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AvalonBay (AVB) Withdraws 2020 Guidance on Coronavirus Scare

Zacks Equity Research

The coronavirus outbreak has been wreaking havoc on the global economy for the past couple of months, the residential REIT sector being no exception.  In regard to that, AvalonBay Communities, Inc. AVB recently informed its stakeholders about the actions being taken to tackle this volatile situation.

Like its residential REIT counterparts, Mid-America Apartment Communities, Inc MAA and Apartment Investment and Management Company AIV, AvalonBay has withdrawn its full-year 2020 guidance, and does not intend to issue one until any further clarity on the economic conditions. Earlier, the company had projected its core FFO per share at $9.62-$10.02. This was based on the assumptions of established communities’ revenue growth of 2.2-3.2%, operating expense rise of 1.3-2.3%, and NOI expansion of 2.5-3.5%.

AvalonBay also apprised of its operating position by reporting that for the two-month period ended Feb 29, 2020, the total rental revenues from established communities grew 3.2% year over year. Moreover, for the week ended Mar 22, 2020, it had a physical occupancy rate of 96.1% for established communities compared with 95.8% in the same week of March 2019.

AvalonBay informed that its liquidity position is solid. The company drew $750 million from its $1.75-billion credit facility, which matures on Feb 28, 2024. In total, the company had access to liquidity of $1.8 billion. Furthermore, the company has no commercial paper program, at present. It also noted that it had about $68 million of secured debt maturities and amortization in 2020. For 2021, the secured and unsecured maturities with amortization totaled $328 million.

While providing the investment updates, AvalonBay stated that this year it has not commenced construction activities for any new development communities, and the future actions will be based on economic conditions. The company ended 2019 with 22 development communities under construction. Out of these, three are almost complete, four have been suspended and for the remaining 15, activities have slowed substantially. Further, AvalonBay expects to expend about $400 million during the remainder of 2020 and another $400 million in 2021 for these activities.

Apart from the above-mentioned financial updates, AvalonBay announced certain additional steps to deal with this pandemic. These include minimizing in-person contact, increased cleaning protocols and allowing maintenance associates access to protective equipment. For its residents, the company has followed suit of other notable Residential REITs like Essex Property Trust, Inc. ESS and Equity Residential by halting evictions for residents for 90 days, curbing rent escalations and creating payment plans.

Shares of this Zacks Rank #3 (Hold) company have depreciated 32.9% so far this year, while its industry has declined 32.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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