AvalonBay Communities, Inc. Announces Third Quarter 2009 Operating Results

ALEXANDRIA, Va., Oct 28, 2009 (BUSINESS WIRE) --
AVB | Quote | Chart | News | PowerRating -- AvalonBay Communities, Inc. (NYSE:AVB) reported today that Net Income
Attributable to Common Stockholders ("Net Income") for the quarter ended
September 30, 2009 was $58,154,000. This resulted in Earnings per Share
-- diluted ("EPS") of $0.72 for the quarter ended September 30, 2009,
compared to EPS of $2.98 for the comparable period of 2008, a decrease
of 75.8%. For the nine months ended September 30, 2009, EPS was $1.54
compared to $5.20 for the comparable period of 2008, a per share
decrease of 70.4%. These decreases are primarily attributable to the
reduced number of communities sold and amount of gains related to these
sales in 2009 as compared with the prior year periods. Year to date 2009
results also include impairment and other charges associated with the
Company's reduction in planned development activity recognized in the
second quarter of 2009.

Funds from Operations attributable to common stockholders - diluted
("FFO") for the quarter ended September 30, 2009 decreased 14.8% to
$1.09 per share from $1.28 per share for the comparable period of 2008.
FFO per share for the nine months ended September 30, 2009 decreased by
14.0% to $3.25 from $3.78 for the comparable period of 2008.

FFO and Net Income per share amounts for the nine months ended September
30, 2009, and for the three and nine months ended September 30, 2008
include certain non-routine items that are detailed in Attachment 14.

Adjusting for these non-routine items, FFO per share for the three and
nine months ended September 30, 2009 would have decreased by 16.2% and
9.0%, respectively from the prior year periods.

There were no significant non-routine items in the current quarter.

Operating Results for the Quarter Ended September 30, 2009 Compared
to the Prior Year Period

For the Company, including discontinued operations, total revenue
increased by $759,000, or 0.3% to $224,192,000. For Established
Communities, rental revenue decreased 4.8% due to a decrease in
Economic Occupancy of 0.2% and a decrease in Average Rental Rates of
4.6%. As a result, total revenue for Established Communities decreased
$7,546,000 to $153,223,000. Operating expenses for Established
Communities increased $1,680,000, or 3.2% to $54,318,000. Accordingly,
Net Operating Income ("NOI") for Established Communities decreased by
$9,226,000, or 8.5% to $98,905,000.

The following table reflects the percentage changes in rental revenue,
operating expenses and NOI for Established Communities from the third
quarter of 2008 to the third quarter of 2009:

3Q 09 Compared to 3Q 08
                      Rental    Operating            % of
                      Revenue   Expenses   NOI       NOI (1)
New England           (4.7 %)   1.5  %     (8.0  %)  20.6  %
Metro NY/NJ           (5.7 %)   4.0  %     (9.9  %)  28.1  %
Mid-Atlantic/Midwest  (0.7 %)   0.9  %     (1.7  %)  16.2  %
Pacific NW            (7.0 %)   (1.9 %)    (9.0  %)  4.6   %
No. California        (7.0 %)   6.5  %     (11.6 %)  19.6  %
So. California        (6.1 %)   9.0  %     (12.3 %)  10.9  %
Total                 (4.8 %)   3.2  %     (8.5  %)  100.0 %

(1)  Total represents each region's % of total NOI from the Company,
     including discontinued operations.

Operating Results for the Nine Months Ended September 30, 2009
Compared to the Prior Year Period

For the Company, including discontinued operations, total revenue
increased by $4,579,000, or 0.7% to $666,015,000. For Established
Communities, rental revenue decreased 2.8% due to a decrease in
Economic Occupancy of 0.7% and a decrease in Average Rental Rates of
2.1%. As a result, total revenue for Established Communities decreased
$13,092,000 to $465,646,000. Operating expenses for Established
Communities increased $4,521,000, or 3.0% to $157,263,000. Accordingly,
NOI for Established Communities decreased by $17,612,000, or 5.4% to
$308,383,000.

