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AvalonBay (AVB) Beats Q1 FFO Estimates on Solid NOI Growth

Zacks Equity Research

AvalonBay Communities, Inc.’s AVB first-quarter 2019 core funds from operations (FFO) per share of $2.30 surpassed the Zacks Consensus Estimate of $2.28. The figure also mirrors an improvement of 5.5% from the year-ago reported tally of $2.18.

Results indicate growth in average rental rates though economic occupancy went south.

Total revenues of $566.2 million were up 1.0% year over year. However, the revenue figure missed the Zacks Consensus Estimate of $579.2 million.

Quarter in Detail   

In the reported quarter, average rental rates were up 3.5% year over year, while economic occupancy edged down 0.1%. Revenues from established communities improved 3.5% year over year to $460.3 million. This indicates increase in average rental rates.

Operating expenses for established communities flared up 0.2% on a year-over-year basis. Consequently, NOI from established communities increased 4.9% year over year to around $331.5 million.

During the first quarter, the company acquired the Ridge at Wheatlands, in Aurora, CO, comprising 338 apartment homes for $91.25 million. The company sold Oakwood Arlington, a wholly-owned operating community in Arlington, VA, for $70 million, leading to a gain of $16.38 million in accordance with GAAP.

Further, during the quarter, the company completed the development of two communities — Avalon at the Hingham Shipyard II, in Hingham, MA; and Avalon Sudbury, in Sudbury, MA. Aggregating 440 apartment homes, these communities were constructed for a total capital cost of $152 million.

As of Mar 31, 2019, AvalonBay had 19 communities under construction (expected to contain in total 6,170 apartment homes and 87,000 square feet of retail space), which will likely be accomplished for a projected total capital cost of $2.23 billion.

Balance-Sheet Position

As of Mar 31, 2019, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility. The company had around $195.2 million in unrestricted cash and cash in escrow as of the same date.

Moreover, the company sold 755,054 shares of common stock at average sales price of $198.26 per share, reaping net proceeds of $147.5 million under its current continuous equity program established in December 2015.

In Conclusion

AvalonBay is expected to benefit from its high-quality assets in premium locations, favorable demographics, household formation, healthy economy and job-market growth. Nonetheless, new apartment deliveries are anticipated to remain elevated in the company’s markets in the near-to-mid term, limiting robust rent growth.

AvalonBay currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AvalonBay Communities, Inc. Price, Consensus and EPS Surprise
 

AvalonBay Communities, Inc. Price, Consensus and EPS Surprise | AvalonBay Communities, Inc. Quote

We now look forward to the earnings releases of other residential REITs like UDR Inc. UDR, Mid-America Apartment Communities, Inc. MAA and Apartment Investment and Management Company AIV or commonly known as “Aimco”. UDR is slated to release first-quarter earnings on Apr 30, while Mid-America Apartment Communities and Aimco will report on May 1 and May 2, respectively.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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