<PAGE>
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[Photo of Avalon Crescent, McLean, VA]
AvalonBay
---------
[Photo of Avalon on the [Photo of Tower at Avalon
Alameda, San Jose, CA] Cove, Jersey City, NJ]
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FORWARD-LOOKING STATEMENTS
AND QUALIFICATIONS
This presentation and the accompanying appendix contain 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 forward-looking statements by use of words such as
"believe," "expect," "anticipate," "intend," "estimate," "assume," and other
similar expressions that predict or indicate future events and trends; in
addition, statements that do not relate to the reporting of historical
matters and that do not report facts about present matters are
forward-looking statements. The forward-looking statements contained in this
presentation are subject to many risks and uncertainties. These risks and
uncertainties include the following: (i) both generally and in our markets,
demand for apartment homes may change, economic conditions (including
employment and income levels) may change, and competition (including an
increase in the supply of apartments) and competitive pricing may increase,
and these changes could affect our occupancy and rental rates; (ii)
construction costs could increase, financing may become more expensive or
difficult, and the cost of operating our communities or our organization
could increase, and these changes could reduce our earnings and cash flow;
and (iii) projections regarding population and income trends could prove to
be wrong, or the suggested effect of such trends could prove to be wrong, and
therefore investors should be cautious in relying on the analyses of such
trends that are presented in this report. Additional risks and uncertainties
affecting the Company are detailed in AvalonBay's filings with the Securities
and Exchange Commission, including AvalonBay's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Forward-Looking Statements" and elsewhere in that report and in subsequent
reports on Form 10-Q and Form 8-K.
This presentation contains projections and statements regarding trends in the
multifamily real estate industry. By their nature, there can be no assurance
as to how accurate these projections will be, and other observers of the
multifamily real estate industry could discern different trends or draw
different conclusions from these trends. This report includes data and
projections prepared by third parties. AvalonBay does not endorse or confirm
such data and projections and is not suggesting that the sources of those
projections are experts. Additional cautions apply to data and projections
prepared by third parties, because AvalonBay cannot independently verify
these data and projections. In general, it is unlikely that any two analysts
would produce identical data and projections.
Readers should review this presentation in conjunction with a review of
AvalonBay's Form 10-K for the fiscal year ended December 31, 1999 and subsequent
reports on Form 10-Q and Form 8-K.
Page 2
<PAGE>
Important Notes
Because this presentation was prepared as a slide show, the text on each page
was kept to a minimum to facilitate visual communication and to emphasize major
points. There is an appendix to this presentation that contains important
explanations regarding the sources, interpretations and qualifications that
relate to statements made in the presentation. This appendix also contains
important descriptive material that will assist persons who are reading this
presentation. Readers are urged to read the appendix as part of their review of
this report.
This presentation is dated October 23, 2000, and the information and analyses
presented should be read as of that date with the understanding that AvalonBay
is not undertaking to update this presentation or the third party data and
projections included in this presentation.
Page 3
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AvalonBay Table of Contents
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o Introduction
o Economic and Multifamily Industry Outlook
o Competitive Environment
o AvalonBay Customer Profile and Demographic Trends
o AvalonBay Strategy
o New Business Opportunities
o Summary
Page 4
<PAGE>
AvalonBay
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Introduction
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Page 5
<PAGE>
AvalonBay Introduction
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1998 Strategic Plan "A View to 2000 and Beyond":
o Important "compass" to newly merged company:
- Focus on market concentration
- Focus on recycling of capital
- Focus on development competencies
- Focus on balance sheet strength
o Strong results: AVB Multifamily Peer Group
----- ----------------------
- SSS NOI(1) 9.2% 5.9%
- FFO/share(2) 13.0% 8.3%
- Total shareholder return(3) 45.9% 17.1%
- Annual NAV growth(4) 13.3% 7.7%
(1) 2000 thru Second Quarter
(2) 2000 Estimate
(3) YTD thru October 13, 2000
(4) June 1998 thru June 2000
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Page 6
<PAGE>
AvalonBay Introduction
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Why Revisit Plan?
