CLEVELAND, Feb. 9 /PRNewswire-FirstCall/ -- Associated Estates Realty
Corporation (NYSE: AEC) today reported net income applicable to common shares
of $23,239,000 or $1.28 per common share (basic and diluted), for the fourth
quarter ended December 31, 2005, compared with a net loss applicable to common
shares of $3,410,000, or $0.17 per common share (basic and diluted), for the
fourth quarter ended December 31, 2004. The results for the fourth quarter of
2005 include gains from property sales of approximately $1.49 per share.
Funds from operations (FFO) for the quarter were $0.26 per common share
(basic and diluted), compared with $0.26 per common share (basic and diluted)
for the fourth quarter ended December 31, 2004. A reconciliation of net income
(loss) 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 revenues for the quarter were $38,889,000, compared with $36,688,000
for the fourth quarter of 2004, an increase of 6.0 percent.
Additional quarterly and year to date financial information, including
segment detail and performance by region for the Company's same store
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://www.snl.com/interactive/ir/corp.asp?iid=103102.
Same Store (Market-Rate) Portfolio
Revenues for the quarter from the Company's same store (market-rate)
portfolio were up 2.7 percent, and total property operating expenses for the
same store (market-rate) portfolio increased 4.6 percent, resulting in a 1.2
percent increase in net operating income (NOI), compared with the fourth
quarter of 2004. Excluding the impact of the state of Ohio property tax
rollback expense, discussed under " Full Year Performance" below, NOI for the
same store (market-rate) portfolio would have increased 2.3 percent, compared
with the fourth quarter of 2004.
Controllable expenses, including personnel, advertising and promotion,
buildings and grounds repair and maintenance and other operating expenses,
declined 3.5 percent, while noncontrollable expenses, including utilities and
real estate taxes and insurance, increased 16.2 percent.
Physical occupancy was 92.5 percent at the end of the fourth quarter of
2005, compared with physical occupancy of 91.2 percent at the end of the
fourth quarter of 2004.
For the fourth quarter, the average net collected rent per unit for the
same store (market-rate) properties increased 2.5 percent to $690 per month,
compared with the fourth quarter of 2004. Net collected rent per unit for the
Company's same store (market-rate) Midwest portfolio grew 1.5 percent, while
net collected rent per unit for the Company's same store (market-rate)
properties in the Mid-Atlantic/Southeast markets grew 6.0 percent.
Sequential Same Store (Market-Rate) Portfolio
On a sequential quarterly basis, revenues from the Company's same store
(market-rate) portfolio were down 0.7 percent, and the average net collected
rent per unit for the same store (market-rate) properties decreased 0.6
percent in the fourth quarter, compared with the third quarter of 2005.
Full Year Performance
For the year ended December 31, 2005, the Company had net income
applicable to common shares of $28,913,000 or $1.51 per common share (basic
and diluted), compared with a net loss applicable to common shares of
$2,481,000 or $0.13 per common share (basic and diluted) for the year ended
December 31, 2004. The full year results include gains from property sales of
approximately $2.53 per share in 2005 and $0.50 per share in 2004.
Funds from operations (FFO) for the year 2005 were $0.91 per common share
(basic and diluted), compared with $1.07 per common share (basic and diluted)
for the year 2004. The results for the year 2005 exclude non-cash redemption
costs of approximately $0.11 per share associated with the redemption of the
Company's Class A Preferred Shares in January 2005.
The FFO per share for 2005 also reflects: decline in third party
management fee revenues; more "normalized" operations for the Company's
painting subsidiary; and the elimination of the 10 percent property tax
rollback for commercial properties in the state of Ohio, which resulted in
real estate tax increases for the year of approximately $0.04 per share,
compared with 2004.
A reconciliation of net income (loss) 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.
Acquisitions and Dispositions
As previously announced, the Company acquired a 168-unit apartment
community in Atlanta, GA, in October. The Company also sold a 460-unit
community in Orlando, FL, in October, as previously announced. Proceeds from
the sales of properties are currently being used primarily to pay down debt
and repurchase shares of the Company's stock.
The Company said it expects to sell at least $75 million of properties
during 2006.
Stock Repurchase
In 2005, the Company's Board of Directors approved a $50 million stock
repurchase program. During the fourth quarter, the Company purchased 914,800
shares at an average price of $9.26 per share, bringing the total shares
repurchased for the year to 1,818,700 shares at an average price of $9.56 per
share.
The Company said it intends to enter into a Rule 10b5-1 contract to
facilitate stock repurchases under the previously authorized stock repurchase
program.
2006 Earnings Guidance
The Company said its current FFO expectations for the year 2006 are in the
range of $0.98 to $1.02 per share. Assumptions relating to the Company's
earnings guidance can be found on page 21 of the fourth quarter 2005
supplemental fact booklet posted on the Company's website at
http://www.aecrealty.com.
