Form 10-K





Washington, D.C. 20549





For the fiscal year ended December 31, 2011

Commission file number 1-12672




(Exact name of registrant as specified in its charter)


Maryland   77-0404318

(State or other jurisdiction of

incorporation or organization)


(I.R.S. Employer

Identification No.)

Ballston Tower

671 N. Glebe Rd, Suite 800

Arlington, Virginia 22203

(Address of principal executive office)

(703) 329-6300

(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $.01 per share   New York Stock Exchange
(Title of each class)   (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨      Smaller reporting company   ¨

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

The aggregate market value of the registrant’s Common Stock, par value $.01 per share, held by nonaffiliates of the registrant, as of June 30, 2011 was $11,277,881,945.

The number of shares of the registrant’s Common Stock, par value $.01 per share, outstanding as of January 31, 2012 was 95,208,685.



Documents Incorporated by Reference

Portions of AvalonBay Communities, Inc.’s Proxy Statement for the 2012 annual meeting of stockholders, a definitive copy of which will be filed with the SEC within 120 days after the year end of the year covered by this Form 10-K, are incorporated by reference herein as portions of Part III of this Form 10-K.






  PART I   
ITEM 1.  


ITEM 1a.  


ITEM 1b.  


ITEM 2.  


ITEM 3.  


ITEM 4.  


  PART II   
ITEM 5.  


ITEM 6.  


ITEM 7.  


ITEM 7a.  


ITEM 8.  


ITEM 9.  


ITEM 9a.  


ITEM 9b.  


ITEM 10.  


ITEM 11.  


ITEM 12.  


ITEM 13.  


ITEM 14.  


  PART IV   
ITEM 15.  


SIGNATURES        66   


This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our actual results could differ materially from those set forth in each forward-looking statement. Certain factors that might cause such a difference are discussed in this report, including in the section entitled “Forward-Looking Statements” included in this Form 10-K. You should also review Item 1a., “Risk Factors,” for a discussion of various risks that could adversely affect us.




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. We engage in the development, redevelopment, acquisition, ownership and operation of multifamily communities in high barrier to entry markets of the United States. These barriers to entry generally include a difficult and lengthy entitlement process with local jurisdictions and dense urban or suburban areas where zoned and entitled land is in limited supply. Our markets are located in the following regions of the United States: New England, the New York/New Jersey Metro area, the Washington DC Metro area, the Pacific Northwest, Northern and Southern California and currently the Midwest. We focus on these markets because we believe that, over the long-term, a limited new supply of apartment homes and lower housing affordability in these markets will result in higher growth in cash flows relative to other markets.

At January 31, 2012, we owned or held a direct or indirect ownership interest in:



180 operating apartment communities containing 53,090 apartment homes in ten states and the District of Columbia, of which 149 communities containing 43,948 apartment homes were consolidated for financial reporting purposes, four communities containing 1,194 apartment homes were held by joint ventures in which we hold an ownership and/or residual profits interest, and 27 communities containing 7,948 apartment homes were owned by the Funds (as defined below). 13 of the consolidated communities containing 3,338 apartment homes were under redevelopment, as discussed below;



19 wholly-owned communities under construction that are expected to contain an aggregate of 5,244 apartment homes when completed; and



rights to develop an additional 32 communities that, if developed in the manner expected, will contain an estimated 9,012 apartment homes.

We generally obtain ownership in an apartment community by developing a new community on vacant land or by acquiring an existing community. In selecting sites for development or acquisition, we favor locations that are near expanding employment centers and convenient to transportation, recreation areas, entertainment, shopping and dining.

Our consolidated real estate investments consist of the following reportable segments: Established Communities, Other Stabilized Communities and Development/Redevelopment Communities. Established Communities are generally operating communities that were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year such that year-over-year comparisons are meaningful. Other Stabilized Communities are generally all other operating communities that have stabilized occupancy and operating expenses during the current year, but that were not owned or had not achieved stabilization as of the beginning of the prior year such that year-over-year comparisons are not meaningful, as well as communities that are planned for disposition during the current year. Development/Redevelopment Communities consist of communities that are under construction, communities where substantial redevelopment is in progress or is planned to begin during the current year and communities under lease-up. A more detailed description of these segments and other related information can be found in Note 9, “Segment Reporting,” of the Consolidated Financial Statements set forth in Item 8 of this report.

Our principal financial goal is to increase long-term stockholder value through the development, redevelopment, acquisition, operation, and when appropriate, disposition of apartments in our markets. To help meet this goal, we regularly (i) monitor our investment allocation by geographic market and product type, (ii) develop, redevelop and acquire an interest in apartment communities in high barrier to entry markets with growing or high potential for demand and high for-sale housing costs, (iii) selectively sell apartment communities that no longer meet our long-term strategy or when opportunities are presented to realize a portion of the value created through our investment and redeploy the proceeds from those sales, and (iv) endeavor to maintain a capital structure that is aligned with our business risks with a view to maintaining continuous access to cost-effective capital. Our strategy is to be leaders in multifamily market research, consumer insight, and capital allocation, delivering a range of multifamily offerings



tailored to serve the needs of the most attractive customer segments in the best-performing U.S. submarkets. A substantial majority of our current communities are upscale, which 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.

In late 2011, we announced two new apartment community brands that will complement our traditional “Avalon” brand. We believe that this branding segmentation will allow us to better target our product offerings to multiple customer segments and submarkets within our existing geographic footprint. The “Avalon” brand will remain our core offering, focusing on upscale apartment living and high end amenities and services in urban and suburban markets. Our new “AVA” brand is designed for people who want to live in or near urban neighborhoods and in close proximity to public transportation, services, shopping and night-life. AVA apartments will generally be smaller, many engineered for roommate living, and will feature modern design and a technology focus. Our “Eaves by Avalon” brand is designed for renters who seek good quality apartment living, often in a suburban setting, with practical amenities and services at a more modest price point.

During the three years ended December 31, 2011, excluding activity for the Funds (as defined below), we acquired one apartment community. During the same three-year period, excluding dispositions in which we retained an ownership interest, we disposed of 11 apartment communities and completed the development of 19 apartment communities and the redevelopment of 16 apartment communities. In addition, we exchanged a portfolio of three communities and a parcel of land we owned for a portfolio of six communities and $26,000,000 in cash.

During this period, we also realized our pro rata share of the gain from the sale of two communities owned by AvalonBay Value Added Fund, L.P. (“Fund I”), an institutional discretionary real estate investment fund, which we manage and in which we own a 15.2% interest. Fund I acquired communities with the objective of either redeveloping or repositioning them, or taking advantage of market cycle timing and improved operating performance. From its inception in March 2005 through the close of its investment period in March 2008, Fund I acquired 20 communities. Fund I sold one community in 2008, two communities in 2011, and two communities in 2012, through the date this Form 10-K was filed.

In addition, during this period we obtained an investment interest in communities through AvalonBay Value Added Fund II, L.P. (“Fund II”), a second institutional discretionary real estate investment fund which we manage and in which we own a 31.3% interest. While the investment period for Fund II closed in August 2011, additional acquisitions may occur for active acquisition candidates identified prior to the end of the investment period. From the commencement of Fund II through December 31, 2011, Fund II acquired 12 operating communities. In 2012, the Company expects Fund II to acquire its final operating community, which was an active acquisition candidate at the end of the investment period for Fund II. A more detailed description of Fund I and Fund II (collectively, the “Funds”) and the related investment activity can be found in the discussion in Note 6, “Investments in Real Estate Entities,” of the Consolidated Financial Statements in Item 8 of this report.

Excluding the portfolio exchange discussed above, and including sales by unconsolidated entities, during 2011, we sold eight real estate assets, consisting of five operating communities and three land parcels, resulting in a gain in accordance with U.S. generally accepted accounting principles (“GAAP”) of $290,194,000.

A further discussion of our development, redevelopment, disposition, acquisition, property management and related strategies follows.



Development Strategy. We select land for development and follow established procedures that we believe minimize both the cost and the risks of development. As one of the largest developers of multifamily rental apartment communities in high barrier to entry markets of the United States, we identify development opportunities through local market presence and access to local market information achieved through our regional offices. In addition to our principal executive office in Arlington, Virginia, we also maintain regional offices, administrative offices or specialty offices in or near the following cities:



Boston, Massachusetts;



Chicago, Illinois;



Long Island, New York;



Los Angeles, California;



New York, New York;



Newport Beach, California;



San Francisco, California;



San Jose, California;



Seattle, Washington;



Shelton, Connecticut;



Virginia Beach, Virginia; and



Woodbridge, New Jersey.

After selecting a target site, we usually negotiate for the right to acquire the site either through an option or a long-term conditional contract. Options and long-term conditional contracts generally allow us to acquire the target site shortly before the start of construction, which reduces development-related risks and preserves capital. However, as a result of competitive market conditions for land suitable for development, we have sometimes acquired and held land prior to construction for extended periods while entitlements are obtained, or acquired land zoned for uses other than residential with the potential for rezoning. For further discussion of our Development Rights, refer to Item 2. “Communities” in this report.

We generally act as our own general contractor and construction manager, except for certain mid-rise and high-rise apartment communities where we may elect to use third-party general contractors as construction managers. We generally perform these functions directly (although we may use a wholly-owned subsidiary) both for ourselves and for the joint ventures and partnerships of which we are a member or a partner. We believe direct involvement in construction enables us to achieve higher construction quality, greater control over construction schedules and cost savings. Our development, property management and construction teams monitor construction progress to ensure quality workmanship and a smooth and timely transition into the leasing and operating phase.

During periods where competition for development land is more intense, we may acquire improved land with existing commercial uses and rezone the site for multifamily residential use. During the period that we hold these buildings for future development, any net revenue from these operations, which we consider to be incidental, is accounted for as a reduction in our investment in the development pursuit and not as net income. We have also participated, and may in the future participate, in master planned or other large multi-use developments where we commit to build infrastructure (such as roads) to be used by other participants or commit to act as construction manager or general contractor in building structures or spaces for third parties (such as unimproved ground floor retail space, municipal garages or parks). Costs we incur in connection with these activities may be accounted for as additional invested capital in the community or we may earn fee income for providing these services. Particularly with large scale, urban in-fill developments, we may engage in significant environmental remediation efforts to prepare a site for construction.

Throughout this report, the term “development” is used to refer to the entire property development cycle, including pursuit of zoning approvals, procurement of architectural and engineering designs and the construction process. References to “construction” refer to the actual construction of the property, which is only one element of the development cycle.

