Associated Estates Realty Corporation Reports Third Quarter Results

     Associated Estates Realty Corporation Reports Third Quarter Results

Third Quarter Same Community NOI Up 6.1%

Company Issues $100 Million of 7 and 10-Year Unsecured Notes

PR Newswire

CLEVELAND, Oct. 22, 2013

CLEVELAND, Oct. 22, 2013 /PRNewswire/ --Associated Estates Realty Corporation
(NYSE, NASDAQ: AEC) announced today its financial results for the third
quarter ended September 30, 2013. Funds from Operations (FFO) for the third
quarter of 2013 was $0.32 per common share (diluted), compared to $0.32 per
common share (diluted), for the third quarter of 2012.

Net income applicable to common shares was $19.9 million, or $0.40 per common
share (diluted), for the quarter ended September 30, 2013. This compared to
net income applicable to common shares of $2.1 million, or $0.04 per common
share (diluted), for the quarter ended September 30, 2012.

"Operationally and strategically, it was another strong quarter for Associated
Estates. Occupancy is solid at just under 96%, margins continue to improve
and apartment fundamentals remain solid," said Jeffrey I. Friedman, President
and Chief Executive Officer. "With our younger portfolio and strong balance
sheet, we are well positioned to take advantage of the strength in the
apartment market," Friedman continued.

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 Third Quarter Supplemental Financial Information 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 third quarter of 2013 for the Company's
same community portfolio increased 6.1% compared to the third quarter of
2012. Revenue increased 3.0% and property operating expenses decreased 1.7%.
Physical occupancy was 95.8% at the end of the third quarter compared to 97.2%
at the end of the third quarter of 2012. Average monthly net rent collected
per unit for the same community properties was $1,127 compared to $1,098 for
the third quarter of 2012, a 2.6% increase. Operating margins were 62.3% for
the third quarter of 2013 compared to 60.5% for the third quarter of 2012.

Year-to-Date Performance

FFO and FFO as adjusted for the nine months ended September 30, 2013 was $0.93
per common share (diluted). FFO as adjusted for the nine months ended
September 30, 2012 was $0.93 per common share (diluted) after adjusting for
$1.7 million of loan prepayment costs and a credit to expense of $279,000 for
a refund of defeasance costs on a previously defeased loan.

For the nine months ended September 30, 2013, net income applicable to common
shares was $31.8 million, or $0.63 per common share (diluted), compared to net
income applicable to common shares of $23.7 million, or $0.53 per common share
(diluted), for the period ended September 30, 2012.

Additional quarterly financial information, including performance by region
for the Company's portfolio, is included in the Third Quarter 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

The Company updated the midpoint of its full year FFO as adjusted guidance to
$1.27 per common share (diluted) from its previous guidance midpoint of $1.28
per common share (diluted). The FFO revision is partially the result of legal
accruals associated with the bankruptcy of the master lease holder in our
office building in Los Angeles. These legal costs are accounted for in General
and Administrative expenses. Detailed assumptions relating to the Company's
guidance can be found on page 30 of the Third Quarter 2013 Supplemental
Financial Information on the Company's website at AssociatedEstates.com.

Transactional Activity

On September 3, the Company sold Bradford at Easton, a 324-unit property
located in Columbus, OH, for $29.5 million.

On September 27, the Company acquired Rienzi at Turtle Creek, a 152-unit
apartment community in the affluent Uptown neighborhood of Dallas, TX. Rienzi
is a luxury high-rise building with upscale amenities that was built in 2002.
Rienzi is a block from the Company's Cantabria development, a 249-unit
community currently under construction in Turtle Creek. In addition, the
Company owns one apartment community in the Medical District and two
communities in North Dallas.

As previously announced on September 23, the Company entered into a definitive
purchase agreement with respect to a seven-asset portfolio of Class-A
apartment communities in high growth submarkets of Raleigh, Charlotte, Atlanta
and Tampa for $324 million. The Company closed on the purchase of one of the
properties, The Apartments at Blakeney in Charlotte, NC on October 10. The
seven assets in the portfolio are listed in the table below:

Property                        Location       Year Built  Closing
The Apartments at Blakeney      Charlotte, NC  2008        Closed on October
                                                           10
Lofts at Weston Lakeside        Cary, NC       2013        Q4 2013
St. Mary's Square               Raleigh, NC    2013        Q4 2013
Alpha Mill Apartments Phase I   Charlotte, NC  2007        Q1 2014
Alpha Mill Apartments Phase II  Charlotte, NC  2014        Q1 2014
Perimeter Town Center           Atlanta, GA    2014        Q4 2014
Varela                     Tampa, FL      2014        Q4 2014

The Company intends to fund the purchase of the recently announced
acquisitions principally from the proceeds of property dispositions over the
next twelve months. The asset sales currently planned are listed in the table
below:

Property              Location            Year Built
Annen Woods           Pikesville, MD      1987
Hampton Point         Silver Spring, MD   1986
Reflections           Columbia, MD        1985
Cypress Shores        Coconut Creek, FL   1991
Windsor Pines  Pembroke Pines, FL  1998
Courtney Chase        Orlando, FL         2003
Vista Germantown     Nashville, TN       2012

Capital Markets Activity

On October 1, the Company closed on the May forward equity issuance of
7,047,958 common shares, resulting in net proceeds of approximately $115
million. The Company used the net proceeds from the forward equity sale
toward the repayment of five secured mortgages totaling approximately $129
million that matured on October 1. The Company has no remaining debt
maturities in 2013, $45 million maturing in 2014 and $20 million maturing in
2015.

