Slide 1: Investor Teleconference Presentation Third Quarter 2023
Avalon Woburn Woburn, MA Kanso Twinbrook INVESTOR TELECONFERENCE PRESENTATION Rockville, MD Third Quarter 2023 October 25, 2023 1 AVA Hollywood at La Pietra Place Los Angeles, CA
Slide 2: See Appendix for forward-looking statements and non-GAAP information
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 Third Quarter and Year-to-Date Results and Activity
REVIEW OF THIRD QUARTER AND YEAR-TO-DATE RESULTS AND ACTIVITY THIRD QUARTER AND YEAR-TO-DATE 2023 RESULTS AND ACTIVITY Q3 YTD CORE FFO PER SHARE YEAR-OVER-YEAR GROWTH 6.4% 9.7% SAME STORE RESIDENTIAL RENTAL REVENUE GROWTH YEAR-OVER-YEAR 5.2% 6.9% SEQUENTIAL 1.2% N/A DEVELOPMENT COMPLETIONS | WTD. AV
Slide 5: Q3 Same Store Revenue Growth Outperformance Versus Outlook
60 BASIS POINTS OF OUTPERFORMANCE IN Q3 SAME STORE REVENUE GROWTH DRIVEN BY BETTER-THAN-EXPECTED OCCUPANCY AND EFFECTIVE LEASE RATES THIRD QUARTER 2023 SAME STORE YEAR-OVER-YEAR COMPONENTS OF RESIDENTIAL RENTAL REVENUE GROWTH OUTPERFORMANCE VERSUS OUTLOOK(1) 6% 0.1% 5.2% 0.3% -.-% -.-% 5% 0.2% 4.6%
Slide 6: Updated Full Year 2023 Outlook
UPDATED FULL YEAR 2023 OUTLOOK FULL YEAR 2023 OUTLOOK SUMMARY(1) INITIAL(2) MIDYEAR(3) UPDATED PROJECTED CORE FFO PER SHARE GROWTH 5.3% 7.9% 8.6% SAME STORE COMMUNITIES (RESIDENTIAL ONLY) RENTAL REVENUE GROWTH 5.0% 6.0% 6.3% OPERATING EXPENSE GROWTH 6.5% 6.5% 6.3% NET OPERATING INCOME GROWTH 4.25% 6
Slide 7: AVB Established Regions Well-Positioned Given Stable Rent-to-Income Ratios
AVB ESTABLISHED REGIONS WELL-POSITIONED GIVEN STABLE RENT-TO-INCOME RATIOS AND HIGH COST OF HOME OWNERSHIP 1 RENTAL AFFORDABILITY MORE STABLE 2 …AND THE FOR-SALE HOUSING ALTERNATIVE IN AVB ESTABLISHED REGIONS… HAS BECOME VERY EXPENSIVE COMPARED TO RENTS ANNUAL EFFECTIVE RENT(1) MEDIAN MORTGAGE PAYME
Slide 8: 2024 Supply Outlook for AVB Established Regions Favorable
2024 SUPPLY OUTLOOK FOR AVB ESTABLISHED REGIONS FAVORABLE RELATIVE TO OTHER U.S. REGIONS 1 AVB ESTABLISHED REGIONS PROJECTED 2 …AND THE PORTFOLIO IS EXPECTED TO BENEFIT TO REMAIN SUPPLY CONSTRAINED IN 2024… FROM LESS DIRECTLY-COMPETITIVE SUPPLY(1) PROJECTED 2024 NEW MARKET RATE APARTMENT DELIVERIES
Slide 9: Several Tailwinds to Support Same Store Revenue Growth in 2024
SEVERAL TAILWINDS IN PLACE TO SUPPORT HEALTHY SAME STORE RESIDENTIAL RENTAL REVENUE GROWTH IN 2024 2023 AVB SAME STORE 1 EMBEDDED GROSS POTENTIAL GROWTH 2 LOSS-TO-LEASE ≈ 2% (“EARN-IN”) OF ≈ 1.5% CURRENT LOSS-TO-LEASE(1) GROSS POTENTIAL $216 3% MILLIONS $214 1.5% 2% $212 1% $210 - JANUARY - SEPTEM
Slide 10: Lease-Ups Continue to Exceed Expectations; Increased Deliveries
LEASE-UPS CONTINUE TO EXCEED EXPECTATIONS; INCREASED DELIVERIES PROJECTED TO DRIVE INCREMENTAL EARNINGS GROWTH INTO 2024 CURRENT LEASE-UP ACTIVITY(1) CURRENT INITIAL VARIANCE 5 COMMUNITIES | ≈ $ 525M IN PROJECTED TOTAL CAPITAL COST PROJECTION PROJECTION WTD. AVG. MONTHLY RENTAL REVENUE PER HOME $ 3,
Slide 11: Structured Investment Program Growing; 2023 Commitments 13% Return
STRUCTURED INVESTMENT PROGRAM GROWING; 2023 COMMITMENTS TO DELIVER A 13% RATE OF RETURN PROGRAM SUMMARY SINCE INCEPTION PROGRAM STATUS AS OF SEPTEMBER 30, 2023 TOTAL WTD. AVG. COMMITMENTS RATE OF RETURN $500 2022 $ 92M 9.8% 2023 52M 13.0% TOTAL | WTD. AVG. $ 144M 10.9% MILLIONS $250 MIDPOINT OF TARG
Slide 12: Balance Sheet Is Strong; Net Leverage Below Target Range
BALANCE SHEET IS STRONG; NET LEVERAGE WELL BELOW TARGET RANGE, AND DEVELOPMENT UNDERWAY IS ≈ 95% MATCH-FUNDED BALANCE SHEET METRICS Q3 2023 NET DEBT-TO-CORE EBITDAre 4.1x TARGET RANGE 5.0x – 6.0x INTEREST COVERAGE 7.5x UNENCUMBERED NOI (YEAR-TO-DATE) 95% WTD. AVG. YEARS-TO-MATURITY OF TOTAL DEBT(1)
Slide 13: Approximately $1.6 Billion of Excess Liquidity After Commitments
≈ $ 1.6 BILLION OF EXCESS LIQUIDITY AFTER COMMITMENTS EXCESS LIQUIDITY AS OF SEPTEMBER 30, 2023 $3 OPEN COMMITMENTS, $2 AVAILABLE $ 1.12B COMMERCIAL BILLIONS PAPER PROGRAM & LINE OF CREDIT CAPACITY, $ 2.18B $1 EXCESS LIQUIDITY, $ 1.57B CASH AND CASH EQUIVALENTS, $ 0.51B - TOTAL LIQUIDITY (1) OPEN TO
