Vivmark Residential
11/09/2026 | Press release | Distributed by Public on 11/09/2026 15:43
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide an understanding of our business, financial condition and results of operations. This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this report, as well as the Annual Report on Form 10-K for the year ended December 31, 2025 of AvalonBay Communities, Inc., a Maryland corporation ("AvalonBay"), and the combined Annual Report on Form 10-K for the year ended December 31, 2025 of Equity Residential, a Maryland real estate investment trust ("Equity Residential"), and ERP Operating Limited Partnership, an Illinois limited partnership ("ERPOP"), each as previously filed with the SEC.
Forward-Looking Statements
Forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, projections and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "may," "will," "should," "could" and similar expressions identify forward-looking statements. While the Company's management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, which could cause actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements, including, without limitation, with respect to our ability to realize the anticipated benefits of the Merger. Many of these uncertainties and risks are difficult to predict and beyond management's control. Additional factors that might cause such differences are discussed in Part I of AvalonBay's Annual Report on Form 10-K for the year ended December 31, 2025 and of Equity Residential's and ERPOP's combined Annual Report on Form 10-K for the year ended December 31, 2025, particularly under Item 1A, Risk Factors, in each report. Additional factors are also included in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q. Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report. Forward-looking statements are not guarantees of future performance, results or events. The forward-looking statements contained herein are made as of the date hereof, and the Company undertakes no obligation to update or supplement these forward-looking statements.
Executive Overview
Business Description
On August 17, 2026 (the "Merger Date"), AvalonBay, Equity Residential, ERPOP, and Canopy Merger Sub LLC, a Maryland limited liability company and a direct wholly owned subsidiary of Equity Residential ("Merger Sub"), completed the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, (i) AvalonBay contributed certain assets to ERPOP in exchange for units of partnership interest in ERPOP with an aggregate value equal to the fair market value of the contributed assets (the "Asset Contribution"), and (ii) following the Asset Contribution, AvalonBay merged with and into Merger Sub, with Merger Sub surviving as a direct, wholly owned subsidiary of Equity Residential (the "Merger"). Following the consummation of the Merger, Equity Residential contributed all of the membership interests of Merger Sub to ERPOP, and Merger Sub then merged with and into ERPOP, with ERPOP continuing as the surviving entity. On the Merger Date, Equity Residential was renamed Vivmark Residential ("Vivmark").
At the effective time of the Merger, each outstanding share of AvalonBay common stock was automatically cancelled and converted into the right to receive 2.793 common shares ("Common Shares") of Vivmark (the "Exchange Ratio"), plus the right, if any, to receive cash in lieu of fractional Common Shares. As a result, former AvalonBay stockholders and Equity Residential shareholders owned approximately 51% and 49% of Vivmark, respectively.
The Merger was accounted for as a reverse acquisition under ASC 805, Business Combinations, with Equity Residential as the legal acquirer and AvalonBay as the accounting acquirer. AvalonBay was determined to be the accounting acquirer based on the following: (i) former AvalonBay stockholders hold the largest portion of the voting rights in the Company; and (ii) AvalonBay's senior management, including its Chief Executive Officer and President, comprise the majority of the executive management team of the Company. Accordingly, the Company's historical financial statements for periods before the Merger Date are those of AvalonBay, and share and per share amounts for those periods have been retroactively adjusted to reflect the Exchange Ratio. AvalonBay's assets and liabilities continue to be reported at their historical carrying amounts, and Equity Residential's identifiable assets acquired and liabilities assumed were recognized at their fair values as of the Merger Date. The Company's results include Equity Residential's operations from the Merger Date. See Note 3, "Business Combination," of the Consolidated Financial Statements for further discussion of the Merger.
Vivmark develops, redevelops, acquires, owns and operates multifamily communities in premier U.S. markets and has elected to be taxed as a real estate investment trust ("REIT").
References to the "Company," "we," "us" or "our" mean collectively Vivmark, ERPOP and the entities and subsidiaries owned or controlled by Vivmark and/or ERPOP. References to the "Operating Partnership" mean collectively ERPOP and the entities and subsidiaries owned or controlled by ERPOP.
Vivmark is the sole general partner of ERPOP ("General Partner") and, as of September 30, 2026, owned an approximate 98.7% ownership interest in ERPOP. References to "General Partner Capital" and "General Partner Units" represent Vivmark's ownership interest in ERPOP. Approximately 1.3% is owned by ERPOP's limited partners ("Limited Partners"). References to "Limited Partner Capital" and "Limited Partner Units" represent Limited Partners' interests in ERPOP. The Company conducts all of its community ownership, operations, development, redevelopment and any other activity through the Operating Partnership, which holds all of the assets of the Company, including the Company's ownership interests in its joint ventures. Vivmark has no assets or liabilities other than its investment in ERPOP. Vivmark is obligated to contribute the net proceeds of its equity offerings to ERPOP. In exchange, it receives one unit of partnership interest in ERPOP ("OP Unit") for each Common Share of Vivmark, or, for any preferred share offerings, preference units with economic terms substantially the same as the related preferred shares. Vivmark does not have any indebtedness as all debt is incurred by the Operating Partnership. ERPOP is structured as a partnership with no publicly traded equity.
The Company's dual corporate headquarters are located in Chicago, Illinois and Arlington, Virginia. The Company also operates regional property management offices in most of its markets.
Third Quarter 2026 Operating Highlights
•
Net loss attributable to Common Shares for the three months ended September 30, 2026 was $735.5 million compared to net income attributable to Common Shares of $381.3 million for the prior year period, a decrease of $1.1 billion. The decrease was primarily attributable to an increase in depreciation expense driven by real estate assets acquired in the Merger, specifically in-place lease intangible assets, and transaction costs associated with the Merger.
•
Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential ("Residential") revenue, for the three months ended September 30, 2026 was $471.6 million, an increase of $4.2 million, or 0.9%, over the prior year period. The increase was primarily attributable to an increase in Residential revenue of $21.5 million, or 3.1%, partially offset by an increase in Residential property operating expenses of $17.3 million, or 7.6%.
•
Other Stabilized Residential NOI for the three months ended September 30, 2026 was $288.9 million, an increase of $273.5 million over the prior year period due to the real estate assets acquired in the Merger.
•
Development and Redevelopment Residential NOI for the three months ended September 30, 2026 was $19.3 million, an increase of $13.8 million over the prior year period due to recently completed Development projects that had not reached stabilized occupancy.
Third Quarter 2026 Development Highlights
At September 30, 2026, we owned or held a direct or indirect interest in:
•
28 wholly owned communities under construction, which are expected to contain 9,104 apartment homes with a projected total capitalized cost of $3.5 billion.
•
Land or rights to land on which we expect to develop an additional 32 apartment communities that, if developed as expected, will contain 10,273 apartment homes.
Third Quarter 2026 Real Estate Transaction Highlights
During the three months ended September 30, 2026 we sold two wholly owned communities containing 467 apartment homes for $208.1 million.
Communities Overview
Our real estate investments consist primarily of current apartment operating communities ("Current Communities"), consolidated and unconsolidated communities in various stages of development ("Development" communities and "Unconsolidated Development" communities) and Development Rights (as defined below). Our Current Communities are further classified as Same Store communities, Other Stabilized communities, Redevelopment communities and Unconsolidated communities. Our Current Communities and Development communities include communities that we wholly own as well as communities that we partially own through consolidated or unconsolidated joint ventures. While we generally establish the classification of communities on an annual basis, we update the classification of communities during the calendar year to the extent that our plans with regard to the disposition or redevelopment of a community change, or if something occurs that materially impacts the operations of a community such as a casualty loss. The following is a description of each category:
Current Communities are categorized as Same Store, Other Stabilized, Redevelopment, or Unconsolidated according to the following attributes:
•
Same Store is composed of 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 as of the beginning of the respective prior year period. For the nine month periods ended September 30, 2026 and 2025, Same Store communities are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2025, are not conducting or expected to conduct substantial redevelopment activities and are not held for sale as of September 30, 2026 or probable for disposition to unrelated third parties within the current year. As Equity Residential communities were acquired in connection with the Merger on August 17, 2026, they are not classified as Same Store communities. The Equity Residential communities with stabilized occupancy are classified as Other Stabilized communities and will not be eligible to enter the Company's Same Store portfolio until January 1, 2028. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 90% physical occupancy or (ii) the one year anniversary of completion of development or redevelopment.
