Exhibit 99.2
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Associated Estates Realty Corporation
Fourth Quarter 2010
Earnings Release and Supplemental Financial Data
Westwind Farms is located six miles northwest of the Dulles International Airport, in Ashburn, Virginia. Westwind is less than a mile from the Dulles Greenway Toll Road, three miles from Brambleton Regional Park's golf course and recreational facilities, and six miles from Dulles Town Center Mall. This community's one, two and three bedroom apartment homes feature the perfect mix of traditional style and contemporary design, with nine-foot ceilings, crown molding, soaking tub, granite countertops, stainless steel appliances, and full-size washer and dryer. Community features include a clubhouse with WiFi lounge, swimming pool with poolside WiFi, fitness studio with attached children's play area and more.
Westwind Farms |
| Phone: | (866) 408-5651 |
22541 Hickory Hill Square |
| Fax: | (703) 729-3886 |
Ashburn, VA 20148 |
| Web Site: | www.westwindfarmsapartments.com |
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For more information, please contact: |
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Jeremy Goldberg |
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(216) 797-8715 |
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Associated Estates Realty Corporation |
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Reconciliation of Funds from Operations (FFO) and Funds Available for Distribution (FAD) | 10 |
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Overview of Operating Expenses Related to Repairs and Maintenance and Capitalized |
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Expenditures | 13 |
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Fees, Reimbursements and Other Revenue, Direct Property Management and Service Company |
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Expense, Construction and Other Services and General and Administrative Expense | 14 |
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"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 2011 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; our ability to refinance debt on favorable terms at maturity; risks of a lessening of demand for the multifamily units that we own; competition from other available multifamily units and changes in market rental rates; new acquisitions and/or development projects may fail to perform in accordance with our expectations; 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; our inability to control operating expenses or achieve increases in revenue; shareholder ownership limitations that may discourage a takeover otherwise considered favorably by shareholders; the results of litigation filed or to be filed against us; changes in tax legislation; risks of personal injury claims and property damage related to mold claims that are not covered by our insurance; catastrophic property damage losses that are not covered by our insurance; our ability to acquire properties at prices consistent with our investment criteria; risks associated with property acquisitions such as failure to achieve expected results or matters not discovered in due diligence, among others; risks related to the perception of residents and prospective residents as to the attractiveness, convenience and safety of our properties or the neighborhoods in which they are located; and construction and construction business risks, including, without limitation, rapid and unanticipated increases in prices of building materials and commodities. |
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Associated Estates Realty Corporation |
ASSOCIATED ESTATES REALTY CORPORATION REPORTS FOURTH QUARTER
AND FULL YEAR RESULTS
Fourth Quarter Same Community NOI Up 5.0%
Positive Full Year 2010 Same Community NOI
Cleveland, Ohio – February 7, 2011 – Associated Estates Realty Corporation (NYSE, NASDAQ: AEC) today reported financial results for the fourth quarter and year ended December 31, 2010.
Funds from operations (FFO) for the fourth quarter ended December 31, 2010 were $0.24 per common share (basic and diluted), compared with $0.26 per common share (basic and diluted), for the fourth quarter ended December 31, 2009.
Net loss applicable to common shares was $1.4 million or $0.03 per common share (basic and diluted) for the fourth quarter ended December 31, 2010, compared with net loss applicable to common shares of $3.9 million or $0.23 per common share (basic and diluted) for the fourth quarter ended December 31, 2009.
"Our operating results were much stronger than we expected at the beginning of 2010," said Jeffrey I. Friedman, president and chief executive officer. "It was a year where Associated Estates was hitting on all cylinders; solid property operations, improving our balance sheet and closing on strategic acquisitions," Friedman added.
A reconciliation of net (loss) income attributable to the Company to FFO, and to FFO as adjusted, is included on page 10.
Same Community Portfolio Results
Net operating income (NOI) for the fourth quarter of 2010 for the Company’s same community portfolio increased 5.0 percent compared with the fourth quarter of 2009. Revenue increased 2.1 percent and property operating expenses decreased 2.1 percent when compared with the fourth quarter of 2009. Physical occupancy was 94.7 percent at the end of the fourth quarter 2010 versus 93.9 percent at the end of the fourth quarter of 2009. Average net rent collected per unit for the fourth quarter 2010 for the same community properties was $866 per month compared with $848 for the fourth quarter of 2009. Net rent collected per unit for the fourth quarter 2010 for the Company’s same community Midwest portfolio increased 2.3 percent to $795; net collected rent per unit for the Company’s same community Mid-Atlantic portfolio increased 0.3 percent to $1,167; and net rent collected per unit for the Company’s same community properties in the Southeast markets increased 2.7 percent to $899.
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, 2010, was $0.85 per common share (basic and diluted) and includes a credit to expenses of $553,000 for a refund of defeasance costs on certain previously defeased loans and non-cash charges of $1.0 million and $727,000, associated with the redemption of the Company’s Series B preferred shares and trust preferred debt in the second quarter, respectively. FFO as adjusted for the twelve months of 2010, excludes the refund and non-cash charges, and was $0.89 per common share (basic and diluted). FFO for the twelve months ended December 31, 2009, was $1.20 per common share (basic and diluted) and includes a credit to expenses of $563,000 for a refund of defeasance costs on certain previously defeased loans. FFO as adjusted for the twelve months of 2009, excluding that credit, was $1.17 per common share (basic and diluted). The lower per share 2010 FFO and FFO as adjusted amounts reflect the issuance of an additional 23.6 million common shares in 2010.
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Associated Estates Realty Corporation |
For the twelve months ended December 31, 2010, net loss applicable to common shares was $11.7 million or $0.38 per common share (basic and diluted) compared to net income applicable to common shares of $1.6 million or $0.10 per common share (basic and diluted) for the period ended December 31, 2009. The December 31, 2009 results include $0.95 per share (basic and diluted) attributable to income from discontinued operations, primarily due to gains from property dispositions. There were no such gains in 2010.
A reconciliation of net (loss) income attributable to the Company to FFO, and to FFO as adjusted, is included on page 10.
NOI for the twelve months ended December 31, 2010 for the Company’s same community portfolio, increased 0.8 percent due to the net of a 0.8 percent increase in revenue partially offset by a 0.8 percent increase in property operating expenses compared to the twelve months of 2009.
Acquisitions
On December 14, the Company purchased Westwind Farms Apartments, a Class A apartment community located in Ashburn, Virginia. The property was built in 2006, contains 464 units and is approximately 96 percent occupied. Average monthly rent per unit is $1,249.
2011 Outlook
The Company announced its full year FFO as adjusted guidance range of $1.02 to $1.06 per common share (basic and diluted). The Company also said its same community NOI guidance is for growth in the range of 4.0% to 5.0%. 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 February 8, 2011 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 2010 Earnings Webcast" link. The webcast will be archived through February 27, 2011.
