Analyst Note| Kevin Brown, CFA |
Third-quarter results for AvalonBay Communities were slightly ahead of our expectations, though we didn't see anything in the quarter that would materially change our $205 fair value estimate for the no-moat company. Same-store occupancy remained flat at 96.2% in the third quarter, in line with our expectations. Same-store rental rates fell 2.2% year-over-year, though that was slightly better than our estimate of a 5.1% decline. Same-store revenue increased only 1.0% while same-store expenses increased 3.5%, leading to same-store net operating income falling 0.3%, though that was better than the 2.5% drop we had expected. While flat same-store NOI led to AvalonBay reporting core funds from operations of $2.06 in the third quarter that was in line with the figure reported in the third quarter of 2020, the higher-than-anticipated same-store revenue growth led to core FFO being 8 cents above our estimate and 10 cents above management's own third-quarter guidance provided back in July.