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Investing in Education Realty Trust: A Must-Know Company Overview

Peter Barnes - Author

Nov. 25 2015, Published 5:46 p.m. ET

Education Realty Trust’s history

The origin of Education Realty Trust (EDR) goes back to Allen & O’Hara’s student housing business, which was established in 1952. The company has over 40 years of experience as an owner, manager, and developer of student housing properties in the country. Education Realty Trust (or EdR) is headquartered in Memphis, Tennessee. The company completed its IPO in 2005 and became the second publicly traded student housing REIT (real estate investment trust) on the New York Stock Exchange after American Campus Communities (ACC). The company is a part of the S&P 600 Index.

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Business profile

EdR (EDR) is a self-managed and self-administered equity REIT. The main objective of the company is to develop, acquire, own, and manage student housing properties near the university campuses mainly for its own account. In addition, EdR also provides third-party development consulting services to universities and other third parties on student housing development projects.

Business dynamics

The company normally leases its owned properties for a period of 12 months. However, in some cases the company considers nine-month or shorter leases. Because of the short-term nature of leases, the company may receive lower cash flows at properties with short-term leases. In addition, all the company’s properties are required to re-lease each year, exposing the company to increased leasing risk.

Most of the leases at the company’s student housing properties begin in mid-August and end in July of each year. The higher occupancy levels are therefore highly dependent on the effectiveness of the company’s marketing initiatives during this leasing period.

Other apartment REIT like Equity Residential (EQR), Essex Property Trust (ESS), and UDR (UDR) are mainly involved in resident leases rather than student leases. The iShares Core S&P Small-Cap ETF (IJR) invests 0.31% of its portfolio in EdR.

Series content

In this series, we’ll be covering the following topics:

  • Investing in Education Realty Trust: A must-know company overview
  • A look at EdR’s business segments
  • How does industry competition affect EdR?
  • EdR’s property portfolio has witnessed healthy growth
  • EdR has a strong presence in the South Central region
  • EdR’s strategy to enhance shareholder returns
  • Property acquisitions and development add value to EdR’s portfolio
  • EdR’s occupancy level is one of the lowest in the industry
  • EdR reported healthy revenue growth in recent years
  • EdR’s EBITDA margin is lower than industry average
  • Why EdR has been reporting higher funds from operations
  • Must-Know: EdR’s FFO payout ratio is highest in among peers
  • EdR has lower leverage than industry average
  • EdR’s price-to-FFO multiple is higher than industry average
  • Why EdR trades at average EV-EBITDA multiple?
  • Investing in EdR through ETFs

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