•
Other Stabilized is composed of completed consolidated communities that we wholly or partially own and that are not Same Store but which have stabilized occupancy, as defined above, as of January 1, 2026, or which were acquired subsequent to January 1, 2025. Other Stabilized includes all stabilized consolidated communities acquired in the Merger. Other Stabilized excludes communities that are conducting, or are probable to conduct substantial redevelopment activities within the current year, as defined below.
•
Redevelopment is composed of consolidated communities where substantial redevelopment occurred, is in progress, or is probable to begin during the fiscal year. Redevelopment is considered substantial when (i) capital invested is expected to exceed the lesser of $5,000,000 or 10% of the community's pre-redevelopment basis and (ii) physical occupancy is below or is expected to be below 90% during, or as a result of, the redevelopment activity.
•
Unconsolidated is composed of communities that we have an indirect ownership interest in through our investment interest in an unconsolidated joint venture.
Development is composed of consolidated projects that are either currently under construction, were under construction and were completed during the current year or where construction has been complete for less than one year and that do not have stabilized occupancy. These projects may be partially or fully complete and operating.
Unconsolidated Development is composed of projects that are either currently under construction, or were under construction and were completed during the current year, in which we have an indirect ownership interest through an unconsolidated joint venture. These projects may be partially or fully complete and operating.
Development Rights are development opportunities in the early phase of the development process where we either have an option to acquire land or enter into a leasehold interest, where we are the buyer under a long-term conditional contract to purchase land, where we control the land through a ground lease or own land to develop a new community, or where we are the designated developer in a public-private partnership. We capitalize related pre-development costs incurred in pursuit of new developments for which we currently believe future development is probable.
As of September 30, 2026, communities that we owned or held a direct or indirect interest in were classified as follows:
|
Communities |
Homes |
|||
|
Same Store: |
||||
|
Boston, MA |
39 |
9,697 |
||
|
Metro NY/NJ |
41 |
12,795 |
||
|
Mid-Atlantic |
36 |
12,655 |
||
|
Southeast Florida |
9 |
3,091 |
||
|
Denver, CO |
8 |
2,192 |
||
|
Seattle, WA |
19 |
5,624 |
||
|
Northern California |
37 |
11,197 |
||
|
Southern California |
59 |
17,899 |
||
|
Other expansion regions |
12 |
3,200 |
||
|
Total Same Store |
260 |
78,350 |
||
|
Other Stabilized (1): |
||||
|
Boston, MA |
25 |
6,908 |
||
|
Metro NY/NJ |
35 |
8,784 |
||
|
Mid-Atlantic |
42 |
13,553 |
||
|
Atlanta, GA |
22 |
6,420 |
||
|
Southeast Florida |
1 |
270 |
||
|
Denver, CO |
17 |
5,085 |
||
|
Seattle, WA |
40 |
8,419 |
||
|
Northern California |
41 |
12,339 |
||
|
Southern California |
77 |
19,994 |
||
|
Other expansion regions |
26 |
8,019 |
||
|
Total Other Stabilized |
326 |
89,791 |
||
|
Redevelopment |
1 |
842 |
||
|
Unconsolidated |
11 |
3,410 |
||
|
Total Current Communities |
598 |
172,393 |
||
|
Development |
36 |
12,180 |
||
|
Unconsolidated Development |
2 |
639 |
||
|
Total Communities |
636 |
185,212 |
||
|
Development Rights |
32 |
10,273 |
(1)
Other Stabilized includes all stabilized consolidated communities acquired in the Merger (the "Equity Residential Communities"), including communities that are partially owned through consolidated joint ventures. Equity Residential Communities held through unconsolidated joint ventures are included in Unconsolidated.
Results of Operations
Our results of operations are driven by our operating platform and are primarily affected by both overall and individual geographic market conditions and apartment fundamentals. A comparison of our operating results for the three and nine months ended September 30, 2026 and 2025 is as follows (amounts in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
REVENUES |
||||||||||||||||
|
Rental income |
$ |
1,193,530 |
$ |
764,926 |
$ |
2,737,962 |
$ |
2,267,665 |
||||||||
|
Management, development and other fees |
1,954 |
1,870 |
5,568 |
5,204 |
||||||||||||
|
Total revenues |
1,195,484 |
766,796 |
2,743,530 |
2,272,869 |
||||||||||||
|
EXPENSES |
||||||||||||||||
|
Property operating, excluding property taxes |
245,277 |
164,342 |
559,223 |
464,748 |
||||||||||||
|
Property taxes |
147,492 |
89,749 |
327,715 |
257,611 |
||||||||||||
|
Property management |
56,273 |
39,062 |
136,471 |
116,653 |
||||||||||||
|
General and administrative |
118,308 |
22,052 |
167,521 |
64,828 |
||||||||||||
|
Expensed development and pursuit costs |
5,017 |
1,392 |
16,042 |
8,629 |
||||||||||||
|
Transaction costs |
464,321 |
- |
476,688 |
- |
||||||||||||
|
Depreciation |
897,976 |
230,371 |
1,364,056 |
679,989 |
||||||||||||
|
Interest expense |
123,791 |
68,172 |
268,652 |
197,933 |
||||||||||||
|
Casualty and impairment loss |
2,374 |
- |
6,993 |
858 |
||||||||||||
|
Total expenses |
2,060,829 |
615,140 |
3,323,361 |
1,791,249 |
||||||||||||
|
Gain (loss) on sale of communities |
108,304 |
180,155 |
287,877 |
336,081 |
||||||||||||
|
Income (loss) from unconsolidated real estate |
(5,811 |
) |
137 |
(6,286 |
) |
552 |
||||||||||
|
Non-operating gains (losses) |
3,593 |
42,454 |
5,516 |
43,849 |
||||||||||||
|
Other income (expense), net |
11,446 |
9,594 |
29,933 |
27,740 |
||||||||||||
|
Income (loss) before income taxes |
(747,813 |
) |
383,996 |
(262,791 |
) |
889,842 |
||||||||||
|
Tax benefit (expense) |
672 |
166 |
832 |
772 |
||||||||||||
|
Net income (loss) |
(747,141 |
) |
384,162 |
(261,959 |
) |
890,614 |
||||||||||
|
Net (income) loss attributable to noncontrolling |
||||||||||||||||
|
Operating Partnership and DownREIT Units |
11,027 |
(2,856 |
) |
7,294 |
(4,046 |
) |
||||||||||
|
Partially Owned Communities |
966 |
- |
966 |
- |
||||||||||||
|
Net income (loss) attributable to controlling interests |
(735,148 |
) |
381,306 |
(253,699 |
) |
886,568 |
||||||||||
|
Preferred distributions |
(355 |
) |
- |
(355 |
) |
- |
||||||||||
|
Net income (loss) available to Common Shares |
$ |
(735,503 |
) |
$ |
381,306 |
$ |
(254,054 |
) |
$ |
886,568 |
||||||
Rental income increased $428.6 million, or 56.0%, and $470.3 million, or 20.7%, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily due to rental revenue from the Equity Residential Communities acquired in the Merger and an increase in rental revenue from our stabilized operating communities. For the Company's same store portfolio, average rental revenue per home increased 2.1% to $3,119 for the nine months ended September 30, 2026.
Our primary financial measure for evaluating each of our apartment communities is net operating income ("NOI"). NOI represents rental income less direct property operating expenses (including property taxes). Management considers NOI to be an important and appropriate supplemental performance measure to net income because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any corporate-level property management overhead or financing-related costs. Residential NOI represents results attributable to our apartment rental operations, including parking and other ancillary residential revenue.
NOI does not represent cash generated from operating activities in accordance with GAAP, and NOI should not be considered an alternative to net income as an indication of our performance. NOI should also not be considered an alternative to net cash flows from operating activities, as determined by GAAP, as a measure of liquidity, nor is NOI indicative of cash available to fund cash needs.
