AvalonBay Communities, Inc. Announces 2012 Operating Results, Dividend Increase and Initial 2013 Fin

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AvalonBay Communities, Inc. Announces 2012 Operating Results, Dividend Increase and Initial 2013 Financial Outlook

ARLINGTON, Va.--(BUSINESS WIRE)-- AvalonBay Communities, Inc. (NYS: AVB) (the "Company") reported today that Net Income Attributable to Common Stockholders ("Net Income") for the quarter ended December 31, 2012 was $122,356,000. This resulted in Earnings per Share - diluted ("EPS") of $1.19 for the quarter ended December 31, 2012, compared to EPS of $3.38 for the comparable period of 2011, a decrease of 64.8%. For the year ended December 31, 2012, EPS was $4.32 compared to $4.87 for the comparable period of 2011, a decrease of 11.3%.


The decreases in EPS for the quarter and year ended December 31, 2012 from the prior year periods are due primarily to decreases in real estate asset sales and related gains coupled with capital markets activity and acquisition costs for the expected Archstone Acquisition (as defined below). These declines are offset in part by increases in Net Operating Income ("NOI") from existing and newly developed and acquired communities and a decline in net interest expense.

Funds from Operations attributable to common stockholders - diluted ("FFO") per share for the quarter ended December 31, 2012 increased 6.7% to $1.27 from $1.19 for the comparable period of 2011. FFO per share for the year ended December 31, 2012 increased 16.4% to $5.32 from $4.57 for 2011. Adjusting for the non-routine items in this release, FFO per share would have increased for the three months and full year ended December 31, 2012 by 15.9% and 18.5%, respectively over the comparable period in 2011.

The following table compares the Company's actual results for the quarter and year ended December 31, 2012 to the outlook provided in its third quarter 2012 earnings release in October 2012:

 
 Per Share
4Q12 2012
 
Projected FFO per share - October 2012 Outlook (1)$1.43$5.47
Archstone Acquisition related costs (2)(0.16)(0.14)
Superstorm Sandy expenses(0.01)(0.02)
Joint Venture promote and overhead 0.01  0.01 
FFO per share reported results$1.27 $5.32 
 

(1) Represents the mid-point of the Company's October 2012 Outlook.

(2) Consists primarily of impact of capital markets activity and professional fees related to the expected Archstone Acquisition.

Commenting on the Company's results, Tim Naughton, CEO and President, said, "Our fourth quarter results capped a year of solid performance marked by our second consecutive year of double-digit FFO growth. We expect apartment fundamentals to remain healthy in 2013 and in anticipation of continued growth in 2013 from our development platform, our current communities and the addition of the Archstone portfolio, our Board approved a 10.3% increase to our quarterly dividend."

Operating Results for the Quarter Ended December 31, 2012 Compared to the Prior Year Period

For the Company, including discontinued operations, total revenue increased by $20,249,000, or 7.9% to $275,772,000. For Established Communities, rental revenue increased 5.0%, attributable to increases in average rental rates of 4.7% and Economic Occupancy of 0.3%. As a result, total revenue for Established Communities increased $9,324,000 to $194,332,000. Operating expenses for Established Communities increased $1,672,000, or 3.0%, to $57,925,000. Accordingly, NOI for Established Communities increased by 5.9%, or $7,652,000, to $136,407,000.

The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the fourth quarter of 2012 compared to the fourth quarter of 2011:

 
Q4 2012 Compared to Q4 2011
   
RentalOperating% of
RevenueExpensesNOI

NOI(1)

 
New England3.1%3.9%2.7%18.9%
Metro NY/NJ4.8%(0.9%)7.5%30.8%
Mid-Atlantic1.8%5.6%0.5%12.3%
Pacific NW11.1%(6.1%)19.1%3.7%
No. California9.5%2.8%12.1%19.8%
So. California4.8%12.1%1.9%14.5%
Total5.0%3.0%5.9%100.0%
 

(1) Total represents each region's % of total NOI from the Company, including discontinued operations.

