Exhibit 99.2
Associated Estates Realty Corporation
First Quarter 2015
Earnings Release and Supplemental Financial Information
| Cambridge at Buckhead | |||
| 3432 Piedmont Road | Phone: | (866) 207-0948 | |
| Atlanta, GA 30305 | Web Site: | cambridgeatbuckhead.com | |
| For more information, please contact: | ||
| Jeremy Goldberg | ||
| (216) 797-8715 | ||
| Associated Estates Realty Corporation |
| First Quarter 2015 |
| Supplemental Financial Information |
| Table of Contents | Page |
Development Pipeline | |
| General and Administrative Expense, Personnel Expense - Allocated, Construction Services, | |
| Development and Property Management | |
Sequential Property Revenue, Operating Expenses and Net Operating Income | |
First Quarter Property Revenue, Operating Expenses and Net Operating Income | |
This communication contains “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. These statements, as they relate to Associated Estates, its management or the proposed transaction between Associated Estates and Brookfield, involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. These statements are based on current plans, estimates and projections, and therefore, you are cautioned not to place undue reliance on them. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Associated Estates undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by law. Forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about the business and future financial results, and other legal, regulatory and economic developments. We use words such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “future,” “intends,” “may,” “will,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance,” and similar expressions to identify these forward-looking statements that are intended to be covered by the safe harbor provisions of the PSLRA. Actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including: the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; restrictions imposed by outstanding indebtedness and indebtedness incurred in connection with the transaction; worldwide and regional economic, business, and political conditions; changes in customer demand and requirements; business cycles and other industry conditions; the timing of new services or facilities; ability to compete with others in the industry in which Associated Estates and Brookfield operate; effects of compliance with laws; matters relating to operating facilities; effect and costs of claims (known or unknown) relating to litigation and environmental remediation; ability to attract and retain key personnel; escalation in the cost of providing employee health care; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; any conditions imposed on the combined company in connection with consummation of the merger; the failure to obtain approval of the merger by the shareholders of Associated Estates and the failure to satisfy various other conditions to the closing of the merger contemplated by the merger agreement; changes in the economic climate in the markets in which Associated Estates 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; risks of a lessening of demand for the multifamily units owned by Associated Estates; competition from other available multifamily units, single family units available for rental or purchase, and changes in market rental rates; the failure of development projects or redevelopment activities to achieve expected results due to, among other causes, construction and contracting risks; unanticipated increases in materials and/or labor, and delays in project completion and/or lease-up that result in increased costs and/or reduce the profitability of a completed project; losses resulting from property damage or personal injury that are not insured; results of litigation involving Associated Estates; the cost, disruption and diversion of management’s attention associated with campaigns commenced by activist investors seeking to influence Associated Estates to take particular actions favored by the activist or gain representation on Associated Estates’ Board of Directors; information security breaches and other disruptions that could compromise our information and expose us to business interruption, increased costs, liability and reputational damage; and risks associated with property acquisitions and dispositions, such as failure to achieve expected results and the risks that are described from time to time in Associated Estates’ reports filed with the SEC, including its annual report on Form 10-K for the year ended December 31, 2014, as such report may have been amended. This document speaks only as of its date, and Associated Estates disclaims any duty to update the information herein. |
2
| Associated Estates Realty Corporation |
| First Quarter Earnings |
ASSOCIATED ESTATES REALTY CORPORATION REPORTS
FIRST QUARTER 2015 RESULTS
Operating FFO per Share of $0.29 In Line with Guidance
CLEVELAND - May 1, 2015 - Associated Estates Realty Corporation (NYSE, NASDAQ: AEC) announced today its financial results for the first quarter ended March 31, 2015.
Quarterly Results
Operating Funds from Operations (Operating FFO), which excludes $1.1 million of expenses incurred by the Company during the quarter related to the Land and Buildings activism campaign and a $444,000 gain recognized in conjunction with the acquisition of our joint venture partner’s interest in 5th and Huntington, was $0.29 per common share (diluted) for the quarter ended March 31, 2015 compared to Operating FFO of $0.30 per common share (diluted) for the quarter ended March 31, 2014. There were no FFO adjustments in the first quarter of 2014.
For the quarter ended March 31, 2015, net income applicable to common shares was $744,000, or $0.01 per common share (diluted), compared to net income applicable to common shares for the quarter ended March 31, 2014 of $42.1 million, or $0.73 per common share (diluted). The quarter over quarter decrease was driven by a $41.0 million gain associated with the sale of one property in the first quarter of 2014.
NOI for the quarter ended March 31, 2015 for the Company’s same community portfolio increased 2.8% compared to the quarter ended March 31, 2014. Revenue increased by 2.1% and property operating expenses increased by 1.2%. Average occupancy for the same community portfolio for the first quarter of 2015 was 95.2% compared to 96.1% for the first quarter of 2014. Average monthly revenue per occupied unit for the same community portfolio for the first quarter of 2015 was $1,287 compared to $1,249 in the first quarter of 2014, a 3.0% increase.
A reconciliation of net income to FFO and Operating FFO is included on page 10.
Transactional Activity
During the first quarter, the Company closed on the purchase of 1160 Hammond, a 345-unit property located in Atlanta, GA. The brand new property offers units with 10’ ceilings, kitchen islands, granite countertops, tiled backsplashes, upscale cabinets and plank-style flooring. The property also has 16,000 square feet of amenity space and a smoke-free policy for its apartment homes.
Subsequent to quarter end, on April 6, 2015, the Company closed on the sale of Clinton Place Apartments, a 202-unit property located in southeast Michigan. The market cap rate on the sale is 5.9%, which is calculated on trailing twelve months NOI after a 3% management fee and marking real estate taxes to market.
3
| Associated Estates Realty Corporation |
| First Quarter Earnings |
Outlook
Given the Company’s announcement on April 22, 2015 that it had entered into an agreement and plan of merger with an affiliate of a real estate fund managed by Brookfield Asset Management, the Company is not providing an outlook for the remainder of 2015 nor updating or affirming its previously issued guidance range for the full-year 2015 for EPS and Operating FFO per share.
