AVALONBAY COMMUNITIES, INC. 
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 ended
December 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,Southeast Florida ,Denver, Colorado , thePacific Northwest , and Northern andSouthern California . We are pursuing opportunities in new expansion markets ofDallas andAustin, Texas , andCharlotte andRaleigh-Durham, North Carolina . 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.
Second Quarter 2021 Highlights
•Net income attributable to common stockholders for the three months endedJune 30, 2021 was$447,953,000 , an increase of$277,125,000 , or 162.2%, as compared to the prior year period. The increase is primarily due to an increase in gains on consolidated and unconsolidated real estate dispositions in the current year period and an increase in NOI from our Development communities, partially offset by a decrease in Same Store NOI. •Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential revenue ("Residential"), for the three months endedJune 30, 2021 was$333,449,000 , a decrease of$33,920,000 , or 9.2%, from the prior year period. The decrease was due to a decrease in Residential rental revenues of$24,577,000 , or 4.7%, as well as an increase in Residential property operating expenses of$9,187,000 , or 6.0%, over the prior year period. 25 -------------------------------------------------------------------------------- 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 arising from the national emergency 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 this national emergency 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 on the duration and severity of the pandemic, the effectiveness of vaccines and the rate of vaccination, the duration and nature of governmental responses to contain the spread of the disease and cushion the impact on consumers, the responses of consumers and businesses with respect to living and work preferences, and how quickly and to what extent normal economic and operating conditions can resume. The current and potential future impacts of the COVID-19 pandemic on our business, particularly on (i) rent levels, collectibility of rents, occupancy and the extent to which we waive certain other customary fees associated with our apartment rental business and (ii) development timing and volume, mean that our historical results of operations and financial condition may not be indicative of future results of operations and financial condition. The COVID-19 pandemic continues to affect our rental operations including (i) revenues and expenses, as well as (ii) 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, including parking and storage rent, along with pet and other fees in accordance with residential leases, that has been collected ("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 andJune 30, 2021 (unaudited). Collected Residential Revenue excludes transactional and other fees. At quarter end (1)(2) At July 31, 2021 (3)(4) Q2 2020 95.4% 98.3% Q3 2020 95.1% 97.7% Q4 2020 94.7% 97.3% Q1 2021 94.7% 96.7% Q2 2021 95.0% 96.1%
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(1)Collections presented reflect our 2021 Same Store communities and exclude commercial revenue, which was 0.6% and 1.1% of our 2020 and 2019 Same Store total revenue, respectively. (2)The Collected Residential Revenue percentage as ofJune 30, 2020 for Q2 2020,September 30, 2020 for Q3 2020,December 31, 2020 for Q4 2020,March 31, 2021 for Q1 2021 andJune 30, 2021 for Q1 2021, respectively. (3)The percentage of Collected Residential Revenue as ofJuly 31, 2021 . (4)Collected Residential Revenue forJuly 2021 as ofJuly 31, 2021 was 93.4%. The collection rates are based on individual 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. AtJune 30, 2021 , our outstanding rent receivable balance for residential and commercial tenants, net of reserves, decreased to$15,047,000 from$18,159,000 atDecember 31, 2020 .
Second Quarter 2021 Development Highlights
At
•14 wholly-owned communities under construction, which are expected to contain 3,988 apartment homes with a projected total capitalized cost of$1,553,000,000 , and two unconsolidated communities under construction, which are expected to contain 803 apartment homes with a projected total capitalized cost of$386,000,000 . 26 -------------------------------------------------------------------------------- Table of Contents •Land or rights to land on which we expect to develop an additional 23 apartment communities that, if developed as expected, will contain 7,802 apartment homes and will be developed for an aggregate total capitalized cost of$3,120,000,000 . During the three months endedJune 30, 2021 , we sold six wholly-owned operating communities containing 1,309 apartment homes for$512,200,000 , and our gain in accordance with GAAP was$334,572,000 . In addition, we sold 16 residential condominiums at The Park Loggia, for gross proceeds of$38,392,000 , resulting in a gain in accordance with GAAP of$575,000 . During the three months endedJune 30, 2021 , we acquiredAvalon Arundel Crossing East, located inLinthicum Heights, MD , which is adjacent to ourAvalon Arundel Crossing operating community. Avalon Arundel Crossing East contains 384 apartment homes and was acquired for a purchase price of$119,000,000 .
