Edgar Filing: Education Realty Trust, Inc.

Document

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, 2016



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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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

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

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

Education Realty Trust, Inc. Yes o No x

Education Realty Operating Partnership, LP Yes o No x

As of July 29, 2016, Education Realty Trust, Inc. had 73,049,412 shares of common stock outstanding.

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the quarterly period ended June 30, 2016 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 indirectly wholly-owned by EdR. As of June 30, 2016, 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


•	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 on 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 condensed 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.

Education Realty Trust, Inc.

Education Realty Operating Partnership, LP

Form 10-Q

For the Quarter Ended June 30, 2016

Table of Contents



		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, 2016 and December 31, 2015	1
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2016 and 2015	2
	Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2016 and 2015	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	5
Condensed Consolidated Financial Statements of Education Realty Operating Partnership, LP and Subsidiaries:
	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	7
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2016 and 2015	8
	Condensed Consolidated Statements of Changes in Partners' Capital and Noncontrolling Interests for the six months ended June 30, 2016 and 2015	10
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	11
Notes to Condensed Consolidated Financial Statements		13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.		37
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.		62
Item 3. Defaults Upon Senior Securities.		63
Item 4. Mine Safety Disclosures.		63
Item 5. Other Information.		63
Item 6. Exhibits.		63
Signatures.		64

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)



	June 30, 2016			December 31, 2015
Assets:
Collegiate housing properties, net	$	1,898,602		$	1,774,796
Assets under development	265,337			117,384
Cash and cash equivalents	230,402			33,742
Restricted cash	8,674			9,784
Other assets	63,457			66,125
Total assets	$	2,466,472		$	2,001,831

Liabilities:
Mortgage and construction loans, net of unamortized premium and deferred financing costs	$	98,369		$	204,511
Unsecured revolving credit facility	—			—
Unsecured term loan, net of unamortized deferred financing costs	186,643			186,518
Unsecured senior notes, net of unamortized deferred financing costs	247,808			247,678
Accounts payable and accrued expenses	114,403			85,670
Deferred revenue	11,890			19,024
Total liabilities	659,113			743,401

Commitments and contingencies (see Note 7)	—			—

Redeemable noncontrolling interests	11,828			13,560

Equity:
Common stock, $0.01 par value per share, 200,000,000 shares authorized, 71,760,137 and 56,879,003 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively	718			569
Preferred shares, $0.01 par value per share, 50,000,000 shares authorized, no shares issued and outstanding	—			—
Additional paid-in capital	1,791,014			1,263,603
Retained earnings (accumulated deficit)	—			(21,998		)
Accumulated other comprehensive loss	(9,963		)	(5,475		)
Total Education Realty Trust, Inc. stockholders’ equity	1,781,769			1,236,699
Noncontrolling interests	13,762			8,171
Total equity	1,795,531			1,244,870
Total liabilities and equity	$	2,466,472		$	2,001,831

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share data)

(Unaudited)



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenues:
Collegiate housing leasing revenue	$	61,690		$	53,734		$	131,873		$	114,117
Third-party development consulting services	467			444			950			1,041
Third-party management services	697			780			1,591			1,833
Operating expense reimbursements	2,286			2,366			4,105			4,462
Total revenues	65,140			57,324			138,519			121,453
Operating expenses:
Collegiate housing leasing operations	26,166			22,868			51,055			47,008
Development and management services	2,728			2,507			5,249			5,209
General and administrative	3,079			2,559			6,188			5,198
Depreciation and amortization	19,099			15,911			36,615			31,777
Ground lease expense	2,296			2,170			5,605			5,018
Reimbursable operating expenses	2,286			2,366			4,105			4,462
Total operating expenses	55,654			48,381			108,817			98,672

Operating income	9,486			8,943			29,702			22,781

Nonoperating (income) expenses:
Interest expense	3,635			5,451			8,298			11,392
Amortization of deferred financing costs	457			491			937			1,007
Interest income	(200		)	(67		)	(274		)	(105		)
Loss on extinguishment of debt	216			—			10,136			—
Total nonoperating expenses	4,108			5,875			19,097			12,294
Income before equity in earnings (losses) of unconsolidated entities, income taxes and gain on sale of collegiate housing properties	5,378			3,068			10,605			10,487
Equity in earnings (losses) of unconsolidated entities	107			(202		)	(137		)	(396		)
Income before income taxes and gain on sale of collegiate housing properties	5,485			2,866			10,468			10,091
Income tax expense	89			90			140			168
Income before gain on sale of collegiate housing properties	5,396			2,776			10,328			9,923
Gain on sale of collegiate housing properties	12,083			—			23,956			—
Net income	17,479			2,776			34,284			9,923
Less: Net (loss) income attributable to the noncontrolling interests	(176		)	(141		)	(40		)	65
Net income attributable to Education Realty Trust, Inc.	$	17,655		$	2,917		$	34,324		$	9,858

See accompanying notes to the condensed consolidated financial statements.



