10q10k10q10k.net

What changed in AvalonBay Communities's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of AvalonBay Communities's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+338 added−382 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in AvalonBay Communities's 2023 10-K

338 paragraphs added · 382 removed · 278 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

40 edited+3 added−35 removed53 unchanged
Biggest changeWhile we emphasize equity real estate investments in rental apartment communities, we have the ability to invest in other activities and to make non-equity investments, including the following: • Commercial space : we develop, own and lease commercial space at our communities when either (i) the highest and best use of the space is for commercial (e.g., street level in an urban area); (ii) we believe the commercial space will enhance the attractiveness of the community to residents; or (iii) some component of commercial space is required to obtain entitlements to build apartment homes.
Biggest changeWhile we emphasize equity real estate investments in rental apartment communities, we have the ability to invest in other activities and to make non-equity investments, including the following: • Structured Investment Program : while we generally invest in multifamily real estate through fee simple ownership or an equity investment in a joint venture, we operate an investment platform through which we provide mezzanine loans or preferred equity to third-party multifamily developers in our existing regions. • Commercial space : we develop, own and lease commercial space at our communities when either (i) the highest and best use of the space is for commercial (e.g., street level in an urban area); (ii) we believe the commercial space will enhance the attractiveness of the community to residents; or (iii) some component of commercial space is required to obtain entitlements to build apartment homes. • Property technology and environmentally focused companies and investment management funds : we have also invested, either through a wholly-owned TRS, or in an investment vehicle that has elected to be treated as a TRS, in companies (and in venture funds that invest in companies) that provide technology services to the real estate industry, and we have invested, through a TRS, in environmentally focused companies and investment management funds to further our sustainability efforts and learning. 5 Table of Contents • For-sale real estate development : we may also develop a property in conjunction with another real estate company that will own and operate the commercial or for-sale residential components of a mixed-use building or project that we help develop.
We operate our apartment communities under four core brands: • Avalon, our core “Avalon” brand, focuses on upscale apartment living and high end amenities and services; • AVA targets customers in high energy, transit-served neighborhoods and generally feature smaller apartments, many of which are designed for roommate living, and a variety of active common spaces that encourage socialization; • eaves by Avalon is targeted to the cost conscious, “value” segment primarily in suburban areas; and • Kanso, which we introduced in 2020, is designed to create an apartment living experience that offers simplicity without sacrifice at a more moderate price point, featuring high-quality apartment homes, limited-to-no community amenities and a low-touch, largely self-service operating model that leverages technology and smart access.
We operate our apartment communities under four core brands: • Avalon, our core “Avalon” brand, focuses on upscale apartment living and high end amenities and services; • AVA targets customers in high energy, transit-served neighborhoods and generally feature smaller apartments, many of which are designed for roommate living, and a variety of active common spaces that encourage socialization; • eaves by Avalon is targeted to the cost conscious, “value” segment primarily in suburban areas; and • Kanso is designed to create an apartment living experience that offers simplicity without sacrifice at a more moderate price point, featuring high-quality apartment homes, limited-to-no community amenities and a low-touch, largely self- service operating model that leverages technology and smart access.
“Management's Discussion and Analysis of Financial Condition and Results of Operations.” A further discussion of our development, redevelopment, disposition, acquisition, property management and related strategies follows. Development Strategy. We select land for development and follow established procedures that we believe minimize both the cost and the risks of development.
“Management's Discussion and Analysis of Financial Condition and Results of Operations.” A further discussion of our development, redevelopment, disposition, acquisition, operating and property management and related strategies follows. Development Strategy. We select land for development and follow established procedures that we believe minimize both the cost and the risks of development.
In addition, the charters of our Board's Nominating, Governance and Corporate Responsibility Committee, Audit Committee and Compensation Committee, as well as our Director Independence Standards, Corporate Governance Guidelines, Code of Business Conduct and Ethics, Policy Regarding Shareholder Rights Agreements, Policy Regarding Shareholder Approval of Future Severance Agreements, Senior Officer Stock Ownership Guidelines, Policy on Political Contributions and Government Relations, Policy on Recoupment, AvalonBay Sanctions Compliance and Anti-Corruption Policy and Environmental, Social, and Governance Reports, are available free of charge in that section of our website or by writing to AvalonBay Communities, Inc., 4040 Wilson Blvd., Suite 1000, Arlington, Virginia 22203, Attention: Chief Financial Officer.
In addition, the charters of our Board's Nominating, Governance and Corporate Responsibility Committee, Audit Committee and Compensation Committee, as well as our Director Independence Standards, Corporate Governance Guidelines, Code of Business Conduct and Ethics, Policy Regarding Shareholder Rights Agreements, Policy Regarding Shareholder Approval of Future Severance Agreements, Senior Officer Stock Ownership Guidelines, Policy on Political Contributions and Government Relations, Compensation Recovery Policy, AvalonBay Sanctions Compliance and Anti-Corruption Policy and Environmental, Social, and Governance Reports, are available free of charge in that section of our website or by writing to AvalonBay Communities, Inc., 4040 Wilson Blvd., Suite 1000, Arlington, Virginia 22203, Attention: Chief Financial Officer.
“Business” in the Company's Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 22, 2019), we acquired, and still own, 14 assets that had previously been contributed by third parties on a tax-deferred basis to an Archstone partnership in which the third parties received ownership interests.
“Business” in the Company's Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2019), we acquired, and still own, 14 assets that had previously been contributed by third parties on a tax-deferred basis to an Archstone partnership in which the third parties received ownership interests.
We develop, redevelop, acquire, own and operate multifamily 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 markets of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado.
We develop, redevelop, acquire, own and operate multifamily 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.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including exhibits and amendments to those reports, filed or furnished pursuant to the Securities Exchange Act of 1934 are available free of charge in the “Investor Relations” section of our website as soon as reasonably practicable after the reports are filed with or furnished to the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including exhibits and amendments to those reports, filed or furnished pursuant to the Exchange Act are available free of charge in the “Investor Relations” section of our website as soon as reasonably practicable after the reports are filed with or furnished to the SEC.
While we are primarily focused on acquisitions in our expansion markets of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado, we may pursue additional investments in our established regions based on market conditions. Property Management Strategy.
While we are primarily focused on acquisitions in our expansion regions of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado, we may pursue additional investments in our established regions based on market conditions. Operating & Property Management Strategy.
We provide such non-customary services to residents or share in the revenue or income from such services through a taxable REIT subsidiary ("TRS"), which is a subsidiary that is treated as a “C corporation” subject to federal income taxes. See “Tax Matters” below. Financing Strategy.
We provide such non-customary services to residents or share in the revenue or income from such services through a taxable REIT subsidiary (“TRS”), which is a subsidiary that is treated as a “C corporation” subject to federal income taxes. See “Tax Matters” below. Financing Strategy.
We believe these market characteristics have offered, and will continue in the future 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.
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.
The construction, operation and leasing of our communities is subject to federal, state and local laws and regulations, include zoning laws, building codes, requirements that our communities be accessible to persons with disabilities, fair housing laws, and, depending on the jurisdiction, regulations regarding the charging of rents and fees and increases in such amounts upon renewal of leases.
The construction, operation and leasing of our communities is subject to federal, state and local laws and regulations, include zoning laws, building codes, requirements 6 Table of Contents that our communities be accessible to persons with disabilities, fair housing laws, and, depending on the jurisdiction, regulations regarding the charging of rents and fees and increases in such amounts upon renewal of leases.
At the present time, we do not intend to take actions that would cause us to be required to make tax protection payments with respect to any of these assets. 3 Table of Contents Acquisition Strategy. Our core competencies in development and redevelopment discussed above allow us to be selective in the acquisitions we target.
At the present time, we do not intend to take actions that would cause us to be required to make tax protection payments with respect to any of these assets. Acquisition Strategy. Our core competencies in development and redevelopment discussed above allow us to be selective in the acquisitions we target.
Our learning management system, AvalonBay University, offers approximately 600 courses providing functional, technical, management, ethics, compliance and cyber-awareness training. 7 Table of Contents Other Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may obtain copies of our SEC filings, free of charge, from the SEC's website at www.sec.gov.
Our learning management system, AvalonBay University, offers approximately 700 courses providing functional, technical, management, ethics, compliance, cyber-awareness and safety training. 7 Table of Contents Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may obtain copies of our SEC filings, free of charge, from the SEC's website at www.sec.gov.
After review and investigation of Archstone’s tax and accounting records, we estimate that, had we sold or taken other triggering actions in 2022 with respect to all 14 assets, the aggregate amount of the tax protection payments that would have been triggered would have been approximately $44,900,000.
After review and investigation of Archstone’s tax and accounting records, we estimate that, had we sold or taken other triggering actions in 2023 with respect to all 14 assets, the aggregate amount of the tax protection payments that would have been triggered would have been approximately $44,100,000.
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) 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 (iv) maintain a capital structure that we believe is aligned with our business risks and allows us to maintain continuous access to cost-effective capital.
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.
Our principal financial goal is to increase long-term shareholder value through the development, redevelopment, acquisition, ownership and, when appropriate, disposition of apartment communities in our markets.
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.
We generally act as our own development manager, general contractor and construction manager directly (although we may use a wholly-owned subsidiary), and will elect to use a third-party developer or general contractor where we believe it is beneficial to do so, such as in our expansion markets where we have limited experience.
We generally act as our own development manager, general contractor and construction manager directly (although we may use a wholly-owned subsidiary), and will elect to use a third-party developer or general contractor where we believe it is beneficial to do so, such as in our expansion regions where we may have limited resources or scale.
The actual renovation work is referred to as “reconstruction,” which is only one element of the redevelopment cycle. Disposition Strategy.
The actual renovation work is referred to as “reconstruction,” which is only one element of the redevelopment cycle. 3 Table of Contents Disposition Strategy.
We engage with our associates to understand our purpose, "Creating a Better Way to Live," our core values (a commitment to integrity, a spirit of caring and a focus on continuous improvement) and our cultural norms (we collaborate, excel, innovate, act like owners, are thoughtful and thorough, and show appreciation).
We engage with our associates to understand our purpose, “Creating a Better Way to Live,” our core values (a commitment to integrity, a spirit of caring and a focus on continuous improvement) and our cultural norms (we collaborate, excel, innovate, act like owners, are thoughtful and thorough, show appreciation, and champion inclusion and diversity).
We focus on leading metropolitan areas that we believe historically have been 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 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.
ITEM 1. BUSINESS General 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 treated as a real estate investment trust (“REIT”) for federal income tax purposes.
ITEM 1. BUSINESS General 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 believe that a diverse workplace will produce a variety of perspectives, motivate associates and help us understand and better serve our customers and the communities in which we do business.
We value workforce diversity and an inclusive culture. We believe that a diverse workplace will produce a variety of perspectives, motivate associates and help us understand and better serve our customers and the communities in which we do business.
We constrain growth in operating expenses in a variety of ways, which include, but are not limited to, the following: • purchase order controls, including acquiring goods and services from pre-approved vendors; • national negotiated contracts and bulk purchases where possible; • bidding third-party contracts on a volume basis; • retaining residents through high levels of service, which reduces apartment turnover costs, marketing and vacant apartment utility costs; • performing turnover work in-house or hiring third parties, generally considering the most cost effective approach as well as expertise needed to perform the work; • regular preventive maintenance to maximize resident safety and satisfaction and property and equipment life; • centralization of many community administration and support tasks at our shared service center; • pursuing real estate tax appeals; • installing high efficiency lighting and water fixtures, cogeneration systems and solar panels; and • implementing technology for resident and prospect services such as package lockers and self guided or virtual tours.
We constrain growth in operating expenses in a variety of ways, which include, but are not limited to, the following: • purchase order controls, including acquiring goods and services from pre-approved vendors; • national negotiated contracts and bulk purchases where possible; • bidding third-party contracts on a volume basis; • retaining residents through high levels of service, which reduces apartment turnover costs, marketing and vacant apartment utility costs; • performing turnover work in-house or hiring third parties, generally considering the most cost-effective approach as well as expertise needed to perform the work; • regular preventive maintenance to maximize resident safety and satisfaction and property and equipment life; • centralization of lease renewal activity, as well as many community administration and support tasks at our shared service center; • pursuing real estate tax appeals; • installing high efficiency lighting and water fixtures, cogeneration systems and solar panels; and • implementing technology for resident and prospect services such as package lockers and self-guided or virtual tours. 4 Table of Contents On-site property management teams receive bonuses based largely upon the revenue, expense, Net Operating Income (“NOI”), prospect conversion, resident retention and customer service metrics produced at their respective communities.
Our tax protection payment obligations with respect to these assets expire at different times and in some cases don’t expire until the death of a third party who contributed ownership interests to the Archstone partnership.
Our tax protection payment obligations with respect to these assets don’t expire until the death of a third party who contributed ownership interests to the Archstone partnership.
To the extent required by the rules of the SEC and the NYSE, we will disclose amendments and waivers relating to these documents in the same place on our website. The information posted on our website is not incorporated into this Annual Report on Form 10-K. Supplemental U.S.
To the extent required by the rules of the SEC and the New York Stock Exchange (the “NYSE”), we will disclose amendments and waivers relating to these documents in the same place on our website. The information posted on our website is not incorporated into this Annual Report on Form 10-K. 8 Table of Contents
In addition to our principal executive office in Arlington, Virginia, we also have regional offices, administrative offices or specialty offices, including offices that are in or near the following cities: • Bellevue, Washington; • Boston, Massachusetts; • Chapel Hill, North Carolina; • Denver, Colorado; • Fort Lauderdale, Florida; • Irvine, California; • Los Angeles, California; • Melville, New York; • New York, New York; • San Francisco, California; • San Jose, California; • Shelton, Connecticut; • Virginia Beach, Virginia; and • Westfield, New Jersey. 2 Table of Contents After selecting a site for development, we usually negotiate for the right to acquire the site either through an option or a long-term conditional contract.
In addition to our principal executive office in Arlington, Virginia, we also have regional offices, administrative offices or specialty offices, including offices that are in or near the following cities: 2 Table of Contents • Austin, Texas; • Bellevue, Washington; • Boston, Massachusetts; • Chapel Hill, North Carolina; • Denver, Colorado; • Fort Lauderdale, Florida; • Irvine, California; • Los Angeles, California; • Melville, New York; • New York, New York; • San Antonio, Texas; • San Francisco, California; • San Jose, California; • Shelton, Connecticut; • Virginia Beach, Virginia; and • Westfield, New Jersey.
At January 31, 2023, 37% of our associates self-identified as White, 30% as Hispanic, 15% as Black, 7% as Asian, and 11% as other ethnicities, two or more ethnicities or did not respond. At January 31, 2023, 60% of our associates self-identified as male and 40% as female.
At January 31, 2024, 37% of our associates self-identified as White, 30% as Hispanic, 16% as Black, 6% as Asian, and 11% as other ethnicities, two or more ethnicities or did not respond. At January 31, 2024, 59% of our associates self-identified as male and 41% as female.
During the three years ended December 31, 2022, we: • acquired 11 apartment communities, excluding unconsolidated investments; • disposed of 27 apartment communities, excluding unconsolidated investments; • realized our pro rata share of the gain from the sale of six communities owned by unconsolidated real estate entities; and • completed the development of 23 apartment communities, including unconsolidated investments, and the redevelopment of one apartment community.
During the three years ended December 31, 2023, we: • acquired 14 apartment communities, excluding unconsolidated investments; • disposed of 22 apartment communities, excluding unconsolidated investments; • realized our pro rata share of the gain from the sale of five communities owned by unconsolidated real estate entities; and • completed the development of 21 apartment communities, including unconsolidated investments, and the redevelopment of two apartment communities.
Options and long-term conditional contracts generally allow us to acquire an interest in the site after the completion of entitlements and shortly before the start of construction, which reduces development-related risks and preserves capital.
After selecting a site for development, 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 allow us to acquire an interest in the site after the completion of entitlements and shortly before the start of construction, which reduces development-related risks and preserves capital.
To help our associates develop the skills they need to advance in their careers and succeed at AvalonBay, we train them in a variety of ways, including online, instructor-led and on-the-job learning.
To help our associates develop the skills they need to advance in their careers and succeed at AvalonBay, we train them in a variety of ways, including providing job aids and quick reference guides, web-based courses and videos, in-person and virtual, instructor-led training and on-the-job learning.
At January 31, 2023, we owned or held a direct or indirect ownership interest in: • 275 operating apartment communities containing 82,411 apartment homes in 12 states and the District of Columbia, of which 267 communities containing 80,164 apartment homes were consolidated for financial reporting purposes and eight communities containing 2,247 apartment homes were held by unconsolidated entities in which we hold an ownership interest. • 18 wholly-owned development apartment communities that are expected to contain an aggregate of 5,589 apartment homes when completed and one unconsolidated investment which holds an apartment community under development and is expected to contain 475 apartment homes when completed. • Rights to develop an additional 39 communities that, if developed as expected, will contain 13,312 apartment homes.
At January 31, 2024, we owned or held a direct or indirect ownership interest in: • 279 operating apartment communities containing 83,655 apartment homes in 12 states and the District of Columbia, of which 271 communities containing 81,408 apartment homes were consolidated for financial reporting purposes and eight communities containing 2,247 apartment homes were held by unconsolidated entities in which we hold an ownership interest. • 19 wholly-owned development apartment communities that are under construction or completed and in lease-up and are expected to contain an aggregate of 6,539 apartment homes when completed and one unconsolidated investment which holds an apartment community under development and is expected to contain 475 apartment homes when completed. • Rights to develop an additional 30 communities that, if developed as expected, will contain 10,801 apartment homes.
We also seek to generate additional shareholder value from investments in other real estate-related ventures, including through the Structured Investment Program ("SIP"), our platform to provide mezzanine loans or preferred equity to third-party multifamily developers. We undertake our development and redevelopment activities primarily through in-house development and redevelopment teams, and buy and dispose of assets through our in-house investments platform.
We also seek to generate additional shareholder value from investments in other real estate-related ventures, including through the Structured Investment Program (“SIP”), our platform to provide mezzanine loans or preferred equity to third-party multifamily developers in our existing regions.
We estimate that our short-term liquidity needs will be met from cash on hand, borrowings under our $2,250,000,000 revolving variable rate unsecured credit facility (the “Credit Facility”) and our $500,000,000 unsecured commercial paper note program (the "Commercial Paper Program"), sales of current operating communities and/or issuance of additional debt or equity securities, including amounts through the planned settlement of the outstanding forward contracts to sell 2,000,000 shares of common stock by no later than 4 Table of Contents December 31, 2023.