The following table presents reconciliations of net income (loss) per the Consolidated Statements of Operations to NOI (amounts in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Net (loss) income |
$ |
(747,141 |
) |
$ |
384,162 |
$ |
(261,959 |
) |
$ |
890,614 |
||||||
|
Adjustments: |
||||||||||||||||
|
Property management, net of corporate income |
54,319 |
37,192 |
130,903 |
111,449 |
||||||||||||
|
General and administrative |
118,308 |
22,052 |
167,521 |
64,828 |
||||||||||||
|
Expensed development and pursuit costs |
5,017 |
1,392 |
16,042 |
8,629 |
||||||||||||
|
Transaction costs |
464,321 |
- |
476,688 |
- |
||||||||||||
|
Depreciation |
897,976 |
230,371 |
1,364,056 |
679,989 |
||||||||||||
|
Interest expense |
123,791 |
68,172 |
268,652 |
197,933 |
||||||||||||
|
Casualty and impairment loss |
2,374 |
- |
6,993 |
858 |
||||||||||||
|
(Gain) loss on sale of communities |
(108,304 |
) |
(180,155 |
) |
(287,877 |
) |
(336,081 |
) |
||||||||
|
(Income) loss from unconsolidated |
5,811 |
(137 |
) |
6,286 |
(552 |
) |
||||||||||
|
Non-operating (gains) losses |
(3,593 |
) |
(42,454 |
) |
(5,516 |
) |
(43,849 |
) |
||||||||
|
Other (income) expense, net |
(11,446 |
) |
(9,594 |
) |
(29,933 |
) |
(27,740 |
) |
||||||||
|
Tax (benefit) expense |
(672 |
) |
(166 |
) |
(832 |
) |
(772 |
) |
||||||||
|
Total NOI |
800,761 |
510,835 |
1,851,024 |
1,545,306 |
||||||||||||
|
Non-Residential NOI (1) |
(15,549 |
) |
(7,552 |
) |
(31,441 |
) |
(25,043 |
) |
||||||||
|
Residential NOI |
$ |
785,212 |
$ |
503,283 |
$ |
1,819,583 |
$ |
1,520,263 |
||||||||
(1)
Represents results attributable to the retail and other non-residential operations at our communities.
The following table presents Residential revenue, Residential operating expenses and Residential NOI for our Same Store, Other Stabilized and Development/Redevelopment communities for the three and nine months ended September 30, 2026 and 2025 (amounts in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Residential revenue: |
||||||||||||||||
|
Same Store |
$ |
714,425 |
$ |
692,949 |
$ |
2,109,007 |
$ |
2,066,427 |
||||||||
|
Other Stabilized |
417,912 |
25,608 |
480,022 |
51,077 |
||||||||||||
|
Development / Redevelopment |
32,577 |
11,003 |
74,447 |
27,043 |
||||||||||||
|
Total Residential revenue |
1,164,914 |
729,560 |
2,663,476 |
2,144,547 |
||||||||||||
|
Residential operating expenses: |
||||||||||||||||
|
Same Store |
242,810 |
225,557 |
680,958 |
647,675 |
||||||||||||
|
Other Stabilized |
129,029 |
10,214 |
152,528 |
22,136 |
||||||||||||
|
Development / Redevelopment |
13,286 |
5,515 |
31,361 |
12,639 |
||||||||||||
|
Total Residential operating expenses |
385,125 |
241,286 |
864,847 |
682,450 |
||||||||||||
|
Residential NOI (1): |
||||||||||||||||
|
Same Store |
471,615 |
467,392 |
1,428,049 |
1,418,752 |
||||||||||||
|
Other Stabilized |
288,883 |
15,394 |
327,494 |
28,941 |
||||||||||||
|
Development / Redevelopment |
19,291 |
5,488 |
43,086 |
14,404 |
||||||||||||
|
Total Residential NOI |
$ |
779,789 |
$ |
488,274 |
$ |
1,798,629 |
$ |
1,462,097 |
||||||||
(1)
Does not include Residential NOI from real estate assets sold or held for sale. Residential NOI related to these assets is $5,423 and $15,009 for the three months ended September 30, 2026 and 2025, respectively, and $20,954 and $58,166 for the nine months ended September 30, 2026 and 2025, respectively.
The 0.7% increase in Same Store Residential NOI for the nine months ended September 30, 2026 is due to an increase in Residential revenue of $42.6 million, or 2.1%, partially offset by an increase in Residential property operating expenses of $33.3 million, or 5.1%, over the prior year period.
The following table provides results related to our Residential Same Store operations by market for the nine months ended September 30, 2026 and 2025 (amounts in thousands):
|
For the Nine Months Ended September 30, |
||||||||||||||||||||||||||||||||||||||||
|
Apartment |
Revenues |
Expenses |
NOI |
|||||||||||||||||||||||||||||||||||||
|
Market |
2026 |
2025 |
% Change |
2026 |
2025 |
% Change |
2026 |
2025 |
% Change |
|||||||||||||||||||||||||||||||
|
Boston, MA |
9,697 |
$ |
290,821 |
$ |
287,937 |
1.0 |
% |
$ |
98,882 |
$ |
94,476 |
4.7 |
% |
$ |
191,939 |
$ |
193,461 |
(0.8 |
%) |
|||||||||||||||||||||
|
Metro NY/NJ |
12,795 |
432,245 |
421,748 |
2.5 |
% |
146,450 |
134,507 |
8.9 |
% |
285,795 |
287,241 |
(0.5 |
%) |
|||||||||||||||||||||||||||
|
Mid-Atlantic |
12,655 |
283,138 |
279,682 |
1.2 |
% |
94,210 |
86,019 |
9.5 |
% |
188,928 |
193,663 |
(2.4 |
%) |
|||||||||||||||||||||||||||
|
Southeast Florida |
3,091 |
80,870 |
79,891 |
1.2 |
% |
28,755 |
26,425 |
8.8 |
% |
52,115 |
53,466 |
(2.5 |
%) |
|||||||||||||||||||||||||||
|
Denver, CO |
2,192 |
40,115 |
41,718 |
(3.8 |
%) |
12,717 |
13,843 |
(8.1 |
%) |
27,398 |
27,875 |
(1.7 |
%) |
|||||||||||||||||||||||||||
|
Seattle, WA |
5,624 |
142,460 |
142,343 |
0.1 |
% |
41,414 |
39,075 |
6.0 |
% |
101,046 |
103,268 |
(2.2 |
%) |
|||||||||||||||||||||||||||
|
Northern California |
11,197 |
324,784 |
306,842 |
5.8 |
% |
92,648 |
91,329 |
1.4 |
% |
232,136 |
215,513 |
7.7 |
% |
|||||||||||||||||||||||||||
|
Southern California |
17,899 |
462,624 |
454,131 |
1.9 |
% |
144,165 |
139,702 |
3.2 |
% |
318,459 |
314,429 |
1.3 |
% |
|||||||||||||||||||||||||||
|
Other expansion regions |
3,200 |
51,950 |
52,135 |
(0.4 |
%) |
21,717 |
22,299 |
(2.6 |
%) |
30,233 |
29,836 |
1.3 |
% |
|||||||||||||||||||||||||||
|
Total |
78,350 |
$ |
2,109,007 |
$ |
2,066,427 |
2.1 |
% |
$ |
680,958 |
$ |
647,675 |
5.1 |
% |
$ |
1,428,049 |
$ |
1,418,752 |
0.7 |
% |
|||||||||||||||||||||
The following table provides results related to the Equity Residential Communities, which are included in our Other Stabilized results, by market for the period from August 17, 2026, the Merger Date, through September 30, 2026 (amounts in thousands):
|
Market |
Apartment Homes |
Revenues |
Expenses |
NOI |
||||||||||||
|
Boston, MA |
6,908 |
$ |
41,358 |
$ |
11,243 |
$ |
30,115 |
|||||||||
|
Metro NY/NJ |
8,235 |
61,848 |
24,938 |
36,910 |
||||||||||||
|
Mid-Atlantic |
13,553 |
55,495 |
16,899 |
38,596 |
||||||||||||
|
Atlanta, GA |
6,420 |
17,949 |
5,989 |
11,960 |
||||||||||||
|
Denver, CO |
4,469 |
13,418 |
4,540 |
8,878 |
||||||||||||
|
Seattle, WA |
8,051 |
32,223 |
8,971 |
23,252 |
||||||||||||
|
Northern California |
11,466 |
62,351 |
15,675 |
46,676 |
||||||||||||
|
Southern California |
19,994 |
86,538 |
23,626 |
62,912 |
||||||||||||
|
Other expansion regions |
4,615 |
12,123 |
4,391 |
7,732 |
||||||||||||
|
Total |
83,711 |
$ |
383,303 |
$ |
116,272 |
$ |
267,031 |
|||||||||
Property management, net of corporate income increased $17.1 million, or 46.1%, and $19.5 million, or 17.5%, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily due to the inclusion of property management costs of Equity Residential subsequent to the closing of the Merger, primarily for higher payroll related costs, legal and professional fees.
