Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide an understanding of our business, financial condition and results of operations. This MD&A should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under "Forward-Looking Statements" included in this report. Actual results or developments could differ materially from those projected in such statements as a result of the factors described under "Forward-Looking Statements" as well as the risk factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "Form 10-K") and in Part II, Item 1A. "Risk Factors" in this report.
Capitalized terms used without definition have the meanings provided elsewhere in this Form 10-Q.
Executive Overview Business Description We develop, redevelop, acquire, own and operate multifamily apartment communities inNew England , theNew York /New Jersey metro area, the Mid-Atlantic, thePacific Northwest , and Northern andSouthern California , as well as in our expansion markets ofRaleigh-Durham andCharlotte, North Carolina ,Southeast Florida ,Dallas andAustin, Texas , andDenver, Colorado . We focus on leading metropolitan areas that we believe historically have been characterized by growing employment in high wage sectors of the economy, higher cost of home ownership and a diverse and vibrant quality of life. We believe these market characteristics have offered and will continue in the future to offer the opportunity for superior risk-adjusted returns over the long-term on apartment community investments relative to other markets that do not have these characteristics. We seek to create long-term shareholder value by accessing capital on cost effective terms; deploying that capital to develop, redevelop and acquire apartment communities in our selected markets; leveraging our scale and competencies in technology and data science to operate apartment communities; and selling communities when they no longer meet our long-term investment strategy or when pricing is attractive. Our strategic vision is to be the leading apartment company in selectU.S. markets, providing a range of distinctive living experiences that customers value. We pursue this vision by targeting what we believe are among the best markets and submarkets, leveraging our strategic capabilities in market research and consumer insight and being disciplined in our capital allocation and balance sheet management. Our communities are predominately upscale and generally command among the highest rents in their markets. However, we also pursue the ownership and operation of apartment communities that target a variety of customer segments and price points, consistent with our goal of offering a broad range of products and services. We regularly evaluate the market allocation of our investments by current market value and share of total revenue and NOI, as well as relative asset value and submarket positioning.
Third Quarter 2021 Operating Highlights
•Net income attributable to common stockholders for the three months endedSeptember 30, 2021 was$78,914,000 , a decrease of$68,789,000 , or 46.6%, as compared to the prior year period. The decrease is primarily due to a decrease in gains on consolidated real estate dispositions, an increase in depreciation expense and loss on extinguishment of debt in the current year period, partially offset by an increase in NOI from our Development communities. •Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential revenue ("Residential"), for the three months endedSeptember 30, 2021 was$342,896,000 , a decrease of$923,000 , or 0.3%, from the prior year period. The decrease was due to an increase in Residential property operating expenses of$5,772,000 , or 3.5%, over the prior year period, partially offset by an increase in Residential rental revenues of$5,067,000 , or 1.0%, over the prior year period. 26 -------------------------------------------------------------------------------- Table of Contents COVID-19 Pandemic We have taken various actions in response to the COVID-19 pandemic to adjust our business operations and to address the health and safety of our residents and associates. We adopted varying measures to help mitigate the financial impact on our residents, including providing flexible lease renewal options, creating payment plans for residents who are unable to pay their rent because they are impacted by COVID-19 and, in certain jurisdictions, waiving late fees and certain other customary fees associated with apartment rentals. To the extent still implemented, we may discontinue these measures at any time except where required by law. The impact on our consolidated results of operations from COVID-19 for 2021 and periods beyond will depend, among other factors, on (i) the effect on the multifamily industry and the general economy of measures taken by businesses and the government to prevent the spread of the novel coronavirus and relieve economic distress of consumers, such as governmental limitations on the ability of multifamily owners to evict residents who are delinquent in the payment of their rent and (ii) the preferences of consumers and businesses for living and working arrangements both during and after the pandemic. The COVID-19 pandemic continues to affect our rental operations, including revenues and expenses, as well as our collections and associated outstanding receivables. For further discussion see "Results of Operations." The following table presents the percentage of (i) apartment base rent charged to residents and (ii) other rentable items, such as parking and storage rent, along with pet and other fees in accordance with residential leases, that has been collected, including$14,128,000 of aggregate rent relief payments received under Emergency Rental Assistance Programs, of which$11,235,000 was received during the three months endedSeptember 30, 2021 , ("Collected Residential Revenue") for our 2021 Same Store communities for the three months endedJune 30, 2020 ,September 30, 2020 ,December 31, 2020 ,March 31, 2021 ,June 30, 2021 andSeptember 30, 2021 (unaudited). Collected Residential Revenue excludes transactional and other fees. At quarter end (1)(2) At October 31, 2021 (3)(4) Q2 2020 95.4% 98.4% Q3 2020 95.1% 98.0% Q4 2020 94.7% 97.8% Q1 2021 94.7% 97.7% Q2 2021 95.0% 98.0% Q3 2021 95.8% 97.3%
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(1)Collections presented reflect our 2021 Same Store communities and exclude commercial revenue, which was 0.5% and 1.0% of our 2020 and 2019 Same Store total revenue, respectively. (2)The Collected Residential Revenue percentage as of the last day in the respective quarter. (3)The percentage of Collected Residential Revenue as ofOctober 31, 2021 . (4)Collected Residential Revenue forOctober 2021 atOctober 31, 2021 was 94.0%. The collection rates are based on resident activity as reflected in our property management systems and are presented to provide information about collections trends during the COVID-19 pandemic. Prior to the COVID-19 pandemic, the collections information provided was not routinely produced for internal use by senior management or publicly disclosed by the Company and is a result of analysis that is not subject to internal controls over financial reporting. This information is not prepared in accordance with GAAP, does not reflect GAAP revenue or cash flow metrics and may be subject to adjustment in preparing GAAP revenue and cash flow metrics. Additionally, this information should not be interpreted as predicting the Company's financial performance, results of operations or liquidity for any period. AtSeptember 30, 2021 , our outstanding rent receivable balance for residential and commercial tenants, net of reserves, remained consistent withDecember 31, 2020 at approximately$18,200,000 .
Third Quarter 2021 Development Highlights
At
•15 wholly-owned communities under construction, which are expected to contain 4,645 apartment homes with a projected total capitalized cost of$1,863,000,000 , and two unconsolidated communities under construction, which are expected to contain 803 apartment homes with a projected total capitalized cost of$386,000,000 . •Land or rights to land on which we expect to develop an additional 22 apartment communities that, if developed as expected, will contain 7,376 apartment homes and will be developed for an aggregate total capitalized cost of$3,019,000,000 . 27
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Third Quarter 2021 Real Estate Transaction Highlights
During the three months ended
During the three months ended
•The Nexus Lakeside, located inFlower Mound, TX , which contains 425 apartment homes and 18,000 square feet of commercial space and was acquired for a purchase price of$117,000,000 . •HubSouth End , located inCharlotte, NC , which contains 265 apartment homes and 23,000 square feet of commercial space and was acquired for a purchase price of$104,350,000 .
