
Changes From July 2009  
 
    Per  
    Share  
         
FFO (July 2009 Outlook)
  $ 4.22  
NOI & other income
    0.05  
Interest expense, new unsecured debt
    (0.04 )
Impairments & abandoned pursuits
    (0.01 )
Gain / (loss) on medium term note repurchase
    (0.33 )
Impact of shares issued during quarter
    (0.01 )
 
     
FFO (September 2009 Outlook)
    3.88  
 
     
 
 
Fourth Quarter 2009 Conference/Event Schedule
The Company expects to release its fourth quarter 2009 earnings on February 3, 2010 after the market closes. The Company expects to hold a conference call on February 4, 2010 at 1:00 PM EST to discuss the fourth quarter and full year 2009 results.
The Company is tentatively scheduled to participate in the following conferences during the fourth quarter of 2009:
 
     
4Q 2009 Conference Schedule
 
Event/Conference   Date
     
NAREIT Annual Convention
  Nov 11 – 13
Goldman Sachs Real Estate Symposium
  Dec 4
Barclays Real Estate Conference
  Dec 8
Wells Fargo Conference
  Dec 9
 
 
Management may discuss the Company’s current operating environment; operating trends; development, redevelopment, disposition and acquisition activity; financial outlook and other business and financial matters affecting the Company. Details on each conference and access to any related materials will be available beginning November 2, 2009 on the Company’s website at http://www.avalonbay.com/events.
Other Matters
The Company will hold a conference call on October 29, 2009 at 1:00 PM EDT to review and answer questions about this release, its third quarter results, the Attachments (described below) and related matters. To participate on the call, dial 1-877-510-2397 domestically and 1-763-416-6924 internationally.
To hear a replay of the call, which will be available from October 29, 2009 at 3:00 PM EDT to November 29, 2009 at 11:59 PM EST, dial 1-800-642-1687 domestically and 1-706-645-9291 internationally, and use Access Code: 33681043.
A webcast of the conference call will also be available at http://www.avalonbay.com/earnings, and an on-line playback of the webcast will be available for at least 30 days following the call.
The Company produces Earnings Release Attachments (the “Attachments”) that provide detailed information regarding operating, development, redevelopment, disposition and acquisition activity. These Attachments are considered a part of this earnings release and are available in full with this earnings release via the Company’s website at http://www.avalonbay.com/earnings. To receive future press releases via e-mail, please submit a request through http://www.avalonbay.com/email.
About AvalonBay Communities, Inc.
As of September 30, 2009, the Company owned or held a direct or indirect ownership interest in 172 apartment communities containing 50,114 apartment homes in ten states and the District of Columbia, of which nine communities were under construction and six communities were under reconstruction. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in high barrier to entry markets of the United States. More information may be found on the Company’s website at http://www.avalonbay.com. For additional information, please contact John Christie, Senior Director of Investor Relations and Research at 1-703-317-4747 or Thomas J. Sargeant, Chief Financial Officer at 1-703-317-4635.
Forward-Looking Statements
This release, including its Attachments, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by the Company’s use of words such as “expects,” “plans,” “estimates,” “projects,” “intends,” “believes,” “outlook” and similar expressions that do not relate to historical matters. Actual results may differ materially from those expressed or implied by the forward-looking statements as a result of risks and uncertainties, which include the following: we may abandon development or redevelopment opportunities for which we have already incurred costs; adverse capital and credit market conditions may affect our access to various sources of capital and/or cost of capital, which may affect our business activities, earnings and common stock price, among other things; changes in local employment conditions, demand for apartment homes, supply of competitive housing products, and other economic conditions may result in lower than expected occupancy and/or rental rates and adversely affect the profitability of our communities; increases in costs of materials, labor or other expenses may result in communities that we develop or redevelop failing to achieve expected profitability; delays in completing development, redevelopment and/or lease-up may result in increased financing and construction costs and may delay and/or reduce the profitability of a community; debt and/or equity financing for development, redevelopment or acquisitions of communities may not be available or may not be available on favorable terms; we may be unable to obtain, or experience delays in obtaining, necessary governmental permits and authorizations; increases in costs of materials, labor or other expenses may result in communities that we develop or redevelop failing to achieve expected profitability; or delays in completing
 
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved

 


 

development, redevelopment and/or lease-up may result in increased financing and construction costs and may delay and/or reduce the profitability of a community. Additional discussions of risks and uncertainties appear in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 under the headings “Risk Factors” and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements” and in subsequent quarterly reports on
Form 10-Q.
The Company does not undertake a duty to update forward-looking statements, including its expected operating results for the fourth quarter and full year 2009. The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this release.
Definitions and Reconciliations
Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and further explained on Attachment 14, “Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.” Attachment 14 is included in the full earnings release available at the Company’s website at http://www.avalonbay.com/earnings.
 
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved

 


 

 
 
(IMAGE)
THIRD QUARTER 2009
Supplemental Operating and Financial Data
(PICTURE)
Avalon Northborough I, located in Northborough, MA, contains 163 apartment homes and was completed in the third quarter of 2009 for a Total Capital Cost of $26.2 million. Set on 33 acres, Avalon Northborough is part of a 150-acre master planned community within walking distance of shopping and restaurants, and commuting distance of Boston and Worcester.
 

 


 

 
 
THIRD QUARTER 2009
Supplemental Operating and Financial Data
Table of Contents
         
Company Profile
       
Selected Operating and Other Information
  Attachment 1
Detailed Operating Information
  Attachment 2
Condensed Consolidated Balance Sheets
  Attachment 3
 
       
Sub-Market Profile
       
Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 4
Sequential Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 5
Year-to-Date Revenue and Occupancy Changes (Established Communities)
  Attachment 6
 
       
Development, Redevelopment, Acquisition and Disposition Profile
       
Summary of Development and Redevelopment Activity
  Attachment 7
Development Communities
  Attachment 8
Redevelopment Communities
  Attachment 9
Summary of Development and Redevelopment Community Activity
  Attachment 10
Future Development
  Attachment 11
Unconsolidated Real Estate Investments
  Attachment 12
Summary of Disposition Activity
  Attachment 13
 
       
Definitions and Reconciliations
       
Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
  Attachment 14
The following is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The projections and estimates contained in the following attachments are forward-looking statements that involve risks and uncertainties, and actual results may differ materially from those projected in such statements. Risks associated with the Company’s development, redevelopment, construction, and lease-up activities, which could impact the forward-looking statements made are discussed in the paragraph titled “Forward-Looking Statements” in the release to which these attachments relate. In particular, development opportunities may be abandoned; Total Capital Cost of a community may exceed original estimates, possibly making the community uneconomical and/or affecting projected returns; construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs; and other risks described in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and the Company’s Quarterly Reports on Form 10-Q for subsequent quarters.
 

 


 

 
 
Attachment 1
AvalonBay Communities, Inc.
Selected Operating and Other Information
September 30, 2009

(Dollars in thousands except per share data)
(unaudited)
SELECTED OPERATING INFORMATION (1)
                                                 
    Q3     Q3             YTD     YTD        
    2009     2008     % Change   2009     2008     % Change
Net income attributable to common stockholders
  $ 58,154     $ 231,406       (74.9 %)   $ 123,253     $ 402,839       (69.4 %)
 
                                               
Per common share — basic
  $ 0.72     $ 3.00       (76.0 %)   $ 1.55     $ 5.23       (70.4 %)
Per common share — diluted
  $ 0.72     $ 2.98       (75.8 %)   $ 1.54     $ 5.20       (70.4 %)
 
                                               
Funds from Operations
  $ 87,737     $ 99,015       (11.4 %)   $ 260,526     $ 292,984       (11.1 %)
Per common share — diluted
  $ 1.09     $ 1.28       (14.8 %)   $ 3.25     $ 3.78       (14.0 %)
 
                                               
Dividends declared — common
  $ 72,587     $ 68,820       5.5 %   $ 215,218     $ 206,278       4.3 %
Per common share
  $ 0.8925     $ 0.8925       0.0 %   $ 2.678     $ 2.678       0.0 %
 
                                               
Common shares outstanding
    81,429,356       77,109,737       5.6 %     81,429,356       77,109,737       5.6 %
Outstanding operating partnership units
    15,351       64,019       (76.0 %)     15,351       64,019       (76.0 %)
 
                               
Total outstanding shares and units
    81,444,707       77,173,756       5.5 %     81,444,707       77,173,756       5.5 %
 
                               
 
                                               
Average shares and participating securities outstanding — basic
    80,384,149       77,080,874       4.3 %     79,772,819       77,008,487       3.6 %
 
                               
Weighted shares — basic
    80,132,409       76,833,942       4.3 %     79,521,277       76,754,096       3.6 %
Average operating partnership units outstanding
    15,351       64,019       (76.0 %)     16,874       64,019       (73.6 %)
Effect of dilutive securities
    461,517       682,886       (32.4 %)     631,942       698,107       (9.5 %)
 
                               
Average shares outstanding — diluted
    80,609,277       77,580,847       3.9 %     80,170,093       77,516,222       3.4 %
 
                               
DEBT COMPOSITION AND MATURITIES
                                 
            Average    
            Interest   Remaining
Debt Composition (2)   Amount   Rate (3)   Maturities (2)
Conventional Debt
                    2009     $ 35,801  
Long-term, fixed rate
  $ 3,440,625               2010     $ 171,062  
Long-term, variable rate
    201,801               2011     $ 510,886  
Variable rate facilities (4)
    —               2012     $ 620,161  
                     
Subtotal, Conventional
    3,642,426       5.7 %     2013     $ 433,026  
                     
 
                               
Tax-Exempt Debt
                               
Long-term, fixed rate
    163,981                          
Long-term, variable rate
    628,926                          
Subtotal, Tax-Exempt
    792,907       2.8 %                
                     
 
                               
Total Debt
  $ 4,435,333       5.2 %                
                     
CAPITALIZED COSTS
                         
                    Non-Rev  
    Cap     Cap     Capex  
    Interest     Overhead     per Home  
Q309
  $ 11,878     $ 5,680     $ 59  
Q209
  $ 13,677     $ 6,610     $ 32  
Q109
  $ 12,368     $ 6,507     $ 8  
Q408
  $ 16,996     $ 7,836     $ 290  
Q308
  $ 18,803     $ 7,753     $ 132  
COMMUNITY INFORMATION
                 
            Apartment
    Communities   Homes
Current Communities
    163       46,693  
Development Communities
    9       3,421  
Development Rights
    27       6,788  
 
(1)   Per share amounts have been adjusted to reflect the impact of including unvested restricted shares.
 
