Avalonbay Communities, Inc. · NYSE:AVB
Avalonbay Communities — Q2 2024 Earnings Presentation
29 slides from Avalonbay Communities's earnings presentation, Aug 1, 2024
Slide 1: Investor Teleconference Presentation, Second Quarter 2024
Avalon Princeton Circle Princeton, NJ AVA Esterra Park INVESTOR TELECONFERENCE PRESENTATION Redmond, WA Second Quarter 2024 August 1, 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: Key Takeaways
KEY TAKEAWAYS ➢ 2Q RESULTS EXCEEDED EXPECTATIONS; INCREASED OUTLOOKS FOR FY CORE FFO PER SHARE, SAME STORE RESIDENTIAL REVENUE AND NOI GROWTH ➢ DRIVING INCREMENTAL REVENUE AND EFFICIENCIES VIA OPERATING MODEL TRANSFORMATION ➢ LEASE-UPS OUTPERFORMING INITIAL EXPECTATIONS AND PROVIDING INCREMENTAL EAR
Slide 5: Review of 2Q and 1H 2024 Results and Activity
REVIEW OF 2Q AND 1H 2024 RESULTS AND ACTIVITY 2Q AND 1H 2024 RESULTS AND ACTIVITY 2Q 1H CORE FFO PER SHARE YEAR-OVER-YEAR GROWTH 4.1% 4.6% SAME STORE RESIDENTIAL REVENUE YEAR-OVER-YEAR GROWTH 3.2% 3.7% DEVELOPMENT COMPLETIONS | WTD. AVG. PROJECTED INITIAL STABILIZED YIELD(1) $ 350M | 7.7% $ 350M | 7
Slide 6: 2Q Core FFO per Share Outperformance Driven by Same Store Portfolio
2Q CORE FFO PER SHARE OUTPERFORMANCE PRIMARILY DRIVEN BY BETTER-THAN-EXPECTED RESULTS FROM THE SAME STORE PORTFOLIO COMPONENTS OF SECOND QUARTER 2024 CORE FFO PER SHARE OUTPERFORMANCE $2.80 (4) $0.02 $2.77 $0.02 REVENUES $0.02 $2.70 EXPENSES(2) $0.03 $2.68 $2.60 OUTLOOK(1) SAME STORE OTHER RESIDENTI
Slide 7: Updated Full Year 2024 Outlook
UPDATED FULL YEAR 2024 OUTLOOK FULL YEAR 2024 CURRENT PRIOR INITIAL OUTLOOK SUMMARY(1) OUTLOOK OUTLOOK OUTLOOK PROJECTED CORE FFO PER SHARE GROWTH 3.7% 2.6% 1.4% SAME STORE RESIDENTIAL REVENUE GROWTH 3.5% 3.1% 2.6% OPERATING EXPENSE GROWTH 4.8% 5.4% 5.6% NET OPERATING INCOME GROWTH 2.9% 2.1% 1.25% D
Slide 8: Upward Revision to Full Year Projected Core FFO per Share
UPWARD REVISION TO FULL YEAR PROJECTED CORE FFO PER SHARE DRIVEN BY STRONGER SAME STORE NOI FORECAST COMPONENTS OF INCREASE TO 2024 FULL YEAR PROJECTED CORE FFO PER SHARE BASED ON THE MIDPOINT OF THE OUTLOOK RANGES $11.10 $0.03 $11.02 (1) $0.10 PRIOR $10.85 OUTLOOK, $10.91 INITIAL OUTLOOK, $10.78 $1
Slide 9: 3Q Projected Core FFO per Share Impacted Sequentially by Seasonal Expenses
3Q PROJECTED CORE FFO PER SHARE IMPACTED SEQUENTIALLY BY SEASONAL INCREASE IN SAME STORE EXPENSES AND DISPOSITION TIMING COMPONENTS OF Q2 2024 CORE FFO PER SHARE TO Q3 2024 PROJECTED CORE FFO PER SHARE CHANGE BASED ON THE MIDPOINT OF THE OUTLOOK RANGE $2.90 $0.05 ($0.09) $2.75 $2.77 $0.03 Column1, (
Slide 10: Portfolio Trends Strengthened in 2Q and Remain Healthy Early in 3Q
PORTFOLIO TRENDS STRENGTHENED IN 2Q AND REMAIN HEALTHY EARLY IN 3Q 2024 SAME STORE RESIDENTIAL 1 TURNOVER REMAINED WELL 2 …WHICH SUPPORTED BELOW HISTORICAL LEVELS… HEALTHY OCCUPANCY… ANNUALIZED TURNOVER ECONOMIC OCCUPANCY 80% 97% 50% 95% 20% 93% JAN FEB MAR APR MAY JUN JUL JAN FEB MAR APR MAY JUN JU
Slide 11: Full Year Same Store Revenue Forecast Increase Driven by Stronger Effective Lease Rates
FULL YEAR SAME STORE REVENUE FORECAST INCREASE DRIVEN BY STRONGER EFFECTIVE LEASE RATES… YEAR-OVER-YEAR 2024 SAME STORE COMPONENTS OF FULL YEAR 2024 SAME STORE RESIDENTIAL REVENUE GROWTH RESIDENTIAL REVENUE GROWTH INCREASE 4.5% ACTUAL | PROJECTED BASED ON THE MIDPOINT OF THE OUTLOOK RANGE 3.0% 4% 1.