4
| Associated Estates Realty Corporation |
| Financial and Operating Highlights |
| For the Three Months Ended March 31, 2015 and 2014 |
| (Unaudited; in thousands, except per share and ratio data) |
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| OPERATING INFORMATION | ||||||||
| Total revenue | $ | 48,243 | $ | 49,715 | ||||
Property revenue (1) | $ | 47,317 | $ | 49,150 | ||||
| Property management and construction services revenue | $ | 315 | $ | 87 | ||||
| Net income applicable to common shares | $ | 744 | $ | 42,116 | ||||
| Per share - basic | $ | 0.01 | $ | 0.73 | ||||
| Per share - diluted | $ | 0.01 | $ | 0.73 | ||||
Funds from Operations (FFO) (2) | $ | 16,054 | $ | 17,076 | ||||
Operating FFO (2) | $ | 16,723 | $ | 17,076 | ||||
| FFO per share - diluted | $ | 0.28 | $ | 0.30 | ||||
| Operating FFO per share - diluted | $ | 0.29 | $ | 0.30 | ||||
Funds Available for Distribution (FAD) (2) | $ | 16,286 | $ | 16,229 | ||||
| Dividends per share | $ | 0.21 | $ | 0.19 | ||||
| Payout ratio - FFO | 75.0 | % | 63.3 | % | ||||
| Payout ratio - Operating FFO | 72.4 | % | 63.3 | % | ||||
| Payout ratio - FAD | 75.0 | % | 67.9 | % | ||||
| General and administrative expense (excluding shareholder activism costs) | $ | 5,407 | $ | 5,319 | ||||
| Shareholder activism costs | $ | 1,113 | $ | — | ||||
| Development costs | $ | 199 | $ | 330 | ||||
| Construction services expense | $ | 203 | $ | 57 | ||||
| Personnel expense - allocated | $ | 1,133 | $ | 1,163 | ||||
| Costs associated with acquisitions | $ | 62 | $ | 86 | ||||
Interest expense (3) | $ | 5,625 | $ | 6,481 | ||||
| Capitalized interest | $ | 1,365 | $ | 1,034 | ||||
Interest coverage ratio (4) | 3.00:1 | 3.09:1 | ||||||
Fixed charge coverage ratio (4) | 3.00:1 | 3.09:1 | ||||||
| General and administrative expense (excluding shareholder activism costs) to property revenue | 11.4 | % | 10.8 | % | ||||
| Personnel - allocated as a percentage of property revenue | 2.4 | % | 2.4 | % | ||||
Interest expense to property revenue (3) | 11.9 | % | 13.2 | % | ||||
Property NOI (5) | $ | 28,407 | $ | 29,782 | ||||
Same Community revenue increase (6) | 2.1 | % | 3.1 | % | ||||
Same Community expense increase (6) | 1.2 | % | 5.2 | % | ||||
Same Community NOI increase (6) | 2.8 | % | 1.8 | % | ||||
| (1) | As reported per the Consolidated Statement of Operations and Comprehensive Income. Prior periods exclude discontinued operations. |
| (2) | See page 10 for a reconciliation of net income to these non-GAAP measurements and page 19 for the Company's definition of these non-GAAP measurements. |
| (3) | Excludes amortization of financing fees of $489 for 2015 and $472 for 2014. |
| (4) | Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs and excluding prepayment costs/refunds if applicable. Individual line items in this calculation include results from discontinued operations where applicable. See page 19 for a reconciliation of net income applicable to common shares to EBITDA and the Company's definition of EBITDA. |
| (5) | See page 20 for a reconciliation of net income to this non-GAAP measurement and the Company's definition of this non-GAAP measurement. |
| (6) | Same Community percentages for prior periods are as previously reported. |
5
| Associated Estates Realty Corporation |
| Financial and Operating Highlights |
| First Quarter 2015 |
| (Unaudited; in thousands, except per share and ratio data) |
| March 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| CAPITALIZATION DATA | ||||||||
| Cash and cash equivalents | $ | 6,952 | $ | 4,692 | ||||
| Cash held in escrow for 1031 | $ | — | $ | 43,295 | ||||
| Net real estate assets | $ | 1,480,817 | $ | 1,381,427 | ||||
| Total assets | $ | 1,526,515 | $ | 1,465,697 | ||||
| Debt | $ | 826,587 | $ | 749,113 | ||||
| Noncontrolling interests | $ | 350 | $ | 350 | ||||
| Total shareholders' equity attributable to AERC | $ | 636,916 | $ | 647,226 | ||||
| Common shares outstanding | 57,886 | 57,650 | ||||||
| Share price, end of period | $ | 24.68 | $ | 23.21 | ||||
| Total capitalization | $ | 2,255,213 | $ | 2,087,170 | ||||
Undepreciated book value of real estate assets (1) | $ | 1,892,752 | $ | 1,778,637 | ||||
Net debt to undepreciated book value of real estate assets (2) | 43.3 | % | 39.4 | % | ||||
| Secured debt to undepreciated book value | 14.9 | % | 15.3 | % | ||||
| Annual dividend | $ | 0.84 | $ | 0.84 | ||||
| Annual dividend yield based on share price, end of period | 3.4 | % | 3.6 | % | ||||
| (1) | Includes $55,084 and $54,800 of the Company's investment in unconsolidated entities at March 31, 2015 and December 31, 2014. |
| (2) | Net of cash and cash held in escrow for 1031 like kind exchange. |
6
| Associated Estates Realty Corporation |
| Financial and Operating Highlights |
| First Quarter 2015 |
| (Unaudited) |
| Number of | |||||||||
| Properties | Units | Average Age | |||||||
| PORTFOLIO INFORMATION | |||||||||
| Company Portfolio: | |||||||||
| Same Community: | |||||||||
| Midwest | 24 | 5,734 | 22 | ||||||
| Mid-Atlantic | 13 | 3,790 | 8 | ||||||
| Southeast | 6 | 1,648 | 17 | ||||||
| Southwest | 4 | 994 | 12 | ||||||
| Total Same Community | 47 | 12,166 | 16 | ||||||
| Acquisitions | 2 | 612 | 2 | ||||||
Development (1) | 1 | 348 | 1 | ||||||
Held for Sale (2) | 1 | 202 | 27 | ||||||
| Total Owned Portfolio | 51 | 13,328 | 15 | ||||||
| Properties Under Development: | |||||||||
| Consolidated: | |||||||||
| Metro DC | 1 | 140 | |||||||
| Southern California | 1 | 175 | |||||||
| Unconsolidated: | |||||||||
| Northern California | 1 | 410 | |||||||
| Southern California | 1 | 472 | |||||||
| Managed (under contract to acquire): | |||||||||
| Central Florida | 1 | 350 | |||||||
| Southeast Florida | 1 | 331 | |||||||
| Total Company Portfolio | 57 | 15,206 | |||||||
| (1) | Reflects a 99-unit expansion to a community located in Dallas, Texas and a 249-unit development in Dallas, Texas. |
| (2) | Reflects a community sold on April 6, 2015. |
7
| Associated Estates Realty Corporation |
| Condensed Consolidated Balance Sheets |
| First Quarter 2015 |
| (Unaudited; dollar amounts in thousands) |
