UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

Filed by the Registrant

Filed by a Party other than the Registrant

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AvalonBay Communities, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):
	No fee required.
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Dear Fellow Stockholders:

We invite you to join us and our Board of Directors at our 2024 Annual Meeting of Stockholders, which will be held at 10:00 a.m. Eastern Time on May 16, 2024. The meeting will be held in a virtual format via audio webcast only. Stockholders will not be able to attend the Annual Meeting physically but will be able to vote and submit questions online before and during the meeting.

At this year’s meeting we will vote on the election of 11 directors and the ratification of Ernst & Young LLP as the Company’s independent auditor. We will also conduct a non-binding, advisory vote to approve the compensation of the Company’s named executive officers.

Your vote at the upcoming Annual Meeting is important. Whether or not you plan to attend the meeting, we want your shares to be represented. Please authorize a proxy to vote your shares as soon as possible. You can do so on a dedicated website, by telephone, or by completing, signing and returning the proxy card or voting instruction form enclosed with the Proxy Statement (if you received a printed copy of the proxy materials). For more detailed instructions on how to vote and attend the virtual meeting audio webcast, as well as how to submit questions before and during the meeting, see the questions and answers beginning on page 73 of the Proxy Statement.

Our Board of Directors values your participation as a stockholder and appreciates your continued support of AvalonBay.

March 28, 2024

Sincerely,

Timothy J. Naughton Chairman of the Board

Benjamin W. Schall Chief Executive Officer and President

Holders of record of AvalonBay common stock may vote during the meeting. However, we suggest that you authorize a proxy to vote your shares in advance of the meeting, using one of the following three methods, in case you are unable to attend:
BY INTERNET	BY TELEPHONE	BY MAIL
Go to www.proxyvote.com and follow the instructions	Call 800-690-6903	Sign the enclosed proxy card and mail it promptly in the enclosed postage-prepaid envelope
For more information on how to vote, see “Some Questions You May Have Regarding This Proxy Statement.”

TABLE OF CONTENTS

Proxy Summary

This summary highlights certain information about AvalonBay Communities, Inc., a Maryland corporation (“AvalonBay” or the “Company”), and its 2024 Annual Meeting of Stockholders and summarizes information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement before voting. This Proxy Statement and the accompanying Notice of Annual Meeting and proxy card are first being made available to stockholders on or about March 28, 2024. For more complete information regarding AvalonBay’s 2023 performance, please review the Annual Report on Form 10-K for the year ended December 31, 2023, and the 2023 Annual Report to Stockholders, both of which are available online at www.proxyvote.com and on our website at investors.avalonbay.com. Materials located on or through our website and referenced in this Proxy Statement are not deemed to be part of this Proxy Statement and are not incorporated herein by reference.

2024 Annual Meeting of Stockholders Information

Meeting Agenda and Voting Matters

Election of Directors

Our Board represents a broad range of ages, tenures, and experience, as shown below.

Name	Age	Director Since	Independent	Committees*
Glyn F. Aeppel	65	2013		IFC, NGCR
Terry S. Brown**	62	2015		CC, NGCR
Ronald L. Havner, Jr.	66	2014		AC (Chair), IFC
Stephen P. Hills	65	2017		CC, IFC
Christopher B. Howard	55	2021		NGCR, IFC
Richard J. Lieb	64	2016		AC, CC (Chair)
Nnenna Lynch	52	2021		AC, IFC (Chair)
Charles E. Mueller, Jr.	60	2022		AC, IFC
Timothy J. Naughton***	62	2005		IFC
Benjamin W. Schall	49	2021		IFC
Susan Swanezy	65	2016		NGCR (Chair), IFC

Skills, attribute or experience:

Corporate Governance, Cybersecurity and ESG Best Practices

	Commitment to Board refreshment, including guidelines on director and committee chairman tenure		No stockholder rights plan (“poison pill”) and policy regarding adoption of future plans
	Annual Board, committee and director evaluations		Double-trigger restricted stock vesting in the event of a change in control
	Annual election of all directors with a majority voting standard in uncontested elections		Policy on political contributions and government relations publicly available on website
	Lead Independent Director		Reimbursement policy for director education programs and subscription for each director to relevant newsletters
	Independent Audit, Compensation and Nominating, Governance and Corporate Responsibility (“NGCR”) Committees		Published a comprehensive environmental, social and governance (“ESG”) report every year for more than a decade
	Regular executive sessions of independent directors, including at each regularly scheduled Board meeting		Annual advisory vote to ratify independent auditor
	Director and senior officer stock ownership guidelines		Annual advisory vote on executive compensation
	Robust anti-hedging, anti-speculation and no pledging policies		Published diversity vision
	Policy regarding stockholder approval of certain future severance agreements		Published EEO-1 data
	Bylaws contain provisions for stockholder rights relating to proxy access and Bylaw amendments		Published sustainability targets and other ESG goals with regular reporting to Board and NGCR Committee
	Policy on recovery of incentive compensation (clawback policy)		Board Audit Committee oversight of cybersecurity risks and preparedness, and oversight of the Company’s response to cybersecurity incidents, if any
	When compiling a pool of candidates for a new director search, the NGCR Committee endeavors to include, and requests that any search firm it engages endeavor to include, candidates with a diversity of race, ethnicity and gender		The Audit Committee meets with senior IT associates regarding cybersecurity regularly, including during 2023
	Mandatory, regular cybersecurity training for all associates; maintain cyber security insurance		Annual evaluation of cybersecurity program by independent external consultants, which results are reported to the Audit Committee

Executive Compensation Highlights

Consistent with our total compensation philosophy, a substantial majority of the target pay for our named executive officers (“NEOs”) is variable and contingent on performance.

Target Total Compensation Mix

CEO 2023 Target Pay Mix		Other NEOs 2023 Average Target Pay Mix

Proposal 1. Election of Directors 

The Board of Directors (which we refer to as the “Board”) currently consists of 12 members. All of the current directors are nominated for re-election at the Annual Meeting, except for W. Edward Walter, who has served as a director since 2008 and will be retiring from the Board at the time of the Annual Meeting. The Board has reduced the size of the Board to 11 to eliminate the vacancy resulting from Mr. Walter’s retirement, effective at the time of the Annual Meeting. If elected, these 11 nominees will serve until the 2025 Annual Meeting of Stockholders and until their successors are elected and qualify. The Board anticipates that each of the nominees, if elected, will serve as a director. However, if any nominee is unable to serve or chooses not to serve, proxies will be voted for the election of such other person as the Board may recommend. You may not vote for more than 11 directors at the Annual Meeting.

Required Vote and Recommendation

Only holders of record of AvalonBay’s common stock as of the close of business on the Record Date are entitled to vote on this proposal. Proxies will be voted for all of the nominees unless contrary instructions are set forth on a properly executed proxy card. Under our Bylaws, a majority of the total votes cast as to each nominee is required to elect such nominee. Under Maryland law, abstentions and broker non-votes are not treated as votes cast and will have no effect on the result of the vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL OF THE NOMINEES.

Information

The Nominating, Governance and Corporate Responsibility Committee  (“NGCR”) and the full Board are focused on ensuring that the composition of the Board continues to provide the diversity of background, experience, functional skills, expertise, and thought necessary to appropriately address the needs of AvalonBay and our stockholders.

The following table summarizes certain qualifications, skills and experiences of each director that the Board considered important in its decision to re-nominate that individual to the Board. Exclusion of a factor for a nominee does not necessarily mean the nominee does not possess that attribute. It means only that when the NGCR considered skills and experiences in the overall context of the members of the Board, certain attributes were not considered critical with respect to certain individuals.

Skills, attribute or experience

Naughton

Schall

Aeppel

Brown

Havner

Hills

Howard

Lieb

Lynch

Mueller

Swanezy

Accounting/Financial Literacy

■

■

■

■

■

■

■

■

■

■

■

Real Estate Development

■

■

■

■

■

■

■

Board Diversity*

■

■

■

■

C-Level Management Experience

■

■

■

■

■

■

■

■

Financial/Capital Markets Experience

■

■

■

■

■

■

■

■

Marketing/Brand Management/Consumer Focus

■

■

■

■

Non-AVB Public Board Experience

■

■

■

■

■

■

Public Company CEO Experience

■

■

■

Real Estate Investment & Finance

■

■

■

■

■

■

■

■

■

Leadership in Non-Corporate Settings (e.g. Military, Academia, Public Sector)

■

■

Technology, Information Security and Innovation

■

■

The biographies below describe each director’s qualifications and relevant experience in more detail.

