Form: 8-K

Current report filing

October 26, 2005

 

Exhibit 99.2
AvalonBay Communities, Inc.
For Immediate News Release
October 25, 2005
Avalonbay Communities Inc. Announces
Third Quarter 2005 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, 2005 was $96,953,000, resulting in Earnings per Share — diluted (“EPS”) of $1.30, compared to $0.60 for the comparable period of 2004, a per share increase of 116.7%. For the nine months ended September 30, 2005, EPS was $2.95 compared to $1.39 for the comparable period of 2004, a per share increase of 112.2%. These increases are primarily attributable to higher recognized gains on asset sales during 2005 as compared to 2004.
Funds from Operations attributable to common stockholders — diluted (“FFO”) for the quarter ended September 30, 2005 was $68,091,000, or $0.91 per share compared to $63,601,000, or $0.86 per share for the comparable period of 2004, a per share increase of 5.8%. FFO per share of $0.86 for the quarter ended September 30, 2004 included a $1,138,000, or $0.02 per share, gain recognized on the sale of a land parcel previously held for development. The increase in FFO per share for the quarter ended September 30, 2005 as compared to the comparable period in 2004 is primarily attributable to contributions from newly developed communities and improved community operating results. FFO per share for the nine months ended September 30, 2005 increased by 14.5% to $2.84 from $2.48 for the comparable period of 2004.
Operating Results for the Quarter Ended September 30, 2005 Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue increased by $8,753,000, or 5.2% to $177,014,000. For Established Communities, rental revenue increased 4.3%, comprised of an increase in rental rates of 3.7% and an increase in Economic Occupancy of 0.6%. As a result, total revenue for Established Communities increased $4,987,000 to $120,964,000, and operating expenses for Established Communities increased $1,272,000 or 3.3% to $39,681,000. Accordingly, Net Operating Income (“NOI”) for Established Communities increased by $3,715,000 or 4.8%, to $81,283,000.
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities from the third quarter of 2004 to the third quarter of 2005:
 
3Q 05 Compared to 3Q 04
 
                                 
    Rental     Operating             % of  
    Revenue     Expenses     NOI     NOI (1)  
Northeast
    4.1 %     1.9 %     5.2 %     43.6 %
Mid-Atlantic
    5.4 %     6.4 %     4.9 %     16.5 %
Midwest
    3.0 %     10.5 %     (2.5 %)     2.0 %
Pacific NW
    4.7 %     1.2 %     6.9 %     4.6 %
No. California
    3.6 %     4.8 %     3.0 %     22.3 %
So. California
    5.9 %     (1.4 %)     9.0 %     11.0 %
 
                       
Total
    4.3 %     3.3 %     4.8 %     100.0 %
 
                       
(1)   Total represents each region’s % of total NOI from the Company, including discontinued operations.
 
Sequential Operating Results for the Quarter Ended September 30, 2005 Compared to the Quarter Ended June 30, 2005
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 2005:
 
3Q 05 Compared to 2Q 05
 
                         
    Rental     Operating        
    Revenue     Expenses     NOI  
Northeast
    2.2 %     2.9 %     1.8 %
Mid-Atlantic
    2.9 %     5.6 %     1.8 %
Midwest
    0.7 %     27.8 %     (14.4 %)
Pacific NW
    3.1 %     9.1 %     (0.1 %)
No. California
    1.6 %     8.6 %     (1.5 %)
So. California
    2.3 %     0.4 %     3.1 %
 
                 
Total
    2.1 %     5.9 %     0.4 %
 
                 
 
 
Copyright Ó 2005 AvalonBay Communities, Inc. All Rights Reserved

 


 

Operating Results for the Nine Months Ended September 30, 2005 Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue increased by $28,486,000, or 5.8% to $519,945,000. For Established Communities, rental revenue increased 3.1%, comprised of an increase in rental rates of 2.3% and an increase in Economic Occupancy of 0.8%. As a result, total revenue for Established Communities increased $10,657,000 to $356,032,000, and operating expenses for Established Communities increased $2,253,000 or 2.0% to $113,892,000. Accordingly, NOI for Established Communities increased by $8,404,000 or 3.6%, to $242,140,000.
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004:
 
YTD 2005 Compared to YTD 2004
 
                                 
    Rental     Operating             % of  
    Revenue     Expenses     NOI     NOI (1)  
Northeast
    3.4 %     3.3 %     3.4 %     42.4 %
Mid-Atlantic
    2.5 %     2.1 %     2.7 %     16.7 %
Midwest
    3.2 %     (1.8 %)     6.7 %     2.2 %
Pacific NW
    3.5 %     (2.7 %)     7.3 %     4.8 %
No. California
    2.2 %     1.8 %     2.4 %     22.8 %
So. California
    5.4 %     2.5 %     6.6 %     11.1 %
 
                       
Total
    3.1 %     2.0 %     3.6 %     100.0 %
 
                       
(1)   Total represents each region’s % of total NOI from the Company, including discontinued operations.
 
Established Communities Operating Statistics
Average Rental Rates were $1,515 per home for the Established Community portfolio as a whole in the third quarter of 2005, increasing 3.7% as compared to Average Rental Rates for the third quarter of 2004 and increasing 1.3% over Average Rental Rates for the second quarter of 2005. The increase in Average Rental Rates in the third quarter of 2005 as compared to the third quarter of 2004 is comprised of increases of 3.2% in July 2005, 3.9% in August 2005 and 4.1% in September 2005.
Economic Occupancy was 96.5% during the third quarter of 2005, increasing 0.6% as compared to the third quarter of 2004 and increasing 0.8% as compared to the second quarter of 2005.
Cash concessions are recognized on an accrual basis in accordance with Generally Accepted Accounting Principles (“GAAP”) and are amortized over the approximate lease term, which is generally one year.
The following table reflects the percentage changes in GAAP rental revenue and rental revenue with concessions on a cash basis for our Established Communities:
 
         
    3Q 05 vs 3Q 04   3Q 05 vs 2Q 05
GAAP rental revenue
  4.3%   2.1%
Rental revenue (with concessions on a cash basis)
  4.6%   1.3%
 
Development Activity
The Company completed one development community during the third quarter of 2005. Avalon Pines I, located in the Long Island, NY area, is a mixed garden-style and townhome community containing 298 apartment homes and was completed for a Total Capital Cost of $48,100,000. Avalon Pines II, the second phase of this community, is currently under construction and expected to be completed in the third quarter of 2006.
The Company commenced construction of four communities during the third quarter of 2005. Avalon at Decoverly II is located in the Washington, DC metro area, Avalon Lyndhurst is located in Northern New Jersey, Avalon Shrewsbury is located in the greater Boston, MA area and Avalon Riverview North is located in New York, NY. These four communities are expected to contain an aggregate of 1,377 apartment homes when completed, for an aggregate Total Capital Cost of $321,000,000.
Disposition Activity
During the third quarter of 2005, the Company sold three communities, Avalon Crossing, located in the Washington, DC metro area, Avalon Fremont II, located in the Oakland, CA area and Avalon Wildwood, located in the Seattle, WA area. Avalon Fremont II was acquired in 1994, and Avalon Wildwood was acquired in 2001. Avalon Crossing was developed and completed by the Company in 1996. These three communities, which contained a total of 505 apartment homes, were sold to condominium converters for an aggregate sales price of approximately $128,500,000. The sale of these communities resulted in a gain as reported in accordance with GAAP of $68,491,000 and an Economic Gain of approximately $62,194,000. The weighted average Initial Year Market Cap Rate related to these communities was 3.5%, and the Unleveraged IRR was 16.4%.
In addition, in October 2005, the Company decided to relocate one of its regional offices and as a result sold an office building in the Fairfield-New Haven, CT area. This office building was sold for a purchase price of
 
Copyright Ó 2005 AvalonBay Communities, Inc. All Rights Reserved

 


 

$7,650,000, resulting in a gain as reported in accordance with GAAP of approximately $2,800,000 and an Economic Gain of approximately $2,400,000.
Fund Activity
AvalonBay Value Added Fund, L.P. (the “Fund”), the private, discretionary investment vehicle in which the Company holds a 15.2% equity interest, acquired one community, Avalon at Poplar Creek, located in the Chicago, IL area, for a purchase price of $24,950,000. The Company’s pro rata share of the required capital investment for this acquisition is $3,780,000.
Financing, Liquidity and Balance Sheet Statistics
As of September 30, 2005, the Company had $112,800,000 outstanding under its $500,000,000 unsecured credit facility. Leverage, calculated as total debt as a percentage of Total Market Capitalization, was 27.2% at September 30, 2005. Unencumbered NOI for the nine months ended September 30, 2005 was 84.9% and Interest Coverage for the third quarter of 2005 was 2.9 times.
Outlook
The Company expects EPS in the range of $1.48 to $1.52 for the fourth quarter of 2005, resulting in EPS of $4.45 to $4.49 for the full year 2005.
The Company’s operating performance continued to improve in the third quarter of 2005, with increases in both occupancy and in rental rates across the portfolio that exceeded the Company’s expectations. These positive trends are continuing into October 2005. As such, the Company expects Projected FFO per share in the range of $0.90 to $0.94 for the fourth quarter of 2005. In addition, the Company is increasing its Projected FFO per share range as provided in July 2005 to a revised range of $3.74 to $3.78 for the full year 2005.
Fourth Quarter 2005 Conference Schedule
The Company is scheduled to participate in the following conferences during the fourth quarter of 2005:
 
4Q 05 Conference Schedule
         
Event/Conference   Date
     
2005 NAREIT Annual Convention
    Nov. 2nd-3rd  
UBS 2005 Global Real Estate Conference
    Dec. 2nd  
Bear Stearns 2nd Annual Real Estate Conference
    Dec. 5th  
 
