AvalonBay Communities
Annual Report 2013

Plain-text annual report

2013 AnnuAl RepoRt AvalonBay Communities, Inc. is an equity ReIt in the business of developing, redeveloping, acquiring and managing apartment communities in high barrier-to- entry markets of the united States. leAdeRS in Bui ldinG lAStinG VAlue AnnuAlized tOtAl SHAReHOldeR RetuRn (1) Source: SNL Financial, as of December 31, 2013 AvAlonBAy multIfAmIly SeCtoR We Ighted AveRAge 18.6% 17.1% 14.0% 9.7% 13.8% 11.7% 5 yeARS 10 yeARS 15 yeARS AvAlonBAy CommunItI eS has a long-term track record of delivering attractive apartment homes in desirable locations to customers and outsized, risk-adjusted returns to shareholders. Building lasting value while maintaining a leadership edge in property development sets us apart. For 20 years, we’ve been developing new apartment homes, reinvesting in our core communities and generating growth that expands the possibilities for our shareholders, customers and associates. With equal parts experience and vision, AvalonBay has established a leadership position rooted in building value for the long term. AnnuAlized FFO PeR SHARe GROwtH (2) AvalonBay Multifamily Sector Weighted Average 8.9 % 3.9 % 7.0 % 5.3 % 2.7% 2.0 % 5 yeARS 10 yeARS 15 yeARS Source: SNL Financial, as of December 31, 2013 2013 FFO for AVB and EQR has been adjusted to account for non-routine costs associated with the Archstone acquisition. AnnuAlized nAV PeR SHARe GROwtH (3) AvalonBay Multifamily Sector Weighted Average 12.5 % 11.3 % 11.1% 6.3 % 9.6 % 4.3 % 5 yeARS 10 yeARS 15 yeARS Source: Green Street Advisors, Inc., as of December 31, 2013 2 AvAlonBAy | 2013 Annual Report Avalon at Wesmont Station, Wood-Ridge, NJ 3 letter to our shareholders from our Chairman and Ceo, tim naughton lOOkinG BAck... And AHeAd totAl ApARtment CommunItIeS 273 125 22 10 1993 Ipo AvAlon pRopeRtIeS 1994 Ipo BAy CommunItIeS 1998 AvAlonBAy CommunItIeS 2013 AvAlonBAy CommunItIeS Avalon mosaic, Fairfax, VA 2013 At A gl AnCe: 14.7% ffo peR ShARe gRoWth (Adjusted for non-routine items) $1.3 Billion neW development StARtS 37.3% poRtfolIo gRoWth (Apartment homes) tHe YeAR in ReView 2013 was a record-setting year for AvalonBay. We delivered another year of exceptional operating results, completed the largest acquisition in Company history, expanded development to an all-time high and raised a record amount of capital. For the year, adjusted for non-routine items, we delivered sector-leading FFO per Share growth totaling nearly 15%. Over the last three years, we have increased FFO per Share, adjusted for non-routine items, by 57%, well above the sector average. This growth has been driven by accretive investment activity and strong portfolio performance, with same-store NOI up 22% cumulatively over the last three years. In February, we closed on the $6.5 billion acquisition of the Archstone portfolio. This was a rare opportunity to acquire a high-quality portfolio concentrated in our markets. We increased brand penetration, largely met our geographic portfolio allocation objectives, and enhanced G&A and operating synergies at the corporate and property levels while preserving the strength of our balance sheet, liquidity and financial flexibility. We continued to invest aggressively in new development in 2013, starting 13 new communities representing a projected Total Capital Cost of $1.3 billion. We completed the development of 12 communities containing nearly 2,900 apartment homes, on schedule and below budget. These completed communities represent a total capital investment of approximately $630 million and are projected to produce a weighted average initial stabilized yield of approximately 7.3%, generating value creation of approximately $260 million(4) based on current market capitalization rates. By year end, total development under construction stood at $2.8 billion. In addition, we acquired new development rights, mostly in the form of land options, which provide us with the opportunity to invest an estimated $2 billion in future development activity and will support sustained future earnings growth. We raised a record level of attractively priced capital to fund this investment activity. For the Archstone acquisition, we raised $2.1 billion in equity and $250 million of long-term unsecured debt in late 2012 after announcing the acquisition. In February 2013, we assumed $2.0 billion of