(2)   Excludes debt associated with assets classified as held for sale.
 
(3)   Includes costs of financing such as credit enhancement fees, trustees’ fees, etc.
 
(4)   Represents the Company’s $1 billion unsecured credit facility, of which no amount was drawn at September 30, 2009.
 

 


 

 
 
Attachment 2
AvalonBay Communities, Inc.
Detailed Operating Information
September 30, 2009

(Dollars in thousands except per share data)
(unaudited)
                                                 
    Q3     Q3             YTD     YTD        
    2009     2008     % Change     2009     2008     % Change  
Revenue:
                                               
Rental and other income
  $ 220,173     $ 213,768       3.0 %   $ 652,418     $ 619,880       5.2 %
Management, development and other fees
    1,878       1,622       15.8 %     5,423       4,805       12.9 %
 
                               
Total
    222,051       215,390       3.1 %     657,841       624,685       5.3 %
 
                               
 
                                               
Operating expenses:
                                               
Direct property operating expenses, excluding property taxes
    57,026       53,118       7.4 %     164,456       147,601       11.4 %
Property taxes
    21,710       18,756       15.7 %     63,643       56,276       13.1 %
Property management and other indirect operating expenses
    8,832       9,689       (8.8 %)     28,510       30,257       (5.8 %)
 
                               
Total operating expenses
    87,568       81,563       7.4 %     256,609       234,134       9.6 %
 
                               
 
                                               
Interest expense, net
    (41,208 )     (28,363 )     45.3 %     (107,836 )     (85,620 )     25.9 %
General and administrative expense
    (5,750 )     (9,318 )     (38.3 %)     (18,388 )     (26,821 )     (31.4 %)
Joint venture income
    190       495       (61.6 %)     4,139       4,329       (4.4 %)
Investments and investment management expense
    (976 )     (1,229 )     (20.6 %)     (2,799 )     (3,643 )     (23.2 %)
Expensed development and other pursuit costs
    (1,721 )     (715 )     140.7 %     (5,096 )     (3,044 )     67.4 %
Depreciation expense
    (54,960 )     (48,698 )     12.9 %     (159,935 )     (140,885 )     13.5 %
Impairment loss
    —       —       N/A       (20,302 )     —       N/A  
Gain on sale of land
    241       —       N/A       241       —       N/A  
 
                               
Income from continuing operations
    30,299       45,999       (34.1 %)     91,256       134,867       (32.3 %)
Income from discontinued operations (1)
    1,132       3,176       (64.4 %)     3,998       16,163       (75.3 %)
Gain on sale of communities
    26,670       183,711       (85.5 %)     26,670       257,850       (89.7 %)
 
                               
Total discontinued operations
    27,802       186,887       (85.1 %)     30,668       274,013       (88.8 %)
 
                               
Net income
    58,101       232,886       (75.1 %)     121,924       408,880       (70.2 %)
Net expense attributable to redeemable noncontrolling interests
    53       695       (92.4 %)     1,329       484       174.6 %
 
                               
Net income attributable to the Company
    58,154       233,581       (75.1 %)     123,253       409,364       (69.9 %)
Dividends attributable to preferred stock
    —       (2,175 )     (100.0 %)     —       (6,525 )     (100.0 %)
 
                               
 
                                               
Net income attributable to common stockholders
  $ 58,154     $ 231,406       (74.9 %)   $ 123,253     $ 402,839       (69.4 %)
 
                               
 
                                               
Net income attributable to common
stockholders per common
share — basic
  $ 0.72     $ 3.00       (76.0 %)   $ 1.55     $ 5.23       (70.4 %)
 
                               
 
                                               
Net income attributable to common
stockholders per common
share — diluted
  $ 0.72     $ 2.98       (75.8 %)   $ 1.54     $ 5.20       (70.4 %)
 
                               
 
(1)   Reflects net income for investments in real estate classified as discontinued operations as of September 30, 2009 and investments in real estate sold during the period from January 1, 2008 through September 30, 2009. The following table details income from discontinued operations for the periods shown:
                                 
    Q3     Q3     YTD     YTD  
    2009     2008     2009     2008  
Rental income
  $ 2,141     $ 8,043     $ 8,174     $ 36,751  
Operating and other expenses
    (655 )     (2,973 )     (2,418 )     (11,662 )
Interest expense, net
    —       (237 )     —       (1,314 )
Depreciation expense
    (354 )     (1,657 )     (1,758 )     (7,612 )
 
                       
Income from discontinued operations
  $ 1,132     $ 3,176     $ 3,998     $ 16,163  
 
                       
 

 


 

 
 
Attachment 3
AvalonBay Communities, Inc.
Condensed Consolidated Balance Sheets

(Dollars in thousands)
(unaudited)
                 
    September 30,     December 31,  
    2009     2008  
Real estate
  $ 7,460,796     $ 6,796,771  
Less accumulated depreciation
    (1,482,256 )     (1,322,698 )
 
           
Net operating real estate
    5,978,540       5,474,073  
 
               
Construction in progress, including land
    607,952       867,040  
Land held for development
    243,656       239,456  
Operating real estate assets held for sale, net
    26,106       69,174  
 
           
 
               
Total real estate, net
    6,856,254       6,649,743  
 
               
Cash and cash equivalents
    554,335       65,678  
Cash in escrow
    223,121       193,599  
Resident security deposits
    25,917       29,935  
Other assets
    286,793       235,398  
 
           
 
               
Total assets
  $ 7,946,420     $ 7,174,353  
 
           
 
               
Unsecured notes, net
  $ 2,080,295     $ 2,002,965  
Unsecured facilities
    —       124,000  
Notes payable
    2,352,556       1,547,492  
Resident security deposits
    36,765       40,462  
Liabilities related to assets held for sale
    372       241  
Other liabilities
    389,323       532,844  
 
           
 
               
Total liabilities
  $ 4,859,311     $ 4,248,004  
 
           
 
               
Redeemable noncontrolling interests
    4,539       10,234  
 
               
Stockholders’ equity
    3,082,570       2,916,115  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 7,946,420     $ 7,174,353  
 
           
 

 


 

 
 
Attachment 4
AvalonBay Communities, Inc.
Quarterly Revenue and Occupancy Changes — Established Communities (1)
September 30, 2009
                                                                                 
    Apartment     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s) (3)  
    Homes     Q3 09     Q3 08     % Change     Q3 09     Q3 08     % Change     Q3 09     Q3 08     % Change  
New England
                                                                               
Boston, MA
    3,289     $ 1,962     $ 1,983       (1.1 %)     94.7 %     96.6 %     (1.9 %)   $ 18,326     $ 18,889       (3.0 %)
Fairfield-New Haven, CT
    2,518       1,916       2,057       (6.9 %)     96.2 %     96.2 %     0.0 %     13,926       14,955       (6.9 %)
 
                                                 
New England Average
    5,807       1,942       2,015       (3.6 %)     95.3 %     96.4 %     (1.1 %)     32,252       33,844       (4.7 %)
 
                                                 
 
                                                                               
Metro NY/NJ
                                                                               
New Jersey
    2,750       2,019       2,213       (8.8 %)     96.8 %     95.4 %     1.4 %     16,127       17,411       (7.4 %)
New York, NY
    1,936       2,603       2,717       (4.2 %)     97.1 %     97.5 %     (0.4 %)     14,678       15,388       (4.6 %)
Long Island, NY
    1,621       2,236       2,360       (5.3 %)     95.5 %     94.7 %     0.8 %     10,382       10,867       (4.5 %)
 
                                                 
Metro NY/NJ Average
    6,307       2,254       2,407       (6.4 %)     96.6 %     95.9 %     0.7 %     41,187       43,666       (5.7 %)
 
                                                 
 
                                                                               
Mid-Atlantic/Midwest
                                                                               
Washington Metro
    5,787       1,741       1,745       (0.2 %)     96.5 %     96.6 %     (0.1 %)     29,188       29,290       (0.3 %)
Chicago, IL
    896       1,442       1,501       (3.9 %)     96.7 %     96.2 %     0.5 %     3,750       3,880       (3.4 %)
 
                                                 
Mid-Atlantic/Midwest Average
    6,683       1,701       1,714       (0.8 %)     96.6 %     96.5 %     0.1 %     32,938       33,170       (0.7 %)
 
