AvalonBay Communities, Inc. Announces First Quarter 2013 Operating Results

  AvalonBay Communities, Inc. Announces First Quarter 2013 Operating Results

Business Wire

ARLINGTON, Va. -- April 30, 2013

AvalonBay Communities, Inc. (NYSE: AVB) (the “Company”) reported today that
Net Income Attributable to Common Stockholders (“Net Income”) for the quarter
ended March 31, 2013 was $75,427,000. This resulted in Earnings per Share –
diluted (“EPS”) of $0.63 for the quarter ended March 31, 2013, compared to EPS
of $0.60 for the comparable period of 2012, an increase of 5.0%.

The increase in EPS for the quarter ended March 31, 2013 over the prior year
period is due primarily to community sales and related gains in 2013 not
present in 2012, and an increase in Net Operating Income (“NOI”) from the
Archstone Acquisition and existing and newly developed communities. This
increase is offset partially by acquisition costs and increased depreciation
associated with the Archstone Acquisition.

Funds from Operations attributable to common stockholders - diluted (“FFO”)
per share for the quarter ended March 31, 2013 decreased 39.1% to $0.78 from
$1.28 for the comparable period of 2012. Adjusting for non-routine items as
detailed in the definitions of this release, including the impact of
prefunding the Archstone Acquisition, FFO per share for the three months ended
March 31, 2013 would have increased by 17.1% over the prior year period.

The following table compares the Company’s first quarter 2013 actual results
to its January 2013 outlook:

                                                             
First Quarter 2013 Results
Comparison to January 2013 Outlook
                                      
                                                                  Per Share
                                                                  
FFO loss per share Q1 2013 - January 2013 Outlook (1)             $ (0.64)
                                                                  
Change in Archstone Acquisition related costs (2)                 0.88
Interest rate contract & other (3)                                0.50
Community NOI, including Archstone                                0.04
                                                                  
FFO per share Q1 2013 reported results                            $ 0.78
                                                                  
(1) Represents the mid-point of the Company's Q1 2013 outlook.
(2) See Archstone Acquisition discussion on page two of this release for
details.
(3) Recognition of swap settlement deferred to Q4 2013.


Commenting on the Company’s results, Tim Naughton, CEO and President, said,
“This quarter we completed, along with our partner, the acquisition of
Archstone while posting adjusted FFO growth of 17%. This growth was driven by
portfolio operations, as Same Store NOI was up over 5 1/2%, as well as strong
leasing performance from our development communities, where rents and leasing
velocity exceeded our initial expectations.”

Operating Results for the Quarter Ended March 31, 2013 Compared to the Prior
Year Period

For the Company, including discontinued operations, total revenue increased by
$60,872,000, or 23.9% to $315,359,000. For Established Communities, rental
revenue increased 4.9%, attributable to increases in average rental rates of
4.7% and Economic Occupancy of 0.2%. As a result, total revenue for
Established Communities increased $9,655,000 to $205,822,000. Operating
expenses for Established Communities increased $2,034,000, or 3.3%, to
$62,801,000. Accordingly, NOI for Established Communities increased by 5.6%,
or $7,621,000, to $143,021,000.

The following table reflects the percentage changes in rental revenue,
operating expenses and NOI for Established Communities from the first quarter
of 2013 compared to the first quarter of 2012:

                                                            
Q1 2013 Compared to Q1 2012
                                                             
                        Rental         Operating        NOI         % of
                        Revenue        Expenses                     NOI ^ (1)
                                                                    
New England             3.2%           6.0%             1.7%        16.5%
Metro NY/NJ             4.9%           3.6%             5.5%        28.9%
Mid-Atlantic            1.5%           1.3%             1.6%        14.6%
Pacific NW              8.9%           5.9%             10.5%       4.4%
No. California          8.7%           0.6%             11.6%       19.0%
So. California          4.5%           1.6%             5.9%        16.6%
Total                   4.9%           3.3%             5.6%        100.0%
                                                                    
                                                                    
(1) Total represents each region's % of total NOI from the Company, including
discontinued operations.



