Form: 8-K

Current report filing

April 28, 2010

Exhibit 99.2
(AVALONBAY COMMUNITIES LOGO)
For Immediate News Release
April 28, 2010
AVALONBAY COMMUNITIES, INC. ANNOUNCES
FIRST QUARTER 2010 OPERATING RESULTS
(Arlington, VA) AvalonBay Communities, Inc. (NYSE: AVB) reported today that Net Income Attributable to Common Stockholders (“Net Income”) for the quarter ended March 31, 2010 was $72,523,000. This resulted in Earnings per Share – diluted (“EPS”) of $0.88 for the quarter ended March 31, 2010, compared to EPS of $0.59 for the comparable period of 2009, an increase of 49.2%.
The increase in the first quarter 2010 EPS over the prior year period is due primarily to gains on asset sales in the first quarter of 2010, with no comparable activity in 2009.
Funds from Operations attributable to common stockholders — diluted (“FFO”) per share for the quarter ended March 31, 2010 decreased 24.4% to $0.96 per share from $1.27 per share for the comparable period of 2009.
The Company’s FFO and EPS for the quarter ended March 31, 2010 were adversely impacted by the severe weather experienced by the East Coast communities (approximately $0.01 per share). The Company expects second quarter expenses will also be elevated relative to the prior year period due to repair activity for storm related damage. FFO and EPS for the quarter ended March 31, 2009 included certain non-routine items, as discussed in the Company’s first quarter 2009 Earnings Release. Adjusting for these non-routine items, FFO per share for the three months ended March 31, 2010 would have decreased by 19.8% from the prior year period.
Commenting on the Company’s results, Bryce Blair, Chairman and CEO, said “Our first quarter results reflect a recovery in apartment market conditions that is occurring sooner than anticipated. Declining homeownership, favorable demographics and limited new rental supply are all contributing to improved fundamentals. We now expect FFO per share for the full year 2010 will be at the high end of the range provided in our February Financial Outlook.”
Operating Results for the Quarter Ended March 31, 2010 Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue decreased by $890,000, or 0.4% to $218,789,000. For Established Communities, rental revenue decreased 4.2% due to a decrease in Average Rental Rates of 5.2%, offset somewhat by an increase in Economic Occupancy of 1.0%. As a result, total revenue for Established Communities decreased $6,865,000 to $159,789,000. Operating expenses for Established Communities increased $1,549,000, or 2.8% to $56,802,000. Accordingly, NOI for Established Communities decreased by $8,414,000, or 7.6% to $102,987,000.
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the first quarter of 2009 compared to the first quarter of 2010:
   
                                 
1Q 10 Compared to 1Q 09  
    Rental     Operating             % of  
    Revenue     Expenses     NOI   NOI (1)  
New England
    (1.8% )     2.9%       (4.6% )     19.8%  
Metro NY/NJ
    (2.8% )     (0.9% )     (3.5% )     28.0%  
Mid-Atlantic/Midwest
    (1.1% )     6.2%       (5.6% )     15.7%  
Pacific NW
    (10.4% )     0.7%       (15.0% )     4.4%  
No. California
    (9.1% )     5.5%       (14.5% )     19.7%  
So. California
    (6.1% )     2.3%       (9.9% )     12.4%  
 
                       
Total
    (4.2% )     2.8%       (7.6% )     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:
 
Copyright Ó 2010 AvalonBay Communities, Inc. All Rights Reserved

 


 

   
         
    1Q 10 vs 1Q 09  
 
       
Rental Revenue Change with Concessions on a
GAAP Basis
    (4.2% )
 
       
Rental Revenue Change with Concessions on a
Cash Basis
    (4.0% )
 
       
 
Development Activity
During the first quarter of 2010, the Company commenced the development of Avalon Rockville Centre, located in Rockville Centre, NY. Avalon Rockville Centre will contain 349 apartment homes when completed for an estimated Total Capital Cost of $110,700,000.
During the first quarter of 2010, the Company completed the development of Avalon Irvine, located in Irvine, CA. Avalon Irvine contains 279 apartment homes and was completed for a Total Capital Cost of $77,400,000.
Disposition Activity
During the first quarter of 2010, the Company sold two communities: Avalon at Danada Farms, located in Wheaton, IL and Avalon Knoll, located in Germantown, MD. The Company acquired Avalon at Danada Farms in 1997. Avalon Knoll was developed by predecessors of the Company, and was acquired by the Company in 1993. In the aggregate, these two communities contain 595 apartment homes and were sold for $82,950,000. These dispositions resulted in a gain in accordance with GAAP of $50,291,000 and an Economic Gain of $33,151,000. The weighted average Initial Year Market Cap Rate for these two communities was 6.6% and the Unleveraged IRR over a 14 year average holding period was 9.8%.
In April 2010, the Company sold Avalon on the Sound, a 412 apartment home community, located in New Rochelle, NY for $107,500,000. The Company continues to own and operate Avalon on the Sound East, a 588 apartment home community adjacent to Avalon on the Sound.
Investment Management Fund Activity
The Company currently has investments in and serves as the manager for two private, discretionary investment management vehicles.
In February 2010, Fund II purchased its third community, located in Gaithersburg, 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
At March 31, 2010, the Company had no amounts outstanding under its $1,000,000,000 unsecured credit facility and the Company had $330,633,000 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 three months ended March 31, 2010 was 67%. Interest Coverage for the first quarter of 2010 was 2.8 times.
New Financing Activity
During the first quarter of 2010, the Company sold 891,685 shares of common stock under the continuous equity offering program commenced in August 2009, at an average price of approximately $84 per share, for net proceeds of $73,870,000.
Debt Repayment Activity
In February 2010, the Company repaid a 6.47% fixed rate secured mortgage note in the amount of $13,961,000 in advance of its March 2012 scheduled maturity date. In March 2010, the Company repaid a 6.95% fixed rate secured mortgage note in the amount of $11,226,000 in advance of its February 2025 scheduled maturity date. The Company recorded a charge of approximately $700,000 related to the accelerated recognition of deferred financing costs for these notes.
Second Quarter 2010 Financial Outlook
First Quarter results were better than anticipated and the Company now expects apartment fundamentals will continue to improve at a faster pace than originally assumed in its initial 2010 Financial Outlook provided in February 2010. Accordingly, the Company now expects rental revenue and NOI changes will be favorable compared to the initial February outlook and will likely be outside the original ranges provided in February. Full year 2010 FFO per share will likely be at the high end of the range provided in the initial February outlook. The Company will provide revised ranges for rental revenue, NOI and FFO per share in the mid-year update to the 2010 Financial Outlook that will be included as a part of the Second Quarter 2010 earnings announcement scheduled to be released in August 2010.
For the second quarter of 2010, the Company expects EPS in the range of $0.50 to $0.56 and expects Projected FFO per share in the range of $0.93 to $0.97.
 