                                                 
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    1,943       1,261       1,340       (5.9 %)     94.7 %     95.8 %     (1.1 %)     6,964       7,490       (7.0 %)
 
                                                 
Pacific Northwest Average
    1,943       1,261       1,340       (5.9 %)     94.7 %     95.8 %     (1.1 %)     6,964       7,490       (7.0 %)
 
                                                 
 
                                                                               
Northern California
                                                                               
San Jose, CA
    2,542       1,849       1,990       (7.1 %)     96.7 %     96.8 %     (0.1 %)     13,637       14,690       (7.2 %)
San Francisco, CA
    1,170       2,219       2,364       (6.1 %)     95.8 %     96.4 %     (0.6 %)     7,464       8,004       (6.7 %)
Oakland-East Bay, CA
    720       1,460       1,577       (7.4 %)     97.0 %     96.8 %     0.2 %     3,059       3,297       (7.2 %)
 
                                                 
Northern California Average
    4,432       1,883       2,021       (6.8 %)     96.5 %     96.7 %     (0.2 %)     24,160       25,991       (7.0 %)
 
                                                 
 
                                                                               
Southern California
                                                                               
Los Angeles, CA
    1,447       1,568       1,698       (7.7 %)     95.9 %     94.5 %     1.4 %     6,525       6,967       (6.3 %)
Orange County, CA
    1,174       1,410       1,484       (5.0 %)     92.5 %     95.2 %     (2.7 %)     4,593       4,977       (7.7 %)
San Diego, CA
    1,058       1,476       1,505       (1.9 %)     94.2 %     96.3 %     (2.1 %)     4,411       4,593       (4.0 %)
 
                                                 
Southern California Average
    3,679       1,491       1,574       (5.3 %)     94.4 %     95.2 %     (0.8 %)     15,529       16,537       (6.1 %)
 
                                                 
 
                                                                               
Average/Total Established
    28,851     $ 1,842     $ 1,930       (4.6 %)     96.0 %     96.2 %     (0.2 %)   $ 153,030     $ 160,698       (4.8 %)
 
                                                 
 
(1)   Established Communities are communities with stabilized operating expenses as of January 1, 2008 such that a comparison of 2008 to 2009 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the average lease term.
 
(3)   With concessions reflected on a cash basis, rental revenue from Established Communities decreased 4.1% between years.
 

 


 

 
 
Attachment 5
AvalonBay Communities, Inc.
*Sequential Quarterly* Revenue and Occupancy Changes — Established Communities (1)
September 30, 2009
                                                                                 
    Apartment     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s)  
    Homes     Q3 09     Q209     % Change     Q3 09     Q209     % Change     Q3 09     Q209     % Change  
New England
                                                                               
Boston, MA
    3,289     $ 1,962     $ 1,969       (0.4 %)     94.7 %     95.8 %     (1.1 %)   $ 18,326     $ 18,606       (1.5 %)
Fairfield-New Haven, CT
    2,518       1,916       1,952       (1.8 %)     96.2 %     95.5 %     0.7 %     13,926       14,076       (1.1 %)
 
                                                 
New England Average
    5,807       1,942       1,961       (1.0 %)     95.3 %     95.7 %     (0.4 %)     32,252       32,682       (1.3 %)
 
                                                 
 
                                                                               
Metro NY/NJ
                                                                               
New Jersey
    2,750       2,019       2,096       (3.7 %)     96.8 %     95.3 %     1.5 %     16,127       16,487       (2.2 %)
New York, NY
    1,936       2,603       2,654       (1.9 %)     97.1 %     96.7 %     0.4 %     14,678       14,897       (1.5 %)
Long Island, NY
    1,621       2,236       2,295       (2.6 %)     95.5 %     95.5 %     0.0 %     10,382       10,655       (2.6 %)
 
                                                 
Metro NY/NJ Average
    6,307       2,254       2,318       (2.8 %)     96.6 %     95.8 %     0.8 %     41,187       42,039       (2.0 %)
 
                                                 
 
                                                                               
Mid-Atlantic/Midwest
                                                                               
Washington Metro
    5,787       1,741       1,738       0.2 %     96.5 %     96.1 %     0.4 %     29,188       28,998       0.7 %
Chicago, IL
    896       1,442       1,459       (1.2 %)     96.7 %     96.5 %     0.2 %     3,750       3,785       (0.9 %)
 
                                                 
Mid-Atlantic/Midwest Average
    6,683       1,701       1,701       0.0 %     96.6 %     96.1 %     0.5 %     32,938       32,783       0.5 %
 
                                                 
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    1,943       1,261       1,312       (3.9 %)     94.7 %     93.7 %     1.0 %     6,964       7,167       (2.8 %)
 
                                                 
Pacific Northwest Average
    1,943       1,261       1,312       (3.9 %)     94.7 %     93.7 %     1.0 %     6,964       7,167       (2.8 %)
 
                                                 
 
                                                                               
Northern California
                                                                               
San Jose, CA
    2,542       1,849       1,930       (4.2 %)     96.7 %     96.1 %     0.6 %     13,637       14,151       (3.6 %)
San Francisco, CA
    1,170       2,219       2,301       (3.6 %)     95.8 %     94.8 %     1.0 %     7,464       7,655       (2.5 %)
Oakland-East Bay, CA
    720       1,460       1,522       (4.1 %)     97.0 %     96.1 %     0.9 %     3,059       3,158       (3.1 %)
 
                                                 
Northern California Average
    4,432       1,883       1,962       (4.0 %)     96.5 %     95.7 %     0.8 %     24,160       24,964       (3.2 %)
 
                                                 
 
Southern California
                                                                               
Los Angeles, CA
    1,447       1,568       1,628       (3.7 %)     95.9 %     93.3 %     2.6 %     6,525       6,593       (1.0 %)
Orange County, CA
    1,174       1,410       1,438       (1.9 %)     92.5 %     92.9 %     (0.4 %)     4,593       4,705       (2.4 %)
San Diego, CA
    1,058       1,476       1,504       (1.9 %)     94.2 %     92.7 %     1.5 %     4,411       4,434       (0.5 %)
 
                                                 
Southern California Average
    3,679       1,491       1,533       (2.7 %)     94.4 %     93.0 %     1.4 %     15,529       15,732       (1.3 %)
 
                                                 
 
                                                                               
Average/Total Established
    28,851     $ 1,842     $ 1,881       (2.1 %)     96.0 %     95.4 %     0.6 %   $ 153,030     $ 155,367       (1.5 %)
 
                                                 
 
(1)   Established Communities are communities with stabilized operating expenses as of January 1, 2008 such that a comparison of 2008 to 2009 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the average lease term.
 

 


 

 
 
Attachment 6
AvalonBay Communities, Inc.
Year-to-Date Revenue and Occupancy Changes — Established Communities (1)
September 30, 2009
                                                                                 
    Apartment     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s)  
    Homes     YTD 09     YTD 08     % Change     YTD 09     YTD 08     % Change     YTD 09     YTD 08     % Change  
New England
                                                                               
Boston, MA
    3,289     $ 1,971     $ 1,967       0.2 %     95.1 %     96.7 %     (1.6 %)   $ 55,503     $ 56,277       (1.4 %)
Fairfield-New Haven, CT
    2,518       1,947       2,042       (4.7 %)     95.2 %     96.4 %     (1.2 %)     42,002       44,626       (5.9 %)
 
                                                 
New England Average
    5,807       1,960       2,000       (2.0 %)     95.2 %     96.6 %     (1.4 %)     97,505       100,903       (3.4 %)
 
                                                 
 
                                                                               
Metro NY/NJ
                                                                               
New Jersey
    2,750       2,081       2,195       (5.2 %)     95.9 %     95.7 %     0.2 %     49,397       52,003       (5.0 %)
New York, NY
    1,936       2,645       2,690       (1.7 %)     96.5 %     97.0 %     (0.5 %)     44,457       45,449       (2.2 %)
Long Island, NY
    1,621       2,281       2,327       (2.0 %)     94.8 %     95.6 %     (0.8 %)     31,537       32,450       (2.8 %)
 
                                                 
Metro NY/NJ Average
    6,307       2,306       2,382       (3.2 %)     95.8 %     96.1 %     (0.3 %)     125,391       129,902       (3.5 %)
 
                                                 
 
                                                                               
Mid-Atlantic/Midwest
                                                                               
Washington Metro
    5,787       1,737       1,738       (0.1 %)     96.4 %     96.5 %     (0.1 %)     87,221       87,357       (0.2 %)
Chicago, IL
    896       1,454       1,478       (1.6 %)     96.2 %     96.3 %     (0.1 %)     11,282       11,475       (1.7 %)
 
                                                 
Mid-Atlantic/Midwest Average
    6,683       1,699       1,703       (0.2 %)     96.4 %     96.5 %     (0.1 %)     98,503       98,832       (0.3 %)
 
                                                 
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    1,943       1,304       1,328       (1.8 %)     94.3 %     95.6 %     (1.3 %)     21,507       22,195       (3.1 %)
 
                                                 
Pacific Northwest Average
    1,943       1,304       1,328       (1.8 %)     94.3 %     95.6 %     (1.3 %)     21,507       22,195       (3.1 %)
 
                                                 
 
