Lofts at Weston Lakeside Cary, NC 215 Units. REITWorld 2014 November 5-7, 2014

Transcription

1 Lofts at Weston Lakeside Cary, NC 215 Units 1 REITWorld 2014 November 5-7, 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 Q3 2014, unless otherwise noted. We assume no duty to update this information. 2

3 Investment Highlights Proven Track Record Capital Recycling 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 most rents demanding a 10% premium to the market Efficiently recycling capital to fund acquisitions in faster growing markets Building critical mass in strategic markets Average age of 15 years, second youngest multifamily portfolio (2) Value Creation From Development Fully funded active development pipeline with 1,446 units in various stages of development Two joint ventures reduce capital outlay and mitigates risk Focused on value creation through the continued execution of our 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 3 (1) Total shareholder return for the multifamily sector as reported in KeyBanc Capital Markets Leaderboard, 10/31/2014. (2) Green Street Residential Sector Update, 8/28/2014.

4 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 2.6% 2.9% Albert T. Adams Partner of BakerHostetler LLP since 1984 Has served as a director of five public REITS PPS EQR 1.8% 1.6% Michael E. Gibbons Finance & Planning Chairman Senior MD and Principal, Brown Gibbons Lang & Co. L.P. Former President and CEO of Underwood, Neuhaus & Average 1.5% 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% 0.8% 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% 0.4% 4 Source: FactSet and company filings as of 10/17/2014. (1) Multifamily REIT insider ownership shown as a percent of total shares outstanding, as reported by FactSet.

5 History of Returning Capital to Shareholders 5 Year Total Shareholder Return 287% 217% 234% 153% 155% 167% 171% 177% 183% 100% 107% MAA HME UDR CPT AVB AEC Average EQR ESS AIV PPS 10 Year Total Shareholder Return 250% 265% 271% 115% 148% 154% 164% 168% 191% 194% 214% AIV UDR PPS HME CPT MAA Average EQR AVB AEC ESS 5 Source: KeyBanc Capital Markets Leaderboard, 10/31/2014.

6 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 ( ) 5.2% 4.8% 4.8% 4.9% 4.2% 4.3% 4.4% 4.4% 4.4% 4.5% 4.0% MAA PPS UDR AIV AVB AEC Average HME CPT EQR ESS 6 Source: Company financials, 2014 at midpoint of guidance as of 10/31/2014.

7 Committed Acquisitions: Best-in-Class Portfolio 1,026 units under contract in various stages of development and lease-up 1160 Hammond (345 units) Atlanta, GA (Perimeter Submarket) Property under contract in Q3 2013; currently 20% leased Expected to close Q4 2014, once construction is complete Varela Westshore (350 units) Tampa, FL (Westshore Submarket) Property under contract in Q3 2013; currently 10% leased Expected to close Q1 2015, once construction is complete The Edge at Flagler Village (331 units) Fort Lauderdale, FL (Downtown Fort Lauderdale) Property under contract in Q4 2012; currently 40% leased Expected to close in mid 2015, once property is stabilized 7 As of 10/31/2014.

8 2014 Strategic Dispositions Completed Dispositions Property Closed Location Units Age Sales Price Market Cap Rate (1) IRR Gain (GAAP) Hampton Point February Silver Spring, MD $60, % 15.3% $41,000 Vista Germantown April Nashville, TN $53, % 19.7% $18,800 Reflections April Columbia, MD $38, % 15.7% $27,900 Annen Woods June Pikesville, MD $20, % 12.7% $13,200 Total / Average $172, % 17.1% $100,900 Dispositions Under Contract Property Est. Closing Date Location Units Age Cypress Shores Q4 Coconut Creek, FL Clinton Place Q4 Clinton Township, MI Georgetown Park Q4 Fenton, MI Total / Average Cypress Shores 2014 Total / Average 1, ~$266,000 8 Note: $ s in thousands Total / Average includes completed dispositions and properties under contract that are expected to close in Q (1) Market cap rate assumes a 3% management fee and marking to market real estate taxes.

9 NOI Diversification Minimizes Risk Current Portfolio (1) Upon Completion of Committed Acquisitions and Active Developments (2) Southwest 7% West 11% Southeast 17% Midwest 38% Southwest 9% Midwest 27% Mid-Atlantic 38% Southeast 21% Mid-Atlantic 32% 9 (1) 3Q14 annualized NOI. (2) 3Q14 annualized NOI as computed for current portfolio, adjusted for anticipated development deliveries, forward acquisition commitments, and announced dispositions.