The following table reflects the percentage changes in rental revenue,
operating expenses and NOI for Established Communities for the nine
months ended September 30, 2009 as compared to the nine months ended
September 30, 2008:

YTD 2009 Compared to YTD 2008
                      Rental    Operating           % of
                      Revenue   Expenses   NOI      NOI (1)
New England           (3.4 %)   2.3  %     (6.4 %)  20.0  %
Metro NY/NJ           (3.5 %)   2.1  %     (5.9 %)  27.5  %
Mid-Atlantic/Midwest  (0.3 %)   2.7  %     (2.1 %)  16.5  %
Pacific NW            (3.1 %)   2.1  %     (5.2 %)  4.7   %
No. California        (2.8 %)   4.1  %     (5.1 %)  20.4  %
So. California        (4.4 %)   6.8  %     (8.8 %)  10.9  %
Total                 (2.8 %)   3.0  %     (5.4 %)  100.0 %

(1)  Total represents each region's % of total NOI from the Company,
     including discontinued operations.

Cash concessions are recognized in accordance with generally
accepted accounting principles ("GAAP") and are amortized over the
approximate lease term, which is generally one year. The following table
reflects the percentage changes in rental revenue with concessions on a
GAAP basis and Rental Revenue with Concessions on a Cash Basis for our
Established Communities:

                             3Q 09 vs 3Q 08   YTD 09
                                              vs YTD 08
Rental Revenue Change with   (4.8    %)       (2.8 %)
Concessions on a GAAP Basis
Rental Revenue Change with
Concessions on a Cash Basis  (4.1    %)       (2.5 %)

Development Activity

The Company completed the development of three communities in the third
quarter of 2009: Avalon Anaheim Stadium located in Anaheim, CA, Avalon
Charles Pond, located in Coram, NY, and Avalon Northborough I, located
in Northborough, MA. These communities contain an aggregate 614
apartment homes and were completed for an aggregate Total Capital Cost
of $173,000,000.

At September 30, 2009, the Company had nine communities under
construction with a Total Capital Cost of $1,218,900,000, down from 15
communities with a Total Capital Cost of $1,608,500,000 at September 30,
2008. The Company has not started any new development activity through
September 30, 2009.

During the fourth quarter of 2009, the Company expects to commence the
development of two communities containing an aggregate 399 apartment
homes, with an expected Total Capital Cost of $66,400,000. The Company
expects to complete the development of four communities during the
fourth quarter of 2009. The anticipated completions contain an aggregate
of 1,382 apartment homes and are expected to be completed for a Total
Capital Cost of $470,500,000.

At December 31, 2009, the Company anticipates that it will have seven
communities under development, with a Total Capital Cost of
$814,800,000, down from the 14 communities with a Total Capital Cost of
$1,583,800,000 at December 31, 2008.

Redevelopment Activity

During the third quarter of 2009, the Company completed the
redevelopment of Avalon Symphony Woods I and II, located in Columbia,
MD. These two communities contain an aggregate of 392 apartment homes
and redevelopment was completed for a Total Capital Cost of $10,100,000,
excluding costs incurred prior to redevelopment.

During the third quarter of 2009, the Company commenced the
redevelopment of one community: Avalon at Cedar Ridge located in Daly
City, CA. This community contains an aggregate of 195 apartment homes
and will be redeveloped for an estimated Total Capital Cost of
$6,600,000, excluding costs incurred prior to redevelopment.

Disposition Activity

During the third quarter of 2009, the Company sold two communities:
Avalon at River Oaks, located in San Jose, CA and Avalon at Faxon Park,
located in Quincy, MA. These two communities contain an aggregate of 397
apartment homes and were sold for an aggregate sales price of
$69,500,000. These dispositions resulted in a gain in accordance with
GAAP of $26,670,000 and an Economic Gain of approximately $22,670,000.
The weighted average Initial Year Market Cap Rate for these two
communities was 6.8% and the Unleveraged IRR over a 12 year holding
period was 14.6%.

In October 2009, the Company sold Avalon Parkside, a 192 apartment home
community, located in Sunnyvale, CA for $43,800,000.

Investment Management Fund Activity

The Company currently has investments in and serves as the manager for
two private, discretionary investment management vehicles. There was no
acquisition or disposition activity by either investment fund during the
current quarter.

Financing, Liquidity and Balance Sheet Statistics

At September 30, 2009, the Company had no amounts outstanding under its
$1,000,000,000 unsecured credit facility and the Company had
$777,456,000 in unrestricted cash and cash in escrow. The cash in escrow
is available for development activity and includes $93,440,000 in bond
proceeds related to an existing Development Right that the Company
expects to develop in the future. Unencumbered NOI as a percentage of
total NOI generated by real estate assets for the nine months ended
September 30, 2009 was 64.8%. Interest Coverage for the third quarter of
2009 was 3.1 times.

