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| 8-K - 8-K - Education Realty Trust, Inc. | a8-kcitiinvestorpresentati.htm |
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Key Themes
Recent Updates
Deep Experienced Management Team
Best-in-Class Portfolio
Stable Industry With Growth Potential
Investment Strategy for Value Creation
Capital Structure to Support Growth
Superior Historical Shareholder Returns
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Recent Updates
Recent Updates
On-Campus – ONE Plans
• Awarded 7 on-campus deals since start of 2017:
• Lehigh – ONE Plan – ~425 beds – targeting delivery in 2019
• Mississippi State – ONE Plan – ~650 beds – targeting delivery in 2019
• Cornell East Hill Village – ONE Plan - ~470 beds targeting delivery in 2020
• South Carolina – Third-party – ~3,700 beds – targeting deliveries in 2020 – 2024
• Univ. of South FL – St. Petersburg – Third-party – ~550 beds – 2019 or 2020 delivery
• Sacramento State – possible ONE Plan - ~1,100 beds – targeting delivery in 2021
• Umass Dartmouth – Third-party - ~1,200 beds – targeting delivery in 2020
• 82% of ONE Plan assets and 77% of our total portfolio, including active developments,
are at Ivy League and Power 5 conference schools.
Developments and Acquisitions
• Grew collegiate housing assets by 16% in 2017, with $128 million in acquisitions and
delivery of 6 owned developments totaling $281 million.
• Accelerated anticipated delivery of Hawaii development from 2019 to summer 2018.
• Active development pipeline, 7,464 beds for $900 million, represents prefunded growth
in collegiate housing assets of 32% over 12/31/2017.
• Anticipate 2019 development pipeline to be between $117 and $150 million.
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Recent Updates
Recent Updates
Capital Structure
• Amended revolver, increasing capacity by $100 million to $600 million and extending
maturity for 5 years to 2023.
• Debt to gross assets, net of ATM forward equity, was 21% at 12/31/17 and 27%
forward looking after funding active developments.
• First debt maturity not until 2021.
• $190 million of unsettled ATM forward equity shares available to fund developments.
• Pursuing the disposition of $150 - $225 million of assets in 2018.
2018 New Supply in EdR’s Markets
• Supply growth is expected to outpace enrollment growth by ~60 bps compared to an
average of 64 bps over the last 5 years.
• Six EdR markets are anticipated to be challenging due to three year cumulative supply
in excess of 10%.
• 75% of NOI is from markets where purpose built off-campus student housing is below
the national average of 25% of enrollment, indicating further room for modernization.
• 71% of NOI comes from markets where cumulative supply over the last 3 years was
less than 6% of enrollment or on average less than 2% per year.
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Recent Updates
Recent Updates
Guidance
• 2018 Core FFO per share/unit guidance range of $1.81 to $1.91, a 2% decline at the
midpoint from 2017.
• Guidance includes no third-party development fees, driving a decline in third-party fees
that equates to an $0.08 decline in Core FFO from 2017.
• Anticipate full year same-community revenue, expense, and NOI growth at the
midpoint to be 1.3%, 3.5% and flat, respectively.
• Projected 2018/2019 leasing results include revenue growth of 2.0% to 4.0% for the
same-leasing portfolio (all communities leased for this and last leasing cycle) and 1.5%
to 3.0% for the 2018 financial same-community portfolio.
• Capital needs during 2018 are projected to be $426 million and are expected to be
funded with $190 million of sold but unsettled ATM forward equity shares, $225 million
of disposition proceeds and the remainder with the revolver.
• Year end leverage is expected to be approximately 26%.
See following page for a comparison of 2018 Core FFO per share/unit guidance at the
midpoint to the results for 2017.
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Recent Updates
Recent Updates
Guidance (cont.)
