Quick10K

Education Realty Trust

Price	41.58		EPS	2
Shares	81		P/E	26
MCap	3,351		P/FCF	23
Net Debt	979		EBIT	150
TEV	4,329		TEV/EBIT	29
TTM 2018-06-30, in MM, except price, ratios

10-Q	2018-06-30	Filed 2018-08-08 Print
10-Q	2018-03-31	Filed 2018-05-02 Print
10-K	2017-12-31	Filed 2018-02-27 Print
10-Q	2017-09-30	Filed 2017-10-30 Print
10-Q	2017-06-30	Filed 2017-07-31 Print
10-Q	2017-03-31	Filed 2017-05-01 Print
10-K	2016-12-31	Filed 2017-02-28 Print
10-Q	2016-09-30	Filed 2016-10-31 Print
10-Q	2016-06-30	Filed 2016-08-01 Print
10-Q	2016-03-31	Filed 2016-05-02 Print
10-K	2015-12-31	Filed 2016-02-29 Print
10-Q	2015-09-30	Filed 2015-11-02 Print
10-Q	2015-06-30	Filed 2015-08-05 Print
10-Q	2015-03-31	Filed 2015-05-06 Print
10-K	2014-12-31	Filed 2015-02-27 Print
10-Q	2014-09-30	Filed 2014-11-07 Print
10-Q	2014-06-30	Filed 2014-08-06 Print
10-Q	2014-03-31	Filed 2014-05-07 Print
10-K	2013-12-31	Filed 2014-03-03 Print
10-Q	2013-09-30	Filed 2013-11-06 Print
10-Q	2013-06-30	Filed 2013-07-31 Print
10-Q	2013-03-31	Filed 2013-05-07 Print
10-K	2012-12-31	Filed 2013-03-01 Print
10-Q	2012-09-30	Filed 2012-11-06 Print
10-Q	2012-06-30	Filed 2012-08-07 Print
10-Q	2012-03-31	Filed 2012-05-08 Print
10-K	2011-12-31	Filed 2012-03-08 Print
10-Q	2011-09-30	Filed 2011-11-09 Print
10-Q	2011-06-30	Filed 2011-08-08 Print
10-Q	2011-03-31	Filed 2011-05-09 Print
10-K	2010-12-31	Filed 2011-03-09 Print
10-Q	2010-09-30	Filed 2010-11-05 Print
10-Q	2010-06-30	Filed 2010-08-06 Print
10-Q	2010-03-31	Filed 2010-05-07 Print
10-K	2009-12-31	Filed 2010-03-16 Print

8-K	2018-09-20
8-K	2018-09-14
8-K	2018-08-21
8-K	2018-08-09
8-K	2018-06-25
8-K	2018-05-10
8-K	2018-04-30
8-K	2018-03-05
8-K	2018-02-22
8-K	2018-02-20
8-K	2018-02-20
8-K	2018-01-04

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Balance Sheet	Income Statement	Cash Flow
CopyHistoryView Assets, Equity	CopyHistoryView Rev, G Profit, Net Income	CopyHistoryView Ops, Inv, Fin

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10-Q 1 edr20180630-10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to         

Commission file number 001-32417

Education Realty Trust, Inc.

Education Realty Operating Partnership, LP

(Exact Name of Registrant as Specified in Its Charter)

Maryland		20-1352180
Delaware		20-1352332
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

999 South Shady Grove Road, Suite 600 Memphis, Tennessee		38120
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (901) 259-2500

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Education Realty Trust, Inc.                            Yes x No o

Education Realty Operating Partnership, LP                    Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Education Realty Trust, Inc.                            Yes x No o

Education Realty Operating Partnership, LP                    Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Education Realty Trust, Inc.

Large accelerated filer x		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o
		Emerging growth company o

Education Realty Operating Partnership, LP

Large accelerated filer o		Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)		Smaller reporting company o
		Emerging growth company o

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If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Education Realty Trust, Inc.                            Yes o No x

Education Realty Operating Partnership, LP                    Yes o No x

As of August 6, 2018, Education Realty Trust, Inc. had 80,604,618 shares of common stock outstanding.

