Avalonbay Communities, Inc. · NYSE:AVB

Avalonbay Communities — Q3 2024 Earnings Presentation

36 slides from Avalonbay Communities's earnings presentation, Nov 5, 2024

  1. Slide 1: Investor Teleconference Presentation Third Quarter 2024

    INVESTOR TELECONFERENCE PRESENTATION THIRD QUARTER 2024 NOVEMBER 5, 2024 Avalon Mosaic Fairfax, VA

  2. Slide 2: See Appendix for forward-looking statements and non-GAAP definitions

    See Appendix for information about forward-looking statements and definitions and reconciliations of non-GAAP financial measures and other terms. For the reasons described in the referenced forward-looking statements, our historical results may not be indicative of future results. Avalon Bothell Com

  3. Slide 3: Participants

    PARTICIPANTS BEN SCHALL CHIEF EXECUTIVE OFFICER & PRESIDENT KEVIN O’SHEA CHIEF FINANCIAL OFFICER MATT BIRENBAUM CHIEF INVESTMENT OFFICER SEAN BRESLIN CHIEF OPERATING OFFICER 3

  4. Slide 4: Strong Progress on 2023 Investor Day Priorities

    STRONG PROGRESS ON 2023 INVESTOR DAY PRIORITIES EVOLVING TO DELIVER SUPERIOR GROWTH OPERATING MODEL PORTFOLIO TRANSFORMATION OPTIMIZATION • ADVANCING TOWARD $80M ANNUAL • DRIVING SUBURBAN ALLOCATION INCREMENTAL NOI TARGET TOWARD 80% TARGET • $10M OF ANNUAL INCREMENTAL NOI PROJECTED • CONTINUED GROWT

  5. Slide 5: Continuing to Innovate and Drive Incremental NOI

    CONTINUING TO INNOVATE AND DRIVE INCREMENTAL NOI OPERATING MODEL TRANSFORMATION ANNUAL INCREMENTAL NOI SELF-SERVE DIGITAL EXPERIENCES AND RESIDENT SERVICES FROM OPERATING INITIATIVES • BULK INTERNET EXPECTED TO BE DEPLOYED AT ≈ 90% AVALON CONNECT OF COMMUNITIES BY YE 2024 $80M ORGANIZATIONAL MODEL G

  6. Slide 6: Increasing Allocation to the Suburbs and Expansion Regions

    INCREASING ALLOCATION TO THE SUBURBS AND EXPANSION REGIONS PORTFOLIO OPTIMIZATION YEAR-TO-DATE TRANSACTION ACTIVITY(1) SUBURBAN 70% 73% 80% YE 2023 CURRENT TARGET ALLOCATION ALLOCATION DISPOSITIONS ACQUISITIONS 100% ESTABLISHED REGIONS 85% EXPANSION REGIONS EXPANSION REGIONS $590M VOLUME ($) $325M 0

  7. Slide 7: Consistently Generating Accretive External Growth

    CONSISTENTLY GENERATING ACCRETIVE EXTERNAL GROWTH DEVELOPMENT GROWTH ENGINE YTD DEVELOPMENT COMPLETIONS PROJECTED 2024 DEVELOPMENT STARTS EXCEEDING INITIAL UNDERWRITING INCREASED TO OVER $1B WTD. AVG. PROJECTED INITIAL STABILIZED YIELD 6.5% $945M PROJECTED TOTAL CAPITAL COST(1) 2024 PROJECTION +50BP

  8. Slide 8: Ensuring Continuous Access to Cost Effective Capital

    ENSURING CONTINUOUS ACCESS TO COST EFFECTIVE CAPITAL GROWTH-ORIENTED BALANCE SHEET A3 | A- CREDIT MOODY’S RATINGS S&P $1.76B YTD CAPITAL $850M 3Q 2024 FORWARD • • SECURED ACCRETIVELY PRICED CAPITAL TO MATCH-FUND 2025 DEVELOPMENT STARTS 100-150BPS OF ACCRETIVE SPREAD TO EQUITY ACTIVITY SOURCED PROJEC