o Reflect changes in context:
- Economic
- Demographic
- Competitive
o Offensive: Capitalize on opportunities
o Defensive: Prepare for new challenges
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AvalonBay Introduction
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Strategic Plan Summary
o Not a radical change
o Recommit to core aspects of existing plan
o Challenge organization to capitalize on new opportunities
o Evaluate breadth of strategic commitment
- Geographic Market Focus
- Targeted Customer Segments
- Product and Service Offerings
[down arrow]
"Resident focused - Market leader"
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Page 8
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AvalonBay
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Economic and Multifamily
Industry Outlook
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Page 9
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AvalonBay Economic and Multifamily Industry Outlook
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Summary
o Economic growth is moderating; the "soft landing" appears to be taking hold;
o Stable occupancies, solid returns, and informed capital flows should result
in a sustained period of equilibrium for the real estate industry;
o The multifamily sector should continue to remain healthy over the near term,
with many AvalonBay markets leading the way.
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AvalonBay Economic and Multifamily Industry Outlook
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o The current expansion is now in its 110th month. It is projected to
decelerate in the latter part of 2000 and through 2001 toward a "soft
landing";
[The following table was depicted as a line graph in the printed material.]
Real GDP Growth
1995-2004
Year Growth
---- ------
1995 2.7%
1996 3.6%
1997 4.4%
1998 4.4%
1999 4.2%
2000 4.3%
2001 3.2%
2002 3.0%
2003 2.9%
2004 3.0%
o Occupancy rates are at high levels nationally. AvalonBay markets have
consistently outperformed the national average.
[The following table was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Occupancy Rate
--------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AvalonBay Market Average 95.2% 95.0% 95.8% 95.2% 95.8% 96.3% 96.8% 97.2% 97.4% 97.7% 97.5% 97.1% 96.9% 96.5% 96.2%
US Average 93.5% 93.5% 94.4% 94.7% 95.2% 95.7% 95.8% 96.0% 96.1% 96.2% 95.8% 95.8% 95.3% 95.0% 94.8%
</TABLE>
Source: RFA/Economy.com, REIS Reports
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AvalonBay Economic and Multifamily Industry Outlook
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o Rents have continued to accelerate through the current expansion, a trend
that is even more pronounced in our markets.
[The following table was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Average Rental Growth
---------------------
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AvalonBay Market Average 1.7% 1.6% 2.2% 4.1% 6.8% 6.0% 5.6% 8.3% 6.6% 5.7% 5.2% 5.0% 4.8%
US Average 1.8% 2.1% 2.6% 3.5% 4.6% 4.8% 4.3% 6.1% 5.6% 5.1% 4.6% 4.3% 4.1%
</TABLE>
o While home ownership rates have risen to record levels, home affordability
remains out of reach for more households in AvalonBay's markets compared to
the national average.
[Bar chart titled "Home Affordability". Chart indicates that AVB Market Average
is 50% and US Average is 63%.]
Source: REIS Reports, NAHB
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AvalonBay Economic and Multifamily Industry Outlook
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AvalonBay is active in 12 of the top 13 markets nationwide. We derive over 81%
of our NOI from these markets(1).
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Metropolitan Area AVB Presence
--------------------------------------------------------------------------------
1. Orange County, CA x
2. Oakland, CA x
3. San Francisco, CA x
4. Boston, MA x
5. San Diego, CA x
6. San Jose, CA x
7. Nassau-Suffolk (Long Island), NY x
8. New York, NY x
9. Riverside, CA
10. Los Angeles, CA x
11. Newark - Northern New Jersey, NJ x
12. Washington, DC x
13. Central New Jersey, NY x
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Source: National Real Estate Index - Second Quarter 2000 Apartment Market
Rankings.
(1) Based on second quarter 2000 net operating income.
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AvalonBay
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Competitive Environment
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Page 14
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AvalonBay Competitive Environment
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Trends
o Greater competition in AvalonBay markets
o Increased activity in infill development
o Product line expansion
o Additional customized service programs
o Emphasis on branding initiatives
o Increased level of prospect traffic from the Internet
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AvalonBay Competitive Environment
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Our current business model is characterized by:
o Developing communities in high barrier markets;
o Offering high quality, diverse product, e.g. garden and townhome, high
density wood frame, high rise;
o Targeting the discretionary renter;
o Expanding service programs;
o Applying technology to support strategic plan.
[Pie chart titled "AVB Development Mix". Chart indicates the following
breakdown: Garden and Townhome - 48%; High Rise - 17%; High Density - 35%.]