The following compares the midpoint of 2018 Core FFO per share/unit guidance to the
results for 2017 (in millions, except per share/unit amounts):
Core FFO
Core FFO per
Share/Unit
Weighted
Average
Shares/Units
Total
Shares/Units
Outstanding
Full Year 2017 $ 141.5 $ 1.90 74.5 76.4
Impact of difference in weighted average shares and shares outstanding
at 12/31/2017 — (0.05) 1.9 —
Increase in community NOI 25.4 0.33 — —
Decrease in third-party fee revenue (6.2) (0.08) — —
Decrease in general and administrative expense 4.3 0.06 — —
Increase in interest expense, net (16.9) (0.22) — —
All other, net 0.2 — — —
Midpoint of 2018 Core FFO guidance without Capital Transactions $ 148.3 $ 1.94 76.4 76.4
Decrease in NOI from asset dispositions (10.4) (0.14) — —
Net impact on interest expense and share count from anticipated
dispositions and settling 4.8 million already sold ATM forward
equity shares 7.0 0.06 1.5 4.8
Midpoint of 2018 Core FFO Guidance with Capital Transactions $ 144.9 $ 1.86 77.9 81.2
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Deep Experienced Management Team
Deep Experienced Management Team
Executives
Randy Churchey CEO & Chairman 8
Tom Trubiana President 28
Chris Richards COO 16
Bill Brewer CFO 4
Operations
Matt Fulton SVP 19
Frank Witt Regional VP 25
16 Other VPs and Regional Directors 10
Years of Tenure At EdR
Senior Development / Acq 7
Senior Finance and Other 9
Board of Directors (5) – Includes 3 current/former public REIT CEOs, former
CEO of public hospitality company and a former “big 4” audit partner.
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Portfolio Snapshot
Best-in-Class Portfolio
December 31, 2017
Including
Announced
Transactions
Owned communities 70 74
University markets 41 44
Beds 36,420 39,684
Median distance to campus 0.1 miles 0.1 miles
Average distance to campus 0.3 miles 0.3 miles
% of NOI on or pedestrian to campus 90% 92%
% NOI on campus 34% 30%
Average full-time enrollment 27,275 26,675
Average rental rate $816 $ 872
Average age 7 years 7 years
NOTE: Enrollment is based on 2016 full-time enrollment from common data sets. The last column includes announced developments and excludes
anticipated dispositions, with the exception of the recently awarded Cornell – East Hill Village and Sacramento State, which are in preliminary stages.
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Portfolio Characteristics
Best-in-Class Portfolio
HIGH DEMAND
UNIVERSITIES
1.8x
APPLICATION
TO ADMITTANCE
RATIO
(1) Represents our communities’ relative position in their respective market, based on a comparison of average rents to local
competitors. Includes only open and operating communities.
81%
OF BEDS SERVE
UNIVERSITIES
WITH >20,000
ENROLLMENT
12%
56%
33%
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Well Positioned(1)
Low End Average
High End
44%
28%
23%
5%
Diverse Product
Mid-Rise High-Rise
Garden2 Cottage2
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Strong Operating Performance
Best-in-Class Portfolio
Source: Respective financial supplements.
$397
$783
2010 2017
Same-Community NAR
per Occupied Bed
51%
60%
2010 2017
Same-Community
Margins
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Market Leading Internal Growth
Best-in-Class Portfolio
Source: Respective company’s disclosures. EdR’s proprietary leasing system, PILOT, which tracks market trends and
leasing velocity by unit type, gives EdR the tools to produce consistent and market leading leasing results.
Market-Leading
Leasing Results in
3 of Last 5
Years
3.3% 3.4%
2.7%
3.0%
Revenue NOI
EdR ACC
Same-Community Growth
Seven-Year CAGR Through December 2017
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Stable Demand
Stable Industry With Growth Potential
Projected Full-Time Enrollment Growth
Projected Average % Growth 2016-2025 = 1.4%
Sources: National Center for Education Statistics (NCES) report titled “Projections of Education Statistics to 2025, Forty-fourth edition" (Sept 2017),
Pew Research - Social & Demographic Trends: The Rising Cost of Not Going to College, February 11, 2014, Moody’s Investors Service, Special
Comment: More US Colleges Face Stagnating Enrollment and Tuition Revenue, According to Moody’s Survey, Jan. 10, 2013.
