Form: 8-K

Current report filing

October 22, 2003

 

Exhibit 99.2

AvalonBay Communities, Inc.

For Immediate News Release
October 21, 2003

AVALONBAY COMMUNITIES, INC. ANNOUNCES
THIRD QUARTER 2003 OPERATING RESULTS

(Alexandria, VA) AvalonBay Communities, Inc. (NYSE/PCX: AVB) reported today that Net Income Available to Common Stockholders for the quarter ended September 30, 2003 was $55,212,000, resulting in Earnings per Share (“EPS”) of $0.79 (diluted), compared to $0.35 (diluted) for the comparable period of 2002, a per share increase of 125.7%. For the nine month period ended September 30, 2003, EPS was $2.35 (diluted) compared to $1.32 (diluted) for the comparable period of 2002, a per share increase of 78.0%.

Funds from Operations attributable to common stockholders (“FFO”) for the quarter ended September 30, 2003 was $56,159,000 or $0.80 per share (diluted) compared to $61,810,000 or $0.87 per share (diluted) for the comparable period of 2002, a per share decrease of 8.0%. FFO per share (diluted) for the nine months ended September 30, 2003 decreased by 12.5% to $2.46 from $2.81 for the comparable period in 2002.

Operating Results for the Quarter Ended September 30, 2003 Compared to the Prior Year Period

For the Company, including discontinued operations, total revenue decreased by $3,212,000, or 2.0% to $157,402,000. For Established Communities, rental revenue decreased 3.5%, which is primarily attributable to a decline in rental rates; economic occupancy between periods remained stable. Total revenue for Established Communities decreased $4,110,000 to $112,341,000 and operating expenses increased $2,018,000, or 5.6%, to $38,185,000. Accordingly, Net Operating Income (“NOI”) for Established Communities decreased by $6,128,000 or 7.6%, to $74,156,000.

The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities from the third quarter of 2002 to the third quarter of 2003:


                                   
3Q 03 Compared to 3Q 02

      Established Communities   Total*
     
 
      Rental   Operating           % of
      Revenue   Expenses   NOI   NOI
     
 
 
 
Northeast
    (3.8 %)     6.4 %     (8.6 %)     38.9 %
Mid-Atlantic
    (0.9 %)     5.0 %     (3.3 %)     16.7 %
Midwest
    (4.7 %)     23.4 %     (22.4 %)     2.0 %
Pacific NW
    (4.1 %)     2.2 %     (7.9 %)     5.2 %
No. California
    (5.7 %)     2.3 %     (9.0 %)     25.9 %
So. California
    1.2 %     7.6 %     (1.6 %)     11.3 %
 
   
     
     
     
 
 
Total
    (3.5 %)     5.6 %     (7.6 %)     100.0 %
 
   
     
     
     
 

*   Total represents each region’s % of total NOI from the Company, including discontinued operations.


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Sequential Operating Results for the Quarter Ended September 30, 2003 Compared to the Quarter Ended June 30, 2003

The following table reflects the sequential percentage changes in rental revenue, operating expenses and NOI for Established Communities from the second quarter to the third quarter of 2003:


                           
3Q 03 Compared to 2Q 03

      Established Communities
     
      Rental   Operating        
      Revenue   Expenses   NOI
     
 
 
Northeast
    (1.0 %)     9.5 %     (6.1 %)
Mid-Atlantic
    1.2 %     3.0 %     0.5 %
Midwest
    0.9 %     14.4 %     (9.8 %)
Pacific NW
    1.9 %     4.1 %     0.4 %
No. California
    (2.2 %)     6.0 %     (5.6 %)
So. California
    1.1 %     2.7 %     0.3 %
 
   
     
     
 
 
Total
    (0.6 %)     6.7 %     (4.0 %)
 
   
     
     
 


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Operating Results for the Nine Months Ended September 30, 2003 Compared to the Prior Year Period

For the Company, including discontinued operations, total revenue decreased by $2,825,000, or 0.6% to $475,963,000. For Established Communities, rental revenue decreased 4.8%, comprised of a rental rate decline of 5.0% partially offset by an increase in economic occupancy of 0.2%. Total revenue for Established Communities decreased $16,958,000 to $338,738,000 and operating expenses increased $6,588,000, or 6.4%, to $109,337,000. Accordingly, NOI for Established Communities decreased by $23,546,000 or 9.3%, to $229,401,000.

The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities from the nine months ended September 30, 2002 to the nine months ended September 30, 2003:


                                   
YTD 03 Compared to YTD 02

      Established Communities   Total*
     
 
      Rental   Operating           % of
      Revenue   Expenses   NOI   NOI
     
 
 
 
Northeast
    (4.0 %)     8.7 %     (9.5 %)     37.9 %
Mid-Atlantic
    (2.5 %)     5.7 %     (5.7 %)     15.9 %
Midwest
    (6.6 %)     12.4 %     (19.1 %)     3.0 %
Pacific NW
    (7.4 %)     2.5 %     (12.7 %)     5.2 %
No. California
    (7.9 %)     2.6 %     (11.6 %)     26.0 %
So. California
    2.2 %     10.8 %     (1.3 %)     12.0 %
 
   
     
     
     
 
 
Total
    (4.8 %)     6.4 %     (9.3 %)     100.0 %
 
   
     
     
     
 

*   Total represents each region’s % of total NOI from the Company, including discontinued operations.


Established Communities Operating Statistics

Market Rents, as determined by the Company, declined by an average of 2.5% in the third quarter of 2003 compared to the same quarter in the prior year. The greatest declines, on a year over year basis, were in San Jose, CA with a decline of 10.2% and San Francisco, CA with a decline of 5.3% from the third quarter of 2002. Sequentially, as compared to the second quarter of 2003, market rents remained stable for the Established Community portfolio as a whole.

Economic Occupancy was 94.0% during the third quarter of 2003, remaining flat as compared to the same quarter last year. Sequentially, from the second quarter to the third quarter of 2003, Economic Occupancy increased 0.4%. The largest increases in the third quarter 2003 as compared to the second quarter were in San Diego, CA at 3.0%, Boston, MA at 2.7% and Central New Jersey at 2.6%.

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. For the third quarter of 2003, Rental Revenue with Concessions on a Cash Basis decreased 3.6% as compared to the third quarter of 2002 and 1.5% as compared to the second quarter of 2003.

Concessions granted per move-in for Established Communities averaged $873 during the third quarter of 2003, an increase of 170.3% from $323 in the third quarter of 2002 and an increase of 8.7% from $803 in the second quarter of 2003.

Development Activity

The Company completed two development communities during the third quarter of 2003. Avalon at Rock Spring, located in the greater Washington, DC metro area, is a mid-rise community containing 386 apartment homes and was completed for a Total Capital Cost of $46,000,000. Avalon at Gallery Place, also located in Washington, DC, is a high-rise community containing 203 apartment homes and was completed for a Total Capital Cost of $49,000,000.

During the third quarter of 2003, the Company commenced construction on two communities, Avalon at Crane Brook, located in the Boston, MA area and Avalon Milford I, located in the Fairfield-New Haven, CT area. These communities, when completed, are expected to contain an aggregate of 633 apartment homes for a Total Capital Cost of $88,700,000.

Disposition Activity

The Company sold one community, Amberway (located in Orange County, CA), during the third quarter of 2003. This 272 apartment home community was originally constructed in 1983 and was acquired by the Company in 1998. The sales price for this community was $33,500,000, resulting in a gain as reported in accordance with GAAP of $13,575,000 and an Economic Gain of $11,417,000.

Also during the third quarter of 2003, Falkland Chase, a 450 apartment home community located in Silver Spring, MD, was sold by Falkland Partners, LLC, in which the Company has held a 50% membership interest since 1993. The Company’s share of the $58,500,000 sales price for this community was $29,250,000, resulting in net proceeds to the Company of $16,700,000. The Company’s share of the GAAP gain reported by Falkland Partners, LLC is $21,816,000 and is included in joint venture income and minority interest. The Company recognized an additional gain in accordance with GAAP of $1,632,000, resulting from the wind-up of its investment in Falkland Partners, LLC which is also included in joint venture income and minority interest. As a result, the Company reported an Economic Gain of $16,745,000 related to the sale of Falkland Chase. The weighted average Initial Year Market Cap Rate for the two communities sold during the third quarter was 6.4%.


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

On October 15, 2003, the Company sold Avalon at Fair Lakes, a 234 apartment home community located in Fairfax, VA. This community was constructed by the Company in 1998. The sales price for this community was $48,500,000, resulting in a gain as reported in accordance with GAAP of approximately $28,200,000 and an Economic Gain of approximately $24,500,000. The Economic Gain as a percentage of Total Capital Cost for this community was 104.4%. The Company anticipates two additional dispositions in the fourth quarter of 2003 with an aggregate estimated sales price of approximately $110,000,000. These anticipated dispositions will bring the aggregate estimated sales price for the Company’s dispositions to $158,500,000 for the fourth quarter of 2003 and to approximately $453,000,000 for the full year 2003, although there can be no assurance that these dispositions will be completed as planned.