We estimate that our short-term liquidity needs will be met from cash on hand, borrowings under our $2,250,000,000 revolving variable rate unsecured credit facility (the “Credit Facility”) and our $500,000,000 unsecured commercial paper note program (the “Commercial Paper Program”), sales of current operating communities and/or issuance of additional debt or equity securities.
Our principal strategies to maximize operating income include: • focusing on associate engagement and resident satisfaction; • staggering lease terms such that lease expirations are matched with seasonal demand; • delivering high occupancy with premium pricing for various customer segments; and • making innovations in our operating model through (i) leveraging technology, including digital smart access and various automation technologies and (ii) data science to optimize revenue from the portfolio, while reducing customer acquisition, transaction and retention costs.
Our principal strategies to maximize operating income include: • focusing on associate engagement and resident satisfaction; • employing an innovative and continually evolving operating model that combines effective onsite associates with the capabilities of our centralized shared services center, technology platform and digital offerings and various automation technologies; • utilizing data science and our operating experience to optimize revenue from the portfolio, including making operating decisions that reduce customer acquisition, transaction and retention costs; • staggering lease terms such that lease expirations are matched with seasonal demand; and • delivering high occupancy with premium pricing for various customer segments.
We believe that our organizational structure, which includes dedicated development and operational teams, and strong culture are key differentiators.
We undertake our development and redevelopment activities primarily through in-house development and redevelopment teams, and buy and dispose of assets through our in-house investments platform. We believe that our organizational structure, which includes dedicated development and operational teams, and strong culture are key differentiators.
At all times we intend to make investments in a manner so as to qualify as a REIT unless, because of circumstances or changes to the Internal Revenue Code of 1986, as amended (the “Code”) (or the Treasury Regulations thereunder), our Board of Directors determines that it is no longer in our best interest to qualify as a REIT. 5 Table of Contents We conduct many of the administrative functions associated with our property operations (including billing, collections, and response to resident inquiries) through an internally operated shared services center, rather than having on-site associates conduct such activities.
At all times we intend to make investments in a manner so as to qualify as a REIT unless, because of circumstances or changes to the Internal Revenue Code of 1986, as amended (the “Code”) (or the Treasury Regulations thereunder), our Board of Directors determines that it is no longer in our best interest to qualify as a REIT.
From time to time we may engage a third party to manage leasing and/or maintenance activity at one or more of our communities where we have limited historical experience such as our expansion markets or for other reasons.
From time to time, we may engage a third party to manage leasing and/or maintenance activity at one or more of our communities, including in our expansion regions where we may have limited resources or scale. From time to time we also pursue or arrange ancillary services for our residents to provide additional revenue sources or increase resident satisfaction.
At January 31, 2023, we had 2,947 employees, of which approximately 97% were employed on a full-time basis. Approximately 66% of our associates work on-site at our operating communities and the balance work on other matters.
At January 31, 2024, we had 3,039 employees, of which approximately 98% were employed on a full-time basis. Approximately 65% of our associates work on-site at our operating communities and the balance work on other matters. None of our associates are represented by a union. We consider the following aspects of human capital management to be important: Diversity and Inclusion.
We pursue our development, redevelopment, investment and operating activities with the purpose of "Creating a Better Way to Live." 1 Table of Contents Our strategic vision is to be the leading apartment company in select U.S. markets, providing a range of distinctive living experiences that customers value.
We pursue our development, redevelopment, investment and operating activities with the purpose of “Creating a Better Way to Live.” 1 Table of Contents We seek to be a leading apartment company in select U.S. markets that are characterized by growing employment in high wage sectors of the economy, higher home prices and a diverse and vibrant quality of life.
We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers and do not intend to do so.
We may from time to time, through a TRS, develop real estate and hold it for sale upon completion if we believe that this will be the best use or disposition opportunity for the property. We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers and do not intend to do so.
Removed
We pursue this vision by targeting what we believe are among the best markets and submarkets, leveraging our strategic capabilities in market research and consumer insight and being disciplined in our capital allocation and balance sheet management.
Added
From an operating perspective, we seek to deliver seamless, personalized experiences for our residents on an efficient and effective basis by our resident-focused on-site associates that are supported by our centralized shared services operating organization and flexible technology platform that incorporates automation and artificial intelligence.
Removed
On-site property management teams receive bonuses based largely upon the revenue, expense, Net Operating Income (“NOI”), prospect conversion, resident retention and customer service metrics produced at their respective communities.
Added
We conduct many of the administrative functions associated with our property operations (including billing, collections, and response to resident inquiries) through an internally operated shared services center, rather than having on-site associates conduct such activities.
Removed
From time to time we also pursue or arrange ancillary services for our residents to provide additional revenue sources or increase resident satisfaction.
Added
Since mid-2023, we have provided various back-office, financial administrative support services for a third party leveraging the economies of scale at our center to produce an additional revenue stream.
Removed
As of December 31, 2022, we had a total of approximately 926,000 square feet of rentable commercial space, excluding commercial space within communities currently under development.
Removed
Gross rental revenue provided by leased commercial space in 2022 was $42,971,000 (1.7% of total revenue). • For-sale real estate development : we may also develop a property in conjunction with another real estate company that will own and operate the commercial or for-sale residential components of a mixed-use building or project that we help develop.
Removed
We may from time to time, through a TRS, develop real estate and hold it for sale upon completion if we believe that this will be the best use or disposition opportunity for the property, as is the case with our sale of apartment condominium units at The Park Loggia condominium development in New York, NY. • Structured Investment Program : while we generally invest in multifamily real estate through fee simple ownership or an equity investment in a joint venture, we established a new investment platform through which we provide mezzanine loans or preferred equity to third-party multifamily developers.
Removed
At December 31, 2022, we had commitments for three mezzanine loans of up to $92,375,000 in the aggregate. The mezzanine loans have a weighted average rate of return of 9.8% and mature at various dates on or before June 2026.
Removed
At December 31, 2022, we have funded $29,352,000 of these commitments. • Property technology and environmentally focused companies and investment management funds : we have also invested, either through a wholly-owned TRS, or in an investment vehicle that has elected to be treated as a TRS, in companies (and in venture funds that invest in companies) that provide technology services to the real estate industry, and we have invested, through a TRS, in environmentally focused companies and investment management funds to further our sustainability efforts and learning.
Removed
As of December 31, 2022, we had invested $36,178,000 in various property technology and environmentally focused companies directly and indirectly through investment management funds.
Removed
As of December 31, 2022, we have $34,299,000 of outstanding equity commitments to these investment management funds, with the timing and amount for these commitments to be fulfilled dependent on if, and when, investment opportunities are identified by their respective funds.
Removed
We are exploring the possibility of performing these shared service center administrative functions for a third party as a means of creating an additional revenue stream and economies of scale at our center. We cannot assure that we will provide such services to a third party or that it will be successful if we do so.
Removed
In addition, various temporary federal, state and local laws enacted during the COVID-19 pandemic have imposed additional 6 Table of Contents regulations of or limitations on our ability to evict tenants who are delinquent in payment of their rent, charge late fees, or raise rents more than a regulated amount upon renewal.
Removed
None of our associates are represented by a union except for approximately 13 maintenance associates at communities in Westchester County, New York, where we are in the process of negotiating a collective bargaining agreement. We consider the following aspects of human capital management to be important: Diversity and Inclusion. We value workforce diversity and an inclusive culture.
Removed
Federal Income Tax Considerations The following discussion supplements and updates the disclosures under “Certain U.S. Federal Income Tax Considerations and Consequences of Your Investment” in the prospectus dated February 25, 2021, contained in our Registration Statement on Form S-3 filed with the SEC on February 25, 2021, as supplemented by the discussion under the heading “Supplemental U.S.
Removed
Federal Income Tax Considerations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 25, 2022. Capitalized terms herein that are not otherwise defined shall have the same meaning as when used in such disclosures (as supplemented).
Removed
On December 29, 2022, the Internal Revenue Service promulgated final Treasury Regulations under Sections 897, 1441, 1445, and 1446 of the Code that were, in part, intended to coordinate various withholding regimes for non-U.S. stockholders. The new Treasury Regulations provide that: i.
Removed
The withholding rules applicable to ordinary REIT dividends paid to a non-U.S. stockholder (generally, a 30% rate of withholding on gross amounts unless otherwise reduced by treaty or effectively connected with such non-U.S. stockholder’s trade or business within the U.S. and proper certifications are provided) apply to (a) that portion of any distribution paid by us that is not designated as a capital gain dividend, a return of basis or a distribution in excess of the non-U.S. stockholder’s adjusted basis in its stock that is treated as gain from the disposition of such stock and (b) any portion of a capital gain dividend paid by us that is not treated as gain attributable to the sale or exchange of a U.S. real property interest by reason of the recipient not owning more than 10% of a class of our stock that is regularly traded on an established securities market during the one-year period ending on the date of the capital gain dividend. ii.
Removed
The withholding rules under FIRPTA apply to a distribution paid by us in excess of a non-U.S. stockholder’s adjusted basis in our stock, unless the interest in our stock is not a U.S. real property interest (for example, because we are a domestically controlled qualified investment entity) or the distribution is paid to a “withholding qualified holder.” A “withholding qualified holder” means a qualified holder (as defined below) and a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships. iii.
Removed
The withholding rules under FIRPTA apply to any portion of a capital gain dividend paid by us to a non-U.S. stockholder that is attributable to the sale or exchange of a U.S. real property interest, unless it is paid to a withholding qualified holder.
Removed
In the case of FIRPTA withholding under clause (ii) above, the applicable withholding rate is currently 15%, and in the case of FIRPTA withholding under clause (iii) above the withholding rate is currently 21%.
Removed
For purposes of FIRPTA withholding under clause (iii), whether a capital gain dividend is attributable to the sale or exchange of a U.S. real property interest is determined taking into account the general exception from FIRPTA distribution treatment for distributions paid to certain non-U.S. stockholders under which any distribution by us to a non-U.S. stockholder with respect to any class of stock which is regularly traded on an established securities market located in the United States is not treated as gain recognized from the sale or exchange of a U.S. real property interest if such non-U.S. stockholder did not own more than 10% of such class of stock at any time during the 1-year period ending on the date of such distribution.
Removed
To the extent inconsistent, these Treasury Regulations supersede the discussion on withholding contained in the above-referenced disclosures (as supplemented) under the heading “-U.S. Taxation of Non-U.S.
Removed
Stockholders.” However, if, notwithstanding these Treasury Regulations, we encounter difficulties 8 Table of Contents in properly characterizing a distribution for purposes of the withholding rules, we may decide to withhold on such distribution at the highest possible U.S. federal withholding rate that we determine could apply. Additionally, the second paragraph under the heading “-U.S. Taxation of Non-U.S.
Removed
Stockholders-Distributions by Avalon Bay” is hereby deleted and replaced with the following: Distributions in excess of our current and accumulated earnings and profits (not attributable to gains from disposition of U.S. real property interests) that exceed the non-U.S. stockholder’s basis in its common stock will be taxable to a non-U.S. stockholder as gain from the sale of its common stock, which is discussed below.
Removed
Distributions in excess of our current or accumulated earnings and profits and not attributable to gains from our sales or exchanges of U.S. real property interests will not be taxable to a non-U.S. stockholder to the extent they do not exceed the adjusted basis of the non-U.S. stockholder’s shares (determined separately for each share).
Removed
Instead, they will reduce adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a non-U.S. stockholder’s shares, they will be treated as gain from the sale or disposition of the non-U.S. stockholder’s shares and may be subject to tax as described in the “- Sale of Common Stock” portion of this section below.
Removed
The new Treasury Regulations also provide new guidance regarding qualified foreign pension funds. Accordingly, the first paragraph under the heading “-U.S. Taxation of Non-U.S.
Removed
Stockholders-Qualified Foreign Pension Funds” is hereby deleted and replaced with the following: In general, for FIRPTA purposes, and subject to the discussion below regarding “qualified holders,” neither a “qualified foreign pension fund” (as defined below) nor any entity all of the interests of which are held by a qualified foreign pension fund is treated as a foreign person, thereby exempting such entities from tax under FIRPTA.
Removed
A “qualified foreign pension fund” is an organization or arrangement (i) created or organized in a foreign country, (ii) established by a foreign country (or one or more political subdivisions thereof) or one or more employers to provide retirement or pension benefits to current or former employees (including self-employed individuals) or their designees or, in consideration for, services rendered, (iii) which does not have a single participant or beneficiary that has a right to more than 5% of its assets or income, (iv) which is subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to relevant local tax authorities, and (v) with respect to which, under its local laws, (A) contributions that would otherwise be subject to tax are deductible or excluded from its gross income or taxed at a reduced rate, or (B) taxation of its investment income is deferred, or such income is excluded from its gross income or taxed at a reduced rate.
Removed
Under Treasury Regulations, subject to the discussion below regarding “qualified holders,” a “qualified controlled entity” also is not generally treated as a foreign person for purposes of FIRPTA.
Removed
A qualified controlled entity generally includes a trust or corporation organized under the laws of a foreign country all of the interests of which are held by one or more qualified foreign pension funds either directly or indirectly through one or more qualified controlled entities.
Removed
Treasury Regulations further require that a qualified foreign pension fund or qualified controlled entity will not be exempt from FIRPTA with respect to dispositions of U.S. real property interests or REIT distributions attributable to the same unless the qualified foreign pension fund or qualified controlled entity is a “qualified holder.” To be a qualified holder, a qualified foreign pension fund or qualified controlled entity must satisfy one of two alternative tests at the time of the disposition of the U.S. real property interest or the REIT distribution.
Removed
Under the first test, a qualified foreign pension fund or qualified controlled entity is a qualified holder if it owned no U.S. real property interests as of the earliest date during an uninterrupted period ending on the date of the disposition or distribution during which it qualified as a qualified foreign pension fund or qualified controlled entity.
Removed
Alternatively, if a qualified foreign pension fund or qualified controlled entity held U.S. real property interests as of the earliest date during the period described in the preceding sentence, it can be a qualified holder only if it satisfies certain testing period requirements.
Removed
Treasury Regulations also provide that a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships, may certify its status as such and will not be treated as a foreign person for purposes of withholding under Code Section 1445 (and Code Section 1446, as applicable). 9 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

67 edited+24 added−9 removed123 unchanged
Biggest changeFurthermore, we may be subject to a 100% penalty tax, to the extent dealings between us and our TRSs are not deemed to be arm’s length in nature. We intend that our dealings with our TRSs will be on an arm’s length basis. No assurances can be given, however, that the Internal Revenue Service will not assert a contrary position.
Biggest changeWhile we will attempt to ensure that our dealings with our TRSs do not adversely affect our REIT qualification, we cannot provide assurances that it will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, to the extent dealings between us and our TRSs are not deemed to be arm’s-length in nature.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders. The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Department of the Treasury.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders. The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service ("IRS") and the U.S. Department of the Treasury.
Inflation could outpace any increases in rent and adversely affect us. We may not be able to mitigate the effects of inflation and related impacts, and the duration and extent of any prolonged periods of inflation, and any related adverse effects on our results of operations and financial condition, are unknown at this time.
However, inflation could outpace any increases in rent and adversely affect us. We may not be able to mitigate the effects of inflation and related impacts, and the duration and extent of any prolonged periods of inflation, and any related adverse effects on our results of operations and financial condition, are unknown at this time.
A number of states and municipalities have implemented or are seeking to implement rent control or rent stabilization laws and regulations or take other actions that could limit or delay our ability to raise rents, charge non-rent fees and evict tenants for non-payment of rent or other lease violations.
A number of states and municipalities have implemented or are seeking to implement rent control or rent stabilization laws and regulations or take other actions that could limit or delay our ability to raise rents, charge non-rent fees, screen and evict tenants for non-payment of rent or other lease violations.
Local conditions in our markets significantly affect occupancy, rental rates and the operating performance of our communities, and may be adversely affected by the following risks: • corporate restructurings and/or layoffs, and industry slowdowns; • an oversupply of, or a reduced demand for, apartment homes; • a decline in household formation or employment or lack of employment growth; • the inability or unwillingness of residents to pay rent increases; and • economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.
Local conditions in our regions significantly affect occupancy, rental rates and the operating performance of our communities, and may be adversely affected by the following risks: • corporate restructurings and/or layoffs, and industry slowdowns; • an oversupply of, or a reduced demand for, apartment homes; • a decline in household formation or employment or lack of employment growth; • the inability or unwillingness of residents to pay rent increases; and • economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.
The tax imposed on REITs engaging in "prohibited transactions" may limit our ability to engage in transactions which would be treated as sales for federal income tax purposes. We may transfer or otherwise dispose of some of our properties.
The tax imposed on REITs engaging in “ prohibited transactions ” may limit our ability to engage in transactions which would be treated as sales for federal income tax purposes. We may transfer or otherwise dispose of some of our properties.
These activities may expose us to the following risks, among others: • we may abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover expenses already incurred in exploring those opportunities; • occupancy rates and rents at a community may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions beyond our control and the development by competitors of competing communities; • we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy or other required governmental or third party permits and authorizations, which could result in increased costs, or the delay or abandonment of opportunities; • we may incur costs that exceed our original estimates due to increased material, labor or other costs or supply chain disruptions which could impact our overall return from our development, redevelopment or construction activity; • we may be unable to complete construction of a community on schedule or for the originally projected cost resulting in increased construction and financing costs; • we may incur liabilities to third parties during the development process, for example, in connection with managing existing improvements on the site prior to tenant terminations and demolition (such as commercial space) or in connection with providing services to third parties (such as the construction of shared infrastructure or other improvements); and • we may incur liability if our communities are not constructed in compliance with the accessibility provisions of the Americans with Disabilities Acts, the Fair Housing Act or other federal, state or local requirements.
