A P
P
R
E C I A T
I N G
V A L U E
2010 ANNUAL REPORT
AvalonBay Communities, Inc. is an equity REIT primarily
and Northern and Southern California. At year-end,
engaged in developing, redeveloping, acquiring, and
our Total Market Capitalization was approximately
managing quality apartment communities in high
$13.7 billion.
barrier-to-entry markets within the United States. Our
strategy is to be leaders in customer insight, market
AvalonBay Communities
Inc. common shares are
research and capital allocation, delivering a range of
traded on the New York Stock Exchange under the ticker
multifamily offerings tailored to serve the needs of
symbol AVB and are included in the S&P 500 Index.
the most attractive customer segments in the best-
More information about AvalonBay may be found on
performing US submarkets. Our markets are located in
our website at www.avalonbay.com.
the Northeast, Mid-Atlantic, Midwest, Pacific Northwest,
F I N A N C I A L H I G H L I G H T S
See page 13 for notes and defined terms, and page 15 for 5 year stock performance graph
TOTAL SHAREHOLDER RETURN (1)
NAV PE R SHARE GROW TH (2)
49.7%
42.1%
e
t
a
R
h
t
w
o
r
G
l
a
u
n
n
A
d
n
u
o
p
m
o
C
60%
50%
40%
30%
20%
10%
0%
9.7%
8.5%
13.9%
11.3%
e
t
a
R
h
t
w
o
r
G
l
a
u
n
n
A
d
n
u
o
p
m
o
C
60%
56.3%
40%
46.6%
20%
0%
-20%
0.4%
6.6%
4.4%
-0.6%
1 Year
5 Year
10 Year
1 Year
5 Year
10 Year
AVB Multifamily Sector Avg.
Source: SNL Financial, Green Street Advisors
AVB Multifamily Sector Avg.
COVER: AVALON TOWERS BELLEVUE, WA. THIS PAGE: AVALON NORWALK, CT
A P
P
R
E C I A T
I N G
V A L U E
2010 ANNUAL REPORT
AVALONBAY COMMUNITIES, INC. 1
A V A L O N F O R T G R E E N E , N Y
2 AVALONBAY COMMUNITIES, INC.
T O O U R
S H A R E H O L D E R S
It was a good year to invest with AvalonBay. Last year
we said 2010 would be a transition year with both the
economy and apartment markets in recovery. Indeed,
it was. Modest job growth emerged while apartment
rental demand surged to the strongest level in five years.
Fundamentals other than employment were driving
the apartment market recovery and this shift was
recognized by investors. For the year, the S&P 500 Index
was up 13% while the Morgan Stanley REIT Index rose
h
t
w
o
r
G
b
o
J
R
Y
/
R
Y
S
U
3%
2%
1%
0
-1%
-2%
-3%
IMPROVING JOB OUTLOOK
%
8
.
0
%
2
.
0
%
2
.
1
%
3
.
1
%
4
.
2
%
0
.
2
%
3
.
2
-
%
5
.
0
-
Q1’10 Q2’10 Q3’10 Q4’10 Q1’11E Q2’11E Q3’11E Q4’11E
24%. For AvalonBay, Total Shareholder Return was 42%.
Source: Moody’s Analytics
n
o
i
t
p
r
o
s
b
A
t
n
e
m
t
r
a
p
A
t
e
N
l
a
u
n
n
A
l
a
t
o
T
)
s
d
n
a
s
u
o
h
t
n
i
(
300
200
100
0
STRONG U.S. NET RENTER
AB SO RPTION (3)
227
78
1995-2009 Avg. 2010
Source: Witten Advisors
As we move into 2011, apartment fundamentals look
even stronger. Accelerating job growth, limited new
supply, a declining homeownership rate, favorable de-
mographics and expectations for an improving econ-
omy all support
improved operating performance.
Accordingly, we expect absorption, occupancy and
rental rates for our portfolio to rise. Moreover, attitudes
among consumers, lenders, and lawmakers are shift-
ing from homeownership towards renting. Given the
key structural advantages of our markets, our ability
to invest capital through multiple growth platforms,
and a balance sheet that supports growth, AvalonBay is
well-positioned to extend our industry-leading position
for value creation in new apartment investment.
Last year’s annual report, titled “Where You Want To Be”,
describes an organization that is alert and responsive to
challenging market conditions while prepared for the
next phase of growth and opportunities. In this year’s
report, we will review our accomplishments in 2010
and share with you our view of fundamentals that favor
rental housing over the next several years. We will also
provide a deeper look into our business. By understanding
the value-creation opportunities available to us, we
believe investors will better appreciate the potential for
outsized returns going forward. “Appreciating Value” is
the theme of our report this year.