•Three30Five, located in
InOctober 2021 , we acquired Curv located inFort Lauderdale, FL , containing 243 apartment homes and 49,000 square feet of commercial space that is 100% leased toWhole Foods Market , for a purchase price of$150,000,000 .
Communities Overview
Our real estate investments consist primarily of current operating apartment communities ("Current Communities"), consolidated and unconsolidated communities in various stages of development ("Development" communities and "Unconsolidated Development " communities) and Development Rights (as defined below). Our Current Communities are further classified as Same Store communities, Other Stabilized communities, Lease-Up communities, Redevelopment communities and Unconsolidated communities. While we generally establish the classification of communities on an annual basis, we update the classification of communities during the calendar year to the extent that our plans with regard to the disposition or redevelopment of a community change. The following is a description of each category:
Current Communities are categorized as Same Store, Other Stabilized, Lease-Up, Redevelopment, or Unconsolidated according to the following attributes:
•Same Store is composed of consolidated communities in the markets where we have a significant presence (New England ,New York /New Jersey , Mid-Atlantic,Southeast Florida ,Denver, Colorado ,Pacific Northwest , and Northern andSouthern California ), and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy as of the beginning of the respective prior year period. For the nine month periods endedSeptember 30, 2021 and 2020, Same Store communities are consolidated for financial reporting purposes, had stabilized occupancy as ofJanuary 1, 2020 , are not conducting or are not probable to conduct substantial redevelopment activities and are not held for sale as ofSeptember 30, 2021 or probable for disposition to unrelated third parties within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment. •Other Stabilized is composed of completed consolidated communities that we own, which have stabilized occupancy, as defined above, as ofJanuary 1, 2021 , or which were acquired subsequent toJanuary 1, 2020 . Other Stabilized excludes communities that are conducting or are probable to conduct substantial redevelopment activities within the current year, as defined below.
•Lease-Up is composed of consolidated communities where construction has been complete for less than one year and that do not have stabilized occupancy.
•Redevelopment is composed of consolidated communities where substantial redevelopment is in progress or is probable to begin during the current year. Redevelopment is considered substantial when (i) capital invested during the reconstruction effort is expected to exceed the lesser of$5,000,000 or 10% of the community's pre-redevelopment basis and (ii) physical occupancy is below or is expected to be below 90% during, or as a result of, the redevelopment activity. 28 -------------------------------------------------------------------------------- Table of Contents •Unconsolidated is composed of communities that we have an indirect ownership interest in through our investment interest in an unconsolidated joint venture. Development is composed of consolidated communities that are either currently under construction, or were under construction and were completed during the current year. These communities may be partially or fully complete and operating.Unconsolidated Development is composed of communities that are either currently under construction, or were under construction and were completed during the current year, in which we have an indirect ownership interest through our investment interest in an unconsolidated joint venture. These communities may be partially or fully complete and operating. Development Rights are development opportunities in the early phase of the development process where we either have an option to acquire land or enter into a leasehold interest, where we are the buyer under a long-term conditional contract to purchase land, where we control the land through a ground lease or own land to develop a new community, or where we are the designated developer in a public-private partnership. We capitalize related pre-development costs incurred in pursuit of new developments for which we currently believe future development is probable.
We currently lease our corporate headquarters located in
29 -------------------------------------------------------------------------------- Table of Contents As ofSeptember 30, 2021 , communities that we owned or held a direct or indirect interest in were classified as follows: Number of Number of communities apartment homes Current Communities Same Store: New England 37 9,536 Metro NY/NJ 42 12,008 Mid-Atlantic 39 13,645 Southeast Florida 4 1,214 Denver, CO 4 1,086 Pacific Northwest 16 4,217 Northern California 39 11,831 Southern California 57 16,761Total Same Store 238 70,298 Other Stabilized: New England 3 703 Metro NY/NJ 4 1,742 Mid-Atlantic 1 384 North Carolina 2 429 Southeast Florida - - Texas 1 425 Denver, CO - - Pacific Northwest 3 1,012 Northern California 1 289 Southern California - - Total Other Stabilized 15 4,984 Lease-Up 12 3,752 Redevelopment 1 344 Unconsolidated 10 2,590 Total Current 276 81,968 Development 15 4,645 Unconsolidated Development 2 803 Total Communities 293 87,416 Development Rights 22 7,376 30
-------------------------------------------------------------------------------- Table of Contents Results of Operations As discussed above under "Executive Overview - COVID-19 Pandemic" and elsewhere in this report, the COVID-19 pandemic continues to affect our business, and may continue to do so. See also Part II, Item 1A, "Risk Factors." Our year-over-year operating performance is primarily affected by both overall and individual geographic market conditions and apartment fundamentals and is reflected in changes in Same Store NOI; NOI derived from acquisitions, development completions and development under construction and in lease-up; loss of NOI related to disposed communities; and capital market and financing activity. A comparison of our operating results for the three and nine months endedSeptember 30, 2021 and 2020 follows (unaudited, dollars in thousands). For the three months ended For the nine months ended 9/30/2021 9/30/2020 $ Change % Change 9/30/2021 9/30/2020 $ Change % Change Revenue: Rental and other income$ 580,079 $ 566,387 $ 13,692 2.4 %$ 1,691,273 $ 1,742,509 $ (51,236) (2.9) % Management, development and other fees 695 1,017 (322) (31.7) % 2,380 2,950 (570) (19.3) % Total revenue 580,774 567,404 13,370 2.4 % 1,693,653 1,745,459 (51,806) (3.0) % Expenses: Direct property operating expenses, excluding property taxes 122,691 119,064 3,627 3.0 % 353,905 333,998 19,907 6.0 % Property taxes 72,332 68,934 3,398 4.9 % 212,518 202,973 9,545 4.7 % Total community operating expenses 195,023 187,998 7,025 3.7 % 566,423 536,971 29,452 5.5 % Corporate-level property management and other indirect operating expenses (26,013) (24,845) (1,168) 4.7 % (76,472) (72,993) (3,479) 4.8 % Expensed transaction, development and other pursuit costs, net of recoveries (417) (567) 150 (26.5) % (1,900) (4,289) 2,389 (55.7) % Interest expense, net (55,987) (53,249) (2,738) 5.1 % (164,704) (162,562) (2,142) 1.3 % (Loss) gain on extinguishment of debt, net (17,890) 105 (17,995) N/A (1) (17,768) (9,333) (8,435) 90.4 % Depreciation expense (193,791) (175,348) (18,443) 10.5 % (561,560) (529,508) (32,052) 6.1 % General and administrative expense (17,313) (13,985) (3,328) 23.8 % (53,130) (46,878) (6,252) 13.3 % Casualty and impairment loss (1,940) - (1,940) 100.0 % (3,117) - (3,117) 100.0 % Income from investments in unconsolidated entities 6,867 5,083 1,784 35.1 % 32,959 6,770 26,189 386.8 % Gain on sale of communities 58 31,607 (31,549) (99.8) % 388,354 91,338 297,016 325.2 % Gain on other real estate transactions, net 1,543 129 1,414 1,096.1 % 2,002 328 1,674 510.4 % Net for-sale condominium activity 158 (646) 804 N/A (1) (1,402) 4,162 (5,564) N/A (1) Income before income taxes 81,026 147,690 (66,664) (45.1) % 670,492 485,523 184,969 38.1 % Income tax (expense) benefit (2,179) 27 (2,206) N/A (1) (1,434) 1,069 (2,503) N/A (1) Net income 78,847 147,717 (68,870) (46.6) % 669,058 486,592 182,466 37.5 % Net loss (income) attributable to noncontrolling interests 67 (14) 81 N/A (1) 32 (90) 122 N/A (1) Net income attributable to common stockholders$ 78,914 $ 147,703 $ (68,789) (46.6) %$ 669,090 $ 486,502 $ 182,588 37.5 %
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(1)Percent change is not meaningful.
