AvalonBay Communities Inc.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 11:45

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide an understanding of our business, financial condition and results of operations. This MD&A should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under "Forward-Looking Statements" included in this report. Actual results or developments could differ materially from those projected in such statements as a result of the factors described under "Forward-Looking Statements" as well as the risk factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2024 (the "Form 10-K") and in Part II, Item 1A. "Risk Factors" in this report.
Capitalized terms used without definition have the meanings provided elsewhere in this Form 10-Q.
Executive Overview
Business Description
AvalonBay Communities, Inc. (the "Company," "we," "our" and "us" which terms, unless the context otherwise requires, refer to AvalonBay Communities, Inc. together with its subsidiaries), is a Maryland corporation that has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes. We develop, redevelop, acquire, own and operate apartment communities in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in our expansion regions of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado. We focus on leading metropolitan areas that we believe are generally characterized by growing employment in high wage sectors of the economy, higher cost of home ownership and a diverse and vibrant quality of life. We believe these market characteristics have offered, and will continue to offer, the opportunity for superior risk-adjusted returns over the long-term on apartment community investments relative to other markets that do not have these characteristics.
Our principal financial goal is to increase long-term shareholder value through the development, redevelopment, acquisition, ownership, operation and asset management and, when appropriate, disposition of apartment communities in our markets. To help meet this goal, we regularly (i) monitor our investment allocation by geographic market and product type, (ii) develop, redevelop and acquire interests in apartment communities in our selected markets, (iii) efficiently operate our communities to maximize resident satisfaction and shareholder return, (iv) selectively sell apartment communities that no longer meet our long term strategy or when opportunities are presented to realize a portion of the value created through our investment and redeploy the proceeds from those sales and (v) maintain a capital structure that we believe is aligned with our business risks and allows us to maintain continuous access to cost-effective capital. We pursue our development, redevelopment, investment and operating activities with the purpose of "Creating a Better Way to Live."
Third Quarter 2025 Operating Highlights
•Net income attributable to common stockholders for the three months ended September 30, 2025 was $381,306,000, an increase of $8,787,000, or 2.4%, from the prior year period. The increase was primarily attributable to a net increase in unrealized gains on property technology investments, an increase in NOI from communities over the prior year period, and increases in real estate sales and related gains.
•Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential ("Residential") revenue, for the three months ended September 30, 2025 was $461,048,000, an increase of $5,189,000, or 1.1%, over the prior year period. The increase over the prior year period was due to an increase in Residential revenue of $15,100,000, or 2.3%, partially offset by an increase in Residential property operating expenses of $9,911,000, or 4.6%.
Third Quarter 2025 Development Highlights
At September 30, 2025, we owned or held a direct or indirect interest in:
•21 wholly-owned communities under construction, which are expected to contain 7,806 apartment homes with a projected total capitalized cost of $3,012,000,000.
•Land or rights to land on which we expect to develop an additional 34 apartment communities that, if developed as expected, will contain 9,381 apartment homes.
Third Quarter 2025 Real Estate Transactions Highlights
During the three months ended September 30, 2025, we had the following activity:
•We acquired three wholly-owned communities containing 584 apartment homes for an aggregate purchase price of $186,950,000.
•We acquired our joint venture partner's 50% interest in Avalon Alderwood Place, a 328 apartment home community in Lynnwood, WA, for a purchase price of $71,250,000. With the buyout of the joint venture partner's interest, Avalon Alderwood Place is now a wholly owned apartment community and consolidated for financial reporting purposes.
•We sold six wholly-owned communities containing 1,594 apartment homes and 20,000 square feet of commercial space, for $585,080,000, for a gain in accordance with GAAP of $180,537,000.
In addition, in October 2025, we acquired Avalon Townhome Collection Brier Creek, located in Durham, NC, containing 93 townhomes for a purchase price of $36,500,000.
Communities Overview
Our real estate investments consist primarily of current operating apartment communities ("Current Communities"), consolidated and unconsolidated communities in various stages of development ("Development" communities and "Unconsolidated Development" communities) and Development Rights (as defined below). Our Current Communities are further classified as Same Store communities, Other Stabilized communities, Redevelopment communities and Unconsolidated communities. While we generally establish the classification of communities on an annual basis, we update the classification of communities during the calendar year to the extent that our plans with regard to the disposition or redevelopment of a community change, or if something occurs that materially impacts the operations of a community such as a casualty loss. The following is a description of each category:
Current Communitiesare categorized as Same Store, Other Stabilized, Redevelopment, or Unconsolidated according to the following attributes:
•Same Storeis composed of consolidated 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 as of the beginning of the prior year period. For the nine month periods ended September 30, 2025 and 2024, Same Store communities are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2024, are not conducting or are not probable to conduct substantial redevelopment activities and are not held for sale as of September 30, 2025 or probable for disposition to unrelated third parties within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.
•Other Stabilized is composed of completed consolidated communities that we own and that are not Same Store but which have stabilized occupancy, as defined above, as of January 1, 2025, or which were acquired subsequent to January 1, 2024. Other Stabilized excludes communities that are conducting or are probable to conduct substantial redevelopment activities within the current year, as defined below.
•Redevelopment is composed of consolidated communities where substantial redevelopment occurred, is in progress, or is probable to begin during the fiscal year. Redevelopment is considered substantial when (i) capital invested is expected to exceed the lesser of $5,000,000 or 10% of the community's pre-redevelopment basis and (ii) physical occupancy is below or is expected to be below 90% during, or as a result of, the redevelopment activity.
•Unconsolidated is composed of communities that we have an indirect ownership interest in through our investment interest in an unconsolidated joint venture.
Developmentis composed of consolidated communities that are either currently under construction, were under construction and were completed during the current year or where construction has been complete for less than one year and that do not have stabilized occupancy. These communities may be partially or fully complete and operating.
Unconsolidated Developmentis composed of communities that are either currently under construction, or were under construction and were completed during the current year, in which we have an indirect ownership interest through our investment interest in an unconsolidated joint venture. These communities may be partially or fully complete and operating.
Development Rightsare development opportunities in the early phase of the development process where we either have an option to acquire land or enter into a leasehold interest, where we are the buyer under a long-term conditional contract to purchase land, where we control the land through a ground lease or own land to develop a new community, or where we are the designated developer in a public-private partnership. We capitalize related pre-development costs incurred in pursuit of new developments for which we currently believe future development is probable.
We currently lease our corporate headquarters located in Arlington, Virginia, as well as our other regional and administrative offices, under operating leases.
As of September 30, 2025, communities that we owned or held a direct or indirect interest in were classified as follows:
Number of
communities 		Number of
apartment homes
Current Communities
Same Store:
New England 38 9,535
Metro NY/NJ 40 12,643
Mid-Atlantic 38 13,714
Southeast Florida 8 2,837
Denver, CO 6 1,539
Pacific Northwest 17 4,943
Northern California 38 11,803
Southern California 58 17,798
Other Expansion Regions 9 2,512
Total Same Store 252 77,324
Other Stabilized:
New England 1 162
Metro NY/NJ 2 559
Mid-Atlantic 1 234
Southeast Florida 2 524
Denver, CO 2 653
Pacific Northwest 4 1,049
Northern California 2 742
Southern California 1 100
Other Expansion Regions 12 3,663
Total Other Stabilized 27 7,686
Redevelopment - -
Unconsolidated 8 2,394
Total Current 287 87,404
Development 27 9,815
Unconsolidated Development - -
Total Communities 314 97,219
Development Rights 34 9,381
Results of Operations
Our results of operations are driven by our operating platform and are primarily affected by both overall and individual geographic market conditions and apartment fundamentals and are reflected in changes in Same Store NOI; NOI derived from acquisitions, development completions and development under construction and in lease-up; loss of NOI related to disposed communities; and capital market and financing activity. A comparison of our operating results for the three and nine months ended September 30, 2025 and 2024 is as follows (unaudited, dollars in thousands).
