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AVB Avalonbay Communities

Filed: 5 May 21, 3:39pm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended March 31, 2021
Commission file number 1-12672
AVALONBAY COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
 
Maryland 77-0404318
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
 
4040 Wilson Blvd., Suite 1000
Arlington, Virginia  22203
(Address of principal executive offices, including zip code)
(703) 329-6300
(Registrant's telephone number, including area code)  
(Former name, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareAVBNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.
Yes                     No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes                     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes                     No

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

139,604,637 shares of common stock, par value $0.01 per share, were outstanding as of April 30, 2021.


AVALONBAY COMMUNITIES, INC.
FORM 10-Q
INDEX
 






AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
 3/31/202112/31/2020
 (unaudited) 
ASSETS  
Real estate:  
Land and improvements$4,422,683 $4,394,298 
Buildings and improvements17,439,415 17,231,275 
Furniture, fixtures and equipment941,756 924,583 
 22,803,854 22,550,156 
Less accumulated depreciation(5,859,490)(5,700,179)
Net operating real estate16,944,364 16,849,977 
Construction in progress, including land818,232 989,765 
Land held for development184,058 110,142 
For-sale condominium inventory253,859 267,219 
Real estate assets held for sale, net52,776 16,678 
Total real estate, net18,253,289 18,233,781 
Cash and cash equivalents129,298 216,976 
Cash in escrow100,434 96,556 
Resident security deposits30,914 30,811 
Investments in unconsolidated real estate entities210,650 202,612 
Deferred development costs47,081 55,427 
Prepaid expenses and other assets195,965 207,715 
Right of use lease assets152,901 155,266 
Total assets$19,120,532 $19,199,144 
LIABILITIES AND EQUITY  
Unsecured notes, net$6,703,759 $6,702,005 
Variable rate unsecured credit facility
Mortgage notes payable, net834,025 862,332 
Dividends payable223,805 224,897 
Payables for construction84,954 93,609 
Accrued expenses and other liabilities303,188 274,699 
Lease liabilities179,968 181,479 
Accrued interest payable62,203 49,033 
Resident security deposits56,426 55,928 
Liabilities related to real estate assets held for sale443 311 
Total liabilities8,448,771 8,444,293 
Commitments and contingencies00
Redeemable noncontrolling interests2,857 2,677 
Equity:  
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at March 31, 2021 and December 31, 2020; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020
Common stock, $0.01 par value; 280,000,000 shares authorized at March 31, 2021 and December 31, 2020; 139,604,087 and 139,526,671 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively1,396 1,395 
Additional paid-in capital10,657,665 10,664,416 
Accumulated earnings less dividends47,151 126,022 
Accumulated other comprehensive loss(37,883)(40,250)
Total stockholders' equity10,668,329 10,751,583 
Noncontrolling interests575 591 
Total equity10,668,904 10,752,174 
Total liabilities and equity$19,120,532 $19,199,144 
 
See accompanying notes to Condensed Consolidated Financial Statements.
1

AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(Dollars in thousands, except per share data)
 For the three months ended
 3/31/20213/31/2020
Revenue:  
Rental and other income$550,258 $601,260 
Management, development and other fees877 1,007 
Total revenue551,135 602,267 
Expenses:  
Operating expenses, excluding property taxes140,050 132,609 
Property taxes69,410 67,026 
Expensed transaction, development and other pursuit costs, net of recoveries(170)3,334 
Interest expense, net52,613 55,914 
(Gain) loss on extinguishment of debt, net(122)9,170 
Depreciation expense183,297 177,911 
General and administrative expense17,352 17,320 
Total expenses462,430 463,284 
Equity in (loss) income of unconsolidated real estate entities(467)1,175 
Gain on sale of communities53,727 24,436 
Gain on other real estate transactions, net427 43 
Net for-sale condominium activity(913)3,460 
Income before income taxes141,479 168,097 
Income tax benefit (expense)755 (91)
Net income142,234 168,006 
Net income attributable to noncontrolling interests(11)(35)
Net income attributable to common stockholders$142,223 $167,971 
Other comprehensive income:  
Loss on cash flow hedges(17,603)
Cash flow hedge losses reclassified to earnings2,367 1,949 
Comprehensive income$144,590 $152,317 
Earnings per common share - basic:  
Net income attributable to common stockholders$1.02 $1.19 
Earnings per common share - diluted:  
Net income attributable to common stockholders$1.02 $1.19 

See accompanying notes to Condensed Consolidated Financial Statements.
2

AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
 For the three months ended
 3/31/20213/31/2020
Cash flows from operating activities:
Net income$142,234 $168,006 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation expense183,297 177,911 
Amortization of deferred financing costs1,837 1,882 
Amortization of debt discount642 411 
(Gain) loss on extinguishment of debt, net(122)9,170 
Amortization of stock-based compensation5,382 5,338 
Equity in loss of, and return on, unconsolidated real estate entities and noncontrolling interests, net of eliminations1,994 1,871 
Abandonment of development pursuits246 1,988 
Unrealized gain on terminated cash flow hedges(2,654)
Cash flow hedge losses reclassified to earnings2,367 1,949 
Gain on sale of real estate assets(54,154)(24,479)
Gain on for-sale condominiums(131)(4,903)
Decrease (increase) in resident security deposits, prepaid expenses and other assets9,423 (1,239)
Increase in accrued expenses, other liabilities and accrued interest payable39,784 3,799 
Net cash provided by operating activities330,145 341,704 
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs(198,373)(245,789)
Capital expenditures - existing real estate assets(28,020)(32,922)
Capital expenditures - non-real estate assets(2,234)(10,663)
(Decrease) increase in payables for construction(8,655)462 
Proceeds from sale of real estate, net of selling costs76,543 63,073 
Proceeds from the sale of for-sale condominiums, net of selling costs13,569 98,790 
Mortgage note receivable lending(179)
Mortgage note receivable payments1,250 960 
Investments in unconsolidated real estate entities(10,032)(9,799)
Net cash used in investing activities(155,952)(136,067)
Cash flows from financing activities:
Issuance of common stock, net11 125 
Dividends paid(222,734)(213,671)
Net borrowings under unsecured credit facility750,000 
Issuance of mortgage notes payable51,000 
Repayments of mortgage notes payable, including prepayment penalties(28,488)(51,484)
Issuance of unsecured notes699,252 
Repayment of unsecured notes, including prepayment penalties(658,655)
Payment of deferred financing costs(5,988)
Receipt (payment) for termination of forward interest rate swaps6,962 (20,314)
Payment to noncontrolling interest(22)(35)
Payments related to tax withholding for share-based compensation(13,228)(14,346)
Distributions to DownREIT partnership unitholders(12)(12)
Distributions to joint venture and profit-sharing partners(82)(102)
Preferred interest obligation redemption and dividends(400)(600)
Net cash (used in) provided by financing activities(257,993)535,170 
Net (decrease) increase in cash, cash equivalents and cash in escrow(83,800)740,807 
Cash, cash equivalents and cash in escrow, beginning of period313,532 127,614 
Cash, cash equivalents and cash in escrow, end of period$229,732 $868,421 
Cash paid during the period for interest, net of amount capitalized$37,252 $36,985 
See accompanying notes to Condensed Consolidated Financial Statements.
3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

The following table provides a reconciliation of cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows (dollars in thousands):
For the three months ended
3/31/20213/31/2020
Cash and cash equivalents$129,298 $777,995 
Cash in escrow100,434 90,426 
Cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows$229,732 $868,421 

Supplemental disclosures of non-cash investing and financing activities:

During the three months ended March 31, 2021:

As described in Note 4, "Equity," 149,520 shares of common stock were issued as part of the Company's stock-based compensation plans, of which 56,545 shares related to the conversion of performance awards to common shares, and the remaining 92,975 shares valued at $16,347,000 were issued in connection with new stock grants; 839 shares valued at $138,000 were issued through the Company's dividend reinvestment plan; 74,726 shares valued at $13,228,000 were withheld to satisfy employees' tax withholding and other liabilities; and 343 restricted shares with an aggregate value of $69,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $222,424,000.

The Company recorded an increase of $273,000 in redeemable noncontrolling interest with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

The Company reclassified $2,367,000 of cash flow hedge losses from other comprehensive income (loss) to interest expense, net, to record the impact of the Company's derivative and hedge accounting activity.

During the three months ended March 31, 2020:

The Company issued 161,229 shares of common stock as part of the Company's stock-based compensation plans, of which 96,317 shares related to the conversion of performance awards to restricted shares, and the remaining 64,912 shares valued at $14,640,000 were issued in connection with new stock grants; 529 shares valued at $112,000 were issued through the Company's dividend reinvestment plan; 70,351 shares valued at $14,346,000 were withheld to satisfy employees' tax withholding and other liabilities; and 3,931 restricted shares with an aggregate value of $660,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $224,079,000.

The Company recorded a decrease of $471,000 in redeemable noncontrolling interest with a corresponding increase to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

The Company recorded an increase to accrued expenses and other liabilities of $3,302,000, an increase in prepaid expenses and other assets of $22,000 and a corresponding adjustment to accumulated other comprehensive loss, and reclassified $1,949,000 of cash flow hedge losses from other comprehensive income (loss) to interest expense, net, to record the impact of the Company's derivative and hedge accounting activity.

The Company recorded $46,875,000 of lease liabilities and offsetting right of use lease assets related to the execution of 2 new office leases.


4

AVALONBAY COMMUNITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.  Organization, Basis of Presentation and Significant Accounting Policies

Organization and Basis of Presentation

AvalonBay Communities, Inc. (the "Company," which term, unless the context otherwise requires, refers to AvalonBay Communities, Inc. together with its subsidiaries), is a Maryland corporation that has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes under the Internal Revenue Code of 1986 (the "Code"). The Company focuses on the development, redevelopment, acquisition, ownership and operation of multifamily communities in New England, the New York/New Jersey metro area, the Mid-Atlantic, Southeast Florida, Denver, Colorado, the Pacific Northwest, and Northern and Southern California.

At March 31, 2021, the Company owned or held a direct or indirect ownership interest in 275 operating apartment communities containing 81,227 apartment homes in 11 states and the District of Columbia. In addition, the Company owned or held a direct or indirect ownership interest in 15 communities under development that are expected to contain an aggregate of 4,560 apartment homes when completed, as well as The Park Loggia, which contains 172 for-sale residential condominiums, of which 80 have been sold as of March 31, 2021, and 66,000 square feet of commercial space, of which 87% has been leased as of March 31, 2021. The Company also owned or held a direct or indirect ownership interest in land or rights to land on which the Company expects to develop an additional 25 communities that, if developed as expected, will contain an estimated 8,075 apartment homes.

The interim unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements required by GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company's 2020 Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results for the full year. Management believes the disclosures are adequate to ensure the information presented is not misleading. In the opinion of management, all adjustments and eliminations, consisting only of normal, recurring adjustments necessary for a fair presentation of the financial statements for the interim periods, have been included.

Capitalized terms used without definition have meanings provided elsewhere in this Form 10-Q.

Earnings per Common Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares outstanding during the period. All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share ("EPS"). Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company's earnings per common share are determined as follows (dollars in thousands, except per share data):
5

 For the three months ended
 3/31/20213/31/2020
Basic and diluted shares outstanding  
Weighted average common shares - basic139,291,187 140,376,996 
Weighted average DownREIT units outstanding7,500 7,500 
Effect of dilutive securities253,726 393,377 
Weighted average common shares - diluted139,552,413 140,777,873 
Calculation of Earnings per Share - basic  
Net income attributable to common stockholders$142,223 $167,971 
Net income allocated to unvested restricted shares(324)(427)
Net income attributable to common stockholders, adjusted$141,899 $167,544 
Weighted average common shares - basic139,291,187 140,376,996 
Earnings per common share - basic$1.02 $1.19 
Calculation of Earnings per Share - diluted  
Net income attributable to common stockholders$142,223 $167,971 
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships12 12 
Adjusted net income attributable to common stockholders$142,235 $167,983 
Weighted average common shares - diluted139,552,413 140,777,873 
Earnings per common share - diluted$1.02 $1.19 
 
Certain options to purchase shares of common stock in the amount of 294,115 were outstanding as of March 31, 2021, but were not included in the computation of diluted earnings per share because such options were anti-dilutive for the period.

Legal and Other Contingencies

The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of its business. While no assurances can be given, the Company does not currently believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to amounts in prior years' notes to financial statements to conform to current year presentations as a result of changes in held for sale classification, disposition activity and segment classification.

For-Sale Condominium Inventory

The Company presents for-sale condominium inventory at historical cost and evaluates the condominiums for impairment when potential indicators exist, as further discussed in Note 6, "Real Estate Disposition Activities." 

6

Leases

The Company is party to leases as both a lessor and a lessee, primarily as follows:

lessor of residential and commercial space within its apartment communities; and
lessee under (i) ground leases for land underlying current operating or development communities and certain commercial and parking facilities and (ii) office leases for its corporate headquarters and regional offices.

Lessee Considerations

The Company assesses whether a contract is or contains a lease based on whether the contract conveys the right to control the use of an identified asset, including specified portions of larger assets, for a period of time in exchange for consideration. The Company’s leases include both fixed and variable lease payments, which are based on an index or rate such as the consumer price index (CPI) or percentage rents based on total sales. Lease payments included in the lease liability include only payments that depend on an index or rate. For leases that have options to extend the term or terminate the lease early, the Company only factored the impact of such options into the lease term if the option was considered reasonably certain to be exercised. The Company determined the discount rate associated with its ground and office leases on a lease by lease basis using the Company’s actual borrowing rates as well as indicative market pricing for longer term rates and taking into consideration the remaining term of each of the lease agreements.

Lessor Considerations

The Company evaluates leases in which it is the lessor, which are composed of residential and commercial leases at its apartment communities, and determined these leases to be operating leases. For lease agreements that provide for rent concessions and/or scheduled fixed and determinable rent increases, rental income is recognized on a straight-line basis over the noncancellable term of the lease, which, for residential leases, is generally one year. Some of the Company’s commercial leases have fixed-price renewal options, and the lessee may be able to exercise its renewal option at an amount less than the fair value of the rent at such time. The Company only includes renewal options in the lease term if, at the commencement of the lease, it is reasonably certain that the lessee will exercise this option.

Additionally, for the Company’s residential and commercial leases, which are comprised of the lease component and common area maintenance as a non-lease component, the Company determined that (i) the leases are operating leases, (ii) the lease component is the predominant component and (iii) that all components of its operating leases share the same timing and pattern of transfer.

Revenue and Gain Recognition

Revenue from contracts with customers is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration that the Company expects to be entitled to for those goods and services. The majority of the Company’s revenue is derived from residential and commercial rental income and other lease income, which are accounted for under ASC 842, Leases, discussed above. The Company's revenue streams that are not accounted for under ASC 842 include (i) management fees, (ii) rental and non-rental related income and (iii) gains or losses on the sale of real estate.

