ASSOCIATED ESTATES REALTY CORP - FORM 8-K - EX-99.2 - SUPPLEMENTAL

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EX-99.2 - SUPPLEMENTAL PDF - ASSOCIATED ESTATES REALTY CORP	q12014supex992r181.pdf
8-K - 8-K - ASSOCIATED ESTATES REALTY CORP	q120148k.htm
EX-99.1 - PRESS RELEASE - ASSOCIATED ESTATES REALTY CORP	q12014pr991.htm

Exhibit 99.2

Associated Estates Realty Corporation

First Quarter 2014

Earnings Release and Supplemental Financial Information



The Apartments at Blakeney
8718 Wintersweet Ln.	Phone:	888-285-0398
Charlotte, NC 28277	Web Site:	blakeneyapartments.com



For more information, please contact:
Jeremy Goldberg
(216) 797-8715

Associated Estates Realty Corporation

First Quarter 2014

Supplemental Financial Information



Table of Contents	Page

Earnings Release	3

Financial and Operating Highlights	5

Condensed Consolidated Balance Sheets	8

Consolidated Statements of Operations and Comprehensive Income	9

Reconciliation of Funds from Operations (FFO) and Funds Available for Distribution (FAD)	10

Development Pipeline	11

Overview of Operating Expenses Related to Repairs and Maintenance and Capitalized Expenditures	12

General and Administrative Expense, Personnel Expense - Allocated, Construction Services,

Development and Property Management	13

Same Community Data	14

Sequential Property Revenue, Operating Expenses and Net Operating Income	16

First Quarter Property Revenue, Operating Expenses and Net Operating Income	17

Debt Structure	18

2014 Financial Outlook	19

Definitions of Non-GAAP Financial Measures	20

This news release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on certain assumptions, as well as current expectations, estimates, projections, judgments and knowledge of management, all of which are subject to risks, trends and uncertainties that could cause actual results to vary from those projected. Factors which may cause the Company’s actual results or performance to differ materially from those contemplated by forward-looking statements include, without limitation, those described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission, and 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; 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 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 results of litigation involving the Company; and risks associated with property acquisitions and dispositions, such as failure to achieve expected results. Readers should carefully review the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and the other documents the Company files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management’s judgment as of this date, and the Company assumes no obligation to revise or update them to reflect future developments or circumstances.

Associated Estates Realty Corporation

First Quarter Earnings

ASSOCIATED ESTATES REALTY CORPORATION

REPORTS FIRST QUARTER 2014 RESULTS

Same Community Revenue Growth of 3.1%

Same Community Average Occupancy of 96.2%

Portfolio Transformation Continues with Property Sales

Cleveland, Ohio - April 29, 2014 - Associated Estates Realty Corporation (NYSE, NASDAQ: AEC) announced today its financial results for the first quarter ended March 31, 2014.

“Revenue growth continues to be solid throughout our portfolio, and average occupancy for the quarter remained strong at over 96 percent," said Jeffrey I. Friedman, President and Chief Executive Officer. “Furthermore, we’ve completed a number of important transactions as part of our previously announced funding strategy. The proceeds from property dispositions will be used to fund our committed acquisitions and development projects, both of which are transforming the portfolio,” Friedman continued.

Funds from Operations (FFO) for the first quarter of 2014 were $0.30 per common share (diluted), compared to $0.31 per common share (diluted) for the first quarter of 2013. Net income applicable to common shares was $42.1 million, or $0.73 per common share (diluted), for the quarter ended March 31, 2014. This compared to net income applicable to common shares of $10.3 million, or $0.20 per common share (diluted), for the first quarter of 2013. The quarter-over-quarter increase in net income was driven by a $41.0 million gain associated with the sale of one property in the first quarter of 2014 versus a gain of $8.8 million associated with the sale of one property in the first quarter of 2013.

Same Community Portfolio Results

Net operating income (NOI) for the first quarter of 2014 for the Company’s same community portfolio increased 1.8% compared to the first quarter of 2013. Revenue increased 3.1%, and property operating expenses increased 5.2%. Operating expenses were impacted by the extremely harsh winter weather experienced during the first quarter of 2014. Adjusting for the expenses associated with the weather, expense growth would have been 2.4% and NOI growth would have been 3.6%, both in line with expectations. Average occupancy for the first quarter of 2014 was 96.2% compared to 95.7% for the first quarter of 2013. Average monthly property revenue per occupied unit for the first quarter of 2014 was $1,220 compared to $1,189 for the first quarter of 2013, a 2.6% increase.

A reconciliation of net income attributable to the Company to FFO, is included on page 10.

Disposition Activity

Year-to-date, the Company closed on the sale of three properties:


•	Hampton Point in Silver Spring, MD on February 24, 2014;


•	Vista Germantown in Nashville, TN on April 2, 2014; and


•	Reflections in Columbia, MD on April 28, 2014.

The dispositions noted above represented 778 units and total proceeds of approximately $152 million. The blended unlevered IRR on these sales is 17.7%, and the blended market cap is 5.4%, which is calculated after a 3% management fee and marking real estate taxes to market.

Associated Estates Realty Corporation

First Quarter Earnings

Capital Markets Activity

Subsequent to quarter end, the Company’s 50/50 joint venture with AIG Global Real Estate entered into a construction loan agreement for 350 Eighth, the 410-unit apartment community under construction in the SoMa neighborhood of San Francisco. The $143.6 million loan has a five-year term and based on the Company’s current credit ratings, has a rate of LIBOR plus 160 basis points. PNC Capital Markets LLC is the Lead Arranger and Sole Bookrunner of the facility, and PNC Bank, N.A., RBS Citizens, N.A. and Bank of America, N.A. are lenders in the facility.

