AVALONBAY COMMUNITIES INC - Annual Report: 2019 (Form 10-K)

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274 operating apartment communities containing 79,636 apartment homes in 11 states and the District of Columbia, of which 261 communities containing 76,447 apartment homes were consolidated for financial reporting purposes and 13 communities containing 3,189 apartment homes were held by unconsolidated entities in which we hold an ownership interest. One of the consolidated communities containing 422 apartment homes was under redevelopment.

•	A mixed-use project located in New York, NY that contains 172 for-sale residential condominiums and 67,000 square feet of retail space.

•	22 apartment communities under development that are expected to contain an aggregate of 6,960 apartment homes when completed. One of these communities, expected to contain 328 apartment homes, is being developed through a joint venture.

•	Rights to develop an additional 27 communities that, if developed as expected, will contain 9,587 apartment homes.

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•	acquired 12 apartment communities, excluding unconsolidated investments, and in 2019 we purchased our joint venture partner's interest in one operating community, obtaining a 100% ownership in that apartment community;

•	disposed of 20 apartment communities, excluding unconsolidated investments and the five wholly-owned communities we contributed to the NYC Joint Venture (as defined below) during 2018;

•	realized our pro rata share of the gain from the sale of seven communities owned by unconsolidated real estate entities;

•	contributed five wholly-owned operating communities located in New York, NY, to a newly formed joint venture (the "NYC Joint Venture") in 2018, retaining a 20.0% interest in the venture and acting as the managing member of the venture as well as the property manager for the communities; and

•	completed the development of 28 apartment communities and the redevelopment of 24 apartment communities.

•	Bellevue, Washington;

•	Boston, Massachusetts;

•	Denver, Colorado;

•	Fairfield, Connecticut;

•	Irvine, California;

•	Iselin, New Jersey;

•	Los Angeles, California;

•	Melville, New York;

•	New York, New York;

•	San Diego, California;

•	San Francisco, California;

•	San Jose, California; and

•	Virginia Beach, Virginia.

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•	focusing on resident satisfaction;

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

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•	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.

•	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 considering the most cost effective approach as well as expertise needed to perform the work;

•	we undertake preventive maintenance regularly to maximize resident safety and satisfaction, as well as to maximize property and equipment life;

•	we have a customer care center, centralizing and improving the efficiency and consistency in the application of our policies for many of the administrative tasks associated with owning and operating apartment communities;

•	we aggressively pursue real estate tax appeals; and

•	we install high efficiency lighting and water fixtures, cogeneration systems and implement sustainability initiatives in our operating platform.

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•	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

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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.

•	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;

•	permits;

•	professional fees;

•	allocated development or redevelopment overhead; and

•	other regulatory fees.

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•	corporate restructurings and/or layoffs, 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 sufficiently 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.

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

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

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•	our subsidiaries that are the general partner or managing member of the ventures are generally liable, under applicable law or the governing agreement of a venture, for the debts and obligations of the respective venture, subject to certain exculpation and indemnification rights pursuant to the terms of the governing agreement;

•	investors in the ventures holding a majority of the equity interests may remove us as the general partner or managing member in certain cases involving cause;

•	while we have broad discretion to manage the ventures, 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 ventures 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 ventures, or the REIT entities associated with the ventures, fail to comply with various tax or other regulatory matters.

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•	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.

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Established Communities (also known as Same Store Communities) for the year ended December 31, 2019 are consolidated communities in the markets where we have a significant presence (New England, New York/New Jersey, Mid-Atlantic, Pacific Northwest, and Northern and Southern California) and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had Stabilized Occupancy, as defined below, as of the beginning of the respective prior year. The Established Communities for the year ended December 31, 2019 are communities that are consolidated for financial reporting purposes, had Stabilized Occupancy as of January 1, 2018, are not conducting or planning to conduct substantial redevelopment activities, and are not held for sale or planned for disposition within the fiscal 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.

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Other Stabilized Communities are all other completed consolidated communities that have Stabilized Occupancy, as of January 1, 2019, or which were acquired during the years ended December 31, 2019 or 2018. Other Stabilized Communities for the year ended December 31, 2019 includes stabilized operating communities in our expansion markets of Denver, Colorado, and Southeast Florida, but excludes communities that are conducting or planning to conduct substantial redevelopment activities within the fiscal year.

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

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Redevelopment Communities are consolidated communities where substantial redevelopment is in progress or is planned to begin during the fiscal year. 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 pre-redevelopment cost basis and is expected to have a material impact on the operations of the community, including occupancy levels and future rental rates.

•	Unconsolidated Communities are communities that we have an indirect ownership interest in through our investment interest in an unconsolidated entity. Unconsolidated Communities that are under development are presented as Development Communities.

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(1)	Development Communities includes Avalon Alderwood Mall, expected to contain 328 apartment homes, which is being developed within an unconsolidated joint venture, and excludes The Park Loggia, which contains 172 for-sale residential condominiums and 67,000 square feet of retail space, which was completed in the fourth quarter of 2019.

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(1)

We remove a community from our Established Communities portfolio if we believe that planned activity for a community for the upcoming year will result in that community's expected operations not being comparable to the prior year period. We believe that a community's expected operations will not be comparable to the prior year period when we intend either (i) to undertake a significant capital renovation of the community, such that we would consider the community to be classified as a Redevelopment Community; (ii) to dispose of a community through a sale or other disposition transaction; or (iii) when a significant casualty loss occurs.

