EX-99.1
Published on February 4, 2010
Exhibit 99.1
For Immediate News Release
February 3, 2010
February 3, 2010
AVALONBAY COMMUNITIES, INC. ANNOUNCES
FOURTH QUARTER AND FULL YEAR 2009 OPERATING RESULTS
AND PROVIDES INITIAL 2010 FINANCIAL OUTLOOK
FOURTH QUARTER AND FULL YEAR 2009 OPERATING RESULTS
AND PROVIDES INITIAL 2010 FINANCIAL OUTLOOK
(Alexandria, VA) AvalonBay Communities, Inc.
(NYSE: AVB) reported today that Net Income
Attributable to Common Stockholders (Net Income)
for the quarter ended December 31, 2009 was
$32,394,000. This resulted in Earnings per Share
diluted (EPS) of
$0.40 for the quarter ended December 31, 2009,
compared to a Loss per Share, diluted of $0.02 for
the comparable period of 2008. For the year ended
December 31, 2009, EPS was $1.93 compared to $5.17
for the year ended December 31, 2008, a per share
decrease of 62.7%.
The increase in the fourth quarter 2009 EPS over
the prior year period is due primarily to the
non-cash charges from land impairments and
abandoned pursuit costs incurred in 2008.
In addition, asset sales and related gains in the fourth quarter of 2009 were larger than those in the fourth quarter of 2008.
The decrease for the full year 2009
EPS over the prior year is primarily due to
the reduced number of communities sold and amount
of gains related to these sales in 2009 as compared
to the prior year.
Funds from Operations attributable to common
stockholders diluted (FFO) for the quarter
ended December 31, 2009 on a per share basis increased 113.3% to $0.64
per share from $0.30 per share for the comparable
period of 2008. FFO per share for the full year
ended December 31, 2009 decreased by 4.4% to $3.89
from $4.07 for the comparable period of 2008.
During the fourth quarter 2009, the Company
recognized net charges for non-routine items of
approximately $29,000,000 due primarily to costs
associated with the tender offer on the Companys
unsecured notes completed in October. For the full
year 2009, the Company recognized net charges for
non-routine items of approximately $46,000,000 due
primarily to land impairment charges and costs
associated with the October unsecured notes tender.
Included in the non-routine charges for the quarter ended December 31, 2009, are impairments
for one unconsolidated asset and one land parcel, for a combined total impairment of approximately $3,500,000 million.
While the Company is not aware of any additional impairments present in its portfolio or development pipeline, the
Companys focus on value creation through development of new apartments and the existence of a large development
pipeline, presents valuation risk that could result in future impairment charges that are not apparent or determinable at this time.
Detail of the impacts of non-routine items on FFO
and Net Income per share amounts for the fourth
quarter and full year 2009 and 2008 are presented
in Attachment 17.
Adjusting for these non-routine items, FFO per
share for the three months and full year ended
December 31, 2009 would have decreased by 18.7% and
11.3%, respectively from the prior year periods.
Commenting on the Companys results, Bryce Blair,
Chairman and CEO, said Our fourth quarter report
caps a challenging year for the economy, our
industry and the Company. We expect 2010 to be a
transition year, where a continued weak economic
climate that pressures apartment performance will
trend into a period of stronger demand/supply
fundamentals for 2011 and beyond. We plan to
increase investment activity in 2010 to ensure we
deliver product into what we anticipate will be the
early growth phase of the next expansion.
Operating Results for the Quarter Ended December
31, 2009 Compared to the Prior Year Period
For the Company, including discontinued operations,
total revenue decreased by $615,000, or 0.3% to
$220,653,000. For Established Communities, rental
revenue decreased 6.1% due to an increase in
Economic Occupancy of 0.2% and a decrease in
Average Rental Rates of 6.3%. As a result, total
revenue for Established Communities decreased
$9,100,000 to $143,440,000. Operating expenses for
Established Communities increased $3,219,000, or 6.7% to $51,027,000. Accordingly, Net Operating
Income (NOI) for Established Communities
decreased by $12,319,000, or 11.8% to $92,413,000.
The following table reflects the percentage changes
in rental revenue, operating expenses and NOI for
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
Established Communities for the fourth quarter of 2008 compared to the fourth quarter of 2009:
| 4Q 09 Compared to 4Q 08 | ||||||||||||||||
| Rental | Operating | % of | ||||||||||||||
| Revenue | Expenses | NOI | NOI (1) | |||||||||||||
New England |
(5.4 | %) | 3.0 | % | (10.0 | %) | 20.0 | % | ||||||||
Metro NY/NJ |
(6.6 | %) | 6.0 | % | (11.7 | %) | 27.4 | % | ||||||||
Mid-Atlantic/Midwest |
(1.1 | %) | 8.6 | % | (6.3 | %) | 17.1 | % | ||||||||
Pacific NW |
(10.6 | %) | 17.1 | % | (21.7 | %) | 4.1 | % | ||||||||
No. California |
(10.2 | %) | 7.0 | % | (16.2 | %) | 19.4 | % | ||||||||
So. California |
(6.6 | %) | 8.3 | % | (12.4 | %) | 12.0 | % | ||||||||
Total |
(6.1 | %) | 6.7 | % | (11.8 | %) | 100.0 | % | ||||||||
| (1) | Total represents each regions % of total NOI from the Company, including discontinued operations. |
Operating Results for the Full Year December
31, 2009 Compared to the Prior Year
For the Company, including discontinued operations,
total revenue increased by $3,963,000, or 0.4% to
$886,668,000. For Established Communities, rental
revenue decreased 3.7% due to a decrease in
Economic Occupancy of 0.6% and a decrease in
Average Rental Rates of 3.1%. As a result, total
revenue for Established Communities decreased
$22,053,000 to $588,423,000. Operating expenses
for Established Communities increased $7,654,000,
or
4.0% to $201,296,000. Accordingly, NOI for
Established Communities decreased by $29,707,000,
or 7.1% to $387,127,000.
