MEMPHIS, Tenn., Aug. 7, 2006 (PRIMEZONE) -- Education Realty Trust, Inc. (NYSE:EDR), one of America's largest owners and operators of collegiate student housing, today reported financial and operational results for the second quarter ended June 30, 2006. Among its highlights, EDR reported:
-- Total revenue increased 33% to $29.1 million for the second quarter
2006 compared to $21.9 million for the second quarter of 2005.
Operating income increased to $4.7 million from a $0.4 million
operating loss for the comparable quarter last year. Net loss for
the second quarter 2006 improved to $2.5 million from a $4.1
million loss for the same period last year;
-- Funds from operations (FFO) for the second quarter 2006 increased
28% to $6.3 million from $4.9 million for the same quarter in 2005.
FFO per weighted average potentially dilutive share increased 9% to
$0.23 per share from $0.21 per share for the same quarter last
year;
-- For the six months ended June 30, 2006, total revenue increased 55%
to $59.1 million from $38.1 million for the same period last year.
Operating income increased to $10.6 million from a $3.3 million
loss a year ago and net loss improved to $3.3 million from a $10.4
million loss for the same period last year. FFO increased 279% to
$14.7 million from $3.9 million for the same period in 2005;
-- Average same community economic occupancy was 92.2% for the second
quarter of 2006, up from 90.8% for the second quarter of 2005;
-- Pre-leasing for the 2006/2007 academic year is ahead of the
previous year, with 94% of beds at EDR-owned and operated
communities pre-leased as of July 31, 2006 compared to 93%
pre-leased at the same time last year;
-- Average rental rates are projected to be 4.2% higher on average for
new Fall 2006 leases over rates for the lease term just ended;
-- The purchase of Players Club a 624-bed community serving Georgia
Southern University in Statesboro, Georgia on June 15, 2006;
-- The start of construction on two multi-phase development consulting
projects at Indiana University of Pennsylvania and at California
University of Pennsylvania;
-- The start of construction on a new 600-bed off-campus joint-venture
development near the University of North Carolina, Greensboro;
-- Being selected by the University of Alabama at Tuscaloosa to
develop the $31.7 million Freshman Village;
-- Declaration of a regular quarterly cash dividend of $.2975 per
share payable August 9, 2006.
Second Quarter 2006 Operating Results
Quarterly revenues were $29.1 million, a 33% increase over the $21.9 million of revenue posted for the quarter ended June 30, 2005. The increase was driven by the addition of $3.4 million in lease revenue generated from the portfolio of 13 regional collegiate communities purchased from Place Properties LP in January 2006 and the impact of owning 1,200 additional beds compared to the same period last year. Revenues from third-party development services and third-party management services also contributed to the increase in quarterly revenue. Development services revenue in the second quarter 2006 increased more than four fold to approximately $0.9 million. Management services revenue in the second quarter rose 97% from the same period last year to approximately $0.7 million.
Operating income was $4.7 million for the second quarter 2006, a $5.1 million increase compared to an operating loss of $0.4 million for the same period in 2005. Operating income growth was strong despite a $0.8 million increase in general and administrative expenses, which include costs associated with first-year implementation of the Sarbanes-Oxley Act requirements. The improved operating income was offset by a $3.2 million increase in interest expense, excluding amortization of debt premiums/discounts, mostly related to the Place portfolio. As a result, net loss improved by $1.6 million from a net loss of $4.1 million in the second quarter of 2005 to a loss of $2.5 million for the second quarter 2006.
Funds from operations (FFO) for the second quarter 2006 increased 28% to $6.3 million compared with $4.9 million for the second quarter of 2005. Quarterly FFO per weighted average potentially dilutive share increased 9% to $0.23 versus $0.21 per share for the same period last year. A reconciliation of FFO to net loss, the most directly comparable GAAP measure, is included in a schedule accompanying this press release.
"We have posted another solid quarter. Revenues rose sharply and operating expenses rose modestly over the comparable quarter. We achieved strong operating income growth despite higher than anticipated growth in general and administrative expenses. We also produced near double digit FFO growth for the quarter despite increasing pressure from rising short-term interest rates," said EDR Chairman, President and Chief Executive Officer Paul O. Bower. "Pre-leasing for the new academic year is strong. We expect rental rates across our portfolio to be up an average of 4.2% for the year ahead. These indicators make us optimistic about the upcoming academic year while we will continue to confront anticipated rising short-term interest rates and corporate expense pressure for the balance of 2006."