Net income attributable to common stockholders decreased$68,789,000 , or 46.6%, to$78,914,000 and increased$182,588,000 , or 37.5%, to$669,090,000 for the three and nine months endedSeptember 30, 2021 as compared to the prior year periods. The decrease for the three months endedSeptember 30, 2021 is primarily due to a decrease in gains on consolidated real estate dispositions, an increase in depreciation expense and loss on extinguishment of debt in the current year period, partially offset by an increase in NOI from our Development communities. The increase for the nine months endedSeptember 30, 2021 is primarily due to an increase in gains on consolidated and unconsolidated real estate dispositions in the current year period, partially offset by a decrease in Same Store NOI and an increase in depreciation expense in the current year period. 31 -------------------------------------------------------------------------------- Table of Contents NOI is considered by management to be an important and appropriate supplemental performance measure to net income because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easier comparison of the operating performance of individual assets or groups of assets. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impact to overhead as a result of acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. We define NOI as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, expensed transaction, development and other pursuit costs, net of recoveries, interest expense, net, loss (gain) on extinguishment of debt, net, general and administrative expense, income from investments in unconsolidated entities, depreciation expense, corporate income tax expense (benefit), casualty and impairment loss, gain on sale of communities, gain on other real estate transactions, net, net for-sale condominium activity and net operating income from real estate assets sold or held for sale. NOI does not represent cash generated from operating activities in accordance with GAAP, and NOI should not be considered an alternative to net income as an indication of our performance. NOI should also not be considered an alternative to net cash flow from operating activities, as determined by GAAP, as a measure of liquidity, nor is NOI indicative of cash available to fund cash needs. Residential NOI represents results attributable to the Company's apartment rental operations, including parking and other ancillary residential revenue. Reconciliations of NOI and Residential NOI for the three and nine months endedSeptember 30, 2021 and 2020 to net income for each period are as follows (unaudited, dollars in thousands): For the three months ended For the nine months ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 Net income$ 78,847
25,322 23,837 74,110 70,043
Expensed transaction, development and other pursuit costs, net of recoveries
417 567 1,900 4,289 Interest expense, net 55,987 53,249 164,704 162,562 Loss (gain) on extinguishment of debt, net 17,890 (105) 17,768 9,333 General and administrative expense 17,313 13,985 53,130 46,878 Income from investments in unconsolidated entities (6,867) (5,083) (32,959) (6,770) Depreciation expense 193,791 175,348 561,560 529,508 Income tax expense (benefit) 2,179 (27) 1,434 (1,069) Casualty and impairment loss 1,940 - 3,117 - Gain on sale of communities (58) (31,607) (388,354) (91,338) Gain on other real estate transactions, net (1,543) (129) (2,002) (328) Net for-sale condominium activity (158) 646 1,402 (4,162) Net operating income from real estate assets sold or held for sale (2,373) (14,686) (17,393) (47,798) NOI 382,687 363,712 1,107,475 1,157,740 Commercial NOI (1) (6,823) (4,362) (17,868) (13,131) Residential NOI$ 375,864 $ 359,350 $ 1,089,607 $ 1,144,609
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(1)Represents results attributable to the non-apartment components of our mixed-use communities and other non-residential operations ("Commercial").
The Residential NOI changes for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods, consist of changes in the following categories (unaudited, dollars in thousands): For the three months For the nine months ended ended 9/30/2021 9/30/2021 Same Store $ (923) $ (89,197) Other Stabilized 2,968 6,137 Development / Redevelopment 14,469 28,058 Total $ 16,514 $ (55,002) 32
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Rental and other income increased$13,692,000 , or 2.4%, and decreased$51,236,000 , or 2.9%, for the three and nine months endedSeptember 30, 2021 compared to the prior year periods. The increase for the three months endedSeptember 30, 2021 is primarily due to additional rental income generated from development completions and development under construction and in lease-up, as well as increased occupancy at our Same Store communities, partially offset by decreased rental rates. The decrease for the nine months endedSeptember 30, 2021 is primarily due to decreased rental rates, amortization of concessions at our Same Store communities and decreased rental income from dispositions, partially offset by additional rental income generated from development completions and development under construction and in lease-up, as well as increased occupancy at our Same Store communities.
Results for the three and nine months ended
•For the three months ended
•For the nine months endedSeptember 30, 2021 , uncollectible lease revenue improved by$739,000 , composed of a decrease of$6,599,000 for Commercial revenue, partially offset by an increase of$5,860,000 for Residential revenue, compared to the prior year period. As a result of the pandemic, we increased our use of residential concessions during 2020 and the three and nine months endedSeptember 30, 2021 relative to concessions granted prior to 2020. The increased concessions, which are amortized on a straight-line basis over the life of the respective leases (generally one year), contributed to the overall decline in our rental revenue during the three and nine months endedSeptember 30, 2021 and will continue to impact rental revenue throughout 2021. The amortization of residential concessions for our consolidated communities increased by$10,474,000 and$41,268,000 in the three and nine months endedSeptember 30, 2021 , respectively, as compared to the prior year periods, and the remaining net unamortized balance of residential concessions as ofSeptember 30, 2021 was$26,802,000 . As discussed elsewhere in this report, the COVID-19 impact and related economic, regulatory and operating impacts are likely to continue to adversely affect our rental revenue. If job losses in our markets and nationally reoccur, this would likely decrease our ability to maintain and/or increase rents and/or maintain occupancy at our historical levels. Deteriorating financial conditions among our residents and commercial tenants, as well as regulations that limit our ability to evict residents and tenants, may continue to result in higher than normal uncollectible lease revenue. The pandemic may also continue to depress demand among consumers for our apartments for a variety of other reasons, including the following: consumers whose income has declined, who are working from home remotely or who cannot freely access neighborhood amenities like restaurants, gyms and entertainment venues, may decide during the pandemic to live in markets or submarkets that are less costly than ours; low interest rates that are caused by government response to the pandemic may encourage consumers who would otherwise rent to seek out home ownership; and various sources of demand for our apartments (e.g., students, corporate apartment homes, seasonal job-related demand as in the entertainment industry) may remain below pre-pandemic levels. Consolidated Communities - The weighted average number of occupied apartment homes for consolidated communities decreased to 75,354 apartment homes for the nine months endedSeptember 30, 2021 , compared to 78,727 homes for the prior year period. The weighted average monthly rental revenue per occupied apartment home increased to$2,491 for the nine months endedSeptember 30, 2021 compared to$2,456 in the prior year period.
