PRO FORMA FINANCIAL INFORMATION
Exhibit 99.2
PRO FORMA FINANCIAL INFORMATION
Education Realty Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), which is the operating partnership subsidiary of Education Realty Trust, Inc., a Maryland corporation (the “Company”), purchased GrandMarc at Xxxxxxxxx Place, a 644-bed collegiate housing community on the campus of Texas Christian University in Fort Worth, Texas in December of 2011 for purchase price of $55.1 million. The Company assumed $36.9 million in debt as part of the transaction. The Operating Partnership also purchased University Village Towers, a 544-bed collegiate housing community at the University of California at Riverside in Riverside, California in September 2011 for a purchase price of $38.1 million. The Operating Partnership had a 10% equity investment in the entity that owned University Village Towers and also managed the property prior to the acquisition.
In evaluating these properties as potential acquisitions and determining the appropriate amount of consideration to be paid, the Company considered a variety of factors, including the current and historical occupancy and rent levels of the properties; the financial condition of the properties; property location, visibility and access, including proximity to the applicable college or university; the identity and enrollment levels at the applicable colleges and universities; age of the properties, physical condition and curb appeal; neighboring property; local market conditions, including other student housing; zoning; title to the properties; environmental matters; and growth patterns and economic conditions that may affect the properties.
The Operating Partnership has entered into agreements to sell two communities, NorthPointe and The Reserve on Frankford, which primarily serve The University of Arizona and Texas Tech University, respectively, and have an aggregate of 1,649 beds. The aggregate net proceeds from the sale of these communities are expected to be approximately $43.0 million. The Company expects these sales to be completed in September 2012, though there can be no assurance that the sales will close as expected, or at all. These communities will be classified as discontinued operations in the Company’s consolidated statement of operations in future presentations.
The Company completed a follow-on equity offering in August 2012 selling 17.3 million shares of common stock and raising net proceeds of $180.9 million. It used $30.0 million of the proceeds to repay the balance on its unsecured line of credit, and the Company will use the remaining proceeds to repay debt, fund the development pipeline, fund future acquisitions and for general corporate purposes.
The Company is filing pro forma financial information related to the two acquired real estate properties that are individually insignificant, the potential dispositions and the follow-on equity offering discussed above in order to comply with the financial statement requirements related to registration statements under the Securities Act of 1933, as amended.
The following unaudited pro forma condensed consolidated financial statements of the Company are presented as if the Company had disposed of NorthPointe and The Reserve on Frankford and completed the follow-on equity offering as of June 30, 2012 for the pro forma condensed consolidated balance sheet and as if the Company had disposed of the properties on the first day of the period presented for the pro forma condensed consolidated statements of operations. The unaudited pro forma condensed consolidated statement of operations for the year-ended December 31, 2011 is presented as if the Company had acquired GrandMarc at Xxxxxxxxx Place and University Village Towers on January 1, 2011.
These pro forma condensed consolidated financial statements are presented for informational purposes only and should be read in conjunction with the historical financial statements of GrandMarc at Xxxxxxxxx Place included herewith and University Village Towers appearing on pages F-9 to F-12 in the Company’s registration statement on Form S-3 (File No. 333-177422) filed with the Securities and Exchange Commission on October 21, 2011 and the Company’s historical financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. The adjustments to the pro forma condensed consolidated financial statements are based on available information and assumptions that management considers reasonable. The pro forma condensed consolidated financial statements are unaudited and are not necessarily indicative of what the financial position of the Company or the actual results of operations would have been if the acquisitions and dispositions of the properties had been completed as described above, nor do they purport to represent the financial position or the results of operations of the Company as of any future date or for any future periods.