Development Pipeline Activity

During the first quarter of 2013, the Company added ten development rights,
consisting of six development rights acquired as part of the Archstone
Acquisition, and four development rights sourced from the Company’s existing
investment activities. The development rights acquired as part of the
Archstone Acquisition, if developed as expected, will contain 2,064 apartment
homes and will be developed for a Total Capital Cost of $724,000,000. The four
development rights sourced from the Company’s existing investment activities,
if developed as expected, will contain 1,076 apartment homes and will be
developed for a Total Capital Cost of $312,000,000.

The Company acquired seven land parcels during the quarter ended March 31,
2013 for an aggregate purchase price of approximately $81,800,000, including
six land parcels acquired as part of the Archstone Acquisition. The Company
anticipates starting construction on four of these land parcels in the next
twelve months.

Development Construction Activity

During the first quarter of 2013, the Company started the construction of two
communities: AVA Stuart Street, located in Boston, MA, and Avalon Huntington
Station, located in Huntington Station, NY. These two communities will contain
701 apartment homes when completed and will be developed for an estimated
Total Capital Cost of $259,000,000.

During the first quarter of 2013, the Company completed the development of
three communities: Avalon Garden City, located in Garden City, NY, Avalon Park
Crest, located in Tysons Corner, VA and AVA H Street, located in Washington,
DC. These three communities contain 696 apartment homes and were constructed
for an aggregate Total Capital Cost of $179,000,000.

As part of the Archstone Acquisition, the Company acquired five apartment
communities under construction and one apartment community in lease-up. The
communities under construction include Archstone Toscano in Houston, TX;
Archstone Parkland Gardens in Arlington, VA; Archstone Memorial Heights Phase
I in Houston, TX; Archstone West Valley Expansion in San Jose, CA and
Archstone Berkeley on Addison in Berkeley, CA; and are expected to contain an
aggregate of 1,198 apartment homes and are being constructed for an estimated
Total Capital Cost of $281,900,000.

Archstone First & M Phase I, located in Washington DC, was completed in a
prior quarter and is currently in lease-up. This community contains 469
apartment homes and was acquired for a Total Capital Cost of $200,000,000.

Redevelopment Activity

During the first quarter of 2013, the Company completed the redevelopment of
two communities under its eaves brand. These communities contain 581 apartment
homes and were redeveloped for an aggregate Total Capital Cost of $18,800,000,
excluding costs incurred prior to redevelopment.

Archstone Acquisition

As previously disclosed, on February 27, 2013, the Company and Equity
Residential acquired all of the assets and assumed all of the liabilities of
Archstone Enterprise LP (“Archstone,” which has since changed its name to
Jupiter Enterprise LP). Under the terms of the agreements related to this
transaction, the Company acquired approximately 40% of Archstone’s assets and
liabilities consisting primarily of direct and indirect interests in 64
operating communities, six communities currently under development and/or in
lease-up, and interests in development rights and certain other joint ventures
(the “Archstone Acquisition”).

As consideration, the Company issued 14,889,706 shares of its common stock,
assumed $3,512,000,000 principal amount of consolidated secured indebtedness,
paid $749,000,000 in cash consideration and assumed certain other of
Archstone’s liabilities. Concurrent with the closing of the transaction, the
Company repaid $1,478,000,000 principal amount of the indebtedness assumed.

The Company’s results for the three months ended March 31, 2013 include
approximately $69,271,000 in acquisition costs related to the Archstone
Acquisition. The following table details the components of the lower than
expected expensed acquisition costs for the first quarter of 2013:

                                                            
First Quarter 2013 Results
Change in Archstone Expensed Acquisition Costs
                                                            
                                                                 Per Share
                                                                 
          Change in accounting classification                    (0.36)
          Cost Savings                                           (0.35)
          Costs expected to be recognized later in 2013          (0.17)
                                                                 
  Total change in expensed Archstone Acquisition costs 1Q 2013   $ (0.88)

                                                                 

Disposition Activity

During the first quarter of 2013, the Company sold Avalon at Decoverly located
in Rockville, MD. The community contains 564 apartment homes and was sold for
$135,250,000. The disposition resulted in a gain in accordance with GAAP of
$84,491,000 and an Economic Gain of $62,641,000.

In March 2013, the Company also sold two apartment communities that were
acquired as part of the Archstone Acquisition. Crystal House and Crystal House
II are located in Arlington, VA, contain an aggregate of 827 apartment homes
and were sold for $197,150,000.