Copyright Ó 2010 AvalonBay Communities, Inc. All Rights Reserved

 


 

The Company expects to release its second quarter 2010 earnings on August 3, 2010 after the market closes. The Company expects to hold a conference call on August 4, 2010 at 1:00 PM EDT to discuss the second quarter 2010 results.
Second Quarter 2010 Conference/Event Schedule
The Company is scheduled to participate in the NAREIT Institutional Investor Forum in Chicago, IL, from June 9-11, 2010. The Company will present and conduct a question and answer session at the conference. 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 how to access the webcast and related materials will be available beginning June 1, 2010 on the Company’s website at http://www.avalonbay.com/events.
Expanded Disclosure
In this earnings release, the Company included expanded disclosure of the operating results for its direct and indirect investments in apartment communities, included as Attachment 4, Sequential Operating Information by Business Segment. In addition, the Company has provided additional disclosure of the direct operating expenses for the Established Community portfolio, included as Attachment 7, Operating Expenses (“Opex”) – Established Communities.
Other Matters
The Company will hold a conference call on April 29, 2010 at 1:00 PM EDT to review and answer questions about this release, its first 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 April 29, 2010 at 5:00 PM EDT to May 6, 2010 at 11:59 PM EDT, dial 1-800-642-1687 domestically and 1-706-645-9291 internationally, and use Access Code: 67744614.
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 March 31, 2010, the Company owned or held a direct or indirect ownership interest in 172 apartment communities containing 50,322 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 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,” “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.
 
Copyright Ó 2010 AvalonBay Communities, Inc. All Rights Reserved

 


 

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, 2009 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 second quarter of 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 13, “Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.” Attachment 13 is included in the full earnings release available at the Company’s website at http://www.avalonbay.com/earnings.
 
Copyright Ó 2010 AvalonBay Communities, Inc. All Rights Reserved

 


 

 
 
(IMAGE)
FIRST QUARTER 2010
Supplemental Operating and Financial Data
(PICTURE)
Avalon at Mission Bay III, located in San Francisco’s South of Market district, was completed in the fourth quarter of 2009 for a Total Capital Cost of $147.4 million.
Avalon at Mission Bay III contains 260 apartment homes and is one of the first green apartment buildings in San Francisco. The community was officially LEED certified in the fourth quarter of 2009 and is the first LEED certified building for AvalonBay.
 

 


 

 
 
FIRST QUARTER 2010
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
Sequential Operating Information by Business Segment
  Attachment 4
 
   
Sub-Market Profile
   
Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 5
Sequential Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 6
Operating Expenses (“Opex”) (Established Communities)
  Attachment 7
 
   
Development, Redevelopment, Acquisition and Disposition Profile
   
Development Communities
  Attachment 8
Redevelopment Communities
  Attachment 9
Summary of Development and Redevelopment Community Activity
  Attachment 10
Future Development
  Attachment 11
Summary of Disposition Activity
  Attachment 12
 
   
Definitions and Reconciliations
   
Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
  Attachment 13
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, 2009 and the Company’s Quarterly Reports on Form 10-Q for subsequent quarters.
 

 


 

 
 
Attachment 1
AvalonBay Communities, Inc.
Selected Operating and Other Information
March 31, 2010

(Dollars in thousands except per share and per home data)
(unaudited)
SELECTED OPERATING INFORMATION
                                 
    Q1     Q1              
    2010     2009     $ Change     % Change  
Net Income attributable to common stockholders
  $ 72,523     $ 47,425     $ 25,098       52.9%  
 
                               
Per common share — basic
  $ 0.89     $ 0.60     $ 0.29       48.3%  
Per common share — diluted
  $ 0.88     $ 0.59     $ 0.29       49.2%  
 
                               
Funds from Operations
  $ 79,257     $ 100,975     $ (21,718 )     (21.5% )
Per common share — diluted
  $ 0.96     $ 1.27     $ (0.31 )     (24.4% )
 
                               
Dividends declared
  $ 73,804     $ 71,292     $ 2,512       3.5%  
Per common share
  $ 0.8925     $ 0.8925     $ —       0.0%  
 
                               
Common shares outstanding
    82,693,377       79,879,306       2,814,071       3.5%  
Outstanding operating partnership units
    15,351       19,427       (4,076 )     (21.0% )
 
                     
Total outstanding shares and units
    82,708,728       79,898,733       2,809,995       3.5%  
 
                     
 
                               
Average shares outstanding — basic
    81,897,566       79,005,998       2,891,568       3.7%  
 
                     
Weighted shares — basic
    81,637,686       78,752,744       2,884,942       3.7%  
Average operating partnership units outstanding
    15,351       19,427       (4,076 )     (21.0% )
Effect of dilutive securities
    657,633       1,020,110       (362,477 )     (35.5% )
 
                     
Average shares outstanding — diluted
    82,310,670       79,792,281       2,518,389       3.2%  
 
                     
DEBT COMPOSITION AND MATURITIES
                                 
            Average    
            Interest   Remaining
Debt Composition (1)   Amount   Rate (2)   Maturities (1)
     
Conventional Debt
                    2010     $ 122,552  
Long-term, fixed rate
    $ 2,829,468               2011     $ 237,286  
Long-term, variable rate
    354,806               2012     $ 503,259  
Variable rate facilities (3)
    —               2013     $ 379,573  
                     
Subtotal, Conventional
    3,184,274       5.8%       2014     $ 198,869  
                     
 
                               
Tax-Exempt Debt
                               
Long-term, fixed rate
    137,264                          
Long-term, variable rate
    629,318                          
                     
Subtotal, Tax-Exempt
    766,582       2.7%                  
                     
 
                               
Total Debt
  $ 3,950,856       5.2%                  
                     
CAPITALIZED COSTS
                         
                    Non-Rev  
    Cap     Cap     Capex  
    Interest     Overhead     per Home  
Q110
  $ 9,836     $ 5,491     $ 38  
Q409
  $ 10,303     $ 6,135     $ 193  
Q309
  $  11,878     $ 5,680     $ 59  
Q209
  $ 13,677     $ 6,610     $ 32  
Q109
  $ 12,368     $ 6,507     $ 8  
COMMUNITY INFORMATION
                 
            Apartment
    Communities   Homes
Current Communities
    165       47,813  
Development Communities
    7       2,509  
Development Rights
    29       7,361  
 
(1)   Excludes debt associated with assets classified as held for sale.
 
