AVB - Earnings call transcript Q1 2022 | AvalonBay Communities, Inc.

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Operator

Good day, ladies and gentlemen, and Welcome to AvalonBay Communities’ First Quarter 2022 Earnings Conference Call.

As a reminder, today’s conference is been recorded. At this time, all participants are in a listen-only mode.

Following the remarks by the Company, we will conduct a question and answer session. [Operator Instructions] Your host for today’s conference call is Mr. of President Vice Reilley, Investor Relations. Jason Mr. may you begin your conference. Reilley,

Jason Reilley

And Thank Communities welcome first Jay. quarter AvalonBay call. to you, conference XXXX earnings

Company’s we as materially. are uncertainties SEC. press that XX-K during Before XX-Q forward-looking risks statements, Form and note and may results with in a please made may release filed discussion actual be these differ uncertainties Forward-Looking associated afternoon’s this is Form variety as in the a Statements There the yesterday and well of There risks and discussion. with begin, of

As to and review and definitions this is used attachment usual, this call Communities, and we of press in and you release financial I be refer does The results www.avalonbay.com/earnings, include operating discussion. with CEO also the an the for available and will remarks. performance. attachment turn our of Schall, other President with today’s during may on financial Ben reconciliations information of terms, And our over which Ben. measures AvalonBay his at non-GAAP to that, to encourage website

Benjamin Schall

moment. increase a guidance. into year-over-year outperformance of Core our a all Q&A. joining FFO results. dive X XX.X% our And are thanks deeper start strong strong remarks presentation. by $X.XX was per midpoint we we Matt Sean with some operating expect in for of to will the year Slide Jason. us prepared and call. a on came at be joined that will continue and $X.XX, very a to very Kevin and Starting Thanks, on I above in for today’s open QX I of share to drivers of and the what

X.X% allocation development growth on to our yield front, meaningful robust developments with creation platform On earnings continues a this completed leading very capital quarter. the and value drive industry

rates. to about of cap at For are yield substantial represents a spread we an the X.X%, current which completions average million year, XXX market projecting of

are also slower we the grow, regions. sale we of portfolio assets through selective optimizing As established the growth our older, from

of at with million X% in XXX we primarily for the to $XXX of with And rate into an XXXX, high opportunistically draw equity a then of cost down cap markets. an development source quarter what on our million capital we capital expansion spread. board intention April, This in locking our dispositions expect in a expected be executed to for as redeploy end to activity through this and acquisitions of at creative capital future the

GAAP basis X% residential Slide basis, to point almost on increase a Turning X. On debt. led rates XX%. a increased and revenue year-over-year residential net in increased revenue effective improvement cash by about lease a basis a X.X% bad in XXX

expected better tailwinds and Slide Chart collections X.X% debt revenue supported guidance number been assumed increase our roommates to miles shown to of urban above our levels, lease XXX expectations. and from particularly speaks than a and to indicator and X, we portfolio. growth established which QX GAAP our across back we continued space, elevated and Slide performance bulk occupancy the a at of as job for continue desire our see as more de-densification with less also away, As leading a by rates has bad of per residents driving to demand on suburban X, and in greater Chart In X, flow a Starting as incremental to basis to move-ins X. the positive than apartment, fewer adults relative markets for the centered continue elevated driver communities. of than see we and was X% prior on outperformance greater detailed Portfolio our guidance point rent the still with XXX with relief while

residents, which on XX% versus Chart on new monthly are they grow, X, economics, the in year As as relative own to to QX rents finally continue was Chart income And prior the markets shown with a provides by month, up X. from and difference of per almost of $XXXX supported meaningful rent rent household cost renting period a growth. to greater a versus our level, renting materially and in the historically high of home owning our support one cost a which cushion favors

translating and on this Slide shown like continued throughout XX.X%. which QX into X, term effective momentum April As is accelerated backdrop into change, rent at continued

leasing well extremely peak Looking forward, into heading our season. portfolio is positioned the

the is at as figures continue we less rates since on effectively shown to XX.X%. at the Slide existing lease wide supported X% currently leases meaningful lease resident at loss steady of a than which capture occupancy has asking Annualized while XX-day portfolio increase our inventory to X, to of remains about been to lease XX%, means loss year. in by high strong and the for remains that X% our available As relative and historic turnover near-term availability low limited very remains units. expire, And beginning

Turning Slide to XX.

basis bulk the meaningful with We smart are drive our million margins million making platform, additional and third, of transformation million slide XX approximately of enhanced generated value home toward in many by operational our enhance And operating opportunities over our operating an three with or to but projected incremental only mobile XX million improving also our as will internet which revenue annual residents material XX platform, efficiency. points XXX goal efficiencies NOI of which of ultimately technology, to-date. and experience forward. going our unlocks the us, not XX both we is initiatives, which deliver This NOI, digital wifi, managed highlights including progress to of deliver maintenance

updated for to our and growth, QX FFO NOI XX% our Slide momentum XX strong outlook growth. and Before in guidance core provides reflecting turning our full-year revenue with incorporating increased it Matt, projected same-store

of our take couple to We guidance have account into updated also a factors.

in the Southern eviction while the some in Northern particularly quite other markets, California there slowly. have strong, moratoria uncertainty operating processes and is about And to some in Alameda expired, while side, core debt core bad County and are moving operating markets, On certain continues net performance California. be

XXXX, of may XXXX get the a we pushed growth have As expecting half of in result, in which some assumed guidance. are the updated our we back in

relates to where have the stand for core back assumption FFO on scaled acquisition it year, XXXX, our based our growth today. activity we As through for we projected for

As we keep cap markets. in a close any assess on shifts fund the flows and eye rates, transaction

over to Columbus And While from with acquisition and our of our acquisition in contract, before we into active, volume assumption that, net another further balancing from account it update Matt with to go will I an buyer taking development activities. disposition being under circle. including recently we remain allocation we guidance XXXX proceeds put volume a to capital into turn

Matthew Birenbaum

thanks Great, Ben.