Slide 12: New England, Mid-Atlantic and Pacific Northwest Outperforming
…WITH NEW ENGLAND, THE MID-ATLANTIC AND PACIFIC NORTHWEST OUTPERFORMING MOST SIGNIFICANTLY CURRENT AND PRIOR 2024 FULL YEAR SAME STORE RESIDENTIAL REVENUE GROWTH PROJECTION BY REGION 6% 3% - CURRENT AVB ESTABLISHED REGIONS(1) AVB EXPANSION REGIONS(1) MIDPOINT CURRENT MIDPOINT 3.6% CURRENT MIDPOINT 1
Slide 13: Continued Progress on Operating Model Transformation
CONTINUED PROGRESS ON OPERATING MODEL TRANSFORMATION; $10M OF PROJECTED INCREMENTAL NOI IN 2024 $ 80M INCREMENTAL NOI TARGET(1) 2024 PRIORITIES AVALON CONNECT NEIGHBORHOOD STAFFING MODEL TOTAL $ 80M 80 HORIZON 2 EXPAND BULK INTERNET INCREASE DEPLOYMENT OF $ 25M AND SMART ACCESS OFFERING MAINTENANCE
Slide 14: Lease-Ups Continue to Exceed Expectations
LEASE-UPS CONTINUE TO EXCEED EXPECTATIONS LEASE-UP SUMMARY(1) CURRENT INITIAL VARIANCE 6 COMMUNITIES | ≈ $ 920M IN PROJ. TOTAL CAPITAL COST PROJECTION PROJECTION WTD. AVG. MONTHLY REVENUE PER HOME $ 3,250 $ 2,930 $ 320 | 11% WTD. AVG. PROJECTED INITIAL STABILIZED YIELD(2) 6.0% 5.6% 40 BPS AVALON BOT
Slide 15: Increasing Start Activity to Over $1B
INCREASING START ACTIVITY TO OVER $1B, CONCENTRATED IN THE EAST COAST AND IN AVB EXPANSION REGIONS PREDOMINANTLY IN SUBURBAN SUBMARKETS PROJECTED 2024 DEVELOPMENT STARTS GEOGRAPHIC ALLOCATION BASED ON TOTAL CAPITAL COST 9 $1.05B 6.4% EXPANSION, COMMUNITIES PROJECTED WTD. AVG. EAST, 44% TOTAL PROJECT
Slide 16: Over $500M in YTD Disposition Proceeds; Recycling Capital
OVER $500M IN YTD DISPOSITION PROCEEDS; RECYCLING CAPITAL INTO EXPANSION REGIONS AT ATTRACTIVE BASIS GEOGRAPHIC ALLOCATION 2024 YEAR-TO-DATE DISPOSITION ACTIVITY 2024 TRANSACTION ACTIVITY (1) $515M $475K AGGREGATE PRICE PER HOME SALES PROCEEDS 2024 YEAR-TO-DATE ACQUISITION ACTIVITY $225M $260K AGGRE
Slide 17: 13th Annual ESG Report Highlights Leadership and Impact
13TH ANNUAL ESG REPORT HIGHLIGHTS LEADERSHIP AND IMPACT 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 2023 YEAR-END 2023 SQUARE FOOT BY 2030
Slide 18: AvalonBay Communities
AvalonBay COMMUNITIES
Slide 19: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS ➢ This presentation dated July 31, 2024 is provided in connection with AvalonBay’s second quarter 2024 earnings conference call on August 1, 2024. This presentation is intended to accompany AvalonBay’s earnings release dated July 31, 2024 and should be read in conjunction
Slide 20: 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 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 Q2 Q2 YTD YTD 2024 2023 2024 2023 Net income attributable to common stockholders $ 253,934 $ 367,923 $ 427,383 $ 514,825 Depreciation - real estate assets, including joint venture adjustments 206,338 199,197 417,685 402,4
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) Amount for 2023 is for the Company's recognition of its promoted interest in Archstone Multifamily Partners AC LP. (3) Changes are the e
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 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
Slide 25: 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 release in the Company’s outlook, are calculated on a basis consistent with historical FFO and Core FFO, and are therefore considered to be appropriate supplem
Slide 26: 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 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 27: Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS Redevelopment is composed of consolidated communities where substantial redevelopment is in progress or is probable to begin during the current year. Redevelopment is considered substantial when (i) capital invested durin
Slide 28: 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 29: AvalonBay Communities
AvalonBay COMMUNITIES
AvalonBay Communities — Q2 2024 Earnings Presentation on 6ix