(2)   Includes costs of financing such as credit enhancement fees, trustees’ fees, etc.
 
(3)   Represents the Company’s $1 billion unsecured credit facility, of which no amount was drawn at March 31, 2010.
 

 


 

 
 
Attachment 2
AvalonBay Communities, Inc.
Detailed Operating Information
March 31, 2010

(Dollars in thousands except per share data)
(unaudited)
                         
    Q1     Q1        
    2010     2009     % Change  
Revenue:
                       
Rental and other income
  $ 213,738     $ 208,265       2.6%  
Management, development and other fees
    1,849       1,468       26.0%  
 
               
Total
    215,587       209,733       2.8%  
 
               
 
                       
Operating expenses:
                       
Direct property operating expenses, excluding property taxes
    54,433       50,728       7.3%  
Property taxes
    23,172       20,886       10.9%  
Property management and other indirect operating expenses
    9,054       10,043       (9.8% )
 
               
Total operating expenses
    86,659       81,657       6.1%  
 
               
 
                       
Interest expense, net
    (42,541 )     (30,130 )     41.2%  
Gain on extinguishment of debt, net
    —       1,062       n/a      
General and administrative expense
    (8,895 )     (7,247 )     22.7%  
Joint venture income
    227       3,457       (93.4% )
Investments and investment management expense
    (1,039 )     (916 )     13.4%  
Expensed development and other pursuit costs
    (505 )     (1,093 )     (53.8% )
Depreciation expense
    (56,095 )     (50,073 )     12.0%  
 
               
Income from continuing operations
    20,080       43,136       (53.4% )
Income from discontinued operations (1)
    1,995       3,965       (49.7% )
Gain on sale of communities
    50,291       —       n/a      
 
               
Total discontinued operations
    52,286       3,965       1,218.7%  
 
               
Net income
    72,366       47,101       53.6%  
Net loss attributable to redeemable noncontrolling interests
    157       324       (51.5% )
 
               
 
                       
Net income attributable to common stockholders
  $ 72,523     $ 47,425       52.9%  
 
               
 
                       
Net income attributable to common stockholders per common share — basic
  $ 0.89     $ 0.60       48.3%  
 
               
 
                       
Net income attributable to common stockholders per common share — diluted
  $ 0.88     $ 0.59       49.2%  
 
               
 
(1)   Reflects net income for investments in real estate classified as discontinued operations as of March 31, 2010 and investments in real estate sold during the period from January 1, 2009 through March 31, 2010. The following table details income from discontinued operations for the periods shown:
                 
    Q1     Q1  
    2010     2009  
Rental income
  $ 3,202     $ 9,946  
Operating and other expenses
    (1,207 )     (3,237 )
Interest expense, net
    —       (177 )
Depreciation expense
    —       (2,567 )
 
           
Income from discontinued operations
  $ 1,995     $ 3,965  
 
           
 

 


 

 
 
Attachment 3
AvalonBay Communities, Inc.
Condensed Consolidated Balance Sheets

(Dollars in thousands)
(unaudited)
                 
    March 31,     December 31,  
    2010     2009  
Real estate
  $ 7,529,460     $ 7,425,310  
Less accumulated depreciation
    (1,533,579 )     (1,477,772 )
 
           
Net operating real estate
    5,995,881       5,947,538  
 
               
Construction in progress, including land
    580,814       531,299  
Land held for development
    206,713       237,095  
Operating real estate assets held for sale, net
    86,610       117,555  
 
           
 
               
Total real estate, net
    6,870,018       6,833,487  
 
               
Cash and cash equivalents
    123,297       105,691  
Cash in escrow
    207,336       210,676  
Resident security deposits
    22,456       23,646  
Other assets
    285,027       284,105  
 
           
 
               
Total assets
  $ 7,508,134     $ 7,457,605  
 
           
 
               
Unsecured notes, net
  $ 1,659,529     $ 1,658,029  
Unsecured facilities
    —       —  
Notes payable
    2,290,378       2,316,843  
Resident security deposits
    33,532       33,646  
Liabilities related to assets held for sale
    1,679       2,669  
Other liabilities
    380,643       390,494  
 
           
 
               
Total liabilities
  $ 4,365,761     $ 4,401,681  
 
           
 
               
Redeemable noncontrolling interests
    6,724       5,797  
 
               
Stockholders’ equity
    3,135,649       3,050,127  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 7,508,134     $ 7,457,605  
 
           
 

 


 

 
 
Attachment 4
AvalonBay Communities, Inc.
Sequential Operating Information by Business Segment (1)

March 31, 2010
(Dollars in thousands)
(unaudited)
                         
    Total     Quarter Ended     Quarter Ended  
    Homes (2)     March 31, 2010     December 31, 2009  
RENTAL REVENUE
                       
Established (3)
    30,672     $ 159,640     $ 160,055  
Other Stabilized (4)
    5,446       28,901       27,745  
Redevelopment (5)
    5,067       23,030       22,975  
Development (6)
    2,788       1,988       1,160  
 
                 
Total Consolidated Communities
    43,973     $ 213,559     $ 211,935  
 
                 
 
                       
OPERATING EXPENSE
                       
Established
          $ 56,802     $ 56,700  
Other Stabilized
            12,075       11,444  
Redevelopment
            7,315       7,812  
Development
            1,422       1,304  
 
                   
Total Consolidated Communities
          $ 77,614     $ 77,260  
 
                   
 
                       
NOI (7)
                       
Established
          $ 102,987     $ 103,606  
Other Stabilized
            16,869       16,855  
Redevelopment
            15,737       15,202  
Development
            567       (141 )
 
                   
Total Consolidated Communities
          $ 136,160     $ 135,522  
 
                   
 
                       
AVERAGE REVENUE PER OCCUPIED HOME
                       
Established
          $ 1,804     $ 1,813  
Other Stabilized
            1,810       1,812  
Redevelopment
            1,603       1,622  
Development (8)
            2,266       1,744  
 
                       
ECONOMIC OCCUPANCY
                       
Established
            96.2 %     96.0 %
Other Stabilized
            94.3 %     90.1 %
Redevelopment
            94.5 %     93.2 %
Development
            31.3 %     56.2 %
 
(1)   Excludes amounts related to communities that have been sold, or that are classified as held for sale.
 
