Associated Estates Realty Corporation Reaffirms FFO as Adjusted Guidance and Updates Acquisition Guidance

Jun 02, 2010, 16:05 ET from Associated Estates Realty Corporation

CLEVELAND, June 2 /PRNewswire-FirstCall/ -- Associated Estates Realty Corporation (NYSE: AEC) (Nasdaq: AEC) today announced that it has reaffirmed its full year funds from operations (FFO) as adjusted range of $0.86 to $0.92 per common share (basic and diluted).  The FFO as adjusted range excludes $554,000 of cash received in the first quarter of 2010 for refunds on previously defeased loans and the expected second quarter non-cash charges of $1.0 million and $700,000, respectively, associated with the previously announced redemption of the Company's series B preferred shares and trust preferred debt. Full year FFO would be in the range of $0.82 to $0.88 per common share (basic and diluted) if that defeasance credit and those non-cash charges were included in FFO.

The Company also announced that it has raised its full year acquisition guidance, previously reflecting no activity, up to a range of $100 million to $150 million, which includes the $54.3 million Northern Virginia acquisition (Riverside Station), which closed on May 18, 2010.  Additionally, the Company announced that it expects full year funds available for distribution (FAD) per common share (basic and diluted) to exceed the $0.68 annual dividend.  

On May 12, 2010, the Company announced that it had completed the sale of 9,200,000 common shares resulting in net proceeds of approximately $114.3 million.  The proceeds from the offering will be used to redeem approximately $74 million of high coupon preferred shares (8.70%) and trust preferred debt (7.92%), partially fund the acquisition of Riverside Station and for general corporate purposes.  The common share offerings completed in May and January have increased the common shares outstanding from approximately 16.7 million common shares on December 31, 2009, to approximately 32 million common shares outstanding today.  

"Our year-to-date capital raising activities have been truly transformational.  With our strong balance sheet and enhanced financial flexibility, we are well-positioned to acquire additional properties in the second half of the year," said Lou Fatica, vice president, chief financial officer and treasurer.

Company Profile

Associated Estates is a real estate investment trust ("REIT") and is a member of the Russell 2000. The Company is headquartered in Richmond Heights, Ohio. Associated Estates' portfolio consists of 50 properties containing 12,670 units located in eight states. For more information about the Company, please visit its website at www.AssociatedEstates.com.

FFO, FFO as adjusted and FAD are non-Generally Accepted Accounting Principle (GAAP) measures.  The Company generally considers FFO and FFO as adjusted to be useful measures 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 to different REITs.  A reconciliation of net (loss) income attributable to the Company to FFO and FFO as adjusted is included in the following table.  Additionally, the Company considers FAD to be an appropriate supplemental measure of a Company's performance as it reflects the recurring capital expenditures that are necessary to maintain the associated real estate.

Earnings Guidance Per Common Share

As of June 2, 2010

Expected net (loss) income attributable to AERC

-$0.49 to -$0.43

Expected real estate depreciation and amortization

1.38

Expected preferred share dividends

-0.07

Expected gains on disposition of properties/ gain on insurance recoveries

0.00

Expected Funds from Operations (1)

$0.82 to $0.88

Expected net defeasance costs (credits)

-0.02

Expected trust preferred redemption costs

0.02

Expected preferred share redemption costs

0.04

Expected Funds from Operations as Adjusted (2)

$0.86 to $0.92

(1)

The Company defines FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT").  This definition includes 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, gains on insurance recoveries and gains and losses from the disposition of properties and land. 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

(2)

The Company defines FFO as adjusted as FFO, as defined above, plus the add back of defeasance and/or other prepayment costs/credits of $(554,000) and $700,000, respectively.  In accordance with GAAP, these prepayment costs/credits are included as interest expense in the Company's Consolidated Statement of Operations.  Additionally, the preferred share redemption costs of $1,000,000, which are included in the Company's Statement of Operations, are also added back.  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.

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:  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 2010 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 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; 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; 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; ownership limitations on our common and preferred shares that may discourage a takeover otherwise considered favorably by shareholders; 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 ability to acquire properties at prices consistent with the Company's investment criteria or to successfully consummate the acquisition of such properties; 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; 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 construction business risks.

Investor Contact:

Jeremy Goldberg

(216) 797-8715

Media Contact:

Kimberly Kanary

(216) 797-8718

SOURCE Associated Estates Realty Corporation



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http://www.AssociatedEstates.com