Redevelopment Strategy. When we undertake the redevelopment of a community, our goal is to renovate and/or rebuild an existing community so that our total investment is generally below replacement cost and the community is well positioned in the market to achieve attractive returns on our capital. We have established a dedicated group of associates and procedures to control both the cost and risks of redevelopment. Our redevelopment teams, which include key redevelopment, construction and property management personnel, monitor redevelopment progress. We believe we achieve significant cost savings by acting as our own general contractor. More importantly, this helps to ensure quality design and workmanship and a smooth and timely transition into the lease-up and restabilization phases.



Throughout this report, the term “redevelopment” is used to refer to the entire redevelopment cycle, including planning and procurement of architectural and engineering designs, budgeting and actual renovation work. The actual renovation work is referred to as “reconstruction,” which is only one element of the redevelopment cycle.

Disposition Strategy. We sell assets that no longer meet our long-term strategy or when market conditions are favorable, and we redeploy the proceeds from those sales to develop, redevelop and acquire communities and to rebalance our portfolio across or within geographic regions. This also allows us to realize a portion of the value created through our investments and provides additional liquidity. We are then able to redeploy the net proceeds from our dispositions in lieu of raising that amount of capital externally. When we decide to sell a community, we generally solicit competing bids from unrelated parties for these individual assets and consider the sales price of each proposal.

Acquisition Strategy. Our core competencies in development and redevelopment discussed above allow us to be selective in the acquisitions we target. Acquisitions allow us to achieve rapid penetration into markets in which we desire an increased presence. Acquisitions (and dispositions) also help us achieve our desired product mix or rebalance our portfolio. We are not presently pursuing the formation of a new, third fund, preferring at this time to maintain flexibility in shaping our portfolio of wholly-owned assets through acquisitions and dispositions.

Property Management Strategy. We seek to increase operating income through innovative, proactive property management that will result in higher revenue from communities while constraining operating expenses. Our principal strategies to maximize revenue include:



strong focus on resident satisfaction;



staggering lease terms such that lease expirations are better matched to traffic patterns;



balancing high occupancy with premium pricing, and increasing rents as market conditions permit; and



employing revenue management software to optimize the pricing and term of leases.

Constraining growth in operating expenses is another way in which we seek to increase earnings growth. Growth in our portfolio and the resulting increase in revenue allows for fixed operating costs to be spread over a larger volume of revenue, thereby increasing operating margins. We constrain growth in operating expenses in a variety of ways, which include, but are not limited to, the following:



we use purchase order controls, acquiring goods and services from pre-approved vendors;



we use national negotiated contracts and also purchase supplies in bulk where possible;



we bid third-party contracts on a volume basis;



we strive to retain residents through high levels of service in order to eliminate the cost of preparing an apartment home for a new resident and to reduce marketing and vacant apartment utility costs;



we perform turnover work in-house or hire third parties, generally depending upon the least costly alternative;



we undertake preventive maintenance regularly to maximize resident satisfaction and property and equipment life; and



we aggressively pursue real estate tax appeals.

On-site property management teams receive bonuses based largely upon the net operating income (“NOI”) produced at their respective communities. We use and continuously seek ways to improve technology applications to help manage our communities, believing that the accurate collection of financial and resident data will enable us to maximize revenue and control costs through careful leasing decisions, maintenance decisions and financial management.

We generally manage the operation and leasing activity of our communities directly (although we may use a wholly-owned subsidiary) both for ourselves and the joint ventures and partnerships of which we are a member or a partner.

From time to time we also pursue or arrange ancillary services for our residents to provide additional revenue sources or increase resident satisfaction. As a REIT, we generally cannot provide direct services to our tenants that are not customarily provided by a landlord, nor can we directly share in the income of a third party that provides such services. However, we can provide such non-customary services to residents or share in the revenue from such services if we do so through a “taxable REIT subsidiary,” which is a subsidiary that is treated as a “C corporation” subject to federal income taxes.

Financing Strategy. We maintain a capital structure that provides financial flexibility to ensure we can select cost effective capital market options that are well matched to our business risks. We estimate that our short-term liquidity needs will be met from cash on hand, borrowings under our $750,000,000 revolving variable rate unsecured credit facility (the “Credit Facility”), sales of current operating communities and/or issuance of additional debt or equity securities. A determination to engage in an equity or debt offering depends on a variety of factors such as general



market and economic conditions, our short and long-term liquidity needs, the relative costs of debt and equity capital and growth opportunities. A summary of debt and equity activity for the last three years is reflected on our Consolidated Statement of Cash Flows of the Consolidated Financial Statements set forth in Item 8 of this report.

We have entered into, and may continue in the future to enter into, joint ventures (including limited liability companies or partnerships) through which we would own an indirect economic interest of less than 100% of the community or communities owned directly by such joint ventures. Our decision to either hold an apartment community in fee simple or to have an indirect interest in the community through a joint venture is based on a variety of factors and considerations, including: (i) the economic and tax terms required by a seller of land or of a community; (ii) our desire to diversify our portfolio of communities by market, submarket and product type; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) our projection, in some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture vehicle is used. Investments in joint ventures are not limited to a specified percentage of our assets. Each joint venture agreement is 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 agreement.

In addition, from time to time, we may offer shares of our equity securities, debt securities or options to purchase stock in exchange for property. We may also acquire properties in exchange for properties we currently own.

Other Strategies and Activities. While we emphasize equity real estate investments in rental apartment communities, we have the ability to invest in other types of real estate, mortgages (including participating or convertible mortgages), securities of other REITs or real estate operating companies, or securities of technology companies that relate to our real estate operations or of companies that provide services to us or our residents, in each case consistent with our qualification as a REIT. In addition, we own and lease retail space at our communities when either (i) the highest and best use of the space is for retail (e.g., street level in an urban area); (ii) we believe the retail space will enhance the attractiveness of the community to residents or; (iii) some component of retail space is required to obtain entitlements to build apartment homes. As of December 31, 2011, we had a total of 530,604 square feet of rentable retail space, excluding retail space within communities currently under construction. Gross rental revenue provided by leased retail space in 2011 was $8,131,000 (0.8% of total revenue). We may also develop a property in conjunction with another real estate company that will own and operate the retail component of a mixed-use building that we help develop. If we secure a development right and believe that its best use, in whole or in part, is to develop the real estate with the intent to sell rather than hold the asset, we may, through a taxable REIT subsidiary, develop real estate for sale. Any investment in securities of other entities, and any development of real estate for sale, is subject to the percentage of ownership limitations, gross income tests, and other limitations that must be observed for REIT qualification.

We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers and do not intend to do so. At all times we intend to make investments in a manner so as to qualify as a REIT unless, because of circumstances or changes to the Internal Revenue Code of 1986 (or the Treasury Regulations), our Board of Directors determines that it is no longer in our best interest to qualify as a REIT.

Tax Matters

We filed an election with our 1994 federal income tax return to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, (“the Code”) and intend to maintain our qualification as a REIT in the future. As a qualified REIT, with limited exceptions, we will not be taxed under federal and certain state income tax laws at the corporate level on our taxable net income to the extent taxable net income is distributed to our stockholders. We expect to make sufficient distributions to avoid income tax at the corporate level. While we believe that we are organized and qualified as a REIT and we intend to operate in a manner that will allow us to continue to qualify as a REIT, there can be no assurance that we will be successful in this regard. Qualification as a REIT involves the application of highly technical and complex provisions of the Code for which there are limited judicial and administrative interpretations and involves the determination of a variety of factual matters and circumstances not entirely within our control.


We face competition from other real estate investors, including insurance companies, pension and investment funds, partnerships and investment companies and other REITs, to acquire and develop apartment communities and acquire land for future development. As an owner and operator of apartment communities, we also face competition for prospective residents from other operators whose communities may be perceived to offer a better location or better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks. We also compete against condominiums and single-family homes that are for sale or rent. Although we often compete against large sophisticated developers and operators for development opportunities and for prospective residents, real estate developers and operators of any size can provide effective competition for both real estate assets and potential residents.



Environmental and Related Matters

As a current or prior owner, operator and developer of real estate, we are subject to various federal, state and local environmental laws, regulations and ordinances and also could be liable to third parties resulting from environmental contamination or noncompliance at our communities. For some development communities, we undertake extensive environmental remediation to prepare the site for construction, which could be a significant portion of our total construction cost. Environmental remediation efforts could expose us to possible liabilities for accidents or improper handling of contaminated materials during construction. These and other risks related to environmental matters are described in more detail in Item 1a., “Risk Factors.”

We believe that more government regulation of energy use, along with a greater focus on environmental protection may, over time, have a significant impact on urban growth patterns. If changes in zoning to encourage greater density and proximity to mass transit do occur, such changes could benefit multifamily housing and those companies with a competency in high-density development. However, there can be no assurance as to whether or when such changes in regulations or zoning will occur or, if they do occur, whether the multifamily industry or the Company will benefit from such changes.

Other Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may call the SEC at 1-202-551-8090 for further information on the operation of the Public Reference Room. Our SEC filings are also available to the public from the SEC’s website at

We maintain a website at Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to the Securities Exchange Act of 1934 are available free of charge in the “Investors” section of our website as soon as reasonably practicable after the reports are filed with or furnished to the SEC. In addition, the charters of our Board’s Nominating and Corporate Governance Committee, Audit Committee and Compensation Committee, as well as our Director Independence Standards, Corporate Governance Guidelines, Policy Regarding Shareholder Rights Agreement and Code of Conduct, are available free of charge in that section of our website or by writing to AvalonBay Communities, Inc., Ballston Tower, Suite 800, 671 N. Glebe Rd., Arlington, Virginia 22203, Attention: Chief Financial Officer. To the extent required by the rules of the SEC and the NYSE, we will disclose amendments and waivers relating to these documents in the same place on our website.

We were incorporated under the laws of the State of California in 1978. In 1995, we reincorporated in the State of Maryland and have been focused on the ownership and operation of apartment communities since that time. As of January 31, 2012, we had 2,095 employees.



Our operations involve various risks that could have adverse consequences, including those described below. This Item 1a. includes forward-looking statements. You should refer to our discussion of the qualifications and limitations on forward-looking statements in this Form 10-K.

Development, redevelopment and construction risks could affect our profitability.