Financing, Liquidity and Balance Sheet Statistics

As of September 30, 2003, the Company had $149,350,000 outstanding under its $500,000,000 unsecured credit facility and unrestricted cash of approximately $6,771,000. This unrestricted cash, the unsecured credit facility, net proceeds from anticipated additional asset sales in 2003 and cash retained from operations, will be used to fund development and redevelopment activity and for general corporate purposes. On July 15, 2003, the Company repaid $100,000,000 of unsecured notes pursuant to their scheduled maturity, with an interest rate of 6.5%, along with any unpaid interest.

Leverage, as measured by debt as a percentage of total market capitalization, was 41.6% at September 30, 2003. For the third quarter of 2003, Unencumbered NOI was approximately 80% and Interest Coverage was 3.2 times. Interest Coverage for the third quarter of 2003 includes $23,448,000 representing gains related to the sale of the Falkland Chase Community and investment wind-up.

Issuance of Common Stock

During the third quarter of 2003, the Company sold 2,804,700 shares of common stock at a price of $46.00 per share. The net proceeds from this offering, after underwriting discounts and commissions, of approximately $127,333,000 were used to repay a portion of amounts outstanding on the unsecured credit facility and for general corporate purposes.

Recently Issued Accounting Standards

In January 2003, the Financial Accounting Standards Board issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities,” which the Company will adopt effective December 31, 2003. The adoption of FIN 46 is not expected to have a material impact on the Company’s financial condition or results of operations.

The Company has adopted Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” effective July 1, 2003. The adoption of this statement did not have a material impact on the Company’s financial condition or results of operations.

In July 2003, the SEC clarified Emerging Issues Task Force Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock.” The clarification of Topic D-42 is effective in the first fiscal period ending after September 15, 2003 and is to be applied retroactively. As such, the Company has revised its second quarter 2003 results of operations, as included in the year-to-date September 30, 2003 results, to reflect additional preferred stock dividends of $280,000; no other periods presented in this release were impacted.

Outlook

The Company expects EPS (diluted) in the range of $1.35 to $1.38 for the fourth quarter of 2003 and $3.72 to $3.75 for the full year 2003.

The Company expects Projected FFO per share (diluted) in the range of $0.79 to $0.82 for the fourth quarter of 2003 and $3.25 to $3.28 for the full year 2003.

Other Matters

The Company will hold a conference call on October 22, 2003 at 1:00 PM Eastern Daylight Time (EDT) to review and answer appropriate questions about these results and projections, the earnings release attachments described below, and related matters. The domestic number to call to participate is 1-877-510-2397. The international number to call to participate is 1-706-634-5877. The domestic number to hear a replay of this call is 1-800-642-1687, and the international number to hear a replay of this call is 1-706-645-9291 — Access Code: 2733022.

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 and through e-mail distribution. Access to the full earnings release including the Attachments through the Company’s website is available at http://www.avalonbay.com/earnings. If you would like to receive future press releases via e-mail, please register through the Company’s website at http://www.avalonbay.com/Template.cfm?Section=Subscribe. Some items referenced in the earnings release may


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

require the Adobe Acrobat 5.0 Reader. If you do not have the Adobe Acrobat 5.0 Reader, you may download it at the following website address: http://www.adobe.com/products/acrobat/readstep.html.

Definitions and Reconciliations

The following non-GAAP financial measures and other terms, as used in the text of this earnings release, are defined and further explained on Attachment 13, “Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms”:

•   FFO
 
•   Projected FFO
 
•   Established Communities
 
•   NOI
 
•   Market Rents
 
•   Economic Occupancy
 
•   Rental Revenue with Concessions on a Cash Basis
 
•   Total Capital Cost
 
•   Economic Gain
 
•   Initial Year Market Cap Rate
 
•   Leverage
 
•   Unencumbered NOI
 
•   Interest Coverage

About AvalonBay Communities, Inc.

AvalonBay currently owns or holds an ownership interest in 142 apartment communities containing 42,058 apartment homes in ten states and the District of Columbia, of which ten communities are under construction and two communities are under reconstruction. AvalonBay is an equity REIT in the business of developing, redeveloping, acquiring and managing upscale apartment communities in high barrier-to-entry markets of the United States. More information on AvalonBay may be found on AvalonBay’s Website at http://www.avalonbay.com. For additional information, please contact Bryce Blair, Chairman, Chief Executive Officer and President, at (703) 317-4652 or Thomas J. Sargeant, Executive Vice President and Chief Financial Officer, at (703) 317-4635.

Forward-Looking Statements

This release, including its attachments, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by the Company’s use of words such as “expects,” “plans,” “estimates,” “projects,” “intends,” “believes” 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, including possible changes in demand for apartment homes, the effects of economic conditions (including interest rates), the impact of competition and competitive pricing, delays in completing developments and lease-ups on schedule, changes in construction costs, the results of financing efforts, the timing and closing of planned dispositions under agreement, the effects of the Company’s accounting policies and other matters detailed in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements.

The Company does not undertake a duty to update forward-looking statements, including its expected operating results for the fourth quarter or full year 2003. 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 © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

(AVALONBAY COMMUNTIES LOGO)

THIRD QUARTER 2003
Supplemental Operating and Financial Data

(AVALONBAY PHOTO)

Avalon at Rock Spring contains 386 one-, two -and three-bedroom apartment homes
in six four-story buildings. Apartment home features include fully applianced
kitchens, walk-in closets, double bowl bathroom vanities and full size washers
and dryers. Optional amenities include gas fireplaces, bay windows and private
balconies or patios. Residents also enjoy many community amenities including a
fully equipped fitness center, outdoor swimming pool, telecommuting center,
resident lounge and controlled access parking garages.

Avalon at Rock Spring is conveniently located between Old Georgetown Road and
I-270, in North Bethesda, Maryland. The community is located three miles from
downtown Bethesda, and the accessibility of the I-270/Capital Beltway spur
offers residents convenient commuting to major employment and entertainment
centers in Suburban Maryland, Northern Virginia and Washington, D.C. The
community is also adjacent to the Rock Spring business park, the corporate
headquarters of Marriott and Lockheed Martin and the local headquarters of IBM
Federal Systems.

The completion of Avalon at Rock Spring increases AvalonBay’s presence in the
Washington, D.C. metropolitan region to 17 communities with more than 5,600
apartment homes.


 


 

THIRD QUARTER 2003

Supplemental Operating and Financial Data

Table of Contents

         
Company Profile
       
Selected Operating and Other Information
  Attachment 1
Detailed Operating Information
  Attachment 2
Condensed Consolidated Balance Sheets
  Attachment 3
 
Sub-Market Profile
       
Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 4
Sequential Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 5
Year to Date Revenue and Occupancy Changes (Established Communities)
  Attachment 6
 
Development, Redevelopment, Acquisition and Disposition Profile
       
Summary of Development, Redevelopment and Acquisition Activity
  Attachment 7
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 and Section 21E of the Securities and Exchange Act of 1934, as amended. The projections and estimates contained in the attachments referred to above are forward-looking statements. These forward-looking statements 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, include: 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/A for the fiscal year ended December 31, 2002.


 


Attachment 1

AvalonBay Communities, Inc.
Selected Operating and Other Information
September 30, 2003

(Dollars in thousands except per share data)
(unaudited)

                                                   
      Q3   Q3           YTD   YTD        
Selected Operating Information:   2003   2002   % Change   2003   2002   % Change
   
 
 
 
 
 
Net income available to common stockholders:
  $ 55,212     $ 24,685       123.7 %   $ 162,673     $ 92,689       75.5 %
 
Per common share — basic
  $ 0.80     $ 0.36       122.2 %   $ 2.40     $ 1.34       79.1 %
 
Per common share — diluted
  $ 0.79     $ 0.35       125.7 %   $ 2.35     $ 1.32       78.0 %
                                                 
Funds from Operations attributable to common stockholders:
  $ 56,159     $ 61,810       (9.1 %)   $ 170,868     $ 199,017       (14.1 %)
 
Per common share — diluted
  $ 0.80     $ 0.87       (8.0 %)   $ 2.46     $ 2.81       (12.5 %)
                                                 
Dividends declared — common:
  $ 49,487     $ 48,561       1.9 %   $ 143,934     $ 145,413       (1.0 %)
 
Per common share
  $ 0.70     $ 0.70       0.0 %   $ 2.10     $ 2.10       0.0 %
                                                 
Common shares outstanding
    70,695,270       69,398,518               70,695,270       69,398,518          
Outstanding operating partnership units
    784,726       1,018,448               784,726       1,018,448          
 
   
     
             
     
         
Total outstanding shares and units
    71,479,996       70,416,966               71,479,996       70,416,966          
 
   
     
             
     
         
Average shares outstanding — basic
    68,779,429       69,154,045               67,880,019       68,940,901          
Average operating partnership units outstanding
    899,870       1,018,448               947,790       983,443          
Effect of dilutive securities
    852,621       877,206               696,419       1,019,697          
 
   
     
             
     
         
Average shares outstanding — diluted
    70,531,920       71,049,699               69,524,228       70,944,041          
 
   
     
             
     
         


Debt Composition and Maturities (1)

                                                           
      Conventional           Tax-Exempt
     
         
      Amt           % of Mkt Cap           Amt           % of Mkt Cap
     
         
         
         
Long-term notes:
                                                       
 
Variable rate
  $ —               —             $ 81,155               1.4 %
 
Fixed rate
    1,880,013               31.9 %             302,348               5.2 %
Variable rate credit facility
    149,350               2.5 %             —               —  
Short term construction note
    36,629               0.6 %             —               —  
 
   
             
Total debt
  $ 2,065,992               35.0 %           $ 383,503               6.6 %
 
   
             
 
Average interest rates (2)
            6.3 %                             5.7 %        
 
   
             
 
Combined average interest rate (2)
                            6.2 %                        
 
   
 
                                         
    2003   2004   2005   2006   2007
   
 
 
 
 
Remaining debt maturities (3)
  $ 1,253     $ 190,305     $ 154,681     $ 155,011     $ 301,345  
     
    (1) Includes debt related to assets held for sale.
 