Looking Back at 2010
At the beginning of last year, the economic outlook was
uncertain. The economy had lost 270,000 jobs in the last
quarter of 2009. Rental rates and occupancies were falling.
Our 2010 financial outlook called for the impact of these
soft economic conditions on our portfolio to moderate and
trend into a period of stronger demand/supply fundamen-
tals for 2011 and beyond.
In fact, the job market stabilized early in 2010, consumer
confidence improved, and renters that had doubled up be-
gan to establish their own households. This drove renter
demand higher at a time when fewer of our residents were
choosing to move. As a result, we began to recoup rental
revenue lost during the recession sooner than expected.
AVALONBAY COMMUNITIES, INC. 3
Fundamentals accelerated quickly. We updated investors
• We sold three assets for an aggregate price of $190
in April and again in June, increasing our forecast for rev-
million. These sales, at a weighted average Initial Year
enue growth. At mid-year, we announced a 5% increase
Market Capitalization Rate of 5.8%, provided a total
in our full-year 2010 outlook for Funds From Operations
Economic Gain to us of $22 million and a 9%
per Share (FFO) and another 2% increase in the fall. We
unleveraged IRR on our investment over a 12 year
ended the year with Net Operating Income (NOI) from
weighted average holding period - harvesting value
our Same Store portfolio down 3% for the year com-
that was reinvested into attractive new development.
pared to a projected decline of 6% in our original outlook.
Earnings per Share (EPS) increased 7%, primarily from
• Through our second private discretionary real estate
an increase in gains from community dispositions and
investment fund, we acquired six communities with
impairment charges reported in 2009 not present in 2010.
just under 2,800 apartment homes for approximately
FFO increased 3% for the full year.
$400 million.
We also increased our investment activity last year:
• We completed five redevelopments during the year
for a Total Capital Cost of approximately $80 million
• We started 11 communities for a total budgeted cost
(excluding costs incurred prior to redevelopment) and
of $640 million. This was 60% more than we antici-
started seven redevelopments with
incremental
pated at the beginning of the year and demonstrates
estimated Total Capital Costs of $80 million.
the multiple dimensions of our Company. Organiza-
tional capacity, a willingness to be agile and balance
This opportunistic and timely commitment to new in-
street strength allow us to respond quickly to accelera-
vestment required new capital from a variety of sources.
ting fundamentals.
We issued $340 million of common stock under our
Continuous Equity Program (CEP) at an average price
AVALO NB AY D E VE LO P ME NT A C TIV IT Y
of $98 – 20% above the share price at the beginning of
t
s
o
C
l
a
t
i
p
a
C
l
a
t
o
T
)
s
n
o
i
l
l
i
m
n
i
(
$2,200
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
0
7
3
2
,
1
$
4
6
7
$
3
8
6
$
0
5
8
$
4
4
6
$
4
8
4
$
4
6
$
5
6
3
$
1
7
3
$
7
4
2
$
6
2
1
$
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(E)
Total Development Starts Total Development Under Construction
the year. We sourced $250 million in ten-year unsecured
notes at a coupon of 3.95% and lowered our cost of debt
by repaying $64 million with a weighted average rate
of 6.3%. The pricing on the ten-year note offering was
reported to be the lowest coupon in modern REIT history
on unsecured debt by any REIT in any sector, and reflects
an appreciation by the credit markets of the strong finan-
cial condition of AvalonBay and our overall credit qual-
ity. This is especially meaningful given the severity of the
recent credit crisis and our ability to preserve our strong
credit profile during the downturn.
Source: AVB (as of December 31, 2010)
SOL ID CR EDIT ME TR ICS (4)
• We completed and delivered four new communities
totaling over 1,500 apartment homes for a Total
Capital Cost of $570 million. At year-end 2010, we had
14 developments under construction – double the
number underway at the prior year-end.
Multifamily
AVB Sector Avg.
L ev era ge
2 9.6 %
4 2. 1%
F ixe d Ch arg e Cov er ag e
2 .8
2 .3
Deb t/E BIT DA
7 .2x
8 .6x
Source: SNL Financial (as of December 31, 2010)
4 AVALONBAY COMMUNITIES, INC.
A V A L O N A N A H E I M S T A D I U M , C A
A P P R E C I A T I N G F O C U S
We see opportunities to improve growth and investment returns
in our markets through greater focus on location, asset quality
and customer segment.
