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TABLE OF CONTENTS
PART III

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

Commission file number 1-12672

AVALONBAY COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)	77-0404318 (I.R.S. Employer Identification No.)
Ballston Tower 671 N. Glebe Rd, Suite 800 Arlington, Virginia 22203 (Address of principal executive office)
(703) 329-6300 (Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Name of each exchange on which registered)
Common Stock, par value $.01 per share	New York Stock Exchange

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ý    No  o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller repobrting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  ý

         The aggregate market value of the registrant's Common Stock, par value $.01 per share, held by nonaffiliates of the registrant, as of June 28, 2013 was $17,455,382,529.

         The number of shares of the registrant's Common Stock, par value $.01 per share, outstanding as of January 31, 2014 was 129,417,333.

Documents Incorporated by Reference

         Portions of AvalonBay Communities, Inc.'s Proxy Statement for the 2014 annual meeting of stockholders, a definitive copy of which will be filed with the SEC within 120 days after the year end of the year covered by this Form 10-K, are incorporated by reference herein as portions of Part III of this Form 10-K.

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	BUSINESS	1
ITEM 1a.	RISK FACTORS	11
ITEM 1b.	UNRESOLVED STAFF COMMENTS	23
ITEM 2.	COMMUNITIES	23
ITEM 3.	LEGAL PROCEEDINGS	42
ITEM 4.	MINE SAFETY DISCLOSURES	42
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	43
ITEM 6.	SELECTED FINANCIAL DATA	44
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	47
ITEM 7a.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	74
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	74
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	74
ITEM 9a.	CONTROLS AND PROCEDURES	75
ITEM 9b.	OTHER INFORMATION	75
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	76
ITEM 11.	EXECUTIVE COMPENSATION	76
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	76
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	77
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	77
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULE	77
SIGNATURES		83

PART I

        This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our actual results could differ materially from those set forth in each forward-looking statement. Certain factors that might cause such a difference are discussed in this report, including in the section entitled "Forward-Looking Statements" included in this Form 10-K. You should also review Item 1a., "Risk Factors," for a discussion of various risks that could adversely affect us.

ITEM 1.    BUSINESS

General

        AvalonBay Communities, Inc. (the "Company," which term, unless the context otherwise requires, refers to AvalonBay Communities, Inc. together with its subsidiaries) is a Maryland corporation that has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes. We engage in the development, redevelopment, acquisition, ownership and operation of multifamily communities located primarily in high barrier to entry markets of the United States. These barriers to entry generally include a difficult and lengthy entitlement process with local jurisdictions and dense urban or suburban areas where zoned and entitled land is in limited supply. Our primary markets are located in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. We focus on these markets because we believe that, over the long-term, a limited new supply of apartment homes and lower housing affordability in these markets will result in higher growth in cash flows relative to other markets.

        At January 31, 2014, we owned or held a direct or indirect ownership interest in:

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244 operating apartment communities containing 72,811 apartment homes in twelve states and the District of Columbia, of which 214 communities containing 63,514 apartment homes were consolidated for financial reporting purposes, three communities containing 979 apartment homes were held by joint ventures in which we hold an ownership interest, and 27 communities containing 8,318 apartment homes were owned by the Funds (as defined below). Three of the consolidated communities containing 1,126 apartment homes were under redevelopment, as discussed below;

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29 wholly-owned communities under construction that are expected to contain an aggregate of 8,708 apartment homes when completed, including one community in which we had an indirect interest expected to contain 103 apartment homes; and

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rights to develop an additional 46 communities that, if developed in the manner expected, will contain an estimated 12,986 apartment homes; and

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an indirect interest in a joint venture formed with Equity Residential (as defined in this Form 10-K) which owns direct and indirect interests in assets acquired as part of the Archstone Acquisition, including a direct interest in apartment communities in Germany, an indirect interest in a joint venture which owns six apartment communities with 1,902 apartment homes in the United States, and two land parcels.

        We generally obtain ownership in an apartment community by developing a new community on vacant land or by acquiring an existing community. In selecting sites for development or acquisition, we favor locations that are near expanding employment centers and convenient to transportation, recreation areas, entertainment, shopping and dining.

        Our consolidated real estate investments consist of the following reportable segments: Established Communities, Other Stabilized Communities and Development/Redevelopment Communities.

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Established Communities are generally operating communities that were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year such that year-over-year comparisons are meaningful. Other Stabilized Communities are generally all other operating communities that have stabilized occupancy and operating expenses during the current year, but that were not owned or had not achieved stabilization as of the beginning of the prior year such that year-over-year comparisons are not meaningful, as well as communities that are planned for disposition during the current year. Development/Redevelopment Communities consist of communities that are under construction, communities where substantial redevelopment is in progress or is planned to begin during the current year and communities under lease-up. A more detailed description of these segments and other related information can be found in Note 9, "Segment Reporting," of the Consolidated Financial Statements set forth in Item 8 of this report.

        Our principal financial goal is to increase long-term stockholder value through the development, redevelopment, acquisition, operation, and when appropriate, disposition of apartment communities in our markets. To help meet this goal, we regularly (i) monitor our investment allocation by geographic market and product type, (ii) develop, redevelop and acquire an interest in apartment communities in high barrier to entry markets with growing or high potential for demand and high for-sale housing costs, (iii) selectively sell apartment communities that no longer meet our long-term strategy or when opportunities are presented to realize a portion of the value created through our investment and redeploy the proceeds from those sales and (iv) endeavor to maintain a capital structure that is aligned with our business risks with a view to maintaining continuous access to cost-effective capital. Our strategy is to be leaders in multifamily market research, consumer insight and capital allocation, delivering a range of multifamily offerings tailored to serve the needs of the most attractive customer segments in the best-performing U.S. submarkets. A substantial majority of our current communities are upscale, which generally command among the highest rents in their markets. However, we also pursue the ownership and operation of apartment communities that target a variety of customer segments and price points, consistent with our goal of offering a broad range of products and services.

        We operate our apartment communities under three core brands Avalon, AVA, and Eaves by Avalon. We believe that this branding differentiation allows us to target our product offerings to multiple customer groups and submarkets within our existing geographic footprint. The "Avalon" brand is our core offering, focusing on upscale apartment living and high end amenities and services in urban and suburban markets. Our "AVA" brand is designed for people who want to live in or near urban neighborhoods and in close proximity to public transportation, services, shopping and night-life. AVA apartments are generally smaller, many engineered for roommate living, and feature modern design and a technology focus. Our Eaves by Avalon brand is designed for renters who seek good quality apartment living, often in a suburban setting, with practical amenities and services at a more modest price point.

        During the three years ended December 31, 2013, excluding activity for the Funds (as defined below), we acquired 59 apartment communities, of which 54 were acquired as part of the Archstone Acquisition (as defined in this Form 10-K). In addition, in conjunction with the Archstone Acquisition, excluding investments in joint ventures formed with Equity Residential, we acquired interests in three unconsolidated joint ventures, as discussed below, which own an aggregate of 12 apartment communities. During the three years ended December 31, 2013, we disposed of 15 apartment communities, four of which were acquired in the Archstone Acquisition, and completed the development of 26 apartment communities and the redevelopment of 24 apartment communities. During 2012 we also purchased our joint venture partner's interest in one operating community, obtaining a 100% ownership interest in that apartment community. In addition, in 2011 we exchanged a portfolio of three communities and a parcel of land we owned for a portfolio of six communities and $26,000,000 in cash. In addition, we sold one community in 2014 through the date this Form 10-K was filed.

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        In March 2005, we formed AvalonBay Value Added Fund, L.P. ("Fund I"), a private, discretionary real estate investment vehicle, which we manage and in which we own a 15.2% interest. Fund I acquired communities with the objective of either redeveloping or repositioning them, or taking advantage of market cycle timing and improved operating performance. From its inception in March 2005 through the close of its investment period in March 2008, Fund I acquired 20 communities. During the three years ended December 31, 2013, we realized our pro rata share of the gain from the sale of 16 communities owned by Fund I.

        In September 2008, we formed AvalonBay Value Added Fund II, L.P. ("Fund II"), a second institutional discretionary real estate investment fund which we manage and in which we own a 31.3% interest. In 2012, Fund II acquired its final operating community, which was an active acquisition candidate as of August 2011, the end of the investment period for Fund II. From the commencement of Fund II through the close of the investment period, Fund II acquired 13 operating communities. During the three years ended December 31, 2013, we realized our pro rata share of the gain from the sale of one community owned by Fund II.

        In conjunction with the Archstone Acquisition, excluding joint ventures formed with Equity Residential, we acquired interests in three additional joint ventures, Brandywine Apartments of Maryland, LLC ("Brandywine"), Archstone Multifamily Partners AC LP (the "U.S. Fund") and Multifamily Partners AC JV LP (the "AC JV").

        Brandywine owns a 305 apartment home community located in Washington, DC, which is managed by a third party. Brandywine is comprised of five members who hold various interests in the joint venture. In conjunction with the Archstone Acquisition, we acquired a 26.1% equity interest in the venture, and subsequently purchased an additional 2.6% interest, and as of December 31, 2013, hold a 28.7% equity interest in the venture.

        The U.S. Fund was formed in July 2011 and is fully invested. The U.S. Fund owns nine communities containing 1,726 apartment homes, one of which includes a marina containing 229 boat slips. Through subsidiaries, we acquired and own the general partner of the fund and hold a 28.6% interest in the fund.

        The AC JV is a joint venture in which we acquired Archstone's 20% ownership interest. The AC JV was formed in 2011 and owns two operating apartment communities containing 818 apartment homes in Cambridge, MA and Herndon, VA, and one development community which, if completed as expected, will contain 103 apartment homes in Cambridge, MA. The AC JV partnership agreement contains provisions that require us to provide a right of first offer ("ROFO") to the AC JV in connection with additional opportunities to acquire or develop additional interests in multifamily real estate assets within a specified geographic radius of the existing assets, generally one mile or less. We own one land parcel for the development of 301 apartment homes, classified as a Development Right in Cambridge, MA, acquired as part of the Archstone Acquisition that is subject to the ROFO restrictions. The ROFO restriction expires in 2019.

        A more detailed description of Fund I, Fund II, the U.S. Fund and the AC JV (collectively, the "Funds"), Brandywine and the related investment activity can be found in the discussion in Note 6, "Investments in Real Estate Entities," of the Consolidated Financial Statements in Item 8 of this report and in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

        Including sales by unconsolidated entities and entities in which we held a residual profits interest, during 2013 we sold 16 operating communities and recognized a gain in accordance with U.S. generally accepted accounting principles ("GAAP") of $292,684,000.

        A further discussion of our development, redevelopment, disposition, acquisition, property management and related strategies follows.

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        Development Strategy.    We select land for development and follow established procedures that we believe minimize both the cost and the risks of development. As one of the largest developers of multifamily rental apartment communities in high barrier to entry markets of the United States, we identify development opportunities through local market presence and access to local market information achieved through our regional offices. In addition to our principal executive office in Arlington, Virginia, we also maintain regional offices, administrative offices or specialty offices, including offices that are in or near the following cities:

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Boston, Massachusetts;

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Long Island, New York;

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Los Angeles, California;

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New York, New York;

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Newport Beach, California;

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San Francisco, California;

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San Jose, California;

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Seattle, Washington;

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Fairfield, Connecticut;

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Virginia Beach, Virginia; and

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Woodbridge, New Jersey.

        After selecting a target site, we usually negotiate for the right to acquire the site either through an option or a long-term conditional contract. Options and long-term conditional contracts generally allow us to acquire the target site shortly before the start of construction, which reduces development-related risks and preserves capital. However, as a result of competitive market conditions for land suitable for development, we have sometimes acquired and held land prior to construction for extended periods while entitlements are obtained, or acquired land zoned for uses other than residential with the potential for rezoning. For further discussion of our Development Rights, refer to Item 2. "Communities" in this report.

        We generally act as our own general contractor and construction manager, except for certain mid-rise and high-rise apartment communities and certain development communities acquired as part of the Archstone Acquisition, where we may elect to use third-party general contractors as construction managers. We generally perform these functions directly (although we may use a wholly-owned subsidiary) both for ourselves and for the joint ventures and partnerships of which we are a member or a partner. We believe direct involvement in construction enables us to achieve higher construction quality, greater control over construction schedules and cost savings. Our development, property management and construction teams monitor construction progress to ensure quality workmanship and a smooth and timely transition into the leasing and operating phase.

        During periods where competition for development land is more intense, we may acquire improved land with existing commercial uses and rezone the site for multifamily residential use. During the period that we hold these buildings for future development, any rent received in excess of expenses from these operations, which we consider to be incidental, is accounted for as a reduction in our investment in the development pursuit and not as net income. Any expenses relating to these operations, in excess of any rents received, are accounted for as a reduction in net income. We have also participated, and may in the future participate, in master planned or other large multi-use developments where we commit to build infrastructure (such as roads) to be used by other participants or commit to act as construction manager or general contractor in building structures or spaces for

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third parties (such as unimproved ground floor retail space, municipal garages or parks). Costs we incur in connection with these activities may be accounted for as additional invested capital in the community or we may earn fee income for providing these services. Particularly with large scale, urban in-fill developments, we may engage in significant environmental remediation efforts to prepare a site for construction.

        Throughout this report, the term "development" is used to refer to the entire property development cycle, including pursuit of zoning approvals, procurement of architectural and engineering designs and the construction process. References to "construction" refer to the actual construction of the property, which is only one element of the development cycle.

        Redevelopment Strategy.    When we undertake the redevelopment of a community, our goal is to renovate and/or rebuild an existing community so that our total investment is generally below replacement cost and the community is well positioned in the market to achieve attractive returns on our capital. We have a dedicated group of associates and procedures that are intended to control both the cost and risks of redevelopment. Our redevelopment teams, which include redevelopment, construction and property management personnel, monitor redevelopment progress. We believe we achieve significant cost savings by acting as our own general contractor. More importantly, this helps to ensure quality design and workmanship and a smooth and timely transition into the lease-up and restabilization phases.

        Throughout this report, the term "redevelopment" is used to refer to the entire redevelopment cycle, including planning and procurement of architectural and engineering designs, budgeting and actual renovation work. The actual renovation work is referred to as "reconstruction," which is only one element of the redevelopment cycle.

        Disposition Strategy.    We sell assets that no longer meet our long-term strategy or when market conditions are favorable, and we redeploy the proceeds from those sales to develop, redevelop and acquire communities and to rebalance our portfolio across or within geographic regions. This also allows us to realize a portion of the value created through our investments and provides additional liquidity. We are then able to redeploy the net proceeds from our dispositions in lieu of raising that amount of capital externally. When we decide to sell a community, we generally solicit competing bids from unrelated parties for these individual assets and consider the sales price of each proposal.

        We acquired 16 assets in the Archstone Acquisition for which outstanding third parties retained an indirect interest with associated tax protection rights which may be triggered if we sell the assets or repay secured financing thereon; if triggered upon a sale of all 16 assets, the associated tax protection payments are estimated to be approximately $44 million at December 31, 2013.

        Acquisition Strategy.    Our core competencies in development and redevelopment discussed above allow us to be selective in the acquisitions we target. Acquisitions allow us to achieve rapid penetration into markets in which we desire an increased presence. Acquisitions (and dispositions) also help us achieve our desired product mix or rebalance our portfolio. Portfolio growth also allows for fixed general and administrative costs to be a smaller percentage of overall community Net Operating Income ("NOI"). We are not presently pursuing the formation of a new discretionary real estate investment fund, preferring at this time to maintain flexibility in shaping our portfolio of wholly-owned assets through acquisitions and dispositions.

        Property Management Strategy.    We seek to increase operating income through innovative, proactive property management that will result in higher revenue from communities while constraining operating expenses. Our principal strategies to maximize revenue include:

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focusing on resident satisfaction;

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staggering lease terms such that lease expirations are better matched to traffic patterns;

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balancing high occupancy with premium pricing, and increasing rents as market conditions permit; and

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employing revenue management software to optimize the pricing and term of leases.

        Constraining growth in operating expenses is another way in which we seek to increase earnings growth. Growth in our portfolio and the resulting increase in revenue allows for fixed operating costs to be spread over a larger volume of revenue, thereby increasing operating margins. We constrain growth in operating expenses in a variety of ways, which include, but are not limited to, the following:

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we use purchase order controls, acquiring goods and services from pre-approved vendors;

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we use national negotiated contracts and also purchase supplies in bulk where possible;

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we bid third-party contracts on a volume basis;

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we strive to retain residents through high levels of service in order to eliminate the cost of preparing an apartment home for a new resident and to reduce marketing and vacant apartment utility costs;

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we perform turnover work in-house or hire third parties, generally depending upon the least costly alternative;

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we undertake preventive maintenance regularly to maximize resident satisfaction and property and equipment life; and

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we aggressively pursue real estate tax appeals.

        On-site property management teams receive bonuses based largely upon the NOI produced at their respective communities. We use and continuously seek ways to improve technology applications to help manage our communities, believing that the accurate collection of financial and resident data will enable us to maximize revenue and control costs through careful leasing decisions, maintenance decisions and financial management.

        We generally manage the operation and leasing activity of our communities directly (although we may use a wholly-owned subsidiary) both for ourselves and the joint ventures and partnerships of which we are a member or a partner.

        From time to time we also pursue or arrange ancillary services for our residents to provide additional revenue sources or increase resident satisfaction. As a REIT, we generally cannot provide direct services to our residents that are not customarily provided by a landlord, nor can we directly share in the income of a third party that provides such services. However, we can provide such non-customary services to residents or share in the revenue from such services if we do so through a "taxable REIT subsidiary," which is a subsidiary that is treated as a "C corporation" subject to federal income taxes.

        Financing Strategy.    We maintain a capital structure that provides financial flexibility to ensure we can select cost effective capital market options that are well matched to our business risks. We estimate that our short-term liquidity needs will be met from cash on hand, borrowings under our $1,300,000,000 revolving variable rate unsecured credit facility (the "Credit Facility"), sales of current operating communities and/or issuance of additional debt or equity securities. A determination to engage in an equity or debt offering depends on a variety of factors such as general market and economic conditions, our short and long-term liquidity needs, the relative costs of debt and equity capital and growth opportunities. A summary of debt and equity activity for the last three years is reflected on our Consolidated Statement of Cash Flows of the Consolidated Financial Statements set forth in Item 8 of this report.

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        We have entered into, and may continue in the future to enter into, joint ventures (including limited liability companies or partnerships) through which we would own an indirect economic interest of less than 100% of the community or communities owned directly by such joint ventures. Our decision to either hold an apartment community in fee simple or to have an indirect interest in the community through a joint venture is based on a variety of factors and considerations, including: (i) the economic and tax terms required by a seller of land or of a community; (ii) our desire to diversify our portfolio of communities by market, submarket and product type; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) our projection, in some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture vehicle is used. Investments in joint ventures are not limited to a specified percentage of our assets. Each joint venture agreement is individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture agreement.

        In addition, from time to time, we may offer shares of our equity securities, debt securities or options to purchase stock in exchange for property. We may also acquire properties in exchange for properties we currently own.

        Other Strategies and Activities.    While we emphasize equity real estate investments in rental apartment communities, we have the ability to invest in other types of real estate, mortgages (including participating or convertible mortgages), securities of other REITs or real estate operating companies, or securities of technology companies that relate to our real estate operations or of companies that provide services to us or our residents, in each case consistent with our qualification as a REIT. In addition, we own and lease retail space at our communities when either (i) the highest and best use of the space is for retail (e.g., street level in an urban area); (ii) we believe the retail space will enhance the attractiveness of the community to residents or; (iii) some component of retail space is required to obtain entitlements to build apartment homes. As of December 31, 2013, we had a total of 659,847 square feet of rentable retail space, excluding retail space within communities currently under construction. Gross rental revenue provided by leased retail space in 2013 was $15,946,000 (1.1% of total revenue). We may also develop a property in conjunction with another real estate company that will own and operate the retail component of a mixed-use building that we help develop. If we secure a development right and believe that its best use, in whole or in part, is to develop the real estate with the intent to sell rather than hold the asset, we may, through a taxable REIT subsidiary, develop real estate for sale. Any investment in securities of other entities, and any development of real estate for sale, is subject to the percentage of ownership limitations, gross income tests, and other limitations that must be observed for REIT qualification.

        We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers and do not intend to do so. At all times we intend to make investments in a manner so as to qualify as a REIT unless, because of circumstances or changes to the Internal Revenue Code of 1986 (or the Treasury Regulations), our Board of Directors determines that it is no longer in our best interest to qualify as a REIT.

Archstone Acquisition

        On February 27, 2013, pursuant to an asset purchase agreement (the "Purchase Agreement") dated November 26, 2012, by and among the Company, Equity Residential and its operating partnership, ERP Operating Limited Partnership (together, "Equity Residential"), Lehman Brothers Holdings, Inc. ("Lehman," which term is sometimes used in this report to refer to Lehman Brothers Holdings, Inc., and/or its relevant subsidiary or subsidiaries), and Archstone Enterprise LP ("Archstone," which has since changed its name to Jupiter Enterprise LP), we, together with Equity Residential, acquired, directly or indirectly, all of Archstone's assets, including all of the ownership interests in joint ventures and other entities owned by Archstone, and assumed Archstone's liabilities,

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both known and unknown, with certain limited exceptions. Under the terms of the Purchase Agreement, we acquired approximately 40% of Archstone's assets and liabilities and Equity Residential acquired approximately 60% of Archstone's assets and liabilities (the "Archstone Acquisition").

        We acquired the following as part of the Archstone Acquisition:

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54 operating apartment communities that were consolidated for financial reporting purposes, containing 18,423 apartment homes, of which four communities containing 1,368 apartment homes were subsequently disposed of during 2013;

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six communities that were under construction and/or in lease-up, of which two have been completed with 553 homes and the other four of which are expected to be completed during 2014 and contain 1,114 apartment homes;

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six parcels of land, one of which we sold to the AC JV, which is currently being developed;

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options to acquire two additional parcels of land, of which one was acquired in 2013 and will begin construction in 2014;

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interests in unconsolidated joint ventures in which we are the general partner or managing member, which joint ventures own 11 apartment communities containing 2,544 apartment homes, and an interest in an unconsolidated joint venture in which we are a limited partner, which joint venture owns one apartment community containing 305 apartment homes, as further discussed below; and

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a 40% ownership interest in unconsolidated joint venture arrangements with Equity Residential which will hold assets and liabilities that we and Equity Residential will jointly manage, and that we and Equity Residential intend to sell to or resolve with third parties, and/or subsequently transfer to Equity Residential or to us.

        The Company provided the following consideration for the Archstone Acquisition:

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the issuance of 14,889,706 shares of the Company's common stock, valued at $1,875,210,000 as of the market's close on the closing date, February 27, 2013;

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cash payment of approximately $760,000,000;

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the assumption of consolidated indebtedness with a fair value of approximately $3,732,980,000, as of February 27, 2013, consisting of $3,512,202,000 principal amount of consolidated indebtedness and $220,777,000 representing the amount by which fair value of the aforementioned debt exceeds the principal face value, $70,479,000 of which excess related to debt the Company repaid concurrent with the Archstone Acquisition;

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the acquisition with Equity Residential of interests in entities that have preferred units outstanding, some of which may be presented for redemption from time to time. The Company's 40% share of the fair value of the collective obligations, including accrued dividends on these outstanding Archstone preferred units as of February 27, 2013, was approximately $67,500,000; and

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the assumption with Equity Residential of all other liabilities, known or unknown, of Archstone, other than certain excluded liabilities. The Company shares 40% of the responsibility for these liabilities.

Tax Matters

        We filed an election with our 1994 federal income tax return to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, ("the Code") and intend to maintain our qualification as a REIT in the future. As a qualified REIT, with limited exceptions, we will not be taxed under federal

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and certain state income tax laws at the corporate level on our taxable net income to the extent taxable net income is distributed to our stockholders. We expect to make sufficient distributions to avoid income tax at the corporate level. While we believe that we are organized and qualified as a REIT and we intend to operate in a manner that will allow us to continue to qualify as a REIT, there can be no assurance that we will be successful in this regard. Qualification as a REIT involves the application of highly technical and complex provisions of the Code for which there are limited judicial and administrative interpretations and involves the determination of a variety of factual matters and circumstances not entirely within our control.

Competition

        We face competition from other real estate investors, including insurance companies, pension and investment funds, partnerships and investment companies and other REITs, to acquire and develop apartment communities and acquire land for future development. As an owner and operator of apartment communities, we also face competition for prospective residents from other operators whose communities may be perceived to offer a better location or better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks. We also compete against condominiums and single-family homes that are for sale or rent. Although we often compete against large, sophisticated developers and operators for development opportunities and for prospective residents, real estate developers and operators of any size can provide effective competition for both real estate assets and potential residents.

Environmental and Related Matters

        As a current or prior owner, operator and developer of real estate, we are subject to various federal, state and local environmental laws, regulations and ordinances and also could be liable to third parties resulting from environmental contamination or noncompliance at our communities. For some development communities we undertake extensive environmental remediation to prepare the site for construction, which could be a significant portion of our total construction cost. Environmental remediation efforts could expose us to possible liabilities for accidents or improper handling of contaminated materials during construction. These and other risks related to environmental matters are described in more detail in Item 1a., "Risk Factors."

        We believe that more government regulation of energy use, along with a greater focus on environmental protection, may, over time, have a significant impact on urban growth patterns. If changes in zoning to encourage greater density and proximity to mass transit do occur, such changes could benefit multifamily housing and those companies with a competency in high-density development. However, there can be no assurance as to whether or when such changes in regulations or zoning will occur or, if they do occur, whether the multifamily industry or the Company will benefit from such changes.

Other Information

        We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may call the SEC at 1-202-551-8090 for further information on the operation of the Public Reference Room. Our SEC filings are also available to the public from the SEC's website at www.sec.gov.

        We maintain a website at www.avalonbay.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to the Securities Exchange Act of 1934 are available free of charge in the "Investors" section of our website as soon as reasonably practicable after the reports are filed with or furnished to the

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SEC. In addition, the charters of our Board's Nominating and Corporate Governance Committee, Audit Committee and Compensation Committee, as well as our Director Independence Standards, Corporate Governance Guidelines, Code of Business Conduct and Ethics, Policy Regarding Shareholder Rights Agreement, Policy Regarding Shareholder Approval of Future Severance Agreements, Executive Stock Ownership Guidelines, and Policy for Recoupment of Incentive Compensation, are available free of charge in that section of our website or by writing to AvalonBay Communities, Inc., Ballston Tower, Suite 800, 671 N. Glebe Rd., Arlington, Virginia 22203, Attention: Chief Financial Officer. To the extent required by the rules of the SEC and the NYSE, we will disclose amendments and waivers relating to these documents in the same place on our website.

        We were incorporated under the laws of the State of California in 1978. In 1995, we reincorporated in the State of Maryland and have been focused on the ownership and operation of apartment communities since that time. As of January 31, 2014, we had 2,900 employees.

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ITEM 1a.    RISK FACTORS

        Our operations involve various risks that could have adverse consequences, including those described below. This Item 1a. includes forward-looking statements. You should refer to our discussion of the qualifications and limitations on forward-looking statements in this Form 10-K.

Development, redevelopment and construction risks could affect our profitability.

        We intend to continue to develop and redevelop apartment home communities. These activities can include long planning and entitlement timelines and can involve complex and costly activities, including significant environmental remediation or construction work in high-density urban areas. These activities may be exposed to the following risks:

•

we may abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover expenses already incurred in exploring those opportunities;

•

occupancy rates and rents at a community may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions beyond our control and the development by competitors of competing communities;

•

we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or the delay or abandonment of opportunities;

•

we may incur costs that exceed our original estimates due to increased material, labor or other costs;

•

we may be unable to complete construction and lease-up of a community on schedule, resulting in increased construction and financing costs and a decrease in expected rental revenues;

•

we may be unable to obtain financing with favorable terms, or at all, for the proposed development of a community, which may cause us to delay or abandon an opportunity;

•

we may incur liabilities to third parties during the development process, for example, in connection with managing existing improvements on the site prior to tenant terminations and demolition (such as commercial space) or in connection with providing services to third parties (such as the construction of shared infrastructure or other improvements); and

•

we may incur liability if our communities are not constructed and operated in compliance with the accessibility provisions of the Americans with Disabilities Acts, the Fair Housing Act or other federal, state or local requirements. Noncompliance could result in imposition of fines, an award of damages to private litigants, and a requirement that we undertake structural modifications to remedy the noncompliance.

        We estimate construction costs based on market conditions at the time we prepare our budgets, and our projections include changes that we anticipate but cannot predict with certainty. Construction costs may increase, particularly for labor and certain materials and, for some of our Development Communities and Development Rights (as defined below), the total construction costs may be higher than the original budget. Total capitalized cost includes all capitalized costs incurred and projected to be incurred to develop or redevelop a community, determined in accordance with GAAP, including:

•

land and/or property acquisition costs;

•

fees paid to secure air rights and/or tax abatements;

•

construction or reconstruction costs;

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•

costs of environmental remediation;

•

real estate taxes;

•

capitalized interest and insurance;

•

loan fees;

•

permits;

•

professional fees;

•

allocated development or redevelopment overhead; and

•

other regulatory fees.

        Costs to redevelop communities that have been acquired have, in some cases, exceeded our original estimates and similar increases in costs may be experienced in the future. We cannot assure you that market rents in effect at the time new development or redevelopment communities complete lease-up will be sufficient to fully offset the effects of any increased construction or reconstruction costs.

Unfavorable changes in market and economic conditions could adversely affect occupancy, rental rates, operating expenses, and the overall market value of our assets, including joint ventures and investments in the Funds.

        Local conditions in our markets significantly affect occupancy, rental rates and the operating performance of our communities. The risks that may adversely affect conditions in those markets include the following:

•

plant closings, industry slowdowns and other factors that adversely affect the local economy;

•

an oversupply of, or a reduced demand for, apartment homes;

•

a decline in household formation or employment or lack of employment growth;

•

the inability or unwillingness of residents to pay rent increases;

•

rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and

•

economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.

Changes in applicable laws, or noncompliance with applicable laws, could adversely affect our operations or expose us to liability.

        We must develop, construct and operate our communities in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord tenant laws and other laws generally applicable to business operations. Noncompliance with laws could expose us to liability.

        Lower revenue growth or significant unanticipated expenditures may result from our need to comply with changes in (i) laws imposing remediation requirements and the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) rent control or rent stabilization laws or other residential landlord/tenant laws, or (iii) other governmental rules and regulations or enforcement policies affecting the development, use and operation of our communities, including changes to building codes and fire and life-safety codes.

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Short-term leases expose us to the effects of declining market rents.

        Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.

Competition could limit our ability to lease apartment homes or increase or maintain rents.

        Our apartment communities compete with other housing alternatives to attract residents, including other rental apartments, condominiums and single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing in a particular area could adversely affect our ability to lease apartment homes and to increase or maintain rental rates.

Attractive investment opportunities may not be available, which could adversely affect our profitability.

        We expect that other real estate investors, including insurance companies, pension funds, other REITs and other well-capitalized investors, will compete with us to acquire existing properties and to develop new properties. This competition could increase prices for properties of the type we would likely pursue and adversely affect our profitability.

Capital and credit market conditions may adversely affect our access to various sources of capital and/or the cost of capital, which could impact our business activities, dividends, earnings, and common stock price, among other things.

        In periods when the capital and credit markets experience significant volatility, the amounts, sources and cost of capital available to us may be adversely affected. We primarily use external financing to fund construction and to refinance indebtedness as it matures. If sufficient sources of external financing are not available to us on cost effective terms, we could be forced to limit our development and redevelopment activity and/or take other actions to fund our business activities and repayment of debt, such as selling assets, reducing our cash dividend or paying out less than 100% of our taxable income. To the extent that we are able and/or choose to access capital at a higher cost than we have experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing) our earnings per share and cash flows could be adversely affected. In addition, the price of our common stock may fluctuate significantly and/or decline in a high interest rate or volatile economic environment. We believe that the lenders under our Credit Facility will fulfill their lending obligations thereunder, but if economic conditions deteriorate, there can be no assurance that the ability of those lenders to fulfill their obligations would not be adversely impacted.

Insufficient cash flow could affect our debt financing and create refinancing risk.

        We are subject to the risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. In this regard, we note that in order for us to continue to qualify as a REIT, we are required to annually distribute dividends generally equal to at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gain. This requirement limits the amount of our cash flow available to meet required principal and interest payments. The principal outstanding balance on a portion of our debt will not be fully amortized prior to its maturity. Although we may be able to repay our debt by using our cash flows, we cannot assure you that we will have sufficient cash flows available to make all required principal payments. Therefore, we may need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that a refinancing will not be done on as favorable terms; either of these outcomes could have a material adverse effect on our financial condition and results of operations.

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Rising interest rates could increase interest costs and could affect the market price of our common stock.

        We currently have, and may in the future incur, contractual variable interest rate debt. In addition, we regularly seek access to both fixed and variable rate debt financing to repay maturing debt and to finance our development and redevelopment activity. Accordingly, if interest rates increase, our interest costs will also rise, unless we have made arrangements that hedge the risk of rising interest rates. In addition, an increase in market interest rates may lead purchasers of our common stock to demand a greater annual dividend yield, which could adversely affect the market price of our common stock.

Bond financing and zoning compliance requirements could limit our income, restrict the use of communities and cause favorable financing to become unavailable.

        We have financed some of our apartment communities with obligations issued by local government agencies because the interest paid to the holders of this debt is generally exempt from federal income taxes and, therefore, the interest rate is generally more favorable to us. These obligations are commonly referred to as "tax-exempt bonds" and generally must be secured by mortgages on our communities. As a condition to obtaining tax-exempt financing, or on occasion as a condition to obtaining favorable zoning in some jurisdictions, we will commit to make some of the apartments in a community available to households whose income does not exceed certain thresholds (e.g., 50% or 80% of area median income), or who meet other qualifying tests. As of December 31, 2013, approximately 6% of our apartment homes at current operating communities were under income limitations such as these. These commitments, which may run without expiration or may expire after a period of time (such as 15 or 20 years) may limit our ability to raise rents and, in consequence, can also adversely affect the value of the communities subject to these restrictions.

        In addition, some of our tax-exempt bond financing documents require us to obtain a guarantee from a financial institution of payment of the principal of, and interest on, the bonds. The guarantee may take the form of a letter of credit, surety bond, guarantee agreement or other additional collateral. If the financial institution defaults in its guarantee obligations, or if we are unable to renew the applicable guarantee or otherwise post satisfactory collateral, a default will occur under the applicable tax-exempt bonds and the community could be foreclosed upon if we do not redeem the bonds.

Risks related to indebtedness.

        We have a Credit Facility with Bank of America, N.A., as administrative agent, swing lender, issuing bank and a bank, JPMorgan Chase Bank, N.A., as a bank and as syndication agent, Deutsche Bank Trust Company Americas, Morgan Stanley Bank and Wells Fargo Bank, N.A., each as a bank and as documentation agent, Barclays Bank PLC as a bank and as co-documentation agent, UBS AG, Stamford Branch, as a co-documentation agent, Goldman Sachs Bank USA, The Bank of New York Mellon, Compass Bank, PNC Bank, National Association, and Suntrust Bank, each as a bank and as a managing agent, Branch Banking and Trust Company, Bank of Tokyo Mitsubishi UFJ, Ltd., and Capital One, N.A., each as a bank and as a co-agent, and the other bank parties signatory thereto. Our organizational documents do not limit the amount or percentage of indebtedness that may be incurred. Accordingly, subject to compliance with outstanding debt covenants, we could incur more debt, resulting in an increased risk of default on our obligations and an increase in debt service requirements that could adversely affect our financial condition and results of operations.

        The mortgages on those of our properties that are subject to secured debt, our Credit Facility and the indenture under which a substantial portion of our debt was issued contain customary restrictions, requirements and other limitations, as well as certain financial and operating covenants including maintenance of certain financial ratios. Maintaining compliance with these restrictions could limit our flexibility. A default in these requirements, if uncured, could result in a requirement that we repay indebtedness, which could severely affect our liquidity and increase our financing costs. Refer to

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Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," for further discussion.

        The mortgages on those of our properties subject to secured debt generally include provisions which stipulate a prepayment penalty or payment that we will be obligated to pay in the event that we elect to repay the mortgage note prior to the earlier of (i) the stated maturity of the note, or (ii) the date at which the mortgage note is prepayable without such penalty or payment. If we elect to repay some or all of the outstanding principal balance for our mortgage notes, we may incur prepayment penalties or payments under these provisions which could adversely affect our results of operations.

Failure to maintain our current credit ratings could adversely affect our cost of funds, related margins, liquidity and access to capital markets.

        There are two major debt rating agencies that routinely evaluate and rate our debt. Their ratings are based on a number of factors, which include their assessment of our financial strength, liquidity, capital structure, asset quality amount of real estate under development, and sustainability of cash flow and earnings, among other factors. If market conditions change, we may not be able to maintain our current credit ratings, which could adversely affect our cost of funds and related margins, liquidity, and access to capital markets.

Debt financing may not be available and equity issuances could be dilutive to our stockholders.

        Our ability to execute our business strategy depends on our access to an appropriate blend of debt and equity financing. Debt financing may not be available in sufficient amounts or on favorable terms. If we issue additional equity securities, the interests of existing stockholders could be diluted.

Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to stockholders.

        A decrease in rental revenue, or liquidity needs such as the repayment of indebtedness or funding of our development activities, could have an adverse effect on our ability to pay distributions to our stockholders. Significant expenditures associated with each community such as debt service payments, if any, real estate taxes, insurance and maintenance costs are generally not reduced when circumstances cause a reduction in income from a community.

The form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations.

        The form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Directors may consider relevant. The Board of Directors may modify our dividend policy from time to time.

We may choose to pay dividends in our own stock, in which case stockholders may be required to pay tax in excess of the cash they receive.

        We may distribute taxable dividends that are payable in part in our stock, as we did in the fourth quarter of 2008. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of the cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the

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sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, the trading price of our stock would experience downward pressure if a significant number of our stockholders sell shares of our stock in order to pay taxes owed on dividends.

Difficulty of selling apartment communities could limit liquidity and financial flexibility.

        Federal tax laws may limit our ability to earn a gain on the sale of a community (unless we own it through a subsidiary which will incur a taxable gain upon sale) if we are found to have held, acquired or developed the community primarily with the intent to resell the community, and this limitation may affect our ability to sell communities without adversely affecting returns to our stockholders. In addition, real estate in our markets can at times be difficult to sell quickly at prices we find acceptable. These potential difficulties in selling real estate in our markets may limit our ability to change or reduce the apartment communities in our portfolio promptly in response to changes in economic or other conditions.

Acquisitions may not yield anticipated results.

        Our business strategy includes acquiring as well as developing communities. Our acquisition activities and their success may be exposed to the following risks:

•

an acquired property may fail to perform as we expected in analyzing our investment; and

•

our estimate of the costs of repositioning or redeveloping an acquired property may prove inaccurate.

Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences.

        We may from time to time commence development activity or make acquisitions outside of our existing market areas if appropriate opportunities arise. Our historical experience in our existing markets in developing, owning and operating rental communities does not ensure that we will be able to operate successfully in new markets, should we choose to enter them. We may be exposed to a variety of risks if we choose to enter new markets, including an inability to accurately evaluate local apartment market conditions; an inability to obtain land for development or to identify appropriate acquisition opportunities; an inability to hire and retain key personnel; and lack of familiarity with local governmental and permitting procedures.

        Although we are primarily in the multifamily business, we also own and lease ancillary retail space when a retail component represents the best use of the space, as is often the case with large urban in-fill developments. We also may engage or have an interest in for-sale activity. We may be unsuccessful in owning and leasing retail space at our communities or in developing real estate with the intent to sell, which could have an adverse effect on our results of operations.

        We are currently implementing two new brands of communities that target various customer preferences. We cannot assure that these brands will be successful or that our costs in developing and implementing these brands will result in incremental revenue and earnings.

Land we hold with no current intent to develop may be subject to future impairment charges.

        We own parcels of land that we do not currently intend to develop. As discussed in Item 2., "Communities—Other Land and Real Estate Assets," in the event that the fair market value of a parcel changes such that we determine that the carrying basis of the parcel reflected in our financial statements is greater than the parcel's then current fair value, less costs to dispose, we would be subject to an impairment charge, which would reduce our net income.

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Risks involved in real estate activity through joint ventures.

        Instead of acquiring or developing apartment communities directly, at times we invest as a partner or a co-venturer. Joint venture investments (including investments through partnerships or limited liability companies) involve risks, including the possibility that our partner might become insolvent or otherwise refuse to make capital contributions when due; that we may be responsible to our partner for indemnifiable losses; that our partner might at any time have business goals that are inconsistent with ours; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. Frequently, we and our partner may each have the right to trigger a buy-sell arrangement, that could cause us to sell our interest, or acquire our partner's interest, at a time when we otherwise would not have initiated such a transaction.

Risks associated with an investment in and management of discretionary real estate investment funds.

        We formed Fund I and Fund II, in which we have an equity interest of 15.2% and 31.3%, and as part of the Archstone Acquisition we acquired equity interests in the U.S. Fund and the AC JV of 28.6% and 20.0%, respectively, which, through wholly-owned subsidiaries, we manage as the general partner and managing member and in which at December 31, 2013 we have an aggregate equity investment, excluding costs incurred in excess of our equity in the underlying net assets of each respective fund, of approximately $270,178,000, net of distributions to us and excluding our purchase of a mortgage note secured by a Fund I community. The investment periods for Fund I, Fund II and the U.S. Fund are over. These Funds present risks, including the following:

•

our subsidiaries that are the general partners of the Funds are generally liable, under partnership law, for the debts and obligations of the respective Funds, subject to certain exculpation and indemnification rights pursuant to the terms of the partnership agreement of the Funds;

•

investors in the Funds holding a majority of the partnership interests may remove us as the general partner without cause, subject to our right to receive compensation for an additional period of management fees after such removal and our right to acquire one of the properties then held by the Funds;

•

while we have broad discretion to manage the Funds and make investment decisions on behalf of the Funds, the investors or an advisory committee comprised of representatives of the investors must approve certain matters, and as a result we may be unable to cause the Funds to implement certain decisions that we consider beneficial; and

•

we may be liable and/or our status as a REIT may be jeopardized if either the Funds, or the REIT entities associated with the Funds and/or the U.S. Fund and/or AC JV, fail to comply with various tax or other regulatory matters.

The governance provisions of our joint ventures with Equity Residential could adversely affect our flexibility in dealing with such joint venture assets and liabilities.

        In connection with the Archstone Acquisition, we created joint ventures with Equity Residential that manage certain of the acquired assets and liabilities. These structures involve participation in the ventures by Equity Residential whose interests and rights may not be the same as ours. Joint ownership of an investment in real estate involves risks not associated with direct ownership of real estate, including the risk that Equity Residential may at any time have economic or other business interests or goals which become inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in the joint ventures or the timing of the termination and liquidation of the joint ventures. Under the form for the joint venture arrangements, neither we nor Equity Residential expect to individually have the sole power to control the ventures, and an impasse

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could occur, which would adversely affect the applicable joint venture and decrease potential returns to us and our investors.

We rely on information technology in our operations, and any breach, interruption or security failure of that technology could have a negative impact on our business, operations and/or financial condition.

        Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber attacks.

        We collect and hold personally identifiable information of our residents and prospective residents in connection with our leasing and property management activities, and we collect and hold personally identifiable information of our associates in connection with their employment. In addition, we engage third party service providers that may have access to such personally identifiable information in connection with providing necessary information technology and security and other business services to us.

        We address potential breaches or disclosure of this confidential personally identifiable information by engaging reputable, recognized firms to help us design and maintain our information technology and data security systems, including testing and verification of their proper and secure operations on a periodic basis. We also maintain cyber risk insurance to cover certain risks arising out of data and network breaches.

        However, a failure in or breach of our operational or information security systems, or those of our third party service providers, as a result of cyber attacks or information security breaches could result in a wide range of potentially serious harm to our business operations and financial prospects, including (among others) disruption of our business and operations, disclosure or misuse of confidential or proprietary information (including personal information of our residents and/or associates), damage to our reputation, and/or potentially significant legal and/or financial liabilities.

Risk of earthquake damage.

        As further described in Item 2., "Communities—Insurance and Risk of Uninsured Losses," many of our West Coast communities are located in the general vicinity of active earthquake faults. We cannot assure you that an earthquake would not cause damage or losses greater than insured levels. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected community, as well as anticipated future revenue from that community. We would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. Any such loss could materially and adversely affect our business and our financial condition and results of operations.

        Insurance coverage for earthquakes can be costly due to limited industry capacity. As a result, we may experience shortages in desired coverage levels if market conditions are such that insurance is not available or the cost of insurance makes it, in management's view, economically impractical.

A significant uninsured property or liability loss could have a material adverse effect on our financial condition and results of operations.

        In addition to the earthquake insurance discussed above, we carry commercial general liability insurance, property insurance and terrorism insurance with respect to our communities on terms we consider commercially reasonable. There are, however, certain types of losses (such as losses arising from acts of war) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in management's view, economically impractical. If an uninsured property loss or a property loss in excess of insured limits were to occur, we could lose our capital invested in a community, as well as the anticipated future revenues from such community. We would also continue to

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be obligated to repay any mortgage indebtedness or other obligations related to the community. If an uninsured liability to a third party were to occur, we would incur the cost of defense and settlement with, or court ordered damages to, that third party. A significant uninsured property or liability loss could materially and adversely affect our business and our financial condition and results of operations.

We may incur costs and increased expenses to repair property damage resulting from inclement weather.

        Particularly in New England and the Metro New York/New Jersey area, we are exposed to risks associated with inclement weather, including increased costs related to winter weather, such as costs for the removal of snow and ice, repair of water and wind damage from storms, as well as from delays in construction. In addition, inclement weather could increase the need for maintenance and repair of our communities.

We may incur costs due to environmental contamination or non-compliance.

        Under various federal, state and local environmental and public health laws, regulations and ordinances, we may be required, regardless of knowledge or responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at our properties (including in some cases natural substances such as methane and radon gas) and may be held liable under these laws or common law to a governmental entity or to third parties for property, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination. These damages and costs may be substantial and may exceed any insurance coverage we have for such events. The presence of such substances, or the failure to properly remediate the contamination, may adversely affect our ability to borrow against, develop, sell or rent the affected property. In addition, some environmental laws create or allow a government agency to impose a lien on the contaminated site in favor of the government for damages and costs it incurs as a result of the contamination.

        The development, construction and operation of our communities are subject to regulations and permitting under various federal, state and local laws, regulations and ordinances, which regulate matters including wetlands protection, storm water runoff and wastewater discharge. Such laws and regulations may impose restrictions on the manner in which our communities may be developed, and noncompliance with such laws and regulations may subject us to fines and penalties. We do not currently anticipate that we will incur any material liabilities as a result of noncompliance with these laws.

        Certain federal, state and local laws, regulations and ordinances govern the removal, encapsulation or disturbance of asbestos containing materials ("ACMs") when such materials are in poor condition or in the event of renovation or demolition of a building. These laws and the common law may impose liability for release of ACMs and may allow third parties to seek recovery from owners or operators of real properties for personal injury associated with exposure to ACMs. We are not aware that any ACMs were used in the construction of the communities we developed. ACMs were, however, used in the construction of a number of the communities that we acquired. We implement an operations and maintenance program at each of the communities at which ACMs are detected. We do not currently anticipate that we will incur any material liabilities as a result of the presence of ACMs at our communities.

        We are aware that some of our communities have lead paint and have implemented an operations and maintenance program at each of those communities. We do not currently anticipate that we will incur any material liabilities as a result of the presence of lead paint at our communities.

        Environmental agencies and third parties may assert claims for remediation or personal injury based on the alleged actual or potential intrusion into buildings of chemical vapors from soils or groundwater underlying or in the vicinity of those buildings or on nearby properties. We currently do

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not anticipate that we will incur any material liabilities as a result of vapor intrusion at our communities.

        All of our stabilized operating communities, and all of the communities that we are currently developing, have been subjected to at least a Phase I or similar environmental assessment, which generally does not involve invasive techniques such as soil or ground water sampling. These assessments, together with subsurface assessments conducted on some properties, have not revealed, and we are not otherwise aware of, any environmental conditions that we believe would have a material adverse effect on our business, assets, financial condition or results of operations. In connection with our ownership, operation and development of communities, from time to time we undertake substantial remedial action in response to the presence of subsurface or other contaminants, including contaminants in soil, groundwater and soil vapor beneath or affecting our buildings. In some cases, an indemnity exists upon which we may be able to rely if environmental liability arises from the contamination or remediation costs exceed estimates. There can be no assurance, however, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that environmental liability arises.

        Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Although the occurrence of mold at multifamily and other structures, and the need to remediate such mold, is not a new phenomenon, there has been increased awareness in recent years that certain molds may in some instances lead to adverse health effects, including allergic or other reactions. To help limit mold growth, we educate residents about the importance of adequate ventilation and request or require that they notify us when they see mold or excessive moisture. We have established procedures for promptly addressing and remediating mold or excessive moisture from apartment homes when we become aware of its presence regardless of whether we or the resident believe a health risk is presented. However, we cannot provide assurance that mold or excessive moisture will be detected and remediated in a timely manner. If a significant mold problem arises at one of our communities, we could be required to undertake a costly remediation program to contain or remove the mold from the affected community and could be exposed to other liabilities that may exceed any applicable insurance coverage.

        Additionally, we have occasionally been involved in developing, managing, leasing and operating various properties for third parties. Consequently, we may be considered to have been an operator of such properties and, therefore, potentially liable for removal or remediation costs or other potential costs which relate to the release or presence of hazardous or toxic substances or petroleum products at such properties. We are not aware of any material environmental liabilities with respect to properties managed or developed by us or our predecessors for such third parties.

        We cannot assure you that:

•

the environmental assessments described above have identified all potential environmental liabilities;

•

no prior owner created any material environmental condition not known to us or the consultants who prepared the assessments;

•

no environmental liabilities have developed since the environmental assessments were prepared;

•

the condition of land or operations in the vicinity of our communities, such as the presence of underground storage tanks, will not affect the environmental condition of our communities;

•

future uses or conditions, including, without limitation, changes in applicable environmental laws and regulations, will not result in the imposition of environmental liability; and

20

•

no environmental liabilities will arise at communities that we have sold for which we may have liability.

Our success depends on key personnel whose continued service is not guaranteed.

        Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. Our executive officers make important capital allocation decisions or recommendations to our Board of Directors from among the opportunities identified by our regional offices. There is substantial competition for qualified personnel in the real estate industry, and the loss of several of our key personnel could adversely affect the Company.

Failure to qualify as a REIT would cause us to be taxed as a corporation, which would significantly reduce funds available for distribution to stockholders.

        If we fail to qualify as a REIT for federal income tax purposes, we will be subject to federal income tax on our taxable income at regular corporate rates (subject to any applicable alternative minimum tax). In addition, unless we are entitled to relief under applicable statutory provisions, we would be ineligible to make an election for treatment as a REIT for the four taxable years following the year in which we lose our qualification. The additional tax liability resulting from the failure to qualify as a REIT would significantly reduce or eliminate the amount of funds available for distribution to our stockholders. Furthermore, we would no longer be required to make distributions to our stockholders. Thus, our failure to qualify as a REIT could also impair our ability to expand our business and raise capital, and would adversely affect the value of our common stock.

        We believe that we are organized and qualified as a REIT, and we intend to operate in a manner that will allow us to continue to qualify as a REIT. However, we cannot assure you that we are qualified as a REIT, or that we will remain qualified in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial and administrative interpretations and involves the determination of a variety of factual matters and circumstances not entirely within our control. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of this qualification.

        Even if we qualify as a REIT, we will be subject to certain federal, state and local taxes on our income and property and on taxable income that we do not distribute to our shareholders. Our non-U.S. assets may be subject to foreign taxes. In addition, we may hold certain assets and engage in certain activities that a REIT could not engage in directly through our taxable REIT subsidiaries. We also use taxable REIT subsidiaries to hold certain assets that we believe would be subject to the 100% prohibited transaction tax if sold at a gain outside of a taxable REIT subsidiary. Our domestic taxable REIT subsidiaries are subject to U.S. tax as regular corporations. The Archstone Acquisition increased the amount of assets held through our taxable REIT subsidiaries.

The ability of our stockholders to control our policies and effect a change of control of our company is limited by certain provisions of our charter and bylaws and by Maryland law.

        There are provisions in our charter and bylaws that may discourage a third party from making a proposal to acquire us, even if some of our stockholders might consider the proposal to be in their best interests. These provisions include the following:

        Our charter authorizes our Board of Directors to issue up to 50,000,000 shares of preferred stock without stockholder approval and to establish the preferences and rights, including voting rights, of any series of preferred stock issued. The Board of Directors may issue preferred stock without stockholder

21

approval, which could allow the Board to issue one or more classes or series of preferred stock that could discourage or delay a tender offer or a change in control.

        To maintain our qualification as a REIT for federal income tax purposes, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by or for five or fewer individuals at any time during the last half of any taxable year. To maintain this qualification, and/or to address other concerns about concentrations of ownership of our stock, our charter generally prohibits ownership (directly, indirectly by virtue of the attribution provisions of the Code, or beneficially as defined in Section 13 of the Securities Exchange Act) by any single stockholder of more than 9.8% of the issued and outstanding shares of any class or series of our stock. In general, under our charter, pension plans and mutual funds may directly and beneficially own up to 15% of the outstanding shares of any class or series of stock. Under our charter, our Board of Directors may in its sole discretion waive or modify the ownership limit for one or more persons, but is not required to do so even if such waiver would not affect our qualification as a REIT. Our Board of Directors waived this ownership limit with respect to the common stock issued to Lehman in connection with the Archstone Acquisition. These ownership limits may prevent or delay a change in control and, as a result, could adversely affect our stockholders' ability to realize a premium for their shares of common stock.

        As a Maryland corporation, we are subject to the provisions of the Maryland General Corporation Law. Maryland law imposes restrictions on some business combinations and requires compliance with statutory procedures before some mergers and acquisitions may occur, which may delay or prevent offers to acquire us or increase the difficulty of completing any offers, even if they are in our stockholders' best interests. In addition, other provisions of the Maryland General Corporation Law permit the Board of Directors to make elections and to take actions without stockholder approval (such as classifying our Board such that the entire Board is not up for re-election annually) that, if made or taken, could have the effect of discouraging or delaying a change in control.

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ITEM 1b.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    COMMUNITIES

        Our real estate investments consist primarily of current operating apartment communities, communities in various stages of development ("Development Communities") and Development Rights (as defined below). Our current operating communities are further distinguished as Established Communities, Other Stabilized Communities, Lease-Up Communities and Redevelopment Communities, and exclude communities in which we obtained an indirect interest through joint ventures we formed with Equity Residential as part of the Archstone Acquisition. While we generally establish the classification of communities on an annual basis, we may update the classification of communities during the calendar year to the extent that our plans with regard to the disposition or redevelopment of a community change during the year. The following is a description of each category:

Current Communities are categorized as Established, Other Stabilized, Lease-Up, or Redevelopment according to the following attributes:

•

Established Communities (also known as Same Store Communities) are consolidated communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year. For the year ended December 31, 2013, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2012, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

•

Other Stabilized Communities includes all other completed communities that we own or have a direct or indirect ownership interest in, and that have stabilized occupancy, as defined above. Other Stabilized Communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year.

•

Lease-Up Communities are communities where construction has been complete for less than one year and where physical occupancy has not reached 95%.

•

Redevelopment Communities are communities where substantial redevelopment is in progress or is planned to begin during the current year. Redevelopment is considered substantial when capital invested during the reconstruction effort is expected to exceed the lesser of $5,000,000 or 10% of the community's pre-redevelopment basis and is expected to have a material impact on the operations of the community, including occupancy levels, and future rental rates.

Development Communities are communities that are under construction and for which a final certificate of occupancy has not been received. These communities may be partially complete and operating.

Development Rights are development opportunities in the early phase of the development process for which we either have an option to acquire land or enter into a leasehold interest, for which we are the buyer under a long-term conditional contract to purchase land or where we control the land through a ground lease or own land to develop a new community. We capitalize related pre-development costs incurred in pursuit of new developments for which we currently believe future development is probable.

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        We currently lease our corporate headquarters located in Arlington, Virginia under an operating lease. The lease term ends in 2020, subject to two five year renewal options. All other regional and administrative offices are leased under operating leases.

        As of December 31, 2013, communities that we owned or held a direct or indirect interest in were classified as follows.

	Number of communities		Number of apartment homes
Current Communities
Established Communities:
New England		29		7,222
Metro NY/NJ		25		8,416
Mid-Atlantic		11		4,443
Pacific Northwest		10		2,387
Northern California		18		5,224
Southern California		22		5,827
Total Established		115		33,519
Other Stabilized Communities:
New England		17		3,749
Metro NY/NJ		19		5,876
Mid-Atlantic		25		8,206
Pacific Northwest		5		1,142
Northern California		17		5,502
Southern California		33		10,562
Non-Core		3		1,030
Total Other Stabilized		119		36,067
Lease-Up Communities		7		2,099
Redevelopment Communities		3		1,126
Total Current Communities		244		72,811
Development Communities		29		8,708
Development Rights		46		12,986

        Our holdings under each of the above categories are discussed on the following pages.

        We generally establish the composition of our Established Communities portfolio annually. For the years ended December 31, 2013, 2012 and 2011, there were 19, 11 and 14 communities added to the Established Communities portfolio, respectively, and 7, 17 and 7 communities removed, respectively. We anticipate updating the composition of our Established Communities portfolio as of both January 1, 2014 and April 1, 2014. The expected April 1, 2014 update is primarily to incorporate the stabilized apartment communities acquired in February 2013 as part of the Archstone acquisition, although we will also add previously existing assets that we owned that qualify for inclusion in our Established Communities portfolio as of April 1, 2014.

Current Communities

        Our Current Communities include garden-style apartment communities consisting of multi-story buildings in landscaped settings, as well as mid and high rise apartment communities in urban settings. As of January 31, 2014, our current communities consisted of 145 garden-style (of which 16 are mixed communities and/or include town homes), 22 high-rise and 77 mid-rise apartment communities.

24

        Our communities generally offer a variety of quality amenities and features, which may include:

•

fully-equipped kitchens;

•

lofts and vaulted ceilings;

•

walk-in closets;

•

fireplaces;

•

patios/decks; and

•

modern appliances.

        Other features at various communities may include:

•

swimming pools;

•

fitness centers;

•

tennis courts; and

•

wi-fi lounges.

        As described in Item 1, we operate under three core brands Avalon, AVA, and Eaves by Avalon. Our core "Avalon" brand focuses on upscale apartment living and high end amenities and services. "AVA" targets customers in high energy, transit-served urban neighborhoods and generally feature smaller apartments, many of which are designed for roommate living with an emphasis on modern design and a technology focus. "Eaves by Avalon" is targeted to the cost conscious, "value" segment in suburban areas. We believe that these brands allow us to further penetrate our existing markets by targeting our market by consumer preference and attitude as well as by location and price.

        We also have an extensive and ongoing maintenance program to continually maintain and enhance our communities and apartment homes. The aesthetic appeal of our communities and a service-oriented property management team, focused on the specific needs of residents, enhances market appeal to discriminating residents. We believe our mission of Enhancing the Lives of our Residents helps us achieve higher rental rates and occupancy levels while minimizing resident turnover and operating expenses.

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        Our Current Communities are located in the following geographic markets:

	Number of communities at				Number of apartment homes at				Percentage of total apartment homes at
	1-31-13		1-31-14		1-31-13		1-31-14		1-31-13			1-31-14
New England		42		49		9,652		11,868		18.4	%		16.3	%
Boston, MA		29		34		6,792		8,518		12.9	%		11.7	%
Fairfield County, CT		13		15		2,860		3,350		5.5	%		4.6	%
Metro NY/NJ		38		45		12,698		14,676		24.2	%		20.2	%
Long Island, NY		8		10		2,281		2,881		4.4	%		4.0	%
Northern New Jersey		7		9		2,048		2,414		3.9	%		3.3	%
Central New Jersey		8		9		3,258		3,642		6.2	%		5.0	%
New York, NY		6		10		2,196		3,581		4.2	%		4.9	%
New York Suburban		9		7		2,915		2,158		5.6	%		3.0	%
Mid-Atlantic		21		37		8,493		13,118		16.2	%		18.0	%
Washington Metro		21		37		8,493		13,118		16.2	%		18.0	%
Pacific Northwest		12		16		2,810		3,794		5.4	%		5.2	%
Seattle, WA		12		16		2,810		3,794		5.4	%		5.2	%
Northern California		28		37		8,338		11,104		15.9	%		15.3	%
Oakland-East Bay, CA		8		10		2,573		3,244		4.9	%		4.5	%
San Francisco, CA		11		14		2,535		3,207		4.8	%		4.4	%
San Jose, CA		9		13		3,230		4,653		6.2	%		6.4	%
Southern California		37		57		10,436		17,221		19.9	%		23.7	%
Los Angeles, CA		18		34		4,636		10,344		8.8	%		14.2	%
Orange County, CA		11		13		3,017		3,745		5.8	%		5.1	%
San Diego, CA		8		10		2,783		3,132		5.3	%		4.3	%
Non-Core		—		3		—		1,030		0.0	%		1.4	%
		178		244		52,427		72,811		100.0	%		100.0	%

        We manage and operate substantially all of our Current Communities. During the year ended December 31, 2013, we completed construction of 4,907 apartment homes in 12 communities, and sold 4,907 apartment homes in 16 communities. The average age of our Current Communities, on a weighted average basis according to number of apartment homes, is 19.6 years. When adjusted to reflect redevelopment activity, as if redevelopment were a new construction completion date, the weighted average age of our Current Communities is 13.5 years.

        Of the Current Communities, as of January 31, 2014, we owned (directly or through wholly-owned subsidiaries):

•

a full fee simple, or absolute, ownership interest in 211 operating communities, 11 of which are on land subject to land leases expiring in October 2026, November 2028, May 2041, December 2061, September 2065, November 2067, April 2095, May 2105, September 2105, April 2106, and March 2142;

•

a general partnership interest and an indirect limited partnership interest in Fund I, Fund II, the U.S. Fund and the AC JV. Subsidiaries of Fund I own a fee simple interest in four operating communities, subsidiaries of Fund II own a fee simple interest in 12 operating communities, subsidiaries of the U.S. Fund own a fee simple interest in nine operating communities, and subsidiaries of the AC JV own a fee simple interest in two operating communities and one development community;

•

a general partnership interest in one partnership structured as a "DownREIT," as described more fully below, that owns one community; and

26

•

a membership interest in five limited liability companies, that each hold a fee simple interest in an operating community.

        For some communities, a land lease is used to support tax advantaged structures that ultimately allow us to purchase the land upon lease expiration. We have options to purchase the underlying land for certain of the land leases for which we have an absolute ownership interest that expire in October 2026, November 2028 and April 2095.

        We also hold, directly or through wholly-owned subsidiaries, the full fee simple ownership interest in 26 of the 29 Development Communities and a leasehold interest in three of the Development Communities with the land leases expiring in July 2046, December 2086, and November 2106. Two of the three land leases (those expiring in 2046 and 2086) provide options for the Company to purchase the land at some point during the lease term.

        In our partnership structured as a DownREIT, one of our wholly-owned subsidiaries is the general partner, and there are limited partners whose interest in the partnership is represented by units of limited partnership interest. Limited partners are entitled to receive an initial distribution before any distribution is made to the general partner. Under the partnership agreement for the DownREIT, the distributions per unit paid to the holders of units of limited partnership interests are equal to our current common stock dividend amount. The holders of units of limited partnership interest have the right to present all or some of their units for redemption for a cash amount as determined by the partnership agreement and based on the fair value of our common stock. In lieu of a cash redemption by the partnership, we may elect to acquire any unit presented for redemption for one share of our common stock or for such cash amount. As of January 31, 2014, there were 7,500 DownREIT partnership units outstanding. The DownREIT partnership is consolidated for financial reporting purposes.

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Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13			Average economic occupancy						Average rental rate					Financial reporting cost(5)
	City and state	Number of homes											2013			2012			$ per Apt(4)		$ per Sq. Ft.
CURRENT COMMUNITIES
NEW ENGLAND
Boston, MA
Avalon at Lexington	Lexington, MA		198		230,926		1994		1,166		92.9	%		95.1	%		96.1%	(2)		2,152		1.76			23,805
Avalon Oaks	Wilmington, MA		204		229,752		1999		1,126		81.4	%		95.9	%		96.5	%		1,451		1.24			22,675
Eaves Quincy	Quincy, MA		245		224,538		1986/1996		916		90.6	%		96.5	%		96.8	%		1,605		1.69			25,478
Avalon Essex	Peabody, MA		154		198,478		2000		1,289		90.3	%		96.3	%		97.0	%		1,846		1.38			23,175
Avalon Oaks West	Wilmington, MA		120		133,376		2002		1,111		95.0	%		96.1	%		96.3	%		1,588		1.37			17,360
Avalon Orchards	Marlborough, MA		156		175,399		2002		1,124		94.9	%		96.6	%		97.1	%		1,679		1.44			22,772
Avalon at Newton Highlands(11)	Newton, MA		294		341,717		2003		1,162		92.2	%		96.2	%		94.7	%		2,501		2.07			59,899
Avalon at The Pinehills	Plymouth, MA		192		151,712		2004/2011		790		95.0	%		97.0	%		96.0	%		1,966		2.41			37,413
Eaves Peabody	Peabody, MA		286		250,624		2004		876		91.3	%		96.0	%		96.3	%		1,490		1.63			35,433
Avalon at Bedford Center	Bedford, MA		139		159,912		2005		1,150		96.4	%		96.4	%		95.5	%		2,035		1.70			25,040
Avalon Chestnut Hill	Chestnut Hill, MA		204		270,956		2007		1,328		93.1	%		96.6	%		94.9	%		2,827		2.06			61,760
Avalon Shrewsbury	Shrewsbury, MA		251		272,880		2007		1,087		90.8	%		96.1	%		95.8	%		1,576		1.39			36,304
Avalon Danvers	Danvers, MA		433		492,345		2006		1,137		93.3	%		96.8	%		95.5	%		1,691		1.44			84,639
Avalon at Lexington Hills	Lexington, MA		387		484,560		2007		1,252		93.5	%		95.8	%		96.0	%		2,336		1.79			88,237
Avalon Acton	Acton, MA		380		375,119		2007		987		88.9	%		96.7	%		96.7	%		1,581		1.55			63,185
Avalon Sharon	Sharon, MA		156		175,389		2007		1,124		92.3	%		97.3	%		96.4	%		1,826		1.58			30,457
Avalon at Center Place(13)	Providence, RI		225		222,835		1991/1997		990		88.9	%		96.1	%		96.1%	(2)		2,523		2.45			37,046
Avalon at Hingham Shipyard	Hingham, MA		235		290,790		2009		1,237		89.4	%		95.3	%		94.4	%		2,425		1.87			53,940
Avalon Northborough	Northborough, MA		382		182,757		2009/2010		478		91.4	%		94.5	%		96.3	%		1,784		3.52			60,614
Avalon Blue Hills	Randolph, MA		276		269,675		2009		977		96.4	%		94.7	%		96.2	%		1,534		1.49			45,908
Avalon Cohasset	Cohasset, MA		220		293,272		2012		1,333		89.5	%		94.2	%		70.8%	(3)		1,999		1.41			54,980
Avalon Andover	Andover, MA		115		132,918		2012		1,156		90.4	%		94.4	%		63.1%	(3)		1,868		1.52			26,059
Eaves Burlington	Burlington, MA		203		198,193		1988/2012		976		92.1	%		96.1	%		96.1%	(3)		1,576		1.55			40,321
Avalon at Prudential Center III	Boston, MA		271		246,935		1968/1998		911		87.8	%		96.1	%(2)		95.2%	(2)		3,311		3.49	(2)		75,447
Avalon at Prudential Center II	Boston, MA		266		243,315		1968/1998		915		88.7	%		96.1	%(2)		95.2%	(2)		3,357		3.53	(2)		62,085
Avalon at Prudential Center I	Boston, MA		243		242,410		1968/1998		998		94.7	%		96.1	%(2)		94.9%	(2)		3,452		3.33	(2)		56,613
Avalon Burlington	Boston, MA		312		315,575		2013		1,011		86.9	%		96.1	%(3)		N/A			1,812		1.72	(3)		79,850
Avalon Bear Hill	Waltham, MA		324		391,394		1999/2013		1,208		93.5	%		96.1	%(3)		N/A			2,570		2.04	(3)		129,044
Eaves North Quincy	Quincy, MA		224		157,908		1977/2013		705		94.6	%		96.1	%(3)		N/A			1,747		2.38	(3)		53,572
Avalon Natick	Natick, MA		407		362,744		2011		891		95.1	%		96.1	%(3)		N/A			2,992		3.23	(3)		79,124
Fairfield-New Haven, CT
Eaves Trumbull	Trumbull, CT		340		379,242		1997		1,115		91.2	%		96.0	%		96.0	%		1,755		1.51			38,542
Eaves Stamford	Stamford, CT		238		222,165		1991		933		89.5	%		96.1	%(2)		96.2	%		2,063		2.12	(2)		41,315
Avalon Wilton I	Wilton, CT		102		158,259		1997		1,552		87.3	%		95.5	%		94.9%	(2)		3,281		2.02			22,543
Avalon Valley	Danbury, CT		268		299,923		1999		1,119		92.2	%		95.7	%		96.1	%		1,702		1.45			26,701
Avalon on Stamford Harbor	Stamford, CT		323		322,461		2003		998		90.7	%		95.7	%		95.5	%		2,507		2.40			63,739
Avalon New Canaan(12)	New Canaan, CT		104		132,080		2002		1,270		94.2	%		93.7	%		94.5	%		3,276		2.42			24,854
Avalon at Greyrock Place	Stamford, CT		306		315,380		2002		1,031		92.5	%		95.5	%		96.3	%		2,300		2.13			72,267
Avalon Danbury	Danbury, CT		234		235,320		2005		1,006		92.7	%		95.9	%		96.1	%		1,702		1.62			36,124
Avalon Darien	Darien, CT		189		242,675		2004		1,284		89.4	%		95.8	%		95.8	%		2,855		2.13			42,995
Avalon Milford I	Milford, CT		246		217,077		2004		882		93.9	%		96.0	%		95.7	%		1,595		1.74			32,022
Avalon Huntington	Shelton, CT		99		139,869		2008		1,413		91.9	%		97.3	%		96.0	%		2,283		1.57			25,406
Avalon Norwalk	Norwalk, CT		311		310,629		2011		999		91.6	%		96.7	%		95.6	%		2,079		2.01			74,254
Avalon Wilton II	Wilton, CT		100		128,716		2011		1,287		94.0	%		95.6	%		93.1	%		2,408		1.79			30,376
Avalon Shelton	Shelton, CT		250		249,190		2013		997		88.8	%		41.8	%(3)		N/A			3,789		1.59	(3)		48,185
Avalon East Norwalk	Norwalk, CT		240		223,698		2013		932		87.9	%		32.8	%(3)		N/A			3,423		1.20	(3)		46,089

28

Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13			Average economic occupancy						Average rental rate					Financial reporting cost(5)
	City and state	Number of homes											2013			2012			$ per Apt(4)		$ per Sq. Ft.
METRO NY/NJ
Long Island, NY
Avalon Commons	Smithtown, NY		312		377,240		1997		1,209		96.2	%		96.6	%		97.3	%		2,389		1.91			38,625
Avalon Towers	Long Beach, NY		109		124,611		1990/1995		1,143		90.8	%		95.7	%		96.4	%		3,543		2.96			21,705
Avalon Court	Melville, NY		494		596,874		1997/2000		1,208		94.3	%		96.2	%		96.2	%		2,725		2.17			61,981
Avalon at Glen Cove(13)	Glen Cove, NY		256		261,425		2004		1,021		95.3	%		96.9	%		96.6	%		2,582		2.45			68,833
Avalon Pines	Coram, NY		450		545,989		2005/2006		1,213		94.2	%		96.8	%		96.0	%		2,130		1.70			71,982
Avalon at Glen Cove North(13)	Glen Cove, NY		111		100,754		2007		908		91.0	%		96.5	%		97.0	%		2,494		2.65			40,080
Avalon Charles Pond	Coram, NY		200		208,532		2009		1,043		94.5	%		96.6	%		95.8	%		1,898		1.76			48,383
Avalon Rockville Centre	Rockville Centre, NY		349		349,048		2012		1,000		91.7	%		96.7	%		81.2%	(3)		2,884		2.79			110,834
Avalon Garden City	Garden City, NY		204		288,443		2012		1,414		93.6	%		95.4	%(3)		28.8%	(3)		3,541		2.39	(3)		67,483
Avalon Westbury	Westbury, NY		396		401,496		2006/2013		1,014		94.4	%		96.6	%(3)		N/A	(3)		2,631		2.51	(3)		119,210
Northern New Jersey
Avalon Cove	Jersey City, NJ		504		574,339		1997		1,140		92.9	%		96.1	%		96.0%	(2)		3,246		2.74			111,502
Avalon at Edgewater	Edgewater, NJ		408		428,792		2002		1,051		91.7	%		96.5	%		96.7	%		2,627		2.41			78,768
Avalon at Florham Park	Florham Park, NJ		270		330,410		2001		1,224		91.1	%		96.7	%		96.7	%		2,853		2.25			43,460
Avalon Lyndhurst	Lyndhurst, NJ		328		330,408		2006		1,007		92.4	%		96.2	%		96.1	%		2,224		2.12			79,022
Avalon North Bergen	North Bergen, NJ		164		146,170		2012		891		95.7	%		97.0	%		62.7%	(3)		2,036		2.22			40,172
Avalon at Wesmont Station	Wood-Ridge, NJ		266		242,637		2012		912		93.2	%		95.9	%		48.4%	(3)		1,997		2.10			57,459
Avalon at Wesmont Station II	Wood-Ridge, NJ		140		146,799		2013		1,049		97.9	%		65.8	%(3)		N/A			2,998		1.88	(3)		22,811
Avalon Hackensack(13)	Hackensack, NJ		226		228,184		2013		1,010		97.8	%		49.3	%(3)		N/A			3,202		1.56	(3)		44,270
Central New Jersey
Avalon Run(10)	Lawrenceville, NJ		632		707,592		1994/1996		1,120		91.9	%		96.1	%		96.1	%		1,565		1.34			77,630
Avalon Princeton Junction	West Windsor, NJ		512		486,069		1988		949		92.6	%		96.7	%		96.6	%		1,658		1.69			48,584
Avalon at Freehold	Freehold, NJ		296		317,356		2002		1,072		90.2	%		96.7	%		97.5	%		1,918		1.73			35,295
Avalon Run East	Lawrenceville, NJ		312		341,320		2003		1,094		91.0	%		96.5	%		96.6	%		1,914		1.69			52,734
Avalon at Tinton Falls	Tinton Falls, NJ		216		237,747		2007		1,101		94.9	%		96.4	%		96.8	%		1,911		1.67			41,161
Avalon West Long Branch	West Long Branch, NJ		180		193,511		2011		1,075		92.2	%		96.8	%		98.0	%		1,955		1.76			25,660
Avalon Somerset	Somerset, NJ		384		390,365		2013		1,017		90.1	%		51.9	%(3)		6.6%	(3)		1,903		0.97	(3)		75,894
New York, NY
Avalon Riverview I(13)	Long Island City, NY		372		332,991		2002		895		93.3	%		96.8	%		96.4	%		3,460		3.74			97,654
Avalon Bowery Place I	New York, NY		206		152,725		2006		741		96.6	%		96.7	%		97.0	%		5,094		6.64			95,323
Avalon Riverview North(13)	Long Island City, NY		602		477,665		2007		793		93.0	%		96.6	%		96.3	%		3,276		3.99			169,007
Avalon Bowery Place II	New York, NY		90		73,596		2007		818		95.6	%		96.5	%		96.9	%		4,682		5.53			57,689
Avalon Morningside Park(13)	New York, NY		295		245,320		2009		832		95.3	%		96.2	%		95.7	%		3,467		4.01			115,114
Avalon Fort Greene	Brooklyn, NY		631		498,651		2010		790		94.8	%		96.0	%		96.0	%		3,125		3.80			302,124
Avalon Midtown West	New York, NY		550		393,554		1998/2013		716		94.4	%		93.4	%(3)		N/A			4,002		5.22	(3)		346,771
Avalon Clinton North	New York, NY		339		181,672		2008/2013		536		91.4	%		94.6	%(3)		N/A			3,200		5.65	(3)		195,860
Avalon Clinton South	New York, NY		288		160,368		2007/2013		557		92.7	%		93.7	%(3)		N/A			3,248		5.47	(3)		166,439
New York Suburban, NY
Eaves Nanuet	Nanuet, NY		504		608,842		1998		1,208		91.9	%		96.9	%		97.2	%		2,224		1.78			57,368
Avalon Green	Elmsford, NY		105		113,538		1995		1,081		90.5	%		95.5	%		97.5	%		2,447		2.16			13,748
Avalon Willow	Mamaroneck, NY		227		216,161		2000		952		91.6	%		96.0	%		96.4	%		2,435		2.45			48,325
The Avalon	Bronxville, NY		110		118,952		1999		1,081		89.1	%		93.2	%(2)		96.0%	(2)		4,135		3.56	(2)		39,161
Avalon White Plains	White Plains, NY		407		372,406		2009		915		92.6	%		96.2	%		96.5	%		2,984		3.14			152,755
Avalon Green II	Elmsford, NY		444		533,539		2012		1,202		90.5	%		95.9	%		55.0%	(3)		2,519		2.01			104,549

29

Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13			Average economic occupancy						Average rental rate					Financial reporting cost(5)
	City and state	Number of homes											2013			2012			$ per Apt(4)		$ per Sq. Ft.
MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills(10)	Columbia, MD		720		724,027		1987/1996		1,006		94.2	%		95.9	%(2)		95.6%	(2)		1,523		1.45	(2)		58,877
Eaves Columbia Town Center	Columbia, MD		392		180,410		1986		460		90.9	%		96.1	%		95.8	%		1,542		3.22			55,764
Avalon Russett	Laurel, MD		238		274,663		1999/2013		1,154		95.0	%		95.1	%(3)		N/A			1,829		1.51	(3)		60,215
Washington Metro
Avalon at Foxhall	Washington, DC		308		297,875		1982		967		93.5	%		94.6	%		93.7	%		2,589		2.53			45,819
Avalon at Gallery Place	Washington, DC		203		184,157		2003		907		90.1	%		96.1	%		96.3	%		2,913		3.08			49,118
Eaves Washingtonian Center I	Gaithersburg, MD		192		191,280		1996		996		94.3	%		97.0	%		96.4	%		1,537		1.50			14,846
Eaves Washingtonian Center II	Gaithersburg, MD		96		99,386		1998		1,035		91.7	%		96.7	%		94.5	%		1,739		1.62			8,424
Avalon at Grosvenor Station	North Bethesda, MD		497		476,585		2004		959		93.8	%		95.2	%		96.2	%		1,975		1.96			83,925
Avalon at Traville	North Potomac, MD		520		573,717		2004		1,103		94.6	%		96.8	%		96.9	%		1,929		1.69			70,383
Eaves Fair Lakes	Fairfax, VA		420		355,228		1989/1996		846		93.3	%		96.4	%		96.8	%		1,552		1.77			38,532
AVA Ballston	Arlington, VA		344		294,271		1990		855		93.3	%		95.3	%(2)		92.8%	(2)		2,207		2.46	(2)		52,585
Eaves Fairfax City	Fairfax, VA		141		148,282		1988/1997		1,052		95.7	%		96.1	%		95.6%	(2)		1,813		1.66			16,449
Avalon Crescent	McLean, VA		558		613,426		1996		1,099		94.1	%		95.8	%		96.2	%		2,040		1.78			58,703
Avalon at Arlington Square	Arlington, VA		842		895,781		2001		1,064		94.3	%		95.4	%		95.7	%		2,121		1.90			114,830
Avalon Park Crest	Tysons Corner, VA		354		288,231		2010		814		94.9	%		83.7	%(3)		29.4%	(3)		2,480		2.55	(3)		77,042
Fairfax Towers	Falls Church, VA		415		336,051		1978/2011		810		94.0	%		96.4	%		96.8	%		1,747		2.08			93,255
AVA H Street	Washington, DC		138		95,594		2012		693		91.3	%		72.2	%(3)		4.7%	(3)		2,775		2.89	(3)		32,893
Archstone First & M	Washington, DC		469		410,812		2013		876		84.0	%		80.6	%(3)		N/A			2,879		2.65	(3)		200,037
The Albemarle	Washington, DC		228		256,610		1966/2013		1,123		95.2	%		96.9	%(3)		N/A			2,637		2.27	(3)		81,122
Eaves Tunlaw Gardens	Washington, DC		166		135,450		1944/2013		816		95.2	%		96.3	%(3)		N/A			1,817		2.15	(3)		41,079
The Statesman	Washington, DC		281		190,420		1961/2013		678		91.1	%		96.1	%(3)		N/A			1,972		2.80	(3)		76,888
Eaves Glover Park	Washington, DC		120		104,310		1953/2013		869		93.3	%		96.6	%(3)		N/A			2,329		2.59	(3)		37,710
The Consulate	Washington, DC		269		225,924		1978/2013		843		93.3	%		94.2	%(3)		N/A			2,181		2.45	(3)		84,714
Oakwood Philadelphia(15)	Philadelphia, PA		80		66,440		1945/2013		831		N/A			N/A	(3)		N/A			N/A		2.25	(3)		36,235
Avalon Ballston Place	Arlington, VA		383		333,677		2001/2013		871		94.8	%		95.3	%(3)		N/A			2,591		2.83	(3)		165,782
Eaves Tysons Corner	Vienna, VA		217		209,940		1980/2013		967		91.7	%		96.8	%(3)		N/A			1,798		1.80	(3)		63,690
Archstone Ballston Square	Arlington, VA		714		626,170		1992/2013		877		93.1	%		94.8	%(3)		N/A			2,374		2.57	(3)		297,083
Archstone Courthouse Place	Arlington, VA		564		478,896		1999/2013		849		92.2	%		94.9	%(3)		N/A			2,440		2.73	(3)		242,381
Avalon Reston Landing	Reston, VA		400		398,192		2000/2013		995		93.5	%		96.5	%(3)		N/A			1,831		1.77	(3)		113,921
Oakwood Arlington(15)	Arlington, VA		184		154,376		1987/2013		839		N/A			N/A	(3)		N/A			N/A		2.24	(3)		59,235
PACIFIC NORTHWEST
Seattle, WA
Avalon Redmond Place	Redmond, WA		222		211,450		1991/1997		952		94.1	%		95.4	%		96.2	%		1,577		1.58			32,519
Avalon at Bear Creek	Redmond, WA		264		288,250		1998		1,092		93.9	%		95.6	%		95.5	%		1,582		1.38			37,722
Avalon Bellevue	Bellevue, WA		200		165,504		2001		828		92.5	%		95.6	%		96.5	%		1,790		2.07			32,416
Avalon RockMeadow	Bothell, WA		206		243,958		2000		1,184		89.3	%		95.5	%		96.2	%		1,430		1.15			26,193
Avalon ParcSquare	Redmond, WA		124		127,251		2000		1,026		90.3	%		95.9	%		96.3	%		1,786		1.67			21,271
Avalon Brandemoor	Lynwood, WA		424		453,602		2001		1,070		93.4	%		95.9	%		96.1	%		1,301		1.17			46,902
AVA Belltown	Seattle, WA		100		82,418		2001		824		91.0	%		96.1	%		97.2	%		1,916		2.23			19,198
Avalon Meydenbauer	Bellevue, WA		368		331,945		2008		902		95.9	%		96.5	%		96.8	%		1,856		1.98			91,339
Avalon Towers Bellevue(13)	Bellevue, WA		397		331,366		2011		835		91.7	%		95.3	%		95.4	%		2,165		2.47			123,267
AVA Queen Anne	Seattle, WA		203		164,644		2012		811		92.1	%		95.6	%		69.0%	(3)		2,011		2.37			53,785
Avalon Brandemoor II	Lynwood, WA		82		93,320		2011		1,138		91.5	%		96.3	%		94.0	%		1,529		1.29			13,998
AVA Ballard	Seattle, WA		265		190,043		2012		717		92.1	%		47.9	%(3)		N/A			2,814		1.88	(3)		63,121
Eaves Redmond Campus	Redmond, WA		422		429,164		1991/2013		1,017		94.1	%		94.4	%(3)		N/A			1,760		1.63	(3)		114,623
Archstone Redmond Lakeview	Redmond, WA		166		141,000		1987/2013		849		97.6	%		96.0	%(3)		N/A			1,478		1.67	(3)		38,460

30

Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13									Average rental rate					Financial reporting cost(5)
		Number of homes											Average economic occupancy						$ per Apt(4)		$ per Sq. Ft.
	City and state												2013			2012
NORTHERN CALIFORNIA
Oakland-East Bay, CA
Avalon Fremont	Fremont, CA		308		316,052		1994		1,026		96.8	%		96.3	%		96.8	%		2,031		1.91			59,134
Eaves Dublin	Dublin, CA		204		179,004		1989/1997		877		95.1	%		96.4	%		95.8	%		1,836		2.02			29,575
Eaves Pleasanton	Pleasanton, CA		456		366,062		1988/1994		803		93.4	%		96.5	%		95.3	%		1,794		2.16			79,416
Eaves Union City	Union City, CA		208		150,225		1973/1996		722		93.3	%		96.4	%		97.1	%		1,516		2.02			23,866
Eaves Fremont	Fremont, CA		235		191,935		1985/1994		817		94.9	%		96.4	%		96.1	%		1,835		2.17			42,895
Avalon Union City	Union City, CA		439		429,768		2009		979		93.2	%		96.7	%		96.3	%		1,840		1.82			118,989
Avalon Walnut Creek(13)	Walnut Creek, CA		418		409,890		2010		981		95.2	%		95.8	%		95.8	%		2,305		2.25			146,994
Eaves Walnut Creek	Walnut Creek, CA		510		380,542		1987/2013		746		94.3	%		95.7	%(3)		N/A			1,614		2.07	(3)		116,914
Avalon Walnut Ridge I	Walnut Creek, CA		106		80,942		2000/2013		764		90.6	%		95.0	%(3)		N/A			1,952		2.43	(3)		30,530
Avalon Walnut Ridge II	Walnut Creek, CA		360		251,901		1989/2013		700		96.1	%		94.7	%(3)		N/A			1,698		2.30	(3)		87.425
San Francisco, CA
Eaves Daly City	Daly City, CA		195		141,411		1972/1997		725		95.9	%		96.0	%		97.0	%		1,939		2.57			32,508
AVA Nob Hill	San Francisco, CA		185		108,962		1990/1995		589		95.7	%		97.0	%		97.2	%		2,520		4.15			33,857
Eaves San Rafael	San Rafael, CA		254		221,780		1973/1996		873		91.7	%		97.4	%		96.4	%		1,911		2.13			46,888
Eaves Foster City	Foster City, CA		288		222,364		1973/1994		772		93.1	%		95.2	%		91.9	%(2)		2,073		2.56			50,505
Avalon Pacifica	Pacifica, CA		220		186,800		1971/1995		849		94.5	%		96.9	%		96.3	%		1,898		2.17			33,192
Avalon Sunset Towers	San Francisco, CA		243		171,836		1961/1996		707		95.5	%		95.2	%		96.1	%(2)		2,391		3.22			39,716
Eaves Diamond Heights	San Francisco, CA		154		123,047		1972/1994		799		96.1	%		96.7	%		96.1	%		2,341		2.83			29,646
Avalon at Mission Bay North	San Francisco, CA		250		241,788		2003		967		94.0	%		96.1	%		96.7	%		3,975		3.95			94,405
Avalon at Mission Bay III	San Francisco, CA		260		261,169		2009		1,004		97.3	%		96.2	%		96.3	%		3,977		3.81			147,918
Avalon Ocean Avenue	San Francisco, CA		173		161,083		2012		931		95.4	%		96.5	%		47.5	%(3)		3,104		3.22			58,152
Archstone San Bruno	San Bruno, CA		300		267,171		2004/2013		891		96.0	%		94.9	%(3)		N/A			2,400		2.56	(3)		112,220
Archstone San Bruno II	San Bruno, CA		185		156,583		2007/2013		846		96.2	%		95.8	%(3)		N/A			2,275		2.58	(3)		70,397
Archstone San Bruno III	San Bruno, CA		187		231,306		2010/2013		1,237		95.7	%		95.6	%(3)		N/A			3,222		2.49	(3)		98,567
San Jose, CA
Avalon Campbell	Campbell, CA		348		326,796		1995		939		95.4	%		95.2	%(2)		95.7	%(2)		2,041		2.07	(2)		72,773
Eaves San Jose	San Jose, CA		440		322,992		1985/1996		734		94.4	%		96.5	%(2)		93.8	%(2)		1,908		2.51	(2)		84,791
Avalon on the Alameda	San Jose, CA		305		299,762		1999		983		94.8	%		96.5	%		96.2	%		2,317		2.27			57,964
Avalon Silicon Valley	Sunnyvale, CA		710		653,929		1997/1998		921		95.9	%		96.2	%		95.2	%		2,352		2.46			124,896
Avalon Mountain View(12)	Mountain View, CA		248		211,552		1986		853		96.4	%		96.0	%		96.3	%		2,520		2.84			58,659
Eaves Creekside	Mountain View, CA		294		215,680		1962/1997		734		92.9	%		95.9	%(2)		96.5	%		1,973		2.58	(2)		44,425
Avalon at Cahill Park	San Jose, CA		218		218,177		2002		1,001		95.0	%		96.2	%		95.8	%		2,361		2.27			53,284
Avalon Towers on the Peninsula	Mountain View, CA		211		218,392		2002		1,035		97.2	%		96.0	%		95.2	%		3,333		3.09			66,654
Avalon Willow Glen	San Jose, CA		412		382,147		2002/2013		928		94.4	%		95.0	%(3)		N/A			2,107		2.16	(3)		131,888
Eaves West Valley	San Jose, CA		789		504,171		1970/2013		639		95.1	%		95.0	%(3)		N/A			1,592		2.37	(3)		211,273
Eaves Mountain View at Middlefield	Mountain View, CA		402		261,702		1969/2013		651		95.0	%		96.0	%(3)		N/A			2,079		3.07	(3)		137,629
Eaves West Valley II	San Jose, CA		84		71,136		2013		847		76.2	%		26.2	%(3)		N/A			816		0.25	(3)		17,291

31

Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13									Average rental rate					Financial reporting cost(5)
		Number of homes											Average economic occupancy						$ per Apt(4)		$ per Sq. Ft.
	City and state												2013			2012
SOUTHERN CALIFORNIA
Orange County, CA
AVA Newport	Costa Mesa, CA		145		122,415		1956/1996		844		86.2	%		96.0	%		94.9	%(2)		1,940		2.21			15,590
Avalon Mission Viejo	Mission Viejo, CA		166		124,600		1984/1996		751		93.4	%		95.9	%		96.6	%		1,337		1.71			14,260
Eaves South Coast	Costa Mesa, CA		258		207,672		1973/1996		805		94.6	%		95.4	%		95.7	%		1,616		1.92			33,541
Eaves Santa Margarita	Rancho Santa Margarita, CA		301		229,593		1990/1997		763		92.7	%		96.2	%		94.4	%(2)		1,490		1.88			31,766
Eaves Huntington Beach	Huntington Beach, CA		304		268,000		1971/1997		882		95.1	%		96.0	%		96.3	%		1,606		1.75			34,138
Avalon Anaheim Stadium	Anaheim, CA		251		302,480		2009		1,205		86.5	%		96.1	%		95.4	%		2,279		1.82			97,626
Avalon Irvine	Irvine, CA		279		243,157		2010		872		91.4	%		95.0	%		95.1	%		1,851		2.02			77,501
The Springs(6)	Corona, CA		320		241,440		1987/2006		755		93.4	%		96.6	%		96.9	%		1,099		1.41			30,047
Eaves Lake Forest	Lake Forest, CA		225		215,319		1975/2011		957		91.1	%		96.4	%		95.5	%		1,538		1.55			26,728
Avalon Irvine II	Irvine, CA		179		160,987		2012		899		87.2	%		76.1	%(3)		8.3	%(2)		1,916		1.62	(3)		45,229
Eaves Seal Beach	Seal Beach, CA		549		387,594		1971/2013		706		91.3	%		94.7	%(3)		N/A			1,731		2.32	(3)		151,083
San Diego, CA
Avalon at Mission Bay	San Diego, CA		564		402,285		1969/1997		713		94.5	%		96.5	%		96.2	%		1,514		2.05			68,132
Eaves Mission Ridge	San Diego, CA		200		207,700		1960/1997		1,039		91.0	%		96.3	%		95.9	%		1,753		1.63			24,825
AVA Cortez Hill	San Diego, CA		299		230,395		1973/1998		771		92.0	%		95.8	%		92.3	%(2)		1,729		2.15			46,367
Avalon Fashion Valley	San Diego, CA		161		183,802		2008		1,142		92.5	%		96.8	%		94.2	%		2,380		1.80			64,884
Eaves San Marcos	San Marcos, CA		184		161,352		1988/2011		877		93.5	%		96.2	%		96.6	%		2,381		1.70			16,662
Eaves Rancho Penasquitos	San Diego, CA		250		191,256		1986/2011		765		92.8	%		96.2	%		94.4	%		2,382		1.86			33,872
Archstone La Jolla Colony	San Diego, CA		180		137,036		1987/2013		761		91.1	%		97.0	%(3)		N/A			2,383		2.14	(3)		46,094
Eaves La Mesa	La Mesa, CA		168		139,428		1989/2013		830		93.5	%		95.8	%(3)		N/A			2,384		1.80	(3)		39,069
Los Angeles, CA
AVA Burbank	Burbank, CA		748		530,160		1961/1997		709		93.6	%		95.1	%(2)		97.2	%(2)		1,548		2.08	(2)		93,048
Avalon Woodland Hills	Woodland Hills, CA		663		594,396		1989/1997		897		93.8	%		96.7	%		96.7	%		1,702		1.84			111,131
Eaves Warner Center	Woodland Hills, CA		227		191,443		1979/1998		843		93.8	%		97.4	%		97.4	%		1,621		1.87			29,218
Avalon at Glendale(13)	Burbank, CA		223		241,714		2003		1,084		94.2	%		95.6	%		96.8	%		2,378		2.10			43,217
Avalon Burbank	Burbank, CA		400		360,587		1988/2002		901		93.8	%		96.3	%		96.1	%		2,281		2.44			94,643
Avalon Camarillo	Camarillo, CA		249		233,273		2006		937		95.6	%		96.1	%		96.3	%		1,698		1.74			48,822
Avalon Wilshire	Los Angeles, CA		123		125,093		2007		1,017		95.9	%		95.1	%		96.2	%		2,865		2.68			47,595
Avalon Encino	Los Angeles, CA		131		131,220		2008		1,002		89.3	%		97.7	%		97.4	%		2,660		2.60			62,242
Avalon Warner Place	Canoga Park, CA		210		186,402		2007		888		95.2	%		97.0	%		96.6	%		1,710		1.87			52,931
Eaves Phillips Ranch	Pomona, CA		501		498,036		1989/2011		994		94.8	%		96.6	%		96.4	%		1,507		1.46			51,595
Eaves San Dimas	San Dimas, CA		102		94,200		1978/2011		924		97.1	%		97.2	%		96.6	%		1,338		1.41			9,759
Eaves San Dimas Canyon	San Dimas, CA		156		144,669		1981/2011		927		92.9	%		97.1	%		96.6	%		1,436		1.50			15,561
AVA Pasadena	Pasadena, CA		84		70,648		1973/2012		841		90.5	%		87.8	%(2)		97.9	%(3)		1,837		1.92	(2)		23,534
Eaves Cerritos	Artesia, CA		151		106,961		1973/2012		708		95.4	%		95.2	%		93.7	%(3)		1,406		1.89			29,500
Avalon Del Rey	Del Rey, CA		309		283,183		2006/2012		916		93.5	%		96.8	%		97.2	%(3)		2,154		2.27			103,205
Avalon Simi Valley	Simi Valley, CA		500		430,218		2007/2013		860		95.0	%		96.4	%(3)		N/A			1,674		1.88	(3)		119,684
Archstone Studio City II	Studio City, CA		101		84,207		1991/2013		834		92.1	%		94.0	%(3)		N/A			1,937		2.18	(3)		28,523