General and administrative increased $96.3 million to $118.3 million and $102.7 million to $167.5 million, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily due to Merger-related compensation costs, including severance costs, transaction awards, and accelerated vesting of long-term compensation.
Expensed development and pursuit costs include write downs and costs related to the abandonment of Development Rights, development pursuits not yet considered probable for development, and abandoned acquisition and disposition pursuits. These costs may vary significantly from year to year driven by fluctuations in our investment activity, volatility in capital market conditions, or other factors. In addition, the timing for recoveries will not always align with the timing for expensing an abandoned pursuit. Expensed development and other pursuit costs were $5.0 million and $16.0 million for the three and nine months ended September 30, 2026, respectively, and $1.4 million and $8.6 million for the three and nine months ended September 30, 2025, respectively.
Transaction costs are primarily composed of transfer taxes, advisory fees and legal fees related to the Merger, and were $464.3 million and $476.7 million for the three and nine months ended September 30, 2026, respectively. See Note 3, "Business Combination," of the Consolidated Financial Statements for further discussion of the Merger.
Depreciation increased $667.6 million to $898.0 million and $684.1 million to $1.4 billion, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily due to expense recognized in the current-year periods on in-place lease intangible assets and real estate acquired in the Merger.
Interest expense increased $55.6 million, or 81.6%, and $70.7 million, or 35.7%, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily resulting from the Merger, whereby the Company assumed $8.4 billion principal amount of secured and unsecured indebtedness that remained outstanding as of September 30, 2026. The debt assumed in the Merger was recognized at fair value, resulting in a net discount of $516.0 million, which is recognized as an increase to the contractual interest expense over the life of the related debt. The increase in interest expense was partially offset by higher capitalized interest. The Company capitalized interest of $17.9 million and $13.7 million during the three months ended September 30, 2026 and 2025, respectively, and $48.4 million and $36.1 million during the nine months ended September 30, 2026 and 2025, respectively.
Casualty and impairment loss for the three and nine months ended September 30, 2026 was $2.4 million and $7.0 million, respectively, and $0.9 million for the nine months ended September 30, 2025, which represents property damage and emergency response at certain of our communities resulting from casualty events.
Gain on sales of communities decreased $71.9 million, or 39.9%, and $48.2 million, or 14.3%, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods. The amount of gain realized in a particular period depends on many factors, including the number of communities sold, expected operating performance of the communities and the market conditions in the local area. For the three and nine months ended September 30, 2026, we sold two and five wholly owned communities and recognized a gain of $108.1 million and $287.8 million, respectively. For the three and nine months ended September 30, 2025, we sold six and nine wholly owned communities and recognized a gain of $180.2 million and $336.1 million, respectively.
Loss (income) from investment in unconsolidated real estate investments increased $5.9 million and $6.8 million for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily due to depreciation expense recognized on in-place lease intangible assets at unconsolidated communities acquired in the Merger.
Non-operating gains (losses) decreased $38.9 million, or 91.5%, and $38.3 million, or 87.4%, for the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods, primarily due to the impairment of a land parcel and lower unrealized gains on property technology investments in the current year periods.
Liquidity and Capital Resources
With $3.2 billion in readily available liquidity as of October 30, 2026 under Vivmark's two separate revolving credit facilities (the "Unsecured Revolving Credit Facilities" or the "Credit Facilities"), available cash on hand, staggered debt maturities, strong credit metrics and access to capital markets, we believe Vivmark is well positioned to meet future obligations and take advantage of opportunities. On August 18, 2026, following completion of the Merger, S&P Global Ratings raised our long-term issuer credit rating to 'A' with a stable outlook from 'A-.'
Statements of Cash Flows
The following table sets forth our sources and uses of cash flows for the nine months ended September 30, 2026 and 2025 (amounts in thousands):
|
Nine Months Ended September 30, |
||||||||
|
2026 |
2025 |
|||||||
|
Cash flows provided by (used for): |
||||||||
|
Operating activities |
$ |
1,041,874 |
$ |
1,270,674 |
||||
|
Investing activities |
$ |
(333,253 |
) |
$ |
(925,077 |
) |
||
|
Financing activities |
$ |
(674,000 |
) |
$ |
(290,782 |
) |
||
The following provides information regarding our cash flows from operating, investing and financing activities for the nine months ended September 30, 2026.
Operating Activities
Cash flows from operations are determined by operating activities and factors including but not limited to (i) the number of apartment homes owned, (ii) rental rates, (iii) occupancy levels, (iv) uncollectible lease revenue levels or interruptions in collections caused by market conditions, (v) operating expenses and (vi) capital expenditures with respect to our communities. Cash provided by operating activities for the nine months ended September 30, 2026 as compared to the prior year period decreased by $228.8 million primarily due to the payment of Merger-related costs and an increase in prepaid expenses and other assets.
Investing Activities
Our investing cash flows are primarily impacted by our transaction activity, development spend and capital expenditures. Cash used in investing activities for the nine months ended September 30, 2026 decreased by approximately $591.8 million primarily due to (i) a decrease in the acquisition of real estate assets from the prior year period and (ii) cash acquired in the Merger, partially offset by a decrease in net proceeds from the disposition of real estate assets.
Financing Activities
Our financing cash flows primarily relate to our borrowing activity (debt proceeds or repayment), distributions and dividends to shareholders/unitholders and other Common Share activity. For the nine months ended September 30, 2026, key drivers were:
•
Received net proceeds of $281.6 million from our Commercial Paper Program (as defined below);
•
Repaid $475.0 million of our 2.95% unsecured notes at par upon maturity;
•
Repaid $92.0 million of our 7.57% unsecured notes at par upon maturity, which were assumed in connection with the Merger;
•
Repaid three 3.61% mortgage notes with an aggregate principal amount of $185.1 million in advance of their scheduled maturity;
•
Settled outstanding forward contracts, issuing 10,278,240 Common Shares at $78.75 per share for proceeds of $809.4 million;
•
Paid dividends and distributions on Common Shares, Preferred Shares, Units (including OP Units, DownREIT units, and restricted units) and noncontrolling interests in partially owned communities totaling approximately $752.1 million; and
•
Repurchased 3,157,028 Common Shares at an average price of $62.87 per share, including fees, for a total of approximately $198.5 million.
Short-Term Liquidity and Cash Proceeds
We generally expect to meet our short-term liquidity requirements, including capital expenditures related to maintaining our existing communities and scheduled unsecured note and mortgage note repayments, through our working capital, net cash provided by operating activities and borrowings under our Unsecured Revolving Credit Facilities and Commercial Paper Program (each as defined below). We consider these sources of liquidity to be adequate to meet operating requirements and payments of distributions.
Unsecured Revolving Credit Facilities and Commercial Paper Program
We may borrow up to a maximum of $5.0 billion under two separate revolving credit facilities (the "Unsecured Revolving Credit Facilities" or the "Credit Facilities"). One of our $2.5 billion Credit Facilities matures in April 2030, and the other matures in December 2030. We have the ability to increase available borrowings under the Credit Facilities by an additional $0.5 billion and $1.0 billion, respectively, by adding lenders to the Credit Facilities, obtaining the agreement of existing lenders to increase their commitments or incurring one or more term loans. The interest rate on advances under both Credit Facilities will generally be Secured Overnight Financing Rate ("SOFR") plus a spread (currently 0.70%), or based on bids received from the lending group, and an annual facility fee (currently 0.10%). Both the spread and the facility fee are dependent on our senior unsecured credit rating. We limit utilization of the Credit Facilities in order to maintain liquidity to support our Commercial Paper Program, along with certain other obligations. See Note 7, "Debt," in the Notes to Consolidated Financial Statements for additional discussion of our Credit Facilities.
We have an unsecured commercial paper note program (the "Commercial Paper Program"). In September 2026, we increased the borrowing capacity of the Commercial Paper Program from $1.5 billion to $2.5 billion. The commercial paper notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of our other unsecured senior indebtedness.
