AvalonBay Q2 FFO Beats Estimates, Occupancy Delayed, Shares Fall

AvalonBay Communities AVB reported second-quarter 2025 core funds from operations (FFO) per share of $2.82, beating the Zacks Consensus Estimate of $2.80. The figure also climbed 1.8% from the prior-year quarter’s tally.

The quarterly performance reflects favorable same-store residential revenue and operating expense performance. AVB has revised its full-year 2025 outlook, reflecting higher same-store net operating income (NOI), offset by the delayed occupancies’ impact on development NOI.

Amid this, AVB stock has declined 1.44% during the after-market hours yesterday.

Total revenues in the quarter came in at $760.2 million, narrowly missing the Zacks Consensus Estimate by 0.2%. However, the figure increased 4.7% on a year-over-year basis.

AVB’s Q2 in Detail

In the reported quarter, same-store residential revenues increased 3.0% year over year to $689.1 million. Same-store residential operating expenses rose 3.6% to $211.9 million. As a result, the same-store residential NOI climbed 2.7% to $477.18 million.

Same-store average revenue per occupied home rose to $3,056 in the second quarter, up 2.8% from $2,974 in the year-ago period. Same-store economic occupancy of 96.2% jumped 20 basis points (bps) year over year. It is also ahead of our estimate of 96.1%.

However, interest expenses increased 13.5% year over year to $64.8 million. It also exceeded our estimate of $63.0 million.

AVB’s Portfolio Activity

During the second quarter, the company acquired six communities in the Dallas-Fort Worth metropolitan area, containing 1,844 apartment homes, for a stated purchase price of $431.5 million.

During the reported quarter, AVB sold Avalon Wesmont Station I & II, two wholly-owned communities with 406 apartment homes and 18,000 square feet of commercial space, in Wood-Ridge, NJ, for $$161.5 million, resulting in a gain in accordance with GAAP of $99.64 million. 

As of June 30, 2025, AvalonBay had 20 wholly owned Development communities under construction (expected to contain 7,299 apartment homes and 69,000 square feet of commercial space). The estimated total capital cost of these development communities at completion is $2.78 billion.

AVB’s Balance Sheet Position

AVB had $102.83 million in unrestricted cash and cash equivalents as of June 30, 2025. As of the same date, the company did not have any borrowings outstanding under its credit facility. It had outstanding borrowings of $664.64 million under its unsecured commercial paper note program.

Additionally, its annualized net debt-to-core EBITDAre for the April-June period was 4.4 times, and the unencumbered NOI for the six months ended June 30, 2025 was 95%.

AVB’s 2025 Outlook

For full-year 2025, AVB has revised its full-year core FFO and same-store outlooks. The company expects core FFO per share between $11.19 and $11.59 compared with the initial outlook of $11.14-$11.64. 

This denotes a projected core FFO per share growth of 3.5% at the midpoint, unchanged from the initial outlook and reflects higher same-store NOI growth, offsetting the impact of delayed occupancies on 2025 Development NOI. The Zacks Consensus Estimate presently stands at $11.40, within the projected range.

AVB expects same-store residential revenue growth of 2.8% at the midpoint of the outlook range, down from 3% guided earlier. This is due to expected dispositions and slightly higher bad debt. The company noted that though bad debt has continued to improve, the pace is below the outlook. Same-store operating expenses are expected to grow 3.1%, down from 4.1% projected earlier. Consequently, same-store residential NOI is projected to expand 2.7%, up from 2.4% initially guided. 2025 NOI from development communities is projected to be $25 million, down from the prior outlook of $30 million.

For the third quarter of 2025, AvalonBay expects core FFO per share in the range of $2.75-$2.85. This is lower than the Zacks Consensus Estimate, which is currently pegged at $2.86.

AvalonBay currently carries a Zacks Rank #3 (Hold).

AvalonBay Communities, Inc. Price, Consensus and EPS Surprise

AvalonBay Communities, Inc. price-consensus-eps-surprise-chart | AvalonBay Communities, Inc. Quote

Performance of Another Residential REIT

Mid-America Apartment Communities MAA, commonly known as MAA, reported second-quarter 2025 core FFO per share of $2.15, which surpassed the Zacks Consensus Estimate of $2.14. However, the reported figure fell 3.15% year over year from $2.22. Mid-America has experienced a fall in same-store revenues, with average effective rent per unit declining year over year. 

Mid-America witnessed low levels of resident turnover. Rental and other property revenues of $549.9 million for the second quarter missed the Zacks Consensus Estimate by 0.4%. However, the reported figure was 0.6% higher than the year-ago quarter’s tally.

Upcoming Earnings Release

We now look forward to the earnings release of another residential REIT — Equity Residential EQR — which is slated to report on Aug. 4.

The Zacks Consensus Estimate for Equity Residential’s second-quarter 2025 normalized FFO per share stands at 99 cents, indicating a 2.1% increase year over year. The consensus mark for Equity Residential’s second-quarter revenues is pegged at $769.26 million, calling for a 4.8% rise year over year. EQR currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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