Slide 1: Investor Teleconference Presentation, Second Quarter 2023
Avalon Woburn Woburn, MA Kanso Twinbrook INVESTOR TELECONFERENCE PRESENTATION Rockville, MD Second Quarter 2023 July 31, 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 Second Quarter and Year-to-Date Results and Activity
REVIEW OF SECOND QUARTER AND YEAR-TO-DATE RESULTS AND ACTIVITY SECOND QUARTER AND YEAR-TO-DATE 2023 RESULTS AND ACTIVITY Q2 YTD CORE FFO PER SHARE YEAR-OVER-YEAR GROWTH 9.5% 11.5% SAME STORE RESIDENTIAL RENTAL REVENUE GROWTH YEAR-OVER-YEAR 6.3% 7.8% SEQUENTIAL 2.0% N/A DEVELOPMENT COMPLETIONS | WTD.
Slide 5: Second Quarter Same Store Revenue Growth Outperformance
SECOND QUARTER SAME STORE REVENUE GROWTH OUTPERFORMANCE PRIMARILY DRIVEN BY HIGHER LEASE RATES AND LOWER BAD DEBT SECOND QUARTER 2023 SAME STORE YEAR-OVER-YEAR COMPONENTS OF RESIDENTIAL RENTAL REVENUE GROWTH OUTPERFORMANCE VERSUS OUTLOOK(1) 7.0% 0.7% 0.1% 6.3% 0.3% 0.2% 5.2% (0.2%) 3.5% - OUTLOOK EF
Slide 6: AVB Established Regions Projected to Be More Insulated from New Apartment Supply
AVB ESTABLISHED REGIONS PROJECTED TO BE MORE INSULATED FROM NEW APARTMENT SUPPLY AVB ESTABLISHED REGIONS AND SUNBELT REGIONS NEW APARTMENT SUPPLY OUTLOOK 1 MULTIFAMILY STARTS(1) 2 2023 NEW MARKET RATE APARTMENT DELIVERIES(2) 250 4% 3.9% AS A % OF EXISTING MARKET RATE APARTMENT INVENTORY UP ≈ 50% SIN
Slide 7: Updated Full Year 2023 Outlook
UPDATED FULL YEAR 2023 OUTLOOK INITIAL REVISED FULL YEAR 2023 INITIAL AND REVISED OUTLOOK SUMMARY(1) OUTLOOK(2) OUTLOOK PROJECTED CORE FFO PER SHARE GROWTH 5.3% 7.9% SAME STORE COMMUNITIES (RESIDENTIAL ONLY) RENTAL REVENUE GROWTH 5.0% 6.0% OPERATING EXPENSE GROWTH 6.5% 6.5% NET OPERATING INCOME GROW
Slide 8: Better-Than-Expected NOI Driving Upward Revision to Core FFO per Share Midpoint
BETTER-THAN-EXPECTED NOI FROM THE STABILIZED PORTFOLIO DRIVING UPWARD REVISION TO CORE FFO PER SHARE MIDPOINT COMPONENTS OF INCREASE TO 2023 FULL YEAR PROJECTED CORE FFO PER SHARE BASED ON THE MIDPOINT OF THE OUTLOOK RANGE(1) $10.69 INCREASED $ 0.01 $ 0.14 $ 0.02 $ 10.56 $ 0.10 IN APRIL ($ 0.02) $ 1
Slide 9: Bad Debt Improved Due to Nonpaying Residents Moving Out
BAD DEBT IMPROVED DUE TO NONPAYING RESIDENTS MOVING OUT, WHICH IMPACTED TURNOVER AND OCCUPANCY, BUT BODES WELL FOR FUTURE GROWTH 2023 SAME STORE(1) 1 RECAPTURE OF NON-REVENUE GENERATING 2 …AND LED TO AN INCREASE IN TURNOVER… HOMES DROVE BAD DEBT LOWER… ANNUALIZED TURNOVER UNCOLLECTIBLE LEASE REVENUE
Slide 10: Same Store Revenue Growth Outlook Increased in All AVB Established Regions
SAME STORE REVENUE GROWTH OUTLOOK INCREASED IN ALL AVB ESTABLISHED REGIONS; EAST COAST EXPECTED TO OUTPERFORM WEST COAST BY 200 BPS INITIAL AND REVISED PROJECTED 2023 FULL YEAR SAME STORE RESIDENTIAL RENTAL REVENUE GROWTH(1) BY REGION 10% EAST COAST REVISED ≈ 7.0% MIDPOINT 6.0% WEST COAST ≈ 5.0% 5%
Slide 11: Innovation Plans Exceeding Initial Projections
INNOVATION PLANS EXCEEDING INITIAL PROJECTIONS; EXPECTED TO DELIVER NEARLY $ 16 MILLION OF INCREMENTAL NOI IN 2023 AVALON CONNECT(1) RELIABLE, HIGH-SPEED INTERNET SERVICES, AND SMART HOME ACCESS AND SMART HOME DEVICES THAT ARE PRODUCING MEANINGFUL ECONOMIC RETURNS INCREMENTAL NOI FROM INITIATIVE 1H