The following table reflects the percentage changes
in rental revenue, operating expenses and NOI for
Established Communities for the full year December
31, 2009 as compared to the full year December 31,
2008:
| Full Year 2009 Compared to Full Year 2008 | ||||||||||||||||
| Rental | Operating | % of | ||||||||||||||
| Revenue | Expenses | NOI | NOI (1) | |||||||||||||
New England |
(4.0 | %) | 2.5 | % | (7.5 | %) | 20.0 | % | ||||||||
Metro NY/NJ |
(4.3 | %) | 3.0 | % | (7.4 | %) | 27.4 | % | ||||||||
Mid-Atlantic/Midwest |
(0.6 | %) | 4.3 | % | (3.4 | %) | 16.7 | % | ||||||||
Pacific NW |
(5.0 | %) | 5.8 | % | (9.3 | %) | 4.6 | % | ||||||||
No. California |
(4.7 | %) | 4.8 | % | (7.9 | %) | 20.1 | % | ||||||||
So. California |
(5.0 | %) | 7.2 | % | (9.7 | %) | 11.2 | % | ||||||||
Total |
(3.7 | %) | 4.0 | % | (7.1 | %) | 100.0 | % | ||||||||
| (1) | Total represents each regions % 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:
| Full Year 09 | ||||||||
| 4Q 09 vs 4Q 08 | vs Full Year 08 | |||||||
Rental Revenue Change with |
(6.1 | %) | (3.7 | %) | ||||
Concessions on a GAAP Basis |
||||||||
Rental Revenue Change with |
||||||||
Concessions on a Cash Basis |
(5.2 | %) | (3.2 | %) | ||||
Development Activity
The Company completed the development of four
communities in the fourth quarter of 2009 totaling
1,382 apartment homes for an aggregate Total
Capital Cost of $465,200,000:
| | Avalon White Plains located in White Plains, NY contains 407 apartment homes and was completed for a Total Capital Cost of $153,000,000; | ||
| | Avalon Union City located in Union City, CA contains 439 apartment homes and was completed for a Total Capital Cost of $118,700,000; | ||
| | Avalon at Mission Bay North III located in San Francisco, CA contains 260 apartment homes and was completed for a Total Capital Cost of $147,400,000; and | ||
| | Avalon Blue Hills located in Randolph, MA contains 276 apartment homes and was completed for a Total Capital Cost of $46,100,000. |
During 2009, the Company completed the development
of nine communities containing an aggregate of
2,526 apartment homes for a Total Capital Cost of
$810,700,000.
During the fourth quarter of 2009, the Company
commenced the development of two communities:
Avalon Northborough II, located in Northborough, MA
and Avalon at West Long Branch, located in West
Long Branch, NJ. These two communities will contain
an aggregate 399 apartment homes when completed for
an estimated Total Capital Cost of $64,900,000.
These communities are the only development starts
by the Company in 2009.
At December 31, 2009, the Company had seven
communities under development, with a Total Capital
Cost of $813,300,000, and $245,000,000 of capital
remaining to be funded. This is a decrease from
December 31, 2008 when the Company had 14
communities under development with a Total Capital
Cost of $1,583,800,000.
Redevelopment Activity
During the fourth quarter of 2009, the Company
commenced the redevelopment of Avalon at Willow
Creek located in Fremont, CA. Avalon at Willow
Creek contains 235 apartment homes and will be
redeveloped for an estimated Total Capital Cost of
$7,500,000,
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
excluding costs incurred prior to
redevelopment. The Company did not complete any
redevelopments during the fourth quarter of 2009.
During 2009, the Company completed the
redevelopment of four communities containing 926 apartment homes for a Total
Capital Cost of $28,700,000, excluding costs incurred prior to
redevelopment.
Disposition Activity
During the fourth quarter of 2009, the Company sold
three communities: Avalon at Parkside, located in
San Jose, CA, Avalon Orange, located in New Haven,
CT, and Avalon at Flanders Hill, located in
Westborough, MA. These three communities contain 640 apartment homes and were sold for
an aggregate sales price of $110,175,000. These
dispositions resulted in a gain in accordance with
GAAP of approximately $34,190,000 and an Economic
Gain of approximately $21,563,000. The weighted
average Initial Year Market Cap Rate for these
three communities was 6.3% and the Unleveraged IRR
over a nine year average holding period was 11.5%.
During 2009, the Company sold five communities
containing 1,037 apartment homes. These
communities were sold for an aggregate sales price
of $179,675,000, resulting in a GAAP gain of
approximately $61,116,000 and an Economic Gain of
approximately $44,490,000. The weighted average
Initial Year Market Cap Rate related to these
dispositions was 6.5% and the Unleveraged IRR over
a weighted average holding period of approximately
10 years was 13.0%.
In January 2010, the Company sold Avalon at Danada
Farms, a 295 apartment home community, located in
Wheaton, IL for $45,450,000.
Investment Management Fund Activity
The Company currently has investments in and serves
as the manager for two private, discretionary
investment management vehicles.
In November 2009, AvalonBay Value Added Fund II,
L.P. (Fund II) purchased its second community
located in Fairfax, VA. The garden-style community
containing 491 homes, will be renamed Avalon Fair
Oaks and was acquired for a purchase price of
$71,000,000 or approximately $145,000 per apartment
home.
In February 2010, Fund II purchased its third
community located in Montgomery Village, MD. The
garden-style community, renamed Avalon Rothbury,
contains 203 homes and was acquired for a purchase
price of $31,250,000 or approximately $154,000 per
apartment home.