(2)   Home count by segment is determined by the timing and level of stabilization and the Company’s intention for the asset during 2010.
 
(3)   Established Communities are consolidated communities that have Stabilized Operations as of January 1, 2009 and are not conducting or planning to conduct substantial redevelopment activities within the current year. Established Communities do not include communities currently held for sale or planned for disposition during the current year.
 
(4)   Other Stabilized Communities are all other completed consolidated communities that the Company owns, and that have stabilized occupancy as of January 1, 2010. Other Stabilized Communities do not include unconsolidated communities or communities that are planning to conduct substantial redevelopment activities or that are planned for disposition within the current year. Results for these communities for quarters prior to March 31, 2010 may reflect community operations prior to stabilization, including periods of lease-up, such that occupancy levels are below what would be considered stabilized.
 
(5)   Redevelopment communities presented for all periods in this attachment are communities where substantial redevelopment is in progress or planned for the current year. Redevelopment communities in this attachment do not represent the total composition of communities that were under reconstruction for any period prior to the current year.
 
(6)   Development communities presented for all periods in this attachment are communities under construction in the current year, that may be fully or partially operating. Development communities included in this attachment do not represent the total composition of communities that were under construction for any period prior to the current year.
 
(7)   NOI includes other revenue amounts that are not included in rental revenue.
 
(8)   Average revenue per occupied home for development communities includes only those assets with at least one full quarter of lease-up activity.
 

 


 

 
 
Attachment 5
AvalonBay Communities, Inc.
Quarterly Revenue and Occupancy Changes — Established Communities (1)
March 31, 2010
                                                                                 
    Apartment     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s) (3)  
    Homes     Q1 10     Q1 09     % Change     Q1 10     Q1 09     % Change     Q1 10     Q1 09     % Change  
New England
                                                                               
Boston, MA
    4,092     $ 1,904     $ 1,933       (1.5 %)     95.6 %     95.0 %     0.6 %   $ 22,360     $ 22,564       (0.9 %)
Fairfield-New Haven, CT
    2,350       1,888       2,005       (5.8 %)     96.3 %     93.9 %     2.4 %     12,822       13,280       (3.4 %)
 
                                                 
New England Average
    6,442       1,899       1,960       (3.1 %)     95.9 %     94.6 %     1.3 %     35,182       35,844       (1.8 %)
 
                                                 
 
                                                                               
Metro NY/NJ
                                                                               
New York, NY
    2,714       2,562       2,670       (4.0 %)     96.3 %     95.5 %     0.8 %     20,093       20,765       (3.2 %)
New Jersey
    2,462       1,849       1,930       (4.2 %)     96.4 %     95.7 %     0.7 %     13,171       13,647       (3.5 %)
Long Island, NY
    1,732       2,199       2,299       (4.3 %)     96.4 %     93.4 %     3.0 %     11,020       11,165       (1.3 %)
 
                                                 
Metro NY/NJ Average
    6,908       2,217       2,314       (4.2 %)     96.4 %     95.0 %     1.4 %     44,284       45,577       (2.8 %)
 
                                                 
 
                                                                               
Mid-Atlantic/Midwest
                                                                               
Washington Metro
    5,343       1,746       1,757       (0.6 %)     96.1 %     96.5 %     (0.4 %)     26,899       27,163       (1.0 %)
Chicago, IL
    601       1,425       1,484       (4.0 %)     96.7 %     95.1 %     1.6 %     2,485       2,546       (2.4 %)
 
                                                 
Mid-Atlantic/Midwest Average
    5,944       1,713       1,729       (0.9 %)     96.2 %     96.4 %     (0.2 %)     29,384       29,709       (1.1 %)
 
                                                 
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    1,943       1,187       1,339       (11.4 %)     95.5 %     94.5 %     1.0 %     6,613       7,377       (10.4 %)
 
                                                 
Pacific Northwest Average
    1,943       1,187       1,339       (11.4 %)     95.5 %     94.5 %     1.0 %     6,613       7,377       (10.4 %)
 
                                                 
 
                                                                               
Northern California
                                                                               
San Jose, CA
    2,982       1,725       1,927       (10.5 %)     96.7 %     96.2 %     0.5 %     14,918       16,570       (10.0 %)
Oakland-East Bay, CA
    1,569       1,378       1,506       (8.5 %)     95.4 %     94.6 %     0.8 %     6,183       6,699       (7.7 %)
San Francisco, CA
    1,424       2,006       2,197       (8.7 %)     96.9 %     96.6 %     0.3 %     8,306       9,068       (8.4 %)
 
                                                 
Northern California Average
    5,975       1,701       1,881       (9.6 %)     96.5 %     96.0 %     0.5 %     29,407       32,337       (9.1 %)
 
                                                 
 
                                                                               
Southern California
                                                                               
Los Angeles, CA
    1,780       1,572       1,738       (9.6 %)     96.3 %     92.8 %     3.5 %     8,082       8,606       (6.1 %)
Orange County, CA
    916       1,357       1,457       (6.9 %)     95.2 %     95.6 %     (0.4 %)     3,548       3,827       (7.3 %)
San Diego, CA
    764       1,437       1,516       (5.2 %)     95.3 %     94.6 %     0.7 %     3,140       3,289       (4.5 %)
 
                                                 
Southern California Average
    3,460       1,485       1,616       (8.1 %)     95.8 %     93.8 %     2.0 %     14,770       15,722       (6.1 %)
 
                                                 
 
                                                                               
Average/Total Established
    30,672     $ 1,804     $ 1,902       (5.2 %)     96.2 %     95.2 %     1.0 %   $ 159,640     $ 166,566       (4.2 %)
 
                                                 
 
(1)   Established Communities are communities with stabilized operating expenses as of January 1, 2009 such that a comparison of 2009 to 2010 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 4.0% between years.
 