32

Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13								Average rental rate					Financial reporting cost(5)
		Number of homes											Average economic occupancy					$ per Apt(4)		$ per Sq. Ft.
	City and state												2013			2012
Archstone Studio City III	Studio City, CA		276		263,512		2002/2013		955		91.7	%		94.4	%(3)		N/A		2,330		2.30	(3)		97,194
Avalon Calabasas	Calabasas, CA		600		506,394		1988/2013		844		92.7	%		95.5	%(3)		N/A		1,749		1.98	(3)		156,518
Avalon Oak Creek	Agoura Hills, CA		336		364,176		2004/2013		1,084		92.6	%		94.8	%(3)		N/A		2,281		2.00	(3)		127,587
Avalon Santa Monica on Main	Santa Monica, CA		133		122,502		2007/2013		921		90.2	%		93.8	%(3)		N/A		4,040		4.11	(3)		95,736
Avalon Del Mar Station	Pasadena, CA		347		338,466		2006/2013		975		93.7	%		94.3	%(3)		N/A		2,220		2.15	(3)		130,181
Eaves Old Town Pasadena	Pasadena, CA		96		66,420		1972/2013		692		94.8	%		96.4	%(3)		N/A		1,726		2.41	(3)		25,468
Eaves Thousand Oaks	Thousand Oaks, CA		154		134,388		1992/2013		873		93.5	%		95.7	%(3)		N/A		1,861		2.04	(3)		35,835
Eaves Los Feliz	Los Angeles, CA		263		201,830		1989/2013		767		92.8	%		96.0	%(3)		N/A		1,749		2.19	(3)		65,273
Oakwood Toluca Hills(15)	Los Angeles, CA		1,151		795,442		1973/2013		691		N/A			N/A	(3)		N/A		N/A		2.07	(3)		256,316
Eaves Woodland Hills	Woodland Hills, CA		883		578,365		1971/2013		655		95.1	%		95.8	%(3)		N/A		1,374		2.01	(3)		166,429
Avalon Thousand Oaks Plaza	Thousand Oaks, CA		148		140,452		2002/2013		949		95.9	%		96.5	%(3)		N/A		1,944		1.98	(3)		37,031
Avalon Pasadena	Pasadena, CA		120		102,516		2004/2013		854		92.5	%		95.1	%(3)		N/A		2,343		2.61	(3)		43,325
Archstone Studio City	Studio City, CA		450		331,324		1987/2013		736		93.3	%		94.9	%(3)		N/A		1,801		2.32	(3)		112,222
Non-Core
Archstone Lexington	Flower Mound, TX		222		218,309		2000/2013		983		91.4	%		96.3	%(3)		N/A		1,300		1.27	(3)		32,108
Archstone Memorial Heights	Houston, TX		556		434,236		1996/2013		781		91.0	%		95.4	%(3)		N/A		1,397		1.71	(3)		187,351
DEVELOPMENT COMMUNITIES
Avalon Exeter(13)	Boston, MA		187		200,641		N/A		1,073		17.6	%		N/A	(3)		N/A		N/A		N/A	(3)		95,579
Avalon West Chelsea/AVA High Line(13)	New York, NY		710		226,556		N/A		319		N/A			N/A	(3)		N/A		N/A		N/A	(3)		228,950
Avalon Mosaic	Tysons Corner, VA		531		458,198		N/A		863		27.7	%		6.5	%(3)		N/A		N/A		N/A	(3)		110,310
Avalon/AVA Assembly Row(13)	Somerville, MA		445		181,910		N/A		409		19.5	%		N/A	(3)		N/A		N/A		N/A	(3)		99,880
AVA University District	Seattle, WA		283		201,389		N/A		712		42.4	%		22.6	%(3)		N/A		N/A		N/A	(3)		68,640
Avalon Dublin Station II	Dublin, CA		253		247,301		N/A		977		24.5	%		N/A	(3)		N/A		N/A		N/A	(3)		74,099
Avalon Morrison Park	San Jose, CA		250		277,710		N/A		1,111		22.0	%		4.0	%(3)		N/A		N/A		N/A	(3)		68,443
AVA 55 Ninth	San Francisco, CA		273		236,907		N/A		868		4.0	%		N/A	(3)		N/A		N/A		N/A	(3)		100,858
Avalon Bloomingdale	Bloomingdale, NJ		174		176,542		N/A		1,015		71.8	%		27.2	%(3)		N/A		N/A		N/A	(3)		28,831
Avalon Wharton	Wharton, NJ		248		246,814		N/A		995		N/A			N/A	(3)		N/A		N/A		N/A	(3)		20,533
Avalon Ossining	Ossining, NY		168		184,137		N/A		1,096		12.5	%		N/A	(3)		N/A		N/A		N/A	(3)		24,768
AVA Little Tokyo	Los Angeles, CA		280		282,917		N/A		1,010		N/A			N/A	(3)		N/A		N/A		N/A	(3)		62,238
AVA Stuart Street	Boston, MA		398		324,768		N/A		816		N/A			N/A	(3)		N/A		N/A		N/A	(3)		52,037
Avalon Canton	Canton, MA		196		235,437		N/A		1,201		6.1	%		N/A	(3)		N/A		N/A		N/A	(3)		20,638
Avalon at Stratford	Stratford, CT		130		148,720		N/A		1,144		N/A			N/A	(3)		N/A		N/A		N/A	(3)		13,398
Avalon Bloomfield Station	Bloomfield, NJ		224		211,008		N/A		942		N/A			N/A	(3)		N/A		N/A		N/A	(3)		12,332
Avalon Willoughby Square/AVA DoBro	New York, NY		826		606,284		N/A		734		N/A			N/A	(3)		N/A		N/A		N/A	(3)		172,272
Avalon Huntington Station	Huntington Station, NY		303		364,602		N/A		1,203		1.3	%		N/A	(3)		N/A		N/A		N/A	(3)		48,921
Avalon Alderwood I	Lynnwood, WA		367		352,320		N/A		960		N/A			N/A	(3)		N/A		N/A		N/A	(3)		31,288
Avalon Hayes Valley	San Francisco, CA		182		135,044		N/A		742		N/A			N/A	(3)		N/A		N/A		N/A	(3)		39,052
Avalon Baker Ranch	Lake Forest, CA		430		424,840		N/A		988		N/A			N/A	(3)		N/A		N/A		N/A	(3)		34,803
Avalon Vista	Vista, CA		221		222,768		N/A		1,008		N/A			N/A	(3)		N/A		N/A		N/A	(3)		15,349
Avalon San Dimas	San Dimas, CA		156		152,724		N/A		979		N/A			N/A	(3)		N/A		N/A		N/A	(3)		18,729
Avalon Glendora	Los Angeles, CA		256		242,176		N/A		946		N/A			N/A	(3)		N/A		N/A		N/A	(3)		23,052

33

Profile of Current, Development and Unconsolidated Communities(1)(14)

				Approx. rentable area (Sq. Ft.)		Year of completion/ acquisition		Average size (Sq. Ft.)		Physical occupancy at 12/31/13									Average rental rate					Financial reporting cost(5)
		Number of homes											Average economic occupancy						$ per Apt(4)		$ per Sq. Ft.
	City and state												2013			2012
Maple Leaf(9)	Cambridge, MA		103		46,453		N/A		451		N/A			N/A	(3)		N/A			N/A		N/A	(3)		N/A
Avalon Arlington North	Arlington, VA		228		268,618		N/A		1,178		14.5	%		N/A	(3)		N/A			N/A		N/A	(3)		69,524
Avalon Berkeley	Berkeley, CA		94		79,524		N/A		846		N/A			N/A	(3)		N/A			N/A		N/A	(3)		23,096
Archstone Toscano	Houston, TX		474		460,983		N/A		973		62.9	%		37.9	%(3)		N/A			1,336		N/A	(3)		86,419
Archstone Memorial Heights Phase I	Houston, TX		318		305,262		N/A		960		4.7	%		N/A(3	)		N/A			N/A		N/A	(3)		35,920
UNCONSOLIDATED COMMUNITIES(14)
Avalon at Mission Bay North II(12)	San Francisco, CA		313		291,556		2006		931		93.9	%		96.5	%		96.3	%		3,843		3.98			N/A
Avalon Chrystie Place I(12)	New York, NY		361		266,940		2005		739		94.5	%		94.2	%		95.7	%		4,651		5.93			N/A
South Hills Apartments(6)	West Covina, CA		85		104,600		1966/2007		1,231		92.9	%		97.0	%		96.4	%		1,807		1.42			N/A
Weymouth Place(6)	Weymouth, MA		211		154,957		1971/2007		734		90.5	%		95.8	%		97.3	%		1,331		1.74			N/A
Avalon at Rutherford Station(6)	East Rutherford, NJ		108		112,709		2005/2007		1,044		92.6	%		96.2	%		95.9	%		2,383		2.20			N/A
Avalon Fair Oaks(7)	Fairfax, VA		491		373,843		1987/2009		761		93.7	%		96.5	%		97.0	%		1,504		1.91			N/A
Avalon Bellevue Park(7)	Bellevue, WA		220		165,948		1994/2009		754		95.9	%		95.8	%		95.7	%		1,516		1.92			N/A
Eaves Tustin(7)	Tustin, CA		628		511,992		1968/2010		815		92.4	%		96.0	%		95.1	%		1,469		1.73			N/A
Eaves Los Alisos(7)	Lake Forest, CA		140		126,480		1978/2010		903		92.1	%		97.4	%		95.6	%		1,448		1.56			N/A
Eaves Carlsbad(7)	San Diego, CA		450		340,371		1985/2011		756		92.4	%		96.4	%		96.3	%		1,403		1.79			N/A
Eaves Rancho San Diego(7)	San Diego, CA		676		587,500		1985/2011		869		90.8	%		95.7	%		95.9	%		1,463		1.61			N/A
Briarwood Apartments(7)	Owings Mills, MD		348		340,868		1999/2010		980		93.7	%		96.2	%		96.1	%		1,283		1.26			N/A
Eaves Gaithersburg(7)	Gaithersburg, MD		684		658,846		1974/2010		963		94.6	%		96.4	%		95.4	%		1,326		1.33			N/A
Eaves Rockville(7)	Rockville, MD		210		403,912		1970/2011		1,923		95.2	%		96.9	%		90.2	%		2,162		1.09			N/A
Eaves Plainsboro(7)	Plainsboro, NJ		776		553,320		1973/2010		713		90.5	%		96.4	%		96.6	%		1,215		1.64			N/A
Captain Parker Arms(7)	Lexington, MA		94		88,680		1965/2011		943		95.7	%		95.8	%		96.0	%		2,116		2.15			N/A
Avalon Watchung(7)	Watchung, NJ		334		336,586		2003/2012		1,008		94.9	%		96.3	%		96.2	%		1,945		1.86			N/A
Archstone North Point(9)	Cambridge, MA		426		383,537		2008/2013		900		89.2	%		94.0	%(3)		N/A			3,354		3.50	(3)		N/A
Avalon Station 250(8)	Dedham, MA		285		306,375		2011/2013		1,075		90.2	%		94.9	%(3)		N/A			2,094		1.85	(3)		N/A
Avalon Kips Bay(8)	New York, NY		209		152,865		1997/2013		731		94.3	%		93.3	%(3)		N/A			4,581		5.84	(3)		N/A
Brandywine(12)	Washington, DC		305		390,456		1954/2013		1,280		N/A			92.0	%(3)		N/A			2,388		1.72	(3)		N/A
Archstone Woodland Park(9)	Herndon, VA		392		393,112		2000/2013		1,003		92.9	%		95.0	%(3)		N/A			1,694		1.60	(3)		N/A
Avalon Grosvenor Tower(8)	Bethesda, MD		237		229,392		1987/2013		972		94.5	%		94.1	%(3)		N/A			2,107		2.05	(3)		N/A
Eaves Sunnyvale(8)	Sunnyvale, CA		192		204,096		1991/2013		1,063		95.3	%		95.7	%(3)		N/A			2,591		2.33	(3)		N/A
Boca Town Center(8)	Boca Raton, FL		252		268,128		1988/2013		1,064		90.1	%		95.1	%(3)		N/A			1,520		1.36	(3)		N/A
Avalon Kirkland at Carillon Point(8)	Kirkland, WA		131		174,720		1990/2013		1,344		90.1	%		95.6	%(3)		N/A			2,510		1.80	(3)		N/A
Avalon Studio 4041(8)	Studio City, CA		149		125,299		2009/2013		841		96.0	%		94.9	%(3)		N/A			2,187		2.47	(3)		N/A
Avalon Marina Bay(8) (13)	Marina del Rey, CA		205		167,075		1967/2013		815		35.6	%		65.4	%(2)(3)		N/A			1,259		1.01	(3)		N/A
Avalon Venice on Rose(8)	Venice, CA		70		84,490		2011/2013		1,207		91.4	%		93.3	%(3)		N/A			4,655		3.60	(3)		N/A

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1.	We own a fee simple interest in the communities listed, excepted as noted below.
2.	Represents a community that was under redevelopment during the year, which could result in lower average economic occupancy and average rental rate per square foot for the year.
3.	Represents a community that is under construction at the respective year end or that completed development or was purchased during the year, which could result in lower average economic occupancy and average rental rate per square foot for the year.
4.	Represents the average rental revenue per occupied apartment home.
5.	Dollars in thousands. Costs are presented in accordance with GAAP. For current Development Communities, cost represents total costs incurred through December 31, 2013. Financial reporting costs are excluded for unconsolidated communities, see Note 6, "Investments in Real Estate Entities."
6.	We own a 15.2% combined general partnership and indirect limited partner equity interest in this community.
7.	We own a 31.3% combined general partnership and indirect limited partner equity interest in this community.
8.	We own a 28.6% combined general partnership and indirect limited partner equity interest in this community.
9.	We own a 20.0% combined general partnership and indirect limited partner equity interest in this community.
10.	We own a general partnership interest in a partnership that owns a fee simple interest in this community.
11.	We own a general partnership interest in a partnership structured as a DownREIT that owns this community.
12.	We own a membership interest in a limited liability company that holds a fee simple interest in this community.
13.	Community is located on land subject to a land lease.
14.	Does not include our indirect interest in the joint venture formed with Equity Residential (as defined in this Form 10-K).
15.	Community is master leased to a third party manager.

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Development Communities

        As of December 31, 2013, we had 29 Development Communities under construction. We expect these Development Communities, when completed, to add a total of 8,708 apartment homes to our portfolio for a total capitalized cost, including land acquisition costs, of approximately $2,802,900,000. In addition, the land for three Development Communities that we control under long-term land lease agreements is subject to future minimum rental amounts of approximately $8,552,000 in 2014 in the aggregate. We cannot assure you that we will meet our schedule for construction completion or that we will meet our budgeted costs, either individually, or in the aggregate. You should carefully review Item 1a., "Risk Factors," for a discussion of the risks associated with development activity and our discussion under Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," for further discussion of development activity.

        The following table presents a summary of the Development Communities. We hold a direct or indirect fee simple ownership interest in these communities except where noted.

		Number of apartment homes		Projected total capitalized cost(1) ($ millions)		Construction start	Initial projected occupancy(2)	Estimated completion	Estimated stabilization(3)
1.	Archstone Toscano		474	$	90.2	Q2 2011	Q1 2013	Q1 2014	Q3 2014
	Houston, TX
2.	Avalon Bloomingdale		174		32.2	Q3 2012	Q3 2013	Q1 2014	Q3 2014
	Bloomingdale, NJ
3.	AVA University District		283		75.7	Q2 2012	Q3 2013	Q2 2014	Q4 2014
	Seattle, WA
4.	Avalon Mosaic		531		116.4	Q1 2012	Q3 2013	Q4 2014	Q2 2015
	Tysons Corner, VA
5.	Avalon West Chelsea/AVA High Line(4)		710		276.1	Q4 2011	Q4 2013	Q1 2015	Q3 2015
	New York, NY
6.	Avalon Arlington North(5)		228		87.2	Q2 2012	Q4 2013	Q3 2014	Q1 2015
	Arlington, VA
7.	Avalon Morrison Park		250		79.7	Q3 2012	Q4 2013	Q3 2014	Q1 2015
	San Jose, CA
8.	Avalon Dublin Station II		253		77.7	Q2 2012	Q1 2014	Q2 2014	Q4 2014
	Dublin, CA
9.	Avalon/AVA Assembly Row(4)		445		113.5	Q2 2012	Q1 2014	Q3 2014	Q1 2015
	Somerville, MA
10.	AVA 55 Ninth		273		123.3	Q3 2012	Q1 2014	Q4 2014	Q2 2015
	San Francisco, CA
11.	Avalon Exeter(4)		187		120.0	Q2 2011	Q1 2014	Q3 2014	Q1 2015
	Boston, MA
12.	Avalon Ossining		168		37.4	Q4 2012	Q1 2014	Q3 2014	Q1 2015
	Ossining, NY
13.	Avalon Canton		196		40.9	Q2 2013	Q1 2014	Q4 2014	Q2 2015
	Canton, MA
14.	Avalon Huntington Station		303		83.3	Q1 2013	Q1 2014	Q1 2015	Q3 2015
	Huntington Station, NY
15.	Archstone Memorial Heights Phase I		318		54.9	Q3 2012	Q1 2014	Q3 2014	Q1 2015
	Houston, TX
16.	Avalon Berkeley(5)		94		30.2	Q3 2012	Q2 2014	Q3 2014	Q4 2014
	Berkeley, CA
17.	AVA Little Tokyo		280		109.8	Q4 2012	Q3 2014	Q2 2015	Q4 2015
	Los Angeles, CA
18.	Avalon Wharton		248		55.6	Q4 2012	Q1 2015	Q3 2015	Q1 2016
	Wharton, NJ
19.	AVA Stuart Street		398		175.7	Q1 2013	Q1 2015	Q3 2015	Q1 2016
	Boston, MA
20.	Avalon Alderwood I		367		69.2	Q2 2013	Q2 2014	Q2 2015	Q4 2015
	Lynnwood, WA
21.	Avalon San Dimas		156		41.4	Q2 2013	Q4 2014	Q1 2015	Q3 2015
	San Dimas, CA
22.	Maple Leaf(6)		103		28.0	Q3 2013	Q3 2014	Q4 2014	Q1 2015
	Cambridge, MA

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		Number of apartment homes		Projected total capitalized cost(1) ($ millions)		Construction start	Initial projected occupancy(2)	Estimated completion	Estimated stabilization(3)
23.	Avalon at Stratford		130		29.7	Q3 2013	Q3 2014	Q4 2014	Q2 2015
	Stratford, CT
24.	Avalon Hayes Valley		182		90.2	Q3 2013	Q1 2015	Q2 2015	Q4 2015
	San Francisco, CA
25.	Avalon Willoughby Square/AVA DoBro		826		444.9	Q3 2013	Q3 2015	Q4 2016	Q2 2017
	Brooklyn, NY
26.	Avalon Baker Ranch		430		132.9	Q4 2013	Q1 2015	Q1 2016	Q3 2016
	Lake Forest, CA
27.	Avalon Vista		221		58.3	Q4 2013	Q2 2015	Q4 2015	Q2 2016
	Vista, CA
28.	Avalon Bloomfield Station		224		53.4	Q4 2013	Q3 2015	Q1 2016	Q3 2016
	Bloomfield, NJ
29.	Avalon Glendora		256		75.1	Q4 2013	Q3 2015	Q1 2016	Q3 2016
	Glendora, CA
	Total		8,708	$	2,802.9

(1)

Projected total capitalized cost includes all capitalized costs projected to be or actually incurred to develop the respective Development Community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees. Total capitalized cost for communities identified as having joint venture ownership, either during construction or upon construction completion, represents the total projected joint venture contribution amount.

(2)

Future initial occupancy dates are estimates. There can be no assurance that we will pursue to completion any or all of these proposed developments.

(3)

Stabilized operations is defined as the earlier of (i) attainment of 95% or greater physical occupancy or (ii) the one-year anniversary of completion of development.

(4)

This Development Community is owned subject to a leasehold interest.

(5)

Avalon North Arlington and Avalon Berkeley were formerly Archstone branded developments.

(6)

The Company has a 20% ownership interest in this community through the AC JV.

Redevelopment Communities

        As of December 31, 2013, there were three communities under redevelopment. We expect the total capitalized cost to redevelop these communities to be $36,800,000, excluding costs incurred prior to redevelopment. We have found that the cost to redevelop an existing apartment community is more difficult to budget and estimate than the cost to develop a new community. Accordingly, we expect that actual costs may vary from our budget by a wider range than for a new development community. We cannot assure you that we will meet our schedule for reconstruction completion or for attaining restabilized operations, or that we will meet our budgeted costs, either individually or in the aggregate. We anticipate maintaining or increasing our current level of redevelopment activity related to communities in our current operating portfolio. You should carefully review Item 1a., "Risk Factors," for a discussion of the risks associated with redevelopment activity.

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        The following presents a summary of these Redevelopment Communities.

		Number of apartment homes		Projected total capitalized cost(1) ($ millions)		Reconstruction start	Estimated reconstruction completion	Estimated restabilized operations(2)
1.	AVA Burbank		748	$	19.3	Q4 2012	Q4 2014	Q1 2015
	Burbank, CA
2.	AVA Pasadena		84		5.6	Q2 2013	Q3 2014	Q1 2015
	Pasadena, CA
3.	Eaves Creekside		294		11.9	Q3 2013	Q4 2014	Q2 2015
	Mountain View, CA
	Total(3)(4)		1,126	$	36.8

(1)

Projected total capitalized cost does not include capitalized costs incurred prior to redevelopment.

(2)

Restabilized operations is defined as the earlier of (i) attainment of 95% or greater physical occupancy or (ii) the one-year anniversary of completion of redevelopment.

(3)

We commenced the redevelopment of AVA Back Bay in Boston, MA during the first quarter of 2013 for an estimated total capitalized cost of $16.9 million. The redevelopment of this community is primarily focused on the exterior and/or common area and is not expected to have a material impact on community operations. This community is therefore included in the Established Community portfolio and not classified as a Redevelopment Community.

(4)

We assumed responsibility for the redevelopment of Marina Bay, comprised of 205 apartment homes and 229 boat slips, in conjunction with the Archstone Acquisition. Marina Bay, located in Marina del Rey, CA is owned by the U.S. Fund, in which we hold a 28.6% interest, and is being redeveloped for an estimated total capitalized cost of $32.9 million. All capital necessary for the redevelopment of Marina Bay was contributed to the venture prior to us acquiring an interest in the venture.

Development Rights

        At December 31, 2013, we had $300,364,000 in acquisition and related capitalized costs for land parcels we own, and $31,592,000 in capitalized costs (including legal fees, design fees and related overhead costs) related to Development Rights for which we control the land parcel, typically through an option to purchase or lease the land. Collectively, the land held for development and associated costs for deferred development rights relate to 46 Development Rights for which we expect to develop new apartment communities in the future. The cumulative capitalized costs for land held for development as of December 31, 2013 includes $244,619,000 in original land acquisition costs. The original land acquisition cost per home ranged from $13,000 per home in Massachusetts to $126,000 per home in California. The Development Rights range from those beginning design and architectural planning to those that have completed site plans and drawings and can begin construction almost immediately. We estimate that the successful completion of all of these communities would ultimately add approximately 12,986 apartment homes to our portfolio. Substantially all of these apartment homes will offer features like those offered by the communities we currently own.

        For 31 Development Rights, we control the land through an option to purchase or lease the parcel. While we generally prefer to hold Development Rights through options to acquire land, for the 15 remaining Development Rights we either currently own the land or have executed a long term land lease for the parcel of land on which a community would be built if we proceeded with development.

        The properties comprising the Development Rights are in different stages of the due diligence and regulatory approval process. The decisions as to which of the Development Rights to invest in, if any,

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or to continue to pursue once an investment in a Development Right is made, are business judgments that we make after we perform financial, demographic and other analyses. In the event that we do not proceed with a Development Right, we generally would not recover any of the capitalized costs incurred in the pursuit of those communities, unless we were to recover amounts in connection with the sale of land; however, we cannot guarantee a recovery. Pre-development costs incurred in the pursuit of Development Rights, for which future development is not yet considered probable, are expensed as incurred. In addition, if the status of a Development Right changes, making future development no longer probable, any capitalized pre-development costs are charged to expense. During 2013, we incurred a charge of approximately $998,000 for development pursuits that were not yet probable of future development at the time incurred, or for pursuits that we determined would not likely be developed.

        You should carefully review Section 1a., "Risk Factors," for a discussion of the risks associated with Development Rights.

        The following presents a summary of these Development Rights:

Location	Number of rights		Estimated number of homes		Projected total capitalized cost ($ millions)(1)
Boston, MA		6		2,033	$	655
Fairfield-New Haven, CT		1		160		40
New York Suburban		6		1,097		343
New Jersey		14		3,872		939
Baltimore, MD		1		343		69
Washington, DC Metro		7		2,290		630
Seattle, WA		5		1,547		444
Oakland-East Bay, CA		2		486		173
San Francisco, CA		1		330		162
Orange County, CA		2		534		171
Los Angeles, CA		1		294		152
Total		46		12,986	$	3,778

(1)

Projected total capitalized cost includes all projected capitalized costs incurred to date (if any) and projected to be incurred to develop the respective community, determined in accordance with GAAP, including land acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees.

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Land Acquisitions

        We select land for development and follow established procedures that we believe minimize both the cost and the risks of development. During 2013, we acquired land parcels for 17 Development Rights, as shown in the table below, for an aggregate purchase price of approximately $278,642,000. For 15 of the 17 parcels construction has either started or will start within the next 12 months.

		Estimated number of apartment homes		Projected total capitalized cost(1)  ($ millions)		Date acquired
1	Avalon Baker Ranch		430	$	132.9	March 2013
	Lake Forest, CA
2	AVA 55 M		436		136.2	February 2013(2)
	Washington, DC
3	Avalon Huntington Beach		378		117.1	February 2013(2)
	Huntington Beach, CA
4	North Point II		341		147.0	February 2013(2)
	Cambridge, MA
5	Maple Leaf		103		28.0	February 2013(2)
	Cambridge, MA
6	Avalon Hillwood Square		384		111.2	June 2013
	Falls Church, VA
7	Avalon Glendora		256		75.1	June/July/August 2013
	Glendora, CA
8	Avalon Irvine III		156		54.1	April 2013
	Irvine, CA
9	Avalon San Dimas		156		41.4	May 2013
	San Dimas, CA
10	Avalon Wharton		248		55.6	April 2013
	Wharton, NJ
11	Avalon Hayes Valley		182		90.2	August 2013
	San Francisco, CA
12	Avalon Movietown		294		152.3	September 2013
	West Hollywood, CA
13	Avalon Marlborough		350		76.6	October 2013
	Marlborough, MA
14	Avalon Bloomfield		224		53.4	November 2013
	Bloomfield, NJ
15	Avalon Roseland		136		46.2	December 2013
	Roseland, NJ
16	AVA Capitol Hill		249		81.3	December 2013
	Seattle, WA
17	Avalon Nashua Street		503		242.8	December 2013
	Boston, MA
	Total		4,826	$	1,641.4

(1)

Projected total capitalized cost includes all capitalized costs incurred to date (if any) and projected to be incurred to develop the respective community, determined in accordance with GAAP, including land and related acquisition costs, construction costs, real estate taxes, capitalized interest and loan fees, permits, professional fees, allocated development overhead and other regulatory fees.

(2)

We acquired these land parcels as part of the Archstone Acquisition. Maple Leaf is now owned by the AC JV and is being developed. North Point II is subject to a ROFO in favor of the AC JV.

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Other Land and Real Estate Assets

        We own land parcels with a carrying value of approximately $29,839,000 that we do not currently plan to develop. These parcels consist of land that we (i) originally planned to develop and (ii) ancillary parcels acquired in connection with Development Rights that we had not planned to develop. We believe that the current carrying value for all of these land parcels is such that there is no indication of impaired value, or further need to record a charge for impairment in the case of assets previously impaired. However, we may be subject to the recognition of further charges for impairment in the event that there are indicators of such impairment and we determine that the carrying value of the assets is greater than the current fair value, less costs to dispose.

Disposition Activity

        We (i) sell assets when they do not meet our long-term investment strategy or when capital and real estate markets allow us to realize a portion of the value created over the past business cycle and (ii) redeploy the proceeds from those sales to develop, redevelop and acquire communities. Pending such redeployment, we will generally use the proceeds from the sale of these communities to reduce amounts outstanding under our Credit Facility or retain the cash proceeds on our balance sheet until it is redeployed into development or redevelopment activity. On occasion, we will set aside the proceeds from the sale of communities into a cash escrow account to facilitate a tax deferred, like-kind exchange transaction. From January 1, 2013 to January 31, 2014, we sold our interest in eight wholly-owned communities, four of which were acquired by the Company as part of the Archstone Acquisition, containing 3,299 apartment homes. The aggregate gross sales price for these assets was $932,800,000.

Insurance and Risk of Uninsured Losses

        We carry commercial general liability insurance and property insurance with respect to all of our communities. These policies, and other insurance policies we carry, have policy specifications, insured limits and deductibles that we consider commercially reasonable. There are, however, certain types of losses (such as losses arising from acts of war) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in management's view, economically impractical. You should carefully review the discussion under Item 1a., "Risk Factors," of this Form 10-K for a discussion of risks associated with an uninsured property or liability loss.

        Many of our West Coast communities are located in the general vicinity of active earthquake faults. Many of our communities are near, and thus susceptible to, the major fault lines in California, including the San Andreas Fault and the Hayward Fault. We cannot assure you that an earthquake would not cause damage or losses greater than insured levels. We have in place with respect to communities located in California and Washington, for any single occurrence and in the aggregate, $150,000,000 of coverage, an increase over the $75,000,000 of coverage under our prior insurance policy. Earthquake coverage outside of California and Washington is subject to a $175,000,000 limit for each occurrence and in the aggregate. In California the deductible for each occurrence is five percent of the insured value of each damaged building. Our earthquake insurance outside of California provides for a $100,000 deductible per occurrence except that the next $350,000 of loss per occurrence outside California will be treated as an additional self-insured retention until the total incurred self-insured retention exceeds $1,500,000.

        In May 2013, we renewed our property insurance policy, with no material change in coverage terms other than the increase in our earthquake coverage discussed above. In August 2013, we renewed our general liability and workers compensation insurance policies with no material change in coverage.

        Just as with office buildings, transportation systems and government buildings, there have been reports that apartment communities could become targets of terrorism. In December 2007, Congress passed the Terrorism Risk Insurance Program Reauthorization Act ("TRIPRA") which is designed to

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make terrorism insurance available through a federal back-stop program until it expires in December 2014. Congress is currently considering extending the act, however there can be no assurance at this time that Congress will extend the provisions of the act. In connection with this legislation, we have purchased insurance for property damage due to terrorism up to $250,000,000. Additionally, we have purchased insurance for certain terrorist acts, not covered under TRIPRA, such as domestic-based terrorism. This insurance, often referred to as "non-certified" terrorism insurance, is subject to deductibles, limits and exclusions. Our general liability policy provides TRIPRA coverage (subject to deductibles and insured limits) for liability to third parties that result from terrorist acts at our communities.

        An additional consideration for insurance coverage and potential uninsured losses is mold growth. Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. If a significant mold problem arises at one of our communities, we could be required to undertake a costly remediation program to contain or remove the mold from the affected community and could be exposed to other liabilities. For further discussion of the risks and the Company's related prevention and remediation activities, please refer to the discussion under Item 1a., "Risk Factors—We may incur costs due to environmental contamination or non-compliance," elsewhere in this report. We cannot provide assurance that we will have coverage under our existing policies for property damage or liability to third parties arising as a result of exposure to mold or a claim of exposure to mold at one of our communities.

        We also carry crime policies (also commonly referred to as a fidelity policy or employee dishonesty policy) that protect the Company, up to $5,000,000 per occurrence, from employee theft of money, securities or property.

ITEM 3.    LEGAL PROCEEDINGS

        The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of our business. While no assurances can be given, the Company does not currently believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on its financial condition or results of operations.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not Applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our common stock is traded on the NYSE under the ticker symbol AVB. The following table sets forth the quarterly high and low sales prices per share of our common stock for the years 2013 and 2012, as reported by the NYSE. On January 31, 2014 there were 563 holders of record of an aggregate of 129,417,333 shares of our outstanding common stock. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency as one record holder.

	2013						2012
	Sales Price						Sales Price
					Dividends declared						Dividends declared
	High		Low				High		Low
Quarter ended March 31	$	139.15	$	124.02	$	1.0700	$	141.69	$	123.71	$	0.9700
Quarter ended June 30	$	141.46	$	127.97	$	1.0700	$	148.54	$	134.51	$	0.9700
Quarter ended September 30	$	141.04	$	122.36	$	1.0700	$	151.11	$	134.03	$	0.9700
Quarter ended December 31	$	134.25	$	116.86	$	1.0700	$	139.70	$	126.12	$	0.9700

        At present, we expect to continue our policy of paying regular quarterly cash dividends. However, the form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors as the Board of Directors may consider relevant. The Board of Directors may modify our dividend policy from time to time.

        In January 2014, we announced that our Board of Directors declared a dividend on our common stock for the first quarter of 2014 of $1.16 per share, an 8.4% increase over the previous quarterly dividend per share of $1.07. The dividend will be payable on April 15, 2014 to all common stockholders of record as of March 31, 2014.

Issuer Purchases of Equity Securities

Period	(a) Total Number of Shares Purchased(1)		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Dollar Amount that May Yet be Purchased Under the Plans or Programs (in thousands)(2)
October 1 - October 31, 2013		—		—		—	$	200,000
November 1 - November 30, 2013		—		—		—	$	200,000
December 1 - December 31, 2013		3,560	$	118.23		—	$	200,000

(1)

Reflects shares surrendered to the Company in connection with exercise of stock options as payment of exercise price, as well as for taxes associated with the vesting of restricted share grants.

(2)

As disclosed in our Form 10-Q for the quarter ended March 31, 2008, represents amounts outstanding under the Company's $500,000,000 Stock Repurchase Program. There is no scheduled expiration date to this program.

        Information regarding securities authorized for issuance under equity compensation plans is included in the section entitled "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in this Form 10-K.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following table provides historical consolidated financial, operating and other data for the Company. You should read the table with our Consolidated Financial Statements and the Notes included in this report (dollars in thousands, except per share information).

	For the year ended
	12-31-13			12-31-12		12-31-11		12-31-10		12-31-09
Revenue:
Rental and other income	$	1,451,419		$	990,370	$	890,431	$	800,689	$	755,479
Management, development and other fees		11,502			10,257		9,656		7,354		7,328
Total revenue		1,462,921			1,000,627		900,087		808,043		762,807
Expenses:
Operating expenses, excluding property taxes		352,245			259,350		246,872		235,168		224,068
Property taxes		158,774			97,555		88,964		84,319		74,759
Interest expense, net		172,402			136,920		167,814		169,997		145,090
Loss on interest rate contract		51,000			—		—		—		—
Loss on extinguishment of debt, net		14,921			1,179		1,940		—		25,910
Depreciation expense		560,215			243,680		226,728		208,662		185,135
General and administrative expense		39,573			34,101		29,371		26,846		28,748
Expensed acquisition, development and other pursuit costs		45,050			11,350		2,967		2,741		5,842
Casualty and impairment loss		—			1,449		14,052		—		21,152
Total expenses		1,394,180			785,584		778,708		727,733		710,704
Equity in (loss) income of unconsolidated entities		(11,154	)		20,914		5,120		762		1,441
Gain on sale of land		240			280		13,716		—		4,830
Gain on acquisition of unconsolidated entity		—			14,194		—		—		—
Income from continuing operations		57,827			250,431		140,215		81,072		58,374
Discontinued operations:
Income from discontinued operations		16,713			26,820		20,065		18,933		32,013
Gain on sale of communities		278,231			146,311		281,090		74,074		63,887
Total discontinued operations		294,944			173,131		301,155		93,007		95,900
Net income		352,771			423,562		441,370		174,079		154,274
Net loss attributable to noncontrolling interests		370			307		252		1,252		1,373
Net income attributable to the Company		353,141			423,869		441,622		175,331		155,647
Net income attributable to common stockholders	$	353,141		$	423,869	$	441,622	$	175,331	$	155,647
Per Common Share and Share Information:
Earnings per common share—basic:
Income from continuing operations attributable to common stockholders (net of dividends attributable to preferred stock)	$	0.46		$	2.57	$	1.55	$	0.97	$	0.73
Discontinued operations attributable to common stockholders		2.32			1.77		3.34		1.11		1.21
Net income attributable to common stockholders	$	2.78		$	4.34	$	4.89	$	2.08	$	1.94
Weighted average shares outstanding—basic(1)		126,855,754		$	97,416,401	$	89,922,465	$	83,859,936	$	79,951,348
Earnings per common share—diluted:
Income from continuing operations attributable to common stockholders (net of dividends attributable to preferred stock)	$	0.46		$	2.55	$	1.55	$	0.97	$	0.74
Discontinued operations attributable to common stockholders		2.32			1.77		3.32		1.10		1.19
Net income attributable to common stockholders	$	2.78		$	4.32	$	4.87	$	2.07	$	1.93
Weighted average shares outstanding—diluted		127,265,903		$	98,025,152	$	90,777,462	$	84,632,869	$	80,599,657
Cash dividends declared	$	4.28		$	3.88	$	3.57	$	3.57	$	3.57

(1)

Amounts do not include unvested restricted shares included in the calculation of Earnings per Share. Please refer to Note 1, "Organization and Basis of Presentation—Earnings per Common Share" of the Consolidated Financial Statements set forth in Item 8 of this report for a discussion of the calculation of Earnings per Share.

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	For the year ended
	12-31-13			12-31-12			12-31-11			12-31-10			12-31-09
Other Information:
Net income attributable to the Company	$	353,141		$	423,869		$	441,622		$	175,331		$	155,647
Depreciation—continuing operations		560,215			243,680			226,728			208,662			185,135
Depreciation—discontinued operations		13,500			16,414			23,541			24,280			33,151
Interest expense, net—continuing operations(1)		238,323			138,099			169,754			169,997			171,000
Interest expense, net—discontinued operations(1)		—			735			8,688			5,212			5,914
EBITDA(2)	$	1,165,179		$	822,797		$	870,333		$	583,482		$	550,847
Funds from Operations(3)	$	642,814		$	521,047		$	414,482		$	338,353		$	315,841
Number of Current Communities(4)		244			180			181			172			165
Number of apartment homes		72,811			52,792			53,294			51,245			47,926
Balance Sheet Information:
Real estate, before accumulated depreciation	$	16,800,321		$	10,049,484		$	9,288,496		$	8,661,211		$	8,360,091
Total assets	$	15,328,143		$	11,160,078		$	8,482,390		$	7,821,488		$	7,457,605
Notes payable and unsecured credit facilities	$	6,145,391		$	3,851,033		$	3,632,296		$	4,067,657		$	3,974,872
Cash Flow Information:
Net cash flows provided by operating activities	$	724,501		$	540,819		$	429,354		$	332,106		$	376,581
Net cash flows used in investing activities	$	(1,181,174	)	$	(623,386	)	$	(443,141	)	$	(298,936	)	$	(333,559	)
Net cash flows (used in) provided by financing activities	$	(1,995,404	)	$	2,199,332		$	326,233		$	167,565		$	(4,285	)

Notes to Selected Financial Data

(1)

Interest expense, net includes any loss or gain incurred from the extinguishment of debt.

(2)

EBITDA is defined as net income before interest income and expense, income taxes, depreciation and amortization from both continuing and discontinued operations. Under this definition, EBITDA includes gains on sale of assets and gain on sale of partnership interests. Management generally considers EBITDA to be an appropriate supplemental measure to net income of our operating performance because it helps investors to understand our ability to incur and service debt and to make capital expenditures. EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP), as an indicator of our operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. Our calculation of EBITDA may not be comparable to EBITDA as calculated by other companies.

(3)

We generally consider Funds from Operations, or "FFO," as defined below, to be an appropriate supplemental measure of our operating and financial performance because, by excluding gains or losses related to dispositions of previously depreciated property and excluding real estate depreciation, which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates, FFO can help one compare the operating performance of a real estate company between periods or as compared to different companies. We believe that in order to understand our operating results, FFO should be examined with net income as presented in the Consolidated Statements of Comprehensive Income included elsewhere in this report.

Consistent with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts® ("NAREIT"), we calculate FFO as net income or loss computed in accordance with GAAP, adjusted for:

•

gains or losses on sales of previously depreciated operating communities;

•

extraordinary gains or losses (as defined by GAAP);

•

cumulative effect of change in accounting principle;

•

impairment write-downs of depreciable real estate assets;

•

write-downs of investments in affiliates due to a decrease in the value of depreciable real estate assets held by those affiliates;

•

depreciation of real estate assets; and

•

adjustments for unconsolidated partnerships and joint ventures.

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FFO does not represent net income in accordance with GAAP, and therefore it should not be considered an alternative to net income, which remains the primary measure, as an indication of our performance. In addition, FFO as calculated by other REITs may not be comparable to our calculation of FFO.

FFO also does not represent cash generated from operating activities in accordance with GAAP, and therefore should 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. A presentation of GAAP based cash flow metrics is provided in "Cash Flow Information" in the table on the previous page.

The following is a reconciliation of net income to FFO (dollars in thousands, except per share data).

	For the year ended
	12-31-13			12-31-12			12-31-11			12-31-10			12-31-09
Net income attributable to the Company	$	353,141		$	423,869		$	441,622		$	175,331		$	155,647
Depreciation—real estate assets, including discontinued operations and joint venture adjustments		582,325			265,627			256,986			237,041			221,415
Distributions to noncontrolling interests, including discontinued operations		32			28			27			55			66
Gain on sale of unconsolidated entities holding previously depreciated real estate assets		(14,453	)		(7,972	)		(3,063	)		—			—
Write-down of investment in unconsolidated real estate entities		—			—			—			—			2,600
Gain on sale of previously depreciated real estate assets		(278,231	)		(146,311	)		(281,090	)		(74,074	)		(63,887	)
Gain on acquisition of unconsolidated real estate entity		—			(14,194	)		—			—			—
Funds from Operations attributable to common stockholders	$	642,814		$	521,047		$	414,482		$	338,353		$	315,841
Weighted average shares outstanding—diluted		127,265,903			98,025,152			90,777,462			84,632,869			80,599,657
FFO per common share—diluted	$	5.05		$	5.32		$	4.57		$	4.00		$	3.92

(4)

Current Communities consist of all communities other than those which are still under construction and have not received a certificate of occupancy.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide an understanding of our business and results of operations. This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this report. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under "Forward-Looking Statements" included in this report. Actual results or developments could differ materially from those projected in such statements as a result of the factors described under "Forward-Looking Statements" as well as the risk factors described in Item 1a, "Risk Factors," of this report.

        Capitalized terms have the meanings provided elsewhere in this Form 10-K.

Executive Overview

Business Description

        We are primarily engaged in developing, acquiring, owning and operating apartment communities in high barrier to entry markets of the United States. We believe that apartment communities are an attractive long-term investment opportunity compared to other real estate investments, because a broad potential resident base should help reduce demand volatility over a real estate cycle. We seek to create long-term shareholder value by accessing capital on cost effective terms; deploying that capital to develop, redevelop and acquire apartment communities in high barrier to entry markets; operating apartment communities; and selling communities when they no longer meet our long-term investment strategy or when pricing is attractive. Barriers to entry in our markets generally include a difficult and lengthy entitlement process with local jurisdictions and dense urban or suburban areas where zoned and entitled land is in limited supply.

        Our strategy is to be leaders in market research and capital allocation, delivering a range of multifamily offerings tailored to serve the needs of the most attractive customer segments in the best-performing submarkets of the United States. Our communities are predominately upscale and generally command among the highest rents in their markets. However, we also pursue the ownership and operation of apartment communities that target a variety of customer segments and price points, consistent with our goal of offering a broad range of products and services.

        We regularly evaluate the allocation of our investments by the amount of invested capital and by product type within our individual markets, which are primarily located in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States.

Financial Highlights

        For the year ended December 31, 2013, net income attributable to common stockholders was $353,141,000 compared to $423,869,000 for 2012, a decrease of 16.7%. The decrease is attributable primarily to an increase in depreciation expense and expensed transaction costs associated with the Archstone Acquisition, coupled with the recognition of a loss associated with an interest rate protection agreement. The decrease was partially offset by an increase in NOI from our communities.

        For the year ended December 31, 2013, Established Communities NOI increased by $26,147,000, or 4.7%, over the prior year. The increase was driven by an increase in rental revenue of 4.3%, partially offset by an increase in operating expenses of 3.5% over 2012.

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        On February 27, 2013, pursuant to the Purchase Agreement dated November 26, 2012, by and among us, Equity Residential, Lehman, and Archstone, we, together with Equity Residential, acquired, directly or indirectly, all of Archstone's assets, including all of the ownership interests in joint ventures and other entities owned by Archstone, and assumed Archstone's liabilities, with certain limited exceptions. Under the terms of the Purchase Agreement, we acquired approximately 40% of Archstone's assets and liabilities and Equity Residential acquired approximately 60% of Archstone's assets and liabilities. We acquired the following:

•

54 operating apartment communities that were consolidated for financial reporting purposes, containing 18,423 apartment homes, of which four communities containing 1,368 apartment homes were subsequently disposed of during 2013;

•

six communities that were under construction and/or in lease-up, of which two have been completed with 553 homes and the other four of which are expected to be completed during 2014 and contain 1,114 apartment homes;

•

six parcels of land, one of which we sold to the AC JV, which is currently being developed;

•

options to acquire two additional parcels of land, of which one was acquired in 2013 and will begin construction in 2014;

•

interests in unconsolidated joint ventures in which we are the general partner or managing member, which joint ventures own 11 apartment communities containing 2,544 apartment homes, and an interest in an unconsolidated joint venture in which we are a limited partner, which joint venture owns one apartment community containing 305 apartment homes; and

•

a 40% ownership interest in unconsolidated joint venture arrangements with Equity Residential which will hold assets and liabilities that we and Equity Residential will jointly manage, and that we and Equity Residential intend to sell to or resolve with third parties, and/or subsequently transfer to Equity Residential or to us.

        In 2013, our capital activity related to funding the Archstone Acquisition as well as our core business activities in our development and redevelopment platforms. Our funding for the Archstone Acquisition included the assumption of approximately $2 billion in net indebtedness, as well as the issuance to Lehman of 14,889,706 shares of our common stock. In addition to this activity, during 2013 we raised approximately $1,682,800,000 of gross capital through the issuance of unsecured notes and asset sales. The funds raised from dispositions consist of the proceeds from the sale of eight communities for gross sales proceeds of $932,800,000. In addition, in February 2014 we sold one community, Avalon Valley, located in Danbury, CT, for $53,325,000. We believe that our current capital structure will continue to provide financial flexibility to access capital on attractive terms.

        We believe our development activity will continue to create long-term value. We increased development activity during 2013 from the prior year in anticipation of favorable economic conditions and apartment fundamentals. During 2013, we completed the development of 12 communities for an aggregate total capitalized cost of $630,000,000. We also started the development of 13 communities, which are expected to be completed for an estimated total capitalized cost of $1,323,000,000. In addition, during 2013 we completed the redevelopment of six communities for a total investment of $52,700,000, excluding costs incurred prior to the redevelopment.

        We believe that our balance sheet strength, as measured by our current level of indebtedness, our current ability to service interest and other fixed charges, and our current moderate use of financial encumbrances (such as secured financing) provide us with adequate access to liquidity from the capital markets. We expect to be able to meet our reasonably foreseeable liquidity needs, as they arise, through a combination of one or more of the following sources: operating cash flows; borrowings under our Credit Facility; secured debt; the issuance of corporate securities (which could include unsecured

48

debt, preferred equity and/or common equity); the sale of apartment communities; or through the formation of joint ventures. See the discussion under Liquidity and Capital Resources.

        In addition to the Archstone Acquisition, during the year ended December 31, 2013, we acquired Arboretum at Burlington, located in Burlington MA. Arboretum at Burlington contains 312 apartment homes and was acquired for a purchase price of $79,850,000.

        We established Fund I and Fund II (collectively the "Funds") to engage in real estate acquisition programs through discretionary investment funds. We believe this investment format provides the following attributes: (i) third-party joint venture equity as an additional source of financing to expand and diversify our portfolio; (ii) additional sources of income in the form of property management and asset management fees and, potentially, incentive distributions if the performance of the Funds exceeds certain thresholds; and (iii) additional visibility into the transactions occurring in multi-family assets that helps us with other investment decisions related to our wholly-owned portfolio.

        Fund I has nine institutional investors, including us. One of our wholly-owned subsidiaries is the general partner of Fund I and, excluding costs incurred in excess of our equity in the underlying net assets of Fund I, we have an equity investment of approximately $14,209,000 in Fund I (net of distributions and excluding the purchase by us of a mortgage note secured by a Fund I community), representing a 15.2% combined general partner and limited partner equity interest. Fund I was our principal vehicle for acquiring apartment communities from its formation in March 2005 through the close of its investment period in March 2008. Fund I has a term that expires in March 2015.

