MEMPHIS, Tenn., July 22, 2010 (GLOBE NEWSWIRE) -- Education Realty Trust, Inc. (NYSE:EDR), one of America's largest owners, developers and operators of collegiate student housing, today announced operating results for the quarter ended June 30, 2010.
Second Quarter Highlights
- Funds from operations ("FFO") and funds from operations adjusted ("FFOA") for the second quarter were $0.12 per share/unit;
- Same-community net operating income decreased 2.3% for the second quarter on a 1.1% decline in revenue and flat operating expenses as compared to the prior year;
- Same-community preleasing for the 2010-2011 lease term is 311 basis points ahead of this time last year with 82.9% of beds preleased for the fall, while net rental rates are approximately 1.9% ahead;
- Selected by the University of Texas System Board of Regents in July to be the ground tenant to develop, own and manage a new high-rise student apartment community located a couple of blocks from the core of the University of Texas at Austin campus. This project will be owned by the Company under The ONE Plan;
- Commenced construction on a $60.1 million third-party participating-development project at the Science + Technology Park at Johns Hopkins. The 572-bed, 20-story high-rise development is expected to open in the summer of 2012;
- Began construction on the 454-bed, $28.2 million third-party development at SUNY ESF. The project is expected to open in the summer of 2011; and
- General and administrative costs were reduced 4.0%, excluding $0.4 million of reorganization and third-party development pursuit costs recognized in the second quarter of 2010.
Randy Churchey, Education Realty Trust's President and Chief Executive Officer stated, "We continue to make progress on improving our preleasing for the 2010/2011 school year. We attribute this preleasing improvement to the solid execution of our key initiatives, including a more analytical approach toward balancing rate and occupancy, improved systems to monitor our daily progress at each community and improved property websites generating additional traffic."
"I am also proud that our team was able to take advantage of our deep industry relationships and strong balance sheet to secure two new development projects including an on-campus 'ONE Plan' project at the University of Texas at Austin. These projects, along with our capital recycling initiatives and the commencement of new third-party developments, position the Company to grow earnings and cash flow in the coming years."
Net Income Attributable to Common Stockholders
Net income attributable to common stockholders for the second quarter of 2010 was a loss of $0.6 million, or $0.01 per diluted share, compared to net income attributable to common stockholders of $0.2 million, or $0.01 per diluted share, for the same period in 2009.
Funds From Operations
FFO for the second quarter of 2010 was $6.9 million compared to $7.3 million for the same period last year. FFO per share/unit for the second quarter was $0.12 as compared to $0.24 in the second quarter of 2009. The decline in FFO per share/unit was due to a 28.2 million increase in the average shares/units outstanding year over year related to the Company's follow-on common stock offering in July 2009.
FFOA for the second quarter of 2010 was $7.0 million, an increase of 9.4%, or $0.6 million, over the prior year. FFOA per share/unit for the quarter was $0.12 compared to $0.22 in the prior year, which is also indicative of the increased share/unit count year over year.
A reconciliation of FFO to net income is included with the financial tables accompanying this release.
Same-Community Results
Same-community net operating income was $14.3 million for the second quarter of 2010 on a revenue decline of 1.1%, and relatively flat operating expenses. Net operating income improved from the 4.1% decline experienced in the first quarter of 2010 due to stronger occupancy retention in the second quarter of 2010 compared to the second quarter of 2009. As a result, operating margins were down 60 basis points to 53.2%.
Legacy-Communities
Net operating income for the Legacy-communities was $11.7 million for the second quarter of 2010 on a revenue decline of 2.2%, or $0.5 million, and flat operating expenses. Revenue was mainly impacted by a 2.1% decline in rental rates and a 0.5% decrease in other rental revenue. Occupancy was up approximately 0.4% from the prior year. The average operating margin for the Legacy-communities was 54.5%, approximately 100 basis points below the second quarter of 2009.
Place-Communities
Net operating income for the Place-communities increased 5.5%, or $0.1 million, for the second quarter of 2010 on revenue growth of 3.7%, or $0.2 million, and an operating expense increase of just under $0.1 million. The revenue growth is a result of an approximate 3.4% improvement in occupancy, a decline in rental rates of approximately 0.2% and a 0.5% increase in other rental revenue. As a result, operating margins improved approximately 80 basis points to 47.8%.
Community Occupancy
Second quarter 2010 average physical and economic occupancies for the Legacy-communities were 88.2% and 86.6%, respectively, compared to 87.7% and 86.3% for the same period in 2009. The Place-communities had physical and economic occupancies of 81.9% and 78.8%, respectively, compared to 79.0% and 76.7% in the second quarter of 2009. Physical occupancy is the average of occupied rooms to available rooms at the end of each month, whereas economic occupancy represents net apartment rent on a U.S. GAAP basis as a percentage of potential rent and reflects the impact of straight-line rent.
