AvalonBay Communities Inc. (AVB), a leading real estate investment trust (REIT), reported fiscal third quarter funds from operations (FFO) of $87.7 million or $1.09 per share, compared to $99 million or $1.28 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, including discontinued operations, increased 0.3% year over year to $224.2 million. Same-store rental revenues decreased 4.8% due to a 0.2% decline in economic occupancy and 4.6% dip in average rental rates. Same-store net operating income (NOI) during the quarter decreased 8.5% year over year to $98.9 million.
 
AvalonBay completed development activities in three communities during the quarter, totaling 614 apartment homes at an aggregate cost of $173 million. These include Avalon Anaheim Stadium located in Anaheim, California; Avalon Charles Pond in Coram, New York; and Avalon Northborough I in Northborough, Massachusetts. At quarter end, the company had nine properties in its development pipeline at a total estimated cost of $1.2 billion.
 
AvalonBay has not started any new construction projects during the quarter. However, the company expects to start development work on two communities totaling 399 apartment homes at a total cost of $66.4 million during the fourth quarter. At the same time, AvalonBay expects to complete the construction of four communities (1,382 apartment homes) during the fourth quarter at a total cost of $470.5 million.
 
During the quarter, AvalonBay completed the redevelopment of two communities totaling 392 apartment homes for a total cost of $10.1 million. The company also started redevelopment work on a 195 apartment home community for an estimated total cost of $6.6 million. AvalonBay sold two communities totaling 397 apartment homes for $69.5 million during the quarter. Subsequent to the end of the quarter, the company sold a 192 apartment home community for $43.8 million.
 
At quarter end, AvalonBay had $777.5 million of cash and cash equivalents, and an interest coverage ratio of 3.1x. During the quarter, the company initiated a continuous equity offer under which it can issue up to $400 million worth of stock until September 2012. Accordingly, the company sold approximately 1.5 million shares at $70 each, raising gross proceeds $102 million.
 
During the quarter, AvalonBay issued $500 million of unsecured notes in two separate tranches of $250 million each. In addition, the company repaid $102.6 million of unsecured notes along with $112.2 million of unsecured debt. Amid the continued challenges in the macroeconomic environment, the company revised down its FFO guidance for the full year to $3.86 to $3.90 per share, with fourth quarter FFO being anticipated to vary within 61 cents to 65 cents per share.
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