Director Nominees

Corporate Governance

Independence of the Board

The New York Stock Exchange (“NYSE”) has adopted independence standards for companies listed on the NYSE, which apply to AvalonBay. These standards require a majority of the Board to be independent and every member of the Audit Committee, Compensation Committee and NGCR to be independent. NYSE standards provide that a director is considered independent only if the Board “affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company).” In addition, the NYSE prescribes certain other “independence” standards.

To determine which of its members is independent, the Board uses the standards prescribed by the NYSE and also considers whether a director had any other past or present relationships with AvalonBay that created conflicts or the appearance of conflicts. Based on its most recent review, the Board affirmatively determined that all directors who served on the Board during 2023, all currently serving directors and all nominees for director are independent, except in each case for Mr. Naughton and Mr. Schall.

Our Board has made a determination as to each independent director that no relationship exists which, in the opinion of the Board, would interfere with the exercise of the director’s independent judgment in carrying out his or her responsibilities as a director. In making these determinations, our Board reviewed and discussed information provided by the directors and the Company regarding each director’s business and personal activities as they may relate to the Company, its management and/or its independent registered public accounting firm. In reaching the determination that Mr. Walter is independent, the Board considered that Mr. Walter serves as senior advisor to Energy Impact Partners (“EIP”), a climate technology venture capital firm. The Company currently invests in venture funds sponsored by EIP. The Board of Directors has determined that this relationship does not interfere with Mr. Walter’s independence. Mr. Walter is not a nominee for election at the Annual Meeting.

NYSE rules provide for additional independence standards that apply to members of the Audit Committee and the Compensation Committee. The Board has determined that each current and proposed member of these committees satisfies these additional standards.

Leadership Structure and Lead Independent Director

Timothy J. Naughton serves as AvalonBay’s Chairman of the Board. Mr. Naughton previously served for many years as the Company’s Chief Executive Officer.  He served as Executive Chairman throughout 2022 and retired from being an officer of the Company on January 1, 2023, continuing as non-executive Chair.  Our current CEO, Benjamin W. Schall, joined the Company in 2021 and became CEO on January 3, 2022. Mr. Naughton’s role as Chairman of the Board, working with the Lead Independent Director, assures continuity of leadership at the Board level while strengthening the bridge between the Board, our Chief Executive Officer, and management.

To help ensure sound corporate governance practices, the Board established the position of Lead Independent Director. Mr. Brown has served as the Lead Independent Director since May 2023. From May 2019 until May 2023, Mr. Walter served as the Lead Independent Director. The Lead Independent Director presides at all meetings of the Board at which the Chairman is not present, serves as a liaison between the Chairman of the Board and the Chief Executive Officer, on the one hand, and the independent directors, on the other, establishes and approves meeting agendas for the Board, has the authority to call meetings of the independent directors, confers with the Chairman of the Board and the Chief Executive Officer regularly, and acts as a contact person for stockholders and others who wish to communicate with the independent directors. 

Succession Planning for Directors and Board Refreshment

The Board considers a variety of factors when choosing candidates for Board appointment or nomination. While we value long-tenured directors who know AvalonBay and management well, the Board also believes it is important to ensure there are occasional vacancies that create opportunities for new directors who may bring different or more recent experiences or expertise to the Board. Consistent with this philosophy, we have recruited three new independent directors to join the Board in the past five years.

AvalonBay’s Corporate Governance Guidelines incorporate term expectations that reflect the Board’s view of the importance of succession planning. Specifically, the Corporate Governance Guidelines express an expectation that (i) an independent director will not be re-nominated after completing 12 full years of service or within the several years that follow; (ii) the Lead Independent Director will serve in that role for approximately three to five years; and (iii) committee chairs will serve for three to five years. In each case, the guideline is flexible and the exact timing for any transition will depend on the needs of the Board at the time and whether an appropriate successor has been identified and nominated.

Evaluation and Nomination of Director Candidates

One of the key functions of the NGCR is identifying and nominating candidates for service on the Board. In this regard, the NGCR considers the factors set forth in the Corporate Governance Guidelines, which include the nominee’s business and professional background; history of leadership or contributions to other organizations; functional skill set and expertise; general understanding of marketing, finance, accounting and other elements relevant to the success of a publicly-traded company; and service on other boards of directors. Given the current business, opportunities and challenges confronting our industry, the NGCR pays particular attention to the skills and experience described in the Director Skills/Experience Matrix provided above.

When recommending a slate of nominees for director and identifying new candidates for service, the NGCR considers whether the Board as a whole has and will continue to have an adequate distribution and representation of relevant skills, backgrounds and experience. In addition to professional history and expertise, the Board may consider diversity of background, experience and thought in evaluating and recommending candidates for election. The Board believes that diversity (including diversity of gender, race and ethnicity) is important because a variety of points of view can contribute to a more effective decision-making process.

The NGCR may employ a variety of methods for identifying and evaluating nominees for director. In considering whether to recommend re-nomination of a current director for another term, the NGCR considers whether the skills, commitment and performance of the individual director are such that the individual’s continued service on the Board is desirable. The NGCR also may assess the size of the Board, the need for particular expertise, and whether any vacancies are expected, due to retirement or otherwise.

The NGCR will consider potential candidates for director who come to the committee’s attention through current Board members, professional search firms, stockholders or other sources. When compiling a pool of candidates to review and interview for a new director search, the NGCR endeavors to include, and requests that any search firm it engages endeavor to include, candidates with a diversity of race, ethnicity and gender. AvalonBay has in the past engaged and may in the future engage a third party firm to help identify and/or evaluate potential director nominees.

Nominees Recommended by Stockholders

The NGCR will consider candidates properly recommended by stockholders using the same criteria that apply to candidates from other sources. Following verification of the stockholder status of the party or parties proposing a candidate, the NGCR makes an initial analysis of the candidate’s qualifications based on the criteria summarized above to determine whether the candidate is suitable for service on the Board before deciding whether to undertake a complete evaluation of the candidate. If a stockholder provides any materials in connection with the nomination of a director candidate, such materials are forwarded to the NGCR as part of its review. The Board may also consider the specific information required to be provided by nominating stockholders pursuant to the requirements of AvalonBay’s Bylaws. Stockholders may also nominate directors in accordance with the proxy access provisions of AvalonBay’s Bylaws. For more information on stockholder nominations, see “Other Matters -Stockholder Nominations for Directors and Proposals for Annual Meetings.”

Board of Directors Risk and ESG Oversight

We have a number of practices with regard to Board oversight of risk management matters. The charter of each Board committee provides that the committee will, from time to time and to the extent the committee deems appropriate, review risk and compliance matters relevant to the committee and report the results of such review to the full Board. As required by NYSE rules, the charter of the Audit Committee states that the Audit Committee will assist with Board oversight of risk and compliance matters, and in any event will review AvalonBay’s perceived major financial risk exposures and the steps management has taken to monitor and control such exposures. At most regularly scheduled Board meetings, the Board reviews key matters relating to AvalonBay’s

finances, liquidity, operations and investment activity. On an annual basis, the Board and/or the Audit Committee engages in a broader discussion about Company-wide risk management.

The Audit Committee (and on occasion the full Board in lieu of the Audit Committee) also reviews matters related to cybersecurity. The Board has delegated primary oversight of cybersecurity risks to the Audit Committee, including those related to data privacy and network security. The Audit Committee’s charter provides that the Audit Committee shall meet no less frequently than annually with personnel from the Company’s information technology group and senior management to discuss the Company’s strategy and standards to defend its IT networks, business systems and information against cyber-attacks, cyber intrusions, unauthorized disclosures of personally identifiable information or Company data, and similar disruptions, and senior management also provides periodic reports to the Audit Committee and/or the full Board in addition to this annual requirement. The Audit Committee also has oversight responsibility of management’s preparedness for and response to any cybersecurity incidents and, in connection therewith, the Committee may retain consultants and advisors and take and approve other actions and expenditures as deemed reasonable and appropriate by the Committee. The Company has not experienced any material cybersecurity incidents to date. For additional information regarding the Company’s cybersecurity risk management, strategy and governance, see Item 1C. “Cybersecurity” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2024.

Although it is not the primary reason the Board’s current leadership structure was implemented, AvalonBay and the Board believe the current leadership structure—including both a Chairman of the Board and a separate Lead Independent Director—helps facilitate these risk oversight functions by providing multiple channels for risk-related concerns and comments.