These activities may expose us to the following risks, among others: • we have recently, and may in the future, abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs or we may impair land held for development, and as a result, we may fail to recover expenses already incurred in exploring those opportunities; • occupancy rates and rents at a community may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions beyond our control and the development by competitors of competing communities; • we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy or other required governmental or third party permits and authorizations, which could result in increased costs, or the delay or abandonment of opportunities; • we may incur costs that exceed our original estimates due to increased material, labor or other costs or supply chain disruptions which could impact our overall return from our development, redevelopment or construction activity; • we may be unable to complete construction of a community on schedule or for the originally projected cost resulting in increased construction and financing costs; • we may incur liabilities to third parties during the development process, for example, in connection with managing existing improvements on the site prior to tenant terminations and demolition (such as commercial space) or in connection with providing services to third parties (such as the construction of shared infrastructure or other improvements); and • we may incur liability if our communities are not constructed in compliance with the accessibility provisions of the Americans with Disabilities Acts, the Fair Housing Act or other federal, state or local requirements.
Although our information technology is essential to the operation of our business and our ability to perform day-to-day operations, even the most well-protected information, networks, systems 19 Table of Contents and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Although our and our vendors' information technology systems are essential to the operation of our business and our ability to perform day-to-day operations, even the most well-protected information, networks, systems and facilities remain potentially vulnerable because the 19 Table of Contents techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Under the Code, unless certain exceptions apply, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business could be treated as income from a prohibited transaction subject to a 100% penalty tax from the gain on the sale of the community, which could potentially adversely impact our status as a REIT unless we own the community through a TRS.
Under the Code, unless certain exceptions apply, any gain resulting from transfers of properties that we hold as inventory or primarily for sale to customers in the ordinary course of business could be treated as income from a prohibited transaction subject to a 100% penalty tax from the gain on the sale of the property, which could potentially adversely impact our status as a REIT unless we own the property through a TRS.
To maintain this qualification, and/or to address other concerns about concentrations of ownership of our stock, our charter generally prohibits ownership (directly, indirectly by virtue of the attribution provisions of the Code, or beneficially as defined in Section 13 of the Securities Exchange Act of 1934) by any single stockholder of more than 9.8% of the issued and outstanding shares of any class or series of our stock.
To maintain this qualification, and/or to address other concerns about concentrations of ownership of our stock, our charter generally prohibits ownership (directly, indirectly by virtue of the attribution provisions of the Code, or beneficially as defined in Section 13 of the Exchange Act) by any single stockholder of more than 9.8% of the issued and outstanding shares of any class or series of our stock.
Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences. We have in recent years engaged, and may continue from time to time to engage in development, acquisition and operating activity outside of our pre-existing market areas.
Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences. We have engaged, and may continue from time to time to engage in development, acquisition and operating activity outside of our pre-existing market areas.
We are exposed to risks associated with investment in technology and environmentally focused venture funds and companies. In recent years we have invested in, and may in the future invest in, venture funds that invest in companies seeking innovation through new processes and the application of technology to property operations, development, construction and energy management.
We are exposed to risks associated with investment in technology and environmentally focused venture funds and companies. We have invested in, and may in the future invest in, venture funds that invest in companies seeking innovation through new processes and the application of technology to property operations, development, construction and energy management.
Even if we qualify as a REIT, we will be subject to certain federal, state and local taxes on our income and property and on taxable income that we do not distribute to our stockholders. In addition, we hold certain assets and engage in certain activities through our taxable REIT subsidiaries that a REIT could not engage in directly.
Even if we qualify as a REIT, we will be subject to certain federal, state and local taxes on our income and property and on taxable income that we do not distribute to our stockholders. In addition, we hold certain assets and engage in certain activities through our TRSs that a REIT could not engage in directly.
As a condition to obtaining (i) tax-exempt financing, (ii) favorable zoning or (iii) an agreement relating to property taxes in some jurisdictions, we will commit to 12 Table of Contents make some of the apartments in a community available to households whose income does not exceed certain thresholds (e.g., 50% or 80% of area median income), or who meet other qualifying tests.
As a condition to obtaining (i) tax-exempt financing, (ii) favorable zoning or (iii) an agreement relating to property taxes in some jurisdictions, we will commit to make some of the apartments in a community available to households whose income does not exceed certain thresholds (e.g., 50% or 80% of area median income), or who meet other qualifying tests.
In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of this qualification.
In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.
The form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on our rental revenue, actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Directors may consider relevant.
The form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on our rental revenue, actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the 12 Table of Contents Code and other factors as the Board of Directors may consider relevant.
Current and future enactments of rent control or rent stabilization laws or other laws regulating rental housing may limit our ability to charge market rents, increase rents, evict tenants or recover increases in our operating expenses and could make it more difficult for us to dispose of properties in certain circumstances.
Current and future enactments of rent control or rent stabilization laws or other laws regulating rental housing may limit our ability to charge market rents, increase rents, charge non-rent fees, screen and evict tenants or recover increases in our operating expenses and could make it more difficult for us to dispose of properties in certain circumstances.
In addition, an increase in market interest rates may lead purchasers of our common stock to demand a greater annual dividend yield, which could adversely affect the market price of our common stock. We may use interest rate derivatives to manage our exposure to fluctuations in interest rates, such as by entering into interest rate contracts.
In addition, an increase in market interest rates may lead purchasers of our common stock to demand a greater annual dividend yield, which could adversely affect the market price of our common stock. 11 Table of Contents We may use interest rate derivatives to manage our exposure to fluctuations in interest rates, such as by entering into interest rate contracts.
Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. There is substantial competition for qualified personnel in the real estate industry, and the loss of our key personnel could adversely affect us. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 20 Table of Contents
Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. There is substantial competition for qualified personnel in the real estate industry, and the loss of our key personnel could adversely affect us. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We may be unsuccessful at developing real estate with the 10 Table of Contents intent to sell or in selling condominiums at originally underwritten values, or at all, as a disposition strategy for an asset, which could have an adverse effect on our results of operations.
We may be unsuccessful at developing real estate with the intent to sell or in selling condominiums at originally underwritten values, or at all, as a disposition strategy for an asset, which could have an adverse effect on our results of operations.
This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code for which there are only limited judicial and administrative interpretations and involves the determination of a variety of factual matters and circumstances not entirely within our control.
This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code 15 Table of Contents for which there are only limited judicial and administrative interpretations and involves the determination of a variety of factual matters and circumstances not entirely within our control.
The additional tax liability resulting from the failure to qualify as a REIT would significantly reduce or eliminate the amount of funds available for distribution to our stockholders. Furthermore, we would no longer be required to 15 Table of Contents make distributions to our stockholders.
The additional tax liability resulting from the failure to qualify as a REIT would significantly reduce or eliminate the amount of funds available for distribution to our stockholders. Furthermore, we would no longer be required to make distributions to our stockholders.
The development, construction and operation of our communities are subject to regulations and permitting under various federal, state and local laws, regulations and ordinances, which regulate matters including wetlands protection, storm water runoff and wastewater discharge.
The development, construction and operation of our communities are subject to environmental, health and safety regulations and permitting under various federal, state and local laws, regulations and ordinances, which regulate matters including wetlands protection, storm water runoff and wastewater discharge.
As discussed in Item 2. “Properties—Other Land and Real Estate Assets,” in the event that the fair market value, less the cost to dispose of a parcel, changes such that it is less than the carrying basis of the parcel, we would be subject to an impairment charge, which would reduce our net income.
“Properties—Other Land and Real Estate Assets,” in the event that the fair market value, less the cost to dispose of a parcel, changes such that it is less than the carrying basis of the parcel, we would be subject to an impairment charge, which would reduce our net income.
In addition, some environmental laws create or allow a government agency to impose a lien on the contaminated site in favor of the government for damages and costs it incurs as a result of the contamination.
In addition, 17 Table of Contents some environmental laws create or allow a government agency to impose a lien on the contaminated site in favor of the government for damages and costs it incurs as a result of the contamination.
As of December 31, 2022, 4.9% of our apartment homes at current operating communities were under income limitations such as these. These commitments, which may or may not expire, may limit our ability to raise rents, adversely affecting the value of communities subject to these restrictions.
As of December 31, 2023, 4.6% of our apartment homes at current operating communities were under income limitations such as these. These commitments, which may or may not expire, may limit our ability to raise rents, adversely affecting the value of communities subject to these restrictions.
Gross rental revenue provided by leased commercial space in our portfolio represented 1.7% of our total revenue in 2022. The long term nature of our commercial leases and characteristics of many of our tenants (small, local businesses) may subject us to certain risks.
Gross rental revenue provided by leased commercial space in our portfolio represented 1.5% of our total revenue in 2023. The long term nature of our commercial leases and characteristics of many of our tenants (small, local businesses) may subject us to certain risks.
See “Risks related to our REIT or tax status” section for more information on federal tax law risks. In addition, the capitalization rates/disposition yields at which apartment communities may be sold could also be higher than historic rates, thereby reducing our potential proceeds from sale.
See “Risks related to our REIT or tax status or reliance on various tax regulations” section for more information on federal tax law risks. In addition, the capitalization rates/disposition yields at which apartment communities may be sold could also be higher than historic rates, thereby reducing our potential proceeds from sale.
We also use taxable REIT subsidiaries to hold certain assets that we believe would be subject to the 100% prohibited transaction tax if sold at a gain outside of a taxable REIT subsidiary or to engage in activities that generate non-qualifying REIT income. Our taxable REIT subsidiaries are subject to federal income tax as regular corporations.
We also use TRSs to hold certain assets that we believe would be subject to the 100% prohibited transaction tax if sold at a gain outside of a TRS or to engage in activities that generate non-qualifying REIT income. Our TRSs are subject to federal income tax as regular corporations.
Various laws and regulations and interpretations thereof, as well as agreements with payment processors, require, or may require, us to comply with rules related to our websites for use by residents and prospective residents, including requirements related to accessibility of our websites to persons with disabilities and our handling and use of data we collect.
Various laws and regulations and interpretations thereof, as well as agreements with payment processors, require, or may require, us to comply with rules related to our business and our websites used by residents and prospective residents, including requirements related to accessibility of our websites to persons with disabilities and our handling and use of data, including personal data, that we collect.
We cannot be certain that reserves carried to protect against future credit losses will be adequate over time to protect against future credit losses because of unanticipated adverse changes in the economy or events adversely affecting specific properties, assets, tenants, borrowers, industries in which our tenants and borrowers operate or markets in which our tenants and borrowers or their properties are located.
We cannot be certain that our estimate of future credit losses will be adequate over time because of unanticipated adverse changes in the economy or events adversely affecting specific properties, assets, tenants, borrowers, industries in which our tenants and borrowers operate or markets in which our tenants and borrowers or their properties are located.
These laws and regulations may impose restrictions on the manner in which our communities may be developed, and noncompliance with these laws and regulations may subject us to fines and penalties and may subject us to liability in connection with personal injury.
These laws and regulations may impose restrictions on how our communities may be developed, and noncompliance with these laws and regulations may subject us to fines and penalties and may subject us to liability in connection with personal injury.
We are subject to the risks associated with debt financing, including the risk that our available cash will be insufficient to meet required payments of principal and interest on our debt.
Insufficient cash flow could affect our debt financing and create refinancing risk. We are subject to the risks associated with debt financing, including the risk that our available cash will be insufficient to meet required payments of principal and interest on our debt.
Impacts from a pandemic may include the following: • State, local, and federal entities may impose restrictions, for varying times and to varying degrees, on our ability to enforce residents’ contractual lease obligations, and this may affect our ability to enforce all our remedies (such as pursuing collections and seeking evictions) for the failure to pay rent. 14 Table of Contents • Consumers whose income has declined, who are working remotely or who cannot freely access neighborhood amenities like restaurants, may decide to live in a location other than our markets.
Impacts from a pandemic may include the following: • State, local, and federal entities may impose restrictions, for varying times and to varying degrees, on our ability to enforce residents’ contractual lease obligations, and this may affect our ability to enforce all our remedies (such as pursuing collections and seeking evictions) for the failure to pay rent. • Consumers whose income has declined or who are working remotely may decide to live in a location other than our markets.
Inflation and related volatility in the economy could negatively impact our residents and our results of operations. Inflation accelerated rapidly in 2022 and may continue at an elevated level.
Inflation and related volatility in the economy could negatively impact our residents and our results of operations. Inflation accelerated rapidly in 2022, continued at an elevated level in 2023 and may continue at the present level or increase.
We may be held liable under these laws or common law to a governmental entity or to third parties for property, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination.
We may be held liable under these laws or common law to a governmental entity or to third parties for property, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination. These damages and costs may be substantial and may exceed any insurance coverage we have for such events.
These requirements or practices may result in foregone revenue. • Our properties may incur significant costs or losses related to shelter-in-place or stay-at-home orders, quarantines, infection, clean-up costs or other related factors. • There may be concerns related to the general economy about (i) supply chain constraints and (ii) inflation caused by both supply chain constraints and governmental fiscal and monetary policies.
These requirements or practices may result in foregone revenue. 14 Table of Contents • Our properties may incur significant costs or losses related to shelter-in-place or stay-at-home orders, quarantines, infection, clean-up costs or other related factors. • Impacts on the general economy and our industry caused by (i) supply chain constraints and (ii) inflation caused by both supply chain constraints and governmental fiscal and monetary policies.
We may experience climate change impacts including extreme weather and changes in precipitation, temperature and wildfire exposure, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions.
We may experience climate change impacts including extreme weather, sea level rise, the effects of declines in available water supplies and changes in precipitation, temperature and wildfire exposure, all of which may result in physical damage to and/or a decrease in demand for properties located in areas affected by these conditions.
If the IRS were to argue successfully that a transfer or disposition of property was a prohibited transaction, then we would be required to pay a 100% penalty tax on any gain allocable to it from the prohibited transaction, and our ability to retain proceeds from real property sales may be jeopardized. 16 Table of Contents We may face risks in connection with Section 1031 exchanges.
If the IRS were to argue successfully that a transfer or disposition of property was a prohibited transaction, then we would be required to pay a 100% penalty tax on any gain allocable to it from the prohibited transaction, and our ability to retain proceeds from real property sales may be jeopardized.
Our ownership of taxable REIT subsidiaries is subject to certain restrictions, and it will be required to pay a 100% penalty tax on certain income or deductions if transactions with our TRSs are not conducted on arm’s length terms. We have established several TRSs.
Our ownership of TRSs is subject to certain restrictions, and we will be required to pay a 100% penalty tax on certain income or deductions if transactions with our TRSs are not conducted on arm’s-length terms. We have established several TRSs. The TRSs must pay federal income tax on their taxable income as regular corporations.
Declines in the value of the property may prevent us from realizing an amount equal to our investment upon foreclosure even if we make substantial improvements or repairs to the underlying real estate in order to maximize such property's investment potential.
Declines in the value of the underlying properties may prevent us from realizing an amount equal to our investment upon foreclosure or other remedies even if we make substantial improvements or repairs to maximize such properties' investment potential.
Borrowers may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against such enforcement and/or bring claims for lender liability in response to actions to enforce their obligations to us.
In addition, borrowers and sponsors may seek bankruptcy protection against such enforcement and/or bring claims for lender liability in response to actions to enforce their obligations to us.
Increased scrutiny and changing expectations from investors, tenants and others regarding our environmental, social and governance ("ESG") practices and reporting could impact the price of our securities and business practices, and could cause us to incur additional costs.
Increased scrutiny and changing expectations from investors, tenants and others regarding our environmental, social and governance ( “ ESG ” ) practices and reporting could impact our business practices, cause us to incur additional costs and expose us to new risks.
Mezzanine debt and preferred equity investments could cause us to incur expenses, which could adversely affect our results of operations. We hold mezzanine loans and plan to hold preferred equity interests as part of our SIP through which we make these kinds of investments in projects owned by third parties.
Mezzanine debt and preferred equity investments could cause us to incur expenses, which could adversely affect our results of operations. We make mezzanine loans to borrowers and obtain preferred equity interests in projects owned by third party sponsors as part of our SIP.
Litigation could adversely affect our business. We are and may in the future become involved in legal proceedings, claims, actions, inquiries and/or investigations in connection with our operations, which may result in defense costs, settlements, fines and/or judgments against us, some of which are not, or cannot be, covered by insurance.
We are and may in the future become involved in legal proceedings, claims, actions, inquiries and/or investigations in connection with our operations, which may result in defense costs, settlements, fines and/or judgments against us, some of which are not, or cannot be, covered by insurance, including risks related to the multifamily rental antitrust litigation discussed below.
We may dispose of real properties in transactions intended to qualify as "like-kind exchanges" under Section 1031 of the Code.
We may face risks in connection with Section 1031 exchanges. We may dispose of real properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code.
We rely on information technology, including the internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions, personally identifiable information ("PII"), and tenant and lease data. Our business requires us and some of our vendors, to use and store PII and other sensitive information of our residents and employees.
We rely on information technology, including the internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions, personally identifiable information (“PII”), and tenant and lease data.
Any failure in or breach of our operational or information security systems, or those of our third party service providers, as a result of cyber attacks or information security breaches, could result in a wide range of potentially serious harm to our business operations and financial prospects, including (among others) disruption of our business and operations caused by an inability to access network systems or otherwise, disclosure or misuse of confidential or proprietary information (including PII of our residents and/or associates), damage to our reputation, and/or potentially significant legal and/or financial liabilities and penalties.
Any failure in or breach of our operational or information security systems, or those of our vendors, as a result of cyber-attacks or other security incidents, could materially adversely impact our operations and financial position, including disruption of our operations caused by an inability to access network systems, disclosure or misuse of confidential or proprietary information (including PII of our residents and/or associates), damage to our reputation, and/or potentially significant legal and/or financial liabilities and penalties.
Additionally, in January 2023, the White House published a white paper entitled the Blueprint for a Renters Bill of Rights and announced accompanying efforts aimed at increasing fairness in the rental market.
Additionally, the Biden Administration published a white paper entitled the Blueprint for a Renters Bill of Rights and various federal agencies have engaged in accompanying efforts aimed at increasing fairness in the rental market.
Any material weaknesses identified in our internal control over financial reporting could have an impact on our Company. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting.
We could incur costs to comply with stricter and more complex data privacy, data collection and information security laws and standards. Any material weaknesses identified in our internal control over financial reporting could have an impact on our Company. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting.
At times we invest directly and indirectly in real estate as a partner or a co-venturer with other investors.
We are exposed to risks associated with investment in, and management of, joint ventures. At times we invest directly and indirectly in real estate as a partner or a co-venturer with other investors.
We must develop, construct and operate our communities in compliance with federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord/tenant laws and other laws generally applicable to business operations.
Noncompliance with applicable laws in the building and operation of our communities could adversely affect our operations or expose us to liability. We must develop, construct and operate our communities in compliance with federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations.
Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of the cash dividend received.
Taxable stockholders receiving 16 Table of Contents such dividends will be required to include the full amount of the dividend as income to the extent of our current and accumulated earnings and profits for federal income tax purposes.
Failure of one or more of our subsidiaries to qualify as a REIT could adversely affect our ability to qualify as a REIT. We own interests in subsidiaries that have elected to be taxed as REITs under the Code. These subsidiary REITs are subject to the REIT qualification requirements and other limitations that are applicable to us.
We have owned and may in the future own interests in subsidiaries that have elected (or will elect) to be taxed as REITs under the Code. These subsidiary REITs were or will be subject to the REIT qualification requirements and other limitations that are applicable to us.
We could face liabilities for failure to comply with these requirements. New statutes, such as the California Consumer Privacy Act (“CCPA”), and related regulations are evolving and may be subject to differing interpretations. We could incur costs to comply with stricter and more complex data privacy, data collection and information security laws and standards.
We could face liabilities for failure to comply with these requirements. Privacy laws and regulations, such as the California Consumer Privacy Act as amended by the California Privacy Rights Act (“CCPA”), related regulations and other U.S. state privacy laws, are evolving and may be subject to differing interpretations.
These ground leases may impose limitations on our use of the properties, restrict our ability to finance, sell or otherwise transfer our interests or restrict the leasing of the properties. These restrictions may limit our ability to timely sell or exchange the properties, impair the properties’ value or negatively impact our ability to operate the properties.
These ground leases may impose 10 Table of Contents limitations on our use or improvement of the properties, restrict our ability to finance, sell or otherwise transfer our interests or restrict the leasing of the properties.
Relying on third parties to assist with and/or oversee development and construction creates additional and different risks than when we manage these activities directly, including that the third party may not perform to our standards, may breach contractual arrangements, or may incur liquidity constraints.
Relying on third parties to assist with and/or oversee development and construction creates additional and different risks than when we manage these activities directly, including that the third party may not perform to our standards, may breach contractual arrangements, or may incur liquidity constraints. 9 Table of Contents We also may engage or have an interest in for-sale activity, such as the sale of the residential condominiums at The Park Loggia, a mixed-use development located in New York, New York.
Expenses associated with our investment in these communities, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from the community. Noncompliance with applicable laws in the building and operation of our communities could adversely affect our operations or expose us to liability.
Expenses associated with our investment in these communities, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from the community. We face risks related to multifamily rental antitrust, regulatory scrutiny and new litigation.
These damages and costs may be substantial and may exceed any 17 Table of Contents insurance coverage we have for such events. The presence of these substances, or the failure to properly remediate or contain the contamination, may adversely affect our ability to borrow against, develop, sell or rent the affected property.
The presence of these substances, or the failure to properly remediate or contain the contamination, may adversely affect our ability to borrow against, develop, sell or rent the affected property.
Our investments in technology companies, or in funds that invest in technology companies, are generally held through taxable REIT subsidiaries pursuant to which we will incur taxable gains upon the disposition of our interests.
Our investments in technology companies, or in funds that invest in technology companies, are generally held through TRSs pursuant to which we will incur taxable gains upon the disposition of our interests. In addition, the value of these investments may be volatile and declines in value may impact our reported income even if we do not sell the investment.
Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber attacks.
Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to market our properties and services. Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.
In addition, the adoption of increased government regulations and changes in investor preference related to ESG and similar matters may result in changes to our business practices, including increasing expenses or capital expenditures. 13 Table of Contents Risks related to ongoing operations of our communities Laws, regulations and orders imposing rent control or rent stabilization, or limiting our rights as a landlord, could adversely affect our operations and revenue.
Risks related to operations of our communities Laws, regulations and orders imposing rent control or rent stabilization, or limiting our rights as a landlord, could adversely affect our operations and revenue.
Accordingly, we may be unable to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. There can be no assurance that we will be able to prevent unauthorized access to this PII or to our network or business systems in general.
Accordingly, we may be unable to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. These threats, in turn, may lead to increased costs to protect our information systems, detect and respond to threats, and recover from cyber incidents.
In addition, we could lose our interests in the properties if the ground leases are breached by us, terminated or lapse. As we get closer to the lease termination dates, the values of the properties could decrease if we are unable to agree upon an extension of the lease with the lessor.
As we get closer to the lease termination dates, the values of the properties could decrease if we are unable to agree upon an extension of the lease with the lessor. Certain of these ground leases have payments subject to annual escalations and/or periodic fair market value adjustments which could adversely affect our financial condition or results of operations.
Some of these instruments may have some recourse to their sponsors, while others are limited to the collateral securing the loan. In the event of a default under these obligations, we may have to take possession of the collateral securing these interests.
Some of these instruments may have some recourse to their borrower or sponsor, while others are limited to the collateral securing the loan or the right to remove the sponsor as manager of the venture in preferred equity investments.
Privacy and information security laws and regulations for PII continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to market our properties and services.
Our business requires us and some of our vendors to use and store PII and other confidential and sensitive information of our residents and employees. Privacy and information security laws and regulations for PII continue to evolve and may be inconsistent from one jurisdiction to another.
Certain of these ground leases have payments subject to annual escalations and/or periodic fair market value adjustments which could adversely affect our financial condition or results of operations. 11 Table of Contents Land we hold with no current intent to develop may be subject to future impairment charges. We own land parcels that we do not currently intend to develop.
Land we hold with no current intent to develop may be subject to future impairment charges. We own land parcels that we do not currently intend to develop. As discussed in Item 2.
Removed
We also may engage or have an interest in for-sale activity, such as the sale of the residential condominiums at The Park Loggia, a mixed-use development located in New York, New York.
Added
During 2023, we began to provide, through our internally operated shared service center, various back-office, financial administrative support services to a third party for a fee, and we may in the future provide such services to other third parties.
Removed
In addition, the value of these investments may be volatile and declines in value may impact our reported income even if we do not sell the investment. We are exposed to risks associated with investment in, and management of, discretionary real estate investment funds and joint ventures.
Added
There can be no assurance that we will be successful in providing such services, and the provision of such services creates additional sources of risk and potential liability for us with respect to the professional commitments and service levels we undertake when providing such services.
Removed
We believe that the lenders under our Credit Facility and the dealers under our Commercial Paper Program will fulfill their lending obligations thereunder, but if economic conditions deteriorate, the ability of those lenders and/or dealers to fulfill their obligations may be adversely impacted. Insufficient cash flow could affect our debt financing and create refinancing risk.
Added
In the event of a default under these obligations, we may elect to take possession of the collateral securing these interests, or remove a sponsor from management of a preferred equity investment. Borrowers of mezzanine loans may contest our enforcement actions, including, foreclosure, assignment in lieu of foreclosure, or other remedies, and sponsors may contest our removal actions.
Removed
Noncompliance with laws could expose us to liability.
Added
These restrictions may limit our ability to timely sell or exchange the properties, impair the properties’ value or negatively impact our ability to operate the properties. In addition, we could lose our interests in the properties if the ground leases are breached by us, terminated or lapse.
Removed
The TRSs must pay U.S. federal income tax on their taxable income as a regular C corporation. While we will attempt to ensure that our dealings with our TRSs do not adversely affect our REIT qualification, we cannot provide assurances that it will successfully achieve that result.
Added
Further, events involving limited liquidity, defaults, non-performance or other adverse developments that affect the lenders under our Credit Facility, the dealers under our Commercial Paper Program, financial institutions where we have deposits, transactional counterparties or other companies in the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, could result in losses or defaults by these institutions or counterparties or could lead to market-wide liquidity problems.
Removed
We may incur costs due to environmental contamination or non-compliance.
Added
Disruptions and uncertainty with respect to financial institutions, including as a result of recent bank failures and liquidity concerns, may negatively impact our ability to refinance existing indebtedness and access additional financing at reasonable terms or at all or may cause us or our transactional counterparties to be unable to complete transactions as intended, all of which could have a material adverse effect on our financial condition and results of operations .
Removed
For example, in late 2022 and early 2023, 14 purported class actions were filed against the Company, RealPage, Inc., (“RealPage”) and other defendants (the “RealPage Litigation”) alleging that RealPage and lessors of multifamily residential real estate conspired, principally in connection with the alleged use of RealPage revenue management systems, to artificially inflate the rental rates for multifamily residential real estate above competitive levels.

… 20 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

48 edited+10 added−12 removed34 unchanged
Biggest changeOur Current Communities are located in the following geographic markets: 23 Table of Contents Number of communities at Number of apartment homes at Percentage of total apartment homes at 1/31/2022 1/31/2023 1/31/2022 1/31/2023 1/31/2022 1/31/2023 New England 43 41 10,552 10,221 12.9 % 12.4 % Metro NY/NJ 52 47 15,261 14,296 18.6 % 17.4 % New York City, NY 14 14 5,089 5,089 6.2 % 6.2 % New York Suburban 16 12 4,577 3,792 5.6 % 4.6 % New Jersey 22 21 5,595 5,415 6.8 % 6.6 % Mid-Atlantic 46 45 15,924 15,770 19.5 % 19.2 % Washington Metro 40 39 13,962 13,808 17.1 % 16.8 % Baltimore, MD 6 6 1,962 1,962 2.4 % 2.4 % North Carolina 3 4 500 760 0.6 % 0.9 % Southeast Florida 7 8 2,187 2,837 2.7 % 3.4 % Texas 1 2 425 621 0.5 % 0.8 % Denver, Colorado 4 6 1,086 1,539 1.3 % 1.9 % Pacific Northwest 20 21 5,474 5,802 6.7 % 7.0 % Northern California 42 42 12,633 12,641 15.5 % 15.3 % San Jose, CA 12 12 4,717 4,723 5.8 % 5.7 % Oakland-East Bay, CA 15 15 4,336 4,338 5.3 % 5.3 % San Francisco, CA 15 15 3,580 3,580 4.4 % 4.3 % Southern California 60 59 17,761 17,924 21.7 % 21.7 % Los Angeles, CA 41 39 12,624 12,133 15.4 % 14.7 % Orange County, CA 12 13 3,370 4,024 4.1 % 4.9 % San Diego, CA 7 7 1,767 1,767 2.2 % 2.1 % 278 275 81,803 82,411 100.0 % 100.0 % We manage and operate substantially all of our Current Communities.
Biggest changeWe believe our mission of “Creating a Better Way to Live” helps us achieve higher rental rates and occupancy levels while minimizing resident turnover and operating expenses. 24 Table of Contents Our Current Communities are located in the following geographic markets: Number of communities at Number of apartment homes at Percentage of total apartment homes at 1/31/2023 1/31/2024 1/31/2023 1/31/2024 1/31/2023 1/31/2024 New England 41 42 10,221 10,328 12.4 % 12.4 % Metro NY/NJ 47 49 14,296 14,756 17.4 % 17.6 % New York City, NY 14 14 5,089 5,089 6.2 % 6.1 % New York Suburban 12 13 3,792 3,878 4.6 % 4.6 % New Jersey 21 22 5,415 5,789 6.6 % 6.9 % Mid-Atlantic 45 44 15,770 15,501 19.2 % 18.5 % Washington Metro 39 36 13,808 12,784 16.8 % 15.3 % Baltimore, MD 6 8 1,962 2,717 2.4 % 3.2 % Southeast Florida 8 8 2,837 2,837 3.4 % 3.4 % Denver, Colorado 6 6 1,539 1,539 1.9 % 1.8 % Pacific Northwest 21 21 5,802 5,802 7.0 % 6.9 % Northern California 42 41 12,641 12,446 15.3 % 14.9 % San Jose, CA 12 12 4,723 4,723 5.7 % 5.7 % Oakland-East Bay, CA 15 15 4,338 4,338 5.3 % 5.2 % San Francisco, CA 15 14 3,580 3,385 4.3 % 4.0 % Southern California 59 59 17,924 17,934 21.7 % 21.4 % Los Angeles, CA 39 39 12,133 12,143 14.7 % 14.5 % Orange County, CA 13 13 4,024 4,024 4.9 % 4.8 % San Diego, CA 7 7 1,767 1,767 2.1 % 2.1 % Other Expansion Regions 6 9 1,381 2,512 1.7 % 3.1 % North Carolina 4 5 760 963 0.9 % 1.2 % Texas 2 4 621 1,549 0.8 % 1.9 % 275 279 82,411 83,655 100.0 % 100.0 % We manage and operate substantially all of our Current Communities.
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, 2022, or which were acquired subsequent to January 1, 2021.
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, 2023, or which were acquired subsequent to January 1, 2022.
Collectively, the land held for development and associated costs for deferred development rights relate to 39 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.
Collectively, the land held for development and associated costs for deferred development rights relate to 30 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.
(2) Borrowing on this community is comprised of two mortgage loans. The interest rate is the weighted average interest rate as of December 31, 2022. (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.
(2) Borrowing on this community is comprised of two mortgage loans. The interest rate is the weighted average interest rate as of December 31, 2023. (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.
AVA Arts District (2)(3) Los Angeles, CA 25.0 % 475 $ 276 Q3 2020 Q3 2023 Q4 2023 _____________________________ (1) Projected total capitalized cost includes all capitalized costs projected to be incurred to develop the respective Unconsolidated Development Community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees and other regulatory fees, as well as costs incurred for first generation commercial tenants such as tenant improvements and leasing commissions.
AVA Arts District (2)(3) Los Angeles, CA 25.0 % 475 $ 291 Q3 2020 Q3 2023 Q1 2024 Q4 2024 _____________________________ (1) Projected total capitalized cost includes all capitalized costs projected to be incurred to develop the respective Unconsolidated Development Community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees and other regulatory fees, as well as costs incurred for first generation commercial tenants such as tenant improvements and leasing commissions.
The land leases have various expiration dates from July 2046 to April 2106, and three of the land leases are used to support tax advantaged structures that ultimately allow us to purchase the land upon lease expiration. 24 Table of Contents • A membership interest in five limited liability companies.
The land leases have various expiration dates from July 2046 to April 2106, and three of the land leases are used to support tax advantaged structures that ultimately allow us to purchase the land upon lease expiration. • A membership interest in five limited liability companies.
We estimate that the successful completion of all of these communities would ultimately add approximately 13,312 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.
We estimate that the successful completion of all of these communities would ultimately add approximately 10,801 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 following is a description of each category: Current Communities are categorized as Same Store, Other Stabilized, Redevelopment or Unconsolidated according to the following attributes: • Same Store for the year ended December 31, 2022 is 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 respective prior year period.
The following is a description of each category: Current Communities are categorized as Same Store, Other Stabilized, Redevelopment or Unconsolidated according to the following attributes: • Same Store is 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 respective prior year period.
ITEM 2. PROPERTIES 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.
ITEM 2. PROPERTIES 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.
In addition to our potential liability for the various policy self-insured retentions and deductibles, our captive insurance company is directly responsible for 100% of the first $25,000,000 of losses (per occurrence) and 10% of the second $25,000,000 of losses (per occurrence) incurred by the master property insurance policy.
In addition to our potential liability for the various policy self-insured retentions and deductibles, our captive insurance company is directly responsible for 100% of the first $25,000,000 of losses (per occurrence) and an additional $5,000,000 of losses (per occurrence) incurred by the master property insurance policy.
In addition, we had $58,489,000 in capitalized costs (including legal fees, design fees and related overhead costs) related to (i) 27 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 four Development Rights that we expect to construct as additional phases of our existing stabilized operating communities on land we own.
In addition, we had $53,122,000 in capitalized costs (including legal fees, design fees and related overhead costs) related to (i) 19 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 three Development Rights that we expect to construct as additional phases of our existing stabilized operating communities on land we own.
Land Acquisitions We select land for development and follow established procedures that we believe minimize both the cost and the risks of development. During 2022, we acquired the following land parcels for an aggregate investment of $137,885,000. Estimated number of apartment homes Projected total capitalized cost (1) ($ millions) Date acquired 1.
Land Acquisitions We select land for development and follow established procedures that we believe minimize both the cost and the risks of development. During 2023, we acquired the following land parcels for an aggregate investment of $80,870,000. Estimated number of apartment homes Projected total capitalized cost (1) ($ millions) Date acquired 1.
During 2022, we incurred a charge of $16,565,000 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.
During 2023, we incurred a charge of $33,479,000 for expensed transaction, development and other pursuit costs, net of recoveries, which include development pursuits that were not yet probable of future development at the time incurred, or for pursuits that we determined were no longer probable of being developed.
Of the Current Communities, as of January 31, 2023, we owned (directly or through wholly-owned subsidiaries): • 265 operating communities, including 258 with a full fee simple, or absolute, ownership interest and seven that are on land subject to a land lease.
Of the Current Communities, as of January 31, 2024, we owned (directly or through wholly-owned subsidiaries): • 270 operating communities, including 263 with a full fee simple or absolute ownership interest, and seven that are on land subject to a land lease.
Unconsolidated Development Communities As of December 31, 2022, we had an indirect interest in the following Unconsolidated Development Communities. Unconsolidated Development Community Company ownership percentage # of apartment homes Projected total capitalized cost (1) ($ millions) Construction start Initial projected or actual occupancy Estimated completion 1.
Unconsolidated Development Communities As of December 31, 2023, we had an indirect interest in the following Unconsolidated Development Communities. Unconsolidated Development Community Company ownership percentage # of apartment homes Projected total capitalized cost (1) ($ millions) Construction start Initial occupancy Estimated completion Estimated stabilized operations (4) 1.
Development Communities As of December 31, 2022, we owned or held a direct interest in 17 Development Communities under construction. We expect these Development Communities, when completed, to add a total of 5,417 apartment homes and 56,000 square feet of commercial space to our portfolio for a total capitalized cost, including land acquisition costs, of approximately $2,259,000,000.
Development Communities As of December 31, 2023, we owned or held a direct interest in 17 Development Communities under construction. We expect these Development Communities, when completed, to add a total of 6,064 apartment homes and 59,000 square feet of commercial space to our portfolio for a total capitalized cost, including land acquisition costs, of approximately $2,491,000,000.
We include coverage for losses arising from these types of weather events within our master property insurance program. We cannot assure you that a significant storm event would not cause damage or losses greater than our current insured levels.
Our Southeast Florida communities could be impacted by significant storm events like hurricanes. We include coverage for losses arising from these types of weather events within our master property insurance program. We cannot assure you that a significant storm event would not cause damage or losses greater than our current insured levels.
