AvalonBay Communities (AVB) M&A Announcement summary

Deal rationale and strategic fit

• Sale of a nine-property, 2,701-unit portfolio for $618.5 million enables focus on high-growth Texas Triangle assets, unlocks intrinsic value, and validates IFRS NAV, addressing public market mispricing.

• Strengthens governance by reducing legacy Class B unit holders' ownership, eliminating consent rights, and reducing trustee nomination rights.

• Supports asset rotation strategy, redeploying capital into higher growth opportunities in Houston and Dallas.

• Leverages management’s expertise in portfolio repositioning and value optimization.

• Increases scale in high-growth regions, supporting operating synergies and aligning with allocation priorities.

Financial terms and conditions

• Portfolio sold for $618.5 million: $187 million in cash for Austin assets, $431.5 million for Dallas assets ($193 million in cash, remainder in exchange/cancellation of up to 15 million Class B units or DownREIT Units valued at $225 per unit).

• Average sale price per unit is $229,000, with weighted average rent per home at $1,675 per month.

• Weighted average initial market cap rate projected in the high 4% range (Austin: 4.7%, Dallas: 5.2%).

• Sale covers about 30% of assets and 40% of portfolio market value, with a profit of over $2 per REIT unit.

• Closings subject to customary conditions and participation of additional holders of BSR Class B Units for Dallas Portfolio.

Synergies and expected cost savings

• Simplifies capital structure by reducing Class B unit ownership from 38% to 13% and board representation from three to one.

• Eliminates Class B veto rights, increasing nimbleness and effectiveness.

• Increased operating synergies anticipated as scale grows in Texas markets.

• Suburban garden communities expected to complement existing operations and development pipeline.

• Capital from the sale will be redeployed, with $190 million targeted for acquisitions in Houston and Dallas.