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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended June 30, 2021
Commission file number 1-12672
AVALONBAY COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
 
Maryland   77-0404318
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
 
4040 Wilson Blvd., Suite 1000
Arlington, Virginia 22203
(Address of principal executive offices, including zip code)
(703) 329-6300
(Registrant's telephone number, including area code)  
(Former name, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.01 per share AVB New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.
Yes                     No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes                     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes                     No

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

139,616,764 shares of common stock, par value $0.01 per share, were outstanding as of July 31, 2021.


AVALONBAY COMMUNITIES, INC.
FORM 10-Q
INDEX
 
  PAGE
PART I - FINANCIAL INFORMATION  
   
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
     
 
1
     
 
2
     
 
3
     
 
5
   
   
   
   
 
   
   
   
   
   
   
   
   






AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
  6/30/2021 12/31/2020
  (unaudited)  
ASSETS    
Real estate:    
Land and improvements $ 4,442,708  $ 4,394,298 
Buildings and improvements 17,549,286  17,231,275 
Furniture, fixtures and equipment 965,741  924,583 
  22,957,735  22,550,156 
Less accumulated depreciation (5,907,270) (5,700,179)
Net operating real estate 17,050,465  16,849,977 
Construction in progress, including land 773,938  989,765 
Land held for development 100,106  110,142 
For-sale condominium inventory 220,022  267,219 
Real estate assets held for sale, net —  16,678 
Total real estate, net 18,144,531  18,233,781 
Cash and cash equivalents 297,036  216,976 
Cash in escrow 190,069  96,556 
Resident security deposits 32,350  30,811 
Investments in unconsolidated real estate entities 227,953  202,612 
Deferred development costs 49,335  55,427 
Prepaid expenses and other assets 220,916  207,715 
Right of use lease assets 154,435  155,266 
Total assets $ 19,316,625  $ 19,199,144 
LIABILITIES AND EQUITY    
Unsecured notes, net $ 6,705,513  $ 6,702,005 
Variable rate unsecured credit facility —  — 
Mortgage notes payable, net 828,120  862,332 
Dividends payable 224,282  224,897 
Payables for construction 66,315  93,609 
Accrued expenses and other liabilities 295,771  274,699 
Lease liabilities 177,448  181,479 
Accrued interest payable 48,974  49,033 
Resident security deposits 58,576  55,928 
Liabilities related to real estate assets held for sale —  311 
Total liabilities 8,404,999  8,444,293 
Commitments and contingencies
Redeemable noncontrolling interests 3,039  2,677 
Equity:    
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at June 30, 2021 and December 31, 2020; zero shares issued and outstanding at June 30, 2021 and December 31, 2020
—  — 
Common stock, $0.01 par value; 280,000,000 shares authorized at June 30, 2021 and December 31, 2020; 139,618,254 and 139,526,671 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
1,396  1,395 
Additional paid-in capital 10,670,564  10,664,416 
Accumulated earnings less dividends 272,398  126,022 
Accumulated other comprehensive loss (36,339) (40,250)
Total stockholders' equity 10,908,019  10,751,583 
Noncontrolling interests 568  591 
Total equity 10,908,587  10,752,174 
Total liabilities and equity $ 19,316,625  $ 19,199,144 
 
See accompanying notes to Condensed Consolidated Financial Statements.
1

AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(Dollars in thousands, except per share data)
  For the three months ended For the six months ended
  6/30/2021 6/30/2020 6/30/2021 6/30/2020
Revenue:    
Rental and other income $ 560,935  $ 575,479  $ 1,111,194  $ 1,176,123 
Management, development and other fees 808  926  1,685  1,933 
Total revenue 561,743  576,405  1,112,879  1,178,056 
Expenses:    
Operating expenses, excluding property taxes 141,622  131,090  281,673  263,083 
Property taxes 70,776  67,013  140,186  134,039 
Expensed transaction, development and other pursuit costs, net of recoveries 1,653  388  1,483  3,722 
Interest expense, net 56,104  53,399  108,717  109,313 
Loss (gain) on extinguishment of debt, net —  268  (122) 9,438 
Depreciation expense 184,472  176,249  367,769  354,160 
General and administrative expense 18,465  15,573  35,817  32,893 
Casualty and impairment loss 1,177  —  1,177  — 
Total expenses 474,269  443,980  936,700  906,648 
Income from investments in unconsolidated entities 26,559  512  26,092  1,687 
Gain on sale of communities 334,569  35,295  388,296  59,731 
Gain on other real estate transactions, net 32  156  459  199 
Net for-sale condominium activity (647) 1,348  (1,560) 4,808 
Income before income taxes 447,987  169,736  589,466  337,833 
Income tax (expense) benefit (10) 1,133  745  1,042 
Net income 447,977  170,869  590,211  338,875 
Net income attributable to noncontrolling interests (24) (41) (35) (76)
Net income attributable to common stockholders $ 447,953  $ 170,828  $ 590,176  $ 338,799 
Other comprehensive income:    
Loss on cash flow hedges (822) (1,461) (822) (19,064)
Cash flow hedge losses reclassified to earnings 2,366  2,301  4,733  4,250 
Comprehensive income $ 449,497  $ 171,668  $ 594,087  $ 323,985 
Earnings per common share - basic:    
Net income attributable to common stockholders $ 3.21  $ 1.21  $ 4.23  $ 2.41 
Earnings per common share - diluted:    
Net income attributable to common stockholders $ 3.21  $ 1.21  $ 4.23  $ 2.41 

See accompanying notes to Condensed Consolidated Financial Statements.
2

AVALONBAY COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
  For the six months ended
  6/30/2021 6/30/2020
Cash flows from operating activities:
Net income $ 590,211  $ 338,875 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation expense 367,769  354,160 
Amortization of deferred financing costs 3,675  3,720 
Amortization of debt discount 1,320  833 
(Gain) loss on extinguishment of debt, net (122) 9,438 
Amortization of stock-based compensation 13,185  11,870 
Equity in loss of, and return on, unconsolidated real estate entities and noncontrolling interests, net of eliminations 2,989  3,705 
Real estate casualty loss 831  — 
Abandonment of development pursuits 685  2,095 
Unrealized gain on terminated cash flow hedges (2,654) — 
Cash flow hedge losses reclassified to earnings 4,733  4,250 
Gain on sale of real estate assets (412,060) (59,930)
Gain on for-sale condominiums (706) (7,446)
Increase in resident security deposits, prepaid expenses and other assets (16,329) (13,595)
Increase in accrued expenses, other liabilities and accrued interest payable 15,102  (19,058)
Net cash provided by operating activities 568,629  628,917 
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs (325,692) (383,139)
Acquisition of real estate assets, including partnership interest (118,572) — 
Capital expenditures - existing real estate assets (57,157) (51,858)
Capital expenditures - non-real estate assets (2,584) (14,461)
Decrease in payables for construction (27,294) (11,547)
Proceeds from sale of real estate, net of selling costs 575,431  132,882 
Proceeds from the sale of for-sale condominiums, net of selling costs 48,655  155,217 
Mortgage note receivable lending (113) (209)
Mortgage note receivable payments 1,556  2,238 
Distributions from unconsolidated real estate entities 22,331  — 
Investments in unconsolidated real estate entities (27,356) (14,251)
Net cash provided by (used in) investing activities 89,205  (185,128)
Cash flows from financing activities:
Issuance of common stock, net 2,372  1,613 
Dividends paid (444,572) (437,326)
Issuance of mortgage notes payable —  51,000 
Repayments of mortgage notes payable, including prepayment penalties (34,734) (56,852)
Issuance of unsecured notes —  1,296,581 
Repayment of unsecured notes, including prepayment penalties —  (958,680)
Payment of deferred financing costs —  (11,276)
Receipt (payment) for termination of forward interest rate swaps 6,962  (25,135)
Payment to noncontrolling interest (33) (42)
Payments related to tax withholding for share-based compensation (13,228) (14,750)
Distributions to DownREIT partnership unitholders (24) (24)
Distributions to joint venture and profit-sharing partners (164) (218)
Preferred interest obligation redemption and dividends (840) (600)
Net cash used in financing activities (484,261) (155,709)
Net increase in cash, cash equivalents and cash in escrow 173,573  288,080 
Cash, cash equivalents and cash in escrow, beginning of period 313,532  127,614 
Cash, cash equivalents and cash in escrow, end of period $ 487,105  $ 415,694 
Cash paid during the period for interest, net of amount capitalized $ 101,703  $ 103,328 
See accompanying notes to Condensed Consolidated Financial Statements.
3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

The following table provides a reconciliation of cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows (dollars in thousands):
For the six months ended
6/30/2021 6/30/2020
Cash and cash equivalents $ 297,036  $ 322,817 
Cash in escrow 190,069  92,877 
Cash, cash equivalents and cash in escrow reported in the Condensed Consolidated Statements of Cash Flows $ 487,105  $ 415,694 

Supplemental disclosures of non-cash investing and financing activities:

During the six months ended June 30, 2021:

As described in Note 4, "Equity," 151,186 shares of common stock were issued as part of the Company's stock-based compensation plans, of which 56,545 shares related to the conversion of performance awards to common shares, and the remaining 94,641 shares valued at $16,687,000 were issued in connection with new stock grants; 1,561 shares valued at $274,000 were issued through the Company's dividend reinvestment plan; 74,726 shares valued at $13,228,000 were withheld to satisfy employees' tax withholding and other liabilities; and 709 restricted shares with an aggregate value of $140,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $222,901,000.