2014 Outlook

The Company has reaffirmed its 2014 guidance. Detailed assumptions relating to the Company's guidance can be found on page 19.

Conference Call

A conference call to discuss the Company’s first quarter results will be held on April 30, 2014, 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 11616128. An operator will ask you for the conference ID. The call will be archived through May 14, 2014. 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 "First Quarter 2014 Earnings Conference Call" link. The webcast will be archived for 90 days.

Upcoming Events

The Company will participate in REITWeek: NAREIT’s Investor Forum, being held June 3-5 at The Waldorf Astoria in New York City. 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 June 3, in the Investors section of the Company's website at AssociatedEstates.com.

Associated Estates Realty Corporation

Financial and Operating Highlights

For the Three Months Ended March 31, 2014 and 2013

(Unaudited; in thousands, except per share and ratio data)



	Three Months Ended
	March 31,
	2014			2013
OPERATING INFORMATION
Total revenue	$	49,715		$	42,856
Property revenue	$	49,150		$	42,544
Property management and construction services revenue	$	87		$	—
Net income applicable to common shares	$	42,116		$	10,298
Per share - basic	$	0.73		$	0.21
Per share - diluted	$	0.73		$	0.20
Funds from Operations (FFO) ⁽¹⁾	$	17,076		$	15,589
FFO per share - diluted	$	0.30		$	0.31
Funds Available for Distribution (FAD) ⁽¹⁾	$	16,229		$	14,720
Dividends per share	$	0.19		$	0.19
Payout ratio - FFO	63.3		%	61.3		%
Payout ratio - FAD	67.9		%	65.5		%
General and administrative expense	$	5,319		$	4,958
Development costs	$	330		$	262
Construction services expense	$	57		$	—
Personnel expense - allocated	$	1,163		$	1,010
Costs associated with acquisitions	$	86		$	—
Interest expense ⁽²⁾	$	6,481		$	6,927
Capitalized interest	$	1,034		$	476
Interest coverage ratio ⁽³⁾	3.09:1			2.99:1
Fixed charge coverage ratio ⁽⁴⁾	3.09:1			2.99:1
General and administrative expense to property revenue	10.8		%	11.7		%
Personnel - allocated as a percentage of property revenue	2.4		%	2.4		%
Interest expense to property revenue ⁽²⁾	13.2		%	16.3		%
Property NOI ⁽⁵⁾	$	29,782		$	26,348
ROA ⁽⁶⁾	7.9		%	8.0		%
Same Community revenue increase	3.1		%	4.3		%
Same Community expense increase	5.2		%	1.6		%
Same Community NOI increase	1.8		%	6.1		%
Same Community operating margins	60.9		%	61.5		%


(1)	See page 10 for a reconciliation of net income attributable to AERC to these non-GAAP measurements and page 20 for the Company's definition of these non-GAAP measurements.


(2)	Excludes amortization of financing fees of $472 for 2014 and $494 for 2013.


(3)	Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs and excluding prepayment costs/refunds. Individual line items in this calculation include results from discontinued operations where applicable. See page 20 for a reconciliation of net income applicable to common shares to EBITDA and the Company's definition of EBITDA.


(4)	Represents interest expense, including capitalized interest, and preferred stock dividend payment coverage, excluding prepayment costs/refunds. Individual line items in this calculation include discontinued operations where applicable.


(5)	See page 21 for a reconciliation of net income attributable to AERC to this non-GAAP measurement and the Company's definition of this non-GAAP measurement.


(6)	ROA is calculated as trailing twelve month Property NOI divided by average gross real estate assets, excluding properties currently under development. Gross real estate assets for acquired properties are prorated based upon the percentage of time owned.

Associated Estates Realty Corporation

Financial and Operating Highlights

First Quarter 2014

(Unaudited; in thousands, except per share and ratio data)



	March 31,			December 31,
	2014			2013
CAPITALIZATION DATA
Cash and cash equivalents	$	11,619		$	4,586
Net real estate assets	$	1,334,784		$	1,373,999
Total assets	$	1,394,150		$	1,422,497

Debt	$	758,084		$	812,974
Noncontrolling interests	$	350		$	350
Total shareholders' equity attributable to AERC	$	576,995		$	544,450

Common shares outstanding	57,567			57,476
Share price, end of period	$	16.94		$	16.05

Total capitalization	$	1,733,269		$	1,735,464

Undepreciated book value of real estate assets ⁽¹⁾	$	1,721,471		$	1,760,840

Net debt to undepreciated book value of real estate assets	43.4		%	45.9		%

Secured debt to undepreciated book value	15.6		%	15.9		%

Annual dividend	$	0.76		$	0.76

Annual dividend yield based on share price, end of period	4.5		%	4.7		%


(1)	Includes $35,007 and $9,321 of the Company's investment in unconsolidated entities at March 31, 2014 and December 31, 2013.

Associated Estates Realty Corporation

Financial and Operating Highlights

First Quarter 2014

(Unaudited)



		Number of
	Properties	Units	Average Age
PORTFOLIO INFORMATION
Company Portfolio:
Same Community:
Midwest	25	5,936	21
Mid-Atlantic	12	3,461	10
Southeast	7	1,802	16
Southwest	3	842	11
Total Same Community	47	12,041	16

Acquisitions	5	1,184	9
Development ⁽¹⁾	—	99	1
Total Owned Portfolio	52	13,324	15
Third Party Managed:
Charlotte, NC	2	267
Total Company Portfolio	54	13,591


(1)	Reflects a 99-unit expansion to a community located in Dallas, Texas.