| March 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Real estate assets | ||||||||
| Investment in real estate | $ | 1,748,189 | $ | 1,650,256 | ||||
| Construction in progress | 75,826 | 73,581 | ||||||
| Less: Accumulated depreciation | (404,491 | ) | (397,210 | ) | ||||
| Real estate held for sale, net of accumulated depreciation of $7,444 | 6,209 | — | ||||||
| Net real estate owned | 1,425,733 | 1,326,627 | ||||||
| Investment in unconsolidated entities | 55,084 | 54,800 | ||||||
| Total net real estate | 1,480,817 | 1,381,427 | ||||||
| Cash and cash equivalents | 6,952 | 4,692 | ||||||
| Restricted cash | 4,148 | 46,361 | ||||||
| Other assets | 34,598 | 33,217 | ||||||
| Total assets | $ | 1,526,515 | $ | 1,465,697 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Mortgage notes payable | $ | 282,587 | $ | 272,613 | ||||
| Unsecured notes | 250,000 | 250,000 | ||||||
| Unsecured revolving credit facility | 144,000 | 76,500 | ||||||
| Unsecured term loan | 150,000 | 150,000 | ||||||
| Total debt | 826,587 | 749,113 | ||||||
| Accounts payable and other liabilities | 62,662 | 69,008 | ||||||
| Total liabilities | 889,249 | 818,121 | ||||||
| Equity | ||||||||
| Common shares, without par value; $.10 stated value; 91,000,000 authorized; | ||||||||
| 57,929,535 issued and 57,885,841 outstanding at March 31, 2015 and | ||||||||
| 57,708,675 issued and 57,649,609 outstanding at December 31, 2014, respectively | 5,793 | 5,771 | ||||||
| Paid-in capital | 759,526 | 758,079 | ||||||
| Accumulated distributions in excess of accumulated net income | (126,084 | ) | (114,551 | ) | ||||
| Accumulated other comprehensive loss | (1,229 | ) | (1,093 | ) | ||||
| Less: Treasury shares, at cost, 43,694 and 59,066 shares | ||||||||
| at March 31, 2015 and December 31, 2014, respectively | (1,090 | ) | (980 | ) | ||||
| Total shareholders' equity attributable to AERC | 636,916 | 647,226 | ||||||
| Noncontrolling interest | 350 | 350 | ||||||
| Total equity | 637,266 | 647,576 | ||||||
| Total liabilities and equity | $ | 1,526,515 | $ | 1,465,697 | ||||
8
| Associated Estates Realty Corporation |
| Consolidated Statements of Operations and Comprehensive Income |
| Three Months Ended March 31, 2015 and 2014 |
| (Unaudited; dollar and share amounts in thousands) |
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| REVENUE | ||||||||
| Property revenue | $ | 47,317 | $ | 49,150 | ||||
| Office revenue | 611 | 478 | ||||||
| Property management and construction services revenue | 315 | 87 | ||||||
| Total revenue | 48,243 | 49,715 | ||||||
| EXPENSES | ||||||||
| Property operating and maintenance | 18,910 | 19,368 | ||||||
| Depreciation and amortization | 15,935 | 16,295 | ||||||
| General and administrative | 6,520 | 5,319 | ||||||
| Development costs | 199 | 330 | ||||||
| Construction services | 203 | 57 | ||||||
| Costs associated with acquisitions | 62 | 86 | ||||||
| Total expenses | 41,829 | 41,455 | ||||||
| Operating income | 6,414 | 8,260 | ||||||
| Interest expense | (6,114 | ) | (6,953 | ) | ||||
| Gain on change in control | 444 | — | ||||||
| Gain on disposition of properties | — | 40,966 | ||||||
| Net income | 744 | 42,273 | ||||||
| Allocation to participating securities | — | (157 | ) | |||||
| Net income applicable to common shares | $ | 744 | $ | 42,116 | ||||
| Earnings per common share - basic: | ||||||||
| Net income applicable to common shares - basic | $ | 0.01 | $ | 0.73 | ||||
| Earnings per common share - diluted: | ||||||||
| Net income applicable to common shares - diluted | $ | 0.01 | $ | 0.73 | ||||
| Comprehensive income: | ||||||||
| Net income | $ | 744 | $ | 42,273 | ||||
| Other comprehensive income: | ||||||||
| Change in fair value and reclassification of hedge instruments | (136 | ) | (63 | ) | ||||
| Total comprehensive income | $ | 608 | $ | 42,210 | ||||
| Weighted average shares outstanding - basic | 57,612 | 57,362 | ||||||
| Weighted average shares outstanding - diluted | 58,225 | 57,833 | ||||||
9
| Associated Estates Realty Corporation |
| Reconciliation of Funds from Operations (FFO) and Funds Available for Distribution (FAD) |
| Three Months Ended March 31, 2015 and 2014 |
| (In thousands, except per share data) |
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| CALCULATION OF FFO AND FAD | ||||||||||
| Net income | $ | 744 | $ | 42,273 | ||||||
| Add: | Depreciation - real estate assets | 15,144 | 14,795 | |||||||
| Amortization of intangible assets | 166 | 974 | ||||||||
| Less: | Gain on disposition of properties | — | (40,966 | ) | ||||||
Funds from Operations (FFO) (1) | 16,054 | 17,076 | ||||||||
| Add: | Shareholder activism costs | 1,113 | — | |||||||
| Less: | Gain on change in control | (444 | ) | — | ||||||
Operating Funds from Operations (1) | 16,723 | 17,076 | ||||||||
| Add: | Depreciation - other assets | 625 | 526 | |||||||
| Amortization of deferred financing fees | 489 | 472 | ||||||||
| Less: | Recurring fixed asset additions (2) | (1,551 | ) | (1,845 | ) | |||||
Funds Available for Distribution (FAD) (1) | $ | 16,286 | $ | 16,229 | ||||||
Weighted average shares outstanding - diluted (3) | 58,225 | 57,833 | ||||||||
| PER SHARE INFORMATION: | ||||||||||
| FFO - diluted | $ | 0.28 | $ | 0.30 | ||||||
| Operating FFO - diluted | $ | 0.29 | $ | 0.30 | ||||||
| Dividends | $ | 0.21 | $ | 0.19 | ||||||
| Payout ratio - FFO | 75.0 | % | 63.3 | % | ||||||
| Payout ratio - Operating FFO | 72.4 | % | 63.3 | % | ||||||
| Payout ratio - FAD | 75.0 | % | 67.9 | % | ||||||
| (1) | See page 19 for the Company's definition of these non-GAAP measurements. Individual line items included in FFO and FAD calculations include results from discontinued operations where applicable. |
| (2) | Fixed asset additions exclude development, investment, revenue enhancing and non-recurring capital additions. |
| (3) | The Company has excluded 42 stock options for the three months ended March 31, 2014, as their inclusion would be anti-dilutive. |
10
| Associated Estates Realty Corporation |
| Development Pipeline |
| As of March 31, 2015 |
| (Unaudited; dollar amounts in thousands, except per unit data) |
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.
