(Source: Business Wire)
AvalonBay Communities, Inc. (NYSE:AVB) reported today that Net Income
Attributable to Common Stockholders ("Net Income") for the quarter ended
September 30, 2009 was $58,154,000. This resulted in Earnings per Share
-- diluted ("EPS") of $0.72 for the quarter ended September 30, 2009,
compared to EPS of $2.98 for the comparable period of 2008, a decrease
of 75.8%. For the nine months ended September 30, 2009, EPS was $1.54
compared to $5.20 for the comparable period of 2008, a per share
decrease of 70.4%. These decreases are primarily attributable to the
reduced number of communities sold and amount of gains related to these
sales in 2009 as compared with the prior year periods. Year to date 2009
results also include impairment and other charges associated with the
Company's reduction in planned development activity recognized in the
second quarter of 2009.
Funds from Operations attributable to common stockholders - diluted
("FFO") for the quarter ended September 30, 2009 decreased 14.8% to
$1.09 per share from $1.28 per share for the comparable period of 2008.
FFO per share for the nine months ended September 30, 2009 decreased by
14.0% to $3.25 from $3.78 for the comparable period of 2008.
FFO and Net Income per share amounts for the nine months ended September
30, 2009, and for the three and nine months ended September 30, 2008
include certain non-routine items that are detailed in Attachment 14.
Adjusting for these non-routine items, FFO per share for the three and
nine months ended September 30, 2009 would have decreased by 16.2% and
9.0%, respectively from the prior year periods.
There were no significant non-routine items in the current quarter.
Operating Results for the Quarter Ended September 30, 2009 Compared
to the Prior Year Period
For the Company, including discontinued operations, total revenue
increased by $759,000, or 0.3% to $224,192,000. For Established
Communities, rental revenue decreased 4.8% due to a decrease in
Economic Occupancy of 0.2% and a decrease in Average Rental Rates of
4.6%. As a result, total revenue for Established Communities decreased
$7,546,000 to $153,223,000. Operating expenses for Established
Communities increased $1,680,000, or 3.2% to $54,318,000. Accordingly,
Net Operating Income ("NOI") for Established Communities decreased by
$9,226,000, or 8.5% to $98,905,000.
The following table reflects the percentage changes in rental revenue,
operating expenses and NOI for Established Communities from the third
quarter of 2008 to the third quarter of 2009:
3Q 09 Compared to 3Q 08
Rental Operating % of
Revenue Expenses NOI NOI (1)
New England (4.7 %) 1.5 % (8.0 %) 20.6 %
Metro NY/NJ (5.7 %) 4.0 % (9.9 %) 28.1 %
Mid-Atlantic/Midwest (0.7 %) 0.9 % (1.7 %) 16.2 %
Pacific NW (7.0 %) (1.9 %) (9.0 %) 4.6 %
No. California (7.0 %) 6.5 % (11.6 %) 19.6 %
So. California (6.1 %) 9.0 % (12.3 %) 10.9 %
Total (4.8 %) 3.2 % (8.5 %) 100.0 %
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(1) Total represents each region's % of total NOI from the Company, including discontinued operations.
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Operating Results for the Nine Months Ended September 30, 2009
Compared to the Prior Year Period
For the Company, including discontinued operations, total revenue
increased by $4,579,000, or 0.7% to $666,015,000. For Established
Communities, rental revenue decreased 2.8% due to a decrease in
Economic Occupancy of 0.7% and a decrease in Average Rental Rates of
2.1%. As a result, total revenue for Established Communities decreased
$13,092,000 to $465,646,000. Operating expenses for Established
Communities increased $4,521,000, or 3.0% to $157,263,000. Accordingly,
NOI for Established Communities decreased by $17,612,000, or 5.4% to
$308,383,000.
The following table reflects the percentage changes in rental revenue,
operating expenses and NOI for Established Communities for the nine
months ended September 30, 2009 as compared to the nine months ended
September 30, 2008:
YTD 2009 Compared to YTD 2008
Rental Operating % of
Revenue Expenses NOI NOI (1)
New England (3.4 %) 2.3 % (6.4 %) 20.0 %
Metro NY/NJ (3.5 %) 2.1 % (5.9 %) 27.5 %
Mid-Atlantic/Midwest (0.3 %) 2.7 % (2.1 %) 16.5 %
Pacific NW (3.1 %) 2.1 % (5.2 %) 4.7 %
No. California (2.8 %) 4.1 % (5.1 %) 20.4 %
So. California (4.4 %) 6.8 % (8.8 %) 10.9 %
Total (2.8 %) 3.0 % (5.4 %) 100.0 %
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(1) Total represents each region's % of total NOI from the Company, including discontinued operations.