Enrollment Drivers
• Earnings gap between high school and college
graduates has stretched to its widest level in nearly a
half century
• US high school graduates will increase by an
average annual rate of 0.6% between 2016 and 2025
• Students seek the highest value education
• There is a correlation between university size and
enrollment trends, with the highest median
enrollment growth experienced at large, program-
diversified universities.
• Enrollment at public four-year institutions has out
performed four-year private and for-profit institutions
as well as two-year institutions
1.3%
2.3% 2.0%
1.5%
1.1% 1.3%
1.2% 1.3% 1.1%
0.4%
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
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2016 Enrollment Growth
Stable Industry With Growth Potential
2016 enrollment at post-secondary institutions
declined 1.4%, driven mainly by a large drop at
for-profit and 2-year institutions.
• Decline at 4-Year Private institutions mainly
isolated to small schools with <3,000 students
• 4-year public schools experienced enrollment
growth
Sources: Wall Street Journal article titled "College Enrollment Drops 1.4% as Adults Head Back to Work" (Dec. 2016), National Student Clearinghouse Research
Center. Enrollment growth for EdR markets comes from either university common data sets or IPEDS.
• Average enrollment across EdR portfolio is
over 27,000
• Enrollment at EdR universities served is
consistent with prior years and outpaces the
average
• International students represent
approximately 5% of all university students
EdR's focus on larger tier 1 universities produces stronger enrollment growth.
-1.4%
-14.5%
-2.6%
-0.6%
0.2% 1.1%
All Institutions For-Profit 2-Year 4-Year Private 4-Year Public EdR Markets
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Growth by Market
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Manageable Supply
Stable Industry With Growth Potential
EdR Markets – Supply, Enrollment and Revenue Growth
Note: Source is Company and AXIOMetrics data. 2013 through 2017 data represents the portfolio as it was in each respective year.
(1) Data includes the existing portfolio plus 2017 developments. The estimated enrollment growth is based on the 3-year enrollment CAGR through 2016 for the included
communities.
(2) The estimated enrollment growth is based on the 3-year enrollment CAGR through 2016 for the included communities.
(3) Represents the midpoint of 2018/2019 leasing guidance.
(14%) (23%) (22%)
2013 2014 2015 2016 2017(1) 2018 Est(2)
EdR Markets:
New supply as % of enrollment 2.2% 2.2% 2.0% 1.8% 2.1% 1.9%
Enrollment growth 1.3% 1.4% 1.5% 1.5% 1.4% 1.3%
Difference 0.9% 0.8% 0.5% 0.3% 0.7% 0.6%
Same-community leasing results:
Occupancy increase/(decrease) 3.0% 2.0% 0.4% (1.1)% (1.2)%
Rate increase 2.0% 2.0% 3.4% 3.4 % 3.0%
Total leasing revenue growth 5.0% 4.0% 3.8% 2.3 % 1.8% 3.0%(3)
• 2018 supply to enrollment gap improved
compared to last 5 years.
• Averaged 3.4% revenue growth over
last 5 years.
•Favorable environment for future muted supply
▪ Increasing land and construction costs
▪ Tighter construction lending market
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Modernization
Stable Industry With Growth Potential
Modernization is in full swing with new purpose-built housing
supply replacing older duplexes, single-family homes, etc.
Source: Company and AXIOMetrics data. Represents EdR’s markets.
Other Housing
49%On‐Campus
Housing 27%
Off‐Campus
Purpose Built
24%
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Consistent and Stable Revenue Growth
Stable Industry With Growth Potential
Student Housing - 52 consecutive quarters with same store revenue growth.
