AvalonBay Communities: The Sunbelt Region Has A New Player In Town

Core Viewpoint - AvalonBay Communities (AVB) is transitioning towards more suburban and Sunbelt areas, showing positive performance for the quarter [1] Financial Performance - Projected growth in FFO per share is 1.4%, with potential for slight upward revision based on recent commentary [2] - Revenue growth is slightly higher than projected due to improved occupancy and reduced losses on uncollectible lease revenue [2] - AVB plans to increase renewal offers by an average of 5% for March and April 2024, although actual rental rate increases may be lower due to turnover and new leases [2] Regional Strategy - AVB has historically focused on "Gateway" markets, which are high-rent areas with significant barriers to new supply [3] - The company aims to increase its suburban market presence from 71% to 80% and expand its footprint in Sunbelt regions [4][5] - To achieve this shift, AVB will need to sell some existing locations and develop more suburban properties [4] Market Comparison - UDR, a peer company, currently has 69% of its properties in suburban markets and 27% in Sunbelt regions, compared to AVB's 71% and 8% respectively [5] - The Sunbelt regions have seen a boom in supply due to increased development activity, while Gateway markets are experiencing less new supply [7] Management Guidance - AVB's guidance for Core FFO per share growth is set at 1.4%, with Same Store Net Operating Income (SS NOI) growth projected at 1.25% [7] Overall Impression - The earnings and guidance outlook for AVB is considered positive, with performance on FFO per share over the last two years being strong [8] - There were no significant surprises in the latest results that would drive shares higher [8]