    (2) Includes credit enhancement fees, facility fees, trustees’ fees, etc.
 
    (3) Excludes amounts under the $500 million variable rate credit facility that, after all extensions, matures in 2005.


 


Community Information

                 
    Communities   Apt Homes
   
 
Current Communities
    132       38,808  
Development Communities
    10       3,250  
Development Rights
    41       10,326  
Third-party management
    1       101  

Analysis of Capitalized Costs

                                 
    Q4 02   Q1 03   Q2 03   Q3 03
   
 
 
 
Cap interest
  $ 6,533     $ 6,206     $ 6,305     $ 6,360  
Cap overhead
  $ 4,050     $ 3,176     $ 3,291     $ 3,710  
Non-revenue generating capex per home
  $ 89     $ 41     $ 99     $ 112  



 



Attachment 2

AvalonBay Communities, Inc.
Detailed Operating Information
September 30, 2003

(Dollars in thousands except per share data)
(unaudited)

                                                   
      Q3   Q3           YTD   YTD        
      2003   2002   % Change   2003   2002   % Change
     
 
 
 
 
 
Revenue:
                                               
 
Rental and other income
  $ 153,339     $ 147,662       3.8 %   $ 453,674     $ 438,305       3.5 %
 
Management, development and other fees
    234       249       (6.0 %)     744       1,866       (60.1 %)
 
   
     
     
     
     
     
 
 
Total
    153,573       147,911       3.8 %     454,418       440,171       3.2 %
 
   
     
     
     
     
     
 
Operating expenses:
                                               
 
Direct property operating expenses, excluding property taxes
    39,327       35,341       11.3 %     110,296       95,910       15.0 %
 
Property taxes
    14,443       13,477       7.2 %     42,853       38,489       11.3 %
 
Property management and other indirect operating expenses
    7,577       6,906       9.7 %     22,630       22,498       0.6 %
 
   
     
     
     
     
     
 
 
Total
    61,347       55,724       10.1 %     175,779       156,897       12.0 %
 
   
     
     
     
     
     
 
 
Interest income
    852       909       (6.3 %)     2,634       3,013       (12.6 %)
 
Interest expense
    (33,432 )     (31,386 )     6.5 %     (101,826 )     (86,614 )     17.6 %
 
General and administrative expense
    (3,382 )     (2,966 )     14.0 %     (10,636 )     (10,009 )     6.3 %
 
Joint venture income, minority interest and venture partner interest in profit-sharing (1)
    23,266       (571 )     N/A       23,170       (439 )     N/A  
 
Depreciation expense
    (37,996 )     (34,723 )     9.4 %     (112,898 )     (98,618 )     14.5 %
 
   
     
     
     
     
     
 
 
Income from continuing operations
    41,534       23,450       77.1 %     79,083       90,607       (12.7 %)
                                                 
Discontinued operations: (2)
                                               
 
Income from discontinued operations
    2,278       5,261       (56.7 %)     10,001       16,169       (38.1 %)
 
Gain on sale of communities
    13,575       —       100.0 %     82,158       —       100.0 %
 
   
     
     
     
     
     
 
 
Total
    15,853       5,261       201.3 %     92,159       16,169       470.0 %
                                                 
Net income
    57,387       28,711       99.9 %     171,242       106,776       60.4 %
Dividends attributable to preferred stock
    (2,175 )     (4,026 )     (46.0 %)     (8,569 )     (14,087 )     (39.2 %)
 
   
     
     
     
     
     
 
Net income available to common stockholders
  $ 55,212     $ 24,685       123.7 %   $ 162,673     $ 92,689       75.5 %
 
   
     
     
     
     
     
 
Net income per common share- basic
  $ 0.80     $ 0.36       122.2 %   $ 2.40     $ 1.34       79.1 %
 
   
     
     
     
     
     
 
Net income per common share- diluted
  $ 0.79     $ 0.35       125.7 %   $ 2.35     $ 1.32       78.0 %
 
   
     
     
     
     
     
 

(1)  Includes the Company’s share of the GAAP gain reported by Falkland Partners, LLC as a result of the sale of Falkland Chase in the amount of $21,816 and the gain recognized by the Company for the wind-up of its investment of $1,632.

(2)  Reflects net income for communities held for sale as of September 30, 2003 and communities sold during the period from January 1, 2002 through September 30, 2003. The following table details income from discontinued operations as of the periods shown:

                                   
      Q3   Q3   YTD   YTD
      2003   2002   2003   2002
     
 
 
 
Rental income
  $ 3,829     $ 12,703     $ 21,545     $ 38,617  
Operating and other expenses
    (1,327 )     (4,585 )     (8,556 )     (13,243 )
Interest expense, net
    (224 )     (437 )     (1,040 )     (1,302 )
Minority interest expense
    —       (201 )     (389 )     (603 )
Depreciation expense
    —       (2,219 )     (1,559 )     (7,300 )
 
   
     
     
     
 
 
Income from discontinued operations (3)
  $ 2,278     $ 5,261     $ 10,001     $ 16,169  
 
   
     
     
     
 

(3)  NOI for discontinued operations totaled $2,502 and $12,989 for the three and nine months ended September  30, 2003, of which $158 and $6,127, respectively, related to assets sold.


 


Attachment 3

AvalonBay Communities, Inc.
Condensed Consolidated Balance Sheets
September 30, 2003

(Dollars in thousands)
(unaudited)

                 
    September 30,   December 31,
    2003   2002
   
 
Net real estate
  $ 4,419,045     $ 4,213,241  
Construction in progress (including land)
    283,003       312,378  
Real estate assets held for sale, net
    78,863       259,812  
 
   
     
 
Total real estate, net
    4,780,911       4,785,431  
 
Cash and cash equivalents
    6,771       12,916  
Cash in escrow
    20,682       10,228  
Resident security deposits
    22,524       21,839  
Other assets (1)
    134,976       120,421  
 
   
     
 
Total assets
  $ 4,965,864     $ 4,950,835  
 
   
     
 
Unsecured senior notes
  $ 1,835,298     $ 1,985,342  
Unsecured facility
    149,350       28,970  
Notes payable
    452,785       417,186  
Liabilities related to assets held for sale
    14,027       43,053  
Other liabilities
    232,493       242,559  
 
   
     
 
Total liabilities
  $ 2,683,953     $ 2,717,110  
 
   
     
 
Minority interest
    31,016       39,185  
Stockholders’ equity
    2,250,895       2,194,540  
 
   
     
 
Total liabilities and stockholders’ equity
  $ 4,965,864     $ 4,950,835  
 
   
     
 

    (1) Other assets includes $898 and $1,954 relating to discontinued operations as of September 30, 2003 and December 31, 2002, respectively.


