Associated Estates to Offer Shares

Zacks

Associated Estates Realty Corporation (AEC), a real estate investment trust (:REIT), recently announced that it has priced 5.5 million shares at $14.40 each.To cover the over-allotment options, Associated Estates also plans to offer a 30-day option to the underwriters for purchasing an additional 825,000 shares.The offering is expected to close on June 27, 2012.

The company expects to generate net proceeds of approximately $75.8 million from the offering after the underwriting discount and estimated offering expenses. The net proceeds from the equity offer will be utilized to repay debts outstanding under its unsecured revolving credit facility, to fund property acquisitions and for general corporate purposes.

During the first quarter 2012, Associated Estates repaid seven property-specific mortgage loans totaling $123.5 million, thus leaving the company with no remaining debt maturities in 2012. These repayments were funded from the unsecured revolving credit facility.

Associated Estates reported first quarter 2012 adjusted FFO (funds from operations) of 25 cents per share, compared with 23 cents per share in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Headquartered in Richmond Heights, Ohio, Associated Estates’ portfolio consists of 53 properties containing 13,908 units in eight states. It primarily owns and manages apartment communities in the Midwest, Mid-Atlantic and Southeast regions in the U.S.

Associated Estates currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We have a long-term Neutral recommendation on the stock. One of its competitors, Equity Residential (EQR) also holds a Zacks #3 Rank.

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