Cambridge at Buckhead Atlanta, GA 168 Units. September Investor Presentation September 2014

Transcription

1 Cambridge at Buckhead Atlanta, GA 168 Units 1 September Investor Presentation September 2014

2 Safe Harbor Statement Statements included in this presentation, including responses to questions, that are not based on historical facts are forward-looking statements based on current knowledge and judgments of management. You are cautioned not to rely upon these forward-looking statements, which are subject to certain risks, trends and uncertainties that could cause actual results to vary from the expectations and projections of management. The Risk Factors and other cautionary statements identifying important factors that could cause actual results to differ materially from those in these forward-looking statements are detailed in our filings with the SEC, including our most recent reports on Form 10-K and Form 10-Q. Copies of our filings with the SEC are available online at sec.gov or by clicking the Investors tab at AssociatedEstates.com. All information in this presentation is as of Q2 2014, unless otherwise noted. We assume no duty to update this information. 2

3 Table Of Contents Proven Track Record of Generating Superior Shareholder Returns Demonstrated Capital Recycling to Enhance Portfolio Repositioning Embedded Value of Fully Funded Active Development Pipeline Investment Grade Balance Sheet 3

4 Investment Highlights Proven Track Record Top quartile total shareholder return over 10 year period (1) Committed to operational excellence by managing costs, improving efficiencies and increasing revenue Best-in-class operating platform, with ability to expand Capital Recycling Efficiently recycling capital to fund acquisitions in faster growing markets Building critical mass in strategic markets Strong NOI growth has outperformed in good times and bad Value Creation From Development Fully funded active development pipeline High quality joint venture partners reduce capital outlay and mitigates risk Focused on value creation through the continued execution of development projects Investment Grade Balance Sheet Unsecured borrower profile and low cost of debt Manageable debt maturity schedule with limited near term maturities Conservative dividend payout ratio 4 (1) Total shareholder return as reported in KeyBanc Capital Markets Leaderboard, 8/29/2014.

5 About Associated Estates History Established in 1964, went public as a REIT in 1993 Only publically-traded apartment REIT with a presence in the Midwest Expanded into the Mid-Atlantic and Southeast regions in 1998 Common Dividend $0.80 annual dividend (1) 4.3% dividend yield (2) 83 consecutive quarterly dividends paid Portfolio Composition 13,034 units in 9 states 1,446 units in various stages of development Properties are located in high-barrier-to-entry markets in major metropolitan areas Portfolio Highlights 96.4% physical occupancy on same community properties (3) Average property revenue per occupied unit of $1,215 (3) Average age of 15 years, second youngest multifamily portfolio (4) 5 (1) Recently announced quarterly dividend, annualized. (2) Stock price as of 8/29/2014. Based on recently announced quarterly dividend, annualized. (3) Same Community as of Q (4) Green Street Residential Sector Update, 8/28/2014.

6 6 Proven Track Record of Generating Superior Shareholder Returns

7 Experienced Board Well-Aligned with Shareholders Jeffrey I. Friedman Chairman, President & CEO Chairman, President & CEO of Associated Estates Ernst & Young "Entrepreneur of the Year" in 2011 Multifamily REIT Insider Ownership (1) Richard T. Schwarz Lead Independent Director Executive Compensation Chairman Limited Partner of Edgewater Capital Partners since 2003 Former Director and President of Laurel Industries and co-founder of Sycamore Partners LLC AEC CPT 2.9% 2.7% Albert T. Adams Partner of BakerHostetler LLP since 1984 Has served as a director of five public REITS EQR PPS 2.1% 2.0% Michael E. Gibbons Finance & Planning Chairman Senior MD and Principal, Brown Gibbons Lang & Co. L.P. Former President and CEO of Underwood, Neuhaus & Average 1.6% Company, and SVP of McDonald & Company Securities HME 1.5% Mark L. Milstein Owner, Adam Building Company, LLC UDR 1.3% James J. Sanfilippo Audit Committee Chairman Retired Managing Partner, Grant Thornton LLP Served as Office Managing Partner for Grant Thornton LLP, Cleveland, Ohio from 1988 to 2007 MAA AIV 1.0% 0.9% James A. Schoff Nominating & Corporate Governance Chairman Consultant Former DDR executive, roles included Special Advisor to the Chairman, EVP & COO, Vice Chairman & CIO ESS AVB 0.8% 0.5% 7 Source: FactSet as of 8/1/2014. (1) Multifamily REIT insider ownership shown as a percent of total shares outstanding, as reported by FactSet.