New Financing Activity

In August 2009, the Company commenced a continuous equity offering
program, under which the Company can issue up to $400 million common
stock until September 2012. The Company may sell common stock in amounts
and at times to be determined by the Company. During the third quarter
of 2009, the Company sold 1,467,000 Shares at an average price of
approximately $70 per share, for gross proceeds of $102,000,000.

In September 2009, the Company issued $500,000,000 of unsecured notes
under its existing shelf registration statement. The offering consisted
of two separate $250,000,000 tranches with effective interest rates of
5.72% and 6.12%, maturing in 2017 and 2020, respectively.

Debt Repayment Activity

In August 2009, the Company repaid $102,562,000 of unsecured notes with
an annual interest rate of 7.50% pursuant to their scheduled maturity.

Also in August 2009, the Company repaid $112,200,000 in unsecured debt,
representing the second tranche of its $330,000,000 unsecured variable
rate term loan (the "Term Loan"), in advance of the scheduled maturity
in January 2010.

In October 2009, the Company completed a cash tender offer commenced in
September 2009. The Company purchased $300,000,000 principal amount of
its unsecured notes at a weighted average purchase price of 108% of par.
Also in October 2009, the Company purchased an additional $10,100,000
principal amount of its unsecured notes at a price of 107% of par. The
Company will recognize a charge for the purchase premium and the
accelerated recognition of certain deferred issuance costs of
approximately $26,000,000 in the fourth quarter of 2009. All of the
notes purchased by the Company were cancelled.

Also in October 2009, the Company repaid the final $112,200,000
outstanding of its Term Loan in advance of the scheduled maturity in
January 2011.

Fourth Quarter and Full Year 2009 Financial Outlook

The Company anticipates that revenues from Established Communities will
decline by 5.75% to 6.25%, and NOI from Established Communities will
decline by 11.0% to 12.0% for the fourth quarter 2009 as compared to the
prior year period. For the full year 2009, Established Community revenue
and NOI are anticipated to decline 3.50% to 3.75% and 6.50% to 7.50%,
respectively. These ranges are consistent with the previous financial
outlook provided in July 2009.

For the fourth quarter of 2009, the Company expects EPS to be in the
range of $0.53 to $0.57. The Company expects EPS for the full year 2009
to be in the range of $2.07 to $2.11.

The Company expects Projected FFO per share to be in the range of $0.61
to $0.65 for the fourth quarter of 2009 and Projected FFO per share for
the full year 2009 to be in the range of $3.86 to $3.90.

The Company's expected fourth quarter and full year 2009 results include
approximately $26,000,000 related to the tender offer the Company
completed in October 2009. The Company's fourth quarter and full year
2008 and 2009 results also include the non-routine items detailed in
Attachment 14. Adjusting for these non-routine items in both years, the
Company expects fourth quarter and full year 2009 Projected FFO per
share to decline by 20% and 12%, respectively, from the prior year
periods.

An analysis of the revised full year 2009 financial outlook compared to
financial outlook provided in July 2009 follows:

Full Year 2009 Outlook
As of September 2009
Changes From July 2009
                                               Per
                                               Share
FFO (July 2009 Outlook)                        $   4.22
NOI & other income                                 0.05
Interest expense, new unsecured debt               (0.04 )
Impairments & abandoned pursuits                   (0.01 )
Gain / (loss) on medium term note repurchase       (0.33 )
Impact of shares issued during quarter             (0.01 )
FFO (September 2009 Outlook)                       3.88

Fourth Quarter 2009 Conference/Event Schedule

The Company expects to release its fourth quarter 2009 earnings on
February 3, 2010 after the market closes. The Company expects to hold a
conference call on February 4, 2010 at 1:00 PM EST to discuss the fourth
quarter and full year 2009 results.

