CLEVELAND, Oct. 25 /PRNewswire-FirstCall/ -- Associated Estates Realty
Corporation (NYSE: AEC) today reported net loss available to common
shareholders of $4.0 million or $0.24 per common share (basic and diluted),
for the third quarter ended September 30, 2007, compared with net loss
available to common shareholders of $7.9 million or $0.47 per common share
(basic and diluted), for the third quarter ended September 30, 2006. The
third quarter 2006 results included gains from property sales of
approximately $0.20 per share and defeasance costs of $0.44 per share.
Funds from operations (FFO) for the quarter were $0.29 per common share
(basic and diluted), compared with a negative $0.19 per common share (basic
and diluted), for the third quarter ended September 30, 2006. FFO adjusted
for defeasance and/or other prepayment costs of $7.5 million ("FFO as
adjusted") for the third quarter 2006 was $0.26 per share (basic and
diluted).
"The 11.5 percent improvement in FFO as adjusted is a direct result of
the initiatives we have undertaken to improve the operating performance of
our portfolio, lower our interest costs, sell lower margin assets and buy
properties in faster growing markets," said Jeffrey I. Friedman, Chairman,
President and CEO.
A reconciliation of net (loss) income 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.
Total revenue for the quarter was $39.4 million compared with $35.2
million for the third quarter of 2006, an increase of 11.9 percent.
Same Community (Market-Rate) Portfolio Results
Revenues for the quarter from the Company's same community portfolio
were up 3.9 percent, and total property operating expenses for the same
community portfolio increased 8.1 percent, resulting in a 0.5 percent
increase in net operating income (NOI), compared with the third quarter of
2006. Physical occupancy was 95.7 percent at the end of the third quarter
of 2007 compared with 95.8 percent at the end of the third quarter of 2006.
For the third quarter, the average net collected rent per unit for the same
community properties increased 3.5 percent to $817 per month, compared with
the third quarter of 2006. Net collected rent per unit for the Company's
same community Midwest portfolio grew 4.1 percent, while net collected rent
per unit for the Company's same community properties in the
Mid-Atlantic/Southeast markets grew 2.0 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 nine months ended September 30, 2007, net income applicable to
common shares was $4.0 million or $0.23 per share compared to net income
applicable to common shares of $9.9 million or $0.58 per share for the
period ended September 30, 2006. The results for the nine month period
ended September 30, 2007 include gains from property sales of $1.00 per
share compared to gains from property sales of $2.24 per share for the nine
months ended September 30, 2006. In addition, the results for the nine
month period ended September 30, 2007 include defeasance and/or other
prepayment costs of $0.25 per share compared to defeasance and/or other
prepayment costs of $0.86 per share for the nine months ended September 30,
2006.
Funds from operations for the nine months ended September 30, 2007 were
$0.66 per share. The results include defeasance and/or other 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 depository shares
of the Company's Class B Preferred Shares. Excluding these costs, FFO as
adjusted for the period ended September 30, 2007 would have been $0.92 per
share. Included in the Company's nine month results was the contribution of
$1.6 million or approximately $0.09 per common share related to the
settlement of a lawsuit.
Revenues for the nine month period ended September 30, 2007 for the
Company's same community portfolio were up 4.5 percent and total property
operating expenses for the same community portfolio increased 4.1 percent,
resulting in a 4.9 percent increase in NOI compared with the same period in
2006.
Stock Repurchases
As of the release date, 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, leaving $5.9 million available under the previously board authorized
$50.0 million stock repurchase program.
2007 FFO as Adjusted Outlook
The Company is increasing its expectations for full year FFO as
adjusted, which excludes defeasance, other prepayment and preferred share
repurchase costs, to a range of $1.21 to $1.25 per share, up from the
Company's previous guidance of $1.19 to $1.23 per share. Assumptions
relating to the Company's earnings guidance can be found on page 24 of the
supplemental fact book.
Conference Call
A conference call to discuss the results will be held today, Thursday,
October 25, at 2:00 p.m. (ET). To participate in the call:
Via Telephone: The dial in number is 800-862-9098 and the pass code 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 November 8, 2007.
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 98 multifamily properties containing a total of 19,909 units
located in ten 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 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 2007 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 our 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 managed 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 Nine
Months Ended Months Ended
September 30, September 30,
2007 2006 2007 2006
Total revenue $39,368 $35,183 $113,297 $104,121
Net (loss) income (2,821) (6,671) 7,858 13,668
Net (loss) income applicable
to common shares (1) (4,022) (7,933) 3,962 9,883
Add: Depreciation -
real estate assets 8,210 7,772 23,131 23,386
Depreciation -
real estate assets -
joint ventures 24 242 505 720
Amortization of joint
venture deferred costs - 8 17 26
Amortization of
intangible assets 753 163 792 819
Less: Gain on disposition
of properties - (3,397) (17,043) (38,120)
Funds from Operations (FFO)(2) 4,965 (3,145) 11,364 (3,286)
Funds from Operations (FFO)
as adjusted (3) 4,965 4,346 15,760 11,288
Add: Depreciation -
other assets 315 328 919 1,020
Depreciation -
other assets -
joint ventures 1 51 83 141
Amortization of deferred
financing fees 299 255 810 792
Amortization of deferred
financing fees -
joint ventures - 12 25 36
Less: Fixed asset additions (2,999) (1,944) (6,670) (5,262)
Fixed asset additions -
joint ventures (2) (65) (26) (119)
Funds available for
distribution (FAD) (4) $2,579 $2,983 $10,901 $7,896
Per share:
Net (loss) income applicable
to common shares
- basic and diluted (1) $(0.24) $(0.47) $0.23 $0.58
Funds from Operations
- basic and diluted (2) $0.29 $(0.19) $0.66 $(0.19)
Funds from Operations
as adjusted
- basic and diluted (3) $0.29 $0.26 $0.92 $0.66
Dividends per share $0.17 $0.17 $0.51 $0.51
Weighted average shares
outstanding
- basic and diluted 17,069 16,892 17,110 17,016
(1) After dividends and original costs associated with the preferred
share repurchase of $1,201, $1,262, $3,896 and $3,785, equivalent
to $0.07, $0.08, $0.23, and $0.22 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 costs and other prepayment costs of
$4,224 for the nine months ended September 30, 2007 and $7,491 and
$14,574 for the quarter and nine months ended September 30, 2006,
respectively. Also, added back is $172 of preferred stock
repurchase costs for the nine months ended September 30, 2007. In
accordance with GAAP, these prepayment costs are included as
interest expense in the Company's Consolidated Statement of
Operations. Also, in accordance with GAAP, the Company
reclassified the original issuance costs associated with the
repurchase of 111,500 depository shares of the Series B Preferred
Shares for the nine months ended September 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 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 "News"
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
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Related links:
http://www.aecrealty.com/
CONTACT:
Michael Lawson, Associated Estates Realty
Corporation, +1-216-797-8798
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