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EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended June 30, 2018 of Education Realty Trust, Inc. and Education Realty Operating Partnership, LP. Unless stated otherwise or the context otherwise requires, references to “EdR” mean only Education Realty Trust, Inc., a Maryland corporation, and references to “EROP” mean only Education Realty Operating Partnership, LP, a Delaware limited partnership. References to the "Trust," "we," "us" or "our" mean collectively EdR, EROP and those entities/subsidiaries owned or controlled by EdR and/or EROP. References to the "Operating Partnership" mean collectively EROP and those entities/subsidiaries owned or controlled by EROP. The following chart illustrates our corporate structure:

    

The general partner of EROP is Education Realty OP GP, Inc. (the “OP GP”), an entity that is wholly-owned by EdR. As of June 30, 2018, OP GP held an ownership interest in EROP of less than 1%. The limited partners of EROP are Education Realty OP Limited Partner Trust, a wholly-owned subsidiary of EdR, and other limited partners consisting of current and former members of management. The OP GP, as the sole general partner of EROP, has the responsibility and discretion in the management and control of the Operating Partnership, and the limited partners of EROP, in such capacity, have no authority to transact business for, or participate in the management activities of, the Operating Partnership. Management operates EdR and the Operating Partnership as one business. The management of EdR consists of the same members as the management of the Operating Partnership.

The Trust is structured as an umbrella partnership real estate investment trust (“UPREIT”) and EdR contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, EdR receives an equal number of partnership units of EROP (the “OP Units”). Contributions of properties to the Trust can be structured as tax-deferred transactions through the issuance of OP Units. Holders of OP Units may tender their OP Units for redemption by the Operating Partnership in exchange for cash equal to the market price of EdR's common stock at the time of redemption or, at EdR's option, for shares of EdR's common stock. Pursuant to the partnership agreement of EROP, the number of shares to be issued upon the redemption of OP Units is equal to the number of OP Units being redeemed. Additionally, for every one share of common stock offered and sold by EdR for cash, EdR must contribute the net proceeds to EROP and, in return, EROP will issue one OP Unit to EdR.

The Trust believes that combining the quarterly reports on Form 10-Q of EdR and the Operating Partnership into this single report provides the following benefits:

•	enhances investors’ understanding of the Trust by enabling investors to view the business of EdR and the Operating Partnership as a whole in the same manner as management views and operates the business;

•	eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both EdR and the Operating Partnership; and

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•	creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

EdR consolidates the Operating Partnership for financial reporting purposes, and EdR essentially has no assets or liabilities other than its investment in the Operating Partnership. Therefore, the assets and liabilities of EdR and the Operating Partnership are the same in their respective financial statements. However, the Trust believes it is important to understand the few differences between EdR and the Operating Partnership in the context of how the entities operate as a consolidated company. All of the Trust's property ownership, development and related business operations are conducted through the Operating Partnership. EdR also issues public equity from time to time and guarantees certain debt of EROP. EdR does not have any indebtedness, as all debt is incurred by the Operating Partnership. The Operating Partnership holds all of the assets of the Trust, including the Trust’s ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from EdR’s equity offerings, which are contributed to the capital of EROP in exchange for OP Units on the basis of one share of common stock for one OP Unit, the Operating Partnership generates all remaining capital required by the Trust's business, including as a result of the incurrence of indebtedness. These sources include, but are not limited to, the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its credit facilities, proceeds from mortgage indebtedness and debt issuances, and proceeds received from the disposition of certain properties. Noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Trust and those of the Operating Partnership. The noncontrolling interests in the Operating Partnership’s financial statements consist of the interests of unaffiliated partners in various consolidated joint ventures. The noncontrolling interests in the Trust's financial statements include the same noncontrolling interests at the Operating Partnership level. The differences between stockholders’ equity and partners’ capital result from differences in the type of equity issued by EdR and the Operating Partnership.

To help investors understand the significant differences between the Trust and the Operating Partnership, this report provides separate condensed consolidated financial statements for the Trust and the Operating Partnership. A single set of consolidated notes to such financial statements is presented that includes separate discussions for the Trust and the Operating Partnership when applicable (for example, noncontrolling interests, stockholders’ equity or partners’ capital, earnings per share or unit, etc.). A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents discrete information related to each entity, as applicable.

 

In order to highlight the differences between the Trust and the Operating Partnership, the separate sections in this report for the Trust and the Operating Partnership specifically refer to the Trust and the Operating Partnership. In the sections that combine disclosure of the Trust and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Trust. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Trust is appropriate because the Trust operates its business through the Operating Partnership. The separate discussions of the Trust and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Trust on a consolidated basis and how management operates the Trust.

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Education Realty Trust, Inc.

