AvalonBay Communities Announces Fourth Quarter 2005 Disposition and Acquisition Activity

Fourth Quarter 2005 Disposition Activity

The Tower at Avalon Cove, which was developed by the Company for aTotal Capital Cost of $49.9 million, was sold in December 2005 for agross sales price of $106.0 million. The buyer intends to convert theapartment homes to condominiums.

Financial information regarding the sale of The Tower at AvalonCove is set forth in the following table:

(All amounts in $millions)

4Q'05 Date Sales Net GAAP Depreciation Economic
Dispositions Sold Price Proceeds Gain and Other Gain
--------------- -------- ------- -------- ------ ------------ --------

The Tower at
Avalon Cove Dec 2005 $106.0 $ 104.1 $63.7 $ (9.5) $ 54.2

The net proceeds of $104.1 million from the sale were used torepay a portion of amounts outstanding on the Company's unsecuredcredit facility.

The sale of The Tower at Avalon Cove resulted in a GrossUnleveraged Internal Rate of Return ("Unleveraged IRR") of 17.8%, overa 7.7 year holding period, and an Economic Gain on Total Capital Costof 108.5%.

Fourth Quarter 2005 Acquisition Activity

The AvalonBay Value Added Fund, L.P. (the "Fund"), a private,discretionary investment vehicle in which the Company has a 15% equityinterest, acquired three apartment communities during the fourthquarter of 2005. Fuller Martel, Civic Center Place and Paseo Park wereacquired in three separate transactions, for an aggregate purchaseprice of $75.0 million.

4Q'05 Fund Acquisition Number of Purchase Price
Acquisitions Date Location Apt. Homes ($ millions)
------------------ ----------- ------------- ---------- --------------

Fuller Martel Nov. 2005 Hollywood, CA 82 $ 17.5
Civic Center Place Dec. 2005 Norwalk, CA 192 $ 37.8
Paseo Park Dec. 2005 Fremont, CA 134 $ 19.7
---------- --------------

Total 408 $ 75.0
========== ==============

Fuller Martel, located in Los Angeles, California, was acquired inlate November 2005 for a purchase price of $17.5 million. Thecommunity was built in 1987 by an unrelated third party and features82 one- and two-bedroom apartment homes. Community amenities include afitness center, indoor spa, and a rooftop deck, which offers views ofthe entire Los Angeles Basin.

Fuller Martel is conveniently located within the WestHollywood/Hollywood submarket of Los Angeles and is easily accessibleto an abundance of recreation, arts and entertainment venues. Thecommunity's location also provides easy access to multiple employmentcenters throughout Los Angeles, including Downtown Los Angeles,Beverly Hills/Century City, and Burbank.

Civic Center Place, also located in Los Angeles, California, wasacquired in December 2005 for a purchase price of $37.8 million. CivicCenter Place was built in 1987 by an unrelated third party andfeatures 192 one- and two-bedroom apartment homes and two-bedroomtownhomes. Community amenities include a fitness center, tennis courtand two swimming pools and spas.

Civic Center Place is located within the Norwalk submarket of LosAngeles, directly across the street from the Norwalk Civic Center.Three major freeways are within 1.5 miles of the community, and twocommuter train stations, one of which is adjacent to the community,also provide for easy commuting to multiple employment centersthroughout Los Angeles.

Paseo Park, located in Fremont, California, was acquired inDecember 2005 for a purchase price of $19.7 million. The community wasbuilt in 1987 by an unrelated third party and features 134 one- andtwo-bedroom apartment homes. Community amenities include two outdoorswimming pools and a playground.

Paseo Park's convenient East Bay location and proximity to BayArea Rapid Transit (BART) stations in both Fremont and Union Cityoffers residents easy commutes to multiple employment centersthroughout the greater Bay area.

Full Year 2005 Disposition and Acquisition Activity

For the full year 2005, the Company sold seven apartmentcommunities and two land parcels for an aggregate gross sales price ofapproximately $374.5 million. The Company sold these seven apartmentcommunities, excluding the land parcels, at a weighted average initialyear market capitalization rate of 3.8%, a weighted averageUnleveraged IRR of 18.0% over a weighted average holding period ofapproximately eight years and an Economic Gain on Total Capital Costof 110.1%.

