Exhibit 99.2
Associated Estates Realty Corporation
Fourth Quarter 2009
Earnings Release and Supplemental Financial Data
Saw Mill Village, located in Columbus, Ohio, is a community of 340 units and has various unique floor plans from which to choose. Amenities include clubhouse with tanning salon, universal weight room, racquetball court, lighted tennis courts, washer and dryer in each unit, fireplace with mantel and more. |
Saw Mill Village | | Phone: | (614) 761-9608 |
6900 Saw Mill Village Road | | Fax: | (614) 761-1231 |
Columbus, OH 43235-4999 | | Web Site: | www.sawmillvillageapts.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
Fourth 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 2010 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 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; ownership limitations on our common and preferred shares that may discourage a takeover otherwise considered favorably by shareholders; 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; 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 construction business risks. |
ASSOCIATED ESTATES REALTY CORPORATION REPORTS FOURTH QUARTER AND FULL YEAR RESULTS
Full Year 2009 FFO Results In-Line with Guidance
Cleveland, Ohio – February 8, 2010 – Associated Estates Realty Corporation (NYSE: AEC) (NASDAQ: AEC) today reported financial results for the fourth quarter and year ended December 31, 2009.
Funds from operations (FFO) for the fourth quarter ended December 31, 2009, was $0.26 per common share (basic and diluted), compared to $0.48 per common share (basic and diluted), for the fourth quarter ended December 31, 2008. FFO as adjusted for the fourth quarter of 2008 was $0.35 per common share (basic and diluted) after adjusting for net preferred share repurchase discounts of $2.1 million or $0.13 per common share. Total revenue for the fourth quarter of 2009 was $32.4 million compared with $32.9 million for the fourth quarter of 2008, a decrease of 1.6 percent.
Net loss applicable to common shares was $3.9 million or $0.23 per common share (basic and diluted) for the fourth quarter ended December 31, 2009, compared to net income applicable to common shares of $300,000 or $0.02 per common share (basic and diluted) for the fourth quarter ended December 31, 2008.
A reconciliation of net (loss) income attributable to the Company to FFO and FFO as adjusted, is included on page 10.
Same Community Portfolio Results
Net operating income (NOI) for the fourth quarter for the Company’s Same Community portfolio declined 3.1 percent compared to the fourth quarter of 2008. This decline was the result of revenue decreasing 1.9 percent and property operating expenses decreasing 0.3 percent. Quarter end physical occupancy was 93.9 percent compared to 93.0 percent at the end of the fourth quarter of 2008. Average net rent per unit for the fourth quarter for the Same Community portfolio was $912 per month, a 2.1 percent decrease compared to the fourth quarter of 2008. Net rent per unit for the fourth quarter for the Company’s Same Community Midwest portfolio declined by 0.7 percent compared to the fourth quarter of 2008. Net rent per unit for the Company’s Same Community Mid-Atlantic portfolio decreased 1.0 percent and net rent per unit for the Company’s Same Community properties in the Southeast markets decreased 5.4 percent.
On a sequential basis, compared to the third quarter of 2009, revenue for the Same Community portfolio declined by 1.5 percent and expenses decreased by 5.5 percent reflecting an increase in NOI of 1.4 percent.
Additional quarterly financial information, including performance by region for the Company's portfolio, is included on pages 15 through 23.
Year-to-Date Performance
FFO for the twelve months ended December 31, 2009, was $1.20 per common share (basic and diluted). FFO includes a credit to expense of $563,000 or approximately $0.03 per common share. This credit to expense was for a refund of defeasance costs on certain previously defeased loans. FFO as adjusted for the twelve months ended December 31, 2009, excludes that credit, and was $1.17 per common share (basic and diluted).
Associated Estates Realty Corporation
Fourth Quarter Earnings |
For the twelve months ended December 31, 2009, net income applicable to common shares was $1.6 million or $0.10 per common share (basic and diluted) compared to net income applicable to common shares of $31.4 million or $1.93 per common share (basic and diluted) for the period ended December 31, 2008. The results for the twelve-month period ended December 31, 2009, include gains on insurance recoveries of $665,000 or $0.04 per common share, gains on dispositions of properties of $15.4 million or $0.93 per common share and a credit to expenses of $563,000 or approximately $0.03 per common share attributable to a refund of defeasance costs on certain previously defeased loans. The December 31, 2008 results include gains from property sales of $45.2 million or $2.78 per common share and defeasance and/or prepaid costs of $2.0 million or $0.12 per common share.
For the year, NOI for the Company’s Same Community portfolio decreased 2.4 percent compared to 2008. The decline is due to a 1.2 percent revenue decrease and a 0.4 percent operating expense increase.
“Our planning and discipline paid off as we faced turbulent market conditions in 2009,” said Jeffrey I. Friedman, president and chief executive officer. “Our hands-on approach and our dedicated team have positioned us to benefit when businesses start to add jobs and pricing power returns to apartment owners,” Friedman added.
A reconciliation of net (loss) income attributable to the Company to FFO and FFO as adjusted, is included on page 10.
Equity and Debt Financing
On January 15, 2010, the Company announced that it had completed the sale of 5,175,000 common shares resulting in net proceeds of approximately $54.7 million. Additionally, on December 22, 2009, the Company announced that it had entered into a credit facility agreement with Wells Fargo Multifamily Capital, on behalf of Freddie Mac, pursuant to which the Company has the potential to borrow up to $100 million over a two-year period. Obligations under this facility will be secured by nonrecourse, non cross-collateralized fixed or variable rate mortgages having terms of five, seven or ten years.
As of the date of this release, the Company has no outstanding balance on its $150 million unsecured revolving credit facility. The Company recently repaid a $42.0 million mortgage, which was originally scheduled to mature in June 2010. For 2010, the Company has remaining debt maturities of $36.3 million, which it intends to repay using its unsecured revolving credit facility or with proceeds from anticipated refinancing activity.
2010 Outlook
The Company said its current FFO expectations for 2010 range between $0.86 to $0.92 per common share. 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, February 9 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 "Q4 2009 Earnings Webcast" link. The webcast will be archived through February 23, 2010.