(2)	Community was moved from the Established Communities portfolio to the Other Stabilized portfolio as a result of a casualty loss that occurred during the year and impacted operations.

(3)	Includes the five wholly-owned communities contributed to the NYC Joint Venture.

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•	259 operating communities, including 248 with a full fee simple, or absolute, ownership interest and 11 that are on land subject to a land lease. The land leases have various expiration dates from October 2026 to March 2142, and six of the land leases are used to support tax advantaged structures that ultimately allow us to purchase the land upon lease expiration.

•	A general partnership interest and an indirect limited partnership interest in Archstone Multifamily Partners AC LP (the “U.S. Fund”) and Multifamily Partners AC JV LP (the “AC JV”), subsidiaries of which own four and two operating communities, respectively.

•	A membership interest in four limited liability companies, one of which, the NYC Joint Venture, through subsidiaries owns a fee simple interest in three operating communities and a leasehold interest in two additional operating communities, as well as three ventures that each hold a fee simple interest in an operating community, one of which is consolidated for financial reporting purposes.

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

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(1)

Projected total capitalized cost includes all capitalized costs projected to be or actually incurred to develop the respective Development Community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, as well as costs incurred for first generation retail tenants such as tenant improvements and leasing commissions. Projected total capitalized cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the total projected joint venture contribution amount unless otherwise noted.

(2)	Initial projected occupancy dates are estimates.  There can be no assurance that we will complete any or all of these proposed developments.

(3)	Estimated stabilization will occur subsequent to January 1, 2020, when Stabilized Operations is defined as the earlier of (i) attainment of 90% or greater physical occupancy or (ii) the one-year anniversary of completion of development.

(4)	Developments containing at least 10,000 square feet of retail space include AVA Hollywood (19,000 square feet) and Avalon Harrison (27,000 square feet).

(5)	We are developing this project within an unconsolidated joint venture that was formed in December 2019, in which we own a 50.0% interest. The information above represents the total cost for the venture.

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(1)	Total capitalized cost is as of December 31, 2019. We generally anticipate incurring additional costs associated with these communities that are customary for new developments.

(2)	Approximate rentable area includes retail space. Developments containing at least 10,000 square feet of retail space include Avalon Belltown Towers (11,000 square feet) and Avalon Saugus (23,000 square feet).

(3)	Excludes the development of The Park Loggia, which contains 172 for-sale residential condominiums and 67,000 square feet of retail space. Development was complete in the fourth quarter of 2019.

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(1)

Projected total capitalized cost includes all capitalized costs incurred to date (if any) and projected to be incurred to develop the respective community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, as well as costs incurred for first generation retail tenants such as tenant improvements and leasing commissions.

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(1)

Projected total capitalized cost includes all capitalized costs incurred to date (if any) and projected to be incurred to develop the respective community, determined in accordance with GAAP, including land and related acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, as well as costs incurred for first generation retail tenants such as tenant improvements and leasing commissions, net of projected proceeds for any planned sales of associated outparcels and other real estate.

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(1)	Reflects shares surrendered to the Company in connection with exercise of stock options as payment of exercise price.

(2)	As disclosed in our Form 10-Q for the quarter ended March 31, 2008, represents amounts outstanding under the Company's $500,000,000 Stock Repurchase Program. There is no scheduled expiration date to this program.

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(1)	Amounts do not include unvested restricted shares included in the calculation of Earnings per Share. Please refer to Note 1, “Organization, Basis of Presentation and Significant Accounting Policies—Earnings per Common Share,” of the Consolidated Financial Statements set forth in Item 8 of this report for a discussion of the calculation of Earnings per Share.

(2)	Interest expense, net includes any gain or loss incurred from the extinguishment of debt.

(3)

EBITDA is defined as net income before interest income and expense, income taxes and depreciation and amortization. Under this definition, EBITDA includes gains on sale of assets and gain on sale of partnership interests. Management generally considers EBITDA to be an appropriate supplemental measure to net income of our operating performance because it helps investors to understand our ability to incur and service debt and to make capital expenditures. EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP), as an indicator of our operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. Our calculation of EBITDA may not be comparable to EBITDA as calculated by other companies.

(4)	Refer to “Reconciliation of Non-GAAP Financial Measures” below.

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(5)	Current Communities consist of all communities other than those which are still under construction and for which a certificate or certificates of occupancy for the entire community have not been received.

•	gains or losses on sales of previously depreciated operating communities;

•	cumulative effect of change in accounting principle;

•	impairment write-downs of depreciable real estate assets;

•	write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates;

•	depreciation of real estate assets; and

•	adjustments for unconsolidated partnerships and joint ventures, including those from a change in control.

