Same community NOI up 6.5 percent for the quarter
Company sets expectations for 2008
CLEVELAND, Feb. 7 /PRNewswire-FirstCall/ -- Associated Estates Realty
Corporation (NYSE: AEC) today reported net income available to common
shareholders of $1.1 million or $0.07 per common share (basic and diluted),
for the fourth quarter ended December 31, 2007, compared with net income
available to common shareholders of $12.1 million or $0.71 per common share
(basic and diluted), for the fourth quarter ended December 31, 2006. The
fourth quarter 2007 results included gains from property sales of
approximately $0.24 per share and no defeasance costs. Fourth quarter 2006
results included gains from property sales of $0.94 per share and
defeasance costs of approximately $0.05 per share.
Funds from operations (FFO) for the quarter were $0.39 per common share
(basic and diluted), compared with $0.25 per common share (basic and
diluted), for the fourth quarter ended December 31, 2006. FFO for the
fourth quarter 2006, adjusted for defeasance costs of $948,000 or
approximately $0.05 per share, was $0.30 per share (basic and diluted).
"Our exceptional operating performance in 2007 is directly attributable
to the strength of AEC's apartment markets, the competitiveness of each of
our properties and our hardworking employees," commented Jeffrey I.
Friedman, Chairman, President and CEO.
A reconciliation of net income applicable to common shares to FFO is
included in the table at the end of this press release and in the Company's
supplemental financial information to be furnished with this earnings
release to the Securities and Exchange Commission on Form 8K.
Total revenue for the quarter was $38.9 million compared with $34.4
million for the fourth quarter of 2006, an increase of 13.1 percent.
Same Community (Market-Rate) Portfolio Results
Revenues for the quarter from the Company's same community portfolio
were up 3.7 percent, and total property operating expenses for the same
community portfolio were flat for the period, resulting in a 6.5 percent
increase in net operating income (NOI), compared with the fourth quarter of
2006. Physical occupancy was 94.4 percent at the end of the fourth quarter
of 2007 compared with 94.8 percent at the end of the fourth quarter of
2006. Average net rent collected per unit for the same community properties
for the fourth quarter increased 3.2 percent to $810 per month, as compared
with $785 per month average net rent collected for the fourth quarter of
2006. Net rent collected per unit for the Company's same community Midwest
portfolio grew 3.8 percent, while net rent collected per unit for the
Company's same community properties in the Mid-Atlantic/Southeast markets
grew by 1.4 percent.
Additional quarterly financial information, including performance by
region for the Company's portfolio, is included in the Company's
supplemental fact booklet, which is available on the "Investor Relations"
section of the Company's web site at http://www.aecrealty.com, or by clicking on
the following link: http://ir.aecrealty.com/results.cfm.
Year to Date Performance
For the twelve months ended December 31, 2007, net income applicable to
common shares was $5.1 million or $0.30 per share compared to net income
applicable to common shares of $22.0 million or $1.29 per share for the
period ended December 31, 2006. The results for the twelve month period
ended December 31, 2007 include gains from property sales of $1.24 per
share as compared to gains from property sales of $3.18 per share for the
twelve months ended December 31, 2006. Additionally, the results for 2007
include defeasance and prepayment costs and preferred stock repurchase
costs of approximately $0.26 per share as compared to defeasance and
prepayment costs of approximately $0.91 per share included in calendar year
2006 results.
Funds from operations for the twelve months ended December 31, 2007
were $1.05 per share and include defeasance and/or prepayment costs of $4.2
million, or approximately $0.25 per share associated with the repayment of
$62.9 million in debt and $172,000, or approximately $0.01 per share, of
costs associated with the repurchase of 111,500 depositary shares of the
Company's Class B Preferred Shares. Excluding these costs, FFO for the
period ended December 31, 2007 would have been $1.31 per share. Also,
included in the Company's twelve month results was a contribution of $1.6
million or approximately $0.09 per common share related to the settlement
of a lawsuit pertaining to the collection of passed due rents in connection
with the Company's affordable portfolio.
NOI for the twelve month period ended December 31, 2007 for the
Company's same community portfolio was up 5.3 percent compared with 2006.
The increase in 2007 NOI was driven by a 4.3 percent increase in revenue
net of a 3.1 percent increase in total property operating expenses.
Stock Repurchase
During the year, the Company repurchased 1,021,200 shares of the
Company's common stock for $13.6 million, at an average price of $13.30 per
share. At the end of the year, $5.9 million remained available under the
previously board authorized $50.0 million stock repurchase program.
2007 Acquisitions and Dispositions
In 2007, the Company purchased one property and acquired its joint
venture partners' 51% interest in another property for a total of $91.3
million. In 2007, the Company sold three properties for a total of $49.0
million. Net sales proceeds were primarily used to pay down debt,
repurchase our common shares and fund capital improvement programs.