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
OPERATING INFORMATION | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | |
Total revenue | | $ | 32,415 | | $ | 32,926 | | $ | 130,419 | | $ | 130,642 |
Property revenue | | $ | 31,756 | | $ | 32,381 | | $ | 127,972 | | $ | 127,848 |
Net (loss) income applicable to common shares | | $ | (3,866) | | $ | 298 | | $ | 1,588 | | $ | 31,388 |
Per share - basic and diluted | | $ | (0.23) | | $ | 0.02 | | $ | 0.10 | | $ | 1.93 |
| | | | | | | | |
Funds from Operations (FFO) (1) | | $ | 4,275 | | $ | 7,846 | | $ | 19,836 | | $ | 21,893 |
| | | | | | | | |
FFO as adjusted (1) | | $ | 4,275 | | $ | 5,700 | | $ | 19,273 | | $ | 21,706 |
| | | | | | | | |
FFO per share - basic and diluted | | $ | 0.26 | | $ | 0.48 | | $ | 1.20 | | $ | 1.35 |
| | | | | | | | |
FFO as adjusted per share - basic and diluted | | $ | 0.26 | | $ | 0.35 | | $ | 1.17 | | $ | 1.33 |
| | | | | | | | |
Funds Available for Distribution (FAD) (1) | | $ | 2,633 | | $ | 4,733 | | $ | 14,213 | | $ | 15,636 |
| | | | | | | | |
Dividends per share | | $ | 0.17 | | $ | 0.17 | | $ | 0.68 | | $ | 0.68 |
| | | | | | | | |
Payout ratio - FFO | | 65.4% | | 35.4% | | 56.7% | | 50.4% |
Payout ratio - FFO as adjusted | | 65.4% | | 48.6% | | 58.1% | | 51.1% |
Payout ratio - FAD | | 106.3% | | 58.6% | | 79.1% | | 70.8% |
| | | | | | | | |
General and administrative expense | | $ | 3,888 | | $ | 3,390 | | $ | 14,024 | | $ | 13,769 |
Interest expense (2) | | $ | 8,334 | | $ | 8,737 | | $ | 33,564 | | $ | 34,449 |
Interest coverage ratio (3) | | 1.66:1 | | 1.78:1 | | 1.72:1 | | 1.76:1 |
Fixed charge coverage ratio (4) | | 1.48:1 | | 1.60:1 | | 1.53:1 | | 1.56:1 |
General and administrative expense to property revenue | | 12.2% | | 10.5% | | 11.0% | | 10.8% |
Interest expense to property revenue | | 26.2% | | 27.0% | | 26.2% | | 26.9% |
Property NOI (5) | | $ | 18,520 | | $ | 19,109 | | $ | 73,170 | | $ | 73,787 |
ROA (6) | | 7.8% | | 8.2% | | 7.8% | | 8.2% |
Same Community revenue (decrease) increase | | (1.9)% | | 1.4% | | (1.2)% | | 3.0% |
Same Community expense (decrease) increase | | (0.3)% | | 2.8% | | 0.4% | | 0.3% |
Same Community NOI (decrease) increase | | (3.1)% | | 0.4% | | (2.4)% | | 5.1% |
Same Community operating margins | | 58.3% | | 59.0% | | 56.7% | | 57.4% |
(1) | See page 10 for a reconciliation of net (loss) income 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 $300 and $1,219 for 2009 and $299 and $1,211 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 (loss) income 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 (loss) income 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
Fourth Quarter 2009
(Unaudited; in thousands, except per share and ratio data) |
| | December 31, | | December 31, |
MARKET CAPITALIZATION DATA | | 2009 | | 2008 |
| | | | |
Net real estate assets | | $ | 638,535 | | $ | 673,848 |
Total assets | | $ | 662,505 | | $ | 699,896 |
| | | | |
Debt | | $ | 525,836 | | $ | 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 | | $ | 99,440 | | $ | 105,621 |
| | | | |
Common shares outstanding | | 16,676 | | 16,556 |
Share price, end of period | | $ | 11.27 | | $ | 9.13 |
| | | | |
Total market capitalization | | $ | 762,038 | | $ | 756,900 |
| | | | |
Undepreciated book value of real estate assets (1) | | $ | 940,643 | | $ | 957,061 |
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Debt to undepreciated book value of real estate assets | | 55.9% | | 58.2% |
Debt and preferred stock to undepreciated book value of real estate assets | | 61.0% | | 63.3% |
Debt to total market capitalization | | 69.0% | | 73.7% |
Debt and preferred stock to total market capitalization | | 75.3% | | 80.0% |
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Annual dividend | | $ | 0.68 | | $ | 0.68 |
| | | | |
Annual dividend yield based on share price, end of period | | 6.0% | | 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
Fourth 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 | | 1 | | 258 | | |
Total Company Portfolio | | 49 | | 12,366 | | |
| | December 31, | | December 31, |
| | 2009 | | 2008 |
ASSETS | | | | |
| | | | |
Real estate assets | | |
Investment in real estate | | $ | 935,846 | | $ | 951,978 |
Construction in progress | | 4,797 | | 745 |
Less: accumulated depreciation | | (302,108) | | (280,541) |
| | 638,535 | | 672,182 |
Real estate associated with property held for sale, net | | - | | 1,666 |
| | | | |
Real estate, net | | 638,535 | | 673,848 |
Cash and cash equivalents | | 3,600 | | 3,551 |
Restricted cash | | 7,093 | | 6,873 |
Other assets | | 13,277 | | 15,624 |
Total assets | | $ | 662,505 | | $ | 699,896 |
| | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
| | | | |
Mortgage notes payable | | $ | 487,556 | | $ | 510,201 |
Unsecured revolving credit facility | | 12,500 | | 21,500 |
Unsecured debt | | 25,780 | | 25,780 |
Total debt | | 525,836 | | 557,481 |
Accounts payable, accrued expenses and other liabilities | | 35,400 | | 34,965 |
Total liabilities | | 561,236 | | 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 December 31, 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 16,675,826 and 16,556,221 | | | | |
outstanding at December 31, 2009 and December 31, 2008, respectively | | 2,300 | | 2,300 |
Paid-in capital | | 283,090 | | 282,501 |
Accumulated distributions in excess of accumulated net income | | (168,822) | | (159,595) |
Accumulated other comprehensive loss | | (1,420) | | (2,899) |
Less: Treasury shares, at cost, 6,319,937 and 6,439,542 shares | | | | |
at December 31, 2009 and December 31, 2008, respectively | | (63,971) | | (64,949) |
Total shareholders' equity | | 99,440 | | 105,621 |
Total liabilities and shareholders' equity | | $ | 662,505 | | $ | 699,896 |
