January 31, 2018

AVB – Market expectations are for record-high Uniform ROA, but management has concerns about growth, volatility, and costs


  • AvalonBay Communities, Inc. (AVB:USA)¬†currently trades near recent averages relative to UAFRS-based (Uniform) Assets, with a 1.9x Uniform P/B, implying somewhat bullish expectations for the firm. However, management has concerns about growth, volatility, and costs
  • Specifically, management may be concerned about the sustainability of growth in consumer business confidence. Additionally, they may be concerned about the importance of timing in more volatile markets, and may be exaggerating the benefits they can realize over time as a result of economies of scale. Furthermore, they may lack confidence in the sustainability of same-store average physical occupancy rate growth, and may be concerned about construction costs in some markets running above rent growth leading to declining supply

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