2008 Outlook
The Company said its current FFO expectations for the year 2008 are in
the range of $1.18 to $1.22 per share, excluding defeasance and other
prepayment costs. Assumptions relating to the Company's earnings guidance
can be found on page 25 of the fourth quarter, 2007 supplemental fact
booklet on the Company's website at http://www.aecrealty.com.
For its same community, market-rate portfolio, the Company expects
revenue growth in 2008 to be in the range of 3.0 to 3.3 percent, with
expense growth of between 2.5 and 2.9 percent, resulting in growth in NOI
in the range of 3.3 to 3.7 percent.
The Company anticipates the disposition of approximately $100 million
of properties and the acquisition of approximately $100 million of
properties in 2008.
Conference Call
A conference call to discuss the results will be held today, Thursday,
February 7, at 2:00 p.m. (ET). To participate in the call:
Via Telephone: The dial in number is 800-860-2442, and the pass code is
"Estates."
Via the Internet (listen only): Access the Company's website at
http://www.aecrealty.com. Please log on at least 15 minutes prior to the scheduled
start time in order to register, download and install any necessary audio
software. Select the "Register for AEC's Conference Call" link on the left
hand side of the page and follow the brief instructions to register for
the event. The webcast will be archived through February 21, 2008.
Company Profile
Associated Estates Realty Corporation is a real estate investment trust
("REIT"), headquartered in Richmond Heights, Ohio, a suburb of Cleveland.
The Company directly or indirectly owns, manages or is a joint venture
partner in 67 multifamily properties containing a total of 15,066 units
located in nine states. For more information about the Company, please
visit its website at: http://www.aecrealty.com.
FFO and FFO as adjusted are non-Generally Accepted Accounting Principle
(GAAP) measures. The Company generally considers FFO and FFO as adjusted to
be a useful measure for reviewing the comparative operating and financial
performance of the Company because FFO and FFO as adjusted can help one
compare the operating performance of a company's real estate between
periods or as compared to different REITs. A reconciliation of net income
applicable to common shares to FFO and FFO as adjusted are included in the
table at the end of this press release and in the Company's supplemental
financial information to be furnished with this earnings release to the
Securities and Exchange Commission on Form 8K.
Safe Harbor Statement
This news release contains forward-looking statements based on current
judgments and knowledge of management, which are subject to certain risks,
trends and uncertainties that could cause actual results to vary from those
projected, including but not limited to, expectations regarding the
Company's 2008 performance, which are based on certain assumptions.
Accordingly, readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date of this news
release. These forward-looking statements are intended to be covered by the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The words "expects," "projects," "believes," "plans," "anticipates,"
and similar expressions are intended to identify forward-looking
statements. Investors are cautioned that the Company's forward-looking
statements involve risks and uncertainty, that could cause actual results
to differ from estimates or projections contained in these forward-looking
statements, including without limitation the following: changes in the
economic climate in the markets in which the Company owns and manages
properties, including interest rates, the ability of the Company to
consummate the sale of properties pursuant to its current plan, the overall
level of economic activity, the availability of consumer credit and
mortgage financing, unemployment rates and other factors; the ability of
the Company to refinance debt on favorable terms at maturity; the ability
of the Company to defease or prepay debt pursuant to its current plan;
risks of a lessening of demand for the multifamily units owned or managed
by the Company; competition from other available multifamily units and
changes in market rental rates; increases in property and liability
insurance costs; unanticipated increases in real estate taxes and other
operating expenses (e.g., cleaning, utilities, repair and maintenance
costs, insurance and administrative costs, security, landscaping, staffing
and other general costs); weather conditions that adversely affect
operating expenses; expenditures that cannot be anticipated such as utility
rate and usage increases, unanticipated repairs, and real estate tax
valuation reassessments or millage rate increases; inability of the Company
to control operating expenses or achieve increases in revenue; the results
of litigation filed or to be filed against the Company; changes in tax
legislation; risks of personal injury claims and property damage related to
mold claims because of diminished insurance coverage; catastrophic property
damage losses that are not covered by the Company's insurance; risks
associated with property acquisitions such as environmental liabilities,
among others; changes in government regulations affecting properties, the
rents of which are subsidized and certain aspects of which are regulated by
the United States Department of Housing and Urban Development ("HUD") and
other properties owned by the Company; inability to renew current contracts
with HUD for rent subsidized properties at existing rents; changes in or
termination of contracts relating to third party management and advisory
business; risks related to the Company's joint ventures; risks related to
the perception of residents and prospective residents as to the
attractiveness, convenience and safety of the Company's properties or the
neighborhoods in which they are located; and the Company's ability to
acquire properties at prices consistent with our investment criteria.