Education Realty Trust, Inc. and Subsidiaries
Pro forma condensed consolidated balance sheet
As of June 30, 2012 (Unaudited)
(Dollars in thousands, except share and per share data)
Equity | Pending | |||||||||||||||
Consolidated | Offering | Dispositions | ||||||||||||||
Education Realty | Pro Forma | Pro Forma | Company | |||||||||||||
Trust, Inc. | Adjustments | Adjustments | Pro Forma | |||||||||||||
Assets | (A) | (B) | (C) | |||||||||||||
Collegiate housing properties, net | $ | 817,321 | $ | - | $ | (38,210 | ) | $ | 779,111 | |||||||
Assets under development | 128,349 | 128,349 | ||||||||||||||
Corporate office furniture and equipment, net | 1,974 | 1,974 | ||||||||||||||
Cash and cash equivalents | 8,414 | 150,912 | 43,000 | 202,326 | ||||||||||||
Restricted cash | 5,442 | 5,442 | ||||||||||||||
Student contracts receivable, net | 496 | 496 | ||||||||||||||
Management fee receivable from third parties | 497 | 497 | ||||||||||||||
Notes receivable | 18,000 | 18,000 | ||||||||||||||
Goodwill and other intangibles, net | 3,258 | 3,258 | ||||||||||||||
Other assets | 16,257 | 16,257 | ||||||||||||||
Total assets | $ | 1,000,008 | $ | 150,912 | $ | 4,790 | $ | 1,155,710 | ||||||||
Liabilities and equity | ||||||||||||||||
Liabilities: | ||||||||||||||||
Mortgage and construction loans, net of unamortized premium/discount | $ | 310,507 | $ | - | $ | - | $ | 310,507 | ||||||||
Unsecured revolving credit facility | 30,000 | (30,000 | ) | - | ||||||||||||
Accounts payable | 3,675 | 3,675 | ||||||||||||||
Accrued expenses | 43,183 | (810 | ) | 42,373 | ||||||||||||
Deferred revenue | 12,000 | (358 | ) | 11,642 | ||||||||||||
Total liabilities | 399,365 | (30,000 | ) | (1,168 | ) | 368,197 | ||||||||||
Commitments and contingencies | - | - | ||||||||||||||
Redeemable noncontrolling interests | 9,218 | 9,218 | ||||||||||||||
Equity: | ||||||||||||||||
Education Realty Trust, Inc. stockholders' equity: | ||||||||||||||||
Common stock, $.01 par value, 200,000,000 shares authorized, 95,293,349 issued and outstanding as of June 30, 2012 | 953 | 173 | 1,126 | |||||||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issues and outstanding | - | - | ||||||||||||||
Additional paid-in capital | 686,546 | 180,739 | 867,285 | |||||||||||||
Accumulated deficit | (98,564 | ) | 5,958 | (92,606 | ) | |||||||||||
Total Education Realty Trust, Inc. stockholders' equity | 588,935 | 180,912 | 5,958 | 775,805 | ||||||||||||
Noncontrolling interests | 2,490 | 2,490 | ||||||||||||||
Total equity | 591,425 | 180,912 | 5,958 | 778,295 | ||||||||||||
Total liabilities and equity | $ | 1,000,008 | $ | 150,912 | $ | 4,790 | $ | 1,155,710 |
See accompanying notes.
Education Realty Trust, Inc. and Subsidiaries
Pro forma condensed consolidated statement of operations
Six months ended June 30, 2012 (Unaudited)
(Dollars in thousands)
Pending | ||||||||||||
Consolidated | Dispositions | |||||||||||
Education Realty | Pro Forma | Company | ||||||||||
Trust, Inc. | Adjustments | Pro Forma | ||||||||||
Revenues: | (D) | (E) | ||||||||||
Collegiate housing leasing revenue | $ | 67,715 | $ | 3,894 | $ | 63,821 | ||||||
Third-party development services | 345 | 345 | ||||||||||
Third-party management services | 1,572 | 1,572 | ||||||||||
Operating expense reimbursements | 4,399 | 4,399 | ||||||||||
Total revenues | 74,031 | 3,894 | 70,137 | |||||||||
Operating expenses: | ||||||||||||
Collegiate housing leasing operations | 30,677 | 1,768 | 28,909 | |||||||||
Development and management services | 3,263 | 3,263 | ||||||||||
General and administrative | 4,050 | 4,050 | ||||||||||
Depreciation and amortization | 17,518 | 1,007 | 16,511 | |||||||||
Ground lease expense | 3,020 | 3,020 | ||||||||||
Reimbursable operating expenses | 4,399 | 4,399 | ||||||||||
Total operating expenses | 62,927 | 2,775 | 60,152 | |||||||||
Operating income | 11,104 | 1,119 | 9,985 | |||||||||
Nonoperating expenses: | ||||||||||||
Interest expense | 7,587 | 7,587 | ||||||||||
Amortization of deferred financing costs | 623 | 623 | ||||||||||
Interest income | (44 | ) | (44 | ) | ||||||||
Loss on extinguishment of debt | - | - | ||||||||||
Total nonoperating expenses | 8,166 | - | 8,166 | |||||||||
Income before equity in earnings (losses) of unconsolidated entities, income taxes and discontinued operations | 2,938 | 1,119 | 1,819 | |||||||||
Equity in earnings (losses) of unconsolidated entities | (301 | ) | (301 | ) | ||||||||
Income before income taxes and discontinued operations | 2,637 | 1,119 | 1,518 | |||||||||
Income tax benefit | (479 | ) | (479 | ) | ||||||||
Income from continuing operations | $ | 3,116 | $ | 1,119 | $ | 1,997 |
See accompanying notes.