Education Realty Operating Partnership, LP

Form 10-Q

For the Quarter Ended June 30, 2018

Table of Contents

Copy History

			Page Number
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements of Education Realty Trust, Inc. and Subsidiaries:
	Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017		1
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 and 2017		2
	Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2018 and 2017		4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017		5
Condensed Consolidated Financial Statements of Education Realty Operating Partnership, LP and Subsidiaries:
	Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017		7
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2018 and 2017		8
	Condensed Consolidated Statements of Changes in Partners' Capital and Noncontrolling Interests for the six months ended June 30, 2018 and 2017		10
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017		11
Notes to Condensed Consolidated Financial Statements			13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			39
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			59
Item 4. Controls and Procedures.			60
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.			62
Item 1A. Risk Factors.			62
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			63
Item 3. Defaults Upon Senior Securities.			64
Item 4. Mine Safety Disclosures.			64
Item 5. Other Information.			64
Item 6. Exhibits.			64
Signatures.			68

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PART I - Financial Information

Item 1. Financial Statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

(Unaudited)

Copy History

	June 30, 2018				December 31, 2017
Assets:
Collegiate housing properties, net	$	2,526,609			$	2,424,304
Assets under development	733,200				488,614
Cash and cash equivalents	9,502				24,787
Restricted cash	8,839				4,368
Other assets	56,529				73,091
Total assets	$	3,334,679			$	3,015,164
Liabilities:
Unsecured debt, net of unamortized deferred financing costs	$	864,730			$	933,449
Mortgage debt, net of unamortized deferred financing costs	127,270				—
Accounts payable and accrued expenses	161,072				162,434
Deferred revenue	10,586				20,473
Total liabilities	1,163,658				1,116,356
Commitments and contingencies (see Note 7)	—				—
Redeemable noncontrolling interests	58,846				52,843
Equity:
Common stock, $0.01 par value per share, 200,000,000 shares authorized, 80,581,104 and 75,779,932 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	805				757
Preferred shares, $0.01 par value per share, 50,000,000 shares authorized, no shares issued and outstanding	—				—
Additional paid-in capital	2,028,379				1,844,639
Retained earnings	43,747				—
Accumulated other comprehensive income (loss)	2,598				(660		)
Total Education Realty Trust, Inc. stockholders’ equity	2,075,529				1,844,736
Noncontrolling interests	36,646				1,229
Total equity	2,112,175				1,845,965
Total liabilities and equity	$	3,334,679			$	3,015,164

See accompanying notes to the condensed consolidated financial statements.

1

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EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share data)

(Unaudited)

Copy History

	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
Revenues:
Collegiate housing leasing revenue	$	74,190			$	70,071			$	161,939			$	150,856
Third-party development consulting services	—				1,156				—				2,971
Third-party management services	599				831				1,504				1,776
Operating expense reimbursements	1,593				1,984				3,667				4,237
Total revenues	76,382				74,042				167,110				159,840
Operating expenses:
Collegiate housing leasing operations	32,165				30,338				64,339				59,215
Development and management services	2,984				2,775				5,835				5,676
General and administrative	8,605				3,338				11,524				6,765
Depreciation and amortization	23,879				24,520				46,386				50,359
Ground lease expense	2,647				2,462				6,435				6,022
Other operating expense	—				—				—				500
Reimbursable operating expenses	1,593				1,984				3,667				4,237
Total operating expenses	71,873				65,417				138,186				132,774
Operating income	4,509				8,625				28,924				27,066
Nonoperating (income) expenses:
Interest expense, net of amounts capitalized	4,122				3,062				8,873				6,090
Amortization of deferred financing costs	350				358				713				779
Interest income	(21		)		(17		)		(64		)		(49		)
Gain on consolidation of unconsolidated joint ventures	(34,259		)		—				(34,259		)		—
Loss on extinguishment of debt	—				—				—				22
Total nonoperating (income) expenses	(29,808		)		3,403				(24,737		)		6,842
Income before equity in earnings of unconsolidated entities, income taxes and gain on sale of collegiate housing properties	34,317				5,222				53,661				20,224
Equity in earnings of unconsolidated entities	6,889				129				6,831				384
Income before income taxes and gain on sale of collegiate housing properties	41,206				5,351				60,492				20,608
Income tax (benefit) expense	(36		)		353				30				(532		)
Income before gain on sale of collegiate housing properties	41,242				4,998				60,462				21,140
Gain on sale of collegiate housing properties	20,979				691				42,337				691
Net income	62,221				5,689				102,799				21,831
Less: Net loss attributable to the noncontrolling interests	(1,193		)		(371		)		(1,573		)		(386		)
Net income attributable to Education Realty Trust, Inc.	$	63,414			$	6,060			$	104,372			$	22,217

See accompanying notes to the condensed consolidated financial statements.