The Company recorded an increase of $528,000 in redeemable noncontrolling interest with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

The Company recorded an increase to accrued expenses and other liabilities of $822,000 and a corresponding adjustment to accumulated other comprehensive loss, and reclassified $4,733,000 of cash flow hedge losses from other comprehensive income (loss) to interest expense, net, to record the impact of the Company's derivative and hedge accounting activity.

During the six months ended June 30, 2020:

The Company issued 164,526 shares of common stock as part of the Company's stock-based compensation plans, of which 96,317 shares related to the conversion of performance awards to restricted shares, and the remaining 68,209 shares valued at $15,150,000 were issued in connection with new stock grants; 1,183 shares valued at $217,000 were issued through the Company's dividend reinvestment plan; 73,089 shares valued at $14,750,000 were withheld to satisfy employees' tax withholding and other liabilities; and 4,050 restricted shares with an aggregate value of $685,000 previously issued in connection with employee compensation were canceled upon forfeiture.

Common stock dividends declared but not paid totaled $224,482,000.

The Company recorded a decrease of $325,000 in redeemable noncontrolling interest with a corresponding increase to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

The Company recorded an increase to accrued expenses and other liabilities of $98,000, an increase in prepaid expenses and other assets of $178,000 and a corresponding adjustment to accumulated other comprehensive loss, and reclassified $4,250,000 of cash flow hedge losses from other comprehensive income (loss) to interest expense, net, to record the impact of the Company's derivative and hedge accounting activity.

The Company recorded $46,875,000 of lease liabilities and offsetting right of use lease assets related to the execution of two new office leases.


4

AVALONBAY COMMUNITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.  Organization, Basis of Presentation and Significant Accounting Policies

Organization and Basis of Presentation

AvalonBay Communities, Inc. (the "Company," which term, unless the context otherwise requires, refers to AvalonBay Communities, Inc. together with its subsidiaries), is a Maryland corporation that has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes under the Internal Revenue Code of 1986 (the "Code"). The Company focuses on the development, redevelopment, acquisition, ownership and operation of multifamily communities in New England, the New York/New Jersey metro area, the Mid-Atlantic, Southeast Florida, Denver, Colorado, the Pacific Northwest, and Northern and Southern California. The Company is pursuing opportunities in new expansion markets of Dallas and Austin, Texas, and Charlotte and Raleigh-Durham, North Carolina.

At June 30, 2021, the Company owned or held a direct or indirect ownership interest in 272 operating apartment communities containing 80,958 apartment homes in 11 states and the District of Columbia. In addition, the Company owned or held a direct or indirect ownership interest in 16 communities under development that are expected to contain an aggregate of 4,791 apartment homes when completed, as well as The Park Loggia, which contains 172 for-sale residential condominiums, of which 96 have been sold as of June 30, 2021, and 66,000 square feet of commercial space, of which 87% has been leased as of June 30, 2021. The Company also owned or held a direct or indirect ownership interest in land or rights to land on which the Company expects to develop an additional 23 communities that, if developed as expected, will contain an estimated 7,802 apartment homes.

The interim unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements required by GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company's 2020 Annual Report on Form 10-K. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results for the full year. Management believes the disclosures are adequate to ensure the information presented is not misleading. In the opinion of management, all adjustments and eliminations, consisting only of normal, recurring adjustments necessary for a fair presentation of the financial statements for the interim periods, have been included.

Capitalized terms used without definition have meanings provided elsewhere in this Form 10-Q.

Earnings per Common Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares outstanding during the period. All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share ("EPS"). Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company's earnings per common share are determined as follows (dollars in thousands, except per share data):
5

  For the three months ended For the six months ended
  6/30/2021 6/30/2020 6/30/2021 6/30/2020
Basic and diluted shares outstanding    
Weighted average common shares - basic 139,373,963  140,450,744  139,332,575  140,413,857 
Weighted average DownREIT units outstanding 7,500  7,500  7,500  7,500 
Effect of dilutive securities 269,176  279,916  261,451  330,974 
Weighted average common shares - diluted 139,650,639  140,738,160  139,601,526  140,752,331 
Calculation of Earnings per Share - basic    
Net income attributable to common stockholders $ 447,953  $ 170,828  $ 590,176  $ 338,799 
Net income allocated to unvested restricted shares (902) (390) (1,267) (817)
Net income attributable to common stockholders, adjusted $ 447,051  $ 170,438  $ 588,909  $ 337,982 
Weighted average common shares - basic 139,373,963  140,450,744  139,332,575  140,413,857 
Earnings per common share - basic $ 3.21  $ 1.21  $ 4.23  $ 2.41 
Calculation of Earnings per Share - diluted    
Net income attributable to common stockholders $ 447,953  $ 170,828  $ 590,176  $ 338,799 
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships 12  12  24  24 
Adjusted net income attributable to common stockholders $ 447,965  $ 170,840  $ 590,200  $ 338,823 
Weighted average common shares - diluted 139,650,639  140,738,160  139,601,526  140,752,331 
Earnings per common share - diluted $ 3.21  $ 1.21  $ 4.23  $ 2.41 
 
Certain options to purchase shares of common stock in the amount of 292,544 were outstanding as of June 30, 2021, but were not included in the computation of diluted earnings per share because such options were anti-dilutive for the period. All options to purchase shares of common stock outstanding as of June 30, 2020 are included in the computation of diluted earnings per share.

Derivative Instruments and Hedging Activities

The Company enters into interest rate swap and interest rate cap agreements (collectively, "Hedging Derivatives") for interest rate risk management purposes and in conjunction with certain variable rate secured debt to satisfy lender requirements. The Company does not enter into Hedging Derivative transactions for trading or other speculative purposes. The Company assesses the effectiveness of qualifying cash flow and fair value hedges, both at inception and on an on-going basis. Hedge ineffectiveness is reported as a component of interest expense, net. The fair values of Hedging Derivatives that are in an asset position are recorded in prepaid expenses and other assets. The fair value of Hedging Derivatives that are in a liability position are included in accrued expenses and other liabilities. The Company does not present or disclose the fair value of Hedging Derivatives on a net basis. Fair value changes for derivatives that are not in qualifying hedge relationships are reported as a component of interest expense, net. For the Hedging Derivative positions that the Company has determined qualify as effective cash flow hedges, the Company has recorded the cumulative changes in the fair value of Hedging Derivatives in other comprehensive loss. Amounts recorded in accumulated other comprehensive loss will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flow. The effective portion of the change in fair value of the Hedging Derivatives that the Company has determined qualified as effective fair value hedges is reported as an adjustment to the carrying amount of the corresponding debt being hedged. See Note 11, “Fair Value,” for further discussion of derivative financial instruments.

6

Legal and Other Contingencies

The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of its business. While no assurances can be given, the Company does not currently believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to amounts in prior years' notes to financial statements to conform to current year presentations as a result of changes in held for sale classification, disposition activity and segment classification.

For-Sale Condominium Inventory

The Company presents for-sale condominium inventory at historical cost and evaluates the condominiums for impairment when potential indicators exist, as further discussed in Note 6, "Real Estate Disposition Activities." 

Leases

The Company is party to leases as both a lessor and a lessee, primarily as follows:

lessor of residential and commercial space within its apartment communities; and
lessee under (i) ground leases for land underlying current operating or development communities and certain commercial and parking facilities and (ii) office leases for its corporate headquarters and regional offices.

Lessee Considerations

The Company assesses whether a contract is or contains a lease based on whether the contract conveys the right to control the use of an identified asset, including specified portions of larger assets, for a period of time in exchange for consideration. The Company’s leases include both fixed and variable lease payments, which are based on an index or rate such as the consumer price index (CPI) or percentage rents based on total sales. Lease payments included in the lease liability include only fixed lease payments including fixed amounts that depend on an index or rate. For leases that have options to extend the term or terminate the lease early, the Company only factored the impact of such options into the lease term if the option was considered reasonably certain to be exercised. The Company determined the discount rate associated with its ground and office leases on a lease by lease basis using the Company’s actual borrowing rates as well as indicative market pricing for longer term rates and taking into consideration the remaining term of each of the lease agreements.

Lessor Considerations

The Company evaluates leases in which it is the lessor, which are composed of residential and commercial leases at its apartment communities, and determined these leases to be operating leases. For lease agreements that provide for rent concessions and/or scheduled fixed and determinable rent increases, rental income is recognized on a straight-line basis over the noncancellable term of the lease, which, for residential leases, is generally one year. Some of the Company’s commercial leases have fixed-price renewal options, and the lessee may be able to exercise its renewal option at an amount less than the fair value of the rent at such time. The Company only includes renewal options in the lease term if, at the commencement of the lease, it is reasonably certain that the lessee will exercise this option.