indebtedness and issued $1.9 billion of additional equity to the seller when we completed the acquisition. To fund our ongoing business, including our development activity, we raised another $2 billion of capital, composed of $1.3 billion from the sale of existing apartment communities at an average cap rate of less than 5%, and $750 million of long-term unsecured debt at an average interest rate of less than 4%. After a record year of raising and deploying capital, our balance sheet and liquidity remains the strongest in the sector, with net debt-to-EBITDA running at less than 6x and with more than $1.5 billion of cash and undrawn capacity under our corporate line of credit. This financial strength and flexibility, when combined with our sector-leading development capability, provides AvalonBay with an unmatched opportunity in our sector to continue building lasting value through a development- focused investment strategy in one of the healthiest apartment cycles in several decades. lOOkinG BAck Over the past year, the Company celebrated several important milestones: the 20th anniversaries of the Initial Public Offerings (IPOs) of Avalon and Bay, and the 15th anniversary of the two companies joining forces to form AvalonBay. It is remarkable to reflect back on the achievements of the past 20 years. At the combined IPOs of Avalon and Bay, the companies owned 32 communities with just over 9,000 apartments and had an Enterprise Value of less than $1 billion. Today, AvalonBay owns or holds an interest in 273 apartment communities, containing over 81,000 apartment homes, with an Enterprise Value of approximately $23 billion. At the time of Avalon’s and Bay’s IPOs, each company’s portfolio consisted largely of wood-frame, suburban garden apartments. Today, AvalonBay’s portfolio is remarkably diverse, containing a mix of garden, mid-rise, high-rise and mixed-use communities, located in suburban, urban and transit-oriented submarkets. 4 5 AvAlonBAy | 2013 Annual ReportIn 1994, Avalon and Bay were led by entrepreneurial executives who had a vision of creating an evergreen apartment company, united by a common purpose and set of values, which could become a leader in the modern REIT era. Early on, our founders established a culture emphasizing excellence, collaboration, continuous improvement and a relentless focus on hiring and growing talent. AvalonBay today is largely a fulfillment of that vision—an apartment company that has successfully transitioned from one generation of leaders to another, all while maintaining our position as a leading apartment REIT serving the most attractive customer segments in the best performing markets. In addition to having best-in-class capabilities in the areas of development, construction and operations, we are a fully integrated company with important strategic capabilities in capital management, market research, customer insight and design. Our platform includes a team of sophisticated professionals, processes and technologies that support hiring and retaining the best talent, delivering exceptional customer experiences, and operating a large and diverse portfolio. it’S R emARkABle tO ReFlect BAck On tHe AcHieVementS OF tHe PASt twentY YeARS It is with tremendous pride that we reflect on all we have accomplished as a public company. While our strategy continues to evolve with the changing landscape, in the end, our results speak for themselves. Over the last 20 years, we’ve consistently delivered extraordinary returns to shareholders. We’ve provided a workplace where our associates are highly engaged and motivated, and we’ve built communities that our residents are proud to call home. lOOkinG AHeAd We are just as optimistic about AvalonBay’s prospects in 2014 and beyond, with healthy fundamentals and a strong competitive position providing a stage for continued outperformance. U.S. economic conditions appear stronger than at any time in the last five years. Fiscal headwinds are fading and U.S. corporations are reporting record profits. Lending institutions are liquid and well-capitalized. U.S. household debt burdens are lower than they have been in nearly 30 years, and business sentiment and consumer confidence are improving. These favorable conditions are projected to support apartment market fundamentals through stronger job and income growth in our markets, which are forecasted to grow by 1.6% and 5% in 