•	joint venture gains (if not adjusted through FFO), non-core costs, and promoted interests;

•	casualty and impairment losses or gains, net on non-depreciable real estate;

•	business interruption insurance proceeds and the related lost NOI that is covered by the business interruption insurance proceeds;

•	gains or losses from early extinguishment of consolidated borrowings;

•	advocacy contributions;

•	hedge ineffectiveness;

•	severance related costs;

•	abandoned pursuits;

•	for-sale condominium activity, including gains, marketing and administrative costs and imputed carry cost;

•	gains or losses on sales of assets not subject to depreciation;

•	expensed acquisition costs related to business acquisitions that occurred prior to the adoption of ASU 2017-0 as of October 1, 2016;

•	property and casualty insurance proceeds and legal settlements;

•	income taxes; and

•	other non-core items.

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(1)

During 2015, we recognized an impairment on depreciable real estate of $4,195 from the severe winter storms that occurred in our Northeast markets. During 2016, we received insurance proceeds, net of additional costs incurred, of $5,732 related to the winter storms, and recognized $4,195 of this recovery as an offset to the loss recognized in the prior year period. The balance of the net insurance proceeds received in 2016 of $1,537 is recognized as a casualty gain and is included in the reconciliation of FFO to Core FFO.

(2)

Amounts for 2019, 2018, 2017 and 2016 are primarily composed of (i) the write-off of asset management fee intangibles primarily associated with the disposition of communities in the U.S. Fund in 2019, 2018, 2017 and 2016 and the AC JV in 2018 and (ii) our proportionate share of operating results for joint ventures formed with Equity Residential as part of the Archstone Acquisition. Amounts for 2015 are primarily composed of our proportionate share of gains and operating results for joint ventures formed with Equity Residential as part of the Archstone Acquisition.

(3)	Amounts for 2018, 2017 and 2016 are composed of the recognition of our promoted interest in AvalonBay Value Added Fund II, L.P. (“Fund II”). Amount for 2015 is primarily composed of amounts received related to the modification of the joint venture agreement for the entity that owns Avalon at Mission Bay II to eliminate our promoted interest in future distributions.

(4)	Amounts include impairment charges relating to ancillary land parcels.

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(5)

Amount for 2018 includes $554 in legal settlement proceeds relating to construction defects at a community acquired as part of the Archstone Acquisition. Amount for 2017 includes $19,481 for the Maplewood casualty loss, partially offset by $17,143 of property damage insurance proceeds, and $5,438 in legal settlement proceeds relating to construction defects at a community acquired as part of the Archstone Acquisition. Amount for 2016 includes $8,702 in property damage insurance proceeds for the Edgewater casualty loss, and $1,537 in insurance proceeds in excess of the total recognized loss related to severe winter storms in our Northeast markets that occurred in 2015. Amount for 2015 includes $44,142 of Edgewater insurance proceeds received partially offset by $28,604 for the write-off of real estate and related costs.

(6)	The aggregate impact of (i) casualty and impairment (recovery) loss, net on real estate, (ii) impairment loss on real estate and (iii) casualty (gain) loss, net on real estate for 2018 and 2017 are losses of $215 and $6,250, respectively, and for 2016 and 2015 are gains of $3,935 and $10,542, respectively.

(7)	Amount for 2017 is composed of business interruption insurance proceeds resulting from the final insurance settlement of the Maplewood casualty loss. Amount for 2016 is primarily composed of business interruption insurance proceeds resulting from the final insurance settlement of the Edgewater casualty loss.

(8)

Amounts for 2017, 2016 and 2015 primarily relate to lost NOI resulting from the Edgewater casualty loss, for which we received $20,306 in business interruption insurance proceeds in the first quarter of 2016. Amount for 2018, as well as a portion of the amount for 2017, relates to the Maplewood casualty loss, for which we received $3,495 in business interruption insurance proceeds in the third quarter of 2017.

(9)	Represents the imputed carry cost of the for-sale residential condominiums at The Park Loggia. The Company computes this adjustment by multiplying the total capitalized cost of completed and unsold for-sale residential condominiums by the Company's weighted average unsecured debt rate.

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•	Completed the construction of seven apartment communities containing an aggregate of 2,027 apartment homes and 34,000 square feet of retail space, for an aggregate total capitalized cost of $667,000,000.

•	Started the construction of eight apartment communities containing an aggregate of 2,377 apartment homes, which are expected to be completed for an estimated total capitalized cost of $849,000,000, or $794,000,000 when including only our 50.0% interest in one community developed through an unconsolidated joint venture.

•	Completed the redevelopment of nine apartment communities containing an aggregate of 3,276 apartment homes for a total investment of $136,000,000, excluding costs incurred prior to the redevelopment.

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(1)	Historically for years prior to January 1, 2019, we presented charges for uncollectible lease revenue in direct property operating expenses, excluding property taxes. With the adoption of ASU 2016-02, Leases, we are presenting such charges as an adjustment to rental and other income in our consolidated financial statements on a prospective basis as of January 1, 2019.

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(1)

Economic occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community's gross revenue. Economic occupancy is defined as gross potential revenue less vacancy loss, as a percentage of gross potential revenue. Gross potential revenue is determined by valuing occupied homes at leased rates and vacant homes at market rents.

(2)

The New York State Housing Stability and Tenant Protection Act of 2019, which was signed into law on June 14, 2019, now limits some of the fees we previously charged in New York State (including late fees and new lease application fees), eliminates our ability to raise rents on rent stabilized apartments up to the full legal rent when residents with a preferential rent renew their lease, and implements other changes that are expected to limit our rent increases on rent stabilized apartments and generally increases tenant rights. We expect the impact of the New York State Housing Stability and Tenant Protection Act of 2019 to be immaterial to our Metro New York/New Jersey results of operations.