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Comprehensive income:
Net income	$	17,479		$	2,776		$	34,284		$	9,923
Other comprehensive loss:
(Loss) gain on cash flow hedging derivatives	(1,042		)	2,091			(4,488		)	(348		)
Comprehensive income	$	16,437		$	4,867		$	29,796		$	9,575
Less: Comprehensive (loss) income attributable to the noncontrolling interests	(176		)	(141		)	(40		)	65
Comprehensive income attributable to Education Realty Trust, Inc.	$	16,613		$	5,008		$	29,836		$	9,510

Earnings per share information:
Net income attributable to Education Realty Trust, Inc. common stockholders per share – basic	$	0.26		$	0.06		$	0.53		$	0.20
Net income attributable to Education Realty Trust, Inc. common stockholders per share – diluted	$	0.26		$	0.06		$	0.52		$	0.20

Distributions per share of common stock	$	0.37		$	0.36		$	0.74		$	0.72

Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	68,025			48,514			65,352			48,345
Weighted average common shares outstanding – diluted	68,293			48,832			65,629			48,665

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except shares)

(Unaudited)



	Common Stock			Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Shares	Amount		Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance, December 31, 2014	47,999,427	$	480	$	1,034,683		$	(41,909	)	$	(4,465	)	$	3,029		$	991,818
Proceeds from issuance of common stock, net of offering costs	331,395	3		11,564			—			—			—			11,567
Amortization of restricted stock and long-term incentive plan awards	7,191	—		855			—			—			—			855
Common stock issued to officers and directors	12,300	—		408			—			—			—			408
Cash dividends	—	—		(34,706		)	—			—			(152		)	(34,858		)
Contributions from noncontrolling interests	—	—		—			—			—			1,667			1,667
Adjustments to reflect redeemable noncontrolling interests at fair value	—	—		1,074			—			—			—			1,074
Comprehensive income (loss)	—	—		—			9,858			(348		)	(59		)	9,451
Balance, June 30, 2015	48,350,313	$	483	$	1,013,878		$	(32,051	)	$	(4,813	)	$	4,485		$	981,982


Balance, December 31, 2015	56,879,003	$	569	$	1,263,603		$	(21,998	)	$	(5,475	)	$	8,171		$	1,244,870
Proceeds from issuance of common stock, net of offering costs	14,866,378	149		567,322			—			—			—			567,471
Amortization of restricted stock and long-term incentive plan awards	3,956	—		1,431			—			—			—			1,431
Common stock issued to officers and directors	10,800	—		450			—			—			—			450
Cash dividends	—	—		(35,538		)	(12,326		)	—			(125		)	(47,989		)
Contributions from noncontrolling interests	—	—		—			—			—			10,073			10,073
Purchase of noncontrolling interests	—	—		(4,253		)	—			—			(4,211		)	(8,464		)
Adjustments to reflect redeemable noncontrolling interests at fair value	—	—		(2,001		)	—			—			—			(2,001		)
Comprehensive income (loss)	—	—		—			34,324			(4,488		)	(146		)	29,690
Balance, June 30, 2016	71,760,137	$	718	$	1,791,014		$	—		$	(9,963	)	$	13,762		$	1,795,531

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



	Six months ended June 30,
	2016			2015
Operating activities:
Net income	$	34,284		$	9,923
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	36,615			31,777
Loss on disposal of assets	20			—
Gain on sale of collegiate housing properties	(23,956		)	—
Noncash rent expense related to the straight-line adjustment for long-term ground leases	2,373			2,401
Loss on extinguishment of debt	10,136			—
Amortization of deferred financing costs	937			1,007
Amortization of unamortized debt premiums	(49		)	(419		)
Distributions of earnings from unconsolidated entities	178			89
Noncash compensation expense related to stock-based incentive awards	2,021			1,319
Equity in losses of unconsolidated entities	137			396
Change in operating assets and liabilities (net of acquisitions)	(2,553		)	(848		)
Net cash provided by operating activities	60,143			45,645

Investing activities:
Property acquisitions	(210,649		)	(9,367		)
Purchase of corporate assets	(585		)	(447		)
Restricted cash	1,110			(2,746		)
Investment in collegiate housing properties	(13,782		)	(7,063		)
Proceeds from sale of collegiate housing properties	94,951			—
Advances under notes receivable	—			(2,257		)
Collections on notes receivable	1,667			—
Earnest money deposits	(530		)	(1,327		)
Investment in assets under development	(133,286		)	(90,280		)
Distributions from unconsolidated entities	266			692
Investments in unconsolidated entities	—			(391		)
Net cash used in investing activities	(260,838		)	(113,186		)

See accompanying notes to the condensed consolidated financial statements.



