EX-99.1
Published on April 29, 2009
Exhibit 99.1
For Immediate News Release
April 29, 2009
April 29, 2009
AVALONBAY COMMUNITIES, INC. ANNOUNCES
FIRST QUARTER 2009 OPERATING RESULTS
FIRST QUARTER 2009 OPERATING RESULTS
(Alexandria, VA) AvalonBay Communities, Inc. (NYSE: AVB) reported today that Net Income
Attributable to Company Common Stockholders (Net Income) for the quarter ended March 31, 2009
was $47,425,000. This resulted in Earnings per Share diluted (EPS) of $0.59 for the quarter
ended March 31, 2009, compared to EPS of $0.60 for the comparable period of 2008, a decrease of
1.7%.
Funds from Operations attributable to common stockholders diluted (FFO) for the quarter ended
March 31, 2009 increased 2.4% to $1.27 per share from $1.24 per share for the comparable period of
2008.
FFO and Net Income for the quarter ended March 31, 2009 include the following non-routine items:
| | Incremental earnings due primarily to the recognition of the Companys promoted interest in a joint venture of $3,894,000, or $0.05 per share; and | ||
| | a gain of $1,062,000, or $0.01 per share from purchasing medium-term notes at a discount prior to the scheduled maturity. |
In addition, the period-over-period results are impacted by the 2,627,000 additional shares issued
in January 2009 as part of the special dividend declared in the fourth quarter of 2008.
Commenting on the Companys results, Bryce Blair, Chairman and CEO, said: Portfolio operations
performed largely as expected. The closing of our $740 million
secured facility, the final closing
of our $400 million acquisition fund and the reduction in our development activity all strengthen
our liquidity and provide capital to pursue emerging investment
opportunities. While accelerated job losses during the quarter will
likely affect future rental demand, a strong balance sheet and access
to cost effective capital help mitigate the overall financial impact.
Operating Results for the Quarter Ended March 31, 2009 Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue increased by $3,491,000, or 1.6%
to $219,679,000. For Established Communities, rental revenue decreased 0.7% due to a
decrease in economic occupancy of 0.9%, partially offset by an increase in Average Rental Rates of
0.2%. As a result, total revenue for Established Communities decreased $1,053,000 to $158,072,000.
Operating expenses for Established Communities increased $1,197,000, or 2.4% to $52,046,000.
Accordingly, Net Operating Income (NOI) for Established Communities decreased by $2,250,000, or
2.1% to $106,026,000.
The following table reflects the percentage changes in rental revenue, operating expenses and NOI
for Established Communities from the first quarter of 2008 to the first quarter of 2009:
| 1Q 09 Compared to 1Q 08 | ||||||||||||||||
| Rental | Operating | % of | ||||||||||||||
| Revenue | Expenses | NOI | NOI (1) | |||||||||||||
New England |
(2.2% | ) | (1.0% | ) | (2.8% | ) | 19.4% | |||||||||
Metro NY/NJ |
(1.5% | ) | 4.4% | (4.2% | ) | 26.3% | ||||||||||
Mid-Atlantic/Midwest |
0.8% | 3.3% | (0.6% | ) | 16.7% | |||||||||||
Pacific NW |
0.6% | 0.9% | 0.4% | 4.9% | ||||||||||||
No. California |
1.6% | 1.5% | 1.7% | 21.5% | ||||||||||||
So. California |
(2.7% | ) | 4.9% | (5.6% | ) | 11.2% | ||||||||||
Total |
(0.7% | ) | 2.4% | (2.1% | ) | 100.0% | ||||||||||
| (1) | Total represents each regions % of total NOI from the Company, including discontinued operations. |
Cash concessions are recognized in accordance with generally accepted accounting principles
(GAAP) and are amortized over the approximate lease term, which is generally one year. Both
Rental Revenue with Concessions on a Cash Basis and on a GAAP basis for our Established Communities
for the first quarter of 2009 decreased by 0.7% from the prior year period.