Development and Investment Activity
The Company began construction on the 454-bed, $28.2 million third-party development at SUNY College of Environmental Science and Forestry, which is expected to open in August 2011.
The Company was awarded a ONE Plan on-campus development project at the University of Texas at Austin by The University of Texas System Board of Regents. This is the Company's second ONE Plan development. While the final design and total cost is still to be finalized, the project is projected for a summer 2013 opening. Commencement of construction is subject to execution of final definitive agreements, city approval processes and confirmation of development costs.
In July, the Company commenced construction on a new graduate student housing project in the Science + Technology Park at Johns Hopkins. Scheduled to open in the summer of 2012, the Company will develop and manage the 572-bed, 20-story building which will draw residents from the more than 4,000 students and fellows attending the Johns Hopkins Medical School, the School of Nursing, and the Bloomberg School of Public Health located on the east campus. The Company will invest in the project in the form of an $18.0 million second mortgage and will also provide a repayment guarantee on the construction first mortgage. Due to this financial involvement in a third-party development, the project is considered a participating-development project, and the Company's statements of operations will recognize the development services revenue and interest income earned on the Second Mortgage when the Second Mortgage is repaid. The Company's calculation of Funds From Operations – Adjusted will, however, include the economic benefits of these items on a quarterly basis.
"We anticipated that the improvement in the credit markets over the past twelve months along with additional new third-party development awards would result in increased construction starts," stated Tom Trubiana, Education Realty Trust's Executive Vice President and Chief Investment Officer. "Based on the rising velocity of our activities over the last several months, it is becoming apparent that this could be the start of an evolving trend."
Capital Recycling
The Company previously announced that it had signed contracts to sell two communities. These transactions are still contingent upon the completion of the due diligence and financing process. If these transactions progress as expected, they could close by the end of the third quarter of this year.
The Company entered into a lease agreement with Macon State University under which the University will master lease the Macon Place community beginning August 1, 2010. The lease has a term of one year and also includes an option for the University to purchase the property. The monthly lease payments of $30,000 are more than the monthly net operating income achieved by or forecasted for the property in 2010. Because the University will be responsible for leasing the community this fall and the Company will not have individual leases with students during the master lease, Macon Place has been removed from the Company's 2010-2011 preleasing statistics. The community will also be removed from same-community operating information starting in the third quarter of 2010.
Capital Structure
On June 30, 2010, the Company had cash and cash equivalents totaling $23.3 million and no outstanding borrowings on its revolving credit facility, which had a borrowing base availability of $41.9 million. In addition, the Company has two communities unencumbered by debt and eligible for inclusion in the revolving credit facility. If these communities were included, the Company estimates that the borrowing base availability would be approximately $52.0 million. The Company's debt to gross asset value was 42.1%, its net debt was 7.6x EBITDA, and its interest coverage ratio was 2.1x.
Approximately 94% of the Company's indebtedness has either fixed or capped interest rates. The Company addressed its only 2010 maturity by paying down $5.0 million of the construction loan on its community at Southern Illinois University and obtaining an extension of the remaining debt through June 2012. The Company has one other project-based construction loan with a balance of $8.8 million that will reach initial maturity in September of 2011. Upon initial maturity, the Company expects to also exercise the two year extension option on this loan.
Earnings Guidance and Outlook
Based upon management's current estimates, the Company is raising its guidance for full year 2010 FFOA per share/unit to a range of $0.38 to $0.42 from its previous guidance of $0.34 to $0.40. Consistent with prior guidance, this outlook does not include the impact of any 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, July 22, 2010. 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 (877) 941-4774, and participants from outside the U.S. may dial (480) 629-9760. The passcode for this call is 4325599. Participants may also access the call via live webcast by visiting the Company's investor relations website at www.educationrealty.com.
The replay of the call will be available at approximately 7:00 p.m. Eastern Time on July 22, 2010 through midnight Eastern Time on August 5, 2010. 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 4325599. The archive of the webcast will be available on the Company's website for a limited time.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements about the Company's business that are not historical facts are "forward-looking statements." Forward-looking statements are based on current expectations. You should not rely on our forward-looking statements because the matters they describe are subject to known and unknown risks and uncertainties that could cause the Company's future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such statements. Such risks are set forth under the captions "Item 1A. Risk Factors" and "Forward-Looking Statements" in our annual report on Form 10-K and under the caption "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" (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 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 funds from operations on the same basis. The Company presents FFO available to all stockholders and unitholders because it considers it an important supplemental measure of the Company's operating performance, assists in the comparison of our operating performance between periods to that of different companies 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 results. As such, the Company also excludes the impact of noncontrolling interest 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.
