Exhibit 99.2
Associated Estates Realty Corporation
Second Quarter 2009
Earnings Release and Supplemental Financial Data
River Forest Apartments is located in Chesterfield County, just three miles from I-95 and VA-288, and minutes from great shopping, dining and entertainment. Residents choose River Forest because of the extensive features and amenities such as tennis courts, volleyball court, a cardio fitness center, a swimming pool with poolside WiFi and more. The apartment homes feature vaulted ceilings, fireplaces, private decks, washers and dryers and garage parking.
River Forest Apartments | | Phone: | (804) 796-3366 |
5701 Quiet Pine Circle | | Fax: | (804) 796-3367 |
Chester, Virginia 23831 | | Web Site: | www.riverforestapartments.com |
| | | |
Investor Contact: | | Media Contact: |
Swarup Katuri | | Kimberly Kanary |
Senior Director of Corporate Finance | | Director of Corporate Communications |
and Investor Relations | | (216) 797-8718 |
(216) 797-8743 | | kkanary@AssociatedEstates.com |
skaturi@AssociatedEstates.com | | |
www.AssociatedEstates.com | | |
Associated Estates Realty Corporation
Second Quarter 2009
Supplemental Financial Data |
"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 2009 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; 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; the ability to acquire properties at prices consistent with the Company’s investment criteria; 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; and risks related to the perception of residents and prospective residents as to the attractiveness, convenience and safety of the Company's properties or the neighborhoods in which they are located.
2
Cleveland, Ohio – July 27, 2009 – Associated Estates Realty Corporation (NYSE: AEC) (NASDAQ: AEC) today reported funds from operations (FFO) for the second quarter ended June 30, 2009 of $0.33 per common share (basic and diluted), compared to $0.34 per common share (basic and diluted), for the second quarter ended June 30, 2008.
Net income applicable to common shares was $10.3 million or $0.62 per common share (basic and diluted) for the second quarter ended June 30, 2009, compared to a net loss applicable to common shares of $1.4 million or $0.09 per common share (basic and diluted) for the second quarter ended June 30, 2008. The second quarter 2009 net income results include gains on insurance recoveries of $544,000 or $0.03 per common share (basic and diluted) and gains on the disposition of a property of $13.1 million or $0.79 per common share. The second quarter 2008 results included gains on the disposition of a property of $2.3 million or $0.14 per common share.
“We are pleased with our second quarter and first half of the year results,” said Jeffrey I. Friedman, president and chief executive officer. “We are in-line with our expectations, despite a very challenging macro-economic environment. I believe our results demonstrate the market competitiveness of our properties and the skill and dedication of our employees.”
A reconciliation of net income (loss) attributable to the Company to FFO and FFO as adjusted, is included on page 10.
Total revenue for the second quarter of 2009 was $32.7 million, which was flat when compared to the second quarter of 2008.
Same Community Portfolio Results
Net operating income (NOI) for the second quarter for the Company’s Same Community portfolio declined 1.9 percent as a result of revenue decreasing 1.1 percent and property operating expenses increasing 0.1 percent, compared to the second quarter of 2008. Quarter end physical occupancy was 95.4 percent compared to 96.3 percent at the end of the second quarter of 2008. Average net rent per unit for the second quarter for the Same Community portfolio was $913 per month, a 0.2 percent decrease compared to the second quarter of 2008. Net rent per unit for the second quarter for the Company’s Same Community Midwest portfolio rose 1.0 percent to $827. Net rent per unit for the Company’s Same Community Mid-Atlantic portfolio grew 2.6 percent to $1,335. Net rent per unit for the Company’s Same Community properties in the Southeast markets decreased 3.5 percent to $1,002.
On a sequential basis NOI for the Company’s Same Community portfolio increased by 1.4 percent when compared to the first quarter of 2009. Same Community revenue grew by 1.1 percent relative to the first quarter, supported by 1.3 percent growth in the Midwest portfolio, 2.4 percent growth in the Mid-Atlantic portfolio and 0.1 percent growth in the Southeast portfolio. Net Rents for the Company’s Same Community portfolio decreased by $6 or 0.7 percent to $913 per month.
Additional quarterly financial information, including performance by region for the Company's portfolio, is included on pages 15 to 23.
Associated Estates Realty Corporation
Second Quarter Earnings |
First Half Performance
FFO for the six months ended June 30, 2009, was $0.69 per common share (basic and diluted) and includes a credit to expenses of $563,000 or approximately $0.04 per common share for a refund of defeasance costs on certain previously defeased loans. FFO as adjusted for the first half of 2009, excludes that credit, and was $0.65 per common share (basic and diluted).
For the six months ended June 30, 2009, net income applicable to common shares was $9.3 million or $0.56 per common share (basic and diluted) compared to net income applicable to common shareholders of $35.3 million or $2.18 per common share (basic and diluted) for the period ended June 30, 2008. The results for the six month period ended June 30, 2009 include gains on insurance recoveries of $544,000 or $0.03 per common share, gains on dispositions of properties of $15.4 million or $0.94 per common share and a credit to expenses of $563,000 or approximately $0.04 per common share attributable to a refund of defeasance costs on certain previously defeased loans. The June 30, 2008 results include gains on dispositions of properties of $45.2 million or $2.79 per common share and defeasance and/or prepayment costs of $2.0 million or $0.12 per common share.
A reconciliation of net income (loss) attributable to the Company to FFO and FFO as adjusted, is included on page 10.
NOI for the six months ended June 30, 2009, for the Company’s Same Community portfolio, decreased 2.7 percent due to a 0.7 percent decrease in revenue and a 2.0 percent increase in property operating expenses compared to the first six months of 2008.
Property Dispositions
During the first half of 2009 the Company completed the sale of two non-core Midwest assets. The assets were, on average, 21-years-old and were sold for an aggregate price of $33.9 million or approximately $60,000 per unit. These sales represented a blended economic cap rate of 7.6 percent, based on trailing 12-month NOI, after $500 per unit in capital expenditures and a three percent management fee. The Company does not expect to sell any additional properties in 2009.
2009 Outlook
The Company reaffirmed its current full year FFO expectations for 2009 of $1.17 to $1.23 per common share, excluding defeasance and other prepayment costs/credits. Detailed 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 on Tuesday, July 28 at 2:00 p.m. Eastern. To participate in the call:
Via Telephone: The dial-in number is 800-860-2442, and the passcode is “Estates.”
Via the Internet (listen only): Access the Company's website at www.AssociatedEstates.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 "Q2 2009 Earnings Webcast" link. The webcast will be archived through August 11, 2009.