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Associated Estates Realty Corporation |
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
OPERATING INFORMATION | 2010 | 2009 | 2010 | 2009 | ||||||||
Total revenue | $ | 45,589 | $ | 32,415 | $ | 153,715 | $ | 130,419 | ||||
Property revenue | $ | 36,884 | $ | 31,756 | $ | 135,847 | $ | 127,972 | ||||
Net (loss) income applicable to common shares | $ | (1,359) | $ | (3,866) | $ | (11,659) | $ | 1,588 | ||||
Per share - basic and diluted | $ | (0.03) | $ | (0.23) | $ | (0.38) | $ | 0.10 | ||||
Funds from Operations (FFO) (1) | $ | 9,829 | $ | 4,275 | $ | 25,908 | $ | 19,836 | ||||
FFO as adjusted (1) | $ | 9,829 | $ | 4,275 | $ | 27,075 | $ | 19,273 | ||||
FFO per share - basic and diluted | $ | 0.24 | $ | 0.26 | $ | 0.85 | $ | 1.20 | ||||
FFO as adjusted per share - basic and diluted | $ | 0.24 | $ | 0.26 | $ | 0.89 | $ | 1.17 | ||||
Funds Available for Distribution (FAD) (1) | $ | 9,110 | $ | 2,633 | $ | 22,291 | $ | 14,213 | ||||
Dividends per share | $ | 0.17 | $ | 0.17 | $ | 0.68 | $ | 0.68 | ||||
Payout ratio - FFO | 70.8% | 65.4% | 80.0% | 56.7% | ||||||||
Payout ratio - FFO as adjusted | 70.8% | 65.4% | 76.4% | 58.1% | ||||||||
Payout ratio - FAD | 77.3% | 106.3% | 93.2% | 79.1% | ||||||||
General and administrative expense | $ | 4,727 | $ | 3,888 | $ | 15,684 | $ | 14,024 | ||||
Costs associated with acquisitions | $ | 170 | $ | - | $ | 599 | $ | - | ||||
Interest expense (2) | $ | 7,409 | $ | 8,334 | $ | 30,115 | $ | 33,564 | ||||
Interest coverage ratio (3) | 2.27:1 | 1.66:1 | 1.97:1 | 1.72:1 | ||||||||
Fixed charge coverage ratio (4) | 2.27:1 | 1.48:1 | 1.85:1 | 1.53:1 | ||||||||
General and administrative expense to property revenue | 12.8% | 12.2% | 11.5% | 11.0% | ||||||||
Interest expense to property revenue | 20.1% | 26.2% | 22.2% | 26.2% | ||||||||
Property NOI (5) | $ | 22,419 | $ | 18,520 | $ | 78,262 | $ | 73,170 | ||||
ROA (6) | 7.4% | 7.8% | 7.4% | 7.8% | ||||||||
Same Community revenue increase (decrease) | 2.1% | (1.9)% | 0.8% | (1.2)% | ||||||||
Same Community expense (decrease) increase | (2.1)% | (0.3)% | 0.8% | 0.4% | ||||||||
Same Community NOI increase (decrease) | 5.0% | (3.1)% | 0.8% | (2.4)% | ||||||||
Same Community operating margins | 60.0% | 58.3% | 57.2% | 57.2% | ||||||||
(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 $412 and $1,415 for 2010 and $300 and $1,219 for 2009. The twelve months ended 2010 excludes a credit of $(553) and the twelve months ended 2009 excludes a credit of $(563) for refunds of defeasance costs for previously defeased loans. In addition, the twelve months ended 2010 excludes $727 of issuance costs related to the redemption of trust preferred securities. |
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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 and/or other prepayment costs/credits. 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 costs/credits, other prepayment costs and preferred share redemption costs. Individual line items in this calculation include discontinued operations where applicable. |
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(5) | See page 28 for a reconciliation of net (loss) income 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 properties currently under development or held for sale. |
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Associated Estates Realty Corporation |
December 31, | December 31, | |||||
MARKET CAPITALIZATION DATA | 2010 | 2009 | ||||
Net real estate assets | $ | 875,000 | $ | 638,535 | ||
Total assets | $ | 918,235 | $ | 662,505 | ||
Debt | $ | 555,666 | $ | 525,836 | ||
Noncontrolling redeemable interest | $ | 2,774 | $ | 1,829 | ||
Preferred stock - 8.70% Class B Cumulative Redeemable Preferred Shares | $ | - | $ | 48,263 | ||
Total shareholders' equity attributable to AERC | $ | 316,184 | $ | 99,440 | ||
Common shares outstanding | 41,380 | 16,676 | ||||
Share price, end of period | $ | 15.29 | $ | 11.27 | ||
Total market capitalization | $ | 1,188,366 | $ | 762,038 | ||
Undepreciated book value of real estate assets | $ | 1,210,289 | $ | 940,643 | ||
Debt to undepreciated book value of real estate assets | 45.9% | 55.9% | ||||
Debt and preferred stock to undepreciated book value of real estate assets | 45.9% | 61.0% | ||||
Debt to total market capitalization | 46.8% | 69.0% | ||||
Debt and preferred stock to total market capitalization | 46.8% | 75.3% | ||||
Annual dividend | $ | 0.68 | $ | 0.68 | ||
Annual dividend yield based on share price, end of period | 4.4% | 6.0% | ||||
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Associated Estates Realty Corporation |
Average Age | ||||||
Number | of Owned | |||||
PORTFOLIO INFORMATION | Properties | of Units | Properties | |||
Company Portfolio: | ||||||
Directly Owned: | ||||||
Same Community Midwest | 34 | 7,648 | 18 | |||
Same Community Mid-Atlantic | 6 | 1,471 | 13 | |||
Same Community Southeast | 8 | 2,989 | 14 | |||
Total Same Community | 48 | 12,108 | 16 | |||
Acquisitions | 4 | 1,494 | 6 | |||
Development (1) | - | 60 | - | |||
Total Company Portfolio | 52 | 13,662 | 15 |
(1) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
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Associated Estates Realty Corporation |
December 31, | December 31, | |||||
2010 | 2009 | |||||
ASSETS | ||||||
Real estate assets | ||||||
Investment in real estate | $ | 1,207,554 | $ | 935,846 | ||
Construction in progress | 2,735 | 4,797 | ||||
Less: accumulated depreciation | (335,289) | (302,108) | ||||
Real estate, net | 875,000 | 638,535 | ||||
Cash and cash equivalents | 4,370 | 3,600 | ||||
Restricted cash | 8,959 | 7,093 | ||||
Other assets | 29,906 | 13,277 | ||||
Total assets | $ | 918,235 | $ | 662,505 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Mortgage notes payable | $ | 463,166 | $ | 487,556 | ||
Unsecured revolving credit facility | 92,500 | 12,500 | ||||
Unsecured debt | - | 25,780 | ||||
Total debt | 555,666 | 525,836 | ||||
Accounts payable, accrued expenses and other liabilities | 43,611 | 35,400 | ||||