The following table provides details of the Company’s revenue streams disaggregated by the Company’s reportable operating segments, further discussed in Note 8, “Segment Reporting,” for the three months ended March 31, 2021 and 2020. Segment information for total revenue has been adjusted to exclude the real estate assets that were sold from January 1, 2020 through March 31, 2021, or otherwise qualify as held for sale as of March 31, 2021, as described in Note 6, "Real Estate Disposition Activities" (dollars in thousands):
7

 For the three months ended
Established
Communities
Other
Stabilized
Communities
Development/
Redevelopment
Communities
Non-
allocated (1)
Total
For the three months ended March 31, 2021
Management, development and other fees$$$$877 $877 
Rental and non-rental related income (2)1,668 427 135 2,230 
Total non-lease revenue (3)1,668 427 135 877 3,107 
Lease income (4)500,590 29,566 15,569 545,725 
Business interruption insurance proceeds
Total revenue$502,258 $29,993 $15,704 $877 $548,832 
For the three months ended March 31, 2020
Management, development and other fees$$$$1,007 $1,007 
Rental and non-rental related income (2)1,633 594 51 2,278 
Total non-lease revenue (3)1,633 594 51 1,007 3,285 
Lease income (4)551,000 27,991 4,738 583,729 
Business interruption insurance proceeds
Total revenue$552,633 $28,585 $4,789 $1,007 $587,014 
__________________________________
(1)Revenue represents third-party management, asset management and developer fees and miscellaneous income which are not allocated to a reportable segment.
(2)Amounts include revenue streams related to leasing activities that are not considered components of a lease, including but not limited to, apartment hold fees and application fees, as well as revenue streams not related to leasing activities, including but not limited to, vendor revenue sharing, building advertising, vending and dry cleaning revenue.
(3)Represents all revenue accounted for under ASC 606.
(4)Amounts include all revenue streams derived from residential and commercial rental income and other lease income, which are accounted for under ASC 842.

Due to the nature and timing of the Company’s identified revenue streams, there are no material amounts of outstanding or unsatisfied performance obligations as of March 31, 2021.

Lease Revenue Reserves

The Company assesses the collectability of its lease revenue and receivables on an on-going basis. Under ASC 842, Lease Accounting, the Company assesses the probability of receiving all remaining lease amounts due on a lease by lease basis, reserving for revenue and the related receivables for those leases where collection of substantially all of the remaining lease payments is not probable. Subsequently, the Company will only recognize revenue to the extent cash is received. If the Company determines that collection of the remaining lease payments becomes probable at a future date, the Company will recognize the cumulative revenue that would have been recorded under the original lease agreement.

In addition to the specific reserves recognized under ASC 842, the Company also evaluates its lease receivables for collectability at a portfolio level under ASC 450, Contingencies – Loss Contingencies. The Company recognizes a reserve under ASC 450 when the uncollectible revenue is probable and reasonably estimable. The Company applies this reserve to the population of the Company’s revenue and receivables not specifically addressed as part of the specific ASC 842 reserve.

8

COVID-19 Pandemic

In March 2020, the World Health Organization designated COVID-19 as a pandemic. While the Company has taken various actions in response to the COVID-19 pandemic, the ultimate impact on its consolidated results of operations, cash flows, financial condition and liquidity will depend on (i) the duration and severity of the pandemic, (ii) the effectiveness of vaccines and the rate of vaccinations, (iii) the duration and nature of governmental responses to contain the spread of the disease and assist consumers and businesses, (iv) consumer and business responses to the pandemic, including preferences for where and how to live and work, and (v) how quickly and to what extent normal economic and operating conditions can resume. Because of this uncertainty, any estimate of the expected impact of the COVID-19 pandemic on results of operations, cash flows, financial condition, or liquidity for periods beyond the three months ended March 31, 2021 is uncertain.

As of March 31, 2021, the Company assessed the collectibility of the outstanding lease income receivables as a result of the impact of the COVID-19 pandemic on its residential and commercial lease portfolios. The Company recorded an aggregate offset to income for uncollectible lease revenue for its residential and commercial portfolios of $18,645,000 for the three months ended March 31, 2021 under ASC 842 and ASC 450.

2.  Interest Capitalized

The Company capitalizes interest during the development and redevelopment of real estate assets. Capitalized interest associated with the Company's development or redevelopment activities totaled $8,799,000 and $11,498,000 for the three months ended March 31, 2021 and 2020, respectively.

3.  Mortgage Notes Payable, Unsecured Notes, Term Loans and Credit Facility

The Company's mortgage notes payable, unsecured notes, variable rate unsecured term loans (the "Term Loans") and Credit Facility, as defined below, as of March 31, 2021 and December 31, 2020 are summarized below. The following amounts and discussion do not include the mortgage notes related to the communities classified as held for sale, if any, as of March 31, 2021 and December 31, 2020, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities").
 3/31/202112/31/2020
Fixed rate unsecured notes (1)$6,500,000 $6,500,000 
Term Loans (1)250,000 250,000 
Fixed rate mortgage notes payable - conventional and tax-exempt (2)380,576 408,964 
Variable rate mortgage notes payable - conventional and tax-exempt (2)470,750 470,850 
Total mortgage notes payable and unsecured notes and Term Loans7,601,326 7,629,814 
Credit Facility
Total mortgage notes payable, unsecured notes, Term Loans and Credit Facility$7,601,326 $7,629,814 
_____________________________________
(1)Balances at March 31, 2021 and December 31, 2020 exclude $9,978 and $10,380, respectively, of debt discount, and $36,263 and $37,615, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.
(2)Balances at March 31, 2021 and December 31, 2020 exclude $14,361 and $14,478, respectively, of debt discount, and $2,940 and $3,004, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Condensed Consolidated Balance Sheets.

The following debt activity occurred during the three months ended March 31, 2021:

In January 2021, the Company repaid $27,795,000 principal amount of 5.37% fixed rate debt secured by Avalon San Bruno II at par in advance of its April 2021 maturity date.

9

At March 31, 2021, the Company has a $1,750,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the “Credit Facility”) which matures in February 2024. The Credit Facility bears interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.) and (ii) the rating levels issued for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (0.89% at March 31, 2021), assuming a one month borrowing rate. The annual facility fee for the Credit Facility remained 0.125%, resulting in a fee of $2,188,000 annually based on the $1,750,000,000 facility size and based on the Company's current credit rating.

The Company had 0 borrowings outstanding under the Credit Facility and had $2,613,000 and $2,900,000 outstanding in letters of credit that reduced the borrowing capacity as of March 31, 2021 and December 31, 2020, respectively. In addition, the Company had $33,482,000 and $32,079,000 outstanding in additional letters of credit unrelated to the Credit Facility as of March 31, 2021 and December 31, 2020, respectively.

In the aggregate, secured notes payable mature at various dates from March 2027 through July 2066, and are secured by certain apartment communities (with a net carrying value of $1,382,452,000, excluding communities classified as held for sale, as of March 31, 2021).

The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was 3.8% at both March 31, 2021 and December 31, 2020. The weighted average interest rate of the Company's variable rate secured notes payable (conventional and tax-exempt), including the effect of certain financing related fees, was 1.7% at both March 31, 2021 and December 31, 2020.

Scheduled payments and maturities of secured notes payable and unsecured notes outstanding at March 31, 2021 are as follows (dollars in thousands):
YearSecured notes
principal payments
Secured notes maturitiesUnsecured notes and Term Loans maturitiesStated interest rate of unsecured notes and Term Loans
2021$8,660 $— $— N/A
20229,918 — 450,000 2.950 %
100,000 LIBOR + 0.90%
202310,739 — 350,000 4.200 %
250,000 2.850 %
202411,677 — 300,000 3.500 %
150,000 LIBOR + 0.85%
202512,408 — 525,000 3.450 %
300,000 3.500 %
202613,445 — 475,000 2.950 %
300,000 2.900 %
202715,880 236,100 400,000 3.350 %
202820,707 — 450,000 3.200 %
202911,742 66,250 450,000 3.300 %
203012,384 — 700,000 2.300 %
Thereafter176,078 245,338 600,000 2.450 %
350,000 3.900 %
300,000 4.150 %
300,000 4.350 %
 $303,638 $547,688 $6,750,000  
 

The Company was in compliance at March 31, 2021 with customary financial covenants under the Credit Facility, the Term Loans and the Company's fixed rate unsecured notes.
10

4.  Equity

The following summarizes the changes in equity for the three months ended March 31, 2021 (dollars in thousands):
Common
stock
Additional
paid-in
capital
Accumulated
earnings
less
dividends
Accumulated
other
comprehensive
loss
Total stockholder's equityNoncontrolling interestsTotal
equity
Balance at December 31, 2020$1,395 $10,664,416 $126,022 $(40,250)$10,751,583 $591 $10,752,174 
Net income attributable to common stockholders— — 142,223 — 142,223 — 142,223 
Cash flow hedge losses reclassified to earnings— — — 2,367 2,367 — 2,367 
Change in redemption value of redeemable noncontrolling interest— — (273)— (273)— (273)
Noncontrolling interest distribution and income allocation— — — — — (16)(16)
Dividends declared to common stockholders ($1.59 per share)— — (221,779)— (221,779)— (221,779)
Issuance of common stock, net of withholdings(14,037)958 — (13,078)— (13,078)
Amortization of deferred compensation— 7,286 — — 7,286 — 7,286 
Balance at March 31, 2021$1,396 $10,657,665 $47,151 $(37,883)$10,668,329 $575 $10,668,904 

The following summarizes the changes in equity for the three months ended March 31, 2020 (dollars in thousands):
Common
stock
Additional
paid-in
capital
Accumulated
earnings
less
dividends
Accumulated
other
comprehensive
loss
Total stockholder's equityNoncontrolling interestsTotal
equity
Balance at December 31, 2019$1,406 $10,736,733 $282,913 $(31,503)$10,989,549 $649 $10,990,198 
Net income attributable to common stockholders— — 167,971 — 167,971 — 167,971 
Loss on cash flow hedges, net— — — (17,603)(17,603)— (17,603)
Cash flow hedge losses reclassified to earnings— — — 1,949 1,949 — 1,949 
Change in redemption value of redeemable noncontrolling interest— — 471 — 471 — 471 
Noncontrolling interests income allocation— — — — — (35)(35)
Dividends declared to common stockholders ($1.59 per share)— — (224,083)— (224,083)— (224,083)
Issuance of common stock, net of withholdings(12,492)(1,616)— (14,107)— (14,107)
Amortization of deferred compensation— 7,781 — — 7,781 — 7,781 
Balance at March 31, 2020$1,407 $10,732,022 $225,656 $(47,157)$10,911,928 $614 $10,912,542 

As of March 31, 2021 and December 31, 2020, the Company's charter had authorized for issuance a total of 280,000,000 shares of common stock and 50,000,000 shares of preferred stock.

During the three months ended March 31, 2021, the Company:

i.issued 2,126 shares of common stock in connection with stock options exercised;
ii.issued 839 common shares through the Company's dividend reinvestment plan;
iii.issued 149,520 common shares in connection with restricted stock grants and the conversion of performance awards to restricted shares;
iv.withheld 74,726 common shares to satisfy employees' tax withholding and other liabilities; and
v.canceled 343 common shares of restricted stock upon forfeiture.

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Any deferred compensation related to the Company's stock option, restricted stock and performance award grants during the three months ended March 31, 2021 is not reflected on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2021, and will not be reflected until recognized as compensation cost.

In July 2020, the Company’s Board of Directors voted to terminate the Company’s prior $500,000,000 Stock Repurchase Program (the "Amended 2005 Stock Repurchase Program") and approved a new stock repurchase program under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000 (the "2020 Stock Repurchase Program"). Purchases of common stock under the 2020 Stock Repurchase Program may be exercised from time to time in the Company’s discretion and in such amounts as market conditions warrant. The timing and actual number of shares repurchased will depend on a variety of factors, including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. During the three months ended March 31, 2021, the Company had 0 repurchases of shares under this program. As of March 31, 2021, the Company had $316,148,000 remaining authorized for purchase under this program.

In May 2019, the Company commenced a fifth continuous equity program ("CEP V") under which the Company may sell (and/or enter into forward sale agreements for the sale of) up to $1,000,000,000 of its common stock from time to time. Actual sales will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company's common stock and determinations by the Company of the appropriate sources of funding for the Company. In conjunction with CEP V, the Company engaged sales agents who will receive compensation of up to 1.5% of the gross sales price for shares sold. The Company expects that, if entered into, it will physically settle each forward sale agreement on one or more dates specified by the Company on or prior to the maturity date of that particular forward sale agreement, in which case the Company will expect to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward agreement multiplied by the relevant forward sale price. However, the Company may also elect to cash settle or net share settle a forward sale agreement. In connection with each forward sale agreement, the Company will pay the relevant forward seller, in the form of a reduced initial forward sale price, a commission of up to 1.5% of the sales prices of all borrowed shares of common stock sold. During the three months ended March 31, 2021, the Company had 0 sales under the program. As of March 31, 2021, the Company had $752,878,000 remaining authorized for issuance under CEP V.

5.  Investments in Real Estate Entities

Investments in Unconsolidated Real Estate Entities

As of March 31, 2021, the Company had investments in 8 unconsolidated real estate entities with ownership interest percentages ranging from 20.0% to 50.0% and other unconsolidated investments. The Company accounts for its investments in unconsolidated real estate entities under the equity method of accounting. The significant accounting policies of the Company's unconsolidated real estate entities are consistent with those of the Company in all material respects.

The following is a combined summary of the financial position of the entities accounted for using the equity method discussed above as of the dates presented, including development joint ventures started and unconsolidated communities sold during the respective periods (dollars in thousands):
 3/31/202112/31/2020
 (unaudited)
Assets:  
Real estate, net$1,276,766 $1,249,730 
Other assets248,999 255,606 
Total assets$1,525,765 $1,505,336 
Liabilities and partners' capital:  
Mortgage notes payable, net (1)$750,370 $751,257 
Other liabilities172,082 163,808 
Partners' capital603,313 590,271 
Total liabilities and partners' capital$1,525,765 $1,505,336 
_________________________________
(1)    The Company has not guaranteed the outstanding debt, nor does the Company have any obligation to fund this debt should the unconsolidated entity be unable to do so.