During the first quarter of 2013, AvalonBay Value Added Fund, L.P. (“Fund I”),
a private discretionary real estate investment vehicle in which the Company
holds an equity interest of approximately 15%, sold Avalon Yerba Buena,
located in San Francisco, CA. This community contains 160 apartment homes and
32,000 square feet of retail space, and was sold for $103,000,000.

Also during the first quarter of 2013, AvalonBay Value Added Fund II, L.P.
(“Fund II”), a private discretionary real estate investment vehicle in which
the Company holds an equity interest of approximately 31%, sold Avalon
Rothbury, located in Gaithersburg, MD. Avalon Rothbury contains 205 apartment
homes and was sold for $39,600,000.

The Company’s aggregate share of the gain in accordance with GAAP for the
dispositions by Fund I and Fund II was $9,352,000.

Financing, Liquidity and Balance Sheet Statistics

At March 31, 2013, the Company had no amounts outstanding under its
$1,300,000,000 unsecured credit facility.

At March 31, 2013, the Company had $541,106,000 in unrestricted cash and cash
in escrow.

Debt Assumption and Repayment Activity

In addition to the net debt assumed as consideration for the Archstone
Acquisition in February 2013, the Company had the following debt activity
through the date of this release.

In March 2013, the Company repaid $100,000,000 principal amount of its 4.95%
coupon unsecured notes pursuant to their scheduled maturity.

In April 2013, the Company repaid a 4.69% fixed-rate, secured mortgage note in
the amount of $170,125,000 pursuant to its scheduled maturity.

Second Quarter 2013 and Full Year Financial Outlook

For the second quarter of 2013, the Company expects EPS in the range of $0.04
to $0.08 and expects Projected FFO per share in the range of $1.49 to $1.53.

For the full year 2013, the Company expects EPS in the range of $1.37 to $1.67
and expects Projected FFO per share in the range of $4.98 to $5.28.

The Company’s results of operations for the first quarter 2013 and its outlook
for the balance of 2013 include certain non-routine items, detailed further in
the following table:


                                Actual          Projected
                                    Q1 2013          Q2 2013       FY 2013
FFO per share (1)                   $   0.78         $   1.51       $   5.13
Non-Routine Items (2):
Acquisition costs (3)                   0.58             0.06           0.69
Interest rate hedge                     (0.01)           -              0.42
Other                                  0.01            0.01          0.05
FFO per share excluding             $   1.36         $   1.58       $   6.29
non-routine items
                                                                    
                                                                    
(1) For Projected FFO per share, represents the mid-point of the Company's
Outlook.
(2) Additional detail for non-routine items incurred in Q1 2013 is provided in
the definitions of this release.
(3) Relates primarily to costs for the Archstone Acquisition.



Second Quarter 2013 Conference/Event Schedule

The Company is scheduled to participate in the NAREIT Investor Forum in
Chicago, IL, from June 5-7, 2013 and host an Investor Day in Washington, D.C.
on June 26, 2013. The Company will present and conduct a question and answer
session at the events. Management may discuss the Company's current operating
environment; operating trends; development, redevelopment, disposition and
acquisition activity; financial outlook; portfolio strategy and other business
and financial matters affecting the Company. Details on how to access a
webcast of the Company's presentations will be available in advance of the
conference event and Investor Day at the Company's website at
http://www.avalonbay.com/events.

Other Matters

The Company will hold a conference call on May 1, 2013 at 2:00 PM ET to review
and answer questions about this release, its first quarter 2013 results, the
Attachments (described below) and related matters. To participate on the call,
dial 877-510-2397 domestically and 763-416-6924 internationally and use
conference id: 34120286.

To hear a replay of the call, which will be available from May 1, 2013 at 6:00
PM ET to May 7, 2013 at 11:59 PM ET, dial 855-859-2056 domestically and
404-537-3406 internationally, and use conference id: 34120286. A webcast of
the conference call will also be available at
http://www.avalonbay.com/earnings, and an on-line playback of the webcast will
be available for at least 30 days following the call.

The Company produces Earnings Release Attachments (the "Attachments") that
provide detailed information regarding operating, development, redevelopment,
disposition and acquisition activity. These Attachments are considered a part
of this earnings release and are available in full with this earnings release
via the Company's website at http://www.avalonbay.com/earnings. To receive
future press releases via e-mail, please submit a request through
http://www.avalonbay.com/email.