        During the year ended December 31, 2013, Fund I sold seven communities:

•

Avalon Yerba Buena, a 160 apartment home community with 32,300 square feet of retail located in San Francisco, CA, for $103,000,000;

•

Avalon at Civic Center, a 192 apartment home community located in Norwalk, CA, for $45,844,000;

•

Avalon at Cedar Place, a 156 apartment home community located in Columbia, MD, for $26,000,000;

•

Avalon Sunset, a 82 apartment home community located in Los Angeles, CA for $25,800,000;

•

Crystal Hill, a 169 apartment home community located in Pomona, NY for $33,050,000;

•

Centerpoint, a 392 apartment home community located in Baltimore, MD for $75,250,000; and

•

Middlesex Crossing, a 252 apartment home community located in Billerica, MA, for $40,250,000.

        Our proportionate share of the gain from the sale of these communities was $11,484,000.

        Fund II has six institutional investors, including us. One of our wholly owned subsidiaries is the general partner of Fund II and, excluding costs incurred in excess of our equity in the underlying net assets of Fund II, we have made an equity investment of $93,714,000 (net of distributions), representing a 31.3% combined general partner and limited partner equity interest. Fund II served as the exclusive vehicle through which we acquired investment interests in apartment communities from its formation in 2008 through the close of its investment period in August 2011. Fund II has a term that expires in August 2020, assuming the exercise of two one-year extension options.

        During the year ended December 31, 2013, Fund II sold Avalon Rothbury, located in Gaithersburg, MD, for $39,600,000. The Company's proportionate share of the gain in accordance with GAAP for the disposition was $2,790,000.

        In 2013, in conjunction with the Archstone Acquisition, we acquired an interest in one additional discretionary real estate management investment fund. The U.S. Fund has six institutional investors,

49

including us. Through subsidiaries, we own the general partner of the U.S. Fund and, excluding costs incurred in excess of our equity in the underlying net assets of the U.S. Fund, we have made an equity investment of $93,685,000 (net of distributions), representing a 28.6% combined general partner and limited partner equity interest. The U.S. Fund has a term that expires in July 2023, assuming the exercise of two one-year extension options.

Communities Overview

        As of December 31, 2013, we owned or held a direct or indirect ownership interest in 273 apartment communities containing 81,519 apartment homes in 12 states and the District of Columbia, of which 29 communities were under construction and three communities were under reconstruction. Of these communities, 36 were owned by entities that were not consolidated for financial reporting purposes, including four owned by subsidiaries of Fund I, 12 owned by subsidiaries of Fund II, and nine owned by the U.S. Fund. In addition, we owned a direct or indirect ownership interest in Development Rights to develop an additional 46 wholly-owned communities that, if developed in the manner expected, will contain an estimated 12,986 apartment homes.

        Our real estate investments consist primarily of current operating apartment communities, Development Communities, and Development Rights. Our current operating communities are further distinguished as Established Communities, Other Stabilized Communities, Lease-Up Communities and Redevelopment Communities.

        Established Communities are generally operating communities that are consolidated for financial reporting purposes and were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year, which allows the performance of these communities to be compared between years. Other Stabilized Communities are generally all other consolidated operating communities that have stabilized occupancy and operating expenses during the current year, but had not achieved stabilization as of the beginning of the prior year. Lease-Up Communities consist of communities where construction is complete but stabilization has not been achieved. Redevelopment Communities consist of communities where substantial redevelopment is in progress or is planned to begin during the current year. A more detailed description of our reportable segments and other related operating information can be found in Note 9, "Segment Reporting," of our Consolidated Financial Statements.

        Although each of these categories is important to our business, we generally evaluate overall operating, industry and market trends based on the operating results of Established Communities, for which a detailed discussion can be found in "Results of Operations" as part of our discussion of overall operating results. We evaluate our current and future cash needs and future operating potential based on acquisition, disposition, development, redevelopment and financing activities within Other Stabilized, Redevelopment and Development Communities. Discussions related to current and future cash needs and financing activities can be found in "Liquidity and Capital Resources."

        NOI of our current operating communities is one of the financial measures that we use to evaluate community performance. NOI is affected by the demand and supply dynamics within our markets, our rental rates and occupancy levels and our ability to control operating costs. Our overall financial performance is also impacted by the general availability and cost of capital and the performance of newly developed, redeveloped and acquired apartment communities.

Results of Operations

        Our year-over-year operating performance is primarily affected by both overall and individual geographic market conditions and apartment fundamentals and reflected in changes in NOI of our Established Communities; NOI derived from acquisitions and development completions; the loss of

50

NOI related to disposed communities; and capital market and financing activity. A comparison of our operating results for 2013, 2012 and 2011 follows (dollars in thousands):

	2013			2012			$ Change			% Change			2012			2011			$ Change			% Change
Revenue:
Rental and other income	$	1,451,419		$	990,370		$	461,049			46.6	%	$	990,370		$	890,431		$	99,939			11.2	%
Management, development and other fees		11,502			10,257			1,245			12.1	%		10,257			9,656			601			6.2	%
Total revenue		1,462,921			1,000,627			462,294			46.2	%		1,000,627			900,087			100,540			11.2	%
Expenses:
Direct property operating expenses, excluding property taxes		295,150			211,086			84,064			39.8	%		211,086			201,533			9,553			4.7	%
Property taxes		158,774			97,555			61,219			62.8	%		97,555			88,964			8,591			9.7	%
Total community operating expenses		453,924			308,641			145,283			47.1	%		308,641			290,497			18,144			6.2	%
Corporate-level property management and other indirect operating expenses		53,105			42,193			10,912			25.9	%		42,193			40,213			1,980			4.9	%
Investments and investment management expense		3,990			6,071			(2,081	)		(34.3	)%		6,071			5,126			945			18.4	%
Expensed acquisition, development and other pursuit costs		45,050			11,350			33,700			296.9	%		11,350			2,967			8,383			282.5	%
Interest expense, net		172,402			136,920			35,482			25.9	%		136,920			167,814			(30,894	)		(18.4	)%
Loss on interest rate contract		51,000			—			51,000			100.0	%		—			—			—			0.0	%
Loss on extinguishment of debt, net		14,921			1,179			13,742			1,165.6	%		1,179			1,940			(761	)		(39.2	)%
Depreciation expense		560,215			243,680			316,535			129.9	%		243,680			226,728			16,952			7.5	%
General and administrative expense		39,573			34,101			5,472			16.0	%		34,101			29,371			4,730			16.1	%
Casualty and impairment loss		—			1,449			(1,449	)		(100.0	)%		1,449			14,052			(12,603	)		(89.7	)%
Gain on sale of land		(240	)		(280	)		40			(14.3	)%		(280	)		(13,716	)		13,436			(98.0	)%
Gain on acquisition of unconsolidated real estate entity		—			(14,194	)		14,194			(100.0	)%		(14,194	)		—			14,194			(100.0	)%
Total other expenses		940,016			462,469			477,547			103.3	%		462,469			474,495			(12,026	)		(2.5	)%
(Loss) equity in income of unconsolidated entities		(11,154	)		20,914			(32,068	)		(153.3	)%		20,914			5,120			15,794			308.5	%
Income from continuing operations		57,827			250,431			(192,604	)		(76.9	)%		250,431			140,215			110,216			78.6	%
Discontinued operations:
Income from discontinued operations		16,713			26,820			(10,107	)		(37.7	)%		26,820			20,065			6,755			33.7	%
Gain on sale of communities		278,231			146,311			131,920			90.2	%		146,311			281,090			(134,779	)		(47.9	)%
Total discontinued operations		294,944			173,131			121,813			70.4	%		173,131			301,155			(128,024	)		(42.5	)%
Net income		352,771			423,562			(70,791	)		(16.7	)%		423,562			441,370			(17,808	)		(4.0	)%
Net loss attributable to noncontrolling interests		370			307			63			20.5	%		307			252			55			21.8	%
Net income attributable to common stockholders	$	353,141		$	423,869		$	(70,728	)		(16.7	)%	$	423,869		$	441,622		$	(17,753	)		(4.0	)%

Net income attributable to common stockholders decreased $70,728,000, or 16.7%, to $353,141,000 in 2013 due primarily to an increase in depreciation expense and expensed transaction costs associated with the Archstone Acquisition, coupled with the recognition of a loss associated with an interest rate protection agreement. The decrease was partially offset by an increase in NOI from communities acquired in the Archstone Acquisition and our existing and newly developed communities in 2013, as well as an increase in gain on sale of communities as compared to the prior year. Net income attributable to common stockholders decreased $17,753,000, or 4.0% in 2012 over 2011 due primarily to a decrease in gain on sale of communities as compared to the prior year, offset partially by increased NOI in 2012 over 2011.

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NOI is considered by management to be an important and appropriate supplemental performance measure to net income because it helps both investors and management to understand the core operations of a community or communities prior to the allocation of any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual assets or groups of assets. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead as a result of acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. We define NOI as total property revenue less direct property operating expenses, including property taxes.

        NOI does not represent cash generated from operating activities in accordance with GAAP. Therefore, NOI should not be considered an alternative to net income as an indication of our performance. NOI should also not be considered an alternative to net cash flow from operating activities, as determined by GAAP, as a measure of liquidity, nor is NOI indicative of cash available to fund cash needs. Reconciliations of NOI for the years ended December 31, 2013, 2012 and 2011 to net income for each year are as follows (dollars in thousands):

	For the year ended
	12-31-13			12-31-12			12-31-11
Net income	$	352,771		$	423,562		$	441,370
Indirect operating expenses, net of corporate income		41,554			31,911			30,550
Investments and investment management expense		3,990			6,071			5,126
Expensed acquisition, development and other pursuit costs		45,050			11,350			2,967
Interest expense, net		172,402			136,920			167,814
Loss on interest rate contract		51,000			—			—
Loss on extinguishment of debt, net		14,921			1,179			1,940
General and administrative expense		39,573			34,101			29,371
Loss (equity) in income of unconsolidated entities		11,154			(20,914	)		(5,120	)
Depreciation expense		560,215			243,680			226,728
Casualty and impairment loss		—			1,449			14,052
Gain on sale of real estate assets		(278,471	)		(146,591	)		(294,806	)
Income from discontinued operations		(16,713	)		(26,820	)		(20,065	)
Gain on acquisition of unconsolidated real estate entity		—			(14,194	)		—
Net operating income	$	997,446		$	681,704		$	599,927

        The NOI increases for both 2013 and 2012, as compared to the prior year period, consist of changes in the following categories (dollars in thousands):

	Full Year 2013		Full Year 2012
Established Communities	$	26,146	$	35,412
Other Stabilized Communities		254,488		17,395
Development and Redevelopment Communities		35,108		28,970
Total	$	315,742	$	81,777

        The increase in our Established Communities' NOI in 2013 is due to increased rental rates and increased occupancy, partially offset by increased operating expenses. During 2013, we experienced increases in rental rates over 2012, while maintaining occupancy of at least 95% in all markets, offset partially by an increase in operating expenses.

Rental and other income increased in both 2013 and 2012 as compared to the prior years due to additional rental income generated from newly developed and acquired communities, including those acquired in the Archstone Acquisition in 2013, and increases in rental rates and occupancy at our Established Communities.

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        Overall Portfolio—The weighted average number of occupied apartment homes for consolidated communities increased to 57,240 apartment homes for 2013, which includes the impact of communities acquired in the Archstone Acquisition, as compared to 43,411 homes for 2012 and 42,613 homes for 2011. The increase in 2013 over 2012 is due to homes available from newly developed and acquired communities, which includes the impact of communities acquired in the Archstone Acquisition offset partially by communities sold during 2013 and 2012. The weighted average monthly revenue per occupied apartment home increased to $2,171 for 2013 as compared to $2,017 in 2012 and $1,911 in 2011.

        Established Communities—Rental revenue increased $34,749,000, or 4.3%, for 2013 and increased $41,698,000 or 5.8%, for 2012 as compared to the respective prior years. For 2013, the weighted average monthly revenue per occupied apartment home increased 4.2% to $2,156 compared to $2,069 in 2012. The increase for 2013 is due to an increase in rental rates of 4.2% and economic occupancy of 0.1% to 96.2%. Economic occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community's gross revenue. Economic occupancy is defined as gross potential revenue less vacancy loss, as a percentage of gross potential revenue. Gross potential revenue is determined by valuing occupied homes at leased rates and vacant homes at market rents.

        We experienced increases in rental revenue for all of our Established Communities regions in 2013 as compared to the prior year as discussed in more detail below.

        The Metro New York/New Jersey region, which accounted for approximately 29.9% of the Established Community rental revenue for 2013, experienced an increase in rental revenue of 4.3% for 2013 as compared to 2012. Average rental rates increased 4.3% during 2013 to $2,563 and economic occupancy remained consistent at 96.5%. Apartment demand in the Metro New York/New Jersey region is being driven by job growth across a diverse group of industries including healthcare, professional business services, technology, retail, hospitality and education. The region also experienced an increase in construction related employment growth related to Hurricane Sandy recovery efforts. We expect to see continued but moderating growth in the Metro New York/New Jersey region in 2014. New York City is beginning to see a larger pipeline of new apartment deliveries in 2014, but suburban markets surrounding the city are mostly insulated from this new competition.

        The New England region accounted for approximately 21.3% of the Established Community rental revenue for 2013 and experienced a rental revenue increase of 3.2% over the prior year. Average rental rates increased 3.1% to $2,137, and economic occupancy increased 0.1% to 95.8% for 2013 as compared to 2012. The New England region's favorable results are driven by employment growth in the medical, education and technology fields in the Boston metro area. In response to a favorable employment market, the region benefitted from an in-migration. The Boston metro area is seeing a recovery in for-sale housing ahead of most other regions, resulting in resurgence in suburban employment. The Fairfield market continues to experience slower growth due to this market's greater exposure to the financial services sector, which has experienced slower job growth during this recovery than other industries. While demand drivers should become more favorable in 2014, we expect this market to continue to lag due to new supply pressure, particularly in and around Stamford.

        The Northern California region accounted for approximately 16.9% of the Established Community rental revenue for 2013 and experienced a rental revenue increase of 8.1% over the prior year. Average rental rates increased 7.8% to $2,335, and economic occupancy increased 0.3% to 96.3% for 2013 as compared to 2012. While new apartment supply may slow revenue growth in future periods, we expect the strength in the technology and medical sectors to continue to fuel demand for apartment homes in 2014.

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        The Southern California region accounted for approximately 14.3% of the Established Community rental revenue for 2013 and experienced a rental revenue increase of 3.9% over the prior year. Average rental rates increased 3.7% to $1,767, and economic occupancy increased 0.2% to 96.3% for 2013 as compared to 2012. Southern California has seen steady job growth and limited new apartment supply which we expect will continue to support favorable operating results in 2014.

        The Mid-Atlantic region, which represented approximately 12.0% of the Established Community rental revenue during 2013, experienced an increase in rental revenue of 0.8% as compared to 2012. Average rental rates increased by 0.9% to $1,967, and were partially offset by a decrease in economic occupancy of 0.1% to 95.9% for 2013 as compared to 2012. The region experienced a modest decrease in revenue growth in the second half of 2013, driven by an increase in the supply of apartment homes combined with the impact of the decline in federal government spending. We expect rental revenue to decline further in the Mid-Atlantic region during 2014 as additional supply is delivered into the market.

        The Pacific Northwest region accounted for approximately 5.6% of the Established Community rental revenue for 2013 and experienced a rental revenue increase of 7.2% over the prior year. Average rental rates increased 7.5% to $1,695, and were partially offset by a decrease in economic occupancy of 0.3% to 95.7% for 2013 as compared to 2012. The region's innovative technology, e-commerce, and manufacturing sectors continue to support growth in the economy and improvement in apartment fundamentals. Rental revenue growth may be tempered in the near term due to the increased supply of apartment homes in 2014, particularly in the urban core of Seattle, which may affect our future revenue growth in this region.

Management, development and other fees increased $1,245,000 or 12.1%, in 2013 and increased $601,000, or 6.2%, in 2012 as compared to the prior years. The increase in 2013 was primarily due to management fees related to the U.S. Fund and the AC JV, partially offset by lower property management and other management fees earned related to dispositions from Fund I and Fund II. The increase in 2012 was primarily due to increased asset management fees and property management fees from Fund II over the prior year.

Direct property operating expenses, excluding property taxes increased $84,064,000, or 39.8%, and $9,553,000, or 4.7%, in 2013 and 2012, respectively, as compared to the prior years. The increase in 2013 was primarily due to the addition of newly developed and acquired apartment homes, including the communities acquired as part of the Archstone Acquisition. The increase in 2012 was primarily due to the addition of newly developed apartment homes.

        For Established Communities, direct property operating expenses, excluding property taxes, increased $4,374,000, or 2.6%, in 2013 and decreased $475,000, or 0.3%, in 2012 as compared to the prior years. The increase in 2013 was primarily due to increased repairs and maintenance, insurance, and office operations costs.

Property taxes increased $61,219,000, or 62.8%, and $8,591,000, or 9.7%, in 2013 and 2012, respectively, as compared to the prior years. The increase in 2013 was primarily due to the addition of newly developed and acquired apartment homes, including communities acquired as part of the Archstone Acquisition, coupled with increased tax rates and assessments across our portfolio. The increase in 2012 was primarily due to the addition of newly developed and redeveloped apartment homes and overall higher assessments. Property tax increases are also impacted by the size and timing of successful tax appeals.

        For Established Communities, property taxes increased $4,282,000, or 5.4%, and $4,581,000, or 6.5%, in 2013 and 2012, respectively, as compared to the prior years. The increase in 2013 was due to higher rates and assessments, partially offset by higher successful appeals and refunds received in 2013,

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as compared to the prior year. For communities in California, property tax changes are determined by the change in the California Consumer Price Index, with increases limited by law (Proposition 13). Massachusetts also has laws in place to limit property tax increases. The increase in 2012 was primarily due to appeals and settlements recognized in 2011 that were not present in 2012, coupled with increased rates and assessments throughout our regions. We evaluate property tax increases internally and also engage third-party consultants to assist in our evaluations. We appeal property tax increases when appropriate.

Corporate-level property management and other indirect operating expenses increased $10,912,000, or 25.9%, in 2013 and increased $1,980,000, or 4.9%, in 2012, as compared to the prior years. The increases in both years were primarily due to increased compensation related costs, with the increase in 2013 over 2012 including the increase in overhead associated with the Archstone Acquisition. The increase in 2012 was also attributable to costs associated with our introduction and implementation of our AVA and Eaves by Avalon brands.

Investments and investment management costs decreased $2,081,000, or 34.3%, in 2013 and increased by $945,000, or 18.4%, in 2012, due to reductions in compensation costs, as our investment fund management activity has declined.

Expensed acquisition, development and other pursuit costs primarily reflect the costs incurred related to our asset investment activity, abandoned pursuit costs, which include costs incurred for development pursuits not yet considered probable for development, as well as the abandonment of Development Rights, acquisition pursuits and disposition pursuits. These costs can be volatile, particularly in periods of increased acquisition activity, periods of economic downturn or when there is limited access to capital, and the costs may vary significantly from period to period. These costs increased $33,700,000, or 296.9%, and $8,383,000, or 282.5%, in 2013 and 2012, respectively, as compared to the prior years, primarily due to costs associated with the Archstone Acquisition.

Interest expense, net increased $35,482,000, or 25.9%, in 2013 and decreased $30,894,000, or 18.4%, in 2012, as compared to the prior years. This category includes interest costs offset by capitalized interest pertaining to development activity, amortization of the mark to market adjustment on debt assumed as part of the Archstone Acquisition, and interest income. The increase in 2013 was primarily due to net interest costs on debt assumed in the Archstone Acquisition, partially offset by increased capitalized interest as compared to the prior year. The decrease in 2012 was primarily due to decreased average outstanding indebtedness and lower average effective interest rates coupled with increased capitalized interest. This decrease was partially offset by interest income associated with escrow accounts for certain tax exempt secured borrowings recognized in 2011 that were not present in 2012. The increase in capitalized interest in both 2013 and 2012 over the respective prior years was driven primarily by increased development activity and development pursuits.

Loss on interest rate contract reflects the loss recorded by the Company related to the forward interest rate protection agreement that matured in May 2013. Based on changes in the Company's capital needs in 2013, the Company did not issue the anticipated debt for which the interest rate protection agreement was transacted.

Loss on the extinguishment of debt, net reflects prepayment penalties, the expensing of deferred financing costs from our debt repurchase and retirement activity, or payments to acquire our outstanding debt at amounts above or below the carrying basis of the debt acquired, excluding costs related to debt secured by assets sold or held for sale, which is included in discontinued operations, below. During 2013, we incurred a charge for prepayment penalties and the write-off of deferred fees related to the early retirement of three secured notes. During 2012, we recognized a non-cash charge for the write-off of deferred financing fees related to the early retirement of a secured note.

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Depreciation expense increased $316,535,000 or 129.9%, and $16,952, or 7.5%, in 2013 and 2012, respectively, as compared to the prior years. The increase in 2013 was primarily due to additional depreciation expense from the Archstone Acquisition, consisting largely of the depreciation of in-place lease intangibles, which were depreciated over a six month period. The increase in 2012 was primarily due to the net increase in assets from the completion of development, redevelopment and acquisition activity, partially offset by a reduction in depreciation expense from assets sold during the year.

General and administrative expense ("G&A") increased $5,472,000, or 16.0%, and $4,730,000, or 16.1% in 2013 and 2012, respectively, as compared to the prior years. The increases in both years were primarily due to increased compensation costs, including costs related to the Archstone Acquisition in 2013. The increase in 2012 was also due to increased professional fees.

Casualty and impairment loss for 2012 consists of the losses we incurred associated with Superstorm Sandy. Amounts for 2011 consist of the write down of two land parcels and an other than temporary impairment of an investment in unconsolidated joint venture.

Gain on sale of land decreased in 2013 and 2012 as compared to the prior years, due to decreased volume and associated gains on the sale of land parcels.

Gain on acquisition of unconsolidated real estate entity represents the amount by which the fair value of our prior ownership interest in the joint venture that owned Avalon Del Rey exceeded our carrying value.

Equity in (loss) income of unconsolidated entities decreased $32,068,000, or 153.3%, in 2013 and increased $15,794,000, or 308.5%, in 2012, as compared to the prior years. The decrease in 2013 is primarily due to costs of approximately $39,543,000 associated with the Archstone Acquisition that were incurred through the unconsolidated joint venture entities owned with Equity Residential during the year. The increase in 2012 was primarily due to the recognition of income from our promoted interest for Avalon Del Rey and an increase in our proportionate share of gains from Fund I disposition activity over the prior year.

Income from discontinued operations represents the net income generated by real estate sold or qualifying as discontinued operations during the period from January 1, 2011 through December 31, 2013. Income from discontinued operations decreased in 2013 and increased in 2012, due to changes in the number of communities sold, the size and carrying value of those communities and the market conditions in the local area as compared to the prior year. See Note 7, "Real Estate Disposition Activities," to our Consolidated Financial Statements.

Gain on sale of communities increased in 2013 and decreased in 2012, due to changes in the volume of community disposition activity and associated gains as compared to the prior year. The amount of gain realized upon disposition of communities depends on many factors, including the number of communities sold, the size and carrying value of those communities and the market conditions in the local area.

Net loss attributable to noncontrolling interests resulted in an allocation of loss of $370,000 in 2013, $307,000 in 2012, and $252,000 in 2011.

Liquidity and Capital Resources

        We believe our principal short-term liquidity needs are to fund:

•

development and redevelopment activity in which we are currently engaged;

•

the minimum dividend payments on our common stock required to maintain our REIT qualification under the Code;

•

debt service and principal payments either at maturity or opportunistically before maturity; and

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•

normal recurring operating expenses.

        Factors affecting our liquidity and capital resources are our cash flows from operations, financing activities and investing activities (including dispositions) as well as general economic and market conditions. Operating cash flow has historically been determined by: (i) the number of apartment homes currently owned, (ii) rental rates, (iii) occupancy levels and (iv) operating expenses with respect to apartment homes. The timing and type of capital markets activity in which we engage, as well as our plans for development, redevelopment, acquisition and disposition activity, are affected by changes in the capital markets environment, such as changes in interest rates or the availability of cost-effective capital. We regularly review our liquidity needs, the adequacy of cash flows from operations and other expected liquidity sources to meet these needs.

        In 2014, we expect to meet our liquidity needs from a variety of internal and external sources, which may include real estate dispositions, cash balances on hand, borrowing capacity under our Credit Facility, secured and unsecured debt financings, and other public or private sources of liquidity including the issuance of common and preferred equity, as well as cash generated from our operating activities. Our ability to obtain additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to the real estate industry, our credit ratings and credit capacity, as well as the perception of lenders regarding our long or short-term financial prospects. Capital raising activities in 2013 included asset sales, the issuance of unsecured notes in September and December, and the issuance of common shares to Lehman and assumption of secured debt as part of the Archstone Acquisition.

        Unrestricted cash and cash equivalents totaled $281,541,000 at December 31, 2013, a decrease of $2,452,077,000 from $2,733,618,000 at December 31, 2012. The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows included elsewhere in this report.

        Operating Activities—Net cash provided by operating activities increased to $724,501,000 in 2013 from $540,819,000 in 2012. The increase was primarily driven by increased NOI from community operations in 2013 as compared to 2012 and the timing of payments of corporate expenditures.

        Investing Activities—Net cash used in investing activities of $1,181,174,000 in 2013 primarily related to investments in assets through acquisition, development and redevelopment. In 2013, we invested $2,151,799,000 in the following areas:

•

we invested $839,469,000 in the acquisition of real estate related to acquisitions, primarily the Archstone Acquisition;

•

we invested $1,285,715,000 in the development and redevelopment of communities; and

•

we had capital expenditures of $26,615,000 for real estate and non-real estate assets.

        Financing Activities—Net cash used in financing activities totaled $1,995,404,000 in 2013. The net cash used is due to the repayment of $2,110,347,000 in secured notes and prepayment penalties, primarily in conjunction with the Archstone Acquisition, payment of cash dividends in the amount of $526,050,000, and the repayment of $100,000,000 in unsecured notes, partially offset by the issuance of $750,000,000 aggregate principal amount of unsecured notes.

Variable Rate Unsecured Credit Facility

        The Company has a $1,300,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the "Credit Facility") which matures in April 2017. We may extend the maturity for up to one year through the exercise of two, six month extension options for an aggregate fee of $1,950,000. The Credit Facility bears interest at varying levels based on the London Interbank Offered Rate

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("LIBOR"), rating levels achieved on our unsecured notes and on a maturity schedule selected by us. The current stated pricing is LIBOR plus 1.05% (1.21% at January 31, 2014 assuming a one month borrowing rate). The annual facility fee is 0.15% (or approximately $1,950,000 annually based on the $1,300,000,000 facility size and based on our current credit rating).

        We did not have any borrowings outstanding under the Credit Facility and had $66,396,000 outstanding in letters of credit that reduced our borrowing capacity as of January 31, 2014.

Financial Covenants

        We are subject to financial and other covenants contained in the Credit Facility and the indenture under which our unsecured notes were issued. The financial covenants include the following:

•

limitations on the amount of total and secured debt in relation to our overall capital structure;

•

limitations on the amount of our unsecured debt relative to the undepreciated basis of real estate assets that are not encumbered by property-specific financing; and

•

minimum levels of debt service coverage.

        We were in compliance with these covenants at December 31, 2013.

        In addition, our secured borrowings may include yield maintenance, defeasance, or prepayment penalty provisions, which would result in us incurring an additional charge in the event of a full or partial prepayment of outstanding principal before the scheduled maturity. These provisions in our secured borrowings are generally consistent with other similar types of debt instruments issued during the same time period in which our borrowings were secured.

Continuous Equity Offering Program

        In August 2012, we commenced a third continuous equity program ("CEP III"), under which we are authorized by our Board of Directors to sell up to $750,000,000 of shares of our common stock from time to time during a 36-month period. In conjunction with CEP III we have engaged sales agents who receive compensation of approximately 1.5% of the gross sales price for shares sold. During the year ended December 31, 2013, we had no sales under CEP III and have $646,274,000 of shares that remain authorized for issuance under this program.

Issuance of Common Stock in Archstone Acquisition

        During 2013 we issued 14,889,706 shares of common stock to Lehman (as defined in Note 5, "Archstone Acquisition" of our Consolidated Financial Statements) in conjunction with the Archstone Acquisition. On February 18, 2014, Lehman announced that it had sold all of the shares of our common stock it received as consideration for the Archstone Acquisition. Lehman received all of the net proceeds from the sale of its shares of our common stock, and Lehman's sale of such shares did not impact the total number of the our shares of common stock outstanding.

Future Financing and Capital Needs—Debt Maturities

        One of our principal long-term liquidity needs is the repayment of long-term debt at the time that such debt matures. For both our unsecured and secured notes, a portion of the principal of these notes may be repaid prior to maturity. Early retirement of our unsecured or secured notes could result in gains or losses on extinguishment. If we do not have funds on hand sufficient to repay our indebtedness as it becomes due, it will be necessary for us to refinance or repay the debt. This refinancing or repayment may be accomplished by uncollateralized private or public debt offerings, equity issuances, additional debt financing that is secured by mortgages on individual communities or groups of communities, or borrowings under our Credit Facility. Although we believe we will have the capacity to

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meet our currently anticipated liquidity needs, we cannot assure you that additional debt financing or debt or equity offerings will be available or, if available, that they will be on terms we consider satisfactory.

        The following additional financing activity occurred during 2013:

•

In connection with the Archstone Acquisition, we assumed $2,034,482,000 net principal amount of Archstone's existing secured indebtedness, detailed in the following table.

•

In March 2013, we repaid $100,000,000 principal amount of 4.95% unsecured notes pursuant to their scheduled maturity.

•

In April 2013, we obtained a 3.06% fixed rate secured mortgage loan in the amount of $15,000,000 that matures in April 2018.

•

In April 2013, we repaid a 4.69% fixed rate secured mortgage note in the amount of $170,125,000 pursuant to its scheduled maturity date.

•

In May 2013, we repaid a $5,393,000 fixed rate secured mortgage note with an interest rate of 5.55% at par and without penalty in advance of its July 2028 scheduled maturity date.

•

In May 2013, we obtained a 3.08% fixed rate secured mortgage loan that matures in June 2020 in the amount of $56,210,000, in association with the refinancing of an existing $47,000,000 variable rate secured mortgage note. The refinancing was necessitated by the secured community-specific tax protection obligation assumed through certain of the preferred interests we assumed as part of the Archstone Acquisition.

•

In May 2013, we repaid a $52,806,000 fixed rate secured mortgage note with an interest rate of 5.24% pursuant to its scheduled maturity date.

•

In September 2013, we issued $400,000,000 principal amount of unsecured notes in a public offering under our existing shelf registration statement for net proceeds of approximately $396,212,000. The notes mature in October 2020 and were issued at a 3.63% interest rate. The notes have an effective interest rate of 3.79% including the effect of offering costs.

•

In December 2013, we issued $350,000,000 principal amount of unsecured notes in a public offering under our existing shelf registration statement for net proceeds of approximately $346,934,000. The notes mature in December 2023 and were issued at a 4.20% interest rate. The notes have an effective interest rate of 4.30% including the effect of offering costs.

•

In December 2013, we repaid a $150,000,000 fixed rate secured mortgage note with an interest rate of 5.66%, a $110,600,000 fixed rate secured mortgage note with an interest rate of 5.48%, and a $41,439,000 fixed rate secured mortgage note with an interest rate of 4.75%, in advance of their 2015 maturity dates, and incurred a charge for repayment penalties and the write-off of deferred fees of $14,921,000.

        The following table details our consolidated debt maturities for the next five years, excluding our Credit Facility and amounts outstanding related to communities classified as held for sale, for debt outstanding at December 31, 2013 (dollars in thousands) as compared to the amounts of debt outstanding as of at December 31, 2012. We are not directly or indirectly (as borrower or guarantor) obligated in any material respect to pay principal or interest on the indebtedness of any unconsolidated entities in which we have any equity or other interest.

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						Balance Outstanding					Scheduled maturities
	All-In interest rate(1)			Principal maturity date
Community						12-31-12		12-31-13			2014		2015		2016		2017		2018		Thereafter
Tax-exempt bonds
Fixed rate(4)
Eaves Washingtonian Center I		7.83	%		May-2027	$	8,764	$	8,401		$	390	$	419	$	449	$	482	$	517	$	6,144
Avalon Oaks		7.50	%		Feb-2041		16,288		16,094			207		222		238		255		276		14,896
Avalon Oaks West		7.54	%		Apr-2043		16,205		16,032			185		198		211		225		241		14,972
Avalon at Chestnut Hill		6.15	%		Oct-2047		40,390		39,979			434		457		482		509		536		37,561
Avalon Westbury		4.13	%		Nov-2036		—		62,200	(7)		—		—		—		—		—		62,200
							81,647		142,706			1,216		1,296		1,380		1,471		1,570		135,773
Variable rate(2)(4)
Avalon at Mountain View		0.98	%		Feb-2017		18,300		18,300	(3)		—		—		—		18,300		—		—
Avalon at Mission Viejo		1.21	%		Jun-2025		7,635		7,635	(3)		—		—		—		—		—		7,635
AVA Nob Hill		1.14	%		Jun-2025		20,800		20,800	(3)		—		—		—		—		—		20,800
Avalon Campbell		1.48	%		Jun-2025		38,800		38,800	(3)		—		—		—		—		—		38,800
Avalon Pacifica		1.49	%		Jun-2025		17,600		17,600	(3)		—		—		—		—		—		17,600
Avalon Bowery Place I		3.02	%		Nov-2037		93,800		93,800	(3)		—		—		—		—		—		93,800
Avalon Acton		1.59	%		Jul-2040		45,000		45,000	(3)		—		—		—		—		—		45,000
Avalon Walnut Creek		1.37	%		Mar-2046		116,000		116,000	(9)		—		—		—		—		—		116,000
Avalon Walnut Creek		1.37	%		Mar-2046		10,000		10,000	(9)		—		—		—		—		—		10,000
Avalon Morningside Park		1.61	%		May-2046		100,000		100,000	(5)		—		—		—		—		—		100,000
Avalon Clinton North		1.75	%		Nov-2038		—		147,000	(7)(3)		—		—		—		—		—		147,000
Avalon Clinton South		1.75	%		Nov-2038		—		121,500	(7)(3)		—		—		—		—		—		121,500
Avalon Midtown West		1.65	%		May-2029		—		100,500	(7)(3)		—		—		—		—		—		100,500
Archstone San Bruno		1.73	%		Dec-2037		—		64,450	(7)(3)		—		—		—		—		—		64,450
Avalon Calabasas		1.82	%		Apr-2028		—		44,410	(7)(3)		—		—		—		—		128		44,282
							467,935		945,795			—		—		—		18,300		128		927,367
Conventional loans(4)
Fixed rate
$100 Million unsecured notes		—	%		Mar-2013		100,000		—			—		—		—		—		—		—
$150 Million unsecured notes		5.52	%		Apr-2014		150,000		150,000			150,000		—		—		—		—		—
$250 Million unsecured notes		5.89	%		Sep-2016		250,000		250,000			—		—		250,000		—		—		—
$250 Million unsecured notes		5.82	%		Mar-2017		250,000		250,000			—		—		—		250,000		—		—
$250 Million unsecured notes		6.19	%		Mar-2020		250,000		250,000			—		—		—		—		—		250,000
$250 Million unsecured notes		4.04	%		Jan-2021		250,000		250,000			—		—		—		—		—		250,000
$450 Million unsecured notes		4.30	%		Sep-2022		450,000		450,000			—		—		—		—		—		450,000
$250 Million unsecured notes		3.00	%		Mar-2023		250,000		250,000			—		—		—		—		—		250,000
$400 Million unsecured notes		3.78	%		Oct-2020		—		400,000			—		—		—		—		—		400,000
$350 Million unsecured notes		4.30	%		Dec-2023		—		350,000			—		—		—		—		—		350,000
Avalon at Tysons West		—	%		Jul-2028		5,465		—	(8)		—		—		—		—		—		—
Avalon Orchards		7.78	%		Jul-2033		17,939		17,530			438		470		503		539		577		15,003
Avalon at Arlington Square		—	%		Apr-2013		170,125		—	(6)		—		—		—		—		—		—
Avalon Crescent		—	%		May-2015		110,600		—	(10)		—		—		—		—		—		—
Avalon at Silicon Valley		—	%		Jul-2015		150,000		—	(10)		—		—		—		—		—		—
Avalon Darien		6.22	%		Dec-2016		49,221		48,484			785		47,699		—		—		—		—
Avalon Greyrock Place		6.13	%		Dec-2016		59,292		58,385			962		57,423		—		—		—		—
Avalon Walnut Creek		4.30	%		Jul-2066		2,500		3,042			—		—		—		—		—		3,042
Avalon Shrewsbury		5.92	%		May-2019		20,737		20,464			289		307		323		346		367		18,832
Eaves Trumbull		5.93	%		May-2019		40,552		40,018			566		601		631		676		717		36,827
Avalon at Stamford Harbor		5.92	%		May-2019		64,472		63,624			900		955		1,003		1,075		1,140		58,551
Avalon Freehold		5.94	%		May-2019		35,948		35,475			502		532		559		599		636		32,647
Avalon Run East		5.94	%		May-2019		38,519		38,013			538		571		599		642		681		34,982
Eaves Nanuet		6.06	%		May-2019		65,004		64,149			907		963		1,011		1,083		1,150		59,035
Avalon at Edgewater		5.94	%		May-2019		77,103		76,088			1,076		1,142		1,199		1,285		1,363		70,023
Avalon Foxhall		6.05	%		May-2019		57,912		57,150			808		858		901		965		1,024		52,594
Avalon at Gallery Place		6.06	%		May-2019		44,997		44,405			628		667		700		750		796		40,864
Avalon at Traville		5.91	%		May-2019		76,254		75,251			1,065		1,130		1,186		1,271		1,348		69,251
Avalon Bellevue		5.92	%		May-2019		26,201		25,856			366		388		408		437		463		23,794
Avalon on The Alameda		5.91	%		May-2019		52,975		52,278			740		785		824		883		937		48,109
Avalon at Mission Bay North		5.90	%		May-2019		71,905		70,959			1,004		1,065		1,118		1,198		1,272		65,302
Fairfax Towers		—	%		Aug-2015		42,459		—	(10)		—		—		—		—		—		—
Eaves Phillips Ranch		—	%		Jun-2013		53,348		—	(6)		—		—		—		—		—		—
AVA Pasadena		4.05	%		Jun-2018		11,958		11,869	(7)		186		195		202		213		11,073		—
Eaves Seal Beach		3.12	%		Nov-2015		—		86,167	(7)		—		86,167		—		—		—		—
Oakwood Toluca Hills		3.12	%		Nov-2015		—		167,595	(7)		—		167,595		—		—		—		—
Mountain View at Middlefield		3.12	%		Nov-2015		—		72,374	(7)		—		72,374		—		—		—		—
Tunlaw Gardens		3.12	%		Nov-2015		—		28,844	(7)		—		28,844		—		—		—		—
Eaves Glover Park		3.12	%		Nov-2015		—		23,858	(7)		—		23,858		—		—		—		—
Oakwood Philadelphia		3.12	%		Nov-2015		—		10,427	(7)		—		10,427		—		—		—		—
Oakwood Arlington		3.12	%		Nov-2015		—		42,703	(7)		—		42,703		—		—		—		—
Eaves North Quincy		3.12	%		Nov-2015		—		37,212	(7)		—		37,212		—		—		—		—
Avalon Thousand Oaks Plaza		3.12	%		Nov-2015		—		28,742	(7)		—		28,742		—		—		—		—
Archstone La Jolla Colony		3.36	%		Nov-2017		—		27,176	(7)		—		—		—		27,176		—		—
Eaves Old Town Pasadena		3.36	%		Nov-2017		—		15,669	(7)		—		—		—		15,669		—		—
Eaves Thousand Oaks		3.36	%		Nov-2017		—		27,411	(7)		—		—		—		27,411		—		—
Avalon Walnut Ridge I		3.36	%		Nov-2017		—		20,754	(7)		—		—		—		20,754		—		—

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						Balance Outstanding					Scheduled maturities
	All-In interest rate(1)			Principal maturity date
Community						12-31-12		12-31-13			2014		2015		2016		2017		2018		Thereafter
Eaves Los Feliz		3.36	%		Nov-2017		—		43,258	(7)		—		—		—		43,258		—		—
Avalon Oak Creek		3.36	%		Nov-2017		—		85,288	(7)		—		—		—		85,288		—		—
Avalon Del Mar Station		3.36	%		Nov-2017		—		76,471	(7)		—		—		—		76,471		—		—
Archstone Courthouse Place		3.36	%		Nov-2017		—		140,332	(7)		—		—		—		140,332		—		—
Avalon Pasadena		3.36	%		Nov-2017		—		28,079	(7)		—		—		—		28,079		—		—
Eaves West Valley		3.36	%		Nov-2017		—		83,087	(7)		—		—		—		83,087		—		—
Eaves Woodland Hills		3.36	%		Nov-2017		—		104,694	(7)		—		—		—		104,694		—		—
Avalon Russett		3.36	%		Nov-2017		—		39,972	(7)		—		—		—		39,972		—		—
Archstone First + M		5.55	%		May-2053		—		142,061	(7)		901		954		987		1,067		1,129		137,023
Archstone San Bruno II		3.85	%		Apr-2021		—		31,398	(7)		430		454		475		506		534		28,999
Avalon Westbury		4.13	%		Nov-2036		—		21,260	(7)		1,095		1,155		1,315		1,275		1,340		15,080
Archstone Lexington		3.32	%		Mar-2016		—		16,780	(7)		255		270		16,255		—		—		—
Avalon Andover		3.28	%		Apr-2018		—		14,821			309		319		328		339		13,526		—
Archstone San Bruno III		4.87	%		Jun-2020		—		56,210			—		561		1,147		1,188		1,226		52,088
							3,295,486		4,875,683			164,750		617,386		281,674		958,528		41,299		2,812,046
Variable rate(2)(4)
Avalon Walnut Creek		1.71	%		Mar-2046		9,000		8,500	(9)		—		—		—		—		—		8,500
Avalon Calabasas		2.60	%		Aug-2018		—		57,314	(7)(3)		1,020		1,084		1,152		1,225		52,833		—
							9,000		65,814			1,020		1,084		1,152		1,225		52,833		8,500
Total indebtedness—excluding unsecured credit facility						$	3,854,068	$	6,029,998		$	166,986	$	619,766	$	284,206	$	979,524	$	95,830	$	3,883,686

(1)

Includes credit enhancement fees, facility fees, trustees' fees, the impact of interest rate hedges, offering costs, mark to market amortization and other fees.

(2)

Variable rates are given as of December 31, 2013.

(3)

Financed by variable rate debt, but interest rate is capped through an interest rate protection agreement.

(4)

Balances outstanding represent total amounts due at maturity, and are net of $5,291 of debt discount and $4,202 of debt discount and basis adjustments associated with the hedged unsecured notes as of December 31, 2013 and December 31, 2012, respectively, and $120,684 and $1,167 of premium associated with secured notes as of December 31, 2013 and December 31, 2012, respectively, as reflected on our Consolidated Balance Sheets included elsewhere in this report.

(5)

In July 2012 we remarketed the bonds converting them to a variable rate through July 2017.

(6)

Borrowing was repaid in accordance with its scheduled maturity.

(7)

Borrowing was assumed as part of the Archstone Acquisition.

(8)

Borrowing was repaid in May 2013 at par in advance of its scheduled maturity in July 2028.

(9)

In July 2013 we remarketed the bonds converting them to variable rate through July 2018.

(10)

Borrowing was repaid in December 2013 in advance of its 2015 scheduled maturity.

Future Financing and Capital Needs—Portfolio and Other Activity

        As of December 31, 2013, we had 29 wholly-owned communities under construction, and three wholly-owned communities under reconstruction. Substantially all of the capital expenditures necessary to complete the communities currently under construction and reconstruction and fund development costs related to pursuing Development Rights will be funded from:

•

our $1,300,000,000 Credit Facility;

•

cash currently on hand, invested in highly liquid overnight money market funds and repurchase agreements, and short-term investment vehicles;

•

retained operating cash;

•

the net proceeds from sales of existing communities;

•

the issuance of debt or equity securities; and/or

•

private equity funding, including joint venture activity.

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        Before planned construction or reconstruction activity, including activity related to communities owned by unconsolidated joint ventures begins, or the construction of a Development Right begins, we intend to arrange adequate financing to complete these undertakings, although we cannot assure you that we will be able to obtain such financing. In the event that financing cannot be obtained, we may have to abandon Development Rights, write off associated pre-development costs that were capitalized and/or forego reconstruction activity. In such instances, we will not realize the increased revenues and earnings that we expected from such Development Rights or reconstruction activity and significant losses could be incurred.

        From time to time we use joint ventures to hold or develop individual real estate assets. We generally employ joint ventures primarily to mitigate asset concentration or market risk and secondarily as a source of liquidity. We may also use joint ventures related to mixed-use land development opportunities where our partners bring development and operational expertise to the venture. Each joint venture or partnership agreement has been individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion may be limited to varying degrees depending on the terms of the joint venture or partnership agreement. We cannot assure you that we will achieve our objectives through joint ventures.

        In evaluating our allocation of capital within our markets, we sell assets that do not meet our long-term investment criteria or when capital and real estate markets allow us to realize a portion of the value created over the past business cycle and redeploy the proceeds from those sales to develop and redevelop communities. Because the proceeds from the sale of communities may not be immediately redeployed into revenue generating assets, the immediate effect of a sale of a community for a gain is to increase net income, but reduce future total revenues, total expenses and NOI. However, we believe that the absence of future cash flows from communities sold will have a minimal impact on our ability to fund future liquidity and capital resource needs.

Unconsolidated Real Estate Investments and Off-Balance Sheet Arrangements

Unconsolidated Investments

        As of December 31, 2013, we had investments in unconsolidated real estate entities accounted for under the equity method of accounting. Refer to Note 5, "Archstone Acquisition," and Note 6, "Investments in Real Estate Entities" of the Consolidated Financial Statements located elsewhere in this report, which includes information on the aggregate assets, liabilities and equity, as well as

62

operating results, and our proportionate share of their operating results. Detail of the real estate and associated funding underlying our unconsolidated investments is presented in the following table.

								Debt(2)
Unconsolidated Real Estate Investments	Company Ownership Percentage			# of Apartment Homes		Total Capitalized Cost(1)		Amount		Type	Interest Rate(3)			Maturity Date
Fund I
1. The Springs—Corona, CA(4)					320	$	30,047	$	22,169	Fixed		6.06	%		Oct 2014
2. Avalon Rutherford Station—East Rutherford, NJ					108		36,849		18,746	Fixed		6.13	%		Sep 2016
3. South Hills Apartments—West Covina, CA					85		25,014		11,762	Fixed		5.92	%		Oct 2014
4. Weymouth Place—Weymouth, MA					211		25,499		13,455	Fixed		5.12	%		Mar 2015
Total Fund I		15.2	%		724	$	117,409	$	66,132			5.86	%
Fund II
1. Avalon Bellevue Park—Bellevue, WA					220	$	34,108	$	21,515	Fixed		5.52	%		Jun 2019
2. Avalon Fair Oaks—Fairfax, VA					491		72,561		42,279	Fixed		5.26	%		May 2017
3. The Apartments at Briarwood—Owings Mills, MD					348		45,655		26,809	Fixed		3.64	%		Nov 2017
4. Eaves Gaithersburg—Gaithersburg, MD(5)					684		102,385		63,200	Fixed		5.42	%		Jan 2018
5. Eaves Tustin—Tustin, CA					628		100,511		59,100	Fixed		3.81	%		Oct 2017
6. Eaves Los Alisos—Lake Forest, CA					140		27,466		—	N/A		N/A			N/A
7. Eaves Plainsboro—Plainsboro, NJ(5)					776		91,498		52,167	Fixed		4.56	%		Nov 2014
8. Eaves Carlsbad—Carlsbad, CA					449		80,456		46,141	Fixed		4.68	%		Feb 2018
9. Eaves Rockville—Rockville, MD					210		51,535		30,875	Fixed		4.26	%		Aug 2019
10 Captain Parker Arms—Lexington, MA					94		22,058		13,500	Fixed		3.90	%		Sep 2019
11 Eaves Rancho San Diego—San Diego, CA					676		126,803		71,423	Fixed		3.45	%		Nov 2018
12 Avalon Watchung—Watchung, NJ					334		65,955		40,950	Fixed		3.37	%		Apr 2019
Total Fund II		31.3	%		5,050	$	820,991	$	467,959			4.34	%
U.S. Fund
1. Eaves Sunnyvale—Sunnyvale, CA(5)					192	$	66,902	$	33,888	Fixed		5.32	%		Nov 2019
2. Avalon Studio 4041—Studio City, CA					149		56,671		30,150	Fixed		3.34	%		Nov 2022
3. Marina Bay—Marina del Rey, CA(6)					205		68,347		—	N/A		N/A			N/A
4. Avalon Venice on Rose—Venice, CA					70		56,529		31,696	Fixed		3.31	%		Jun 2020
5. Boca Town Center—Boca Raton, FL(7)					252		45,761		25,000	Fixed		3.71	%		Feb 2019
6. Avalon Station 250—Dedham, MA					285		94,925		60,000	Fixed		3.73	%		Sep 2022
7. Avalon Grosvenor Tower—Bethesda, MD					235		76,793		46,500	Fixed		3.74	%		Sep 2022
8. Avalon Kips Bay—New York, NY					208		133,686		70,000	Fixed		4.25	%		Jan 2019
9. Avalon Kirkland at Carillon—Kirkland, WA					130		49,467		30,615	Fixed		3.75	%		Feb 2019
Total U.S. Fund		28.6	%		1,726	$	649,081	$	327,849			3.93	%
AC JV(8)
1. Archstone North Point—Cambridge, MA(9)					426	$	186,444	$	111,653	Fixed		6.00	%		July 2021
2. Archstone Woodland Park—Herndon, VA(9)					392		84,776		50,647	Fixed		6.00	%		July 2021
Total AC JV		20.0	%		818	$	271,220	$	162,300			6.00	%
Residual JV(11)
1. SWIB					1,902	$	434,173	$	187,021	Fixed/Variable		4.37	%		Dec 2014(12	)
Total Residual JV		8.0	%		1,902	$	434,173	$	187,021			4.37	%
Other Operating Joint Ventures
1. Avalon Chrystie Place I—New York, NY(10)		20.0	%		361	$	138,386	$	117,000	Variable		0.63	%		Nov 2036
2. Avalon at Mission Bay North II—San Francisco, CA(10)		25.0	%		313	$	124,337	$	105,000	Fixed		6.02	%		Dec 2015
3. Archstone Brandywine—Washington, DC		28.7	%		305	$	17,290	$	24,839	Fixed		4.30	%		Jun 2028
					979	$	280,013	$	246,839			3.29	%
					11,199	$	2,572,887	$	1,458,100			4.33	%

(1)

Represents total capitalized cost as of December 31, 2013.