Changes in the Same Store communities portfolios for the years ended December 31, 2022, 2021 and 2020 were as follows: Number of communities Same Store communities as of December 31, 2019 210 Communities added 32 Communities removed (1) Redevelopment communities (1) Disposed communities (9) Same Store communities as of December 31, 2020 232 Communities added 15 Communities removed (1) Redevelopment communities — Disposed communities (9) Other Stabilized (1) Same Store communities as of December 31, 2021 237 Communities added 8 Communities removed (1) Redevelopment communities (1) Disposed communities (9) Same Store communities as of December 31, 2022 235 _________________________________ (1) We remove a community from our Same Store portfolio if we believe that planned activity for the upcoming year will result in that community's expected operations not being comparable to the prior year, including (i) when we intend to undertake a significant capital renovation, such that the community will be classified as a Redevelopment community; (ii) when we intend to dispose of a community; or (iii) when a significant casualty loss occurs.
Changes in the Same Store communities portfolios for the years ended December 31, 2023, 2022 and 2021 were as follows: Number of communities Same Store communities as of December 31, 2020 232 Communities added 15 Communities removed (1) Redevelopment communities — Disposed communities (9) Other Stabilized (1) Same Store communities as of December 31, 2021 237 Communities added 8 Communities removed (1) Redevelopment communities (1) Disposed communities (9) Same Store communities as of December 31, 2022 235 Communities added 21 Communities removed (1) Redevelopment communities — Disposed communities (4) Same Store communities as of December 31, 2023 252 _________________________________ (1) Communities were removed from our Same Store portfolio if we believed that planned activity for the upcoming year would result in that community's expected operations not being comparable to the prior year, including (i) when we intended to undertake a significant capital renovation, such that the community was classified as a Redevelopment community; (ii) when we intended to dispose of a community; or (iii) when a significant casualty loss occurred.
Kanso Milford (3) Milford, MA 162 66 November 2022 Total 3,083 $ 1,117 ____________________________________ (1) Projected total capitalized cost includes all capitalized costs incurred to date (if any) and projected to be incurred to develop the respective community, determined in accordance with GAAP, including land and related 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, net of projected proceeds for any planned sales of associated outparcels and other real estate.
Avalon Carmel Charlotte, NC 360 126 December 2023 Total 2,190 $ 795 ____________________________________ (1) Projected total capitalized cost includes all capitalized costs incurred to date (if any) and projected to be incurred to develop the respective community, determined in accordance with GAAP, including land and related 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, net of projected proceeds for any planned sales of associated outparcels and other real estate.
Kanso Milford Milford, MA 162 66 Q4 2022 Q1 2024 Q3 2024 Q1 2025 Total 5,417 $ 2,259 _________________________________ (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.
Avalon Parsippany Parsippany, NJ 410 148 Q4 2023 Q3 2025 Q2 2026 Q3 2026 Total 6,064 $ 2,491 _________________________________ (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.
As of January 31, 2023, our Current Communities consisted of the following: Number of communities Number of apartment homes Garden-style 128 39,909 Mid-rise 119 34,060 High-rise 28 8,442 Total Current Communities 275 82,411 As discussed in Item 1. “Business,” we operate under four core brands: Avalon, AVA, e aves by Avalon and Kanso .
As of January 31, 2024, our Current Communities consisted of the following: Number of communities Number of apartment homes Garden-style 131 41,026 Mid-rise 120 34,187 High-rise 28 8,442 Total Current Communities 279 83,655 As discussed in Item 1. “Business,” we operate under four core brands: Avalon, AVA, e aves by Avalon and Kanso.
For the year ended December 31, 2022, Same Store communities are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2021, are not conducting or are not probable to conduct substantial redevelopment activities and are not held for sale or probable for disposition to unrelated third parties within the current year.
For the year ended December 31, 2023, Same Store communities are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2022, did not conduct substantial redevelopment activities and are not held for sale as of December 31, 2023.
Disposition Activity We sell assets when they do not meet our long-term investment strategy or when real estate markets allow us to realize a portion of the value created over our periods of ownership, and we generally redeploy the proceeds from those sales to develop, redevelop and acquire communities.
We also dispose of assets when capital and real estate markets allow us to realize a portion of the value created over our ownership periods, and we generally redeploy the proceeds from those sales to develop, redevelop and acquire communities.
Avalon Alderwood MF Member, LLC - Avalon Alderwood Place - Lynnwood, WA (4) 50.0 % 328 108,682 — N/A N/A N/A Total Other Joint Ventures 946 257,370 122,731 3.27 % Total Unconsolidated Investments (5) 2,247 $ 1,025,520 $ 517,920 3.73 % _________________________________ (1) We have not guaranteed the debt of these unconsolidated investees and bear no responsibility for the repayment unless otherwise disclosed.
Avalon Alderwood MF Member, LLC - Avalon Alderwood Place - Lynnwood, WA 50.0 % 328 111,159 — N/A N/A N/A Total Other Joint Ventures 946 260,933 122,062 3.26 % Total Unconsolidated Real Estate Investments (4) 2,247 $ 1,032,356 $ 516,796 3.73 % _________________________________ (1) We have not guaranteed the debt of these unconsolidated investees and bear no responsibility for the repayment unless otherwise disclosed.
In addition to our Current Communities, we also hold, directly or through wholly-owned subsidiaries, a full fee simple ownership interest in our wholly-owned Development Communities and a membership interest in one limited liability company that holds a fee simple interest in an Unconsolidated Development Community.
The other four ventures each hold a fee simple interest in an operating community, one of which is consolidated for financial reporting purposes. 25 Table of Contents In addition to our Current Communities, we also hold, directly or through wholly-owned subsidiaries, a full fee simple ownership interest in our wholly-owned Development Communities and a membership interest in one limited liability company that holds a fee simple interest in an Unconsolidated Development Community.
This amount includes charges of $10,073,000 primarily related to development opportunities in the Pacific Northwest and Southern California that we determined are no longer probable. You should carefully review Item 1A. “Risk Factors,” for a discussion of the risks associated with Development Rights.
The amount for 2023 includes write-offs of $27,455,000 related to seven Development Rights that we determined are no longer probable. You should carefully review Item 1A. “Risk Factors,” for a discussion of the risks associated with Development Rights.
Projected total capitalized cost is the total projected joint venture amount. (2) AVA Arts District is expected to contain 56,000 square feet of commercial space. (3) As of December 31, 2022, we have contributed our equity investment in AVA Arts District of $28,660.
Projected total capitalized cost is the total projected joint venture amount. (2) AVA Arts District is expected to contain 56,000 square feet of commercial space. (3) As of December 31, 2023, we had contributed an equity investment in AVA Arts District of $32,738. The remaining development costs are primarily expected to be funded by the venture's variable rate construction loan.
However, for any losses resulting from earthquakes at communities located in California or Washington, the loss limit is $200,000,000 for any single occurrence and in the annual aggregate, subject to deductibles and self-insured retentions. Our Southeast Florida communities could be impacted by significant storm events like hurricanes.
However, for any losses resulting from earthquakes at communities located in California or Washington, the loss limit is $200,000,000 for any single occurrence and in the annual aggregate, subject to deductibles and self-insured retentions. A portion of coverage is included in the aforementioned self-insurance limits underwritten through the captive.
During the year ended December 31, 2022, we completed construction of five communities containing 1,858 apartment homes and sold 12 operating communities containing 2,733 apartment homes.
During the year ended December 31, 2023, we completed construction of six communities containing 1,393 apartment homes, acquired three communities containing 1,131 apartment homes and sold four operating communities containing 987 apartment homes.
We currently lease our corporate headquarters located in Arlington, Virginia, as well as our other regional and administrative offices, under operating leases. 21 Table of Contents As of December 31, 2022, 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 37 9,618 Metro NY/NJ 39 11,641 Mid-Atlantic 37 12,577 Southeast Florida 4 1,214 Denver, CO 4 1,086 Pacific Northwest 18 4,807 Northern California 40 12,128 Southern California 56 16,422 Total Same Store 235 69,493 Other Stabilized: New England 3 253 Metro NY/NJ 3 1,354 Mid-Atlantic 4 1,337 North Carolina 4 760 Southeast Florida 4 1,623 Texas 2 621 Denver, CO 1 207 Pacific Northwest 2 667 Northern California 1 200 Southern California 2 849 Total Other Stabilized 26 7,871 Redevelopment 1 714 Unconsolidated 8 2,247 Total Current 270 80,325 Development 23 7,675 Unconsolidated Development 1 475 Total Communities 294 88,475 Development Rights 39 13,312 Our holdings under each of the above categories are discussed on the following pages. 22 Table of Contents We generally establish the composition of our Same Store communities portfolio annually.
We currently lease our corporate headquarters located in Arlington, Virginia, as well as our other regional and administrative offices, under operating leases. 22 Table of Contents As of December 31, 2023, 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 39 9,577 Metro NY/NJ 41 12,766 Mid-Atlantic 39 13,301 Southeast Florida 7 2,187 Denver, CO 4 1,086 Pacific Northwest 20 5,474 Northern California 40 12,133 Southern California 58 17,281 Other Expansion Regions 4 925 Total Same Store 252 74,730 Other Stabilized: New England 1 350 Metro NY/NJ — — Mid-Atlantic 4 1,895 Southeast Florida 1 650 Denver, CO 2 453 Pacific Northwest — — Northern California — — Southern California 1 653 Other Expansion Regions 5 1,587 Total Other Stabilized 14 5,588 Redevelopment — — Unconsolidated 8 2,247 Total Current 274 82,565 Development 24 7,629 Unconsolidated Development 1 475 Total Communities 299 90,669 Development Rights 30 10,801 Our holdings under each of the above categories are discussed on the following pages. 23 Table of Contents We generally establish the composition of our Same Store communities portfolio annually.
Other Stabilized includes stabilized wholly-owned communities in Charlotte, North Carolina and Dallas, Texas, the two new expansion markets we entered in 2021, but 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 is in progress or is probable to begin during the current year.
Other Stabilized excludes communities that are conducting or conducted substantial redevelopment activities within the current year, as defined below. • Redevelopment is composed of consolidated communities where substantial redevelopment occurred or is in progress.
The aesthetic appeal of our communities, and a service-oriented property management team that is focused on the specific needs of residents, enhances market appeal. We believe our mission of "Creating a Better Way to Live" helps us achieve higher rental rates and occupancy levels while minimizing resident turnover and operating expenses.
The aesthetic appeal of our communities, and a service-oriented property management team that is focused on the specific needs of residents, enhances market appeal.
Avalon Merrick Park Miami, FL 254 101 Q2 2021 Q1 2023 Q2 2023 Q1 2024 6. Avalon Amityville I Amityville, NY 338 135 Q2 2021 Q4 2023 Q2 2024 Q4 2024 7. Avalon Bothell Commons I Bothell, WA 467 236 Q2 2021 Q3 2023 Q3 2024 Q2 2025 8.
Avalon Amityville Amityville, NY 338 $ 134 Q2 2021 Q3 2023 Q2 2024 Q4 2024 2. Avalon Bothell Commons I Bothell, WA 467 236 Q2 2021 Q3 2023 Q2 2024 Q1 2025 3. Avalon Westminster Promenade Westminster, CO 312 112 Q3 2021 Q2 2024 Q3 2024 Q2 2025 4.
(5) Avalon Redmond Campus is a densification of the existing eaves Redmond Campus wholly-owned community, replacing 48 existing older apartment homes that were demolished. 26 Table of Contents During the year ended December 31, 2022, we completed the development of the following wholly-owned communities: Number of apartment homes Total capitalized cost (1) ($ millions) Approximate rentable area (sq. ft.) Total capitalized cost per sq. ft.
During the year ended December 31, 2023, we completed the development of the following wholly-owned communities: Number of apartment homes Total capitalized cost (1) ($ millions) Approximate rentable area (sq. ft.) Total capitalized cost per sq. ft. Quarter of completion 1. Avalon Harrison (2) Harrison, NY 143 $ 94 171,036 $ 550 Q2 2023 2.
The following table presents a summary of the Development Communities. 25 Table of Contents 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 Harrison (3) Harrison, NY 143 $ 94 Q4 2018 Q3 2021 Q2 2023 Q3 2023 2.
“Management's Discussion and Analysis of Financial Condition and Results of Operations” (including the factors identified under “Forward-Looking Statements”) for further discussion of development activity. 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 Montville Montville, NJ 349 127 Q4 2021 Q4 2023 Q3 2024 Q4 2024 12. Avalon Redmond Campus (5) Redmond, WA 214 80 Q4 2021 Q3 2023 Q1 2024 Q3 2024 13. Avalon Governor's Park Denver, CO 304 135 Q1 2022 Q2 2024 Q3 2024 Q2 2025 14.
Avalon West Dublin Dublin, CA 499 267 Q3 2021 Q4 2023 Q4 2024 Q2 2025 5. Avalon Montville Montville, NJ 349 127 Q4 2021 Q4 2023 Q3 2024 Q4 2024 6. Avalon Redmond Campus (3) Redmond, WA 214 89 Q4 2021 Q1 2024 Q2 2024 Q4 2024 7.
Avalon West Chelsea—New York, NY (3) 305 128,851 66,000 Fixed 4.01 % Jan 2029 5. AVA High Line—New York, NY (3) 405 122,181 84,000 Fixed 4.01 % Jan 2029 Total NYTA MF Investors LLC 20.0 % 1,301 768,150 395,189 3.88 % Other Operating Joint Ventures 1.
AVA High Line—New York, NY (3) 405 122,463 84,000 Fixed 4.01 % Jan 2029 Total NYTA MF Investors LLC 20.0 % 1,301 771,423 394,734 3.88 % Other Operating Joint Ventures 1. MVP I, LLC - Avalon at Mission Bay II - San Francisco, CA 25.0 % 313 129,681 103,000 Fixed 3.24 % Jul 2025 2.
While we guarantee the construction loan on behalf of the venture, any amounts under the guarantee are obligations of the venture partners in proportion to ownership interest. Unconsolidated Operating Communities As of December 31, 2022, we had investments in the following unconsolidated real estate entities accounted for under the equity method of accounting, excluding development joint ventures.
The venture had drawn $135,983 of the $167,147 maximum borrowing capacity of the construction loan as of December 31, 2023. While we guarantee the construction loan on behalf of the venture, any amounts p ayable under the guarantee are obligations of the venture partners in proportion to ownership interest.
Avalon West Windsor (3) West Windsor, NJ 535 201 Q2 2022 Q3 2024 Q4 2025 Q2 2026 15. Avalon Durham Durham, NC 336 125 Q2 2022 Q2 2024 Q3 2024 Q2 2025 16. Avalon Annapolis Annapolis, MD 508 202 Q3 2022 Q3 2024 Q3 2025 Q2 2026 17.
Avalon Governor's Park Denver, CO 304 135 Q1 2022 Q3 2024 Q4 2024 Q2 2025 8. Avalon West Windsor (4) West Windsor, NJ 535 201 Q2 2022 Q2 2025 Q3 2026 Q1 2027 9. Avalon Durham (5) Durham, NC 336 125 Q2 2022 Q2 2024 Q3 2024 Q2 2025 10.
For joint ventures holding operating apartment communities as of December 31, 2022, detail of the real estate and associated indebtedness underlying our unconsolidated investments is presented in the following table (dollars in thousands). 27 Table of Contents Debt (1) Unconsolidated Real Estate Investments Company Ownership Percentage # of Apartment Homes Total Capitalized Cost Principal Amount Type Interest Rate Maturity Date NYTA MF Investors LLC 1.
See Note 5, “Investments,” of the Consolidated Financial Statements included elsewhere in this report. For joint ventures holding operating apartment communities as of December 31, 2023, detail of the real estate and associated indebtedness underlying our unconsolidated investments is presented in the following table (dollars in thousands).
On occasion, we will set aside the proceeds from the sale of communities into a cash escrow account to facilitate a tax-deferred, like-kind exchange transaction. From January 1, 2022 to January 31, 2023, we sold our interest in nine wholly-owned communities, containing 2,062 apartment homes, with an aggregate gross sales price of $924,450,000.
At times, we will set aside the proceeds from the sale of communities into a cash escrow account to facilitate a tax-deferred, like-kind exchange transaction.
During the year ended December 31, 2022, we recognized income of $4,690,000 for our promoted interest included in income from investments in unconsolidated entities on the accompanying Consolidated Statements of Comprehensive Income. 28 Table of Contents Development Rights At December 31, 2022, we had $179,204,000 in acquisition and related capitalized costs for direct interests in eight land parcels we own.
Fund”) and because we achieved a threshold return for the fund, during the years ended December 31, 2023 and 2022, we recognized income of $1,519,000 and $4,690,000, respectively, for our promoted interest, which is included in income from unconsolidated investments on the accompanying Consolidated Statements of Comprehensive Income. The U.S.
MVP I, LLC - Avalon at Mission Bay II - San Francisco, CA 25.0 % 313 129,305 103,000 Fixed 3.24 % Jul 2025 2. Brandywine Apartments of Maryland, LLC - Brandywine - Washington, D.C. 28.7 % 305 19,383 19,731 Fixed 3.40 % Jun 2028 3.
Brandywine Apartments of Maryland, LLC - Brandywine - Washington, D.C. 28.7 % 305 20,093 19,062 Fixed 3.40 % Jun 2028 3.
Avalon Harbor Isle Island Park, NY 172 94 227,070 $ 414 Q4 2022 Total 1,858 $ 692 ____________________________________ (1) Total capitalized cost is as of December 31, 2022. We generally anticipate incurring additional costs associated with these communities that are customary for new developments.
Avalon Princeton Circle Princeton, NJ 221 89 253,462 $ 351 Q4 2023 Total 1,393 $ 575 ____________________________________ (1) Total capitalized cost is as of December 31, 2023. We generally anticipate incurring additional costs associated with these communities that are customary for new developments. (2) Avalon Harrison contains 27,000 square feet of commercial space. (3) Community was developed through our DFP.
(4) Development of this community, which contains 284,000 square feet of rentable space, was completed during the year ended December 31, 2022. (5) In addition to leasehold assets, there are net other assets of $49,848 as of December 31, 2022 associated with these unconsolidated real estate investments which are primarily cash and cash equivalents.
(4) In addition to leasehold assets, there were net other assets of $30,792 as of December 31, 2023 associated with our unconsolidated real estate investments which are primarily cash and cash equivalents. We had an equity interest of 28.6% in the Archstone Multifamily Partners AC LP (the “U.S.