	Six months ended June 30,
	2016			2015
Financing activities:
Payment of mortgage and construction loans	(134,231		)	(67,011		)
Borrowings under construction loans	28,083			42,481
Debt issuance costs	(92		)	(48		)
Debt extinguishment costs	(10,290		)	—
Borrowings on line of credit	—			116,000
Repayments of line of credit	—			(2,000		)
Proceeds from issuance of common stock	567,257			10,660
Payment of offering costs	(574		)	(99		)
Purchase and return of equity to noncontrolling interests	(11,374		)	—
Contributions from noncontrolling interests	7,112			1,691
Dividends and distributions paid to common and restricted stockholders	(47,864		)	(34,706		)
Dividends and distributions paid to noncontrolling interests	(357		)	(517		)
Repurchases of common stock for payments of restricted stock tax withholding	(315		)	(213		)
Net cash provided by financing activities	397,355			66,238
Net increase (decrease) in cash and cash equivalents	196,660			(1,303		)
Cash and cash equivalents, beginning of period	33,742			18,385
Cash and cash equivalents, end of period	$	230,402		$	17,082

Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	8,891		$	8,452
Income taxes paid	$	142		$	—

Supplemental disclosure of noncash activities:
Redemption of redeemable noncontrolling interests from unit holder to shares of common stock	$	938		$	960
Capital expenditures in accounts payable and accrued expenses related to developments	$	36,544		$	21,463

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except unit data)

(Unaudited)



	June 30, 2016			December 31, 2015
Assets:
Collegiate housing properties, net	$	1,898,602		$	1,774,796
Assets under development	265,337			117,384
Cash and cash equivalents	230,402			33,742
Restricted cash	8,674			9,784
Other assets	63,457			66,125
Total assets	$	2,466,472		$	2,001,831

Liabilities:
Mortgage and construction loans, net of unamortized premium and deferred financing costs	$	98,369		$	204,511
Unsecured revolving credit facility	—			—
Unsecured term loans, net of unamortized deferred financing costs	186,643			186,518
Unsecured senior notes, net of unamortized deferred financing costs	247,808			247,678
Accounts payable and accrued expenses	114,403			85,670
Deferred revenue	11,890			19,024
Total liabilities	659,113			743,401

Commitments and contingencies (see Note 7)	—			—

Redeemable limited partner units	9,051			8,312

Redeemable noncontrolling interests	2,777			5,248

Partners' capital:
General partner - 6,920 units outstanding as of June 30, 2016 and December 31, 2015, respectively	183			184
Limited partners - 71,753,217 and 56,872,083 units issued and outstanding as of June 30, 2016 and December 31, 2015, respectively	1,791,549			1,241,990
Accumulated other comprehensive loss	(9,963		)	(5,475		)
Total partners' capital	1,781,769			1,236,699
Noncontrolling interests	13,762			8,171
Total partners' capital	1,795,531			1,244,870
Total liabilities and partners' capital	$	2,466,472		$	2,001,831

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in thousands, except per unit data)

(Unaudited)



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenues:
Collegiate housing leasing revenue	$	61,690		$	53,734		$	131,873		$	114,117
Third-party development consulting services	467			444			950			1,041
Third-party management services	697			780			1,591			1,833
Operating expense reimbursements	2,286			2,366			4,105			4,462
Total revenues	65,140			57,324			138,519			121,453
Operating expenses:
Collegiate housing leasing operations	26,166			22,868			51,055			47,008
Development and management services	2,728			2,507			5,249			5,209
General and administrative	3,079			2,559			6,188			5,198
Depreciation and amortization	19,099			15,911			36,615			31,777
Ground lease expense	2,296			2,170			5,605			5,018
Reimbursable operating expenses	2,286			2,366			4,105			4,462
Total operating expenses	55,654			48,381			108,817			98,672

Operating income	9,486			8,943			29,702			22,781

Nonoperating (income) expenses:
Interest expense	3,635			5,451			8,298			11,392
Amortization of deferred financing costs	457			491			937			1,007
Interest income	(200		)	(67		)	(274		)	(105		)
Loss on extinguishment of debt	216			—			10,136			—
Total nonoperating expenses	4,108			5,875			19,097			12,294
Income before equity in earnings (losses) of unconsolidated entities, income taxes and gain on sale of collegiate housing properties	5,378			3,068			10,605			10,487
Equity in earnings (losses) of unconsolidated entities	107			(202		)	(137		)	(396		)
Income before income taxes and gain on sale of collegiate housing properties	5,485			2,866			10,468			10,091
Income tax expense	89			90			140			168
Income before gain on sale of collegiate housing properties	5,396			2,776			10,328			9,923
Gain on sale of collegiate housing properties	12,083			—			23,956			—
Net income	17,479			2,776			34,284			9,923
Less: Net (loss) income attributable to the noncontrolling interests	(229		)	(152		)	(151		)	14
Net income attributable to Education Realty Operating Partnership L.P.	$	17,708		$	2,928		$	34,435		$	9,909

See accompanying notes to the condensed consolidated financial statements.



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Comprehensive income:
Net income	$	17,479		$	2,776		$	34,284		$	9,923
Other comprehensive income:
(Loss) gain on cash flow hedging derivatives	(1,042		)	2,091			(4,488		)	(348		)
Comprehensive income	16,437			4,867			29,796			9,575
Less: Comprehensive (loss) income attributable to the noncontrolling interests	(229		)	(152		)	(151		)	14
Comprehensive income attributable to unitholders	$	16,666		$	5,019		$	29,947		$	9,561

Earnings per unit information:
Net income attributable to unitholders – basic	$	0.26		$	0.06		$	0.53		$	0.20
Net income attributable to unitholders - diluted	$	0.26		$	0.06		$	0.52		$	0.20

Weighted average units outstanding:
Weighted average units outstanding – basic	68,224			48,763			65,560			48,596
Weighted average units outstanding – diluted	68,293			48,832			65,629			48,665

See accompanying notes to the condensed consolidated financial statements.

