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EDR Reports Operating Activity

EDR AEC

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Education Realty Trust, Inc. (EDR - Snapshot Report), a real estate investment trust (REIT), recently reported its operating activities for the 2012-2013 academic year. The company achieved a strong growth in rental rates, but did not attain the desired occupancy level.

Net rental rates for same-community portfolio surged 5.1% year over year in 2012-2013, while occupancy for same-community portfolio stood at 90.5% versus 94.7% recorded in the 2011-2012 academic school year. The occupancy decrease is attributable to a decline in occupancy in five major communities.

Education Realty intends to reduce its heavy reliance on NOI growth from its prominent same-community portfolio and thereby equally spread the risk quotient to other communities. Since 2011, the company has acquired or developed many communities located in major U.S. universities in a strategic move to boost numbers. During the third quarter of 2012, the company concluded the acquisition of a 728-bed community known as The Province, located adjacent to East Carolina University at Greenville in North Carolina. The company had acquired the property for $50 million.

Additionally, the company closed on the sale of two communities - The Reserve at Frankford and North Pointe Apartments - for a combined gross price of $42 million. The properties were based in Texas and Arizona, respectively.

Regarding the above-mentioned operating activities in the 2012-2013 collegiate academic year, Education Realty has been cautious about its Core FFO (fund from operations) growth for full-year 2012. Consequently, Education Realty has trimmed down its Core FFO expectations in the range of 46 cents to 48 cents per share, from the previous range of 46 cents to 51 cents per share.

Education Realty is expected to release its third-quarter 2012 results on October 25, 2012. The Zacks Consensus Estimate for third quarter FFO is currently pegged at 6 cents per share.

Education Realty is one of the largest owners, developers and managers of collegiate housing in the U.S. It also provides third-party management services, including residence life and student development, marketing, leasing administration, strategic relationships and accounting services for student housing communities owned by educational institutions.

The company owns or manages 63 communities in 24 states with more than 35,400 beds in around 12,000 units. It’s ideal acquisition targets are generally located in markets that have stable or increasing collegiate populations and high barriers to entry.

We have a long-term Neutral recommendation on the stock. Also, it carries a short-term Zacks #3 Rank (Hold). One of its competitors, Associated Estates Realty Corporation (AEC - Snapshot Report), holds a short-term Zacks #2 Rank (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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