Property Operations Ahead of Expectations
CLEVELAND, April 27 /PRNewswire-FirstCall/ -- Associated Estates Realty
Corporation (NYSE: AEC) today reported a net loss applicable to common
shares of $8,885,000 or $0.51 per common share (basic and diluted), for the
first quarter ended March 31, 2006, compared with a net loss applicable to
common shares of $6,843,000, or $0.35 per common share (basic and diluted),
for the first quarter ended March 31, 2005.
Funds from operations (FFO) for the quarter were $(0.02) per common
share (basic and diluted), compared with $0.09 per common share (basic and
diluted) for the first quarter ended March 31, 2005.
The results for the first quarter of 2006 include $3.6 million in
defeasance costs associated with the prepayment of $35.3 million in debt.
Excluding these costs, FFO for the first quarter of 2006 would have been
$0.19 per common share (basic and diluted). Excluding non-cash redemption
costs of approximately $2.2 million, or $0.11 per share associated with the
redemption of the Company's Class A Shares in January 2005, FFO for the
first quarter of 2005 would have been $0.20 per common share (basic and
diluted).
A reconciliation of net (loss) 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 revenues for the quarter were $38,618,000, compared with
$34,840,000 for the first quarter of 2005, an increase of 10.8 percent.
Additional quarterly financial information, including 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 5.5 percent, and total property operating expenses for
the same store (market-rate) portfolio increased 9.3 percent, resulting in
a 2.0 percent increase in net operating income (NOI), compared with the
first quarter of 2005. Physical occupancy was 94.6 percent at the end of
the first quarter of 2006 compared with 92.6 percent at the end of the
first quarter of 2005.
For the first quarter, the average net collected rent per unit for the
same store (market-rate) properties increased 5.4 percent to $706 per
month, compared with the first quarter of 2005. Net collected rent per unit
for the Company's same store (market-rate) Midwest portfolio grew 4.1
percent, while net collected rent per unit for the Company's same store
(market-rate) properties in the Mid-Atlantic/Southeast markets grew 9.5
percent.
"We are pleased with the strong revenue growth in our same-store
portfolio," said John T. Shannon, Senior Vice President of Operations.
Shannon noted that these stronger revenues were driven by higher occupancy,
which contributed growth of approximately 1.9 percent, and a combination of
reduced concessions and increased rental rates, which contributed growth of
approximately 3.6 percent.
"We expect the momentum from our same-store portfolio performance in
the first quarter to continue to drive our results in the coming quarters,"
he added.
Sequential Same Store (Market-Rate) Portfolio
On a sequential quarterly basis, revenues from the Company's same store
(market-rate) portfolio were up 1.5 percent, and the average net collected
rent per unit for the same store (market-rate) properties increased 1.7
percent in the first quarter, compared with the fourth quarter of 2005.
Stock Repurchase
In 2005, the Company's Board of Directors approved a $50 million stock
repurchase program. During the first quarter of 2006, the Company purchased
985,225 shares at an average price of $10.34 per share, bringing the total
shares repurchased under this program to 2,803,925 shares at an average
price of $9.83 per share.
Dispositions
The Company said it still expects to sell at least $75 million of
assets during 2006.
Outlook
"Our first quarter FFO per share, excluding defeasance costs, was on
the high end of our expectations," said Lou Fatica, Vice President, Chief
Financial Officer and Treasurer.
"The majority of our FFO contributions are anticipated to be delivered
in the second half of the year as a result of the expected timing of
property sales, the redistribution of sales proceeds to pay down debt, and
the historically seasonal low FFO experienced during the first quarter," he
added.
"We are reiterating our expected FFO per share guidance of $0.98 to
$1.02 per share for the year, excluding the effect of defeasance costs,"
said Fatica.
Assumptions relating to the Company's earnings guidance can be found on
page 19 of the first quarter 2006 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,
April 27, at 2:00 p.m. Eastern. To participate in the call:
Via Telephone: The dial in number is 800-362-0571, 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 May 11, 2006.
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 2006 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 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 multifamily units and changes in market rental rates;
increases in property and liability insurance costs; changes 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); 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; changes in or termination of contracts relating to third party
management and advisory business; inability to renew current contracts with
HUD for rent-subsidized properties 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 control operating
expenses or achieve 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 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 liability, among others; changes in market conditions that
may limit or prevent the Company from acquiring or selling properties; 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
110 multifamily properties containing a total of 23,511 units located in 11
states.
ASSOCIATED ESTATES REALTY
CORPORATION
Financial Highlights
(in thousands, except per share data)
For the Three Months Ended March 31,
2006 2005
Total revenue $38,618 $34,840
Net (loss) income (7,623) (3,334)
Net (loss) income applicable to common shares(1) (8,885) (6,843)
Add: Depreciation - real estate assets 7,886 8,127
Depreciation - real estate assets -
joint ventures 240 240
Amortization of joint venture deferred
costs 9 8
Amortization of intangible assets 440 244
Funds from Operations (FFO) (2) (310) 1,776
Funds from Operations (FFO) adjusted for
defeasance costs and/or preferred share
redemption costs(3) 3,249 3,939
Add: Depreciation - other assets 363 425
Depreciation - other assets -
joint ventures 44 51
Amortization of deferred financing fees 281 272
Amortization of deferred financing fees
- joint ventures 12 7
Less: Fixed asset additions (1,272) (961)
Fixed asset additions - joint ventures (22) (13)
Funds available for distribution
(FAD) (4) $2,655 $3,720
Per share:
Net (loss) income applicable to common
shares - basic and diluted (1) $(0.51) $(0.35)
Funds from operations - basic and diluted (2) $(0.02) $0.09
- adjusted for defeasance costs and/or
preferred share redemption costs(3) $0.19 $0.20
Dividends per share $0.17 $0.17
Weighted average shares outstanding - basic
and diluted 17,283 19,579
(1) After dividends and original costs associated with the preferred
share redemption, of $1,262 and $3,509, equivalent to $0.07 and $0.18
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 defeasance costs and/or preferred
redemption costs as FFO, as defined above, plus the add back of
defeasance costs of $3,559,000 for the quarter ended March 31, 2006
and/or the $2,163,000 original issuance costs associated with the
redemption of preferred shares for the quarter ended March 31, 2005.
In accordance with GAAP, the defeasance costs are included as
interest expense in the Company's Consolidated Statement of
Operations. These costs are the costs associated with the defeasance
(prepayment) of four loans. Also, in accordance with GAAP, the
Company reclassified the original issuance costs associated with the
redemption of the Series A Preferred Shares in January 2005. 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
For more information regarding the content
of this news release, please contact:
Barbara Hasenstab
216-797-8798
SOURCE Associated Estates Realty Corporation
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Related links:
http://www.aecrealty.com
http://www.snl.com/interactive/ir/corp.asp?iid=103102
CONTACT:
Barbara Hasenstab of Associated Estates
Realty Corporation, +1-216-797-8798
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