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Associated Estates Realty Corporation
Third Quarter 2008
Earnings Release and Supplemental Financial Data |
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The Bradford at Easton
4150 Silver Springs Lane
Columbus, OH 43230
Tel: (866) 850-2950
WebSite:www.bradfordateaston.com |
Located in one of the most sought-after areas of Columbus, Ohio, residents select The Bradford at Easton because of the location adjacent to Easton Town Center. Located fifteen minutes from downtown Columbus, The Bradford at Easton offers a range of floor plans from one bedroom apartments to three bedroom townhomes with attached garages. Numerous features and amenities such as wood-burning fireplace, sunroom and resort-style swimming pool, make The Bradford at Easton a care-free alternative to home ownership.
Associated Estates Realty Corporation | Phone: (216) 261-5000 |
1 AEC Parkway | Fax: (216) 289-9600 |
Richmond Heights, Ohio 44143-1467 | Web Site: www.aecrealty.com |
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Investor contact: Kimberly Kanary | |
Vice President of Corporate Communications | |
(216) 797-8718 | |
kkanary@aecrealty.com | |
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: 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.
Associated Estates Realty Corporation
Third Quarter 2008
Supplemental Financial Data |
Cleveland, Ohio – October 27, 2008 – Associated Estates Realty Corporation (NYSE:AEC) (NASDAQ: AEC) today reported a net loss available to common shareholders of $4.2 million or $0.26 per common share (basic and diluted), for the third quarter ended September 30, 2008, compared with a 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.
Funds from operations (FFO) for the quarter were $0.31 per common share (basic and diluted), compared with $0.29 per common share (basic and diluted), for the third quarter ended September 30, 2007, a 6.9 percent increase.
A reconciliation of net (loss) income applicable to common shares to FFO is included on page 10.
Revenue for the quarter was $35.3 million compared with $34.5 million for the third quarter of 2007, a 2.3 percent increase.
Q3 Same Community Portfolio Results
Net operating income (NOI) from the Company’s same community portfolio increased 6.9 percent as a result of revenue increasing 3.3 percent, and property operating expenses decreasing 1.0 percent, compared with the third quarter of 2007. Physical occupancy remains constant at 95.8 percent compared to the end of the third quarter of 2007. For the third quarter, the average net rent collected per unit for the same community properties increased 3.1 percent to $864 per month. Net rent collected per unit for the Company’s same community Midwest portfolio grew 5.1 percent to $789, while net rent collected per unit for the Company’s same community properties in the Mid-Atlantic/Southeast markets decreased 0.1 percent to $1,020.
Additional quarterly financial information, including performance by region for the Company's portfolio, is included on pages 15 to 23.
Year-to-Date Performance
For the nine months ended September 30, 2008, net income applicable to common shares was $31.8 million or $1.96 per share (basic and diluted) compared to net income applicable to common shares of $4.0 million or $0.23 per share (basic and diluted) for the period ended September 30, 2007. The results for the nine month period ended September 30, 2008 and September 30, 2007 include gains from property sales of $45.2 million and $17.0 million, or $2.79 per share and $1.00 per share, respectively.
Funds from operations for the first nine months ended September 30, 2008 were $0.87 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 as adjusted for the period ended September 30, 2008 was $0.99 per share.
A reconciliation of net (loss) income applicable to common shares to FFO, and to FFO as adjusted, is included on page 10.
Year-to-date, NOI for the same community portfolio was up 6.7 percent. This increase was driven by a 3.5 percent increase in revenue and a 0.3 percent decrease in property operating expenses.
Associated Estates Realty Corporation
Third Quarter Earnings |
Debt Maturities
The Company has no debt maturities remaining in 2008, a total of $72.3 million maturing in 2009, and a total of $78.6 million in 2010. A schedule of debt maturities can be found on page 24.
The Company’s $150 million line of credit had a balance of $14.5 million on September 30, 2008, and matures in 2011.
2008 Outlook
The Company has reaffirmed its expectations for full-year FFO as adjusted of $1.28 to $1.32 per share, which excludes defeasance and other prepayment costs. Assumptions relating to the Company's earnings guidance can be found on page 25.
Conference Call
A conference call to discuss the results will be held tomorrow, Tuesday, October 28, 2008 at 2:00 p.m. (EST). 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 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 November 11, 2008.
Associated Estates Realty Corporation
Financial and Operating Highlights
For the Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited; in thousands, except per share and ratio data) |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
OPERATING INFORMATION | | 2008 | | 2007 | | 2008 | | 2007 |
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Total revenue | | $ | 35,343 | | $ | 34,535 | | $ | 101,484 | | $ | 97,337 |
Property revenue | | $ | 34,368 | | $ | 31,513 | | $ | 99,234 | | $ | 87,162 |
Net (loss) income applicable to common shares | | $ | (4,244) | | $ | (4,022) | | $ | 31,820 | | $ | 3,962 |
Per share - basic and diluted | | $ | (0.26) | | $ | (0.24) | | $ | 1.96 | | $ | 0.23 |
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Funds from Operations (FFO) (1) | | $ | 5,056 | | $ | 4,965 | | $ | 14,047 | | $ | 11,364 |
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FFO as adjusted (1) | | $ | 5,056 | | $ | 4,965 | | $ | 16,006 | | $ | 15,760 |
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FFO per share - basic and diluted | | $ | 0.31 | | $ | 0.29 | | $ | 0.87 | | $ | 0.66 |
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FFO as adjusted per share - basic and diluted | | $ | 0.31 | | $ | 0.29 | | $ | 0.99 | | $ | 0.92 |
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Funds Available for Distribution (FAD) (1) | | $ | 2,541 | | $ | 2,579 | | $ | 10,899 | | $ | 10,901 |
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Dividends per share | | $ | 0.17 | | $ | 0.17 | | $ | 0.51 | | $ | 0.51 |
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Payout ratio - FFO | | 54.8% | | 58.6% | | 58.6% | | 77.3% |
Payout ratio - FFO as adjusted | | 54.8% | | 58.6% | | 51.5% | | 55.4% |
Payout ratio - FAD | | 106.3% | | 113.3% | | 76.1% | | 79.7% |
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General and administrative expense | | $ | 3,668 | | $ | 2,463 | | $ | 10,379 | | $ | 7,873 |
Interest expense (2) | | $ | 8,882 | | $ | 9,419 | | $ | 26,357 | | $ | 25,830 |
Interest coverage ratio (3) | | 1.72 | | 1.64 | | 1.75 | | 1.72 |
Fixed charge coverage ratio (4) | | 1.52 | | 1.47 | | 1.55 | | 1.52 |
General and administrative expense to property revenue | | 10.7% | | 7.8% | | 10.5% | | 9.0% |