Associated Estates Realty Corporation
Financial and Operating Highlights
For the Three and Six Months Ended June 30, 2009 and 2008
(Unaudited; in thousands, except per share and ratio data) |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
OPERATING INFORMATION | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | |
Total revenue | | $ | 32,748 | | $ | 32,751 | | $ | 65,137 | | $ | 63,665 |
Property revenue | | $ | 32,138 | | $ | 32,166 | | $ | 63,962 | | $ | 62,390 |
Net income (loss) applicable to common shares | | $ | 10,250 | | $ | (1,380) | | $ | 9,260 | | $ | 35,296 |
Per share - basic and diluted | | $ | 0.62 | | $ | (0.09) | | $ | 0.56 | | $ | 2.18 |
| | | | | | | | |
Funds from Operations (FFO) (1) | | $ | 5,418 | | $ | 5,477 | | $ | 11,296 | | $ | 8,991 |
FFO as adjusted (1) | | $ | 5,418 | | $ | 5,477 | | $ | 10,733 | | $ | 10,950 |
FFO per share - basic and diluted | | $ | 0.33 | | $ | 0.34 | | $ | 0.69 | | $ | 0.56 |
FFO as adjusted per share - basic and diluted | | $ | 0.33 | | $ | 0.34 | | $ | 0.65 | | $ | 0.68 |
Funds Available for Distribution (FAD) (1) | | $ | 4,397 | | $ | 3,289 | | $ | 9,049 | | $ | 8,360 |
| | | | | | | | |
Dividends per share | | $ | 0.17 | | $ | 0.17 | | $ | 0.34 | | $ | 0.34 |
| | | | | | | | |
Payout ratio - FFO | | 51.5% | | 50.0% | | 49.3% | | 60.7% |
Payout ratio - FFO as adjusted | | 51.5% | | 50.0% | | 52.3% | | 50.0% |
Payout ratio - FAD | | 63.0% | | 85.0% | | 61.8% | | 65.4% |
| | | | | | | | |
General and administrative expense | | $ | 3,165 | | $ | 3,183 | | $ | 6,304 | | $ | 6,711 |
Interest expense (2) | | $ | 8,435 | | $ | 8,491 | | $ | 16,865 | | $ | 17,007 |
Interest coverage ratio (3) | | 1.79:1 | | 1.78:1 | | 1.78:1 | | 1.76:1 |
Fixed charge coverage ratio (4) | | 1.60:1 | | 1.57:1 | | 1.59:1 | | 1.56:1 |
General and administrative expense to property revenue | | 9.8% | | 9.9% | | 9.9% | | 10.8% |
Interest expense to property revenue | | 26.2% | | 26.4% | | 26.4% | | 27.3% |
Property NOI (5) | | $ | 18,326 | | $ | 18,455 | | $ | 36,396 | | $ | 36,013 |
ROA (6) | | 8.0% | | 8.2% | | 8.0% | | 8.2% |
Same Community revenue (decrease) increase | | (1.1)% | | 3.1% | | (0.7)% | | 3.4% |
Same Community expense increase (decrease) | | 0.1% | | (2.7)% | | 2.0% | | 0.4% |
Same Community NOI (decrease) increase | | (1.9)% | | 8.2% | | (2.7)% | | 5.8% |
Same Community operating margins | | 56.4% | | 56.9% | | 56.4% | | 57.5% |
(1) | See page 10 for a reconciliation of net income (loss) attributable to AERC 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 $301 and $617 for 2009 and $293 and $604 for 2008. 2009 excludes a credit of $(563) for a refund of defeasance costs for previously defeased loans. |
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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 costs/credits and/or preferred repurchase costs including discounts received and premiums paid. Individual line items in this calculation include results from discontinued operations where applicable. See page 27 for a reconciliation of net income (loss) available to common shares 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/credits. Individual line items in this calculation include discontinued operations where applicable. |
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(5) | See page 28 for a reconciliation of net income (loss) attributable to AERC 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. |
Associated Estates Realty Corporation
Financial and Operating Highlights
Second Quarter 2009
(Unaudited; in thousands, except per share and ratio data) |
| | June 30, | | December 31, |
MARKET CAPITALIZATION DATA | | 2009 | | 2008 |
| | | | |
Net real estate assets | | $ | 645,257 | | $ | 673,848 |
Total assets | | $ | 671,394 | | $ | 699,896 |
| | | | |
Debt | | $ | 524,915 | | $ | 557,481 |
Noncontrolling redeemable interest | | $ | 1,829 | | $ | 1,829 |
Preferred stock - 8.70% Class B Cumulative Redeemable Preferred Shares | | $ | 48,263 | | $ | 48,263 |
Total shareholders' equity | | $ | 111,007 | | $ | 105,621 |
| | | | |
Common shares outstanding | | 16,705 | | 16,556 |
Share price, end of period | | $ | 5.96 | | $ | 9.13 |
| | | | |
Total market capitalization | | $ | 672,740 | | $ | 756,900 |
| | | | |
Undepreciated book value of real estate assets (1) | | $ | 931,503 | | $ | 957,061 |
| | | | |
Debt to undepreciated book value of real estate assets | | 56.4% | | 58.2% |
Debt and preferred stock to undepreciated book value of real estate assets | | 61.5% | | 63.3% |
Debt to total market capitalization | | 78.0% | | 73.7% |
Debt and preferred stock to total market capitalization | | 85.2% | | 80.0% |
| | | | |
Annual dividend | | $ | 0.68 | | $ | 0.68 |
| | | | |
Annual dividend yield based on share price, end of period | | 11.4% | | 7.4% |
(1) | December 31, 2008 includes $4,338 of undepreciated real estate associated with one property classified as held for sale. |
Associated Estates Realty Corporation
Financial and Operating Highlights
Second Quarter 2009 |
| | | | | | Average Age |
| | | | Number | | of Owned |
PORTFOLIO INFORMATION | | Properties | | of Units | | Properties |
| | | | | | |
Company Portfolio: | | | | | | |
Directly Owned: | | | | | | |
Same Community Midwest | | 34 | | 7,648 | | 17 |
Same Community Mid-Atlantic | | 4 | | 935 | | 17 |
Same Community Southeast | | 8 | | 2,989 | | 13 |
Total Same Community | | 46 | | 11,572 | | 16 |
| | | | | | |
Acquisitions | | 2 | | 536 | | 4 |
Total Directly Owned | | 48 | | 12,108 | | 15 |
Third Party Managed: | | | | | | |
Affordable Housing | | 1 | | 85 | | |
Market Rate | | 1 | | 258 | | |
Total Third Party Managed | | 2 | | 343 | | |
Total Company Portfolio | | 50 | | 12,451 | | |
| | June 30, | | December 31, |
| | 2009 | | 2008 |
ASSETS | | | | |
| | | | |
Real estate assets | | |
Investment in real estate | | $ | 927,576 | | $ | 951,978 |
Construction in progress | | 3,927 | | 745 |
Less: accumulated depreciation | | (286,246) | | (280,541) |
| | 645,257 | | 672,182 |
Real estate associated with property held for sale, net | | - | | 1,666 |
| | | | |
Real estate, net | | 645,257 | | 673,848 |
Cash and cash equivalents | | 4,321 | | 3,551 |
Restricted cash | | 7,862 | | 6,873 |
Other assets | | 13,954 | | 15,624 |
Total assets | | $ | 671,394 | | $ | 699,896 |
| | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
| | | | |
Mortgage notes payable | | $ | 489,135 | | $ | 510,201 |
