Avalon Bay Communities recently became the fourth multifamily REIT company named to the Standard & Poor's (S&P) 500, an index fund that includes a sample of 500 of the top companies in the country's leading industries. AIMCO, Archstone, and Equity Residential are the other apartment companies on the list.
Based in Alexandria, Va., AVB owns or has interests in 167 apartment communities totaling 48,294 rental units in 10 states and the District of Columbia. Seventeen of those are under construction and another six are being renovated.
“Inclusion in the S&P 500 creates significant incremental demand for our stock, provides additional flexibility for our capital needs,” explains AvalonBay CFO Tom Sargeant. “It also provides for broader representation by REITs and reflects the growing importance of the REIT industry in the U.S. economy.”
Concurrent with its addition to the S&P, AvalonBay completed a common stock offering to raise equity to increase debt coverage. The offering consisted of 4 million shares plus an over-allotment option of 600,000 shares. The firm plans to use proceeds of approximately $594 million from the offering for “general corporate purposes.”
“The common stock offering will bolster the company's already strong balance sheet by providing additional equity capital that will be raised via a very cost efficient offering,” notes Craig Leupold, a principal with Green Street Advisors in Newport Beach, Calif. “The proceeds will be used to fund the increasing size of the company's development pipeline, which should result in significant value creation for shareholders.”
WORTH THE RISK New Orleans rents increase, despite lingering worries.
Rebuilding New Orleans' decimated rental market has been a slow, steady process. But for some landlords and developers, the low inventory is reaping big benefits.
With a rental vacancy rate of 7.9 percent, the city and surrounding parish are experiencing exponential rental increases. According to data from HUD and the Greater New Orleans Community Data Center, average rent has grown by 45 percent since Hurricane Katrina battered the area.
Fundamentals like that have developers clambering to renovate damaged apartment communities. New Orleans East is particularly attractive to deep-pocketed private investors who—unlike the mom-and-pop landlords who dominated the city before the storm—have enough capital to forge ahead without state and federal dollars.