Buy AvalonBay Communities, Inc. (AVB) Despite Near Term Headaches

Construction work started on three more communities, totaling 696 apartment homes costing $202.8 million, while work on two communities was finished during the quarter. During the fourth quarter, AvalonBay started redevelopment of two communities, while redevelopment work on four communities was finished during the quarter.

Liquidity Position

At the end of the fourth quarter, the company had $2.8 billion of unrestricted cash and cash in escrow, while AvalonBay had no amounts outstanding under its $1.3 million unsecured credit facility.

2013 Outlook

For the first quarter of 2013, AvalonBay expected FFO to be a loss within $0.62 and $0.66 per share. The loss was mainly blamed on the cost incurred from the acquisition of Archstone. Based on the 3.5% to 5% growth in same-store rental revenues and same store NOI growth between 4% and 5.5% for the full year 2013, FFO per share is expected to be within the range of $4.11 and $4.47. This is a decline from 2012’s FFO per share of $5.32.


I believe costs related to the Archstone acquisition will depress the stock price and the company’s financials in the near term, but the company’s focus on expansion in the high barrier-to-entry regions will drive the top line. In this regard, the Archstone deal will strengthen the company’s presence in those targeted high barrier-to-entry regions. Therefore, I believe the company presents a long-term investment opportunity.

The article Buy This REIT Despite Near Term Headaches originally appeared on and is written by Adnan Khan.

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