Operating Results for the Year Ended December 31, 2012 Compared to the Prior Year Period

For the Company, including discontinued operations, total revenue increased by $74,656,000, or 7.5% to $1,064,033,000. For Established Communities, rental revenue increased 5.8%, attributable to increases in average rental rates of 5.6% and Economic Occupancy of 0.2%. Total revenue for Established Communities increased $41,672,000 to $763,405,000. Operating expenses for Established Communities increased $4,106,000, or 1.8%, to $231,537,000. Accordingly, NOI for Established Communities increased by 7.6%, or $37,566,000, to $531,868,000.

The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities for the year ended December 31, 2012 as compared to the year ended December 31, 2011:

    
Full Year 2012 Compared to Full Year 2011
 
RentalOperating% of
RevenueExpensesNOI

NOI(1)

 
New England4.2%3.0%4.9%19.2%
Metro NY/NJ5.5%1.3%7.3%30.1%
Mid-Atlantic3.6%4.7%3.2%12.7%
Pacific NW9.6%(1.8%)15.0%3.7%
No. California10.1%0.7%14.0%19.8%
So. California4.9%0.6%7.0%14.5%
Total5.8%1.8%7.6%100.0%
 

(1) Total represents each region's % of total NOI from the Company, including discontinued operations.

Development and Redevelopment Activity

During the fourth quarter of 2012, the Company started the construction of three communities: Avalon Wharton, located in Wharton, NJ, Avalon Ossining, located in Ossining, NY, and AVA Little Tokyo, located in Los Angeles, CA. These three communities will contain 696 apartment homes when completed, and will be developed for an estimated Total Capital Cost of $202,800,000. During 2012, the Company started construction of 12 communities which will contain a total of 3,290 apartment homes for an expected aggregate Total Capital Cost of $891,300,000.

During the fourth quarter of 2012, the Company completed the development of two communities: Avalon Green II, located in Greenburgh, NY and Avalon at Wesmont Station I, located in Wood-Ridge, NJ. These two communities contain 710 apartment homes and were constructed for an aggregate Total Capital Cost of $166,100,000. During 2012, the Company completed the construction of eight communities containing 1,934 apartment homes for a Total Capital Cost of $513,100,000.

The Company also acquired four land parcels during the quarter ended December 31, 2012 for an aggregate purchase price of approximately $24,700,000. The Company has started or anticipates starting construction in 2013 on three of these land parcels.

During the fourth quarter of 2012, the Company commenced the redevelopment of two communities that contain 1,096 apartment homes and will be redeveloped for an estimated Total Capital Cost of $31,700,000, excluding costs incurred prior to redevelopment.

During the fourth quarter of 2012, the Company completed the redevelopment of four communities, two under our AVA brand and two under our Avalon brand. These communities contain 1,111 apartment homes and were redeveloped for an aggregate Total Capital Cost of $41,300,000, excluding costs incurred prior to redevelopment.

During 2012, the Company completed the redevelopment of eleven communities containing 2,903 apartment homes for a Total Capital Cost of $105,900,000, excluding costs incurred prior to redevelopment.

Archstone Acquisition

As disclosed in November 2012, the Company and Equity Residential Trust agreed to acquire all of the assets and assume all of the liabilities of Archstone Enterprise LP ("Archstone"). Under the Company's agreements related to this transaction, the Company will acquire, directly and indirectly, approximately 40% of the assets and assume 40% of the liabilities of Archstone (the "Archstone Acquisition").

The Company expects to provide the following consideration for the Archstone Acquisition:

  • the issuance of 14,889,706 shares of its common stock to Lehman Brothers Holdings Inc. ("Lehman");
  • cash payment of $669,000,000;
  • the assumption of indebtedness discussed under "2013 Financial Outlook";
  • an obligation to pay, when presented for redemption from time to time, approximately $132,200,000 in respect of the liquidation value of and accrued dividends on outstanding Archstone preferred units; and
  • the assumption of 40% of all other liabilities, known or unknown, of Archstone, other than certain excluded liabilities.

Acquisition Activity

During the fourth quarter of 2012, the Company acquired Eaves Burlington, located in Burlington, MA. Eaves Burlington is a garden-style community consisting of 203 apartment homes and was acquired for a purchase price of $40,250,000.