8 Experienced Management Team with Consistent Leadership Executives Jeffrey I. Friedman Chairman, President & CEO Experience Joined Associated Estates in 1974 Has served as Chairman & CEO of Associated Estates since 1993 Has more than 40 years of real estate experience Resumed President title in 2002 Lou Fatica SVP, Treasurer & CFO Joined Associated Estates in 1999 Became CFO in 2001 Has more than 20 years of finance and accounting experience Is a Certified Public Accountant (CPA) John T. Shannon SVP, Operations Joined Associated Estates in 2004 Has over 24 years of property management experience Responsible for the overall direction and guidance of property operations Jason A. Friedman SVP, Acquisitions & Development Joined Associated Estates in 2009 Has more than 16 years of real estate experience Responsible for acquisitions, development and construction 8

9 History of Returning Capital to Shareholders 5 Year Total Shareholder Return 262% 105% 114% 145% 175% 177% 179% 180% 182% 210% 215% MAA HME CPT UDR Average AVB AEC EQR ESS AIV PPS 10 Year Total Shareholder Return 249% 279% 285% 121% 147% 157% 169% 171% 198% 199% 211% AIV UDR CPT PPS HME MAA Average EQR AEC AVB ESS 9 Source: KeyBanc Capital Markets Leaderboard, 8/29/2014.

10 Conservative Dividend Payout Ratio Dividend Yield (1) 4.0% 4.3% 4.6% 3.5% 3.5% 3.5% 2.7% 3.0% 3.0% 3.0% 3.0% ESS PPS AIV EQR AVB Average UDR CPT MAA AEC HME AFFO Payout Ratio (2) 69.0% 69.6% 70.5% 70.8% 71.3% 71.7% 72.5% 74.9% 75.8% 76.5% 61.5% (2) AIV AEC ESS MAA PPS Average AVB CPT EQR HME UDR 10 Note: 2014 AFFO based on KeyBanc Capital Markets Leaderboard, 8/29/2014 and Company financials. (1) Stock price as of closing on 8/29/2014. (2) Based on recently announced quarterly dividend, annualized.

11 11 Demonstrated Capital Recycling to Enhance Portfolio Repositioning

12 Portfolio Acquisition: Geared Towards Best-in-Class Portfolio Property City Submarket # of Units Acquired Physical Occupancy (1) The Apartments at Blakeney Charlotte Ballantyne /10/ % St. Mary s Square Raleigh Glenwood South /18/ % Lofts at Weston Lakeside Raleigh Cary /19/ % Alpha Mill Phase I Charlotte Uptown 167 6/10/ % Alpha Mill Phase II Charlotte Uptown 100 6/10/ % (2) 1160 Hammond (345 units) Atlanta, GA (Perimeter Submarket) Expected to close Q4 2014, once construction is complete Assumed management of property in April 2014 Varela Westhore (350 units) Tampa, FL (Westshore Submarket) Expected to close Q1 2015, once construction is complete Assumed management of property in May (1) As of 8/31/2014. (2) Property is currently in lease up. Based on units leased as of 8/31/2014.

13 Strategic Dispositions: Successfully Exiting Select Markets Hampton Point (352 units, built in 1986, acquired in 1998) Substantial rehab by Associated Estates in 2010 Sold for $60.0 million ($170,500 per unit) Market Cap Rate: 6.0% IRR since acquisition: 15.3% Reflections (184 units, built in 1985, acquired in 1998) Substantial rehab by Associated Estates in 2008 Sold for $38.4 million ($208,700 per unit) Market Cap Rate: 5.7% IRR since acquisition: 15.7% Annen Woods (131 units, built in 1987, acquired in 1998) Sold for $20.5 million ($156,500 per unit) Market Cap Rate: 5.8% IRR since acquisition: 12.7% Courtney Chase (288 units, built in 2003) Built by Associated Estates in 2003 Sold for $38.1 million ($132,300 per unit) Market Cap Rate: 5.6% IRR since development: 12.7% 13 Source: Company financials.

14 Improve Efficiencies By Creating Scale in Strategic Markets Raleigh-Durham, North Carolina 5 Properties / 1,109 Units Dallas, Texas 5 Properties / 1,342 Units The Brixton (224 units) Acquired: October 2011 Southpoint Village (211 units) Acquired: July 2012 San Raphael (222 units) Acquired: October 2010 Lofts at Weston Lakeside (215 units) Acquired: November 2013 The Apts. at the Arboretum (205 units) Acquired: May 2012 San Raphael Phase II (99 units) Construction Completed Forty Medical District (396 units) Acquired: July 2012 The Park at Crossroads (344 units) Acquired: August 2012 St. Mary's Square (134 units) Acquired: November 2013 Rienzi at Turtle Creek (152 units) Acquired: September 2013 Cantabria at Turtle Creek (249 units) Land Under Contract: Q Delivered: September Operating Property Current Development

