AvalonBay Communities, Inc. Announces 2014 Operating Results, 7.8% Dividend Increase and Initial 2015 Financial Outlook
The decrease in EPS for the three months ended
The increase in EPS for the year ended
Funds from Operations attributable to common stockholders - diluted (“FFO”) per share for the three months ended
The following table compares the Company’s actual results for FFO per share and Core FFO per share for the three months ended
Fourth Quarter 2014 Results | ||||||
Comparison to |
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Per Share | ||||||
FFO | Core FFO | |||||
Projected per share - |
$ | 1.77 | $ | 1.76 | ||
Community revenue | 0.02 | 0.01 | ||||
Community operating expenses | (0.02 | ) | (0.02 | ) | ||
Joint venture income | 0.02 | — | ||||
Income taxes | (0.07 | ) | — | |||
Acquisition costs net of recoveries | 0.06 | — | ||||
Overhead and other | (0.02 | ) | (0.01 | ) | ||
Q4 2014 per share reported results | $ | 1.76 | $ | 1.74 | ||
(1) Represents the mid-point of the Company's |
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The variance in the Company’s actual results for the year ended
Commenting on the Company’s results,
Operating Results for the Quarter Ended
For the Company, including discontinued operations, total revenue increased by
The Company updated its Established Communities portfolio, as of
For Established Communities as of
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the fourth quarter of 2014 compared to the fourth quarter of 2013:
Q4 2014 Compared to Q4 2013 | |||||||||||||||
Established Communities as of |
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Rental Revenue | |||||||||||||||
Avg |
Ec | % of | |||||||||||||
Rates |
Occ |
|
NOI |
NOI (1) |
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2.5 | % | 0.4 | % | 7.3 | % | 0.5 | % | 14.6 | % | ||||||
Metro NY/NJ | 2.9 | % | 0.2 | % | 2.9 | % | 4.4 | % | 26.3 | % | |||||
Mid-Atlantic |
(0.5 |
)% |
(0.3 | )% | 1.0 | % | (1.6 | )% | 16.0 | % | |||||
Pacific NW | 6.3 | % | 0.0 | % | (1.0 | )% | 9.6 | % | 5.0 | % | |||||
No. |
8.0 | % | 0.1 | % | (2.6 | )% | 12.3 | % | 19.8 | % | |||||
So. |
5.2 | % | 0.6 | % | (3.1 | )% | 10.7 | % | 18.3 | % | |||||
Total | 3.8 | % | 0.3 | % | 0.9 | % | 5.9 | % | 100.0 | % | |||||
(1) Represents each region's % of total NOI from the Company, including discontinued operations. | |||||||||||||||
Operating Results for the Year Ended
For the Company, including discontinued operations, total revenue increased by
The Company's Established Communities' operating results for the year ended
For Established Communities, which includes 36,814 apartment homes as determined at
The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the year ended
Full Year 2014 Compared to Full Year 2013</td> | |||||||||||||||
Established Communities as of |
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Rental Revenue | |||||||||||||||
Avg |
Ec | % of | |||||||||||||
Rates |
Occ |
|
NOI |
NOI (1) |
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2.9 | % | (0.4 | )% | 5.7 | % | 0.8 | % | 14.7 | % | ||||||
Metro NY/NJ | 3.4 | % | 0.0 | % | 4.9 | % | 3.1 | % | 26.1 | % | |||||
Mid-Atlantic | (0.2 | )% | (0.3 | )% | 4.6 | % | (2.5 | )% | 16.1 | % | |||||
Pacific NW | 6.2 | % | (0.3 | )%3.2 | % | 7.0 | % | 4.8 | % | ||||||
No. |
7.6 | % | 0.1 | % | 6.2 | % | 8.2 | % | 19.8 | % | |||||
So. |
4.7 | % | (0.1 | )% | 3.4 | % | 5.2 | % | 18.5 | % | |||||
Total | 4.0 | % | (0.1 | )% | 4.9 | % | 3.5 | % | 100.0 | % | |||||
(1) Represents each region's % of total NOI from the Company, including discontinued operations. | |||||||||||||||
Development Activity
During the three months ended
The Company completed the development of four communities:
Avalon Exeter , located inBoston, MA ;- Avalon Mosaic, located in
Fairfax, VA ; Avalon Huntington Station , located inHuntington Station, NY ; andAvalon San Dimas , located inSan Dimas, CA.