Interest expense to property revenue | | 25.8% | | 29.9% | | 26.6% | | 29.6% |
Property NOI (5) | | $ | 19,386 | | $ | 17,031 | | $ | 56,721 | | $ | 47,829 |
ROA (6) | | 8.3% | | 8.1% | | 8.3% | | 8.1% |
Same community revenue increase | | 3.3% | | 4.0% | | 3.5% | | 4.5% |
Same community expense (decrease) increase | | (1.0)% | | 9.4% | | (0.3)% | | 4.3% |
Same community NOI increase (decrease) | | 6.9% | | (0.3)% | | 6.7% | | 4.6% |
Same community operating margins | | 55.9% | | 54.0% | | 56.3% | | 54.6% |
(1) | See page 10 for a reconciliation of net (loss) income applicable to common shares to these non-GAAP measurements and page 26 for the Company's definition of these non-GAAP measurements. |
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(2) | Excludes amortization of financing fees of $320 and $956 for 2008 and $290 and $783 for 2007. Also, it excludes $0 and $4,183 of defeasance and other prepayment costs for 2007. |
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(3) | Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs, and excluding defeasance, other prepayment and/or preferred repurchase costs. Individual line items in this calculation include results from discontinued operations where applicable. See page 27 for a reconciliation of net (loss) income available to common shareholders to EBITDA and for the Company's definition of EBITDA. |
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(4) | Represents interest expense and preferred stock dividend payment coverage, excluding defeasance, and/or other prepayment costs. Individual line items in this calculation include discontinued operations where applicable. |
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(5) | See page 28 for a reconciliation of net (loss) income to this non-GAAP measurement and for the Company's definition of this non-GAAP measurement. |
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(6) | ROA is calculated as trailing twelve month Property NOI divided by average gross real estate assets, excluding held for sale assets. |
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Associated Estates Realty Corporation
Financial and Operating Highlights
Third Quarter 2008
(Unaudited; in thousands, except per share and ratio data) |
| | September 30, | | December 31, |
MARKET CAPITALIZATION DATA | | 2008 | | 2007 |
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Net real estate assets | | $ | 678,813 | | $ | 659,586 |
Total assets | | $ | 706,395 | | $ | 686,796 |
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Debt | | $ | 551,233 | | $ | 556,695 |
Minority interest | | $ | 1,829 | | $ | 1,829 |
Preferred stock - 8.70% Class B Cumulative Redeemable Preferred Shares | | $ | 55,213 | | $ | 55,213 |
Total shareholders' equity | | $ | 116,023 | | $ | 89,786 |
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Common shares outstanding | | 16,558 | | 16,354 |
Share price, end of period | | $ | 13.03 | | $ | 9.44 |
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Total market capitalization (1) | | $ | 824,259 | | $ | 768,358 |
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Undepreciated book value of real estate assets | | $ | 955,019 | | $ | 965,013 |
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Debt to undepreciated book value of real estate assets | | 57.7% | | 57.7% |
Debt and preferred stock to undepreciated book value of real estate assets | | 63.5% | | 63.4% |
Debt to total market capitalization (1) | | 67.1% | | 72.7% |
Debt and preferred stock to total market capitalization (1) | | 73.8% | | 79.9% |
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Annual dividend | | $ | 0.68 | | $ | 0.68 |
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Annual dividend yield based on share price, end of period | | 5.2% | | 7.2% |
(1) | Includes the Company's share of unconsolidated debt of $2,062 and $2,068 as of September 30, 2008 and December 31, 2007. |
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Associated Estates Realty Corporation
Financial and Operating Highlights
Third Quarter 2008 |
| | | | | | Average Age |
| | | | Number | | of Owned |
PORTFOLIO INFORMATION | | Properties | | of Units | | Properties |
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Company Portfolio: | | | | | | |
Directly owned: | | | | | | |
Same Community Midwest | | 36 | | 8,212 | | 16 |
Same Community Mid-Atlantic/Southeast | | 12 | | 3,924 | | 13 |
Total Same Community | | 48 | | 12,136 | | 15 |
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Acquisitions | | 2 | | 536 | | 3 |
Total directly owned | | 50 | | 12,672 | | 14 |
Joint Ventures: | | | | | | |
Affordable Housing | | 1 | | 108 | | |
Third Party Managed: | | | | | | |
Affordable Housing | | 1 | | 85 | | |
Market Rate | | 2 | | 531 | | |
Total Third Party Managed | | 3 | | 616 | | |
Total Company Portfolio | | 54 | | 13,396 | | |
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| | September 30, | | December 31, |
| | 2008 | | 2007 |
ASSETS | | | | |
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Real estate assets | | |
Investment in real estate | | $ | 954,178 | | $ | 964,292 |
Construction in progress | | 841 | | 721 |
Less: accumulated depreciation | | (276,206) | | (305,427) |
Real estate, net | | 678,813 | | 659,586 |
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Cash and cash equivalents | | 3,800 | | 1,549 |
Restricted cash | | 6,366 | | 6,730 |
Other assets | | 17,416 | | 18,931 |
Total assets | | $ | 706,395 | | $ | 686,796 |
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LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
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Mortgage notes payable | | $ | 510,953 | | $ | 510,915 |
Unsecured revolving credit facility | | 14,500 | | 20,000 |
Unsecured debt | | 25,780 | | 25,780 |
Total debt | | 551,233 | | 556,695 |
Accounts payable, accrued expenses and other liabilities | | 37,310 | | 38,486 |
Total liabilities | | 588,543 | | 595,181 |
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Operating partnership minority interest | | 1,829 | | 1,829 |
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Shareholders' equity | | | | |
Preferred shares, without par value; 9,000,000 shares authorized: 8.70% | | | | |
Class B Series II cumulative redeemable, $250 per share liquidation | | | | |
preference, 232,000 issued and 220,850 outstanding | | 55,213 | | 55,213 |
Common shares, without par value, $.10 stated value; 41,000,000 | | | | |
authorized; 22,995,763 issued and 16,557,633 and 16,353,700 | | | | |
outstanding at September 30, 2008 and December 31, 2007, respectively | | 2,300 | | 2,300 |
Paid-in capital | | 281,837 | | 281,152 |
Accumulated distributions in excess of accumulated net income | | (157,050) | | (180,436) |
Accumulated other comprehensive loss | | (1,325) | | (1,050) |
Less: Treasury shares, at cost, 6,438,130 and 6,642,063 shares | | | | |
at September 30, 2008 and December 31, 2007, respectively | | (64,952) | | (67,393) |
Total shareholders' equity | | 116,023 | | 89,786 |
Total liabilities and shareholders' equity | | $ | 706,395 | | $ | 686,796 |
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| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
REVENUE | | | | | | | | |
Property revenue | | $ | 34,368 | | $ | 31,513 | | $ | 99,234 | | $ | 87,162 |