Disposition Activity

During the fourth quarter of 2012, the Company sold two communities: Avalon Wildreed and Avalon Highgrove, both located in Everett, WA. These communities, containing a total of 625 apartment homes, were sold for an aggregate sales price of $94,500,000. The dispositions resulted in an aggregate gain in accordance with GAAP of $50,080,000 and an Economic Gain of $28,735,000. The weighted average Initial Year Market Cap rate for these two communities was 5.3%, and the unleveraged IRR over a 12.2 year average holding period was 9.4%.

Also during the fourth quarter of 2012, AvalonBay Value Added Fund, L.P. ("Fund I"), a private discretionary real estate investment vehicle in which the Company holds an equity interest of approximately 15%, sold three communities: Avalon Paseo Place, located in Fremont, CA, Avalon Skyway, located in San Jose, CA, and Avalon at Aberdeen Station, located in Aberdeen, NJ. These communities, containing a total of 772 apartment homes, were sold for $187,150,000. The Company's share of the gain in accordance with GAAP was $6,501,000.

In conjunction with the disposition of these communities, Fund I repaid $89,142,000 of related secured indebtedness in advance of the scheduled maturity dates. This resulted in charges for prepayment penalties and a write off of deferred financing costs, of which the Company's portion was approximately $530,000, and was reported as a reduction of Joint Venture Income.

Additionally, in the fourth quarter of 2012, the Company recognized income from a residual profit interest of $1,857,000 related to the sale of a community in Kirkland, WA, which the Company had developed and managed for an unrelated third party.

In January 2013, Fund I sold Avalon Yerba Buena, located in San Francisco, CA. This community contains 160 apartment homes and 32,000 square feet of retail space, and was sold for $103,000,000.

Also, in January 2013, AvalonBay Value Added Fund II, L.P. ("Fund II") sold Avalon Rothbury, located in Gaithersburg, MD. Avalon Rothbury contains 205 apartment homes and was sold for $39,600,000.

Financing, Liquidity and Balance Sheet Statistics

In December 2012, the Company entered into an amendment to increase its borrowing capacity under its unsecured credit facility from $750,000,000 to $1,300,000,000. In addition, the Company extended the term of the credit facility from September 2015 to April 2017, with two further six month extension options available. As part of the amendment, the Company's current margin over LIBOR decreased from 1.075% to 1.05%, and its annual facility fee decreased from 17.5 basis points to 15.0 basis points.

At December 31, 2012, the Company had no amounts outstanding under its $1,300,000,000 unsecured credit facility.

At December 31, 2012, the Company had $2,783,651,000 in unrestricted cash and cash in escrow.

Unencumbered NOI as a percentage of total NOI generated by real estate assets for the year ended December 31, 2012 was 73%. Interest Coverage for the fourth quarter of 2012 was 4.7 times.

New Financing and Refinancing Activity

To pre-fund the expected Archstone Acquisition, the Company raised equity and debt in the fourth quarter of 2012 as summarized below.

  • The Company issued 16,675,000 shares of its common stock at a per share price of $130.00, resulting in net proceeds after fees and expenses of approximately $2,102,718,000.
  • The Company also issued $250,000,000 principal amount of unsecured notes under its existing shelf registration statement. The unsecured notes mature in March 2023 and were issued at a 2.85% coupon rate. The notes have an effective interest rate of 3.00%, including the effect of fees and expenses.

Separately, the Company repaid $201,600,000 principal amount of its 6.125% coupon unsecured notes pursuant to their scheduled maturity in November 2012.

First Quarter 2013 Dividend Declaration

The Company's Board of Directors declared a dividend for the first quarter of 2013 of $1.07 per share of the Company's common stock (par value of $0.01 per share). The declared dividend is a 10.3% increase over the Company's prior quarterly dividend of $0.97 per share. The dividend is payable on April 15, 2013 to common stockholders of record as of March 29, 2013.

In declaring the increased dividend, the Board of Directors evaluated the Company's past performance and future prospects for earnings growth. Additional factors considered in determining the increase included current common dividend distributions, the ratio of the current common dividend distribution to the Company's FFO, the relationship of dividend distributions to taxable income, distribution requirements under rules governing real estate investment trusts, and expected growth in taxable income.