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•	a prepayment penalty of $8,579,000 and the non-cash write-off of deferred financing costs of $347,000 associated with the early repayment of $250,000,000 principal amount of 6.10% unsecured notes; and

•	the aggregate prepayment penalty of $3,308,000 and the non-cash write-off of deferred financing costs of $5,258,000 on the repayment or refinancing of $244,546,000 principal amount of mortgage notes secured by six wholly-owned operating communities.

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•	development and redevelopment activity in which we are currently engaged;

•	the minimum dividend payments on our common stock required to maintain our REIT qualification under the Code;

•	debt service and principal payments either at maturity or opportunistically before maturity; and

•	normal recurring operating expenses and corporate overhead expenses.

•	investment of $1,052,011,000 in the development and redevelopment of communities;

•	acquisition of five wholly-owned operating communities and our joint venture partner's 45.0% interest in one operating community for $420,517,000; and

•	capital expenditures of $140,892,000 for our operating communities and non-real estate assets.

•	payment of cash dividends in the amount of $839,646,000; and

•	the repayment of mortgage notes payable in the amount of $227,570,000.

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•	proceeds from the issuance of unsecured notes in the amount of $449,804,000;

•	the issuance of common stock in the amount of $409,725,000, including $197,122,000 in settlement of the Forward under CEP V and $196,700,000 through CEP IV and CEP V; and

•	the issuance of a mortgage note payable in the amount of $30,250,000.

•	limitations on the amount of total and secured debt in relation to our overall capital structure;

•	limitations on the amount of our unsecured debt relative to the undepreciated basis of real estate assets that are not encumbered by property-specific financing; and

•	minimum levels of debt service coverage.

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•	In February 2019, we amended and restated the $250,000,000 variable rate unsecured term loan that we originally entered into in February 2017, of which $100,000,000 matures in February 2022 with stated pricing of LIBOR plus 0.90%, which remained the same, and $150,000,000 matures in February 2024 with stated pricing of LIBOR plus 0.85% that decreased from LIBOR plus 1.50%.

•	In April 2019, we repaid $13,363,000 of 2.99% fixed rate debt and $33,854,000 of variable rate debt secured by Avalon Natick at par on its maturity date.

•	In May 2019, we repaid $7,635,000 principal amount of variable rate debt secured by Eaves Mission Viejo at par in advance of its scheduled maturity date. We utilized $3,706,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

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•	In May 2019, we repaid $20,800,000 principal amount of variable rate debt secured by AVA Nob Hill at par in advance of its scheduled maturity date. We utilized $10,584,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, we repaid $38,800,000 principal amount of variable rate debt secured by Avalon Campbell at par in advance of its scheduled maturity date. We utilized $22,622,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, we repaid $17,600,000 principal amount of variable rate debt secured by Eaves Pacifica at par in advance of its scheduled maturity date. We utilized $10,263,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, we issued $450,000,000 principal amount of unsecured notes in a public offering under our existing shelf registration statement for net proceeds of approximately $446,877,000. The notes mature in June 2029 and were issued at a 3.30% interest rate. The effective interest rate of the notes is 3.66%, including the impact of an interest rate hedge and offering costs.

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In August 2019, as part of the tax-deferred exchange associated with the disposition of Archstone Lexington and acquisition of Avalon Cerritos, we (i) repaid $21,700,000 principal amount of variable rate debt secured by Archstone Lexington at par in advance of its scheduled maturity date and (ii) entered into a $30,250,000 fixed rate note secured by Avalon Cerritos, with a contractual interest rate of 3.26%, maturing in August 2029. Further discussion of the disposition and acquisition activity can be found in Note 6, "Real Estate Disposition Activities," and Note 5, "Investments in Real Estate Entities," of our Consolidated Financial Statements.

•	In November 2019, we repaid $65,749,000 of 3.38% fixed rate debt secured by Avalon Columbia Pike at par on its maturity date.

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(1)	Rates are given as of December 31, 2019 and include credit enhancement fees, facility fees, trustees’ fees, the impact of interest rate hedges, offering costs, mark to market amortization and other fees.

(2)

Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured notes of $41,352 and $44,007 as of December 31, 2019 and 2018, respectively, deferred financing costs and debt discount associated with secured notes of $17,729 and $18,085 as of December 31, 2019 and 2018, respectively, as reflected on our Consolidated Balance Sheets included elsewhere in this report.

(3)	Maturity date reflects the contractual maturity of the underlying bond. There is also an associated earlier credit enhancement maturity date.

(4)	During 2019, we repaid this borrowing at par in advance of its scheduled maturity date.

(5)	Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement.

(6)	In February 2020, we called these borrowings for redemption in advance of their scheduled maturity dates.

(7)	During 2019, we repaid this borrowing at par on its scheduled maturity date.

(8)	In August 2019, as part of the tax-deferred exchange associated with the disposition of Archstone Lexington and acquisition of Avalon Cerritos, we (i) repaid the borrowing secured by Archstone Lexington at par in advance of its scheduled maturity date and (ii) entered into a new borrowing secured by Avalon Cerritos.