Total liabilities | 599,277 | 561,236 | ||||
Noncontrolling redeemable interest | 1,734 | 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 | - | 48,263 | ||||
Common shares, without par value; $.10 stated value; 91,000,000 | ||||||
authorized; 46,570,763 issued and 41,380,205 outstanding at | ||||||
December 31, 2010 and 22,995,763 issued and 16,675,826 outstanding | ||||||
at December 31, 2009, respectively | 4,657 | 2,300 | ||||
Paid-in capital | 574,994 | 283,090 | ||||
Accumulated distributions in excess of accumulated net income | (205,021) | (168,822) | ||||
Accumulated other comprehensive loss | - | (1,420) | ||||
Less: Treasury shares, at cost, 5,190,558 and 6,319,937 shares | ||||||
at December 31, 2010 and December 31, 2009, respectively | (58,446) | (63,971) | ||||
Total shareholders' equity attributable to AERC | 316,184 | 99,440 | ||||
Noncontrolling interest | 1,040 | - | ||||
Total shareholders' equity | 317,224 | 99,440 | ||||
Total liabilities and shareholders' equity | $ | 918,235 | $ | 662,505 | ||
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Associated Estates Realty Corporation |
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, |
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2010 | 2009 | 2010 | 2009 | |||||||||
REVENUE | ||||||||||||
Property revenue | $ | 36,884 | $ | 31,756 | $ | 135,847 | $ | 127,972 | ||||
Management and service company revenue: | ||||||||||||
Fees, reimbursements and other | 102 | 228 | 817 | 1,287 | ||||||||
Construction and other services | 8,603 | 431 | 17,051 | 1,160 | ||||||||
Total revenue | 45,589 | 32,415 | 153,715 | 130,419 | ||||||||
EXPENSES | ||||||||||||
Property operating and maintenance | 14,465 | 13,236 | 57,585 | 54,802 | ||||||||
Depreciation and amortization | 11,923 | 8,640 | 39,639 | 34,937 | ||||||||
Direct property management and service company expense | 143 | 189 | 745 | 1,107 | ||||||||
Construction and other services | 7,938 | 746 | 16,623 | 1,745 | ||||||||
General and administrative | 4,727 | 3,888 | 15,684 | 14,024 | ||||||||
Costs associated with acquisitions | 170 | - | 599 | - | ||||||||
Total expenses | 39,366 | 26,699 | 130,875 | 106,615 | ||||||||
Operating income | 6,223 | 5,716 | 22,840 | 23,804 | ||||||||
Interest income | 7 | 5 | 34 | 46 | ||||||||
Interest expense | (7,821) | (8,634) | (31,704) | (34,220) | ||||||||
(Loss) income before gain on insurance recoveries | ||||||||||||
and (loss) income from discontinued operations | (1,591) | (2,913) | (8,830) | (10,370) | ||||||||
Gain on insurance recoveries | 245 | 121 | 245 | 665 | ||||||||
(Loss) income from continuing operations | (1,346) | (2,792) | (8,585) | (9,705) | ||||||||
(Loss) income from discontinued operations: | ||||||||||||
Operating income | - | - | - | 568 | ||||||||
(Loss) gain on disposition of properties | - | (11) | - | 15,400 | ||||||||
(Loss) income from discontinued operations | - | (11) | - | 15,968 | ||||||||
Net (loss) income | (1,346) | (2,803) | (8,585) | 6,263 | ||||||||
Net income attributable to noncontrolling redeemable interest | (13) | (13) | (51) | (53) | ||||||||
Net (loss) income attributable to AERC | (1,359) | (2,816) | (8,636) | 6,210 | ||||||||
Preferred share dividends | - | (1,050) | (2,030) | (4,199) | ||||||||
Preferred share redemption costs | - | - | (993) | - | ||||||||
Allocation to participating securities | - | - | - | (423) | ||||||||
Net (loss) income applicable to common shares | $ | (1,359) | $ | (3,866) | $ | (11,659) | $ | 1,588 | ||||
Earnings per common share - basic and diluted: | ||||||||||||
(Loss) income from continuing operations | ||||||||||||
applicable to common shares | $ | (0.03) | $ | (0.23) | $ | (0.38) | $ | (0.85) | ||||
Income from discontinued operations | - | - | - | 0.95 | ||||||||
Net (loss) income applicable to common shares | $ | (0.03) | $ | (0.23) | $ | (0.38) | $ | 0.10 | ||||
Weighted average shares outstanding - basic and diluted | 41,147 | 16,561 | 30,421 | 16,516 | ||||||||
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Associated Estates Realty Corporation |
| Three Months Ended | Twelve Months Ended | |||||||||||
December 31, |
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2010 | 2009 | 2010 | 2009 | ||||||||||
CALCULATION OF FFO AND FAD | |||||||||||||
Net (loss) income attributable to AERC | $ | (1,359) | $ | (2,816) | $ | (8,636) | $ | 6,210 | |||||
Add: | Depreciation - real estate assets | 9,971 | 8,251 | 35,593 | 32,822 | ||||||||
Amortization of intangible assets | 1,462 | - | 2,219 | 1,068 | |||||||||
Less: | Preferred share dividends | - | (1,050) | (2,030) | (4,199) | ||||||||
Preferred share redemption costs | - | - | (993) | - | |||||||||
Gain on disposition of properties/gain on insurance recoveries | (245) | (110) | (245) | (16,065) | |||||||||
Funds from Operations (FFO) (1) | 9,829 | 4,275 | 25,908 | 19,836 | |||||||||
Add: | Preferred share redemption costs | - | - | 993 | - | ||||||||
Trust preferred redemption costs | - | - | 727 | - | |||||||||
Less: | Refund of defeasance costs for previously defeased loans | - | - | (553) | (563) | ||||||||
Funds from Operations as adjusted (1) | 9,829 | 4,275 | 27,075 | 19,273 | |||||||||
Add: | Depreciation - other assets | 490 | 389 | 1,827 | 1,522 | ||||||||
Amortization of deferred financing fees | 412 | 300 | 1,415 | 1,225 | |||||||||
Less: | Recurring fixed asset additions (2) | (1,621) | (2,331) | (8,026) | (7,807) | ||||||||
Funds Available for Distribution (FAD) (1) | $ | 9,110 | $ | 2,633 | $ | 22,291 | $ | 14,213 | |||||
Weighted average shares outstanding - basic and diluted (3) | 41,147 | 16,561 | 30,421 | 16,516 | |||||||||
PER SHARE INFORMATION: | |||||||||||||
FFO - basic and diluted | $ | 0.24 | $ | 0.26 | $ | 0.85 | $ | 1.20 | |||||
FFO as adjusted - basic and diluted | $ | 0.24 | $ | 0.26 | $ | 0.89 | $ | 1.17 | |||||
Dividends | $ | 0.17 | $ | 0.17 | $ | 0.68 | $ | 0.68 | |||||
Payout ratio - FFO | 70.8% | 65.4% | 80.0% | 56.7% | |||||||||
Payout ratio - FFO as adjusted | 70.8% | 65.4% | 76.4% | 58.1% | |||||||||
Payout ratio - FAD | 77.3% | 106.3% | 93.2% | 79.1% | |||||||||