2014, respectively, and accelerating household formation, forecasted to increase by 1.4 million this year and by 9 million by the end of the decade (NABE, Moody’s). Rental demand is expected to be further bolstered by favorable demographics. Our prime renter cohort, those aged 25–34, is projected to increase by 1.2 million in the next two years and by nearly 4 million by the end of the decade. Apartment fundamentals should also benefit from the for- sale housing industry’s challenge in ramping up production to meet household growth over the next few years. Housing starts contracted significantly in the downturn, averaging 50% of the post- war average, as home builders substantially reduced investments in land, entitlements and infrastructure, and production capacity has not returned to pre-recession levels. Today, most of the excess housing inventory from the mid/late 2000s has been absorbed. With 930,000 total housing starts in 2013 and 1.5 million households expected to be formed, on average, in 2014 and 2015, housing production would have to increase by 60% to meet household demand (BOC, NABE, Moody’s). For us, improving fundamentals should support solid cash flow growth from our stabilized portfolio and provide an attractive environment for our 5,000 new apartment home deliveries in 2014. Overall, we remain extremely well positioned given our coastal market focus, attractive pipeline of new opportunities and robust organizational capabilities that allow us to create value by building in strong market conditions. Given this outlook, in January of this year we announced a dividend increase of over 8%, continuing a 20-year tradition of strong dividend growth that has averaged over 5% on an annual compounded basis. 2014 is set to be another exceptional year for AvalonBay as we deliver a record amount of new product to the market and continue a tradition of Building Strong. I am extremely proud of our accomplishments in 2013 and want to thank our shareholders for their support, our associates for their dedication and our residents for choosing AvalonBay. Finally, I wish to thank our Chief Financial Officer, Tom Sargeant, who will be retiring at the end of May 2014. Tom has worked with AvalonBay and its predecessors for 28 years, including the last 19 years as CFO. Tom is one of the most highly regarded CFOs in our industry and has played an influential leadership role throughout AvalonBay’s history. We are grateful for Tom’s contribution and wish him the best in his retirement. tImothy J. nAughton Chairman and CEO 6 Avalon first and m, Washington, DC 7 AvAlonBAy | 2013 Annual Report tHRiVinG OVeR time 2013 AvalonBay closes Archstone acquisition, adding 60 communities and 20,000 apartment homes to the portfolio AnnuAlized tOtAl SHAReHOldeR RetuRn thR ough de CemBeR 31, 2013 AvalonBay since merger (06/04/98) Avalon Properties IPO investor (11/10/93) Bay Communities IPO investor (03/10/94) Source: SNL Financial 1994 1997 Bay Communities IPO 10 communities, 2,400 apartment homes, 180 associates 1993 Avalon Properties IPO 22 communities, 7,000 apartment homes, 470 associates 1 4 9 1 0 6 1 0 2 1 0 5 1 0 0 1 0 0 Avalon Properties completes the development of Avalon Cove (Jersey City, NJ), its first mid-rise development 2 0 5 1 1 3 1 0 5 13.0% 13.3% 15.0% 2 9 2 1 1 8 1 0 8 5 7 3 1 4 1 1 3 4 4 7 6 1 3 2 1 2 3 4 4 9 1 2 5 1 1 6 , 1 5 0 6 2 5 6 , 1 0 6 4 2 3 2 9 8 9 8 8 7 9 0 0 2 1 3 2 1 3 2 1 3 1998 1999 2001 2005 2007 2008 2011 AvalonBay introduces the AVA and eaves apartment brands 2012 Timothy Naughton is named CEO of AvalonBay AvalonBay is formed: 126 communities and 37,000 apartment homes establishing the first bicoastal multifamily REIT AvalonBay completes the development of Avalon Towers by the Bay (San Francisco, CA), its first West Coast high-rise development Bryce Blair is named Chairman and CEO of AvalonBay AvalonBay completes the development of Avalon Chrystie Place (New York, NY), its first Manhattan mixed-use development for Total Capital Costs of $150 million AvalonBay becomes the 12th REIT to join the S&P 500 AvalonBay commences operations at its Customer Care Center (Virginia Beach, VA) 6 3 7 1 5 3 1 5 1 6 4 0 1 6 7 1 5 6 6 3 3 1 6 7 1 5 2 6 6 2 1 6 7 1 5 3 6 9 8 1 7 0 1 5 5 7 3 9 1 8 6 1 5 9 8 8 3 2 1 3 1 7 3 8 2 4 2 0 3 1 6 7 1 5 8 1 6 1 1 5 0 1 4 4 1 3 8 AvalonBay total revenue ($millions) AvalonBay dividend (indexed to 100 in 1994) Multifamily Sector Weighted Average dividend (indexed to 100 in 1994) Source: SNL Financial Multifamily Sector Weighted Average includes AEC, BRE, CPT, EQR, ESS, MAA, PPS, UDR. Amounts prior to merger represent the sum of Avalon Properties and Bay Communities. 