Slide 1: Investor Teleconference Presentation First Quarter 2023
Avalon Woburn Woburn, MA Kanso Twinbrook INVESTOR TELECONFERENCE PRESENTATION Rockville, MD First Quarter 2023 April 26, 2023 1 AVA Hollywood at La Pietra Place Los Angeles, CA
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. 2
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
Slide 4: Review of First Quarter 2023 Results and Activity
REVIEW OF FIRST QUARTER 2023 RESULTS AND ACTIVITY 2023 RESULTS & ACTIVITY Q1 CORE FFO PER SHARE YEAR-OVER-YEAR GROWTH 13.7% SAME STORE RESIDENTIAL RENTAL REVENUE GROWTH YEAR-OVER-YEAR 9.5% SEQUENTIAL 1.1% DEVELOPMENT STARTS $ 100M SUBSEQUENT EVENT SETTLEMENT OF EQUITY FORWARD (IN APRIL) | WTD. AVG.
Slide 5: Market occupancy and rent growth showing less volatility in AVB Established Regions
MARKET OCCUPANCY AND RENT GROWTH SHOWING LESS VOLATILITY IN AVB ESTABLISHED REGIONS COSTAR MARKET OCCUPANCY AND EFFECTIVE MOVE-IN RENT AVB ESTABLISHED REGIONS & SUNBELT REGIONS 1 PHYSICAL OCCUPANCY 2 EFFECTIVE MOVE-IN RENT 3 EFFECTIVE MOVE-IN RENT YEAR-OVER-YEAR CHANGE INDEXED TO 100 IN Q1 2020 97.0
Slide 6: AVB Established Regions expected to be more insulated from new apartment deliveries in 2023
AVB ESTABLISHED REGIONS ARE EXPECTED TO BE MORE INSULATED FROM NEW APARTMENT DELIVERIES IN 2023 PROJECTED 2023 NEW MARKET RATE APARTMENT DELIVERIES U.S., SUNBELT REGIONS, AND AVB ESTABLISHED REGIONS AVB ESTABLISHED REGIONS 1 2 APARTMENT DELIVERIES DIRECTLY-COMPETITIVE APARTMENT DELIVERIES(3) AS A %
Slide 7: AVB Established Regions: effective rent growth on West Coast decelerates, East Coast stabilizing
AVB ESTABLISHED REGIONS: EFFECTIVE RENT GROWTH ON THE WEST COAST CONTINUES TO DECELERATE WHILE THE EAST COAST IS STABILIZING COSTAR MARKET EFFECTIVE MOVE-IN RENT AVB ESTABLISHED REGIONS 1 COMPOSITE INDEX 2 YEAR-OVER-YEAR GROWTH 100 IN Q1 2020 115 16% 100 - 85 (16%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 8: Same store portfolio trends remained healthy in the first quarter
SAME STORE PORTFOLIO TRENDS REMAINED HEALTHY IN THE FIRST QUARTER; WELL-POSITIONED FOR THE PEAK LEASING SEASON AVB SAME STORE(1) 1 AVAILABILITY REMAINED IN THE LOW 5% RANGE 2 …TURNOVER WAS STABLE… THROUGHOUT THE FIRST QUARTER… ANNUALIZED TURNOVER 60-DAY AVAILABILITY 6.6% 62.0% 5.8% 48.0% 5.0% 34.0%
Slide 9: Current lease-ups significantly outperforming initial expectations
CURRENT LEASE-UPS SIGNIFICANTLY OUTPERFORMING INITIAL EXPECTATIONS; RENTS ON SEVEN ADDITIONAL 2023 LEASE-UPS NOT YET MARKED-TO-MARKET CURRENT ORIGINAL LEASE-UP PERFORMANCE VARIANCE PROJECTION PROJECTION(1) CURRENT LEASE-UPS(2) PROJECTED TOTAL CAPITAL COST ≈ $ 385 MILLION WTD. AVG. MONTHLY RENTAL REV
Slide 10: Development underway expected to deliver incremental NOI upon stabilization
DEVELOPMENT UNDERWAY IS EXPECTED TO DELIVER > $ 130 MILLION OF INCREMENTAL NOI ANNUALLY UPON STABILIZATION ACTUAL AND PROJECTED STABILIZED NOI FROM DEVELOPMENT UNDERWAY(1) AS OF MARCH 31, 2023 150 $ MILLIONS 75 $ 132M $ 10M $ 10M - ACTUAL Q1 2023 ACTUAL Q1 2023 DEVELOPMENT NOI, ANNUALIZED DEVELOPMEN
Slide 11: Development market adjusting to changes in the capital markets
DEVELOPMENT MARKET ADJUSTING TO CHANGES IN THE CAPITAL MARKETS ➢ PRIVATE MULTIFAMILY DEVELOPERS DELAYING OR ABANDONING STARTS AS THEY STRUGGLE TO SOURCE CONSTRUCTION FINANCING ➢ SOME ENTITLED SITES ARE STARTING TO COME BACK TO MARKET, OFTEN AT MATERIALLY REDUCED LAND PRICING ➢ HARD COSTS STARTING TO
Slide 12: Balance sheet is strong and positioned to support growth
BALANCE SHEET IS STRONG AND POSITIONED TO SUPPORT GROWTH BALANCE SHEET METRICS Q1 2023 NET DEBT-TO-CORE EBITDAre 4.6x TARGET RANGE 5.0x – 6.0x INTEREST COVERAGE 6.9x UNENCUMBERED NOI 95% WTD. AVG. YEARS-TO-MATURITY OF TOTAL DEBT(1) 7.9 MATCH-FUNDING - DEVELOPMENT UNDERWAY > 100% S&P: A-, STABLE OUTL
Slide 13: Customer Care Center: one of AVB's operating model differentiators
CUSTOMER CARE CENTER: ONE OF AVB’S OPERATING MODEL DIFFERENTIATORS NOW BEING EXTENDED TO THIRD-PARTIES FOR SELECT OFFERINGS ABOUT HISTORY OF OUR CUSTOMER CARE CENTER (“CCC”) → CENTRALIZED SERVICE CENTER FINANCIAL AND OPERATING ADMINISTRATIVE SUPPORT 2007 REDUCED ON-SITE ASSISTANT COMMUNITY MANAGERS