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The following is a combined summary of the operating results of the entities accounted for using the equity method discussed above for the periods presented (dollars in thousands):
For the three months ended
 3/31/20213/31/2020
(unaudited)
Rental and other income$26,398 $33,072 
Operating and other expenses(13,631)(12,181)
Interest expense, net(7,668)(8,056)
Depreciation expense(8,478)(8,689)
Net (loss) income$(3,379)$4,146 
Company's share of net income (loss)$61 $1,705 
Amortization of excess investment and other(528)(530)
Equity in (loss) income from unconsolidated real estate investments$(467)$1,175 

Expensed Transaction, Development and Other Pursuit Costs

The Company capitalizes pre-development costs incurred in pursuit of new development opportunities for which the Company currently believes future development is probable ("Development Rights"). Future development of these Development Rights is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and the availability of capital. Initial pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development by the Company no longer probable, any non-recoverable capitalized pre-development costs are expensed. The Company expensed costs related to development pursuits not yet considered probable for development and the abandonment of Development Rights, as well as costs incurred in pursuing the acquisition or disposition of assets for which such acquisition and disposition activity did not occur. The amount for the three months ended March 31, 2021, was a net recovery of $170,000. The amount for the three months ended March 31, 2020 was a net expense of $3,334,000. These costs are included in expensed transaction, development and other pursuit costs, net of recoveries on the accompanying Condensed Consolidated Statements of Comprehensive Income. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Casualty and Impairment of Long-Lived Assets

In the Company's evaluation of its real estate portfolio for impairment, as discussed below, it considered the impact of the COVID-19 pandemic and did not identify any indicators of impairment as a result.

The Company evaluates its real estate and other long-lived assets for impairment when potential indicators of impairment exist. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property or long-lived asset may not be recoverable, the Company assesses its recoverability by comparing the carrying amount of the property or long-lived asset to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Company recognizes an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property or long-lived asset. Based on periodic tests of recoverability of long-lived assets, the Company did not recognize any impairment losses for the three months ended March 31, 2021 and 2020.

The Company evaluates its for-sale condominium inventory for potential indicators of impairment, considering whether the fair value of the individual for-sale condominium units exceeds the carrying value of those units. For-sale condominium inventory is stated at cost, unless the carrying amount of the inventory is not recoverable when compared to the fair value of each unit. The Company determines the fair value of its for-sale condominium inventory as the estimated sales price less direct costs to sell. For the three months ended March 31, 2021 and 2020, the Company did 0t recognize any impairment losses on its for-sale condominium inventory.

The Company assesses its portfolio of land held for both development and investment for impairment if the intent of the Company changes with respect to either the development of, or the expected holding period for, the land. During the three months ended March 31, 2021 and 2020, the Company did 0t recognize any impairment charges on its investment in land.

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The Company evaluates its unconsolidated investments for other than temporary impairment, considering both the extent and amount by which the carrying value of the investment exceeds the fair value, and the Company's intent and ability to hold the investment to recover its carrying value. The Company also evaluates its proportionate share of any impairment of assets held by unconsolidated investments. There were 0 other than temporary impairment losses recognized by any of the Company's investments in unconsolidated real estate entities during the three months ended March 31, 2021 and 2020.

6.  Real Estate Disposition Activities

The following real estate sale occurred during the three months ended March 31, 2021:

Community NameLocationPeriod of saleApartment homesGross sales priceGain on Disposition (1)
eaves StamfordStamford, CTQ121238$72,000 $53,775 
_________________________________
(1)    Gain on disposition was reported in gain on sale of communities on the accompanying Condensed Consolidated Statements of Comprehensive Income.

At March 31, 2021, the Company had 1 real estate asset that qualified as held for sale.

The Park Loggia

The Park Loggia, located in New York, NY, contains 172 for-sale residential condominiums and 66,000 square feet of commercial space. During the three months ended March 31, 2021, the Company sold 10 residential condominiums at The Park Loggia, for gross proceeds of $14,609,000, resulting in a gain in accordance with GAAP of $131,000. As of March 31, 2021, there were 92 residential condominiums remaining to be sold. The Company incurred $1,044,000 and $1,443,000 during the three months ended March 31, 2021 and 2020, respectively, in marketing, operating and administrative costs. All amounts are included in net for-sale condominium activity, on the accompanying Condensed Consolidated Statements of Comprehensive Income. As of March 31, 2021 and December 31, 2020, the unsold for-sale residential condominiums at The Park Loggia have an aggregate carrying value of $253,859,000 and $267,219,000, respectively, presented as for-sale condominium inventory on the accompanying Condensed Consolidated Balance Sheets.

7. Commitments and Contingencies

Lease Obligations

The Company owns 10 apartment communities and 2 commercial properties, located on land subject to ground leases expiring between May 2041 and March 2142. The Company has purchase options for all ground leases expiring prior to 2060. The ground leases for 9 of the 10 of the apartment communities and the rest of the ground leases are operating leases, with rental expense recognized on a straight-line basis over the lease term. In addition, the Company is party to 14 leases for its corporate and regional offices with varying terms through 2031, all of which are operating leases.

As of March 31, 2021 and December 31, 2020, the Company has total operating lease assets of $131,269,000 and $133,581,000, respectively, and lease obligations of $159,813,000 and $161,313,000, respectively, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets. The Company incurred costs of $3,827,000 and $3,917,000 for the three months ended March 31, 2021 and 2020, respectively, related to operating leases.

The Company has 1 apartment community located on land subject to a ground lease and 2 leases for portions of parking garages, adjacent to apartment communities, that are finance leases. As of March 31, 2021 and December 31, 2020, the Company has total finance lease assets of $21,632,000 and $21,685,000, respectively, and total finance lease obligations of $20,154,000 and $20,166,000, respectively, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets.

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8.  Segment Reporting

The Company's reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities. Annually as of January 1, the Company determines which of its communities fall into each of these categories and generally maintains that classification throughout the year for the purpose of reporting segment operations, unless disposition or redevelopment plans regarding a community change. In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

The Company's segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment's performance. The Company's chief operating decision maker ("CODM") is comprised of several members of its executive management team who use net operating income ("NOI") as the primary financial measure for Established Communities and Other Stabilized Communities. NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, expensed transaction, development and other pursuit costs, net of recoveries, interest expense, net, (gain) loss on extinguishment of debt, net, general and administrative expense, equity in income of unconsolidated real estate entities, depreciation expense, corporate income tax (benefit) expense, casualty and impairment (gain) loss, net, gain on sale of communities, (gain) loss on other real estate transactions, net, net for-sale condominium activity and net operating income from real estate assets sold or held for sale. The CODM evaluates the Company's financial performance on a consolidated residential and commercial basis, as the Company's commercial results attributable to the non-apartment components of the Company's mixed-use communities and other nonresidential operations represents 1.5% and 1.6% of total NOI for the three months ended March 31, 2021 and 2020, respectively. Although the Company considers NOI a useful measure of a community's or communities' operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP. NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

A reconciliation of NOI to net income for the three months ended March 31, 2021 and 2020 is as follows (dollars in thousands):
 For the three months ended
 3/31/20213/31/2020
Net income$142,234 $168,006 
Indirect operating expenses, net of corporate income24,470 22,799 
Expensed transaction, development and other pursuit costs, net of recoveries(170)3,334 
Interest expense, net52,613 55,914 
(Gain) loss on extinguishment of debt, net(122)9,170 
General and administrative expense17,352 17,320 
Equity in loss (income) of unconsolidated real estate entities467 (1,175)
Depreciation expense183,297 177,911 
Income tax (benefit) expense(755)91 
Gain on sale of communities(53,727)(24,436)
Gain on other real estate transactions, net(427)(43)
Net for-sale condominium activity913 (3,460)
Net operating income from real estate assets sold or held for sale(1,490)(9,918)
        Net operating income$364,655 $415,513 

The following is a summary of NOI from real estate assets sold or held for sale for the periods presented (dollars in thousands):
For the three months ended
3/31/20213/31/2020
Rental income from real estate assets sold or held for sale$2,303 $15,253 
Operating expenses from real estate assets sold or held for sale(813)(5,335)
Net operating income from real estate assets sold or held for sale$1,490 $9,918 

The primary performance measure for communities under development or redevelopment depends on the stage of completion.  While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.
15


The following table provides details of the Company's segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community's status at January 1, 2021. Segment information for the three months ended March 31, 2021 and 2020 has been adjusted to exclude the real estate assets that were sold from January 1, 2020 through March 31, 2021, or otherwise qualify as held for sale as of March 31, 2021, as described in Note 6, "Real Estate Disposition Activities."
 For the three months ended
 Total
revenue
NOIGross real estate (1)
For the period ended March 31, 2021 
Established   
New England$73,318 $46,267 $2,768,546 
Metro NY/NJ104,949 71,640 4,113,854 
Mid-Atlantic82,931 56,291 3,562,330 
Southeast Florida7,241 4,189 394,451 
Denver, CO5,653 4,019 319,667 
Pacific Northwest30,669 20,666 1,232,975 
Northern California90,406 64,063 3,443,896 
Southern California107,091 72,535 4,363,141 
Total Established502,258 339,670 20,198,860 
Other Stabilized29,993 18,464 1,279,134 
Development / Redevelopment15,704 6,521 2,041,887 
Land Held for DevelopmentN/AN/A184,058 
Non-allocated (2)877 N/A356,064 
Total$548,832 $364,655 $24,060,003 
For the period ended March 31, 2020 
Established   
New England$78,845 $52,269 $2,748,893 
Metro NY/NJ112,813 79,653 4,100,221 
Mid-Atlantic90,345 65,210 3,537,207 
Southeast Florida7,504 4,126 393,025 
Denver, CO5,170 3,340 318,624 
Pacific Northwest33,480 24,306 1,225,511 
Northern California106,877 81,879 3,425,170 
Southern California117,599 84,237 4,339,176 
Total Established552,633 395,020 20,087,827 
Other Stabilized28,585 18,396 1,260,482 
Development / Redevelopment4,789 2,097 1,413,772 
Land Held for DevelopmentN/AN/A38,115 
Non-allocated (2)1,007 N/A472,311 
Total$587,014 $415,513 $23,272,507 
__________________________________
(1)Does not include gross real estate assets held for sale of $75,814 as of March 31, 2021 and gross real estate either sold or classified as held for sale subsequent to March 31, 2020 of $435,561.
(2)Revenue represents third-party management, accounting, and developer fees and miscellaneous income which are not allocated to a reportable segment. Gross real estate includes the for-sale residential condominiums at The Park Loggia, as discussed in Note 6, "Real Estate Disposition Activities."

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9.  Stock-Based Compensation Plans

As part of its long-term compensation plans, the Company has granted stock options, performance awards and restricted stock. Details of the outstanding awards and activity are presented below.

Information with respect to stock options granted under the Company's Second Amended and Restated 2009 Equity Incentive Plan (the "2009 Plan") for the three months ended March 31, 2021, is as follows:
2009 Plan
shares
Weighted average
exercise price
per share
Outstanding at December 31, 202012,506 $129.35 
Exercised(2,126)121.78 
Granted (1)294,115 180.32 
Forfeited
Options Outstanding, March 31, 2021304,495 $178.64 
Options Exercisable, March 31, 202110,380 $130.90 

__________________________________
(1)Include 4,847 options resulting from recipient elections to receive a portion of earned performance awards in the form of stock options.

The Company granted stock options in 2021 with the exercise price equal to the closing stock price on the date of grant. The stock options awarded in 2021 will cliff vest in two years on March 1, 2023 and they have a ten-year term. The Company used the Black-Scholes Option Pricing model to determine the grant date fair value of options. The assumptions used are as follows:
2021
Dividend yield3.5%
Estimated volatility27.1%
Risk free rate0.81%
Expected life of options5 years
Estimated fair value$28.64

Information with respect to performance awards granted is as follows:
Performance awardsWeighted average grant date fair value per award
Outstanding at December 31, 2020241,921 $195.13 
  Granted (1)137,929 191.10 
  Change in awards based on performance (2)(37,469)156.00 
  Converted to common shares(56,545)156.00 
  Forfeited
Outstanding at March 31, 2021285,836 $206.05 
__________________________________
(1)The amount of common shares that ultimately may be earned is based on the total shareholder return metrics related to the Company's common stock for 69,012 performance awards and financial metrics related to operating performance, net asset value and leverage metrics of the Company for 68,917 performance awards.
(2)Represents the change in the number of performance awards earned based on performance achievement for the performance period.

The Company used a Monte Carlo model to assess the compensation cost associated with the portion of the performance awards granted in 2021 for which achievement will be determined by using total shareholder return measures. The assumptions used are as follows:
17

2021
Dividend yield3.5%
Estimated volatility over the life of the plan (1)22.0% - 49.0%
Risk free rate0.06% - 0.38%
Estimated performance award value based on total shareholder return measure$213.16
__________________________________
(1)Estimated volatility over the life of the plan is using 50% historical volatility and 50% implied volatility.

For the portion of the performance awards granted in 2021 for which achievement will be determined by using financial metrics, the compensation cost was based on a weighted average grant date value of $178.37, and the Company's estimate of corporate achievement for the financial metrics.

Information with respect to restricted stock granted is as follows:
Restricted stock sharesRestricted stock shares weighted average grant date fair value per shareRestricted stock shares converted from performance awards
Outstanding at December 31, 2020131,724 $203.28 146,319 
  Granted - restricted stock shares92,975 175.83 
  Vested - restricted stock shares(65,213)192.64 (71,535)
  Forfeited(343)202.25 
Outstanding at March 31, 2021159,143 $191.60 74,784 

Total employee stock-based compensation cost recognized in income was $5,247,000 and $5,039,000 for the three months ended March 31, 2021 and 2020, respectively, and total capitalized stock-based compensation cost was $1,903,000 and $3,178,000 for the three months ended March 31, 2021 and 2020, respectively. At March 31, 2021, there was a total unrecognized compensation cost of $68,665,000 for unvested restricted stock, stock options and performance awards, which does not include forfeitures, and is expected to be recognized over a weighted average period of 2.5 years. Forfeitures are included in compensation cost as they occur.

10.  Related Party Arrangements

Unconsolidated Entities

The Company manages unconsolidated real estate entities for which it receives asset management, property management, development and redevelopment fee revenue. From these entities, the Company earned fees of $877,000 and $1,007,000 for the three months ended March 31, 2021 and 2020, respectively. In addition, the Company had outstanding receivables associated with its property and construction management roles of $3,686,000 and $5,408,000 as of March 31, 2021 and December 31, 2020, respectively.

Director Compensation

The Company recorded non-employee director compensation expense relating to restricted stock grants and deferred stock units in the amount of $465,000 and $455,000 in the three months ended March 31, 2021 and 2020, respectively, as a component of general and administrative expense. Deferred compensation relating to these restricted stock grants and deferred stock units to non-employee directors was $227,000 and $614,000 on March 31, 2021 and December 31, 2020, respectively, reported as a component of prepaid expenses and other assets on the accompanying Condensed Consolidated Balance Sheets.

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11.  Fair Value

Financial Instruments Carried at Fair Value

Derivative Financial Instruments

The Company uses interest rate swap and interest rate cap agreements to manage its interest rate risk. These instruments are carried at fair value in the Company's financial statements. In adjusting the fair value of its derivative contracts for the effect of counterparty nonperformance risk, the Company has considered the impact of its net position with a given counterparty, as well as any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group. As part of its on-going control procedures, the Company monitors the credit ratings of counterparties and the exposure of the Company to any single entity, thus reducing credit risk concentration. The Company believes the likelihood of realizing losses from counterparty nonperformance is remote. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, such as interest rate, term to maturity and volatility, the credit valuation adjustments associated with its derivatives use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of March 31, 2021, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined it is not significant. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.

