AvalonBay Communities, Inc. Announces Public Offering of 3,200,000 Shares of Common Stock

Rhea-AI Summary

AvalonBay Communities (NYSE: AVB) has announced a public offering of 3,200,000 shares of common stock. The company plans to enter into forward sale agreements with Goldman Sachs, Bank of America, Deutsche Bank, and Morgan Stanley. These firms will act as joint book-running managers and forward purchasers. AVB intends to grant underwriters a 30-day option to purchase an additional 480,000 shares.

The company aims to settle the forward sale agreements by December 31, 2025, potentially receiving cash proceeds. AVB plans to use the net proceeds for land acquisitions, development and redevelopment of apartment communities, investments, and general corporate purposes. This may include repaying outstanding debts and refinancing. The offering allows AVB to set the share price now while delaying issuance and receipt of proceeds until closer to when funds are needed.

Positive

• Potential to raise significant capital through 3,200,000 share offering
• Flexibility in timing of share issuance and fund receipt through forward sale agreements
• Option for underwriters to purchase additional 480,000 shares, potentially increasing capital raised
• Proceeds intended for strategic growth initiatives like land acquisitions and community development
• Opportunity to repay outstanding debts and strengthen financial position

Negative

• Potential dilution of existing shareholders' ownership
• Delayed receipt of proceeds may impact immediate capital needs
• Market risks associated with forward sale agreements and potential share price fluctuations

Insights

Financial Analyst

This public offering of 3.2 million shares with an option for 480,000 additional shares is a significant capital-raising move by AvalonBay Communities. The use of forward sale agreements is a strategic financial maneuver, allowing the company to lock in the current stock price while delaying the actual issuance of shares. This approach provides flexibility in timing the receipt of proceeds, aligning with their future funding needs.

The intended use of proceeds for land acquisitions, development and redevelopment of apartment communities signals aggressive growth plans. This expansion strategy could potentially increase the company's market share and boost future revenue streams. However, investors should note that this will likely dilute existing shareholders' ownership once the shares are issued.

The option to use proceeds for debt repayment, including commercial paper and credit facility, indicates a focus on balance sheet management. This could lead to improved financial ratios and potentially lower interest expenses in the future, positively impacting the company's profitability.

Real Estate Market Analyst

AvalonBay's move to raise capital for land acquisitions and property development suggests a bullish outlook on the multifamily real estate market. This aggressive expansion strategy indicates that the company sees significant growth opportunities in the apartment sector, possibly driven by favorable demographic trends or anticipated market dislocations.

The focus on both acquisitions and development allows AvalonBay to pursue a two-pronged growth strategy. Acquisitions can provide immediate portfolio expansion, while development projects offer potential for higher returns but with longer timelines and increased risk. The structured investment program investments mentioned could indicate a move towards more diverse real estate exposure, potentially including mixed-use or non-traditional multifamily assets.

Investors should monitor how effectively AvalonBay deploys this capital in a competitive real estate market, as the success of these investments will be crucial for justifying the equity dilution and maintaining the company's position as a leading multifamily REIT.

ARLINGTON, Va.--(BUSINESS WIRE)-- AVALONBAY COMMUNITIES, INC. (NYSE: AVB) (the “Company”) announced today that it is commencing an underwritten public offering of 3,200,000 shares of common stock in connection with the forward sale agreements described below. Goldman Sachs & Co. LLC, BofA Securities, Deutsche Bank Securities Inc. and Morgan Stanley are acting as joint book-running managers for the offering. In connection with the offering, the Company intends to grant the underwriters a 30-day option to purchase up to an additional 480,000 shares of common stock.

The Company expects to enter into forward sale agreements with Goldman Sachs & Co. LLC, Bank of America, N.A., Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC or their affiliates (the “forward purchasers”) with respect to 3,200,000 shares of its common stock. In connection with the forward sale agreements, the forward purchasers or their affiliates are expected to borrow and sell to the underwriters an aggregate of 3,200,000 shares of the common stock that will be delivered in the offering. Subject to its right to elect cash or net share settlement, which right is subject to certain conditions, the Company intends to deliver, upon physical settlement of such forward sale agreements on one or more dates specified by the Company occurring no later than December 31, 2025, an aggregate of 3,200,000 shares of its common stock (or an aggregate of 3,680,000 shares of common stock if the underwriters exercise their option to purchase additional shares in full) to the forward purchasers in exchange for cash proceeds per share equal to the applicable forward sale price, subject to certain adjustments as provided in the forward sale agreements.