Communities Overview
Our real estate investments consist primarily of current operating apartment
communities, consolidated and unconsolidated communities in various stages of
development ("Development" communities and "Unconsolidated Development "
communities) and Development Rights (as defined below). Our current operating
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 consists 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 six month periods endedJune 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 ofJune 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 consists of all other completed consolidated communities that 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 consists of consolidated communities where construction has been complete for less than one year and that do not have stabilized occupancy.
•Redevelopment consists 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 gross cost basis and (ii) physical occupancy is below or is expected to be below 90% during, or as a result of, the redevelopment activity.
•Unconsolidated consists of communities that we have an indirect ownership interest in through our investment interest in an unconsolidated joint venture.
27
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Table of Contents
Development consists of consolidated communities that are under construction and
for which a certificate or certificates of occupancy for the entire community
have not been received. These communities may be partially complete and
operating.
Unconsolidated Development consists of communities that are under construction
and for which a certificate or certificates of occupancy for the entire
community have not been received that we have an indirect ownership interest in
through our investment interest in an unconsolidated joint venture. These
communities may be partially 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
As of
Number of Number of
communities apartment homes
Current Communities
Same Store:
New England 37 9,536
Metro NY/NJ 42 12,008
Mid-Atlantic 38 13,417
Southeast Florida 4 1,214
Denver, CO 4 1,086
Pacific Northwest 16 4,217
Northern California 39 11,829
Southern California 57 16,761
Total Same Store 237 70,068
Other Stabilized:
New England 3 703
Metro NY/NJ 4 1,742
Mid-Atlantic 1 384
Southeast Florida - -
Denver, CO - -
Pacific Northwest 3 1,012
Northern California 1 289
Southern California - -
Total Other Stabilized 12 4,130
Lease-Up 11 3,598
Redevelopment 2 572
Unconsolidated 10 2,590
Total Current 272 80,958
Development 14 3,988
Unconsolidated Development 2 803
Total Communities 288 85,749
Development Rights 23 7,802
28-------------------------------------------------------------------------------- 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 six months endedJune 30, 2021 and 2020 follows (unaudited, dollars in thousands). For the three months ended For the six months ended 6/30/2021 6/30/2020 $ Change % Change 6/30/2021 6/30/2020 $ Change % Change Revenue: Rental and other income$ 560,935 $ 575,479 $ (14,544) (2.5) %$ 1,111,194 $ 1,176,123 $ (64,929) (5.5) % Management, development and other fees 808 926 (118) (12.7) % 1,685 1,933 (248) (12.8) % Total revenue 561,743 576,405 (14,662) (2.5) % 1,112,879 1,178,056 (65,177) (5.5) % Expenses: Direct property operating expenses, excluding property taxes 116,506 106,753 9,753 9.1 % 231,214 214,934 16,280 7.6 % Property taxes 70,776 67,013 3,763 5.6 % 140,186 134,039 6,147 4.6 % Total community operating expenses 187,282 173,766 13,516 7.8 % 371,400 348,973 22,427 6.4 % Corporate-level property management and other indirect operating expenses (25,116) (24,337) (779) 3.2 % (50,459) (48,149) (2,310) 4.8 % Expensed transaction, development and other pursuit costs, net of recoveries (1,653) (388) (1,265) 326.0 % (1,483) (3,722) 2,239 (60.2) % Interest expense, net (56,104) (53,399) (2,705) 5.1 % (108,717) (109,313) 596 (0.5) % (Loss) gain on extinguishment of debt, net - (268) 268 100.0 % 122 (9,438) 9,560 N/A (1) Depreciation expense (184,472) (176,249) (8,223) 4.7 % (367,769) (354,160) (13,609) 3.8 % General and administrative expense (18,465) (15,573) (2,892) 18.6 % (35,817) (32,893) (2,924) 8.9 % Casualty and impairment loss (1,177) - - 100.0 % (1,177) - (1,177) 100.0 % Income from investments in unconsolidated entities 26,559 512 26,047 N/A (1) 26,092 1,687 24,405 N/A (1) Gain on sale of communities 334,569 35,295 299,274 847.9 % 388,296 59,731 328,565 550.1 % Gain on other real estate transactions, net 32 156 (124) (79.5) % 459 199 260 130.7 % Net for-sale condominium activity (647) 1,348 (1,995) N/A (1) (1,560) 4,808 (6,368) N/A (1) Income before income taxes 447,987 169,736 278,251 163.9 % 589,466 337,833 251,633 74.5 % Income tax (expense) benefit (10) 1,133 (1,143) N/A (1) 745 1,042 (297) N/A (1) Net income 447,977 170,869 277,108 162.2 % 590,211 338,875 251,336 74.2 % Net income attributable to noncontrolling interests (24) (41) 17 (41.5) % (35) (76) 41 (53.9) % Net income attributable to common stockholders$ 447,953 $ 170,828 $ 277,125 162.2 %$ 590,176 $ 338,799 $ 251,377 74.2 %
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(1)Percent change is not meaningful.