The following table summarizes the consolidated derivative positions at March 31, 2021 (dollars in thousands):
Non-designated Hedges
Interest Rate Caps
Notional balance$410,950
Weighted average interest rate (1)1.7 %
Weighted average swapped/capped interest rate6.1 %
Earliest maturity dateJuly 2021
Latest maturity dateFebruary 2026
____________________________________
(1)For debt hedged by interest rate caps, represents the weighted average interest rate on the hedged debt prior to any impact of the associated interest rate caps.

During the three months ended March 31, 2021, the Company terminated $150,000,000 of forward interest rate swap agreements for which hedge accounting was ceased in 2020 (the "Swaps"), receiving a payment of $6,962,000. The Company recognized $2,894,000 of these proceeds as a gain in 2020, and $2,654,000 of these proceeds as a gain during the three months ended March 31, 2021 included in interest expense, net on the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company is party to 5 derivatives not designated as hedges at March 31, 2021 for which the fair value changes for the three months ended March 31, 2021 and 2020 were not material.

The following table summarizes the deferred losses reclassified from accumulated other comprehensive loss as a component of interest expense, net (dollars in thousands):
For the three months ended
3/31/20213/31/2020
Cash flow hedge losses reclassified to earnings$2,367 $1,949 

The Company anticipates reclassifying approximately $9,467,000 of net hedging losses from accumulated other comprehensive loss into earnings within the next 12 months as an offset to the hedged item during this period.

Redeemable Noncontrolling Interests

The Company issued units of limited partnership interest in a DownREIT which provides the DownREIT limited partners the ability to present all or some of their units for redemption for cash as determined by the partnership agreement. Under the
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DownREIT agreement, for each limited partnership unit, the limited partner is entitled to receive cash in the amount equal to the fair value of the Company's common stock on or about the date of redemption. In lieu of cash redemption, the Company may elect to exchange such units for an equal number of shares of the Company's common stock. The limited partnership units in the DownREIT are valued using the market price of the Company's common stock, a Level 1 price under the fair value hierarchy.

Financial Instruments Not Carried at Fair Value

Cash and Cash Equivalents

Cash and cash equivalent balances are held with various financial institutions within accounts designed to preserve principal. The Company monitors credit ratings of these financial institutions and the concentration of cash and cash equivalent balances with any one financial institution and believes the likelihood of realizing material losses related to cash and cash equivalent balances is remote. Cash and cash equivalents are carried at their face amounts, which reasonably approximate their fair values and are Level 1 within the fair value hierarchy.

Other Financial Instruments

Rents and other receivables and prepaid expenses, accounts and construction payable and accrued expenses and other liabilities are carried at their face amounts, which reasonably approximate their fair values.

Indebtedness

The Company values its fixed rate unsecured notes using quoted market prices, a Level 1 price within the fair value hierarchy. The Company values its mortgage notes payable, variable rate unsecured notes, Term Loans and outstanding amounts under the Credit Facility using a discounted cash flow analysis on the expected cash flows of each instrument. This analysis reflects the contractual terms of the instrument, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The process also considers credit valuation adjustments to appropriately reflect the Company's nonperformance risk. The Company has concluded that the value of its mortgage notes payable, variable rate unsecured notes, Term Loans and outstanding amounts under the Credit Facility are Level 2 prices as the majority of the inputs used to value its positions fall within Level 2 of the fair value hierarchy.

Financial Instruments Measured/Disclosed at Fair Value on a Recurring Basis

The following tables summarize the classification between the three levels of the fair value hierarchy of the Company's financial instruments measured/disclosed at fair value on a recurring basis (dollars in thousands):
3/31/2021
DescriptionTotal Fair ValueQuoted Prices
in Active
Markets for Identical Asset
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Non Designated Hedges
Interest Rate Caps$88 $— $88 $— 
DownREIT units(1,384)(1,384)— — 
Indebtedness
Fixed rate unsecured notes(6,904,309)(6,904,309)— — 
Mortgage notes payable, variable rate unsecured notes and Term Loans(1,008,042)— (1,008,042)— 
Total$(7,913,647)$(6,905,693)$(1,007,954)$
20

12/31/2020
DescriptionTotal Fair ValueQuoted Prices
in Active
Markets for Identical Asset
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Non Designated Hedges
Interest Rate Caps$$— $$— 
Interest Rate Swaps - Assets4,308 — 4,308 — 
DownREIT units(1,203)(1,203)— — 
Indebtedness
Fixed rate unsecured notes(7,271,799)(7,271,799)— — 
Mortgage notes payable, variable rate unsecured notes and Term Loans(1,043,976)— (1,043,976)— 
Total$(8,312,664)$(7,273,002)$(1,039,662)$

12.  Subsequent Events

The Company has evaluated subsequent events through the date on which this Form 10-Q was filed, the date on which these financial statements were issued, and identified the items below for discussion.

In April 2021, the Company:

acquired Avalon Arundel Crossing East located in Linthicum Heights, MD, containing 384 apartment homes for a purchase price of $119,000,000; and

entered into an agreement to sell 1 operating community containing 299 apartment homes and net real estate of $19,558,000 as of March 31, 2021, resulting in the community qualifying as held for sale subsequent to March 31, 2021. The Company expects to complete the sale in the second quarter of 2021.

As of May 5, 2021, the Company has $226,000,000 outstanding under the Credit Facility.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide an understanding of our business, financial condition and results of operations. This MD&A should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under "Forward-Looking Statements" included in this report. Actual results or developments could differ materially from those projected in such statements as a result of the factors described under "Forward-Looking Statements" as well as the risk factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020 (the "Form 10-K") and in Part II, Item 1A. "Risk Factors" in this report.

Capitalized terms used without definition have the meanings provided elsewhere in this Form 10-Q.

Executive Overview

Business Description

We develop, redevelop, acquire, own and operate multifamily apartment communities in New England, the New York/New Jersey metro area, the Mid-Atlantic, Southeast Florida, Denver, Colorado, the Pacific Northwest, and Northern and Southern California. We focus on leading metropolitan areas that we believe historically have been characterized by growing employment in high wage sectors of the economy, higher cost of home ownership and a diverse and vibrant quality of life. We believe these market characteristics have offered and will continue in the future to offer the opportunity for superior risk-adjusted returns over the long-term on apartment community investments relative to other markets that do not have these characteristics. We seek to create long-term shareholder value by accessing capital on cost effective terms; deploying that capital to develop, redevelop and acquire apartment communities in our selected markets; leveraging our scale and competencies in technology and data science to operate apartment communities; and selling communities when they no longer meet our long-term investment strategy or when pricing is attractive.

Our strategic vision is to be the leading apartment company in select U.S. markets, providing a range of distinctive living experiences that customers value. We pursue this vision by targeting what we believe are among the best markets and submarkets, leveraging our strategic capabilities in market research and consumer insight and being disciplined in our capital allocation and balance sheet management. Our communities are predominately upscale and generally command among the highest rents in their markets. However, we also pursue the ownership and operation of apartment communities that target a variety of customer segments and price points, consistent with our goal of offering a broad range of products and services. We regularly evaluate the market allocation of our investments by current market value and share of total revenue and NOI, as well as relative asset value and submarket positioning.

First Quarter 2021 Highlights

Net income attributable to common stockholders for the three months ended March 31, 2021 was $142,223,000, a decrease of $25,748,000, or 15.3%, as compared to the prior year period. The decrease is primarily due to a decrease in NOI from Established Communities, partially offset by an increase in net gains of real estate dispositions in the current year period, a loss on extinguishment of debt in the prior year period and an increase in NOI from Development Communities in the current year period.

Established Communities NOI attributable to our apartment rental operations, including parking and other ancillary residential revenue ("Residential"), for the three months ended March 31, 2021 was $335,617,000, a decrease of $54,543,000, or 14.0%, from the prior year period. The decrease was due to a decrease in Residential rental revenues of $49,473,000, or 9.1%, from the prior year period, of which $12,428,000 of the decline was due to an increase in Residential uncollectible lease revenue, as well as an increase in Residential property operating expenses of $4,973,000, or 3.2%, from the prior year period.


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COVID-19 Pandemic

We have taken various actions in response to the COVID-19 pandemic to adjust our business operations and to address the health and safety of our residents and associates. We adopted varying measures to help mitigate the financial impact arising from the national emergency on our residents, including providing flexible lease renewal options, creating payment plans for residents who are unable to pay their rent because they are impacted by this national emergency and, in certain jurisdictions, waiving late fees and certain other customary fees associated with apartment rentals. To the extent still implemented, we may discontinue these measures at any time except where required by law.

The impact on our consolidated results of operations from COVID-19 for 2021 and periods beyond will depend on the duration and severity of the pandemic, the effectiveness of vaccines and the rate of vaccination, the duration and nature of governmental responses to contain the spread of the disease and cushion the impact on consumers, the responses of consumers and businesses with respect to living and work preferences, and how quickly and to what extent normal economic and operating conditions can resume. The current and potential future impacts of the COVID-19 pandemic on our business, particularly on (i) rent levels, collectibility of rents, occupancy and the extent to which we waive certain other customary fees associated with our apartment rental business and (ii) development timing and volume, mean that our historical results of operations and financial condition may not be indicative of future results of operations and financial condition.

The COVID-19 pandemic has impacted our rental operations including (i) revenues and expenses, as well as (ii) our collections and associated outstanding receivables. For further discussion see "Results of Operations." The following table presents the percentage of (i) apartment base rent charged to residents and (ii) other rentable items, including parking and storage rent, along with pet and other fees in accordance with residential leases, that has been collected ("Collected Residential Revenue") for our 2021 Established Communities for the three months ended June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021 (unaudited). Collected Residential Revenue excludes transactional and other fees.
 At quarter end (1)(2)At April 30, 2021 (3)(4)
Q2 202095.4%98.3%
Q3 202095.1%97.5%
Q4 202094.8%96.9%
Q1 202194.8%95.8%
_________________________
(1)Collections presented reflect our 2021 Established Communities and exclude commercial revenue, which was 0.6% and 1.1% of our 2020 and 2019 Established Communities' total revenue, respectively.
(2)The Collected Residential Revenue percentage as of June 30, 2020 for Q2 2020, September 30, 2020 for Q3 2020, December 31, 2020 for Q4 2020 and March 31, 2021 for Q1 2021, respectively.
(3)The percentage of Collected Residential Revenue as of April 30, 2021.
(4)Collected Residential Revenue for April 2021 as of April 30, 2021 was 93.4%.

The collection rates are based on individual resident activity as reflected in our property management systems and are presented to provide information about collections trends during the COVID-19 pandemic. Prior to the COVID-19 pandemic, the collections information provided was not routinely produced for internal use by senior management or publicly disclosed by the Company and is a result of analysis that is not subject to internal controls over financial reporting. This information is not prepared in accordance with GAAP, does not reflect GAAP revenue or cash flow metrics and may be subject to adjustment in preparing GAAP revenue and cash flow metrics. Additionally, this information should not be interpreted as predicting the Company’s financial performance, results of operations or liquidity for any period. At March 31, 2021, our outstanding rent receivable balance for residential and commercial tenants, net of reserves, decreased to $15,104,000 from $18,159,000 at December 31, 2020.

First Quarter 2021 Development Highlights

At March 31, 2021, we owned or held a direct or indirect interest in:

13 wholly-owned communities under construction, which are expected to contain 3,757 apartment homes with a projected total capitalized cost of $1,349,000,000, and two unconsolidated communities under construction, which are expected to contain 803 apartment homes with a projected total capitalized cost of $386,000,000.

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Land or rights to land on which we expect to develop an additional 25 apartment communities that, if developed as expected, will contain 8,075 apartment homes and will be developed for an aggregate total capitalized cost of $3,196,000,000.

During the three months ended March 31, 2021, we sold one wholly-owned operating community containing 238 apartment homes for $72,000,000, and our gain in accordance with GAAP was $53,775,000. In addition, we sold 10 residential condominiums at The Park Loggia, for gross proceeds of $14,609,000, resulting in a gain in accordance with GAAP of $131,000.

In April 2021, we acquired Avalon Arundel Crossing East located in Linthicum Heights, MD. Avalon Arundel Crossing East contains 384 apartment homes and was acquired for a purchase price of $119,000,000.


Communities Overview

Our real estate investments consist primarily of current operating apartment communities, consolidated and unconsolidated communities in various stages of development ("Development Communities" and "Unconsolidated Development Communities") and Development Rights (as defined below). Our current operating communities are further classified as Established Communities, Other Stabilized Communities, Lease-Up Communities, Redevelopment Communities and Unconsolidated Communities. While we generally establish the classification of communities on an annual basis, we update the classification of communities during the calendar year to the extent that our plans with regard to the disposition or redevelopment of a community change. The following is a description of each category:

Current Communities are categorized as Established, Other Stabilized, Lease-Up, Redevelopment, or Unconsolidated according to the following attributes:

Established Communities (also known as Same Store Communities) are consolidated communities in the markets where we have a significant presence (New England, New York/New Jersey, Mid-Atlantic, Southeast Florida, Denver, Colorado, Pacific Northwest, and Northern and Southern California), and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy as of the beginning of the respective prior year period. For the three month periods ended March 31, 2021 and 2020, Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2020, are not conducting or are not probable to conduct substantial redevelopment activities and are not held for sale as of March 31, 2021 or probable for disposition to unrelated third parties within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

Other Stabilized Communities are all other completed consolidated communities that have stabilized occupancy, as defined above, as of January 1, 2021, or which were acquired subsequent to January 1, 2020. Other Stabilized Communities excludes communities that are conducting or are probable to conduct substantial redevelopment activities within the current year, as defined below.

Lease-Up Communities are consolidated communities where construction has been complete for less than one year and that do not have stabilized occupancy.

Redevelopment Communities are consolidated communities where substantial redevelopment is in progress or is probable to begin during the current year. Redevelopment is considered substantial when (i) capital invested during the reconstruction effort is expected to exceed the lesser of $5,000,000 or 10% of the community's pre-redevelopment gross cost basis and (ii) physical occupancy is below or is expected to be below 90% during, or as a result of, the redevelopment activity.

Unconsolidated Communities are communities that we have an indirect ownership interest in through our investment interest in an unconsolidated joint venture.

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Development Communities are consolidated communities that are under construction and for which a certificate or certificates of occupancy for the entire community have not been received. These communities may be partially complete and operating.

Unconsolidated Development Communities are communities that are under construction and for which a certificate or certificates of occupancy for the entire community have not been received that we have an indirect ownership interest in through our investment interest in an unconsolidated joint venture. These communities may be partially complete and operating.