Management is scheduled to participate in panel discussions and related question and answer sessions at both the UBS and Bear Stearns conferences. Management’s discussion and related question and answer sessions may include reference to the Company’s operating environment; operating trends; development, redevelopment, disposition and acquisition activity; the Company’s outlook and other business and financial matters affecting the Company.
Where available, a live audio webcast of each panel discussion and question and answer session will be accessible at http://www.avalonbay.com/events.
Other Matters
The Company will hold a conference call October 26, 2005 at 1:00 PM EDT to review and answer questions about these results and projections, the earnings release attachments described below and related matters. To participate on the call, dial 1-877-510-2397 domestically and 1-706-634-5877 internationally. To hear a replay of the call, which will be available from October 26, 2005 until November 3, 2005, dial 1-800-642-1687 domestically and 1-706-645-9291 internationally, and use Access Code: 9317285.
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. The full earnings release including the Attachments is available at http://www.avalonbay.com/earnings. To receive future press releases via e-mail, please register through the Investor Relations section of the website at http://www.avalonbay.com/Template.cfm?Section=Subscribe. Some items referenced in the earnings release may require the Adobe Acrobat Reader. If you do not have the Adobe Acrobat Reader, you may download it at 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 14, “Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms”:
•   FFO
•   Projected FFO
•   Established Communities
•   NOI
•   Average Rental Rates
•   Economic Occupancy
•   Rental revenue with concessions on a cash basis
•   Total Capital Cost
•   Economic Gain
•   Initial Year Market Cap Rate
•   Unleveraged IRR
•   Leverage
 
Copyright Ó 2005 AvalonBay Communities, Inc. All Rights Reserved

 


 

•   Total Market Capitalization
•   Unencumbered NOI
•   Interest Coverage
About AvalonBay Communities, Inc.
As of September 30, 2005, AvalonBay owned or held an ownership interest in 152 apartment communities containing 44,139 apartment homes in ten states and the District of Columbia, of which 14 communities were under construction and four communities were under reconstruction. AvalonBay is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in high barrier-to-entry markets of the United States. More information on AvalonBay may be found on AvalonBay’s website at http://www.avalonbay.com . For additional information, please contact Thomas J. Sargeant, Chief Financial Officer, at (703) 317-4635 or Alaine Walsh, Director of Investor Relations at (703) 317-4632.
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, which include the following: changes in local employment conditions, demand for apartment homes, supply of competitive housing products, and other economic conditions may result in lower than expected occupancy and/or rental rates and adversely affect the profitability of our communities; increases in costs of materials, labor or other expenses may result in communities that we develop or redevelop failing to achieve expected profitability; delays in completing development, redevelopment and/or lease-up may result in increased financing and construction costs, and may delay and/or reduce the profitability of a community; debt and/or equity financing for development, redevelopment or acquisitions of communities may not be available on favorable terms; we may be unable to obtain, or experience delays in obtaining, necessary governmental permits and authorizations or we may abandon development or redevelopment opportunities for which we have already incurred costs. Additional discussions of risks and uncertainties appear in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and the Company’s Quarterly Reports on Form 10-Q for subsequent quarters 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 and full year 2005. 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 Ó 2005 AvalonBay Communities, Inc. All Rights Reserved

 


 

 
(AVALONBAY LOGO)
(PICTURE AVALON PINES)

Located in Coram, New York on Long Island, Avalon Pines I is the first of a two-phase, garden-style,
apartment community that is adjacent to an 18-hole golf course. Apartment homes feature washers
and dryers, private patios or balconies and optional features such as crown molding and fireplaces.
Community amenities include a fitness center, swimming pool, indoor basketball court,
tennis court and jogging trails.

With easy access to the Long Island Expressway, I-495, two Long Island Railroad stations, and the
Port Jefferson/Bridgeport ferry landing, Avalon Pines I provides residents with access to New York
City and convenient travel throughout Long Island.

Avalon Pines I, containing 298 apartment homes, was completed in the third quarter of 2005 for a
Total Capital Cost of $48.1 million. Avalon Pines II, a 152 apartment home community which
is currently under construction, is scheduled to be completed in the third quarter of 2006 for
a Total Capital Cost of $26.6 million.

 

 


 

 
THIRD QUARTER 2005
Supplemental Operating and Financial Data
Table of Contents
     
Company Profile
   
Selected Operating and Other Information
  Attachment 1
Detailed Operating Information
  Attachment 2
Condensed Consolidated Balance Sheets
  Attachment 3
 
   
Sub-Market Profile
   
Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 4
Sequential Quarterly Revenue and Occupancy Changes (Established Communities)
  Attachment 5
Year-to-Date Revenue and Occupancy Changes (Established Communities)
  Attachment 6
 
   
Development, Redevelopment, Acquisition and Disposition Profile
   
Summary of Development and Redevelopment Activity
  Attachment 7
Development Communities
  Attachment 8
Redevelopment Communities
  Attachment 9
Summary of Development and Redevelopment Community Activity
  Attachment 10
Future Development
  Attachment 11
Unconsolidated Real Estate Investments
  Attachment 12
Summary of Disposition Activity
  Attachment 13
 
   
Definitions and Reconciliations
   
Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
  Attachment 14
 
‘The following is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. The projections and estimates contained in the following attachments are forward-looking statements that involve risks and uncertainties, and actual results may differ materially from those projected in such statements. Risks associated with the Company’s development, redevelopment, construction, and lease-up activities, which could impact the forward-looking statements made are discussed in the paragraph titled “Forward-Looking Statements” in the release to which these attachments relate. In particular, development opportunities may be abandoned; Total Capital Cost of a community may exceed original estimates, possibly making the community uneconomical and/or affecting projected returns; construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs; and other risks described in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and the Company’s Quarterly Reports on Form 10-Q for subsequent quarters.

 

 


 

Attachment 1
AvalonBay Communities, Inc.
Selected Operating and Other Information
September 30, 2005

(Dollars in thousands except per share data)
(unaudited)
SELECTED OPERATING INFORMATION
 
                                                 
    Q3     Q3             YTD     YTD        
    2005     2004     % Change     2005     2004     % Change  
 
                                               
Net income available to common stockholders
  $ 96,953     $ 43,191       124.5 %   $ 219,124     $ 99,151       121.0 %
 
                                               
Per common share — basic
  $ 1.32     $ 0.60       120.1 %   $ 3.01     $ 1.39       116.6 %
Per common share — diluted
  $ 1.30     $ 0.60       116.7 %   $ 2.95     $ 1.39       112.2 %
 
                                               
Funds from Operations
  $ 68,091     $ 63,601       7.1 %   $ 211,665     $ 181,430       16.7 %
Per common share — diluted
  $ 0.91     $ 0.86       5.8 %   $ 2.84     $ 2.48       14.5 %
 
                                               
Dividends declared — common
  $ 52,204     $ 50,488       3.4 %   $ 155,981     $ 150,831       3.4 %
Per common share
  $ 0.71     $ 0.70       1.4 %   $ 2.13     $ 2.10       1.4 %
 
                                               
Common shares outstanding
    73,526,905       72,125,003       1.9 %     73,526,905       72,125,003       1.9 %
Outstanding operating partnership units
    454,064       560,513       (19.0 %)     454,064       560,513       (19.0 %)
 
                                   
Total outstanding shares and units
    73,980,969       72,685,516       1.8 %     73,980,969       72,685,516       1.8 %
 
                                   
 
                                               
Average shares outstanding — basic
    73,194,714       71,784,059       2.0 %     72,824,732       71,372,239       2.0 %
Average operating partnership units outstanding
    468,307       570,076       (17.9 %)     481,306       586,532       (17.9 %)
Effect of dilutive securities
    1,341,746       1,229,589       9.1 %     1,321,744       1,115,337       18.5 %
 
                                   
Average shares outstanding — diluted
    75,004,767       73,583,724       1.9 %     74,627,782       73,074,108       2.1 %
 
                                   
DEBT COMPOSITION AND MATURITIES
 
                         
            % of Total   Average
            Market   Interest
Debt Composition   Amount   Cap   Rate (1)
 
Conventional Debt
                       
Long-term, fixed rate
  $ 1,854,471       21.0 %        
Long-term, variable rate
    80,790       0.9 %        
Variable rate credit facility and short term notes
    140,721       1.6 %        
     
Subtotal, Conventional
    2,075,982       23.5 %     6.4 %
     
 
                       
Tax-Exempt Debt
                       
Long-term, fixed rate
    195,693       2.2 %        
Long-term, variable rate
    128,520       1.5 %        
     
Subtotal, Tax-Exempt
    324,213       3.7 %     5.5 %
     
 
                       
Total Debt
  $ 2,400,195       27.2 %     6.3 %
     
         
 
Remaining
Maturities (2)
2005
  $ 2,763  
2006
  $ 158,074  
2007
  $ 296,521  
2008
  $ 213,505  
2009
  $ 232,063  


 
(1)   Includes credit enhancement fees, facility fees, trustees’ fees, etc.
 