Associated Estates Realty Corporation

Condensed Consolidated Balance Sheets

First Quarter 2014

(Unaudited; dollar amount in thousands)



	March 31,			December 31,
	2014			2013
ASSETS
Real estate assets
Investment in real estate	$	1,596,060		$	1,708,726
Construction in progress	53,753			42,793
Less: Accumulated depreciation	(383,808		)	(386,841		)
Real estate held for sale, net of accumulated depreciation of $2,879	33,772			—
Net real estate owned	1,299,777			1,364,678
Investment in unconsolidated entities	35,007			9,321
Total net real estate	1,334,784			1,373,999
Cash and cash equivalents	11,619			4,586
Restricted cash	3,789			3,465
Other assets	43,958			40,447
Total assets	$	1,394,150		$	1,422,497

LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable	$	269,084		$	279,474
Unsecured notes	250,000			250,000
Unsecured revolving credit facility	89,000			133,500
Unsecured term loan	150,000			150,000
Total debt	758,084			812,974
Accounts payable and other liabilities	58,721			64,723
Total liabilities	816,805			877,697

Equity
Common shares, without par value; $.10 stated value; 91,000,000 authorized;
57,627,745 issued and 57,566,529 outstanding at March 31, 2014 and
57,595,479 issued and 57,476,192 outstanding at December 31, 2013, respectively	5,763			5,760
Paid-in capital	755,021			754,582
Accumulated distributions in excess of accumulated net income	(182,050		)	(213,275		)
Accumulated other comprehensive loss	(765		)	(702		)
Less: Treasury shares, at cost, 61,216 and 119,287 shares
at March 31, 2014 and December 31, 2013, respectively	(974		)	(1,915		)
Total shareholders' equity attributable to AERC	576,995			544,450
Noncontrolling interest	350			350
Total equity	577,345			544,800
Total liabilities and equity	$	1,394,150		$	1,422,497

Associated Estates Realty Corporation

Consolidated Statements of Operations and Comprehensive Income

Three Months Ended March 31, 2014 and 2013

(Unaudited; dollar and share amounts in thousands)



	Three Months Ended
	March 31,
	2014			2013
REVENUE
Property revenue	$	49,150		$	42,544
Office revenue	478			312
Property management and construction services revenue	87			—
Total revenue	49,715			42,856

EXPENSES
Property operating and maintenance	19,368			16,196
Depreciation and amortization	16,295			13,890
General and administrative	5,319			4,958
Development costs	330			262
Construction services	57			—
Costs associated with acquisitions	86			—
Total expenses	41,455			35,306
Operating income	8,260			7,550
Interest expense	(6,953		)	(7,421		)
Income from continuing operations	1,307			129
Income from discontinued operations:
Operating income, net of interest expense	—			1,438
Gain on disposition of properties	—			8,796
Income from discontinued operations	—			10,234
Income before gain on disposition of properties	1,307			10,363
Gain on disposition of properties	40,966			—
Net income	42,273			10,363
Net income attributable to noncontrolling redeemable interest	—			(17		)
Net income attributable to AERC	$	42,273		$	10,346
Allocation to participating securities	(157		)	(48		)
Net income applicable to common shares	$	42,116		$	10,298

Earnings per common share - basic:
Income from continuing operations applicable to common shares	$	0.73		$	—
Income from discontinued operations	—			0.21
Net income applicable to common shares - basic	$	0.73		$	0.21

Earnings per common share - diluted:
Income from continuing operations applicable to common shares	$	0.73		$	—
Income from discontinued operations	—			0.20
Net income applicable to common shares - diluted	$	0.73		$	0.20

Comprehensive income:
Net income	$	42,273		$	10,363
Other comprehensive income:
Change in fair value and reclassification of hedge instruments	(63		)	(112		)
Total comprehensive income	42,210			10,251
Comprehensive income attributable to noncontrolling interests	—			(17		)
Total comprehensive income attributable to AERC	$	42,210		$	10,234

Weighted average shares outstanding - basic	57,362			49,634

Weighted average shares outstanding - diluted	57,833			50,280

Associated Estates Realty Corporation

Reconciliation of Funds from Operations (FFO) and Funds Available for Distribution (FAD)

Three Months Ended March 31, 2014 and 2013

(Unaudited; in thousands, except per share data)



		Three Months Ended
		March 31,
		2014			2013
CALCULATION OF FFO AND FAD
Net income attributable to AERC		$	42,273		$	10,346

Add:	Depreciation - real estate assets	14,795			12,834
	Amortization of intangible assets	974			1,205
Less:	Gain on disposition of properties	(40,966		)	(8,796		)

	Funds from Operations (FFO) ⁽¹⁾	17,076			15,589

Add:	Depreciation - other assets	526			522
	Amortization of deferred financing fees	472			494
Less:	Recurring fixed asset additions ⁽²⁾	(1,845		)	(1,885		)
	Funds Available for Distribution (FAD) ⁽¹⁾	$	16,229		$	14,720

Weighted average shares outstanding - diluted ⁽³⁾		57,833			50,280

PER SHARE INFORMATION:
FFO - diluted		$	0.30		$	0.31
Dividends		$	0.19		$	0.19

Payout ratio - FFO		63.3		%	61.3		%
Payout ratio - FAD		67.9		%	65.5		%


(1)	See page 20 for the Company's definition of these non-GAAP measurements. Individual line items included in FFO and FAD calculations include results from discontinued operations where applicable.


(2)	Fixed asset additions exclude development, investment, revenue enhancing and non-recurring capital additions.


(3)	The Company has excluded 42 and 83 stock options for the three months ended March 31, 2014 and 2013, respectively as their inclusion would be anti-dilutive.

Associated Estates Realty Corporation

Development Pipeline

As of March 31, 2014

(Unaudited; dollar amounts in thousands)

This table includes forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause results to vary from those projected. Please see the paragraph on forward-looking statements on page 2 of this document for a list of risk factors.