Turning to Slide XX.

basis XX widely a across ahead XX%. of creation $XXX Our to outstanding X.X%. basis lease have in million. expectations excess This there five provides consolidated to With are regions of for on of million five points generate is are $X The $XXX in different value yield dispersed at development billion roughly our profit an which and exceptional rents estimated turn in activity cost margin currently currently in which initial or of contributing completion an which value results. are X% $XXX proforma, up, continues above communities

certainly compress provide these from trending adjusted are March there and still levels from of elevated forward. up, to risk While returns hard is strong costs plenty room going

Austin, XX. sourcing call, shown very pipeline up active of the and our from the well the as $X Slide expansion our teams Denver regions New start quarter, year new billion development development rights established the sites added grown to at been regions $X.X last England in have quarter’s of As we Northern in our had billion California. of with as and opportunities on on new as in end At first mentioned also

slide important current weighted and this both likely total urban, lower towards well. pressures stabilized XX% new All with rights suburban increasingly flow right portfolio trend an in how these locations development costs through and issue the mix and yield. XX% in that of illustration development The environment. time of inflationary chart suburban NOIs This hand on will the are in provides is typically an over our as corner the would hard to pipeline of

underwritten to on XX% pipeline yield hard and or because variances specific the constant, hard current The else NOIs total of X.X%. holding how of that of development rights capital on impact depending would a average change of cost a development both represent costs Our chart all plus costs shows site. XX% minus with to is yield roughly or news

can have similar yield You of NOIs on roughly an that see rising twice much impact costs as as magnitude. hard of a rising

basis be our safety. As hard in we and typically either all costs. underwrite This running a of trend preserved NOI environment this current and measure gives Florida. provides with just not do us update progress costs NOIs current hard Even level, if at on a levels, X.X% a current X% the yield cost still on quick the from Denver increase development inflation by Slide suggests or XX% even of our can math reminder, of in a rise XX expansion markets a our Southeast in with

has investing will want are that We larger-than-typical communities the have as also of in on future and asset investment regions. focused young and acquisitions, to growth be be us the portfolios will increase well like our suburban as This take initial of our optimized urban of chart. approach together positioned a from that well as work allowed developing size locations we to millennials the directly revenue as average on home Critically, getting regions, advantage strong and in both put measured through and unit demographic both products the aging developers return been in building local these we believe in in combination the regions. diversified submarkets trends age funding our established average third-party we for in shown portfolios to the do reflected own we in with

to activity Carolina XX% Texas newest our North and up of towards a as goal a trajectory steady of and our to follow these expect regions. similar expansion expansion investment we in progress allocation ramp regions make We our

XX. Slide to Turning

for to and few attractive $XXX a turn our Program, another We some over plus that a million between developers The quarter, our calling in investment to returns primary also and our mezzanine to the SIP third-party or the construction $XXX level deep loan to expertise this the operations shareholders, Investment position with construction the Structured platform total is capital we a launched we closing provides construction next generate lending first our established sponsor risk-adjusted will which regions to for and in and build remarks. This financing the to million equity. local program short-term for years. Florida in And Denver SIP. back are stack vehicle to expect I Ben our investment us that, way new development, with leverage provides in it

Benjamin Schall

continuing tailwinds to up Thanks, our which Matt. season. a going have strong QX we To strongest experienced wrap into operating and the key fundamentals, to support the themes, of peak several have positioned was year the some leasing summarize well start are and us with

We number operating continue access the to platform our and initiatives transformative in smart of over both executing across with Wi-Fi, a XXXX, teams maintenance. including mobile invest

and we outperforming As value growth our development continue you generating into to lease-ups meaningful platform earnings heard, with lean creation. and

create I to program also established construction as regions at the up $X We latest our and tapping structured creation expansion by tap our are continued investment for our and future the optimizing by look on strengths our rights financial to continue development, grow investment that, a in we pipeline value it markets. now offering with accretive value. providing to Company’s growing questions. operator to And know-how returns as development turn our our our earnings including building will significant well to focus billion, on portfolio into With options being in finally,

Operator

We with will Instructions] Citi. begin Joseph Nicholas [Operator with

Nicholas Joseph

much. Thank very you

quickly redemption million ladder that structured how entering program, deals at up to and scale the to and the how you look expect in million thinking you do $XXX As are investment to you $XXX about timing?

Matthew Birenbaum

Matt. I take guess one. that is can this I Nick, Hey

it us would get our The I that couple of expect the will to level. we really going probably on kind to to think how once but investments. be I origination is it years. transaction you and will take goes, before volume. of a market dependent It volume to typically to five be are Then three that years get level, these two it three year starts up

redemptions, and putting some year, new some each is there are out money. you hopefully, So

to is it there. ramp keep probably So then to is there it it and worth a that get

Nicholas Joseph

you you Thanks and were of then market what of have the thinking or an it, own this enter are you just within throughout the then terms in as all deals? to buy competition to to look and going option

Matthew Birenbaum

Yes. Thanks for that.

clear So we the we we the to with. with no, deals, be sponsors not an that are to and the are second to question, do working very buy trying the market option expect have and

that a that during a market good real program to is ultimately markets is estate. in For leveraging about risk-adjusted presence is owning expertise us, the generate that duration is and local our It not these of our about investment. this returns the program

So really a question? are we the of What as investment. was onetime part viewing it first the

Nicholas Joseph

Competition.