 


 

 
 
Attachment 6
AvalonBay Communities, Inc.
*Sequential Quarterly* Revenue and Occupancy Changes — Established Communities (1)
March 31, 2010
                                                                                 
    Apartment     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s)  
    Homes     Q1 10     Q4 09     % Change     Q1 10     Q4 09     % Change     Q1 10     Q4 09     % Change  
New England
                                                                               
Boston, MA
    4,092     $ 1,904     $ 1,893       0.6 %     95.6 %     95.2 %     0.4 %   $ 22,360     $ 22,136       1.0 %
Fairfield-New Haven, CT
    2,350       1,888       1,899       (0.6 %)     96.3 %     96.6 %     (0.3 %)     12,822       12,930       (0.8 %)
 
                                                 
New England Average
    6,442       1,899       1,897       0.1 %     95.9 %     95.7 %     0.2 %     35,182       35,066       0.3 %
 
                                                 
 
                                                                               
Metro NY/NJ
                                                                               
New York, NY
    2,714       2,562       2,578       (0.6 %)     96.3 %     96.7 %     (0.4 %)     20,093       20,303       (1.0 %)
New Jersey
    2,462       1,849       1,838       0.6 %     96.4 %     96.2 %     0.2 %     13,171       13,068       0.8 %
Long Island, NY
    1,732       2,199       2,184       0.7 %     96.4 %     95.8 %     0.6 %     11,020       10,883       1.3 %
 
                                                 
Metro NY/NJ Average
    6,908       2,217       2,217       0.0 %     96.4 %     96.3 %     0.1 %     44,284       44,254       0.1 %
 
                                                 
 
                                                                               
Mid-Atlantic/Midwest
                                                                               
Washington Metro
    5,343       1,746       1,744       0.1 %     96.1 %     97.0 %     (0.9 %)     26,899       27,118       (0.8 %)
Chicago, IL
    601       1,425       1,422       0.2 %     96.7 %     95.4 %     1.3 %     2,485       2,447       1.6 %
 
                                                 
Mid-Atlantic/Midwest Average
    5,944       1,713       1,712       0.1 %     96.2 %     96.9 %     (0.7 %)     29,384       29,565       (0.6 %)
 
                                                 
 
                                                                               
Pacific Northwest Seattle, WA
    1,943       1,187       1,214       (2.2 %)     95.5 %     93.9 %     1.6 %     6,613       6,644       (0.5 %)
 
                                                 
Pacific Northwest Average
    1,943       1,187       1,214       (2.2 %)     95.5 %     93.9 %     1.6 %     6,613       6,644       (0.5 %)
 
                                                 
 
                                                                               
Northern California
                                                                               
San Jose, CA
    2,982       1,725       1,747       (1.3 %)     96.7 %     96.1 %     0.6 %     14,918       15,017       (0.7 %)
Oakland-East Bay, CA
    1,569       1,378       1,390       (0.9 %)     95.4 %     95.6 %     (0.2 %)     6,183       6,250       (1.1 %)
San Francisco, CA
    1,424       2,006       2,031       (1.2 %)     96.9 %     96.0 %     0.9 %     8,306       8,328       (0.3 %)
 
                                                 
Northern California Average
    5,975       1,701       1,720       (1.1 %)     96.5 %     96.0 %     0.5 %     29,407       29,595       (0.6 %)
 
                                                 
 
                                                                               
Southern California
                                                                               
Los Angeles, CA
    1,780       1,572       1,599       (1.7 %)     96.3 %     95.5 %     0.8 %     8,082       8,159       (0.9 %)
Orange County, CA
    916       1,357       1,386       (2.1 %)     95.2 %     95.9 %     (0.7 %)     3,548       3,651       (2.8 %)
San Diego, CA
    764       1,437       1,453       (1.1 %)     95.3 %     93.6 %     1.7 %     3,140       3,121       0.6 %
 
                                                 
Southern California Average
    3,460       1,485       1,510       (1.7 %)     95.8 %     95.2 %     0.6 %     14,770       14,931       (1.1 %)
 
                                                 
 
                                                                               
Average/Total Established
    30,672     $ 1,804     $ 1,813       (0.5 %)     96.2 %     96.0 %     0.2 %   $ 159,640     $ 160,055       (0.3 %)
 
                                                 
 
(1)   Established Communities are communities with stabilized operating expenses as of January 1, 2009 such that a comparison of 2009 to 2010 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the average lease term.
 

 


 

 
 
Attachment 7
AvalonBay Communities, Inc.
Operating Expenses (“Opex”) — Established Communities (1)
March 31, 2010
(Dollars in thousands)
(unaudited)
                                 
                            Q1 10  
                            % of  
    Q1 10     Q1 09     % Change     Total Opex  
Payroll (2)
  $ 11,753     $ 11,588       1.4 %     20.7 %
Utilities (3)
    7,158       7,319       (2.2 %)     12.6 %
Repairs & maintenance (4)
    8,696       7,683       13.2 %     15.3 %
Marketing
    1,617       1,578       2.5 %     2.8 %
Land lease expense (5)
    3,423       3,433       (0.3 %)     6.0 %
Office operations (6)
    5,426       4,907       10.6 %     9.6 %
Insurance (7)
    1,341       1,758       (23.7 %)     2.4 %
Property taxes
    17,388       16,987       2.4 %     30.6 %
 
                       
Total Established Communities Operating Expenses (8)
  $ 56,802     $ 55,253       2.8 %     100.0 %
 
                       
 
(1)   Established Communities includes 30,672 apartment homes and consists of communities with stabilized operating expenses as of January 1, 2009 such that a comparison of 2009 to 2010 is meaningful.
 
(2)   Payroll reflects expenses directly related to on-site operations.
 
(3)   Utilities represents aggregate utility costs, net of resident reimbursements.
 
(4)   Repairs & maintenance includes costs associated with preparing an apartment home for new residents including carpet and appliance replacement, as well as redecorating, landscaping, snow removal and regular maintenance costs.
 