Same Store rental revenue increased
•Residential rental revenue increased$5,067,000 , or 1.0%, and decreased$68,917,000 , or 4.4%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. The increase for the three month endedSeptember 30, 2021 was partially due to a reduction in uncollectible lease revenue of$7,369,000 and the decrease for the nine months endedSeptember 30, 2021 was partially due to an increase in uncollectible lease revenue for$4,245,000 . See below for a table detailing the change in Same Store Residential rental revenue by market for the nine months endedSeptember 30, 2021 , including the attribution of the change between rental rates and Economic Occupancy (as defined below). •Commercial rental revenue increased$1,532,000 , or 37.5%, and$3,403,000 , or 29.2%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. The increase in Commercial revenue was due in part to a reduction in uncollectible lease revenue of$1,777,000 and$4,799,000 , for the three and nine months endedSeptember 30, 2021 , respectively. 33
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The following table presents the change in Same Store Residential rental revenue for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods (unaudited): For the three months
ended For the nine months ended
9/30/2021 9/30/2021 Residential rental revenue Lease rates (1.8) % (3.2) % Concessions and other discounts (1.8) % (2.3) % Economic Occupancy 3.2 % 1.3 % Other rental revenue - % 0.1 % Uncollectible lease revenue 1.4 % (0.3) % Total Residential rental revenue 1.0 % (4.4) % The following table presents the change in Same Store Residential rental revenue, including the attribution of the change between rental rates and Economic Occupancy for the nine months endedSeptember 30, 2021 (unaudited). For the nine months ended September 30, 2021 Residential rental revenue (000s) Average rental rates Economic Occupancy (1) $ Change % Change % Change
% Change
2021 to 2021 to 2021 to 2021 to 2021 2020 2020 2020 2021 2020 2020 2021 2020 2020New England $ 224,173 $ 231,308 $ (7,135) (3.1) %$ 2,722 $ 2,861 (4.9) % 96.0 % 94.2 % 1.8 % Metro NY/NJ 315,285 323,011 (7,726) (2.4) % 3,031 3,158 (4.0) % 96.2 % 94.6 % 1.6 % Mid-Atlantic 249,693 259,575 (9,882) (3.8) % 2,138 2,242 (4.6) % 95.1 % 94.3 % 0.8 %Southeast Florida 23,055 21,771 1,284 5.9 % 2,191 2,151 1.9 % 96.3 % 92.3 % 4.0 %Denver, CO 17,573 15,757 1,816 11.5 % 1,863 1,724 8.1 % 96.5 % 93.1 % 3.4 %Pacific Northwest 78,513 82,525 (4,012) (4.9) % 2,167 2,278 (4.9) % 95.5 % 95.5 % - %Northern California 267,709 305,751 (38,042) (12.4) % 2,620 3,042 (13.9) % 96.0 % 94.5 % 1.5 %Southern California 328,242 333,462 (5,220) (1.6) % 2,252 2,314 (2.7) % 96.6 % 95.5 % 1.1 %Total Same Store $ 1,504,243 $ 1,573,160 $ (68,917) (4.4) %$ 2,476 $ 2,627 (5.7) % 96.0 % 94.7 % 1.3 %
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(1) Economic occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community's gross revenue. Economic occupancy is defined as gross potential revenue less vacancy loss, as a percentage of gross potential revenue. Gross potential revenue is determined by valuing occupied homes at leased rates and vacant homes at market rents. Vacancy loss is determined by valuing vacant units at current market rents. Direct property operating expenses, excluding property taxes, increased$3,627,000 , or 3.0%, and$19,907,000 , or 6.0%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. The increases for the three and nine months endedSeptember 30, 2021 are primarily due to the addition of newly developed apartment communities, as well as the timing of repairs and maintenance projects previously delayed due to the COVID-19 pandemic. Same Store Residential direct property operating expenses, excluding property taxes, represents 99.9% of total Same Store operating expenses for the three and nine months endedSeptember 30, 2021 . Residential direct property operating expenses, excluding property taxes, increased$3,175,000 , or 3.0%, and$14,328,000 , or 4.8%, for the three and nine months endedSeptember 30, 2021 compared to the prior year periods. The increases for the three and nine months endedSeptember 30, 2021 are primarily due to the timing of repairs and maintenance projects previously delayed due to the COVID-19 pandemic. 34 -------------------------------------------------------------------------------- Table of Contents Property taxes increased$3,398,000 , or 4.9%, and$9,545,000 , or 4.7%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. The increases for the three and nine months endedSeptember 30, 2021 are primarily due to the addition of newly developed apartment communities and increased assessments for the Company's stabilized portfolio, partially offset by decreased property taxes from dispositions. Same Store Residential property taxes represents 98.8% of total Same Store property taxes for the three and nine months endedSeptember 30, 2021 . Residential property taxes increased$2,597,000 , or 4.3%, and$5,480,000 , or 3.1%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. The increases for the three and nine months endedSeptember 30, 2021 are primarily due to increased assessments across the portfolio and the expiration of certain property tax incentive programs inNew York City in the current year periods. Corporate-level property management and other indirect operating expenses increased$1,168,000 , or 4.7%, and$3,479,000 , or 4.8%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods, primarily due to increased compensation related costs and costs related to an increased investment in technology initiatives to improve efficiency in services for resident and prospects in the current year periods. Expensed transaction, development and other pursuit costs, net of recoveries primarily reflect costs incurred for development pursuits not yet considered probable for development, as well as the abandonment of Development Rights and costs related to abandoned acquisition and disposition pursuits and any recoveries of costs incurred. These costs can be volatile, particularly in periods of increased acquisition pursuit activity, periods of economic downturn or when there is limited access to capital, and therefore may vary significantly from year to year. In addition, the timing for recoveries will not always align with the timing for expensing an abandoned pursuit. Expensed transaction, development and other pursuit costs, net of recoveries, decreased$150,000 , or 26.5%, and$2,389,000 , or 