AvalonBay Communities, Inc. Q4 FY2025 earnings call

• Thanked associates for dedication in 2025. • 2025 operating results reflect portfolio quality, growth optimization, and operating teams. • 2026 key themes: modest revenue growth, development NOI uplift, restrained new starts, Board approved dividend increase. • Sean Breslin detailed operating outlook with revenue growth drivers, regional trends, and operating expense growth. • Kevin O'Shea discussed earnings outlook building blocks, development earnings contribution. • Matthew Birenbaum talked about development activity, lease-up projections, and product variety

In 2025, overall revenue grew 2.1%. Turnover rate was 41%, lowest in company history. Mid-Lease Net Promoter Score was 34. Started $1.65 billion of projects with projected initial stabilized yield of 6.2%. In 2026, forecast modest revenue growth of 1.4%. Development NOI to have uplift as projects lease up, new starts restrained to $800 million with 7 projects and average development yield 6.5%-7%. Regional revenue growth varies: New York, New Jersey ~2%, Boston projected occupancy decline, Mid-Atlantic ~1% growth, Northern California mid-3%, Seattle modest net effective rate growth, Southern California mid-1%, Southeast Florida ~1.5%, Denver challenging. Same-store operating expense growth expected 3.8%, 130 basis points above organic growth rate of 2.5%

• Forecast modest revenue growth of 1.4% in 2026. • Development NOI to have uplift as projects lease up in 2026, partially offset by funding costs. • Restrained new starts to $800 million with 7 projects and average development yield 6.5%-7%. • Board approved increase of quarterly dividend to $1.78 per share

• Risks associated with forward-looking statements, including actual results differing materially from expectations. • Risks related to macro environment impacting job growth, demand for apartments. • Risks from legislative activity affecting other rental revenue and operating expenses. • Risks from supply and demand dynamics in different regions

Q: You mentioned renewals are going out in the 4% to 4.5% range. Could you talk about whether you expect to achieve 4% to 4.5% on these renewals or the take rate will be lower? And what changed between now and the 2.5% you achieved on renewals in January?

A: Sean Breslin explained about renewal offers, settlement range, overall forecast, and factors driving first half vs second half performance.

Q: You mentioned lessons learned in 2025 when setting guidance for 2026. What lessons did you learn and which figures have more confidence in upside or downside?

A: Benjamin Schall talked about guidance approach, Sean Breslin discussed core same-store portfolio demand factor.

Q: You cut the starts number in half this year. Is the reduction more a function of enough deals don't pencil at that 6.5% to 7% or a conscious decision due to choppy environment?

A: Matthew Birenbaum explained it's a little bit of both, related to deal opportunity set, funding capacity, and geographic mix.

Q: Can you talk more about the other income drag from the legislative activity last year and other political initiatives to watch?

A: Sean Breslin detailed the drivers of other rental revenue drag and mentioned watching initiatives like Massachusetts ballot initiative.

Q: Curious about your views around the D.C. market and surrounding markets and the DOGE impact.

A: Sean Breslin discussed job loss impact, supply reduction, and outlook for the market.

Q: When you look at cap rates in certain markets, what is driving cap rate compression?

A: Matthew Birenbaum and Benjamin Schall discussed factors like debt markets, NOI growth, investor sentiment.

Q: Why is same-store revenue in Denver noticeably lower?

A: Sean Breslin explained drivers like job growth and deliveries.

Q: Can you provide a breakdown of performance between urban and suburban and vary by regions?

A: Sean Breslin talked about urban vs suburban rent change performance.

Q: Starts in the fourth quarter included a Kanso and a townhome community. Could there be more opportunities in these types?

A: Matthew Birenbaum talked about product variety and strategic growth.

Q: Question on commercial paper program and stock buybacks vs development.

A: Kevin O'Shea and Benjamin Schall discussed commercial paper program and considerations on stock buybacks and development.

Q: Outlook for expansion markets over next 1-3 years?

A: Benjamin Schall talked about multiyear journey and plans for expansion markets