AvalonBay Communities Inc. (AVB), a leading real estate investment trust (REIT), reported fiscal 2010 first quarter funds from operations (FFO) of $79.3 million or $0.96 per share, compared to $101.0 million or $1.27 per share in the year-earlier quarter. Funds from operations, 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.

Total revenues during the quarter, including discontinued operations, decreased 0.4% year-over-year to $218.8 million. Same-store quarterly rental revenues decreased 4.2% year-over-year due to a 5.2% dip in average rental rates, partially offset by 1% increase in economic occupancy.

Same-store revenue decreased across all geographic segments. Same-store operating expenses increased 2.8% during the quarter compared to the year-ago period. Same-store net operating income (NOI) during the quarter decreased 7.6% year-over-year to $103.0 million.

During the quarter, AvalonBay completed the development of Avalon Irvine in Irvine, California, which included 279 apartment homes, at an aggregate cost of $77.4 million. The company also started development work on Avalon Rockville Centre in New York, which contain 349 apartment homes, at a total estimated cost of $110.7 million.

During the quarter, AvalonBay sold two communities totaling 595 apartment homes for $83.0 million at a weighted average initial year market cap rate of 6.6%. Subsequent to the end of the quarter, the company sold a 412-apartment home community in New York for $107.5 million.
At quarter end, AvalonBay had $330.6 million of unrestricted cash and cash in escrow, and an interest coverage ratio of 2.8x. In addition, the company had full availability under its $1 billion unsecured credit facility.

During the quarter, AvalonBay sold approximately 0.9 million common shares at $84 each for net proceeds of $73.9 million. In addition, the company repaid a 6.47% fixed rate secured mortgage note totaling $14.0 million and a 6.95% fixed rate secured mortgage note totaling $11.2 million.
With gradual improvement in the apartment fundamentals, AvalonBay expects FFO for full year 2010 in the upper end of its earlier guidance in the range of $3.60 to $3.85 per share, with second quarter FFO in the range of $0.93 to $0.97.
Read the full analyst report on “AVB”
Zacks Investment Research