About AvalonBay Communities, Inc.

As of March 31, 2013, the Company owned or held a direct or indirect ownership
interest in 272 apartment communities containing 81,279 apartment homes in
twelve states and the District of Columbia, of which 27 communities were under
construction and five communities were under reconstruction. The Company is an
equity REIT in the business of developing, redeveloping, acquiring and
managing apartment communities in high barrier-to-entry markets of the United
States. More information may be found on the Company’s website at
http://www.avalonbay.com. For additional information, please contact Jason
Reilley, Director of Investor Relations at 1-703-317-4681.

Forward-Looking Statements

This release, including its Attachments, contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. You can
identify these forward-looking statements by the Company’s use of words such
as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,”
“believes,” “outlook” and similar expressions that do not relate to historical
matters. Actual results may differ materially from those expressed or implied
by the forward-looking statements as a result of risks and uncertainties,
which include the following: we may abandon development or redevelopment
opportunities for which we have already incurred costs; adverse capital and
credit market conditions may affect our access to various sources of capital
and/or cost of capital, which may affect our business activities, earnings and
common stock price, among other things; changes in local employment
conditions, demand for apartment homes, supply of competitive housing
products, and other economic conditions may result in lower than expected
occupancy and/or rental rates and adversely affect the profitability of our
communities; delays in completing development, redevelopment and/or lease-up
may result in increased financing and construction costs and may delay and/or
reduce the profitability of a community; debt and/or equity financing for
development, redevelopment or acquisitions of communities may not be available
or may not be available on favorable terms; we may be unable to obtain, or
experience delays in obtaining, necessary governmental permits and
authorizations; increases in costs of materials, labor or other expenses may
result in communities that we develop or redevelop failing to achieve expected
profitability; we may not be able to integrate the assets and operations
acquired in the Archstone Acquisition in a manner consistent with our
assumptions and/or we may fail to achieve expected efficiencies and synergies;
we may encounter liabilities related to the Archstone Acquisition for which we
may be responsible that were unknown to us at the time we completed the
Archstone Acquisition or at the time of this press release; and our
assumptions concerning risks relating to our lack of control of joint ventures
and our abilities to successfully dispose of certain assets may not be
realized. Additional discussions of risks and uncertainties appear in the
Company’s filings with the Securities and Exchange Commission, including the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2012 under the heading “Risk Factors” and under the heading “Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Forward-Looking Statements” and in subsequent quarterly reports on Form 10-Q.
The Company does not undertake a duty to update forward-looking statements,
including its expected second quarter and full year 2013 operating results.
The Company may, in its discretion, provide information in future public
announcements regarding its outlook that may be of interest to the investment
community. The format and extent of future outlooks may be different from the
format and extent of the information contained in this release.

Definitions and Reconciliations

Non-GAAP financial measures and other capitalized terms, as used in this
earnings release, are defined and further explained on Attachment 13,
“Definitions and Reconciliations of Non-GAAP Financial Measures and Other
Terms.” Attachment 13 is included in the full earnings release available at
the Company’s website at http://www.avalonbay.com/earnings. This wire
distribution includes only definitions and reconciliations of the following
non-GAAP financial measures:

FFO is determined based on a definition adopted by the Board of Governors of
the National Association of Real Estate Investment Trusts (“NAREIT”). FFO is
calculated by the Company 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, extraordinary gains or
losses (as defined by GAAP), cumulative effect of a change in accounting
principle, impairment write-downs of depreciable real estate assets,
write-downs of investments in affiliates which are driven by a decrease in the
value of depreciable real estate assets held by the affiliate and depreciation
of real estate assets, including adjustments for unconsolidated partnerships
and joint ventures. Management generally considers FFO to be an appropriate
supplemental measure of operating performance because, by excluding gains or
losses related to dispositions of previously depreciated operating communities
and excluding 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 company’s real estate between periods or as compared to different companies.
A reconciliation of FFO to Net income attributable to common stockholders is
as follows (dollars in thousands):


                                          2013            2012         
                                                                  
    Net income attributable to common
       stockholders                           $ 75,427          $ 57,758
    Depreciation - real estate assets,
       including discontinued operations
       and joint venture adjustments            111,944           65,292
    Distributions to noncontrolling
    interests,
       including discontinued operations        8                 7
    Gain on sale of unconsolidated entities
       holding previously depreciated real
       estate
       assets                                   (9,352      )     (1,086     )
    Gain on sale of previously depreciated
       real estate assets                       (84,491     )     --
                                                               