Net income attributable to common stockholders increased$277,125,000 , or 162.2%, to$447,953,000 and$251,377,000 , or 74.2%, to$590,176,000 for the three and six months endedJune 30, 2021 as compared to the prior year periods. The increase for the three and six months endedJune 30, 2021 is primarily due to an increase in gains on consolidated and unconsolidated real estate dispositions in the current year periods and an increase in NOI from our Development communities, partially offset by a decrease in Same Store NOI. 29 -------------------------------------------------------------------------------- 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, (gain) loss on extinguishment of debt, net, general and administrative expense, income from investments in unconsolidated real estate entities, depreciation expense, corporate income tax (benefit) expense, casualty and impairment (gain) loss, net, gain on sale of communities, (gain) loss 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 six months endedJune 30, 2021 and 2020 to net income for each period are as follows (unaudited, dollars in thousands): For the three months ended For the six months ended 6/30/2021 6/30/2020 6/30/2021 6/30/2020 Net income$ 447,977 $ 170,869 $ 590,211 $ 338,875
Indirect operating expenses, net of corporate income 24,318
23,407 48,788 46,206
Expensed transaction, development and other pursuit costs, net of recoveries
1,653 388 1,483 3,722
Interest expense, net 56,104 53,399 108,717 109,313
(Loss) gain on extinguishment of debt, net - 268 (122) 9,438
General and administrative expense 18,465 15,573 35,817 32,893
Income from investments in unconsolidated entities (26,559) (512) (26,092) (1,687)
Depreciation expense 184,472 176,249 367,769 354,160
Income tax expense (benefit) 10 (1,133) (745) (1,042)
Casualty and impairment loss 1,177 - 1,177 -
Gain on sale of real estate assets (334,569) (35,295) (388,296) (59,731)
Gain on other real estate transactions, net (32) (156) (459) (199)
Net for-sale condominium activity 647 (1,348) 1,560 (4,808)
Net operating income from real estate assets sold or
held for sale (4,749) (13,581) (10,549) (28,572)
NOI 368,914 388,128 729,259 798,568
Commercial NOI (1) (5,678) (1,986) (11,045) (8,769)
Residential NOI $ 363,236 $ 386,142 $ 718,214 $ 789,799 _________________________
(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 six months ended
For the three months ended For the six months ended
6/30/2021 6/30/2021
Same Store $ (33,920) $ (87,641)
Other Stabilized 2,104 3,100
Development / Redevelopment 8,910 12,956
Total $ (22,906) $ (71,585)
30-------------------------------------------------------------------------------- Table of Contents Rental and other income decreased$14,544,000 , or 2.5%, and$64,929,000 , or 5.5%, for the three and six months endedJune 30, 2021 compared to the prior year periods. The decrease for the three and six months endedJune 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 six months endedJune 30, 2021 were also impacted by uncollectible lease revenue. •For the three months endedJune 30, 2021 , uncollectible lease revenue improved by$5,034,000 , composed of$425,000 for Residential revenue and$4,609,000 for Commercial revenue, compared to the prior year period.