Source: SNL Financial and Goldman Sachs Global Investment Research
3.0%
Average
3.5%
Average
-6%
-4%
-2%
0%
2%
4%
6%
8%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Student Housing Apartment
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2018 – 2019 development deliveries $900mm
Median distance to campus 0.1 miles
Average distance to campus 0.3 miles
Average full-time enrollment 26,675
Average development yields 6.5% - 7.0%
32%
GROWTH IN
COLLEGIATE
HOUSING
ASSETS FROM 2017
29%OF
DEVELOPMENTS
ARE ON-CAMPUS
Embedded External Growth
Investment Strategy for Value Creation
Note: Does not include the University or Cornell – East Hill Village and Sacramento State developments as
details are not yet finalized.
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Quality Development Pipeline
Investment Strategy for Value Creation
29%
ON-CAMPUS(1)
96%
ADJACENT TO
OR
ON-CAMPUS (1)
(1) Includes announced developments.
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5.00%
5.00%
1.50% - 1.75%
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
Development Yields
Market Cap Rates
Acquisition Cap Rates Development Premium
Development Premiums Drive Growth
Investment Strategy for Value Creation
Yield Premium For Low-Risk Developments(1)
(1) Current market cap rates for adjacent to campus assets in EdR type markets range from 4.50 to 5.25%.
30% Premium
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Development
Year
Percentage
On-Campus
Budgeted
Total Cost
EdR’s
Economic
Ownership
Cost
Market
Value(1)
Additional
AV Creation
Incremental
NAV per
Share
2018 Deliveries 18% $783 $648 $843 $195 $1.93
2019 Deliveries 100% $118 $118 $180 $62 $0.62
Total Active
Developments 29% $901 $766 $1,023 $257 $2.55
Value Creation from Announced Developments
Investment Strategy for Value Creation
(1) Based on a 6.5% average project yield and cap rates of 4.25% for on-campus and 5.25% for off-campus developments.
in Millions, except
per share data
34% Value Creation
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EdR’s
Share of
Cost
(in millions)
First Year
Occupancy
Second Year
Occupancy
First-Year
Economic
Yield
2017 Deliveries $271 87.9% N / A 6.5% - 7%(1)
2016 Deliveries $158 91.1% 92.6% 7.3%
2015 Deliveries $180 94.1% 99.1% 7.5%
2014 Deliveries $263 94.4% 95.0% 7.7%
2013 Deliveries $192 92.4% 98.9% 7.4%
2012 Deliveries $91 96.7% 99.3% 9.1%
Total / Average $1,155 92.3% 96.5% 7.8%
Note: Excludes any unconsolidated joint ventures.
(1) Represents average proforma first-year economic yields
EdR developments have opened with average first year occupancy of 92.3% and first-year economic yields above 7%
Student Housing Developments Less Risky
• Delivering to stable market demand
• Campuses expand but don’t move
• Construction risk passed to general
contractor
• Developments on or adjacent to campus
Successful Development Delivery
Investment Strategy for Value Creation
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Investment Strategy for Value Creation
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On-Campus Market Context
Investment Strategy for Value Creation
University Market Trends
▪ Reduction in state funding
▪ Demographic shifts
▪ Significant deferred maintenance
▪ Increasing competitiveness for
students
▪ On-campus students perform better
Main Reasons Universities Pursue P3s
▪ Funding shortfalls
▪ Risk transfer
▪ Operational efficiencies
▪ Project efficiencies
▪ Debt control
Enrollment
Growth
7.2%
State
Appropriations
(14.6%)
Source: Center on Budget & Policy Priorities, Aon Infrastructure Solutions and P3C Conference Survey Report.
(‘07 to ’14)
(‘07 to ’14)
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Public REITs Dominate Equity P3s
Investment Strategy for Value Creation
NOTE: Combined public company results from company financial supplements.