(2)   Excludes amounts under the $500,000 variable rate credit facility that, after all extensions, matures in 2008.
CAPITALIZED COSTS
 
                         
                    Non-Rev
    Cap   Cap   Capex
    Interest   Overhead   per Home
     
Q305
  $ 6,519     $ 4,842     $ 155  
Q205
  $ 6,036     $ 4,321     $ 214  
Q105
  $ 5,662     $ 5,981     $ 25  
Q404
  $ 5,231     $ 5,193     $ 104  
COMMUNITY INFORMATION
 
                 
            Apartment
    Communities   Homes
     
Current Communities
    138       40,467  
Development Communities
    14       3,672  
Development Rights
    46       11,981  

 


 


Attachment 2
AvalonBay Communities, Inc.
Detailed Operating Information
September 30, 2005

(Dollars in thousands except per share data)
(unaudited)
                                                 
    Q3     Q3             YTD     YTD        
    2005     2004     % Change     2005     2004     % Change  
Revenue:
                                               
Rental and other income
  $ 168,613     $ 155,756       8.3 %   $ 492,528     $ 452,187       8.9 %
Management, development and other fees
    1,379       157       778.3 %     3,175       463       585.7 %
 
                                   
Total
    169,992       155,913       9.0 %     495,703       452,650       9.5 %
 
                                   
Operating expenses:
                                               
Direct property operating expenses, excluding property taxes
    41,043       38,933       5.4 %     115,003       110,584       4.0 %
Property taxes
    16,525       14,882       11.0 %     48,618       43,532       11.7 %
Property management and other indirect operating expenses
    8,442       6,975       21.0 %     23,164       20,669       12.1 %
Investments and investment management(1)
    1,211       932       29.9 %     3,374       3,484       (3.2 %)
 
                                   
Total
    67,221       61,722       8.9 %     190,159       178,269       6.7 %
 
                                   
 
                                               
Interest expense, net
    (31,787 )     (33,132 )     (4.1 %)     (96,010 )     (97,670 )     (1.7 %)
General and administrative expense(2)
    (5,857 )     (3,898 )     50.3 %     (19,278 )     (13,098 )     47.2 %
Joint venture income, minority interest and venture partner interest in profit-sharing(3)
    (107 )     (498 )     (78.5 %)     5,803       (962 )     (703.2 %)
Depreciation expense
    (39,196 )     (39,699 )     (1.3 %)     (118,136 )     (113,652 )     3.9 %
 
                                   
Income from continuing operations before cumulative effect of change in accounting principle
    25,824       16,964       52.2 %     77,923       48,999       59.0 %
 
                                               
Discontinued operations:(4)
                                               
Income from discontinued operations
    4,813       5,640       (14.7 %)     14,358       16,993       (15.5 %)
Gain on sale of real estate assets(5)
    68,491       22,762       200.9 %     133,368       35,137       279.6 %
 
                                   
Total discontinued operations
    73,304       28,402       158.1 %     147,726       52,130       183.4 %
 
                                   
 
                                               
Income before cumulative effect of change in accounting principle(6)
    99,128       45,366       118.5 %     225,649       101,129       123.1 %
Cumulative effect of change in accounting principle
    —       —       —       —       4,547       (100.0 %)
 
                                   
Net income
    99,128       45,366       118.5 %     225,649       105,676       113.5 %
Dividends attributable to preferred stock
    (2,175 )     (2,175 )     —       (6,525 )     (6,525 )     —  
 
                                   
Net income available to common stockholders
  $ 96,953     $ 43,191       124.5 %   $ 219,124     $ 99,151       121.0 %
 
                                   
Net income per common share — basic
  $ 1.32     $ 0.60       120.1 %   $ 3.01     $ 1.39       116.6 %
 
                                   
Net income per common share — diluted
  $ 1.30     $ 0.60       116.7 %   $ 2.95     $ 1.39       112.2 %
 
                                   
  (1)   Reflects costs incurred related to investment acquisition, investment management and abandoned pursuits.
 
  (2)   Amount for the nine months ended September 30, 2005 includes the accrual of $1,500 in costs related to various litigation matters.
 
  (3)   Amount for the nine months ended September 30, 2005 includes $6,252 related to gain on the acquisition of Rent.com by eBay.
 
  (4)   Reflects net income for communities held for sale as of September 30, 2005 and communities sold during the period from January 1, 2004 through September 30, 2005. The following table details income from discontinued operations as of the periods shown:
                                 
    Q3     Q3     YTD     YTD  
    2005     2004     2005     2004  
Rental income
  $ 7,022     $ 12,348     $ 24,242     $ 38,809  
Operating and other expenses
    (2,204 )     (3,878 )     (7,502 )     (12,659 )
Interest expense, net
    (3 )     (66 )     (11 )     (451 )
Minority interest expense
    —       (12 )     —       (37 )
Depreciation expense
    (2 )     (2,752 )     (2,371 )     (8,669 )
 
                       
Income from discontinued operations(7)
  $ 4,813     $ 5,640     $ 14,358     $ 16,993  
 
                       
  (5)   Amounts for the nine months ended September 30, 2005 and the three and nine months ended September 30, 2004 include gains on the sale of land in the amount of $4,617 and $1,138, respectively.
 
  (6)   Operations for the periods ended September 30, 2004 include the operations of a community in which the Company held a variable interest. This community was consolidated as of January 1, 2004 as required by the Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No. 51. On October 15, 2004, the community repaid its note payable to the Company, terminating the variable interest relationship.
 
  (7)   NOI for discontinued operations totaled $4,818 and $16,740 for the three and nine months ended September 30, 2005, respectively, of which $649 and $5,048, respectively, related to assets sold.

 


 


Attachment 3
AvalonBay Communities, Inc.
Condensed Consolidated Balance Sheets
Detailed Operating Information

(Dollars in thousands)
(unaudited)
                 
    September 30,     December 31,  
    2005     2004  
Real estate
  $ 5,224,680     $ 5,059,047  
Less accumulated depreciation
    (902,116 )     (773,565 )
 
           
Net operating real estate
    4,322,564       4,285,482  
 
Construction in progress, including land
    243,867       173,290  
Land held for development
    188,135       166,751  
Operating real estate assets held for sale, net
    137,714       252,302  
 
           
Total real estate, net
    4,892,280       4,877,825  
 
Cash and cash equivalents
    2,268       1,440  
Cash in escrow
    56,106       13,075  
Resident security deposits
    26,942       23,478  
Other assets(1)
    155,505       152,463  
 
           
Total assets
  $ 5,133,101     $ 5,068,281  
 
           
 
Unsecured senior notes
  $ 1,809,166     $ 1,859,448  
Unsecured facility
    112,800       102,000  
Notes payable
    477,395       480,843  
Resident security deposits
    35,981       33,117  
Liabilities related to assets held for sale
    3,236       3,960  
Other liabilities
    184,183       182,097  
 
           
Total liabilities
  $ 2,622,761     $ 2,661,465  
 
           
 
Minority interest
    19,464       21,525  
Stockholders’ equity
    2,490,876       2,385,291  
 
           
Total liabilities and stockholders’ equity
  $ 5,133,101     $ 5,068,281  
 
           
 
(1)   Other assets includes $1,187 and $1,200 relating to discontinued operations as of September 30, 2005 and December 31, 2004, respectively.


 


 

 
Attachment 4
AvalonBay Communities, Inc.
Quarterly Revenue and Occupancy Changes — Established Communities (1)
September 30, 2005
                                                                       
    Apartment                    
    Homes     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s) (3)  
                                                                         
          Q3 05     Q3 04     % Change     Q3 05     Q3 04     % Change     Q3 05     Q3 04     % Change  
Northeast
                                                                               
Boston, MA
    2,177     $ 1,567     $ 1,519       3.2 %     95.8 %     95.8 %     0.0 %   $ 9,810     $ 9,509       3.2 %
New York, NY
    1,606       2,148       2,116       1.5 %     96.9 %     95.2 %     1.7 %     10,023       9,712       3.2 %
Fairfield-
New Haven, CT
    1,384       1,776       1,724       3.0 %     97.6 %     96.5 %     1.1 %     7,188       6,905       4.1 %
Northern New Jersey
    1,182       2,307       2,138       7.9 %     97.2 %     96.7 %     0.5 %     7,949       7,332       8.4 %
Long Island, NY
    806       2,174       2,117       2.7 %     97.3 %     98.3 %     (1.0 %)     5,115       5,031       1.7 %
Central New Jersey
    502       1,635       1,579       3.5 %     96.9 %     97.0 %     (0.1 %)     2,385       2,306       3.4 %
 
                                                           
Northeast Average
    7,657       1,909       1,844       3.5 %     96.9 %     96.3 %     0.6 %     42,470       40,795       4.1 %
 
                                                           
 
                                                                               
Mid-Atlantic
                                                                               
Washington, DC
    3,721       1,461       1,385       5.5 %     96.4 %     96.2 %     0.2 %     15,718       14,877       5.7 %
Baltimore, MD
    526       1,160       1,122       3.4 %     96.1 %     96.8 %     (0.7 %)     1,759       1,712       2.7 %
 
                                                           
Mid-Atlantic Average
    4,247       1,424       1,354       5.2 %     96.4 %     96.2 %     0.2 %     17,477       16,589       5.4 %
 
                                                           
 
                                                                               
Midwest
                                                                               
Chicago, IL
    887       1,102       1,072       2.8 %     96.1 %     95.9 %     0.2 %     2,817       2,736       3.0 %
 
                                                           
Midwest Average
    887       1,102       1,072       2.8 %     96.1 %     95.9 %     0.2 %     2,817       2,736       3.0 %
 
                                                           
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    2,500       1,063       1,019       4.3 %     95.5 %     95.1 %     0.4 %     7,616       7,276       4.7 %
 
                                                           
Pacific Northwest Average
    2,500       1,063       1,019       4.3 %     95.5 %     95.1 %     0.4 %     7,616       7,276       4.7 %
 
                                                           
 
                                                                               
Northern California
                                                                               
San Jose, CA
    5,099       1,448       1,429       1.3 %     96.4 %     95.5 %     0.9 %     21,338       20,872       2.2 %
San Francisco, CA
    2,015       1,707       1,629       4.8 %     96.5 %     95.0 %     1.5 %     9,959       9,370       6.3 %
Oakland-East Bay, CA
    1,955       1,233       1,188       3.8 %     95.7 %     95.6 %     0.1 %     6,916       6,658       3.9 %
 
                                                           
Northern California Average
    9,069       1,459       1,420       2.7 %     96.3 %     95.4 %     0.9 %     38,213       36,900       3.6 %
 
                                                           
 
                                                                               
Southern California
                                                                               
Orange County, CA
    1,174       1,293       1,223       5.7 %     96.6 %     95.8 %     0.8 %     4,400       4,133       6.5 %
San Diego, CA
    1,058       1,352       1,303       3.8 %     95.7 %     96.8 %     (1.1 %)     4,109       4,001       2.7 %
Los Angeles, CA
    975       1,334       1,240       7.6 %     97.2 %     96.0 %     1.2 %     3,788       3,482       8.8 %
 
                                                           
Southern California Average
    3,207       1,325       1,255       5.6 %     96.5 %     96.2 %     0.3 %     12,297       11,616       5.9 %
 
                                                           
 
                                                                               
Average/Total Established
    27,567     $ 1,515     $ 1,461       3.7 %     96.5 %     95.9 %     0.6 %   $ 120,890     $ 115,912       4.3 %
 
                                                           
(1) Established Communities are communities with stabilized operating expenses as of January 1, 2004 such that a comparison of 2004 to 2005 is meaningful.
(2) Reflects the effect of concessions amortized over the average lease term.
(3) With concessions reflected on a cash basis, rental revenue from Established Communities increased 4.6% between years.
 

