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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission file number 1-12672
AVALONBAY COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
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Maryland 77-0404318
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2900 Eisenhower Avenue, Suite 300
Alexandria, Virginia 22314
(Address of principal executive office, including zip code)
(703) 329-6300
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 per share New York Stock Exchange, Pacific Exchange
Preferred Stock Purchase Rights New York Stock Exchange, Pacific Exchange
8.50% Series C Cumulative Redeemable Preferred Stock, New York Stock Exchange, Pacific Exchange
par value $.01 per share
8.00% Series D Cumulative Redeemable Preferred Stock, New York Stock Exchange, Pacific Exchange
par value $.01 per share
8.70% Series H Cumulative Redeemable Preferred Stock, New York Stock Exchange, Pacific Exchange
par value $.01 per share
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock, par value $.01 per
share, held by nonaffiliates of the Registrant, as of March 1, 2002 was
$3,229,266,823.
The number of shares of the Registrant's Common Stock, par value $.01 per share,
outstanding as of March 1, 2002 was 68,780,976.
Documents Incorporated by Reference
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Portions of AvalonBay Communities, Inc.'s Proxy Statement for the 2002 annual
meeting of stockholders, a definitive copy of which will be filed with the SEC
within 120 days after the year end of the year covered by this Form 10-K, are
incorporated by reference herein as portions of Part III of this Form 10-K.
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TABLE OF CONTENTS
PAGE
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PART I
ITEM 1. BUSINESS.................................................................................1
ITEM 2. COMMUNITIES..............................................................................6
ITEM 3. LEGAL PROCEEDINGS.......................................................................29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.........................................29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...........................................................30
ITEM 6. SELECTED FINANCIAL DATA.................................................................31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................................34
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................................................47
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........................................49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT..........................................49
ITEM 11. EXECUTIVE COMPENSATION..................................................................49
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................................49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K...........................................................50
SIGNATURES ........................................................................................55
PART I
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Our actual results could differ materially from those set forth in each
forward-looking statement. Certain factors that might cause such a difference
are discussed in this report, including in the section entitled "Forward-Looking
Statements" on page 34 of this Form 10-K.
ITEM 1. BUSINESS
General
AvalonBay is a Maryland corporation that has elected to be treated as a real
estate investment trust, or REIT, for federal income tax purposes. We focus on
the ownership and operation of upscale apartment communities (which generally
command among the highest rents in their submarkets) in high barrier-to-entry
markets of the United States. This is because we believe that, over the long
term, the limited new supply of upscale apartment homes in these markets will
result in larger increases in cash flows relative to other markets. These
barriers-to-entry generally include a difficult and lengthy entitlement process
with local jurisdictions and dense in-fill locations where zoned and entitled
land is in limited supply. Our markets are located in the Northeast,
Mid-Atlantic, Midwest, Pacific Northwest, and Northern and Southern California
regions of the United States. We believe that we have penetrated substantially
all of the high barrier-to-entry markets of the country.
As of March 1, 2002, we owned or held a direct or indirect ownership interest in
126 operating apartment communities containing 37,228 apartment homes in eleven
states and the District of Columbia, of which three communities containing 1,896
apartment homes were under redevelopment. In addition to these operating
communities, we also owned 15 communities under construction that will contain
3,963 apartment homes and rights to develop an additional 30 communities that,
if developed as expected, will contain an estimated 8,918 apartment homes. We
generally obtain ownership in an apartment community by developing a new
community on vacant land or by acquiring and either repositioning or
redeveloping an existing community. In selecting sites for development,
redevelopment or acquisition, we favor locations that are near expanding
employment centers and convenient to recreation areas, entertainment, shopping
and dining.
Our real estate investments consist of Established Communities, Other Stabilized
Communities, Development Communities and Redevelopment Communities. A
description of these segments and other related information can be found in Note
9 of the Consolidated Financial Statements set forth in Item 8 of this report.
Our principal operating objectives are to develop, own and operate, in our
selected markets, high quality, upscale communities that contain features and
amenities desired by prospective residents, and to provide our residents with
efficient and effective service. Our principal financial goals are to
successfully implement those operating objectives in a cost effective manner and
thereby increase long-term stockholder value by increasing operating cash flow
and Funds from Operations (as defined by the National Association of Real Estate
Investment Trusts). For a description of the meaning of Funds from Operations
and its use and limitation as an operating measure, see the discussion titled
"Funds from Operations" in Item 7 of this report. Our strategies and goals to
achieve these objectives include:
- generating consistent, sustained earnings growth at each community
through increased revenue, by balancing high occupancy with premium
pricing, and increased operating margins from operating expense
management;
- investing selectively in new development, redevelopment and
acquisition communities in markets with growing or high potential
for demand and high barriers-to-entry;
- selling communities in markets where we seek to adjust our market
penetration; and
- maintaining a conservative capital structure to provide continuous
access to cost-effective capital.
We believe that we can generally implement these strategies best by developing,
redeveloping, acquiring and managing upscale assets in supply-constrained
markets while maintaining the financial discipline to ensure balance sheet
flexibility.
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Development Strategy. We carefully select land for development and follow
established procedures that we believe minimize both the cost and the risks of
development. As one of the largest developers of multifamily apartment
communities in high barrier-to-entry markets of the United States, we identify
development opportunities through local market presence and access to local
market information achieved through our regional offices. In addition to our
principal executive offices in Alexandria, Virginia, we also maintain regional
offices and administrative or specialty offices in or near the following cities:
- Boston, Massachusetts;
- Chicago, Illinois;
- Newport Beach, California;
- New York, New York;
- San Jose, California;
- Wilton, Connecticut;
- Woodbridge, New Jersey; and
- Seattle, Washington
After selecting a target site, we usually negotiate for the right to acquire the
site either through an option or a long-term conditional contract. Options and
long-term conditional contracts generally enable us to acquire the target site
shortly before the start of construction, which reduces development-related
risks as well as preserves capital. After we acquire land, we generally shift
our focus to construction. Except for certain mid-rise and high-rise apartment
communities where we may elect to use third-party general contractors or
construction managers, we act as our own general contractor and construction
manager. We believe this enables us to achieve higher construction quality,
greater control over construction schedules and significant cost savings. Our
development and property management teams monitor construction progress to
ensure high quality workmanship and a smooth and timely transition into the
leasing and operational phase.
Redevelopment Strategy. When we undertake the redevelopment of a community, our
goal is to generally renovate and/or rebuild an existing community so that our
total investment is significantly below replacement cost and the community is
the highest quality apartment community or best rental value for an upscale
apartment community in its local area. We have established procedures to
minimize both the cost and risks of redevelopment. Our redevelopment teams,
which include key redevelopment, construction and property management personnel,
monitor redevelopment progress. We believe we achieve significant cost savings
by acting as our own general contractor. More importantly, this helps to ensure
high quality design and workmanship and a smooth and timely transition into the
lease-up and restabilization phase.
Disposition Strategy. To optimize our concentration of communities in selected
high barrier-to-entry markets, we sell assets that do not meet our long-term
investment criteria when market conditions are favorable and redeploy the
proceeds from those sales to develop and redevelop communities under
construction or reconstruction. This disposition strategy acts as a source of
capital because we are able to redeploy the net proceeds from our dispositions
in lieu of raising that amount of capital externally. When we decide to sell a
community, we solicit competing bids from unrelated parties for these individual
assets and consider the sales price and tax ramifications of each proposal. In
connection with this disposition program, we disposed of a total of seven
communities since January 1, 2001. The net proceeds from the sale of these
assets were approximately $239,000,000. However, we cannot provide assurance
that we will be able to continue our current disposition strategy or that assets
we identify for sale can be sold on terms that are satisfactory to us. For 2002,
we plan to significantly curtail disposition activity in response to the current
capital and real estate markets.
Acquisition Strategy. Our core competencies in development and redevelopment
discussed above allow us to be selective in the acquisitions we target. Between
January 1, 2001 and March 1, 2002, we acquired three communities containing 995
apartment homes. These communities were acquired in connection with a forward
purchase contract agreed to in 1997. This expansion is consistent with our
strategy to achieve long-term earnings growth by providing a high quality
platform for expansion while also providing additional economic and geographic
diversity. The acquisition of these presale communities was designed to achieve
rapid penetration into markets that are generally
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supply constrained and in which we had no significant presence. We have one
presale commitment provided for under a separate agreement which is expected to
close in the second quarter of 2002.
Property Management Strategy. We intend to increase operating income through
innovative, proactive property management that will result in higher revenue
with controlled operating expenses from communities.
Our principle strategies to maximize revenue include:
- strong focus on resident satisfaction;
- staggering lease terms based on vacancy exposure by apartment type,
so that lease expirations are better matched to each community's
traffic patterns;
- increasing rents as market conditions permit;
- managing community occupancy for optimal rental revenue levels; and
- applying new technology to optimize revenue from each community.
Controlling operating expenses is another way in which we intend to increase
earnings growth. Growth in our portfolio and the resulting increase in revenue
allows for fixed operating costs to be spread over a larger volume of revenue,
thereby increasing operating margins. We aggressively pursue real estate tax
appeals and control operating expenses as follows:
- record invoices on-site to ensure careful monitoring of budgeted
versus actual expenses;
- purchase supplies in bulk where possible;
- bid third-party contracts on a volume basis;
- strive to retain residents through high levels of service in order
to eliminate the cost of preparing an apartment home for a new
resident and to reduce marketing and vacant apartment utility costs;
- perform turnover work in-house or hire third-parties, generally
depending upon the least costly alternative; and
- undertake preventive maintenance regularly to maximize resident
satisfaction and property and equipment life.
On-site property management teams receive bonuses based largely upon the net
operating income produced at their respective communities. We are also pursuing
ancillary services which could provide additional revenue sources. On a limited
basis, we also manage properties for third parties, believing that doing so will
provide information about new markets or provide an acquisition opportunity,
thereby enhancing opportunities for growth.
Technology Strategy. We believe that an innovative management information system
infrastructure will be an important element in managing our future growth. This
is because timely and accurate collection of financial and resident profile data
will enable us to maximize revenue through careful leasing decisions and
financial management. We currently employ a company-wide intranet using a
digital network with high-speed digital lines. This network connects all of our
communities and offices to central servers in Alexandria, Virginia, providing
access to our associates and to AvalonBay's corporate information throughout the
country from all locations.
We have invested in five technology companies in the belief that the development
and application of their technology and services will improve the operating
performance of our real estate holdings. Our most significant technology
investment is in Realeum, Inc. Realeum is engaged in the development of an
on-site property management system and leasing automation system to enable
management to capture, review and analyze data to a greater extent than is
possible using existing commercial software. To help monitor this investment,
Thomas J. Sargeant, our Executive Vice President and Chief Financial Officer, is
a director of Realeum. We are also a member of Constellation Real Technologies
LLC, an entity formed by a number of real estate investment trusts and real
estate operating companies for the purpose of investing in multi-sector real
estate technology opportunities. Our original commitment to Constellation was
$4,000,000 and we have contributed $959,000 to date. Constellation has proposed
a reduction in the aggregate amount of capital commitments from its members. If
that proposal is accepted, our revised commitment would fall to $2,600,000. The
aggregate carrying value of all of our technology investments, including Realeum
and Constellation, at March 1, 2002 was $4,800,000.
3
Financing Strategy. We have consistently maintained, and intend to continue to
maintain, a conservative capital structure, largely comprised of common equity.
At December 31, 2001, our debt-to-total market capitalization (i.e., the
aggregate of the market value of common stock, the liquidation preference of
preferred stock and the principle amount of debt) was 37.1%, and our permanent
long-term floating rate debt, not including borrowings under the unsecured
credit facility, was only 1.2% of total market capitalization.
Before planned construction or reconstruction activity begins, we intend to
arrange adequate capital sources to complete such undertakings, although we
cannot assure you that we will be able to obtain such financing. During 2001,
substantially all of our construction and reconstruction activities were funded
by issuance of unsecured debt securities, asset sales, through nontaxable
like-kind exchanges, and retained operating cash. In the event that financing
cannot be obtained, we may have to abandon planned development activities,
write-off associated pursuit costs and/or forego reconstruction activity. In
such instances, we will not realize the increased revenues and earnings that we
expected from such pursuits, and the related write-off of costs will increase
current period expenses.
We estimate that a portion of our short-term liquidity needs will be met from
retained operating cash and borrowings under our $500,000,000 variable rate
unsecured credit facility. At March 1, 2002, zero was outstanding, $85,820,000
was used to provide letters of credit and $414,180,000 was available for
borrowing under the unsecured credit facility.
If required, to meet the balance of our liquidity needs we will need to arrange
additional capacity under our existing unsecured credit facility, sell
additional existing communities and/or issue additional debt or equity
securities. While we believe we have the financial position to expand our
short-term credit capacity and access the capital markets as needed, we cannot
assure you that we will be successful in completing these arrangements, sales or
offerings. The failure to complete these transactions on a cost-effective basis
could have a material adverse impact on our operating results and financial
condition, including the abandonment of deferred development costs and a
resultant charge to earnings.
Inflation and Tax Matters
Substantially all of our leases are for a term of one year or less, which may
enable us to realize increased rents upon renewal of existing leases or the
beginning of new leases. Such short-term leases generally minimize the risk to
us of the adverse effects of inflation, although as a general rule these leases
permit residents to leave at the end of the lease term without penalty. Our
current policy is generally to permit residents to terminate leases upon an
agreed advance written notice and a lease termination payment, as provided for
in the resident's lease. Short-term leases combined with relatively consistent
demand have allowed rents, and therefore cash flow from the portfolio, to
provide an attractive inflation hedge.
We filed an election with our initial federal income tax return to be taxed as a
REIT under the Internal Revenue Code of 1986, as amended, and intend to maintain
our qualification as a REIT in the future. As a qualified REIT, with limited
exceptions, we will not be taxed under federal and certain state income tax laws
at the corporate level on our net income to the extent net income is distributed
to our stockholders. We expect to make sufficient distributions to avoid income
tax at the corporate level.
Environmental Matters
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required, in many instances regardless of knowledge or responsibility, to
investigate and remediate the effects of hazardous or toxic substances or
petroleum product releases at such property. The owner or operator may be held
liable to a governmental entity or to third parties for property damage and for
investigation and remediation costs incurred by such parties in connection with
the contamination, which may be substantial. The presence of such substances, or
the failure to properly remediate the contamination, may adversely affect the
owner's ability to borrow against, sell or rent such property. In addition, some
environmental
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laws create a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination.
Certain federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos-containing materials, or ACMs,
when such materials are in poor condition or in the event of construction,
remodeling, renovation or demolition of a building. Such laws may impose
liability for release of ACMs and may provide for third parties to seek recovery
from owners or operators of real properties for personal injury associated with
ACMs. In connection with our ownership and operation of apartment communities,
we potentially may be liable for such costs. We are not aware that any ACMs were
used in connection with the construction of the communities developed by us.
However, we are aware that ACMs were used in connection with the construction of
certain communities acquired by us. We do not anticipate that we will incur any
material liabilities in connection with the presence of ACMs at these
communities. We currently have an operations and maintenance program for ACMs at
each of the communities at which ACMs have been detected.
When excessive moisture accumulates in buildings or on building materials, mold
growth may occur, particularly if the moisture problem remains undiscovered or
is not addressed over a period of time. Some molds may produce toxins or
irritants. Concern about indoor exposure to mold has been increasing as exposure
to mold may cause a variety of health effects and symptoms, including allergic
or other reactions. As a result, the presence of significant mold at a community
owned by us could require us to undertake a costly remediation program to
contain or remove the mold from the affected community. In addition, the
presence of significant mold could expose us to liability from residents and
others if property damage or health concerns arise.
We are also aware that certain communities have lead paint and we are
undertaking or intend to undertake appropriate remediation.
All of our stabilized operating communities, and all of the communities that we
are currently developing or redeveloping, have been subjected to at least a
Phase I or similar environmental assessment which generally does not involve
invasive techniques such as soil or ground water sampling. These assessments
have not revealed any environmental conditions that we believe will have a
material adverse effect on our business, assets, financial condition or results
of operations. We are not aware of any other environmental conditions which
would have such a material adverse effect.
However, we are aware that the migration of contamination from an upgradient
landowner near a community owned by us (Avalon at Silicon Valley, formerly known
as Toscana) has affected the groundwater there. The upgradient landowner is
undertaking remedial response actions and a ground water treatment system has
been installed. We expect that the upgradient landowner will take all necessary
remediation actions and ensure the ongoing operation and maintenance of the
ground water treatment system. The upgradient landowner has also provided an
indemnity that runs to current and future owners of the property and upon which
we may be able to rely if environmental liability arises from the groundwater
contamination.
Additionally, prior to 1994, we had occasionally been involved in developing,
managing, leasing and operating various properties for third parties.
Consequently, we may be considered to have been an operator of such properties
and, therefore, potentially liable for removal or remediation costs or other
potential costs which could relate to hazardous or toxic substances. We are not
aware of any material environmental liabilities with respect to properties that
we managed or developed for such third parties.
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We cannot provide assurance that:
- the environmental assessments identified all potential environmental
liabilities;
- no prior owner created any material environmental condition not
known to us or the consultants who prepared the assessments;
- no environmental liabilities developed since such environmental
assessments were prepared;
- the condition of land or operations in the vicinity of our
communities, such as the presence of underground storage tanks, will
not affect the environmental condition of such communities;
- future uses or conditions, including, without limitation, changes in
applicable environmental laws and regulations, will not result in
the imposition of environmental liability; or
- no environmental liabilities will develop at communities that have
been sold pursuant to our disposition strategy for which we may have
liability.
ITEM 2. COMMUNITIES
Our real estate investments consist of current operating apartment communities,
communities in various stages of development, and land or land options held for
development. The following is a description of each category:
Current Communities are categorized as Established, Other Stabilized, Lease-Up,
or Redevelopment according to the following:
- Established Communities (also known as Same Store Communities) are
communities where a comparison of operating results from the prior year
to the current year is meaningful, as these communities were owned and
had stabilized operating costs as of the beginning of the prior year. We
determine which of our communities fall into the Established Communities
category annually on January 1 of each year and maintain that
classification throughout the year. For the year 2001, the Established
Communities were communities that had stabilized operating costs as of
January 1, 2000.
- Other Stabilized Communities are all other completed communities that
have stabilized occupancy and are not undergoing or planning
redevelopment activities. We consider a community to have stabilized
occupancy at the earlier of (i) attainment of 95% occupancy or (ii) the
one-year anniversary of completion of development or redevelopment. For
the year 2001, Other Stabilized Communities therefore include
communities that were either acquired or achieved stabilization after
January 1, 2000 and that were not undergoing or planning redevelopment
activities.
- Lease-Up Communities are communities where construction has been
complete for less than one year and where occupancy has not reached 95%.
- Redevelopment Communities are communities where substantial
redevelopment is in progress or is planned to take place during the
current year. Redevelopment is considered substantial when capital
invested during the reconstruction effort exceeds the lesser of
$5,000,000 or 10% of the community's acquisition cost.
Development Communities are communities that are under construction and for
which a final certificate of occupancy has not been received. These communities
may be partially complete and operating.
Development Rights are development opportunities in the early phase of the
development process for which we have an option to acquire land, a leasehold
interest, for which we are the buyer under a long-term conditional contract to
purchase land or where we own land to develop a new community. We capitalize all
related pre-development costs incurred in pursuit of these new developments.
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As of December 31, 2001, our communities were classified as follows:
Number of Number of
communities apartment homes
----------- ---------------
Current Communities
- -------------------
Established Communities:
Northeast 20 5,416
Mid-Atlantic 18 5,297
Midwest 6 1,591
Pacific Northwest 2 486
Northern California 27 7,851
Southern California 11 3,112
------ ------
Total Established 84 23,753
Other Stabilized Communities:
Northeast 15 3,901
Mid-Atlantic 3 1,125
Midwest 3 1,033
Pacific Northwest 9 2,573
Northern California 3 1,038
Southern California 4 1,397
------ ------
Total Other Stabilized 37 11,067
Lease-Up Communities 2 512
Redevelopment Communities 3 1,896
------ ------
Total Current Communities 126 37,228
====== ======
Development Communities 15 3,963
- ----------------------- ====== ======
Development Rights 30 8,918
- ------------------ ====== ======
Our holdings under each of the above categories are discussed on the following
pages.
Current Communities
The Current Communities are primarily garden-style apartment communities
consisting of two and three-story buildings in landscaped settings. The Current
Communities, as of March 1, 2002, include 100 garden-style, 15 high-rise and 11
mid-rise apartment communities. The Current Communities offer many attractive
amenities including some or all of the following:
- vaulted ceilings;
- lofts;
- fireplaces;
- patios/decks; and
- modern appliances.
Other features at various communities may include:
- swimming pools;
- fitness centers;
- tennis courts; and
- business centers.
We also have an extensive and ongoing maintenance program to keep all
communities and apartment homes substantially free of deferred maintenance and,
where vacant, available for immediate occupancy. We believe that
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the aesthetic appeal of our communities and a service oriented property
management team focused on the specific needs of residents enhances market
appeal to discriminating residents. We believe this will ultimately achieve
higher rental rates and occupancy levels while minimizing resident turnover and
operating expenses. These Current Communities are located in the following
geographic markets:
Number of Number of Percentage of total
communities at apartment homes at apartment homes at
------------------- ------------------- ---------------------
1-1-01 3-1-02 1-1-01 3-1-02 1-1-01 3-1-02
------ ------ ------ ------ ------ ------
NORTHEAST 36 38 11,043 10,877 29.7% 29.3%
Boston, MA 10 11 2,734 2,839 7.3% 7.6%
Fairfield County, CT 11 11 2,960 2,939 8.0% 7.9%
Hartford, CT 1 -- 932 - 2.5% 0.0%
Long Island, NY 3 3 915 915 2.5% 2.5%
Northern New Jersey 3 4 1,124 1,394 3.0% 3.8%
Central New Jersey 3 3 1,144 1,144 3.1% 3.1%
New York, NY 5 6 1,234 1,646 3.3% 4.4%
MID-ATLANTIC 20 21 5,910 6,422 15.9% 17.2%
Baltimore, MD 4 4 1,052 1,054 2.8% 2.8%
Washington, DC 16 17 4,858 5,368 13.1% 14.4%
MIDWEST 9 9 2,624 2,624 7.1% 7.1%
Chicago, IL 4 4 1,296 1,296 3.5% 3.5%
Minneapolis, MN 5 5 1,328 1,328 3.6% 3.6%
PACIFIC NORTHWEST 9 12 2,638 3,159 7.1% 8.5%
Portland, OR 2 -- 776 - 2.1% 0.0%
Seattle, WA 7 12 1,862 3,159 5.0% 8.5%
NORTHERN CALIFORNIA 31 30 9,115 8,889 24.6% 23.8%
Oakland-East Bay, CA 6 6 2,090 2,090 5.6% 5.6%
San Francisco, CA 9 8 1,991 1,765 5.4% 4.7%
San Jose, CA 16 16 5,034 5,034 13.6% 13.5%
SOUTHERN CALIFORNIA 18 16 5,817 5,257 15.6% 14.1%
Los Angeles, CA 6 4 2,561 2,001 6.9% 5.4%
Orange County, CA 8 8 2,022 2,022 5.4% 5.4%
San Diego, CA 4 4 1,234 1,234 3.3% 3.3%
------ ------ ------ ------ ------ ------
123 126 37,147 37,228 100.0% 100.0%
====== ====== ====== ====== ====== ======
We manage and operate all of the Current Communities. During the year ended
December 31, 2001, we completed construction of 1,656 apartment homes in six
communities for a total cost of $274,000,000. The average age of the Current
Communities, on a weighted average basis according to number of apartment homes,
is 6.9 years.
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Of the Current Communities, as of March 1, 2002, we own:
- a fee simple, or absolute, ownership interest in 103 operating
communities, one of which is on land subject to a 149 year land
lease;
- a general partnership interest in four partnerships that each own a
fee simple interest in an operating community;
- a general partnership interest in four partnerships structured as
"DownREITs," as described more fully below, that own an aggregate of
17 communities;
- a 100% interest in a senior participating mortgage note secured by
one community, which allows us to share in part of the rental income
or resale proceeds of the community; and
- a membership interest in a limited liability company that holds a
fee simple interest in one Redevelopment community.
We also hold a fee simple ownership interest in eleven of the Development
Communities and a membership interest in a limited liability company that holds
a fee simple interest in one Development Community.
In each of the four partnerships structured as DownREITs, either we or one of
our wholly-owned subsidiaries is the general partner, and there are one or more
limited partners whose interest in the partnership is represented by units of
limited partnership interest. For each DownREIT partnership, limited partners
are entitled to receive distributions before any distribution is made to the
general partner. Although the partnership agreements for each of the DownREITs
are different, generally the distributions paid to the holders of units of
limited partnership interests approximate the current AvalonBay common stock
dividend amount. Each DownREIT partnership has been structured so that it is
unlikely the limited partners will be entitled to a distribution greater than
the initial distribution provided for in the partnership agreement. The holders
of units of limited partnership interest have the right to present each unit of
limited partnership interest for redemption for cash equal to the fair market
value of a share of our common stock on the date of redemption. In lieu of cash,
we may elect to acquire any unit presented for redemption for one share of our
common stock. As of December 31, 2001, there were 905,946 units outstanding. The
DownREIT partnerships are consolidated for financial reporting purposes.
9
PROFILE OF CURRENT AND DEVELOPMENT COMMUNITIES
(Dollars in thousands, except per apartment home data)
Approx.
Number of rentable area
City and state homes (Sq. Ft.) Acres
------------------------------------------------ ---------------------------- ----------- --------------- ---------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center Boston, MA 781 747,954 1.0
Longwood Towers Brookline, MA 277 289,361 4.5
Avalon Summit Quincy, MA 245 203,848 9.1
Avalon at Lexington Lexington, MA 198 231,182 18.0
Avalon at Faxon Park Quincy, MA 171 175,494 8.3
Avalon West Westborough, MA 120 147,472 10.1
Avalon Oaks Wilmington, MA 204 229,748 22.5
Avalon Essex Peabody, MA 154 173,520 11.1
Avalon at Center Place Providence, RI 225 231,671 1.2
Avalon Estates Hull, MA 162 188,392 55.0
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II Hamden, CT 764 761,441 38.4
Avalon Glen Stamford, CT 238 221,828 4.1
Avalon Gates Trumbull, CT 340 381,322 37.0
Avalon Springs Wilton, CT 102 158,259 12.0
Avalon Valley Danbury, CT 268 297,479 17.1
Avalon Lake Danbury, CT 135 166,231 32.0
Avalon Corners Stamford, CT 195 192,174 3.2
Avalon Haven North Haven, CT 128 140,107 10.6
LONG ISLAND, NY
Avalon Commons Smithtown, NY 312 363,049 20.6
Avalon Towers Long Beach, NY 109 124,836 1.3
Avalon Court Melville, NY 494 597,104 35.4
NORTHERN NEW JERSEY
Avalon Cove Jersey City, NJ 504 574,675 11.1
The Tower at Avalon Cove Jersey City, NJ 269 241,825 2.8
Avalon Crest Fort Lee, NJ 351 371,411 13.1
Avalon at Florham Park Florham Park, NJ 270 331,560 41.9
CENTRAL NEW JERSEY
Avalon Watch West Windsor, NJ 512 485,871 64.0
Avalon Run East Lawrenceville, NJ 206 265,198 27.0
NEW YORK, NY
Avalon Gardens Nanuet, NY 504 638,439 55.0
Avalon View Wappingers Falls, NY 288 335,088 41.0
Avalon Green Elmsford, NY 105 113,538 16.9
The Avalon Bronxville, NY 110 119,186 1.5
Avalon Willow Mamaroneck, NY 227 199,945 4.0
Avalon on the Sound New Rochelle, NY 412 372,860 2.4
Average economic
Year of Average Physical occupancy
completion/ size occupancy at -------------------------
acquisition (Sq. Ft.) 12/31/01 2001 2000
------------------------------------------------ ------------- ----------- -------------- --------- ---------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center 1968/98 958 92.0% 94.9% (2) 98.1% (2)
Longwood Towers 1993 1,045 95.5% 96.4% 96.6%
Avalon Summit 1996 832 96.7% 96.8% 98.3%
Avalon at Lexington 1994 1,168 92.9% 96.5% 98.5%
Avalon at Faxon Park 1998 1,026 97.7% 97.4% 98.0%
Avalon West 1996 1,229 97.5% 97.8% 97.9%
Avalon Oaks 1999 1,023 92.2% 96.3% 98.3%
Avalon Essex 2000 1,127 97.4% 96.4% 69.8% (3)
Avalon at Center Place 1997 1,030 91.4% 96.1% 97.2%
Avalon Estates 2001 1,163 96.9% 91.2% (3) N/A
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II 1992/94 996 96.2% 98.5% 97.9%
Avalon Glen 1991 932 95.4% 96.5% 97.4%
Avalon Gates 1997 1,122 97.9% 98.8% 98.4%
Avalon Springs 1996 1,552 88.2% 95.9% 99.1%
Avalon Valley 1999 1,070 99.6% 99.0% 99.0%
Avalon Lake 1999 1,184 96.3% 98.1% 99.2%
Avalon Corners 2000 986 91.8% 96.5% 92.9% (3)
Avalon Haven 2000 1,095 96.9% 98.8% 71.8% (3)
LONG ISLAND, NY
Avalon Commons 1997 1,164 93.6% 97.1% 98.8%
Avalon Towers 1995 1,145 97.3% 99.0% 98.8%
Avalon Court 1997/2000 1,209 99.4% 99.3% 97.3% (3)
NORTHERN NEW JERSEY
Avalon Cove 1997 1,140 91.7% 96.7% 98.0%
The Tower at Avalon Cove 1999 905 89.2% 96.6% 98.6%
Avalon Crest 1998 1,058 91.7% 94.2% 96.9%
Avalon at Florham Park 2001 1,228 96.7% 91.8% (3) N/A
CENTRAL NEW JERSEY
Avalon Watch 1999 949 95.5% 96.7% 97.9%
Avalon Run East 1996 1,287 95.6% 97.2% 98.3%
NEW YORK, NY
Avalon Gardens 1998 1,267 90.7% 94.3% 97.1%
Avalon View 1993 1,164 99.0% 98.4% 98.2%
Avalon Green 1995 1,081 88.6% 94.5% 98.8%
The Avalon 1999 1,085 98.2% 97.8% 98.4%
Avalon Willow 2000 881 91.6% 95.5% 86.2% (3)
Avalon on the Sound 2001 905 77.2% 35.5% (3) N/A
Average
rental rate
------------------------ Financial
$ per $ per reporting cost
Apt (4) Sq. Ft. (5)
------------------------------------------------ --------- --------- ----------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center 2,448 2.42 (2) $ 144,558
Longwood Towers 2,085 1.97 $ 37,409
Avalon Summit 1,300 1.51 $ 16,510
Avalon at Lexington 1,997 1.65 $ 15,274
Avalon at Faxon Park 1,798 1.71 $ 15,158
Avalon West 1,844 1.47 $ 10,888
Avalon Oaks 1,702 1.46 $ 20,769
Avalon Essex 1,933 1.65 $ 21,405
Avalon at Center Place 2,103 1.96 $ 27,254
Avalon Estates 1,679 1.32 (3) $ 20,139
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II 1,242 1.23 $ 58,977
Avalon Glen 1,905 1.97 $ 31,170
Avalon Gates 1,534 1.35 $ 35,968
Avalon Springs 2,755 1.70 $ 16,711
Avalon Valley 1,540 1.37 $ 26,060
Avalon Lake 1,680 1.34 $ 16,995
Avalon Corners 2,237 2.19 $ 31,391
Avalon Haven 1,526 1.38 $ 13,765
LONG ISLAND, NY
Avalon Commons 1,728 1.44 $ 33,268
Avalon Towers 2,691 2.33 $ 16,764
Avalon Court 2,081 1.71 $ 59,270
NORTHERN NEW JERSEY
Avalon Cove 2,732 2.32 $ 91,722
The Tower at Avalon Cove 2,565 2.76 $ 49,619
Avalon Crest 2,302 2.05 $ 55,972
Avalon at Florham Park 2,358 1.76 (3) $ 41,286
CENTRAL NEW JERSEY
Avalon Watch 1,325 1.35 $ 29,365
Avalon Run East 1,629 1.23 $ 16,272
NEW YORK, NY
Avalon Gardens 1,864 1.39 $ 54,134
Avalon View 1,246 1.05 $ 18,159
Avalon Green 2,448 2.14 $ 12,567
The Avalon 3,342 3.02 $ 31,213
Avalon Willow 2,348 2.55 $ 46,946
Avalon on the Sound 2,743 1.08 (3) $ 90,218
10
PROFILE OF CURRENT AND DEVELOPMENT COMMUNITIES
(Dollars in thousands, except per apartment home data)
Approx.