The following table presents our cash and cash equivalents, restricted cash and available borrowing capacity under the Credit Facilities as of September 30, 2026 (amounts in thousands):
|
September 30, 2026 |
||||
|
Cash and cash equivalents |
$ |
111,876 |
||
|
Restricted cash |
$ |
275,828 |
||
|
Credit Facilities commitment |
$ |
5,000,000 |
||
|
Commercial Paper Program balance outstanding |
(1,022,900 |
) |
||
|
Credit Facilities balance outstanding |
- |
|||
|
Other restricted amounts |
(4,328 |
) |
||
|
Available borrowing capacity under the Credit Facilities |
$ |
3,972,772 |
||
As of October 30, 2026, available borrowing capacity under the Credit Facilities was $3.2 billion. This reflects $1.8 billion of commercial paper outstanding and no borrowings outstanding under the Credit Facilities.
Long-Term Financing and Capital Needs
Our primary long-term liquidity requirements include repayment of long-term debt at maturity, financing real estate acquisitions and development, redevelopment and other capitalized spend at our communities both wholly owned and through the formation of joint ventures. We expect to meet these needs from one or more of a variety of internal and external sources, which may include (i) real estate dispositions, (ii) secured and unsecured debt financings and (iii) issuance of equity securities (including additional OP Units). We have a significant number of unencumbered communities available to secure additional mortgage borrowings should unsecured capital be unavailable or the cost of alternative sources of capital be too high. The value of and cash flow from these unencumbered communities are in excess of the requirements we must maintain in order to comply with covenants under our unsecured notes and Credit Facilities and variable rate term loan (the "Term Loan"). Our ability to obtain additional financing will depend on a variety of factors, such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, as well as the perception of lenders regarding our financial prospects. For additional details, see Item 1A, Risk Factors, of AvalonBay's Annual Report on Form 10-K for the year ended December 31, 2025 and of Equity Residential's and ERPOP's combined Annual Report on Form 10-K for the year ended December 31, 2025, particularly under Item 1A, Risk Factors, in each report, and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q.
Vivmark issues equity and may guarantee certain debt of the Operating Partnership from time to time. Vivmark does not have any indebtedness as all debt is incurred by the Operating Partnership.
The following table details our consolidated debt obligations, including the effective interest rate and contractual maturity dates, and principal payments for periodic amortization and maturities for the next five years, excluding the Credit Facilities and our Commercial Paper Program and amounts outstanding related to communities classified as held for sale at September 30, 2026 (dollars in thousands).
|
Balance |
Scheduled Maturities |
|||||||||||||||||||||||||||||||||
|
Debt |
Stated interest rate |
Principal maturity date |
9/30/2026 |
2026 |
2027 |
2028 |
2029 |
2030 |
Thereafter |
|||||||||||||||||||||||||
|
Tax-exempt bonds |
||||||||||||||||||||||||||||||||||
|
Variable rate |
||||||||||||||||||||||||||||||||||
|
Avalon Acton |
4.87 |
% |
Jul-2040 |
$ |
45,000 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
45,000 |
|||||||||||||||||
|
Avalon Clinton North |
5.46 |
% |
Nov-2038 |
126,400 |
- |
- |
- |
- |
- |
126,400 |
||||||||||||||||||||||||
|
Avalon Clinton South |
5.46 |
% |
Nov-2038 |
104,500 |
- |
- |
- |
- |
- |
104,500 |
||||||||||||||||||||||||
|
Avalon Midtown West |
5.17 |
% |
May-2029 |
54,400 |
700 |
8,900 |
9,800 |
35,000 |
- |
- |
||||||||||||||||||||||||
|
Avalon San Bruno I |
5.27 |
% |
Dec-2037 |
49,950 |
- |
2,400 |
2,900 |
3,100 |
3,300 |
38,250 |
||||||||||||||||||||||||
|
300 East 39th |
4.88 |
% |
Nov-2031 |
59,500 |
4,400 |
4,800 |
5,300 |
5,700 |
6,400 |
32,900 |
||||||||||||||||||||||||
|
West 54th |
5.13 |
% |
Aug-2032 |
46,400 |
- |
3,400 |
3,700 |
4,000 |
4,400 |
30,900 |
||||||||||||||||||||||||
|
La Terrazza at Colma Station |
4.87 |
% |
Nov-2035 |
25,175 |
- |
- |
- |
- |
- |
25,175 |
||||||||||||||||||||||||
|
Glo |
5.13 |
% |
May-2037 |
35,290 |
- |
- |
- |
- |
- |
35,290 |
||||||||||||||||||||||||
|
Kelvin Court |
4.88 |
% |
Jun-2051 |
26,495 |
- |
- |
- |
- |
- |
26,495 |
||||||||||||||||||||||||
|
573,110 |
5,100 |
19,500 |
21,700 |
47,800 |
14,100 |
464,910 |
||||||||||||||||||||||||||||
|
Conventional loans and notes |
||||||||||||||||||||||||||||||||||
|
Fixed rate |
||||||||||||||||||||||||||||||||||
|
$300 million unsecured notes |
2.90 |
% |
Oct-2026 |
300,000 |
300,000 |
- |
- |
- |
- |
- |
||||||||||||||||||||||||
|
$350 million unsecured notes |
3.90 |
% |
Oct-2046 |
350,000 |
- |
- |
- |
- |
- |
350,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
3.35 |
% |
May-2027 |
400,000 |
- |
400,000 |
- |
- |
- |
- |
||||||||||||||||||||||||
|
$300 million unsecured notes |
4.15 |
% |
Jul-2047 |
300,000 |
- |
- |
- |
- |
- |
300,000 |
||||||||||||||||||||||||
|
$450 million unsecured notes |
3.20 |
% |
Jan-2028 |
450,000 |
- |
- |
450,000 |
- |
- |
- |
||||||||||||||||||||||||
|
$300 million unsecured notes |
4.35 |
% |
Apr-2048 |
300,000 |
- |
- |
- |
- |
- |
300,000 |
||||||||||||||||||||||||
|
$450 million unsecured notes |
3.30 |
% |
Jun-2029 |
450,000 |
- |
- |
- |
450,000 |
- |
- |
||||||||||||||||||||||||
|
$700 million unsecured notes |
2.30 |
% |
Mar-2030 |
700,000 |
- |
- |
- |
- |
700,000 |
- |
||||||||||||||||||||||||
|
$600 million unsecured notes |
2.45 |
% |
Jan-2031 |
600,000 |
- |
- |
- |
- |
- |
600,000 |
||||||||||||||||||||||||
|
$700 million unsecured notes |
2.05 |
% |
Jan-2032 |
700,000 |
- |
- |
- |
- |
- |
700,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
1.90 |
% |
Dec-2028 |
400,000 |
- |
- |
400,000 |
- |
- |
- |
||||||||||||||||||||||||
|
$350 million unsecured notes |
5.00 |
% |
Feb-2033 |
350,000 |
- |
- |
- |
- |
- |
350,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
5.30 |
% |
Dec-2033 |
400,000 |
- |
- |
- |
- |
- |
400,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
5.35 |
% |
Jun-2034 |
400,000 |
- |
- |
- |
- |
- |
400,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
5.00 |
% |
Aug-2035 |
400,000 |
- |
- |
- |
- |
- |
400,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
4.35 |
% |
Dec-2030 |
400,000 |
- |
- |
- |
- |
400,000 |
- |
||||||||||||||||||||||||
|
$500 million unsecured notes |
2.85 |
% |
Nov-2026 |
500,000 |
500,000 |
- |
- |
- |
- |
