Multifamily communities developer AvalonBay Communities Inc. (AVB) reported Wednesday that its third-quarter funds from operations declined from last year hurt by higher expenses and lower rental revenue due to a decrease in economic occupancy and a decrease in average rental rates, but still topped analysts' expectations by a penny. The company also forecast its funds from operations or FFO for the fourth-quarter and full-year of 2009 well below analysts' estimates.
AvalonBay Communities develops, redevelops, acquires and manages high-quality apartment communities in the high barrier-to-entry markets of the U.S. These markets are located in the Northeast, Mid-Atlantic, Midwest, Pacific Northwest and Northern and Southern California regions of the country.
As of June 30, 2009, AvalonBay owned or held an interest in 174 apartment communities containing 50,511 apartment homes in ten states and the District of Columbia, of which 12 communities were under construction and seven communities were under reconstruction. In addition, the company holds future development rights for 26 communities.
Third Quarter Results
The Alexandria, Virginia-based company said that its funds from operations for the third-quarter of 2009 declined to $87.74 million or $1.09 per share from $99.01 million or $1.28 per share in the year-ago quarter. On average, 21 analysts polled by Thomson Reuters expected per share FFO of $1.08 per share for the third quarter. Analysts' estimates typically exclude special items.
The company's net income for the quarter was $58.15 million or $0.72 per share, about 75% lower than $233.58 million or $2.98 per share in the prior-year quarter.
Total revenues for the quarter increased 3.1% to $222.05 million from $215.39 million in the same quarter last year. Ten Wall Street analysts had a consensus revenue estimate of $214.98 million for the quarter.
For established communities, rental revenue decreased 4.8% due to a decrease in economic occupancy of 0.2% and a decrease in average rental rates of 4.6%. The total revenue for established communities was $153.2 million, a decline of 4.7% from the year-ago quarter.
Among AvalonBay's peers, Denver, Colorado-based Apartment Investment & Management Co. (AIV) is scheduled to announce financial results for the third on Friday, October 30, 2009. Analysts expect the company to report per share FFO of $0.39 for the third quarter, on revenues of $310.79 million.
Other Metrics
Total operating expenses for the quarter rose 7.4% to $87.57 million from $81.56 million in the year-ago quarter. Net interest expenses were $41.21 million, up 45.3% from $28.36 million in the prior-year quarter. Depreciation expense grew 12.9% to $54.96 million from $48.70 million in the same quarter last year.
Earlier in the month, AvalonBay declared a quarterly cash dividend on its common stock of $0.8925 per share, payable on October 15, to all common stockholders of record as of September 28, 2009.
Outlook
Looking ahead, the company expects FFO per share to be in a range of $0.61 to $0.65 for the fourth quarter of 2009, well below the analysts' estimate of $0.97 per share.
AvalonBay also forecast earnings in a range of $0.53 to $0.57 per share for the fourth-quarter.
For fiscal 2009, the company slashed its FFO outlook to $3.86 - $3.90 per share range from its prior FFO outlook of $4.15 to $4.30 per share. Analysts are looking for FFO per share of $4.19.
AvalonBay also trimmed its earnings forecast for the year to $2.07 - $2.11 per share range from its previous earnings guidance of $2.70 to $2.85 per share.
Further, the company noted that revenue from established communities is expected to decline by 5.756% to 6.25% for fiscal 2009. This compares to the 3.5%-4.5% decline incorporated into the previous outlook.
Stock Quote
AVB closed Wednesday's regular trading session at $69.78, down $2.96 or 4.07% on a volume of 1.96 million shares, higher than the three-month average volume of 1.71 million shares. In the past 52-week period, the stock has been trading in a range of $38.34 to $78.75.
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