For the three months ended September 30, For the nine months ended September 30,
2025 2024 2025 2024
Revenue:
Rental and other income $ 764,926 $ 732,591 $ 2,267,665 $ 2,167,866
Management, development and other fees 1,870 1,716 5,204 5,342
Total revenue 766,796 734,307 2,272,869 2,173,208
Expenses:
Direct property operating expenses, excluding property taxes 164,414 151,145 464,794 430,256
Property taxes 89,749 82,419 257,611 243,255
Total community operating expenses 254,163 233,564 722,405 673,511
Property management and other indirect operating expenses (39,064) (41,896) (116,652) (118,297)
Expensed transaction, development and other pursuit costs, net of recoveries (1,392) (1,573) (8,629) (7,235)
Interest expense, net (65,410) (55,769) (190,075) (167,613)
Depreciation expense (230,371) (212,122) (679,989) (631,314)
General and administrative expense (22,028) (20,089) (64,805) (60,006)
Casualty and impairment loss - - (858) (2,935)
Income from unconsolidated investments 42,487 25,250 40,436 33,845
Structured Investment Program interest income 6,832 5,470 19,882 12,544
Gain on sale of communities, net 180,155 172,973 336,081 241,459
Other real estate activity 127 314 3,919 636
Income before income taxes 383,969 373,301 889,774 800,781
Income tax benefit (expense) 193 (782) 840 (698)
Net income 384,162 372,519 890,614 800,083
Net income attributable to noncontrolling interests (2,856) - (4,046) (181)
Net income attributable to common stockholders $ 381,306 $ 372,519 $ 886,568 $ 799,902
Net income attributable to common stockholdersincreased $8,787,000, or 2.4%, to $381,306,000 and $86,666,000, or 10.8%, to $886,568,000 for the three and nine months ended September 30, 2025, respectively, as compared to the prior year periods, primarily due to a net increase in unrealized gains on property technology investments, an increase in NOI from communities over the prior year period, and increases in real estate sales and related gains.
NOI.We define NOI as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), property management and other indirect operating expenses, net of corporate income, expensed transaction, development and other pursuit costs, net of recoveries, interest expense, net, loss on extinguishment of debt, net, general and administrative expense, income from unconsolidated investments, Structured Investment Program interest income, depreciation expense, income tax expense (benefit), casualty and impairment loss, gain on sale of communities, net, other real estate activity and net operating income from real estate assets sold or held for sale. Management considers NOI to be an important and appropriate supplemental performance measure to net income because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any corporate-level property management overhead or financing-related costs. NOI reflects the operating performance of a community and allows for an easier comparison of the operating performance of individual assets or groups of assets. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impact to overhead as a result of acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets.
NOI does not represent cash generated from operating activities in accordance with GAAP, and NOI should not be considered an alternative to net income as an indication of our performance. NOI should also not be considered an alternative to net cash flow from operating activities, as determined by GAAP, as a measure of liquidity, nor is NOI indicative of cash available to fund cash needs. Residential NOI represents results attributable to our apartment rental operations, including parking and other ancillary residential revenue. Reconciliations of NOI and Residential NOI for the three and nine months ended September 30, 2025 and 2024 to net income for each period are as follows (unaudited, dollars in thousands):
For the three months ended September 30, For the nine months ended September 30,
2025 2024 2025 2024
Net income $ 384,162 $ 372,519 $ 890,614 $ 800,083
Property management and other indirect operating expenses, net of corporate income 37,194 40,149 111,447 112,906
Expensed transaction, development and other pursuit costs, net of recoveries 1,392 1,573 8,629 7,235
Interest expense, net 65,410 55,769 190,075 167,613
General and administrative expense 22,028 20,089 64,805 60,006
Income from unconsolidated investments (42,487) (25,250) (40,436) (33,845)
Structured Investment Program interest income (6,832) (5,470) (19,882) (12,544)
Depreciation expense 230,371 212,122 679,989 631,314
Income tax (benefit) expense (193) 782 (840) 698
Casualty and impairment loss - - 858 2,935
Gain on sale of communities, net (180,155) (172,973) (336,081) (241,459)
Other real estate activity (127) (314) (3,919) (636)
Net operating income from real estate assets sold or held for sale (6,987) (18,405) (33,736) (67,134)
NOI 503,776 480,591 1,511,523 1,427,172
Commercial NOI (1) (7,403) (7,537) (24,475) (23,573)
Residential NOI $ 496,373 $ 473,054 $ 1,487,048 $ 1,403,599
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(1)Represents results attributable to the commercial and other non-residential operations at our communities ("Commercial").
The Residential NOI changes for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 consist of changes in the following categories (unaudited, dollars in thousands):
For the three months ended September 30, For the nine months ended September 30,
2025 2024 Increase/ (Decrease) 2025 2024 Increase/ (Decrease)
Same Store $ 461,048 $ 455,859 $ 5,189 $ 1,400,202 $ 1,371,164 $ 29,038
Other Stabilized 28,355 15,980 12,375 73,139 30,919 42,220
Development / Redevelopment 6,970 1,215 5,755 13,707 1,516 12,191
Total $ 496,373 $ 473,054 $ 23,319 $ 1,487,048 $ 1,403,599 $ 83,449
The 1.1% increase in our Same Store Residential NOI for the three months ended September 30, 2025 is due to an increase in Residential revenue of $15,100,000, or 2.3%, partially offset by an increase in Residential property operating expenses of $9,911,000, or 4.6%, over the prior year period. The 2.1% increase in our Same Store Residential NOI for the nine months ended September 30, 2025 is due to an increase in Residential revenue of $54,483,000, or 2.7%, partially offset by an increase in Residential property operating expenses of $25,445,000, or 4.1%, over the prior year period.
Rental and other incomeincreased $32,335,000, or 4.4%, and $99,799,000, or 4.6%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, due to an increase in rental revenue from our stabilized operating communities, discussed below.
Consolidated Communities - The weighted average number of occupied apartment homes for consolidated communities increased to 82,437 apartment homes for the nine months ended September 30, 2025, compared to 79,593 homes for the prior year period. The weighted average monthly residential revenue per occupied apartment home increased to $3,073 for the nine months ended September 30, 2025, compared to $3,020 in the prior year period.
Same Store Communities - The following table presents the change in Same Store Residential revenue, including the attribution of the change between average revenue per occupied home and Economic Occupancy (as defined below) for the nine months ended September 30, 2025 (unaudited, dollars in thousands).
For the nine months ended September 30,
2025 2024 2025 to
2024 		2025 to
2024 		2025 2024 2025 to
2024 		2025 2024 2025 to
2024
Residential revenue Average monthly revenue per occupied home Economic Occupancy (1)
$ Change % Change % Change % Change
New England $ 284,452 $ 277,220 $ 7,232 2.6 % $ 3,438 $ 3,348 2.7 % 96.4 % 96.5 % (0.1) %
Metro NY/NJ 417,797 405,527 12,270 3.0 % 3,823 3,732 2.4 % 96.1 % 95.5 % 0.6 %
Mid-Atlantic 304,154 292,388 11,766 4.0 % 2,581 2,481 4.0 % 95.5 % 95.5 % - %
Southeast Florida 71,788 71,846 (58) (0.1) % 2,903 2,900 0.1 % 96.8 % 97.0 % (0.2) %
Denver, CO 30,627 30,493 134 0.4 % 2,340 2,325 0.6 % 94.5 % 94.7 % (0.2) %
Pacific Northwest 123,998 119,404 4,594 3.8 % 2,891 2,782 3.9 % 96.4 % 96.5 % (0.1) %
Northern California 318,649 311,019 7,630 2.5 % 3,122 3,056 2.2 % 96.1 % 95.8 % 0.3 %
Southern California 451,307 441,261 10,046 2.3 % 2,939 2,867 2.5 % 95.9 % 96.1 % (0.2) %
Other Expansion Regions 41,116 40,247 869 2.2 % 1,906 1,916 (0.5) % 95.4 % 92.7 % 2.7 %
Total Same Store $ 2,043,888 $ 1,989,405 $ 54,483 2.7 % $ 3,060 $ 2,982 2.6 % 96.0 % 95.9 % 0.1 %
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(1) Economic Occupancy is defined as gross potential revenue less vacancy loss, as a percentage of gross potential revenue. Gross potential revenue is determined by valuing occupied homes at contract rates and vacant homes at market rents. Vacancy loss is determined by valuing vacant units at current market rents. Economic Occupancy considers that apartment homes of different sizes and locations within a community have different economic impacts on a community's gross revenue.