Unsecured revolving credit facility | | 10,000 | | 21,500 |
Unsecured debt | | 25,780 | | 25,780 |
Total debt | | 524,915 | | 557,481 |
Accounts payable, accrued expenses and other liabilities | | 33,643 | | 34,965 |
Total liabilities | | 558,558 | | 592,446 |
| | | | |
Noncontrolling redeemable interest | | 1,829 | | 1,829 |
| | | | |
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 193,050 outstanding | | | | |
at June 30, 2009 and December 31, 2008, respectively | | 48,263 | | 48,263 |
Common shares, without par value; $.10 stated value; 41,000,000 | | | | |
authorized; 22,995,763 issued and 16,705,327 and 16,556,221 | | | | |
outstanding at June 30, 2009 and December 31, 2008, respectively | | 2,300 | | 2,300 |
Paid-in capital | | 282,480 | | 282,501 |
Accumulated distributions in excess of accumulated net income | | (155,560) | | (159,595) |
Accumulated other comprehensive loss | | (2,150) | | (2,899) |
Less: Treasury shares, at cost, 6,290,436 and 6,439,542 shares | | | | |
at June 30, 2009 and December 31, 2008, respectively | | (64,326) | | (64,949) |
Total shareholders' equity | | 111,007 | | 105,621 |
Total liabilities and shareholders' equity | | $ | 671,394 | | $ | 699,896 |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| | 2009 | | 2008 | | 2009 | | 2008 |
REVENUE | | | | | | | | |
Property revenue | | $ | 32,138 | | $ | 32,166 | | $ | 63,962 | | $ | 62,390 |
Management and service company revenue: | | | | | | | | |
Fees, reimbursements and other | | 357 | | 397 | | 825 | | 950 |
Painting services | | 253 | | 188 | | 350 | | 325 |
Total revenue | | 32,748 | | 32,751 | | 65,137 | | 63,665 |
| | | | | | | | |
EXPENSES | | | | | | | | |
Property operating and maintenance | | 13,812 | | 13,711 | | 27,566 | | 26,377 |
Depreciation and amortization | | 8,587 | | 9,167 | | 17,795 | | 17,421 |
Direct property management and service company expense | | 348 | | 398 | | 708 | | 793 |
Painting services and charges | | 322 | | 277 | | 535 | | 520 |
General and administrative | | 3,165 | | 3,183 | | 6,304 | | 6,711 |
Total expenses | | 26,234 | | 26,736 | | 52,908 | | 51,822 |
Operating income | | 6,514 | | 6,015 | | 12,229 | | 11,843 |
Interest income | | 18 | | 92 | | 33 | | 106 |
Interest expense | | (8,736) | | (8,784) | | (16,919) | | (17,611) |
(Loss) income before gain on insurance recoveries, equity in net | | | | | | | | |
loss of joint ventures, and income from discontinued operations | | (2,204) | | (2,677) | | (4,657) | | (5,662) |
Gain on insurance recoveries | | 544 | | - | | 544 | | - |
Equity in net loss of joint ventures | | - | | (23) | | - | | (45) |
(Loss) income from continuing operations | | (1,660) | | (2,700) | | (4,113) | | (5,707) |
Income from discontinued operations: | | | | | | | | |
Operating income (loss) | | 267 | | 241 | | 569 | | (1,003) |
Gain on disposition of properties | | 13,135 | | 2,293 | | 15,413 | | 45,203 |
Income from discontinued operations | | 13,402 | | 2,534 | | 15,982 | | 44,200 |
Net income (loss) | | 11,742 | | (166) | | 11,869 | | 38,493 |
Net loss attributable to noncontrolling redeemable interest | | (14) | | (13) | | (27) | | (27) |
Net income (loss) attributable to AERC | | 11,728 | | (179) | | 11,842 | | 38,466 |
Preferred share dividends | | (1,049) | | (1,201) | | (2,100) | | (2,402) |
Allocation to participating securities | | (429) | | - | | (482) | | (768) |
Net income (loss) applicable to common shares | | $ | 10,250 | | $ | (1,380) | | $ | 9,260 | | $ | 35,296 |
| | | | | | | | |
Earnings per common share - basic and diluted: | | | | | | | | |
(Loss) income from continuing operations | | | | | | | | |
applicable to common shares | | $ | (0.16) | | $ | (0.24) | | $ | (0.38) | | $ | (0.50) |
Income from discontinued operations | | 0.78 | | 0.15 | | 0.94 | | 2.68 |
Net income (loss) applicable to common shares | | $ | 0.62 | | $ | (0.09) | | $ | 0.56 | | $ | 2.18 |
| | | | | | | | |
Weighted average shares outstanding - basic and diluted | | 16,528 | | 16,200 | | 16,481 | | 16,184 |
| | | Three Months Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
CALCULATION OF FFO AND FAD | | | | | | | | |
Net income (loss) attributable to AERC | | $ | 11,728 | | $ | (179) | | $ | 11,842 | | $ | 38,466 |
| | | | | | | | | |
Add: | Depreciation - real estate assets | | 8,245 | | 7,920 | | 16,500 | | 16,124 |
| Depreciation - real estate assets - joint ventures | | - | | 23 | | - | | 46 |
| Amortization of intangible assets | | 173 | | 1,207 | | 1,011 | | 1,960 |
Less: | Preferred share dividends | | (1,049) | | (1,201) | | (2,100) | | (2,402) |
| Gain on disposition of properties/gain on insurance recoveries | | (13,679) | | (2,293) | | (15,957) | | (45,203) |
| | | | | | | | | |
| Funds from Operations (FFO) (1) | | 5,418 | | 5,477 | | 11,296 | | 8,991 |
| | | | | | | | | |
Add: | Defeasance and other prepayment costs | | - | | - | | - | | 1,959 |
Less: | Refund of defeasance costs for previously defeased loans | | - | | - | | (563) | | - |
| | | | | | | | | |
| Funds from Operations as Adjusted (1) | | 5,418 | | 5,477 | | 10,733 | | 10,950 |
| | | | | | | | | |
Add: | Depreciation - other assets | | 385 | | 346 | | 758 | | 691 |
| Depreciation - other assets - joint ventures | | - | | 1 | | - | | 2 |
| Amortization of deferred financing fees | | 301 | | 307 | | 623 | | 664 |
Less: | Recurring fixed asset additions (2) | | (1,707) | | (2,842) | | (3,065) | | (3,947) |
| Funds Available for Distribution (FAD) (1) | | $ | 4,397 | | $ | 3,289 | | $ | 9,049 | | $ | 8,360 |
| | | | | | | | | |
Weighted average shares outstanding - basic and diluted (3) | | 16,528 | | 16,200 | | 16,481 | | 16,184 |
| | | | | | | | | |
PER SHARE INFORMATION: | | | | | | | | |
FFO - basic and diluted | | $ | 0.33 | | $ | 0.34 | | $ | 0.69 | | $ | 0.56 |
FFO as adjusted - basic and diluted | | $ | 0.33 | | $ | 0.34 | | $ | 0.65 | | $ | 0.68 |
Dividends | | $ | 0.17 | | $ | 0.17 | | $ | 0.34 | | $ | 0.34 |
| | | | | | | | | |
Payout ratio - FFO | | 51.5% | | 50.0% | | 49.3% | | 60.7% |
Payout ratio - FFO as adjusted | 51.5% | | 50.0% | | 52.3% | | 50.0% |
Payout ratio - FAD | | 63.0% | | 85.0% | | 61.8% | | 65.4% |
| Payout ratio - FAD | | 63.0% | | 85.0% | | 61.8% | | 65.4% |
(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. |