These four communities contain an aggregate of 1,177 apartment homes and were constructed for an aggregate Total Capital Cost of
The Company started the construction of three communities:
The Company acquired four land parcels for development, for an aggregate investment of
The Company added two development rights. If developed as expected, these development rights will contain a total of 462 apartment homes and will be developed for an aggregate estimated Total Capital Cost of
The projected Total Capital Cost of overall development rights increased to
In
During 2014 the Company:
- completed the development of 17 communities containing an aggregate of 4,121 apartment homes, for a Total Capital Cost of
$1,134,300,000 ; and - commenced the development of 14 communities which are expected to contain an aggregate of 3,914 apartment homes and be completed for a Total Capital Cost of
$1,342,800,000 .
Redevelopment Activity
During the three months ended
During 2014 the Company:
- completed the redevelopment of five communities containing an aggregate of 1,887 apartment homes, for a Total Capital Cost of
$53,000,000 , excluding costs incurred prior to redevelopment; and - commenced the redevelopment of nine communities containing an aggregate of 3,428 apartment homes, for a projected Total Capital Cost of
$127,000,000 , excluding costs incurred prior to redevelopment.
Acquisition Activity
During the three months ended
Disposition Activity
Consolidated Dispositions
During the three months ended
During 2014 the Company sold four wholly-owned communities, including two communities acquired as part of the
In
Joint Venture Dispositions
During 2014, real estate ventures in which the Company had a direct investment, or in which the Company held a residual profits interest sold 10 communities containing 2,389 apartment homes, resulting in gains from dispositions of
Liquidity and Capital Markets
During
At
The Company’s annualized Net Debt-to-Adjusted EBITDA for the fourth quarter of 2014 was 5.2 times.
New Financing Activity
In
First Quarter 2015 Dividend Declaration
The Company’s Board of Directors declared a dividend for the first quarter of 2015 of
In declaring the increased dividend, the Board of Directors evaluated the Company’s past performance and future prospects for earnings growth. Additional factors considered in determining the increase included current common dividend distributions, the relationship of the current common dividend distribution to the Company’s FFO, the relationship of dividend distributions to taxable income, distribution requirements under rules governing real estate investment trusts, and expected growth in taxable income.
Edgewater Casualty Loss
A fire occurred on
2015 Financial Outlook
The following presents the Company’s financial outlook for 2015, the details of which are summarized in the full earnings release.
In setting operating expectations for 2015, the Company has considered third party macroeconomic forecasts that project continued economic growth. The Company has also adjusted its 2015 financial outlook as presented in this release to reflect its current estimates of the impact of the
The Company expects Projected EPS to be within a range of
The following table compares the 2015 full year outlook for FFO per share and Core FFO per share to the Company’s actual results for the full year 2014:
Full Year 2015 Outlook | ||||||
Comparison to Full Year 2014 Results | ||||||
Per Share | ||||||
FFO | Core FFO | |||||
2014 per share reported results | $ | 7.25 | $ | 6.78 | ||
Established Community NOI | 0.30 | 0.32 | ||||
Other community NOI | 0.69 | 0.69 | ||||
Capital markets and transaction activity | (0.29 | ) |
(0.35 |
) | ||
Joint venture income and management fees | (0.31 | ) | (0.07 | ) | ||
(0.10 | ) | — | ||||
Overhead and other | (0.14 | ) |
(0.02 |
) | ||
2015 per share outlook (1) | $ | 7.40 | $ | 7.35 | ||
(1) Represents the mid-point of the Company's |
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For the first quarter of 2015, the Company expects projected EPS within a range of
The Company’s 2015 financial outlook is based on a number of assumptions and estimates, some of which are provided in the full earnings release. The primary macroeconomic assumptions considered by the Company include the job growth and personal income growth that the Company expects for 2015, both for the U.S. as a whole and for the Company’s markets. In the Company’s markets for 2015, the Company expects job growth and total personal income growth of 2.5% and 6.7%, respectively.
The following provides additional information on the Company’s primary estimates and assumptions for 2015:
Property Operations
The following are the Company’s expectations for full year 2015 growth in its
- The Company expects an increase in Established Communities’ rental revenue of 3.5% to 4.5%.
- The Company expects an increase in Established Communities’ operating expenses of 3.0% to 4.0%.
- The Company expects an increase in Established Communities’ NOI of 3.5% to 5.0%.