Direct property operating expenses, excluding property taxes,increased $13,269,000, or 8.8%, and $34,538,000, or 8.0%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, primarily due to the
addition of newly developed and acquired apartment communities as well as increased Residential operating expenses at our Same Store communities as discussed below.
Same Store Residential direct property operating expenses, excluding property taxes, increased $7,199,000, or 5.2%, and $20,173,000, or 5.1%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, primarily due to increased (i) repairs and maintenance costs, (ii) utility costs, including from our bulk internet offering, the costs for which are more than offset by the associated bulk internet revenue included as a component of rental and other income and (iii) payroll costs primarily from increased employee benefit costs, growth in average salaries and bonus achievement.
Property taxesincreased $7,330,000, or 8.9%, and $14,356,000, or 5.9%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, primarily due to the addition of newly developed and acquired apartment communities and increases for our Same Store Residential portfolio, partially offset by decreased property taxes from dispositions.
Same Store Residential property taxes increased $2,712,000, or 3.5%, and $5,272,000, or 2.3%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, due to increased assessments across the portfolio and the expiration of property tax incentive programs primarily at certain of our properties in New York City, partially offset by decreased tax rates and/or successful tax appeals at certain of our properties in the current year period in excess of the prior year period.
Property management and other indirect operating expenses, net of corporate income decreased $2,832,000, or 6.8%, and $1,645,000, or 1.4%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, due to decreased advocacy costs partially offset by increased costs related to investments in technology and process related spend for initiatives to improve future efficiency in services for residents and prospects, as well as higher compensation.
Expensed transaction, development and other pursuit costs, net of recoveriesincludes costs incurred for write downs and abandonment of Development Rights and development pursuits not yet considered probable for development, as well as costs related to abandoned acquisition and disposition pursuits, offset by any recoveries of costs incurred. In periods of increased acquisition and pursuit activity, periods of economic downturn or when there is limited access to capital, these costs can be volatile and may vary significantly from year to year. In addition, the timing for potential recoveries will not always align with the timing for expensing an abandoned pursuit. Expensed transaction, development and other pursuit costs, net of recoveries, was $1,392,000 and $8,629,000 for the three and nine months ended September 30, 2025, respectively, and $1,573,000 and $7,235,000 for the three and nine months ended September 30, 2024, respectively. The amounts for the nine months ended September 30, 2025 and 2024 include a write-off of $3,668,000 and $1,600,000, respectively, for one development opportunity in each year that we determined is no longer probable.
Interest expense, net increased $9,641,000, or 17.3%, and $22,462,000, or 13.4%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods. This category includes interest costs offset by capitalized interest pertaining to development and redevelopment activity, amortization of premium/discount on debt, interest income and any mark-to-market impact from derivatives not in qualifying hedge relationships. The increases for the three and nine months ended September 30, 2025 are primarily due to decreases in interest income compared to the prior year periods due to lower cash amounts invested and lower rates, increased commercial paper outstanding and increased effective interest expense for our unsecured indebtedness. The increases for the three and nine months ended September 30, 2025 are partially offset by increased capitalized interest compared to the prior year periods.
General and administrative expenseincreased $1,939,000, or 9.7%, and $4,799,000, or 8.0%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods primarily due to an increase in legal costs and settlements and higher compensation costs.
Depreciation expenseincreased $18,249,000, or 8.6%, and $48,675,000, or 7.7%, for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, primarily due to the addition of newly developed and acquired apartment communities, partially offset by dispositions.
Casualty and impairment lossfor the nine months ended September 30, 2025 and September 30, 2024 was $858,000 and $2,935,000, respectively, which represents property and casualty damage to certain of our communities. The charge for the nine months ended September 30, 2025 relates to damage from a water pipe break at a community in Massachusetts. The charge for the nine months ended September 30, 2024 relates to flooding and resulting water damage at communities in California from extensive rainfall and a fire at a community in New Jersey.
Income from unconsolidated investmentsincreased $17,237,000 and $6,591,000 for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, primarily due to an increase in unrealized gains on our property technology investments.
Structured Investment Program interest incomeincreased $1,362,000 and $7,338,000 for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods, primarily due to the increased principal amount funded in our SIP investments.
Gain on sale of communities, netincreased $7,182,000 and $94,622,000 for the three and nine months ended September 30, 2025, respectively, compared to the prior year periods. The amount of gain realized in a particular period depends on many factors, including the number of communities sold, expected operating performance of the communities and the market conditions in the local area. For the three and nine months ended September 30, 2025, we sold six and nine wholly-owned communities and recognized gains of $180,155,000 and $336,081,000, respectively. For the three and nine months ended September 30, 2024, we sold two and five wholly-owned communities and recognized gains of $172,973,000 and $241,459,000, respectively.
Income Tax Benefit increased $975,000 and $1,538,000 for the three and nine months ended September 30, 2025, respectively, compared to the expense in prior year periods, primarily due to the sale of solar tax credits in the current year.
Non-GAAP Financial Measures - Reconciliation of FFO and Core FFO
FFO and FFO adjusted for non-core items, or "Core FFO," as defined below, are generally considered by management to be appropriate supplemental measures of our operating and financial performance.
Consistent with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts® ("Nareit"), we calculate Funds from Operations Attributable to Common Stockholders ("FFO") as net income or loss attributable to common stockholders computed in accordance with GAAP, adjusted for:
•gains or losses on sales of previously depreciated operating communities;
•cumulative effect of a change in accounting principle;
•impairment write-downs of depreciable real estate assets;
•write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates;
•depreciation of real estate assets; and
•similar adjustments for unconsolidated partnerships and joint ventures, including those from a change in control.
FFO can help with the comparison of the operating and financial performance of a real estate company between periods or as compared to different companies because the adjustments such as (i) gains or losses on sales of previously depreciated property or (ii) real estate depreciation may impact comparability as the amount and timing of these or similar items can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates. By further adjusting for items that we do not consider part of our core business operations, Core FFO can help with the comparison of our core operating performance year over year. We believe that, in order to understand our operating results, FFO and Core FFO should be considered in conjunction with net income as presented in the Condensed Consolidated Statements of Comprehensive Income included elsewhere in this report.
We calculate Core FFO as FFO, adjusted for:
•joint venture gains (if not adjusted through FFO), non-core costs and promoted interests from partnerships;
•casualty and impairment losses or gains, net on non-depreciable real estate or other investments;
•gains or losses from early extinguishment of consolidated borrowings;
•expensed transaction, development and other pursuit costs, net of recoveries;
•legal recoveries, settlement proceeds, and certain legal costs;
•property and casualty insurance proceeds;
•gains or losses on sales of assets not subject to depreciation and other investment gains or losses;
•advocacy contributions, representing payments to promote our business interests;
•hedge ineffectiveness or gains or losses from derivatives not designated as hedges for accounting purposes;
•changes to expected credit losses associated with the lending commitments under the SIP;
•severance related costs;
•executive transition compensation costs;
•net for-sale condominium activity, including gains, marketing, operating and administrative costs and imputed carry cost; and
•income taxes.