We intend to continue to develop and redevelop apartment home communities. These activities can include long planning and entitlement timelines and can involve complex and costly activities, including significant environmental remediation or construction work in high-density urban areas. These activities may be exposed to the following risks:



we may abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover expenses already incurred in exploring those opportunities;



occupancy rates and rents at a community may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions beyond our control and the development by competitors of competing communities;




we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or the delay or abandonment of opportunities;



we may incur costs that exceed our original estimates due to increased material, labor or other costs;



we may be unable to complete construction and lease-up of a community on schedule, resulting in increased construction and financing costs and a decrease in expected rental revenues;



we may be unable to obtain financing with favorable terms, or at all, for the proposed development of a community, which may cause us to delay or abandon an opportunity;



we may incur liabilities to third parties during the development process, for example, in connection with managing existing improvements on the site prior to tenant terminations and demolition (such as commercial space) or in connection with providing services to third parties (such as the construction of shared infrastructure or other improvements); and



we may incur liability if our communities are not constructed and operated in compliance with the accessibility provisions of the Americans with Disabilities Acts, the Fair Housing Act or other federal, state or local requirements. Noncompliance could result in imposition of fines, an award of damages to private litigants, and a requirement that we undertake structural modifications to remedy the noncompliance.

We estimate construction costs based on market conditions at the time we prepare our budgets, and our projections include changes that we anticipate but cannot predict with certainty. Construction costs may increase, particularly for labor and certain materials and, for some of our Development Communities and Development Rights (as defined below), the total construction costs may be higher than the original budget. Total capitalized cost includes all capitalized costs incurred and projected to be incurred to develop or redevelop a community, determined in accordance with GAAP, including:



land and/or property acquisition costs;



fees paid to secure air rights and/or tax abatements;



construction or reconstruction costs;



costs of environmental remediation;



real estate taxes;



capitalized interest and insurance;



loan fees;






professional fees;



allocated development or redevelopment overhead; and



other regulatory fees.

Costs to redevelop communities that have been acquired have, in some cases, exceeded our original estimates and similar increases in costs may be experienced in the future. We cannot assure you that market rents in effect at the time new development or redevelopment communities complete lease-up will be sufficient to fully offset the effects of any increased construction or reconstruction costs.

Unfavorable changes in market and economic conditions could adversely affect occupancy, rental rates, operating expenses, and the overall market value of our assets, including joint ventures and investments in the Funds.

Local conditions in our markets significantly affect occupancy, rental rates and the operating performance of our communities. The risks that may adversely affect conditions in those markets include the following:



plant closings, industry slowdowns and other factors that adversely affect the local economy;



an oversupply of, or a reduced demand for, apartment homes;



a decline in household formation or employment or lack of employment growth;



the inability or unwillingness of residents to pay rent increases;



rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and



economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.



Changes in applicable laws, or noncompliance with applicable laws, could adversely affect our operations or expose us to liability.

We must develop, construct and operate our communities in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord tenant laws and other laws generally applicable to business operations. Noncompliance with laws could expose us to liability.

Lower revenue growth or significant unanticipated expenditures may result from our need to comply with changes in (i) laws imposing remediation requirements and the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) rent control or rent stabilization laws or other residential landlord/tenant laws, or (iii) other governmental rules and regulations or enforcement policies affecting the development, use and operation of our communities, including changes to building codes and fire and life-safety codes.

Short-term leases expose us to the effects of declining market rents.

Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.

Competition could limit our ability to lease apartment homes or increase or maintain rents.

Our apartment communities compete with other housing alternatives to attract residents, including other rental apartments, condominiums and single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing in a particular area could adversely affect our ability to lease apartment homes and to increase or maintain rental rates.

Attractive investment opportunities may not be available, which could adversely affect our profitability.

We expect that other real estate investors, including insurance companies, pension funds, other REITs and other well-capitalized investors, will compete with us to acquire existing properties and to develop new properties. This competition could increase prices for properties of the type we would likely pursue and adversely affect our profitability.

Capital and credit market conditions may adversely affect our access to various sources of capital and/or the cost of capital, which could impact our business activities, dividends, earnings, and common stock price, among other things.

In periods when the capital and credit markets experience significant volatility, the amounts, sources and cost of capital available to us may be adversely affected. We primarily use external financing to fund construction and to refinance indebtedness as it matures. If sufficient sources of external financing are not available to us on cost effective terms, we could be forced to limit our development and redevelopment activity and/or take other actions to fund our business activities and repayment of debt, such as selling assets, reducing our cash dividend or paying out less than 100% of our taxable income. To the extent that we are able and/or choose to access capital at a higher cost than we have experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing) our earnings per share and cash flows could be adversely affected. In addition, the price of our common stock may fluctuate significantly and/or decline in a high interest rate or volatile economic environment. We believe that the lenders under our Credit Facility will fulfill their lending obligations thereunder, but if economic conditions deteriorate, there can be no assurance that the ability of those lenders to fulfill their obligations would not be adversely impacted.

Insufficient cash flow could affect our debt financing and create refinancing risk.

We are subject to the risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. In this regard, we note that in order for us to continue to qualify as a REIT, we are required to annually distribute dividends generally equal to at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gain. This requirement limits the amount of our cash flow available to meet required principal and interest payments. The principal outstanding balance on a portion of our debt will not be fully amortized prior to its maturity. Although we may be able to repay our debt by using our cash flows, we cannot assure you that we will have sufficient cash flows available to make all required principal payments. Therefore, we may need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that a refinancing will not be done on as favorable terms; either of these outcomes could have a material adverse effect on our financial condition and results of operations.



Rising interest rates could increase interest costs and could affect the market price of our common stock.

We currently have, and may in the future incur, contractual variable interest rate debt, as well as effective variable interest rate debt achieved through the use of qualifying hedging relationships. In addition, we regularly seek access to both fixed and variable rate debt financing to repay maturing debt and to finance our development and redevelopment activity. Accordingly, if interest rates increase, our interest costs will also rise, unless we have made arrangements that hedge the risk of rising interest rates. In addition, an increase in market interest rates may lead purchasers of our common stock to demand a greater annual dividend yield, which could adversely affect the market price of our common stock.

Bond financing and zoning compliance requirements could limit our income, restrict the use of communities and cause favorable financing to become unavailable.

We have financed some of our apartment communities with obligations issued by local government agencies because the interest paid to the holders of this debt is generally exempt from federal income taxes and, therefore, the interest rate is generally more favorable to us. These obligations are commonly referred to as “tax-exempt bonds” and generally must be secured by mortgages on our communities. As a condition to obtaining tax-exempt financing, or on occasion as a condition to obtaining favorable zoning in some jurisdictions, we will commit to make some of the apartments in a community available to households whose income does not exceed certain thresholds (e.g., 50% or 80% of area median income), or who meet other qualifying tests. As of December 31, 2011, approximately 6.11% of our apartment homes at current operating communities were under income limitations such as these. These commitments, which may run without expiration or may expire after a period of time (such as 15 or 20 years) may limit our ability to raise rents and, in consequence, can also adversely affect the value of the communities subject to these restrictions.

In addition, some of our tax-exempt bond financing documents require us to obtain a guarantee from a financial institution of payment of the principal of, and interest on, the bonds. The guarantee may take the form of a letter of credit, surety bond, guarantee agreement or other additional collateral. If the financial institution defaults in its guarantee obligations, or if we are unable to renew the applicable guarantee or otherwise post satisfactory collateral, a default will occur under the applicable tax-exempt bonds and the community could be foreclosed upon if we do not redeem the bonds.

Risks related to indebtedness.

We have a Credit Facility with Bank of America, N.A., as administrative agent, swing lender, issuing bank and a bank, JPMorgan Chase Bank, N.A., as a bank and as syndication agent, Deutsche Bank Trust Company Americas, Morgan Stanley Bank and Wells Fargo Bank, N.A., each as a bank and as documentation agent, Barclays Bank PLC as a bank and as co-documentation agent, UBS Securities LLC as a co-documentation agent, The Bank of New York Mellon, BBVA Compass Bank, PNC Bank, National Association, and Suntrust Bank, each as a bank and as a managing agent, Branch Banking and Trust Company, Bank of Tokyo Mitsubishi UFJ, Ltd., and Citizens Bank, each as a bank and as a co-agent, and the other bank parties signatory thereto. Our organizational documents do not limit the amount or percentage of indebtedness that may be incurred. Accordingly, subject to compliance with outstanding debt covenants, we could incur more debt, resulting in an increased risk of default on our obligations and an increase in debt service requirements that could adversely affect our financial condition and results of operations.

The mortgages on those of our properties subject to secured debt, our Credit Facility and the indenture under which a substantial portion of our debt was issued contain customary restrictions, requirements and other limitations, as well as certain financial and operating covenants including maintenance of certain financial ratios. Maintaining compliance with these restrictions could limit our flexibility. A default in these requirements, if uncured, could result in a requirement that we repay indebtedness, which could severely affect our liquidity and increase our financing costs. Refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for further discussion.

The mortgages on those of our properties subject to secured debt generally include provisions which stipulate a prepayment penalty or payment that we will be obligated to pay in the event that we elect to repay the mortgage note prior to the earlier of (i) the stated maturity of the note, or (ii) the date at which the mortgage note is prepayable without such penalty or payment. If we elect to repay some or all of the outstanding principal balance for our mortgage notes, we may incur prepayment penalties or payments under these provisions which could adversely affect our results of operations.



Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity and access to capital markets.

There are two major debt rating agencies that routinely evaluate and rate our debt. These ratings are based on a number of factors, which include their assessment of our financial strength, liquidity, capital structure, asset quality amount of real estate under development, and sustainability of cash flow and earnings, among other factors. If market conditions change, we may not be able to maintain our current credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets.

We could be negatively impacted by the condition of Fannie Mae or Freddie Mac.

Fannie Mae and Freddie Mac are a major source of secured financing to the multifamily industry and we have used Fannie Mae and Freddie Mac for a portion of our financing needs. In February 2011, the Obama administration released a report calling for the winding down of the role that Fannie Mae and Freddie Mac play in the mortgage market. A final decision by the government to eliminate Fannie Mae or Freddie Mac or reduce their acquisitions or guarantees of multifamily community loans may adversely affect interest rates, capital availability, and the value of multifamily communities.

Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to stockholders.

A decrease in rental revenue or other liquidity needs, including the repayment of indebtedness or funding of our development activities, could have an adverse effect on our ability to pay distributions to our stockholders. Significant expenditures associated with each community such as debt service payments, if any, real estate taxes, insurance and maintenance costs are generally not reduced when circumstances cause a reduction in income from a community.

The form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.

The form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Directors may consider relevant. The Board of Directors may modify our dividend policy from time to time.

We may choose to pay dividends in our own stock, in which case stockholders may be required to pay tax in excess of the cash they receive.