 


 


Attachment 4

AvalonBay Communities, Inc.
Quarterly Revenue and Occupancy Changes — Established Communities
(1)
September 30, 2003

                                                                                     
        Apartment Homes   Average Rental Rates (2)   Economic Occupancy   Rental Revenue ($000’s)
       
 
 
 
                Q3 03   Q3 02   % Change   Q3 03   Q3 02   % Change   Q3 03   Q3 02   % Change
               
 
 
 
 
 
 
 
 
Northeast
                                                                               
 
Fairfield-New Haven, CT
    2,170     $ 1,590     $ 1,661       (4.3 %)     90.8 %     92.0 %     (1.2 %)   $ 9,386     $ 9,932       (5.5 %)
 
Boston, MA
    1,479       1,640       1,782       (8.0 %)     93.8 %     92.2 %     1.6 %     6,817       7,282       (6.4 %)
 
New York, NY
    1,234       1,943       1,980       (1.9 %)     93.3 %     93.6 %     (0.3 %)     6,710       6,859       (2.2 %)
 
Northern New Jersey
    1,043       2,267       2,387       (5.0 %)     90.0 %     90.0 %     0.0 %     6,382       6,719       (5.0 %)
 
Long Island, NY
    915       2,206       2,135       3.3 %     97.2 %     98.7 %     (1.5 %)     5,888       5,783       1.8 %
 
Central New Jersey
    718       1,406       1,457       (3.5 %)     92.5 %     92.5 %     0.0 %     2,794       2,896       (3.5 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Northeast Average
    7,559       1,806       1,873       (3.6 %)     92.7 %     92.9 %     (0.2 %)     37,977       39,471       (3.8 %)
 
   
     
     
     
     
     
     
     
     
     
 
Mid-Atlantic
                                                                               
 
Washington, DC
    3,630       1,366       1,391       (1.8 %)     94.3 %     94.6 %     (0.3 %)     14,034       14,330       (2.1 %)
 
Baltimore, MD
    1,054       1,140       1,105       3.2 %     96.9 %     96.0 %     0.9 %     3,494       3,355       4.1 %
 
   
     
     
     
     
     
     
     
     
     
 
 
Mid-Atlantic Average
    4,684       1,316       1,327       (0.8 %)     94.8 %     94.9 %     (0.1 %)     17,528       17,685       (0.9 %)
 
   
     
     
     
     
     
     
     
     
     
 
Midwest
                                                                               
 
Chicago, IL
    1,296       1,144       1,180       (3.1 %)     91.0 %     92.6 %     (1.6 %)     4,048       4,249       (4.7 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Midwest Average
    1,296       1,144       1,180       (3.1 %)     91.0 %     92.6 %     (1.6 %)     4,048       4,249       (4.7 %)
 
   
     
     
     
     
     
     
     
     
     
 
Pacific Northwest
                                                                               
 
Seattle, WA
    2,436       1,015       1,047       (3.1 %)     93.0 %     94.0 %     (1.0 %)     6,899       7,193       (4.1 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Pacific Northwest Average
    2,436       1,015       1,047       (3.1 %)     93.0 %     94.0 %     (1.0 %)     6,899       7,193       (4.1 %)
 
   
     
     
     
     
     
     
     
     
     
 
Northern California
                                                                               
 
San Jose, CA
    4,808       1,412       1,543       (8.5 %)     95.4 %     93.9 %     1.5 %     19,421       20,877       (7.0 %)
 
Oakland-East Bay, CA
    2,090       1,230       1,291       (4.7 %)     95.3 %     94.5 %     0.8 %     7,349       7,646       (3.9 %)
 
San Francisco, CA
    1,765       1,530       1,622       (5.7 %)     94.5 %     92.8 %     1.7 %     7,656       7,975       (4.0 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Northern California Average
    8,663       1,392       1,498       (7.1 %)     95.2 %     93.8 %     1.4 %     34,426       36,498       (5.7 %)
 
   
     
     
     
     
     
     
     
     
     
 
Southern California
                                                                               
 
Orange County, CA
    1,350       1,207       1,182       2.1 %     95.6 %     96.0 %     (0.4 %)     4,675       4,599       1.7 %
 
San Diego, CA
    940       1,274       1,233       3.3 %     96.1 %     97.5 %     (1.4 %)     3,452       3,386       1.9 %
 
Los Angeles, CA
    890       1,317       1,276       3.2 %     94.5 %     97.9 %     (3.4 %)     3,324       3,329       (0.2 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Southern California Average
    3,180       1,258       1,224       2.8 %     95.4 %     97.0 %     (1.6 %)     11,451       11,314       1.2 %
 
   
     
     
     
     
     
     
     
     
     
 
   
Average/Total Established
    27,818     $ 1,432     $ 1,484       (3.5 %)     94.0 %     94.0 %     0.0 %   $ 112,329     $ 116,410       (3.5 %)
 
   
     
     
     
     
     
     
     
     
     
 

(1)   Established Communities are communities with stabilized operating costs as of January 1, 2002 such that a comparison of 2002 to 2003 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the lease term.


 


 


Attachment 5

AvalonBay Communities, Inc.
*Sequential Quarterly* Revenue and Occupancy Changes — Established Communities (1)
September 30, 2003

                                                                                     
        Apartment Homes   Average Rental Rates (2)   Economic Occupancy   Rental Revenue ($000's)
       
 
 
 
                Q303   Q203   % Change   Q303   Q203   % Change   Q303   Q203   % Change
               
 
 
 
 
 
 
 
 
Northeast
                                                                               
 
Fairfield-New Haven, CT
    2,170     $ 1,590     $ 1,612       (1.4 %)     90.8 %     93.1 %     (2.3 %)   $ 9,386     $ 9,740       (3.6 %)
 
Boston, MA
    1,479       1,640       1,689       (2.9 %)     93.8 %     91.1 %     2.7 %     6,817       6,827       (0.1 %)
 
New York, NY
    1,234       1,943       1,943       0.0 %     93.3 %     94.6 %     (1.3 %)     6,710       6,808       (1.4 %)
 
Northern New Jersey
    1,043       2,267       2,228       1.8 %     90.0 %     91.8 %     (1.8 %)     6,382       6,389       (0.1 %)
 
Long Island, NY
    915       2,206       2,176       1.4 %     97.2 %     98.5 %     (1.3 %)     5,888       5,882       0.1 %
 
Central New Jersey
    718       1,406       1,409       (0.2 %)     92.5 %     89.9 %     2.6 %     2,794       2,727       2.5 %
 
   
     
     
     
     
     
     
     
     
     
 
 
Northeast Average
    7,559       1,806       1,814       (0.4 %)     92.7 %     93.3 %     (0.6 %)     37,977       38,373       (1.0 %)
 
   
     
     
     
     
     
     
     
     
     
 
Mid-Atlantic
                                                                               
 
Washington, DC
    3,630       1,366       1,373       (0.5 %)     94.3 %     92.8 %     1.5 %     14,034       13,871       1.2 %
 
Baltimore, MD
    1,054       1,140       1,143       (0.3 %)     96.9 %     95.4 %     1.5 %     3,494       3,448       1.3 %
 
   
     
     
     
     
     
     
     
     
     
 
 
                                                                               
 
Mid-Atlantic Average
    4,684       1,316       1,321       (0.4 %)     94.8 %     93.3 %     1.5 %     17,528       17,319       1.2 %
 
   
     
     
     
     
     
     
     
     
     
 
Midwest
                                                                               
 
Chicago, IL
    1,296       1,144       1,149       (0.4 %)     91.0 %     89.8 %     1.2 %     4,048       4,013       0.9 %
 
   
     
     
     
     
     
     
     
     
     
 
 
Midwest Average
    1,296       1,144       1,149       (0.4 %)     91.0 %     89.8 %     1.2 %     4,048       4,013       0.9 %
 
   
     
     
     
     
     
     
     
     
     
 
Pacific Northwest
                                                                               
 
Seattle, WA
    2,436       1,015       1,017       (0.2 %)     93.0 %     91.1 %     1.9 %     6,899       6,773       1.9 %
 
   
     
     
     
     
     
     
     
     
     
 
 
Pacific Northwest Average
    2,436       1,015       1,017       (0.2 %)     93.0 %     91.1 %     1.9 %     6,899       6,773       1.9 %
 
   
     
     
     
     
     
     
     
     
     
 
Northern California
                                                 
 
San Jose, CA
    4,808       1,412       1,459       (3.2 %)     95.4 %     94.8 %     0.6 %     19,421       19,949       (2.6 %)
 
Oakland-East Bay, CA
    2,090       1,230       1,250       (1.6 %)     95.3 %     95.6 %     (0.3 %)     7,349       7,488       (1.9 %)
 
San Francisco, CA
    1,765       1,530       1,558       (1.8 %)     94.5 %     94.1 %     0.4 %     7,656       7,763       (1.4 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Northern California Average
    8,663       1,392       1,428       (2.5 %)     95.2 %     94.8 %     0.4 %     34,426       35,200       (2.2 %)
 
   
     
     
     
     
     
     
     
     
     
 
Southern California
                                                                               
 
Orange County, CA
    1,350       1,207       1,207       0.0 %     95.6 %     94.5 %     1.1 %     4,675       4,620       1.2 %
 
San Diego, CA
    940       1,274       1,263       0.9 %     96.1 %     93.1 %     3.0 %     3,452       3,317       4.1 %
 
Los Angeles, CA
    890       1,317       1,322       (0.4 %)     94.5 %     96.1 %     (1.6 %)     3,324       3,392       (2.0 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Southern California Average
    3,180       1,258       1,256       0.2 %     95.4 %     94.5 %     0.9 %     11,451       11,329       1.1 %
 
   
     
     
     
     
     
     
     
     
     
 
   
Average/Total Established
    27,818     $ 1,432     $ 1,446       (1.0 %)     94.0 %     93.6 %     0.4 %   $ 112,329     $ 113,007       (0.6 %)
 
   
     
     
     
     
     
     
     
     
     
 

(1)   Established Communities are communities with stabilized operating costs as of January 1, 2002 such that a comparison of 2002 to 2003 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the lease term.


