Associated Estates Realty Corporation Reports Fourth Quarter And Full Year Results

  Associated Estates Realty Corporation Reports Fourth Quarter And Full Year
                                   Results

Apartment Fundamentals Remain Strong

Fourth Quarter Same Community NOI up 7.9%

2013 Same Community NOI Guidance of 5.75% at the Midpoint

PR Newswire

CLEVELAND, Feb. 5, 2013

CLEVELAND, Feb.5, 2013 /PRNewswire/ --Associated Estates Realty Corporation
(NYSE, NASDAQ: AEC) announced today its financial results for the fourth
quarter and full year 2012. Funds from Operations (FFO) for the fourth
quarter of 2012 was $0.34 per common share (diluted), compared with $0.26 per
common share (diluted), for the fourth quarter of 2011, a 30.8% increase. FFO
as adjusted for the fourth quarter of 2012 was $0.35 per common share
(diluted), after adjusting for $332,000 of prepayment costs associated with
the repayment of two mortgages on December 31, 2012 and the write-off of
deferred financing fees totaling $356,000. There were no such adjustments in
the fourth quarter of 2011.

Net income applicable to common shares was $6.9 million or $0.14 per common
share (diluted) for the quarter ended December 31, 2012. This compared with a
net loss applicable to common shares of $2.2 million or $(0.05) per common
share (diluted) for the quarter ended December 31, 2011.

"We had a very solid year. Our portfolio of properties is uniquely positioned
for continued strong performance," said Jeffrey I. Friedman, President and
Chief Executive Officer. "Achieving our investment grade ratings was an
important milestone and significantly enhances our financial flexibility,"
Friedman continued.

A reconciliation of net income (loss) attributable to the Company 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.

Quarterly Same Community Portfolio Results

Net operating income (NOI) for the fourth quarter of 2012 for the Company's
same community portfolio increased 7.9% when compared with the fourth quarter
of 2011. Revenue increased 6.7% and property operating expenses increased
4.7%. Physical occupancy was 96.0% at the end of the fourth quarter versus
95.2% at the end of the fourth quarter of 2011. Average monthly net rent
collected per unit for the same community properties was $1,076 compared with
$1,010 for the fourth quarter of 2011, a 6.5% increase.

Full Year Performance

FFO as adjusted for the year ended December 31, 2012, increased 23.3% to $1.27
per common share (diluted) over 2011 FFO per common share (diluted) after
adjusting for loan prepayment costs and the write-off of deferred financing
fees which totaled $2.4 million. This was partially offset by a credit to
expense of $279,000 in the first quarter for a refund of defeasance costs on a
previously defeased loan. FFO as adjusted for the year ended December 31,
2011, was $1.03 per common share (diluted).

For the year ended December 31, 2012, net income applicable to common shares
was $30.6 million, or $0.66 per common share (diluted), compared to net income
applicable to common shares of $5.3 million, or $0.13 per common share
(diluted), for the year ended December 31, 2011.

A reconciliation of net income (loss) attributable to the Company 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 furnished with this
earnings release to the Securities and Exchange Commission on Form 8-K.

For the year ended December 31, 2012, revenue for the Company's same community
portfolio increased 6.0% and expenses grew 4.8%, resulting in a 6.9% increase
in the Company's same community NOI compared to the year ended December 31,
2011.

Additional quarterly and year-to-date financial information, including
performance by region for the Company's portfolio, is included in the
Company's supplemental financial information which is available on the
"Investors" section of the Company's website at AssociatedEstates.com, or by
clicking on the following link: quarterly results.

2013 Outlook

Same community outlook for 2013:

  oRevenue Growth  4.00% to 5.00%
  oExpense Growth  2.00% to 3.00%
  oProperty NOI Growth  5.25% to 6.25%

Detailed assumptions relating to the Company's guidance can be found on page
30 of the Fourth Quarter 2012 Supplemental Financial Information on the
Company's website at AssociatedEstates.com.