Development and Redevelopment
- The Company anticipates starting new developments in 2015 with an estimated Total Capital Cost of
$1,500,000,000 , including communities to be constructed in joint ventures. The Company’s share of the estimated Total Capital Cost is$1,250,000,000 . - The Company expects to complete the development of 11 communities with a Total Capital Cost of approximately
$1,200,000,000 in 2015. - The Company expects an aggregate investment of
$1,550,000,000 in 2015 related to its planned development activity, including the cost of acquiring land for future development and amounts associated with communities developed in joint ventures. Of this amount the Company’s share is expected to be$1,500,000,000 . - The Company expects to complete and deliver approximately 3,700 apartment homes in 2015, and expects to occupy 3,500 new apartment homes during the year.
- The Company expects to invest approximately
$200,000,000 in its redevelopment communities in 2015. Amounts exclude costs incurred prior to redevelopment.
Capital Markets & Transaction Activity
In 2015, the Company anticipates sourcing approximately
First Quarter Conference Schedule
Management is scheduled to present at Citi's
Other Matters
The Company will hold a conference call on
To hear a replay of the call, which will be available from
The Company produces Earnings Release Attachments (the "Attachments") that provide detailed information regarding operating, development, redevelopment, disposition and acquisition activity. These Attachments are considered a part of this earnings release and are available in full with this earnings release via the Company's website at http://www.avalonbay.com/earnings. To receive future press releases via e-mail, please submit a request through http://www.avalonbay.com/email.
In addition to the Attachments, the Company provides a management letter and teleconference presentation that will be available on the Company's website at http://www.avalonbay.com/earnings before the market opens on
About
As of
Forward-Looking Statements
This release, including its Attachments, contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which you can identify by the Company’s use of words such as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,” “believes,” “outlook” and similar expressions that do not relate to historical matters, are based on the Company’s expectations, forecasts and assumptions at the time of this release, which may not be realized and involve risks and uncertainties that cannot be predicted accurately or that might not be anticipated. These could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Risks and uncertainties that might cause such differences include the following, among others: the Company's preliminary expectations and assumptions as of the date of this release regarding insurance coverage, lender payoff and refinancing requirements and potential uninsured loss amounts resulting from the Avalon at
The Company does not undertake a duty to update forward-looking statements, including its expected 2015 operating results and other financial data forecasts contained in this release. The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this release.
Definitions and Reconciliations
Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and further explained on Attachment 20, “Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms.” Attachment 20 is included in the full earnings release available at the Company’s website at http://www.avalonbay.com/earnings. This wire distribution includes only definitions and reconciliations of the following non-GAAP financial measures:
Core FFO is the Company's FFO as adjusted for the non-routine items outlined in the following table (dollars in thousands, except per share data):
Q4 | Q4 | Full Year | Full Year | |||||||||||||
2014 | 2013 | 2014 | 2013 (1) | |||||||||||||
FFO, actual | $ | 233,484 | $ | 195,344 | $ | 951,035 | $ | 642,814 | ||||||||
Non-Routine Items | ||||||||||||||||
(7,715 | ) | (1,198 | ) | (7,682 | ) | 44,052 | ||||||||||
Joint venture (gains) losses and costs (2) | (2,497 | ) | 475 | (63,322 | ) | 35,554 | ||||||||||
Loss on interest rate protection agreement | — | — | — | 51,000 | ||||||||||||
Write-off of development rights and retail assets (3) | — | 1,314 | 2,564 | 1,506 | ||||||||||||
Compensation plan redesign and severance related costs | 155 | (1,145 | ) | 815 | 3,580 | |||||||||||
Business interruption insurance proceeds | (1,907 | ) | (299 | ) | (2,494 | ) | (299 | ) | ||||||||
Early extinguishment of consolidated debt | — | 14,921 | 412 | 14,921 | ||||||||||||
Gain on sale of land | (490 | ) | — | (490 | ) | (240 | ) | |||||||||
Income taxes | 9,243 | — | 9,243 | — | ||||||||||||
Core FFO | $ | 230,273 | $ | 209,412 | $ | 890,081 | $ | 792,888 | ||||||||
Core FFO per share | $ | 1.74 | $ | 1.62 | $ | 6.78 | $ | 6.23 | ||||||||
Average shares outstanding - diluted | 132,677,639 | 129,611,467 | 131,237,502 | 127,265,903 | ||||||||||||
(1) The Company issued unsecured notes and common stock for purposes of funding the |
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(2) Amounts include the Company’s proportionate share of gains and losses from joint ventures formed with Equity Residential as part of the |
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(3) Represents write-offs expensed by the Company during the year to date period for development rights and retail tenants individually in excess of |
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Debt-to-Total Market Capitalization is a measure of leverage that is calculated by expressing, as a percentage, debt divided by Total Market Capitalization, which is defined as the aggregate of the market value of the Company’s common stock, the market value of the Company’s operating partnership units outstanding (based on the market value of the Company’s common stock) and the outstanding principal balance of debt. Management believes that this measure of leverage can be one useful measure of a real estate operating company’s long-term liquidity and balance sheet strength, because it shows an approximate relationship between a company’s total debt and the current total market value of its assets based on the current price at which the Company’s common stock trades. Because this measure of leverage changes with fluctuations in the Company’s stock price, which occur regularly, this measure may change even when the Company’s earnings, interest and debt levels remain stable. Investors should also note that the net realizable value of the Company’s assets in liquidation is not easily determinable and may differ substantially from the Company’s Total Market Capitalization.