Completed Development

Actual Dates for

Completed

Ownership

Total

Construction

Initial

Construction

Stabilized

Construction

Units

Costs

Debt

Start

Occupancy

Completion

Operations ⁽²⁾

Occupied

San Raphael Phase II

100.0%

13,712

—

Q2 2012

Q4 2013

Q1 2014

97.0%

Dallas, TX

Total

13,712

—

Consolidated Current Developments

Total

Estimated

Estimated/Actual Dates for

Under

Ownership

Total

Capital

Cost to

Total

Construction

Initial

Construction

Stabilized

Construction

Units

Cost ⁽¹⁾

Date

Debt

Start

Occupancy

Completion

Operations ⁽²⁾

Leased

Occupied

7001 Bethesda

97.0% ⁽³⁾

140

53,400

28,592

5,837

Q4 2012

Q4 2014

Q2 2015

Q3 2015

N/A

Bethesda, MD

Cantabria

100.0%

249

56,800

32,379

12,614

Q2 2013

Q3 2014

Q1 2015

Q2 2015

N/A

Dallas, TX

The Desmond on Wilshire

100.0%

175

76,300

30,579

—

Q2 2013

Q3 2015

Q4 2015

Q1 2016

N/A

Los Angeles, CA

Total

564

186,500

91,550

18,451

Unconsolidated Future Development Pipeline - Unimproved Land



			Estimated Number			AEC Investment
Name	Location	Ownership %	of Units ⁽⁴⁾	Cost to Date		to Date
350 Eighth	San Francisco, CA	50.0%	410	$	53,903	$	25,074

950 Third	Los Angeles, CA	50.0%	472	$	32,924	$	2,527

Monrovia	Monrovia, CA	50.0%	154	$	14,636	$	7,406

Total			1,036	$	101,463	$	35,007


(1)	Total capital cost represents estimated costs for projects under development inclusive of all capitalized costs in accordance with GAAP.


(2)	We define stabilized occupancy as the earlier of the attainment of 93.0% physical occupancy or one year after the completion of construction.


(3)	Ownership percentage based on current equity of the joint venture and is subject to change based on changes in total equity. Joint venture partner contribution is $350.


(4)	Based on current projections as of April 29, 2014.

Associated Estates Realty Corporation

Overview of Operating Expenses Related to Repairs and Maintenance and Capitalized Expenditures

(In thousands; except estimated GAAP useful life and cost per unit)



		Three Months Ended
	Estimated	March 31, 2014
	GAAP Useful			Cost Per
	Life (Years)	Amount		Unit ⁽¹⁾
OPERATING EXPENSES RELATED TO REPAIRS AND MAINTENANCE
Repairs and maintenance ⁽²⁾		$	2,983	$	222
Maintenance personnel labor cost ⁽²⁾		1,764		131
Total Operating Expenses Related to Repairs and Maintenance		4,747		353

CAPITAL EXPENDITURES
Recurring Capital Expenditures ⁽³⁾
Amenities	5	206		15
Appliances	5	289		22
Building improvements	14	205		15
Carpet and flooring	5	697		52
Furnishings	5	30		2
Office/Model	5	19		2
HVAC and mechanicals	15	175		13
Landscaping and grounds	14	51		4
Unit improvements	5	32		2
Total Recurring Capital Expenditures - Properties		1,704		127
Corporate capital expenditures		141		10
Total Recurring Capital Expenditures		1,845		137
Total Recurring Capital Expenditures and Repairs and Maintenance		$	6,592	$	490

Total Recurring Capital Expenditures		$	1,845
Investment/Revenue Enhancing/Non-Recurring Expenditures ⁽⁴⁾
Building improvements - unit upgrades	Various	108
Building improvements - other	20	209
Ground improvements	Various	3
Total Investment/Revenue Enhancing/Non-Recurring Expenditures		320
Grand Total Capital Expenditures		$	2,165


(1)	Calculated using weighted average units owned during the three months ended March 31, 2014 of 13,440.


(2)	Included in property operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income.


(3)	See page 21 for the Company's definition of recurring fixed asset additions.


(4)	See page 21 for the Company's definition of investment/revenue enhancing and/or non-recurring fixed asset additions.

Associated Estates Realty Corporation

General and Administrative Expense, Personnel Expense - Allocated, Construction Services,

Development and Property Management

For the Three Months Ended March 31, 2014 and 2013

(Unaudited; in thousands)



	Three Months Ended
	March 31,
	2014			2013
General and Administrative, Personnel - Allocated, Construction Services,
Development and Property Management
General and administrative expense ⁽¹⁾	$	5,319		$	4,958
Personnel expense - allocated ⁽²⁾	1,163			1,010
Total	6,482			5,968
Construction services revenue	(66		)	—
Construction services expense	57			—
Construction services, net	(9		)	—
Development costs	330			262
Net development	321			262
Property management revenue	(21		)	—
Net overhead	$	6,782		$	6,230


(1)	As reported per the Consolidated Statement of Operations and Comprehensive Income.


(2)	Represents general and administrative expense allocations to property operating and maintenance expenses.