•For the six months ended
As a result of the pandemic, we increased our use of residential concessions during 2020 and the three and six months endedJune 30, 2021 as compared to the prior year periods. 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 six months endedJune 30, 2021 and will continue to impact rental revenue throughout 2021. The amortization of residential concessions for our consolidated communities increased by$15,810,000 and$30,793,000 in the three and six months endedJune 30, 2021 , respectively, as compared to the prior year periods, and the remaining net unamortized balance of residential concessions as ofJune 30, 2021 was$33,840,000 . 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 during the COVID-19 pandemic. If job losses in our markets and nationally continue, this would likely continue to 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 increased to 74,999 apartment homes for the six months endedJune 30, 2021 , compared to 74,079 homes for the prior year period. The weighted average monthly rental revenue per occupied apartment home decreased to$2,466 for the six months endedJune 30, 2021 compared to$2,642 in the prior year period. Same Store rental revenue decreased$21,899,000 , or 4.2%, and$71,590,000 , or 6.7%, for the three and six months endedJune 30, 2021 , compared to the prior year periods. Residential rental revenue decreased$24,577,000 , or 4.7%, and$73,463,000 , or 6.9%, for the three and six months endedJune 30, 2021 , compared to the prior year periods. The decrease for the three month endedJune 30, 2021 was partially offset by a decrease in uncollectible lease revenue of$773,000 . For the six months endedJune 30, 2021 , uncollectible lease revenue contributed$11,572,000 to the decrease in rental revenue from the prior year period. Commercial rental revenue increased$2,676,000 , or 135.5%, and$1,873,000 , or 24.7%, for the three and six months endedJune 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$3,455,000 and$3,022,000 , for the three and six months endedJune 30, 2021 , respectively. 31 -------------------------------------------------------------------------------- Table of Contents The following table presents the change in Same Store Residential rental revenue for the three and six months endedJune 30, 2021 , compared to the prior year periods (unaudited): For the three months
ended For the six months ended
6/30/2021 6/30/2021
Residential rental revenue
Lease rates (4.0) % (3.8) %
Concessions and other discounts (2.7) % (2.5) %
Economic Occupancy 1.6 % 0.4 %
Other rental revenue 0.3 % 0.1 %
Uncollectible lease revenue 0.1 % (1.1) %
Total Residential rental revenue (4.7) % (6.9) %
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 six months ended
For the six months ended June 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 2020
New England $ 147,377 $ 155,992 $ (8,615) (5.5) % $ 2,695 $ 2,874 (6.2) % 95.6 % 94.9 % 0.7 %
Metro NY/NJ 207,603 217,991 (10,388) (4.8) % 2,998 3,172 (5.5) % 96.1 % 95.4 % 0.7 %
Mid-Atlantic 161,813 171,375 (9,562) (5.6) % 2,114 2,230 (5.2) % 95.1 % 95.5 % (0.4) %
Southeast Florida 14,918 14,840 78 0.5 % 2,136 2,200 (2.9) % 95.9 % 92.5 % 3.4 %
Denver, CO 11,503 10,336 1,167 11.3 % 1,831 1,712 7.0 % 96.4 % 92.1 % 4.3 %
Pacific Northwest 51,875 55,650 (3,775) (6.8) % 2,148 2,283 (5.9) % 95.4 % 96.3 % (0.9) %
Northern California 178,360 208,857 (30,497) (14.6) % 2,611 3,067 (14.9) % 96.3 % 96.0 % 0.3 %
Southern California 213,560 225,431 (11,871) (5.3) % 2,201 2,343 (6.1) % 96.5 % 95.7 % 0.8 %
Total Same Store $ 987,009 $ 1,060,472 $ (73,463) (6.9) % $ 2,447 $ 2,640 (7.3) % 95.9 % 95.5 % 0.4 %
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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$9,753,000 , or 9.1%, and$16,280,000 , or 7.6%, for the three and six months endedJune 30, 2021 , compared to the prior year periods. The increases for the three and six months endedJune 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 six months endedJune 30, 2021 . Residential direct property operating expenses, excluding property taxes, increased$7,260,000 , or 7.6%, and$11,029,000 , or 5.8%, for the three and six months endedJune 30, 2021 compared to the prior year periods. The increases for the three and six months endedJune 30, 2021 are primarily due to the timing of repairs and maintenance projects previously delayed due to the COVID-19 pandemic. 32 -------------------------------------------------------------------------------- Table of Contents Property taxes increased$3,763,000 , or 5.6%, and$6,147,000 , or 4.6%, for the three and six months endedJune 30, 2021 , compared to the prior year periods. The increases for the three and six months endedJune 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 six months endedJune 30, 2021 . Residential property taxes increased$1,927,000 , or 3.3%, and$2,897,000 , or 2.5%, for the three and six months endedJune 30, 2021 , compared to the prior year periods. The increases for the three and six months endedJune 30, 2021 are primarily due to increased assessments across the portfolio in the current year periods and successful appeals in the prior year periods. The increase for the six months endedJune 30, 2021 was partially offset by a successful appeal in Metro NY/NJ in the current year period.