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
Development Activity
During the first quarter of 2009, the Company completed the development of two communities: Avalon
Morningside Park, located in New York, NY and Avalon at the Hingham Shipyard, located in Hingham,
MA. These communities contain an aggregate 530 apartment homes and were completed for an aggregate
Total Capital Cost of $172,500,000.
Investment Management Fund Activity
The Company currently has investments in and serves as the manager for two private, discretionary
investment management vehicles.
AvalonBay Value Added Fund, L.P. (the Fund) is a private, discretionary investment vehicle in
which the Company holds an equity interest of approximately 15%.
AvalonBay Value Added Fund II, L.P. (Fund II) is a private, discretionary investment vehicle with
commitments from five institutional investors. In addition, the Company is an investor in
Fund II.
As of March 31, 2009, Fund II equity commitments totaled $333,000,000, of which the Company
committed $150,000,000, representing a 45% equity interest. As of March 31, 2009, no capital was
contributed to Fund II and no investments were made.
In April 2009, the Company announced the second and final closing of Fund II. In this closing,
total equity commitments to Fund II increased by $67,000,000 as a result of the following:
| | a new institutional investor made an equity commitment of $75,000,000; | ||
| | an existing institutional investor increased its commitment by $17,000,000, based on terms of its existing commitment; and | ||
| | the Company decreased its commitment by $25,000,000, based on terms of its existing commitment, decreasing the Companys equity interest to approximately 31%. |
With the final closing, Fund II equity commitments now total
$400,000,000 (including the Companys $125,000,000 commitment). Fund II can employ leverage of up
to 65%, allowing for an investment capacity of approximately $1,100,000,000.
Financing, Liquidity and Balance Sheet Statistics
At March 31, 2009, $359,000,000 was outstanding under the Companys $1,000,000,000 unsecured credit
facility and the Company had $259,990,000 in
unrestricted cash and cash in escrow. The cash in escrow is available
for development activity.
Unencumbered NOI as a percentage of total NOI generated by real estate assets for the first quarter
of 2009 was 77%. Interest Coverage for the first quarter of 2009
was 4.4 times.
New Financing Activity
In April 2009, the Company completed a 5.86% fixed rate, pooled secured financing transaction for
aggregate borrowing of $741,140,000. The financing consists of fourteen separate mortgage loans
each with a 10-year term. Each loan provides for payment of interest only during the first and second years of the
loan term, with payment of principal and interest (based on a 30 year amortization schedule)
thereafter and the remaining principal amount and any unpaid interest due at maturity on the tenth
anniversary.
Debt Repayment Activity
In January 2009, the Company made a cash tender offer for any and all of its 7.5% medium-term notes
due in August 2009 and December 2010. The Company purchased
at par $37,438,000 principal amount of its
$150,000,000, 7.5% medium-term notes due in August 2009. In addition, the Company purchased
$64,423,000 principal amount of its $200,000,000, 7.5% medium-term
notes due December 2010, at 98%
of par, recording a gain of
$1,062,000. All of the notes purchased in the tender offer were cancelled.
Second Quarter 2009 Financial Outlook
For the second quarter of 2009, the Company expects EPS in the range of $0.49 to $0.53 and expects
Projected FFO per share in the range of $1.16 to $1.20.
The Company expects to release its second quarter 2009 earnings on July 29, 2009 after the market
closes. The Company expects to hold a conference call on July 30, 2009 at 1:00 PM EDT to discuss the
second quarter 2009 results.
Second Quarter 2009 Conference/Event Schedule
The Company is scheduled to participate in the NAREIT Institutional Investor Forum from June 3-5,
2009. The Company will present and conduct a question and answer session at the conference.
Management may discuss the Companys current operating environment; operating trends; development,
redevelopment, disposition and acquisition activity; financial outlook and other business and
financial matters affecting the Company. Details on how to access related materials will be
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
available
beginning June 1, 2009 on the Companys website at http://www.avalonbay.com/events.