 


 


Attachment 6

AvalonBay Communities, Inc.
Year to Date Revenue and Occupancy Changes — Established Communities (1)
September 30, 2003

                                                                                     
        Apartment Homes   Average Rental Rates (2)   Economic Occupancy   Rental Revenue ($000's)
       
 
 
 
                YTD 03   YTD 02   % Change   YTD 03   YTD 02   % Change   YTD 03   YTD 02   % Change
               
 
 
 
 
 
 
 
 
Northeast
                                                                               
 
Fairfield-New Haven, CT
    2,170     $ 1,602     $ 1,648       (2.8 %)     91.2 %     93.6 %     (2.4 %)   $ 28,543     $ 30,102       (5.2 %)
 
Boston, MA
    1,479       1,683       1,790       (6.0 %)     91.9 %     93.2 %     (1.3 %)     20,582       22,196       (7.3 %)
 
New York, NY
    1,234       1,943       1,991       (2.4 %)     94.2 %     91.8 %     2.4 %     20,323       20,325       0.0 %
 
Northern New Jersey
    1,043       2,237       2,514       (11.0 %)     90.4 %     87.6 %     2.8 %     18,984       20,684       (8.2 %)
 
Long Island, NY
    915       2,181       2,120       2.9 %     98.2 %     98.3 %     (0.1 %)     17,642       17,162       2.8 %
 
Central New Jersey
    718       1,408       1,459       (3.5 %)     90.9 %     92.2 %     (1.3 %)     8,267       8,686       (4.8 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Northeast Average
    7,559       1,813       1,889       (4.0 %)     92.7 %     92.7 %     0.0 %     114,341       119,155       (4.0 %)
 
   
     
     
     
     
     
     
     
     
     
 
Mid-Atlantic
                                                                               
 
Washington, DC
    3,630       1,368       1,412       (3.1 %)     93.1 %     93.8 %     (0.7 %)     41,626       43,279       (3.8 %)
 
Baltimore, MD
    1,054       1,135       1,096       3.6 %     95.8 %     96.1 %     (0.3 %)     10,310       9,980       3.3 %
 
   
     
     
     
     
     
     
     
     
     
 
 
Mid-Atlantic Average
    4,684       1,316       1,341       (1.9 %)     93.6 %     94.2 %     (0.6 %)     51,936       53,259       (2.5 %)
 
   
     
     
     
     
     
     
     
     
     
 
Midwest
                                                                               
 
Chicago, IL
    1,296       1,154       1,198       (3.7 %)     90.3 %     93.2 %     (2.9 %)     12,160       13,018       (6.6 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Midwest Average
    1,296       1,154       1,198       (3.7 %)     90.3 %     93.2 %     (2.9 %)     12,160       13,018       (6.6 %)
 
   
     
     
     
     
     
     
     
     
     
 
Pacific Northwest
                                                                               
 
Seattle, WA
    2,436       1,019       1,082       (5.8 %)     92.0 %     93.6 %     (1.6 %)     20,555       22,200       (7.4 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Pacific Northwest Average
    2,436       1,019       1,082       (5.8 %)     92.0 %     93.6 %     (1.6 %)     20,555       22,200       (7.4 %)
 
   
     
     
     
     
     
     
     
     
     
 
Northern California
                                                                               
 
San Jose, CA
    4,808       1,452       1,628       (10.8 %)     95.1 %     93.2 %     1.9 %     59,795       65,660       (8.9 %)
 
Oakland-East Bay, CA
    2,090       1,248       1,352       (7.7 %)     95.5 %     93.8 %     1.7 %     22,410       23,846       (6.0 %)
 
San Francisco, CA
    1,765       1,553       1,666       (6.8 %)     94.5 %     94.5 %     0.0 %     23,308       25,013       (6.8 %)
 
   
     
     
     
     
     
     
     
     
     
 
 
Northern California Average
    8,663       1,423       1,570       (9.4 %)     95.1 %     93.6 %     1.5 %     105,513       114,519       (7.9 %)
 
   
     
     
     
     
     
     
     
     
     
 
Southern California
                                                                               
 
Orange County, CA
    1,350       1,204       1,185       1.6 %     95.4 %     95.4 %     0.0 %     13,953       13,740       1.6 %
 
San Diego, CA
    940       1,265       1,234       2.5 %     94.8 %     95.7 %     (0.9 %)     10,151       9,994       1.6 %
 
Los Angeles, CA
    890       1,316       1,278       3.0 %     95.4 %     94.7 %     0.7 %     10,059       9,697       3.7 %
 
   
     
     
     
     
     
     
     
     
     
 
 
Southern California Average
    3,180       1,253       1,225       2.3 %     95.2 %     95.3 %     (0.1 %)     34,163       33,431       2.2 %
 
   
     
     
     
     
     
     
     
     
     
 
   
Average/Total Established
    27,818     $ 1,444     $ 1,520       (5.0 %)     93.7 %     93.5 %     0.2 %   $ 338,668     $ 355,582       (4.8 %)
 
   
     
     
     
     
     
     
     
     
     
 

(1)   Established Communities are communities with stabilized operating costs as of January 1, 2002 such that a comparison of 2002 to 2003 is meaningful.
 
(2)   Reflects the effect of concessions amortized over the lease term.


 


 


Attachment 7

AvalonBay Communities, Inc.
Summary of Development, Redevelopment and Presale Activity as of September 30, 2003

                                   
              Number   Number   Total
              of   of   Capital Cost (1)
              Communities   Homes   (millions)
Portfolio Additions:
                               
2002 Annual Completions
                               
  Development             10       2,521     $ 466.6  
 
Redevelopment (2)
            2       —       44.2  
 
Presale Communities (3)
            1       306       69.9  
 
           
     
     
 
 
Total Additions
            13       2,827     $ 580.7  
 
           
     
     
 
2003 Annual Completions (4)
                               
 
Development
            5       1,442     $ 274.6  
 
Redevelopment (2)
            1       —       22.2  
 
           
     
     
 
 
Total Additions
            6       1,442     $ 296.8  
 
           
     
     
 
Pipeline Activity:  (4)
                               
Currently Under Construction
                               
 
Development
            10       3,250     $ 552.5  
 
Redevelopment (2)
            2       —       30.3  
 
           
     
     
 
 
Subtotal
            12       3,250     $ 582.8  
 
           
     
     
 
Planning
                               
 
Development Rights
            41       10,326     $ 2,240.0  
 
           
     
     
 
 
Total Pipeline
            53       13,576     $ 2,822.8  
 
           
     
     
 

(1)   See Attachment #13 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(2)   Represents only cost of redevelopment activity, does not include original acquisition cost or number of apartment homes acquired.
 
(3)   A presale community is a community which, before or while under construction, the company contracts with an unrelated third party to purchase upon construction completion. In some cases, an additional condition to closing the presale acquisition is that the community has achieved stabilized or some other level of occupancy.
 
(4)   Information represents projections and estimates.
 
    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 charts for the third quarter of 2003.

 



 


Attachment 8

AvalonBay Communities, Inc.
Development Communities as of September 30, 2003

                                                                                         
                            Schedule                                
                    Total  
  Avg                        
            # of   Capital                                   Rent                        
            Apt   Cost (1)           Initial           Stabilized   Per   % Comp   % Leased   % Occ
            Homes   (millions)   Start   Occupancy   Complete   Ops (1)   Home (1)   (2)   (3)   (4) (5)
           
 
 
 
 
 
 
 
 
 
                                                            Inclusive of                        
                                                            Concessions                        
                                                            See Attachment #13                        
                                                                                     
Under Construction:
                                                                               
   
1. Avalon Glendale
    223     $ 40.4       Q1 2002       Q2 2003       Q1 2004       Q3 2004     $ 1,990       55.2 %     41.7 %     39.5 %
       
Glendale, CA
                                                                               
   
2. Avalon at Grosvenor Station (8) (9)
    497     $ 82.3       Q1 2002       Q3 2003       Q4 2004       Q2 2005     $ 1,540       15.9 %     31.8 %     18.3 %
       
North Bethesda, MD
                                                                               
   
3. Avalon at Newton Highlands (8)
    294     $ 58.7       Q2 2002       Q2 2003       Q1 2004       Q3 2004     $ 2,280       64.6 %     53.7 %     43.2 %
       
Newton, MA
                                                                               
   
4. Avalon at Glen Cove South
    256     $ 62.6       Q3 2002       Q1 2004       Q2 2004       Q4 2004     $ 2,715       N/A       N/A       N/A  
       
Glen Cove, NY
                                                                               
   
5. Avalon at Steven’s Pond
    326     $ 55.4       Q3 2002       Q1 2003       Q2 2004       Q4 2004     $ 1,745       42.9 %     38.7 %     31.9 %
       
Saugus, MA
                                                                               
   
6. Avalon Darien
    189     $ 43.6       Q4 2002       Q2 2003       Q3 2004       Q1 2005     $ 2,385       28.0 %     42.9 %     25.4 %
       
Darien, CT
                                                                               
   
7. Avalon at Traville (10)
    520     $ 71.5       Q4 2002       Q3 2003       Q1 2005       Q3 2005     $ 1,475       14.4 %     17.5 %     10.4 %
       