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(3) | The Company computes the weighted average shares outstanding in accordance with SFAS 128 and accordingly, has excluded 16 common share equivalents from the three and six months ended June 30, 2009 calculation, respectively, and 335 and 246 common share equivalents from the three and six months ended June 30, 2008 calculation, respectively, used in the computation of earnings per share and FFO per share, as they would be anti-dilutive to the loss from continuing operations. |
Associated Estates Realty Corporation
Discontinued Operations (1)
Three Months Ended June 30, 2009 and 2008
(Unaudited; dollar amounts in thousands) |
| | Three Months Ended |
| | June 30, |
| | 2009 | | 2008 |
REVENUE | | | | |
Property revenue | | $ | 925 | | $ | 1,339 |
| | | | |
EXPENSES | | | | |
Property operating and maintenance | | 442 | | 594 |
Depreciation and amortization | | 216 | | 306 |
Total expenses | | 658 | | 900 |
Operating income | | 267 | | 439 |
Interest income | | - | | - |
Interest expense | | - | | (198) |
Gain on disposition of properties | | 13,135 | | 2,293 |
Income from discontinued operations | | $ | 13,402 | | $ | 2,534 |
| | | | |
(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 two properties disposed of in 2009 and fifteen properties disposed of in 2008. |
Associated Estates Realty Corporation
Discontinued Operations (1)
Six Months Ended June 30, 2009 and 2008
(Unaudited; dollar amounts in thousands) |
| | Six Months Ended |
| | June 30, |
| | 2009 | | 2008 |
REVENUE | | | | |
Property revenue | | $ | 2,021 | | $ | 6,559 |
| | | | |
EXPENSES | | | | |
Property operating and maintenance | | 948 | | 3,387 |
Depreciation and amortization | | 474 | | 1,354 |
Total expenses | | 1,422 | | 4,741 |
Operating income | | 599 | | 1,818 |
Interest income | | 1 | | 5 |
Interest expense (2) | | (31) | | (2,826) |
Gain on disposition of properties | | 15,413 | | 45,203 |
Income from discontinued operations | | $ | 15,982 | | $ | 44,200 |
(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 as 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. |
| |
| Included in the table above are two properties disposed of in 2009 and fifteen properties disposed of in 2008. |
| |
(2) | Included in the 2008 expense is $1,959 of defeasance and other prepayment costs. |
| | |
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) |
| | | | Six Months Ended |
| | Estimated | | June 30, 2009 |
| | GAAP Useful | | | | Cost Per |
| | Life (Years) | | Amount | | Unit (1) |
OPERATING EXPENSES RELATED TO REPAIRS AND MAINTENANCE | | | | | | |
Repairs and maintenance (2) | | | | $ | 4,846 | | $ | 386 |
Maintenance personnel labor cost (2) | | | | 2,686 | | 214 |
Total Operating Expenses Related to Repairs and Maintenance | | | | 7,532 | | 600 |
| | | | | | |
CAPITAL EXPENDITURES | | | | | | |
Recurring Capital Expenditures (3) | | | | | | |
Amenities | | 5 | | 92 | | 7 |
Appliances | | 5 | | 431 | | 34 |
Building improvements | | 14 | | 299 | | 24 |
Carpet and flooring | | 5 | | 1,338 | | 107 |
Furnishings | | 5 | | 52 | | 4 |
HVAC and mechanicals | | 15 | | 424 | | 34 |
Landscaping and grounds | | 14 | | 244 | | 20 |
Suite improvements | | 5 | | 11 | | 1 |
Miscellaneous | | 5 | | 45 | | 4 |
Total Recurring Capital Expenditures - Properties | | | | 2,936 | | 235 |
Corporate capital expenditures (4) | | | | 129 | | 10 |
Total Recurring Capital Expenditures | | | | 3,065 | | 245 |
Total Recurring Capital Expenditures and Repairs and Maintenance | | | | $ | 10,597 | | $ | 845 |
| | | | | | |
Total Recurring Capital Expenditures | | | | $ | 3,065 | | |
Investment/Revenue Enhancing Expenditures (5) | | | | | | |
Building improvements - unit upgrades | | Various | | 124 | | |
Building improvements - other | | 20 | | 1,025 | | |
Ground improvements | | Various | | 62 | | |
Total Investment/Revenue Enhancing Expenditures | | | | 1,211 | | |
| | | | | | |
Grand Total Capital Expenditures | | | | $ | 4,276 | | |
(1) | Calculated using weighted average units owned during the six months ended June 30, 2009 of 12,545. |
| |
(2) | Included in property operating and maintenance expense in the Consolidated Statements of Operations. |
| |
(3) | See page 28 for the Company's definition of recurring fixed asset additions. |
| |
(4) | Includes upgrades to computer hardware and software as well as corporate office furniture and fixtures. |
| |
(5) | See page 28 for the Company's definition of investment/revenue enhancing additions. |
Associated Estates Realty Corporation
Fees, Reimbursements and Other Revenue, Direct Property Management
and Service Company Expense and General and Administrative Expense
For the Three and Six Months Ended June 30, 2009 and 2008
(In thousands) |
| | | Three Months Ended | | Six Months Ended |
| | | June 30, | June 30, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
Fees, Reimbursements and Other Revenue | | | | | | | | |
Property management fees | | $ | 68 | | $ | 75 | | $ | 129 | | $ | 150 |
Asset management fees | | 74 | | 66 | | 123 | | 109 |
Other revenue | | 9 | | - | | 117 | | 157 |
Payroll reimbursements(1) | | 206 | | 256 | | 456 | | 534 |
| | | | | | | | | |
Fees, Reimbursements and Other Revenue(2) | | 357 | | 397 | | 825 | | 950 |
| | | | | | | | | |
Direct Property Management and Service Company Expense | | | | | | | | |
Service company allocations | | 142 | | 142 | | 252 | | 259 |
Payroll reimbursements(1) | | 206 | | 256 | | 456 | | 534 |
Direct Property Management and Service Company Expense(2) | | 348 | | 398 | | 708 | | 793 |
Service Company NOI | | $ | 9 | | $ | (1) | | $ | 117 | | $ | 157 |
| | | | | | | | | |
| | | | | | | | | |
General and Administrative and Service Company Expense | | | | | | | | |
General and administrative expense(2) | | $ | 3,165 | | $ | 3,183 | | $ | 6,304 | | $ | 6,711 |
Service company allocations | | 142 | | 142 | | 252 | | 259 |
General and Administrative and Service Company Expense | | $ | 3,307 | | $ | 3,325 | | $ | 6,556 | | $ | 6,970 |
(1) | Salaries and benefits reimbursed in connection with the management of properties for third parties. |
| |
(2) | As reported per the Consolidated Statement of Operations. |
| | Quarter Ended |
| | June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| | 2009 | | 2009 | | 2008 | | 2008 | | 2008 |
| | | | | | | | | | |
Property Revenue | | $ | 30,466 | | $ | 30,124 | | $ | 30,587 | | $ | 31,249 | | $ | 30,791 |
| | | | | | | | | | |
Property Operating and | | | | | | | | | | |