Slide 14: Key Takeaways
KEY TAKEAWAYS ➢ FIRST QUARTER RESULTS WERE STRONG; FULL YEAR 2023 CORE FFO PER SHARE MIDPOINT INCREASED ➢ SUPPLY CONSTRAINED, COASTAL SUBURBAN FOOTPRINT PROJECTED TO OUTPERFORM ➢ CURRENT LEASE-UPS MATERIALLY EXCEEDING INITIAL RENT AND YIELD EXPECTATIONS; ANOTHER $ 1.0 BILLION OF DEVELOPMENT TO COMME
Slide 15: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS ➢ This presentation dated April 26, 2023 is provided in connection with AvalonBay’s first quarter 2023 earnings conference call on April 27, 2023. This presentation is intended to accompany AvalonBay’s earnings release dated April 26, 2023 and should be read in conjunction
Slide 16: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Asset Preservation Capex represents capital expenditures that the Company does not expect will directly result in increased revenue or expense savings. Average Monthly Rental Revenue per Home, as calculated for certain De
Slide 17: Definitions and Reconciliations: EBITDAre
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 2023 Net income $ 146,775 Interest expense and loss on extinguishment of debt 61,745 Income tax expense 3,560 Depreciation expense 204,743 EBITDA $ 416,823 Casualty loss 5,051 Loss on sale of communities 13 Unconsolida
Slide 18: Definitions and Reconciliations: FFO and Core FFO
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS FFO and Core FFO are generally considered by management to be appropriate supplemental measures of our operating and financial performance. FFO is calculated by the Company in accordance with the definition adopted by Nar
Slide 19: Definitions and Reconciliations: FFO reconciliation
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 Q1 2023 2022 Net income attributable to common stockholders $ 146,902 $ 262,044 Depreciation - real estate assets, including joint venture adjustments 203,280 200,652 Distributions to noncontrolling interests 12 12 Los
Slide 20: Definitions and Reconciliations: footnotes and Interest Coverage
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS (1) Amounts consist primarily of net unrealized gains on technology investments. (2) Amounts are the expected credit losses associated with the Company's lending commitments under its Structured Investment Program. The ti
Slide 21: Definitions and Reconciliations: Market Cap Rate
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 estimates for non-routine allowance of approximately $300 - $500 per
Slide 22: Definitions and Reconciliations: Net Debt-to-Core EBITDAre
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
Slide 23: Definitions and Reconciliations: NOI
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), corporat
Slide 24: Definitions and Reconciliations: NOI reconciliation
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 2023 Net income $ 146,775 Property management and other indirect operating expenses, net of corporate income 30,784 Expensed transaction, development and other pursuit costs, net of recoveries 2,992 Interest expense, n
Slide 25: Definitions and Reconciliations: Projected NOI
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Projected NOI, as used within this release for certain Development communities and in calculating the Market Cap Rate for dispositions, represents management’s estimate, as of the date of this release (or as of the date o
Slide 26: Definitions and Reconciliations: cash from operations available for investment
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 2023 cash from operations available for investment, annualized is the Company’s first quarter 2023 Core FFO, less (i) first quarter 2023 dividends declared – common and (ii) first quarter 2023 Asset Preservation Capex,
Slide 27: Definitions and Reconciliations: Stabilized Operations and Total Capital Cost
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Stabilized Operations is defined as the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development. Suburban submarkets are defined as having less than 3,500 househol
Slide 28: AvalonBay Communities
AvalonBay COMMUNITIES