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| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2009 | | 2008 | | 2009 | | 2008 |
REVENUE | | | | | | | | |
Property revenue | | $ | 31,756 | | $ | 32,381 | | $ | 127,972 | | $ | 127,848 |
Management and service company revenue: | | | | | | | | |
Fees, reimbursements and other | | 228 | | 407 | | 1,287 | | 1,784 |
Construction and other services | | 431 | | 138 | | 1,160 | | 1,010 |
Total revenue | | 32,415 | | 32,926 | | 130,419 | | 130,642 |
| | | | | | | | |
EXPENSES | | | | | | | | |
Property operating and maintenance | | 13,236 | | 13,272 | | 54,802 | | 54,061 |
Depreciation and amortization | | 8,640 | | 9,188 | | 34,937 | | 35,913 |
Direct property management and service company expense | | 189 | | 412 | | 1,107 | | 1,624 |
Construction and other services | | 746 | | 240 | | 1,745 | | 1,338 |
General and administrative | | 3,888 | | 3,390 | | 14,024 | | 13,769 |
Total expenses | | 26,699 | | 26,502 | | 106,615 | | 106,705 |
Operating income | | 5,716 | | 6,424 | | 23,804 | | 23,937 |
Interest income | | 5 | | 11 | | 46 | | 132 |
Interest expense | | (8,634) | | (9,036) | | (34,220) | | (35,660) |
(Loss) income before gain on insurance recoveries, equity in net | | | | | | | | |
income of joint ventures, and income from discontinued operations | | (2,913) | | (2,601) | | (10,370) | | (11,591) |
Gain on insurance recoveries | | 121 | | - | | 665 | | - |
Equity in net income of joint ventures | | - | | 1,574 | | - | | 1,502 |
(Loss) income from continuing operations | | (2,792) | | (1,027) | | (9,705) | | (10,089) |
Income from discontinued operations: | | | | | | | | |
Operating income (loss) | | - | | 245 | | 568 | | (433) |
Gain on disposition of properties | | (11) | | - | | 15,400 | | 45,202 |
Income from discontinued operations | | (11) | | 245 | | 15,968 | | 44,769 |
Net (loss) income | | (2,803) | | (782) | | 6,263 | | 34,680 |
Net income attributable to noncontrolling redeemable interest | | (13) | | (13) | | (53) | | (53) |
Net (loss) income attributable to AERC | | (2,816) | | (795) | | 6,210 | | 34,627 |
Preferred share dividends | | (1,050) | | (1,053) | | (4,199) | | (4,655) |
Preferred share repurchase costs | | - | | (143) | | - | | (143) |
Discount on preferred share repurchase | | - | | 2,289 | | - | | 2,289 |
Allocation to participating securities | | - | | - | | (423) | | (730) |
Net (loss) income applicable to common shares | | $ | (3,866) | | $ | 298 | | $ | 1,588 | | $ | 31,388 |
| | | | | | | | |
Earnings per common share - basic and diluted: | | | | | | | | |
(Loss) income from continuing operations | | | | | | | | |
applicable to common shares | | $ | (0.23) | | $ | - | | $ | (0.85) | | $ | (0.78) |
Income from discontinued operations | | - | | 0.02 | | 0.95 | | 2.71 |
Net (loss) income applicable to common shares | | $ | (0.23) | | $ | 0.02 | | $ | 0.10 | | $ | 1.93 |
| | | | | | | | |
Weighted average shares outstanding - basic and diluted | | 16,561 | | 16,383 | | 16,516 | | 16,262 |
| | | | | | | | |
| | | Three Months Ended | | Twelve Months Ended |
| | | December 31, | | December 31, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
CALCULATION OF FFO AND FAD | | | | | | | | |
Net (loss) income attributable to AERC | | $ | (2,816) | | $ | (795) | | $ | 6,210 | | $ | 34,627 |
| | | | | | | | | |
Add: | Depreciation - real estate assets | | 8,251 | | 8,262 | | 32,822 | | 32,560 |
| Depreciation - real estate assets - joint ventures | | - | | 23 | | - | | 91 |
| Amortization of intangible assets | | - | | 866 | | 1,068 | | 3,929 |
| Gain on preferred share repurchase costs | | - | | (143) | | - | | (143) |
Less: | Preferred share dividends | | (1,050) | | (1,053) | | (4,199) | | (4,655) |
| Preferred share repurchase discount | | - | | 2,289 | | - | | 2,289 |
| Gain on disposition of joint venture property | | - | | (1,603) | | - | | (1,603) |
| Gain on disposition of properties/gain on insurance recoveries | | (110) | | - | | (16,065) | | (45,202) |
| | | | | | | | | |
| Funds from Operations (FFO) (1) | | 4,275 | | 7,846 | | 19,836 | | 21,893 |
| | | | | | | | | |
Add: | Defeasance and other prepayment costs | | - | | - | | - | | 1,959 |
Add: | Preferred stock repurchase costs | | - | | 143 | | - | | 143 |
Less: | Preferred stock repurchase discount | | - | | (2,289) | | - | | (2,289) |
Less: | Refund of defeasance costs for previously defeased loans | | - | | - | | (563) | | - |
| | | | | | | | | |
| Funds from Operations as Adjusted (1) | | 4,275 | | 5,700 | | 19,273 | | 21,706 |
| | | | | | | | | |
Add: | Depreciation - other assets | | 389 | | 362 | | 1,522 | | 1,381 |
| Amortization of deferred financing fees | | 300 | | 311 | | 1,225 | | 1,297 |
Less: | Recurring fixed asset additions (2) | | (2,331) | | (1,635) | | (7,807) | | (8,739) |
| Recurring fixed asset additions - joint ventures (2) | | - | | (5) | | - | | (9) |
| | | | | | | | | |
| Funds Available for Distribution (FAD) (1) | | $ | 2,633 | | $ | 4,733 | | $ | 14,213 | | $ | 15,636 |
| | | | | | | | | |
Weighted average shares outstanding - basic and diluted (3) | | 16,561 | | 16,383 | | 16,516 | | 16,262 |
| | | | | | | | | |
PER SHARE INFORMATION: | | | | | | | | |
FFO - basic and diluted | | $ | 0.26 | | $ | 0.48 | | $ | 1.20 | | $ | 1.35 |
FFO as adjusted - basic and diluted | | $ | 0.26 | | $ | 0.35 | | $ | 1.17 | | $ | 1.33 |
Dividends | | $ | 0.17 | | $ | 0.17 | | $ | 0.68 | | $ | 0.68 |
| | | | | | | | | |
Payout ratio - FFO | | 65.4% | | 35.4% | | 56.7% | | 50.4% |
Payout ratio - FFO as adjusted | 65.4% | | 48.6% | | 58.1% | | 51.1% |
Payout ratio - FAD | | 106.3% | | 58.6% | | 79.1% | | 70.8% |
(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, revenue enhancing and non-recurring capital additions. |