Other Matters
The Company will hold a conference call on April 30, 2009 at 1:00 PM EDT to review and answer
questions about this release, its first quarter results, the Attachments (described below) and
related matters. To participate on the call, dial 1-877-510-2397 domestically and 1-763-416-6924
internationally.
To hear a replay of the call, which will be available from April 30, 2009 at 2:00 PM EDT to May 6,
2009 at 11:59 PM EDT, dial 1-800-642-1687 domestically and 1-706-645-9291 internationally, and use
Access Code: 92862758.
A webcast of the conference call will also be available at
http://www.avalonbay.com/earnings, and an on-line playback of the webcast will be available
for at least 30 days following the call.
The Company produces Earnings Release Attachments (the Attachments) that provide detailed
information regarding operating, development, redevelopment, disposition and acquisition activity.
These Attachments are considered a part of this earnings release and are available in full with
this earnings release via the Companys website at http://www.avalonbay.com/earnings. To
receive future press releases via e-mail, please submit a request through
http://www.avalonbay.com/email.
About AvalonBay Communities, Inc.
As of March 31, 2009, the Company owned or held a direct or indirect ownership interest in 173
apartment communities containing 50,291 apartment homes in ten states and the District of Columbia,
of which 12 communities were under construction and seven communities were under reconstruction.
The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing
apartment communities in high barrier-to-entry markets of the United States. More information may
be found on the Companys website at
http://www.avalonbay.com. For
additional information, please contact John Christie, Senior Director of Investor Relations and
Research at 1-703-317-4747 or Thomas J. Sargeant, Chief Financial Officer at 1-703-317-4635.
Forward-Looking Statements
This release, including its Attachments, contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. You can identify these forward-looking statements by the Companys use of
words such as expects, plans, estimates, projects, intends, believes, outlook and
similar expressions that do not relate to historical matters. Actual results may differ materially
from those expressed or implied by the forward-looking statements as a result of risks and
uncertainties, which include the following: adverse capital and credit market conditions may affect
our access to various sources of capital and/or cost of capital, which may affect our business
activities, earnings and common stock price, among other things; changes in local employment
conditions, demand for apartment homes, supply of competitive housing products, and other economic
conditions may result in lower than expected occupancy and/or rental rates and adversely affect the
profitability of our communities; increases in costs of materials, labor or other expenses may
result in communities that we develop or redevelop failing to achieve expected profitability;
delays in completing development, redevelopment and/or lease-up may result in increased financing
and construction costs and may delay and/or reduce the profitability of a community; debt and/or
equity financing for development, redevelopment or acquisitions of communities may not be available
or may not be available on favorable terms; we may be unable to obtain, or experience delays in
obtaining, necessary governmental permits and authorizations; or we may abandon development or
redevelopment opportunities for which we have already incurred costs. Additional discussions of
risks and uncertainties appear in the Companys filings with the Securities and Exchange
Commission, including the Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2008 under the headings Risk Factors and under the heading Managements Discussion and
Analysis of Financial Condition and Results of Operations Forward-Looking Statements.
The Company does not undertake a duty to update forward-looking statements, including its expected
operating results for the second quarter of 2009. The Company may, in its discretion, provide
information in future public announcements regarding its outlook that may be of interest to the
investment community. The format and extent of future outlooks may be different from the format
and extent of the information contained in this release.