    FFO attributable to common stockholders   $ 93,536         $ 121,971    
                                                                  
    Average shares outstanding - diluted        120,111,128       95,653,779
                                                                  
    Earnings per share - diluted              $ 0.63           $ 0.60       
                                                                  
    FFO per common share - diluted            $ 0.78           $ 1.28       



The Company’s results for the three months ended March 31, 2013 and the
comparable prior year period include the non-routine items outlined in the
following table:


 Non-Routine Items
  Decrease (Increase) in Net Income and FFO
  (dollars in thousands)
                                                         
                                        Q1                      Q1
                                        2013                    2012
                                                                
  Acquisition costs (1)                 $ 39,814                $ 92
  Joint venture related losses          30,006                  203
  and costs (2)
  Interest rate protection              (1,414)                 -
  agreement unrealized gain
  Net interest expense -                835                     -
  unsecured debt (3)
  Compensation plan redesign            1,475                   307
  and severance related costs
  Prepayment penalties and
  write off of deferred
  financing costs                       -                       1,179
                                                               
  Total Non-routine items               $70,716                 $1,781
                                                                
  Weighted average dilutive             120,111,128             95,653,779
  shares outstanding
  Incremental shares for
  Archstone Acquisition                 11,116,667              -
  prefunding (4)
                                                                
  (1) Amount for 2013 relates to the Archstone Acquisition and consists
  primarily of debt assumption costs, title charges, legal, consulting and
  other fees.
  (2) Includes both Archstone Acquisition related costs and yield maintenance
  costs for Fund I and Fund II dispositions.
  (3) Represents the net interest cost incurred in 2013 through the closing of
  the Archstone Acquisition related to the unsecured debt issued in December
  2012 in connection with the Archstone Acquisition less amounts earned on
  invested cash from the December 2012 unsecured debt and common share
  issuances.
  (4) Represents the impact on the weighted average shares outstanding through
  the closing of the Archstone Acquisition from the Company's issuance of
  common stock in December 2012 in anticipation of the Archstone Acquisition.

Projected FFO, as provided within this release in the Company’s outlook, is
calculated on a basis consistent with historical FFO, and is therefore
considered to be an appropriate supplemental measure to projected Net Income
from projected operating performance. A reconciliation of the range provided
for Projected FFO per share (diluted) for the second quarter and full year
2013 to the range provided for projected EPS (diluted) are as follows:


                                                      Low       High
                                                         Range        Range
                                                                      
    Projected EPS (diluted) - Q2 2013                    $ 0.04       $ 0.08
    Projected depreciation (real estate related)         1.55         1.59
    Projected gain on sale of operating communities      (0.10)       (0.14)
                                                                      
    Projected FFO per share (diluted) - Q2 2013          $ 1.49       $ 1.53
                                                                      
    Projected EPS (diluted) - Full Year 2013             $ 1.37       $ 1.67
    Projected depreciation (real estate related)         4.62         4.92
    Projected gain on sale of operating communities      (1.01)       (1.31)
                                                                      
    Projected FFO per share (diluted) - Full Year 2013   $ 4.98       $ 5.28



NOI is defined by the Company as total property revenue less direct property
operating expenses (including property taxes), and excludes corporate-level
income (including management, development and other fees), corporate-level
property management and other indirect operating expenses, investments and
investment management expenses, expensed development and other pursuit costs,
net interest expense, gain (loss) on extinguishment of debt, general and
administrative expense, joint venture income (loss), depreciation expense,
impairment loss on land holdings, gain on sale of real estate assets and
income from discontinued operations. The Company considers NOI to be an
appropriate supplemental measure to Net Income of operating performance of a
community or communities because it helps both investors and management to
understand the core operations of a community or communities prior to the
allocation of corporate-level property management overhead or general and
administrative costs. This is more reflective of the operating performance of
a community, and allows for an easier comparison of the operating performance
of single assets or groups of assets. In addition, because prospective buyers
of real estate have different overhead structures, with varying marginal
impact to overhead by 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 groups of assets. A reconciliation of NOI (from
continuing operations) to Net Income, as well as a breakdown of NOI by
operating segment, is as follows (dollars in thousands):