55.7%, for the three and nine months endedSeptember 30, 2021 as compared to the prior year periods. Interest expense, net increased$2,738,000 , or 5.1%, and$2,142,000 , or 1.3%, for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. This category includes interest costs offset by capitalized interest pertaining to development and redevelopment activity, amortization of premium/discount on debt, interest income and any mark to market impact from derivatives not in qualifying hedge relationships. The increases for the three and nine months endedSeptember 30, 2021 were primarily due to a decrease in capitalized interest and an increase in the amount of unsecured indebtedness, partially offset by lower overall effective rates on unsecured indebtedness and a combination of a decrease in variable rates on, and amounts of, secured indebtedness. Loss (gain) on extinguishment of debt, net reflects prepayment penalties, the write-off of unamortized deferred financing costs, premiums/discounts and deferred hedging losses, from our debt repurchase and retirement activity, or payments to acquire our outstanding debt at amounts above or below the carrying basis of the debt acquired. The losses of$17,890,000 and$17,768,000 for the three and nine months endedSeptember 30, 2021 , respectively, and$9,333,000 for the nine months endedSeptember 30, 2020 , were due to the repayments of unsecured debt during the periods. Depreciation expense increased$18,443,000 , or 10.5%, and$32,052,000 , or 6.1%, for the three and nine months endedSeptember 30, 2021 , as compared to the prior year periods, primarily due to depreciation at a portion of a current operating community that will be taken out of service in conjunction with the development of an adjacent apartment community and the addition of newly developed and acquired apartment communities, partially offset by dispositions. General and administrative expense ("G&A") increased$3,328,000 , or 23.8%, and$6,252,000 , or 13.3%, for the three and nine months endedSeptember 30, 2021 , as compared to the prior year periods, primarily due to increases in compensation related expenses, including executive transition costs, in the current year periods. Casualty and impairment loss for the three and nine months endedSeptember 30, 2021 of$1,940,000 and$3,117,000 , consists of a$1,971,000 charge recognized for the damages across several communities in ourEast Coast markets related to severe storms. The loss for the nine months endedSeptember 30, 2021 , also consists of a$1,146,000 charge recognized for the property and casualty damages resulting from a fire at an operating community. Income from investments in unconsolidated entities increased$1,784,000 and$26,189,000 for the three and nine months endedSeptember 30, 2021 , as compared to the prior year periods, due to unrealized gains on property technology investments recognized in the current year periods, partially offset by the gain on the sale of a community inArchstone Multifamily Partners AC LP (the "U.S. Fund ") in the prior year periods. The increase for the nine months endedSeptember 30, 2021 was also due to the gain on the sale of the final two communities inArchstone Multifamily Partners AC JV LP (the "AC JV"). 35 -------------------------------------------------------------------------------- Table of Contents Gain on sale of communities decreased by$31,549,000 and increased by$297,016,000 for the three and nine months endedSeptember 30, 2021 , compared to the prior year periods. The amount of gain realized in a given period depends on many factors, including the number of communities sold, the size and carrying value of the communities sold and the market conditions in the local area. Net for-sale condominium activity is a net gain of$158,000 and net expense of$1,402,000 for the three and nine months endedSeptember 30, 2021 and a net expense of$646,000 and net gain of$4,162,000 for the three and nine months endedSeptember 30, 2020 , and is comprised of the net gain before taxes on the sale of condominiums at The Park Loggia and associated marketing, operating and administrative costs. During the three and nine months endedSeptember 30, 2021 , we sold 17 and 43 residential condominiums at The Park Loggia, for gross proceeds of$54,277,000 and$107,278,000 , resulting in gains in accordance with GAAP of$1,345,000 and$2,051,000 , respectively. During the three and nine months endedSeptember 30, 2020 , we sold seven and 59 residential condominiums at The Park Loggia for gross proceeds of$15,699,000 and$182,512,000 , resulting in gains in accordance with GAAP of$727,000 and$8,174,000 , respectively. In addition, we incurred$1,187,000 and$1,373,000 for the three months endedSeptember 30, 2021 and 2020, respectively, and$3,453,000 and$4,012,000 for the nine months endedSeptember 30, 2021 and 2020, respectively, in marketing, operating and administrative costs.
Reconciliation of Non-GAAP Financial Measures
Consistent with the definition adopted by theBoard of Governors of the National Association of Real Estate Investment Trusts® ("Nareit"), we calculate Funds from Operations Attributable to Common Stockholders ("FFO") as net income or loss attributable to common stockholders computed in accordance with GAAP, adjusted for: •gains or losses on sales of previously depreciated operating communities; •cumulative effect of change in accounting principle; •impairment write-downs of depreciable real estate assets; •write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates; •depreciation of real estate assets; and •similar adjustments for unconsolidated partnerships and joint ventures, including those from a change in control. FFO and FFO adjusted for non-core items, or "Core FFO," as defined below, are generally considered by management to be appropriate supplemental measures of our operating and financial performance. In calculating FFO, we exclude gains or losses related to dispositions of previously depreciated property and exclude real estate depreciation, which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates. FFO can help one compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered by us to be part of our core business operations, Core FFO allows one to compare the core operating performance of the Company between periods. We believe that in order to understand our operating results, FFO and Core FFO should be examined with net income as presented in our Condensed Consolidated Financial Statements included elsewhere in this report.
