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AvalonBay Communities AVB is well-poised to gain from healthy renter demand for its residential properties in the high barrier-to-entry regions of the United States. The company’s efforts to leverage technology to drive margin expansion seem encouraging.
Strategic buyouts and development projects, backed by a healthy balance sheet position, augur well for long-term growth. However, elevated rental unit supply in select markets and high-interest expenses raise concerns.
Last month, AvalonBay reported a first-quarter 2025 core funds from operations (FFO) per share of $2.83, beating the Zacks Consensus Estimate of $2.80. The figure also climbed 4.8% from the prior-year quarter’s tally. The quarterly performance reflected better-than-expected operating results. Total revenues in the quarter came in at $745.9 million, increasing 4.6% on a year-over-year basis. AvalonBay has also reaffirmed its full-year 2025 outlook.
What Is Aiding AvalonBay Communities?
AvalonBay owns high-quality assets in top U.S. markets, focusing on metro areas with strong job growth, high homeownership costs and vibrant lifestyles. This positions it to earn superior long-term risk-adjusted returns. Its well-diversified portfolio includes both urban and suburban communities. For 2025, management forecasts 2%-4% year-over-year growth in same-store residential revenues.
To enhance its overall portfolio quality, AvalonBay has carried out several strategic acquisitions over the years. The company is also disposing of non-core assets for capital recycling. Moreover, AVB's growth over the intermediate term is likely to be further supported by its increased development deliveries. In the next few years, the developments underway upon completion and stabilization are expected to fuel FFO and net asset value growth.
AvalonBay has a healthy balance sheet with ample liquidity, positioning it well to capitalize on long-term growth opportunities. As of March 31, 2025, the company had $53.3 million in unrestricted cash and cash equivalents. As of the same date, AvalonBay did not have any borrowings outstanding under its $2.25 billion unsecured credit facility. AVB has a well-laddered debt maturity schedule with a weighted average year-to-maturity of 6.8 years. In the first quarter of 2025, its annualized net debt-to-core EBITDAre was 4.3 times, and unencumbered NOI was 95%, providing scope for tapping additional secured debt capital if required.
Solid dividend payouts are arguably the biggest enticement for REIT investors, and AvalonBay has consistently paid dividends each year since it went public in 1994. In February 2025, concurrent with its fourth-quarter earnings release, AvalonBay increased its first-quarter 2025 dividend to $1.75 per share from $1.70 paid in the prior quarter. This represented a hike of 2.9% from the prior payout. Given the company’s solid operating platform, scope for growth and decent financial position compared to that of the industry, this dividend rate is expected to be sustainable in the long run.