  9. Slide 9: Review of 3Q and YTD 2024 Results and Activity

    REVIEW OF 3Q AND YTD 2024 RESULTS AND ACTIVITY 3Q AND YTD RESULTS AND ACTIVITY 3Q YTD CORE FFO PER SHARE YEAR-OVER-YEAR GROWTH 3.0% 4.1% SAME STORE RESIDENTIAL RENTAL REVENUE YEAR-OVER-YEAR GROWTH 3.1% 3.5% DEVELOPMENT STARTS $450M $835M DEVELOPMENT COMPLETIONS | WTD. AVG. PROJECTED INITIAL STABILIZ

  10. Slide 10: 2024 Full Year Outlook Increased

    2024 FULL YEAR OUTLOOK INCREASED CURRENT PRIOR INITIAL FULL YEAR OUTLOOK SUMMARY OUTLOOK OUTLOOK OUTLOOK PROJECTED CORE FFO PER SHARE GROWTH 3.9% 3.7% 1.4% SAME STORE RESIDENTIAL REVENUE GROWTH 3.5% 3.5% 2.6% OPERATING EXPENSE GROWTH 4.5% 4.8% 5.6% NET OPERATING INCOME GROWTH 3.0% 2.9% 1.25% Source:

  11. Slide 11: Turnover Remains Below Historical Norms, Supporting Healthy Occupancy

    TURNOVER REMAINS BELOW HISTORICAL NORMS, SUPPORTING HEALTHY OCCUPANCY ENTERING THE SLOWER LEASING SEASON 2024 SAME STORE RESIDENTIAL ANNUALIZED TURNOVER ECONOMIC OCCUPANCY 80% 96.5% 50% 95.5% 20% 94.5% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 11 Source: Interna

  12. Slide 12: Outlook for Rent Change Through Year-End Is Healthier Than Normal

    THE OUTLOOK FOR RENT CHANGE THROUGH YEAR-END IS HEALTHIER THAN NORMAL 2024 SAME STORE RESIDENTIAL INDEXED MONTHLY ASKING RENT LIKE-TERM EFFECTIVE RENT CHANGE 106 4% 103 2% 100 - JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC FORECAST 2023 2024 2024 FO

  13. Slide 13: Rental Affordability Has Improved in AVB Established Regions

    RENTAL AFFORDABILITY HAS IMPROVED IN AVB ESTABLISHED REGIONS, HOMEOWNERSHIP REMAINS RELATIVELY UNAFFORDABLE STRONG INCOME GROWTH SUPPORTING RENTING SUBSTANTIALLY MORE AFFORDABLE RENTAL AFFORDABILITY IN AVB ESTABLISHED REGIONS THAN OWNING A HOME IN AVB ESTABLISHED REGIONS INDEXED RENT-TO-INCOME RATIO

  14. Slide 14: Favorable 2025 Supply Outlook in AVB Established Regions

    FAVORABLE 2025 SUPPLY OUTLOOK IN AVB ESTABLISHED REGIONS, PARTICULARLY IN THE SUBURBS FAVORABLE RELATIVE SUPPLY OUTLOOK …WITH THE PORTFOLIO MORE INSULATED FOR AVB ESTABLISHED REGIONS IN 2025… FROM DIRECTLY-COMPETITIVE SUPPLY(1) PROJECTED 2025 NEW MARKET RATE APARTMENT DELIVERIES PROJECTED 2025 NEW M

  15. Slide 15: Several Tailwinds to Support 2025 Same Store Revenue Growth

    SEVERAL TAILWINDS IN PLACE TO SUPPORT 2025 SAME STORE REVENUE GROWTH 2024 SAME STORE RESIDENTIAL 1 2 3 PROJECTED EMBEDDED UNDERLYING UNCOLLECTIBLE LEASE OUTSIZED GROWTH IN OTHER RENTAL GROSS POTENTIAL GROWTH REVENUE (“BAD DEBT”) IMPROVING(1) REVENUE (“ORR”) PROJECTED TO CONTINUE (“EARN-IN”) AS A % O

  16. Slide 16: Operating Expense Growth Projected to Moderate in 2025

    OPERATING EXPENSE GROWTH PROJECTED TO MODERATE IN 2025 COMPONENTS OF SAME STORE RESIDENTIAL OPERATING EXPENSE GROWTH % OF PROJECTED PROJECTED 2025 EXPECTATIONS FY 2024 OPEX FY 2024 GROWTH (RELATIVE TO 2024 PROJECTIONS) PROPERTY TAXES 35% 4% PAYROLL 19% 0% REPAIRS & MAINTENANCE 18% 4% (1) UTILITIES 1