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)



	General Partner				Limited Partners				Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Units	Amount			Units	Amount			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance, December 31, 2014	6,920	$	191		47,992,507	$	993,063		$	(4,465	)	$	3,029		$	991,818
Vesting of restricted stock and restricted stock units	—	—			12,300	408			—			—			408
Issuance of units in exchange for contributions of equity offering proceeds and redemption of units	—	—			331,395	11,567			—			—			11,567
Amortization of restricted stock and long-term incentive plan awards	—	—			7,191	855			—			—			855
Distributions	—	(5		)	—	(34,701		)	—			(152		)	(34,858		)
Contributions from noncontrolling interests	—	—			—	—			—			1,667			1,667
Adjustments to reflect redeemable noncontrolling interests at fair value	—	—			—	1,074			—			—			1,074
Comprehensive income (loss)	—	2			—	9,856			(348		)	(59		)	9,451
Balance, June 30, 2015	6,920	$	188		48,343,393	$	982,122		$	(4,813	)	$	4,485		$	981,982


Balance, December 31, 2015	6,920	$	184		56,872,083	$	1,241,990		$	(5,475	)	$	8,171		$	1,244,870
Vesting of restricted stock and restricted stock units	—	—			10,800	450			—			—			450
Issuance of units in exchange for contributions of equity offering proceeds and redemption of units	—	—			14,866,378	567,471			—			—			567,471
Amortization of restricted stock and long-term incentive plan awards	—	—			3,956	1,431			—			—			1,431
Distributions	—	(3		)	—	(47,861		)	—			(125		)	(47,989		)
Contributions from noncontrolling interests	—	—			—	—			—			10,073			10,073
Purchase of noncontrolling interests	—	—			—	(4,253		)	—			(4,211		)	(8,464		)
Adjustments to reflect redeemable noncontrolling interests at fair value	—	—			—	(2,001		)	—			—			(2,001		)
Comprehensive income (loss)	—	2			—	34,322			(4,488		)	(146		)	29,690
Balance, June 30, 2016	6,920	$	183		71,753,217	$	1,791,549		$	(9,963	)	$	13,762		$	1,795,531

See accompanying notes to the condensed consolidated financial statements.

EDUCATION REALTY OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



	Six months ended June 30,
	2016			2015
Operating activities:
Net income	$	34,284		$	9,923
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	36,615			31,777
Loss on disposal of assets	20			—
Gain on sale of collegiate housing properties	(23,956		)	—
Noncash rent expense related to the straight-line adjustment for long-term ground leases	2,373			2,401
Loss on extinguishment of debt	10,136			—
Amortization of deferred financing costs	937			1,007
Amortization of unamortized debt premiums	(49		)	(419		)
Distributions of earnings from unconsolidated entities	178			89
Noncash compensation expense related to stock-based incentive awards	2,021			1,319
Equity in losses of unconsolidated entities	137			396
Change in operating assets and liabilities (net of acquisitions)	(2,553		)	(848		)
Net cash provided by operating activities	60,143			45,645

Investing activities:
Property acquisitions	(210,649		)	(9,367		)
Purchase of corporate assets	(585		)	(447		)
Restricted cash	1,110			(2,746		)
Investment in collegiate housing properties	(13,782		)	(7,063		)
Proceeds from sale of collegiate housing properties	94,951			—
Advances under notes receivable	—			(2,257		)
Collections on notes receivable	1,667			—
Earnest money deposits	(530		)	(1,327		)
Investment in assets under development	(133,286		)	(90,280		)
Distributions from unconsolidated entities	266			692
Investments in unconsolidated entities	—			(391		)
Net cash used in investing activities	(260,838		)	(113,186		)

Financing activities:
Payment of mortgage and construction loans	(134,231		)	(67,011		)
Borrowings under construction loans	28,083			42,481
Debt issuance costs	(92		)	(48		)
Debt extinguishment costs	(10,290		)	—
Borrowings on line of credit	—			116,000
Repayments of line of credit	—			(2,000		)
Proceeds from issuance of common units in exchange for contributions	567,257			10,660
Payment of offering costs	(574		)	(99		)
Purchase and return of equity to noncontrolling interests	(11,374		)	—

See accompanying notes to the condensed consolidated financial statements.



	Six months ended June 30,
	2016			2015
Contributions from noncontrolling interests	7,112			1,691
Distributions paid on unvested restricted stock and long-term incentive plan awards	(176		)	(72		)
Distributions paid to unitholders	(47,688		)	(34,634		)
Distributions paid to noncontrolling interests	(357		)	(517		)
Repurchases of units for payments of restricted stock tax withholding	(315		)	(213		)
Net cash provided by financing activities	397,355			66,238
Net increase (decrease) in cash and cash equivalents	196,660			(1,303		)
Cash and cash equivalents, beginning of period	33,742			18,385
Cash and cash equivalents, end of period	$	230,402		$	17,082

Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	8,891		$	8,452
Income taxes paid	$	142		$	—

Supplemental disclosure of noncash activities:
Redemption of redeemable noncontrolling interests from unit holder to shares of common stock	$	938		$	960
Capital expenditures in accounts payable and accrued expenses related to developments	$	36,544		$	21,463

See accompanying notes to the condensed consolidated financial statements.