Transactional Activity

On November 7, 2012, the Company sold Muirwood Bennell, a 164-unit property
located in Columbus, OH for $7.3 million. This sale brought the aggregate
2012 disposition proceeds to $67.3 million. These sales consisted of six
properties having an average age of 25 years, with a total of 1,356 units.

Quarterly Dividend on Common Shares

The Company announced on December 6, 2012, that a quarterly dividend of $0.19
per share had been declared on the Company's common shares. It was paid on
February 1, 2013, to shareholders of record on January 15, 2013. The dividend
represents a 5.6% increase over the prior $0.18 per quarter dividend.

Capital Markets and Liquidity Activity

On October 19, 2012, as previously announced, the Company made certain
modifications to its unsecured term loan, including increasing the amount to
$150 million from $125 million and extending the maturity date to January
2018.

On October 17, 2012, the Company repaid the construction loan on its recently
completed Vista Germantown property totaling $21.7 million. Additionally, on
December 31, 2012, the Company prepaid two property specific mortgages.
Inclusive of $332,000 of prepayment penalties, the total amount to fund these
two prepayments was $33.6 million.

On January 22, 2013, the Company announced that it completed the issuance of
$150 million of unsecured Senior Notes. The notes were offered in a private
placement with two maturity tranches: $63 million 8-year maturity at 4.02% and
$87 million 10-year maturity at 4.45%. The $150 million total issuance has a
weighted average term of 9.2 years at a weighted average interest rate of
4.27%. Proceeds from the issuance were used to repay borrowings under the
Company's unsecured credit facility, including amounts borrowed in December to
prepay the two mortgages noted above.

Conference Call

A conference call to discuss the results will be held on February 6, 2013 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." The call will be archived through February 21, 2013. The dial-in
number for the replay is 877-344-7529 and the conference number for the replay
is 10023231.

Via the Internet (listen only): Access the Company's website at
AssociatedEstates.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 "Fourth Quarter 2012 Earnings Conference Call"
link. The webcast will be archived for 90 days.

Upcoming Events

The Company announced today its participation in Citi's 2013 Global Property
CEO Conference scheduled for Sunday, March 3 through Wednesday, March 6 in
Hollywood, FL.

Jeffrey I. Friedman, President and Chief Executive Officer, will participate
in a roundtable discussion with investors, moderated by Eric Wolfe of Citi
Investment Research & Analysis. As part of the conference, Friedman will also
conduct meetings with various investors. A copy of all presentation materials
to be used at the conference will be posted to the Investors section of the
Company's website.

Company Profile

Associated Estates is a real estate investment trust ("REIT") and is a member
of the Russell 2000 and the MSCI US REIT Indices. The Company is headquartered
in Richmond Heights, Ohio. Associated Estates' portfolio consists of 52
properties containing 13,950 units located in ten states. For more information
about the Company, please visit its website at AssociatedEstates.com.

FFO and FFO as adjusted are non-Generally Accepted Accounting Principle
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 income attributable to the
Company 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 included with this earnings release and furnished to the Securities and
Exchange Commission on Form 8-K.

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
2013 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; elimination or
limitations to federal government support for Fannie Mae and/or Freddie Mac
that might result in significantly reduced availability of mortgage financing
sources as well as increases in interest rates for mortgage financing; the
ability of the Company to refinance debt on favorable terms at maturity; risks
of a lessening of demand for the multifamily units owned by the Company;
competition from other available multifamily units and changes in market
rental rates; the failure of development projects or redevelopment activities
to achieve expected results due to, among other causes, construction and
contracting risks, unanticipated increases in materials and/or labor, and
delays in project completion and/or lease-up that result in increased costs
and/or reduce the profitability of a completed project; 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 and unanticipated repairs; inability of the Company
to control operating expenses or achieve increases in revenue; shareholder
ownership limitations 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 that are not covered by the
Company's insurance; 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; risks associated with
property acquisitions such as failure to achieve expected results or matters
not discovered in due diligence; 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
other uncertainties and risk factors addressed in documents filed by the
Company with the Securities and Exchange Commission, including, without
limitation, the Company's Annual Report on Form 10-K and the Company's
Quarterly Reports on Form 10-Q.