Education Realty Trust, Inc. and Subsidiaries
Pro forma condensed consolidated statement of operations
Year ended December 31, 2011 (Unaudited)
(Dollars in thousands)
Completed | ||||||||||||||||||||||||||||
Acquisitions | ||||||||||||||||||||||||||||
Completed | Pending | and Pending | ||||||||||||||||||||||||||
Consolidated | Acquisition of | Acquisition of | Acquisitions | Dispositions | Dispositions | |||||||||||||||||||||||
Education Realty | GrandMarc at | University | Pro Forma | Company | Pro Forma | Company | ||||||||||||||||||||||
Trust, Inc. | Xxxxxxxxx Place | Village Towers | Adjustments | Pro Forma | Adjustments | Pro Forma | ||||||||||||||||||||||
Revenues: | (F) | (G) | (H) | (P) | ||||||||||||||||||||||||
Collegiate housing leasing revenue | $ | 109,404 | $ | 6,728 | $ | 2,769 | $ | - | $ | 118,901 | $ | 7,078 | $ | 111,823 | ||||||||||||||
Third-party development services | 4,103 | 4,103 | 4,103 | |||||||||||||||||||||||||
Third-party management services | 3,336 | (101 | )(I) | 3,235 | 3,235 | |||||||||||||||||||||||
Operating expense reimbursements | 8,604 | 8,604 | 8,604 | |||||||||||||||||||||||||
Total revenues | 125,447 | 6,728 | 2,769 | (101 | ) | 134,843 | 7,078 | 127,765 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Collegiate housing leasing operations | 50,610 | 3,194 | 1,449 | (960 | )(J) | 54,293 | 3,933 | 50,360 | ||||||||||||||||||||
Development and management services | 5,506 | 5,506 | 5,506 | |||||||||||||||||||||||||
General and administrative | 11,016 | 11,016 | 11,016 | |||||||||||||||||||||||||
Depreciation and amortization | 29,105 | 2,905 | (K) | 32,010 | 1,996 | 30,014 | ||||||||||||||||||||||
Ground lease expense | 5,498 | 960 | (J) | 6,458 | 6,458 | |||||||||||||||||||||||
Loss on impairment | 7,859 | 7,859 | 7,859 | - | ||||||||||||||||||||||||
Reimbursable operating expenses | 8,604 | 8,604 | 8,604 | |||||||||||||||||||||||||
Total operating expenses | 118,198 | 3,194 | 1,449 | 2,905 | 125,746 | 13,788 | 111,958 | |||||||||||||||||||||
Operating income (loss) | 7,249 | 3,534 | 1,320 | (3,006 | ) | 9,097 | (6,710 | ) | 15,807 | |||||||||||||||||||
Nonoperating expenses: | ||||||||||||||||||||||||||||
Interest expense | 18,242 | 1,851 | (L) | 20,093 | 20,093 | |||||||||||||||||||||||
Amortization of deferred financing costs | 1,244 | 38 | (M) | 1,282 | 1,282 | |||||||||||||||||||||||
Interest income | (175 | ) | (175 | ) | (175 | ) | ||||||||||||||||||||||
Xxxx on extinguishment of debt | 351 | 351 | 351 | |||||||||||||||||||||||||
Total nonoperating expenses | 19,662 | - | - | 1,889 | 21,551 | - | 21,551 | |||||||||||||||||||||
Income (loss) before equity in earnings (losses) of unconsolidated entities, income taxes and discontinued operations | (12,413 | ) | 3,534 | 1,320 | (4,895 | ) | (12,454 | ) | (6,710 | ) | (5,744 | ) | ||||||||||||||||
Equity in earnings (losses) of unconsolidated entities | (447 | ) | 270 | (N) | (177 | ) | (177 | ) | ||||||||||||||||||||
Income (loss) before income taxes and discontinued operations | (12,860 | ) | 3,534 | 1,320 | (4,625 | ) | (12,631 | ) | (6,710 | ) | (5,921 | ) | ||||||||||||||||
Income tax benefit | (95 | ) | (41 | )(O) | (136 | ) | (136 | ) | ||||||||||||||||||||
Income (loss) from continuing operations | $ | (12,765 | ) | $ | 3,534 | $ | 1,320 | $ | (4,584 | ) | $ | (12,495 | ) | $ | (6,710 | ) | $ | (5,785 | ) |
See accompanying notes.
