AVB - AvalonBay Communities Inc. (AVB) Q4 2023 Earnings Call Transcript

2024-02-01 15:43:06 ET

AvalonBay Communities, Inc. (AVB)

Q4 2023 Earnings Conference Call

February 01, 2024, 01:00 PM ET

Company Participants

Jason Reilley - Vice President of Investor Relations

Ben Schall - Chief Executive Officer and President

Sean Breslin - Chief Operating Officer

Matt Birenbaum - Chief Investment Officer

Kevin O’Shea - Chief Financial Officer

Conference Call Participants

James Feldman - Wells Fargo

Adam Kramer - Morgan Stanley

Austin Wurschmidt - KeyBanc Capital Markets

Eric Wolfe - Citi

Steve Sakwa - Evercore

John Kim - BMO Capital Markets

Joshua Dennerlein - Bank of America

Brad Heffern - RBC Capital Markets

Michael Goldsmith - UBS

Rich Anderson - Wedbush

Alexander Goldfarb - Piper Sandler

Haendel St. Juste - Mizuho

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to AvalonBay Communities Fourth Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. Following remarks by the company, we will conduct a question-and-answer session. [Operator Instructions] Your host for today’s conference call is Mr. Jason Reilley, Vice President of Investor Relations.

Mr. Reilley, you may begin your conference.

Jason Reilley

Well, thank you, operator, and welcome to AvalonBay Communities fourth quarter 2023 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday afternoon’s press release as well as in the company’s Form 10-K and Form 10-Q filed with the SEC.

As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today’s discussion. The attachment is also available on our website at www.avalonbay.com/earnings, and we encourage you to refer to this information during the review of our operating results and financial performance.

And with that, I will turn the call over to Ben Schall, CEO and President of AvalonBay Communities, for his remarks. Ben?

Ben Schall

Thank you, Jason. I am joined today by Kevin O’Shea, our CFO; Matt Birenbaum, our Chief Investment Officer and Sean Breslin, our Chief Operating Officer. We'd like to start by thanking our 3,000 AvalonBay Associates for delivering exceptional results in 2023. Your efforts and dedication are what make it happen, and your commitment to our purpose and culture makes us who we are as an organization. Thank you.

As a brief recap on last year, as shown on Slide four, we achieved 8.6% core FFO growth for the year, a testament to our ability to grow earnings through unique internal and external drivers. Through the proactive management of our assets, same-store revenue ended the year up 6.3%, and NOI increased by 6.2%.

For external growth, our developments underway continue to outperform with $575 million of completions across six projects, delivering outside stabilized yields of 7.1%. We're particularly proud of the results from our operating model transformation, where we are delivering enhanced value to customers and driving meaningful efficiencies. As highlighted on Slide five, our operating initiatives exceeded expectations in 2023, delivering $19 million of incremental annual NOI to the bottom line, which was $7 million or almost 60% higher than anticipated.

Moving to Slide six and capital allocation, remain nimble in 2023, having shifted to being a net seller during the year, with four dispositions from our established regions for $445 million, $275 million of which we'd redeployed into acquisitions in our expansion regions. We also started $800 million of profitable new development during the year, including $300 million of starts in the fourth quarter at an initial projected yield of 6.7%....

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