Consolidated Current Developments
| Total | ||||||||||||||||||||||||||||||||||||||||
| Estimated | Cost | Estimated/Actual Dates for | Average | Commercial | ||||||||||||||||||||||||||||||||||||
| Under | Ownership | Total | Capital | to | Total | Construction | Initial | Construction | Stabilized | Rent | Rent | % | % | |||||||||||||||||||||||||||
| Construction | Location | % | Units | Cost (1) (6) | Date | Debt | Start | Occupancy | Completion | Operations (2) | Per Unit (3) | Per Month (5) | Leased | Occupied | ||||||||||||||||||||||||||
| Cantabria at Turtle Creek | Dallas, TX | 100.0% | 249 | $ | 55,904 | $ | 55,874 | $ | 36,335 | Q2 2013 | Q3 2014 | Q1 2015 | Q2 2015 | $ | 2,286 | N/A | 46.6% | 43.0% | ||||||||||||||||||||||
| 7001 Arlington at Bethesda | Bethesda, MD | 98.1% (4) | 140 | $ | 53,400 | $ | 49,639 | $ | 23,085 | Q4 2012 | Q2 2015 | Q2 2015 | Q3 2015 | $ | 2,781 | $ | 39,000 | N/A | N/A | |||||||||||||||||||||
| The Desmond on Wilshire | Los Angeles, CA | 100.0% | 175 | $ | 76,300 | $ | 51,474 | $ | — | Q2 2013 | Q3 2015 | Q4 2015 | Q1 2016 | $ | 3,338 | N/A | N/A | N/A | ||||||||||||||||||||||
| Total | 564 | $ | 185,604 | $ | 156,987 | $ | 59,420 | |||||||||||||||||||||||||||||||||
Unconsolidated Current Developments
| Total | ||||||||||||||||||||||||||||||||||||||||||||
| Estimated | Cost | AEC | AEC | Estimated/Actual Dates for | Average | Commercial | ||||||||||||||||||||||||||||||||||||||
| Under | Ownership | Total | Capital | to | Investment | Total | Share | Construction | Initial | Construction | Stabilized | Rent | Rent | % | % | |||||||||||||||||||||||||||||
| Construction | Location | % | Units | Cost (1) (6) | Date | to Date | Debt | of Debt | Start | Occupancy | Completion | Operations (2) | Per Unit (3) | Per Month (5) | Leased | Occupied | ||||||||||||||||||||||||||||
| 350 8th | San Francisco, CA | 50.01% | 410 | $ | 245,000 | $ | 97,528 | $ | 45,570 | $ | — | $ | — | Q2 2014 | Q4 2015 | Q4 2016 | Q1 2017 | $ | 3,837 | $ | 152,000 | N/A | N/A | |||||||||||||||||||||
| 950 East Third | Los Angeles, CA | 50.0% | 472 | $ | 164,000 | $ | 40,272 | $ | 9,514 | $ | — | — | Q3 2014 | Q3 2016 | Q1 2017 | Q4 2017 | $ | 2,651 | $ | 66,000 | N/A | N/A | ||||||||||||||||||||||
| Total | 882 | $ | 409,000 | $ | 137,800 | $ | 55,084 | $ | — | $ | — | |||||||||||||||||||||||||||||||||
Consolidated Future Development Pipeline - Unimproved Land
| Estimated | ||||||||||||||
| Ownership | Number | Cost to | ||||||||||||
| Name | Location | % | of Units (6) | Date | ||||||||||
| 5th and Huntington | Monrovia, CA | 100.0% | 154 | $ | 16,546 | (7) | ||||||||
| Warner Center | Woodland Hills, CA | 100.0% | 379 | $ | 18,825 | |||||||||
| (1) | Total capital cost are calculated as if owned 100.0% by the Company and represent estimated costs for projects under development inclusive of all capitalized costs in accordance with GAAP. |
| (2) | We define stabilized occupancy as the earlier of the attainment of 93.0% physical occupancy or one year after the completion of construction. |
| (3) | Reflects our projected stabilized rents. We expect to update these projections periodically to reflect market rents and rents achieved. |
| (4) | Ownership percentage based on current equity of the joint venture and is subject to change based on changes in total equity. Joint venture partner contribution is $350. |
| (5) | Based on 6,898 square feet of commercial space at 7001 Arlington at Bethesda, 40,000 square feet of commercial space at 350 8th and 19,700 square feet of commercial space at 950 East Third. |
| (6) | Based on current projections as of May 1, 2015. |
| (7) | Does not include the $444 gain on change in control related to the acquisition of our partner's interest. |
11
| 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) |
| Three Months Ended | ||||||||||
| Estimated | March 31, 2015 | |||||||||
| GAAP Useful | Cost Per | |||||||||
| Life (Years) | Amount | Unit (1) | ||||||||
| OPERATING EXPENSES RELATED TO REPAIRS AND MAINTENANCE | ||||||||||
Repairs and maintenance (2) | $ | 3,050 | $ | 238 | ||||||
Maintenance personnel labor cost (2) | 1,765 | 137 | ||||||||
| Total Operating Expenses Related to Repairs and Maintenance | 4,815 | 375 | ||||||||
| CAPITAL EXPENDITURES | ||||||||||
Recurring Capital Expenditures (3) | ||||||||||
| Amenities | 5 | 154 | 12 | |||||||
| Appliances | 5 | 225 | 17 | |||||||
Building improvements (4) | 14 | (177 | ) | (14 | ) | |||||
| Carpet and flooring | 5 | 725 | 56 | |||||||
| Furnishings | 5 | 7 | 1 | |||||||
| Office/Model | 5 | 22 | 2 | |||||||
| HVAC and mechanicals | 15 | 191 | 15 | |||||||
| Landscaping and grounds | 14 | 48 | 4 | |||||||
| Unit improvements | 5 | 14 | 1 | |||||||
| Total Recurring Capital Expenditures - Properties | 1,209 | 94 | ||||||||
| Corporate capital expenditures | 342 | 26 | ||||||||
| Total Recurring Capital Expenditures | 1,551 | 120 | ||||||||
| Total Recurring Capital Expenditures and Repairs and Maintenance | $ | 6,366 | $ | 495 | ||||||
| Total Recurring Capital Expenditures | $ | 1,551 | ||||||||
Investment/Revenue Enhancing/Non-Recurring Expenditures (5) | ||||||||||
| Building improvements - unit upgrades | Various | 762 | ||||||||
| Building improvements - other | 20 | 170 | ||||||||
| Ground improvements | Various | 2 | ||||||||
| Corporate capital expenditures | Various | 221 | ||||||||
| Total Investment/Revenue Enhancing/Non-Recurring Expenditures | 1,155 | |||||||||
| Grand Total Capital Expenditures | $ | 2,706 | ||||||||
| (1) | Calculated using weighted average units owned during the three months ended March 31, 2015 of 12,849. |
| (2) | Included in property operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income. |
| (3) | See page 20 for the Company's definition of recurring fixed asset additions. |
| (4) | Includes $225 reversal of accrual reported at December 31, 2014. |
| (5) | See page 20 for the Company's definition of investment/revenue enhancing and/or non-recurring fixed asset additions.chong |
12
| Associated Estates Realty Corporation |
| General and Administrative Expense, Personnel Expense - Allocated, Construction Services, |
| Development and Property Management |
| For the Three Months Ended March 31, 2015 and 2014 |
| (Unaudited; in thousands) |
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| General and Administrative, Personnel - Allocated, Construction | ||||||||
| Services, Development and Property Management | ||||||||