Economic Gain (Loss) is calculated by the Company as the gain (loss) on sale in accordance with GAAP, less accumulated depreciation through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers Economic Gain (Loss) to be an appropriate supplemental measure to gain (loss) on sale in accordance with GAAP because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain (Loss) for each of the communities presented is estimated based on their respective final settlement statements. A reconciliation of Economic Gain (Loss) to gain on sale in accordance with GAAP for the year ended
Economic Occupancy (“Ec Occ”) is defined as total possible revenue less vacancy loss as a percentage of total possible revenue. Total possible revenue (also known as “gross potential”) is determined by valuing occupied units at contract rates and vacant units at market rents. Vacancy loss is determined by valuing vacant units at current market rents. By measuring vacant apartments at their market rents, Economic Occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community’s gross revenue.
Established Communities are identified by the Company as communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had Stabilized Operations, as defined below, as of the beginning of the respective prior year period. Therefore, for full year 2014 operating results, Established Communities are consolidated communities that have Stabilized Operations as of
Established Communities Effective
FFO is determined based on a definition adopted by the
Q4 | Q4 | Full Year | Full Year | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income attributable to common stockholders | $ | 142,642 | $ | 252,212 | $ | 683,567 | $ | 353,141 | ||||||||
Depreciation - real estate assets, including discontinued | ||||||||||||||||
operations and joint venture adjustments | 115,592 | 106,123 | 449,769 | 582,325 | ||||||||||||
Distributions to noncontrolling interests, including | ||||||||||||||||
discontinued operations | 9 | 8 | 35 | 32 | ||||||||||||
Gain on sale of unconsolidated entities holding previously | ||||||||||||||||
depreciated real estate assets | (779 | ) | (2,941 | ) | (73,674 | ) | (14,453 | ) | ||||||||
Gain on sale of previously depreciated real estate assets (1) | (23,980 | ) | (160,058 | ) | (108,662 | ) | (278,231 | ) | ||||||||
FFO attributable to common stockholders | $ | 233,484 | $ | 195,344 | $ | 951,035 | $ | 642,814 | ||||||||
Average shares outstanding - diluted | 132,677,639 | 129,611,467 | 131,237,502 | 127,265,903 | ||||||||||||
Earnings per share - diluted | $ | 1.08 | $ | 1.95 | $ | 5.21 | $ | 2.78 | ||||||||
FFO per common share - diluted | $ | 1.76 | $ | 1.51 | $ | 7.25 | $ | 5.05 | ||||||||
(1) Full year 2014 includes the impact of the non-controlling interest portion of the gain on sale of community owned by Fund I that was consolidated for financial reporting purposes. | ||||||||||||||||
Initial Year Market Cap Rate is defined by the Company as Projected NOI of a single community for the first 12 months of operations (assuming no repositioning), less estimates for non-routine allowance of approximately
Interest Coverage is calculated by the Company as EBITDA, as adjusted, divided by the sum of interest expense, net, and preferred dividends, if applicable. Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our ability to service debt obligations to that of other companies. EBITDA is defined by the Company as net income or loss attributable to the Company before interest income and expense, income taxes, depreciation and amortization.