The Company is tentatively scheduled to participate in the following
conferences during the fourth quarter of 2009:

4Q 2009 Conference Schedule
Event/Conference                     Date
NAREIT Annual Convention             Nov 11-13
Goldman Sachs Real Estate Symposium  Dec 4
Barclays Real Estate Conference      Dec 8
Wells Fargo Conference               Dec 9

Management may discuss the Company's current operating environment;
operating trends; development, redevelopment, disposition and
acquisition activity; financial outlook and other business and financial
matters affecting the Company. Details on each conference and access to
any related materials will be available beginning November 2, 2009 on
the Company's website at http://www.avalonbay.com/events.

Other Matters

The Company will hold a conference call on October 29, 2009 at 1:00 PM
EDT to review and answer questions about this release, its third quarter
results, the Attachments (described below) and related matters. To
participate on the call, dial 1-877-510-2397 domestically and
1-763-416-6924 internationally.

To hear a replay of the call, which will be available from October 29,
2009 at 3:00 PM EDT to November 29, 2009 at 11:59 PM EST, dial
1-800-642-1687 domestically and 1-706-645-9291 internationally, and use
Access Code: 33681043.

A webcast of the conference call will also be available at http://www.avalonbay.com/earnings,
and an on-line playback of the webcast will be available for at least 30
days following the call.

The Company produces Earnings Release Attachments (the "Attachments")
that provide detailed information regarding operating, development,
redevelopment, disposition and acquisition activity. These Attachments
are considered a part of this earnings release and are available in full
with this earnings release via the Company's website at http://www.avalonbay.com/earnings.
To receive future press releases via e-mail, please submit a request
through http://www.avalonbay.com/email.

About AvalonBay Communities, Inc.

As of September 30, 2009, the Company owned or held a direct or indirect
ownership interest in 172 apartment communities containing 50,114
apartment homes in ten states and the District of Columbia, of which
nine communities were under construction and six communities were under
reconstruction. The Company is an equity REIT in the business of
developing, redeveloping, acquiring and managing apartment communities
in high barrier to entry markets of the United States. More information
may be found on the Company's website at http://www.avalonbay.com.
For additional information, please contact John Christie, Senior
Director of Investor Relations and Research at 1-703-317-4747 or Thomas
J. Sargeant, Chief Financial Officer at 1-703-317-4635.

Forward-Looking Statements

This release, including its Attachments, contains forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. You can identify these forward-looking statements by
the Company's use of words such as "expects," "plans," "estimates,"
"projects," "intends," "believes," "outlook" and similar expressions
that do not relate to historical matters. Actual results may differ
materially from those expressed or implied by the forward-looking
statements as a result of risks and uncertainties, which include the
following: we may abandon development or redevelopment opportunities for
which we have already incurred costs; adverse capital and credit market
conditions may affect our access to various sources of capital and/or
cost of capital, which may affect our business activities, earnings and
common stock price, among other things; changes in local employment
conditions, demand for apartment homes, supply of competitive housing
products, and other economic conditions may result in lower than
expected occupancy and/or rental rates and adversely affect the
profitability of our communities; increases in costs of materials, labor
or other expenses may result in communities that we develop or redevelop
failing to achieve expected profitability; delays in completing
development, redevelopment and/or lease-up may result in increased
financing and construction costs and may delay and/or reduce the
profitability of a community; debt and/or equity financing for
development, redevelopment or acquisitions of communities may not be
available or may not be available on favorable terms; we may be unable
to obtain, or experience delays in obtaining, necessary governmental
permits and authorizations; increases in costs of materials, labor or
other expenses may result in communities that we develop or redevelop
failing to achieve expected profitability; or delays in completing
development, redevelopment and/or lease-up may result in increased
financing and construction costs and may delay and/or reduce the
profitability of a community. Additional discussions of risks and
uncertainties appear in the Company's filings with the Securities and
Exchange Commission, including the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 under the headings "Risk
Factors" and under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Forward-Looking
Statements" and in subsequent quarterly reports on Form 10-Q.

The Company does not undertake a duty to update forward-looking
statements, including its expected operating results for the fourth
quarter and full year 2009. The Company may, in its discretion, provide
information in future public announcements regarding its outlook that
may be of interest to the investment community. The format and extent of
future outlooks may be different from the format and extent of the
information contained in this release.

