AvalonBay Communities, Inc.

conference call. At this time, all participants are on 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 star 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press star 2 on your telephone keypad. If you're using a speakerphone, please lift the handset before asking your question and And we ask that you refrain from typing and have your cell phones turned off during the Q&A session. Your host for today's conference call is Mr. Jason Riley, Vice President of Investor Relations. Mr. Riley, you may begin your conference.

Thank you, Rob, and welcome to Avalon Bay Community's third quarter 2023 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 is 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 filed with 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. This 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 Ben Shaw, CEO and President of Avalon Bay Communities, for his remarks. Ben?

Ben Shaw Thank you, Jason, and thank you, everyone, for joining us. In keeping with our custom, we posted a presentation last night to accompany our earnings release. In addition to my opening comments, you will hear from Sean on our operating performance and revenue building blocks for 2024. from Matt on the significant earnings being generated by our development projects and lease up, and from Kevin on the strength of our balance sheet. I want to start with my thanks to the Avalon Bay team and our 3,000 plus associates for delivering another strong quarter of financial performance and operating results. Particularly in the current environment of higher interest rates and uncertain cap rates, we are laser focused on driving cash flow growth from our portfolio. The bottom line results from our operating model transformation, led by our onsite and centralized teams, and powered by our technology, revenue management, and data science teams, and proprietary systems, continue to outpace expectations. Our strong operating performance also speaks to our portfolio positioning, which is 70% suburban, and primarily in suburban coastal markets, which continue to benefit from the combination of steady demand and limited new supply. Turning to slide four in the presentation, we grew core FFO by 6.4% in Q3, which was six cents ahead of our expectations. This outperformance was primarily driven by better than expected revenue growth, which positions us well as we enter the traditional slower leasing season. As shown on the bottom of slide four, we have raised $855 million of capital this year at a 4.3% initial cost. which includes the drawdown of our $500 million equity forward, which we priced at $250 per share, and with the remainder coming from asset sales that we've sold in an average cap rate of 4.7%. We completed three development projects in Q3, two in suburban submarkets in the northeast, and one in Miami at a 7.2% stabilized yield. As Matt will emphasize later, our lease-up communities continue to outperform our original expectations by a wide margin. These projects are funded with yesterday's capital at yesterday's capital cost and are slated to generate outsized value creation and earnings for investors. We also started two projects this quarter, one in Princeton, New Jersey, and one in South Miami, with projected yields in the mid-6% range. I will come back to our positioning on new development and capital allocation at the end of our prepared remarks. In Q3, we made $50 million of commitments under our Structured Investment Program, or SIP, and feel fortunate to be building this book of business in today's environment with these new commitments generating an attractive 13% return. Slide five provides the breakdown of our Q3 revenue outperformance relative to guidance from the end of July, with a 30 basis point uplift from higher than expected occupancy, 20 basis points from higher rates, and 10 basis points from improving bad debt. Turning to slide six, we've exceeded and raised guidance three times this year, We now expect core FFO to grow 8.6 percent in 2023, which is 330 basis points above our initial expectations for the year. Same-store revenue growth expectations are up 130 basis points. Expenses are down slightly, leading to NOI growth of 6.3 percent. And with that, I'll turn it to Sean to comment on the favorable demand and supply drivers in our markets and provide a fuller operating update.