Matthew Birenbaum

Yes. of There some we sorry. from our is Competition, is REIT are aware. as competition. peers There competition

in to probably Although to I would get is challenging, the forward, say, that capital going that market a program as this I going shifting make loan first conditions think constrained. more little are gets a maybe proceeds start more way as development attractive

And many pretty So we is the years. these And are bullish. in in of have have them thing we all relationships for markets. other key we been

of lot capacities is the have view And folks kind of can another it sleeve worked it of and We we capital other in to another that a with so past, as it. really in we with way. work

Benjamin Schall

you our about with think think in ton daily so established our being we and returns. right, leverage way knowledge here a we in risk-adjusted own as about we and if on-the-ground we of markets, do Nick, think can a competitive have GC, us self-performing And come that

Nicholas Joseph

Thank you.

Operator

with to will a question from Morgan we Rich Stanley. Hill Now move

Richard Hill

good acquisition also but guys. the to I afternoon equity circle that the acquisition, square recent to wanted to maybe $X.XX about down by guidance Hey back raise. from taking

bit returns like, And of the negative that? Just taking about uncertainty the near-term. given And using really does way, maximize a a sort the right to a over about I’m long-term trying you seems are the acquisition cap development medium to but with potentially future raise on say market equity way so, it rather approach if to think pause trying to fund it this not in that rates, the in mean understand, I correctly, a is a way. than that the maybe little in taking if complementary thinking of to

Kevin O’Shea

pieces. of Kevin. just I right that, the with with two Yes. break part first apart Maybe Sure, all respect are it Rich. you to is to This maybe into think

the the or we fund one spend. is that this of more end are correct. point of course equity in XXXX, least down at in You our that is XXXX Obviously, of expectation XXXX. we here are equity can we did settlements at through the our capital that to going to intention, point, pull $XXX this forward down at Mentioned, million use that development to draw over while from

is our that current intention. So

So to XXXX. capital this it have is that we basically at earmarked point into fund future starts

an rates to pointed second, and the number from markets $X.XX earnings occupancy referencing As a to lesser can primarily the a as first of obviously transaction that midpoint. then And out, minuses as $X.XX rental repayments. change page are earnings what $X.XX see from from higher in expectation higher you for there four and And rental you you the earnings result which, and extent, Rich, pluses same-store in the And activity, NOI are of when in at expectations turn, FFO higher of in release, capital pluses and are a driven among to point year. in net from change. the in a is and are in at in notable today for on that you this increase overall changes kind reforecast of we the more by where We $X.XX core acquisition driven increased on in net activity stand least terms for kind forecasted the early full-year $X.XX correct. you part of by based minuses category acquisitions, decrease at decrease

we dynamic change may That the we a our is front. what of doing and when be investment acquisitions do on budget quickly. Of part can pretty course, what may

moment, but compensation little the items. item can of that to pulled earnings And a decrease speak to a down $X.XX bit little which a the Matt certainly So that through the at bit, other flow we just related a is creates decrease. in the notable $X.XX

our expectations. of reforecast because sort is reconciliation not for pulled and So equity forward, down of that be clear, is in XXXX that being model not is to current the that the XXXX, for the other

Benjamin Schall

Ben. Rich, is it

tidbits Just a couple more there.

last So some the acquisition capital established our year. we our sort and year, market about did We earlier had that narrow we it out redeploying of Kevin of so on, and on side, a We macro into a expansion looking we and can the of this to happening is dynamics obviously to that we wanted of it some which think as acquisitions it monetize sort is regions assumption we as stand capital box pulled continue there. the capital today. is trade assess where balance and hit to what reflection and between the really markets. then be down to to And dispositions similar

Richard Hill

those risk done properties And dispositions? that overstepping my job segue wouldn’t accelerate spend, into right a here, tight accelerate a it, you that and dispositions higher older powder? call wouldn’t expansion and into of markets. CapEx as, you why money and maybe good it with At selling now the it is rolling next Why question. good have rates maybe cap at dry taking take of You use really

Benjamin Schall

a push active of and can We continuing that are last then will of we year, start It well. on. our of end lot and have you had hit the performing around. reasons a I in. there the at Yes, to activity some portfolio, were for got is year Matt very lot Again, the of conviction chime last bulk of

about think longer-term the optimizing is portfolio a we as movement our So approach.

values in that There asset are movement very at also So we from about we operating in how be there help cap to as rates, say. we fundamentals support forward. and a some look going months strong six are think value value time, is today versus today do point thinking assets let’s could about why

Matthew Birenbaum

just are I one to shift that, that some where little - a Rich, it we haven’t are changing. add and what favor maybe are and we changes is be and are and been And would will bit that selling. in buy I quite thing of change is as between sell to regions to starting be about to in, the also a of buying and say in relative value I see regions may be guess values the might what in we looking we the may looking we

value the proposition forward more year it look say So were relative this better quarter of first I actually in when may trade we think, looking on the a is than that cautious. little being

Richard Hill

That for guys. Thanks is me. it

Operator

move now to will We with Stephen ISI. Sakwa Evercore

Stephen Sakwa

I wondering, first, that the could Thanks, how I start you July are guess, first good afternoon. we just kind was those for, in up sending if the of quarter June, out either May, on renewals stacked April. and

Sean Breslin

Steve is it Sean. Yes

committed when originally In gone higher so or the are better the basically low bit offers terms out, little that expected of we we renewal have what bps is than expected. which probably XXX maybe budget, than we originally contemplated a in teens, we

So what that is is out now.