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 real estate investment trust ("REIT") that is publicly traded on the New York Stock Exchange under the ticker symbol "EDR." Under the Articles of Incorporation, as amended, 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 indirectly wholly-owned by EdR. As of June 30, 2016, 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 one of our taxable REIT subsidiaries ("TRS"), EDR Management Inc. (our “Management Company”), a Delaware corporation performing collegiate housing management activities. EDR Development LLC (our “Development Company”), a Delaware limited liability company and wholly owned subsidiary of the Management Company providing 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.

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

In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810) ("ASU 2015-02"), which amends the consolidation requirements in ASC 810, Consolidation, and makes changes to both the variable interest model and the voting model of consolidation. Under ASU 2015-02, companies will need to reevaluate whether an entity meets the criteria to be considered a variable interest entity (“VIE”) or whether the consolidation of an entity should be assessed under the voting model. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, and eliminates the presumption in the previous

voting model that a general partner should consolidate a limited partnership or similar entity unless the presumption can be overcome. ASU 2015-02 was effective for the Trust and the Operating Partnership as of January 1, 2016. The adoption of the new standard did not result in the consolidation of entities not previously consolidated or the deconsolidation of any entities previously consolidated.

The Trust accounts for interests in partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the amended guidance. The Trust first evaluates whether each entity is a VIE. 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.

Upon adoption, the Operating Partnership and certain properties that have noncontrolling interests (see Note 8) became VIEs as the limited partners of these entities lack substantive kick-out rights and substantive participating rights. The Trust continues to consolidate these entities as the primary beneficiary because it directs the activities that most significantly impact the economic performance of the VIEs and has an obligation to absorb potentially significant losses or the right to receive potentially significant benefits of the VIEs. EdR has the power and economic exposure through the rights held by OP GP as it relates to the Operating Partnership, while EROP has power and economic exposure through its role as the property manager and equity interest holder of certain properties with noncontrolling interests (see Note 8).

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 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 consolidated financial statements and related notes included in the Trust's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission (the "SEC") on February 29, 2016.

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.

Notes receivable

On August 26, 2013, the Trust provided a $0.5 million promissory loan to College Park Apartments, Inc. ("CPA"), the Trust's partner in the unconsolidated joint venture University Village-Greensboro LLC (see Note 5), at an interest rate of 10% per annum and a maturity date of August 1, 2020. Under the loan, CPA can make one draw per calendar quarter. As of June 30, 2016 and December 31, 2015, the outstanding balance was $0.5 million for both periods. The loan is secured by CPA's interest in the joint venture.

On March 20, 2015, the Trust provided a $1.7 million promissory loan to Concord Eastridge, Inc, the Trust's partner in the joint venture at Roosevelt Point, at an interest rate equal to 2% plus London InterBank Offered Rate ("LIBOR") per annum compounded monthly and a maturity date of March 1, 2017. The loan was secured by Concord Eastridge's interest in the joint venture. As of December 31, 2015, $1.7 million was outstanding. In February 2016, the Trust acquired Concord Eastridge, Inc.'s remaining partnership interest for $4.9 million in cash. The outstanding promissory loan was repaid in full at closing.

Collegiate housing properties

Land, land improvements, buildings and improvements, and furniture, fixtures and equipment are recorded at cost. Buildings and improvements are depreciated over 15 to 40 years, land improvements are depreciated over 15 years and furniture, fixtures, and equipment are depreciated over 3 to 7 years. Depreciation is computed using the straight-line method for financial reporting purposes over the estimated useful life.

The Trust capitalizes interest based on the weighted average interest costs of total debt, and internal development costs while developments are ongoing, as assets under development. When the property opens, these costs, along with other direct costs of the development, are transferred into the applicable asset category and depreciation commences.

Acquired collegiate housing communities’ results of operations are included in the Trust’s results of operations from the respective dates of acquisition. Appraisals, estimates of cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, land improvements, buildings and improvements, furniture, fixtures and equipment and identifiable intangibles such as amounts related to in-place leases. Acquisition costs are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of income and comprehensive income.

Management assesses impairment of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management uses an estimate of future undiscounted cash flows of the related asset based on its intended use to determine whether the carrying value is recoverable. If the Trust determines that the carrying value of an asset is not recoverable, the fair value of the asset is estimated and an impairment loss is recorded to the extent the carrying value exceeds estimated fair value. Management estimates fair value using discounted cash flow models, market appraisals if available, and other market participant data. During the six months ended June 30, 2016 and 2015, there were no impairment losses recognized.

When a collegiate housing community has met the criteria to be classified as held for sale, the fair value less cost to sell such asset is estimated. If the fair value less cost to sell the asset is less than the carrying amount of the asset, an impairment charge is recorded for the estimated loss. Depreciation expense is no longer recorded once a collegiate housing community has met the held for sale criteria. Dispositions that represent a strategic shift in the business will qualify for treatment as discontinued operations. The property dispositions during the six months ended June 30, 2016 did not qualify for treatment as discontinued operations and, as a result, the operations of the properties are included in continuing operations in the accompanying condensed consolidated statements of income and comprehensive income.