About Education Realty Trust
Education Realty Trust, Inc. (NYSE:EDR) is one of America's largest owners, developers and operators of collegiate student housing. EDR is a self-administered and self-managed real estate investment trust that owns or manages 64 communities in 22 states with 37,830 beds. For more information please visit the Company's website at www.educationrealty.com.
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
| June 30, 2010 | December 31, 2009 | ||
| (unaudited) | |||
| Assets | |||
| Student housing properties, net | $ 743,462 | $ 749,884 | |
| Cash and cash equivalents | 23,348 | 31,169 | |
| Restricted cash | 5,167 | 4,579 | |
| Other assets | 19,078 | 18,981 | |
| Total assets | $ 791,055 | $ 804,613 | |
| Liabilities and equity | |||
| Liabilities: | |||
| Mortgage and construction loans, net of unamortized premium/discount | $ 399,243 | $ 406,365 | |
| Accounts payable and accrued expenses | 14,708 | 11,658 | |
| Deferred revenue | 7,071 | 10,346 | |
| Total liabilities | 421,022 | 428,369 | |
| Commitments and contingencies | -- | -- | |
| Redeemable noncontrolling interests | 10,725 | 11,079 | |
| Equity: | |||
| Education Realty Trust, Inc. stockholders' equity: | |||
| Common stock, $0.01 par value, 200,000,000 shares authorized, | |||
| 56,823,288 and 56,705,605 shares issued and outstanding at | |||
| June 30, 2010 and December 31, 2009, respectively | 568 | 567 | |
| Preferred shares, $0.01 par value, 50,000,000 shares authorized, | |||
| no shares issued and outstanding | -- | -- | |
| Additional paid-in capital | 407,796 | 410,455 | |
| Accumulated deficit | (49,056) | (48,636) | |
| Total Education Realty Trust, Inc. stockholders' equity | 359,308 | 362,386 | |
| Noncontrolling interest | -- | 2,779 | |
| Total equity | 359,308 | 365,165 | |
| Total liabilities and equity | $ 791,055 | $ 804,613 | |
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Unaudited
| Three months ended June 30, | |||
| 2010 | 2009 | ||
| Revenues: | |||
| Student housing leasing revenue | $ 28,394 | $ 27,967 | |
| Third-party development services | 648 | 1,259 | |
| Third-party management services | 707 | 723 | |
| Operating expense reimbursements | 1,957 | 2,036 | |
| Total revenues | 31,706 | 31,985 | |
| Operating expenses: | |||
| Student housing leasing operations | 13,208 | 12,929 | |
| General and administrative | 4,036 | 3,841 | |
| Depreciation and amortization | 7,475 | 7,110 | |
| Reimbursable operating expenses | 1,957 | 2,036 | |
| Total operating expenses | 26,676 | 25,916 | |
| Operating income | 5,030 | 6,069 | |
| Nonoperating expenses: | |||
| Interest expense | 5,518 | 6,150 | |
| Amortization of deferred financing costs | 334 | 218 | |
| Interest income | (111) | (105) | |
| Gain on extinguishment of debt | -- | (830) | |
| Total nonoperating expenses | 5,741 | 5,433 | |
| Income (loss) before equity in earnings of unconsolidated entities, income taxes, redeemable noncontrolling interests and discontinued operations | (711) | 636 | |
| Equity in earnings of unconsolidated entities | 7 | 46 | |
| Less: Income tax (benefit) expense | (102) | 502 | |
| Less: Loss attributable to redeemable noncontrolling interests | (16) | (63) | |
| Loss from discontinued operations | -- | (2) | |
| Net income (loss) | (586) | 241 | |
| Less: Net income attributable to the noncontrolling interests | 4 | 10 | |
| Net income (loss) attributable to Education Realty Trust, Inc. | $ (590) | $ 231 | |
| Earnings per share information: | |||
| Net income (loss) attributable to Education Realty Trust, Inc. common stockholders per share – basic & diluted: | $ (0.01) | $ 0.01 | |
| Weighted-average common shares outstanding – basic | 56,933 | 28,520 | |
| Weighted-average common shares outstanding – diluted | 56,933 | 29,641 | |
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Unaudited
|
Six months ended June 30, |
||
| 2010 | 2009 | |
| Revenues: | ||
| Student housing leasing revenue | $ 58,045 | $ 57,280 |
| Third-party development services | 1,341 | 2,716 |
| Third-party management services | 1.573 | 1,632 |
| Operating expense reimbursements | 3,865 | 4,226 |
| Total revenues | 64,824 | 65,854 |
| Operating expenses: | ||
| Student housing leasing operations | 26,646 | 26,099 |
| General and administrative | 8,336 | 7,835 |