Slide 12: Lease-Ups Continue to Materially Outperform Initial Expectations
LEASE-UPS CONTINUE TO MATERIALLY OUTPERFORM INITIAL EXPECTATIONS CURRENT LEASE-UP ACTIVITY(1) CURRENT INITIAL VARIANCE 5 COMMUNITIES | ≈ $ 490M IN PROJECTED TOTAL CAPITAL COST PROJECTION PROJECTION WTD. AVG. MONTHLY RENTAL REVENUE PER HOME $ 3,365 $ 2,845 $ 520 | 18.3% WTD. AVG. INITIAL PROJECTED ST
Slide 13: Increasing Development Deliveries Expected to Drive Further Earnings Growth
INCREASING DEVELOPMENT DELIVERIES EXPECTED TO DRIVE FURTHER EARNINGS GROWTH OVER THE NEXT FEW YEARS CUMULATIVE NEW DEVELOPMENT DELIVERIES(1) ACTUAL | PROJECTED 2023 & 2024 APARTMENT DELIVERIES 4,400 ≈ 3,600 NEW DELIVERIES AVALON MONTVILLE 2,200 MONTVILLE, NJ - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2023 2024 AVALO
Slide 14: Modest Disposition Activity at Attractive Pricing
MODEST DISPOSITION ACTIVITY AT ATTRACTIVE PRICING DISPOSITION ACTIVITY(1) ➢ SOLD THREE WHOLLY-OWNED COMMUNITIES CONTAINING 758 APARTMENT HOMES AND ≈ 35,000 SQ. FT. OF COMMERCIAL SPACE ➢ ACTIVITY REFLECTS DIVERSITY OF MARKET CONDITIONS AND BUYER PROFILES BASED ON LOCATION AND ASSET SPECIFIC CHARACTER
Slide 15: 12th Annual ESG Report Highlights Our Progress
12TH ANNUAL ESG REPORT HIGHLIGHTS OUR PROGRESS TOWARD CREATING A BETTER WAY TO LIVE SCIENCE-BASED TARGETS SOLAR SITES REDUCTION IN SCOPE 1 REDUCTION IN SCOPE 3 REDUCTION SINCE 2017 REDUCTION SINCE 2017 ACTIVATED AS OF & 2 GHG EMISSIONS PER GHG EMISSIONS PER BASELINE YEAR BASELINE YEAR IN 2022 YEAR-E
Slide 16: Key Takeaways
KEY TAKEAWAYS ➢ Q2 AND YEAR-TO-DATE PERFORMANCE EXCEEDED OUR EXPECTATIONS ➢ SUPPLY OUTLOOK FOR AVB ESTABLISHED REGIONS PROJECTED TO BE FAVORABLE AS COMPARED TO SUNBELT REGIONS ➢ FULL YEAR PROJECTED CORE FFO PER SHARE MIDPOINT INCREASED; UPWARD REVISIONS TO SAME STORE RESIDENTIAL RENTAL REVENUE AND N
Slide 17: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS ➢ This presentation dated July 31, 2023 is provided in connection with AvalonBay’s second quarter 2023 earnings conference call on August 1, 2023. This presentation is intended to accompany AvalonBay’s earnings release dated August 1, 2023 and should be read in conjunction
Slide 18: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS AVB Established Regions include markets located in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. AVB Expansion Regions include markets loca
Slide 19: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
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 20: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Q2 Q2 YTD YTD 2023 2022 2023 2022 Net income attributable to common stockholders 367,923 138,691 514,825 400,735 Depreciation - real estate assets, including joint venture adjustments 199,197 198,493 402,477 399,145 Distr
Slide 21: 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 the U.S. Fund. (3) Amounts are the expected credit losses a
Slide 22: 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 23: 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 24: 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 25: 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
Slide 26: AvalonBay Communities
AvalonBay COMMUNITIES