Financing, Liquidity and Balance Sheet Statistics
During 2009, the Company raised approximately
$1,722,000,000 from a variety of sources as
detailed
below:
| | Secured debt of $833,580,000, which includes $93,440,000 held in escrow, associated with a Development Right ; | ||
| | Gross proceeds from asset sales of approximately $193,200,000; | ||
| | Unsecured debt of $500,000,000; | ||
| | Issuance of common stock with net proceeds of approximately $103,000,000; and | ||
| | Additional joint venture partner capital commitments for Fund II of approximately $92,000,000. |
The
proceeds received from these transactions were used to fund the
Companys development and redevelopment activity,
to redeem certain secured and unsecured notes
(including the October 2009 unsecured note tender
discussed in the next section) and to repay all
amounts then outstanding on the Companys unsecured
credit facility discussed below.
At December 31, 2009, the Company had no amounts
outstanding under its $1,000,000,000 unsecured
credit facility and the Company had $316,367,000 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 full year December 31, 2009 was 65%.
Adjusting for the costs associated with the tender
offer completed in October 2009, discussed below,
Interest Coverage for the fourth quarter of 2009
was 2.7 times.
Capital Markets Activity
In October 2009, the Company completed a 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 recognized a charge for
the purchase premium and the accelerated
recognition of certain deferred issuance costs of
approximately $27,000,000 in the fourth quarter of
2009. All of the notes purchased by the Company
were cancelled.
In October 2009, the Company repaid the final
$112,200,000 outstanding under its $330,000,000 unsecured term loan in
advance of the January 2011 scheduled maturity date.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
Also in October 2009, the Company effectively
converted $300,000,000 principal of fixed rate
unsecured notes with a weighted average maturity of
approximately two years to floating rate debt at a
weighted average interest rate of three month LIBOR
plus 5.42%, through the execution of interest rate
swaps.
In December 2009, the Company repaid a $33,615,000
variable rate secured note, pursuant to its scheduled maturity.
In February 2010, the Company repaid a $13,691,000 6.47% fixed rate secured note in advance of its March 2012 scheduled maturity date.
2010 Financial Outlook
Management considers several third party economic
forecasts in setting operating expectations for
2010. Based on a composite view of these forecasts,
management expects job growth to emerge in the
second half of 2010. Growth in those age groups
that have historically demonstrated a higher
propensity to rent will continue to generate
pent-up demand for rental housing, which may
materialize as job markets improve. The for-sale
housing market is expected to remain sluggish in
most of the Companys markets during 2010. In
addition, the level of new rental completions in
the Companys markets is anticipated to decline
during 2010 from 2009 levels.
The following presents the Companys financial
outlook for 2010, the details of which are
summarized on Attachments 15 and 16.
Projected EPS is expected to be within a range of
$1.60 to $1.85 for the full year 2010.
The Company expects 2010 Projected FFO per share to
be in the range of $3.60 to $3.85 as compared to
$3.89 for the full year 2009, resulting in a
decrease in Projected FFO per share of
approximately 4% at the mid-point of the range.
For the first quarter of 2010, the Company expects
projected EPS within a range of $1.06 to $1.12. The
Company expects Projected FFO per share in the
first quarter of 2010 within a range of $0.89 to
$0.93.
The Companys 2010 financial outlook is based on a
number of assumptions and estimates, which are
provided on Attachment 15 of this release. The
primary assumptions and estimates include the
following:
Property Operations
| | The Company expects a decline in Established Communities revenue of 3.0% to 4.5%. | ||
| | The Company expects a change in Established Communities operating expenses of (1.0%) to 1.0%. | ||
| | The Company expects a decline in Established Communities NOI within a range of 5.0% to 7.0%. |
Development
| | The Company currently has seven communities under development. During 2010, the Company expects to disburse approximately $375,000,000 related to these communities and expected acquisitions of land for future development. | ||
| | The Company expects to complete the development of one community during 2010 for an aggregate Total Capital Cost of approximately $77,400,000. | ||
| | The Company anticipates starting approximately $380,000,000 of new development during 2010, of which $125,000,000 is expected to be disbursed during 2010. |
Dispositions
The Company expects gross sales proceeds from
planned asset dispositions of approximately
$190,000,000 in 2010, occurring in the early part
of the year.
Capital Markets
The Company expects to issue new unsecured and
secured debt, common stock or other forms of
capital in 2010 totaling $200,000,000.
First Quarter 2010 Conference/Event Schedule
The Company expects to release its first
quarter 2010 earnings on April 28, 2010 after the
market closes. The Company expects to hold a
conference call on April 29, 2010 at 1:00 PM EDT to
discuss the first quarter 2010 results.
Management is scheduled to attend Citis Global
Property CEO Conference from Feb 28 Mar 3, 2010.
Management may discuss the Companys current
operating environment; operating trends;
development, redevelopment, disposition and
acquisition activity; financial outlook and other
business and financial matters affecting the
Company. Details on how to access related materials
will be available beginning February 5, 2010 on the
Companys website at
http://www.avalonbay.com/events.
Other Matters
The Company will hold a conference call on February
4, 2010 at 1:00 PM EST to review and answer
questions about this release, its fourth quarter
and full year 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.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
To hear a replay of the call, which will be
available from February 4, 2010 at 3:00 PM EST to
February 11, 2010 at 11:59 PM EST, dial
1-800-642-1687 domestically and
1-706-645-9291 internationally, and use Access
Code:
49801463.
