AVB: Q2 2023 Rent Keeps Running Higher

AvalonBay Communities (AVB) delivered outstanding results.

Core FFO Guidance

Up 1.44%. That’s a solid performance. It’s backed by raising guidance on same-store metrics. That’s favorable because the underlying real estate supports the enhanced cash flow. This isn’t just a non-recurring bump. This is better rent. 

NOI (Net Operating Income) from the same-store portfolio is by far the largest factor driving the increased guidance:

• Guidance started at $10.31.

• Q1 2023 raised to $10.41.

• Q2 2023 raised to $10.56.

Same-Store NOI

Same-Store NOI (SS NOI) was fueled by improvements in revenue. They didn’t move guidance for same-store expenses, but incremental NOI from initiatives included three items:

The first two enhance revenue. The third reduces expenses.

Rental Rates

Positive rental rate surprises are happening throughout the country. AVB provides rough guidance by region, which helps us evaluate which areas are outperforming:

The west coast is underperforming, but AVB reports better West Coast numbers than Essex Property Trust (ESS).

Development

AvalonBay is one of the big apartment developers. The information on development under construction is available, but it isn’t featured prominently.

They have about a billion left to fund for projects currently under development. 

Note: AVB reports total cost and cost to date, including projects that were very recently completed. Since the impact on both values is identical, the “left” value is still calculated accurately.

In the current environment, I’ve been less favorable about development. In general, I would prefer to see development curtailed unless funded by asset sales. 

Positive Development Surprises