AvalonBay Communities’ (AVB) business segments primarily consist of current operating apartment communities, development communities, and development rights. The company’s operating communities are further distinguished as established communities, other stabilized communities, lease-up communities, and redevelopment communities.
Established communities, also known as same-store communities, are operating communities that are owned and have stabilized occupancy and operating expenses. A community is considered to have stabilized occupancy if it attains 95% physical occupancy or completes one year of development or redevelopment. Established communities comprised 53.2% of total apartment homes in 2014.
Other stabilized communities
This segment includes all other completed communities that have stabilized occupancy. Other stabilized communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year. Other established communities comprised 19.1% of total apartment homes in 2014.
Development and redevelopment communities
Both development and redevelopment communities consist of communities that are under construction, communities where substantial redevelopment is in progress or is planned to begin during the year, and communities under lease-up that did not reach stabilized occupancy. Development and redevelopment communities comprised 6.2% of total apartment homes in 2014.
Lease-up communities are communities where construction has been completed for less than one year and where physical occupancy has not reached 95%. Lease-up communities comprised 4.1% of total apartment homes in 2014.
Development rights are development opportunities in the early phase of the development process for which the company either has an option to acquire land or enter into a leasehold interest. Development rights comprised 11.2% of total apartment homes in 2014.
Apart from AvalonBay Communities, other major players in the apartment REITs such as Equity Residential (EQR), Essex Property Trust (ESS), and UDR (UDR) are also focused on major metropolitan markets in the country. The Vanguard REIT ETF (VNQ) invests 3.25% of its portfolio in AvalonBay Communities.
In the next part of the series, we will discuss AvalonBay Communities’ geographic coverage.