(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 492 and 551 common share equivalents from the three and twelve months ended December 31, 2010 calculation, respectively, and 117 and 1 common share equivalents from the three and twelve months ended December 31, 2009 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. |
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Associated Estates Realty Corporation |
Three Months Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
REVENUE | ||||||||
Property revenue | $ | - | $ | - | ||||
EXPENSES | ||||||||
Property operating and maintenance | - | - | ||||||
Depreciation and amortization | - | - | ||||||
Total expenses | - | - | ||||||
Operating income | - | - | ||||||
Interest income | - | - | ||||||
Interest expense | - | - | ||||||
Loss on disposition of properties | - | (11) | ||||||
(Loss) income from discontinued operations | $ | - | $ | (11) | ||||
(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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Associated Estates Realty Corporation |
Twelve Months Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
REVENUE | ||||||||
Property revenue | $ | - | $ | 2,021 | ||||
EXPENSES | ||||||||
Property operating and maintenance | - | 948 | ||||||
Depreciation and amortization | - | 475 | ||||||
Total expenses | - | 1,423 | ||||||
Operating income | - | 598 | ||||||
Interest income | - | 1 | ||||||
Interest expense | - | (31) | ||||||
Gain on disposition of properties | - | 15,400 | ||||||
Income from discontinued operations | $ | - | $ | 15,968 | ||||
(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. |
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Associated Estates Realty Corporation |
Twelve Months Ended | ||||||||
Estimated | December 31, 2010 | |||||||
GAAP Useful | Cost Per | |||||||
Life (Years) | Amount | Unit (1) | ||||||
OPERATING EXPENSES RELATED TO REPAIRS AND MAINTENANCE | ||||||||
Repairs and maintenance (2) | $ | 9,390 | $ | 750 | ||||
Maintenance personnel labor cost (2) | 5,597 | 447 | ||||||
Total Operating Expenses Related to Repairs and Maintenance | 14,987 | 1,197 | ||||||
CAPITAL EXPENDITURES | ||||||||
Recurring Capital Expenditures (3) | ||||||||
Amenities | 5 | 224 | 18 | |||||
Appliances | 5 | 833 | 66 | |||||
Building improvements | 14 | 986 | 79 | |||||
Carpet and flooring | 5 | 2,653 | 212 | |||||
Furnishings | 5 | 36 | 3 | |||||
HVAC and mechanicals | 15 | 886 | 71 | |||||
Landscaping and grounds | 14 | 2,065 | 165 | |||||
Suite improvements | 5 | 100 | 8 | |||||
Total Recurring Capital Expenditures - Properties | 7,783 | 622 | ||||||
Corporate capital expenditures | 243 | 19 | ||||||
Total Recurring Capital Expenditures | 8,026 | 641 | ||||||
Total Recurring Capital Expenditures and Repairs and Maintenance | $ | 23,013 | $ | 1,838 | ||||
Total Recurring Capital Expenditures | $ | 8,026 | ||||||
Investment/Revenue Enhancing/Non-Recurring Expenditures (4) | ||||||||
Building improvements - unit upgrades | Various | 4,643 | ||||||
Building improvements - other | 20 | 2,821 | ||||||
Corporate capital expenditures | 225 | |||||||
Total Investment/Revenue Enhancing/Non-Recurring Expenditures | 7,689 | |||||||
Grand Total Capital Expenditures | $ | 15,715 | ||||||
(1) | Calculated using weighted average units owned during the twelve months ended December 31, 2010 of 12,519. |
|
|
(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) | See page 28 for the Company's definition of investment/revenue enhancing and/or non-recurring fixed asset additions. |
|
|
13 |
Associated Estates Realty Corporation and Administrative Expense |
| Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | ||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||
Fees, Reimbursements and Other Revenue | |||||||||||||
Property management fees | $ | 7 | $ | 20 | $ | 68 | $ | 175 | |||||
Asset management fees | 1 | 76 | 170 | 269 | |||||||||
Other revenue | 24 | 40 | 137 | 180 | |||||||||
Payroll reimbursements(1) | 70 | 92 | 442 | 663 | |||||||||
Fees, Reimbursements and Other Revenue(2) | 102 | 228 | 817 | 1,287 | |||||||||
Direct Property Management and Service Company Expense | |||||||||||||
Service company allocations | 73 | 96 | 303 | 444 | |||||||||
Payroll reimbursements(1) | 70 | 93 | 442 | 663 | |||||||||
Direct Property Management and Service Company Expense(2) | 143 | 189 | 745 | 1,107 | |||||||||
Service Company NOI | $ | (41) | $ | 39 | $ | 72 | $ | 180 | |||||
Construction and Other Services | |||||||||||||
Revenue | $ | 8,603 | $ | 431 | $ | 17,051 | $ | 1,160 | |||||
Expense(3) | 7,938 | 746 | 16,623 | 1,745 | |||||||||
Construction and Other Services Net Income | $ | 665 | $ | (315) | $ | 428 | $ | (585) | |||||
General and Administrative and Service Company Expense | |||||||||||||
General and administrative expense(2) | $ | 4,727 | $ | 3,888 | $ | 15,684 | $ | 14,024 | |||||
Service company allocations | 73 | 96 | 303 | 444 | |||||||||
General and Administrative and Service Company Expense | $ | 4,800 | $ | 3,984 | $ | 15,987 | $ | 14,468 | |||||
(1) | Salaries and benefits reimbursed in connection with the management of properties for third parties. |
|
|
(2) | As reported per the Consolidated Statement of Operations. |
|
|
(3) | Includes direct and general and administrative overhead expenses. |
14 |
Associated Estates Realty Corporation |
Quarter Ended | |||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
2010 | 2010 | 2010 | 2010 | 2009 | |||||||||||
Property Revenue | $ | 32,410 | $ | 32,595 | $ | 32,336 | $ | 31,646 | $ | 31,756 | |||||
Property Operating and | |||||||||||||||
Maintenance Expenses | |||||||||||||||
Personnel | 3,911 | 3,886 | 3,813 | 3,870 | 3,687 | ||||||||||
Advertising | 379 | 369 | 371 | 366 | 380 | ||||||||||
Utilities | 1,775 | 1,933 | 1,821 | 1,899 | 1,765 | ||||||||||
Repairs and maintenance | 1,955 | 2,415 | 2,547 | 2,132 | 1,863 | ||||||||||
Real estate taxes and insurance | 3,806 | 4,454 | 4,285 | 4,540 | 4,398 | ||||||||||
Other operating | 1,133 | 1,240 | 1,204 | 1,118 | 1,143 | ||||||||||