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Cash concessions are recognized in accordance with generally
accepted accounting principles ("GAAP") and are amortized over the
approximate lease term, which is generally one year. The following table
reflects the percentage changes in rental revenue with concessions on a
GAAP basis and Rental Revenue with Concessions on a Cash Basis for our
Established Communities:
3Q 09 vs 3Q 08 YTD 09 vs YTD 08
Rental Revenue Change with (4.8 %) (2.8 %)
Concessions on a GAAP Basis
Rental Revenue Change with
Concessions on a Cash Basis (4.1 %) (2.5 %)
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Development Activity
The Company completed the development of three communities in the third
quarter of 2009: Avalon Anaheim Stadium located in Anaheim, CA, Avalon
Charles Pond, located in Coram, NY, and Avalon Northborough I, located
in Northborough, MA. These communities contain an aggregate 614
apartment homes and were completed for an aggregate Total Capital Cost
of $173,000,000.
At September 30, 2009, the Company had nine communities under
construction with a Total Capital Cost of $1,218,900,000, down from 15
communities with a Total Capital Cost of $1,608,500,000 at September 30,
2008. The Company has not started any new development activity through
September 30, 2009.
During the fourth quarter of 2009, the Company expects to commence the
development of two communities containing an aggregate 399 apartment
homes, with an expected Total Capital Cost of $66,400,000. The Company
expects to complete the development of four communities during the
fourth quarter of 2009. The anticipated completions contain an aggregate
of 1,382 apartment homes and are expected to be completed for a Total
Capital Cost of $470,500,000.
At December 31, 2009, the Company anticipates that it will have seven
communities under development, with a Total Capital Cost of
$814,800,000, down from the 14 communities with a Total Capital Cost of
$1,583,800,000 at December 31, 2008.
Redevelopment Activity
During the third quarter of 2009, the Company completed the
redevelopment of Avalon Symphony Woods I and II, located in Columbia,
MD. These two communities contain an aggregate of 392 apartment homes
and redevelopment was completed for a Total Capital Cost of $10,100,000,
excluding costs incurred prior to redevelopment.
During the third quarter of 2009, the Company commenced the
redevelopment of one community: Avalon at Cedar Ridge located in Daly
City, CA. This community contains an aggregate of 195 apartment homes
and will be redeveloped for an estimated Total Capital Cost of
$6,600,000, excluding costs incurred prior to redevelopment.
Disposition Activity
During the third quarter of 2009, the Company sold two communities:
Avalon at River Oaks, located in San Jose, CA and Avalon at Faxon Park,
located in Quincy, MA. These two communities contain an aggregate of 397
apartment homes and were sold for an aggregate sales price of
$69,500,000. These dispositions resulted in a gain in accordance with
GAAP of $26,670,000 and an Economic Gain of approximately $22,670,000.
The weighted average Initial Year Market Cap Rate for these two
communities was 6.8% and the Unleveraged IRR over a 12 year holding
period was 14.6%.
In October 2009, the Company sold Avalon Parkside, a 192 apartment home
community, located in Sunnyvale, CA for $43,800,000.
Investment Management Fund Activity
The Company currently has investments in and serves as the manager for
two private, discretionary investment management vehicles. There was no
acquisition or disposition activity by either investment fund during the
current quarter.
Financing, Liquidity and Balance Sheet Statistics
At September 30, 2009, the Company had no amounts outstanding under its
$1,000,000,000 unsecured credit facility and the Company had
$777,456,000 in unrestricted cash and cash in escrow. The cash in escrow
is available for development activity and includes $93,440,000 in bond
proceeds related to an existing Development Right that the Company
expects to develop in the future. Unencumbered NOI as a percentage of
total NOI generated by real estate assets for the nine months ended
September 30, 2009 was 64.8%. Interest Coverage for the third quarter of
2009 was 3.1 times.
New Financing Activity
In August 2009, the Company commenced a continuous equity offering
program, under which the Company can issue up to $400 million common
stock until September 2012. The Company may sell common stock in amounts
and at times to be determined by the Company. During the third quarter
of 2009, the Company sold 1,467,000 Shares at an average price of
approximately $70 per share, for gross proceeds of $102,000,000.
In September 2009, the Company issued $500,000,000 of unsecured notes
under its existing shelf registration statement. The offering consisted
of two separate $250,000,000 tranches with effective interest rates of
5.72% and 6.12%, maturing in 2017 and 2020, respectively.