ASSOCIATED ESTATES REALTY CORPORATION
Financial Highlights
(in thousands, except per share data)
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
2007 2006 2007 2006
Total revenue $ 38,947 $ 34,438 $ 151,356 $ 137,693
Net income 2,307 13,353 10,165 27,021
Net income applicable to common
shares (1) 1,106 12,092 5,069 21,975
Add: Depreciation - real
estate assets 8,233 7,819 31,363 31,205
Depreciation - real
estate assets - joint
ventures 24 241 529 962
Amortization of joint
venture deferred costs - 9 17 34
Amortization of
intangible assets 753 28 1,545 847
Less: Gain on disposition of
properties (3,821) (15,972) (20,864) (54,093)
Funds from Operations (FFO) (2) 6,295 4,217 17,659 930
Funds from Operations (FFO) as
adjusted (3) 6,295 5,165 22,055 16,453
Add: Depreciation - other
assets 336 318 1,255 1,337
Depreciation - other
assets - joint
ventures 1 41 82 181
Amortization of
deferred financing
fees 318 243 1,128 1,035
Amortization of
deferred financing
fees - joint ventures - 12 24 48
Less: Recurring fixed asset
additions (2,149) (1,746) (8,819) (7,008)
Recurring fixed asset
additions - joint
ventures (173) (21) (199) (140)
Funds available for
distribution (FAD) (4) $4,628 $4,012 $15,526 $11,906
Per share:
Net income applicable to
common shares - basic and
diluted (1) $ 0.07 $ 0.71 $ 0.30 $ 1.29
Funds from Operations -
basic and diluted (2) $ 0.39 $ 0.25 $ 1.05 $ 0.06
Funds from Operations as
adjusted - basic and
diluted (3) $ 0.39 $ 0.30 $ 1.31 $ 0.97
Dividends per share $ 0.17 $ 0.17 $ 0.68 $ 0.68
Weighted average shares
outstanding - basic and
diluted 16,153 17,043 16,871 17,023
(1) After dividends and original costs associated with the preferred
share repurchase of $1,201, $1,261, $5,096 and $5,046, equivalent to $0.07,
$0.07, $0.30, and $0.30 per common share, respectively.
(2) The Company defines funds from operations (FFO) as the inclusion of
all operating results, both recurring and non-recurring, except those
results defined as "extraordinary items" under generally accepted
accounting principles (GAAP), adjusted for depreciation on real estate
assets and amortization of intangible assets and gains and losses from the
disposition of properties and land. Adjustments for joint ventures are
calculated to reflect FFO on the same basis. FFO does not represent cash
generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs and should not
be considered an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity. The Company generally considers FFO to be a useful measure for
reviewing the comparative operating and financial performance of the
Company because FFO can help one compare the operating performance of a
company's real estate between periods or as compared to different REITs. It
should be noted, however, that certain other real estate companies may
define FFO in a different manner.
(3) The Company defines FFO as adjusted as FFO, as defined above, plus
the add back of defeasance and other prepayment costs of $4,224 for the
twelve months ended December 31, 2007, and $948 and $15,523 for the quarter
and twelve months ended December 31, 2006, respectively. In accordance with
GAAP, these prepayment costs are included as interest expense in the
Company's Consolidated Statement of Operations. Also added back for the
twelve months ended December 31, 2007, is $172 of original issuance costs
associated with the repurchase of 111,500 depositary shares of the Series B
Preferred Shares that had been reclassified in accordance with GAAP. The
Company is providing this calculation as an alternative FFO calculation as
it considers it a more appropriate measure of comparing the operating
performance of a company's real estate between periods or as compared to
different REITs.
(4) The Company defines FAD as FFO as adjusted plus depreciation other
and amortization of deferred financing fees less recurring fixed asset
additions. Fixed asset additions exclude development, investment, revenue
enhancing and non-recurring capital additions. Adjustments for joint
ventures are calculated to reflect FAD on the same basis. The Company
considers FAD to be an appropriate supplemental measure of the performance
of an equity REIT because, like FFO and FFO as adjusted, it captures real
estate performance by excluding gains or losses from the disposition of
properties and land and depreciation on real estate assets and amortization
of intangible assets. Unlike FFO and FFO as adjusted, FAD also reflects
that recurring capital expenditures are necessary to maintain the
associated real estate.
The full text and supplemental schedules of this press release are
available on AEC's website at http://www.aecrealty.com. To receive a copy of the
results by mail or fax, please contact Investor Relations at
1-800-440-2372. For more information, access the Investor Relations section
of http://www.aecrealty.com.
For more information regarding the content
of this news release, please contact:
Michael Lawson
(216) 797-8798
SOURCE Associated Estates Realty Corporation
 back to top
Related links:
http://www.aecrealty.com
http://ir.aecrealty.com/results.cfm
CONTACT:
Michael Lawson for Associated Estates Realty
Corporation, +1-216-797-8798
|