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 deVelOPinG FOR tHe lOnG teRm ouR deCentRAlI zed, fully IntegRAted development And Con StR uCtIon plAtfoRm has been integral to our success and a leading generator of value for shareholders since our founding as a public company. It is unmatched in the industry and hard to replicate. We understand what it takes to bring sites through the entitlements process while minimizing risk along the way. Development is a local business, requiring long-term commitment and focus to consistently generate value across multiple business cycles. This is why we maintain 11 regional offices—four in the New York metro area alone—each fully staffed with a team of professionals in development, construction and residential services. We choose to act as our own general contractor in most cases, allowing us to further control costs and quality while ensuring that the communities we develop are built to last. In 2014, we expect to deliver over $1 billion of new communities, with more to come in the years ahead. We expect these new developments will be put in place at a cost basis that is approximately 8% below the market value of our current 17-year-old stabilized portfolio and command rents that are 20% higher. $335 $308 deVelOPinG VAlue (5) (dollars in thousands) Current communities— fair market value per Green Street Advisors, Inc. Under construction— projected cost basis per home Source: Company Reports, as of December 31, 2013 mARket Rent PeR HOme Current communities Projected under construction $2,445 $2,040 Source: Company Reports, as of December 31, 2013 11 AllOcAtinG cAPitAl FOR GROwtH AnnuAlized diVidend GROwtH Source: SNL Financial, as of December 31, 2013 AvAlonBAy multIfAmIly SeCtoR We Ighted AveRAge 5.4% 4.3% 3.0% 0.8% -0.6% -2.5% 5 yeARS 10 yeARS 15 yeARS duRIng ouR 20-yeAR h IStoRy, our strategy of augmenting growth through development has been supported by a solid financial foundation. We’ve maintained low leverage and healthy debt service coverage and have produced sector-leading dividend growth. Looking ahead, we plan to preserve our financial foundation of balance-sheet strength and financial flexibility through a capital management strategy that emphasizes matching long-term investments with long-term capital. This strategy focuses on accessing the most cost-effective mix of capital from a variety of sources. OuR PRActice OF mAtcH-FundinG lOckS in AttRActiVe inVeStment mARGinS On new deVelOPment deBt-tO-mARket cAPitAlizAtiOn RAtiO Equity Fixed-rate debt Floating-rate debt 5% 72% 23% 12 AvAlonBAy | 2013 Annual Report Avalon Bloomingdale, Bloomingdale, NJ 13 Source: Company Reports, as of December 31, 2013 VAluinG OuR cultuRe And cAPABilitieS cuStOmeR SAtiSFActiOn Source: Company Reports, as of December 13, 2013 emPlOYee enGAGement† Source: Company Reports, as of December 13, 2013 AvAlonBAy InduStRy Index AvAlonBAy gloBAl Index ‡ 83% 76% 78% 73% † Engagement measures the degree to which an associate is actively engaged in the organization. ‡ Survey results from Kenexa, comparing AVB to its global database of more than 700 companies. OuR cultuRe iS GROunded in OuR tHRee cORe VAlueS: •  A commitment to integrity •  A spirit of caring •  A focus on continuous improvement ouR deCentRAlI zed StR uCtuRe, so critical to our development success, depends upon a culture of collaboration and responsibility to balance the autonomy of our regional offices with the centralized support and oversight provided by corporate headquarters in Arlington, VA. Regional offices are able to improve execution by drawing on our centralized strategic capabilities in market research, customer insight, design and capital management. They are also able to apply insights gleaned from across our portfolio to our multiple growth platforms in development, redevelopment, acquisitions and operations. OuR cAPABilitY-led StRAteGY sets us apart and positions us well to continue our 20-year track record of delivering outsized long-term returns to shareholders. t R C h e A k e R S A m R e CA mAnA pIt g e A l R e m o t S u t h g I S n I C cAPABilitieS m e