The Economy and Apartment Fundamentals
With only limited job growth, the recovery in our sector
is evidence that the drivers we believe support strong de-
mand for rental housing for the next several years are
now aligning:
segment as potential buyers face tighter mortgage
qualifications and lingering concerns regarding the
risks and burdens of investing in a home. Some fore-
casts suggest that by 2015, the U.S. homeownership
rate could fall to 64%, potentially creating two million
new renter households.
• Demographics Younger age groups have a higher
propensity to rent and today there are more U.S.
residents age 20 to 29 than 30 to 39 years old. Further,
the pace of hiring among young adults in the 20 to 34
years old age range is reportedly at its strongest pace
since the mid-1980’s. Together, these trends help ex-
plain some of the “unbundling” of households which
occurred during 2010 that boosted renter demand.
• New Supply Perhaps most importantly, a sharp
reduction in new rental supply is now underway. Over
the last ten years, nationwide construction starts for
multifamily rental units averaged 200,000 per year. In
2010, only 75,000 multifamily rental units were started,
a 60% drop. While new starts will likely increase this
year, only 130,000 apartment homes are anticipated
for completion in 2012. These are the lowest levels of
new rental development in the last 40 years.
O UT SIZ E D J OB GA INS AMO NG P RIM E R E N TE R S
CONSTRAI NTS ON N EW SUPPLY I N AV B M ARK ET S
1,300
900
73%
)
s
d
n
a
s
u
o
h
t
n
i
(
1,400
1,200
1,000
800
400
200
0
100%
80%
60%
40%
20%
0%
31%
Total New Jobs
in 2010
(All Ages)
Total New Jobs
in 2010
(20-34 Year Olds)
Share of New
2010 Jobs
(20-34 Year Olds)
Share of Total
2010 Job Base
(20-34 Year Olds)
Source: Bureau of Labor Statistics
k 2.0%
c
o
t
S
l
a
t
n
e
R
l
a
t
o
T
f
o
%
s
a
s
n
o
i
t
e
p
m
o
C
l
l
a
t
n
e
R
1.5%
1.0%
0.5%
0.0%
2000
2002
2004
2006
2008
2010
2012 (E)
AVB Markets U.S.
Source: REIS, AVB
• Homeownership The nation’s homeownership rate is
• Government Policy Recent proposals to scale back
approximately 67%, down from the 69% peak reached
in early 2005. Not surprisingly, the percentage of our
residents leaving to purchase a home is near historical
lows. This reflects continued weakness in the for-sale
the government’s footprint in the mortgage market
send strong signals of a general shift towards a more
balanced housing policy. The impact of this shift will
likely be tougher lending hurdles and higher costs
for homeowners, which will benefit rental housing
HIGH HOUSE HO LD IN CO ME
LO W HO U SING AF FORDABILITY (5)
demand in the years to come.
)
s
d
n
a
s
u
o
h
t
$
(
$70
$60
$50
$40
$65.3
$49.8
i
n
a
d
e
M
o
t
e
c
i
r
P
e
s
u
o
H
n
a
d
e
M
i
4.2x
e
m
o
c
n
I
y
l
i
m
a
F
4.5
4.0
3.5
3.0
2.5
2.0
2.6x
AVB Markets
U.S.
AVB Markets
U.S.
Source: Moody’s Analytics, AVB
6 AVALONBAY COMMUNITIES, INC.
The Road Ahead: Appreciating Value
Our markets have a number of key structural advantages:
higher household income, lower home affordability
and constraints on new supply. This helps explain why
many of our markets were among the top-performing in
effective rent growth over the last ten years. These ad-
vantages should continue to result in strong performance
l
e
m
o
c
n
I
d
o
h
e
s
u
o
H
n
a
d
e
M
i
A V A L O N W E S T L O N G B R A N C H , N J
A P P R E C I A T I N G G R O W T H
Whether through development, redevelopment or acquisitions,
we will invest capital through multiple platforms as a means to
grow Net Asset Value and optimize portfolio performance.
going forward. As a result, we are likely to see other
LEADING SHARE OF NEW DEVELOPMENT
players enter or expand in our markets. An investor
should ask: “How will you create value in a potentially
more competitive environment?”
Opportunity exists within our markets to
improve
growth and investment returns through greater focus
on submarket selection, asset quality and customer
segmentation. Portfolio performance can be enhanced by
shifting AVB’s portfolio over time to the top-performing
submarkets within each of our markets. With enhanced
market research and local knowledge, a reasonable goal
is to shift the portfolio so that approximately 70% is
located in the top half of each MSA’s submarkets vs.