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AvalonBay Competitive Environment
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Key strengths which set us apart from our competitors include
o Balance between centralized support and local product delivery, managed
through a decentralized operating model
o Strength of our markets
o Market share leader in most of our markets
o Conservative balance sheet management
o Application of technology
o Seasoned local development expertise
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Page 17
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AvalonBay
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AvalonBay Customer Profile and
Multifamily
Demographic Trends
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Page 18
<PAGE>
AvalonBay Multifamily Demographic Trends
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Trends
o The renter population is becoming increasingly diverse in terms of age,
income and household type
o Needs and expectations of these different segments vary, creating
opportunities for AVB to:
- Extend products and services
- Develop new, more targeted products and services
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Page 19
<PAGE>
AvalonBay Multifamily Demographic Trends
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Occupation and Education Profile
--------------------------------------------------------------------------------
Our current resident profile fits the definition of the discretionary or
"lifestyle" renter.
-------------------------------------------
AVB Renter
-------------------------------------------
Average Household Income $85,000
-------------------------------------------
Occupation
-------------------------------------------
Hi Tech 36%
-------------------------------------------
Services 23%
-------------------------------------------
Finance 15%
-------------------------------------------
Subtotal 74%
-------------------------------------------
Education
-------------------------------------------
Attended College 87%
-------------------------------------------
College Graduate 71%
-------------------------------------------
Advanced Degree 26%
-------------------------------------------
Previous Residence
-------------------------------------------
Rental Apartment 55%
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Rental Home/Condo 14%
-------------------------------------------
Owned Home/Condo 31%(1)
-------------------------------------------
(1) 54% for those over 45 years old
Source: AVB Resident Survey (May 2000)
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AvalonBay Multifamily Demographic Trends
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Net Rental Household Growth by Age Cohort
--------------------------------------------------------------------------------
Rental household growth over the next 10 years will be generated by "empty
nester" baby boomers and by "echo boomers" under 25. This trend will result in a
renter population that is increasingly diverse.
[The following table was depicted as a bar chart in the printed material.]
Renter Household Growth by Age Segment
--------------------------------------
Age Segment Under 25 26-35 36-45 46-55 56-65 66+
----------- -------- ----- ----- ----- ----- ---
(thousands)
1990-2000 134 -703 616 705 94 -200
2000-2010 858 87 -889 1257 1390 686
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Source: U.S. Census Bureau
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AvalonBay Multifamily Demographic Trends
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Net Rental Household Growth by Income Distribution
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Strong rental household growth in the over $50K income distribution is expected
to continue with the emergence of the "empty nester" segment, driving demand for
new product and increasing levels of service.
--------------------------------------------------------------------------------
US Renter Annual
AVB Household Growth
Income Residents Increase (1) Rate
Segment 2000 2000 - 2010 2000 - 2010
--------------------------------------------------------------------------------
less than $25K 6.7% 680 0.4%
$25-$50K 20.7% 1,201 1.1%
$50K-$75K 24.4% 782 1.8%
$75K-$100K 20.3% 379 2.5%
greater than $100K 27.9% 346 2.8%
--------------------------------------------------------------------------------
Total 100% 3,388 1.0%
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(1) in thousands
Sources: RFA/Economy.com and AVB Resident Survey (May 2000)
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<PAGE>
AvalonBay Multifamily Demographic Trends
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Net Rental Household Growth by Household Type
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Growth in single households and married couples without children will fuel
rental housing demand over the next 10 years.
-------------------------------------------------------------------------------
US Renter
AVB Household
Household Residents Increase(1)
Type 2000 2000 - 2010
-------------------------------------------------------------------------------
Single 32.6% 2,228
Married w/out Children 21.9% 658
Married w/ Children 12.9% -380
Single Parents 3.8% 233
Other Family HH 8.1% 337
Other Nonfamily 20.7% 312
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Total(1) 100% 3,388
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(1) in thousands
Sources: US Census Bureau and AVB Resident Survey (May 2000)
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Page 23
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AvalonBay
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AvalonBay Strategy
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Page 24
<PAGE>
AvalonBay AvalonBay Strategy
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Customer Strategy
o Focus on the discretionary renter
o Develop more targeted product/service offerings
o Continue the evolution of consistent delivery of customer-focused products
and services
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Page 25
<PAGE>
AvalonBay AvalonBay Strategy
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Growth Strategy
o Market/Product Expansion
- Expand market share in existing markets through development
capabilities
- Extend existing product lines to established markets
- Extend product lines to emerging growth segments
- Establish new product lines that appeal to both existing AVB primary
segments and emerging segments
o Service Expansion
- Technology/Telecommunication
- Concierge Services
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<PAGE>
AvalonBay AvalonBay Strategy
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Investment Strategy
o Focus on development in most attractive markets
o Recycle capital via dispositions to development
o 1031 Exchange to re-deploy capital into chosen markets
Capital Formation Strategy
o Maximize retained cash flow
o Maintain conservative balance sheet
o No unfunded commitments
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Page 27
<PAGE>
AvalonBay AvalonBay Strategy
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Organizational Strategy
o Reinforce regional business model
- Recruiting
- Training
- Compensation
o Encourage movement and re-allocation of human resources
o Incubate new ideas centrally; rollout via decentralized model
o Enhance support functions that further our strategic objectives, e.g.