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 Companys 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 December 31, 2009, the Company owned or held
a direct or indirect ownership interest in 172
apartment communities containing 50,364 apartment
homes in ten states and the District of Columbia,
of which seven communities were under construction
and seven 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 Companys 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 Companys use of
words such as expects, plans, estimates,
anticipates, 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;
and increases in costs of materials, labor or other
expenses may result in communities that we develop
or redevelop failing to achieve expected
profitability. Additional discussions of risks and
uncertainties appear in the Companys filings with
the Securities and Exchange Commission, including
the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008 under the
headings Risk Factors and under the heading
Managements 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 first quarter and full
year 2010. 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.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
Definitions and Reconciliations
Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are
defined and further explained on Attachment 17, Definitions and Reconciliations of Non-GAAP
Financial Measures and Other Terms. Attachment 17 is included in the full earnings release
available at the Companys website at http://www.avalonbay.com/earnings. This wire distribution
includes only definitions and reconciliations of the following Non-GAAP financial measures:
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 companys real estate between periods or as compared to different
companies. A reconciliation of FFO to Net Income is as follows (dollars in thousands):
| Q4 | Q4 | Full Year | Full Year | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income attributable to the Company |
$ | 32,394 | $ | 2,123 | $ | 155,647 | $ | 411,487 | ||||||||
Dividends attributable to preferred stock |
| (3,929 | ) | | (10,454 | ) | ||||||||||
Depreciation real estate assets,
including discontinued operations
and joint venture adjustments |
57,524 | 51,776 | 221,415 | 203,082 | ||||||||||||
Distributions to noncontrolling interests,
including discontinued operations |
14 | 44 | 66 | 216 | ||||||||||||
Gain on sale of unconsolidated entities
holding previously depreciated real estate
assets |
| | | (3,483 | ) | |||||||||||
Gain on sale of previously depreciated
real estate assets |
(37,217 | ) | (27,051 | ) | (63,887 | ) | (284,901 | ) | ||||||||
FFO attributable to common stockholders |
$ | 52,715 | $ | 22,963 | $ | 313,241 | $ | 315,947 | ||||||||
Average shares outstanding diluted |
81,869,688 | 77,734,587 | 80,599,657 | 77,578,852 | ||||||||||||
Earnings per share diluted |
$ | 0.40 | $ | (0.02 | ) | $ | 1.93 | $ | 5.17 | |||||||
FFO per common share diluted |
$ | 0.64 | $ | 0.30 | $ | 3.89 | $ | 4.07 | ||||||||
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
Projected FFO, as provided within this release in the Companys 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 first quarter
and full year 2010 to the range provided for Projected EPS (diluted) is as follows:
| Low | High | |||||||
| range | range | |||||||
Projected EPS (diluted) Q1 10 |
$ | 1.06 | $ | 1.12 | ||||
Projected depreciation (real estate related) |
0.69 | 0.71 | ||||||
Projected gain on sale of operating communities |
(0.86 | ) | (0.90 | ) | ||||
Projected FFO per share (diluted) Q1 10 |
$ | 0.89 | $ | 0.93 | ||||
Projected EPS (diluted) Full Year 2010 |
$ | 1.60 | $ | 1.85 | ||||
Projected depreciation (real estate related) |
2.75 | 3.00 | ||||||
Projected gain on sale of operating communities |
(0.75 | ) | (1.00 | ) | ||||
Projected FFO per share (diluted) Full Year 2010 |
$ | 3.60 | $ | 3.85 | ||||
The Companys results 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)
Decrease (Increase) in Net Income and FFO
(dollars in thousands)
| Full Year | Full Year | |||||||||||||||
| Q4 08 | 2008 | Q4 09 | 2009 | |||||||||||||
Land impairments |
$ | 57,899 | $ | 57,899 | $ | 850 | $ | 21,152 | ||||||||
Abandoned pursuits (1) |
6,611 | 6,611 | | 1,139 | ||||||||||||
Severance and related costs |
3,400 | 3,400 | 2,500 | 4,500 | ||||||||||||
Federal excise tax |
3,200 | 3,200 | 1,000 | (3) | 515 | |||||||||||
(Gain) loss on unsecured
notes repurchase |
(1,839 | ) | (1,839 | ) | 26,972 | (3) | 25,910 | |||||||||
Gain on sale of land |
| | (4,589 | ) | (4,830 | ) | ||||||||||
Joint venture income
adjustment (2) |
| | 2,600 | (1,294 | ) | |||||||||||
Legal settlement proceeds, net |
| | (75 | ) (3) | (1,175 | ) | ||||||||||
Preferred stock deferred
offering expenses |
3,566 | 3,566 | | | ||||||||||||
Fund II organizational costs |
| 1,209 | | | ||||||||||||
Total non-routine items |
$ | 72,837 | $ | 74,046 | $ | 29,258 | $ | 45,917 | ||||||||
Weighted Average Dilutive
Shares Outstanding |
77,734,587 | 77,578,852 | 81,869,688 | 80,599,657 | ||||||||||||
| (1) | For purposes of non-routine classification, abandoned pursuits includes costs expensed by the Company for individual pursuits in excess of $1,000 in a given quarter. | |
| (2) | Includes the Companys promoted interest of $3,894 in joint venture, and the Companys pro-rata portion of an impairment charge on a community in an unconsolidated joint venture of $2,600. | |
| (3) | Non-routine item was included in the Companys full year 2009 Outlook provided in November 2009. | |
| The Companys outlook included $2,900 for federal excise tax. |
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
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 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):
| Q4 | Q4 | Full Year | Full Year | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income |
$ | 32,350 | $ | 1,866 | $ | 154,274 | $ | 410,746 | ||||||||
Indirect operating expenses, net of corporate income |
7,392 | 7,839 | 30,315 | 33,010 | ||||||||||||
Investments and investment management expense |
1,045 | 1,145 | 3,844 | 4,787 | ||||||||||||
Expensed development and other pursuit costs |
746 | 9,467 | 5,842 | 12,511 | ||||||||||||
Interest expense, net |
42,107 | 30,829 | 150,323 | 114,910 | ||||||||||||
Loss (gain) on extinguishment of debt, net |
26,972 | (1,839 | ) | 25,910 | (1,839 | ) | ||||||||||
General and administrative expense |