Number of rentable area
City and state homes (Sq. Ft.) Acres
------------------------------------------------ ---------------------------- ----------- --------------- ---------
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II Columbia, MD 720 724,253 42.1
Avalon at Symphony Glen Columbia, MD 176 179,867 10.0
Avalon Landing Annapolis, MD 158 117,033 13.8
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers Arlington, VA 454 420,242 2.3
Avalon Crescent McLean, VA 558 613,426 19.1
Avalon at Ballston - Washington Towers Arlington, VA 344 294,786 4.1
Avalon at Cameron Court Alexandria, VA 460 467,292 16.0
AutumnWoods Fairfax, VA 420 355,228 24.2
Avalon at Fair Lakes Fairfax, VA 234 285,822 10.0
Avalon at Dulles Sterling, VA 236 232,632 15.7
Avalon at Providence Park Fairfax, VA 141 148,211 4.0
Avalon at Fox Mill Herndon, VA 165 219,360 12.8
Avalon at Decoverly Rockville, MD 368 368,446 25.0
Avalon Knoll Germantown, MD 300 290,365 26.7
Avalon Fields I & II Gaithersburg, MD 288 292,282 9.2
Avalon Crossing Rockville, MD 132 147,690 5.0
4100 Massachusetts Avenue Washington, D.C. 308 298,725 2.7
Avalon at Arlington Square I Arlington, VA 510 583,950 14.2
MIDWEST
CHICAGO, IL
Avalon at Danada Farms Wheaton, IL 295 350,606 19.2
Avalon at West Grove Westmont, IL 400 388,500 17.4
Avalon at Stratford Green Bloomingdale, IL 192 237,204 12.7
200 Arlington Place Arlington Heights, IL 409 346,832 2.8
MINNEAPOLIS, MN
Avalon at Devonshire Bloomington, MN 498 470,762 42.0
Avalon at Edinburgh Brooklyn Park, MN 198 222,130 11.3
Avalon at Town Centre Eagan, MN 248 235,518 18.7
Avalon at Town Square Plymouth, MN 160 144,026 8.3
Avalon at Woodbury Woodbury, MN 224 287,975 15.0
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek Redmond, WA 264 288,250 22.0
Avalon Redmond Place Redmond, WA 222 206,004 22.0
Avalon Greenbriar Renton, WA 421 382,382 20.0
Avalon HighGrove Everett, WA 391 422,482 19.8
Avalon ParcSquare Redmond, WA 124 127,236 1.9
Avalon RockMeadow Mill Creek, WA 206 240,817 11.5
Avalon WildReed Everett, WA 234 259,080 22.3
Avalon Bellevue Bellevue, WA 202 164,226 1.7
Avalon Belltown Seattle, WA 100 80,200 0.7
Avalon Wynhaven Issaquah, WA 333 424,604 11.6
Avalon Brandemoor Lynwood, WA 424 453,602 22.6
Avalon WildWood Lynwood, WA 238 313,107 15.8
Average economic
Year of Average Physical ocupancy
completion/ size occupancy at -------------------------
acquisition (Sq. Ft.) 12/31/01 2001 2000
------------------------------------------------ ------------- ----------- -------------- --------- ---------
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II 1987/96 1,005 95.7% 96.8% 98.0%
Avalon at Symphony Glen 1986 1,022 97.7% 97.1% 97.7%
Avalon Landing 1995 741 96.8% 97.5% 97.9%
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers 1997 926 89.2% 95.3% 97.5%
Avalon Crescent 1996 1,099 91.4% 93.9% 98.2%
Avalon at Ballston - Washington Towers 1990 857 95.1% 96.9% 97.6%
Avalon at Cameron Court 1998 1,016 95.9% 96.3% 97.2%
AutumnWoods 1996 846 94.0% 95.7% 97.7%
Avalon at Fair Lakes 1998 1,221 93.2% 96.0% 97.6%
Avalon at Dulles 1986 986 89.0% 95.5% 98.5%
Avalon at Providence Park 1997 1,051 95.7% 96.4% 98.2%
Avalon at Fox Mill 2000 1,329 92.7% 95.6% 98.0% (3)
Avalon at Decoverly 1995 1,001 94.0% 97.0% 97.6%
Avalon Knoll 1985 968 97.0% 97.8% 97.2%
Avalon Fields I & II 1998 1,050 96.6% 97.2% 97.2%
Avalon Crossing 1996 1,119 92.4% 95.3% 97.8%
4100 Massachusetts Avenue 1982 970 95.8% 96.4% 97.7%
Avalon at Arlington Square I 2001 1,145 96.3% 49.9% (3) N/A
MIDWEST
CHICAGO, IL
Avalon at Danada Farms 1997 1,188 97.6% 95.7% 96.1%
Avalon at West Grove 1967 971 97.0% 96.4% 97.3%
Avalon at Stratford Green 1997 1,235 90.6% 95.2% 97.1%
200 Arlington Place 1987/00 848 88.5% 95.1% 97.6% (3)
MINNEAPOLIS, MN
Avalon at Devonshire 1988 945 95.6% 95.4% 96.3%
Avalon at Edinburgh 1992 1,122 90.4% 96.5% 94.2%
Avalon at Town Centre 1986 950 92.3% 95.9% 98.4%
Avalon at Town Square 1986 900 95.6% 96.8% 96.4%
Avalon at Woodbury 1999 1,286 89.3% 93.9% 95.6%
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek 1998 1,092 91.7% 94.2% 95.5%
Avalon Redmond Place 1991/97 928 91.9% 94.8% 96.4%
Avalon Greenbriar 1987/88 908 96.4% 92.2% 87.8% (2)
Avalon HighGrove 2000 1,081 91.6% 93.5% 94.5% (3)
Avalon ParcSquare 2000 1,026 88.7% 94.2% 96.9% (3)
Avalon RockMeadow 2000 1,169 93.2% 92.7% 94.4% (3)
Avalon WildReed 2000 1,107 96.2% 95.9% 99.9% (3)
Avalon Bellevue 2001 813 79.7% 63.5% (3) N/A
Avalon Belltown 2001 802 41.0% 16.1% (3) N/A
Avalon Wynhaven 2001 1,275 88.6% 95.1% (3) N/A
Avalon Brandemoor 2001 1,070 95.5% 96.5% (3) N/A
Avalon WildWood 2001 1,316 93.3% 96.0% (3) N/A
Average
rental rate
------------------------ Financial
$ per $ per reporting cost
Apt (4) Sq. Ft. (5)
------------------------------------------------ --------- --------- ----------------
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II 1,057 1.02 $ 44,612
Avalon at Symphony Glen 1,070 1.02 $ 9,070
Avalon Landing 977 1.28 $ 9,673
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers 1,422 1.46 $ 46,993
Avalon Crescent 1,668 1.42 $ 57,276
Avalon at Ballston - Washington Towers 1,407 1.59 $ 37,219
Avalon at Cameron Court 1,591 1.51 $ 43,223
AutumnWoods 1,151 1.30 $ 30,833
Avalon at Fair Lakes 1,500 1.18 $ 23,470
Avalon at Dulles 1,128 1.09 $ 11,857
Avalon at Providence Park 1,270 1.16 $ 11,299
Avalon at Fox Mill 1,647 1.18 $ 19,468
Avalon at Decoverly 1,311 1.27 $ 31,684
Avalon Knoll 1,020 1.03 $ 8,517
Avalon Fields I & II 1,286 1.23 $ 22,701
Avalon Crossing 1,701 1.45 $ 13,890
4100 Massachusetts Avenue 1,787 1.78 $ 35,692
Avalon at Arlington Square I 1,948 0.85 (3) $ 69,371
MIDWEST
CHICAGO, IL
Avalon at Danada Farms 1,411 1.14 $ 38,367
Avalon at West Grove 916 0.91 $ 29,706
Avalon at Stratford Green 1,433 1.10 $ 21,932
200 Arlington Place 1,235 1.38 $ 49,525
MINNEAPOLIS, MN
Avalon at Devonshire 1,015 1.02 $ 37,296
Avalon at Edinburgh 1,130 0.97 $ 18,476
Avalon at Town Centre 1,007 1.02 $ 18,104
Avalon at Town Square 1,023 1.10 $ 10,852
Avalon at Woodbury 1,233 0.90 $ 25,963
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek 1,270 1.10 $ 34,437
Avalon Redmond Place 1,186 1.21 $ 25,989
Avalon Greenbriar 963 0.98 $ 36,133
Avalon HighGrove 979 0.85 $ 39,604
Avalon ParcSquare 1,385 1.27 $ 19,025
Avalon RockMeadow 1,120 0.89 $ 24,457
Avalon WildReed 932 0.81 $ 22,950
Avalon Bellevue 1,399 1.09 (3) $ 30,572
Avalon Belltown 1,672 0.34 (3) $ 18,097
Avalon Wynhaven 1,380 1.03 (3) $ 52,554
Avalon Brandemoor 1,005 0.91 (3) $ 45,309
Avalon WildWood 1,194 0.87 (3) $ 32,865
11
PROFILE OF CURRENT AND DEVELOPMENT COMMUNITIES
(Dollars in thousands, except per apartment home data)
Approx.
Number of rentable area
City and state homes (Sq. Ft.) Acres
------------------------------------------------ ---------------------------- ----------- --------------- ---------
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford Hayward, CA 544 451,937 11.1
Avalon Fremont Fremont, CA 443 446,422 22.3
Avalon Pleasanton Pleasanton, CA 456 377,438 14.7
Avalon Dublin Dublin, CA 204 179,004 13.0
Avalon at Willow Creek Fremont, CA 235 197,575 3.5
Avalon at Union Square Union City, CA 208 150,140 8.5
SAN FRANCISCO, CA
Crowne Ridge San Rafael, CA 254 221,525 21.9
Avalon at Sunset Towers San Francisco, CA 243 175,511 16.0
Avalon at Nob Hill San Francisco, CA 185 109,238 1.4
Avalon at Diamond Heights San Francisco, CA 154 123,080 2.6
Avalon Towers by the Bay San Francisco, CA 226 243,033 1.0
Avalon at Cedar Ridge Daly City, CA 195 141,411 8.0
Avalon Foster City Foster City, CA 288 222,276 11.0
Avalon Pacifica Pacifica, CA 220 186,785 7.7
SAN JOSE, CA
Avalon Silicon Valley Sunnyvale, CA 710 658,591 13.6
Avalon at Blossom Hill San Jose, CA 324 322,207 7.5
Avalon Campbell Campbell, CA 348 326,796 8.0
CountryBrook San Jose, CA 360 323,012 14.0
Avalon at Pruneyard Campbell, CA 252 197,000 8.5
Avalon at Creekside Mountain View, CA 294 215,680 13.0
Avalon at River Oaks San Jose, CA 226 210,050 4.0
Avalon at Parkside Sunnyvale, CA 192 199,353 8.0
Avalon Mountain View Mountain View, CA 248 211,552 10.5
San Marino San Jose, CA 248 209,465 11.5
Avalon Sunnyvale Sunnyvale, CA 220 159,653 5.0
Avalon at Foxchase San Jose, CA 396 335,212 12.0
Fairway Glen San Jose, CA 144 119,492 6.0
Avalon Cupertino Cupertino, CA 311 293,328 8.0
Avalon on the Alameda San Jose, CA 305 299,722 8.9
Avalon Rosewalk I & II San Jose, CA 456 450,252 16.6
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills Woodland Hills, CA 663 592,722 18.2
Avalon at Media Center Burbank, CA 748 530,114 14.7
Avalon Westside Terrace Los Angeles, CA 363 229,296 4.8
Avalon at Warner Center Woodland Hills, CA 227 191,645 6.8
ORANGE COUNTY, CA
Avalon Huntington Beach Huntington Beach, CA 400 353,192 16.4
Avalon at Pacific Bay Huntington Beach, CA 304 268,000 9.7
Avalon at South Coast Costa Mesa, CA 258 208,890 8.9
Avalon Santa Margarita Rancho Santa Margarita, CA 301 229,593 20.0
Amberway Anaheim, CA 272 205,572 9.9
Avalon at Laguna Niguel Laguna Niguel, CA 176 174,848 10.0
Avalon Newport Costa Mesa, CA 145 120,690 6.6
Avalon Mission Viejo Mission Viejo, CA 166 124,600 7.8
Average economic
Year of Average Physical ocupancy
completion/ size occupancy at -------------------------
acquisition (Sq. Ft.) 12/31/01 2001 2000
------------------------------------------------ ------------- ----------- -------------- --------- ---------
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford 1985/86 831 90.4% 94.7% 97.7%
Avalon Fremont 1992/94 1,008 91.2% 95.8% 98.2%
Avalon Pleasanton 1988/94 828 91.9% 92.8% 97.3%
Avalon Dublin 1989/97 877 93.6% 94.4% 97.8%
Avalon at Willow Creek 1985/94 841 96.6% 95.3% 98.5%
Avalon at Union Square 1973/96 722 92.8% 95.5% 97.3%
SAN FRANCISCO, CA
Crowne Ridge 1973/96 872 98.0% 97.1% 97.4%
Avalon at Sunset Towers 1961/96 722 95.1% 96.7% 98.5%
Avalon at Nob Hill 1990/95 590 95.1% 93.7% 97.3%
Avalon at Diamond Heights 1972/94 799 93.5% 95.2% 98.9%
Avalon Towers by the Bay 1999 1,075 94.7% 91.4% 97.5%
Avalon at Cedar Ridge 1975/97 725 98.0% 96.5% 97.8%
Avalon Foster City 1973/94 772 97.6% 92.1% 94.8%
Avalon Pacifica 1971/95 849 97.7% 97.3% 98.3%
SAN JOSE, CA
Avalon Silicon Valley 1997 928 85.1% 91.2% 97.9%
Avalon at Blossom Hill 1995 994 82.7% 93.2% 98.1%
Avalon Campbell 1995 939 82.8% 93.1% 97.0%
CountryBrook 1985/96 897 84.7% 91.6% 97.4%
Avalon at Pruneyard 1966/97 782 90.1% 95.9% 97.5%
Avalon at Creekside 1962/97 734 95.6% 95.6% 89.9% (2)
Avalon at River Oaks 1990/96 929 78.8% 93.4% 98.4%
Avalon at Parkside 1991/96 1,038 96.9% 95.6% 98.1%
Avalon Mountain View 1986 853 92.7% 97.5% 98.5%
San Marino 1984/88 845 81.1% 91.0% 97.7%
Avalon Sunnyvale 1987/95 726 90.5% 94.9% 98.5%
Avalon at Foxchase 1986/87 844 89.3% 95.6% 97.5%
Fairway Glen 1986 830 87.5% 94.0% 98.5%
Avalon Cupertino 1999 943 92.9% 96.3% 98.3%
Avalon on the Alameda 1999 983 83.0% 89.5% 96.6%
Avalon Rosewalk I & II 1997/99 987 80.0% 91.9% 98.0%
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills 1989/97 894 94.1% 96.1% 96.1%
Avalon at Media Center 1969/97 709 89.0% 83.8% (2) 89.4% (2)
Avalon Westside Terrace 1966/97 632 94.2% 95.7% 92.4%
Avalon at Warner Center 1979/98 844 98.7% 97.2% 97.8%
ORANGE COUNTY, CA
Avalon Huntington Beach 1972/97 883 91.8% 94.7% 96.1%
Avalon at Pacific Bay 1971/97 882 95.7% 96.6% 96.7%
Avalon at South Coast 1973/96 810 95.0% 94.8% 96.2%
Avalon Santa Margarita 1990/97 763 92.0% 96.0% 97.3%
Amberway 1983/98 756 94.5% 93.9% 95.5%
Avalon at Laguna Niguel 1988/98 993 98.9% 96.1% 95.9% (2)
Avalon Newport 1956/96 832 97.2% 97.9% 97.2%
Avalon Mission Viejo 1984/96 751 98.8% 96.9% 97.1%
Average
rental rate
------------------------ Financial
$ per $ per reporting cost
Apt (4) Sq. Ft. (5)
------------------------------------------------ --------- --------- ----------------
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford 1,267 1.44 $ 58,796
Avalon Fremont 1,718 1.63 $ 76,932
Avalon Pleasanton 1,443 1.62 $ 59,840
Avalon Dublin 1,540 1.66 $ 26,721
Avalon at Willow Creek 1,568 1.78 $ 33,977
Avalon at Union Square 1,341 1.77 $ 21,729
SAN FRANCISCO, CA
Crowne Ridge 1,501 1.67 $ 30,869
Avalon at Sunset Towers 1,631 2.18 $ 28,123
Avalon at Nob Hill 1,638 2.60 $ 27,444
Avalon at Diamond Heights 1,611 1.92 $ 24,284
Avalon Towers by the Bay 3,260 2.77 $ 66,826
Avalon at Cedar Ridge 1,622 2.16 $ 25,530
Avalon Foster City 1,615 1.93 $ 42,790
Avalon Pacifica 1,593 1.83 $ 31,201
SAN JOSE, CA
Avalon Silicon Valley 2,337 2.30 $ 120,806
Avalon at Blossom Hill 1,898 1.78 $ 60,736
Avalon Campbell 1,798 1.78 $ 59,928
CountryBrook 1,597 1.63 $ 47,777
Avalon at Pruneyard 1,548 1.90 $ 31,717
Avalon at Creekside 1,756 2.29 $ 42,966
Avalon at River Oaks 2,006 2.02 $ 45,580
Avalon at Parkside 2,026 1.87 $ 37,761
Avalon Mountain View 1,948 2.23 $ 50,260
San Marino 1,585 1.71 $ 33,739
Avalon Sunnyvale 1,645 2.15 $ 34,615
Avalon at Foxchase 1,497 1.69 $ 58,471
Fairway Glen 1,462 1.66 $ 17,074
Avalon Cupertino 2,221 2.27 $ 49,058
Avalon on the Alameda 2,284 2.08 $ 56,695
Avalon Rosewalk I & II 1,900 1.77 $ 78,110
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills 1,232 1.32 $ 71,318
Avalon at Media Center 1,002 1.18 (2) $ 75,031
Avalon Westside Terrace 1,141 1.73 $ 37,079
Avalon at Warner Center 1,282 1.47 $ 26,329
ORANGE COUNTY, CA
Avalon Huntington Beach 1,235 1.32 $ 37,126
Avalon at Pacific Bay 1,193 1.31 $ 31,859
Avalon at South Coast 1,128 1.32 $ 24,366
Avalon Santa Margarita 1,119 1.41 $ 23,570
Amberway 976 1.21 $ 21,260
Avalon at Laguna Niguel 1,193 1.15 $ 20,957
Avalon Newport 1,304 1.53 $ 10,102
Avalon Mission Viejo 1,097 1.42 $ 12,939
12
PROFILE OF CURRENT AND DEVELOPMENT COMMUNITIES
(Dollars in thousands, except per apartment home data)
Approx.
Number of rentable area
City and state homes (Sq. Ft.) Acres
------------------------------------------------ ---------------------------- ----------- --------------- ---------
SAN DIEGO, CA
Avalon at Mission Bay San Diego, CA 564 402,327 5.7
Avalon at Cortez Hill San Diego, CA 294 224,840 1.2
Avalon at Mission Ridge San Diego, CA 200 208,100 4.0
Avalon at Penasquitos Hills San Diego, CA 176 141,120 8.8
DEVELOPMENT COMMUNITIES
Avalon at Edgewater Edgewater, NJ 408 405,144 7.1
Avalon at Freehold Freehold, NJ 296 317,608 42.3
Avalon on Stamford Harbor Stamford, CT 323 336,566 12.1
Avalon Towers on the Peninsula Mountain View, CA 211 218,392 1.9
Avalon at Cahill Park San Jose, CA 218 218,245 3.8
Avalon Riverview Long Island City, NY 372 332,940 1.0
Avalon at Mission Bay North San Francisco, CA 250 244,224 1.4
Avalon Oaks West Wilmington, MA 120 123,960 27
Avalon Ledges Weymouth, MA 304 315,554 58.0
Avalon Orchards Marlborough, MA 156 186,500 23.0
Avalon at Arlington Square II Arlington, VA 332 325,499 6.1
Avalon at Flanders Hill Westborough, MA 280 299,978 62.0
Avalon New Canaan New Canaan, CT 104 130,104 9.1
Avalon at Rock Spring North Bethesda, MD 386 388,480 10.16
Avalon at Gallery Place I Washington, DC 203 183,326 0.5
Average economic
Year of Average Physical ocupancy
completion/ size occupancy at -------------------------
acquisition (Sq. Ft.) 12/31/01 2001 2000
------------------------------------------------ ------------- ----------- -------------- --------- ---------
SAN DIEGO, CA
Avalon at Mission Bay 1969/97 713 91.5% 97.1% 94.2% (2)
Avalon at Cortez Hill 1973/98 765 90.1% 84.0% (2) 80.9% (2)
Avalon at Mission Ridge 1960/97 1,041 98.5% 97.2% 98.0%
Avalon at Penasquitos Hills 1982/97 802 93.8% 95.9% 97.6%
DEVELOPMENT COMMUNITIES
Avalon at Edgewater N/A 993 N/A N/A N/A
Avalon at Freehold N/A 1,073 N/A N/A N/A
Avalon on Stamford Harbor N/A 1,042 N/A N/A N/A
Avalon Towers on the Peninsula N/A 1,035 N/A N/A N/A
Avalon at Cahill Park N/A 1,001 N/A N/A N/A
Avalon Riverview N/A 895 N/A N/A N/A
Avalon at Mission Bay North N/A 977 N/A N/A N/A
Avalon Oaks West N/A 1,033 N/A N/A N/A
Avalon Ledges N/A 1,023 N/A N/A N/A
Avalon Orchards N/A 1,219 N/A N/A N/A
Avalon at Arlington Square II N/A 980 N/A N/A N/A
Avalon at Flanders Hill N/A 1,099 N/A N/A N/A
Avalon New Canaan N/A 1,251 N/A N/A N/A
Avalon at Rock Spring N/A 1,006 N/A N/A N/A
Avalon at Gallery Place I N/A 903 N/A N/A N/A
Average
rental rate
------------------------ Financial
$ per $ per reporting cost
Apt (4) Sq. Ft. (5)
------------------------------------------------ --------- --------- ----------------
SAN DIEGO, CA
Avalon at Mission Bay 1,217 1.66 $ 65,842
Avalon at Cortez Hill 1,198 1.32 (2) $ 34,282
Avalon at Mission Ridge 1,351 1.26 $ 21,567
Avalon at Penasquitos Hills 1,067 1.28 $ 14,187
DEVELOPMENT COMMUNITIES
Avalon at Edgewater N/A N/A $ 72,383
Avalon at Freehold N/A N/A $ 31,740
Avalon on Stamford Harbor N/A N/A $ 36,479
Avalon Towers on the Peninsula N/A N/A $ 56,177
Avalon at Cahill Park N/A N/A $ 32,748
Avalon Riverview N/A N/A $ 67,765
Avalon at Mission Bay North N/A N/A $ 22,343
Avalon Oaks West N/A N/A $ 13,824
Avalon Ledges N/A N/A $ 22,134
Avalon Orchards N/A N/A $ 14,312
Avalon at Arlington Square II N/A N/A $ 24,119
Avalon at Flanders Hill N/A N/A $ 11,150
Avalon New Canaan N/A N/A $ 14,920
Avalon at Rock Spring N/A N/A $ 5,171
Avalon at Gallery Place I N/A N/A $ 17,711
(1) For the purpose of this table, Current Communities excludes communities held
by unconsolidated real estate joint ventures.
(2) Represents community which was under redevelopment during the year,
resulting in lower average economic occupancy and average rental rate per
square foot for the year.
(3) Represents community that completed development or was purchased during the
year, which could result in lower average economic occupancy and average
rental rate per square foot for the year.
(4) Represents the average rental revenue per occupied apartment home.
(5) Costs are presented in accordance with generally accepted accounting
principles. For current Development Communities, cost represents total costs
incurred through December 31, 2001.
13
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
1 BR 2BR 3BR
---------- ------------------------ ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies
- --------------------------------------------------- ---------- ---------- ------------ ---------- ----- --------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center 361 -- 237 -- 23 148
Longwood Towers 137 53 22 25 -- 78
Avalon Summit 154 61 28 2 -- --
Avalon at Lexington 28 24 90 56 -- --
Avalon at Faxon Park 68 -- 75 28 -- --
Avalon West 40 -- 55 25 -- --
Avalon Oaks 60 24 96 24 -- --
Avalon Essex 50 -- 62 -- -- --
Avalon at Center Place 103 -- 111 5 -- 6
Avalon Estates 66 16 80 -- -- --
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II 272 116 122 74 -- --
Avalon Glen 124 -- 114 -- -- --
Avalon Gates 122 -- 168 50 -- --
Avalon Springs -- -- 70 32 -- --
Avalon Valley 106 -- 134 28 -- --
Avalon Lake 36 -- 46 -- -- 24
Avalon Corners 118 -- 77 -- -- --
Avalon Haven 44 60 -- 24 -- --
LONG ISLAND, NY
Avalon Commons 128 40 112 32 -- --
Avalon Towers -- -- 37 1 3 1
Avalon Court 172 54 194 44 30 --
NORTHERN NEW JERSEY
Avalon Cove 190 -- 190 46 2 --
The Tower at Avalon Cove 147 24 74 24 -- --
Avalon Crest 96 -- 131 67 -- --
Avalon at Florham Park 46 -- 107 117 -- --
CENTRAL NEW JERSEY
Avalon Watch 252 36 142 82 -- --
Avalon Run East 64 -- 106 36 -- --
NEW YORK, NY
Avalon Gardens 208 48 144 104 -- --
Avalon View 115 47 62 64 -- --
Avalon Green 25 24 56 -- -- --
The Avalon 55 2 43 10 -- --
Avalon Willow 150 77 -- -- -- --
Avalon on the Sound 143 -- 184 22 20 43
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II 283 223 154 60 -- --
Avalon at Symphony Glen 86 14 54 20 -- --
Avalon Landing 65 18 57 -- -- --
Washer
& dryer
Parking hook-ups or Vaulted
Other Total spaces units ceilings Lofts Fireplaces
- --------------------------------------------------- ------- ------- --------- ------------- ---------- ------- ------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center 12 781 142 None None None None
Longwood Towers 19 334 210 Some None None Some
Avalon Summit -- 245 328 None None None None
Avalon at Lexington -- 198 355 All Some Some Some
Avalon at Faxon Park -- 171 287 All Some Some Some
Avalon West -- 120 145 All Some Some Some
Avalon Oaks -- 204 355 All Some Some Some
Avalon Essex 42 154 259 All None Some Some
Avalon at Center Place -- 225 345 All None None None
Avalon Estates -- 162 354 All Some Some Some
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II 180 764 1,528 All Some Some Half
Avalon Glen -- 238 400 Most Some Some Some
Avalon Gates -- 340 580 All Some Some None
Avalon Springs -- 102 153 All Half Half Most
Avalon Valley -- 268 626 All Some Some Some
Avalon Lake 29 135 382 All Some Some Some
Avalon Corners -- 195 273 All Some Some Some
Avalon Haven -- 128 256 All None Some Some
LONG ISLAND, NY
Avalon Commons -- 312 538 All Some Some Some
Avalon Towers 67 109 198 All None None None
Avalon Court -- 494 1,110 All Some Most Some
NORTHERN NEW JERSEY
Avalon Cove 76 504 464 All Some Some Some
The Tower at Avalon Cove -- 269 263 All None None None
Avalon Crest 57 351 364 All Some Some Some
Avalon at Florham Park -- 270 611 All Most None Some
CENTRAL NEW JERSEY
Avalon Watch -- 512 768 Most Some None Some
Avalon Run East -- 206 345 All Some Some Some
NEW YORK, NY
Avalon Gardens -- 504 1,008 All Half Half Some
Avalon View -- 288 576 All Some Some Some
Avalon Green -- 105 179 All Some Half Some
The Avalon -- 110 167 All Some Some Some
Avalon Willow -- 227 379 All Some Some None
Avalon on the Sound -- 412 645 Most None Some None
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II -- 720 1,137 All Some None Some
Avalon at Symphony Glen -- 174 266 All Some None Most
Avalon Landing 18 158 257 All None None Most
Large Balcony, Non-
storage patio, direct Direct
or walk-in deck or Built-in access access
closet sunroom bookcases Carports garages garages
- --------------------------------------------------- ------------ ---------- ----------- ---------- --------- ---------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center Most Some None No No No
Longwood Towers Most Some Some No No No
Avalon Summit None All None No Yes No
Avalon at Lexington Most All None Yes Yes No
Avalon at Faxon Park All All None No Yes No
Avalon West All Half None No Yes Yes
Avalon Oaks All All None No Yes No
Avalon Essex All All None No Yes Yes
Avalon at Center Place Half Some None No No No
Avalon Estates All All None No Yes Yes
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II All All Some Yes No No
Avalon Glen Half Most None Yes Yes No
Avalon Gates All All None Yes Yes No
Avalon Springs All All None No No Yes
Avalon Valley All All None Yes Yes No
Avalon Lake All All None No Yes No
Avalon Corners All All None No Yes No
Avalon Haven All All None Yes Yes No
LONG ISLAND, NY
Avalon Commons All All None No Yes No
Avalon Towers All Most None No No Yes
Avalon Court All All None No Yes Yes
NORTHERN NEW JERSEY
Avalon Cove All Most None No Yes Some
The Tower at Avalon Cove Half Some None No Yes No
Avalon Crest All All None No Yes Yes
Avalon at Florham Park All Some None No No Yes
CENTRAL NEW JERSEY
Avalon Watch All All None No Yes No
Avalon Run East All All None Yes Yes Yes
NEW YORK, NY
Avalon Gardens All Most None Yes Yes Yes
Avalon View Most All None Yes No No
Avalon Green All All None Yes No No
The Avalon Most Half None No Yes No
Avalon Willow Most All None No Yes Yes
Avalon on the Sound Most Some None No Yes No
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II Some All Some No No No
Avalon at Symphony Glen All All Half No No No
Avalon Landing Most All None Yes No No
Homes w/
pre-wired
security
systems
- --------------------------------------------------- -----------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center None
Longwood Towers Some
Avalon Summit None
Avalon at Lexington All
Avalon at Faxon Park All
Avalon West All
Avalon Oaks All
Avalon Essex All
Avalon at Center Place None
Avalon Estates All
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II Half
Avalon Glen Most
Avalon Gates All
Avalon Springs All
Avalon Valley All
Avalon Lake All
Avalon Corners All
Avalon Haven All
LONG ISLAND, NY
Avalon Commons All
Avalon Towers All
Avalon Court All
NORTHERN NEW JERSEY
Avalon Cove All
The Tower at Avalon Cove All
Avalon Crest All
Avalon at Florham Park All
CENTRAL NEW JERSEY
Avalon Watch None
Avalon Run East All
NEW YORK, NY
Avalon Gardens All
Avalon View None
Avalon Green All
The Avalon All
Avalon Willow All
Avalon on the Sound Some
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II None
Avalon at Symphony Glen None
Avalon Landing None
14
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
1 BR 2BR 3BR
---------- ------------------------ ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies
- --------------------------------------------------- ---------- ---------- ------------ ---------- ----- --------------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers 333 37 84 -- -- --
Avalon Crescent 186 26 346 -- -- --
Avalon at Ballston - Washington Towers 205 28 111 -- -- --
Avalon at Cameron Court 208 -- 168 -- -- --
AutumnWoods 220 72 96 -- -- --
Avalon at Fair Lakes 45 12 125 26 26 --
Avalon at Dulles 104 40 76 -- 16 --
Avalon at Providence Park 19 -- 112 4 -- --
Avalon at Fox Mill -- -- 92 73 -- --
Avalon at Decoverly 156 -- 104 64 44 --
Avalon Knoll 136 55 81 28 -- --
Avalon Fields I & II 74 32 84 32 -- --
Avalon Crossing -- 27 105 -- -- --
4100 Massachusetts Avenue 160 70 -- 3 -- 27
Avalon at Arlington Square I 211 20 226 53 -- --
MIDWEST
CHICAGO, IL
Avalon at Danada Farms 80 52 134 29 -- --
Avalon at West Grove 200 200 -- -- -- --
Avalon at Stratford Green 45 9 108 21 -- --
200 Arlington Place 142 89 148 -- -- 30
MINNEAPOLIS, MN
Avalon at Devonshire 194 -- 304 -- -- --
Avalon at Edinburgh 56 -- 114 26 -- 2
Avalon at Town Centre 104 -- 111 33 -- --
Avalon at Town Square 76 -- 68 12 -- --
Avalon at Woodbury 41 -- 147 36 -- --
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek 55 40 110 59 -- --
Avalon Redmond Place 76 44 67 35 -- --
Avalon Greenbriar 16 19 217 169 -- --
Avalon HighGrove 84 119 124 56 8 --
Avalon ParcSquare 31 26 55 5 7 --
Avalon RockMeadow 28 48 86 28 16 --
Avalon WildReed 36 60 78 60 -- --
Avalon Bellevue 110 -- 67 -- -- 25
Avalon Belltown 64 -- 20 -- -- 16
Avalon Wynhaven 3 42 239 13 28 --
Avalon Brandemoor 88 109 149 78 -- --
Avalon Wildwood 5 -- 211 -- 17 --
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford 208 -- 336 -- -- --
Avalon Fremont 130 81 176 -- 56 --
Avalon Pleasanton 238 -- 218 -- -- --
Avalon Dublin 72 8 60 48 -- --
Avalon at Willow Creek 99 -- 136 -- -- --
Avalon at Union Square 124 84 -- -- -- --
Washer
& dryer
Parking hook-ups or Vaulted
Other Total spaces units ceilings Lofts Fireplaces
- --------------------------------------------------- ------- ------- --------- ------------- ---------- ------- ------------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers -- 454 498 All None None None
Avalon Crescent -- 558 662 All Some Some Half
Avalon at Ballston - Washington Towers -- 344 415 All None None Some
Avalon at Cameron Court 84 460 736 All Some Some Some
AutumnWoods 32 420 727 All Some None Some
Avalon at Fair Lakes -- 234 505 All Half None Half
Avalon at Dulles -- 236 493 All Some None Some
Avalon at Providence Park 6 141 287 All None None Most
Avalon at Fox Mill -- 165 343 All Most None Most
Avalon at Decoverly -- 368 584 All Some Some Most
Avalon Knoll -- 300 482 All Some None Half
Avalon Fields I & II 66 288 443 All Some Some Half
Avalon Crossing -- 132 224 All Some Some Half
4100 Massachusetts Avenue 48 308 330 All None None Some
Avalon at Arlington Square I -- 510 949 All Some Some Some
MIDWEST
CHICAGO, IL
Avalon at Danada Farms -- 295 714 All None None Some
Avalon at West Grove -- 400 860 None None None None
Avalon at Stratford Green 9 192 437 All None None Some
200 Arlington Place -- 409 650 All None None None
MINNEAPOLIS, MN
Avalon at Devonshire -- 498 498 Most Some None Some
Avalon at Edinburgh -- 198 210 All None None Some
Avalon at Town Centre -- 248 250 All Some None Some
Avalon at Town Square 4 160 162 All Some None Some
Avalon at Woodbury -- 224 513 All None None Some
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek -- 264 470 All All None Most
Avalon Redmond Place -- 222 384 All Some None Most
Avalon Greenbriar -- 421 731 All Some None Most
Avalon HighGrove -- 391 713 All Some None Most
Avalon ParcSquare -- 124 196 All No None None
Avalon RockMeadow -- 206 308 All Some None Most
Avalon WildReed -- 234 462 All Some None Most
Avalon Bellevue -- 202 304 All None Some Some
Avalon Belltown -- 100 134 All None None None
Avalon Wynhaven 8 333 260 All Most Some Most
Avalon Brandemoor -- 424 732 All Some None Most
Avalon Wildwood 5 238 16 All Some None Most
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford -- 544 876 Some Some None None
Avalon Fremont -- 443 830 All Most None Some
Avalon Pleasanton -- 456 856 All Some None Most
Avalon Dublin 16 204 427 Most Some None Most
Avalon at Willow Creek -- 235 240 All None None None
Avalon at Union Square -- 208 210 None None None Most
Large Balcony, Non-
storage patio, direct Direct
or walk-in deck or Built-in access access
closet sunroom bookcases Carports garages garages
- --------------------------------------------------- ------------ ---------- ----------- ---------- --------- ---------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers Most All None No No Yes
Avalon Crescent Most All Some No Yes Yes
Avalon at Ballston - Washington Towers Most All None No No Yes
Avalon at Cameron Court All Most None No Yes Yes
AutumnWoods All All Some Yes No No
Avalon at Fair Lakes All Most None No Yes Yes
Avalon at Dulles All All Some No No No
Avalon at Providence Park All All None No No No
Avalon at Fox Mill All All None No No Yes
Avalon at Decoverly Most All None No No No
Avalon Knoll All All Some No No No
Avalon Fields I & II All Most None No Yes No
Avalon Crossing All All Some No Yes Yes
4100 Massachusetts Avenue Most All Some No Yes No
Avalon at Arlington Square I All Some Some No No Yes
MIDWEST
CHICAGO, IL
Avalon at Danada Farms All Some Some No No Yes
Avalon at West Grove None All None Yes No No
Avalon at Stratford Green Most Some Some No Yes Yes
200 Arlington Place All Some None No Yes No
MINNEAPOLIS, MN
Avalon at Devonshire Most Most Some No Yes Yes
Avalon at Edinburgh Some All None No Yes No
Avalon at Town Centre Some All None No Yes No
Avalon at Town Square Some All None No Yes No
Avalon at Woodbury Some Some None No No Yes
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek All All Some Yes Yes Yes
Avalon Redmond Place All All None Yes Yes No
Avalon Greenbriar All All Some Yes No No
Avalon HighGrove Most All Some Yes Yes Yes
Avalon ParcSquare All All None No No No
Avalon RockMeadow Most All Some Yes Yes Yes
Avalon WildReed Most All Some Yes Yes No
Avalon Bellevue All All None No No No
Avalon Belltown All Some None No No No
Avalon Wynhaven All All None Yes Yes Yes
Avalon Brandemoor All All Some Yes Yes Yes
Avalon Wildwood Some Most None No No Yes
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford All All None Yes No No
Avalon Fremont Most All None Yes Yes No
Avalon Pleasanton All All None Yes Yes Yes
Avalon Dublin All All None No Yes No
Avalon at Willow Creek All All None Yes No No
Avalon at Union Square All All None Yes No No
Homes w/
pre-wired
security
systems
- --------------------------------------------------- -----------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers None
Avalon Crescent All
Avalon at Ballston - Washington Towers None
Avalon at Cameron Court All
AutumnWoods None
Avalon at Fair Lakes None
Avalon at Dulles None
Avalon at Providence Park None
Avalon at Fox Mill All
Avalon at Decoverly None
Avalon Knoll None
Avalon Fields I & II All
Avalon Crossing All
4100 Massachusetts Avenue None
Avalon at Arlington Square I All
MIDWEST
CHICAGO, IL
Avalon at Danada Farms None
Avalon at West Grove None
Avalon at Stratford Green None
200 Arlington Place None
MINNEAPOLIS, MN
Avalon at Devonshire None
Avalon at Edinburgh None
Avalon at Town Centre None
Avalon at Town Square None
Avalon at Woodbury None
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek All
Avalon Redmond Place None
Avalon Greenbriar None
Avalon HighGrove All
Avalon ParcSquare All
Avalon RockMeadow All
Avalon WildReed All
Avalon Bellevue None
Avalon Belltown Some
Avalon Wynhaven All
Avalon Brandemoor All
Avalon Wildwood All
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford None
Avalon Fremont All
Avalon Pleasanton None
Avalon Dublin None
Avalon at Willow Creek None
Avalon at Union Square None
15
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
1 BR 2BR 3BR
---------- ------------------------ ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies
- --------------------------------------------------- ---------- ---------- ------------ ---------- ----- --------------
SAN FRANCISCO, CA
Crown Ridge 158 68 24 -- -- 4
Avalon at Sunset Towers 183 20 20 -- -- 20
Avalon at Nob Hill 114 -- 25 -- -- 46
Avalon at Diamond Heights 90 -- 49 15 -- --
Avalon Towers by the Bay 103 -- 120 -- 3 --
Avalon at Cedar Ridge 117 33 24 -- -- 21
Avalon Foster City 124 123 1 -- -- 40
Avalon Pacifica 58 106 56 -- -- --
SAN JOSE, CA
Avalon Silicon Valley 338 -- 336 18 15 3
Avalon at Blossom Hill 90 -- 210 -- 24 --
Avalon Campbell 156 -- 180 -- 12 --
CountryBrook 108 -- 252 -- -- --
Avalon at Pruneyard 212 40 -- -- -- --
Avalon at Creekside 158 128 -- -- -- 8
Avalon at River Oaks 100 -- 126 -- -- --
Avalon at Parkside 60 -- 96 36 -- --
Avalon Mountain View 108 -- 88 52 -- --
San Marino 103 -- 145 -- -- --
Avalon Sunnyvale 112 10 54 -- -- 44
Avalon at Foxchase 168 -- 228 -- -- --
Fairway Glen 60 -- 84 -- -- --
Avalon Cupertino 145 -- 152 -- 14 --
Avalon on the Alameda 113 -- 164 -- 28 --
Avalon Rosewalk I & II 168 -- 264 -- 24 --
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills 222 -- 441 -- -- --
Avalon at Media Center 296 102 117 12 -- 221
Avalon Westside Terrace 126 -- 102 -- -- 135
Avalon at Warner Center 88 54 65 20 -- --
ORANGE COUNTY, CA
Avalon Huntington Beach -- 36 324 40 -- --
Avalon at Pacific Bay 144 56 104 -- -- --
Avalon at South Coast 124 -- 86 -- -- 48
Avalon Santa Margarita 160 -- 141 -- -- --
Amberway 114 48 48 -- -- 62
Avalon at Laguna Niguel -- -- 176 -- -- --
Avalon Newport 44 54 -- 35 -- 12
Avalon Mission Viejo 94 28 44 -- -- --
SAN DIEGO, CA
Avalon at Mission Bay 270 9 165 -- -- 120
Avalon at Cortez Hill 114 -- 83 -- -- 97
Avalon at Mission Ridge 18 1 98 83 -- --
Avalon at Penasquitos Hills 48 48 80 -- -- --
Washer
& dryer
Parking hook-ups or Vaulted
Other Total spaces units ceilings Lofts Fireplaces
- --------------------------------------------------- ------- ------- --------- ------------- ---------- ------- ------------
SAN FRANCISCO, CA
Crown Ridge -- 254 377 Some Some None Some
Avalon at Sunset Towers -- 243 244 None None None None
Avalon at Nob Hill -- 185 104 None None None None
Avalon at Diamond Heights -- 154 155 None Some None None
Avalon Towers by the Bay -- 226 235 All Some None Some
Avalon at Cedar Ridge -- 195 258 None None Some None
Avalon Foster City -- 288 490 None None None None
Avalon Pacifica -- 220 299 None None None Some
SAN JOSE, CA
Avalon Silicon Valley -- 710 1,400 All Some Some Some
Avalon at Blossom Hill -- 324 562 All Some None None
Avalon Campbell -- 348 588 All Some None None
CountryBrook -- 360 694 All Some None All
Avalon at Pruneyard -- 252 395 All None None None
Avalon at Creekside -- 294 376 None None None Some
Avalon at River Oaks -- 226 354 All None None Most
Avalon at Parkside -- 192 192 All Some None Half
Avalon Mountain View -- 248 248 All Some None None
San Marino -- 248 436 All Some None None
Avalon Sunnyvale -- 220 394 Some None None None
Avalon at Foxchase -- 396 719 All Some None None
Fairway Glen -- 144 226 All Some None None
Avalon Cupertino -- 311 526 All Some None Some