marketing, research, technology, recruiting, training
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Page 28
<PAGE>
AvalonBay AvalonBay Strategy
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Technology Strategy
o Build, or buy technology that enhances current business practices or supports
strategic plan
o Provide technology solutions that enhance residents' lives
o Not an incubator of technology
Preparedness Strategy
o Researched and selected proprietary trip wires that predict adverse
conditions
o Institutionalized via balanced scorecard
o Leads to preordained, staged response
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Page 29
<PAGE>
AvalonBay
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New Business Opportunities
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Page 30
<PAGE>
AvalonBay New Business Opportunities
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Strategic Criteria
Strategic criteria are used to screen strategic alternatives being considered.
Each proposed strategic initiative should align with and be supported by the
strategic criteria.
--------------------------------------------------------------------------------
Strategic Criteria
--------------------------------------------------------------------------------
o Consistent with Vision Statement/Core Values
o Supports the Brand
o Leverage Existing Core Competencies
o Impact on Financial Flexibility/Strength
o Impact on FFO/Share Growth
o Understanding of Target Customer (e.g., Discretionary Renters)
o Effect on Corporate Culture
o Risk/Reward Balance
o Human Resource Requirement
o Impact on NAV Growth
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Page 31
<PAGE>
AvalonBay New Business Opportunities
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Strategic Direction and Potential Initiatives
We have identified several strategic initiatives to be studied given our
strategic objectives, demographic trends, the current environment, and our
competitive position in the market over the next several years.
----------------------------------------------------------------
<TABLE>
<CAPTION>
New Expand Invent
<S> <C> <C>
o [In the printed materials, the phrase o [In the printed materials, the phrases
"New Markets" appeared here with a slash "Senior Housing," "Student Housing" and
through it indicating that AvalonBay does "For Sale Condo" appeared here with
not intend to continue at this time slashes through them indicating that
serious study of expansion into new AvalonBay does not intend to continue
geographic markets.] at this time serious study of expansion
into these market segments.]
</TABLE>
Markets
(Geography
/ Segment) ----------------------------------------------------------------
[up arrow]
Existing Improve Extend
o Jvalon o Mixed Use
o Technology Enhancements o Echoboomer Product
o Customer Knowledge o Empty Nester Product
o Concierge Services
o Corporate Furnished Apartments
----------------------------------------------------------------
Existing New
Products / Services [right arrow]
Page 32
<PAGE>
AvalonBay
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Summary
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Page 33
<PAGE>
AvalonBay Summary
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o AVB's current strategy and business model is well-positioned given an
assessment of economic, demographic and competitive trends
o Current Strategic Plan:
- Recommit to core aspects of existing plan
- Challenge organization to capitalize on emerging opportunities
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Page 34
<PAGE>
AvalonBay Summary
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Implications
------------
Current Future
------- ------
Markets ============= [right arrow] [left arrow] Consolidate
Customers ======= [left arrow] [right arrow] Broaden
Products and ======= [left arrow] [right arrow] Extend/Expand
Services
[down arrow]
"Resident Focused - Market Leader"
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Page 35
<PAGE>
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[Photo of Avalon Crescent, McLean, VA]
AvalonBay
---------
[Photo of Avalon on the [Photo of Tower at Avalon
Alameda, San Jose, CA] Cove, Jersey City, NJ]
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Page 36
<PAGE>
APPENDIX
Page 6 (1998 Strategic Plan):
Avalon Properties, Inc. merged in June 1998 with and into Bay Apartment
Communities, Inc., and the name of Bay Apartment Communities, Inc. was
changed to AvalonBay Communities, Inc. This page first discusses the areas
that management focused on after the merger. "Recycling of capital" refers to
the reinvestment of the cash proceeds from a sale of a community. The page
then gives information regarding certain quantitative measures, and compares
those measures to a peer group consisting of Archstone Communities Trust,
Apartment Investment and Management Company, BRE Properties, Inc., Camden
Property Trust, Equity Residential Properties Trust, Gables Residential
Trust, Post Properties, Inc., Charles E. Smith Residential Realty, Inc., and
United Dominion Realty Trust, Inc. Peer group measures are simple averages of
the measure for each of the nine companies in the peer group. The sources for
the measures are described below (AvalonBay calculated the average for the
peer group based on the reported measures).
