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AvalonBay (AVB) Q1 FFO Misses Estimates, Revenues Up Y/Y
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AvalonBay Communities, Inc.’s (AVB - Free Report) first-quarter 2017 core funds from operations (“FFO”) per share of $2.09 missed the Zacks Consensus Estimate of $2.11. However, the figure grew 6.1% from the year-ago number of $1.97.
Growth in net operating income (“NOI”) from existing, acquired and newly developed operating communities attributed to this year-over-year increase. However, the benefit was partly offset by a rise in interest expense.
Total revenue of this residential real estate investment trust (“REIT”) climbed 2.7% year over year to $522.3 million as revenues from stabilized operating communities and development communities reported growth. Total revenue also surpassed the Zacks Consensus Estimate of $521.3 million.
Quarter in Detail
For the quarter, average rental rates were up 3.1% year over year, with the highest increase in the Pacific North West portfolio (6.1%), followed by the South California (4.5%) and Metro NY/NJ (2.8%) portfolios.
Revenues from established communities – those that stabilized operations as of Jan 1, 2016 and are neither executing nor planning any significant redevelopment work during the current year – improved 3.2% year over year. This was driven by a 3.1% rise in average rental rates and 0.1% increase in economic occupancy.
However, operating expenses for established communities inched up 1.5% on a year-over-year basis. Consequently, net operating income from established communities rose 3.9% year over year to $276.1 million.
Solid Liquidity Position
As of Mar 31, 2017, AvalonBay had no borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around $368.7 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for first-quarter 2017 was 5.0 times.
Casualty and Impairment Loss
In Feb 2017, AvalonBay declared the occurrence of fire at the Avalon Maplewood apartment community in Maplewood, NJ. The property was under construction and unoccupied. As a result, during the reported quarter, the company realized a casualty loss that was partly compensated by expected property damage insurance proceeds, a share of which were received, leading to a net casualty loss of around $2.3 million.
Outlook
AvalonBay expects its FFO per share in the range of $2.18–$2.24 and core FFO per share in the band of $2.07–$2.13 for second-quarter 2017. Currently, the Zacks Consensus Estimate for the quarter is pegged at $2.16.
In Conclusion
AvalonBay is well poised to grow on the back of its solid portfolio of high quality assets in premium locations. In addition, the company has a healthy balance sheet. However, completion of a number of projects in the company’s markets, leading to higher supply, is likely to result in moderation of rent growth. Moreover, hike in interest rates remains a concern.
Over the past three months, shares of AvalonBay outperformed the Zacks categorized REIT and Equity Trust – Residential industry. Over this time frame, AvalonBay’s shares logged in a return of 9.0% as against 5.2% growth recorded by the industry.
Let us now look forward to the earnings releases of Ventas, Inc. (VTR - Free Report) , Host Hotels & Resorts, Inc. (HST - Free Report) and GGP Inc. , all of which are expected to report their quarterly numbers in the upcoming days.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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AvalonBay (AVB) Q1 FFO Misses Estimates, Revenues Up Y/Y
AvalonBay Communities, Inc.’s (AVB - Free Report) first-quarter 2017 core funds from operations (“FFO”) per share of $2.09 missed the Zacks Consensus Estimate of $2.11. However, the figure grew 6.1% from the year-ago number of $1.97.
Growth in net operating income (“NOI”) from existing, acquired and newly developed operating communities attributed to this year-over-year increase. However, the benefit was partly offset by a rise in interest expense.
Total revenue of this residential real estate investment trust (“REIT”) climbed 2.7% year over year to $522.3 million as revenues from stabilized operating communities and development communities reported growth. Total revenue also surpassed the Zacks Consensus Estimate of $521.3 million.
Quarter in Detail
For the quarter, average rental rates were up 3.1% year over year, with the highest increase in the Pacific North West portfolio (6.1%), followed by the South California (4.5%) and Metro NY/NJ (2.8%) portfolios.
Revenues from established communities – those that stabilized operations as of Jan 1, 2016 and are neither executing nor planning any significant redevelopment work during the current year – improved 3.2% year over year. This was driven by a 3.1% rise in average rental rates and 0.1% increase in economic occupancy.
However, operating expenses for established communities inched up 1.5% on a year-over-year basis. Consequently, net operating income from established communities rose 3.9% year over year to $276.1 million.
Solid Liquidity Position
As of Mar 31, 2017, AvalonBay had no borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around $368.7 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for first-quarter 2017 was 5.0 times.
Casualty and Impairment Loss
In Feb 2017, AvalonBay declared the occurrence of fire at the Avalon Maplewood apartment community in Maplewood, NJ. The property was under construction and unoccupied. As a result, during the reported quarter, the company realized a casualty loss that was partly compensated by expected property damage insurance proceeds, a share of which were received, leading to a net casualty loss of around $2.3 million.
Outlook
AvalonBay expects its FFO per share in the range of $2.18–$2.24 and core FFO per share in the band of $2.07–$2.13 for second-quarter 2017. Currently, the Zacks Consensus Estimate for the quarter is pegged at $2.16.
In Conclusion
AvalonBay is well poised to grow on the back of its solid portfolio of high quality assets in premium locations. In addition, the company has a healthy balance sheet. However, completion of a number of projects in the company’s markets, leading to higher supply, is likely to result in moderation of rent growth. Moreover, hike in interest rates remains a concern.
AvalonBay currently has 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 and EPS Surprise | AvalonBay Communities, Inc. Quote
Over the past three months, shares of AvalonBay outperformed the Zacks categorized REIT and Equity Trust – Residential industry. Over this time frame, AvalonBay’s shares logged in a return of 9.0% as against 5.2% growth recorded by the industry.
Let us now look forward to the earnings releases of Ventas, Inc. (VTR - Free Report) , Host Hotels & Resorts, Inc. (HST - Free Report) and GGP Inc. , all of which are expected to report their quarterly numbers in the upcoming days.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>