Definitions and Reconciliations

Non-GAAP financial measures and other capitalized terms, as used in this
earnings release, are defined and further explained on Attachment 14,
"Definitions and Reconciliations of Non-GAAP Financial Measures and
Other Terms." Attachment 14 is included in the full earnings release
available at the Company's website at http://www.avalonbay.com/earnings.
This wire distribution includes only definitions and reconciliations of
the following Non-GAAP financial measures:

FFO is determined based on a
definition adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts ("NAREIT"). FFO is calculated by the
Company as Net Income or loss computed in accordance with GAAP, adjusted
for gains or losses on sales of previously depreciated operating
communities, extraordinary gains or losses (as defined by GAAP),
cumulative effect of a change in accounting principle and depreciation
of real estate assets, including adjustments for unconsolidated
partnerships and joint ventures. Management generally considers FFO to
be an appropriate supplemental measure of operating performance because,
by excluding gains or losses related to dispositions of previously
depreciated operating communities and excluding real estate depreciation
(which can vary among owners of identical assets in similar condition
based on historical cost accounting and useful life estimates), FFO can
help one compare the operating performance of a company's real estate
between periods or as compared to different companies. A reconciliation
of FFO to Net Income is as follows (dollars in thousands):

                                                                   Q3              Q3              YTD             YTD
                                                                   2009            2008            2009            2008
Net income attributable to the Company                             $ 58,154        $ 233,581       $ 123,253       $ 409,364
Dividends attributable to preferred stock                            --              (2,175     )    --              (6,525     )
Depreciation - real estate assets, including discontinued            56,239          51,263          163,891         151,307
operations and joint venture adjustments
Distributions to noncontrolling interests, including discontinued    14              57              52              171
operations
Gain on sale of unconsolidated entities holding previously           --              --              --              (3,483     )
depreciated real estate assets
Gain on sale of previously depreciated real estate assets            (26,670    )    (183,711   )    (26,670    )    (257,850   )
FFO attributable to common stockholders                            $ 87,737        $ 99,015        $ 260,526       $ 292,984
Average shares outstanding - diluted                                 80,609,277      77,580,847      80,170,093      77,516,222
Earnings per share - diluted                                       $ 0.72          $ 2.98          $ 1.54          $ 5.20
FFO per common share - diluted                                     $ 1.09          $ 1.28          $ 3.25          $ 3.78

Projected FFO, as provided within
this release in the Company's outlook, is calculated on a basis
consistent with historical FFO, and is therefore considered to be an
appropriate supplemental measure to projected net income from projected
operating performance. A reconciliation of the range provided for
Projected FFO per share (diluted) for the fourth quarter and full year
2009 to the range provided for Projected EPS (diluted) is as follows:

                                                    Low        High
                                                    range      range
Projected EPS (diluted) - Q4 09                     $ 0.53     $ 0.57
Projected depreciation (real estate related)          0.71       0.75
Projected gain on sale of operating communities       (0.63 )    (0.67 )
Projected FFO per share (diluted) - Q4 09           $ 0.61     $ 0.65
Projected EPS (diluted) - Full Year 2009            $ 2.07     $ 2.11
Projected depreciation (real estate related)          2.76       2.80
Projected gain on sale of operating communities       (0.97 )    (1.01 )
Projected FFO per share (diluted) - Full Year 2009  $ 3.86     $ 3.90

The Company's results for the nine months ended September 30, 2009, the
Company's outlook for the quarter and year ended December 31, 2009, and
the comparable prior year periods include the non-routine items outlined
in the following table:

Non-Routine Items
Decrease (Increase) in Net Income and FFO
(dollars in thousands)
                                             YTD                            Full Year           YTD                              Full Year
                                             Q3 08          Q4 08           2008                Q3 09           Q4 09 (1)        2009 (1)
Land impairments                             $  -           $ 57,899        $   57,899          $ 20,302        $    -           $   20,302
Abandoned pursuits (2)                          -             6,611             6,611             1,139              -               1,139
Severance and related costs                     -             3,400             3,400             2,000              -               2,000
Federal excise tax                              -             3,200             3,200             (485       )       2,900           2,415
Loss/(Gain) on medium term notes repurchase     -             (1,839     )      (1,839     )      (1,062     )       26,271          25,208
Gain on sale of land                            -             -                 -                 (241       )       -               (241       )
Promoted interest in joint venture              -             -                 -                 (3,894     )       -               (3,894     )
Legal settlement proceeds, net                  -             -                 -                 (1,100     )       -               (1,100     )
Preferred stock deferred offering expenses      -             3,566             3,566             -                  -               -
Fund II organizational costs                    1,209         -                 1,209             -                  -               -
Total non-routine items                      $  1,209       $ 72,837        $   74,046          $ 16,659        $    29,171      $   45,829
Weighted Average Dilutive
Shares Outstanding                              77,516,222    77,734,587        77,578,852        80,170,093         81,903,599      80,586,863

(1)  Amounts shown are projected results.
(2)  Abandoned pursuits includes costs expensed by the Company for
     individual pursuits in excess of $1,000 in a given quarter.