Associated Estates Realty Corporation

Same Community Data

Operating Results for the Last Five Quarters

(Unaudited; in thousands, except unit totals and per unit amounts)



	Quarter Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2014			2013			2013			2013			2013

Property Revenue	$	42,394		$	42,259		$	42,447		$	41,811		$	41,111
Property Operating and
Maintenance Expenses
Personnel - on site	3,473			3,214			3,420			3,352			3,478
Personnel - allocated	1,004			999			1,005			984			977
Advertising	476			429			444			460			447
Utilities	1,952			1,919			1,984			1,775			1,832
Repairs and maintenance	2,576			2,187			2,607			2,686			2,308
Real estate taxes and insurance	6,126			5,667			5,656			5,870			5,717
Other operating	987			969			985			1,074			1,008
Total Expenses	16,594			15,384			16,101			16,201			15,767

Property Net Operating Income	$	25,800		$	26,875		$	26,346		$	25,610		$	25,344

Operating Margin	60.9		%	63.6		%	62.1		%	61.3		%	61.6		%

Personnel - Allocated as a
Percentage of Property Revenue	2.4		%	2.4		%	2.4		%	2.4		%	2.4		%

Total Number of Units	12,041			12,041			12,041			12,041			12,041

Property NOI Per Unit	$	2,143		$	2,232		$	2,188		$	2,127		$	2,105

Monthly Property Revenue
Per Occupied Unit	$	1,220		$	1,226		$	1,228		$	1,211		$	1,189

Average Occupancy ⁽¹⁾	96.2		%	95.4		%	95.7		%	95.6		%	95.7		%


(1)	Is defined as the average number of units occupied during the quarter divided by total number of units.

Associated Estates Realty Corporation

Same Community Data

As of March 31, 2014 and 2013

(Unaudited)



			Property Revenue per						Average				Turnover
			Occupied Unit						Occupancy ⁽¹⁾				Ratio ⁽²⁾
	No. of	Average	Q1		Q1		%		Q1		Q1		Q1		Q1
	Units	Age ⁽³⁾	2014		2013		Change		2014		2013		2014		2013
Midwest Properties
Indianapolis	836	18	$	944	$	920	2.6	%	97.9	%	96.2	%	36.4	%	34.0	%
Southeast Michigan	1,778	21	1,010		969		4.2	%	96.3	%	95.4	%	42.5	%	38.2	%
Western Michigan	438	23	916		896		2.2	%	97.6	%	97.9	%	48.4	%	42.9	%
Central Ohio	1,581	23	1,005		987		1.8	%	95.8	%	95.1	%	46.8	%	55.2	%
Northeast Ohio	1,303	19	1,186		1,153		2.9	%	95.6	%	95.6	%	46.4	%	48.2	%
Total Midwest	5,936	21	1,031		1,002		2.9	%	96.3	%	95.7	%	44.1	%	44.7	%

Mid-Atlantic Properties
Maryland	315	28	1,572		1,573		(0.1	)%	94.2	%	95.6	%	34.3	%	26.7	%
Metro DC	250	6	2,118		2,110		0.4	%	94.6	%	96.8	%	48.0	%	49.6	%
Raleigh-Durham	760	7	1,211		1,156		4.8	%	97.1	%	94.6	%	50.5	%	42.6	%
Northern Virginia	1,272	9	1,638		1,622		1.0	%	95.9	%	95.7	%	44.3	%	46.9	%
Southeast Virginia	864	8	1,229		1,215		1.2	%	95.5	%	95.0	%	47.2	%	47.2	%
Total Mid-Atlantic	3,461	10	1,471		1,449		1.5	%	95.7	%	95.5	%	45.8	%	44.4	%

Southeast Properties
Southeast Florida	1,206	16	1,418		1,375		3.1	%	97.1	%	95.9	%	46.1	%	47.1	%
Atlanta	354	22	1,130		1,082		4.4	%	96.6	%	96.8	%	50.8	%	42.9	%
Nashville	242	2	1,600		1,531		4.5	%	95.0	%	96.4	%	67.8	%	51.2	%
Total Southeast	1,802	16	1,386		1,339		3.5	%	96.7	%	96.1	%	49.9	%	46.8	%

Southwest Properties
Dallas	842	11	1,169		1,121		4.3	%	96.3	%	96.4	%	47.5	%	52.3	%
Total Southwest	842	11	1,169		1,121		4.3	%	96.3	%	96.4	%	47.5	%	52.3	%

Total/Average Same
Community	12,041	16	$	1,220	$	1,189	2.6	%	96.2	%	95.7	%	45.7	%	45.4	%


(1)	Is defined as the average number of units occupied during the quarter divided by total number of units.


(2)	Represents the number of units turned over for the quarter, divided by the number of units in a market, annualized.


(3)	Age shown in years.



