AvalonBay Communities Announces Disposition Activity.ALEXANDRIA, Va. -- AvalonBay Communities AvalonBay Communities, Inc. (NYSE: AVB) is an Alexandria, Virginia-based public real estate investment trust. The company specializes in acquiring, developing, redeveloping and managing high-quality apartment communities in high barrier-to-entry markets, such as the Northeast, , Inc. (NYSE/PCX:AVB AVB Allgemeine Versicherungsbedingungen AVB Armin Van Buuren (musician) AVB Atrioventricular Block AVB Association Vaincre le Bègaiement AVB Acappella Vocal Band (men's Christian a cappella group) ) announced today the disposition of two communities during the last week of March 2005. The Company sold Avalon Sunnyvale, a 220 apartment home community located in Sunnyvale, California Sunnyvale ([sʌniveil]) is a city in Santa Clara County, California, United States. It is one of the major cities that make up the Silicon Valley. As of the 2000 census, the city population was 131,760. , and Avalon at Penasquitos Hills, a 176 apartment home community located in San Diego, California “San Diego” redirects here. For other uses, see San Diego (disambiguation). San Diego is a coastal Southern California city located in the southwestern corner of the continental United States. As of 2006, the city has a population of 1,256,951. . Avalon Sunnyvale and Avalon at Penasquitos Hills were built in 1982 and purchased by the Company in 1995 and 1997 respectively. Financial information regarding the sale of the communities is set forth in the following table ($ in millions):
(All amounts in $millions)
Sales Net GAAP Depreciation Economic
Price Proceeds Gain and Other Gain
------ --------- ------ ------------ --------
Avalon Sunnyvale $45.0 $ 44.5 $15.9 $ 8.4 $ 24.3
Avalon at Penasquitos
Hills 34.3 33.8 21.8 (1.4) 20.4
------------------------ ------ --------- ------ ------------ --------
YTD Total $79.3 $ 78.3 $37.7 $ 7.0 $ 44.7
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The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from these sales of $78.3 million were used to repay a portion of amounts outstanding on the Company's unsecured credit facility. These two communities sold at a weighted average initial year market capitalization rate Market capitalization rate Expected return on a security. The market-consensus estimate of the appropriate discount rate for a firm's cash flow. of 3.9% and a weighted average Gross Unleveraged Internal Rate of Return ("Unleveraged IRR IRR In currencies, this is the abbreviation for the Iranian Rial. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ") of 19.4%. The weighted average Economic Gain on Total Capital Cost for the communities sold is 134.9%. Definitions and Notes GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Gain represents the gain on sale in accordance with GAAP. The GAAP Gain is estimated based on the final settlement statement. Economic Gain is calculated as the gain on sale in accordance with GAAP, less accumulated depreciation accumulated depreciation The total amount of depreciation that has been recorded for an asset since its date of acquisition. For example, a computer with a 5-year estimated life that was purchased for $2,000 would have accumulated depreciation of $800 [( through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers Economic Gain to be an appropriate supplemental measure to gain on sale in accordance with GAAP because it helps investors understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain is estimated based on the final settlement statement. A reconciliation of Economic Gain to gain on sale in accordance with GAAP for these two communities is presented, in the aggregate, in the following table:
(All amounts in $ millions)
Accumulated
Depreciation and
GAAP Gain Other Economic Gain
----------------------- ----------------------- ----------------------
$ 37.7 $ 7.0 $ 44.7
Total Capital Cost reflects actual capital costs incurred to develop or acquire a community, including acquisition costs, construction costs, real estate taxes, capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, all as determined in accordance with GAAP. Initial Year Market Capitalization Rate is defined by the Company as Projected NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics of a single community for the first 12 months following the date of the buyer's valuation, less estimates for non-routine allowance of approximately $250 to $300 per apartment, divided by the gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. price for the community. Projected NOI, as referred to above, represents management's estimate of projected rental revenue minus projected operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. before interest, income taxes (if any), depreciation, amortization and extraordinary items. For this purpose, management's projection of operating expenses for the community includes a management fee of 3.25%. The Initial Year Market Capitalization Rate, which may be determined in a different manner by others, is a measure frequently used in the real estate industry when determining the appropriate purchase price for a property or estimating the value for the property. Buyers may assign different Initial Year Market Capitalization Rates to different communities when determining the appropriate value because they (i) may project different rates of change in operating expenses, including capital expenditure estimates and (ii) may project different rates of change in future rental revenue due to different estimates for changes in rent and occupancy levels. The weighted average Initial Year Market Capitalization Rate is weighted based on the gross sales price of each community. 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 the 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. About AvalonBay Communities, Inc. AvalonBay Communities, Inc., headquartered in Alexandria, Virginia Alexandria is an independent city in the Commonwealth of Virginia. As of the 2000 census, the city had a total population of 128,284. Located along the Western bank of the Potomac River, Alexandria is approximately 6 miles (9.6 kilometers) south of downtown Washington, DC. , currently owns or holds an ownership interest in 146 apartment communities containing 42,414 apartment homes in ten states and the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). , of which ten communities are under construction and four communities are under reconstruction. AvalonBay is in the business of developing, redeveloping, acquiring, and managing apartment communities in high barrier-to-entry markets of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . More information on AvalonBay may be found on AvalonBay's Web site at http://www.avalonbay.com. Copyright (C) 2005 Avalonbay Communities, Inc. All Rights Reserved |
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