Avalon on the Alameda -- 305 558 All Some None Some
Avalon Rosewalk I & II -- 456 648 All Some None Some
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills -- 663 1,300 Some None Some None
Avalon at Media Center -- 748 838 Some None None Some
Avalon Westside Terrace -- 363 487 None None None None
Avalon at Warner Center -- 227 252 All Some None Some
ORANGE COUNTY, CA
Avalon Huntington Beach -- 400 790 None None None None
Avalon at Pacific Bay -- 304 478 All None None None
Avalon at South Coast 258 403 Some Half None None
Avalon Santa Margarita -- 301 523 All None None None
Amberway -- 272 454 None Some None None
Avalon at Laguna Niguel -- 176 335 None Some None All
Avalon Newport -- 145 235 Most Some None Some
Avalon Mission Viejo -- 166 250 None None None None
SAN DIEGO, CA
Avalon at Mission Bay -- 564 695 None None None None
Avalon at Cortez Hill -- 294 292 None None None None
Avalon at Mission Ridge -- 200 384 Most None None Most
Avalon at Penasquitos Hills -- 176 176 All None None All
Large Balcony, Non-
storage patio, direct Direct
or walk-in deck or Built-in access access
closet sunroom bookcases Carports garages garages
- --------------------------------------------------- ------------ ---------- ----------- ---------- --------- ---------
SAN FRANCISCO, CA
Crown Ridge None All None Yes No Yes
Avalon at Sunset Towers None Some None No No Yes
Avalon at Nob Hill None Some Most No Yes No
Avalon at Diamond Heights All All None No Yes No
Avalon Towers by the Bay Half Most None No No Yes
Avalon at Cedar Ridge Some All None Yes No Yes
Avalon Foster City Most Most None Yes No No
Avalon Pacifica Some All None Yes Yes No
SAN JOSE, CA
Avalon Silicon Valley Most All Some No Yes No
Avalon at Blossom Hill Most All None Yes Yes No
Avalon Campbell All All None Yes Yes No
CountryBrook None All None Yes Yes No
Avalon at Pruneyard None Half None Yes Yes No
Avalon at Creekside None Most None Yes No No
Avalon at River Oaks All All None No No Yes
Avalon at Parkside All All Some Yes Yes No
Avalon Mountain View Some All None Yes No No
San Marino Most All None Yes No No
Avalon Sunnyvale All All None No No Yes
Avalon at Foxchase Some All None Yes No No
Fairway Glen None All None Yes No No
Avalon Cupertino Some All Some No Yes No
Avalon on the Alameda All All Some No Yes No
Avalon Rosewalk I & II Some All Most Yes Yes No
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills Most All None No No No
Avalon at Media Center Some Some None Yes Yes No
Avalon Westside Terrace None All Some No No No
Avalon at Warner Center Some All None Yes No No
ORANGE COUNTY, CA
Avalon Huntington Beach Most Most None Yes Yes No
Avalon at Pacific Bay Half All None Yes Yes No
Avalon at South Coast Half All None Yes Yes No
Avalon Santa Margarita None All None Yes Yes No
Amberway None All None Yes Yes No
Avalon at Laguna Niguel None Most None Yes No No
Avalon Newport Most Most Some Yes Yes No
Avalon Mission Viejo None All None Yes Yes No
SAN DIEGO, CA
Avalon at Mission Bay Some All None No Yes No
Avalon at Cortez Hill None All None No No Yes
Avalon at Mission Ridge Most Most None No Yes No
Avalon at Penasquitos Hills Some All All Yes No No
Homes w/
pre-wired
security
systems
- --------------------------------------------------- -----------
SAN FRANCISCO, CA
Crown Ridge None
Avalon at Sunset Towers None
Avalon at Nob Hill None
Avalon at Diamond Heights None
Avalon Towers by the Bay All
Avalon at Cedar Ridge None
Avalon Foster City None
Avalon Pacifica None
SAN JOSE, CA
Avalon Silicon Valley None
Avalon at Blossom Hill All
Avalon Campbell All
CountryBrook None
Avalon at Pruneyard None
Avalon at Creekside None
Avalon at River Oaks None
Avalon at Parkside None
Avalon Mountain View None
San Marino None
Avalon Sunnyvale None
Avalon at Foxchase None
Fairway Glen Some
Avalon Cupertino None
Avalon on the Alameda All
Avalon Rosewalk I & II All
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills None
Avalon at Media Center None
Avalon Westside Terrace None
Avalon at Warner Center None
ORANGE COUNTY, CA
Avalon Huntington Beach None
Avalon at Pacific Bay None
Avalon at South Coast None
Avalon Santa Margarita None
Amberway None
Avalon at Laguna Niguel None
Avalon Newport None
Avalon Mission Viejo None
SAN DIEGO, CA
Avalon at Mission Bay None
Avalon at Cortez Hill None
Avalon at Mission Ridge None
Avalon at Penasquitos Hills None
16
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
1 BR 2BR 3BR
---------- ------------------------ ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies
- --------------------------------------------------- ---------- ---------- ------------ ---------- ----- --------------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater 158 -- 190 60 -- --
Avalon at Freehold 42 41 176 37 -- --
Avalon on Stamford Harbor 159 -- 130 20 -- 14
Avalon Towers on the Peninsula 90 -- 115 -- 6 --
Avalon at Cahill Park 118 -- 94 -- 6 --
Avalon Riverview 184 -- 114 -- 31 43
Avalon at Mission Bay North 148 -- 95 6 -- 1
Avalon Oaks West 48 12 48 12 -- --
Avalon Ledges 124 -- 152 28 -- --
Avalon Orchards 69 12 75 -- -- --
Avalon at Arlington Square II 172 -- 116 44 -- --
Avalon at Flanders Hill 108 -- 142 30 -- --
Avalon New Canaan 16 -- 64 24 -- --
Avalon at Rock Spring 178 39 133 36 -- --
Avalon at Gallery Place I 111 77 -- 4 -- 11
Washer
& dryer
Parking hook-ups or Vaulted
Other Total spaces units ceilings Lofts Fireplaces
- --------------------------------------------------- ------- ------- --------- ------------- ---------- ------- ------------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater -- 408 872 All None Some Some
Avalon at Freehold -- 296 611 All Some Some Some
Avalon on Stamford Harbor -- 323 543 All Some Some Some
Avalon Towers on the Peninsula -- 211 512 All None None None
Avalon at Cahill Park -- 218 283 All Some Some Some
Avalon Riverview -- 372 128 All None None None
Avalon at Mission Bay North -- 250 198 All None Some None
Avalon Oaks West -- 120 233 All Some Some Some
Avalon Ledges -- 304 610 All None Some Some
Avalon Orchards -- 156 312 All None Half Some
Avalon at Arlington Square II -- 332 563 All Some Some Some
Avalon at Flanders Hill -- 280 569 All None Some Some
Avalon New Canaan -- 104 202 All None Some Some
Avalon at Rock Spring -- 386 678 All Some Some Some
Avalon at Gallery Place I -- 203 125 All Some None None
Large Balcony, Non-
storage patio, direct Direct
or walk-in deck or Built-in access access
closet sunroom bookcases Carports garages garages
- --------------------------------------------------- ------------ ---------- ----------- ---------- --------- ---------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater All All None No No Yes
Avalon at Freehold All All None No Yes No
Avalon on Stamford Harbor Most All None No No No
Avalon Towers on the Peninsula Most All None No Yes No
Avalon at Cahill Park Most All None No Yes No
Avalon Riverview Most Some None No Yes No
Avalon at Mission Bay North All Some None No Yes No
Avalon Oaks West All All None No Yes No
Avalon Ledges All Some None No Yes No
Avalon Orchards Most All None No Yes Yes
Avalon at Arlington Square II Some All Some No No No
Avalon at Flanders Hill All Some None No Yes Yes
Avalon New Canaan All All None No Yes Yes
Avalon at Rock Spring Most Most Some No No Yes
Avalon at Gallery Place I All Some None None None None
Homes w/
pre-wired
security
systems
- --------------------------------------------------- -----------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater Some
Avalon at Freehold None
Avalon on Stamford Harbor All
Avalon Towers on the Peninsula No
Avalon at Cahill Park No
Avalon Riverview Some
Avalon at Mission Bay North No
Avalon Oaks West All
Avalon Ledges Yes
Avalon Orchards All
Avalon at Arlington Square II Yes
Avalon at Flanders Hill Yes
Avalon New Canaan Yes
Avalon at Rock Spring Yes
Avalon at Gallery Place I None
17
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
(CONTINUED)
Buildings Community entrance Building entrance
w/ security systems controlled access controlled access
- ---------------------------------------------------- --------------------- ------------------- -------------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center None No Yes
Longwood Towers None No No
Avalon Summit None No Yes
Avalon at Lexington None No Yes
Avalon at Faxon Park None No Yes
Avalon West None No Yes
Avalon Oaks None No Yes
Avalon Essex None No Yes
Avalon at Center Place None Yes Yes
Avalon Estates None No No
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II None No No
Avalon Glen None No Yes
Avalon Gates None Yes No
Avalon Springs All No No
Avalon Valley None No No
Avalon Lake None No No
Avalon Corners All Yes Yes
Avalon Haven None No No
LONG ISLAND, NY
Avalon Commons All No Yes
Avalon Towers All No No
Avalon Court All Yes Yes
NORTHERN NEW JERSEY
Avalon Cove All Yes Yes
The Tower at Avalon Cove All No Yes
Avalon Crest All Yes Yes
Avalon at Florham Park None No No
CENTRAL NEW JERSEY
Avalon Watch None No Yes
Avalon Run East None No No
NEW YORK, NY
Avalon Gardens All No No
Avalon View None No No
Avalon Green All No No
The Avalon All No Yes
Avalon Willow All Yes Yes
Avalon on the Sound All Yes Yes
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II None No No
Avalon at Symphony Glen None No No
Avalon Landing None No No
Under- Aerobics
ground parking dance studio Car wash Picnic area
- ---------------------------------------------------- ---------------- -------------- ---------- -------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center Yes No No Yes
Longwood Towers No Yes No Yes
Avalon Summit No No No Yes
Avalon at Lexington No No No Yes
Avalon at Faxon Park No No No Yes
Avalon West No No No Yes
Avalon Oaks No No No Yes
Avalon Essex No No No Yes
Avalon at Center Place Yes No Yes Yes
Avalon Estates No No No Yes
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II No Yes No Yes
Avalon Glen Yes No No No
Avalon Gates No No No Yes
Avalon Springs No No No Yes
Avalon Valley No No No Yes
Avalon Lake No No No Yes
Avalon Corners Yes No No Yes
Avalon Haven No No No Yes
LONG ISLAND, NY
Avalon Commons No No No Yes
Avalon Towers Yes No Yes No
Avalon Court No No Yes Yes
NORTHERN NEW JERSEY
Avalon Cove No No No Yes
The Tower at Avalon Cove No No No Yes
Avalon Crest No No No No
Avalon at Florham Park No No No No
CENTRAL NEW JERSEY
Avalon Watch No No No Yes
Avalon Run East No No No Yes
NEW YORK, NY
Avalon Gardens No No No Yes
Avalon View No No No Yes
Avalon Green No No No No
The Avalon Yes No No No
Avalon Willow Yes No No Yes
Avalon on the Sound No No No Yes
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II No No Yes Yes
Avalon at Symphony Glen No No Yes Yes
Avalon Landing No No Yes Yes
Walking / jogging trail Pool Sauna / whirlpool Tennis court
- ---------------------------------------------------- ------------------------- ------ ------------------- --------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center No No No No
Longwood Towers No No No No
Avalon Summit No Yes No No
Avalon at Lexington No Yes No No
Avalon at Faxon Park No Yes Yes No
Avalon West No Yes No No
Avalon Oaks No Yes Yes No
Avalon Essex No Yes Yes No
Avalon at Center Place No Yes No No
Avalon Estates Yes Yes Yes No
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II Yes Yes No Yes
Avalon Glen No Yes No No
Avalon Gates No Yes No No
Avalon Springs Yes Yes No No
Avalon Valley No Yes No No
Avalon Lake No Yes No No
Avalon Corners No Yes No No
Avalon Haven No Yes No No
LONG ISLAND, NY
Avalon Commons No Yes No No
Avalon Towers No Yes No No
Avalon Court Yes Yes No No
NORTHERN NEW JERSEY
Avalon Cove Yes Yes No Yes
The Tower at Avalon Cove Yes Yes No Yes
Avalon Crest No Yes No No
Avalon at Florham Park No Yes No No
CENTRAL NEW JERSEY
Avalon Watch No Yes No Yes
Avalon Run East Yes Yes No No
NEW YORK, NY
Avalon Gardens No Yes No Yes
Avalon View No Yes No Yes
Avalon Green No Yes No No
The Avalon No No No No
Avalon Willow No Yes No No
Avalon on the Sound Yes Yes No No
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II No Yes No Yes
Avalon at Symphony Glen Yes Yes No No
Avalon Landing Yes Yes No No
Indoor
Racquetball Fitness center Sand volleyball outdoor basketball
- ---------------------------------------------------- ------------- ---------------- ----------------- --------------------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center No No No No
Longwood Towers No Yes No No
Avalon Summit No Yes No No
Avalon at Lexington No Yes No Yes
Avalon at Faxon Park No Yes No No
Avalon West No No No Yes
Avalon Oaks No Yes No No
Avalon Essex No Yes No No
Avalon at Center Place No Yes No No
Avalon Estates No Yes No No
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II Yes Yes No Yes
Avalon Glen Yes Yes No No
Avalon Gates Yes Yes Yes Yes
Avalon Springs No Yes No No
Avalon Valley No Yes No Yes
Avalon Lake No Yes No No
Avalon Corners No Yes No No
Avalon Haven No Yes No No
LONG ISLAND, NY
Avalon Commons No Yes No Yes
Avalon Towers No Yes No No
Avalon Court Yes Yes No Yes
NORTHERN NEW JERSEY
Avalon Cove Yes Yes No Yes
The Tower at Avalon Cove Yes Yes No Yes
Avalon Crest No Yes No Yes
Avalon at Florham Park No Yes No No
CENTRAL NEW JERSEY
Avalon Watch Yes Yes No Yes
Avalon Run East No Yes No No
NEW YORK, NY
Avalon Gardens Yes Yes Yes Yes
Avalon View No Yes No Yes
Avalon Green No No Yes No
The Avalon No Yes No No
Avalon Willow Yes Yes No No
Avalon on the Sound No Yes No Yes
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II Yes Yes No No
Avalon at Symphony Glen No Yes No No
Avalon Landing No Yes No No
Clubhouse / clubroom Business center Totlot Concierge
- ---------------------------------------------------- ---------------------- ----------------- -------- -----------
CURRENT COMMUNITIES (1)
NORTHEAST
BOSTON, MA
Avalon at Prudential Center Yes No No Yes
Longwood Towers Yes No Yes Yes
Avalon Summit No No No No
Avalon at Lexington Yes No Yes No
Avalon at Faxon Park Yes No Yes No
Avalon West Yes No Yes No
Avalon Oaks Yes No Yes No
Avalon Essex Yes No No No
Avalon at Center Place Yes No No Yes
Avalon Estates No Yes Yes No
FAIRFIELD-NEW HAVEN, CT
Avalon Walk I & II Yes No Yes No
Avalon Glen Yes No No Yes
Avalon Gates Yes No Yes No
Avalon Springs Yes No Yes No
Avalon Valley Yes No Yes No
Avalon Lake No No No No
Avalon Corners Yes Yes No Yes
Avalon Haven Yes No Yes No
LONG ISLAND, NY
Avalon Commons Yes Yes Yes No
Avalon Towers Yes No No Yes
Avalon Court Yes Yes Yes No
NORTHERN NEW JERSEY
Avalon Cove Yes Yes Yes Yes
The Tower at Avalon Cove Yes Yes Yes Yes
Avalon Crest Yes Yes No No
Avalon at Florham Park Yes No No No
CENTRAL NEW JERSEY
Avalon Watch Yes No Yes No
Avalon Run East Yes No Yes No
NEW YORK, NY
Avalon Gardens Yes Yes Yes Yes
Avalon View Yes No Yes No
Avalon Green Yes No No No
The Avalon Yes Yes No Yes
Avalon Willow Yes Yes No Yes
Avalon on the Sound Yes Yes No Yes
MID-ATLANTIC
BALTIMORE, MD
Avalon at Fairway Hills I & II Yes Yes Yes No
Avalon at Symphony Glen Yes No Yes No
Avalon Landing Yes No No No
18
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
(CONTINUED)
Buildings Community entrance Building entrance
w/ security systems controlled access controlled access
- ---------------------------------------------------- --------------------- ------------------- -------------------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers None Yes Yes
Avalon Crescent None Yes No
Avalon at Ballston - Washington Towers None Yes Yes
Avalon at Cameron Court All Yes No
AutumnWoods None No No
Avalon at Fair Lakes None Yes No
Avalon at Dulles None No No
Avalon at Providence Park None No No
Avalon at Fox Mill None No No
Avalon at Decoverly None No No
Avalon Knoll None No Yes
Avalon Fields I & II All No No
Avalon Crossing None Yes No
4100 Massachusetts Avenue None Yes Yes
Avalon at Arlington Square I None No Yes
MIDWEST
CHICAGO, IL
Avalon at Danada Farms None No No
Avalon at West Grove None No Yes
Avalon at Stratford Green None No No
200 Arlington Place None No Yes
MINNEAPOLIS, MN
Avalon at Devonshire None No Yes
Avalon at Edinburgh None No Yes
Avalon at Town Centre None No Yes
Avalon at Town Square None No Yes
Avalon at Woodbury None No No
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek All Yes No
Avalon Redmond Place None No No
Avalon Greenbriar None No Yes
Avalon HighGrove None No No
Avalon ParcSquare None Yes Yes
Avalon RockMeadow None No No
Avalon WildReed None No No
Avalon Bellevue None No Yes
Avalon Belltown None Yes Yes
Avalon Wynhaven None No Yes
Avalon Brandemoor All No No
Avalon Wildwood All No No
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford Some Yes No
Avalon Fremont All No No
Avalon Pleasanton None No No
Avalon Dublin None No No
Avalon at Willow Creek Some Yes No
Avalon at Union Square None Yes No
Under- Aerobics
ground parking dance studio Car wash Picnic area
- ---------------------------------------------------- ---------------- -------------- ---------- -------------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers Yes No No Yes
Avalon Crescent No Yes Yes Yes
Avalon at Ballston - Washington Towers Yes No No Yes
Avalon at Cameron Court No Yes Yes Yes
AutumnWoods No No Yes Yes
Avalon at Fair Lakes No No Yes Yes
Avalon at Dulles No No Yes No
Avalon at Providence Park No No Yes No
Avalon at Fox Mill No No Yes Yes
Avalon at Decoverly No No Yes Yes
Avalon Knoll No No Yes Yes
Avalon Fields I & II No No Yes Yes
Avalon Crossing No No Yes Yes
4100 Massachusetts Avenue Yes No No No
Avalon at Arlington Square I No No No Yes
MIDWEST
CHICAGO, IL
Avalon at Danada Farms No No No No
Avalon at West Grove No No No Yes
Avalon at Stratford Green No No Yes Yes
200 Arlington Place No No No No
MINNEAPOLIS, MN
Avalon at Devonshire Yes No Yes Yes
Avalon at Edinburgh Yes No Yes Yes
Avalon at Town Centre Yes No Yes Yes
Avalon at Town Square Yes No Yes Yes
Avalon at Woodbury No No No No
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek No No No Yes
Avalon Redmond Place No No Yes No
Avalon Greenbriar No No No Yes
Avalon HighGrove No No No No
Avalon ParcSquare Yes No No No
Avalon RockMeadow No No No Yes
Avalon WildReed No No No Yes
Avalon Bellevue Yes No No No
Avalon Belltown Yes No No No
Avalon Wynhaven Yes No No Yes
Avalon Brandemoor No No No Yes
Avalon Wildwood No No No No
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford No No Yes No
Avalon Fremont Yes Yes Yes No
Avalon Pleasanton No No Yes No
Avalon Dublin No No Yes Yes
Avalon at Willow Creek No No Yes Yes
Avalon at Union Square No No No No
Walking / jogging trail Pool Sauna / whirlpool Tennis court
- ---------------------------------------------------- ------------------------- ------ ------------------- --------------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers No Yes Yes No
Avalon Crescent Yes Yes No No
Avalon at Ballston - Washington Towers No Yes No Yes
Avalon at Cameron Court No Yes Yes No
AutumnWoods Yes Yes No Yes
Avalon at Fair Lakes No Yes No Yes
Avalon at Dulles Yes Yes Yes Yes
Avalon at Providence Park No Yes No No
Avalon at Fox Mill No Yes No No
Avalon at Decoverly Yes Yes No Yes
Avalon Knoll Yes Yes No Yes
Avalon Fields I & II No Yes No No
Avalon Crossing No Yes No No
4100 Massachusetts Avenue Yes Yes No No
Avalon at Arlington Square I No Yes No No
MIDWEST
CHICAGO, IL
Avalon at Danada Farms No Yes No No
Avalon at West Grove No Yes Yes No
Avalon at Stratford Green Yes Yes No No
200 Arlington Place No Yes No No
MINNEAPOLIS, MN
Avalon at Devonshire Yes Yes No Yes
Avalon at Edinburgh Yes Yes Yes No
Avalon at Town Centre Yes Yes Yes Yes
Avalon at Town Square Yes Yes Yes Yes
Avalon at Woodbury Yes Yes No No
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek Yes Yes Yes No
Avalon Redmond Place Yes Yes Yes No
Avalon Greenbriar No Yes Yes No
Avalon HighGrove No Yes Yes No
Avalon ParcSquare Yes No No No
Avalon RockMeadow No Yes Yes No
Avalon WildReed Yes Yes Yes No
Avalon Bellevue No No No No
Avalon Belltown No No No No
Avalon Wynhaven Yes Yes Yes No
Avalon Brandemoor No Yes Yes No
Avalon Wildwood Yes Yes Yes No
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford No Yes Yes No
Avalon Fremont No Yes Yes No
Avalon Pleasanton No Yes Yes No
Avalon Dublin No Yes Yes No
Avalon at Willow Creek No Yes Yes No
Avalon at Union Square No Yes No No
Indoor
Racquetball Fitness center Sand volleyball outdoor basketball
- ---------------------------------------------------- ------------- ---------------- ----------------- --------------------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers No Yes No No
Avalon Crescent No Yes No No
Avalon at Ballston - Washington Towers No Yes No No
Avalon at Cameron Court No Yes Yes Yes
AutumnWoods No Yes Yes Yes
Avalon at Fair Lakes No Yes No No
Avalon at Dulles No Yes No No
Avalon at Providence Park No Yes No No
Avalon at Fox Mill No Yes No No
Avalon at Decoverly Yes Yes No Yes
Avalon Knoll No Yes No Yes
Avalon Fields I & II No Yes No No
Avalon Crossing No Yes No No
4100 Massachusetts Avenue No Yes No No
Avalon at Arlington Square I No Yes No Yes
MIDWEST
CHICAGO, IL
Avalon at Danada Farms No Yes No No
Avalon at West Grove Yes Yes No No
Avalon at Stratford Green No No No No
200 Arlington Place No Yes No No
MINNEAPOLIS, MN
Avalon at Devonshire No Yes No No
Avalon at Edinburgh No Yes No No
Avalon at Town Centre No Yes Yes No
Avalon at Town Square No Yes Yes No
Avalon at Woodbury No Yes No No
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek No Yes No No
Avalon Redmond Place No Yes No No
Avalon Greenbriar No Yes No Yes
Avalon HighGrove No Yes No No
Avalon ParcSquare No Yes No No
Avalon RockMeadow No Yes No No
Avalon WildReed No Yes No No
Avalon Bellevue No Yes No No
Avalon Belltown No Yes No No
Avalon Wynhaven No Yes No Yes
Avalon Brandemoor No Yes No No
Avalon Wildwood No Yes No No
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford No Yes No Yes
Avalon Fremont No Yes No No
Avalon Pleasanton No Yes No Yes
Avalon Dublin No Yes Yes Yes
Avalon at Willow Creek No Yes No No
Avalon at Union Square No Yes No No
Clubhouse / clubroom Business center Totlot Concierge
- ---------------------------------------------------- ---------------------- ----------------- -------- -----------
WASHINGTON, DC
Avalon at Ballston - Vermont & Quincy Towers Yes No No No
Avalon Crescent Yes Yes Yes Yes
Avalon at Ballston - Washington Towers Yes No No Yes
Avalon at Cameron Court Yes Yes No No
AutumnWoods Yes No Yes No
Avalon at Fair Lakes Yes Yes No No
Avalon at Dulles Yes No No No
Avalon at Providence Park Yes Yes No No
Avalon at Fox Mill Yes No Yes No
Avalon at Decoverly Yes No Yes No
Avalon Knoll No No Yes No
Avalon Fields I & II Yes No Yes No
Avalon Crossing Yes No Yes No
4100 Massachusetts Avenue Yes No No No
Avalon at Arlington Square I Yes Yes Yes No
MIDWEST
CHICAGO, IL
Avalon at Danada Farms Yes Yes No Yes
Avalon at West Grove Yes Yes Yes No
Avalon at Stratford Green Yes No No Yes
200 Arlington Place Yes No No No
MINNEAPOLIS, MN
Avalon at Devonshire Yes No No No
Avalon at Edinburgh Yes No No No
Avalon at Town Centre Yes No Yes No
Avalon at Town Square Yes No Yes No
Avalon at Woodbury No No No No
PACIFIC NORTHWEST
SEATTLE, WA
Avalon at Bear Creek Yes Yes Yes No
Avalon Redmond Place Yes No Yes No
Avalon Greenbriar Yes No Yes No
Avalon HighGrove Yes Yes Yes No
Avalon ParcSquare Yes Yes No No
Avalon RockMeadow Yes Yes Yes No
Avalon WildReed Yes Yes Yes No
Avalon Bellevue Yes Yes No Yes
Avalon Belltown Yes No No No
Avalon Wynhaven Yes Yes Yes No
Avalon Brandemoor Yes Yes Yes No
Avalon Wildwood Yes Yes Yes No
NORTHERN CALIFORNIA
OAKLAND-EAST BAY, CA
Waterford No No Yes No
Avalon Fremont Yes No No No
Avalon Pleasanton No Yes Yes No
Avalon Dublin No Yes No No
Avalon at Willow Creek No No No No
Avalon at Union Square No No No No
19
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
(CONTINUED)
Buildings Community entrance Building entrance
w/ security systems controlled access controlled access
- ---------------------------------------------------- --------------------- ------------------- -------------------
SAN FRANCISCO, CA
Crown Ridge None No No
Avalon at Sunset Towers All Yes Yes
Avalon at Nob Hill None Yes Yes
Avalon at Diamond Heights None No Yes
Avalon Towers by the Bay None Yes Yes
Avalon at Cedar Ridge None No No
Avalon Foster City Some No No
Avalon Pacifica None No No
SAN JOSE, CA
Avalon Silicon Valley Some Yes Yes
Avalon at Blossom Hill None Yes Yes
Avalon Campbell Some Yes Yes
CountryBrook None Yes No
Avalon at Pruneyard None No No
Avalon at Creekside Some No No
Avalon at River Oaks None No No
Avalon at Parkside None No No
Avalon Mountain View None No No
San Marino None Yes No
Avalon Sunnyvale None No No
Avalon at Foxchase None No No
Fairway Glen Some No No
Avalon Cupertino None Yes Yes
Avalon on the Alameda All Yes Yes
Avalon Rosewalk I & II None Yes No
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills None Yes No
Avalon at Media Center None No Yes
Avalon Westside Terrace None Yes Yes
Avalon at Warner Center None Yes Yes
ORANGE COUNTY, CA
Avalon Huntington Beach None Yes No
Avalon at Pacific Bay None Yes No
Avalon at South Coast None Yes No
Avalon Santa Margarita None No No
Amberway None Yes No
Avalon at Laguna Niguel None No No
Avalon Newport None No No
Avalon Mission Viejo None Yes No
SAN DIEGO, CA
Avalon at Mission Bay None Yes Yes
Avalon at Cortez Hill All Yes Yes
Avalon at Mission Ridge Some No No
Avalon at Penasquitos Hills None No No
Under- Aerobics
ground parking dance studio Car wash Picnic area
- ---------------------------------------------------- ---------------- -------------- ---------- -------------
SAN FRANCISCO, CA
Crown Ridge Yes No No No
Avalon at Sunset Towers Yes No Yes Yes
Avalon at Nob Hill Yes No No Yes
Avalon at Diamond Heights Yes No No No
Avalon Towers by the Bay Yes No No No
Avalon at Cedar Ridge No No No No
Avalon Foster City No No Yes No
Avalon Pacifica No No No No
SAN JOSE, CA
Avalon Silicon Valley Yes Yes No Yes
Avalon at Blossom Hill No No Yes No
Avalon Campbell Yes Yes No Yes
CountryBrook No No Yes No
Avalon at Pruneyard No No No Yes
Avalon at Creekside No No No Yes
Avalon at River Oaks No No No Yes
Avalon at Parkside Yes No No Yes
Avalon Mountain View Yes No Yes Yes
San Marino No No Yes No
Avalon Sunnyvale Yes Yes Yes Yes
Avalon at Foxchase Yes No Yes No
Fairway Glen No No Yes Yes
Avalon Cupertino Yes No No No
Avalon on the Alameda Yes No No No
Avalon Rosewalk I & II No Yes No Yes
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills Yes No No No
Avalon at Media Center No No No Yes
Avalon Westside Terrace Yes No No No
Avalon at Warner Center No No No No
ORANGE COUNTY, CA
Avalon Huntington Beach No No No Yes
Avalon at Pacific Bay No No No No
Avalon at South Coast No No Yes No
Avalon Santa Margarita No No No Yes
Amberway No No No No
Avalon at Laguna Niguel Yes No No No
Avalon Newport No No Yes No
Avalon Mission Viejo No No No No
SAN DIEGO, CA
Avalon at Mission Bay Yes Yes Yes No
Avalon at Cortez Hill No No No No
Avalon at Mission Ridge No No No Yes
Avalon at Penasquitos Hills No No No Yes
Walking / jogging trail Pool Sauna / whirlpool Tennis court
- ---------------------------------------------------- ------------------------- ------ ------------------- --------------
SAN FRANCISCO, CA
Crown Ridge Yes Yes Yes No
Avalon at Sunset Towers No No No No
Avalon at Nob Hill No No No No
Avalon at Diamond Heights No Yes Yes No
Avalon Towers by the Bay No No Yes No
Avalon at Cedar Ridge No Yes Yes No
Avalon Foster City Yes Yes No No
Avalon Pacifica No Yes No No
SAN JOSE, CA
Avalon Silicon Valley No Yes Yes Yes
Avalon at Blossom Hill No Yes Yes No
Avalon Campbell Yes Yes Yes No
CountryBrook No Yes Yes No
Avalon at Pruneyard No Yes Yes No
Avalon at Creekside Yes Yes No Yes
Avalon at River Oaks No Yes Yes No
Avalon at Parkside No Yes Yes No
Avalon Mountain View No Yes No No
San Marino No Yes Yes No
Avalon Sunnyvale No Yes Yes No
Avalon at Foxchase No Yes Yes No
Fairway Glen No Yes Yes No
Avalon Cupertino No Yes Yes No
Avalon on the Alameda No Yes Yes No
Avalon Rosewalk I & II Yes Yes Yes No
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills No Yes Yes No
Avalon at Media Center No Yes No No
Avalon Westside Terrace No Yes Yes Yes
Avalon at Warner Center No Yes Yes Yes
ORANGE COUNTY, CA
Avalon Huntington Beach No Yes Yes No
Avalon at Pacific Bay No Yes Yes No
Avalon at South Coast No Yes Yes Yes
Avalon Santa Margarita Yes Yes Yes No
Amberway No Yes Yes No
Avalon at Laguna Niguel No Yes Yes No
Avalon Newport No Yes Yes No
Avalon Mission Viejo Yes Yes Yes No
SAN DIEGO, CA
Avalon at Mission Bay No Yes Yes Yes
Avalon at Cortez Hill Yes Yes Yes Yes
Avalon at Mission Ridge No Yes Yes No
Avalon at Penasquitos Hills Yes Yes Yes Yes
Indoor
Racquetball Fitness center Sand volleyball outdoor basketball
- ---------------------------------------------------- ------------- ---------------- ----------------- --------------------
SAN FRANCISCO, CA
Crown Ridge No Yes No No
Avalon at Sunset Towers No No No No
Avalon at Nob Hill No Yes No No
Avalon at Diamond Heights No Yes No No
Avalon Towers by the Bay No Yes No No
Avalon at Cedar Ridge No Yes No No
Avalon Foster City No No No No
Avalon Pacifica No Yes No No
SAN JOSE, CA
Avalon Silicon Valley No Yes No Yes
Avalon at Blossom Hill No Yes No No
Avalon Campbell No Yes Yes No
CountryBrook No Yes No No
Avalon at Pruneyard No Yes Yes Yes
Avalon at Creekside No Yes Yes Yes
Avalon at River Oaks No Yes No No
Avalon at Parkside No Yes No Yes
Avalon Mountain View No Yes No No
San Marino No Yes No No
Avalon Sunnyvale No Yes No No
Avalon at Foxchase No Yes No No
Fairway Glen No Yes No No
Avalon Cupertino No Yes No No
Avalon on the Alameda No Yes No No
Avalon Rosewalk I & II No Yes No No
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills No Yes No No
Avalon at Media Center No Yes No No
Avalon Westside Terrace No Yes No Yes
Avalon at Warner Center No Yes No No
ORANGE COUNTY, CA
Avalon Huntington Beach No Yes No No
Avalon at Pacific Bay No Yes No No
Avalon at South Coast No Yes Yes No
Avalon Santa Margarita No Yes No No
Amberway No Yes No No
Avalon at Laguna Niguel No Yes No No
Avalon Newport No Yes No No
Avalon Mission Viejo No Yes No No
SAN DIEGO, CA
Avalon at Mission Bay No Yes Yes Yes
Avalon at Cortez Hill No Yes No No
Avalon at Mission Ridge No Yes No No
Avalon at Penasquitos Hills Yes Yes Yes No
Clubhouse / clubroom Business center Totlot Concierge
- ---------------------------------------------------- ---------------------- ----------------- -------- -----------
SAN FRANCISCO, CA
Crown Ridge No Yes No No
Avalon at Sunset Towers No No No No
Avalon at Nob Hill No No No Yes
Avalon at Diamond Heights Yes No No No
Avalon Towers by the Bay Yes Yes No Yes
Avalon at Cedar Ridge Yes No No No
Avalon Foster City Yes No Yes No
Avalon Pacifica No No No No
SAN JOSE, CA
Avalon Silicon Valley Yes Yes Yes Yes
Avalon at Blossom Hill No Yes No No
Avalon Campbell No Yes Yes No
CountryBrook No No No No
Avalon at Pruneyard No Yes No No
Avalon at Creekside Yes Yes No No
Avalon at River Oaks No Yes No No
Avalon at Parkside Yes Yes Yes No
Avalon Mountain View No Yes Yes No
San Marino No No Yes No
Avalon Sunnyvale No Yes Yes No
Avalon at Foxchase No No No No
Fairway Glen No No Yes No
Avalon Cupertino No Yes No No
Avalon on the Alameda No No No No
Avalon Rosewalk I & II No Yes No No
SOUTHERN CALIFORNIA
LOS ANGELES, CA
Avalon Woodland Hills No Yes No No
Avalon at Media Center No Yes No No
Avalon Westside Terrace Yes Yes Yes No
Avalon at Warner Center No Yes No No
ORANGE COUNTY, CA
Avalon Huntington Beach Yes Yes Yes No
Avalon at Pacific Bay No Yes Yes No
Avalon at South Coast Yes Yes No No
Avalon Santa Margarita No No Yes No
Amberway No No No No
Avalon at Laguna Niguel No No Yes No
Avalon Newport No Yes No No
Avalon Mission Viejo No Yes No No
SAN DIEGO, CA
Avalon at Mission Bay Yes Yes No No
Avalon at Cortez Hill Yes Yes No No
Avalon at Mission Ridge No No Yes No
Avalon at Penasquitos Hills No Yes Yes No
20
FEATURES AND RECREATIONAL AMENITIES - CURRENT AND DEVELOPMENT COMMUNITIES
(CONTINUED)
Buildings Community entrance Building entrance
w/ security systems controlled access controlled access
- ---------------------------------------------------- --------------------- ------------------- -------------------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater All Yes Yes
Avalon at Freehold None No No
Avalon on Stamford Harbor All Yes Yes
Avalon Towers on the Peninsula Yes Yes Yes
Avalon at Cahill Park Yes Yes Yes
Avalon Riverview All Yes Yes
Avalon at Mission Bay North Yes Yes Yes
Avalon Oaks West All No Yes
Avalon Ledges Yes No Yes
Avalon Orchards No No No
Avalon at Arlington Square II Yes No Yes
Avalon at Flanders Hill Yes No Yes
Avalon New Canaan Yes No Yes
Avalon at Rock Spring No No Yes
Avalon at Gallery Place I All Yes Yes
Under- Aerobics
ground parking dance studio Car wash Picnic area
- ---------------------------------------------------- ---------------- -------------- ---------- -------------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater Yes No No No
Avalon at Freehold No No No Yes
Avalon on Stamford Harbor Yes No No Yes
Avalon Towers on the Peninsula Yes No Yes Yes
Avalon at Cahill Park Yes Yes No No
Avalon Riverview No No No Yes
Avalon at Mission Bay North Yes Yes No No
Avalon Oaks West No No No Yes
Avalon Ledges No No No Yes
Avalon Orchards No No No Yes
Avalon at Arlington Square II No No No Yes
Avalon at Flanders Hill No No No Yes
Avalon New Canaan No No No Yes
Avalon at Rock Spring No No No Yes
Avalon at Gallery Place I Yes No No No
Walking / jogging trail Pool Sauna / whirlpool Tennis court
- ---------------------------------------------------- ------------------------- ------ ------------------- --------------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater No Yes No No
Avalon at Freehold No Yes No No
Avalon on Stamford Harbor Yes Yes No No
Avalon Towers on the Peninsula No Yes Yes No
Avalon at Cahill Park No Yes Yes No
Avalon Riverview Yes No No No
Avalon at Mission Bay North No No No No
Avalon Oaks West No Yes Yes No
Avalon Ledges No Yes Yes No
Avalon Orchards Yes Yes Yes No
Avalon at Arlington Square II No Yes No No
Avalon at Flanders Hill No Yes Yes No
Avalon New Canaan Yes Yes No No
Avalon at Rock Spring No Yes No No
Avalon at Gallery Place I No No No No
Indoor
Racquetball Fitness center Sand volleyball outdoor basketball
- ---------------------------------------------------- ------------- ---------------- ----------------- --------------------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater No Yes No No
Avalon at Freehold No Yes No No
Avalon on Stamford Harbor Yes Yes No Yes
Avalon Towers on the Peninsula No Yes No No
Avalon at Cahill Park No Yes No No
Avalon Riverview No Yes No No
Avalon at Mission Bay North No Yes No No
Avalon Oaks West No Yes No No
Avalon Ledges No Yes No Yes
Avalon Orchards No Yes No No
Avalon at Arlington Square II No Yes No Yes
Avalon at Flanders Hill No Yes No Yes
Avalon New Canaan No Yes No No
Avalon at Rock Spring No Yes No No
Avalon at Gallery Place I No Yes No No
Clubhouse / clubroom Business center Totlot Concierge
- ---------------------------------------------------- ---------------------- ----------------- -------- -----------
DEVELOPMENT COMMUNITIES
Avalon at Edgewater Yes Yes No Yes
Avalon at Freehold Yes Yes Yes No
Avalon on Stamford Harbor Yes Yes No Yes
Avalon Towers on the Peninsula No No No Yes
Avalon at Cahill Park Yes Yes No No
Avalon Riverview Yes Yes No Yes
Avalon at Mission Bay North Yes No No Yes
Avalon Oaks West Yes No Yes No
Avalon Ledges Yes No Yes No
Avalon Orchards Yes No Yes No
Avalon at Arlington Square II Yes Yes Yes No
Avalon at Flanders Hill Yes No Yes No
Avalon New Canaan Yes Yes Yes No
Avalon at Rock Spring Yes Yes Yes No
Avalon at Gallery Place I No Yes No Yes
(1) For the purpose of this table, Current Communities excludes communities
held by unconsolidated real estate joint ventures.