Debt Repayment Activity
In August 2009, the Company repaid $102,562,000 of unsecured notes with
an annual interest rate of 7.50% pursuant to their scheduled maturity.
Also in August 2009, the Company repaid $112,200,000 in unsecured debt,
representing the second tranche of its $330,000,000 unsecured variable
rate term loan (the "Term Loan"), in advance of the scheduled maturity
in January 2010.
In October 2009, the Company completed a cash tender offer commenced in
September 2009. The Company purchased $300,000,000 principal amount of
its unsecured notes at a weighted average purchase price of 108% of par.
Also in October 2009, the Company purchased an additional $10,100,000
principal amount of its unsecured notes at a price of 107% of par. The
Company will recognize a charge for the purchase premium and the
accelerated recognition of certain deferred issuance costs of
approximately $26,000,000 in the fourth quarter of 2009. All of the
notes purchased by the Company were cancelled.
Also in October 2009, the Company repaid the final $112,200,000
outstanding of its Term Loan in advance of the scheduled maturity in
January 2011.
Fourth Quarter and Full Year 2009 Financial Outlook
The Company anticipates that revenues from Established Communities will
decline by 5.75% to 6.25%, and NOI from Established Communities will
decline by 11.0% to 12.0% for the fourth quarter 2009 as compared to the
prior year period. For the full year 2009, Established Community revenue
and NOI are anticipated to decline 3.50% to 3.75% and 6.50% to 7.50%,
respectively. These ranges are consistent with the previous financial
outlook provided in July 2009.
For the fourth quarter of 2009, the Company expects EPS to be in the
range of $0.53 to $0.57. The Company expects EPS for the full year 2009
to be in the range of $2.07 to $2.11.
The Company expects Projected FFO per share to be in the range of $0.61
to $0.65 for the fourth quarter of 2009 and Projected FFO per share for
the full year 2009 to be in the range of $3.86 to $3.90.
The Company's expected fourth quarter and full year 2009 results include
approximately $26,000,000 related to the tender offer the Company
completed in October 2009. The Company's fourth quarter and full year
2008 and 2009 results also include the non-routine items detailed in
Attachment 14. Adjusting for these non-routine items in both years, the
Company expects fourth quarter and full year 2009 Projected FFO per
share to decline by 20% and 12%, respectively, from the prior year
periods.
An analysis of the revised full year 2009 financial outlook compared to
financial outlook provided in July 2009 follows:
Full Year 2009 Outlook
As of September 2009
Changes From July 2009
Per
Share
FFO (July 2009 Outlook) $ 4.22
NOI & other income 0.05
Interest expense, new unsecured debt (0.04 )
Impairments & abandoned pursuits (0.01 )
Gain / (loss) on medium term note repurchase (0.33 )
Impact of shares issued during quarter (0.01 )
FFO (September 2009 Outlook) 3.88
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Fourth Quarter 2009 Conference/Event Schedule
The Company expects to release its fourth quarter 2009 earnings on
February 3, 2010 after the market closes. The Company expects to hold a
conference call on February 4, 2010 at 1:00 PM EST to discuss the fourth
quarter and full year 2009 results.
The Company is tentatively scheduled to participate in the following
conferences during the fourth quarter of 2009:
4Q 2009 Conference Schedule
Event/Conference Date
NAREIT Annual Convention Nov 11-13
Goldman Sachs Real Estate Symposium Dec 4
Barclays Real Estate Conference Dec 8
Wells Fargo Conference Dec 9
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Management may discuss the Company's current operating environment;
operating trends; development, redevelopment, disposition and
acquisition activity; financial outlook and other business and financial
matters affecting the Company. Details on each conference and access to
any related materials will be available beginning November 2, 2009 on
the Company's website at http://www.avalonbay.com/events.
Other Matters
The Company will hold a conference call on October 29, 2009 at 1:00 PM
EDT to review and answer questions about this release, its third 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 October 29,
2009 at 3:00 PM EDT to November 29, 2009 at 11:59 PM EST, dial
1-800-642-1687 domestically and 1-706-645-9291 internationally, and use
Access Code: 33681043.
A webcast of the conference call will also be available at http://www.avalonbay.com/earnings,
and an on-line playback of the webcast will be available for at least 30
days following the call.
The Company produces Earnings Release Attachments (the "Attachments")
that provide detailed information regarding operating, development,
redevelopment, disposition and acquisition activity. These Attachments
are considered a part of this earnings release and are available in full
with this earnings release via the Company's website at http://www.avalonbay.com/earnings.