Additionally, for the Company’s residential and commercial leases, which are comprised of the lease component and common area maintenance as a non-lease component, the Company determined that (i) the leases are operating leases, (ii) the lease component is the predominant component and (iii) that all components of its operating leases share the same timing and pattern of transfer.

7

Revenue and Gain Recognition

Revenue from contracts with customers is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration that the Company expects to be entitled to for those goods and services. The majority of the Company’s revenue is derived from residential and commercial rental income and other lease income, which are accounted for under ASC 842, Leases, discussed above. The Company's revenue streams that are not accounted for under ASC 842 include (i) management fees, (ii) rental and non-rental related income and (iii) gains or losses on the sale of real estate.

The following table provides details of the Company’s revenue streams disaggregated by the Company’s reportable operating segments, further discussed in Note 8, “Segment Reporting,” for the three and six months ended June 30, 2021 and 2020. Segment information for total revenue has been adjusted to exclude the real estate assets that were sold from January 1, 2020 through June 30, 2021, or otherwise qualify as held for sale as of June 30, 2021, as described in Note 6, "Real Estate Disposition Activities" (dollars in thousands):
  For the three months ended
Same Store Other
Stabilized
Development/
Redevelopment
Non-
allocated (1)
Total
For the period ended June 30, 2021
Management, development and other fees and other ancillary items $ —  $ —  $ —  $ 808  $ 808 
Rental and non-rental related income (2) 1,922  395  186  —  2,503 
Total non-lease revenue (3) 1,922  395  186  808  3,311 
Lease income (4) 498,719  29,104  22,890  —  550,713 
Business interruption insurance proceeds —  —  —  —  — 
Total revenue $ 500,641  $ 29,499  $ 23,076  $ 808  $ 554,024 
For the period ended June 30, 2020
Management, development and other fees and other ancillary items $ —  $ —  $ —  $ 299  $ 299 
Rental and non-rental related income (2) 1,848  482  78  —  2,408 
Total non-lease revenue (3) 1,848  482  78  299  2,707 
Lease income (4) 520,753  24,160  7,290  —  552,203 
Business interruption insurance proceeds 96  —  —  —  96 
Total revenue $ 522,697  $ 24,642  $ 7,368  $ 299  $ 555,006 

8

  For the six months ended
Same Store Other
Stabilized
Development/
Redevelopment
Non-
allocated (1)
Total
For the period ended June 30, 2021
Management, development and other fees and other ancillary items $ —  $ —  $ —  $ 1,685  $ 1,685 
Rental and non-rental related income (2) 3,571  821  327  —  4,719 
Total non-lease revenue (3) 3,571  821  327  1,685  6,404 
Lease income (4) 993,569  55,443  40,156  —  1,089,168 
Business interruption insurance proceeds —  —  —  —  — 
Total revenue $ 997,140  $ 56,264  $ 40,483  $ 1,685  $ 1,095,572 
For the period ended June 30, 2020
Management, development and other fees and other ancillary items $ —  $ —  $ —  $ 690  $ 690 
Rental and non-rental related income (2) 3,462  1,073  137  —  4,672 
Total non-lease revenue (3) 3,462  1,073  137  690  5,362 
Lease income (4) 1,065,425  48,600  14,044  —  1,128,069 
Business interruption insurance proceeds 96  —  —  —  96 
Total revenue $ 1,068,983  $ 49,673  $ 14,181  $ 690  $ 1,133,527 
__________________________________
(1)Revenue represents third-party management, asset management and developer fees and miscellaneous income and other ancillary items which are not allocated to a reportable segment.
(2)Amounts include revenue streams related to leasing activities that are not considered components of a lease, including but not limited to, apartment hold fees and application fees, as well as revenue streams not related to leasing activities, including but not limited to, vendor revenue sharing, building advertising, vending and dry cleaning revenue.
(3)Represents all revenue accounted for under ASC 606.
(4)Amounts include all revenue streams derived from residential and commercial rental income and other lease income, which are accounted for under ASC 842.

Due to the nature and timing of the Company’s identified revenue streams, there are no material amounts of outstanding or unsatisfied performance obligations as of June 30, 2021.

Lease Revenue Reserves

The Company assesses the collectability of its lease revenue and receivables on an on-going basis. Under ASC 842, Lease Accounting, the Company assesses the probability of receiving all remaining lease amounts due on a lease by lease basis, reserving for revenue and the related receivables for those leases where collection of substantially all of the remaining lease payments is not probable. Subsequently, the Company will only recognize revenue to the extent cash is received. If the Company determines that collection of the remaining lease payments becomes probable at a future date, the Company will recognize the cumulative revenue that would have been recorded under the original lease agreement.

In addition to the specific reserves recognized under ASC 842, the Company also evaluates its lease receivables for collectability at a portfolio level under ASC 450, Contingencies – Loss Contingencies. The Company recognizes a reserve under ASC 450 when the uncollectible revenue is probable and reasonably estimable. The Company applies this reserve to the population of the Company’s revenue and receivables not specifically addressed as part of the specific ASC 842 reserve.

9

COVID-19 Pandemic

In March 2020, the World Health Organization designated COVID-19 as a pandemic. While the Company has taken various actions in response to the COVID-19 pandemic, the ultimate impact on its consolidated results of operations, cash flows, financial condition and liquidity will depend on (i) the duration and severity of the pandemic, (ii) the effectiveness of vaccines and the rate of vaccinations, (iii) the duration and nature of governmental responses to contain the spread of the disease and assist consumers and businesses, (iv) consumer and business responses to the pandemic, including preferences for where and how to live and work, and (v) how quickly and to what extent normal economic and operating conditions can resume. Because of this uncertainty, any estimate of the expected impact of the COVID-19 pandemic on results of operations, cash flows, financial condition, or liquidity for periods beyond the six months ended June 30, 2021 is uncertain.

As of June 30, 2021, the Company assessed the collectibility of the outstanding lease income receivables as a result of the impact of the COVID-19 pandemic on its residential and commercial lease portfolios. The Company recorded an aggregate offset to income for uncollectible lease revenue for its residential and commercial portfolios of $15,065,000 and $20,099,000 for the three months ended June 30, 2021 and 2020, respectively, and $33,710,000 and $24,279,000 for six months ended June 30, 2021 and 2020, respectively, under ASC 842 and ASC 450.

2.  Interest Capitalized

The Company capitalizes interest during the development and redevelopment of real estate assets. Capitalized interest associated with the Company's development or redevelopment activities totaled $8,362,000 and $11,019,000 for the three months ended June 30, 2021 and 2020, respectively, and $17,161,000 and $22,517,000 for the six months ended June 30, 2021 and 2020, respectively.

3.  Mortgage Notes Payable, Unsecured Notes, Term Loans and Credit Facility

The Company's mortgage notes payable, unsecured notes, variable rate unsecured term loans (the "Term Loans") and Credit Facility, as defined below, as of June 30, 2021 and December 31, 2020 are summarized below. The following amounts and discussion do not include the mortgage notes related to the communities classified as held for sale, if any, as of June 30, 2021 and December 31, 2020, as shown in the accompanying Condensed Consolidated Balance Sheets (dollars in thousands) (see Note 6, "Real Estate Disposition Activities").
  6/30/2021 12/31/2020
Fixed rate unsecured notes (1) $ 6,500,000  $ 6,500,000 
Term Loans (1) 250,000  250,000 
Fixed rate mortgage notes payable - conventional and tax-exempt (2) 380,030  408,964 
Variable rate mortgage notes payable - conventional and tax-exempt (2) 465,050  470,850 
Total mortgage notes payable and unsecured notes and Term Loans 7,595,080  7,629,814 
Credit Facility —  — 
Total mortgage notes payable, unsecured notes, Term Loans and Credit Facility $ 7,595,080  $ 7,629,814 
_____________________________________
(1)Balances at June 30, 2021 and December 31, 2020 exclude $9,577 and $10,380, respectively, of debt discount, and $34,910 and $37,615, respectively, of deferred financing costs, as reflected in unsecured notes, net on the accompanying Condensed Consolidated Balance Sheets.
(2)Balances at June 30, 2021 and December 31, 2020 exclude $14,083 and $14,478, respectively, of debt discount, and $2,877 and $3,004, respectively, of deferred financing costs, as reflected in mortgage notes payable, net on the accompanying Condensed Consolidated Balance Sheets.

The following debt activity occurred during the six months ended June 30, 2021:

In January 2021, the Company repaid $27,795,000 principal amount of 5.37% fixed rate debt secured by Avalon San Bruno II at par in advance of its April 2021 maturity date.

10

At June 30, 2021, the Company has a $1,750,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the “Credit Facility”) which matures in February 2024. The Credit Facility bears interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) applicable to the period of borrowing for a particular draw of funds from the facility (e.g., one month to maturity, three months to maturity, etc.) and (ii) the rating levels issued for our unsecured notes. The current stated pricing for drawn borrowings is LIBOR plus 0.775% per annum (0.88% at June 30, 2021), assuming a one month borrowing rate. The annual facility fee for the Credit Facility remained 0.125%, resulting in a fee of $2,188,000 annually based on the $1,750,000,000 facility size and based on the Company's current credit rating.