10,360 | 15,960 | 28,748 | 42,781 | ||||||||||||
Joint venture loss (income) |
2,698 | (238 | ) | (1,441 | ) | (4,566 | ) | |||||||||
Depreciation expense |
55,392 | 48,592 | 209,746 | 183,748 | ||||||||||||
Impairment loss land holdings |
850 | 57,899 | 21,152 | 57,899 | ||||||||||||
Gain on sale of real estate assets |
(41,806 | ) | (27,051 | ) | (68,717 | ) | (284,901 | ) | ||||||||
Income from discontinued operations |
(2,570 | ) | (4,564 | ) | (13,974 | ) | (27,353 | ) | ||||||||
NOI from continuing operations |
$ | 135,536 | $ | 139,905 | $ | 546,022 | $ | 541,733 | ||||||||
Established: |
||||||||||||||||
New England |
$ | 18,365 | $ | 20,398 | $ | 75,766 | $ | 81,887 | ||||||||
Metro NY/NJ |
24,663 | 27,938 | 103,558 | 111,859 | ||||||||||||
Mid-Atlantic/Midwest |
18,631 | 19,888 | 74,983 | 77,639 | ||||||||||||
Pacific NW |
4,160 | 5,316 | 19,101 | 21,070 | ||||||||||||
No. California |
16,242 | 19,373 | 70,819 | 76,875 | ||||||||||||
So. California |
10,352 | 11,819 | 42,900 | 47,504 | ||||||||||||
Total Established |
92,413 | 104,732 | 387,127 | 416,834 | ||||||||||||
Other Stabilized |
20,220 | 21,202 | 81,517 | 67,289 | ||||||||||||
Development/Redevelopment |
22,903 | 13,971 | 77,378 | 57,610 | ||||||||||||
NOI from continuing operations |
$ | 135,536 | $ | 139,905 | $ | 546,022 | $ | 541,733 | ||||||||
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 December 31, 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):
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
| Q4 | Q4 | Full Year | Full Year | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Income from discontinued operations |
$ | 2,570 | $ | 4,564 | $ | 13,974 | $ | 27,353 | ||||||||
Interest expense, net |
| 444 | 681 | 3,297 | ||||||||||||
Depreciation expense |
1,200 | 2,363 | 8,540 | 15,704 | ||||||||||||
NOI from discontinued operations |
$ | 3,770 | $ | 7,371 | $ | 23,195 | $ | 46,354 | ||||||||
NOI from assets sold |
$ | 571 | $ | 3,935 | $ | 9,913 | $ | 32,695 | ||||||||
NOI from assets held for sale |
3,199 | 3,436 | 13,282 | 13,659 | ||||||||||||
NOI from discontinued operations |
$ | 3,770 | $ | 7,371 | $ | 23,195 | $ | 46,354 | ||||||||
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
managements estimate, as of the date of this release (or as of the date of the buyers 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 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 buyers valuation. Projected stabilized rental
revenue represents managements estimate of projected gross potential (based on leased rents for
occupied homes and market rents 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 Companys share of the Total Capital Cost of each
community, based on its percentage ownership.
Management believes that Projected NOI of the development communities, on an aggregated weighted
average basis, assists investors in understanding managements estimate of the likely impact on
operations of the development 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 is complex, impractical to develop, and may not
be meaningful. Projected NOI of these communities is not a projection of the Companys overall
financial performance or cash flow. There can be no assurance that the communities under
development 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.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
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):
| Q4 | Q4 | Full Year | Full Year | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Rental revenue (GAAP basis) |
$ | 143,199 | $ | 152,424 | $ | 587,752 | $ | 610,122 | ||||||||
Concessions amortized |
1,723 | 1,915 | 8,000 | 6,771 | ||||||||||||
Concessions granted |
(717 | ) | (2,204 | ) | (6,361 | ) | (8,004 | ) | ||||||||
Rental revenue (with concessions on a cash basis) |
$ | 144,205 | $ | 152,135 | $ | 589,391 | $ | 608,889 | ||||||||
% change GAAP revenue |
(6.1 | %) | (3.7 | %) | ||||||||||||
% change cash revenue |
(5.2 | %) | (3.2 | %) | ||||||||||||
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 full year ended December 31, 2009 as well as prior years
activities is presented in the full earnings release.
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.
A reconciliation of EBITDA and a calculation of Interest Coverage for the fourth quarter of 2009
are as follows (dollars in thousands):
Net income attributable to the Company |
$ | 32,394 | ||
Interest expense, net |
42,107 | |||
Interest expense (discontinued operations) |
| |||
Depreciation expense |
55,392 | |||
Depreciation expense (discontinued operations) |
1,200 | |||
EBITDA |
$ | 131,093 | ||
EBITDA from continuing operations |
$ | 90,106 | ||
EBITDA from discontinued operations |
40,987 | |||
EBITDA |
$ | 131,093 | ||
EBITDA from continuing operations |
$ | 90,106 | ||
Land gains |
(4,589 | ) | ||
EBITDA from continuing operations, excluding land gains |
$ | 85,517 | ||
Interest charges |
$ | 42,107 | ||
Interest coverage (1) |
2.0 | |||
| (1) | Adjusted to remove the impact of the October 2009 tender offer, interest coverage is 2.7 times. |
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
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 in the full earnings release, 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 managements estimate of projected
rental revenue minus projected operating expenses before interest, income taxes (if any),
depreciation, amortization and extraordinary items. For this purpose, managements 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.
The calculation of Unleveraged IRR does not include an adjustment for the Companys 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 Companys 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 Companys 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 full year December 31, 2009 is as follows
(dollars in thousands):
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
NOI for Established Communities |
$ | 387,127 | ||
NOI for Other Stabilized Communities |
81,517 | |||
NOI for Development/Redevelopment Communities |
77,378 | |||
Total NOI generated by real estate assets |
546,022 | |||
NOI on encumbered assets |
192,389 | |||
NOI on unencumbered assets |
353,633 | |||
Unencumbered NOI |
65 | % | ||
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 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.
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 communitys gross revenue.
