AvalonBay (AVB) Q3 FFO Lags Estimates, Urban Assets Struggle
AvalonBay Communities, Inc.’s AVB third-quarter 2020 core funds from operations (FFO) per share of $2.06 missed the Zacks Consensus Estimate of $2.16. The reported tally also declined 12% year over year from the prior-year quarter’s $2.34.
Results reflect decline in residential rental revenues, driven by concessions, occupancy and uncollectible lease revenues. While weak same-store results is mainly due to the urban portfolio, the sub-urban portfolio is performing better.
Total revenues of $567.4 million slipped 3.4% year over year. However, the revenue figure surpassed the Zacks Consensus Estimate of $563 million.
The company also noted about the residential revenue collections for established communities, through Oct 27. The collected residential revenues for third quarter improved to 96.1% as of Oct 27 from 95.2% at quarter end. Moreover, collected residential revenues for October was 92.4% as of Oct 27, 2020.
Quarter in Detail
In the reported quarter, revenues from established communities decreased 6.1% year over year to $508.6 million. Residential and commercial uncollectible lease revenues resulted in this decrease.
Operating expenses for established communities flared up 3.5% on a year-over-year basis. Consequently, NOI from established communities dropped 10.1% year on year to $342.9 million.
During the July-September period, the company accomplished the development of Avalon Public Market in Emeryville, CA. It contains 289 apartment homes and was constructed for $175 million. As of Sep 30, 2020, AvalonBay had 17 consolidated development communities under construction (expected to contain 5,581 apartment homes and 64,000 square feet of commercial space). The estimated total capital cost at completion for these development communities is $2.1 billion.
As of Sep 30, 2020, the projected total capital cost of development rights decreased to $3.9 billion from the prior-quarter end’s $4.2 billion.
During the third quarter, the company sold a wholly-owned operating community — Avalon Towers — in Long Beach, NY, for $54 million, leading to an economic gain of $13.6 million.
Balance Sheet Position
As of Sep 30, 2020, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility.The company had $182.4 million in unrestricted cash and cash in escrow as of the same date. In addition, its annualized net debt-to-core EBITDAre for the July-September quarter was 5.4 times and unencumbered NOI was 94%.
Stock-Repurchase Program
In July, AvalonBay’s board of directors also approved a new stock-repurchase program, under which it might acquire shares of its common stock up to an aggregate purchase price of $500 million in open market or negotiated transactions.There is no expiration date for this stock-repurchase program. Through the date of its third quarter earnings release, the company repurchased 1,131,919 shares of common stock at an average price of $150.11 per share under this program.
AvalonBay 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
Essex Property Trust Inc. ESS reported third-quarter 2020 core FFO per share of $3.15, missing the Zacks Consensus Estimate of $3.16. The figure also fell 6% from the year-ago quarter’s $3.35. Results reflected a choppy environment due to the coronavirus pandemic and subsequent economic recession that prevailed throughout the third quarter. Cash concessions and delinquencies affected same-property revenues during the quarter.
Equity Residential’s EQR third-quarter normalized FFO per share of 77 cents missed the Zacks Consensus Estimate of 82 cents. The reported figure also declined 15.4% year over year. According to its president and CEO Mark J. Parrell, roughly 23% of the company’s portfolio positioned in the urban cores of New York, San Francisco and Boston continues to struggle amid pandemic-related reductions in economic activity. This resulted in a fall in occupancy, lower resident-renewal levels and an associated drop in rental rates.
Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported third-quarter 2020 core funds from operations (FFO) per share of $1.57, surpassing the Zacks Consensus Estimate of $1.53. The reported figure remained flat year over year. The residential REIT’s quarterly results reflect rise in average effective rent per unit for the same-store portfolio.
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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