T
I
E
R
y
l
i
m
a
f
i
t
l
u
M
f
o
e
r
a
h
S
B
V
A
s
t
r
a
t
S
t
n
e
m
p
o
e
v
e
D
l
50%
40%
30%
20%
10%
0
41%
38%
2010 Starts
2011 Starts (E)
Source: Industry reports
approximately 50% today. Within individual submarkets,
• Redevelopment Depending on the strategy, redevel-
performance can vary by asset class. With a greater
opment can range from remerchandising (essentially
focus on segmenting our markets by customer, price
upgrading finishes and furnishings) to a major
point and, ultimately, product type, we can identify the
reconstruction of an older asset. The value created
most attractive pockets of growth at a more granular level
from a redevelopment includes the higher rents we
to optimize portfolio performance. With only a 1% share
achieve from improving the asset and the incremental
of the total rental inventory in our markets and only a
NOI growth over time as a result of higher rents and
9% share of new development, we believe there is room
lower expenses. Over the past decade, we have invested
to expand our capabilities and capture return from these
close to $300 million in redevelopment capital for 31
value-added activities.
communities. Assuming favorable market conditions,
To optimize portfolio positioning and grow NAV,
ment opportunities exists in our portfolio for the next
we believe about $100 million per year of redevelop-
AvalonBay can invest capital through multiple growth
few years.
platforms: development (to grow the portfolio), rede-
velopment (to position the portfolio), and transaction
• Transaction Activity Acquisitions are also a platform
activity (acquisitions and dispositions to shape the port-
for growth. Combined with dispositions, they provide
folio). Let’s look at each platform.
a vehicle to achieve portfolio reshaping goals. Since
1998, we realized a 14.2% unleveraged IRR on $1.5
• Development From $6 billion in new development
billion of acquired assets that were subsequently sold.
invested since 1994, we have sold $1.1 billion
We currently invest in and manage two acquisition funds
and realized a 16.8% unleveraged IRR and an eco-
through our Investment Management platform. By
nomic gain of $96,000 per apartment home. With
executing acquisition activity principally through the
the ability to compete for any apartment opportu-
funds, we are able to tap into an additional source of
nity within our diverse geographic
footprint,
capital through the private equity market while we
AvalonBay’s development capabilities are unmatched
separately allocate capital into development activity.
in our sector. At year-end 2010, we had $900 million of
These activities provide both the potential for outsized
new development underway at a projected weighted
returns to inves-tors and an additional source of rev-
average yield of 7%. Our future pipeline consists of 26
enue from fees and promotes, all while being good
sites for an estimated Total Capital Cost cost of
stewards of the capital provided by both our public and
$2.2 billion.
private investors.
8 AVALONBAY COMMUNITIES, INC.
A V A L O N A T D E C O V E R L Y , M D
A P P R E C I A T I N G C A P I T A L
M A N A G E M E N T
We have the strongest balance sheet in our sector. A largely
unencumbered asset base and access to unsecured markets
preserves financial flexibility and enhances liquidity.
AVALONBAY COMMUNITIES, INC. 9
As a value-centric organization, we align our perfor-
Conclusion
mance measures with value creation over a period of
Through the years, creating value has been our focus and
Appreciating Value has been the outcome. We recognize
that value and earnings growth align over time to gen-
erate outsized returns and cash flow. Looking forward,
our strategy of allocating capital to deliver a range of
multifamily offerings tailored to serve the needs of the
most attractive customer segments in the best perform-
ing US submarkets positions us well to improve growth
and investment returns. We believe the fundamentals
in our markets, our multiple growth platforms and our
disciplined approach to capital management are all
aligned to deliver outsized dividend growth, Total Share-
holder Return and NAV growth.
As always, thank you to our shareholders for your con-
tinued support, to our associates for your extraordinary
efforts, and to our residents who have chosen to make an
AvalonBay community your home.
time that may not necessarily be within a calendar year.
As a result, we manage our capital structure by match-
ing financing and investing activities. This disciplined
approach helps guide the type and timing of capital
markets activity by managing our credit metrics, liquid-
ity and debt maturities. This helps mitigate the impact
of recent capital markets volatility by increasing our
financial flexibility. Through these efforts, we have
expanded our financing options, avoiding unfavorable
market conditions, reducing our cost of capital and creat-
ing shareholder value.
We have found that value-centric activities, characterized
by low leverage, conservative accounting policies and
a willingness to recycle capital back into our invest-
ment platform are highly correlated to Total Shareholder
Return. Not surprisingly, dividend growth and Total
Shareholder Return are highly correlated. Our dividend
has never been reduced and has always been covered by
recurring cash flow. We can think of no better evidence
of an organization’s long-term value creation capability
than outsized cash flow growth as measured by dividend
growth and retained cash.