North Potomac, MD
                                                                               
   
8. Avalon Run East II
    312     $ 49.3       Q2 2003       Q3 2004       Q1 2005       Q3 2005     $ 1,690       N/A       N/A       N/A  
       
Lawrenceville, NJ
                                                                               
   
9. Avalon at Crane Brook
    387     $ 56.2       Q3 2003       Q3 2004       Q2 2005       Q4 2005     $ 1,590       N/A       N/A       N/A  
       
Danvers & Peabody, MA
                                                                               
   
10. Avalon Milford I
    246     $ 32.5       Q3 2003       Q3 2004       Q1 2005       Q3 2005     $ 1,420       N/A       N/A       N/A  
       
Milford, CT
                                                                               
 
   
     
                                     
                         
       
Subtotal/Weighted Average
    3,250     $ 552.5                                     $ 1,800                          
 
   
     
                                     
                         
Completed this Quarter:
                                                                               
   
1. Avalon at Rock Spring (6)
    386     $ 46.0       Q4 2001       Q4 2002       Q3 2003       Q1 2004     $ 1,620       100.0 %     81.9 %     79.0 %
       
North Bethesda, MD
                                                                               
   
2. Avalon at Gallery Place I (7)
    203     $ 49.0       Q4 2001       Q2 2003       Q3 2003       Q2 2004     $ 2,050       100.0 %     67.0 %     62.1 %
       
Washington, DC
                                                                               
 
   
     
                                     
                         
       
Subtotal/Weighted Average
    589     $ 95.0                                     $ 1,770                          
 
   
     
                                     
                         
       
Total/Weighted Average
    3,839     $ 647.5                                     $ 1,795                          
 
   
     
                                     
                         
     
Weighted Average Projected NOI as a % of Total Capital Cost (1)
            8.6 %   Inclusive of Concessions - 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 October 10, 2003.
 
(3)   Includes apartment homes for which leases have been executed or non-refundable deposits have been paid as of October 17, 2003.
 
(4)   Physical occupancy based on apartment homes occupied as of October 17, 2003.
 
(5)   Q3 2003 Net Operating Income/(Deficit) for communities under construction and communities completed during this quarter was $0.5 million (excludes Net Operating Income for communities completed in previous quarters but not yet stabilized). See Attachment #13.
 
(6)   The community is owned by a limited liability company or a limited partnership in which the Company is a majority partner. The costs reflected above exclude construction and management fees due to AvalonBay. This community is consolidated for financial reporting purposes.
 
(7)   The Total Capital Cost for this community excludes approximately $4 million of proceeds that the Company expects to receive upon the sale of transferable development rights associated with the development of the community; however, there can be no assurance that the projected amount of proceeds will be achieved.
 
(8)   The community is owned by a DownREIT partnership in which a wholly-owned subsidiary of AvalonBay is the general partner with a majority interest. This community is consolidated for financial reporting purposes.
 
(9)   For purposes of calculating Projected NOI as a % of Total Capital Cost for this community and its related impact on the Weighted Average calculation, the Company has included in Total Capital Cost $1.9 million, the present value of a projected residual land payment that is a priority distribution upon a sale or refinancing transaction in the future.
 
(10)   Construction started at Avalon Traville Phase II in Q203. It is combined above with Phase I for reporting purposes.
 
    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 charts for the third quarter of 2003.


 


 


Attachment 9

AvalonBay Communities, Inc.
Redevelopment Communities (1) as of September 30, 2003

                                                                                       
                  Cost (millions)   Schedule           Number of Homes
                 
 
         
                                                                  Avg                
          # of           Total                                   Rent           Out of
          Apt   Acquisition   Capital                           Restabilized   Per   Completed   Service
          Homes   Cost   Cost (2)   Acquisition   Start   Complete   Ops (2)   Home (2)   to date   @ 9/30/03
         
 
 
 
 
 
 
 
 
 
                                                                  Inclusive of                
                                                                  Concessions                
                                                                  See Attachment #13                
Under Redevelopment:
                                                                               
 
1. Avalon at Foxhall (3)
    308     $ 35.7     $ 43.8       Q3 1994       Q4 2002       Q2 2004       Q4 2004     $ 1,895       219       45  
     
Washington, DC
                                                                               
 
2. Avalon at Prudential Center (4)
Boston, MA
    781     $ 133.9     $ 156.1       Q3 1998       Q4 2000       Q4 2003       Q2 2004     $ 2,655       459       31  
 
   
     
     
                                     
     
     
 
     
Total/Weighted Average
    1,089     $ 169.6     $ 199.9                                     $ 2,440       678       76  
 
   
     
     
                                     
     
     
 
   
Weighted Average Projected NOI as a % of Total Capital Cost (2)
                    9.6 %   Inclusive of Concessions - See Attachment #13                          

(1)   Redevelopment Communities are communities acquired for which redevelopment costs are expected to exceed 10% of the original acquisition cost or $5,000,000.
 
(2)   Inclusive of acquisition cost. See Attachment #13 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(3)   The Acquisition Cost of $35.7 million is comprised of the initial acquisition cost of $33.8 million plus capital expenditures of $1.9 million that were made following the acquisition and were unrelated to redevelopment costs. This asset was formerly known as 4100 Massachusetts Avenue.
 
(4)   The Acquisition Cost of $133.9 million is comprised of the initial acquisition cost of $130 million plus capital expenditures of $3.9 million that were made following the acquisition and were unrelated to redevelopment costs. In Q2 2003, the scope of this redevelopment was changed to include a roof replacement and other apartment renovations, increasing the redevelopment budget to $22.2 million from $20.6 million.
 
    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 charts for the third quarter of 2003.


 


 


Attachment 10

AvalonBay Communities, Inc.
Summary of Development and Redevelopment Community Activity (1) as of September 30, 2003

                                           
DEVELOPMENT (2)

      Apt Homes   Development   Cost of Homes           Construction in
      Completed &   Community   Completed &   Remaining to   Progress at
      Occupied   Investments (3)   Occupied (4)   Invest (5)   Period End (6)
     
 
 
 
 
Total - 2001 Actual
    1,582     $ 404,586,134     $ 258,593,463     $ 431,505,675     $ 415,617,828  
 
   
     
     
                 
2002 Actual:
                                       
 
Quarter 1
    565     $ 119,213,893     $ 102,870,891     $ 369,248,732     $ 407,887,099  
 
Quarter 2
    798       119,760,121       154,985,308       367,499,307       350,311,849  
 
Quarter 3
    692       94,377,426       133,106,593       404,565,295       313,104,399  
 
Quarter 4
    424       84,212,982       78,307,747       254,198,266       295,107,369  
 
   
     
     
                 
Total - 2002 Actual
    2,479     $ 417,564,422     $ 469,270,539                  
 
   
     
     
                 
2003:
                                       
 
Quarter 1 (Actual)
    343     $ 47,610,401     $ 66,767,096     $ 205,448,920     $ 304,444,246  
 
Quarter 2 (Actual)
    380       96,480,917       75,410,129       307,768,115       270,813,025  
 
Quarter 3 (Actual)
    633       78,516,195       120,057,691       304,758,336       266,114,151  
 
Quarter 4 (Projected)
    449       101,342,833       85,505,734       203,415,501       208,968,709  
 
   
     
     
                 
Total - 2003 Projected
    1,805     $ 323,950,346     $ 347,740,650                  
 
   
     
     
                 
                                   
REDEVELOPMENT

      Avg Homes   Redevelopment           Reconstruction in
      Out   Community   Remaining to   Progress at
      of Service   Investments (3)   Invest (5)   Period End (6)
     
 
 
 
Total - 2001 Actual
          $ 26,832,005     $ 10,190,945     $ 14,000,460  
 
           
                 
2002 Actual:
                               
 
Quarter 1
    34     $ 3,426,482     $ 7,568,111     $ 6,500,000  
 
Quarter 2
    31       2,102,054       5,083,139       14,002,156  
 
Quarter 3
    26       2,004,800       10,406,023       13,778,043  
 
Quarter 4
    44       3,078,838       7,655,832       17,317,952  
 
           
                 
Total - 2002
          $ 10,612,174                  
 
           
                 
2003:
                               
 
Quarter 1 (Actual)
    68     $ 1,798,678     $ 5,857,154     $ 10,541,752  
 
Quarter 2 (Actual)
    75       1,535,351       5,738,979       15,074,513  
 
Quarter 3 (Actual)
    83       3,055,001       3,179,103       16,888,849  
 
Quarter 4 (Projected)
    55       2,635,972       543,131       6,013,333  
 
           
                 
Total - 2003 Projected
          $ 9,025,002                  
 
           
                 

(1)   Data is presented for all Historical and Current Development Communities currently under construction; all Historical and Current Redevelopment Communities under reconstruction; and those communities for which construction or reconstruction is expected to begin within the next 90 days. Does not include data for Presale Communities.
 
(2)   Projected Periods include data for consolidated joint ventures at 100%. The offset for joint venture partners’ participation is reflected in the minority interest line items of the Financial Statements.
 