Conference Call
A conference call to discuss the results will be held today, Thursday,
February 9, at 2:00 p.m. Eastern. To participate in the call:
Via Telephone: The dial in number is 800-867-4593, and the passcode is
"Estates."
Via the Internet (listen only): Access the Investor Relations page on 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 "Live Webcast" link at the
top of the page and follow the brief instructions to register for the event.
The webcast will be archived through February 23, 2006.
Safe Harbor Statement
This news release contains forward-looking statements based on current
judgments and current 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 2006 performance, which are based on certain assumptions.
Accordingly, readers are cautioned not to place undue reliance on forward-
looking statements. 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, including without limitation the
following: changes in economic conditions in the markets in which the Company
owns and manages properties, including interest rates, the overall level of
economic activity, the availability of consumer credit and mortgage financing,
unemployment rates and other factors; risks of a lessening of demand for the
multifamily units owned or managed by the Company; competition from other
available apartments and change in market rental rates; increases in property
and liability insurance costs; catastrophic losses that are not covered by the
Company's insurance; risks of personal injury claims and property damage
related to mold claims because of diminished insurance coverage; changes in
government regulations affecting the Affordable Housing properties and other
properties operated by the Company; changes in or termination of contracts
relating to third party management and advisory business; inability to renew
current Housing Assistance Payment (HAP) contracts at existing rents; weather
and other conditions that might 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 achieve anticipated
reductions in operating expenses and increases in revenues; the results of
litigation filed or to be filed against the Company; changes in tax
legislation; risks related to the Company's joint ventures; risks associated
with property acquisitions such as environmental liability, among others;
changes in market conditions that may limit or prevent the Company from
acquiring or selling properties; the timing of the defeasance of loans; and
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.
Company Profile
Associated Estates Realty Corporation, one of the largest multifamily
property owners in the United States, 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
111 multifamily properties containing a total of 23,752 units located in 11
states.
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,
2005 2004 2005 2004
Total revenue $38,889 $36,688 $150,428 $149,387
Net income (loss) 24,501 (1,719) 36,206 3,324
Net income (loss) applicable to
common shares(1) 23,239 (3,410) 28,913 (2,481)
Add: Depreciation - real estate assets 7,923 8,022 32,355 31,583
Depreciation - real estate assets
- joint ventures 239 241 959 1,059
Amortization of joint venture
deferred costs 9 9 34 8
Amortization of intangible assets 453 152 1,492 434
Less: Extraordinary item and
gain on disposition
of properties (27,099) - (48,536) (9,682)
Funds from operations (FFO) (2) 4,764 5,014 15,217 20,921
Add: Original cost associated
with redemption of
preferred shares - - 2,163 -
Funds from operations (FFO) excluding
preferred redemption costs (3) 4,764 5,014 17,380 20,921
Add: Depreciation - other assets 386 441 1,617 1,737
Depreciation - other assets -
joint ventures 43 50 177 200
Amortization of deferred
financing fees 270 266 1,156 1,067
Amortization of deferred
financing fees - joint ventures 12 7 47 68
Less: Fixed asset additions (2,512) (3,059) (8,152) (9,058)
Fixed asset additions - joint
ventures (74) (46) (148) (76)
Funds available for
distribution (FAD) (4) $2,889 $2,673 $12,077 $14,859
Per share:
Net income (loss) applicable to
common shares - basic and diluted (1) $1.28 $(0.17) $1.51 $(0.13)
Funds from operations
- basic and diluted (2) $0.26 $0.26 $0.79 $1.07
- excluding preferred redemption
costs (3) $0.26 $0.26 $0.91 $1.07
Dividends per share $0.17 $0.17 $0.68 $0.68
Weighted average shares outstanding -
basic and diluted 18,214 19,551 19,162 19,519
(1) After dividends and original costs associated with the preferred
share redemption, of $1,262, $1,691, $7,293 and $5,805, equivalent
to $0.07, $0.09, $0.38 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 excluding preferred redemption costs as FFO,
as defined above, plus the add back of the $2,163,000 original
issuance costs associated with the redemption of preferred shares.
In accordance with GAAP, the Company reclassified these costs from
paid-in-capital to operating activity in connection with the
redemption of the Series A Preferred Shares. 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 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, 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, FAD also
reflects that recurring capital expenditures are necessary to
maintain the associated real estate.
Should you have any questions concerning this release, please contact:
Barbara E. Hasenstab, Vice President of Investor Relations and Corporate
Communications, 216-797-8798 or IR@aecrealty.com. The full text and
supplemental schedules of this press release are available on AEC's home page
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, ext. 8752. AEC's web site
is linked to Sharebuilder, an online service that allows investments in shares
of AEC common stock directly on a recurring basis. For more information,
access the Investor Relations "News" section of http://www.aecrealty.com
SOURCE Associated Estates Realty Corporation
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