"Our development team has been extremely active. During the quarter, we started construction on two new, on-campus developments in Pennsylvania and broke ground on a new off-campus joint venture in North Carolina. In July we were pleased to be awarded a new on-campus development contract at the University of Alabama," said Bower.
"We also continue to look for accretive acquisitions of quality off-campus collegiate communities. During the second quarter, we completed the purchase of an off-campus community serving Georgia Southern University," Bower said. "We believe all parts of our business model are driving continued growth and financial success for our company."
Occupancy and Leasing
Average economic occupancy for same communities owned and operated by EDR for more than one year was 92.2% for the quarter ended June 30, 2006 versus 90.8% for the same period last year. Average physical occupancy for same communities was approximately 89% for the quarters ended June 30, 2006 and June 30, 2005.
As of July 31, 2006, 94% of all owned and operated beds are pre-leased for the 2006-2007 academic year compared to 93% of beds pre-leased at the same time last year. Approximately 93% of all beds managed by EDR are pre-leased as of July 31, 2006 versus 90% at the same time last year.
Rental rates for the EDR owned and operated communities are expected to average 4.2% higher for the upcoming Fall lease year over rents in place at the end of the recently completed lease term.
Acquisition and Development Activity
On June 15, 2006, EDR completed its acquisition of Players Club, a 624-bed, off-campus community near Georgia Southern University in Statesboro, Georgia for $12.9 million. The community, one mile from Georgia's fourth largest university, is 79% pre-leased for the Fall 2006 term. EDR continues to evaluate high-quality, purpose-built collegiate communities for possible acquisition in 2006.
In May, Allen & O'Hara Development Company LLC, the development company subsidiary of EDR, broke ground on a joint-venture development of a new 204-unit, 600-bed off-campus collegiate community two blocks from the campus of the University of North Carolina at Greensboro. EDR's taxable REIT subsidiary will provide development and construction management services on this project.
In May, Allen & O'Hara Development Company also began construction on the development consulting project at Indiana University of Pennsylvania, part of a multi-phase, multi-year $250 million initiative, providing fees of more than $1.6 million.
Allen & O'Hara Development Company commenced construction in June on a new 354-bed development consulting project at California University of Pennsylvania. This project is the company's third development assignment on the campus. The company is currently finishing work on a new 447-bed community set to open this month.
During the second quarter, EDR completed two development consulting projects, including the 190-unit, 753-bed Blazer Hall at the University of Alabama -- Birmingham and a 359-bed residence and Greek organization building at the University of Louisville which opened ahead of schedule.
Development consulting services continue at Slippery Rock University, where two new buildings with 700 beds are set to open later this month. Two additional buildings with 690 beds are slated to open in October of 2006 and early 2007. Design of Phase II, with 1,000 beds, is under way and the scheduled construction start is slated for mid-2007.
Construction nears completion on a development consulting project at the University of Colorado at Denver, where the 685-bed Campus Village Apartments are set to open this week adjacent to the Auraria Higher Education Center, a shared campus with Metropolitan State College and Community College of Denver.
In addition, EDR expects to receive about $1.2 million in development and construction-management fees under a contract announced this past month to develop two new on-campus residence halls estimated at $31.7 million at the University of Alabama in Tuscaloosa, Ala. The development, known as Freshman Village, is slated to open in the fall of 2007 with 631 beds. Construction is set to start in September.
Property Management Update
EDR's wholly-owned management company, Allen & O'Hara Education Services Inc., is engaged to manage operations at the recently completed Blazer Hall at UAB and Community Park at the University of Louisville, which are both 100% pre-leased for fall. In addition we will begin management at the soon-to-be-completed Campus Village in Denver.
Supplemental Information
EDR has scheduled a conference call for interested parties beginning at 11 a.m. (Eastern Time) on Tuesday, August 8, 2006, with Chairman, CEO and President Paul Bower, Executive Vice President and CFO Randy Brown and Executive Vice President and Chief Investment Officer Craig Cardwell, who will discuss the results.
The conference call will be accessible by telephone and through the Internet. To access the call, participants from within the U.S. may dial 866.510.0704 and participants from outside the U.S. may dial 617.597.5362. The pass code for this call is 23636498.
Participants who prefer may access the call via the Internet at www.educationrealty.com or www.earnings.com, or institutional investors may log on to www.streetevents.com prior to the call.
A taped rebroadcast of the earnings call will be available shortly after its completion on August 8 through August 15, 2006. To access the rebroadcast, the domestic number is 888.286.8010, the international number is 617.801.6888 and the pass code is 35699505. A replay of the call will also be available at www.educationrealty.com or www.earnings.com for 30 days following the call. The call will also be available for MP3 player download through www.reitcafe.com.