Maintenance Expenses | | | | | | | | | | |
Personnel | | 3,643 | | 3,586 | | 3,557 | | 3,628 | | 3,441 |
Advertising | | 385 | | 379 | | 373 | | 390 | | 385 |
Utilities | | 1,617 | | 1,744 | | 1,717 | | 1,689 | | 1,567 |
Repairs and maintenance | | 2,353 | | 2,112 | | 1,872 | | 2,574 | | 2,413 |
Real estate taxes and insurance | | 4,211 | | 4,339 | | 4,098 | | 4,365 | | 4,382 |
Other operating | | 1,066 | | 1,012 | | 1,056 | | 1,123 | | 1,072 |
Total Expenses | | 13,275 | | 13,172 | | 12,673 | | 13,769 | | 13,260 |
| | | | | | | | | | |
Property Net Operating Income | | $ | 17,191 | | $ | 16,952 | | $ | 17,914 | | $ | 17,480 | | $ | 17,531 |
| | | | | | | | | | |
Operating Margin | | 56.4% | | 56.3% | | 58.6% | | 55.9% | | 56.9% |
| | | | | | | | | | |
Total Number of Units | | 11,572 | | 11,572 | | 11,572 | | 11,572 | | 11,572 |
| | | | | | | | | | |
NOI Per Unit | | $ | 1,486 | | $ | 1,465 | | $ | 1,548 | | $ | 1,511 | | $ | 1,515 |
| | | | | | | | | | |
Average Net Rent Collected Per Unit (1) | $ | 849 | | $ | 840 | | $ | 856 | | $ | 869 | | $ | 857 |
| | | | | | | | | | |
Physical Occupancy - End of Period (2) | 95.4% | | 93.9% | | 93.0% | | 95.6% | | 96.3% |
(1) | Represents gross potential rents less vacancies and concessions. |
| |
(2) | Is defined as number of units occupied divided by total number of units. |
Associated Estates Realty Corporation
Same Community Data
Operating Results for the Six Months Ended June 30, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | Six Months Ended |
| | June 30, |
| | 2009 | | 2008 |
| | | | |
Property Revenue | | $ | 60,590 | | $ | 61,015 |
| | | | |
Property Operating and Maintenance Expenses | | | | |
Personnel | | 7,228 | | 7,004 |
Advertising | | 764 | | 764 |
Utilities | | 3,362 | | 3,194 |
Repairs and maintenance | | 4,465 | | 4,373 |
Real estate taxes and insurance | | 8,550 | | 8,502 |
Other operating | | 2,078 | | 2,087 |
Total Expenses | | 26,447 | | 25,924 |
| | | | |
Property Net Operating Income | | $ | 34,143 | | $ | 35,091 |
| | | | |
Operating Margin | | 56.4 % | | 57.5 % |
| | | | |
Total Number of Units | | 11,572 | | 11,572 |
| | | | |
NOI Per Unit | | $ | 2,950 | | $ | 3,032 |
| | | | |
Average Net Rent Collected Per Unit (1) | | $ | 845 | | $ | 850 |
| | | | |
Physical Occupancy - End of Period (2) | | 95.4% | | 96.3% |
(1) | Represents gross potential rents less vacancies and concessions. |
| |
(2) | Is defined as number of units occupied divided by total number of units. |
Associated Estates Realty Corporation
Same Community Data
As of June 30, 2009 and June 30, 2008
(Unaudited) |
| | | | | | 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 | | Q2 | | Q2 | | % | | Q2 | | Q2 | | % | | Q2 | | Q2 | | % | | Q2 | | Q2 | | Q2 | | Q2 |
| | Units | | Age (6) | | 2009 | | 2008 | | Change | | 2009 | | 2008 | | Change | | 2009 | | 2008 | | Change | | 2009 | | 2008 | | 2009 | | 2008 |
Midwest Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indiana | | 836 | | 13 | | $ | 809 | | $ | 804 | | 0.6% | | $ | 851 | | $ | 854 | | (0.4)% | | $ | 908 | | $ | 908 | | 0.0% | | 97.8% | | 97.6% | | 87.1% | | 88.0% |
Michigan | | 2,888 | | 18 | | 727 | | 719 | | 1.1% | | 768 | | 761 | | 0.9% | | 839 | | 832 | | 0.8% | | 96.1% | | 97.4% | | 67.7% | | 62.7% |
Ohio - Central Ohio | | 2,621 | | 18 | | 779 | | 758 | | 2.8% | | 820 | | 804 | | 2.0% | | 837 | | 830 | | 0.8% | | 97.0% | | 96.5% | | 67.6% | | 66.8% |
Ohio - Northeastern Ohio | | 1,303 | | 14 | | 924 | | 918 | | 0.7% | | 957 | | 956 | | 0.1% | | 1,014 | | 1,005 | | 0.9% | | 98.9% | | 97.0% | | 50.3% | | 58.9% |
Total Midwest Properties | | 7,648 | | 17 | | 788 | | 775 | | 1.7% | | 827 | | 819 | | 1.0% | | 876 | | 869 | | 0.8% | | 97.1% | | 97.1% | | 66.8% | | 66.2% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 23 | | 1,250 | | 1,220 | | 2.5% | | 1,315 | | 1,294 | | 1.6% | | 1,352 | | 1,308 | | 3.4% | | 98.1% | | 96.4% | | 40.2% | | 47.4% |
Virginia | | 268 | | 3 | | 1,319 | | 1,282 | | 2.9% | | 1,383 | | 1,320 | | 4.8% | | 1,390 | | 1,320 | | 5.3% | | 96.6% | | 99.6% | | 94.0% | | 82.1% |
Total Mid-Atlantic Properties | 935 | | 17 | | 1,270 | | 1,237 | | 2.7% | | 1,335 | | 1,301 | | 2.6% | | 1,363 | | 1,311 | | 4.0% | | 97.6% | | 97.3% | | 55.6% | | 57.3% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Florida | | 1,272 | | 10 | | 1,124 | | 1,166 | | (3.6)% | | 1,216 | | 1,248 | | (2.6)% | | 1,352 | | 1,338 | | 1.0% | | 94.0% | | 95.8% | | 62.9% | | 56.9% |
Georgia | | 1,717 | | 14 | | 689 | | 787 | | (12.5)% | | 843 | | 882 | | (4.4)% | | 980 | | 983 | | (0.3)% | | 87.8% | | 93.0% | | 67.6% | | 42.9% |
Total Southeast Properties | | 2,989 | | 13 | | 874 | | 948 | | (7.8)% | | 1,002 | | 1,038 | | (3.5)% | | 1,138 | | 1,134 | | 0.4% | | 90.4% | | 94.2% | | 65.6% | | 48.9% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total/Average Same | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community | | 11,572 | | 16 | | $ | 849 | | $ | 857 | | (0.9)% | | $ | 913 | | $ | 915 | | (0.2)% | | $ | 983 | | $ | 973 | | 1.0% | | 95.4% | | 96.3% | | 65.6% | | 61.0% |
(1) | Represents gross potential rents less vacancies and allowances for all units divided by the number of units in a market. |
| |
(2) | Represents gross potential rents less allowances for all units divided by the number of units in a market. |
| |
(3) | Represents gross potential rents for all units divided by the number of units in a market. |
| |
(4) | Represents physical occupancy at the end of the quarter. |
| |
(5) | Represents the number of units turned over for the quarter, divided by the number of units in a market, annualized. |
| |
(6) | Age shown in years. |
Associated Estates Realty Corporation
Property Revenue
For the Three Months Ended June 30 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | Q2 | | Q2 | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property Revenue | | Units | | Occupancy (1) | | Occupancy (1) | | Revenue | | Revenue | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 97.8% | | 97.6% | | $ | 2,115 | | $ | 2,105 | | $ | 10 | | 0.5% |
Michigan | | 2,888 | | 96.1% | | 97.4% | | 6,604 | | 6,544 | | 60 | | 0.9% |
Ohio - Central Ohio | | 2,621 | | 97.0% | | 96.5% | | 6,334 | | 6,169 | | 165 | | 2.7% |
Ohio - Northeastern Ohio | | 1,303 | | 98.9% | | 97.0% | | 3,732 | | 3,705 | | 27 | | 0.7% |