The Company had no borrowings outstanding under the Credit Facility and had $2,599,000 and $2,900,000 outstanding in letters of credit that reduced the borrowing capacity as of June 30, 2021 and December 31, 2020, respectively. In addition, the Company had $36,682,000 and $32,079,000 outstanding in additional letters of credit unrelated to the Credit Facility as of June 30, 2021 and December 31, 2020, respectively.

In the aggregate, secured notes payable mature at various dates from March 2027 through July 2066, and are secured by certain apartment communities (with a net carrying value of $1,373,062,000, excluding communities classified as held for sale, as of June 30, 2021).

The weighted average interest rate of the Company's fixed rate secured notes payable (conventional and tax-exempt) was 3.8% at both June 30, 2021 and December 31, 2020. The weighted average interest rate of the Company's variable rate secured notes payable (conventional and tax-exempt), including the effect of certain financing related fees, was 1.6% and 1.7% at June 30, 2021 and December 31, 2020, respectively.

Scheduled payments and maturities of secured notes payable and unsecured notes outstanding at June 30, 2021 are as follows (dollars in thousands):
Year Secured notes
principal payments
Secured notes maturities Unsecured notes and Term Loans maturities Stated interest rate of unsecured notes and Term Loans
2021 $ 2,414  $ —  $ —  N/A
2022 9,918  —  450,000  2.950  %
100,000 
LIBOR + 0.90%
2023 10,739  —  350,000  4.200  %
250,000  2.850  %
2024 11,677  —  300,000  3.500  %
150,000 
LIBOR + 0.85%
2025 12,408  —  525,000  3.450  %
300,000  3.500  %
2026 13,445  —  475,000  2.950  %
300,000  2.900  %
2027 15,880  236,100  400,000  3.350  %
2028 20,707  —  450,000  3.200  %
2029 11,742  66,250  450,000  3.300  %
2030 12,384  —  700,000  2.300  %
Thereafter 176,078  245,338  600,000  2.450  %
350,000  3.900  %
300,000  4.150  %
300,000  4.350  %
  $ 297,392  $ 547,688  $ 6,750,000   
 
The Company was in compliance at June 30, 2021 with customary financial covenants under the Credit Facility, the Term Loans and the Company's fixed rate unsecured notes.
11

4.  Equity

The following summarizes the changes in equity for the six months ended June 30, 2021 (dollars in thousands):
Common
stock
Additional
paid-in
capital
Accumulated
earnings
less
dividends
Accumulated
other
comprehensive
loss
Total stockholder's equity Noncontrolling interests Total
equity
Balance at December 31, 2020 $ 1,395  $ 10,664,416  $ 126,022  $ (40,250) $ 10,751,583  $ 591  $ 10,752,174 
Net income attributable to common stockholders —  —  142,223  —  142,223  —  142,223 
Cash flow hedge losses reclassified to earnings —  —  —  2,367  2,367  —  2,367 
Change in redemption value of redeemable noncontrolling interest —  —  (273) —  (273) —  (273)
Noncontrolling interest distribution and income allocation —  —  —  —  —  (16) (16)
Dividends declared to common stockholders ($1.59 per share)
—  —  (221,779) —  (221,779) —  (221,779)
Issuance of common stock, net of withholdings (14,037) 958  —  (13,078) —  (13,078)
Amortization of deferred compensation —  7,286  —  —  7,286  —  7,286 
Balance at March 31, 2021 $ 1,396  $ 10,657,665  $ 47,151  $ (37,883) $ 10,668,329  $ 575  $ 10,668,904 
Net income attributable to common stockholders —  —  447,953  —  447,953  —  447,953 
Loss on cash flow hedges, net —  —  —  (822) (822) —  (822)
Cash flow hedge losses reclassified to earnings —  —  —  2,366  2,366  —  2,366 
Change in redemption value of redeemable noncontrolling interest —  —  (255) —  (255) —  (255)
Noncontrolling interest distribution and income allocation —  —  —  —  —  (7) (7)
Dividends declared to common stockholders ($1.59 per share)
—  —  (222,451) —  (222,451) —  (222,451)
Issuance of common stock, net of withholdings —  2,496  —  —  2,496  —  2,496 
Amortization of deferred compensation —  10,403  —  —  10,403  —  10,403 
Balance at June 30, 2021 $ 1,396  $ 10,670,564  $ 272,398  $ (36,339) $ 10,908,019  $ 568  $ 10,908,587 

12

The following summarizes the changes in equity for the six months ended June 30, 2020 (dollars in thousands):
Common
stock
Additional
paid-in
capital
Accumulated
earnings
less
dividends
Accumulated
other
comprehensive
loss
Total stockholder's equity Noncontrolling interests Total
equity
Balance at December 31, 2019 $ 1,406  $ 10,736,733  $ 282,913  $ (31,503) $ 10,989,549  $ 649  $ 10,990,198 
Net income attributable to common stockholders —  —  167,971  —  167,971  —  167,971 
Loss on cash flow hedges, net —  —  —  (17,603) (17,603) —  (17,603)
Cash flow hedge losses reclassified to earnings —  —  —  1,949  1,949  —  1,949 
Change in redemption value of redeemable noncontrolling interest —  —  471  —  471  —  471 
Noncontrolling interests income allocation —  —  —  —  —  (35) (35)
Dividends declared to common stockholders ($1.59 per share)
—  —  (224,083) —  (224,083) —  (224,083)
Issuance of common stock, net of withholdings (12,492) (1,616) —  (14,107) —  (14,107)
Amortization of deferred compensation —  7,781  —  —  7,781  —  7,781 
Balance at March 31, 2020 $ 1,407  $ 10,732,022  $ 225,656  $ (47,157) $ 10,911,928  $ 614  $ 10,912,542 
Net income attributable to common stockholders —  —  170,828  —  170,828  —  170,828 
Loss on cash flow hedges, net —  —  —  (1,461) (1,461) —  (1,461)
Cash flow hedge losses reclassified to earnings —  —  —  2,301  2,301  —  2,301 
Change in redemption value of redeemable noncontrolling interest —  —  (146) —  (146) —  (146)
Noncontrolling interests income allocation —  —  —  —  — 
Dividends declared to common stockholders ($1.59 per share)
—  —  (224,172) —  (224,172) —  (224,172)
Issuance of common stock, net of withholdings —  1,050  138  —  1,188  —  1,188 
Amortization of deferred compensation —  9,724  —  —  9,724  —  9,724 
Balance at June 30, 2020 $ 1,407  $ 10,742,796  $ 172,304  $ (46,317) $ 10,870,190  $ 615  $ 10,870,805 

As of June 30, 2021 and December 31, 2020, the Company's charter had authorized for issuance a total of 280,000,000 shares of common stock and 50,000,000 shares of preferred stock.

During the six months ended June 30, 2021, the Company:

i.issued 2,126 shares of common stock in connection with stock options exercised;
ii.issued 1,561 common shares through the Company's dividend reinvestment plan;
iii.issued 151,186 common shares in connection with restricted stock grants and the conversion of performance awards to restricted shares;
iv.withheld 74,726 common shares to satisfy employees' tax withholding and other liabilities;
v.issued 12,145 common shares through the Employee Stock Purchase Plan; and
vi.canceled 709 common shares of restricted stock upon forfeiture.

Any deferred compensation related to the Company's stock option, restricted stock and performance award grants as of June 30, 2021 is not reflected on the accompanying Condensed Consolidated Balance Sheets as of June 30, 2021, and will not be reflected until recognized as compensation cost.

13

In July 2020, the Company’s Board of Directors voted to terminate the Company’s prior $500,000,000 Stock Repurchase Program (the "Amended 2005 Stock Repurchase Program") and approved a new stock repurchase program under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000 (the "2020 Stock Repurchase Program"). Purchases of common stock under the 2020 Stock Repurchase Program may be exercised from time to time in the Company’s discretion and in such amounts as market conditions warrant. The timing and actual number of shares repurchased will depend on a variety of factors, including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. During the six months ended June 30, 2021, the Company had no repurchases of shares under this program. As of June 30, 2021, the Company had $316,148,000 remaining authorized for purchase under this program.

In May 2019, the Company commenced a fifth continuous equity program ("CEP V") under which the Company may sell (and/or enter into forward sale agreements for the sale of) up to $1,000,000,000 of its common stock from time to time. Actual sales will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company's common stock and determinations by the Company of the appropriate sources of funding for the Company. In conjunction with CEP V, the Company engaged sales agents who will receive compensation of up to 1.5% of the gross sales price for shares sold. The Company expects that, if entered into, it will physically settle each forward sale agreement on one or more dates specified by the Company on or prior to the maturity date of that particular forward sale agreement, in which case the Company will expect to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward agreement multiplied by the relevant forward sale price. However, the Company may also elect to cash settle or net share settle a forward sale agreement. In connection with each forward sale agreement, the Company will pay the relevant forward seller, in the form of a reduced initial forward sale price, a commission of up to 1.5% of the sales prices of all borrowed shares of common stock sold. During the six months ended June 30, 2021, the Company had no sales under the program. As of June 30, 2021, the Company had $752,878,000 remaining authorized for issuance under CEP V.

