AvalonBay Communities, Inc. Announces Second Quarter 1999 Operating Results
ALEXANDRIA, Va., July 19 -- AvalonBay Communities, Inc. (NYSE: AVB; PCX) reported today that Funds from Operations (``FFO'') for the quarter ended June 30, 1999 was $50,559,000 or $.77 per share (diluted) compared to $28,314,000 or $.70 per share (diluted) for the comparable period of 1998, a per share increase of approximately 10.0%. For the six month period ended June 30, 1999, FFO was $99,419,000 or $1.52 per share (diluted) compared to $48,050,000 or $1.38 per share (diluted) for the comparable period of 1998, a per share increase of approximately 10.1%. AvalonBay Communities, Inc. (the ``Company'') is the surviving corporation from the merger (the ``Merger'') of Avalon Properties, Inc. (``Avalon'') with and into the Company (sometimes hereinafter referred to as ``Bay'' before the Merger) on June 4, 1998. The 1999 results reflect the operating results of the surviving corporation. The 1998 results reflect the operating results of Bay through June 4, 1998 and reflect the results of the Merger after that date.
The Company will hold a conference call on July 20, 1999 at 11:00 a.m. Eastern Time to review these results. The domestic and international number to call to participate is 888-836-6071. To hear a replay of this call, please call 888-266-2086 - Access Code: 1667269.
Operating Results for the Quarter Ended June 30, 1999 Compared to the Prior Year Period
Total revenue increased by $52,702,000, or 75.1% to $122,895,000, and earnings before interest, income taxes, depreciation and amortization (``EBITDA'') increased by $33,168,000 or 76.0% to $76,797,000. The overall increase in revenue and EBITDA is primarily attributable to the Merger of Avalon with and into the Company on June 4, 1998. Newly developed, redeveloped and acquired communities as well as operating improvements related to Established Communities also contributed to the overall increase in revenue and EBITDA. Established Communities consist of all communities owned by Bay with stabilized occupancy levels and operating costs at January 1, 1998, and on a pro forma basis, those communities owned by Avalon at January 1, 1998 with stabilized occupancy levels and operating costs as of that date, such that a comparison of 1998 operating results to 1999 operating results is meaningful. Net income available to common stockholders was $24,218,000 or $.37 per share (diluted) compared to $13,748,000 or $.34 per share (diluted) for the prior year period.
For Established Communities, on a pro forma basis, average rental rates
increased 4.9%, economic occupancy declined .9%, resulting in rental revenue
growth of 4.0%.
Total revenue increased $2,394,000 to $64,671,000.
Operating
expenses increased $596,000 or 3.4%.
Accordingly, net operating income
increased by $1,798,000 or 4.0%.
Expense growth was adversely impacted by a
change in an accounting policy whereby the threshold for capitalization of
community improvements for the west coast portfolio was increased from $5,000
per occurrence to $15,000 per occurrence.
Had this change occurred as of
January 1, 1998, operating expenses would have increased by approximately
$360,000 or 1.3%, and net operating income would have increased by 4.9%.
The
table that follows summarizes the percentage change in second quarter 1999
operating results for Established Communities, on a pro forma basis, by region
compared to the prior year period (positive percentage changes relate to
increases, whereas negative percentage changes relate to decreases):
Established Communities Operating Results by Region
Percentage Change in 2Q99 Compared to 2Q98
Average
Number Rental Economic Rental Operating
of homes Rates Occupancy Revenue Expenses NOI
No. California 6,461 4.2% (2.2%) 2.0% (0.7%) 2.9%
So. California 600 8.0% 1.2% 9.2% 6.6% 10.7%
Northeast 5,248 4.7% (0.3%) 4.4% 4.5% 3.8%
Mid-Atlantic 5,631 5.7% 0.2% 5.9% 6.9% 5.5%
Midwest 498 5.6% (1.8%) 3.8% 4.4% 3.2%
Operating Results for the Six Months Ended June 30, 1999 Compared to the Prior Year Period
Total revenue increased by $125,853,000, or 108.9% to $241,454,000, and earnings before interest, income taxes, depreciation and amortization (``EBITDA'') increased by $77,605,000 or 106.9% to $150,224,000. Net income available to common stockholders was $34,080,000 or $.52 per share (diluted) compared to $22,698,000 or $.66 per share (diluted) for the prior year period. The six months ended June 30, 1999 results include non-recurring charges totaling $16,590,000 primarily attributable to certain management and other organizational changes announced in the first quarter of 1999.