2

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Copy History

	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
Comprehensive income:
Net income	$	62,221			$	5,689			$	102,799			$	21,831
Other comprehensive income:
Gain (loss) on cash flow hedging derivatives	983				(365		)		3,258				713
Comprehensive income	63,204				5,324				106,057				22,544
Less: Comprehensive loss attributable to the noncontrolling interests	(1,193		)		(371		)		(1,573		)		(386		)
Comprehensive income attributable to Education Realty Trust, Inc.	$	64,397			$	5,695			$	107,630			$	22,930
Earnings per share information:
Net income attributable to Education Realty Trust, Inc. common stockholders per share – basic	$	0.81			$	0.07			$	1.34			$	0.29
Net income attributable to Education Realty Trust, Inc. common stockholders per share – diluted	$	0.81			$	0.07			$	1.34			$	0.28
Distributions per share of common stock	$	0.39			$	0.38			$	0.78			$	0.76
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	77,101				73,623				76,660				73,566
Weighted average common shares outstanding – diluted	77,250				73,841				76,820				73,795

See accompanying notes to the condensed consolidated financial statements.

3

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EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except shares)

(Unaudited)

Copy History

	Common Stock							Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests				Total
	Shares			Amount
Balance, December 31, 2016	73,075,455			$	731			$	1,802,852			$	—			$	(3,564	)		$	1,422			$	1,801,441
Proceeds from issuance of common stock, net of offering costs	110,092			1				403				—				—				—				404
Amortization of long-term incentive plan awards	6			—				1,538				—				—				—				1,538
Surrender of shares to cover taxes on vesting of restricted stock	(3,283	)		—				(2,564		)		—				—				—				(2,564		)
Common stock issued to officers and directors	12,654			—				480				—				—				—				480
Cash dividends	—			—				(33,555		)		(22,217		)		—				—				(55,772		)
Adjustments to reflect redeemable noncontrolling interests at fair value	—			—				4				—				—				—				4
Accretion of redeemable noncontrolling interests	—			—				(1,207		)		—				—				—				(1,207		)
Comprehensive income (loss)	—			—				—				22,217				713				(79		)		22,851
Balance, June 30, 2017	73,194,924			$	732			$	1,767,951			$	—			$	(2,851	)		$	1,343			$	1,767,175
Balance, December 31, 2017	75,779,932			$	757			$	1,844,639			$	—			$	(660	)		$	1,229			$	1,845,965
Issuance of common stock, net of offering costs	4,789,527			48				188,373				—				—				—				188,421
Reclassification of vested LTIP Units to redeemable noncontrolling interest	—			—				(2,856		)		—				—				—				(2,856		)
Amortization of long-term incentive plan awards	—			—				1,534				—				—				—				1,534
Common stock issued to officers and directors	11,645			—				400				—				—				—				400
Cash dividends	—			—				—				(59,177		)		—				—				(59,177		)
Adjustments to reflect redeemable noncontrolling interests at fair value	—			—				(3,711		)		—				—				—				(3,711		)
Accretion of redeemable noncontrolling interests	—			—				—				(1,448		)		—				—				(1,448		)
Consolidation of previously unconsolidated joint ventures	—			—				—				—				—				36,111				36,111
Comprehensive income (loss)	—			—				—				104,372				3,258				(694		)		106,936
Balance, June 30, 2018	80,581,104			$	805			$	2,028,379			$	43,747			$	2,598			$	36,646			$	2,112,175

See accompanying notes to the condensed consolidated financial statements.

4

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EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

Copy History

	Six months ended June 30,
	2018				2017
Operating activities:
Net income	$	102,799			$	21,831
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	46,386				50,359
Deferred tax expense	31				1,078
Excess tax benefit related to the vesting of restricted stock	—				(1,610		)
Loss on disposal of assets	475				—
Gain on sale of collegiate housing properties	(42,337		)		(691		)
Noncash rent expense related to the straight-line adjustment for long-term ground leases	2,340				2,349
Loss on extinguishment of debt	—				22
Amortization of deferred financing costs	713				779
Distributions of earnings from unconsolidated entities	3,078				287
Noncash compensation expense related to stock-based incentive awards	1,907				1,893
Equity in earnings of unconsolidated entities	(6,831		)		(384		)
Gain on consolidation of unconsolidated joint ventures	(34,259		)		—
Change in operating assets and liabilities	(7,723		)		(6,695		)
Net cash provided by operating activities (net of acquisitions)	66,579				69,218
Investing activities:
Property acquisitions	—				(127,647		)
Purchase of corporate assets	(965		)		(1,028		)
Investment in collegiate housing properties	(8,492		)		(7,549		)
Proceeds from sale of collegiate housing properties	125,076				17,738
Collections on notes receivable	500				—
Proceeds from disposal of property and related equity investment	3,800				—
Cash acquired in excess of cost of additional ownership interests acquired	1,891				—
Earnest money deposits	(225		)		(750		)
Investment in assets under development	(277,948		)		(194,491		)
Reimbursement of development related costs	6,659				—
Distributions from unconsolidated entities	50				128
Net cash used in investing activities	(149,654		)		(313,599		)

See accompanying notes to the condensed consolidated financial statements.