5.  Investments in Real Estate Entities

Investments in Unconsolidated Real Estate Entities

As of June 30, 2021, the Company had investments in eight unconsolidated real estate entities with ownership interest percentages ranging from 20.0% to 50.0% and other unconsolidated investments. The Company accounts for its investments in unconsolidated real estate entities under the equity method of accounting. The significant accounting policies of the Company's unconsolidated real estate entities are consistent with those of the Company in all material respects.

During the three and six months ended June 30, 2021, Archstone Multifamily Partners AC JV LP (the "AC JV") sold its final two communities, Avalon North Point and Avalon North Point Lofts, located in Cambridge, MA, containing an aggregate of 529 apartment homes, for $325,000,000. The Company's share of the gain was $23,305,000. In conjunction with the disposition of Avalon North Point, the AC JV repaid a $111,653,000 loan to the equity investors in the venture at par.

The following is a combined summary of the financial position of the entities accounted for using the equity method discussed above as of the dates presented, including development joint ventures started and unconsolidated communities sold during the respective periods (dollars in thousands):
  6/30/2021 12/31/2020
  (unaudited)
Assets:    
Real estate, net $ 1,147,860  $ 1,249,730 
Other assets 473,193  255,606 
Total assets $ 1,621,053  $ 1,505,336 
Liabilities and partners' capital:    
Mortgage notes payable, net (1) $ 637,676  $ 751,257 
Other liabilities 169,258  163,808 
Partners' capital 814,119  590,271 
Total liabilities and partners' capital $ 1,621,053  $ 1,505,336 
_________________________________
14

(1)    The Company has not guaranteed the outstanding debt, nor does the Company have any obligation to fund this debt should the unconsolidated entity be unable to do so.

The following is a combined summary of the operating results of the entities accounted for using the equity method discussed above for the periods presented (dollars in thousands):
For the three months ended For the six months ended
  6/30/2021 6/30/2020 6/30/2021 6/30/2020
(unaudited) (unaudited)
Rental and other income (1) $ 41,809  $ 30,427  $ 66,744  $ 63,499 
Operating and other expenses (12,126) (11,732) (24,293) (23,912)
Gain on sale of communities 164,317  40  164,317  40 
Interest expense, net (7,582) (8,053) (15,250) (16,109)
Depreciation expense (7,441) (8,713) (15,919) (17,402)
Net income $ 178,977  $ 1,969  $ 175,599  $ 6,116 
Company's share of net income from investments in unconsolidated entities $ 27,087  $ 1,041  $ 27,149  $ 2,746 
Amortization of excess investment and other (528) (529) (1,057) (1,059)
Income from investments in unconsolidated entities $ 26,559  $ 512  $ 26,092  $ 1,687 
_________________________________
(1)    Includes unrealized gains on property technology investments during the three and six months ended June 30, 2021.

Investments in Consolidated Real Estate Entities

During the six months ended June 30, 2021, the Company acquired Avalon Arundel Crossing East, located in Linthicum Heights, MD, which contains 384 apartment homes and was acquired for a purchase price of $119,000,000. The Company accounted for this purchase as an asset acquisition and recorded the acquired assets and assumed liabilities, including identifiable intangibles, at their relative fair values based on the purchase price and acquisition costs incurred. The Company used third party pricing or internal models for the value of the land, a valuation model for the value of the building, and an internal model to determine the fair value of the remaining real estate assets and in-place leases. Given the heterogeneous nature of multifamily real estate, the fair values for the land, debt, real estate assets and in-place leases incorporated significant unobservable inputs and therefore are considered to be Level 3 prices within the fair value hierarchy.

Expensed Transaction, Development and Other Pursuit Costs

The Company capitalizes pre-development costs incurred in pursuit of new development opportunities for which the Company currently believes future development is probable ("Development Rights"). Future development of these Development Rights is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and the availability of capital. Initial pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development by the Company no longer probable, any non-recoverable capitalized pre-development costs are expensed. The Company expensed costs related to development pursuits not yet considered probable for development and the abandonment of Development Rights, as well as costs incurred in pursuing the acquisition or disposition of assets for which such acquisition and disposition activity did not occur. The amounts for the three and six months ended June 30, 2021 and 2020, were $1,653,000 and $1,483,000 and $388,000 and $3,722,000, respectively. These costs are included in expensed transaction, development and other pursuit costs, net of recoveries on the accompanying Condensed Consolidated Statements of Comprehensive Income. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

15

Casualty and Impairment of Long-Lived Assets

In the Company's evaluation of its real estate portfolio for impairment, as discussed below, it considered the impact of the COVID-19 pandemic and did not identify any indicators of impairment as a result.

The Company evaluates its real estate and other long-lived assets for impairment when potential indicators of impairment exist. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property or long-lived asset may not be recoverable, the Company assesses its recoverability by comparing the carrying amount of the property or long-lived asset to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Company recognizes an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property or long-lived asset. Based on periodic tests of recoverability of long-lived assets, the Company did not recognize any impairment losses for the three and six months ended June 30, 2021 and 2020, other than those related to casualty losses from property damage. During the three and six months ended June 30, 2021, the Company recognized a casualty loss of $1,177,000 for the property and casualty damages resulting from a fire at an operating community, reported as casualty and impairment loss on the accompanying Condensed Consolidated Statements of Comprehensive Income

The Company evaluates its for-sale condominium inventory for potential indicators of impairment, considering whether the fair value of the individual for-sale condominium units exceeds the carrying value of those units. For-sale condominium inventory is stated at cost, unless the carrying amount of the inventory is not recoverable when compared to the fair value of each unit. The Company determines the fair value of its for-sale condominium inventory as the estimated sales price less direct costs to sell. For the three and six months ended June 30, 2021 and 2020, the Company did not recognize any impairment losses on its for-sale condominium inventory.

The Company assesses its portfolio of land held for both development and investment for impairment if the intent of the Company changes with respect to either the development of, or the expected holding period for, the land. During the three and six months ended June 30, 2021 and 2020, the Company did not recognize any impairment charges on its investment in land.

The Company evaluates its unconsolidated investments for other than temporary impairment, considering both the extent and amount by which the carrying value of the investment exceeds the fair value, and the Company's intent and ability to hold the investment to recover its carrying value. The Company also evaluates its proportionate share of any impairment of assets held by unconsolidated investments. There were no other than temporary impairment losses recognized for any of the Company's investments in unconsolidated real estate entities during the three and six months ended June 30, 2021 and 2020.

6.  Real Estate Disposition Activities

The following real estate sales occurred during the six months ended June 30, 2021:

Community Name Location Period of sale Apartment homes Gross sales price Gain on Disposition (1)
eaves Stamford Stamford, CT Q121 238 $ 72,000  $ 53,775 
Avalon Norwalk Norwalk, CT Q221 311 $ 103,000  $ 48,912 
AVA Cortez Hill San Diego, CA Q221 299 $ 96,500  $ 75,716 
Avalon Redmond Place Redmond, WA Q221 222 $ 97,700  $ 72,929 
Avalon Bronxville Bronxville, NY Q221 110 $ 89,000  $ 71,773 
Avalon Glen Cove & Avalon Glen Cove North Glen Cove, NY Q221 367 $ 126,000  $ 65,242 
_________________________________
(1)    Gain on disposition was reported in gain on sale of communities on the accompanying Condensed Consolidated Statements of Comprehensive Income.

At June 30, 2021, the Company had no real estate assets that qualified as held for sale.

16

The Park Loggia

The Park Loggia, located in New York, NY, contains 172 for-sale residential condominiums and 66,000 square feet of commercial space. During the three and six months ended June 30, 2021, the Company sold 16 and 26 residential condominiums at The Park Loggia, for gross proceeds of $38,392,000 and $53,001,000, respectively, resulting in a gain in accordance with GAAP of $575,000 and $706,000, respectively. As of June 30, 2021, there were 76 residential condominiums remaining to be sold. The Company incurred $1,222,000 and $1,196,000 during the three months ended June 30, 2021 and 2020, respectively, and $2,266,000 and $2,639,000 during the six months ended June 30, 2021 and 2020, respectively, in marketing, operating and administrative costs. All amounts are included in net for-sale condominium activity, on the accompanying Condensed Consolidated Statements of Comprehensive Income. As of June 30, 2021 and December 31, 2020, the unsold for-sale residential condominiums at The Park Loggia have an aggregate carrying value of $220,022,000 and $267,219,000, respectively, presented as for-sale condominium inventory on the accompanying Condensed Consolidated Balance Sheets.