Development Rights are development opportunities in the early phase of the development process where we either have an option to acquire land or enter into a leasehold interest, where we are the buyer under a long-term conditional contract to purchase land, where we control the land through a ground lease or own land to develop a new community, or where we are the designated developer in a public-private partnership. We capitalize related pre-development costs incurred in pursuit of new developments for which we currently believe future development is probable.

We currently lease our corporate headquarters located in Arlington, Virginia, as well as our other regional and administrative offices under operating leases.

As of March 31, 2021, communities that we owned or held a direct or indirect interest in were classified as follows:
Number of
communities
Number of
apartment homes
Current Communities  
Established Communities:  
New England37 9,536 
Metro NY/NJ42 12,008 
Mid-Atlantic39 13,645 
Southeast Florida1,214 
Denver, CO1,086 
Pacific Northwest18 4,861 
Northern California39 11,827 
Southern California57 16,761 
Total Established240 70,938 
Other Stabilized Communities:  
New England1,014 
Metro NY/NJ2,219 
Mid-Atlantic— — 
Southeast Florida— — 
Denver, CO— — 
Pacific Northwest590 
Northern California289 
Southern California299 
Total Other Stabilized15 4,411 
Lease-Up Communities2,415 
Redevelopment Communities344 
Unconsolidated Communities12 3,119 
Total Current Communities275 81,227 
Development Communities13 3,757 
Unconsolidated Development Communities803 
Total Communities290 85,787 
Development Rights25 8,075 
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Results of Operations

As discussed above under “Executive Overview - COVID-19 Pandemic” and elsewhere in this report, the COVID-19 pandemic has affected our business, and may continue to do so. See also Part II, Item 1A, “Risk Factors.” Our year-over-year operating performance is primarily affected by both overall and individual geographic market conditions and apartment fundamentals and is reflected in changes in NOI of our Established Communities; NOI derived from acquisitions, development completions and development under construction and in lease-up; loss of NOI related to disposed communities; and capital market and financing activity. A comparison of our operating results for the three months ended March 31, 2021 and 2020 follows (unaudited, dollars in thousands).
 For the three months ended
 3/31/20213/31/2020$ Change% Change
Revenue:    
Rental and other income$550,258 $601,260 $(51,002)(8.5)%
Management, development and other fees877 1,007 (130)(12.9)%
Total revenue551,135 602,267 (51,132)(8.5)%
Expenses:    
Direct property operating expenses, excluding property taxes114,707 108,797 5,910 5.4 %
Property taxes69,410 67,026 2,384 3.6 %
Total community operating expenses184,117 175,823 8,294 4.7 %
Corporate-level property management and other indirect operating expenses(25,343)(23,812)(1,531)6.4 %
Expensed transaction, development and other pursuit costs, net of recoveries170 (3,334)3,504 N/A (1)
Interest expense, net(52,613)(55,914)3,301 (5.9)%
Gain (loss) on extinguishment of debt, net122 (9,170)9,292 N/A (1)
Depreciation expense(183,297)(177,911)(5,386)3.0 %
General and administrative expense(17,352)(17,320)(32)0.2 %
Equity in (loss) income of unconsolidated real estate entities(467)1,175 (1,642)N/A (1)
Gain on sale of communities53,727 24,436 29,291 119.9 %
Gain on other real estate transactions, net427 43 384 893.0 %
Net for-sale condominium activity(913)3,460 (4,373)N/A (1)
Income before income taxes141,479 168,097 (26,618)(15.8)%
Income tax benefit (expense)755 (91)846 N/A (1)
Net income142,234 168,006 (25,772)(15.3)%
Net income attributable to noncontrolling interests(11)(35)24 (68.6)%
Net income attributable to common stockholders$142,223 $167,971 $(25,748)(15.3)%
_________________________
(1)Percent change is not meaningful.

Net income attributable to common stockholders decreased $25,748,000, or 15.3%, to $142,223,000 for the three months ended March 31, 2021 as compared to the prior year period. The decrease for the three months ended March 31, 2021 is primarily due to a decrease in NOI from Established Communities, partially offset by an increase in gains of real estate dispositions in the current year period, a loss on extinguishment of debt in the prior year period and an increase in NOI from Development Communities in the current year period.
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NOI is considered by management to be an important and appropriate supplemental performance measure to net income because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easier comparison of the operating performance of individual assets or groups of assets. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impact to overhead as a result of acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. We define NOI as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, expensed transaction, development and other pursuit costs, net of recoveries, interest expense, net, (gain) loss on extinguishment of debt, net, general and administrative expense, equity in (loss) income of unconsolidated real estate entities, depreciation expense, corporate income tax (benefit) expense, casualty and impairment (gain) loss, net, gain on sale of communities, (gain) loss on other real estate transactions, net, net for-sale condominium activity and net operating income from real estate assets sold or held for sale.

NOI does not represent cash generated from operating activities in accordance with GAAP, and NOI should not be considered an alternative to net income as an indication of our performance. NOI should also not be considered an alternative to net cash flow from operating activities, as determined by GAAP, as a measure of liquidity, nor is NOI indicative of cash available to fund cash needs. Residential NOI represents results attributable to the Company's apartment rental operations, including parking and other ancillary residential revenue. Reconciliations of NOI and Residential NOI for the three months ended March 31, 2021 and 2020 to net income for each period are as follows (unaudited, dollars in thousands):
 For the three months ended
 3/31/20213/31/2020
Net income$142,234 $168,006 
Indirect operating expenses, net of corporate income24,470 22,799 
Expensed transaction, development and other pursuit costs, net of recoveries(170)3,334 
Interest expense, net52,613 55,914 
(Gain) loss on extinguishment of debt, net(122)9,170 
General and administrative expense17,352 17,320 
Equity in loss (income) of unconsolidated real estate entities467 (1,175)
Depreciation expense183,297 177,911 
Income tax (benefit) expense(755)91 
Gain on sale of real estate assets(53,727)(24,436)
Gain on other real estate transactions, net(427)(43)
Net for-sale condominium activity913 (3,460)
Net operating income from real estate assets sold or held for sale(1,490)(9,918)
NOI364,655 415,513 
Commercial NOI (1)(5,377)(6,792)
Residential NOI$359,278 $408,721 
_________________________
(1)Represents results attributable to the non-apartment components of our mixed-use communities and other non-residential operations ("Commercial").

The Residential NOI changes for the three months ended March 31, 2021, compared to the prior year period, consist of changes in the following categories (unaudited, dollars in thousands):
 For the three months ended
 3/31/2021
  
Established Communities$(54,543)
Other Stabilized Communities633 
Development / Redevelopment4,467 
Total$(49,443)

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Rental and other income decreased $51,002,000, or 8.5%, for the three months ended March 31, 2021 compared to the prior year period. The decrease for the three months ended March 31, 2021 is primarily due to an increase of $14,465,000 in uncollectible lease revenue as a result of the COVID-19 pandemic, of which $13,568,000 relates to Residential and $897,000 relates to Commercial, as well as decreased rental rates and occupancy at our Established Communities, partially offset by additional rental income generated from development completions and development under construction and in lease-up.

As a result of the pandemic, we increased our use of residential concessions during 2020 and the three months ended March 31, 2021. The increased concessions, which are amortized on a straight-line basis over the life of the respective leases (generally one year), contributed to the overall decline in our rental revenue during the three months ended March 31, 2021 and will continue to impact rental revenue throughout 2021. The amortization of residential concessions increased by $14,983,000 in the three months ended March 31, 2021 as compared to the prior year period, and the remaining net unamortized balance of residential concessions as of March 31, 2021 was $37,095,000.

As discussed elsewhere in this report, the COVID-19 impact and related economic, regulatory and operating impacts are likely to continue to adversely affect our rental revenue during the COVID-19 pandemic. If job losses in our markets and nationally continue, this would likely continue to decrease our ability to maintain and/or increase rents and/or maintain occupancy at our historical levels. Deteriorating financial conditions among our residents and commercial tenants, as well as regulations that limit our ability to evict residents and tenants, may continue to result in higher than normal uncollectible lease revenue. The pandemic may also continue to depress demand among consumers for our apartments for a variety of other reasons, including the following: consumers whose income has declined, who are working from home remotely or who cannot freely access neighborhood amenities like restaurants, gyms and entertainment venues, may decide during the pandemic to live in markets or submarkets that are less costly than ours; low interest rates that are caused by government response to the pandemic may encourage consumers who would otherwise rent to seek out home ownership; and various sources of demand for our apartments (e.g., students, corporate apartment homes, seasonal job-related demand as in the entertainment industry) may remain below pre-pandemic levels.

Consolidated Communities — The weighted average number of occupied apartment homes for consolidated communities decreased to 74,275 apartment homes for the three months ended March 31, 2021, compared to 74,491 homes for the prior year period. The weighted average monthly rental revenue per occupied apartment home decreased to $2,466 for the three months ended March 31, 2021 compared to $2,684 in the prior year period.

For Established Communities, rental revenue decreased $50,278,000, or 9.1%, for the three months ended March 31, 2021, compared to the prior year period. Residential rental revenue decreased $49,473,000, or 9.1%, for the three months ended March 31, 2021, compared to the prior year period, with uncollectible lease revenue contributing $12,428,000 of this decrease. Commercial rental revenue decreased $805,000 or 14.3%, for the three months ended March 31, 2021, compared to the prior year period, with uncollectible lease revenue contributing $435,000 of this decrease.

The following table presents the change in Residential rental revenue for Established Communities for the three months ended March 31, 2021, compared to the prior year period (unaudited):
For the three months ended
3/31/2021
Residential rental revenue
Lease rates(3.6)%
Concessions and other discounts(2.4)%
Economic Occupancy(0.6)%
Other rental revenue(0.2)%
Uncollectible lease revenue(2.3)%
Total Residential rental revenue(9.1)%

The following table presents the change in Residential rental revenue, including the attribution of the change between rental rates and Economic Occupancy, for Established Communities for the three months ended March 31, 2021 (unaudited).
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For the three months ended March 31, 2021
Residential rental revenue (000s)Average rental ratesEconomic Occupancy (1)
$ Change% Change% Change% Change
202120202021 to
2020
2021 to
2020
202120202021 to
2020
202120202021 to
2020
New England$73,359 $78,726 $(5,367)(6.8)%$2,692 $2,886 (6.7)%95.2 %95.3 %(0.1)%
Metro NY/NJ103,266 111,552 (8,286)(7.4)%2,989 3,224 (7.3)%95.9 %96.0 %(0.1)%
Mid-Atlantic82,250 89,335 (7,085)(7.9)%2,115 2,263 (6.5)%95.0 %96.4 %(1.4)%
Southeast Florida7,227 7,490 (263)(3.5)%2,078 2,209 (5.9)%95.5 %93.1 %2.4 %
Denver, CO5,652 5,169 483 9.3 %1,815 1,724 5.3 %95.6 %91.6 %4.0 %
Pacific Northwest29,741 32,438 (2,697)(8.3)%2,151 2,291 (6.1)%94.8 %97.0 %(2.2)%
Northern California89,647 105,837 (16,190)(15.3)%2,637 3,075 (14.2)%95.8 %96.9 %(1.1)%
Southern California105,965 116,033 (10,068)(8.7)%2,193 2,393 (8.4)%96.1 %96.4 %(0.3)%
Total Established$497,107 $546,580 $(49,473)(9.1)%$2,443 $2,669 (8.5)%95.6 %96.2 %(0.6)%
_________________________________
(1)     Economic occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community's gross revenue. Economic occupancy is defined as gross potential revenue less vacancy loss, as a percentage of gross potential revenue. Gross potential revenue is determined by valuing occupied homes at leased rates and vacant homes at market rents. Vacancy loss is determined by valuing vacant units at current market rents.

Direct property operating expenses, excluding property taxes, increased $5,910,000, or 5.4%, for the three months ended March 31, 2021, compared to the prior year period. The increase for the three months ended March 31, 2021 is primarily due to the addition of newly developed apartment communities, as well as the timing of repairs and maintenance projects previously delayed due to the COVID-19 pandemic.

For Established Communities, Residential direct property operating expenses, excluding property taxes, represents 99.9% of total Established Communities operating expenses for the three months ended March 31, 2021. Residential direct property operating expenses, excluding property taxes, increased $3,954,000, or 4.0%, for the three months ended March 31, 2021 compared to the prior year period. The increase for the three months ended March 31, 2021 is primarily due to increased turnover and the timing of repairs and maintenance projects previously delayed due to the COVID-19 pandemic.

Property taxes increased $2,384,000, or 3.6%, for the three months ended March 31, 2021, compared to the prior year period. The increase for the three months ended March 31, 2021 are primarily due to the addition of newly developed apartment communities and increased assessments for the Company's stabilized portfolio, partially offset by decreased property taxes from dispositions.

For Established Communities, Residential property taxes represents 98.8% of total Established Communities property taxes for the three months ended March 31, 2021. Residential property taxes increased $1,019,000, or 1.7%, for the three months ended March 31, 2021, compared to the prior year period. The increase for the three months ended March 31, 2021 is primarily due to increased assessments across the portfolio in the current year period, partially offset by a successful appeal in Metro NY/NJ in the current year period.

Corporate-level property management and other indirect operating expenses increased $1,531,000, or 6.4%, for the three months ended March 31, 2021, compared to the prior year period, primarily due to increased compensation related costs and costs related to an increased investment in technology initiatives to improve efficiency in services for resident and prospects in the current year period.

Expensed transaction, development and other pursuit costs, net of recoveries primarily reflect costs incurred for development pursuits not yet considered probable for development, as well as the abandonment of Development Rights and costs related to abandoned acquisition and disposition pursuits and any recoveries of costs incurred. These costs can be volatile, particularly in periods of increased acquisition pursuit activity, periods of economic downturn or when there is limited access to capital, and therefore may vary significantly from year to year. In addition, the timing for recoveries will not always align with the timing for expensing an abandoned pursuit. Expensed transaction, development and other pursuit costs, net of recoveries, decreased $3,504,000 for the three months ended March 31, 2021 as compared to the prior year period.

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Interest expense, net decreased $3,301,000, or 5.9%, for the three months ended March 31, 2021, compared to the prior year period. This category includes interest costs offset by capitalized interest pertaining to development and redevelopment activity, amortization of premium/discount on debt, interest income and any mark to market impact from derivatives not in qualifying hedge relationships. The decrease for the three months ended March 31, 2021 was primarily due to a gain on the fair value change of derivatives not in qualifying hedge relationships, lower overall effective rates on unsecured indebtedness and a combination of a decrease in variable rates on, and amounts of, secured indebtedness. This was partially offset by a decrease in capitalized interest and an increase in outstanding unsecured indebtedness.

(Gain) loss on extinguishment of debt, net reflects prepayment penalties, the write-off of unamortized deferred financing costs and premiums/discounts from our debt repurchase and retirement activity, or payments to acquire our outstanding debt at amounts above or below the carrying basis of the debt acquired. The gain of $122,000 for the three months ended March 31, 2021 was due to the non-cash write-off of unamortized premium associated with the repayment of a secured note during the period at par, ahead of its scheduled maturity. The loss of $9,170,000 for the three months ended March 31, 2020 is due to the repayments of unsecured debt during the period.