Associated Estates Realty Corporation
Sequential Property Revenue,Operating Expenses and Net Operating Income (NOI)
For the Three Months Ended March 31,2014 and December 31, 2013
(Unaudited, in thousands, except unit totals)
		Q1		Q4		Q1		Q4							Q1		Q4					Q1		Q4
		2014		2013		2014		2013							2014		2013					2014		2013
	No. of	Average		Average						Incr/			%						Incr/	%						Incr/		%
	Units	Occupancy ⁽¹⁾		Occupancy ⁽¹⁾		Revenue		Revenue		(Decr)			Change		Expenses		Expenses		(Decr)	Change		NOI		NOI		(Decr)		Change
Same Community
Midwest Properties
Indianapolis	836	97.9	%	95.1	%	$	2,319	$	2,275	$	44		1.9	%	855		$	838	17	2.0	%	1,464		$	1,437	27		1.9	%
Southeast Michigan	1,778	96.3	%	95.1	%	5,186		5,160		26			0.5	%	2,026		1,935		91	4.7	%	3,160		3,225		(65	)	(2.0	)%
Western Michigan	438	97.6	%	97.4	%	1,175		1,186		(11		)	(0.9	)%	520		478		42	8.8	%	655		708		(53	)	(7.5	)%
Central Ohio	1,581	95.8	%	95.8	%	4,566		4,616		(50		)	(1.1	)%	1,983		1,816		167	9.2	%	2,583		2,800		(217	)	(7.8	)%
Northeast Ohio	1,303	95.6	%	94.6	%	4,435		4,439		(4		)	(0.1	)%	1,758		1,516		242	16.0	%	2,677		2,923		(246	)	(8.4	)%
	5,936	96.3	%	95.3	%	17,681		17,676		5			—	%	7,142		6,583		559	8.5	%	10,539		11,093		(554	)	(5.0	)%
Mid-Atlantic Properties
Maryland	315	94.2	%	95.7	%	1,400		1,442		(42		)	(2.9	)%	501		430		71	16.5	%	899		1,012		(113	)	(11.2	)%
Metro DC	250	94.6	%	94.6	%	1,502		1,505		(3		)	(0.2	)%	508		471		37	7.9	%	994		1,034		(40	)	(3.9	)%
Raleigh-Durham	760	97.1	%	96.9	%	2,680		2,672		8			0.3	%	909		870		39	4.5	%	1,771		1,802		(31	)	(1.7	)%
Northern Virginia	1,272	95.9	%	94.4	%	5,996		5,954		42			0.7	%	2,024		1,836		188	10.2	%	3,972		4,118		(146	)	(3.5	)%
Southeast Virginia	864	95.5	%	94.2	%	3,042		2,992		50			1.7	%	1,056		1,007		49	4.9	%	1,986		1,985		1		0.1	%
	3,461	95.7	%	95.0	%	14,620		14,565		55			0.4	%	4,998		4,614		384	8.3	%	9,622		9,951		(329	)	(3.3	)%
Southeast Properties
Southeast Florida	1,206	97.1	%	96.3	%	4,984		4,905		79			1.6	%	2,188		2,063		125	6.1	%	2,796		2,842		(46	)	(1.6	)%
Atlanta	354	96.6	%	97.4	%	1,160		1,174		(14		)	(1.2	)%	493		479		14	2.9	%	667		695		(28	)	(4.0	)%
Nashville	242	95.0	%	96.3	%	1,103		1,121		(18		)	(1.6	)%	415		389		26	6.7	%	688		732		(44	)	(6.0	)%
	1,802	96.7	%	96.5	%	7,247		7,200		47			0.7	%	3,096		2,931		165	5.6	%	4,151		4,269		(118	)	(2.8	)%
Southwest Properties
Dallas	842	96.3	%	96.0	%	2,846		2,818		28			1.0	%	1,358		1,256		102	8.1	%	1,488		1,562		(74	)	(4.7	)%
	842	96.3	%	96.0	%	2,846		2,818		28			1.0	%	1,358		1,256		102	8.1	%	1,488		1,562		(74	)	(4.7	)%
Total Same Community	12,041	96.2	%	95.4	%	42,394		42,259		135			0.3	%	16,594		15,384		1,210	7.9	%	25,800		26,875		(1,075	)	(4.0	)%
Acquisitions ⁽²⁾
Southeast Florida	388	94.8	%	96.0	%	1,964		2,001		(37		)	(1.8	)%	823		721		102	14.1	%	1,141		1,280		(139	)	(10.9	)%
Charlotte	295	94.3	%	96.6	%	1,120		1,009		111			11.0	%	412		336		76	22.6	%	708		673		35		5.2	%
Raleigh-Durham	349	93.0	%	84.1	%	1,264		532		732			137.6	%	414		222		192	86.5	%	850		310		540		174.2	%
Dallas	152	96.5	%	95.9	%	1,205		1,175		30			2.6	%	658		471		187	39.7	%	547		704		(157	)	(22.3	)%
Development
Dallas	99	83.5	%	N/A		291		141		150			106.4	%	104		68		36	52.9	%	187		73		114		156.2	%
Properties owned at 3/31	13,324	95.9	%	95.2	%	48,238		47,117		1,121			2.4	%	19,005		17,202		1,803	10.5	%	29,233		29,915		(682	)	(2.3	)%
Dispositions ⁽³⁾	352					912		1,457							363		484					549		973
Total	13,676					$	49,150	$	48,574						$	19,368	$	17,686				$	29,782	$	30,888


(1)	Is defined as the average number of units occupied during the quarter divided by total number of units.


(2)	We define acquisition properties as acquired properties which have been owned less than one year.


(3)	Effective Q1 2014 for the Company, per ASU No. 2014-08, only disposals representing a major strategic shift in operations will be presented as discontinued operations.