FFO refers to "Funds from Operations." We consider Funds from Operations to be
an appropriate measure of our operating performance because it helps investors
understand our ability to incur and service debt and to make capital
expenditures. We believe that to understand our operating results, FFO should be
examined with net income as presented in our publicly filed Forms 10-K and 10-Q.
FFO is determined based on a definition adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts(R) (NAREIT) in October
1999, and is defined as:
- net income or loss computed in accordance with generally accepted
accounting principles (GAAP), except that excluded from net income or
loss are gains or losses on sales of property and extraordinary (as
defined by GAAP) gains or losses on debt restructuring;
- plus depreciation of real estate assets; and
- after adjustments for unconsolidated partnerships and joint ventures.
FFO does not represent cash generated from operating activities in accordance
with GAAP. Therefore it should not be considered an alternative to net income as
an indication of our performance. FFO should also not be considered an
alternative to net cash flows from operating activities as determined by GAAP as
a measure of liquidity. Additionally, it is not necessarily indicative of cash
available to fund cash needs. Further, FFO as calculated by other REITs may not
be comparable to our calculation of FFO.
The FFO per share numbers used in this presentation represent estimates of the
FFO per share for the year 2000. These estimates, for both AvalonBay and the
peer group, were reported by Salomon Smith Barney in "The Hunter" report dated
October 13, 2000. The estimates are forward-looking statements. The Company does
not endorse or confirm these estimates. Other analysts could have different
estimates.
SSS NOI refers to "same store net operating income." "Same store net
operating income" is the net operating income, for the six months ended June
30, 2000, of communities that were fully stabilized prior to December 31,
1998, such that a comparison of the net operating income of those communities
for the first six months of 2000 to the net operating income of those
communities for the first six months of 1999 is meaningful. Net operating
income of a community is defined as that community's gross community-level
earnings before interest, income taxes (if any), depreciation, amortization
and extraordinary items, minus direct operating expenses. Net operating
income of a community does not include either a management fee or any
allocation of corporate overhead and is not a measure that can be determined
in accordance with generally accepted accounting principles ("GAAP"). Net
operating income of a community should not be considered as an alternative to
operating income, as determined in accordance with GAAP, as an indicator of
Page A-1
<PAGE>
a company's or a community's operating performance, or to cash flows from
operating activities (as determined in accordance with GAAP) as a measure of
liquidity. Different companies and different analysts may calculate the net
operating income of a community or group of communities differently. The SSS
NOI presented for AvalonBay and the peer group were reported by Green Street
Advisors, Inc. in a special report dated August 7, 2000, titled "NAV Growth
-- A Meaningful Performance Yardstick." These figures are estimates prepared
by Green Street. The Company does not endorse or confirm this data.
Total shareholder return refers to the total investment return, through
October 13, 2000, to a stockholder who purchased a share of stock on January
1, 2000, as reported for AvalonBay and the peer group by Salomon Smith Barney
in "The Hunter" report dated October 13, 2000.
NAV refers to "net asset value." Net asset value, which cannot be determined
with precision, is the estimated amount of net proceeds (i.e., after repayment
of all debt and other liabilities) from the sale of a real estate company's
assets if the assets were sold off individually at their current estimated fair
market values. The NAV growth presented was reported by Green Street Advisors in
its NAV Report dated August 7, 2000, and represents estimated annual NAV growth
from June 30, 1998 through June 30, 2000. The Company does not endorse or
confirm this data, and other analysts could estimate different net assets values
and NAV growths. NAV cannot be determined under GAAP and should not be used as a
measure of the Company's financial condition or performance, nor as an indicator
of the present or future value of the Company's securities.