We calculate Core FFO as FFO, adjusted for:
•joint venture gains (if not adjusted through FFO), non-core costs and promoted interests from partnerships; •casualty and impairment losses or gains, net on non-depreciable real estate; •gains or losses from early extinguishment of consolidated borrowings; •development pursuit write-offs and expensed transaction costs, net of recoveries; •third-party business interruption insurance proceeds and the related lost NOI that is covered by the expected third party business interruption insurance proceeds; •property and casualty insurance proceeds and legal settlement activity; •gains or losses on sales of assets not subject to depreciation and other investment gains or losses; •advocacy contributions, representing payments to promote our business interests; •hedge ineffectiveness or gains or losses from derivatives not designated as hedges for accounting purposes; •severance related costs; •executive transition compensation costs; •net for-sale condominium activity, including gains, marketing, operating and administrative costs and imputed carry cost; •income taxes; and •other non-core items. 36
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FFO and Core FFO do not represent net income in accordance with GAAP, and therefore should not be considered an alternative to net income, which remains the primary measure, as an indication of our performance. In addition, FFO and Core FFO as calculated by other REITs may not be comparable to our calculations of FFO and Core FFO. The following is a reconciliation of net income attributable to common stockholders to FFO attributable to common stockholders and to Core FFO attributable to common stockholders (unaudited, dollars in thousands, except per share amounts): For the three months ended For the nine months ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020
Net income attributable to common stockholders
192,435 174,505 558,006 527,491 Distributions to noncontrolling interests 12 12 36 36 Gain on sale of unconsolidated entities holding previously depreciated real estate - (5,157) (23,305) (5,157) Gain on sale of previously depreciated real estate (58) (31,607) (388,354) (91,338) Casualty and impairment loss on real estate 1,940 - 3,117 - FFO attributable to common stockholders 273,243 285,456 818,590 917,534 Adjusting items: Unconsolidated entity (gains) losses, net (1) (6,924) 86 (9,056) 86 Business interruption insurance proceeds - (282) - (385) Lost NOI from casualty losses covered by business interruption insurance - - - 48 Loss (gain) on extinguishment of consolidated debt 17,890 (105) 17,768 9,333 Gain on interest rate contract - - (2,654) - Advocacy contributions - 1,308 - 3,074 Executive transition compensation costs 411 - 2,599 - Severance related costs 284 75 386 2,115 Development pursuit write-offs and expensed transaction costs, net of recoveries 273 147 575 3,536 Gain on for-sale condominiums (2) (1,345) (727) (2,051) (8,174) For-sale condominium marketing, operating and administrative costs (2) 1,187 1,373 3,453 4,012 For-sale condominium imputed carry cost (3) 1,648 2,580 5,779 9,013 Gain on other real estate transactions, net (1,543) (129) (2,002) (328) Legal settlements 22 59 1,100 35 Income tax expense (benefit) 2,179 (27) 1,434 (1,069)
Core FFO attributable to common stockholders
Weighted average common shares outstanding - diluted 139,737,725
140,603,722 139,645,069 140,702,803 EPS per common share - diluted $ 0.56
$ 1.96
$ 2.06
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(1)Amounts for the three and nine months endedSeptember 30, 2021 include unrealized gains on property technology investments of$6,924 and$10,094 , respectively. The amount for the nine months endedSeptember 30, 2021 is partially offset by the write-off of asset management fee intangibles associated with the disposition of the final two AC JV communities. (2)The aggregate impact of (i) gain on for-sale condominiums and (ii) for-sale condominium marketing, operating and administrative costs is a net expense of$158 and$1,402 for the three and nine months endedSeptember 30, 2021 and a net expense of$646 and net gain of$4,162 for the three and nine months endedSeptember 30, 2020 . (3)Represents the imputed carry cost of for-sale residential condominiums at The Park Loggia. We computed this adjustment by multiplying the total capitalized cost of completed and unsold for-sale residential condominiums by our weighted average unsecured debt rate. 37 -------------------------------------------------------------------------------- Table of Contents FFO and Core FFO also do not represent cash generated from operating activities in accordance with GAAP, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by GAAP, as a measure of liquidity. Additionally, it is not necessarily indicative of cash available to fund cash needs. A presentation of GAAP based cash flow metrics is as follows (unaudited, dollars in thousands) and a discussion of "Liquidity and Capital Resources" can be found later in this report: For the three months ended For the nine months ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 Net cash provided by operating activities$ 343,113 $ 333,157 $ 911,742 $ 962,074 Net cash used in investing activities$ (404,958) $ (136,195) $ (315,753) $ (321,323) Net cash provided by (used in) financing activities$ 10,590 $ (430,256) $ (473,671) $ (585,965)
Liquidity and Capital Resources
We employ a disciplined approach to our liquidity and capital management. When we source capital, we take into account both our view of the most cost effective alternative available and our desire to maintain a balance sheet that provides us with flexibility. Our principal focus on near-term and intermediate-term liquidity is to ensure we have adequate capital to fund: •development and redevelopment activity in which we are currently engaged or in which we plan to engage; •the minimum dividend payments on our common stock required to maintain our REIT qualification under the Code; •debt service and principal payments either at maturity or opportunistically before maturity; •normal recurring operating expenses and corporate overhead expenses; and •investment in our operating platform, including strategic investments. Factors affecting our liquidity and capital resources are our cash flows from operations, financing activities and investing activities (including dispositions) as well as general economic and market conditions. Cash flows from operations are determined by operating activities and factors including but not limited to (i) the number of apartment homes currently owned, (ii) rental rates, (iii) occupancy levels, (iv) uncollectible lease revenue levels or interruptions in collections caused by market conditions and (v) operating expenses with respect to apartment homes. The timing and type of capital markets activity in which we engage is affected by changes in the capital markets environment, such as changes in interest rates or the availability of cost-effective capital. Our plans for development, redevelopment, non-routine capital expenditure, acquisition and disposition activity are affected by market conditions and capital availability. We frequently review our liquidity needs, especially in periods with volatile market conditions, as well as the adequacy of cash flows from operations and other expected liquidity sources to meet these needs. We had cash, cash equivalents and cash in escrow of$435,850,000 atSeptember 30, 2021 , an increase of$122,318,000 from$313,532,000 atDecember 31, 2020 . The following discussion relates to changes in cash, cash equivalents and cash in escrow due to operating, investing and financing activities, which are presented in our Condensed Consolidated Statements of Cash Flows included elsewhere in this report. Operating Activities - Net cash provided by operating activities decreased to$911,742,000 for the nine months endedSeptember 30, 2021 from$962,074,000 for the nine months endedSeptember 30, 2020 , primarily due to decreases in rental income, including the impact of uncollectible lease revenue.
Investing Activities - Net cash used in investing activities totaled
•investment of$476,307,000 in the development and redevelopment of communities; •acquisition of four operating communities for$392,746,000 ; and •capital expenditures of$110,310,000 for our operating communities and non-real estate assets.
These amounts were partially offset by:
•net proceeds from the disposition of six operating communities and ancillary real estate of$576,973,000 ; and •net proceeds from the sale of for-sale residential condominiums of$98,752,000 . 38 -------------------------------------------------------------------------------- Table of Contents Financing Activities - Net cash used in financing activities totaled$473,671,000 for the nine months endedSeptember 30, 2021 . The net cash used was primarily due to:
•payment of cash dividends in the amount of
The amounts were partially offset by:
•proceeds from the issuance of unsecured notes in the amount of$699,167,000 ; and •the issuance of common stock in the amount of$7,011,000 , primarily through CEP V.
Variable Rate Unsecured Credit Facility
We have a$1,750,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the "Credit Facility") which matures inFebruary 2024 . The Credit Facility bears interest at varying levels based on (i) theLondon Interbank Offered Rate ("LIBOR") applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.) and (ii) the rating levels issued for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (0.86% atOctober 29, 2021 ), assuming a one month borrowing rate. The annual facility fee for the Credit Facility remained at 0.125%, resulting in a fee of$2,188,000 annually based on the$1,750,000,000 facility size and based on our current credit rating.
We had
Financial Covenants
We are subject to financial covenants contained in the Credit Facility, Term Loans and the indentures under which our unsecured notes were issued. The principal financial covenants include the following:
•limitations on the amount of total and secured debt in relation to our overall capital structure; •limitations on the amount of our unsecured debt relative to the undepreciated basis of real estate assets that are not encumbered by property-specific financing; and •minimum levels of debt service coverage.