(3)   Represents Total Capital Cost incurred or expected to be incurred during the quarter for (i) Current Development/Redevelopment Communities under construction or reconstruction during the quarter and (ii) those for which construction or reconstruction is expected to begin within the next 90 days.
 
(4)   Represents Total Capital Cost incurred in all quarters 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 (i) Current Development/Redevelopment Communities under construction or reconstruction during the quarter and (ii) those for which construction or reconstruction is expected to begin within the next 90 days. Remaining to invest for Q303 includes $97.5 million attributed to three anticipated Q403 development starts, one of which is to be developed under a joint venture structure with third-party financing. AvalonBay’s portion of the Total Capital Cost for this joint venture is projected to be $30.0 million including community-based debt.
 
(6)   Represents period end balance of construction or reconstruction costs.

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 charts for the third quarter of 2003.

 



 


Attachment 11

AvalonBay Communities, Inc.
Future Development as of September 30, 2003

                                 
DEVELOPMENT RIGHTS

                    Estimated   Total
                    Number   Capital Cost (1)
Location of Development Right           of Homes   (millions)

         
 
  1.    
Coram, NY Phase I
    (2 )     298       $49  
  2.    
Plymouth, MA Phase I
    (2 )     98       21  
  3.    
New York, NY Phase I
(2) (3 )(4)     361       148  
  4.    
Kirkland, WA
    (2 )     211       50  
  5.    
Bedford, MA
    (2 )     139       21  
  6.    
Danbury, CT
    (2 )     234       36  
  7.    
Orange, CT
    (2 )     168       22  
  8.    
Seattle, WA
    (2 )     194       50  
  9.    
Los Angeles, CA
    (2 )     309       63  
  10.    
Long Island City, NY Phase II and III
            552       162  
  11.    
Plymouth, MA Phase II
            72       13  
  12.    
San Francisco, CA
            313       100  
  13.    
Stratford, CT
            146       23  
  14.    
Camarillo, CA
    (2 )     249       43  
  15.    
Bellevue, WA
            368       71  
  16.    
Newton, MA
            240       60  
  17.    
Hingham, MA
            236       44  
  18.    
Quincy, MA
    (2 )     148       24  
  19.    
Andover, MA
            115       21  
  20.    
Milford, CT
            284       41  
  21.    
Dublin, CA Phase I
            305       72  
  22.    
Cohasset, MA
            200       38  
  23.    
New York, NY Phase II
            205       88  
  24.    
Los Angeles, CA
            123       36  
  25.    
Glen Cove, NY
            111       31  
  26.    
New Rochelle, NY Phase II and III
            588       144  
  27.    
Greenburgh, NY Phase II
            766       120  
  28.    
Encino, CA
            146       46  
  29.    
Coram, NY Phase II
    (2 )     152       26  
  30.    
Wilton, CT
            100       24  
  31.    
Dublin, CA Phase II
            200       47  
  32.    
Sharon, MA
            190       31  
  33.    
Norwalk, CT
            312       63  
  34.    
Danvers, MA
            476       85  
  35.    
College Park, MD
            320       44  
  36.    
Oyster Bay, NY
            273       69  
  37.    
Yaphank, NY
            270       41  
  38.    
New York, NY Phase III
            103       46  
  39.    
West Haven, CT
            170       23  
  40.    
Dublin, CA Phase III
            205       49  
  41.    
Camarillo, CA
            376       55  
       
 
           
     
 
       
Totals
            10,326     $ 2,240  
       
 
           
     
 

(1)   See Attachment #13 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(2)   Company owns land, but construction has not yet begun.
 
(3)   Total Capital Cost for this community includes costs associated with the construction of 89,000 square feet of retail space and 30,000 square feet for a community facility.
 
(4)   This community will be developed under a joint venture structure with third party financing. AvalonBay’s portion of the Total Capital Cost for this joint venture is projected to be $30.0 million including community-based 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 charts for the third quarter of 2003.

 



 


Attachment 12

AvalonBay Communities, Inc.
Summary of Disposition Activity as of September 30, 2003

                                                         
    Weighted                   Accumulated           Weighted   Weighted
Number of   Average   Gross Sales           Depreciation   Economic   Average Initial   Average
Communities Sold   Holding Period   Price   GAAP Gain   and Other   Gain (1)   Year Mkt. Cap Rate (1)   Unleveraged IRR (1)

 
 
 
 
 
 
 
1998:
                                                       
9 Communities
          $ 170,312,000     $ 25,270,000     $ 23,438,000     $ 1,832,000       7.5 %     11.8 %
 
           
     
     
     
                 
1999:
                                                       
16 Communities
          $ 316,512,000     $ 47,093,000     $ 27,150,000     $ 19,943,000       8.3 %     10.0 %
 
           
     
     
     
                 
2000:
                                                       
8 Communities
          $ 160,085,000     $ 40,779,000     $ 6,262,000     $ 34,517,000       7.9 %     21.3 %
 
           
     
     
     
                 
2001:
                                                       
7 Communities
          $ 241,130,000     $ 62,852,000     $ 21,623,000     $ 41,229,000       8.0 %     14.0 %
 
           
     
     
     
                 
2002:
                                                       
1 Community
          $ 80,100,000     $ 48,893,000     $ 7,462,000     $ 41,431,000       5.4 %     22.1 %
 
           
     
     
     
                 
YTD 2003:
                                                       
9 Communities (2)
          $ 294,875,000     $ 105,606,000     $ 37,053,000     $ 68,553,000       6.6 %     13.6 %
 
           
     
     
     
                 
1998-3Q 2003 Total
    4.9     $ 1,263,014,000     $ 330,493,000     $ 122,988,000     $ 207,505,000       7.5 %     14.0 %
 
           
     
     
     
                 

 

(1)   See Attachment #13 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
     
(2)   2003 Information includes the Company's 50% interest in the gross sales price, GAAP gain and Economic Gain resulting from the sale of the Falkland Chase community, as well as the GAAP gain and Economic Gain resulting from the wind-up of the Company's investment in Falkland Partners, LLC.

 



 

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 computed in accordance with GAAP, adjusted for gains or losses on sales of property, extraordinary gains or losses (as defined by GAAP) 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 property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. A reconciliation of FFO to net income is as follows (dollars in thousands):


                                 
    Q3   Q3   YTD   YTD
    2003   2002   2003   2002
   
 
 
 
Net income
  $ 57,387     $ 28,711     $ 171,242     $ 106,776  
Dividends attributable to preferred stock
    (2,175 )     (4,026 )     (8,569 )     (14,087 )
Depreciation — real estate assets, including discontinued operations
    37,443       36,393       111,932       104,147  
Joint venture adjustments
    (23,206 )     326       (22,626 )     965  
Minority interest, including discontinued operations
    285       406       1,047       1,216  
Gain on sale of communities
    (13,575 )     —       (82,158 )     —  
 
   
     
     
     
 
FFO attributable to common stockholders
  $ 56,159     $ 61,810     $ 170,868     $ 199,017  
 
   
     
     
     
 
Average shares outstanding — diluted
    70,531,920       71,049,699       69,524,228       70,944,041  
 
EPS — diluted
  $ 0.79     $ 0.35     $ 2.35     $ 1.32  
 
   
     
     
     
 
FFO per common share — diluted
  $ 0.80     $ 0.87     $ 2.46     $ 2.81  
 
   
     
     
     
 


Projected FFO, as provided within this release in the Company’s outlook for 2003, is calculated on a consistent basis as historical FFO, and is therefore considered to be an appropriate supplemental measure to projected net income of projected operating performance. A reconciliation of the range provided for Projected FFO per share (diluted) for the fourth quarter and full year 2003 to the range provided for projected EPS (diluted) is as follows:


                 
    Low   High
    range   range
   
 
Projected EPS (diluted)- Q4 03
  $ 1.35     $ 1.38  
Projected depreciation (real estate related)
    0.50       0.55  
Projected gain on sale of communities
    (1.06 )     (1.11 )
 
   
     
 
Projected FFO per share (diluted) — Q4 03
  $ 0.79     $ 0.82  
 
   
     
 
Projected EPS (diluted) — Full Year 2003
  $ 3.72     $ 3.75  
Projected depreciation (real estate related)
    2.11       2.15  
Projected gain on sale of communities
    (2.58 )     (2.62 )
 
   
     
 
Projected FFO per share (diluted) — Full Year 2003
  $ 3.25     $ 3.28  
 
   
     
 


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


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Attachment 13 (continued)

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 is presented on Attachment 12.

Initial Year Market Cap Rate is defined by the Company as Projected NOI of a single community for the first 12 months following the date of the buyer’s valuation, less estimates for non-routine allowance of approximately $225-$250 per apartment home, divided by the gross sales price for the community. For this purpose, management’s projection of stabilized operating expenses for the community includes a management fee of approximately 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 the 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, including 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.

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 2003, Established Communities are communities that have Stabilized Operations as of January 1, 2002 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.