(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 Harrison (27,000 square feet) and Avalon West Windsor (19,000 square feet).
(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. 26 Table of Contents (3) Avalon Redmond Campus is a densification of the existing eaves Redmond Campus wholly-owned community, replacing 48 existing older apartment homes that were demolished.
Avalon Bowery Place I—New York, NY 206 $ 214,411 $ 93,800 Fixed 4.01 % Jan 2029 2. Avalon Bowery Place II—New York, NY 90 91,236 39,639 Fixed 4.01 % Jan 2029 3. Avalon Morningside—New York, NY (2) 295 211,471 111,750 Fixed 3.55 % Jan 2029/May 2046 4.
Avalon Morningside—New York, NY (2) 295 212,444 111,295 Fixed 3.55 % Jan 2029/May 2046 4. Avalon West Chelsea—New York, NY (3) 305 129,225 66,000 Fixed 4.01 % Jan 2029 5.
Avalon Somerville Station Somerville, NJ 374 122 Q4 2020 Q2 2022 Q3 2023 Q1 2024 3. Avalon North Andover (4) North Andover, MA 221 78 Q2 2021 Q4 2022 Q3 2023 Q4 2023 4. Avalon Brighton Boston, MA 180 89 Q2 2021 Q1 2023 Q2 2023 Q4 2023 5.
Avalon Brighton Boston, MA 180 90 167,230 $ 538 Q2 2023 3. Avalon Somerville Station Somerville, NJ 374 121 368,396 $ 328 Q3 2023 4. Avalon North Andover North Andover, MA 221 77 216,545 $ 356 Q3 2023 5. Avalon Merrick Park (3) Miami, FL 254 104 218,742 $ 475 Q3 2023 6.
Removed
The other four ventures that each hold a fee simple interest in an operating community, one of which is consolidated for financial reporting purposes. • A general partnership interest in one partnership structured as a “DownREIT,” which is consolidated and owns one community. At January 31, 2023, there were 7,500 DownREIT partnership units outstanding.
Added
Avalon Annapolis Annapolis, MD 508 200 Q3 2022 Q3 2024 Q3 2025 Q2 2026 11. Kanso Milford Milford, MA 162 65 Q4 2022 Q1 2024 Q3 2024 Q1 2025 12. Avalon Lake Norman (5) Mooresville, NC 345 101 Q1 2023 Q1 2025 Q1 2026 Q3 2026 13.
Removed
The limited partnership interests have the right to present all or some of their units for redemption for a cash amount based on the fair value of our common stock or we may elect to acquire any unit presented for redemption for one share of our common stock.
Added
Avalon Hunt Valley West Hunt Valley, MD 322 109 Q2 2023 Q1 2025 Q1 2026 Q3 2026 14. Avalon South Miami (4) South Miami, FL 290 186 Q3 2023 Q3 2025 Q1 2026 Q3 2026 15. Avalon Princeton Shopping Center Princeton, NJ 200 82 Q3 2023 Q1 2025 Q2 2025 Q4 2025 16.
Removed
“Management's Discussion and Analysis of Financial Condition and Results of Operations” (including the factors identified under “Forward-Looking Statements”) for further discussion of development activity.
Added
Avalon Wayne Wayne, NJ 473 174 Q4 2023 Q2 2025 Q2 2026 Q4 2026 17.
Removed
Avalon Westminster Promenade Westminster, CO 312 110 Q3 2021 Q1 2024 Q2 2024 Q1 2025 9. Avalon West Dublin Dublin, CA 499 270 Q3 2021 Q4 2023 Q1 2025 Q2 2025 10. Avalon Princeton Circle Princeton, NJ 221 88 Q4 2021 Q2 2023 Q1 2024 Q3 2024 11.
Added
(4) Development Communities containing at least 10,000 square feet of commercial space include Avalon West Windsor (19,000 square feet) and Avalon South Miami (32,000 square feet). (5) 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.
Removed
(4) During the year ended December 31, 2022, we expanded our existing Development Community, Avalon North Andover, adding 51 apartment homes at an incremental projected total capitalized cost of $22,000.
Added
(4) Stabilized operations is defined as the earlier of either (i) attainment of 90% or greater physical occupancy or (ii) the one-year anniversary of completion of development. 27 Table of Contents Unconsolidated Operating Communities As of December 31, 2023, we had investments in the following unconsolidated real estate entities accounted for under the equity method of accounting, excluding development joint ventures.
Removed
Quarter of completion 1. Avalon Foundry Row Owings Mills, MD 437 $ 98 364,310 $ 269 Q1 2022 2. Avalon Woburn Woburn, MA 350 120 329,792 $ 364 Q1 2022 3. Avalon Brea Place Brea, CA 653 293 557,454 $ 526 Q2 2022 4. AVA RiNo Denver, CO 246 87 187,733 $ 463 Q2 2022 5.
Added
Debt (1) Unconsolidated Real Estate Investments Company Ownership Percentage # of Apartment Homes Total Capitalized Cost Principal Amount Type Interest Rate Maturity Date NYTA MF Investors LLC 1. Avalon Bowery Place I—New York, NY 206 $ 215,923 $ 93,800 Fixed 4.01 % Jan 2029 2. Avalon Bowery Place II—New York, NY 90 91,368 39,639 Fixed 4.01 % Jan 2029 3.
Removed
The remaining development costs, representing 60% of the total project cost, are expected to be funded by the venture's variable rate construction loan. The venture has drawn $86,664 of the $167,147 maximum borrowing capacity of the construction loan as of December 31, 2022.
Added
Fund sold its final three communities in 2022 and has completed its dissolution in 2023. 28 Table of Contents Development Rights At December 31, 2023, we had $199,062,000 in acquisition and related capitalized costs for direct interests in eight land parcels we own.
Removed
See Note 5, “Investments,” of the Consolidated Financial Statements included elsewhere in this report, which includes information on the aggregate assets, liabilities and equity, as well as operating results, and our proportionate share of their operating results.
Added
Avalon Quincy Adams Quincy, MA 288 $ 117 April 2023 2. Avalon Princeton Shopping Center (2) Princeton, NJ 200 82 June 2023 3. Avalon Wayne (2) Wayne, NJ 473 174 September 2023 4. Avalon Oakridge I Durham, NC 459 148 October 2023 5. Avalon Parsippany (2) Parsippany, NJ 410 148 October 2023 6.
Removed
During 2022, the Archstone Multifamily Partners AC LP (the "U.S. Fund") sold its final three communities containing 671 apartment homes for a sales price of $313,500,000. Our share of the gain in accordance with GAAP was $38,144,000. The U.S. Fund repaid the $115,213,000 of outstanding secured indebtedness at par in advance of the scheduled maturity dates.
Added
(2) Construction on this land parcel commenced during 2023. 29 Table of Contents Acquisition & Disposition Activity We buy and sell assets based on our long-term investment criteria and target portfolio allocation.
Removed
We have an equity interest of 28.6% in the U.S. Fund and during the year ended December 31, 2022 in conjunction with the final dispositions, achieved a threshold return, resulting in an incentive distribution for our promoted interest based on the returns earned by the U.S. Fund.
Added
From January 1, 2023 to January 31, 2024, (i) we acquired three wholly-owned communities containing 1,131 apartment homes for an aggregate purchase price of $277,200,000 and (ii) we sold our interest in four wholly-owned communities, containing 987 apartment homes, with an aggregate gross sales price of $446,000,000.
Removed
Avalon Northtown (2) Austin, TX 1,427 $ 429 March 2022 2. Avalon Durham (3) Durham, NC 336 125 March 2022 3. Avalon Pleasanton Pleasanton, CA 305 191 June 2022 4. Avalon Annapolis (3)(4) Annapolis, MD 508 202 September 2022 5. Avalon Lake Norman Mooresville, NC 345 104 October 2022 6.
Removed
(2) Land purchased for the expected development of three adjacent operating communities. (3) Construction on this land parcel commenced during 2022. 29 Table of Contents (4) Additional parcel of land acquired in 2022 for a current Development Community. The estimated number of apartment homes and projected total capitalized cost represent the amounts for the full Development Community.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+2 added−2 removed0 unchanged
Removed
ITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal proceedings that arise in the ordinary course of its business.
Added
ITEM 3. LEGAL PROCEEDINGS As disclosed in Note 7, “Commitments and Contingencies” of the Consolidated Financial Statements in Item 8 of this report, we are engaged in certain legal proceedings, and the disclosure set forth in Note 7, “Commitments and Contingencies” relating to legal and other contingencies is incorporated herein by reference. ITEM 4.
Removed
While the resolutions of these matters cannot be predicted with certainty, the Company does not currently believe that any of these outstanding litigation matters, either individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 32 Table of Contents PART II
Added
MINE SAFETY DISCLOSURES Not Applicable. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed2 unchanged
Biggest changeIssuer Purchases of Equity Securities Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2) October 1 - October 31, 2022 428 $ 184.19 — $ 316,148 November 1 - November 30, 2022 — $ — — $ 316,148 December 1 - December 31, 2022 223 $ 173.92 — $ 316,148 Total 651 $ 180.67 — _________________________________ (1) Consists of shares surrendered to the Company in connection with exercise of stock options as payment of exercise price, as well as for taxes associated with the vesting of restricted share grants.
Biggest changeIssuer Purchases of Equity Securities Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2) October 1 - October 31, 2023 28 $ 169.88 — $ 314,237 November 1 - November 30, 2023 — $ — — $ 314,237 December 1 - December 31, 2023 427 $ 177.94 — $ 314,237 Total 455 $ 177.44 — _________________________________ (1) Consists of (i) shares surrendered to the Company in connection with exercise of stock options as payment of exercise price, as well as for taxes associated with the vesting of restricted share grants and the conversion of performance awards to shares of common stock and (ii) activity under the Stock Repurchase Program, if any, as indicated under Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs.
(2) In July 2020, the Board of Directors approved the 2020 Stock Repurchase Program, under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000.
(2) The Board of Directors approved the Stock Repurchase Program in July 2020, under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000.
The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. Information regarding securities authorized for issuance under equity compensation plans is included in the section entitled Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in this Form 10-K.
The Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. Information regarding securities authorized for issuance under equity compensation plans is included in the section entitled Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in this Form 10-K.
Purchases of common stock under the 2020 Stock Repurchase Program may be exercised from time to time in the Company’s discretion and in such amounts as market conditions warrant. 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.
Purchases of common stock under the Stock Repurchase Program may be exercised from time to time in the Company’s discretion and in such amounts as market conditions warrant. 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 Board of Directors may modify our dividend policy from time to time. In February 2023, we announced that our Board of Directors declared a dividend on our common stock for the first quarter of 2023 of $1.65 per share, a 3.8% increase over the Company's prior quarterly dividend of $1.59 per share.
The Board of Directors may modify our dividend policy from time to time. In January 2024, we announced that our Board of Directors declared a dividend on our common stock for the first quarter of 2024 of $1.70 per share, a 3.0% increase over the Company's prior quarterly dividend of $1.65 per share.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the ticker symbol AVB. On January 31, 2023 there were 687 holders of record of an aggregate of 139,920,107 shares of our outstanding common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the ticker symbol AVB. On January 31, 2024 there were 694 holders of record of an aggregate of 142,025,313 shares of our outstanding common stock.
The dividend will be payable on April 17, 2023 to all common stockholders of record as of March 31, 2023.
The dividend will be payable on April 15, 2024 to all common stockholders of record as of March 28, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

109 edited+21 added−46 removed48 unchanged
Biggest changeAll-In interest rate (1) Principal maturity date Balance Outstanding (2) Scheduled Maturities Community 12/31/2021 12/31/2022 2023 2024 2025 2026 2027 Thereafter Tax-exempt bonds Fixed rate Avalon at Chestnut Hill — % Oct-2047 (3) $ 35,770 $ — $ — $ — $ — $ — $ — $ — 35,770 — — — — — — — Variable rate Avalon Acton 4.70 % Jul-2040 (4) 45,000 45,000 — — — — — 45,000 Avalon Clinton North 5.35 % Nov-2038 (4) 147,000 147,000 — — — — 700 146,300 Avalon Clinton South 5.35 % Nov-2038 (4) 121,500 121,500 — — — — 600 120,900 Avalon Midtown West 5.29 % May-2029 (4) 88,300 82,700 6,100 6,800 7,300 8,100 8,800 45,600 Avalon San Bruno I 5.24 % Dec-2037 (4) 62,350 60,950 2,200 2,300 2,400 2,500 2,800 48,750 464,150 457,150 8,300 9,100 9,700 10,600 12,900 406,550 Conventional loans Fixed rate $250 million unsecured notes 3.00 % Mar-2023 250,000 250,000 250,000 — — — — — $350 million unsecured notes 4.30 % Dec-2023 350,000 350,000 350,000 — — — — — $300 million unsecured notes 3.66 % Nov-2024 300,000 300,000 — 300,000 — — — — $525 million unsecured notes 3.55 % Jun-2025 525,000 525,000 — — 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 4.37 % Feb-2033 — 350,000 — — — — — 350,000 Avalon Walnut Creek 4.00 % Jul-2066 4,161 4,327 — — — — — 4,327 eaves Los Feliz 3.68 % Jun-2027 41,400 41,400 — — — — 41,400 — 46 Table of Contents All-In interest rate (1) Principal maturity date Balance Outstanding (2) Scheduled Maturities Community 12/31/2021 12/31/2022 2023 2024 2025 2026 2027 Thereafter 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 3.35 % Aug-2029 30,250 30,250 — — — — — 30,250 7,420,511 7,770,677 600,000 300,000 825,000 775,000 636,100 4,634,577 Variable rate Term Loan - $100 million — % Feb-2022 (5) 100,000 — — — — — — — Term Loan - $150 million 5.42 % Feb-2024 150,000 150,000 — 150,000 — — — — 250,000 150,000 — 150,000 — — — — Total indebtedness - excluding Credit Facility and Commercial Paper $ 8,170,431 $ 8,377,827 $ 608,300 $ 459,100 $ 834,700 $ 785,600 $ 649,000 $ 5,041,127 _________________________________ (1) Rates are as of December 31, 2022 and include credit enhancement fees, facility fees, trustees’ fees, the impact of interest rate hedges, offering costs, mark to market amortization and other fees.
Biggest changeEffective interest rate (1) Principal maturity date Balance Outstanding (2) Scheduled Maturities Debt 12/31/2022 12/31/2023 2024 2025 2026 2027 2028 Thereafter Tax-exempt bonds Variable rate Avalon Acton 4.91 % Jul-2040 (3) $ 45,000 $ 45,000 $ — $ — $ — $ — $ — $ 45,000 Avalon Clinton North 5.56 % Nov-2038 (3)(5) 147,000 126,400 — — — 700 2,800 122,900 Avalon Clinton South 5.56 % Nov-2038 (3)(5) 121,500 104,500 — — — 600 2,300 101,600 Avalon Midtown West 5.51 % May-2029 (3) 82,700 76,600 6,800 7,300 8,100 8,800 9,600 36,000 Avalon San Bruno I 5.45 % Dec-2037 (3) 60,950 57,650 2,200 2,400 2,600 2,800 3,000 44,650 457,150 410,150 9,000 9,700 10,700 12,900 17,700 350,150 Conventional loans Fixed rate $250 million unsecured notes — % Mar-2023 (4) 250,000 — — — — — — — $350 million unsecured notes — % Dec-2023 (4) 350,000 — — — — — — — $300 million unsecured notes 3.66 % Nov-2024 300,000 300,000 300,000 — — — — — $525 million unsecured notes 3.55 % Jun-2025 525,000 525,000 — 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 Avalon Walnut Creek 4.00 % Jul-2066 4,327 4,501 — — — — — 4,501 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 3.35 % Aug-2029 30,250 30,250 — — — — — 30,250 Avalon West Plano 5.97 % May-2029 — 63,041 593 1,065 1,111 1,159 1,202 57,911 7,770,677 7,633,892 300,593 826,065 776,111 637,259 851,202 4,242,662 Variable rate Term Loan - $150 million — % Feb-2024 (5) 150,000 — — — — — — — Total indebtedness - excluding Credit Facility and Commercial Paper $ 8,377,827 $ 8,044,042 $ 309,593 $ 835,765 $ 786,811 $ 650,159 $ 868,902 $ 4,592,812 _________________________________ (1) Rates are as of December 31, 2023 and include credit enhancement fees, facility fees, trustees’ fees, the impact of interest rate hedges, offering costs, mark to market amortization and other fees.
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 further discussed below and (iii) investments in other real estate-related ventures through direct and indirect investments in property technology and environmentally focused companies and investment management funds.
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 property technology and environmentally focused companies and investment management funds.
Actual sales will depend on a variety of factors to be determined, including market conditions, the trading price of our common stock and our determinations of the appropriate funding sources. We engaged sales agents for CEP V who receive compensation of up to 1.5% of the gross sales price for shares sold.
Actual sales will depend on a variety of factors to be determined, including market conditions, the trading price of our common stock and our determinations of the appropriate funding sources. We engaged sales agents for the CEP who receive compensation of up to 1.5% of the gross sales price for shares sold.
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 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.
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.
Purchases of common stock under the 2020 Stock Repurchase Program may be exercised at our discretion with the timing and number of shares repurchased depending on a variety of factors including price, corporate and regulatory requirements and other corporate liquidity requirements and priorities.
Purchases of common stock under the Stock Repurchase Program may be exercised at our discretion with the timing and number of shares repurchased depending on a variety of factors including price, corporate and regulatory requirements and other corporate liquidity requirements and priorities.
Other Stabilized communities are generally all other completed consolidated communities that have stabilized occupancy at the beginning of the current year or were acquired during the year. Redevelopment communities are consolidated communities where substantial redevelopment is in progress or is probable to begin during the fiscal year.
Other Stabilized communities are generally all other completed consolidated communities that have stabilized occupancy at the beginning of the current year or were acquired during the year. Redevelopment communities are consolidated communities where substantial redevelopment is in progress or is probable to begin during the current year.
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; • gains or losses from early extinguishment of consolidated borrowings; • expensed transaction, development and other pursuit costs, net of recoveries; • third-party business interruption insurance proceeds and the related lost NOI that is covered by the expected third party business interruption insurance proceeds; • property and casualty insurance proceeds and legal settlement activity; • 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; • 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.