(2)

We have not guaranteed the debt of unconsolidated investees and bear no responsibility for the repayment.

(3)

Represents weighted average rate on outstanding debt as of December 31, 2013.

(4)

Beginning in the third quarter of 2010, we consolidated the net assets and results of operations of The Springs.

(5)

Borrowing on this community is comprised of two mortgage loans.

(6)

This community is currently under redevelopment for which the venture is expecting to invest $32.9 million. Currently approximately one half of the apartment homes are not in service due to the redevelopment. This community is owned through a leasehold interest.

(7)

The debt secured by this community is a variable rate note converted to an effective fixed rate borrowing with an interest rate swap.

(8)

As discussed in this report, the venture commenced the construction of a third operating community in Cambridge, MA that, when completed, is expected to contain 103 apartments homes for a total capitalized cost of $28,000,000.

(9)

Borrowing is comprised of four mortgage loans made by the equity investors in the venture in proportion to their equity interests.

63

(10)

After the venture makes certain threshold distributions to the third-party partner, we will generally receive 50% of all further distributions.

(11)

Our ownership interest of 8.0% is determined by our 40.0% ownership interest in the joint venture entity with Equity Residential which owns a 20% interest in this joint venture.

(12)

Maturity date represents the earliest of the maturity dates on the two loans and six draws on the credit facility relating to the six communities owned by SWIB. Maturity dates range from December 2014 to December 2029.

Off-Balance Sheet Arrangements

        In addition to our investment interests in consolidated and unconsolidated real estate entities, we have certain off-balance sheet arrangements with the entities in which we invest. Additional discussion of these entities can be found in Note 6, "Investments in Real Estate Entities," of our Consolidated Financial Statements located elsewhere in this report.

•

Subsidiaries of Fund I have four loans secured by individual assets with aggregate amounts outstanding of $66,132,000, including $22,169,000 for the mortgage note of a Fund I subsidiary that we purchased during 2010. Fund I subsidiary loans have varying maturity dates (and, in some cases, dates after which the loans can be prepaid without penalty), ranging from October 2014 to September 2016. These mortgage loans are secured by the underlying real estate. The mortgage loans are payable by the subsidiaries of Fund I with operating cash flow or disposition proceeds from the underlying real estate. We have not guaranteed the debt of Fund I, nor do we have any obligation to fund this debt should Fund I be unable to do so.

In addition, as part of the formation of Fund I, we have provided to one of the limited partners a guarantee. The guarantee provides that if, upon final liquidation of Fund I, the total amount of all distributions to that partner during the life of Fund I (whether from operating cash flow or property sales) does not equal a minimum of the total capital contributions made by that partner, then we will pay the partner an amount equal to the shortfall, but in no event more than 10% of the total capital contributions made by the partner (maximum of approximately $7,500,000 as of December 31, 2013). As of December 31, 2013, the expected realizable value of the real estate assets owned by Fund I is considered adequate to cover such potential payment to that partner under the expected Fund I liquidation scenario. The estimated fair value of, and our obligation under, this guarantee both at inception and as of December 31, 2013, was not significant and therefore we have not recorded any obligation for this guarantee as of December 31, 2013.

•

As of December 31, 2013, subsidiaries of Fund II have 13 loans secured by individual assets with aggregate amounts outstanding of $467,959,000 with varying maturity dates (or dates after which the loans can be prepaid without penalty), ranging from November 2014 to September 2019. The mortgage loans are payable by the subsidiaries of Fund II with operating cash flow or disposition proceeds from the underlying real estate. We have not guaranteed the debt of Fund II, nor do we have any obligation to fund this debt should Fund II be unable to do so.

In addition, as part of the formation of Fund II, we have provided to one of the limited partners a guarantee. The guarantee provides that if, upon final liquidation of Fund II, the total amount of all distributions to that partner during the life of Fund II (whether from operating cash flow or property sales) does not equal a minimum of the total capital contributions made by that partner, then we will pay the partner an amount equal to the shortfall, but in no event more than 10% of the total capital contributions made by the partner (maximum of approximately $8,910,000 as of December 31, 2013). As of December 31, 2013, the expected realizable value of the real estate assets owned by Fund II is considered adequate to cover such potential payment to that partner under the expected Fund II liquidation scenario. The estimated fair value of, and our obligation under, this guarantee, both at inception and as of December 31, 2013, was not significant and therefore we have not recorded any obligation for this guarantee as of December 31, 2013.

64

•

Each individual mortgage loan of Fund I or Fund II was made to a special purpose, single asset subsidiary of the Funds. Each mortgage loan provides that it is the obligation of the respective subsidiary only, except under exceptional circumstances (such as fraud or misapplication of funds) in which case the respective Fund could also have obligations with respect to the mortgage loan. In no event do the mortgage loans provide for recourse against investors in the Funds, including against us or our wholly-owned subsidiaries that invest in the Funds. A default by a Fund or a Fund subsidiary on any loan to it would not constitute a default under any of our loans or any loans of our other "non-Fund" subsidiaries or affiliates. If either the Funds or a subsidiary of one of the Funds were unable to meet its obligations under a loan, the value of our investment in that Fund would likely decline and we might also be more likely to be obligated under the guarantee we provided to one of the Fund partners in each Fund as described above. If a Fund subsidiary or a Fund were unable to meet its obligations under a loan, we and/or the other investors might evaluate whether it was in our respective interests to voluntarily support the Fund through additional equity contributions and/or take other actions to avoid a default under a loan or the consequences of a default (such as foreclosure of a Fund asset).

In the future, in the event either of the Funds were unable to meet their obligations under a loan, we cannot predict at this time whether we would provide any voluntary support, or take any other action, as any such action would depend on a variety of factors, including the amount of support required and the possibility that such support could enhance the return of either of the Funds and/or our returns by providing time for performance to improve.

•

CVP I, LLC, the entity that owns Avalon Chrystie Place I, has outstanding tax-exempt, variable rate bonds maturating in November 2036 in the amount of $117,000,000, which have permanent credit enhancement. We have not guaranteed the debt of CVP I, LLC, nor do we have any obligation to fund this debt should CVP I, LLC be unable to do so.

•

MVP I, LLC, the entity that owns Avalon at Mission Bay North II, has a loan secured by the underlying real estate assets of the community for $105,000,000. The loan is a fixed rate, interest-only note bearing interest at 6.02%, maturing in December 2015. We have not guaranteed the debt of MVP I, LLC, nor do we have any obligation to fund this debt should MVP I, LLC be unable to do so.

        In conjunction with the Archstone Acquisition, the Company acquired interests in the following entities:

•

The U.S. Fund was formed in July 2011 and is fully invested. As of December 31, 2013, the U.S. Fund owns nine communities containing 1,726 apartment homes, one of which includes a marina containing 229 boat slips. Through subsidiaries we own the general partner of the U.S. Fund and hold a 28.6% interest in the U.S. Fund.

As of December 31, 2013, subsidiaries of the U.S. Fund have nine loans secured by individual assets with aggregate amounts outstanding of $327,849,000 with varying maturity dates, ranging from January 2019 to November 2022. The mortgage loans are payable by the subsidiaries of the U.S. Fund with operating cash flow or disposition proceeds from the underlying real estate. We have not guaranteed the debt of the U.S. Fund, nor do we have any obligation to fund this debt should the U.S. Fund be unable to do so.

•

The AC JV is a joint venture in which we acquired Archstone's 20% ownership interest. The AC JV was formed in 2011 and as of December 31, 2013 owned two operating apartment communities containing 818 apartment homes in Cambridge, MA and Herndon, VA. The AC JV partnership agreement contains provisions that require the Company to provide a ROFO to the AC JV in connection with additional opportunities to acquire or develop additional interests in multifamily real estate assets within a specified geographic radius of the existing assets, generally

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one mile or less. During the year ended December 31, 2013, the Company provided the AC JV with the opportunity to acquire a parcel of land owned by the Company as required in the right of first offer provisions for the joint venture. The AC JV exercised its right to acquire the land parcel for development and commenced construction of an additional apartment community located in Cambridge, MA, which is expected to contain 103 apartment homes and be completed for a total capitalized cost of $28,000,000. The Company sold the parcel of land to the AC JV in exchange for a cash payment and a capital account credit, and is overseeing the development in exchange for a developer fee. The Company owns one additional land parcel for the development of 301 apartment homes, classified as a Development Right in Cambridge, MA, acquired as part of the Archstone Acquisition that is subject to ROFO restrictions. The ROFO restriction expires in 2019.

As of December 31, 2013, subsidiaries of the AC JV have eight unsecured loans outstanding in the aggregate amount of $162,300,000 which mature in July 2021, and which were made by the investors in the venture, including us, in proportion to the investors' respective equity ownership interest. The unsecured loans are payable by the subsidiaries of the AC JV with operating cash flow from the venture. We have not guaranteed the debt of the AC JV, nor do we have any obligation to fund this debt should the AC JV be unable to do so.

•

Brandywine owns a 305 apartment home community located in Washington, DC. The community is managed by a third party. Brandywine is comprised of five members who hold various interests in the joint venture. In conjunction with the Archstone Acquisition, we acquired a 26.1% equity interest in the venture, and subsequently purchased an additional 2.6% interest, and as of December 31, 2013, hold a 28.7% equity interest in the venture.

As of December 31, 2013, Brandywine has an outstanding $24,839,000 fixed rate mortgage loan that is payable by Brandywine. We have not guaranteed the debt of Brandywine, nor do we have any obligation to fund this debt should Brandywine be unable to do so.

•

Through subsidiaries, the Company and Equity Residential entered into three limited liability company agreements (collectively, the "Residual JV") through which the Company and Equity Residential acquired (i) certain assets of Archstone that the Company and Equity Residential plan to divest (to third parties or to the Company or Equity Residential) over time (the "Residual Assets"), and (ii) various liabilities of Archstone that the Company and Equity Residential agreed to assume in conjunction with the Archstone Acquisition (the "Residual Liabilities"). The Residual Assets include interests in apartment communities in Germany (including through a fund which Archstone managed); a 20.0% interest in SWIB, a joint venture which owns and manages six apartment communities with 1,902 apartment homes in the United States; two land parcels; and various licenses, insurance policies, contracts, office leases and other miscellaneous assets. The Residual Liabilities generally include most existing or future litigation and claims related to Archstone's operations for periods before the close of the Archstone Acquisition, except for (i) claims that principally relate to the physical condition of the assets acquired directly by the Company or Equity Residential, which generally remain the sole responsibility of the Company or Equity Residential, as applicable, and (ii) certain tax and other litigation between Archstone and various equity holders in Archstone related to periods before the close of the Archstone Acquisition, and claims which may arise due to changes in the capital structure of Archstone that occurred prior to closing, for which Lehman has agreed to indemnify the Company and Equity Residential. The Company and Equity Residential jointly control the Residual JV and the Company generally holds a 40% economic interest in the assets and liabilities of the Residual JV.

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As of December 31, 2013, SWIB has two loans and draws on a credit facility secured by individual assets with aggregate amounts outstanding of $187,021,000 with varying maturity dates, ranging from December 2014 to December 2029. We have not guaranteed the debt of SWIB, nor do we have any obligation to fund this debt should SWIB be unable to do so.

        There are no other material lines of credit, side agreements, financial guarantees or any other derivative financial instruments related to or between our unconsolidated real estate entities and us. In evaluating our capital structure and overall leverage, management takes into consideration our proportionate share of the indebtedness of unconsolidated entities in which we have an interest.

Contractual Obligations

        Scheduled contractual obligations required for the next five years and thereafter are as follows as of December 31, 2013 (dollars in thousands):

	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Debt Obligations	$	6,029,998	$	166,986	$	903,972	$	1,075,354	$	3,883,686
Interest on Debt Obligations		2,179,768		259,520		484,354		359,229		1,076,665
Capital Lease Obligations(1)		64,461		1,863		20,968		1,696		39,934
Operating Lease Obligations(1)		1,345,871		19,801		39,185		38,191		1,248,694
	$	9,620,098	$	448,170	$	1,448,479	$	1,474,470	$	6,248,979

(1)

Includes land leases expiring between October 2026 and March 2142. Amounts do not include any adjustment for purchase options available under the land leases.

Inflation and Deflation

        Substantially all of our apartment leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Similarly, in a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter-term leases.

Forward-Looking Statements

        This Form 10-K contains "forward-looking statements" as that term is defined under the Private Securities

        Litigation Reform Act of 1995. You can identify forward-looking statements by our use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "project," "plan," "may," "shall," "will" and other similar expressions in this Form 10-K, that predict or indicate future events and trends and that do not report historical matters. These statements include, among other things, statements regarding our intent, belief or expectations with respect to:

•

our potential development, redevelopment, acquisition or disposition of communities;

•

the timing and cost of completion of apartment communities under construction, reconstruction, development or redevelopment;

•

the timing of lease-up, occupancy and stabilization of apartment communities;

•

the pursuit of land on which we are considering future development;

•

the anticipated operating performance of our communities;

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•

cost, yield, revenue, NOI and earnings estimates;

•

our declaration or payment of distributions;

•

our joint venture and discretionary fund activities;

•

our policies regarding investments, indebtedness, acquisitions, dispositions, financings and other matters;

•

our qualification as a REIT under the Internal Revue Code;

•

the real estate markets in Northern and Southern California and markets in selected states in the Mid-Atlantic, New England, Metro New York/New Jersey and Pacific Northwest regions of the United States and in general;

•

the availability of debt and equity financing;

•

interest rates;

•

general economic conditions including the potential impacts from the economic conditions; and

•

trends affecting our financial condition or results of operations.

        We cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect our current expectations of the approximate outcomes of the matters discussed. We do not undertake a duty to update these forward-looking statements, and therefore they may not represent our estimates and assumptions after the date of this report. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by these forward-looking statements. You should carefully review the discussion under Item 1a. "Risk Factors," in this report for further discussion of risks associated with forward-looking statements.

        Some of the factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following:

•

we may fail to secure development opportunities due to an inability to reach agreements with third parties to obtain land at attractive prices or to obtain desired zoning and other local approvals;

•

we may abandon or defer development opportunities for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses;

•

construction costs of a community may exceed our original estimates;

•

we may not complete construction and lease-up of communities under development or redevelopment on schedule, resulting in increased interest costs and construction costs and a decrease in our expected rental revenues;

•

occupancy rates and market rents may be adversely affected by competition and local economic and market conditions which are beyond our control;

•

financing may not be available on favorable terms or at all, and our cash flows from operations and access to cost effective capital may be insufficient for the development of our pipeline which could limit our pursuit of opportunities;

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•

our cash flows may be insufficient to meet required payments of principal and interest, and we may be unable to refinance existing indebtedness or the terms of such refinancing may not be as favorable as the terms of existing indebtedness;

•

we may be unsuccessful in our management of Fund I, Fund II, the U.S. Fund, the AC JV or the REIT vehicles that are used with each of them; and

•

we may be unsuccessful in managing changes in our portfolio composition.

Critical Accounting Policies

        The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements. Below is a discussion of the accounting policies that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 1, "Organization and Basis of Presentation" of our Consolidated Financial Statements.

Principles of Consolidation

        We may enter into various joint venture agreements with unrelated third parties to hold or develop real estate assets. We must determine for each of these ventures whether to consolidate the entity or account for our investment under the equity or cost basis of accounting.

        We determine whether to consolidate certain entities based on our rights and obligations under the joint venture agreements, applying the applicable accounting guidance. For investment interests that we do not consolidate, we evaluate the guidance to determine the accounting framework to apply. The application of the rules in evaluating the accounting treatment for each joint venture is complex and requires substantial management judgment. Therefore, we believe the decision to choose an appropriate accounting framework is a critical accounting estimate.

        If we were to consolidate the joint ventures that we accounted for using the equity method, excluding joint venture entities the company formed with Equity Residential as part of the Archstone Acquisition, at December 31, 2013, our assets would have increased by $1,925,274,000 and our liabilities would have increased by $1,280,744,000. We would be required to consolidate those joint ventures currently not consolidated for financial reporting purposes if the facts and circumstances changed, including but not limited to the following reasons, none of which are currently expected to occur:

•

For entities not considered to be variable interest entities, the nature of the entity changed such that it would be considered a variable interest entity and we were considered the primary beneficiary.

•

For entities in which we do not hold a controlling voting and/or variable interest, the contractual arrangement changed resulting in our investment interest being either a controlling voting and/or variable interest.

        We evaluate our accounting for investments on a regular basis including when a significant change in the design of an entity occurs.

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Cost Capitalization

        We capitalize costs during the development of assets. Capitalization begins when we determine that development of a future asset is probable and continues until the asset, or a portion of the asset, is delivered and is ready for its intended use. For redevelopment efforts, we capitalize costs either (i) in advance of taking apartment homes out of service when significant renovation of the common area has begun and continue until the redevelopment is completed, or (ii) when an apartment home is taken out of service for redevelopment and continue until the redevelopment is completed and the apartment home is available for a new resident. Rental income and operating expenses incurred during the initial lease-up or post-redevelopment lease-up period are fully recognized as they accrue.

        During the development and redevelopment efforts we capitalize all direct costs and indirect costs which have been incurred as a result of the development and redevelopment activities. These costs include interest and related loan fees, property taxes as well as other direct and indirect costs. Interest is capitalized for any project specific financing, as well as for general corporate financing to the extent of our aggregate investment in the projects. Indirect project costs, which include personnel and office and administrative costs that are clearly associated with our development and redevelopment efforts, are also capitalized. Capitalized indirect costs associated with our development and redevelopment activities are comprised primarily of compensation related costs for associates dedicated to our development and redevelopment efforts and total $38,128,000, $26,513,000, and $23,984,000 for 2013, 2012 and 2011, respectively. The estimation of the direct and indirect costs to capitalize as part of our development and redevelopment activities requires judgment and, as such, we believe cost capitalization to be a critical accounting estimate.

        There may be a change in our operating expenses in the event that there are changes in accounting guidance governing capitalization or changes to our levels of development or redevelopment activity. If changes in the accounting guidance limit our ability to capitalize costs or if we reduce our development and redevelopment activities without a corresponding decrease in indirect project costs, there may be an increase in our operating expenses. For example, if in 2013 our development activities decreased by 10%, and there were no corresponding decrease in our indirect project costs, our costs charged to expense would have increased by $3,813,000.

        We capitalize pre-development costs incurred in pursuit of Development Rights. These costs include legal fees, design fees and related overhead costs. Future development of these pursuits is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and availability of capital. Pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development no longer probable, any capitalized pre-development costs are written off with a charge to expense.

        Due to the subjectivity in determining whether a pursuit will result in the development of an apartment community, and therefore should be capitalized, the accounting for pursuit costs is a critical accounting estimate. If we had determined that 10% of our capitalized pursuit costs were associated with Development Rights that were no longer probable of occurring, net income for the year ended December 31, 2013 would have decreased by $3,159,000.

Abandoned Pursuit Costs & Asset Impairment

        We evaluate our real estate and other long-lived assets for impairment when potential indicators of impairment exist. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, we assess its recoverability by comparing the carrying amount of the property to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the

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carrying amount exceeds the estimated fair value of the property. Based on periodic tests of recoverability of long-lived assets, for the years ended December 31, 2013, 2012 and 2011, we did not recognize any impairment losses for wholly-owned operating real estate assets.

        We expensed costs related to abandoned pursuits, which includes the abandonment of Development Rights and disposition pursuits, in the amounts of $998,000 in 2013, $1,757,000 in 2012 and $1,957,000 in 2011. These costs are included in operating expenses, excluding property taxes on the accompanying Consolidated Statements of Operations and Other Comprehensive Income. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future years.

        We also assess land held for development for impairment if our intent changes with respect to the development of the land. We did not recognize any impairment charges for land holdings in 2013 or 2012. During 2011, we concluded that we would pursue the sale of two land parcels where the carrying values of the two land parcels were not fully recoverable. As a result, we recognized an aggregate charge of $12,097,000 for the impairment of these land parcels. We had previously recognized an impairment loss of $9,952,000 in 2008 when we determined that we no longer intended to pursue development of the assets. Our change in intent to pursue disposition of these assets rather than holding for investment triggered the determination that a further impairment of the basis of the land parcels existed. We looked to a combination of internal models and third-party pricing estimates to determine the fair values for these impaired land parcels. Considering our knowledge of multifamily residential development, the fair values of parcels zoned for multifamily development were generated using an internal model. Land parcels zoned for other purposes were valued using third-party estimates of fair value. For the internally generated fair values, we used a discounted cash flow analysis on the expected cash flows for a multifamily rental community. The cash flow analysis incorporated assumptions that market participants would make, including applying discount factors to the estimated future cash flows of the underlying asset, as well as potential disposition proceeds. The third-party values incorporated the use of estimated rates of return, investment time horizons and sales prices for land parcels considered to be market comparables, adjusted for known differences in critical areas including the existing entitlements (such as zoning and state of infrastructure readiness). Both valuation methods included significant other unobservable inputs and are therefore classified as Level 3 prices in the fair value hierarchy.

        We also evaluate our unconsolidated investments for impairment, considering both the carrying value of the investment, estimated to be the expected proceeds that it would receive if the entity were dissolved and the net assets were liquidated, as well as our proportionate share of any impairment of assets held by unconsolidated investments. During 2011, we concluded that because the market for for-sale housing development had not improved as expected, the investment in an unconsolidated joint venture was impaired and that impairment was other than temporary. As a result, we recognized a charge of $1,955,000 for the impairment of the investment in the unconsolidated joint venture. There were no impairment losses recognized by any of our investments in unconsolidated entities during 2013 or 2012.

        Our focus on value creation through real estate development presents an impairment risk in the event of a future deterioration of the real estate and/or capital markets or a decision by us to reduce or cease development. We cannot predict the occurrence of future events that may cause an impairment assessment to be performed, or the likelihood of any future impairment charges, if any. You should also review Item 1a., "Risk Factors" in this Form 10-K.

REIT Status

        We are a Maryland corporation that has elected to be treated, for federal income tax purposes, as a REIT. We elected to be taxed as a REIT under the Internal Revenue Code for the year ended

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December 31, 1994 and have not revoked such election. A corporate REIT is a legal entity which holds real estate interests and must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to stockholders. As a REIT, we generally will not be subject to corporate level federal income tax on taxable income if we distribute 100% of our taxable income to our stockholders over time periods allowed under the Code. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at regular corporate rates (subject to any applicable alternative minimum tax) and may not be able to elect to qualify as a REIT for four subsequent taxable years. For example, if we failed to qualify as a REIT in 2013, our net income would have decreased by approximately $141,963,000.

        Our qualification as a REIT requires management to exercise significant judgment and consideration with respect to operational matters and accounting treatment. Therefore, we believe our REIT status is a critical accounting estimate.

Acquisition of Investments in Real Estate

        We account for our acquisitions of investments in real estate in accordance with the authoritative guidance for the initial measurement, which requires the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree to be recognized at fair value. Typical assets and liabilities acquired include land, building, furniture, fixtures, and equipment, and identified intangible assets and liabilities, consisting of the value of above-below market leases and in-place leases. In making estimates of fair values for purposes of allocating purchase price, we utilize various sources, including our own analysis of recently acquired and existing comparable properties in our portfolio and other market data.

Federal Income Tax Changes and Updates for Incorporation in Existing Registration Statements

        The following discussion updates the disclosures under "Federal Income Tax Considerations and Consequences of Your Investment" in the prospectus dated February 27, 2012 contained in our Registration Statement on Form S-3 filed with the SEC on February 27, 2012 and in our other registration statements into which this Annual Report on Form 10-K is incorporated by reference.

Additional Disclosure Relating to Taxation of AvalonBay as a REIT

        The section captioned "Taxation of AvalonBay as a REIT—Ownership of Partnership Interests by a REIT" is replaced in its entirety by the following:

        Ownership of Partnership Interests by a REIT.    A REIT that is a partner in a partnership (or a member in a limited liability company or other entity that is treated as a partnership for U.S. federal income tax purposes) will be deemed to own its proportionate share of the assets of the partnership and will be deemed to earn its proportionate share of the partnership's income. The assets and gross income of the partnership retain the same character in the hands of the REIT for purposes of the asset and gross income tests applicable to REITs as described below. Thus, our proportionate share of the assets and items of gross income of any entity taxable as a partnership for U.S. federal income tax purposes in which we hold an interest will be treated as our assets and liabilities and our items of income for purposes of applying the requirements described in this prospectus. The assets, liabilities and items of income of any partnership in which we own an interest include such entity's share of the assets and liabilities and items of income with respect to any partnership in which it holds an interest.

        The assets of one of our joint ventures with Equity Residential include indirect interests in partnerships controlled by Equity Residential, and thus for purposes of our compliance with the REIT asset and gross income requirements we will be treated as owning our proportionate share of the assets and as receiving our proportionate share of gross income of the Equity Residential partnerships in which the joint venture has an interest. Although Equity Residential has agreed to operate those

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partnerships in compliance with the REIT requirements, we cannot assure you that such Equity Residential partnerships will be operated in compliance with the REIT requirements. Failure by those partnerships to comply with the REIT requirements could potentially jeopardize our REIT status.

        The discussion above does not apply to our interest in any partnership or other unincorporated entity treated as a corporation for U.S. federal income tax purposes. If an entity that we treated as a partnership for U.S. federal income tax purposes and the REIT requirements were determined instead to be taxed as a corporation, we could fail one or more of the REIT income and asset tests described below. Generally, a domestic unincorporated entity with two or more owners is treated as a partnership for U.S. federal income tax purposes unless it affirmatively elects to be treated as a corporation. However, certain "publicly traded partnerships" are treated as corporations for U.S. federal income tax purposes. A "publicly traded partnership" is any partnership (i) the interests in which are traded on an established securities market or (ii) the interests in which are readily tradable on a "secondary market or the substantial equivalent thereof." However, under the relevant Treasury Regulations, interests in a partnership will not be considered readily tradable on a secondary market or on the substantial equivalent of a secondary market if the partnership qualifies for specified "safe harbors," which are based on the specific facts and circumstances relating to the partnership. Moreover, certain publicly traded partnerships will avoid being treated as a corporation for U.S. federal income tax purposes if the partnership derives at least 90% of its gross income from certain specified sources of "qualifying income." We do not believe that any of our direct or indirect subsidiary partnerships should be treated as corporations under the publicly traded partnership rules. However, a contrary determination could prevent us from qualifying as a REIT.

        The fifth paragraph in the section captioned "Taxation of AvalonBay as a REIT—Income Tests Applicable to REITs" is replaced with the following:

        Taxable dividends from a taxable REIT subsidiary and gain from a sale or other taxable disposition of interests in a taxable REIT subsidiary will qualify under the 95% income test, but not the 75% income test. Our need to satisfy the 75% income test may adversely affect our ability to distribute earnings from, or dispose of our investment in, a taxable REIT subsidiary.

        The following paragraph is added at the end of the section captioned "Taxation of AvalonBay as a REIT—Asset Tests Applicable to REITs":

        Shares in other qualifying REITs are treated as "real estate assets" for purposes of the REIT assets tests, while shares of our taxable REIT subsidiaries do not qualify as "real estate assets."

        The last sentence in the section captioned "Other U.S. Federal Income Tax Withholding and Reporting Requirements" is replaced with the following:

        The most recent guidance from the IRS delays withholding under FATCA on withholdable payments to foreign financial institutions and non-financial foreign entities until after December 31, 2016 with respect to gross proceeds of a disposition of property that can produce U.S. source interest or dividends and certain other sources of income and after June 30, 2014 with respect to other withholdable payments.

        The section captioned "Expiration of Certain Reduced Tax Provisions" is replaced with the following:

Federal Income Tax Rates Update

        As of January 1, 2013, (1) the maximum tax rate on "qualified dividend income" for non-corporate taxpayers is 20%, (2) the maximum tax rate on long-term capital gain for non-corporate taxpayers is 20%, (3) the highest marginal non-corporate income tax rate is 39.6%, and (4) the backup withholding rate remains at 28%. Thus, references in the prospectus to "15% rate gain distributions" shall be replaced with references to "20% rate gain distributions," which are taxed to non-corporate U.S. shareholders at the new maximum 20% long-term capital gains rate.

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ITEM 7a.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are exposed to market risks from our financial instruments primarily from changes in market interest rates. We do not have exposure to any other significant market risk. We monitor interest rate risk as an integral part of our overall risk management, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on our results of operations. Our operating results are affected by changes in interest rates, primarily in short-term LIBOR and the SIFMA index as a result of borrowings under our Credit Facility and outstanding bonds with variable interest rates. In addition, the fair value of our fixed rate unsecured and secured notes are impacted by changes in market interest rates. The effect of interest rate fluctuations on our results of operations historically has been small relative to other factors affecting operating results, such as rental rates and occupancy.

        As of December 31, 2013 and 2012, we had $1,011,609,000 and $476,935,000, respectively, in variable rate debt outstanding, with no amounts outstanding under our Credit Facility. If interest rates on the variable rate debt had been 100 basis points higher throughout 2013 and 2012, our annual interest costs would have increased by approximately $9,680,000 and $3,969,000, respectively, based on balances outstanding during the applicable years. In conjunction with the Archstone Acquisition, we assumed approximately $2,034,482,000 secured fixed and floating rate indebtedness, which impacted the Company's overall exposure to interest rate risk. In May 2013, a $215,000,000 forward interest rate protection agreement matured, resulting in a payment to the counterparty of $51,000,000, the fair value at time of settlement.

        Because the counterparties providing the interest rate cap and swap agreements are major financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group and the current valuation of the position is a net liability for us, we do not believe there is exposure at this time to a default by a counterparty provider.

        In addition, changes in interest rates affect the fair value of our fixed rate debt, computed using quoted market prices for our unsecured notes or a discounted cash flow model for our secured notes, considering our current market yields, which impacts the fair value of our aggregate indebtedness. Debt securities and notes payable (including amounts outstanding under our Credit Facility) with an aggregate carrying value of $6,029,998,000 at December 31, 2013 had an estimated aggregate fair value of $6,294,850,000 at December 31, 2013. Contractual fixed rate debt represented $5,255,089,000 of the fair value at December 31, 2013. If interest rates had been 100 basis points higher as of December 31, 2013, the fair value of this fixed rate debt would have decreased by approximately $321,709,000.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The response to this Item 8 is included as a separate section of this Annual Report on Form 10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

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ITEM 9a.    CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.



(b)

Management's Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2013.

Our internal control over financial reporting as of December 31, 2013 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

(c)

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the fourth quarter of the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9b.    OTHER INFORMATION

        None.

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PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        The information required by Item 10 pertaining to directors and executive officers of the Company and the Company's Code of Conduct is incorporated herein by reference to the Company's Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Stockholders scheduled to be held on May 21, 2014.

ITEM 11.    EXECUTIVE COMPENSATION

        The information required by Item 11 pertaining to executive compensation is incorporated herein by reference to the Company's Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Stockholders scheduled to be held on May 21, 2014.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information required by Item 12 pertaining to security ownership of management and certain beneficial owners of the Company's common stock is incorporated herein by reference to the Company's Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Stockholders scheduled to be held on May 21, 2014, to the extent not set forth below.

        The Company maintains the 2009 Stock Option and Incentive Plan (the "2009 Plan") and the 1996 Non-Qualified Employee Stock Purchase Plan (the "ESPP"), pursuant to which common stock or other equity awards may be issued or granted to eligible persons.

        The following table gives information about equity awards under the 2009 Plan, the Company's prior 1994 Stock Incentive Plan (the "1994 Plan") under which awards were previously made, and the ESPP as of December 31, 2013:

	(a)			(b)			(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders(1)		1,545,891	(2)		112.32	(3)		2,341,585
Equity compensation plans not approved by security holders(4)		—			n/a			724,675
Total		1,545,891			112.32	(3)		3,066,260

(1)

Consists of the 2009 Plan.

(2)

Includes 87,856 deferred units granted under the 2009 Plan and the 1994 Plan, which, subject to vesting requirements, will convert in the future to common stock on a one-for-one basis. Also includes the maximum number of shares that may be issued upon settlement of outstanding Performance Awards awarded to officers and maturing on December 31, 2014 and December 31, 2015, and the number of shares issuable based on actual performance for Performance Awards awarded to officers maturing on December 31, 2013. Does not include 182,083 shares of restricted stock that are outstanding and that are already reflected in the Company's outstanding shares.

(3)

Excludes deferred units granted under the 2009 Plan and the 1994 Plan, which, subject to vesting requirements, will convert in the future to common stock on a one-for-one basis.

(4)

Consists of the ESPP.

76

        The ESPP, which was adopted by the Board of Directors on October 29, 1996, has not been approved by our shareholders. A further description of the ESPP appears in Note 9, "Stock-Based Compensation Plans," of our Consolidated Financial Statements included in this report.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        The information required by Item 13 pertaining to certain relationships and related transactions is incorporated herein by reference to the Company's Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Stockholders to be held on May 21, 2014.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information required by Item 14 pertaining to the fees paid to and services provided by the Company's principal accountant is incorporated herein by reference to the Company's Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Stockholders to be held on May 21, 2014.

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULE

15(a)(1) Financial Statements
Index to Financial Statements
Consolidated Financial Statements and Financial Statement Schedule:
Reports of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011	F-4
Consolidated Statements of Equity for the years ended December 31, 2013, 2012 and 2011	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	F-6
Notes to Consolidated Financial Statements	F-9
15(a)(2) Financial Statement Schedule
Schedule III—Real Estate and Accumulated Depreciation	F-47
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
15(a)(3) Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed as a part of this report.

77

INDEX TO EXHIBITS

3(i).1	—	Articles of Amendment and Restatement of Articles of Incorporation of the Company, dated as of June 4, 1998. (Incorporated by reference to Exhibit 3(i) to Form 10-K of the Company filed March 1, 2007.)
3(i).2	—	Articles of Amendment, dated as of October 2, 1998. (Incorporated by reference to Exhibit 3(i).2 to Form 10-K of the Company filed March 1, 2007.)
3(i).3	—	Articles of Amendment, dated as of May 22, 2013. (Incorporated by reference to Exhibit 3(i).3 to Form 8-K of the Company filed on May 22, 2013.)
3(ii).1	—	Amended and Restated Bylaws of the Company, as adopted by the Board of Directors on May 21, 2009. (Incorporated by reference to Exhibit 3(ii).1 to Form 10-Q of the Company filed November 2, 2012.)
3(ii).2	—	Amendment to Amended and Restated Bylaws of AvalonBay Communities, Inc., dated February 10, 2010. (Incorporated by reference to Exhibit 3(ii).2 to Form 10-Q of the Company filed November 2, 2012.)
3(ii).3	—	Amendment to Amended and Restated Bylaws of AvalonBay Communities, Inc., dated September 19, 2012. (Incorporated by reference to Exhibit 3.2 to Form 8-K of the Company filed September 20, 2012.)
4.1	—	Indenture for Senior Debt Securities, dated as of January 16, 1998, between the Company and State Street Bank and Trust Company, as Trustee. (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-3 of the Company (File No. 333-139839), filed January 8, 2007.)
4.2	—	First Supplemental Indenture, dated as of January 20, 1998, between the Company and State Street Bank and Trust Company as Trustee. (Incorporated by reference to Exhibit 4.2 to Registration Statement on Form S-3 of the Company (File No. 333-139839), filed January 8, 2007.)
4.3	—	Second Supplemental Indenture, dated as of July 7, 1998, between the Company and State Street Bank and Trust Company as Trustee. (Incorporated by reference to Exhibit 4.3 to Registration Statement on Form S-3 of the Company (File No. 333-139839), filed January 8, 2007.)
4.4	—	Amended and Restated Third Supplemental Indenture, dated as of July 10, 2000 between the Company and State Street Bank and Trust Company as Trustee. (Incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-3 of the Company (File No. 333-139839), filed January 8, 2007.)
4.5	—	Fourth Supplemental Indenture, dated as of September 18, 2006, between the Company and U.S. Bank National Association as Trustee. (Incorporated by reference to Exhibit 4.5 to Registration Statement on Form S-3 of the Company (File No. 333-139839), filed January 8, 2007.)
4.6	—	Dividend Reinvestment and Stock Purchase Plan of the Company. (Incorporated by reference to Exhibit 8.1 to Registration Statement on Form S-3 of the Company (File No. 333-87063), filed September 14, 1999.)
4.7	—	Amendment to the Company's Dividend Reinvestment and Stock Purchase Plan filed on December 17, 1999. (Incorporated by reference to the Prospectus Supplement filed pursuant to Rule 424(b)(2) of the Securities Act of 1933 on December 17, 1999.)

78

4.8	—	Amendment to the Company's Dividend Reinvestment and Stock Purchase Plan filed on March 26, 2004. (Incorporated by reference to the Prospectus Supplement filed pursuant to Rule 424(b)(3) of the Securities Act of 1933 on March 26, 2004.)
4.9	—	Amendment to the Company's Dividend Reinvestment and Stock Purchase Plan filed on May 15, 2006. (Incorporated by reference to the Prospectus Supplement filed pursuant to Rule 424(b)(3) of the Securities Act of 1933 on May 15, 2006.)
10.1	—	Amended and Restated Limited Partnership Agreement of AvalonBay Value Added Fund, L.P., dated as of March 16, 2005. (Incorporated by reference to Exhibit 10.2 to Form 10-K of the Company filed February 23, 2011.)
10.2	—	Master Cross-Collateralization Agreement, dated as of April 24, 2009, between Deutsche Bank Berkshire Mortgage, Inc., parties identified on Exhibit A-Schedule 1 attached thereto, and Shady Grove Financing, LLC. (Incorporated by reference to Exhibit 10.2 to Form 10-Q of the Company filed August 10, 2009.)
10.3	—	Master Substitution Agreement, dated April 23, 2009, between Deutsche Bank Berkshire Mortgage, Inc., AvalonBay Traville, LLC and the entities identified on Schedule B attached thereto. (Incorporated by reference to Exhibit 10.3 to Form 10-Q of the Company filed August 10, 2009.)
10.4	—	Form of Multifamily Note, dated April 24, 2009. (Used in connection with the properties identified on Exhibit B to the Master Cross-Collateralization Agreement dated April 24, 2009.) (Incorporated by reference to Exhibit 10.4 to Form 10-Q of the Company filed August 10, 2009.)
10.5	—	Form of Guaranty, dated April 24, 2009. (Used in connection with the properties identified on Exhibit B to the Master Cross-Collateralization Agreement dated April 24, 2009.) (Incorporated by reference to Exhibit 10.5 to Form 10-Q of the Company filed August 10, 2009.)
10.6+	—	Endorsement Split Dollar Agreements and Amendments thereto with Messrs. Blair, Naughton, Sargeant, and Horey. (Incorporated by reference to Exhibit 10.8 to Form 10-K of the Company filed February 23, 2011.)
10.7+	—	Form of Amendment to Endorsement Split Dollar Agreement with Messrs. Blair, Naughton, Sargeant, and Horey. (Incorporated by reference to Exhibit 10.4 to Form 10-K of the Company filed March 2, 2009.)
10.8+	—	Employment Agreement between the Company and Timothy J. Naughton, dated as of December 16, 2011. (Incorporated by reference to Exhibit 10.1 to Form 8-K of the Company filed December 21, 2011.)
10.9+	—	Employment Agreement between the Company and Thomas J. Sargeant dated as of December 16, 2011. (Incorporated by reference to Exhibit 10.2 to Form 8-K of the Company filed December 21, 2011.)
10.10+	—	Employment Agreement between the Company and Leo S. Horey dated as of December 16, 2011. (Incorporated by reference to Exhibit 10.3 to Form 8-K of the Company filed December 21, 2011.)
10.11+	—	AvalonBay Communities, Inc. 2009 Stock Option and Incentive Plan. (Incorporated by reference to Exhibit 10.1 to Form 8-K of the Company filed May 28, 2009.)

79

10.12+	—	Form of Incentive Stock Option Agreement (2009 Stock Option and Incentive Plan). (Incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-8 of the Company filed May 22, 2009.)
10.13+	—	Form of Non-Qualified Stock Option Agreement (2009 Stock Option and Incentive Plan). (Incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-8 of the Company filed May 22, 2009.)
10.14+	—	Form of Stock Grant and Restricted Stock Agreement (2009 Stock Option and Incentive Plan). (Incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-8 of the Company filed May 22, 2009.)
10.15+	—	Form of Director Restricted Stock Agreement (2009 Stock Option and Incentive Plan). (Incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-8 of the Company filed May 22, 2009.)
10.16+	—	Form of Director Restricted Unit Agreement (2009 Stock Option and Incentive Plan). (Incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-8 of the Company filed May 22, 2009.)
10.17+	—	1996 Non-Qualified Employee Stock Purchase Plan, dated June 26, 1997, as amended and restated. (Incorporated by reference to Exhibit 99.1 to Post-effective Amendment No. 1 to Registration Statement on Form S-8 of the Company (File No. 333-16837), filed June 26, 1997.)
10.18+	—	1996 Non-Qualified Employee Stock Purchase Plan—Plan Information Statement dated June 26, 1997. (Incorporated by reference to Exhibit 99.2 to Registration Statement on Form S-8 of the Company (File No. 333-16837), filed November 26, 1996.)
10.19+	—	Form of Indemnity Agreement between the Company and its Directors. (Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company filed August 2, 2013.)
10.20+	—	The Company's Officer Severance Plan, as amended and restated on November 9, 2011. (Incorporated by reference to Exhibit 10.1 to Form 8-K of the Company filed November 15, 2011.)
10.21+	—	AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated in full on December 8, 2004. (Incorporated by reference to Exhibit 10.21 to Form 10-K of the Company filed March 2, 2009.)
10.22+	—	Amendment dated February 9, 2006, to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated on December 8, 2004. (Incorporated by reference to Exhibit 10.23 to Form 10-K of the Company filed February 22, 2013.)
10.23+	—	Amendment, dated December 6, 2006, to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated on December 8, 2004. (Incorporated by reference to Exhibit 10.24 to Form 10-K of the Company filed February 22, 2013.)
10.24+	—	Amendment, dated September 20, 2007, to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as amended and restated on December 8, 2004. (Incorporated by reference to Exhibit 10.25 to Form 10-K of the Company filed February 22, 2013.)
10.25+	—	Form of AvalonBay Communities, Inc. Non-Qualified Stock Option Agreement (1994 Stock Incentive Plan, as Amended and Restated). (Incorporated by reference to Exhibit 10.26 to Form 10-K of the Company filed February 22, 2013.)

80

10.26+	—	Form of AvalonBay Communities, Inc. Incentive Stock Option Agreement (1994 Stock Incentive Plan, as Amended and Restated.) (Incorporated by reference to Exhibit 10.27 to Form 10-K of the Company filed February 22, 2013.)
10.27+	—	Form of AvalonBay Communities, Inc. Employee Stock Grant and Restricted Stock Agreement (1994 Stock Incentive Plan, as Amended and Restated.) (Incorporated by reference to Exhibit 10.33 to Form 10-K of the Company filed March 2, 2009.)
10.28+	—	Form of AvalonBay Communities, Inc. Director Restricted Unit Agreement (1994 Stock Incentive Plan, as Amended and Restated). (Incorporated by reference to Exhibit 10.29 to Form 10-K of the Company filed February 22, 2013.)
10.29+	—	Form of AvalonBay Communities, Inc. Director Restricted Stock Agreement (1994 Stock Incentive Plan, as Amended and Restated). (Incorporated by reference to Exhibit 10.30 to Form 10-K of the Company filed February 22, 2013.)
10.31	—	Third Amended and Restated Revolving Loan Agreement, dated as of September 29, 2011, with Bank of America, N.A., as administrative agent, swing lender, issuing bank and a bank, JPMorgan Chase Bank, N.A., as a bank and as syndication agent, Deutsche Bank Trust Company Americas, Morgan Stanley Bank and Wells Fargo Bank, N.A., each as a bank and as documentation agent, Barclays Bank PLC as a bank and as co-documentation agent, UBS Securities LLC as a co-documentation agent, The Bank of New York Mellon, BBVA Compass Bank, PNC Bank, National Association, and Suntrust Bank, each as a bank and as a managing agent, Branch Banking and Trust Company, Bank of Tokyo Mitsubishi UFJ, Ltd., and Citizens Bank, each as a bank and as a co-agent, and the other bank parties signatory thereto (Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company filed November 7, 2011.)
10.32	—	Amendment No. 1 to Third Amended and Restated Revolving Loan Agreement, dated as of December 20, 2012, among the Company, as Borrower, the banks signatory thereto, each as a Bank, and Bank of America, N.A., as Administrative Agent. (Incorporated by reference to Exhibit 10.1 to Form 8-K of the Company, filed December 21, 2012.)
10.33+	—	Rules and Procedures for Non-Employee Directors' Deferred Compensation Program, as adopted on November 20, 2006, as amended on December 11, 2008, February 10, 2010 and November 10, 2010. (Incorporated by reference to Exhibit 10.49 to Form 10-K of the Company filed February 23, 2011.)
10.34+	—	Amended and Restated AvalonBay Communities, Inc. Deferred Compensation Plan, effective as of January 1, 2011. (Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company filed August 6, 2010.)
10.35	—	Asset Purchase Agreement, dated November 26, 2012, by and among AvalonBay Communities, Inc., Equity Residential and its operating partnership, ERP Operating Partnership, LP, Lehman Brothers Holdings,  Inc., and Archstone Enterprise LP. (Incorporated by reference to Exhibit 2.1 to Form 8-K of the Company filed November 26, 2012.)
10.36+	—	Form of AvalonBay Communities, Inc. 2008 Performance Plan Deferred Stock Award Agreement. (Incorporated by reference to Exhibit 10.1 to Form 8-K of the Company filed May 22, 2008.)
10.37+	—	Form of AvalonBay Communities, Inc. Award Terms of Performance-Based Restricted Stock Units. (Incorporated by reference to Exhibit 10.1 to Form 10-Q filed May 10, 2013.)

