AvalonBay Communities Inc. (
, a real estate investment trust (REIT), reported funds from
operations (FFO) of $128.2 million or $1.34 per share in the second
quarter of 2012 compared with $99.9 million or $1.13 per share in
the year-earlier quarter. While total FFO increased 28.3% year over
year, FFO per share increased 18.6% during the reported quarter.
The superior results were primarily due to an increase in real
estate sales and related gains, rise in Net Operating Income (NOI)
from existing and newly developed and acquired communities, and a
decline in net interest expense.
Reported FFO per share in the quarter marginally missed the
Zacks Consensus Estimate by a penny. Total revenue during the
reported quarter increased 9.9% year over year to $258.8
Same-store quarterly rental revenues increased 5.8% year over
year to $190.2 million, based on a 6.2% rise in average rental
rates to $2,085 per apartment unit. Economic occupancy dipped 0.4%
on a year-over-year basis to 95.8%. Same-store operating expenses
increased 3.0% year over year during the quarter to $57.7 million,
while NOI increased 7.1% to $132.5 million
AvalonBay started construction on four communities during the
quarter. With 1,226 apartment homes on completion, these four new
communities will involve investments of $308.7 million.
Additionally, the company completed construction of four
communities spanning 887 apartment homes for $245.9 million
The company also commenced the redevelopment of Eaves
Fairfax, containing 141 apartment homes for a total cost of $4.9
million during the quarter.
During the quarter, AvalonBay sold two communities located in
Oakland and Chicago for a GAAP profit of $ 95.0 million. These
included the sale of 'Waterford' (544 apartment homes) for $86.5
million and 'Arlington Heights' (409 apartment homes) for $87.3
million. Concurrent with the divestiture of Waterford, the
company repaid the outstanding $33.1 million variable rate note
secured by the community before its scheduled maturity.
Additionally, AvalonBay Value Added Fund, L.P., a private
discretionary real estate investment vehicle where the company
holds an equity interest of approximately 15%, sold a community l
in Chicago, Illinois. The property called 'Avalon Lombard (256
apartment homes) was sold for $35.4 million. With these asset sale
transactions in the reported quarter, the company exited the
During the reported quarter, the company acquired Eaves Cerritos
containing 151 apartment homes in Artesia, California,
for $29 .5 million. Also, the company acquired two land
parcels for $24.6 million.
As of June 30, 2012, AvalonBay had $431.9 million of
unrestricted cash and cash in escrow and a total debt of $3.4
billion. In addition, the company had full availability under its
$750 million unsecured credit facility. The company expects to
raise a total of $700 million to $900 million of new debt and
equity capital during 2012. During second quarter 2012, AvalonBay
repaid a variable rate secured mortgage note of $14.6 million.
AvalonBay expects FFO for third quarter 2012 in the range of
$1.38 to $1.42 per share and for 2012, FFO is projected in
the range of $5.39 to $ 5.53 . The company expects same-store
revenue and NOI to grow in the range of 5.5% - 6.0 % and 7.0% -
8.0% respectively in the remainder of 2012.
AvalonBay currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on the stock. One of its
Apartment Investment & Management Co. (
, currently retains a Zacks #3 Rank.
Note: FFO, a widely used metric to gauge the performance of
REITs, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.
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