Associated Estates Realty Corporation
First Quarter Property Revenue, Operating Expenses and Net Operating Income (NOI)
For the Three Months Ended March 31, 2014 and 2013
(Unaudited; in thousands, except unit totals)
		Q1		Q1		Q1		Q1							Q1		Q1							Q1		Q1
		2014		2013		2014		2013							2014		2013							2014		2013
	No. of	Average		Average						Incr/			%						Incr/			%						Incr/			%
	Units	Occupancy ⁽¹⁾		Occupancy ⁽¹⁾		Revenue		Revenue		(Decr)			Change		Expenses		Expenses		(Decr)			Change		NOI		NOI		(Decr)			Change
Same Community
Midwest Properties
Indianapolis	836	97.9	%	96.2	%	$	2,319	$	2,219	$	100		4.5	%	$	855	$	809	$	46		5.7	%	$	1,464	$	1,410	$	54		3.8	%
Southeast Michigan	1,778	96.3	%	95.4	%	5,186		4,935		251			5.1	%	2,026		1,980		46			2.3	%	3,160		2,955		205			6.9	%
Western Michigan	438	97.6	%	97.9	%	1,175		1,154		21			1.8	%	520		506		14			2.8	%	655		648		7			1.1	%
Central Ohio	1,581	95.8	%	95.1	%	4,566		4,451		115			2.6	%	1,983		1,953		30			1.5	%	2,583		2,498		85			3.4	%
Northeast Ohio	1,303	95.6	%	95.6	%	4,435		4,308		127			2.9	%	1,758		1,649		109			6.6	%	2,677		2,659		18			0.7	%
	5,936	96.3	%	95.7	%	17,681		17,067		614			3.6	%	7,142		6,897		245			3.6	%	10,539		10,170		369			3.6	%
Mid-Atlantic Properties
Maryland	315	94.2	%	95.6	%	1,400		1,420		(20		)	(1.4	)%	501		494		7			1.4	%	899		926		(27		)	(2.9	)%
Metro DC	250	94.6	%	96.8	%	1,502		1,532		(30		)	(2.0	)%	508		513		(5		)	(1.0	)%	994		1,019		(25		)	(2.5	)%
Raleigh-Durham	760	97.1	%	94.6	%	2,680		2,493		187			7.5	%	909		811		98			12.1	%	1,771		1,682		89			5.3	%
Northern Virginia	1,272	95.9	%	95.7	%	5,996		5,922		74			1.2	%	2,024		1,916		108			5.6	%	3,972		4,006		(34		)	(0.8	)%
Southeast Virginia	864	95.5	%	95.0	%	3,042		2,992		50			1.7	%	1,056		908		148			16.3	%	1,986		2,084		(98		)	(4.7	)%
	3,461	95.7	%	95.5	%	14,620		14,359		261			1.8	%	4,998		4,642		356			7.7	%	9,622		9,717		(95		)	(1.0	)%
Southeast Properties
Southeast Florida	1,206	97.1	%	95.9	%	4,984		4,771		213			4.5	%	2,188		2,098		90			4.3	%	2,796		2,673		123			4.6	%
Atlanta	354	96.6	%	96.8	%	1,160		1,112		48			4.3	%	493		493		—			—	%	667		619		48			7.8	%
Nashville	242	95.0	%	96.4	%	1,103		1,072		31			2.9	%	415		351		64			18.2	%	688		721		(33		)	(4.6	)%
	1,802	96.7	%	96.1	%	7,247		6,955		292			4.2	%	3,096		2,942		154			5.2	%	4,151		4,013		138			3.4	%
Southwest Properties
Dallas	842	96.3	%	96.4	%	2,846		2,730		116			4.2	%	1,358		1,286		72			5.6	%	1,488		1,444		44			3.0	%
	842	96.3	%	96.4	%	2,846		2,730		116			4.2	%	1,358		1,286		72			5.6	%	1,488		1,444		44			3.0	%
Total Same Community	12,041	96.2	%	95.7	%	42,394		41,111		1,283			3.1	%	16,594		15,767		827			5.2	%	25,800		25,344		456			1.8	%
Acquisitions ⁽²⁾
Southeast Florida	388	94.8	%	N/A		1,964		—		1,964			N/A		823		—		823			N/A		1,141		—		1,141			N/A
Charlotte	295	94.3	%	N/A		1,120		—		1,120			N/A		412		—		412			N/A		708		—		708			N/A
Raleigh-Durham	349	93.0	%	N/A		1,264		—		1,264			N/A		414		—		414			N/A		850		—		850			N/A
Dallas	152	96.5	%	N/A		1,205		—		1,205			N/A		658		—		658			N/A		547		—		547			N/A
Development
Dallas	99	83.5	%	N/A		291		—		291			N/A		104		—		104			N/A		187		—		187			N/A
Properties owned at 3/31	13,324	95.9	%	95.7	%	48,238		41,111		7,127			17.3	%	19,005		15,767		3,238			20.5	%	29,233		25,344		3,889			15.3	%
Dispositions ⁽³⁾	352					912		1,433							363		429							549		1,004
Total	13,676					$	49,150	$	42,544						$	19,368	$	16,196						$	29,782	$	26,348


(1)	Is defined as the average number of units occupied during the quarter divided by total number of units.


(2)	We define acquisition properties as acquired properties which have been owned less than one year.


(3)	Effective Q1 2014 for the Company, per ASU No. 2014-08, only disposals representing a major strategic shift in operations will be presented as discontinued operations.

Associated Estates Realty Corporation

Debt Structure

As of March 31, 2014

(Dollar amounts in thousands)



	Balance		Percentage		Weighted
	Outstanding		of		Average
	March 31, 2014		Total Debt		Interest Rate
Fixed Rate Debt:
Secured	$	250,633	33.0	%	4.9	%
Unsecured - notes	250,000		33.0	%	4.4	%
Total Fixed Rate Debt	500,633		66.0	%	4.7	%

Variable Rate Debt Swapped to Fixed:
Unsecured - term loan⁽¹⁾	125,000		16.5	%	3.0	%
Total Variable Rate Debt Swapped to Fixed	125,000		16.5	%	3.0	%

Variable Rate Debt Unhedged:
Secured	18,451		2.4	%	1.5	%
Unsecured - revolver	89,000		11.7	%	1.5	%
Unsecured - term loan	25,000		3.4	%	1.9	%
Total Variable Rate Debt Unhedged	132,451		17.5	%	1.5	%

TOTAL DEBT	$	758,084	100.0	%	3.8	%

Interest coverage ratio ⁽²⁾	3.09:1
Fixed charge coverage ratio ⁽³⁾	3.09:1
Weighted average maturity	5.5 years



Scheduled Principal Maturities:	Secured		Unsecured		Total
2014	$	24,500	$	—	$	24,500
2015	19,851		—		19,851
2016	60,569		—		60,569
2017	—		89,000		89,000
2018	47,591		150,000		197,591
Thereafter	116,573		250,000		366,573
TOTAL	$	269,084	$	489,000	$	758,084

(1)

The Company entered into a forward starting swap in December 2011 fixing the rate beginning in June 2013 until June 2016 at a rate of 1.26% plus the credit spread which was 1.70% as of March 31, 2014, or an all-in rate of 2.96%. Additionally, the Company entered into a forward starting swap in April 2013 fixing the rate beginning June 2016 at a rate of 1.55% plus the credit spread which was 1.70% as of March 31, 2014, or an all-in rate of 3.25% until the loan matures in January 2018.