 


 

 
Attachment 5
AvalonBay Communities, Inc.
*Sequential Quarterly* Revenue and Occupancy Changes — Established Communities (1)
September 30, 2005
                                                                       
    Apartment                    
    Homes     Average Rental Rates (2)     Economic Occupancy     Rental Revenue ($000’s) (3)  
                                                                       
          Q3 05     Q2 05     % Change     Q3 05     Q2 05     % Change     Q3 05     Q2 05     % Change  
Northeast
                                                                               
Boston, MA
    2,177     $ 1,567     $ 1,541       1.7 %     95.8 %     95.6 %     0.2 %   $ 9,810     $ 9,629       1.9 %
New York, NY
    1,606       2,148       2,131       0.8 %     96.9 %     96.5 %     0.4 %     10,023       9,908       1.2 %
Fairfield-
New Haven, CT
    1,384       1,776       1,762       0.8 %     97.6 %     95.7 %     1.9 %     7,188       6,999       2.7 %
Northern New Jersey
    1,182       2,307       2,258       2.2 %     97.2 %     95.9 %     1.3 %     7,949       7,678       3.5 %
Long Island, NY
    806       2,174       2,140       1.6 %     97.3 %     97.2 %     0.1 %     5,115       5,028       1.7 %
Central New Jersey
    502       1,635       1,613       1.4 %     96.9 %     95.6 %     1.3 %     2,385       2,323       2.7 %
 
                                                           
Northeast Average
    7,657       1,909       1,883       1.4 %     96.9 %     96.1 %     0.8 %     42,470       41,565       2.2 %
 
                                                           
 
                                                                               
Mid-Atlantic
                                                                               
Washington, DC
    3,721       1,461       1,441       1.4 %     96.4 %     94.7 %     1.7 %     15,718       15,239       3.1 %
Baltimore, MD
    526       1,160       1,151       0.8 %     96.1 %     96.1 %     0.0 %     1,759       1,745       0.8 %
 
                                                           
Mid-Atlantic Average
    4,247       1,424       1,405       1.4 %     96.4 %     94.9 %     1.5 %     17,477       16,984       2.9 %
 
                                                           
 
                                                                               
Midwest
                                                                               
Chicago, IL
    887       1,102       1,094       0.7 %     96.1 %     96.1 %     0.0 %     2,817       2,797       0.7 %
 
                                                           
Midwest Average
    887       1,102       1,094       0.7 %     96.1 %     96.1 %     0.0 %     2,817       2,797       0.7 %
 
                                                           
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    2,500       1,063       1,037       2.5 %     95.5 %     94.9 %     0.6 %     7,616       7,384       3.1 %
 
                                                           
Pacific Northwest Average
    2,500       1,063       1,037       2.5 %     95.5 %     94.9 %     0.6 %     7,616       7,384       3.1 %
 
                                                           
 
                                                                               
Northern California
                                                                               
San Jose, CA
    5,099       1,448       1,441       0.5 %     96.4 %     95.7 %     0.7 %     21,338       21,083       1.2 %
San Francisco, CA
    2,015       1,707       1,670       2.2 %     96.5 %     96.2 %     0.3 %     9,959       9,715       2.5 %
Oakland-East Bay, CA
    1,955       1,233       1,215       1.5 %     95.7 %     95.6 %     0.1 %     6,916       6,808       1.6 %
 
                                                           
Northern California Average
    9,069       1,459       1,443       1.1 %     96.3 %     95.8 %     0.5 %     38,213       37,606       1.6 %
 
                                                           
 
                                                                               
Southern California
                                                                               
Orange County, CA
    1,174       1,293       1,273       1.6 %     96.6 %     96.3 %     0.3 %     4,400       4,319       1.9 %
San Diego, CA
    1,058       1,352       1,348       0.3 %     95.7 %     94.9 %     0.8 %     4,109       4,063       1.1 %
Los Angeles, CA
    975       1,334       1,307       2.1 %     97.2 %     95.1 %     2.1 %     3,788       3,634       4.2 %
 
                                                           
Southern California Average
    3,207       1,325       1,308       1.3 %     96.5 %     95.5 %     1.0 %     12,297       12,016       2.3 %
 
                                                           
 
                                                                               
Average/Total Established
    27,567     $ 1,515     $ 1,495       1.3 %     96.5 %     95.7 %     0.8 %   $ 120,890     $ 118,352       2.1 %
 
                                                           
(1) Established Communities are communities with stabilized operating expenses as of January 1, 2004 such that a comparison of 2004 to 2005 is meaningful.
(2) Reflects the effect of concessions amortized over the average lease term.
(3) With concessions reflected on a cash basis, rental revenue from Established Communities increased 1.3% between quarters.
 

 


 


Attachment 6
AvalonBay Communities, Inc.
Year-to-Date Revenue and Occupancy Changes — Established Communities (1)
September 30, 2005
                                                                       
    Apartment                    
    Homes     Average Rental Rates (2)     Economic Occupancy       Rental Revenue ($000’s) (3)  
                                                                       
          YTD 05     YTD 04     % Change     YTD 05     YTD 04     % Change     YTD 05     YTD 04     % Change  
Northeast
                                                                               
Boston, MA
    2,177     $ 1,550     $ 1,517       2.2 %     95.6 %     95.7 %     (0.1 %)   $ 29,038     $ 28,442       2.1 %
New York, NY
    1,606       2,129       2,104       1.2 %     96.3 %     94.7 %     1.6 %     29,642       28,845       2.8 %
Fairfield-
New Haven, CT
    1,384       1,757       1,750       0.4 %     96.3 %     93.2 %     3.1 %     21,068       20,361       3.5 %
Northern New Jersey
    1,182       2,254       2,153       4.7 %     96.6 %     94.0 %     2.6 %     23,176       21,597       7.3 %
Long Island, NY
    806       2,147       2,126       1.0 %     96.9 %     96.2 %     0.7 %     15,093       14,841       1.7 %
Central New Jersey
    502       1,615       1,579       2.3 %     95.6 %     95.1 %     0.5 %     6,975       6,785       2.8 %
 
                                                           
Northeast Average
    7,657       1,885       1,851       1.8 %     96.2 %     94.6 %     1.6 %     124,992       120,871       3.4 %
 
                                                           
 
                                                                               
Mid-Atlantic
                                                                               
Washington, DC
    3,721       1,436       1,393       3.1 %     95.1 %     95.6 %     (0.5 %)     45,763       44,585       2.6 %
Baltimore, MD
    526       1,148       1,125       2.0 %     95.6 %     96.4 %     (0.8 %)     5,195       5,131       1.2 %
 
                                                           
Mid-Atlantic Average
    4,247       1,400       1,359       3.0 %     95.2 %     95.7 %     (0.5 %)     50,958       49,716       2.5 %
 
                                                           
 
                                                                               
Midwest
                                                                               
Chicago, IL
    887       1,092       1,077       1.4 %     95.6 %     93.8 %     1.8 %     8,332       8,077       3.2 %
 
                                                           
Midwest Average
    887       1,092       1,077       1.4 %     95.6 %     93.8 %     1.8 %     8,332       8,077       3.2 %
 
                                                           
 
                                                                               
Pacific Northwest
                                                                               
Seattle, WA
    2,500       1,041       1,014       2.7 %     95.2 %     94.4 %     0.8 %     22,296       21,545       3.5 %
 
                                                           
Pacific Northwest Average
    2,500       1,041       1,014       2.7 %     95.2 %     94.4 %     0.8 %     22,296       21,545       3.5 %
 
                                                           
 
                                                                               
Northern California
                                                                               
San Jose, CA
    5,099       1,439       1,426       0.9 %     95.9 %     95.8 %     0.1 %     63,374       62,734       1.0 %
San Francisco, CA
    2,015       1,678       1,626       3.2 %     95.8 %     95.5 %     0.3 %     29,161       28,182       3.5 %
Oakland-East Bay, CA
    1,955       1,218       1,187       2.6 %     95.8 %     94.3 %     1.5 %     20,524       19,720       4.1 %
 
                                                           
Northern California Average
    9,069       1,444       1,421       1.6 %     95.9 %     95.3 %     0.6 %     113,059       110,636       2.2 %
 
                                                           
 
                                                                               
Southern California
                                                                               
Orange County, CA
    1,174       1,274       1,213       5.0 %     96.5 %     95.7 %     0.8 %     12,981       12,267       5.8 %
San Diego, CA
    1,058       1,344       1,288       4.3 %     95.1 %     95.6 %     (0.5 %)     12,174       11,726       3.8 %
Los Angeles, CA
    975       1,306       1,232       6.0 %     96.2 %     95.5 %     0.7 %     11,028       10,333       6.7 %
 
                                                           
Southern California Average
    3,207       1,307       1,244       5.1 %     95.9 %     95.6 %     0.3 %     36,183       34,326       5.4 %
 
                                                           
 
                                                                               
Average/Total Established
    27,567     $ 1,495     $ 1,462       2.3 %     95.9 %     95.1 %     0.8 %   $ 355,820     $ 345,171       3.1 %
 
                                                           
(1) Established Communities are communities with stabilized operating expenses as of January 1, 2004 such that a comparison of 2004 to 2005 is meaningful.
(2) Reflects the effect of concessions amortized over the average lease term.
(3) With concessions reflected on a cash basis, rental revenue from Established Communities increased 3.5% between years.