5

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Copy History

	Six months ended June 30,
	2018				2017
Financing activities:
Payment of mortgage and construction loans	(89,307		)		(32,950		)
Borrowings under mortgage and construction loans	129,400				146
Debt issuance costs	(5,620		)		(493		)
Borrowings on line of credit	158,000				328,000
Repayments of line of credit	(227,000		)		(3,000		)
Proceeds from issuance of common stock	187,119				—
Payment of offering costs	—				(335		)
Contributions from noncontrolling interests	904				11,054
Dividends and distributions paid to common and restricted stockholders	(59,177		)		(55,772		)
Dividends and distributions paid to noncontrolling interests	(22,058		)		(450		)
Repurchases of common stock for payments of restricted stock tax withholding	—				(2,563		)
Net cash provided by financing activities	72,261				243,637
Net decrease in cash and cash equivalents and restricted cash	(10,814		)		(744		)
Cash and cash equivalents and restricted cash, beginning of period	29,155				42,313
Cash and cash equivalents and restricted cash, end of period	$	18,341			$	41,569
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	9,502			$	33,496
Restricted cash	8,839				8,073
Total cash and cash equivalents and restricted cash	$	18,341			$	41,569
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	8,638			$	5,815
Income taxes paid	$	323			$	195
Supplemental disclosure of noncash activities:
Redemption of redeemable noncontrolling interests from unit holder to shares of common stock	$	1,031			$	1,138
Capital expenditures in accounts payable and accrued expenses related to developments	$	69,850			$	69,390

See accompanying notes to the condensed consolidated financial statements.

6

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EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except unit data)

(Unaudited)

Copy History

	June 30, 2018				December 31, 2017
Assets:
Collegiate housing properties, net	$	2,526,609			$	2,424,304
Assets under development	733,200				488,614
Cash and cash equivalents	9,502				24,787
Restricted cash	8,839				4,368
Other assets	56,529				73,091
Total assets	$	3,334,679			$	3,015,164
Liabilities:
Unsecured debt, net of unamortized deferred financing costs	$	864,730			$	933,449
Mortgage debt, net of unamortized deferred financing costs	127,270				—
Accounts payable and accrued expenses	161,072				162,434
Deferred revenue	10,586				20,473
Total liabilities	1,163,658				1,116,356
Commitments and contingencies (see Note 7)	—				—
Redeemable limited partner units	7,296				4,353
Redeemable noncontrolling interests	51,550				48,490
Partners' capital:
General partner - 6,920 units outstanding as of June 30, 2018 and December 31, 2017	180				177
Limited partners - 80,574,184 and 75,773,012 units issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	2,072,751				1,845,219
Accumulated other comprehensive income (loss)	2,598				(660		)
Total partners' capital	2,075,529				1,844,736
Noncontrolling interests	36,646				1,229
Total capital	2,112,175				1,845,965
Total liabilities and partners' capital	$	3,334,679			$	3,015,164

See accompanying notes to the condensed consolidated financial statements.

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EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in thousands, except per unit data)

(Unaudited)

Copy History

	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
Revenues:
Collegiate housing leasing revenue	$	74,190			$	70,071			$	161,939			$	150,856
Third-party development consulting services	—				1,156				—				2,971
Third-party management services	599				831				1,504				1,776
Operating expense reimbursements	1,593				1,984				3,667				4,237
Total revenues	76,382				74,042				167,110				159,840
Operating expenses:
Collegiate housing leasing operations	32,165				30,338				64,339				59,215
Development and management services	2,984				2,775				5,835				5,676
General and administrative	8,605				3,338				11,524				6,765
Depreciation and amortization	23,879				24,520				46,386				50,359
Ground lease expense	2,647				2,462				6,435				6,022
Other operating expense	—				—				—				500
Reimbursable operating expenses	1,593				1,984				3,667				4,237
Total operating expenses	71,873				65,417				138,186				132,774
Operating income	4,509				8,625				28,924				27,066
Nonoperating (income) expenses:
Interest expense, net of amounts capitalized	4,122				3,062				8,873				6,090
Amortization of deferred financing costs	350				358				713				779
Interest income	(21		)		(17		)		(64		)		(49		)
Gain on consolidation of unconsolidated joint ventures	(34,259		)		—				(34,259		)		—
Loss on extinguishment of debt	—				—				—				22
Total nonoperating (income) expenses	(29,808		)		3,403				(24,737		)		6,842
Income before equity in earnings of unconsolidated entities, income taxes and gain on sale of collegiate housing properties	34,317				5,222				53,661				20,224
Equity in earnings of unconsolidated entities	6,889				129				6,831				384
Income before income taxes and gain on sale of collegiate housing properties	41,206				5,351				60,492				20,608
Income tax (benefit) expense	(36		)		353				30				(532		)
Income before gain on sale of collegiate housing properties	41,242				4,998				60,462				21,140
Gain on sale of collegiate housing properties	20,979				691				42,337				691
Net income	62,221				5,689				102,799				21,831
Less: Net loss attributable to the noncontrolling interests	(1,226		)		(381		)		(1,662		)		(431		)
Net income attributable to Education Realty Operating Partnership L.P.	$	63,447			$	6,070			$	104,461			$	22,262

