ARLINGTON, Va.--(BUSINESS WIRE)--AvalonBay Communities, Inc. (NYSE: AVB) reported today that Net Income Attributable to Common Stockholders for the three months ended June 30, 2016 was $197,444,000. This resulted in an increase in Earnings per Share – diluted (“EPS”) of 11.6% to $1.44 for the three months ended June 30, 2016, from $1.29 for the prior year period.
Funds from Operations attributable to common stockholders - diluted (“FFO”) per share for the three months ended June 30, 2016 decreased 8.7% to $1.99 from $2.18 for the prior year period.
Core FFO per share for the three months ended June 30, 2016 increased 8.6% to $2.03 from $1.87 for the prior year period.
The Company's EPS, FFO per share and Core FFO per share were impacted by an increase in Net Operating Income (“NOI”) from newly developed and existing operating communities for the three months ended June 30, 2016 over the prior year period, partially offset by an increase in the average shares outstanding. The increase in EPS was also due to an increase in both wholly-owned and joint venture real estate sales and related gains, partially offset by an increase in depreciation expense and a decrease in casualty and impairment gain, net. The decrease in FFO per share is primarily due to a decrease in casualty and impairment gain, net, coupled with the gain on extinguishment of debt in the prior year period as compared to the loss on extinguishment of debt for the three months ended June 30, 2016.
For the six months ended June 30, 2016, EPS increased 10.8% to $3.17 from $2.86 for the prior year period. FFO per share was $4.06 for both the six months ended June 30, 2016 and the prior year period. For the six months ended June 30, 2016, Core FFO per share increased 10.2% to $4.00 from $3.63 for the prior year period.
Operating Results for the Three Months Ended June 30, 2016 Compared to the Prior Year Period
For the Company, total revenue increased by $44,848,000, or 9.8%, to $502,307,000. This increase is primarily due to growth in revenue from development communities and Established Communities.
For Established Communities, Average Rental Rates increased 5.2%, and were partially offset by a decrease in Economic Occupancy of 0.2%, resulting in an increase in rental revenue of 5.0%. If the Company were to include current and previously completed redevelopment communities as part of its Established Communities portfolio, the increase in Established Communities' rental revenue would have been 5.1%. Total revenue for Established Communities increased $17,901,000, or 4.9%, to $379,853,000. Operating expenses for Established Communities increased $5,080,000, or 4.7%, to $112,575,000. NOI for Established Communities increased $12,821,000, or 5.0%, to $267,278,000.
Acquisition Activity
In May 2016, the Company acquired Avalon Clarendon, located in Arlington, VA. Avalon Clarendon contains 300 apartment homes and was acquired for a purchase price of $120,300,000. Avalon Clarendon is part of a mixed-use development containing residential, retail, office and public parking. To facilitate the acquisition, the Company entered into a joint venture under which the Company acquired all of the rights and obligations associated with the residential component, while the joint venture partner acquired all of the rights and obligations associated with the other components. The Company and its venture partner expect to complete a vertical subdivision of the property in the third quarter of 2016, at which time the Company will report the operating results of Avalon Clarendon as part of its consolidated results of operations.
Disposition Activity
Consolidated Apartment Communities
During the three months ended June 30, 2016, the Company sold Avalon Essex, a wholly-owned community located in Peabody, MA. Avalon Essex contains 154 apartment homes and was sold for $45,100,000, resulting in a gain in accordance with GAAP of $31,081,000 and an Economic Gain of $20,787,000. Avalon Essex generated an Unleveraged IRR of 13.7% over an investment period of 15.7 years.
Unconsolidated Real Estate Investments
During the three months ended June 30, 2016, AvalonBay Value Added Fund II, L.P. ("Fund II"), a private discretionary real estate investment vehicle in which the Company holds an equity interest of approximately 31.3%, sold one community containing 628 apartment homes for a sales price of $163,550,000. The Company's share of the gain in accordance with GAAP was $23,547,000. In conjunction with the disposition, Fund II repaid $59,100,000 of related secured indebtedness in advance of the scheduled maturity date. This resulted in charges for a prepayment penalty and write-off of deferred financing costs, of which the Company’s portion was $463,000, reported as a reduction of joint venture income. In July 2016, Fund II distributed the proceeds from the sale, of which the Company received $35,947,000. The Company’s share of the distribution included $5,014,000 for an incentive distribution, of which $3,447,000 was recognized as income from the Company’s promoted interest in the three months ended June 30, 2016.
Liquidity and Capital Markets
At June 30, 2016, the Company did not have any borrowings outstanding under its $1,500,000,000 unsecured credit facility, and had $287,691,000 in unrestricted cash and cash in escrow.
The Company’s annualized Net Debt-to-Core EBITDA for the second quarter of 2016 was 5.1 times.
During the three months ended June 30, 2016, the Company issued $475,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration for net proceeds of approximately $471,751,000. The notes mature in May 2026, were issued at a 2.95% coupon interest rate and have an effective interest rate of approximately 3.35%, including the effect of an interest rate hedge and offering costs.
During the three months ended June 30, 2016, the Company repaid $134,500,000 of variable rate debt secured by Avalon Walnut Creek at par in advance of its March 2046 maturity date, recognizing a non-cash charge of $2,461,000 for the write-off of deferred financing costs.
Other Matters
The Company will hold a conference call on July 26, 2016 at 11:00 AM ET to review and answer questions about this release, its second quarter 2016 results, the Attachments (described below) and related matters. To participate on the call, dial 888-516-2377 domestically and 719-325-4937 internationally and use conference id: 8768422.
To hear a replay of the call, which will be available from July 26, 2016 at 2:00 PM ET to August 2, 2016 at 2:00 PM ET, dial 888-203-1112 domestically and 719-457-0820 internationally and use conference id: 8768422. 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 athttp://www.avalonbay.com/earnings. To receive future press releases via e-mail, please submit a request throughhttp://www.avalonbay.com/email.
In addition to the Attachments, the Company is providing a management letter and 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 July 26, 2016. These supplemental materials will be available on the Company's website for 30 days following the earnings call.
About AvalonBay Communities, Inc.
As of June 30, 2016, the Company owned or held a direct or indirect ownership interest in 283 apartment communities containing 82,984 apartment homes in 10 states and the District of Columbia, of which 23 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 leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. More information may be found on the Company’s website at http://www.avalonbay.com. For additional information, please contact Jason Reilley, Senior Director of Investor Relations at 703-317-4681.