A reconciliation of EBITDA, as adjusted, and a calculation of Interest Coverage for the fourth quarter of 2014 are as follows (dollars in thousands):
Net income attributable to common stockholders | $ | 142,642 | |||
Interest expense, net | 47,987 | ||||
Income tax expense | 9,332 | ||||
Depreciation expense | 114,084 | ||||
EBITDA | $ | 314,045 | |||
NOI from discontinued operations and real estate assets sold or held for sale, |
2,257 | ||||
Gain on sale of communities | 23,980 | ||||
EBITDA after disposition activity | $ | 287,808 | |||
Joint venture income | (5,241 | ) | |||
EBITDA, as adjusted | $ | 282,567 | |||
Interest expense, net | $ | 47,987 | |||
Interest Coverage | 5.9 times | ||||
Net Debt-to-Adjusted EBITDA is calculated by the Company as total debt that is consolidated for financial reporting purposes, less consolidated cash and cash in escrow, divided by annualized fourth quarter 2014 EBITDA, as adjusted.
Total debt principal (1) | $ | 6,448,138 | |
Cash and cash in escrow | (605,085 | ) | |
Net debt | $ | 5,843,053 | |
Net income attributable to common stockholders | $ | 142,642 | |
Interest expense, net | 47,987 | ||
Income tax expense | 9,332 | ||
Depreciation expense | 114,084 | ||
EBITDA | $ | 314,045 | |
NOI from discontinued operations and real estate assets sold or held for sale, not classified as discontinued operations | 2,257 | ||
Gain on sale of communities | 23,980 | ||
EBITDA after disposition activity | $ | 287,808 | |
Joint venture income | (5,241 | ) | |
EBITDA, as adjusted | $ | 282,567 | |
EBITDA, as adjusted, annualized | $ | 1,130,268 | |
Net Debt-to-Adjusted EBITDA | 5.2 times | ||
(1) Balance at |
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NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excludes corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed development and other pursuit costs, net interest expense, gain (loss) on extinguishment of debt, general and administrative expense, joint venture income (loss), depreciation expense, impairment loss on land holdings, gain on sale of real estate assets, gain on sale of discontinued operations, income from discontinued operations and NOI from real estate assets held for sale or that have been sold. The Company considers NOI to be an appropriate supplemental measure to Net Income of operating performance of a community or communities because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of corporate-level property management overhead or general and administrative costs. This is more reflective of the operating performance of a community, and allows for an easier comparison of the operating performance of single assets or groups of assets. In addition, because prospective buyers of real estate have different overhead structures, with varying marginal impact to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or groups of assets.
A reconciliation of NOI to Net Income, as well as a breakdown of NOI by operating segment, is as follows (dollars in thousands):
Q4 | Q4 | Q3 | Q2 | Q1 | Full Year | Full Year | |||||||||||||||||||||||
2014 (1) | 2013 (1) | 2014 (1) | 2014 (1) | 2014 (1) | 2014 (2) | 2013 (2) | |||||||||||||||||||||||
Net income (loss) | $ | 142,530 | $ | 252,090 | $ | 241,001 | $ | 172,197 | $ | 141,599 | $ | 697,327 | $ | 352,771 | |||||||||||||||
Indirect operating expenses, net of corporate income | 12,721 | 10,881 | 13,173 | 12,343 | 10,818 | 49,055 | 41,554 | ||||||||||||||||||||||
Investments and investment management expense | 1,290 | 836 | 1,079 | 1,137 | 979 | 4,485 | 3,990 | ||||||||||||||||||||||
Expensed acquisition, development and other pursuit costs, net of recoveries | (6,855 | ) | (991 | ) | 406 | 2,017 | 715 | (3,717 | ) | 45,050 | |||||||||||||||||||
Interest expense, net | 47,987 | 44,630 | 46,376 | 43,722 | 42,533 | 180,618 | 172,402 | ||||||||||||||||||||||
Loss on extinguishment of debt, net | — | 14,921 | — | 412 | — | 412 | 14,921 | ||||||||||||||||||||||
Loss on interest rate contract | — | — | — | — | — | — | 51,000 | ||||||||||||||||||||||
General and administrative expense | 10,715 | 8,311 | 11,254 | 10,220 | 9,236 | 41,425 | 39,573 | ||||||||||||||||||||||
Joint venture (income) loss | (5,241 | ) | (5,090 | ) | (130,592 | ) | (7,710 | ) | (5,223 | ) | (148,766 | ) | 11,154 | ||||||||||||||||