7. Commitments and Contingencies

Lease Obligations

The Company owns nine apartment communities and two commercial properties, located on land subject to ground leases expiring between May 2041 and March 2142. The Company has purchase options for all ground leases expiring prior to 2060. The ground leases for eight of the nine apartment communities and the rest of the ground leases are operating leases, with rental expense recognized on a straight-line basis over the lease term. In addition, the Company is party to 13 leases for its corporate and regional offices with varying terms through 2031, all of which are operating leases.

As of June 30, 2021 and December 31, 2020, the Company has total operating lease assets of $129,064,000 and $133,581,000, respectively, and lease obligations of $157,305,000 and $161,313,000, respectively, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets. The Company incurred costs of $3,896,000 and $4,240,000 for the three months ended June 30, 2021 and 2020, respectively, and $7,723,000 and $8,157,000 for the six months ended June 30, 2021 and 2020, respectively, related to operating leases.

The Company has one apartment community located on land subject to a ground lease and three leases for portions of parking garages, adjacent to apartment communities, that are finance leases. As of June 30, 2021 and December 31, 2020, the Company has total finance lease assets of $25,371,000 and $21,685,000, respectively, and total finance lease obligations of $20,143,000 and $20,166,000, respectively, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets.

17

8.  Segment Reporting

The Company's reportable operating segments include Same Store, Other Stabilized, and Development/Redevelopment. Annually as of January 1, the Company determines which of its communities fall into each of these categories and generally maintains that classification throughout the year for the purpose of reporting segment operations, unless disposition or redevelopment plans regarding a community change. In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

The Company's segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment's performance. The Company's chief operating decision maker ("CODM") is comprised of several members of its executive management team who use net operating income ("NOI") as the primary financial measure for Same Store communities and Other Stabilized communities. NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, expensed transaction, development and other pursuit costs, net of recoveries, interest expense, net, (gain) loss on extinguishment of debt, net, general and administrative expense, income from investments in unconsolidated entities, depreciation expense, corporate income tax (benefit) expense, casualty and impairment (gain) loss, net, gain on sale of communities, (gain) loss on other real estate transactions, net, net for-sale condominium activity and net operating income from real estate assets sold or held for sale. The CODM evaluates the Company's financial performance on a consolidated residential and commercial basis, as the Company's commercial results attributable to the non-apartment components of the Company's mixed-use communities and other nonresidential operations represents 1.5% and 0.5% of total NOI for the three months ended June 30, 2021 and 2020, respectively, and 1.5% and 1.1% for the six months ended June 30, 2021 and 2020, respectively. Although the Company considers NOI a useful measure of a community's or communities' operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP. NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

A reconciliation of NOI to net income for the three and six months ended June 30, 2021 and 2020 is as follows (dollars in thousands):
  For the three months ended For the six months ended
  6/30/2021 6/30/2020 6/30/2021 6/30/2020
Net income $ 447,977  $ 170,869  $ 590,211  $ 338,875 
Indirect operating expenses, net of corporate income 24,318  23,407  48,788  46,206 
Expensed transaction, development and other pursuit costs, net of recoveries 1,653  388  1,483  3,722 
Interest expense, net 56,104  53,399  108,717  109,313 
Loss (gain) on extinguishment of debt, net —  268  (122) 9,438 
General and administrative expense 18,465  15,573  35,817  32,893 
Income from investments in unconsolidated entities (26,559) (512) (26,092) (1,687)
Depreciation expense 184,472  176,249  367,769  354,160 
Income tax expense (benefit) 10  (1,133) (745) (1,042)
Casualty and impairment loss 1,177  —  1,177  — 
Gain on sale of communities (334,569) (35,295) (388,296) (59,731)
Gain on other real estate transactions, net (32) (156) (459) (199)
Net for-sale condominium activity 647  (1,348) 1,560  (4,808)
Net operating income from real estate assets sold or held for sale (4,749) (13,581) (10,549) (28,572)
        Net operating income $ 368,914  $ 388,128  $ 729,259  $ 798,568 

The following is a summary of NOI from real estate assets sold or held for sale for the periods presented (dollars in thousands):
For the three months ended For the six months ended
6/30/2021 6/30/2020 6/30/2021 6/30/2020
Rental income from real estate assets sold or held for sale $ 7,719  $ 21,399  $ 17,307  $ 44,529 
Operating expenses from real estate assets sold or held for sale (2,970) (7,818) (6,758) (15,957)
Net operating income from real estate assets sold or held for sale $ 4,749  $ 13,581  $ 10,549  $ 28,572 

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The primary performance measure for communities under development or redevelopment depends on the stage of completion.  While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.

The following table provides details of the Company's segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community's status at January 1, 2021. Segment information for the three and six months ended June 30, 2021 and 2020 has been adjusted to exclude the real estate assets that were sold from January 1, 2020 through June 30, 2021, or otherwise qualify as held for sale as of June 30, 2021, as described in Note 6, "Real Estate Disposition Activities."

  For the three months ended For the six months ended
  Total
revenue
NOI Total
revenue
NOI Gross real estate (1)
For the period ended June 30, 2021  
Same Store      
New England $ 74,259  $ 47,895  $ 147,577  $ 94,163  $ 2,772,638 
Metro NY/NJ 105,355  70,944  210,304  142,584  4,114,155 
Mid-Atlantic 82,232  54,823  163,460  110,083  3,485,698 
Southeast Florida 7,706  4,557  14,948  8,746  395,009 
Denver, CO 5,853  3,935  11,505  7,954  319,994 
Pacific Northwest 26,935  18,298  53,548  36,192  1,054,701 
Northern California 89,591  63,506  179,997  127,569  3,450,054 
Southern California 108,710  73,364  215,801  145,899  4,373,247 
Total Same Store 500,641  337,322  997,140  673,190  19,965,496 
Other Stabilized 29,499  19,123  56,264  36,049  1,338,844 
Development / Redevelopment 23,076  12,469  40,483  20,020  2,324,779 
Land Held for Development N/A N/A N/A N/A 100,106 
Non-allocated (2) 808  N/A 1,685  N/A 322,576 
Total $ 554,024  $ 368,914  $ 1,095,572  $ 729,259  $ 24,051,801 
For the period ended June 30, 2020  
Same Store      
New England $ 77,240  $ 52,030  $ 156,085  $ 104,299  $ 2,751,535 
Metro NY/NJ 106,452  73,858  219,266  153,511  4,097,021 
Mid-Atlantic 84,634  59,217  172,954  122,975  3,462,890 
Southeast Florida 7,364  4,298  14,868  8,423  393,329 
Denver, CO 5,166  3,326  10,335  6,666  318,833 
Pacific Northwest 28,105  19,932  57,263  41,065  1,049,913 
Northern California 103,867  79,384  210,744  161,263  3,427,805 
Southern California 109,869  76,433  227,468  160,671  4,345,382 
Total Same Store 522,697  368,478  1,068,983  758,873  19,846,708 
Other Stabilized 24,642  16,055  49,673  32,552  1,209,541 
Development / Redevelopment 7,368  3,595  14,181  7,143  1,614,237 
Land Held for Development N/A N/A N/A N/A 39,829 
Non-allocated (2) 299  N/A 690  N/A 407,361 
Total $ 555,006  $ 388,128  $ 1,133,527  $ 798,568  $ 23,117,676 
__________________________________
(1)Does not include gross real estate assets held for sale or classified as held for sale subsequent to June 30, 2020 of $672,125.
(2)Revenue represents third-party management, accounting, and developer fees and miscellaneous income and other ancillary items which are not allocated to a reportable segment. Gross real estate includes the for-sale residential condominiums at The Park Loggia, as discussed in Note 6, "Real Estate Disposition Activities."

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9.  Stock-Based Compensation Plans

As part of its long-term compensation plans, the Company has granted stock options, performance awards and restricted stock. Details of the outstanding awards and activity are presented below.

Information with respect to stock options granted under the Company's Second Amended and Restated 2009 Equity Incentive Plan (the "2009 Plan") for the three and six months ended June 30, 2021, is as follows:
2009 Plan
shares
Weighted average
exercise price
per share
Options Outstanding, December 31, 2020 12,506  $ 129.35 
Exercised (2,126) 121.78 
Granted (1) 294,115  180.32 
Forfeited (1,571) 180.32 
Options Outstanding, June 30, 2021 302,924  $ 178.63 
Options Exercisable, June 30, 2021 10,380  $ 130.90 
__________________________________
(1)Includes 4,847 options resulting from recipient elections to receive a portion of earned restricted stock awards in the form of stock options.

The Company granted stock options in 2021 with the exercise price equal to the closing stock price on the date of grant. The stock options awarded in 2021 will cliff vest in two years on March 1, 2023 and they have a ten-year term. The Company used the Black-Scholes Option Pricing model to determine the grant date fair value of options. The assumptions used are as follows:
2021
Dividend yield 3.5%
Estimated volatility 27.1%
Risk free rate 0.81%
Expected life of options
5 years
Estimated fair value $28.64

Information with respect to performance awards granted is as follows:
Performance awards Weighted average grant date fair value per award
Outstanding at December 31, 2020 241,921  $ 195.13 
  Granted (1) 138,033  191.12 
  Change in awards based on performance (2) (37,469) 156.00 
  Converted to common shares (56,545) 156.00 
  Forfeited (240) 208.35 
Outstanding at June 30, 2021 285,700  $ 206.06 
__________________________________
(1)The amount of common shares that ultimately may be earned is based on the total shareholder return metrics related to the Company's common stock for 69,064 performance awards and financial metrics related to operating performance, net asset value and leverage metrics of the Company for 68,969 performance awards.
(2)Represents the change in the number of performance awards earned based on performance achievement for the performance period.

