AvalonBay Communities, Inc.

You stand by. Good day, ladies and gentlemen, and welcome to Avalon Bay Community's fourth quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. Following remarks by the company, we will conduct a question and answer session. You may enter the question and answer queue at any time during this call by pressing the star key followed by the digit 1 on your telephone keypad. If your question has been answered, you may remove yourself from the queue by pressing star 2. If you are using a speakerphone, please lift the handset before asking your question. We also ask that you refrain from typing and have your cell phones turned off during the question and answer session. Your host for today's conference call is Jason Riley, Vice President of Investor Relations. Mr. Riley, you may begin your conference.

Thank you, April, and welcome to Avalon Bay Community's fourth quarter 2018 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There's a discussion of these risks and uncertainties in yesterday afternoon's press release, as well as in the company's Form 10-K and Form 10-Q on the SEC. As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com forward slash earnings, and we encourage you to refer to this information during the review of our operating results and financial performance. And with that, I'll turn the call over to Tim Naughton, Chairman and CEO of Avalon Bay Communities, for his remarks.

Tim? Thank you. Yeah, thanks, Jason. With me today on the call are Kevin O'Shea, Matt Bierenbaum, and Sean Breslin. Sean has actually joined us remotely. The four of us will provide comments on the slides that we posted last night, and then all of us will be available for Q&A afterwards. Our comments will focus on providing a summary of Q4 and the full year results, and then the discussion surrounding our outlook for 2019. Before we get started, though, I thought I'd just note that we have chosen to eliminate quarterly guidance this year. You may have noticed that in our release. We've thought about this for some time and have concluded that so long as we continue providing good disclosure that allows investors to assess our business in a detailed way, which we believe we do, moving away from quarterly guidance is better aligned with how we think about the business and will help discourage undue focus on short-term quarterly results. We will, however, continue to update our annual guidance after the second quarter, concurrent with our internal midyear reforecasting process. Starting now on slide four, highlights for the quarter and the year include core FFO growth of 2.7% in Q4 and 4.4% for the full year, which was 80 basis points above our initial outlook. Same-store revenue growth came in at 2.7% for the quarter, or 2.8%, which include redevelopment. For the full year, same-store revenue growth ended at 2.5%, which was equal to what we saw in 2017. We completed $740 million of new development for the year at a 6.4% initial projected stabilized yield and started another $720 million And lastly, we raised $1.7 billion in external capital this year, this past year, principally through asset sales at an average initial cost of 4.7%, with more than half of that being raised in Q4, mostly from the closing of our New York JV, where we contributed an 80% interest in five stabilized assets to the newly formed venture. The next few slides provide a little more detail on 2018 performance, and I think that provides some helpful context to our 2019 outlook. Turning to slide five, as I mentioned before, same-store revenue growth for the year was consistent with 2017. However, some regions saw improvement, while others actually decelerated from the prior year. Specifically, Boston and Northern California showed significant improvement. from 2017, up 60 and 130 base points respectively, while Seattle decelerated by almost 300 pips as that market began to feel the impact of several years of continuous and elevated supply. Turning to slide six, while seeing store revenue growth was equal to that experience in 2017, the cadence of rent growth through the year was not. We saw rent growth accelerate in the second half of the year. outpacing 2017 in Q3 and Q4 by 70 and 120 bps, respectively, benefiting from a strengthening economy towards the end of the year and a cooling for sale housing market. This provides good momentum for our business going into 2019. Moving to slide seven and turning to the development portfolio, we continue to see a meaningful contribution to core FFO growth from stabilizing new development. although at a lesser rate than in years past as we delivered only about a third of the homes as we did in 2017 and completed about half as much in capitalized cost as we had on average in the prior four years. With our starts down by about 40 percent over the last couple of years, we will generate less growth from external investment over the next two to three years than we did in the early and middle part of this cycle when development economics were particularly compelling. Moving to slide eight of the capital that we raised this year, 1.3 billion came from wholly owned dispositions and the sale of 80% interest of the New York JV that I mentioned earlier. The initial cost of the capital activity was about 110 basis points greater than the 2.6 billion that we raised in 2017, where about 70% of that was raised in the form of debt. Since much of this higher cost capital was raised in Q4, at the end of the year in 2018, it will also contribute to lower external growth in 2019. Now to slide nine. Our elevated disposition activity in 2018 did help drive down leverage. At year end, debt to EBITDA stood at a cyclical low of 4.6 times. Our liquidity and credit metrics, as you can see, are in excellent shape as we move into what will be the 10th year of the current expansion. And finally, on slide 10, we've seldom made progress with several of our other stakeholders this last year, including our customers. We were ranked number one nationally among all apartment REITs for online reputation for the third consecutive year. With our associates, we were renamed to Glassdoor's list of top 100 best places to work for the second consecutive year. and by Indeed as a top five workplace in DC. And lastly, with our communities, where our efforts on the ESG front have been widely recognized by several organizations, helping to establish ABB as a industry leader in this area. And with that, I'm gonna turn it over to Kevin, who will provide an overview of our outlook for 2019.