Depreciation expense | 114,084 | 104,806 | 111,836 | 110,395 | 106,367 | 442,682 | 560,215 | ||||||||||||||||||||||
Income tax expense | 9,332 | — | 36 | — | — | 9,368 | — | ||||||||||||||||||||||
Gain on sale of real estate assets | (24,470 | ) | — | — | (60,945 | ) | — | (85,415 | ) | (240 | ) | ||||||||||||||||||
Gain on sale of discontinued operations | — | (160,058 | ) | — | — | (37,869 | ) | (37,869 | ) | (278,231 | ) | ||||||||||||||||||
Income from discontinued operations | — | (3,823 | ) | — | — | (310 | ) | (310 | ) | (16,713 | ) | ||||||||||||||||||
NOI from real estate assets sold or held for sale, not classified as discontinued operations | (2,257 | ) | (5,185 | ) | ) | (4,998 | ) | (5,129 | ) | (15,199 | ) | (19,448 | ) | ||||||||||||||||
NOI | $ | 299,836 | $ | 261,328 | $ | 291,754 | $ | 278,790 | $ | 263,716 | $ | 1,134,096 | $ | 977,998 | |||||||||||||||
Established: | |||||||||||||||||||||||||||||
$ | 29,602 | $ | 29,453 | $ | 30,259 | $ | 29,178 | $ | 28,026 | $ | $ | 113,043 | |||||||||||||||||
Metro NY/NJ | 68,357 | 65,466 | 67,255 | 66,054 | 63,989 | 223,591 | 216,928 | ||||||||||||||||||||||
Mid-Atlantic | 32,991 | 33,515 | 32,284 | 32,531 | 32,800 | 69,498 | 71,282 | ||||||||||||||||||||||
Pacific NW | 11,698 | 10,671 | 11,668 | 11,554 | 11,200 | 37,637 | 35,164 | ||||||||||||||||||||||
No. |
47,888 | 42,654 | 48,805 | 47,498 | 45,000 | 132,899 | 122,872 | ||||||||||||||||||||||
So. |
43,120 | 38,969 | 41,655 | 41,607 | 39,659 | 95,626 | 90,906 | ||||||||||||||||||||||
Total Established | 233,656 | 220,728 | 231,926 | 228,422 | 220,674 | 673,156 | 650,195 | ||||||||||||||||||||||
Other Stabilized - AvalonBay | 32,487 | 27,632 | 31,838 | 31,202 | 28,980 | 101,539 | 76,551 | ||||||||||||||||||||||
Other Stabilized - |
N/A | N/A | N/A | N/A | N/A | 241,522 | 192,203 | ||||||||||||||||||||||
Development/Redevelopment | 33,693 | 12,968 | 27,990 | 19,166 | 14,062 | 117,879 | 59,049 | ||||||||||||||||||||||
NOI | $ | 299,836 | $ | 261,328 | $ | 291,754 | $ | 278,790 | $ | 263,716 | $ | 1,134,096 | $ | 977,998 | |||||||||||||||
(1) Results based upon reportable operating segments as determined as of |
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(2) Results based upon reportable operating segments as determined as of |
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NOI as reported by the Company does not include the operating results from discontinued operations (i.e., assets sold during the period
Q4 | Q4 | Full Year | Full Year | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Income from discontinued operations | $ | — | $ | 3,823 | $ | 310 | $ | 16,713 | |||||||||
Depreciation expense | — | 345 | — | 13,500 | |||||||||||||
NOI from discontinued operations | $ | — | $ | 4,168 | $ | 310 | $ | 30,213 | |||||||||
Revenue from real estate assets sold or held for sale, not classified as discontinued operations | $ | 3,421 | $ | 8,248 | $ | 24,389 | $ | 30,867 | |||||||||
Operating expenses real estate assets sold or held for sale, not classified as discontinued operations | (1,164 | ) | (3,063 | ) | (9,190 | ) | (11,419 | ) | |||||||||
NOI from real estate assets sold or held for sale, not classified as discontinued operations | $ | 2,257 | $ | 5,185 | $ | 15,199 | $ | 19,448 | |||||||||
Other Stabilized Communities (includes Other Stabilized Communities - AvalonBay and Other Stabilized Communities -
Projected FFO, as provided within this earnings release in the Company’s outlook, is calculated on a basis consistent with historical FFO, and is therefore considered to be an appropriate supplemental measure to projected Net Income from projected operating performance. A reconciliation of the ranges provided for Projected FFO per share (diluted) for the first quarter and full year of 2015 to the ranges provided for projected EPS (diluted) and corresponding reconciliation of the ranges for Projected FFO per share to the ranges for Core FFO per share are as follows:
Low
Range |
High
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Projected EPS (diluted) - Q1 2015 | $ | 1.57 | $ | 1.61 | |||||||
Projected depreciation (real estate related) | 0.88 | 0.92 | |||||||||
Projected gain on sale of operating communities | (0.59 | ) | (0.63 | ) | |||||||
Projected FFO per share (diluted) - Q1 2015 | 1.86 | 1.90 | |||||||||
Non recurring joint venture income and management fees | (0.22 | ) | (0.24 | ) | |||||||
