AvalonBay Boasts Recession Proof Balance Sheet

If there is a balance sheet in the world of multi-family that could be considered recession-proof, AvalonBay’s just might be it.

13 MIN READ
IN THE PIPELINE: AvalonBay’s Avalon Towers in Bellevue, Wash., shows off the REIT’s growing acumen in high-rise development. Whatever product type, AvalonBay sticks to 16 high-barriermarkets such as Los Angeles, where Avalon Warner Place sits pretty in the Canoga Park submarket.

AvalonBay Communities

IN THE PIPELINE: AvalonBay’s Avalon Towers in Bellevue, Wash., shows off the REIT’s growing acumen in high-rise development. Whatever product type, AvalonBay sticks to 16 high-barriermarkets such as Los Angeles, where Avalon Warner Place sits pretty in the Canoga Park submarket.

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AvalonBay began an institutional program of expense management five years ago that has included centralized procurement for purchasing power and a near abandonment of print marketing in favor of a Web-centric approach. This year, the REIT will complete the transition of all properties to its Customer Care Center, which centralizes back-end leasing office administration and frees up property managers for more thoughtful and productive operations management and resident service.

“It’s an example of a different way of doing business that we expect will create greater efficiencies and help contain our expenses,” Horey says. “When we lose 600,000 jobs a month there is not a lot that operations people can do. It is what it is. You cannot control market supply; you can only focus on what you can control: delivering great customer service, maximizing revenue relative to market, and focusing on capital spend that is in the best interest of the property.”

Horey sets expectations for individual community performance but largely leaves execution in the hands of AvalonBay’s local property experts, who are expected to keep ahead of the market in terms of occupancy and prices by signing at least one lease a week and closing 30 percent of lease traffic. As for capital expenditures, he has one guiding principle that everyone in the economy can relate to. “Just spend it smartly. Spend it as though it is your own money.”

Leadership Lessons

Tom Sargeant

• Favorite Quote: “Never, never, never give up.”—Winston Churchill

• Greatest Business Challenge: Making the right decision with incomplete information

• Best Advice Someone Ever Gave You: Surround yourself with good people, and you will be a better person.

• Someone You Admire: Winston Churchill

• LEADERSHIP Philosophy: Hire great people, and get out of their way.

• Currently Reading: Benjamin Franklin: An American Life by Walter Isaacson (Simon & Schuster, 2003)

AvalonBay Communities

• Founded: 1978

• Headquarters: Alexandria, Va.

• 2008 Net Income: $411.4 million

• No. of Units: Own 46,102; manage 50,292; started 1,768 (as of 2008)

• Markets: Northeast, Midwest, West

About the Author

Chris Wood

Chris Wood is a freelance writer and former editor of Multifamily Executive and sister publication ProSales.

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