We were in compliance with these covenants at
In addition, some of our secured borrowings include yield maintenance, defeasance, or prepayment penalty provisions, which would result in us incurring an additional charge in the event of a full or partial prepayment of outstanding principal before the scheduled maturity. These provisions in our secured borrowings are generally consistent with other similar types of debt instruments issued during the same time period in which our borrowings were secured. 39 -------------------------------------------------------------------------------- Table of Contents Continuous Equity Offering Program InMay 2019 , we commenced our fifth continuous equity program ("CEP V") under which we may sell (and/or enter into forward sale agreements for the sale of) up to$1,000,000,000 of our common stock from time to time. Actual sales will depend on a variety of factors to be determined, including market conditions, the trading price of our common stock and determinations of the appropriate sources of funding. In conjunction with CEP V, we engaged sales agents who will receive compensation of up to 1.5% of the gross sales price for shares sold. We expect that, if entered into, we will physically settle each forward sale agreement on one or more dates prior to the maturity date of that particular forward sale agreement, in which case we will expect to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward agreement multiplied by the relevant forward sale price. However, we may also elect to cash settle or net share settle a forward sale agreement. In connection with each forward sale agreement, we will pay the relevant forward seller, in the form of a reduced initial forward sale price, a commission of up to 1.5% of the sales prices of all borrowed shares of common stock sold. During the three and nine months endedSeptember 30, 2021 , we sold 21,000 shares of common stock at an average sales price of$227.60 per share, for net proceeds of$4,708,000 under this program. DuringOctober 2021 , we sold 101,343 shares of common stock at an average sales price of$225.85 , for net proceeds of$22,545,000 under this program. As ofOctober 29, 2021 , we had$725,210,000 remaining authorized for issuance under this program.
Forward Interest Rate Swap Agreements
The following derivative activity occurred during the nine months ended
•We terminated$150,000,000 of forward interest rate swap agreements for which hedge accounting was ceased in 2020, receiving a payment of$6,962,000 . We recognized$2,894,000 of these proceeds as a gain in 2020, and$2,654,000 of these proceeds as a gain during the nine months endedSeptember 30, 2021 , included in interest expense, net on the accompanying Condensed Consolidated Statements of Comprehensive Income. •In conjunction with the issuance of our$700,000,000 2.050% unsecured notes due 2032 inSeptember 2021 , we settled$200,000,000 of forward interest rate swap agreements, entered into in 2021, designated as cash flow hedges of the interest rate variability on the issuance of the unsecured notes, making a net payment of$2,211,000 . We have deferred these amounts in accumulated other comprehensive loss on the accompanying Condensed Consolidated Balance Sheets, and are recognizing the impact as a component of interest expense, net, over the term of the respective hedged debt. •We entered into an additional$150,000,000 of new forward interest rate swap agreements executed to reduce the impact of variability in interest rates on a portion of our expected debt issuance activity in 2022. At the maturity of the remaining outstanding swap agreements, we expect to cash settle the contracts and either pay or receive cash for the then current fair value. Assuming that we issue the debt as expected, the hedging impact from these positions will then be recognized over the life of the issued debt as a yield adjustment. Stock Repurchase Program InJuly 2020 , our Board of Directors voted to terminate our prior$500,000,000 Stock Repurchase Program (the "Amended 2005 Stock Repurchase Program") and approved a new stock repurchase program under which we may acquire shares of our common stock in open market or negotiated transactions up to an aggregate purchase price of$500,000,000 (the "2020 Stock Repurchase Program"). Purchases of common stock under the 2020 Stock Repurchase Program may be exercised from time to time in our discretion and in such amounts as market conditions warrant. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. During the nine months endedSeptember 30, 2021 and throughOctober 29, 2021 , we had no repurchases of shares under this program. As ofOctober 29, 2021 , we had$316,148,000 remaining authorized for purchase under this program. 40 -------------------------------------------------------------------------------- Table of Contents Future Financing and Capital Needs - Debt Maturities One of our principal long-term liquidity needs is the repayment of long-term debt at maturity. For both our unsecured and secured notes, a portion of the principal of these notes may be repaid prior to maturity. Early retirement of our unsecured or secured notes could result in gains or losses on extinguishment. If we do not have funds on hand sufficient to repay our indebtedness as it becomes due, it will be necessary for us to refinance or otherwise provide liquidity to satisfy the debt at maturity. This refinancing may be accomplished by uncollateralized private or public debt offerings, equity issuances, additional debt financing that is secured by mortgages on individual communities or groups of communities or borrowings under our Credit Facility. Although we believe we will have the capacity to meet our currently anticipated liquidity needs, we cannot assure you that capital from additional debt financing or debt or equity offerings will be available or, if available, that they will be on terms we consider satisfactory, especially in light of the uncertain impacts of the COVID-19 pandemic on capital markets.
The following debt activity occurred during the nine months ended
•InJanuary 2021 , we repaid$27,795,000 principal amount of 5.37% fixed rate debt secured by Avalon San Bruno II at par in advance of theApril 2021 maturity date. •InSeptember 2021 , we repaid$450,000,000 principal amount of our 2.95% unsecured notes in advance of theSeptember 2022 scheduled maturity, recognizing a loss on debt extinguishment of$17,890,000 , composed of a prepayment penalty of$12,147,000 , and the non-cash write off of unamortized deferred hedging losses and unamortized deferred financing costs of$5,743,000 . •InSeptember 2021 , we issued$700,000,000 principal amount of unsecured notes in a public offering under our existing shelf registration statement for proceeds net of underwriting fees of approximately$694,617,000 , before considering the impact of other offering costs. The notes mature inJanuary 2032 and were issued at a 2.050% interest rate. The notes were issued under our green bond framework, and we have allocated or will allocate the net proceeds, in whole or in part, to one or more new or existing eligible green projects.