Total Midwest Properties | | 7,648 | | 97.1% | | 97.1% | | 18,785 | | 18,523 | | 262 | | 1.4% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 98.1% | | 96.4% | | 2,550 | | 2,471 | | 79 | | 3.2% |
Virginia | | 268 | | 96.6% | | 99.6% | | 1,082 | | 1,059 | | 23 | | 2.2% |
Total Mid-Atlantic Properties | | 935 | | 97.6% | | 97.3% | | 3,632 | | 3,530 | | 102 | | 2.9% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 94.0% | | 95.8% | | 4,401 | | 4,572 | | (171) | | (3.7)% |
Georgia | | 1,717 | | 87.8% | | 93.0% | | 3,648 | | 4,166 | | (518) | | (12.4)% |
Total Southeast Properties | | 2,989 | | 90.4% | | 94.2% | | 8,049 | | 8,738 | | (689) | | (7.9)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 95.4% | | 96.3% | | 30,466 | | 30,791 | | (325) | | (1.1)% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 94.0% | | 98.9% | | 1,672 | | 1,375 | | 297 | | 21.6% |
| | | | | | | | | | | | | | |
Total Property Revenue | | 12,108 | | 95.4% | | 96.4% | | $ | 32,138 | | $ | 32,166 | | $ | (28) | | (0.1)% |
(1) | Represents physical occupancy at the end of the quarter. |
| |
(2) | The Company defines acquisition properties as acquired properties which have not been owned for one year. |
Associated Estates Realty Corporation
Property Operating Expenses
For the Three Months Ended June 30, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | Q2 | | Q2 | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property Operating Expenses | | Units | | Occupancy (1) | | Occupancy (1) | | Expenses | | Expenses | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 97.8% | | 97.6% | | $ | 872 | | $ | 1,107 | | $ | (235) | | (21.2)% |
Michigan | | 2,888 | | 96.1% | | 97.4% | | 3,199 | | 3,162 | | 37 | | 1.2% |
Ohio - Central Ohio | | 2,621 | | 97.0% | | 96.5% | | 2,851 | | 2,858 | | (7) | | (0.2)% |
Ohio - Northeastern Ohio | | 1,303 | | 98.9% | | 97.0% | | 1,437 | | 1,439 | | (2) | | (0.1)% |
Total Midwest Properties | | 7,648 | | 97.1% | | 97.1% | | 8,359 | | 8,566 | | (207) | | (2.4)% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 98.1% | | 96.4% | | 827 | | 788 | | 39 | | 4.9% |
Virginia | | 268 | | 96.6% | | 99.6% | | 328 | | 314 | | 14 | | 4.5% |
Total Mid-Atlantic Properties | | 935 | | 97.6% | | 97.3% | | 1,155 | | 1,102 | | 53 | | 4.8% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 94.0% | | 95.8% | | 1,925 | | 1,775 | | 150 | | 8.5% |
Georgia | | 1,717 | | 87.8% | | 93.0% | | 1,836 | | 1,817 | | 19 | | 1.0% |
Total Southeast Properties | | 2,989 | | 90.4% | | 94.2% | | 3,761 | | 3,592 | | 169 | | 4.7% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 95.4% | | 96.3% | | 13,275 | | 13,260 | | 15 | | 0.1% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 94.0% | | 98.9% | | 537 | | 451 | | 86 | | 19.1% |
| | | | | | | | | | | | | | |
Total Property Operating Expenses | | 12,108 | | 95.4% | | 96.4% | | $ | 13,812 | | $ | 13,711 | | $ | 101 | | 0.7% |
(1) | Represents physical occupancy at the end of the quarter. |
| |
(2) | The Company defines acquisition properties as acquired properties which have not been owned for one year. |
Associated Estates Realty Corporation
Property Net Operating Income (Property NOI)
For the Three Months Ended June 30, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | Q2 | | Q2 | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property NOI (1) | | Units | | Occupancy (2) | | Occupancy (2) | | NOI | | NOI | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 97.8% | | 97.6% | | $ | 1,243 | | $ | 998 | | $ | 245 | | 24.5% |
Michigan | | 2,888 | | 96.1% | | 97.4% | | 3,405 | | 3,382 | | 23 | | 0.7% |
Ohio - Central Ohio | | 2,621 | | 97.0% | | 96.5% | | 3,483 | | 3,311 | | 172 | | 5.2% |
Ohio - Northeastern Ohio | | 1,303 | | 98.9% | | 97.0% | | 2,295 | | 2,266 | | 29 | | 1.3% |
Total Midwest Properties | | 7,648 | | 97.1% | | 97.1% | | 10,426 | | 9,957 | | 469 | | 4.7% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 98.1% | | 96.4% | | 1,723 | | 1,683 | | 40 | | 2.4% |
Virginia | | 268 | | 96.6% | | 99.6% | | 754 | | 745 | | 9 | | 1.2% |
Total Mid-Atlantic Properties | | 935 | | 97.6% | | 97.3% | | 2,477 | | 2,428 | | 49 | | 2.0% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 94.0% | | 95.8% | | 2,476 | | 2,797 | | (321) | | (11.5)% |
Georgia | | 1,717 | | 87.8% | | 93.0% | | 1,812 | | 2,349 | | (537) | | (22.9)% |
Total Southeast Properties | | 2,989 | | 90.4% | | 94.2% | | 4,288 | | 5,146 | | (858) | | (16.7)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 95.4% | | 96.3% | | 17,191 | | 17,531 | | (340) | | (1.9)% |
| | | | | | | | | | | | | | |
Acquisitions (3) | | | | | | | | | | | | | | |
Virginia | | 536 | | 94.0% | | 98.9% | | 1,135 | | 924 | | 211 | | 22.8% |
| | | | | | | | | | | | | | |
Total Property NOI | | 12,108 | | 95.4% | | 96.4% | | $ | 18,326 | | $ | 18,455 | | $ | (129) | | (0.7)% |
(1) | See page 28 for a reconciliation of net income (loss) attributable to AERC 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 been owned for one year. |
Associated Estates Realty Corporation
Property Revenue
For the Six Months Ended June 30 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | YTD | | YTD | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property Revenue | | Units | | Occupancy (1) | | Occupancy (1) | | Revenues | | Revenues | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 97.8% | | 97.6% | | $ | 4,168 | | $ | 4,111 | | $ | 57 | | 1.4% |
Michigan | | 2,888 | | 96.1% | | 97.4% | | 13,138 | | 12,968 | | 170 | | 1.3% |
Ohio - Central Ohio | | 2,621 | | 97.0% | | 96.5% | | 12,646 | | 12,164 | | 482 | | 4.0% |
Ohio - Northeastern Ohio | | 1,303 | | 98.9% | | 97.0% | | 7,369 | | 7,311 | | 58 | | 0.8% |
Total Midwest Properties | | 7,648 | | 97.1% | | 97.1% | | 37,321 | | 36,554 | | 767 | | 2.1% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 98.1% | | 96.4% | | 5,018 | | 4,937 | | 81 | | 1.6% |
Virginia | | 268 | | 96.6% | | 99.6% | | 2,162 | | 2,081 | | 81 | | 3.9% |
Total Mid-Atlantic Properties | | 935 | | 97.6% | | 97.3% | | 7,180 | | 7,018 | | 162 | | 2.3% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 94.0% | | 95.8% | | 8,785 | | 9,104 | | (319) | | (3.5)% |
Georgia | | 1,717 | | 87.8% | | 93.0% | | 7,304 | | 8,339 | | (1,035) | | (12.4)% |
Total Southeast Properties | | 2,989 | | 90.4% | | 94.2% | | 16,089 | | 17,443 | | (1,354) | | (7.8)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 95.4% | | 96.3% | | 60,590 | | 61,015 | | (425) | | (0.7)% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 94.0% | | 98.9% | | 3,372 | | 1,375 | | 1,997 | | 145.2% |