The Company will not initially receive any proceeds from the sale of shares of its common stock by the forward purchasers or their affiliates in the offering. The Company intends to use the net proceeds, if any, it receives upon the future settlement of the forward sale agreements for identified and prospective land acquisitions, the development and redevelopment of apartment communities, the acquisition of communities, funding of its structured investment program investments, and working capital and general corporate purposes. General corporate purposes may include the repayment of outstanding indebtedness, including borrowings under the Company’s commercial paper program, which allows the Company to issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year up to a maximum amount outstanding at any one time of $500 million, or its $2.25 billion revolving variable rate unsecured credit facility, and the repayment and refinancing of other indebtedness. Pending the application of such net proceeds, the Company may temporarily invest all or a portion of the net proceeds from the offering in cash or cash equivalents and/or hold such proceeds in accordance with its internal liquidity policy.

Selling common stock through the forward sale agreements enables the Company to set the price of such shares upon the pricing of the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company until a time closer to the funding requirements described above.

The offering is being conducted pursuant to the Company’s currently effective shelf registration statement, which was previously filed with the Securities and Exchange Commission (the “SEC”). This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the Company’s securities, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

You may obtain copies of the prospectus supplement and prospectus relating to the offering without charge from the SEC at www.sec.gov. Alternatively, copies of these documents may be obtained by contacting (i) Goldman Sachs & Co. LLC, Prospectus Department, 200 West Street, New York, NY 10282, telephone: 1-866-471-2526, facsimile: 212-902-9316 or by email at Prospectus-ny@ny.email.gs.com; (ii) BofA Securities, NC1-022-02-25, 201 North Tryon Street, Charlotte, North Carolina 28255-0001, Attention: Prospectus Department or by email at dg.prospectus_requests@bofa.com; (iii) Deutsche Bank Securities Inc., Attention: Prospectus Department, at 1 Columbus Circle, New York, NY 10019, by telephone at (800) 503-4611 or by email at Prospectus.Ops@db.com; and (iv) Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, 2nd Floor, New York, NY 10014, or email: prospectus@morganstanley.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which include, but are not limited to, statements related to the size of the offering and the intended use of the net proceeds from the offering. The Company intends these 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 and is including this statement for purposes of complying with those safe harbor provisions, in each case, to the extent applicable. The Company cautions investors that any such forward-looking statements are based on current beliefs or expectations of future events and on assumptions made by, and information currently available to, management. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “project,” “plan,” “may,” “shall,” “will,” “pursue” and other similar expressions in this press release, that predict or indicate future events and trends and that do not report historical matters. Such forward-looking statements are subject to various risks and uncertainties, including, among others, the availability of debt and equity financing; and the trends affecting the Company’s financial condition or results of operations. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are described under the sections entitled “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. The forward-looking statements speak only as of the date of this press release, and the Company expressly disclaims any obligation or undertaking to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except to the extent otherwise required by law.

About AvalonBay Communities, Inc.

AvalonBay Communities, Inc., a member of the S&P 500, is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion regions of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado. As of June 30, 2024, the Company owned or held a direct or indirect ownership interest in 300 apartment communities containing 91,399 apartment homes in 12 states and the District of Columbia, of which 17 communities were under development.

Copyright © 2024 AvalonBay Communities, Inc. All Rights Reserved

View source version on businesswire.com: https://www.businesswire.com/news/home/20240905915791/en/

Jason Reilley

Vice President

Investor Relations

AvalonBay Communities, Inc.

703-317-4681

Source: AvalonBay Communities, Inc.

FAQ

How many shares is AvalonBay Communities (AVB) offering in its public offering?

AvalonBay Communities is offering 3,200,000 shares of common stock in its public offering, with an option for underwriters to purchase an additional 480,000 shares.

What are the key terms of AVB's forward sale agreements?

AVB plans to enter into forward sale agreements for 3,200,000 shares, with settlement expected by December 31, 2025. The company will receive cash proceeds per share equal to the applicable forward sale price, subject to certain adjustments.

How does AvalonBay plan to use the proceeds from this offering?

AvalonBay intends to use the proceeds for land acquisitions, development and redevelopment of apartment communities, investments, working capital, and general corporate purposes, including potential debt repayment.

Who are the joint book-running managers for AVB's public offering?

Goldman Sachs & Co. , BofA Securities, Deutsche Bank Securities Inc., and Morgan Stanley are acting as joint book-running managers for AvalonBay's public offering.

What is the significance of the forward sale agreements for AVB?

The forward sale agreements allow AvalonBay to set the share price now while delaying the issuance of shares and receipt of proceeds until closer to when the funds are needed, providing financial flexibility.