Total Expenses | 12,959 | 14,297 | 14,041 | 13,925 | 13,236 | ||||||||||
|
|
|
|
| |||||||||||
Property Net Operating Income | $ | 19,451 | $ | 18,298 | $ | 18,295 | $ | 17,721 | $ | 18,520 | |||||
Operating Margin | 60.0% | 56.1% | 56.6% | 56.0% | 58.3% | ||||||||||
Total Number of Units | 12,108 | 12,108 | 12,108 | 12,108 | 12,108 | ||||||||||
NOI Per Unit | $ | 1,606 | $ | 1,511 | $ | 1,511 | $ | 1,464 | $ | 1,530 | |||||
Average Net Rents Per Unit (1) | $ | 920 | $ | 915 | $ | 909 | $ | 906 | $ | 912 | |||||
Average Net Rent Collected Per Unit (2) | $ | 866 | $ | 866 | $ | 859 | $ | 844 | $ | 848 | |||||
Physical Occupancy - End of Period (3) | 94.7% | 96.0% | 96.6% | 95.3% | 93.9% | ||||||||||
(1) | Represents gross potential rents less concessions. |
|
|
(2) | Represents gross potential rents less vacancies and concessions. |
|
|
(3) | Is defined as number of units occupied divided by total number of units. |
15 |
Associated Estates Realty Corporation |
Twelve Months Ended | ||||||
December 31, | ||||||
2010 | 2009 | |||||
Property Revenue | $ | 128,987 | $ | 127,972 | ||
Property Operating and Maintenance Expenses | ||||||
Personnel | 15,480 | 14,911 | ||||
Advertising | 1,485 | 1,558 | ||||
Utilities | 7,428 | 7,112 | ||||
Repairs and maintenance | 9,049 | 8,954 | ||||
Real estate taxes and insurance | 17,085 | 17,740 | ||||
Other operating | 4,695 | 4,527 | ||||
Total Expenses | 55,222 | 54,802 | ||||
Property Net Operating Income | $ | 73,765 | $ | 73,170 | ||
Operating Margin | 57.2% | 57.2% | ||||
Total Number of Units | 12,108 | 12,108 | ||||
NOI Per Unit | $ | 6,092 | $ | 6,043 | ||
Average Net Rents Per Unit (1) | $ | 913 | $ | 919 | ||
Average Net Rent Collected Per Unit (2) | $ | 859 | $ | 852 | ||
Physical Occupancy - End of Period (3) | 94.7% | 93.9% | ||||
(1) | Represents gross potential rents less concessions. |
|
|
(2) | Represents gross potential rents less vacancies and concessions. |
|
|
(3) | Is defined as number of units occupied divided by total number of units. |
16 |
Associated Estates Realty Corporation |
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) | 2010 | 2009 | Change | 2010 | 2009 | Change | 2010 | 2009 | Change | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||
Midwest Properties | ||||||||||||||||||||||||||||||||||||
Indiana | 836 | 14 | $ | 823 | $ | 797 | 3.3% | $ | 851 | $ | 856 | (0.6)% | $ | 918 | $ | 913 | 0.5% | 97.5% | 95.0% | 39.7% | 50.2% | |||||||||||||||
Michigan | 2,888 | 19 | 735 | 715 | 2.8% | 772 | 765 | 0.9% | 846 | 842 | 0.5% | 95.6% | 94.0% | 44.2% | 49.4% | |||||||||||||||||||||
Ohio - Central Ohio | 2,621 | 19 | 783 | 771 | 1.6% | 831 | 818 | 1.6% | 858 | 844 | 1.7% | 94.9% | 95.1% | 44.9% | 50.7% | |||||||||||||||||||||
Ohio - Northeastern Ohio | 1,303 | 15 | 934 | 912 | 2.4% | 979 | 960 | 2.0% | 1,030 | 1,020 | 1.0% | 96.1% | 96.2% | 46.0% | 49.7% | |||||||||||||||||||||
Total Midwest | 7,648 | 18 | 795 | 777 | 2.3% | 836 | 827 | 1.1% | 889 | 881 | 0.9% | 95.6% | 94.9% | 44.2% | 50.0% | |||||||||||||||||||||
Mid-Atlantic Properties | ||||||||||||||||||||||||||||||||||||
Baltimore/Washington | 667 | 24 | 1,291 | 1,250 | 3.3% | 1,347 | 1,313 | 2.6% | 1,405 | 1,373 | 2.3% | 97.5% | 95.2% | 40.2% | 39.6% | |||||||||||||||||||||
Virginia | 804 | 4 | 1,064 | 1,090 | (2.4)% | 1,144 | 1,166 | (1.9)% | 1,223 | 1,202 | 1.7% | 93.2% | 94.7% | 49.3% | 55.2% | |||||||||||||||||||||
Total Mid-Atlantic | 1,471 | 13 | 1,167 | 1,163 | 0.3% | 1,236 | 1,233 | 0.2% | 1,305 | 1,280 | 2.0% | 95.1% | 94.9% | 45.1% | 48.1% | |||||||||||||||||||||
Southeast Properties | ||||||||||||||||||||||||||||||||||||
Florida | 1,272 | 11 | 1,118 | 1,090 | 2.6% | 1,212 | 1,192 | 1.7% | 1,361 | 1,351 | 0.7% | 93.2% | 92.5% | 49.4% | 62.3% | |||||||||||||||||||||
Georgia | 1,717 | 15 | 737 | 715 | 3.1% | 809 | 813 | (0.5)% | 999 | 993 | 0.6% | 91.3% | 89.9% | 63.8% | 69.2% | |||||||||||||||||||||
Total Southeast | 2,989 | 14 | 899 | 875 | 2.7% | 980 | 975 | 0.5% | 1,153 | 1,145 | 0.7% | 92.1% | 91.0% | 57.7% | 66.2% | |||||||||||||||||||||
Total/Average Same | ||||||||||||||||||||||||||||||||||||
Community | 12,108 | 16 | $ | 866 | $ | 848 | 2.1% | $ | 920 | $ | 912 | 0.9% | $ | 1,005 | $ | 995 | 1.0% | 94.7% | 93.9% | 47.7% | 53.8% | |||||||||||||||
(1) | Represents gross potential rents less vacancies and concessions for all units divided by the number of units in a market. |
|
|
(2) | Represents gross potential rents less concessions 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. |
17 |
Associated Estates Realty Corporation |
2010 | 2009 | Q4 | Q4 | ||||||||||||||
No. of | Physical | Physical | 2010 | 2009 | Increase/ | % | |||||||||||
Property Revenue | Units | Occupancy (1) | Occupancy (1) | Revenue | Revenue | (Decrease) | Change | ||||||||||
Same Community | |||||||||||||||||
Midwest Properties | |||||||||||||||||
Indiana | 836 | 97.5% | 95.0% | $ | 2,125 | $ | 2,064 | $ | 61 | 3.0% | |||||||
Michigan | 2,888 | 95.6% | 94.0% | 6,638 | 6,468 | 170 | 2.6% | ||||||||||
Ohio - Central Ohio | 2,621 | 94.9% | 95.1% | 6,358 | 6,264 | 94 | 1.5% | ||||||||||
Ohio - Northeastern Ohio | 1,303 | 96.1% | 96.2% | 3,767 | 3,696 | 71 | 1.9% | ||||||||||
Total Midwest Properties | 7,648 | 95.6% | 94.9% | 18,888 | 18,492 | 396 | 2.1% | ||||||||||
Mid-Atlantic Properties | |||||||||||||||||
Baltimore/Washington | 667 | 97.5% | 95.2% | 2,626 | 2,545 | 81 | 3.2% | ||||||||||
Virginia | 804 | 93.2% | 94.7% | 2,609 | 2,691 | (82) | (3.0)% | ||||||||||
Total Mid-Atlantic Properties | 1,471 | 95.1% | 94.9% | 5,235 | 5,236 | (1) | (0.0)% | ||||||||||
Southeast Properties | |||||||||||||||||
Florida | 1,272 | 93.2% | 92.5% | 4,376 | 4,264 | 112 | 2.6% | ||||||||||
Georgia | 1,717 | 91.3% | 89.9% | 3,911 | 3,764 | 147 | 3.9% | ||||||||||
Total Southeast Properties | 2,989 | 92.1% | 91.0% | 8,287 | 8,028 | 259 | 3.2% | ||||||||||
Total Same Community | 12,108 | 94.7% | 93.9% | 32,410 | 31,756 | 654 | 2.1% | ||||||||||
Acquisitions (2) | |||||||||||||||||
Virginia | 1,272 | 95.9% | N/A | 3,811 | N/A | 3,811 | N/A | ||||||||||
Texas | 222 | 94.1% | N/A | 483 | N/A | 483 | N/A | ||||||||||