Management and service company revenue: | | | | | | | | |
Fees, reimbursements and other | | 428 | | 2,462 | | 1,378 | | 8,378 |
Painting services | | 547 | | 560 | | 872 | | 1,797 |
Total revenue | | 35,343 | | 34,535 | | 101,484 | | 97,337 |
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EXPENSES | | | | | | | | |
Property operating and maintenance | | 14,982 | | 14,482 | | 42,513 | | 39,333 |
Depreciation and amortization | | 9,602 | | 8,462 | | 27,614 | | 21,863 |
Direct property management and service company expense | | 420 | | 2,931 | | 1,213 | | 9,802 |
Painting services and charges | | 578 | | 498 | | 1,098 | | 1,651 |
General and administrative | | 3,668 | | 2,463 | | 10,379 | | 7,873 |
Total expenses | | 29,250 | | 28,836 | | 82,817 | | 80,522 |
Operating income | | 6,093 | | 5,699 | | 18,667 | | 16,815 |
Interest income | | 16 | | 49 | | 124 | | 379 |
Interest expense | | (9,202) | | (9,709) | | (27,313) | | (30,796) |
Equity in net loss of joint ventures | | (28) | | (31) | | (72) | | (247) |
Minority interest in operating partnership | | (13) | | (13) | | (40) | | (40) |
(Loss) income from continuing operations | | (3,134) | | (4,005) | | (8,634) | | (13,889) |
Income from discontinued operations: | | | | | | | | |
Operating income (loss) | | 91 | | 1,184 | | (1,146) | | 4,704 |
Gain on disposition of properties | | - | | - | | 45,203 | | 17,043 |
Income from discontinued operations | | 91 | | 1,184 | | 44,057 | | 21,747 |
Net (loss) income | | (3,043) | | (2,821) | | 35,423 | | 7,858 |
Preferred share dividends | | (1,201) | | (1,201) | | (3,603) | | (3,724) |
Preferred share repurchase costs | | - | | - | | - | | (172) |
Net (loss) income applicable to common shares | | $ | (4,244) | | $ | (4,022) | | $ | 31,820 | | $ | 3,962 |
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Earnings per common share - basic and diluted: | | | | | | | | |
(Loss) income from continuing operations applicable to | | | | | | | | |
common shares | | $ | (0.27) | | $ | (0.31) | | $ | (0.75) | | $ | (1.04) |
Income from discontinued operations | | 0.01 | | 0.07 | | 2.71 | | 1.27 |
Net (loss) income applicable to common shares | | $ | (0.26) | | $ | (0.24) | | $ | 1.96 | | $ | 0.23 |
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Weighted average shares outstanding - basic and diluted | | 16,298 | | 17,069 | | 16,222 | | 17,110 |
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| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
CALCULATION OF FFO AND FAD | | | | | | | | |
Net (loss) income applicable to common shares | | $ | (4,244) | | $ | (4,022) | | $ | 31,820 | | $ | 3,962 |
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Add: | Depreciation - real estate assets | | 8,175 | | 8,210 | | 24,299 | | 23,131 |
| Depreciation - real estate assets - joint ventures | | 24 | | 24 | | 69 | | 505 |
| Amortization of joint venture deferred costs | | - | | - | | - | | 17 |
| Amortization of intangible assets | | 1,101 | | 753 | | 3,062 | | 792 |
Less: | Gain on disposition of properties | | - | | - | | (45,203) | | (17,043) |
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| Funds from Operations (FFO) (1) | | 5,056 | | 4,965 | | 14,047 | | 11,364 |
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Add: | Defeasance and other prepayment costs | | - | | - | | 1,959 | | 4,224 |
Add: | Preferred stock repurchase costs | | - | | - | | - | | 172 |
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| Funds from Operations as Adjusted (1) | | 5,056 | | 4,965 | | 16,006 | | 15,760 |
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Add: | Depreciation - other assets | | 326 | | 315 | | 1,015 | | 919 |
| Depreciation - other assets - joint ventures | | - | | 1 | | 2 | | 83 |
| Amortization of deferred financing fees | | 320 | | 299 | | 984 | | 810 |
| Amortization of deferred financing fees - joint ventures | | - | | - | | - | | 25 |
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Less: | Recurring fixed asset additions (2) | | (3,159) | | (2,999) | | (7,104) | | (6,670) |
| Recurring fixed asset additions - joint ventures (2) | | (2) | | (2) | | (4) | | (26) |
| Funds Available for Distribution (FAD) (1) | | $ | 2,541 | | $ | 2,579 | | $ | 10,899 | | $ | 10,901 |
| | | | | | | | | |
Weighted average shares outstanding - basic and diluted (3) | | 16,298 | | 17,069 | | 16,222 | | 17,110 |
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PER SHARE INFORMATION: | | | | | | | | |
FFO - basic and diluted | | $ | 0.31 | | $ | 0.29 | | $ | 0.87 | | $ | 0.66 |
FFO as adjusted - basic and diluted | | $ | 0.31 | | $ | 0.29 | | $ | 0.99 | | $ | 0.92 |
Dividends | | $ | 0.17 | | $ | 0.17 | | $ | 0.51 | | $ | 0.51 |
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Payout ratio - FFO | | 54.8% | | 58.6% | | 58.6% | | 77.3% |
Payout ratio - FFO as adjusted | 54.8% | | 58.6% | | 51.5% | | 55.4% |
Payout ratio - FAD | | 106.3% | | 113.3% | | 76.1% | | 79.7% |
(1) | See page 26 for the Company's definition of these non-GAAP measurements. Individual line items included in FFO and FAD calculation include results from discontinued operations where applicable. |
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(2) | Fixed asset additions exclude development, investment and non-recurring capital additions and only reflect the Company's prorata share of recurring joint venture capital additions. |
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(3) | The Company computes the weighted average shares outstanding in accordance with SFAS 128 and accordingly, has excluded 568 and 397 common share equivalents from the three and nine months ended September 30, 2008 calculation, and 533 and 598 common share equivalents from the three and nine months ended September 30, 2007 calculation, used in the computation of earnings per share and FFO per share, as they would be anti-dilutive to the loss from continuing operations. |
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Associated Estates Realty Corporation
Discontinued Operations (1)
Three Months Ended September 30, 2008 and 2007
(Unaudited; dollar and share amounts in thousands) |
| | Three Months Ended |
| | September 30, |
| | 2008 | | 2007 |
REVENUE | | | | |
Property revenue | | $ | - | | $ | 4,833 |
| | | | |
EXPENSES | | | | |
Property operating and maintenance | | (91) | | 2,479 |
Depreciation and amortization | | - | | 816 |
Total expenses | | (91) | | 3,295 |
Operating income | | 91 | | 1,538 |
Interest income | | - | | 8 |
Interest expense | | - | | (362) |
Income from discontinued operations | | $ | 91 | | $ | 1,184 |
| | | | |
Earnings per common share - basic and diluted: | | | | |
Income from discontinued operations | | $ | 0.01 | | $ | 0.07 |
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Weighted average shares outstanding - basic and diluted | | 16,298 | | 17,069 |
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(1) | In accordance with SFAS 144, the Company reports the results of operations and gain/loss related to the sale of real estate assets as discontinued operations. Real estate assets that are classified as held for sale are also reported as discontinued operations. The Company generally classifies properties held for sale when all significant contingencies surrounding the closing have been resolved. In many transactions, these contingencies are not satisfied until the actual closing of the transaction. Interest expense included in discontinued operations is limited to interest on mortgage debt specifically associated with properties sold or classified as held for sale. |
