EdR Announces First Quarter 2018 Results

MEMPHIS, Tenn., April 30, 2018

The following compares the Company's net income, operating income, same-community net operating income and Core Funds from Operations ("Core FFO") for the quarter ended March 31, 2018 to the same period in 2017 (in millions except per share/unit data):

		Three months ended March 31,
		2018			2017
Net income attributable to common shareholders		$41.0 ARIVA.DE Börsen-Geflüster Kurse Education Realty -   0,00%			$16.2
Per diluted share/unit		$0.53			$0.21
Operating income		$24.4			$18.4
Same-community net operating income (NOI)		$46.5			$47.2
Core FFO		$43.7			$44.0
Per share/unit		$0.57			$0.60
Per share/unit change		(5.0)%

Company Highlights

• Completed the disposition of five communities through April of 2018 for total net proceeds of $125.1 million.  These communities, which averaged 0.5 miles from campus and 16 years old, sold for a 6.0% economic cap rate. The Company recognized a $21.4 million gain on sales completed in the first quarter and anticipates an additional gain of approximately $21.0 million on the dispositions completed in April,
  
  
• Began construction in February on College View, a 656-bed, mixed use, ONE Plan community on the campus of Mississippi State University. The $69.2 million community is targeting a summer 2019 delivery,
  
  
• Began construction on SouthSide Commons, a 428-bed ONE Plan community on the campus of Lehigh University. The $48.3 million community is targeting a summer 2019 delivery,
  
  
• Amended the Company's revolving credit facility, extending the term five years to 2023 and increasing capacity by $100 million to $600 million. The Company's first debt maturity is in 2021,
  
  
• Opened phase two of The Woods in January 2018, adding 433 beds to the ONE Plan development on Northern Michigan University's campus.  The third phase is scheduled to open this summer, and 
  
  
• Reaffirmed full year Core FFO per share/unit guidance for 2018 of $1.81 to $1.91. Increased guidance range for GAAP net income attributable to common shareholders per diluted share/unit by $0.55 to a range of $1.12 to $1.18, due to estimated gains on asset sales through April 2018.

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders for the first quarter was $41.0 million, or $0.53 per diluted share, as compared to $16.2 million, or $0.21 per diluted share, for the first quarter of 2017. The $24.8 million improvement year over year relates primarily to a $21.4 million gain on sale of collegiate housing assets recognized in 2018 and a $3.3 million reduction in amortization versus the first quarter of 2017.

Operating Income

Operating income for the first quarter was $24.4 million as compared to $18.4 million for the first quarter of 2017. The $6.0 million increase relates primarily to a $3.7 million growth in community NOI and a $3.3 million decline in depreciation and amortization, offset by a $1.8 million decline in third-party development consulting fees.

Core FFO

Core FFO for the first quarter was $43.7 million compared to $44.0 million in the first quarter of 2017, and Core FFO per share/unit for the first quarter declined $0.03, or 5.0%, to $0.57. The decline in Core FFO relates primarily to a $1.8 million decline in third-party development fees, a $1.0 million increase in tax expense and a $1.7 million increase in net interest expense, partially offset by a $3.7 million growth in community net operating income ("NOI"), a $0.5 million reduction in G&A and development pursuit costs and a 3.5% increase in weighted average share/units outstanding.

A reconciliation of GAAP net income attributable to common stockholders to funds from operations ("FFO") and Core FFO is included with the financial tables accompanying this release.

Same-Community Results

Same community NOI for the first quarter declined 1.5%, or $0.7 million, with revenue up 0.4% and a 4.1% growth in operating expenses. The growth in revenue for the quarter was comprised of a 2.4% increase in rental rates and a 0.2% increase in other income, offset by a 2.2% decline in occupancy.  Operating expense growth for the quarter was mainly driven by a $0.4 million increase in real estate taxes, a $0.3 million increase in utilities and a $0.2 million increase in marketing costs. The same-community portfolio achieved a 61% gross margin for the trailing twelve months through March 31, 2018.

Investment Activity

In total, the Company's active 2018 and 2019 development pipeline, which represents a 32% growth in collegiate housing assets over December 31, 2017, includes twelve communities with 7,464 beds for a total development cost of $900.9 million. These active developments have a median distance to campus of 0.1 miles and serve universities with an average full time enrollment of over 23,000.  29% of our development costs are for communities on campus and 96% are on or pedestrian to campus.

Including active developments, 83% of the Company's ONE Plan assets and 77% of its total portfolio serve universities in the Ivy League and Power 5 conferences.

The Company's financial guidance for 2018 included the disposition of six to seven assets for $150 to $225 million.  In February and April of 2018, the Company completed the sales of five communities for total net proceeds of $125.1 million. In the aggregate the communities, which were the lower quality tier in the Company's portfolio averaging 0.5 miles from campus and 16 years old, sold for a 6.0% economic cap rate.

In April, the Company also sold its 25% interest in an unconsolidated joint venture that owned a community serving the University of North Carolina - Greensboro. The Company received net proceeds of $3.7 million and expects to recognize a gain on the transaction.

Capital Structure

At March 31, 2018, the Company had cash and cash equivalents totaling $22.9 million and availability on its unsecured revolving credit facility of $208.0 million.  The Company's net debt to gross assets was 22.5%, its net debt to EBITDA - adjusted was 3.0x, and its interest coverage ratio was 9.3x. 

The Company did not settle any ATM forward equity shares in the first quarter. At March 31, 2018, the Company had 4.8 million forward equity shares sold under its ATM that have not yet been settled.  The shares were sold at a weighted average net price of $41.56, representing approximately $188.4 million in future funding for its capital commitments and can be settled at the Company's option through December 2018.

Approximately $374.9 million of the Company's $900.9 million in capital commitments remained to be funded at March 31, 2018, with $319.0 million anticipated to be spent in the remainder of 2018 and the rest in 2019.  The Company expects to meet these capital commitments with existing cash, debt capacity, proceeds from community dispositions and settling its existing $188.4 million of ATM forward equity shares that have already been sold.  After doing so, the Company's projected debt to gross assets at December 31, 2018 would be 26%, which is within management's targeted leverage range of 25% to 30%.  Please see the Company's financial supplement for a schedule of sources and uses of capital for all announced transactions as well as pro forma debt to gross asset ratios including the impact of funding the commitments.

The Company's short interest of approximately 11% is elevated due to the outstanding ATM forward equity shares.  The 4.8 million outstanding ATM forward equity shares represent approximately 60% of the short interest.

Market Supply and Demand

Student housing supply growth is expected to tighten in 2018 with new supply as a percentage of enrollment in EdR's markets declining from 2.1% in 2017 to 1.9% in 2018.  The anticipated growth in new supply is expected to outpace projected enrollment growth in 2018 by approximately 60 bps, as noted in the following table:

The Company provides additional enrollment and supply information by market in its quarterly earnings supplement located at http://www.snl.com/irweblinkx/yearlypresentations.aspx?iid=4095382.

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