 


 

 
Attachment 7
AvalonBay Communities, Inc.
Summary of Development and Redevelopment Activity as of September 30, 2005
                                 
            Number     Number     Total  
            of     of     Capital Cost (1)  
            Communities     Homes     (millions)  
Portfolio Additions:
                               
 
                               
2005 Annual Completions
    (2 )                        
 
                               
Development
            7       1,971     $ 409.4  
 
                               
Redevelopment
    (3 )     1       —       3.9  
 
                         
 
                               
Total Additions
            8       1,971     $ 413.3  
 
                         
 
                               
2004 Annual Completions
                               
 
                               
Development
            7       2,135     $ 363.7  
 
                               
Redevelopment
            1       —       8.3  
 
                         
 
                               
Total Additions
            8       2,135     $ 372.0  
 
                         
 
                               
Pipeline Activity:
    (2 )                        
 
                               
Currently Under Construction
                               
 
                               
Development
            14       3,672     $ 946.4  
 
                               
Redevelopment
    (3 )     4       —       40.0  
 
                         
 
                               
Subtotal
            18       3,672     $ 986.4  
 
                         
 
                               
Planning
                               
 
                               
Development Rights
            46       11,981     $ 2,693.0  
 
                         
 
                               
Total Pipeline
            64       15,653     $ 3,679.4  
 
                         
  (1)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.  
 
  (2)   Information represents projections and estimates.  
 
  (3)   Represents only cost of redevelopment activity, does not include original acquisition cost or number of apartment homes acquired.  
 
      This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2005.  
 

 


 

 
Attachment 8
AvalonBay Communities, Inc.
Development Communities as of September 30, 2005
                                                                                                 
    Percentage             Total     Schedule     Avg                        
    Ownership     # of     Capital                                     Rent                     % Occ  
    Upon     Apt     Cost (1)             Initial             Stabilized     Per     % Comp     % Leased     Physical     Economic  
    Completion     Homes     (millions)     Start     Occupancy     Complete     Ops (1)     Home (1)     (2)     (3)     (4)     (1) (5)  
                         
                                                    Inclusive of
                       
                                                    Concessions
                       
                                                    See Attachment #14
                       
 
                                                                                               
Under Construction:
                                                                                               
1. Avalon Chrystie Place I (6)
    20 %     361     $ 150.0       Q4 2003       Q2 2005       Q4 2005       Q2 2006     $ 3,095       94.5 %     81.7 %     77.0 %     40.6 %
New York, NY
                                                                                               
2. Avalon Danbury
    100 %     234     $ 35.6       Q1 2004       Q1 2005       Q4 2005       Q2 2006     $ 1,690       95.7 %     75.2 %     70.9 %     46.0 %
Danbury, CT
                                                                                               
3. Avalon Del Rey (7)
    30 %     309     $ 70.0       Q2 2004       Q1 2006       Q2 2006       Q4 2006     $ 1,790       N/A       34.0 %     N/A       N/A  
Los Angeles, CA
                                                                                               
4. Avalon at Juanita Village (8)
    —       211     $ 45.5       Q2 2004       Q2 2005       Q4 2005       Q2 2006     $ 1,320       78.2 %     78.7 %     73.5 %     36.9 %
Kirkland, WA
                                                                                               
5. Avalon Camarillo
    100 %     249     $ 47.2       Q2 2004       Q1 2006       Q2 2006       Q4 2006     $ 1,630       N/A       N/A       N/A       N/A  
Camarillo, CA
                                                                                               
6. Avalon at Bedford Center
    100 %     139     $ 25.3       Q4 2004       Q3 2005       Q2 2006       Q4 2006     $ 1,735       23.0 %     19.4 %     12.9 %     1.0 %
Bedford, MA
                                                                                               
7. Avalon Wilshire
    100 %     123     $ 46.6       Q1 2005       Q4 2006       Q1 2007       Q3 2007     $ 2,520       N/A       N/A       N/A       N/A  
Los Angeles, CA
                                                                                               
8. Avalon at Mission Bay North II (9)
    25 %     313     $ 118.0       Q1 2005       Q4 2006       Q2 2007       Q4 2007     $ 2,580       N/A       N/A       N/A       N/A  
San Francisco, CA
                                                                                               
9. Avalon Pines II
    100 %     152     $ 26.6       Q2 2005       Q2 2006       Q3 2006       Q1 2007     $ 1,885       N/A       N/A       N/A       N/A  
Coram, NY
                                                                                               
10. Avalon Chestnut Hill
    100 %     204     $ 60.6       Q2 2005       Q4 2006       Q1 2007       Q3 2007     $ 2,735       N/A       N/A       N/A       N/A  
Chestnut Hill, MA
                                                                                               
11. Avalon at Decoverly II
    100 %     196     $ 30.5       Q3 2005       Q3 2006       Q2 2007       Q4 2007     $ 1,450       N/A       N/A       N/A       N/A  
Rockville, MD
                                                                                               
12. Avalon Lyndhurst
    100 %     328     $ 78.8       Q3 2005       Q4 2006       Q2 2007       Q4 2007     $ 2,260       N/A       N/A       N/A       N/A  
Lyndhurst, NJ
                                                                                               
13. Avalon Shrewsbury
    100 %     251     $ 36.1       Q3 2005       Q4 2006       Q2 2007       Q4 2007     $ 1,420       N/A       N/A       N/A       N/A  
Shrewsbury, MA
                                                                                               
14. Avalon Riverview North
    100 %     602     $ 175.6       Q3 2005       Q3 2007       Q3 2008       Q1 2009     $ 2,695       N/A       N/A       N/A       N/A  
New York, NY
                                                                                               
 
                                                                                         
Subtotal/Weighted Average
            3,672     $ 946.4                                     $ 2,180                                  
 
                                                                                         
 
                                                                                               
Completed this Quarter:
                                                                                               
1. Avalon Pines I
    100 %     298     $ 48.1       Q4 2003       Q4 2004       Q3 2005       Q4 2005     $ 1,805       100.0 %     99.3 %     99.0 %     92.0 %
Coram, NY
                                                                                               
 
                                                                                         
 
                                                                                               
Subtotal/Weighted Average
            298     $ 48.1                                                                          
 
                                                                                         
 
                                                                                               
Total/Weighted Average
            3,970     $ 994.5                                     $ 2,140                                  
 
                                                                                         
 
                                                                                               
Weighted Average Projected NOI
as a % of Total Capital Cost (1) (10)
                    7.7 %   Inclusive of Concessions — See Attachment #14                                

                         
Non-Stabilized Development Communities: (11)                   % Economic  
                    Occ  
Prior Quarter Completions:                   (1)(5)  
                     
 
                       
Avalon at The Pinehills I, Plymouth, MA
    101       19.9          
Avalon at Crane Brook, Danvers & Peabody, MA
    387       55.9          
Avalon Orange, Orange, CT
    168       22.1          
 
                   
 
                       
Total
    656     $ 97.9       93.0 %
 
                 
                     
Asset Value, Non-Stabilized Development                   Source
 
                   
Capital Cost, Prior Quarter Completions
          $ 97.9     Att. 8
Capital Cost, Current Completions
            48.1     Att. 8
Capital Cost, Under Construction
            737.9     Att. 8 (less JV partner share)
Less: Remaining to Invest, Under Construction
                   
Total Remaining to Invest
    734.5             Att. 10
Capital Cost, Projected Q4 2005 Starts
    (314.4 )           Att. 10, Footnote 5
 
                 
 
            (420.1 )    
 
                 
Total Asset Value, Non-Stabilized Development
          $ 463.8      
 
                 


 
    Q3 2005 Net Operating Income/(Deficit) for communities under construction and non-stabilized development communities was $2.6 million. See Attachment #14.
 
 
(1)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(2)   Includes apartment homes for which construction has been completed and accepted by management as of October 21, 2005.
 
(3)   Includes apartment homes for which leases have been executed or non-refundable deposits have been paid as of October 21, 2005.
 
(4)   Physical occupancy based on apartment homes occupied as of October 21, 2005.
 
(5)   Represents Economic Occupancy for the third quarter of 2005.
 
(6)   The community is financed under a joint venture structure with third-party financing, in which the community is owned by a limited liability company managed by a wholly-owned subsidiary of the Company.
The Company’s portion of the Total Capital Cost of this joint venture is projected to be $30.0 million including community-based tax-exempt debt.
 
(7)   The community is currently owned by a wholly-owned subsidiary of the Company, will be financed, in part or in whole, by a construction loan, and is subject to a joint venture agreement that allows for a joint venture partner to be admitted upon construction completion.
 
(8)   The community is being developed by a wholly-owned, taxable REIT subsidiary of the Company, and is subject to a venture agreement that provides for the transfer of 100% of the ownership interests upon completion.
 
(9)   The community is being developed under a joint venture structure and is expected to be financed in part by a construction loan. The Company’s portion of the Total Capital Cost of this joint venture is projected to be $29.5 million including community-based debt.
 
(10)   The Weighted Average calculation is based on the Company’s pro rata share of the Total Capital Cost for each community.
 
(11)   Represents Development Communities completed in the current quarter and prior quarters that had not achieved Stabilized Operations for the entire current quarter. Estimates are based on the Company’s pro rata share of the Total Capital Cost for each community.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2005.
 