Depreciation expense increased $5,386,000, or 3.0%, for the three months ended March 31, 2021, as compared to the prior year period, primarily due to the addition of newly developed apartment communities, partially offset by dispositions.

Equity in (loss) income of unconsolidated real estate entities decreased $1,642,000 for the three months ended March 31, 2021, compared to the prior year period. The decrease for the three months ended March 31, 2021 is primarily due to decreased NOI from the ventures in the current year period and the sale of one unconsolidated community in the prior year.

Gain on sale of communities increased by $29,291,000 for the three months ended March 31, 2021, compared to the prior year period. The amount of gain realized in a given period depends on many factors, including the number of communities sold, the size and carrying value of the communities sold and the market conditions in the local area.

Net for-sale condominium activity is a net expense of $913,000 for the three months ended March 31, 2021 and a net gain of $3,460,000 for the three months ended March 31, 2020, and is comprised of the net gain before taxes on the sale of condominiums at The Park Loggia and associated marketing, operating and administrative costs. During the three months ended March 31, 2021, we sold 10 residential condominiums at The Park Loggia, for gross proceeds of $14,609,000, resulting in a gain in accordance with GAAP of $131,000, compared to the three months ended March 31, 2020 during which we sold 36 residential condominiums at The Park Loggia for gross proceeds of $105,607,000 resulting in a gain in accordance with GAAP of $4,903,000. In addition, we incurred $1,044,000 and $1,443,000 for the three months ended March 31, 2021 and 2020, respectively, in marketing, operating and administrative costs.

Income tax benefit (expense) for the three months ended March 31, 2021 consists of a benefit of $755,000 which was primarily due to a reduction in our 2021 taxes resulting from activity in our taxable REIT subsidiaries.

Reconciliation of Non-GAAP Financial Measures

Consistent with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts® ("Nareit"), we calculate Funds from Operations Attributable to Common Stockholders ("FFO") as net income or loss attributable to common stockholders computed in accordance with GAAP, adjusted for:

gains or losses on sales of previously depreciated operating communities;
cumulative effect of change in accounting principle;
impairment write-downs of depreciable real estate assets;
write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates;
depreciation of real estate assets; and
similar adjustments for unconsolidated partnerships and joint ventures, including those from a change in control.

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FFO and FFO adjusted for non-core items, or "Core FFO," as defined below, are generally considered by management to be appropriate supplemental measures of our operating and financial performance. In calculating FFO, we exclude gains or losses related to dispositions of previously depreciated property and exclude real estate depreciation, which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates. FFO can help one compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered by us to be part of our core business operations, Core FFO allows one to compare the core operating performance of the Company between periods. We believe that in order to understand our operating results, FFO and Core FFO should be examined with net income as presented in our Condensed Consolidated Financial Statements included elsewhere in this report.

We calculate Core FFO as FFO, adjusted for:

joint venture gains (if not adjusted through FFO), non-core costs and promoted interests from partnerships;
casualty and impairment losses or gains, net on non-depreciable real estate;
gains or losses from early extinguishment of consolidated borrowings;
development pursuit write-offs and expensed transaction costs, net of recoveries;
third-party business interruption insurance proceeds and the related lost NOI that is covered by the expected third party business interruption insurance proceeds;
property and casualty insurance proceeds and legal settlements;
gains or losses on sales of assets not subject to depreciation;
advocacy contributions, representing payments to promote our business interests;
hedge ineffectiveness or gains or losses from derivatives not designated as hedges for accounting purposes;
severance related costs;
net for-sale condominium activity, including gains, marketing, operating and administrative costs and imputed carry cost;
income taxes; and
other non-core items.

FFO and Core FFO do not represent net income in accordance with GAAP, and therefore should not be considered an alternative to net income, which remains the primary measure, as an indication of our performance. In addition, FFO and Core FFO as calculated by other REITs may not be comparable to our calculations of FFO and Core FFO.

The following is a reconciliation of net income attributable to common stockholders to FFO attributable to common stockholders and to Core FFO attributable to common stockholders (unaudited, dollars in thousands, except per share amounts):
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 For the three months ended
 3/31/20213/31/2020
Net income attributable to common stockholders$142,223 $167,971 
Depreciation - real estate assets, including joint venture adjustments182,314 177,428 
Distributions to noncontrolling interests12 12 
Gain on sale of previously depreciated real estate(53,727)(24,436)
FFO attributable to common stockholders270,822 320,975 
Adjusting items:
Joint venture losses101 — 
(Gain) loss on extinguishment of consolidated debt(122)9,170 
Gain on interest rate contract(2,654)— 
Advocacy contributions— 301 
Executive transition compensation costs1,781 — 
Severance related costs— 1,951 
Development pursuit write-offs and expensed transaction costs, net of recoveries(225)3,120 
Gain on for-sale condominiums (1)(131)(4,903)
For-sale condominium marketing, operating and administrative costs (1)1,044 1,443 
For-sale condominium imputed carry cost (2)2,152 3,609 
Gain on other real estate transactions(427)(43)
Legal settlements60 43 
Income tax (benefit) expense(755)91 
Core FFO attributable to common stockholders$271,646 $335,757 
Weighted average common shares outstanding - diluted139,552,413 140,777,873 
EPS per common share - diluted$1.02 $1.19 
FFO per common share - diluted$1.94 $2.28 
Core FFO per common share - diluted$1.95 $2.39 
_________________________
(1)The aggregate impact of (i) gain on for-sale condominiums and (ii) for-sale condominium marketing, operating and administrative costs is a net expense of $913 for the three months ended March 31, 2021 and a net gain of $3,460 for the three months ended March 31, 2020.
(2)Represents the imputed carry cost of for-sale residential condominiums at The Park Loggia. We compute this adjustment by multiplying the total capitalized cost of completed and unsold for-sale residential condominiums by our weighted average unsecured debt rate.

FFO and Core FFO also do not represent cash generated from operating activities in accordance with GAAP, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by GAAP, as a measure of liquidity. Additionally, it is not necessarily indicative of cash available to fund cash needs.

A presentation of GAAP based cash flow metrics is as follows (unaudited, dollars in thousands) and a discussion of "Liquidity and Capital Resources" can be found later in this report:
 For the three months ended
 3/31/20213/31/2020
Net cash provided by operating activities$330,145 $341,704 
Net cash used in investing activities$(155,952)$(136,067)
Net cash (used in) provided by financing activities$(257,993)$535,170 

Liquidity and Capital Resources

We employ a disciplined approach to our liquidity and capital management. When we source capital, we take into account both our view of the most cost effective alternative available and our desire to maintain a balance sheet that provides us with flexibility. Our principal focus on near-term and intermediate-term liquidity is to ensure we have adequate capital to fund:
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development and redevelopment activity in which we are currently engaged or in which we plan to engage;
the minimum dividend payments on our common stock required to maintain our REIT qualification under the Code;
debt service and principal payments either at maturity or opportunistically before maturity;
normal recurring operating expenses and corporate overhead expenses; and
investment in our operating platform, including strategic investments.

Factors affecting our liquidity and capital resources are our cash flows from operations, financing activities and investing activities (including dispositions) as well as general economic and market conditions. Cash flows from operations are determined by operating activities and factors including but not limited to (i) the number of apartment homes currently owned, (ii) rental rates, (iii) occupancy levels, (iv) uncollectible lease revenue levels or interruptions in collections caused by market conditions and (v) operating expenses with respect to apartment homes. The timing and type of capital markets activity in which we engage is affected by changes in the capital markets environment, such as changes in interest rates or the availability of cost-effective capital. Our plans for development, redevelopment, non-routine capital expenditure, acquisition and disposition activity are affected by market conditions and capital availability. We frequently review our liquidity needs, especially in periods with volatile market conditions, as well as the adequacy of cash flows from operations and other expected liquidity sources to meet these needs.

We had cash, cash equivalents and cash in escrow of $229,732,000 at March 31, 2021, a decrease of $83,800,000 from $313,532,000 at December 31, 2020. The following discussion relates to changes in cash, cash equivalents and cash in escrow due to operating, investing and financing activities, which are presented in our Condensed Consolidated Statements of Cash Flows included elsewhere in this report.

Operating Activities — Net cash provided by operating activities decreased to $330,145,000 for the three months ended March 31, 2021 from $341,704,000 for the three months ended March 31, 2020, primarily due to decreases in rental income, including the impact of uncollectible lease revenue.

Investing Activities — Net cash used in investing activities totaled $155,952,000 for the three months ended March 31, 2021. The net cash used was primarily due to:

investment of $198,373,000 in the development and redevelopment of communities; and
capital expenditures of $30,254,000 for our operating communities and non-real estate assets.

These amounts are partially offset by:

net proceeds from the disposition of one operating community and ancillary real estate of $76,543,000; and
net proceeds from the sale of for-sale residential condominiums of $13,569,000.

Financing Activities — Net cash used in financing activities totaled $257,993,000 for the three months ended March 31, 2021. The net cash used was primarily due to:

payment of cash dividends in the amount of $222,734,000; and
mortgage note repayments and principal amortization payments in the amount of $28,488,000.

Variable Rate Unsecured Credit Facility

We have a $1,750,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the “Credit Facility”) which matures in February 2024. The Credit Facility bears interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.) and (ii) the rating levels issued for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (0.89% at April 30, 2021), assuming a one month borrowing rate. The annual facility fee for the Credit Facility remained at 0.125%, resulting in a fee of $2,188,000 annually based on the $1,750,000,000 facility size and based on our current credit rating.

We had borrowings of $313,000,000 outstanding under the Credit Facility and had $2,599,000 outstanding in letters of credit that reduced our borrowing capacity as of April 30, 2021. In addition, we had $33,882,000 outstanding in additional letters of credit unrelated to the Credit Facility as of April 30, 2021.

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Financial Covenants

We are subject to financial covenants contained in the Credit Facility, Term Loans and the indentures under which our unsecured notes were issued. The principal financial covenants include the following:

limitations on the amount of total and secured debt in relation to our overall capital structure;
limitations on the amount of our unsecured debt relative to the undepreciated basis of real estate assets that are not encumbered by property-specific financing; and
minimum levels of debt service coverage.

We were in compliance with these covenants at March 31, 2021.

In addition, some of our secured borrowings include yield maintenance, defeasance, or prepayment penalty provisions, which would result in us incurring an additional charge in the event of a full or partial prepayment of outstanding principal before the scheduled maturity. These provisions in our secured borrowings are generally consistent with other similar types of debt instruments issued during the same time period in which our borrowings were secured.

Continuous Equity Offering Program

In May 2019, we commenced our fifth continuous equity program ("CEP V") under which we may sell (and/or enter into forward sale agreements for the sale of) up to $1,000,000,000 of our common stock from time to time. Actual sales will depend on a variety of factors to be determined, including market conditions, the trading price of our common stock and determinations of the appropriate sources of funding. In conjunction with CEP V, we engaged sales agents who will receive compensation of up to 1.5% of the gross sales price for shares sold. We expect that, if entered into, we will physically settle each forward sale agreement on one or more dates prior to the maturity date of that particular forward sale agreement, in which case we will expect to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward agreement multiplied by the relevant forward sale price. However, we may also elect to cash settle or net share settle a forward sale agreement. In connection with each forward sale agreement, we will pay the relevant forward seller, in the form of a reduced initial forward sale price, a commission of up to 1.5% of the sales prices of all borrowed shares of common stock sold. During the three months ended March 31, 2021 and through April 30, 2021, we had no sales under the program. As of April 30, 2021, there are no outstanding forward sale agreements and we had $752,878,000 remaining authorized for issuance under this program.

Forward Interest Rate Swap Agreements

During the three months ended March 31, 2021, we terminated $150,000,000 of forward interest rate swap agreements for which we ceased hedge accounting in 2020 (the "Swaps"), receiving a payment of $6,962,000. We recognized $2,894,000 of these proceeds as a gain in 2020, and $2,654,000 of these proceeds as a gain during the three months ended March 31, 2021 included in interest expense, net on the accompanying Condensed Consolidated Statements of Comprehensive Income included elsewhere in this report.

Stock Repurchase Program

In July 2020, our Board of Directors voted to terminate our prior $500,000,000 Stock Repurchase Program (the "Amended 2005 Stock Repurchase Program") and approved a new stock repurchase program under which we may acquire shares of our common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000 (the "2020 Stock Repurchase Program"). Purchases of common stock under the 2020 Stock Repurchase Program may be exercised from time to time in our discretion and in such amounts as market conditions warrant. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. During the three months ended March 31, 2021 and through April 30, 2021, we had no repurchases of shares under this program. As of April 30, 2021, we had $316,148,000 remaining authorized for purchase under this program.

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Future Financing and Capital Needs — Debt Maturities

One of our principal long-term liquidity needs is the repayment of long-term debt at maturity. For both our unsecured and secured notes, a portion of the principal of these notes may be repaid prior to maturity. Early retirement of our unsecured or secured notes could result in gains or losses on extinguishment. If we do not have funds on hand sufficient to repay our indebtedness as it becomes due, it will be necessary for us to refinance or otherwise provide liquidity to satisfy the debt at maturity. This refinancing may be accomplished by uncollateralized private or public debt offerings, equity issuances, additional debt financing that is secured by mortgages on individual communities or groups of communities or borrowings under our Credit Facility. Although we believe we will have the capacity to meet our currently anticipated liquidity needs, we cannot assure you that capital from additional debt financing or debt or equity offerings will be available or, if available, that they will be on terms we consider satisfactory, especially in light of the uncertain impacts of the COVID-19 pandemic on capital markets.

During the three months ended March 31, 2021, we repaid $27,795,000 principal amount of 5.37% fixed rate debt secured by Avalon San Bruno II at par in advance of the April 2021 maturity date.