Stephen Sakwa

take And shop they the they of -- attitude no consumer change any kind from back is market once acceptance in or kind the come or kind Sean, kind else, better of are sign? and the anywhere there rates Okay. it of of is realize

Sean Breslin

it materially. down for presented, mean, this is move-outs, to norms breaks, the reflected to those I were acceptance mean to you again both and lease I of year. kind year-over-year, XX% on Ben well look in XX% is of as rates turnover turnover, QX XX% then I relates on which it, about that of as down, pretty pre-COVID what compared but of when QX think Yes. down at typically slide call account third renewals was as it the as

So for power strong is pricing us.

get selling transition people [indiscernible], offer a use renewal shop that it, are is they there your I go think costs. value. we And and they see when

the switching out just roughly So if is inclined go to are are. I’m or and where going they to same then have people going and it I to moving pay stay costs got costs

Stephen Sakwa

trying kind What for I if full-year makes or uncollectibles is debt today to it? and was of sense. what And just assumption apologize. in XXXX. the the maybe Kevin, compare one that you and bad here, That I missed to Right. for for it

Kevin O’Shea

I add want and little bit. jump Steve, will a So may Sean in here to here

So not change. in revenue terms of overall there a whole is bad of a of basis, debt lot percent on

this we of points. course, the revenue. basis Of that you revenue our give assume the overall XXX is categories feed basis point, there uncollectible to into - two XXX be basis that for a But just points kind headwind points number. of would full-year is that sense about it at that of in budget, XXX And

there pieces. we So of far on bit net basis, of you in probably reflected, some better. the first so the have part as But seen those movement of a a is as saw marginally underlying year in

worse overall, and so a bad delinquencies, the such relief overall the year. you trends, And be jurisdictions of we QX, category and to expect of if trended At the underlying same full-year, little will course bit we in for payments debt to that have rent for a our receive the rent saw couple that the more full-year. worse time, over more expect now payments we

And full-year, neutral be that when Sean, for our debt roughly back you over taking account front expected nearly and offset of of debt outlook to so underlying relative debt, bad the initial do you is kind overall with trends, into anything? the year out relief to by bad in year. higher expected reforecast net primarily add rent projected of payments underlying our to bad overall, the rent want the in higher the half relief primarily net

Sean Breslin

add was thing we to, question would as is reported I to Kevin $X.X million is revenue alluded on only compared that just million for the as current Steve, the $X.XX XXXX. XXXX reforecast, your for XXXX uncollectible the Yes, for

Stephen Sakwa

Got it.

Okay.

in are year. saying sort of a bad the got headwind effect, point, in revenue growth you you little basis a year-over-year. So it within the XXX this is about a growth, headwind of have bit X% But debt

Kevin O’Shea

particularly California, in improvement continuation in little in to given probably not And into to a we the our get little the of and getting throughout more Los really Kevin noted, our expiration, County and a is it, what think headwind are trends Steve, more would offset of moratorium reflect outlook better. kind way XXXX relative bit we a than those adjusted bad I standpoint, debt From Northern significant original delay budget, elevated the put about expect maybe Angeles eviction markets greater originally it. Correct. But is until you that as little we through rent of through by that anticipated we than is a where markets geography relation. a seeing but XXXX and some

Stephen Sakwa

question And for one Great. just Matt. last

Just the construction unfolding where on the kind supply chain, projects? of or that the Just is starts of better? of should just are you getting that? sort of manage today? And how are how maybe Was we . Is you is what that expect? bottlenecks? start do to lot as challenging to a And what new more that, it due risk sort looking

Matthew Birenbaum

guess I would running is say definitely construction Steve, hot. Yes, I inflation

go agreements. So years build back costs many does able us really we are and to on help the relationships over of agreements the rise. we have This being to build lot because early sign subcontractors and negotiate with is on general where are a had our contractor our

doing in can Those The and we a the better four stay of to So probably got or months. chain little five issues. over have we actual supply the last are it. issues availability what bit front

probably final from Those set inspections power the that. just meters. out jurisdictions, getting would through cases, the bigger jurisdictions, to of heard as much things occupancy, the I say haven’t challenges gotten permits getting getting I been final there about haven’t in certificates better yet. have company So some

the is about kind of industry as will to or So of of slowing out - us delayed a get about delays just and much we I by that jurisdiction final two more the but jobs whole. to thought going get in approval. on the year, as probably I’m a in and that the couple durations the start of supplies us a so for were the first think second year, of really is down, starts so of couple extending half the But through the getting cases. quarter half kind in we a not that months many we talking construction

Stephen Sakwa

Great. Thanks for is it me. that

Operator

from We a Capital question KeyBanc Wurschmidt with will now Markets. take Austin

Austin Wurschmidt

increase the you good and asking thanks curious your rates relative tracking that could to how was the that the outset at Great, X% in year afternoon finish and - year-to-date where the I where expectation is think of everybody. year.