                                 Q1           Q1          Q4
                                      2013            2012           2012
                                                                     
    Net income                        $ 75,469        $ 57,609       $ 122,384
    Indirect operating expenses,      9,041           8,036          7,862
    net of corporate income
    Investments and investment        1,015           1,446          1,545
    management expense
    Expensed acquisition,
    development and other pursuit     40,059          239            9,601
    costs
    Interest expense, net             38,174          33,626         36,117
    Loss on extinguishment of debt,   --              1,179          --
    net
    General and administrative        10,039          9,710          7,703
    expense
    Joint venture loss (income)       18,564          (2,175)        (11,113)
    Depreciation expense              109,829         61,571         65,567
    Impairment loss                   --              --             1,449
    Gain on sale of real estate       (84,491)        --             (51,262)
    assets
    (Income) loss from discontinued   (2,446)         (3,935)        (2,885)
    operations
                                      $ 215,253       $              $ 186,968
                                                      167,306
    NOI from continuing operations
                                                                     
             New England              $ 28,577        $ 28,087       $ 29,637
             Metro NY/NJ              42,439          40,233         42,150
             Mid-Atlantic             18,188          17,902         18,218
             Pacific NW               7,850           7,106          7,782
             No. California           27,504          24,637         26,716
             So. California           18,463          17,435         18,192
                    Total             143,021         135,400        142,695
                    Established
    Other Stabilized (excluding       31,823          20,053         30,260
    Archstone)
    Other Stabilized - Archstone      24,420          --             --
    Development/Redevelopment         15,989          11,853         14,013
    NOI from continuing operations    $ 215,253       $              $ 186,968
                                                      167,306



NOI as reported by the Company does not include the operating results from
discontinued operations (i.e., assets sold during the period January 1, 2012
through March 31, 2013 or classified as held for sale at March 31, 2013). A
reconciliation of NOI from communities sold or classified as discontinued
operations to Net Income for these communities is as follows (dollars in
thousands):


                                        Q1         Q1
                                              2013          2012
                                                            
                                                            
    Income from discontinued operations       $ 2,446       $ 3,935
    Interest expense, net                     --            80
    Depreciation expense                      --            1,741
                                                            
       NOI from discontinued operations       $ 2,446       $ 5,756
                                                            
    NOI from assets sold                      2,446         5,756
                                                            
       NOI from discontinued operations       $ 2,446       $ 5,756

                                                            

Projected NOI, as used within this release for certain development communities
and in calculating the Initial Year Market Cap Rate for dispositions,
represents management’s estimate, as of the date of this release (or as of the
date of the buyer’s valuation in the case of dispositions), of projected
stabilized rental revenue minus projected stabilized operating expenses. For
development communities, Projected NOI is calculated based on the first twelve
months of stabilized operations, following the completion of construction. In
calculating the Initial Year Market Cap Rate, Projected NOI for dispositions
is calculated for the first twelve months following the date of the buyer’s
valuation. Projected stabilized rental revenue represents management’s
estimate of projected gross potential minus projected stabilized economic
vacancy and adjusted for projected stabilized concessions plus projected
stabilized other rental revenue. Projected stabilized operating expenses do
not include interest, income taxes (if any), depreciation or amortization, or
any allocation of corporate-level property management overhead or general and
administrative costs. Projected gross potential for development communities
and dispositions is based on leased rents for occupied homes and management’s
best estimate of rental levels for homes which are currently unleased, as well
as those homes which will become available for lease during the twelve month
forward period used to develop Projected NOI. The weighted average Projected
NOI as a percentage of Total Capital Cost is weighted based on the Company’s
share of the Total Capital Cost of each community, based on its percentage
ownership.

Management believes that Projected NOI of the development communities, on an
aggregated weighted average basis, assists investors in understanding
management's estimate of the likely impact on operations of the development
communities when the assets are complete and achieve stabilized occupancy
(before allocation of any corporate-level property management overhead,
general and administrative costs or interest expense). However, in this
release the Company has not given a projection of NOI on a company-wide basis.
Given the different dates and fiscal years for which NOI is projected for
these communities, the projected allocation of corporate-level property
management overhead, general and administrative costs and interest expense to
communities under development is complex, impractical to develop, and may not
be meaningful. Projected NOI of these communities is not a projection of the
Company's overall financial performance or cash flow. There can be no
assurance that the communities under development or redevelopment will achieve
the Projected NOI as described in this release.

