AvalonBay (AVB) Q4 FFO Beats Estimates, Dividend Raised
AvalonBay Communities AVB reported a fourth-quarter 2023 core funds from operations (FFO) per share of $2.74, beating the Zacks Consensus Estimate of $2.73. Moreover, the figure climbed 5.8% from the prior-year quarter’s tally.
The quarterly results reflect a year-over-year increase in same-store residential rental revenues. The same-store average rental revenue per occupied home reported a rise, though occupancy declined.
Total revenues in the quarter came in at $704.7 million, outpacing the Zacks Consensus Estimate of $701.7 million. The figure increased 5.2% on a year-over-year basis.
For the full-year 2023, the core FFO per share came in at $10.63, higher than the prior-year tally of $9.79 and beating the Zacks Consensus Estimate of $10.62. This was backed by a 6.7% increase in total revenues to $2.77 billion.
Quarter in Detail
In the reported quarter, same-store residential rental revenues increased 4.5% year over year to $636.3 million. Same-store residential operating expenses rose 6.2% to $195.9 million. As a result, the same-store residential NOI climbed 3.8% to $440.8 million from the prior-year period.
Same-store average rental revenue per occupied home rose to $2,967 in the fourth quarter, up from $2,962 in the third quarter of 2023 and $2,833 in the year-ago quarter. While the same-store economic occupancy of 95.6% shrunk 10 basis points (bps) sequentially and 20 bps year over year. Our estimate for the metric was the same as reported.
As of Dec 31, 2023, AvalonBay had 17 consolidated development communities under construction (expected to contain 6,064 apartment homes and 59,000 square feet of commercial space). The estimated total capital cost of these development communities at completion is $2.49 billion.
Portfolio Activity
In the fourth quarter, AVB acquired two wholly-owned communities, namely, Avalon Mooresville in Mooresville, NC, comprising 203 apartment homes for $52.1 million and Avalon West Plano in Carrollton, TX, with 568 apartment homes for $142 million.
During the reported quarter, AVB sold Avalon Mamaroneck, a wholly-owned community containing 229 apartment homes, in Mamaroneck, NY, for $104 million, resulting in a gain in accordance with GAAP of $77.9 million.
Balance Sheet
AVB had $397.9 million in unrestricted cash and cash equivalents and $96 million in restricted cash as of Dec 31, 2023. As of the same date, the company did not have any borrowings outstanding under its $2.25 billion unsecured revolving credit facility and $500 million unsecured commercial paper note program.
Additionally, its annualized net debt-to-core EBITDAre for the October-December period was 4.2 times, and the unencumbered NOI for the year ended Dec 31, 2023, was 95%.
2024 Outlook
For first-quarter 2024, AvalonBay expects core FFO per share in the range of $2.56-$2.66.
For the full year, AVB expects core FFO per share between $10.53 and $11.03, indicating a 1.4% increase at the midpoint of $10.78. The Zacks Consensus Estimate presently stands at $11.00, within the projected range.
Management expects same-store residential revenue growth of 1.6-3.6% and an operating expense increase of 4.5-6.7%. Consequently, same-store residential NOI is projected to expand 0.0-2.5%.
Dividend Raise
Concurrent with its fourth-quarter earnings release, AvalonBay increased its first-quarter 2024 dividend to $1.70 per share from the $1.65 paid in the prior quarter. This represented a sequential hike of 3%. The new dividend will be paid out on Apr 15 to shareholders on record as of Mar 28, 2024.
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-eps-surprise-chart | AvalonBay Communities, Inc. Quote
Performance of Another Residential REIT
Equity Residential EQR reported a fourth-quarter 2023 normalized FFO per share of $1.00, which was in line with the Zacks Consensus Estimate. The rental income of $727.5 million narrowly missed the consensus mark of $727.6 million.
EQR's results reflect healthy same-store revenue performance.
Upcoming Earnings Releases
We now look forward to the earnings releases of residential REITs like Mid-America Apartment Communities, Inc. MAA and Essex Property Trust, Inc. ESS.
MAA and ESS are scheduled to come up with their results on Feb 7 and Feb 6, respectively.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
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