Sean Breslin

is we why Sean. tracking Good ahead what for are question. on a the only anticipated of little what year is we actually would trend of we as well people have renewals say it we were were and it reason not was that updating based reforecast, part at as in in the I bit What and looked that the Yes, outlook is asking Q. on movement what on taking rents, seeing, that renewal but we seeing the as as offers the the side well our

move maybe through would year. I then to rise, half back the continue we period the July think, early sort decelerate of typically, what you see would in of as happen if you look as historically, at the our and rents August business

of and rents. patterns that that get is et better is do in call. just really we reflected in It We on in more things leveled that XXXX, decelerate to talked quarter start about the seasonal see was year outlook normal for our off. this terms didn’t asking and we think to As of a to for see kind second call, last believe in we the as supply the the kind where we come some demand things quarter year will really of the half deceleration But just the of the have somewhat dictate market will our half overall cetera, in housing sense year. because I second macroeconomic of dynamics forces, out back

Austin Wurschmidt

how in things What what of current down? makes entering that And you lease? for your based much on loss That you XX% does How left do with the What for expectation a that sense. does play pattern? based imply draw more that guide? that on XXXX imply to seasonal out are will current

Sean Breslin

January Good what talking to Yes. be answer we question. it of late XXXX. sitting little that is one in April I in more a probably it about when here are would say challenging might

So I we trying know it average, too would to be should this you speculative range on well but would based above give be say, point. just what a today, at

Austin Wurschmidt

has And initially Okay. any that fair. curious, That Kevin, of I’m outlined that just terms you for source XXX been versus of is you there to me. last capital plan back then to we point? the million have one and through the seen on the move change amount this based expect still bulk I the have balance you where in or February, what that up - capital rates believe in of we into seen debt do be

Kevin O’Shea

is This Kevin. Austin. Thanks, Yes.

I mean, short capital the a bit, So has our not answer changed plan lot. yes, is a little

was are began you year, was $XXX of point, $XXX our be at our plan initial to capital we debt. calls outlook million million of When under the that which, of most just this time, capital, for unsecured external current of external issuance for for sourced correct. the At capital. So planned

the can QX to then in below we $XXX in to at basis record with a to X.XX%, out million of pulp then and ago, go the year, come more forward X/X little it, down, net newly to mentioned left starting half So year. so as half QX sales external XXXX, much which XXXX been on external just And we to $XXX bit in capital to as one-fourth the hedges we kind a down reminder, then the as against million about acquisition which And of $XX rate in the put points sourced of unsecured to a QX materials, circle where our call closer from from are to today. only we earnings what sourced, needs still initial ago the that on of to our in $XXX of XXX the anyway, swap alluded capital, to other not [indiscernible] -- I a for expected treasuries a disposition relative of $XXX needs do dispositions, push, million debt be you a moment, we overall at through is disposition of to that about of versus perspective, in expect of nearly million of see proceeds capital from well have place so moment rather a external for million this is outlook. in as as from expect that about $XXX just million on are And drawing point at anticipated capital currently here. as do plan, but

Austin Wurschmidt

Great. Very helpful. you. Thank

Operator

now question will Chandni with Sachs. Goldman a And from take Luthra we

Chandni Luthra

taking Hi, thank for you my question.

So perhaps end end you give now? end bit high what low us the of you Could to would a a took down color your you as of to right little guidance high versus your couple by get the pennies.

Kevin O’Shea

This Chandni we is time had hard Kevin. hearing.

Chandni Luthra

messed repeat. really can is really sorry, my I’m up. I throat

Kevin O’Shea

think it. No, no, I have got I

I the think of could $X.XX. to want $X.X end the of high what to drive midpoint know range you us our versus

driven rental of is the over by would revenue be increase and range activity other currently known P&L think could changed growth rental the I but I be mean answer us end for could received toward in than higher acquisition primarily down of well. as much high signs, acquisitions would seeing including an rate the other up be with are probably a year. so expectation course be forth, the expected the the that we primarily and would but an anything the smaller There they impact drive

Chandni Luthra

what the take Got would equation? Like And you to towards it then wrong in end, what kind there? to have low would of go it. that get

Kevin O’Shea

of suggested. of Yes, it what I is just probably kind the inverse

that expectation, the sort the in of what guess potentially possibility. I unexpected unexpected of decline the involves So a macroeconomic of course within our but sort we is saw is today I would that pandemic in but revenues of XXXX sharp, the in guess, certainly, a something realm year. with cause over analogous not event

Chandni Luthra

then And follow-up. a Understood. as

right what in At just to Are this reversal sending people from seeing rate lot the the I longer are any where that a those earlier. are given are low last no it activity obviously previously deal-seeking mentioned apartments you mean standpoint? you there on was. was especially seeing up perhaps of the year, from you reversing? of not level you now renewals that Is standpoint market into got point teens the able who it afford that seekers apartments? where So did deal kind

Sean Breslin

materially Yes, question. is behavior. I say would it not terms is in Good of this Sean. changing

across the it primarily consistent, if wage residents, quite prepared robust. And are in even Ben not basis other that or in for experiencing represented this look are quarter year-over-year reasons, that seeing think moving good, on is standpoint XX%, are referenced sectors. people financial generally double-digit range. importantly, particularly occupations uncommon on people at that I some rent incomes you been has is are last up from the up in environment are XX% items. with that growth is discretionary increase low And a with the people where at less remarks, single-digit, movements for our look spending very moving same where out that those wage modestly is and the you as especially to opposed growth, high is by year to various we of it are If a out that we in his income quarter not people find some That numbers an probably, reason there that pretty

much system stress that so question. the far, purpose not there in is of of the kind So, the is main if

Chandni Luthra

Yes. Thank very much. you

Operator

question And come from the Pawlowski will Green John with next Street.