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; • third-party business interruption insurance proceeds and the related lost NOI that is covered by the expected third party business interruption insurance proceeds; • property and casualty insurance proceeds and legal settlements and costs; • 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.
These costs can be volatile, particularly in periods of increased acquisition pursuit activity, periods of economic downturn or when there is limited access to capital, and therefore 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.
In periods of increased acquisition 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.
In addition, we may invest, through mezzanine loans or other preferred equity investments, in multifamily development projects being undertaken by third parties.
In addition, we may invest, through mezzanine loans or preferred equity investments, in multifamily development projects being undertaken by third parties.
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) excluding gains or losses on sales of previously depreciated property or (ii) real estate depreciation may impact comparability between companies 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 like estimates.
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.
We cannot predict the occurrence of future events that may cause an impairment assessment to be performed, or the likelihood of any future impairment charges, if any. You should also review Item 1A. “Risk Factors” in this Form 10-K. 52 Table of Contents
We cannot predict the occurrence of future events that may cause an impairment assessment to be performed, or the likelihood of any future impairment charges, if any. You should also review Item 1A. “Risk Factors” in this Form 10-K. 50 Table of Contents
Before beginning new construction or reconstruction activity in 2023, including activity related to communities owned by unconsolidated joint ventures, we plan to source sufficient capital to complete these undertakings, although we cannot assure you that we will be able to obtain such financing.
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 you that we will be able to obtain such financing.
We have an indirect interest in nine of the 294 apartment communities which were owned by entities that were not consolidated for financial reporting purposes, including one that is being developed within a joint venture.
We have an indirect interest in nine of the 299 apartment communities which were owned by entities that were not consolidated for financial reporting purposes, including one that is being developed within a joint venture.
Expensed transaction, development and other pursuit costs, net of recoveries primarily reflect costs incurred for development pursuits not yet considered probable for development, as well as write downs and abandonment of Development Rights and costs related to abandoned acquisition and disposition pursuits and any recoveries of costs incurred.
Expensed transaction, development and other pursuit costs, net of recoveries primarily reflect costs incurred for write downs and abandonment of Development Rights, 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.
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 36 Table of Contents ancillary residential revenue.
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.
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), corporate-level property management and other indirect operating expenses, 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 investments in unconsolidated entities, depreciation expense, income tax expense, casualty loss, gain on sale of communities, gain on other real estate transactions, net, net for-sale condominium activity and net operating income from real estate assets sold or held for sale.
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), corporate-level property management and other indirect operating expenses, 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, depreciation expense, income tax expense, casualty loss, gain on sale of communities, other real estate activity and net operating income from real estate assets sold or held for sale.
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 construction loan (see "Investments" for further discussion of the construction loan).
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 construction loan (see “Unconsolidated Investments” for further discussion of the construction loan).
Rental income and operating expenses incurred during the initial lease-up or post-redevelopment lease-up period are fully recognized in earnings as they accrue. During the development and redevelopment efforts we capitalize all direct costs and indirect costs which have been incurred as a result of the development and redevelopment activities.
Rental income and operating expenses incurred during the initial lease-up or post-redevelopment lease-up period are fully recognized in earnings as they accrue. 49 Table of Contents During the development and redevelopment efforts we capitalize all direct costs and indirect costs which have been incurred as a result of the development and redevelopment activities.
Unconsolidated communities are communities in which we have an indirect ownership interest through our investment interest in an unconsolidated entity. A more detailed description of our reportable segments and other related operating information can be found in Note 8, “Segment Reporting,” of our Consolidated Financial Statements.
Unconsolidated communities are communities in which we have an indirect ownership interest through our investment interest in an unconsolidated joint venture. A more detailed description of our reportable segments and other related operating information can be found in Note 8, “Segment Reporting,” of our Consolidated Financial Statements.
Discussions related to current and future cash needs and financing activities can be found under "Liquidity and Capital Resources." NOI of our current operating communities is one of the financial measures that we use to evaluate the performance of our communities.
Discussions related to current and future cash needs and financing activities can be found under “Liquidity and Capital Resources.” NOI of our current operating communities is one of the financial measures that we use to evaluate the performance of our communities.
These statements include, among other things, statements regarding our intent, belief or expectations with respect to: • the impact of the Pandemic on our business, results of operations and financial condition; • our potential development, redevelopment, acquisition or disposition of communities; • the timing and cost of completion of apartment communities under construction, reconstruction, development or redevelopment; 49 Table of Contents • the timing of lease-up, occupancy and stabilization of apartment communities; • the timing and net sales proceeds of condominium sales; • the pursuit of land on which we are considering 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; • our expansion into new markets; • our declaration or payment of dividends; • our joint venture and discretionary fund 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 Metro New York/New Jersey, Northern and Southern California, Denver, Colorado, Southeast Florida, Dallas and Austin, Texas and Charlotte and Raleigh-Durham, North Carolina, and markets in selected states in the Mid-Atlantic, New England and Pacific Northwest regions of the United States and in general; • the availability of debt and equity financing; • interest rates; • general economic conditions, including the potential impacts from current economic conditions, including rising interest rates and general price inflation, and the Pandemic; • trends affecting our financial condition or results of operations; • adverse regulatory developments that may affect us; and • the impact of legal proceedings.
These statements include, among other things, statements regarding our intent, belief or expectations with respect to: • our potential development, redevelopment, acquisition or disposition of communities; • the timing and cost of completion of apartment communities under construction, reconstruction, development or redevelopment; • the timing of lease-up, occupancy and stabilization of apartment communities; • the pursuit of land on which we are considering 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; • 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 Metro New York/New Jersey, Northern and Southern California, Denver, Colorado, Southeast Florida, Dallas and Austin, Texas and Charlotte and Raleigh-Durham, North Carolina, and markets in selected states in the Mid-Atlantic, New England and Pacific Northwest regions of the United States and in general; • the availability of debt and equity financing; • interest rates; • general economic conditions, including the potential impacts from current economic conditions, including rising interest rates and general price inflation; • trends affecting our financial condition or results of operations; • regulatory changes that may affect us; and • the impact of legal proceedings.
The Credit Facility contains a sustainability-linked pricing component which provides for interest rate margin and commitment fee reductions or increases by meeting or missing targets related to environmental sustainability, specifically greenhouse gas emission reductions, with the adjustment determined annually beginning in July 2023.
The Credit Facility contains a sustainability-linked pricing component which provides for interest rate margin and commitment fee reductions or increases by meeting or missing targets related to environmental sustainability, specifically greenhouse gas emission reductions, with the adjustment determined annually.
(2) Amount for 2022 is for our recognition of our promoted interest in the U.S. Fund. (3) Amount for 2022 is the expected credit losses associated with the lending commitments under our SIP. The timing and amount of actual losses that will be incurred, if any, is to be determined.
(2) Amounts are for our recognition of our promoted interest in the U.S. Fund. (3) Amounts are the expected credit losses associated with our lending commitments primarily under our SIP. The timing and amount of actual losses that will be incurred, if any, is to be determined.
We were in compliance with these covenants at December 31, 2022. In addition, some of our secured borrowings include yield maintenance, defeasance, or prepayment penalty provisions, which would result in us incurring an additional charge in the event of a full or partial prepayment of outstanding principal before the 44 Table of Contents scheduled maturity.
We were in compliance with these covenants at December 31, 2023. In addition, some of our secured borrowings include yield maintenance, defeasance, or prepayment penalty provisions, which would result in us incurring an additional charge in the event of a full or partial prepayment of outstanding principal before the scheduled maturity.
Indirect project costs, which include personnel and office and administrative costs that are clearly associated with our development and redevelopment efforts, are also capitalized. Capitalized indirect costs associated with our development and redevelopment activities are comprised primarily of compensation related costs for associates dedicated to our development and redevelopment efforts and total $50,039,000 and $46,263,000 for 2022 and 2021, respectively.
Indirect project costs, which include personnel and office and administrative costs that are clearly associated with our development and redevelopment efforts, are also capitalized. Capitalized indirect costs associated with our development and redevelopment activities are comprised primarily of compensation related costs for associates dedicated to our development and redevelopment efforts and total $50,996,000 and $50,039,000 for 2023 and 2022, respectively.
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; • debt service and principal payments either at maturity or opportunistically before maturity; • lending commitments under our SIP; • normal recurring operating and corporate overhead expenses; and • investment in our operating platform, including strategic investments.
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.
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 our 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 our expected rental revenues; • the timing and net proceeds of condominium sales at The Park Loggia may not equal our current expectations; • occupancy rates and market rents may be adversely affected by competition and local economic and market conditions which are beyond our control; • financing may not be available on favorable terms or at all, and 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; • the impact of new landlord-tenant laws and rent regulations may be greater than we expect; • 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; 50 Table of Contents • we may be unsuccessful in our management of joint ventures and the REIT vehicles that are used with certain joint ventures; • 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 are subject to change; • the possibility that 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 in either mezzanine debt or preferred equity of third-party multifamily development 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.
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: 48 Table of Contents • 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 our 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 our 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; • financing may not be available on favorable terms or at all, and 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; • the impact of new landlord-tenant laws and rent regulations may be greater than we expect; • an outbreak of disease or other public health event may affect the multifamily industry and general economy, including from measures taken by businesses and the government and the preferences of consumers and businesses for living and working arrangements both during and after such an event; • 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; • 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 are subject to change; • the possibility that 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 in either mezzanine debt or preferred equity of third-party multifamily development 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.
We amortize concessions on a straight-line basis over the life of the respective leases (generally one year), reducing the income recognized over the lease term. For the year ended December 31, 2022, amortized concessions decreased by $39,932,000 contributing to the increase in revenue as compared to the prior year.
We amortize concessions on a straight-line basis over the life of the respective leases (generally one year), reducing the income recognized over the lease term. For the year ended December 31, 2023, amortized concessions decreased by $7,219,000 contributing to the increase in revenue as compared to the prior year.
Additional sources of liquidity in 2023 may include the issuance of common and preferred equity, including the issuance of shares of our common stock under CEP V.
Additional sources of liquidity in 2024 may include the issuance of common and preferred equity, including the issuance of shares of our common stock under the CEP.
See Note 6, "Real Estate Disposition Activities," of the Consolidated Financial Statements included elsewhere in this report for further discussion.
See Note 6, “Real Estate Disposition Activities,” of the Consolidated Financial Statements included elsewhere in this report for further discussion.
In addition, we held a direct or indirect ownership interest in Development Rights to develop an additional 39 communities that, if developed as expected, will contain an estimated 13,312 apartment homes. Our real estate investments consist primarily of Current Communities, Development communities, Unconsolidated Development communities and Development Rights.
In addition, we held a direct or indirect ownership interest in Development Rights to develop an additional 30 communities that, if developed as expected, will contain an estimated 10,801 apartment homes. Our real estate investments consist primarily of Current Communities, Development communities, Unconsolidated Development communities and Development Rights.
NOI is considered by management 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 or financing-related costs.
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.
Due to the subjectivity in determining whether a pursuit will result in the development of an apartment community, and therefore should be capitalized, the accounting for pursuit costs is a critical accounting estimate. As of December 31, 2022, capitalized pursuit costs associated with Development Rights totaled $58,489,000.
Due to the subjectivity in determining whether a pursuit will result in the development of an apartment community, and therefore should be capitalized, the accounting for pursuit costs is a critical accounting estimate. As of December 31, 2023, capitalized pursuit costs associated with Development Rights totaled $53,122,000.
As of December 31, 2022, we have $34,299,000 of remaining equity commitments to contribute to these investment management funds, with the timing and amount for these commitments to be fulfilled dependent on if, and when, investment opportunities are identified by the respective funds.
As of December 31, 2023, we have $73,892,000 of remaining equity commitments to contribute to these investment management funds, with the timing and amount for these commitments to be fulfilled dependent on if, and when, investment opportunities are identified by the respective funds.
These costs include legal fees, design fees and related overhead costs. Future development of these pursuits is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and availability of capital. Pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred.
Future development of these pursuits is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and availability of capital. Pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred.
See also Part I, Item 1A, “Risk Factors.” Discussion of our operating results for 2021 and comparison to 2020 can be found in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K filed with the SEC on February 25, 2022.
See also Part I, Item 1A, “Risk Factors.” Discussion of our operating results for 2022 and comparison to 2021 can be found in Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K filed with the SEC on February 24, 2023.
(3) During 2022, we repaid this borrowing in advance of its scheduled maturity date. (4) Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement. (5) During 2022, we repaid this borrowing at its scheduled maturity date.
(3) Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement. (4) During 2023, we repaid this borrowing at its scheduled maturity date. (5) During 2023, we repaid some or all amounts outstanding of this borrowing in advance of its scheduled maturity date.
Financial Covenants We are subject to financial covenants contained in the Credit Facility and the Commercial Paper Program, Term Loan and the indentures under which our unsecured notes were issued.
Financial Covenants We are subject to financial covenants contained in the Credit Facility and the indentures under which our unsecured notes were issued.
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 of $15,905,000 for 2023, $15,631,000 for 2024 and $361,248,000 thereafter.
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 of $15,333,000 for 2024, $15,633,000 for 2025 and $348,404,000 thereafter.
If changes in the accounting guidance limit our ability to capitalize costs or if we reduce our development and redevelopment activities without a corresponding decrease in indirect project costs, there may be an increase in our operating expenses. 51 Table of Contents We capitalize pre-development costs incurred in pursuit of Development Rights.
If changes in the accounting guidance limit our ability to capitalize costs or if we reduce our development and redevelopment activities without a corresponding decrease in indirect project costs, there may be an increase in our operating expenses. We capitalize pre-development costs incurred in pursuit of Development Rights. These costs include legal fees, design fees and related overhead costs.
The weighted average monthly rental revenue per occupied apartment home increased to $2,784 for 2022 as compared to $2,518 in 2021.
The weighted average monthly rental revenue per occupied apartment home increased to $2,955 for 2023 compared to $2,784 in 2022.
In 2023, we expect to meet our liquidity needs from one or more of a variety of internal and external sources, which may include (i) the settlement of the outstanding forward equity contracts to sell 2,000,000 shares of our common stock, (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.
In 2024, 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) real estate dispositions, (ii) cash balances on hand as well as cash generated from our operating activities, (iii) borrowing capacity under the Credit Facility, (iv) borrowings under the Commercial Paper Program and (v) secured and unsecured debt financings.
(2) Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured notes of $47,695 and $50,606 as of December 31, 2022 and 2021, respectively, deferred financing costs and debt discount associated with secured notes of $14,087 and $16,278 as of December 31, 2022 and 2021, respectively, as reflected on our Consolidated Balance Sheets included elsewhere in this report.
(2) Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured notes of $43,848 and $47,695 as of December 31, 2023 and 2022, respectively, deferred financing costs and debt discount associated 45 Table of Contents with secured notes of $18,372 and $14,087 as of December 31, 2023 and 2022, respectively, as reflected on our Consolidated Balance Sheets included elsewhere in this report.
Estimates of the undiscounted cash flows are sensitive to significant assumptions including future rental revenues, operating expenses, and our intent and ability to hold the related asset, which could be impacted by our expectations about the future. We expense costs related to abandoned pursuits, which include the abandonment of Development Rights and disposition pursuits.
Estimates of the undiscounted cash flows are sensitive to significant assumptions including future rental revenues, operating expenses, and our intent and ability to hold the related asset, which could be impacted by our expectations about the future.
We expect to be able to meet our reasonably foreseeable liquidity needs, as they arise, through a combination of one or more of the following sources: existing cash on hand; operating cash flows; borrowings under our Credit Facility and Commercial Paper Program; secured debt; the issuance of corporate securities (which could include unsecured debt, preferred equity, including amounts through the planned settlement of the outstanding forward contracts to sell 2,000,000 shares of common stock by no later than December 31, 2023 and/or common equity); the sale of apartment communities; or through the formation of joint ventures.
We expect to be able to meet our reasonably foreseeable liquidity needs, as they arise, through a combination of one or more of the following sources: existing cash on hand; operating cash flows; borrowings under our Credit Facility and Commercial Paper Program; secured debt; the issuance of corporate securities (which could include unsecured debt, preferred equity and/or common equity); the sale of apartment communities; or through the formation of joint ventures.
Early retirement of our unsecured or secured notes could result in gains or losses on extinguishment. 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.
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.
The interest rate applicable to borrowings under the Credit Facility is 5.14% at January 31, 2023 and is composed of (i) SOFR, applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.), plus (ii) the current borrowing spread to SOFR of 0.825% per annum, which consists of a 0.10% SOFR adjustment plus 0.725% per annum, assuming a one month term SOFR borrowing rate.
The interest rate that would be applicable to borrowings under the Credit Facility is 6.13% at January 31, 2024 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 facility (e.g., one month to maturity, three months to maturity, etc.), plus (ii) the current borrowing spread to SOFR of 0.805% per annum, which consists of a 0.10% SOFR adjustment plus 0.705% per annum, assuming a daily SOFR borrowing rate.
The gains of $555,558,000 and $602,235,000 in 2022 and 2021, respectively, were primarily due to the sale of nine wholly-owned communities in both 2022 and 2021.
The gains of $287,424,000 and $555,558,000 in 2023 and 2022, respectively, were primarily due to the sale of four and nine wholly-owned communities in 2023 and 2022, respectively.
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 cash in escrow of $734,245,000 at December 31, 2022, an increase of $190,457,000 from $543,788,000 at December 31, 2021.
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 $530,960,000 at December 31, 2023, a decrease of $203,285,000 from $734,245,000 at December 31, 2022.
See the discussion under "Liquidity and Capital Resources." Communities Overview As of December 31, 2022 we owned or held a direct or indirect ownership interest in 294 apartment communities containing 88,475 apartment homes in 12 states and the District of Columbia, of which 18 communities were under development and one community was under redevelopment.
See the discussion under “Liquidity and Capital Resources.” Communities Overview As of December 31, 2023 we owned or held a direct or indirect ownership interest in 299 apartment communities containing 90,669 apartment homes in 12 states and the District of Columbia, of which 18 communities were under development.
These costs can vary greatly, and the costs incurred in any given period may be significantly different in future years. Our focus on value creation through real estate development presents an impairment risk in the event of a future deterioration of the real estate and/or capital markets or a decision by us to reduce or cease development.
Our focus on value creation through real estate development presents an impairment risk in the event of a future deterioration of the real estate and/or capital markets or a decision by us to reduce or cease development.