2013 Financial Outlook

The following presents the Company's financial outlook for 2013, the details of which are summarized in the full Earnings Release. All amounts presented, unless otherwise indicated, include the impact of the expected Archstone Acquisition discussed in this release.

In setting operating expectations for 2013, management considered third party macroeconomic forecasts, local market conditions and performance at individual communities. Management expects continued, moderate economic growth for 2013. Positive annual rental revenue growth in our Established Communities is expected in all regions. Projected EPS is expected to be within a range of $2.28 to $2.64 for the full year 2013.

The Company expects 2013 Projected FFO per share to be in the range of $4.11 to $4.47 representing a 19.4% decrease from full year 2012 FFO per share of $5.32, at the midpoint of the range. This outlook for projected EPS and Projected FFO per share for 2013 includes the cash charge for transaction costs and prepayment fees from the repayment of assumed indebtedness associated with the Archstone Acquisition.

For the first quarter of 2013, the Company expects projected loss per share, diluted within a range of $1.31 to $1.27. The Company expects Projected FFO per share in the first quarter of 2013 to be a loss within a range of $0.66 to $0.62. This outlook includes the expected first quarter 2013 cash charge for transaction costs and prepayment fees from the repayment of assumed indebtedness associated with the Archstone Acquisition. The Company has assumed that substantially all of the transaction costs and prepayment penalties associated with the Archstone Acquisition will be incurred in the first quarter of 2013. The recognition of such charges is subject to uncertainty and may be recognized in future quarters.

The Company's 2013 financial outlook is based on a number of assumptions and estimates, which are provided in the full earnings release. The primary assumptions and estimates include the following:

Property Operations

  • The Company expects an increase in Established Communities' rental revenue of 3.5% to 5.0%.
  • The Company expects an increase in Established Communities' operating expenses of 3.0% to 4.0%.
  • The Company expects an increase in Established Communities' NOI of 4.0% to 5.5%.

Development

  • The Company currently has 23 communities under development and expects to acquire certain communities that Archstone currently has under development. Including development opportunities the Company expects to acquire from Archstone, the Company anticipates starting between $1,400,000,000 and $1,600,000,000 of new development during 2013.
  • The Company expects to disburse between $1,200,000,000 and $1,400,000,000 related to current and expected development communities including the incremental spend for Archstone development communities the Company expects to acquire, and the cost of acquiring land for future development.
  • The Company expects to complete the development of nine communities currently under construction and one community currently being constructed by Archstone for an aggregate Total Capital Cost of approximately $575,000,000.

Redevelopment Activity

The Company currently has five communities under redevelopment and expects to invest between $75,000,000 and $125,000,000 in its redevelopment communities during 2013.

Acquisition & Disposition Activity

The Company expects to complete the Archstone Acquisition during the first quarter of 2013, and expects the acquisition will consist primarily of direct and indirect interests in operating and development communities as discussed by the Company in its November 26, 2012 press release.

The final composition of assets, both wholly owned and those owned through joint ventures, that the Company will acquire under the Archstone Acquisition is subject to change through and up to the closing of the expected acquisition.

In addition to the communities it expects to acquire as part of the Archstone Acquisition and excluding transactions that have closed and are discussed in this Earnings Release, the Company expects to be active in both acquisition and disposition activity for its wholly owned portfolio in 2013. This activity, detailed in the following paragraphs, pertains primarily to continued portfolio shaping and repositioning and considers the impact of communities we expect to acquire as part of the Archstone Acquisition.

  • The Company anticipates selling approximately $700,000,000 of operating communities. The Company's expected sales for 2013 include approximately $300,000,000 of operating communities that we expect to either acquire as part of the Archstone Acquisition and sell immediately following the Archstone Acquisition, or which will be sold prior to the Archstone Acquisition.
  • The Company expects to acquire approximately $300,000,000 of operating communities in addition to the Archstone Acquisition.
  • The Company expects Fund I to continue to sell operating communities, with an additional $150,000,000 of planned sales in 2013, of which the Company's indirect ownership interest is approximately 15%.