The Company used a Monte Carlo model to assess the compensation cost associated with the portion of the performance awards granted in 2021 for which achievement will be determined by using total shareholder return measures. The assumptions used are as follows:
20

2021
Dividend yield 3.5%
Estimated volatility over the life of the plan (1)
22.0% - 49.0%
Risk free rate
0.06% - 0.38%
Estimated performance award value based on total shareholder return measure $213.16
__________________________________
(1)Estimated volatility over the life of the plan is using 50% historical volatility and 50% implied volatility.

For the portion of the performance awards granted in 2021 for which achievement will be determined by using financial metrics, the compensation cost was based on a weighted average grant date value of $178.38, and the Company's estimate of corporate achievement for the financial metrics.

Information with respect to restricted stock granted is as follows:
Restricted stock shares Restricted stock shares weighted average grant date fair value per share Restricted stock shares converted from performance awards
Outstanding at December 31, 2020 131,724  $ 203.28  146,319 
  Granted - restricted stock shares 94,641  176.32  — 
  Vested - restricted stock shares (66,038) 192.17  (71,535)
  Forfeited (709) 197.01  — 
Outstanding at June 30, 2021 159,618  $ 191.92  74,784 

Total employee stock-based compensation cost recognized in income was $12,897,000 and $11,624,000 for the six months ended June 30, 2021 and 2020, respectively, and total capitalized stock-based compensation cost was $4,599,000 and $6,174,000 for the six months ended June 30, 2021 and 2020, respectively. At June 30, 2021, there was a total unrecognized compensation cost of $57,078,000 for unvested restricted stock, stock options and performance awards, which does not include forfeitures, and is expected to be recognized over a weighted average period of 2.1 years. Forfeitures are included in compensation cost as they occur.

10.  Related Party Arrangements

Unconsolidated Entities

The Company manages unconsolidated real estate entities for which it receives asset management, property management, development and redevelopment fee revenue. From these entities, the Company earned fees of $808,000 and $926,000 for the three months ended June 30, 2021 and 2020, respectively, and $1,685,000 and $1,933,000 for the six months ended June 30, 2021 and 2020, respectively. In addition, the Company had outstanding receivables associated with its property and construction management roles of $3,199,000 and $5,408,000 as of June 30, 2021 and December 31, 2020, respectively.

Director Compensation

The Company recorded non-employee director compensation expense relating to restricted stock grants and deferred stock units in the amount of $476,000 and $446,000 in the three months ended June 30, 2021 and 2020, respectively, and $941,000 and $901,000 in the six months ended June 30, 2021 and 2020, respectively, as a component of general and administrative expense. Deferred compensation relating to these restricted stock grants and deferred stock units to non-employee directors was $1,543,000 and $614,000 on June 30, 2021 and December 31, 2020, respectively, reported as a component of prepaid expenses and other assets on the accompanying Condensed Consolidated Balance Sheets.

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11.  Fair Value

Financial Instruments Carried at Fair Value

Derivative Financial Instruments

The Company uses interest rate swap and interest rate cap agreements to manage its interest rate risk. These instruments are carried at fair value in the Company's financial statements. In adjusting the fair value of its derivative contracts for the effect of counterparty nonperformance risk, the Company has considered the impact of its net position with a given counterparty, as well as any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group. As part of its on-going control procedures, the Company monitors the credit ratings of counterparties and the exposure of the Company to any single entity, thus reducing credit risk concentration. The Company believes the likelihood of realizing losses from counterparty nonperformance is remote. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, such as interest rate, term to maturity and volatility, the credit valuation adjustments associated with its derivatives use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of June 30, 2021, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined it is not significant. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.

The following table summarizes the consolidated derivative positions at June 30, 2021 (dollars in thousands):
Non-designated Hedges Cash Flow Hedges
Interest Rate Caps Interest Rate Swaps
Notional balance $ 410,950 $ 150,000
Weighted average interest rate (1) 1.6  % N/A
Weighted average swapped/capped interest rate 6.1  % 1.5  %
Earliest maturity date July 2021 September 2021
Latest maturity date February 2026 September 2021
____________________________________
(1)For debt hedged by interest rate caps, represents the weighted average interest rate on the hedged debt prior to any impact of the associated interest rate caps.

During the six months ended June 30, 2021, the Company terminated $150,000,000 of forward interest rate swap agreements for which hedge accounting was ceased in 2020, receiving a payment of $6,962,000. The Company recognized $2,894,000 of these proceeds as a gain in 2020, and $2,654,000 of these proceeds as a gain during the six months ended June 30, 2021 included in interest expense, net on the accompanying Condensed Consolidated Statements of Comprehensive Income.

In addition, during the three and six months ended June 30, 2021, the Company entered into $150,000,000 of new forward interest rate swap agreements executed to reduce the impact of variability in interest rates on a portion of the Company's expected debt issuance activity in 2021.

The Company is party to five derivatives not designated as hedges at June 30, 2021 for which the fair value changes for the three and six months ended June 30, 2021 and 2020 were not material.

The following table summarizes the deferred losses reclassified from accumulated other comprehensive loss as a component of interest expense, net (dollars in thousands):
For the three months ended For the six months ended
6/30/2021 6/30/2020 6/30/2021 6/30/2020
Cash flow hedge losses reclassified to earnings $ 2,366  $ 2,301  $ 4,733  $ 4,250 

The Company anticipates reclassifying approximately $9,467,000 of net hedging losses from accumulated other comprehensive loss into earnings within the next 12 months as an offset to the hedged item during this period.

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Redeemable Noncontrolling Interests

The Company issued units of limited partnership interest in a DownREIT which provides the DownREIT limited partners the ability to present all or some of their units for redemption for cash as determined by the partnership agreement. Under the DownREIT agreement, for each limited partnership unit, the limited partner is entitled to receive cash in the amount equal to the fair value of the Company's common stock on or about the date of redemption. In lieu of cash redemption, the Company may elect to exchange such units for an equal number of shares of the Company's common stock. The limited partnership units in the DownREIT are valued using the market price of the Company's common stock, a Level 1 price under the fair value hierarchy.

Financial Instruments Not Carried at Fair Value

Cash and Cash Equivalents

Cash and cash equivalent balances are held with various financial institutions within accounts designed to preserve principal. The Company monitors credit ratings of these financial institutions and the concentration of cash and cash equivalent balances with any one financial institution and believes the likelihood of realizing material losses related to cash and cash equivalent balances is remote. Cash and cash equivalents are carried at their face amounts, which reasonably approximate their fair values and are Level 1 within the fair value hierarchy.

Other Financial Instruments

Rents and other receivables and prepaid expenses, accounts and construction payable and accrued expenses and other liabilities are carried at their face amounts, which reasonably approximate their fair values.

Indebtedness

The Company values its fixed rate unsecured notes using quoted market prices, a Level 1 price within the fair value hierarchy. The Company values its mortgage notes payable, variable rate unsecured notes, Term Loans and outstanding amounts under the Credit Facility using a discounted cash flow analysis on the expected cash flows of each instrument. This analysis reflects the contractual terms of the instrument, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The process also considers credit valuation adjustments to appropriately reflect the Company's nonperformance risk. The Company has concluded that the value of its mortgage notes payable, variable rate unsecured notes, Term Loans and outstanding amounts under the Credit Facility are Level 2 prices as the majority of the inputs used to value its positions fall within Level 2 of the fair value hierarchy.

Financial Instruments Measured/Disclosed at Fair Value on a Recurring Basis

The following tables summarize the classification between the three levels of the fair value hierarchy of the Company's financial instruments measured/disclosed at fair value on a recurring basis (dollars in thousands):
6/30/2021
Description Total Fair Value Quoted Prices
in Active
Markets for Identical Asset
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Non Designated Hedges
Interest Rate Caps $ 97  $ —  $ 97  $ — 
Interest Rate Swaps - Assets 88  —  88  — 
Interest Rate Swaps - Liabilities (910) —  (910) — 
DownREIT units (1,565) (1,565) —  — 
Indebtedness
Fixed rate unsecured notes (7,061,205) (7,061,205) —  — 
Mortgage notes payable, variable rate unsecured notes
and Term Loans
(1,007,522) —  (1,007,522) — 
Total $ (8,071,017) $ (7,062,770) $ (1,008,247) $ — 
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12/31/2020
Description Total Fair Value Quoted Prices
in Active
Markets for Identical Asset
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Non Designated Hedges
Interest Rate Caps $ $ —  $ $ — 
Interest Rate Swaps - Assets 4,308  —  4,308  — 
DownREIT units (1,203) (1,203) —  — 
Indebtedness
Fixed rate unsecured notes (7,271,799) (7,271,799) —  — 
Mortgage notes payable, variable rate unsecured notes
and Term Loans
(1,043,976) —  (1,043,976) — 
Total $ (8,312,664) $ (7,273,002) $ (1,039,662) $ — 
12.  Subsequent Events

The Company has evaluated subsequent events through the date on which this Form 10-Q was filed, the date on which these financial statements were issued, and did not identify any items for disclosure.