NOI is defined by the Company as
total property revenue less direct property operating expenses
(including property taxes), and excludes corporate-level income
(including management, development and other fees), corporate-level
property management and other indirect operating expenses, investments
and investment management expenses, expensed development and other
pursuit costs, net interest expense, general and administrative expense,
joint venture income, net income or expense attributable to
noncontrolling interests, depreciation expense, gain on sale of real
estate assets and income from discontinued operations. The Company
considers NOI to be an appropriate supplemental measure to net income of
operating performance of a community or communities because it helps
both investors and management to understand the core operations of a
community or communities prior to the allocation of corporate-level
property management overhead or general and administrative costs. This
is more reflective of the operating performance of a community, and
allows for an easier comparison of the operating performance of single
assets or groups of assets. In addition, because prospective buyers of
real estate have different overhead structures, with varying marginal
impact to overhead by acquiring real estate, NOI is considered by many
in the real estate industry to be a useful measure for determining the
value of a real estate asset or groups of assets.

A reconciliation of NOI (from continuing operations) to Net Income, as
well as a breakdown of NOI by operating segment, is as follows (dollars
in thousands):

                                                      Q3           Q3            YTD          YTD
                                                      2009         2008          2009         2008
Net income                                            $ 58,101     $ 232,886     $ 121,924    $ 408,880
Indirect operating expenses, net of corporate income    6,987        7,821         22,922       25,171
Investments and investment management expense           976          1,229         2,799        3,643
Expensed development and other pursuit costs            1,721        715           5,096        3,044
Interest expense, net                                   41,208       28,363        107,836      85,620
General and administrative expense                      5,750        9,318         18,388       26,821
Joint venture income                                    (190    )    (495     )    (4,139  )    (4,329   )
Depreciation expense                                    54,960       48,698        159,935      140,885
Impairment loss - land holdings                         --           --            20,302       --
Gain on sale of real estate assets                      (26,911 )    (183,711 )    (26,911 )    (257,850 )
Income from discontinued operations                     (1,132  )    (3,176   )    (3,998  )    (16,163  )
NOI from continuing operations                        $ 141,470    $ 141,648     $ 424,154    $ 415,722
Established:
New England                                           $ 19,993     $ 21,732      $ 60,986     $ 65,159
Metro NY/NJ                                             27,147       30,143        84,417       89,692
Mid-Atlantic/Midwest                                    19,713       20,060        60,914       62,203
Pacific NW                                              4,768        5,238         14,941       15,754
No. California                                          16,988       19,222        54,577       57,502
So. California                                          10,296       11,736        32,548       35,685
Total Established                                       98,905       108,131       308,383      325,995
Other Stabilized                                        21,185       19,794        61,296       46,087
Development/Redevelopment                               21,380       13,723        54,475       43,640
NOI from continuing operations                        $ 141,470    $ 141,648     $ 424,154    $ 415,722

NOI as reported by the Company does not include the operating results
from discontinued operations (i.e., assets sold during the period
January 1, 2008 through September 30, 2009). A reconciliation of NOI
from communities sold or classified as discontinued operations to net
income for these communities is as follows (dollars in thousands):

                                     Q3        Q3        YTD       YTD
                                     2009      2008      2009      2008
Income from discontinued operations  $  1,132  $  3,176  $  3,998  $  16,163
Interest expense, net                   --        237       --        1,314
Depreciation expense                    354       1,657     1,758     7,612
NOI from discontinued operations     $  1,486  $  5,070  $  5,756  $  25,089
NOI from assets sold                 $  758    $  4,239  $  3,379  $  22,617
NOI from assets held for sale           728       831       2,377     2,472
NOI from discontinued operations     $  1,486  $  5,070  $  5,756  $  25,089