We may distribute taxable dividends that are payable in part in our stock, as we did in the fourth quarter of 2008. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of the cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, the trading price of our stock would experience downward pressure if a significant number of our stockholders sell shares of our stock in order to pay taxes owed on dividends.

Debt financing may not be available and equity issuances could be dilutive to our stockholders.

Our ability to execute our business strategy depends on our access to an appropriate blend of debt and equity financing. Debt financing may not be available in sufficient amounts or on favorable terms. If we issue additional equity securities, the interests of existing stockholders could be diluted.

Difficulty of selling apartment communities could limit flexibility.

Federal tax laws may limit our ability to earn a gain on the sale of a community (unless we own it through a subsidiary which will incur a taxable gain upon sale) if we are found to have held, acquired or developed the community primarily with the intent to resell the community, and this limitation may affect our ability to sell communities without adversely affecting returns to our stockholders. In addition, real estate in our markets can at times be difficult to sell quickly at prices we find acceptable. These potential difficulties in selling real estate in our markets may limit our ability to change or reduce the apartment communities in our portfolio promptly in response to changes in economic or other conditions.



Acquisitions may not yield anticipated results.

Our business strategy includes acquiring as well as developing communities. Our acquisition activities and their success may be exposed to the following risks:



an acquired property may fail to perform as we expected in analyzing our investment; and



our estimate of the costs of repositioning or redeveloping an acquired property may prove inaccurate.

Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences.

We may from time to time commence development activity or make acquisitions outside of our existing market areas if appropriate opportunities arise. Our historical experience in our existing markets in developing, owning and operating rental communities does not ensure that we will be able to operate successfully in new markets, should we choose to enter them. We may be exposed to a variety of risks if we choose to enter new markets, including an inability to accurately evaluate local apartment market conditions; an inability to obtain land for development or to identify appropriate acquisition opportunities; an inability to hire and retain key personnel; and lack of familiarity with local governmental and permitting procedures.

Although we are primarily in the multifamily business, we also own and lease ancillary retail space when a retail component represents the best use of the space, as is often the case with large urban in-fill developments. We also may engage or have an interest in for-sale activity. We may be unsuccessful in owning and leasing retail space at our communities or in developing real estate with the intent to sell, which could have an adverse effect on our results of operations.

We are currently implementing two new brands of communities that target various customer preferences. We cannot assure that these brands will be successful or that our costs in developing and implementing these brands will result in incremental revenue and earnings.

Land we hold with no current intent to develop may be subject to future impairment charges.

We own parcels of land that we do not currently intend to develop. As discussed in Item 2., “Communities – Other Land and Real Estate Assets,” in the event that the fair market value of a parcel changes such that we determine that the carrying basis of the parcel reflected in our financial statements is greater than the parcel’s then current fair value, less costs to dispose, we would be subject to an impairment charge, which would reduce our net income.

Risks involved in real estate activity through joint ventures.

Instead of acquiring or developing apartment communities directly, at times we invest as a partner or a co-venturer. Joint venture investments (including investments through partnerships or limited liability companies) involve risks, including the possibility that our partner might become insolvent or otherwise refuse to make capital contributions when due; that we may be responsible to our partner for indemnifiable losses; that our partner might at any time have business goals which are inconsistent with ours; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. Frequently, we and our partner may each have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction.

Risks associated with an investment in and management of discretionary real estate investment funds.

We formed Fund I and Fund II, in which we have an equity interest of 15.2% and 31.3%, respectively, which, through wholly-owned subsidiaries, we manage as the general partner and in which we have invested an aggregate of approximately $146,465,000, net of distributions to us at December 31, 2011. The investment period for both Funds is over. These Funds present risks, including the following:



our subsidiaries that are the general partners of the Funds are generally liable, under partnership law, for the debts and obligations of the respective Funds, subject to certain exculpation and indemnification rights pursuant to the terms of the partnership agreement of the Funds;




investors in the Funds holding a majority of the partnership interests may remove us as the general partner without cause, subject to our right to receive an additional nine months of management fees after such removal and our right to acquire one of the properties then held by the Funds;



while we have broad discretion to manage the Funds and make investment decisions on behalf of the Funds, the investors or an advisory committee comprised of representatives of the investors must approve certain matters, and as a result we may be unable to cause the Funds to implement certain decisions that we consider beneficial; and



we may be liable and/or our status as a REIT may be jeopardized if either the Funds, or the REITs through which a number of investors have invested in the Funds and which we manage, fail to comply with various tax or other regulatory matters.

Risk of earthquake damage.

As further described in Item 2., “Communities – Insurance and Risk of Uninsured Losses,” many of our West Coast communities are located in the general vicinity of active earthquake faults. We cannot assure you that an earthquake would not cause damage or losses greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could materially and adversely affect our business and our financial condition and results of operations.

Insurance coverage for earthquakes can be costly due to limited industry capacity. As a result, we may experience shortages in desired coverage levels if market conditions are such that insurance is not available or the cost of insurance makes it, in management’s view, economically impractical.

A significant uninsured property or liability loss could have a material adverse effect on our financial condition and results of operations.

In addition to the earthquake insurance discussed above, we carry commercial general liability insurance, property insurance and terrorism insurance with respect to our communities on terms we consider commercially reasonable. There are, however, certain types of losses (such as losses arising from 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. If an uninsured property loss or a property loss in excess of insured limits were to occur, we could lose our capital invested in a community, as well as the anticipated future revenues from such community. We would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. If an uninsured liability to a third party were to occur, we would incur the cost of defense and settlement with, or court ordered damages to, that third party. A significant uninsured property or liability loss could materially and adversely affect our business and our financial condition and results of operations.

We may incur costs and increased expenses to repair property damage resulting from inclement weather.

Particularly in New England, the New York and New Jersey Metro area and the Midwest, we are exposed to risks associated with inclement winter weather, including increased costs for the removal of snow and ice as well as from delays in construction. In addition, inclement weather could increase the need for maintenance and repair of our communities.

We may incur costs due to environmental contamination or non-compliance.

Under various federal, state and local environmental and public health laws, regulations and ordinances, we may be required, regardless of knowledge or responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at our properties (including in some cases natural substances such as methane and radon gas) and may be held liable under these laws or common law to a governmental entity or to third parties for property, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination. These damages and costs may be substantial and may exceed any insurance coverage we have for such events. The presence of such substances, or the failure to properly remediate the contamination, may adversely affect our ability to borrow against, sell or rent the affected property.

In addition, some environmental laws create or allow a government agency to impose a lien on the contaminated site in favor of the government for damages and costs it incurs as a result of the contamination.

The development, construction and operation of our communities are subject to regulations and permitting under various federal, state and local laws, regulations and ordinances, which regulate matters including wetlands protection, storm water runoff and wastewater discharge. Noncompliance with such laws and regulations may subject us to fines and penalties. We do not currently anticipate that we will incur any material liabilities as a result of noncompliance with these laws.



Certain federal, state and local laws, regulations and ordinances govern the removal, encapsulation or disturbance of asbestos containing materials (“ACMs”) when such materials are in poor condition or in the event of renovation or demolition of a building. These laws and the common law may impose liability for release of ACMs and may allow third parties to seek recovery from owners or operators of real properties for personal injury associated with exposure to ACMs. We are not aware that any ACMs were used in the construction of the communities we developed. ACMs were, however, used in the construction of a number of the communities that we acquired. We implement an operations and maintenance program at each of the communities at which ACMs are detected. We do not currently anticipate that we will incur any material liabilities as a result of the presence of ACMs at our communities.

We are aware that some of our communities have lead paint and have implemented an operations and maintenance program at each of those communities. We do not currently anticipate that we will incur any material liabilities as a result of the presence of lead paint at our communities.

We are also aware that environmental agencies and third parties have, in the case of certain properties with on-site or nearby contamination, asserted claims for remediation or personal injury based on the alleged actual or potential intrusion into buildings of chemical vapors from soils or groundwater underlying or in the vicinity of those buildings or on nearby properties. We currently do not anticipate that we will incur any material liabilities as a result of vapor intrusion at our communities.

All of our stabilized operating communities, and all of the communities that we are currently developing, have been subjected to at least a Phase I or similar environmental assessment, which generally does not involve invasive techniques such as soil or ground water sampling. These assessments, together with subsurface assessments conducted on some properties, have not revealed, and we are not otherwise aware of, any environmental conditions that we believe would have a material adverse effect on our business, assets, financial condition or results of operations. In connection with our ownership, operation and development of communities, from time to time we undertake substantial remedial action in response to the presence of subsurface or other contaminants, including contaminants in soil, groundwater and soil vapor beneath or affecting our buildings. In some cases, an indemnity exists upon which we may be able to rely if environmental liability arises from the contamination or remediation costs exceed estimates. There can be no assurance, however, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that environmental liability arises.

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. Although the occurrence of mold at multifamily and other structures, and the need to remediate such mold, is not a new phenomenon, there has been increased awareness in recent years that certain molds may in some instances lead to adverse health effects, including allergic or other reactions. To help limit mold growth, we educate residents about the importance of adequate ventilation and request or require that they notify us when they see mold or excessive moisture. We have established procedures for promptly addressing and remediating mold or excessive moisture from apartment homes when we become aware of its presence regardless of whether we or the resident believe a health risk is presented. However, we cannot provide assurance that mold or excessive moisture will be detected and remediated in a timely manner. 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 that may exceed any applicable insurance coverage.

Additionally, we have occasionally been involved in developing, managing, leasing and operating various properties for third parties. Consequently, we may be considered to have been an operator of such properties and, therefore, potentially liable for removal or remediation costs or other potential costs which relate to the release or presence of hazardous or toxic substances. We are not aware of any material environmental liabilities with respect to properties managed or developed by us or our predecessors for such third parties.

We cannot assure you that:



the environmental assessments described above have identified all potential environmental liabilities;



no prior owner created any material environmental condition not known to us or the consultants who prepared the assessments;



no environmental liabilities have developed since the environmental assessments were prepared;



the condition of land or operations in the vicinity of our communities, such as the presence of underground storage tanks, will not affect the environmental condition of our communities;




future uses or conditions, including, without limitation, changes in applicable environmental laws and regulations, will not result in the imposition of environmental liability; and



no environmental liabilities will arise at communities that we have sold for which we may have liability.

Our success depends on key personnel whose continued service is not guaranteed.

Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. Our executive officers make important capital allocation decisions or recommendations to our Board of Directors from among the opportunities identified by our regional offices. There is substantial competition for qualified personnel in the real estate industry, and the loss of several of our key personnel could adversely affect the Company.