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 managements projected rents.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
Exhibit 99.2
For Immediate News Release
February 3, 2010
February 3, 2010
AVALONBAY COMMUNITIES, INC. ANNOUNCES
FOURTH QUARTER AND FULL YEAR 2009 OPERATING RESULTS
AND PROVIDES INITIAL 2010 FINANCIAL OUTLOOK
FOURTH QUARTER AND FULL YEAR 2009 OPERATING RESULTS
AND PROVIDES INITIAL 2010 FINANCIAL OUTLOOK
(Alexandria, VA) AvalonBay Communities, Inc.
(NYSE: AVB) reported today that Net Income
Attributable to Common Stockholders (Net Income)
for the quarter ended December 31, 2009 was
$32,394,000. This resulted in Earnings per Share
diluted (EPS) of
$0.40 for the quarter ended December 31, 2009,
compared to a Loss per Share, diluted of $0.02 for
the comparable period of 2008. For the year ended
December 31, 2009, EPS was $1.93 compared to $5.17
for the year ended December 31, 2008, a per share
decrease of 62.7%.
The increase in the fourth quarter 2009 EPS over
the prior year period is due primarily to the
non-cash charges from land impairments and
abandoned pursuit costs incurred in 2008. In addition, asset sales
and related gains in the fourth quarter of 2009 were larger than those in the fourth quarter of 2008.
The decrease for the full year 2009
EPS over the prior year is primarily due to
the reduced number of communities sold and amount
of gains related to these sales in 2009 as compared
to the prior year.
Funds from Operations attributable to common
stockholders diluted (FFO) for the quarter
ended December 31, 2009 on a per share basis increased 113.3% to $0.64
per share from $0.30 per share for the comparable
period of 2008. FFO per share for the full year
ended December 31, 2009 decreased by 4.4% to $3.89
from $4.07 for the comparable period of 2008.
During the fourth quarter 2009, the Company recognized net charges for non-routine items of approximately $29,000,000 due primarily to costs associated with the tender offer on the Companys unsecured notes completed in October. For the full year 2009, the Company recognized net charges for non-routine items of approximately $46,000,000 due primarily to land
impairment charges and costs associated with the October unsecured notes tender. Included in the non-routine charges for the quarter ended December 31, 2009, are impairments for one unconsolidated asset and one land parcel, for a combined total impairment of approximately $3,500,000. While the Company is not aware of any additional impairments present in its portfolio or development pipeline, the Companys focus
on value creation through development of new apartments and the existence of a large development pipeline, presents valuation risk that could result in future impairment charges that are not apparent or determinable at this time.
Detail of the impacts of non-routine items on FFO and Net Income per share amounts
for the fourth quarter and full year 2009 and 2008 are presented in Attachment 17.
Adjusting for these non-routine items, FFO per
share for the three months and full year ended
December 31, 2009 would have decreased by 18.7% and
11.3%, respectively from the prior year periods.
Commenting on the Companys results, Bryce Blair,
Chairman and CEO, said Our fourth quarter report
caps a challenging year for the economy, our
industry and the Company. We expect 2010 to be a
transition year, where a continued weak economic
climate that pressures apartment performance will
trend into a period of stronger demand/supply
fundamentals for 2011 and beyond. We plan to
increase investment activity in 2010 to ensure we
deliver product into what we anticipate will be the
early growth phase of the next expansion.
Operating Results for the Quarter Ended December
31, 2009 Compared to the Prior Year Period
For the Company, including discontinued operations,
total revenue decreased by $615,000, or 0.3% to
$220,653,000. For Established Communities, rental
revenue decreased 6.1% due to an increase in
Economic Occupancy of 0.2% and a decrease in
Average Rental Rates of 6.3%. As a result, total
revenue for Established Communities decreased
$9,100,000 to $143,440,000. Operating expenses for
Established Communities increased $3,219,000, or
6.7% to $51,027,000. Accordingly, Net Operating
Income (NOI) for Established Communities
decreased by $12,319,000, or 11.8% to $92,413,000.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
The following table reflects the percentage changes
in rental revenue, operating expenses and NOI for
Established Communities for the fourth quarter
of 2008 compared to the fourth quarter of 2009:
4Q 09 Compared to 4Q 08
| Rental | Operating | % of | ||||||||||||||
| Revenue | Expenses | NOI | NOI (1) | |||||||||||||
New England |
(5.4 | %) | 3.0 | % | (10.0 | %) | 20.0 | % | ||||||||
Metro NY/NJ |
(6.6 | %) | 6.0 | % | (11.7 | %) | 27.4 | % | ||||||||
Mid-Atlantic/Midwest |
(1.1 | %) | 8.6 | % | (6.3 | %) | 17.1 | % | ||||||||
Pacific NW |
(10.6 | %) | 17.1 | % | (21.7 | %) | 4.1 | % | ||||||||
No. California |
(10.2 | %) | 7.0 | % | (16.2 | %) | 19.4 | % | ||||||||
So. California |
(6.6 | %) | 8.3 | % | (12.4 | %) | 12.0 | % | ||||||||
Total |
(6.1 | %) | 6.7 | % | (11.8 | %) | 100.0 | % | ||||||||
| (1) | Total represents each regions % of total NOI from the Company, including discontinued operations. |
Operating Results for the Full Year December
31, 2009 Compared to the Prior Year
For the Company, including discontinued operations,
total revenue increased by $3,963,000, or 0.4% to
$886,668,000. For Established Communities, rental
revenue decreased 3.7% due to a decrease in
Economic Occupancy of 0.6% and a decrease in
Average Rental Rates of 3.1%. As a result, total
revenue for Established Communities decreased
$22,053,000 to
$588,423,000. Operating expenses for Established
Communities increased $7,654,000, or
4.0% to $201,296,000. Accordingly, NOI for
Established Communities decreased by $29,707,000,
or 7.1% to $387,127,000.
