The moves, which the company says will not affect 15 apartment communities now under construction, follow a review of its operating and investment plan, from which it concluded that "that general deterioration in capital market conditions and the related decline in employment levels and credit availability are market conditions that do not support the development and construction of certain new apartment communities previously in planning."

The financial impact will be a non-cash impairment charge of $55 million to $65 million for the lost value in eight land parcels it owns that will not be developed, a non-cash charge of about $7 million for seven specific development rights for land under option agreement that will not proceed to development; and severance charges of about $3 million, all in the fourth quarter, the company said. The company did not reveal how many layoffs were related to the severance charge, but did say they would affect the company's construction and development divisions.

"The company does not anticipate starting any new development during the first half of 2009," it said. "Development starts in the second half of 2009, if any, will be evaluated based on the Company's then current assessment of economic and capital market conditions."

With regard to the 15 projects currently being built, AvalonBay says it plans to complete and construction and lease-up at a cost of approximately $683 million. The company's committed capital liquidity is projected to be approximately $1.1 billion as of December 31, 2008.

"These sources of financing together with retained cash from operations are adequate to fund current construction underway through completion as well as fund all debt maturities scheduled for 2009 and 2010," the company estimates.

Regardless, the company says it intends to arrange additional financings to add to the current level of committed capital. The company has approximately 100 unencumbered apartment communities available for future secured financing activity.

One of the 15 projects it presumably will not abandon is a mixed-use transit-oriented development on county-owned land surrounding the Pleasant Hill Bay Area Rapid Transit station in Pleasant Hill, CA. The $400-million project will replace surface parking lots with 522 residential units, a 270,000-square-foot office building and 35,000 square feet of retail. The developer is a public-private partnership consisting of AvalonBay, New York-based Millennium Partners, the San Francisco Bay Area Rapid Transit District and Contra Costa County. The company did not immediately return a phone call seeking comment.

Instant Insights /

AvalonBay Abandoning Projects, Reducing Staff

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