Redeemable noncontrolling interests (the Trust) / redeemable limited partners (EROP)

The Trust follows the guidance issued by the FASB regarding the classification and measurement of redeemable securities. The Trust classifies redeemable noncontrolling interests, which include redeemable interests in consolidated joint ventures and units of limited partnership interest in University Towers Operating Partnership, LP and in the Operating Partnership in the mezzanine section of the accompanying condensed consolidated balance sheets.

In the accompanying condensed consolidated balance sheets of the Operating Partnership, the redeemable units of limited partnership in the Operating Partnership are classified as redeemable limited partners and the redeemable interests in consolidated joint ventures and units of limited partnership in University Towers Operating Partnership, LP are classified as redeemable noncontrolling interests. The redeemable noncontrolling interest units / redeemable limited partner units are adjusted to the greater of carrying value or fair market value based on the price per share of EdR's common stock at the end of each respective reporting period.

Common stock issuances and offering costs

Specific incremental costs directly attributable to the issuance of EdR common stock are charged against the gross proceeds of the related issuance. Accordingly, underwriting commissions and other stock issuance costs are reflected as a reduction of additional paid-in capital in the accompanying condensed consolidated statements of changes in equity.

The Trust is structured as an umbrella partnership REIT ("UPREIT") and contributes all proceeds from its various equity offerings to EROP. 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.

During October 2014, the Trust entered into agreements to establish an at-the-market equity offering program ("ATM Program") authorized to sell a maximum of $150.0 million in additional shares of EdR common stock. The Trust sold approximately 2.3 million shares under these distribution agreements during the six months ended June 30, 2016 and received net proceeds of approximately $93.5 million. The Trust sold 0.3 million shares under these distribution agreements during the six months ended June 30, 2015 and received net proceeds of $10.6 million.

On January 15, 2016, the Trust completed a follow-on equity offering of approximately 6.3 million shares of EdR common stock. The Trust received approximately $215.1 million in net proceeds from the offering after deducting the underwriting discount and other offering expenses payable by the Trust. Of the total net proceeds, approximately $108.5 million was used to pay off $98.2 million of fixed rate mortgage debt bearing an average effective interest rate of 5.4% and $10.3 million of prepayment penalties associated with the early extinguishment of debt.

On March 24, 2016, we issued approximately 0.5 million shares of our common stock for a total of approximately $20.0 million pursuant to the direct stock purchase component of the Amended and Restated Dividend Reinvestment and Direct Stock Purchase Plan.

On May 2, 2016, the Trust entered into agreements to establish a new ATM Program authorized to sell a maximum of $300.0 million in additional shares of EdR common stock. The Trust sold approximately 5.7 million shares under these distribution agreements during the six months ended June 30, 2016 and received net proceeds of approximately $238.3 million.

Income taxes

EdR qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). EdR is generally not subject to federal, state and local income taxes on any of its taxable income that it distributes if it distributes at least 90% of its REIT taxable income for each tax year to its stockholders and meets certain other requirements. If EdR fails to qualify as a REIT for any taxable year, EdR will be subject to federal, state and local income taxes (including any applicable alternative minimum tax) on its taxable income.

The Trust has elected to treat certain of its subsidiaries, including the Management Company, as TRSs. A TRS is subject to federal, state and local income taxes. The Management Company provides management services and through the Development Company, provides development services, which if directly provided by the Trust would jeopardize EdR’s REIT status. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse.

The Trust had no unrecognized tax benefits as of June 30, 2016 and December 31, 2015. The Trust and its subsidiaries file federal and state income tax returns. As of June 30, 2016, open tax years generally included tax years for 2012, 2013, 2014 and 2015. The Trust’s policy is to include interest and penalties related to unrecognized tax benefits in general and administrative expenses. For each of the six months ended June 30, 2016 and 2015, the Trust had no interest or penalties recorded related to unrecognized tax benefits.

Goodwill and other intangible assets

Goodwill is tested annually for impairment as of December 31, and is tested for impairment more frequently if events and circumstances indicate that the carrying value of the assets might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The accumulated impairment loss recorded is $0.4 million. No additional impairment has been recorded through June 30, 2016. The carrying value of goodwill was $3.1 million as of June 30, 2016 and December 31, 2015, of which $2.1 million was recorded on the management services segment and $0.9 million was recorded on the development consulting services segment. Goodwill is not subject to amortization. Other intangible assets generally include in-place leases acquired in connection with acquisitions and are amortized over the estimated life of the lease/contract term. The carrying value of other intangible assets was $0.5 million and $0.2 million as of June 30, 2016 and December 31, 2015, respectively.

Investment in unconsolidated entities

The Trust accounts for its investments in unconsolidated joint ventures using the equity method whereby the costs of an investment are adjusted for the Trust’s share of earnings of the respective investment reduced by distributions received. The earnings and distributions of the unconsolidated joint ventures are allocated based on each owner’s respective ownership interests. These investments are classified as other assets or accrued expenses, depending on whether the distributions exceed

the Trust’s contributions and share of earnings in the joint ventures, in the accompanying condensed consolidated balance sheets (see Note 5).