Page 7 (Why Revisit Plan):
This page explains that AvalonBay decided to re-examine the areas it is focusing
on because of changes AvalonBay perceived in economic, demographic and
competitive market conditions.
Page 10 (Summary):
The statements made on this page are forward-looking statements and reflect the
current view of senior management of AvalonBay regarding trends in the general
economy and the real estate industry.
Page 11 (Economic and Multifamily Industry Outlook):
The information regarding Real GDP Growth was obtained from the "Precis Metro
report" dated September 2000 and issued by Economy.com (formerly RFA). Data
after 1999 is a projection by Economy.com and is a forward-looking statement.
GDP stands for "Gross Domestic Product." The information regarding occupancy
rates was obtained from a report provided to AvalonBay by REIS, Inc. Data after
1999 is a projection by REIS and is a forward-looking statement. Occupancy rates
for the "AvalonBay Markets' Average" represents the simple average of the
occupancy rates reported by REIS for 17 of the 19 markets in which AvalonBay
currently owns communities (two markets were not included in this average due to
the small relative size of AvalonBay's asset base in those markets). The
statement that "our markets consistently outperform the national average" is a
generalization based on the fact that in recent years many of the markets that
AvalonBay is in are among the markets with the highest rent growth and occupancy
rates.
Page 12 (Economic and Multifamily Industry Outlook):
The data on average rental growth was obtained from the report provided by
REIS, Inc. described in the note to page 11. The data on rent growth in
AvalonBay's markets represents the simple average of the growth rates
reported for 17 markets in which AvalonBay currently owns
Page A-2
<PAGE>
communities, as described in the note to page 11. Data after 1999 is a
projection by REIS and is a forward-looking statement. The statements
regarding the percentage of households that can afford to buy a home is based
on data obtained from the Housing Opportunity Index used by the National
Association of Homebuilders, as most recently published in June 2000. The
affordability index represents the percentage of the homes sold in a market
that a household earning a median household income in that market could
afford to buy. For these purposes, a household is deemed to be able to afford
a home if it would spend no more than 28 percent of its gross income on
housing. In preparing the Housing Opportunity Index, the National Association
of Home Builders estimates the cost of housing by following certain
procedures for estimating mortgage costs, property taxes and insurance.
Page 13 (Economic and Multifamily Industry Outlook):
"Top 13 markets nationally" means the top 13 markets that the National Real
Estate Index (published by CB Richard Ellis) reported in its Market Score,
Volume 30, Summer 2000, as being the markets that, for the apartment sector, had
been determined by the National Real Estate Index to have the highest investment
return potential for the succeeding two years. This market ranking is a
projection and a forward-looking statement. The National Real Estate Index uses
a proprietary model for analyzing the real estate investment potential of
markets.
Page 15 (Trends):
The bullet points on this page represent trends in the multifamily real estate
industry (i.e., activities by competitors) that AvalonBay's senior management
currently perceives. These are forward-looking statements.
Page 16 (current business model):
The pie chart illustrates the percentage (based on AvalonBay's budgeted cost) of
each category of community that is under development or for which the Company
holds development rights. Development rights are development opportunities in
the early phase of the development process for which we have an option to
acquire land, or with respect to which we have a long-term conditional contract
to purchase land or with respect to which we own the land for possible future
development. There is no assurance that the Company will develop any particular
development right.
The Company generally categorizes its communities as follows: garden and
townhome developments are woodframe developments, generally not more than four
stories, which do not have a structured, common parking facility; high density
communities are developments that are four stories or more and that have a
structured, common parking facility; high rise refers to developments that are
usually five stories or more with an elevator and are made of non-combustible
materials, such as masonry, steel and/or brick; "high barrier markets" refers to
markets where we believe there will be limited new supply of upscale apartment
homes. High barrier markets are characterized by a difficult and lengthy
entitlement process with local jurisdictions as well as dense locations where
zoned and entitled land is in limited supply. "Discretionary renter" refers to a
renter whose household income is $50,000 or more.
Page 17 (key strengths):
AvalonBay believes that it excels in certain areas that give it a competitive
advantage; this page lists those perceived advantages.