Corporate-level property management and other indirect operating expenses
increased
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, increased$1,265,000 for the three months endedJune 30, 2021 and decreased$2,239,000 for the six months endedJune 30, 2021 as compared to the prior year periods. The amounts for the three and six months endedJune 30, 2021 , include the non-cash write-off of asset management fee intangibles associated with the disposition of the final two communities inMultifamily Partners AC JV LP (the "AC JV"). Interest expense, net increased$2,705,000 , or 5.1%, for the three months endedJune 30, 2021 , compared to the prior year period. 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 increase for the three months endedJune 30, 2021 was primarily due to a decrease in capitalized interest, 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. (Gain) loss on extinguishment of debt, net reflects prepayment penalties, the write-off of unamortized deferred financing costs and premiums/discounts 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$268,000 and$9,438,000 for the three and six months endedJune 30, 2020 were due to the repayments of unsecured debt during the periods. Depreciation expense increased$8,223,000 , or 4.7%, and$13,609,000 , or 3.8%, for the three and six months endedJune 30, 2021 , as compared to the prior year periods, primarily due to the addition of newly developed apartment communities, partially offset by dispositions. General and administrative expense ("G&A") increased$2,892,000 , or 18.6%, and$2,924,000 , or 8.9%,for the three and six months endedJune 30, 2021 , as compared to the prior year periods, primarily due to increases in compensation related expenses and legal settlements in the current year periods. Casualty and impairment loss for the three and six months endedJune 30, 2021 consists of a$1,177,000 charge recognized for the property and casualty damages resulting from a fire at an operating community that occurred during the three months endedJune 30, 2021 . Income from investments in unconsolidated entities increased$26,047,000 and$24,405,000 for the three and six months endedJune 30, 2021 , compared to the prior year periods, primarily due to gains on the sale of the final two communities in the AC JV. Gain on sale of communities increased by$299,274,000 and$328,565,000 for the three and six months endedJune 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. 33 -------------------------------------------------------------------------------- Table of Contents Net for-sale condominium activity is a net expense of$647,000 and$1,560,000 for the three and six months endedJune 30, 2021 and a net gain of$1,348,000 and$4,808,000 for the three and six months endedJune 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 six months endedJune 30, 2021 , we sold 16 and 26 residential condominiums at The Park Loggia, for gross proceeds of$38,392,000 and$53,001,000 , resulting in gains in accordance with GAAP of$575,000 and$706,000 , respectively. During the three and six months endedJune 30, 2020 , we sold 16 and 52 residential condominiums at The Park Loggia for gross proceeds of$61,207,000 and$166,814,000 , resulting in gains in accordance with GAAP of$2,544,000 and$7,447,000 , respectively. In addition, we incurred$1,222,000 and$1,196,000 for the three months endedJune 30, 2021 and 2020, respectively, and$2,266,000 and$2,639,000 for the six months endedJune 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 settlements; •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; •net for-sale condominium activity, including gains, marketing, operating and administrative costs and imputed carry cost; •income taxes; and •other non-core items. 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):
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For the three months ended For the six months ended
6/30/2021 6/30/2020 6/30/2021 6/30/2020
Net income attributable to common stockholders
$ 170,828 $ 590,176 $ 338,799
Depreciation - real estate assets, including joint venture adjustments
183,257 175,558 365,571 352,986
Distributions to noncontrolling interests 12 12 24 24
Gain on sale of unconsolidated entities holding
previously depreciated real estate (23,305) - (23,305) -Gain on sale of previously depreciated real estate (334,569)
(35,295) (388,296) (59,731)
Casualty and impairment loss on real estate 1,177 - 1,177 -