The following table details our consolidated debt maturities for the next five years, excluding our Credit Facility and amounts outstanding related to communities classified as held for sale, for debt outstanding at March 31, 2021 and December 31, 2020 (dollars in thousands). We are not directly or indirectly (as borrower or guarantor) obligated in any material respect to pay principal or interest on the indebtedness of any unconsolidated entities in which we have an equity or other interest.
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 All-In
interest
rate (1)
Principal
maturity
date
Balance Outstanding (2)Scheduled Maturities
Community12/31/20203/31/202120212022202320242025Thereafter
Tax-exempt bonds          
Fixed rate          
Avalon at Chestnut Hill6.16 %Oct-2047$36,399 $36,245 $475 $663 $699 $737 $778 $32,893 
Avalon Westbury3.86 %Nov-2036(3)62,200 62,200 — — — — — 62,200 
   98,599 98,445 475 663 699 737 778 95,093 
Variable rate          
Avalon Acton1.11 %Jul-2040(4)45,000 45,000 — — — — — 45,000 
Avalon Clinton North1.76 %Nov-2038(4)147,000 147,000 — — — — — 147,000 
Avalon Clinton South1.76 %Nov-2038(4)121,500 121,500 — — — — — 121,500 
Avalon Midtown West1.68 %May-2029(4)93,500 93,500 5,200 5,600 6,100 6,800 7,300 62,500 
Avalon San Bruno I1.65 %Dec-2037(4)63,850 63,750 1,800 2,000 2,200 2,300 2,400 53,050 
470,850 470,750 7,000 7,600 8,300 9,100 9,700 429,050 
Conventional loans          
Fixed rate          
$450 million unsecured notes4.30 %Sep-2022450,000 450,000 — 450,000 — — — — 
$250 million unsecured notes3.00 %Mar-2023250,000 250,000 — — 250,000 — — — 
$350 million unsecured notes4.30 %Dec-2023350,000 350,000 — — 350,000 — — — 
$300 million unsecured notes3.66 %Nov-2024300,000 300,000 — — — 300,000 — — 
$525 million unsecured notes3.55 %Jun-2025525,000 525,000 — — — — 525,000 — 
$300 million unsecured notes3.62 %Nov-2025300,000 300,000 — — — — 300,000 — 
$475 million unsecured notes3.35 %May-2026475,000 475,000 — — — — — 475,000 
$300 million unsecured notes3.01 %Oct-2026300,000 300,000 — — — — — 300,000 
$350 million unsecured notes3.95 %Oct-2046350,000 350,000 — — — — — 350,000 
$400 million unsecured notes3.50 %May-2027400,000 400,000 — — — — — 400,000 
$300 million unsecured notes4.09 %Jul-2047300,000 300,000 — — — — — 300,000 
$450 million unsecured notes3.32 %Jan-2028450,000 450,000 — — — — — 450,000 
$300 million unsecured notes3.97 %Apr-2048300,000 300,000 — — — — — 300,000 
$450 million unsecured notes3.66 %Jun-2029450,000 450,000 — — — — — 450,000 
$700 million unsecured notes2.69 %Mar-2030700,000 700,000 — — — — — 700,000 
$600 million unsecured notes2.65 %Jan-2031600,000 600,000 — — — — — 600,000 
Avalon Walnut Creek4.00 %Jul-20664,001 4,001 — — — — — 4,001 
eaves Los Feliz3.68 %Jun-202741,400 41,400 — — — — — 41,400 
eaves Woodland Hills3.67 %Jun-2027111,500 111,500 — — — — — 111,500 
Avalon Russett3.77 %Jun-202732,200 32,200 — — — — — 32,200 
Avalon San Bruno II3.85 %Apr-2021(5)27,844 — — — — — — — 
Avalon Westbury4.88 %Nov-2036(3)12,170 11,780 1,185 1,655 1,740 1,840 1,930 3,430 
Avalon San Bruno III2.38 %Mar-202751,000 51,000 — — — — — 51,000 
Avalon Cerritos3.35 %Aug-202930,250 30,250 — — — — — 30,250 
   6,810,365 6,782,131 1,185 451,655 601,740 301,840 826,930 4,598,781 
Variable rate          
Term Loan - $100 million1.20 %Feb-2022100,000 100,000 — 100,000 — — — — 
Term Loan - $150 million1.13 %Feb-2024150,000 150,000 — — — 150,000 — — 
   250,000 250,000 — 100,000 — 150,000 — — 
Total indebtedness - excluding Credit Facility  $7,629,814 $7,601,326 $8,660 $559,918 $610,739 $461,677 $837,408 $5,122,924 
_________________________
(1)Rates are given as of March 31, 2021 and include credit enhancement fees, facility fees, trustees' fees, the impact of interest rate hedges, offering costs, mark to market amortization and other fees.
(2)Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured notes of $46,241 and $47,995 as of March 31, 2021 and December 31, 2020, respectively, and deferred financing costs and debt discount associated with secured notes of $17,301 and $17,482 as of March 31, 2021 and December 31, 2020, respectively, as reflected on our Condensed Consolidated Balance Sheets included elsewhere in this report.
(3)Maturity date reflects the contractual maturity of the underlying bond. There is also an associated earlier credit enhancement maturity date.
(4)Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement.
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(5)During 2021, we repaid this borrowing at par in advance of its scheduled maturity date.

Future Financing and Capital Needs — Portfolio and Capital Markets Activity

In light of the COVID-19 pandemic, we continue to monitor the availability of our various capital raising alternatives. In 2021, we expect to meet our liquidity needs from one or more a variety of internal and external sources, which may include (i) real estate dispositions, (ii) cash balances on hand as well as cash generated from our operating activities, (iii) borrowing capacity under our Credit Facility and (iv) secured and unsecured debt financings. Additional sources of liquidity in 2021 may include the issuance of common and preferred equity. Our ability to obtain additional financing will depend on a variety of factors, such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, as well as the perception of lenders regarding our long or short-term financial prospects. In addition, the impacts of the COVID-19 pandemic on capital markets, including the availability and costs of debt and equity capital, remain uncertain and may have material adverse effects on our access to capital on attractive terms.

Before beginning new construction or reconstruction activity in 2021, including activity related to communities owned by unconsolidated joint ventures, we plan to source sufficient capital to complete these undertakings, although we cannot assure you that we will be able to obtain such financing. In the event that financing cannot be obtained, we may have to abandon Development Rights, write-off associated pre-development costs that were capitalized and/or forego reconstruction activity. In such instances, we will not realize the increased revenues and earnings that we expected from such Development Rights or reconstruction activity and significant losses could be incurred.

From time to time we use joint ventures to hold or develop individual real estate assets. We generally employ joint ventures primarily to mitigate asset concentration or market risk and secondarily as a source of liquidity. We may also use joint ventures related to mixed-use land development opportunities and new markets where our partners bring development and operational expertise and/or experience to the venture. Each joint venture or partnership agreement has been individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture or partnership agreement. We cannot assure you that we will achieve our objectives through joint ventures.

In addition we may pursue opportunities to invest in real estate development through mezzanine loans or other investments structured as debt.

In evaluating our allocation of capital within our markets, we sell assets that do not meet our long-term investment criteria or when capital and real estate markets allow us to realize a portion of the value created over our ownership periods and redeploy the proceeds from those sales to develop and redevelop communities. Because the proceeds from the sale of communities may not be immediately redeployed into revenue generating assets that we develop, redevelop or acquire, the immediate effect of a sale of a community for a gain is to increase net income, but reduce future total revenues, total expenses and NOI until such time as the proceeds have been redeployed into revenue generating assets. We believe that the temporary absence of future cash flows from communities sold will not have a material impact on our ability to fund future liquidity and capital resource needs.

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Unconsolidated Real Estate Investments and Off-Balance Sheet Arrangements

Unconsolidated Investments - Operating Communities

As of March 31, 2021, we had investments in the following unconsolidated real estate entities accounted for under the equity method of accounting, excluding development joint ventures. Refer to Note 5, "Investments in Real Estate Entities," of the Condensed Consolidated Financial Statements included elsewhere in this report, which includes information on the aggregate assets, liabilities and equity, as well as operating results, and our proportionate share of their operating results. For ventures holding operating apartment communities as of March 31, 2021, detail of the real estate and associated indebtedness underlying our unconsolidated investments is presented in the following table (dollars in thousands).
 Company
 ownership percentage
# of apartment homesTotal capitalized costDebt (1)
   Interest rateMaturity date
Unconsolidated Real Estate InvestmentsAmountType
NYTA MF Investors LLC
1. Avalon Bowery Place I - New York, NY206$209,358 $93,800 Fixed4.01 %Jan 2029
2. Avalon Bowery Place II - New York, NY9090,988 39,639 Fixed4.01 %Jan 2029
3. Avalon Morningside - New York, NY (2)295211,042 112,500 Fixed3.55 %Jan 2029/May 2046
4. Avalon West Chelsea - New York, NY (3)305127,879 66,000 Fixed4.01 %Jan 2029
5. AVA High Line - New York, NY (3)405121,373 84,000 Fixed4.01 %Jan 2029
Total NYTA MF Investors LLC20.0 %1,301 760,640 395,939 3.88 %
Archstone Multifamily Partners AC LP      
1. Avalon Studio 4121 - Studio City, CA 149 57,206 26,816 Fixed3.34 %Nov 2022
2. Avalon Station 250 - Dedham, MA 285 98,695 52,228 Fixed3.73 %Sep 2022
3. Avalon Grosvenor Tower - Bethesda, MD 237 80,895 40,486 Fixed3.74 %Sep 2022
Total Archstone Multifamily Partners AC LP28.6 %671 236,796 119,530  3.65 % 
Multifamily Partners AC JV LP       
1. Avalon North Point - Cambridge, MA (4) 426 190,302 111,653 Fixed6.00 %Aug 2021
2. Avalon North Point Lofts - Cambridge, MA103 26,917 — N/AN/AN/A
Total Multifamily Partners AC JV LP20.0 %529 217,219 111,653  6.00 % 
Other Operating Joint Ventures       
1. MVP I, LLC25.0 %313 128,932 103,000 Fixed3.24 %Jul 2025
2. Brandywine Apartments of Maryland, LLC28.7 %305 19,383 20,851 Fixed3.40 %Jun 2028
Total Other Joint Ventures618 148,315 123,851 3.27 %
  
Total Unconsolidated Investments3,119 $1,362,970 $750,973 4.06 %
_____________________________
(1)We have not guaranteed the debt of these unconsolidated investees and bear no responsibility for the repayment unless otherwise disclosed.
(2)Borrowing on this community is comprised of two mortgage loans. The interest rate is the weighted average interest rate as of March 31, 2021.
(3)Borrowing on this dual-branded community is comprised of a single mortgage loan.
(4)Borrowing is comprised of a loan made by the equity investors in the venture in proportion to their equity interests.

38

Unconsolidated Investments - Development Communities

The following table presents a summary of the Unconsolidated Development Communities.

Unconsolidated 
Development Community
Company
 ownership percentage
# of apartment homesProjected total
capitalized cost (1)
($ millions)
Construction
start
Initial projected
occupancy
Estimated
completion
1.
Avalon Alderwood Mall
Lynnwood, WA
50.0 %328$110 Q4 2019Q4 2021Q3 2022
2.
AVA Arts District (2)(3)
Los Angeles, CA
25.0 %475276Q3 2020Q1 2023Q4 2023
 Total803 $386 

_____________________________
(1)Projected total capitalized cost includes all capitalized costs projected to be incurred to develop the respective Unconsolidated Development Community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees and other regulatory fees, as well as costs incurred for first generation commercial tenants such as tenant improvements and leasing commissions. Projected total capitalized cost is the total projected joint venture amount.
(2)AVA Arts District is expected to contain 56,000 square feet of commercial space.
(3)Our total expected equity investment in AVA Arts District is approximately $27,600,000, of which $21,000,000 has already been contributed. The venture has secured a $165,600,000 variable rate construction loan to fund approximately 60% of the development of AVA Arts District, of which no amounts have been drawn as of March 31, 2021. The venture will commence draws under the loan subsequent to required equity contributions by the venture partners. We have guaranteed the construction loan on behalf of the venture, and any obligations we may incur under the construction loan guarantee, except to the extent that our misconduct gave rise to the obligation, are required capital contributions of the partners based on ownership interest.

Off-Balance Sheet Arrangements

In addition to our investment interests in consolidated and unconsolidated real estate entities, we have certain off-balance sheet arrangements with the entities in which we invest. Additional discussion of these entities can be found in Note 5, "Investments in Real Estate Entities," of our Condensed Consolidated Financial Statements included elsewhere in this report.

Unless otherwise noted, we have not guaranteed the debt of our unconsolidated real estate entities, as referenced in the tables above, nor do we have any obligation to fund this debt should the unconsolidated real estate entities be unable to do so. In the future, in the event the unconsolidated real estate entities were unable to meet their obligations under a loan, we cannot predict at this time whether we would provide any voluntary support, or take any other action, as any such action would depend on a variety of factors, including the amount of support required and the possibility that such support could enhance the return of the unconsolidated real estate entities and/or our returns by providing time for performance to improve.

There are no other material lines of credit, side agreements, financial guarantees or any other derivative financial instruments related to or between our unconsolidated real estate entities and us. In evaluating our capital structure and overall leverage, management takes into consideration our proportionate share of the indebtedness of unconsolidated entities in which we have an interest.

Contractual Obligations

We currently have contractual obligations consisting primarily of long-term debt obligations and lease obligations for certain land parcels and regional and administrative office space. As of March 31, 2021, other than as discussed in this Form 10-Q, there have been no other material changes in our scheduled contractual obligations as disclosed in our Form 10-K.

39

Development Communities

As of March 31, 2021, we owned or held a direct interest in 13 Development Communities under construction. We expect these Development Communities, when completed, to add a total of 3,757 apartment homes and 43,000 square feet of commercial space to our portfolio for a total capitalized cost, including land acquisition costs, of approximately $1,349,000,000. We cannot assure you that we will meet our schedule for construction completion or that we will meet our budgeted costs, either individually or in the aggregate. You should carefully review Part I, Item 1A. "Risk Factors" of our Form 10-K, as well as the discussion under Part II, Item 1A. "Risk Factors" in this report, for a discussion of the risks associated with development activity.

The following table presents a summary of the Development Communities.
Number of
apartment
homes
Projected total
capitalized cost (1)
($ millions)
Construction
start
Initial projected
or actual occupancy
(2)
Estimated
completion
Estimated
stabilized operations
(3)
1.
Avalon Old Bridge
Old Bridge, NJ
252 $72 Q3 2018Q3 2020Q2 2021Q3 2021
2.
Avalon 555 President
Baltimore, MD
400 139 Q3 2018Q3 2020Q2 2021Q1 2022
3.
Avalon Newcastle Commons II
Newcastle, WA
293 107 Q4 2018Q4 2020Q2 2021Q1 2022
4.
Kanso Twinbrook
Rockville, MD
238 67 Q4 2018Q4 2020Q2 2021Q4 2021
5.
Avalon Harrison (4)
Harrison, NY
143 77 Q4 2018Q2 2021Q2 2022Q3 2022
6.
Avalon Brea Place
Brea, CA
653 290 Q2 2019Q1 2021Q2 2022Q1 2023
7.
Avalon Foundry Row
Owings Mill, MD
437 100 Q2 2019Q1 2021Q1 2022Q2 2022
8.
Avalon Woburn
Woburn, MA
350 121 Q4 2019Q3 2021Q2 2022Q4 2022
9.
AVA RiNo
Denver, CO
246 87 Q4 2019Q1 2022Q2 2022Q4 2022
10.
Avalon Monrovia
Monrovia, CA
154 68 Q4 2019Q2 2021Q3 2021Q1 2022
11.
Avalon Harbor Isle
Island Park, NY
172 90 Q4 2020Q1 2022Q3 2022Q1 2023
12.
Avalon Easton II
Easton, MA
44 15 Q4 2020Q3 2021Q4 2021Q1 2022
13.
Avalon Somerville Station
Somerville, NJ
375 116 Q4 2020Q2 2022Q3 2023Q1 2024
 Total3,757 $1,349 
_________________________________
(1)Projected total capitalized cost includes all capitalized costs projected to be or actually incurred to develop the respective Development Community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, as well as costs incurred for first generation commercial tenants such as tenant improvements and leasing commissions.
(2)Initial projected occupancy dates are estimates.
(3)Stabilized operations is defined as the earlier of (i) attainment of 90% or greater physical occupancy or (ii) the one-year anniversary of completion of development.
(4)Development Communities containing at least 10,000 square feet of commercial space include Avalon Harrison (27,000 square feet).