See accompanying notes to the condensed consolidated financial statements.

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Copy History

	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
Comprehensive income:
Net income	$	62,221			$	5,689			$	102,799			$	21,831
Other comprehensive income:
Gain (loss) on cash flow hedging derivatives	983				(365		)		3,258				713
Comprehensive income	63,204				5,324				106,057				22,544
Less: Comprehensive loss attributable to the noncontrolling interests	(1,226		)		(381		)		(1,662		)		(431		)
Comprehensive income attributable to unitholders	$	64,430			$	5,705			$	107,719			$	22,975
Earnings per unit information:
Net income attributable to unitholders – basic and diluted	$	0.81			$	0.07			$	1.34			$	0.29
Distributions per unit	$	0.39			$	0.38			$	0.78			$	0.76
Weighted average units outstanding:
Weighted average units outstanding – basic	77,406				73,755				76,912				73,709
Weighted average units outstanding – diluted	77,475				73,841				76,981				73,795

See accompanying notes to the condensed consolidated financial statements.

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EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND NONCONTROLLING INTERESTS

(Amounts in thousands, except units)

(Unaudited)

Copy History

	General Partner							Limited Partners							Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests				Total
	Units			Amount				Units			Amount
Balance, December 31, 2016	6,920			$	178			73,068,535			$	1,803,405			$	(3,564	)		$	1,422			$	1,801,441
Vesting of restricted stock and restricted stock units	—			—				12,654			480				—				—				480
Issuance of units in exchange for contributions of equity offering proceeds and redemption of units	—			—				110,092			404				—				—				404
Amortization of long-term incentive plan awards	—			—				6			1,538				—				—				1,538
Surrender of shares to cover taxes on vesting of restricted shares	—			—				(3,283	)		(2,564		)		—				—				(2,564		)
Distributions	—			(3		)		—			(55,769		)		—				—				(55,772		)
Adjustments to reflect redeemable noncontrolling interests at fair value	—			—				—			4				—				—				4
Accretion of redeemable noncontrolling interests	—			—				—			(1,207		)		—				—				(1,207		)
Comprehensive income (loss)	—			1				—			22,216				713				(79		)		22,851
Balance, June 30, 2017	6,920			$	176			73,188,004			$	1,768,507			$	(2,851	)		$	1,343			$	1,767,175
Balance, December 31, 2017	6,920			$	177			75,773,012			$	1,845,219			$	(660	)		$	1,229			$	1,845,965
Vesting of restricted stock and restricted stock units	—			—				11,645			400				—				—				400
Issuance of units in exchange for contributions of equity offering proceeds and redemption of units	—			—				4,789,527			188,421				—				—				188,421
Reclassification of vested LTIP Units to redeemable noncontrolling interest	—			—				—			(2,856		)		—				—				(2,856		)
Amortization of long-term incentive plan awards	—			—				—			1,534				—				—				1,534
Distributions	—			(3		)		—			(59,174		)		—				—				(59,177		)
Adjustments to reflect redeemable noncontrolling interests at fair value	—			—				—			(3,711		)		—				—				(3,711		)
Accretion of redeemable noncontrolling interests	—			—				—			(1,448		)		—				—				(1,448		)
Consolidation of previously unconsolidated joint ventures	—			—				—			—				—				36,111				36,111
Comprehensive income (loss)	—			6				—			104,366				3,258				(694		)		106,936
Balance, June 30, 2018	6,920			$	180			80,574,184			$	2,072,751			$	2,598			$	36,646			$	2,112,175

See accompanying notes to the condensed consolidated financial statements.

