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AvalonBay Communities (AVB) Q1 FFO & Revenues Top, '23 View Up

AvalonBay Communities, Inc. AVB reported first-quarter 2023 core funds from operations (FFO) per share of $2.57, beating the Zacks Consensus Estimate of $2.54 and our estimate of $2.51. Moreover, the figure climbed 13.7% from the prior-year quarter’s tally.

The quarterly results reflect a year-over-year increase in same-store residential rental revenues driven by solid lease rate growth. The same-store average rental revenue per occupied home and occupancy improved sequentially. AVB also raised its core FFO per share outlook for 2023.

Total revenues in the quarter came in at $674.7 million, outpacing the Zacks Consensus Estimate of $665.6 million. The figure increased 9.9% on a year-over-year basis and surpassed our estimate of $665.3 million.

Quarter in Detail

In the reported quarter, same-store residential rental revenues increased 9.5% year over year to $622.4 million. Same-store residential operating expenses rose 7.1% to $192.5 million. As a result, the same-store residential net operating income (NOI) climbed 10.7% to $430.4 million from the prior-year period.

Same-store average rental revenue per occupied home rose to $2,859 in the first quarter, up from $2,837 at the end of fourth-quarter 2022. The same-store economic occupancy improved 30 basis points sequentially to 96.1%. We projected the same to be 95.8%.

As of Mar 31, 2023, AvalonBay had 18 consolidated development communities under construction (expected to contain 5,762 apartment homes and 56,000 square feet of commercial space). The estimated total capital cost of these development communities at completion is $2.36 billion.

Balance Sheet

AVB had $254.5 million in unrestricted cash and cash equivalents and $121.6 million in cash in escrow as of Mar 31, 2023. As of the same date, the company did not have any borrowings outstanding under its $2.25 billion unsecured revolving credit facility or its $500 million unsecured commercial paper note program.

Additionally, its annualized net debt-to-core EBITDAre for the January-March period was 4.6 times, and the unencumbered NOI for the three months ended Mar 31, 2023, was 95%.

2023 Outlook Raised

For second-quarter 2023, AvalonBay expects core FFO per share in the range of $2.54-$2.64. The Zacks Consensus Estimate for the same is currently pegged at $2.58, which lies within the guided range.

For the full year, AVB expects core FFO per share between $10.21 and $10.61, up from the prior guided range of $10.06-$10.56. This reflects an increase at the midpoint from $10.31 to $10.41. The Zacks Consensus Estimate for the same presently stands at $10.38, within the projected range.

AvalonBay Communities currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AvalonBay Communities, Inc. Price, Consensus and EPS Surprise

AvalonBay Communities, Inc. price-consensus-eps-surprise-chart | AvalonBay Communities, Inc. Quote

Performance of Other Residential REITs

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported first-quarter 2023 core FFO per share of $2.28, surpassing the Zacks Consensus Estimate of $2.25. Moreover, the reported figure climbed 15.7% year over year.

This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA also raised its outlook for 2023 core FFO per share.

Equity Residential’s EQR first-quarter 2023 normalized FFO per share of 87 cents increased 13% year over year but narrowly missed the Zacks Consensus Estimate of 88 cents.

Results reflected continued healthy demand and lower-than-anticipated bad debt. EQR also noted that it experienced better payment and move-out activity related to delinquent residents than assumed in its February 2023 guidance.

However, higher expenses due to repair and maintenance work resulting from severe California rain storms, coupled with increased property-related legal and administrative expenditures, acted as a dampener. Also, there was a contraction in physical occupancy.

UDR Inc. UDR reported first-quarter 2023 FFO as adjusted (FFOA) per share of 60 cents, missing the Zacks Consensus Estimate by a whisker.

Revenues from rental income of $398.3 million, too, lagged the Zacks Consensus Estimate of $404.5 million.

Quarterly results reflect lower-than-anticipated revenues. A fall in occupancy and higher same-store expenses act as dampeners. Nonetheless, UDR benefited from a rise in blended lease rates and past accretive external growth investments. It also reaffirmed its 2023 outlook.

On a year-over-year basis, FFOA per share and revenues from rental income climbed 9.1% and 11.8%, respectively.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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