10 Skillful Execution of Development Platform Remaining Committed Development Spend Relative to Gross Real Estate Assets (1) $2,077 $2,172 $1, % $1, % 4.9% $400 $205 $ % $ PF 2015 PF 2016 PF Gross Real Estate Assets Remaining Committed Development Spend Remaining Committed Development Spend / Gross Real Estate Assets 10 (1) Gross Real Estate Assets for 2014 PF 2016 PF is adjusted to include announced acquisitions, developments and dispositions.

11 Coastal California Presence via Off Market Transactions San Francisco th (50/50 JV) (410 units) Land Under Contract: Q Expected Delivery: Q th and Huntington (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

12 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 (1) 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 (2) SoMa Roberts. Obayashi Q Q Q East Third (50/50 JV) Los Angeles, CA 472 (2) Arts District TBD Q Q Q (1) First units delivered September (2) Units reflect 100%.

13 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 (1) Market Cap Rate (2) 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 (3) Q $4.50 $122,500 (4) 4.00% 6.60% 2.60% 472 (3) Q $3.22 $82,000 (4) 4.25% 6.80% 2.55% Total 1,446 $3.68 $391, % 6.75% 2.60% 13 (1) $ s in thousands. (2) Assumes 3% management fee. (3) Units reflect 100%. (4) Total estimated cost is based on Associated Estates portion of the unconsolidated joint venture.

14 Continued Focus on Improving Already Strong Credit Metrics Net Debt / Annualized EBITDA 8.1x Target: < 7.0x Net Debt / Undepreciated Book Value Secured Debt / Undepreciated Book Value Target: < 45% & < 20% 7.5x 7.5x 7.4x 46% 38% 49% 36% 47% 46% 40% 6.5x 25% 16% 16% PF Fixed Charge Coverage PF % Unencumbered NOI Target: > 3.5x Target: > 75% 3.0x 3.0x 3.3x 72% 75% 2.3x 59% 1.9x 44% 34% PF PF 14 Note: is as reported and 2014 PF is midpoint of guidance and reflects announced acquisitions, dispositions, development and financing activities. Cash held in escrow for 1031 like kind exchanges are considered cash for net debt calculations. Source: Company financials.

15 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% Q % Weighted Average Cost of Debt 4.5% 4.4% 4.2% 4.2% 4.1% 4.0% 4.0% 3.9% 3.9% 3.7% AIV EQR CPT HME Average PPS AVB UDR ESS AEC MAA 15 Source: Company financials as of Q

16 Well Staggered Debt Maturities Fixed Mortgages Unsecured Notes Term Loan Revolver Construction Loans 20% 5% 6% 9% 12% 7% 6% 6% 6% 6% 5% 4% 3% 3% 2% Debt $25 (1) $20 $80 $42 (2) $48 $12 $230 $91 $41 $87 $55 # of Properties (3) (4) Note: $ in millions. As of 9/30/2014. (1) $24.5 million mortgage was repaid on 10/1/2014. (2) Subject to a one-year extension option. (3) Includes two construction loans totaling $72.0 million with an outstanding balance of $38.6 million (4) Includes one construction loan for $71.8 million (AEC pro-rata share) with no outstanding balance. AEC has guaranteed 100% of the loan.

17 Conservative Dividend Payout Ratio Dividend Yield (1) 4.1% 4.1% 4.5% 3.4% 3.4% 3.4% 2.6% 2.9% 2.9% 2.9% 3.0% ESS PPS EQR AIV AVB Average UDR CPT MAA AEC HME AFFO Payout Ratio 69.0% 70.9% 71.1% 71.3% 71.8% 72.9% 73.7% 75.1% 76.4% 76.5% 61.5% AIV AEC MAA PPS ESS Average CPT AVB EQR HME UDR 17 Note: 2014 AFFO based on KeyBanc Capital Markets Leaderboard, 10/31/2014 and Company financials. (1) Stock price as of closing on 10/31/2014.

18 Associated Estates: Focused on Shareholder Return Organic NOI Growth Development Value Creation Accretive Acquisitions Strategic Dispositions Attractive Total Shareholder Return Consistent and Growing Dividend 18

19 19 AssociatedEstates.com Cantabria at Turtle Creek Dallas, TX 249 Units