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EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

Copy History

	Six months ended June 30,
	2018				2017
Operating activities:
Net income	$	102,799			$	21,831
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	46,386				50,359
Deferred tax expense	31				1,078
Excess tax benefit related to the vesting of restricted stock	—				(1,610		)
Loss on disposal of assets	475				—
Gain on sale of collegiate housing properties	(42,337		)		(691		)
Noncash rent expense related to the straight-line adjustment for long-term ground leases	2,340				2,349
Loss on extinguishment of debt	—				22
Amortization of deferred financing costs	713				779
Distributions of earnings from unconsolidated entities	3,078				287
Noncash compensation expense related to stock-based incentive awards	1,907				1,893
Equity in earnings of unconsolidated entities	(6,831		)		(384		)
Gain on consolidation of unconsolidated joint ventures	(34,259		)		—
Change in operating assets and liabilities	(7,723		)		(6,695		)
Net cash provided by operating activities (net of acquisitions)	66,579				69,218
Investing activities:
Property acquisitions	—				(127,647		)
Purchase of corporate assets	(965		)		(1,028		)
Investment in collegiate housing properties	(8,492		)		(7,549		)
Proceeds from sale of collegiate housing properties	125,076				17,738
Collections on notes receivable	500				—
Proceeds from disposal of property and related equity investment	3,800				—
Cash acquired in excess of cost of additional ownership interests acquired	1,891				—
Earnest money deposits	(225		)		(750		)
Investment in assets under development	(277,948		)		(194,491		)
Reimbursement of development related costs	6,659				—
Distributions from unconsolidated entities	50				128
Net cash used in investing activities	(149,654		)		(313,599		)
Financing activities:
Payment of mortgage and construction loans	(89,307		)		(32,950		)
Borrowings under mortgage and construction loans	129,400				146
Debt issuance costs	(5,620		)		(493		)
Borrowings on line of credit	158,000				328,000
Repayments of line of credit	(227,000		)		(3,000		)
Proceeds from issuance of common units in exchange for contributions	187,119				—
Payment of offering costs	—				(335		)

See accompanying notes to the condensed consolidated financial statements.

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Copy History

	Six months ended June 30,
	2018				2017
Contributions from noncontrolling interests	904				11,054
Distributions paid on unvested restricted stock and long-term incentive plan awards	(305		)		(279		)
Distributions paid to unitholders	(58,872		)		(55,493		)
Distributions paid to noncontrolling interests	(22,058		)		(450		)
Repurchases of units for payments of restricted stock tax withholding	—				(2,563		)
Net cash provided by financing activities	72,261				243,637
Net decrease in cash and cash equivalents and restricted cash	(10,814		)		(744		)
Cash and cash equivalents and restricted cash, beginning of period	29,155				42,313
Cash and cash equivalents and restricted cash, end of period	$	18,341			$	41,569
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	9,502			$	33,496
Restricted cash	8,839				8,073
Total cash and cash equivalents and restricted cash	$	18,341			$	41,569
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	8,638			$	5,815
Income taxes paid	$	323			$	195
Supplemental disclosure of noncash activities:
Redemption of redeemable noncontrolling interests from unit holder to shares of common stock	$	1,031			$	1,138
Capital expenditures in accounts payable and accrued expenses related to developments	$	69,850			$	69,390

See accompanying notes to the condensed consolidated financial statements.

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EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and description of business

Education Realty Trust, Inc. ("EdR" and collectively with its consolidated subsidiaries, the “Trust”) was organized in the state of Maryland on July 12, 2004 and commenced operations effective with the initial public offering that was completed on January 31, 2005. Through the Trust's controlling interest in both the sole general partner and the majority owning limited partner of Education Realty Operating Partnership L.P. ("EROP" and collectively with its consolidated subsidiaries, the "Operating Partnership"), the Trust is one of the largest developers, owners and managers of collegiate housing communities in the United States in terms of beds owned and under management. The Trust is a self-administered and self-managed REIT that is publicly traded on the New York Stock Exchange under the ticker symbol "EDR". Under the Articles of Incorporation, as amended, restated and supplemented, the Trust is authorized to issue up to 200 million shares of common stock and 50 million shares of preferred stock, each having a par value of $0.01 per share.