(5)   Land lease expense represents GAAP-based rental expense. Cash paid for Established Community land leases during the quarter ended March 31, 2010 was $844.
 
(6)   Office operations includes administrative costs, bad debt expense and association and license fees.
 
(7)   The Company renegotiated its property insurance policies in the fourth quarter of 2009, lowering premiums through April 2011.
 
(8)   Direct operating costs for Established Communities excludes indirect costs for off-site corporate level property management related expenses, and other support related expenses.
 

 


 

 
 
Attachment 8
AvalonBay Communities, Inc.
Development Communities as of March 31, 2010
                                                                                                 
    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 #13                                  
Under Construction:
                                                                                               
 
                                                                               
1. Avalon Fort Greene
    100 %     631     $ 305.8       Q4 2007       Q4 2009       Q1 2011       Q3 2011     $ 2,780       41.8 %     46.0 %     35.8 %     24.5 %
New York, NY
                                                                                               
2. Avalon Walnut Creek (6)
    100 %     422       151.7       Q3 2008       Q2 2010       Q1 2011       Q3 2011       2,215       N/A       13.3 %     N/A       N/A  
Walnut Creek, CA
                                                                                               
3. Avalon Norwalk
    100 %     311       85.4       Q3 2008       Q2 2010       Q2 2011       Q4 2011       2,260       7.7 %     20.6 %     4.5 %     N/A  
Norwalk, CT
                                                                                               
4. Avalon Towers Bellevue
    100 %     397       126.1       Q4 2008       Q2 2010       Q2 2011       Q4 2011       2,390       12.1 %     5.8 %     1.3 %     N/A  
Bellevue, WA
                                                                                               
5. Avalon Northborough II
    100 %     219       35.7       Q4 2009       Q1 2010       Q1 2011       Q3 2011       1,650       22.4 %     31.5 %     12.8 %     3.5 %
Northborough, MA
                                                                                               
6. Avalon at West Long Branch
    100 %     180       28.1       Q4 2009       Q3 2010       Q1 2011       Q3 2011       1,815       N/A       N/A       N/A       N/A  
West Long Branch, NJ
                                                                                               
7. Avalon Rockville Centre
    100 %     349       110.7       Q1 2010       Q3 2011       Q3 2012       Q1 2013       2,615       N/A       N/A       N/A       N/A  
Rockville Centre, NY
                                                                                               
 
                                                                                               
 
                                                                                         
 
                                                                                               
Subtotal/Weighted Average
            2,509     $ 843.5                                     $ 2,370                                  
 
                                                                                         
 
                                                                                               
Completed this Quarter:
                                                                                               
 
                                                                                               
1. Avalon Irvine
    100 %     279     $ 77.4       Q4 2007       Q2 2009       Q1 2010       Q3 2010     $ 1,725       100.0 %     94.3 %     90.0 %     80.8 %
Irvine, CA
                                                                                               
 
                                                                                         
 
                                                                                               
Subtotal/Weighted Average
            279     $ 77.4                                     $ 1,725                                  
 
                                                                                         
 
                                                                                               
Total/Weighted Average
            2,788     $ 920.9                                     $ 2,305                                  
 
                                                                                         
 
                                                                                               
Weighted Average Projected NOI as a % of Total Capital Cost (1) (7)
                    6.0 %   Inclusive of   Concessions - See   Attachment #13                                                
                                             
Non-Stabilized Development Communities:(8)                   % Economic     Asset Cost Basis (millions), Non-Stabilized Development:           Source  
                    Occ                      
                    (1) (5)                      
Prior Completions:
                          Capital Cost, Prior Quarter Completions   $ 465.2     Att. 8
Avalon White Plains
    407     $ 153.0             Capital Cost, Current Completions     77.4     Att. 8
Avalon Union City
    439       118.7             Capital Cost, Under Construction     843.5     Att. 8
Avalon at Mission Bay III
    260       147.4             Less: Remaining to Invest, Under Construction     (228.6 )   Att. 10
 
                                         
Avalon Blue Hills
    276       46.1                  Total Asset Cost Basis, Non-Stabilized Development   $ 1,157.5          
 
                                         
 
                                       
 
    1,382     $ 465.2       94.0 %                    
 
                                     
    Q1 2010 Net Operating Income/(Deficit) for communities under construction and non-stabilized development communities was $5.1 million. See Attachment #13.
 
 
(1)   See Attachment #13 — 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 April 23, 2010.
 
(3)   Includes apartment homes for which leases have been executed or non-refundable deposits have been paid as of April 23, 2010.
 
(4)   Physical occupancy based on apartment homes occupied as of April 23, 2010.
 
(5)   Represents Economic Occupancy for the first quarter of 2010.
 
(6)   This community is being financed in part by a combination of third-party tax-exempt and taxable debt.
 
(7)   The Weighted Average calculation is based on the Company’s pro rata share of the Total Capital Cost for each community.
 
(8)   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 first quarter of 2010.
 

 


 

 
 
Attachment 9
AvalonBay Communities, Inc.
Redevelopment Communities as of March 31, 2010
                                                                                 
                    Cost (millions)     Schedule     Avg        
            # of     Pre-     Total                                   Rent     Homes  
    Percentage     Apt     Redevelopment     Capital     Acquisition /                     Restabilized     Per     Completed  
    Ownership     Homes     Capital Cost     Cost (1)(2)     Completion     Start     Complete     Ops (2)     Home (2)     @ 3/31/2010  
                                                                    Inclusive of          
                                                                    Concessions          
                                                                    See Attachment #13          
Under Redevelopment:
                                                                               
 
                                                                               
1. Avalon Woodland Hills
    100 %     663     $ 72.1     $ 110.6       Q4 1997       Q4 2007       Q2 2010       Q4 2010     $ 1,600       663  
Woodland Hills, CA
                                                                               
2. Avalon at Diamond Heights
    100 %     154       25.3       30.6       Q2 1994       Q4 2007       Q4 2010       Q2 2011       2,165       78  
San Francisco, CA
                                                                               
3. Avalon Burbank
    100 %     400       71.0       94.4       Q2 2002       Q3 2008       Q3 2010       Q1 2011       2,005       355  
Burbank, CA
                                                                               