FFO and Core FFO do not represent (i) net income in accordance with GAAP, and therefore should not be considered an alternative to net income, which remains the primary measure, as an indication of our performance, or (ii) cash generated from operating activities in accordance with GAAP, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by GAAP, as a measure of liquidity. In addition, FFO and Core FFO are not necessarily indicative of cash available to fund cash needs and may not be comparable to FFO and Core FFO as calculated by other REITs.
The following is a reconciliation of net income attributable to common stockholders to FFO attributable to common stockholders and to Core FFO attributable to common stockholders (unaudited, dollars in thousands, except per share amounts):
For the three months
ended September 30, 		For the nine months
ended September 30,
2025 2024 2025 2024
Net income attributable to common stockholders $ 381,306 $ 372,519 $ 886,568 $ 799,902
Depreciation - real estate assets, including joint venture adjustments 227,962 210,992 674,853 628,677
Income attributable to noncontrolling interests 2,856 - 4,046 -
Gain on sale of previously depreciated real estate, net (180,155) (172,973) (336,081) (241,459)
Casualty loss and impairment on real estate - - 858 2,935
FFO 431,969 410,538 1,230,244 1,190,055
Adjusting items:
Unconsolidated entity gains, net (1) (42,350) (25,261) (39,885) (34,823)
Structured Investment Program loan reserve (2) 236 (813) 6 (771)
Hedge accounting activity 2 25 24 80
Advocacy contributions 150 3,732 237 5,914
Executive transition compensation costs - 200 - 304
Severance related costs 751 738 953 1,979
Expensed transaction, development and other pursuit costs, net of recoveries (3) 503 252 5,798 3,857
Other real estate activity (4) (127) (293) (3,874) (574)
Legal settlements and costs 3,252 781 8,828 2,289
Income tax (benefit) expense (193) 782 (840) 698
Core FFO $ 394,193 $ 390,681 $ 1,201,491 $ 1,169,008
Weighted average common shares outstanding - diluted 143,535,401 142,516,684 143,104,755 142,376,434
Earnings per common share - diluted $ 2.68 $ 2.61 $ 6.22 $ 5.62
FFO per common share - diluted $ 3.01 $ 2.88 $ 8.60 $ 8.36
Core FFO per common share - diluted $ 2.75 $ 2.74 $ 8.40 $ 8.21
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(1)Amounts consist primarily of net unrealized gains on property technology investments.
(2)Reflects changes to expected credit losses associated with our lending commitments primarily under the SIP. The timing and amount of actual losses that will be incurred, if any, is to be determined at the maturity of each respective lending agreement.
(3)The amounts for the nine months ended September 30, 2025 and September 30, 2024 include a write-off of $3,668,000 and $1,600,000, respectively, for one development opportunity in each year that we determined is no longer probable.
(4)Amounts for the nine months ended September 30, 2025 consist primarily of the gain on sale of a development right. Amounts for the three and nine months ended September 30, 2024 consist primarily of gains on sale of other non-operating real estate, as well as the imputed carry cost of for-sale residential condominiums at The Park Loggia. We compute this adjustment by multiplying the total capitalized cost of completed and unsold for-sale residential condominiums by the weighted average effective interest rate on our unsecured debt.
Liquidity and Capital Resources
We employ a disciplined approach to our liquidity and capital management. When we source capital, we take into account both our view of the most cost-effective alternative available and our desire to maintain a balance sheet that provides us with flexibility. Our principal focus on near-term and intermediate-term liquidity is to ensure we have adequate capital to fund:
•development and redevelopment activity in which we are currently engaged or in which we plan to engage;
•the minimum dividend payments on our common stock required to maintain our REIT qualification under the Code;
•regularly scheduled principal and interest payments and principal payments either at maturity or opportunistically before maturity;
•normal recurring operating and corporate overhead expenses; and
•investment in our operating platform, including strategic investments.
Factors affecting our liquidity and capital resources are our cash flows from operations, financing activities and investing activities (including dispositions) as well as general economic and market conditions. Cash flows from operations are determined by operating activities and factors including but not limited to (i) the number of apartment homes currently owned, (ii) rental rates, (iii) occupancy levels, (iv) uncollectible lease revenue levels or interruptions in collections caused by market conditions (v) operating expenses and (vi) capital expenditures with respect to our communities. The timing and type of capital markets activity in which we engage is affected by changes in the capital markets environment, such as changes in interest rates or the availability of cost-effective capital. Our plans for development, redevelopment, non-routine capital expenditure, acquisition and disposition activity are affected by market conditions and capital availability. We frequently review our liquidity needs, especially in periods with volatile market conditions, as well as the adequacy of cash flows from operations and other expected liquidity sources to meet these needs.
We had cash, cash equivalents and restricted cash of $321,891,000 at September 30, 2025, an increase of $54,815,000 from $267,076,000 at December 31, 2024. The following discussion relates to changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities.
A presentation of GAAP based cash flow metrics is as follows (unaudited, dollars in thousands):
For the nine months ended September 30,
2025 2024
Net cash provided by operating activities $ 1,270,674 $ 1,279,065
Net cash used in investing activities $ (925,077) $ (682,589)
Net cash used in financing activities $ (290,782) $ (334,959)
•Net cash provided by operating activities increased primarily due to an increase in NOI from our stabilized operating communities as well as from our Development Communities.
•Net cash used in investing activities was primarily due to (i) the investment of $849,799,000 in the development and redevelopment of communities, (ii) acquisition of 12 wholly-owned communities and our joint venture partner's 50% interest in Avalon Alderwood Place for $643,975,000 and (iii) capital expenditures of $186,318,000 for our wholly-owned communities and non-real estate assets. These amounts were partially offset by net proceeds from the disposition of real estate assets of $799,247,000.
•Net cash used in financing activities was primarily due to (i) the payment of cash dividends in the amount of $742,879,000, (ii) repayment of $525,000,000 of our 3.45% coupon unsecured notes at par upon maturity and (iii) the repurchase of 786,797 shares of common stock at an average price of $192.99 per share for a total purchase price including fees of $151,846,000. These amounts were partially offset by proceeds from the issuance of unsecured notes, including the Term Loan, in the amount of $947,488,000 and proceeds from the issuance of commercial paper in the amount of $234,981,000.
Variable Rate Unsecured Credit Facility
In April 2025, we entered into the Seventh Amended and Restated Revolving Loan Agreement with a syndicate of banks (the "Credit Facility"), which replaces our prior credit facility, dated September 27, 2022. The amended and restated Credit Facility (i) increased the borrowing capacity under the Credit Facility from $2,250,000,000 to $2,500,000,000, and (ii) extended the term of the Credit Facility from September 2026 to April 2030. The interest rate that would be applicable to borrowings under the Credit Facility was 4.93% at October 31, 2025 and is composed of (i) the Secured Overnight Financing Rate ("SOFR"), applicable to the period of borrowing for a particular draw of funds from the Credit Facility (e.g., one month to maturity, three months to maturity, etc.), plus (ii) the current borrowing spread to SOFR of 0.705% per annum, assuming a daily SOFR borrowing rate. The borrowing spread to SOFR can vary from SOFR plus 0.65% to SOFR plus 1.40% based upon the rating of our unsecured senior notes. There is also an annual facility commitment fee of 0.12% of the borrowing capacity under the Credit Facility, which can vary from 0.10% to 0.30% based upon the rating of our unsecured senior notes. The Credit Facility contains a sustainability-linked pricing component which provides for interest rate margin and commitment fee reductions or increases related to certain environmental sustainability targets, specifically greenhouse gas emission reductions, with the adjustment determined annually. The most recent annual determination under the sustainability-linked pricing component occurred in July 2025, maintaining reductions of approximately 0.02% to the interest rate margin and 0.005% to the commitment fee due to our achievement of sustainability targets.