Development | |||||||||||||||||
Virginia (3) | 60 | 93.3% | N/A | 180 | N/A | 180 | N/A | ||||||||||
Total Property Revenue | 13,662 | 94.8% | 93.9% | $ | 36,884 | $ | 31,756 | $ | 5,128 | 16.1% | |||||||
(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. |
|
|
(3) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
18 |
Associated Estates Realty Corporation |
2010 | 2009 | Q4 | Q4 | ||||||||||||||
No. of | Physical | Physical | 2010 | 2009 | Increase/ | % | |||||||||||
Property Operating Expenses | Units | Occupancy (1) | Occupancy (1) | Expenses | Expenses | (Decrease) | Change | ||||||||||
Same Community | |||||||||||||||||
Midwest Properties | |||||||||||||||||
Indiana | 836 | 97.5% | 95.0% | $ | 819 | $ | 649 | $ | 170 | 26.2% | |||||||
Michigan | 2,888 | 95.6% | 94.0% | 2,789 | 2,906 | (117) | (4.0)% | ||||||||||
Ohio - Central Ohio | 2,621 | 94.9% | 95.1% | 2,761 | 2,872 | (111) | (3.9)% | ||||||||||
Ohio - Northeastern Ohio | 1,303 | 96.1% | 96.2% | 1,423 | 1,385 | 38 | 2.7% | ||||||||||
Total Midwest Properties | 7,648 | 95.6% | 94.9% | 7,792 | 7,812 | (20) | (0.3)% | ||||||||||
Mid-Atlantic Properties | |||||||||||||||||
Baltimore/Washington | 667 | 97.5% | 95.2% | 841 | 902 | (61) | (6.8)% | ||||||||||
Virginia | 804 | 93.2% | 94.7% | 885 | 869 | 16 | 1.8% | ||||||||||
Total Mid-Atlantic Properties | 1,471 | 95.1% | 94.9% | 1,726 | 1,771 | (45) | (2.5)% | ||||||||||
Southeast Properties | |||||||||||||||||
Florida | 1,272 | 93.2% | 92.5% | 1,645 | 1,720 | (75) | (4.4)% | ||||||||||
Georgia | 1,717 | 91.3% | 89.9% | 1,796 | 1,933 | (137) | (7.1)% | ||||||||||
Total Southeast Properties | 2,989 | 92.1% | 91.0% | 3,441 | 3,653 | (212) | (5.8)% | ||||||||||
Total Same Community | 12,108 | 94.7% | 93.9% | 12,959 | 13,236 | (277) | (2.1)% | ||||||||||
Acquisitions (2) | |||||||||||||||||
Virginia | 1,272 | 95.9% | N/A | 1,201 | N/A | 1,201 | N/A | ||||||||||
Texas | 222 | 94.1% | N/A | 263 | N/A | 263 | N/A | ||||||||||
Development | |||||||||||||||||
Virginia (3) | 60 | 93.3% | N/A | 42 | N/A | 42 | N/A | ||||||||||
Total Property Operating Expenses | 13,662 | 94.8% | 93.9% | $ | 14,465 | $ | 13,236 | $ | 1,229 | 9.3% | |||||||
(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. |
|
|
(3) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
19 |
Associated Estates Realty Corporation |
2010 | 2009 | Q4 | Q4 | ||||||||||||||
No. of | Physical | Physical | 2010 | 2009 | Increase/ | % | |||||||||||
Property NOI (1) | Units | Occupancy (2) | Occupancy (2) | NOI | NOI | (Decrease) | Change | ||||||||||
Same Community | |||||||||||||||||
Midwest Properties | |||||||||||||||||
Indiana | 836 | 97.5% | 95.0% | $ | 1,306 | $ | 1,415 | $ | (109) | (7.7)% | |||||||
Michigan | 2,888 | 95.6% | 94.0% | 3,849 | 3,562 | 287 | 8.1% | ||||||||||
Ohio - Central Ohio | 2,621 | 94.9% | 95.1% | 3,597 | 3,392 | 205 | 6.0% | ||||||||||
Ohio - Northeastern Ohio | 1,303 | 96.1% | 96.2% | 2,344 | 2,311 | 33 | 1.4% | ||||||||||
Total Midwest Properties | 7,648 | 95.6% | 94.9% | 11,096 | 10,680 | 416 | 3.9% | ||||||||||
Mid-Atlantic Properties | |||||||||||||||||
Baltimore/Washington | 667 | 97.5% | 95.2% | 1,785 | 1,643 | 142 | 8.6% | ||||||||||
Virginia | 804 | 93.2% | 94.7% | 1,724 | 1,822 | (98) | (5.4)% | ||||||||||
Total Mid-Atlantic Properties | 1,471 | 95.1% | 94.9% | 3,509 | 3,465 | 44 | 1.3% | ||||||||||
Southeast Properties | |||||||||||||||||
Florida | 1,272 | 93.2% | 92.5% | 2,731 | 2,544 | 187 | 7.4% | ||||||||||
Georgia | 1,717 | 91.3% | 89.9% | 2,115 | 1,831 | 284 | 15.5% | ||||||||||
Total Southeast Properties | 2,989 | 92.1% | 91.0% | 4,846 | 4,375 | 471 | 10.8% | ||||||||||
Total Same Community | 12,108 | 94.7% | 93.9% | 19,451 | 18,520 | 931 | 5.0% | ||||||||||
Acquisitions (3) | |||||||||||||||||
Virginia | 1,272 | 95.9% | N/A | 2,610 | N/A | 2,610 | N/A | ||||||||||
Texas | 222 | 94.1% | N/A | 220 | N/A | 220 | N/A | ||||||||||
Development | |||||||||||||||||
Virginia (4) | 60 | 93.3% | N/A | 138 | N/A | 138 | N/A | ||||||||||
Total Property NOI | 13,662 | 94.8% | 93.9% | $ | 22,419 | $ | 18,520 | $ | 3,899 | 21.1% | |||||||
(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. |
|
|
(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. |
|
|
(4) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
20 |
Associated Estates Realty Corporation |
2010 | 2009 | YTD | YTD | ||||||||||||||
No. of | Physical | Physical | 2010 | 2009 | Increase/ | % | |||||||||||
Property Revenue | Units | Occupancy (1) | Occupancy (1) | Revenues | Revenues | (Decrease) | Change | ||||||||||
Same Community | |||||||||||||||||
Midwest Properties | |||||||||||||||||
Indiana | 836 | 97.5% | 95.0% | $ | 8,413 | $ | 8,375 | $ | 38 | 0.5% | |||||||
Michigan | 2,888 | 95.6% | 94.0% | 26,254 | 26,180 | 74 | 0.3% | ||||||||||
Ohio - Central Ohio | 2,621 | 94.9% | 95.1% | 25,360 | 25,300 | 60 | 0.2% | ||||||||||
Ohio - Northeastern Ohio | 1,303 | 96.1% | 96.2% | 15,024 | 14,818 | 206 | 1.4% | ||||||||||
Total Midwest Properties | 7,648 | 95.6% | 94.9% | 75,051 | 74,673 | 378 | 0.5% | ||||||||||
Mid-Atlantic Properties | |||||||||||||||||
Baltimore/Washington | 667 | 97.5% | 95.2% | 10,325 | 10,136 | 189 | 1.9% | ||||||||||
Virginia | 804 | 93.2% | 94.7% | 10,645 | 10,939 | (294) | (2.7)% | ||||||||||
Total Mid-Atlantic Properties | 1,471 | 95.1% | 94.9% | 20,970 | 21,075 | (105) | (0.5)% | ||||||||||
Southeast Properties | |||||||||||||||||
Florida | 1,272 | 93.2% | 92.5% | 17,534 | 17,406 | 128 | 0.7% | ||||||||||
Georgia | 1,717 | 91.3% | 89.9% | 15,432 | 14,818 | 614 | 4.1% | ||||||||||
Total Southeast Properties | 2,989 | 92.1% | 91.0% | 32,966 | 32,224 | 742 | 2.3% | ||||||||||
Total Same Community | 12,108 | 94.7% | 93.9% | 128,987 | 127,972 | 1,015 | 0.8% | ||||||||||
Acquisitions (2) | |||||||||||||||||
Virginia | 1,272 | 95.9% | N/A | 6,110 | N/A | 6,110 | N/A | ||||||||||
Texas | 222 | 94.1% | N/A | 483 | N/A | 483 | N/A | ||||||||||
Development | |||||||||||||||||
Virginia (3) | 60 | 93.3% | N/A | 267 | N/A | 267 | N/A | ||||||||||