4. Avalon Pleasanton
    100 %     456       63.0       80.9       Q1 1994       Q2 2009       Q4 2011       Q2 2012       1,350       25  
Pleasanton, CA
                                                                               
5. Avalon Princeton Junction (3)
    100 %     512       30.2       49.9       Q4 1988       Q2 2009       Q1 2012       Q3 2012       1,455       54  
West Windsor, NJ
                                                                               
6. Avalon at Cedar Ridge
    100 %     195       27.7       33.8       Q2 1997       Q3 2009       Q1 2011       Q3 2011       1,485       78  
Daly City, CA
                                                                               
7. Avalon at Willow Creek
    100 %     235       36.5       44.0       Q1 1994       Q4 2009       Q1 2011       Q3 2011       1,480       —  
Fremont, CA
                                                                               
 
                                                                               
 
                                                                     
 
                                                                               
Total/Weighted Average
            2,615     $ 325.8     $ 444.2                                     $ 1,605       1,253  
 
                                                                     
 
(1)   Inclusive of acquisition cost.
 
(2)   See Attachment #13 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(3)   This community was formerly known as Avalon Watch.
 
    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 first quarter of 2010.
 

 


 

 
 
Attachment 10
AvalonBay Communities, Inc.
Summary of Development and Redevelopment Community Activity (1) as of March 31, 2010
(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 - 2008 Actual
    2,907     $ 724,962     $ 758,238     $ 666,623     $ 820,218  
 
                                 
 
                                       
2009 Actual:
                                       
Quarter 1
    422     $ 124,422     $ 143,195     $ 526,116     $ 776,473  
Quarter 2
    719       128,785       222,384       395,611       745,907  
Quarter 3
    797       96,859       262,127       287,956       576,563  
Quarter 4
    555       101,306       181,678       245,046       500,671  
 
                                 
Total - 2009 Actual
    2,493     $ 451,372     $ 809,384                  
 
                                 
 
                                       
2010 Projected:
                                       
Quarter 1 (Actual)
    279     $ 122,151     $ 101,286     $ 228,620     $ 552,899  
Quarter 2 (Projected)
    502       78,056       169,386       150,564       469,848  
Quarter 3 (Projected)
    533       50,159       173,516       100,405       356,590  
Quarter 4 (Projected)
    459       39,107       146,867       61,298       179,704  
 
                                 
Total - 2010 Projected
    1,773     $ 289,473     $ 591,055                  
 
                                 

REDEVELOPMENT
                         
    Total Capital             Reconstruction in  
    Cost Invested     Remaining to     Progress at  
    During Period (3)     Invest (5)     Period End  
Total - 2008 Actual
  $ 45,918     $ 53,214     $ 47,362  
 
                     
2009 Actual:
                       
Quarter 1
  $ 12,031     $ 40,056     $ 40,477  
Quarter 2
    15,983       61,157       38,027  
Quarter 3
    12,868       54,489       31,389  
Quarter 4
    10,029       49,527       30,628  
 
                     
Total - 2009 Actual
  $ 50,911                  
 
                     
 
                       
2010 Projected:
                       
Quarter 1 (Actual)
  $ 12,654     $ 36,873     $ 27,915  
Quarter 2 (Projected)
    12,201       24,672       27,172  
Quarter 3 (Projected)
    7,968       16,704       23,505  
Quarter 4 (Projected)
    4,708       11,996       13,615  
 
                     
Total - 2010 Projected
  $ 37,531                  
 
                     
 
(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 #13 — 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 Q1 2010 includes $59.4 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 first quarter of 2010.
 

 


 

 
 
Attachment 11
AvalonBay Communities, Inc.
Future Development as of March 31, 2010
DEVELOPMENT RIGHTS (1)
                 
    Estimated     Total  
    Number     Capital Cost (1)  
Location of Development Right   of Homes     (millions)  
1. Seattle, WA
    204     $ 58  
2. Wilton, CT
    100       30  
3. Plymouth, MA Phase II
    91       20  
4. Greenburgh, NY Phase II
    288       77  
5. Lynnwood, WA Phase II
    82       18  
6. San Francisco, CA
    173       65  
7. Wood-Ridge, NJ Phase I
    266       60  
8. Tysons Corner, VA I
    354       80  
9. Garden City, NY
    160       51  
10. New York, NY Phase I
    396       169  
11. Boston, MA
    180       97  
12. Cohasset, MA
    200       38  
13. Shelton, CT
    251       66  
14. Andover, MA
    115       26  
15. North Bergen, NJ
    164       47  
16. Brooklyn, NY
    861       443  
17. Wood-Ridge, NJ Phase II
    140       32  
18. Rockville, MD
    240       57  
19. Dublin, CA Phase II
    487       145  
20. Hackensack, NJ
    226       48  
21. Seattle, WA II
    272       81  
22. Huntington Station, NY
    424       100  
23. Roselle Park, NJ
    249       54  
24. Ossining, NY
    210       44  
25. Tysons Corner, VA II
    338       87  
26. Greenburgh, NY Phase III
    156       43  
27. Ocean Township, NJ
    309       57  
28. New York, NY Phase II
    295       142  
29. Stratford, CT
    130       22  
 
           
 
               
Total
    7,361     $ 2,257  
 
           
 
(1)   See Attachment #13 — 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 first quarter of 2010.
 

 


 

 
 
Attachment 12
AvalonBay Communities, Inc.
Summary of Disposition Activity (1) as of March 31, 2010

(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     $ 199,767     $ 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:
                                               
5 Communities, 2 Land Parcels (10)
  $ 193,186     $ 68,717     $ 16,692     $ 52,025       6.5 %     13.0 %
 
                                       
 
                                               
2010:
                                               
2 Communities
  $ 82,950     $ 50,291     $ 17,140     $ 33,151       6.6 %     9.8 %
 
                                       
 
                                               
1998 - 2010 Total
  $ 3,541,353     $ 1,419,800     $ 302,385     $ 1,117,415       5.9 %     15.0 %
 
                                       
 
(1)   Activity excludes dispositions to joint venture entities in which the Company retains an economic interest.
 
(2)   For dispositions from January 1, 1998 through March 31, 2010 the Weighted Average Holding Period is 7.8 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 #13 — 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.
 