The availability on the Credit Facility as of October 31, 2025 is as follows (dollars in thousands):
October 31, 2025
Credit Facility commitment $ 2,500,000
Credit Facility outstanding -
Commercial paper outstanding (445,000)
Letters of credit outstanding (1) (864)
Total Credit Facility available $ 2,054,136
_____________________________________
(1)In addition, we had $54,864 outstanding in additional letters of credit unrelated to the Credit Facility as of October 31, 2025.
Commercial Paper Program
We have a Commercial Paper Program in which we may issue unsecured commercial paper notes with maturities of less than one year. In April 2025, we increased the maximum amount of commercial paper notes that can be outstanding under the Commercial Paper Program from $500,000,000 to $1,000,000,000. The Commercial Paper Program is backstopped by our commitment to maintain available borrowing capacity under the Credit Facility in an amount equal to actual borrowings under the Commercial Paper Program. As of October 31, 2025, we had $445,000,000 of borrowings outstanding under the Commercial Paper Program.
Secured and Unsecured Borrowings - Financial Covenants and Early Repayment Provisions
We are subject to financial covenants contained in the Credit Facility, the Term Loan and the indentures under which our unsecured notes were issued. The principal financial covenants include the following:
•limitations on the amount of total and secured debt in relation to our overall capital structure;
•limitations on the amount of our unsecured debt relative to the undepreciated basis of real estate assets that are not encumbered by property-specific financing; and
•minimum levels of debt service coverage.
We were in compliance with these covenants at September 30, 2025.
In addition, some of our secured and unsecured borrowings include yield maintenance, defeasance or prepayment penalty provisions, which could result in us incurring an additional charge in the event of a full or partial prepayment of outstanding principal before the scheduled maturity. These provisions in our borrowings are generally consistent with other similar types of debt instruments issued during the same time period in which our borrowings were issued.
Continuous Equity Offering Program
Under our continuous equity program (the "CEP"), we may sell (and/or enter into forward sale agreements for the sale of) up to $1,000,000,000 of our common stock from time to time. During 2024, we entered into forward contracts under the CEP to sell 367,113 shares of common stock for approximate proceeds, net of fees, of $80,687,000, based on the gross weighted average price of $223.27 per share, with settlement of the forward contracts expected to occur on one or more dates not later than December 31, 2025. The final proceeds will be determined on the date(s) of settlement and are subject to certain customary adjustments for dividends and a daily interest factor. During the three and nine months ended September 30, 2025 and through October 31, 2025, we did not have any sales under the CEP. As of October 31, 2025, we had $623,997,000 remaining authorized for issuance under this program, after consideration of outstanding forward contracts.
Forward Equity Offering
In addition to the CEP, during the three months ended September 30, 2024, we entered into forward contracts to sell 3,680,000 shares of common stock at a discount to the closing price of $226.52 per share for approximate net proceeds of $808,606,000. The final proceeds will be determined on the date(s) of settlement and are subject to certain customary adjustments for dividends and a daily interest factor. During the three months ended September 30, 2025, we amended each of the forward contracts related to the September 2024 Equity Offering to extend the settlement of the forward contracts to a date no later than December 31, 2026.
Future Financing and Capital Needs - Debt Maturities and Material Obligations
One of our principal long-term liquidity needs is the repayment of long-term debt at maturity. For both our unsecured and secured notes, a portion of the principal of these notes may be repaid prior to maturity. Early retirement of our unsecured or secured notes could result in gains or losses on extinguishment. We may use capital from a variety of sources to repay debt at maturity, including proceeds received from the dispositions of our operating communities or other direct and indirect investments in real estate and cash from operations. If we do not have funds on hand sufficient to repay our indebtedness as it becomes due, it will be necessary for us to refinance or otherwise provide liquidity to satisfy the debt at maturity. This refinancing may be accomplished by uncollateralized private or public debt offerings, equity issuances, including through the settlement of the outstanding equity forwards, additional debt financing that is secured by mortgages on individual communities or groups of communities or borrowings under our Credit Facility, Term Loan or Commercial Paper Program. In addition, to the extent we have amounts outstanding under the Commercial Paper Program, we are obligated to repay the short-term indebtedness at maturity through either current cash on hand or by incurring other indebtedness, including by way of borrowing under our Credit Facility or Term Loan. Although we believe we will have the capacity to meet our currently anticipated liquidity needs, we cannot assure you that capital from additional debt financing or debt or equity offerings will be available or, if available, that they will be on terms we consider satisfactory.
The following debt and derivative activity occurred during the nine months ended September 30, 2025 through the date of this Form 10-Q:
•In April 2025, we entered into a $450,000,000 Term Loan which matures in April 2029. The Term Loan bears interest at varying levels based on (i) the SOFR applicable to the period of borrowing for a particular draw of funds from the facility, which rate is recalculated at the end of each such period if the Term Loan remains outstanding, (ii) a stated spread over SOFR that can vary from SOFR plus 0.70% to SOFR plus 1.60% per annum based upon the rating of our unsecured and unsubordinated long-term indebtedness and (iii) a sustainability spread adjustment that can range from (0.02)% to 0.02%. The current borrowing spread to SOFR under the Term Loan is 0.78% per annum, inclusive of a sustainability spread adjustment of (0.02)%. On August 1, 2025, we amended the Term Loan to (i) exercise our full accordion option to increase the amount of the Term Loan by $100,000,000 to $550,000,000 and (ii) extend the applicability of the sustainability-linked pricing component. During the nine months ended September 30, 2025, we drew down the full amount of the Term Loan and entered into $550,000,000 notional amount of interest rate swaps to hedge the impact of variability in interest rates on the Term Loan. The swaps are coterminous with the Term Loan, maturing in April 2029. Including the impact of these swaps and transaction costs, assuming the Term Loan will be fully drawn until maturity and our current borrowing spread to SOFR, the effective interest rate on borrowings under the Term Loan is fixed at 4.44% through maturity.
•In June 2025, we repaid $525,000,000 of our 3.45% coupon unsecured notes at par upon maturity.
•In July 2025, we issued $400,000,000 principal amount of unsecured notes in a public offering under our existing shelf registration statement for proceeds net of underwriting fees and discounts of approximately $394,888,000, before considering the impact of other offering costs. The notes mature in August 2035 and were issued at a 5.00% interest rate. The effective interest rate of the notes is 5.05%, considering the net proceeds and including the impact of offering costs and hedging activity. In connection with the issuance of our $400,000,000 unsecured notes, we terminated $200,000,000 of interest rate swap agreements designated as cash flow hedges of the interest rate variability on the issuance of the unsecured notes, receiving payments of $4,099,000 in July 2025 which will be recognized over the life of the unsecured notes as a reduction in the effective interest rate. Of the $200,000,000 forward interest rate swap agreements terminated, $100,000,000 were entered into during the nine months ended September 30, 2025.
•On August 1, 2025, we amended the Credit Facility to extend the applicability of the sustainability-linked pricing component, which provides for interest rate margin and commitment fee reductions or increases related to certain environmental sustainability targets. The reductions or increases can range from (0.02)% to 0.02% to the interest rate margin and (0.005)% to 0.005% to the commitment fee. All other terms of the Credit Facility, including its maturity date of April 2030, remain unchanged.