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During the three months ended March 31, 2021, we completed the development of the following communities:

Number of
apartment
homes
Total capitalized 
cost (1)
($ millions)
Approximate rentable area
(sq. ft.)
Total capitalized cost per sq. ft.
1.
Avalon Yonkers
Yonkers, NY
590 $196 535,742 $366 
2.
AVA Hollywood at La Pietra Place (2)
Hollywood, CA
695 375 635,062 $590 
3.
Avalon Acton II
Acton, MA
86 31 128,044 $242 
Total1,371 $602  
____________________________________
(1)Total capitalized cost is as of March 31, 2021. We generally anticipate incurring additional costs associated with these communities that are customary for new developments.
(2)AVA Hollywood at La Pietra Place contains 19,000 square feet of commercial space.

Development Rights

At March 31, 2021, we had $184,058,000 in acquisition and related capitalized costs for direct interests in nine land parcels we own. In addition, we had $47,081,000 in capitalized costs (including legal fees, design fees and related overhead costs) related to (i) 12 Development Rights for which we control the land parcel, typically through a conditional agreement or option to purchase or lease the land, as well as (ii) costs incurred for four Development Rights that are additional development phases of existing stabilized operating communities we own and which will be constructed on land currently adjacent to or directly associated with those operating communities for which we own the land. Collectively, the land held for development and associated costs for deferred development rights relate to 25 Development Rights for which we expect to develop new apartment communities in the future. The Development Rights range from those beginning design and architectural planning to those that have completed site plans and drawings and can begin construction almost immediately. We estimate that the successful completion of all of these communities would ultimately add approximately 8,075 apartment homes to our portfolio. Substantially all of these apartment homes will offer features like those offered by the communities we currently own.

The properties comprising the Development Rights are in different stages of the due diligence and regulatory approval process. The decisions as to which of the Development Rights to invest in, if any, or to continue to pursue once an investment in a Development Right is made, are business judgments that we make after we perform financial, demographic and other analyses. In the event that we do not proceed with a Development Right, we generally would not recover any of the capitalized costs incurred in the pursuit of those communities, unless we were to recover amounts in connection with the sale of land; however, we cannot guarantee a recovery. Pre-development costs incurred in the pursuit of Development Rights for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development no longer probable, any unrecoverable capitalized pre-development costs are charged to expense. During the three months ended March 31, 2021, we recognized net recoveries of $170,000 for expensed transaction, development and other pursuit costs, net of recoveries, which include development pursuits that were not yet probable of future development at the time incurred, or for pursuits that we determined were no longer probable of being developed.

You should carefully review Part I, Item 1A. "Risk Factors" of our Form 10-K, as well as the discussion under Part II, Item 1A. "Risk Factors" in this report, for a discussion of the risks associated with Development Rights.


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Insurance and Risk of Uninsured Losses

We maintain commercial general liability insurance and property insurance with respect to all of our communities, with insurance policies issued by a combination of third party insurers as well as a wholly-owned captive insurance company. These policies, along with other insurance policies we maintain, have policy specifications, insured and self-insured limits, exclusions and deductibles that we consider commercially reasonable. We utilize a wholly-owned captive insurance company to insure certain types and amounts of risks, which include property damage and resulting business interruption losses, general liability insurance and other construction related liability risks. The captive is utilized to insure other limited levels of risk, which may be in part reinsured by third party insurance. There are, however, certain types of losses (including, but not limited to, losses arising from nuclear liability, pandemic or acts of war) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in management’s view, economically impractical. You should carefully review the discussion under Part I, Item 1A. “Risk Factors” of our Form 10-K for a discussion of risks associated with an uninsured property or casualty loss.

Our communities are insured for certain property damage and business interruption losses through a combination of community specific insurance policies and/or a master property insurance program which covers the majority of our communities. This master property program provides a $400,000,000 limit for any single occurrence, subject to certain sub-limits and exclusions. Under the master property program, we are subject to various deductibles per occurrence, as well as additional self-insured retentions. In addition to our potential liability for the various policy self-insured retentions and deductibles, our captive insurance company is directly responsible for 100% of the first $25,000,000 of losses (per occurrence) and 10% of the second $25,000,000 of losses (per occurrence) incurred by the master property insurance policy. Our master property insurance program includes coverage for losses resulting from wildfires and windstorm. Limits, deductibles, self-insured retentions and coverages are consistent with customary market programs and may increase or decrease annually during the insurance renewal process which occurs on different dates throughout the calendar year.

Many of our West Coast communities are located within the general vicinity of active earthquake faults. Many of our communities are near, and thus susceptible to, the major fault lines in California, including the San Andreas Fault, the Hayward Fault or other geological faults that are known or unknown. We cannot assure you that an earthquake would not cause damage or losses greater than our current insured levels. We procure property damage and resulting business interruption insurance coverage with a loss limit of $175,000,000 for any single occurrence and in the annual aggregate for losses resulting from earthquakes. However, for any losses resulting from earthquakes at communities located in California or Washington, the loss limit is $200,000,000 for any single occurrence and in the annual aggregate.

Our communities are insured for third-party liability losses through a combination of community specific insurance policies and/or coverage provided under a master commercial general liability and umbrella/excess insurance program. The master commercial general liability and umbrella/excess insurance policies cover the majority of our communities and are subject to certain coverage limitations and exclusions. Our captive insurance company is directly responsible for covered liability claims arising out of our primary commercial general liability policy, subject to a $2,000,000 per occurrence loss limit.

We also maintain certain casualty policies (general liability, umbrella/excess and workers compensation) for construction related risks that have various exclusions and deductibles that, in management’s view, are commercially reasonable.

Just as with office buildings, transportation systems and government buildings, there have been reports that apartment communities could become targets of terrorism. Our communities are insured for terrorism related losses through the Terrorism Risk Insurance Program Reauthorization Act (“TRIPRA”) program. This coverage extends to most of our casualty exposures (subject to deductibles and insured limits) and certain property insurance policies. We have also purchased private-market insurance for property damage due to terrorism with limits of $600,000,000 per occurrence and in the annual aggregate that includes certain coverages (not covered under TRIPRA) such as domestic-based terrorism. This insurance, often referred to as “non-certified” terrorism insurance, is subject to deductibles, limits and exclusions.

An additional consideration for insurance coverage and potential uninsured losses is mold growth or other environmental contamination. Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. If a significant mold problem arises at one of our communities, we could be required to undertake a costly remediation program to contain or remove the mold from the affected community and could be exposed to other liabilities. For further discussion of the risks and our related prevention and remediation activities, please refer to the discussion under Part I, Item 1A. “Risk Factors - We may incur costs due to environmental contamination or non-compliance” of our Form 10-K. We cannot provide assurance that we will have coverage under our existing policies for property damage or liability to third parties arising as a result of exposure to mold or a claim of exposure to mold at one of our communities.
42


We also maintain a crime policy (also commonly referred to as a fidelity policy or employee dishonesty policy) that applies to losses from employee theft of money, securities or property and a cyber liability insurance policy that applies to losses from breaches of data privacy. These policies are subject to maximum loss limits and include coverage limitations or exclusion that may preclude a full insurance recovery of losses related to employee theft or breaches of data privacy.

The amount or types of insurance we maintain may not be sufficient to cover all losses and we may change our policy limits, coverages and self-insured retentions at any time.

Inflation and Deflation

Substantially all of our apartment leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally minimize our risk from the adverse effect of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore expose us to the effect of a decline in market rents.

Forward-Looking Statements
This Form 10-Q contains "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by our use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "project," "plan," "may," "shall," "will" and other similar expressions in this Form 10-Q, that predict or indicate future events and trends and that do not report historical matters. These statements include, among other things, statements regarding our intent, belief or expectations with respect to:

the impact of the COVID-19 pandemic on our business, results of operations and financial condition;

our potential development, redevelopment, acquisition or disposition of communities;

the timing and cost of completion of apartment communities under construction, reconstruction, development or redevelopment;

the timing of lease-up, occupancy and stabilization of apartment communities;

the timing and net sales proceeds of condominium sales;

the pursuit of land on which we are considering future development;

the anticipated operating performance of our communities;

cost, yield, revenue, NOI and earnings estimates;

the impact of landlord-tenant laws and rent regulations;

our declaration or payment of dividends;

our joint venture and discretionary fund activities;

our policies regarding investments, indebtedness, acquisitions, dispositions, financings and other matters;

our qualification as a REIT under the Code;

the real estate markets in Northern and Southern California, Denver, Colorado, and Southeast Florida, and markets in selected states in the Mid-Atlantic, New England, Metro New York/New Jersey and Pacific Northwest regions of the United States and in general;

the availability of debt and equity financing;

interest rates;

43

general economic conditions including the potential impacts from current economic conditions and the COVID-19 pandemic;

trends affecting our financial condition or results of operations; and

the impact of outstanding legal proceedings.

We cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect our current expectations of the approximate outcomes of the matters discussed. We do not undertake a duty to update these forward-looking statements, and therefore they may not represent our estimates and assumptions after the date of this report. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by these forward-looking statements. You should carefully review the discussion under Part I, Item 1A. "Risk Factors" of our Form 10-K and Part II, Item 1A. "Risk Factors" in this report, for further discussion of risks associated with forward-looking statements.

Risks and uncertainties that might cause such differences include those related to the COVID-19 pandemic, about which there are many uncertainties, including (i) the duration and severity of the pandemic, (ii) the effect on the multifamily industry and the general economy of measures taken by businesses and the government to prevent the spread of the novel coronavirus and relieve economic distress of consumers, such as governmental limitations on the ability of multifamily owners to evict residents who are delinquent in the payment of their rent and (iii) the preferences of consumers and businesses for living and working arrangements both during and after the pandemic. Due to this uncertainty we are not able at this time to estimate the effect of these factors on our business, but the adverse impact of the pandemic on our business, results of operations, cash flows and financial condition could be material. In addition, the effects of the pandemic are likely to heighten the following risks, which we routinely face in our business:

we may fail to secure development opportunities due to an inability to reach agreements with third-parties to obtain land at attractive prices or to obtain desired zoning and other local approvals;

we may abandon or defer development opportunities for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses;

construction costs of a community may exceed our original estimates;

we may not complete construction and lease-up of communities under development or redevelopment on schedule, resulting in increased interest costs and construction costs and a decrease in our expected rental revenues;

the timing and net proceeds of condominium sales may not equal our current expectations;

occupancy rates and market rents may be adversely affected by competition and local economic and market conditions which are beyond our control;

financing may not be available on favorable terms or at all, and our cash flows from operations and access to cost effective capital may be insufficient for the development of our pipeline which could limit our pursuit of opportunities;

the impact of new landlord-tenant laws and rent regulations may be greater than we expect;

our cash flows may be insufficient to meet required payments of principal and interest, and we may be unable to refinance existing indebtedness or the terms of such refinancing may not be as favorable as the terms of existing indebtedness;

we may be unsuccessful in our management of joint ventures and the REIT vehicles that are used with certain joint ventures;

laws and regulations implementing rent control or rent stabilization, or otherwise limiting our ability to increase rents, charge fees or evict tenants, may impact our revenue or increase our costs;

44

our expectations, estimates and assumptions as of the date of this filing regarding outstanding legal proceedings are subject to change; and

the possibility that we may choose to pay dividends in our stock instead of cash, which may result in stockholders having to pay taxes with respect to such dividends in excess of the cash received, if any.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements. Our critical accounting policies consist of the following: (i) cost capitalization and (ii) abandoned pursuit costs and asset impairment. Our critical accounting policies and estimates have not changed materially from the discussion of our significant accounting policies found in Management's Discussion and Analysis and Results of Operations in our Form 10-K.
45

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our exposures to market risk since December 31, 2020.

ITEM 4.    CONTROL AND PROCEDURES

(a)Evaluation of disclosure controls and procedures. 

The Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2021. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.

We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

(b)Changes in internal controls over financial reporting.

None.

PART II.    OTHER INFORMATION
 
ITEM 1.    LEGAL PROCEEDINGS

The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of its business. While no assurances can be given, the Company does not currently believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.

ITEM 1A.     RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors that could materially affect our business, financial condition or future results discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 in Part I, Item 1A. "Risk Factors." The risks described in our Form 10-K are not the only risks that could affect the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results in the future. There have been no material changes to our risk factors since December 31, 2020.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Issuer Purchases of Equity Securities
Period(a)
Total Number of Shares
Purchased (1)
(b)
Average Price Paid 
Per Share
(c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
(d)
Maximum Dollar
Amount that May Yet
be Purchased Under
the Plans or Programs
(in thousands) (2)
January 1- January 31, 202117 $160.43 — $316,148 
February 1- February 28, 2021— $— — $316,148 
March 1- March 31, 202174,709 $177.02 — $316,148 
___________________________________

46

(1)Consists of shares surrendered to the Company in connection with exercise of stock options as payment of exercise price, as well as for taxes associated with the vesting of restricted share grants.
(2)The Company announced on July 29, 2020 that the Board of Directors approved the 2020 Stock Repurchase Program, under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000. Purchases of common stock under the 2020 Stock Repurchase Program may be exercised from time to time in the Company’s discretion and in such amounts as market conditions warrant. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.        MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.        OTHER INFORMATION

None.

47

ITEM 6.        EXHIBITS
Exhibit No.   Description
     
3(i).1  
3(i).2  
3(i).3  
3(i).4
3(ii).1
10.1+
10.2+
10.3+
31.1  
31.2  
32  
101The following financial materials from AvalonBay Communities, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) Notes to the Consolidated Financial Statements. (Filed herewith.)
104Cover Page Interactive Data File (embedded within the Inline XBRL document). (Filed herewith.)
_______________________________________________________________________________

+    Management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this Form 10-Q.



48

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AVALONBAY COMMUNITIES, INC.
  
  
Date:May 5, 2021/s/ Timothy J. Naughton
 Timothy J. Naughton
 Chairman and Chief Executive Officer
 (Principal Executive Officer)
  
Date:May 5, 2021/s/ Kevin P. O'Shea
 Kevin P. O'Shea
 Chief Financial Officer
 (Principal Financial Officer)

49