AvalonBay Communities Announces Disposition and Acquisition Activity.

ALEXANDRIA, Va. -- AvalonBay Communities, Inc. (NYSE/PCX:AVB) announced today the disposition of Avalon Cupertino, a 311 apartment home community located in Cupertino, California. Additionally, the AvalonBay Value Added Fund, L.P. (the "Fund") acquired Aurora Yerba Buena, a 160 apartment home community with 32,000 square feet of retail space, located in the South of Market district of San Francisco, California.

Disposition Activity

Avalon Cupertino, which was developed by the Company for a Total Capital Cost of $49.0 million, was sold for a gross sales price of $88.0 million. The Company previously announced the sale of Avalon Estates, a 162 apartment home community located in the Boston, Massachusetts area. Avalon Estates was developed by the Company for a Total Capital Cost of $20.1 million and sold for a gross sales price of $34.6 million. Both communities were sold in January 2006 to buyers that intend to continue to operate the communities as rental apartments.

Financial information regarding these sales is set forth in the following table:

All amounts in $millions

                   Sales       Net               Depreciation Economic
   Community       Price     Proceeds  GAAP Gain   and Other    Gain
---------------- ---------- ---------- --------- ------------ --------
Avalon Estates       $34.6      $33.9     $16.5         $3.0    $13.5
Avalon Cupertino      88.0       87.1      49.1         11.0     38.1
---------------- ---------- ---------- --------- ------------ --------
   Total            $122.6     $121.0     $65.6        $14.0    $51.6
================ ========== ========== ========= ============ ========

The net proceeds of $121.0 million from these sales were used to repay a portion of amounts outstanding on the Company's unsecured credit facility. These two communities were sold for a weighted average Initial Year Market Capitalization rate of 4.4% and a Gross Unleveraged Internal Rate of Return ("Unleveraged IRR") of 16.5%, over an approximate 8 year weighted average holding period. The aggregate Economic Gain on Total Capital Cost for the two communities was approximately 74.0%.

Acquisition Activity

The Fund, a private, discretionary investment vehicle in which the Company has a 15% equity interest, acquired Aurora Yerba Buena for $66.0 million. The community features a fitness center overlooking a sun deck, a sauna, three business centers and two conference rooms. Additionally, the community includes a 32,000 square foot Whole Foods Market and a 155-space parking garage.

The South of Market district is the center of San Francisco's art community and is home to the San Francisco Museum of Modern Art and many restaurants and nightclubs. This is one of the most sought after submarkets due to its local attractions and proximity to the Financial District to the North and Mission Bay to the South. The community is located adjacent to Interstate 80, which provides easy access to Oakland and the East Bay, and near Interstate 280 and US Highway 101 which are major thoroughfares connecting San Francisco to San Jose.

Definitions and Notes

GAAP Gain represents the gain on sale in accordance with GAAP.

Economic Gain is calculated as the gain 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 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.

Total Capital Cost reflects actual capital costs incurred to develop or acquire a community, including acquisition costs, construction costs, real estate taxes, capitalized interest 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 of a single community for the first 12 months of operations (assuming no repositioning), less estimates for non-routine allowance of approximately $200 to $300 per apartment, divided by the gross sales price for the community. The gross sales price is adjusted for transaction costs and deferred maintenance in determining the Initial Year Market Capitalization Rate for acquisitions. Projected NOI, as referred to above, represents management's estimate of projected rental revenue minus projected operating expenses 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 3.0% to 3.5%. 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 (for dispositions) and on the expected total investment in each community (for acquisitions).

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. 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.

About AvalonBay Communities, Inc.

AvalonBay Communities, Inc., headquartered in Alexandria, Virginia, currently owns or holds an ownership interest in 156 apartment communities containing 45,161 apartment homes in ten states and the District of Columbia, of which fifteen communities are under construction and two 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. More information on AvalonBay may be found on AvalonBay's Web site at http://www.avalonbay.com.

Copyright (C) 2006 AvalonBay Communities, Inc. All Rights Reserved