Slide 14: Continuing to Adjust Capital Allocation Strategy
CONTINUING TO ADJUST CAPITAL ALLOCATION STRATEGY IN RESPONSE TO MARKET CONDITIONS ➢ PIVOTED TO A NET SELLER OF ASSETS IN 2023 → YTD, SOLD ≈ $ 445M ($ 445,000 / HOME) IN ESTABLISHED REGIONS, WHILE ACQUIRING ≈ $ 275M ($ 245,000 / HOME) IN EXPANSION REGIONS(1,2) ➢ DEVELOPMENT UNDERWAY IS ≈ 95% MATCH-FU
Slide 15: Key Takeaways
KEY TAKEAWAYS ➢ THIRD QUARTER RESULTS EXCEEDED EXPECTATIONS; FULL YEAR 2023 CORE FFO PER SHARE GROWTH RATE INCREASED TO 8.6%, UP 330 BPS FROM INITIAL OUTLOOK(1) ➢ 2024 OUTLOOK FAVORABLE FOR APARTMENT FUNDAMENTALS IN AVB ESTABLISHED REGIONS → SEVERAL TAILWINDS IN PLACE TO SUPPORT HEALTHY RESIDENTIAL
Slide 16: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS ➢ This presentation dated October 25, 2023 is provided in connection with AvalonBay’s third quarter 2023 earnings conference call on October 26, 2023. This presentation is intended to accompany AvalonBay’s earnings release dated October 25, 2023 and should be read in conju
Slide 17: Definitions and Reconciliations of Non-GAAP Financial Measures
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. AVB Established Regions include markets located in New England, the N
Slide 18: Definitions and Reconciliations: EBITDAre
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q3 2023 Net income $ 171,790 Interest expense and loss on extinguishment of debt 59,091 Income tax expense 4,372 Depreciation expense 200,982 EBITDA $ 436,235 Casualty loss $ 3,499 Gain on sale of communities (22,121) Unc
Slide 19: Definitions and Reconciliations: Economic Occupancy, FFO
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
Slide 20: Definitions and Reconciliations: FFO and Core FFO
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 2023 2023 2022 2022 2023 2023 2022 2022 Netincome Net incomeattributable attributableto tocommon commonstockholders stockholders $ 172,031 172,031 $ 494,747 494,747 $ 686,856 686,856 $ 895,482
Slide 21: Definitions and Reconciliations: Footnotes
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS (1) Amounts consist primarily of net unrealized gains on technology investments. (2) Amounts for 2023 and 2022 are for the Company's recognition of its promoted interest in the U.S. Fund. (3) Amounts are the expected cred
Slide 22: Definitions: Market Rents and Match-funding
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Market Rents as reported by the Company are based on the current market rates set by the Company based on its experience in renting apartments and publicly available market data. Market Rents for a period are based on the
Slide 23: Definitions: 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 24: Definitions: 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 25: Reconciliation of Net Income to NOI
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS YTD 2023 Net income $ 686,372 Property management and other indirect operating expenses, net of corporate income 90,177 Expensed transaction, development and other pursuit costs, net of recoveries 23,212 Interest expense,
Slide 26: Projected FFO and Projected Core FFO Reconciliation
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
Slide 27: Definitions: Projected NOI
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Projected NOI, as used within this presentation for certain Development communities, represents management’s estimate, as of the date of this presentation, of projected stabilized rental revenue minus projected stabilized
Slide 28: Cash from Operations Available for Investment; Same Store
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q3 2023 Core FFO attributable to common stockholders $ 377,734 Dividends declared - common (234,777) Established and Other Stabilized Asset Preservation Capex (31,255) Q3 2023 cash from operations available for investment
Slide 29: Definitions: Total Capital Cost
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 community, including land acquisition costs, construction costs, real estate taxes, capitalized
Slide 30: AvalonBay Communities
AvalonBay COMMUNITIES