21
Development Communities
As of March 1, 2002, we had 15 Development Communities under construction. We
expect these Development Communities, when completed, to add a total of 3,963
apartment homes to our portfolio for a total capitalized cost, including land
acquisition costs, of approximately $750,300,000. Statements regarding the
future development or performance of the Development Communities are
forward-looking statements. We cannot assure you that:
- we will complete the Development Communities;
- our budgeted costs or estimates of occupancy rates will be realized;
- our schedule of leasing start dates or construction completion dates
will be achieved; or
- future developments will realize returns comparable to our past
developments.
You should carefully review the discussion under "Risks of Development and
Redevelopment" included elsewhere in this Item 2.
22
The following table presents a summary of the Development Communities. We hold a
direct or indirect fee simple ownership interest in these communities except
where noted.
Number of Budgeted Estimated Estimated
apartment cost (1) Construction Initial completion stabilization
homes ($ millions) start occupancy (2) date date (3)
---------- ------------ ------------ ------------- ---------- -------------
1. Avalon at Edgewater 408 $ 75.6 Q3 1999 Q2 2001 Q2 2002 Q4 2002
Edgewater, NJ
2. Avalon at Freehold 296 $ 33.1 Q2 2000 Q3 2001 Q1 2002 Q3 2002
Freehold, NJ
3. Avalon on Stamford Harbor 323 $ 60.7 Q3 2000 Q1 2002 Q4 2002 Q2 2003
Stamford, CT
4. Avalon Towers on the Peninsula 211 $ 65.9 Q3 2000 Q1 2002 Q2 2002 Q4 2002
Mountain View, CA
5. Avalon at Cahill Park 218 $ 50.5 Q4 2000 Q4 2001 Q3 2002 Q1 2003
San Jose, CA
6. Avalon Riverview 372 $ 102.5 Q4 2000 Q2 2002 Q4 2002 Q2 2003
Long Island City, NY
7. Avalon at Mission Bay North 250 $ 79.5 Q1 2001 Q4 2002 Q1 2003 Q3 2003
San Francisco, CA
8. Avalon Oaks West 120 $ 17.7 Q1 2001 Q4 2001 Q2 2002 Q4 2002
Wilmington, MA
9. Avalon Ledges 304 $ 37.7 Q2 2001 Q2 2002 Q1 2003 Q3 2003
Weymouth, MA
10. Avalon Orchards 156 $ 21.7 Q2 2001 Q1 2002 Q4 2002 Q2 2003
Marlborough, MA
11. Avalon at Arlington Square II 332 $ 43.9 Q3 2001 Q3 2002 Q1 2003 Q3 2003
Arlington, VA
12. Avalon at Flanders Hill 280 $ 38.4 Q3 2001 Q3 2002 Q2 2003 Q4 2003
Westborough, MA
13. Avalon New Canaan (4) 104 $ 27.2 Q3 2001 Q3 2002 Q4 2002 Q2 2003
New Canaan, CT
14. Avalon at Rock Spring (4) 386 $ 45.9 Q4 2001 Q1 2003 Q3 2003 Q1 2004
North Bethesda, MD
15. Avalon at Gallery Place I (5) 203 $ 50.0 Q4 2001 Q3 2003 Q4 2003 Q2 2004
Washington, DC
------ -------
Total 3,963 $ 750.3
======= =======
(1) Total budgeted cost includes all capitalized costs projected to be incurred
to develop the respective Development Community, including land acquisition
costs, construction costs, real estate taxes, capitalized interest and loan
fees, permits, professional fees, allocated development overhead and other
regulatory fees determined in accordance with generally accepted accounting
principles.
(2) Future initial occupancy dates are estimates.
(3) Stabilized operations is defined as the first full quarter of 95% or
greater occupancy after completion of construction.
(4) The land for this community is currently owned by a limited partnership in
which we are a majority partner. It is currently anticipated that the land
seller will retain a minority limited partner interest. The budgeted cost
reflected above excludes construction and management fees due to AvalonBay.
(5) The total budgeted cost for this community excludes approximately $4
million of proceeds that the Company estimates it will receive upon a sale
of transferable development rights associated with the development of the
community. These rights do not become transferable until construction
completion and there can be no assurance that the projected amount of
proceeds will be achieved.
23
Redevelopment Communities
As of March 1, 2002, we had three communities under redevelopment. We expect the
total budgeted cost to complete these Redevelopment Communities, including the
cost of acquisition and redevelopment, to be approximately $290,800,000, of
which approximately $64,100,000 is the additional capital invested or expected
to be invested above the original purchase cost. Statements regarding the future
redevelopment or performance of the Redevelopment Communities are
forward-looking statements. We have found that the cost to redevelop an existing
apartment community is more difficult to budget and estimate than the cost to
develop a new community. Accordingly, we expect that actual costs may vary from
our budget by a wider range than for a new development community. We cannot
assure you that we will meet our schedules for reconstruction completion, or
that we will meet our budgeted costs, either individually or in the aggregate.
See the discussion under "Risks of Development and Redevelopment" indcluded
elsewhere in this Item 2.
The following presents a summary of Redevelopment Communities:
Budgeted Cost
($ millions)
Number of -------------------------- Estimated
apartment Acquisition Total Reconstruction Reconstruction restabilized
homes cost cost (1) start completion (2) operations (3)
--------- ----------- -------- -------------- -------------- --------------
1. Avalon at Media Center
Burbank, CA 748 $ 55.3 $ 75.3 Q1 2000 Q1 2002 Q2 2002
2. Avalon at Prudential Center
Boston, MA 781 $ 133.9 $ 154.5 Q4 2000 Q4 2002 Q2 2003
3. Avalon Terrace (4)
Stamford, CT 367 $ 37.5 $ 61.0 Q4 2000 Q2 2002 Q4 2002
------- ------- -------
Total 1,896 $ 226.7 $ 290.8
======= ======= =======
(1) Total budgeted cost includes all capitalized costs projected to be incurred
to redevelop the respective Redevelopment Community, including costs to
acquire the community, reconstruction costs, real estate taxes, capitalized
interest and loan fees, permits, professional fees, allocated redevelopment
overhead and other regulatory fees determined in accordance with GAAP.
(2) Reconstruction completion dates are estimates.
(3) Restabilized operations is defined as the first full quarter of 95% or
greater occupancy after completion of reconstruction.
(4) This community is being redeveloped in a joint venture structure with third
party financing. Our portion of the equity contribution for this
unconsolidated joint venture is projected to be $9.6 million.
Development Rights
As of March 1, 2002, we are considering the development of 30 new apartment
communities on land that is either owned by us, under contract, subject to a
leasehold interest, or for which we hold a purchase option. These Development
Rights range from those beginning design and architectural planning to those
that have completed site plans and drawings and can begin construction almost
immediately. We estimate that the successful completion of all of these
communities would ultimately add 8,918 upscale apartment homes to our portfolio.
At December 31, 2001, the cumulative capitalized costs incurred in pursuit of
the 30 Development Rights was approximately $29,800,000, net of land acquisition
costs associated with nine of the Development Rights. Substantially all of these
apartment homes will offer features like those offered by the communities we
currently own.
We generally hold Development Rights through options to acquire land. The
properties comprising the Development Rights are in different stages of the due
diligence and regulatory approval process. The decisions as to which of the
Development Rights to pursue, if any, or to continue to pursue once an
investment in a Development Right is made, are business judgments that we make
after we perform financial, demographic and other analyses. Finally, we
currently intend to limit the percentage of debt used to finance new
developments in order to maintain our general historical practice with respect
to the proportion of debt in our capital structure. Therefore, other financing
alternatives may be required to finance the development of those Development
Rights scheduled to start construction after January 1, 2002. Although the
development of any particular Development Right cannot be
24
assured, we believe that the Development Rights, in the aggregate, present
attractive potential opportunities for future development and growth of our
long-term stockholder value.
Statements regarding the future development of the Development Rights are
forward-looking statements. We cannot assure you that:
- we will succeed in obtaining zoning and other necessary governmental
approvals or the financing required to develop these communities, or
that we will decide to develop any particular community; or
- if we undertake construction of any particular community, that we
will complete construction at the total budgeted cost assumed in the
financial projections below.
The following presents a summary of the 30 Development Rights we are currently
pursuing:
Estimated Estimated
number budgeted cost
Location of homes ($ millions)
----------------------------------- -------------- ---------------
1. North Bethesda, MD (1) 499 $85
2. Newton, MA 294 58
3. Lawrence, NJ 312 43
4. Los Angeles, CA (2) 309 59
5. Darien, CT (2) 189 39
6. Danbury, CT (2) 253 36
7. Glen Cove, NY (2) 256 71
8. Coram, NY 450 65
9. Orange, CT (2) 168 21
10. Bedford, MA 139 21
11. North Potomac, MD 520 61
12. New Rochelle, NY Phase II and III 588 144
13. Washington, D.C. (2) 144 30
14. Hingham, MA 270 44
15. Oakland, CA (2) 180 40
16. Seattle, WA (2) 154 50
17. Bellevue, WA 347 63
18. Long Island City, NY Phase II and III 539 162
19. Glendale, CA 223 49
20. Cohasset, MA 240 38
21. Kirkland, WA 215 50
22. Milford, CT 284 35
23. Greenburgh, NY Phase II and III 766 139
24. Stratford, CT 146 18
25. Andover, MA 136 21
26. College Park, MD 320 44
27. Wilton, CT 106 24
28. San Francisco, CA 303 106
29. Hopewell, NJ Phase I 280 40
30. Hopewell, NJ Phase II 288 43
-------------- ---------------
Totals 8,918 $1,699
============== ===============
(1) This develoment right is owned by a DownREIT partnership. The partnership
owns the land, but construction has not yet begun.
(2) Land is owned, but construction has not begun.
25
Risks of Development and Redevelopment
We intend to continue to pursue the development and redevelopment of apartment
home communities. Our development and redevelopment activities may be exposed to
the following:
- we may abandon opportunities we have already begun to explore based
on further review of, or changes in, financial, demographic,
environmental or other factors;
- we may encounter liquidity constraints, including the unavailability
of financing on favorable terms for the development or redevelopment
of a community;
- we may be unable to obtain, or we may experience delays in
obtaining, all necessary zoning, land-use, building, occupancy, and
other required governmental permits and authorizations;
- we may incur construction or reconstruction costs for a community
that exceed our original estimates due to increased materials, labor
or other expenses, which could make completion or redevelopment of
the community uneconomical;
- occupancy rates and rents at a newly completed or redevelopment
community may fluctuate depending on a number of factors, including
market and general economic conditions, and may not be sufficient to
make the community profitable; and
- we may be unable to complete construction and lease-up on schedule,
resulting in increased debt service expense and construction costs.
The occurrence of any of the events described above could adversely affect our
ability to achieve our projected yields on communities under development or
redevelopment and could affect our payment of distributions to our stockholders.
Construction costs are projected by us based on market conditions prevailing in
the community's market at the time our budgets are prepared and reflect changes
to those market conditions that we anticipated at that time. Although we attempt
to anticipate changes in market conditions, we cannot predict with certainty
what those changes will be. Construction costs have been increasing and, for
some of our Development Communities, the total construction costs have been or
are expected to be higher than the original budget. Total budgeted cost includes
all capitalized costs projected to be incurred to develop the respective
Development or Redevelopment Community, including:
- land and/or property acquisition costs;
- construction or reconstruction costs;
- real estate taxes;
- capitalized interest;
- loan fees;
- permits;
- professional fees;
- allocated development or redevelopment overhead; and
- other regulatory fees determined in accordance with generally
accepted accounting principles.
We believe that, in the aggregate, we will still achieve our targeted projected
yield (i.e., return on invested capital) for those communities experiencing
costs in excess of the original budget because of increases in prevailing market
rents. Costs to redevelop communities that have been acquired have, in some
cases, exceeded our original estimates and similar increases in costs may be
experienced in the future. We cannot assure you that market rents in effect at
the time new development communities or redeveloped communities complete
lease-up will be sufficient to fully offset the effects of any increased
construction or reconstruction costs.
26
Capitalized Interest
In accordance with generally accepted accounting principles, we capitalize
interest expense during construction or reconstruction until a community or
portion of a community obtains a certificate of occupancy. Thereafter, the
interest allocated to that community or portion of a community is expensed.
Capitalized interest during the years ended December 31, 2001 and 2000 totaled
$27,635,000 and $18,328,000, respectively.
Acquisition Activities and Other Recent Developments
Acquisitions of Existing Communities. We have acquired three communities
containing 995 apartment homes since January 1, 2001 for an acquisition price of
approximately $129,300,000. Each of these communities was acquired pursuant to a
forward purchase contract agreed to in 1997 with an unaffiliated party.
One DownREIT partnership was formed since January 1, 2001 in conjunction with
the acquisition of land by that partnership.
Sales of Existing Communities. We seek to increase our geographical
concentration in selected high barrier-to-entry markets where we believe we can:
- apply sufficient market and management presence to enhance revenue
growth;
- reduce operating expenses; and
- leverage management talent.
To achieve this increased concentration, we sell assets that do not meet our
long term investment criteria and redeploy the proceeds from those sales to
develop and redevelop communities. Pending such redeployment, we will generally
use the proceeds from the sale of these communities to reduce amounts
outstanding under our variable rate unsecured credit facility. On occasion, we
will set aside the proceeds from the sale of communities into a cash escrow
account to facilitate a nontaxable like-kind exchange transaction. Accordingly,
we sold seven communities, totaling 2,551 apartment homes, since January 1,
2001. Net proceeds from the sales of these assets totaled $230,400,000.
27
Land Acquisitions and Leases for New Developments. We carefully select land for
development and follow established procedures that we believe minimize both the
cost and the risks of development. During 2001, we acquired the following land
parcels for future development:
Estimated
number Budgeted
Gross of apartment cost (1) Date Construction Construction
acres homes ($ millions) acquired start (2) completion (2)
------- ------------ ------------ -------------- ------------ --------------
1. Grosvenor Village 10.0 499 $85.0 December 2001 Q1 2002 Q2 2004
North Bethesda, MD
2. Avalon del Ray 4.5 309 $59.0 January 2001 Q2 2002 Q1 2004
Los Angeles, CA
3. Avalon at Mountain Terrace 36.0 253 $36.0 November 2001 Q3 2002 Q1 2004
Danbury, CT
4. Avalon Glen Cove 3.5 256 $71.0 November 2001 Q2 2002 Q1 2004
Glen Cove, NY
5. Avalon Madison (3) 0.7 154 $50.0 August 2001 n/a n/a
Seattle, WA
6. Gallery Place II 0.3 144 $30.0 February 2001 Q4 2002 Q4 2004
Washington, DC
------- ------- --------
Total 55 1,615 $331.0
======= ======= ========
(1) Total budgeted cost includes all capitalized costs projected to be incurred
to develop the respective Development Community, including land acquisition
costs, construction costs, real estate taxes, capitalized interest and loan
fees, permits, professional fees allocated development overhead and other
regulatory fees determined in accordance with generally accepted accounting
principles.
(2) Future construction start and completion dates are estimates.
(3) In October 2001, the Company annnounced that it was deferring development
of Avalon Madison until economic conditions improve.
Natural Disasters
Many of our West Coast communities are located in the general vicinity of active
earthquake faults. A large concentration of AvalonBay communities lies near, and
thus is susceptible to, the major fault lines in the San Francisco Bay Area,
including the San Andreas fault and Hayward fault. We cannot assure you that an
earthquake would not cause damage or losses greater than insured levels.
In November 2001, we renewed our earthquake insurance. For any single
occurrence, and in the aggregate, we have in place with respect to communities
located in California, $67,000,000 of coverage with a deductible per building
equal to five percent of the value of that building. The five percent deductible
is subject to a minimum of $100,000 per occurrence. Earthquake coverage outside
of California, with the exception of Washington State, is subject to a
$100,000,000 limit and a $100,000 deductible per location. In addition, up to an
aggregate of $2,000,000, the next $400,000 of loss per occurrence will be
treated as an additional deductible. Coverage in Washington State is subject to
a $65,000,000 limit, with the same deductible. Our general liability and
property insurance program provides coverage for public liability and fire
damage. In the event an uninsured disaster or a loss in excess of insured limits
were to occur, we could lose our capital invested in the affected community, as
well as anticipated future revenue from that community. We would also continue
to be obligated to repay any mortgage indebtedness or other obligations related
to the community. Any such loss could materially and adversely affect our
business and our financial condition and results of operations.
Americans with Disabilities Act
The apartment communities we own and any apartment communities that we acquire
must comply with Title III of the Americans with Disabilities Act to the extent
that such properties are "public accommodations" and/or "commercial facilities"
as defined by the Americans with Disabilities Act. Compliance with the Americans
with Disabilities Act requirements could require removal of structural barriers
to handicapped access in certain public areas of our properties
28
where such removal is readily achievable. The Americans with Disabilities Act
does not, however, consider residential properties, such as apartment
communities, to be public accommodations or commercial facilities, except to the
extent portions of such facilities, such as leasing offices, are open to the
public. We believe our properties comply in all material respects with all
present requirements under the Americans with Disabilities Act and applicable
state laws. Noncompliance could result in imposition of fines or an award of
damages to private litigants.
ITEM 3. LEGAL PROCEEDINGS
AvalonBay is from time to time subject to claims and administrative proceedings
arising in the ordinary course of business. Some of these claims and proceedings
are expected to be covered by liability insurance. The following matter, for
which we believe we have meritorious defenses and are therefore vigorously
defending against, is not covered by liability insurance. However, outstanding
litigation matters, individually and in the aggregate, including the matter
described below, are not expected to have a material adverse effect on our
business or financial condition.
AvalonBay is currently involved in litigation with York Hunter Construction,
Inc. and National Union Fire Insurance Company. The action arises from our
October 1999 termination of York Hunter as construction manager under a contract
relating to construction of the Avalon Willow community in Mamaroneck, New York,
because of alleged failures and deficiencies by York Hunter and its
subcontractors in performing under the contract. York Hunter initiated the
litigation in October 1999 by filing a complaint against us and other defendants
claiming more than $15,000,000 in damages. We have filed counterclaims against
York Hunter seeking more than $9,000,000 in compensatory damages, including lost
rental income and costs to complete the community. We have also filed a claim
against National Union Fire Insurance, which furnished construction and
performance bonds to us on behalf of York Hunter. We believe that we have
meritorious defenses against all of York Hunter's claims and are vigorously
contesting those claims. We also intend to pursue our counterclaims against York
Hunter and National Union Fire Insurance aggressively. The litigation is pending
in the Supreme Court of the State of New York, County of Westchester. A trial
date has not been set.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
No matter was submitted to a vote of our security holders during the fourth
quarter of 2001.
29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is traded on the New York Stock Exchange (NYSE) and the
Pacific Exchange (PCX) under the ticker symbol AVB. The following table sets
forth the quarterly high and low sales prices per share of our common stock on
the NYSE for the years 2001 and 2000, as reported by the NYSE. On March 1,
2002 there were 617 holders of record of an aggregate of 68,780,976 shares of
our outstanding common stock. The number of holders does not include
individuals or entities who beneficially own shares but whose shares are held
of record by a broker or clearing agency, but does include each such broker or
clearing agency as one recordholder.
2001 2000
------------------------------ -------------------------------
Sales Price Sales Price
--------------------- Dividends -------------------- Dividends
High Low declared High Low declared
---------- ---------- -------- --------- --------- ----------
Quarter ended March 31 $ 50.000 $45.200 $ 0.64 $36.688 $ 32.625 $ 0.56
Quarter ended June 30 $ 47.450 $42.450 $ 0.64 $43.125 $ 36.125 $ 0.56
Quarter ended September 30 $ 51.900 $43.800 $ 0.64 $48.250 $ 42.000 $ 0.56
Quarter ended December 31 $ 49.700 $44.010 $ 0.64 $50.625 $ 44.000 $ 0.56
We expect to continue our policy of paying regular quarterly cash dividends.
However, dividend distributions will be declared at the discretion of the
Board of Directors and will depend on actual cash from operations, our
financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code and other
factors as the Board of Directors may consider relevant. The Board of
Directors may modify our dividend policy from time to time.
30
ITEM 6. SELECTED FINANCIAL DATA
The following table provides historical consolidated financial, operating and
other data for AvalonBay Communities, Inc. You should read the table with our
Consolidated Financial Statements and the Notes included in this report.
Dollars in thousands, except per share information.
Years ended
---------------------------------------------------------------
12-31-01 12-31-00 12-31-99 12-31-98 12-31-97
----------- ----------- ----------- ----------- -----------
Revenue:
Rental income $ 637,379 $ 571,943 $ 504,567 $ 369,945 $ 169,442
Management fees 1,325 1,051 1,176 1,377 1,029
Other income 2,953 401 236 81 633
----------- ----------- ----------- ----------- -----------
Total revenue 641,657 573,395 505,979 371,403 171,104
----------- ----------- ----------- ----------- -----------
Expenses:
Operating expenses, excluding property taxes 161,887 142,664 135,517 104,346 47,279
Property taxes 52,201 46,958 42,701 31,775 14,429
Interest expense 103,203 83,609 74,699 54,650 16,977
Depreciation 130,079 122,610 109,759 77,374 29,113
General and administrative 15,224 13,013 9,592 9,124 5,093
Non-recurring items -- -- 16,782 -- --
----------- ----------- ----------- ----------- -----------
Total expenses 462,594 408,854 389,050 277,269 112,891
----------- ----------- ----------- ----------- -----------
Equity in income of
unconsolidated entities 856 2,428 2,867 2,638 5,689
Interest income 6,823 4,764 7,362 3,508 1,346
Minority interest in consolidated partnerships (597) (1,908) (1,975) (1,770) 174
----------- ----------- ----------- ----------- -----------
Income before gain on sale of
communities and extraordinary item 186,145 169,825 125,183 98,510 65,422
Gain on sale of communities 62,852 40,779 47,093 25,270 677
----------- ----------- ----------- ----------- -----------
Income before extraordinary item 248,997 210,604 172,276 123,780 66,099
Extraordinary item -- -- -- (245) (1,183)
----------- ----------- ----------- ----------- -----------
Net income 248,997 210,604 172,276 123,535 64,916
Dividends attributable to preferred stock (32,497) (39,779) (39,779) (28,132) (19,656)
----------- ----------- ----------- ----------- -----------
Net income available to common
stockholders $ 216,500 $ 170,825 $ 132,497 $ 95,403 $ 45,260
=========== =========== =========== =========== ===========
PER COMMON SHARE AND SHARE INFORMATION:
Per common share - basic
Income before extraordinary item $ 3.19 $ 2.58 $ 2.05 $ 1.89 $ 1.64
(net of preferred dividends)
Extraordinary item $ -- $ -- $ -- $ -- $ (0.04)
Net income available to common stockholders $ 3.19 $ 2.58 $ 2.05 $ 1.89 $ 1.60
Weighted average common shares outstanding 67,842,752 66,309,707 64,724,799 50,387,258 28,244,845
Per common share - diluted
Income before extraordinary item $ 3.12 $ 2.53 $ 2.03 $ 1.88 $ 1.63
(net of preferred dividends)
Extraordinary item $ -- $ -- $ -- $ -- $ (0.04)
Net income available to common stockholders $ 3.12 $ 2.53 $ 2.03 $ 1.88 $ 1.59
Weighted average common shares and units 69,781,719 68,140,998 66,110,664 51,771,247 28,431,823
outstanding
Cash dividends declared $ 2.56 $ 2.24 $ 2.06 $ 2.04 $ 2.00
31
Years ended
-------------------------------------------------------------------
12-31-01 12-31-00 12-31-99 12-31-98 12-31-97
------------- ------------- ------------- ------------ ------------
OTHER INFORMATION:
Net income $ 248,997 $ 210,604 $ 172,276 $ 123,535 $ 64,916
Depreciation 130,079 122,610 109,759 77,374 29,113
Interest expense 103,203 83,609 74,699 54,650 16,977
Interest income (6,823) (4,764) (7,362) (3,508) (1,346)
Non-recurring items -- -- 16,782 -- --
Gain on sale of communities (62,852) (40,779) (47,093) (25,270) (677)
Extraordinary item -- -- -- 245 1,183
------------- ------------- ------------- ------------ ------------
Gross EBITDA (1) $ 412,604 $ 371,280 $ 319,061 $ 227,026 $ 110,166
============= ============= ============= ============ ============
Funds from Operations (2) $ 283,293 $ 252,013 $ 196,058 $ 148,487 $ 73,525
Number of current communities (3) 126 126 122 127 64
Number of apartment homes 37,228 37,147 36,008 37,911 19,318
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation $ 4,837,869 $ 4,535,969 $ 4,266,426 $ 4,006,456 $ 1,534,986
Total assets $ 4,664,289 $ 4,397,255 $ 4,154,662 $ 4,005,013 $ 1,529,703
Notes payable and unsecured credit facilities $ 2,082,769 $ 1,729,924 $ 1,593,647 $ 1,484,371 $ 506,129
CASH FLOW INFORMATION:
Net cash flows provided by operating activities $ 308,723 $ 296,462 $ 251,779 $ 192,339 $ 93,584
Net cash flows used in investing activities $ (259,391) $ (252,534) $ (236,687) $ (566,516) $ (421,355)
Net cash flows provided by (used in) financing activities $ (33,580) $ 5,685 $ (16,361) $ 376,345 $ 320,252
Notes to Selected Financial Data
- ---------------------------------
(1) Gross EBITDA represents earnings before interest, income taxes,
depreciation and amortization, non-recurring items, gain on sale of
communities and extraordinary items. Gross EBITDA is relevant to an
understanding of the economics of AvalonBay because it is one indication
of cash flow available from continuing operations to service fixed
obligations. Gross EBITDA should not be considered as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles, or "GAAP"), as an indicator of our operating
performance, or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. Our calculation of gross
EBITDA may not be comparable to gross EBITDA as calculated by other
companies.
(2) We generally consider Funds from Operations, or FFO, to be an appropriate
measure of our operating performance because it helps investors understand
our ability to incur and service debt and to make capital expenditures. We
believe that to gain a clear understanding of our operating results, FFO
should be examined with net income as presented in the Consolidated
Statements of Operations included elsewhere in this report. FFO is
determined based on a definition adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts(R) and is defined
as:
- net income or loss computed in accordance with GAAP, except
that excluded from net income or loss are gains or losses on
sales of property and extraordinary (as defined by GAAP) gains
and losses on debt restructuring;
- plus depreciation of real estate assets; and
- after adjustments for unconsolidated partnerships and joint
ventures.
32
FFO does not represent cash generated from operating activities in
accordance with GAAP. Therefore it should not be considered as an
alternative to net income as an indication of performance. FFO should also
not be considered an alternative to net cash flows from operating
activities, as determined by GAAP, or as a measure of liquidity.
Additionally, it is not necessarily indicative of cash available to fund
cash needs. Further, FFO as calculated by other REITs may not be
comparable to our calculation of FFO. Calculations for FFO are presented
below:
Years ended
------------------------------------------------------------
12-31-01 12-31-00 12-31-99 12-31-98 12-31-97
----------- ----------- ------------ ----------- -----------
Net income available to common stockholders $ 216,500 $ 170,825 $ 132,497 $ 95,403 $ 45,260
Depreciation (real estate related) 126,984 119,416 107,928 75,614 27,360
Joint venture adjustments 1,102 792 751 725 399
Minority interest 1,559 1,759 1,975 1,770 --
Gain on sale of communities (62,852) (40,779) (47,093) (25,270) (677)
Extraordinary items -- -- -- 245 1,183
----------- ----------- ------------ ----------- -----------
Funds from Operations $ 283,293 $ 252,013 $ 196,058 $ 148,487 $ 73,525
Net cash provided by operating activities $ 308,723 $ 296,462 $ 251,779 $ 192,339 $ 93,584
=========== =========== ============ =========== ===========
Net cash used in investing activities $(259,391) $(252,534) $ (236,687) $(566,516) $(421,355)
=========== =========== ============ =========== ===========
Net cash provided by (used in) financing activities $ (33,580) $ 5,685 $ (16,361) $ 376,345 $ 320,252
=========== =========== ============ =========== ===========
(3) Current Communities consist of all communities other than those which are
still under construction and have not received a final certificate of
occupancy.
33
ITEM 7. MANAGMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Form 10-K, including the footnotes to our Consolidated Financial
Statements which immediately follows, contains "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of
1995. You can identify forward-looking statements by our use of the words
"believe," "expect," "anticipate," "intend," "estimate," "assume," "project,"
and other similar expressions in this Form 10-K, that predict or indicate
future events and trends or that do not report historical matters. In
addition, information concerning the following are forward-looking statements:
- the timing and cost of completion of apartment communities under
construction, reconstruction, development or redevelopment;
- the timing of lease-up and occupancy of apartment communities;
- the pursuit of land on which we are considering future development;
- cost, yield and earnings estimates; and
- the development of management information systems by companies in
which we have an investment and our implementation and use of those
systems.