 


 

 
Attachment 9
AvalonBay Communities, Inc.
Redevelopment Communities (1) as of September 30, 2005
                                                                                         
                    Cost (millions)     Schedule     Avg     Number of Homes  
            # of     Pre-     Total                                     Rent             Out of  
    Percentage     Apt     Redevelopment     Capital                             Restabilized     Per     Completed     Service  
    Ownership     Homes     Capital Cost     Cost (2)(3)     Acquisition     Start     Complete     Ops (3)     Home (3)     to date     @ 9/30/05  
                         
                                                            Inclusive of
       
                                                            Concessions
       
                                                            See Attachment #14
       
Under Redevelopment:
                                                                                       
 
                                                                                       
Stabilized Portfolio (4)
                                                                                       
 
                                                                                       
1. Avalon at Prudential Center (5)
    100 %     781     $ 133.9     $ 160.0       Q3 1998       Q4 2000       Q2 2006       Q4 2006     $ 2,660       546       34  
Boston, MA
                                                                                       
 
                                                                                       
2. Avalon at Fairway Hills III (6)
    100 %     336     $ 23.3     $ 29.4       Q3 1996       Q4 2004       Q2 2006       Q4 2006     $ 1,335       256       24  
Columbia, MD
                                                                                       
 
                                                                           
 
                                                                                       
Subtotal
            1,117     $ 157.2     $ 189.4                                     $ 2,265       802       58  
 
                                                                           
 
                                                                                       
Acquisitions (4)
                                                                                       
 
                                                                                       
1. Avalon Lakeside (7)
    15 %     204     $ 14.5     $ 18.4       Q3 2004       Q4 2004       Q1 2006       Q3 2006     $ 955       177       12  
Wheaton, IL
                                                                                       
 
                                                                                       
2. Avalon Columbia (8)
    15 %     170     $ 25.5     $ 29.4       Q4 2004       Q2 2005       Q2 2006       Q4 2006     $ 1,425       91       19  
Columbia, MD
                                                                                       
 
                                                                           
Subtotal
            374     $ 40.0     $ 47.8                                     $ 1,165       268       31  
 
                                                                           
 
                                                                                       
Total/Weighted Average
            1,491     $ 197.2     $ 237.2                                     $ 1,990       1,070       89  
 
                                                                           
 
                                                                                       
Weighted Average Projected NOI as a % of Total Capital Cost (3)                             9.8 %   Inclusive of Concessions — See Attachment #14                
     
(1)   Redevelopment Communities are communities for which redevelopment costs are expected to exceed 10% of the original acquisition cost or $5.0 million.
 
(2)   Inclusive of acquisition cost.
 
(3)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(4)   Stabilized Portfolio Redevelopment Communities have been held for one year or more and have achieved Stabilized Operations before beginning redevelopment. Acquired redevelopments are those communities that begin redevelopment within one year of acquisition.
 
(5)   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. In Q4 2003, the scope of this redevelopment was extended to include renovations on all remaining apartments, increasing the redevelopment budget to $26.1 million.
 
(6)   This is one of two communities that previously comprised Avalon at Fairway Hills II. In connection with the beginning of its renovation, this community will now be reported separately as Phase III.
 
(7)   This community was acquired in Q3 2004 and was transferred to a subsidiary of the Company’s Investment Management Fund (the “IM Fund”) in Q1 2005, reducing the Company’s indirect equity interest in the community to 15%. This community was formerly known as Briarcliffe Lakeside.
 
(8)   This community was acquired in Q4 2004 and was transferred to a subsidiary of the Company’s IM Fund in Q1 2005, reducing the Company’s indirect equity interest in the community to 15%. This community was formerly known as Hobbits Grove.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2005.
 

 


 

 
Attachment 10
AvalonBay Communities, Inc.
Summary of Development and Redevelopment Community Activity (1) as of September 30, 2005

($ in Thousands)

DEVELOPMENT (2)
                                         
    Apt Homes     Total Capital     Cost of Homes             Construction in  
    Completed &     Cost Invested     Completed &     Remaining to     Progress at  
    Occupied     During Period (3)     Occupied (4)     Invest (5)     Period End (6)  
 
                                       
Total - 2003 Actual
    1,781     $ 304,470     $ 335,364     $ 325,139     $ 240,137  
 
                                 
 
                                       
2004 Actual:
                                       
Quarter 1
    345     $ 69,258     $ 61,978     $ 366,959     $ 265,154  
Quarter 2
    771       111,146       130,022       254,300       296,509  
Quarter 3
    655       53,935       108,786       332,144       264,259  
Quarter 4
    410       67,845       67,515       287,812       266,548  
 
                                 
Total - 2004 Actual
    2,181     $ 302,184     $ 368,301                  
 
                                 
 
                                       
2005 Projected:
                                       
Quarter 1 (Actual)
    259     $ 60,827     $ 42,234     $ 286,946     $ 294,379  
Quarter 2 (Actual)
    473       72,327       75,121       588,802       315,720  
Quarter 3 (Actual)
    510       96,202       66,050       734,543       295,545  
Quarter 4 (Projected)
    226       145,026       32,551       590,603       360,715  
 
                                 
Total - 2005 Projected
    1,468     $ 374,382     $ 215,956                  
 
                                 

REDEVELOPMENT
                                         
            Total Capital                     Reconstruction in  
    Avg Homes     Cost Invested             Remaining to     Progress at  
    Out of Service     During Period (3)             Invest (5)     Period End (6)  
 
                                       
Total - 2003 Actual
          $ 8,009             $ 5,660     $ 13,046  
 
                                     
 
                                       
2004 Actual:
                                       
Quarter 1
    30     $ 677             $ 4,362     $ 29  
Quarter 2
    31       887               7,444       —  
Quarter 3
    38       497               7,132       865  
Quarter 4
    44       1,483               15,710       2,140  
 
                                     
Total - 2004 Actual
          $ 3,544                          
 
                                     
 
                                       
2005 Projected:
                                       
Quarter 1 (Actual)
    80     $ 2,878             $ 9,938     $ 5,963  
Quarter 2 (Actual)
    98       2,536               7,301       14,236  
Quarter 3 (Actual)
    110       1,890               17,350       15,172  
Quarter 4 (Projected)
    88       2,813               14,536       19,241  
 
                                     
Total - 2005 Projected
          $ 10,117                          
 
                                     
(1)   Data is presented for all communities currently under construction or reconstruction and those communities for which construction or reconstruction is expected to begin within the next 90 days.
 
(2)   Projected periods include data for consolidated joint ventures at 100%. The offset for joint venture partners’ participation is reflected as minority interest.
 
(3)   Represents Total Capital Cost incurred or expected to be incurred during the quarter, year or in total. See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(4)   Represents 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 communities currently under construction or reconstruction and those for which construction or reconstruction is expected to begin within the next 90 days. Remaining to invest for Q3 2005 includes $314.4 million attributed to four anticipated Q4 2005 development starts and $11.9 million related to one anticipated Q4 2005 redevelopment. Remaining to Invest also includes $4.2 million attributed to Avalon Chrystie Place I and $19.5 million attributed to Avalon at Mission Bay North II. The Company’s portion of the Total Capital Cost of these joint ventures is projected to be $30.0 million and $29.5 million, respectively, including community-based tax-exempt and construction debt.
 
(6)   Represents period end balance of construction or reconstruction costs. Amount for Q3 2005 includes $66.9 million related to two unconsolidated joint ventures and two unconsolidated investments in the IM Fund, and is reflected in other assets for financial 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 for the third quarter of 2005.
 

 


 

 
Attachment 11
AvalonBay Communities, Inc.
Future Development as of September 30, 2005

DEVELOPMENT RIGHTS
                         
            Estimated     Total  
Location of Development Right           Number     Capital Cost (1)  
            of Homes     (millions)  
 
                       
 1. New York, NY Phase II
    (2 )     206     $ 108  
 2. Glen Cove, NY
    (2 )     111       41  
 3. Danvers, MA
            433       85  
 4. Dublin, CA Phase I
    (2 )     305       80  
 5. Woburn, MA
            446       81  
 6. New Rochelle, NY Phase II
            588       165  
 7. Bellevue, WA
            368       81  
 8. Encino, CA
    (2 )     131       51  
 9. New York, NY Phase III
    (2 )     96       56  
10. Lexington, MA
            387       84  
11. Wilton, CT
    (2 )     100       24  
12. Milford, CT
    (2 )     284       45  
13. Canoga Park, CA
            210       47  
14. Kirkland, WA Phase II
    (2 )     173       48  
15. Hingham, MA
            236       44  
16. Irvine, CA
            290       63  
17. Acton, MA
            380       71  
18. Norwalk, CT
            312       63  
19. White Plains, NY
            410       138  
20. Quincy, MA
    (2 )     146       24  
21. Plymouth, MA Phase II
            81       17  
22. Tinton Falls, NJ
            298       51  
23. West Haven, CT
            170       23  
24. Greenburgh, NY Phase II
            444       112  
25. Sharon, MA
            156       26  
26. Oyster Bay, NY
            273       69  
27. Dublin, CA Phase II
            200       52  
28. Dublin, CA Phase III
            205       53  
29. Shelton, CT II
            171       34  
30. Andover, MA
    (2 )     115       21  
31. Union City, CA Phase I
    (2 )     272       74  
32. Union City, CA Phase II
    (2 )     166       46  
33. Hackensack, NJ
            210       47  
34. Stratford, CT
    (2 )     146       23  
35. Plainview, NY
            220       47  
36. Yaphank, NY
    (2 )     344       57  
37. Camarillo, CA
            376       55  
38. Gaithersburg, MD
            254       41  
39. Highland Park, NJ
            285       67  
40. Shelton, CT
            302       49  
41. Wheaton, MD
    (2 )     320       56  
42. Alexandria, VA
    (2 )     282       56  
43. Cohasset, MA
            200       38  
44. Wanaque, NJ
            200       33  
45. Tysons Corner, VA
    (2 )     439       101  
46. Rockville, MD
    (2 )     240       46  
 
                       
 
                   
 
                       
Total
            11,981     $ 2,693  
 
                     
(1)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.
 
(2)   Company owns land, but construction has not yet begun.
 
    This chart contains forward-looking statements. Please see the paragraph regarding forward-looking statements on the Table of Contents page relating to the Company’s Supplemental Operating and Financial Data for the third quarter of 2005.
 