(2)	Is calculated as EBITDA divided by interest expense, including capitalized interest and amortization of deferred financing costs and excluding prepayment costs/credits. Individual line items in this calculation include results from discontinued operations where applicable. See page 20 for a reconciliation of net income available to common shares to EBITDA and the Company's definition of EBITDA.


(3)	Represents interest expense, including capitalized interest and preferred stock dividend payment coverage, excluding costs/refunds. Individual line items in this calculation include discontinued operations where applicable.

Associated Estates Realty Corporation

2014 Financial Outlook

As of April 29, 2014



Earnings Guidance Per Common Share
Expected net income attributable to AERC		$2.95 to $3.25
Expected real estate depreciation and amortization		1.08
Expected gains on disposition of properties		-2.76 to -3.02
Expected Funds from Operations ⁽¹⁾		$1.27 to $1.31

Same Community Portfolio
Revenue growth		2.75% to 3.75%
Expense growth		1.75% to 2.75%
Property NOI ⁽²⁾ growth		3.40% to 4.40%

Transactions
Acquisitions	$125.6 million
Dispositions	$210.0 to $275.0 million
Development	$110.0 to $120.0 million

Corporate Revenue/Expenses
Construction services revenue, net ⁽³⁾	$0.2 to $0.5 million
Property management fee revenue		$0.2 to $0.3 million
General and administrative expense	$18.6 to $19.1 million
Development costs ⁽³⁾		$0.8 to $1.0 million
Costs associated with acquisitions		$0.2 million

Debt
Capitalized interest	$5.5 million
Expensed interest ⁽⁴⁾	$24.9 to $25.3 million

Capital Structure⁽⁵⁾
Weighted average shares outstanding		58.0 million


(1)	See page 20 for our definition of this non-GAAP measurement.


(2)	See page 21 for our definition of this non-GAAP measurement.


(3)	Net of construction services expense.


(4)	Includes $1.8 million of deferred financing costs.


(5)	Earnings guidance reflects no common share issuances.

Associated Estates Realty Corporation

Definitions of Non-GAAP Financial Measures

The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.

Funds from Operations ("FFO")

We define 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 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 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 our operating performance or as an alternative to cash flow as a measure of liquidity. We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance because FFO can help one compare the operating performance of a company's real estate between periods or as compared to different REITs.

Funds Available for Distribution ("FAD")

We define FAD as FFO, 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. We consider FAD to be an appropriate supplemental measure of the performance of an equity REIT because, like FFO, 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, FAD also reflects the recurring capital expenditures that are necessary to maintain the associated real estate.

Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. We consider EBITDA to be an appropriate supplemental measure of our performance because it eliminates depreciation, income taxes and interest which permits investors to view income from operations unclouded by non-cash depreciation or the cost of debt. Below is a reconciliation of net income applicable to common shares to EBITDA.



	Three Months Ended
	March 31,
(In thousands)	2014			2013

Net income applicable to common shares	$	42,116		$	10,298
Allocation to participating securities	157			48
Interest expense	6,953			7,421
Depreciation and amortization	16,295			14,561
Gain on disposition of properties	(40,966		)	(8,796		)
Income taxes	103			102

Total EBITDA	$	24,658		$	23,634

Associated Estates Realty Corporation

Definitions of Non-GAAP Financial Measures

Property Net Operating Income ("Property NOI")

Property NOI is determined by deducting property operating and maintenance expenses from total property revenue. We consider Property NOI to be an appropriate supplemental measure of our performance because it reflects the operating performance of our real estate portfolio at the property level and is used to assess regional property level performance. Property NOI should not be considered an alternative to net income as a measure of performance or cash generated from operating activities in accordance with GAAP and, therefore, it should not be considered indicative of cash available to fund cash needs. The following is a reconciliation of Property NOI to total consolidated net income attributable to AERC.



	Three Months Ended
	March 31,
(In thousands)	2014			2013

Property NOI	$	29,782		$	26,348
Office NOI	478			312
Property management and construction services NOI	30			—
Depreciation and amortization	(16,295		)	(13,890		)
General and administrative expense	(5,319		)	(4,958		)
Development costs	(330		)	(262		)
Costs associated with acquisitions	(86		)	—
Interest expense	(6,953		)	(7,421		)
Income from continuing operations	1,307			129
Income from discontinued operations:
Operating income, net of interest expense	—			1,438
Gain on disposition of properties	—			8,796
Income from discontinued operations	—			10,234
Income before gain on disposition of properties	1,307			10,363
Gain on disposition of properties	40,966			—
Net income	42,273			10,363
Net income attributable to noncontrolling redeemable interest	—			(17		)
Consolidated net income attributable to AERC	$	42,273		$	10,346

Recurring Fixed Asset Additions

We consider recurring fixed asset additions to a property to be capital expenditures made to replace worn out assets so as to maintain the property's value.

Investment/Revenue Enhancing and/or Non-Recurring Fixed Asset Additions

We consider investment/revenue enhancing and/or non-recurring fixed assets to be capital expenditures if such improvements increase the value of the property and/or enable us to increase rents.

Same Community Properties

Same Community properties are conventional multifamily residential apartments which were owned and operational for the entire periods presented.

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ASSOCIATED ESTATES REALTY CORP Reports