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| Included in the table above are fifteen properties disposed of in 2008 and three properties disposed of in 2007. |
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Associated Estates Realty Corporation
Discontinued Operations (1)
Nine Months Ended September 30, 2008 and 2007
(Unaudited; dollar and share amounts in thousands) |
| | Nine Months Ended |
| | September 30, |
| | 2008 | | 2007 |
REVENUE | | | | |
Property revenue | | $ | 4,083 | | $ | 18,903 |
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EXPENSES | | | | |
Property operating and maintenance | | 2,144 | | 10,165 |
Depreciation and amortization | | 762 | | 2,979 |
Total expenses | | 2,906 | | 13,144 |
Operating income | | 1,177 | | 5,759 |
Interest income | | 3 | | 22 |
Interest expense (2) | | (2,326) | | (1,077) |
Gain on disposition of properties | | 45,203 | | 17,043 |
Income from discontinued operations | | $ | 44,057 | | $ | 21,747 |
| | | | |
Earnings per common share - basic and diluted: | | | | |
Income from discontinued operations | | $ | 2.71 | | $ | 1.27 |
| | | | |
Weighted average shares outstanding - basic and diluted | | 16,222 | | 17,110 |
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(1) | In accordance with SFAS 144, the Company reports the results of operations and gain/loss related to the sale of real estate assets as discontinued operations. Real estate assets that are classified as held for sale are also reported as discontinued operations. The Company generally classifies properties held for sale when all significant contingencies surrounding the closing have been resolved. In many transactions, these contingencies are not satisfied until the actual closing of the transaction. Interest expense included in discontinued operations is limited to interest on mortgage debt specifically associated with properties sold or classified as held for sale. |
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| Included in the table above are fifteen properties disposed of in 2008 and three properties disposed of in 2007. |
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(2) | Included in the 2008 expense is $1,959 of defeasance and other prepayment costs. |
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Associated Estates Realty Corporation
Overview of Operating Expenses Related to Repairs and Maintenance and Capitalized Expenditures
(In thousands, except estimated GAAP useful life and cost per unit) |
| | | | Nine Months Ended |
| | Estimated | | September 30, 2008 |
| | GAAP Useful | | | | Cost Per |
| | Life (Years) | | Amount | | Unit (1) |
OPERATING EXPENSES RELATED TO REPAIRS AND MAINTENANCE | | | | | | |
Repairs and maintenance (2) | | | | $ | 7,741 | | $ | 590 |
Maintenance personnel labor cost (2) | | | | 4,218 | | 322 |
Total Operating Expenses Related to Repairs and Maintenance | | | | 11,959 | | 912 |
| | | | | | |
CAPITAL EXPENDITURES | | | | | | |
Recurring Capital Expenditures (3) | | | | | | |
Amenities | | 5 | | 235 | | 18 |
Appliances | | 5 | | 603 | | 46 |
Building improvements | | 14 | | 1,809 | | 138 |
Carpet and flooring | | 5 | | 1,956 | | 149 |
Furnishings | | 5 | | 390 | | 30 |
Office/Model | | 5 | | 5 | | - |
HVAC and mechanicals | | 15 | | 532 | | 41 |
Landscaping and grounds | | 14 | | 1,343 | | 102 |
Suite improvements | | 5 | | 41 | | 3 |
Miscellaneous | | 5 | | 74 | | 6 |
Total Recurring Capital Expenditures - Properties | | | | 6,988 | | 533 |
Corporate capital expenditures (4) | | | | 116 | | 9 |
Total Recurring Capital Expenditures | | | | 7,104 | | 542 |
Total Recurring Capital Expenditures and Repairs and Maintenance | | | | $ | 19,063 | | $ | 1,454 |
| | | | | | |
Total Recurring Capital Expenditures | | | | $ | 7,104 | | |
Investment/Revenue Enhancing Expenditures (5) | | | | | | |
Building improvements - unit upgrades | | Various | | 2,562 | | |
| | | | | | |
Grand Total Capital Expenditures | | | | $ | 9,666 | | |
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(1) | Calculated using weighted average units owned during the nine months ended September 30, 2008 of 13,107. |
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(2) | Included in property operating and maintenance expense in the Consolidated Statements of Operations. |
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(3) | See page 28 for the Company's definition of recurring fixed asset additions. |
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(4) | Includes upgrades to computer hardware and software as well as corporate office furniture and fixtures. |
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(5) | See page 28 for the Company's definition of investment/revenue enhancing additions. |
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Associated Estates Realty Corporation
Fees, Reimbursements and Other Revenue, Direct Property Management
and Service Company Expense and General Administrative Expense
For the Three and Nine Months Ended September 30, 2008 and 2007
(In thousands) |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | September 30, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
Fees, Reimbursements and Other Revenue | | | | | | | | |
Property management fees | | $ | 73 | | $ | 505 | | $ | 223 | | $ | 1,640 |
Asset management fees | | 90 | | 69 | | 199 | | 288 |
Other revenue | | 8 | | 3 | | 165 | | 80 |
Payroll reimbursements(1) | | 257 | | 1,885 | | 791 | | 6,370 |
| | | | | | | | | |
Fees, Reimbursements and Other Revenue(2) | | 428 | | 2,462 | | 1,378 | | 8,378 |
| | | | | | | | | |
Direct Property Management and Service Company Expense | | | | | | | | |
Service company allocations | | 163 | | 1,046 | | 422 | | 3,432 |
Payroll reimbursements(1) | | 257 | | 1,885 | | 791 | | 6,370 |
| | | | | | | | | |
Direct Property Management and Service Company Expense(2) | | 420 | | 2,931 | | 1,213 | | 9,802 |
Service Company NOI | | $ | 8 | | $ | (469) | | $ | 165 | | $ | (1,424) |
| | | | | | | | | |
| | | | | | | | | |
General and Administrative and Service Company Expense | | | | | | | | |
General and administrative expense(2) | | $ | 3,668 | | $ | 2,463 | | $ | 10,379 | | $ | 7,873 |
Service company allocations | | 163 | | 1,046 | | 422 | | 3,432 |
| | | | | | | | | |
General and Administrative and Service Company Expense | | $ | 3,831 | | $ | 3,509 | | $ | 10,801 | | $ | 11,305 |
| | | | | | | | | |
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(1) | Salaries and benefits reimbursed in connection with the management of properties for third parties. |
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(2) | As reported per the Consolidated Statement of Operations. |
| | |
| | Quarter Ended |
| | September 30, | | June 30, | | March 31, | | December 31, | | September 30, |
| | 2008 | | 2008 | | 2008 | | 2007 | | 2007 |
| | | | | | | | | | |
Property Revenue | | $ | 32,540 | | $ | 32,059 | | $ | 31,431 | | $ | 31,341 | | $ | 31,513 |
| | | | | | | | | | |