 


 

 
Attachment 12
AvalonBay Communities, Inc.
Unconsolidated Real Estate Investments (1) as of September 30, 2005
                                                         
                    AVB                             AVB's  
            # of     Book     Outstanding Debt   Economic  
Unconsolidated   Percentage     Apt     Value                 Interest     Maturity   Share  
Joint Ventures   Ownership     Homes     Investment (2)     Amount     Type   Rate     Date   of Debt  
                     
 
                                                       
AvalonBay Value Added Fund, LP
                                                       
1. Avalon at Redondo Beach
    N/A       105       N/A     $ 16,765     Fixed     4.84 %   Oct 2011   $ 2,540  
Los Angeles, CA
                                                       
2. Avalon Lakeside
    N/A       204       N/A       7,995     Fixed     6.90 %   Feb 2028 (3)     1,211  
Chicago, IL
                                                       
3. Avalon Columbia
    N/A       170       N/A       16,575     Fixed     5.25 %   Apr 2012     2,511  
Baltimore, MD
                                                       
4. Ravenswood at the Park
    N/A       400       N/A       31,500     Fixed     4.96 %   Jul 2012     4,772  
Seattle, WA
                                                       
5. Avalon at Poplar Creek
    N/A       196       N/A       16,500     Fixed     4.83 %   Oct 2012     2,500  
Chicago, IL
                                                       
Fund corporate debt (4)
    N/A       N/A       N/A       15,300     Variable     4.59 %   Jan 2008     2,318  
 
                                             
 
    15.2 %     1,075     $ 27,217     $ 104,635                     $ 15,852  
 
                                             
 
                                                       
Other Operating Joint Ventures
                                                       
1. Avalon Run
    (5 )     426     $ 1,544     $ —     N/A     N/A     N/A   $ —  
Lawrenceville, NJ
                                                       
2. Avalon Grove
    (6 )     402       8,690       —     N/A     N/A     N/A     —  
Stamford, CT
                                                       
3. Avalon Bedford
    25.0 %     388       12,982       22,500     Fixed     6.55 %   Nov 2005     5,625  
Stamford, CT
                                                       
 
                                               
 
            1,216     $ 23,216     $ 22,500                     $ 5,625  
 
                                               
 
                                                       
Other Development Joint Ventures
                                                       
1. Avalon Chrystie Place I
    20.0 %     361     $ 29,666     $ 117,000     Variable     2.27 %   Feb 2009   $ 23,400  
New York, NY
                                                       
2. Avalon at Mission Bay North II (7)
    25.0 %     313       5,843       —     Variable     5.36 %   Sep 2008     —  
San Francisco, CA
                                                       
 
                                               
 
            674     $ 35,509     $ 117,000                     $ 23,400  
 
                                               
 
            2,965     $ 85,942     $ 244,135                     $ 44,877  
 
                                               
(1)   Schedule does not include two communities (Avalon at Juanita Village and Avalon Del Rey) that are being developed under joint venture arrangements, but are currently wholly-owned and therefore consolidated for financial reporting purposes.
 
(2)   These unconsolidated real estate investments are accounted for under the equity method of accounting. AVB Book Value Investment represents the Company’s recorded equity investment plus the Company’s pro rata share of outstanding debt.
 
(3)   Debt can be prepaid after February 2008 without penalty.
 
(4)   Amounts are outstanding under the Fund’s permanent credit facility.
 
 
(5)   After the venture makes certain distributions to the third-party partner, the Company will generally be entitled to receive 40% of all operating cash flow distributions and 49% of all residual cash flow following a sale.
 
(6)   After the venture makes certain distributions to the third-party partner, the Company generally receives 50% of all further distributions.
 
(7)   In September 2005, Avalon at Mission Bay North II closed on a $94,400 construction loan, however there are no outstanding draws as of September 30, 2005. The maturity date as reflected on this attachment may be extended to September 2010 upon exercise of two one-year extension options.
 

 


 

 
Attachment 13
AvalonBay Communities, Inc.
Summary of Disposition Activity as of September 30, 2005

(Dollars in thousands)
                                             
    Weighted                   Accumulated             Weighted Average   Weighted
Number of   Average   Gross Sales             Depreciation     Economic     Initial Year   Average
Communities Sold   Holding Period (1)   Price     GAAP Gain     and Other     Gain (2)     Mkt. Cap Rate (1)(2)   Unleveraged IRR (1)(2)
 
                                           
1998:
                                           
9 Communities
      $ 170,312     $ 25,270     $ 23,438     $ 1,832     8.1%   16.2%
 
                                   
 
                                           
1999:
                                           
16 Communities
      $ 317,712     $ 47,093     $ 27,150     $ 19,943     8.3%   12.1%
 
                                   
 
                                           
2000:
                                           
8 Communities
      $ 160,085     $ 40,779     $ 6,262     $ 34,517     7.9%   15.3%
 
                                   
 
                                           
2001:
                                           
7 Communities
      $ 241,130     $ 62,852     $ 21,623     $ 41,229     8.0%   14.3%
 
                                   
 
                                           
2002:
                                           
1 Community
      $ 80,100     $ 48,893     $ 7,462     $ 41,431     5.4%   20.1%
 
                                   
 
                                           
2003:
                                           
12 Communities, 1 Land Parcel (3)
      $ 460,600     $ 184,438     $ 52,613     $ 131,825     6.3%   15.3%
 
                                   
 
                                           
2004:
                                           
5 Communities, 1 Land Parcel
      $ 250,977     $ 122,425     $ 19,320     $ 103,105     4.8%   16.8%
 
                                   
 
                                           
2005:
                                           
6 Communities, 2 Land Parcels (4)
      $ 268,450     $ 133,368     $ 4,921     $ 128,447     3.7%   18.0%
 
                                   
 
                                           
1998 - 2005 Total
  5.6   $ 1,949,366     $ 665,118     $ 162,789     $ 502,329     6.5%   15.5%
 
                                   
(1)   For purposes of this attachment, land sales are not included in the calculation of Weighted Average Holding Period, Weighted Average Initial Year Market Cap Rate, or Weighted Average Unleveraged IRR.
 
(2)   See Attachment #14 — Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms. For purposes of this attachment, land sales are not included in the Weighted Average Initial Year Market Cap Rate or the Weighted Average Unleveraged IRR.
 
(3)   2003 GAAP gain, for purposes of this attachment, includes $23,448 related to the sale of a community in which the Company held a 50% membership interest.
 
(4)   2005 GAAP gain includes the recovery of an impairment loss in the amount of $3,000 recorded in 2002 related to one of the land parcels sold in 2005. This loss was recorded to reflect the land at fair value based on its entitlement status at the time it was determined planned for disposition.
 

 


 

Attachment 14
AvalonBay Communities, Inc.
Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
This release, including its attachments, contains certain non-GAAP financial measures and other terms. The definition and calculation of these non-GAAP financial measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. The non-GAAP financial measures referred to below should not be considered an alternative to net income as an indication of our performance. In addition, these non-GAAP financial measures do not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered as an alternative measure of liquidity or as indicative of cash available to fund cash needs.
FFO is determined based on a definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). FFO is calculated by the Company as net income or loss computed in accordance with GAAP, adjusted for gains or losses on sales of previously depreciated operating communities, extraordinary gains or losses (as defined by GAAP), cumulative effect of a change in accounting principle and depreciation of real estate assets, including adjustments for unconsolidated partnerships and joint ventures. Management generally considers FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses related to dispositions of previously depreciated operating communities and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. A reconciliation of FFO to net income is as follows (dollars in thousands):
 
                                 
    Q3     Q3     YTD     YTD  
    2005     2004     2005     2004  
 
                               
Net income
  $ 99,128     $ 45,366     $ 225,649     $ 105,676  
Dividends attributable to preferred stock
    (2,175 )     (2,175 )     (6,525 )     (6,525 )
Depreciation — real estate assets, including discontinued operations and joint venture adjustments
    39,338       41,152       120,220       118,704  
Minority interest, including discontinued operations
    291       882       1,072       2,121  
Cumulative effect of change in accounting principle
    —       —       —       (4,547 )
Gain on sale of previously depreciated real estate assets
    (68,491 )     (21,624 )     (128,751 )     (33,999 )
 
                       
FFO attributable to common stockholders
  $ 68,091     $ 63,601     $ 211,665     $ 181,430  
 
                       
 
                               
Average shares outstanding — diluted
    75,004,767       73,583,724       74,627,782       73,074,108  
 
                               
EPS — diluted
  $ 1.30     $ 0.60     $ 2.95     $ 1.39  
 
                       
 
                               
FFO per common share — diluted
  $ 0.91     $ 0.86     $ 2.84     $ 2.48  
 
                       
 
Projected FFO, as provided within this release in the Company’s outlook, 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 2005 to the range provided for projected EPS (diluted) is as follows:
 
                 
    Low     High  
    range     range  
 
               
Projected EPS (diluted) — Q4 05
  $ 1.48     $ 1.52  
Projected depreciation (real estate related)
    0.51       0.55  
Projected gain on sale of operating communities
    (1.09 )     (1.13 )
 
           
Projected FFO per share (diluted) — Q4 05
  $ 0.90     $ 0.94  
 
           
 
               
Projected EPS (diluted) — Full Year 2005
  $ 4.45     $ 4.49  
Projected depreciation (real estate related)
    2.12       2.16  
Projected gain on sale of operating communities
    (2.83 )     (2.87 )
 
           
Projected FFO per share (diluted) — Full Year 2005
  $ 3.74     $ 3.78  
 
           
 

 


 

Attachment 14 (continued)
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 2005, Established Communities are communities that have Stabilized Operations as of January 1, 2004 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 property revenue less direct property operating expenses (including property taxes), and excludes corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management, interest expense, net, general and administrative expense, joint venture income, minority interest and venture partner interest in profit-sharing, depreciation expense, gain on sale of real estate assets, cumulative effect of change in accounting principle and income from discontinued operations. The Company considers NOI to be an appropriate supplemental measure to net income of operating performance of a community or communities because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of 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.
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  
    2005     2004     2005     2005     2004  
 
