AvalonBay Abandoning Projects, Reducing Staff

ALEXANDRIA, VA-AvalonBay Communities Inc. said late Wednesday it will cut back on new developments and reduce the size of its organization in response to the slumping capital and real estate markets. The 50,000-unit apartment REIT said it will no longer pursue certain development parcels or rights, which will result in charges for impairments to the value of land holdings, charges for abandoned pursuit costs for land not owned but under option and severance charges for planned overhead reductions.

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.