We cannot assure the future results or outcome of the matters described in
these statements; rather, these statements merely reflect our current
expectations of the approximate outcomes of the matters discussed. You should
not rely on forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, some of which are beyond our control.
These risks, uncertainties and other factors may cause our actual results,
performance or achievements to differ materially from the anticipated future
results, performance or achievements expressed or implied by these
forward-looking statements. Some of the factors that could cause our actual
results, performance or achievements to differ materially from those expressed
or implied by these forward-looking statements include, but are not limited
to, the following:
- we may fail to secure development opportunities due to an inability
to reach agreements with third parties or to obtain desired zoning
and other local approvals;
- we may abandon or defer development opportunities for a number of
reasons, including changes in local market conditions which make
development less desirable, increases in costs of development and
increases in the cost of capital;
- construction costs of a community may exceed our original
estimates;
- we may not complete construction and lease-up of communities under
development or redevelopment on schedule, resulting in increased
interest expense and construction costs and reduced rental
revenues;
- occupancy rates and market rents may be adversely affected by local
economic and market conditions which are beyond our control;
- financing may not be available on favorable terms or at all, and
our cash flow from operations and access to cost effective capital
may be insufficient for the development of our pipeline and could
limit our pursuit of opportunities;
- our cash flow may be insufficient to meet required payments of
principal and interest, and we may be unable to refinance existing
indebtedness or the terms of such refinancing may not be as
favorable as the terms of existing indebtedness;
- we may be unsuccessful in managing our current growth in the number
of apartment communities; and
34
- software applications and ancillary services being developed by
companies in which we have invested may be unsuccessful in
achieving their business plans or unsuccessful in obtaining
additional funding, which could lead to a partial or complete loss
of our investment in these companies.
You should read our Consolidated Financial Statements and notes included in
this report in conjunction with the following discussion. These
forward-looking statements represent our estimates and assumptions only as of
the date of this report. We do not undertake to update these forward-looking
statements, and you should not rely upon them after the date of this report.
Business Description and Community Information
AvalonBay is a Maryland corporation that has elected to be treated as a real
estate investment trust, or REIT, for federal income tax purposes. We focus on
the ownership and operation of upscale apartment communities (which generally
command among the highest rents in their submarkets) in high barrier-to-entry
markets of the United States. This is because we believe that, long term, the
limited new supply of upscale apartment homes in these markets will result in
larger increases in cash flows relative to other markets. These
barriers-to-entry generally include a difficult and lengthy entitlement
process with local jurisdictions and dense in-fill locations where zoned and
entitled land is in limited supply. These markets are located in the
Northeast, Mid-Atlantic, Midwest, Pacific Northwest, and Northern and Southern
California regions of the United States.
We are a fully-integrated real estate organization with in-house expertise in
the following areas:
- development and redevelopment;
- construction and reconstruction;
- leasing and management;
- acquisition and disposition;
- financing;
- marketing; and
- information technologies.
We believe apartment communities present an attractive investment opportunity
compared to other real estate investments because a broad potential resident
base results in relatively stable demand during all phases of a real estate
cycle. With our expertise and in-house capabilities, we believe we are
well-positioned to continue to pursue opportunities to develop and acquire
upscale apartment homes in our target markets. Our ability to identify or
pursue attractive opportunities, however, is affected by capital market
conditions, including prevailing interest rates, and by the availability of
attractively priced opportunities. Given current capital market and real
estate market conditions, we are carefully considering the appropriate
allocation of capital investment among development and redevelopment
communities as well as the acquisition of established communities. We intend
to pursue these investments in markets where constraints to new supply exist
and where new household formations have out-paced multifamily permit activity
in recent years.
Our real estate investments consist primarily of current operating apartment
communities, communities in various stages of development, and development
rights (i.e., land or land options held for development). Our current
operating communities are further distinguished as Established, Other
Stabilized, and Redevelopment. A description of these categories and operating
performance information can be found in Note 9, "Segment Reporting," in our
Consolidated Financial Statements included in this report.
35
On December 31, 2001, we owned or had an ownership interest in these categories
as follows:
Number of Number of
communities apartment homes
------------------- ---------------------
Current Communities
--------------------
Established Communities:
Northeast 20 5,416
Mid-Atlantic 18 5,297
Midwest 6 1,591
Pacific Northwest 2 486
Northern California 27 7,851
Southern California 11 3,112
-------- --------
Total Established 84 23,753
Other Stabilized Communities:
Northeast 16 4,313
Mid-Atlantic 3 1,125
Midwest 3 1,033
Pacific Northwest 10 2,673
Northern California 3 1,038
Southern California 4 1,397
-------- --------
Total Other Stabilized 39 11,579
Redevelopment Communities 3 1,896
-------- --------
Total Current Communities 126 37,228
======== ========
Development Communities 15 3,963
-----------------------
======== ========
Development Rights 30 8,918
------------------ ======== ========
36
Results of Operations and Funds From Operations
A comparison of our operating results for the years 2001, 2000, and 1999
follows (dollars in thousands):
Change
------------------------
2001 2000 $ % 2000
----------- ----------- ----------- ----------- -----------
Revenue:
Rental income $ 637,379 $571,943 $ 65,436 11.4% $571,943
Management fees 1,325 1,051 274 26.1% 1,051
Other income 2,953 401 2,552 636.4% 401
----------- ----------- ----------- ----------- -----------
Total revenue 641,657 573,395 68,262 11.9% 573,395
----------- ----------- ----------- ----------- -----------
Expenses:
Operating, excluding property taxes 161,887 142,664 19,223 13.5% 142,664
Property taxes 52,201 46,958 5,243 11.2% 46,958
----------- ----------- ----------- ----------- -----------
Total operating expenses 214,088 189,622 24,466 12.9% 189,622
----------- ----------- ----------- ----------- -----------
Net operating income 427,569 383,773 43,796 11.4% 383,773
Interest expense 103,203 83,609 19,594 23.4% 83,609
Depreciation expense 130,079 122,610 7,469 6.1% 122,610
General and administrative 15,224 13,013 2,211 17.0% 13,013
Non-recurring charges -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total other expenses 248,506 219,232 29,274 13.4% 219,232
----------- ----------- ----------- ----------- -----------
Equity in income of unconsolidated entities 856 2,428 (1,572) (64.7%) 2,428
Interest income 6,823 4,764 2,059 43.2% 4,764
Minority interest of unitholders
in consolidated partnerships (597) (1,908) 1,311 (68.7%) (1,908)
----------- ----------- ----------- ----------- -----------
Income before gain on sale of communities 186,145 169,825 16,320 9.6% 169,825
Gain on sale of communities 62,852 40,779 22,073 54.1% 40,779
----------- ----------- ----------- ----------- -----------
Net income 248,997 210,604 38,393 18.2% 210,604
Preferred dividends (32,497) (39,779) 7,282 (18.3%) (39,779)
----------- ----------- ----------- ----------- -----------
Net income available to common stockholders $216,500 $170,825 $ 45,675 26.7% $170,825
=========== =========== =========== =========== ===========
Change
------------------------
1999 $ %
----------- ----------- -----------
Revenue:
Rental income $ 504,567 $ 67,376 13.4%
Management fees 1,176 (125) (10.6%)
Other income 236 165 69.9%
----------- ----------- -----------
Total revenue 505,979 67,416 13.3%
----------- ----------- -----------
Expenses:
Operating, excluding property taxes 135,517 7,147 5.3%
Property taxes 42,701 4,257 10.0%
----------- ----------- -----------
Total operating expenses 178,218 11,404 6.4%
----------- ----------- -----------
Net operating income 327,761 56,012 17.1%
Interest expense 74,699 8,910 11.9%
Depreciation expense 109,759 12,851 11.7%
General and administrative 9,592 3,421 35.7%
Non-recurring charges 16,782 (16,782) (100.0%)
----------- ----------- -----------
Total other expenses 210,832 8,400 4.0%
----------- ----------- -----------
Equity in income of unconsolidated entities 2,867 (439) (15.3%)
Interest income 7,362 (2,598) (35.3%)
Minority interest of unitholders
in consolidated partnerships (1,975) 67 (3.4%)
----------- ----------- -----------
Income before gain on sale of communities 125,183 44,642 35.7%
Gain on sale of communities 47,093 (6,314) (13.4%)
----------- ----------- -----------
Net income 172,276 38,328 22.2%
Preferred dividends (39,779) -- 0.0%
----------- ----------- -----------
Net income available to common stockholders $132,497 $ 38,328 28.9%
=========== =========== ===========
Net income available to common stockholders increases in 2001 and 2000 over
the prior years are primarily attributable to gain on sale of communities,
additional net operating income from newly developed and redeveloped
communities as well as growth in operating income from Established
Communities. Net operating income from newly developed and redeveloped
communities exceeded the corresponding cost of capital (primarily debt) used
to develop or redevelop these communities.
During each of the last three years, we have funded a portion of our
development and redevelopment activities through the sale of assets that did
not meet our long-term investment criteria. The short-term effect of a sale of
a community is that net operating income will be negatively impacted because
that community's contribution to net operating income has been eliminated and
the development or redevelopment community in which the proceeds from the sale
are being invested is not yet complete. There will also be less interest
expense than would otherwise be incurred as the proceeds from the sale of
communities are initially used to repay amounts outstanding on our unsecured
credit facility. We believe that, once stabilized, the net operating income
generated by the newly developed and redeveloped communities will be higher
than the net operating income from the assets sold.
37
Net operating income increases generated in 2001 and 2000 over the prior years
resulted from changes in the following categories:
2001 2000
Increase Increase
--------------- ---------------
Established Communities $ 21,783,000 $ 22,162,000
Other Stabilized Communities 27,922,000 39,575,000
Communities sold (14,649,000) (19,629,000)
Development and Redevelopment Communities 13,596,000 19,228,000
Central operating overhead (4,856,000) (5,324,000)
--------------- ---------------
Total net operating income increase $ 43,796,000 $ 56,012,000
=============== ===============
These net operating income increases were largely due to the relatively high
occupancy and market rents experienced in 2000, which were carried into 2001.
As we begin to experience the full effects of the recession, we expect net
operating income from Established Communities to decline during the first half
of 2002, while total net operating income will increase modestly. If the
economy recovers as anticipated in the second half of 2002, we expect to
experience modest net operating income growth from Established Communities
during that period.
Rental income increases in 2001 and 2000 over the prior year are primarily due
to an increase in the weighted average monthly rental income per occupied
apartment home and an increase in the weighted average number of occupied
apartment homes.
Overall Portfolio - The weighted average number of occupied apartment
homes increased to 34,417 apartment homes for 2001 compared to 33,976
apartment homes for 2000 and 33,726 in 1999. These changes are primarily
the result of development, redevelopment and acquisition of new
communities partially offset by (i) the sale of communities and (ii) for
2001, occupancy declines related to the national recession and softening
conditions in certain of our markets. The weighted average monthly revenue
per occupied apartment home increased to $1,543 in 2001 compared to $1,402
in 2000 and $1,242 in 1999. Monthly revenue per occupied apartment home
and occupancy levels may decline in 2002 as our portfolio is affected by
the national recession.
Established Communities - Rental revenue increased $26,268,000 (6.6%) in
2001 and $25,911,000 (8.9%) in 2000. The increase in 2001 is due to market
conditions during the past year that allowed for higher average rents
partially offset by lower economic occupancy levels. Economic occupancy
takes into account the fact that apartment homes of different sizes and
locations have different economic impacts on a community's gross revenue
and measures the percentage impact on gross revenue that the vacant
apartments would have if the community were otherwise fully leased at
current market rents. For 2001, the weighted average monthly revenue per
occupied apartment home increased $130 (9.1%) to $1,558 compared to $1,432
for 2000. The average economic occupancy decreased from 97.6% in 2000 to
95.4% for 2001.
Although most of our markets have been affected by the current recession, we
have observed the most volatility in market rents and occupancy in certain
Northern California sub-markets over the past two years, which accounts for
approximately 37.2% of current Established Community rental revenue. This
volatility in rents and occupancy was partially related to volatility in the
technology sector that comprises a significant portion of the Northern
California economy. While market rental rates increased substantially in 2000,
we have experienced a 22.0% decline in market rental rates for that region
during 2001. Economic occupancy decreased in the Northern California region,
from 97.8% for 2000 to 93.9% for 2001. We could see further declines in
occupancy and market rents as this market resets to more sustainable levels.
Also in 2001, we experienced greater volatility in occupancy related to our
corporate and furnished
38
apartment homes throughout our portfolio, partially due to reduced business
travel. Our exposure to these homes fell from a peak of approximately 7.0% to
approximately 4.5% of our current portfolio at year end.
Operating expenses, excluding property taxes increased primarily due to the
addition of newly developed, redeveloped and acquired apartment homes. In
2001, separation costs of $2,493,000 due to the departure of a senior
executive during the first quarter contributed to the increase for that year.
Maintenance, insurance and other costs associated with Development and
Redevelopment Communities go from being capitalized when the community is
under construction to expensed when and as homes within the community receive
a certificate of occupancy. Insurance expense has increased over the past two
years, particularly during 2001 as the insurance and reinsurance markets
deteriorated, resulting in higher insurance costs for the entire real estate
sector. We renewed our general liability policy on August 1, 2001 and our
property coverage on November 1, 2001. While the terms of our insurance
coverage has not materially changed, the level of our deductible and premium
costs increased significantly. We expect that our insurance costs will
increase in 2002 by approximately $9.2 million (of which $4 million is for the
primary layer of property coverage) including the cost of deductible
allocations, which now represents uninsured losses that previously would have
been covered by insurance. The remaining $5.2 million increase is for the
upper layers of property coverage and casualty coverage.
For Established Communities, 2001 operating expenses, excluding property
taxes and unallocated overhead expenses, increased $3,559,000 (4.8%) to
$76,995,000 due to increases in insurance, utilities, marketing and office
and administration expenses. During 2000, operating expenses increased
$2,754,000 (4.7%) due to higher payroll, insurance, decorating and
maintenance costs which were partially offset by lower utility and
marketing costs.
Property taxes increased due to higher assessments and the addition of newly
developed, redeveloped or acquired apartment homes, partially offset by the
sale of communities. Property taxes on Development and Redevelopment
Communities are capitalized while the community is under construction. We
begin to expense these costs as homes within the community receive a
certificate of occupancy.
For Established Communities, the increase in property taxes in 2001 of
$969,000 was primarily due to higher assessments throughout all regions.
The increase in 2000 was primarily due to an adjustment made in 1999 to
eliminate accrued but unassessed taxes and payments made in 2000 to settle
prior year assessments.
Interest expense increased in 2001 primarily due to the issuance of
$350,000,000 of unsecured notes during the second half of 2000 and the
issuance of $300,000,000 of unsecured notes in September 2001. The increase in
interest expense in 2000 compared to 1999 was due to the issuance of unsecured
notes, an increase in short term interest rates and a decrease in capitalized
interest. We expect to issue $200,000,000 or more of unsecured debt in 2002,
of which $100,000,000 will be used to refinance maturing unsecured debt.
Depreciation expense changes are primarily related to the timing of asset
sales, acquisitions and completion of development or redevelopment activities.
Depreciation expense increased $7,469,000 and $12,851,000 in 2001 and 2000,
respectively. We expect that depreciation expense will continue to increase
during 2002 as we anticipate a reduction in asset sales compared to prior
years.
General and administrative expense increased in 2001 primarily due to an
increase in office personnel and related payroll costs and compensation
expense of $784,000 related to the retirement of a senior executive.
Contributing to the increase in 2000, there was an increase in compensation
expense for a senior officer, whose salary was expensed in 2000 but
capitalized in 1999 while he served the company in a different capacity and
consulting costs related to services provided by a former senior officer.
39
Equity in income of unconsolidated joint ventures represents our share of net
income or loss from joint ventures. The decrease in 2001 related primarily to
our pro rata share of net losses from a technology investment accounted for
under the equity method as well as a valuation allowance of $934,000 for an
investment in a technology company accounted for under the cost method.
Interest income during 2001 increased due to higher average cash balances
invested. The decrease in interest income during 2000 related primarily to the
sale of the Fairlane Woods participating mortgage note in the fourth quarter of
1999.
Gain on sale of communities of $62,852,000, $40,779,000, and $47,093,000 were
realized in 2001, 2000, and 1999, respectively. These gains are the result of
our strategy to sell communities that do not meet our long-term strategic
objectives and redeploy the proceeds to current Development and Redevelopment
Communities. The amount of gains realized depend on many factors, including the
number of communities sold, the size and carrying value of those communities,
and the market conditions in the local area. In 2002, we expect to decrease our
disposition activity compared to recent years.
Funds from Operations
We consider Funds from Operations ("FFO") to be an appropriate measure of our
operating performance because it helps investors understand our ability to incur
and service debt and to make capital expenditures. We believe that to understand
our operating results, FFO should be examined with net income as presented in
the Consolidated Statements of Operations and Comprehensive Income included
elsewhere in this report. FFO is determined in accordance with a definition
adopted by the Board of Governors of the National Association of Real Estate
Investment Trusts(R), and is defined as:
- net income or loss computed in accordance with generally
accepted accounting principles ("GAAP"), except that excluded
from net income or loss are gains or losses on sales of property
and extraordinary (as defined by GAAP) gains or losses on debt
restructuring;
- plus depreciation of real estate assets; and
- after adjustments for unconsolidated partnerships and joint
ventures.
FFO does not represent cash generated from operating activities in accordance
with GAAP. Therefore it should not be considered an alternative to net income as
an indication of our performance. FFO should also not be considered an
alternative to net cash flows from operating activities, as determined by GAAP,
or as a measure of liquidity. Additionally, it is not necessarily indicative of
cash available to fund cash needs. Further, FFO as calculated by other REITs may
not be comparable to our calculation of FFO. The following is a reconciliation
of net income to FFO and a presentation of GAAP based cash flow metrics (dollars
in thousands):
Years ended
----------------------------------
2001 2000 1999
-------- ------ ------
Funds from Operations
Net income $ 248,997 $ 210,604 $ 172,276
Preferred dividends (32,497) (39,779) (39,779)
Depreciation - real estate assets 126,984 119,416 107,928
Joint venture adjustments 1,102 792 751
Minority interest expense 1,559 1,759 1,975
Gain on sale of communities (62,852) (40,779) (47,093)
--------- --------- ---------
Funds from Operations $ 283,293 $ 252,013 $ 196,058
========= ========= =========
GAAP based Cash Flow Metrics
Net cash provided by operating activities $ 308,723 $ 296,462 $ 251,779
========= ========= =========
Net cash used in investing activities $(259,391) $(252,534) $(236,687)
========= ========= =========
Net cash provided by (used in) financing activities $ (33,580) $5,685 $ (16,361)
========= ========= =========
40
Capitalization of Fixed Assets and Community Improvements
Our policy with respect to capital expenditures is generally to capitalize only
non-recurring expenditures. We capitalize improvements and upgrades only if the
item:
- exceeds $15,000;
- extends the useful life of the asset; and
- is not related to making an apartment home ready for the next
resident.
Under this policy, virtually all capitalized costs are non-recurring, as
recurring make-ready costs are expensed as incurred. Recurring make-ready costs
include the following:
- carpet and appliance replacements;
- floor coverings;
- interior painting; and
- other redecorating costs.
We capitalize purchases of personal property, such as computers and furniture,
only if the item is a new addition and the item exceeds $2,500. We generally
expense purchases of personal property made for replacement purposes. For
Established and Other Stabilized Communities, we recorded non-revenue generating
capitalized expenditures of approximately $251 per apartment home in 2001 and
$225 per apartment home in 2000. The average maintenance expense, including
carpet and appliance replacements, related to these communities was $1,196 per
apartment home in 2001 and $1,145 in 2000. We anticipate that capitalized costs
per apartment home will gradually increase as the average age of our communities
increases.
Liquidity and Capital Resources
Liquidity. The primary source of liquidity is our cash flows from operations.
Operating cash flows have historically been determined by:
- the number of apartment homes;
- rental rates;
- occupancy levels; and
- our expenses with respect to these apartment homes.
The timing, source and amount of cash flows provided by financing activities and
used in investing activities are sensitive to the capital markets environment,
particularly to changes in interest rates. Changes in the capital markets
environment affect our plans for undertaking construction and development as
well as acquisition activity.
Cash and cash equivalents totaled $72,986,000 on December 31, 2001, an increase
of $15,752,000 for the year. The following discussion relates to changes in cash
due to operating, investing and financing activities, which are presented in our
Consolidated Statements of Cash Flows included in this report.
Operating Activities - Net cash provided by operating activities increased to
$308,723,000 in 2001 from $296,462,000 in 2000 primarily due to additional
operating income from newly developed and redeveloped communities as well as
growth in operating income from Established Communities, partially offset by the
loss of operating income from communities sold.
41
Investing Activities - Net cash used in investing activities of $259,391,000 in
2001 related to investments in assets through development and redevelopment of
apartment communities partially offset by proceeds from the sales of apartment
communities.
During 2001, we invested $484,604,000 in the purchase and development of
real estate.
- We began the development of nine new communities. These communities
are expected to contain a total of 2,135 apartment homes upon
completion, and the total investment, including land acquisition
costs, is projected to be approximately $362,000,000. Also, we
completed the development of six new communities containing a total of
1,656 apartment homes for a total investment of $274,000,000.
- We acquired six land parcels during 2001 on which construction has not
yet commenced. If developed in the manner expected, we expect that the
six new communities developed on these parcels would contain a total
of 1,615 apartment homes at an investment, including land acquisition
costs of $52,110,000, of approximately $331,000,000. In addition, we
continue to hold three parcels of land purchased prior to January 2001
that if developed in the manner expected would contain three new
communities with a total of 537 apartment homes. Total land held for
future development, including carrying cost, totals $66,608,000.
- We completed the redevelopment of one community containing 294
apartment homes during 2001 for a total investment in redevelopment
(i.e. excluding acquisition costs) of $24,400,000.
- We acquired three communities, containing 995 apartment homes, for
approximately $129,300,000. We acquired these communities in
connection with a fixed price forward purchase agreement signed in
1997 with an unaffiliated party.
The development and redevelopment of communities involves risks that the
investment will fail to perform in accordance with expectations. See "Risks
of Development and Redevelopment" in Item 2 of this report for our
discussion of these and other risks inherent in developing or redeveloping
communities.
We sold seven apartment communities during 2001 as we seek to optimize the
level of our geographical concentration in selected high barrier-to-entry
markets when market conditions are favorable. The net proceeds of
$238,545,000 generated by these sales are being used to develop and
redevelop communities currently under construction or reconstruction. We
deposited the proceeds from two of these sales into a cash escrow account
to facilitate a like-kind exchange transaction. The remaining proceeds were
invested or used to reduce amounts outstanding under our variable rate
unsecured credit facility until needed to fund development or redevelopment
activities.
Financing Activities - Net cash used in financing activities totaled $33,580,000
for the year ended December 31, 2001, primarily due to dividends paid and the
redemption of our Series F and Series G Preferred Stock, partially offset by the
proceeds from the issuance of $300,000,000 of unsecured notes in September 2001.
See Note 3 "Notes Payable, Unsecured Notes and Credit Facility" and Note 4
"Stockholders Equity" in our Consolidated Financial Statements, for additional
information.
We regularly review our short and long-term liquidity needs, the adequacy of
Funds from Operations, as defined above, and other expected liquidity sources to
meet these needs. We believe our principal short-term liquidity needs are to
fund:
- normal recurring operating expenses;
- debt service payments;
- the distributions required with respect to preferred stock;
42
- the minimum dividend payments required to maintain our REIT
qualification under the Internal Revenue Code of 1986;
- opportunities for the acquisition of improved property; and
- development and redevelopment activity in which we are currently
engaged.
We anticipate that we can fully satisfy these needs from a combination of cash
flows provided by operating activities and capacity under the unsecured credit
facility.
One of our principal long-term liquidity needs is the repayment of medium and
long-term debt at the time at which such debt matures. For unsecured senior
notes, we anticipate that no significant portion of the principal of these notes
will be repaid prior to maturity. If we do not have funds on hand sufficient to
repay our indebtedness, it will be necessary for us to refinance this debt. This
refinancing may be accomplished by additional debt financing that is
collateralized by mortgages on individual communities or groups of communities,
by uncollateralized private or public debt offerings or by additional equity
offerings. We also anticipate having significant retained cash flow in each year
so that when a debt obligation matures, some or all of each maturity can be
satisfied from this retained cash. Although we believe we will have the capacity
to meet our long-term liquidity needs, we cannot assure you that additional debt
financing or debt or equity offerings will be available or, if available, that
they will be on terms we consider satisfactory.
Capital Resources. We intend to match the long-term nature of our real estate
assets with long-term cost effective capital to the extent permitted by
prevailing market conditions. Since January 1, 2000, external sources of debt
capital used to fund investment activities totaled $650,000,000, representing
issuances of ten year unsecured debt. During this same two year period, cash
flow from operating activities exceeded dividends paid by $216,000,000. We
expect both sources of capital to remain available to meet our capital needs for
the foreseeable future.
Variable Rate Unsecured Credit Facility
Our unsecured revolving credit facility is furnished by a consortium of banks
and provides $500,000,000 in short-term credit. Under the terms of the credit
facility, if the Company elects to increase the facility up to $650,000,000, the
consortium of banks cannot prohibit such an increase of the facility and the
increased lending commitment could be provided by one or more banks (from the
consortium or otherwise) to the extent they choose to commit to lend additional
funds. We pay participating banks an annual facility fee of $750,000 in equal
quarterly installments. The unsecured credit facility bears interest at varying
levels tied to the London Interbank Offered Rate (LIBOR) based on ratings levels
achieved on our unsecured notes and on a maturity schedule selected by us. The
current stated pricing is LIBOR plus 0.60% per annum (2.5% on March 1, 2002). A
competitive bid option is available for borrowings of up to $400,000,000. This
option allows banks that are part of the lender consortium to bid to provide us
loans at a rate that is lower than the stated pricing provided by the unsecured
credit facility. The competitive bid option may result in lower pricing if
market conditions allow. Pricing under the competitive bid option resulted in
average pricing of LIBOR plus 0.43% for amounts most recently borrowed under the
competitive bid option. At March 1, 2002, zero was outstanding, $85,820,000 was
used to provide letters of credit and $414,180,000 was available for borrowing
under the unsecured credit facility.
Interest Rate Protection Agreements
We are not a party to any long-term interest rate agreements, other than
interest rate protection and swap agreements on approximately $167,000,000 of
our variable rate tax-exempt indebtedness. We intend, however, to evaluate the
need for long-term interest rate protection agreements as interest rate market
conditions dictate, and we have engaged a consultant to assist in managing our
interest rate risks and exposure.
43
Future Financing and Capital Needs
As of December 31, 2001, we had 15 new communities under construction. Also, one
additional community is being built by an unaffiliated third party with whom we
have entered into a fixed price forward purchase commitment. As of December 31,
2001, a total estimated cost of $404,682,000 remained to be invested in these
communities. In addition, we had three other communities under reconstruction,
for which an estimated $10,191,000 remained to be invested.
Substantially all of the capital expenditures necessary to complete the
communities currently under construction and reconstruction will be funded from:
- the remaining capacity under our current $500,000,000 unsecured credit
facility;
- the net proceeds from sales of existing communities;
- retained operating cash; and/or
- the issuance of debt or equity securities.
We expect to continue to fund development costs related to pursuing Development
Rights from retained operating cash and borrowings under the unsecured credit
facility. We believe these sources of capital will be adequate to take the
proposed communities to the point in the development cycle where construction
can begin. Before planned reconstruction activity or the construction of a
Development Right begins, we intend to arrange adequate financing to complete
these undertakings, although we cannot assure you that we will be able to obtain
such financing. In the event that financing cannot be obtained, we may have to
abandon Development Rights, write-off associated pursuit costs that were
capitalized and/or forego reconstruction activity. In such instances, we will
not realize the increased revenues and earnings that we expected from such
pursuits, and the related write-off of costs will increase current period
expenses.
Our liquidity could be adversely impacted by expanding development and
acquisition activities and/or reduced capital (as compared to prior years)
available from asset sales. To meet the balance of our liquidity needs under
such conditions, we would need to arrange additional capacity under our existing
unsecured credit facility, sell additional existing communities and/or issue
additional debt or equity securities. While we believe we have the financial
position to expand our short-term credit capacity and support our capital
markets activity, we cannot assure you that we will be successful in completing
these arrangements, sales or offerings. The failure to complete these
transactions on a cost-effective basis could have a material adverse impact on
our operating results and financial condition, including the abandonment of
development pursuits and a resulting charge to earnings.
It is our policy to sell assets that do not meet our long-term investment
criteria when market conditions are favorable, and to redeploy the proceeds.
Under our disposition program, we solicit competing bids from unrelated parties
for these individual assets and consider the sales price and tax ramifications
of each proposal. We intend to actively seek buyers for communities that we
determine to hold for sale. However, we cannot assure you that the assets can be
sold on terms that we consider satisfactory. We expect to significantly curtail
our disposition program in 2002 in response to anticipated real estate and
capital markets conditions.
We have minority interest investments in five technology companies, including
Constellation Real Technologies LLC, an entity formed by a number of real estate
investment trusts and real estate operating companies for the purpose of
investing in multi-sector real estate technology opportunities. Our original
commitment to Constellation was $4 million. Constellation has proposed a
reduction in the aggregate amount of capital commitments from its members. If
that proposal is accepted, our revised commitment would fall to $2.6 million. As
of March 1, 2002, we have contributed approximately $959,000. In January 2002,
we invested an additional $2.3 million in Realeum, Inc., a company involved in
the development and deployment of a property management and leasing automation
system. Pursuant to an agreement with Realeum, Inc., we will utilize the
property management and leasing automation system in exchange for
44
payments under a licensing arrangement. Realeum, Inc. is negotiating licensing
arrangements with other real estate companies unaffiliated with AvalonBay. As of
March 1, 2002, the total remaining carrying value of our investments in the five
technology companies was $4.8 million. We have no obligation to contribute
additional funds, other than the commitment to Constellation described above.
Debt Maturities
The following table details debt maturities for the next five years, excluding
the unsecured credit facility:
ALL-IN PRINCIPAL BALANCE OUTSTANDING SCHEDULED MATURITIES
INTEREST MATURITY ----------------------- ----------------------------------
COMMUNITY RATE (1) DATE 12-31-00 12-31-01 2002 2003 2004
- ----------------------------------- -------- -------- -------- -------- ---- ---- ----
TAX-EXEMPT BONDS
FIXED RATE
Avalon at Foxchase I 5.88% Nov-2007 $ 16,800 $ 16,800(2) $ -- $ -- $ --
Avalon at Foxchase II 5.88% Nov-2007 9,600 9,600(2) -- -- --
Fairway Glen 5.88% Nov-2007 9,580 9,580(2) -- -- --
CountryBrook 7.87% Mar-2012 18,934 18,577 386 417 451
Waterford 5.88% Aug-2014 33,100 33,100(2) -- -- --
Avalon at Mountain View 5.88% Mar-2017 18,300 18,300(2) -- -- --
Avalon at Dulles 7.04% Jul-2024 12,360 12,360 -- -- --
Avalon at Symphony Glen 7.00% Jul-2024 9,780 9,780 -- -- --
Avalon View 7.55% Aug-2024 18,465 18,115 373 397 425
Avalon at Lexington 6.56% Feb-2025 14,347 14,073 289 307 326
Avalon at Nob Hill 5.80% Jun-2025 20,013 19,745(2) 288 308 331
Avalon at Mission Viejo 5.50% Jun-2025 7,354 7,256(2) 105 112 121
Avalon Campbell 6.48% Jun-2025 36,981 36,386(2) 637 684 733
Avalon Pacifica 6.48% Jun-2025 16,775 16,505(2) 289 310 332
Crossbrook 6.48% Jun-2025 8,156 --(3) -- -- --
Avalon Knoll 6.95% Jun-2026 13,393 13,193 214 230 246
Avalon Landing 6.85% Jun-2026 6,626 6,525 108 116 124
Avalon Fields 7.05% May-2027 11,609 11,454 169 180 193
Avalon West 7.73% Dec-2036 8,579 8,522 61 65 70
Avalon Oaks 6.95% Feb-2041 -- 17,718 91 97 104
---------- ---------- --------- --------- ---------
290,752 297,589 3,010 3,223 3,456
VARIABLE RATE
Avalon Devonshire Dec-2025 27,305 27,305 -- -- --
Avalon at Fairway Hills I Jun-2026 11,500 11,500 -- -- --
Avalon at Laguna Niguel Mar-2009 10,400 10,400 -- -- --
Avalon Greenbriar May-2026 18,755 18,755 -- -- --
---------- ---------- --------- --------- ---------
67,960 67,960 -- -- --
CONVENTIONAL LOANS
FIXED RATE
$100 Million unsecured notes 7.375% Sep-2002 100,000 100,000 100,000 -- --
$50 Million unsecured notes 6.25% Jan-2003 50,000 50,000 -- 50,000 --
$100 Million unsecured notes 6.50% Jul-2003 100,000 100,000 -- 100,000 --
$125 Million medium-term notes 6.58% Feb-2004 125,000 125,000 -- -- 125,000
$100 Million unsecured notes 6.625 Jan-2005 100,000 100,000 -- -- --
$50 Million unsecured notes 6.50% Jan-2005 50,000 50,000 -- -- --
$150 Million unsecured notes 6.80% Jul-2006 150,000 150,000 -- -- --
$110 Million unsecured notes 6.875% Dec-2007 110,000 110,000 -- -- --
$50 Million unsecured notes 6.625% Jan-2008 50,000 50,000 -- -- --
$150 Million medium-term notes 8.25% Jul-2008 150,000 150,000 -- -- --
$150 Million medium-term notes 7.50% Aug-2009 150,000 150,000 -- -- --
$200 Million medium-term notes 7.50% Dec-2010 200,000 200,000 -- -- --
$300 Million medium-term notes 6.625% Sep-2011 -- 300,000 -- -- --
Avalon Redmond Place 7.31% May-2001 11,042 -- -- -- --
Avalon at Pruneyard 7.25% May-2004 12,870 12,870 -- -- 12,870
Avalon Walk II 8.93% Aug-2004 12,300 12,036 288 315 11,433
---------- ---------- -------- -------- --------
1,371,212 1,659,906 100,288 150,315 149,303
VARIABLE RATE
Avalon on the Sound 2002 -- 57,314 57,314 -- --
---------- ---------- -------- -------- --------
TOTAL INDEBTEDNESS - EXCLUDING UNSECURED CREDIT FACILITY $1,729,924 $2,082,769 $160,612 $153,538 $152,759
========== ========== ======== ======== ========
SCHEDULED MATURITIES
-------------------------------------
COMMUNITY 2005 2006 THEREAFTER
--------- ---- ---- ----------
TAX-EXEMPT BONDS
FIXED RATE
Avalon at Foxchase I $ -- $ -- $ 16,800
Avalon at Foxchase II -- -- 9,600
Fairway Glen -- -- 9,580
CountryBrook 488 528 16,307
Waterford -- -- 33,100
Avalon at Mountain View -- -- 18,300
Avalon at Dulles -- -- 12,360
Avalon at Symphony Glen -- -- 9,780
Avalon View 455 485 15,980
Avalon at Lexington 347 368 12,436
Avalon at Nob Hill 355 380 18,083
Avalon at Mission Viejo 129 139 6,650
Avalon Campbell 786 843 32,703
Avalon Pacifica 356 382 14,836
Crossbrook -- -- --
Avalon Knoll 263 282 11,958
Avalon Landing 132 142 5,903
Avalon Fields 207 222 10,483
Avalon West 75 80 8,171
Avalon Oaks 112 120 17,194
--------- --------- ---------
3,705 3,971 280,224
VARIABLE RATE
Avalon Devonshire -- -- 27,305
Avalon at Fairway Hills I -- -- 11,500
Avalon at Laguna Niguel -- -- 10,400
Avalon Greenbriar -- -- 18,755
--------- --------- ---------
-- -- 67,960
CONVENTIONAL LOANS
FIXED RATE
$100 Million unsecured notes -- -- --
$50 Million unsecured notes -- -- --
$100 Million unsecured notes -- -- --
$125 Million medium-term notes -- -- --
$100 Million unsecured notes 100,000 -- --
$50 Million unsecured notes 50,000 -- --
$150 Million unsecured notes -- 150,000 --
$110 Million unsecured notes -- -- 110,000
$50 Million unsecured notes -- -- 50,000
$150 Million medium-term notes -- -- 150,000
$150 Million medium-term notes -- -- 150,000
$200 Million medium-term notes -- -- 200,000
$300 Million medium-term notes -- -- 300,000
Avalon Redmond Place -- -- --
Avalon at Pruneyard -- -- --
Avalon Walk II -- -- --
--------- --------- -----------
150,000 150,000 960,000
VARIABLE RATE
Avalon on the Sound -- -- --
--------- --------- -----------
TOTAL INDEBTEDNESS - EXCLUDING UNSECURED CREDIT FACILITY $153,705 $153,971 $1,308,184
- -----------------------
(1) Includes credit enhancement fees, facility fees, trustees, etc.
