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Education Realty Trust Announces Third Quarter 2011 Results

^{Published on 2011-10-27 13:13:24 - 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 September 30, 2011.

Third Quarter Highlights

• Core FFO per share/unit was $0.03, which was flat to the prior year on improved community operating results offset by a 26% increase in outstanding shares. Proceeds derived from the increased share count were partially used to reduce overall leverage from 42% to 34% of gross assets;
• Same-community net operating income for the quarter increased 2.1% on a 5.6% increase in revenue and a real estate tax driven 7.5% increase in operating expenses. Year to date same-community net operating income increased 2.7%;
• Same-community opening occupancy for the 2011/2012 lease term improved 112 basis points over the prior year to 94.9%;
• Same-community net rental rates for the 2011/2012 lease term increased 4.6%;
• Closed on a new three-year, $175 million, senior unsecured credit facility with an accordion feature expandable up to $315 million; and
• Acquired the 554-bed University Village Towers adjacent to the University of California at Riverside for $38.1 million.

Randy Churchey, Education Realty Trustas president and chief executive officer, stated, "EDR was able to deliver solid third quarter results while increasing its financial flexibility and positioning the Company for sustained future growth. Collegiate enrollment continues to increase and is expected to increase through 2019. We continue to evaluate numerous opportunities to purchase or develop desirable assets at reasonable pricing. Our consistent earnings performance over the last six quarters along with our robust 2011/2012 leasing results highlight EDRas growing leadership in the collegiate housing industry and supports our commitment to creating long-term value for our shareholders."

Net Loss Attributable to Common Stockholders

Net loss attributable to common stockholders for the third quarter of 2011, was $6.5 million, or $0.09 per diluted share, compared to $39.8 million, or $0.69 per diluted share, for the same period in 2010.

Funds From Operations

Core FFO for the third quarter of 2011 was $2.4 million as compared to $1.6 million in the prior year. Funds from operations (aFFOa) for the third quarter of 2011 was $0.5 million compared to a loss of $32.6 million for the same period last year. FFO per share/unit for the third quarter was $0.01 compared to ($0.55) in the third quarter of 2010. The improvement in FFO was the result of impairment losses in the third quarter of 2010, related to portfolio repositioning transactions in late 2010, and improved operating results from our same-community portfolio and third-party development services in 2011.

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 $7.9 million for the third quarter of 2011, an increase of 2.1%, or $0.2 million, from the prior year. This growth in operating income was the result of a 5.0%, or $1.1 million, increase in net apartment rent, an approximate 60 basis point increase from other revenue and a 7.5%, or $1.1 million, increase in operating expenses.

The growth in revenue for the quarter was driven by a 1.2% increase in occupancies, a 3.8% increase in net rental rates and a 0.6% improvement from other revenue. Operating expenses grew 7.5% for the quarter mostly due to the timing of direct expenditures between quarters and increases in real estate taxes. The Company anticipates full year operating expense growth of approximately 3.5% for 2011.

Year to date net apartment rent was up 3.6%, other revenue was up 0.1%, operating expenses were up 4.7% and net operating income was up 2.7% over the prior year.

Fall 2011 Opening Leasing

The same-community portfolio opened the 2011/2012 lease term 94.9% occupied, a 112 basis point improvement over the prior lease term with a 4.6% increase in net rental rates.

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

Investment Activity Third Quarter 2011

In September 2011, the Company completed the purchase of University Village Towers, a 554-bed community adjacent to the University of California at Riverside, for $38.1 million. The Company previously had a 10% equity interest in the community and was the manager. Built in 2005, the community is adjacent to campus and opened the 2011/2012 lease-term 87% occupied, which is 10 percentage points ahead of the prior year opening occupancy with net rental rates equal to last year. Based on the current leasing results and other information, the purchase price represents a 6.3% economic cap rate on expected next twelve months net operating income. The universityas enrollment has grown more than 5% per annum for each of the last three years and is expected to continue this approximate pace in the near future due to its affordable tuition.

Capital Structure

In September 2011, the Company closed on a new three-year, $175 million, senior unsecured credit facility. The new facility has an accordion feature and is expandable up to $315 million. This new unsecured credit facility both enhances the Companyas financial flexibility and provides financing for future growth opportunities at advantageous rates.

At September 30, 2011, the Company had cash and cash equivalents totaling $47.3 million and had nothing outstanding on its new revolving credit facility. The Companyas debt to gross assets was 34.1%, its net debt to EBITDA was 6.1x and its interest coverage ratio was 2.4x.

From June 30, 2011 through October 26th, the Company sold 5,377,687 shares of common stock under its ATM program. The shares were sold at a weighted average share price of $9.08, raising net proceeds of $48.1 million.

Earnings Guidance and Outlook

Based upon managementas current estimates of market conditions and future operating results, the Company reaffirms its previous guidance for full year 2011 Core FFO per share/unit of $0.40 to $0.43. 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 $47.3 million of existing cash at September 30, 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, October 27, 2011. The call will be hosted by Randy Churchey, president and chief executive officer, and Randy Brown, executive vice president and chief financial officer.

The conference call will be accessible by telephone and the Internet. To access the call, participants from within the U.S. may dial (888) 846-5003, and participants from outside the U.S. may dial (480) 629-9856. Participants may also access the call via live webcast by visiting the companyas investor relations Web site at [ www.educationrealty.com ].

The replay of the call will be available from approximately 7:00 p.m. Eastern Time on October 27, 2011 through midnight Eastern Time on November 10, 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 4478778. The archive of the webcast will be available on the companyas Web site for a limited time.

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

Statements about the Companyas 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 Companyas 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 aRisk Factors,a aForward-Looking Statementsa and Managementas Discussion and Analysis of Financial Condition and Results of Operationsa (or similar captions) in our most recent Annual Report on Form 10-K and 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 Companyas 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 Companyas 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 Americaas largest owners, developers and managers of collegiate housing. EDR is a self-administered and self-managed real estate investment trust that owns or manages 57 communities in 23 states with nearly 33,400 beds within more than 10,600 units. For more information please visit the company's web site at [ www.educationrealty.com ].