| General and administrative expense (excluding shareholder activism costs) | $ | 5,407 | $ | 5,319 | ||||
| Shareholder activism costs | 1,113 | — | ||||||
General and administrative expense (1) | 6,520 | 5,319 | ||||||
Personnel expense - allocated (2) | 1,133 | 1,163 | ||||||
| Total | 7,653 | 6,482 | ||||||
Construction services revenue (1) | (224 | ) | (66 | ) | ||||
Construction services expense (1) | 203 | 57 | ||||||
| Construction services, net | (21 | ) | (9 | ) | ||||
Development costs (1) | 199 | 330 | ||||||
| Net development | 178 | 321 | ||||||
Property management revenue (1) | (91 | ) | (21 | ) | ||||
| Net overhead | $ | 7,740 | $ | 6,782 | ||||
| (1) | As reported per the Consolidated Statement of Operations and Comprehensive Income. |
| (2) | Represents general and administrative expense allocations to property operating and maintenance expenses. |
13
| Associated Estates Realty Corporation |
| Same Community Data |
| Operating Results for the Last Five Quarters |
| (Unaudited; in thousands, except unit totals and per unit amounts) |
| Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| 2015 | 2014 | 2014 | 2014 | 2014 | ||||||||||||||||
| Property Revenue | $ | 44,719 | $ | 44,388 | $ | 44,592 | $ | 44,272 | $ | 43,780 | ||||||||||
| Property Operating and | ||||||||||||||||||||
| Maintenance Expenses | ||||||||||||||||||||
| Personnel - on site | 3,655 | 3,307 | 3,393 | 3,541 | 3,481 | |||||||||||||||
| Personnel - allocated | 1,071 | 1,045 | 1,052 | 1,047 | 1,036 | |||||||||||||||
| Advertising | 385 | 457 | 491 | 452 | 491 | |||||||||||||||
| Utilities | 2,091 | 2,078 | 2,101 | 1,864 | 2,043 | |||||||||||||||
| Repairs and maintenance | 2,872 | 2,064 | 2,701 | 2,816 | 2,658 | |||||||||||||||
| Real estate taxes and insurance | 6,365 | 5,997 | 6,022 | 6,163 | 6,569 | |||||||||||||||
| Other operating | 1,024 | 1,038 | 1,017 | 918 | 977 | |||||||||||||||
| Total Expenses | 17,463 | 15,986 | 16,777 | 16,801 | 17,255 | |||||||||||||||
| Property Net Operating Income | $ | 27,256 | $ | 28,402 | $ | 27,815 | $ | 27,471 | $ | 26,525 | ||||||||||
| Operating Margin | 61.0 | % | 64.0 | % | 62.4 | % | 62.1 | % | 60.6 | % | ||||||||||
| Personnel - Allocated as a | ||||||||||||||||||||
| Percentage of Property Revenue | 2.4 | % | 2.4 | % | 2.4 | % | 2.4 | % | 2.4 | % | ||||||||||
| Total Number of Units | 12,166 | 12,166 | 12,166 | 12,166 | 12,166 | |||||||||||||||
| Property NOI Per Unit | $ | 2,240 | $ | 2,335 | $ | 2,286 | $ | 2,258 | $ | 2,180 | ||||||||||
| Monthly Property Revenue | ||||||||||||||||||||
| Per Occupied Unit | $ | 1,287 | $ | 1,289 | $ | 1,288 | $ | 1,261 | $ | 1,249 | ||||||||||
Average Occupancy (1) | 95.2 | % | 94.3 | % | 94.8 | % | 96.2 | % | 96.1 | % | ||||||||||
| (1) | Is defined as the average number of units occupied during the quarter divided by total number of units. |
14
| Associated Estates Realty Corporation |
| Same Community Data |
| As of March 31, 2015 and 2014 |
| (Unaudited) |
| Property Revenue per | Average | Turnover | |||||||||||||||||||||||||||
| Occupied Unit | Occupancy (1) | Ratio (2) | |||||||||||||||||||||||||||
| No. of | Average | Q1 | Q1 | % | Q1 | Q1 | Q1 | Q1 | |||||||||||||||||||||
| Units | Age (3) | 2015 | 2014 | Change | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Midwest Properties | |||||||||||||||||||||||||||||
| Indianapolis | 836 | 19 | $ | 990 | $ | 944 | 4.9 | % | 95.1 | % | 97.9 | % | 43.5 | % | 36.4 | % | |||||||||||||
| Southeast Michigan | 1,576 | 22 | 1,058 | 1,023 | 3.4 | % | 94.9 | % | 96.3 | % | 33.5 | % | 43.9 | % | |||||||||||||||
| Western Michigan | 438 | 24 | 950 | 916 | 3.7 | % | 96.9 | % | 97.6 | % | 48.4 | % | 48.4 | % | |||||||||||||||
| Central Ohio | 1,581 | 24 | 1,031 | 1,005 | 2.6 | % | 95.2 | % | 95.8 | % | 41.0 | % | 46.8 | % | |||||||||||||||
| Northeast Ohio | 1,303 | 20 | 1,240 | 1,186 | 4.6 | % | 94.1 | % | 95.6 | % | 55.6 | % | 46.4 | % | |||||||||||||||
| Total Midwest | 5,734 | 22 | 1,074 | 1,036 | 3.7 | % | 94.9 | % | 96.3 | % | 43.2 | % | 44.5 | % | |||||||||||||||
| Mid-Atlantic Properties | |||||||||||||||||||||||||||||
| Metro DC | 250 | 7 | 2,117 | 2,118 | — | % | 95.0 | % | 94.6 | % | 59.2 | % | 48.0 | % | |||||||||||||||
| Charlotte | 295 | 7 | 1,401 | 1,343 | 4.3 | % | 94.2 | % | 94.3 | % | 65.1 | % | 84.1 | % | |||||||||||||||
| Raleigh-Durham | 1,109 | 6 | 1,269 | 1,238 | 2.5 | % | 97.2 | % | 95.7 | % | 42.6 | % | 44.4 | % | |||||||||||||||
| Northern Virginia | 1,272 | 10 | 1,622 | 1,638 | (1.0 | )% | 95.7 | % | 95.9 | % | 42.1 | % | 44.3 | % | |||||||||||||||
| Southeast Virginia | 864 | 9 | 1,244 | 1,228 | 1.3 | % | 95.1 | % | 95.5 | % | 53.2 | % | 47.2 | % | |||||||||||||||
| Total Mid-Atlantic | 3,790 | 8 | 1,448 | 1,436 | 0.8 | % | 95.8 | % | 95.6 | % | 47.7 | % | 48.3 | % | |||||||||||||||
| Southeast Properties | |||||||||||||||||||||||||||||
| Southeast Florida | 1,294 | 16 | 1,653 | 1,554 | 6.4 | % | 95.2 | % | 96.3 | % | 62.4 | % | 45.7 | % | |||||||||||||||
| Atlanta | 354 | 23 | 1,215 | 1,130 | 7.5 | % | 94.7 | % | 96.6 | % | 50.8 | % | 50.8 | % | |||||||||||||||
| Total Southeast | 1,648 | 17 | 1,558 | 1,463 | 6.5 | % | 95.1 | % | 96.4 | % | 60.0 | % | 46.8 | % | |||||||||||||||
| Southwest Properties | |||||||||||||||||||||||||||||
| Dallas | 994 | 12 | 1,453 | 1,409 | 3.1 | % | 94.4 | % | 96.4 | % | 45.9 | % | 45.1 | % | |||||||||||||||
| Total Southwest | 994 | 12 | 1,453 | 1,409 | 3.1 | % | 94.4 | % | 96.4 | % | 45.9 | % | 45.1 | % | |||||||||||||||
| Total/Average Same Community | 12,166 | 16 | $ | 1,287 | $ | 1,249 | 3.0 | % | 95.2 | % | 96.1 | % | 47.1 | % | 46.1 | % | |||||||||||||
| (1) | Is defined as the average number of units occupied during the quarter divided by total number of units. |
| (2) | Represents the number of units turned over for the quarter, divided by the number of units in a market, annualized. |
| (3) | Age shown in years. |
15
| Associated Estates Realty Corporation | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sequential Property Revenue, Operating Expenses and Net Operating Income (NOI) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2015 and December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited, in thousands, except unit totals) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q1 | Q4 | Q1 | Q4 | Q1 | Q4 | Q1 | Q4 | |||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||
| No. of | Average | Average | Incr/ | % | Incr/ | % | Incr/ | % | ||||||||||||||||||||||||||||||||||||||||||||
