AvalonBay: Earnings News Release AvalonBay Communities, Inc. For Immediate News Release January 19, 1999 AVALONBAY COMMUNITIES, INC. ANNOUNCES FOURTH QUARTER 1998 AND YEAR END OPERATING RESULTS (Alexandria, VA) AvalonBay Communities, Inc. (NYSE/PCX Symbol: AVB) reported today that Funds from Operations ("FFO") for the quarter ended December 31, 1998 was $48,610,000 or $.75 per share (diluted) compared to $18,329,000 or $.65 per share (diluted) for the comparable period of 1997, a per share increase of approximately 15.4%. For the twelve month period ended December 31, 1998, FFO was $144,152,000 or $2.87 per share (diluted) compared to $62,417,000 or $2.45 per share (diluted) for the comparable period of 1997, a per share increase of approximately 17.1%. The twelve month results for 1998 reflect the operating results of Bay Apartment Communities, Inc. ("Bay") through June 4, 1998 and reflect the results of the merger of Avalon Properties, Inc. ("Avalon") with and into Bay after that date, with Bay as the surviving corporation. In connection with the merger, Bay was renamed AvalonBay Communities, Inc. (the "Company"). The Company will hold a conference call on January 19, 1999 at 11:00 a.m. Eastern Time to review these results. The number to call to participate is (612) 332-0630. To hear a replay of this call, please call (USA) 1-(800) 475-6701 or (international) 1-(320) 365-3844 - Access Code: 422486. Operating Results for the Quarter Ended December 31, 1998 Compared to the Prior Year Period Total revenue increased by $82,153,000 or 219.7% to $119,542,000 and earnings before interest, income taxes, depreciation and amortization ("EBITDA") increased by $51,069,000 or 215.4% to $74,774,000. The overall increase in revenue and EBITDA comes from a number of sources, including (listed in order of magnitude) the merger with Avalon on June 4, 1998, from newly developed, redeveloped and acquired communities and from Established Communities. Net income available to common stockholders was $22,091,000 or $.34 per share (basic and diluted) compared to $9,396,000 or $.37 per share (basic and diluted) for the prior year period. For Established Communities, on a pro forma basis, rental rates increased 5.3%, economic occupancy declined 0.6%, resulting in rental revenue growth of 4.7%. Total revenue increased $2,159,000 to $48,536,000. Operating expenses increased $236,000 or 1.7%. Accordingly, EBITDA increased by $1,923,000 or 5.9% and operating margins increased from 70% to 70.8%. These amounts are pro forma to include the East Coast Established Communities as if they were owned during both years. For the West Coast's Established Communities, rental rates increased 6.5%, economic occupancy declined 2.5%, resulting in rental revenue growth of 4.0%. Total revenue increased $743,000 to $19,578,000. Operating expenses increased $42,000 or 0.8%. Accordingly, EBITDA increased by $701,000 or 5.1% and operating margins increased from 73.2% to 74.0%. The West Coast's Established Communities portfolio is comprised of Bay's "same store" portfolio. The number of apartment homes included in the West Coast pool of Established Communities totals 5,702, all of which are located in the San Francisco Bay area. For the East Coast's Established Communities, rental rates increased 4.5%, economic occupancy increased 0.7%, resulting in rental revenue growth of 5.2%. Total revenue increased $1,416,000 to $28,958,000. Operating expenses increased $194,000 or 2.2%. Accordingly, EBITDA increased by $1,222,000 or 6.6% and operating margins increased from 67.7% to 68.6%. The East Coast's Established Communities portfolio is the former "same store" portfolio operated by Avalon. This is presented on a pro forma basis as if the Avalon communities were a component of the Company's Established Communities pool during 1997 and 1998. The number of apartment homes included in the pro forma pool of East Coast Established Communities totals 10,171. Operating Results for the Twelve Months Ended December 31, 1998 Compared to the Prior Year Period Total revenue increased $226,478,000 or 179.2% to $352,884,000 and EBITDA increased by $139,778,000 or 175.0% to $219,635,000. Net income available to common stockholders was $68,560,000 or $1.37 per share (diluted) compared to $31,461,000 or $1.40 per share (diluted) for the prior year period. Under the basic calculation, net income available to common stockholders was $1.39 per share compared to $1.40 per share for the prior year period. For Established Communities, on a pro forma basis, rental revenue increased 5.5%, which is attributable entirely to an increase in rental rates (economic occupancy did not change). Total revenue increased $10,018,000 to $191,874,000. Operating expenses increased $1,272,000 or 2.3%. Accordingly, EBITDA increased by $8,746,000 or 6.9% and operating margins increased from 69.5% to 70.5% For the West Coast's Established Communities, rental rates increased 7.4%, economic occupancy declined 0.6%, resulting in rental revenue growth of 6.8%. Total