| | | | | | | | | | | | | | |
Total Property Revenue | | 12,108 | | 95.4% | | 96.4% | | $ | 63,962 | | $ | 62,390 | | $ | 1,572 | | 2.5% |
| | | | | | | | | | | | | | |
(1) | Represents physical occupancy at the end of the quarter. |
| |
(2) | The Company defines acquisition properties as acquired properties which have not been owned for one year. |
Associated Estates Realty Corporation
Property Operating Expenses
For the Six Months Ended June 30, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | YTD | | YTD | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property Operating Expenses | | Units | | Occupancy (1) | | Occupancy (1) | | Expenses | | Expenses | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 97.8% | | 97.6% | | $ | 1,796 | | $ | 2,007 | | $ | (211) | | (10.5)% |
Michigan | | 2,888 | | 96.1% | | 97.4% | | 6,303 | | 6,166 | | 137 | | 2.2% |
Ohio - Central Ohio | | 2,621 | | 97.0% | | 96.5% | | 5,620 | | 5,573 | | 47 | | 0.8% |
Ohio - Northeastern Ohio | | 1,303 | | 98.9% | | 97.0% | | 2,885 | | 2,845 | | 40 | | 1.4% |
Total Midwest Properties | | 7,648 | | 97.1% | | 97.1% | | 16,604 | | 16,591 | | 13 | | 0.1% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 98.1% | | 96.4% | | 1,711 | | 1,568 | | 143 | | 9.1% |
Virginia | | 268 | | 96.6% | | 99.6% | | 683 | | 626 | | 57 | | 9.1% |
Total Mid-Atlantic Properties | | 935 | | 97.6% | | 97.3% | | 2,394 | | 2,194 | | 200 | | 9.1% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 94.0% | | 95.8% | | 3,831 | | 3,512 | | 319 | | 9.1% |
Georgia | | 1,717 | | 87.8% | | 93.0% | | 3,618 | | 3,627 | | (9) | | (0.2)% |
Total Southeast Properties | | 2,989 | | 90.4% | | 94.2% | | 7,449 | | 7,139 | | 310 | | 4.3% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 95.4% | | 96.3% | | 26,447 | | 25,924 | | 523 | | 2.0% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 94.0% | | 98.9% | | 1,119 | | 453 | | 666 | | 147.0% |
| | | | | | | | | | | | | | |
Total Property Operating Expenses | | 12,108 | | 95.4% | | 96.4% | | $ | 27,566 | | $ | 26,377 | | $ | 1,189 | | 4.5% |
(1) | Represents physical occupancy at the end of the quarter. |
| |
(2) | The Company defines acquisition properties as acquired properties which have not been owned for one year. |
Associated Estates Realty Corporation
Property Net Operating Income (Property NOI)
For the Six Months Ended June 30, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | YTD | | YTD | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property NOI (1) | | Units | | Occupancy (2) | | Occupancy (2) | | NOI | | NOI | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 97.8% | | 97.6% | | $ | 2,372 | | $ | 2,104 | | $ | 268 | | 12.7% |
Michigan | | 2,888 | | 96.1% | | 97.4% | | 6,835 | | 6,802 | | 33 | | 0.5% |
Ohio - Central Ohio | | 2,621 | | 97.0% | | 96.5% | | 7,026 | | 6,591 | | 435 | | 6.6% |
Ohio - Northeastern Ohio | | 1,303 | | 98.9% | | 97.0% | | 4,484 | | 4,466 | | 18 | | 0.4% |
Total Midwest Properties | | 7,648 | | 97.1% | | 97.1% | | 20,717 | | 19,963 | | 754 | | 3.8% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 98.1% | | 96.4% | | 3,307 | | 3,369 | | (62) | | (1.8)% |
Virginia | | 268 | | 96.6% | | 99.6% | | 1,479 | | 1,455 | | 24 | | 1.6% |
Total Mid-Atlantic Properties | | 935 | | 97.6% | | 97.3% | | 4,786 | | 4,824 | | (38) | | (0.8)% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 94.0% | | 95.8% | | 4,954 | | 5,592 | | (638) | | (11.4)% |
Georgia | | 1,717 | | 87.8% | | 93.0% | | 3,686 | | 4,712 | | (1,026) | | (21.8)% |
Total Southeast Properties | | 2,989 | | 90.4% | | 94.2% | | 8,640 | | 10,304 | | (1,664) | | (16.1)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 95.4% | | 96.3% | | 34,143 | | 35,091 | | (948) | | (2.7)% |
| | | | | | | | | | | | | | |
Acquisitions (3) | | | | | | | | | | | | | | |
Virginia | | 536 | | 94.0% | | 98.9% | | 2,253 | | 922 | | 1,331 | | 144.4% |
| | | | | | | | | | | | | | |
Total Property NOI | | 12,108 | | 95.4% | | 96.4% | | $ | 36,396 | | $ | 36,013 | | $ | 383 | | 1.1% |
(1) | See page 28 for a reconciliation of net income (loss) attributable to AERC 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 been owned for one year. |
Associated Estates Realty Corporation
Debt Structure
As of June 30, 2009
(Dollar amounts in thousands) |
| Balance | | Percentage | | Weighted |
| Outstanding | | of | | Average |
FIXED RATE DEBT | June 30, 2009 | | Total Debt | | Interest Rate |
| | | | | |
Mortgages payable - CMBS | $ | 116,501 | | 22.2% | | 7.7% |
Mortgages payable - other (1) | 337,524 | | 64.3% | | 5.8% |
Unsecured debt | 25,780 | | 4.9% | | 7.9% |
Total fixed rate debt | 479,805 | | 91.4% | | 6.4% |
| | | | | |
VARIABLE RATE DEBT | | | | | |
Mortgages payable | 35,110 | | 6.7% | | 4.8% |
Unsecured revolving credit facility | 10,000 | | 1.9% | | 2.0% |
Total variable rate debt | 45,110 | | 8.6% | | 4.1% |
TOTAL DEBT | $ | 524,915 | | 100.0% | | 6.2% |
| | | | | |
Interest coverage ratio (2) | 1.78:1 | | | | |
Fixed charge coverage ratio (3) | 1.59:1 | | | | |
Weighted average maturity | 7.5 years | | | | |
| Fixed Rate | | Fixed Rate | | | | |
SCHEDULED PRINCIPAL MATURITIES | CMBS | | Other | | Variable Rate | | Total |
| | | | | | | |
2009 | $ | - | | $ | - | | $ | - | | $ | - |
2010 | 15,442 | | 63,000 | | - | | 78,442 |
2011(4) | 55,086 | | - | | 10,000 | | 65,086 |
2012 | 45,973 | | 36,000 | | - | | 81,973 |
2013 | - | | 132,209 | | - | | 132,209 |
Thereafter | - | | 132,095 | | 35,110 | | 167,205 |
Total | $ | 116,501 | | $ | 363,304 | | $ | 45,110 | | $ | 524,915 |
| | | | | | | |
(1) | Includes $63,000 of variable rate debt swapped to fixed. |
| |
(2) | Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs and excluding defeasance, other prepayment costs/credits and/or preferred repurchase costs including discounts received and premiums paid. See page 27 for a reconciliation of net income (loss) available to common shares to EBITDA and for the Company's definition of EBITDA. |
| |
(3) | Represents interest expense and preferred stock dividend payment coverage, including capitalized interest and excluding defeasance and/or other prepayment costs. |
| |
(4) | Includes the Company's unsecured revolving credit facility. |
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 page 2 of this document for a list of risk factors.
