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| AvalonBay Communities Announces Disposition Activity |
ALEXANDRIA, Va., Aug. 21 /PRNewswire-FirstCall/ -- AvalonBay Communities, Inc. (NYSE: AVB; PCX) announced today the disposition of Amberway, a 272 apartment home community located in Orange County, California. Financial information regarding the sale of Amberway, is set forth in the following table ($ in millions): Net GAAP Economic Sales Price Proceeds Gain Depreciation Gain Amberway $ 33.5 $ 33.0 $ 13.6 $ (2.2) $ 11.4 The Company achieved a Gross Unleveraged Internal Rate of Return ("Unleveraged IRR") of approximately 16.6% on the capital invested, in the aggregate, during the period of ownership of Amberway. The net proceeds of approximately $33.0 million were used to repay a portion of amounts outstanding on the Company's unsecured credit facility. Year-to-date, AvalonBay has sold eight communities at a gross sales price, in the aggregate, of $265.6 million at a weighted average initial year market capitalization rate of 6.6% and a weighted average Unleveraged IRR of 13.3%. Definitions and Notes GAAP Gain represents the gain on sale in accordance with GAAP. The GAAP Gain 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. Management generally considers Economic Gain to be an appropriate supplemental measure to gain on sale in accordance with GAAP because it helps investors understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain is estimated based on the final settlement statement. Initial Year Market Capitalization Rate is defined by the Company as Projected NOI of a single community for the first 12 months following the date of the buyer's valuation, less estimates for non-routine allowance of approximately $250 per apartment, divided by the gross sales price for the community. Projected NOI, as referred to above, represents management's estimate 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 of approximately 3.0%. 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. Unleveraged IRR on sold communities refers to the Internal Rate of Return calculated by the Company 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 Unleveraged IRR does not include an adjustment for the Company's general and administrative expense, interest expense, or corporate- level property management and other indirect operating expenses. Therefore, Unleveraged IRR is not a substitute for net income as a measure of our performance. Management believes that the Unleveraged 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 Unleveraged IRR achieved on the communities as 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 Unleveraged 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 141 apartment communities containing 41,875 apartment homes in ten 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 .SOURCE 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.