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(3) | The Company has excluded 117 and 1 common share equivalents from the three and twelve months ended December 31, 2009 calculation, respectively, and 24 and 243 common share equivalents from the three and twelve months ended December 31, 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 December 31, 2009 and 2008
(Unaudited; dollar amounts in thousands) |
| | Three Months Ended |
| | December 31, |
| | 2009 | | 2008 |
REVENUE | | | | |
Property revenue | | $ | - | | $ | 1,297 |
| | | | |
EXPENSES | | | | |
Property operating and maintenance | | - | | 560 |
Depreciation and amortization | | - | | 302 |
Total expenses | | - | | 862 |
Operating income | | - | | 435 |
Interest income | | - | | - |
Interest expense | | - | | (190) |
Gain on disposition of properties | | (11) | | - |
Income from discontinued operations | | $ | (11) | | $ | 245 |
| | | | |
(1) | 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 15 properties disposed of in 2008. |
Associated Estates Realty Corporation
Discontinued Operations (1)
Twelve Months Ended December 31, 2009 and 2008
(Unaudited; dollar amounts in thousands) |
| | Twelve Months Ended |
| | December 31, |
| | 2009 | | 2008 |
REVENUE | | | | |
Property revenue | | $ | 2,021 | | $ | 9,147 |
| | | | |
EXPENSES | | | | |
Property operating and maintenance | | 948 | | 4,427 |
Depreciation and amortization | | 475 | | 1,954 |
Total expenses | | 1,423 | | 6,381 |
Operating income | | 598 | | 2,766 |
Interest income | | 1 | | 6 |
Interest expense (2) | | (31) | | (3,205) |
Gain on disposition of properties | | 15,400 | | 45,202 |
Income from discontinued operations | | $ | 15,968 | | $ | 44,769 |
| | | | |
(1) | 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. |
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| Included in the table above are two properties disposed of in 2009 and 15 properties disposed of in 2008. |
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(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) |
| | | | Twelve Months Ended |
| | Estimated | | December 31, 2009 |
| | GAAP Useful | | | | Cost Per |
| | Life (Years) | | Amount | | Unit (1) |
OPERATING EXPENSES RELATED TO REPAIRS AND MAINTENANCE | | | | | | |
Repairs and maintenance (2) | | | | $ | 9,126 | | $ | 741 |
Maintenance personnel labor cost (2) | | | | 5,227 | | 424 |
Total Operating Expenses Related to Repairs and Maintenance | | | | 14,353 | | 1,165 |
| | | | | | |
CAPITAL EXPENDITURES | | | | | | |
Recurring Capital Expenditures (3) | | | | | | |
Amenities | | 5 | | 98 | | 8 |
Appliances | | 5 | | 822 | | 67 |
Building improvements | | 14 | | 1,220 | | 99 |
Carpet and flooring | | 5 | | 2,721 | | 221 |
Furnishings | | 5 | | 186 | | 15 |
Office/Model | | 5 | | 73 | | 6 |
HVAC and mechanicals | | 15 | | 726 | | 59 |
Landscaping and grounds | | 14 | | 1,620 | | 131 |
Suite improvements | | 5 | | 55 | | 4 |
Miscellaneous | | 5 | | 158 | | 13 |
Total Recurring Capital Expenditures - Properties | | | | 7,679 | | 623 |
Corporate capital expenditures (4) | | | | 128 | | 10 |
Total Recurring Capital Expenditures | | | | 7,807 | | 633 |
Total Recurring Capital Expenditures and Repairs and Maintenance | | | | $ | 22,160 | | $ | 1,798 |
| | | | | | |
Total Recurring Capital Expenditures | | | | $ | 7,807 | | |
Investment/Revenue Enhancing/Non-Recurring Expenditures (5) | | | | | | |
Building improvements - unit upgrades | | Various | | 211 | | |
Building improvements - other | | 20 | | 2,122 | | |
Ground improvements | | Various | | 197 | | |
Corporate office renovations | | | | 758 | | |
Total Investment/Revenue Enhancing/Non-Recurring Expenditures | | | | 3,288 | | |
| | | | | | |
Grand Total Capital Expenditures | | | | $ | 11,095 | | |
| | | | | | |
(1) | Calculated using weighted average units owned during the twelve months ended December 31, 2009 of 12,323. |
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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. |
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 Twelve Months Ended December 31, 2009 and 2008
(In thousands) |
| | | Three Months Ended | | Twelve Months Ended |
| | | December 31, | December 31, |
| | | 2009 | | 2008 | | 2009 | | 2008 |
Fees, Reimbursements and Other Revenue | | | | | | | | |
Property management fees | | $ | 20 | | $ | 76 | | $ | 175 | | $ | 299 |
Asset management fees | | 76 | | 64 | | 269 | | 263 |
Other revenue | | 40 | | (5) | | 180 | | 160 |
Payroll reimbursements(1) | | 92 | | 272 | | 663 | | 1,062 |
Fees, Reimbursements and Other Revenue(2) | | 228 | | 407 | | 1,287 | | 1,784 |
| | | | | | | | | |
Direct Property Management and Service Company Expense | | | | | | | | |
Service company allocations | | 96 | | 140 | | 444 | | 562 |
Payroll reimbursements(1) | | 93 | | 272 | | 663 | | 1,062 |
Direct Property Management and Service Company Expense(2) | | 189 | | 412 | | 1,107 | | 1,624 |
Service Company NOI | | $ | 39 | | $ | (5) | | $ | 180 | | $ | 160 |
| | | | | | | | | |
| | | | | | | | | |
General and Administrative and Service Company Expense | | | | | | | | |
General and administrative expense(2) | | $ | 3,888 | | $ | 3,390 | | $ | 14,024 | | $ | 13,769 |
Service company allocations | | 96 | | 140 | | 444 | | 562 |
General and Administrative and Service Company Expense | | $ | 3,984 | | $ | 3,530 | | $ | 14,468 | | $ | 14,331 |
| | | | | | | | | |
(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 |
| | December 31, | | September 30, | | June 30, | | March 31, | | December 31, |
| | 2009 | | 2009 | | 2009 | | 2009 | | 2008 |
| | | | | | | | | | |
Property Revenue | | $ | 31,756 | | $ | 32,255 | | $ | 32,138 | | $ | 31,824 | | $ | 32,381 |
| | | | | | | | | | |