Stockholder Engagement and Responsiveness

We consider our relationship with our stockholders to be an important part of AvalonBay’s success and we value the outlook and opinions of our investors. During 2023 and early 2024, our management reached out to stockholders who collectively held approximately two-thirds of AvalonBay’s outstanding stock, and to stockholder advisory firms, to invite them to discuss with us our practices and policies with respect to board governance, compensation, ESG and other matters. Management (in conjunction with one or more independent directors when requested by a shareholder) spoke with those who responded to that outreach regarding such matters. These discussions addressed matters such as Board composition and refreshment, stockholder rights, the structure for executive compensation, and sustainability efforts. The goal of these conversations was to ensure that management and the Board understood and considered the issues that are most important to our stockholders and to enable AvalonBay to address them effectively. Feedback received from these calls is conveyed to and discussed with the full Board and relevant committees.

In addition to conversations with our stockholders, AvalonBay management occasionally receives and responds to correspondence from stockholders and stockholder advocacy groups and, when appropriate, shares this correspondence with the NGCR and the full Board. The Board also considers the votes of stockholders at our Annual Meeting and discusses potential issues raised through that forum.

Board and Committee Self-Evaluation

Each year the Board conducts a self-evaluation in which the Lead Independent Director talks to each director individually regarding his or her view of how the Board overall and each of our directors is performing. Topics discussed may include whether there are additional items that should be added to agendas, whether management is providing the Board with the information it needs to effectively review AvalonBay’s performance and risks, whether meetings feature a healthy level of debate and participation, whether the composition of the Board is appropriate, whether the Board is adequately monitoring AvalonBay’s strategic direction, and the performance and development of management. This feedback is then discussed in an executive session of the Board. 

In addition, each of the Board’s committees annually conducts a review of its charter and a self-assessment of the performance of committee duties under its charter over the previous year. The review generally includes the role of the committee within AvalonBay, the committee’s structure and functioning, and the committee’s charter and fulfillment of delegated responsibilities.

Committees of the Board of Directors

The Board has four committees: the Audit Committee, the Compensation Committee, the Nominating, Governance and Corporate Responsibility Committee, and the Investment and Finance Committee. With the exception of the Investment and Finance Committee, the committees are made up entirely of independent directors. The charters for the Audit, Compensation, and Nominating, Governance and Corporate Responsibility Committees are available in the Investor Relations section of our website under “Corporate Governance Documents.”

Meetings and Attendance

The Board met five times during 2023. The Board generally schedules regular executive sessions at each of its meetings during which the independent directors meet without management participation. The Lead Independent Director presides over executive sessions of the Board. The independent directors met in executive session four times during 2023.

Each director attended at least 75% of the total number of meetings of the Board and meetings of the Board committees of which he or she was a member during the periods they served during 2023. The Board’s policy is that every director should attend our annual meetings of stockholders. All of the directors attended the virtual 2023 Annual Meeting of Stockholders.

Governance Documents

The Board has adopted a Code of Business Conduct and Ethics that applies to the Board of Directors and all AvalonBay executives and employees. In addition, the Board has adopted Corporate Governance Guidelines that govern many of its practices and policies. These documents are available on the Investor Relations section of our website (www.avalonbay.com) under “Corporate Governance Documents,” together with the following additional documents:

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. Additional information on corporate governance policies is included in the Compensation Discussion & Analysis section of this Proxy Statement under the heading “Compensation Policies.” The information contained on, or available through, our website is not incorporated by reference into this Proxy Statement.

Contacting the Board

Any stockholder or other interested party may contact any of our directors, including the Lead Independent Director or our independent directors as a group, by writing to them at the following address. All communications addressed to one or more directors will be forwarded as addressed.

[Name of Director or Group of Directors]
c/o AvalonBay Communities, Inc.

4040 Wilson Boulevard, Suite 1000
Arlington, VA 22203
Attention: Corporate Secretary

Human Capital Management

Our purpose as a company is to create a better way to live, and all AvalonBay associates, from those based at our communities to those at our regional and corporate offices, have a role to play in bringing our purpose to life.

We believe that AvalonBay’s culture is a differentiator that leads to success in fulfilling our purpose. Our company culture centers around our core values and cultural norms, which are touchstones that help guide our behavior and decision-making.

Our Workforce

As of January 31, 2024, we had 3,039 employees, of which approximately 98% were employed on a full-time basis. Approximately 65% of our associates work on-site at our operating communities and the balance work on other matters. Approximately 41% of our associates self-identify as female and 63% self-identify as non-White or did not specify their ethnicities.

Inclusion and Diversity

Building a more inclusive and diverse AvalonBay begins with our purpose — creating a better way to live. Inspired by this purpose, AvalonBay’s Inclusion & Diversity (“I&D”) mission is to foster an environment where all associates feel welcome, are supported with opportunities to thrive and are represented by our leadership team. As we grow and innovate, it’s important that we create an environment that encourages idea flow and ensures all voices are heard, understood, and appreciated.  Recognizing the importance of these issues, during 2023 we added our seventh cultural norm: We Champion Inclusion & Diversity. 

To help promote and provide an inclusive culture, we established associate resource groups and opportunities for associates with diverse backgrounds, experiences, and perspectives to connect with one another and continue to strengthen our culture.

Current associate resource groups include:

The Company has also offered training in unconscious bias, inclusive culture and allyship to all associates and has broadened its talent acquisition efforts to include diverse interview slates and panels and outreach to student groups and associations that represent diverse populations.

Attracting, motivating, developing, and retaining our associates is critical to the long-term success of AvalonBay. We empower our associates to grow in their careers as they take on new roles or broaden existing roles, receive and provide candid feedback, and learn valuable skills. One way we support this is through our Mentorship Program.

The Company set a vision of the gender and racial diversity that could be achieved in leadership (defined as director-level associates and above) by 2025 and by 2030 if the Company takes appropriate actions, and every department is responsible for driving an appropriate action plan to support I&D across the organization. Additionally, we publish our latest EEO-1 report on our public ESG website. Annually, we review our diversity metrics, vision and efforts with our NGCR.

Mr. Schall, the Company’s CEO, is a signatory of the CEO Action for Diversity and Inclusion pledge and member of the Nareit Dividends Through Diversity, Equity & Inclusion CEO Council.

Company Workforce by the Numbers (as of January 31, 2024)

Others: American Indian/Alaska Native, Native Hawaiian/Other Pacific Islander and two or more races.

Training & Development

At AvalonBay we believe that our associates are our most important resource and support their professional development and career advancement. To support their progress, our managers and associates have ongoing performance and career development conversations and memorialize them in a year-end performance review and development goals.

We train and develop our associates in a variety of ways, including online, instructor-led and on-the-job learning. Our learning management system, AvalonBay University, offers approximately 700 courses providing functional, technical, management, ethics, compliance, cyber-awareness and safety training. In addition, our tuition assistance program supports our associates by providing them with reimbursement, subject to program rules and limitations, for undergraduate and graduate degree programs or for coursework leading to professional certifications/designations. 

Associate Engagement

Each year we conduct an Associate Perspective Survey, which enables AvalonBay to better understand how associates view the Company, their managers, and their overall experience. Based on the survey results, we endeavor to improve in areas that are deemed by associates as opportunities for growth. For the 2023 survey, we included questions across 11 categories, including Culture, I&D, Communication, and Manager Effectiveness, to help us understand how our associates feel about their experiences in those areas. The 2023 survey showed that our associates’ engagement remained stable from the previous year. We implemented actions around improving communication between departments and enhancing transparency for growth opportunities, and plan to measure the impact of these actions in the 2024 survey. 

Health and Safety

We take workplace safety seriously at our construction sites, our operating communities and our offices. Through our Construction Site Safety Observation program and our dedicated safety team, we monitor project-level safety performance metrics at our construction sites, and elements of compensation for our construction group and our CEO are based on safety compliance performance. Our maintenance associates are required to take monthly safety training on a variety of subjects, and our risk management group monitors incident reports from our offices and communities.

Board Oversight of Human Capital

The Board, through its Compensation Committee, regularly reviews management’s human resources practices, including talent management and training. The NGCR regularly reviews diversity metrics and inclusion and diversity efforts. The Board actively supports activities that encourage an inclusive culture at AvalonBay, including in some cases participating in and contributing to programs sponsored by our associate resource groups.