| Units | Occupancy (1) | Occupancy (1) | Revenue | Revenue | (Decr) | Change | Expenses | Expenses | (Decr) | Change | NOI | NOI | (Decr) | Change | ||||||||||||||||||||||||||||||||||||||
| Same Community | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midwest Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indianapolis | 836 | 95.1 | % | 95.3 | % | $ | 2,359 | $ | 2,375 | $ | (16 | ) | (0.7 | )% | 908 | $ | 857 | 51 | 6.0 | % | 1,451 | $ | 1,518 | (67 | ) | (4.4 | )% | |||||||||||||||||||||||||
| Southeast Michigan | 1,576 | 94.9 | % | 94.3 | % | 4,752 | 4,723 | 29 | 0.6 | % | 1,874 | 1,659 | 215 | 13.0 | % | 2,878 | 3,064 | (186 | ) | (6.1 | )% | |||||||||||||||||||||||||||||||
| Western Michigan | 438 | 96.9 | % | 95.0 | % | 1,209 | 1,191 | 18 | 1.5 | % | 498 | 430 | 68 | 15.8 | % | 711 | 761 | (50 | ) | (6.6 | )% | |||||||||||||||||||||||||||||||
| Central Ohio | 1,581 | 95.2 | % | 93.8 | % | 4,651 | 4,623 | 28 | 0.6 | % | 1,943 | 1,769 | 174 | 9.8 | % | 2,708 | 2,854 | (146 | ) | (5.1 | )% | |||||||||||||||||||||||||||||||
| Northeast Ohio | 1,303 | 94.1 | % | 93.2 | % | 4,561 | 4,528 | 33 | 0.7 | % | 1,827 | 1,492 | 335 | 22.5 | % | 2,734 | 3,036 | (302 | ) | (9.9 | )% | |||||||||||||||||||||||||||||||
| 5,734 | 94.9 | % | 94.1 | % | 17,532 | 17,440 | 92 | 0.5 | % | 7,050 | 6,207 | 843 | 13.6 | % | 10,482 | 11,233 | (751 | ) | (6.7 | )% | ||||||||||||||||||||||||||||||||
| Mid-Atlantic Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Metro DC | 250 | 95.0 | % | 95.9 | % | 1,509 | 1,506 | 3 | 0.2 | % | 512 | 477 | 35 | 7.3 | % | 997 | 1,029 | (32 | ) | (3.1 | )% | |||||||||||||||||||||||||||||||
| Charlotte | 295 | 94.2 | % | 94.7 | % | 1,168 | 1,195 | (27 | ) | (2.3 | )% | 424 | 367 | 57 | 15.5 | % | 744 | 828 | (84 | ) | (10.1 | )% | ||||||||||||||||||||||||||||||
| Raleigh-Durham | 1,109 | 97.2 | % | 95.4 | % | 4,105 | 4,076 | 29 | 0.7 | % | 1,348 | 1,229 | 119 | 9.7 | % | 2,757 | 2,847 | (90 | ) | (3.2 | )% | |||||||||||||||||||||||||||||||
| Northern Virginia | 1,272 | 95.7 | % | 94.9 | % | 5,923 | 5,966 | (43 | ) | (0.7 | )% | 2,022 | 1,819 | 203 | 11.2 | % | 3,901 | 4,147 | (246 | ) | (5.9 | )% | ||||||||||||||||||||||||||||||
| Southeast Virginia | 864 | 95.1 | % | 94.8 | % | 3,065 | 3,059 | 6 | 0.2 | % | 1,084 | 971 | 113 | 11.6 | % | 1,981 | 2,088 | (107 | ) | (5.1 | )% | |||||||||||||||||||||||||||||||
| 3,790 | 95.8 | % | 95.1 | % | 15,770 | 15,802 | (32 | ) | (0.2 | )% | 5,390 | 4,863 | 527 | 10.8 | % | 10,380 | 10,939 | (559 | ) | (5.1 | )% | |||||||||||||||||||||||||||||||
| Southeast Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Southeast Florida | 1,294 | 95.2 | % | 94.4 | % | 6,108 | 5,921 | 187 | 3.2 | % | 2,457 | 2,376 | 81 | 3.4 | % | 3,651 | 3,545 | 106 | 3.0 | % | ||||||||||||||||||||||||||||||||
| Atlanta | 354 | 94.7 | % | 96.1 | % | 1,222 | 1,235 | (13 | ) | (1.1 | )% | 478 | 516 | (38 | ) | (7.4 | )% | 744 | 719 | 25 | 3.5 | % | ||||||||||||||||||||||||||||||
| 1,648 | 95.1 | % | 94.7 | % | 7,330 | 7,156 | 174 | 2.4 | % | 2,935 | 2,892 | 43 | 1.5 | % | 4,395 | 4,264 | 131 | 3.1 | % | |||||||||||||||||||||||||||||||||
| Southwest Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dallas | 994 | 94.4 | % | 92.2 | % | 4,087 | 3,990 | 97 | 2.4 | % | 2,088 | 2,024 | 64 | 3.2 | % | 1,999 | 1,966 | 33 | 1.7 | % | ||||||||||||||||||||||||||||||||
| 994 | 94.4 | % | 92.2 | % | 4,087 | 3,990 | 97 | 2.4 | % | 2,088 | 2,024 | 64 | 3.2 | % | 1,999 | 1,966 | 33 | 1.7 | % | |||||||||||||||||||||||||||||||||
| Total Same Community | 12,166 | 95.2 | % | 94.3 | % | 44,719 | 44,388 | 331 | 0.7 | % | 17,463 | 15,986 | 1,477 | 9.2 | % | 27,256 | 28,402 | (1,146 | ) | (4.0 | )% | |||||||||||||||||||||||||||||||
Acquisitions (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Atlanta | 345 | 40.8 | % | N/A | 239 | — | 239 | N/A | 218 | — | 218 | N/A | 21 | — | 21 | N/A | ||||||||||||||||||||||||||||||||||||
| Charlotte | 267 | 96.4 | % | 96.0 | % | 974 | 960 | 14 | 1.5 | % | 278 | 293 | (15 | ) | (5.1 | )% | 696 | 667 | 29 | 4.3 | % | |||||||||||||||||||||||||||||||
| Development | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Metro DC (3) | — | N/A | N/A | 1 | — | 1 | N/A | 77 | 38 | 39 | N/A | (76 | ) | (38 | ) | (38 | ) | N/A | ||||||||||||||||||||||||||||||||||
Dallas (4) (5) | 348 | 95.7 | % | 58.0 | % | 869 | 546 | 323 | N/A | 645 | 404 | 241 | N/A | 224 | 142 | 82 | N/A | |||||||||||||||||||||||||||||||||||
Properties owned at 3/31 (6) | 13,126 | 91.8 | % | 93.7 | % | 46,802 | 45,894 | 908 | 2.0 | % | 18,681 | 16,721 | 1,960 | 11.7 | % | 28,121 | 29,173 | (1,052 | ) | (3.6 | )% | |||||||||||||||||||||||||||||||
Dispositions/Held for Sale (7) | 1,411 | 515 | 1,551 | 229 | 706 | 286 | 845 | |||||||||||||||||||||||||||||||||||||||||||||
| Total | 14,537 | $ | 47,317 | $ | 47,445 | $ | 18,910 | $ | 17,427 | $ | 28,407 | $ | 30,018 | |||||||||||||||||||||||||||||||||||||||
| (1) | Is defined as the average number of units occupied during the quarter divided by total number of units. |
| (2) | We define acquisition properties as acquired properties which have been owned less than one year. |
| (3) | Pre-leasing and administrative costs for our 140-unit 7001 Arlington at Bethesda development. |
| (4) | Includes revenue of $508 and $203 for Q1 and Q4, respectively and administrative costs of $492 and $255 for Q1 and Q4, respectively for our 249-unit Cantabria development in Dallas. |
| (5) | Average Occupancy numbers exclude our 249-unit Cantabria development, which had not yet reached stabilization as of March 31, 2015. |
| (6) | Excludes 202-unit community held for sale at March 31, 2015. |
| (7) | Effective Q1 2014 for the Company, per ASU No. 2014-08, only disposals representing a major strategic shift in operations will be presented as discontinued operations. |
16
| Associated Estates Realty Corporation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| First Quarter Property Revenue, Operating Expenses and Net Operating Income (NOI) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2015 and 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited; in thousands, except unit totals) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q1 | Q1 | Q1 | Q1 | Q1 | Q1 | Q1 | Q1 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||
| No. of | Average | Average | Incr/ | % | Incr/ | % | Incr/ | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Units | Occupancy (1) | Occupancy (1) | Revenue | Revenue | (Decr) | Change | Expenses | Expenses | (Decr) | Change | NOI | NOI | (Decr) | Change | ||||||||||||||||||||||||||||||||||||||||
