Avalonbay Communities, Inc. · NYSE:AVB
Avalonbay Communities — Q1 2024 Earnings Presentation
31 slides from Avalonbay Communities's earnings presentation, Apr 26, 2024
Slide 1: Investor Teleconference Presentation First Quarter 2024
Avalon Princeton Circle Princeton, NJ AVA Esterra Park INVESTOR TELECONFERENCE PRESENTATION Redmond, WA First Quarter 2024 April 26, 2024 1 Avalon Chino Hills Chino Hills, 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: First Quarter Highlights
FIRST QUARTER HIGHLIGHTS ➢ FIRST QUARTER RESULTS EXCEEDED EXPECTATIONS → OCCUPANCY RECOVERED EARLIER IN THE YEAR THAN ANTICIPATED → UNCOLLECTIBLE LEASE REVENUE IMPROVED SIGNIFICANTLY IN FEBRUARY AND MARCH ➢ SAME STORE PORTFOLIO WELL-POSITIONED FOR PEAK LEASING SEASON → SUPPLY CONSTRAINED COASTAL, SU
Slide 5: First Quarter Results Exceeded Expectations
FIRST QUARTER RESULTS EXCEEDED EXPECTATIONS VERSUS Q1 2024 RESULTS ACTUAL EXPECTATIONS(1) 350 CORE FFO PER SHARE YEAR-OVER-YEAR GROWTH 5.1% BASIS POINTS 90 SAME STORE RESIDENTIAL REVENUE YEAR-OVER-YEAR GROWTH 4.2% BASIS POINTS CURRENT DEVELOPMENTS IN LEASE-UP(2) 40 6.0% WTD. AVG. INITIAL PROJECTED S
Slide 6: First Quarter Core FFO per Share Outperformance
FIRST QUARTER CORE FFO PER SHARE OUTPERFORMANCE PRIMARILY DRIVEN BY BETTER-THAN-EXPECTED RESULTS IN THE STABILIZED PORTFOLIO COMPONENTS OF FIRST QUARTER 2024 CORE FFO PER SHARE OUTPERFORMANCE $2.75 $2.70 $2.70 REVENUES $0.04 $0.04 $2.65 EXPENSES(1) $0.03 $2.60 $2.61 $2.55 OUTLOOK NOI FROM NOI FROM O
Slide 7: NABE's 2024 Job Growth Forecast Increased; Rental Economics Attractive
NABE’S 2024 JOB GROWTH FORECAST INCREASED; RENTAL ECONOMICS INCREASINGLY ATTRACTIVE VERSUS HOME OWNERSHIP NABE’S FORECAST FOR JOB GROWTH RENTAL DEMAND IN AVB ESTABLISHED REGIONS CONTINUES INCREASED SUBSTANTIALLY TO BENEFIT FROM AN EXPENSIVE FOR-SALE ALTERNATIVE 2024 PROJECTED NET JOB GROWTH MEDIAN M
Slide 8: Favorable Supply Outlook for AVB Established Regions Through 2025
FAVORABLE SUPPLY OUTLOOK FOR AVB ESTABLISHED REGIONS EXPECTED TO PERSIST THROUGH 2025 PROJECTED NEW MARKET RATE APARTMENT DELIVERIES AS A % OF EXISTING MARKET RATE APARTMENT INVENTORY 4% 3.8% 2024 DELIVERIES IMPACT PERFORMANCE THROUGH 2025+ 2.5% 2.5% 2% 1.9% 1.5% 1.3% - U.S. AVB ESTABLISHED SUNBELT
Slide 9: Updated Full Year Outlook
UPDATED FULL YEAR OUTLOOK FULL YEAR 2024 REVISED AND REVISED INITIAL INITIAL OUTLOOK SUMMARY(1) OUTLOOK OUTLOOK 120 PROJECTED CORE FFO PER SHARE GROWTH 2.6% 1.4% BASIS POINTS SAME STORE RESIDENTIAL 50 REVENUE GROWTH 3.1% 2.6% BASIS POINTS 20 OPERATING EXPENSE GROWTH 5.4% 5.6% BASIS POINTS 85 NET OPE
Slide 10: Better-Than-Expected NOI Driving Upward Revision to Core FFO per Share
BETTER-THAN-EXPECTED NOI FROM THE STABILIZED PORTFOLIO DRIVING UPWARD REVISION TO CORE FFO PER SHARE MIDPOINT COMPONENTS OF FULL YEAR 2024 PROJECTED CORE FFO PER SHARE MIDPOINT INCREASE $11.00 $10.90 $10.91 $0.11 $10.80 $10.78 $10.70 $10.60 INITIAL OUTLOOK NOI FROM NOI FROM OTHER REVISED OUTLOOK (Mi
Slide 11: First Quarter Same Store Revenue Growth Outperformance
FIRST QUARTER SAME STORE REVENUE GROWTH OUTPERFORMANCE ATTRIBUTABLE TO HIGHER-THAN-EXPECTED OCCUPANCY AND LOWER UNCOLLECTIBLE LEASE REVENUE COMPONENTS OF FIRST QUARTER 2024 SAME STORE YEAR-OVER-YEAR RESIDENTIAL REVENUE GROWTH OUTPERFORMANCE 5% 4% 0.2% 4.2% 0.3% ACTUAL 1.9% OUTLOOK 2.1% 3% 3.3% ACTUA
Slide 12: Portfolio Trends Healthy; Well-Positioned for Peak Leasing Season
PORTFOLIO TRENDS REMAINED HEALTHY IN THE FIRST QUARTER; WELL-POSITIONED FOR PEAK LEASING SEASON 2024 SAME STORE RESIDENTIAL | ACTUAL | 2015 – 2019 AVERAGE 1 TURNOVER REMAINS WELL 2 …SUPPORTING RELATIVELY STABLE AVAILABILITY BELOW HISTORICAL LEVELS… 60-DAY AVAILABILITY ANNUALIZED TURNOVER 50% 10% 35%
Slide 13: Full Year Same Store Residential Revenue Forecast Increase