About Education Realty Trust
Education Realty Trust, Inc. (NYSE:EDR) is a real estate investment trust that owns, manages and develops high-quality collegiate student housing. Led by a team with more than 170 years of shared industry experience, EDR is one of America's largest owners and operators of collegiate student housing. Its portfolio includes 36,551 beds at 59 properties in 21 states. For more information please visit the company's Web site at www.educationrealty.com.
"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 can be identified by such words as "expect," "should," "project," "forecast," "continue," "anticipate," "may," "believe," "will" or comparable terms and expressions. Such 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 EDR undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
June 30, December 31,
2006 2005
---------- ----------
(Unaudited)
Assets
Student housing properties, net $ 819,121 $ 620,305
Corporate office furniture, net 876 991
Cash and cash equivalents 5,247 61,662
Restricted cash 9,525 6,738
Student contracts receivable, net 378 470
Receivable from affiliates 98 --
Management fee receivable from
third party 399 552
Goodwill and other intangibles, net 3,793 3,546
Other assets 8,331 9,785
---------- ----------
Total assets $ 847,768 $ 704,049
========== ==========
Liabilities and stockholders' equity
Liabilities:
Mortgage loans, net of premium/discount $ 425,959 $ 328,335
Long term debt 50,000 --
Line of credit and other short term debt 15,400 --
Accounts payable and accrued expenses 10,308 9,370
Accounts payable affiliates -- 225
Deferred revenue 6,655 7,660
---------- ----------
Total liabilities 508,322 345,590
---------- ----------
Minority interests 20,368 27,926
---------- ----------
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $.01 par value,
200,000,000 shares authorized,
26,384,939, and 26,263,889 shares
issued and outstanding June 30, 2006
and December 31, 2005, respectively 264 263
Preferred shares, $0.01 par value,
50,000,000 shares authorized, no
shares issues and outstanding -- --
Additional paid-in capital 337,506 351,664
Loan to shareholder -- (5,996)
Warrants 375 375
Accumulated deficit (19,067) (15,773)
---------- ----------
319,078 330,533
---------- ----------
Total liabilities and stockholders' equity $ 847,768 $ 704,049
========== ==========
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Unaudited
Three months ended June 30,
2006 2005
---------- ----------
Revenues:
Student housing leasing revenue $ 21,367 $ 19,096
Student housing food service revenue 807 853
Other leasing revenue 3,434 --
Third-party development services 872 173
Third-party management services 699 355
Operating expense reimbursements 1,950 1,378
---------- ----------
Total revenues 29,129 21,855
---------- ----------
Operating Expenses:
Student housing leasing operations 9,448 8,308
Student housing food service operations 724 796
General and administrative 3,185 2,401
Depreciation and amortization 9,087 9,392
Reimbursable operating expenses 1,950 1,378
---------- ----------
Total operating expenses 24,394 22,275
---------- ----------
Operating income (loss) 4,735 (420)
Nonoperating Income and Expenses:
Interest expense 7,261 4,228
Amortization of deferred financing costs 279 214
Interest income (129) (205)
---------- ----------
Total nonoperating expenses 7,411 4,237
---------- ----------
Loss before equity in earnings of
unconsolidated entities, income taxes,
and minority interest (2,676) (4,657)
Equity in earnings of unconsolidated entities 142 157
---------- ----------
Loss before income taxes and minority interest (2,534) (4,500)
Income tax expense (benefit) 186 (104)
---------- ----------
Net loss before minority interest (2,720) (4,396)
Minority interest (206) (336)
---------- ----------
Net loss $ (2,514) $ (4,060)
========== ==========
Earnings per share information:
Loss per share - basic and diluted $ (0.10) $ (0.19)
========== ==========
Weighted-average common shares outstanding -
Basic and diluted 26,349,426 21,862,719
========== ==========
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES AND
EDUCATION REALTY TRUST PREDECESSOR CONDENSED
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Unaudited
EDR EDR
EDR Predecessor Consolidated
Consolidated Combined & Combined
------------------------ ----------- -----------
Six months Six months Six months
ended ended Jan. 1 to ended
June 30, June 30, Jan. 30, June 30,
2006 2005 2005 2005
----------- ----------- ----------- -----------
Revenues:
Student housing
leasing revenue $ 43,901 $ 31,184 $ 1,503 $ 32,687
Student housing
food service
revenue 1,775 1,441 269 1,710
Other leasing
revenue 6,868 -- -- --
Third-party