Property Operating and | | | | | | | | | | |
Maintenance Expenses | | | | | | | | | | |
Personnel | | 3,799 | | 3,607 | | 3,730 | | 3,678 | | 3,723 |
Advertising | | 405 | | 400 | | 395 | | 434 | | 393 |
Utilities | | 1,772 | | 1,651 | | 1,731 | | 1,615 | | 1,713 |
Repairs and maintenance | | 2,678 | | 2,527 | | 2,057 | | 1,919 | | 2,511 |
Real estate taxes and insurance | | 4,524 | | 4,546 | | 4,280 | | 4,083 | | 4,933 |
Other operating | | 1,160 | | 1,110 | | 1,044 | | 1,147 | | 1,209 |
Total Expenses | | 14,338 | | 13,841 | | 13,237 | | 12,876 | | 14,482 |
| | | | | | | | | | |
Property Net Operating Income | | $ | 18,202 | | $ | 18,218 | | $ | 18,194 | | $ | 18,465 | | $ | 17,031 |
| | | | | | | | | | |
Operating Margin | | 55.9% | | 56.8% | | 57.9% | | 58.9% | | 54.0% |
| | | | | | | | | | |
Total Number of Units | | 12,136 | | 12,136 | | 12,136 | | 12,136 | | 12,136 |
| | | | | | | | | | |
NOI Per Unit | | $ | 1,500 | | $ | 1,501 | | $ | 1,499 | | $ | 1,522 | | $ | 1,403 |
| | | | | | | | | | |
Average Net Rent Collected Per Unit (2) | $ | 864 | | $ | 852 | | $ | 836 | | $ | 834 | | $ | 838 |
| | | | | | | | | | |
Physical Occupancy - End of Period (3) | 95.8% | | 96.4% | | 94.6% | | 94.1% | | 95.8% |
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(1) | The results for all quarters include Alexander at Ghent and the Idlewylde Apartments, both of which were acquired by the Company in June 2007. |
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(2) | Represents gross potential rents less vacancies and concessions. |
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(3) | Is defined as number of units occupied divided by total number of units. |
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Associated Estates Realty Corporation
Same Community Data (1)
Operating Results for the Nine Months Ended September 30, 2008 and 2007
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | Nine Months Ended |
| | September 30, |
| | 2008 | | 2007 |
| | | | |
Property Revenue | | $ | 86,737 | | $ | 83,807 |
| | | | |
Property Operating and Maintenance Expenses | | | | |
Personnel | | 10,116 | | 9,862 |
Advertising | | 1,138 | | 1,089 |
Utilities | | 4,622 | | 4,372 |
Repairs and maintenance | | 6,754 | | 6,948 |
Real estate taxes and insurance | | 12,283 | | 12,498 |
Other operating | | 2,990 | | 3,265 |
Total Expenses | | 37,903 | | 38,034 |
| | | | |
Property Net Operating Income | | $ | 48,834 | | $ | 45,773 |
| | | | |
Operating Margin | | 56.3% | | 54.6% |
| | | | |
Total Number of Units | | 11,025 | | 11,025 |
| | | | |
NOI Per Unit | | $ | 4,429 | | $ | 4,152 |
| | | | |
Average Net Rent Collected Per Unit (2) | | $ | 845 | | $ | 820 |
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Physical Occupancy - End of Period (3) | | 96.2% | | 95.9% |
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(1) | The results shown for both years exclude Alexander at Ghent and the Idlewylde Apartments, both of which were acquired by the Company in June 2007. |
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(2) | Represents gross potential rents less vacancies and concessions. |
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(3) | Is defined as number of units occupied divided by total number of units. |
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Associated Estates Realty Corporation
Same Community Data
As of September 30, 2008 and 2007
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | | | Net Rent Collected | | Net Rents | | Average Rent | | Physical | | Turnover |
| | | | | | per Unit (1) | | per Unit (2) | | per Unit (3) | | Occupancy (4) | | Ratio (5) |
| | No. of | | Average | | Q3 | | Q3 | | % | | Q3 | | Q3 | | % | | Q3 | | Q3 | | % | | Q3 | | Q3 | | Q3 | | Q3 |
| | Units | | Age (6) | | 2008 | | 2007 | | Change | | 2008 | | 2007 | | Change | | 2008 | | 2007 | | Change | | 2008 | | 2007 | | 2008 | | 2007 |
Midwest Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indiana | | 836 | | 12 | | $ | 801 | | $ | 791 | | 1.3 % | | $ | 857 | | $ | 832 | | 3.0% | | $ | 904 | | $ | 902 | | 0.2 % | | 95.2% | | 95.7% | | 89.0% | | 84.7% |
Michigan | | 2,888 | | 17 | | 739 | | 713 | | 3.6 % | | 768 | | 747 | | 2.8% | | 835 | | 835 | | 0.0 % | | 97.1% | | 97.3% | | 68.8% | | 72.4% |
Ohio - Central Ohio | | 2,621 | | 17 | | 775 | | 728 | | 6.5 % | | 814 | | 764 | | 6.5% | | 833 | | 815 | | 2.2 % | | 97.2% | | 96.0% | | 75.8% | | 70.4% |
Ohio - Northeastern Ohio | | 1,399 | | 13 | | 920 | | 870 | | 5.7 % | | 953 | | 928 | | 2.7% | | 997 | | 987 | | 1.0 % | | 97.2% | | 94.8% | | 71.2% | | 71.5% |
Pennsylvania | | 468 | | 22 | | 758 | | 691 | | 9.7 % | | 780 | | 753 | | 3.6% | | 822 | | 814 | | 1.0 % | | 99.1% | | 95.9% | | 63.2% | | 65.8% |
Total Midwest Properties | | 8,212 | | 16 | | 789 | | 751 | | 5.1 % | | 824 | | 792 | | 4.0% | | 868 | | 860 | | 0.9 % | | 97.1% | | 96.2% | | 73.2% | | 72.5% |
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Mid-Atlantic/Southeast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Florida | | 1,272 | | 9 | | 1,160 | | 1,164 | | (0.3)% | | 1,245 | | 1,271 | | (2.0)% | | 1,344 | | 1,322 | | 1.7 % | | 93.8% | | 93.3% | | 67.9% | | 67.9% |
Georgia | | 1,717 | | 13 | | 789 | | 813 | | (3.0)% | | 880 | | 869 | | 1.3% | | 986 | | 983 | | 0.3 % | | 91.2% | | 95.1% | | 84.8% | | 76.6% |
Virginia | | 268 | | 2 | | 1,319 | | 1,196 | | 10.3 % | | 1,356 | | 1,288 | | 5.3% | | 1,356 | | 1,291 | | 5.0 % | | 98.5% | | 97.0% | | 100.0% | | 100.0% |
Baltimore/Washington | | 667 | | 22 | | 1,231 | | 1,211 | | 1.7 % | | 1,312 | | 1,261 | | 4.0% | | 1,326 | | 1,280 | | 3.6 % | | 94.0% | | 97.2% | | 55.8% | | 52.8% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southeast Properties | | 3,924 | | 13 | | 1,020 | | 1,021 | | (0.1)% | | 1,104 | | 1,095 | | 0.8% | | 1,185 | | 1,164 | | 1.8 % | | 93.0% | | 95.0% | | 75.4% | | 71.3% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total/Average Same | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community | | 12,136 | | 15 | | $ | 864 | | $ | 838 | | 3.1 % | | $ | 915 | | $ | 890 | | 2.8% | | $ | 971 | | $ | 959 | | 1.3 % | | 95.8% | | 95.8% | | 73.9% | | 72.1% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Represents gross potential rents less vacancies and allowances for all units divided by the number of units in a market. |
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(2) | Represents gross potential rents less allowances for all units divided by the number of units in a market. |
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(3) | Represents gross potential rents for all units divided by the number of units in a market. |
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(4) | Represents physical occupancy at the end of the quarter. |
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(5) | Represents the number of units turned over for the quarter, divided by the number of units in a market, annualized. |
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(6) | Age shown in years. |
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Associated Estates Realty Corporation
Property Revenue
For the Three Months Ended September 30, 2008 and 2007 |
| | | | 2008 | | 2007 | | Q3 | | Q3 | | | | |
| | No. of | | Physical | | Physical | | 2008 | | 2007 | | Increase/ | | % |
