AvalonBay Communities Advances Portfolio Optimization Efforts Through Planned Acquisition of Eight Apartment Communities in Texas and Reaffirms Outlook
“This transaction will double the size of our portfolio in our Texas Expansion Regions at a time when assets can be acquired at a compelling basis relative to today’s construction costs, with assets that are strongly aligned with our portfolio allocation priorities,” said Matthew Birenbaum, AvalonBay’s Chief Investment Officer. “The assets are suburban garden communities with an average age of 11 years, providing a strong complement to our current and planned development activity with rents at a more affordable price point, and allowing for increased operating synergies as we increase our scale in these high-growth regions.”
The acquisition of the Austin Assets is expected to close on or around March 31, 2025, for an aggregate purchase price of
The acquisition of the Dallas Portfolio is expected to close in the second quarter of 2025 for a stated aggregate purchase price of
Following is a summary of each community to be acquired:
| Community | Metro Area | Homes | Year Built |
| Cielo(1) | 554 |
2015 |
|
| Retreat at Wolf Ranch | 303 |
2017 |
|
Subtotal | Weighted Average |
857 |
2016 |
|
|
|
||
| Auberry at Twin Creeks | 216 |
2005 |
|
| Satori |
330 |
2019 |
|
| Vale |
349 |
2021 |
|
| Aura |
301 |
2020 |
|
| Lakeway Castle Hills | 276 |
2019 |
|
| Wimberly | 372 |
1995 |
|
Subtotal | Weighted Average |
1,844 |
2014 |
|
|
|
||
Total | Weighted Average |
2,701 |
2014 |
|
| (1) Cielo was developed and reported as two properties by BSR REIT, and upon acquisition it will be operated and reported as one community by AvalonBay. | |||
For the eight communities to be acquired:
-
The average price per home is approximately
$229,000 -
The weighted average rent per home is
$1,675 -
The weighted average initial Market Cap Rate is projected to be in the high
4% range.
Only holders of BSR Class B Units who are residents of
2025 Outlook Reaffirmed
The Company reaffirms its previously disclosed ranges for first quarter and full year 2025 projected EPS (diluted), Projected FFO per share, and Projected Core FFO per share, which reaffirmation is not dependent on the closing of the transactions described above.
Advisors
Wachtell, Lipton, Rosen & Katz, Davies Ward Phillips & Vineberg LLP and Goulston & Storrs PC are acting as legal counsel to the Company in connection with the transaction.
About AvalonBay Communities, Inc.
AvalonBay Communities, Inc., a member of the S&P 500, is an equity REIT that develops, redevelops, acquires and manages apartment communities in leading metropolitan areas in New England, the
Forward-Looking Statements
This release 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. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company's forward-looking statements generally use the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “project,” “plan,” “may,” “shall,” “will,” “pursue,” “outlook” and other similar expressions that indicate future events and trends and do not report historical matters. These statements, among other things, address the Company’s intent, belief, forecasts, assumptions or expectations with respect to first quarter and full year 2025 projected EPS (diluted), Projected FFO per share and Projected Core FFO per share; the acquisition of the Austin Assets and the Dallas Portfolio; the Market Cap Rate of acquired assets; the amount of the cash payment for the Dallas Portfolio; and the issuance of DownREIT Units in connection with the contribution of the Dallas Portfolio to the AVB DownREIT. The Company cannot assure the future results or outcome of the matters described in these statements; these statements reflect the Company’s current expectations of the outcomes of the matters discussed. The Company does not undertake a duty to update these forward-looking statements, and therefore they may not represent the Company’s estimates and assumptions after the date of this release. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the Company’s control. These risks, uncertainties and other factors may cause the Company’s actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by these forward-looking statements. You should carefully review the discussion under Part I, Item 1A. “Risk Factors” of the Company’s Form 10-K for the year ended December 31, 2023 and Part II, Item 1A. “Risk Factors” in subsequent quarterly reports on Form 10-Q or Part I, Item 1A. “Risk Factors” in a subsequently filed Form 10-K for further discussion of risks associated with forward-looking statements. Some of the factors that could cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: the Company’s assumptions and expectations in its financial outlook may prove to be too optimistic; the acquisitions of the Austin Assets and the Dallas Portfolio may not close at the time or on the terms currently expected; the parties may not be able to satisfy the closing conditions of the acquisitions on the expected timeframe or at all; the possibility that the acquisitions may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the Company may not be able to integrate the Austin Assets and the Dallas Portfolio in a manner consistent with its assumptions or those communities may not perform as estimated; and the Company may encounter liabilities for which it is responsible that were unknown at the time it agreed to the acquisitions.
Definitions
DownREIT Units means units representing limited partnership interests in the AVB DownREIT. Each DownREIT Unit will be entitled to receive quarterly distributions at the same rate as quarterly dividends on a share of the Company’s common stock. Following the one-year anniversary of the closing date, each holder of a DownREIT Unit will have the right to initiate a transaction in which each DownREIT Unit may be redeemed for a cash amount related to the then-current trading price of one share of the Company’s common stock or, at the Company’s election, one share of the Company’s common stock.
Expansion Regions include markets located in
FFO and Core FFO are generally considered by management to be appropriate supplemental measures of our operating and financial performance. FFO is calculated by the Company in accordance with the definition adopted by Nareit. FFO is calculated by the Company as Net income or loss attributable to common stockholders computed in accordance with GAAP, adjusted for gains or losses on sales of previously depreciated operating communities, cumulative effect of a change in accounting principle, impairment write-downs of depreciable real estate assets, write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates and depreciation of real estate assets, including similar adjustments for unconsolidated partnerships and joint ventures, including those from a change in control. FFO can help one compare the operating and financial performance of a real estate company between periods or as compared to different companies because adjustments such as (i) gains or losses on sales of previously depreciated property or (ii) real estate depreciation may impact comparability between companies as the amount and timing of these or similar items can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates. Core FFO is the Company's FFO as adjusted for non-core items. By further adjusting for items that we do not consider be part of our core business operations, Core FFO can help with the comparison of core operating performance of the Company between periods.
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 an estimate of typical capital expenditure allowance per apartment home, divided by the gross sales price for the community. 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 and amortization. For this purpose, management’s projection of operating expenses for the community includes a management fee of
Projected FFO and Projected Core FFO, as provided within this press release, are calculated on a basis consistent with historical FFO and Core FFO, and are therefore considered to be appropriate supplemental measures to projected net income from projected operating performance.
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Jason Reilley
Vice President
Investor Relations
AvalonBay Communities, Inc.
703-317-4681
Source: AvalonBay Communities, Inc.