0.05 | 0.07 | ||||||||||
Other non-routine items | 0.02 | 0.02 | Projected Core FFO per share (diluted) - Q1 2015 | $ | 1.71 | $ | 1.75 | ||||
Projected EPS (diluted) - Full Year 2015 | $ | 4.65 | $ | 4.95 | |||||||
Projected depreciation (real estate related) | 3.50 | 3.70 | |||||||||
Projected gain on asset sales | (0.90 | ) | (1.10 | ) | |||||||
Projected FFO per share (diluted) - Full Year 2015 | 7.25 | 7.55 | |||||||||
Non recurring joint venture income and management fees | (0.23 | ) | (0.25 | ) | |||||||
0.09 | 0.11 | ||||||||||
Income taxes | 0.10 | 0.12 | |||||||||
Write-off of unamortized MTM premium | (0.05 | ) | (0.07 | ) | |||||||
Other non-routine items | 0.04 | 0.04 | |||||||||
Projected Core FFO per share (diluted) - Full Year 2015 | $ | 7.20 | $ | 7.50 | |||||||
Projected NOI, as used within this release for certain development communities and in calculating the Initial Year Market Cap Rate for dispositions, represents management’s estimate, as of the date of this release (or as of the date of the buyer’s valuation in the case of dispositions), of projected stabilized rental revenue minus projected stabilized operating expenses. For development communities, Projected NOI is calculated based on the first twelve months of Stabilized Operations, as defined below, following the completion of construction. In calculating the Initial Year Market Cap Rate, Projected NOI for dispositions is calculated for the first twelve months following the date of the buyer’s valuation. Projected stabilized rental revenue represents management’s estimate of projected gross potential minus projected stabilized economic vacancy and adjusted for projected stabilized concessions plus projected stabilized other rental revenue. Projected stabilized operating expenses do not include interest, income taxes (if any), depreciation or amortization, or any allocation of corporate-level property management overhead or general and administrative costs. In addition, projected stabilized operating expenses for development communities do not include property management fee expense. Projected gross potential for development communities and dispositions is based on leased rents for occupied homes and management’s best estimate of rental levels for homes which are currently unleased, as well as those homes which will become available for lease during the twelve month forward period used to develop Projected NOI. The weighted average Projected NOI as a percentage of Total Capital Cost is weighted based on the Company’s share of the Total Capital Cost of each community, based on its percentage ownership.
Management believes that Projected NOI of the development communities, on an aggregated weighted average basis, assists investors in understanding management's estimate of the likely impact on operations of the development communities when the assets are complete and achieve stabilized occupancy (before allocation of any corporate-level property management overhead, general and administrative costs or interest expense). However, in this release the Company has not given a projection of NOI on a company-wide basis. Given the different dates and fiscal years for which NOI is projected for these communities, the projected allocation of corporate-level property management overhead, general and administrative costs and interest expense to communities under development is complex, impractical to develop, and may not be meaningful. Projected NOI of these communities is not a projection of the Company's overall financial performance or cash flow. There can be no assurance that the communities under development or redevelopment will achieve the Projected NOI as described in this release.
Projected Stabilized Yield (also expressed as “weighted average initial stabilized yield” or words of similar meaning) means Projected NOI as a percentage of Total Capital Cost.
Rental Revenue with Concessions on a Cash Basis is considered by the Company to be a supplemental measure to rental revenue in conformity with GAAP to help investors evaluate the impact of both current and historical concessions on GAAP-based rental revenue and to more readily enable comparisons to revenue as reported by other companies. In addition, Rental Revenue with Concessions on a Cash Basis allows an investor to understand the historical trend in cash concessions.