Additional information on each of these areas relating to human capital management can be found in our ESG Report by visiting https://www.avaloncommunities.com/about-us/esg. Materials located on AvalonBay’s website and referenced herein are not deemed to be part of this Proxy Statement and are not incorporated herein by reference.

Transactions with Related Persons, Promoters and Certain Control Persons

Our Code of Business Conduct and Ethics prohibits employees, including executive officers and directors, from engaging in activities that create a conflict of interest with AvalonBay unless all relevant details have been disclosed and an appropriate mitigation or waiver permitting the conduct has been received. An activity constitutes a conflict of interest under the Code if (i) the activity could adversely affect or compete with AvalonBay, (ii) any interest, connection or benefit to the employee or director from the activity could reasonably be expected to cause such employee or director to consider anything other than the best interest of AvalonBay when deliberating and voting on Company matters, (iii) any interest, connection or benefit to the employee or director from the activity could give such employee or director or a member of his or her family or other closely related individuals an improper benefit that was obtained on account of his or her position within AvalonBay, or (iv) the employee or director is placing his or her own interests above the Company’s interest. Mitigations and waivers for executive officers or directors may only be granted by the Board or a designated committee of the Board, and any mitigation or waiver granted to an executive officer or director will be disclosed to the extent required by law or NYSE rules. The NGCR (or any other committee of independent directors that is designated) is responsible for administering the Code for executive officers and directors.

Director Compensation

The compensation for our non-employee directors is described below. Directors who are also employees do not receive additional compensation for serving on the Board. Our Board and NGCR Committee periodically assess the total compensation for non-employee directors relative to the compensation provided by similarly sized REITs, by our multifamily peer group, and by a group of cross-industry similarly sized companies. Based on the most recent review, the Board has approved increases to the compensation of non-employee directors effective after the 2024 Annual Meeting, as noted in the table below.

All shares of restricted stock (or deferred stock units) granted to non-employee directors vest in four quarterly installments over a one-year period, subject to accelerated vesting upon departure from the Board except in the case of a voluntary departure by the director during the director’s elected term that is not due to death or disability or the director’s removal for cause. If a director elects to receive deferred stock units in lieu of restricted stock, the director will receive shares of stock in respect of the vested portion of the deferred stock units within 60 to 90 days following termination of service as a director (or within 30 days of termination of service in the case of deferred stock unit awards made before January 1, 2024).

Director Stock Ownership Guidelines

Under our Corporate Governance Guidelines, non-employee directors are generally required to hold shares (or deferred stock units) having a value that equals or exceeds five times the annual cash retainer paid to non-employee directors. Directors have five years from the commencement of their service as a director to comply with such requirement. As of April 1, 2024, all the non-employee directors who have served on the Board for five years or more were in compliance with this requirement.

The following table sets forth the compensation for service as an AvalonBay director received by each non-employee director in 2023.

Director Compensation Table

Proposal 2. Non-Binding, Advisory Vote on Executive Compensation 

Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a non-binding, advisory stockholder vote to approve the compensation of the Company’s named executive officers. The Compensation Discussion and Analysis as presented below describes AvalonBay’s executive officer compensation program and decisions made by the Compensation Committee and the Board with respect to the 2023 compensation of our named executive officers. We believe the compensation program achieves our goals of (i) attracting, retaining, motivating and engaging experienced and effective executives, (ii) directing pay for performance of those executives with clearly defined goals and measures of achievement, and (iii) aligning the interests of management with the interests of our stockholders.

We have held a non-binding, advisory vote on executive compensation (known as a say-on-pay vote) at each Annual Meeting of Stockholders since 2011. At our 2023 Annual Meeting of Stockholders, our stockholders voted on a proposal regarding the frequency of holding a non-binding, advisory vote on the compensation of our Named Executive Officers (a “Say-on-Pay Vote”), among other matters. A majority of the votes cast on the frequency proposal were cast in favor of holding a Say-on-Pay Vote every year, which was consistent with the recommendation of our Board. Our Board currently intends for the Company to hold a Say-on-Pay Vote every year at least until the 2029 Annual Meeting of Stockholders, which is the next required non-binding, advisory vote on the frequency of holding a Say-on-Pay Vote. At that meeting we plan to hold an advisory vote regarding the frequency of future say-on-pay votes.

While the vote on the following resolution is advisory and will not bind us to take any particular action, our Compensation Committee and our Board will carefully consider the stockholder say-on-pay vote in making future decisions regarding our compensation program. The Board is asking stockholders to adopt the following resolution:

“RESOLVED, that the compensation paid to AvalonBay’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and any related material disclosed in this Proxy Statement, is hereby APPROVED, on a non-binding, advisory basis, by the stockholders of AvalonBay.”

Required Vote and Recommendation

Only holders of record of AvalonBay’s common stock as of the close of business on the Record Date are entitled to vote on this proposal. Proxies will be voted for adoption of the resolution approving the compensation disclosed unless contrary instructions are set forth on the proxy card. A majority of the votes cast on the proposal at the Annual Meeting is required to provide non-binding, advisory approval of the compensation paid to AvalonBay’s named executive officers. Under Maryland law, abstentions and broker non-votes are not treated as votes cast. Accordingly, an abstention or broker non-vote will have no effect on the result of the vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RESOLUTION TO APPROVE, ON A NON BINDING, ADVISORY BASIS, THE COMPENSATION PAID TO AVALONBAY’S NAMED EXECUTIVE OFFICERS.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes how the Board, the Compensation Committee and the Company think about compensation for the Company’s executive officers and what decisions were made in setting 2023 compensation, including how we established goals and aligned compensation with performance and stockholder interests.

Specifically, the CD&A describes the compensation of the following individuals, who were our named executive officers (“NEOs”) in 2023:

Executive Summary

Our Company Performance

The Company produced strong financial and operating results in 2023. Core Funds from Operations (“Core FFO”) per share increased by 8.6% in 2023 from 2022, and Same Store Residential rental revenue and Same Store Residential Net Operating Income (“NOI”) increased by 6.3% and by 6.2%, respectively, as compared to the prior year. Our three-year TSR outperformed the NAREIT Apartment REIT index and NAREIT Equity REIT index. Over the course of the year, we made considerable progress in transforming the way we operate and how we deliver services to prospects and residents. We continued to optimize the growth profile of our portfolio in 2023 by selling approximately $450 million of wholly owned real estate assets, primarily located in our established regions, and recycling the proceeds into acquisitions and new developments in our expansion regions. We also continued to grow our Structured Investment Program (“SIP”) in 2023, which seeks to make mezzanine loans to or preferred equity investments in third-party multifamily developments, delivering attractive investment returns to the Company. Finally, we remained focused on ESG matters, which are important to our employees, residents and stakeholders.

2023 KEY HIGHLIGHTS
Operating Activity Our Same Store Residential NOI increased by 6.2% and was driven by 6.3% Same Store Residential rental revenue growth year over year, which was supported by strong operating fundamentals and improved underlying bad debt trends. We continued our implementation of various operating initiatives designed to enhance the customer experience while generating operating efficiencies, including prospect website improvements, digitalization and automation of maintenance processes, digitalization and centralization of certain activities previously performed on-site, and implementation of smart access and community wide Wi-Fi.	6.2%   SAME STORE RESIDENTIAL NOI GROWTH OVER 2022
Development Activity We completed six new wholly owned development communities containing 1,393 apartment homes for an aggregate total capitalized cost of approximately $575 million. We also started the development of six new apartment communities, which are expected to contain 2,040 apartment homes in total when completed for an aggregate projected total capitalized cost of approximately $800 million. Our 2023 development completions delivered a 7.1% initial stabilized yield, exceeding our original pro-forma underwriting by 0.9%.	7.1%   INITIAL STABILIZED YIELD ON 2023 COMPLETED DEVELOPMENTS
Dividend During 2023, we paid quarterly dividends at a rate of $1.65 per share, and in January 2024 we declared the first quarter dividend for 2024 at a rate of $1.70 per share, a 3.0% increase over the prior rate.	$6.60   TOTAL DIVIDENDS/SHARE PAID IN 2023 3.0% INCREASE FOR 1Q 2024
Balance Sheet Management We raised approximately $1.35 billion of capital, including approximately $446 million from the sale of real estate and $397 million through the issuance of unsecured notes. Additionally, we generated proceeds of approximately $490 million from settlement of our forward equity contract, which we entered in April 2022, resulting in the issuance of two million shares of common stock. At year-end, the Company’s Net Debt-to-Core-EBITDAre was 4.2x and unencumbered NOI was 95% as a percent of total NOI.	NET DEBT-TO- CORE EBITDAre   4.2X   95%   UNENCUMBERED NOI
Portfolio Management We sold four wholly owned communities, containing 987 apartment homes, for an aggregate sales price of approximately $446 million. The Company also acquired three wholly owned communities, containing 1,131 apartment homes, for an aggregate purchase price of approximately $277 million. The three newly acquired communities were in our expansion regions of Texas (two communities) and North Carolina. We ended the year with approximately 70% of our portfolio in suburban submarkets (based on year end percent of stabilized NOI), making progress towards our long-term goal of 80%.	70%   SUBURBAN PORTFOLIO AT YEAR END 2023
Environmental, Social and Governance We continued our focus on ESG in 2023. Notably we earned an “A-” grade from CDP, while also maintaining our MSCI score of “A”, which continues to outperform our multifamily REIT peers. These scores are reflective of our consistent progress against our science-based emissions reduction targets and climate resilience work. We continued to work toward our Diversity in Leadership Vision for the representation of women and underrepresented minorities on our leadership team, which includes all associates at or above the director level.   Additional information on our ESG efforts including targets, goals, and progress is published annually in our ESG Report, which can be found under the “About Us – ESG” section of our website at www.avalonbay.com. We expect to publish our 2023 ESG Report in mid-2024.