n t o p e R A t I o n S d e SIgn e n t & C tIo n p m u R d e v e l o C o n S t 14 AvAlonBAy | 2013 Annual Report AvalonBay Associates, Arlington, VA 15 FinAnciAlS 16 AvAlonBAy | 2013 Annual Report AvA Ballard, Seattle, WA tABle OF cOntentS form 10-k page Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Consolidated Financial Statements 43 44 47 74 74 F-3 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 or FFO, Net Operating Income or NOI, Established/Same Store Communities) are contained in our annual report on Form 10-K, which is distributed with and a part of this Annual Report. The Multifamily Sector Weighted Average is a weighted average based on Total Market Capitalization per SNL Financial. The weighted average for Total Shareholder Return, FFO per Share Growth and Long-Term Dividend Growth includes AEC, AIV, BRE, CPT, EQR, ESS, HME, MAA, PPS and UDR. The weighted average for NAV per Share Growth includes all multifamily companies under Green Street Advisors, Inc.’s coverage, for which data is available during each of the time periods presented and includes AEC, AIV, BRE, CPT, EQR, ESS, PPS and UDR. Net debt-to-EBITDA is calculated by the Company as total debt, less cash and cash in escrow, divided by annualized fourth quarter EBITDA from continuing operations. cAlculAtiOn OF leVeRAGe (as of December 31, 2013, dollars in thousands) net deBt-tO-eBitdA (as of December 31, 2013, dollars in thousands) Total debt Cash and cash in escrow Net Debt Net income attributable to common stockholders Interest expense, net Depreciation expense Depreciation expense (discontinued operations) EBITDA EBITDA from continuing operations EBITDA from discontinued operations EBITDA from continuing operations, annualized Net debt-to-EBITDA $6,029,998 380,022 $5,649,976 252,212 44,630 104,806 345 $401,993 237,767 164,226 951,068 5.9 Total Market Capitalization, or Enterprise Value, 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 fixed and variable debt. Leverage is total debt as a percentage of Total Market Capitalization. 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, 2013, is as follows: Common stock Preferred stock Operating partnership units Total debt Total market capitalization Debt as a % of capitalization $15,300,936 — 887 6,029,998 $21,331,821 28% The Stock Performance Graph provides a comparison, from December 2008 through December 2013, of the cumulative total shareholder return (assuming reinvestment of dividends) among the Company, the S&P 500 Index and a peer group index (the FTSE NAREIT Apartment REIT Index) composed of 14 publicly traded apartment REITs, including the Company based on an initial purchase price of $100. The FTSE NAREIT Apartment REIT Index includes only REITs that invest directly or indirectly primarily in the equity ownership of multifamily residential apartment communities. Upon written request to the Company’s secretary, the Company will provide any stockholder with a list of REITs included in the FTSE NAREIT Apartment REIT Index. The historical information set forth below is not necessarily indicative of future performance. Data for the FTSE NAREIT Apartment REIT Index and the S&P 500 Index were provided to the Company by SNL Financial. StOck PeRFORmAnce 300 225 150 75 0 2008 2009 2010 2011 2012 2013 AvalonBay Communities, Inc. FTSE NAREIT Apartment REIT Index S&P 500 Period Ending AvalonBay Communities, Inc. FTSE NAREIT Apartment REIT Index S&P 500 12-31-08 12-31-09 12-31-10 12-31-11 12-31-12 12-31-13 100 100 100 144 130 126 204 192 146 244 221 149 261 236 172 235 221 228 18 19 AvAlonBAy | 2013 Annual Report FFO RecOnciliAtiOn tO net incOme (dollars in thousands, except per share data) For the Year Ended 2013 2012 2011 2010 2008 2003 1998 Net income $353,141 $423,869 $441,622 $175,331 $411,487 $262,503 $68,560 Dividends attributable to preferred stock — — — — (10,454) (10,744) — Depreciation – real estate assets, including discontinued operations and joint venture adjustments 582,325 265,627 256,986 237,041 203,082 129,207 78,388 Distributions to noncontrolling interests, including discontinued operations 32 28 27 55 216 1,263 1,174 Cumulative effect of change in accounting principle Gain on acquisition of unconsolidated entities Gain on sale of unconsolidated entities Gain on sale of operating communities — — — (14,194) — — (14,453) (7,972) (3,063) — — — — — (3,483) — — — — — — (278,231) (146,311) (281,090) (74,074) (284,901) (159,756) (3,970) Funds