NOI is defined by the Company as total revenue less direct property operating expenses (including property taxes), and excludes corporate-level property management and other indirect operating expenses, interest income and expense, general and administrative expense, joint venture income, minority interest and venture partner interest in profit-sharing, depreciation expense, gain on sale of communities, impairment losses and income from discontinued operations. The Company considers NOI to be an appropriate supplemental measure to net income of operating performance because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any 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.


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Attachment 13 (continued)

A reconciliation of NOI (from continuing operations) to net income, as well as a breakdown of NOI by operating segment, is as follows (dollars in thousands):


                                             
        Q3   Q3   Q2   YTD   YTD
        2003   2002   2003   2003   2002
       
 
 
 
 
Net income
  $ 57,387     $ 28,711     $ 76,468     $ 171,242     $ 106,776  
Property management and other indirect operating expenses
    7,577       6,906       7,056       22,630       22,498  
Interest income
    (852 )     (909 )     (880 )     (2,634 )     (3,013 )
Interest expense
    33,432       31,386       34,249       101,826       86,614  
General and administrative expense
    3,382       2,966       3,623       10,636       10,009  
Joint venture income, minority interest and venture partner interest in profit-sharing
    (23,266 )     571       27       (23,170 )     439  
Depreciation expense
    37,996       34,723       37,736       112,898       98,618  
Gain on sale of communities
    (13,575 )     —       (54,511 )     (82,158 )     —  
Discontinued operations
    (2,278 )     (5,261 )     (2,984 )     (10,001 )     (16,169 )
 
   
     
     
     
     
 
NOI from continuing operations
  $ 99,803     $ 99,093     $ 100,784     $ 301,269     $ 305,772  
 
   
     
     
     
     
 
Established:
                                       
 
Northeast
  $ 24,361     $ 26,652     $ 25,935     $ 75,494     $ 83,419  
 
Mid-Atlantic
    12,160       12,577       12,105       36,273       38,447  
 
Midwest
    2,028       2,612       2,248       6,372       7,872  
 
Pacific NW
    4,125       4,480       4,107       12,623       14,457  
 
No. California
    23,724       26,082       25,134       75,104       84,915  
 
So. California
    7,758       7,881       7,732       23,535       23,837  
 
   
     
     
     
     
 
   
Total Established
    74,156       80,284       77,261       229,401       252,947  
 
   
     
     
     
     
 
Other Stabilized
    14,184       11,138       13,433       40,761       33,067  
Development/Redevelopment
    11,284       7,415       10,013       30,471       17,740  
Non-Allocated
    179       256       77       636       2,018  
 
   
     
     
     
     
 
NOI from continuing operations
  $ 99,803     $ 99,093     $ 100,784     $ 301,269     $ 305,772  
 
   
     
     
     
     
 

Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Attachment 13 (continued)

NOI as reported by the Company does not include the operating results from discontinued operations (i.e., assets sold or held for sale as of September 30, 2003). A reconciliation of NOI for communities sold or held for sale to net income for these communities for the third quarter and year-to-date 2003 is as follows (dollars in thousands):


                   
      Q3   YTD
      2003   2003
     
 
NOI from assets held for sale
  $ 2,344     $ 6,862  
NOI from assets sold
    158       6,127  
 
   
     
 
 
NOI from discontinued operations
  $ 2,502     $ 12,989  
 
   
     
 
Income from discontinued operations
  $ 2,278     $ 10,001  
Interest expense, net
    224       1,040  
Minority interest expense
    —       389  
Depreciation expense
    —       1,559  
 
   
     
 
NOI from discontinued operations
  $ 2,502     $ 12,989  
 
   
     
 

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, 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 Total Capital Cost of each community.

In this release the Company has not given a projection of NOI on a company-wide basis.   Management believes that Projected NOI of the development and redevelopment communities, on an aggregated weighted average basis, assists investors in understanding management’s estimate of the likely impact on operations of the development and redevelopment communities (before allocation of any corporate-level property management overhead,  general and administrative costs or interest expense) when they are complete and achieve stabilized occupancy.    Given the different dates and fiscal years at which stabilization is projected for these communities, the projected allocation of corporate-level property management overhead,  general and administrative costs and interest expense to communities under development or redevelopment is complex, impractical to develop, and of uncertain meaningfulness.  Projected NOI of these communities is not a projection of the Company’s financial performance or cash flow.  There can be no assurance that the communities under development or redevelopment will achieve the Projected NOI used in the calculation of weighted average Projected NOI to total capital cost.

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.

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.

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 in helping investors to 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, which is an indicator of current rental market conditions. A reconciliation of


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Attachment 13 (continued)

rental revenue from Established Communities in conformity with GAAP to Rental Revenue with Concessions on a Cash Basis is as follows (dollars in thousands):

                         

    Established Communities
   
    Q3   Q3   Q2
    2003   2002   2003
   
 
 
Rental revenue (GAAP basis)
  $ 112,329     $ 116,410     $ 113,007  
Concessions amortized
    3,358       1,665       2,880  
Concessions granted
    (4,737 )     (2,927 )     (3,304 )
 
   
     
     
 
Rental revenue (cash basis)
  $ 110,950     $ 115,148     $ 112,583  
 
   
     
     
 
Q3 03% change — GAAP revenue
            (3.5 %)     (0.6 %)
Q3 03% change — cash revenue
            (3.6 %)     (1.5 %)

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. 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.

Leverage is calculated by the Company as total debt as a percentage of total market capitalization. Market capitalization represents the aggregate of the market value of the Company’s common stock, the market value of the Company’s operating partnership units outstanding (based on the market value of the Company’s common stock), the liquidation preference of the Company’s preferred stock and the outstanding principal balance of the Company’s debt. Management believes that Leverage can be one useful measure of a real estate operating company’s long term liquidity and balance sheet strength, because it shows an approximate relationship between a company’s total debt and the current total market value of its assets based on the current price at which the company’s common stock trades. Changes in Leverage also can influence changes in per share results. A calculation of Leverage as of September 30, 2003 is as follows (dollars in thousands):

         

Total debt
  $ 2,449,495  
 
   
 
Common stock
    3,308,539  
Preferred stock
    100,000  
Operating partnership units
    36,725
Total debt
    2,449,495  
 
   
 
Total capitalization
    5,894,759  
 
   
 
Debt as % of capitalization
    41.6 %
 
   
 



 


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Attachment 13 (continued)

Unencumbered NOI is calculated by the Company as a measure of liquidity and represents Stabilized NOI generated by real estate assets unencumbered by outstanding secured debt as a percentage of total Stabilized NOI for the Company. In calculating Stabilized NOI, historical NOI is used for communities with Stabilized Operations, as defined below, and Projected NOI is used for Development and Redevelopment communities that do not have Stabilized Operations. Unencumbered NOI is used as a measure of protection for unsecured creditors of the Company. In addition, the Company believes that Unencumbered NOI can be one useful measure of an entity’s liquidity and balance sheet strength, and provides rating agencies and investors an additional means of comparing our liquidity to that of other companies. A calculation of Unencumbered NOI for the nine months ended September 30, 2003 is as follows (dollars in thousands):

           
NOI for Established Communities
  $ 229,401  
NOI for Other Stabilized Communities
    40,761  
NOI for discontinued operations
    12,989  
Projected NOI for Development/Redevelopment Communities
    30,374  
 
   
 
 
Total Stabilized NOI
    313,525  
Stabilized NOI on encumbered assets
    63,069  
 
   
 
 
Stabilized NOI on unencumbered assets
    250,456  
 
   
 
Unencumbered NOI
    80 %
 
   
 

Interest Coverage is calculated by the Company as EBITDA from continuing operations divided by the sum of interest expense and preferred dividends net of interest income. Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our liquidity to that of other companies. EBITDA is defined by the Company as net income before interest income and expense, income taxes, depreciation and amortization. Under this definition, which complies with the rules and regulations of the Securities and Exchange Commission, EBITDA includes gains on sale of assets and gain on sale of partnership interests.


Copyright © 2003 AvalonBay Communities, Inc. All Rights Reserved

 


 

Attachment 13 (continued)

A reconciliation of EBITDA and a calculation of Interest Coverage for the third quarter of 2003 are as follows (dollars in thousands):

           

Net income
  $ 57,387  
Interest income
    (852 )
Interest expense
    33,432  
Interest expense (discontinued operations)
    224  
Depreciation expense
    37,996  
 
   
 
EBITDA
  $ 128,187  
 
   
 
EBITDA from continuing operations
  $ 112,110  
EBITDA from discontinued operations
    16,077  
 
   
 
EBITDA
  $ 128,187  
 
   
 
EBITDA from continuing operations
  $ 112,110  
Interest expense
    33,432  
Interest income
    (852 )
Dividends attributable to preferred stock
    2,175
 
   
 
 
Interest charges
    34,755  
 
   
 
Interest coverage
    3.2  
 
   
 

In the calculations of EBITDA above, EBITDA from continuing operations includes $23,448 representing gains related to the sale of the Falkland Chase community and investment wind-up. In addition, EBITDA from discontinued operations includes $13,575 in gain on sale of communities.

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 amortized 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, including concessions equal to one-half month rent.

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 the 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.



 


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