Breaches of our data security could materially harm our business and reputation.

We collect and retain certain personal information provided by our tenants and employees. While we have implemented a variety of security measures to protect the confidentiality of this information and periodically review and improve our security measures, there can be no assurance that we will be able to prevent unauthorized access to this information. Any breach of our data security measures and loss of this information may result in legal liability and costs (including damages and penalties), as well as damage to our reputation, that could materially and adversely affect our business and financial performance.

Failure to qualify as a REIT would cause us to be taxed as a corporation, which would significantly reduce funds available for distribution to stockholders.

If we fail to qualify as a REIT for federal income tax purposes, we will be subject to federal income tax on our taxable income at regular corporate rates (subject to any applicable alternative minimum tax). In addition, unless we are entitled to relief under applicable statutory provisions, we would be ineligible to make an election for treatment as a REIT for the four taxable years following the year in which we lose our qualification. The additional tax liability resulting from the failure to qualify as a REIT would significantly reduce or eliminate the amount of funds available for distribution to our stockholders. Furthermore, we would no longer be required to make distributions to our stockholders. Thus, our failure to qualify as a REIT could also impair our ability to expand our business and raise capital, and would adversely affect the value of our common stock.

We believe that we are organized and qualified as a REIT, and we intend to operate in a manner that will allow us to continue to qualify as a REIT. However, we cannot assure you that we are qualified as a REIT, or that we will remain qualified in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial and administrative interpretations and involves the determination of a variety of factual matters and circumstances not entirely within our control. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of this qualification.

Even if we qualify as a REIT, we will be subject to certain federal, state and local taxes on our income and property and on taxable income that we do not distribute to our shareholders. In addition, we may engage in activities that are not customarily provided by a landlord through taxable subsidiaries and will be subject to federal income tax at regular corporate rates on the income of those subsidiaries.

The ability of our stockholders to control our policies and effect a change of control of our company is limited by certain provisions of our charter and bylaws and by Maryland law.

There are provisions in our charter and bylaws that may discourage a third party from making a proposal to acquire us, even if some of our stockholders might consider the proposal to be in their best interests. These provisions include the following:

Our charter authorizes our Board of Directors to issue up to 50,000,000 shares of preferred stock without stockholder approval and to establish the preferences and rights, including voting rights, of any series of preferred stock issued. The Board of Directors may issue preferred stock without stockholder approval, which could allow the Board to issue one or more classes or series of preferred stock that could discourage or delay a tender offer or a change in control.



To maintain our qualification as a REIT for federal income tax purposes, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by or for five or fewer individuals at any time during the last half of any taxable year. To maintain this qualification, and/or to address other concerns about concentrations of ownership of our stock, our charter generally prohibits ownership (directly, indirectly by virtue of the attribution provisions of the Code, or beneficially as defined in Section 13 of the Securities Exchange Act) by any single stockholder of more than 9.8% of the issued and outstanding shares of any class or series of our stock. In general, under our charter, pension plans and mutual funds may directly and beneficially own up to 15% of the outstanding shares of any class or series of stock. Under our charter, our Board of Directors may in its sole discretion waive or modify the ownership limit for one or more persons, but is not required to do so even if such waiver would not affect our qualification as a REIT. These ownership limits may prevent or delay a change in control and, as a result, could adversely affect our stockholders’ ability to realize a premium for their shares of common stock.

Our bylaws provide that the affirmative vote of holders of a majority of all of the shares entitled to be cast in the election of directors is required to elect a director. In a contested election, if no nominee receives the vote of holders of a majority of all of the shares entitled to be cast, the incumbent directors would remain in office. This requirement may prevent or delay a change in control and, as a result, could adversely affect our stockholders’ ability to realize a premium for their shares of common stock.

As a Maryland corporation, we are subject to the provisions of the Maryland General Corporation Law. Maryland law imposes restrictions on some business combinations and requires compliance with statutory procedures before some mergers and acquisitions may occur, which may delay or prevent offers to acquire us or increase the difficulty of completing any offers, even if they are in our stockholders’ best interests. In addition, other provisions of the Maryland General Corporation Law permit the Board of Directors to make elections and to take actions without stockholder approval (such as classifying our Board such that the entire Board is not up for reelection annually) that, if made or taken, could have the effect of discouraging or delaying a change in control.







Our real estate investments consist primarily of current operating apartment communities, communities in various stages of development (“Development Communities”) and Development Rights (as defined below). Our current operating communities are further distinguished as Established Communities, Other Stabilized Communities, Lease-Up Communities and Redevelopment Communities. The following is a description of each category:

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



Established Communities (also known as Same Store Communities) are consolidated communities 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 and operating expenses as of the beginning of the prior year. For the year ended December 31, 2011, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2010, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.



Other Stabilized Communities includes all other completed communities that we own or have a direct or indirect ownership interest in, and that have stabilized occupancy, as defined above. Other Stabilized Communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year.



Lease-Up Communities are communities where construction has been complete for less than one year and where physical occupancy has not reached 95%.



Redevelopment Communities are communities where substantial redevelopment is in progress or is planned to begin during the current year. For communities that we wholly own, redevelopment is considered substantial when capital invested during the reconstruction effort is expected to exceed the lesser of $5,000,000 or 10% of the community’s capitalized cost and is expected to have a material impact on the community’s operations and future rental rates. The occupancy levels of Redevelopment Communities may also be impacted to the extent we take multiple apartment homes out of service for an extended period of time. The definition of substantial redevelopment may differ for communities owned through a joint venture arrangement, or by one of the Funds.

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

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



As of December 31, 2011, communities that we owned or held a direct or indirect interest in were classified as follows:


     Number of
     Number of
apartment homes

Current Communities


Established Communities:


New England

     30         7,315   

Metro NY/NJ

     22         6,981   


     14         5,298   

Pacific Northwest

     10         2,533   

Northern California

     15         4,829   

Southern California

     15         4,003   







Total Established

     106         30,959   







Other Stabilized Communities:


New England

     7         1,608   

Metro NY/NJ

     11         3,945   


     12         4,119   

Pacific Northwest

     3         828   

Northern California

     12         3,297   

Southern California

     19         5,898   







Total Other Stabilized

     64         19,695   







Lease-Up Communities

     3         273   

Redevelopment Communities (1)

     8         2,367   







Total Current Communities

     181         53,294   







Development Communities

     19         5,244   







Development Rights

     32         9,012   








(1) In addition to the eight communities indicated, the Company commenced the redevelopment of five communities with an aggregate of 971 apartment homes during 2011, for which at December 31, 2011 the redevelopment activity is focused on the common area and is not impacting community operations, including occupancy or rental revenue. These communities are therefore included in the Established Community portfolio.

Our holdings under each of the above categories are discussed on the following pages.

Current Communities

Our Current Communities include garden-style apartment communities consisting of multi-story buildings in landscaped settings, as well as mid and high rise apartment communities in urban settings. As of January 31, 2012, our current communities consisted of 126 garden-style (of which 16 are mixed communities and/or include town homes), 22 high-rise and 32 mid-rise apartment communities.

Our communities generally offer a variety of quality amenities and features, which may include:



fully-equipped kitchens;



lofts and vaulted ceilings;



walk-in closets;






patios/decks; and



modern appliances.

Other features at various communities may include:



swimming pools;



fitness centers;



tennis courts; and



wi-fi lounges.



As described in Item 1, in late 2011 we announced the introduction of two new brands to supplement our core Avalon offering, which remains focused on upscale apartment living and high end amenities and services. “AVA” will target customers in high energy, transit-served urban neighborhoods and will feature smaller apartments, many of which are designed for roommate living with an emphasis on modern design and a technology focus. “Eaves by Avalon” is targeted to the cost conscious, “value” segment and will likely be concentrated in older assets in suburban areas. We believe that the addition of these new brands will allow us to further penetrate our existing markets, by segmenting our market by consumer preference and attitude as well as by location and price.

We also have an extensive and ongoing maintenance program to continually maintain and enhance our communities and apartment homes. The aesthetic appeal of our communities and a service-oriented property management team, focused on the specific needs of residents, enhances market appeal to discriminating residents. We believe our mission of Enhancing the Lives of our Residents helps us achieve higher rental rates and occupancy levels while minimizing resident turnover and operating expenses.

Our Current Communities are located in the following geographic markets:


     Number of
communities at
     Number of apartment
homes at
     Percentage of total
apartment homes at
     1-31-11      1-31-12      1-31-11      1-31-12      1-31-11     1-31-12  

New England

     37         39         9,351         9,114         18.1     17.2

Boston, MA

     26         26         6,902         6,254         13.4     11.8

Fairfield County, CT

     11         13         2,449         2,860         4.7     5.4

Metro NY/NJ

     33         34         11,250         11,430         21.8     21.5

Long Island, NY

     7         7         1,932         1,932         3.8     3.6

Northern New Jersey

     5         5         1,618         1,618         3.1     3.0

Central New Jersey

     7         8         3,034         3,214         5.9     6.1

New York, NY

     14         14         4,666         4,666         9.0     8.8


     29         26         10,344         9,557         20.0     18.0

Washington, DC

     24         23         9,087         8,696         17.6     16.4

Chicago, IL

     5         3         1,257         861         2.4     1.6

Pacific Northwest

     12         14         2,964         3,443         5.7     6.5

Seattle, WA

     12         14         2,964         3,443         5.7     6.5

Northern California

     33         32         9,578         9,351         18.5     17.6

Oakland-East Bay, CA

     10         10         3,251         3,251         6.3     6.1

San Francisco, CA

     12         11         2,749         2,522         5.3     4.8

San Jose, CA

     11         11         3,578         3,578         6.9     6.7

Southern California

     29         35         8,206         10,195         15.9     19.2

Los Angeles, CA

     13         15         3,555         4,209         6.9     7.9

Orange County, CA

     11         12         2,984         3,209         5.8     6.1

San Diego, CA

     5         8         1,667         2,777         3.2     5.2


















     173         180         51,693         53,090         100.0     100.0



















We manage and operate substantially all of our Current Communities. During the year ended December 31, 2011, we completed construction of 1,161 apartment homes in six communities, sold 1,313 apartment homes in five communities, and exchanged three communities with 1,060 apartment homes for six communities with 1,418 apartment homes with another apartment owner. The average age of our Current Communities, on a weighted average basis according to number of apartment homes, is 17 years. When adjusted to reflect redevelopment activity, as if redevelopment were a new construction completion date, the average age of our Current Communities is 11 years.