The following table reflects the percentage changes
in rental revenue, operating expenses and NOI for
Established Communities for the full year December
31, 2009 as compared to the full year December 31,
2008:
Full Year 2009 Compared to Full Year 2008
| Rental | Operating | % of | ||||||||||||||
| Revenue | Expenses | NOI | NOI (1) | |||||||||||||
New England |
(4.0 | %) | 2.5 | % | (7.5 | %) | 20.0 | % | ||||||||
Metro NY/NJ |
(4.3 | %) | 3.0 | % | (7.4 | %) | 27.4 | % | ||||||||
Mid-Atlantic/Midwest |
(0.6 | %) | 4.3 | % | (3.4 | %) | 16.7 | % | ||||||||
Pacific NW |
(5.0 | %) | 5.8 | % | (9.3 | %) | 4.6 | % | ||||||||
No. California |
(4.7 | %) | 4.8 | % | (7.9 | %) | 20.1 | % | ||||||||
So. California |
(5.0 | %) | 7.2 | % | (9.7 | %) | 11.2 | % | ||||||||
Total |
(3.7 | %) | 4.0 | % | (7.1 | %) | 100.0 | % | ||||||||
| (1) | Total represents each regions % 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:
| Full Year 09 | ||||||||
| 4Q 09 vs 4Q 08 | vs Full Year 08 | |||||||
Rental Revenue Change with
Concessions on a GAAP Basis |
(6.1 | %) | (3.7 | %) | ||||
Rental Revenue Change with
Concessions on a Cash Basis |
(5.2 | %) | (3.2 | %) | ||||
Development Activity
The Company completed the development of four
communities in the fourth quarter of 2009 totaling
1,382 apartment homes for an aggregate Total
Capital Cost of $465,200,000:
| | Avalon White Plains located in White Plains, NY contains 407 apartment homes and was completed for a Total Capital Cost of $153,000,000; | ||
| | Avalon Union City located in Union City, CA contains 439 apartment homes and was completed for a Total Capital Cost of $118,700,000; | ||
| | Avalon at Mission Bay North III located in San Francisco, CA contains 260 apartment homes and was completed for a Total Capital Cost of $147,400,000; and | ||
| | Avalon Blue Hills located in Randolph, MA contains 276 apartment homes and was completed for a Total Capital Cost of $46,100,000. |
During 2009, the Company completed the development
of nine communities containing an aggregate of
2,526
apartment homes for a Total Capital Cost of
$810,700,000.
During the fourth quarter of 2009, the Company
commenced the development of two communities:
Avalon Northborough II, located in Northborough, MA
and Avalon at West Long Branch, located in West
Long Branch, NJ. These two communities will contain
an aggregate 399 apartment homes when completed for
an estimated Total Capital Cost of $64,900,000.
These communities are the only development starts
by the Company in 2009.
At December 31, 2009, the Company had seven
communities under development, with a Total Capital
Cost of $813,300,000, and $245,000,000 of capital
remaining to be funded. This is a decrease from
December 31, 2008 when the Company had 14
communities under development with a Total Capital
Cost of $1,583,800,000.
Redevelopment Activity
During the fourth quarter of 2009, the Company
commenced the redevelopment of Avalon at Willow
Creek located in Fremont, CA. Avalon at Willow
Creek contains 235 apartment homes and will be
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
redeveloped for an estimated Total Capital Cost of
$7,500,000, excluding costs incurred prior to
redevelopment. The Company did not complete any
redevelopments during the fourth quarter of 2009.
During 2009, the Company completed the
redevelopment of four communities containing an
aggregate of 926 apartment homes for a Total
Capital Cost of $28,700,000, excluding costs incurred prior to redevelopment.
Disposition Activity
During the fourth quarter of 2009, the Company sold
three communities: Avalon at Parkside, located in
San Jose, CA, Avalon Orange, located in New Haven,
CT, and Avalon at Flanders Hill, located in
Westborough, MA. These three communities contain
of 640 apartment homes and were sold for
an aggregate sales price of $110,175,000. These
dispositions resulted in a gain in accordance with
GAAP of approximately $34,190,000 and an Economic
Gain of approximately $21,563,000. The weighted
average Initial Year Market Cap Rate for these
three communities was 6.3% and the Unleveraged IRR
over a nine year average holding period was 11.5%.
During 2009, the Company sold five communities
containing 1,037 apartment homes. These
communities were sold for an aggregate sales price
of $179,675,000, resulting in a GAAP gain of
approximately $61,116,000 and an Economic Gain of
approximately $44,490,000. The weighted average
Initial Year Market Cap Rate related to these
dispositions was 6.5% and the Unleveraged IRR over
a weighted average holding period of approximately
10 years was 13.0%.
In January 2010, the Company sold Avalon at Danada
Farms, a 295 apartment home community, located in
Wheaton, IL for $45,450,000.
Investment Management Fund Activity
The Company currently has investments in and serves
as the manager for two private, discretionary
investment management vehicles.
In November 2009, AvalonBay Value Added Fund II,
L.P. (Fund II) purchased its second community
located in Fairfax, VA. The garden-style community
containing 491 homes, will be renamed Avalon Fair
Oaks and was acquired for a purchase price of
$71,000,000 or approximately $145,000 per apartment
home.
In February 2010, Fund II purchased its third
community located in Montgomery Village, MD. The
garden-style community, renamed Avalon Rothbury,
contains 203 homes and was acquired for a purchase
price of $31,250,000 or approximately $154,000 per
apartment home.
Financing, Liquidity and Balance Sheet Statistics
During 2009, the Company raised approximately
$1,722,000,000 from a variety of sources as
detailed below:
| | Secured debt of $833,580,000, which includes $93,440,000 held in escrow, associated with a Development Right ; | ||
| | Gross proceeds from asset sales of approximately $193,200,000; | ||
| | Unsecured debt of $500,000,000; | ||
| | Issuance of common stock with net proceeds of approximately $103,000,000; and | ||
| | Additional joint venture partner capital commitments for Fund II of approximately $92,000,000. |
The proceeds received from these transactions were used to fund the
Companys development and redevelopment activity,
to redeem certain secured and unsecured notes
(including the October 2009 unsecured note tender
discussed in the next section) and to repay all
amounts then outstanding on the Companys unsecured
credit facility discussed below.