Capital Markets

The Company expects to assume indebtedness under the Archstone Acquisition with a fair value of approximately $4,100,000,000, consisting of $3,700,000,000 principal amount for consolidated borrowings, $238,300,000 principal amount for our proportionate share of debt related to unconsolidated joint ventures, and $197,500,000 representing the amount by which the fair value of the aforementioned debt exceeds the principal face value. The Company expects to repay approximately $1,700,000,000 principal amount of this assumed indebtedness concurrent with or immediately following the Archstone Acquisition.

In addition to the common shares the Company expects to issue to Lehman and the net amount of indebtedness the Company expects to assume in conjunction with the Archstone Acquisition, the Company expects to raise between $700,000,000 and $900,000,000 of new capital in 2013.

Based on changes in the Company's capital markets outlook for 2013, coupled with its current liquidity position, a previously planned 2013 debt issuance subject to an interest rate protection agreement put in place in 2011 is no longer anticipated to occur. As a result the Company anticipates recognizing a charge of approximately $55,000,000 in 2013, as reflected in its 2013 outlook.

Impact of Archstone Acquisition

The Company's outlook includes the expected operating results from the Archstone Acquisition for the 10 months of 2013 subsequent to the expected acquisition on March 1, 2013. In addition, the Company's 2013 outlook includes the following impacts of its actual and expected capital markets activity associated with the Archstone Acquisition:

  • Issuance of common stock in November 2012, that will be outstanding for the full year 2013,
  • expected issuance of common shares to Lehman on March 1, 2013, which will be outstanding for one month in the first quarter of 2013 and for 10 months during 2013, and
  • interest recognized on the $250 million of debt securities issued in December 2012.

The expected Archstone Acquisition also includes several non-routine charges that are included in the Company's 2013 outlook as discussed in this release. The table below details the expected non-routine items included in the Company's 2013 outlook, which are predominantly those expected to be incurred as a result of the Archstone Acquisition.

      

Projected FFO / Share

1Q132013
 

Projected FFO per share (1)

$(0.64)$4.29
 

Non-routine items (estimated):

 
Acquisition and other non-routine costs1.030.99

Debt prepayment penalties and hedge unwind

0.940.87
  
 

Projected FFO per share after non-routine items (2)

$1.33 $6.15

 

(1) Represents the mid-point of the Company's 2013 outlook.

(2) If the Company had not entered into the Archstone Acquisition agreement and not incurred the related pursuit costs and capital markets activity, the Company estimates that its Projected FFO per share for 2013 would have been $5.90.

First Quarter 2013 Conference Schedule

Management is scheduled to present at Citi's Global Property CEO Conference from March 3 - 6, 2013. Management may discuss the Company's current operating environment; operating trends; development, redevelopment, disposition and acquisition activity; financial outlook; portfolio strategy and other business and financial matters affecting the Company. Details on how to access a webcast of the Company's presentation will be available in advance of the conference event at the Company's website at http://www.avalonbay.com/events.

Other Matters

The Company will hold a conference call on January 31, 2013 at 1:00 PM ET to review and answer questions about this release, its fourth quarter and full year 2012 results, the Attachments (described below) and related matters. To participate on the call, dial 877-510-2397 domestically and 763-416-6924 internationally, and use Conference ID: 86328657.

To hear a replay of the call, which will be available from January 31, 2013 at 5:00 PM ET to February 6, 2013 at 11:59 PM ET, dial 855-859-2056 domestically and 404-537-3406 internationally, and use Access Code: 86328657. A webcast of the conference call will also be available at http://www.avalonbay.com/earnings, and an on-line playback of the webcast will be available for at least 30 days following the call.

The Company produces Earnings Release Attachments (the "Attachments") that provide detailed information regarding operating, development, redevelopment, disposition and acquisition activity. These Attachments are considered a part of this earnings release and are available in full with this earnings release via the Company's website at http://www.avalonbay.com/earnings. To receive future press releases via e-mail, please submit a request through http://www.avalonbay.com/email.

About AvalonBay Communities, Inc.

As of December 31, 2012, the Company owned or held a direct or indirect ownership interest in 203 apartment communities containing 59,391 apartment homes in nine states and the District of Columbia, of which 23 communities were under construction and five communities were under reconstruction. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in high barrier-to-entry markets of the United States. More information may be found on the Company's website at http://www.avalonbay.com. For additional information, please contact Jason Reilley, Director of Investor Relations at 1-703-317-4681.

