April 26 2007
Associated Estates Realty Corporation Reports First Quarter Results
Robust growth in same community NOI and FFO
CLEVELAND, April 26, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Associated
Estates Realty Corporation (NYSE: AEC) today reported a net loss applicable to common
shares of $812,000 or $0.05 per common share (basic and diluted), for the first quarter
ended March 31, 2007, compared with a net loss applicable to common shares of $8.9 million
or $0.51 per common share (basic and diluted), for the first quarter ended March 31, 2006.
Funds from operations (FFO) for the quarter were $0.14 per common share (basic and
diluted), compared with a negative $0.02 per common share (basic and diluted) for the
first quarter ended March 31, 2006. The results for the first quarter of 2007 include $2.7
million in defeasance/prepayment costs associated with the prepayment of $30.9 million in
debt. Excluding defeasance/prepayment costs, FFO for the first quarter of 2007 would have
been $0.29 per common share (basic and diluted), compared to $0.19 per common share over
the same period in 2006, an increase of 52.6 percent
The increase in FFO for the quarter ended March 31, 2007 was positively impacted by
improved property operating results and insurance premium refunds attributable to a
favorable loss experience under the Company's self-insured retention property plan, which
amounted to $629,000 or approximately $0.04 per share.
Commenting on the Company's results, John Shannon, senior vice president of operations,
said, "Our favorable performance in the quarter is reflective of the fact that we
have the right people in place to take advantage of the improving market fundamentals in
the Midwest and the continued strength in our Atlanta, Metro DC and Florida
sub-markets."
A reconciliation of net (loss) income applicable to common shares to FFO is included in
the table at the end of this press release and in the Company's supplemental financial
information to be furnished with this earnings release to the Securities and Exchange
Commission on Form 8K.
Total revenue for the quarter was $37.2 million compared with $35.7 million for the
first quarter of 2006, an increase of 4.2 percent.
Same Community (Market-Rate) Portfolio Results
Revenues for the quarter from the Company's same community portfolio were up 4.9
percent, and total property operating expenses for the same community portfolio decreased
0.9 percent, resulting in a 10.3 percent increase in net operating income (NOI), compared
with the first quarter of 2006. Physical occupancy was 95.5 percent at the end of the
first quarter of 2007 compared with 94.9 percent at the end of the first quarter of 2006.
For the first quarter, the average net collected rent per unit for the same community
properties increased 5.0 percent to $776 per month, compared with the first quarter of
2006. Net collected rent per unit for the Company's same community Midwest portfolio grew
5.3 percent, while net collected rent per unit for the Company's same community properties
in the Mid- Atlantic/Southeast markets grew 4.4 percent.
Additional quarterly financial information, including performance by region for the
Company's portfolio, is included in the Company's supplemental fact booklet, which is
available on the "Investor Relations" section of the Company's web site at http://www.aecrealty.com/, or by
clicking on the following link: http://ir.aecrealty.com/results.cfm.
Dispositions
During the quarter, the Company sold a 120-unit property, located in Mayfield Heights,
Ohio, which completed its exit from the congregate care business. The Company said it
still expects to sell between $50 million and $75 million of assets during 2007.
Outlook
The Company has reaffirmed its current FFO guidance for the year 2007 of $1.08 to $1.12
per share, excluding defeasance and other prepayment costs. Assumptions relating to the
Company's earnings guidance can be found on page 19 of the supplemental fact book.
Conference Call
A conference call to discuss the results will be held today, Thursday, April 26, at
2:00 p.m. Eastern. To participate in the call:
Via Telephone: The dial in number is 800-909-5202, and the passcode is
"Estates."
Via the Internet (listen only): Access the Investor Relations page on the Company's
website at http://www.aecrealty.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 "Live Webcast"
link at the top of the page and follow the brief instructions to register for the event.
The webcast will be archived through May 10, 2007.
Company Profile
Associated Estates Realty Corporation is a real estate investment trust
("REIT"), headquartered in Richmond Heights, Ohio, a suburb of Cleveland. The
Company directly or indirectly owns, manages or is a joint venture partner in 99
multifamily properties containing a total of 20,650 units located in nine states. For more
information about the Company, please visit its website at: http://www.aecrealty.com/.
FFO is a non-Generally Accepted Accounting Principle (GAAP) financial measure. 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. A reconciliation of net (loss) income applicable to common shares to FFO
is included in the table at the end of this press release and in the Company's
supplemental financial information to be furnished with this earnings release to the
Securities and Exchange Commission on Form 8K.