Projected NOI, as used within this
release for certain development and redevelopment communities and in
calculating the Initial Year Market Cap Rate for dispositions,
represents management's estimate, as of the date of this release (or as
of the date of the buyer's valuation in the case of dispositions), of
projected stabilized rental revenue minus projected stabilized operating
expenses. For development and redevelopment communities, Projected NOI
is calculated based on the first year of Stabilized Operations, as
defined below, following the completion of construction. In calculating
the Initial Year Market Cap Rate, Projected NOI for dispositions is
calculated for the first twelve months following the date of the buyer's
valuation. Projected stabilized rental revenue represents management's
estimate of projected gross potential (based on leased rents for
occupied homes and market rents for vacant homes) minus projected
economic vacancy and adjusted for concessions. Projected stabilized
operating expenses do not include interest, income taxes (if any),
depreciation or amortization, or any allocation of corporate-level
property management overhead or general and administrative costs. The
weighted average Projected NOI as a percentage of Total Capital Cost is
weighted based on the Company's share of the Total Capital Cost of each
community, based on its percentage ownership.

Management believes that Projected NOI of the development and
redevelopment communities, on an aggregated weighted average basis,
assists investors in understanding management's estimate of the likely
impact on operations of the development and redevelopment communities
when the assets are complete and achieve stabilized occupancy (before
allocation of any corporate-level property management overhead, general
and administrative costs or interest expense). However, in this release
the Company has not given a projection of NOI on a company-wide basis.
Given the different dates and fiscal years for which NOI is projected
for these communities, the projected allocation of corporate-level
property management overhead, general and administrative costs and
interest expense to communities under development or redevelopment is
complex, impractical to develop, and may not be meaningful. Projected
NOI of these communities is not a projection of the Company's overall
financial performance or cash flow. There can be no assurance that the
communities under development or redevelopment will achieve the
Projected NOI as described in this release.

Rental Revenue with Concessions on a Cash
Basis is considered by the Company to be a supplemental measure
to rental revenue in conformity with GAAP to help investors evaluate the
impact of both current and historical concessions on GAAP based rental
revenue and to more readily enable comparisons to revenue as reported by
other companies. In addition, rental revenue (with concessions on a cash
basis) allows an investor to understand the historical trend in cash
concessions.

A reconciliation of rental revenue from Established Communities in
conformity with GAAP to rental revenue (with concessions on a cash
basis) is as follows (dollars in thousands):

                                                   Q3           Q3            YTD          YTD
                                                   2009         2008          2009         2008
Rental revenue (GAAP basis)                        $ 153,030    $ 160,698     $ 465,235    $ 478,525
Concessions amortized                                2,094        1,740         6,437        5,015
Concessions granted                                  (1,701  )    (2,435  )     (5,761  )    (5,893  )
Rental revenue (with concessions on a cash basis)  $ 153,423    $ 160,003     $ 465,911    $ 477,647
% change -- GAAP revenue                                          (4.8    %)                 (2.8    %)
% change -- cash revenue                                          (4.1    %)                 (2.5    %)

Economic Gain is calculated by the
Company 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 Economic Gain to be an appropriate supplemental measure to
gain on sale in accordance with GAAP because it helps investors to
understand the relationship between the cash proceeds from a sale and
the cash invested in the sold community. The Economic Gain for each of
the communities presented is estimated based on their respective final
settlement statements. A reconciliation of Economic Gain to gain on sale
in accordance with GAAP for both the nine months ended September 30,
2009 as well as prior years' activities is presented in the full
earnings release.

Interest Coverage is calculated by
the Company as EBITDA from continuing operations, excluding land gains
and gain on the sale of investments in real estate joint ventures,
divided by the sum of interest expense, net, and preferred dividends.
Interest Coverage is presented by the Company because it provides rating
agencies and investors an additional means of comparing our ability to
service debt obligations to that of other companies. EBITDA is defined
by the Company as net income attributable to the Company before interest
income and expense, income taxes, depreciation and amortization.

