AvalonBay Says Rent Revenue to Be as Expected Amid Share Selloff

  • ‘Performance is consistent’ with company’s expectations
  • Stocks have declined since Equity Residential cut its forecast

As apartment investors worry about softening rents in New York and San Francisco, landlord AvalonBay Communities Inc. said it expects second-quarter revenue to be as it projected earlier this year.

For established apartment communities open at least a year, the company expects rental revenue to increase 4.9 percent to 5. 1 percent in the three months through June 30, Arlington, Virginia-based AvalonBay said in a statement Monday.

“This performance is consistent with what the company’s expectations were,” AvalonBay said in the statement.

The statement comes amid a selloff of apartment-owner shares since June 1, when Equity Residential lowered its revenue forecast for the second time this year. The Chicago-based company said that newly signed leases in New York and San Francisco weren’t meeting its projections because an increased number of newly built apartments in those cities were competing for renters’ attention.

The Bloomberg REIT Apartment Index of 15 publicly traded landlords has fallen 6.4 percent since May 31, the day before Equity Residential’s announcement. AvalonBay shares have declined 5.4 percent in the same period.

San Francisco and New York -- favored markets for landlords and developers in recent years because of their outsized rent growth -- have had a surge in construction that may now be limiting how much owners can raise rates. In San Francisco, where rents climbed 11 percent last year, about 5,100 new units -- the most in 26 years -- are expected to be listed for rent in 2016, data from research firm Reis Inc. show. In Manhattan, 5,675 apartments will be added to the rental inventory, according to brokerage Citi Habitats.