Property taxes increased $5,871,000, or 2.1%, in 2022 as compared to the prior year, primarily due to the addition of newly developed and acquired apartment communities and increased assessments for our stabilized portfolio, partially offset by decreased property taxes from dispositions.
Property taxes increased $17,834,000, or 6.2%, in 2023 compared to the prior year, 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.
Adjusting to remove the impact of rent relief, uncollectible lease revenue as a percentage of Same Store Residential rental revenue decreased to 3.4% in the year ended December 31, 2022 from 3.7% in the year ended December 31, 2021. We recognized $36,778,000 and $31,823,000 from government rent relief programs during the years ended December 31, 2022 and 2021, respectively.
Adjusting to remove the impact of rent relief, uncollectible lease revenue as a percentage of Same Store Residential rental revenue decreased to 2.4% in the year ended December 31, 2023 from 3.7% in the year ended December 31, 2022.
We generally employ joint ventures to mitigate asset concentration or market risk and secondarily 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.
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.
As of January 31, 2023, we had $705,961,000 remaining authorized for issuance under this program.
During 2023 and through January 31, 2024, we did not have any sales under this program. As of January 31, 2024, we had $705,961,000 remaining authorized for issuance under this program.
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 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.
Rental and other income increased $295,347,000, or 12.9%, in 2022 compared to the prior year primarily due to the increased rental revenue from our stabilized wholly-owned communities, discussed below. Consolidated Communities—The weighted average number of occupied apartment homes for consolidated communities increased to 77,319 apartment homes for 2022, as compared to 75,744 homes for 2021.
Rental and other income increased $173,074,000, or 6.7%, in 2023 compared to the prior year primarily due to the increased rental revenue from our Same Store communities, discussed below. Consolidated Communities —The weighted average number of occupied apartment homes for consolidated communities increased to 77,667 apartment homes for 2023, compared to 77,319 homes for 2022.
Expensed transaction, development and other pursuit costs, net of recoveries, increased $13,334,000 in 2022 as compared to the prior year. The amount for 2022 includes charges of $10,073,000 primarily related to development opportunities in the Pacific Northwest and Southern California that we determined are no longer probable.
Expensed transaction, development and other pursuit costs, net of recoveries, increased $16,914,000 in 2023 compared to the prior year. The amount for 2023 includes write-offs of $27,455,000 related to seven Development Rights that we determined are no longer probable. The amount for 2022 includes write-offs of $10,073,000 related to three development opportunities that we determined are no longer probable.
As of January 31, 2023, we have funded $34,046,000 of these commitments. See Note 5, "Investments," of the Consolidated Financial Statements included elsewhere in this report. You should carefully review Part I, Item 1A. "Risk Factors" of this Form 10-K for a discussion of the risks associated with our investment activity.
See Note 5, “Investments,” of the Consolidated Financial Statements included elsewhere in this report. You should carefully review Part I, Item 1A. “Risk Factors” of this Form 10-K for a discussion of the risks associated with our investment activity.
Increases in inflation can result in an increase in our operating costs, including utilities and payroll, both at our communities and at the corporate level. Substantially all of our apartment leases are for a term of one year or less.
Increases in inflation can result in an increase in our operating costs both at our communities and at the corporate level. Substantially all of our apartment leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases.
FFO and Core FFO also do not represent 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. Additionally, it is not necessarily indicative of cash available to fund cash needs.
(7) Amounts are primarily for the recognition of taxes associated with The Park Loggia dispositions. FFO and Core FFO also do not represent 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.
Vacancy loss is determined by valuing vacant units at current market rents. 38 Table of Contents The following table details the increase in Same Store Residential rental revenue by component for the year ended December 31, 2022, compared to the prior year: For the year ended December 31, 2022 Residential rental revenue Lease rates 7.8 % Concessions and other discounts 1.9 % Economic Occupancy 0.1 % Other rental revenue 1.0 % Uncollectible lease revenue (excluding rent relief) (0.1) % Rent relief 0.2 % Total Residential rental revenue 10.9 % The increase for Same Store Residential rental revenue for the year ended December 31, 2022, compared to the prior year, was impacted by (i) uncollectible lease revenue, net of amounts received from government rent relief programs and (ii) concessions.
The following table details the increase in Same Store Residential rental revenue by component for the year ended December 31, 2023, compared to the prior year: For the year ended December 31, 2023 Residential rental revenue Lease rates 5.4 % Concessions and other discounts 0.4 % Economic Occupancy (0.3) % Other rental revenue 0.9 % Uncollectible lease revenue (excluding rent relief) 1.2 % Rent relief (1.3) % Total Residential rental revenue 6.3 % The increase for Same Store Residential rental revenue for the year ended December 31, 2023, as compared to the prior year was not significantly impacted by uncollectible lease revenue, inclusive of amounts received from government rent relief programs.
For the year ended December 31, 2022 2021 Net income attributable to common stockholders $ 1,136,775 $ 1,004,299 Depreciation - real estate assets, including joint venture adjustments 810,611 753,755 Distributions to noncontrolling interests 48 48 Gain on sale of unconsolidated entities holding previously depreciated real estate (38,144) (23,305) Gain on sale of previously depreciated real estate (555,558) (602,235) Casualty loss on real estate — 3,119 FFO attributable to common stockholders $ 1,353,732 $ 1,135,681 Adjusting items: Unconsolidated entity gains, net (1) (8,355) (14,870) Joint venture promote (2) (4,690) — Structured Investment Program loan reserve (3) 1,632 — Loss on extinguishment of consolidated debt 1,646 17,787 Gain on interest rate contract (229) (2,654) Advocacy contributions 634 59 Executive transition compensation costs 1,631 3,010 Severance related costs 1,097 313 Expensed transaction, development and other pursuit costs, net of recoveries (4) 13,288 1,363 Gain on for-sale condominiums (5) (2,217) (3,110) For-sale condominium marketing, operating and administrative costs (5) 2,129 4,087 For-sale condominium imputed carry cost (6) 2,306 7,031 Gain on other real estate transactions, net (5,039) (2,097) Legal settlements (2,212) 1,139 Income tax expense (7) 14,646 5,733 Core FFO attributable to common stockholders $ 1,369,999 $ 1,153,472 Weighted average common shares outstanding - diluted 139,975,087 139,717,399 EPS per common share - diluted $ 8.12 $ 7.19 FFO per common share - diluted $ 9.67 $ 8.13 Core FFO per common share - diluted $ 9.79 $ 8.26 _________________________________ (1) Amounts consist primarily of net unrealized gains on technology investments.
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 for the years ended December 31, 2023 and 2022 (dollars in thousands, except per share amounts). 40 Table of Contents For the year ended December 31, 2023 2022 Net income attributable to common stockholders $ 928,825 $ 1,136,775 Depreciation - real estate assets, including joint venture adjustments 811,717 810,611 Distributions to noncontrolling interests 25 48 Gain on sale of unconsolidated entities holding previously depreciated real estate — (38,144) Gain on sale of previously depreciated real estate (287,424) (555,558) Casualty loss on real estate 9,118 — FFO attributable to common stockholders $ 1,462,261 $ 1,353,732 Adjusting items: Unconsolidated entity gains, net (1) (4,161) (8,355) Joint venture promote (2) (1,519) (4,690) Structured Investment Program loan reserve (3) 1,186 1,632 Loss on extinguishment of consolidated debt 150 1,646 Hedge accounting activity 566 (229) Advocacy contributions 1,625 634 Executive transition compensation costs 1,244 1,631 Severance related costs 2,625 1,097 Expensed transaction, development and other pursuit costs, net of recoveries (4) 30,583 13,288 Other real estate activity (174) (5,127) For-sale condominium imputed carry cost (5) 602 2,306 Legal settlements and costs (6) 457 (2,212) Income tax expense (7) 10,153 14,646 Core FFO attributable to common stockholders $ 1,505,598 $ 1,369,999 Weighted average common shares outstanding - diluted 141,643,788 139,975,087 Earnings per common share - diluted $ 6.56 $ 8.12 FFO per common share - diluted $ 10.32 $ 9.67 Core FFO per common share - diluted $ 10.63 $ 9.79 _________________________________ (1) Amounts consist primarily of net unrealized gains on technology investments.
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 January 31, 2023, we did not have any amounts outstanding under the Commercial Paper Program.
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 January 31, 2024, we had $20,000,000 outstanding under the Commercial Paper Program at a weighted average contractual interest rate of 5.45%.
This category includes interest costs offset by capitalized interest pertaining to development and redevelopment activity, amortization of premium/discount on debt, interest income, any mark to market impact from derivatives not in qualifying hedge relationships and the recognition of the GAAP required estimate of future credit losses for the SIP.
Interest expense, net decreased $24,082,000, or 10.5%, in 2023 compared to the prior year. 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.
During the year ended December 31, 2022, we recognized income of $4,690,000 for the promoted interest, which is reported as a component of income from investments in unconsolidated entities on the accompanying Consolidated Statements of Comprehensive Income. • Arts District Joint Venture was formed to develop, own, and operate AVA Arts District, an apartment community located in Los Angeles, CA, which is currently under construction and expected to contain 475 apartment homes and 56,000 square feet of commercial space when completed.
Fund. • Arts District Joint Venture was formed to develop, own, and operate AVA Arts District, an apartment community located in Los Angeles, CA, which is currently under construction and expected to contain 475 apartment homes and 56,000 square feet of commercial space when completed. We have a 25% ownership interest in the venture.
In addition, inflation could cause our construction costs and cost of other capitalized expenditures to increase, impacting the expected economic return of, and expected operating results for, current and planned development activity.
Short-term leases generally reduce our risk from the adverse effect of inflation, although these leases also permit residents to leave at the end of their lease term. In addition, inflation could cause our construction costs and cost of other capitalized expenditures to increase, impacting the expected economic return of, and expected operating results for, current and planned development activity.
Under the terms of the Commercial Paper Program, we may issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year.
Commercial Paper Program We have a Commercial Paper Program with the maximum aggregate face or principal amount outstanding at any one time not to exceed $500,000,000. Under the terms of the Commercial Paper Program, we may issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year.
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. Investments We invest in consolidated real estate entities, unconsolidated investments in real estate ventures and direct and indirect investments in property technology and environmentally focused companies through investment management funds.
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.
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, for debt outstanding at December 31, 2022 and 2021 (dollars in thousands).
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. 44 Table of Contents 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, for debt outstanding at December 31, 2023 and 2022 (dollars in thousands).
The loss of $17,787,000 in 2021 was due to the repayments of unsecured debt. Depreciation expense increased $56,382,000, or 7.4%, in 2022 as compared to the prior year, primarily due to the addition of newly developed and acquired apartment communities, partially offset by dispositions.
Depreciation expense increased $1,987,000, or 0.2%, in 2023 compared to the prior year, primarily due to the addition of newly developed and acquired apartment communities, partially offset by dispositions.
The increase was due to an increase in Residential rental revenue of $218,692,000, or 10.9%, partially offset by an increase in Residential property operating expenses of $39,015,000, or 6.0%, over 2021.
The increase was due to an increase in Same Store Residential rental revenue of $149,495,000, or 6.3%, partially offset by an increase in Same Store Residential property operating expenses of $48,752,000, or 6.6%, over 2022.
There is also an annual facility commitment fee of 0.125% of the borrowing capacity under the facility, which can vary from 0.10% to 0.30% based upon the rating of our unsecured and unsubordinated long-term indebtedness.
The borrowing spread to SOFR can vary from SOFR plus 0.63% to SOFR plus 1.38% 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 facility, which can vary from 0.095% to 0.295% based upon the rating of our unsecured senior notes.
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.
Income tax expense of $10,153,000 and $14,646,000 for the years ended December 31, 2023 and 2022, respectively, was primarily related to dispositions at The Park Loggia. 39 Table of Contents 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.
Continuous Equity Offering Program In May 2019, we commenced CEP V under which 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.
These provisions in our secured borrowings are generally consistent with other similar types of debt instruments issued during the same time period in which our borrowings were secured. 43 Table of Contents 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.
These amounts were partially offset by an increase in depreciation expense and decrease in gains related to real estate sales in the current year. Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential revenue ("Residential"), for the year ended December 31, 2022 was $1,540,390,000, an increase of $179,941,000, or 13.2%, over the prior year.
Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential revenue (“Residential”), for the year ended December 31, 2023 was $1,732,422,000, an increase of $100,738,000, or 6.2%, over the prior year.
Reconciliations of NOI and Residential NOI for the years ended December 31, 2022 and 2021 to net income for each year are as follows (dollars in thousands): For the year ended December 31, 2022 2021 Net income $ 1,136,438 $ 1,004,356 Property management and other indirect operating expenses, net of corporate income 114,200 98,665 Expensed transaction, development and other pursuit costs, net of recoveries 16,565 3,231 Interest expense, net 230,074 220,415 Loss on extinguishment of debt, net 1,646 17,787 General and administrative expense 74,064 69,611 Income from investments in unconsolidated entities (53,394) (38,585) Depreciation expense 814,978 758,596 Income tax expense 14,646 5,733 Casualty loss — 3,119 Gain on sale of communities (555,558) (602,235) Gain on other real estate transactions, net (5,039) (2,097) Net for-sale condominium activity (88) 977 Net operating income from real estate assets sold or held for sale (22,746) (61,105) NOI 1,765,786 1,478,468 Commercial NOI (1) (36,144) (25,326) Residential NOI $ 1,729,642 $ 1,453,142 _________________________ (1) Represents results attributable to the commercial and other non-residential operations at our communities ("Commercial").
Reconciliations of NOI and Residential NOI for the years ended December 31, 2023 and 2022 to net income for each year are as follows (dollars in thousands): 36 Table of Contents For the year ended December 31, 2023 2022 Net income $ 928,438 $ 1,136,438 Property management and other indirect operating expenses, net of corporate income 121,704 114,200 Expensed transaction, development and other pursuit costs, net of recoveries 33,479 16,565 Interest expense, net 205,992 230,074 Loss on extinguishment of debt, net 150 1,646 General and administrative expense 76,534 74,064 Income from unconsolidated investments (13,454) (53,394) Depreciation expense 816,965 814,978 Income tax expense 10,153 14,646 Casualty loss 9,118 — Gain on sale of communities (287,424) (555,558) Other real estate activity (174) (5,127) Net operating income from real estate assets sold or held for sale (14,733) (46,678) NOI 1,886,748 1,741,854 Commercial NOI (1) (33,911) (35,652) Residential NOI $ 1,852,837 $ 1,706,202 _________________________ (1) Represents results attributable to the commercial and other non-residential operations at our communities (“Commercial”).
Income from investments in unconsolidated entities increased $14,809,000 in 2022 as compared to the prior year, primarily due to the gain from the sale of the final three communities in the U.S. Fund and includes the recognition of $4,690,000 for the promoted interest associated with the final U.S. Fund dispositions.
Income from unconsolidated investments decreased $39,940,000 in 2023 compared to the prior year, primarily due to prior year gains from the sale of the final three communities in the U.S. Fund and related promoted interest, coupled with unrealized gains on property technology investments. Gain on sale of communities decreased in 2023 compared to the prior year.
The increase in 2022 is primarily due to an increase in variable rates on unsecured and secured indebtedness, partially offset by an increase in capitalized interest.
The decrease in 2023 was primarily due to an increase in interest income due to higher cash amounts invested and higher interest rates coupled with increased capitalized interest, partially offset by the increase in rates on variable rate indebtedness.
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 leased rates and vacant homes at market rents.
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.

… 96 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed6 unchanged
Biggest changeDuring the year ended December 31, 2022, in connection with the issuance of our $350,000,000 unsecured notes due 2033 in November 2022, we terminated $150,000,000 of forward interest swap agreements designated as cash flow hedges of the interest rate variability on the issuance of unsecured notes, receiving a net payment of $26,869,000.
Biggest changeDuring the year ended December 31, 2023, in connection with the issuance of our $400,000,000 unsecured notes in December 2023 maturing in 2033, we terminated $250,000,000 of forward interest rate swap agreements designated as cash flow hedges of the interest rate variability on the issuance of unsecured notes, receiving payments of $8,331,000 which will be recognized over the life of the unsecured notes as a reduction in the effective interest rate.
Because the counterparties providing the interest rate cap and swap agreements are major financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group, we do not believe there is exposure at this time to a default by a counterparty provider.
Because the counterparties providing the interest rate cap and swap agreements are major financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group or equivalent, we do not believe there is exposure at this time to a default by a counterparty provider.
In addition, we have interest rate caps that serve to effectively limit the amount of interest rate expense we would incur on a floating rate borrowing. Further discussion of the financial instruments impacted and our exposure is presented below.
In addition, we have interest rate caps that serve to effectively limit the amount of interest rate expense we would incur on our outstanding floating rate borrowings. Further discussion of the financial instruments impacted and our exposure is presented below.
As of December 31, 2022 and 2021, we had $607,150,000 and $714,150,000, respectively, in variable rate debt outstanding, with no amounts outstanding under our Credit Facility or Commercial Paper Program.
As of December 31, 2023 and 2022, we had $410,150,000 and $607,150,000, respectively, in variable rate debt outstanding, with no amounts outstanding under our Credit Facility or Commercial Paper Program.
If interest rates on the variable rate debt had been 100 basis points higher throughout 2022 and 2021, our annual interest incurred would have increased by approximately $6,850,000 and $7,716,000, respectively, based on balances outstanding during the applicable years.
If interest rates on the variable rate debt had been 100 basis points higher throughout 2023 and 2022, our annual interest incurred would have increased by approximately $5,428,000 and $6,850,000, respectively, based on balances outstanding during the applicable years.
If interest rates had been 100 basis points higher as of December 31, 2022, the fair value of this fixed rate debt would have decreased by approximately $463,553,000.
If interest rates had been 100 basis points higher as of December 31, 2023, the fair value of this fixed rate debt would have decreased by approximately $449,065,000.
Debt securities and notes payable (including amounts outstanding under our Credit Facility and Commercial Paper Program) with an aggregate principal amount outstanding of $8,377,827,000 at December 31, 2022 had an estimated aggregate fair value of $7,207,272,000 at December 31, 2022. Contractual fixed rate debt represented $6,887,811,000 of the fair value at December 31, 2022.
As of December 31, 2023, we had outstanding debt of $8,044,042,000 with an estimated aggregate fair value of $7,360,944,000 at December 31, 2023. Contractual fixed rate debt represented $7,011,605,000 of the fair value at December 31, 2023.

Other AVB 10-K year-over-year comparisons