revenue increased $4,991,000 to $77,924,000. Operating expenses increased $327,000 or 1.6%. Accordingly, EBITDA increased by $4,664,000 or 8.8% and operating margins increased from 72.5% to 73.9%. For the East Coast's Established Communities, presented on a pro forma basis, rental rates increased 4.4%, economic occupancy increased 0.3%, resulting in rental revenue growth of 4.7%. Total revenue increased $5,027,000 to $113,950,000. Operating expenses increased $945,000 or 2.7%. Accordingly, EBITDA increased by $4,082,000 or 5.5% and operating margins increased from 67.5% to 68.1%. Development, Redevelopment and Acquisition Activity During the fourth quarter, the development of two new communities commenced that will contain 505 apartment homes for a projected investment of $60.5 million. Two new development communities were completed this quarter containing 1,170 apartment homes for a total investment of $163.1 million. Disposition Activity During the fourth quarter, the Company sold six existing communities. Proceeds from the sale of the communities, which contain a total of 1,779 apartment homes, were approximately $55 million. The proceeds will be re-deployed to development and redevelopment communities currently under construction or reconstruction. Financing Activity In early October, the Company issued $100 million of perpetual preferred stock with a dividend yield of 8.7%, which lowered the Company's debt to total market capitalization to 35.7% as of year end. About AvalonBay Communities, Inc. AvalonBay, named the NAHB Development Company of the year for 1998/1999 and the Property Management Company of the Year for 1996/1997, owns or holds an ownership interest in 141 apartment communities containing 41,173 apartment homes in sixteen states and the District of Columbia, of which presently fourteen communities are under construction and thirteen communities are under reconstruction. AvalonBay is an equity REIT in the business of developing, redeveloping, acquiring and managing multifamily apartment communities in high barrier-to-entry markets of the United States. More information on AvalonBay may be found on AvalonBay's Web Site at http://www.avalonbay.com. For additional information, please contact Richard L. Michaux, Chief Executive Officer at (703) 317-4602 or Thomas J. Sargeant, Chief Financial Officer at (703) 317-4635. This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained in this release are statements that involve risks and uncertainties, including, but not limited to, the demand for apartment homes, the effects of economic conditions, the impact of competition and competitive pricing, changes in construction costs, the results of financing efforts, potential acquisitions under agreement, the effects of the Company's accounting policies and other risks detailed in the Company's filings with the Securities and Exchange Commission. FFO is generally considered the primary earnings measure for equity REITs. FFO is calculated based on the revised definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") which may differ from the methodology for computing FFO used by other REITs, and, accordingly, may not be comparable to such other REITs. AVALONBAY COMMUNITIES, INC Company Profile at December 31, 1998 (Dollars in thousands except per share data) Selected Operating Information: Q4 98 Q4 97 % Change ----------- ----------- ---------- Funds from Operations $ 48,610 $ 18,329 165.2% Per common share - basic $ 0.75 $ 0.68 10.3% Per common share - diluted $ 0.75 $ 0.65 15.4% Net income available to common stockholders $ 22,091 $ 9,396 135.1% Per common share - basic $ 0.34 $ 0.37 (8.1%) Per common share - diluted $ 0.34 $ 0.37 (8.1%) Dividends declared - common $ 32,582 $ 10,953 197.5% Per common share $ 0.51 $ 0.42 21.4% EBITDA: Established Communities $ 14,495 $ 13,794 5.1% Other communities 67,452 12,183 453.7% Other income & expense (7,173) (2,272) 215.7% ----------- ----------- --------- Total EBITDA $ 74,774 $ 23,705 215.4% =========== =========== ========= Average shares outstanding - basic 64,486,472 25,258,094 Average shares outstanding - diluted 65,047,368 28,296,053 YTD 98 YTD 97 % Change ----------- ----------- ---------- Funds from Operations $ 144,152 $ 62,417 130.9% Per common share - basic $ 2.91 $ 2.57 13.2% Per common share - diluted $ 2.87 $ 2.45 17.1% Net income available to common stockholders $ 68,560 $ 31,461 117.9% Per common share - basic $ 1.39 $ 1.40 (0.7%) Per common share - diluted $ 1.37 $ 1.40 (2.1%) Dividends declared - common $ 108,484 $ 37,478 189.5% Per common share $ 1.95 $ 1.61 21.1% EBITDA: Established Communities $ 57,551 $ 52,887 8.8% Other communities 183,952 35,429 419.2% Other income & expense (21,868) (8,459) 158.5% ----------- ----------- ---------- Total EBITDA $ 219,635 $ 79,857 175.0% =========== =========== ========== Average shares outstanding - basic 49,488,868 22,472,394 Average shares outstanding - diluted 50,146,909 25,508,309 Copyright (c) 1999 AvalonBay Communities, Inc. All Rights Reserved Ends.