Page 19 (Trends):
Page A-3
<PAGE>
The statements made on this page are forward-looking statements and reflect the
current subjective view of senior management of AvalonBay regarding trends in
the real estate industry and the opportunities afforded by those trends.
Page 20 (Occupation and Education Profile):
The note to Page 16 explains the use of the term "discretionary renter." The
data on AvalonBay residents was obtained from a survey conducted on behalf of
AvalonBay during June and July 2000. Survey questionnaires were delivered to
approximately 31,500 AvalonBay apartment units, and the residents of
approximately 9,800 apartments completed and returned the questionnaires. There
is no assurance that the sample that returned the questionnaires is
representative of the entire resident base.
Page 21 (Net Rental Household Growth by Age Cohort):
Both the historical data and the projections were issued by the U.S. Census
Bureau in its American Housing Survey. The projections are forward-looking
statements. The statement regarding the effect on rental patterns of these
trends is the current subjective interpretation of AvalonBay's senior
management.
Page 22 (Net Rental Household Growth by Income Distribution):
The symbol "K" means thousands (i.e., $25K means $25,000). The information
regarding the growth in the number of households of different income segments
is a forward-looking statement, as is the introductory text to the chart. The
source of the historical and projected information is a study provided by
Economy.com (formerly RFA).
Page 23 (Net Rental Household Growth by Household Type):
The data regarding the percentage of AvalonBay residents that come from each
household type was obtained from the AvalonBay survey described in the note to
page 20. The data regarding the future growth in the U.S. of different household
types was obtained from projections issued by the U.S. Census Bureau and is a
forward-looking statement. The statement made at the top of the page is a
forward-looking statement and reflects the current subjective view of senior
management of AvalonBay.
Pages 25, 26, 27, 28, 29 (Strategy):
The term "1031 Exchange", used on page 27, refers to an exchange of property
under Section 1031 of the Internal Revenue Code such that a property owner has
disposed of one property and acquired another property while deferring taxable
gain on the property that was disposed. The strategies described on these pages
are forward-looking statements. The bullet point on page 29 regarding
"proprietary trip wires" refers to AvalonBay's policy of monitoring certain
general economic and industry indicators, with the intent of adjusting various
business plans and actions when those indicators reach certain levels. The
bullet point on page 29 regarding the "balanced scorecard" refers to the
Company's adoption of a disciplined performance management evaluation
methodology. There can be no assurance that AvalonBay will endeavor to execute
or will succeed at all or any of these strategies.
Page 31 (Strategic Criteria):
This is a forward-looking statement. Although AvalonBay management currently
intends to evaluate proposed initiatives against the strategic criteria listed,
there can be no assurance that all strategic initiatives that are undertaken
will in fact satisfy the criteria listed on this page.
Page 32 (Strategic Direction and Potential Initiatives):
Page A-4
<PAGE>
This page illustrates the various initiatives that AvalonBay has recently
studied. The page illustrates that AvalonBay has decided that, at this time,
management does not intend to continue serious study of expansion into new
geographic markets as a major initiative or into senior housing, student housing
or the for sale condo market. The page also illustrates that there are various
possible initiatives that AvalonBay management intends to continue to study.
There can be no assurance that any or all of these initiatives will in fact be
undertaken. The initiatives that AvalonBay intends to continue to study include:
mixed use developments that combine residential with retail and/or office space,
an "echoboomer product" (i.e., a community whose location, amenities, and
apartment sizes are designed to appeal to a younger age group that has not yet
established a family), an "empty nester product" (i.e., a community whose
location, amenities and apartment sizes are designed to appeal to an older age
group that does not have children at home), expansion of concierge services at
communities, expansion of corporate furnished apartment homes, expansion of
technology enhancements that help operate the Company's real estate assets more
efficiently and effectively, and enhancement of knowledge of the Company's
customer base. "Jvalon" refers to the software product being designed by
Realeum, Inc. The Company established Realeum, Inc. with two other REITs (United
Dominion Realty Trust, Inc. and Post Properties, Inc.), and Realeum has secured
$15,000,000 of venture financing. The Company currently has a minority stake in
Realeum. The Jvalon software product has been discussed in the Company's SEC
filings and public disclosures.
Page 35 (Implications):
This page illustrates that the application of the observations and strategies
set forth in the presentation could lead AvalonBay to consolidate its holdings
into fewer markets; broaden its customer base; and broaden the types of products
and services offered residents. There can be no assurance in this regard,
however.
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