For the full year 2005, the Fund acquired four apartmentcommunities for an aggregate purchase price of $100 million at aweighted average market cap rate of approximately 5.0% with anexpected post-renovation weighted average yield of approximately 5.8%.As of December 31, 2005, the Fund owned eight apartment communitiesfor a total acquisition price of approximately $211.0 million.

Definitions and Notes

GAAP Gain represents the gain on sale in accordance with GAAP.

Economic Gain is calculated as the gain on sale in accordance withGAAP, less accumulated depreciation through the date of sale and anyother non-cash adjustments that may be required under GAAP accounting.Management generally considers Economic Gain to be an appropriatesupplemental measure to gain on sale in accordance with GAAP becauseit helps investors understand the relationship between the cashproceeds from a sale and the cash invested in the sold community.

Total Capital Cost reflects actual capital costs incurred todevelop or acquire a community, including acquisition costs,construction costs, real estate taxes, capitalized interest and loanfees, permits, professional fees, allocated development overhead andother regulatory fees, all as determined in accordance with GAAP.

Initial Year Market Capitalization Rate is defined by the Companyas Projected NOI of a single community for the first 12 months ofoperations (assuming no repositioning), less estimates for non-routineallowance of approximately $200 to $300 per apartment, divided by thegross sales price for the community. The gross sales price is adjustedfor transaction costs and deferred maintenance in determining theInitial Year Market Capitalization Rate for acquisitions. ProjectedNOI, as referred to above, represents management's estimate ofprojected rental revenue minus projected operating expenses beforeinterest, income taxes (if any), depreciation, amortization andextraordinary items. For this purpose, management's projection ofoperating expenses for the community includes a management fee of 3.0%to 3.5%. The Initial Year Market Capitalization Rate, which may bedetermined in a different manner by others, is a measure frequentlyused in the real estate industry when determining the appropriatepurchase price for a property or estimating the value for theproperty. Buyers may assign different Initial Year MarketCapitalization Rates to different communities when determining theappropriate value because they (i) may project different rates ofchange in operating expenses, including capital expenditure estimatesand (ii) may project different rates of change in future rentalrevenue due to different estimates for changes in rent and occupancylevels. The weighted average Initial Year Market Capitalization Rateis weighted based on the gross sales price of each community (fordispositions) and on the expected total investment in each community(for acquisitions).

Post-Renovation Yield is defined as Projected NOI, followingrenovation, of a single community divided by the total expectedinvestment in each community following completion of renovation.Post-Renovation Yield and Projected NOI are forward-lookingstatements, and actual results may differ if the cost or duration ofrenovation is greater than expected, the Company does not achieveexpected rents, or operating expenses for the community are greaterthan expected.

Unleveraged IRR on sold communities refers to the Internal Rate ofReturn calculated by the Company considering the timing and amounts of(i) total revenue during the period owned by the Company and (ii) thegross sales price net of selling costs, offset by (iii) theundepreciated capital cost of the communities at the time of sale and(iv) total direct operating expenses during the period owned by theCompany. Each of the items (i), (ii), (iii) and (iv) are calculated inaccordance with GAAP.

The calculation of Unleveraged IRR does not include an adjustmentfor the Company's general and administrative expense, interestexpense, or corporate-level property management and other indirectoperating expenses. Therefore, Unleveraged IRR is not a substitute fornet income as a measure of our performance. Management believes thatthe Unleveraged IRR achieved during the period a community is owned bythe Company is useful because it is one indication of the gross valuecreated by the Company's acquisition, development or redevelopment,management and sale of the community, before the impact of indirectexpenses and Company overhead. The Unleveraged IRR achieved on thecommunities as cited in this release should not be viewed as anindication of the gross value created with respect to othercommunities owned by the Company, and the Company does not representthat it will achieve similar Unleveraged IRRs upon the disposition ofother communities. The weighted average Unleveraged IRR for soldcommunities is weighted based on all cash flows over the holdingperiod for each respective community, including net sales proceeds.

About AvalonBay Communities, Inc.

As of December 31, 2005, AvalonBay Communities, Inc.,headquartered in Alexandria, Virginia, owned or held an ownershipinterest in 154 apartment communities containing 44,278 apartmenthomes in ten states and the District of Columbia, of which fourteencommunities were under construction and four communities were underreconstruction. AvalonBay is in the business of developing,redeveloping, acquiring, and managing apartment communities in highbarrier-to-entry markets of the United States. More information onAvalonBay may be found on AvalonBay's Web site athttp://www.avalonbay.com.

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