A reconciliation of EBITDA and a calculation of Interest Coverage for
the third quarter of 2009 are as follows (dollars in thousands):

Net income attributable to the Company                   $ 58,154
Interest expense, net                                      41,208
Interest expense (discontinued operations)                 --
Depreciation expense                                       54,960
Depreciation expense (discontinued operations)             354
EBITDA                                                   $ 154,676
EBITDA from continuing operations                        $ 126,520
EBITDA from discontinued operations                        28,156
EBITDA                                                   $ 154,676
EBITDA                                                   $ 126,520
Land gains                                                 (241    )
EBITDA from continuing operations, excluding land gains  $ 126,279
Interest expense, net                                      41,208
Interest charges                                           41,208
Interest coverage                                          3.1

Total Capital Cost includes all
capitalized costs projected to be or actually incurred to develop the
respective development or redevelopment community, or development right,
including land acquisition costs, construction costs, real estate taxes,
capitalized interest and loan fees, permits, professional fees,
allocated development overhead and other regulatory fees, all as
determined in accordance with GAAP. For redevelopment communities, Total
Capital Cost excludes costs incurred prior to the start of redevelopment
when indicated. With respect to communities where development or
redevelopment was completed in a prior or the current period, Total
Capital Cost reflects the actual cost incurred, plus any contingency
estimate made by management. Total Capital Cost for communities
identified as having joint venture ownership, either during construction
or upon construction completion, represents the total projected joint
venture contribution amount. For joint ventures not in construction as
presented in the full earnings release, Total Capital Cost is equal to
gross real estate cost.

Initial Year Market Cap Rate is
defined by the Company as Projected NOI of a single community for the
first 12 months of operations (assuming no repositioning), less
estimates for non-routine allowance of approximately $200 - $300 per
apartment home, 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 3.0% -
3.5%. The Initial Year Market Cap 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 a property. Buyers may assign
different Initial Year Market Cap Rates to different communities when
determining the appropriate value because they (i) may project different
rates of change in operating expenses and 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 Cap 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 a 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. The weighted average Unleveraged IRR for sold communities
is weighted based on all cash flows over the holding period for each
respective community, including net sales proceeds.

Unencumbered NOI as calculated by
the Company represents NOI generated by real estate assets unencumbered
by either outstanding secured debt or land leases (excluding land leases
with purchase options that were put in place for governmental incentives
or tax abatements) as a percentage of total NOI generated by real estate
assets. The Company believes that current and prospective unsecured
creditors of the Company view Unencumbered NOI as one indication of the
borrowing capacity of the Company. Therefore, when reviewed together
with the Company's Interest Coverage, EBITDA and cash flow from
operations, the Company believes that investors and creditors view
Unencumbered NOI as a useful supplemental measure for determining the
financial flexibility of an entity. A calculation of Unencumbered NOI
for the nine months ended September 30, 2009 is as follows (dollars in
thousands):

NOI for Established Communities                $ 308,383
NOI for Other Stabilized Communities             61,296
NOI for Development/Redevelopment Communities    54,475
Total NOI generated by real estate assets        424,154
NOI on encumbered assets                         149,369
NOI on unencumbered assets                       274,785
Unencumbered NOI                                 64.8    %

Established Communities are
identified by the Company as 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 Operations, as defined below,
as of the beginning of the prior year. Therefore, for 2009, Established
Communities are consolidated communities that have Stabilized Operations
as of January 1, 2008 and are not conducting or planning to conduct
substantial redevelopment activities within the current year.
Established Communities do not include communities that are currently
held for sale or planned for disposition during the current year.

Economic Occupancy is defined as
total possible revenue less vacancy loss as a percentage of total
possible revenue. Total possible revenue is determined by valuing
occupied units at contract rates and vacant units at market rents.
Vacancy loss is determined by valuing vacant units at current market
rents. By measuring vacant apartments at their market rents, Economic
Occupancy takes into account the fact that apartment homes of different
sizes and locations within a community have different economic impacts
on a community's gross revenue.

Stabilized/Restabilized Operations
is defined as the earlier of (i) attainment of 95% physical occupancy or
(ii) the one-year anniversary of completion of development or
redevelopment.

SOURCE: AvalonBay Communities, Inc.

AvalonBay Communities, Inc. 
John Christie 
Senior Director of Investor Relations and Research 
1-703-317-4747 
or 
Thomas J. Sargeant 
Chief Financial Officer 
1-703-317-4635

For full details on Avalonbay Communities (AVB) AVB. Avalonbay Communities (AVB) has Short Term PowerRatings at TradingMarkets. Details on Avalonbay Communities (AVB) Short Term PowerRatings is available at This Link.