$0.3
Billion
$1.8
Billion
2009 2017
Delivered On-Campus
Equity Developments
Significant Competitive Advantages
Proven on-campus development and
management expertise
Well-capitalized balance sheet
Size and depth of resources
Public company transparency
Long-term owner of assets
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ONE Plan History
Investment Strategy for Value Creation
• Best risk-adjusted return
• Currently 34% NOI from on-campus
assets
• Recently awarded Lehigh University,
Mississippi State and second
development at Cornell
• Robust pipeline of opportunities
(1) Based on average economic yield of 6.5% and cap rate of 4.25%
(2) Current and announced ONE Plan investments, except for the recently awarded developments at Cornell – East Hill Village and Sacramento State as
details are not yet finalized.
$26 $81 $111
$204
$342
$443
$527
$718
$833
$951
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ONE Plan investments
Market Value(1)
$1,454
Year-End Cumulative Cost
in Millions
(2)
49%
CAGR
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On-Campus Market Continues to Grow
Investment Strategy for Value Creation
Boise State University Honors Housing
Northern Michigan University
30+ Active on-campus opportunities
New housing growth: South / West
Replacement housing: Midwest / Northeast
Growth in university systems
Growth in top tier privates
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Approach to Funding Capital Commitments
Capital Structure to Support Growth
• Investment Grade Rated Balance Sheet (recent upgrade to Baa2 by Moody’s)
• Capital commitments include developments and acquisitions we are contractually
obligated to complete
• Maintain forward looking debt to gross asset target range of 25% - 30%
• Capital sources include cash on hand, cash from operations, sold but unsettled
ATM forward equity shares, current debt facilities, capital recycling and equity
issuance depending on market conditions and economics
• ATM is most efficient source of equity due to low execution cost and ability to do
over time as capital is needed. Forward option on ATM protects against current
dilution.
• Sold $505 million in assets since 2010, representing 73% of the assets owned at
the beginning of 2010
• Every incremental development or acquisition commitment requires equity
funding or capital recycling of 70% - 75% to maintain debt to gross asset range
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Capital Commitments and Funding
Capital Structure to Support Growth
Estimated Capital Commitments:
Total Project
Development
Cost
Acquisition or
Development Costs
funded by EdR
(Excludes Partner
Contributions)
Cost Incurred to
Date
Remaining Capital
Needs
2018 Development deliveries $ 783 $ 743 $ 371 $ 372
2019 Development deliveries 118 118 2 116
Total Capital Commitments $ 901 $ 861 $ 373 $ 488
Estimated Capital Funding: 2018 Thereafter Capital Sources
Disposition proceeds $ 225 $ — $ 225
Equity proceeds, available from ATM forward sales 190 — 190
Additional debt, including draws on Line of Credit 11 62 73
Total Capital Funding $ 426 $ 62 $ 488
12/31/2017
Pro Forma for
Funding Needs
Through
12/31/2018
Pro Forma for
Funding Needs
Through 12/31/2019
Debt to Gross Assets(1) 28% 26% 27%
Note: Capital Commitments include EdR’s share of announced and active developments. See the Fourth Quarter 2017 Financial Supplement for further details.
(1) Debt to gross assets is defined as total debt, excluding deferred financing costs, divided by gross assets, or total assets excluding accumulated depreciation on real estate assets.
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Leverage Target and Philosophy
Capital Structure to Support Growth
• Target - 25% to 30% debt to gross assets
• Philosophy - run our balance sheet such that we can fund current commitments with
cash on hand, sold but unsettle ATM forward shares, cash from operations and current
debt facilities and stay within target debt to gross asset range
• Results in balance sheet capacity and flexibility to take advantage of opportunities
(1) Projected year end 2018 leverage, which reflects funding all announced developments with cash on hand, proceeds from completed ATM forward equity sales
and draws on EdR’s revolving credit facility without any additional equity.
(2) Net debt to gross assets is defined as total debt, excluding the unamortized deferred financing costs, less cash, divided by gross assets, or total assets excluding
accumulated depreciation on real estate assets.
42%
35%
27%
17%
27% 26%
2013 2014 2015 2016 2017 2018 F (1)
N
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(
2
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November '15 new debt to gross
asset target range established.
