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AvalonBay (AVB) Beats on Q2 FFO & Revenues, Issues Strong View

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AvalonBay Communities, Inc.’s AVB second-quarter 2021 core funds from operations (FFO) per share of $1.98 beat the Zacks Consensus Estimate of $1.93.

Results were backed by the better-than-anticipated top-line figure. Improvement in same-store residential net operating income (NOI) and development and other stabilized residential NOI were the tailwinds.

Total revenues of $561.7 million exceeded the Zacks Consensus Estimate of $551.8 million.

However, core FFO per share dropped 11.2% from the prior-year period’s $2.23. Also, total revenues decreased 2.5% from the year-ago quarter, underlining the adverse impact of the pandemic.

As of Jul 27, 2021, collected residential revenues for the second quarter improved to 96.0% from 95.0% as of the end of second-quarter 2021. Collected residential revenues for July 2021 was 92.7% as of Jul 27.

The residential REIT has also issued an impressive view for the full year.

Quarter in Detail

In the reported quarter, same-store residential rental revenue decreased 4.7% year on year, operating expenses flared up 6%, and consequently, same-store residential NOI declined 9.2% to $333.4 million.

AvalonBay is tracking prospects in the new expansion markets of Dallas and Austin, TX, and Charlotte and Raleigh-Durham, NC.

During the April-June period, the company accomplished the development of four consolidated apartment communities. The communities contain 1,183 apartment homes and were constructed for $384 million.

As of Jun 30, 2021, AvalonBay had 14 consolidated development communities under construction (expected to contain 3,988 apartment homes and 43,000 square feet of commercial space). The estimated total capital cost at completion for these development communities is $1.55 billion.

In the June-end quarter, the company acquired a wholly-owned operating community containing 384 apartment homes in Linthicum Heights, MD — Avalon Arundel Crossing East — for $119 million. During the same period, the company sold six wholly-owned operating communities for $512.2 million, leading to an economic gain of $181.46 million.

During the second quarter, the company sold 16 of the 172 residential condominiums at The Park Loggia, in New York, NY, for gross proceeds of $38.4 million.

Balance Sheet Position

As of Jun 30, 2021, AvalonBay Communities did not have any borrowings outstanding under its $1.75-billion unsecured credit facility. The company had $487.1 million in unrestricted cash and cash in escrow, as of the same date. In addition, its annualized net debt-to-core EBITDAre for the April-June period was 5.3 times and unencumbered NOI was 94%.

Outlook

For third-quarter 2021, the company projects core FFO per share in the range of $1.91 and $2.01. The Zacks Consensus Estimate for the same is currently pinned at $1.97 and lies within the guided range. For the third quarter, the company expects same-store residential revenues to be down 1.1-0.5%, operating expense to flare up 3.2-3.8% and NOI to fall 3.6-2.4%.

For full-year 2021, the company expects core FFO per share in the range of $7.92 and $8.12, which higher than the Zacks Consensus Estimate of $7.84. For the full year, the company estimates same-store residential revenues to be down 3.7-2.7%, operating expense to shoot up up 2.8-3.8% and NOI to slip 7.2-5.2%.

AvalonBay Communities 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. Price, Consensus and EPS Surprise

AvalonBay Communities, Inc. price-consensus-eps-surprise-chart | AvalonBay Communities, Inc. Quote

Performance of Another Residential REIT

Equity Residential’s EQR second-quarter FFO per share of 78 cents outpaced the Zacks Consensus Estimate of 70 cents. Results highlighted robust physical occupancy and improvement in other same-store operating metrics, driving quarterly sequential same-store revenues and NOI positive for the first time since the onset of the global health crisis. Based on these improvements, the residential REIT also raised its full-year guidance for same-store revenues, NOI and FFO per share.

We now look forward to the earnings releases of other REITs — Vornado Realty Trust VNO and Realty Income Corporation O — both of which are slated to release quarterly numbers on Aug 2.

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


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