Property Operating and | | | | | | | | | | |
Maintenance Expenses | | | | | | | | | | |
Personnel | | 3,687 | | 3,686 | | 3,798 | | 3,738 | | 3,707 |
Advertising | | 380 | | 385 | | 400 | | 392 | | 385 |
Utilities | | 1,765 | | 1,851 | | 1,686 | | 1,811 | | 1,784 |
Repairs and maintenance | | 1,863 | | 2,417 | | 2,463 | | 2,211 | | 2,000 |
Real estate taxes and insurance | | 4,398 | | 4,494 | | 4,332 | | 4,515 | | 4,246 |
Other operating | | 1,143 | | 1,166 | | 1,132 | | 1,086 | | 1,150 |
Total Expenses | | 13,236 | | 13,999 | | 13,811 | | 13,753 | | 13,272 |
| | | | | | | | | | |
Property Net Operating Income | | $ | 18,520 | | $ | 18,256 | | $ | 18,327 | | $ | 18,071 | | $ | 19,109 |
| | | | | | | | | | |
Operating Margin | | 58.3% | | 56.6% | | 57.0% | | 56.8% | | 59.0% |
| | | | | | | | | | |
Total Number of Units | | 12,108 | | 12,108 | | 12,108 | | 12,108 | | 12,108 |
| | | | | | | | | | |
NOI Per Unit | | $ | 1,530 | | $ | 1,508 | | $ | 1,514 | | $ | 1,492 | | $ | 1,578 |
| | | | | | | | | | |
Average Net Rents Per Unit (2) | | $ | 912 | | $ | 917 | | $ | 920 | | $ | 926 | | $ | 932 |
| | | | | | | | | | |
Average Net Rent Collected Per Unit (3) | $ | 848 | | $ | 858 | | $ | 855 | | $ | 847 | | $ | 864 |
| | | | | | | | | | |
Physical Occupancy - End of Period (4) | 93.9% | | 94.6% | | 95.4% | | 93.9% | | 93.0% |
| | | | | | | | | | |
(1) | The results for all quarters include Belvedere and River Forest Apartments, both of which were acquired by the Company in April 2008. |
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(2) | Represents gross potential rents less concessions. |
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(3) | Represents gross potential rents less vacancies and concessions. |
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(4) | 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 Twelve Months Ended December 31, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | Twelve Months Ended |
| | December 31, |
| | 2009 | | 2008 |
| | | | |
Property Revenue | | $ | 121,362 | | $ | 122,851 |
| | | | |
Property Operating and Maintenance Expenses | | | | |
Personnel | | 14,323 | | 14,190 |
Advertising | | 1,500 | | 1,527 |
Utilities | | 6,841 | | 6,597 |
Repairs and maintenance | | 8,512 | | 8,819 |
Real estate taxes and insurance | | 17,142 | | 16,965 |
Other operating | | 4,278 | | 4,265 |
Total Expenses | | 52,596 | | 52,363 |
| | | | |
Property Net Operating Income | | $ | 68,766 | | $ | 70,488 |
| | | | |
Operating Margin | | 56.7 % | | 57.4 % |
| | | | |
Total Number of Units | | 11,572 | | 11,572 |
| | | | |
NOI Per Unit | | $ | 5,942 | | $ | 6,091 |
| | | | |
Average Net Rents Per Unit (2) | | $ | 912 | | $ | 917 |
| | | | |
Average Net Rent Collected Per Unit (3) | | $ | 846 | | $ | 856 |
| | | | |
Physical Occupancy - End of Period (4) | | 93.9% | | 93.0% |
| | | | |
(1) | The results shown for both years exclude Belvedere and River Forest Apartments, both of which were acquired by the Company in April 2008. |
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(2) | Represents gross potential rents less concessions. |
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(3) | Represents gross potential rents less vacancies and concessions. |
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(4) | Is defined as number of units occupied divided by total number of units. |
Associated Estates Realty Corporation
Same Community Data
As of December 31, 2009 and 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 | | Q4 | | Q4 | | % | | Q4 | | Q4 | | % | | Q4 | | Q4 | | % | | Q4 | | Q4 | | Q4 | | Q4 |
| | Units | | Age (6) | | 2009 | | 2008 | | Change | | 2009 | | 2008 | | Change | | 2009 | | 2008 | | Change | | 2009 | | 2008 | | 2009 | | 2008 |
Midwest Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indiana | | 836 | | 13 | | $ | 797 | | $ | 790 | | 0.9% | | $ | 856 | | $ | 863 | | (0.8)% | | $ | 913 | | $ | 909 | | 0.4% | | 95.0% | | 93.9% | | 50.2% | | 56.9% |
Michigan | | 2,888 | | 18 | | 715 | | 736 | | (2.9)% | | 765 | | 776 | | (1.4)% | | 842 | | 840 | | 0.2% | | 94.0% | | 94.5% | | 49.4% | | 54.2% |
Ohio - Central Ohio | | 2,621 | | 18 | | 771 | | 778 | | (0.9)% | | 818 | | 818 | | 0.0% | | 844 | | 834 | | 1.2% | | 95.1% | | 95.5% | | 50.7% | | 52.5% |
Ohio - Northeastern Ohio | | 1,303 | | 14 | | 912 | | 915 | | (0.3)% | | 960 | | 969 | | (0.9)% | | 1,020 | | 1,012 | | 0.8% | | 96.2% | | 94.6% | | 49.7% | | 59.2% |
Total Midwest Properties | | 7,648 | | 17 | | 777 | | 786 | | (1.1)% | | 827 | | 833 | | (0.7)% | | 881 | | 875 | | 0.7% | | 94.9% | | 94.8% | | 50.0% | | 54.8% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 23 | | 1,250 | | 1,217 | | 2.7% | | 1,313 | | 1,329 | | (1.2)% | | 1,373 | | 1,343 | | 2.2% | | 95.2% | | 92.2% | | 39.6% | | 44.4% |
Virginia | | 804 | | 3 | | 1,090 | | 1,132 | | (3.7)% | | 1,166 | | 1,176 | | (0.9)% | | 1,202 | | 1,177 | | 2.1% | | 94.7% | | 94.8% | | 55.2% | | 41.5% |
Total Mid-Atlantic Properties | 1,471 | | 11 | | 1,163 | | 1,171 | | (0.7)% | | 1,233 | | 1,245 | | (1.0)% | | 1,280 | | 1,252 | | 2.2% | | 94.9% | | 93.6% | | 48.1% | | 42.8% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Florida | | 1,272 | | 10 | | 1,090 | | 1,121 | | (2.8)% | | 1,192 | | 1,245 | | (4.3)% | | 1,351 | | 1,346 | | 0.4% | | 92.5% | | 90.3% | | 62.3% | | 66.7% |
Georgia | | 1,717 | | 14 | | 715 | | 756 | | (5.4)% | | 813 | | 873 | | (6.9)% | | 993 | | 988 | | 0.5% | | 89.9% | | 86.5% | | 69.2% | | 79.2% |
Total Southeast Properties | | 2,989 | | 13 | | 875 | | 911 | | (4.0)% | | 975 | | 1,031 | | (5.4)% | | 1,145 | | 1,140 | | 0.4% | | 91.0% | | 88.1% | | 66.3% | | 73.9% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total/Average Same | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community | | 12,108 | | 15 | | $ | 848 | | $ | 864 | | (1.9)% | | $ | 912 | | $ | 932 | | (2.1)% | | $ | 995 | | $ | 986 | | 0.9% | | 93.9% | | 93.0% | | 53.8% | | 58.0% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. |