In
The following table details our consolidated debt maturities for the next five years, excluding our Credit Facility and amounts outstanding related to communities classified as held for sale, for debt outstanding atSeptember 30, 2021 andDecember 31, 2020 (dollars in thousands). We are not directly or indirectly (as borrower or guarantor) obligated in any material respect to pay principal or interest on the indebtedness of any unconsolidated entities in which we have an equity or other interest. 41
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Table of Contents All-In Principal Balance Outstanding (2) Scheduled Maturities interest maturity Community rate (1) date12/31/2020 9/30/2021 2021 2022 2023 2024 2025 Thereafter Tax-exempt bonds Fixed rate Avalon at Chestnut Hill 6.16 % Oct-2047$ 36,399 $ 35,930 $ 160 $ 663 $ 699 $ 737 $ 778 $ 32,893 Avalon Westbury 3.86 % Nov-2036 (3) 62,200 62,200 - - - - - 62,200 98,599 98,130 160 663 699 737 778 95,093 Variable rateAvalon Acton 1.09 % Jul-2040 (4) 45,000 45,000 - - - - - 45,000Avalon Clinton North 1.74 % Nov-2038 (4) 147,000 147,000 - - - - - 147,000 Avalon Clinton South 1.74 % Nov-2038 (4) 121,500 121,500 - - - - - 121,500Avalon Midtown West 1.67 % May-2029 (4) 93,500 88,300 - 5,600 6,100 6,800 7,300 62,500Avalon San Bruno I 1.63 % Dec-2037 (4) 63,850 62,850 900 2,000 2,200 2,300 2,400 53,050 470,850 464,650 900 7,600 8,300 9,100 9,700 429,050 Conventional loans Fixed rate$450 million unsecured notes 4.30 % Sep-2022 (5) 450,000 - - - - - - -$250 million unsecured notes 3.00 % Mar-2023 250,000 250,000 - - 250,000 - - -$350 million unsecured notes 4.30 % Dec-2023 350,000 350,000 - - 350,000 - - -$300 million unsecured notes 3.66 % Nov-2024 300,000 300,000 - - - 300,000 - -$525 million unsecured notes 3.55 % Jun-2025 525,000 525,000 - - - - 525,000 -$300 million unsecured notes 3.62 % Nov-2025 300,000 300,000 - - - - 300,000 -$475 million unsecured notes 3.35 % May-2026 475,000 475,000 - - - - - 475,000$300 million unsecured notes 3.01 % Oct-2026 300,000 300,000 - - - - - 300,000$350 million unsecured notes 3.95 % Oct-2046 350,000 350,000 - - - - - 350,000$400 million unsecured notes 3.50 % May-2027 400,000 400,000 - - - - - 400,000$300 million unsecured notes 4.09 % Jul-2047 300,000 300,000 - - - - - 300,000$450 million unsecured notes 3.32 % Jan-2028 450,000 450,000 - - - - - 450,000$300 million unsecured notes 3.97 % Apr-2048 300,000 300,000 - - - - - 300,000$450 million unsecured notes 3.66 % Jun-2029 450,000 450,000 - - - - - 450,000$700 million unsecured notes 2.69 % Mar-2030 700,000 700,000 - - - - - 700,000$600 million unsecured notes 2.65 % Jan-2031 600,000 600,000 - - - - - 600,000$700 million unsecured notes 2.15 % Jan-2032 (6) - 700,000 - - - - - 700,000Avalon Walnut Creek 4.00 % Jul-2066 4,001 4,161 - - - - - 4,161 eavesLos Feliz 3.68 % Jun-2027 41,400 41,400 - - - - - 41,400 eavesWoodland Hills 3.67 % Jun-2027 111,500 111,500 - - - - - 111,500Avalon Russett 3.77 % Jun-2027 32,200 32,200 - - - - - 32,200 Avalon San Bruno II 3.85 % Apr-2021 (5) 27,844 - - - - - - -Avalon Westbury 4.88 % Nov-2036 (3) 12,170 10,995 400 1,655 1,740 1,840 1,930 3,430 Avalon San Bruno III 2.38 % Mar-2027 51,000 51,000 - - - - - 51,000Avalon Cerritos 3.35 % Aug-2029 30,250 30,250 - - - - - 30,250 6,810,365 7,031,506 400 1,655 601,740 301,840 826,930 5,298,941 Variable rate Term Loan -$100 million 1.17 % Feb-2022 100,000 100,000 - 100,000 - - - - Term Loan -$150 million 1.10 % Feb-2024 150,000 150,000 - - - 150,000 - - 250,000 250,000 - 100,000 - 150,000 - - Total indebtedness - excluding Credit Facility$ 7,629,814 $ 7,844,286 $ 1,460 $ 109,918 $ 610,739 $ 461,677 $ 837,408 $ 5,823,084 _________________________ (1)Rates are given as ofSeptember 30, 2021 and include credit enhancement fees, facility fees, trustees' fees, the impact of interest rate hedges, offering costs, mark to market amortization and other fees. (2)Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured notes of$48,363 and$47,995 as ofSeptember 30, 2021 andDecember 31, 2020 , respectively, and deferred financing costs and debt discount associated with secured notes of$16,619 and$17,482 as ofSeptember 30, 2021 andDecember 31, 2020 , respectively, as reflected on our Condensed Consolidated Balance Sheets included elsewhere in this report. (3)InNovember 2021 , we repaid this borrowing at par in advance of its scheduled maturity date. (4)Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement. 42 -------------------------------------------------------------------------------- Table of Contents (5)During the nine months endedSeptember 30, 2021 , we repaid this borrowing at par in advance of its scheduled maturity date. (6)The net proceeds of these unsecured notes have been or will be allocated, in whole or in part, to one or more new or existing eligible green projects.
Future Financing and Capital Needs - Portfolio and Capital Markets Activity
In light of the COVID-19 pandemic, we continue to monitor the availability of our various capital raising alternatives. For the remainder of 2021, we expect to meet our liquidity needs from one or more a variety of internal and external sources, which may include (i) real estate dispositions, (ii) cash balances on hand as well as cash generated from our operating activities, (iii) borrowing capacity under our Credit Facility and (iv) secured and unsecured debt financings. Additional sources of liquidity in 2021 may include the issuance of common and preferred equity. Our ability to obtain additional financing will depend on a variety of factors, such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, as well as the perception of lenders regarding our long or short-term financial prospects. In addition, the impacts of the COVID-19 pandemic on capital markets, including the availability and costs of debt and equity capital, remain uncertain and may have material adverse effects on our access to capital on attractive terms. Before beginning new construction or reconstruction activity in 2021, including activity related to communities owned by unconsolidated joint ventures, we plan to source sufficient capital to complete these undertakings, although we cannot assure you that we will be able to obtain such financing. In the event that financing cannot be obtained, we may have to abandon Development Rights, write-off associated pre-development costs that were capitalized and/or forego reconstruction activity. In such instances, we will not realize the increased revenues and earnings that we expected from such Development Rights or reconstruction activity and significant losses could be incurred. From time to time we use joint ventures to hold or develop individual real estate assets. We generally employ joint ventures primarily to mitigate asset concentration or market risk and secondarily as a source of liquidity. We may also use joint ventures related to mixed-use land development opportunities and new markets where our partners bring development and operational expertise and/or experience to the venture. Each joint venture or partnership agreement has been individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture or partnership agreement. We cannot assure you that we will achieve our objectives through joint ventures.
In addition, we may pursue opportunities to invest in real estate development through mezzanine loans or other investments structured as debt.
In evaluating our allocation of capital within our markets, we sell assets that do not meet our long-term investment criteria or when capital and real estate markets allow us to realize a portion of the value created over our ownership periods and redeploy the proceeds from those sales to develop and redevelop communities. Because the proceeds from the sale of communities may not be immediately redeployed into revenue generating assets that we develop, redevelop or acquire, the immediate effect of a sale of a community for a gain is to increase net income, but reduce future total revenues, total expenses and NOI until such time as the proceeds have been redeployed into revenue generating assets. We believe that the temporary absence of future cash flows from communities sold will not have a material impact on our ability to fund future liquidity and capital resource needs. 43
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