AvalonBay's Revenue Rise in April and May Surpasses Projection

In a recent operating update, AvalonBay Communities AVB disclosed that for the two months ended May 31, 2025, the company experienced a 3% year-over-year increase in same-store residential revenues, exceeding its internal projections by 35 basis points. Occupancy remains strong at 96.3%, ahead of the 96.0% experienced in the first quarter, and like-term effective rent change improved from 1.7% in the first quarter to 2.3% in April and May.

A key theme underpinning AVB’s recent success is its transformation into a digitally enabled, highly efficient operator. With innovative efforts and transformative moves, the company has delivered $39 million in annual incremental NOI through year-end 2024, projects another $9 million in 2025 and is advancing toward its target of $80 million.

Beyond operations, AvalonBay continues to actively refine its portfolio. In 2024 and through April 30, 2025, it has completed $1.1 billion in acquisitions at an average price of $260,000 per home while disposing of $955 million in assets at $465,000 per home, increasing its suburban allocation to 73% and its expansion market allocation to 12%. AVB targets for suburban allocation to reach 80% and expansion region allocation to attain 25%.

The $620 million Texas acquisition — where six of eight properties are under 10 years old — adds scale on a compelling basis and strengthens AVB’s presence in high-growth metros. Moreover, development remains a powerful growth lever for AvalonBay. With $3 billion of projects underway, fully match-funded and 6.3% projected initial stabilized yield (untrended), the REIT is well-positioned to deliver value creation in the upcoming years as occupancies ramp.

AVB’s financial foundation remains rock solid. With A3/A- credit ratings from Moody’s and S&P, respectively, $2.8 billion in liquidity, and a 4.3x net debt-to-Core EBITDAre ratio, the company maintains ample flexibility to pursue accretive growth. Around 95% of its NOI is unencumbered, and its expanded $2.5 billion unsecured credit facility further enhances its capital stack efficiency.

Final Thoughts on AVB

For investors seeking a high-quality multifamily REIT with strong internal growth, disciplined capital management and exposure to the most resilient rental markets in the United States, AvalonBay offers a compelling long-term opportunity. Its strategic focus on operational innovation, capital recycling and suburban coastal markets has made it a clear leader. However, an elevated supply of rental units in some markets is likely to fuel competition and curb pricing power, impeding the rent growth momentum. High interest expenses add to its woes.

So far in the quarter, shares of this residential REIT, with a Zacks Rank #3 (Hold), have lost 3.5%, slightly narrower than its industry's 4.8% decline.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are VICI Properties VICI and W.P. Carey WPC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for VICI’s 2025 FFO per share is pegged at $2.34, suggesting year-over-year growth of 3.5%.

The Zacks Consensus Estimate for WPC’s 2025 FFO per share stands at $4.88, indicating an increase of 3.8% from the year-ago reported figure.

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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research