AVB FFO E XC E ED S DI VID END S PA I D
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
AVB FFO per Share AVB Dividends per Share
Source: SNL Financial
Bryce Blair
Chairman and CEO
10 AVALONBAY COMMUNITIES, INC.
10 AVALONBAY COMMUNITIES, INC.
A V A L O N C E N T E R P O I N T , M D
A P P R E C I A T I N G V A L U E
We have internal and external opportunities to create value,
with attractive fundamentals in our markets and an ability to
execute based on a strong balance sheet and an experienced
management team.
A V A L O N F A S H I O N V A L L E Y , C A
12 AVALONBAY COMMUNITIES, INC.
NOTES
1.
Total Shareholder Return: The change in value over the period stated with all dividends reinvested. Total Shareholder Return is sometimes presented as the compound annual growth
rate. The Total Shareholder Return for each year within the timeframe presented may vary.
2.
Estimated NAV per Share Growth: The compound annual growth rate of Estimated NAV per Share as estimated by Green Street Advisors, Inc. during the periods indicated. Estimated
NAV per Share Growth for each year within the timeframe presented may vary.
3.
Net Renter Absorption is a measure of renter demand and is defined as the year-over-year change in occupied apartments. Data based on US rental inventoty as calculated by
Witten Advisors as of 4Q 2010.
See “Definitions and Reconciliations of Non-GAAAP Financial Measures and Other Terms.”
Home Affordability defined as the ratio of the current US median home sales price to US median household income (data as of 3Q 2010). A higher price-to-income ratio implies
that homes are less affordable. Data from Moody’s Analytics.
4.
5.
TABLE OF CONTENTS
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
35
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Consolidated Financial Statements
37
40
59
61
F-3
Form 10-K Page
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND OTHER TERMS
This Annual Report contains certain non-GAAP financial measures and other terms. The definition and calculation of these non-GAAP financial measures and other terms may differ from the
definitions and methodologies used by other REITs and, accordingly, may not be comparable. The non-GAAP financial measures referred to below should not be considered an alternative to net
income as an indication of our performance. In addition, these non-GAAP financial measures do not represent cash generated from operating activities in accordance with GAAP and therefore
should not be considered as an alternative measure of liquidity or as indicative of cash available to fund cash needs. The definitions of Non-GAAP financial measures and other terms not
included below (Funds from Operations, Net Operating Income, Established/Same Store Communities) are contained in our Annual Report on Form 10-K.
Net Asset Value (NAV) Per Share
The estimated market value of a company’s assets less the estimated market value of all current and long-term liabilities divided by the number of outstanding common shares (diluted) and
operating partnership units per Green Street Advisors.
Interest Coverage
Interest Coverage is calculated by the Company as EBITDA from continuing operations, excluding land gains and gain on the sale of investments in real estate joint ventures, divided by the
sum of interest expense, net, and preferred dividends. Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our
ability to service debt obligations to that of other companies. EBITDA is defined by the Company as net income attributable to the Company before interest income and expense, income taxes,
depreciation, and amortization. A reconciliation of EBITDA and a calculation of Interest Coverage for the full year 2010 are as follows (dollars in thousands):
Net income attributable to common stockholders
Interest expense, net
Interest expense (discontinued operations)
Depreciation expense
Depreciation expense (discontinued operations)
EBITDA
EBITDA from continuing operations
EBITDA from discontinued operations
EBITDA
EBITDA from continuing operations
Interest charges
Interest coverage
$175,331
175,209
0
232,571
371
$583,482
$507,100
76,382
$583,482
$507,100
175,209
2.9
AVALONBAY COMMUNITIES, INC. 13
Initial Year Market Capitalization Rate (Cap Rate)
Initial Year 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 estimates for non-routine
allowance of approximately $200 - $300 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, amortization, and extraordinary items. For this purpose, management’s
projection of operating expenses for the community includes a management fee of 3.0% - 3.5%. The Initial Year Market Cap 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 a property. Buyers may assign different Initial
Year Market Cap Rates to different communities when determining the appropriate value because they (i) may project different rates of change in operating expenses and 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
Cap Rate is weighted based on the gross sales price of each community.
Leverage and Total Market Capitalization
Leverage is total debt as a percentage of Total Market Capitalization. Total Market Capitalization represents the aggregate of the market value of the Company’s common stock, the market
value of the Company’s operating partnership units outstanding (based on the market value of the Company’s common stock) and the outstanding principal balance of the Company’s debt.