(2) Financed by variable rate tax exempt debt, but interest rate is
effectively fixed at the rate indicated through a swap agreement.
The weighted average maturity of these swap agreements is 4.5 years.
(3) The remaining loan balance was repaid in connection with the
disposition of the community during 2001.
45
Redemption of Preferred Stock
In June 2001, we redeemed all 4,455,000 outstanding shares of our 9.00% Series F
Cumulative Redeemable Preferred Stock at a price of $25.00 per share, plus
$0.1625 in accrued and unpaid dividends, for an aggregate redemption price of
$25.1625 per share. In October 2001, we redeemed all 4,300,000 outstanding
shares of our 8.96% Series G Cumulative Redeemable Preferred Stock at a price of
$25.00 per share, plus $0.4418 in accrued and unpaid dividends, for an aggregate
redemption price of $25.4418 per share. We currently have other series of
redeemable preferred stock outstanding having an aggregate stated value of
$239,192,500. These series become redeemable at our option at various times over
the next seven years. As such series become redeemable, we will evaluate the
requirements necessary for such redemptions as well as the cost-effectiveness
based on the existing market conditions. The following preferred stock series
remain outstanding:
Shares outstanding Payable Annual Liquidation Non-redeemable
Series March 1, 2002 quarterly rate preference prior to
------ ------------------ ------------------------ ------- ------------ ------------------
C 2,300,000 March, June, September, 8.50% $25 June 20, 2002
December
D 3,267,700 March, June, September, 8.00% $25 December 15, 2002
December
H 4,000,000 March, June, September, 8.70% $25 October 15, 2008
December
Inflation
Substantially all of our leases are for a term of one year or less. This may
enable us to realize increased rents upon renewal of existing leases or the
beginning of new leases. Short-term leases generally minimize our risk from the
adverse effects of inflation, although these leases generally permit residents
to leave at the end of the lease term without penalty. We believe that
short-term leases, combined with relatively consistent demand, results in rents
and cash flow which provide an attractive inflation hedge.
Critical Accounting Policies
Our accounting policies are in conformity with GAAP. The preparation of
financial statements in conformity with GAAP requires management to use judgment
in the application of accounting policies, including making estimates and
assumptions. These judgments affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. If our judgment or interpretation of the facts and
circumstances relating to various transactions had been different, it is
possible that different accounting policies would have been applied resulting in
a different presentation of our financial statements. Below is a discussion of
accounting policies which we consider critical in that they may require complex
judgment in their application or require estimates about matters which are
inherently uncertain. Additional discussion of accounting policies which we
consider significant, including further discussion of the critical accounting
policies described below, can be found in the notes to our Consolidated
Financial Statements.
Real Estate Development Rights
With few exceptions, we capitalize pre-development costs incurred in pursuit of
new development opportunities. These costs include legal fees, design fees and
related overhead costs. The accompanying Consolidated Financial Statements
include a charge to expense to provide an allowance for unrecoverable
46
capitalized pre-development costs that may be written off if we determine that a
pre-development community is unlikely to be developed.
Real Estate
If there is an event or change in circumstance that indicates an impairment in
the value of a community, our policy is to assess the impairment by making a
comparison of the current and projected operating cash flows of the community
over its remaining useful life, on an undiscounted basis, to the carrying amount
of the community. If the carrying amount is in excess of the estimated projected
operating cash flows of the community, we would recognize an impairment loss
equivalent to an amount required to adjust the carrying amount to its estimated
fair market value. We have not recognized an impairment loss in 2001, 2000 or
1999 on any real estate.
Investments in Technology Companies
The Company has minority interest investments in five technology companies. As
of March 1, 2002, the total remaining carrying value of these investments, net
of an allowance of $934,000, was $4,819,000. If there is an event or change in
circumstance that indicates a loss in the value of an investment, our policy is
to record the loss and reduce the value of the investment to its fair value. A
loss in value would be indicated if we could not recover the carrying value of
the investment or if the investee could not sustain an earnings capacity that
would justify the carrying amount of the investment. Due to the nature of these
investments, an impairment in value can be difficult to determine.
Legal Contingencies
We are subject to various legal proceedings and claims that arise in the
ordinary course of business. These matters are frequently covered by insurance.
While the resolution of these matters cannot be predicted with certainty, we
believe the final outcome of such matters will not have a material adverse
effect on our financial position or the results of operations. Once it has been
determined that a loss is probable to occur, the estimated amount of the loss is
recorded in the financial statements. Both the amount of the loss and the point
at which its occurrence is considered probable can be difficult to determine.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain financial market risks, the most predominant being
fluctuations in interest rates. Interest rate fluctuations are monitored by us
as an integral part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on our results of operations. The effect of interest rate
fluctuations historically has been small relative to other factors affecting
operating results, such as rental rates and occupancy. The specific market risks
and the potential impact on our operating results are described below.
Our operating results are affected by changes in interest rates as a result of
borrowings under our variable rate unsecured credit facility as well as
outstanding bonds with variable interest rates. We had $125,274,000 and
$67,960,000 in variable rate debt outstanding as of December 31, 2001 and 2000,
respectively. If interest rates on the variable rate debt had been 100 basis
points higher throughout 2001 and 2000, our annual interest costs would have
increased by approximately $1,500,000 and $2,500,000, respectively, based on
balances outstanding during the applicable years.
47
We currently use interest rate swap agreements to reduce the impact of interest
rate fluctuations on certain variable rate indebtedness. Under swap agreements,
- we agree to pay to a counterparty the interest that would have been
incurred on a fixed principal amount at a fixed interest rate
(generally, the interest rate on a particular treasury bond on the
date the agreement is entered into, plus a fixed increment), and
- the counterparty agrees to pay to us the interest that would have been
incurred on the same principal amount at an assumed floating interest
rate tied to a particular market index.
As of December 31, 2001, the effect of swap agreements is to fix the interest
rate on approximately $167,272,000 of our variable rate tax-exempt debt.
Furthermore, swap agreements fix the interest rate on approximately $23,500,000
of unconsolidated variable rate debt as of December 31, 2001. The swap
agreements were not electively entered into by us but, rather, were a
requirement of either the bond issuer or the credit enhancement provider related
to certain of our tax-exempt bond financings. Because the counterparties
providing the swap agreements are major financial institutions which have an A+
or better credit rating by the Standard & Poor's Ratings Group and the interest
rates fixed by the swap agreements are significantly higher than current market
rates for such agreements, we do not believe there is exposure at this time to a
default by a counterparty provider.
48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item 8 is included as a separate section of this Annual
Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information pertaining to directors and executive officers of the registrant is
incorporated herein by reference to the registrant's Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to the Annual Meeting of
Stockholders to be held on May 7, 2002.
ITEM 11. EXECUTIVE COMPENSATION
Information pertaining to executive compensation is incorporated herein by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission within 120 days after the end of the year covered by
this Form 10-K with respect to the Annual Meeting of Stockholders to be held on
May 7, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information pertaining to security ownership of management and certain
beneficial owners of the registrant's Common Stock is incorporated herein by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission within 120 days after the end of the year covered by
this Form 10-K with respect to the Annual Meeting of Stockholders to be held on
May 7, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information pertaining to certain relationships and related transactions is
incorporated herein by reference to the registrant's Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to the Annual Meeting of
Stockholders to be held on May 7, 2002.
49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
14(a)(1) FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements and Financial Statement Schedule:
Report of Independent Accountants F-1
Consolidated Balance Sheets as of December 31, 2001 and 2000 F-2
Consolidated Statements of Operations and Other Comprehensive Income for
the years ended December 31, 2001, 2000 and 1999 F-3
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Cash Flows for
the years ended December 31, 2001, 2000 and 1999 F-5
Notes to Consolidated Financial Statements F-7
14(a)(2) FINANCIAL STATEMENT SCHEDULE
Schedule III - Real Estate and Accumulated Depreciation F-25
14(a)(3) EXHIBITS
The exhibits listed on the accompanying Index to Exhibits are filed as a part of
this report.
14(b) REPORTS ON FORM 8-K
On October 9, 2001, the Company filed a Report on Form 8-K for the purpose of
disclosing a letter sent to holders of the Company's common and preferred stock
to announce the suspension of the Company's Dividend Reinvestment and Stock
Purchase Plan until further notice.
50
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
3(i).1 - Articles of Amendment and Restatement of Articles of Incorporation
of the Company, dated as of June 4, 1998. (Incorporated by reference
to Exhibit 3(i).1 to Form 10-Q of the Company filed August 14,
1998.)
3(i).2 - Articles of Amendment, dated as of October 2, 1998. (Incorporated
by reference to Exhibit 3.1(ii) to the Company's Current Report on
Form 8-K filed October 6, 1998.)
3(i).3 - Articles Supplementary, dated as of October 13, 1998, relating to
the 8.70% Series H Cumulative Redeemable Preferred Stock.
(Incorporated by reference to Exhibit 1 to Form 8-A of the Company
filed October 14, 1998.)
3(ii).1 - Bylaws of the Company, as amended and restated, dated as of July
24, 1998. (Incorporated by reference to Exhibit 3(ii).1 to Form 10-Q
of the Company filed August 14, 1998.)
3(ii).2 - Amendment to Bylaws of the Company, dated February 10, 1999.
(Incorporated by reference to Exhibit 3(ii).2 to Form 10-K of the
Company filed March 31, 1999.)
3(ii).3 - Amendment to Bylaws of the Company, dated May 5, 1999. (Incorporated
by reference to Exhibit 3(ii).3 to Form 10-Q of the Company filed
August 16, 1999.)
4.1 - Indenture of Avalon Properties, Inc. (hereinafter referred to as
"Avalon Properties") dated as of September 18, 1995. (Incorporated
by reference to Avalon Properties' Registration Statement on Form
S-3(33-95412), filed on August 4, 1995.)
4.2 - First Supplemental Indenture of Avalon Properties dated as of
September 18, 1995. (Filed herewith.)
4.3 - Second Supplemental Indenture of Avalon Properties dated as of
December 16, 1997. (Incorporated by reference to Avalon Properties'
Current Report on Form 8-K filed January 26, 1998.)
4.4 - Third Supplemental Indenture of Avalon Properties dated as of
January 22, 1998. (Incorporated by reference to Avalon Properties'
Current Report on Form 8-K filed January 26, 1998.)
51
EXHIBIT
NO. DESCRIPTION
4.5 - Indenture, dated as of January 16, 1998, between the Company and
State Street Bank and Trust Company, as Trustee. (Incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form 8-K
filed January 21, 1998.)
4.6 - First Supplemental Indenture, dated as of January 20, 1998,
between the Company and the Trustee. (Incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K filed
January 21, 1998.)
4.7 - Second Supplemental Indenture, dated as of July 7, 1998, between
the Company and the Trustee. (Incorporated by reference to Exhibit
4.2 to the Company's Current Report on Form 8-K filed July 9, 1998.)
4.8 - Third Supplemental Indenture, dated as of December 21, 1998
between the Company and the Trustee, including forms of Floating
Rate Note and Fixed Rate Note (Incorporated by reference to Exhibit
4.4 to the Company's Current Report on Form 8-K filed December 21,
1998.)
4.9 - Amended and Restated Third Supplemental Indenture, dated as of
July 10, 2000 between the Company and the Trustee, including forms
of Floating Rate Note and Fixed Rate Note. (Incorporated by
reference to Exhibit 4.4 to the Company's Current Report on Form 8-K
filed July 11, 2000.)
4.10 - Dividend Reinvestment and Stock Purchase Plan of the Company
filed September 14, 1999. (Incorporated by reference to Form S-3 of
the Company, File No. 333-87063.)
4.11 - Amendment to the Company's Dividend Reinvestment and Stock
Purchase Plan filed on December 17, 1999. (Incorporated by reference
to the Prospectus Supplement filed pursuant to Rule 424(b)(2) of the
Securities Act of 1933 on December 17, 1999.)
4.12 - Shareholder Rights Agreement, dated March 9, 1998 (the "Rights
Agreement"), between the Company and First Union National Bank (as
successor to American Stock Transfer and Trust Company) as Rights
Agent (including the form of Rights Certificate as Exhibit B).
(Incorporated by reference to Exhibit 4.1 to Form 8-A of the Company
filed March 11, 1998.)
4.13 - Amendment No. 1 to the Rights Agreement, dated as of February 28,
2000, between the Company and the Rights Agent. (Incorporated by
reference to Exhibit 4.2 to Form 8-A/A of the Company filed February
28, 2000.)
4.14 - Amendment No.2 to the Rights Agreement, dated January 4, 2002,
between the Company and the Rights Agent. (Incorporated by reference
to Exhibit 4.3 to Form 8-K of the Company filed January 7, 2002.)
10.1 - Distribution Agreement, dated December 21, 1998, among AvalonBay
Communities, Inc. (the "Company") and the Agents, including
Administrative Procedures, relating to the MTNs. (Incorporated by
reference to Exhibit 4.4 to the Company's Current Report on Form 8-K
filed December 21, 1998.)
10.2 - First Amendment, dated as of June 27, 2000, to Distribution
Agreement, dated December 21, 1998, among the Company and the
Agents. (Incorporated by reference to Exhibit 1.2 to the Company's
Current Report on Form 8-K filed July 11, 2000.)
10.3 - Second Amendment, dated as of August 31, 2001, to Distribution
Agreement, dated December 21, 1998, among the Company and the
Agents. (Incorporated by reference to Exhibit 1.3 to the Company's
Current Report on Form 8-K filed September 4, 2001.)
10.4+ - Employment Agreement, dated as of March 9, 1998, between the
Company and Richard L. Michaux (Incorporated by reference to Exhibit
10.1 to Form 10-Q of the Company filed August 14, 1998) and
Amendment, dated as of July 30, 1999, to Employment Agreement, dated
as of March 9, 1998, between the Company and Richard L. Michaux.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q of the
Company filed August 16, 1999.)
10.5+ - Employment Agreement, dated as of March 9, 1998, between the
Company and Thomas J. Sargeant. (Incorporated by reference to
Exhibit 10.4 to Form 10-Q of the Company filed August 14, 1998.)
10.6+ - Employment Agreement, dated as of March 9, 1998, between the
Company and Bryce Blair (Incorporated by reference to Exhibit 10.5
to Form 10-Q of the Company filed August 14, 1998)
52
EXHIBIT
NO. DESCRIPTION
and Amendment, dated as of July 30, 1999, to Employment Agreement, dated as of March 9,
1998, between the Company and Bryce Blair. (Incorporated by reference to Exhibit 10.2 to Form
10-Q of the Company filed August 16, 1999.)
10.7+ -- Employment Agreement, dated as of February 26, 2001, between the Company and Timothy J.
Naughton. (Incorporated by reference to Exhibit 10.5 to Form 10-K of the Company filed March
29, 2001.)
10.8+ -- Employment Agreement, dated as of September 10, 2001, between the Company and Leo S. Horey.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company filed November 14,
2001.)
10.9+ -- Employment Agreement, dated as of December 31, 2001, between the Company and Samuel B.
Fuller. (Filed herewith.)
10.10+ -- Letters of clarification, dated as of July 30, 1999, to the Employment Agreements of Messrs.
Michaux, Blair and Slater. (Incorporated by reference to Exhibit 10.4 to Form 10-Q of the
Company filed August 16, 1999.)
10.11+ -- Letter Agreement regarding departure, dated February 26, 2001, by and between the Company and
Robert H. Slater. (Incorporated by reference to Exhibit 10.8 to Form 10-K of the Company
filed March 29, 2001.)
10.12+ -- Mutual Release and Separation Agreement, dated as of March 24, 2000, between the Company and
Gilbert M. Meyer. (Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company
filed May 15, 2000.)
10.13+ -- Retirement Agreement, dated as of March 24, 2000, between the Company and Gilbert M. Meyer.
(Incorporated by reference to Exhibit 10.2 to Form 10-Q of the Company filed May 15, 2000.)
10.14+ -- Consulting Agreement, dated as of March 24, 2000, between the Company and Gilbert M. Meyer.
(Incorporated by reference to Exhibit 10.3 to Form 10-Q of the Company filed May 15, 2000.)
10.15+ -- Avalon Properties, Inc. 1993 Stock Option and Incentive Plan. (Incorporated by reference to
Exhibit 10.14 to Form 10-K of the Company filed March 29, 2001.)
10.16+ -- Avalon Properties, Inc. 1995 Equity Incentive Plan. (Incorporated by reference to Exhibit
10.15 to Form 10-K of the Company filed March 29, 2001.)
10.17+ -- Amendment, dated May 6, 1999, to the Avalon Properties Amended and Restated 1995 Equity
Incentive Plan. (Incorporated by reference to Exhibit 10.7 to Form 10-Q of the Company filed
August 16, 1999.)
10.18+ -- AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated on April 13,
1998, and subsequently amended on July 24, 1998 (incorporated by reference to Exhibit 10.1 to
the Company's Form 10-Q filed November 16, 1998) and amendment thereto, dated May 6, 1999
(Incorporated by reference to Exhibit 10.8 to Form 10-Q of the Company filed August 16, 1999).
53
EXHIBIT
NO. DESCRIPTION
10.19+ -- 1996 Non-Qualified Employee Stock Purchase Plan, dated June 26, 1997, as amended and restated.
(Incorporated by reference to Exhibit 99.1 to Post-effective Amendment No. 1 to Form S-8 of
the Company filed June 26, 1997, File No. 333-16837.)
10.20+ -- 1996 Non-Qualified Employee Stock Purchase Plan - Plan Information Statement dated June 26,
1997. (Incorporated by reference to Exhibit 99.2 to Form S-8 of the company, File No. 333-16837.)
10.21+ -- Promissory Note and Pledge and Security Agreement between the Company and Samuel B. Fuller,
dated June 15, 2000. (Incorporated by reference to Exhibit 10.23 to Form 10-K of the Company
filed March 29, 2001.)
10.22+ -- Indemnification Agreements between the Company and the Directors of the Company.
(Incorporated by reference to Exhibit 10.39 to Form 10-K of the Company filed March 31, 1999.)
10.23+ -- The Company's Officer Severance Plan. (Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed July 11, 2000.)
10.24 -- Revolving Loan Agreement, dated as of May 24, 2001, among the Company, as Borrower, The Chase
Manhattan Bank, as a Bank, Co-Agent and Syndication Agent, Fleet National Bank, as a Bank and
Co-Agent, Bank of America, N.A., First Union National Bank and Citicorp Real Estate, Inc.,
each as a Bank and Documentation Agent, the other banks signatory thereto, each as a Bank,
J.P. Morgan Securities, Inc., as Sole Bookrunner and Lead Arranger, and Fleet National Bank,
as Administrative Agent. (Incorporated by reference to Exhibit 10.1 to Form 10-Q of the
Company filed August 14, 2001.)
12.1 -- Statements re: Computation of Ratios. (Filed herewith.)
21.1 -- Schedule of Subsidiaries of the Company. (Filed herewith.)
23.1 -- Consent of Arthur Andersen LLP. (Filed herewith.)
99.1 -- Letter to Securities and Exchange Commission from the Company with respect to representations
made by Arthur Andersen LLP. (Filed herewith.)
+ Management contract or compensatory plan or arrangement required to be filed
or incorporated by reference as an exhibit to this Form 10-K pursuant to Item
14(c) of Form 10-K.
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AVALONBAY COMMUNITIES, INC.
Date: March 21, 2002 By:/s/ BRYCE BLAIR
-----------------------------------------------------
Bryce Blair, Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 21, 2002 By:/s/ BRYCE BLAIR
-----------------------------------------------------
Bryce Blair, Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Date: March 21, 2002 By:/s/ THOMAS J. SARGEANT
-----------------------------------------------------
Thomas J. Sargeant, Chief Financial Officer and
Executive VP (Principal Financial and Accounting Officer)
Date: March 21, 2002 By:/s/ BRUCE A. CHOATE
-----------------------------------------------------
Bruce A. Choate, Director
Date: March 21, 2002 By:/s/ JOHN J. HEALY, JR.
-----------------------------------------------------
John J. Healy, Jr., Director
Date: March 21, 2002 By:/s/ GILBERT M. MEYER
-----------------------------------------------------
Gilbert M. Meyer, Director
Date: March 21, 2002 By:/s/ RICHARD L. MICHAUX
-----------------------------------------------------
Richard L. Michaux, Director
Date: March 21, 2002 By:/s/ CHARLES D. PEEBLER, JR.
-----------------------------------------------------
Charles D. Peebler, Jr., Director
Date: March 21, 2002 By:/s/ LANCE R. PRIMIS
----------------------------------------------------
Lance R. Primis, Director
Date: March 21, 2002 By:/s/ ALLAN D. SCHUSTER
-----------------------------------------------------
Allan D. Schuster, Director
Date: March 21, 2002 By:/s/ AMY P. WILLIAMS
-----------------------------------------------------
Amy P. Williams, Director
55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
AvalonBay Communities, Inc.:
We have audited the accompanying consolidated balance sheets of AvalonBay
Communities, Inc. (a Maryland corporation, the "Company") and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of
operations and comprehensive income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AvalonBay
Communities, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.
As explained in Note 5 to the financial statements, effective January 1, 2001,
the Company changed its method of accounting for derivative instruments and
hedging activities.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Schedule of Real Estate and Accumulated
Depreciation is presented for purposes of complying with the rules of the
Securities and Exchange Commission and is not a required part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Vienna, Virginia
January 22, 2002
F-1
AVALONBAY COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
12-31-01 12-31-00
------------- -------------
ASSETS
Real estate:
Land $ 825,118 $ 742,863
Buildings and improvements 3,465,166 3,047,560
Furniture, fixtures and equipment 113,278 98,880
------------- -------------
4,403,562 3,889,303
Less accumulated depreciation (447,026) (316,045)
------------- -------------
Net operating real estate 3,956,536 3,573,258
Construction in progress (including land) 434,307 418,583
Communities held for sale, net -- 208,118
------------- -------------
Total real estate, net 4,390,843 4,199,959
Cash and cash equivalents 72,986 57,234
Cash in escrow 49,965 16,733
Resident security deposits 20,370 18,281
Investments in unconsolidated real estate joint ventures 15,066 12,215
Deferred financing costs, net 20,357 15,265
Deferred development costs, net 26,038 16,359
Participating mortgage notes 21,483 21,483
Prepaid expenses and other assets 47,181 39,696
------------- -------------
Total assets $ 4,664,289 $ 4,397,225
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Unsecured notes $ 1,635,000 $ 1,335,000
Variable rate unsecured credit facility -- --
Mortgage notes payable 447,769 394,924
Dividends payable 49,007 47,572
Payables for construction 43,656 19,997
Accrued expenses and other liabilities 51,052 46,771
Accrued interest payable 38,841 32,829
Resident security deposits 29,216 28,138
------------- -------------
Total liabilities 2,294,541 1,905,231
------------- -------------
Minority interest of unitholders in consolidated partnerships 55,193 49,501
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; $25 liquidation preference; 50,000,000 shares authorized
at both December 31, 2001 and December 31, 2000; 9,567,700 and 18,322,700 shares
outstanding at December 31, 2001 and December 31, 2000, respectively. 96 183
Common stock, $.01 par value; 140,000,000 shares authorized at both December 31, 2001
and December 31, 2000; 68,713,384 and 67,191,542 shares both issued and
outstanding at December 31, 2001 and December 31, 2000, respectively. 687 672
Additional paid-in capital 2,333,241 2,493,033
Deferred compensation (7,489) (3,550)
Dividends in excess of accumulated earnings (3,497) (47,845)
Accumulated other comprehensive loss (8,483) --
------------- -------------
Total stockholders' equity 2,314,555 2,442,493
------------- -------------
Total liabilities and stockholders' equity $ 4,664,289 $ 4,397,225
============= =============
See accompanying notes to Consolidated Financial Statements.
F-2
AVALONBAY COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share data)
Year ended
---------------------------------------
12/31/01 12/31/00 12/31/99
------------ ------------ -----------
Revenue:
Rental income $ 637,379 $ 571,943 $ 504,567
Management fees 1,325 1,051 1,176
Other income 2,953 401 236
------------ ------------ -----------
Total revenue 641,657 573,395 505,979
------------ ------------ -----------
Expenses:
Operating expenses, excluding property taxes 161,887 142,664 135,517
Property taxes 52,201 46,958 42,701
Interest expense 103,203 83,609 74,699
Depreciation expense 130,079 122,610 109,759
General and administrative 15,224 13,013 9,592
Non-recurring charges -- -- 16,782
------------ ------------ -----------
Total expenses 462,594 408,854 389,050
------------ ------------ -----------
Equity in income of unconsolidated entities 856 2,428 2,867
Interest income 6,823 4,764 7,362
Minority interest in consolidated partnerships (597) (1,908) (1,975)
------------ ------------ -----------
Income before gain on sale of communities 186,145 169,825 125,183
Gain on sale of communities 62,852 40,779 47,093
Net income 248,997 210,604 172,276
Dividends attributable to preferred stock (32,497) (39,779) (39,779)
------------ ------------ -----------
Net income available to common stockholders $ 216,500 $ 170,825 $ 132,497
============ ============ ===========
Other comprehensive loss:
Cumulative effect of change in accounting principle (6,412) -- --
Unrealized loss on cash flow hedges (2,071) -- --
------------ ------------ -----------
Other comprehensive loss (8,483) -- --
------------ ------------ -----------
Comprehensive income $ 208,017 $ 170,825 $ 132,497
============ ============ ===========
Net income available to common stockholders:
Per common share - basic $ 3.19 $ 2.58 $ 2.05
Per common share - diluted $ 3.12 $ 2.53 $ 2.03
See accompanying notes to Consolidated Financial Statements.
F-3
AVALONBAY COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)
Shares issued Amount
------------------------------------------------------ Additional
Preferred Common Preferred Common paid-in
Stock Stock Stock Stock capital
-------------- -------------- -------- --------- --------------
Balance at December 31, 1998 18,322,700 63,887,126 $ 183 $ 639 $ 2,386,087
Net income -- -- -- -- --
Dividends declared to common
and preferred stockholders -- -- -- -- --
Issuance of Common Stock -- 1,870,883 -- 19 56,423
Amortization of deferred compensation -- -- -- -- --
-------------- -------------- -------- --------- --------------
Balance at December 31, 1999 18,322,700 65,758,009 183 658 2,442,510
Net income -- -- -- -- --
Dividends declared to common
and preferred stockholders -- -- -- -- --
Issuance of Common Stock -- 1,433,533 -- 14 50,523
Amortization of deferred compensation -- -- -- -- --
-------------- -------------- -------- --------- --------------
Balance at December 31, 2000 18,322,700 67,191,542 183 672 2,493,033
Cumulative effect of change
in accounting principle -- -- -- -- --
Net income -- -- -- -- --
Unrealized loss on cash flow hedges -- -- -- -- --
Dividends declared to common
and preferred stockholders -- -- -- -- --
Redemption of Series F and G Preferred Stock (8,755,000) -- (87) -- (218,908)
Issuance of Common Stock -- 1,521,842 -- 15 59,116
Amortization of deferred compensation -- -- -- -- --
-------------- -------------- -------- --------- --------------
Stockholders' equity, December 31, 2001 9,567,700 68,713,384 $ 96 $ 687 $ 2,333,241
============== ============== ======== ========= ==============
Dividends in Accumulated
excess of other
Deferred accumulated comprehensive Stockholders'
compensation earnings loss equity
------------ ------------- ------------- ----------------
Balance at December 31, 1998 $ (4,356) $ (68,116) $ -- $ 2,314,437
Net income -- 172,276 -- 172,276
Dividends declared to common
and preferred stockholders -- (173,667) -- (173,667)
Issuance of Common Stock (3,167) -- -- 53,275
Amortization of deferred compensation 3,964 -- -- 3,964
------------ ------------- ------------- ----------------
Balance at December 31, 1999 (3,559) (69,507) -- 2,370,285
Net income -- 210,604 -- 210,604
Dividends declared to common
and preferred stockholders -- (188,942) -- (188,942)
Issuance of Common Stock (3,408) -- -- 47,129
Amortization of deferred compensation 3,417 -- -- 3,417
------------ ------------- ------------- ----------------
Balance at December 31, 2000 (3,550) (47,845) -- 2,442,493
Cumulative effect of change
in accounting principle -- -- (6,412) (6,412)
Net income -- 248,997 -- 248,997
Unrealized loss on cash flow hedges -- -- (2,071) (2,071)
Dividends declared to common
and preferred stockholders -- (204,649) -- (204,649)
Redemption of Series F and G Preferred Stock -- -- -- (218,995)
Issuance of Common Stock (7,545) -- -- 51,586
Amortization of deferred compensation 3,606 -- -- 3,606
------------ ------------- ------------- ----------------
Stockholders' equity, December 31, 2001 $ (7,489) $ (3,497) $ (8,483) $ 2,314,555
============ ============= ============= ================
See accompanying notes to Consolidated Financial Statements.
F-4
AVALONBAY COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the year ended
--------------------------------------------
12-31-01 12-31-00 12-31-99
------------- ------------ -------------
Cash flows from operating activities:
Net income $ 248,997 $ 210,604 $ 172,276
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation expense 130,079 122,610 109,759
Amortization of deferred financing costs 3,716 2,924 2,668
Amortization of deferred compensation 3,606 3,417 3,964
Income allocated to minority interest in consolidated
partnerships 597 1,908 1,975
Gain on sale of communities (62,852) (40,779) (47,093)
Decrease (increase) in cash in operating escrows 41 1,144 (348)
Increase in resident security deposits, accrued interest
receivable on participating mortgage notes, prepaid
expenses and other assets (20,386) (21,059) (2,775)
Increase in accrued expenses, other liabilities
and accrued interest payable 4,925 15,693 11,353
------------- ------------ -------------
Net cash provided by operating activities 308,723 296,462 251,779
------------- ------------ -------------
Cash flows used in investing activities:
Purchase and development of real estate (484,604) (435,332) (516,261)
Proceeds from sale of communities, net of selling costs 238,545 156,086 285,263
Increase (decrease) in payables for construction 23,656 1,123 (29,276)
Sale of participating mortgage note -- -- 25,097
Increase in cash in section 1031 exchange escrows (33,273) (9,076) --
Decrease (increase) in investments in unconsolidated
real estate joint ventures (2,851) 1,280 (1,510)
Proceeds received from real estate joint venture partner -- 33,385 --
Redemption of operating units in DownREIT partnerships (864) -- --
------------- ------------ -------------
Net cash used in investing activities (259,391) (252,534) (236,687)
------------- ------------ -------------
Cash flows from financing activities:
Issuance of common stock 50,912 36,203 53,275
Redemption of preferred stock and related costs (218,995) -- --
Dividends paid (203,214) (185,509) (172,333)
Net repayments of unsecured credit facility -- (178,600) (150,400)
Issuance of secured mortgage notes payable 75,110 -- --
Proceeds from sale of unsecured notes 300,000 350,000 275,000
Repayments of notes payable (22,265) (35,123) (33,579)
Payment of deferred financing costs (8,808) (4,428) (3,654)
Contributions from (distributions to) minority partners (6,320) 23,142 (3,425)
Refinancings of notes payable -- -- 18,755
------------- ------------ -------------
Net cash provided by (used in) financing activities (33,580) 5,685 (16,361)
------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents 15,752 49,613 (1,269)
Cash and cash equivalents, beginning of year 57,234 7,621 8,890
------------- ------------ -------------
Cash and cash equivalents, end of year $ 72,986 $ 57,234 $ 7,621
============= ============ =============
Cash paid during year for interest, net of amount capitalized $ 88,996 $ 72,712 $ 60,705
============= ============ =============
See accompanying notes to Consolidated Financial Statements.
F-5
Supplemental disclosures of non-cash investing and financing activities (dollars
in thousands):
During the year ended December 31, 2001:
- 762 units of limited partnership, valued at $36, were presented for
redemption to the DownREIT partnership that issued such units and were
acquired by the Company in exchange for an equal number of shares of the
Company's common stock.
- the Company issued 619 units of limited partnership in DownREIT
partnerships valued at $30 as consideration for acquisitions of apartment
communities that were acquired pursuant to the terms of a forward purchase
contract agreed to in 1997 with an unaffiliated party. In addition, the
Company issued 256,940 units of limited partnership in a DownREIT
partnership valued at $12,274 in connection with the formation of a
DownREIT partnership and the acquisition by that partnership of land.
- 186,877 shares of restricted common stock were issued at a value of $8,570
and 19,646 shares of restricted stock were forfeited at a value of $235.
- $67 of deferred stock units were converted into 1,803 shares of common
stock.
- the Company recorded a liability and a corresponding charge to Other
comprehensive loss of $8,483 to adjust the Company's Swap Agreements (as
defined in Note 5 of the notes to the Consolidated Financial Statements)
to their fair value.
- Common and preferred dividends declared but not paid were $49,007.
During the year ended December 31, 2000:
- 1,520 units of limited partnership in DownREIT partnerships, valued at
$60, were issued in connection with an acquisition for cash and units
pursuant to a forward purchase contract agreed to in 1997 with an
unaffiliated party.
- 304,602 units of limited partnership in DownREIT partnerships, valued at
$10,926, were exchanged for an equal number of shares of the Company's
common stock.
- 139,336 shares of restricted common stock were issued at a value of $4,703
and 50,310 shares of restricted stock were forfeited at a value of $1,668.
- Real estate assets valued at $5,394 were contributed to a limited
liability company in exchange for a 25% membership interest.
- Common and preferred dividends declared but not paid totaled $47,572.
During the year ended December 31, 1999:
- 117,178 units of limited partnership in DownREIT partnerships, valued at
$4,614, were issued in connection with an acquisition for cash and units
pursuant to a forward purchase contract agreed to in 1997 with an
unaffiliated party.
- 22,623 units of limited partnership in DownREIT partnerships, valued at
$868, were exchanged for an equal number of shares of the Company's common
stock.
- 97,456 shares of restricted common stock were issued at a value of $3,167.
- Common and preferred dividends declared but not paid totaled $44,139.
F-6
AVALONBAY COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. Organization and Significant Accounting Policies
Organization
AvalonBay Communities, Inc. (the "Company," which term, unless the context
otherwise requires, refers to AvalonBay Communities, Inc. together with its
subsidiaries) is a Maryland corporation that has elected to be taxed as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended. The Company focuses on the ownership and operation of upscale apartment
communities in high barrier-to-entry markets of the United States. These markets
are located in the Northeast, Mid-Atlantic, Midwest, Pacific Northwest, and
Northern and Southern California regions of the country.
At December 31, 2001, the Company owned or held a direct or indirect ownership
interest in 126 operating apartment communities containing 37,228 apartment
homes in eleven states and the District of Columbia, of which three communities
containing 1,896 apartment homes were under reconstruction. In addition, the
Company owned 15 communities with 3,963 apartment homes under construction and
rights to develop an additional 30 communities that, if developed as expected,
will contain an estimated 8,918 apartment homes.
Principles of Consolidation
The Company is the surviving corporation from the merger (the "Merger") of Bay
Apartment Communities, Inc. ("Bay") and Avalon Properties, Inc. ("Avalon") on
June 4, 1998, where Avalon shareholders received a 0.7683 share of common stock
of the Company for each share owned of Avalon common stock. The Merger was
accounted for under the purchase method of accounting, with the historical
financial statements for Avalon presented prior to the Merger. At that time,
Avalon ceased to legally exist, and Bay as the surviving legal entity adopted
the historical financial statements of Avalon. Consequently, Bay's assets were
recorded in the historical financial statements of Avalon at an amount equal to
Bay's debt outstanding at that time plus the value of capital stock retained by
the Bay stockholders, which approximates fair value. In connection with the
Merger, the Company changed its name from Bay Apartment Communities, Inc. to
AvalonBay Communities, Inc.
The accompanying Consolidated Financial Statements include the accounts of the
Company and its wholly-owned partnerships and certain joint venture partnerships
in addition to subsidiary partnerships structured as DownREITs. All significant
intercompany balances and transactions have been eliminated in consolidation.