John Pawlowski

we for just in from and comments a any Are see operating of and understanding now of industry a a dearth particularly now taking development about are to going just there benefiting to your some operating whether of you once overall, right just just back to markets trying a deliveries a market high quarters, AvalonBay. I’m get deliveries go I markets results to of are the the just the Thanks delays on there want kind lot here? the some shoe of an not these just artificially is be to these in be to right results delays high to deliveries where for Matt, of question. drop? where these talking going on are few are jurisdictional certain dropped

Matthew Birenbaum

there happen period will what longer don’t -- know a more is likely I Yes. interesting, time. think in that supply of to to I be see and it will It is that suddenly correct bleed John. is you over going are

to eventually. So extend there get it that is out pipeline. will delivery It going

it, markets just but starting So absorb much. people maybe time as more are gives a those to little

going types utilities. soon when is to Those Those anytime of some So, are is it suddenly jurisdictions structural a these issues, issues. change it hire a, don’t I and new entities go or of is to particularly don’t it think people. of bunch

of tons Austin hear how spend years the which new is one to all you starts supply today, is way, about for is there. that and taking job talk in coming contractors the if got two to you’ll should start developers on example, of But time the most that a the from X.X markets in So is take there finish three.

extend being kind say not of pressures top most So credit of in of say are think the markets, including up think terms on just stretched not in don’t demand, just times supply I are is inspections the in, to - keep on would all a expansion in our of is -- that that our I and among able those that I out the system, both that And to probably of don’t but two we going where I general. are final other markets probably Austin. are delivery some the of are terms the markets, I two it there in seeing not that. with supply those of I know in the amount would and have read about, the Denver and way lot deliveries terms we

John Pawlowski

on is Makes a just undermanaged? sense just it much market fundamentals And then these strong I being growth. Okay. acquisitions revenue XX% this year-over-year Can few sense. versus you assets. how for Southeast of is give really Florida, me know question final previously a

Sean Breslin

that, It blend asset the managed the and of growth both. to how of and back quite in given you it out we pools use if currently is a to was that, the is want range XXs. you different very I that early Yes, still XXXX. Sean. market have move there lift. fundamentals want or Certainly, would felt been pricing of little revenue of at it John, had of one numbers as been terms case was that when teens is have say come have the that But a depends you compelling in XXXX market would how stores you of But I bit that of half opportunity of how terms a referenced, being is we with add, you couple particularly whether parking something case, I sort a it robust maybe garage pick would pretty small is assets bought captured say through, again, fundamentals significant in little a of the out that. healthy another rent bit the Florida, on managed, high see all market robust it value say the management us a management managed Southeast low like in probably is would of

John Pawlowski

Okay. great you. Alright, thank

Operator

Heffern we Capital will move Brad RBC Markets. to with Now

Bradley Heffern

you back concerned make and economic making are rate through flow that and, it you think just want I the the sure factors go refer I acquisition the are wanted that higher to about will Hi Is guidance don’t everyone. to therefore, process Is there. to thought rates the higher understand growth of just guess assumptions? the and Are cost you I the lower that? outlook down of prices come what ahead it like defensive? capital? more key given you accretion as

Benjamin Schall

I market, of offset rates to be and including were we of much strong There and sort get countervailing to this of and into Ben. or is Brad, part an and as changes. of be feel snapshot does is assess and is that start, there get the obviously the multifamily balance that, how before, can is Matt there with out It rising more selective, mentioned factors more primarily continue just which very today going as will we part was in color. provide did updated stand that I that fund where is whether macro flows, sector. to

investment with hoping most So take that, our thesis. long-term looking buyers, approach, a there higher to going is going by those that to also to be impacted we a be are opportunity, levered we we group, of rates, are is not and are able it is forward,

So paying close attention. are we

prepared opportunities. As market the are I acquisition and pursue underwrite mentioned to in we actively active continuing in and my are remarks, some

Bradley Heffern

Yes.

for to expect anomaly de-densification that that somewhat is people curious, to chart to is I this sort Okay, reverse be work have COVID again a on will deck. or you I’m double the and need financially? that. thanks permanent guess you And back then a go that of something in it up

Sean Breslin

we issue. more factors where to Yes, to through nature space maybe opposed of maybe bubble that period XYZ whether somewhere this it and describe people answer people are growth say the a a are way where COVID, only standpoint we for And Sean. for work in wanting being working COVID just just of bit I the of cyclical too maybe to the number that home person a have the terms would something phenomenon coming but And you population probably playing took - out tell, is spending the longer Brad, been getting of general, that a can future else, secular, have it people nature but single and And in and is we and more else, thought of have significant from short you I suppose from spending space of of or certainly, I more say to the time. and has kind on being to it, as housing in just been kids, macro singular early just multifamily, single-family, a little doing could how home leave but okay, during see quiet in I that who people a through a mean going would place so to might bit us households. little married the a not more good of seen a to has maybe want just support window this kind be that is is for more how on things it of move demographically, location longer the given there there see see they other time, reasons. evolving is so lot say, time back that were

several lead that the in a over trend well as durable. tend few is others there there, quarters conclusion number next you probably can remain know to you will is But may the short So we would to that to answer we be issues different that a this continue that quantify place. of see out

Benjamin Schall

health Brad, about of another that is the supporting our just theme wage to it customer. financial Think emphasize resident, our want and to growth. job

importance additional they of You the referenced look sort increasing that the to Sean create that for quality home factors add savings, more stickiness and think is about space. of as feeling on definitely an the home, a that going environments

Bradley Heffern

Thank you. Okay.

Operator

with SMBC. Rich to moving Now Anderson

Richard Anderson

Thanks.

recognize I -. So your

Benjamin Schall

Hey Rich soft on the you phone. are very

Richard Anderson

stopped working. headset My

So -- now? can you hear me

Benjamin Schall

Okay.