                                                                               
Northern California
                                                                               
San Jose, CA
    2,542       1,920       1,963       (2.2 %)     96.5 %     96.8 %     (0.3 %)     42,397       43,486       (2.5 %)
San Francisco, CA
    1,170       2,289       2,336       (2.0 %)     95.8 %     96.8 %     (1.0 %)     23,097       23,817       (3.0 %)
Oakland-East Bay, CA
    720       1,518       1,574       (3.6 %)     96.4 %     96.4 %     0.0 %     9,478       9,830       (3.6 %)
 
                                                 
Northern California Average
    4,432       1,952       1,998       (2.3 %)     96.3 %     96.8 %     (0.5 %)     74,972       77,133       (2.8 %)
 
                                                 
 
                                                                               
Southern California
                                                                               
Los Angeles, CA
    1,447       1,619       1,692       (4.3 %)     94.0 %     95.5 %     (1.5 %)     19,830       21,052       (5.8 %)
Orange County, CA
    1,174       1,433       1,485       (3.5 %)     93.4 %     95.9 %     (2.5 %)     14,142       15,041       (6.0 %)
San Diego, CA
    1,058       1,499       1,485       0.9 %     93.7 %     95.2 %     (1.5 %)     13,385       13,467       (0.6 %)
 
                                                 
Southern California Average
    3,679       1,526       1,567       (2.6 %)     93.7 %     95.5 %     (1.8 %)     47,357       49,560       (4.4 %)
 
                                                 
 
                                                                               
Average/Total Established
    28,851     $ 1,875     $ 1,915       (2.1 %)     95.6 %     96.3 %     (0.7 %)   $ 465,235     $ 478,525       (2.8 %)
 
                                                 
 
(1)   Established Communities are communities with stabilized operating expenses as of January 1, 2008 such that a comparison of 2008 to 2009 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the average lease term.
 

 


 

 
 
Attachment 7
AvalonBay Communities, Inc.
Summary of Development and Redevelopment Activity (1) as of September 30, 2009
                                 
            Number     Number     Total  
            of     of     Capital Cost (2)  
            Communities     Homes     (millions)  
Portfolio Additions:
                               
 
2009 Projected Completions (3)
                               
Development
            9       2,526     $ 816.0  
Redevelopment (4)
            4       926       28.7  
 
                         
Total Additions
            13       3,452     $ 844.7  
 
                         
 
                               
2008 Actual Completions
                               
Development
            13       4,036     $ 1,044.3  
Redevelopment (4)
            6       1,213       27.8  
 
                         
Total Additions
            19       5,249     $ 1,072.1  
 
                         
 
                               
Pipeline Activity: (3)
                               
 
                               
Currently Under Construction
                               
Development
            9       3,421     $ 1,218.9  
Redevelopment (4)
            6       2,380       112.1  
 
                         
Subtotal
            15       5,801     $ 1,331.0  
 
                         
 
                               
Planning
                               
Development Rights
            27       6,788     $ 2,132.0  
 
                         
Total Pipeline
            42       12,589     $ 3,463.0  
 
                         
 
(1)   Represents activity for consolidated and unconsolidated entities.
 
(2)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(3)   Information represents projections and estimates.
 
(4)   Represents only cost of redevelopment activity, does not include original acquisition cost.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2009.
 

 


 

 
 
Attachment 8
AvalonBay Communities, Inc.
Development Communities as of September 30, 2009
                                                                                                 
    Percentage             Total                                     Avg                        
    Ownership     # of     Capital     Schedule     Rent                     % Occ  
    Upon     Apt     Cost (1)             Initial             Stabilized     Per     % Comp     % Leased     Physical     Economic  
    Completion     Homes     (millions)     Start     Occupancy     Complete     Ops (1)     Home (1)     (2)     (3)     (4)     (1) (5)  
                                                            Inclusive of                                  
                                                            Concessions                                  
                                                            See Attachment #14                                  
Under Construction:
                                                                                               
 
1. Avalon White Plains
    100 %     407     $ 153.0       Q2 2007       Q3 2008       Q4 2009       Q2 2010     $ 2,470       87.5 %     85.0 %     82.3 %     67.5 %
White Plains, NY
                                                                                               
2. Avalon Union City
    100 %     439       120.9       Q3 2007       Q1 2009       Q4 2009       Q2 2010       1,540       86.3 %     80.2 %     72.7 %     48.7 %
Union City, CA
                                                                                               
3. Avalon at Mission Bay North III
    100 %     260       150.0       Q4 2007       Q2 2009       Q4 2009       Q2 2010       3,215       100.0 %     76.2 %     73.8 %     43.0 %
San Francisco, CA
                                                                                               
4. Avalon Irvine (6)
    100 %     279       77.4       Q4 2007       Q2 2009       Q1 2010       Q3 2010       1,755       62.7 %     50.9 %     49.8 %     26.4 %
Irvine, CA
                                                                                               
5. Avalon Fort Greene
    100 %     631       306.8       Q4 2007       Q4 2009       Q1 2011       Q3 2011       3,605       N/A       14.6 %     N/A       N/A  
New York, NY
                                                                                               
6. Avalon Blue Hills
    100 %     276       46.6       Q2 2008       Q1 2009       Q4 2009       Q2 2010       1,405       88.4 %     76.4 %     66.7 %     46.6 %
Randolph, MA
                                                                                               
7. Avalon Walnut Creek (7)
    100 %     422       151.7       Q3 2008       Q3 2010       Q1 2011       Q3 2011       2,215       N/A       N/A       N/A       N/A  
Walnut Creek, CA
                                                                                               
8. Avalon Norwalk
    100 %     311       86.4       Q3 2008       Q3 2010       Q2 2011       Q4 2011       2,260       N/A       N/A       N/A       N/A  
Norwalk, CT
                                                                                               
9. Avalon Towers Bellevue
    100 %     396       126.1       Q4 2008       Q2 2010       Q2 2011       Q4 2011       2,390       N/A       N/A       N/A       N/A  
Bellevue, WA
                                                                                               
 
                                                                 
 
                                                                                               
Subtotal/Weighted Average
            3,421     $ 1,218.9                                     $ 2,415                                  
 
                                                                 
 
                                                                                               
Completed this Quarter:
                                                                                               
 
                                                                                               
1. Avalon Anaheim Stadium
    100 %     251     $ 98.5       Q2 2007       Q4 2008       Q3 2009       Q1 2010     $ 2,045       100.0 %     88.8 %     84.9 %     64.5 %
Anaheim, CA
                                                                                               
2. Avalon Charles Pond
    100 %     200       48.3       Q1 2008       Q1 2009       Q3 2009       Q1 2010       1,820       100.0 %     90.0 %     89.0 %     68.2 %
Coram, NY
                                                                                               
3. Avalon Northborough I
    100 %     163       26.2       Q4 2008       Q2 2009       Q3 2009       Q1 2010       1,485       100.0 %     85.9 %     84.0 %     46.1 %
Northborough, MA
                                                                                               
 
                                                                 
 
                                                                                               
Subtotal/Weighted Average
            614     $ 173.0                                     $ 1,820                                  
 
                                                                 
 
                                                                                               
Total/Weighted Average
            4,035     $ 1,391.9                                     $ 2,325                                  
 
                                                                 
 
                                                                                               
Weighted Average Projected NOI as a % of Total Capital Cost (1) (8)
                    5.7 %   Inclusive of   Concessions — See   Attachment #14                                                
                                             
Non-Stabilized Development Communities: (9)                   % Economic     Asset Cost Basis, Non-Stabilized Development:           Source  
                    Occ                      
                    (1) (5)                      
Prior Completions:
                          Capital Cost, Prior Quarter Completions   $ 180.4     Att. 8
Avalon Fashion Valley
    161     $ 64.7             Capital Cost, Current Completions     173.0     Att. 8
Avalon Encino
    131       62.2             Capital Cost, Under Construction     1,218.9     Att. 8
Avalon at the Hingham Shipyard
    235       53.5             Less: Remaining to Invest, Under Construction     ( 288.0 )   Att. 10
 
                                     
 
    527     $ 180.4       92.5%    
Total Asset Cost Basis, Non-Stabilized Development
  $ 1,284.3          
 
                                   
    Q3 2009 Net Operating Income/(Deficit) for communities under construction and non-stabilized development communities was $5.6 million. See Attachment #14.
 
(1)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(2)   Includes apartment homes for which construction has been completed and accepted by management as of October 23, 2009.
 
(3)   Includes apartment homes for which leases have been executed or non-refundable deposits have been paid as of October 23, 2009.
 
(4)   Physical occupancy based on apartment homes occupied as of October 23, 2009.
 
(5)   Represents Economic Occupancy for the third quarter of 2009.
 
(6)   This community was formerly known as Avalon Jamboree Village.
 
(7)   This community is being financed in part by a combination of third-party tax-exempt and taxable debt.
 
(8)   The Weighted Average calculation is based on the Company’s pro rata share of the Total Capital Cost for each community.
 
(9)   Represents Development Communities completed in prior quarters that had not achieved Stabilized Operations for the entire current quarter. Estimates are based on the Company’s pro rata share of the Total Capital Cost for each community.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2009.
 