Associated Estates Realty Corporation
Property Revenue
For the Three Months Ended December 31, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | Q4 | | Q4 | | | | |
| | No. of | | Physical | | Physical | | 2009 | | 2008 | | Increase/ | | % |
Property Revenue | | Units | | Occupancy (1) | | Occupancy (1) | | Revenue | | Revenue | | (Decrease) | | Change |
Same Community | | | | | | | | | | | | | | |
Midwest Properties | | | | | | | | | | | | | | |
Indiana | | 836 | | 95.0% | | 93.9% | | $ | 2,064 | | $ | 2,055 | | $ | 9 | | 0.4% |
Michigan | | 2,888 | | 94.0% | | 94.5% | | 6,468 | | 6,637 | | (169) | | (2.5)% |
Ohio - Central Ohio | | 2,621 | | 95.1% | | 95.5% | | 6,264 | | 6,279 | | (15) | | (0.2)% |
Ohio - Northeastern Ohio | | 1,303 | | 96.2% | | 94.6% | | 3,696 | | 3,696 | | - | | 0.0% |
Total Midwest Properties | | 7,648 | | 94.9% | | 94.8% | | 18,492 | | 18,667 | | (175) | | (0.9)% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 95.2% | | 92.2% | | 2,545 | | 2,464 | | 81 | | 3.3% |
Virginia | | 804 | | 94.7% | | 94.8% | | 2,691 | | 2,872 | | (181) | | (6.3)% |
Total Mid-Atlantic Properties | | 1,471 | | 94.9% | | 93.6% | | 5,236 | | 5,336 | | (100) | | (1.9)% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 92.5% | | 90.3% | | 4,264 | | 4,390 | | (126) | | (2.9)% |
Georgia | | 1,717 | | 89.9% | | 86.5% | | 3,764 | | 3,988 | | (224) | | (5.6)% |
Total Southeast Properties | | 2,989 | | 91.0% | | 88.1% | | 8,028 | | 8,378 | | (350) | | (4.2)% |
| | | | | | | | | | | | | | |
Total/Same Community | | | | | | | | | | | | | | |
Property Revenue | | 12,108 | | 93.9% | | 93.0% | | 31,756 | | 32,381 | | (625) | | (1.9)% |
| | | | | | | | | | | | | | |
(1) | Represents physical occupancy at the end of the quarter. |
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Associated Estates Realty Corporation
Property Operating Expenses
For the Three Months Ended December 31, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | Q4 | | Q4 | | | | |
| | 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 | | 95.0% | | 93.9% | | $ | 649 | | $ | 879 | | $ | (230) | | (26.2)% |
Michigan | | 2,888 | | 94.0% | | 94.5% | | 2,906 | | 2,944 | | (38) | | (1.3)% |
Ohio - Central Ohio | | 2,621 | | 95.1% | | 95.5% | | 2,872 | | 2,726 | | 146 | | 5.4% |
Ohio - Northeastern Ohio | | 1,303 | | 96.2% | | 94.6% | | 1,385 | | 1,360 | | 25 | | 1.8% |
Total Midwest Properties | | 7,648 | | 94.9% | | 94.8% | | 7,812 | | 7,909 | | (97) | | (1.2)% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 95.2% | | 92.2% | | 902 | | 814 | | 88 | | 10.8% |
Virginia | | 804 | | 94.7% | | 94.8% | | 869 | | 902 | | (33) | | (3.7)% |
Total Mid-Atlantic Properties | | 1,471 | | 94.9% | | 93.6% | | 1,771 | | 1,716 | | 55 | | 3.2% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 92.5% | | 90.3% | | 1,720 | | 1,780 | | (60) | | (3.4)% |
Georgia | | 1,717 | | 89.9% | | 86.5% | | 1,933 | | 1,867 | | 66 | | 3.5% |
Total Southeast Properties | | 2,989 | | 91.0% | | 88.1% | | 3,653 | | 3,647 | | 6 | | 0.2% |
| | | | | | | | | | | | | | |
Total/Same Community | | | | | | | | | | | | | | |
Property Operating Expenses | | 12,108 | | 93.9% | | 93.0% | | 13,236 | | 13,272 | | (36) | | (0.3)% |
| | | | | | | | | | | | | | |
(1) | Represents physical occupancy at the end of the quarter. |
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Associated Estates Realty Corporation
Property Net Operating Income (Property NOI)
For the Three Months Ended December 31, 2009 and 2008
(Unaudited, in thousands, except unit totals and per unit amounts) |
| | | | 2009 | | 2008 | | Q4 | | Q4 | | | | |
| | 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 | | 95.0% | | 93.9% | | $ | 1,415 | | $ | 1,176 | | $ | 239 | | 20.3% |
Michigan | | 2,888 | | 94.0% | | 94.5% | | 3,562 | | 3,693 | | (131) | | (3.5)% |
Ohio - Central Ohio | | 2,621 | | 95.1% | | 95.5% | | 3,392 | | 3,553 | | (161) | | (4.5)% |
Ohio - Northeastern Ohio | | 1,303 | | 96.2% | | 94.6% | | 2,311 | | 2,336 | | (25) | | (1.1)% |
Total Midwest Properties | | 7,648 | | 94.9% | | 94.8% | | 10,680 | | 10,758 | | (78) | | -0.7% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 95.2% | | 92.2% | | 1,643 | | 1,650 | | (7) | | (0.4)% |
Virginia | | 804 | | 94.7% | | 94.8% | | 1,822 | | 1,970 | | (148) | | (7.5)% |
Total Mid-Atlantic Properties | | 1,471 | | 94.9% | | 93.6% | | 3,465 | | 3,620 | | (155) | | (4.3)% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 92.5% | | 90.3% | | 2,544 | | 2,610 | | (66) | | (2.5)% |
Georgia | | 1,717 | | 89.9% | | 86.5% | | 1,831 | | 2,121 | | (290) | | (13.7)% |
Total Southeast Properties | | 2,989 | | 91.0% | | 88.1% | | 4,375 | | 4,731 | | (356) | | (7.5)% |
| | | | | | | | | | | | | | |
Total/Same Community | | | | | | | | | | | | | | |
Property NOI | | 12,108 | | 93.9% | | 93.0% | | 18,520 | | 19,109 | | (589) | | (3.1)% |
| | | | | | | | | | | | | | |
(1) | See page 28 for a reconciliation of net (loss) income attributable to AERC 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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Associated Estates Realty Corporation
Property Revenue
For the Twelve Months Ended December 31, 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 | | 95.0% | | 93.9% | | $ | 8,375 | | $ | 8,248 | | $ | 127 | | 1.5% |
Michigan | | 2,888 | | 94.0% | | 94.5% | | 26,180 | | 26,313 | | (133) | | (0.5)% |
Ohio - Central Ohio | | 2,621 | | 95.1% | | 95.5% | | 25,300 | | 24,758 | | 542 | | 2.2% |
Ohio - Northeastern Ohio | | 1,303 | | 96.2% | | 94.6% | | 14,818 | | 14,812 | | 6 | | 0.0% |