Richard Anderson

calls of series are There today.

We that things? war on us lot first the a territory escalating. and here in of values from got conversation were role obviously, at print play issues recognize So there things development, if on what market inflation property doing perspective. pulse that funding in for around your that point just A you obviously, the no your could quarter do you to negative are extrapolate on a going today, plays home. at acquisition out. of But But is GDP see to waiting how what the I side, have sort into

we say, looking So little doing to are you bit well, now? -- not looking factors I’m a to pause just in should in conclusion, you to even caution. development development take right curious happening it how to you is how introduce your change is are but for though factors perspective are come not that could perhaps the What expanding future it that. about But obviously, and at what maybe more a

Matthew Birenbaum

Hey shot I a Ben want chime Rich, in, may Matt. will at to take one, too. is it that and

We focused are always management, very built kind and our of DNA. into risk it on is

the if ground, we are spot close we breaking that being beginning And current renovated vast we are on we in I deals looking we never to we ground. land the are things not basis. are As the of that our always at where mentioned very my remarks, in trend, until cases, structure closing majority on at so a not, when

say very of So optionality. I is mindful a lot we that what would we and of are have

$X sheet pipeline million don’t between the capitalized less that $XXX total we a on billion the that rights and we than land today, a control land the are development with for balance get. So costs of investment pursuit

able to that be that pretty opportunity that investment that so So the to respond have, ability much to with gives is and control accordingly. the we impressive us

still getting hard what up. have So about that if it. table, answer right and are of I because And changes, economics grow well, than the faster At we we we keep and costs when can -- But some you faster costs yield. hard every fund questions some we And we that, now, obviously, are the think going modestly that if very preserve been equation know watching -- sensitivity the rents, is point, match will are favorable. that provide we start, do development day.

if risk of it don’t and we match on we we starts. lot the good careful to really So we a have the are until deal being of make think are quarter it the mitigation is funding and the we if have options on the business, upfront, about basically, way decision

Benjamin Schall

and to sheet just and comments. a thing to the strong flexibility bring both balance as would add liquidity equation, terrifically Matt’s standpoint is a And to do standpoint a standpoint. -- I we that, that from leverage we financial that a one and

the is debt-to-EBITDA end to know, of low our at earnings target of you range is five our times, from six net As five our times. which materials,

high in which Our history. the at company’s is unencumbered NOI an is probably XX%, all-time

we that likely we of our circumstances of have should got low when changing it look because plenty And line very need we and and hand the of on so the see then equity at I liquidity, credit, to need So quarters forward. billion our so. have cash flexibility just $X.X do you

do again, all our of sheet also bring point, strong flexibility. business, and we that first Matt’s of first balance firepower a parts to hand plenty gives that but to So we bring

Richard Anderson

a to a say. and wonder into I likes looking opposed and then the Is take extend earn-in has to thing? normally to have. XXXX how degree of taking extend your And this have opportunity second environment this we and this week, taking not lease exist rents there that get, shelf do you is beyond the I grow this already for given that time? this This to quick Is asked market extend it environment maybe XXXX to that way couple ability what my money something Great. to we the into any period capture of type what just do Okay. you. of would have you term type life an preserve an peers which that it XXXX strategy seen to gift and to that question longer are sort of or just and as wheelhouse the of let the are you is you there your of of in a see to looking the the

Benjamin Schall

are medium the And a very strong on focused of term, fundamentals I mentioned, items growing that start But looking as need it there ways earnings. of you value driving that focused, couple are Rich, top at are on and will with be to obviously, and we are other mind. we today.

our assets we us And themes, of over that our how area continue. so do capital higher redeploying we better cash have then the area from driving assets, operating focus Think newer through that is pipeline think transformation, model about we CapEx that margin one. or we our and another with that markets is growth right, are hearing flow profile. portfolio NOI driving a And then is and slower selling off expansion and you our time, other into another optimize development

that this DNA part capital, quarter another And allocate is earnings. the about of into development grow to avenues growing our structured to that with other an announcement finding tapping saw investment Just we you around And think other general earnings. that is ways aspect as program.

Sean Breslin

a questions, as be The would look one XXXX, of specific was add, that macroeconomic kind shock are guidance all an not above while you give the Rich, average that of would them some earlier. are kind couple a of to absent pretty I you a you a good as of of just still start there year factors up XXXX, thing used -- significant providing forward, year should reminder number and is phrase sense a for that that your is we line maybe kind would I if a

numbers, we would which to what move we of or due are is is then the is at are sets well could things terms is we in basis orders where point And unlock are COVID of just one, through constrained into we versus markets the offers rents have renewal our forecast out loss out they for points the I of I in the then mentioned bad in place. which this debt the in we and couple of as that prepared XX as say And seeing growth year, robust. that lease. X.X%, so. there that are about piece seeing these But Some is increases year. would we it there It that we of send of rough as are beginning remarks, to call, up are today, overlays of asking is to regulatory sort X.X%. move somewhat we still are: pretty That are for to terms a that we good simple pretty actually into rent today, going year boosting as in other us Ben’s XXXX. all when And next that the pointed this normally out

So there esthetic else I is good some say. have that, for a few a of anything things recurring there would XXXX in we environment, this outcome is pretty what absent out

mind. So just those keep in

Richard Anderson

I that. Thanks. You it. will got do

Operator

move to now will We Alexander Instructions] with Goldfarb [Operator Sandler. Piper