Property Revenue | | Units | | Occupancy (1) | | Occupancy (1) | | Revenue | | Revenue | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.2% | | 95.7% | | $ | 2,082 | | $ | 2,058 | | $ | 24 | | 1.2% |
Michigan | | 2,888 | | 97.1% | | 97.3% | | 6,708 | | 6,461 | | 247 | | 3.8% |
Ohio - Central Ohio | | 2,621 | | 97.2% | | 96.0% | | 6,315 | | 5,888 | | 427 | | 7.3% |
Ohio - Northeastern Ohio | | 1,399 | | 97.2% | | 94.8% | | 4,014 | | 3,805 | | 209 | | 5.5% |
Pennsylvania | | 468 | | 99.1% | | 95.9% | | 1,082 | | 994 | | 88 | | 8.9% |
Total Midwest Properties | | 8,212 | | 97.1% | | 96.2% | | 20,201 | | 19,206 | | 995 | | 5.2% |
| | | | | | | | | | | | | | |
Mid-Atlantic/Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 93.8% | | 93.3% | | 4,570 | | 4,579 | | (9) | | (0.2)% |
Georgia | | 1,717 | | 91.2% | | 95.1% | | 4,185 | | 4,309 | | (124) | | (2.9)% |
Virginia | | 268 | | 98.5% | | 97.0% | | 1,088 | | 977 | | 111 | | 11.4% |
Baltimore/Washington | | 667 | | 94.0% | | 97.2% | | 2,496 | | 2,442 | | 54 | | 2.2% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | |
Southeast Properties | | 3,924 | | 93.0% | | 95.0% | | 12,339 | | 12,307 | | 32 | | 0.3% |
| | | | | | | | | | | | | | |
Total Same Community | | 12,136 | | 95.8% | | 95.8% | | 32,540 | | 31,513 | | 1,027 | | 3.3% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 98.1% | | N/A | | 1,828 | | - | | 1,828 | | 100.0% |
| | | | | | | | | | | | | | |
Total Property Revenue | | 12,672 | | 95.9% | | 95.8% | | $ | 34,368 | | $ | 31,513 | | $ | 2,855 | | 9.1% |
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(1) | Represents physical occupancy at the end of the quarter. |
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(2) | The Company defines acquisition properties as acquired properties which have not yet reached stabilization. A property is considered stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year. |
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Associated Estates Realty Corporation
Property Operating Expenses
For the Three Months Ended September 30, 2008 and 2007 |
| | | | 2008 | | 2007 | | Q3 | | Q3 | | | | |
| | No. of | | Physical | | Physical | | 2008 | | 2007 | | Increase/ | | % |
Property Operating Expenses | | Units | | Occupancy (1) | | Occupancy (1) | | Expenses | | Expenses | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.2% | | 95.7% | | $ | 1,003 | | $ | 995 | | $ | 8 | | 0.8% |
Michigan | | 2,888 | | 97.1% | | 97.3% | | 3,157 | | 3,216 | | (59) | | (1.8)% |
Ohio - Central Ohio | | 2,621 | | 97.2% | | 96.0% | | 2,996 | | 3,095 | | (99) | | (3.2)% |
Ohio - Northeastern Ohio | | 1,399 | | 97.2% | | 94.8% | | 1,622 | | 1,614 | | 8 | | 0.5% |
Pennsylvania | | 468 | | 99.1% | | 95.9% | | 445 | | 461 | | (16) | | (3.5)% |
Total Midwest Properties | | 8,212 | | 97.1% | | 96.2% | | 9,223 | | 9,381 | | (158) | | (1.7)% |
| | | | | | | | | | | | | | |
Mid-Atlantic/Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 93.8% | | 93.3% | | 1,868 | | 1,948 | | (80) | | (4.1)% |
Georgia | | 1,717 | | 91.2% | | 95.1% | | 1,906 | | 1,967 | | (61) | | (3.1)% |
Virginia | | 268 | | 98.5% | | 97.0% | | 372 | | 325 | | 47 | | 14.5% |
Baltimore/Washington | | 667 | | 94.0% | | 97.2% | | 969 | | 861 | | 108 | | 12.5% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | |
Southeast Properties | | 3,924 | | 93.0% | | 95.0% | | 5,115 | | 5,101 | | 14 | | 0.3% |
| | | | | | | | | | | | | | |
Total Same Community | | 12,136 | | 95.8% | | 95.8% | | 14,338 | | 14,482 | | (144) | | (1.0)% |
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Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 98.1% | | N/A | | 644 | | - | | 644 | | 100.0% |
| | | | | | | | | | | | | | |
Total Property Operating Expenses | 12,672 | | 95.9% | | 95.8% | | $ | 14,982 | | $ | 14,482 | | $ | 500 | | 3.5% |
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(1) | Represents physical occupancy at the end of the quarter. |
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(2) | The Company defines acquisition properties as acquired properties which have not yet reached stabilization. A property is considered stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year. |
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Associated Estates Realty Corporation
Property Net Operating Income (Property NOI)
For the Three Months Ended September 30, 2008 and 2007 |
| | | | 2008 | | 2007 | | Q3 | | Q3 | | | | |
| | No. of | | Physical | | Physical | | 2008 | | 2007 | | Increase/ | | % |
Property NOI (1) | | Units | | Occupancy (2) | | Occupancy (2) | | NOI | | NOI | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.2% | | 95.7% | | $ | 1,079 | | $ | 1,063 | | $ | 16 | | 1.5% |
Michigan | | 2,888 | | 97.1% | | 97.3% | | 3,551 | | 3,245 | | 306 | | 9.4% |
Ohio - Central Ohio | | 2,621 | | 97.2% | | 96.0% | | 3,319 | | 2,793 | | 526 | | 18.8% |
Ohio - Northeastern Ohio | | 1,399 | | 97.2% | | 94.8% | | 2,392 | | 2,191 | | 201 | | 9.2% |
Pennsylvania | | 468 | | 99.1% | | 95.9% | | 637 | | 533 | | 104 | | 19.5% |
Total Midwest Properties | | 8,212 | | 97.1% | | 96.2% | | 10,978 | | 9,825 | | 1,153 | | 11.7% |
| | | | | | | | | | | | | | |
Mid-Atlantic/Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 93.8% | | 93.3% | | 2,702 | | 2,631 | | 71 | | 2.7% |
Georgia | | 1,717 | | 91.2% | | 95.1% | | 2,279 | | 2,342 | | (63) | | (2.7)% |
Virginia | | 268 | | 98.5% | | 97.0% | | 716 | | 652 | | 64 | | 9.8% |
Baltimore/Washington | | 667 | | 94.0% | | 97.2% | | 1,527 | | 1,581 | | (54) | | (3.4)% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | |
Southeast Properties | | 3,924 | | 93.0% | | 95.0% | | 7,224 | | 7,206 | | 18 | | 0.2% |
| | | | | | | | | | | | | | |
Total Same Community | | 12,136 | | 95.8% | | 95.8% | | 18,202 | | 17,031 | | 1,171 | | 6.9% |
| | | | | | | | | | | | | | |
Acquisitions (3) | | | | | | | | | | | | | | |
Virginia | | 536 | | 98.1% | | N/A | | 1,184 | | - | | 1,184 | | 100.0% |
| | | | | | | | | | | | | | |
Total Property NOI | | 12,672 | | 95.9% | | 95.8% | | $ | 19,386 | | $ | 17,031 | | $ | 2,355 | | 13.8% |
| | | | | | | | | | | | | | |
(1) | See page 28 for a reconciliation of net (loss) income to this non-GAAP measurement and for the Company's definition of this non-GAAP measurement. |
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(2) | Represents physical occupancy at the end of the quarter. |
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(3) | The Company defines acquisition properties as acquired properties which have not yet reached stabilization. A property is considered stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year. |
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| | | | 2008 | | 2007 | | YTD | | YTD | | | | |
| | No. of | | Physical | | Physical | | 2008 | | 2007 | | Increase/ | | % |
Property Revenue | | Units | | Occupancy (1) | | Occupancy (1) | | Revenues | | Revenues | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.2% | | 95.7% | | $ | 6,193 | | $ | 5,981 | | $ | 212 | | 3.5% |
Michigan | | 2,888 | | 97.1% | | 97.3% | | 19,676 | | 19,122 | | 554 | | 2.9% |
Ohio - Central Ohio | | 2,621 | | 97.2% | | 96.0% | | 18,479 | | 17,224 | | 1,255 | | 7.3% |
Ohio - Northeastern Ohio | | 1,399 | | 97.2% | | 94.8% | | 11,729 | | 11,189 | | 540 | | 4.8% |