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
Definitions and Reconciliations
Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are
defined and further explained on Attachment 13, Definitions and Reconciliations of Non-GAAP
Financial Measures and Other Terms. Attachment 13 is included in the full earnings release
available at the Companys website at
http://www.avalonbay.com/earnings. This wire distribution
includes only definitions and reconciliations of the following Non-GAAP financial measures:
FFO is determined based on a definition adopted by the Board of Governors of the National
Association of Real Estate Investment Trusts (NAREIT). FFO is calculated by the Company as Net
Income or loss computed in accordance with GAAP, adjusted for gains or losses on sales of
previously depreciated operating communities, extraordinary gains or losses (as defined by GAAP),
cumulative effect of a change in accounting principle and depreciation of real estate assets,
including adjustments for unconsolidated partnerships and joint ventures. Management generally
considers FFO to be an appropriate supplemental measure of operating performance because, by
excluding gains or losses related to dispositions of previously depreciated operating communities
and excluding real estate depreciation (which can vary among owners of identical assets in similar
condition based on historical cost accounting and useful life estimates), FFO can help one compare
the operating performance of a companys real estate between periods or as compared to different
companies. A reconciliation of FFO to Net Income is as follows (dollars in thousands):
| Q1 | Q1 | |||||||
| 2009 | 2008 | |||||||
Net income attributable to the Company |
$ | 47,425 | $ | 48,450 | ||||
Dividends attributable to preferred stock |
| (2,175 | ) | |||||
Depreciation real estate assets,
including discontinued operations
and joint venture adjustments |
53,525 | 49,785 | ||||||
Distributions to noncontrolling interests,
including discontinued operations |
25 | 57 | ||||||
FFO attributable to common stockholders |
$ | 100,975 | $ | 96,117 | ||||
Average shares outstanding diluted |
79,792,281 | 77,440,892 | ||||||
Earnings per share diluted |
$ | 0.59 | $ | 0.60 | ||||
FFO per common share diluted |
$ | 1.27 | $ | 1.24 | ||||
Projected FFO, as provided within this release in the Companys outlook, is calculated on a
basis consistent with historical FFO, and is therefore considered to be an appropriate supplemental
measure to projected net income from projected operating performance. A reconciliation of the
range provided for Projected FFO per share (diluted) for the second quarter of 2009 to the range
provided for projected EPS (diluted) is as follows:
| Low | High | |||||||
| range | range | |||||||
Projected EPS (diluted) Q2 09 |
$ | 0.49 | $ | 0.53 | ||||
Projected depreciation (real estate related) |
0.67 | 0.67 | ||||||
Projected gain on sale of operating communities |
| | ||||||
Projected FFO per share (diluted) Q2 09
|
$ | 1.16 | $ | 1.20 | ||||
NOI is defined by the Company as total property revenue less direct property
operating expenses (including property taxes), and excludes corporate-level income (including
management, development and other fees), corporate-level property management and other indirect
operating expenses, investments and investment management expenses, expensed development and other pursuit costs, net interest expense, general and
administrative expense, joint venture income, net income or expense attributable to noncontrolling interests, depreciation expense, gain
on sale of real estate assets and income from discontinued operations. The Company considers NOI to
be an appropriate supplemental measure to net income of operating performance of a community or
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
communities because it helps both investors and management to understand the core operations of a
community or communities prior to the allocation of corporate-level property management overhead or
general and administrative costs. This is more reflective of the operating performance of a
community, and allows for an easier comparison of the operating performance of single assets or
groups of assets. In addition, because prospective buyers of real estate have different overhead
structures, with varying marginal impact to overhead by acquiring real estate, NOI is considered by
many in the real estate industry to be a useful measure for determining the value of a real estate
asset or groups of assets.