- |
||||||||||||||||||||||||
|
$400 million unsecured notes |
3.25 |
% |
Aug-2027 |
400,000 |
- |
400,000 |
- |
- |
- |
- |
||||||||||||||||||||||||
|
$500 million unsecured notes |
3.50 |
% |
Mar-2028 |
500,000 |
- |
- |
500,000 |
- |
- |
- |
||||||||||||||||||||||||
|
$400 million unsecured notes |
4.15 |
% |
Dec-2028 |
400,000 |
- |
- |
400,000 |
- |
- |
- |
||||||||||||||||||||||||
|
$600 million unsecured notes |
3.00 |
% |
Jul-2029 |
600,000 |
- |
- |
- |
600,000 |
- |
- |
||||||||||||||||||||||||
|
$600 million unsecured notes |
2.50 |
% |
Feb-2030 |
600,000 |
- |
- |
- |
- |
600,000 |
- |
||||||||||||||||||||||||
|
$500 million unsecured notes |
1.85 |
% |
Aug-2031 |
500,000 |
- |
- |
- |
- |
- |
500,000 |
||||||||||||||||||||||||
|
$600 million unsecured notes |
4.95 |
% |
Oct-2031 |
600,000 |
- |
- |
- |
- |
- |
600,000 |
||||||||||||||||||||||||
|
$500 million unsecured notes |
4.95 |
% |
Jun-2032 |
500,000 |
- |
- |
- |
- |
- |
500,000 |
||||||||||||||||||||||||
|
$600 million unsecured notes |
4.65 |
% |
Sep-2034 |
600,000 |
- |
- |
- |
- |
- |
600,000 |
||||||||||||||||||||||||
|
$400 million unsecured notes |
5.45 |
% |
Oct-2036 |
400,000 |
- |
- |
- |
- |
- |
400,000 |
||||||||||||||||||||||||
|
$750 million unsecured notes |
4.50 |
% |
Jul-2044 |
750,000 |
- |
- |
- |
- |
- |
750,000 |
||||||||||||||||||||||||
|
$300 million unsecured notes |
4.50 |
% |
Jun-2045 |
300,000 |
- |
- |
- |
- |
- |
300,000 |
||||||||||||||||||||||||
|
$300 million unsecured notes |
4.00 |
% |
Aug-2047 |
300,000 |
- |
- |
- |
- |
- |
300,000 |
||||||||||||||||||||||||
|
$550 million Term Loan |
4.26 |
% |
Apr-2029 |
(2) |
550,000 |
- |
- |
- |
550,000 |
- |
- |
|||||||||||||||||||||||
|
Avalon Walnut Creek |
4.00 |
% |
Jul-2066 |
5,063 |
- |
- |
- |
- |
- |
5,063 |
||||||||||||||||||||||||
|
Avalon San Bruno III |
2.38 |
% |
Mar-2027 |
51,000 |
- |
51,000 |
- |
- |
- |
- |
||||||||||||||||||||||||
|
Avalon Cerritos |
3.34 |
% |
Aug-2029 |
30,250 |
- |
- |
- |
30,250 |
- |
- |
||||||||||||||||||||||||
|
Avalon West Plano |
5.97 |
% |
May-2029 |
60,557 |
284 |
1,159 |
1,202 |
57,912 |
- |
- |
||||||||||||||||||||||||
|
FNMA 2029 |
3.94 |
% |
Mar-2029 |
288,120 |
- |
- |
- |
288,120 |
- |
- |
||||||||||||||||||||||||
|
FNMA 2030 |
2.60 |
% |
May-2030 |
495,000 |
- |
- |
- |
- |
495,000 |
- |
||||||||||||||||||||||||
|
Baxter Decatur |
2.24 |
% |
Sep-2030 |
53,462 |
- |
- |
- |
- |
53,462 |
- |
||||||||||||||||||||||||
|
Canyon Creek |
3.58 |
% |
Mar-2031 |
28,500 |
- |
- |
- |
- |
- |
28,500 |
||||||||||||||||||||||||
|
FNMA 2033 |
5.18 |
% |
Sep-2033 |
200,000 |
- |
- |
- |
- |
- |
200,000 |
||||||||||||||||||||||||
|
FNMA 2033 |
5.25 |
% |
Sep-2033 |
350,000 |
- |
- |
- |
- |
- |
350,000 |
||||||||||||||||||||||||
|
Avenir Apartments |
0.10 |
% |
May-2061 |
850 |
- |
- |
- |
- |
- |
850 |
||||||||||||||||||||||||
|
15,962,802 |
800,284 |
852,159 |
1,751,202 |
1,976,282 |
2,248,462 |
8,334,413 |
||||||||||||||||||||||||||||
|
Total indebtedness - excluding Credit Facility and Commercial Paper |
$ |
16,535,912 |
$ |
805,384 |
$ |
871,659 |
$ |
1,772,902 |
$ |
2,024,082 |
$ |
2,262,562 |
$ |
8,799,323 |
||||||||||||||||||||
(1)
Balances outstanding represent total amounts due at maturity, and exclude deferred financing costs and debt discount for the unsecured debt of $458,684 as of September 30, 2026 and deferred financing costs and debt discount for the secured notes of $96,475 as of September 30, 2026 as reflected on our Consolidated Balance Sheets included elsewhere in this report.
(2)
The Term Loan has been swapped to an effective fixed rate using interest rate swaps.
Forward Equity Offering
During the year ended December 31, 2024, AvalonBay completed an underwritten public offering pursuant to which it entered into forward contracts to sell 10,278,240 Common Shares at a discount to the closing price of $81.10 per share for net proceeds of $808.6 million based on the initial forward price. During the nine months ended September 30, 2026, AvalonBay fully settled the outstanding forward contracts, issuing 10,278,240 Common Shares at an average price of $78.75 per share for proceeds of $809.4 million.
Share Repurchases
During the nine months ended September 30, 2026, AvalonBay repurchased 3,157,028 Common Shares at an average price of $62.87 per share, including fees, for a total of $198.5 million under its previously existing stock repurchase program. In connection with the Merger, AvalonBay suspended its stock repurchase program as of the date of the Merger Agreement. The Company maintains Equity Residential's share repurchase program. Pursuant to the share repurchase program, when Vivmark repurchases Common Shares, ERPOP will concurrently repurchase and retire the same amount of OP Units issued to Vivmark. As of September 30, 2026, 8,156,451 Common Shares remained available for repurchase under this program.
Interest Rate Swap Agreements
During the nine months ended September 30, 2026, we entered into $150.0 million of forward starting interest rate swap agreements designated as cash flow hedges of interest rate variability on future debt issuance activity through December 31, 2026. We expect to cash settle the swaps and either pay or receive cash for the then current fair value, and will amortize the deferred hedging gain or loss over the life of the hedged debt as a component of interest expense.
Partially Owned Operating Communities
The following table summarizes our partially owned operating communities as of September 30, 2026, including NOI for the three and nine months ended September 30, 2026, and the related debt outstanding (amounts in thousands):
|
NOI |
Debt |
|||||||||||||||||||||||||
|
Weighted Average Ownership |
Total |
Total |
QTD 2026 |
YTD 2026 |
Principal Amount |
Weighted Average |
||||||||||||||||||||
|
Consolidated Communities |
86.6% |
13 |
3,096 |
$ |
10,243 |
$ |
10,243 |
$ |
26,274 |
5.8 |
% |
|||||||||||||||
|
Unconsolidated Communities |
69.0% |
13 |
4,049 |
20,335 |
53,755 |
920,002 |
5.7 |
% |
||||||||||||||||||
|
Total Partially Owned Communities |
26 |
7,145 |
$ |
30,578 |
$ |
63,998 |
$ |
946,276 |
5.7 |
% |
||||||||||||||||
Development Communities
As of September 30, 2026, we owned or held a direct interest in 28 Development communities under construction. We expect these Development communities, when completed, to add a total of 9,104 apartment homes and 89,000 square feet of commercial space to our portfolio. We cannot assure you that we will meet our schedule for construction completion or that we will meet our projected total capital cost, either individually, or in the aggregate.