Earnings per share

Earnings per Share - The Trust

Basic earnings per share is calculated by dividing net earnings available to common stockholders by weighted average shares of common stock outstanding, including outstanding units in the Operating Partnership designated as LTIP Units ("LTIP Units"). Diluted earnings per share is calculated similarly, except that it includes the dilutive effect of the assumed exercise of potentially dilutive securities. The Trust follows the authoritative guidance regarding the determination of whether certain instruments are participating securities. All unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are included in the computation of earnings per share under the two-class method. This results in shares of unvested restricted stock and LTIP Units being included in the computation of basic earnings per share for all periods presented.

Earnings per OP Unit - EROP

Basic earnings per unit is calculated by dividing net earnings available to unitholders by the weighted average number of OP Units and LTIP Units outstanding. Diluted earnings per unit is calculated similarly, except that it includes the dilutive effect of the assumed exercise of potentially dilutive securities. EROP follows the authoritative guidance regarding the determination of whether certain instruments are participating securities.

Recent accounting pronouncements

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those years. The Trust is currently evaluating the impact of this guidance.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years, on a modified prospective basis. The Trust is currently evaluating the impact of this guidance.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), as amended by ASU 2015-04 to defer the effective date. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including the guidance on real estate derecognition for most transactions. ASU 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years and permits the use of either the retrospective or cumulative effect transition method. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. Since the issuance of ASU 2014-09, the FASB has issued ASU 2016-08 that is intended to improve the understandability of the implementation guidance regarding principal versus agent considerations and has issued ASU 2016-10 to clarify the identification of performance obligations and the implementation guidance related to licensing. The effective dates of these amendments are the same as ASU 2014-09. The Trust is currently evaluating the provisions of this guidance.

3. Acquisition and development of real estate investments

Acquisition of collegiate housing properties

2016 Acquisitions

During the six months ended June 30, 2016, the Trust completed the following two collegiate housing property acquisitions:



Name	Primary University Served	Acquisition Date	# of Beds	# of Units	Contract Price (in thousands)
Lokal	Colorado State University, Colorado	March 2016	194	79	$	24,600
The Hub at Madison	University of Wisconsin, Wisconsin	May 2016	1,036	341	$	188,500

Combined acquisition costs for these purchases were $0.1 million and are included in general and administrative expenses in the accompanying condensed statements of income and comprehensive income for the six months ended June 30, 2016. These acquisitions were funded from proceeds of the sale of 605 West (see Note 4), the follow-on equity offering completed in January 2016 (see Note 2) and shares sold under the ATM program (see Note 2).

Due to the timing of the completion of the acquisitions, work is still ongoing to determine the fair value of the assets and liabilities as of the acquisition date, and as a result, the following amounts are preliminary. Below is the preliminary allocation of the purchase price to the fair values of assets acquired and liabilities assumed as of the date of the acquisition (in thousands):



	Lokal			The Hub at Madison			Total
Collegiate housing property	$	24,350		$	192,412		$	216,762
In-place leases	152			1,008			1,160
Other assets	3			87			90
Current liabilities	(148		)	(7,442		)	(7,590		)
Total net assets acquired	$	24,357		$	186,065		$	210,422

The $2.7 million difference between the contracted price of $213.1 million and the net assets set forth in the table above includes contingent consideration estimated at $5.3 million representing additional purchase price related to future operating performance of the property and future tax assessments. Of this amount, $3.1 million was paid out subsequent to the acquisition. At June 30, 2016, the remaining contingent consideration of $2.2 million was determined based on the probability of achieving of certain operating performance metrics; the estimated range of possible outcomes is between $0.0 million and $4.5 million. The remaining difference represents working capital and other liabilities that were not part of the contractual purchase price, but were acquired.

The unaudited pro forma information had the acquisition date been January 1, 2016 is as follows (in thousands, except per share and per unit amounts):



	Six months ended June 30,
	2016 ⁽¹⁾
Total revenue	$	146,604
Net income attributable to the Trust	$	37,991
Net income attributable to common shareholders - basic and diluted	$	0.58

Net income attributable to EROP	$	38,112
Net income attributable to unitholders - basic and diluted	$	0.58

⁽¹⁾As the Lokal and the Hub at Madison first opened for the 2015/2016 lease year (August 2015), supplemental pro forma revenue and net income information is not available for the period January 1, 2015 - June 30, 2015.

During the six months ended June 30, 2016, the Trust also entered into binding agreements to acquire the following collegiate housing communities located in Fort Collins, Colorado serving Colorado State University for total consideration of $24.0 million:


•	Pura Vida Place, which has 52 units consisting of 100 beds; and


•	Carriage House, which has 54 units consisting of 94 beds.

The Trust also entered into binding agreements to acquire ownership interests in The Hub at Tucson II, which is currently under development and will have 104 units consisting of 311 beds serving the University of Arizona in Tucson, Arizona, for a cash consideration of approximately $50.0 million. The development is expected to open in the fall of 2016.