Management believes that Leverage can be one useful measure of a real estate operating company’s long-term liquidity and balance sheet strength, because it shows an approximate
relationship between a company’s total debt and the current total market value of its assets based on the current price at which the Company’s common stock trades. Changes in Leverage also
can influence changes in per share results. A calculation of Leverage as of December 31, 2010 is as follows (dollars in thousands):
Common stock
Preferred stock
Operating partnership units
Total debt
Total Market Capitalization
$9,667,941
—
1,712
$4,068,417
$13,378,070
Debt as % of Total Market Capitalization 30.4%
Because Leverage changes with fluctuations in the Company’s stock price, which occur regularly, the Company’s Leverage may change even when the Company’s earnings, interest and debt
levels remain stable. Investors should also note that the net realizable value of the Company’s assets in liquidation is not easily determinable and may differ substantially from the Company’s
Total Market Capitalization.
Multifamily Sector Average
Multifamily Sector Average is a weighted average based on Total Market Capitalization per SNL Financial. The weighted average for “Total Shareholder Return” includes AEC, AIV, BRE, CPT,
EQR, ESS, HME, MAA, PPS, and UDR. The weighted average for “NAV per Share Growth” includes all apartment companies under Green Street Advisors, Inc.’s coverage for which data is
available during each of the time periods presented and includes AEC, BRE, CPT, EQR, PPS, and UDR. The weighed average for “Leverage”, “Fixed Charge Coverage” and “Debt/EBITDA”
includes AIV, BRE, CPT, EQR, ESS, HME and UDR.
Total Capital Cost
Total Capital Cost includes all capitalized costs projected to be actually incurred to develop the respective Development Community, Redevelopment Community or Development Right,
including land 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. For Redevelopment Communities, Total Capital Cost excludes costs incurred prior to the start of redevelopment when indicated. With respect to
communities where development or redevelopment was recently completed in the prior or current period, Total Capital Cost reflects the actual cost incurred, plus any construction contingency
estimate made by management. Total Capital Cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the
total projected joint venture contribution amount. For joint ventures not in construction, Total Capital Cost is equal to gross real estate cost.
Economic Gain (Loss)
Economic Gain (Loss) is calculated by the Company as the gain (loss) 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 (Loss) to be an appropriate supplemental measure to gain (loss) on sale in
accordance with GAAP because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain (Loss)
for each of the communities presented is estimated based on their respective final settlement statements. A reconciliation of Economic Gain (Loss) to gain on sale in accordance with GAAP for
the full year ended December 31, 2010 and from 1998-2010 is shown below.
Number of
Communities Sold
2010 (3 Communities, 1 Office Building)
1998-2010 (19 Communities, 4,941 Apt. Homes)
Gross Sales
Price
$198,600
$1,083,921
GAAP Gain
$74,074
$583,344
Accumulated
Depreciation
and Other
$51,977
$111,179
Economic
Gain
$21,767
$472,166
Unleveraged IRR
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 a community, before the impact of indirect expenses and Company
overhead. The Unleveraged IRR achieved on the communities as cited in this report 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.
