UPDATE 1-Landlord AvalonBay posts higher-than-expected FFO

Tue Apr 30, 2013 5:18pm EDT

NEW YORK, April 30 (Reuters) - Apartment landlord AvalonBay Communities Inc reported a 23.7 percent decrease in a key earnings performance measure in the first quarter, mostly related to its acquisition of 40 percent of former rival Archstone from Lehman Brothers.

But the results were much higher than the company had forecast due to lower interest and Archstone-related costs as well as higher net operating income.

The real estate investment trust posted first-quarter funds from operations, or FFO, of $93 million, or 78 cents per share, down from $122.0 million, or $1.28 per share, in the year-earlier quarter.

The company had forecast a loss of 64 cents per share.

During the quarter, AvalonBay and Equity Residential closed on their $6.5 billion acquisition of the properties of Archstone, a company that Lehman Brothers helped take private in 2007, but which ultimately helped push the investment bank into bankruptcy the following year.

Funds from operations is an industry measure that usually excludes the effect of depreciation on earnings as well as losses or gains from property sales.

Total revenue increased 23.9 percent to $315.4 million.

For properties the company has operated more than a year, AvalonBay posted a 5.6 percent rise in first-quarter net operating income, an indicator of how well they are managed. The average rental rate rose 4.9 percent. The Pacific Northwest and Northern California lead the rental revenue increases, up 8.9 percent and 8.7 percent, respectively. Those markets also turned in double-digit net operating income growth.

AvalonBay revised its outlook for the year to FFO in the range of $4.98 to $5.98 per share, up from $4.11 to $4.47 per share. Analysts had forecast $4.35 per share, according to Thomson Reuters I/B/E/S.

Shares of AvalonBay closed 1.5 percent higher at $133.04 on the New York Stock Exchange on Tuesday, shortly before the results came out. The shares were unchanged after-hours.

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