A reconciliation of NOI (from continuing operations) to Net Income, as well as a breakdown of NOI
by operating segment, is as follows (dollars in thousands):
| Q1 | Q1 | |||||||
| 2009 | 2008 | |||||||
Net income attributable to the Company |
$ | 47,425 | $ | 48,450 | ||||
Indirect operating expenses, net of corporate income |
8,575 | 8,458 | ||||||
Investments and investment management expense |
916 | 1,219 | ||||||
Expensed development and other pursuit costs |
1,093 | 500 | ||||||
Interest expense, net |
29,157 | 27,661 | ||||||
General and administrative expense |
7,247 | 8,119 | ||||||
Joint venture income |
(3,457 | ) | (34 | ) | ||||
Net (income) loss attributable to noncontrolling interests |
(324 | ) | 106 | |||||
Depreciation expense |
52,627 | 45,941 | ||||||
Income from discontinued operations |
(53 | ) | (4,820 | ) | ||||
NOI from continuing operations |
$ | 143,206 | $ | 135,600 | ||||
Established: |
||||||||
New England |
$ | 20,418 | $ | 20,999 | ||||
Metro NY/NJ |
28,071 | 29,291 | ||||||
Mid-Atlantic/Midwest |
20,678 | 20,805 | ||||||
Pacific NW |
5,214 | 5,193 | ||||||
No. California |
20,299 | 19,969 | ||||||
So. California |
11,346 | 12,019 | ||||||
Total Established |
106,026 | 108,276 | ||||||
Other Stabilized |
21,026 | 12,087 | ||||||
Development/Redevelopment |
16,154 | 15,237 | ||||||
NOI from continuing operations |
$ | 143,206 | $ | 135,600 | ||||
NOI as reported by the Company does not include the operating results from discontinued operations
(i.e., assets sold during the period January 1, 2008 through March 31, 2009). A reconciliation of
NOI from communities sold or classified as discontinued operations to net income for these
communities is as follows (dollars in thousands):
| Q1 | Q1 | |||||||
| 2009 | 2008 | |||||||
Income from discontinued operations |
$ | 53 | $ | 4,820 | ||||
Interest expense, net |
88 | 530 | ||||||
Depreciation expense |
13 | 2,851 | ||||||
NOI from discontinued operations |
$ | 154 | $ | 8,201 | ||||
NOI from assets sold |
$ | | $ | 8,201 | ||||
NOI from assets held for sale |
154 | | ||||||
NOI from discontinued operations |
$ | 154 | $ | 8,201 | ||||
Projected NOI, as used within this release for certain development and redevelopment
communities and in calculating the Initial Year Market Cap Rate for dispositions, represents
managements estimate, as of the date of this release (or
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
as of the date of the buyers valuation
in the case of dispositions), of projected stabilized rental revenue minus projected stabilized
operating expenses. For development and redevelopment communities, Projected NOI is calculated
based on the first year of stabilized operations following the completion of construction. In
calculating the Initial Year Market Cap Rate, Projected NOI for dispositions is calculated for the
first twelve months following the date of the buyers valuation. Projected stabilized rental
revenue represents managements estimate of projected gross potential (based on leased rents for
occupied homes and market rents for vacant homes) minus projected economic vacancy and adjusted for
concessions. Projected stabilized operating expenses do not include interest, income taxes (if
any), depreciation or amortization, or any allocation of corporate-level property management
overhead or general and administrative costs. The weighted average Projected NOI as a percentage
of Total Capital Cost is weighted based on the Companys share of the Total Capital Cost of each
community, based on its percentage ownership.
Management believes that Projected NOI of the development and redevelopment communities, on an
aggregated weighted average basis, assists investors in understanding managements estimate of the
likely impact on operations of the development and redevelopment communities when the assets are
complete and achieve stabilized occupancy (before allocation of any corporate-level property
management overhead, general and administrative costs or interest expense). However, in this
release the Company has not given a projection of NOI on a company-wide basis. Given the different
dates and fiscal years for which NOI is projected for these communities, the projected allocation
of corporate-level property management overhead, general and administrative costs and interest
expense to communities under development or redevelopment is complex, impractical to develop, and
may not be meaningful. Projected NOI of these communities is not a projection of the Companys
overall financial performance or cash flow. There can be no assurance that the communities under
development or redevelopment will achieve the Projected NOI as described in this release.