Alexander Goldfarb

taking thank the for you question. Hey and afternoon good

first. questions two Just

residents California the owed On saw balances, and million split nationally, to by $XX otherwise, versus existing And the the versus that by call residents federal But to you yesterday’s landlord from that much doesn’t the former within on treasury process program. from that is mixes, saying are received that, understanding owed, is is the owed how fall that curious residents the the former our under rents from two, federal need AR from that paid. guys I the in you apply in then those is what just get in California participate quarter. about both

just breakout of curious those. So sort of the on

Sean Breslin

Yes.

with probably the between level the to need we back you and that breakout different are you the detail Alex, components. looking for So to of get all

comments but... couple of provide So in better but we high might details. Kevin to have hand, that a can some in address level, be it the got that specific of to of terms offline

Alexander Goldfarb

is High High is fine. level fine. level

Kevin O’Shea

your response a coming of where first the wear money to about overall through in to just the maybe the question programs Yes, beginning is February. emergency terms from from reassess

February the we from - So receivables And received from XXXX then through the about has about of with come funds Massachusetts. California. to chunk XXXX, respect that in XXXX, two-third and XX% next biggest from

Benjamin Schall

Alex. Yes,

overview. a that high-level is So

we the In back about residents terms get versus current Jason former you on one. stuff and with can to of question don’t that, follow that you? like why up

Alexander Goldfarb

is to the at Are caution quarter market be to little curious, the Street the stays you little your for it the of look coming basically a a items second guidance? short how the up the or the for where that half guidance second just demand Great. Then a the question same bit your the of that view when is, some of second the some or overall is materially stronger rents sort was and of year But are and talked for just range timing give quarter is about year you guys the that going full-year back matter product. such the guidance offsets that helpfully the expecting. there pretty of

Sean Breslin

specifically specifically what said clear you are about core going same-store be FFO, just so are about? are Alex, you asking what metrics we to And

Alexander Goldfarb

your of FFO top core guidance, end Street is. the where is Just your range the

I’m bad were some of items Street or some there would had maybe curious sort things value. would of onetime caution if debt in that So factored the items have just or have that

Kevin O’Shea

all, reconcile this me on guess, dozen Kevin. is some I analyst basis. first numbers Alex, of it composite or our to So is impossible numbers against for a so

individually, and of should couple all own guess would group make free I forecast. make a points. to I be sort of free and As a you are your

to a with by around which close QX, to Street share. guided all, at but it certainly $X.XX up didn’t of we being to accurate, $X.XX. of midpoint there. we beat respect First Street $X.XX, was ended pretty per We The the $X.XX, guide

X a full-year. play on similarly, are things on balance Street we Street the so out kind And based of to guess, XX in have as have kind of trying And the level. back We little includes that we of that things pain something the share, guided around plan X around will pulling per be in of updated you try as where think that for business $X.XX. of just today. XX. and the never a in forecast, think give stand, the outlined And bit our lot risk on XX, I point to XX/XX model the guided the We of not $X.XX place we year of the acquisitions frankly, may assumptions we by we the stand the shake to based that numbers into X out expression

know don’t is one our having maybe to not the would actually versus Streets. try we But $X.XX. assumptions I to reconcile so probably at be out so, to of how composite that to compare So way that, the done beyond $X.XX,

Alexander Goldfarb

I Actually Thank Kevin color. that you. is appreciate super that awesome,

Operator

Dennerlein hear Joshua we Bank will Now from America. with of

Joshua Dennerlein

also like your then the how curious for preferences a I on the everyone. why I forward capital had do will going guess, influence you Hey just Good. launching now program. investment program. deployment structured question that feel and

Matthew Birenbaum

Josh, it is strategy. Matt. I don’t think deployment will our it capital influence

think the is just I adding was accretive these as markets that something additive. to is in It else presence relationships a it will leverage really shareholders. our and Ben way, our -- for and our it is capabilities to be more saying,

is our in been capital developers displacing lenders. while And the in potential been have we bring is things. things exclusively that, doing of the it valued else valued, Why now regions. have We learned have been expansion a learned have that not where we their we do by plans. for developer is is is valued capital our now? And it we in different anything it by as other it So some one developers, partners, market expertise providing the with our valued funding we program, our by program, to that is

be And in we it of forward has cheap it again, it a to placing see environment extend kind when the will better years going market these investments last so was frankly, been couple And did think for easy. and capital capabilities. of those as, opportunity a incredibly I than

a if more with competitive anything, a of I money coming just the think maybe terms little probably out starting bit position capital I to So we rise next over place rates and are look to in better years -. in this couple as

Joshua Dennerlein

equity, do said it And if you like or it. for X% are whether will or targeting think, you kind you fixed loan fixed I the a Got know But floating. of be just mezz to, curious returns. XX% preferred floating? I on

Matthew Birenbaum

deals fixed is. market And but And the think for looking so way the to go shifts, about. capital are where when our think talking low, I is we market we was that with are now better the will of - that incredibly probably short were it. the If shift to rates one that couple provider. first are closed meet are the fixed, we we I going at it and something that

Joshua Dennerlein

Awesome. Thanks guys.

Operator

will And session your remarks. call for or conclude closing over to Ben today. ladies to for turn any I would and back gentlemen, the additional like question-and-answer this

Benjamin Schall

questions. and for you you. today look seeing dialogue to soon. continued and Thank forward joining We you our Thank us your

Operator

this and And with may ladies will gentlemen, you that, We you for your conference your participation, thank conclude today. and do disconnect. now for

AvalonBay Communities (AVB) 28 Apr 222022 Q1 Earnings call transcript