The following table presents a summary of the Development communities (dollars in thousands):
|
Location |
Number of |
Total |
Construction |
Initial |
Complete |
Stabilized (2) |
||||||||||||
|
Communities Under Construction: |
||||||||||||||||||
|
Avalon West Windsor (3) |
West Windsor, NJ |
535 |
$ |
209,588 |
Q2 2022 |
Q3 2025 |
Q4 2026 |
Q3 2027 |
||||||||||
|
Avalon Pleasanton |
Pleasanton, CA |
362 |
218,299 |
Q2 2024 |
Q3 2025 |
Q3 2027 |
Q4 2027 |
|||||||||||
|
Avalon at Becker Farm |
Roseland, NJ |
533 |
186,483 |
Q2 2024 |
Q4 2025 |
Q4 2026 |
Q2 2027 |
|||||||||||
|
Avalon Tech Ridge I |
Austin, TX |
544 |
152,589 |
Q3 2024 |
Q1 2026 |
Q2 2027 |
Q3 2027 |
|||||||||||
|
Avalon Carmel (4) |
Charlotte, NC |
360 |
118,016 |
Q3 2024 |
Q2 2026 |
Q4 2026 |
Q3 2027 |
|||||||||||
|
Avalon Plano (4) |
Plano, TX |
155 |
57,507 |
Q3 2024 |
Q4 2026 |
Q4 2027 |
Q2 2028 |
|||||||||||
|
Avalon Oakridge I |
Durham, NC |
459 |
148,971 |
Q3 2024 |
Q1 2027 |
Q1 2028 |
Q3 2028 |
|||||||||||
|
AVA Brewer's Hill |
Baltimore, MD |
418 |
132,422 |
Q4 2024 |
Q4 2026 |
Q4 2027 |
Q2 2028 |
|||||||||||
|
Kanso Hillcrest |
San Diego, CA |
182 |
84,860 |
Q4 2024 |
Q1 2027 |
Q2 2027 |
Q4 2027 |
|||||||||||
|
Avalon Parker |
Parker, CO |
312 |
123,232 |
Q1 2025 |
Q3 2026 |
Q2 2027 |
Q4 2027 |
|||||||||||
|
Avalon North Palm Beach (3) |
Lake Park, FL |
279 |
117,981 |
Q1 2025 |
Q1 2027 |
Q3 2027 |
Q1 2028 |
|||||||||||
|
Avalon Brier Creek |
Durham, NC |
400 |
126,087 |
Q2 2025 |
Q3 2026 |
Q3 2027 |
Q1 2028 |
|||||||||||
|
Avalon Kendall (4) |
Kendall, FL |
224 |
82,938 |
Q2 2025 |
Q1 2027 |
Q2 2027 |
Q1 2028 |
|||||||||||
|
Avalon Mission Valley (3) |
San Diego, CA |
621 |
302,318 |
Q3 2025 |
Q1 2028 |
Q1 2029 |
Q3 2029 |
|||||||||||
|
Avalon Southpoint (4) |
Durham, NC |
394 |
131,720 |
Q3 2025 |
Q1 2027 |
Q2 2028 |
Q3 2028 |
|||||||||||
|
Avalon Northwest Hills |
Austin, TX |
252 |
89,968 |
Q4 2025 |
Q1 2028 |
Q3 2028 |
Q1 2029 |
|||||||||||
|
Kanso Parsippany |
Parsippany, NJ |
280 |
104,157 |
Q4 2025 |
Q2 2027 |
Q4 2027 |
Q2 2028 |
|||||||||||
|
Avalon Billerica |
Billerica, MA |
200 |
71,572 |
Q4 2025 |
Q2 2027 |
Q4 2027 |
Q2 2028 |
|||||||||||
|
Avalon Townhome Collection Arundel Mills (4) |
Hanover, MD |
90 |
45,058 |
Q4 2025 |
Q4 2026 |
Q4 2026 |
Q4 2027 |
|||||||||||
|
Avalon San Ramon |
San Ramon, CA |
456 |
250,467 |
Q4 2025 |
Q2 2028 |
Q2 2029 |
Q3 2029 |
|||||||||||
|
Avalon Somerville Station II |
Somerville, NJ |
171 |
64,991 |
Q1 2026 |
Q3 2027 |
Q4 2027 |
Q3 2028 |
|||||||||||
|
Avalon Saddle River |
Saddle River, NJ |
275 |
123,157 |
Q1 2026 |
Q4 2027 |
Q3 2028 |
Q4 2028 |
|||||||||||
|
Loxley (4) |
Canton, GA |
240 |
59,612 |
Q1 2026 |
Q3 2027 |
Q1 2028 |
Q1 2029 |
|||||||||||
|
Wilder at Windward (3) (4) |
Alpharetta, GA |
280 |
112,149 |
Q1 2026 |
Q3 2027 |
Q2 2028 |
Q1 2029 |
|||||||||||
|
Kanso Plymouth |
Plymouth, MA |
300 |
95,207 |
Q2 2026 |
Q3 2027 |
Q3 2028 |
Q4 2028 |
|||||||||||
|
Avalon Townhome Collection Central Park (4) |
Denver, CO |
146 |
68,437 |
Q2 2026 |
Q2 2027 |
Q4 2027 |
Q3 2028 |
|||||||||||
|
Avalon Dulles Innovation |
Herndon, VA |
355 |
120,217 |
Q2 2026 |
Q1 2028 |
Q3 2028 |
Q1 2029 |
|||||||||||
|
Avalon Downtown Cary |
Cary, NC |
281 |
98,421 |
Q3 2026 |
Q2 2028 |
Q4 2028 |
Q3 2029 |
|||||||||||
|
Total Under Construction |
9,104 |
3,496,424 |
||||||||||||||||
|
Communities Completed this Quarter: |
||||||||||||||||||
|
Avalon Wayne |
Wayne, NJ |
473 |
169,635 |
Q4 2023 |
Q2 2025 |
Q3 2026 |
Q1 2027 |
|||||||||||
|
Avalon Quincy Adams |
Quincy, MA |
288 |
121,685 |
Q2 2024 |
Q1 2026 |
Q3 2026 |
Q1 2027 |
|||||||||||
|
Total Communities Completed this Quarter |
761 |
291,320 |
||||||||||||||||
|
Total Under Construction and Completed this Quarter |
9,865 |
$ |
3,787,744 |
|||||||||||||||
(1)
Projected total capital cost includes all capitalized costs projected to be or actually incurred to develop the respective Development community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees, as well as costs incurred for first generation commercial tenants such as tenant improvements and leasing commissions.
(2)
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.
(3)
Development communities containing at least 10,000 square feet of commercial space include Avalon West Windsor (19,000 sf), Avalon North Palm Beach (10,000 sf), Avalon Mission Valley (31,000 sf) and Wilder at Windward (11,000 sf).
(4)
Communities being developed through our Developer Funding Program ("DFP"). The DFP utilizes third-party multifamily developers to source and construct communities which we own and operate.
Development Rights
At September 30, 2026, we had $133.9 million in acquisition and related capitalized costs for direct interests in seven land parcels we own and intend to develop. In addition, we had $74.2 million in capitalized costs (including legal fees, design fees and related overhead costs) related to pursuits probable of future development including (i) 20 Development Rights for which we control the land parcel, typically through a conditional agreement or option to purchase or lease the land, as well as (ii) costs incurred for five Development Rights that we expect to construct as additional phases of our existing stabilized operating communities on land we own. Collectively, the land held for development and associated costs for deferred Development Rights relate to 32 Development Rights for which we expect to develop new apartment communities in the future. We estimate that the successful completion of all of these communities would ultimately add approximately 10,273 apartment homes to our portfolio. There can be no assurance that any
or all of these developments will be completed on the anticipated terms, or at all.
Structured Investment Program
During the nine months ended September 30, 2026, we entered into one new Structured Investment Program (the "SIP") commitment, agreeing to provide an aggregate investment of up to $15.0 million in a multifamily development project in Metro NY/NJ.
As of September 30, 2026, we had fully funded nine outstanding commitments under the SIP totaling $241.8 million in the aggregate. As of September 30, 2026, our investment commitments had a weighted average rate of return of 11.8% and a weighted average final maturity date of November 2028, inclusive of the impact of contractual extension options which typically allow the borrower to extend the maturity of their loan by up to two years from the initial maturity date. See Note 5, "Investments," in the Notes to Consolidated Financial Statements for additional discussion.
Critical Accounting Policies and Estimates
Preparing financial statements in conformity with GAAP requires management to use judgment in applying accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions had been made, different accounting policies might have been applied, resulting in different financial results or a different presentation of our financial statements. Our critical accounting policies are: (i) cost capitalization, (ii) abandoned pursuit costs and asset impairment, and (iii) business combinations. Except for the addition of business combinations as a result of the Merger, described below, our critical accounting policies and estimates have not changed materially from the information included in AvalonBay's Annual Report on Form 10-K for the year ended December 31, 2025 and Equity Residential's and ERPOP's combined Annual Report on Form 10-K for the year ended December 31, 2025.