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(1)	Represents total capitalized cost as of December 31, 2019.

(2)	We have not guaranteed the debt of unconsolidated investees and bear no responsibility for the repayment.

(3)	Represents weighted average rate on outstanding debt as of December 31, 2019.

(4)	Borrowing on this community is comprised of two mortgage loans.

(5)	Borrowing on this dual-branded community is comprised of a single mortgage loan.

(6)	Borrowing is comprised of a loan made by the equity investors in the venture in proportion to their equity interests.

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(1)	Interest payments on variable rate debt obligations are calculated based on the rate as of December 31, 2019.

(2)	Includes ground leases expiring between October 2026 and March 2142. Amounts do not include any adjustment for purchase options available under the ground leases.

(3)	Aggregate finance lease payments include $25,336 in interest costs.

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•	In the first sentence of the fourth paragraph under “Federal Income Tax Considerations and Consequences of Your Investment - Taxation of Non-U.S. Holders of Debt Securities - Disposition of the Debt Securities,” of the prospectus, the phrase “subject to the discussion below regarding FATCA withholding” is deleted; and

•	The paragraph under “Federal Income Tax Considerations and Consequences of Your Investment - Other Tax Consequences for Avalon Bay, its Stockholders, and Holders of its Debt Securities - Other U.S. Federal Income Tax Withholding and Reporting Requirements; FATCA” of the prospectus is replaced with the following:

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

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

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

•	the timing and net sales proceeds of condominium sales;

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

•	the anticipated operating performance of our communities;

•	cost, yield, revenue, NOI and earnings estimates;

•	the impact of landlord-tenant laws and rent regulations;

•	our declaration or payment of dividends;

•	our joint venture and discretionary fund activities;

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

•	our qualification as a REIT under the Internal Revenue Code;

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

•	the availability of debt and equity financing;

•	interest rates;

•	general economic conditions including the potential impacts from current economic conditions;

•	trends affecting our financial condition or results of operations; and

•	the impact of outstanding legal proceedings.

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

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

•	construction costs of a community may exceed our original estimates;

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

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

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

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

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

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

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•	we may be unsuccessful in our management of the U.S. Fund, the AC JV or the REIT vehicles that are used with each respective joint venture;

•	we may be unsuccessful in managing changes in our portfolio composition;

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

•	our expectations, estimates and assumptions regarding outstanding legal proceedings are subject to change.

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(a)

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

(b)

Management's Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.

(c)	Changes in Internal Control Over Financial Reporting. As of January 1, 2019, the Company adopted ASU 2016-02, Leases. The Company implemented internal controls related to the lease accounting process, but there were no significant changes to the internal control over financial reporting due to the adoption of this new standard.

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(1)	Consists of the 2009 Plan.

(2)

Includes 33,392 deferred restricted stock units granted under the 2009 Plan, which, subject to vesting requirements, will convert in the future to common stock on a one-for-one basis. Also includes the maximum number of shares that may be issued upon settlement of outstanding Performance Awards awarded to officers and maturing on December 31, 2019, 2020 and 2021. Does not include 311,437 shares of restricted stock that are outstanding and that are already reflected in the Company's outstanding shares.

(3)	Excludes performance awards and deferred units granted under the 2009 Plan, which, subject to vesting requirements, will convert in the future to common stock on a one-for-one basis.

(4)	Consists of the ESPP.

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+	Management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this Form 10-K pursuant to Item 15(a)(3) of Form 10-K.

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•

As described in Note 4, “Equity,” 152,502 shares of common stock were issued as part of the Company's stock based compensation plans, of which 73,072 shares related to the conversion of performance awards to restricted shares, and the remaining 79,430 shares valued at $15,603,000 were issued in connection with new stock grants; 1,838 shares valued at $205,000 were issued in conjunction with the conversion of deferred stock awards; 2,069 shares valued at $418,000 were issued through the Company’s dividend reinvestment plan; 84,710 shares valued at $16,101,000 were withheld to satisfy employees’ tax withholding and other liabilities; and 2,361 restricted shares with an aggregate value of $399,000 previously issued in connection with employee compensation were canceled upon forfeiture.

•	Common stock dividends declared but not paid totaled $214,832,000.

•	The Company recorded an increase of $373,000 in redeemable noncontrolling interest with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.  For further discussion of the nature and valuation of these items, see Note 11, “Fair Value.”

•	The Company recorded an increase in other liabilities of $6,379,000, an increase in prepaid expenses and other assets of $388,000 and a corresponding adjustment to other comprehensive income, and reclassified $6,571,000 of cash flow hedge losses from other comprehensive income to interest expense, net, to record the impact of the Company’s derivative and hedge accounting activity.

•	The Company recorded $122,276,000 of lease liabilities and offsetting right of use lease assets for its ground and office leases, upon the adoption of ASU 2016-02, Leases, as of January 1, 2019. For further discussion on the adoption of the guidance, see Note 1, "Organization, Basis of Presentation and Significant Accounting Policies."