81

10.38	—	Shareholders Agreement, dated February 27, 2013, by and among the Company, Archstone Enterprise LP and Lehman Brothers Holdings Inc. (Incorporated by Reference to Exhibit 10.2 to Form 8-K of the Company filed March 5, 2013.)
10.39	—	Archstone Residual JV, LLC Limited Liability Company Agreement. (Incorporated by reference to Exhibit 10.3 to Form 8-K of the Company filed March 5, 2013.)
10.40	—	Archstone Parallel Residual JV, LLC Limited Liability Company Agreement. (Incorporated by reference to Exhibit 10.4 to Form 8-K of the Company filed March 5, 2013.)
10.41	—	Archstone Parallel Residual JV 2, LLC Limited Liability Company Agreement. (Incorporated by reference to Exhibit 10.5 to Form 8-K of the Company filed March 5, 2013.)
10.42	—	Legacy Holdings JV, LLC Limited Liability Company Agreement. (Incorporated by reference to Exhibit 10.6 to Form 8-K of the Company filed March 5, 2013.)
10.43	—	Master Credit Facility Agreement, dated February 27, 2013, by and among Federal National Mortgage Association and the parties named therein. (Incorporated by reference to Exhibit 10.7 to Form 8-K of the Company filed March 5, 2013.)
12.1	—	Statements re: Computation of Ratios. (Filed herewith.)
21.1	—	Schedule of Subsidiaries of the Company. (Filed herewith.)
23.1	—	Consent of Ernst & Young LLP. (Filed herewith.)
31.1	—	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer). (Filed herewith.)
31.2	—	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer). (Filed herewith.)
32	—	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer). (Furnished herewith.)
101	—	XBRL (Extensible Business Reporting Language). The following materials from AvalonBay Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL: (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of cash flows, (iv) consolidated changes in stockholders' equity, and (v) notes to consolidated financial statements.

+

Management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this Form 10-K pursuant to Item 15(a)(3) of Form 10-K.

82

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AvalonBay Communities, Inc.
Date: February 27, 2014	By:	/s/ TIMOTHY J. NAUGHTON Timothy J. Naughton, Director, Chairman, Chief Executive Officer and President (Principal Executive Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: February 27, 2014	By:	/s/ TIMOTHY J. NAUGHTON Timothy J. Naughton, Director, Chairman, Chief Executive Officer and President (Principal Executive Officer)
Date: February 27, 2014	By:	/s/ THOMAS J. SARGEANT Thomas J. Sargeant, Chief Financial Officer (Principal Financial Officer)
Date: February 27, 2014	By:	/s/ KERI A. SHEA Keri A. Shea, Senior Vice President—Finance & Treasurer (Principal Accounting Officer)
Date: February 27, 2014	By:	/s/ GLYN F. AEPPEL Glyn F. Aeppel, Director
Date: February 27, 2014	By:	/s/ ALAN B. BUCKELEW Alan B. Buckelew, Director
Date: February 27, 2014	By:	/s/ BRUCE A. CHOATE Bruce A. Choate, Director
Date: February 27, 2014	By:	/s/ JOHN J. HEALY, JR. John J. Healy, Jr., Director
Date: February 27, 2014	By:	/s/ LANCE R. PRIMIS Lance R. Primis, Director
Date: February 27, 2014	By:	/s/ PETER S. RUMMELL Peter S. Rummell, Director
Date: February 27, 2014	By:	/s/ H. JAY SARLES H. Jay Sarles, Director
Date: February 27, 2014	By:	/s/ W. EDWARD WALTER W. Edward Walter, Director

83

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
AvalonBay Communities, Inc.:

        We have audited the accompanying consolidated balance sheets of AvalonBay Communities, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AvalonBay Communities, Inc. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), AvalonBay Communities, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 28, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia
February 28, 2014

F-1

Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting

The Board of Directors and Stockholders of
AvalonBay Communities, Inc.:

        We have audited AvalonBay Communities, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). AvalonBay Communities, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting in Item 9a. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, AvalonBay Communities, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of AvalonBay Communities, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2013 of AvalonBay Communities, Inc. and our report dated February 28, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia
February 28, 2014

F-2

AVALONBAY COMMUNITIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	12-31-13			12-31-12
ASSETS
Real estate:
Land	$	3,315,521		$	1,406,706
Buildings and improvements		11,230,813			6,847,227
Furniture, fixtures and equipment		343,802			249,023
		14,890,136			8,502,956
Less accumulated depreciation		(2,503,902	)		(1,945,281	)
Net operating real estate		12,386,234			6,557,675
Construction in progress, including land		1,583,120			802,779
Land held for development		300,364			316,037
Operating real estate assets held for sale, net		14,491			338,629
Total real estate, net		14,284,209			8,015,120
Cash and cash equivalents		281,541			2,733,618
Cash in escrow		98,481			49,950
Resident security deposits		26,672			24,748
Investments in unconsolidated real estate entities		367,866			129,352
Deferred financing costs, net		40,677			38,700
Deferred development costs		31,592			24,665
Prepaid expenses and other assets		197,105			143,925
Total assets	$	15,328,143		$	11,160,078
LIABILITIES AND EQUITY
Unsecured notes, net	$	2,594,709		$	1,945,798
Variable rate unsecured credit facility		—			—
Mortgage notes payable		3,550,682			1,905,235
Dividends payable		138,476			110,966
Payables for construction		94,472			52,903
Accrued expenses and other liabilities		243,045			216,756
Accrued interest payable		43,353			33,056
Resident security deposits		45,485			37,049
Liabilities related to real estate assets held for sale		874			10,495
Total liabilities		6,711,096			4,312,258
Redeemable noncontrolling interests		17,320			7,027
Equity:
Preferred stock, $0.01 par value; $25 liquidation preference; 50,000,000 shares authorized at both December 31, 2013 and December 31, 2012; zero shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively		—			—
Common stock, $0.01 par value; 280,000,000 and 140,000,000 shares authorized at December 31, 2013 and December 31, 2012, respectively; 129,416,695 and 114,403,472 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively		1,294			1,144
Additional paid-in capital		8,988,723			7,086,407
Accumulated earnings less dividends		(345,254	)		(142,329	)
Accumulated other comprehensive loss		(48,631	)		(108,007	)
Total stockholders' equity		8,596,132			6,837,215
Noncontrolling interest		3,595			3,578
Total equity		8,599,727			6,840,793
Total liabilities and equity	$	15,328,143		$	11,160,078

See accompanying notes to Consolidated Financial Statements.

F-3

AVALONBAY COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands, except per share data)

	For the year ended
	12-31-13			12-31-12			12-31-11
Revenue:
Rental and other income	$	1,451,419		$	990,370		$	890,431
Management, development and other fees		11,502			10,257			9,656
Total revenue		1,462,921			1,000,627			900,087
Expenses:
Operating expenses, excluding property taxes		352,245			259,350			246,872
Property taxes		158,774			97,555			88,964
Interest expense, net		172,402			136,920			167,814
Loss on interest rate contract		51,000			—			—
Loss on extinguishment of debt, net		14,921			1,179			1,940
Depreciation expense		560,215			243,680			226,728
General and administrative expense		39,573			34,101			29,371
Expensed acquisition, development and other pursuit costs		45,050			11,350			2,967
Casualty and impairment loss		—			1,449			14,052
Total expenses		1,394,180			785,584			778,708
Equity in (loss) income of unconsolidated entities		(11,154	)		20,914			5,120
Gain on sale of land		240			280			13,716
Gain on acquisition of unconsolidated entity		—			14,194			—
Income from continuing operations		57,827			250,431			140,215
Discontinued operations:
Income from discontinued operations		16,713			26,820			20,065
Gain on sale of real estate assets		278,231			146,311			281,090
Total discontinued operations		294,944			173,131			301,155
Net income		352,771			423,562			441,370
Net loss attributable to noncontrolling interests		370			307			252
Net income attributable to common stockholders	$	353,141		$	423,869		$	441,622
Other comprehensive income:
Unrealized loss on cash flow hedges		—			(22,876	)		(85,845	)
Cash flow hedge losses reclassified to earnings		59,376			1,889			—
Comprehensive income	$	412,517		$	402,882		$	355,777
Earnings per common share—basic:
Income from continuing operations attributable to common stockholders	$	0.46		$	2.57		$	1.55
Discontinued operations attributable to common stockholders		2.32			1.77			3.34
Net income attributable to common stockholders	$	2.78		$	4.34		$	4.89
Earnings per common share—diluted:
Income from continuing operations attributable to common stockholders	$	0.46		$	2.55		$	1.55
Discontinued operations attributable to common stockholders		2.32			1.77			3.32
Net income attributable to common stockholders	$	2.78		$	4.32		$	4.87

See accompanying notes to Consolidated Financial Statements.

F-4

AVALONBAY COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)

	Shares issued
											Accumulated earnings less dividends			Accumulated other comprehensive loss			Total AvalonBay stockholders' equity
	Preferred stock		Common stock		Preferred stock		Common stock		Additional paid-in capital											Noncontrolling interests			Total equity
Balance at December 31, 2010		—		85,899,080	$	—	$	859	$	3,593,677	$	(282,743	)	$	(1,175	)	$	3,310,618		$	4,973		$	3,315,591
Net income attributable to common stockholders		—		—		—		—		—		441,622			—			441,622			(1,172	)		440,450
Unrealized loss on cash flow hedges		—		—		—		—		—		—			(85,845	)		(85,845	)		—			(85,845	)
Change in redemption value of redeemable noncontrolling interest		—		—		—		—		—		(2,607	)		—			(2,607	)		—			(2,607	)
Noncontrolling interest consolidation and income allocation		—		—		—		—		—		—			—			—			3,350			3,350
Dividends declared to common stockholders		—		—		—		—		—		(326,813	)		—			(326,813	)		—			(326,813	)
Issuance of common stock, net of withholdings		—		9,276,597		—		93		1,036,316		(1,107	)		—			1,035,302			—			1,035,302
Amortization of deferred compensation		—		—		—		—		22,464		—			—			22,464			—			22,464
Balance at December 31, 2011		—		95,175,677		—		952		4,652,457		(171,648	)		(87,020	)		4,394,741			7,151			4,401,892
Net income attributable to common stockholders		—		—		—		—		—		423,869			—			423,869			—			423,869
Unrealized loss on cash flow hedges		—		—		—		—		—		—			(22,876	)		(22,876	)		—			(22,876	)
Cash flow hedge losses reclassified to earnings		—		—		—		—		—		—			1,889			1,889			—			1,889
Change in redemption value of redeemable noncontrolling interest		—		—		—		—		—		(375	)		—			(375	)		—			(375	)
Noncontrolling interest consolidation and income allocation		—		—		—		—		—		—			—			—			(3,573	)		(3,573	)
Dividends declared to common stockholders		—		—		—		—		—		(391,906	)		—			(391,906	)		—			(391,906	)
Issuance of common stock, net of withholdings		—		19,227,795		—		192		2,416,852		(2,269	)		—			2,414,775			—			2,414,775
Amortization of deferred compensation		—		—		—		—		17,098		—			—			17,098			—			17,098
Balance at December 31, 2012		—		114,403,472		—		1,144		7,086,407		(142,329	)		(108,007	)		6,837,215			3,578			6,840,793
Net income attributable to common stockholders		—		—		—		—		—		353,141			—			353,141			—			353,141
Cash flow hedge losses reclassified to earnings		—		—		—		—		—		—			59,376			59,376			—			59,376
Change in redemption value of redeemable noncontrolling interest		—		—		—		—		—		(1,246	)		—			(1,246	)		—			(1,246	)
Noncontrolling interest consolidation and income allocation		—		—		—		—		1,515		—			—			1,515			17			1,532
Dividends declared to common stockholders		—		—		—		—		—		(553,829	)		—			(553,829	)		—			(553,829	)
Issuance of common stock, net of withholdings		—		15,013,223		—		150		1,873,792		(991	)		—			1,872,951			—			1,872,951
Amortization of deferred compensation		—		—		—		—		27,009		—			—			27,009			—			27,009
Balance at December 31, 2013		—		129,416,695	$	—	$	1,294	$	8,988,723	$	(345,254	)	$	(48,631	)	$	8,596,132		$	3,595		$	8,599,727

See accompanying notes to Consolidated Financial Statements.

F-5

AVALONBAY COMMUNITIES, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	For the year ended
	12-31-13			12-31-12			12-31-11
Cash flows from operating activities:
Net income	$	352,771		$	423,562		$	441,370
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation expense		560,215			243,680			226,728
Depreciation expense from discontinued operations		13,500			16,414			23,541
Amortization of deferred financing costs and debt (premium) discount		(22,947	)		6,427			5,834
Amortization of stock-based compensation		15,160			8,707			7,244
Equity in loss (income) of, and return on, unconsolidated entities and noncontrolling interests, net of eliminations		33,125			(12,103	)		2,246
Cash flow hedge losses reclassified to earnings		59,376			1,889			—
Casualty loss and impairment of real estate assets		—			1,449			14,052
Loss on extinguishment of debt, net		14,921			1,781			5,820
Gain on sale of real estate assets		(278,471	)		(146,591	)		(294,806	)
Gain on acquisition of unconsolidated entity		—			(14,194	)		—
(Increase) decrease in cash in operating escrows		(28,960	)		6,543			(7,702	)
(Increase) decrease in resident security deposits, prepaid expenses and other assets		(5,186	)		7,992			(4,018	)
Decrease (increase) in accrued expenses, other liabilities and accrued interest payable		10,997			(4,737	)		9,045
Net cash provided by operating activities		724,501			540,819			429,354
Cash flows from investing activities:
Development/redevelopment of real estate assets including land acquisitions and deferred development costs		(1,285,715	)		(755,363	)		(640,778	)
Acquisition of real estate assets, including partnership interest		(839,469	)		(155,755	)		(46,275	)
Capital expenditures—existing real estate assets		(24,415	)		(23,452	)		(41,851	)
Capital expenditures—non-real estate assets		(2,200	)		(3,076	)		(8,281	)
Proceeds from exchange/sale of real estate, net of selling costs		919,682			274,018			310,228
Increase in payables for construction		34,779			16,832			2,342
Decrease in cash in construction escrows		—			16,824			14,109
Acquisition of mortgage note		—			—			(1,701	)
Decrease (increase) in investments in unconsolidated real estate entities		16,164			6,586			(30,934	)
Net cash used in investing activities		(1,181,174	)		(623,386	)		(443,141	)
Cash flows from financing activities:
Issuance of common stock		4,703			2,430,190			1,049,835
Dividends paid		(526,050	)		(365,572	)		(318,231	)
Issuance of mortgage notes payable		84,928			—			—
Repayments of mortgage notes payable, including prepayment penalties		(2,110,347	)		(110,013	)		(200,166	)
Issuance of unsecured notes		750,000			700,000			—
Settlement of interest rate contract		(51,000	)		(54,930	)		—
Repayment of unsecured notes		(100,000	)		(381,001	)		(189,900	)
Payment of deferred financing costs and issuance discounts		(10,100	)		(15,664	)		(5,996	)
Redemption of units for cash by minority partners		(1,965	)		—			(25	)
Acquisition of joint venture partner equity interest		—			(3,350	)		(9,070	)
Distributions to DownREIT partnership unitholders		(32	)		(29	)		(20	)
Distributions to joint venture and profit-sharing partners		(317	)		(299	)		(194	)
Redemption of preferred interest obligation		(35,224	)		—			—
Net cash (used in) provided by financing activities		(1,995,404	)		2,199,332			326,233
Net (decrease) increase in cash and cash equivalents		(2,452,077	)		2,116,765			312,446
Cash and cash equivalents, beginning of year		2,733,618			616,853			304,407
Cash and cash equivalents, end of year	$	281,541		$	2,733,618		$	616,853
Cash paid during the year for interest, net of amount capitalized	$	179,325		$	119,268		$	156,898

See accompanying notes to Consolidated Financial Statements.

F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

        Supplemental disclosures of non-cash investing and financing activities:

        During the year ended December 31, 2013:

•

As described in Note 4, "Equity," 14,889,706 shares of common stock valued at $1,875,210,000 were issued as partial consideration for the Archstone Acquisition (as defined in this Form 10-K); 123,977 shares of common stock valued at $16,019,000 were issued in connection with stock grants; 2,002 shares valued at $269,000 were issued through the Company's dividend reinvestment plan; 48,310 shares valued at $6,127,000 were withheld to satisfy employees' tax withholding and other liabilities; and 7,653 shares and certain options valued at $1,105,000 previously issued in connection with employee compensation were cancelled upon forfeiture. In addition, the Company granted 215,230 options for common stock at a value of $5,768,000.

•

The Company reclassified $5,892,000 of deferred cash flow hedge losses from other comprehensive income to interest expense, net, and $53,484,000 to loss on interest rate contract, to record the impact of the Company's derivative and hedge accounting activity.

•

Common stock dividends declared but not paid totaled $138,476,000.

•

The Company recorded $13,262,000 in redeemable noncontrolling interests associated with consolidated joint ventures acquired as part of the Archstone Acquisition. The Company also recorded an increase of $1,246,000 in redeemable noncontrolling interest with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units. For further discussion of the nature and valuation of these items, see Note 11, "Fair Value."

•

The Company assumed secured indebtedness with a principal amount of $3,512,202,000 in conjunction with the Archstone Acquisition, discussed further in Note 3, "Notes Payable, Unsecured Notes and Credit Facility." The Company also assumed an obligation related to outstanding preferred interests of approximately $67,500,000, included in accrued expenses and other liabilities, and discussed further in Note 5, "Archstone Acquisition."

        During the year ended December 31, 2012:

•

96,592 shares of common stock valued at $12,883,000 were issued in connection with stock grants, 2,331 shares valued at $321,000 were issued through the Company's dividend reinvestment plan, 121,351 shares valued at $15,543,000 were withheld to satisfy employees' tax withholding and other liabilities and 7,558 shares and options valued at $393,000 previously issued in connection with employee compensation were cancelled upon forfeiture. In addition, the Company granted 115,303 options for common stock at a value of $3,357,000.

•

The Company recorded an increase to other liabilities and a corresponding loss to other comprehensive income of $22,876,000; reclassified $1,889,000 of deferred cash flow hedge losses from other comprehensive income to interest expense, net and recorded a decrease to prepaid expenses and other assets of $11,000, with a corresponding offset to the basis of unsecured notes, net to record the impact of the Company's hedge accounting activity.

•

Common stock dividends declared but not paid totaled $110,966,000.

•

The Company recorded an increase of $375,000 in redeemable noncontrolling interests with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put option held by a joint venture partner and DownREIT partnership units.

F-7

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

•

The Company assumed a 4.61% fixed rate mortgage loan with an outstanding balance of $11,958,000 in conjunction with the acquisition of The Mark Pasadena.

        During the year ended December 31, 2011:

•

511,817 shares of common stock valued at $64,747,000 were issued in connection with stock grants, 3,343 shares valued at $403,000 were issued through the Company's dividend reinvestment plan, 129,762 shares valued at $14,891,000 were withheld to satisfy employees' tax withholding and other liabilities and 505 shares valued at $35,000 were forfeited, for a net value of $50,224,000. In addition, the Company granted 144,827 options for common stock at a value of $4,258,000.

•

7,500 units of limited partnership, valued at $365,000, were presented for redemption to the DownREIT partnerships that issued such units and were acquired by the Company in exchange for an equal number of shares of the Company's stock.

•

The Company recorded an increase to other liabilities and a corresponding loss to other comprehensive income of $85,845,000; and recorded a decrease to prepaid expenses and other assets of $1,498,000, with a corresponding offset to the basis of unsecured notes, net to record the impact of the Company's hedge accounting activity.

•

Common stock dividends declared but not paid totaled $84,953,000.

•

The Company recorded an increase of $2,607,000 in redeemable noncontrolling interests with a corresponding decrease to accumulated earnings less dividends to adjust the redemption value associated with the put options held by joint venture partners and DownREIT partnership units.

•

The Company repaid all amounts due under a $93,440,000 variable rate, tax-exempt bond financing using the proceeds which were held in escrow.

•

The Company assumed a 4.75% fixed rate mortgage loan with an outstanding balance of $44,044,000 in conjunction with the acquisition of Fairfax Towers.

•

As part of an asset exchange in April 2011, the Company assumed a $55,400,000 fixed rate mortgage loan with a 5.24% fixed rate and relinquished a $55,800,000 mortgage loan with a 5.86% fixed rate.

•

The Company entered into a ground lease that is considered a capital lease associated with a Development Community, recording a capital lease obligation of $14,500,000 in accrued expenses and other liabilities with a corresponding offset to construction in progress.

•

The Company entered into a ground lease that is considered a capital lease associated with a Development Right, recording a capital lease obligation of $17,285,000 in accrued expenses and other liabilities with a corresponding offset to land.

•

The Company recorded an increase in noncontrolling interest of $3,350,000 associated with the consolidation of a development joint venture.

See accompanying notes to Consolidated Financial Statements.

F-8

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Organization

        AvalonBay Communities, Inc. (the "Company," which term, unless the context otherwise requires, refers to AvalonBay Communities, Inc. together with its consolidated subsidiaries), is a Maryland corporation that has elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986 (the "Code"). The Company focuses on the development, acquisition, ownership and operation of apartment communities primarily in high barrier to entry markets of the United States. The Company's primary markets are located in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest and the Northern and Southern California regions of the United States.

        At December 31, 2013, the Company owned or held a direct or indirect ownership interest in 244 operating apartment communities containing 72,811 apartment homes in 12 states and the District of Columbia, of which three communities containing 1,126 apartment homes were under reconstruction. In addition, the Company owned or held a direct or indirect ownership interest in 29 communities under construction that are expected to contain an aggregate of 8,708 apartment homes when completed. The Company also owned or held a direct or indirect ownership interest in land or rights to land in which the Company expects to develop an additional 46 communities that, if developed as expected, will contain an estimated 12,986 apartment homes.

        Capitalized terms used without definition have the meaning as provided elsewhere in this Form 10-K.

Principles of Consolidation

        The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, certain joint venture partnerships, subsidiary partnerships structured as DownREITs and any variable interest entities that qualified for consolidation. All significant intercompany balances and transactions have been eliminated in consolidation.

        The Company accounts for joint venture entities and subsidiary partnerships that are not variable interest entities in accordance with the guidance applicable to limited partnerships or similar entities. The Company evaluates the partnership of each joint venture entity and determines whether control over the partnership lies with the general partner or, when the limited partners have certain rights, with the limited partners. The Company consolidates an investment when both (i) the Company is the general partner and (ii) the limited partner interests do not overcome the Company's presumption of control by having either substantive participating rights, the ability to remove the Company as the general partner or the ability to dissolve the partnership.

        The Company generally uses the equity method under all other potential scenarios, including where (i) the Company holds a general partner interest but the presumption of control by the Company is overcome by the limited partner interests as described in the preceding paragraph or (ii) the Company holds a noncontrolling limited partner interest in a joint venture. Investments in which the Company has little or no influence are accounted for using the cost method.

Revenue and Gain Recognition

        Rental income related to leases is recognized on an accrual basis when due from residents as required by the accounting guidance applicable to leases, which provides guidance on classification and

F-9

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

recognition. In accordance with the Company's standard lease terms, rental payments are generally due on a monthly basis. Any cash concessions given at the inception of the lease are amortized over the approximate life of the lease, which is generally one year.

        The Company accounts for the sale of real estate assets and any related gain recognition in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions, other than retail land sales. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete and the Company is not obligated to perform significant activities after the sale.

Real Estate

        Operating real estate assets are stated at cost and consist of land, buildings and improvements, furniture, fixtures and equipment, and other costs incurred during their development, redevelopment and acquisition. Significant expenditures which improve or extend the life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

        Improvements and upgrades are generally capitalized only if the item exceeds $15,000, extends the useful life of the asset and is not related to making an apartment home ready for the next resident. Purchases of personal property, such as computers and furniture, are generally capitalized only if the item is a new addition and exceeds $2,500. The Company generally expenses purchases of personal property made for replacement purposes.

        Project costs related to the development, construction and redevelopment of real estate projects (including interest and related loan fees, property taxes and other direct costs) are capitalized as a cost of the project. Indirect project costs that relate to several projects are capitalized and allocated to the projects to which they relate. Indirect costs not clearly related to development, construction and redevelopment activity are expensed as incurred. For development, capitalization (i) begins when the Company has determined that development of the future asset is probable, (ii) can be suspended if there is no current development activity underway, but future development is still probable and (iii) ends when the asset, or a portion of an asset, is delivered and is ready for its intended use, or the Company's intended use changes such that capitalization is no longer appropriate. For redevelopment efforts, the Company capitalizes costs either (i) in advance of taking homes out of service when significant renovation of the common area has begun until the redevelopment is completed, or (ii) when an apartment home is taken out of service for redevelopment until the redevelopment is completed and the apartment home is available for a new resident. Rental income and operating costs incurred during the initial lease-up or post-redevelopment lease-up period are recognized as incurred.

        The Company acquired as Development Rights four land parcels improved with office buildings, industrial space and other commercial and residential ventures occupied by unrelated third parties. As of December 31, 2013, the Company is actively pursuing development of all of these parcels. For the land parcels for which the Company intends to pursue development, the Company will manage the current improvements until such time as all tenant obligations have been satisfied or eliminated through negotiation, and construction of new apartment communities is ready to begin. Revenue from incidental operations received from the current improvements on these land parcels in excess of any incremental costs are being recorded as a reduction of total capitalized costs of the Development Right and not as part of net income.

F-10

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

        In connection with the acquisition of an operating community, the Company identifies and records each asset acquired and liability assumed in such transaction at its estimated fair value at the date of acquisition. The purchase price allocations to tangible assets, such as land, buildings and improvements, and furniture, fixtures and equipment, and the in-place lease intangible assets, are reflected in real estate assets and depreciated over their estimated useful lives. Any purchase price allocation to intangible assets, other than in-place lease intangibles, is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets and amortized over the term of the acquired intangible asset. The fair value of acquired in-place leases is determined based on the estimated cost to replace such leases, including foregone rents during an assumed re-lease period, as well as the impact on projected cash flow of acquired leases with leased rents above or below current market rents. The Company expenses all costs incurred related to acquisitions.

        Depreciation is calculated on buildings and improvements using the straight-line method over their estimated useful lives, which range from seven to thirty years. Furniture, fixtures and equipment are generally depreciated using the straight-line method over their estimated useful lives, which range from three years (primarily computer-related equipment) to seven years.

Income Taxes

        As of December 31, 2013 and 2012, the Company did not have any unrecognized tax benefits. The Company does not believe that there will be any material changes in its unrecognized tax positions over the next 12 months. The Company is subject to examination by the respective taxing authorities for the tax years 2010 through 2012.

        The Company elected to be taxed as a REIT under the Code for its tax year ended December 31, 1994 and has not revoked such election. A corporate REIT is a legal entity which holds real estate interests and can deduct from its federally taxable income qualifying dividends it pays if it meets a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to stockholders. Therefore, as a REIT the Company generally will not be subject to corporate level federal income tax on taxable income if it distributes 100% of its taxable income over the time period allowed under the Code to its stockholders. The states in which the Company operates have similar tax provisions which recognize the Company as a REIT for state income tax purposes. Management believes that all such conditions for the avoidance of income taxes on ordinary income have been or will be met for the periods presented. Accordingly, no provision for federal and state income taxes has been made. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. The Company did not incur any charges or receive refunds of excise taxes related to the years ended December 31, 2013, 2012 and 2011. In addition, taxable income from non-REIT activities performed through taxable REIT subsidiaries is subject to federal, state and local income taxes, although no taxes were incurred during 2013, 2012 and 2011.

F-11

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

        The following reconciles net income attributable to common stockholders to taxable net income for the years ended December 31, 2013, 2012 and 2011 (dollars in thousands):

	2013 Estimate			2012 Actual			2011 Actual
Net income attributable to common stockholders	$	353,141		$	423,869		$	441,622
GAAP gain on sale of communities (in excess of) less than tax gain		29,388			37,525			(84,152	)
Depreciation/amortization timing differences on real estate		176,982			9,572			9,192
Tax compensation expense less than (in excess of) GAAP		31,524			(26,314	)		(43,145	)
Casualty and impairment loss		—			1,449			14,052
Other adjustments		(14,974	)		(9,034	)		183
Taxable net income	$	576,061		$	437,067		$	337,752

        The following summarizes the tax components of the Company's common dividends declared for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
Ordinary income		42	%		47	%		34	%
15% capital gain (20% for 2013)		40	%		33	%		47	%
Unrecaptured §1250 gain		18	%		20	%		19	%

Deferred Financing Costs

        Deferred financing costs include fees and other expenditures necessary to obtain debt financing and are amortized on a straight-line basis, which approximates the effective interest method, over the shorter of the term of the loan or the related credit enhancement facility, if applicable. Unamortized financing costs are charged to earnings when debt is retired before the maturity date. Accumulated amortization of deferred financing costs was $19,719,000 as of December 31, 2013 and $20,773,000 as of December 31, 2012.

Cash, Cash Equivalents and Cash in Escrow

        Cash and cash equivalents include all cash and liquid investments with an original maturity of three months or less from the date acquired. Cash in escrow includes construction financing proceeds that are restricted for use in the construction of a specific community. The majority of the Company's cash, cash equivalents and cash in escrows are held at major commercial banks.

Interest Rate Contracts

        The Company utilizes derivative financial instruments to manage interest rate risk. See Note 11, "Fair Value," for further discussion of derivative financial instruments.

F-12

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

Comprehensive Income

        Comprehensive income, as reflected on the Consolidated Statements of Comprehensive Income, is defined as all changes in equity during each period except for those resulting from investments by or distributions to shareholders. Accumulated other comprehensive loss, as reflected on the Consolidated Statements of Equity, reflects the effective portion of the cumulative changes in the fair value of derivatives in qualifying cash flow hedge relationships.

Earnings per Common Share

        Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares outstanding during the period. All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share ("EPS"). Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company's earnings per common share are determined as follows (dollars in thousands, except per share data):

	For the year ended
	12-31-13			12-31-12			12-31-11
Basic and diluted shares outstanding
Weighted average common shares—basic		126,855,754			97,416,401			89,922,465
Weighted average DownREIT units outstanding		7,500			7,500			8,322
Effect of dilutive securities		402,649			601,251			846,675
Weighted average common shares—diluted		127,265,903			98,025,152			90,777,462
Calculation of Earnings per Share—basic
Net income attributable to common stockholders	$	353,141		$	423,869		$	441,622
Net income allocated to unvested restricted shares		(563	)		(1,264	)		(1,631	)
Net income attributable to common stockholders, adjusted	$	352,578		$	422,605		$	439,991
Weighted average common shares—basic		126,855,754			97,416,401			89,922,465
Earnings per common share—basic	$	2.78		$	4.34		$	4.89
Calculation of Earnings per Share—diluted
Net income attributable to common stockholders	$	353,141		$	423,869		$	441,622
Add: noncontrolling interests of DownREIT unitholders in consolidated partnerships, including discontinued operations		32			28			27
Adjusted net income attributable to common stockholders	$	353,173		$	423,897		$	441,649
Weighted average common shares—diluted		127,265,903			98,025,152			90,777,462
Earnings per common share—diluted	$	2.78		$	4.32		$	4.87
Dividends per common share	$	4.28		$	3.88		$	3.57

F-13

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

        Certain options to purchase shares of common stock in the amounts of 605,899 and 396,346 were outstanding as of December 31, 2013 and 2012, respectively, but were not included in the computation of diluted earnings per share because such options were anti-dilutive.

        The Company is required to estimate the forfeiture of stock options and recognize compensation cost net of the estimated forfeitures. The estimated forfeitures included in compensation cost are adjusted to reflect actual forfeitures at the end of the vesting period. The forfeiture rate at December 31, 2013 was 1.4% and is based on the average forfeiture activity over a period equal to the estimated life of the stock options. The application of estimated forfeitures did not materially impact compensation expense for the years ended December 31, 2013, 2012 and 2011.

Casualty Loss, Abandoned Pursuit Costs and Impairment of Long-Lived Assets

        During the year ended December 31, 2012 the Company incurred damages related to Superstorm Sandy at certain of its communities on the East Coast, and recognized a charge of $1,449,000 for the casualty loss associated with this damage on the accompanying Consolidated Statements of Comprehensive Income. The Company did not incur a casualty loss in 2013 or 2011.

        The Company evaluates its real estate and other long-lived assets for impairment when potential indicators of impairment exist. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Company assesses its recoverability by comparing the carrying amount of the property to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Company recognizes an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. Based on periodic tests of recoverability of long-lived assets, for the years ended December 31, 2013, 2012 and 2011, the Company did not recognize any impairment losses for wholly-owned operating real estate assets.

        The Company capitalizes pre-development costs incurred in pursuit of new development opportunities for which the Company currently believes future development is probable ("Development Rights"). Future development of these Development Rights is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and the availability of capital. Initial pre-development costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development by the Company no longer probable, any capitalized pre-development costs are written off with a charge to expense. The Company expensed costs related to the abandonment of Development Rights as well as costs incurred in pursuing the acquisition of assets or costs incurred pursuing the disposition of assets for which such acquisition and disposition activity did not occur, in the amounts of $998,000, $1,757,000 and $1,957,000 during the years ended December 31, 2013, 2012 and 2011, respectively. These costs are included in operating expenses, excluding property taxes on the accompanying Consolidated Statements of Comprehensive Income. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

        The Company evaluates its real estate and other long-lived assets for impairment if the intent of the Company changes with respect to either the development of, or the expected hold period for, the land. The Company did not recognize any impairment charges for land holdings in 2013 or 2012.

F-14

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

During 2011, the Company concluded that the carrying basis of two land parcels was not fully recoverable when the Company decided to pursue the sale of these assets. As a result, the Company recognized an aggregate charge of $12,097,000 for the impairment of these land parcels. The impairment recognized in 2011 was primarily attributable to one of the land parcels, which the Company sold in 2012. The Company had previously recognized an impairment loss of $9,952,000 in 2008 when the Company determined that it no longer intended to pursue development of these two land parcels. At that time, the Company had the intent and ability to hold the assets for the foreseeable future. The Company looked to a combination of internal models and third-party pricing estimates to determine the fair values for these impaired land parcels. Considering the Company's knowledge of multifamily residential development, the fair values of parcels zoned for multifamily development were generated using an internal model. Land parcels zoned for other purposes were valued using third-party estimates of fair value. For the internally generated fair values, the Company used a discounted cash flow analysis on the expected cash flows for a multifamily rental community. The cash flow analysis incorporated assumptions that market participants would make, including applying discount factors to the estimated future cash flows of the underlying asset, as well as potential disposition proceeds. The third-party values incorporated the use of estimated rates of return, investment time horizons and sales prices for land parcels considered to be market comparables, adjusted for known differences in critical areas including the existing entitlements (such as zoning and state of infrastructure readiness). Both valuation methods included significant other unobservable inputs and are therefore classified as Level 3 prices in the fair value hierarchy.

        The Company also evaluates its unconsolidated investments for impairment, considering both its carrying value of the investment, estimated as the expected proceeds that it would receive if the entity were dissolved and the net assets were liquidated, as well as the Company's proportionate share of any impairment of assets held by unconsolidated investments. There were no impairment losses recognized by any of the Company's investments in unconsolidated entities during the years ended December 31, 2013 and December 31, 2012. During 2011, the Company recognized a charge of $1,955,000 for the impairment of its investment in an unconsolidated joint venture, which was disposed of during 2013.

Assets Held for Sale and Discontinued Operations

        The Company presents the assets and liabilities of any communities which have been sold, or otherwise qualify as held for sale, separately in the Consolidated Balance Sheets. In addition, the results of operations for those assets that meet the definition of discontinued operations are presented as such in the Company's Consolidated Statements of Comprehensive Income. Held for sale and discontinued operations classifications are provided in both the current and prior periods presented. Real estate assets held for sale are measured at the lower of the carrying amount or the fair value less the cost to sell. Both the real estate assets and corresponding liabilities are presented separately in the accompanying Consolidated Balance Sheets. Subsequent to classification of an asset as held for sale, no further depreciation is recorded. For those assets qualifying for classification as discontinued operations, the specific components of net income presented as discontinued operations include net operating income, depreciation expense and interest expense, net. For periods prior to the asset qualifying for discontinued operations, the Company reclassifies the results of operations to discontinued operations. In addition, the net gain or loss (including any impairment loss) on the eventual disposal of assets held for sale will be presented as discontinued operations when recognized. A change in presentation for held for sale or discontinued operations will not have any impact on the

F-15

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

Company's financial condition or results of operations. The Company combines the operating, investing and financing portions of cash flows attributable to discontinued operations with the respective cash flows from continuing operations on the accompanying Consolidated Statements of Cash Flows. The Company had one operating community that qualified for held for sale presentation at December 31, 2013.

Redeemable Noncontrolling Interests

        Redeemable noncontrolling interests are comprised of potential future obligations of the Company, which allow the investors holding the noncontrolling interest to require the Company to purchase their interest. The Company classifies obligations under the redeemable noncontrolling interests at fair value, with a corresponding offset for changes in the fair value recorded in accumulated earnings less dividends. Reductions in fair value are recorded only to the extent that the Company has previously recorded increases in fair value above the redeemable noncontrolling interest's initial basis. The redeemable noncontrolling interests are presented outside of permanent equity as settlement in the Company's common shares, where permitted, may not be within the Company's control. The nature and valuation of the Company's redeemable noncontrolling interests are discussed further in Note 11, "Fair Value."

Derivative Instruments and Hedging Activities

        The Company enters into interest rate swap and interest rate cap agreements (collectively, "Hedging Derivatives") for interest rate risk management purposes and in conjunction with certain variable rate secured debt to satisfy lender requirements. The Company does not enter into Hedging Derivative transactions for trading or other speculative purposes. The Company assesses both at inception and on an on-going basis, the effectiveness of qualifying cash flow and fair value hedges. Hedge ineffectiveness is reported as a component of general and administrative expenses. The fair values of Hedging Derivatives that are in an asset position are recorded in prepaid expenses and other assets. The fair value of Hedging Derivatives that are in a liability position are included in accrued expenses and other liabilities. Other than the $51,000,000 loss on interest rate contract recorded during 2013, fair value changes for derivatives that are not in qualifying hedge relationships are reported as a component of interest expense, net. For the Hedging Derivative positions that the Company has determined qualify as effective cash flow hedges, the Company has recorded the effective portion of cumulative changes in the fair value of the Hedging Derivatives in other comprehensive income. Amounts recorded in other comprehensive income will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flow. The effective portion of the change in fair value of the Hedging Derivatives that the Company has determined qualified as effective fair value hedges is reported as an adjustment to the carrying amount of the corresponding debt being hedged.

Noncontrolling Interests

        Noncontrolling interests represent our joint venture partners' claims on consolidated investments where the Company owns less than a 100% interest. The Company records these interests at their initial fair value, adjusting the basis prospectively for the joint venture partners' share of the respective consolidated investments' results of operations and applicable changes in ownership.

F-16

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Basis of Presentation (Continued)

Legal and Other Contingencies

        The Company is involved in various claims and/or administrative proceedings that arise in the ordinary course of the Company's business. While no assurances can be given, the Company does not believe that any of these outstanding litigation matters, individually or in the aggregate, will have a material adverse effect on the Company's financial position or results of operations.

Use of Estimates

        The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications

        Certain reclassifications have been made to amounts in prior years' financial statements to conform to current year presentations.

Recently Adopted Accounting Standards

        In February 2013, the FASB issued guidance on reclassifications out of accumulated other comprehensive income (AOCI). For significant items reclassified out of AOCI to net income in their entirety, reporting is required about the effect of the reclassifications on the respective line items where net income is presented. Additionally, for items that are not reclassified to net income in their entirety, a cross reference to other disclosures is required in the notes. The guidance did not have a material impact on the Company's financial position or results of operations.

2. Interest Capitalized

        The Company capitalizes interest during the development and redevelopment of real estate assets. Capitalized interest associated with the Company's development or redevelopment activities totaled $66,838,000, $49,556,000 and $33,863,000 for years ended December 31, 2013, 2012 and 2011, respectively.

3. Notes Payable, Unsecured Notes and Credit Facility

        The Company's mortgage notes payable, unsecured notes, and Credit Facility, as defined below, as of December 31, 2013 and December 31, 2012 are summarized below (dollars in thousands). The following amounts and discussion do not include the mortgage notes related to the communities

F-17

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Notes Payable, Unsecured Notes and Credit Facility (Continued)

classified as held for sale, if any, as of December 31, 2013 and 2012, as shown in the Consolidated Balance Sheets (dollars in thousands) (see Note 7, "Real Estate Disposition Activities").

	12-31-13		12-31-12
Fixed rate unsecured notes(1)	$	2,600,000	$	1,950,000
Fixed rate mortgage notes payable—conventional and tax-exempt(2)		2,418,389		1,427,133
Variable rate mortgage notes payable—conventional and tax-exempt		1,011,609		476,935
Total notes payable and unsecured notes		6,029,998		3,854,068
Credit Facility		—		—
Total mortgage notes payable, unsecured notes and Credit Facility	$	6,029,998	$	3,854,068

(1)

Balances at December 31, 2013 and December 31, 2012 exclude $5,291 and $4,202 of debt discount, respectively, as reflected in unsecured notes, net on the Company's Consolidated Balance Sheets.

(2)

Balances at December 31, 2013 and December 31, 2012 exclude $120,684 and $1,167 of debt premium, respectively, as reflected in mortgage notes payable on the Company's Consolidated Balance Sheets.

        The following debt activity occurred during the year ended December 31, 2013:

•

In February 2013, as a portion of the consideration for the Archstone Acquisition, the Company assumed $3,512,202,000 consolidated principal amount of Archstone's existing secured indebtedness, repaying $1,477,720,000 principal amount of the indebtedness assumed concurrent with the closing of the Archstone Acquisition.

•

In March 2013, the Company repaid $100,000,000 of its 4.95% unsecured notes in accordance with the scheduled maturity.

•

In April 2013, the Company obtained a 3.06% fixed rate, secured mortgage loan in the amount of $15,000,000 that matures in April 2018.

•

In April 2013, the Company repaid a 4.69% fixed rate, secured mortgage note in the amount of $170,125,000 pursuant to its scheduled maturity date.

•

In May 2013, the Company repaid a $5,393,000 fixed rate secured mortgage note with an interest rate of 5.55% at par and without penalty in advance of its July 2028 scheduled maturity date.

•

In May 2013, the Company obtained a 3.08% fixed rate secured mortgage loan that matures in June 2020 in the amount of $56,210,000, in association with the refinancing of an existing $47,000,000 variable rate secured mortgage note. The refinancing was necessitated by the secured community-specific tax protection obligation assumed through certain of the preferred interests the Company assumed as part of the Archstone Acquisition.

F-18

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Notes Payable, Unsecured Notes and Credit Facility (Continued)

•

In May 2013, the Company repaid a $52,806,000 fixed rate secured mortgage note with an interest rate of 5.24% pursuant to its scheduled maturity date.

•

In September 2013, the Company issued $400,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $396,212,000. The notes mature in October 2020 and were issued at a 3.63% interest rate. The notes have an effective interest rate of 3.79% including the effect of offering costs.

•

In December 2013, the Company issued $350,000,000 principal amount of unsecured notes in a public offering under its existing shelf registration statement for net proceeds of approximately $346,934,000. The notes mature in December 2023 and were issued at a 4.20% interest rate. The notes have an effective interest rate of 4.30% including the effect of offering costs.

•

In December 2013, the Company repaid a $150,000,000 fixed rate secured mortgage note with an interest rate of 5.66%, a $110,600,000 fixed rate secured mortgage note with an interest rate of 5.48%, and a $41,439,000 fixed rate secured mortgage note with an interest rate of 4.75%, in advance of their 2015 maturity dates, and incurred a charge for prepayment penalties and the write-off of deferred fees of $14,921,000.

        The Company has a $1,300,000,000 revolving variable rate unsecured credit facility with a syndicate of banks (the "Credit Facility") which matures in April 2017. The Company has the option to extend the maturity by up to one year under two, six month extension options for an aggregate fee of $1,950,000. The Credit Facility bears interest at varying levels based on the London Interbank Offered Rate ("LIBOR"), rating levels achieved on the unsecured notes and on a maturity schedule selected by the Company. The current stated pricing is LIBOR plus 1.05% (1.22% at December 31, 2013), assuming a one month borrowing rate. The annual facility fee is approximately $1,950,000 based on the $1,300,000,000 facility size and based on the Company's current credit rating.

        The Company had no borrowings outstanding under the Credit Facility and had $65,018,000 and $44,833,000 outstanding in letters of credit that reduced the borrowing capacity as of December 31, 2013 and December 31, 2012, respectively.

        In the aggregate, secured notes payable mature at various dates from November 2015 through July 2066, and are secured by certain apartment communities and improved land parcels (with a net carrying value of $4,469,421,000, excluding communities classified as held for sale, as of December 31, 2013).

        As of December 31, 2013, the Company has guaranteed approximately $309,358,000 of mortgage notes payable held by wholly-owned subsidiaries; all such mortgage notes payable are consolidated for financial reporting purposes. The weighted average interest rate of the Company's fixed rate mortgage notes payable (conventional and tax-exempt) was 3.4% and 5.8% at December 31, 2013 and December 31, 2012, respectively. The weighted average interest rate of the Company's variable rate mortgage notes payable and its Credit Facility, including the effect of certain financing related fees, was 1.8% and 2.7% at December 31, 2013 and December 31, 2012, respectively.

F-19

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Notes Payable, Unsecured Notes and Credit Facility (Continued)

        Scheduled payments and maturities of mortgage notes payable and unsecured notes outstanding at December 31, 2013 are as follows (dollars in thousands):

Year	Secured notes payments		Secured notes maturities		Unsecured notes maturities		Stated interest rate of unsecured notes
2014	$	16,986	$	—	$	150,000		5.375	%
2015		16,722		603,044		—		—
2016		17,951		16,255		250,000		5.750	%
2017		19,033		710,491		250,000		5.700	%
2018		18,398		77,432		—		—
2019		7,125		610,811		—		—
2020		6,190		50,824		250,000		6.100	%
						400,000		3.625	%
2021		5,965		27,844		250,000		3.950	%
2022		6,350		—		450,000		2.950	%
2023		6,744		—		350,000		4.300	%
						250,000		3.000	%
Thereafter		85,771		1,126,062		—		—	%
	$	207,235	$	3,222,763	$	2,600,000

        The Company's unsecured notes are redeemable at our option, in whole or in part, generally at a redemption price equal to the greater of (i) 100% of their principal amount or (ii) the sum of the present value of the remaining scheduled payments of principal and interest discounted at a rate equal to the yield on U.S. Treasury securities with a comparable maturity plus a spread between 25 and 45 basis points depending on the specific series of unsecured note, plus accrued and unpaid interest to the redemption date. The indenture under which the Company's unsecured notes were issued contains limitations on the amount of debt the Company can incur or the amount of assets that can be used to secure other financing transactions, and other customary financial and other covenants, with which the Company was in compliance at December 31, 2013.

4. Equity

        As of December 31, 2013 and 2012, the Company's charter had authorized for issuance a total of 280,000,000 and 140,000,000 shares of common stock, respectively, and 50,000,000 shares of preferred stock.

        During the year ended December 31, 2013, the Company:

(i)

issued 44,241 shares of common stock in connection with stock options exercised;



(ii)

issued 2,002 common shares through the Company's dividend reinvestment plan;



(iii)

issued 123,977 common shares in connection with stock grants;



(iv)

withheld 48,310 common shares to satisfy employees' tax withholding and other liabilities;



(v)

cancelled 7,653 shares of restricted common stock upon forfeiture;

F-20

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Equity (Continued)

(vi)

issued 14,889,706 common shares in connection with the closing of the Archstone Acquisition; and



(vii)

issued 9,260 shares through the Employee Stock Purchase Plan.

        With respect to the 14,889,706 shares of common stock issued in conjunction with the Archstone Acquisition to Lehman (as defined below), in May 2013, Lehman sold 7,870,000 of the Company's common shares that it had received as consideration for the Archstone Acquisition. Lehman received all of the net proceeds from the offering. See discussion in Note 14, "Subsequent Events" for discussion of Lehman selling all of its remaining holdings of the Company's common stock in 2014.

        In August 2012, the Company commenced a third continuous equity program ("CEP III"), under which the Company is authorized by its Board of Directors to sell up to $750,000,000 of shares of its common stock from time to time during a 36-month period. Actual sales will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company's common stock and determinations by the Company of the appropriate sources of funding for the Company. In conjunction with CEP III, the Company engaged sales agents who receive compensation of approximately 1.5% of the gross sales price for shares sold. During the year ended December 31, 2013, the Company had no sales under CEP III and had $646,274,000 of shares that remain authorized under CEP III for issuance under this program.

5. Archstone Acquisition

        On February 27, 2013, pursuant to an asset purchase agreement (the "Purchase Agreement") dated November 26, 2012, by and among the Company, Equity Residential and its operating partnership, ERP Operating Limited Partnership (together, "Equity Residential"), Lehman Brothers Holdings, Inc. ("Lehman", which term is sometimes used in this report to refer to Lehman Brothers Holdings, Inc., and/or its relevant subsidiary or subsidiaries), and Archstone Enterprise LP ("Archstone," which has since changed its name to Jupiter Enterprise LP), the Company, together with Equity Residential, acquired, directly or indirectly, all of Archstone's assets, including all of the ownership interests in joint ventures and other entities owned by Archstone, and assumed Archstone's liabilities, both known and unknown, with certain limited exceptions.