Of the Current Communities, as of January 31, 2012, we owned:



a full fee simple, or absolute, ownership interest in 146 operating communities, ten of which are on land subject to land leases expiring in October 2026, November 2028, December 2034, December 2061, April 2095, September 2105, April 2105, May 2105 and March 2142;




a general partnership interest and an indirect limited partnership interest in both Fund I and Fund II. Subsidiaries of Fund I own a fee simple interest in 15 operating communities, and subsidiaries of Fund II own a fee simple interest in 12 operating communities;



a general partnership interest in one partnership structured as a “DownREIT,” as described more fully below, that owns one community;



a membership interest in five limited liability companies, that each hold a fee simple interest in an operating community; and



a residual profits interest (with no ownership interest) in a limited liability company to which an operating community was transferred upon completion of construction in the second quarter of 2006.

For some communities, a land lease is used to support tax advantaged structures that ultimately allow us to purchase the land upon lease expiration. We have options to purchase the underlying land for the leases that expire in October 2026, November 2028, December 2034 and April 2095. We also hold, directly or through wholly-owned subsidiaries, the full fee simple ownership interest in 16 of the 19 Development Communities and a leasehold interest in three of the Development Communities with the land leases expiring in July 2046, November 2106, and May 2041. Two of the three land leases (those expiring in 2041 and 2046) provide options for the Company to purchase the land at some point during the lease term.

In our partnership structured as a DownREIT, one of our wholly-owned subsidiaries is the general partner, and there are one or more limited partners whose interest in the partnership is represented by units of limited partnership interest. Limited partners are entitled to receive an initial distribution before any distribution is made to the general partner. Under the partnership agreement for the DownREIT, the distributions per unit paid to the holders of units of limited partnership interests are equal to our current common stock dividend amount. The holders of units of limited partnership interest have the right to present all or some of their units for redemption for a cash amount as determined by the partnership agreement and based on the fair value of our common stock. In lieu of a cash redemption by the partnership, we may elect to acquire any unit presented for redemption for one share of our common stock or for such cash amount. As of January 31, 2012, there were 7,500 DownREIT partnership units outstanding. The DownREIT partnership is consolidated for financial reporting purposes.



Profile of Current, Development and Unconsolidated Communities (1)

(Dollars in thousands, except per apartment home data)



City and state

of homes
rentable area
(Sq. Ft.)
    Acres     Year of

(Sq.  Ft.)
occupancy at
    Average economic
rental rate
cost (5)
                2011     2010     $ per
Apt (4)
    $ per
Sq. Ft.





Boston, MA


Avalon at Lexington


Lexington, MA

    198        230,039        16.1      1994     1,162        92.4     96.3     96.4     1,854        1.54        17,270   

Avalon Oaks


Wilmington, MA

    204        229,752        22.5      1999     1,126        94.6     96.4     97.0     1,567        1.34        21,732   

Avalon Summit


Quincy, MA

    245        224,538        8.0      1986/1996     916        95.5     94.5 % (2)      92.6 % (2)      1,451        1.50        25,517   

Avalon Essex


Peabody, MA

    154        198,478        11.1      2000     1,289        96.1     97.1     97.8     1,665        1.25        22,704   

Avalon at Prudential Center


Boston, MA

    780        732,610        1.0      1968/1998     939        93.7     95.8     95.2     3,112        3.17        182,385   

Avalon Oaks West


Wilmington, MA

    120        133,376        27.0      2002     1,111        95.0     96.4     95.3     1,493        1.29        17,266   

Avalon Orchards


Marlborough, MA

    156        175,505        23.0      2002     1,125        97.4     96.7     97.4     1,585        1.36        21,914   

Avalon at Newton Highlands (8)


Newton, MA

    294        339,537        8.1      2003     1,155        90.8     95.0     96.6     2,249        1.85        57,956   

Avalon at The Pinehills I


Plymouth, MA

    101        151,712        6.0      2004     1,502        95.0     95.8     97.9     2,019        1.29        20,013   

Essex Place


Peabody, MA

    286        250,624        18.0      2004     876        95.5     97.2     96.6     1,359        1.51        35,063   

Avalon at Bedford Center


Bedford, MA

    139        159,912        38.0      2005     1,150        95.7     96.4     96.1     1,888        1.58        24,895   

Avalon Chestnut Hill


Chestnut Hill, MA

    204        270,956        5.0      2007     1,328        90.2     95.6     96.7     2,566        1.85        60,737   

Avalon Shrewsbury


Shrewsbury, MA

    251        273,223        25.5      2007     1,089        95.6     96.1     95.9     1,433        1.27        35,851   

Avalon Danvers


Danvers, MA

    433        492,222        75.0      2006     1,137        95.8     96.1     95.7     1,570        1.33        84,052   

Avalon at Lexington Hills


Lexington, MA

    387        483,878        23.0      2007     1,250        96.1     95.9     96.2     2,114        1.62        87,847   

Avalon Acton


Acton, MA

    380        374,888        50.3      2007     987        96.3     96.6     95.7     1,421        1.39        63,072   

Avalon Sharon


Sharon, MA

    156        175,389        27.0      2007     1,124        95.5     96.1     96.1     1,724        1.47        30,241   

Avalon at Center Place (10)


Providence, RI

    225        222,835        1.2      1991/1997     990        92.4     96.0     96.3     2,157        2.09        31,450   

Avalon at Hingham Shipyard


Hingham, MA

    235        290,951        13.0      2009     1,238        93.6     94.8     96.6     2,134        1.63        53,815   

Avalon Northborough I


Northborough, MA

    163        182,688        14.0      2009     1,121        93.9     96.7     95.9     1,530        1.32        25,684   

Avalon Blue Hills


Randolph, MA

    276        269,333        23.1      2009     976        92.4     96.1     95.3     1,467        1.44        45,810   

Avalon Northborough II


Northborough, MA

    219        271,031        17.7      2010     1,238        95.9     95.5     46.7 % (3)      1,700        1.31        34,742   

Avalon at Pinehills II


Plymouth, MA

    91        103,519        4.5      2011     1,138        87.9     47.6 % (3)      N/A        1,345        0.56        17,331   

Fairfield-New Haven, CT


Avalon Gates


Trumbull, CT

    340        379,002        37.0      1997     1,115        96.5     96.7     97.8     1,708        1.48        38,098   

Avalon Glen


Stamford, CT

    238        222,165        4.1      1991     933        92.0     97.0     96.0     1,924        2.00        33,000   

Avalon Wilton


Wilton, CT

    102        158,642        12.0      1996     1,555        90.2     95.3     95.6     2,818        1.73        17,375   

Avalon Valley


Danbury, CT

    268        299,923        17.1      1999     1,119        95.1     96.9     97.1     1,608        1.39        26,502   

Avalon on Stamford Harbor


Stamford, CT

    323        322,461        12.1      2003     998        96.3     95.7     95.8     2,468        2.36        63,216   

Avalon New Canaan (9)


New Canaan, CT

    104        132,080        9.1      2002     1,270        92.3     94.7     96.2     2,899        2.16        24,572   

Avalon at Greyrock Place


Stamford, CT

    306        315,380        3.0      2002     1,031        96.7     96.6     95.9     2,198        2.06        71,036   

Avalon Danbury


Danbury, CT

    234        235,320        35.0      2005     1,006        94.4     97.2     97.0     1,624        1.57        35,877   

Avalon Darien


Darien, CT

    189        242,675        30.0      2004     1,284        96.8     96.4     95.8     2,616        1.96        41,772   

Avalon Milford I


Milford, CT

    246        217,085        22.0      2004     882        93.5     97.5     97.3     1,535        1.70        31,595   

Avalon Huntington


Shelton, CT

    99        139,869        7.1      2008     1,413        96.0     96.1     96.5     2,146        1.46        25,380   

Avalon Norwalk


Norwalk, CT

    311        310,629        4.4      2011     999        96.1     86.5 % (3)      32.8 % (3)      2,054        1.78        74,054   

Avalon Wilton II


Wilton, CT

    100        129,276        6.0      2011     1,293        83.0     43.8 % (3)      N/A        1,767        0.60        30,031   



Long Island, NY


Avalon Commons


Smithtown, NY

    312        377,337        20.6      1997     1,209        94.6     96.1 % (2)      96.9 % (2)      2,173        1.73        38,592   



Profile of Current, Development and Unconsolidated Communities (1)

(Dollars in thousands, except per apartment home data)



City and state

of homes
rentable area
(Sq. Ft.)
    Acres     Year of completion/

(Sq.  Ft.)
occupancy at
    Average economic
rental rate
cost (5)
                2011     2010     $ per
Apt (4)
    $ per
Sq. Ft.

Avalon Towers


Long Beach, NY

    109        124,611        1.3      1990/1995     1,143        95.4     96.3     96.8     3,579        3.02        21,774   

Avalon Court


Melville, NY

    494        596,809        35.4      1997/2000     1,208        92.7     95.4     95.7     2,496        1.97        61,641   

Avalon at Glen Cove South (10)


Glen Cove, NY

    256        261,425        4.0      2004     1,021        95.7     96.8     95.4     2,392        2.27        68,275   

Avalon Pines I & II


Coram, NY

    450        545,989        52.0      2005/2006     1,213        94.9     96.3     95.5     2,075        1.65        71,712   

Avalon at Glen Cove North (10)


Glen Cove, NY

    111        100,754        1.3      2007     908        95.5     96.1     94.9     2,225        2.35        39,971   

Avalon Charles Pond


Coram, NY

    200        208,532        41.0      2009     1,043        94.5     96.4     96.8     1,876        1.73        48,355   

Northern New Jersey


Avalon Cove


Jersey City, NJ

    504        574,339        11.0      1997     1,140        94.8     95.5 % (2)      96.3 % (2)      2,781        2.33        109,015   

Avalon at Edgewater


Edgewater, NJ

    408        424,823        7.1      2002     1,041        95.8     96.7     96.5     2,380        2.21        76,841   

Avalon at Florham Park


Florham Park, NJ

    270        330,410        41.9      2001     1,224        97.4     96.5     96.1     2,595        2.05        42,585   

Avalon Lyndhurst


Lyndhurst, NJ

    328        330,588        5.8      2006     1,008        95.1     96.3     96.2     2,113        2.02        78,653   

Central New Jersey


Avalon Run & Run East (7)


Lawrenceville, NJ

    632        707,592        36.0      1994/1996     1,120        94.1     95.7     96.3     1,527        1.31        77,181   

Avalon Princeton Junction


West Windsor, NJ

    512        486,069        64.0      1988     949        95.1     93.8 % (2)      94.5 % (2)      1,516        1.50        48,462   