                              ASSOCIATED ESTATES REALTY CORPORATION
                              Financial Highlights
                              (in thousands, except per share data)
                              Three Months Ended      Twelve Months Ended
                              December 31,             December 31,
                              2012        2011         2012        2011
Total revenue                 $ 46,964   $ 39,903    $ 174,868   $ 165,067
Net income (loss)             $  6,911  $ (2,213)   $  30,592  $   5,328
attributable to AERC
Add:  Depreciation - real     12,868      11,435       48,547      44,006
      estate assets
      Amortization of         1,232       1,708        4,889       7,970
      intangible assets
Less: Gain on disposition of  (4,030)     -            (26,849)    (14,597)
      properties
Funds from Operations (FFO)   $ 16,981   $ 10,930    $  57,179  $  42,707
^(1)
Add:  Prepayment costs        $        $       $         $     
                              688         -           2,430       -
      Refund of defeasance
Less: costs on previously     -           -            (279)       -
      defeased loan
Funds from Operations (FFO)   $ 17,669   $ 10,930    $  59,330  $ 42,707
as adjusted ^(2)
Add:  Depreciation - other    532         511          2,108       1,954
      assets
      Amortization of         495         513          2,128       1,970
      deferred financing fees
Less: Recurring fixed asset   (2,981)     (3,086)      (10,746)    (10,214)
      additions
Funds Available for           $ 15,715   $  8,868    $  52,820  $ 36,417
Distribution (FAD) ^(3)
Per share:
Net income (loss) applicable  $         $  (0.05)  $        $   
to common shares - basic     0.14                    0.66        0.13
Net income (loss) applicable  $         $  (0.05)  $        $   
to common shares - diluted    0.14                    0.66        0.13
Funds from Operations -       $         $   0.26  $        $   
diluted ^(1)                  0.34                    1.23        1.03
Funds from Operations as      $         $   0.26  $        $   
adjusted - diluted ^(2)       0.35                    1.27        1.03
Dividends per share           $         $   0.17  $        $   
                              0.18                    0.71        0.68
Weighted average shares       49,478      42,255       46,063      41,657
outstanding - basic
Weighted average shares       49,984      42,255       46,553      41,657
outstanding - diluted

    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, excludes impairment write-downs of depreciable real
    estate and gains and losses from the disposition of properties and land.
    FFO does not represent cash generated from operating activities in
(1) 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.
    The Company defines FFO as adjusted as FFO, as defined above, excluding
    $688 and $2.4 million of prepayment costs associated with debt repayments
    for the three and twelve months ended December 31, 2012 and $(279) of
    refunds for a previously defeased loan for the twelve months ended
    December 31, 2012. In accordance with GAAP, these prepayment costs and
(2) refunds on the previously defeased loan are included in interest expense
    in the Company's Consolidated Statements of Operations and Comprehensive
    Income. We are providing this calculation as an alternative FFO
    calculation as we consider it a more appropriate measure of comparing the
    operating performance of a Company's real estate between periods or as
    compared to different REITs.
    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. The Company considers FAD to be an appropriate supplemental
(3) 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 financial information of this press release are
available on Associated Estates' website at AssociatedEstates.com. To receive
a copy of the results by mail or fax, please contact Investor Relations at
800-440-2372. For more information, access the Investors section of
AssociatedEstates.com.

For more information, please contact:
Jeremy Goldberg (216) 797-8715

SOURCE Associated Estates Realty Corporation

Website: http://www.AssociatedEstates.com
 
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