FFO attributable to common stockholders 274,525 311,103 545,347 632,078
Adjusting items:
Unconsolidated entity (gains) losses (1) (2,233) - (2,132) -
Business interruption insurance proceeds - (103) - (103)
Lost NOI from casualty losses covered by business
interruption insurance - 48 - 48
Loss (gain) on extinguishment of consolidated debt - 268 (122) 9,438
Gain on interest rate contract - - (2,654) -
Advocacy contributions - 1,465 - 1,766
Executive transition compensation costs 407 - 2,188 -
Severance related costs 102 89 102 2,040
Development pursuit write-offs and expensed
transaction costs, net of recoveries 527 269 302 3,389
Gain on for-sale condominiums (2) (575) (2,544) (706) (7,447)
For-sale condominium marketing, operating and
administrative costs (2) 1,222 1,196 2,266 2,639
For-sale condominium imputed carry cost (3) 1,979 2,824 4,131 6,433
Gain on other real estate transactions, net (32) (156) (459) (199)
Legal settlements 1,018 (67) 1,078 (24)
Income tax expense (benefit) 10 (1,133) (745) (1,042)
Core FFO attributable to common stockholders
$ 313,259 $ 548,596 $ 649,016
Weighted average common shares outstanding - diluted 139,650,639
140,738,160 139,601,526 140,752,331
EPS per common share - diluted $ 3.21 $ 1.21 $ 4.23 $ 2.41
FFO per common share - diluted $ 1.97 $ 2.21 $ 3.91 $ 4.49
Core FFO per common share - diluted $ 1.98 $ 2.23 $ 3.93 $ 4.61 _________________________
(1)Amounts for the three and six months endedJune 30, 2021 include unrealized gains on property technology investments of$3,272 , 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$647 and$1,560 for the three and six months endedJune 30, 2021 and a net gain of$1,348 and$4,808 for the three and six months endedJune 30, 2020 . (3)Represents the imputed carry cost of for-sale residential condominiums at The Park Loggia. We compute this adjustment by multiplying the total capitalized cost of completed and unsold for-sale residential condominiums by our weighted average unsecured debt rate. 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. 35
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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 six months ended
6/30/2021 6/30/2020 6/30/2021 6/30/2020
Net cash provided by operating activities $ 238,484 $ 287,213 $ 568,629 $ 628,917
Net cash provided by (used in) investing
activities $ 245,157 $ (49,061) $ 89,205 $ (185,128)
Net cash used in financing activities $ (226,268) $ (690,879) $ (484,261) $ (155,709) 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$487,105,000 atJune 30, 2021 , an increase of$173,573,000 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$568,629,000 for the six months endedJune 30, 2021 from$628,917,000 for the six months endedJune 30, 2020 , primarily due to decreases in rental income, including the impact of uncollectible lease revenue.
Investing Activities - Net cash provided by investing activities totaled
•net proceeds from the disposition of six operating communities and ancillary real estate of$575,431,000 ; and •net proceeds from the sale of for-sale residential condominiums of$48,655,000 .
These amounts are partially offset by:
•investment of$325,692,000 in the development and redevelopment of communities; •acquisition of an operating community for$118,572,000 ; and •capital expenditures of$59,741,000 for our operating communities and non-real estate assets.
Financing Activities - Net cash used in financing activities totaled
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•payment of cash dividends in the amount of $444,572,000 ; and
•mortgage note repayments and principal amortization payments in the amount of
$34,734,000 .
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 (0.87% atJuly 30, 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 no borrowings outstanding under the Credit Facility and had$1,885,000 outstanding in letters of credit that reduced our borrowing capacity as ofJuly 30, 2021 . In addition, we had$37,282,000 outstanding in additional letters of credit unrelated to the Credit Facility as ofJuly 30, 2021 .
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.
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 six months endedJune 30, 2021 and throughJuly 30, 2021 , we had no sales under the program. As ofJuly 30, 2021 , there are no outstanding forward sale agreements and we had$752,878,000 remaining authorized for issuance under this program.