development
services 1,427 182 -- 182
Third-party
management
services 1,398 644 103 747
Operating
expense
reimbursements 3,745 2,064 671 2,735
----------- ----------- ----------- -----------
Total revenues 59,114 35,515 2,546 38,061
----------- ----------- ----------- -----------
Operating
expenses:
Student housing
leasing
operations 18,737 13,212 524 13,736
Student housing
food service
operations 1,583 1,316 255 1,571
General and
administrative 6,165 7,577 367 7,944
Depreciation
and
amortization 18,240 15,151 260 15,411
Reimbursable
operating
expenses 3,745 2,064 671 2,735
----------- ----------- ----------- -----------
Total operating
expenses 48,470 39,320 2,077 41,397
----------- ----------- ----------- -----------
Operating income
(loss) 10,644 (3,805) 469 (3,336)
Nonoperating
income and
expenses:
Interest expense 14,131 6,805 479 7,284
Exit fees on
early repayment
of mortgages -- 1,084 -- 1,084
Amortization of
deferred
financing costs 553 330 -- 330
Interest income (338) (484) -- (484)
----------- ----------- ----------- -----------
Total
nonoperating
expenses 14,346 7,735 479 8,214
----------- ----------- ----------- -----------
Loss before
equity in
earnings of
unconsolidated
entities,
income taxes,
and minority
interest (3,702) (11,540) (10) (11,550)
Equity in
earnings of
unconsolidated
entities 425 228 27 255
----------- ----------- ----------- -----------
Income (loss)
before income
taxes and
minority
interest (3,277) (11,312) 17 (11,295)
Income tax
expense
(benefit) 82 (170) -- (170)
----------- ----------- ----------- -----------
Net income (loss)
before minority
interest (3,359) (11,142) 17 (11,125)
Minority interest (65) (767) -- (767)
----------- ----------- ----------- -----------
Net income (loss) $ (3,294) $ (10,375) $ 17 $ (10,358)
=========== =========== =========== ===========
Earnings per
share
information:
Loss per share
-- basic and
diluted $ (0.13) $ (0.47)
=========== ===========
Weighted-average
common shares
outstanding --
Basic and
diluted 26,309,154 21,859,108
=========== ===========
EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES
CALCULATION OF FFO AND FFOA
(Amounts in thousands, except share and per share data)
Unaudited
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
EDR EDR
Consolidated Consolidated
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net loss $ (2,514) $ (4,060) $ (3,294) $ (10,375)
Real estate related
depreciation and
amortization 8,999 9,317 18,068 15,019
Minority interest
expense (206) (336) (65) (767)
---------- ---------- ---------- ----------
Funds from
operations ("FFO") 6,279 4,921 14,709 3,877
Elimination of
one-time IPO
related
transactions:
Compensation
charge for profit
interest units -- -- -- 4,039
Write-off of fees
associated with
repayment of
mortgage debt -- -- -- 1,084
Loss of deferred
revenue due to
purchase
accounting (1) -- 616 -- 1,027
---------- ---------- ---------- ----------
Impact of IPO
related
transactions -- 616 -- 6,150
---------- ---------- ---------- ----------
Funds from
operations -
adjusted ("FFOA") $ 6,279 $ 5,538 $ 14,709 $ 10,027
========== ========== ========== ==========
FFO per weighted
average potentially
dilutive
shares/units (2) $ 0.23 $ 0.21 $ 0.52 $ 0.16
========== ========== ========== ==========
FFOA per weighted
average potentially
dilutive
shares/units (2) $ 0.23 $ 0.23 $ 0.52 $ 0.42
========== ========== ========== ==========
Weighted average
potentially
dilutive shares/
units (2) 27,850,196 23,754,195 28,025,579 23,721,194
========== ========== ========== ==========
Notes:
(1) -- Represents the balance of deferred straight-lined rents and
service fees at the time of the IPO acquisitions that would
have been recognized by EDR during the reported period had it
already owned the properties. Generally accepted accounting
standards do not allow such deferred revenue items to be
carried forward in an acquisition, resulting in a one-time,
non-recurring loss of revenue.
(2) -- Funds from operations and funds from operations -- adjusted
per share were computed using weighted average shares and
units outstanding, including the impact of dilutive
securities.
FFO is an important supplemental measure of operating performance
for EDR. 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 rate, rental rates, operating
costs, development activities and interest costs, providing
perspective not immediately apparent from net income.
For a definition of FFO and a statement by management regarding
the reasons for and significance of reporting FFO as a measure of
performance, see Management's Discussion and Analysis of
Financial Condition and Results of Operations in the EDR annual
report on form 10-K for the year ended December 31, 2005.