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Debt Metrics as of December 31, 2017
Capital Structure to Support Growth
Source: Company financial supplements and KeyBanc Corp; Debt includes any outstanding preferred equity
(1) Net debt to gross assets is defined as total debt, excluding the unamortized deferred financing costs, less cash, divided by gross assets, or total assets excluding accumulated depreciation on
real estate assets.
(2) Adjusted EBITDA is defined as GAAP net income excluding: (1) straight line adjustment for ground leases; (2) acquisition costs; (3) depreciation and amortization; (4) loss on impairment of
collegiate housing assets; (5) gain on sale of collegiate housing properties; (6) interest expense, net of capitalized interest and interest income; (7) amortization of deferred financing costs; (8)
income tax expense (benefit); (9) non-controlling interests; (10) other operating expense related to noncash adjustments; (11) loss on extinguishment of debt and (12) other non-operating
expense (income).
(3) Interest coverage is adjusted EBITDA divided by interest expense.
27%
38%
48%
Net Debt To
Gross Assets(1)
6.0X
6.8X 6.8X
Debt to EBITDA(2)
5.3X
4.2X
3.1X
Interest
Coverage(3)
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Current Capital Structure
Capital Structure to Support Growth
• Conservative Leverage Levels
• Debt to Gross Assets: 21%, net of
unsettled ATM forward equity
• Net Debt to Adjusted EBITDA: 3.3x
• No Secured Debt
• Strong Coverage Levels
• Interest Coverage Ratio: 5.3x
• Well-staggered debt maturities
• $600 million unsecured Credit Facility
expandable to $1 billion(1)
• $190 million sold but not yet settled ATM
forward equity
• Attractive dividend(2)
• Dividend Yield: 5.0%
(1) In February 2018, the unsecured revolving credit facility was amended to extend the maturity until February 2023 and to expand the maximum availability to $600 million.
(2) Based on current annual dividend of $1.56 and stock price of $31.05 on February 27, 2018.
$123
$65
$250
$349
$150
2018 2019 2020 2021 2022 2023 2024 2025+
Debt Maturities as of December 31,
2017 (in Millions)
Unsecured Private Placement Notes
Unsecured revolving credit facility (1)
Unsecured Senior Notes
Unsecured Term Loan - Fixed Rate
Construction Loans - Variable Rate
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Superior Historical Shareholder Return
Superior Historical Shareholder Return
Note: Period starting from the date Randy Churchey, Chairman and CEO and new management team was put in place.
Source: KeyBanc Leaderboard. Other REIT sector TSRs: MFG housing 331%, self-storage 321%, data centers 223%, industrial
288%, triple net 210%, mall 152%, shopping ctr 127%, healthcare 134%, lodging 115% and office 122%.
222%
187%
157%
98%
EdR MF RMZ ACC
TSR – January 2010 to December 2017
EdR TSR 28th
of 174 REITS.
Top 16%
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Safe Harbor Statement
Statements about the Company’s business that are not historical facts are “forward-looking
statements,” which relate to expectations, beliefs, projections, future plans and strategies,
anticipated events or trends, and similar expressions. In some cases, you can identify forward-
looking statements by the use of forward-looking terminology such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or the
negative of these words and phrases or similar words or phrases which are predictions of or
indicate future events or trends and which do not relate solely to historical matters. Forward-
looking statements are based on current expectations. You should not rely on our forward-looking
statements because the matters that they describe are subject to known and unknown risks and
uncertainties that could cause the Company’s business, financial condition, liquidity, results of
operations, Core FFO, FFO and prospects to differ materially from those expressed or implied by
such statements. Such risks are set forth under the captions “Risk Factors,” “Forward-Looking
Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” (or similar captions) in our most recent Annual Report on Form 10-K and our quarterly
reports on Form 10-Q, and as described in our other filings with the Securities and Exchange
Commission. Forward-looking statements speak only as of the date on which they are made, and,
except as otherwise may be required by law, the Company undertakes no obligation to update
publicly or revise any guidance or other forward-looking statement, whether as a result of new
information, future developments, or otherwise, except as required by law.