Overview of our Executive Compensation Program

Consistent with our total compensation philosophy, a substantial majority of the target pay for our NEOs is variable and contingent on performance.

Target Total Compensation Mix

CEO 2023 Target Pay Mix		Other NEOs 2023 Average Target Pay Mix

The individual components of direct compensation for the NEOs are summarized below.

Our Compensation Programs Incorporate Best Practices

The Board implements and maintains leading practices in the Company’s executive compensation programs.

What we do
Pay for performance		At least 50% of our NEOs’ target total direct compensation is performance-based and tied to pre-established performance goals aligned with our short-term and long-term objectives.
Rigorous performance goals		We use rigorous, objective performance-based Company goals in our incentive plans.
Annual say-on-pay vote		We have conducted an annual advisory say-on-pay vote on our NEO compensation since 2011.
Annual compensation peer group review		We review competitive market information when considering executive pay.
Caps on annual and long-term incentives		Performance-based incentive awards have maximum achievement levels to mitigate the risk that executives will make unwise decisions in pursuit of excessive rewards.
Limited perquisites		We provide limited perquisites to officers in the Company.
Limited employment agreements		We do not have employment agreements with officers. Our CEO, an external hire who joined us as President in January 2021, entered into an employment agreement to cover his first three years of employment, but that agreement expired by its terms in January 2024.
Compensation Recovery Policy (“clawback” policy)		We have adopted a compensation recovery (or “clawback”) policy (the “Compensation Recovery Policy”), which requires recovery from current and former executive officers of certain incentive-based compensation in the event of a required restatement of previously issued financial statements.
Director and senior officer stock ownership guidelines		Our stock ownership guidelines require significant ownership of AvalonBay stock by officers holding the title of senior vice president or higher, and by our non-employee directors, to align the long-term interests of our officers and non-employee directors with those of our stockholders.
Independent Compensation Committee consultant		The Compensation Committee engages its own independent compensation consultant to advise on executive and director compensation matters.
Prohibition on certain transactions in Company stock by directors and officers		Our Anti-Hedging and Anti-Speculation Policy, which applies to all directors, officers and employees, prohibits hedging and the use of derivative securities and similar transactions relating to our securities. Our No Pledging Policy prohibits our directors and officers from holding AvalonBay securities in a margin account or pledging our securities as collateral for loans.
What we don’t do
No single-trigger vesting of restricted shares or options		We do not maintain any plans that require automatic acceleration of time-based vesting restricted share or option awards upon a change in control of AvalonBay.
No excise tax gross-ups on change in control payments		We do not provide our NEOs with any excise tax gross-ups or other payment or reimbursement of excise taxes in connection with a change in control of AvalonBay.
No tax gross-ups on perquisites		We do not provide our NEOs with any tax gross-ups on perquisites, other than in limited circumstances for expense reimbursement associated with approved business-related relocations.
No discounting of stock options or repricing of underwater options		Our equity compensation plan expressly prohibits discounting the exercise price of stock options and repricing underwater stock options without stockholder approval.
No guaranteed bonuses		Our annual incentive plan is entirely performance-based, and our NEOs are not guaranteed any minimum levels of payment under that plan.

2023 Stockholder Advisory Vote on Executive Compensation

At the 2023 Annual Meeting of Stockholders, the Company’s executive officer compensation for 2022 was approved by approximately 94.1% of the votes cast on the matter. The Compensation Committee and the Company considered these results to be an endorsement by stockholders of the Company’s compensation structure, target levels and actual executive compensation.

Chief Executive Officer & President 2023 Compensation At-A-Glance

Benjamin W. Schall Chief Executive Officer & President

Fiscal 2023 Total Compensation

Chief Executive Officer 2023 Compensation At-A-Glance
Fiscal 2023 Target Total Compensation: $8,500,000
Base Salary:	$1,000,000
Cash Bonus 2023 target:	$1,500,000 (150% of base salary)
Stock Bonus 2023 target:	$1,800,000(1)
Performance award target for 2023-2025 performance period:	$4,200,000
Realized Performance award for 2021-2023 performance period:	For Mr. Schall’s 2021-2023 performance award, combined achievement was 126.1% of target, with a realized stock value of $5,570,422 (based on the February 13, 2024, closing stock price of $172.11 and including payment of a cash amount representing accrued dividends on earned units).

Cash Bonus

Mr. Schall’s target cash bonus was 150% of base salary in 2023, with 80% of the target cash bonus based on corporate performance factors and 20% based on individual performance. The achievement levels for corporate performance and individual factors for 2023 were determined to be 141.3% and 115.0% of target, respectively, resulting in a final cash bonus for 2023 of $2,040,600.

Stock Bonus

Mr. Schall’s target stock bonus for 2023 was $1,800,000. The performance measures used in calculating the stock bonus reflect different elements of the Company’s performance and are not duplicative of the performance measures used to evaluate corporate performance under the annual cash bonus program. The quantitative achievement level for these stock bonus performance measures for 2023 was 99.3% of target. This resulted in a payout of $1,787,400. Mr. Schall elected to receive 25% of the earned stock bonus value in the form of a stock option and the remainder in the form of restricted stock. The restricted stock and stock option vest ratably over three years from the date of grant. Under applicable SEC rules these awards will be disclosed in the 2025 proxy statement Summary Compensation Table as the actual grant of stock and option, though based on 2023 achievement, occurred in 2024.

2023-2025 Performance Awards

Mr. Schall’s target performance award for the 2023-2025 performance period was $4,200,000, with 55% of the target award tied to relative three-year TSR metrics against REIT indices, and 45% of the target award tied to three-year relative financial operating metrics. Additional detail on Mr. Schall’s 2023-2025 performance award is provided later in the CD&A.

Settled 2021-2023 Performance Awards

Mr. Schall’s target performance award for the 2021-2023 performance period was $3,750,000. Fifty percent (50%) of the target award was tied to relative three-year TSR metrics comparisons, and 50% of the target award was tied to three-year relative financial operating metrics. The Compensation Committee determined achievement under the award at 126.1% of target. Mr. Schall’s award was settled on February 13, 2024, in 29,099 shares of fully vested stock valued at $5,008,229 based on the closing price of the Company’s common stock on the NYSE on such date of $172.11, plus a cash amount of $562,193 representing cumulative dividends accrued on the earned shares from the date of grant of the performance award through the date of its settlement.

Target Compensation

In February 2023, the Compensation Committee approved an increase to Mr. Schall’s 2023 target total compensation from $8,000,000 to $8,500,000, an increase of 6.3%, after reviewing the Company’s and Mr. Schall’s performance and considering other factors such as Mr. Schall’s tenure in the position and compensation for CEOs at peer companies. Mr. Schall’s 2023 target pay increase took the form of increases to his target annual stock bonus and multi-year performance award. Eighty-eight percent (88%) of Mr. Schall’s 2023 target total pay is in the form of performance-based compensation and the remaining 12% is in the form of fixed compensation.