Rental Revenue with Concessions on a Cash Basis is considered by the Company
to be a supplemental measure to rental revenue in conformity with GAAP to help
investors evaluate the impact of both current and historical concessions on
GAAP-based rental revenue and to more readily enable comparisons to revenue as
reported by other companies. In addition, rental revenue (with concessions on
a cash basis) allows an investor to understand the historical trend in cash
concessions.

A reconciliation of rental revenue from Established Communities in conformity
with GAAP to rental revenue (with concessions on a cash basis) is as follows
(dollars in thousands):


                                                Q1           Q1
                                                     2013            2012
                                                                     
    Rental revenue (GAAP basis)                      $ 205,744       $ 196,101
    Concessions amortized                            52              385
    Concessions granted                              (37)            (163)
                                                                     
    Rental revenue (with concessions on a cash       $205,759        $ 196,323
    basis)
                                                                     
    % change -- GAAP revenue                                         4.9%
    % change -- cash revenue                                         4.8%

                                                                     

Economic Gain (Loss) is calculated by the Company as the gain (loss) on sale
in accordance with GAAP, less accumulated depreciation through the date of
sale and any other non-cash adjustments that may be required under GAAP
accounting. Management generally considers Economic Gain (Loss) to be an
appropriate supplemental measure to gain (loss) on sale in accordance with
GAAP because it helps investors to understand the relationship between the
cash proceeds from a sale and the cash invested in the sold community. The
Economic Gain (Loss) for each of the communities presented is estimated based
on their respective final settlement statements. A reconciliation of Economic
Gain (Loss) to gain on sale in accordance with GAAP for the quarter ended
March 31, 2013 as well as prior years’ activities is presented in the full
earnings release.

Interest Coverage is calculated by the Company as EBITDA from continuing
operations, excluding land gains and gain on the sale of investments in real
estate joint ventures, divided by the sum of interest expense, net, and
preferred dividends. Interest Coverage is presented by the Company because it
provides rating agencies and investors an additional means of comparing our
ability to service debt obligations to that of other companies. EBITDA is
defined by the Company as net income or loss attributable to the Company
before interest income and expense, income taxes, depreciation and
amortization. The calculation of Interest Coverage for 2013 is impacted by the
reduction in net income caused by the Archstone Acquisition costs.

A reconciliation of EBITDA and a calculation of Interest Coverage for the
first quarter of 2013 are as follows (dollars in thousands):


  Net income attributable to common stockholders    $ 75,427
    Interest expense, net                                38,174
    Depreciation expense                                 109,829
                                                         
    EBITDA                                               $ 223,430
                                                         
    EBITDA from continuing operations                    $ 136,493
    EBITDA from discontinued operations                  86,937
                                                         
    EBITDA                                               $ 223,430
                                                         
    EBITDA from continuing operations                    $ 136,493
    
                  Interest expense, net                  $ 38,174
                                                         
    Interest coverage                                    3.6

                                                         

Total Capital Cost includes all capitalized costs projected to be or actually
incurred to develop the respective development or redevelopment community, or
development right, including land acquisition costs, construction costs, real
estate taxes, capitalized interest and loan fees, permits, professional fees,
allocated development overhead and other regulatory fees, all as determined in
accordance with GAAP. For redevelopment communities, Total Capital Cost
excludes costs incurred prior to the start of redevelopment when indicated.
With respect to communities where development or redevelopment was completed
in a prior or the current period, Total Capital Cost reflects the actual cost
incurred, plus any contingency estimate made by management. Total Capital Cost
for communities identified as having joint venture ownership, either during
construction or upon construction completion, represents the total projected
joint venture contribution amount. For joint ventures not in construction,
Total Capital Cost is equal to gross real estate cost.