The following table details our consolidated debt obligations, including the effective interest rate and contractual maturity dates, and principal payments for periodic amortization and maturities for the next five years, excluding our Credit Facility and Commercial Paper Program and amounts outstanding related to communities classified as held for sale, at September 30, 2025 and December 31, 2024 (dollars in thousands). We are not directly or indirectly (as borrower or guarantor) obligated in any material respect to pay principal or interest on the indebtedness of any unconsolidated entities in which we have an equity or other interest other than as disclosed related to the AVA Arts District loan (see "Unconsolidated Operating Communities" for further discussion of the AVA Arts District loan).
Effective
interest
rate (1) 		Principal
maturity
date 		Balance Outstanding (2) Scheduled Maturities
Debt 12/31/2024 9/30/2025 2025 2026 2027 2028 2029 Thereafter
Tax-exempt bonds
Variable rate
Avalon Acton 3.93 % Jul-2040 (3) $ 45,000 $ 45,000 $ - $ - $ - $ - $ - $ 45,000
Avalon Clinton North 4.58 % Nov-2038 (3) 126,400 126,400 - - 700 2,800 3,000 119,900
Avalon Clinton South 4.58 % Nov-2038 (3) 104,500 104,500 - - 600 2,300 2,400 99,200
Avalon Midtown West 4.58 % May-2029 (3) 69,800 62,500 800 8,100 8,900 9,800 34,900 -
Avalon San Bruno I 4.47 % Dec-2037 (3) 55,250 52,850 - 2,400 2,700 2,900 3,100 41,750
400,950 391,250 800 10,500 12,900 17,800 43,400 305,850
Conventional loans
Fixed rate
$525 million unsecured notes 3.55 % Jun-2025 (4) 525,000 - - - - - - -
$300 million unsecured notes 3.62 % Nov-2025 300,000 300,000 300,000 - - - - -
$475 million unsecured notes 3.35 % May-2026 475,000 475,000 - 475,000 - - - -
$300 million unsecured notes 3.01 % Oct-2026 300,000 300,000 - 300,000 - - - -
$350 million unsecured notes 3.95 % Oct-2046 350,000 350,000 - - - - - 350,000
$400 million unsecured notes 3.50 % May-2027 400,000 400,000 - - 400,000 - - -
$300 million unsecured notes 4.09 % Jul-2047 300,000 300,000 - - - - - 300,000
$450 million unsecured notes 3.32 % Jan-2028 450,000 450,000 - - - 450,000 - -
$300 million unsecured notes 3.97 % Apr-2048 300,000 300,000 - - - - - 300,000
$450 million unsecured notes 3.66 % Jun-2029 450,000 450,000 - - - - 450,000 -
$700 million unsecured notes 2.69 % Mar-2030 700,000 700,000 - - - - - 700,000
$600 million unsecured notes 2.65 % Jan-2031 600,000 600,000 - - - - - 600,000
$700 million unsecured notes 2.16 % Jan-2032 700,000 700,000 - - - - - 700,000
$400 million unsecured notes 2.03 % Dec-2028 400,000 400,000 - - - 400,000 - -
$350 million unsecured notes 4.38 % Feb-2033 350,000 350,000 - - - - - 350,000
$400 million unsecured notes 5.19 % Dec-2033 400,000 400,000 - - - - - 400,000
$400 million unsecured notes 5.05 % Jun-2034 400,000 400,000 - - - - - 400,000
$400 million unsecured notes 5.05 % Aug-2035 - 400,000 - - - - - 400,000
$550 million Term Loan 4.44 % Apr-2029 (5) - 550,000 - - - - 550,000 -
Avalon Walnut Creek 4.00 % Jul-2066 4,681 4,868 - - - - - 4,868
eaves Los Feliz 3.68 % Jun-2027 41,400 41,400 - - 41,400 - - -
eaves Woodland Hills 3.67 % Jun-2027 111,500 111,500 - - 111,500 - - -
Avalon Russett 3.77 % Jun-2027 32,200 32,200 - - 32,200 - - -
Avalon San Bruno III 2.38 % Mar-2027 51,000 51,000 - - 51,000 - - -
Avalon Cerritos 3.34 % Aug-2029 30,250 30,250 - - - - 30,250 -
Avalon West Plano 5.97 % May-2029 62,448 61,656 273 1,111 1,159 1,202 57,911 -
7,733,479 8,157,874 300,273 776,111 637,259 851,202 1,088,161 4,504,868
Total indebtedness - excluding Credit Facility and Commercial Paper $ 8,134,429 $ 8,549,124 $ 301,073 $ 786,611 $ 650,159 $ 869,002 $ 1,131,561 $ 4,810,718
_________________________
(1)Rates are as of September 30, 2025 and include credit enhancement fees, facility fees, trustees' fees, the impact of interest rate hedges, offering costs, mark-to-market amortization and other fees.
(2)Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured notes of $44,287 and $41,216 as of September 30, 2025 and December 31, 2024, respectively, and deferred financing costs and debt discount for the secured notes of $14,182 and $15,964 as of September 30, 2025 and December 31, 2024, respectively, as reflected on our Condensed Consolidated Balance Sheets included elsewhere in this report.
(3)Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement.
(4)In June 2025, we repaid this borrowing at par on its scheduled maturity date.
(5)The variable rate Term Loan has been swapped to an effective fixed rate using interest rate swaps.
In addition to consolidated debt, we have scheduled contractual obligations associated with (i) ground leases for land underlying current operating or development communities and commercial and parking facilities and (ii) office leases for our corporate headquarters and regional offices. As of September 30, 2025, other than as discussed in this Form 10-Q, there have been no other material changes in our scheduled contractual obligations as disclosed in the Form 10-K.
Future Financing and Capital Needs - Portfolio and Capital Markets Activity
We invest in various real estate and real estate related investments, which include (i) the acquisition, development and redevelopment of communities both wholly-owned and through the formation of joint ventures, (ii) other indirect investments in real estate through the SIP, all as discussed further below and (iii) investments in other real estate-related ventures through direct and indirect investments in third-party property technology and sustainability focused companies and investment management funds.
In 2025, we expect to continue to meet our liquidity needs from one or more of a variety of internal and external sources, which may include (i) settlement of our outstanding equity forward contracts, (ii) real estate dispositions, (iii) cash balances on hand as well as cash generated from our operating activities, (iv) borrowing capacity under the Credit Facility, (v) borrowings under the Commercial Paper Program and (vi) secured and unsecured debt financings. Additional sources of liquidity in 2025 may include the issuance of common and preferred equity, including the issuance of additional shares of our common stock under the CEP. Our ability to obtain additional financing will depend on a variety of factors, such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, as well as the perception of lenders regarding our long or short-term financial prospects.
Before beginning new construction or reconstruction activity, including activity related to communities owned by unconsolidated joint ventures, we plan to source sufficient capital to complete these undertakings, although we cannot assure that we will be able to obtain such financing. In the event that financing cannot be obtained, we may abandon Development Rights, write-off associated pre-development 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 Development Rights or reconstruction activity and significant losses could be incurred.
From time to time, we use joint ventures to hold or develop individual real estate assets. We generally employ joint ventures to mitigate asset concentration or market risk and as a source of liquidity. We may also use joint ventures related to mixed-use land development opportunities and new markets where our partners bring development and operational expertise and/or experience to the venture. Each joint venture or partnership agreement has been individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture or partnership agreement. We cannot assure that we will achieve our objectives through joint ventures.
In addition, we may invest, through mezzanine loans or preferred equity investments, in multifamily development projects being undertaken by third parties. In these cases, we do not expect to acquire the underlying real estate but rather to earn a return on our investment (through interest or fixed rate preferred equity returns) and a return of the invested capital generally following completion of construction either on or before a set due date.