Our Compensation Decision-Making Process

Who is Involved in Compensation Decisions

How We Review Market Compensation

In determining the total direct compensation for each NEO, the Compensation Committee generally considers a number of factors on a subjective basis, including:

Although the Compensation Committee reviews the officers’ compensation relative to the peer group, target compensation is not mechanically set at a particular percentage of the peer group average. An officer’s target compensation may vary from the peer group data for the following reasons:

The Compensation Committee believes that the ultimate decision as to appropriate target compensation for a particular officer should be made based on the full review described above.

How We Select and Use Peer Groups

Peer Group for Market Compensation Purposes 

The Compensation Committee uses the peer group described below when evaluating the appropriate levels of executive compensation. In determining the peer group composition, the Compensation Committee considers the following elements:

The peer group for 2023 compensation decisions consisted of the companies listed below.

Total Capitalization (Equity + Debt)

($ in billions as of Dec. 29, 2023)

Source: S&P Global

The Compensation Committee regularly reviews the peer group to ensure the members of the peer group remain relevant to our business. For executive compensation set in 2023, the Compensation Committee replaced Vornado Realty Trust with American Homes 4 Rent from the peer group. Vornado Realty Trust was the smallest of the S&P 500 REITs with office properties primarily in the New York City area and its total capitalization was slightly below half of AvalonBay’s. In comparison, American Homes 4 Rent is a residential single-family focused REIT having an expansive portfolio throughout the United States. The Compensation Committee believes American Homes 4 Rent is a more relevant peer company than Vornado Realty Trust. 

Peer Groups for Performance Award Measurement Purposes

The Compensation Committee uses a different peer group for determining performance under the executives’ performance awards. This peer group emphasizes multifamily peers rather than similarly sized REITs from varying sectors since the performance metrics—operating performance and shareholder return—are more appropriately compared with direct competitors in our specific sector of the real estate industry.

For the 2023-2025 performance awards that are earned based on three-year relative TSR, we used two indices. The FTSE Nareit Equity Apartments Index represents REITs in the U.S. multifamily housing industry. The FTSE Nareit Equity REITS Index represents a comprehensive group of REITs that spans the U.S. commercial real estate industry, and includes all investment and property sectors other than REITs that have been designated as Timber REITs or Infrastructure REITs.

For the 2023-2025 performance awards that are earned based on operating metrics, the peer group consisted of the following multifamily REITs:

These companies were chosen primarily because they are publicly traded companies in the multifamily industry that are of a size and geographic presence comparable to AvalonBay. For Apartment Income REIT Corp. (“AIR”), given that it underwent a spin-off reorganization in December 2020, an analysis was conducted to determine if, because of unusual and non-recurring impacts of the spin-off transaction that affected on-going financial results and made metrics non-comparable, it should be excluded from the peer results for a period of time; the conclusion of that analysis was that AIR results would be excluded from the peer results for 2021 and 2022 and reintroduced in the first quarter of 2023. 

How We Establish Goals and Determine Achievement for Incentive Compensation

Setting Goals 

At the beginning of each year, the Board reviews and approves the Company’s business plan and budget, and management proposes to the Compensation Committee corporate goals for that year for the annual cash bonus program and the multi-year performance program. The Compensation Committee reviews the budget and the proposed goals, adopts any revisions to the proposed goals it deems appropriate, and approves the final corporate goals. The approved targets are intended to be rigorous, and our annual goals are consistent with our business outlook provided to the investment community and our business plan.

Annual business unit goals are drafted by the head of each business unit and reviewed, modified, and approved by the Chief Executive Officer and presented to the Compensation Committee.

The individual goals for the annual bonus program are determined in a similar manner. The goals for the Chief Executive Officer are determined and approved by the Compensation Committee. Goals for the other NEOs are determined by the Chief Executive Officer and presented to the Compensation Committee.

Determining Achievement 

At the end of each year, the CEO reviews and reports to the Compensation Committee his assessment of the achievement of the corporate goals for both the annual bonus program and the long-term incentive program, as well as achievement of the business unit and individual goals and performance for the annual bonus program for the other NEOs. Actual bonus awards and compensation changes for the CEO, and all executive officers, are approved by the Compensation Committee.

Compensation Consultants

The Compensation Committee engaged Steven Hall & Partners (“Steven Hall”), an executive compensation consulting firm, in 2023 to provide general advice regarding trends and changes in executive and Board compensation, regulations, and governance practices. In 2023 and prior years, Steven Hall discussed the impact of these trends and changes on the Company, particularly in light of the Company’s compensation structure and levels and provided general commentary regarding the Company’s executive compensation structure, goals and levels. The firm also reviewed and, if appropriate, commented to the Committee on the work prepared by Ferguson Partners Consulting, L.P. (“FPC”), management’s compensation consultant for 2023 and prior years. Steven Hall did not provide any services directly to the Company or management and after review, taking into account relevant factors in accordance with SEC guidelines, the Compensation Committee concluded that no conflicts of interest existed in connection with the services that Steven Hall provided to the Committee.

In 2023, management used the services of FPC to provide information about executive pay benchmarking, compensation trends, and performance in the REIT industry, which was shared with the Compensation Committee. In 2022 and 2023, an affiliate of FPC provided certain services to management and the Board, including with respect to recruitment of potential officer and director candidates. The Compensation Committee considered whether FPC’s work for the Company raised any conflict of interest, taking into account relevant factors in accordance with SEC guidelines. One of the factors considered was the Company’s donation of $25,000 in 2023 to the Centers for Leadership Excellence, a non-profit associated with FPC that is focused on introducing career opportunities in the real estate industry to ethnically diverse college students. The Committee determined that, in light of the nature of the advisory work that FPC does for the Company, the total fees paid to FPC and its affiliates for various services, and the policies that FPC and its affiliates have put in place to prevent compensation advisor conflicts of interest, the engagement of FPC did not create any material conflict of interest.

2023 Compensation Framework and Decisions 

With respect to 2023 compensation matters for our NEOs, the Compensation Committee reviewed and approved the following: (i) base salaries, (ii) target cash and stock bonuses, (iii) criteria and metrics for the 2023 annual cash bonuses to be paid in 2024, and (iv) 2023-2025 multi-year performance awards. These reviews and determinations are discussed below.

Base Salary

The Compensation Committee reviews the executive officers’ base salaries annually by considering the information from the relevant peer group, internal pay equity, and each executive’s position, experience, demonstrated abilities, and level of achievement. In establishing the base salary for each NEO, the Compensation Committee reviewed a reference market rate after considering comparator group company data and evaluated whether that rate should be adjusted up or down based on differences in the scope of the NEO’s position as compared to the scope of comparable positions in the industry and the comparator group companies. The reference market rate is for review purposes only and base salaries are not determined by the reference market rate. With the exception of the CEO, each of the NEOs received a base salary increase to align with the external market. The table below sets forth the 2023 base salaries for the NEOs.

Annual Cash Incentive Program

Our annual cash bonus program emphasizes short-term goals. The performance measures we assessed to determine payouts under the 2023 Annual Cash Incentive Program are described below.

Annual Cash Incentive Mix

For each metric, the payout is as follows:

Payouts for achievement that is above threshold but that falls between two performance levels are determined by linear interpolation.

Core FFO per Share

Core FFO per share is a key measure of the Company’s performance and is, with some variation among REITs, an industry-wide measure. A quarterly goal was implemented in 2021 given the uncertainty associated with the COVID-19 pandemic. Although the pandemic’s impact on our business has stabilized, at the beginning of 2023, uncertainty remained given the consensus outlook for a recession. Therefore, for 2023, a quarterly goal and an annual goal were adopted. The annual and quarterly goals are not duplicative of each other because of the difference in time periods. As the year progressed, the quarterly target goal increased each quarter in line with increased outlook for the year.

Development Yield

Development continues to drive value creation at AvalonBay. The Development Yield metric is based on projected NOI divided by total capitalized cost for communities completed during the year as compared to our original budgeted yield for such developments. The target goal is based on meeting our pre-established budgeted yield for each development community. Performance is determined based on the weighted average of the stabilized development yields compared to the weighted average of the original budgeted yields for the basket of annual completions. The yields are weighted based on total capitalized cost. The original budgeted development yield is established at construction start for each property based on each property’s projected NOI divided by total capitalized cost. In this case, the actual variance in stabilized yield compared to original budgeted yield for the 2023 development communities resulted in maximum target payout with respect to that metric.