        Under the terms of the Purchase Agreement, the Company acquired approximately 40% of Archstone's assets and liabilities and Equity Residential acquired approximately 60% of Archstone's assets and liabilities (the "Archstone Acquisition"). The Company accounted for the acquisition as a business combination and recorded the purchase price to acquired tangible assets consisting primarily of direct and indirect interests in land and related improvements, buildings and improvements, construction in progress and identified intangible assets and liabilities, consisting primarily of the value

F-21

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Archstone Acquisition (Continued)

of above and below market leases, and the value of in-places leases, at their fair values. The following table summarizes the Company's final purchase price allocation:

	Acquisition Date Fair Value
	(dollars in thousands)
Land and land improvements	$	1,745,520
Buildings and improvements		3,711,853
FF&E		52,290
Construction-in-progress, including land and land held for development(1)		401,747
In-place lease intangibles		182,467
Other assets		109,717
Total consolidated assets		6,203,594
Interest in unconsolidated real estate entities		276,954
Total assets		6,480,548
Fair value of assumed mortgage notes payable		3,732,980
Liability for preferred obligations		67,493
Other liabilities		31,984
Noncontrolling interest		13,262
Net Assets Acquired		2,634,829
Common shares issued		1,875,210
Cash consideration	$	759,619

(1)

Includes amounts for in-place leases for development communities.

        To finalize the purchase price allocation, the Company looked to transaction activity and data received subsequent to the acquisition date which provided the Company better information about the fair value of assets acquired and/or liabilities assumed. Additionally, the Company undertook an effort to evaluate identified assumed obligations as being attributable to the Company, the joint ventures formed with Equity Residential or as being covered under indemnification provisions of the Archstone Acquisition. The final acquisition date fair value has been updated to reflect the additional fair value support, the Company's determination of ownership for assumed liabilities, verification of rights to certain assets acquired, and the Company's allocable portion of the final working capital acquired. The Company's final purchase price allocation represents its best estimate of the fair value as of the acquisition date. Changes to the initial purchase price allocation did not have a material impact on the Company's Consolidated Financial Statements.

        The Company engaged a third party valuation specialist to assist in the determination of the fair value of each of the component parts of the operating communities, consisting of land and land improvements, buildings and improvements, furniture, fixtures and equipment, above and below market leases and in-place lease-related intangibles.

F-22

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Archstone Acquisition (Continued)

        Land valuation was based on a market approach, whereby recent sales of similar properties were used, adjusted for differences due to location, the state of entitlement as well as the shape and size of the parcel. Improvements to the land were valued using a replacement cost approach and considered the structures and amenities included for the communities. The approach applied industry standard replacement costs adjusted for geographic specific considerations, and reduced by estimated depreciation. The value for furniture, fixtures and equipment was also determined based on a replacement cost approach, adjusted for estimated depreciation. The FF&E value estimate considered both costs for items in the apartment homes, such as appliances and furnishings, and those for common areas such as exercise facilities and on-site offices. The fair value of buildings acquired was estimated using the replacement cost approach, assuming the buildings were vacant at acquisition. The replacement cost approach considered the composition of structures in the acquired portfolio, adjusted for an estimate of depreciation. The estimate of depreciation was made considering industry standard information and depreciation curves for the identified asset classes. If the operating community is held in an unconsolidated joint venture, the Company valued its interest in the operating community based on its ownership interest.

        The value of the acquired lease-related intangibles considered the estimated cost of leasing the apartment homes as if the acquired buildings were vacant, as well as the value of the current leases relative to market-rate leases. The in-place lease value was determined using an average total lease-up time, the number of apartment homes and net revenues generated during the lease-up time. The lease-up period for an apartment community was assumed to be 12 months to achieve stabilized occupancy. Net revenues were developed using market rent considering actual leasing and industry rental rate data. The value of current leases relative to a market-rate lease was based on market rents obtained for market comparables, and considered a market derived discount rate.

        The Company applied a weighted average depreciation period for the in-place lease intangibles of six months. During the year ended December 31, 2013, the Company recognized $184,763,000 of depreciation expense for in-place lease intangibles, of which $179,733,000 is recorded as a component of depreciation expense on the accompanying Consolidated Statements of Comprehensive Income, and $5,030,000 is recorded as a component of income from discontinued operations on the accompanying Consolidated Statements of Comprehensive Income.

        The Company used a market approach where applicable, or otherwise an internal model to determine the fair value for the development land parcels acquired. The internal model applied a discounted cash flow analysis on the expected cash flows for each land parcel as if the expected multifamily rental community is constructed. The cash flow analysis incorporated assumptions that market participants would make, including the application of (i) discount factors to the estimated future cash flows of the underlying asset, (ii) a compound annual growth rate for the revenue from the operating community, and (iii) an exit capitalization rate.

        The Company valued the Development Communities under construction and/or in lease-up using either the invested capital basis, or an internal model, depending on the stage of construction completion. For Development Communities earlier in the construction process and not yet in lease-up, invested capital was the relevant metric and was considered reflective of the fair value of the community. For Development Communities that either had completed construction or that were substantially complete with construction and in lease-up, the Company used a capitalization rate model. The capitalization rate model considered the pro-forma NOI for the Development Community, relative

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Archstone Acquisition (Continued)

to NOI for comparable operating communities, with adjustments for the location and/or quality of the community. A capitalization rate was applied to each Development Community's NOI which was based on a relevant capitalization rate observed in comparable acquisition or disposition transactions, if available, as adjusted by the Company for differences in fundamentals between the Development Community and the referenced comparable transactions.

        Given the significance of unobservable inputs, the Company has classified the valuations of the real estate assets acquired as Level 3 prices under the fair value hierarchy.

        Other assets acquired consisted primarily of working capital determined by the Company to be reflective of the fair value.

        During the year ended December 31, 2013, the Company recognized $83,594,000 acquisition related expenses associated with the Archstone Acquisition, with $39,543,000 reported as a component of equity in income (loss) of unconsolidated entities, and the balance in expensed acquisition, development, and other pursuit costs on the accompanying Consolidated Statements of Comprehensive Income.

Consideration

        Pursuant to the Purchase Agreement and separate arrangements between the Company and Equity Residential governing the allocation of liabilities assumed under the Purchase Agreement, the Company's portion of consideration under the Purchase Agreement consisted of the following:

•

the issuance of 14,889,706 shares of the Company's common stock, valued at $1,875,210,000 as of the market's close on the closing date, February 27, 2013;

•

cash payment of approximately $760,000,000;

•

the assumption of consolidated indebtedness with a fair value of approximately $3,732,980,000, as of February 27, 2013, consisting of $3,512,202,000 principal amount of consolidated indebtedness and $220,777,000 representing the amount by which fair value of the aforementioned debt exceeds the principal face value, $70,479,000 of which excess related to debt the Company repaid concurrent with the Archstone Acquisition;

•

the acquisition with Equity Residential of interests in entities that have preferred units outstanding, some of which may be presented for redemption from time to time. The Company's 40% share of the fair value of the collective obligations, including accrued dividends on these outstanding Archstone preferred units as of February 27, 2013, was approximately $67,500,000; and

•

the assumption with Equity Residential of all other liabilities, known or unknown, of Archstone, other than certain excluded liabilities. The Company shares 40% of the responsibility for these liabilities.

        The Company valued the assumed mortgage notes payable using a discounted cash flow analysis that incorporated assumptions that market participants would use. This analysis reflects the contractual terms of the instrument, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The process also considered credit valuation adjustments to appropriately reflect the Company's nonperformance risk. The Company has concluded that the value of the assumed

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Archstone Acquisition (Continued)

mortgage notes payable are Level 2 prices as the majority of the inputs used to value its positions fall within Level 2 of the fair value hierarchy.

        The Company valued its obligation under the preferred units outstanding based on the current liquidation price of the respective preferred unit series, including accrued but unpaid dividends as appropriate. During the year ended December 31, 2013, the Company paid approximately $35,224,000 to redeem its proportionate share of a portion of the preferred interest obligations assumed in conjunction with the Archstone Acquisition. The Company used the pricing for the settlement as the fair value at February 27, 2013.

Pro Forma Information

        The following table presents information for assets acquired in the Archstone Acquisition that is included in the Company's Consolidated Statement of Comprehensive Income from the closing date of the acquisition, February 27, 2013, through December 31, 2013 (in thousands).

	For the period including February 28, 2013 through December 31, 2013
Revenues	$	353,427
Loss attributable to common shareholders(1)	$	(105,589	)

(1)

Amounts exclude acquisition costs for the Archstone Acquisition.

        The following table presents the Company's supplemental consolidated pro forma information as if the acquisition had occurred on January 1, 2012 (in thousands, except per share amounts):

	For the year ended December 31, 2013		For the year ended December 31, 2012
Revenues	$	1,534,868	$	1,411,504
Income from continuing operations	$	348,160	$	158,738
Earnings per common share—diluted (from continuing operations)	$	2.67	$	1.22

        The pro forma consolidated results are prepared for informational purposes only, and are based on assumptions and estimates considered appropriate by the Company's management. However, they are not necessarily indicative of what the Company's consolidated financial condition or results of operations actually would have been assuming the Archstone Acquisition had occurred on January 1, 2012, nor do they purport to represent the consolidated financial position or results of operations for future periods.

Investments in Archstone Consolidated Entities

        In connection with the Archstone Acquisition, the Company entered into a limited liability company agreement with Equity Residential to acquire and own directly and indirectly certain Archstone entities (the "Archstone Legacy Entities") which hold indirect interests in real estate assets, including 16 of the 54 consolidated communities acquired by the Company. As of December 31, 2013, the Archstone Legacy Entities have outstanding preferred interests held by unrelated third parties with

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Archstone Acquisition (Continued)

an aggregate liquidation preference of approximately $90,000,000 (including accrued but unpaid distributions), which are generally subject to redemption at the election of the holders of such interests. One of the Archstone Legacy Entities previously entered into tax protection arrangements with the holders of certain of the preferred interests, which arrangements may limit for varying periods of time the Company's and Equity Residential's ability to dispose of the properties held indirectly by the Archstone Legacy Entities or to refinance certain related indebtedness, without making payments to the holders of such preferred interests. Pursuant to this LLC agreement, the Company has agreed to bear 40% of the economic cost of these preferred redemption obligations. The Company is also obligated to fund the tax protection payments that may arise from its disposition or refinancing of properties of the Archstone Legacy Entities that were contributed to a subsidiary that will be consolidated by the Company. The fair value of the Company's proportionate share of preferred redemption obligations and other liabilities of approximately $37,000,000 is recorded as a component of accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets. As part of the Archstone Acquisition, the Company and Equity Residential have agreed with Lehman and Archstone to require the acquired Archstone Legacy Entities to have sufficient funds available to honor their redemption obligations and to make any payments under its tax protection arrangements, when they may become due. The principal assets indirectly held by the limited liability company that acquired the Archstone Legacy Entities are interests in a subsidiary of the Company's (the "AvalonBay Legacy Subsidiary") and a subsidiary of Equity Residential, each of which subsidiaries acquired certain properties formerly owned by the Archstone Legacy Entities. The Company consolidates the assets, liabilities and results of operations of the AvalonBay Legacy Subsidiary.

Investments in Archstone Unconsolidated Entities

        In conjunction with the Archstone Acquisition, the Company acquired interests in three joint ventures, Multifamily Partners AC LP ("the U.S. Fund"), Multifamily Partners AC JV LP ("the AC JV"), and Brandywine Apartments of Maryland, LLC ("Brandywine"), which are discussed in Note 6, "Investments in Real Estate Entities."

        Additionally, through subsidiaries, the Company and Equity Residential entered into three limited liability company agreements (collectively, the "Residual JV"), discussed further in Note 6, "Investments in Real Estate Entities."

6. Investments in Real Estate Entities

Investments in Unconsolidated Real Estate Entities

        The Company accounts for its investments in unconsolidated real estate entities under the equity method of accounting, except as otherwise noted below, as discussed in Note 1, "Organization and Basis of Presentation," under Principles of Consolidation. The significant accounting policies of the Company's unconsolidated real estate entities are consistent with those of the Company in all material respects.

        As of December 31, 2013, the Company had investments in the following real estate entities:

•

AvalonBay Value Added Fund, LP ("Fund I")—In March 2005, the Company formed Fund I, a private, discretionary real estate investment vehicle, which acquired and operates communities in the Company's markets. Fund I served as the principal vehicle through which the Company

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

acquired investments in apartment communities, subject to certain exceptions, until March 2008. Fund I has a term that expires in March 2015, after having exercised two one-year extension options. Fund I has nine institutional investors, including the Company. A significant portion of the investments made in Fund I by its investors were made through AvalonBay Value Added Fund, Inc., a Maryland corporation that qualifies as a REIT under the Code (the "Fund I REIT"). A wholly-owned subsidiary of the Company is the general partner of Fund I and has a 15.2% combined general partner and limited partner equity interest. Excluding costs incurred in excess of our equity in the underlying net assets of Fund I, the Company has an equity investment of $14,209,000 in Fund I and the Fund I REIT, net of distributions and excluding the purchase by the Company of a mortgage note secured by a Fund I community. The Company receives asset management fees, property management fees and redevelopment fees, as well as a promoted interest if certain thresholds are met.

        During 2013, Fund I sold seven communities:

•

Avalon Yerba Buena, located in San Francisco, CA, for $103,000,000;

•

Avalon at Civic Center, located in Norwalk, CA, for $45,844,000;

•

Avalon at Cedar Place, located in Columbia, MD, for $26,000,000;

•

Avalon Sunset, located in Los Angeles, CA, for $25,800,000;

•

Avalon Crystal Hill, located in Pomona, NY, for $33,050,000;

•

Avalon Centerpoint, located in Baltimore, MD, for $75,250,000; and

•

Middlesex Crossing, located in Billerica, MA, for $40,250,000.

        The Company's proportionate share of the gain in accordance with GAAP recognized on the sale of these seven communities was $11,484,000.

Subsidiaries of Fund I have four loans secured by individual assets (including a mortgage owned by the Company) with aggregate amounts outstanding of $66,132,000. Fund I subsidiary loans have varying maturity dates (or dates after which the loans can be prepaid without penalty), ranging from October 2014 to September 2016. These mortgage loans are secured by the underlying real estate. The mortgage loans are payable by the subsidiaries of Fund I from operating cash flow or disposition proceeds from the underlying real estate. The Company has not guaranteed the debt of Fund I, nor does the Company have any obligation to fund this debt should Fund I be unable to do so.

In addition, as part of the formation of Fund I, the Company provided to one of the limited partners a guarantee. The guarantee provides that if, upon final liquidation of Fund I, the total amount of all distributions to that partner during the life of Fund I (whether from operating cash flow or property sales) does not equal a minimum of the total capital contributions made by that partner, then the Company will pay the partner an amount equal to the shortfall, but in no event more than 10% of the total capital contributions made by the partner (maximum of approximately $7,500,000 as of December 31, 2013). Under the expected Fund I liquidation scenario, as of December 31, 2013, the expected realizable value of the real estate assets owned by Fund I is considered adequate to avoid payment under such guarantee to that partner. The estimated fair value of, and the Company's obligation under this guarantee, both at inception

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

and as of December 31, 2013, was not significant and therefore the Company has not recorded any obligation for this guarantee as of December 31, 2013.

•

AvalonBay Value Added Fund II, LP ("Fund II")—In September 2008, the Company formed Fund II, a private, discretionary real estate investment vehicle which acquired and operates communities in the Company's markets. Fund II served as the exclusive vehicle through which the Company acquired investment interests in apartment communities, subject to certain exceptions, through the close of its investment period in August 2011. Fund II has six institutional investors, including the Company. One of the Company's wholly owned subsidiaries is the general partner of Fund II and, excluding costs incurred in excess of our equity in the underlying net assets of Fund II, the Company has made an equity investment of $93,714,000 (net of distributions), representing a 31.3% combined general partner and limited partner equity interest.

During the year ended December 31, 2013, Fund II sold Avalon Rothbury, located in Gaithersburg, MD, for $39,600,000. The Company's proportionate share of the gain in accordance with GAAP for the disposition was $2,790,000.

Subsidiaries of Fund II have 13 loans secured by individual assets with aggregate amounts outstanding of $467,959,000, with maturity dates that vary from November 2014 to September 2019. The mortgage loans are payable by the subsidiaries of Fund II from operating cash flow or disposition proceeds from the underlying real estate. The Company has not guaranteed repayment of this debt, nor does the Company have any obligation to fund this debt should Fund II be unable to do so.

In addition, as part of the formation of Fund II, the Company provided to one of the limited partners a guarantee. The guarantee provides that if, upon final liquidation of Fund II, the total amount of all distributions to that partner during the life of Fund II (whether from operating cash flow or property sales) does not equal a minimum of the total capital contributions made by that partner, then the Company will pay the partner an amount equal to the shortfall, but in no event more than 10% of the total capital contributions made by the partner (maximum of approximately $8,910,000 as of December 31, 2013). Under the expected Fund II liquidation scenario, as of December 31, 2013, the expected realizable value of the real estate assets owned by Fund II is considered adequate to avoid payment under such guarantee to that partner. The estimated fair value of, and the Company's obligation under, this guarantee, both at inception and as of December 31, 2013, was not significant and therefore the Company has not recorded any obligation for this guarantee as of December 31, 2013.

•

CVP I, LLC—In February 2004, the Company entered into a joint venture agreement with an unrelated third-party for the development of Avalon Chrystie Place, a 361 apartment-home community located in New York, New York, for which construction was completed in 2005. The Company holds a 20% equity interest in the venture (with a right to 50% of distributions after achievement of a threshold return, which was achieved in 2012 and 2013). The Company is the managing member of CVP I, LLC, however, property management services at the community are performed by an unrelated third party.

As of December 31, 2013, CVP I, LLC has outstanding tax-exempt, variable rate bonds maturing in November 2036 in the amount of $117,000,000 which have permanent credit enhancement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

The Company agreed to guarantee, under limited circumstances, the repayment to the credit enhancer of any advances it may make in fulfillment of CVP I, LLC's repayment obligations under the bonds. The Company's 80% partner in this venture agreed that it will reimburse us its pro rata share of any amounts paid relative to the outstanding guaranteed obligation. The estimated fair value of the Company's obligation under the outstanding guarantee, both at inception and as of December 31, 2013, was not significant. As a result the Company has not recorded any obligation associated with the guarantee at December 31, 2013.

•

MVP I, LLC—In December 2004, the Company entered into a joint venture agreement with an unrelated third-party for the development of Avalon at Mission Bay North II. Construction of Avalon at Mission Bay North II, a 313 apartment-home community located in San Francisco, California, was completed in December 2006. The Company holds a 25% equity interest in the venture (with a right to 45% of distributions after achievement of a threshold return, which was achieved in 2013). The Company is responsible for the day-to-day operations of the community and is the management agent subject to the terms of a management agreement. In December 2007, MVP I, LLC executed a fixed-rate conventional loan, which is secured by the underlying real estate assets of the community, for $105,000,000. The loan is a fixed rate, interest-only note bearing interest at 6.02%, maturing in December 2015. The Company has not guaranteed the debt of MVP I, LLC, nor does the Company have any obligation to fund this debt should MVP I, LLC be unable to do so.

•

Arna Valley View LP—In connection with the municipal approval process to develop a consolidated community, the Company entered into a limited partnership in February 1999 to develop, finance, own and operate Arna Valley View, a 101 apartment-home community in Arlington, Virginia. This community has affordable rents for 100% of the apartment homes related to the tax-exempt bond financing and tax credits used to finance construction of the community. A subsidiary of the Company is the general partner of the partnership with a 0.01% ownership interest. The Company manages the community and is subject to a management agreement. As of December 31, 2013, Arna Valley View has $4,829,000 of 6.25% fixed rate, tax-exempt bonds outstanding, which mature in November 2030. In addition, Arna Valley View has $5,836,000 of 4% fixed rate county bonds outstanding that mature in December 2030. Arna Valley View's debt is neither guaranteed by, nor recourse, to the Company. Due to the Company's limited ownership in this venture and the terms of the management agreement regarding the rights of the limited partners, it is accounted for using the cost method.

•

Aria at Hathorne Hill, LLC—In the second quarter of 2007, a wholly-owned taxable REIT subsidiary of the Company entered into an LLC agreement with a joint venture partner to develop 64 for-sale town homes in Danvers, Massachusetts on an out parcel adjacent to our Avalon Danvers rental apartment community. Approximately 30% of the homes have been built and sold. The out parcel was zoned for for-sale activity, and was contributed to the LLC by a subsidiary of the Company in exchange for a 50% ownership interest. During 2011, the Company concluded that because the market for for-sale housing development had not improved as expected, its investment in the venture was impaired and that impairment was other than temporary. As a result, the Company recognized a charge of $1,955,000 for the impairment of the investment in the unconsolidated joint venture, which holds nondepreciable real estate assets. In December 2011, the Company acquired the note that the venture had with a third party lender for $1,700,000. In 2013, the venture repaid the balance of the note and the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

Company sold its interest to the unrelated third party partners in the venture, recognizing a gain in accordance with GAAP of $975,000.

        In conjunction with the Archstone Acquisition, the Company acquired interests in the following entities:

•

The U.S. Fund was formed in July 2011 and is fully invested. As of December 31, 2013, the U.S. Fund owns nine communities containing 1,726 apartment homes, one of which includes a marina containing 229 boat slips. Through subsidiaries the Company owns the general partner of the fund and holds a 28.6% interest in the fund.

Subsidiaries of the U.S. Fund have nine loans secured by individual assets with amounts outstanding in the aggregate of $327,849,000 with varying maturity dates, ranging from January 2019 to November 2022. The mortgage loans are payable by the subsidiaries of the U.S. Fund with operating cash flow or disposition proceeds from the underlying real estate. The Company has not guaranteed the debt of the U.S. Fund, nor does the Company have any obligation to fund this debt should the U.S. Fund be unable to do so.

•

The AC JV is a joint venture in which the Company acquired Archstone's 20% ownership interest. The AC JV was formed in 2011 and as of December 31, 2013 owned two operating apartment communities containing 818 apartment homes in Cambridge, MA and Herndon, VA. The AC JV partnership agreement contains provisions that require the Company to provide a right of first offer ("ROFO") to the AC JV in connection with additional opportunities to acquire or develop additional interests in multifamily real estate assets within a specified geographic radius of the existing assets, generally one mile or less. During the year ended December 31, 2013, the Company provided the AC JV with the opportunity to acquire a parcel of land owned by the Company as required in the right of first offer provisions for the joint venture. The AC JV exercised its right to acquire the land parcel for development and commenced construction of an additional apartment community located in Cambridge, MA. The Company sold the parcel of land to the AC JV in exchange for a cash payment and a capital account credit, and is overseeing the development in exchange for a developer fee. The Company owns one additional land parcel for the development of 301 apartment homes, classified as a Development Right in Cambridge, MA, acquired as part of the Archstone Acquisition that is subject to ROFO restrictions. The ROFO restriction expires in 2019.

As of December 31, 2013, subsidiaries of the AC JV have eight unsecured loans outstanding in the aggregate of $162,300,000 which mature in July 2021, and which were made by the investors in the venture, including the Company, in proportion to the investors' respective equity ownership interest. The unsecured loans are payable by the subsidiaries of the AC JV with operating cash flow from the venture. The Company has not guaranteed the debt of the AC JV, nor does the Company have any obligation to fund this debt should the AC JV be unable to do so.

•

Brandywine owns a 305 apartment home community located in Washington, DC. The community is managed by a third party. Brandywine is comprised of five members who hold various interests in the joint venture. In conjunction with the Archstone Acquisition, the Company acquired a 26.1% equity interest in the venture, and subsequently purchased an additional 2.6% interest, and as of December 31, 2013, holds a 28.7% equity interest in the venture.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

Brandywine has an outstanding $24,839,000 fixed rate mortgage loan that is payable by the venture. The Company has not guaranteed the debt of Brandywine, nor does the Company have any obligation to fund this debt should Brandywine be unable to do so.

•

Through the Residual JV, the Company and Equity Residential acquired (i) certain assets of Archstone that the Company and Equity Residential plan to divest (to third parties or to the Company or Equity Residential) over time (the "Residual Assets"), and (ii) various liabilities of Archstone that the Company and Equity Residential agreed to assume in conjunction with the Archstone Acquisition (the "Residual Liabilities"). The Residual Assets include interests in apartment communities in Germany (including through a fund which Archstone managed); a 20.0% interest in Lake Mendota Investments, LLC and Subsidiaries ("SWIB"), a joint venture which owns and manages six apartment communities with 1,902 apartment homes in the United States; two land parcels; and various licenses, insurance policies, contracts, office leases and other miscellaneous assets. The Residual Liabilities include most existing or future litigation and claims related to Archstone's operations for periods before the close of the Archstone Acquisition, except for (i) claims that principally relate to the physical condition of the assets acquired directly by us or Equity Residential, which generally remain the sole responsibility of us or Equity, as applicable, and (ii) certain tax and other litigation between Archstone and various equity holders in Archstone related to periods before the close of the Archstone Acquisition, and claims which may arise due to changes in the capital structure of Archstone that occurred prior to closing, for which Lehman has agreed to indemnify the Company and Equity Residential. The Company and Equity Residential jointly control the Residual JV and the Company holds a 40% economic interest in the assets and liabilities of the Residual JV.

As of December 31, 2013, SWIB has two loans and draws on a credit facility secured by individual assets with amounts outstanding in the aggregate of $187,021,000 with varying maturity dates, ranging from December 2014 to December 2029. The Company has not guaranteed the debt of SWIB, nor does the Company have any obligation to fund this debt should SWIB be unable to do so.

        The following is a combined summary of the financial position of the entities accounted for using the equity method, excluding joint venture entities the Company formed with Equity Residential as part of the Archstone Acquisition, as of the dates presented (dollars in thousands):

	12-31-13		12-31-12
Assets:
Real estate, net	$	1,890,496	$	1,337,084
Other assets		402,644		73,252
Total assets	$	2,293,140	$	1,410,336
Liabilities and partners' capital:
Mortgage notes payable and credit facility	$	1,251,067	$	943,259
Other liabilities		29,677		20,405
Partners' capital		1,012,396		446,672
Total liabilities and partners' capital	$	2,293,140	$	1,410,336

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

        The following is a combined summary of the operating results of the entities accounted for using the equity method, excluding joint venture entities the Company formed with Equity Residential as part of the Archstone Acquisition, for the years presented (dollars in thousands):

	For the year ended
	12-31-13			12-31-12			12-31-11
Rental and other income	$	208,979		$	172,076		$	160,066
Operating and other expenses		(86,247	)		(73,955	)		(71,926	)
Gain on sale of real estate(1)		96,152			106,195			22,246
Interest expense, net		(61,404	)		(53,904	)		(50,530	)
Depreciation expense		(61,002	)		(47,748	)		(47,920	)
Net income	$	96,478		$	102,664		$	11,936

(1)

Amount for the year ended December 31, 2012 includes $44,700 of gain recognized by the joint venture associated with the Company's acquisition of Avalon Del Rey from its joint venture partner.

        In conjunction with the formation of Fund I and Fund II, the Company incurred costs in excess of its equity in the underlying net assets of the respective investments. These costs represent $5,439,000 at December 31, 2013 and $7,342,000 at December 31, 2012 of the respective investment balances.

        The following is a summary of the Company's equity in income of unconsolidated entities for the years presented (dollars in thousands):

	For the year ended
	12-31-13			12-31-12		12-31-11
Fund I(1)	$	10,924		$	7,041	$	2,204
Fund II(2)		6,206			2,130		(1,053	)
CVP I, LLC(3)		5,783			5,394		4,493
MVP I, LLC(4)		1,137			493		(626	)
Avalon Del Rey, LLC(5)		181			4,000		102
Juanita Village(6)		378			1,856		—
U.S. Fund(7)		(661	)		—		—
AC JV(7)		2,569			—		—
Brandywine(7)		661			—		—
Residual JV(7)(8)		(38,332	)		—		—
Total	$	(11,154	)	$	20,914	$	5,120

(1)

Equity in income for the years ended December 31, 2013, 2012 and 2011 includes the Company's proportionate share of the gain on the sale of Fund I assets of $11,484, $7,971, and $3,063, respectively.

(2)

Equity in income for 2013 includes the Company's proportionate share of the gain on the sale of one Fund II asset of $2,790.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investments in Real Estate Entities (Continued)

(3)

Equity in income from this entity for 2013, 2012, and 2011 includes $5,527, $5,260, and $5,078, respectively, relating to the Company's recognition of its promoted interest.

(4)

Equity in income from this entity for 2013 includes $516 relating to the Company's recognition of its promoted interest.

(5)

During 2012, the Company purchased its joint venture partner's interest in this venture.

(6)

The Company's equity in income for this entity represents its residual profits from the sale of the community.

(7)

The Company's joint venture partner's interest was acquired in conjunction with the Archstone Acquisition.

(8)

Equity in income for the Residual JV includes certain expensed Archstone Acquisition costs borne by the venture.

Investments in Consolidated Real Estate Entities

        In December 2013, the Company acquired Arboretum at Burlington, located in Burlington, MA. Arboretum at Burlington contains 312 apartment homes and was acquired for a purchase price of $79,850,000.

        The Company accounted for this acquisition as a business combination and recorded the acquired assets and assumed liabilities, including identifiable intangibles, based on their fair values. The Company looked to third party pricing or internal models for the values of the land, and an internal model to determine the fair values of the real estate assets and in-place leases. Given the heterogeneous nature of multifamily real estate, the fair values for the land, real estate assets and in-place leases incorporated significant unobservable inputs and therefore are considered to be Level 3 prices within the fair value hierarchy.

        The Company expenses transaction costs associated with acquisition activity as they are incurred. Expensed transaction costs associated with the acquisitions made by the Company in 2013 and 2012, as well as costs associated with the Archstone Acquisition, totaled $44,052,000 and $9,593,000, respectively, reported as a component of expensed acquisition, development and other pursuit costs on the accompanying Consolidated Statements of Comprehensive Income. Acquisition costs in 2011 were not significant.

7. Real Estate Disposition Activities

        During 2013, the Company sold eight communities, containing an aggregate of 3,299 apartment homes for an aggregate gross sales price of $932,800,000 and an aggregate gain in accordance with

F-33

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Real Estate Disposition Activities (Continued)

GAAP of $278,231,000. Details regarding the real estate sales are summarized in the following table (dollars in thousands):

Community Name	Location	Period of sale		Apartment homes		Debt		Gross sales price		Net proceeds
Crystal House I & II	Arlington, VA		Q113		827	$	—	$	197,150	$	196,583
Avalon at Decoverly	Rockville, MD		Q113		564		—		135,250		131,338
Avalon at Dublin Station I	Dublin, CA		Q213		305		—		105,400		104,218
Archstone Vanoni Ranch	Ventura, CA		Q413		316		—		82,000		80,668
Avalon on the Sound East	New Rochelle, NY		Q413		588		—		210,000		206,138
Archstone Wheaton Station	Wheaton, MD		Q413		243		—		57,000		56,306
Avalon Rosewalk	San Jose, CA		Q413		456		—		146,000		144,191
Total of 2013 asset sales(1)					3,299	$	—	$	932,800	$	919,442
Total of 2012 asset sales					1,578	$	—	$	280,550	$	274,018
Total of 2011 asset sales					1,038	$	—	$	292,965	$	287,358

(1)

Total of 2013 asset sales excludes the disposition of development rights located in Hingham, MA and Brooklyn, NY, for total net proceeds of $1,313.

        As of December 31, 2013, the Company had one community that qualified as held for sale.

        The operations for any real estate assets sold from January 1, 2013 through December 31, 2013 and the real estate assets that qualified as discontinued operations and held for sale as of December 31, 2013 have been presented as income from discontinued operations in the accompanying Consolidated Statements of Comprehensive Income. Accordingly, certain reclassifications have been made to prior years to reflect discontinued operations consistent with current year presentation.

        The following is a summary of income from discontinued operations for the periods presented (dollars in thousands):

	For the year ended
	12-31-13			12-31-12			12-31-11
Rental income	$	42,874		$	63,406		$	89,290
Operating and other expenses		(12,661	)		(19,437	)		(36,996	)
Interest expense, net		—			(133	)		(4,808	)
Loss on extinguishment of debt		—			(602	)		(3,880	)
Depreciation expense		(13,500	)		(16,414	)		(23,541	)
Income (loss) from discontinued operations	$	16,713		$	26,820		$	20,065

8. Commitments and Contingencies

Employment Agreements and Arrangements

        As of December 31, 2013, the Company has employment agreements with three executive officers which expire on December 31, 2015. Under the employment agreements, if the Company terminates the executive without cause the executive will be entitled to a multiple of his covered compensation,

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Commitments and Contingencies (Continued)

which is defined as base salary plus annual cash bonus. For two of the executives, the multiple is two times (three if the termination is in connection with a sale of the Company) and for one of the executives the multiple is one time (two if the termination is in connection with a sale of the Company). The employment agreements generally provide that it would be considered a termination without cause if the executive's title or role is reduced except as permitted by the agreement. The agreements provide, as do the standard restricted stock and option agreements used by the Company for its compensation programs, that upon a termination without cause the executive's restricted stock and options will vest.

        The standard restricted stock and option agreements used by the Company in its compensation program provide that upon an employee's termination without cause or the employee's Retirement (as defined in the agreement), all outstanding stock options and restricted shares of stock held by the employee will vest, and the employee will have up to 12 months to exercise any options then held. Under the agreements, Retirement generally means a termination of employment and other business relationships, other than for cause, after attainment of age 50, provided that (i) the employee has worked for the Company for at least 10 years, (ii) the employee's age at Retirement plus years of employment with the Company equals at least 70, (iii) the employee provides at least six months written notice of his intent to retire, and (iv) the employee enters into a one year non-compete and employee non-solicitation agreement.

        The Company also has an Officer Severance Program (the "Program"), which applies only in connection with a sale of the Company for the benefit of those officers of the Company who do not have employment agreements. Under the Program, in the event an officer who is not otherwise covered by a severance arrangement is terminated (other than for cause), or the officer chooses to terminate his or her employment for good reason (as defined), in either case within 18 months following a sale event (as defined) of the Company, such officer will generally receive a cash lump sum payment equal to a multiple of the officer's covered compensation (base salary plus annual cash bonus). The multiple is one times for vice presidents and senior vice presidents, and two times for executive vice presidents. The officer's restricted stock and options would also vest. Costs related to the Company's employment agreements and the Program are deferred and recognized over the requisite service period when considered by management to be probable and estimable.

Legal Contingencies

        The Company accounts for recoveries from legal matters as a reduction in the legal and related costs incurred associated with the matter, with recoveries in excess of these costs reported as a gain or, where appropriate, a reduction in the basis of a community to which the suit related.

        In addition, the Company is subject to various other legal proceedings and claims that arise in the ordinary course of business. These matters are frequently covered by insurance. If it has been determined that a loss is probable to occur and can be reasonably estimated, the estimated amount of the loss is recorded in the financial statements. While the resolution of these other matters cannot be predicted with certainty, management currently believes the final outcome of such matters will not have a material adverse effect on the financial position or results of operations of the Company. In instances where the Company has a gain contingency associated with legal proceedings, the Company records a gain in the financial statements, to the extent of a loss recovery, when it is deemed probable to occur, can be reasonably estimated and is considered to be collectible.

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Commitments and Contingencies (Continued)

Lease Obligations

        The Company owns 11 apartment communities, three communities under construction and two commercial properties which are located on land subject to land leases expiring between October 2026 and March 2142. Of these leases, 14 are accounted for as operating leases recognizing rental expense on a straight-line basis over the lease term. These leases have varying escalation terms, and four of these leases have purchase options exercisable through 2095. The Company incurred costs of $17,996,000, $17,604,000 and $16,887,000 in the years ended December 31, 2013, 2012 and 2011, respectively, related to operating leases. Two of the Development Communities are located on land subject to a land lease, which are accounted for as capital leases, with a lease obligation of $33,879,000 reported as a component of accrued expenses and other liabilities. Each of these leases have purchase options that become exercisable at varying times through 2046. In addition, the Company leases certain office space, which is accounted for as operating leases.

        The following table details the future minimum lease payments under the Company's current leases (dollars in thousands):

	Payments due by period
	2014		2015		2016		2017		2018		Thereafter
Operating Lease Obligations	$	19,801	$	19,628	$	19,557	$	19,034	$	19,157	$	1,248,694
Capital Lease Obligations(1)		1,863		1,885		19,083		848		848		39,934
	$	21,664	$	21,513	$	38,640	$	19,882	$	20,005	$	1,288,628

(1)

Aggregate capital lease payments include $30,519 in interest costs.

9. Segment Reporting

        The Company's reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities. Annually as of January 1^st, the Company determines which of its communities fall into each of these categories and maintains that classification, unless disposition or redevelopment plans regarding a community change, throughout the year for the purpose of reporting segment operations.

•

Established Communities (also known as Same Store Communities) are communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year. For the year 2013, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2012, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

•

Other Stabilized Communities includes all other completed communities that have stabilized occupancy, as defined above. Other Stabilized Communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year.

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Segment Reporting (Continued)

•

Development/Redevelopment Communities consists of communities that are under construction and have not received a final certificate of occupancy, and where substantial redevelopment is in progress or is planned to begin during the current year and communities under lease-up that had not reached stabilized occupancy, as defined above, as of January 1, 2013.

        In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

        The Company's segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment's performance. The Company's chief operating decision maker is comprised of several members of its executive management team who use net operating income ("NOI") as the primary financial measure for Established Communities and Other Stabilized Communities. NOI is defined by the Company as total revenue less direct property operating expenses. Although the Company considers NOI a useful measure of a community's or communities' operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP. NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

        A reconciliation of NOI to net income for years ended December 31, 2013, 2012 and 2011 is as follows (dollars in thousands):

	For the year ended
	12-31-13			12-31-12			12-31-11
Net income	$	352,771		$	423,562		$	441,370
Indirect operating expenses, net of corporate income		41,554			31,911			30,550
Investments and investment management expense		3,990			6,071			5,126
Expensed acquisition, development and other pursuit costs		45,050			11,350			2,967
Interest expense, net		172,402			136,920			167,814
Loss on interest rate contract		51,000			—			—
Loss on extinguishment of debt, net		14,921			1,179			1,940
General and administrative expense		39,573			34,101			29,371
Equity in loss (income) of unconsolidated entities		11,154			(20,914	)		(5,120	)
Depreciation expense		560,215			243,680			226,728
Casualty and impairment loss		—			1,449			14,052
Gain on sale of real estate assets		(278,471	)		(146,591	)		(294,806	)
Income from discontinued operations		(16,713	)		(26,820	)		(20,065	)
Gain on acquisition of unconsolidated real estate entity		—			(14,194	)		—
Net operating income	$	997,446		$	681,704		$	599,927

        The primary performance measure for communities under development or redevelopment depends on the stage of completion. While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.

        The following table provides details of the Company's segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community's status as of the beginning of the given calendar year. Therefore, each year the composition of communities within each business segment is adjusted. Accordingly, the amounts between years are not directly comparable. Segment information for the years ended December 31, 2013, 2012 and 2011 have been

F-37

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Segment Reporting (Continued)

adjusted for the real estate assets that were sold from January 1, 2011 through December 31, 2013, or otherwise qualify as discontinued operations as of December 31, 2013, as described in Note 7, "Real Estate Disposition Activities."

	Total revenue		NOI		% NOI change from prior year			Gross real estate(1)
For the period ended December 31, 2013
Established
New England	$	177,474	$	114,966		1.8	%	$	1,375,961
Metro NY/NJ		249,742		172,912		4.4	%		1,921,307
Mid-Atlantic		100,548		71,851		0.1	%		633,598
Pacific Northwest		46,564		31,283		5.3	%		444,825
Northern California		141,038		106,745		11.7	%		1,233,851
Southern California		119,024		81,182		5.1	%		1,058,883
Total Established(2)		834,390		578,939		4.7	%		6,668,425
Other Stabilized		499,843		339,159		n/a			6,770,517
Development / Redevelopment		117,186		79,348		n/a			3,024,035
Land Held for Future Development		n/a		n/a		n/a			300,364
Non-allocated(3)		11,502		n/a		n/a			10,279
Total	$	1,462,921	$	997,446		46.3	%	$	16,773,620
For the period ended December 31, 2012
Established
New England	$	163,110	$	106,039		5.0	%	$	1,262,987
Metro NY/NJ		213,360		148,441		7.4	%		1,760,429
Mid-Atlantic		103,784		75,313		3.2	%		591,669
Pacific Northwest		32,942		23,433		15.0	%		306,289
Northern California		112,875		83,091		14.1	%		1,015,947
Southern California		99,302		68,880		7.0	%		947,723
Total Established(2)		725,373		505,197		7.5	%		5,885,044
Other Stabilized		135,230		86,722		n/a			1,314,690
Development / Redevelopment		129,767		89,785		n/a			2,032,277
Land Held for Future Development		n/a		n/a		n/a			316,037
Non-allocated(3)		10,257		n/a		n/a			73,724
Total	$	1,000,627	$	681,704		14.5	%	$	9,621,772
For the period ended December 31, 2011
Established
New England	$	164,929	$	105,848		9.8	%	$	1,275,866
Metro NY/NJ		180,003		120,714		6.8	%		1,347,796
Mid-Atlantic		102,834		74,754		6.6	%		603,349
Pacific Northwest		30,057		20,374		6.0	%		301,661
Northern California		79,868		57,749		10.8	%		704,066
Southern California		75,120		50,391		9.8	%		697,705
Total Established(2)		632,811		429,830		8.3	%		4,930,443
Other Stabilized		137,779		89,949		n/a			1,567,875
Development / Redevelopment		119,841		80,148		n/a			1,752,006
Land Held for Future Development		n/a		n/a		n/a			325,918
Non-allocated(3)		9,656		n/a		n/a			78,161
Total	$	900,087	$	599,927		14.8	%	$	8,654,403

(1)

Does not include gross real estate assets held for sale of $26,701, $449,570 and $634,089 as of December 31, 2013, 2012 and 2011, respectively.

(2)

Gross real estate for the Company's established communities includes capitalized additions of approximately $33,553, $25,448 and $34,359 in 2013, 2012 and 2011, respectively.

(3)

Revenue represents third-party management, accounting, and developer fees and miscellaneous income which are not allocated to a reportable segment.

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AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Stock-Based Compensation Plans

        The Company has a stock incentive plan, the 2009 Stock Option and Incentive Plan (the "2009 Plan"). The 2009 Plan includes an authorization to issue up to 4,199,822 shares of the Company's common stock, par value $0.01 per share, (2,930,000 newly authorized shares plus 1,269,822 shares that were available for grant as of May 21, 2009 under the Company's 1994 Stock Option and Incentive Plan (the "1994 Plan")), pursuant to awards under the 2009 Plan. In addition, any awards that were outstanding under the 1994 Plan on May 21, 2009 that are subsequently forfeited, canceled, surrendered or terminated (other than by exercise) will become available for awards under the 2009 Plan. The 2009 Plan provides for various types of equity awards to associates, officers, non-employee directors and other key personnel of the Company and its subsidiaries. The types of awards that may be granted under the 2009 Plan include restricted and deferred stock, stock options that qualify as incentive stock options ("ISOs") under Section 422 of the Code, non-qualified stock options, and stock appreciation rights. The 2009 Plan will expire on May 21, 2019.

        Information with respect to stock options granted under the 2009 and 1994 Plans is as follows (dollars in thousands, other than per share amounts):

	2009 Plan shares			Weighted average exercise price per share		1994 Plan shares			Weighted average exercise price per share
Options Outstanding, December 31, 2010		126,484		$	74.20		2,072,217		$	88.50
Exercised		(23,908	)		75.75		(930,391	)		82.43
Granted		144,827			115.83		—			—
Forfeited		—			—		(28,867	)		68.29
Options Outstanding, December 31, 2011		247,403		$	98.42		1,112,959		$	94.10
Exercised		(43,265	)		85.09		(364,519	)		68.21
Granted		115,303			133.16		—			—
Forfeited		(11,887	)		115.15		(28,610	)		139.58
Options Outstanding, December 31, 2012		307,554		$	112.67		719,830		$	105.40
Exercised		(19,949	)		84.43		(24,292	)		79.42
Granted		215,230			129.03		—			—
Forfeited		(1,267	)		131.56		(4,012	)		127.56
Options Outstanding, December 31, 2013		501,568		$	120.77		691,526		$	106.19
Options Exercisable:
December 31, 2011		30,771		$	81.54		1,012,304		$	98.62
December 31, 2012		74,618		$	97.46		719,830		$	105.40
December 31, 2013		184,167		$	107.18		691,526		$	106.19

F-39

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Stock-Based Compensation Plans (Continued)

        The following summarizes the exercise prices and contractual lives of options outstanding as of December 31, 2013:

2009 Plan Number of Options	Range—Exercise Price	Weighted Average Remaining Contractual Term (in years)
53,836	$70.00 - $79.99		6.1
124,414	110.00 - 119.99		7.1
75,059	120.00 - 129.99		9.2
246,760	130.00 - 139.99		8.6
1,499	140.00 - 149.99		8.5
501,568

1994 Plan Number of Options	Range—Exercise Price	Weighted Average Remaining Contractual Term (in years)
88,323	$40.00 - $49.99		3.5
41,556	60.00 - 69.99		1.1
730	70.00 - 79.99		1.5
104,013	80.00 - 89.99		4.1
174,323	90.00 - 99.99		2.1
282,581	140.00 - 149.99		3.1
691,526

        Options outstanding under the 2009 and 1994 Plans at December 31, 2013 had an intrinsic value of $2,669,000 and $15,424,000, respectively. Options exercisable under the 2009 and 1994 Plans at December 31, 2013 had an intrinsic value of $2,593,000 and $15,424,000, respectively. Options exercisable under the 2009 and 1994 Plans had a weighted average contractual life of 8.1 years and 3.1 years, respectively. The intrinsic value of options exercised during 2013, 2012 and 2011 was $2,395,000, $26,746,000 and $46,126,000, respectively.

        The cost related to stock-based employee compensation for employee stock options included in the determination of net income is based on estimated forfeitures for the given year. Estimated forfeitures are adjusted to reflect actual forfeitures at the end of the vesting period. The following table summarizes the weighted average fair value of employee stock options for the periods shown and the associated assumptions used to calculate the value:

	2013			2012			2011
Weighted average fair value per share	$	26.78		$	29.11		$	29.40
Life of options (in years)		5.0			5.0			7.0
Dividend yield		3.7	%		3.5	%		4.0	%
Volatility		34.00	%		35.00	%		35.00	%
Risk-free interest rate		0.91	%		0.87	%		3.04	%

        During 2013, the Company adopted a revised compensation framework under which share-based compensation will be granted, composed of annual awards and multiyear long term incentive

F-40

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Stock-Based Compensation Plans (Continued)

performance awards. Annual awards will include restricted stock awards for which one third of the award will vest annually over a three year period following the measurement period. Under the multiyear long term incentive component of the revised framework, the Company will grant a target number of restricted stock units, with the ultimate award determined by the total shareholder return of the Company's common stock and/or operating performance metrics, measured in each case over a three-year measurement period. The share-based compensation earned will be in the form of restricted stock, or upon election of the recipient, up to 25% in the form of stock options, for which one third of the award will vest annually over a three year period following the measurement period.

        At December 31, 2013 and 2012, the Company had 182,083 and 202,218, respectively, outstanding unvested shares granted under restricted stock awards. The Company issued 123,977 shares of restricted stock valued at $16,019,000 as part of its stock-based compensation plan during the year ended December 31, 2013. Restricted stock vesting during the year ended December 31, 2013 totaled 141,673 shares and had fair values at the grant date ranging from $48.60 to $149.05 per share. The total fair value of shares vested was $14,832,000, $36,337,000 and $35,029,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

        The Company granted 191,008 restricted stock units with an estimated aggregate compensation cost of $13,371,000, as part of its stock-based compensation plan during the year ended December 31, 2013. The Company used a Monte Carlo model to assess the compensation cost associated with the restricted stock units. The estimated compensation cost was derived using the following assumptions: baseline share value of $130.23; dividend yield of 3.3%; estimated volatility figures ranging from 17.0% to 21.0% over the life of the plan for the Company using 50% historical volatility and 50% implied volatility; and risk free rates over the life of the plan ranging from 0.09% to 0.46%; resulting in an average estimated fair value per restricted stock unit of $70.00.