  17. Slide 17: Key Takeaways

    KEY TAKEAWAYS → SOLID 3Q RESULTS AHEAD OF OUR EXPECTATIONS; FULL YEAR OUTLOOK INCREASED • SAME STORE PORTFOLIO PERFORMED WELL THROUGH PEAK LEASING SEASON • LIKE-TERM EFFECTIVE RENT CHANGE EXPECTED TO REACCELERATE INTO YEAR-END → FAVORABLE OUTLOOK FOR 2025 APARTMENT FUNDAMENTALS IN ESTABLISHED REGION

  18. Slide 18: AvalonBay Communities

    AvalonBay COMMUNITIES

  19. Slide 19: Forward-Looking Statements

    FORWARD-LOOKING STATEMENTS → This presentation dated November 5, 2024 is provided in connection with AvalonBay’s third quarter 2024 earnings conference call on November 5, 2024. This presentation is intended to accompany AvalonBay’s earnings release dated November 4, 2024 and should be read in conju

  20. Slide 20: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS 3Q 2024 Forward Equity Activity, as discussed in this presentation, describes forward contracts the Company entered into during the three months ended September 30, 2024. Under its current continuous equity program, the C

  21. Slide 21: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Current Allocation represents the Company’s projected 2024 Net Operating Income for all communities with Stabilized Operations throughout the entire 12-month period ending December 31, 2024, and Management’s expectation f

  22. Slide 22: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q3 2024 Net income $ 372,519 Interest expense and loss on extinguishment of debt 65,640 Income tax expense 782 Depreciation expense 212,122 EBITDA $ 651,063 Gain on sale of communities (172,973) Unconsolidated entity EBIT

  23. Slide 23: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Economic Occupancy is defined as total possible Residential revenue less vacancy loss as a percentage of total possible Residential revenue. Total possible Residential revenue (also known as “gross potential”) is determin

  24. Slide 24: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q3 Q3 YTD YTD 2024 2023 2024 2023 Net income attributable to common stockholders $ 372,519 $ 172,031 $ 799,902 $ 686,856 Depreciation - real estate assets, including joint venture adjustments 210,992 199,546 628,677 602,0

  25. Slide 25: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS (1) Amounts consist primarily of net unrealized gains on technology investments. (2) Amount for 2023 is for the Company's recognition of its promoted interest in Archstone Multifamily Partners AC LP. (3) Changes are the e

  26. Slide 26: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Incremental NOI represents additional NOI that was not achieved in the prior period before the implementation of the initiatives and that is attributable, in future periods, to the implementation of the initiatives. Initi

  27. Slide 27: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS 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 an estimate of typical capital expenditure allowance per apartment h

  28. Slide 28: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Match-Funded (Development Underway) is calculated by the Company as the sum of (i) Total Capital Cost, disbursed to date for all wholly- owned Development communities that had not achieved Stabilized Operations for the en

  29. Slide 29: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Net Debt-to-Core EBITDAre is calculated by the Company as total debt (secured and unsecured notes, and the Company's Credit Facility and commercial paper program) that is consolidated for financial reporting purposes, les

  30. Slide 30: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), property

  31. Slide 31: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Projected FFO and Projected Core FFO, as provided within this presentation in the Company’s outlook, are calculated on a basis consistent with historical FFO and Core FFO, and are therefore considered to be appropriate su

  32. Slide 32: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Projected NOI, as used within this presentation for certain Development communities and in calculating the Market Cap Rate for dispositions, represents management’s estimate, as of the date of this presentation (or as of

  33. Slide 33: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q3 2024 cash from operations available for investment, annualized is the Company’s third quarter 2024 Core FFO, less (i) third quarter 2024 dividends declared – common and (ii) third quarter 2024 Asset Preservation Capex,

  34. Slide 34: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Residential represents results attributable to the Company's apartment rental operations, including parking and other ancillary Residential revenue. Same Store is composed of consolidated communities where a comparison of

  35. Slide 35: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms

    DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Total Capital Cost includes all capitalized costs projected to be or actually incurred to develop the respective Development or Redevelopment community, including land acquisition costs, construction costs, real estate ta

  36. Slide 36: AvalonBay Communities

    AvalonBay COMMUNITIES

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