On October 21, the Company completed the issuance of $100 million of unsecured
notes. The notes were offered in a private placement with two maturity
tranches: $45 million 7-year maturity at 4.29% and $55 million 10.2-year
maturity at 4.94%. The $100 million total issuance has a weighted average
interest rate of 4.65% and a weighted average maturity of 8.8 years.

The Sole Bookrunner and Lead Placement Agent was Bank of America Merrill Lynch
and the Co-Placement Agent was US Bancorp Investments, Inc.

"Completing this notes offering extends our maturities, reduces our floating
rate debt and further supports our commitment to operate as an unsecured
borrower," said Lou Fatica, Vice President, Treasurer and Chief Financial
Officer. "The spreads on both tranches are 35 basis points tighter than the
private placement we closed in January of this year," Fatica continued.

Proceeds from the issuance were used to repay borrowings under the Company's
unsecured credit facility. At of the time of this release, the Company had
approximately $108 million outstanding on its $350 million revolving line of
credit.

Conference Call

A conference call to discuss the Company's third quarter results will be held
on October 23, 2013 at 2:00 p.m. Eastern. To participate in the call:

Via Telephone: The dial-in number is (855) 233-8223, and the conference ID is
57575786. An operator will ask you for the conference ID. The call will be
archived through November 6, 2013. The dial-in number for the replay is (855)
859-2056.

Via the Internet (listen only): Access the Investors section of 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 "Third Quarter 2013 Earnings Conference
Call" link. The webcast will be archived for 90 days.

Upcoming Events

The Company will participate in REITWorld 2013, NAREIT's Annual Convention,
being held from Wednesday, November 13 through Friday, November 15 at the San
Francisco Marriott Marquis.Members of the Company's management team will be
hosting scheduled meetings with investors throughout the conference. A copy
of all presentation materials will be accessible, beginning November 13, in
the Investors section of the Company's website at AssociatedEstates.com.

Company Profile

Associated Estates is a real estate investment trust ("REIT") and is a member
of the S&P 600, Russell 2000 and the MSCI US REIT Indices. The Company is
headquartered in Richmond Heights, Ohio. Associated Estates' portfolio
consists of 53 properties containing 13,618 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 Third Quarter Supplemental Financial Information
included with this earnings release and furnished to the Securities and
Exchange Commission on Form 8-K.

This press release shall not constitute an offer to sell, nor a solicitation
of an offer to buy, any security, and any statement to the contrary is not
authorized by the Company.

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
uncertainties 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 of, or
limitations on, 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, single family units
available for rental or purchase, and changes in market rental rates; the
inability of the Company to acquire and dispose of multifamily properties at
prices and on terms acceptable to the Company; 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; the failure to enter into development joint venture arrangements on
acceptable terms; 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 involving the Company; changes in tax legislation; risks
of personal injury claims and property damage claims that are not covered by
the Company's insurance; catastrophic property damage losses that are not
covered by the Company's insurance; 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       Nine Months Ended
                            September 30,             September 30,
                            2013         2012         2013         2012
Total revenue               $         $         $          $  
                            47,324       42,878       136,136      119,336
Net income attributable to  $         $        $         $   
AERC                        19,993       2,093       31,977       23,681
Add:  Depreciation - real   13,456       12,294       38,941       35,679
      estate assets
      Amortization of       651          1,400        2,996        3,656
      intangible assets
Less: Gain on disposition   (18,072)     -            (26,868)     (22,819)
      of properties
Funds from Operations       $         $         $         $   
(FFO) ^(1)                  16,028       15,787       47,046       40,197
Add:  Prepayment costs      -            -            -            1,743
      Refund of defeasance
Less: costs on previously   -            -            -            (279)
      defeased loan
Funds from Operations       $         $         $         $   
(FFO) as adjusted ^(2)      16,028       15,787       47,046       41,661
Add:  Depreciation - other  539          522          1,627        1,577
      assets
      Amortization of
      deferred financing    477          490          1,541        1,634
      fees
Less: Recurring fixed       (3,930)      (2,999)      (9,141)      (7,765)
      asset additions
Funds Available for         $         $         $         $   
Distribution (FAD) ^(3)     13,114       13,800       41,073       37,107
Per share:
Net income applicable to    $       $       $       $     
common shares - basic      0.40        0.04        0.64        0.53
Net income applicable to    $       $       $       $     
common shares - diluted     0.40        0.04        0.63        0.53
Funds from Operations -     $       $       $       $     
diluted ^(1)                0.32        0.32        0.93        0.89
Funds from Operations as    $       $       $       $     
adjusted - diluted ^(2)     0.32        0.32        0.93        0.93
Dividends per share         $       $       $       $     
                            0.19        0.18        0.57        0.53
Weighted average shares     49,949       49,461       49,816       44,924
outstanding - basic
Weighted average shares     50,267       49,927       50,376       44,924
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, and excludes impairment write-downs of depreciable
    real estate and gains and losses from the disposition of properties and
(1) land. FFO does not represent cash generated from operating activities in
    accordance with GAAP, 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 other real estate companies may define FFO in a different manner.
    The Company defines FFO as adjusted as FFO, as defined above, excluding
    $1,743 of prepayment costs associated with debt repayments for the nine
    months ended September 30, 2012 and $(279) of refunds for a previously
    defeased loan for the nine months ended September 30, 2012. In accordance
(2) with GAAP, these prepayment costs and 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, 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
 
Press spacebar to pause and continue. Press esc to stop.