 

 
 
Attachment 9
AvalonBay Communities, Inc.
Redevelopment Communities as of September 30, 2009
                                                                                         
                    Cost (millions)     Schedule     Avg     Number of Homes  
            # of     Pre-     Total                                     Rent             Out of  
    Percentage     Apt     Redevelopment     Capital     Acquisition /                     Restabilized     Per     Completed     Service  
    Ownership     Homes     Capital Cost     Cost (1)(2)     Completion     Start     Complete     Ops (2)     Home (2)     to date     @ 9/30/09  
                                                                    Inclusive of                  
                                                                    Concessions                  
                                                                    See Attachment #14                  
Under Redevelopment:
                                                                                       
 
1. Avalon Woodland Hills
    100 %     663     $ 72.1     $ 110.6       Q4 1997       Q4 2007       Q3 2010       Q1 2011     $ 1,550       513       62  
Woodland Hills, CA
                                                                                       
2. Avalon at Diamond Heights
    100 %     154       25.3       30.6       Q2 1994       Q4 2007       Q4 2010       Q2 2011       2,220       71       4  
San Francisco, CA
                                                                                       
3. Avalon Burbank (3)
    100 %     400       71.0       94.4       Q2 2002       Q3 2008       Q3 2010       Q1 2011       2,050       221       23  
Burbank, CA
                                                                                       
4. Avalon Pleasanton
    100 %     456       63.0       80.9       Q1 1994       Q2 2009       Q4 2011       Q2 2012       1,350       —       —  
Pleasanton, CA
                                                                                       
5. Avalon Watch
    100 %     512       30.2       50.6       Q4 1988       Q2 2009       Q1 2012       Q3 2012       1,455       —       —  
West Windsor, NJ
                                                                                       
6. Avalon at Cedar Ridge
    100 %     195       27.7       34.3       Q2 1997       Q3 2009       Q1 2011       Q3 2011       1,545       —       —  
Daly City, CA
                                                                                       
 
                                                                           
Subtotal
            2,380     $ 289.3     $ 401.4                                     $ 1,620       805       89  
 
                                                                           
 
                                                                                       
Completed this Quarter:
                                                                                       
 
1. Avalon Symphony Woods I
    100 %     176     $ 9.4     $ 13.9       Q4 1986       Q2 2008       Q3 2009       Q4 2009     $ 1,440       176       —  
Columbia, MD
                                                                                       
2. Avalon Symphony Woods II
    100 %     216       36.4       42.0       Q4 2006       Q2 2008       Q3 2009       Q4 2009       1,360       216       —  
Columbia, MD
                                                                                       
 
                                                                           
Subtotal
            392     $ 45.8     $ 55.9                                     $ 1,395       392       —  
 
                                                                           
Grand
Total/Weighted Average
            2,772     $ 335.1     $ 457.3                                     $ 1,590       1,197       89  
 
                                                                           
Weighted Average Projected NOI
as a % of Total Capital Cost (2)
                            7.8 %  Inclusive of Concessions — See Attachment #14                        
 
(1)   Inclusive of acquisition cost.
 
(2)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(3)   This community was formerly known as The Promenade.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2009.
 

 


 

 
 
Attachment 10
AvalonBay Communities, Inc.
Summary of Development and Redevelopment Community Activity (1) as of September 30, 2009
(Dollars in Thousands)

DEVELOPMENT (2)
                                         
    Apt Homes     Total Capital     Cost of Homes             Construction in  
    Completed &     Cost Invested     Completed &     Remaining to     Progress at  
    Occupied     During Period (3)     Occupied (4)     Invest (5)(6)     Period End  
Total - 2007 Actual
    2,540     $ 966,858     $ 664,267     $ 1,038,879     $ 924,761  
 
                                 
 
                                       
2008 Actual:
                                       
Quarter 1
    676     $ 179,408     $ 180,366     $ 857,491     $ 925,736  
Quarter 2
    948       178,794       226,235       1,001,288       912,290  
Quarter 3
    827       191,140       207,903       713,840       842,483  
Quarter 4
    456       175,620       143,734       666,623       820,218  
 
                                 
Total - 2008 Actual
    2,907     $ 724,962     $ 758,238                  
 
                                 
 
                                       
2009 Projected:
                                       
Quarter 1 (Actual)
    422     $ 124,422     $ 143,195     $ 526,116     $ 776,473  
Quarter 2 (Actual)
    719       128,785       222,384       395,611       745,907  
Quarter 3 (Actual)
    797       96,859       262,127       287,956       576,563  
Quarter 4 (Projected)
    508       96,450       169,212       191,506       465,626  
 
                                 
Total - 2009 Projected
    2,446     $ 446,516     $ 796,918                  
 
                                 

REDEVELOPMENT
                                 
            Total Capital             Reconstruction in  
    Avg Homes     Cost Invested     Remaining to     Progress at  
    Out of Service     During Period (3)     Invest (5)     Period End  
Total - 2007 Actual
          $ 18,612     $ 69,136     $ 30,683  
 
                             
 
                               
2008 Actual:
                               
Quarter 1
    112     $ 6,433     $ 65,666     $ 37,761  
Quarter 2
    160       11,266       75,362       46,265  
Quarter 3
    103       14,705       63,107       39,981  
Quarter 4
    52       13,514       53,214       47,362  
 
                             
Total - 2008 Actual
          $ 45,918                  
 
                             
 
                               
2009 Projected:
                               
Quarter 1 (Actual)
    89     $ 12,031     $ 40,056     $ 40,477  
Quarter 2 (Actual)
    75       15,983       61,157       38,027  
Quarter 3 (Actual)
    77       12,868       54,489       31,389  
Quarter 4 (Projected)
    82       12,430       42,059       33,380  
 
                             
Total - 2009 Projected
          $ 53,312                  
 
                             
 
(1)   Data is presented for all communities currently under development or redevelopment.
 
(2)   Projected periods include data for consolidated joint ventures at 100%. The offset for joint venture partners’ participation is reflected as redeemable noncontrolling interest.
 
(3)   Represents Total Capital Cost incurred or expected to be incurred during the quarter, year or in total. See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(4)   Represents projected Total Capital Cost of apartment homes completed and occupied during the quarter. Calculated by dividing Total Capital Cost for each Development Community by number of homes for the community, multiplied by the number of homes completed and occupied during the quarter.
 
(5)   Represents projected Total Capital Cost remaining to invest on communities currently under construction or reconstruction.
 
(6)   Amount for Q3 2009 includes $79.2 million expected to be financed by proceeds from third-party tax-exempt and taxable debt.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2009.
 

 


 

 
 
Attachment 11
AvalonBay Communities, Inc.
Future Development as of September 30, 2009
DEVELOPMENT RIGHTS (1)
                 
    Estimated     Total  
    Number     Capital Cost (1)  
Location of Development Right   of Homes     (millions)  
1. Northborough, MA Phase II
    219     $ 36  
2. West Long Branch, NJ
    180       30  
3. Rockville Centre, NY Phase I
    210       78  
4. Greenburgh, NY Phase II
    288       77  
5. Plymouth, MA Phase II
    92       20  
6. Wood-Ridge, NJ Phase I
    216       49  
7. Seattle, WA
    204       58  
8. Lynnwood, WA Phase II
    82       18  
9. Wilton, CT
    100       30  
10. New York, NY
    691       307  
11. San Francisco, CA
    173       65  
12. Rockville Centre, NY Phase II
    139       51  
13. Boston, MA
    180       97  
14. Dublin, CA Phase II
    505       147  
15. Shelton, CT
    251       66  
16. Roselle Park, NJ
    249       54  
17. Brooklyn, NY
    861       443  
18. Stratford, CT
    130       22  
19. Rockville, MD
    240       62  
20. Greenburgh, NY Phase III
    156       43  
21. Wood-Ridge, NJ Phase II
    190       43  
22. Tysons Corner, VA
    338       87  
23. Yaphank, NY
    343       57  
24. Cohasset, MA
    200       38  
25. North Bergen, NJ
    164       47  
26. Seattle, WA II
    272       81  
27. Andover, MA
    115       26  
 
           
 
               
Total
    6,788     $ 2,132  
 
           
 
(1)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2009.
 

 


 

 
 
Attachment 12
AvalonBay Communities, Inc.
Unconsolidated Real Estate Investments as of September 30, 2009

(Dollars in Thousands)
                                                                 
                            AVB                             AVB’s  
            # of     Total     Book     Outstanding Debt   Share  
Unconsolidated   Percentage     Apt     Capital     Value                 Interest     Maturity   of Partnership  
Real Estate Investments   Ownership     Homes     Cost (1)     Investment (2)     Amount     Type   Rate (3)     Date   Debt (4)  
AvalonBay Value Added Fund, LP
                                                               
1. Avalon at Redondo Beach
Los Angeles, CA
    N/A       105     $ 24,562       N/A     $ 21,033     Fixed     4.87 %   Oct 2011   $ 3,197  
2. Avalon Lakeside
Chicago, IL
    N/A       204       18,112       N/A       12,056     Fixed     5.74 %   Mar 2012     1,833  
3. Avalon Columbia
Baltimore, MD
    N/A       170       29,333       N/A       22,275     Fixed     5.48 %   Apr 2012     3,386  
4. Avalon Sunset
Los Angeles, CA
    N/A       82       20,830       N/A       12,750     Fixed     5.41 %   Feb 2014     1,938  
5. Avalon at Poplar Creek
Chicago, IL
    N/A       196       27,991       N/A       16,500     Fixed     4.83 %   Oct 2012     2,508  
6. Avalon at Civic Center
Norwalk, CA
    N/A       192       42,756       N/A       27,001     Fixed     5.38 %   Aug 2013     4,104  
7. Avalon Paseo Place
Fremont, CA
    N/A       134       24,825       N/A       11,800     Fixed     5.74 %   Nov 2013     1,794  
8. Avalon at Yerba Buena
San Francisco, CA
    N/A       160       66,791       N/A       41,500     Fixed     5.88 %   Mar 2014     6,308  
9. Avalon at Aberdeen Station
Aberdeen, NJ
    N/A       290       58,737       N/A       39,842     Fixed     5.64 %   Sep 2013     6,056  
10. The Springs
Corona, CA
    N/A       320       48,333       N/A       26,000     Fixed     6.06 %   Oct 2014     3,952  
11. Avalon Lombard
Lombard, IL
    N/A       256       35,221       N/A       17,243     Fixed     5.43 %   Jan 2014     2,621  
12. Avalon Cedar Place
Columbia, MD
    N/A       156       24,406       N/A       12,000     Fixed     5.68 %   Feb 2014     1,824  
13. Avalon Centerpoint
Baltimore, MD
    N/A       392       79,409       N/A       45,000     Fixed     5.74 %   Dec 2013     6,840  
 
