AVB – Market expectations are for Uniform ROA to reach new peaks, but management may have concerns about rental income, turnover, and legacy markets

• AvalonBay Communities, Inc. (AVB:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 47.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about the sustainability of rental income, occupant turnover in San Francisco, and the performance of their legacy markets
• Specifically, management is confident apartments are less occupied due in part to young age cohorts moving back home. Furthermore, they may lack confidence in their ability to sustain townhome rent increases, finalize asset sale proceeds by year-end, and grow in their expansion markets. Moreover, they may lack confidence in their ability to fund their share repurchase program and mitigate the impact of high turnover and move-outs in San Francisco. In addition, management may be concerned about the performance of their legacy markets and they may be overstating the potential of their Denver suburban assets