Education Realty Trust, Inc. and Subsidiaries
Pro forma condensed consolidated statements of operations
Years ended December 31, 2010 and 2009 (Unaudited)
(Dollars in thousands)
Pending | Pending | |||||||||||||||||||||||
Consolidated | Dispositions | Consolidated | Dispositions | |||||||||||||||||||||
Education Realty | Pro Forma | Company | Education Realty | Pro Forma | Company | |||||||||||||||||||
Trust, Inc. | Adjustments | Pro Forma | Trust, Inc. | Adjustments | Pro Forma | |||||||||||||||||||
2010 | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||||||
Revenues: | (Q) | (R) | (Q) | (R) | ||||||||||||||||||||
Collegiate housing leasing revenue | $ | 96,510 | $ | 6,613 | $ | 89,897 | $ | 93,359 | $ | 6,844 | $ | 86,515 | ||||||||||||
Third-party development services | 2,483 | 2,483 | 8,178 | 8,178 | ||||||||||||||||||||
Third-party management services | 3,189 | 3,189 | 3,221 | 3,221 | ||||||||||||||||||||
Operating expense reimbursements | 14,519 | 14,519 | 9,722 | 9,722 | ||||||||||||||||||||
Total revenues | 116,701 | 6,613 | 110,088 | 114,480 | 6,844 | 107,636 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Collegiate housing leasing operations | 46,293 | 3,640 | 42,653 | 45,582 | 3,642 | 41,940 | ||||||||||||||||||
Development and management services | 5,268 | 5,268 | 5,933 | 5,933 | ||||||||||||||||||||
General and administrative | 12,133 | 12,133 | 9,819 | 9,819 | ||||||||||||||||||||
Depreciation and amortization | 25,021 | 1,928 | 23,093 | 22,787 | 1,912 | 20,875 | ||||||||||||||||||
Ground lease expense | 1,528 | 1,528 | 207 | 207 | ||||||||||||||||||||
Loss on impairment | - | - | - | - | ||||||||||||||||||||
Reimbursable operating expenses | 13,603 | 13,603 | 9,722 | 9,722 | ||||||||||||||||||||
Total operating expenses | 103,846 | 5,568 | 98,278 | 94,050 | 5,554 | 88,496 | ||||||||||||||||||
Operating income | 12,855 | 1,045 | 11,810 | 20,430 | 1,290 | 19,140 | ||||||||||||||||||
Nonoperating expenses: | ||||||||||||||||||||||||
Interest expense | 19,787 | 19,787 | 19,309 | 19,309 | ||||||||||||||||||||
Amortization of deferred financing costs | 1,192 | 1,192 | 939 | 939 | ||||||||||||||||||||
Interest income | - | - | (830 | ) | (830 | ) | ||||||||||||||||||
Gain on extinguishment of debt | (414 | ) | (414 | ) | (469 | ) | (469 | ) | ||||||||||||||||
Total nonoperating expenses | 20,565 | - | 20,565 | 18,949 | - | 18,949 | ||||||||||||||||||
Income (loss) before equity in earnings (losses) of unconsolidated entities, income taxes and discontinued operations | (7,710 | ) | 1,045 | (8,755 | ) | 1,481 | 1,290 | 191 | ||||||||||||||||
Equity in earnings (losses) of unconsolidated entities | (260 | ) | (260 | ) | (1,410 | ) | (1,410 | ) | ||||||||||||||||
Income (loss) before income taxes and discontinued operations | (7,970 | ) | 1,045 | (9,015 | ) | 71 | 1,290 | (1,219 | ) | |||||||||||||||
Income tax expense | 442 | 442 | 1,905 | 1,905 | ||||||||||||||||||||
Income (loss) from continuing operations | $ | (8,412 | ) | $ | 1,045 | $ | (9,457 | ) | $ | (1,834 | ) | $ | 1,290 | $ | (3,124 | ) |
See accompanying notes.