The sole general partner of EROP is Education Realty OP GP, Inc. (“OP GP”), an entity that is wholly-owned by EdR. As of June 30, 2018, OP GP held an ownership interest in EROP of less than 1%. The limited partners of EROP are Education Realty OP Limited Partner Trust, a wholly-owned subsidiary of EdR, and other limited partners consisting of current and former members of management. OP GP, as the sole general partner of EROP, has the responsibility and discretion in the management and control of EROP, and the limited partners of EROP, in such capacity, have no authority to transact business for, or participate in the management activities of, EROP. Management operates the Trust and the Operating Partnership as one business. The management of the Trust consists of the same members as the management of the Operating Partnership. EdR consolidates the Operating Partnership for financial reporting purposes, and EdR does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Trust and the Operating Partnership are the same on their respective financial statements. Unless otherwise indicated, the accompanying Notes to the Condensed Consolidated Financial Statements apply to both the Trust and the Operating Partnership.

The Trust also provides real estate facility management, development and other advisory services through its taxable REIT subsidiaries ("TRS"), EDR Management Inc. (the “Management Company”), a Delaware corporation that performs collegiate housing management activities. EDR Development LLC (the “Development Company”), a Delaware limited liability company and wholly-owned subsidiary of the Management Company, which provides development consulting services for third-party collegiate housing communities, is a disregarded entity for federal income tax purposes, and all assets owned and income earned by our Development Company are deemed to be owned and earned by our Management Company.

Pending Mergers

As disclosed in a Current Report on Form 8-K dated June 25, 2018, the Trust entered into a definitive agreement and plan of merger ("Merger Agreement") with Greystar Student Housing Growth and Income LTP, LP and certain other affiliates of Greystar Real Estate Partners LLC (collectively referred to as "Greystar") pursuant to which, upon closing, all outstanding shares of common stock, OP units and units of limited partnership interest in University Towers Operating Partnership, LP (other than the OP units and units of limited partnership interest in University Towers Operating Partnership, LP held by us and our subsidiaries) are to be converted into the right to receive $41.50 in cash (referred to as the "Mergers"). The pending Mergers are subject to customary closing conditions, including, but not limited to, the approval of the Mergers by EdR’s stockholders.

The Merger Agreement may be terminated under certain circumstances by the Trust. In addition, Greystar may terminate the Merger Agreement under certain circumstances and subject to certain restrictions. Upon a termination of the Merger Agreement, under certain circumstances, the Trust will be required to pay a termination fee to Greystar of either $50,634,537 or $118,147,254 depending on the timing and circumstances of the termination. In certain other circumstances, Greystar will be required to pay the Trust a termination fee of $200,000,000 upon termination of the Merger Agreement.

During the six months ended June 30, 2018, the Trust recognized $5.3 million of Merger-related expenses presented within general and administrative expenses in the condensed consolidated statement of income and comprehensive income. We expect

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that additional expenses will be incurred in connection with the closing of the Mergers; however, all such Merger-related expenses incurred by the Trust will not reduce the Merger consideration.

 

2. Summary of significant accounting policies

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States (“GAAP”). The accompanying condensed consolidated financial statements of the Trust represent the assets and liabilities and operating results of the Trust and its majority owned subsidiaries.

All intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

Principles of consolidation

The Trust accounts for interests in partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the variable interest entity (“VIE”) guidance. Under the VIE model, the Trust consolidates an entity when it has control to direct the activities of the VIE and where it is determined to be the primary beneficiary. Under the voting interest model, the Trust consolidates an entity when it controls the entity through the ownership of a majority voting interest.

All of the Trust's property ownership, development and related business operations are conducted through the Operating Partnership. See the assets and liabilities of the Operating Partnership in the accompanying condensed consolidated financial statements.

Interim financial information

The accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the Trust's and the Operating Partnership's financial position, results of operations and cash flows for such periods. Because of the seasonal nature of the business, the operating results and cash flows are not necessarily indicative of results that may be expected for any other interim periods or for the full fiscal year. These financial statements should be read in conjunction with the Trust's and the Operating Partnership's consolidated financial statements and related notes included in the Trust's Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the "SEC") on February 27, 2018.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Restricted cash

Restricted cash includes (i) escrow accounts held by lenders for the purpose of paying taxes and insurance and funding capital improvements, (ii) certain security deposits received from tenants and (iii) retainage held by financial institutions.

During the three months ended December 31, 2017, the Trust early adopted Accounting Standards Update ("ASU") 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows, and transfers between cash and cash equivalents and restricted cash are no longer presented within the statement of cash flows.

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As a result of the adoption of ASU 2016-18, cash flows related to restricted cash within the investing section of the statement of cash flows have been retrospectively adjusted for the six months ended June 30, 2017, as follows (dollars in thousands):

Copy History

		As Previously Reported				As Adjusted per ASU 2016-18				Effect of Change
Six months ended June 30, 2017:
Investing activities:
Restricted cash		$	(235	)		$	—			$	235
Net cash used in investing activities		(313,834		)		(313,599		)		235