AvalonBay Communities Inc. (NYSE:AVB), a real estate investment trust (REIT) specializing in apartment communities, announced the completion of a public offering of 3.68 million shares of its common stock on Monday. The offering, which included the full exercise of the underwriters' option to purchase additional shares, was conducted through forward sale agreements.
The underwriting agreement for the offering was entered into on September 5, 2024, with Goldman Sachs & Co (NYSE:GS). LLC, BofA Securities, Inc., Deutsche Bank (ETR:DBKGn) Securities Inc., and Morgan Stanley & Co (NYSE:MS). LLC acting as underwriters and forward sellers, as well as forward purchasers. The initial offering of 3.2 million shares was supplemented by the option exercise on Sunday, which added 480,000 shares.
Under the forward sale agreements, the company will not receive immediate proceeds from the sale of shares by the forward sellers. Instead, AvalonBay expects to settle the agreements by December 31, 2025, with the potential for physical settlement, cash settlement, or net share settlement. The initial forward price per share is set at $219.73, adjustable under certain terms of the agreements.
The net proceeds from the offering, once received, are earmarked for various corporate activities. These include land acquisitions, development and redevelopment of apartment communities, acquisitions of communities, investment in structured investment programs, and other general corporate purposes.
These may also cover repayment and refinancing of outstanding debt, such as borrowings under the company's commercial paper program or its $2.25 billion credit facility.
The shares were offered pursuant to AvalonBay's shelf registration statement, which became effective on February 23, 2024, and were sold following a prospectus supplement dated September 5, 2024.
The legal opinion related to the offering was provided by Goodwin Procter LLP, as disclosed in the company's SEC filing. The completion of the offering, inclusive of the option shares, was finalized on September 9, 2024. This move by AvalonBay Communities Inc. is part of the company's broader strategy to manage its portfolio and capital structure, as it continues to invest in the multi-family housing sector.
In other recent news, AvalonBay Communities has initiated a public offering of 3.2 million shares, with Goldman Sachs & Co. LLC, BofA Securities, Deutsche Bank Securities Inc., and Morgan Stanley serving as joint book-running managers. The proceeds from this offering, expected by the end of 2025, are intended for various corporate purposes, including apartment community acquisitions and development.
Simultaneously, AvalonBay has reported strong financial results for the second quarter of 2024, surpassing revenue forecasts and raising its full-year guidance. The company also plans to exit the Connecticut market and optimize its portfolio by selling assets in high-priced markets.
Truist Securities and Wells Fargo (NYSE:WFC) have updated their outlook on AvalonBay, raising their price targets to $230 and $244 respectively. Truist Securities expects a 5.5% growth in normalized Funds From Operations (FFO) for AvalonBay from 2024 to 2029, while Wells Fargo highlights AvalonBay's leading cash flow from operations growth projections for 2025 among its sector peers.
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