14 AVALONBAY COMMUNITIES, INC.
STOCK PERFORMANC E
$200
$150
$100
$50
$0
2005
2006
2007
2008
2009
2010
AVB FTSE NAREIT Apartment REIT Index S&P 500 Index
Source: NAREIT Benchmarked at 12/05=$100
Dec 2005
Dec 2006
Dec 2007
Dec 2008
Dec 2009
Dec 2010
AvalonBay
FTSE NAREIT Apartment REIT Index
S&P 500 Index
$100
100
100
$150
140
116
$112
104
122
$77
78
77
$111
102
97
$ 158
150
112
Ten Year FFO Reconciliation
For the Year Ended
(Dollars in thousands)
12-31--10
12-31-09
12-31-08
12-31-07
12-31-06
12-31-05
12-31-04
12-31-03
12-31-02
12-31-01
Net income
Dividends attributable to preferred stock
Depreciation—real estate assets,
including discontinued operations and
joint venture adjustments
Distributions to noncontrolling interests,
including discontinued operations
Cumulative effect of change in accounting principle
Gain on sale of unconsolidated entities
Gain on sale of operating communities
Funds from Operations attributable
to common stockholders
Weighted average common shares
outstanding—diluted
$175,331
$155,647
$411,487
$358,160
$266,546
$310,468
$207,779
$262,503
$173,125
$248,997
—
—
(10,454)
(8,700)
(8,700)
(8,700)
(8,700)
(10,744)
(17,896)
(40,035)
237,041
221,415
203,082
184,731
165,982
163,252
159,221
129,207
143,026
128,086
55
—
—
66
—
—
216
—
280
—
391
—
(3,483)
(59,927)
(6,609)
1,363
—
—
3,048
(4,547)
—
1,263
1,601
1,559
—
—
—
—
—
—
(74,074)
(63,887)
(284,901)
(106,487)
(97,411)
(195,287)
(121,287)
(159,756)
(48,893)
(62,852)
$338,353
$313,241
$315,947
$368,057
$320,199
$271,096
$235,514
$222,473
$250,963
$275,755
84,632,869 80,599,657 77,578,852 79,856,927 75,586,898 74,759,318 73,354,956
70,203,467 70,674,211 69,781,719
EPS—diluted
$2.07
$1.93
$5.17
$4.38
$3.42
$4.05
$2.75
$3.60
$2.22
$3.02
FFO per common share—diluted
$4.00
$3.89
$4.07
$4.61
$4.24
$3.63
$3.21
$3.17
$3.55
$3.95
AVALONBAY COMMUNITIES, INC. 15
AVALONBAY CORPORATE INFORMATION
William M. McLaughlin
Executive Vice President
Development–Northeast
Stephen W. Wilson
Executive Vice President
Development–West Coast,
Mid-Atlantic
David W. Bellman
Senior Vice President
Construction-East Coast
Kurt Conway
Senior Vice President
Brand Strategy
Deborah A. Coombs
Senior Vice President
Property Operations–
West Coast
Jonathan B. Cox
Senior Vice President
Development–Mid-Atlantic
Frederick S. Harris
Senior Vice President
Development–NY
Joanne M. Lockridge
Senior Vice President
Finance, Assistant Treasurer
and Assistant Secretary
J. Richard Morris
Senior Vice President
Construction
Kevin P. O’Shea
Senior Vice President
Investment Management
Christopher L. Payne
Senior Vice President
Development–Southern CA
Edward M. Schulman
Senior Vice President
General Counsel and
Secretary
Bernard J. Ward
Senior Vice President
Property Operations–
East Coast, Midwest
Danyell D. Alders
Vice President
Property Operations–
Southern CA
BOARD OF DIRECTORS
Bryce Blair
Chairman and CEO
AvalonBay Communities, Inc.
Bruce A. Choate (2,4,5)
President and CEO
Watson Land Company
A real estate investment trust
John J. Healy, Jr. (2,4,5)
Private Investor
Timothy J. Naughton (4)
President
AvalonBay Communities, Inc.
Lance R. Primis (1,3,5)
Managing Partner
Lance R. Primis and Partners, LLC
A management consulting firm
Peter S. Rummel (3,4)
Private Investor
H. Jay Sarles (2,3)
Private Investor
W. Edward Walter (2,4)
President and CEO
Host Hotels & Resorts, Inc.
A real estate investment trust
1 Lead Independent Director
2 Audit Committee
3 Compensation Committee
4 Investment and Finance Committee
5 Nominating and Corporate
Governance Committee
OFFICERS
Bryce Blair
Chairman and CEO
Timothy J. Naughton
President
Thomas J. Sargeant
Chief Financial Officer
Leo S. Horey
Executive Vice President
Property Operations
Sean J. Breslin
Executive Vice President
Investments and Asset
Management
16 AVALONBAY COMMUNITIES, INC.
Ronald S. Ladell
Vice President
Development–NJ
Lyn C. Lansdale
Vice President
Strategic Business Services
Sarah K. Mathewson
Vice President
Property Operations–MA, RI
Mike F. Nootens
Vice President
Engineering
Michael J. Roberts
Vice President
Development–MA
Robert S. Salkovitz
Vice President
Construction–Southern CA
Keri A. Shea
Vice President
Finance and Treasurer
Meg Spriggs
Vice President
Development-Northern CA
Mona R. Stahling
Vice President
Operations
Craig Thomas
Vice President
Market Research
B. Kevin Thompson
Vice President
Marketing
Timothy M. Walters
Vice President
Investments-West Coast
Matthew B. Whalen
Vice President
Development–Long Island
Philip M. Wharton
Vice President
Development–NY
Trinity M. Blue
Vice President
Property Operations–
Metro NY, NJ
Shannon E. Brennan
Vice President
Property Operations–
Mid-Atlantic
Alfred Brockunier III
Vice President
Construction–NY
Duane W. Carlson
Vice President
Construction–Northern CA,
Pacific NW
Sean M. Clark
Vice President
Asset Management/
Redevelopment–West Coast
Scott W. Dale
Vice President
Development–MA
Heather Duffy
Vice President
Property Operations–
CT, NY, Midwest
Steve Fabian
Vice President
Customer Care Center
Mark Forlenza
Vice President
Development–CT
Brian E. Fritz
Vice President
Development–Pacific NW
Patrick Gniadek
Vice President
Investments–East Coast
Karen A. Hollinger
Vice President
Information Services
Suzanne Jakstavich
Vice President
Human Resources
Scott R. Kinter
Vice President
Construction–Northeast
FOR M 10-K
A copy of the Company’s Annual Report
on Form 10-K as filed with the Securities
and Exchange Commission is being distrib-
uted with this Annual Report and also may
be obtained without charge by contacting
Investor Relations.
