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Education Realty Trust Announces First Quarter 2011 Results

^{Published on 2011-04-21 13:10:59 - Market Wire}
 

MEMPHIS, Tenn.--([ BUSINESS WIRE ])--Education Realty Trust Inc. (NYSE:EDR), a leader in the ownership, development and management of collegiate housing, today announced operating results for the quarter ended March 31, 2011.

"We are proud of the job our team is doing managing our existing owned and third-party developments"

First Quarter Highlights

• Core funds from operations (aCore FFOa) was $9.4 million, an increase of 17.5% over the prior year.
• Core FFO per share/unit was $0.13 as compared to $0.14 for the prior year, resulting from currently unutilized investment capacity from an equity raise that increased outstanding shares 24%;
• Same-community net operating income increased 4.3% on a 3.5% increase in revenue and a 2.4% increase in operating expenses;
• Same-community portfolio is 66.9% applied and 57.6% preleased for the 2011/2012 lease term, compared to 64.7% and 56.4% respectively at this time last year;
• Completed the acquisition of two communities with a total of 234-beds at the University of Virginia in Charlottesville, Virginia for $23.0 million;
• Reduced outstanding debt by $40.3 million as the result of asset sales and targeted debt pay down.

Randy Churchey, Education Realty Trusta™s president and chief executive officer stated, aDemand for collegiate housing remains strong with limited new supply anticipated for the next few years. Furthermore, according to recent U.S. Education Statistics, collegiate enrollment is forecasted to increase by an average of 1.1% per year through 2017. Given the solid underlying industry fundamentals, we are pleased to have started our first quarter producing same-community net operating income growth of 4.3%. This improvement is due to a combination of the strategy we put in place over a year ago to strategically reposition our portfolio and to improve our property management leadership, processes and tools. This, combined with our enhanced financial flexibility and national footprint as a leader in the collegiate housing industry, positions the Company to continue adding shareholder value.a

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders for the first quarter of 2011 was $0.7 million, or $0.01 per diluted share, compared to $0.2 million, or just under $0.01 per diluted share, for the same period in 2010.

Funds From Operations

Core FFO for the first quarter of 2011 was $9.4 million as compared to $8.0 million in the prior year, while Core FFO per share/unit for the quarter was $0.13 compared to $0.14 in the prior year. The per share/unit variance is the result of currently unutilized investment capacity from an equity raise that increased outstanding shares 24%.

Funds from operations (aFFOa) for the first quarter of 2011 was $6.9 million compared to $7.8 million for the same period last year. FFO per share/unit for the first quarter was $0.10 compared to $0.13 in the first quarter of 2010. The decline in FFO was the result of portfolio repositioning transactions in late 2010 and early 2011 and an increase in straight-line ground lease expense offset by improved operating results from our same-community portfolio and development services.

A reconciliation of FFO and Core FFO to net income is included with the financial tables accompanying this release.

Same-Community Results

Net operating income was $14.4 million for the first quarter of 2011, an increase of 4.3%, or $0.6 million, from the prior year. This growth in operating income was the result of a 3.5%, or $0.9 million, increase in revenue and a 2.4%, or $0.3 million, increase in operating expenses. The revenue growth was driven by a 1.6% increase in occupancies, a 1.7% increase in net rental rates and a 0.2% increase related to other revenue. Operating expense growth was modest at 2.4%, which in general reflects normal inflationary type increases.

Preleasing for Fall 2011

Same-community preleasing for the 2011/2012 lease term is 120 basis points ahead of the prior year in occupancy with 57.6% of beds preleased for the fall. Net rental rates for the 2011/2012 lease term are currently projected to be approximately 4.0% ahead of the prior lease term.

The Company publishes a property-by-property leasing schedule in its quarterly earnings supplement located at [ http://www.snl.com/irweblinkx/yearlypresentations.aspx?iid=4095382 ]

Investment Activity First Quarter 2011

The Company completed the purchase of two additional communities at the University of Virginia (UVA) in Charlottesville, Virginia for a total purchase price of approximately $23.0 million. Both communities are within a short walk of campus and are already 100% preleased for the 2011/2012 lease term. The communities include a total of 234-beds in 72 unfurnished units. The combined average rental rate for these communities is $662 per bed.

The Company currently has five active, owned and participating developments that are all progressing on or ahead of schedule. Site planning and other preconstruction work is being finalized on four of our projects that are scheduled to begin construction this summer, while we expect to complete the roof and celebrate the atopping offa of the 20-story development at Johns Hopkins University within the next month. As of March 31, 2011, the Company had funded $13.4 million of the $18.0 million in financing it has committed to the Johns Hopkins participating project.

aWe are proud of the job our team is doing managing our existing owned and third-party developments,a stated Tom Trubiana, Education Realty Trusta™s executive vice president and chief investment officer. aAt the same time and as a result of our strong industry reputation and relationships with local and regional developers, we are working a strong pipeline of both development and acquisition activity that should provide opportunities for us in the future.a

Portfolio Repositioning and Capital Recycling

As previously communicated the Company completed the sale of five communities in January 2011. These transactions culminated a significant repositioning of the Companya™s portfolio that began in the fourth quarter of 2010. The five communities had over 1,900 beds and were at mostly smaller universities with limited barriers to entry. With a total sales price of approximately $46.1 million, the dispositions reduced outstanding debt by $16.1 million and provided net cash proceeds, after costs, of approximately $29.7 million.

