CLEVELAND, Feb. 4 /PRNewswire-FirstCall/ --- Associated Estates Realty
Corporation (NYSE: AEC) (Nasdaq: AEC) today reported funds from operations
(FFO) for the fourth quarter of $0.48 per common share (basic and diluted),
compared with $0.39 per common share (basic and diluted), for the fourth
quarter ended December 31, 2007, a 23.1 percent increase. FFO as adjusted for
the fourth quarter was $0.35 per common share (basic and diluted) after
adjusting for net preferred share repurchase discounts of $2.1 million or
$0.13 per common share.
Net income available to common shareholders was $298,000 or $0.02 per
common share (basic and diluted), which included a net discount on the
repurchase of preferred shares of $0.13 per common share for the fourth
quarter ended December 31, 2008, compared with net income available to common
shareholders of $1.1 million or $0.07 per common share (basic and diluted),
which included gains on the disposition of properties of $0.24 per common
share, for the fourth quarter ended December 31, 2007.
"We're very proud of the Company's 2008 performance," said Jeffrey I.
Friedman, president and chief executive officer. "While 2009 presents a more
challenging environment, our management team and properties are well
positioned to compete," he continued.
A reconciliation of net income applicable to common shares to FFO, and to
FFO as adjusted, 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 8-K.
Revenue for the quarter was $34.0 million compared with $34.2 million for
the fourth quarter of 2007, a decrease of 0.6 percent.
Same Community Portfolio Results
Net operating income (NOI) for the fourth quarter of 2008 from the
Company's same community portfolio increased 0.9 percent as a result of
revenue increasing 1.7 percent and property operating expenses increasing 2.8
percent, compared with the fourth quarter of 2007. Physical occupancy was
93.0 percent at the end of the fourth quarter of 2008 compared with 94.1
percent at the end of the fourth quarter of 2007. Average net rent collected
per unit for the same community properties increased 2.0 percent to $852 per
month. Net rent collected per unit for the Company's same community Midwest
portfolio grew 4.9 percent to $785, while net rent collected per unit for the
Company's same community properties in the Mid-Atlantic/Southeast markets
decreased 2.4 percent to $991.
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 "Investors" section of the Company's
web site at www.aecrealty.com, or by clicking on the following link:
http://ir.aecrealty.com/results.cfm .
Year-to-Date Performance
Funds from operations for the twelve months ended December 31, 2008, were
$1.35 per share (basic and diluted) and include defeasance and/or prepayment
costs of $(2.0) million or approximately $(0.12) per share associated with the
repayment of $11.0 million in debt, as well as net preferred share discounts
of $2.1 million or approximately $0.13 per share. FFO as adjusted for the
twelve months ended December 31, 2008, after adjusting for defeasance costs
and the net discount on the repurchase of preferred shares, was $1.33 per
common share (basic and diluted).
For the twelve months ended December 31, 2008, net income applicable to
common shares was $32.1 million or $1.98 per share (basic and diluted)
compared to net income applicable to common shares of $5.1 million or $0.30
per share (basic and diluted) for the period ended December 31, 2007. The
results for the twelve month period ended December 31, 2008 and December 31,
2007 include gains from property sales of $45.2 million and $20.9 million or
$2.78 per share and $1.24 per share, respectively. Additionally, 2008
includes a net discount on the repurchase of preferred shares of $0.13 per
share as compared to a net premium on the repurchase of preferred shares of
$(0.01) per share in 2007.
A reconciliation of net income applicable to common shares to FFO, and to
FFO as adjusted, 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 8-K.
For the year, NOI for the same community portfolio was up 5.4 percent.
This increase was driven by a 3.2 percent increase in revenue and a 0.3
percent increase in property operating expenses.
Debt Maturities
The Company has a total of $72.2 million maturing in 2009. The Company
has loan commitments to fund $52.5 million of the maturities at a current
average rate of 5.22 percent. These seven-year loans will consist of two
variable rate loans with an expected initial pay rate of 4.85 percent and one
fixed rate loan priced at 5.98 percent. The remaining $19.7 million in
maturities relates primarily to a property the Company is currently marketing
for sale and is expected to be carried on the Company's line of credit.
The Company's $150.0 million line of credit had a balance of $21.5 million
on December 31, 2008.
2009 Outlook
The Company said its current FFO expectations for 2009 range between $1.17
to $1.23 per share, excluding defeasance, other prepayment costs and net
preferred share repurchase discounts/premiums. Assumptions relating to the
Company's earnings guidance can be found on page 25 of the fourth quarter 2008
supplemental fact booklet on the Company's website at www.aecrealty.com.
Conference Call
A conference call to discuss the results will be held on Thursday,
February 5 at 2:00 p.m. Eastern. To participate in the call:
Via Telephone: The dial-in number is 800-860-2442, and the passcode is
"Estates."