Pennsylvania | | 468 | | 99.1% | | 95.9% | | 3,153 | | 2,945 | | 208 | | 7.1% |
Total Midwest Properties | | 8,212 | | 97.1% | | 96.2% | | 59,230 | | 56,461 | | 2,769 | | 4.9% |
| | | | | | | | | | | | | | |
Mid-Atlantic/Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 93.8% | | 93.3% | | 13,675 | | 13,836 | | (161) | | (1.2)% |
Georgia | | 874 | | 93.2% | | 95.8% | | 6,399 | | 6,359 | | 40 | | 0.6% |
Baltimore/Washington | | 667 | | 94.0% | | 97.2% | | 7,433 | | 7,151 | | 282 | | 3.9% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | |
Southeast Properties | | 2,813 | | 93.7% | | 95.0% | | 27,507 | | 27,346 | | 161 | | 0.6% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,025 | | 96.2% | | 95.9% | | 86,737 | | 83,807 | | 2,930 | | 3.5% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 804 | | 98.3% | | 97.0% | | 6,123 | | 1,174 | | 4,949 | | 421.6% |
Georgia | | 843 | | 89.1% | | 94.4% | | 6,374 | | 2,181 | | 4,193 | | 192.3% |
| | | | | | | | | | | | | | |
Total Property Revenue | | 12,672 | | 95.9% | | 95.8% | | $ | 99,234 | | $ | 87,162 | | $ | 12,072 | | 13.9% |
| | | | | | | | | | | | | | |
(1) | Represents physical occupancy at the end of the quarter. |
| |
(2) | The Company defines acquisition properties as acquired properties which have not yet reached stabilization. A property is considered stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year. |
| | |
Associated Estates Realty Corporation
Property Operating Expenses
For the Nine Months Ended September 30, 2008 and 2007 |
| | | | 2008 | | 2007 | | YTD | | YTD | | | | |
| | No. of | | Physical | | Physical | | 2008 | | 2007 | | Increase/ | | % |
Property Operating Expenses | | Units | | Occupancy (1) | | Occupancy (1) | | Expenses | | Expenses | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.2% | | 95.7% | | $ | 3,010 | | $ | 2,969 | | $ | 41 | | 1.4% |
Michigan | | 2,888 | | 97.1% | | 97.3% | | 9,324 | | 9,335 | | (11) | | (0.1)% |
Ohio - Central Ohio | | 2,621 | | 97.2% | | 96.0% | | 8,570 | | 8,428 | | 142 | | 1.7% |
Ohio - Northeastern Ohio | | 1,399 | | 97.2% | | 94.8% | | 4,732 | | 4,882 | | (150) | | (3.1)% |
Pennsylvania | | 468 | | 99.1% | | 95.9% | | 1,334 | | 1,336 | | (2) | | (0.1)% |
Total Midwest Properties | | 8,212 | | 97.1% | | 96.2% | | 26,970 | | 26,950 | | 20 | | 0.1% |
| | | | | | | | | | | | | | |
Mid-Atlantic/Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 93.8% | | 93.3% | | 5,382 | | 5,547 | | (165) | | (3.0)% |
Georgia | | 874 | | 93.2% | | 95.8% | | 3,016 | | 3,103 | | (87) | | (2.8)% |
Baltimore/Washington | | 667 | | 94.0% | | 97.2% | | 2,535 | | 2,434 | | 101 | | 4.1% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | |
Southeast Properties | | 2,813 | | 93.7% | | 95.0% | | 10,933 | | 11,084 | | (151) | | (1.4)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,025 | | 96.2% | | 95.9% | | 37,903 | | 38,034 | | (131) | | (0.3)% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 804 | | 98.3% | | 97.0% | | 2,098 | | 428 | | 1,670 | | 390.2% |
Georgia | | 843 | | 89.1% | | 94.4% | | 2,512 | | 871 | | 1,641 | | 188.4% |
| | | | | | | | | | | | | | |
Total Property Operating Expenses | | 12,672 | | 95.9% | | 95.8% | | $ | 42,513 | | $ | 39,333 | | $ | 3,180 | | 8.1% |
| | | | | | | | | | | | | | |
(1) | Represents physical occupancy at the end of the quarter. |
| |
(2) | The Company defines acquisition properties as acquired properties which have not yet reached stabilization. A property is considered stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year. |
| | |
| | | | 2008 | | 2007 | | YTD | | YTD | | | | |
| | No. of | | Physical | | Physical | | 2008 | | 2007 | | Increase/ | | % |
Property NOI (1) | | Units | | Occupancy (2) | | Occupancy (2) | | NOI | | NOI | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.2% | | 95.7% | | $ | 3,183 | | $ | 3,012 | | $ | 171 | | 5.7% |
Michigan | | 2,888 | | 97.1% | | 97.3% | | 10,352 | | 9,787 | | 565 | | 5.8% |
Ohio - Central Ohio | | 2,621 | | 97.2% | | 96.0% | | 9,909 | | 8,796 | | 1,113 | | 12.7% |
Ohio - Northeastern Ohio | | 1,399 | | 97.2% | | 94.8% | | 6,997 | | 6,307 | | 690 | | 10.9% |
Pennsylvania | | 468 | | 99.1% | | 95.9% | | 1,819 | | 1,609 | | 210 | | 13.1% |
Total Midwest Properties | | 8,212 | | 97.1% | | 96.2% | | 32,260 | | 29,511 | | 2,749 | | 9.3% |
| | | | | | | | | | | | | | |
Mid-Atlantic/Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 93.8% | | 93.3% | | 8,293 | | 8,289 | | 4 | | 0.0% |
Georgia | | 874 | | 93.2% | | 95.8% | | 3,383 | | 3,256 | | 127 | | 3.9% |
Baltimore/Washington | | 667 | | 94.0% | | 97.2% | | 4,898 | | 4,717 | | 181 | | 3.8% |
Total Mid-Atlantic/ | | | | | | | | | | | | | | |
Southeast Properties | | 2,813 | | 93.7% | | 95.0% | | 16,574 | | 16,262 | | 312 | | 1.9% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,025 | | 96.2% | | 95.9% | | 48,834 | | 45,773 | | 3,061 | | 6.7% |
| | | | | | | | | | | | | | |
Acquisitions (3) | | | | | | | | | | | | | | |
Virginia | | 804 | | 98.3% | | 97.0% | | 4,025 | | 746 | | 3,279 | | 439.5% |
Georgia | | 843 | | 89.1% | | 94.4% | | 3,862 | | 1,310 | | 2,552 | | 194.8% |
| | | | | | | | | | | | | | |
Total Property NOI | | 12,672 | | 95.9% | | 95.8% | | $ | 56,721 | | $ | 47,829 | | $ | 8,892 | | 18.6% |
| | | | | | | | | | | | | | |
(1) | See page 28 for a reconciliation of net (loss) income to this non-GAAP measurement and for the Company's definition of this non-GAAP measurement. |
| |
(2) | Represents physical occupancy at the end of the quarter. |
| |
(3) | The Company defines acquisition properties as acquired properties which have not yet reached stabilization. A property is considered stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year. |
| | |
Associated Estates Realty Corporation
Debt Structure
As of September 30, 2008
(Dollar amounts in thousands) |
| Balance | | Percentage | | Weighted |
| Outstanding | | of | | Average |
FIXED RATE DEBT | September 30, 2008 | | Total Debt | | Interest Rate |
| | | | | |
Mortgages payable - CMBS | $ | 155,349 | | 28.2% | | 7.7% |
Mortgages payable - other (1) | 320,604 | | 58.2% | | 5.8% |
Unsecured debt | 25,780 | | 4.7% | | 7.9% |
Total fixed rate debt | 501,733 | | 91.1% | | 6.5% |
| | | | | |
VARIABLE RATE DEBT | | | | | |
Mortgages payable | 35,000 | | 6.3% | | 4.6% |
Revolver | 14,500 | | 2.6% | | 4.7% |
Total variable rate debt | 49,500 | | 8.9% | | 4.6% |
TOTAL DEBT | $ | 551,233 | | 100.0% | | 6.3% |
| | | | | |
Interest coverage ratio (2) | 1.75 | | | | |
Fixed charge coverage ratio (3) | 1.55 | | | | |
Weighted average maturity | 7.3 years | | | | |
| Fixed Rate | | Fixed Rate | | | | |
SCHEDULED PRINCIPAL MATURITIES | CMBS | | Other | | Variable Rate | | Total |
| | | | | | | |
2008 | $ | - | | $ | - | | $ | - | | $ | - |
2009 | 37,331 | | - | | 35,000 | | 72,331 |
2010 | 15,634 | | 63,000 | | - | | 78,634 |
2011(4) | 55,842 | | - | | 14,500 | | 70,342 |
2012 | 46,542 | | 36,000 | | - | | 82,542 |
Thereafter | - | | 247,384 | | - | | 247,384 |
Total | $ | 155,349 | | $ | 346,384 | | $ | 49,500 | | $ | 551,233 |
| | | | | | | |
This table includes forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause results to vary from those projected. Please see the paragraph on forward-looking statements on the cover of this document for a list of risk factors.