•

The Company issued 187,010 shares of common stock as part of the Company's stock based compensation plans, of which 88,297 shares related to the conversion of performance awards to restricted shares, and the remaining 98,713 shares valued at $15,950,000 were issued in connection with new stock grants; 2,272 shares valued at $387,000 were issued through the Company’s dividend reinvestment plan; 68,565 shares valued at $10,556,000 were withheld to satisfy employees’ tax withholding and other liabilities; and 4,860 restricted shares with an aggregate value of $717,000 previously issued in connection with employee compensation were canceled upon forfeiture.

•	Common stock dividends declared but not paid totaled $204,191,000.

•	The Company recorded a decrease of $223,000 in redeemable noncontrolling interest with a corresponding increase to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

•	The Company recorded an increase in other liabilities of $6,366,000, and a corresponding adjustment to other comprehensive income, and reclassified $6,143,000 of cash flow hedge losses from other comprehensive income to interest expense, net, to record the impact of the Company’s derivative and hedge accounting activity.

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•	In conjunction with the formation of NYTA MF Investors LLC (the "NYC Joint Venture”), the venture assumed $395,939,000 of secured indebtedness as partial consideration for the purchase of the associated operating communities and the Company recorded an investment of $74,159,000 in unconsolidated real estate entities, representing its 20.0% retained interest in the venture.

•

The Company issued 201,824 shares of common stock as part of the Company's stock based compensation plan, of which 128,482 shares related to the conversion of performance awards to restricted shares, and the remaining 73,342 shares valued at $13,171,000 were issued in connection with new stock grants; 3,058 shares valued at $558,000 were issued through the Company’s dividend reinvestment plan; 60,319 shares valued at $10,542,000 were withheld to satisfy employees’ tax withholding and other liabilities; and 3,388 restricted shares with an aggregate value of $588,000 previously issued in connection with employee compensation were canceled upon forfeiture.

•	Common stock dividends declared but not paid totaled $196,094,000.

•	The Company recorded a decrease of $65,000 in redeemable noncontrolling interest with a corresponding increase to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

•	The Company recorded a decrease in prepaid expenses and other assets of $12,114,000 and an increase in other liabilities of $1,171,000, and a corresponding adjustment to other comprehensive income, and reclassified $7,070,000 of cash flow hedge losses from other comprehensive income to interest expense, net, to record the impact of the Company’s derivative and hedge accounting activity.

•	As discussed in Note 1, "Organization, Basis of Presentation and Significant Accounting Policies," the Company recognized a non-cash charge of $16,361,000 to write-off the net book value of the fixed assets destroyed by the fire that occurred in February 2017 at the Company's Avalon Maplewood ("Maplewood") which at the time was under construction and not yet occupied.

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•	lessor of residential and retail space within its apartment communities; and

•	lessee under (i) ground leases for land underlying current operating or development communities and (ii) office leases for its corporate headquarters and regional offices.

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•	not reassessing (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) the accounting for initial direct costs for any existing leases;

•	not evaluating short term leases;

•	not assessing whether existing land easements are, or contain leases; and

•	making an accounting policy election by class of underlying asset, to not separate non-lease components from lease components and instead to account for each separate lease and non-lease component as a single lease component.

•	by class of underlying asset for retail and residential leases, to not separate non-lease components from lease components and instead to account for each separate lease and non-lease component as a single lease component;

•	to exclude costs paid by lessees directly to third parties on behalf of the Company; and

•	to exclude sales taxes and other similar taxes assessed by a government authority and collected by the Company from the lessee.

•

Management fees - The Company has investment interests in real estate joint ventures, for which the Company may manage (i) the venture, (ii) the associated operating communities owned by the ventures and/or (iii) the development or redevelopment of those operating communities. For these activities, the Company receives asset management, property management, development and/or redevelopment fee revenue. The performance obligation is the management of the venture, community or other defined task such as the development or redevelopment of the community. While the individual activities that comprise the performance obligation of the management fees can vary day to day, the nature of the overall performance obligation to provide management service is the same and considered by the Company to be a series of services that have the same pattern of transfer to the customer and the same method to measure progress toward satisfaction of the performance obligation. The Company recognizes revenue for fees as earned on a monthly basis.

•	Rental and non-rental related income - The Company recognizes revenue for new rental related income not included as components of a lease, such as reservation and application fees, as well as for non-rental related income, as earned.

•

Gains or losses on sales of real estate - The Company accounts for the sale of real estate assets and any related gain recognition in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions, other than retail land sales. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete and the Company does not have significant continuing involvement. A gain or loss is recognized when the criteria for an asset to be derecognized are met, which include when (i) a contract exists and (ii) the buyer obtained control of the nonfinancial asset that was sold. In addition, a gain or loss recognized on the sale of a nonfinancial asset to an unconsolidated entity is recognized at 100%, and not the Company’s proportionate ownership percentage.

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(1)	Revenue represents third-party management, asset management and developer fees and miscellaneous income which are not allocated to a reportable segment.

(2)	Amounts include revenue streams related to leasing activities that are not considered components of a lease, including but not limited to, apartment hold fees and application fees, as well as revenue streams not related to leasing activities, including but not limited to, vendor revenue sharing, building advertising, vending and dry cleaning revenue.

(3)	Represents all revenue accounted for under ASC 2014-09.

(4)	Amounts include all revenue streams derived from residential and retail rental income and other lease income, which are accounted for under ASU 2016-02.

