AvalonBay Communities, Inc. Announces First Quarter 2022 Operating Results and Second Quarter and Full Year 2022 Financial Outlook

ARLINGTON, Va.–(BUSINESS WIRE)–AvalonBay Communities, Inc. (NYSE: AVB) (the “Company”) reported today that Net Income Attributable to Common Stockholders for the three months ended March 31, 2022 was $262,044,000. This resulted in an increase in Earnings per Share – diluted (“EPS”) for the three months ended March 31, 2022 of 83.3% to $1.87 from $1.02 for the prior year period, primarily attributable to an increase in gain on sale of real estate and an increase in Same Store Residential NOI, as detailed in the table below.

Funds from Operations attributable to common stockholders – diluted (“FFO”) per share for the three months ended March 31, 2022 increased 15.5% to $2.24 from $1.94 for the prior year period. Core FFO per share (as defined in this release) for the three months ended March 31, 2022 increased 15.9% to $2.26 from $1.95 for the prior year period.

The following table compares the Company’s actual results for EPS, FFO per share and Core FFO per share for the three months ended March 31, 2022 to its results for the prior year period:

The following table compares the Company’s actual results for EPS, FFO per share and Core FFO per share for the three months ended March 31, 2022 to its February 2022 outlook:

Same Store Operating Results for the Three Months Ended March 31, 2022 Compared to the Prior Year Period

Same Store total revenue increased $43,646,000, or 8.7%, to $546,839,000. Residential revenue increased $42,333,000, or 8.5%, to $540,733,000, which includes a favorable reduction of uncollectible lease revenue of $4,927,000. Same Store Residential rental revenue increased 8.5%, as detailed in the following table:

Same Store Residential operating expenses increased $7,649,000, or 4.7%, to $169,614,000 and Same Store Residential NOI increased $34,684,000, or 10.3%, to $371,119,000.

The following table presents percentage changes in Same Store Residential rental revenue, Residential operating expenses and Residential NOI for the three months ended March 31, 2022 compared to the three months ended March 31, 2021:

Same Store Collections Update

The following table provides an update for Same Store Residential revenue collections for Q2 2020 through Q1 2022 as of each respective period end, as well as through April 26, 2022 for the periods presented. Collected Residential revenue is the portion of apartment base rent charged to residents and other rentable items, such as parking and storage rent, along with pet and other fees in accordance with residential leases, that has been collected, (“Collected Residential Revenue”), and excludes transactional and other fees. Collections also include rent relief payments, of which $11,946,000 was received during the three months ended March 31, 2022.

For further discussion of collection rates and limitations on use of this data, see “Same Store Collections,” in Definitions and Reconciliations.

Development Activity

During the three months ended March 31, 2022, the Company completed the development of two consolidated apartment communities:

• Avalon Foundry Row, located in Owings Mills, MD; and
• Avalon Woburn, located in Woburn, MA.

These communities contain an aggregate of 787 apartment homes and were constructed for a Total Capital Cost of $218,000,000.

During the three months ended March 31, 2022, the Company started the construction of Avalon Governor’s Park, located in Denver, CO, which will contain 304 apartment homes when completed and will be developed for an estimated Total Capital Cost of $135,000,000.

At March 31, 2022, the Company had 16 consolidated Development communities under construction that are expected to contain 4,903 apartment homes and 39,000 square feet of commercial space. Estimated Total Capital Cost at completion for these Development communities is $2,057,000,000.

At March 31, 2022, the Company had two Unconsolidated Development communities under construction that in the aggregate are expected to contain 803 apartment homes and 56,000 square feet of commercial space.

During the three months ended March 31, 2022, the Company acquired land for the future development of apartment communities for an aggregate investment of $72,480,000.

The projected Total Capital Cost of Development Rights at March 31, 2022 was $4.0 billion.

Acquisition Activity

As disclosed in the Company’s fourth quarter 2021 earnings release dated February 2, 2022, during the three months ended March 31, 2022, the Company acquired Avalon Flatirons, a wholly-owned operating community, located in Lafayette, CO, containing 207 apartment homes and 16,000 square feet of commercial space, for a purchase price of $95,000,000.