In evaluating our allocation of capital within our markets, we sell assets that do not meet our long-term investment criteria or when capital and real estate markets allow us to realize a portion of the value created over our ownership periods and redeploy the proceeds from those sales to develop, redevelop and acquire communities. Because the proceeds from the sale of communities may not be immediately redeployed into revenue generating assets that we develop, redevelop or acquire, the immediate effect of a sale of a community for a gain is to increase net income, but reduce future total revenues, total expenses and NOI until such time as the proceeds have been redeployed into revenue generating assets. We believe that the temporary absence of future cash flows from communities sold will not have a material impact on our ability to fund future liquidity and capital resource needs.
Stock Repurchases and New Stock Repurchase Program
During the three months ended September 30, 2025, we repurchased 786,797 shares of common stock at an average price of $192.99 per share, including fees, for a total of $151,846,000 under our then-existing stock repurchase program (the "2020 Stock Repurchase Program").
In October 2025, following the completion of these purchases, we terminated the 2020 Stock Repurchase Program and adopted a new stock repurchase program under which we may acquire shares of our common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000 (the "2025 Stock Repurchase Program"). Purchases of common stock under the 2025 Stock Repurchase Program may occur from time to time in our discretion. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The 2025 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. Through the date of this Form 10-Q, the
Company repurchased 219,289 shares of common stock at an average price of $174.00 per share, including fees, for a total of $38,157,000 under the 2025 Stock Repurchase Program.
Unconsolidated Operating Communities
As of September 30, 2025, we had investments in the following unconsolidated real estate entities accounted for under the equity method of accounting. See Note 5, "Investments," of the Condensed Consolidated Financial Statements included elsewhere in this report. For joint ventures holding operating apartment communities as of September 30, 2025, detail of the real estate and associated indebtedness underlying our unconsolidated investments is presented in the following table (dollars in thousands).
Company
ownership percentage 		# of apartment homes Total capitalized cost Debt (1)
Principal
amount 		Interest rate Maturity date
Unconsolidated Real Estate Investments Type
NYTA MF Investors, LLC
1. Avalon Bowery Place I - New York, NY 206 $ 218,412 $ 93,800 Fixed 4.01 % Jan 2029
2. Avalon Bowery Place II - New York, NY 90 91,769 39,639 Fixed 4.01 % Jan 2029
3. Avalon Morningside - New York, NY (2) 295 217,127 111,295 Fixed 3.55 % Jan 2029/May 2046
4. Avalon West Chelsea - New York, NY (3) 305 130,634 66,000 Fixed 4.01 % Jan 2029
5. AVA High Line - New York, NY (3) 405 123,213 84,000 Fixed 4.01 % Jan 2029
Total NYTA MF Investors, LLC 20.0 % 1,301 781,155 394,734 3.88 %
Other Operating Joint Ventures (7)
1. MVP I, LLC - Avalon at Mission Bay II -
San Francisco, CA (4) 		25.0 % 313 130,469 - - - -
2. Brandywine Apartments of Maryland, LLC -
Brandywine - Washington, D.C. 		28.6 % 305 20,093 17,833 Fixed 3.40 % Jun 2028
3. Arts District Joint Venture - AVA Arts District -
Los Angeles, CA (5) 		25.0 % 475 288,441 161,567 Variable 6.94 % Jul 2028
Total Other Joint Ventures 1,093 439,003 179,400 6.59 %
Total Unconsolidated Real Estate Investments (6) 2,394 $ 1,220,158 $ 574,134 4.73 %
_____________________________
(1)We have not guaranteed the debt of these unconsolidated investees and bear no responsibility for the repayment other than for the Arts District joint venture as discussed below in footnote 5.
(2)Borrowing on this community is comprised of two mortgage loans. The interest rate is the weighted average interest rate as of September 30, 2025.
(3)Borrowing on this dual-branded community is comprised of a single mortgage loan. This dual-branded community is subject to a leasehold interest which is not included in the total capitalized cost.
(4)In July 2025, MVP I, LLC repaid $103,000 of outstanding secured indebtedness at par upon maturity. The equity investors contributed capital in proportion to their ownership interests to repay the outstanding loan.
(5)AVA Arts District completed development during the year ended December 31, 2024 and achieved stabilized residential operations. In June 2025, the joint venture secured a variable rate loan with a maturity date of July 2028 and used the proceeds to repay the previously existing $158,735 variable rate construction loan which was scheduled to mature in August 2025. The outstanding borrowing is subject to an interest rate cap, which will limit the interest rate to 8.2%, based on the current borrowing spread. While we guarantee 25% of the new loan, any amounts payable under the guarantee are obligations of the joint venture partners in proportion to their ownership interest.
(6)In addition to leasehold assets, there were net other assets of $39,471 as of September 30, 2025 associated with our unconsolidated real estate investments which are primarily cash and cash equivalents.
(7)During the three months ended September 30, 2025, the Company acquired its joint venture partner's 50% interest in Avalon Alderwood Place which is now a wholly owned apartment community and consolidated for financial reporting purposes.
Development Communities
As of September 30, 2025, we owned or held a direct interest in 21 Development communities under construction. We expect these Development communities, when completed, to add a total of 7,806 apartment homes and 100,000 square feet of commercial space to our portfolio for a total capitalized cost, including land acquisition costs, of approximately $3,012,000,000. We cannot assure you that we will meet our schedule for construction completion or that we will meet our budgeted costs, either individually, or in the aggregate.
The following table presents a summary of the Development communities.
Number of
apartment
homes 		Projected total
capitalized cost (1)
($ millions) 		Construction
start 		Initial projected
or actual occupancy 		Estimated
completion 		Estimated
stabilized operations
(2)
1. Avalon West Windsor (3)
West Windsor, NJ 		535 $ 210 Q2 2022 Q3 2025 Q2 2026 Q4 2026
2. Avalon Lake Norman (4)
Mooresville, NC 		345 101 Q1 2023 Q2 2025 Q2 2026 Q3 2026
3. Avalon Hunt Valley West
Hunt Valley, MD 		322 106 Q2 2023 Q1 2025 Q4 2025 Q3 2026
4. Avalon South Miami (3)
South Miami, FL 		290 186 Q3 2023 Q3 2025 Q4 2025 Q4 2026
5. Avalon Wayne
Wayne, NJ 		473 171 Q4 2023 Q2 2025 Q3 2026 Q1 2027
6. Avalon Parsippany
Parsippany, NJ 		410 147 Q4 2023 Q3 2025 Q2 2026 Q4 2026
7. Avalon Pleasanton (5)
Pleasanton, CA 		362 218 Q2 2024 Q3 2025 Q3 2027 Q1 2028
8. Avalon Roseland II
Roseland, NJ 		533 196 Q2 2024 Q4 2025 Q4 2026 Q2 2027
9. Avalon Quincy Adams
Quincy, MA 		288 124 Q2 2024 Q1 2026 Q3 2026 Q2 2027
10. Avalon Tech Ridge I
Austin, TX 		444 120 Q3 2024 Q1 2026 Q1 2027 Q3 2027
11. Avalon Carmel (4)
Charlotte, NC 		360 123 Q3 2024 Q2 2026 Q3 2026 Q3 2027
12. Avalon Plano (4)
Plano, TX 		155 58 Q3 2024 Q2 2026 Q2 2027 Q4 2027
13. Avalon Oakridge I
Durham, NC 		459 149 Q3 2024 Q1 2027 Q1 2028 Q3 2028
14. AVA Brewer's Hill
Baltimore, MD 		418 134 Q4 2024 Q4 2026 Q3 2027 Q1 2028
15. Kanso Hillcrest
San Diego, CA 		182 85 Q4 2024 Q1 2027 Q2 2027 Q4 2027
16. Avalon Parker
Parker, CO 		312 122 Q1 2025 Q3 2026 Q2 2027 Q1 2028
17. Avalon North Palm Beach (3)
Lake Park, FL 		279 118 Q1 2025 Q1 2027 Q3 2027 Q1 2028
18. Avalon Brier Creek
Durham, NC 		400 127 Q2 2025 Q3 2026 Q3 2027 Q1 2028
19. Avalon Kendall (4)
Kendall, FL 		224 83 Q2 2025 Q1 2027 Q2 2027 Q1 2028
20. Avalon Southpoint (4)
Durham, NC 		394 132 Q3 2025 Q4 2026 Q2 2028 Q3 2028
21. Avalon Mission Valley (3)
San Diego, CA 		621 302 Q3 2025 Q4 2027 Q1 2029 Q3 2029
Total 7,806 $ 3,012
_________________________________
(1)Projected total capitalized cost includes all capitalized costs projected to be or actually incurred to develop the respective Development community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, as well as costs incurred for first generation commercial tenants such as tenant improvements and leasing commissions.