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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide an understanding of our business, financial condition and results of operations. This MD&A should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under "Forward-Looking Statements" included in this report. Actual results or developments could differ materially from those projected in such statements as a result of the factors described under "Forward-Looking Statements" as well as the risk factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020 (the "Form 10-K") and in Part II, Item 1A. "Risk Factors" in this report.

Capitalized terms used without definition have the meanings provided elsewhere in this Form 10-Q.

Executive Overview

Business Description

We develop, redevelop, acquire, own and operate multifamily apartment communities in New England, the New York/New Jersey metro area, the Mid-Atlantic, Southeast Florida, Denver, Colorado, the Pacific Northwest, and Northern and Southern California. We are pursuing opportunities in new expansion markets of Dallas and Austin, Texas, and Charlotte and Raleigh-Durham, North Carolina. We focus on leading metropolitan areas that we believe historically have been characterized by growing employment in high wage sectors of the economy, higher cost of home ownership and a diverse and vibrant quality of life. We believe these market characteristics have offered and will continue in the future to offer the opportunity for superior risk-adjusted returns over the long-term on apartment community investments relative to other markets that do not have these characteristics. We seek to create long-term shareholder value by accessing capital on cost effective terms; deploying that capital to develop, redevelop and acquire apartment communities in our selected markets; leveraging our scale and competencies in technology and data science to operate apartment communities; and selling communities when they no longer meet our long-term investment strategy or when pricing is attractive.

Our strategic vision is to be the leading apartment company in select U.S. markets, providing a range of distinctive living experiences that customers value. We pursue this vision by targeting what we believe are among the best markets and submarkets, leveraging our strategic capabilities in market research and consumer insight and being disciplined in our capital allocation and balance sheet management. Our communities are predominately upscale and generally command among the highest rents in their markets. However, we also pursue the ownership and operation of apartment communities that target a variety of customer segments and price points, consistent with our goal of offering a broad range of products and services. We regularly evaluate the market allocation of our investments by current market value and share of total revenue and NOI, as well as relative asset value and submarket positioning.

Second Quarter 2021 Highlights

Net income attributable to common stockholders for the three months ended June 30, 2021 was $447,953,000, an increase of $277,125,000, or 162.2%, as compared to the prior year period. The increase is primarily due to an increase in gains on consolidated and unconsolidated real estate dispositions in the current year period and an increase in NOI from our Development communities, partially offset by a decrease in Same Store NOI.

Same Store NOI attributable to our apartment rental operations, including parking and other ancillary residential revenue ("Residential"), for the three months ended June 30, 2021 was $333,449,000, a decrease of $33,920,000, or 9.2%, from the prior year period. The decrease was due to a decrease in Residential rental revenues of $24,577,000, or 4.7%, as well as an increase in Residential property operating expenses of $9,187,000, or 6.0%, over the prior year period.


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COVID-19 Pandemic

We have taken various actions in response to the COVID-19 pandemic to adjust our business operations and to address the health and safety of our residents and associates. We adopted varying measures to help mitigate the financial impact arising from the national emergency on our residents, including providing flexible lease renewal options, creating payment plans for residents who are unable to pay their rent because they are impacted by this national emergency and, in certain jurisdictions, waiving late fees and certain other customary fees associated with apartment rentals. To the extent still implemented, we may discontinue these measures at any time except where required by law.

The impact on our consolidated results of operations from COVID-19 for 2021 and periods beyond will depend on the duration and severity of the pandemic, the effectiveness of vaccines and the rate of vaccination, the duration and nature of governmental responses to contain the spread of the disease and cushion the impact on consumers, the responses of consumers and businesses with respect to living and work preferences, and how quickly and to what extent normal economic and operating conditions can resume. The current and potential future impacts of the COVID-19 pandemic on our business, particularly on (i) rent levels, collectibility of rents, occupancy and the extent to which we waive certain other customary fees associated with our apartment rental business and (ii) development timing and volume, mean that our historical results of operations and financial condition may not be indicative of future results of operations and financial condition.

The COVID-19 pandemic continues to affect our rental operations including (i) revenues and expenses, as well as (ii) our collections and associated outstanding receivables. For further discussion see "Results of Operations." The following table presents the percentage of (i) apartment base rent charged to residents and (ii) other rentable items, including parking and storage rent, along with pet and other fees in accordance with residential leases, that has been collected ("Collected Residential Revenue") for our 2021 Same Store communities for the three months ended June 30, 2020, September 30, 2020, December 31, 2020, March 31, 2021 and June 30, 2021 (unaudited). Collected Residential Revenue excludes transactional and other fees.
  At quarter end (1)(2) At July 31, 2021 (3)(4)
Q2 2020 95.4% 98.3%
Q3 2020 95.1% 97.7%
Q4 2020 94.7% 97.3%
Q1 2021 94.7% 96.7%
Q2 2021 95.0% 96.1%
_________________________
(1)Collections presented reflect our 2021 Same Store communities and exclude commercial revenue, which was 0.6% and 1.1% of our 2020 and 2019 Same Store total revenue, respectively.
(2)The Collected Residential Revenue percentage as of June 30, 2020 for Q2 2020, September 30, 2020 for Q3 2020, December 31, 2020 for Q4 2020, March 31, 2021 for Q1 2021 and June 30, 2021 for Q1 2021, respectively.
(3)The percentage of Collected Residential Revenue as of July 31, 2021.
(4)Collected Residential Revenue for July 2021 as of July 31, 2021 was 93.4%.

The collection rates are based on individual resident activity as reflected in our property management systems and are presented to provide information about collections trends during the COVID-19 pandemic. Prior to the COVID-19 pandemic, the collections information provided was not routinely produced for internal use by senior management or publicly disclosed by the Company and is a result of analysis that is not subject to internal controls over financial reporting. This information is not prepared in accordance with GAAP, does not reflect GAAP revenue or cash flow metrics and may be subject to adjustment in preparing GAAP revenue and cash flow metrics. Additionally, this information should not be interpreted as predicting the Company’s financial performance, results of operations or liquidity for any period. At June 30, 2021, our outstanding rent receivable balance for residential and commercial tenants, net of reserves, decreased to $15,047,000 from $18,159,000 at December 31, 2020.

Second Quarter 2021 Development Highlights

At June 30, 2021, we owned or held a direct or indirect interest in:

14 wholly-owned communities under construction, which are expected to contain 3,988 apartment homes with a projected total capitalized cost of $1,553,000,000, and two unconsolidated communities under construction, which are expected to contain 803 apartment homes with a projected total capitalized cost of $386,000,000.

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Land or rights to land on which we expect to develop an additional 23 apartment communities that, if developed as expected, will contain 7,802 apartment homes and will be developed for an aggregate total capitalized cost of $3,120,000,000.

During the three months ended June 30, 2021, we sold six wholly-owned operating communities containing 1,309 apartment homes for $512,200,000, and our gain in accordance with GAAP was $334,572,000. In addition, we sold 16 residential condominiums at The Park Loggia, for gross proceeds of $38,392,000, resulting in a gain in accordance with GAAP of $575,000.

During the three months ended June 30, 2021, we acquired Avalon Arundel Crossing East, located in Linthicum Heights, MD, which is adjacent to our Avalon Arundel Crossing operating community. Avalon Arundel Crossing East contains 384 apartment homes and was acquired for a purchase price of $119,000,000.

Communities Overview

Our real estate investments consist primarily of current operating apartment communities, consolidated and unconsolidated communities in various stages of development ("Development" communities and "Unconsolidated Development" communities) and Development Rights (as defined below). Our current operating communities are further classified as Same Store communities, Other Stabilized communities, Lease-Up communities, Redevelopment communities and Unconsolidated communities. While we generally establish the classification of communities on an annual basis, we update the classification of communities during the calendar year to the extent that our plans with regard to the disposition or redevelopment of a community change. The following is a description of each category:

Current Communities are categorized as Same Store, Other Stabilized, Lease-Up, Redevelopment, or Unconsolidated according to the following attributes:

Same Store consists of consolidated communities in the markets where we have a significant presence (New England, New York/New Jersey, Mid-Atlantic, Southeast Florida, Denver, Colorado, Pacific Northwest, and Northern and Southern California), and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy as of the beginning of the respective prior year period. For the six month periods ended June 30, 2021 and 2020, Same Store communities are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2020, are not conducting or are not probable to conduct substantial redevelopment activities and are not held for sale as of June 30, 2021 or probable for disposition to unrelated third parties within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 90% physical occupancy or (ii)&n