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| AvalonBay Communities Announces Disposition Activity |
ALEXANDRIA, Va., May 8 /PRNewswire-FirstCall/ -- AvalonBay Communities, Inc. (NYSE: AVB; PCX) announced today the sale of Avalon Huntington Beach, a 400 apartment home community, located in Orange County, California. The community, which was originally constructed in 1972 and acquired by the Company in 1997, was sold on May 1, 2003 for a gross sales price of $58.2 million. The Company previously announced the sale of Avalon Westside Terrace, a 363 apartment home community, located in Los Angeles, California during the first quarter 2003. Avalon Westside Terrace, which was originally constructed in 1966 and acquired by the Company in 1997, was sold for a gross sales price of $46.7 million. Financial information regarding the sales of these communities is set forth in the following table ($ in millions): Sales Net GAAP Depreciation Economic Price Proceeds Gain and Other Gain Avalon Huntington Beach $ 58.2 $ 57.6 $ 26.1 $ (5.7) $ 20.4 Avalon Westside Terrace 46.7 46.4 14.1 (7.7) 6.4 YTD Total $104.9 $104.0 $ 40.2 $(13.4) $ 26.8 These two communities were sold at a weighted average initial year market capitalization rate of 6.3%. The Company achieved a Gross Unleveraged Internal Rate of Return ("Gross IRR") of approximately 13.8% on the capital invested during the period of ownership. The estimated aggregate net proceeds of approximately $104.0 million will be used to repay the Company's unsecured credit facility, fund current development or redevelopment communities and/or redeem debt or equity securities. Definitions and Notes GAAP Gain represents the gain on sale in accordance with GAAP. The GAAP Gain for Avalon Huntington Beach is estimated based on the final settlement statement. Economic Gain is calculated as the gain on sale in accordance with GAAP, less accumulated depreciation through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers the Economic Gain to be an appropriate supplemental measure to the GAAP Gain on Sale because it helps investors understand the relationship between the cash proceeds from a sale and the cash invested in the community. The Economic Gain for Avalon Huntington Beach is estimated based on the final settlement statement. Initial Year Market Capitalization Rate, as determined within this release related to Disposed Communities, is defined as Projected EBITDA of a single community for the first 12 months following the date of the buyer's valuation, less estimates for capital expenditures ($225 per apartment), divided by the gross sales price for the community. Projected EBITDA, as referred to above, represents management's estimate, as of the date of disposition, of projected rental revenue minus projected operating expenses before interest, income taxes (if any), depreciation, amortization and extraordinary items. For this purpose, management's projection of operating expenses for the community includes a management fee (3.5%). The Initial Year Market Capitalization Rate, which may be determined in a different manner by others, is a measure frequently used in the real estate industry when determining the appropriate purchase price for a property or estimating the value for the property. Buyers may assign different Initial Year Market Capitalization Rates to different communities when determining the appropriate value because they (i) may project different rates of change in operating expenses, including capital expenditure estimates and (ii) may project different rates of change in future rental revenue due to different estimates for changes in rent and occupancy levels. The weighted average Initial Year Market Capitalization Rate is weighted based on the gross sales price of each community. Gross IRR refers to the Internal Rate of Return calculated considering the timing and amounts of (i) total revenue during the period owned by the Company and (ii) the gross sales price net of selling costs, offset by (iii) the undepreciated capital cost of the communities at the time of sale and (iv) total direct operating expenses during the period owned by the Company. Each of the items (i), (ii), (iii) and (iv) are calculated in accordance with GAAP. The calculation of Gross IRR does not include an adjustment for the Company's general and administrative expense, interest expense, or property management and other indirect operating expenses. Therefore, Gross IRR is not a substitute for net income as a measure of our performance. Management believes that the Gross IRR achieved during the period a community is owned by the Company is useful because it is one indication of the gross value created by the Company's acquisition, development or redevelopment, management and sale of the community, before the impact of indirect expenses and Company overhead. The Gross IRR achieved on the communities cited in this release should not be viewed as an indication of the gross value created with respect to other communities owned by the Company, and the Company does not represent that it will achieve similar Gross IRRs upon the disposition of other communities. About AvalonBay Communities, Inc. AvalonBay Communities, Inc., headquartered in Alexandria, Virginia, currently owns or holds an ownership interest in 146 apartment communities containing 42,845 apartment homes in eleven states and the District of Columbia, of which ten communities are under construction and two are under reconstruction. AvalonBay is in the business of developing, redeveloping, acquiring and managing luxury apartment communities in high barrier-to-entry markets of the United States. More information on AvalonBay may be found on AvalonBay's Web Site at http://www.avalonbay.com. All Rights ReservedSOURCE AvalonBay Communities, Inc.
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CONTACT:
Bryce Blair, Chairman, Chief Executive
Officer and President, +1-703-317-4652, or Timothy J. Naughton,
Chief Operating Officer, +1-703-317-4620, both of AvalonBay
Communities, Inc.