(10)   2009 GAAP and Economic Gain include the recognition of approximately $2,770 in deferred gains for six prior year dispositions, recognition of which occurred in conjunction with the November 2009 settlement of previously disclosed litigation with The Equal Rights Center, involving accessibility of our communities.
 

 


 

Attachment 13
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 attributable to common stockholders 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 attributable to common stockholders is as follows (dollars in thousands):
                 
 
 
    Q1     Q1  
    2010     2009  
Net income attributable to common stockholders
  $ 72,523     $ 47,425  
Depreciation — real estate assets, including discontinued operations and joint venture adjustments
    57,011       53,525  
Distributions to noncontrolling interests, including discontinued operations
    14       25  
Gain on sale of previously depreciated real estate assets
    (50,291 )     —  
 
           
 
               
 
           
FFO attributable to common stockholders
  $ 79,257     $ 100,975  
 
           
 
               
Average shares outstanding — diluted
    82,310,670       79,792,281  
Earnings per share — diluted
  $ 0.88     $ 0.59  
 
           
FFO per common share — diluted
  $ 0.96     $ 1.27  
 
           
 
 
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 second quarter 2010 to the range provided for projected EPS (diluted) is as follows:

 


 

Attachment 13 (continued)
                 
 
 
               
    Low     High  
    range     range  
Projected EPS (diluted) — Q2 10
  $ 0.50     $ 0.56  
Projected depreciation (real estate related)
    0.67       0.69  
Projected gain on sale of operating communities
    (0.24 )     (0.28 )
 
           
Projected FFO per share (diluted) — Q2 10
  $ 0.93     $ 0.97  
 
           
 
               
 
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, gain (loss) on extinguishment of debt, general and administrative expense, joint venture income (loss), depreciation expense, impairment loss on land holdings, 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):
                         
 
 
                       
    Q1     Q1     Q4  
    2010     2009     2009  
Net income
  $ 72,366     $ 47,101     $ 32,350  
Indirect operating expenses, net of corporate income
    7,232       8,575       7,378  
Investments and investment management expense
    1,039       916       1,045  
Expensed development and other pursuit costs
    505       1,093       746  
Interest expense, net
    42,541       30,130       42,107  
(Gain) loss on extinguishment of debt, net
    —       (1,062 )     26,972  
General and administrative expense
    8,895       7,247       10,360  
Joint venture loss (income)
    (227 )     (3,457 )     2,698  
Depreciation expense
    56,095       50,073       55,392  
Impairment loss — land holdings
    —       —       850  
Gain on sale of real estate assets
    (50,291 )     —       (41,806 )
Income from discontinued operations
    (1,995 )     (3,965 )     (2,570 )
 
                 
NOI from continuing operations
  $ 136,160     $ 136,651     $ 135,522  
 
                 
 
                       
Established:
                       
New England
  $ 21,643     $ 22,683     $ 21,918  
Metro NY/NJ
    29,507       30,584       29,650  
Mid-Atlantic/Midwest
    17,546       18,583       18,233  
Pacific NW
    4,426       5,206       4,144  
No. California
    20,158       23,575       19,827  
So. California
    9,707       10,770       9,834  
 
                 
Total Established
    102,987       111,401       103,606  
 
                 
Other Stabilized
    16,869       7,841       16,855  
Development/Redevelopment
    16,304       17,409       15,061  
 
                 
NOI from continuing operations
  $ 136,160     $ 136,651     $ 135,522  
 
                 
 
                               
 
NOI as reported by the Company does not include the operating results from discontinued operations (i.e., assets sold during the period January 1, 2009 through March 31, 2010 or classified as held for sale at March 31, 2010). A

 


 

Attachment 13 (continued)
reconciliation of NOI from communities sold or classified as discontinued operations to net income for these communities is as follows (dollars in thousands):
                 
 
 
    Q1     Q1  
    2010     2009  
Income from discontinued operations
  $ 1,995     $ 3,965  
Interest expense, net
    —       177  
Depreciation expense
    —       2,567  
 
           
NOI from discontinued operations
  $ 1,995     $ 6,709  
 
           
 
               
NOI from assets sold
  $ 272     $ 4,901  
NOI from assets held for sale
    1,723       1,808  
 
           
NOI from discontinued operations
  $ 1,995     $ 6,709  
 
           
 
 
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 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 Communities, on an aggregated weighted average basis, assists investors in understanding management’s 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 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.

 


 

Attachment 13 (continued)
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):
                 
 
 
    Q1     Q1  
    2010     2009  
Rental revenue (GAAP basis)
  $ 159,640     $ 166,566  
Concessions amortized
    1,600       2,908  
Concessions granted
    (594 )     (2,207 )
 
           
 
               
Rental revenue (with concessions on a cash basis)
  $ 160,646     $ 167,267  
 
           
 
               
% change — GAAP revenue
            (4.2 %)
 
               
% change — cash revenue
            (4.0 %)
 
 
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 three months ended March 31, 2010 as well as prior years’ activities is presented on Attachment 12.
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 first quarter of 2010 are as follows (dollars in thousands):
 
         
Net income attributable to common stockholders
  $ 72,523  
Interest expense, net
    42,541  
Depreciation expense
    56,095  
 
     
EBITDA
  $ 171,159  
 
     
 
       
EBITDA from continuing operations
  $ 118,873  
EBITDA from discontinued operations
    52,286  
 
     
 
       
EBITDA
  $ 171,159  
 
     
 
       
EBITDA from continuing operations
  $ 118,873  
 
     
Interest charges
  $ 42,541  
 
     
 
       
Interest coverage
    2.8  
 
     
 
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

 


 

Attachment 13 (continued)
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, 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.
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 three months ended March 31, 2010 is as follows (dollars in thousands):
 
         
NOI for Established Communities
  $ 102,987  
NOI for Other Stabilized Communities
    16,869  
NOI for Development/Redevelopment Communities
    16,304  
 
     
Total NOI generated by real estate assets
    136,160  
NOI on encumbered assets
    44,934  
 
     
 
       
NOI on unencumbered assets
  $ 91,226  
 
     
 
       
Unencumbered NOI
    67.0 %
 
     
 
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 2010, Established Communities are consolidated communities that have Stabilized Operations as of January 1, 2009 and are not conducting or

 


 

Attachment 13 (continued)
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 during the current year. These communities may be partially or fully 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.
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.