Total Midwest Properties | | 7,648 | | 94.9% | | 94.8% | | 74,673 | | 74,131 | | 542 | | 0.7% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 95.2% | | 92.2% | | 10,136 | | 9,896 | | 240 | | 2.4% |
Virginia | | 268 | | 96.6% | | 96.6% | | 4,329 | | 4,248 | | 81 | | 1.9% |
Total Mid-Atlantic Properties | | 935 | | 95.6% | | 93.5% | | 14,465 | | 14,144 | | 321 | | 2.3% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 92.5% | | 90.3% | | 17,406 | | 18,065 | | (659) | | (3.6)% |
Georgia | | 1,717 | | 89.9% | | 86.5% | | 14,818 | | 16,511 | | (1,693) | | (10.3)% |
Total Southeast Properties | | 2,989 | | 91.0% | | 88.1% | | 32,224 | | 34,576 | | (2,352) | | (6.8)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 93.9% | | 93.0% | | 121,362 | | 122,851 | | (1,489) | | (1.2)% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 93.7% | | 93.8% | | 6,610 | | 4,997 | | 1,613 | | 32.3% |
| | | | | | | | | | | | | | |
Total Property Revenue | | 12,108 | | 93.9% | | 93.0% | | $ | 127,972 | | $ | 127,848 | | $ | 124 | | 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 Twelve Months Ended December 31, 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 | | 95.0% | | 93.9% | | $ | 3,408 | | $ | 3,889 | | $ | (481) | | (12.4)% |
Michigan | | 2,888 | | 94.0% | | 94.5% | | 12,335 | | 12,267 | | 68 | | 0.6% |
Ohio - Central Ohio | | 2,621 | | 95.1% | | 95.5% | | 11,312 | | 11,296 | | 16 | | 0.1% |
Ohio - Northeastern Ohio | | 1,303 | | 96.2% | | 94.6% | | 5,717 | | 5,709 | | 8 | | 0.1% |
Total Midwest Properties | | 7,648 | | 94.9% | | 94.8% | | 32,772 | | 33,161 | | (389) | | (1.2)% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 95.2% | | 92.2% | | 3,521 | | 3,351 | | 170 | | 5.1% |
Virginia | | 268 | | 96.6% | | 96.6% | | 1,381 | | 1,295 | | 86 | | 6.6% |
Total Mid-Atlantic Properties | | 935 | | 95.6% | | 93.5% | | 4,902 | | 4,646 | | 256 | | 5.5% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 92.5% | | 90.3% | | 7,391 | | 7,161 | | 230 | | 3.2% |
Georgia | | 1,717 | | 89.9% | | 86.5% | | 7,531 | | 7,395 | | 136 | | 1.8% |
Total Southeast Properties | | 2,989 | | 91.0% | | 88.1% | | 14,922 | | 14,556 | | 366 | | 2.5% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 93.9% | | 93.0% | | 52,596 | | 52,363 | | 233 | | 0.4% |
| | | | | | | | | | | | | | |
Acquisitions (2) | | | | | | | | | | | | | | |
Virginia | | 536 | | 93.7% | | 93.8% | | 2,206 | | 1,698 | | 508 | | 29.9% |
| | | | | | | | | | | | | | |
Total Property Operating Expenses | 12,108 | | 93.9% | | 93.0% | | $ | 54,802 | | $ | 54,061 | | $ | 741 | | 1.4% |
| | | | | | | | | | | | | | |
(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 Twelve Months Ended December 31, 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 | | 95.0% | | 93.9% | | $ | 4,967 | | $ | 4,359 | | $ | 608 | | 13.9% |
Michigan | | 2,888 | | 94.0% | | 94.5% | | 13,845 | | 14,046 | | (201) | | (1.4)% |
Ohio - Central Ohio | | 2,621 | | 95.1% | | 95.5% | | 13,988 | | 13,462 | | 526 | | 3.9% |
Ohio - Northeastern Ohio | | 1,303 | | 96.2% | | 94.6% | | 9,101 | | 9,103 | | (2) | | (0.0)% |
Total Midwest Properties | | 7,648 | | 94.9% | | 94.8% | | 41,901 | | 40,970 | | 931 | | 2.3% |
| | | | | | | | | | | | | | |
Mid-Atlantic Properties | | | | | | | | | | | | | | |
Baltimore/Washington | | 667 | | 95.2% | | 92.2% | | 6,615 | | 6,545 | | 70 | | 1.1% |
Virginia | | 268 | | 96.6% | | 96.6% | | 2,948 | | 2,953 | | (5) | | (0.2)% |
Total Mid-Atlantic Properties | | 935 | | 95.6% | | 93.5% | | 9,563 | | 9,498 | | 65 | | 0.7% |
| | | | | | | | | | | | | | |
Southeast Properties | | | | | | | | | | | | | | |
Florida | | 1,272 | | 92.5% | | 90.3% | | 10,015 | | 10,904 | | (889) | | (8.2)% |
Georgia | | 1,717 | | 89.9% | | 86.5% | | 7,287 | | 9,116 | | (1,829) | | (20.1)% |
Total Southeast Properties | | 2,989 | | 91.0% | | 88.1% | | 17,302 | | 20,020 | | (2,718) | | (13.6)% |
| | | | | | | | | | | | | | |
Total Same Community | | 11,572 | | 93.9% | | 93.0% | | 68,766 | | 70,488 | | (1,722) | | (2.4)% |
| | | | | | | | | | | | | | |
Acquisitions (3) | | | | | | | | | | | | | | |
Virginia | | 536 | | 93.7% | | 93.8% | | 4,404 | | 3,299 | | 1,105 | | 33.5% |
| | | | | | | | | | | | | | |
Total Property NOI | | 12,108 | | 93.9% | | 93.0% | | $ | 73,170 | | $ | 73,787 | | $ | (617) | | (0.8)% |
| | | | | | | | | | | | | | |
(1) | See page 28 for a reconciliation of net (loss) income 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 December 31, 2009
(Dollar amounts in thousands) |
| Balance | | Percentage | | Weighted |
| Outstanding | | of | | Average |
FIXED RATE DEBT | December 31, 2009 | | Total Debt | | Interest Rate |
| | | | | |
Mortgages payable - CMBS | $ | 115,464 | | 22.0% | | 7.7% |
Mortgages payable - other (1) | 337,241 | | 64.1% | | 5.8% |
Unsecured debt | 25,780 | | 4.9% | | 7.9% |
Total fixed rate debt | 478,485 | | 91.0% | | 6.4% |
| | | | | |
VARIABLE RATE DEBT | | | | | |
Mortgages payable | 34,851 | | 6.6% | | 4.7% |
Unsecured revolving credit facility | 12,500 | | 2.4% | | 2.6% |
Total variable rate debt | 47,351 | | 9.0% | | 4.1% |
TOTAL DEBT | $ | 525,836 | | 100.0% | | 6.2% |
| | | | | |
Interest coverage ratio (2) | 1.72:1 | | | | |
Fixed charge coverage ratio (3) | 1.53:1 | | | | |
Weighted average maturity | 7.0 years | | | | |
| Fixed Rate | | Fixed Rate | | | | |
SCHEDULED PRINCIPAL MATURITIES | CMBS | | Other | | Variable Rate | | Total |
| | | | | | | |
2010 | $ | 15,310 | | $ | 63,000 | | $ | - | | $ | 78,310 |
2011(4) | 54,570 | | - | | 12,500 | | 67,070 |
2012 | 45,584 | | 36,000 | | - | | 81,584 |
2013 | - | | 132,209 | | - | | 132,209 |
2014 | - | | 44,538 | | | | 44,538 |
Thereafter | - | | 87,274 | | 34,851 | | 122,125 |
Total | $ | 115,464 | | $ | 363,021 | | $ | 47,351 | | $ | 525,836 |