                                                             
14. Middlesex Crossing
Billerica, MA
    N/A       252       37,920       N/A       24,100     Fixed     5.49 %   Dec 2013     3,663  
15. Avalon Crystal Hill
Ponoma, NY
    N/A       168       38,577       N/A       24,500     Fixed     5.43 %   Dec 2013     3,724  
16. Avalon Skyway
San Jose, CA
    N/A       348       77,733       N/A       37,500     Fixed     6.11 %   Mar 2014     5,700  
17. Avalon Rutherford Station
East Rutherford, NJ
    N/A       108       36,253       N/A       20,168     Fixed     6.13 %   Sep 2016     3,066  
18. South Hills Apartments
West Covina, CA
    N/A       85       24,756       N/A       11,761     Fixed     5.92 %   Dec 2013     1,788  
19. Weymouth Place
Weymouth, MA
    N/A       211       25,291       N/A       13,455     Fixed     5.12 %   Mar 2015     2,045  
 
                                                               
Fund I corporate debt
    N/A       N/A       N/A       N/A       3,000     Variable     1.65 %   2009 (8)     456  
 
                                                 
 
                                                               
 
    15.2 %     3,829     $ 741,836     $ 108,113     $ 439,484           5.6 %       $ 66,803  
 
                                                 
 
                                                               
AvalonBay Value Added Fund II, LP
                                                               
1. Verona Apartments
Bellevue, WA
    N/A       220     $ 33,139       N/A     $ 21,515     Fixed     5.52 %   Jun 2019   $ 6,723  
Fund II corporate debt
    N/A       N/A       N/A       N/A       1,000     Variable     2.75 %   2010 (9)     313  
 
                                                 
 
    31.25 %     220     $ 33,139     $ 17,284     $ 22,515           5.4 %       $ 7,036  
 
                                                 
 
                                                               
Other Operating Joint Ventures
                                                               
1. Avalon Chrystie Place I (5)
New York, NY
    20.0 %     361       135,247       25,425       117,000     Variable     0.26 %   Nov 2036     23,400  
2. Avalon at Mission Bay North II (5) San Francisco, CA
    25.0 %     313       123,881       28,330       105,000     Fixed     6.02 %   Dec 2015     26,250  
3. Avalon Del Rey
Los Angeles, CA
    30.0 %     309       70,037       18,264       46,159     Variable     3.60 %   April 2016     13,848  
 
                                                               
Other Development Joint Ventures
                                                               
1. Aria at Hathorne (6) (7)
Danvers, MA
    50.0 %     64       N/A       5,156       3,304     Variable     2.95 %   Jun 2010   $ 1,652  
 
                                                   
 
            1,047     $ 329,165     $ 76,923     $ 271,463           3.1 %       $ 65,150  
 
                                                   
 
                                                               
 
            5,096     $ 1,104,140     $ 202,320     $ 733,462           4.7 %       $ 138,989  
 
                                                   
 
(1)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(2)   These unconsolidated real estate investments are accounted for under the equity method of accounting. AVB Book Value Investment represents the Company’s recorded equity investment plus the Company’s pro rata share of outstanding debt.
 
(3)   Represents weighted average rate on outstanding debt.
 
(4)   The Company has not guaranteed the debt of its unconsolidated investees and bears no responsibility for the repayment, other than the construction completion and related financing guarantee for Avalon Chrystie Place I associated with the construction completion and occupancy certificate.
 
(5)   After the venture makes certain threshold distributions to the third-party partner, the Company generally receives 50% of all further distributions.
 
(6)   The Company has contributed land at a stepped up basis as its only capital contribution to this development. The Company is not guaranteeing the construction or acquisition loans, nor is it responsible for any cost over runs until certain thresholds are satisfied.
 
(7)   After the venture makes certain threshold distributions to the Company, AVB receives 50% of all further distributions.
 
(8)   As of September 30, 2009, these borrowings are drawn under an unsecured credit facility maturing in December 2009.
 
(9)   As of September 30, 2009, these borrowings are drawn under an unsecured credit facility maturing in December 2010.
 

 


 

 
 
Attachment 13
AvalonBay Communities, Inc.
Summary of Disposition Activity (1) as of September 30, 2009

(Dollars in thousands)
                                                 
                    Accumulated             Weighted Average        
Number of   Gross Sales             Depreciation     Economic     Initial Year     Weighted Average  
Communities Sold (2)   Price     GAAP Gain     and Other     Gain (4)     Mkt. Cap Rate (3) (4)     Unleveraged IRR (3) (4)  
1998:
                                               
9 Communities
  $ 170,312     $ 25,270     $ 23,438     $ 1,832       8.1 %     16.2 %
 
                                       
 
                                               
1999:
                                               
16 Communities
  $ 317,712     $ 47,093     $ 27,150     $ 19,943       8.3 %     12.1 %
 
                                       
 
                                               
2000:
                                               
8 Communities
  $ 160,085     $ 40,779     $ 6,262     $ 34,517       7.9 %     15.3 %
 
                                       
 
                                               
2001:
                                               
7 Communities
  $ 241,130     $ 62,852     $ 21,623     $ 41,229       8.0 %     14.3 %
 
                                       
 
                                               
2002:
                                               
1 Community
  $ 80,100     $ 48,893     $ 7,462     $ 41,431       5.4 %     20.1 %
 
                                       
 
                                               
2003:
                                               
12 Communities, 1 Land Parcel (5)
  $ 460,600     $ 184,438     $ 52,613     $ 131,825       6.3 %     15.3 %
 
                                       
 
                                               
2004:
                                               
5 Communities, 1 Land Parcel
  $ 250,977     $ 122,425     $ 19,320     $ 103,105       4.8 %     16.8 %
 
                                       
 
                                               
2005:
                                               
7 Communities, 1 Office Building,
3 Land Parcels (6)
  $ 382,720     $ 199,766     $ 14,929     $ 184,838       3.8 %     18.0 %
 
                                       
 
                                               
2006:
                                               
4 Communities, 3 Land Parcels (7)
  $ 281,485     $ 117,539     $ 21,699     $ 95,840       4.6 %     15.2 %
 
                                       
 
                                               
2007:
                                               
5 Communities, 1 Land Parcel (8)
  $ 273,896     $ 163,352     $ 17,588     $ 145,764       4.6 %     17.8 %
 
                                       
 
                                               
2008:
                                               
11 Communities (9)
  $ 646,200     $ 288,384     $ 56,469     $ 231,915       5.1 %     14.1 %
 
                                       
 
                                               
2009:
                                               
2 Communities, 1 Land Parcel
  $ 69,761     $ 26,911     $ 4,000     $ 22,911       6.8 %     14.6 %
 
                                       
 
                                               
1998 - 2009 Total
  $ 3,334,978     $ 1,327,702     $ 272,553     $ 1,055,150       5.8 %     15.4 %
 
                                       
 
(1)   Activity excludes dispositions to joint venture entities in which the Company retains an economic interest.
 
(2)   For dispositions through September 30, 2009, the Weighted Average Holding Period is 7.6 years.
 
(3)   For purposes of this attachment, land sales and the disposition of an office building are not included in the calculation of Weighted Average Holding Period, Weighted Average Initial Year Market Cap Rate, or Weighted Average Unleveraged IRR.
 
(4)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(5)   2003 GAAP gain, for purposes of this attachment, includes $23,448 related to the sale of a community in which the Company held a 50% membership interest.
 
(6)   2005 GAAP gain includes the recovery of an impairment loss of $3,000 recorded in 2002 related to one of the land parcels sold in 2005. This loss was recorded to reflect the land at fair value based on its entitlement status at the time it was determined to be planned for disposition.
 
(7)   2006 GAAP gain, for purposes of this attachment, includes $6,609 related to the sale of a community in which the Company held a 25% equity interest.
 
(8)   2007 GAAP gain, for purposes of this attachment, includes $56,320 related to the sale of a partnership interest in which the Company held a 50% equity interest.
 
(9)   2008 GAAP gain, for purposes of this attachment, includes $3,483 related to the sale of a community held by the Fund in which the Company holds a 15.2% equity interest.
 