Earnings Guidance Per Common Share | | |
Expected net income attributable to AERC | | $0.35 to $0.41 |
Expected real estate depreciation and amortization | | 2.07 |
Expected net defeasance credits | | -0.03 |
Expected preferred share dividends | | -0.25 |
Expected gains on disposition of properties/gain on insurance recoveries | | -0.97 |
Expected Funds from Operations as Adjusted (1) | | $1.17 to $1.23 |
| | |
Same Community Portfolio | | |
Revenue growth | | -1.6% to -1.2% |
Expense growth | | 0.5% to 1.0% |
Property NOI (2) growth | | -3.5% to -2.5% |
Physical occupancy | | 92.5% to 93.0% |
| | |
Transactions | | |
Acquisitions | | $40.0 million |
Dispositions | | $33.9 million |
Development (3) | | $5.0 million |
| | |
Corporate Expenses | | |
General and administrative expense | | $13.6 million |
Service company expense (4) | | $0.5 million |
Total | | $14.1 million |
| | |
Debt | | |
Capitalized interest (3) | | $0.1 million |
Expensed interest (excluding defeasance credits) (5) | | $35.1 million |
Expected net defeasance credits | | -$0.6 million |
| | |
Capital Structure (6) | | |
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) | Reflects development of 60 units on adjacent parcel in Richmond, Virginia, with an expected completion date of June 30, 2010. |
| |
(4) | 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. |
| |
(5) | Includes $1.3 million of deferred financing costs. |
| |
(6) | 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, gains on insurance recoveries, and gains and losses from the disposition of properties and land. 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/credits of $(563,000) and $2.0 million for the six months ended June 30, 2009 and June 30, 2008, respectively. In accordance with GAAP, these prepayment costs/credits are included as interest expense in the Company's Consolidated Statement of Operations. The Company is providing this calculation as an alternative FFO calculation as it considers it a more appropriate measure of comparing the operating performance of a company's real estate between periods or as compared to different REITs.
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. 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 income (loss) available to common shares to EBITDA.
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
(In thousands) | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | |
Net income (loss) available to common shares | | $ | 10,250 | | $ | (1,380) | | $ | 9,260 | | $ | 35,296 |
Allocation to participating securities | | 429 | | - | | 482 | | 768 |
Equity in net loss of joint ventures | | - | | 23 | | - | | 45 |
Preferred share dividends | | 1,049 | | 1,201 | | 2,100 | | 2,402 |
Interest income | | (18) | | (92) | | (34) | | (111) |
Interest expense (1) | | 8,736 | | 8,982 | | 16,950 | | 20,437 |
Depreciation and amortization | | 8,803 | | 9,473 | | 18,269 | | 18,775 |
Gain on disposition of properties/gain on insurance recoveries | | (13,679) | | (2,293) | | (15,957) | | (45,203) |
Taxes | | 86 | | 92 | | 160 | | 152 |
EBITDA | | 15,656 | | 16,006 | | 31,230 | | 32,561 |
EBITDA - Joint Ventures: | | | | | | | | |
Equity in net loss of joint ventures | | - | | (23) | | - | | (45) |
Interest expense | | - | | 10 | | - | | 20 |
Depreciation and amortization | | - | | 24 | | - | | 48 |
EBITDA - Joint Ventures | | - | | 11 | | - | | 23 |
| | | | | | | | |
Total EBITDA | | $ | 15,656 | | $ | 16,017 | | $ | 31,230 | | $ | 32,584 |
(1) | 2009 includes a defeasance credit of $(563), while 2008 includes defeasance and other prepayment costs of $1,959. |
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 income (loss) attributable to AERC.
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
(In thousands) | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | |
Property NOI | $ | 18,326 | | $ | 18,455 | | $ | 36,396 | | $ | 36,013 |
Service company NOI | 9 | | (1) | | 117 | | 157 |
Painting services NOI | (69) | | (89) | | (185) | | (195) |
Depreciation and amortization | (8,587) | | (9,167) | | (17,795) | | (17,421) |
General and administrative expense | (3,165) | | (3,183) | | (6,304) | | (6,711) |
Interest income | 18 | | 92 | | 33 | | 106 |
Interest expense | (8,736) | | (8,784) | | (16,919) | | (17,611) |
Gain on insurance recoveries | 544 | | - | | 544 | | - |
Equity in net loss of joint ventures | - | | (23) | | - | | (45) |
Income from discontinued operations: | | | | | | | |
Operating income (loss) | 267 | | 241 | | 569 | | (1,003) |
Gain on disposition of properties | 13,135 | | 2,293 | | 15,413 | | 45,203 |
Income from discontinued operations | 13,402 | | 2,534 | | 15,982 | | 44,200 |
Net income (loss) | 11,742 | | (166) | | 11,869 | | 38,493 |
Net loss attributable to noncontrolling redeemable interest | (14) | | (13) | | (27) | | (27) |
Consolidated net income (loss) attributable to AERC | $ | 11,728 | | $ | (179) | | $ | 11,842 | | $ | 38,466 |
| | | | | | | |
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 were owned and operational for the entire periods presented.