| Same Community | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midwest Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indianapolis | 836 | 95.1 | % | 97.9 | % | $ | 2,359 | $ | 2,319 | $ | 40 | 1.7 | % | $ | 908 | $ | 855 | $ | 53 | 6.2 | % | $ | 1,451 | $ | 1,464 | $ | (13 | ) | (0.9 | )% | ||||||||||||||||||||||||
| Southeast Michigan | 1,576 | 94.9 | % | 96.3 | % | 4,752 | 4,659 | 93 | 2.0 | % | 1,874 | 1,825 | 49 | 2.7 | % | 2,878 | 2,834 | 44 | 1.6 | % | ||||||||||||||||||||||||||||||||||
| Western Michigan | 438 | 96.9 | % | 97.6 | % | 1,209 | 1,175 | 34 | 2.9 | % | 498 | 520 | (22 | ) | (4.2 | )% | 711 | 655 | 56 | 8.5 | % | |||||||||||||||||||||||||||||||||
| Central Ohio | 1,581 | 95.2 | % | 95.8 | % | 4,651 | 4,566 | 85 | 1.9 | % | 1,943 | 1,983 | (40 | ) | (2.0 | )% | 2,708 | 2,583 | 125 | 4.8 | % | |||||||||||||||||||||||||||||||||
| Northeast Ohio | 1,303 | 94.1 | % | 95.6 | % | 4,561 | 4,435 | 126 | 2.8 | % | 1,827 | 1,758 | 69 | 3.9 | % | 2,734 | 2,677 | 57 | 2.1 | % | ||||||||||||||||||||||||||||||||||
| 5,734 | 94.9 | % | 96.3 | % | 17,532 | 17,154 | 378 | 2.2 | % | 7,050 | 6,941 | 109 | 1.6 | % | 10,482 | 10,213 | 269 | 2.6 | % | |||||||||||||||||||||||||||||||||||
| Mid-Atlantic Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Metro DC | 250 | 95.0 | % | 94.6 | % | 1,509 | 1,502 | 7 | 0.5 | % | 512 | 508 | 4 | 0.8 | % | 997 | 994 | 3 | 0.3 | % | ||||||||||||||||||||||||||||||||||
| Charlotte | 295 | 94.2 | % | 94.3 | % | 1,168 | 1,120 | 48 | 4.3 | % | 424 | 411 | 13 | 3.2 | % | 744 | 709 | 35 | 4.9 | % | ||||||||||||||||||||||||||||||||||
| Raleigh-Durham | 1,109 | 97.2 | % | 95.7 | % | 4,105 | 3,945 | 160 | 4.1 | % | 1,348 | 1,322 | 26 | 2.0 | % | 2,757 | 2,623 | 134 | 5.1 | % | ||||||||||||||||||||||||||||||||||
| Northern Virginia | 1,272 | 95.7 | % | 95.9 | % | 5,923 | 5,996 | (73 | ) | (1.2 | )% | 2,022 | 2,024 | (2 | ) | (0.1 | )% | 3,901 | 3,972 | (71 | ) | (1.8 | )% | |||||||||||||||||||||||||||||||
| Southeast Virginia | 864 | 95.1 | % | 95.5 | % | 3,065 | 3,042 | 23 | 0.8 | % | 1,084 | 1,056 | 28 | 2.7 | % | 1,981 | 1,986 | (5 | ) | (0.3 | )% | |||||||||||||||||||||||||||||||||
| 3,790 | 95.8 | % | 95.6 | % | 15,770 | 15,605 | 165 | 1.1 | % | 5,390 | 5,321 | 69 | 1.3 | % | 10,380 | 10,284 | 96 | 0.9 | % | |||||||||||||||||||||||||||||||||||
| Southeast Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Southeast Florida | 1,294 | 95.2 | % | 96.3 | % | 6,108 | 5,810 | 298 | 5.1 | % | 2,457 | 2,484 | (27 | ) | (1.1 | )% | 3,651 | 3,326 | 325 | 9.8 | % | |||||||||||||||||||||||||||||||||
| Atlanta | 354 | 94.7 | % | 96.6 | % | 1,222 | 1,160 | 62 | 5.3 | % | 478 | 493 | (15 | ) | (3.0 | )% | 744 | 667 | 77 | 11.5 | % | |||||||||||||||||||||||||||||||||
| 1,648 | 95.1 | % | 96.4 | % | 7,330 | 6,970 | 360 | 5.2 | % | 2,935 | 2,977 | (42 | ) | (1.4 | )% | 4,395 | 3,993 | 402 | 10.1 | % | ||||||||||||||||||||||||||||||||||
| Southwest Properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dallas | 994 | 94.4 | % | 96.4 | % | 4,087 | 4,051 | 36 | 0.9 | % | 2,088 | 2,016 | 72 | 3.6 | % | 1,999 | 2,035 | (36 | ) | (1.8 | )% | |||||||||||||||||||||||||||||||||
| 994 | 94.4 | % | 96.4 | % | 4,087 | 4,051 | 36 | 0.9 | % | 2,088 | 2,016 | 72 | 3.6 | % | 1,999 | 2,035 | (36 | ) | (1.8 | )% | ||||||||||||||||||||||||||||||||||
| Total Same Community | 12,166 | 95.2 | % | 96.1 | % | 44,719 | 43,780 | 939 | 2.1 | % | 17,463 | 17,255 | 208 | 1.2 | % | 27,256 | 26,525 | 731 | 2.8 | % | ||||||||||||||||||||||||||||||||||
Acquisitions (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Atlanta | 345 | 40.8 | % | N/A | 239 | — | 239 | N/A | 218 | — | 218 | N/A | 21 | — | 21 | N/A | ||||||||||||||||||||||||||||||||||||||
| Charlotte | 267 | 96.4 | % | N/A | 974 | — | 974 | N/A | 278 | — | 278 | N/A | 696 | — | 696 | N/A | ||||||||||||||||||||||||||||||||||||||
| Development | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Metro DC (3) | — | N/A | N/A | 1 | — | 1 | N/A | 77 | — | 77 | N/A | (76 | ) | — | (76 | ) | N/A | |||||||||||||||||||||||||||||||||||||
Dallas (4) (5) | 348 | 95.7 | % | 83.5 | % | 869 | 291 | 578 | 198.6 | % | 645 | 104 | 541 | 520.2 | % | 224 | 187 | 37 | 19.8 | % | ||||||||||||||||||||||||||||||||||
Properties owned at 3/31 (6) | 13,126 | 93.4 | % | 96.0 | % | 46,802 | 44,071 | 2,731 | 6.2 | % | 18,681 | 17,359 | 1,322 | 7.6 | % | 28,121 | 26,712 | 1,409 | 5.3 | % | ||||||||||||||||||||||||||||||||||
Dispositions/Held for Sale (7) | 1,411 | 515 | 5,079 | 229 | 2,009 | 286 | 3,070 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | 14,537 | $ | 47,317 | $ | 49,150 | $ | 18,910 | $ | 19,368 | $ | 28,407 | $ | 29,782 | |||||||||||||||||||||||||||||||||||||||||
| (1) | Is defined as the average number of units occupied during the quarter divided by total number of units. |
| (2) | We define acquisition properties as acquired properties which have been owned less than one year. |
| (3) | Pre-leasing and administrative costs for our 140-unit 7001 Arlington at Bethesda development. |
| (4) | Includes revenue of $508 for 2015, and administrative costs of $492 for 2015, for our 249-unit Cantabria development in Dallas. |
| (5) | Average Occupancy numbers exclude our 249-unit Cantabria development which had not yet reached stabilization as of March 31, 2015. |
| (6) | Excludes 202-unit community held for sale at March 31, 2015. |
| (7) | Effective Q1 2014 for the Company, per ASU No. 2014-08, only disposals representing a major strategic shift in operations will be presented as discontinued operations |
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| Associated Estates Realty Corporation |
| Debt Structure |
| As of March 31, 2015 |
| (Dollar amounts in thousands) |
| Balance | Percentage | Weighted | ||||||||
| Outstanding | of | Average | ||||||||
| March 31, 2015 | Total Debt | Interest Rate | ||||||||
| Fixed Rate Debt: | ||||||||||
| Secured | $ | 223,167 | 27.0 | % | 4.8 | % | ||||
| Unsecured - notes | 250,000 | 30.3 | % | 4.4 | % | |||||
| Total Fixed Rate Debt | 473,167 | 57.3 | % | 4.6 | % | |||||
| Variable Rate Debt Swapped to Fixed: | ||||||||||
Unsecured - term loan (1) (2) | 125,000 | 15.1 | % | 2.7 | % | |||||
Unsecured - term loan (3) | 25,000 | 3.0 | % | 1.6 | % | |||||
| Total Variable Rate Debt Swapped to Fixed | 150,000 | 18.1 | % | 2.4 | % | |||||
| Variable Rate Debt Unhedged: | ||||||||||
| Secured | 59,420 | 7.2 | % | 1.5 | % | |||||
