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AvalonBay (AVB) Lags Q2 FFO Estimates but Revenues Beat
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Backed by higher average rental rates, AvalonBay Communities, Inc.’s (AVB - Free Report) second-quarter 2016 core funds from operations (“FFO”) grew 8.6% from the year-ago tally to $2.03 per share. However, core FFO missed the Zacks Consensus Estimate of $2.09.
However, total revenue of this residential real estate investment trust (“REIT”) increased 9.8% year over year to $502.3 million on the back of higher revenues from development communities and established communities. The reported figure also surpassed the Zacks Consensus Estimate of $499 million.
Average rentals rates were up 5.2% year over year with the highest contribution made by the North California portfolio (8.7%), followed by South California (7.1%) and Pacific North West (7.0%).
Established Communities' Revenues Increase, Expenses Up
Revenues from established communities – those that have stabilized operations as of Jan 1, 2015 and are neither executing nor planning any significant redevelopment work within the current year – improved 4.9% year over year, as a 5.2% increase in average rental rates offset a 0.2% decrease in economic occupancy.
However, operating expenses for established communities increased 4.7% year over year. Consequently, net operating income from established communities rose 5% year over year to $267.3 million.
Solid Liquidity Position
As of Jun 30, 2016, AvalonBay had no borrowings outstanding under its $1.5 billion unsecured credit facility. The company had around $287.7 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for second-quarter 2016 was 5.1 times.
Notable Portfolio Activity
In May 2016, the company acquired Avalon Clarendon in Arlington, VA for a purchase price of $120.3 million. This property has 300 apartment homes and is part of a mixed-use development, including retail, residential, office and public parking. Notably, the acquisition of the mixed-use development was made in association with Regency Centers Corporation (REG - Free Report) , wherein AvalonBay bought all of the rights and obligations related to the residential component and Regency took over all of the rights and obligations associated with the other components.
Outlook
For third-quarter 2016, AvalonBay expects core FFO per share in the range of $2.05–$2.11. The Zacks Consensus Estimate for the quarter currently stands at $2.08.
For the full year, the company expects core FFO per share in the range of $8.13–$8.33. Presently, the Zacks Consensus Estimate is pegged at $8.39.
In Conclusion
Going forward, AvalonBay remains well poised for growth, aided by higher demand from household formation and favorable demographics. Yet, completion of a number of projects in its markets, leading to higher supply, keeps us concerned.
AvalonBay currently carries a Zacks Rank #2 (Buy).
Investors interested in the residential REIT industry can consider other stocks like Mid-America Apartment Communities, Inc. (MAA - Free Report) and Select Income REIT . Both the stocks carry the same Zacks Rank as AvalonBay.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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AvalonBay (AVB) Lags Q2 FFO Estimates but Revenues Beat
Backed by higher average rental rates, AvalonBay Communities, Inc.’s (AVB - Free Report) second-quarter 2016 core funds from operations (“FFO”) grew 8.6% from the year-ago tally to $2.03 per share. However, core FFO missed the Zacks Consensus Estimate of $2.09.
However, total revenue of this residential real estate investment trust (“REIT”) increased 9.8% year over year to $502.3 million on the back of higher revenues from development communities and established communities. The reported figure also surpassed the Zacks Consensus Estimate of $499 million.
Average rentals rates were up 5.2% year over year with the highest contribution made by the North California portfolio (8.7%), followed by South California (7.1%) and Pacific North West (7.0%).
Established Communities' Revenues Increase, Expenses Up
Revenues from established communities – those that have stabilized operations as of Jan 1, 2015 and are neither executing nor planning any significant redevelopment work within the current year – improved 4.9% year over year, as a 5.2% increase in average rental rates offset a 0.2% decrease in economic occupancy.
However, operating expenses for established communities increased 4.7% year over year. Consequently, net operating income from established communities rose 5% year over year to $267.3 million.
Solid Liquidity Position
As of Jun 30, 2016, AvalonBay had no borrowings outstanding under its $1.5 billion unsecured credit facility. The company had around $287.7 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for second-quarter 2016 was 5.1 times.
Notable Portfolio Activity
In May 2016, the company acquired Avalon Clarendon in Arlington, VA for a purchase price of $120.3 million. This property has 300 apartment homes and is part of a mixed-use development, including retail, residential, office and public parking. Notably, the acquisition of the mixed-use development was made in association with Regency Centers Corporation (REG - Free Report) , wherein AvalonBay bought all of the rights and obligations related to the residential component and Regency took over all of the rights and obligations associated with the other components.
Outlook
For third-quarter 2016, AvalonBay expects core FFO per share in the range of $2.05–$2.11. The Zacks Consensus Estimate for the quarter currently stands at $2.08.
For the full year, the company expects core FFO per share in the range of $8.13–$8.33. Presently, the Zacks Consensus Estimate is pegged at $8.39.
In Conclusion
Going forward, AvalonBay remains well poised for growth, aided by higher demand from household formation and favorable demographics. Yet, completion of a number of projects in its markets, leading to higher supply, keeps us concerned.
AvalonBay currently carries a Zacks Rank #2 (Buy).
Investors interested in the residential REIT industry can consider other stocks like Mid-America Apartment Communities, Inc. (MAA - Free Report) and Select Income REIT . Both the stocks carry the same Zacks Rank as AvalonBay.
AVALONBAY CMMTY Price, Consensus and EPS Surprise
AVALONBAY CMMTY Price, Consensus and EPS Surprise | AVALONBAY CMMTY Quote
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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