15 Coastal California Presence via Off Market Transactions San Francisco th (50/50 JV) (410 units) Land Under Contract: Q Expected Delivery: Q Monrovia (50/50 JV) (~154 units) Land Under Contract: Q Expected Delivery: TBD Warner Center (~379 units) Optioned Land: Q Currently Marketed for Sale Los Angeles Desmond on Wilshire (175 units) Land Under Contract: Q Expected Delivery: Q East Third (50/50 JV) (472 units) Land Under Contract: Q Expected Delivery: Q Current Development Land Banked for Possible Future Development Land for Sale

16 It s a Submarket Story 16 Region Units Market Rent Q2 14 AEC Net Rent (1) Q2 14 AEC Variance to Market Indianapolis 836 $845 $ % Michigan 2,216 - $1,010 - Central Ohio 1,581 $906 $ % Northeast Ohio 1,303 $957 $1, % TOTAL MIDWEST 5,936 $910 $1, % Metro DC 250 $1,918 $2, % Charlotte (2) 562 $1,059 $1, % Raleigh-Durham 1,109 $935 (3) $1, % Northern Virginia 1,272 $1,598 (3) $1, % Southeast Virginia 864 $1,014 (3) $1, % TOTAL MID-ATLANTIC 4,057 $1,237 $1, % Southeast Florida 1,594 $1,575 (3) $1, % Atlanta 354 $1,079 $1, % TOTAL SOUTHEAST 1,948 $1,485 $1, % Dallas 1,093 $1,111 $1, % TOTAL SOUTHWEST 1,093 $1,111 $1, % TOTAL PORTFOLIO 13,034 $1,157 $1, % Source: Company financials, Axiometrics. Note: Market rent is a blend of Class A & Class B MSA rents as reported by Axiometrics. Michigan assets included in unit count, however, relevant MSA data not available. AEC Net Rent excludes properties currently marketed for sale. (1) Net Rent is gross potential rent less allowances divided by total units. (2) Includes pro forma Net Rent for recently acquired properties. (3) Raleigh-Durham is a weighted blend of the Raleigh MSA and Durham MSA. Northern Virginia is a weighted blend of Loudon County and Prince William County. Southeast Virginia is a weighted blend of Richmond and Norfolk. Southeast Florida is a weighted blend of Miami, Fort Lauderdale and West Palm Beach.

17 Sustained NOI Growth Financial Crisis Average ( ) 2.7% 2.8% 2.8% 2.9% 1.2% 1.3% 1.6% 1.6% 1.7% -0.4% -0.3% CPT PPS AVB AIV EQR Average MAA ESS HME AEC UDR Post-Financial Crisis Average ( ) 4.8% 4.8% 4.9% 5.1% 4.2% 4.3% 4.4% 4.4% 4.4% 4.5% 4.0% MAA PPS UDR AIV AVB AEC Average CPT HME EQR ESS 17 Source: Company financials, 2014 at midpoint of guidance as of 8/31/2014.

18 NOI Diversification Minimizes Risk Current Portfolio (1) Upon Completion of Committed Acquisitions and Active Developments (2) Southwest 7% West 11% Southeast 16% Midwest 37% Southwest 8% Midwest 27% Southeast 20% Mid-Atlantic 40% Mid-Atlantic 34% 18 (1) 2Q14 annualized NOI. (2) 2Q14 annualized NOI as computed for current portfolio, adjusted for anticipated development deliveries, forward acquisition commitments, and announced dispositions.

19 19 Embedded Value of Fully Funded Active Development Pipeline

20 Track Record of Value Creation Through Development Demonstrated history of successful value creation through construction and development Built or substantially rehabilitated 43 of 45 properties that were taken public in 1993 Talented on-site development teams with national platform support Development Cost: $37.5 million (1 ) Vista Germantown (242 units) - Nashville, TN Stabilized Return on Cost: 7.3% Sales Price: $53.3 million Market Cap Rate: 4.5% Total IRR on project: 19.8% Value Created: $15.8 million (42%) 20 (1) Includes purchase of joint venture partner s 10% interest.

21 Skillful Execution of Development Platform Remaining Committed Development Spend Relative to Gross Real Estate Assets (1) $2,077 $2,170 $1, % $1, % 4.8% $400 $198 $ % $ PF 2015 PF 2016 PF Gross Real Estate Assets Remaining Committed Development Spend Remaining Committed Development Spend / Gross Real Estate Assets 21 (1) Gross Real Estate Assets for 2014 PF 2016 PF is adjusted to include announced acquisitions, developments and dispositions.