Performance Measure		Weight		Threshold	Target	Max		% of Target Payout
2023 Development Yield		15%						200.0%

GRESB

GRESB is an organization that reviews ESG data, scores and benchmarks on the real estate and infrastructure industries. The GRESB score is an overall measure of ESG performance, including commitment, disclosure, and implementation. Our ESG goals include reductions in Scope 1, 2 and 3 greenhouse gas emissions, reductions in waste and water, progress on inclusion and diversity initiatives, improvement in our score measuring associate engagement and satisfaction, and increases in our annual community philanthropic investments.

For 2023, GRESB assigned AvalonBay a score of 83 (out of a possible 100). We believe this score reflects our continued progress on our science-based targets and our public commitment to a low-carbon and renewable energy future. AVB maintains its commitment to energy efficiency, increased renewable energy production, and leveraging a third-party environmental certification to support the development of communities that align with our long term environmental goals, among other factors.

Performance Measure		Weight		Threshold	Target	Max		% of Target Payout
GRESB		7.5%						125.0%

Customer Satisfaction – Mid-Lease Net Promoter Score (“NPS”) and Online Reputation Sentiment

Mid-Lease NPS

Mid-Lease NPS measures customer feedback from residents who have an active six-month or longer lease agreement and are at the midpoint of that lease term. The NPS is calculated by determining the percentage of Promoters (responding residents who provided a 9 or 10 rating) and subtracting the percentage of Detractors (responding residents who provided a rating of 6 or below). Residents are surveyed through an independent third-party platform.

For 2023, we used two semi-annual measures for mid-lease NPS metric. The NPS calculation for 2023 was weighted 30% for the first half of the year and 70% for the second half. The first half was weighted less because NPS going into the year was lower than historic results and was mainly driven by 2022 actions that would be difficult for associates to impact during the first half  of the year; by weighting the second half more, it was believed that associates would feel engaged and empowered to have a positive impact on the second half measure. The 2023 target range was 26-32 because 26 was the actual achievement for 2022 and 32 was the Company’s highest annual performance, which was achieved in 2018. The threshold goal at 21 reflects 50% payout and the max goal at 37 reflects 200% payout. The resulting weighted NPS for 2023 was 24 (NPS of 21 for the first half of 2023 and 25 for the second half of 2023), below the annual target range of 26-32, which equates to 80.0% achievement. 

Online Reputation Sentiment

Online reputation sentiment measures the average rating of new reviews within the calendar year for all AVB communities (including communities in lease-up or undergoing redevelopment) and that are still live on Google or Facebook as of the end of the calendar year. This information is monitored and scored by a third party.

Our online reputation sentiment was 4.3 out of 5.0 stars in 2023, which was slightly above the target goal of 4.25. Our positive online reputation sentiment continued to be driven by the outstanding service of our maintenance teams and the responsiveness of on-site leasing staff through their interactions with prospects and residents.

Performance Measure		Weight		Threshold	Target	Max		% of Target Payout
Mid-Lease NPS		3.75%						80.0%
Online Reputation Sentiment		3.75%						112.0%

Qualitative Performance Metrics

The following metrics represent qualitative assessments of AvalonBay’s performance.

Strategic & Corporate Technology Initiatives

Determining our progress on strategic and corporate initiatives requires a qualitative judgment about the Company’s achievement on multi-year corporate investments and projects. Our 2023 strategic and corporate initiatives included:

In transforming our operating platform, the Company developed and enhanced digital, self-service applications to support customer experiences when touring, searching for an apartment, applying, and leasing or renewing. Digital applications included enhancements that were developed and rolled out relating to our

website experience, self-guided tours and self-service lease and renewal signing capabilities. The maintenance team also utilized a mobile workforce management platform to handle maintenance requests more efficiently and effectively. The Company also delivered on the first phase of a new, flexible inventory management tool that will allow us to manage, price and analyze the performance of all our products and their attributes. With our teams, we centralized renewal customer support and administration by hiring a combination of employees at our shared services center and remote employees, and we expanded maintenance neighborhoods to provide for a more efficient maintenance staffing model. We also invested in technology enablers, which included the deployment of smart access and managed wi-fi.

We started construction on six new development communities, of which two were in our expansion regions and four were in our established regions. For the SIP, we generated four new commitments. For the DFP, we had one construction start and added one development right in an expansion region. 

Transaction volume across all commercial real estate sectors was muted, slowing our progress against our portfolio goals. With respect to our own portfolio, we completed the sale of four assets in established regions and acquired three communities in our expansion regions.

Our efforts in ESG have reduced our environmental impact, and we have achieved a cumulative reduction in Scope 1 and 2 emissions of 43.6% since the 2017 baseline, in part through our continued development of new onsite solar installations and the purchase of renewable energy for a significant portion of our common area electric load. To reduce Scope 3 emissions, we are piloting solar projects in California using Virtual Net Energy Metering (VNEM) where residents have the opportunity to purchase energy from our rooftop solar installations. Finally, with a goal to reduce common area water use, we explored ways to reduce water consumption in some regions through turf reductions, native and drought tolerant plantings and reduced overall irrigation. 

The Company prepared for the transition of its financial and human resources systems to Workday which, upon completion, will centralize numerous business processes across multiple systems into one system. A change management plan for 2024 is also in place that includes a detailed communication and end user training plan. 

Strategic and corporate initiatives is weighted 10%. Based on the above and progress on other initiatives, the Compensation Committee determined that the achievement on strategic and corporate initiatives in 2023 was 105.0% of target.

Effectiveness of Management

This qualitative measure considers capital allocation, balance sheet and liquidity management, and investing in people and culture. In 2023, we continue to build out the pipeline of development opportunities, carefully managing liquidity through match-funding and land exposure using option contracts. Our balance sheet ratios continue to remain strong with Net Debt-to-Core-EBITDAre at 4.2x (based on the annualized fourth quarter of 2023) and 95% unencumbered NOI. The Company is well poised to capitalize on growth opportunities should they arise. The Company held its first investor day in ten years, which was well received by the investment community. To measure and support investing in people and culture, we continue to strive to be among the best places to work with a diverse and inclusive team. We also implemented new, streamlined channels of communication that connect associates to the Company’s vision, strategy and initiatives and implemented multiple feedback forums to capture associate feedback more often throughout the year via regular small-group sessions and Speak Ups. For career growth and development, the Company implemented various tools for associates to assist them in career development or advancement, such as mentorship programs and “Gigs”, which are part-time special projects that provide associates with exposure and learning opportunities. For Inclusion & Diversity, representatives met throughout the year and business unit specific plans were created for every department. Training sessions were held to build I&D competency within the teams.

Effectiveness of management is weighted 10%. Based on the above, the Compensation Committee determined that the achievement on effectiveness of management was 120%.

	Metric		Weight	Performance (% of target)	Weighted payout
	Annual Core FFO per Share	20%		155.0%	31.0%
	Quarterly Core FFO per Share	30%		137.5%	41.3%
	Development Yield	15%		200.0%	30.0%
	GRESB Score	7.5%		125.0%	9.4%
	Mid-Lease NPS	3.75%		80.0%	3.0%
	Online Reputation Sentiment	3.75%		112.0%	4.2%
	Strategic and Corporate Initiatives	10%		105.0%	10.5%
	Effectiveness of Management	10%		120.0%	12.0%
	Total Payout	100.0%			141.3%

Business Unit and Individual Component of the Bonus Program

As the CEO of the Company, Mr. Schall is responsible for the performance of the Company and therefore his annual cash bonus is weighted 80% corporate performance and 20% individual performance. Below are his major achievements for 2023:

Mr Schall’s major achievements in 2023 included:

The individual performance achievement for Mr. Schall was determined to be 115% of target.

Set forth below are descriptions of each NEO’s business unit responsibilities and achievements in 2023.

Key Responsibilities:

Mr. O’Shea’s business unit goals were based on the achievements of the Financial Services Group, for which Mr. O’Shea has direct supervisory responsibility. The Financial Services Group includes the areas of capital markets, accounting, financial reporting, financial planning and analysis, ESG, risk management, tax, internal audit (for which he has administrative oversight), investor relations, and investment fund management, as well as our call center operations, which support our apartment communities.

Major achievements in 2023 included:

For 2023, the overall achievement for Mr. O’Shea’s business unit was determined to be 114.8% of target.

Key Responsibilities:

Mr. Birenbaum’s business unit goals were based on the achievements of the Investments, Development, Asset Management, Mixed-Use, Design, Construction (including Capital Projects Group and Construction Support Services) and Market Research groups, for which Mr. Birenbaum has direct oversight responsibility.

Major achievements in 2023 included:

For 2023, the overall achievement for Mr. Birenbaum’s business unit was determined to be 103.1% of target.