from operations attributable to common stockholders $642,814 $521,047 $414,482 $338,353 $315,947 $222,473 $144,152 Weighted average common shares outstanding – diluted 127,265,903 98,025,152 90,777,462 84,632,869 77,578,852 70,203,467 50,146,909 EPS – diluted $2.78 $4.32 $4.87 $2.07 $5.17 $3.60 $1.76 FFO per common share – diluted $5.05 $5.32 $4.57 $4.00 $4.07 $3.17 $2.86 nOn-ROutine FFO itemS (dollars in thousands, except per share data) Full Year FFO per Share, actual Non-Routine Items Loss on interest rate contract Archstone acquisition and joint venture costs Compensation plan update and severance charges Land gains and joint venture activity Debt prepayment penalty and deferred finance charge write-off Asset reductions Legal settlement and other Severe weather costs 2013 $5.05 2012 2011 $5.32 $4.57 2010 $4.00 0.40 0.63 0.03 — 0.12 — — — — 0.09 0.01 — 0.03 — (0.06) (0.15) 0.03 0.03 0.01 — 0.06 0.15 — (0.03) $(0.01) — — $(0.02) — — — $0.01 $3.98 FFO per Share, as adjusted for non-routine items $6.23 $5.43 $4.64 nOteS 1. totAl ShAR eholdeR 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. ffo pe R ShAR e gRoWth: The compound annual growth rate of Funds from Operations (FFO) per Share during the periods indicated. FFO per Share Growth for each year within the time frame presented may vary. 3. nAv peR ShAR e gRoWth: The estimated compound annual growth rate of Net Asset Value (NAV) per Share as estimated by Green Street Advisors, Inc. during the periods indicated. NAV per Share Growth for each year within the timeframe presented may vary. 4. vAlue CReAtIon: Determined by calculating the fair market value, based on the Company’s standard underwriting assumptions at completion, less the Total Capital Cost. 5. vAlue pe R home foR Cu RRent CommunItI eS: Derived from Company Net Asset Value from Green Street Advisors, Inc. For Under Construction the Value per Home is the projected cost basis. 20 21 AvAlonBAy | 2013 Annual Reportnew york, ny 275 Seventh Avenue 25th Floor New York, NY 10001 Phone: 212.370.9269 Fax: 212.370.1415 San francisco, CA 455 Market Street Suite 1650 San Francisco, CA 94105 Phone: 415.284.9080 Fax: 415.546.4138 San Jose, CA 400 Race Street Suite 200 San Jose, CA 95126 Phone: 408.983.1500 Fax: 408.287.9167 Seattle, WA 600 108th Avenue NE Suite 840 Bellevue, WA 98004 Phone: 425.468.9440 Fax: 425.455.0135 virginia Beach, vA 2901 Sabre Street Suite 100 Virginia Beach, VA 23452 Phone: 757.631.5000 Fax: 757.486.1063 Woodbridge, nJ Woodbridge Place 517 Route One South Suite 5500 Iselin, NJ 08830 Phone: 732.404.4800 Fax: 732.283.9101 HeAdquARteRS Arlington, vA Ballston Tower 671 N. Glebe Road Suite 800 Arlington, VA 22203 Phone: 703.329.6300 Fax: 703.329.9130 ReGiOnAl OFFiceS Boston, mA 51 Sleeper Street Suite 750 Boston, MA 02210 Phone: 617.654.9500 Fax: 617.426.1610 fairfield, Ct 1499 Post Road Second Floor Fairfield, CT 06824 Phone: 203.319.4900 Fax: 203.319.4944 long Island, ny 58 S. Service Road Suite 303 Melville, NY 11747 Phone: 631.843.0736 Fax: 631.843.0737 los Angeles, CA 16255 Ventura Boulevard Suite 950 Encino, CA 91436 Phone: 818.784.2800 Fax: 818.874.2810 newport Beach, CA 4440 Von Karman Avenue Suite 300 Newport Beach, CA 92660 Phone: 949.955.6200 Fax: 949.724.9208 inVeStOR RelAtiOnS Investor Relations AvalonBay Communities, Inc. Ballston Tower 671 N. Glebe Road Suite 800 Arlington, VA 22203 Phone: 703.329.6300 ir@avalonbay.com Website www.avalonbay.com transfer Agent Computershare Regular Mail P.O. Box 43006 Providence, RI 02940 Overnight Delivery 250 Royall Street Canton, MA 02021 Phone: 866.230.0668 form 10-k A copy of the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission is being distributed with this Annual Report and also may be obtained without charge by contacting Investor Relations. Stock listing NYSE-AVB forward-looking Statements 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 discussion titled “Forward-Looking Statements” on page 67 of our Annual Report on Form 10-K for a discussion regarding risks associated with these statements. BOARd OF diRectORS OFFiceRS timothy J. naughton (4) Chairman of the Board, CEO and President AvalonBay Communities, Inc. glyn f. Aeppel (2, 4) CEO and President Glencove Capital A hotel investment and advisory company Alan B. Buckelew (2, 4) Chief Operating Officer Carnival Corporation & plc A global cruise line Bruce A. Choate (4, 5) CEO and President Watson Land Company A real estate investment trust John J. healy Jr. (2, 5) Private Investor lance R. primis (1, 3, 5) Managing Partner Lance R. Primis and Partners, LLC A management consulting firm peter S. Rummell (3, 4) Private Investor h. Jay Sarles (2, 3) Private Investor W. edward Walter (3, 4) CEO and President 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 timothy J. naughton Chairman of the Board, CEO and President thomas J. Sargeant Chief Financial Officer leo S. horey III Chief Administrative Officer matthew h. Birenbaum Executive Vice President Corporate Strategy Sean J. Breslin Executive Vice President Investments and Asset Management William m. mclaughlin Executive Vice President Development & Construction – Northeast kevin p. o’Shea Executive Vice President Capital Markets edward m. Schulman Executive Vice President General Counsel & Secretary Stephen W. Wilson Executive Vice President Development & Construction – West Coast/Mid-Atlantic david W. Bellman Senior Vice President Construction – Northeast Sean m. Clark Senior Vice President Redevelopment & Asset Management kurt d. Conway Senior Vice President Brand Strategy & Marketing deborah A. Coombs Senior Vice President Property Operations – West Coast Jonathan B. Cox Senior Vice President Development – Mid-Atlantic Scott W. dale Senior Vice President Development – Boston Brian e. fritz Senior Vice President Development – Pacific Northwest nathan k. hong Senior Vice President Development – Northern California Suzanne Jakstavich Senior Vice President Human Resources Ronald S. ladell Senior Vice President Development – New Jersey Joanne m. lockridge Senior Vice President Finance J. Richard morris Senior Vice President Construction – West Coast/ Mid-Atlantic Christopher l. payne Senior Vice President Development – Southern California martin piazzola Senior Vice President Development – New York City michael J. Roberts Senior Vice President Development – Boston keri A. Shea Senior Vice President Finance & Treasurer matthew t. Smith Senior Vice President Property Operations – East Coast mona R. Stahling Senior Vice President Operational Services & Support matthew B. Whalen Senior Vice President Development – Connecticut, Long Island & West Chester Alan Adamson Vice President Associate General Counsel david Alagno Vice President Human Resources danyell d. Alders Vice President Property Operations – Southern California lisa B. Bongardt Vice President Property Operations – Mid-Atlantic Jonathan R. Busch-vogel Vice President Development – New York Randall Caraway Vice President Property Operations – Southern California duane W. Carlson Vice President Construction – Northern California & Pacific Northwest Jong m. Chung Vice President Design heather J. duffy Vice President Property Operations – Northern California linda l. early Vice President Property Operations – New York Stephen m. fabian Vice President Customer Care Center mitchell forlenza Vice President Construction – Connecticut, New Jersey & Westchester patrick gniadek Vice President Investments – East Coast Jim l. graves Vice President Information Services Chris B. helsabeck Vice President Development – Mid-Atlantic kurt R. hesser Vice President Finance karen A. hollinger Vice President Corporate Initiatives david A. hutchins Vice President Internal Audit mark d. Janda Vice President Development – Southern California Scott R. kinter Vice President Construction – Northeast david e. lewis Vice President Engineering Sarah k. mathewson Vice President Property Operations – Massachusetts, Rhode Island, Connecticut & New Jersey Robert S. Salkovitz Vice President Construction – Southern California Brian p. Schley Vice President Risk Management elizabeth A. Smith Vice President Redevelopment & Asset Management – East Coast Steven Spiro Vice President Construction – New York Craig f. thomas Vice President Market Research Jackie todesco Vice President Redevelopment & Asset Management – West Coast Alaine Walsh Vice President Corporate & Investment Services timothy m. Walters Vice President Investments – West Coast Catherine t. White Vice President Associate General Counsel Sean t. Willson Vice President Corporate Controller 22 Front Cover: Avalon mosaic, Fairfax, VA 23 AvAlonBAy | 2013 Annual Report24 

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