Total Property Revenue | 13,662 | 94.8% | 93.9% | $ | 135,847 | $ | 127,972 | $ | 7,875 | 6.2% | |||||||
(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. |
|
|
(3) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
21 |
Associated Estates Realty Corporation |
2010 | 2009 | YTD | YTD | ||||||||||||||
No. of | Physical | Physical | 2010 | 2009 | Increase/ | % | |||||||||||
Property Operating Expenses | Units | Occupancy (1) | Occupancy (1) | Expenses | Expenses | (Decrease) | Change | ||||||||||
Same Community | |||||||||||||||||
Midwest Properties | |||||||||||||||||
Indiana | 836 | 97.5% | 95.0% | $ | 3,436 | $ | 3,408 | $ | 28 | 0.8% | |||||||
Michigan | 2,888 | 95.6% | 94.0% | 12,309 | 12,335 | (26) | (0.2)% | ||||||||||
Ohio - Central Ohio | 2,621 | 94.9% | 95.1% | 11,411 | 11,312 | 99 | 0.9% | ||||||||||
Ohio - Northeastern Ohio | 1,303 | 96.1% | 96.2% | 5,718 | 5,717 | 1 | 0.0% | ||||||||||
Total Midwest Properties | 7,648 | 95.6% | 94.9% | 32,874 | 32,772 | 102 | 0.3% | ||||||||||
Mid-Atlantic Properties | |||||||||||||||||
Baltimore/Washington | 667 | 97.5% | 95.2% | 3,630 | 3,521 | 109 | 3.1% | ||||||||||
Virginia | 804 | 93.2% | 94.7% | 3,591 | 3,587 | 4 | 0.1% | ||||||||||
Total Mid-Atlantic Properties | 1,471 | 95.1% | 94.9% | 7,221 | 7,108 | 113 | 1.6% | ||||||||||
Southeast Properties | |||||||||||||||||
Florida | 1,272 | 93.2% | 92.5% | 7,281 | 7,391 | (110) | (1.5)% | ||||||||||
Georgia | 1,717 | 91.3% | 89.9% | 7,846 | 7,531 | 315 | 4.2% | ||||||||||
Total Southeast Properties | 2,989 | 92.1% | 91.0% | 15,127 | 14,922 | 205 | 1.4% | ||||||||||
Total Same Community | 12,108 | 94.7% | 93.9% | 55,222 | 54,802 | 420 | 0.8% | ||||||||||
Acquisitions (2) | |||||||||||||||||
Virginia | 1,272 | 95.9% | N/A | 1,993 | N/A | 1,993 | N/A | ||||||||||
Texas | 222 | 94.1% | N/A | 264 | N/A | 264 | N/A | ||||||||||
Development | |||||||||||||||||
Virginia (3) | 60 | 93.3% | N/A | 106 | N/A | 106 | N/A | ||||||||||
Total Property Operating Expenses | 13,662 | 94.8% | 93.9% | $ | 57,585 | $ | 54,802 | $ | 2,783 | 5.1% | |||||||
(1) | Represents physical occupancy at the end of the quarter. |
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(2) | The Company defines acquisition properties as acquired properties which have not been owned for one year. |
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(3) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
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Associated Estates Realty Corporation |
2010 | 2009 | YTD | YTD | ||||||||||||||
No. of | Physical | Physical | 2010 | 2009 | Increase/ | % | |||||||||||
Property NOI (1) | Units | Occupancy (2) | Occupancy (2) | NOI | NOI | (Decrease) | Change | ||||||||||
Same Community | |||||||||||||||||
Midwest Properties | |||||||||||||||||
Indiana | 836 | 97.5% | 95.0% | $ | 4,977 | $ | 4,967 | $ | 10 | 0.2% | |||||||
Michigan | 2,888 | 95.6% | 94.0% | 13,945 | 13,845 | 100 | 0.7% | ||||||||||
Ohio - Central Ohio | 2,621 | 94.9% | 95.1% | 13,949 | 13,988 | (39) | (0.3)% | ||||||||||
Ohio - Northeastern Ohio | 1,303 | 96.1% | 96.2% | 9,306 | 9,101 | 205 | 2.3% | ||||||||||
Total Midwest Properties | 7,648 | 95.6% | 94.9% | 42,177 | 41,901 | 276 | 0.7% | ||||||||||
Mid-Atlantic Properties | |||||||||||||||||
Baltimore/Washington | 667 | 97.5% | 95.2% | 6,695 | 6,615 | 80 | 1.2% | ||||||||||
Virginia | 804 | 93.2% | 94.7% | 7,054 | 7,352 | (298) | (4.1)% | ||||||||||
Total Mid-Atlantic Properties | 1,471 | 95.1% | 94.9% | 13,749 | 13,967 | (218) | (1.6)% | ||||||||||
Southeast Properties | |||||||||||||||||
Florida | 1,272 | 93.2% | 92.5% | 10,253 | 10,015 | 238 | 2.4% | ||||||||||
Georgia | 1,717 | 91.3% | 89.9% | 7,586 | 7,287 | 299 | 4.1% | ||||||||||
Total Southeast Properties | 2,989 | 92.1% | 91.0% | 17,839 | 17,302 | 537 | 3.1% | ||||||||||
Total Same Community | 12,108 | 94.7% | 93.9% | 73,765 | 73,170 | 595 | 0.8% | ||||||||||
Acquisitions (3) | |||||||||||||||||
Virginia | 1,272 | 95.9% | N/A | 4,117 | N/A | 4,117 | N/A | ||||||||||
Texas | 222 | 94.1% | N/A | 219 | N/A | 219 | N/A | ||||||||||
Development | |||||||||||||||||
Virginia (4) | 60 | 93.3% | N/A | 161 | N/A | 161 | N/A | ||||||||||
Total Property NOI | 13,662 | 94.8% | 93.9% | $ | 78,262 | $ | 73,170 | $ | 5,092 | 7.0% | |||||||
(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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(3) | The Company defines acquisition properties as acquired properties which have not been owned for one year. |
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(4) | Reflects construction of 60 units on land adjacent to River Forest Apartments in Richmond, Virginia, placed in service on June 30, 2010. |
23 |
Associated Estates Realty Corporation |
Balance | Percentage | Weighted | |||||||||
Outstanding | of | Average | |||||||||
December 31, 2010 | Total Debt | Interest Rate | |||||||||
FIXED RATE DEBT | |||||||||||
Mortgages payable - CMBS | $ | 98,212 | 17.7% | 7.7% | |||||||
Mortgages payable - other | 330,648 | 59.5% | 5.7% | ||||||||
Total fixed rate debt | 428,860 | 77.2% | 6.2% | ||||||||
VARIABLE RATE DEBT | |||||||||||
Mortgages payable | 34,306 | 6.2% | 4.7% | ||||||||
Unsecured revolving credit facility | 92,500 | 16.6% | 2.7% | ||||||||
Total variable rate debt | 126,806 | 22.8% | 3.2% | ||||||||
TOTAL DEBT | $ | 555,666 | 100.0% | 5.5% | |||||||
Interest coverage ratio (1) | 1.97:1 | ||||||||||
Fixed charge coverage ratio (2) | 1.85:1 | ||||||||||
Weighted average maturity | 5.8 years | ||||||||||
Fixed Rate | Fixed Rate | ||||||||||
SCHEDULED PRINCIPAL MATURITIES | CMBS | Other | Variable Rate | Total | |||||||
2011 | $ | 53,464 | $ | - | $ | - | $ | 53,464 | |||
2012 | 44,748 | 36,000 | - | 80,748 | |||||||
2013(3) | - | 132,209 | 92,500 | 224,709 | |||||||
2014 | - | 44,538 | - | 44,538 | |||||||
2015 | 21,000 | - | 21,000 | ||||||||
Thereafter | - | 96,901 | 34,306 | 131,207 | |||||||
Total | $ | 98,212 | $ | 330,648 | $ | 126,806 | $ | 555,666 | |||