(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 (loss) income 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 (loss) income attributable to AERC | | $-0.46 to $-0.40 |
Expected real estate depreciation and amortization | | 1.51 |
Expected net defeasance costs (credits) | | 0.00 |
Expected preferred share dividends | | -0.19 |
Expected gains on disposition of properties/gain on insurance recoveries | | 0.00 |
Expected Funds from Operations as Adjusted (1) | | $0.86 to $0.92 |
| | |
Same Community Portfolio | | |
Revenue growth | | -0.75% to -0.25% |
Expense growth | | 2.75% to 3.75% |
Property NOI (2) growth | | -4.0% to -2.5% |
Physical occupancy | | 93.0% to 94.0% |
| | |
Transactions (3) | | |
Acquisitions | | $0 million |
Dispositions | | $0 million |
Development (4) | | $2.0 million |
| | |
Corporate Expenses | | |
General and administrative expense | | $13.8 million |
Service company expense (5) | | $0.4 million |
Total | | $14.2 million |
| | |
Debt | | |
Capitalized interest (4) | | $0.1 million |
Expensed interest (excluding defeasance costs (credits)) (6) | | $32.2 million |
Expected net defeasance costs (credits) | | $0 million |
| | |
Capital Structure (7) | | |
Common share issuances (8) | | $54.7 million |
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) | Earnings guidance does not take into consideration any asset sales or acquisitions. |
| |
(4) | Reflects development of 60 units on adjacent parcel in Richmond, Virginia, with an expected completion date of June 30, 2010. |
| |
(5) | 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. |
| |
(6) | Includes $1.3 million of deferred financing costs. |
| |
(7) | Earnings guidance does not take into consideration any additional share issuances or share repurchases. |
| |
(8) | Reflects issuance of 5,175,000 shares on January 15, 2010 at a net $10.57 to the Company. |
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 in accordance with NAREIT's definition 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 twelve months ended December 31, 2009 and December 31, 2008, respectively. In accordance with GAAP, these prepayment costs/credits are included as interest expense in the Company's Consolidated Statement of Operations. Additionally, for the three and twelve months ended December 31, 2008, the Company deducted $2.1 million of preferred stock repurchase costs, including discounts received. In accordance with GAAP, the Company reclassified from additional paid-in capital the original issuance costs associated with the repurchase of 278,000 depositary shares of the Series B Preferred Shares for the three and twelve months ended December 31, 2008. 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 (loss) income applicable to common shares to EBITDA.
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
(In thousands) | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | |
Net (loss) income applicable to common shares | | $ | (3,866) | | $ | 298 | | $ | 1,588 | | $ | 31,388 |
Allocation to participating securities | | - | | - | | 423 | | 730 |
Equity in net loss of joint ventures | | - | | (1,574) | | - | | (1,502) |
Preferred share dividends | | 1,050 | | 1,053 | | 4,199 | | 4,655 |
Preferred share repurchase costs | | - | | 143�� | | - | | 143 |
Preferred share repurchase discount | | - | | (2,289) | | - | | (2,289) |
Interest income | | (5) | | (11) | | (47) | | (138) |
Interest expense (1) | | 8,634 | | 9,226 | | 34,251 | | 38,865 |
Depreciation and amortization | | 8,640 | | 9,490 | | 35,412 | | 37,867 |
Gain on disposition of properties/gain on insurance recoveries | | (110) | | - | | (16,065) | | (45,202) |
Taxes | | 46 | | 79 | | 288 | | 303 |
EBITDA | | 14,389 | | 16,415 | | 60,049 | | 64,820 |
EBITDA - Joint Ventures: | | | | | | | | |
Equity in net income of joint ventures | | - | | 1,574 | | - | | 1,502 |
Gain on disposition of joint venture property | | - | | (1,603) | | - | | (1,603) |
Interest income | | - | | - | | | | |
Interest expense | | - | | 11 | | - | | 41 |
Depreciation and amortization | | - | | 23 | | - | | 94 |
EBITDA - Joint Ventures | | - | | 5 | | - | | 34 |
| | | | | | | | |
Total EBITDA | | $ | 14,389 | | $ | 16,420 | | $ | 60,049 | | $ | 64,854 |
| | | | | | | | |
(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 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 attributable to AERC.
| Three Months Ended | | Twelve Months Ended |
| December 31, | | December 31, |
(In thousands) | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | |
Property NOI | $ | 18,520 | | $ | 19,109 | | $ | 73,170 | | $ | 73,787 |
Service company NOI | 39 | | (5) | | 180 | | 160 |
Construction and other services NOI | (315) | | (102) | | (585) | | (328) |
Depreciation and amortization | (8,640) | | (9,188) | | (34,937) | | (35,913) |
General and administrative expense | (3,888) | | (3,390) | | (14,024) | | (13,769) |
Interest income | 5 | | 11 | | 46 | | 132 |
Interest expense | (8,634) | | (9,036) | | (34,220) | | (35,660) |
Gain on insurance recoveries | 121 | | - | | 665 | | - |
Equity in net loss of joint ventures | - | | 1,574 | | - | | 1,502 |
Income from discontinued operations: | | | | | | | |
Operating income (loss) | - | | 245 | | 568 | | (433) |
Gain on disposition of properties | (11) | | - | | 15,400 | | 45,202 |
Income from discontinued operations | (11) | | 245 | | 15,968 | | 44,769 |
Net (loss) income | (2,803) | | (782) | | 6,263 | | 34,680 |
Net income attributable to noncontrolling redeemable interest | (13) | | (13) | | (53) | | (53) |
Consolidated net (loss) income attributable to AERC | $ | (2,816) | | $ | (795) | | $ | 6,210 | | $ | 34,627 |
| | | | | | | |
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.