Education Realty Trust, Inc. and Subsidiaries
Notes to pro forma condensed consolidated financial statements (Unaudited)
(Dollars in thousands)
1. | Adjustments to the unaudited pro forma condensed consolidated balance sheet as of June 30, 2012 |
(A) | Reflects the Company’s unaudited condensed consolidated balance sheet as of June 30, 2012 as reported in its Form 10-Q as of June 30, 2012. |
(B) | Represents the pro forma adjustments to reflect the follow-on equity offering conducted in August 2012. The Company sold 17.3 million shares of common stock, raising net proceeds of $180.9 million. It used $30.0 million of the proceeds to repay the balance on its unsecured line of credit. The remaining proceeds will be used to repay debt, fund the development pipeline, fund future acquisitions and for general corporate purposes. |
(C) | Represents the pro forma adjustments to reflect the probable dispositions of the collegiate housing communities referred to as NorthPointe, serving The University of Arizona, and The Reserve on Frankford, serving Texas Tech University, as if the dispositions had occurred on June 30, 2012. These probable dispositions are expected to be completed in September 2012. The aggregate net proceeds from the sale of these communities are expected to be approximately $43.0 million. These communities will be classified as discontinued operations in our statement of operations in future presentations. |
2. | Adjustments to the unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2012 |
(D) | Reflects the Company’s unaudited historical condensed consolidated statement of operations for the six months ended June 30, 2012. |
(E) | Reflects the historical unaudited collegiate housing leasing revenue, collegiate housing leasing operations expense and depreciation and amortization related to the probable disposition of NorthPointe and The Reserve on Frankford for the six months ended June 30, 2012. |
3. | Adjustments to the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2011 |
(F) | Reflects the Company’s unaudited historical condensed consolidated statement of operations for the year ended December 31, 2011. |
(G) | Reflects the historical unaudited certain revenues and certain expenses related to the acquisition of GrandMarc at Xxxxxxxxx Place through the date of acquisition. |
(H) | Reflects the historical unaudited certain revenues and certain expenses related to the acquisition of University Village Towers through the date of acquisition. |
(I) | Represents the elimination of third-party management fee revenue earned by the Company for managing the joint venture referred to as University Village Towers prior to acquisition. |
(J) | Adjustment to reflect the reclassification of ground lease expense related to GrandMarc at Xxxxxxxxx Place from collegiate housing leasing operations to ground lease expense. |
(K) | Represents the additional depreciation and amortization expense as a result of the purchase accounting adjustments related to both collegiate housing acquisitions. |
(L) | Represents an increase in interest expense for the year ended December 31, 2011 to reflect the assumption of debt in connection with the acquisition of GrandMarc at Xxxxxxxxx Place. |
(M) | Represents the additional amortization of deferred financing costs as a result of the assumption of debt in connection with the acquisition of GrandMarc at Xxxxxxxxx Place. These costs are amortized over the remaining life of the debt using the effective interest method. |
(N) | Elimination of the Company’s share of the loss on the investment in the joint venture referred to as University Village Towers. |
(O) | Adjustment for the reduction in income tax expense associated with the elimination of the third party management fee revenue referenced in note (I) above. |
(P) | Reflects the historical unaudited collegiate housing leasing revenue, collegiate housing leasing operations expense, depreciation and amortization and loss on impairment related to the probable disposition of NorthPointe and The Reserve on Frankford for the year ended December 31, 2011. |
3. | Adjustments to the unaudited pro forma condensed consolidated statement of operations for the years ended December 31, 2010 and 2009 |
(Q) | Reflects the Company’s unaudited historical condensed consolidated statements of operations for the years ended December 31, 2010 and 2009. |
(R) | Reflects the historical unaudited collegiate housing leasing revenue, collegiate housing leasing operations expense and depreciation and amortization related to the probable disposition of NorthPointe and The Reserve on Frankford for the years ended December 31, 2010 and 2009. |