A reconciliation of rental revenue from Established Communities in conformity with GAAP to Rental Revenue with Concessions on a Cash Basis is as follows (dollars in thousands):
Q4 | Q4 | Q2-Q4 | Q2-Q4 | Full Year | Full Year | ||||||||||||||||||||
2014 (1) | 2013 (1) | 2014 (1) | 2013 (1) | 2014 (2) | 2013 (2) | ||||||||||||||||||||
Rental revenue (GAAP basis) | $ | 334,880 | $ | 321,687 | $ | 995,854 | $ | 961,004 | $ | 963,917 | $ | 927,821 | |||||||||||||
Concessions amortized | 464 | 1,144 | 2,343 | 3,584 | 1,388 | 1,406 | |||||||||||||||||||
Concessions granted | (200 | ) | (1,422 | ) | (1,375 | ) | (3,870 | ) | (1,027 | ) | (979 | ) | |||||||||||||
Rental Revenue with Concessions | |||||||||||||||||||||||||
on a Cash Basis | $ | 335,144 | $ | 321,409 | $ | 996,822 | $ | 960,718 | $ | 964,278 | $ | 928,248 | |||||||||||||
% change -- GAAP revenue | 4.1 | % | 3.6 | % | % | ||||||||||||||||||||
% change -- cash revenue | 4.3 | % | 3.8 | % | 3.9 | % | |||||||||||||||||||
(1) Results based upon reportable operating segments as determined as of |
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(2) Results based upon reportable operating segments as determined as of |
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Stabilized/Restabilized Operations is defined as the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.
Total Capital Cost includes all capitalized costs projected to be or actually incurred to develop the respective development or redevelopment community, or development right, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, offset by proceeds from the sale of any associated land or improvements, all as determined in accordance with GAAP. For redevelopment communities, Total Capital Cost excludes costs incurred prior to the start of redevelopment when indicated. With respect to communities where development or redevelopment was completed in a prior or the current period, Total Capital Cost reflects the actual cost incurred, plus any contingency estimate made by management. Total Capital Cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the total projected joint venture contribution amount. For joint ventures not in construction, Total Capital Cost is equal to gross real estate cost.
Unencumbered NOI as calculated by the Company represents NOI generated by real estate assets unencumbered by either outstanding secured debt or land leases (excluding land leases with purchase options that were put in place for governmental incentives or tax abatements) as a percentage of total NOI generated by real estate assets. The Company believes that current and prospective unsecured creditors of the Company view Unencumbered NOI as one indication of the borrowing capacity of the Company. Therefore, when reviewed together with the Company’s Interest Coverage, EBITDA and cash flow from operations, the Company believes that investors and creditors view Unencumbered NOI as a useful supplemental measure for determining the financial flexibility of an entity. A calculation of Unencumbered NOI for the year ended
Year To Date | ||||
NOI (1) | ||||
NOI for Established Communities | $ | 673,156 | ||
NOI for Other Stabilized Communities - AvalonBay | 101,539 | |||
NOI for Other Stabilized Communities - |
241,522 | |||
NOI for Development/Redevelopment Communities | 117,879 | |||
NOI for discontinued operations | 310 | |||
NOI from real estate assets sold or held for sale, not classified as discontinued operations | 15,199 | |||
Total NOI generated by real estate assets |
1,149,605 | |||
NOI on encumbered assets | 352,021 | |||
NOI on unencumbered assets |
$ | 797,584 | ||
Unencumbered NOI | 69 | % | ||
(1) Results based upon reportable operating segments as determined as of |
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Unleveraged IRR on sold communities refers to the internal rate of return calculated by the Company considering the timing and amounts of (i) total revenue during the period owned by the Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated capital cost of the communities at the time of sale and (iv) total direct operating expenses during the period owned by the Company. Each of the items (i), (ii), (iii) and (iv) are calculated in accordance with GAAP.
The calculation of Unleveraged IRR does not include an adjustment for the Company’s general and administrative expense, interest expense, or corporate-level property management and other indirect operating expenses. Therefore, Unleveraged IRR is not a substitute for Net Income as a measure of our performance. Management believes that the Unleveraged IRR achieved during the period a community is owned by the Company is useful because it is one indication of the gross value created by the Company’s acquisition, development or redevelopment, management and sale of a community, before the impact of indirect expenses and Company overhead. The Unleveraged IRR achieved on the communities as cited in this release should not be viewed as an indication of the gross value created with respect to other communities owned by the Company, and the Company does not represent that it will achieve similar Unleveraged IRRs upon the disposition of other communities. The weighted average Unleveraged IRR for sold communities is weighted based on all cash flows over the holding period for each respective community, including net sales proceeds.
703-317-4681
Source:
Cabot Corp Reports First Quarter Adjusted EPS of $0.80 and Diluted EPS of $0.69
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