22 Status of Current Development Pipeline Current Development Units Submarket General Contractor (GMP) Estimated Delivery of First Units Estimated Construction Complete Estimated Stabilized Operations Cantabria at Turtle Creek Dallas, TX 249 Turtle Creek Andres Construction Q Q Q Arlington at Bethesda Bethesda, MD 140 Bethesda Row Walsh Construction Q Q Q Desmond on Wilshire Los Angeles, CA 175 Mid-Wilshire White Residential Q Q Q th (50/50 JV) San Francisco, CA 410 (1) SoMa Roberts. Obayashi Q Q Q East Third (50/50 JV) Los Angeles, CA 472 (1) Arts District TBD (2) Q Q Q (1) Units reflect 100%. (2) Currently in negotiations for GMP contract.

23 Well Located Infill Developments Cantabria at Turtle Creek (249 units) Dallas, TX 7001 Arlington at Bethesda (140 units) Bethesda, MD Q Site Control Q Construction Start Q Delivery of First Units Q Property Stabilization Q Site Control Q Construction Start Q Delivery of First Units Q Property Stabilization Total Estimated Cost: $56.8 million Cost Per Unit: $228,000 Stabilized Yield: 7.2% Stabilized Rent per Sq Ft: $2.27 Total Estimated Cost: $53.4 million Cost Per Unit: $380,900 Stabilized Yield: 7.2% Stabilized Rent per Sq Ft: $

24 Value Creation Through Development Stabilized yield on current developments is 6.75%, which is 260 bps higher than current market cap rates Active Development Cantabria at Turtle Creek Dallas, TX 7001 Arlington at Bethesda Bethesda, MD Desmond on Wilshire Los Angeles, CA th (50/50 JV) San Francisco, CA 950 East Third (50/50 JV) Los Angeles, CA # of Units Estimated Stabilized Date Stabilized Rent per Square Foot Total Estimated Cost Market Cap Rate (1) Estimated Stabilized Yield Spread 249 Q $2.27 $56, % 7.20% 2.70% 140 Q $3.48 $53, % 7.20% 2.95% 175 Q $4.02 $76, % 6.30% 2.30% 410 (2) Q $4.50 $122,500 (3) 4.00% 6.60% 2.60% 472 (2) Q $3.22 $82,000 (3) 4.25% 6.80% 2.55% Total 1,446 $3.68 $391, % 6.75% 2.60% 24 Note: $ s in thousands. (1) Assumes 3% management fee. (2) Units reflect 100%. (3) Total estimated cost is based on Associated Estates portion of the unconsolidated joint venture.

25 25 Investment Grade Balance Sheet

26 Continued Focus on Improving Already Strong Credit Metrics 7.5x Net Debt / Annualized EBITDA 8.1x 7.5x 7.4x Net Debt / Undepreciated Book Value Secured Debt / Undepreciated Book Value 49.1% 45.6% 47.1% 45.9% 40.7% 38% 36% 6.6x 25% 16% 16% PF Fixed Charge Coverage PF % Unencumbered NOI 3.4x 72.2% 74.4% 3.0x 3.0x 59.3% 1.9x 2.3x 34.4% 44.2% PF PF 26 Note: is as reported and 2014 PF is midpoint of guidance and reflects announced acquisitions, dispositions, development and financing activities. Source: Company financials.

27 Low Cost of Debt AEC Historical Cost of Debt 7.4% 7.2% 6.7% 6.1% 6.2% 5.5% 4.8% 3.7% 3.8% 3.9% July % Weighted Average Cost of Debt 4.5% 4.3% 4.3% 4.2% 4.2% 4.0% 4.0% 3.9% 3.9% 3.8% AIV EQR HME PPS CPT Average ESS AVB UDR AEC MAA 27 Source: Company financials as of Q AEC as of 7/31/2014.

28 Well Staggered Debt Maturities Fixed Mortgages Unsecured Notes Term Loan Revolver Construction Loans 21% 9% 12% 6% 4% 7% 6% 6% 6% 6% 5% 4% 3% 3% 2% % Debt $25 $20 $72 $43 (2) $48 $12 $230 $91 $41 $87 $55 # of Properties (1) (3) Note: $ in millions. As of 7/31/2014. (1) Includes two construction loans totaling $72.0 million with an outstanding balance of $30.7 million. (2) Subject to a one-year extension option. (3) Includes one construction loan for $71.8 million (AEC pro-rata share) with no outstanding balance. AEC has guaranteed 100% of the loan.

29 Associated Estates: Focused on Shareholder Return Organic NOI Growth Development Value Creation Accretive Acquisitions Strategic Dispositions Attractive Total Shareholder Return Consistent and Growing Dividend 29

30 30 AssociatedEstates.com Center Point Indianapolis, IN 344 Units