In each of the partnerships structured as DownREITs, either the Company or one
of the Company's wholly-owned subsidiaries is the general partner, and there are
one or more limited partners whose interest in the partnership is represented by
units of limited partnership interest. For each DownREIT partnership, limited
partners are entitled to receive distributions before any distribution is made
to the general partner. Although the partnership agreements for each of the
DownREITs are different, generally the distributions per unit paid to the
holders of units of limited partnership interests have approximated the
Company's current common stock dividend per share. Each DownREIT partnership has
been structured so that it is unlikely the limited partners will be entitled to
a distribution greater than the initial distribution provided for in the
partnership agreement. The holders of units of limited partnership interest have
the right to present each unit of limited partnership interest for redemption
for cash equal to the fair market value of a share of the Company's common stock
on the date of redemption. In lieu of a cash redemption of a limited partner's
unit, the Company may elect to acquire any unit presented for redemption for one
share of common stock.
The Company has minority interest investments in five technology companies. The
Company accounts for these unconsolidated entities in accordance with Accounting
Principles Board ("APB") Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock." In 2001, the Company applied the equity method of
accounting to its investment in Realeum, Inc., a company involved in the
development and deployment of a property management and leasing automation
system. The remaining investments are accounted for under the cost
F-7
method of accounting. As of December 31, 2001, the aggregate carrying value of
our investment in these five companies, net of an allowance of $934, was $2,519.
If there is an event or change in circumstance that indicates a loss in the
value of an investment, the Company's policy is to record the loss and reduce
the value of the investment to its fair value. A loss in value would be
indicated if the Company could not recover the carrying value of the investment
or if the investee could not sustain an earnings capacity that would justify the
carrying amount of the investment.
Revenue Recognition
Rental income related to leases is recognized on an accrual basis when due from
residents in accordance with SEC Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." In accordance with the Company's standard
lease terms, rental payments are generally due on a monthly basis. Any cash
concessions given at the inception of the lease are amortized over the life of
the lease - generally one year.
The following reconciles total revenue in conformity with generally accepted
accounting principles ("GAAP") to total revenue adjusted to state concessions on
a cash basis for the years ended December 31, 2001, 2000 and 1999:
Year ended
------------------------------------
12-31-01 12-31-00 12-31-99
---------- ---------- ----------
Total revenue (GAAP basis) $ 641,657 $ 573,395 $ 505,979
Concessions amortized 4,036 3,043 4,828
Concessions granted (6,431) (2,349) (6,528)
---------- ---------- ----------
Total revenue adjusted to state
concessions on a cash basis $ 639,262 $ 574,089 $ 504,279
========== ========== ==========
Real Estate
Significant expenditures which improve or extend the life of an asset are
capitalized. The operating real estate assets are stated at cost and consist of
land, buildings and improvements, furniture, fixtures and equipment, and other
costs incurred during their development, redevelopment and acquisition.
Expenditures for maintenance and repairs are charged to operations as incurred.
The Company's policy with respect to capital expenditures is generally to
capitalize only non-recurring expenditures. Improvements and upgrades are
capitalized only if the item exceeds $15, extends the useful life of the asset
and is not related to making an apartment home ready for the next resident.
Purchases of personal property, such as computers and furniture, are capitalized
only if the item is a new addition. The Company generally expenses purchases of
personal property made for replacement purposes.
The capitalization of costs during the development of assets (including interest
and related loan fees, property taxes and other direct and indirect costs)
begins when active development commences and ends when the asset is delivered
and a final certificate of occupancy is issued. Cost capitalization during
redevelopment of apartment homes (including interest and related loan fees,
property taxes and other direct and indirect costs) begins when an apartment
home is taken out-of-service for redevelopment and ends when the apartment home
redevelopment is completed and the apartment home is placed in-service.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 67,
"Accounting for Costs and Initial Rental Operations of Real Estate Projects,"
the Company capitalizes pre-development costs incurred in pursuit of new
development opportunities for which the Company currently believes future
development is probable. Future development of these communities is dependent
upon various factors, including zoning and regulatory approval, rental market
conditions, construction costs and availability of capital. The accompanying
F-8
Consolidated Financial Statements include a charge to expense to provide an
allowance for unrecoverable deferred development costs related to
pre-development communities that are unlikely to be developed.
Depreciation is calculated on buildings and improvements using the straight-line
method over their estimated useful lives, which range from seven to thirty
years. Furniture, fixtures and equipment are generally depreciated using the
straight-line method over their estimated useful lives, which range from three
years (primarily computer related equipment) to seven years.
Lease terms for apartment homes are generally one year or less. Rental income
and operating costs incurred during the initial lease-up or post-redevelopment
lease-up period are fully recognized as they accrue.
If there is an event or change in circumstance that indicates an impairment in
the value of a community, the Company's policy is to assess any impairment in
value by making a comparison of the current and projected operating cash flows
of the community over its remaining useful life, on an undiscounted basis, to
the carrying amount of the community. If such carrying amounts are in excess of
the estimated projected operating cash flows of the community, the Company would
recognize an impairment loss equivalent to an amount required to adjust the
carrying amount to its estimated fair market value. The Company has not
recognized an impairment loss in 2001, 2000 or 1999 on any of its real estate.
Income Taxes
The Company elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended, for the year ended December 31, 1994 and has not revoked such
election. A corporate REIT is a legal entity which holds real estate interests
and must meet a number of organizational and operational requirements, including
a requirement that it currently distribute at least 90% of its adjusted taxable
income to stockholders. As a REIT, the Company generally will not be subject to
corporate level federal income tax on taxable income it distributes currently to
its stockholders. Management believes that all such conditions for the avoidance
of income taxes have been met for the periods presented. Accordingly, no
provision for federal and state income taxes has been made. If the Company fails
to qualify as a REIT in any taxable year, it will be subject to federal income
taxes at regular corporate rates (including any applicable alternative minimum
tax) and may not be able to qualify as a REIT for four subsequent taxable years.
Even if the Company qualifies for taxation as a REIT, the Company may be subject
to certain state and local taxes on its income and property, and to federal
income and excise taxes on its undistributed taxable income. In addition,
taxable income from non-REIT activities managed through taxable REIT
subsidiaries is subject to federal, state and local income taxes. The following
reconciles net income available to common stockholders to taxable net income for
the years ended December 31, 2001, 2000 and 1999:
2001 2000 1999
Estimate Actual Actual
------------ ---------- ----------
Net income available to common stockholders $ 216,500 $170,825 $132,497
Dividends attributable to Preferred Stock,
not deductible for tax 32,497 39,779 39,779
GAAP gain on sale of communities in excess of tax gain (21,961) (15,146) (5,162)
Depreciation/Amortization timing differences on real estate 11,421 10,593 6,248
Tax compensation expense in excess of (less than) GAAP (7,752) (5,873) 1,285
Other adjustments (13,459) (12,576) (10,649)
------------ ---------- ----------
Taxable net income $ 217,246 $187,602 $163,998
============ ========== ==========
F-9
The following summarizes the tax components of the Company's common and
preferred dividends declared for the years ended December 31, 2001, 2000 and
1999:
2001 2000 1999
----------- ----------- ------------
Ordinary income 80% 86% 76%
20% capital gain 14% 9% 11%
Unrecaptured Section 1250 gain 6% 5% 13%
Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain debt
financing and are amortized on a straight-line basis, which approximates the
effective interest method, over the shorter of the term of the loan or the
related credit enhancement facility, if applicable. Unamortized financing costs
are written-off when debt is retired before the maturity date. Accumulated
amortization of deferred financing costs were $11,916 and $8,200 at December 31,
2001 and 2000, respectively.
Cash, Cash Equivalents and Cash in Escrow
Cash and cash equivalents include all cash and liquid investments with an
original maturity of three months or less from the date acquired. The majority
of the Company's cash, cash equivalents and cash in escrows is held at major
commercial banks.
F-10
Earnings per Common Share
In accordance with the provisions of SFAS No. 128, "Earnings per Share," basic
earnings per share is computed by dividing earnings available to common
shareholders by the weighted average number of shares outstanding during the
period. Other potentially dilutive common shares, and the related impact to
earnings, are considered when calculating earnings per share on a diluted basis.
The Company's earnings per common share are determined as follows:
Year ended
-------------------------------------------------
12-31-01 12-31-00 12-31-99
--------------- --------------- ---------------
Basic and Diluted shares outstanding
- ------------------------------------
Weighted average common shares - basic 67,842,752 66,309,707 64,724,799
Weighted average DownREIT units outstanding 682,134 861,755 933,122
Effect of dilutive securities 1,256,833 969,536 452,743
--------------- --------------- ---------------
Weighted average common shares and DownREIT units - diluted 69,781,719 68,140,998 66,110,664
=============== =============== ===============
Calculation of Earnings per Share - Basic
- -----------------------------------------
Net income available to common stockholders $ 216,500 $ 170,825 $ 132,497
=============== =============== ===============
Weighted average common shares - basic 67,842,752 66,309,707 64,724,799
=============== =============== ===============
Earnings per common share - basic $ 3.19 $ 2.58 $ 2.05
=============== =============== ===============
Calculation of Earnings per Share - Diluted
- -------------------------------------------
Net income available to common stockholders $ 216,500 $ 170,825 $ 132,497
Add: Minority interest of DownREIT unitholders
in consolidated partnerships 1,559 1,759 1,975
--------------- --------------- ---------------
Adjusted net income available to common stockholders $ 218,059 $ 172,584 $ 134,472
=============== =============== ===============
Weighted average common shares and DownREIT units - diluted 69,781,719 68,140,998 66,110,664
=============== =============== ===============
Earnings per common share - diluted $ 3.12 $ 2.53 $ 2.03
=============== =============== ===============
For each of the years presented, certain options to purchase shares of common
stock were outstanding but were not included in the computation of diluted
earnings per share because the options' exercise prices were greater than the
average market price of the common shares for the period. The number of options
not included totaled 18,269 in 2001, 7,500 in 2000 and 2,282,192 for 1999.
Executive Separation Costs
In February 2001, the Company announced certain management changes including the
departure of a senior executive who became entitled to severance benefits in
accordance with the terms of his employment agreement with the Company. The
Company recorded a charge of approximately $2,500 in the first quarter of 2001
related to the expected costs associated with such departure.
In December 2001, a senior executive of the Company retired from his management
position. Upon retirement, the Company recognized compensation expense of
approximately $784, relating to the accelerated vesting of restricted stock
grants.
F-11
Recently Issued Accounting Standards
In August of 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This
pronouncement establishes accounting and reporting standards requiring that
long-lived assets held for sale be classified as discontinued operations. These
assets will continue to be measured at the lower of the carrying amount or the
fair value less the cost to sell. Operations, including the gain or loss on
sale, for both the current and prior periods shall be reported in discontinued
operations. The statement becomes effective for fiscal years beginning after
December 15, 2001. The Company will adopt this pronouncement beginning January
1, 2002. In the opinion of management, the adoption of this statement will not
have a material effect on the Company's Consolidated Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the dates of the financial statements
and the reported amounts of revenue and expenses during the reporting periods.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to amounts in prior years' financial
statements to conform with current year presentations.
2. Interest Capitalized
Capitalized interest associated with communities under development or
redevelopment totaled $27,635, $18,328 and $21,888 for the years ended December
31, 2001, 2000 and 1999, respectively.
3. Notes Payable, Unsecured Notes and Credit Facility
Mortgage notes payable are collateralized by certain apartment communities and
mature at various dates from March 2002 through February 2041. The weighted
average interest rate of the Company's variable rate notes and unsecured credit
facility, including certain financing related fees, was 3.1% at December 31,
2001. The weighted average interest rate of the Company's fixed rate mortgage
notes (conventional and tax-exempt) was 6.7% at December 31, 2001. The Company's
notes payable, unsecured notes payable and credit facility are summarized as
follows:
12-31-01 12-31-00
-------- --------
Fixed rate unsecured notes $ 1,635,000 $ 1,335,000
Fixed rate mortgage notes payable - conventional and tax-exempt (1) 322,495 326,964
Variable rate mortgage notes payable - tax-exempt 67,960 67,960
----------- -----------
Total notes payable and unsecured notes 2,025,455 1,729,924
Variable rate secured short term construction loan 57,314 --
Variable rate unsecured credit facility -- --
----------- -----------
Total mortgage notes payable, unsecured notes and unsecured credit facility $ 2,082,769 $ 1,729,924
=========== ===========
(1) Includes approximately $167,000 of variable rate notes in both years effectively fixed through swap agreements, as described in
Note 5.
F-12
Scheduled payments and maturities of notes payable and unsecured notes are as
follows:
Secured notes Secured notes Unsecured notes Interest rate of
Year payments maturities maturities unsecured notes
---- -------- ---------- ---------- ---------------
2002 $ 3,298 $ 57,314 $ 100,000 7.375%
2003 $ 3,538 -- $ 50,000 6.250%
$ 100,000 6.500%
2004 $ 3,653 $ 24,106 $ 125,000 6.580%
2005 $ 3,705 -- $ 100,000 6.625%
$ 50,000 6.500%
2006 $ 3,971 -- $ 150,000 6.800%
2007 $ 4,257 $ 35,980 $ 110,000 6.875%
2008 $ 4,565 -- $ 50,000 6.625%
$ 150,000 8.250%
2009 $ 4,895 $ 10,400 $ 150,000 7.500%
2010 $ 5,246 -- $ 200,000 7.500%
2011 $ 5,626 -- $ 300,000 6.625%
Thereafter $ 219,655 $ 57,560 --
--------------- --------------- ---------------
$ 262,409 $ 185,360 $ 1,635,000
=============== =============== ===============
The Company's unsecured notes contain a number of financial and other covenants
with which the Company must comply, including, but not limited to, limits on the
aggregate amount of total and secured indebtedness the Company may have on a
consolidated basis and limits on the Company's required debt service payments.
The Company has a $500,000 variable rate unsecured credit facility with J.P.
Morgan Chase and Fleet National Bank serving as co-agents for a syndicate of
commercial banks, which had zero outstanding on December 31, 2001. Under the
terms of the unsecured credit facility, if the Company elects to increase the
facility up to $650,000, the consortium of banks cannot prohibit such an
increase of the facility and the increased lending commitment could be provided
by one or more banks (from the consortium or otherwise) to the extent they
choose to commit to lend additional funds. The unsecured credit facility bears
interest at a spread over the London Interbank Offered Rate ("LIBOR") based on
rating levels achieved on the Company's unsecured notes and on a maturity
schedule selected by the Company. The current stated pricing is LIBOR plus 0.6%
per annum (2.5% on December 31, 2001). In addition, the unsecured credit
facility includes a competitive bid option, which allows banks that are part of
the lender consortium to bid to make loans to the Company at a rate that is
lower than the stated rate provided by the unsecured credit facility for up to
$400,000. The Company is subject to certain customary covenants under the
unsecured credit facility, including, but not limited to, maintaining certain
maximum leverage ratios, a minimum fixed charges coverage ratio, minimum
unencumbered assets and equity levels and restrictions on paying dividends in
amounts that exceed 95% of the Company's Funds from Operations, as defined
therein. The existing facility matures in May 2005 after application of a one
year renewal option by the Company.
F-13
4. Stockholders Equity
As of both December 31, 2001 and 2000, the Company had authorized for issuance
140,000,000 and 50,000,000 of Common and Preferred Stock, respectively.
Dividends on all series of issued Preferred Stock are cumulative from the date
of original issue and are payable quarterly in arrears on or before the 15th day
of each month as stated in the table below. None of the series of Preferred
Stock are redeemable prior to the date stated in the table below, but on or
after the stated date, may be redeemed for cash at the option of the Company in
whole or in part at a redemption price of $25.00 per share, plus all accrued and
unpaid dividends, if any. In June 2001, the Company redeemed all 4,455,000
outstanding shares of its 9.00% Series F Cumulative Redeemable Preferred Stock
at a price of $25.00 per share, plus $0.1625 in accrued and unpaid dividends. In
October 2001, the Company redeemed all 4,300,000 outstanding shares of its 8.96%
Series G Cumulative Redeemable Preferred Stock at a price of $25.00 per share,
plus $0.4418 in accrued and unpaid dividends. The series of Preferred Stock
outstanding have no stated maturity and are not subject to any sinking fund or
mandatory redemptions. Preferred Stock outstanding as of December 31, 2001 were
as follows:
Shares outstanding Payable Annual Liquidation Non-redeemable
Series December 31, 2001 quarterly rate preference prior to
- ------ ----------------- ----------------------- -------- --------------- -------------------
C 2,300,000 March, June, September, 8.50% $25 June 20, 2002
December
D 3,267,700 March, June, September, 8.00% $25 December 15, 2002
December
H 4,000,000 March, June, September, 8.70% $25 October 15, 2008
December
The Company also has 1,000,000 shares of Series E Junior Participating
Cumulative Preferred Stock authorized for issuance pursuant to the Company's
Shareholder Rights Agreement. As of December 31, 2001, there were no shares of
Series E Preferred Stock outstanding and the Company has amended its Shareholder
Rights Agreement so that it will expire effective March 31, 2002.
Dividends per common share for the years ended December 31, 2001, 2000 and 1999
were $2.56, $2.24 and $2.06, respectively. In 2001, dividends per preferred
share for shares redeemed during the year were $1.41 and dividends per share for
all non-redeemed preferred shares were $2.10. Dividends per preferred share were
$2.17 in both 2000 and 1999.
5. Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133," and SFAS No. 138,
"Accounting for Certain Instruments and Certain Hedging Activities, an amendment
of Statement 133," was adopted by the Company on January 1, 2001. SFAS No. 133,
as amended, establishes accounting and reporting standards requiring that every
derivative instrument be recorded on the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 also requires that a change
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. For fair value hedge transactions,
changes in the fair value of the derivative instrument and changes in the fair
value of the hedged item due to the risk being hedged are recorded through the
income statement. For cash flow hedge transactions, changes in the fair value of
the derivative instrument are reported in other comprehensive income. For hedges
where the changes in the fair value of the derivative exceeds the change in fair
value of the hedged item, the ineffective portion is recognized in current
period earnings. Derivatives which are not part of a hedge relationship are
recorded at fair value through earnings.
The Company has historically used interest rate swap agreements (the "Swap
Agreements") to reduce the impact of interest rate fluctuations on its variable
rate tax-exempt bonds. The Company has not entered into any interest rate hedge
agreements or treasury locks for its conventional unsecured debt. The Swap
Agreements are not held for trading
F-14
or other speculative purposes. As of December 31, 2001, the effect of these Swap
Agreements is to fix $167,272 of the Company's tax-exempt debt at a weighted
average interest rate of 6.0% with an average maturity of 4.5 years. By using
derivative financial instruments to hedge exposures to changes in interest
rates, the Company exposes itself to credit risk and market risk.
The credit risk is the risk of a counterparty not performing under the terms of
the Swap Agreement. The counterparties to these Swap Agreements are major
financial institutions which have an A+ or better credit rating by the Standard
& Poor's Ratings Group. The Company monitors the credit ratings of
counterparties and the amount of the Company's debt subject to Swap Agreements
with any one party. Therefore, the Company believes the likelihood of realizing
material losses from counterparty non-performance is remote.
Market risk is the adverse effect of the value of financial instruments that
results from a change in interest rates. The market risk associated with
interest-rate contracts is managed by the establishment and monitoring of
parameters that limit the types and degree of market risk that may be
undertaken. These risks are managed by the Company's Chief Financial Officer and
Vice President of Finance.
The Company has determined that its Swap Agreements qualify as effective
cash-flow hedges under SFAS No. 133. When entering into hedging transactions,
the Company documents the relationships between hedging instruments and hedged
items, as well as the risk management objective and strategy. The Company
assesses, both at inception and on an on-going basis, the effectiveness of all
hedges in offsetting cash flows of hedged items. In accordance with SFAS No.
133, the Company records all changes in the fair value of the Swap Agreements in
other comprehensive income. Amounts recorded in other comprehensive income will
be reclassified into earnings in the period in which earnings are affected by
the hedged cash flows. For example, the reduction in fair value on a cash flow
hedge due to the periodic payment of interest under the Swap Agreements is
recorded in earnings each period. The combination of this expense with the lower
interest expense we expect to pay on the underlying floating rate debt should
result in overall interest expense equal to the contractually fixed amount
resulting from the fixed rate swaps. In all situations where hedge accounting is
discontinued, the derivative will be carried at fair value with changes in its
fair value recognized in income. Upon the termination of a hedging relationship,
the amount in other comprehensive income will be amortized over the remaining
life of the hedged cash flows.
At January 1, 2001, in accordance with the transition provisions of SFAS No.
133, the Company recorded a cumulative effect adjustment of $6,412 to other
comprehensive loss to recognize at fair value all of the derivatives that are
designated as cash flow hedging instruments. Through December 31, 2001, the
Company recorded additional unrealized losses to other comprehensive loss of
$2,599 to adjust the Swap Agreements to their fair value. In connection with the
sale of a community during the first quarter of 2001, a Swap Agreement with a
fair value of $528 was transferred to the new owner. Hedge ineffectiveness did
not have a material impact on earnings and the Company does not anticipate that
it will have a material effect in the future. The Swap Agreements are included
in accrued expenses and other liabilities on the accompanying Consolidated
Balance Sheets.
6. Investments in Unconsolidated Real Estate Entities
The Company accounts for investments in unconsolidated real estate entities in
accordance with Statement of Position ("SOP") 78-9, "Accounting for Investments
in Real Estate Ventures" and APB Opinion No. 18. The Company applies the equity
method of accounting to an investment in an entity if it owns greater than 20%
or the equity value or has significant and disproportionate influence over that
entity. At December 31, 2001, the Company's investments in unconsolidated real
estate entities accounted for under the equity method of accounting consisted
of:
- a 50% limited liability company membership interest in a limited
liability company that owns the Falkland Chase community;
- a 49% general partnership interest in a partnership that owns
the Avalon Run community;
- a 50% limited liability company membership interest in a limited
liability company that owns the Avalon Grove community; and
- a 50% limited liability company membership interest in a limited
liability company that owns the Avalon Terrace community.
F-15
The following is a combined summary of the financial position of these entities
as of the dates presented:
(Unaudited)
-------------------------
12-31-01 12-31-00
-------- --------
Assets:
Real estate, net $151,590 $132,832
Other assets 10,971 10,400
-------- --------
Total assets $162,561 $143,232
======== ========
Liabilities and partners' equity:
Mortgage notes payable $ 47,195 $ 48,400
Other liabilities 10,040 8,656
Partners' equity 105,326 86,176
-------- --------
Total liabilities and partners' equity $162,561 $143,232
======== ========
The following is a combined summary of the operating results of these entities
for the periods presented:
Year ended
(unaudited)
--------------------------------------------
12-31-01 12-31-00 12-31-99
-------- -------- --------
Rental income $ 28,746 $ 22,222 $ 20,781
Other income 170 57 26
Operating and other expenses (9,098) (6,110) (5,657)
Mortgage interest expense (2,571) (1,107) (773)
Depreciation expense (4,262) (3,202) (3,091)
-------- -------- --------
Net income $ 12,985 $ 11,860 $ 11,286
======== ======== ========
The Company also holds an investment in a real estate entity which is accounted
for under the cost method of accounting. In addition, the Company holds a 25%
limited liability company membership interest in the limited liability company
that owns Avalon on the Sound, which is presented on a consolidated basis in the
financial statements in accordance with GAAP due to the Company's control over
that entity.
7. Communities Held for Sale
The Company has a policy of disposing of assets that are not consistent with its
long-term investment criteria when market conditions are favorable. In
connection with this strategy, the Company solicits competing bids from
unrelated parties for individual assets, and considers the sales price and tax
ramifications of each proposal.
F-16
The communities sold during 2001 and the respective sales price and net proceeds
are summarized below:
Period Apartment Gross sales Net
Community Name Location of sale homes Debt price proceeds
- ----------------------------------------------------- ------- --------- -------- ----------- --------
Crossbrook Rohnert Park, CA 1Q01 226 $ 8,145 $ 23,250 $ 14,500
Avalon Pavilions Manchester, CT 3Q01 932 -- 81,500 81,000
Waterhouse Place Beaverton, OR 3Q01 279 -- 20,900 20,600
Avalon Palladia Hillsboro, OR 3Q01 497 -- 51,250 51,000
Avalon Colchester Brookline, MA 4Q01 57 -- 6,000 5,900
Timberwood West Covina, CA 4Q01 209 -- 22,900 22,700
Arbor Heights Hacienda Heights, CA 4Q01 351 -- 35,330 34,700
-------- -------- -------- --------
Total of all 2001 asset sales 2,551 $ 8,145 $241,130 $230,400
======== ======== ======== ========
Total of all 2000 asset sales 1,932 $ 31,694 $160,085 $124,392
======== ======== ======== ========
Total of all 1999 asset sales 4,464 $ 29,645 $316,512 $280,918
======== ======== ======== ========
There were no communities held for sale as of December 31, 2001, however, the
Company will continue to evaluate market conditions and will dispose of
communities to optimize its concentration of assets when conditions are
favorable.
8. Commitments and Contingencies
Presale Commitments
The Company occasionally enters into fixed price forward purchase commitments
with unrelated third parties, which allow the Company to purchase communities
upon completion of construction. The Company has an agreement to purchase a
community with an estimated 306 apartment homes for an aggregate purchase price
of approximately $70,000. The Company expects the acquisition to close in the
second quarter of 2002. However, there can be no assurance that such acquisition
will be consummated on the terms currently contemplated or at all, or on the
schedule currently contemplated.
Insured Fire at Development Community
During 2000, a fire occurred at one of the Company's development communities,
which was under construction and unoccupied at the time. The book value of the
destroyed assets was reduced to zero from a balance of approximately $13,900 at
the time of the fire. The Company recorded an insurance receivable for the same
amount which was subsequently collected from the insurance company. The Company
has property damage and business interruption insurance and prepared an
insurance claim for the cost of replacing the destroyed assets as well as for
business interruption losses. The Company does not anticipate this event will
have a material adverse impact on the financial condition or results of
operations of the Company. At December 31, 2001, the Company had an insurance
receivable balance of $2,500 for business interruption through December 31,
2001. Income of $2,500 relating to the business interruption insurance claim is
recorded in Other income in the accompanying Consolidated Statements of
Operations and Other Comprehensive Income for 2001. In 2002, the Company expects
to finalize the settlement of its insurance claim related to this fire and to
recognize additional income from business interruption insurance which cannot be
reasonably estimated at this time.
Employment Agreements and Arrangements
As of December 31, 2001, the Company has employment agreements with two
executive officers that it entered into in 1998. In addition, during 2000 and
2001, six other senior officers entered into employment agreements, which are
generally similar in structure to those entered into in 1998 but which generally
do not provide for the same level of severance payments. The employment
agreements provide for severance payments and generally also provide for
accelerated vesting of stock options and restricted stock in the event of a
termination of employment (except for
F-17
a termination by the Company with cause or a voluntary termination by the
employee). The current term of these agreements ends on dates that vary between
March 2003 and April 2004. The employment agreements provide for one-year
automatic renewals after the initial term unless an advance notice of
non-renewal is provided by either party. Under five of the agreements, upon a
notice of non-renewal by the Company, the officer may terminate his employment
and receive a severance payment. Upon a change in control, the agreements
provide for an automatic extension of up to three years from the date of the
change in control. The employment agreements provide for base salary and
incentive compensation in the form of cash awards, stock options and stock
grants subject to the discretion of, and attainment of performance goals
established by, the Compensation Committee of the Board of Directors.
During the fourth quarter of 1999, the Company adopted an Officer Severance
Program (the "Program") for the benefit of those officers of the Company who do
not have employment agreements. Under the Program, in the event an officer who
is not otherwise covered by a severance arrangement is terminated without cause
in connection with a change in control (as defined) of the Company, such officer
will generally receive a cash lump sum payment equal to the amount of such
officer's base salary and cash bonus as well as accelerated vesting of stock
options and restricted stock.
Legal Contingencies
The Company is subject to various legal proceedings and claims that arise in the
ordinary course of business. These matters are frequently covered by insurance.
If it has been determined that a loss is probable to occur, the estimated amount
of the loss is expensed in the financial statements. While the resolution of
these matters cannot be predicted with certainty, management believes the final
outcome of such matters will not have a material adverse effect on the financial
position or results of operations of the Company.
9. Segment Reporting
The Company's reportable operating segments include Established Communities,
Other Stabilized Communities, and Development/Redevelopment Communities.
Annually on January 1st, the Company determines which of its communities fall
into each of these categories and maintains that classification throughout the
year for the purpose of reporting segment operations.
- Established Communities (also known as Same Store Communities)
are communities where a comparison of operating results from the
prior year to the current year is meaningful, as these
communities were owned and had stabilized occupancy and costs as
of the beginning of the prior year. These communities are
divided into geographic regions. For the year 2001, the
Established Communities were communities that had stabilized
occupancy and costs as of January 1, 2000. A community is
considered to have stabilized occupancy at the earlier of (i)
attainment of 95% occupancy or (ii) the one-year anniversary of
completion of development or redevelopment.
- Other Stabilized includes all other completed communities that
have stabilized occupancy, as defined above, and communities
held for sale.
- Development/Redevelopment consists of communities that are under
construction and have not received a final certificate of
occupancy and communities where substantial redevelopment is in
progress or is planned to take place during the current year.
The primary financial measure for Established and Other Stabilized Communities
is Net Operating Income ("NOI"), which represents total revenue less operating
expenses and property taxes. The primary performance measure for communities
under development or redevelopment depends on the stage of completion. While
under development, management monitors actual construction costs against
budgeted costs as well as economic occupancy. While under lease-up, the primary
performance measures for these assets are lease-up pace compared to budget and
rent levels compared to budget.
F-18
(Dollars in thousands)
---------------------------------------------------------
Total Net operating % NOI change Gross
revenue income from prior year real estate
---------- ------------- --------------- -----------
For the year ended December 31, 2001
- ------------------------------------
Segment Results
Established
Northeast $ 113,564 $ 81,777 8.4% $ 570,551
Mid-Atlantic 81,976 60,256 8.4% 438,010
Midwest 21,069 13,089 1.7% 145,025
Pacific Northwest 6,784 4,985 3.3% 60,426
Northern California 157,736 121,923 6.9% 1,216,489
Southern California 42,462 30,188 9.2% 294,625
---------- ---------- ---------- ----------
Total Established 423,591 312,218 7.5% 2,725,126
---------- ---------- ---------- ----------
Other Stabilized 161,297 113,786 n/a 1,025,704
Development / Redevelopment 56,769 34,532 n/a 991,667
Land Held for Future Development n/a n/a n/a 66,608
Non-Allocated n/a n/a n/a 28,764
---------- ---------- ---------- ----------
Total AvalonBay $ 641,657 $ 460,536 11.8% $4,837,869
========== ========== ========== ==========
For the year ended December 31, 2000
- ------------------------------------
Segment Results
Established
Northeast $ 92,094 $ 65,047 6.6% $ 486,217
Mid-Atlantic 68,646 49,694 9.2% 392,758
Midwest 20,455 12,869 5.0% 144,550
Pacific Northwest 3,778 2,751 17.1% 34,382
Northern California 107,342 82,126 15.9% 938,630
Southern California 23,458 16,635 11.6% 158,165
---------- ---------- ---------- ----------
Total Established 315,773 229,122 10.7% 2,154,702
---------- ---------- ---------- ----------
Other Stabilized 198,444 141,270 n/a 1,441,767
Development / Redevelopment 59,178 41,492 n/a 882,043
Land Held for Future Development n/a n/a n/a 33,161
Non-Allocated n/a n/a n/a 24,296
---------- ---------- ---------- ----------
Total AvalonBay $ 573,395 $ 411,884 18.5% $4,535,969
========== ========== ========== ==========
For the year ended December 31, 1999
- ------------------------------------
Segment Results
Established
Northeast $ 84,786 $ 60,098 5.9% $ 475,430
Mid-Atlantic 64,645 45,863 7.6% 390,573
Midwest 5,347 3,049 7.6% 36,912
Northern California 96,182 70,662 1.1% 942,892
Southern California 6,557 4,512 15.2% 51,085
---------- ---------- ---------- ----------
Total Established 257,517 184,184 4.7% 1,896,892
---------- ---------- ---------- ----------
Other Stabilized 164,884 111,637 n/a 1,039,150
Development / Redevelopment 83,578 54,725 n/a 1,266,989
Land Held for Future Development n/a n/a n/a 40,459
Non-Allocated n/a n/a n/a 22,936
---------- ---------- ---------- ----------
Total AvalonBay $ 505,979 $ 350,546 38.3% $4,266,426
========== ========== ========== ==========
F-19
The segments are classified based on the individual community's status as of the
beginning of the given calendar year. Therefore, each year the composition of
communities within each business segment is adjusted. Accordingly, the amounts
between years are not directly comparable. The accounting policies applicable to
the operating segments described above are the same as those described in the
summary of significant accounting policies.
Operating expenses as reflected on the Consolidated Statements of Operations and
Comprehensive Income include $32,967, $28,111 and $22,786 for the years ended
December 31, 2001, 2000 and 1999, respectively, of property management overhead
costs that are not allocated to individual communities. These costs are not
reflected in NOI as shown in the above tables. While there were no communities
held for sale at December 31, 2001, the amount reflected for "Communities held
for sale" on the Consolidated Balance Sheets at December 31, 2000 is net of
$19,965 for accumulated depreciation.
10. Stock-Based Compensation Plans
The Company has adopted the 1994 Stock Incentive Plan, as amended and restated
on March 31, 2001 (the "1994 Plan"), for the purpose of encouraging and enabling
the Company's officers, associates and directors to acquire a proprietary
interest in the Company and as a means of aligning management and stockholder
interests and as a retention incentive for key associates. Individuals who are
eligible to participate in the 1994 Plan include officers, other associates,
outside directors and other key persons of the Company and its subsidiaries who
are responsible for or contribute to the management, growth or profitability of
the Company and its subsidiaries. The 1994 Plan authorizes (i) the grant of
stock options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code ("ISOs"), (ii) the grant of stock options that do not so
qualify, (iii) grants of shares of restricted and unrestricted Common Stock,
(iv) grants of deferred stock awards, (v) performance share awards entitling the
recipient to acquire shares of Common Stock and (vi) dividend equivalent rights.
Under the 1994 Plan, a maximum of 6,576,859 shares of Common Stock, plus upon
the passing of each December 31st starting with December 31, 2001, up to 1.0% of
the total number of shares of common stock and DownREIT units actually
outstanding on such date, may be issued. Notwithstanding the foregoing, the
maximum number of shares of stock for which ISOs may be issued under the 1994
Plan shall not exceed 2,500,000 and no awards shall be granted under the 1994
Plan after May 11, 2011. For purposes of this limitation, shares of Common Stock
which are forfeited, canceled and reacquired by the Company, satisfied without
the issuance of Common Stock or otherwise terminated (other than by exercise)
shall be added back to the shares of Common Stock available for issuance under
the 1994 Plan. Stock Options with respect to no more than 300,000 shares of
stock may be granted to any one individual participant during any one calendar
year period. Options granted to officers and employees under the 1994 Plan vest
over periods (and may be subject to accelerated vesting under certain
circumstances) as determined by the Compensation Committee of the Board of
Directors and must expire no later than ten years from the date of grant.
Options granted to non-employee directors under the 1994 Plan are subject to
accelerated vesting under certain limited circumstances, become exercisable on
the first anniversary of the date of grant, and expire ten years from the date
of grant. Restricted stock granted to officers and employees under the 1994 Plan
vest over periods (and may be subject to accelerated vesting under certain
circumstances) as determined by the Compensation Committee of the Board of
Directors. Generally, the restricted stock grants that have been awarded to
officers and employees vest over four years, with 20% vesting immediately on the
grant date and the remaining 80% vesting equally over the next four years from
the date of grant. Restricted stock granted to non-employee directors vests 20%
on the date of issuance and 20% on each of the first four anniversaries of the
date of issuance. Options to purchase 2,780,757, 3,123,713, and 3,637,724 shares
of Common Stock were available for grant under the 1994 Plan at December 31,
2001, 2000 and 1999, respectively.
Before the Merger, Avalon had adopted its 1995 Equity Incentive Plan (the
"Avalon 1995 Incentive Plan"). Under the Avalon 1995 Incentive Plan, a maximum
number of 3,315,054 shares (or 2,546,956 shares as adjusted for the Merger) of
Common Stock were issuable, plus any shares of Common Stock represented by
awards under Avalon's 1993 Stock Option and Incentive Plan (the "Avalon 1993
Plan") that were forfeited, canceled, reacquired by Avalon, satisfied without
the issuance of Common Stock or otherwise terminated (other than by exercise).