Disposition Activity

During the three months ended March 31, 2022, the Company sold three wholly-owned operating communities:

• Avalon West Long Branch, located in West Long Branch, NJ;
• Avalon Ossining, located in Ossining, NY; and
• Avalon East Norwalk, located in Norwalk, CT.

These communities contain 588 apartment homes and were sold for $235,000,000 and a weighted average Market Cap Rate of 3.9%, resulting in a gain in accordance with GAAP of $148,708,000 and an Economic Gain of $119,804,000.

During the three months ended March 31, 2022, the Company sold 15 of the 172 residential condominiums at The Park Loggia, located in New York, NY, for gross proceeds of $40,336,000. As of March 31, 2022, 138 of the 172 residential condominiums have been sold for aggregate gross proceeds of $392,166,000 and 87% of the 66,000 square feet of commercial space has been leased.

Structured Investment Program Activity

In April 2022, the Company entered into the first commitment under its Structured Investment Program, through which the Company will provide mezzanine loans or preferred equity investments to third party multifamily developers. The initial commitment is for a mezzanine loan of up to $52,575,000 to fund a multifamily development project in Denver, CO.

Liquidity and Capital Markets

In March 2022, the Company established an unsecured commercial paper note program which allows the Company to issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year up to a maximum amount outstanding at any one time of $500,000,000, and is backstopped by the Company’s unsecured credit facility. The Company did not have any amounts outstanding under its commercial paper program as of March 31, 2022.

At March 31, 2022, the Company did not have any borrowings outstanding under its $1,750,000,000 unsecured credit facility and had $457,411,000 in unrestricted cash and cash in escrow.

The Company’s annualized Net Debt-to-Core EBITDAre (as defined in this release) for the first quarter of 2022 was 5.0 times and Unencumbered NOI (as defined in this release) was 95%.

During the three months ended March 31, 2022, the Company repaid $100,000,000 principal amount of its variable rate unsecured term loan indexed to LIBOR plus 0.90% entered into in February 2017 at maturity.

In April 2022, in connection with an underwritten offering of shares, the Company entered into forward contracts to sell 2,000,000 shares of common stock by the end of 2023 for approximate proceeds of $494,200,000 net of offering fees and discounts based on the initial forward price. The proceeds that the Company expects to receive on the date or dates of settlement, are subject to certain customary adjustments during the term of the forward contract for the Company’s dividends and a daily interest charge.

Second Quarter and Full Year 2022 Financial Outlook

For its second quarter and full year 2022 financial outlook, the Company expects the following:

The following table compares the Company’s actual results for EPS, FFO per share and Core FFO per share for the first quarter 2022 to its second quarter 2022 financial outlook:

The following table compares the Company’s April 2022 outlook for EPS, FFO per share and Core FFO per share for the full year 2022 to its February 2022 financial outlook:

Second Quarter Conference Schedule

The Company is scheduled to participate in Nareit’s REITweek Conference from June 7 – 9, 2022. During this conference, management may discuss the Company’s current operating environment; operating trends; development, redevelopment, disposition and acquisition activity; portfolio strategy and other business and financial matters affecting the Company. Details on how to access a webcast of the Company’s presentation will be available in advance of the conference event on the Company’s website at http://www.avalonbay.com/events.

Other Matters

The Company will hold a conference call on April 28, 2022 at 1:00 PM ET to review and answer questions about this release, its first quarter 2022 results, the Attachments (described below) and related matters. To participate on the call, dial 888-254-3590 and use conference id: 2365980.

To hear a replay of the call, which will be available from April 28, 2022 at 6:00 PM ET to May 5, 2022 at 6:00 PM ET, dial 888-203-1112 and use conference id: 2365980. A webcast of the conference call will also be available at http://www.avalonbay.com/earnings, and an online playback of the webcast will be available for at least seven days following the call.

The Company produces Earnings Release Attachments (the “Attachments”) that provide detailed information regarding operating, development, redevelopment, disposition and acquisition activity. These Attachments are considered a part of this earnings release and are available in full with this earnings release via the Company’s website at http://www.avalonbay.com/earnings. To receive future press releases via e-mail, please submit a request through http://investors.avalonbay.com/email_notification.