Via the Internet (listen only): Access the Company's website at
www.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 "Register for AEC's Conference Call" link on the left.
The webcast will be archived through February 19, 2009.
Company Profile
Associated Estates Realty Corporation (AEC) is a real estate investment
trust ("REIT") and is a member of the Russell 2000. The Company is
headquartered in Richmond Heights, Ohio. AEC's portfolio consists of 52
properties containing 13,192 units located in nine states. For more
information about the Company, please visit its website at www.aecrealty.com .
FFO and FFO as adjusted are non-Generally Accepted Accounting Principle
(GAAP) measures. The Company generally considers FFO and FFO as adjusted to
be a useful measure for reviewing the comparative operating and financial
performance of the Company because FFO and FFO as adjusted 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 income applicable
to common shares to FFO and FFO as adjusted is included in the table at the
end of this press release and in the Company's supplemental financial
information to be included with this earnings release and furnished to the
Securities and Exchange Commission on Form 8-K.
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
2009 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; the Company's ability to acquire properties at
prices consistent with the Company's investment criteria; risks associated
with property acquisitions such as environmental liabilities, among others;
changes in or termination of contracts relating to third party management and
advisory business; and 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.
ASSOCIATED ESTATES REALTY CORPORATION
Financial Highlights
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Total revenue $34,013 $34,182 $134,883 $130,913
Net (loss) income (795) 2,307 34,627 10,165
Net income applicable to common
shares (1) 298 1,106 32,118 5,069
Add: Depreciation - real estate
assets 8,262 8,233 32,560 31,363
Depreciation - real estate
assets - joint ventures 23 24 91 529
Amortization of joint
venture deferred costs - - - 17
Amortization of intangible
assets 866 753 3,929 1,545
Less: Gain on disposition of joint
venture property (1,603) - (1,603) -
Gain on disposition of
properties - (3,821) (45,202) (20,864)
Funds from Operations (FFO) (2) 7,846 6,295 21,893 17,659
Funds from Operations (FFO) as
adjusted (3) 5,700 6,295 21,706 22,055
Add: Depreciation - other assets 362 336 1,378 1,255
Depreciation - other assets
- joint ventures - 1 3 82
Amortization of deferred
financing fees 311 318 1,296 1,128
Amortization of deferred
financing fees - joint
ventures - - 1 24
Less: Recurring fixed asset additions (1,635) (2,149) (8,739) (8,819)
Recurring fixed asset additions
- joint ventures (5) (173) (9) (199)
Funds available for distribution
(FAD) (4) $4,733 $4,628 $15,636 $15,526
Per share
Net income applicable to common
shares - basic and diluted (1) $0.02 $0.07 $1.98 $0.30
Funds from Operations - basic and
diluted (2) $0.48 $0.39 $1.35 $1.05
Funds from Operations as adjusted -
basic and diluted (3) $0.35 $0.39 $1.33 $1.31
Dividends per share $0.17 $0.17 $0.68 $0.68
Weighted average shares outstanding
- basic and diluted (3) 16,383 16,153 16,262 16,871
(1) After preferred share dividends and net repurchase costs including
discounts received in 2008 and premiums paid in 2007 associated with the
preferred share repurchase of $(1,093), $1,201, $2,509 and $5,096, equivalent
to $(0.07), $0.07, $0.15 and $0.30 per common share, respectively.
(2) The Company defines 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 as adjusted as FFO, as defined above, plus the
add back of defeasance and other prepayment costs of $2.0 million for the
twelve months ended December 31, 2008, and $4.2 million for twelve months
ended December 31, 2007. In accordance with GAAP, these prepayment costs are
included as interest expense in the Company's Consolidated Statement of
Operations. Additionally, deducted is $2.1 million for the twelve months
ended December 31, 2008, while added back is $172,000 for the twelve months
ended December 31, 2007 of preferred share repurchase costs including
discounts received in 2008 and premiums paid in 2007. In accordance with
GAAP, the Company reclassified from additional paid in capital the original
issuance costs associated with the repurchase of 278,000 and 111,500
depository shares of the Series B Preferred Shares for the twelve months ended
December 31, 2008 and December 31, 2007, 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 as adjusted, as defined above, plus
depreciation other and amortization of deferred financing fees less recurring
fixed asset additions. Fixed asset additions exclude development, investment,
revenue enhancing and non-recurring capital additions. 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 and FFO as adjusted, it captures real estate
performance by excluding gains or losses from the disposition of properties
and land and depreciation on real estate assets and amortization of intangible
assets. Unlike FFO and FFO as adjusted, FAD also reflects 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 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 Investors section of www.aecrealty.com .
For more information regarding the content of this news release, please
contact: Kimberly Kanary, +1-216-797-8718