| Unsecured - revolver | 144,000 | 17.4 | % | 1.5 | % | |||||
| Total Variable Rate Debt Unhedged | 203,420 | 24.6 | % | 1.5 | % | |||||
| TOTAL DEBT | $ | 826,587 | 100.0 | % | 3.5 | % | ||||
Interest coverage ratio (4) | 3.00:1 | |||||||||
Fixed charge coverage ratio (4) | 3.00:1 | |||||||||
| Weighted average maturity | 4.7 years | |||||||||
| Scheduled Principal Maturities: | Secured | Unsecured | Total | |||||||||
| 2015 | $ | 19,461 | $ | — | $ | 19,461 | ||||||
| 2016 | 100,268 | — | 100,268 | |||||||||
| 2017 | — | 144,000 | 144,000 | |||||||||
| 2018 | 47,591 | — | 47,591 | |||||||||
| 2019 | 11,949 | — | 11,949 | |||||||||
| Thereafter | 103,318 | 400,000 | 503,318 | |||||||||
| TOTAL | $ | 282,587 | $ | 544,000 | $ | 826,587 | ||||||
| (1) | The Company entered into a forward starting swap in December 2011 fixing the rate beginning in June 2013 until June 2016 at a rate of 1.26% plus the credit spread which was 1.40% as of March 31, 2015, or an all-in rate of 2.66%. Additionally, the Company entered into a forward starting swap in April 2013 fixing the rate beginning June 2016 at a rate of 1.55% plus the credit spread which was 1.40% as of March 31, 2015, or an all-in rate of 2.95% until January 2018. |
| (2) | The Company entered into a forward starting swap in January 2015 fixing the rate beginning January 2018 at a rate of 1.75% plus the credit spread which was 1.40% as of March 31, 2015, or an all-in rate of 3.15% until the loan matures in January 2020. |
| (3) | The Company entered into a forward starting swap in January 2015 fixing the rate beginning January 2016 at a rate of 1.42% plus the credit spread which was 1.40% as of March 31, 2015, or an all-in rate of 2.82% until the loan matures in January 2020. |
| (4) | Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs and excluding prepayment costs/credits if applicable. Individual line items in this calculation include results from discontinued operations where applicable. See page 19 for a reconciliation of net income available to common shares to EBITDA and the Company's definition of EBITDA. |
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| Associated Estates Realty Corporation |
| Definitions of Non-GAAP Financial Measures |
The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business, as further described below. Our 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")
We define 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, and excludes impairment write-downs of depreciable real estate and gains and losses from the disposition of properties and land. FFO does not represent cash generated from operating activities in accordance with GAAP, 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 our operating performance or as an alternative to cash flow as a measure of liquidity. We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance because FFO can help one compare the operating performance of a company's real estate between periods or as compared to different REITs.
Operating FFO
We define Operating FFO as FFO, as defined above, excluding $1,113 of shareholder activism costs and the $444 gain on change in control for the three months ended March 31, 2015. The shareholder activism costs are included in general and administrative expense in the Company's Consolidated Statement of Operations and Comprehensive Income. We are providing this calculation as an alternative FFO calculation as we consider 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")
We define FAD as FFO, 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. We consider FAD to be an appropriate supplemental measure of the performance of an equity REIT because, like FFO, it captures real estate performance by excluding gains or losses from the disposition of properties and land, depreciation on real estate assets and amortization of intangible assets. Unlike FFO, FAD also reflects the recurring capital expenditures that are necessary to maintain the associated real estate.
Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes and interest which permits investors to view income from operations unclouded by non-cash depreciation or the cost of debt. Below is a reconciliation of net income applicable to common shares to EBITDA.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In thousands) | 2015 | 2014 | ||||||
| Net income applicable to common shares | $ | 744 | $ | 42,116 | ||||
| Allocation to participating securities | — | 157 | ||||||
| Interest expense | 6,114 | 6,953 | ||||||
| Depreciation and amortization | 15,935 | 16,295 | ||||||
| Gain on change in control | (444 | ) | — | |||||
| Gain on disposition of properties | — | (40,966 | ) | |||||
| Income taxes | 103 | 103 | ||||||
| Total EBITDA | $ | 22,452 | $ | 24,658 | ||||
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| 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. We consider Property NOI to be an appropriate supplemental measure of our performance because it reflects the operating performance of our real estate portfolio at the property level and is used to assess regional property level performance. Property NOI should not be considered an alternative to net income as a measure of performance or cash generated from operating activities in accordance with GAAP and, therefore, it should not be considered indicative of cash available to fund cash needs. The following is a reconciliation of Property NOI to total consolidated net income attributable to AERC.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In thousands) | 2015 | 2014 | ||||||
| Property NOI | $ | 28,407 | $ | 29,782 | ||||
| Office NOI | 611 | 478 | ||||||
| Property management and construction services NOI | 112 | 30 | ||||||
| Depreciation and amortization | (15,935 | ) | (16,295 | ) | ||||
| General and administrative expense (including shareholder activism costs) | (6,520 | ) | (5,319 | ) | ||||
| Development costs | (199 | ) | (330 | ) | ||||
| Costs associated with acquisitions | (62 | ) | (86 | ) | ||||
| Interest expense | (6,114 | ) | (6,953 | ) | ||||
| Gain on change in control | 444 | — | ||||||
| Gain on disposition of properties | — | 40,966 | ||||||
| Net income | $ | 744 | $ | 42,273 | ||||
Recurring Fixed Asset Additions
We consider 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
We consider 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 us 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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