(5)	Amount for 2017 is primarily business interruption insurance proceeds related to the Maplewood casualty loss as discussed above in "Casualty Gains and Losses."

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(1)	Balances at December 31, 2019 and 2018 exclude $8,610 and $9,879, respectively, of debt discount, and $32,742 and $34,128, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Consolidated Balance Sheets.

(2)	Balances at December 31, 2019 and 2018 exclude $14,464 and $14,590 of debt discount, respectively, and $3,265 and $3,495, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Consolidated Balance Sheets.

•	In February 2019, the Company amended and restated the $250,000,000 variable rate unsecured term loan that it originally entered into in February 2017, of which $100,000,000 matures in February 2022 with stated pricing of LIBOR plus 0.90%, which remained the same, and $150,000,000 matures in February 2024 with stated pricing of LIBOR plus 0.85% that decreased from LIBOR plus 1.50%.

•	In April 2019, the Company repaid $13,363,000 of 2.99% fixed rate debt and $33,854,000 of variable rate debt secured by Avalon Natick at par on its maturity date.

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•	In May 2019, the Company repaid $7,635,000 principal amount of variable rate debt secured by Eaves Mission Viejo at par in advance of its scheduled maturity date. The Company utilized $3,706,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, the Company repaid $20,800,000 principal amount of variable rate debt secured by AVA Nob Hill at par in advance of its scheduled maturity date. The Company utilized $10,584,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, the Company repaid $38,800,000 principal amount of variable rate debt secured by Avalon Campbell at par in advance of its scheduled maturity date. The Company utilized $22,622,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, the Company repaid $17,600,000 principal amount of variable rate debt secured by Eaves Pacifica at par in advance of its scheduled maturity date. The Company utilized $10,263,000 of restricted cash held in a principal reserve fund to repay a portion of the outstanding indebtedness.

•	In May 2019, the Company issued $450,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $446,877,000. The notes mature in June 2029 and were issued at a 3.30% interest rate. The effective interest rate of the notes is 3.66%, including the impact of an interest rate hedge and offering costs.

•

In August 2019, as part of the tax-deferred exchange associated with the disposition of Archstone Lexington and acquisition of Avalon Cerritos, the Company (i) repaid $21,700,000 principal amount of variable rate debt secured by Archstone Lexington at par in advance of its scheduled maturity date and (ii) entered into a $30,250,000 fixed rate note secured by Avalon Cerritos, with a contractual interest rate of 3.26%, maturing in August 2029. See Note 6, "Real Estate Disposition Activities," and Note 5, "Investments in Real Estate Entities," for further discussion of the disposition and acquisition activity.

•	In November 2019, the Company repaid $65,749,000 of 3.38% fixed rate debt secured by Avalon Columbia Pike at par on its maturity date.

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•	limitations on the amount of total and secured debt in relation to our overall capital structure;

•	limitations on the amount of our unsecured debt relative to the undepreciated basis of real estate assets that are not encumbered by property-specific financing; and

•	minimum levels of debt service coverage.

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i.	issued 109,804 shares of common stock in connection with stock options exercised;

ii.	issued 2,069 common shares through the Company's dividend reinvestment plan;

iii.	issued 152,502 common shares in connection with restricted stock grants and the conversion of performance awards to restricted shares;

iv.	issued 1,942,502 shares under CEP IV and CEP V, including amounts in settlement of the Forward, as discussed below;

v.	issued 1,838 common shares in conjunction with the conversion of deferred stock awards;

vi.	withheld 84,710 common shares to satisfy employees' tax withholding and other liabilities;

vii.	issued 13,894 shares through the Employee Stock Purchase Plan; and

viii.	canceled 2,361 shares of restricted stock upon forfeiture.

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(1)	The Company has not guaranteed the debt, nor does the Company have any obligation to fund this debt should the unconsolidated entity be unable to do so.

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(1)	Amounts include results from AVA North Point through the date the Company acquired its venture partner's 45.0% equity interest.

(2)	Amounts include results from the NYC Joint Venture from the date the venture was formed.

(3)	Includes the Company's share of gain on sale of communities and income recognized for its promoted interest.

•	Avalon Southlands, located in Aurora, CO, which contains 338 apartment homes and was acquired for a purchase price of $91,250,000.

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Avalon Cerritos, located in Cerritos, CA, which contains 132 apartment homes and was acquired for a purchase price of $60,500,000. The acquisition of Avalon Cerritos was facilitated through a tax-deferred exchange as the replacement property for Archstone Lexington, which was sold during the year ended December 31, 2019, as further discussed in Note 6, "Real Estate Disposition Activities." Archstone Lexington was acquired by the Company as part of the Archstone Acquisition, and was subject to both limitations related to disposal of the community, as well as for there to be a required level of secured financing as a result of the tax structured contribution of the assets to the prior Archstone partnerships. The Company maintained compliance with the tax protection requirements when selling Archstone Lexington by facilitating the sale through the tax-deferred exchange, acquiring and encumbering Avalon Cerritos. See Note 3, "Mortgage Notes Payable, Unsecured Notes and Credit Facility," for further discussion of indebtedness associated with Archstone Lexington and Avalon Cerritos.

•	Portico at Silver Spring Metro, located in Silver Spring, MD, which contains 151 apartment homes and was acquired for a purchase price of $43,450,000.