Rental Revenue with Concessions on a Cash Basis is considered by the Company to be a
supplemental measure to rental revenue in conformity with GAAP to help investors evaluate the
impact of both current and historical concessions on GAAP based rental revenue and to more readily
enable comparisons to revenue as reported by other companies. In addition, rental revenue (with
concessions on a cash basis) allows an investor to understand the historical trend in cash
concessions.
A reconciliation of rental revenue from Established Communities in conformity with GAAP to rental
revenue (with concessions on a cash basis) is as follows (dollars in thousands):
| Q1 | Q1 | |||||||
| 2009 | 2008 | |||||||
Rental revenue (GAAP basis) |
$ | 157,974 | $ | 159,070 | ||||
Concessions amortized |
2,172 | 1,636 | ||||||
Concessions granted |
(1,830 | ) | (1,289 | ) | ||||
Rental revenue (with
concessions on a cash basis) |
$ | 158,316 | $ | 159,417 | ||||
% change GAAP revenue |
(0.7 | %) | ||||||
% change cash revenue |
(0.7 | %) | ||||||
Economic Gain is calculated by the Company as the gain on sale in accordance with GAAP,
less accumulated depreciation through the date of sale and any other non-cash adjustments that may
be required under GAAP accounting. Management generally considers Economic Gain to be an
appropriate supplemental measure to gain on sale in accordance with GAAP because it helps investors
to understand the relationship between the cash proceeds from a sale and the cash invested in the
sold community. The Economic Gain for each of the communities presented is estimated based on
their respective final settlement statements. A reconciliation of Economic Gain to gain on sale in
accordance with GAAP for both the three months ended March 31, 2009 as well as prior years
activities is presented in the full earnings release.
Interest Coverage is calculated by the Company as EBITDA from continuing operations,
excluding land gains and gain on the sale of investments in real estate joint ventures, divided by
the sum of interest expense, net, and preferred dividends. Interest Coverage is presented by the
Company because it provides rating agencies and investors an additional means of comparing our
ability to service debt obligations to that of other companies. EBITDA is defined by the Company
as net income attributable to the Company before interest income and expense, income taxes,
depreciation and amortization.
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
A reconciliation of EBITDA and a calculation of Interest Coverage for the first quarter of 2009 are
as follows (dollars in thousands):
Net income attributable to the Company |
$ | 47,425 | ||
Interest expense, net |
29,157 | |||
Interest expense (discontinued operations) |
88 | |||
Depreciation expense |
52,627 | |||
Depreciation expense (discontinued operations) |
13 | |||
EBITDA |
$ | 129,310 | ||
EBITDA from continuing operations |
$ | 129,156 | ||
EBITDA from discontinued operations |
154 | |||
EBITDA |
$ | 129,310 | ||
EBITDA from continuing operations |
$ | 129,156 | ||
Interest expense, net |
29,157 | |||
Interest charges |
29,157 | |||
Interest coverage |
4.4 | |||
Total Capital Cost includes all capitalized costs projected to be or actually incurred to
develop the respective development or redevelopment community, or development right, including land
acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees,
permits, professional fees, allocated development overhead and other regulatory fees, all as
determined in accordance with GAAP. For redevelopment communities, Total Capital Cost excludes
costs incurred prior to the start of redevelopment when indicated. With respect to communities
where development or redevelopment was completed in a prior or the current period, Total Capital
Cost reflects the actual cost incurred, plus any contingency estimate made by management. Total
Capital Cost for communities identified as having joint venture ownership, either during
construction or upon construction completion, represents the total projected joint venture
contribution amount. For joint ventures not in construction as presented in the full earnings
release, Total Capital Cost is equal to gross real estate cost.