Avalon at Freehold


Freehold, NJ

    296        317,356        42.3      2002     1,072        95.6     96.2     96.5     1,760        1.58        34,970   

Avalon Run East II


Lawrenceville, NJ

    312        341,320        70.0      2003     1,094        96.8     96.1     96.8     1,844        1.62        52,634   

Avalon at Tinton Falls


Tinton Falls, NJ

    216        237,747        35.0      2007     1,101        93.5     95.8     95.6     1,779        1.55        41,105   

Avalon West Long Branch


West Long Branch, NJ

    180        193,511        10.4      2011     1,075        97.2     88.0 % (3)      25.7 % (3)      1,749        1.43        25,628   

New York, NY


Avalon Gardens


Nanuet, NY

    504        608,842        54.0      1998     1,208        95.6     96.4     96.7     2,109        1.68        56,356   

Avalon Green


Elmsford, NY

    105        113,538        16.9      1995     1,081        98.1     95.7     96.4     2,346        2.08        14,044   

Avalon Willow


Mamaroneck, NY

    227        216,161        4.0      2000     952        92.5     95.8     96.5     2,267        2.28        47,862   

The Avalon


Bronxville, NY

    110        118,952        1.5      1999     1,081        92.7     94.5     96.6     3,712        3.24        31,786   

Avalon Riverview I (10)


Long Island City, NY

    372        332,991        1.0      2002     895        94.9     96.2     95.7     3,238        3.48        95,790   

Avalon Bowery Place I


New York, NY

    206        152,744        1.1      2006     741        98.1     97.1     97.4     4,356        5.71        95,574   

Avalon Riverview North (10)


Long Island City, NY

    602        477,240        1.8      2007     793        96.0     96.0     95.8     2,962        3.59        167,612   

Avalon on the Sound East (10)


New Rochelle, NY

    588        562,499        2.0      2007     957        94.9     95.8     96.0     2,315        2.32        187,126   

Avalon Bowery Place II


New York, NY

    90        73,705        1.1      2007     819        96.7     97.2     96.2     3,940        4.68        56,896   

Avalon White Plains


White Plains, NY

    407        372,406        3.2      2009     915        95.8     96.0     93.7     2,678        2.81        152,758   

Avalon Morningside Park (10)


New York, NY

    295        245,320        0.8      2009     832        95.3     95.9     96.0     3,061        3.53        114,533   

Avalon Fort Greene


Brooklyn, NY

    631        498,651        1.0      2010     790        94.5     95.4     47.1 % (3)      2,602        3.14        298,158   



Baltimore, MD


Avalon at Fairway Hills I, II, & III (7)


Columbia, MD

    720        724,027        44.0      1987/1996     1,006        94.2     95.3     96.2     1,445        1.37        53,515   

Avalon Symphony Woods (SGlen)


Columbia, MD

    176        180,410        10.0      1986     1,025        96.6     96.0     96.4     1,505        1.41        13,864   

Avalon Symphony Woods (SGate)


Columbia, MD

    216        215,450        12.7      1986/2006     997        94.9     94.1     96.1     1,470        1.39        41,851   

Washington, DC


Avalon at Foxhall


Washington, DC

    308        297,875        2.7      1982     967        95.1     94.7     93.8     2,513        2.46        45,651   

Avalon at Gallery Place I


Washington, DC

    203        184,157        0.5      2003     907        93.1     96.3     95.7     2,747        2.91        49,080   

Avalon at Decoverly


Rockville, MD

    564        551,136        46.0      1991/1995/2007     977        92.9     95.0 % (2)      95.7 % (2)      1,539        1.50        70,443   



Profile of Current, Development and Unconsolidated Communities (1)

(Dollars in thousands, except per apartment home data)



City and state

of homes
rentable area
(Sq. Ft.)
    Acres     Year of

(Sq.  Ft.)
occupancy at
    Average economic
rental rate
cost (5)
                2011     2010     $ per
Apt (4)
    $ per
Sq. Ft.

Avalon Fields I


Gaithersburg, MD

    192        191,280        5.7      1996     996        97.4     97.5     97.6     1,466        1.43        14,762   

Avalon Fields II


Gaithersburg, MD

    96        99,386        3.5      1998     1,035        92.7     93.9     96.2     1,717        1.56        8,376   

Avalon at Grosvenor Station


North Bethesda, MD

    497        476,738        9.9      2004     959        95.8     95.2     96.1     1,888        1.87        82,903   

Avalon at Traville


North Potomac, MD

    520        573,717        47.9      2004     1,103        95.4     96.3     96.8     1,857        1.62        70,216   

Avalon Fair Lakes


Fairfax, VA

    420        355,228        24.2      1989/1996     846        95.5     96.8     96.5     1,460        1.67        38,026   

AVA Ballston


Arlington, VA

    344        294,931        4.1      1990     857        89.0     95.3 % (2)      96.7     1,967        2.19        41,523   

Avalon at Providence Park


Fairfax, VA

    141        148,282        4.0      1988/1997     1,052        94.3     97.2     97.0     1,643        1.52        12,302   

Avalon Crescent


McLean, VA

    558        613,426        19.1      1996     1,099        96.2     95.8     96.6     1,992        1.74        58,358   

Avalon at Arlington Square


Arlington, VA

    842        895,553        18.9      2001     1,064        96.8     94.8     95.9     2,032        1.81        114,446   

Fairfax Towers


Falls Church, VA

    415        336,051        17.0      1978/2011     810        93.7     94.3 % (3)      N/A        1,691        1.97        90,048   

Chicago, IL


Avalon Arlington Heights


Arlington Heights, IL

    409        346,416        2.8      1987/2000     847        94.4     95.3     96.1     1,578        1.78        57,539   



Seattle, WA


Avalon Redmond Place


Redmond, WA

    222        211,450        8.4      1991/1997     952        95.0     95.8     95.7     1,334        1.34        32,344   

Avalon at Bear Creek


Redmond, WA

    264        288,250        22.2      1998     1,092        94.7     95.1     94.6     1,337        1.16        37,409   

Avalon Bellevue


Bellevue, WA

    200        163,801        1.7      2001     819        96.0     95.0     94.7     1,461        1.69        31,696   

Avalon RockMeadow


Bothell, WA

    206        243,958        11.2      2000     1,184        96.1     94.5     94.4     1,288        1.03        25,676   

Avalon WildReed


Everett, WA

    234        259,080        23.0      2000     1,107        97.4     94.1     95.8     1,073        0.91        23,189   

Avalon HighGrove


Everett, WA

    391        422,482        19.0      2000     1,081        92.8     94.5     95.7     1,073        0.94        40,136   

Avalon ParcSquare


Redmond, WA

    124        127,251        2.0      2000     1,026        96.0     96.1     95.5     1,549        1.45        19,600   

Avalon Brandemoor


Lynwood, WA

    424        453,602        22.6      2001     1,070        95.8     94.5     94.6     1,138        1.01        46,833   

AVA Belltown


Seattle, WA

    100        82,418        0.7      2001     824        98.0     95.5     94.3     1,691        1.96        19,185   

Avalon Meydenbauer


Bellevue, WA

    368        331,945        3.6      2008     902        96.7     94.8     95.9     1,591        1.67        88,919   

Avalon Towers Bellevue (10)


Bellevue, WA

    397        331,366        1.5      2011     835        92.9     83.2 % (3)      27.1 % (3)      1,920        1.91        123,053   

Avalon Brandemoor II


Lynwood, WA

    82        93,320        3.8      2011     1,138        93.9     61.6 % (3)      N/A        1,013        0.55        13,872   



Oakland-East Bay, CA


Avalon Fremont


Fremont, CA

    308        316,052        22.3      1994     1,026        95.1     96.6     96.8     1,709        1.61        58,432   

Avalon Dublin


Dublin, CA

    204        179,004        13.0      1989/1997     877        96.1     96.1     96.5     1,539        1.68        29,203   

Avalon Pleasanton


Pleasanton, CA

    456        366,062        14.7      1988/1994     803        90.6     92.8 %(2)      89.8 % (2)      1,521        1.76        79,338   

Avalon at Union Square


Union City, CA

    208        150,225        8.5      1973/1996     722        96.2     96.6     96.1     1,227        1.64        23,638   



Hayward, CA

    544        452,005        11.1      1985/1986     831        95.8     96.5     94.9     1,231        1.43        63,972   

Avalon Warm Springs


Fremont, CA

    235        191,935        13.5      1985/1994     817        95.7     97.1     93.5 % (2)      1,519        1.81        43,050   

Avalon at Dublin Station


Dublin, CA

    305        299,335        4.4      2006     981        94.8     95.3     95.0     1,808        1.76        84,431   

Avalon Union City


Union City, CA

    439        429,892        6.0      2009     979        96.4     96.2     94.7     1,616        1.59        118,751   

Avalon Walnut Creek (10)


Walnut Creek, CA

    418        410,141        5.3      2010     981        95.2     91.5 % (3)      32.4 % (3)      1,890        1.76        146,188   

San Francisco, CA


Avalon at Cedar Ridge


Daly City, CA

    195        141,411        7.0      1972/1997     725        96.4     97.2     91.9 % (2)      1,615        2.16        32,518   

AVA Nob Hill


San Francisco, CA

    185        108,962        1.4      1990/1995     589        97.3     96.5 % (2)      96.5     1,964        3.22        33,735   



Profile of Current, Development and Unconsolidated Communities (1)

(Dollars in thousands, except per apartment home data)



City and state

of homes
rentable area
(Sq. Ft.)
    Acres     Year of

(Sq.  Ft.)
occupancy at
    Average economic
rental rate
cost (5)
                2011     2010     $ per
Apt (4)
    $ per
Sq. Ft.