Key Responsibilities:

Mr. Breslin’s business unit goals were based on the achievements of the Residential Services, Revenue Management, Marketing, Engineering, Enterprise Technology (including cybersecurity), Digital Technology (including Data Analytics), Human Resources and Operating Initiatives functions, for which Mr. Breslin has direct oversight responsibility.

Major achievements in 2023 included:

For 2023, the overall achievement for Mr. Breslin’s business unit was determined to be 113.8% of target.

Key Responsibilities:

Mr. Schulman’s business unit goals were based on the achievements of the Legal Group, for which Mr. Schulman has direct supervisory responsibility. The Legal Group oversees all legal matters for the Company, including in the areas of Board governance, securities law compliance, real estate transactions, compliance with landlord/tenant and other consumer laws, finance and capital markets transactions, broad-based and executive compensation programs, employment matters, retail leasing, litigation and disputes, data privacy, intellectual property, and compliance with various federal and state regulations.

Major achievements in 2023 included:

For 2023, the overall achievement for Mr. Schulman’s business unit was determined to be 115.0% of target.  

The achievement of individual goals by each of the named executive officers in 2023 was determined to be 115% of individual target performance with the exception of Mr. Schulman, who was determined to be at 125%. 

Annual Cash Bonus

Target Bonus Opportunities and Actual Bonuses 

Annual Stock Bonus

Mr. Schall’s 2023 annual stock bonus component consisted of the following one-year performance measures. Annual stock bonuses for Messrs. O’Shea, Birenbaum, Breslin and Schulman were based on the achievement of their respective business unit goals, as described above.

Performance Measure		Weight		Threshold (Payout 50%)		Target (Payout 100%)		Max (Payout 200%)		% of Target Payout
Quarterly Same Store Residential Revenue vs. Target*		25%								100.8%
Annual Same Store Controllable OpEx vs. Target		10%								100.0%
Same Store Base Rental Revenue vs. Submarket Composite		25%								100.0%
Review and Assessment of Development Completions Against Plan in Terms of Capital Cost		15%								85.7%
Review and Assessment of Construction (based on completions)		Budget 8.33%								74.0%
		Safety 8.33%								126.0%
		Quality 8.34%								115.0%
Total		100%								99.3%

These performance measures intentionally do not duplicate the performance measures for the corporate annual cash bonus program to ensure that the CEO focuses on all aspects of the Company’s business. Consistent with the quarterly Core FFO metric used in the annual bonus plan, the Same Store Revenue metric was set and reviewed on a quarterly basis instead of annually due to the potential uncertainty at the beginning of 2023 regarding macroeconomic conditions for the year. A new metric, annual same store controllable operating expenses, was added to counterbalance the Same Store Revenue metric. The Development metric focused on completions against plan in terms of capital cost. 

Once the final achievement for the annual stock bonus is determined, the number of shares of restricted stock earned by each NEO is calculated and awarded in February of the year following the performance period. The restricted stock will vest ratably over three years after the grant date as long as the NEO remains employed by the Company through each vesting date. Vesting will be accelerated in the event of a termination due to death, disability, retirement, or termination by the Company without cause. For his 2023 stock bonus, in accordance with an election made prior to the end of the prior calendar year and as permitted under the Company’s compensation program for officers, Mr. Schall elected to receive 25% of his earned stock bonus value in the form of a stock option that follows the same vesting schedule as restricted stock; the option has a total Black-Scholes value equal in amount to 25% of the value of the earned stock bonus.

Annual Stock Bonus (based on business unit performance for NEOs other than Mr. Schall)

Annual stock bonus awards (and the option award in lieu of stock as described above) in respect of 2023 service will be disclosed in the 2025 proxy statement Summary Compensation Table as they were granted in February 2024.

Discretionary Stock Bonus 

In February 2024, the Compensation Committee granted Mr. Schulman a discretionary stock grant of $250,000 in recognition of his long-time stewardship of the Legal Group and his proactive focus on risk assessment.

Multi-Year Performance Award Program

Under our multi-year, long-term incentive award program, performance awards are granted each year with a target number of performance units and the number of units earned may be reduced or increased from the target number at the end of the three-year performance period depending on achievement against established metrics. For the 2023-2025 performance period, payouts will be determined based on the Company’s performance against two relative TSR metrics and two relative financial operating metrics, as described below. The performance units that are earned at the end of the performance period will be settled in shares of common stock and a cash payment equal to the dividends that would have been earned on that number of shares from the grant date of the award through its settlement date.

The performance awards strengthen the alignment of executive compensation with long-term stockholder value creation. The two indices selected for the relative TSR metric represent the broader REIT industry and the REIT apartment industry, which we believe are complementary investment vehicles for our investors. The operating metrics for the 2023-2025 Performance Awards—Core FFO per share growth and Net Debt to Recurring EBITDA ratio, each measured relative to the performance of our peers—motivates our officers to focus on critical operating performance objectives that we believe will contribute to sustainable stockholder returns over the long term. Previously, relative net asset value (“NAV”) per share growth was part of the operating metrics but was removed starting with the 2023-2025 Performance Awards because it was based on a spot consensus estimate, which was found to have a high degree of subjectivity from the analysts’ reports from which it was derived.

The targets set for the four performance metrics are intended to be challenging. Achievement of maximum performance levels would require meaningful outperformance over the performance period.

2023–2025 Performance Awards 

The metrics included in the performance awards made in 2023 with a three-year performance period ending on December 31, 2025, are as follows:

		Performance Level and Payouts(1) (relative performance stated as percentage points above or below index performance)
TSR Metrics (Weighted 55%)		Threshold 50% payout		Target 100% payout		Max 200% payout		Percent of Total Metrics
Relative to FTSE Nareit Equity Apartments Index								35.75%
Relative to FTSE Nareit Equity REITs Index								19.25%

		Performance Level and Payouts(1) (relative performance stated as (i) percentage points above or below average peer performance(2) or (ii) difference between AVB performance and average peer performance)
Operating Metrics (Weighted 45%)		Threshold 50% payout		Target 100% payout		Max 200% payout		Percent of Total Metrics
Core FFO per share growth vs. peers								22.5%
Net Debt to Recurring EBITDA vs. peers								22.5%

The target, threshold and maximum number of performance units granted in 2023 that may be earned for the 2023-2025 performance period are shown below.

Settlement of 2021–2023 Performance Awards 

Our 2021–2023 Performance Awards were structured similarly to the 2023–2025 Performance Awards, with a focus on TSR metrics and operating metrics.

TSR Metrics (Weighted 50%)		Weight		Threshold		Target		Max		% of Target Payout
AvalonBay 3-yr TSR vs. Nareit Equity REIT Index		15%								116.8%
AvalonBay 3-yr TSR vs. Nareit Apt Index		35%								174.3%
TSR Metrics %										157.0%
Operating Metrics (Weighted 50%)		Weight		Threshold		Target		Max		% of Target Payout
3-yr Core FFO per share growth vs. Peers		20%								87.6%
3-yr Net Debt-to-Core EBITDA vs. Peers		15%								108.0%
NAV per Share Growth vs. Peers (1)		15%								92.6%
Operating Metrics %										95.2%
Overall Achievement %										126.1%

The following table shows the actual performance units earned at the completion of the three-year performance period ended December 31, 2023. These awards were settled in unrestricted shares of stock.

Realized Pay for 2023 Performance

The following chart shows one of the ways our Compensation Committee evaluated compensation paid to the NEOs for service and performance with respect to 2023. This chart differs from the Summary Compensation Table. The Summary Compensation Table includes several items that are driven by accounting and reporting requirements that do not necessarily reflect the compensation actually realized by our NEOs during or with respect to 2023. The primary differences between the 2023 compensation of our NEOs as reported in this Realized Pay for 2023 Performance Table and as reported in the Summary Compensation Table are the following (i) the Summary Compensation Table uses the grant date fair value of restricted stock awarded in February 2023 with respect to 2022 service, whereas the Realized Pay for 2023 Performance Table uses the grant date fair value of restricted stock awarded in February 2024 with respect to 2023 service, and (ii) the Summary Compensation Table uses the grant date fair value of the 2023-2025 performance awards that were awarded in February 2023, whereas the Realized Pay for 2023 Performance Table uses the value (as of the date of settlement) of the unrestricted shares, and cash in respect of accrued dividends, received by each NEO upon settlement of the maturing 2021–2023 performance awards.