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AvalonBay Communities Inc AVB

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Rent Concessions, Uncollectible Revenue, and Higher Expenses Lead to Q4 Miss for AvalonBay

Kevin Brown Equity Analyst

Analyst Note

| Kevin Brown |

AvalonBay ended 2020 with another disappointing quarter, though nothing in the fourth-quarter earnings release significantly changes our long-term view or $194 fair value estimate for the no-moat company. The one bright spot in the quarter was occupancy for the established portfolio increasing 140 basis points sequentially to 94.4%, far better than our estimate of a 50-basis-point decline. However, rate growth fell far more than we had anticipated, down 7.0% year over year compared with our estimate of a 2.7% decline. The difference is due almost entirely to significant rent concessions and recognition of uncollectible lease revenue, both of which should be short term. Still, same-store residential revenue declined 7.6%, while operating expenses, driven by high marketing costs and high repair costs that had been deferred from earlier in the year, rose 5.8%. As a result, portfolio net operating income fell 14.3%, while core funds from operations fell 16.9% year over year in the fourth quarter to $2.02 per share.

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Company Profile

Business Description

AvalonBay Communities owns a portfolio of 275 apartment communities with over 75,000 units and is developing 22 additional properties with over 7,500 units. The company focuses on owning large, high-quality properties in major metropolitan areas of New England, New York/New Jersey, Washington D.C., California, and the Pacific Northwest.

4040 Wilson Boulevard, Suite 1000
Arlington, VA, 22203
T +1 703 329-6300
Sector Real Estate
Industry REIT - Residential
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Hard Assets
Employees 3,090