S TOCK L IS TINGS
NYSE–AVB
FORWA RD -LOOK ING STAT EM ENTS
This Annual Report contains “forward-
looking statements” within the meaning of
the Securities Act of 1933 and the Securities
Exchange Act of 1934. Please see our discus-
sion titled “Forward-Looking Statements”
on page 55 of our Annual Report on Form
10-K for a discussion regarding risks associ-
ated with these statements.
AVALONBAY CORPORATE INFORMATION
San Jose, CA
400 Race Street
Suite 200
San Jose, CA 95126
Phone:
Fax:
(408) 983-1500
(408) 287-9167
Seattle, WA
11808 Northup Way
Suite W311
Bellevue, WA 98005
Phone:
Fax:
(425) 576-2100
(425) 576-8447
Virginia Beach, VA
2901 Sabre Street
Suite 100
Virginia Beach, VA 23452
(757) 631-5000
Phone:
(757) 486-1063
Fax:
Woodbridge, NJ
Woodbridge Place
517 Route One South
Suite 5500
Iselin, NJ 08830
Phone:
Fax:
(732) 404-4800
(732) 283-9105
IN VE STOR R ELAT IONS
Investor Relations
AvalonBay Communities, Inc.
Ballston Tower
671 N. Glebe Road
Suite 800
Arlington, VA 22203
Phone:
ir@avalonbay.com
(703) 329-6300 ext. 4747
WE BSIT E
www.avalonbay.com
T RAN SFE R AGE NT
BNY Mellon Shareowner Services
P.O. Box 358015
Pittsburgh, PA 15252-8015
(866) 230-0668
Phone:
IN DE P END ENT AUD ITORS
Ernst & Young, LLP
8484 Westpark Drive
McLean, VA 22102
Phone:
(703) 747-1000
HEADQU ARTER S
Washington, DC
Ballston Tower
671 N. Glebe Road
Suite 800
Arlington, VA 22203
Phone:
Fax:
(703) 329-6300
(703) 329-9130
REGIONAL OF FIC ES
Boston, MA
51 Sleeper Street
Suite 750
Boston, MA 02210
Phone:
Fax:
(617) 654-9500
(617) 426-1610
Chicago, IL
200 North Arlington Heights Road
Suite 15
Arlington Heights, IL 60004
Phone:
Fax:
(847) 342-0065
(847) 342-0075
Shelton, CT
1000 Bridgeport Avenue
Suite 258
Shelton, CT 06484
Phone:
Fax:
(203) 926-2300
(203) 926-2355
Long Island, NY
135 Pinelawn Road
Suite 130 South
Melville, NY 11747
Phone:
Fax:
(631) 843-0736
(631) 843-0737
Los Angeles, CA
16255 Ventura Boulevard
Suite 950
Encino, CA 91436
Phone:
Fax:
(818) 784-2800
(818) 784-2810
Newport Beach, CA
4440 Von Karman Avenue
Suite 300
Newport Beach, CA 92660
(949) 955-6200
Phone:
(949) 724-9208
Fax:
New York, NY
275 Seventh Avenue
25th Floor
New York, NY 10001
Phone:
Fax:
(212) 370-9269
(212) 370-1415
San Francisco, CA
185 Berry Street
Suite 3500
San Francisco, CA 94107
(415) 284-9080
Phone:
(415) 546-4138
Fax:
O
C
S
I
C
N
A
R
F
N
A
S
,
.
C
N
I
,
G
I
A
R
C
&
Y
E
N
I
E
H
:
N
G
I
S
E
D
Ballston Tower • 671 N. Glebe Road, Suite 800
Arlington • VA • 22203
Tel: (703) 329-6300
www.avalonbay.com