Crowne Ridge


San Rafael, CA

    254        221,780        21.9      1973/1996     873        94.1     88.6 % (2)      95.9 % (2)      1,588        1.61        45,035   

Eaves Foster City


Foster City, CA

    288        222,364        11.0      1973/1994     772        90.6     96.4 % (2)      96.5     1,625        2.03        45,225   

Avalon Pacifica


Pacifica, CA

    220        186,800        21.9      1971/1995     849        93.2     96.6     95.6     1,650        1.88        32,783   

Avalon Sunset Towers


San Francisco, CA

    243        171,836        16.0      1961/1996     707        99.2     95.6 % (2)      95.2 % (2)      1,991        2.69        36,985   

Avalon at Diamond Heights


San Francisco, CA

    154        123,047        3.0      1972/1994     799        96.8     97.0     94.0 % (2)      1,999        2.43        29,610   

Avalon at Mission Bay North


San Francisco, CA

    250        240,911        1.4      2003     964        94.4     96.1     96.0     3,224        3.22        94,346   

Avalon at Mission Bay III


San Francisco, CA

    260        261,169        1.5      2009     1,004        95.0     95.0     92.4     3,296        3.12        147,903   

San Jose, CA


Avalon Campbell


Campbell, CA

    348        326,796        10.8      1995     939        95.1     96.5     95.7     1,737        1.78        61,241   

Eaves San Jose


San Jose, CA

    360        322,992        14.0      1985/1996     897        96.4     95.5 % (2)      97.0     1,519        1.62        53,042   

Avalon on the Alameda


San Jose, CA

    305        299,762        8.9      1999     983        93.8     96.2     96.7     2,026        1.98        57,770   

Avalon Rosewalk


San Jose, CA

    456        448,512        16.6      1997/1999     984        92.1     95.5     95.1     1,729        1.68        80,756   

Avalon Silicon Valley


Sunnyvale, CA

    710        653,929        13.6      1997     921        94.1     95.5     96.1     1,993        2.07        124,571   

Avalon Mountain View (9)


Mountain View, CA

    248        211,552        10.5      1986     853        96.0     96.2     96.3     2,107        2.38        58,951   

Avalon at Creekside


Mountain View, CA

    294        215,680        15.0      1962/1997     734        95.9     97.1     96.3     1,577        2.09        43,806   

Avalon at Cahill Park


San Jose, CA

    218        218,177        3.8      2002     1,001        95.4     95.9     95.7     2,049        1.96        52,854   

Avalon Towers on the Peninsula


Mountain View, CA

    211        218,392        1.9      2002     1,035        95.7     96.1     96.8     2,778        2.58        66,472   

Eaves San Jose II


San Jose, CA

    80        64,428        3.6      2007     805        98.8     96.2 % (2)      97.3     1,500        1.79        18,029   



Orange County, CA


AVA Newport


Costa Mesa, CA

    145        122,415        6.6      1956/1996     844        91.7     96.6     96.2     1,620        1.85        10,538   

Avalon Mission Viejo


Mission Viejo, CA

    166        124,500        7.8      1984/1996     750        95.8     97.1     95.2     1,242        1.61        14,202   

Eaves South Coast


Costa Mesa, CA

    258        207,672        8.9      1973/1996     805        91.1     93.6 % (2)      95.9 % (2)      1,339        1.56        33,470   

Eaves Santa Margarita


Rancho Santa Margarita, CA

    301        229,593        20.0      1990/1997     763        94.4     96.3     95.2     1,296        1.64        25,904   

Avalon at Pacific Bay


Huntington Beach, CA

    304        268,000        9.7      1971/1997     882        94.4     95.5     94.6     1,491        1.62        33,424   

Avalon Anaheim Stadium


Anaheim, CA

    251        302,480        3.5      2009     1,205        94.0     96.2     94.8     2,098        1.67        97,601   

Avalon Irvine


Irvine, CA

    279        243,157        4.5      2010     872        95.3     95.5     88.7 % (3)      1,618        1.77        77,438   

The Springs (6)


Corona, CA

    320        241,440        13.3      1987/2006     755        92.2     97.1     96.4     1,017        1.31        N/A   

Arboretum at Lake Forest


Lake Forest, CA

    225        215,319        8.2      1975/2011     957        93.8     95.5 % (3)      N/A        1,443        1.44        26,334   

San Diego, CA


Avalon at Mission Bay


San Diego, CA

    564        402,285        12.9      1969/1997     713        94.3     96.3     95.2     1,412        1.91        68,065   

Avalon at Mission Ridge


San Diego, CA

    200        208,075        4.0      1960/1997     1,040        96.0     95.9     93.5     1,650        1.52        22,741   

AVA Cortez Hill


San Diego, CA

    294        226,140        1.2      1973/1998     769        93.2     95.3 % (2)      94.9     1,521        1.88        35,564   

Avalon Fashion Valley


San Diego, CA

    161        183,802        1.8      2008     1,142        94.4     94.5     94.8     2,380        1.73        64,608   

Rancho Vallecitos


San Marcos, CA

    184        161,352        10.8      1988/2011     877        93.5     95.2 % (3)      N/A        2,381        1.56        16,662   



San Diego, CA

    250        191,256        10.2      1986/2011     765        90.8     94.1 % (3)      N/A        2,382        1.73        33,835   

Los Angeles, CA


Avalon at Media Center


Burbank, CA

    748        530,084        14.7      1961/1997     709        94.4     95.7     95.5     1,415        1.91        79,397   

Avalon Woodland Hills


Woodland Hills, CA

    663        594,396        18.2      1989/1997     897        93.4     95.8     95.1     1,581        1.69        110,658   

Avalon at Warner Center


Woodland Hills, CA

    227        191,443        6.8      1979/1998     843        96.5     96.7     96.1     1,498        1.72        28,653   



Profile of Current, Development and Unconsolidated Communities (1)

(Dollars in thousands, except per apartment home data)



City and state

of homes
rentable area
(Sq. Ft.)
    Acres     Year of

(Sq.  Ft.)
occupancy at
    Average economic
rental rate
cost (5)
                2011     2010     $ per
Apt (4)
    $ per
Sq. Ft.

Avalon Glendale (10)


Burbank, CA

    223        241,714        5.1      2003     1,084        94.6     96.2     95.0     2,163        1.92        41,714   

Avalon Burbank


Burbank, CA

    400        360,587        6.9      1988/2002     901        94.3     95.2     93.0 % (2)      2,090        2.21        94,591   

Avalon Camarillo


Camarillo, CA

    249        233,302        9.6      2006     937        94.4     96.9     96.5     1,568        1.62        48,754   

Avalon Wilshire


Los Angeles, CA

    123        125,093        1.7      2007     1,017        93.5     94.7     95.2     2,502        2.33        47,030   

Avalon Encino


Los Angeles, CA

    131        131,220        2.0      2008     1,002        96.2     97.8     95.5     2,483        2.42        62,205   

Avalon Warner Place


Canoga Park, CA

    210        186,402        3.3      2007     888        95.7     96.4     96.4     1,593        1.73        52,869   

The Crest at Phillips Ranch


Pomona, CA

    501        498,036        32.2      1989/2011     994        91.6     94.4 % (3)      N/A        1,442        1.37        49,730   

Villas at Bonita


San Dimas, CA

    102        94,200        5.1      1978/2011     924        99.0     97.1 % (3)      N/A        1,284        1.35        9,735   

Villas at San Dimas Canyon


San Dimas, CA

    156        144,669        7.9      1981/2011     927        98.1     96.3 % (3)      N/A        1,377        1.43        15,002   



Avalon Rockville Centre


Rockville Centre, NY

    349        349,374        7.1      N/A     1,001        59.0     27.7     N/A        3,438        0.95        98,497   

AVA Queen Anne


Seattle, WA

    203        164,633        1.0      N/A     811        14.8     8.5     N/A        1,140        0.12        51,731   

Avalon Green Phase II


Greenburgh, NY

    444        533,628        68.5      N/A     1,202        20.3     9.2     N/A        2,650        0.20        81,385   

Avalon Cohasset


Cohasset, MA

    220        278,756        62.0      N/A     1,267        31.4     13.0     N/A        1,979        0.20        46,868   

Avalon Ocean Avenue


San Francisco, CA

    173        161,063        1.9      N/A     931        N/A        N/A        N/A        N/A        N/A        43,009   

Avalon North Bergen


North Bergen, NJ

    164        145,066        2.2      N/A     885        N/A        N/A        N/A        N/A        N/A        27,658   

Avalon at Wesmont Station


Wood-Ridge, NJ

    266        243,107        4.9      N/A     914        N/A        N/A        N/A        N/A        N/A        39,036   

Avalon Park Crest


Tysons Corner, VA

    354        288,160        2.8      N/A     814        N/A        N/A        N/A        N/A        N/A        44,795   

Avalon Garden City


Garden City, NY

    204        287,669        11.3      N/A     1,410        N/A        N/A        N/A        N/A        N/A        29,564   

Avalon Andover


Andover, MA

    115        133,187        9.1      N/A     1,158        N/A        N/A        N/A        N/A        N/A        19,020   

Avalon Exeter (10)


Boston, MA

    187        199,910        0.3      N/A     1,069        N/A        N/A        N/A        N/A        N/A        27,918   

Avalon Irvine II


Irvine, CA

    179        163,218        2.8      N/A     912        N/A        N/A        N/A        N/A        N/A        13,169   

AVA Ballard


Seattle, WA

    265        189,849        1.4      N/A     716        N/A        N/A        N/A        N/A        N/A        26,979   

Avalon Shelton III


Shelton, CT

    251        250,282        4.3      N/A     997        N/A        N/A        N/A        N/A        N/A        11,093   

Avalon Hackensack (10)


Hackensack, NJ

    226        228,260        4.2      N/A     1,010        N/A        N/A        N/A        N/A        N/A        7,217   

AVA H Street


Washington, DC

    138        94,798        0.7      N/A     687        N/A        N/A        N/A        N/A        N/A        —     

Avalon West Chelsea/AVA High Line (10)


New York, NY

    715        496,749        1.5      N/A     695        N/A        N/A        N/A        N/A        N/A        52,507   

Avalon Natick


Natick, MA

    407        369,827        6.5      N/A     909        N/A        N/A        N/A        N/A        N/A        17,492   

Avalon Somerset


Somerset, NJ

    384        389,392        11.6      N/A     1,014        N/A        N/A        N/A        N/A        N/A        20,871   



Avalon at Mission Bay North II (9)


San Francisco, CA

    313        291,556        1.5      2006     931        94.6     95.5     94.5     3,122        3.20        N/A   

Avalon Del Rey (9)


Los Angeles, CA

    309        283,183        4.5      2006     916        95.5     95.9     95.1     1,939        2.03        N/A   

Avalon Chrystie Place I (9)


New York, NY

    361        266,940        1.3      2005     739        96.4     95.9     96.3     4,248        5.51        N/A   

Avalon Juanita Village (13)


Kirkland, WA

    211        208,063        3.0      2005     986        94.3     95.1     93.6     1,376        1.33        N/A   

Avalon Sunset (6)


Los Angeles, CA

    82        72,604        0.8      1987/2005     885        95.1     96.0     97.8     1,866        2.02        N/A   

Civic Center (6)


Norwalk, CA

    192        173,568        8.5