Initial Year Market Cap Rate is defined by the Company as Projected NOI of a single
community for the first 12 months of operations (assuming no repositioning), less estimates for
non-routine allowance of approximately $200 $300 per apartment home, divided by the gross sales
price for the community. Projected NOI, as referred to above, represents managements estimate of
projected rental revenue minus projected operating expenses before interest, income taxes (if any),
depreciation, amortization and extraordinary items. For this purpose, managements projection of
operating expenses for the community includes a management fee of 3.0% 3.5%. The Initial Year
Market Cap Rate, which may be determined in a different manner by others, is a measure frequently
used in the real estate industry when determining the appropriate purchase price for a property or
estimating the value for a property. Buyers may assign different Initial Year Market Cap Rates to
different communities when determining the appropriate value because they (i) may project different
rates of change in operating expenses and capital expenditure estimates and (ii) may project
different rates of change in future rental revenue due to different estimates for changes in rent
and occupancy levels. The weighted average Initial Year Market Cap Rate is weighted based on the
gross sales price of each community.
Unleveraged IRR on sold communities refers to the internal rate of return calculated by the
Company considering the timing and amounts of (i) total revenue during the period owned by the
Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated
capital cost of the communities at the time of sale and (iv) total direct
operating expenses during the period owned by the Company. Each of the items (i), (ii), (iii) and
(iv) are calculated in accordance with GAAP.
The calculation of Unleveraged IRR does not include an adjustment for the Companys general and
administrative expense, interest expense, or corporate-level property management and other indirect
operating expenses.
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved
Therefore, Unleveraged IRR is not a substitute for net income as a measure of
our performance. Management believes that the Unleveraged IRR achieved during the period a
community is owned by the Company is useful because it is one indication of the gross value created
by the Companys acquisition, development or redevelopment, management and sale of a community,
before the impact of indirect expenses and Company overhead. The Unleveraged IRR achieved on the
communities as cited in this release should not be viewed as an indication of the gross value
created with respect to other communities owned by the Company, and the Company does not represent
that it will achieve similar Unleveraged IRRs upon the disposition of other communities. The
weighted average Unleveraged IRR for sold communities is weighted based on all cash flows over the
holding period for each respective community, including net sales proceeds.
Unencumbered NOI as calculated by the Company represents NOI generated by real estate
assets unencumbered by either outstanding secured debt or land leases (excluding land leases with
purchase options that were put in place for governmental incentives or tax abatements) as a
percentage of total NOI generated by real estate assets. The Company believes that current and
prospective unsecured creditors of the Company view Unencumbered NOI as one indication of the
borrowing capacity of the Company. Therefore, when reviewed together with the Companys Interest
Coverage, EBITDA and cash flow from operations, the Company believes that investors and creditors
view Unencumbered NOI as a useful supplemental measure for determining the financial flexibility of
an entity. A calculation of Unencumbered NOI for the three months ended March 31, 2009 is as
follows (dollars in thousands):
NOI for Established Communities |
$ | 106,026 | ||
NOI for Other Stabilized Communities |
21,026 | |||
NOI for Development/Redevelopment Communities |
16,154 | |||
Total NOI generated by real estate assets |
143,206 | |||
NOI on encumbered assets |
32,978 | |||
NOI on unencumbered assets |
110,228 | |||
Unencumbered NOI |
77.0 | % | ||
Established Communities are identified by the Company as communities where a comparison of
operating results from the prior year to the current year is meaningful, as these communities were
owned and had stabilized operations as of the beginning of the prior year. Therefore, for 2009,
Established Communities are consolidated communities that have stabilized operations as of January
1, 2008 and are not conducting or planning to conduct substantial redevelopment activities within
the current year. Established Communities do not include communities that are currently held for
sale or planned for disposition during the current year.
Economic Occupancy is defined as total possible revenue less vacancy loss as a percentage
of total possible revenue. Total possible revenue is determined by valuing occupied units at
contract rates and vacant units at market rents. Vacancy loss is determined by valuing vacant
units at current market rents. By measuring vacant apartments at their market rents, Economic
Occupancy takes into account the fact that apartment homes of different sizes and locations within
a community have different economic impacts on a communitys gross revenue.
Copyright Ó 2009 AvalonBay Communities, Inc. All Rights Reserved