| | |
Earnings Guidance Per Common Share | | |
Expected net income | | $1.99 to $2.03 |
Expected real estate depreciation and amortization | | 2.23 |
Expected adjustments to unconsolidated joint ventures | | 0.01 |
Expected defeasance and other prepayment costs on secured debt | | 0.12 |
Expected gains on disposition of properties | | (3.07) |
Expected Funds from Operations as Adjusted (1) | | $1.28 to $1.32 |
| | |
Same Community Portfolio | | |
Revenue growth | | 3.0% to 3.2% |
Expense growth | | 0.9% to 1.1% |
Property NOI (2) growth | | 4.5% to 4.9% |
Physical occupancy | | 94.5% to 95.0% |
| | |
Transactions | | |
Acquisitions | | $76 million |
Dispositions | | $100 million |
Development | | $0 million |
| | |
Corporate Expenses | | |
General and administrative expense | | $13.8 million |
Service company expense (3) | | $0.5 million |
Total | | $14.3 million |
| | |
Debt | | |
Capitalized interest | | $0 million |
Expensed interest (excluding defeasance/prepayment costs) (4) | | $37.3 million |
Expected defeasance/prepayment costs | | $2.0 million |
| | |
Capital Structure (5) | | |
Common share repurchases | | $0 million |
Preferred share repurchases | | $0 million |
(1) | See page 26 for the Company's definition of this non-GAAP measurement. |
| |
(2) | See page 28 for the Company's definition of this non-GAAP measurement. |
| |
(3) | Excludes salaries and benefits reimbursed in connection with the management of properties for third parties which are grossed up in fees, reimbursements and other and direct property management and service company expense in accordance with GAAP. |
| |
(4) | Includes $1.3 million of deferred financing costs. |
| |
(5) | Earnings guidance does not take into consideration any share repurchases. |
This supplemental includes certain non-GAAP financial measures that the Company believes are helpful in understanding our business, as further described below. The Company's definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.
Funds from Operations ("FFO")
The Company defines FFO as the inclusion of all operating results, both recurring and non-recurring, except those results defined as "extraordinary items" under 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.
Funds from Operations ("FFO") as Adjusted
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 nine months ended September 30, 2008, and $4.2 million 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 added back is $172,000 of preferred stock repurchase costs for the nine months ended September 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 depositary 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.
Funds Available for Distribution ("FAD")
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 the recurring capital expenditures that are necessary to maintain the associated real estate.
Associated Estates Realty Corporation
Definitions of Non-GAAP Financial Measures |
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company considers EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation and interest which permits investors to view income from operations unclouded by non-cash depreciation or the cost of debt. Below is a reconciliation of net (loss) income available to common shareholders to EBITDA.
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
(In thousands) | | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
Net (loss) income available to common shareholders | | $ | (4,244) | | $ | (4,022) | | $ | 31,820 | | $ | 3,962 |
Equity in net loss of joint ventures | | 28 | | 31 | | 72 | | 247 |
Preferred share dividends and repurchase costs | | 1,201 | | 1,201 | | 3,603 | | 3,896 |
Interest income | | (16) | | (57) | | (127) | | (401) |
Interest expense (1) | | 9,202 | | 10,071 | | 29,639 | | 31,873 |
Depreciation and amortization | | 9,602 | | 9,278 | | 28,376 | | 24,842 |
Gain on disposition of properties | | - | | - | | (45,203) | | (17,043) |
Taxes | | 72 | | 71 | | 226 | | 232 |
EBITDA | | 15,845 | | 16,573 | | 48,406 | | 47,608 |
EBITDA - Joint Ventures: | | | | | | | | |
Equity in net loss of joint ventures | | (28) | | (31) | | (72) | | (247) |
Interest expense | | 9 | | 10 | | 29 | | 759 |
Depreciation and amortization | | 24 | | 25 | | 71 | | 605 |
EBITDA - Joint Ventures | | 5 | | 4 | | 28 | | 1,117 |
| | | | | | | | |
Total EBITDA | | $ | 15,850 | | $ | 16,577 | | $ | 48,434 | | $ | 48,725 |
| | | | | | | | |
| | | | | | | | | |
(1) | 2008 includes defeasance and other prepayment costs of $1,959 for the nine months ended September 30, and 2007 includes defeasance and other prepayment costs of $4,183 for the nine months ended September 30, respectively. |
Net Operating Income ("NOI")
NOI is determined by deducting property operating and maintenance expenses, direct property management and service company expense and painting service expense from total revenue. The Company evaluates the performance of its reportable segments based on NOI. The Company considers NOI to be an appropriate supplemental measure of our performance because it reflects the operating performance of our real estate portfolio and management and service company at the property and management service company level and is used to assess regional property and management and service company level performance. NOI should not be considered an alternative to net income as a measure of performance or cash generated from operating activities in accordance with GAAP and, therefore, it should not be considered indicative of cash available to fund cash needs.
Associated Estates Realty Corporation
Definitions of Non-GAAP Financial Measures |
Property Net Operating Income ("Property NOI")
Property NOI is determined by deducting property operating and maintenance expenses from total property revenue. The Company considers Property NOI to be an appropriate supplemental measure of our performance because it reflects the operating performance of our real estate portfolio at the property level and is used to assess regional property level performance. Property NOI should not be considered an alternative to net income as a measure of performance or cash generated from operating activities in accordance with GAAP and, therefore, it should not be considered indicative of cash available to fund cash needs. The following is a reconciliation of Property NOI to total consolidated net (loss) income.
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
(In thousands) | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | |
Property NOI | $ | 19,386 | | $ | 17,031 | | $ | 56,721 | | $ | 47,829 |
Service company NOI | 8 | | (469) | | 165 | | (1,424) |
Painting services NOI | (31) | | 62 | | (226) | | 146 |
Depreciation and amortization | (9,602) | | (8,462) | | (27,614) | | (21,863) |
General and administrative expense | (3,668) | | (2,463) | | (10,379) | | (7,873) |
Interest income | 16 | | 49 | | 124 | | 379 |
Interest expense (1) | (9,202) | | (9,709) | | (27,313) | | (30,796) |
Equity in net loss of joint ventures | (28) | | (31) | | (72) | | (247) |
Minority interest in operating partnership | (13) | | (13) | | (40) | | (40) |
Income from discontinued operations: | | | | | | | |
Operating income (loss) | 91 | | 1,184 | | (1,146) | | 4,704 |
Gain on disposition of properties | - | | - | | 45,203 | | 17,043 |
Income from discontinued operations | 91 | | 1,184 | | 44,057 | | 21,747 |
| | | | | | | |
Consolidated net (loss) income | $ | (3,043) | | $ | (2,821) | | $ | 35,423 | | $ | 7,858 |
| | | | | | | |
(1) | 2007 includes defeasance and other prepayment costs of $4,183 for the nine months ended September 30. |
Recurring Fixed Asset Additions
The Company considers recurring fixed asset additions to a property to be capital expenditures made to replace worn out assets so as to maintain the property's value.
Investment/Revenue Enhancing and/or Non-Recurring Fixed Asset Additions
The Company considers investment/revenue enhancing and/or non-recurring fixed assets to be capital expenditures if such improvements increase the value of the property and/or enable the Company to increase rents.
Same Community Properties
Same Community properties are conventional multifamily residential apartments, which have reached stabilization and were owned and operational for the entire periods presented. The Company considers a property stabilized when its occupancy rate reaches 93.0% and the Company has owned the property for one year.