At December 31, 2009, the Company had no amounts
outstanding under its $1,000,000,000 unsecured
credit facility and the Company had $316,367,000 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 full year December 31, 2009 was 65%.
Adjusting for the costs associated with the tender
offer completed in October 2009, discussed below,
Interest Coverage for the fourth quarter of 2009
was 2.7 times.
Capital Markets Activity
In October 2009, the Company completed a 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 recognized a charge for
the purchase premium and the accelerated
recognition of certain deferred issuance costs of
approximately $27,000,000 in the fourth quarter of
2009. All of the notes purchased by the Company
were cancelled.
In October 2009, the Company repaid the final
$112,200,000 outstanding under its $330,000,000 unsecured term loan in
advance of the January 2011 scheduled maturity date.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
Also in October 2009, the Company effectively
converted $300,000,000 principal of fixed rate
unsecured notes with a weighted average maturity of
approximately two years to floating rate debt at a
weighted average interest rate of three month LIBOR
plus 5.42%, through the execution of interest rate
swaps.
In December 2009, the Company repaid a $33,615,000
variable rate secured note, pursuant to its scheduled maturity.
In February 2010, the Company repaid a $13,691,000 6.47% fixed rate secured note in advance of its March 2012 scheduled maturity date.
2010 Financial Outlook
Management considers several third party economic
forecasts in setting operating expectations for
2010. Based on a composite view of these forecasts,
management expects job growth to emerge in the
second half of 2010. Growth in those age groups
that have historically demonstrated a higher
propensity to rent will continue to generate
pent-up demand for rental housing, which may
materialize as job markets improve. The for-sale
housing market is expected to remain sluggish in
most of the Companys markets during 2010. In
addition, the level of new rental completions in
the Companys markets is anticipated to decline
during 2010 from 2009 levels.
The following presents the Companys financial
outlook for 2010, the details of which are
summarized on Attachments 15 and 16.
Projected EPS is expected to be within a range of
$1.60 to $1.85 for the full year 2010.
The Company expects 2010 Projected FFO per share to
be in the range of $3.60 to $3.85 as compared to
$3.89 for the full year 2009, resulting in a
decrease in Projected FFO per share of
approximately 4% at the mid-point of the range.
For the first quarter of 2010, the Company expects
projected EPS within a range of $1.06 to $1.12. The
Company expects Projected FFO per share in the
first quarter of 2010 within a range of $0.89 to
$0.93.
The Companys 2010 financial outlook is based on a
number of assumptions and estimates, which are
provided on Attachment 15 of this release. The
primary assumptions and estimates include the
following:
Property Operations
| | The Company expects a decline in Established Communities revenue of 3.0% to 4.5%. | ||
| | The Company expects a change in Established Communities operating expenses of (1.0%) to 1.0%. | ||
| | The Company expects a decline in Established Communities NOI within a range of 5.0% to 7.0%. |
Development
| | The Company currently has seven communities under development. During 2010, the Company expects to disburse approximately $375,000,000 related to these communities and expected acquisitions of land for future development. | ||
| | The Company expects to complete the development of one community during 2010 for an aggregate Total Capital Cost of approximately $77,400,000. | ||
| | The Company anticipates starting approximately $380,000,000 of new development during 2010, of which $125,000,000 is expected to be disbursed during 2010. |
Dispositions
The Company expects gross sales proceeds from
planned asset dispositions of approximately
$190,000,000 in 2010, occurring in the early part
of the year.
Capital Markets
The Company expects to issue new unsecured and
secured debt, common stock or other forms of
capital in 2010 totaling $200,000,000.
First Quarter 2010 Conference/Event Schedule
The Company expects to release its first
quarter 2010 earnings on April 28, 2010 after the
market closes. The Company expects to hold a
conference call on April 29, 2010 at 1:00 PM EDT to
discuss the first quarter 2010 results.
Management is scheduled to attend Citis Global
Property CEO Conference from Feb 28 Mar 3, 2010.
Management may discuss the Companys current
operating environment; operating trends;
development, redevelopment, disposition and
acquisition activity; financial outlook and other
business and financial matters affecting the
Company. Details on how to access related materials
will be available beginning February 5, 2010 on the
Companys website at
http://www.avalonbay.com/events.
Other Matters
The Company will hold a conference call on February
4, 2010 at 1:00 PM EST to review and answer
questions about this release, its fourth quarter
and full year results, the Attachments (described
below) and
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved
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 February 4, 2010 at 3:00 PM EST to
February 11, 2010 at 11:59 PM EST, dial
1-800-642-1687 domestically and
1-706-645-9291 internationally, and use Access
Code: 49801463.
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 Companys 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 December 31, 2009, the Company owned or held
a direct or indirect ownership interest in 172
apartment communities containing 50,364 apartment
homes in ten states and the District of Columbia,
of which seven communities were under construction
and seven 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 Companys 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 Companys use of
words such as expects, plans, estimates,
anticipates, 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;
and increases in costs of materials, labor or other
expenses may result in communities that we develop
or redevelop failing to achieve expected
profitability. Additional discussions of risks and
uncertainties appear in the Companys filings with
the Securities and Exchange Commission, including
the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2008 under the
headings Risk Factors and under the heading
Managements 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 first quarter and full
year 2010. 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 17, Definitions and Reconciliations of Non-GAAP
Financial Measures and Other Terms. Attachment 17 is included in the full earnings release
available at the Companys website at http://www.avalonbay.com/earnings.
Copyright © 2010 AvalonBay Communities, Inc. All Rights Reserved