Options granted to officers, non-employee directors and associates under the
Avalon 1995 Incentive Plan generally vested
F-20
over a three-year term, expire ten years from the date of grant and are
exercisable at the market price on the date of grant.
In connection with the Merger, the exercise prices and the number of options
under the Avalon 1995 Incentive Plan and the Avalon 1993 Plan were adjusted to
reflect the equivalent Bay shares and exercise prices based on the 0.7683 share
conversion ratio used in the Merger. Officers, non-employee directors and
associates with Avalon 1995 Incentive Plan or Avalon 1993 Plan options may
exercise their adjusted number of options for the Company's Common Stock at the
adjusted exercise price. As of June 4, 1998, the date of the Merger, options and
other awards ceased to be granted under the Avalon 1993 Plan or the Avalon 1995
Incentive Plan. Accordingly, there were no options to purchase shares of Common
Stock available for grant under the Avalon 1995 Incentive Plan or the Avalon
1993 Plan at December 31, 2001, 2000 or 1999.
Information with respect to stock options granted under the 1994 Plan, the
Avalon 1995 Incentive Plan and the Avalon 1993 Plan is as follows:
Weighted Avalon 1995 Weighted
average and Avalon average
1994 Plan exercise price 1993 Plan exercise price
shares per share shares per share
---------- ---------- ---------- ----------
Options outstanding, December 31, 1998 1,886,082 $ 32.74 2,052,254 $ 34.05
Exercised (311,989) 25.44 (172,977) 26.97
Granted 993,084 32.24 -- --
Forfeited (533,903) 36.25 (50,940) 37.61
---------- ---------- ---------- ----------
Options outstanding, December 31, 1999 2,033,274 $ 32.63 1,828,337 $ 34.63
Exercised (172,376) 34.78 (327,582) 28.65
Granted 631,795 34.56 -- --
Forfeited (66,736) 33.50 (16,410) 35.84
---------- ---------- ---------- ----------
Options outstanding, December 31, 2000 2,425,957 $ 32.96 1,484,345 $ 35.94
Exercised (367,652) 33.05 (487,312) 35.79
Granted 946,612 45.90 -- --
Forfeited (111,639) 40.34 (4,836) 36.61
---------- ---------- ---------- ----------
Options outstanding, December 31, 2001 2,893,278 $ 36.91 992,197 $ 36.03
========== ========== ========== ==========
Options exercisable:
December 31, 1999 682,110 $ 30.33 1,268,520 $ 33.22
========== ========== ========== ==========
December 31, 2000 1,183,551 $ 32.05 1,313,219 $ 35.71
========== ========== ========== ==========
December 31, 2001 1,537,194 $ 33.58 976,830 $ 35.99
========== ========== ========== ==========
For options outstanding at December 31, 2001 for the 1994 plan, 246,666 options
had exercise prices ranging between $18.37 and $29.99 and a weighted average
contractual life of 3.1 years, 1,692,300 options had exercise prices ranging
between $30.00 and $39.99 and a weighted average contractual life of 7.1 years,
and 954,312 options had exercise prices ranging between $40.00 and $47.50 and a
weighted average contractual life of 9.1 years. Options outstanding at December
31, 2001 for the Avalon 1993 and Avalon 1995 plans had exercise prices ranging
from $26.68 to $39.86 and a weighted average contractual life of 5.3 years.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its Plans.
Accordingly, no compensation expense has been recognized for the stock option
portion of the stock-based compensation plan.
F-21
Had compensation expense for the Company's stock option plan been determined
based on the fair value at the grant date for awards under the Plan consistent
with the methodology prescribed under SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the following pro forma amounts (unaudited):
Pro Forma
-----------------------------------------------
Year ended Year ended Year ended
12-31-01 12-31-00 12-31-99
----------- ----------- -----------
Net income available to common stockholders $ 212,924 $ 168,058 $ 130,882
=========== =========== ===========
Per common share - basic $ 3.14 $ 2.53 $ 2.02
Per common share - diluted $ 3.07 $ 2.49 $ 2.01
The fair value of the options granted during 2001 is estimated at $4.83 per
share on the date of grant using the Black-Scholes option pricing model with the
following assumptions: dividend yield of 5.58%, volatility of 16.47%, risk-free
interest rates of 5.07%, actual number of forfeitures, and an expected life of
approximately 3 years. The fair value of the options granted during 2000 is
estimated at $3.76 per share on the date of grant using the Black-Scholes option
pricing model with the following assumptions: dividend yield of 6.51%,
volatility of 15.93%, risk-free interest rates of 6.61%, actual number of
forfeitures, and an expected life of approximately 3 years. The fair value of
the options granted during 1999 is estimated at $3.40 per share on the date of
grant using the Black-Scholes option pricing model with the following
assumptions: dividend yield of 6.10%, volatility of 17.04%, risk-free interest
rates of 5.54%, actual number of forfeitures, and an expected life of
approximately 3 years.
In connection with the Merger, the Company adopted the 1996 Non-Qualified
Employee Stock Purchase Plan, as amended and restated (the "1996 ESP Plan"). The
primary purpose of the 1996 ESP Plan is to encourage Common Stock ownership by
eligible directors, officers and associates (the "Participants") in the belief
that such ownership will increase each Participant's interest in the success of
the Company. Until January 1, 2000, the 1996 ESP Plan provided for two purchase
periods per year. A purchase period was a six month period beginning each
January 1 and July 1 and ending each June 30 and December 31, respectively.
Starting January 1, 2000, there is one purchase period per year, which begins
May 1 and ends October 31. Participants may contribute portions of their
compensation during a purchase period and purchase Common Stock at the end
thereof. One million shares of Common Stock were initially reserved for issuance
under the 1996 ESP Plan. Participation in the 1996 ESP Plan entitles each
Participant to purchase Common Stock at a price which is equal to the lesser of
85% of the closing price for a share of stock on the first day of such purchase
period or 85% of the closing price on the last day of such purchase period. The
Company issued 14,917, 34,055 and 35,408 shares under the 1996 ESP Plan for
2001, 2000 and 1999, respectively.
11. Fair Value of Financial Instruments
Cash and cash equivalent balances are held with various financial institutions
and may at times exceed the applicable Federal Deposit Insurance Corporation
limit. The Company monitors credit ratings of these financial institutions and
the concentration of cash and cash equivalent balances with any one financial
institution and believes the likelihood of realizing material losses from the
excess of cash and cash equivalent balances over insurance limits is remote.
The following estimated fair values of financial instruments were determined by
management using available market information and established valuation
methodologies, including discounted cash flows. Accordingly, the estimates
presented are not necessarily indicative of the amounts the Company could
realize on disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
- Cash equivalents, rents receivable, accounts payable and accrued
expenses, and other liabilities are carried at their face
amounts, which reasonably approximate their fair values.
F-22
- Bond indebtedness and notes payable with an aggregate carrying
value of $2,082,769 and $1,729,924 had an estimated aggregate
fair value of $2,191,115 and $1,765,402 at December 31, 2001 and
2000, respectively.
12. Related Party Arrangements
Purchase of Mortgage Loan
An executive officer and former executive officer of the Company are partners of
an entity that is the general partner of Arbor Commons Associates Limited
Partnership ("Arbor Commons Associates"). Concurrently with Avalon's initial
public offering in November 1993, Avalon purchased an existing participating
mortgage loan made to Arbor Commons Associates that was originated by CIGNA
Investments, Inc. The mortgage loan is secured by the borrower's interests in
the Avalon Arbor community. This loan accrues interest at a fixed rate of 10.2%
per annum, payable at 9% per annum. The balance of the note receivable at both
December 31, 2001 and 2000 was $21,483. The balance of accrued interest on the
note receivable as of December 31, 2001 and 2000, respectively, was $5,231 and
$4,450. Related interest income of $3,081, $3,009 and $2,943 was recorded for
2001, 2000 and 1999, respectively. Under the terms of the loan, the Company (as
successor to Avalon) receives (as contingent interest) 50% of the cash flow
after the 10.2% accrual rate is paid and 50% of the residual profits upon the
sale of the community.
Sublease of San Jose Office Space to Greenbriar Homes
From September 1, 1999 to August 31, 2001, the Company subleased approximately
8,500 square feet of space in its San Jose office to Greenbriar Homes, for
approximately $20,552 per month. A director of the Company holds a controlling
interest in Greenbriar Homes. The lease has expired and Greenbriar no longer
subleases office space from the Company.
Unconsolidated entities
The Company manages several unconsolidated entities for which it receives
management fee revenue. From these entities the Company received management fee
revenue of $1,011, $691 and $612 in 2001, 2000 and 1999, respectively.
Indebtedness of Management
The Company has adopted a recourse loan program under which the Company lends
amounts to or on behalf of employees ("Stock Loans") equivalent to the estimated
employees' tax withholding liabilities related to the vesting of restricted
stock under the 1994 Plan. The balance of the extended Stock Loans to employees
was $1,133 and $770 as of December 31, 2001 and 2000, respectively. The balance
of accrued interest on the notes receivable was $100 and $59 as of December 31,
2001 and 2000, respectively. Interest income on the notes of $62, $76, and $38
was recorded for 2001, 2000 and 1999, respectively.
Pursuant to a Promissory Note and Pledge and Security Agreement dated June 15,
2000, the Company advanced a senior officer $457. Until the fifth anniversary of
this loan, the loan bears interest at the rate of 6.49%, which was the Long Term
Applicable Federal Rate in effect at the time the loan was made. After the fifth
anniversary, the loan will bear interest at 6.49%, or, if the prevailing Short
Term Applicable Federal Rate then in effect is greater than 10.49% or less than
2.49%, then at the prevailing Short Term Applicable Federal Rate thereafter in
effect from time to time. This is a full recourse loan, and in addition is
secured by Common Stock and rights to employee stock options owned by the
officer. Dividends on the Common Stock securing the loan are applied to payment
of interest and principal on the loan. The outstanding balance of the loan,
including accrued interest, was $428 and $448 as of December 31, 2001 and 2000,
respectively. Interest income of $28 and $14 relating to the loan was recorded
for 2001 and 2000, respectively. If this loan is not repaid in full by June 15,
2005, then at any time thereafter the Company in its sole discretion may demand
repayment. In addition, the officer will be required to repay the loan in full
within sixty days following his termination of employment with the Company for
any reason.
F-23
Consulting Agreement with Mr. Meyer
In March 2000, the Company and Mr. Meyer announced that Mr. Meyer would retire
as Executive Chairman of the Company in May 2000. Although Mr. Meyer ceased his
day-to-day involvement with the Company as an executive officer, he continues to
serve as a director. In addition, pursuant to a consulting agreement, Mr. Meyer
agreed to serve as a consultant to the Company for three years following his
retirement for an annual fee of $1,395. In such capacity he assists with respect
to transitional matters that may arise in connection with his retirement, he
responds to requests for assistance or information concerning business matters
with which he became familiar while employed, and he provides business advice
and counsel to the Company with respect to business strategies and acquisitions,
dispositions, development and redevelopment of multifamily rental properties.
Director Compensation
A director of the Company who is also an employee receives no additional
compensation for his services as a director. Under the Stock Incentive Plan, on
the fifth business day following each annual meeting of stockholders, each of
the Company's non-employee directors automatically receives options to purchase
7,000 shares of Common Stock at the last reported sale price of the Common Stock
on the NYSE on such date, and a restricted stock (or deferred stock award) grant
of 2,500 shares of Common Stock. Subject to accelerated vesting under certain
limited circumstances, all of such stock options will become exercisable one
year after the date of grant and will expire ten years after the date of grant,
and such shares of restricted stock (or deferred stock awards) granted to
non-employee directors will vest at the rate of 20% on the date of issuance and
on each of the first four anniversaries of the date of issuance. If a director
elects to receive a deferred stock award in lieu of restricted stock, then at
the time of such election, the director also elects at what time in the future
he or she will receive shares of stock in respect of the vested portion of the
deferred stock award. The Company recorded compensation expense relating to
these awards in the amount of $624, $525 and $438 in 2001, 2000 and 1999,
respectively. Deferred compensation relating to the Board of Directors was $688
and $507 on December 31, 2001 and 2000, respectively.
13. Quarterly Financial Information (Unaudited)
The following summary represents the quarterly results of operations for the
years ended December 31, 2001 and 2000:
Three months ended
-----------------------------------------------------------------
3-31-01 6-30-01 9-30-01 12-31-01
----------- ----------- ----------- -----------
Total revenue $ 155,757 $ 162,359 $ 163,269 $ 160,272
Net income available to common stockholders $ 41,654 $ 39,131 $ 79,229 $ 56,486
Net income per common share - basic $ 0.62 $ 0.58 $ 1.16 $ 0.83
Net income per common share - diluted $ 0.61 $ 0.57 $ 1.14 $ 0.81
Three months ended
-----------------------------------------------------------------
3-31-00 6-30-00 9-30-00 12-31-00
----------- ----------- ----------- -----------
Total revenue $ 135,088 $ 139,958 $ 146,351 $ 151,998
Net income available to common stockholders $ 37,227 $ 40,712 $ 48,550 $ 44,336
Net income per common share - basic $ 0.57 $ 0.62 $ 0.73 $ 0.66
Net income per common share - diluted $ 0.56 $ 0.61 $ 0.71 $ 0.65
14. Subsequent Events
In January 2002, the Company invested an additional $2,300 in Realeum, Inc., a
company involved in the development and deployment of a property management and
leasing automation system.
F-24
AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(Dollars in thousands)
Initial Cost Total Cost
------------------------ --------------------------------------
Building / Costs Building /
Construction in Subsequent to Construction in
Progress & Acquisition / Progress &
Land Improvements Construction Land Improvements Total
-------- ------------ ------------ -------- ------------ ---------
Current Communities
Avalon at Prudential Center $ 25,811 $ 103,233 $ 15,514 $ 25,811 $ 118,747 $ 144,558
Longwood Towers 3,310 13,741 20,358 3,310 34,099 37,409
Avalon Summit 1,743 14,654 113 1,743 14,767 16,510
Avalon at Lexington 2,124 12,599 551 2,124 13,150 15,274
Avalon at Faxon Park 1,136 14,019 3 1,136 14,022 15,158
Avalon West 943 9,881 64 943 9,945 10,888
Avalon Oaks 2,129 18,640 -- 2,129 18,640 20,769
Avalon Essex 5,230 15,483 692 5,230 16,175 21,405
Avalon at Center Place -- 26,816 438 -- 27,254 27,254
Avalon Estates 1,972 18,167 -- 1,972 18,167 20,139
Avalon Walk I & II 9,102 48,796 1,079 9,102 49,875 58,977
Avalon Glen 5,956 23,993 1,221 5,956 25,214 31,170
Avalon Gates 4,414 31,305 249 4,414 31,554 35,968
Avalon Springs 2,116 14,512 83 2,116 14,595 16,711
Avalon Valley 2,277 22,424 1,359 2,277 23,783 26,060
Avalon Lake 3,314 13,139 542 3,314 13,681 16,995
Avalon Corners 6,305 24,179 907 6,305 25,086 31,391
Avalon Haven 1,264 11,762 739 1,264 12,501 13,765
Avalon Commons 4,679 28,552 37 4,679 28,589 33,268
Avalon Towers 3,118 12,709 937 3,118 13,646 16,764
Avalon Court 9,228 48,920 1,122 9,228 50,042 59,270
Avalon Cove 8,760 82,356 606 8,760 82,962 91,722
The Tower at Avalon Cove 3,738 45,755 126 3,738 45,881 49,619
Avalon Crest 11,468 44,035 469 11,468 44,504 55,972
Avalon at Florham Park 6,647 34,639 -- 6,647 34,639 41,286
Avalon Watch 5,585 22,394 1,386 5,585 23,780 29,365
Avalon Run East 1,579 14,669 24 1,579 14,693 16,272
Avalon Gardens 8,428 45,706 -- 8,428 45,706 54,134
Avalon View 3,529 14,140 490 3,529 14,630 18,159
Avalon Green 1,820 10,525 222 1,820 10,747 12,567
The Avalon 2,889 28,273 51 2,889 28,324 31,213
Avalon Willow 6,207 39,852 887 6,207 40,739 46,946
Avalon on the Sound 717 89,501 -- 717 89,501 90,218
Avalon at Fairway Hills I & II 8,612 34,463 1,537 8,612 36,000 44,612
Avalon at Symphony Glen 1,594 6,384 1,092 1,594 7,476 9,070
Avalon Landing 1,849 7,409 415 1,849 7,824 9,673
Avalon at Ballston - Vermont & Quincy Towers 9,340 37,360 293 9,340 37,653 46,993
Avalon Crescent 13,851 43,401 24 13,851 43,425 57,276
Avalon at Ballston - Washington Towers 7,291 29,177 751 7,291 29,928 37,219
Avalon at Cameron Court 10,292 32,931 -- 10,292 32,931 43,223
Total cost,
Net of Year of
Accumulated Accumulated Completion /
Depreciation Depreciation Encumbrances Acquisition
------------ ------------ ------------ -----------
Current Communities
Avalon at Prudential Center $ 13,106 $ 131,452 $ - 1968/1998
Longwood Towers 6,767 30,642 -- 1993
Avalon Summit 2,929 13,581 -- 1996
Avalon at Lexington 3,271 12,003 14,073 1994
Avalon at Faxon Park 1,929 13,229 -- 1998
Avalon West 1,853 9,035 8,522 1996
Avalon Oaks 1,889 18,880 17,718 1999
Avalon Essex 1,033 20,372 -- 2000
Avalon at Center Place 4,302 22,952 -- 1997
Avalon Estates 717 19,422 -- 2001
Avalon Walk I & II 12,432 46,545 12,036 1992/94
Avalon Glen 6,412 24,758 -- 1991
Avalon Gates 5,036 30,932 -- 1997
Avalon Springs 2,432 14,279 -- 1996
Avalon Valley 2,198 23,862 -- 1999
Avalon Lake 1,275 15,720 -- 1999
Avalon Corners 2,007 29,384 -- 2000
Avalon Haven 703 13,062 -- 2000
Avalon Commons 4,439 28,829 -- 1997
Avalon Towers 2,839 13,925 -- 1995
Avalon Court 5,071 54,199 -- 1997
Avalon Cove 13,867 77,855 -- 1997
The Tower at Avalon Cove 4,285 45,334 -- 1999
Avalon Crest 3,989 51,983 -- 1998
Avalon at Florham Park 1,486 39,800 -- 2001
Avalon Watch 6,550 22,815 -- 1999
Avalon Run East 2,719 13,553 -- 1996
Avalon Gardens 6,387 47,747 -- 1998
Avalon View 3,913 14,246 18,115 1993
Avalon Green 2,439 10,128 -- 1995
The Avalon 2,440 28,773 -- 1999
Avalon Willow 3,197 43,749 -- 2000
Avalon on the Sound 1,443 88,775 57,314 2001
Avalon at Fairway Hills I & II 7,465 37,147 11,500 1987/96
Avalon at Symphony Glen 2,041 7,029 9,780 1986
Avalon Landing 1,815 7,858 6,525 1995
Avalon at Ballston - Vermont & Quincy Towers 6,276 40,717 -- 1997
Avalon Crescent 7,074 50,202 -- 1996
Avalon at Ballston - Washington Towers 7,752 29,467 -- 1990
Avalon at Cameron Court 4,487 38,736 -- 1998
F-25
AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(Dollars in thousands)
Initial Cost Total Cost
------------------------ --------------------------------------
Building / Costs Building /
Construction in Subsequent to Construction in
Progress & Acquisition / Progress &
Land Improvements Construction Land Improvements Total
-------- ------------ ------------ -------- ------------ ---------
AutumnWoods 6,096 24,400 337 6,096 24,737 30,833
Avalon at Fair Lakes 4,334 19,127 9 4,334 19,136 23,470
Avalon at Dulles 2,302 9,212 343 2,302 9,555 11,857
Avalon at Providence Park 2,152 8,907 240 2,152 9,147 11,299
Avalon at Fox Mill 2,713 16,678 77 2,713 16,755 19,468
Avalon at Decoverly 6,157 24,800 727 6,157 25,527 31,684
Avalon Knoll 1,528 6,136 853 1,528 6,989 8,517
Avalon Fields I & II 4,047 18,611 43 4,047 18,654 22,701
Avalon Crossing 2,207 11,683 -- 2,207 11,683 13,890
4100 Massachusetts Avenue 6,848 27,614 1,230 6,848 28,844 35,692
Avalon at Arlington Square I 13,453 55,918 -- 13,453 55,918 69,371
Avalon at Danada Farms 7,535 30,444 388 7,535 30,832 38,367
Avalon at West Grove 5,149 20,657 3,900 5,149 24,557 29,706
Avalon at Stratford Green 4,326 17,569 37 4,326 17,606 21,932
200 Arlington Place 9,728 39,527 270 9,728 39,797 49,525
Avalon at Devonshire 7,250 29,641 405 7,250 30,046 37,296
Avalon at Edinburgh 3,541 14,758 177 3,541 14,935 18,476
Avalon at Town Centre 3,450 14,449 205 3,450 14,654 18,104
Avalon at Town Square 2,099 8,642 111 2,099 8,753 10,852
Avalon at Woodbury 5,034 20,857 72 5,034 20,929 25,963
Avalon at Bear Creek 6,786 27,035 616 6,786 27,651 34,437
Avalon Redmond Place 4,558 17,504 3,927 4,558 21,431 25,989
Avalon Greenbriar 3,808 21,239 11,086 3,808 32,325 36,133
Avalon HighGrove 7,569 32,035 -- 7,569 32,035 39,604
Avalon ParcSquare 3,789 15,093 143 3,789 15,236 19,025
Avalon RockMeadow 4,777 19,671 9 4,777 19,680 24,457
Avalon WildReed 4,253 18,676 21 4,253 18,697 22,950
Avalon Bellevue 6,664 23,908 -- 6,664 23,908 30,572
Avalon Belltown 5,644 12,453 -- 5,644 12,453 18,097
Avalon Wynhaven 11,412 41,142 -- 11,412 41,142 52,554
Avalon Brandemoor 8,630 36,679 -- 8,630 36,679 45,309
Avalon WildWood 6,268 26,597 -- 6,268 26,597 32,865
Waterford 11,324 45,717 1,755 11,324 47,472 58,796
Avalon Fremont 15,016 60,681 1,235 15,016 61,916 76,932
Avalon Pleasanton 11,610 46,552 1,678 11,610 48,230 59,840
Avalon Dublin 5,276 19,642 1,803 5,276 21,445 26,721
Avalon at Willow Creek 6,581 26,583 813 6,581 27,396 33,977
Avalon at Union Square 4,249 16,820 660 4,249 17,480 21,729
Crowne Ridge 5,982 16,885 8,002 5,982 24,887 30,869
Avalon at Sunset Towers 3,561 21,321 3,241 3,561 24,562 28,123
Avalon at Nob Hill 5,403 21,567 474 5,403 22,041 27,444
Total Cost,
Net of Year of
Accumulated Accumulated Completion /
Depreciation Depreciation Encumbrances Acquisition
------------ ------------ ------------ -----------
AutumnWoods 4,356 26,477 -- 1996
Avalon at Fair Lakes 2,691 20,779 -- 1998
Avalon at Dulles 2,632 9,225 12,360 1986
Avalon at Providence Park 1,446 9,853 -- 1997
Avalon at Fox Mill 1,358 18,110 -- 2000
Avalon at Decoverly 5,412 26,272 -- 1995
Avalon Knoll 2,208 6,309 13,193 1985
Avalon Fields I & II 3,467 19,234 11,454 1998
Avalon Crossing 2,156 11,734 -- 1996
4100 Massachusetts Avenue 7,171 28,521 -- 1982
Avalon at Arlington Square I 1,222 68,149 -- 2001
Avalon at Danada Farms 4,206 34,161 -- 1997
Avalon at West Grove 3,349 26,357 -- 1967
Avalon at Stratford Green 2,424 19,508 -- 1997
200 Arlington Place 1,431 48,094 -- 1987/2000
Avalon at Devonshire 4,237 33,059 27,305 1988
Avalon at Edinburgh 1,933 16,543 -- 1992
Avalon at Town Centre 2,062 16,042 -- 1986
Avalon at Town Square 1,250 9,602 -- 1986
Avalon at Woodbury 1,805 24,158 -- 1999
Avalon at Bear Creek 3,459 30,978 -- 1998
Avalon Redmond Place 3,013 22,976 -- 1991/97
Avalon Greenbriar 3,809 32,324 18,755 1987/88
Avalon HighGrove 1,277 38,327 -- 2000
Avalon ParcSquare 852 18,173 -- 2000
Avalon RockMeadow 1,124 23,333 -- 2000
Avalon WildReed 995 21,955 -- 2000
Avalon Bellevue 775 29,797 -- 2001
Avalon Belltown 131 17,966 -- 2001
Avalon Wynhaven 1,248 51,306 -- 2001
Avalon Brandemoor 1,028 44,281 -- 2001
Avalon WildWood 737 32,128 -- 2001
Waterford 6,126 52,670 33,100 1985/86
Avalon Fremont 7,844 69,088 -- 1992/94
Avalon Pleasanton 6,141 53,699 -- 1988/94
Avalon Dublin 2,692 24,029 -- 1989/97
Avalon at Willow Creek 3,459 30,518 -- 1985/94
Avalon at Union Square 2,206 19,523 -- 1973/96
Crowne Ridge 3,155 27,714 -- 1973/96
Avalon at Sunset Towers 3,418 24,705 -- 1961/96
Avalon at Nob Hill 2,745 24,699 19,745 1990/95
F-26
AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(Dollars in thousands)
Initial Cost Total Cost
------------------------ --------------------------------------
Building / Costs Building /
Construction in Subsequent to Construction in
Progress & Acquisition / Progress &
Land Improvements Construction Land Improvements Total
-------- ------------ ------------ -------- ------------ ---------
Avalon at Diamond Heights 4,726 19,130 428 4,726 19,558 24,284
Avalon Towers by The Bay 9,155 57,630 41 9,155 57,671 66,826
Avalon at Cedar Ridge 4,230 9,659 11,641 4,230 21,300 25,530
Avalon Foster City 7,852 31,445 3,493 7,852 34,938 42,790
Avalon Pacifica 6,125 24,796 280 6,125 25,076 31,201
Avalon Silicon Valley 20,713 99,304 789 20,713 100,093 120,806
Avalon at Blossom Hill 11,933 48,313 490 11,933 48,803 60,736
Avalon Campbell 11,830 47,828 270 11,830 48,098 59,928
CountryBrook 9,384 34,794 3,599 9,384 38,393 47,777
Avalon at Pruneyard 3,414 15,469 12,834 3,414 28,303 31,717
Avalon at Creekside 6,546 26,301 10,119 6,546 36,420 42,966
Avalon at River Oaks 8,904 35,126 1,550 8,904 36,676 45,580
Avalon at Parkside 7,406 29,823 532 7,406 30,355 37,761
Avalon Mountain View 9,755 39,393 1,112 9,755 40,505 50,260
San Marino 6,607 26,673 459 6,607 27,132 33,739
Avalon Sunnyvale 6,786 27,388 441 6,786 27,829 34,615
Avalon at Foxchase 11,340 45,532 1,599 11,340 47,131 58,471
Fairway Glen 3,341 13,338 395 3,341 13,733 17,074
Avalon Cupertino 9,099 39,926 33 9,099 39,959 49,058
Avalon on the Alameda 6,119 50,164 412 6,119 50,576 56,695
Avalon Rosewalk I & II 15,814 62,028 268 15,814 62,296 78,110
Avalon Woodland Hills 23,828 40,372 7,118 23,828 47,490 71,318
Avalon at Media Center 22,483 28,104 24,444 22,483 52,548 75,031
Avalon Westside Terrace 5,878 23,708 7,493 5,878 31,201 37,079
Avalon at Warner Center 7,045 12,986 6,298 7,045 19,284 26,329
Avalon Huntington Beach 6,663 21,647 8,816 6,663 30,463 37,126
Avalon at Pacific Bay 4,871 19,745 7,243 4,871 26,988 31,859
Avalon at South Coast 4,709 16,063 3,594 4,709 19,657 24,366
Avalon Santa Margarita 4,607 16,911 2,052 4,607 18,963 23,570
Amberway 10,285 7,249 3,726 10,285 10,975 21,260
Avalon Laguna Niguel 656 16,588 3,713 656 20,301 20,957
Avalon Newport 1,975 3,814 4,313 1,975 8,127 10,102
Avalon Mission Viejo 2,517 9,257 1,165 2,517 10,422 12,939
Avalon at Mission Bay 9,922 40,633 15,287 9,922 55,920 65,842
Avalon at Cortez Hill 2,768 20,134 11,380 2,768 31,514 34,282
Avalon at Mission Ridge 2,710 10,924 7,933 2,710 18,857 21,567
Avalon at Penasquitos Hills 2,760 9,391 2,036 2,760 11,427 14,187
-------- ---------- -------- -------- ---------- ----------
748,232 3,259,510 266,664 748,232 3,526,174 4,274,406
-------- ---------- -------- -------- ---------- ----------
Total Cost,
Net of Year of
Accumulated Accumulated Completion /
Depreciation Depreciation Encumbrances Acquisition
------------ ------------ ------------ -----------
Avalon at Diamond Heights 2,476 21,808 -- 1972/94
Avalon Towers by The Bay 4,637 62,189 -- 1999
Avalon at Cedar Ridge 2,815 22,715 -- 1975/97
Avalon Foster City 4,161 38,629 -- 1973/94
Avalon Pacifica 3,120 28,081 16,505 1971/95
Avalon Silicon Valley 12,372 108,434 -- 1997
Avalon at Blossom Hill 6,179 54,557 -- 1995
Avalon Campbell 5,980 53,948 36,386 1995
CountryBrook 4,832 42,945 18,577 1985/96
Avalon at Pruneyard 3,372 28,345 12,870 1966/97
Avalon at Creekside 3,919 39,047 -- 1962/97
Avalon at River Oaks 4,665 40,915 -- 1990/96
Avalon at Parkside 3,769 33,992 -- 1991/96
Avalon Mountain View 5,045 45,215 18,300 1986
San Marino 3,399 30,340 -- 1984/88
Avalon Sunnyvale 3,467 31,148 -- 1987/95
Avalon at Foxchase 5,938 52,533 26,400 1986/87
Fairway Glen 1,756 15,318 9,580 1986
Avalon Cupertino 5,163 43,895 -- 1999
Avalon on the Alameda 5,025 51,670 -- 1999
Avalon Rosewalk I & II 7,236 70,874 -- 1997
Avalon Woodland Hills 6,613 64,705 -- 1989/97
Avalon at Media Center 5,071 69,960 -- 1969/97
Avalon Westside Terrace 3,770 33,309 -- 1966/97
Avalon at Warner Center 2,546 23,783 -- 1979/98
Avalon Huntington Beach 4,273 32,853 -- 1972/97
Avalon at Pacific Bay 3,187 28,672 -- 1971/97
Avalon at South Coast 2,573 21,793 -- 1973/96
Avalon Santa Margarita 2,458 21,112 -- 1990/97
Amberway 1,537 19,723 -- 1983/98
Avalon Laguna Niguel 2,747 18,210 10,400 1988/98
Avalon Newport 1,048 9,054 -- 1956/96
Avalon Mission Viejo 1,344 11,595 7,256 1984/96
Avalon at Mission Bay 6,182 59,660 -- 1969/97
Avalon at Cortez Hill 3,201 31,081 -- 1973/98
Avalon at Mission Ridge 2,430 19,137 -- 1960/97
Avalon at Penasquitos Hills 1,469 12,718 -- 1982/97
--------- ----------- ---------
435,090 3,839,316 447,769
--------- ----------- ---------
F-27
AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(Dollars in thousands)
Initial Cost Total Cost
------------------------ --------------------------------------
Building / Costs Building /
Construction in Subsequent to Construction in
Progress & Acquisition / Progress &
Land Improvements Construction Land Improvements Total
-------- ------------ ------------ -------- ------------ ---------
Development Communities
Avalon at Edgewater 6,191 66,192 -- 6,191 66,192 72,383
Avalon at Freehold 2,124 29,618 -- 2,124 29,618 31,742
Avalon on Stamford Harbor -- 36,479 -- -- 36,479 36,479
Avalon Towers on the Peninsula -- 56,177 -- -- 56,177 56,177
Avalon at Cahill Park 392 32,354 -- 392 32,354 32,746
Avalon Riverview -- 67,765 -- -- 67,765 67,765
Avalon at Mission Bay North -- 22,343 -- -- 22,343 22,343
Avalon Oaks West -- 13,824 -- -- 13,824 13,824
Avalon Ledges -- 22,134 -- -- 22,134 22,134
Avalon Orchards -- 14,312 -- -- 14,312 14,312
Avalon at Arlington Square II -- 24,119 -- -- 24,119 24,119
Avalon at Flanders Hill -- 11,150 -- -- 11,150 11,150
Avalon New Canaan -- 14,920 -- -- 14,920 14,920
Avalon at Rock Spring -- 5,171 -- -- 5,171 5,171
Avalon at Gallery Place I -- 17,711 -- -- 17,711 17,711
--------- ----------- --------- --------- ----------- -----------
8,707 434,269 -- 8,707 434,269 442,976
--------- ----------- --------- --------- ----------- -----------
Land held for development 66,608 -- -- 66,608 -- 66,608
Corporate 1,571 8,242 44,066 1,571 52,308 53,879
--------- ----------- --------- --------- ----------- -----------
$ 825,118 $ 3,702,021 $ 310,730 $ 825,118 $ 4,012,751 $ 4,837,869
========= =========== ========= ========= =========== ===========
Total Cost,
Net of Year of
Accumulated Accumulated Completion /
Depreciation Depreciation Encumbrances Acquisition
------------ ------------ ------------ -----------
Development Communities
Avalon at Edgewater 345 72,038 -- N/A
Avalon at Freehold 87 31,655 -- N/A
Avalon on Stamford Harbor -- 36,479 -- N/A
Avalon Towers on the Peninsula -- 56,177 -- N/A
Avalon at Cahill Park 11 32,735 -- N/A
Avalon Riverview -- 67,765 -- N/A
Avalon at Mission Bay North -- 22,343 -- N/A
Avalon Oaks West -- 13,824 -- N/A
Avalon Ledges -- 22,134 -- N/A
Avalon Orchards -- 14,312 -- N/A
Avalon at Arlington Square II -- 24,119 -- N/A
Avalon at Flanders Hill -- 11,150 -- N/A
Avalon New Canaan -- 14,920 -- N/A
Avalon at Rock Spring -- 5,171 -- N/A
Avalon at Gallery Place I -- 17,711 -- N/A
--------- ----------- ---------
443 442,533 --
--------- ----------- ---------
Land held for development -- 66,608 -- N/A
Corporate 11,493 42,386 -- N/A
--------- ----------- ---------
$ 447,026 $ 4,390,843 $ 447,769
========= =========== =========
F-28
AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(Dollars in thousands)
Depreciation of AvalonBay Communities, Inc. building, improvements, upgrades and
furniture, fixtures and equipment (FF&E) is calculated over the following useful
lives, on a straight line basis:
Building - 30 years
Improvements, upgrades and FF&E - not to exceed 7 years
The aggregate cost of total real estate for Federal income tax purposes was
approximately $4.8 billion at December 31, 2001.
The changes in total real estate assets for the years ended December 31, 2001,
2000 and 1999 are as follows:
Years ended December 31,
----------------------------------------
2001 2000 1999
------------ ------------ ------------
Balance, beginning of period $ 4,535,969 $ 4,266,426 $4,006,456
Acquisitions, Construction Costs and Improvements 496,908 393,359 519,381
Reclassification to investments in JV's -- -- --
Dispositions (195,008) (123,816) (259,411)
------------ ------------ -----------
Balance, end of period $ 4,837,869 $ 4,535,969 $4,266,426
============ ============ ===========
The changes in accumulated depreciation for the years ended December 31, 2001,
2000 and 1999, are as follows:
Years ended December 31,
----------------------------------------
2001 2000 1999
------------ ------------ ------------
Balance, beginning of period $ 336,010 $ 225,103 $ 137,374
Depreciation for period 126,984 119,416 107,928
Dispositions (15,968) (8,509) (20,199)
---------- ---------- ----------
Balance, end of period $ 447,026 $ 336,010 $ 225,103
========== ========== ==========
F-29