News Column

EdR Announces Fourth Quarter 2013 Results

March 7, 2014

By a News Reporter-Staff News Editor at Real Estate Weekly News -- EdR (NYSE:EDR), one of the nation's largest developers, owners and managers of collegiate housing, announced results for the quarter ended December 31, 2013. Company Highlights Core funds from operations ("Core FFO") increased 25% to $0.20 per share/unit for the fourth quarter and grew 17% to $0.55 per share/unit for the full year;

Same-community net operating income ("NOI") for the quarter was $17.8 million, an increase of 4.2% on a 4.9% increase in revenue partially offset by a 6.0% increase in operating expenses;

Preleasing for the 2014-2015 lease term is 550 basis points ahead of last year with the same-community portfolio 45.4% preleased. The same-community portfolio is projected to open the 2014-2015 lease term with an increase in revenue ranging from 3% to 4%, comprised of a 1% to 2% increase in occupancy and an approximate 2% increase in net rate;

University of Kentucky ("UK") Board of Trustees approved the 2016 delivery phase of the multi-year UK campus housing revitalization plan, consisting of 1,141 beds for $83.9 million;

Recycled capital from the sale and pending sales of $62.9 million of communities with an average distance to campus of 1.9 miles into a $54.0 million acquisition pedestrian to campus at the University of Michigan and a $27.8 million joint venture investment in a community adjacent to the University of Georgia;

In January 2014, entered into a $187.5 million term loan with five- and seven-year tranches at an effective fixed interest rate of 3.6%; and

2014 full year Core FFO guidance range of $0.62 to $0.68 per share/unit, which represents an 18% increase, at the midpoint, over 2013.

"Our company and the student housing business are performing well as evidenced by the strong results for the 2013 leasing cycle and our positive preleasing velocity for 2014," stated Randy Churchey, EdR's president and chief executive officer. "Prospectively, our focus remains on completing our $433 million of active 2014 and 2015 developments and presale opportunities and closing the pending asset dispositions while maintaining a well-capitalized balance sheet. These external growth opportunities will increase our gross assets by 17%, which when combined with our strong same-community revenue growth, will provide meaningful growth in shareholder value." Net Income Attributable to Common Stockholders Net income attributable to common stockholders for the quarter was $1.6 million, or $0.01, per diluted share, compared to net income of $4.8 million, or $0.04, per diluted share, for the prior year. Excluding a non-cash impairment loss of $5.0 million, net income would have increased $1.8 million to $6.6 million as a result of an $8.2 million growth in NOI from same and new communities offset by a $4.1 million increase in depreciation and a $1.6 million increase in interest expense. Core Funds From Operations Core FFO for the quarter was $23.5 million, as compared to $18.1 million in the prior year, an increase of 29.7%. The improvement in Core FFO mainly reflects an increase in operating profits from new communities offset by higher interest expense in 2013. Core FFO per share/unit for the quarter increased 25.0% to $0.20.

A reconciliation of funds from operations ("FFO") and Core FFO to net income is included with the financial tables accompanying this release. Same-Community Results Net operating income was $17.8 million for the quarter, an increase of 4.2%, or $0.7 million, from the prior year. Same-community revenue was up 4.9% as compared to the prior year with a 2.7% increase in rental rates and a 2.5% improvement in occupancy offset by a 0.3% decline from other income. Same-community operating expenses increased 6.0%, or $0.7 million for the quarter, driven mainly by higher real estate taxes as a result of new tax bills and assessments received in the quarter. Excluding the increase in real estate taxes, same-community operating expenses increased 3.7%. 2014-2015 Preleasing The same-community portfolio is currently 550 basis points ahead of prior year with 45.4% of the beds preleased for the fall. Based on current leasing velocity and market conditions, the same-community portfolio is projected to open the 2014-2015 lease term with an increase in revenue ranging from 3% to 4%, comprised of a 1% to 2% increase in occupancy and an approximate 2% increase in average net rate net rental rates.

The Company provides additional leasing information in its quarterly earnings supplement located at University of Kentucky ("UK") Campus Housing Revitalization Plan Construction on the next phase of the UK campus housing revitalization plan, which includes five buildings with 2,381 beds at a total project cost of $138.0 million, is proceeding as planned for a summer 2014 opening. Although the university's assignment process does not occur until May, all 2,982 beds, which include the 601 beds delivered in 2013, are 117% applied for this fall.

Construction of the 2015 deliveries is also underway and proceeding as planned. This phase includes 1,610 beds and is projected to cost $101.2 million.

With the overwhelming acceptance of the initial phases of the revitalization plan, the University of Kentucky Board of Trustees recently approved the 2016 deliveries, which include 1,141 beds for a total cost of $83.9 million. To date under this long-term relationship with UK, a total of 5,733 beds in live learn communities have been approved with a total cost of almost $350 million. Investment Activity Construction is on schedule for the 2014 development projects at the Universities of Colorado, Connecticut, Minnesota and at Duke University, with leasing well underway.

In December, the Company completed the acquisition of The Varsity, a 415-bed community pedestrian to the University of Michigan, for $54.0 million, including the assumption of $32.4 million of construction debt. This acquisition had been in process since early last spring as discussed in the third quarter.

This month, we commenced construction on a mixed use development adjacent to the University of Georgia campus that includes 292 beds and 43,000 square feet of retail space, for a total cost of $55.6 million. This development, which will open in summer 2015, is EdR's second project with Schenk Realty Group. EdR will be 50% owners and manage the construction and operation of the community.

As part of the continual review and assessment of the Company's portfolio, we are recycling $62.9 million of capital through the sale of three lower-growth communities with an average distance to campus of 1.9 miles. This includes the December 2013 sale of the Pointe at Western, a community 2.3 miles from the Western Michigan University campus, for $21.0 million and the pending sales of The Reserve on West 31st at the University of Kansas and College Station at West Lafayette at Purdue University. The two pending sales are an average of 1.7 miles from their respective campuses and are under contract with nonrefundable deposits for a combined sales price of $41.9 million. Both pending sales are expected to close by the end of the first quarter.

"We added two stellar investments at the University of Georgia and the University of Michigan while matching funding with closed and pending asset dispositions," stated Tom Trubiana, EdR's executive vice president and chief investment officer. "We plan to pursue additional development opportunities on a leverage neutral basis. Given our elevated cost of capital it is not accretive or beneficial to our shareholders for us to issue equity or increase our leverage to make any additional net acquisitions at this time." Capital Structure At December 31, 2013, the Company had cash and cash equivalents totaling $22.1 million and availability on its unsecured revolving credit facility of $143.1 million. The Company's debt to gross assets was 42.8%, its net debt to EBITDA - adjusted was 6.3x, and its interest coverage ratio was 4.6x.

Keywords for this news article include: EdR, Real Estate.

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Source: Real Estate Weekly News

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