2015 Acquisitions

During the year ended December 31, 2015, the Trust completed the following two collegiate housing property acquisitions:

Acquisition

Contract Price

Name

Primary University Served

Date

# of Beds

# of Units

(in thousands)

The Commons on Bridge

University of Tennessee Knoxville, Tennessee

June 2015

150

9,700

The Province at Boulder

University of Colorado Boulder, Colorado

Sept 2015

317

48,800

Below is the allocation of the purchase price to the fair values of assets acquired and liabilities assumed as of the date of acquisition (in thousands):



	The Commons on Bridge			The Province at Boulder			Total
Collegiate housing properties	$	9,624		$	48,522		$	58,146
In-place leases	76			278			354
Other assets	5			85			90
Current liabilities	(338		)	(376		)	(714		)
Total net assets acquired	$	9,367		$	48,509		$	57,876

The $0.6 million difference between contracted price of $58.5 million and the net assets set forth in the table above represents working capital and other liabilities that were not part of the contractual purchase price, but were acquired.

In conjunction with the acquisition of the The Province at Boulder, the Trust entered into a reverse Section 1031 like-kind exchange agreement with a third party intermediary, which, for a maximum of 180 days, allowed us to defer for tax purposes gains on the sale of other properties identified and sold within this period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition date, the third party intermediary is the legal owner of the property; however, the Trust controlled the activities that most significantly impact the property and retained all of the economic benefits and risks associated with the property. Therefore, at the date of the acquisition, it was determined that the Trust was the primary beneficiary of this VIE and consolidated the property and its operations as of the respective acquisition date. As of December 31, 2015, this VIE had total assets of $48.6 million and liabilities of $0.3 million.

The reverse Section 1031 like-kind exchange was completed during March 2016 in connection with the sale of 605 West (see Note 4). The Trust is now the legal owner of The Province at Boulder.

The unaudited pro forma information had the acquisition date for the 2015 acquisitions been January 1 of the respective year is as follows and is not indicative of results that would have occurred or which may occur (in thousands, except per share and per unit amounts):



	Six months ended June 30,
	2015		2014
Total revenue	$	123,728	$	105,131
Net income attributable to the Trust	$	10,965	$	3,415
Net income attributable to common shareholders - basic and diluted	$	0.23	$	0.09

Net income attributable to EROP	$	11,021	$	3,537
Net income attributable to unitholders - basic and diluted	$	0.23	$	0.09

A summary of actual revenue and net income from the 2016 and 2015 property acquisitions included in the accompanying consolidated statements of income and comprehensive income since the respective dates of acquisition is as follows (in thousands):



	Six months ended June 30,
	2016		2015
2016 Acquisitions
Revenue	$	1,644
Net income	$	1,016

2015 Acquisitions
Revenue			$	42
Net income			$	30

Development of collegiate housing properties

During 2015, the Trust developed the following communities which opened during the 2015/2016 lease year. The costs incurred to date for our owned communities represent the balance capitalized in collegiate housing properties, net as of December 31, 2015 (dollars in thousands):



Name	Primary University Served	Bed Count	Costs Incurred as of December 31, 2015		Internal Development Costs Capitalized		Interest Costs Capitalized		Internal Development Costs Capitalized		Interest Costs Capitalized
Name	Primary University Served	Bed Count	Costs Incurred as of December 31, 2015		Six months ended June 30, 2015				Three months ended June 30, 2015
Woodland Glen III, IV & V	University of Kentucky	1,610	$	103,458	$	190	$	1,855	$	102	$	1,056
The Oaks on the Square - Phase IV	University of Connecticut	391	44,325		107		405		60		243
The Retreat at Louisville	University of Louisville	656	43,935		116		382		59		222
Total - owned communities		2,657	191,718		413		2,642		221		1,521
Georgia Heights ⁽¹⁾	University of Georgia	292	51,639		127		219		78		112
Total joint ventures		292	51,639		127		219		78		112
Total		2,949	$	243,357	$	540	$	2,861	$	299	$	1,633

⁽¹⁾The costs above represent total costs incurred for the joint venture development. The Trust holds a 50% interest in the joint venture and manages the community. The Trust does not consolidate the joint venture and its investment in the community of $10.2 million and $10.4 million as of June 30, 2016 and December 31, 2015, respectively, is classified as other assets in the accompanying condensed consolidated balance sheets.

The following represents a summary of active developments as of June 30, 2016, including internal development costs and interest costs capitalized (dollars in thousands):



Name	Primary University Served	Bed Count	Costs Incurred as of June 30, 2016		Internal Development Costs Capitalized		Interest Costs Capitalized		Internal Development Costs Capitalized		Interest Costs Capitalized
Name	Primary University Served	Bed Count	Costs Incurred as of June 30, 2016		Six months ended June 30, 2016				Three months ended June 30, 2016
Holmes Hall and Boyd Hall (formerly Limestone Park I & II)	University of Kentucky	1,141	$	82,671	$	162	$	1,421	$	79	$	788
Retreat at Oxford - Phase II	University of Mississippi	350	25,585		40		448		19		253
University Flats	University of Kentucky	771	27,860		103		331		52		214
Lewis Hall	University of Kentucky	346	3,903		104		28		33		26
Boise State University