Forward Interest Rate Swap Agreements
During the six months endedJune 30, 2021 , we terminated$150,000,000 of forward interest rate swap agreements for which we ceased hedge accounting in 2020 (the "Swaps"), 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 six months endedJune 30, 2021 included in interest expense, net on the accompanying Condensed Consolidated Statements of Comprehensive Income included elsewhere in this report. 37 -------------------------------------------------------------------------------- Table of Contents During the three and six months endedJune 30, 2021 , we entered into$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 2021. InJuly 2021 , we entered into$200,000,000 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 2021 and 2022.
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 six months endedJune 30, 2021 and throughJuly 30, 2021 , we had no repurchases of shares under this program. As ofJuly 30, 2021 , we had$316,148,000 remaining authorized for purchase under this program.
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.
During the six months ended
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 atJune 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. 38
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All-In Principal Balance Outstanding (2) Scheduled Maturities
interest maturity
Community rate (1) date 12/31/2020 6/30/2021 2021 2022 2023 2024 2025 Thereafter
Tax-exempt bonds
Fixed rate
Avalon at Chestnut Hill 6.16 % Oct-2047 $ 36,399 $ 36,089 $ 319 $ 663 $ 699 $ 737 $ 778 $ 32,893
Avalon Westbury 3.86 % Nov-2036 (3) 62,200 62,200 - - - - - 62,200
98,599 98,289 319 663 699 737 778 95,093
Variable rate
Avalon Acton 1.07 % Jul-2040 (4) 45,000 45,000 - - - - - 45,000
Avalon Clinton North 1.72 % Nov-2038 (4) 147,000 147,000 - - - - - 147,000
Avalon Clinton South 1.72 % Nov-2038 (4) 121,500 121,500 - - - - - 121,500
Avalon Midtown West 1.65 % May-2029 (4) 93,500 88,300 - 5,600 6,100 6,800 7,300 62,500
Avalon San Bruno I 1.61 % Dec-2037 (4) 63,850 63,250 1,300 2,000 2,200 2,300 2,400 53,050
470,850 465,050 1,300 7,600 8,300 9,100 9,700 429,050
Conventional loans
Fixed rate
$450 million unsecured notes 4.30 % Sep-2022 450,000 450,000 - 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
Avalon Walnut Creek 4.00 % Jul-2066 4,001 4,001 - - - - - 4,001
eaves Los Feliz 3.68 % Jun-2027 41,400 41,400 - - - - - 41,400
eaves Woodland Hills 3.67 % Jun-2027 111,500 111,500 - - - - - 111,500
Avalon 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 11,390 795 1,655 1,740 1,840 1,930 3,430
Avalon San Bruno III 2.38 % Mar-2027 51,000 51,000 - - - - - 51,000
Avalon Cerritos 3.35 % Aug-2029 30,250 30,250 - - - - - 30,250
6,810,365 6,781,741 795 451,655 601,740 301,840 826,930 4,598,781
Variable rate
Term Loan - $100 million 1.18 % Feb-2022 100,000 100,000 - 100,000 - - - -
Term Loan - $150 million 1.11 % Feb-2024 150,000 150,000 - - - 150,000 - -
250,000 250,000 - 100,000 - 150,000 - -
Total indebtedness - excluding
Credit Facility $ 7,629,814 $ 7,595,080 $ 2,414 $ 559,918 $ 610,739 $ 461,677 $ 837,408 $ 5,122,924
_________________________
(1)Rates are given as of June 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 $44,487
and $47,995 as of June 30, 2021 and December 31, 2020 , respectively, and
deferred financing costs and debt discount associated with secured notes of
$16,960 and $17,482 as of June 30, 2021 and December 31, 2020 , respectively, as
reflected on our Condensed Consolidated Balance Sheets included elsewhere in
this report.
(3)Maturity date reflects the contractual maturity of the underlying bond. There
is also an associated earlier credit enhancement maturity date.
(4)Financed by variable rate debt, but interest rate is capped through an
interest rate protection agreement.
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Table of Contents (5)During 2021, we repaid this borrowing at par in advance of its scheduled maturity date.
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. In 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.
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