In addition to the Attachments, the Company is providing a teleconference presentation that will be available on the Company’s website at http://www.avalonbay.com/earnings subsequent to this release and before the market opens on April 28, 2022.

About AvalonBay Communities, Inc.

As of March 31, 2022, the Company owned or held a direct or indirect ownership interest in 296 apartment communities containing 87,918 apartment homes in 12 states and the District of Columbia, of which 18 communities were under development and two communities were under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company’s expansion markets of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado. More information may be found on the Company’s website at http://www.avalonbay.com. For additional information, please contact Jason Reilley, Vice President of Investor Relations, at 703-317-4681.

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. These forward-looking statements, which you can identify by the Company’s use of words such as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,” “believes,” “outlook,” “may,” “shall,” “will,” “pursue” and similar expressions that predict or indicate future events and trends and that do not report historical matters, are based on the Company’s expectations, forecasts and assumptions at the time of this release, which may not be realized and involve risks and uncertainties that cannot be predicted accurately or that might not be anticipated. These could cause actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Risks and uncertainties that might cause such differences include those related to the COVID-19 pandemic, including the effect, among other factors, on the multifamily industry and the general economy of measures taken by businesses and the government, such as governmental limitations on the ability of multifamily owners to evict residents who are delinquent in the payment of their rent and federal efforts at economic stimulus; we may abandon development or redevelopment opportunities for which we have already incurred costs; adverse capital and credit market conditions, including rising interest rates, 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, landlord-tenant laws, including the adoption of new rent control regulations, and other economic or regulatory conditions may result in lower than expected occupancy and/or rental rates and adversely affect the profitability of our communities; delays in completing development, redevelopment and/or lease-up, and general price inflation, 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; expenses may result in communities that we develop or redevelop failing to achieve expected profitability; our assumptions concerning risks relating to our lack of control of joint ventures and our ability to successfully dispose of certain assets may not be realized; our assumptions and expectations in our financial outlook may prove to be too optimistic; and the timing and net proceeds of condominium sales may not equal our current expectations. Additional discussions of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements 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, 2021 under the heading “Risk Factors” and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements” and in subsequent quarterly reports on Form 10-Q.

The Company does not undertake a duty to update forward-looking statements, including its expected 2022 operating results and other financial data forecasts contained in this release. The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this release.

Definitions and Reconciliations

Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined, reconciled and further explained on Attachment 11, Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms. Attachment 11 is included in the full earnings release available at the Company’s website at http://www.avalonbay.com/earnings. This wire distribution includes only the following definitions and reconciliations.

AVB Residential Benchmark represents the average monthly revenue collections as a percentage of amounts billed for the referenced day of the month for the period from April 2019 to March 2020.

Average Rental Rates are calculated by the Company as Residential rental revenue in accordance with GAAP, divided by the weighted average number of occupied apartment homes.

Commercial represents results attributable to the non-apartment components of the Company’s mixed-use communities and other non-residential operations.

Development is composed of consolidated communities that are either currently under construction, or were under construction and were completed during the current year. These communities may be partially or fully complete and operating.

Development Rights are development opportunities in the early phase of the development process for which the Company either has an option to acquire land or enter into a leasehold interest, for which the Company is the buyer under a long-term conditional contract to purchase land, where the Company controls the land through a ground lease or owns land to develop a new community, or where the Company is the designated developer in a public-private partnership. The Company capitalizes related pre-development costs incurred in pursuit of new developments for which the Company currently believes future development is probable.

EBITDA, EBITDAre and Core EBITDAre are considered by management to be supplemental measures of our financial performance. EBITDA is defined by the Company as net income or loss attributable to the Company before interest expense, income taxes, depreciation and amortization. EBITDAre is calculated by the Company in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”), as EBITDA plus or minus losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property, with adjustments to reflect the Company’s share of EBITDAre of unconsolidated entities. Core EBITDAre is the Company’s EBITDAre as adjusted for non-core items outlined in the table below. By further adjusting for items that are not considered part of the Company’s core business operations, Core EBITDAre can help one compare the core operating and financial performance of the Company between periods. A reconciliation of EBITDA, EBITDAre and Core EBITDAre to net income is as follows (dollars in thousands):

Contacts

Jason Reilley

Vice President of Investor Relations

703-317-4681

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