 


 

Attachment 14
AvalonBay Communities, Inc.
Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
This release, including its attachments, contains certain non-GAAP financial measures and other terms. The definition and calculation of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. The non-GAAP financial measures referred to below should not be considered an alternative to net income as an indication of our performance. In addition, these non-GAAP financial measures do not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered as an alternative measure of liquidity or as indicative of cash available to fund cash needs.
FFO is determined based on a definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). FFO is calculated by the Company as Net Income or loss computed in accordance with GAAP, adjusted for gains or losses on sales of previously depreciated operating communities, extraordinary gains or losses (as defined by GAAP), cumulative effect of a change in accounting principle and depreciation of real estate assets, including adjustments for unconsolidated partnerships and joint ventures. Management generally considers FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses related to dispositions of previously depreciated operating communities and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. A reconciliation of FFO to Net Income is as follows (dollars in thousands):
                                 
 
 
    Q3     Q3     YTD     YTD  
    2009     2008     2009     2008  
Net income attributable to the Company
  $ 58,154     $ 233,581     $ 123,253     $ 409,364  
Dividends attributable to preferred stock
    —       (2,175 )     —       (6,525 )
Depreciation — real estate assets, including discontinued operations and joint venture adjustments
    56,239       51,263       163,891       151,307  
Distributions to noncontrolling interests, including discontinued operations
    14       57       52       171  
Gain on sale of unconsolidated entities holding previously depreciated real estate assets
    —       —       —       (3,483 )
Gain on sale of previously depreciated real estate assets
    (26,670 )     (183,711 )     (26,670 )     (257,850 )
 
                       
 
                               
 
                       
FFO attributable to common stockholders
  $ 87,737     $ 99,015     $ 260,526     $ 292,984  
 
                       
 
                               
Average shares outstanding — diluted
    80,609,277       77,580,847       80,170,093       77,516,222  
Earnings per share — diluted
  $ 0.72     $ 2.98     $ 1.54     $ 5.20  
 
                       
FFO per common share — diluted
  $ 1.09     $ 1.28     $ 3.25     $ 3.78  
 
                       
 
                               
 

 


 

Attachment 14 (continued)
Projected FFO, as provided within this release in the Company’s outlook, is calculated on a basis consistent with historical FFO, and is therefore considered to be an appropriate supplemental measure to projected net income from projected operating performance. A reconciliation of the range provided for Projected FFO per share (diluted) for the fourth quarter and full year 2009 to the range provided for Projected EPS (diluted) is as follows:
                 
 
 
               
    Low     High  
    range     range  
Projected EPS (diluted) — Q4 09
  $ 0.53     $ 0.57  
Projected depreciation (real estate related)
    0.71       0.75  
Projected gain on sale of operating communities
    (0.63 )     (0.67 )
 
           
Projected FFO per share (diluted) — Q4 09
  $ 0.61     $ 0.65  
 
           
 
               
Projected EPS (diluted) — Full Year 2009
  $ 2.07     $ 2.11  
Projected depreciation (real estate related)
    2.76       2.80  
Projected gain on sale of operating communities
    (0.97 )     (1.01 )
 
           
Projected FFO per share (diluted) — Full Year 2009
  $ 3.86     $ 3.90  
 
           
 
               
 
The Company’s results for the nine months ended September 30, 2009, the Company’s outlook for the quarter and year ended December 31, 2009, and the comparable prior year periods include the non-routine items outlined in the following table:
 
 
Non-Routine Items
Decrease (Increase) in Net Income and FFO
(dollars in thousands)
 
    YTD             Full Year     YTD             Full Year  
    Q3 08     Q4 08     2008     Q3 09     Q4 09 (1)     2009 (1)  
Land impairments
  $ —     $ 57,899     $ 57,899     $ 20,302     $ —     $ 20,302  
Abandoned pursuits (2)
    —       6,611       6,611       1,139       —       1,139  
Severance and related costs
    —       3,400       3,400       2,000       —       2,000  
Federal excise tax
    —       3,200       3,200       (485 )     2,900       2,415  
Loss/(Gain) on medium term notes repurchase
    —       (1,839 )     (1,839 )     (1,062 )     26,271       25,208  
Gain on sale of land
    —       —       —       (241 )     —       (241 )
Promoted interest in joint venture
    —       —       —       (3,894 )     —       (3,894 )
Legal settlement proceeds, net
    —       —       —       (1,100 )     —       (1,100 )
Preferred stock deferred offering expenses
    —       3,566       3,566       —       —       —  
Fund II organizational costs
    1,209       —       1,209       —       —       —  
 
                                               
 
                                   
Total non-routine items
  $ 1,209     $ 72,837     $ 74,046     $ 16,659     $ 29,171     $ 45,829  
 
                                   
 
                                               
Weighted Average Dilutive Shares Outstanding
    77,516,222       77,734,587       77,578,852       80,170,093       81,903,599       80,586,863  
 
 
(1)   Amounts shown are projected results.
 
(2)   Abandoned pursuits includes costs expensed by the Company for individual pursuits in excess of $1,000 in a given quarter.
                                                 
 
NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excludes corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed development and other pursuit costs, net interest expense, general and administrative expense, joint venture income, net income or expense attributable to noncontrolling interests, depreciation expense, gain on sale of real estate assets and income from discontinued operations. The Company considers NOI to be an appropriate supplemental measure to net income of operating performance of a community or communities because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of corporate-level property management overhead or general and administrative costs. This is more reflective of the

 


 

Attachment 14 (continued)
operating performance of a community, and allows for an easier comparison of the operating performance of single assets or groups of assets. In addition, because prospective buyers of real estate have different overhead structures, with varying marginal impact to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or groups of assets.
A reconciliation of NOI (from continuing operations) to Net Income, as well as a breakdown of NOI by operating segment, is as follows (dollars in thousands):
                                 
 
 
                               
    Q3     Q3     YTD     YTD  
    2009     2008     2009     2008  
Net income
  $ 58,101     $ 232,886     $ 121,924     $ 408,880  
Indirect operating expenses, net of corporate income
    6,987       7,821       22,922       25,171  
Investments and investment management expense
    976       1,229       2,799       3,643  
Expensed development and other pursuit costs
    1,721       715       5,096       3,044  
Interest expense, net
    41,208       28,363       107,836       85,620  
General and administrative expense
    5,750       9,318       18,388       26,821  
Joint venture income
    (190 )     (495 )     (4,139 )     (4,329 )
Depreciation expense
    54,960       48,698       159,935       140,885  
Impairment loss — land holdings
    —       —       20,302       —  
Gain on sale of real estate assets
    (26,911 )     (183,711 )     (26,911 )     (257,850 )
Income from discontinued operations
    (1,132 )     (3,176 )     (3,998 )     (16,163 )
 
                       
NOI from continuing operations
  $ 141,470     $ 141,648     $ 424,154     $ 415,722  
 
                       
 
                               
Established:
                               
New England
  $ 19,993     $ 21,732     $ 60,986     $ 65,159  
Metro NY/NJ
    27,147       30,143       84,417       89,692  
Mid-Atlantic/Midwest
    19,713       20,060       60,914       62,203  
Pacific NW
    4,768       5,238       14,941       15,754  
No. California
    16,988       19,222       54,577       57,502  
So. California
    10,296       11,736       32,548       35,685  
 
                       
Total Established
    98,905       108,131       308,383       325,995  
 
                       
Other Stabilized
    21,185       19,794       61,296       46,087  
Development/Redevelopment
    21,380       13,723       54,475       43,640  
 
                       
NOI from continuing operations
  $ 141,470     $ 141,648     $ 424,154     $ 415,722  
 
                       
 
                               
 
NOI as reported by the Company does not include the operating results from discontinued operations (i.e., assets sold during the period January 1, 2008 through September 30, 2009). A reconciliation of NOI from communities sold or classified as discontinued operations to net income for these communities is as follows (dollars in thousands):
                                 
 
 
                               
    Q3     Q3     YTD     YTD  
    2009     2008     2009     2008  
Income from discontinued operations
  $ 1,132     $ 3,176     $ 3,998     $ 16,163  
Interest expense, net
    —       237       —       1,314  
Depreciation expense
    354       1,657       1,758       7,612  
 
                       
NOI from discontinued operations
  $ 1,486     $ 5,070     $ 5,756     $ 25,089  
 
                       
 
                               
NOI from assets sold
  $ 758     $ 4,239     $ 3,379     $ 22,617  
NOI from assets held for sale
    728       831       2,377       2,472  
 
                       
NOI from discontinued operations
  $ 1,486     $ 5,070     $ 5,756     $ 25,089  
 
                       
 
                               
 
Projected NOI, as used within this release for certain Development and Redevelopment Communities and in calculating the Initial Year Market Cap Rate for dispositions, represents management’s estimate, as of the date of this release (or as of the date of the

 


 

Attachment 14 (continued)
buyer’s valuation in the case of dispositions), of projected stabilized rental revenue minus projected stabilized operating expenses. For Development and Redevelopment Communities, Projected NOI is calculated based on the first year of Stabilized Operations, as defined below, following the completion of construction. In calculating the Initial Year Market Cap Rate, Projected NOI for dispositions is calculated for the first twelve months following the date of the buyer’s valuation. Projected stabilized rental revenue represents management’s estimate of projected gross potential (based on leased rents for occupied homes and Market Rents, as defined below, for vacant homes) minus projected economic vacancy and adjusted for concessions. Projected stabilized operating expenses do not include interest, income taxes (if any), depreciation or amortization, or any allocation of corporate-level property management overhead or general and administrative costs. The weighted average Projected NOI as a percentage of Total Capital Cost is weighted based on the Company’s share of the Total Capital Cost of each community, based on its percentage ownership.
Management believes that Projected NOI of the Development and Redevelopment communities, on an aggregated weighted average basis, assists investors in understanding management’s estimate of the likely impact on operations of the Development and Redevelopment Communities when the assets are complete and achieve stabilized occupancy (before allocation of any corporate-level property management overhead, general and administrative costs or interest expense). However, in this release the Company has not given a projection of NOI on a company-wide basis. Given the different dates and fiscal years for which NOI is projected for these communities, the projected allocation of corporate-level property management overhead, general and administrative costs and interest expense to communities under development or redevelopment is complex, impractical to develop, and may not be meaningful. Projected NOI of these communities is not a projection of the Company’s overall financial performance or cash flow. There can be no assurance that the communities under development or redevelopment will achieve the Projected NOI as described in this release.
Rental Revenue with Concessions on a Cash Basis is considered by the Company to be a supplemental measure to rental revenue in conformity with GAAP to help investors evaluate the impact of both current and historical concessions on GAAP based rental revenue and to more readily enable comparisons to revenue as reported by other companies. In addition, rental revenue (with concessions on a cash basis) allows an investor to understand the historical trend in cash concessions.
A reconciliation of rental revenue from Established Communities in conformity with GAAP to rental revenue (with concessions on a cash basis) is as follows (dollars in thousands):
 