(1) | Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs and excluding defeasance and/or other prepayment costs/credits. 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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(2) | Represents interest expense coverage, including capitalized interest and excluding defeasance and/or other prepayment costs/credits. |
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(3) | Includes the Company's unsecured revolving credit facility. |
24 |
Associated Estates Realty Corporation |
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 | $0.16 to $0.20 | |
Expected real estate depreciation and amortization | 1.26 | |
Expected gains on disposition of properties/insurance recoveries | -0.40 | |
Expected Funds from Operations(1) | $1.02 to $1.06 | |
Same Community Portfolio | ||
Revenue growth | 3.0% to 4.0% | |
Expense growth | 1.5% to 2.5% | |
Property NOI (2) growth | 4.0% to 5.0% | |
Physical occupancy | 95.0% | |
Transactions | ||
Acquisitions | $50.0 to $150.0 million | |
Dispositions | $0 to $50.0 million | |
Development (3) | $25.0 to $30.0 million | |
Corporate Expenses | ||
General and administrative expense | $15.0 to $16.0 million | |
Costs associated with acquistions | $0.3 million | |
Debt | ||
Capitalized interest | $0.6 to $1.0 million | |
Expensed interest (4) | $32.6 to $33.3 million | |
Capital Structure (5) | ||
Weighted average shares outstanding | 41.3 million | |
Common share issuances | $0 million | |
Common share repurchases | $0 million | |
(1) | See page 26 for the Company's definition of this non-GAAP measurement. |
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(2) | See page 28 for the Company's definition of this non-GAAP measurement. |
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(3) | Projected development spending associated with Nashville, Tennessee joint venture. |
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(4) | Includes $2.0 million of deferred financing costs. |
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(5) | Earnings guidance does not take into consideration any additional share issuances or share repurchases. |
25 |
Associated Estates Realty Corporation |
The foregoing supplemental financial data 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 the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). This definition includes 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 refunds on previously defeased loans of $(553,000) and $(563,000) for the twelve months ended December 31, 2010 and December 31, 2009, respectively. In accordance with GAAP, these refunds on previously defeased loans are included as an offset to interest expense in the Company's Consolidated Statement of Operations. Additionally, the computation of FFO as adjusted for the twelve months ended December 31, 2010 includes add backs of non–cash charges of $1.0 million and $727,000, respectively, associated with the redemption of the Company’s Series B preferred shares and trust preferred debt. 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.
26 |
Associated Estates Realty Corporation |
Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. The Company considers EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation and interest which permits investors to view income from operations unclouded by non-cash depreciation or the cost of debt. Below is a reconciliation of net (loss) income available to common shares to EBITDA.
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
(In thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||
Net (loss) income applicable to common shares | $ | (1,359) | $ | (3,866) | $ | (11,659) | $ | 1,588 | ||||
Allocation to participating securities | - | - | - | 423 | ||||||||
Preferred share dividends | - | 1,050 | 2,030 | 4,199 | ||||||||
Preferred share redemption costs | - | - | 993 | - | ||||||||
Interest income | (7) | (5) | (34) | (47) | ||||||||
Interest expense (1) | 7,821 | 8,634 | 31,704 | 34,251 | ||||||||
Depreciation and amortization | 11,923 | 8,640 | 39,639 | 35,412 | ||||||||
Gain on disposition of properties/gain on insurance recoveries | (245) | (110) | (245) | (16,065) | ||||||||
Income taxes | (106) | 46 | 119 | 288 | ||||||||
Total EBITDA | $ | 18,027 | $ | 14,389 | $ | 62,547 | $ | 60,049 | ||||
(1) | The twelve months ended December 31, 2010 and 2009 includes defeasance credits and trust preferred securities redemption costs of $174 and $(563), respectively. |
Net Operating Income ("NOI")
NOI is determined by deducting property operating and maintenance expenses, direct property management and service company expense and construction and other services 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.
27 |
Associated Estates Realty Corporation |
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) | 2010 | 2009 | 2010 | 2009 | |||||||
Property NOI | $ | 22,419 | $ | 18,520 | $ | 78,262 | $ | 73,170 | |||
Service company NOI | (41) | 39 | 72 | 180 | |||||||
Construction and other services net income | 665 | (315) | 428 | (585) | |||||||
Depreciation and amortization | (11,923) | (8,640) | (39,639) | (34,937) | |||||||
General and administrative expense | (4,727) | (3,888) | (15,684) | (14,024) | |||||||
Costs associated with acquisitions | (170) | - | (599) | - | |||||||
Interest income | 7 | 5 | 34 | 46 | |||||||
Interest expense | (7,821) | (8,634) | (31,704) | (34,220) | |||||||
Gain on insurance recoveries | 245 | 121 | 245 | 665 | |||||||
Loss (income) from continuing operations | (1,346) | (2,792) | (8,585) | (9,705) | |||||||
(Loss) income from discontinued operations: | |||||||||||
Operating income | - | - | - | 568 | |||||||
(Loss) gain on disposition of properties | - | (11) | - | 15,400 | |||||||
(Loss) income from discontinued operations | - | (11) | - | 15,968 | |||||||
Net (loss) income | (1,346) | (2,803) | (8,585) | 6,263 | |||||||
Net income attributable to noncontrolling redeemable interest | (13) | (13) | (51) | (53) | |||||||
Consolidated net (loss) income attributable to AERC | $ | (1,359) | $ | (2,816) | $ | (8,636) | $ | 6,210 | |||
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.
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