| Depreciation and amortization | 14,891 | 14,274 |
| Reimbursable operating expenses | 3,865 | 4,226 |
| Total operating expenses | 53,738 | 52,434 |
| Operating income | 11,086 | 13,420 |
| Nonoperating expenses: | ||
| Interest expense | 11,129 | 12,502 |
| Amortization of deferred financing costs | 668 | 519 |
| Interest income | (228) | (154) |
| Gain on extinguishment of debt | -- | (830) |
| Total nonoperating expenses | 11,569 | 12,037 |
| Income (loss) before equity in earnings of unconsolidated entities, income taxes, redeemable noncontrolling interests and discontinued operations | (483) | 1,383 |
| Equity in earnings of unconsolidated entities | 86 | 146 |
| Less: Income tax (benefit) expense | (176) | 690 |
| Less: Income attributable to redeemable noncontrolling interests | 189 | 138 |
| Loss from discontinued operations | -- | (18) |
| Net income (loss) | (410) | 683 |
| Less: Net income attributable to the noncontrolling interests | 10 | 19 |
| Net income (loss) attributable to Education Realty Trust, Inc. | $ (420) | $ 664 |
| Earnings per share information: | ||
| Net income (loss) attributable to Education Realty Trust, Inc. common stockholders per share – basic & diluted: | $ (0.01) | $ 0.02 |
| Weighted-average common shares outstanding – basic | 56,847 | 28,518 |
| Weighted-average common shares outstanding – diluted | 56,847 | 29,639 |
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CALCULATION OF FFO AND FFOA
(Amounts in thousands, except per share data)
Unaudited
|
Three months ended June 30, |
Six months ended June 30, |
|||
| 2010 | 2009 | 2010 | 2009 | |
| Net income (loss) attributable to Education Realty Trust, Inc. | $ (590) | $ 231 | $ (420) | $ 664 |
| Real estate related depreciation and amortization | 7,373 | 6,954 | 14,683 | 13,959 |
| Equity portion of real estate depreciation and amortization on equity investees | 124 | 122 | 248 | 244 |
| Depreciation and amortization of discontinued operations | -- | -- | -- | 25 |
| Noncontrolling interests | (12) | (53) | 199 | 157 |
| Funds from operations ("FFO") | $ 6,895 | $ 7,254 | $ 14,710 | $ 15,049 |
| Elimination of refinancing and reorganization charges: | ||||
| Elimination of gain on extinguishment of debt | -- | (830) | -- | (830) |
| Reorganization/severance costs, net of tax | 134 | -- | 307 | -- |
| Impact of refinancing and reorganization charges | $ 134 | $ (830) | $ 307 | $ (830) |
| Funds from operations – adjusted ("FFOA") | $ 7,029 | $ 6,424 | $ 15,017 | $ 14,219 |
| FFO per weighted average share/unit (1) | $ 0.12 | $ 0.24 | $ 0.25 | $ 0.50 |
| FFOA per weighted average share/unit (1) | $ 0.12 | $ 0.22 | $ 0.26 | $ 0.48 |
| Weighted average shares/units (1) | 58,186 | 29,894 | 58,141 | 29,888 |
|
Notes: (1) FFO and FFOA per weighted average share/unit were computed using the weighted average of all shares and partnership units outstanding, regardless of their dilutive impact. |
||||
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
2010 GUIDANCE – RECONCILIATION OF FFO AND FFOA
(Amounts in thousands, except per share data)
Unaudited
The following is a reconciliation of the Company's 2010 net loss to FFO and FFOA guidance:
|
Year ending December 31, 2010 |
||
| Low End | High End | |
| Net loss attributable to Education Realty Trust, Inc. | $ (9,230) | $ (6,861) |
| Real estate related depreciation and amortization | 29,771 | 29,771 |
| Equity portion of real estate depreciation and amortization on equity investees | 513 | 513 |
| Noncontrolling interest | 370 | 330 |
| Funds from operations ("FFO") | $ 21,424 | $ 23,753 |
| Elimination of reorganization charges: | ||
| Reorganization/severance costs, net of tax | 307 | 307 |
| Impact of reorganization charges | 307 | 307 |
| FFO on Participating Developments | ||
| Deferred fees and interest on Johns Hopkins project, net | 390 | 390 |
| FFO on Participating Developments | 390 | 390 |
| Funds from operations – adjusted ("FFOA") | $ 22,121 | $ 24,450 |
| FFO per weighted average share/unit (1) | $ 0.37 | $ 0.41 |
| FFOA per weighted average share/unit (1) | $ 0.38 | $ 0.42 |
| Weighted average shares/units (1) | 58,214 | 58,214 |
|
Notes: (1) FFO and FFOA per weighted average share/unit were computed using the weighted average of all shares and partnership units outstanding, regardless of their dilutive impact. |
||