(2)Stabilized operations is defined as the earlier of (i) attainment of 90% or greater physical occupancy or (ii) the one-year anniversary of completion of development.
(3)Development communities containing at least 10,000 square feet of commercial space include Avalon West Windsor (19,000 sf), Avalon South Miami (32,000 sf), Avalon North Palm Beach (10,000 sf), and Avalon Mission Valley (31,000 sf).
(4)Communities being developed through our Developer Funding Program ("DFP"). The DFP utilizes third-party multifamily developers to source and construct communities which we own and operate.
(5)During the nine months ended September 30, 2025, the Company expanded the Avalon Pleasanton development in Pleasanton, CA, adding an additional 280 apartment homes, and increasing the total estimated capitalized costs by $160,000,000.
During the three months ended September 30, 2025, we completed the development of the following wholly-owned community:
Number of
apartment
homes 		Total capitalized
cost (1)
($ millions) 		Approximate rentable area
(sq. ft.) 		Total capitalized cost per sq. ft.
1. Avalon Annapolis
Annapolis, MD 		508 $ 195 387,000 $ 504
Total 508 $ 195
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(1)Total capitalized cost is as of September 30, 2025. We generally anticipate incurring additional costs associated with this community which is customary for new developments.
Development Rights
At September 30, 2025, we had $126,050,000 in acquisition and related capitalized costs for direct interests in eight land parcels we own. In addition, we had $77,083,000 in capitalized costs (including legal fees, design fees and related overhead costs) consisting of $65,198,000 included as deferred development rights and the balance included in our unconsolidated investments, with these amounts related to (i) 21 Development Rights for which we control the land parcel, typically through a conditional agreement or option to purchase or lease the land, as well as (ii) costs incurred for five Development Rights that we expect to construct as additional phases of our existing stabilized operating communities on land we own. Collectively, the land held for development and associated costs for deferred development rights relate to 34 Development Rights for which we expect to develop new apartment communities in the future. The 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 approximately 9,381 apartment homes to our portfolio. Substantially all of these apartment homes will offer features like those offered by the communities we currently own.
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 invest in, 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. In the event that we do not proceed with a Development Right, we generally would not recover any of the capitalized costs incurred in the pursuit of those communities, unless we were to recover amounts in connection with the sale of land; however, we cannot guarantee a recovery. Pre-development costs incurred in the pursuit of Development Rights for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development no longer probable, any unrecoverable capitalized pre-development costs are charged to expense. We incurred a charge of $1,392,000 and $1,573,000 for the three months ended September 30, 2025 and 2024, respectively, and $8,629,000 and $7,235,000 for the nine months ended September 30, 2025 and 2024, respectively, for expensed transaction, development and other pursuit costs, net of recoveries, which include development pursuits that were not yet probable of future development at the time incurred, or for pursuits that we determined were no longer probable of being developed. The amounts for the nine months ended September 30, 2025 and 2024 include a write-off of $3,668,000 and $1,600,000, respectively, for one development opportunity in each year that we determined is no longer probable.
Structured Investment Program
As of October 31, 2025, we had nine commitments to fund up to $239,585,000 in the aggregate under the SIP. As of October 31, 2025, our investment commitments had a weighted average rate of return of 11.7% and a weighted average initial maturity date of May 2027. As of October 31, 2025, we had funded $206,876,000 of these commitments. See Note 5, "Investments," of the Condensed Consolidated Financial Statements included elsewhere in this report.
You should carefully review Part I, Item 1A. "Risk Factors" of the Form 10-K, as well as the discussion under Part II, Item 1A. "Risk Factors" in this report, for a discussion of the risks associated with our investment activity.
Forward-Looking Statements
This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company's forward-looking statements generally use the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "project," "plan," "may," "shall," "will," "pursue" and other similar expressions that indicate future events and trends and do not report historical matters. These statements, among other things, address the Company's intent, belief or expectations with respect to:
•development, redevelopment, acquisition or disposition of communities;
•the timing and cost of completion of communities under development or redevelopment;
•the timing of lease-up, occupancy and stabilization of communities;
•the pursuit of land for future development;
•the anticipated operating performance of our communities;
•cost, yield, revenue, NOI and earnings estimates;
•the impact of landlord-tenant laws and rent regulations; including rent caps;
•our expansion into new regions;
•our declaration or payment of dividends;
•our joint venture activities;
•our policies regarding investments, indebtedness, acquisitions, dispositions, financings and other matters;
•our qualification as a REIT under the Code;
•the real estate markets in regions where we operate and in general;
•the availability of debt and equity financing;
•interest rates;
•inflation, tariffs and other economic conditions, and their potential impacts;
•trends affecting our financial condition or results of operations;
•regulatory changes that may affect us; and
•the impact of legal proceedings.
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 outcomes of the matters discussed. We do not undertake a duty to update these forward-looking statements, and therefore they may not represent our estimates and assumptions after the date of this report. 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. You should carefully review the discussion under Part I, Item 1A. "Risk Factors" of the Form 10-K and Part II, Item 1A. "Risk Factors" in this report, for further discussion of risks associated with 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 to obtain land at attractive prices 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, increases in the cost of capital or lack of capital availability, resulting in losses;
•construction costs of a community may exceed original estimates;
•we may not complete construction and lease-up of communities under development or redevelopment on schedule, resulting in increased interest costs and construction costs and a decrease in expected rental revenues;
•occupancy rates and market rents may be adversely affected by competition and local economic and market conditions which are beyond our control;
•our cash flows from operations and access to cost-effective capital may be insufficient for the development of our pipeline, which could limit our pursuit of opportunities;
•an outbreak of disease or other public health event may affect the multifamily industry and general economy;
•our cash flows 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 our management of joint ventures and the REIT vehicles that are used with certain joint ventures;
•we may experience a casualty loss, natural disaster or severe weather event, including those caused by climate change;
•new or existing laws and regulations implementing rent control or rent stabilization, or otherwise limiting our ability to increase rents, charge fees or evict tenants, may impact our revenue or increase our costs;
•our expectations, estimates and assumptions as of the date of this filing regarding legal proceedings may change;
•we may choose to pay dividends in our stock instead of cash, which may result in stockholders having to pay taxes with respect to such dividends in excess of the cash received, if any; and
•investments made under the SIP may not be repaid as expected or the development may not be completed on schedule, which could require us to engage in litigation, foreclosure actions, and/or first party project completion to recover our investment, which may not be recovered in full or at all in such event.
Critical Accounting Policies and Estimates
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. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements. Our critical accounting policies consist of the following: (i) cost capitalization and (ii) abandoned pursuit costs and asset impairment. Our critical accounting policies and estimates have not changed materially from the discussion of our significant accounting policies found in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K.
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