                                       
Net income
  $ 99,128     $ 45,366     $ 56,911     $ 225,649     $ 105,676  
Property management and other indirect operating expenses
    8,442       6,975       7,594       23,164       20,669  
Corporate-level other income
    (1,378 )     (434 )     (1,439 )     (3,432 )     (1,178 )
Investments and investment management
    1,211       932       1,171       3,374       3,484  
Interest expense, net
    31,787       33,132       32,109       96,010       97,670  
General and administrative expense
    5,857       3,898       6,262       19,278       13,098  
Joint venture income, minority interest and venture partner interest in profit-sharing
    107       498       159       (5,803 )     962  
Depreciation expense
    39,196       39,699       39,644       118,136       113,652  
Cumulative effect of change in accounting principle
    —       —       —       —       (4,547 )
Gain on sale of real estate assets
    (68,491 )     (22,762 )     (27,264 )     (133,368 )     (35,137 )
Income from discontinued operations
    (4,813 )     (5,640 )     (5,029 )     (14,358 )     (16,993 )
 
                             
NOI from continuing operations
  $ 111,046     $ 101,664     $ 110,118     $ 328,650     $ 297,356  
 
                             
 
                                       
Established:
                                       
Northeast
  $ 28,239     $ 26,843     $ 27,742     $ 83,349     $ 80,590  
Mid-Atlantic
    12,187       11,619       11,974       35,890       34,954  
Midwest
    1,540       1,579       1,798       5,014       4,699  
Pacific NW
    4,810       4,500       4,812       14,418       13,443  
No. California
    25,564       24,822       25,964       77,209       75,424  
So. California
    8,943       8,205       8,673       26,261       24,626  
 
                             
Total Established
    81,283       77,568       80,963       242,141       233,736  
 
                             
Other Stabilized
    11,443       11,612       11,250       32,920       29,389  
Development/Redevelopment
    18,320       12,484       17,905       53,589       34,231  
 
                             
NOI from continuing operations
  $ 111,046     $ 101,664     $ 110,118     $ 328,650     $ 297,356  
 
                             
 

 


 

Attachment 14 (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, 2005). A reconciliation of NOI from communities sold or held for sale to net income for these communities is as follows (dollars in thousands):
 
                                 
    Q3     Q3     YTD     YTD  
    2005     2004     2005     2004  
 
                               
Income from discontinued operations
  $ 4,813     $ 5,640     $ 14,358     $ 16,993  
Interest expense, net
    3       66       11       451  
Minority interest expense
    —       12       —       37  
Depreciation expense
    2       2,752       2,371       8,669  
 
                       
NOI from discontinued operations
  $ 4,818     $ 8,470     $ 16,740     $ 26,150  
 
                       
 
                               
NOI from assets sold
  $ 649     $ 4,837     $ 5,048     $ 15,530  
NOI from assets held for sale
    4,169       3,633       11,692       10,620  
 
                       
NOI from discontinued operations
  $ 4,818     $ 8,470     $ 16,740     $ 26,150  
 
                       
 
Projected NOI, as used within this release for certain Development and Redevelopment Communities and in calculating the Initial Year Market Cap Rate for dispositions, represents management’s estimate, as of the date of this release (or as of the date of the buyer’s valuation in the case of dispositions), of projected stabilized rental revenue minus projected stabilized operating expenses. For Development and Redevelopment Communities, Projected NOI is calculated based on the first year of Stabilized Operations, as defined below, following the completion of construction. In calculating the Initial Year Market Cap Rate, Projected NOI for dispositions is calculated for the first twelve months following the date of the buyer’s valuation. Projected stabilized rental revenue represents management’s estimate of projected gross potential (based on leased rents for occupied homes and Market Rents, as defined below, for vacant homes) minus projected economic vacancy and adjusted for concessions. Projected stabilized operating expenses do not include interest, income taxes (if any), depreciation or amortization, or any allocation of corporate-level property management overhead or general and administrative costs. The weighted average Projected NOI as a percentage of Total Capital Cost is weighted based on the Company’s share of the Total Capital Cost of each community, based on its percentage ownership.
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.
Average Rental Rates are calculated by the Company as rental revenue in accordance with GAAP, divided by the weighted average number of occupied apartment homes.
Markets 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 their 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.

 


 

Attachment 14 (continued)
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. A reconciliation of rental revenue from Established Communities in conformity with GAAP to rental revenue (with concessions on a cash basis) is as follows (dollars in thousands):
 
                                         
    Q3     Q3     Q2     YTD     YTD  
    2005     2004     2005     2005     2004  
 
                                       
Rental revenue (GAAP basis)
  $ 120,890     $ 115,912     $ 118,352     $ 355,820     $ 345,171  
Concessions amortized
    4,229       4,985       4,445       13,336       14,436  
Concessions granted
    (5,033 )     (6,039 )     (4,254 )     (12,520 )     (14,977 )
 
                             
Rental revenue (with concessions on a cash basis)
  $ 120,086     $ 114,858     $ 118,543     $ 356,636     $ 344,630  
 
                             
 
                                       
% change — GAAP revenue
            4.3 %     2.1 %             3.1 %
 
                                       
% change — cash revenue
            4.6 %     1.3 %             3.5 %
 
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. Total Capital Cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the total projected joint venture contribution amount.
Economic Gain is calculated by the Company as the gain on sale in accordance with GAAP, less accumulated depreciation through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers Economic Gain to be an appropriate supplemental measure to gain on sale in accordance with GAAP because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain for each of the communities presented is estimated based on their respective final settlement statements. A reconciliation of Economic Gain for the nine months ended September 30, 2005 to gain on sale in accordance with GAAP is presented on Attachment 13. For the disposition of a regional office building that occurred subsequent to September 30, 2005, the Economic Gain of approximately $2,400,000 represents a GAAP gain of approximately $2,800,000 less accumulated depreciation of $400,000.
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 $200 — $300 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 2.5% — 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 and capital expenditure estimates and (ii) may project different rates of change in future rental revenue due to different estimates for changes in rent and occupancy levels. The weighted average Initial Year Market Cap Rate is weighted based on the gross sales price of each community.
Unleveraged IRR on sold communities refers to the internal rate of return calculated by the Company considering the timing and amounts of (i) total revenue during the period owned by the Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated capital cost of the communities at the time of sale and (iv) total direct operating expenses during the period owned by the Company. Each of the items (i), (ii), (iii) and (iv) are calculated in accordance with GAAP.
The calculation of Unleveraged IRR does not include an adjustment for the Company’s general and administrative expense, interest expense, or corporate-level property management and other indirect operating expenses. Therefore, Unleveraged IRR is not a substitute for net income as a measure of our performance. Management believes that the Unleveraged IRR achieved during the period a community is owned by the Company is useful

 


 

Attachment 14 (continued)
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. The weighted average Unleveraged IRR for sold communities is weighted based on all cash flows over the holding period for each respective community, including net sales proceeds.
Leverage is calculated by the Company as total debt as a percentage of Total Market Capitalization. Total 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, 2005 is as follows (dollars in thousands):
 
         
Total debt
  $ 2,400,195  
 
     
Common stock
    6,301,256  
Preferred stock
    100,000  
Operating partnership units
    38,913  
Total debt
    2,400,195  
 
     
Total market capitalization
    8,840,364  
 
     
 
       
Debt as % of capitalization
    27.2 %
 
     
 
Because Leverage changes with fluctuations in the Company’s stock price, which occurs regularly, the Company’s Leverage may change even when the Company’s earnings, interest and debt levels remain stable. Investors should also note that the net realizable value of the Company’s assets in liquidation is not easily determinable and may differ substantially from the Company’s Total Market Capitalization.
Unencumbered NOI as calculated by the Company represents NOI generated by real estate assets unencumbered by outstanding secured debt as a percentage of total NOI generated by real estate assets. The Company believes that current and prospective unsecured creditors of the Company view Unencumbered NOI as one indication of the borrowing capacity of the Company. Therefore, when reviewed together with the Company’s Interest Coverage, EBITDA and cash flow from operations, the Company believes that investors and creditors view Unencumbered NOI as a useful supplemental measure for determining the financial flexibility of an entity. A calculation of Unencumbered NOI for the nine months ended September 30, 2005 is as follows (dollars in thousands):
 
         
NOI for Established Communities
  $ 242,141  
NOI for Other Stabilized Communities
    32,920  
NOI for Development/Redevelopment Communities
    53,589  
NOI for discontinued operations
    16,740  
 
     
Total NOI generated by real estate assets
    345,390  
NOI on encumbered assets
    52,119  
 
     
NOI on unencumbered assets
    293,271  
 
     
 
       
Unencumbered NOI
    84.9 %
 
     
 

 


 

Attachment 14 (continued)
Interest Coverage is calculated by the Company as EBITDA from continuing operations divided by the sum of interest expense, net, and preferred dividends. Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our 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 gains on sale of partnership interests.
A reconciliation of EBITDA and a calculation of Interest Coverage for the third quarter of 2005 are as follows (dollars in thousands):
 
         
Net income
  $ 99,128  
Interest expense, net
    31,787  
Interest expense (discontinued operations)
    3  
Depreciation expense
    39,196  
Depreciation expense (discontinued operations)
    2  
 
     
 
       
EBITDA
  $ 170,116  
 
     
 
       
EBITDA from continuing operations
  $ 96,807  
EBITDA from discontinued operations
    73,309  
 
     
 
       
EBITDA
  $ 170,116  
 
     
 
       
EBITDA from continuing operations
  $ 96,807  
 
       
Interest expense
    31,787  
Interest income
    —  
Dividends attributable to preferred stock
    2,175  
 
     
Interest charges
    33,962  
 
     
 
       
Interest coverage
    2.9  
 
     
 
In the calculations of EBITDA above, EBITDA from discontinued operations includes $68,491,000 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 estimated stabilized concessions, (ii) estimated market rents net of comparable concessions for all unleased apartments and (iii) includes actual and estimated other rental revenue. For Development and Redevelopment Communities not yet in lease-up, Average Rent per Home reflects management’s projected rents.