Forward-Looking Statements

This release, including its Attachments, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by the Company's use of words such as "expects," "plans," "estimates," "anticipates," "projects," "intends," "believes," "outlook" and similar expressions that do not relate to historical matters. Actual results may differ materially from those expressed or implied by the forward-looking statements as a result of risks and uncertainties, which include the following: we may abandon development or redevelopment opportunities for which we have already incurred costs; adverse capital market conditions may affect our access to various sources of capital and/or cost of capital, which may affect our business activities, earnings and common stock price, among other things; changes in local employment conditions, demand for apartment homes, supply of competitive housing products, and other economic conditions may result in lower than expected occupancy and/or rental rates and adversely affect the profitability of our communities; delays in completing development, redevelopment and/or lease-up may result in increased financing and construction costs and may delay and/or reduce the profitability of a community; debt and/or equity financing for development, redevelopment or acquisitions of communities may not be available or may not be available on favorable terms; we may be unable to obtain, or experience delays in obtaining, necessary governmental permits and authorizations; and increases in costs of materials, labor or other expenses may result in communities that we develop or redevelop failing to achieve expected profitability.

In addition, any forward-looking statements or forecasts relating to the business, prospects, operating statistics or financial results that relate to or may be expected to result from the Archstone Acquisition are based on expectations, forecasts and assumptions that are inherently speculative and are subject to substantial risks and uncertainties, many of which we cannot predict with accuracy and some of which we may not have anticipated. As a result, the actual operating statistics and financial results that relate to or may be expected to result from the Archstone Acquisition may differ materially from the Company's forecasts. Risks, uncertainties and other factors related to the Archstone Acquisition that might cause such differences include, among other things, the following: the Archstone Acquisition may not close at the time or on the terms that we currently expect; assumptions concerning the availability and/or terms of financing, including among other things obtaining lender consents to the assumption of indebtedness related to the Archstone Acquisition may not be realized; obtaining joint venture partner consents to the assumption of partnership interest related to the Archstone Acquisitions may not be realized; we may not be able to integrate the assets and operations acquired in the Archstone Acquisition in a manner consistent with our assumptions and/or we may fail to achieve expected efficiencies and synergies; we may encounter liabilities related to the Archstone Acquisition for which we may be responsible that were unknown to us at the time we agreed to the Archstone Acquisition or at the time of this release; and our assumptions concerning risks relating to our lack of control of joint ventures and our ability to successfully dispose of certain assets may not be realized.

Additional discussions of risks and uncertainties appear in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 under the heading "Risk Factors," under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements," and in other disclosures contained in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including but not limited to our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 26, 2012. The Company does not undertake a duty to update forward-looking statements, including its expected 2013 operating results and other financial data forecasts contained in this release (including, without limitation, forward-looking statements in this release relating to the Archstone Acquisition). The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this release.

Definitions and Reconciliations

Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and further explained on Attachment 17, "Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms." Attachment 17 is included in the full earnings release available at the Company's website at http://www.avalonbay.com/earnings. This wire distribution includes only definitions and reconciliations of the following non-GAAP financial measures:

FFO is determined based on a definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO is calculated by the Company as Net income or loss attributable to common stockholders computed in accordance with GAAP, adjusted for gains or losses on sales of previously depreciated operating communities, extraordinary gains or losses (as defined by GAAP), cumulative effect of a change in accounting principle, impairment write-downs of depreciable real estate assets, write-downs of investments in affiliates which are driven by a decrease in the value of depreciable real estate assets held by the affiliate and depreciation of real estate assets, including adjustments for unconsolidated partnerships and joint ventures. Management generally considers FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses related to dispositions of previously depreciated operating communities and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or as compared to different companies. A reconciliation of FFO to Net income attributable to common stockholders is as follows (dollars in thousands):

 
 
   
Q4 Q4Full YearFull Year
2012 2011 2012 2011 
 

Net income attributable to common stockholders

$122,356$323,085$423,869$441,622

Depreciation - real estate assets, including discontinued operations and joint venture adjustments

66,036

65,053265,627256,986

Distributions to noncontrolling interests, including discontinued operations

772827

Gain on sale of unconsolidated entities holding previously depreciated real estate assets

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