AvalonBay Communities, Inc.

If your question has been answered or you wish to remove yourself from the queue, press star 2. If you are using a speakerphone, please lift the handset before asking your question, and we ask that you refrain from typing and have your cellphones turned off during the question and answer session. Your host for today's conference call is Matthew Grover, Senior Director of Investor Relations. Mr. Grover, you may begin your conference call.

Thank you, Operator, and welcome to Avalon Bank Community's first quarter 2026 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, the press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used during today's discussion. The attachment is also available on our website at investors.avalonbay.com, and we encourage you to refer to this information during the review of our operating results and financial performance. When we get to the question and answer session, we kindly ask participants to limit their questions to one and rejoin the queue if you have any follow-up questions or additional items to discuss. And with that, I will turn the call over to Ben Shaw, CEO and President of Avalon Bank Communities, for his remarks. Ben?

Thank you, Matt, and thank you, everyone, for joining us today. I'm here with Kevin O'Shea, our Chief Financial Officer, Sean Breslin, our Chief Operating Officer, and Matt Birnbaum, our Chief Investment Officer. As is our custom, we've also posted an earnings presentation, which Sean and I will reference during our prepared remarks before turning to Q&A. Starting with the key takeaways on slide four, our first quarter results exceeded our expectations, driven by lower expenses, higher development NOI, and the benefits of our share buyback activity, which was not included in our original outlook for 2026. Our portfolio is well positioned heading into peak leasing season with very low turnover, solid occupancy, and rents tracking as expected through the first four months of the year. We are also benefiting from the ramp in development NOI in 2026, which will further accelerate during the year and into 2027. Leasing velocity at our projects and lease-up has been strong in the typically slower first quarter, which bodes well for the upcoming peak leasing season. And during the quarter, we completed $340 million of dispositions and repurchased $200 million of our shares at an implied cap rate in the low 6% range. Turning to slide five, sitting store residential revenue grew 1.6% year over year, with occupancy up 10 basis points to 96.1%. During the quarter, we started nearly $190 million of new development, with two starts in suburban New Jersey, and are on track for $800 million of planned 2026 development starts with projected initial stabilized yields of 6.5% to 7%. Our performance in Q1, both operationally and from a capital allocation perspective, sets us up well for the balance of the year. Slide 6 details the components of our favorable first quarter core FFO per share results relative to our initial outlook. of our two cents of NOI outperformance, 20% was revenue driven, and 80% was attributable to lower operating expenses. On the expense side, certain operating costs budgeted for the first quarter are now expected to be incurred over the balance of the year. Other drivers of our outperformance for the quarter were one cent of favorable development NOI from our lease-up communities, as well as one cent from our share of repurchases in the quarter. Looking ahead, Slide 7 highlights several factors that continue to support apartment demand and our operating outlook as we move through 2026. First, market occupancy in our established regions remains solid, supporting near-term fundamentals and allowing us to enter the peak leasing season with relative strength. Second, our customers continue to experience healthy wage growth, which will support rent growth throughout the year. Third, the supply backdrop remains very constructive in our markets, with new market rate apartment deliveries expected to stay at historically low levels for the foreseeable future. And fourth, the economics of renting versus home ownership remain very favorable. During the quarter, the percentage of customers leaving us to purchase a home declined to 8%. Taken together, these factors give us confidence in the resiliency of apartment fundamentals, and in the positioning of our portfolio as we move through the balance of the year. Slide 8 highlights the strength of our operating and development capabilities to drive differentiated internal and external growth in the years ahead. On operations, we continue to leverage our scale and leadership in centralization, technology, and AI to deliver superior service for our residents and drive operating efficiencies and incremental NOI. Our forecast has us on track to generate $55 million of annual incremental NOI by year-end, our original Horizon 1 target. Our next set of priorities include the further deployment of AI solutions and our seamless digital self-service experiences, additional enhancements to our technology and data platforms, and further optimization of neighborhood and centralized staffing. all on our way to our Horizon 2 target of $80 million of annual incremental NOI in the coming years. On development, our sector-leading platform is poised to contribute meaningful earnings and value creation in the coming years, with $3.5 billion of development underway, with a projected initial stabilized yield of 6.3% at quarter end. These investments were match-funded with capital raised over the past three years, at a weighted average initial cost of 4.9%. This spread is well within our strike zone, targeting yields of 100 to 150 basis points above our cost of capital and underlying market cap rates. These deals were conservatively underwritten on an untrended basis, and in many instances are seeing favorable construction cost buyouts relative to pro forma. These communities will also deliver into an operating environment with meaningfully less new supply. With this tailwind of activity, we continue to expect a meaningful ramp in development NOI and are projecting $47 million of development NOI this year, increasing to $120 million in 2027. Turning to slide nine, we have three dispositions closed during the first quarter, and we continue to deploy capital into accretive share repurchases. Beyond crystallizing the significant public-private disconnect in asset values, selling 40-year-old high-rise assets improves our go-forward cash flow growth profile, particularly after factory and CapEx. Including our repurchases last year, we've now repurchased $690 million of our stock and have $914 million of remaining authorization. In summary, we have a high-quality portfolio, well-positioned heading into the peak leasing season, operating in technology initiatives that continue to drive internal growth, and a development platform that we expect to contribute an accelerating stream of earnings over the next several years. With that, I'll turn it over to Sean to walk through the operating environment and leasing trends in more detail.