FULL YEAR SAME STORE RESIDENTIAL REVENUE FORECAST INCREASE DRIVEN BY HIGHER EFFECTIVE LEASE RATES AND LOWER UNCOLLECTIBLE LEASE REVENUE COMPONENTS OF FULL YEAR 2024 SAME STORE RESIDENTIAL REVENUE GROWTH MIDPOINT INCREASE 4% 3% 3.1% 2.6% 2% 1% INITIAL EFFECTIVE ECONOMIC OTHER UNCOLLECTIBLE RENT RELIE
Slide 14: Same Store Revenue Growth Outlook Increased or Maintained Across Most Regions
SAME STORE REVENUE GROWTH OUTLOOK INCREASED OR MAINTAINED ACROSS MOST REGIONS INITIAL AND REVISED PROJECTED 2024 FULL YEAR SAME STORE RESIDENTIAL REVENUE GROWTH BY REGION 6% REVISED REVISED MIDPOINT REVISED MIDPOINT MIDPOINT ESTABLISHED REGIONS EXPANSION REGIONS 3.1% 3.3% 1.2% 3% - (3%) TOTAL NEW ME
Slide 15: Nearly $1 Billion of Lease-Up Activity Exceeding Initial Expectations
NEARLY $ 1 BILLION OF LEASE-UP ACTIVITY EXCEEDING INITIAL EXPECTATIONS LEASE-UP SUMMARY(1) CURRENT INITIAL VARIANCE 6 COMMUNITIES | ≈ $ 920M IN PROJECTED TOTAL CAPITAL COST PROJECTION PROJECTION WTD. AVG. MONTHLY REVENUE PER HOME $ 3,220 $ 2,925 $ 295 | 10% WTD. AVG. INITIAL PROJECTED STABILIZED YIE
Slide 16: Capital Allocation Plans On Track With Initial Outlook
CAPITAL ALLOCATION PLANS ON TRACK WITH INITIAL OUTLOOK; INCREMENTAL TRANSACTION MARKET DATAPOINTS EMERGING TRANSACTION ➢ SEVERAL DISPOSITIONS CURRENTLY IN PROCESS MARKET → FOUR ASSETS UNDER AGREEMENT FOR GROSS SALES PROCEEDS OF ≈ $400M ACTIVITY → CAP RATES IN THE HIGH-4% TO MID-5% RANGE ➢ ON TRACK F
Slide 17: AvalonBay Communities
AvalonBay COMMUNITIES
Slide 18: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS ➢ This presentation dated April 26, 2024 is provided in connection with AvalonBay’s first quarter 2024 earnings conference call on April 26, 2024. This presentation is intended to accompany AvalonBay’s earnings release dated April 25, 2024 and should be read in conjunction
Slide 19: 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. AVB Established Regions include markets located in New England, the N
Slide 20: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 2024 Net income $ 173,557 Interest expense and loss on extinguishment of debt 59,439 Income tax benefit (22) Depreciation expense 212,269 EBITDA $ 445,243 Casualty loss 2,935 Loss on sale of communities 70 Unconsolidat
Slide 21: 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
Slide 22: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 Q1 2024 2023 Net income attributable to common stockholders $ 173,449 $ 146,902 Depreciation - real estate assets, including joint venture adjustments 211,347 203,280 Distributions to noncontrolling interests - 12 Loss
Slide 23: 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) Changes are the expected credit losses associated with the Company's lending commitments primarily under its SIP. The timing and amount
Slide 24: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
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 25: 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
Slide 26: 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), corporat
Slide 27: 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
Slide 28: 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
Slide 29: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q1 2024 cash from operations available for investment, annualized is the Company’s first quarter 2024 Core FFO, less (i) first quarter 2024 dividends declared – common and (ii) first quarter 2024 Asset Preservation Capex,
Slide 30: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Stabilized Operations is defined as operations of a community that occur after the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment. Suburb
Slide 31: AvalonBay Communities
AvalonBay COMMUNITIES
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