Company Raises Full-Year Guidance
CLEVELAND, July 29 /PRNewswire-FirstCall/ -- Associated Estates Realty
Corporation (NYSE: AEC)(Nasdaq: AEC) today reported a net loss available to
common shareholders of $1.4 million or $0.09 per common share (basic and
diluted), for the second quarter ended June 30, 2008, compared with net
income available to common shareholders of $8.8 million or $0.51 per common
share (basic and diluted), for the second quarter ended June 30, 2007. The
second quarter 2008 and 2007 results include gains on dispositions of
properties of $2.3 million and $12.5 million, or $0.14 and $0.73 per share,
respectively.
Funds from operations (FFO) for the quarter were $0.34 per common share
(basic and diluted), compared with $0.24 per common share (basic and
diluted), for the second quarter ended June 30, 2007. FFO adjusted for
defeasance and other prepayment costs ("FFO as adjusted") was $0.34 per
share (basic and diluted) for the second quarter of 2008 compared to $0.34
for the second quarter of 2007.
A reconciliation of net (loss) income applicable to common shares to
FFO and FFO as adjusted 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 $34.0 million compared with $32.0
million for the second quarter of 2007, an increase of 6.3 percent.
Same Community Portfolio Results
Net operating income (NOI) for the quarter from the Company's same
community portfolio increased 8.3 percent as a result of revenue from the
Company's same community portfolio increasing 3.3 percent, and property
operating expenses for the same community portfolio decreasing 2.6 percent,
compared with the second quarter of 2007. Physical occupancy was 96.7
percent at the end of the second quarter of 2008 compared with 96.4 percent
at the end of the second quarter of 2007. For the second quarter, the
average net rent collected per unit for the same community properties
increased 3.0 percent to $846 per month. Net rent collected per unit for
the Company's same community Midwest portfolio grew 4.7 percent, while net
rent collected per unit for the Company's same community properties in the
Mid-Atlantic/Southeast markets decreased 0.5 percent.
"Our strong year-to-date performance and improved outlook are a direct
result of well positioned properties and the continued investment in our
portfolio," said John Shannon, Senior Vice President of Operations.
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.
First Half Performance
For the six months ended June 30, 2008, net income applicable to common
shares was $36.1 million or $2.23 per share (basic and diluted) compared to
net income applicable to common shares of $8.0 million or $0.47 per share
(basic and diluted) for the period ended June 30, 2007. The results for the
six month period ended June 30, 2008 and June 30, 2007 includes gains from
property sales of $45.2 million and $17.0 million, or $2.79 per share and
$0.99 per share, respectively.
Funds from operations for the first six months ended June 30, 2008 were
$0.56 per share and include defeasance and/or prepayment costs of $2.0
million, or approximately $0.12 per share associated with the repayment of
$11.0 million in debt. Excluding these costs, FFO for the first half of
2008 would have been $0.68 per share.
NOI for the six month period ended June 30, 2008 for the Company's same
community portfolio was up 5.9 percent primarily due to a 3.5 percent
increase in revenues for the Company's same community portfolio and only a
0.4 percent increase in property operating expenses for the same community
portfolio compared with the first six months of 2007.
Acquisitions
On April 22, 2008, the Company announced that it had closed the
purchase of two Class A properties located in the Richmond, Virginia metro
area, 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, which represents approximately 9 percent of the
Company's NOI on an annualized basis.
2008 Adjusted Outlook
The Company is once again increasing its expectations for full-year FFO
as adjusted, which excludes defeasance and other prepayment costs, to a
range of $1.28 to $1.32 per share, up from the Company's previous guidance
of $1.22 to $1.26 per share. Assumptions relating to the Company's earnings
guidance can be found on page 25 of the supplemental fact book.
Conference Call
A conference call to discuss the results will be held today, Tuesday,
July 29, 2008 at 2:00 p.m. (EDT). 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 August 12, 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 owned and managed 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 (loss)
income applicable to common shares to FFO and FFO as adjusted 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 venture; 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.
Financial Highlights
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Total revenue $ 34,020 $32,043 $66,141 $62,729
Net (loss) income (179) 10,229 38,466 10,679
Net (loss) income applicable
to common shares (1) (1,380) 8,796 36,064 7,984
Add: Depreciation - real
estate assets 7,920 7,472 16,124 14,921
Depreciation - real
estate assets - joint
ventures 23 240 46 481
Amortization of joint
venture deferred costs - 8 - 17
Amortization of intangible
assets 1,207 30 1,960 39
Less: Gain on disposition of
properties (2,293) (12,482) (45,203) (17,043)
Funds from Operations (FFO) (2) 5,477 4,064 8,991 6,399
Funds from Operations (FFO)
as adjusted (3) 5,477 5,797 10,950 10,795
Add: Depreciation - other
assets 346 299 691 603
Depreciation - other
assets - joint ventures 1 36 2 82
Amortization of deferred
financing fees 307 276 664 511
Amortization of deferred
financing fees - joint
ventures - 12 - 24
Less: Recurring fixed asset
additions (2,840) (2,692) (3,945) (3,671)
Recurring fixed asset
additions - joint
ventures (2) (5) (2) (24)
Funds available for
distribution (FAD) (4) $3,289 $3,723 $8,360 $8,320
Per share
Net (loss) income applicable
to common shares - basic
and diluted (1) $(0.09) $0.51 $2.23 $0.47
Funds from Operations - basic
and diluted (2) $0.34 $0.24 $0.56 $0.37
Funds from Operations as
adjusted - basic and
diluted (3) $0.34 $0.34 $0.68 $0.63
Dividends per share $0.17 $0.17 $0.34 $0.34
Weighted average shares
outstanding - basic and
diluted (3) 16,200 17,153 16,184 17,131
(1) After preferred share dividends and original costs associated with the
preferred share repurchase of $1,201, $1,433, $2,402 and $2,695,
equivalent to $0.07, $0.08, $0.15 and $0.16 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 six months ended June 30, 2008, and $1.6 million and $4.2 million
for the three and six months ended June 30, 2007. In accordance with
GAAP, these prepayment costs are included as interest expense in the
Company's Consolidated Statement of Operations. Also added back is
$172,000 of preferred stock repurchase costs for both the three and
six months ended June 30, 2007. In accordance with GAAP, the Company
reclassified from additional paid in capital the original issuance
costs associated with the repurchase of 111,500 depository shares of
the Series B Preferred Shares for the three and six months ended June
30, 2007. 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.
For more information regarding the content of this news release, please
contact:
Kimberly Kanary
(216) 797-8718
SOURCE Associated Estates Realty Corporation
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Related links:
http://www.aecrealty.com
CONTACT:
Kimberly Kanary, Associated Estates Realty
Corporation, +1-216-797-8718
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