Ahead of Expectations
Raises Guidance
CLEVELAND, April 29 /PRNewswire-FirstCall/ -- Associated Estates Realty
Corporation (NYSE: AEC) today reported net income available to common
shareholders of $37.4 million or $2.32 per common share (basic and
diluted), for the first quarter ended March 31, 2008, compared with net
loss available to common shareholders of $812,000 or $0.05 per common share
(basic and diluted), for the first quarter ended March 31, 2007. The first
quarter 2008 and 2007 results included income available to common
shareholders from discontinued operations of $41.6 million and $5.6 million
or $2.58 and $0.33 per share, respectively.
Funds from operations (FFO) for the quarter were $0.22 per common share
(basic and diluted), compared with $0.14 per common share (basic and
diluted), for the first quarter ended March 31, 2007. FFO adjusted for
defeasance and other prepayment costs ("FFO as adjusted") was $0.34 per
share (basic and diluted) for the first quarter of 2008 compared to $0.29
for the first quarter of 2007.
"Our core operations performed better than expected. Occupancy remained
stable and we were able to achieve rental increases for both new leases and
lease renewals," said John Shannon, Senior Vice President of Operations.
A reconciliation of net income (loss) to FFO and FFO as adjusted
applicable to common shares 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 8-K.
Total revenue for the quarter was $32.1 million compared with $30.7
million for the first quarter of 2007, an increase of 4.6 percent.
Same Community Portfolio Results
Total revenue for the quarter from the Company's same community
portfolio was up 3.7 percent, and total property operating expenses for the
same community portfolio increased 3.7 percent, resulting in a 3.6 percent
increase in net operating income (NOI), compared with the first quarter of
2007. Physical occupancy was 95.0 percent at the end of the first quarter
of 2008 compared with 96.0 percent at the end of the first quarter of 2007.
For the first quarter, the average net rent collected per unit for the same
community properties increased 3.1 percent to $831 per month, versus $806
per month for the first quarter of 2007. Net rent collected per unit for
the Company's same community Midwest portfolio grew 4.1 percent, while net
rent collected per unit for the Company's same community properties in the
Mid-Atlantic/Southeast markets grew 1.1 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 "Investors" 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 .
Dispositions
During the quarter, the Company sold its Toledo, Ohio portfolio, which
was comprised of 4 properties and 1,060 units, for $47.0 million, which
represented an overall capitalization rate of approximately 7 percent,
based on trailing 12 month net operating income and after $800 per unit in
capital expenditures and a 3 percent management fee. Also during the
quarter, the Company sold ten of its eleven affordable housing properties,
totaling 995 units, for approximately $41.3 million, which represented an
overall capitalization rate of approximately 8.5 percent after $700 per
unit in capital expenditures and a 3 percent management fee. Subsequent to
quarter end, the Company completed the sale of its remaining wholly owned
affordable property for a sales price of $3.5 million.
Acquisitions
On April 22, 2008, the Company announced that it had completed the
purchase of 2 Class A properties in Richmond, Virginia, totaling 536 units.
The properties were completed in 2005 and 2006. With the addition of these
two properties, the Company's Virginia portfolio now totals 804 units.
Debt Structure
During the quarter, the Company repaid approximately $32.0 million of
Commercial Mortgage Backed Securities (CMBS) debt at par with a coupon of
7.9 percent. The Company has no further scheduled maturities in 2008.
Additionally, the Company defeased $11.0 million of CMBS debt associated
with the sale of a property in the Toledo portfolio. As of March 31, 2008,
the Company's $506.1 million debt balance included 90.5 percent of fixed
rate debt with a weighted average interest rate of 6.6 percent. The
Company's weighted average debt maturity is 5.2 years.
2008 FFO as Adjusted Outlook
The Company is increasing its expectations for full year FFO as
adjusted, which excludes defeasance and other prepayment costs, to a range
of $1.22 to $1.26 per share, up from the Company's previous guidance of
$1.18 to $1.22 per share. Assumptions relating to the Company's earnings
guidance can be found on page 20 of the supplemental fact book.
Conference Call
A conference call to discuss the results will be held today, Tuesday,
April 29, 2008 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 May 13, 2008.
Company Profile
Associated Estates Realty Corporation (AEC), based in Richmond Heights,
Ohio, is a real estate investment trust ("REIT") and is a member of the
Russell 2000. AEC's portfolio consists of 54 properties totaling 13,396
units 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
(loss) to FFO and FFO as adjusted applicable to common shares 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.
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 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.
For more information regarding the content of this news release, please
contact:
Michael Lawson
(216) 797-8798
Financial Highlights
(in thousands, except per share data)
Three Months Ended
March 31,
2008 2007
Total revenue $32,121 $30,685
Net income 38,645 450
Net income (loss) applicable to common
shares (1) 37,445 (812)
Add: Depreciation - real estate assets 8,203 7,449
Depreciation - real estate assets -
joint ventures 24 242
Amortization of joint venture
deferred costs - 9
Amortization of intangible assets 753 9
Less: Gain on disposition of properties (42,910) (4,561)
Funds from Operations (FFO) (2) 3,515 2,336
Funds from Operations (FFO) as adjusted (3) 5,474 4,999
Add: Depreciation - other assets 345 304
Depreciation - other assets -
joint ventures 1 47
Amortization of deferred financing fees 357 235
Amortization of deferred financing fees -
joint ventures - 12
Less: Recurring fixed asset additions (1,105) (979)
Recurring fixed asset additions -
joint ventures - (19)
Funds available for distribution (FAD) (4) $5,072 $4,599
Per share
Net income (loss) applicable to common shares -
basic and diluted (1) $2.32 $(0.05)
Funds from Operations - basic and diluted (2) $0.22 $0.14
Funds from Operations as adjusted -
basic and diluted (3) $0.34 $0.29
Dividends per share $0.17 $0.17
Weighted average shares outstanding -
basic and diluted (3) 16,167 17,109
(1) After preferred share dividends of $1,200, and $1,262, equivalent to
$0.07, and $0.07 per common share, respectively.
(2) The Company defines 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 $2.0 million for
the three months ended March 31, 2008, and $2.7 million for the three
months ended March 31, 2007. In accordance with GAAP, these
prepayment costs are included as interest expense in the Company's
Consolidated Statement of Operations. 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, as defined above, 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 Investors section of
http://www.aecrealty.com.
SOURCE Associated Estates Realty Corporation
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Related links:
http://www.aecrealty.com
http://ir.aecrealty.com/results.cfm
CONTACT:
Michael Lawson of Associated Estates Realty
Corporation, +1-216-797-8798
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