Safe Harbor Statement
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 2007 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 ability of the Company to consummate the sale of properties
pursuant to its current plan, the overall level of economic activity, the availability of
consumer credit and mortgage financing, unemployment rates and other factors; the ability
of the Company to refinance debt on favorable terms at maturity; the ability of the
Company to defease or prepay debt pursuant to its current plan; risks of a lessening of
demand for the multifamily units owned or managed by the Company; competition from other
available multifamily units and changes in market rental rates; increases in property and
liability insurance costs; unanticipated increases in real estate taxes and other
operating expenses (e.g., cleaning, utilities, repair and maintenance costs, insurance and
administrative costs, security, landscaping, staffing and other general costs); weather
conditions that adversely affect operating expenses; expenditures that cannot be
anticipated such as utility rate and usage increases, unanticipated repairs, and real
estate tax valuation reassessments or millage rate increases; inability of the Company to
control operating expenses or achieve increases in revenue; the results of litigation
filed or to be filed against the Company; changes in tax legislation; risks of personal
injury claims and property damage related to mold claims because of diminished insurance
coverage; catastrophic property damage losses that are not covered by the Company's
insurance; risks associated with property acquisitions such as environmental liabilities,
among others; changes in government regulations affecting properties, the rents of which
are subsidized and certain aspects of which are regulated by the United States Department
of Housing and Urban Development ("HUD") and other properties owned by the
Company; inability to renew current contracts with HUD for rent subsidized properties at
existing rents; changes in or termination of contracts relating to third party management
and advisory business; risks related to the Company's joint ventures; risks related to the
perception of residents and prospective residents as to the attractiveness, convenience
and safety of the Company's properties or the neighborhoods in which they are located; and
the Company's ability to acquire properties at prices consistent with our investment
criteria.
ASSOCIATED ESTATES REALTY
CORPORATION
Financial Highlights
(in thousands, except per share data)
For the Three Months Ended March 31,
2007 2006
Total revenue $37,165 $35,692
Net income (loss) 450 (7,623)
Net (loss) income applicable to (812) (8,885)
common shares(1)
Add: Depreciation - real estate assets 7,449 7,886
Depreciation - real estate assets
- joint ventures 242 240
Amortization of joint venture
deferred costs 9 9
Amortization of intangible assets 9 440
Less: Gain on disposition of properties (4,561) -
Funds from Operations (FFO) (2) 2,336 (310)
Funds from Operations (FFO)
adjusted for defeasance costs
and/or other prepayment costs(3) 4,999 3,249
Add: Depreciation - other assets 304 363
Depreciation - other assets
- joint ventures 47 44
Amortization of deferred financing fees 235 281
Amortization of deferred financing fees
- joint ventures 12 12
Less: Fixed asset additions (979) (1,272)
Fixed asset additions - joint ventures (19) (22)
Funds available for distribution
(FAD)(4) $4,599 $2,655
Per share:
Net (loss) income applicable to common
shares - basic and diluted (1) $(0.05) $(0.51)
Funds from operations
- basic and diluted (2) $0.14 $(0.02)
- adjusted for defeasance
costs and/or other prepayment costs(3) $0.29 $0.19
Dividends per share $0.17 $0.17
Weighted average shares
outstanding - basic and diluted 17,109 17,283
(1) After dividends of $1,262 and $1,262, equivalent to $0.07 and
$0.07 per common share, respectively.
(2) The Company defines funds from operations (FFO) as the inclusion of
all operating results, both recurring and non-recurring, except those
results defined as "extraordinary items" under generally accepted
accounting principles (GAAP), adjusted for depreciation on real
estate assets and amortization of intangible assets and gains and
losses from the disposition of properties and land. Adjustments for
joint ventures are calculated to reflect FFO on the same basis. 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. It should be noted, however, that certain other
real estate companies may define FFO in a different manner.
(3) The Company defines FFO excluding defeasance costs and other
prepayment costs as FFO, as defined above, plus the add back of
defeasance costs and other prepayment costs of $2,663,000 for the
quarter ended March 31, 2007 and defeasance costs and other
prepayment costs of $3,559,000 for the quarter ended March 31, 2006.
In accordance with GAAP, these prepayment costs are included as
interest expense in the Company's Consolidated Statement of
Operations. These costs are the costs associated with the defeasance
(prepayment) of two and four loans, respectively. 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.
(4) The Company defines FAD as FFO 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. Adjustments
for joint ventures are calculated to reflect FAD on the same basis.
The Company considers 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 and depreciation on real estate
assets and amortization of intangible assets. Unlike FFO, FAD also
reflects that recurring capital expenditures are necessary to
maintain the associated real estate.
The full text and supplemental schedules of this press release are available on AEC's
website at http://www.aecrealty.com/.
To receive a copy of the results by mail or fax, please contact Investor Relations at
1-800-440-2372. For more information, access the Investor Relations "News"
section of http://www.aecrealty.com/.
For more information regarding the content
of this news release, please contact:
Michael Lawson
(216) 797-8798
Kimberly Kanary
(216) 797-8752
SOURCE Associated Estates Realty Corporation
Michael Lawson, +1-216-797-8798, or Kimberly Kanary, +1-216-797-8752, both for
Associated Estates Realty Corporation
http://www.aecrealty.com/