Initial Year Market Cap Rate is defined by the Company as Projected NOI of a
single community for the first 12 months of operations (assuming no
repositioning), less estimates for non-routine allowance of approximately $300
- $500 per apartment home, divided by the gross sales price for the community.
Projected NOI, as referred to above, represents management’s estimate of
projected rental revenue minus projected operating expenses before interest,
income taxes (if any), depreciation, amortization and extraordinary items. For
this purpose, management’s projection of operating expenses for the community
includes a management fee of 2.5% -  3.5%. The Initial Year Market Cap Rate,
which may be determined in a different manner by others, is a measure
frequently used in the real estate industry when determining the appropriate
purchase price for a property or estimating the value for a property. Buyers
may assign different Initial Year Market Cap Rates to different communities
when determining the appropriate value because they (i) may project different
rates of change in operating expenses and capital expenditure estimates and
(ii) may project different rates of change in future rental revenue due to
different estimates for changes in rent and occupancy levels. The weighted
average Initial Year Market Cap Rate is weighted based on the gross sales
price of each community.

Unleveraged IRR on sold communities refers to the internal rate of return
calculated by the Company considering the timing and amounts of (i) total
revenue during the period owned by the Company and (ii) the gross sales price
net of selling costs, offset by (iii) the undepreciated capital cost of the
communities at the time of sale and (iv) total direct operating expenses
during the period owned by the Company. Each of the items (i), (ii), (iii) and
(iv) are calculated in accordance with GAAP.

The calculation of Unleveraged IRR does not include an adjustment for the
Company’s general and administrative expense, interest expense, or
corporate-level property management and other indirect operating expenses.
Therefore, Unleveraged IRR is not a substitute for Net Income as a measure of
our performance. Management believes that the Unleveraged IRR achieved during
the period a community is owned by the Company is useful because it is one
indication of the gross value created by the Company’s acquisition,
development or redevelopment, management and sale of a community, before the
impact of indirect expenses and Company overhead. The Unleveraged IRR achieved
on the communities as cited in this release should not be viewed as an
indication of the gross value created with respect to other communities owned
by the Company, and the Company does not represent that it will achieve
similar Unleveraged IRRs upon the disposition of other communities. The
weighted average Unleveraged IRR for sold communities is weighted based on all
cash flows over the holding period for each respective community, including
net sales proceeds.

Unencumbered NOI as calculated by the Company represents NOI generated by real
estate assets unencumbered by either outstanding secured debt or land leases
(excluding land leases with purchase options that were put in place for
governmental incentives or tax abatements) as a percentage of total NOI
generated by real estate assets. The Company believes that current and
prospective unsecured creditors of the Company view Unencumbered NOI as one
indication of the borrowing capacity of the Company. Therefore, when reviewed
together with the Company's Interest Coverage, EBITDA and cash flow from
operations, the Company believes that investors and creditors view
Unencumbered NOI as a useful supplemental measure for determining the
financial flexibility of an entity. A calculation of Unencumbered NOI for the
three months ended March 31, 2013 is shown in the table below (dollars in
thousands). The calculation of Unencumbered NOI for the three months ended
March 31, 2013 includes the impact for one month and one day of NOI
(encumbered and unencumbered) for communities acquired in the Archstone
Acquisition.


  NOI for Established Communities                               $ 143,021
    NOI for Other Stabilized Communities (excluding Archstone)       31,823
    NOI for Other Stabilized - Archstone                             24,420
    NOI for Development/Redevelopment Communities                    15,989
    NOI for discontinued operations                                  2,446
             Total NOI generated by real estate assets              217,699
    NOI on encumbered assets                                         65,127
              NOI on unencumbered assets                             152,572
                                                                     
    Unencumbered NOI                                                 70%

                                                                     

Established Communities are identified by the Company as communities where a
comparison of operating results from the prior year to the current year is
meaningful, as these communities were owned and had stabilized operations as
of the beginning of the prior year. Therefore, for 2013, Established
Communities are consolidated communities that have stabilized operations as of
January 1, 2012 and are not conducting or planning to conduct substantial
redevelopment activities within the current year. Established Communities do
not include communities that are currently held for sale or planned for
disposition during the current year. Established Communities do not include
communities acquired as part of the Archstone Acquisition.

Economic Occupancy is defined as total possible revenue less vacancy loss as a
percentage of total possible revenue. Total possible revenue is determined by
valuing occupied units at contract rates and vacant units at market rents.
Vacancy loss is determined by valuing vacant units at current market rents. By
measuring vacant apartments at their market rents, 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.

       Copyright © 2013 AvalonBay Communities, Inc. All Rights Reserved

Contact:

AvalonBay Communities, Inc.
Jason Reilley, Director of Investor Relations
1-703-317-4681
 
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