For Established Communities, on a pro forma basis, average rental rates increased 4.8%, economic occupancy declined .6%, resulting in rental revenue growth of 4.2%. Total revenue increased $5,093,000 to $127,985,000. Operating expenses increased $1,552,000 or 4.5%. Accordingly, net operating income increased by $3,541,000 or 4.0%. Year to date operating expenses were adversely impacted by the change in accounting for community improvements. Had this change occurred as of January 1, 1998, operating expenses would have increased by approximately $720,000 or 2.4%, and net operating income would have increased by 4.9%. The table that follows summarizes the percentage change in the six months ended June 30, 1999 operating results for Established Communities, on a pro forma basis, by region compared to the prior year period (positive percentage changes relate to increases, whereas negative percentage changes relate to decreases):
Established Communities Operating Results by Region
Percentage Change in YTD 99 Compared to YTD 98
Average
Number Rental Economic Rental Operating
of homes Rates Occupancy Revenue Expenses NOI
No. California 6,461 4.3% (2.3%) 2.0% 3.0% 1.6%
So. California 600 8.9% 0.9% 9.8% 2.8% 13.6%
Northeast 5,248 4.8% 0.4% 5.2% 4.7% 4.9%
Mid-Atlantic 5,631 5.6% 0.4% 6.0% 6.2% 5.9%
Midwest 498 5.5% (1.6%) 3.9% 5.9% 2.3%
Development and Redevelopment Activity
During the second quarter, three new development communities, Rosewalk at Waterford Park II and Avalon on the Alameda (both located in San Jose, California area) and Avalon Oaks (located in the Boston, Massachusetts area) were completed containing 665 apartment homes for a total investment of approximately $99.5 million. The Company expects these communities to reach stabilized occupancy during the third and fourth quarters of 1999 with an average estimated yield of 10.7%.
Also during the second quarter, one redevelopment community, Avalon Westhaven (located in the Seattle, Washington area) was completed containing 190 apartment homes for a total investment in redevelopment of approximately $3.4 million. The Company expects this community to reach stabilized occupancy during the third quarter of 1999 with an average estimated yield of 9.1%.
The development of two new communities commenced during the second quarter that will contain 424 apartment homes (located in the Boston, Massachusetts and Northern New Jersey areas) for a projected investment of approximately $62.4 million. Also during the second quarter, redevelopment on two existing communities that contain 694 apartment homes (located in the Chicago, Illinois and Orange County, California areas) commenced. The projected investment in redevelopment on these redevelopment communities is approximately $13.6 million.
Disposition Activity
During the second quarter, the Company sold five existing communities. Estimated net proceeds from the sale of the communities, which contain a total of 1,536 apartment homes, were approximately $104.2 million. The proceeds will be re-deployed to development and redevelopment communities currently under construction or reconstruction. These dispositions were previously disclosed by the Company in a press release dated July 12, 1999.
Financing Activity
Although there was no capital markets activity during the second quarter, the Company priced an offering of $150,000,000 of unsecured notes with a maturity of 10 years at an interest rate of 7.57%. Settlement is scheduled for Friday, July 23, 1999.
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, currently owns or holds an ownership interest in 137 apartment communities containing 39,739 apartment homes in sixteen states and the District of Columbia, of which thirteen communities are under construction and twelve 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, President and 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 matters detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 under the heading ``Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements''. Management generally considers Funds from Operations (``FFO'') to be an appropriate measure of the operating performance of the Company because it provides investors an understanding of the ability of the Company to incur and service debt and to make capital expenditures. FFO is determined in accordance with a definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts which may differ from the methodology for computing FFO used by other REITs, and, accordingly, the Company's calculation of FFO may not be comparable to such other REITs.
Earnings Release Attachments
Earnings Release Attachments (``the Attachments'') will no longer be included in the fax distribution. The Attachments will be available via the Company's web site. To access the Attachments through the Company's web site at http://www.avalonbay.com , select ``Press Releases'' under ``Investors Corner'' or select ``2nd Quarter Earnings Release'' on the AvalonBay Communities home page. If you would like to receive future press releases via e-mail, please register through the Company's web site at http://www.avalonbay.com/website/PressRegistration.nsf .
AvalonBay Communities, Inc
Company Profile at June 30, 1999
(Dollars in thousands except per share data)
Selected Operating Information:
Q2 99 Q2 98 % Change
Funds from Operations $ 50,559 $ 28,314 78.6%
Per common share - basic $ 0.78 $ 0.71 9.9%
Per common share - diluted $ 0.77 $ 0.70 10.0%
Net income available to common
stockholders $ 24,218 $ 13,748 76.2%
Per common share - basic $ 0.37 $ 0.35 5.7%
Per common share - diluted $ 0.37 $ 0.34 8.8%
Dividends declared - common $ 33,071 $ 32,420 2.0%
Per common share $ 0.51 $ 0.51 0.0%
Total EBITDA $ 76,797 $ 43,629 76.0%
Average shares outstanding - basic 65,355,505 39,628,200
Average shares outstanding - diluted 65,868,570 40,345,983
Selected Operating Information:
YTD 99 YTD 98 % Change
Funds from Operations $ 99,419 $ 48,050 106.9%
Per common share - basic $ 1.53 $ 1.41 8.5%
Per common share - diluted $ 1.52 $ 1.38 10.1%
Net income available to common
stockholders $ 34,080 $ 22,698 50.1%
Per common share - basic $ 0.52 $ 0.68 (23.5%)
Per common share - diluted $ 0.52 $ 0.66 (21.2%)
Dividends declared - common $ 65,766 $ 43,423 51.5%
Per common share $ 1.02 $ 0.93 9.7%
Total EBITDA $ 150,224 $ 72,619 106.9%
Average shares outstanding - basic 65,079,447 34,190,165
Average shares outstanding - diluted 65,563,727 34,930,243
End