                                 
    Q3     Q3     YTD     YTD  
    2009     2008     2009     2008  
Rental revenue (GAAP basis)
  $ 153,030     $ 160,698     $ 465,235     $ 478,525  
Concessions amortized
    2,094       1,740       6,437       5,015  
Concessions granted
    (1,701 )     (2,435 )     (5,761 )     (5,893 )
 
                       
 
                               
Rental revenue (with concessions on a cash basis)
  $ 153,423     $ 160,003     $ 465,911     $ 477,647  
 
                       
 
                               
% change — GAAP revenue
            (4.8 %)             (2.8 %)
 
                               
% change — cash revenue
            (4.1 %)             (2.5 %)
 
Economic Gain is calculated by the Company as the gain on sale in accordance with GAAP, less accumulated depreciation through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers Economic Gain to be an appropriate supplemental measure to gain on sale in accordance with GAAP because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain for each of the communities presented is estimated based on their respective final settlement statements. A reconciliation of Economic Gain to gain on sale in accordance with GAAP for both the nine months ended September 30, 2009 as well as prior years’ activities is presented on Attachment 13.
Interest Coverage is calculated by the Company as EBITDA from continuing operations, excluding land gains and gain on the sale of investments in real estate joint ventures, divided by the sum of interest expense, net, and preferred dividends. Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our ability to service debt obligations to that of other companies. EBITDA is defined by the Company as net income attributable to the Company before interest income and expense, income taxes, depreciation and amortization.

 


 

Attachment 14 (continued)
A reconciliation of EBITDA and a calculation of Interest Coverage for the third quarter of 2009 are as follows (dollars in thousands):
 
         
Net income attributable to the Company
  $ 58,154  
Interest expense, net
    41,208  
Interest expense (discontinued operations)
    —  
Depreciation expense
    54,960  
Depreciation expense (discontinued operations)
    354  
 
     
EBITDA
  $ 154,676  
 
     
 
       
EBITDA from continuing operations
  $ 126,520  
EBITDA from discontinued operations
    28,156  
 
     
 
       
EBITDA
  $ 154,676  
 
     
 
       
EBITDA
  $ 126,520  
Land gains
    (241 )
 
     
EBITDA from continuing operations, excluding land gains
  $ 126,279  
 
     
 
       
Interest expense, net
    41,208  
 
     
Interest charges
    41,208  
 
     
 
       
Interest coverage
    3.1  
 
     
 
Total Capital Cost includes all capitalized costs projected to be or actually incurred to develop the respective Development or Redevelopment Community, or Development Right, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, all as determined in accordance with GAAP. For Redevelopment Communities, Total Capital Cost excludes costs incurred prior to the start of redevelopment when indicated. With respect to communities where development or redevelopment was completed in a prior or the current period, Total Capital Cost reflects the actual cost incurred, plus any contingency estimate made by management. Total Capital Cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the total projected joint venture contribution amount. For joint ventures not in construction as presented on Attachment 12, Total Capital Cost is equal to gross real estate cost.
Initial Year Market Cap Rate is defined by the Company as Projected NOI of a single community for the first 12 months of operations (assuming no repositioning), less estimates for non-routine allowance of approximately $200 — $300 per apartment home, divided by the gross sales price for the community. Projected NOI, as referred to above, represents management’s estimate of projected rental revenue minus projected operating expenses before interest, income taxes (if any), depreciation, amortization and extraordinary items. For this purpose, management’s projection of operating expenses for the community includes a management fee of 3.0% - 3.5%. The Initial Year Market Cap Rate, which may be determined in a different manner by others, is a measure frequently used in the real estate industry when determining the appropriate purchase price for a property or estimating the value for a property. Buyers may assign different Initial Year Market Cap Rates to different communities when determining the appropriate value because they (i) may project different rates of change in operating expenses and capital expenditure estimates and (ii) may project different rates of change in future rental revenue due to different estimates for changes in rent and occupancy levels. The weighted average Initial Year Market Cap Rate is weighted based on the gross sales price of each community.
Unleveraged IRR on sold communities refers to the internal rate of return calculated by the Company considering the timing and amounts of (i) total revenue during the period owned by the Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated capital cost of the communities at the time of sale and (iv) total direct operating expenses during the period owned by the Company. Each of the items (i), (ii), (iii) and (iv) are calculated in accordance with GAAP.

 


 

Attachment 14 (continued)
The calculation of Unleveraged IRR does not include an adjustment for the Company’s general and administrative expense, interest expense, or corporate-level property management and other indirect operating expenses. Therefore, Unleveraged IRR is not a substitute for net income as a measure of our performance. Management believes that the Unleveraged IRR achieved during the period a community is owned by the Company is useful because it is one indication of the gross value created by the Company’s acquisition, development or redevelopment, management and sale of a community, before the impact of indirect expenses and Company overhead. The Unleveraged IRR achieved on the communities as cited in this release should not be viewed as an indication of the gross value created with respect to other communities owned by the Company, and the Company does not represent that it will achieve similar Unleveraged IRRs upon the disposition of other communities. The weighted average Unleveraged IRR for sold communities is weighted based on all cash flows over the holding period for each respective community, including net sales proceeds.
Unencumbered NOI as calculated by the Company represents NOI generated by real estate assets unencumbered by either outstanding secured debt or land leases (excluding land leases with purchase options that were put in place for governmental incentives or tax abatements) as a percentage of total NOI generated by real estate assets. The Company believes that current and prospective unsecured creditors of the Company view Unencumbered NOI as one indication of the borrowing capacity of the Company. Therefore, when reviewed together with the Company’s Interest Coverage, EBITDA and cash flow from operations, the Company believes that investors and creditors view Unencumbered NOI as a useful supplemental measure for determining the financial flexibility of an entity. A calculation of Unencumbered NOI for the nine months ended September 30, 2009 is as follows (dollars in thousands):
 
         
NOI for Established Communities
  $ 308,383  
NOI for Other Stabilized Communities
    61,296  
NOI for Development/Redevelopment Communities
    54,475  
 
     
Total NOI generated by real estate assets
    424,154  
NOI on encumbered assets
    149,369  
 
     
 
       
NOI on unencumbered assets
    274,785  
 
     
 
       
Unencumbered NOI
    64.8 %
 
     
 
Established Communities are identified by the Company as communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had Stabilized Operations, as defined below, as of the beginning of the prior year. Therefore, for 2009, Established Communities are consolidated communities that have Stabilized Operations as of January 1, 2008 and are not conducting or planning to conduct substantial redevelopment activities within the current year. Established Communities do not include communities that are currently held for sale or planned for disposition during the current year.
Development Communities are communities that are under construction and for which a final certificate of occupancy has not been received. These communities may be partially complete and operating.
Redevelopment Communities are communities where the Company owns a majority interest and where substantial redevelopment is in progress or is planned to begin during the current year. Redevelopment is considered substantial when capital invested during the reconstruction effort is expected to exceed either $5,000,000 or 10% of the community’s pre-development basis.
Average Rental Rates are calculated by the Company as rental revenue in accordance with GAAP, divided by the weighted average number of occupied apartment homes.
Economic Occupancy is defined as total possible revenue less vacancy loss as a percentage of total possible revenue. Total possible revenue is determined by valuing occupied units at contract rates and vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant apartments at their Market Rents, Economic Occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community’s gross revenue.
Market Rents as reported by the Company are based on the current market rates set by the managers of the Company’s communities based on their experience in renting their communities’ apartments and publicly available market data. Trends in market rents for a region as reported by others could vary. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

 


 

Attachment 14 (continued)
Non-Revenue Generating Capex represents capital expenditures that will not directly result in revenue earnings or expense savings.
Stabilized/Restabilized Operations is defined as the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.
Average Rent per Home, as calculated for certain Development and Redevelopment Communities in lease-up, reflects (i) actual average leased rents for those apartments leased through the end of the quarter net of estimated stabilized concessions, (ii) estimated market rents net of comparable concessions for all unleased apartments and (iii) includes actual and estimated other rental revenue. For Development and Redevelopment Communities not yet in lease-up, Average Rent per Home reflects management’s projected rents.
Development Rights are development opportunities in the early phase of the development process for which the Company either has an option to acquire land or enter into a leasehold interest, for which the Company is the buyer under a long-term conditional contract to purchase land or where the Company owns land to develop a new community. The Company capitalizes related predevelopment costs incurred in pursuit of new developments for which future development is probable.