        Total employee stock-based compensation cost recognized in income was $17,775,000, $9,961,000 and $9,721,000 for the years ended December 31, 2013, 2012 and 2011, respectively, and total capitalized stock-based compensation cost was $8,379,000, $5,140,000 and $5,284,000 for the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, there was a total of $2,674,000 and $7,889,000 in unrecognized compensation cost for unvested stock options and unvested restricted stock, respectively, which does not include estimated forfeitures. The unrecognized compensation cost for unvested stock options and restricted stock is expected to be recognized over a weighted average period of 1.8 and 2.5 years, respectively.

        The Company estimates the forfeiture of stock options and recognizes compensation cost net of the estimated forfeitures. The estimated forfeitures included in compensation cost are adjusted to reflect actual forfeitures at the end of the vesting period. The forfeiture rate at December 31, 2013 was 1.4%. The application of estimated forfeitures did not materially impact compensation expense for the years ended December 31, 2013, 2012 or 2011.

Employee Stock Purchase Plan

        In October 1996, the Company adopted the 1996 Non-Qualified Employee Stock Purchase Plan (as amended, the "ESPP"). Initially 1,000,000 shares of common stock were reserved for issuance under this plan. There are currently 724,675 shares remaining available for issuance under the ESPP. Full-time employees of the Company generally are eligible to participate in the ESPP if, as of the last day of the applicable election period, they have been employed by the Company for at least one month. All other

F-41

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Stock-Based Compensation Plans (Continued)

employees of the Company are eligible to participate provided that, as of the applicable election period, they have been employed by the Company for 12 months. Under the ESPP, eligible employees are permitted to acquire shares of the Company's common stock through payroll deductions, subject to maximum purchase limitations. During 2013, the purchase period was a period of seven months beginning April 1 and ending October 30. The Company modified the ESPP beginning in 2014, establishing two purchase periods of approximately six months each. The first purchase period begins January 1 and ends June 10, and the second purchase period begins July 1 and ends December 10. The purchase price for common stock purchased under the plan is 85% of the lesser of the fair market value of the Company's common stock on the first day of the applicable purchase period or the last day of the applicable purchase period. The offering dates, purchase dates and duration of purchase periods may be changed, if the change is announced prior to the beginning of the affected date or purchase period. The Company issued 9,260, 6,260 and 6,972 shares and recognized compensation expense of $174,000, $127,000 and $216,000 under the ESPP for the years ended December 31, 2013, 2012 and 2011, respectively. The Company accounts for transactions under the ESPP using the fair value method prescribed by accounting guidance applicable to entities that use employee share purchase plans.

11. Fair Value

Financial Instruments Carried at Fair Value

Derivative Financial Instruments

        Currently, the Company uses interest rate cap agreements to manage its interest rate risk. These instruments are carried at fair value in the Company's financial statements. In adjusting the fair value of its derivative contracts for the effect of counterparty nonperformance risk, the Company has considered the impact of its net position with a given counterparty, as well as any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group. As part of its on-going control procedures, the Company monitors the credit ratings of counterparties and the exposure of the Company to any single entity, thus reducing credit risk concentration. The Company believes the likelihood of realizing losses from counterparty nonperformance is remote. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of December 31, 2013, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined it is not significant. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.

        Hedge ineffectiveness did not have a material impact on earnings of the Company for 2013 or any prior period, and the Company does not anticipate that it will have a material effect in the future.

F-42

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Fair Value (Continued)

        The following table summarizes the consolidated Hedging Derivatives at December 31, 2013, excluding derivatives executed to hedge debt on communities classified as held for sale (dollars in thousands):

	Non-designated Hedges			Cash Flow Hedges
	Interest Rate Caps			Interest Rate Caps
Notional balance	$	611,395		$	134,132
Weighted average interest rate(1)		1.8	%		2.5	%
Weighted average capped interest rate		5.9	%		4.9	%
Earliest maturity date		Mar-14			Apr-15
Latest maturity date		Aug-18			Jun-15

(1)

For interest rate caps, this represents the weighted average interest rate on the debt.

        Excluding derivatives executed to hedge secured debt on communities classified as held for sale, the Company had three derivatives designated as cash flow hedges and 14 derivatives not designated as hedges at December 31, 2013. Other than the fair value change associated with the forward interest rate protection agreement discussed below, fair value changes for derivatives not in qualifying hedge relationships for years ended December 31, 2013, 2012 and 2011, were not material. To adjust the Hedging Derivatives in qualifying cash flow hedges to their fair value and recognize the impact of hedge accounting, the Company recorded a decrease to other comprehensive loss of $5,892,000 during the year ended December 31, 2013 and recorded an increase in other comprehensive loss of $22,876,000 and $85,845,000 during the years ended December 31, 2012 and 2011, respectively. The Company reclassified $59,376,000 of deferred losses from accumulated other comprehensive income as a change to earnings, for the year ended December 31, 2013, primarily associated with the forward interest rate protection agreement discussed below. The Company anticipates reclassifying approximately $5,493,000 of hedging losses from accumulated other comprehensive income into earnings within the next 12 months to offset the variability of cash flows of the hedged item during this period. The Company did not have any derivatives designated as fair value hedges as of December 31, 2013 and 2012.

        The Company was party to a $215,000,000 forward interest rate protection agreement, which was entered into in 2011 to reduce the impact of variability in interest rates on a portion of its expected debt issuance activity in 2013. The Company settled this position at its maturity in May 2013 with a payment to the counterparty of $51,000,000, the fair value at the time of settlement. Based on changes in the Company's capital requirements for the year, the Company did not issue the anticipated debt for which this interest rate protection agreement was transacted. During the year ended December 31, 2013, the Company recognized the deferred loss of $53,484,000 for the forward interest rate protection agreement in Loss on interest rate contract on the accompanying Consolidated Statements of Comprehensive Income.

Redeemable Noncontrolling Interests

        The Company provided redemption options (the "Puts") that allow joint venture partners of the Company to require the Company to purchase their interests in the investment at a guaranteed minimum amount related to three ventures, two of which were assumed as part of the Archstone

F-43

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Fair Value (Continued)

Acquisition. The Puts are payable in cash. The Company determines the fair value of the Puts based on unobservable inputs considering the assumptions that market participants would make in pricing the obligations, applying a guaranteed rate of return to the joint venture partners' net capital contribution balances as of period end. Given the significance of the unobservable inputs, the valuations are classified in Level 3 of the fair value hierarchy.

        The Company issued units of limited partnership interest in DownREITs which provide the DownREIT limited partners the ability to present all or some of their units for redemption for cash as determined by the partnership agreement. Under the DownREIT agreements, for each limited partnership unit, the limited partner is entitled to receive cash in the amount equal to the fair value of the Company's common stock on or about the date of redemption. In lieu of cash redemption, the Company may elect to exchange such units for an equal number of shares of the Company's common stock. The limited partnership units in the DownREITs are valued using the market price of the Company's common stock, a Level 1 price under the fair value hierarchy.

Financial Instruments Not Carried at Fair Value

Cash and Cash Equivalents

        Cash and cash equivalent balances are held with various financial institutions, within principal protected accounts. The Company monitors credit ratings of these financial institutions and the concentration of cash and cash equivalent balances with any one financial institution and believes the likelihood of realizing material losses related to cash and cash equivalent balances is remote. Cash and cash equivalents are carried at their face amounts, which reasonably approximate their fair values.

Other Financial Instruments

        Rents receivable, accounts and construction payable and accrued expenses and other liabilities are carried at their face amounts, which reasonably approximate their fair values.

        The Company values its unsecured notes using quoted market prices, a Level 1 price within the fair value hierarchy. The Company values its notes payable and outstanding amounts under the Credit Facility using a discounted cash flow analysis on the expected cash flows of each instrument. This analysis reflects the contractual terms of the instrument, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The process also considers credit valuation adjustments to appropriately reflect the Company's nonperformance risk. The Company has concluded that the value of its notes payable and amounts outstanding under its credit facility are Level 2 prices as the majority of the inputs used to value its positions fall within Level 2 of the fair value hierarchy.

F-44

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Fair Value (Continued)

Financial Instruments Measured/Disclosed at Fair Value on a Recurring Basis

        The following table summarizes the classification between the three levels of the fair value hierarchy of the Company's financial instruments measured/disclosed at fair value on a recurring basis (dollars in thousands):

Description	Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	12-31-2013
Interest Rate Caps	$	106		$	—		$	106		$	—
Put(s)		(15,998	)		—			—			(15,998	)
DownREIT units		(887	)		(887	)		—			—
Indebtedness		(6,294,848	)		(2,657,143	)		(3,637,705	)		—
Total	$	(6,311,627	)	$	(2,658,030	)	$	(3,637,599	)	$	(15,998	)
	12-31-2012
Interest Rate Caps	$	19		$	—		$	19		$	—
Interest Rate Swaps		(53,484	)		—			(53,484	)		—
Put		(5,574	)		—			—			(5,574	)
DownREIT units		(1,017	)		(1,017	)		—			—
Indebtedness		(4,077,397	)		(2,102,927	)		(1,974,470	)		—
Total	$	(4,137,453	)	$	(2,103,944	)	$	(2,027,935	)	$	(5,574	)

12. Related Party Arrangements

Unconsolidated Entities

        The Company manages unconsolidated real estate entities for which it receives asset management, property management, development and redevelopment fee revenue. From these entities, the Company received fees of $11,502,000, $10,257,000 and $9,656,000 in the years ended December 31, 2013, 2012 and 2011, respectively. These fees are included in management, development and other fees on the accompanying Consolidated Statements of Comprehensive Income. In addition, the Company has outstanding receivables associated with its management role of $7,004,000 and $3,484,000 as of December 31, 2013 and 2012, respectively.

Director Compensation

        Directors of the Company who are also employees receive no additional compensation for their services as a director. Following each annual meeting of stockholders, non-employee directors receive (i) a number of shares of restricted stock (or deferred stock awards) having a value of $125,000 and (ii) a cash payment of $60,000, payable in quarterly installments of $15,000. The number of shares of restricted stock (or deferred stock awards) is calculated based on the closing price on the day of the award. Non-employee directors may elect to receive all or a portion of cash payments in the form of a deferred stock award. In addition, the Lead Independent Director receives an annual fee of $30,000 payable in equal quarterly installments of $7,500.

F-45

AVALONBAY COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Related Party Arrangements (Continued)

        The Company recorded non-employee director compensation expense relating to restricted stock grants and deferred stock awards in the amount of $992,000, $880,000, and $778,000 for the years ended December 31, 2013, 2012 and 2011, respectively, as a component of general and administrative expense. Deferred compensation relating to these restricted stock grants and deferred stock awards was $417,000 and $364,000 on December 31, 2013 and December 31, 2012, respectively.

13. Quarterly Financial Information

        The following summary represents the quarterly results of operations for the years ended December 31, 2013 and 2012 (dollars in thousands, except per share amounts):

	For the three months ended(2)
	3-31-13			6-30-13		9-30-13			12-31-13
Total revenue(1)	$	301,356		$	378,207	$	389,189		$	394,169
Income (loss) from continuing operations(1)	$	(14,767	)	$	334	$	(15,949	)	$	88,209
Total discontinued operations(1)	$	90,237		$	35,763	$	5,063		$	163,881
Net income (loss) attributable to common stockholders	$	75,427		$	36,218	$	(10,715	)	$	252,212
Net income (loss) per common share—basic	$	0.63		$	0.28	$	(0.08	)	$	1.95
Net income (loss) per common share—diluted	$	0.63		$	0.28	$	(0.08	)	$	1.95

	For the three months ended(2)
	3-31-12		6-30-12		9-30-12		12-31-12
Total revenue(1)	$	236,788	$	244,697	$	257,568	$	261,574
Income from continuing operations(1)	$	50,380	$	54,975	$	80,715	$	64,361
Total discontinued operations(1)	$	7,229	$	101,846	$	6,033	$	58,023
Net income attributable to common stockholders	$	57,758	$	156,909	$	86,844	$	122,356
Net income per common share—basic	$	0.61	$	1.64	$	0.89	$	1.19
Net income per common share—diluted	$	0.60	$	1.63	$	0.89	$	1.19

(1)

Amounts may not equal previously reported results due to reclassification between income from continuing operations and income from discontinued operations.

(2)

Amounts may not equal full year results due to rounding.

14. Subsequent Events

        The Company has evaluated subsequent events through the date on which this Form 10-K was filed, the date on which these financial statements were issued, and identified the items below for discussion.

        In February 2014, the Company sold Avalon Valley, located in Danbury, CT. Avalon Valley contains 268 homes and was sold for $53,325,000.

        On February 18, 2014, Lehman announced that it had sold all of the shares of the Company's common stock it received as consideration for the Archstone Acquisition. Lehman received all of the net proceeds from the sale of its shares of the Company's common stock, and Lehman's sale of such shares did not impact the total number of the Company's shares of common stock outstanding.

F-46

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon Fremont	Fremont, CA	$	10,746	$	43,399	$	4,989	$	10,746	$	48,388	$	59,134	$	26,226	$	32,908	$	—		1994
Eaves Dublin	Dublin, CA		5,276		19,642		4,657		5,276		24,299		29,575		13,221		16,354		—		1989/1997
Avalon Campbell	Campbell, CA		11,830		47,828		13,115		11,830		60,943		72,773		26,380		46,393		38,800		1995
Eaves Daly City	Daly City, CA		4,230		9,659		18,619		4,230		28,278		32,508		13,771		18,737		—		1972/1997
AVA Nob Hill	San Francisco, CA		5,403		21,567		6,887		5,403		28,454		33,857		13,017		20,840		20,800		1990/1995
Eaves San Jose	San Jose, CA		12,920		53,047		18,824		12,920		71,871		84,791		26,152		58,639		—		1985/1996
Eaves San Rafael	San Rafael, CA		5,982		16,885		24,021		5,982		40,906		46,888		16,644		30,244		—		1973/1996
Eaves Pleasanton	Pleasanton, CA		11,610		46,552		21,254		11,610		67,806		79,416		31,024		48,392		—		1988/1994
AVA Newport	Costa Mesa, CA		1,975		3,814		9,801		1,975		13,615		15,590		4,982		10,608		—		1956/1996
AVA Burbank	Burbank, CA		22,483		28,104		42,461		22,483		70,565		93,048		29,267		63,781		—		1961/1997
Avalon Mission Viejo	Mission Viejo, CA		2,517		9,257		2,486		2,517		11,743		14,260		6,776		7,484		7,635		1984/1996
Eaves South Coast	Costa Mesa, CA		4,709		16,063		12,769		4,709		28,832		33,541		12,855		20,686		—		1973/1996
Avalon at Mission Bay	San Diego, CA		9,922		40,580		17,630		9,922		58,210		68,132		30,126		38,006		—		1969/1997
Eaves Mission Ridge	San Diego, CA		2,710		10,924		11,191		2,710		22,115		24,825		11,438		13,387		—		1960/1997
Eaves Union City	Union City, CA		4,249		16,820		2,797		4,249		19,617		23,866		10,652		13,214		—		1973/1996
Avalon on the Alameda	San Jose, CA		6,119		50,225		1,620		6,119		51,845		57,964		26,168		31,796		52,278		1999
Eaves Foster City	Foster City, CA		7,852		31,445		11,208		7,852		42,653		50,505		19,676		30,829		—		1973/1994
Eaves Pacifica	Pacifica, CA		6,125		24,796		2,271		6,125		27,067		33,192		14,548		18,644		17,600		1971/1995
Avalon Sunset Towers	San Francisco, CA		3,561		21,321		14,834		3,561		36,155		39,716		14,941		24,775		—		1961/1996
Avalon Silicon Valley	Sunnyvale, CA		20,713		99,573		4,610		20,713		104,183		124,896		55,535		69,361		—		1997/1998
Avalon Woodland Hills	Woodland Hills, CA		23,828		40,372		46,931		23,828		87,303		111,131		33,347		77,784		—		1989/1997
Avalon Mountain View	Mountain View, CA		9,755		39,393		9,511		9,755		48,904		58,659		23,899		34,760		18,300		1986
Eaves Santa Margarita	Rancho Santa Margarita, CA		4,607		16,911		10,248		4,607		27,159		31,766		11,720		20,046		—		1990/1997
Eaves Diamond Heights	San Francisco, CA		4,726		19,130		5,790		4,726		24,920		29,646		12,155		17,491		—		1972/1994
Eaves Fremont	Fremont, CA		6,581		26,583		9,731		6,581		36,314		42,895		17,974		24,921		—		1985/1994
Eaves Creekside	Mountain View, CA		6,546		26,263		11,616		6,546		37,879		44,425		19,307		25,118		—		1962/1997
Eaves Warner Center	Woodland Hills, CA		7,045		12,986		9,187		7,045		22,173		29,218		12,142		17,076		—		1979/1998
Eaves Huntington Beach	Huntington Beach, CA		4,871		19,745		9,522		4,871		29,267		34,138		15,512		18,626		—		1971/1997
AVA Cortez Hill	San Diego, CA		2,768		20,134		23,465		2,768		43,599		46,367		17,309		29,058		—		1973/1998
Avalon at Cahill Park	San Jose, CA		4,765		47,600		919		4,765		48,519		53,284		19,093		34,191		—		2002
Avalon Towers on the Peninsula	Mountain View, CA		9,560		56,136		958		9,560		57,094		66,654		23,134		43,520		—		2002
Avalon at Mission Bay North	San Francisco, CA		14,029		78,452		1,924		14,029		80,376		94,405		30,224		64,181		70,959		2003

F-47

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon at Glendale	Burbank, CA		—		42,564		653		—		43,217		43,217		15,350		27,867		—		2003
Avalon Burbank	Burbank, CA		14,053		56,827		23,763		14,053		80,590		94,643		26,423		68,220		—		1988/2002
Avalon Camarillo	Camarillo, CA		8,446		40,290		86		8,446		40,376		48,822		10,901		37,921		—		2006
Avalon Wilshire	Los Angeles, CA		5,459		41,182		954		5,459		42,136		47,595		9,762		37,833		—		2007
Avalon Encino	Los Angeles, CA		12,789		49,073		380		12,789		49,453		62,242		9,036		53,206		—		2008
Avalon Warner Place	Canoga Park, CA		7,920		44,848		163		7,920		45,011		52,931		8,895		44,036		—		2007
Avalon Fashion Valley	San Diego, CA		19,627		44,972		285		19,627		45,257		64,884		8,208		56,676		—		2008
Avalon Anaheim Stadium	Anaheim, CA		27,874		69,156		596		27,874		69,752		97,626		11,824		85,802		—		2009
Avalon Union City	Union City, CA		14,732		104,025		232		14,732		104,257		118,989		16,046		102,943		—		2009
Avalon Irvine	Irvine, CA		9,911		67,524		66		9,911		67,590		77,501		10,104		67,397		—		2010
Avalon at Mission Bay III	San Francisco, CA		28,687		119,156		75		28,687		119,231		147,918		18,465		129,453		—		2009
Avalon Walnut Creek	Walnut Creek, CA		—		145,904		1,090		—		146,994		146,994		17,080		129,914		137,542		2010
Avalon Ocean Avenue	San Francisco, CA		5,544		50,868		1,740		5,544		52,608		58,152		2,916		55,236		—		2012
Eaves Phillips Ranch	Pomona, CA		9,796		41,740		59		9,796		41,799		51,595		4,023		47,572		—		1989/2011
Eaves San Dimas	San Dimas, CA		1,916		7,819		24		1,916		7,843		9,759		758		9,001		—		1978/2011
Eaves San Dimas Canyon	San Dimas, CA		2,953		12,428		180		2,953		12,608		15,561		1,201		14,360		—		1981/2011
Eaves San Marcos	San Marcos, CA		3,277		13,385		—		3,277		13,385		16,662		1,302		15,360		—		1988/2011
Eaves Rancho Penasquitos	San Diego, CA		6,692		27,143		37		6,692		27,180		33,872		2,585		31,287		—		1986/2011
Eaves Lake Forest	Lake Forest, CA		5,199		21,134		395		5,199		21,529		26,728		2,026		24,702		—		1975/2011
AVA Pasadena	Pasadena, CA		8,400		11,547		3,587		8,400		15,134		23,534		732		22,802		11,869		1973/2012
Eaves Cerritos	Artesia, CA		8,305		21,195		—		8,305		21,195		29,500		1,131		28,369		—		1973/2012
Avalon Del Rey	Los Angeles, CA		30,900		72,008		297		30,900		72,305		103,205		3,508		99,697		—		2006/2012
Eaves Walnut Creek	Walnut Creek, CA		29,650		83,045		4,219		29,650		87,264		116,914		6,611		110,303		—		1987/2013
Avalon Simi Valley	Simi Valley, CA		41,610		73,771		4,303		41,610		78,074		119,684		6,279		113,405		—		2007/2013
Eaves La Mesa	La Mesa, CA		6,950		31,022		1,097		6,950		32,119		39,069		1,897		37,172		—		1989/2013
Archstone Studio City II	Los Angeles, CA		4,626		22,954		943		4,626		23,897		28,523		1,641		26,882		—		1991/2013
Archstone Studio City III	Los Angeles, CA		15,756		78,178		3,260		15,756		81,438		97,194		5,590		91,604		—		2002/2013
Avalon Willow Glen	San Jose, CA		47,030		80,987		3,871		47,030		84,858		131,888		6,364		125,524		—		2002/2013
Avalon Calabasas	Calabasas, CA		35,450		114,912		6,156		35,450		121,068		156,518		9,147		147,371		101,724		1988/2013

F-48

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon Oak Creek	Agoura Hills, CA		34,560		88,954		4,084		34,560		93,038		127,598		6,535		121,063		85,288		2004/2013
Avalon Santa Monica on Main	Santa Monica, CA		31,980		60,790		2,966		31,980		63,756		95,736		4,654		91,082		—		2007/2013
Avalon Del Mar Station	Pasadena, CA		20,560		106,556		3,065		20,560		109,621		130,181		6,024		124,157		76,471		2006/2013
Archstone La Jolla Colony	San Diego, CA		17,150		27,304		1,640		17,150		28,944		46,094		2,528		43,566		27,176		1987/2013
Eaves Old Town Pasadena	Pasadena, CA		8,930		15,551		987		8,930		16,538		25,468		1,441		24,027		15,669		1972/2013
Eaves Thousand Oaks	Thousand Oaks, CA		14,500		19,661		1,674		14,500		21,335		35,835		2,313		33,522		27,411		1992/2013
Avalon Walnut Ridge I	Walnut Creek, CA		10,040		19,670		820		10,040		20,490		30,530		1,415		29,115		20,754		2000/2013
Eaves Los Feliz	Los Feliz, CA		18,940		43,661		2,672		18,940		46,333		65,273		3,880		61,393		43,258		1989/2013
Eaves West Valley	San Jose, CA		91,710		112,808		6,755		91,710		119,563		211,273		10,264		201,009		83,087		1970/2013
Eaves Seal Beach	Huntington Beach, CA		46,310		100,479		4,294		46,310		104,773		151,083		7,336		143,747		86,167		1971/2013
Oakwood Toluca Hills	Los Angeles, CA		89,450		157,256		9,610		89,450		166,866		256,316		13,883		242,433		167,595		1973/2013
Eaves Woodland Hills	Woodland Hills, CA		69,400		90,089		6,940		69,400		97,029		166,429		9,504		156,925		104,694		1970/2013
Eaves Mountain View at Middlefield	Mountain View, CA		65,960		67,128		4,541		65,960		71,669		137,629		6,760		130,869		72,374		1969/2013
Avalon Thousand Oaks Plaza	Thousand Oaks, CA		13,010		22,381		1,640		13,010		24,021		37,031		2,304		34,727		28,742		2002/2013
Archstone San Bruno	San Bruno, CA		37,890		71,574		2,756		37,890		74,330		112,220		4,764		107,456		64,450		2004/2013
Archstone San Bruno II	San Bruno, CA		23,787		44,934		1,676		23,787		46,610		70,397		2,991		67,406		31,398		2007/2013
Archstone San Bruno III	San Bruno, CA		33,303		62,910		2,354		33,303		65,264		98,567		4,187		94,380		56,210		2010/2013
Avalon Walnut Ridge II	Walnut Creek, CA		27,190		57,041		3,194		27,190		60,235		87,425		4,922		82,503		—		1989/2013
Avalon Pasadena	Pasadena, CA		9,980		31,818		1,527		9,980		33,345		43,325		2,390		40,935		28,079		2004/2013
Archstone Studio City	Los Angeles, CA		18,178		90,195		3,849		18,178		94,044		112,222		6,447		105,775		—		1987/2013
The Springs (1)	Corona, CA		5,724		23,433		890		5,724		24,323		30,047		3,013		27,034		—		1987/2006
Eaves Trumbull	Trumbull, CT		4,414		31,268		2,860		4,414		34,128		38,542		19,422		19,120		40,018		1997
Eaves Stamford	Stamford, CT		5,956		23,993		11,366		5,956		35,359		41,315		18,636		22,679		—		1991
Avalon Wilton I	Wilton, CT		2,116		14,664		5,763		2,116		20,427		22,543		9,113		13,430		—		1997
Avalon Valley	Danbury, CT		2,277		23,561		863		2,277		24,424		26,701		12,210		14,491		—		1999
Avalon on Stamford Harbor	Stamford, CT		10,836		51,883		1,020		10,836		52,903		63,739		20,938		42,801		63,624		2003
Avalon New Canaan	New Canaan, CT		4,834		19,485		535		4,834		20,020		24,854		7,960		16,894		—		2002
Avalon at Greyrock Place	Stamford, CT		13,819		56,499		1,949		13,819		58,448		72,267		22,691		49,576		58,385		2002

F-49

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon Danbury	Danbury, CT		4,933		30,638		553		4,933		31,191		36,124		9,251		26,873		—		2005
Avalon Darien	Darien, CT		6,926		34,659		1,410		6,926		36,069		42,995		12,348		30,647		48,484		2004
Avalon Milford I	Milford, CT		8,746		22,699		577		8,746		23,276		32,022		7,662		24,360		—		2004
Avalon Norwalk	Norwalk, CT		11,320		62,910		24		11,320		62,934		74,254		7,142		67,112		—		2011
Avalon Huntington	Shelton, CT		5,277		20,029		100		5,277		20,129		25,406		3,674		21,732		—		2008
Avalon Wilton II	Wilton, CT		6,604		23,766		6		6,604		23,772		30,376		2,140		28,236		—		2011
Avalon at Foxhall	Washington, DC		6,848		27,614		11,357		6,848		38,971		45,819		23,539		22,280		57,150		1982
Avalon at Gallery Place	Washington, DC		8,800		39,658		660		8,800		40,318		49,118		15,057		34,061		44,405		2003
The Albemarle	Washington, DC		25,180		52,419		3,523		25,180		55,942		81,122		5,009		76,113		—		1966/2013
Eaves Tunlaw Gardens	Washington, DC		16,430		22,902		1,747		16,430		24,649		41,079		2,369		38,710		28,844		1944/2013
The Statesman	Washington, DC		38,140		35,352		3,396		38,140		38,748		76,888		4,505		72,383		—		1961/2013
Eaves Glover Park	Washington, DC		9,580		26,532		1,598		9,580		28,130		37,710		2,376		35,334		23,858		1978/2013
The Consulate	Washington, DC		22,960		58,621		3,133		22,960		61,754		84,714		4,755		79,959		—		1978/2013
Avalon at Lexington	Lexington, MA		2,124		12,599		9,082		2,124		21,681		23,805		10,620		13,185		—		1994
Avalon Oaks	Wilmington, MA		2,129		18,676		1,870		2,129		20,546		22,675		10,271		12,404		16,094		1999
Eaves Quincy	Quincy, MA		1,743		14,662		9,073		1,743		23,735		25,478		10,954		14,524		—		1986/1996
Avalon Essex	Peabody, MA		5,184		16,320		1,671		5,184		17,991		23,175		8,553		14,622		—		2000
Avalon Oaks West	Wilmington, MA		3,318		13,467		575		3,318		14,042		17,360		5,857		11,503		16,032		2002
Avalon Orchards	Marlborough, MA		2,983		18,037		1,752		2,983		19,789		22,772		7,982		14,790		17,530		2002
Avalon at Newton Highlands	Newton, MA		11,039		45,590		3,270		11,039		48,860		59,899		17,462		42,437		—		2003
Avalon at The Pinehills	Plymouth, MA		6,876		30,401		136		6,876		30,537		37,413		6,765		30,648		—		2004/2011
Eaves Peabody	Peabody, MA		4,645		19,007		11,781		4,645		30,788		35,433		8,628		26,805		—		2004
Avalon at Bedford Center	Bedford, MA		4,258		20,569		213		4,258		20,782		25,040		5,922		19,118		—		2005
Avalon Chestnut Hill	Chestnut Hill, MA		14,572		45,911		1,277		14,572		47,188		61,760		11,971		49,789		39,979		2007
Avalon Shrewsbury	Shrewsbury, MA		5,152		30,608		544		5,152		31,152		36,304		7,982		28,322		20,464		2007
Avalon Danvers	Danvers, MA		7,010		76,904		725		7,010		77,629		84,639		17,168		67,471		—		2006
Avalon at Lexington Hills	Lexington, MA		8,691		79,153		393		8,691		79,546		88,237		16,581		71,656		—		2007
Avalon Acton	Acton, MA		13,124		49,935		126		13,124		50,061		63,185		10,274		52,911		45,000		2007
Avalon at Hingham Shipyard	Hingham, MA		12,218		41,591		131		12,218		41,722		53,940		7,548		46,392		—		2009
Avalon Sharon	Sharon, MA		4,719		25,522		216		4,719		25,738		30,457		5,074		25,383		—		2007
Avalon Northborough	Northborough, MA		8,144		52,454		16		8,144		52,470		60,614		7,277		53,337		—		2009/2010
Avalon Blue Hills	Randolph, MA		11,110		34,736		62		11,110		34,798		45,908		5,587		40,321		—		2009
Avalon Cohasset	Cohasset, MA		8,802		46,162		16		8,802		46,178		54,980		3,254		51,726		—		2012
Avalon Andover	Andover, MA		4,276		21,783		—		4,276		21,783		26,059		1,303		24,756		14,821		2012

F-50

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost							Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction			Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon at Prudential Center III	Boston, MA		9,034		36,540		29,873			9,034		66,413		75,447		23,974		51,473		—		1968/1998
Avalon at Prudential Center II	Boston, MA		8,776		35,496		17,813			8,776		53,309		62,085		23,197		38,888		—		1968/1998
Avalon at Prudential Center I	Boston, MA		8,002		32,370		16,241			8,002		48,611		56,613		21,150		35,463		—		1968/1998
Eaves Burlington	Burlington, MA		7,714		32,536		71			7,714		32,607		40,321		1,185		39,136		—		1988/2012
Avalon Burlington	Burlington, MA		15,600		62,100		2,150			15,600		64,250		79,850		153		79,697		—		1989/2013
Avalon Bear Hill	Waltham, MA		29,660		93,659		5,725			29,660		99,384		129,044		7,305		121,739		—		1999/2013
Eaves North Quincy	Quincy, MA		12,120		39,220		2,232			12,120		41,452		53,572		3,379		50,193		37,212		1977/2013
Avalon at Fairway Hills	Columbia, MD		8,603		34,432		15,842			8,603		50,274		58,877		26,655		32,222		—		1987/1996
Eaves Washingtonian Center I	Gaithersburg, MD		2,608		11,707		531			2,608		12,238		14,846		7,468		7,378		8,401		1996
Eaves Washingtonian Center II	Gaithersburg, MD		1,439		6,846		139			1,439		6,985		8,424		3,731		4,693		—		1998
Eaves Columbia Town Center	Columbia, MD		8,802		35,536		11,426			8,802		46,962		55,764		14,663		41,101		—		1986
Avalon at Grosvenor Station	North Bethesda, MD		29,159		53,001		1,765			29,159		54,766		83,925		18,996		64,929		—		2004
Avalon at Traville	North Potomac, MD		14,365		55,398		620			14,365		56,018		70,383		19,502		50,881		75,251		2004
Avalon Russett	Laurel, MD		10,800		46,924		2,491			10,800		49,415		60,215		3,862		56,353		39,972		1999/2013
Avalon Cove	Jersey City, NJ		8,760		82,422		20,320			8,760		102,742		111,502		50,429		61,073		—		1997
Avalon Run	Lawrenceville, NJ		14,650		60,486		2,494			14,650		62,980		77,630		21,656		55,974		—		1994/1996
Avalon Princeton Junction	West Windsor, NJ		5,585		22,382		20,617			5,585		42,999		48,584		19,856		28,728		—		1988
Avalon at Edgewater	Edgewater, NJ		14,528		60,240		4,000			14,528		64,240		78,768		26,363		52,405		76,088		2002
Avalon at Florham Park	Florham Park, NJ		6,647		34,906		1,907			6,647		36,813		43,460		16,539		26,921		—		2001
Avalon at Freehold	Freehold, NJ		4,119		30,514		662			4,119		31,176		35,295		12,879		22,416		35,475		2002
Avalon Run East	Lawrenceville, NJ		6,766		45,366		602			6,766		45,968		52,734		14,710		38,024		38,013		2003
Avalon Lyndhurst	Lyndhurst, NJ		18,620		59,879		523			18,620		60,402		79,022		14,629		64,393		—		2006
Avalon at Tinton Falls	Tinton Falls, NJ		7,939		33,173		49			7,939		33,222		41,161		6,545		34,616		—		2007
Avalon West Long Branch	West Long Branch, NJ		2,721		22,940		(1	)		2,721		22,939		25,660		2,625		23,035		—		2011
Avalon North Bergen	North Bergen, NJ		8,984		30,953		235			8,984		31,188		40,172		1,671		38,501		—		2012

F-51

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon at Wesmont Station	Wood-Ridge, NJ		14,682		41,616		1,161		14,682		42,777		57,459		2,450		55,009		—		2012
Avalon Commons	Smithtown, NY		4,679		28,286		5,660		4,679		33,946		38,625		17,351		21,274		—		1997
Eaves Nanuet	Nanuet, NY		8,428		45,660		3,280		8,428		48,940		57,368		26,480		30,888		64,149		1998
Avalon Green	Elmsford, NY		1,820		10,525		1,403		1,820		11,928		13,748		7,558		6,190		—		1995
Avalon Towers	Long Beach, NY		3,118		11,973		6,614		3,118		18,587		21,705		10,753		10,952		—		1990/1995
Avalon Willow	Mamaroneck, NY		6,207		40,791		1,327		6,207		42,118		48,325		20,381		27,944		—		2000
Avalon Court	Melville, NY		9,228		50,063		2,690		9,228		52,753		61,981		26,781		35,200		—		1997/2000
The Avalon	Bronxville, NY		2,889		28,324		7,948		2,889		36,272		39,161		14,572		24,589		—		1999
Avalon Riverview I	Long Island City, NY		—		94,061		3,593		—		97,654		97,654		38,010		59,644		—		2002
Avalon at Glen Cove	Glen Cove, NY		7,871		59,969		993		7,871		60,962		68,833		19,855		48,978		—		2004
Avalon Pines	Coram, NY		8,700		62,931		351		8,700		63,282		71,982		18,703		53,279		—		2005/2006
Avalon Bowery Place	New York, NY		18,575		75,009		1,739		18,575		76,748		95,323		19,439		75,884		93,800		2006
Avalon at Glen Cove North	Glen Cove, NY		2,577		37,336		167		2,577		37,503		40,080		8,726		31,354		—		2007
Avalon Riverview North	Long Island City, NY		—		166,856		2,151		—		169,007		169,007		36,401		132,606		—		2007
Avalon Bowery Place II	New York, NY		9,106		47,199		1,384		9,106		48,583		57,689		10,120		47,569		—		2007
Avalon White Plains	White Plains, NY		15,391		137,353		11		15,391		137,364		152,755		22,593		130,162		—		2009
Avalon Morningside Park	New York, NY		—		114,327		787		—		115,114		115,114		20,490		94,624		100,000		2009
Avalon Charles Pond	Coram, NY		14,715		33,640		28		14,715		33,668		48,383		5,606		42,777		—		2009
Avalon Fort Greene	Brooklyn, NY		83,038		218,444		642		83,038		219,086		302,124		27,435		274,689		—		2010
Avalon Rockville Centre	Rockville Centre, NY		32,212		78,622		—		32,212		78,622		110,834		5,587		105,247		—		2012
Avalon Green II	Elmsford, NY		27,724		76,825		—		27,724		76,825		104,549		4,596		99,953		—		2012
Avalon Westbury	Westbury, NY		69,620		43,781		5,809		69,620		49,590		119,210		7,036		112,174		83,460		2006/2013
Avalon Midtown West	New York, NY		154,740		180,243		11,788		154,740		192,031		346,771		16,875		329,896		100,500		1998/2013
Avalon Clinton North	New York, NY		84,058		105,831		5,971		84,058		111,802		195,860		8,969		186,891		147,000		2008/2013
Avalon Clinton South	New York, NY		71,412		89,860		5,167		71,412		95,027		166,439		7,698		158,741		121,500		2007/2013
Oakwood Philadelphia	Philadelphia, PA		3,100		22,342		793		3,100		23,135		26,235		1,313		24,922		10,427		1945/2013

F-52

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon at Center Place	Providence, RI		—		26,816		10,230		—		37,046		37,046		18,410		18,636		—		1991/1997
Archstone Lexington	Flower Mound, TX		5,050		25,436		1,622		5,050		27,058		32,108		2,501		29,607		16,780		2000/2013
Archstone Memorial Heights	Houston, TX		37,070		45,981		4,300		37,070		50,281		87,351		5,680		81,671		—		1996/2013
Eaves Fair Lakes	Fairfax, VA		6,096		24,400		8,036		6,096		32,436		38,532		16,615		21,917		—		1989/1996
AVA Ballston	Arlington, VA		7,291		29,177		16,117		7,291		45,294		52,585		22,558		30,027		—		1990
Eaves Fairfax City	Fairfax, VA		2,152		8,907		5,390		2,152		14,297		16,449		6,068		10,381		—		1988/1997
Avalon Crescent	McLean, VA		13,851		43,397		1,455		13,851		44,852		58,703		25,130		33,573		—		1996
Avalon at Arlington Square	Arlington, VA		22,041		90,296		2,493		22,041		92,789		114,830		39,615		75,215		—		2001
Fairfax Towers	Falls Church, VA		17,889		74,727		639		17,889		75,366		93,255		6,979		86,276		—		1978/2011
Avalon Ballston Place	Arlington, VA		38,530		123,605		3,647		38,530		127,252		165,782		7,218		158,564		—		2001/2013
Eaves Tysons Corner	Vienna, VA		13,690		47,760		2,240		13,690		50,000		63,690		3,615		60,075		—		1980/2013
Archstone Ballston Square	Arlington, VA		71,720		215,857		9,506		71,720		225,363		297,083		15,924		281,159		—		1992/2013
Archstone Courthouse Place	Arlington, VA		56,630		177,952		7,799		56,630		185,751		242,381		12,795		229,586		140,332		1999/2013
Avalon Reston Landing	Reston, VA		28,280		81,514		4,127		28,280		85,641		113,921		6,640		107,281		—		2000/2013
Oakwood Arlington	Arlington, VA		18,930		38,465		1,840		18,930		40,305		59,235		2,980		56,255		42,703		1987/2013
Avalon Redmond Place	Redmond, WA		4,558		18,368		9,593		4,558		27,961		32,519		13,534		18,985		—		1991/1997
Avalon at Bear Creek	Redmond, WA		6,786		27,641		3,295		6,786		30,936		37,722		16,170		21,552		—		1998
Avalon Bellevue	Bellevue, WA		6,664		24,119		1,633		6,664		25,752		32,416		11,190		21,226		25,856		2001
Avalon RockMeadow	Bothell, WA		4,777		19,765		1,651		4,777		21,416		26,193		9,806		16,387		—		2000
Avalon ParcSquare	Redmond, WA		3,789		15,139		2,343		3,789		17,482		21,271		7,900		13,371		—		2000
Avalon Brandemoor	Lynwood, WA		8,608		36,679		1,615		8,608		38,294		46,902		16,740		30,162		—		2001
AVA Belltown	Seattle, WA		5,644		12,733		821		5,644		13,554		19,198		5,805		13,393		—		2001
Avalon Meydenbauer	Bellevue, WA		12,697		77,451		1,191		12,697		78,642		91,339		15,319		76,020		—		2008
Avalon Towers Bellevue	Bellevue, WA		—		123,020		247		—		123,267		123,267		14,551		108,716		—		2011
AVA Queen Anne	Seattle, WA		12,081		41,699		5		12,081		41,704		53,785		2,802		50,983		—		2012
Avalon Brandemoor II	Lynwood, WA		2,655		11,343		—		2,655		11,343		13,998		1,021		12,977		—		2011
Eaves Redmond Campus	Redmond, WA		24,370		86,211		4,042		24,370		90,253		114,623		6,901		107,722		—		1991/2013
Archstone Redmond Lakeview	Redmond, WA		10,580		26,512		1,368		10,580		27,880		38,460		2,227		36,233		—		1987/2013
		$	3,082,550	$	9,848,158	$	944,689	$	3,082,550	$	10,792,847	$	13,875,397	$	2,449,999	$	11,425,398	$	3,287,937

F-53

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Development Communities
Avalon Irvine II	Irvine, CA	$	4,358	$	40,871	$	—	$	4,358	$	40,871	$	45,229	$	1,301	$	43,928	$	—		N/A
AVA Little Tokyo	Los Angeles, CA		—		198		62,040		—		62,238		62,238		—		62,238		—		N/A
Avalon Dublin Station II	Dublin, CA		—		753		73,346		—		74,099		74,099		—		74,099		—		N/A
AVA 55 Ninth	San Francisco, CA		—		1,183		99,675		—		100,858		100,858		—		100,858		—		N/A
Avalon Morrison Park	San Jose, CA		—		760		67,683		—		68,443		68,443		—		68,443		—		N/A
Avalon San Dimas	San Dimas, CA		—		—		18,729		—		18,729		18,729		—		18,729		—		N/A
Avalon Hayes Valley	San Francisco, CA		—		113		38,939		—		39,052		39,052		—		39,052		—		N/A
Avalon Glendora	Glendora, CA		—		53		22,999		—		23,052		23,052		—		23,052		—		N/A
Avalon Vista	Vista, CA		—		—		15,349		—		15,349		15,349		—		15,349		—		N/A
Avalon Baker Ranch	Lake Forest, CA		—		—		34,803		—		34,803		34,803		—		34,803		—		N/A
Avalon Berkeley	Berkeley, CA		—		167		22,929		—		23,096		23,096		—		23,096		—		N/A
Eaves West Valley II	San Jose, CA		—		17,291		—		—		17,291		17,291		114		17,177		—		N/A
Avalon Shelton	Shelton, CT		7,779		40,406		—		7,779		40,406		48,185		770		47,415		—		N/A
Avalon East Norwalk	Norwalk, CT		10,224		35,864		1		10,224		35,865		46,089		292		45,797		—		N/A
Avalon at Stratford	Stratford, CT		—		28		13,370		—		13,398		13,398		—		13,398		—		N/A
AVA H Street	Washington, DC		7,412		25,481		—		7,412		25,481		32,893		811		32,082		—		N/A
Archstone First & M	Washington, DC		51,000		146,650		2,387		51,000		149,037		200,037		6,655		193,382		142,061		N/A
Avalon Exeter	Boston, MA		—		980		94,599		—		95,579		95,579		—		95,579		—		N/A
Avalon Natick	Natick, MA		15,637		63,487		—		15,637		63,487		79,124		1,084		78,040		—		N/A
Avalon/AVA Assembly Row	Somerville, MA		—		457		99,423		—		99,880		99,880		—		99,880		—		N/A
AVA Stuart Street	Boston, MA		—		—		52,037		—		52,037		52,037		—		52,037		—		N/A
Avalon Canton	Canton, MA		—		90		20,548		—		20,638		20,638		—		20,638		—		N/A
Avalon Hackensack	Hackensack, NJ		—		44,270		—		—		44,270		44,270		675		43,595		—		N/A
Avalon Somerset	Somerset, NJ		18,241		57,652		1		18,241		57,653		75,894		1,230		74,664		—		N/A
Avalon at Wesmont Station II	Wood-Ridge, NJ		6,502		16,309		—		6,502		16,309		22,811		348		22,463		—		N/A
Avalon Bloomingdale	Bloomingsdale, NJ		1,801		17,616		9,414		1,801		27,030		28,831		105		28,726		—		N/A
Avalon Wharton	Wharton, NJ		—		28		20,505		—		20,533		20,533		—		20,533		—		N/A
Avalon Bloomfield Station	Bloomfield, NJ		—		33		12,299		—		12,332		12,332		—		12,332		—		N/A
Avalon West Chelsea/AVA High Line	New York, NY		—		2,502		226,448		—		228,950		228,950		—		228,950		—		N/A

F-54

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

		Initial Cost						Total Cost
Community	City and state	Land		Building / Construction in Progress & Improvements		Costs Subsequent to Acquisition / Construction		Land		Building / Construction in Progress & Improvements		Total		Accumulated Depreciation		Total Cost, Net of Accumulated Depreciation		Encumbrances		Year of Completion/ Acquisition
Avalon Garden City	Garden City, NY		18,200		49,283		—		18,200		49,283		67,483		2,241		65,242		—		N/A
Avalon Ossining	Ossining, NY		—		64		24,704		—		24,768		24,768		—		24,768		—		N/A
Avalon Huntington Station	Huntington Station, NY		—		302		48,619		—		48,921		48,921		—		48,921		—		N/A
Avalon Willoughby Square/AVA DoBro	Brooklyn, NY		—		19		172,253		—		172,272		172,272		—		172,272		—		N/A
Archstone Toscano	Houston, TX		11,515		53,802		21,102		11,515		74,904		86,419		943		85,476		—		N/A
Archstone Memorial Heights Phase 1	Houston, TX		—		333		35,587		—		35,920		35,920		—		35,920		—		N/A
Avalon Park Crest	Tysons Corner, VA		13,554		63,488		—		13,554		63,488		77,042		2,543		74,499		—		N/A
Avalon Mosaic	Tysons Corner, VA		9,727		25,746		74,837		9,727		100,583		110,310		155		110,155		—		N/A
Avalon Arlington North	Arlington, VA		—		940		68,584		—		69,524		69,524		—		69,524		—		N/A
AVA Ballard	Seattle, WA		16,460		46,661		—		16,460		46,661		63,121		1,060		62,061		—		N/A
AVA University District	Seattle, WA		5,476		27,512		35,652		5,476		63,164		68,640		183		68,457		—		N/A
Avalon Alderwood I	Lynnwood, WA		—		89		31,199		—		31,288		31,288		—		31,288		—		N/A
			197,886		781,481		1,520,061		197,886		2,301,542		2,499,428		20,510		2,478,918		142,061
Land held for development			300,364		—		—		300,364		—		300,364		—		300,364		—
Corporate overhead			37,362		21,323		66,447		37,362		87,770		125,132		45,603		79,529		2,600,000
		$	3,618,162	$	10,650,962	$	2,531,197	$	3,618,162	$	13,182,159	$	16,800,321	$	2,516,112	$	14,284,209	$	6,029,998

(1)

This community is a Fund asset which the Company consolidated beginning in 2011.

F-55

AVALONBAY COMMUNITIES, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

December 31, 2013

(Dollars in thousands)

        Amounts include real estate assets held for sale.

        Depreciation of AvalonBay Communities, Inc. building, improvements, upgrades and furniture, fixtures and equipment (FF&E) is calculated over the following useful lives, on a straight line basis:

        Building—30 years
Improvements, upgrades and FF&E—not to exceed 7 years

        The aggregate cost of total real estate for federal income tax purposes was approximately $16,521,643 at December 31, 2013.

        The changes in total real estate assets for the years ended December 31, 2013, 2012 and 2011 are as follows:

	Years ended December 31,
	2013			2012			2011
Balance, beginning of period	$	10,071,342		$	9,288,496		$	8,661,211
Acquisitions, construction costs and improvements		7,157,639			934,936			864,439
Dispositions, including impairment loss on planned dispositions		(428,660	)		(152,089	)		(237,154	)
Balance, end of period	$	16,800,321		$	10,071,342		$	9,288,496

        The changes in accumulated depreciation for the years ended December 31, 2013, 2012 and 2011, are as follows:

	Years ended December 31,
	2013			2012			2011
Balance, beginning of period	$	2,056,222		$	1,863,466		$	1,705,567
Depreciation, including discontinued operations		573,715			260,094			250,269
Dispositions		(113,825	)		(67,338	)		(92,370	)
Balance, end of period	$	2,516,112		$	2,056,222		$	1,863,466

F-56