Capital Structure

On March 31, 2011, the Company had cash and cash equivalents totaling $75.6 million and had nothing outstanding on its revolving credit facility, which had a borrowing base availability of $42.7 million. The Companya™s debt to gross assets was 35.4%, its net debt to EBITDA was 5.2x, and its interest coverage ratio was 2.3x.

As previously reported the Company completed a follow-on equity offering, in January 2011, selling 13.2 million shares, including the underwritersa™ overallotment option. A portion of the net proceeds of approximately $91.7 million, after deducting the underwriting discount and other offering costs, was used to repay approximately $19.3 million of debt with the remaining proceeds expected to be used to fund the Companya™s current developments, fund future acquisitions and developments and for general corporate purposes.

Earnings Guidance and Outlook

Based upon managementa™s current estimates of market conditions and future operating results, the Company is raising its guidance for full year 2011 Core FFO per share/unit by 5.0% to a range of $0.38 to $0.42 from its previous guidance range of $0.36 to $0.40. This adjustment reflects the Core FFO impact of the two community acquisitions and the reduction of debt that occurred during the first quarter of 2011. Consistent with prior guidance, this outlook does not include the impact of any of the following that have not already occurred and been announced by the Company: investment of the $75.6 million of existing cash at March 31, 2011, dispositions, acquisitions, new third-party development or management contracts, additional ONE Plan developments, capital transactions or corporate restructuring costs.

Webcast and Conference Call

The Company will host a conference call for investors and other interested parties beginning at 5:00 p.m. Eastern Time on Thursday, April 21, 2011. The call will be hosted by Randy Churchey, president and chief executive officer, Randy Brown, executive vice president and chief financial officer, Tom Trubiana, executive vice president and chief investment officer and Christine Richards, senior vice president of property operations.

The conference call will be accessible by telephone and the Internet. To access the call, participants from within the U.S. may dial (877) 941-4774, and participants from outside the U.S. may dial (480) 629-9760. Participants may also access the call via live webcast by visiting the companya™s investor relations Web site at [ www.educationrealty.com ].

The replay of the call will be available at approximately 7:00 p.m. Eastern Time on April 21, 2011 through midnight Eastern Time on May 5, 2011. To access the replay, the domestic dial-in number is (800) 406-7325, the international dial-in number is (303) 590-3030, and the passcode is 4431641. The archive of the webcast will be available on the companya™s Web site for a limited time.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Statements about the Companya™s business that are not historical facts are aforward-looking statements.a Forward-looking statements are based on current expectations. You should not rely on our forward-looking statements because the matters that they describe are subject to known and unknown risks and uncertainties that could cause the Companya™s business, financial condition, liquidity, results of operations, Core FFO, FFO and prospects to differ materially from those expressed or implied by such statements. Such risks are set forth under the captions aItem 1A. Risk Factorsa and aForward-Looking Statementsa in our most recent Annual Report on Form 10-K and under the caption aItem 2. Managementa™s Discussion and Analysis of Financial Condition and Results of Operationsa (or similar captions) in our quarterly reports on Form 10-Q, and as described in our other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and, except as otherwise may be required by law, the Company undertakes no obligation to update publicly or revise any guidance or other forward-looking statement, whether as a result of new information, future developments, or otherwise.

Non-GAAP Financial Measures

As defined by the National Association of Real Estate Investment Trusts, FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. The Company presents FFO available to all stockholders and unitholders because it considers it to be an important supplemental measure of the Companya™s operating performance, assists in the comparison of our operating performance between periods to that of different REITs and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their operating results. As such, the Company also excludes the impact of noncontrolling interests in the calculation. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income.

The Company also uses core funds from operations, or Core FFO, as an operating measure. Core FFO is defined as FFO adjusted to include the economic impact of revenue on participating projects for which recognition is deferred for GAAP purposes. The adjustment for this revenue is calculated on the same percentage of completion method used to recognize revenue on third-party development projects. Core FFO also includes adjustments to exclude the impact of straight-line adjustment for ground leases, gains/losses on extinguishment of debt, transaction costs related to acquisitions, impairment losses and reorganization or severance costs. The Company believes that these adjustments are appropriate in determining Core FFO as they are not indicative of the operating performance of the Companya™s assets. In addition the Company believes that Core FFO is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as most REITs provide some form of adjusted or modified FFO.

About Education Realty Trust

Education Realty Trust Inc. (NYSE:EDR) is one of Americaa™s largest owners, developers and managers of collegiate housing. EDR is a self-administered and self-managed real estate investment trust that owns or manages 56 communities in 23 states with nearly 34,000 beds within more than 10,500 units. For more information please visit the company's web site at [ www.educationrealty.com ].