On August 17, 2026, we completed the Merger, which we accounted for as a reverse acquisition under ASC 805. AvalonBay was determined to be the accounting acquirer, based on the following: (i) former AvalonBay stockholders hold the largest portion of the voting rights in the Company; and (ii) AvalonBay's senior management, including its Chief Executive Officer and President, comprise the majority of the executive management team of the Company. That determination required significant judgment. Equity Residential's assets acquired and liabilities assumed were recorded at fair value as of the Merger Date. The consideration transferred was approximately $24.7 billion, and we recognized no goodwill.
Allocating the purchase price required significant estimates by management, based, in part, on a valuation prepared by an independent third-party valuation specialist. The most significant were:
•
Real estate: Land was valued using market comparables. Buildings were valued on an as-if-vacant basis, mainly by direct capitalization.
•
In-place lease intangibles: These were valued based on the estimated lost rent and leasing costs avoided during an assumed lease-up period, and are amortized over the remaining lease terms of approximately six months.
•
Assumed debt: This was valued using quoted market prices or discounted cash flows, which resulted in a discount that is being amortized into interest expense.
Changes in the valuation assumptions, particularly capitalization rates and market rents, could materially change the allocation among asset classes and future depreciation, amortization and net income. The allocation is provisional. We will record any measurement-period adjustments within one year of the Merger Date. See Note 3, "Business Combination".
Funds From Operations and Core Funds From Operations
FFO and FFO adjusted for non-core items, or "Core FFO," as defined below, are generally considered by management to be appropriate supplemental measures of our operating and financial performance.
Consistent with the definition adopted by the National Association of Real Estate Investment Trusts, we calculate Funds from Operations Attributable to Common Shares ("FFO") as net income or loss attributable to Common Shares computed in accordance with GAAP, adjusted for:
•
gains or losses on sales of previously depreciated operating communities;
•
cumulative effect of a change in accounting principle;
•
impairment write-downs of depreciable real estate assets;
•
income or losses attributable to noncontrolling interests;
•
write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates;
•
depreciation of real estate assets; and
•
similar adjustments for unconsolidated partnerships and joint ventures, including those from a change in control.
FFO can help with the comparison of the operating and financial performance of a real estate company between periods or as compared to different companies because the adjustments such as (i) gains or losses on sales of previously depreciated property or (ii) real estate depreciation may impact comparability as the amount and timing of these or similar items can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates. By further adjusting for items that we do not consider part of our core business operations, Core FFO can help with the comparison of our core operating performance year over year. We believe that, in order to understand our operating results, FFO and Core FFO should be considered in conjunction with net income as presented in the Consolidated Statements of Operations included elsewhere in this report.
We calculate Core FFO as FFO, adjusted for:
•
joint venture gains and losses (if not adjusted through FFO), non-core costs, promoted interests from partnerships and distributions from unconsolidated ventures where income recognition is deferred;
•
casualty and impairment losses or gains, net on non-depreciable real estate or other investments;
•
gains or losses from early extinguishment of consolidated borrowings;
•
expensed development and other pursuit costs, net of recoveries;
•
transaction costs;
•
interest expense adjustment related to the Merger;
•
legal recoveries, settlement proceeds, and certain legal costs;
•
property and casualty insurance proceeds;
•
gains or losses on sales of assets not subject to depreciation and other investment gains or losses;
•
advocacy contributions, representing payments to promote our business interests;
•
hedge ineffectiveness or gains or losses from derivatives not designated as hedges for accounting purposes;
•
changes to expected credit losses associated with the lending commitments under the SIP;
•
severance related costs;
•
executive transition compensation costs;
•
net for-sale condominium activity, including gains, marketing, operating and administrative costs and imputed carry cost; and
•
income taxes.
FFO and Core FFO do not represent (i) net income in accordance with GAAP, and therefore should not be considered an alternative to net income, which remains the primary measure, as an indication of our performance, or (ii) cash generated from operating activities in accordance with GAAP, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by GAAP, as a measure of liquidity. In addition, FFO and Core FFO are not necessarily indicative of cash available to fund cash needs and may not be comparable to FFO and Core FFO as calculated by other REITs.
The following is a reconciliation of net income to FFO attributable to Common Shares and Units and to Core FFO attributable to Common Shares and Units (unaudited, amounts in thousands, except per share amounts):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Net income (loss) |
$ |
(747,141 |
) |
$ |
384,162 |
$ |
(261,959 |
) |
$ |
890,614 |
||||||
|
Net (income) loss attributable to Noncontrolling |
966 |
- |
966 |
- |
||||||||||||
|
Preferred distributions |
(355 |
) |
- |
(355 |
) |
- |
||||||||||
|
Net income (loss) available to Common Shares and Units |
(746,530 |
) |
384,162 |
(261,348 |
) |
890,614 |
||||||||||
|
Adjustments: |
||||||||||||||||
|
Real estate depreciation |
898,675 |
227,962 |
1,359,596 |
674,853 |
||||||||||||
|
Net (gain) loss on sale of real estate |
(108,304 |
) |
(180,155 |
) |
(287,877 |
) |
(336,081 |
) |
||||||||
|
Casualty loss on real estate |
2,374 |
- |
6,993 |
858 |
||||||||||||
|
FFO available to Common Shares and Units |
46,215 |
431,969 |
817,364 |
1,230,244 |
||||||||||||
|
Adjustments: |
||||||||||||||||
|
Unconsolidated investment activity |
530 |
- |
1,777 |
- |
||||||||||||
|
Loan reserve adjustment (1) |
(202 |
) |
236 |
(365 |
) |
6 |
||||||||||
|
Hedge accounting activity |
159 |
2 |
171 |
24 |
||||||||||||
|
Advocacy contributions |
- |
150 |
2,659 |
237 |
||||||||||||
|
Severance |
40 |
751 |
1,227 |
953 |
||||||||||||
|
Expensed development and pursuit costs |
4,075 |
503 |
13,374 |
5,798 |
||||||||||||
|
Merger-related costs (2) |
544,040 |
- |
556,407 |
- |
||||||||||||
|
(Gain) loss on extinguishment of debt |
2,028 |
- |
2,028 |
- |
||||||||||||
|
Merger accounting interest expense adjustment (3) |
8,344 |
- |
8,344 |
- |
||||||||||||
|
Non-operating (gains) losses (4) |
(3,587 |
) |
(42,477 |
) |
(5,489 |
) |
(43,759 |
) |
||||||||
|
Legal settlements and costs |
7,409 |
3,252 |
16,500 |
8,828 |
||||||||||||
|
Tax benefit (expense) |
(809 |
) |
(193 |
) |
(1,033 |
) |
(840 |
) |
||||||||
|
Core FFO available to Common Shares and Units |
$ |
608,242 |
$ |
394,193 |
$ |
1,412,964 |
$ |
1,201,491 |
||||||||
|
FFO available to Common Shares and Units |
$ |
46,215 |
$ |
431,969 |
$ |
817,364 |
$ |
1,230,244 |
||||||||
|
FFO per share and Unit - diluted |
$ |
0.08 |
$ |
1.08 |
$ |
1.77 |
$ |
3.08 |
||||||||
|
Core FFO available to Common Shares and Units |
$ |
608,242 |
$ |
394,193 |
$ |
1,412,964 |
$ |
1,201,491 |
||||||||
|
Core FFO per share and Unit - diluted |
$ |
1.03 |
$ |
0.98 |
$ |
3.06 |
$ |
3.01 |
||||||||
|
Weighted average Common Shares and Units |
589,531 |
400,894 |
461,058 |
399,692 |
||||||||||||
(1)
Reflects changes to expected credit losses associated with our lending commitments primarily under the SIP. The timing and amount of actual losses that will be incurred, if any, is to be determined at the maturity of each respective lending agreement.
(2)
Merger-related costs include transaction and integration costs, as well as Merger-related compensation costs. Merger-related compensation costs were $79.7 million for the three and nine months ended September 30, 2026 and are recognized in general and administrative expenses on the Company's Consolidated Statements of Operations.
(3)
Merger accounting interest expense adjustment (i) excludes the non-cash amortization of the fair value discount recorded on Equity Residential debt with the Merger and (ii) reduces Core FFO by the amortization of Equity Residential original issue discounts that were eliminated in purchase accounting.
(4)
Amounts for the three and nine months ended September 30, 2026 consist primarily of net unrealized gains on property technology investments, partially offset by a land impairment charge. Amounts for the three and nine months ended September 30, 2025 consist primarily of net unrealized gains on property technology investments.
Vivmark Residential published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 21:43 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]