Avalon Bay Continues Residential REIT Hot Streak With Q2 2024 Earnings

AvalonBay Communities AVB has joined the ranks of residential real estate trusts (REITs) that reported strong Q2 2024 earnings. This will certainly please AvalonBay shareholders but it also underscores how the multifamily residential sector writ large is continuing to pay off for investors. Although many factors are contributing to REITs like AvalonBay, Essex Property Trust, and Equity Residential Inc. surpassing analysts' expectations, high homebuying costs are helping to boost rental occupancy.

The raw numbers for Avalon's most recent quarter show significant year-on-year performance growth. AvalonBay reported $726 million in revenue, besting Q2 2023's performance by 5.1%. Earnings Per Share (EPS) also trended upward from $2.59 in Q2 2023 to $2.77. More importantly, both the revenue and EPS figures exceeded the expectations of many analysts, who projected revenue to be in the $718 million range and the EPS to be $2.21.

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AvalonBay's Net Earnings Per Share (EPS) of $1.78 also surpassed Zacks' "eight-analyst average" projection of $1.30. The portfolio's occupancy statistics improved from 95.9% to 96%. It may not seem like a big increase but it was enough to generate significant extra revenue due to the size of AvalonBay's portfolio. Income from collected rents and other streams was $724 million, which was a 5% increase over last year and almost $10 million more than analysts predicted.

In addition to posting impressive numbers on the earnings front, AvalonBay completed construction on 901 new units spread across three communities in Amityville, NY, Montvale, NJ and Redmond, WA. Both the Amityville, NY and Montvale, NJ locations will serve the lucrative New York City metropolitan area while the Redmond community is only 15 minutes east of Seattle, Washington.

The total expenditure on the new developments was $351 million. AvalonBay also broke ground on three new communities in Q2 2024 that will add another 903 units to its 87,000-unit 281 multifamily asset portfolio. AvalonBay has been around since 1994 when Avalon Properties merged with Bay Apartment Communities to become AvalonBay Communities. In 1998, they formed America's first bicoastal multifamily residential REIT.

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Their portfolio is largely in high-profile markets like Southern California, Washington DC Metro area, Boston, MA and New York. What these areas all have in common is a cycle of rising home prices and a lack of inventory that pushes home prices even higher. That cycle creates a near-permanent base of renters in the cities where AvalonBay's portfolio is concentrated.

AvalonBay appears very well-positioned to continue profiting from that trend. It's also planning to bolster its portfolio with another 6,066 apartments and 65,000 square feet of commercial space spread across 17 projects currently under construction. AvalonBay's current market cap is $29.78 billion and its shares are trading for $210 while paying an estimated 3.19% dividend.

Looking forward, AvalonBay could continue performing well in Q3 while taking advantage of lower interest rates. Speculation of a rate cut in September has hit a fever pitch after Fed Chairman Powell's remarks earlier this week and lower-than-expected job growth numbers. Even if rates do go down, most of the markets Avalon serves have home prices high enough to keep buyers on the sidelines for the near future.

Key questions for shareholders or potential investors include ‘How high can rents go?' and ‘How long will the population in AvalonBay's markets continue to rent before they leave in search of more affordable markets?'. That aside, Avalon's strong Q2 2024 performance and 30-year performance history certainly make it a share worth considering if you're looking for a multifamily residential REIT to invest in.

Disclaimer: Data such as market cap and dividend rates fluctuate frequently due to many factors. Depending on when you read this article, there may be some variance between the data quoted here and the most current data.

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