•	Avalon Bonterra, located in Hialeah, FL, which contains 314 apartment homes and was acquired for a purchase price of $90,000,000.

•	Avalon Toscana, located in Margate, FL, which contains 240 apartment homes and was acquired for a purchase price of $60,250,000.

•	The Company sold six wholly-owned operating communities, containing an aggregate of 1,660 apartment homes for an aggregate sales price of $427,600,000 and an aggregate gain in accordance with GAAP of $166,105,000.

•	The Company sold other real estate for an aggregate sales price of $3,680,000, resulting in an aggregate gain in accordance with GAAP of $439,000.

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(1)	The Company held its investment in, and sold these real estate assets from, a wholly-owned TRS.

(2)	Primarily composed of the sale of two undeveloped land parcels, located in Houston, TX, and Bronxville, NY.

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•

Established Communities (also known as Same Store Communities) are consolidated communities where the Company has a significant presence (New England, New York/New Jersey, Mid-Atlantic, Pacific Northwest, and Northern and Southern California) and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy as of the beginning of the prior year. The Established Communities for the year ended December 31, 2019, are communities that are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2018, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the fiscal 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 consolidated communities that have stabilized occupancy, as defined above, as January 1, 2019, or which were acquired during the years ended December 31, 2019 or 2018. Other Stabilized Communities includes stabilized operating communities in our expansion markets of Denver, Colorado, and Southeast Florida, but excludes communities that are conducting or planning to conduct substantial redevelopment activities within the fiscal year.

•

Development/Redevelopment Communities consists of (i) consolidated communities that are either currently under construction, or were under construction during the fiscal year, which may be partially or fully complete and operating, (ii) consolidated communities where substantial redevelopment is in progress or is planned to begin during the fiscal year and (iii) communities under lease-up that have been complete for less than one year and have not reached stabilized occupancy, as defined above, as of January 1, 2019.

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(1)	Does not include gross real estate assets held for sale of $48,412 as of December 31, 2019 and gross real estate either sold or classified as held for sale subsequent to December 31, 2018 and 2017 of $334,242 and $1,555,387, respectively.

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(2)	Gross real estate for the Company's Established Communities includes capitalized additions of approximately $128,324, $78,469 and $78,241 in 2019, 2018 and 2017, respectively.

(3)	Revenue represents third-party management, accounting, and developer fees and miscellaneous income which are not allocated to a reportable segment. Gross real estate includes the for-sale residential condominiums at The Park Loggia, as discussed in Note 6, "Real Estate Disposition Activities."

(4)	Total revenue and NOI for the year ended December 31, 2017 includes $3,495 in business interruption insurance proceeds related to the Maplewood casualty loss.

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(1)	Options granted during the year ended December 31, 2018 are a result of recipient elections to receive a portion of earned performance awards and time-vesting restricted stock in the form of stock options.

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(1)	The amount of restricted stock that ultimately may be earned is based on the total shareholder return metrics related to the Company’s common stock for 49,374 performance awards and financial metrics related to operating performance and leverage metrics of the Company for 32,334 performance awards.

(2)	Represents the change in the number of performance awards earned based on performance achievement for the performance period.

(3)	The amount of restricted stock that ultimately may be earned is based on the total shareholder return metrics related to the Company’s common stock for 62,043 performance awards and financial metrics related to operating performance and leverage metrics of the Company for 38,922 performance awards.

(4)	The amount of restricted stock that ultimately may be earned is based on the total shareholder return metrics related to the Company’s common stock for 47,502 performance awards and financial metrics related to operating performance and leverage metrics of the Company for 33,010 performance awards.

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(1)	Estimated volatility of the life of the plan is using 50% historical volatility and 50% implied volatility.

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(1)	For interest rate caps, represents the weighted average interest rate on the hedged debt.

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(1)	Amounts may not equal full year results due to rounding.

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(1)

This community was under redevelopment for some or all of 2019, with the redevelopment effort primarily focused on the exterior and/or common area, or with the redevelopment effort focused on apartment homes that do not meet the definition of a Redevelopment Community. These redevelopment activities have no expected material impact on community operations, and therefore this community is included in the Established Community portfolio and not classified as a Redevelopment Community.

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(2)

Some or all of the land for this community is subject to a finance land lease. The Company adopted ASU 2016-02, Leases, as of January 1, 2019, using the prospective adoption approach, applying the provisions of the new standard to existing leases as of the date of adoption. Upon adoption, the Company recorded finance lease assets for the ground lease, previously reported as land, now reported as a component of right of use lease assets on the accompanying Consolidated Balance Sheets.

(3)	Some or all of the land for this community is subject to an operating land lease.

(4)	As of December 31, 2019, this community qualified as held for sale.

(5)	Current Communities excludes Unconsolidated Communities.

(6)	Development Communities excludes Avalon Alderwood Mall, which is being developed within an unconsolidated joint venture.

(7)	The Park Loggia is comprised of 172 for-sale residential condominiums and 67,000 square feet of retail space, and was completed in the fourth quarter of 2019.

(8)	Balance outstanding represents total amount due at maturity, and excludes deferred financing costs and debt discount associated with the unsecured and secured notes of $41,352 and $17,729, respectively.

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